**Exhibit 14.1**

 

**CODE****of****ETHICS****and****CONDUCT**

 

 

**THE NEIMAN MARCUS GROUP, INC.**

 

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| CONTENTS                                   |                                                    |                                                        |   |
|--------------------------------------------|---------------------------------------------------------|-------------------------------------------------------------|--------|
|                                       |                                                    |                                                        |   |
|                                       | A  LETTER TO EMPLOYEES OF THE NEIMAN MARCUS GROUP, INC. |
|                                       |                                                    |
| THE CODE                                   |
|                                       | CONSEQUENCES OF  NON-COMPLIANCE                         |
|                                       | DUTY  TO REPORT                                         |
|                                       |                                                    |                                                        |   |
| COMPLIANCE  WITH LAWS AND RELATED POLICIES |
|                                       |                                                    |                                                        |
|                                       | GENERAL OBLIGATION TO  DEAL FAIRLY                      |                                                        |
|                                       | ANTITRUST LAWS                                          |                                                        |
|                                       | INSIDER TRADING                                         |                                                        |
|                                       | EMPLOYMENT LAWS                                         |                                                        |
|                                       |                                                    | Equal Employment  Opportunity                               |
|                                       |                                                    | Sexual Harassment                                           |
|                                       |                                                    | Reporting  Discrimination and Harassment                    |
|                                       |                                                    | Safety and Health                                           |
|                                       |                                                    | Americans with  Disabilities Act                            |
|                                       | CONTRACTING WITH OTHER  PARTIES                         |                                                        |
|                                       |                                                    | Entering Agreements                                         |
|                                       |                                                    | Terminating Agreements                                      |
|                                       | PRODUCT SAFETY                                          |                                                        |
|                                       |                                                    | Flammability Standards                                      |
|                                       |                                                    | Children’s Toys                                        |
|                                       |                                                    | Food and Cosmetic Products                                  |
|                                       |                                                    | Potentially Hazardous  Products                             |
|                                       | INTELLECTUAL PROPERTY                                   |                                                        |
|                                       |                                                    | Copyright Compliance                                        |
|                                       |                                                    | Trademark Protection                                        |
|                                       |                                                    | Trade  Secrets and proprietary and Confidential Information |
|                                       | INTERNATIONAL BUSINESS                                  |                                                        |
|                                       |                                                    | The Foreign Corrupt  Practices Act                          |
|                                       |                                                    | Import and Customs Controls                                 |
|                                       |                                                    | Export Controls                                             |
|                                       |                                                    | Antiboycott Laws                                            |
|                                       |                                                    | U.S. Embargoes                                              |
|                                       | POLITICAL  ACTIVITES AND CONTRIBUTIONS                  |                                                        |
|                                       | IMPROPER  OR UNRECORDED PAYMENTS; EXCESSIVE GIFTS       |
|                                       | FALSE  STATEMENTS AND SCHEMES TO DEFRAUD                |
|                                       | THEFT OR MISUSE OF  COMPANY PROPERTY                    |
|                                       | WIRETAPPING,  EAVESDROPPING AND TAPE RECORDING          |
|                                       | RESPONDING  TO INQUIRIES FROM THIRD PARTIES             |
|                                       |                                                    | Requests by  Attorneys and Government Agents                |
|                                       |                                                    | Requests for  Inspections of Premises                       |
|                                       |                                                    | Contacts  with the Media and the Financial Community        |
|                                            |                                                         |                                                             |        |  |  |

 

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|                       | ADVERTISING                                                 |                                |
|----------------------------|-------------------------------------------------------------|-------------------------------------|
|                       | RECORD KEEPING                                              |                                |
|                       |                                                        | Preparation of Records              |
|                       |                                                        | Retention of Records                |
|                       | E-MAIL, VOICE  MAIL AND THE INTERNET                        |                                |
|                       |                                                        | Appropriate Use                     |
|                       |                                                        | Privacy                             |
|                       |                                                        | Creation and  Retention of Messages |
|                       | CONFLICTS OF INTEREST                                       |                                |
|                       |                                                        | Gifts                               |
|                       |                                                        | Entertainment                       |
|                       | DRUG AND ALCOHOL USE  AND TESTING                           |                                |
|                       | ENVIRONMENTAL COMPLIANCE                                    |                                |
|                       |                                                        |                                |   |
| IMPLEMENTATION OF THE CODE |
|                       |                                                        |                                |   |
|                       | THE COMPLIANCE COMMITTEE                                    |                                |
|                       | DISSEMINATION OF  INFORMATION                               |                                |
|                       | TRAINING AND EDUCATION                                      |                                |
|                       | DISCIPLINE FOR VIOLATIONS                                   |                                |
|                       | INVESTIGATIONS  AND RESPONDING TO ALLEGATIONS OF VIOLATIONS |
|                       | RETENTION OF OUTSIDE  LEGAL COUNSEL                         |                                |
|                            |                                                             |                                     |  |  |  |

 

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A LETTER TO EMPLOYEES OF THENEIMAN MARCUS GROUP, INC.

 

**We are writing to tell you about the Neiman Marcus Group,Inc.’s (“NMG” or the “Company”) Code of Ethics and Conduct (“Code”) and how itapplies to you.  We also want to remindyou of certain fundamental ethical principles that guide how we conduct ourbusiness.**

 

Oneunwavering rule lies at the core of NMG’s business philosophy: We conduct ourbusinesses in strict compliance with both the letter and the spirit of the law,and with a scrupulous commitment to the highest standards of business andpersonal ethics. Our policies and standards of conduct reflect these basicprinciples, but words alone cannot create a moral conscience or guaranteeadherence to these standards. Each employee plays an important part in settingthese high standards, and each of us shares responsibility for maintainingthem.

Throughits operating units, NMG does business in many communities throughout theUnited States. All employees are ambassadors of the Company, whose conduct,both within and outside their employment context, has a direct and significantimpact on the Company’s business and reputation. The Company’s objective is tobe respectful and tolerant of different values and customs and to be a modelcorporate citizen in all of the communities in which we do business. It expectsno less of each employee.

**This is not justbureaucratic talk.  We mean it. **As part of our compliance efforts,we have implemented a program to ensure that all employees have a clearunderstanding of their legal and ethical responsibilities, have access tomanagement in order to obtain guidance when difficult questions arise, and havea full and fair opportunity to advise the Company if they feel illegal orunethical actions have been or will be taken by other employees of the Companyor parties with whom the Company does or seeks to do business. The Companysupports the efforts of employees who in good faith communicate violations orsuspected violations of the Code, and will not tolerate any form of retaliationagainst individuals who in good faith report possible misconduct, even if uponinvestigation their suspicions prove to be unwarranted.

TheCompany is committed to a comprehensive compliance program that includes manyelements. The Code reiterates and emphasizes the Company’s long-standingpolicies on matters such as antitrust, insider trading and equal employmentopportunities, and sets forth procedures to ensure compliance with the Code.Educational programs enable each employee to recognize and to respondappropriately to legal and ethical issues that may arise. The ComplianceCommittee, headed by Tony Bangs, the Company’s General Counsel, oversees thetraining and compliance program. As part of its responsibilities, theCompliance Committee, in consultation with senior management of each of ouroperating units, has appointed Compliance Officers within these units to whomquestions and reports of violations may be addressed. Employees may discussmatters with whomever they feel most comfortable: their supervisor, a member ofthe Compliance Committee, their Compliance Officer or any lawyer in theCompany’s Legal Department.

**We need yourhelp. **While werealize that the length of the Code may seem somewhat overwhelming, much of itis intuitive, and the compliance program is intended to protect both theCompany and you as a valuable contributor to the success of our many diversebusinesses. We have the highest regard for our employees, and we understandthat NMG can be successful only if it has motivated, dedicated and

 

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responsible employees who treat each other,as well as those with whom we do business or seek to do business, with respectand integrity. ** We ask you to read the Codecarefully to ensure that you understand the important legal and ethicalresponsibilities that we all share, as well as the consequences fornoncompliance.  Each employee will berequired to certify that he or she understands the Code and will abide byit. **We must rely on eachemployee’s good judgement and recognition that only employees who abide by theCode and the Company’s policies have a place with us. Working together, we cantake personal pride in being part of an organization that is second to none inits pursuit of excellence through commitment to the highest legal and ethicalvalues.

 
| Richard A. Smith       |   | Brian J. Knez |   | Robert A. Smith |   | Burton M. Tansky                        |
|------------------------|--------|---------------|--------|-----------------|--------|-----------------------------------------|
| Chairman of the  Board |   | Vice-Chairman |   | Vice-Chairman   |   | President and  Chief Executive  Officer |

 

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**THE CODE**

 

**The Code contains a great deal of information that isimportant to you as an employee of the Company.  While you are expected to read the Code in its entirety and signthe Certification From, the Code’s primary purpose is to serve as a guide foryou as situations arise.  Keep in mindthe general contents of the Code, refer to it periodically to refresh yourmemory, and ensure that your conduct is in compliance with applicable laws andCompany policies.  For purposes of thisCode, (i) all references to the employees of The Neiman Marcus Group, Inc. orthe “Company” shall also include all employees of Neiman Marcus Stores, NeimanMarcus Direct, Neiman Marcus Online, Bergdorf Goodman, Inc., Bergdorf Graphics,Inc., Kate Spade LLP, Gurwitch Products, L.L.C., Horchow, and Chef’s Catalog,and (ii) all references to employees shall specifically include but shall notbe limited to the officers and directors of the Company and its subsidiaries.**

 

CONSEQUENCES OF NON-COMPLIANCE

 

TheCompany’s activities and those of its employees and others acting on behalf ofthe Company must always be ethical and in full compliance with applicable laws,regulations, policies, and the Code. Because the Company feels so stronglyabout maintaining the highest level of business ethics, the Code establishesstandards of conduct which, in some instances, go beyond the minimumrequirements of the law. Failure to comply with the Code can have severeconsequences for both the individuals involved and for the Company. Employeeswho violate the Code may be subject to disciplinary action up to and includingtermination of employment. In addition, supervisors who disregard or shouldhave reasonably detected and reported a violation of the Code may be disciplined.Of course, an employee suspected of such a violation will be given anopportunity to explain his or her actions before any disciplinary action istaken.

Employees who violate the Code alsomay have violated the law. Accordingly, such employees may be subject toprosecution, imprisonment or fines, and may have an obligation to reimburse theCompany, the government or any other person or entity for any losses or damagesresulting from such violations. Additionally, the Company may be subject to prosecutionand/or significant fines for the improper conduct of its employees.

 

DUTY TO REPORT

 

Employeesmust report violations or suspected violations of the Code, or of any lawsapplicable to the Company’s business, to their supervisor, any attorney in theLegal Department, their designated Compliance Officer, the ComplianceCommittee, or Associate Relations. Employees also should seek guidance beforeengaging in conduct they believe may violate the Code. Contact information forthe Compliance Committee members, Compliance Officers, and attorneys in theLegal Department is available in the attached Appendices. Supervisors andCompliance Officers should respond to inquiries and/or notify and seek advicefrom the Compliance Committee or from an attorney in the Legal Department.Supervisors and Compliance Officers who learn of any matter that might exposethe Company to potential liability must immediately report it to

 

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the Compliance Committee. Any employee whobelieves the supervisor to whom he or she has reported a violation or suspectedviolation has not taken appropriate action should promptly contact his or herdesignated Compliance Officer, the Legal Department or the Compliance Committeedirectly.

**The Company willnot retaliate against anyone who in good faith reports a violation or suspectedviolation of the Code.  On the contrary,the Company welcomes and appreciates efforts on the part of its employees tocommunicate possible wrongdoing to the Compliance Committee.  Any employee responsible for reprisalsagainst coworkers or subordinates for reporting in good faith known orsuspected violations will be subject to disciplinary action.  On the other hand, any employee who submitsa report that the employee knows or suspects may be false will be subject todisciplinary action.**

Whilethe Company will not retaliate against an employee because of his or her goodfaith report of a suspected violation of the Code, an employee who reports aviolation or suspected violation of the Code may still be disciplined formisconduct or for any unrelated reasons. In other words, an employee is notexempt from disciplinary action simply because he or she has made a reportunder the Code. For example, an employee who makes a good faith report of aviolation of the Code and who is on probation due to unsatisfactory jobperformance may still be disciplined based on his or her job performance.

TheCompany prefers that employees identify themselves when reporting violations orsuspected violations because this will better enable the Compliance Committeeto investigate the alleged wrongdoing. However, the Company recognizes that insome cases employees may feel it desirable to remain anonymous. The ComplianceCommittee will investigate anonymous reports, but requests that such reports bedescribed in as much detail as possible with regard to the alleged misconduct,the individuals involved, and the basis for the allegations so that a thoroughinvestigation can be conducted.

 

COMPLIANCEWITH LAWS AND RELATED POLICIES

 

Certainlaws, policies and ethical principles that are of particular importance to theCompany are described below. In addition to the Code, the Company periodicallydistributes more detailed guidelines regarding compliance with individualpolicies and laws to employees for whom such guidelines are particularlyrelevant. Employees are bound by such guidelines and should retain a copy fortheir reference.

 

GENERALOBLIGATION TO DEAL FAIRLY

 

Employeesshall endeavor to deal fairly with the Company’s customers, suppliers,competitors, and other employees. No employee shall take unfair advantage ofanyone through manipulation, concealment, abuse of privileged information,misrepresentation of material facts, or any other unfair dealing practice.

 

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ANTITRUST LAWS

 

**Employees areprohibited from making any agreements with competitors in restraint of trade,and shall not engage in price fixing, resale price maintenance, unlawful boycotts,price discrimination or other acts that violate applicable antitrust and tradepractice laws.**

Federaland state antitrust laws are intended to preserve and to promote fair and opencompetition, which lies at the foundation of a free enterprise system. Whilethe Company should compete aggressively and creatively, its commitment is tocompete in strict compliance with the letter and spirit of all antitrust andtrade practice laws. These laws generally forbid agreements or joint actionsbetween competitors regarding prices, product or territory allocations,customers or suppliers, agreements or joint actions between a supplier and acustomer that restrain or tend to reduce competition, and any conduct of asingle firm that is intended to illegally establish or maintain a dominantmarket position or monopoly. Associations, joint ventures or mergers withactual or potential competitors pose special problems that need to be analyzedwith particular care and must be approved in advance by the Legal Department.

Underantitrust laws, unlawful agreements need not take the form of a writtencontract or consist of express commitments or mutual assurances. Courts can -and do - infer agreements based on informal discussions or the exchange ofinformation between competitors from which pricing or other collusion couldresult.  **Any communication with a competitor’srepresentative, no matter how innocuous it may seem at the time, may later besubject to antitrust scrutiny and form the basis for accusations of improper orillegal conduct.  Employees must conductall relations with competitors and other third parties, including socialactivities, as if they were completely in the public view, as those relationsmay be subject to probing examination and unfavorable interpretation.**

Forexample, trade association meetings and other industry gatherings typicallyserve perfectly legitimate and worthwhile purposes. However, these meetingsalso provide an opportunity for unlawful communications to occur because theybring together competitors who share common business interests and problems.Informal gatherings outside official trade association meetings areparticularly risky from an antitrust perspective.

Antitrustlaws that involve prices and pricing procedures pose particular risks for theCompany and its employees. Employees must always make independent pricingdecisions that are in the Company’s best interest and are based on factors suchas value to the customer, costs and competitive pressure in the marketplace.Employees must not communicate either directly or indirectly with competitorsconcerning sensitive information such as prices charged, sale dates orpercentages, business or marketing strategies, profit margins or credit andbilling practices. To avoid any appearance of indirect communications withcompetitors, vendors and distributors should be discouraged from sharing withthe Company any sensitive information concerning other retailers or fromdisclosing information about the Company to others.

Employeesalso must not reach agreements with vendors or distributors regarding the priceat which products will be resold. Although a manufacturer may suggest retailprices and markdown dates and percentages, any agreement with a vendorrequiring the Company to adhere to a retail price or to change the Company’sprices is illegal resale price maintenance.

Finally,vendors and distributors must not discriminate in the prices, terms of sale oradvertising or promotional programs and allowances they provide to competingretailers. While it is not the Company’s obligation to ensure that such vendorsand distributors do not discriminate against other retailers, employees mustnot induce or knowingly receive unlawful preferences in price, terms orpromotional allowances or

 

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servicescompared with competitors who purchase similar products from the seller. Thus,while employees are encouraged to negotiate the best possible prices, terms,and cooperative advertising arrangements, they must not affirmatively seekterms that are better than those offered to competing retailers.

Inaddition to price fixing, resale price maintenance, and price discrimination,antitrust laws prohibit other noncompetitive activities including: predatorypricing (i.e., selling below cost); group boycotts; allocation of customers,territories, products or services; unlawful tying of separate products; certainexclusivity agreements; monopolization; unlawful termination of dealers,suppliers or distributors; and, under certain circumstances, attempts to engagein many of these types of activities. Moreover, antitrust laws generallyprohibit any unfair or deceptive trade practices or methods of competition,including misleading advertising, disparaging a competitor’s products orservices, harassing a competitor and stealing trade secrets or confidentialbusiness information.

Theabove description does not exhaust the reach of all antitrust laws. It doesdemonstrate, however, that antitrust laws, which attempt to ensure thatsuperior market position is achieved only by superior products and performance,affect nearly every business decision made by employees on the Company’sbehalf. The costs and consequences of an antitrust investigation or litigationcan be serious for individual employees, as well as for the Company itself,even if the employees and the Company are ultimately vindicated. Individualviolators of antitrust laws can be imprisoned for up to three (3) years andfined in excess of $350,000 per violation. Corporations that violate antitrustlaws can be subject to criminal penalties in excess of $10 million perviolation. In addition, companies can be subject to treble damage awards incivil lawsuits.

 

INSIDER TRADING

** **

**Employees shall nottrade securities of the Company or other firms based on material non-publicinformation.  Employees also shall notprovide such non-public information to individuals outside the Company.**

Itis a cornerstone of federal securities laws that a purchaser and seller ofsecurities should be on as equal footing as is possible with respect toinformation regarding the issuer of the securities being traded. Consequently,federal securities laws forbid the purchase or sale of a security based upon“inside” information unavailable to the other party. Federal securities lawsalso prohibit employers, directors, officers and employees from knowingly orrecklessly failing to take steps to prevent the trading on, or tipping of,inside information by those whom they directly or indirectly control.

Theconsequences of insider trading can be severe. Employees who trade on insideinformation, or tip information to others, are subject to civil penalties of upto three (3) times the profit gained or loss avoided, criminal fines of up to$1 million, and incarceration of up to ten (10) years. If the Company orsupervisory personnel fail to take appropriate steps to prevent insider tradingby employees, they are subject to civil penalties up to the greater of $1million or three (3) times the profit gained or loss avoided as a result of theemployee’s violation, as well as criminal penalties of up to $2.5 million.

Employeeswho know material information which has not been publicly disclosed, and whichconcerns the financial condition, earnings or business of the Company, or anyimportant development in which the Company is or may be involved, shall not buyor sell shares of stock or other securities of the Company (or puts, calls,options or other rights to buy or sell such securities) until a reasonable timeafter public disclosure of such inside information. Employees also shall notdisclose such inside information to individuals not employed by the Companyuntil a reasonable time after the Company publicly discloses

 

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the information. In addition, employees arenever to advise others to buy or sell securities of the Company. These samerules also apply to the use of material nonpublic information about othercompanies.

**What is“material”? **Any factwhich may affect the price of the securities and/or which a reasonable investorwould consider important in deciding whether to purchase or sell shares ofstock or other securities of the Company is generally considered material.Examples of what may be considered to be material information include:financial results or forecasts; a significant proposed acquisition ordisposition of a business; hiring, firing or resignation of a Director orOfficer of the Company; a stock split or change in dividend; significantlitigation; or changes in customary earnings and earnings trends.

**What constitutespublic disclosure? **Informationeffectively is disclosed to the public if it is contained in an annual orquarterly report to stockholders, a press release issued by the Company, or inpublic filings with securities regulatory authorities.

**What is areasonable period of time after which purchases and sales can be made? **Essentially, the investing publicmust have had time to digest and analyze the information which has beendisclosed. For information disclosed through a press release, a good rule ofthumb is that purchases and sales can be made beginning two (2) business daysafter the release. For information disclosed in a report mailed tostockholders, purchases and sales should not be made until one (1) week afterthe date of mailing.

Thepurpose of this discussion is not to present an exhaustive statement of the lawwith respect to the use of inside information, but to advise you of legalconsiderations whenever you either purchase or sell shares of stock or othersecurities of the Company or talk about Company matters to outsiders. Only theCEO, CFO and individuals specifically designated by them are authorized todiscuss Company affairs with securities analysts, members of the press, orother persons who do not have a direct relationship with the Company.

Employeesshould be aware that discussing the affairs and prospects of the Company couldlead to serious legal liability. Employees should take care not to have conversationsconcerning confidential matters in public areas where they can be overheard orintercepted, such as on an airplane, in an elevator, on a public telephone oron a cellular telephone. Similarly, employees should secure confidentialdocuments and not leave them where they can be read by a casual observer.

 

EMPLOYMENT LAWS

 

**Employees must comply withall labor and employment laws. Employees shall also promote the Company’s goals of ensuring equaltreatment in connection with the recruitment, hiring, placement, training,compensation, benefits, education and development, transfer, promotion,demotion, discipline and termination of employees and providing a safe andhealthy workplace that is free of sexual harassment or other types of illegalharassment or misconduct.**

 

EQUAL EMPLOYMENTOPPORTUNITY

TheCompany is an equal employment opportunity employer. The Company’s policy is todeal with each employee and each job applicant without regard to race,religion, national origin, gender, sexual orientation, age, disability or anyother category protected by law. Consistent with this policy, the Company willnot tolerate harassment of or by its employees, customers, or other thirdparties based upon any of these protected classes.

 

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Employeesmust refrain from any act that is designed to cause or that does cause unlawfulemployment discrimination or harassment. This includes decisions concerningadvertising, recruiting, hiring, placement, training, compensation, benefits,education and development, transfer, promotion, demotion, discipline, ortermination.

Inaddition to ensuring compliance with the law, the Company believes that itscommitment to developing and respecting a diverse workforce empowers employeesto achieve their full potential and helps to foster teamwork toward meeting theCompany’s business objectives. Consistent with this commitment, employees musttreat each other with dignity and respect for one another’s cultures,lifestyles and uniqueness.

 

**SEXUAL HARASSMENT**

 

**The Companyprohibits sexual harassment of an employee by another person.  All employees, male and female, have theright to work in an environment that is free of sexual harassment.  Sexual harassment is a form of misconductthat undermines the integrity of the employment relationship, and no employeeshould be subjected to unwelcome sexual conduct by a co-worker, a contractor, acustomer, a supplier, or any other third party.**

Sexualharassment does not refer to occasional compliments of a socially acceptablenature. It refers to conduct of a sexual nature, whether verbal, physical, orvisual, that is unwelcome and creates a work environment that is hostile,offensive or coercive. While sexual harassment is not easy to define, it mayinclude: unwelcome sexual jokes, language, epithets, advances or propositions;unwelcome touching, leering, whistling, or suggestive, insulting or obscenecomments or gestures; demands for sexual favors in exchange for favorablereviews, assignments, promotions, or continued employment; questions aboutsexual conduct or practices; unwelcome comments about an individual’s body orsexual activity; and the display of sexually suggestive objects, pictures,posters or drawings.

TheCompany has no desire to interfere with consensual relationships betweenco-workers, however, individuals may be or may appear to be improperlyinfluenced by the existence of a personal relationship. Therefore, situationswhere one of the parties in such a relationship supervises or evaluates theother must be disclosed. The Company reserves the right to take appropriateaction to avoid potential problems including, but not limited to, changing thereporting relationship between the parties involved.

 

**REPORTINGDISCRIMINATION AND HARASSMENT**

Anemployee who believes he or she has been subjected to or who becomes aware of asituation involving discrimination or harassment based on any categoryprotected by law, as described above, is encouraged to immediately notifyeither their supervisor, the Human Resources Department, Associate Relations,his or her designated Compliance Officer, the Compliance Committee, or theLegal Department. Any manager or executive to whom discrimination or harassmentis reported must immediately forward that information to the Human ResourcesDepartment for investigation. The Company will promptly and thoroughlyinvestigate all complaints of discrimination or harassment. If the allegationsof employee misconduct are substantiated, disciplinary action ranging from counselingto termination of employment will be taken, commensurate with the factualcircumstances and seriousness of the offense. If the allegations relate to theinappropriate conduct of a contractor, customer, supplier or other third party,the Company will take appropriate steps to eliminate the problem if the claimsare substantiated.

Acomplaint of discrimination or harassment, the investigation of it, and anycorrective action taken will be treated with as much confidentiality aspossible. In

 

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addition, the Company will not permitretaliation of any kind against any employee who makes a good faith complaintof discrimination or harassment or who assists in an investigation of acomplaint. The Company will take corrective action against any employee whoretaliates against another. Any instance of retaliation should be reportedimmediately.

TheCompany will not tolerate false accusations of discrimination or harassmentmade either maliciously or recklessly. In such cases, the accuser will besubject to disciplinary action commensurate with the factual circumstances andseriousness of the matter.

 

**SAFETY AND HEALTH**

TheCompany is committed to complying with all applicable occupational safety andhealth laws and standards, eliminating recognized hazards from the workplace,and providing its employees with a safe and healthy work environment.

Employeesmust conduct themselves in accordance with all applicable federal, state andlocal health and safety laws, and report any unsafe conditions, hazards, brokenequipment or machinery, and injuries or accidents to their supervisor, theirdesignated Compliance Officer, or to the Compliance Committee. In certainsituations, criminal liability may be imposed on the Company and its managersfor failure to notify employees of potential dangers in the workplace.

Toensure that all employees are provided with a healthy work environment,employees who contract diseases that are dangerous and easily communicable toco-workers must notify their supervisor, their Human Resources Department,their designated Compliance Officer, or the Compliance Committee.

** **

**AMERICANS WITH DISABILITIES ACT**

TheAmericans with Disabilities Act (“ADA”) is intended to protect individuals withqualified disabilities against discrimination in employment and in theprovision of services to the public. The ADA’s purpose is to provide suchdisabled individuals with the opportunity to compete for jobs and toparticipate in public services and activities on an equal basis with otherindividuals. The Company is committed to compliance with the ADA.

Asnoted in the discussion of equal employment opportunities, and consistent withthe ADA, the Company prohibits discrimination on the basis of an applicant’s oremployee’s qualified disability. In addition, the Company is obligated toensure the accessibility of its stores to individuals with qualifieddisabilities under the ADA.

 

CONTRACTING WITH OTHERPARTIES

** **

**ENTERING AGREEMENTS**

Employeesare not to sign any agreements on behalf of the Company or any of itssubsidiaries without the approval of the Legal Department, except where theagreement is an unmodified Company form that the Legal Department has approvedin advance; or where the agreement is on a commonly printed form and related tocommercial travel, car rental, shipment of goods, magazine subscriptions or anyother purely routine matter that common sense dictates may be transactedwithout legal review. The reason for this broad requirement is that even anagreement involving relatively minor amounts of money may contain inappropriateindemnification obligations or other contractual burdens, or raise troublesomeantitrust issues or other legal concerns.

Theterm “agreement” refers to letters of intent, offer letters, and exchanges of

 

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correspondence involving the express orimplied acceptance of an offer, as well as to formal contracts.  **It is the Company’s policy to formalize all agreementsin writing; exceptions to this rule may be made under certain circumstances,but only with the Legal Department’s prior approval.**  Every new agreement must be approved by theLegal Department unless an identical form agreement has been previouslyapproved.

Unlessit is inappropriate under the circumstances, the Company, and not the othercontracting party, should take the initiative in preparing agreements. To thisend, the Legal Department should be conferred with at the earliest opportunity,even at the earliest stages of negotiation, so that it may function in a timelymanner to anticipate legal problems and to work constructively with managementpersonnel rather than having to react later under unnecessary time constraints.

 

**TERMINATING AGREEMENTS**

Periodically,the Company may wish to terminate an agreement before it is due to expire.Sometimes the Company has the right to take this action unilaterally; at othertimes, termination must be by consent of both parties. In either event, becauseit can give rise to certain liabilities that may not be readily apparent,termination of an agreement is as critical as execution of an agreement.Therefore, no agreement shall be terminated (before the agreement wouldnormally expire by its terms) by anyone on behalf of the Company or any of itssubsidiaries without the Legal Department’s prior approval.

** **

**PRODUCT SAFETY**

** **

**The Company iscommitted to complying with all applicable product safety laws andregulations.  Although the Company’svendors or ultimately responsible for ensuring the safety and usability oftheir products, the Company must take steps to ensure that their productsindeed satisfy applicable legal requirements. Such steps protect the Company’s reputation and customer relationships, andlimit the risk of potential legal liability.**

 

Whilenot an exhaustive list, some of the most pertinent requirements to ensureproduct safety include:

** **

**FLAMMABILITY STANDARDS**

Textilesused to manufacture clothing sold in the United States must meet requiredflammability standards. Commonly used fabrics subject to these standardsinclude rayon, sheer fabrics and highly napped fabrics such as chenille, velourand cotton terry cloth. In addition, stricter standards apply for fabrics usedin children’s sleepwear. Employees involved in buying apparel made from suchfabrics are responsible for obtaining from vendors copies of test resultsindicating that the fabrics used in clothing sold to the Company meet theflammability standards. Alternatively, vendors may provide copies of applicableContinuing Guarantees of compliance filed by them with the Consumer ProductsSafety Commission.

** **

**CHILDREN’S TOYS**

Toysand other children’s items that present potential choking or ingestion hazardsmust be properly labeled to identify that they are not intended for use bychildren under three (3) years of age. In addition, electrically operated toysor other electrical products intended for use by children must meet applicableregulations. Finally, the surfaces of toys and other items intended for use bychildren must not be

 

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coated with paint or other productscontaining lead.

 

**FOOD AND COSMETIC PRODUCTS**

Itis illegal to adulterate or to misbrand meat, poultry, other food products, orcosmetics. Employees involved in buying these products must confirm withvendors that food and cosmetic items satisfy the applicable regulations.Employees must also ensure that food vendors adhere to nutritional labelingrequirements. In addition, employees must obtain copies of Continuing Pure Foodand Drug Guarantees filed by vendors with the Food and Drug Administration.

** **

**POTENTIALLY HAZARDOUS PRODUCTS**

Inaddition to specific safety regulations, the law generally prohibits the saleof products that contain defects or could pose safety hazards to consumers. Ifan employee ever becomes aware that a product sold by the Company does notcomply with applicable safety regulations or otherwise contains a defect thatmay pose a safety hazard to consumers, the employee must notify the Legal Departmentimmediately.

 

INTELLECTUAL PROPERTY

** **

**Employees must usethe Company’s copyrights, tradenames, patents, trademarks and trade secrets ina manner that will safeguard them as valuable assets of the Company, andemployees must not misappropriate or infringe upon the trade secrets,trademarks, patents or copyrights works of others.**

 

Federaland state laws govern the use of material and/or information which may be thesubject of a trademark or copyright, or which may be treated as a trade secret.The Company owns and uses copyrights, trademarks and trade secrets. At times italso may have in its possession material that the Company has purchased or usedpursuant to an agreement with a third party (such as merchandise, photographsor advertisements), which may be protected by copyright or trademark and/or maybe a trade secret of another party. The Company’s use of these materials mustbe in accordance with the terms of any applicable agreement and must complywith the laws regulating the use of such materials.

** **

**COPYRIGHT COMPLIANCE**

Federalcopyright laws grant a copyright to the creator of any work of authorship, suchas books, articles, magazines, drawings, computer software and photographs.Works created by employees in the course of their employment are ownedexclusively by the Company. Copyright laws prohibit the unauthorized copying ofcopyrighted materials except under limited circumstances. A violation of thisprohibition can subject both the employees involved and the Company tosubstantial civil and/or criminal penalties. Employees should direct anyquestions concerning exceptions to this prohibition to the Legal Department.

** **

**TRADEMARK PROTECTION**

Atrademark is a word, symbol, name, device or any combination of these thingsused to identify a product or line of products or services and to distinguishthem from the products and services of other companies. The Company owns anumber of trademarks which are well recognized by the public and are extremelyvaluable. Employees must be vigilant to protect the Company’s trademarks, touse the Company’s trademarks

 

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correctly, and to notify the LegalDepartment of any unauthorized use of the Company’s trademarks by a thirdparty. Trademarks and tradenames must not be altered or modified in any mannerwithout the approval of the Legal Department.

Similarly,the Company is committed to respecting the trademark rights of others, and toavoiding the use of trademarks confusingly similar to those of other companies.A claim of infringement may arise from the use of a word or design that soundslike or is visually similar to a third party’s trademark, particularly wherethere is similarity in product and/or in the packaging, concept or image of theproduct. Any questions regarding the use of certain words or designs should bedirected to the Legal Department.

** **

**TRADESECRETS AND PROPRIETARY AND CONFIDENTIAL INFORMATION**

Tradesecrets and proprietary and confidential information may consist of anyformula, pattern, device or compilation of information (e.g., customer lists,business plans or projections) that the Company maintains in secrecy and usesto conduct its businesses or to gain competitive advantages. The Company hasdeveloped its own trade secrets and proprietary and confidential information,and often has access to the trade secrets and proprietary and confidentialinformation of other parties with whom it does business.

Employeesmust not use trade secrets or proprietary or confidential information for theirown purposes or disclose such information to unauthorized employees or thirdparties such as customers, clients or outside contractors without priorapproval from the Legal Department. Employees also must not use trade secretsor proprietary or confidential information obtained from former employers orother third parties, such as suppliers or customers.

Immediatelybefore or upon termination of employment, employees must return all propertybelonging to the Company, including any hard copy and computer files, customerlists, personal computer hardware and software, statistical analyses, productpricing and other business formulas and models, identification cards, andaccess cards. Employees must also not retain copies of any such property. Tothe extent permitted by law, the Company reserves the right to withhold anyfunds due to an employee until all such property has been returned.

Withoutproper authorization, employees may not use, distribute, modify, destroy orprovide access to records, systems or data pertaining to the Company or itscustomers or suppliers.

Employeesshould direct any questions concerning whether information is a trade secret oris proprietary or confidential to the Legal Department and should not use ordisclose any questionable information unless and until they are certain suchuse or disclosure is permitted.

Employeesshall maintain the confidentiality of information entrusted to them by theCompany or its customers, except when disclosure is authorized or legallymandated. Employees shall not, at any time, either directly or indirectly,divulge, disclose or communicate to any person, firm, or corporation anyconfidential or non-public information concerning or relating to the businessof the Company, including the names of any of its customers, the prices atwhich it sells its services, or any other information of, about, or concerningthe Company or its manner of operation, strategies, practices, business plans,or any other information which may, if disclosed, be harmful to the Company orits customers, or be useful to its competitors. This obligation shall surviveany termination of employment with the Company.

Furtherinformation concerning the use and disclosure of trade secrets and proprietaryand confidential information is contained in the discussion of the Company’sinsider trading policy.

 

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INTERNATIONALBUSINESS

** **

**Employees must strictlycomply with all laws of each country in which they conduct business, and withall U.S. laws governing foreign operations. Such laws include control laws, the Foreign Corrupt Practices Act andlaws prohibiting cooperation with foreign boycotts or requiring adherence toState Department-mandated embargoes. Employees also must be respectful and tolerant of the values and legallypermissible customs of the communities and of the countries in which theCompany does or seeks to do business. Illegal activities are inexcusable, even if a particular community or countrydoes not enforce certain laws, and therefore does not penalize or censureviolators of those laws.**

** **

**THE FOREIGN CORRUPT PRACTICES ACT**

 

Employees ortheir agents shall not make payments or offers of payment to any foreignofficial, employee or agent of a foreign official, political party official orcandidate for political office to induce that person to affect any governmentalact or decision or to assist the Company in obtaining or retaining business.This policy applies to payments in the form of gifts as well as money, andincludes the use of personal as well as Company funds.

Whilethe law allows certain types of payments to foreign officials, includingpayments to “facilitate” routine government actions, determining what paymentsare permissible involves analysis of the foreign country’s laws and practices.The FCPA also requires the Company to maintain accurate books and records ofall transactions. Violation of the FCPA is a felony that may expose both theCompany and its employees to criminal prosecution, large fines and imprisonment.Therefore, either an employee’s designated Compliance Officer or the ComplianceCommittee must pre-approve any payment an employee believes is “facilitating”or otherwise exempt from the law.

** **

**IMPORT AND CUSTOMS CONTROLS**

Itis the express policy of the Company to comply fully with the laws of theUnited States and regulations of the United States Customs Service (“Customs”)and those of any other applicable Federal agencies relating to, or governing,the importation or exportation of goods and technology to and from the UnitedStates. This policy also applies with respect to the laws and regulationsrelating to international trade of any other country in which the Company doesor seeks to do business. Accordingly, strict adherence to U.S. and foreign customslaws and regulations is required of every Company employee whose work causes,affects, or supports imports and exports.

UnitedStates customs and trade laws provide that all imported goods must enter theUnited States with the appropriate quota or export/import licenses, labels,markings, bills of lading, and commercial invoices. All goods must beadequately and correctly described and all payments and/or charges related tothe importation must be disclosed to Customs. In addition, certain types ofproducts (e.g., consumer products and textiles) are subject to special laws andregulations. All import transactions are subject to strict recordkeepingrequirements by the various agencies having oversight of the goods and/ortransactions. U.S. customs regulations require that records be retained for aperiod of five (5) years from the date of the transaction and may be subject toreview by Customs.

Further,U.S. customs law and Company policy forbid the importation of goods produced byillegally employed underage workers, convicts or other forced labor. Alsoforbidden is the importation of transshipped goods, which are goodsmisrepresented on entry to the U.S. as the product of a second country in orderto avoid additional duties or quantity limitations imposed on the countryactually producing them. Consistent with this policy, the Company shouldascertain that the factories engaged to produce goods are

 

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not on the Customs list of transshippers,and that they observe appropriate labor practices. Where on-site factory visitsare made, Company employees should be alert to any indications of theseprohibited activities and report them immediately to their Compliance Officer,the Compliance Committee or the Legal Department. Where possible, the Companyshould secure in writing a representation and warranty that the factory orfactories contracted will not supply any goods to the Company where theoriginating country is not legally identified or which is produced by underageor involuntary labor.

Anyquestions concerning the legitimacy of any import or export transaction, andany violations or possible violations of U.S. customs laws or regulations thatcome to the attention of any employee must be brought immediately to theattention of the Compliance Committee or the Legal Department.

** **

**EXPORT CONTROLS**

Underthe Export Administration Regulations, the export of goods and services fromthe United States may require a specific export license from the CommerceDepartment. The same may apply to transshipment of U.S. origin goods from thecountry of original destination to a third country, and to exports of foreignmade goods with U.S. content. Employees must consult with the Legal Departmentbefore exporting any goods.

** **

**ANTIBOYCOTT LAWS**

Employeesshall conduct the Company’s business in accordance with the U.S. antiboycottlaws, which are designed to prevent businesses from cooperating withunsanctioned foreign boycotts of countries friendly to the United States. Ingeneral, antiboycott laws and regulations prohibit cooperation with a foreignboycott, whether by way of: (i) refusing to do business with another person;(ii) applying discriminatory employment practices; (iii) furnishing informationon the race, religion, gender or national origin of any U.S. person; (iv)furnishing information concerning any person’s affiliations or businessrelationships with a boycotted country or any person believed to be restrictedfrom doing business in the boycotting countries; or (v) utilizing letters ofcredit containing boycott provisions. As the Company is required to reportboycott requests, employees must inform their designated Compliance Officer,the Compliance Committee, or the Legal Department of any such requests.

** **

**U.S. EMBARGOES**

Employees shall conductthe Company’s business in accordance with the trade restrictions imposed underthe International Emergency Economic Powers Act and the Trading With the EnemyAct. The prohibitions and restrictions imposed under these laws affect exports,imports, travel, currency transactions and assets and accounts with certaincountries, whether directly or through third parties. Before doing businesswith a foreign country, employees must confirm that no trade restrictions arein effect with respect to that country.

 

POLITICALACTIVITIES AND CONTRIBUTIONS

** **

**Employees shall comply with all campaign finance and ethicslaws, including those prohibiting the use of Company funds, assets, facilities,or services to support or oppose political parties or candidates or toreimburse employees who make donations to support or oppose political partiesor candidates.**

Employeeswho participate in the political process, express their personal views onlegislative or political matters, engage in political activities, and/or makepersonal political contributions must conduct such activities on their own timeand at their own

 

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personal expense, as campaign finance andethics laws and Company policy generally prohibit the use of Company funds,assets, services or facilities on behalf of a political party or candidate.Unless authorized by the Company, employees who engage in such politicalactivities or make any public political statements must avoid any references totheir affiliation with the Company or any of its subsidiaries, and must makeclear that they are acting personally and not for the Company. While there maybe limited circumstances when it is legal for the Company to make politicalcontributions, or to reimburse employees or individuals associated with theCompany for political contributions, such contributions or reimbursements mustnot be made without prior approval from the Company’s General Counsel.

Variousfederal, state and local laws govern the conduct of persons who communicatewith legislative or regulatory officials on behalf of the Company with theintent to persuade such officials to support the interests of the Company.Although such communications (often referred to as “lobbying”) are permitted,lobbyists may be subject to registration, reporting, and financial disclosurerequirements. Employees must consult with the Legal Department prior toengaging in any lobbying activity.

Asfurther discussed in the next section regarding improper payments and excessivegifts, it is generally illegal to offer or give any gift (including meals orentertainment) to any government or political official or to a candidate forsuch a position if the intent of the gift is to induce the official orcandidate to act in a manner that benefits the Company.

 

IMPROPEROR UNRECORDED PAYMENTS; EXCESSIVE GIFTS

 

**Employees shall notmake, facilitate or accept bribes, kickbacks or other improper payments, loansor gifts to or from government officials, customers, vendors, suppliers orother business contacts.  Employees alsomust not create or maintain secret or unrecorded funds or assets or make falseor fictitious entries in the Company’s books or records so as to conceal suchfunds or assets.**

Improperpayments may be in the form of gifts or the provision of services, as well asmoney. Such payments remain improper whether made or received directly orindirectly, including arrangements which aid or abet others to make or receivean improper payment.

Improperpayments include payments prohibited by law, such as payments of any kind to orfrom government or regulatory officials or payments which represent bribes,kickbacks, or payoffs to or from government officials, customers, vendors,suppliers or others with whom the Company does or seeks to do business. Inaddition, any payment that an employee falsely reports or intentionally doesnot report in accounting records is improper. Employees must immediately reportall payments made or received, and they must include supporting documentationstating the purpose for such payments or receipts. Unrecorded, off-the-recordpayments or receipts are prohibited.

Employeesshould be aware that gifts or payments to government and regulatory officialsmay violate federal or state laws, even if given without intending to influencesuch official. As discussed regarding the Foreign Corrupt Practices Act,federal law also prohibits bribery of international as well as domesticgovernment officials. Employees must immediately report to their supervisor,their designated Compliance Officer, the Compliance Committee or the LegalDepartment any request by a government or regulatory official for an improperpayment.

Companypolicy also prohibits employees from giving or receiving excessive or

 

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uncustomary gifts or services to or fromothers with whom the Company does business or seeks to do business, regardlessof whether such gifts or services constitute unlawful or otherwise improperpayments. Additional information concerning this prohibition is included in thediscussion of conflicts of interest.

TheCompany is legally required to collect sales tax in all states where itconducts business. Each state’s law varies in the requirements for collectingtax, ranging from different tax rates to varied taxable items. It is mandatorythat the Company comply with the laws that the states have put into place. Anemployee shall never offer a customer the option or opportunity to ship apurchase in order to avoid paying sales tax.

ThePoint of Sale (POS) system has been programmed to collect the proper sales taxin each store and account for most tax exceptions. All employees shall abide bythe rules set forth in the Company’s Sales Tax Policy. Failure to adhere to theserules will result in disciplinary action up to and including termination ofemployment.

 

FALSESTATEMENTS AND SCHEMES TO DEFRAUD

 

**Employees shall notengage in any scheme to defraud any customer, supplier or other person orentity with whom the Company does business or seeks to do business.  In addition, employees are prohibited fromwrongfully withholding or converting the property of others, making untruthfulstatements about the Company’s products and services, willfully concealingmaterial facts from anyone with whom the Company does business or seeks to dobusiness, and knowingly making commitments that the Company cannot fulfill.**

 

These prohibitions are particularlycritical when dealing with government officials. Employees shall not knowinglyor willfully make or cause to be made oral or written false statements togovernment officials, or conceal or cause to be concealed material facts calledfor in a governmental report, application, filing, investigation or request forinformation. An employee can violate this policy and the law even if theemployee does not personally make the false statement or conceal the materialfact. For example, employees are prohibited from providing false information toany other employee or third party knowing that the information will be (or islikely to be) provided to the government. For additional information, pleasealso see the policy described below concerning responses to inquiries fromthird parties.

 

THEFTOR MISUSE OF COMPANY PROPERTY

** **

**All employees shallprotect the Company’s assets and ensure their efficient use.  All Company assets should be used forlegitimate business purposes only. Theft, carelessness and waste have a direct impact on the Company’sprofitability.  Employees shall notsteal or misuse Company assets, provide any products to any person or entitynot in accordance with established Company policy, or retain any uncustomarypersonal benefit from a customer, vendor, supplier or other person with whomthe Company does business or seeks to do business.**

Employeetheft or misuse of Company property can take many different forms including,but not limited to: stealing the Company’s supplies, equipment or otherproperty; misusing the Company’s equipment, such as telephones, computers,photocopy machines or telecopiers; misusing employee discounts; submittingfalsified

 

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time sheets or expense reports; and usingthe Company’s proprietary information, trade secrets or other assets improperlyor without proper authorization.

Becausetheft and misuse of Company property are serious offenses, employees mustimmediately notify the Human Resources Department, Loss Prevention, theirdesignated Compliance Officer, the Compliance Committee, or an attorney in theLegal Department if they learn of or suspect such offenses by other employees.Strict disciplinary action, including possible termination, will be takenagainst any employee engaged in theft or abuse of Company property and, ifwarranted, against the employee’s supervisor and others in the employee’s chainof command.

Foradditional information, refer to the Code provisions below regarding e-mail,voice mail and the Internet and conflicts of interest.

 

WIRETAPPING,EAVESDROPPING AND TAPE RECORDING

 

**The Company and itsemployees shall comply fully with all laws governing wiretapping, taperecording and other forms of electronic surveillance, and shall not sue anydevise to record, monitor or listen to communications between others withoutthe prior approval of the Legal Department, and without consent of all partiesto the communications required under the law.**

 

Withoutexpress permission from the Legal Department, employees may not use anyelectronic, mechanical or other device to listen to, monitor or record any oralor electronic communication. This includes, but is not limited to, the use oftelephone extensions to overhear other individuals’ conversations. It alsoapplies to any interception of electronic mail or other electroniccommunications.

 

RESPONDINGTO INQUIRIES FROM THIRD PARTIES

 

Employeeswho are contact by government representatives, attorneys who do not representthe Company, the media, or other third parties inquiring about Company mattersmust immediately notify appropriate management personnel before attempting torespond to any written or verbal requests for information.

 

**REQUESTS BYATTORNEYS AND GOVERNMENT AGENTS**

Employeeswho are contacted by attorneys, government agents (e.g., from the Department ofJustice, the Federal Trade Commission, the Equal Employment OpportunityCommission, the Securities Exchange Commission, or other federal, state orlocal agencies), investigators, or other third parties concerning potential oractual litigation or investigations, whether or not the matter involves theCompany, must immediately notify the Legal Department. Employees shall promptlyrefer any verbal or written requests for information, documents or testimony tothe Legal Department. Immediate reporting to the Legal Department isparticularly critical when requests are made in the form of a summons,subpoena, order to show cause, or other document legally requiring that anappearance be made or a response be given. The original legal document must besent immediately to the Legal Department.

Employeesmust also report to the Legal Department any inquiries or requests fromattorneys who are not affiliated with the Company, even if litigation is notpending or threatened. The Legal Department will assess the situation, adviseemployees and

 

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determine the appropriate response.

 

**REQUESTSFOR INSPECTIONS OF PREMISES**

Governmentagencies (e.g., occupational safety and health agencies, customs officials ortaxing authorities) and building code enforcement officials periodically mayseek to inspect Company premises. The manager of the relevant facility, or analternate designee in his or her absence, should be prepared to handle suchinspections. The manager should ask the visitor seeking to conduct an officialinspection to produce credentials and to cite the statutory authority for theinspection. The inspector should be asked to state the specific purpose of theinspection, the matters to be investigated, and the persons to whom theinspector wishes to speak.

**If the inspectionis unannounced and is not a routine one (such as an annual licensinginspection), the visitor should be told that Company policy requires you tocontact the Legal Department, and he or she should be invited to wait until aCompany attorney authorizes the inspection.**

** **

**CONTACTSWITH THE MEDIA AND THE FINANCIAL COMMUNITY**

TheCompany has a legal responsibility to provide its shareholders and the publicwith periodic reports concerning its financial condition (e.g., annual reportsand quarterly earnings statements) and to issue periodic press releases withregard to important corporate developments. To ensure that all such reports andpress releases concerning the Company are supplied to the public in anauthoritative and consistent manner, no employees are to provide suchinformation to anyone outside the Company without the prior approval of theCompany’s Chief Financial Officer, Vice President of Finance, or GeneralCounsel.

Onlythe Chief Executive Officer, the Chief Financial Officer, the Vice President ofFinance, and the General Counsel are authorized to respond to requests forcopies of public reports, including financial reports filed with the Securitiesand Exchange Commission, reports regarding meetings with members of the financialcommunity and previously issued press releases. Employees are to refer any suchrequests to the Chief Financial Officer, Vice President of Finance or GeneralCounsel.

Additionally,no one other than employees authorized by the Company’s Chief Executive Officer,Chief Financial Officer, or Vice President of Finance may respond to inquiriesmade by the media, investment analysts or other third parties (e.g., financialwriters or editors) concerning the Company or any of its subsidiaries ordivisions. This includes inquiries concerning finances, operations, marketingplans, industry issues, litigation or investigations. Such inquiries must bereferred to the Vice President of Finance or the Chief Financial Officer, whowill decide whether or not to provide the requested information. In addition,no employee is to issue a press release to the general, financial or trademedia without the approval of the Vice President of Finance.

Officersand employees who are authorized to discuss matters disclosed in the Company’spublished statements or publicly filed reports should limit their discussion tothe information contained in the printed report, and should refer any inquiriesfor additional information to the Vice President of Finance or the ChiefFinancial Officer.

 

ADVERTISING

 

**Employees shall notcreate, approve or disseminate any advertising or promotional materials thatare false or deceptive, are not adequately substantiated, or otherwise violateapplicable laws and regulations.**

 

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Fairand accurate advertising and sales practices are critically important inpreserving the Company’s goodwill and reputation with its customers and thegeneral public. Federal and state laws, Federal Trade Commission regulations,and Company policy prohibit false, misleading or deceptive advertising andrelated activities in the promotion and sale of products sold or offered by theCompany. Therefore, all advertising claims and other representations tocustomers and potential customers must be truthful and have a reasonable basis.In addition, all advertising claims made in any print or non-print medium,including, for example, catalogues, brochures, posters, newspapers, magazines,radio, television, e-mail or the Internet, must be substantiated beforepublication or dissemination.

 

Becausethe Company holds a prominent position in the retail industry, the conduct ofthe Company and its representatives may be subjected to higher scrutiny thansome of its competitors. While this does not prevent the Company from competingvigorously, it does mean that employees should be particularly sensitive to theconsequences of their competitive conduct, including even casual remarks madeto vendors, distributors, suppliers, customers or competitors. As a generalrule, employees must avoid all advertising claims, representations or conductthat could be characterized as unfair, deceptive, or coercive.

 

Deceptiveadvertising, misrepresentations and unfair or coercive conduct are seriousmatters that consumers readily understand. Such conduct can damage theCompany’s reputation, nullify the Company’s efforts to promote consumergoodwill, and subject the Company and individuals to civil and criminalliability.

 

Inaddition to the general requirement that all advertising and promotional claimsmust be truthful and not misleading, there are laws and regulations that applyto particular types of advertising and/or the advertisement of specificproducts or services. Employees involved in the preparation or publication ofadvertising must seek advice from the Legal Department regarding specific lawsand regulations before disseminating advertising claims.

 

RECORD KEEPING

** **

**Employees must accurately prepare all Company records tofairly reflects its transactions, assets and liabilities, and must maintain andsafeguard such records and supporting documentation in accordance with theCompany’s policies and procedures and applicable legal and accountingrequirements.**

 

**PREPARATION OF RECORDS**

Thelaw requires the Company to keep books, records, and accounts which accuratelyand fairly reflect all transactions, disposition of assets and all other eventsthat are the subject of specific regulatory record keeping requirements (e.g.,generally accepted accounting principles and other applicable rules,regulations, and criteria for preparing financial statements). In addition, theCompany must maintain records of all of its assets and liabilities. Under nocircumstances may there be any unrecorded fund or asset of the Company,regardless of the purposes for which the fund or asset may have been intended,or any improper or inaccurate entry knowingly made on the books and records ofthe Company.

Nopayment on behalf of the Company may be approved or made with the

 

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intention, understanding, or awareness thatany part of the payment is to be used for any purpose other than that describedby the documents supporting the payments. All receipts and disbursements mustbe fully and accurately described on the books and records of the Company andmust be supported by appropriate documentation properly describing the purposesthereof.

** **

**RETENTION OF RECORDS**

Numerousfederal and state statutes require the proper retention of many categories ofrecords and documents that are commonly maintained by companies. These statutesapply to records in any form, including e-mail messages, electronic andrecorded data, as well as hard copies of documents. In consideration of thoselegal requirements and the Company’s business needs, the Company’s recordretention policies set forth the appropriate retention periods for the types ofrecords created and received by each business unit or subsidiary.

Inaddition to the applicable statutory requirements, the existence of pending orthreatened litigation, investigations or subpoenas may require that certaininformation and records be retained for longer than the law and the Company’srecord retention policies require. Accordingly, the Legal Department will issuenotices regarding such matters as they arise and will instruct that certaincategories of documents not be discarded until the matter is resolved.  **It is a violation of law to conceal, alter or destroyrecords that are subject to a subpoena or may be evidence in a pending orthreatened lawsuit or investigation.**

Unlessthe Legal Department has issued a notice of a pending matter requiring thecontinued retention of certain documents, all records in any form are to bepermanently discarded at the end of the period set forth in the recordretention policy applicable to the relevant subsidiary or business unit of theCompany.

 

E-MAIL,VOICE MAIL AND THE INTERNET

** **

**The Company encourages theuse of electronic mail and voice mail because these methods of communicationare efficient and effective.  It alsoencourages the sue of the Internet as a valuable source of information aboutour vendors, suppliers, business partners and competitors.  However, employees must ensure thatelectronic mail, voice mail and the Internet are used appropriately, understandthat messages sent or received and data gathered are not private, composemessages with care and retain them only as long as necessary.**

** **

**APPROPRIATE USE**

E-mail,voice mail and the Internet must be used responsibly and are intended forbusiness purposes only. Although personal use of electronic communicationsystems may be understandable and acceptable at times, this is a privilege thatthe Company reserves the right to control and monitor.

Underno circumstances may e-mail, voice mail or the Internet be used for anyillegal, immoral, or unethical purpose, or for any other purpose that violatesthe Code or may lead to liability or cause harm to the Company. The Internet,in particular, also may not be used for transmitting, retrieving or storing anycommunications of an obscene, discriminatory, harassing, or otherwiseinappropriate nature. The Company retains the sole right to determine whetheror not employees are using these methods of communication properly.

Allfiles downloaded from the Internet are subject to the limitation of copyright

 

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laws and policy. This means that such filesmay not be further copied, distributed or forwarded to anyone except asexpressly permitted by the copyright owner or with the prior approval of theLegal Department. The Company’s copyright policy is described in the CopyrightCompliance section of the Code.

Eachoutgoing Internet e-mail message is identified as originating with the Companyor one of its divisions or subsidiaries. As a result, like other officialcommunications, e-mail messages sent via the Internet must responsiblyrepresent the Company.

Employeesmust not post confidential or sensitive Company information on the Internet,including websites, news groups, chat rooms, and other similar locations.Employees shall not develop or establish websites using the Company’s name orany of it’s trademarks without proper authorization.

 

**PRIVACY**

Alltelephone and computer equipment and the data, documents and messages stored onthem are the property of the Company. With the Legal Department’s expressapproval, the Company reserves the right to monitor and review any e-mail orvoice mail messages created, received or maintained on Company property. TheCompany also reserves the right to review employee use of the Internet.  **Employees shall have no expectation of privacy in theuse of e-mail, voice mail, or the Internet when using Company equipment and/orresources.**

Employeesalso should be cautious when sending e-mail messages over the Internet becausesuch messages are subject to potential unauthorized interception. Therefore,employees should not transmit confidential, proprietary or sensitiveinformation via the Internet. Such information includes non-public Companyinformation or other personal or confidential material.

Finally,voice mail and e-mail messages (including messages sent via an internal e-mailsystem as well as those sent over the Internet) are subject to disclosure to thirdparties in the course of litigation or investigation. Indeed, because messagescan be recreated even after they are erased, even deleted messages are subjectto disclosure.

** **

**CREATIONAND RETENTION OF MESSAGES**

Becausee-mail and voice mail messages are not private and may be subject tointerception or disclosure to third parties, it is critical to compose them ascarefully and professionally as you would handwritten letters, inter-officememoranda or any written document. The nearly instantaneous nature ofelectronic messages may make such communications seem less concrete than apiece of paper, but this is not the case. Every e-mail message can be printedby an employee or any recipient, and every message is likely to be stored innumerous places (including on the employee’s own computer, the system server,the recipients’ computers, and back up tapes) for indefinite lengths of time.As noted above, e-mail messages can be recreated even after they are deleted.Consequently, employees should be conscientious about what they write in e-mailand professional in the manner in which they write it.

Italso is critical to retain messages only as long as necessary. Generally, voicemail messages should be deleted immediately after listening to them, and e-mailmessages should be deleted within 120 days of the date that it was sent orreceived. Records that need to be maintained for longer than 120 days should besaved in a format other than e-mail. E-mail over 120 days old will beautomatically deleted. Advance notice will be communicated within Lotus Notesprior to deletion.

 

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CONFLICTS OF INTEREST

 

**Employees must notoccupy positions or become involved in situations that place them in a conflictof interest with the Company.  Thisincludes accepting gifts from, working for, owning an interest in, or usingconfidential information of a vendor, supplier, customer or competitor of theCompany.  Even the appearance of aconflict of interest can be detrimental to the Company and must be avoided.**

Aconflict of interest arises when an employee engages in any activity thatdetracts from or interferes with the employee’s objectivity, effectiveness,duty of loyalty, and timely performance of services for the Company. A conflictof interest also arises when an employee or a member of the employee’s familyhas a financial or other interest which might influence the employee’s judgmenton behalf of the Company. The Company construes the phrase “member of theemployee’s family” broadly to include at least an employee’s spouse, domesticpartner, child, spouse or domestic partner of a child, parent, in-law, sibling,dependent, aunts, uncles, or any adult sharing the employee’s residence.

Conflictsof interest can arise in many situations. For example, an employee has aconflict if he or she operates or has a financial interest in an enterprise, orhas a family member who operates or has a financial interest in an enterprise,in the same industry as one in which the Company is engaged. An employee alsohas a conflict if he or she, or a member of his or her family, purchases goodsor services from a supplier of the Company at less than retail price (otherthan the normal discount available to all employees of the Company or to the generalpublic). In addition, an employee has a conflict if he or she, or a member ofhis or her family, may benefit from the employee’s position at the Company’sexpense.

Loansand/or guarantees for any financial obligations granted to any employee,including but not limited to officers and directors are of special concern andmust be disclosed to and approved by the Board of Directors.

Ingeneral, no employee should: (a) accept a gift from; (b) be employed by,consult, serve as a director, volunteer or otherwise render services to; (c)own or have an ownership interest in; (d) be a creditor of; or (e) obtainconfidential information for personal benefit from any person, firm or entitythat supplies goods or services to, purchases goods or services from, or is acompetitor of the Company, its subsidiaries or affiliates. The only exceptionsto this general rule are that it is not a conflict for employees to owninsubstantial amounts of stock in publicly-held companies with whom the Companydoes business or competes, or to accept non-cash gifts and/or entertainmentmore specifically described below.

Employees,officers and directors are also prohibited from (a) taking for themselvespersonally opportunities that are discovered through the use of Companyproperty, information or position; (b) using Company property, information, orposition for personal gain; and (c) competing with the Company. Employees,officers and directors owe a duty to the Company to advance its legitimateinterests when the opportunity to do so arises.

** **

**GIFTS**

Employeesare prohibited from soliciting gifts, gratuities, or any other personal benefitor favor of any kind from vendors or potential vendors. Gifts include not onlymerchandise and products, but also personal services, theater tickets, ticketsfor sports events, and any other tangible or intangible items, services orfavors that are valuable and not available to all employees on an equalbasis. Except as provided below, employees are discouraged from acceptingunsolicited gifts, and are **prohibited** from accepting gifts ofmoney and gifts in any form which would induce or obligate them to

 

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give special consideration to the person orcompany making the gift.

Duringany calendar year, employees may accept unsolicited, non-monetary giftsprovided: (1) they are items of nominal intrinsic value ($150.00 or less inaggregate retail value); or (2) they are product samples, clearly marked withcompany or brand names, and distributed to a large group of our employees on anequal basis. Any gift of more than nominal intrinsic value must be reported toMarita O’Dea, Lee Roever or Nina Fabian in the Human Resources Department todetermine whether it can be accepted. Whether or not the gift is accepted,employees should tactfully discourage the person or company making the giftfrom making similar gifts in the future.

 

**ENTERTAINMENT**

Employeesshall not encourage or solicit entertainment from any individual or companywith whom our Company does business. Entertainment includes, but is not limitedto, activities such as dinner parties, theater parties and sports events. Fromtime to time, employees may accept unsolicited entertainment, but only underthe following conditions:

(1) the entertainment occurs infrequently;

(2) the entertainment arises out of the ordinary course ofbusiness;

(3) the entertainment involves reasonable, not lavish,expenditures (the amounts involved should be ones employees are accustomed tospending normally for their own business or personal entertainment);

(4) the entertainment takes place in settings that also arereasonable, appropriate and fitting to our employees, their hosts and thebusiness at hand; and

(5) the employee is not tempted to give and does not feelobligated to give to the individual or company providing the entertainment anyspecial consideration.

Anemployee who becomes involved in a situation that creates a conflict ofinterest, or the appearance of one, should notify his or her supervisor andseek guidance from the Compliance Committee or the Legal Department. TheCompany ordinarily will expect the conflict of interest to be eliminated, butthere are occasions when apparent conflicts may be acceptable depending uponall of the circumstances. The Company reserves the right to take all necessaryactions to eliminate any such conflict in its sole discretion.

 

DRUG AND ALCOHOL USE ANDTESTING

** **

**It is the Company’sintention to provide a safe and productive work environment for all of itsemployees.  Drug and alcohol usethreaten the safety and productivity of the work environment.**

Whileworking on Company premises, employees shall not use, possess, sell,distribute, purchase or be under the influence of illegal narcotics or othercontrolled substances (unless pursuant to a current, valid prescription issuedby a medical professional). Any employee convicted of improper use, possessionor dealing in narcotics or other controlled substances may be dischargedimmediately. Off the job illegal drug use also may subject employees todiscipline if such use could adversely affect job performance or jeopardizeCompany interests or the safety of other employees or the public.

Inaddition, the unauthorized use or being under the influence of alcoholicbeverages while on the job may subject employees to disciplinary action up toand including immediate termination of employment. An employee whose jobrequires the operation of a motor vehicle and who is convicted for drivingunder the influence of alcohol will be immediately discharged.

 

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TheCompany encourages employees who may have a problem with or who are dependentupon drugs and/or alcohol to use the Company’s Employee Assistance Program(“EAP”) at 1-800-445-8988, which is intended to assist employees with personalproblems. Information regarding the EAP is available from the Human ResourcesDepartment.

Anemployee whose job performance or behavior indicates that he or she may beunfit for duty shall not be permitted to work. If allowed under applicablestate laws, the Company may require a medical examination by a doctor,including diagnostic tests, as a condition of continued employment. If use ofdrugs or alcohol is substantiated, disciplinary action may be imposed. Refusalto consent to such tests will force the Company to determine the appropriatediscipline based on information available to it and without the benefit ofpotentially exculpatory test results.

 

ENVIRONMENTAL COMPLIANCE

 

**Employees must conduct the Company’s business in a mannerthat reduces potential adverse environmental impacts, enhances conservation ofenergy and natural resources, and complies in all respects with applicable lawsdesigned to protect the natural and workplace environment.**

Employeesshall abide by all applicable environmental laws and regulations, and must notauthorize, direct, approve, or condone violations of those laws or regulationsby any other person. Employees also must not knowingly enter any falseinformation on any governmental environmental form, on any monitoring report,or in response to any request for environmental information from anygovernmental agency.

Violationof environmental laws or regulations can have serious consequences for theCompany and for the individuals involved. The Company and individual employeesmay be liable not only for the costs of cleaning up pollution resulting fromthe Company’s activities, but also for significant penalties. Violations ofenvironmental laws can subject the Company to civil penalties of tens ofthousands of dollars per day. In egregious situations, very large criminalfines and imprisonment of individual employees may also be imposed.

 

IMPLEMENTATION OF THECODE

 

THE COMPLIANCE COMMITTEE

 

TheCompany’s General Counsel is the Chairman of the Compliance Committee, withultimate responsibility for all matters overseen or addressed by the Committee,including the Company’s compliance with applicable laws and the Code. TheGeneral Counsel has appointed several officers of NMG to serve on the ComplianceCommittee, as listed in Appendix 1. In consultation with management, theCompliance Committee has appointed Compliance Officers for each operatingdivision and subsidiary of the Company who are accessible at a local level andto whom employees may address questions and report violations.

 

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DISSEMINATION OFINFORMATION

 

Allemployees receive a copy of the Code and are required to sign a Certificationrepresenting that they have received and reviewed it, understand theirobligation to comply with the Code’s requirements and to report any violations.Periodically, employees may be asked to re-certify their understanding andcompliance with the Code. Signed Certifications are submitted to the appropriateHuman Resources Department for inclusion in the employee’s personnel file.

TheCompany retains the right to update, amend, or modify the Code at any timewithout prior notice. The Compliance Committee and Compliance Officers areavailable to answer all employee questions concerning the meaning andapplication of the Code and its related policies. Employees also may ask theirsupervisors to relay questions or concerns to a Compliance Officer, a member ofthe Compliance Committee, or to the Legal Department.

 

TRAINING AND EDUCATION

 

TheCompliance Committee oversees and coordinates the training of designatedemployees regarding the Code and its policies. The Legal Department may conductperiodic compliance meetings and distribute guidelines to further educateemployees regarding the Code’s contents.

TheCode summarizes certain key laws, policies and ethical principles under whichdifficulties may arise so that an employee can bring possible problems to theCompany’s attention before illegal or unethical activities occur. The Companyrecognizes, however, that the materials contained in the Code and thosedistributed to supplement the Code cannot possibly anticipate all potentialproblems that employees may encounter. To a significant extent, the Companymust rely upon each individual employee to act with integrity, to use his orher best judgment, to seek guidance when necessary and to do the right thing inany given situation.

 

DISCIPLINE FORVIOLATIONS

 

Employeesare expected to follow the letter and the spirit of the law and the Code.Supervisors are responsible for the behavior of employees under their directionand control.

TheCompany will follow whatever procedures and take whatever disciplinary actionit deems appropriate under the particular circumstances. In addition todisciplinary action that the Company may impose in the ordinary course ofconducting its business, the Code provides specific disciplinary guidelines.Under the Code, disciplinary action up to and including termination ofemployment may be taken against the following:

 

•                                          Employees who authorize or participate directly in actionsthat violate the law or the Code;

•                                          Employees who fail to report a violation of the law or theCode, or who withhold relevant and material information concerning a violationof which they are aware or should be aware;

•                                          The violator’s supervisor(s), to the extent that thecircumstances of the violation reflect inadequate supervision or lack ofdiligence by the supervisor(s);

•                                          Employees who attempt or encourage others to retaliate,directly or

 

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indirectly, againstindividuals who report violations of the law or the Code; and

•                                          Employees who submit reports of violations or suspectedviolations which the employees know or should know are false.

 

INVESTIGATINGAND RESPONDING TO ALLEGATIONS OF VIOLATIONS

 

Allreported violations of the law or the Code will be investigated promptly andwill be treated confidentially to the extent reasonable and possible under thecircumstances. The Compliance Committee coordinates all investigations ofwrongdoing and confers with Company management regarding any recommendedcorrective action.

Employeesare expected to cooperate in the investigation of alleged violations of the lawor the Code. It is imperative, however, that employees not conduct even apreliminary investigation of any possible violations without first obtainingthe approval of the Compliance Committee. Investigations may raise complicatedlegal issues, and if conducted without the approval, advice and supervision ofthe Compliance Committee could result in adverse consequences.

 

RETENTIONOF OUTSIDE LEGAL COUNSEL

 

Periodically, the Companywill retain outside counsel to provide advice regarding legal compliance,assist in conducting internal investigations, or represent the Company inlitigation or governmental investigations. Only the Legal Department may decidewhen to retain outside counsel to represent or to advise the Company, and itwill select, hire and supervise outside counsel.  **No one other than the Legal Department may retain outside counsel withrespect to any Company matter.**

 

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**THENEIMAN MARCUS GROUP, INC.**

**CODEOF ETHICS AND CONDUCT**

 

CERTIFICATION

 

Ihave received The Neiman Marcus Group, Inc.’s Code of Ethics and Conduct (the“Code”). I have read the Code, understand its contents, and agree to abide byit. I acknowledge that the Code is a statement of legal and ethical principlesand of individual and business conduct. **It is not an employmentcontract between me and the Company, and does not change my at-will employmentstatus**. Iunderstand that my failure to comply with the Code or other Company policiesmay subject me to disciplinary action, up to and including the immediatetermination of my employment.

 

Ifurther understand my responsibility to report violations of the Code,potential violations of the Code, and violations of any laws and that I shouldreport such matters to my supervisor, any attorney in the Legal Department, mydesignated Compliance Officer, the Compliance Committee, or AssociateRelations.

 

TheCompany reserves the right to update, amend or modify the Code at any timewithout prior notice.

 

 
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| Title       |   |   |
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| Company     |   |   |
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| Date        |   |   |
|             |        |        |  |  |  |  |

 

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Please return this formto your Department Manager or Human Resources Department.

 

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