**EXHIBIT14.1**

 

 

**Codeof Ethics and Business Conduct of Schmitt Industries, Inc.**

 

**Introduction**

 

This Code of Ethics and Business Conduct and Ethics (“Code”) sets forththe policies of Schmitt Industries, Inc. (“Schmitt”, “we”, or the “Company”)with respect to the way we and our subsidiaries conduct ourselves individuallyand operate our business. The provisions of this Code are designed to promotehonest and ethical conduct, including the ethical handling of actual orapparent conflicts of interest between personal and professional relationships.All employees, officers and directors of the Company must comply with theprovisions of this Code. References to employees contained in this Code shouldbe understood as referring to officers and directors as well, regardless ofwhether such officers and directors have an employment relationship with us.

 

In the course of performing our various roles in the Company, each ofus will encounter ethical questions in different forms and under a variety ofcircumstances. Moments of ethical uncertainty may arise in our dealings withfellow employees, with customers, or with other parties such as governmententities or members of our community. Our employees should never be contentwith simply obeying the letter of the law, but must also strive to comportthemselves in an honest and ethical manner. This Code provides rules andprocedures to help our employees, officers and directors recognize and respondto situations that present ethical issues. For guidance with respect to issuesnot addressed in this Code, employees are directed to our Employee Manual whichsets forth the Company’s policies on a wide range of issues that arise in thecourse of employment.

 

Schmitt’s reputation is its greatest asset and its value relies on thecharacter of its employees. In order to protect this asset, Schmitt will nottolerate unethical behavior by employees, officers or directors. Those whoviolate the standards in this Code will be subject to disciplinary action. Ifyou are concerned about taking an action that may violate this Code or areaware of a violation by another employee, follow the guidelines set forth inthis Code.

 

**Compliance with Laws, Rules and Regulations**

 

Company policy requires that all employees of the Company comply fullywith both the spirit and the letter of all laws, rules and regulations.Whenever an applicable law, rule or regulation is unclear or seems to conflictwith either another law or any provision of this Code, all employees are urgedto seek clarification from their supervisor, the Ethics Officer (identifiedbelow), or our outside legal counsel.

 

**Conflicts of Interest**

 

Every employee has a primary business responsibility to the Company andmust avoid conflicts of interest. A conflict of interest arises when an employeetakes actions or enters into relationships that oppose the interests of Schmittor interfere with the employee’s performance or independent judgment whencarrying out his or her duties. The Company strictly prohibits its employeesfrom taking any action or entering into any relationship that creates, or evenappears to create, a conflict of interest without the prior approval of asupervisor. The Company’s chief executive officer and chief financial officermust receive approval of our board of directors (the “Board”) or a Boardcommittee prior to taking any action or entering into any relationship thatcreates, or even appears to create, a conflict of interest. For purposes ofdetermining whether a conflict exists, the actions of an employee’s immediatefamily members are treated as those of the employee and are therefore subjectto the same considerations.

 

In order to avoid such conflicts, an employee may not receive anypayments, compensation, or gifts, other than gifts of nominal value, from any entitythat does business or seeks to do business with Schmitt. Furthermore, employeesmay not use Company property, information or influence or their position in theCompany for improper personal gain. Employees must be sensitive to otherpotential conflicts of interest that may arise and use their best efforts toavoid the conflict.

 

If an employee has any questions regarding the Company’s policy onconflicts of interest or need assistance in avoiding a potential conflict ofinterest, he or she is urged to seek the advice of a supervisor or the EthicsOfficer. Our Ethics Officer is our Chief Financial Officer.

 

**Fair Dealing**

 

Although our prosperity depends on our ability to outperform ourcompetitors, we are committed to achieving success by fair and ethical means.We seek to maintain a reputation for honesty and fair dealing among ourcompetitors and the public

 

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alike. In light of this aim, the Company prohibits employees fromengaging in any dishonest, unethical or illegal business practices. An exhaustivelist of unethical practices cannot be provided. Instead, the Company relies onthe judgment of each individual employee to avoid such practices. Furthermore,each employee should endeavor to deal fairly with the Company’s customers,suppliers, competitors and employees. No employee should take unfair advantageof anyone through manipulation, concealment, abuse of privileged information,misrepresentation of material facts, or any other unfair business practice.

 

**Books and Records, Accounting Controls andDisclosures**

 

The Company requires that all its books and records be maintainedaccurately, timely, consistently, and completely, and be prepared with honesty.This requires that no fund, asset, liability, revenue or expense be concealedor incompletely recorded for any purpose. All entries must be supported bydocumentation adequate to permit the books and records to be verified by audit.Proper accounting requires not only careful compliance by the Company’saccountants, but also the cooperation of all employees who are involved inkeeping or providing information supporting financial records of any type.

 

The Company’s internal review processes and external independentauditing processes are essential to the proper reporting of the Company’sfinancial information. The Audit Committee of our Board has the responsibilityto review the Company’s policies and practice with respect to financialreporting. By conducting this review, the Audit Committee directs management ofthe Company to correct deficiencies in its practices. Auditors shall haveunrestricted access to all Company documents and records. All employees arerequired to cooperate fully with internal and external audits. In no case mayan employee make a false or misleading statement to any internal or externalauditor, withhold records, or otherwise interfere with an audit. An employeewho has knowledge of any unreported or improperly reported financial activitymust report such information to a supervisor, the Ethics Officer or the AuditCommittee.

 

The Company recognizes that the investment community derivesinformation regarding the Company’s financial condition primarily from theCompany’s filings with the Securities and Exchange Commission. To promote thetransparency of its financial operations, the Company has a strict policyrequiring that all filings with the Securities and Exchange Commission befairly stated, accurate, timely, consistent, and complete.

 

**Waivers**

 

The Company expects all employees to comply with the provisions of thisCode. Any waiver of this Code for executive officers or directors may be madeonly by formal action of the Board and will be promptly disclosed to the publicas required by law and the Nasdaq rules. When necessary, a waiver will beaccompanied by appropriate controls designed to protect the Company.

 

**Compliance Resources**

 

In some situations, an employee may be uncertain how to proceed incompliance with this Code. This uncertainty may concern the ethical nature ofthe employee’s own acts or the employee’s duty to report the unethical acts ofanother. When determining the proper course of action, the employee shouldcarefully analyze the situation and seek guidance from his or her supervisor orother appropriate personnel in accordance with the following four steps:

 

1.               *Gather all the facts*. Do not take anyaction that may violate this Code until you have gathered all the facts thatare required to make a well-informed decision and, if necessary, you haveconsulted with your supervisor, the Ethics Officer or our outside counsel.

 

2.               *Consider whether the action is illegal or contrary tothis Code*. If the action is illegal or contrary to the provision ofthis Code, you should not carry out the act. If you believe that this Code hasbeen violated by an employee, you must promptly report the violation inaccordance with the procedures set forth below.

 

3.               *Discuss the problem with your supervisor*.It is your supervisor’s duty to assist you to comply with this Code. Feel freeto discuss the situation with your supervisor if you have any questions. Youwill suffer no retaliation for seeking such guidance.

 

4.               *If necessary, seek additional resources*.The Ethics Officer is available to speak with you about problematic situationsif you do not feel comfortable approaching your direct supervisor.Alternatively, you may also request assistance in writing by sending a requestto the Ethics Officer. The Company’s outside legal counsel is also available toassist you in complying with those aspects of the Code that involve more complexissues, such as insider trading and conflicts of interest.

 

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**Reporting Procedures**

 

All employees have a duty to report any violations of this Code, aswell as violations of any laws, rules, or regulations. Employees also have aduty to report any transaction or relationship that could reasonably beexpected to give rise to a conflict of interest.

 

If you are aware of a potential conflict of interest or believe thatthe Code has been violated by an employee you must promptly report theviolation to his or her direct supervisor or the Ethics Officer. If a report ismade to a supervisor, the supervisor must in turn report the violation to theEthics Officer or the CEO. All violations by an officer or director of theCompany must be reported directly to the Ethics Officer or CEO. Employees mayalso choose to report any violations regarding record keeping or financialreporting to the Audit Committee. Reports may be made in person, by telephone,or in writing by sending a description of the violation and the names of theparties involved to the appropriate persons:

 

•                  Correspondenceaddressed to our Chief Financial Officer/Ethics Officer, Chief ExecutiveOfficer or Audit Committee may be sent to the following location:

 

Schmitt Industries, Inc.

2765 N.W. Nicolai Street

Portland, Oregon  97210

Phone: (503) 227-7908

Fax: (503) 223-1258

 

•                  Correspondenceto our outside legal counsel may be sent to the following location

 

Holland & Knight LLP

Attn: Mark A. von Bergen

111 S.W. Fifth Avenue

2300 U.S. Bancorp Tower

Portland, Oregon  97204

Phone: (503) 243-2300

Fax: (503) 241-8014

 

When reporting a violation, you may choose to remain anonymous.However, if you make an anonymous report, you should create and preserve yourown record of this report in order to be able to demonstrate your compliancewith the requirement of reporting violations. Generally speaking, every effortwill be made to maintain the confidentiality of reports of potentialviolations. However, there may be a point where the identity of the reporting employeemay become known or may have to be revealed in the course of the investigationor to take corrective action.

 

The Company does not permit retaliation of any kind against employeesfor good faith reports of ethical violations. Any employee who attempts to orencourages others to retaliate against an individual who has reported aviolation will be subject to disciplinary action.

 

**Disciplinary Action**

 

The Company has implemented the following disciplinary policies toensure that prompt and consistent actions are taken in response to Codeviolations:

 

1.               *Range of Penalties*. All violations of thisCode will be treated seriously and will result in the prompt imposition ofpenalties which may include (1) an oral or written warning, (2) a reprimand,(3) suspension, (4) termination and/or (5) restitution. Violations will also bereported to the appropriate regulatory agencies or other authorities.

 

2.               *Disciplinary Process*. The penalty for aparticular violation will be decided on a case-by-case basis and will depend onthe nature and severity of the violation as well as the employee’s history ofnon-compliance and cooperation in the disciplinary process. Significantpenalties will be imposed for violations resulting from intentional or recklessbehavior. Penalties may also be imposed when an employee fails to report aviolation due to the employee’s indifference, deliberate ignorance or recklessconduct. Where there is credible evidence of a violation, the Ethics Officer,the CEO, the Audit Committee, or the Board will determine the appropriatesanction. The process will begin with the Ethics Officer and will be escalatedto the level which is appropriate for the position of the person andsignificance of the matters which appear to be involved.

 

3.               *Consistent Enforcement*. All employees,officers and directors will be treated equally with respect to the impositionof disciplinary measures. Pursuant to this policy, all levels of employees willbe subject to the same disciplinary action for the commission of a similaroffense.

 

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