Page 1 John F. Levy Board Advisory (O): (908) (O): (201)

 Back in the Day ◦ Was Ceremonial  Sarbanes Oxley ◦ Then Compliance  New World Order ◦ Now Competitive Advantage John F. Levy Board Advisory 2

 Dutch East India Trading Company  Need for Capital  Limited Investors  Direct contact between managers and investors  More shareholders John F. Levy Board Advisory 3

 Comes from the Latin fides, meaning faith, and, and fiducia, meaning trust.  Act at all times for the sole benefit and interests of another,.  Highest standard of care at either equity or law.  Highlighted by good faith, loyalty and trust. John F. Levy Board Advisory 4

 Director duties are governed by the corporate law of the state of incorporation.  Under Delaware law the business is managed by or under the direction of the Board of Directors.  In this capacity, members of the Board serve as fiduciaries of the Company and its shareholders. John F. Levy Board Advisory 5

 The Duty of Care  The Duty of Loyalty  The Duty of Disclosure John F. Levy Board Advisory 6

Directors do not act in good faith when there is:  fiduciary conduct motivated by an actual intent to do harm;  “gross negligence”; or  intentional dereliction of duty. John F. Levy Board Advisory 7

The courts will not second guess directors’ decisions if the directors can demonstrate that they complied with the duties of care, loyalty and disclosure in good faith. John F. Levy Board Advisory 8

 A full, complete and considered process  Consider utilizing legal, financial and other expert advice  Complete agendas  Materials in advance of meetings  Sufficient time for discussion  Complete minutes John F. Levy Board Advisory 9

 Set Strategy  Understand Risk  Monitor Execution  Select, Assess, Evaluate and Compensate the CEO  Comply with Laws and Regulations John F. Levy Board Advisory 10

 Tough times require additional Board involvement attention  Government, shareholders and activists are watching  Board are focused on Risk  Cash forecasting and management are Board issues John F. Levy Board Advisory 11

 Board Chairperson or Lead Director  Governance Committee  Compensation Committee  Audit Committee  Other Committees John F. Levy Board Advisory 12

Shareholders Board of Directors Chairman/ Lead Director Governance and Nominating Committee Compensatio n Committee Audit Committee Internal Audit CEO Management and Employees John F. Levy Board Advisory

 Each Committee is responsible to a Charter.  The Charter lists the responsibilities and expectations of each committee.  Charters may be detailed or broad.  Charters are typically available on company websites or in public filings. John F. Levy Board Advisory 14

Public companies must disclose:  Audit committee financial expert by name,  Independence,  If no expert the public company must disclose this fact and explain why. John F. Levy Board Advisory 15

An understanding of:  GAAP and the ability to assess the general application GAAP;  Internal controls and procedures for financial reporting; and  Audit committee functions. John F. Levy Board Advisory 16

 Must have obtained by :  principal financial officer, principal accounting officer, controller, public accountant or auditor or similar or actively supervision;  oversee or assess the performance of companies or public accountants;  or other relevant experience. John F. Levy Board Advisory

 NONE  Higher Standard John F. Levy Board Advisory 18

 Annual Board evaluation ◦ Entire Board ◦ Each Director  Skills Assessment ◦ Skills Required ◦ Skills of Existing Board  Board Dynamics ◦ Big Name - Small Company ◦ Team Players ◦ Building Consensus John F. Levy Board Advisory 19

 On Boarding ◦ The Company ◦ The Industry ◦ The Role of Board Members ◦ Committee Responsibilities and Committee Charters  Ongoing Training ◦ Keeping Current ◦ New Committee Assignments ◦ Ongoing Education John F. Levy Board Advisory 20

 Tone at the Top  Continuing role with the Company  See the “big picture”  Independent  Adults in the room John F. Levy Board Advisory 21

 Failure to see ethical issue  Not trained to look for ethical issues  Don’t want to “rock the boat”  Close relationships with CEOs  Short-term focus John F. Levy Board Advisory 22

 Healthy relationships, personal, professional and business, are built on trust.  Unethical behavior violates our trust. John F. Levy Board Advisory 23

 Must become a competitive advantage  Under Delaware law, fiduciaries for the shareholders  Protected by the business judgment rule  Primary role must be to set strategy  Improve selection process and training  Potential to create great wealth, job creation and innovation.  Work hard, faithfully and diligently and make ethical decisions to stop repeating past mistakes. John F. Levy Board Advisory 24