1 Basics of Bank Board Minutes Carol Kelleher Vice-President and Corporate Secretary Pacific Capital Bancorp Santa Barbara, Calif.

2 Minutes Purpose of minutes Who maintains minutes and why? Style of minutes When to file attachments Common mistakes Red flags and the regulators Minimum content Housekeeping issues Drafting samples

3 Purpose of Minutes Corporate Purpose Official internal record of all decisions reached and actions taken Resource for identifying or communicating to outside parties Record of board or committee diligence Evidence of the separate corporate existence of the company Preserve company history

4 Purpose of Minutes Regulatory Purpose Permanent, official record of the business transaction and action taken at meetings of the board, committees and shareholders. (The Model Business Corporation Act) State statutes require that minutes be kept California Corporations Code Delaware General Corporation Law

5 Who Maintains & Why? Corporate Secretary, the quarterback of board meetings Why? Required officer – some prescribed functions Document management/retention processes Focal point for communication with board, senior management and shareholders Web site maintenance

6 Style of Minutes Short, long or hybrid? Determined in large part by the personal preferences of the Chairman, the Corporate Secretary, and directors Short form or abbreviated Long form or narrative and detailed Hybrid (a compromise) Choose a style and be consistent!

7 Short Form Minutes Advantages Concise, easy way to determine action taken by the board Helps avoid ambiguity Presents less language to be misconstrued in a litigation context Disadvantages Does not spell out reasoning for action taken by the board Does not clearly evidence the boards diligence in dealing with specific matters Case law may require more detail for certain kinds of transactions

8 Long Form Minutes Advantages Spells out reasons and provides evidence of the boards diligence in dealing with specific matters Presents clear picture of total deliberation process More in tune with recent case law for material transactions and SOX disclosures Disadvantages Provides greater opportunity for misinterpretation of language, particularly in a litigation context May include extraneous information which may be confusing Not as direct in explaining action taken by the board

9 When to file attachments Incorporate bulky documents by reference Resolutions may specifically identify and incorporate loan agreements, contracts, policies, etc. Reports that contain crucial financial or other technical information Incorporated documents accompany the official minutes

10 Common Mistakes Choose words carefully, without color or unnecessary adjectives Avoid internal company or industry terminology or usage, unless it is essential to accuracy Write minutes/resolutions with a view towards certifications Assume minutes will be in litigation How you say it can make a difference The Chairman noted that the committee had not been diligent in its efforts to … The Chairman requested each member of the committee to increase efforts to …

11 Red Flags What red flags are the regulators looking for when reviewing minutes? Answer: Did the board perform its oversight role? Regulators dig down through the organization Minutes need to validate and document the actions taken by the board and its committees Any bank policy that mentions the board will have oversight responsibility for … is fair game

12 Minimum Content of Minutes Who was there? Directors & non- directors Did they arrive late or leave early? Approval of minutes Reference materials provided to the board – before and during the meeting Who presented? What did they say? Describe subjects discussed, but not individual comments Indicate action taken Negative votes. Does the NO voter want to be named? Explain how conflict of interest situations were resolved

13 Housekeeping Issues What happens to the board material after the meeting? Board meeting backup material Drafts of minutes

14 Drafting Samples Short Form Compensation Committee Report.Ms. ________, Chair of the Compensation Committee, gave a report of the meeting held on December 10, After discussion, the report was accepted and ordered filed with the records of the meeting. Financial Report. Using a series of charts, Mr. ______ reported to the Board on the Companys forecasted results for the first quarter of 2005.

15 Drafting Samples Long Form Audit Committee Report. The Committee Chairman reported on matters considered by the Audit Committee at its January 10, 2005 meeting. This included significant treasury matters, such as share repurchase authorization and activities, foreign exchange hedging, recent internal audits, Sarbanes- Oxley compliance issues, and auditor independence. After discussion and upon motion duly made, seconded and unanimously carried, the Board accepted the Audit Committee Report.