**Rural Telephone Bank**

**Minutes of the 131st Board Meeting**

**February 11, 2000**

[Time and Place of Meeting]{.underline}

The 131^st^ meeting of the Board of Directors (Board) of the Rural
Telephone Bank (Bank) was held Friday, February 11, 2000, in the
Williamsburg Room, U.S. Department of Agriculture, Washington, D.C.,
pursuant to notice published in the [Federal Register]{.underline} on
February 3, 2000*.*^1^ Chairperson (Chair) Jill Long Thompson called the
meeting to order at 9:00 a.m.

[Attendants]{.underline}

Directors present were: Jill Long Thompson Michael Jensen

> Michael Dunn John Dillard
>
> Sharron Harris Curtis Sampson
>
> Carl Whillock John McAllister
>
> Robert Lee Stanton David Crothers
>
> Jimmie Lou Fisher Larry Sevier

Among others present were Acting Governor Christopher McLean and staff
members Roberta Purcell and Jonathan Claffey. Also present was Frank
Clover of the Office of the General Counsel (OGC). (Directors not
present: Dr. I. Miley Gonzalez.)

[Action on the Minutes]{.underline}

On motion duly made and seconded, the minutes of the November 9, 1999,
board meeting were adopted as prepared.^2^

[Secretary\'s Report]{.underline}

Secretary Curtis Sampson reported that in the first quarter the Bank
approved one loan for a total of \$3,037,650.^3^ This loan was
commingled with \$5,207,000 and \$5,000,000 of RUS cost of money funds
and hardship funds, respectively.

[Treasurer\'s Report]{.underline}

Treasurer John McAllister reported on the finances of the Bank for the
first quarter of FY 2000.^4^\
Mr. McAllister reported, among other things, that net revenue for the
first quarter totalled \$26 million as

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^1^ Exhibit 131-1

^2^ Exhibit 131-2

^3^ Exhibit 131-3

^4^ Exhibit 131-4

Minutes of the 131^st^ Board Meeting

February 11, 2000

compared to \$24 million in the first quarter of FY 1999; total class B
stock net of conversions to C stock amounted to \$744.9 million as
compared to \$716.9 million on December 31, 1998; and total class C
stock increased from \$215.3 million on December 31, 1998 to \$280.1
million on December 31, 1999. Advances on loan commitments for the
quarter totalled \$13 million as compared to \$16 million for the same
quarter in FY 1999; and unadvanced loan commitments totalled \$947
million, up from \$918 one year earlier. There being no questions or
comments, the Chair moved on to the next agenda item.

[Privatization Committee Report]{.underline}

Committee Chairman Curtis Sampson expressed the Committee\'s desire to
have the Department of Agriculture support the following Committee
recommendations:

1.  Eliminate from future annual appropriations of the Bank the
    five-percent limitation on the retirement of class A stock. The
    annual limitation provision was not an Administration initiative,
    but one supported by the industry.

2.  Add to the appropriations bill a line item confirming that the Bank
    owns the assets, subject to the liabilities, as audited by the
    Federal Government.

3.  Negotiate the retirement of class A stock with the Office of
    Management and Budget (OMB), the U.S. Treasury and, possibly,
    industry members. The Committee recommends that Class A stock be
    converted to a debenture, with negotiated terms and interest rate.

4.  Retain the RUS staff on a contract basis for a defined term in the
    future to administer the Bank loan program, together with relatively
    minimal Bank employees. Bank employees would likely include a CEO
    and, possibly, a CFO. The Bank would fund part of RUS\'s cost to
    administer the loan program, thereby relieving some of the budget
    pressure as experienced in the past.

5.  Change the interest rate formula and certain other Bank matters
    through legislation after the Board has voted to privatize.

Mr. Sampson added, that if the Department of Agriculture supports this
path, a vote to privatize could follow within the current fiscal year.
In addition, he believes that the industry would be very supportive of
the foregoing recommendations.

Minutes of the 131^st^ Board Meeting

February 11, 2000

[Discussion on Contracting a Financial Advisor and Transferring Funds to
be used for the Contract from]{.underline}

[the Liquidating Account to a Private Financial Institution]{.underline}

Acting Governor Christopher McLean stated that, at the previous meeting,
the Board requested that \$100,000 be sought from the Bank\'s assets to
pay for a financial analysis. The staff had visited with the U.S.
Treasury and OMB, and the answer to our request essentially was no, that
it would not be possible. The main reason was that the annual
appropriations bill requires that expenses of the Bank be funded out of
the RUS Rural Development Budget. The staff, therefore, requested
through the Rural Development Budget Office that the \$100,000
expenditure be placed on the unfunded list and be considered by the
Rural Development Budget Committee. He then advised the Board that the
U.S Treasury denied our request to transfer assets out of the U.S.
Treasury and into a private financial institution.

Director Sampson appealed to the Board regarding the importance of, and
potential urgency for, a business plan to prepare the Bank for
privatization. Speaking for the members of the Privatization Committee,
Mr. Sampson conveyed their request to the Chair for her support of the
Rural Development Budget Office request for the \$100,000 for a business
plan.

The Privatization Committee would like to begin discussions with a small
CPA firm or two that are geographically located in the middle of where
four of the six Privatization Committee members are located. According
to Mr. Sampson, the small CPA firm is very recognized among telephone
companies and has experience with RUS, the Bank, CoBank and the Rural
Telephone Finance Corporation (RTFC). This CPA firm has a very good
understanding of the needs of rural telephone companies and very good
understanding of why borrowers have gone from RUS to RTFC and CoBank.
The Privatization Committee believes that the cost would be a fraction
of what it would be to contract with a Big Five accounting firm, thus,
may engage in general discussions with this small CPA firm within the
next three months. Mr. McLean stated that, in light of the legislative
stalemate that we are engaged in with our colleagues at the U.S.
Treasury and OMB, as well as the very significant actions just
recommended by the Privatization Committee, that such research would be
extraordinarily useful and prudent in proceeding with a privatization
plan.

[Consideration of Resolution to Change the Procedure for Issuing Class C
Stock Certificates]{.underline}

Acting Governor Christopher McLean explained that the proposed
resolution would allow the book entry of class C stock shares rather
than certificate issuance. We would issue certificates only upon request
by the stockholder. The book entry method would be more convenient for
members, as well as facilitate good record keeping by the Bank. There
being no discussion, the following resolution was unanimously
adopted.^5^

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^5^ Exhibit 131-5

Minutes of the 131^st^ Board Meeting

February 11, 2000

**[Resolution No. 2000-1]{.underline}**

> Resolved, That stockholders be informed that Class C stock hereafter
> will be issued in book entry form and certificates therefor will be
> issued only on a specific request of the stockholder as set forth in
> Section 2.3 of the Bylaws.

[Consideration of Resolution to Modify the Procedure for Replacing Lost
Share Certificates]{.underline}

Acting Governor Christopher McLean explained that presently the Board
must vote each time a lost share certificate is replaced. For
administrative convenience, the proposed resolution would give the
Governor the authority to issue replacement shares. Director Michael
Dunn requested that at each meeting the Governor report to the Board
each request received for replacement share certificates along with his
actions thereon. There being no discussion, the following resolution was
unanimously adopted.^6^

**[Resolution No. 2000-2]{.underline}**

> RESOLVED, That the Procedure to Replace Lost Share Certificates,
> adopted by the Board on November 10, 1988, be amended so that the
> fifth (5) paragraph thereof reads as follows:
>
> \"Governor will consider the stockholder\'s request upon receiving a
> satisfactory Affidavit of Lost Shares.\"

[Consideration of Resolution to Adopt a Schedule for Various Actions
Concerning the November 2000]{.underline}

[Board of Directors Election]{.underline}

Acting Governor Christopher McLean explained that the resolution
outlines the proposed schedule as to the election process. After some
discussion, the following resolution was unanimously adopted.^7^

**[Resolution No. 2000-3]{.underline}**

> RESOLVED, That the following schedule be adopted in planning the
> election of directors to be held on November 1, 2000.
>
> Friday, July 7 \"As of date\" for determining voting rights (Bylaws
> §2.5).
>
> Friday, July 14 Governor prepares voting list (Bylaws §2.8).

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^6^ Exhibit 131-6

^7^ Exhibit 131-7

Minutes of the 131^st^ Board Meeting

February 11, 2000

**[Resolution No. 2000-3 *(continued)*]{.underline}**

> Tuesday, July 18 Mail preliminary notice of election with form for
>
> nominating directors (Bylaws §4.4(a)).
>
> Wednesday, August 30 Final date for receipt of nominations by mail or
> fax
>
> (Bylaws §4.4(a)).
>
> Thursday, August 31 Tabulate nominations (Bylaws §4.4(a) and (b)).
>
> Monday, September 25 Mail official ballots (Bylaws §4.4(c).
>
> Tuesday, October 31 Final date for receipt of ballots (Bylaws
> §4.4(d)).
>
> Wednesday, November 1 Tabulate ballots (Bylaws §4.3(a)).
>
> Friday, November 17 First regular meeting of the new Board (Bylaws
> §5.1).

[Consideration of Resolution to Appoint Tellers for the November 2000
Board of Directors Election]{.underline}

Acting Governor Christopher McLean introduced the proposed resolution.
There being no discussion, the following resolution was unanimously
adopted.^8^

**[Resolution No. 2000-4]{.underline}**

> RESOLVED, That the Branch Chiefs, Program Accounting Services
> Division, or their designees, serve as election Tellers to tabulate
> nominations and ballots for the November 1, 2000, Bank election with
> the Director, Program Development and Regulatory Analysis, serving as
> Head Teller.

[Consideration of Resolution to Approve Kenneth M. Ackerman to Serve as
the Assistant Treasurer]{.underline}

Acting Governor Christopher McLean presented the proposed resolution for
consideration by the Board. There being no discussion, the following
resolution was unanimously adopted.^9^

**[Resolution No. 2000-5]{.underline}**

> RESOLVED, That the Board approve the Acting Governor\'s recommendation
> of Kenneth M. Ackerman, Assistant Administrator, Program Accounting &
> Regulatory Analysis, Rural Utilities Service, to serve as the
> Assistant Treasurer of the Rural Telephone Bank.

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^8^ Exhibit 131-8

^9^ Exhibit 131-9

Minutes of the 131^st^ Board Meeting

February 11, 2000

[Other Business]{.underline}

Director Michael Dunn asked Acting Governor Christopher McLean to
address what the RUS Telecommunications Program was doing to fulfill the
President\'s initiative on closing the digital divide. Mr. McLean
summarized RUS\'s as well as other department\'s initiatives on the
subject. Directors\' Sevier, Dillard, and Sampson shared with the Board
their opinions and personal experiences with projects aimed at closing
the digital divide and improving telecommunications in rural areas.

[Next Board Meeting in Washington, DC]{.underline}

The May staff briefing and Board meeting dates are as follows:

> Staff Briefing: Thursday, May 11, 2000, at 2:00 p.m.
>
> Board Meeting: Friday, May 12, 2000, at 9:00 a.m.

[Adjournment]{.underline}

Whereupon motion to adjourn was made and the meeting was adjourned at
9:42 a.m.

Signed by Curtis Sampson

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Secretary