December 1, 1998 Minutes

Board of Directors Meeting

A meeting of the Board of Directors of the Universal Service Administrative Company (USAC) was held by conference call on Tuesday, December 1, 1998. The meeting was called to order at 11:35 a.m. EDST by Ms. Lisa Rosenblum, Chair. Ms. Cathy Howard, Executive Assistant to Ms. Cheryl Parrino called the roll for Mr. Robert Haga, Acting Secretary.

View Meeting Attachments (below)

1. Authorization for NECA to Enter Into a Contract with Vestcom for Printing & Mailing of Remittance Advice Statements to Service Providers – Ms. Parrino explained that this motion is before the Board because the contract cost will be approximately $174,000 a year and as CEO of USAC, Ms. Parrino only has authority to approve contracts under $100,000. Ms. Parrino explained how utilizing Vestcom would save USAC approximately $40,000 over in-house production, and that strict confidentiality requirements were in place. As an aside, Ms. Parrino noted that Vestcom has a very strict provision in its company policy that Vestcom itself as well as any other company Vestcom does business with is Y2K ready.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors authorizes the USAC CEO to provide NECA with the authorization to enter into the contract with Vestcom for printing and mailing of remittance advice statements to service providers in performance of our responsibilities under the Schools, Libraries, and Rural Health Care programs.
   

2. Merger – Ms. Parrino referenced the draft document titled "Agreement and Plan of Merger" as distributed by email. She directed the Board’s attention to the second version that approves a merger of USAC with one or two corporations in the event that one of the corporations does not approve the merger. At this time, SLC and RHCC have adopted resolutions approving the original merger document for the purpose of issuing a notice to consider adopting the merger agreement. The document approved today by the Board will go to the FCC for further review. The Board will review any changes at its December 15, 1998, meeting. The stockholder (National Exchange Carrier Association, Inc.) must approve the final merger document. A notice of a stockholder meeting on December 21, 1998, will be issued if the merger document is approved today. Under Delaware law, SLC and RHCC are required to go through a similar process.
   
   Ms. Parrino explained that there is a possibility that RHCC may not approve the merger document. At this point, the Chair of the RHCC Board has made three specific requests before he would approve the merger. USAC has been negotiating with RHCC on these three points:
   

•  RHCC requests that USAC go through due diligence. USAC has agreed to this request.
  
  
•  RHCC requests that each Party agree that it shall assert no claim against any other Party or its directors, officers, employees, or representatives on the basis of any fact or circumstance that was known, or upon inquiry, reasonably could have been known, to such Party prior to the consummation of the Merger. Parties would not be required to make representations or warranties to any Party. USAC has not agreed to this request.
  
  
•  RHCC requests liability insurance protection offered for its officers and directors for a period of six years. USAC has agreed to this request with a liability cap of 150% of the current premium of USAC. This same provision would apply to officers and directors of SLC. If any liability does go over 150%, USAC is not obligated by the merger agreement to pay more; however, USAC can vote to pay out more if it chooses.
  
  

Ms. Parrino stated that whether or not the Chair of the RHCC Board has the inherent authority to make these requests is not material since the applicable Delaware law requires all four members of the RHCC Board to vote in the affirmative in order for the merger to pass. Ms. Parrino stated that she had not yet been able to connect with the Chair of the RHCC Board, Mr. Sanford Greenberg, but that she hoped to talk with him after the meeting. The Board directed Ms. Parrino to talk with Mr. Greenberg as soon as possible to find out his reasons for the requests and to explain to him the ramifications to RHCC if RHCC does not approve the merger. Some of the ramifications stated during the meeting are the fact that the FCC clearly has given USAC the authority to implement the Rural Health Care Program, which USAC intends to do, and if RHCC votes no, it no longer has any authority to run the program; it will have no cash flow; and USAC will have no obligation for current contracts or to cover any liability for RHCC officers and directors.

Dr. Sanders stated for the record that he has the utmost respect and regard for Mr. Greenberg and wants very much for the Board to have an opportunity to talk with Mr. Greenberg to find out his reasons for his requests before dismissing them out-of-hand.

Mr. Thurber clarified that regardless if RHCC does or does not approve the merger document, the merger document will be effective for those entities that sign it.

On a motion duly made and seconded, the Board unanimously adopted the following resolution:


RESOLVED, that the form, terms, and provisions of the draft Agreement and Plan of Merger (the "Agreement") by and among Universal Service Administrative Company, Rural Health Care Corporation, and Schools and Libraries Corporation in the form presented to the Board of Directors be and are hereby approved and each of the officers of the Corporation be and is hereby authorized to enter into a merger agreement, in substantially the form of the Agreement, and to submit the Agreement to the Corporation’s stockholder for approval at a special meeting thereof held upon the due notice of such meeting as required by law, and

RESOLVED, that upon the execution and delivery of the Agreement by all parties thereto, the Corporation be and is hereby authorized to perform its obligations thereunder, subject to approval of the Agreement by the Corporation’s stockholder, and

RESOLVED, that each of the officers of the Corporation be and is hereby authorized to prepare, execute, deliver, and/or file any other document(s) and to take all other lawful action, as necessary to effect the transactions contemplated by the Agreement, subject to approval of the Agreement by Corporation’s stockholder, and

RESOLVED, that all prior lawful action taken or caused to be taken by any officer of the Corporation in connection with the transactions contemplated by the Agreement are hereby authorized and ratified.

3. Miscellaneous – Ms. Parrino reviewed the proposed agenda for the December 15, 1998, USAC Board of Directors meeting:
   

• Approval of minutes of Tuesday, October 20, 1998, and Tuesday, December 1, 1998
  
  
• 1999 Meeting Schedule Change (Change July 19 and 20 to July 26 and 27)
  
  
• FCC Approval of USAC CEO
  
  
• Report on the Readiness of USAC Operations for the Year 2000 and an Opinion on the Liability of Directors and Officers
  
  
• Merger Issues
  

Mr. Haga noted that when the Board agreed to this meeting date at its quarterly meeting in October 1998, it was suggested that Board members meet in person for this meeting. However, teleconferencing will be available for members who are unable to attend due to unavoidable conflicts.

There being no further business to attend to, Ms. Rosenblum adjourned the meeting at 12:35 p.m. EDST.

____________________________________
Robert W. Haga
Acting Secretary/Treasurer

December 15, 1998
Date

Meeting Attachments:

The attachments listed below are in PDF format.

• Attachment A - Plan of Merger
• Attachment B - Certificate of Merger
• Attachment C - Certificate of Incorporation of USAC
• Attachment D - Notice of Special Meeting of the Stockholder of USA