MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF THE BOARD OF DIRECTORS SEPTEMBER 17, 1:30 P.M. HEADQUARTERS BOARD ROOM

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1 MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF THE BOARD OF DIRECTORS SEPTEMBER 17, 1:30 P.M. HEADQUARTERS BOARD ROOM PRESENT: Frank W. Bacon (Chairman) Earl C. Currin, Jr. (Vice Chairman) Paul S. Bennett (Secretary) Herbert E. Winn (Treasurer) Dorsey L. Drawhorn Charles J. Friedl Michael A. Lobue Kristie Martin-Wallace William T. White John M. Boswell (General Counsel) Christine Marston (Minute Taker) STAFF: GUEST: Jeffrey S. Edwards, President/CEO George A. Felts, VP of Engineering & Operations Services Danny J. Hammond, VP of Finance & Corporate Services Jean H. Morris, VP of Human Resources Allan A. Sharrett, VP of Public & Member Relations Jason Loehr, Controller Dr. Frank Bacon presided and Dorsey Drawhorn gave the invocation. PREVIOUS MINUTES On motion made and seconded: The Minutes of the August 20, 2015 Board Meeting are approved as presented. ODEC REPORT The ODEC report was given by Earl Currin and Jeff Edwards. PRESIDENT/CEO S REPORT MOTION CARRIED 1. The SEC Financial and Statistical report for August 2015 was reviewed and is attached to and made a part of the Minutes. 2. The Institute of Electrical & Electronics Engineers (IEEE) outage data and safety report for August 2015 were reviewed in detail: 1

2 IEEE Outage Data a. System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) were well below historical five-year values. b. System Customer Average Interruption Duration Index (CAIDI) was above historical five-year values. c. There was one Dominion Virginia Power (DVP) supply outage during the month at Stoddart substation on August 28 th due to an animal making contact on their line. d. There were no Appalachian Electric Power (AEP) or SEC supply outages during the month. Safety Report a. No lost-time injuries reported in August b. Total lost-time accumulated in August was 0 days c. As of August 31 st, employees have worked 782 days without a lost time injury. d. The Safety Achievement inspection was held August 31 st September 3 rd. 3. Annual Meeting Preparation and Update: a. Received 1,858 proxies b. Crewe Volunteer Fire Department will be cooking the chicken c. Brocks BBQ will be doing the catering and providing the iced tea d. Crewe Burkeville Youth Recreation Association will be serving the drinks e. Southbound Band will be the entertainment f. New entertainment for children; rock wall and magician g. CFL Charlie and LED Lucy, cooperative mascots, will make an appearance h. Proxy prize of $500 off electric bill and grand prize of $600 off electric bill will be drawn during the Business Meeting (must be present to win the grand prize) i. Serving of the meals will begin once the business meeting is complete 4. Cyber Security: a. Will be a standing item on the agenda b. Information Technology group (IT) will present information each month c. Directors to protect ipads with four-digit security code d. Keep passwords/passcodes in separate locations from the ipad e. Cyber Security policy to be updated 2

3 5. Day in the Life of a Lineman program is being moved to the Fall of each year in order to eliminate any conflict with SOLs. Gene Walden from Pike Electric will talk to the students about opportunities with contractors. Keith Harkins from Southside Virginia Community College (SVCC) will also be present during the programs. 6. SEC has been nominated for the Cooperative Purpose award for the Day in the Life of a Lineman program. 7. The Pre-Apprentice Lineman program through SVCC at Fort Pickett is on schedule to start in March Land clearing will soon begin and some of the barracks will be updated. 8. National Rural Electric Cooperative Association (NRECA) will be selecting an interim CEO in the absence of JoAnn Emerson. 9. The October Board meeting will begin at noon in order to interview a general counsel candidate. ACTION: Jack Boswell to provide questions for interview. 10. Progress-Index newspaper contacted SEC to do an article on the transmission line in Dinwiddie County. The article should appear in this Sunday s paper. 11. New security system has been installed at the Headquarters office and is being installed at all district offices. The new system will track SEC s fuel inventory. 12. Development of the new Member Advocacy groups will be postponed until the Spring of 2016 in order to get business and community leaders involved. ACTION: If Directors have any recommendations, pass them on to Allan Sharrett by year-end. NEW BUSINESS 1. NRECA Group Benefits Renewal: a. Continued/renewed other Group Benefits through NRECA (dental, basic life, long-term disability, Directors AD&D & business travel accident). Dental increase of 6.7% Basic Life will decrease 4.9% No change in long-term disability, directors accidental death & dismemberment or business travel insurance Total annual cost $434,000 b. NRECA Retirement Security Plan renewal: Plan A (legacy plan) increase of 4.9% Plan B (new hires) increase of 10% Overall annual increase of $324,000 c. Overall NRECA RS Plan costs increased by 3% d. SEC RS plan increases are due to the increase in average age of plan participants e. Total projected RS Plan annual cost $3.1 million 3

4 f. Recommendation to continue other group benefits, including dental, basic life, long-term disability, directors AD&D, business travel accident insurances and the retirement security plan. On motion made and seconded: NRECA group benefits will be renewed as presented. 2. CoBank Refinancing Proposal: MOTION CARRIED a. SEC has approximately $17.2 million of outstanding debt with RUS (10% of debt portfolio) b. Comprised of 7 loans scheduled to mature between c. Blended interest rate of 4.874% d. Approximate annual debt service $1.4 million e. Approximate outstanding interest $9.5 million f. Refinancing 100% of the outstanding debt through CoBank g. One loan at an interest rate of 3.79% h. Loan will mature in 2030 (7 years earlier than highest RUS loan) i. Approximate annual debt service $1.4 million j. Approximate interest over life of loan $5.7 million k. Interest savings of approximately $3.8 million l. CoBank patronage capital: Estimated $1.5 million over life of loan Net effective interest rate of 2.95% Currently retiring 75% in the first year Patronage includes line of credit balance m. Favorable line of credit rates n. No prepayment penalty o. RUS hardship funding will be unavailable for nine years p. Financial impact: Total positive margin impact $5.3 million Net Present Value (NPV) of total benefit $2.1 million q. Six-month timeframe for loan finalization, fixed rate has been locked in r. Need approval to proceed with application process On motion made and seconded: The Board approved proceeding with the loan application process with CoBank. MOTION CARRIED 4

5 3. Safety Achievement Inspection Results: a. Unannounced inspection occurred August 31 st September 3 rd at all of SEC s facilities. b. Issues found: One fire extinguisher out of date out of 400 One first aid kit item out of date out of 200 kits One winch line connector improperly installed on spare truck Low voltage gloves not in glove bag Exit signage needed at HQ c. Overall, it was considered to be a great inspection. d. Inspection team noted that SEC had improved significantly over the last 36 months e. Any issues noted during the inspection were resolved during the inspection process. 4. Microwave System Project Bid Results: a. Bid prepared and conducted by Power Systems Engineering and opened in their office on July 1, 2015 b. Total cost and adherence to bid specifications were used to evaluate bids c. All bids were rejected due to total project cost and concerns from each bidder over specifications d. Bids were split into material and labor e. Materials: Bid prepared and conducted by Power Systems Engineering and opened in their office on August 15, 2015 Total cost and adherence to bid specifications were used to evaluate bids Specifications were clarified based on concerns from bidders Winning bidder was Microwave Networks, Inc. with a bid of $991,610 f. Labor: Bid prepared and conducted by Power Systems Engineering and was opened in their office on September 2, 2015 Total cost and adherence to bid specifications were used to evaluate bids Winning bidder was Stimel Communications with a bid of $664,630 5

6 5. Vegetation Assessment Bid results: a. Bid prepared and conducted by SEC Contractor Administrator and opened at the Headquarters office on August 31, 2015 b. Total cost and proposed alternatives used to evaluate winning bidder c. Original proposal was to complete a 25% system inspection d. Both venders provided an alternative for a 5% inspection to provide 95% accuracy e. Winning bidder was Davey Resources with a bid of $69, Virginia Commonwealth University (VCU) Medical Hospital Project: a. Facility highlights: New 3-story, 166,000 square foot hospital located in South Hill Additional 60,000 square foot medical office building to be constructed in future phase of construction Anticipated 3.0MW load to be served by our Brunswick substation Requested service energization date of April 2016 b. Proposed three-phase underground line extension from New Hope Baptist Church to the hospital c. The hospital s estimated peak demand of 3.0MW will require a power transformer upgrade at SEC s Brunswick substation d. The total investment to serve the hospital, line extension and power transformer upgrade is $813,794 e. Based on the load information provided, the estimated 30-month net revenue (total revenue less power purchase costs) is $1.1 million f. VCU has executed a contract obligating them to cover the Cooperative s cost should the project be canceled or energy purchases be less then estimated g. Staff asks the Board to approve a Construction Work Plan (CWP) amendment for the power transformer upgrade at Brunswick substation h. With the CWP amendment approved, SEC will begin the design and material procurement process On motion made and seconded: The amendment to the Construction Work Plan is approved to include construction of the facilities to serve the new hospital. UNFINISHED BUSINESS 6 MOTION CARRIED 1. Jason Loehr presented a portion of the 2014 Key Ratio Trend Analysis (KRTA) Data. This report is published annually by the National Rural Utilities Cooperative Finance Corporation (CFC) and it tracks 145 financial and operational ratios for

7 815 participating electric distribution cooperatives nationwide and 15 state over the previous 10 years. The Cooperative continues to show strength and improvement in all areas of the KRTA. a. Long Term Debt as a percent of total Assets 56.21%, ranked 105 th US & 3 rd State; b. Long Term Debt per Consumer $3,187, ranked 202 nd US & 2 nd State; c. Non-Government Debt as a percentage of Long Term Debt 32.77%, ranked 449 th US & 5 th State; d. Blended Interest Rate 3.28%, ranked 717 th US & 2 nd lowest in State; e. Current Ratio.72, ranked 673 rd US & 13 th State; f. MWH Sold per Mile of Line , ranked 431 st US & 13 th State; g. Total KWH Sold 938,750, ranked 117 th highest US & 7 th highest State; h. Residential kwh sold as a percentage of total kwh sold 80.19%, ranked 76 th US & 4 th State; i. Average Residential Usage per month 1,184, ranked 425 th US & 9 th State; j. Small Commercial kwh sold as a percentage of total kwh sold 6.19%, ranked 764 th US & 14 th State; k. Large Commercial kwh sold as a percentage of total kwh sold 8.68%, ranked 466 th US & 11 th State l. Electric Revenue per kwh sold , ranked 152 nd US & 4 th State; m. Residential Revenue per kwh sold $136.16, ranked 163 rd US & 3 rd State; n. Non-Residential Revenue per kwh sold $99.76, ranked 383 rd US & 8 th State; o. Electric revenue per consumer $2,193 ($183/month), ranked 463 rd US & 9 th State; and p. Write-offs as a percent of operating revenues.31%, ranked 87 th US & 2 nd State. ACTION: The remainder of the presentation will be tabled until next month. LEGAL REPORT The Sutton easement document has been signed and the case is now closed. A member who brought suit against the Cooperative has been nonsuited and the plaintiffs are withdrawing the case. A condemnation suit has been filed in Powhatan County on legatee property. The member that continues to deny SEC access to its equipment has filed a complaint with the State Corporation Commission. An injunction will be filed in Campbell County requesting access to said property. 7

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9 STATEMENT OF GENERAL FUNDS AND OTHER ASSETS August 31, 2015 General Fund Cash in Banks 4,622, General Funds Invested CFC - CTC's 2,186, CFC - Patronage Capital 1,939, Federated Insurance Corporation 309, VED Corporation Incorporated 0.00 TEC Trading Incorporated 622, Town of Hurt 1, Notes and Accounts Receivable Electric Consumer 10,711, Other Accounts Receivable 3,434, ,827, Material and Supplies in Stock 730, Construction Work in Progress to be Paid from Construction Funds 0.00 TOTAL 24,558, Construction Funds Available First Citizens Bank 8,200, NOTES STATISTICS CFC & FIRST CITIZENS BANK CFC RUS & FFB LINE OF CREDIT Allocation Under Notes 56,969, ,337, ,000, Advance to Date 56,969, ,337, ,000, Balance Available for Advance 26,000, Gross Obligations 59,306, ,247, ,000, Interest Paid This Year 1,502, ,413, , Page 1 of 6

10 Southside Electric Cooperative For the Month Ending August 2015 Comparative Operating Statistics Y-T-D 2014 Y-T-D 2015 August 2015 New Services Connected Meters Removed Meters Reinstalled Services Idle, Excluding Seasonal Number of Services Retired Total Consumers Receiving Service Total Miles Energized ,823 1, ,590 1, ,154 4,380 4, ,970 55,292 55,292 8,202 8,235 8,235 Meters Installed - New Services January February March April May June July August September October November December Total Page 2 of 6

11 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /11/2015 9:22:41 am General Ledger Financial And Operating Report Electric Distribution Page: 1 INCOME STATEMENT FOR AUG Year - To - Date Period - To - Date Item Last Year This Year Budget Current Budget 1. Operating Revenue and Patronage Capital 83,021, ,970, ,433, ,795, ,956, Power Production Expense Cost of Purchased Power 49,669, ,480, ,635, ,812, ,623, Transmission Expense 3, , Regional Market Expense Distribution Expense - Operation 2,036, ,317, ,513, , , Distribution Expense - Maintenance 7,318, ,739, ,975, , , Customer Accounts Expense 1,535, ,520, ,481, , , Customer Service and Informational Expense 1,558, ,750, ,910, , , Sales Expense 229, , , , , Administrative and General Expense 3,780, ,914, ,930, , , Total Operation & Maintenance Expense (2 thru 11) 66,132, ,108, ,805, ,956, ,941, Depreciation & Amortization Expense 14. Tax Expense - Property & Gross Receipts 15. Tax Expense - Other 16. Interest on Long-Term Debt 17. Interest Charged to Construction - Credit 18. Interest Expense - Other 19. Other Deductions 20. Total Cost of Electric Service (12 thru 19) 21. Patronage Capital & Operating Margins (1 minus 20) 22. Non Operating Margins - Interest 23. Allowance for Funds Used During Construction 24. Income (Loss) from Equity Investments 25. Non Operating Margins - Other 26. Generation and Transmission Capital Credits 27. Other Capital Credits and Patronage Dividends 28. Extraordinary Items 29. Patronage Capital or Margins (21 thru 28) 6,212, ,723, ,387, , , , , , , , ,170, ,951, ,263, , , , , , , , , , ,503, ,817, ,469, ,513, ,399, ,518, ,152, ,964, , , , , , , , , , , , , , , , , , , , ,290, ,092, ,609, , , Operating - Margin Non Operating - Margin Times Interest Earned Ratio - Operating Times Interest Earned Ratio - Net Times Interest Earned Ratio - Modified 6,290, ,092, ,609, , , Page 3 of /pro/rpttemplate/acct/2.33.1/gl/gl_standard_financial.xml.rpt Lynn

12 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /11/2015 9:22:59 am General Ledger Financial And Operating Report Electric Distribution Page: 1 BALANCE SHEET FOR AUG 2015 Last Year This Year Variance ASSETS AND OTHER DEBITS 1. Total Utility Plant in Service 301,079, ,923, ,844, Construction Work in Progress 10,871, ,071, , Total Utility Plant (1 + 2) 311,950, ,994, ,044, Accum. Provision for Depreciation and Amort. 86,155, ,108, ,953, Net Utility Plant (3-4) 225,794, ,885, ,091, Non-Utility Property (Net) 37, , , Invest. in Subsidiary Companies Invest. in Assoc. Org. - Patronage Capital 43,732, ,684, , Invest. in Assoc. Org. - Other - General Funds 2,462, ,497, , Invest. in Assoc. Org. - Other - Nongeneral Funds Invest. in Economic Development Projects Other Investments 1,030, , , Special Funds Total Other Property & Investments (6 thru 13) 47,263, ,210, , Cash - General Funds 6,526, ,622, ,903, Cash - Construction Funds - Trustee 1,427, ,200, ,772, Special Deposits Temporary Investments Notes Receivable (Net) Accounts Receivable - Sales of Energy (Net) 9,727, ,711, , Accounts Receivable - Other (Net) 3,527, ,434, , Renewable Energy Credits Material and Supplies - Electric & Other 710, , , Prepayments 833, , , Other Current and Accrued Assets 5,261, ,778, ,516, Total Current and Accrued Assets (15 thru 25) 28,014, ,472, ,458, Regulatory Assets 931, , , Other Deferred Debits 6,468, ,529, , Total Assets and Other Debits ( thru 28) 308,472, ,434, ,962, Page 4 of /pro/rpttemplate/acct/2.33.1/gl/gl_standard_financial_bal_sheet.xml.rpt Lynn

13 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /11/2015 9:22:59 am General Ledger Financial And Operating Report Electric Distribution Page: 2 BALANCE SHEET FOR AUG 2015 Last Year This Year Variance LIABILITIES AND OTHER CREDITS 30. Memberships 228, , Patronage Capital 93,970, ,649, ,678, Operating Margins - Prior Years Operating Margins - Current Year 6,290, ,092, ,197, Non-Operating Margins Other Margins and Equities 70, , , Total Margins & Equities (30 thru 35) 100,559, ,034, ,474, Long-Term Debt - RUS (Net) 17,475, ,940, , Long-Term Debt - FFB - RUS Guaranteed 90,706, ,679, ,973, Long-Term Debt - Other - RUS Guaranteed Long-Term Debt - Other (Net) 59,286, ,555, ,731, Long-Term Debt - RUS Econ. Devel. (Net) Payments - Unapplied Total Long-Term Debt (37 thru 41-42) 167,468, ,174, ,706, Obligations Under Capital Leases - Noncurrent Accumulated Operating Provisions 115, , Total Other Noncurrent Liabilities ( ) 115, , Notes Payable 20,800, ,000, ,800, Accounts Payable 6,686, ,619, , Consumers Deposits 2,655, ,570, , Current Maturities Long-Term Debt 6,483, ,378, , Current Maturities Long-Term Debt - Econ. Devel Current Maturities Capital Leases Other Current and Accrued Liabilities 3,367, ,739, , Total Current & Accrued Liabilities (47 thru 53) 39,993, ,308, ,684, Regulatory Liabilities Other Deferred Credits 335, ,802, ,466, Total Liab. & Other Credits ( thru 56) 308,472, ,434, ,962, Current Assets To Current Liabilities 0.70 to to 1 Margins and Equities To Total Assets % % Long-Term Debt To Total Utility Plant % % Page 5 of /pro/rpttemplate/acct/2.33.1/gl/gl_standard_financial_bal_sheet.xml.rpt Lynn

14 Statements of Cash Flows Southside Electric Cooperative Cash flows from operating activities Period ended Period ended August 31, 2015 August 31, 2014 Electric revenue received $ 89,957,528 $ 82,754,038 Power supply paid (54,954,694) (48,502,818) Operating expenses paid (18,008,986) (16,142,170) Interest received 89,221 33,979 Interest paid (3,057,896) (3,133,016) SERP payout (1,066,579) FEMA monies received 348,548 Cash flows provided by operating activities 14,025,173 14,291,982 Cash flows from investing activities Investment in electric plant,net (8,539,177) (11,401,717) Proceeds from disposal of plant 130,417 Installment loans issued (1,010,907) (899,144) Proceeds from sale of investments 36,923 Investment in CRC (10,000) Proceeds from retirement of CTC's 14,103 Cash flows used in investing activities (9,382,744) (12,296,758) Cash flows from financing activities Proceeds from lines of credit 8,560,677 Payments on lines of credit (7,800,162) (1,560,677) Proceeds from long term debt 15,200,000 Principal payments on long term debt (3,946,033) (3,265,193) Capital credits paid to members, net (185,549) (234,694) Proceeds from capital credits 68,957 53,605 Deposits collected from customers (139,837) 173,410 Net change in memberships Cash flows provided (used) in financing activities 3,198,161 3,727,568 Net change in cash 7,840,590 5,722,792 Cash at December 31, 2014 and ,981,750 2,231,107 Cash at August 31, 2015 and 2014 $ 12,822,340 $ 7,953,899

15 CLASS OF SERVICE No. Receiving Service a. No. Minimum Bills d. Avg. No. Receiving Service e. kwh Sold Cumulative f. Amount Cumulative g. 1. Residential Sales (excl seas.) 53,072 67,636,006 8,944, , ,041,908 76,082, Residential Sales Seasonal 3. Irrigation Sales 4. Comm. & Ind 1000 KVA or Less 1,858 5,742, , ,843 39,453,136 4,993, Comm. & Ind Over 1000 KVA 15 6,764, , ,395,974 4,445, Public St. & Highway Lighting 7. Other Sales to Public Authority 347 4,265, , ,734,432 3,612, Sales for Resale - REA Borr. 9. Sales for Resale - Other PART D. CONSUMER SALES AND REVENUE DATA August 2015 THIS MONTH YEAR-TO-DATE kwh Sold b. Amount c. 10. (1 thru 9) 55,292 84,408,802 10,687, , ,625,450 89,133, Other Electric Revenue xxxxxxxxxxxx xxxxxxxxxxxx 108,363 xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 836, Total ( ) xxxxxxxxxxxx xxxxxxxxxxxx 10,795,525 xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 89,970,447 ITEM PART D. CONSUMER SALES AND REVENUE DATA THIS MONTH YEAR-TO-DATE a. ITEM b. THIS MONTH a. YEAR-TO-DATE b. 1. Net kwh Generated Office Use ,489 1,518, kwh Purchased ,439, ,912, Total unaccounted For 3. Interchange kwh - Net (4 less 5 & 6), (149,268) 26,768, Total kwh (1 thru 3) ,439, ,912, Percent System Loss (7/4)x100.. (0.18) Total kwh - Sold ,408, Maximum Demand (kw) ,625, Month When Maximum Demand Occurred , ,271 February 2015 Page 6 of 6

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17 SOUTHSIDE ELECTRIC COOPERATIVE 2015 ANNUAL MEETING HOOPER PARK, CREWE, VIRGINIA SEPTEMBER 26, 11:15 A.M. The Annual Meeting of the members of Southside Electric Cooperative was held at Hooper Park, 1500 feet west of the Cooperative Headquarters Office, on U. S. Highway No. 460, in the Town of Crewe, State of Virginia, at 11:15 a.m. on Saturday, September 26, INTRODUCTIONS Allan Sharrett, Vice President of Public & Member Relations, introduced Frank W. Bacon, Chairman of the Board of Directors, to the membership. Chairman Bacon presided over the meeting. Pastor Mark Wells of Grace Harvest Baptist Church in Amelia, Virginia was introduced and gave the invocation. Chairman Bacon also recognized the special guests attending the Annual Meeting. Allan Sharrett announced the winner of the Proxy Prize drawing, Ernest D. Stinnette, Jr. of Forest, Virginia. BUSINESS MEETING The business meeting was called to order and motion was requested from the membership to appoint John M. Boswell, Southside Electric Cooperative s General Counsel, as parliamentarian over the business session of the meeting, and to appoint Christine Marston, Executive Assistant, as recording secretary of the meeting. On motion made and seconded: John M. Boswell is appointed as Parliamentarian over the Business Session of the meeting and Christine Marston is appointed as Recording Secretary. MOTION CARRIED SECRETARY S REPORT Chairman Bacon introduced the members of the Board of Directors of Southside -1-

18 Electric Cooperative, and then called Paul S. Bennett, Secretary of the Board of Directors, to read the notice of the meeting and quorum statement. After proof of due notice of the meeting, the attendance was checked, and it was determined that 575 members were present in person, and 2,189 members were present by proxy, said members constituting a quorum of the membership for the purpose of this meeting. A list of those present in person and by proxy will be retained by the Cooperative. On motion made and seconded: The reading of the minutes of the 2014 Annual Meeting of members is dispensed with, since a copy of such minutes was published in the Cooperative Living magazine and said minutes are approved as written. MOTION CARRIED REPORT OF OFFICERS The next order of business, according to the Bylaws, was the presentation of reports of officers, which will be attached to and made a part of the Annual Meeting Minutes. This included the Chairman s report and the President/CEO s report. On motion made and seconded: The reports of officers are approved as presented. MOTION CARRIED UNFINISHED BUSINESS The floor was opened for unfinished business, but there was none. NEW BUSINESS The floor was opened for new business. Chairman Bacon introduced General Counsel John M. Boswell to conduct the remainder of the meeting. Nominations were received for Districts I, II and III pursuant to the Bylaws. Board members are elected for a 3-year term and petitions must be received by all nominees not less than 60 days before the Annual Meeting of the members. A list of candidates for all districts shall be mailed to each member not less than 10 days before any meeting where directors are to be elected. Accordingly, the following were placed in nomination: District I William T. White -2-

19 On motion made and seconded: District II Earl C. Currin, Jr. District III Charles J. Friedl Nominees for Districts I, II and III are unanimously elected by acclamation to represent their territorial district. BYLAW REVISIONS -3- MOTION CARRIED General Counsel Boswell then proceeded with the remainder of the meeting and reviewed the Bylaw revisions, which were published in the Cooperative Living magazine. ARTICLE I MEMBERSHIP Section 1 Requirements for Membership: (A) Executed a signed application for membership therein (verbiage cleaned up). (C) Compliance to the Terms and Conditions was added. Membership in the Cooperative shall be transferable except as provided in the Bylaws. Section 2 Membership Certificates: This section was deleted in its entirety and renamed Joint Membership. Joint Membership: A joint membership can be held by no more than three persons. Reference to husband and wife was deleted. Joint membership can only be obtained once all signatures of the joint members appear on the Membership Application. The remainder of this section was revised incorporating joint membership language. Section 4 Conversion of Membership: Is now Section 3. A membership may be converted to an individual membership upon the appropriate request of any member and subject to their compliance with the requirements set forth in Section 1 of this Article. Section 5 Membership Fees: Is now Section 4. Section 6 Purchase of Electric Energy: Is now Section 5 Section 7 Termination of Membership: Is now Section 6. Language deleted referring to membership certificate. ARTICLE IV DIRECTORS Section 3 Election and Tenure: (A) Language referencing individual director terms was eliminated.

20 One director from each district shall be elected each year for a term of three (3) years. Section 4 Qualifications: All candidates for election to the Board of Directors will complete the Director Candidate Questionnaire prior to their candidacy being considered by the Cooperative. No person shall be eligible to become or remain a director unless he or she is a member in good standing of the Cooperative and a bona fide resident for the prior 12 consecutive months in the territorial district from which he or she is elected. No person shall be eligible to become or remain a director who is in any way employed by or has financial interest in a competing enterprise or business. To be eligible to become or remain a director of the Cooperative, that individual, in addition to the above, must: (A) Be a citizen of the United States. (B) Have the capacity to enter into legally binding contracts. (C) Not have been convicted of a felony or a misdemeanor evidencing moral turpitude, such as lying, cheating or stealing (D) Be educationally able and willing to actively participate in the management of the business and affairs of the Cooperative. (E) Not make any material misrepresentations of fact to the members or other directors in the process of the director s election or appointment to the office, including statements made on the Director Candidate Questionnaire. (F) Not have been found by a court to have breached a duty as director. (G) Must have attended all the required meetings as specified in Board policy. Any director who cannot comply with Article IV, Sections A through G above, will lose eligibility to serve as a director. All directors are expected to demonstrate an understanding of and acceptance of the Cooperative s Mission Statements. All directors must embrace and ensure: Integrity Be honest, open and fair minded in the conduct of all Cooperative matters. Safety Regard safety of employees, members and the public as a primary objective in all policy and business decisions. Reliability Anticipate and mitigate risks that might cause or prolong interruption of electrical services. Affordability Provide the lowest cost power consistent with safety, reliability and responsible environmental stewardship, while anticipating -4-

21 and mitigating risks that might threaten the financial health of the Cooperative. Service Reflect respect for members in all policies and member relations and maximize member service consistent with safety, reliability and affordability. Community Support member communities through policies and business decisions that sustain and enhance local economic vitality and quality of life. All directors are expected to support the Seven Cooperative Principles: A. Voluntary and open membership B. Democratic member control C. Member s economic participation D. Autonomy and independence E. Education, training and information F. Cooperation among cooperatives G. Concern for community All directors are expected to make a meaningful contribution to carrying out the function of a director, including: A. Demonstrating a willingness and ability to give the time to attend meetings necessary to provide the background information and knowledge needed to make informed choices on the complex matters coming before a rural electric cooperative board, including: 1. Meetings of the Board and its committees; 2. State and National association meetings; 3. Director updates and other training programs; 4. Meetings of related organizations as required; and 5. Any orientation programs provided by the Cooperative. B. Studying data and other information presented to the Board to keep informed and prepared for Board discussions and deliberations and to be able to answer questions raised by the members. C. Participating in Board meetings by raising pertinent and discerning questions and by contributing ideas and suggestions. D. Supporting the decisions and actions of the Board outside the boardroom, once arrived at, by action, of the majority of the Board. E. Representing the total Cooperative membership on an impartial basis, -5-

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23 SOUTHSIDE ELECTRIC COOPERATIVE RE-ORGANIZATIONAL MEETING OF THE BOARD OF DIRECTORS HEADQUARTERS BOARD ROOM, CREWE, VA SEPTEMBER 26, 12:40 P.M. PRESENT: STAFF: Frank W. Bacon (Chairman) Earl C. Currin, Jr. (Vice Chairman) Paul S. Bennett (Secretary) Herbert E. Winn (Treasurer) Dorsey L. Drawhorn Charles J. Friedl Michael A. Lobue Kristie Martin-Wallace William T. White John M. Boswell (General Counsel & Acting Chairman) Christine Marston (Minute Taker) Jeffrey S. Edwards, President/CEO The meeting was called to order by John M. Boswell, General Counsel and Acting Chairman for the purpose of electing officers. The floor was opened for nominations for the election of officers of the Board of Directors for the year , the current officers are as follows: Frank W. Bacon, Chairman Earl C. Currin, Jr., Vice Chairman Paul S. Bennett, Secretary Herbert E. Winn, Treasurer A motion was made that the current slate of officers be re-elected. On motion made and seconded: The current slate of officers are re-elected as presented. MOTION CARRIED The next order of business was the election of directors and voting delegates to the Virginia, Maryland, Delaware Association of Electric Cooperatives (VMDAEC),

24 Old Dominion Electric Cooperative (ODEC), and Tarheel Electric Membership Association (TEMA). The current slate is as follows: VMDAEC - Frank W. Bacon and Jeffrey S. Edwards (directors) ODEC - Earl C. Currin, Jr. and Jeffrey S. Edwards (directors) TEMA - Earl C. Currin, Jr. and Jeffrey S. Edwards (voting delegates) A motion was made to re-elect the current positions held by the Board and Jeffrey S. Edwards as mentioned. On motion made and seconded: The current offices held by the Board and Jeffrey S. Edwards are re-elected as presented. follows: MOTION CARRIED The remaining elections for voting delegates to the following boards are as National Rural Utilities Cooperative Finance Corporation (CFC) Region I - Herbert E. Winn, delegate and Michael A. Lobue, alternate; National Rural Electric Cooperative Association (NRECA) - Michael A. Lobue, delegate and Jeffrey S. Edwards, alternate; Federated Insurance - Herbert E. Winn, delegate; National Cooperative Services Corporation (NCSC) - Charles J. Friedl, delegate and Frank W. Bacon, alternate; and National Rural Telecommunications Cooperative (NRTC) Frank W. Bacon, delegate and William T. White, alternate. On motion made and seconded: The appointment of voting delegates and alternates are reaffirmed. MOTION CARRIED Next, John M. Boswell, Acting Chairman, requested any unfinished business or new business to come before the Board. There was none. ADJOURNMENT There being no further business to discuss the meeting adjourned at 12:44 p.m. 2

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