INFORMATION CONCERNING SOLICITATION AND VOTING – YOUR VOTE IS IMPORTANT. Whether or not you expect to attend the meeting, please sign and date the proxy and return it promptly in the enclosed envelope, or take advantage of the option to vote by Internet or telephone. If you choose to return the proxy card by mail, we have enclosed an envelope, for which no postage is required if mailed in the United States. You may also vote your shares electronically, either over the Internet at www.proxyvote.com or by touch tonetouch-tone telephone at 1-800-690-6903.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 28, 2015.24, 2018.
This Proxy Statement, along with the Company’s 20142017 Annual Report and Annual Report on Form 10-K are available free of charge on the following website: www.proxyvote.com
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NEW ULM TELECOM, INC
27 North Minnesota Street
New Ulm, Minnesota 56073
(507) 354-4111
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MAY 28, 201524, 2018
QUESTIONS AND ANSWERS
What is the purpose of this Proxy Statement?
This proxy statement is being made available to shareholders beginning on or about April 17, 201513, 2018 for the solicitation of proxies for the Annual Meeting of Shareholders and any adjournment thereof, to be held commencing at 10:00 a.m., Thursday, May 28, 2015 24, 2018 at the New Ulm Event Center, located at 301 20th Street South, New Ulm, Minnesota.
Who can vote?
Record holders of the Company’s common stock at the close of business on April 8, 20154, 2018 are entitled to vote at this Annual Meeting. Shareholders are entitled to one vote for each share held on the April 8, 20154, 2018 record date. On that date, there were 5,101,3345,164,274 shares outstanding. In addition, shareholders have the right to cumulate votes in the election of Directors, as described on page 6.
How do I vote?
Registered Shareholders. If your shares are registered in your name, you may vote in person or by proxy. If you decide to vote by proxy, you may do so in ONE of the following three ways:
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| · By Internet – You may vote using the Internet at the website |
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| · By telephone – You may vote by using the toll-free telephone number, 1-800-690-6903. Using a touch-tone telephone, you can transmit the voting instructions up until 10:59 p.m., Central Daylight Time, the day before the Annual Meeting, or May |
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| · By mailing – You may vote your shares by marking, signing, dating and returning your Proxy Card in the postage paid envelope provided, addressed to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Proxy cards must be received by Broadridge on or before May |
The Internet and telephone voting procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.
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Whether you choose to vote over the Internet, by telephone or by mail, you can specify whether your shares should be voted for all, any one or two, or none of the three nominees for Director.director. You can also specify whether you want to vote for or against, or abstain from voting for, the ratification of the appointment of the independent registered public accounting firm. You can also specify whether you want to vote for or against, or abstain from voting for, the approval of the New Ulm Telecom, Inc. 2015 Employee Stock Plan. If you make these specifications, your shares will be voted as you direct. If you sign, date and return your Proxy Card, but do not specify how you want to vote, your shares will be voted FOR the election of all Director Nominees, director nominees, and FOR the ratification of the appointment of the independent registered public accounting firm and FOR the approval of the New Ulm Telecom, Inc. 2015 Employee Stock Plan. firm.
Beneficial Owners/Nominee Shares. If your shares are held by a bank, broker, trustee or some other nominee, that entity will give you separate voting instructions. If you do not provide voting instructions to your nominee, your shares will not be voted in the election of Directorsdirectors or the other proposals.proposal.
Registered shareholders and beneficial owners of shares held in street name may also vote in person at the Annual Meeting. If you are a registered shareholder and attend the Annual Meeting, you may deliver your completed proxy card in person. Additionally, written ballots will be available for any shareholder that wishes to vote in person at the Annual Meeting. Beneficial owners of shares held in registered name who wish to vote at the Annual Meeting will need to obtain a legal proxy from the entity that holds their shares.
The persons named as proxies are Board members who are not currently standing for election. If any other matters are properly presented for action at the Annual Meeting, including a question of adjourning or postponing the Annual Meeting from time to time, the persons named in the proxies and acting in that capacity, will have discretion to vote on these matters in accordance with their best judgment.
The notice of the Annual Meeting, this proxy statement and related proxy card are being mailed to shareholders on or about April 17, 2015.13, 2018.
May I change my vote?
Your proxy may be revoked at any time before it is voted. You may change your vote after you submit your proxy card by:
· | Sending a written notice addressed to the Chief Executive Officer (CEO) of the Company, which must be received prior to the Annual Meeting, stating that you want to revoke your proxy; |
· | Submitting a new completed proxy card to the CEO of the Company, which must be received prior to the Annual Meeting and contain a later date than the previously submitted |
| proxy; · | Entering later-dated telephone or Internet voting instructions, which will automatically revoke the earlier proxy; or |
· | Attending the Annual Meeting and voting in person and informing the Secretary of the Company that you are revoking your proxy. Attendance of a shareholder at the Annual Meeting will not automatically revoke any proxy previously submitted. |
Who is soliciting proxies?
The enclosed proxy is being solicited by the Board and the Company will pay the cost of the solicitation, including preparing, assembling and mailing the proxies and solicitation materials. The Company is soliciting proxies principally by mail. In addition, the Directors, Officersdirectors, officers and regular employees of the Company may solicit proxies personally or by telephone, for which they will receive no financial consideration other than their regular compensation. The Company will also request brokerage houses, nominees, custodians and fiduciaries to forward soliciting materialmaterials to the beneficial owners of the shares of the Company common stock held as of the record date and will reimburse these persons for their reasonable expenses so incurred.
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When are shareholder proposals due for the next Annual Meeting?
Shareholders who want to have their proposals considered for inclusion in the Company’s proxy materials for the 20162019 Annual Meeting of Shareholders must submit their proposals to the Company no later than December 14, 2015.17, 2018.
Shareholder suggestions for Directors
The Company’s Corporate Governance Committee will consider shareholder suggestions for nominees for election to the Company’s Board if these suggestions are in writing and include biographical data and a description of the nominee’s qualifications. These suggestions must also be accompanied by the written consent of each nominee and can be mailed to the Corporate Governance Committee, New Ulm Telecom, Inc., Attention: Corporate Secretary, 27 North Minnesota Street, New Ulm, Minnesota 56073. These suggestions must be received by the Corporate Secretary no later than December 14, 2015.17, 2018.
Quorum, Abstentions, and Broker Non-Votes
The presence, in person or by proxy, of the shareholders of thirty-five percent of the shares of common stock outstanding and entitled to vote is necessary to constitute a quorum for the transaction of Company business at the Annual Meeting. All votes will be tabulated by the inspector of election for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
If a properly executed proxy is returned and the shareholder has abstained from voting on any matter, the shares represented by that proxy will be considered present at the Annual Meeting for purposes of determining a quorum and for purposes of calculating the vote, but will not be considered to have been voted in favor of that matter.
If a properly executed proxy that is returned by a broker holding shares in street name indicates that the broker does not have discretionary authority as to certain shares to vote on one or more matters (broker non-votes), these shares will be considered present at the Annual Meeting for purposes of determining a quorum, but will not be considered to be represented at the Annual Meeting for purposes of calculating the vote with respect to those matters.
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PROPOSAL 1 – ELECTION OF DIRECTORS
There are currently seven Directorsdirectors serving on the Board and each Directordirector serves a three-year term. Three Directorsdirectors will be elected at this Annual Meeting. The Board has nominated and recommends for election, Dennis E. Miller, Wesley E. Schultz and Suzanne M. Spellacy. Mr. Miller, Mr. Schultz and Ms. Spellacy all currently serve as Directorsdirectors and have agreed to stand for re-election. Biographical information on each of the nominees is set forth on the following pages.
We recommend that each proxy vote in favor of these nominees. The Board believes that each named nominee will be able to serve, but if any of the nominees are unable to stand for election, the Board may designate a substitute. Shares represented by proxies may be voted for the substitute, but will not be voted for more than the three nominees. The three nominees receiving the greatest number of votes will be elected.
Directors are elected by a plurality of the votes cast, i.e. the nominees receiving the greatest number of votes will be elected. For each share held, shareholders may cast one vote for each of the three Directordirector positions to be filled at this Annual Meeting. Each shareholder entitled to vote also has the right to vote shares on a cumulative basis in the election of Directorsdirectors by giving written notice of intent to do so to any Officer of the Company before the Annual Meeting, or to the presiding Officer at the Annual Meeting at any time before the election. If notice of this intent is given, the presiding Officer at the Annual Meeting will announce before the election of Directorsdirectors that shareholders may vote their shares on a cumulative basis by multiplying the number of shares held by the shareholder by the number of Directorsdirectors to be elected. Each shareholder then may cast that shareholder’s votes for one candidate or may distribute the votes among any number of candidates.
If no shareholder provides a notice of such intent, the nominees who receive the affirmative vote of the holders of a plurality of the voting power of the shares present and entitled to vote at the Annual Meeting will be elected to serve on the Board. If any shareholder determines to vote on a cumulative basis and an individual other than the above-stated nominees has been nominated to serve as a Director,director, then the three nominees receiving the largest number of votes, taking into account cumulative voting, will be elected to serve on the Board.
Votes cast for a nominee will be counted in favor of election. Withheld votes and broker non-votes will not count either in favor of or against election of a nominee. The persons appointed as proxies in the accompanying proxy card will vote for the election of the Board’s nominees, unless authorization to do so is withheld.
Your Board recommends a vote FOR these nominees. Shares represented by proxy will be voted FOR the nominees, unless you specify otherwise in your voting instructions
BOARD OF DIRECTORS
Set forth on the following pages is biographical information on the three nominees for election and the other continuing Directorsdirectors with unexpired terms of office. All information is given as of March 31, 2015,2018, unless otherwise indicated. The following table setsbiographies set forth information, including business experience and memberships on other Boards during the past five years, pertaining to the nominees standing for election, as well as for other continuing Directors.directors. Information concerning beneficial ownership of the Company’s common stock as of March 31, 20152018 can be found on page 20. 19. We are not aware of any arrangement or understanding pursuant to which any individual is to be selected as a Directordirector or nominee. There are no familial relationships between any Directordirector and Executive Officer.
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NOMINEES FOR ELECTION
To Serve a Three-Year Term Expiring In 20182021
Dennis E. Miller
Term: | Current term expires in |
Recent Business Experience: | Mr. Miller currently serves on the Board of the Company. Mr. Miller |
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Other Directorships: | Mr. Miller currently serves as a Board Member for DALA, Inc., a reseller of wireless telecommunications services. Mr. Miller has served as a Board Member for Sensor International, a manufacturer of optic lenses to |
Selection Criteria: | Mr. Miller brings to the Board his experience on the Board of the Company, his experience on other Boards and his wireless telecommunications experience. |
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Wesley E. Schultz
Term: | Current term expires in |
Recent Business Experience: | Mr. Schultz currently serves on the Board of the Company. Mr. Schultz served as the Chief Financial Officer (CFO) |
Mr. Schultz was a senior management team member involved in major business decisions, developing and implementing strategic plans for growth and integrating its financial strategy. In addition to being the CFO, he was Executive Vice President and a member of the Board of Directors. | |
Prior to working at RCC, Mr. Schultz was the CFO for two companies where he led their initial public offerings: Spanlink, Inc. | |
Company | Mr. Schultz serves as the Chair of the Audit Committee and serves as a member of the Compensation Committee. |
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Other Directorships: | Currently serves as a Board member for Geneva Capital, LLC, an equipment leasing company, Alexandria, Minnesota; served as a Board member for RCC, a wireless communications company, Alexandria, Minnesota; Professional Support Solutions, Inc., an IVR and CTI support solutions and integration company, Dublin, California; and OrthoCor Medical, Inc., an innovator of devices utilizing pulsed electromagnetic frequency and thermal technologies to alleviate joint pain and minimize swelling, Minneapolis, |
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Selection Criteria: | Mr. Schultz brings to the Board his experience on the Board of the Company, 18 years of CFO experience, including 13 years of public company experience in the telecommunications industry, along with his background and experience in accounting and reporting. The Board has determined that Mr. Schultz satisfies the criteria adopted by the SEC to serve as an “Audit Committee Financial Expert.” The Board believes that Mr. Schultz contributes to the Board and the |
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Suzanne M. Spellacy
Term: | Current term expires in |
Recent Business Experience: | Ms. Spellacy currently serves on the Board of the Company. Ms. Spellacy is Vice President and General Counsel of Taylor Corporation, |
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Other Directorships: | Served as a Board member for Southern Minnesota Advocates; Minnesota Job Skills Partnership |
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THE BOARD RECOMMENDS A VOTE "FOR" EACH NOMINEE FOR DIRECTOR
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CONTINUING DIRECTORS9
CONTINUING DIRECTORS
James P. JensenPerry L. Meyer
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Duane D. Lambrecht
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Perry L. Meyer
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Recent Business Experience: | Mr. Meyer currently serves on the Board of the Company. Mr. Meyer oversees all operations of a 2,500-acre diversified grain and livestock farm. Mr. Meyer serves as President of Steamboat Pork, a 1,500 head/sow farm started in 1998 by eight Nicollet and Sibley county farmers to produce isowean pigs. |
Company Committees: | Mr. Meyer serves as the Chair of the Executive Committee and Chair of the Board. Mr. Meyer also serves as an Ex-officio member of the Audit Committee, the Compensation Committee and |
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Selection Criteria: | Mr. Meyer brings to the Board his previous experience both on the Board of the Company and on other Boards, in particular his experience on the CHS, Inc. and Heartland Corn Products |
Age: | 63 |
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Bill D. Otis
Term: | Current term expires in 2019. Director since 2016. |
Recent Business Experience: | Mr. Otis currently serves as the President and CEO of New Ulm Telecom, Inc. Mr. Otis joined the Company in 1979 as the Controller and became President and CEO in 1982. Under his guidance, New Ulm Telecom, Inc. has become a well-established communications company. During his tenure, Company revenues grew from $3.65 million in 1982 to $46.89 million in 2017. New Ulm Telecom, Inc. currently has 10 offices and proudly serves 36 communities. He is a graduate of Winona State University with a Bachelor’s Degree in Accounting and Business Administration. |
Company Committees: | Mr. Otis serves as a member of the Executive Committee. |
Other Directorships: | Mr. Otis currently serves as Board Chair for Broadband Visions, LLC, Independent Emergency Services, LLC, Southern Minnesota Broadband, LLC, and Alliance Bank where he also is a member of the Senior Executive Committee and Audit Committee. Mr. Otis serves as a member of the Board for FiberComm, LC, and Minnesota Telecom Alliance. He also is a member of the National Telephone Cooperative Association Governance Advisory Committee. Mr. Otis’s past leadership roles include Chair of the Board of Hector Communications Corporation and Midwest Wireless, LLC; Board Member for OPASTCO, United States Telephone Association, Cellular 2000, Switch 2000, New Ulm Chamber of Commerce, Board of New Ulm Economic Development Corporation, United Way (New Ulm area) and Ducks Unlimited (local chapter). |
Selection Criteria: | Mr. Otis brings more than 38 years of experience in the communications industry and has intimate knowledge of our Company and its history. Mr. Otis’s experience on other Boards and his extensive communication industry background, along with his numerous other leadership roles within the community qualifies him to serve on the Board of the Company. Mr. Otis’s experience in finance and operation management, merger and acquisition activities, development of collaborative initiatives and his years of executive leadership experience give Mr. Otis a wide-ranging perspective regarding New Ulm Telecom’s opportunities and challenges. The Board believes that Mr. Otis contributes to the Board with his experience as the Company’s CEO and his vast knowledge of the communication industry. |
Age: | 60 |
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Colleen R. SkillingsJames J. Seifert
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Recent Business Experience: | Until his retirement in 2017, Mr. Seifert had served as Executive Vice President, General Counsel and Corporate Secretary for Ecolab, Inc., a Fortune 200 Company, since May 2010. In that capacity, he was responsible for all legal, regulatory, government relations and safety matters. Ecolab does business in 170 countries. |
Company Committees: | Mr. Seifert serves as a member of the Corporate Governance Committee and Audit Committee. |
Other Directorships: | Mr. Seifert is a past board member of the Science Museum of Minnesota, Twin Cities Public Television, the Dean’s Advisory Council of the Humphrey School of Public Affairs at the University of Minnesota, the Dean’s Advisory Board at the University of St. Thomas Law School, Despatch Industries and the Minnesota Job Skills Partnership Board. He is also past Chairman, Riverwood District, Northern Star Council, Boy Scouts of America. |
Selection Criteria: | Mr. Seifert brings to the Board a rich and diverse background in public company governance, ethics, business strategy as well as a background in technology and innovation. Mr. Seifert has represented large public companies for 32 years and has extensive experience in government affairs and government relations, including service in the Minnesota House of Representatives where he was named first-term Legislator of the Year, was Vice-Chairman of the Civil Law Committee, and a member of the Health and Human Services Finance and Policy Committee and the Commerce Committee. He has a deep commitment to community service and has a long record of volunteering for non-profit organizations. The Board believes that Mr. Seifert contributes to the Board and the Committees on which he serves. |
Age: | 61 |
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Colleen R. Skillings
Term: | Current term expires in 2020. Independent Director since 2014. |
Recent Business Experience: | Since 2000, Ms. Skillings has served as the CFO and Human Resources Director of Minnesota Valley Testing Laboratories, Inc. (MVTL). In her current position, Ms. Skillings oversees all of MVTL’s accounting, finance, financial planning, audit, tax, purchasing, human resources and information technology activities. In addition, she serves on MVTL’s Executive Team, which is responsible for the oversight and overall operations, and strategic planning of the company. Ms. Skillings maintains her Certified Public Accountant’s license. Prior to working at MVTL, Ms. Skillings was an Accounting and Auditing Manager for Biebl, Ranweiler, Christensen, Meyer, Thompson and |
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CORPORATE GOVERNANCE
Director IndependenceCORPORATE GOVERNANCE
AllDirector Independence
Six of the Company’s Directorsseven current directors have met the criteria for independence under the rules of the SEC and Rule 5605(a)(2) of NASDAQ. Mr. Otis serves as President and CEO of the Company and is not independent under these rules. Mr. Otis receives no additional compensation for serving as a director.
Director Qualifications
Criteria for Membership
The Company’s Corporate Governance Committee is responsible for annually reviewing the composition of the Board for desired skills and characteristics of Directors,directors, as well as the composition of the Board as a whole.
Terms, Limitations and Retirement
All Directors are elected to three-year terms. The Board does not believe it should establish a limit on the number of times that a Directordirector may stand for election. To ensure that the Board of the Company is made up of individuals who are active in the business, agriculture, professional or working life of the community, our By-Laws state that it is in the best interest of the Company that age limits are set for members of the Board. No individual is eligible to be appointed or elected as a Directordirector after attaining the age of 69.
Ownership of Company Stock
All Directorsdirectors are required to own common stock of the Company.
Selecting Nominees for Election to the Board
The Corporate Governance Committee is the standing committee responsible for recommending to the full Board the nominees for election as directors at our annual shareholder meetings. The Company’s Bylaws call for the Board to then select nominees to stand for election. In making its recommendations, the Committee reviews the composition of the full Board to determine the qualifications and areas of expertise needed to further enhance the composition of the Board, and works with management in attracting candidates with those qualifications. Although the Committee does not have a formal policy regarding diversity, the Committee seeks to provide the Board prospective nominees that reflect diversity in background, education, gender, business experience, skills, business relationships and associations, and other factors that would contribute to the Board’s governance of the Company.
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Other Board Information
Frequency of Meetings
The Board typically holds twelve regularly scheduled meetings per year. If necessary, special meetings of the Board are held as determined by the Board.
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Annual Evaluations
The Corporate Governance Committee conducts, or causes to be conducted, annual evaluations to assess the Board’s performance and composition.
Executive Sessions of Independent Directors
The Company’s independent Directorsdirectors (all members of the Board are independent Directors)other than Mr. Otis) regularly meet in executive sessions (without members of management present) regularly..
Committees
The Board has four standing Committees: (i) Audit; (ii) Compensation; (iii) Corporate Governance; and (iv) Executive.
CEO and Management Succession
The Corporate Governance Committee conducts periodic reviews to assess the succession planning for the Company’s Executive Officers. In the event of the loss of the CEO or any other Executive Officer, a meeting of the Board would be helddetermine how to discuss the implementation ofimplement the existing succession plan and, in the case of the CEO, determine interim management of the Company.
Review and Access to Guidelines
The Corporate Governance Committee reviews the Company’s Corporate Governance Policy annually, and if deemsdeemed appropriate, recommends amendments to the Board.
Communication with the Board
The Board has implemented a process by which Company shareholders may send written communications to the Board’s attention. Any shareholder desiring to communicate with the Board, or one or more of its Directors, may send a letter addressed to:
New Ulm Telecom, Inc.
Attention: Corporate Secretary (Board Matters)
27 North Minnesota Street
New Ulm, Minnesota 56073
The Board has instructed the Corporate Secretary to promptly forward all communications received to the full Board or the individual Board members specifically addressed in the communication, without first screening those communications.
The Company encourages all of its Directors and Officers to attend the Annual Meeting of Shareholders. All seven of the Company’s current Directors attended the Company’s 20142017 Annual Meeting of Shareholders.
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Code of Business Conduct
We have adopted a Code of Business Conduct and Ethics that applies to all Directors, Executive Officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or persons performing similar functions. The Code of Business Conduct and Ethics includes the following principles related to the Company Directors, Executive Officers and employees:
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| 15 ● Act with honesty and integrity; ● Promote full, fair, accurate, timely and understandable disclosures in reports and documents filed with the SEC and other public communications; ● Comply with laws, rules and regulations of governments and their agencies; ● Respect the confidentiality of information acquired in the course of performing work for the Company, except when authorized or otherwise legally obligated to disclose the information; and ● Do not use confidential information of the Company for personal advantage or for the benefit of acquaintances, friends or relatives. |
The Code of Business Conduct and Ethics is publically available by selecting the “About” tab drop down box and clicking on the “Investors” link on the Company’s website at www.nutelecom.net.www.nutelecom.net. We intend to disclose (i) any amendments to, or (ii) waivers from, the Code of Business Conduct and Ethics applicable to our principal executive officer, principal financial officer and principal accounting officer or persons performing similar functions or with respect to the required elements of the Code of Business Conduct and Ethics, by disclosing the amendment or waiver on this website.
Risk Oversight
The Board and each of its CommitteesCommittee are involved in overseeing risk associated with the Company and its operations. The Board and Audit Committee monitor the Company’s credit risk, liquidity risk, regulatory risk and regulatorycyber security risk through regular reviews with management, external auditors and other advisors. In its periodic meetings with management and the Company’s independent registered public accounting firm, the Audit Committee discusses the scope and plan for the audits and includes management in its review of accounting and financial controls, assessment of business risks, and legal and ethical compliance programs. The Board and the Corporate Governance Committee monitor the Company’s governance and succession risk through regular reviews with management and outside advisors. The Board and the Compensation Committee monitor the Company’s compensation and benefit policies and related risks through regular reviews with management and the Committee’s outside advisors. The Board and its Executive Committee monitor operational risk and enterprise risk by monitoring the Company’s overall strategic goals and objectives with management and the Board, and review and consider merger, acquisition and growth opportunities for recommendation to the Board. The Board as a whole monitors any potential for reputation risk.
Board Leadership
The Company’s governance policy states that the Board does not haveChair must be an independent director, which creates a formal policy regarding the separation of the roles ofbetween the CEO and Chair of the Board. The Board but believes it is in the best interest of the Company to makefeels that determination based on the position and direction of the Company and the membership of the Board. However, at this time, the Board has determined that it is in the best interest of the Company’s shareholders for the roles of Chair and CEO to be separated. The current CEO Bill Otis is not a member of the Board. This structure ensures a greater role for the Chair, together with the active participation of the other independent Directors,directors, in setting agendas and establishing Board priorities and procedures. Further, this structure permits the CEO to focus on the management of the Company’s day-to-day operations.
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THE BOARD OF DIRECTORS AND COMMITTEES
Board of Director Committees
The Board consists of seven members with staggered terms of three years. The Board typically holds regular monthly meetings and several special meetings. It has established the following Committees: (i) Audit Committee; (ii) Compensation Committee; (iii) Corporate Governance Committee; and (iv) Executive Committee. Committee Charters can be viewed on the Company’s website at www.nutelecom.net.www.nutelecom.net. The Chair of the Board is an ex-officio member of all Committees. The Board held 1312 regular and 1 special meetings in 2014.2017. All Committees meetmet as required and each Directordirector attended 75% or more of the Board meetings and applicable Committee meetings.
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Corporate Governance Committee
Members of the Corporate Governance Committee are Duane D. Lambrecht (Chair), Colleen R. Skillings and(Chair), Suzanne M. Spellacy.Spellacy, and James J. Seifert. The Corporate Governance Committee is responsible for reviewing, addressing and making recommendations to the Board on matters pertaining to appropriate governance standards (including the Board’s nominating process and succession planning). Committee responsibilities include:
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· Oversee the evaluation of the Board and its Committees;
· Make recommendations to the Chair and the Board as to composition of all Board Committees;
· Maintain shareholder relations efforts;
· Develop, maintain and implement a Board-approved nomination process for seats on the Company’s Board, although the ultimate decision for nominations rests with the entire Board;
· Ensure appropriate succession planning is in place for both senior management and members of the Board;
· Ensure Board and Committee assessments are completed; and
· Identify and recommend Board educational opportunities from the completed assessments.
Board policy requires consideration of candidates for Directordirector positions as recommended by shareholders, if the persons recommended are qualified to serve on the Board. The Board may elect not to consider an unsolicited recommendation if no vacancy exists on the Board and the Board does not perceive a need to increase its size. In order for a Directordirector candidate to be considered for nomination at the Annual Meeting of Shareholders, the recommendation must be received by the Company as provided under “Shareholder Proposals for 20162019 Annual Meeting” on page 34.36.
The Corporate Governance Committee held three meetingsone meeting in 2014.2017.
Audit Committee
Members of the Audit Committee are Wesley E. Schultz (Chair), Duane D. Lambrecht and Colleen R. Skillings.Skillings and James J. Seifert. All members of the Audit Committee are independent as defined in Rule 5605(a)(2) of the NASDAQ's listing standards. Each member of the Audit Committee is financially literate and two members of the Committee have accounting or related financial management expertise. The Board has determined that Mr. Wesley E. Schultz (Chair of the Audit Committee) and Colleen R. Skillings satisfy the criteria adopted by the SEC to serve as “Audit Committee Financial Experts.”
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The Audit Committee is responsible for overseeing the Company’s accounting procedures, financial reporting processes and internal controls and audit. It consults with management and the independent registered public accounting firm on, among other items, matters related to the annual audit, the published financial statements and the accounting principles applied. As part of its duties, the Audit Committee appoints, evaluates and retains the Company’s independent registered public accounting firm and evaluates that firm’s qualifications, performance and independence. The Audit Committee has established policies and procedures for the pre-approval of all services provided by the independent registered public accounting firm.
The Audit Committee held sixfive meetings in 2014.2017. The Report of the Audit Committee is included on page 29pages 32-33 of this proxy statement.
Compensation Committee
Members of the Compensation Committee are Perry L. Meyer (Chair), Dennis E. Miller (Chair), Wesley E. Schultz and Suzanne M. Spellacy. The Compensation Committee’s duties include evaluating employee compensation and benefit plans as well as staffing. The Compensation Committee also makes recommendations pertaining to the compensation of Directors.directors.
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The Compensation Committee held threeseven meetings in 2014.2017. The Report of Compensation Committee on Executive Compensation is included on page 26pages 30-31 of this proxy statement.
Executive Committee
Members of the Executive Committee are James P. Jensen (Chair), Perry L. Meyer and(Chair), Dennis E. Miller. In addition, the Company’s CEO, Chief Operating Officer (COO)Miller and CFO are also members of the Executive Committee.Bill D Otis. This Committee is responsible for carrying out the Board’s overall responsibility with respect to: (i) exercising the Board’s authority when the Board is not in session; (ii) discussing Board agenda topics beyond those on the Consent Agenda; (iii) conducting strategic planning; (iv) consideration ofconsidering the Company’s merger, acquisition and growth opportunities; (v) monitoring the status of any litigation and making recommendations to the Board and (vi) implementation ofimplementing Board member education based on input given by the Corporate Governance Committee and other committees.
The Executive Committee held twono meetings in 2014.2017.
NON-EMPLOYEE DIRECTOR COMPENSATION18
On February 28, 2012, our Board adopted the New Ulm Telecom, Inc. Director Stock Plan (the “Plan”). The Plan was subsequently approved by the Company shareholders on May 31, 2012 and became effective on that date. Under the plan, the Board (or a Committee) has the power to designate a portion of the Director’s retainer that will be paid in Company common stock. Each Director has the ability to designate an additional percentage of his or her retainers to be paid in Company common stock. For the director terms that began after the 2014 Annual Meeting of Shareholders, the Board determined that 50% of each Director’s retainer would be paid in Company common stock, and each director had the ability to designate an additional percentage of his or her retainer, up to a maximum of 100% of the retainer, to be paid in Company common stock. In 2014, each Director was paid an annual retainer of $16,800. In addition, Directors received $1,000 for each Board and Committee meeting they attended. The Chair of the Board, who is not an employee of the Company, receives an additional annual retainer of $12,000. The Audit Committee Chair, who is not an employee of the Company, receives an additional annual retainer of $7,500. The Compensation Committee Chair, who is not an employee of the Company, receives an additional annual retainer of $5,000.
18
On February 24, 2015, the Company’s Board made changes to its Director’s compensation. These changes were recommended by the Company’s Compensation Committee after consultation with an independent third party consultant. The changes were recommended to better align Director compensation with Company peers. Effective June 1, 2015, the Director’s annual retainer will be increased from $16,800 to $20,000. No other changes were made to existing Director compensation.
Under Board policy for non-employee Director Compensation established May 26, 2009, a Director who serves at least three full terms (nine years) is entitled to receive as compensation three times the Board annual retainer in effect at the time of separation from the Board. A Director who serves full terms beyond the initial three terms is entitled to receive additional compensation of one-half times the annual Board retainer in effect at the time of separation for each additional full term served, not to exceed three additional terms. Separation includes retirement, resignation, death, disability or change of corporate ownership. This compensation to Directors will generally be paid within sixty days of the Director’s separation from the Board, and otherwise in accordance with Section 409A of the Internal Revenue Code. The Company’s future obligations under this policy as of December 31, 2014 were $218,400. The Company developed this policy with the assistance of Organizational Concepts International (OCI), an outside compensation consultant, in an effort to remain competitive in attracting and retaining outside Directors. The decision to engage OCI was made by the Compensation Committee.
The following table shows the compensation paid or accrued to each of the Company’s Directors in 2014:
2014 DIRECTOR COMPENSATION | ||||||||||||
| Fees Earned or Paid in Cash ($) |
| Fees Earned or Paid in Stock ($) (1) |
| All Other Compensation ($) (2) |
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Name |
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| Total ($) | ||||||||
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James P. Jensen | $ | 41,400 |
| $ | 15,400 |
| $ | - |
| $ | 56,800 | |
Perry L. Meyer |
| 24,000 |
|
| 16,800 |
|
| - |
|
| 40,800 | |
Duane D. Lambrecht |
| 31,400 |
|
| 8,400 |
|
| 8,400 |
|
| 48,200 | |
Paul W. Erick |
| 19,125 |
|
| - |
|
| 50,400 |
|
| 69,525 | |
Dennis Miller |
| 18,000 |
|
| 16,800 |
|
| - |
|
| 34,800 | |
Wesley E. Schultz |
| 24,375 |
|
| 16,800 |
|
| - |
|
| 41,175 | |
Colleen R. Skillings |
| 13,400 |
|
| 8,400 |
|
| - |
|
| 21,800 | |
Suzanne M. Spellacy |
| 27,400 |
|
| 8,400 |
|
| - |
|
| 35,800 | |
(1)As noted above, under the “New Ulm Telecom, Inc. Director Stock Plan,” all non-employee directors receive a portion of their board compensation in Company stock and have the ability to elect to have an additional amount paid in Company stock. All shares vest on the date of issuance. The value shown is the number of shares awarded valued at the market price on their grant dates, in all cases computed in accordance with FASB ASC Topic 718.
(2)The amount listed in the All Other Compensation column represents the change in the non-employee Director Compensation policy value accruing to each Director for future payment under the Company’s Director Separation policy dated May 26, 2009.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes information regarding beneficial ownership of the Company’s common stock as of March 31, 20152018 by (a) each person who beneficially owns five percent or more of our common stock; (b) each Directordirector and nominee for Director;director; (c) each Named Executive Officer and (d) all Directorsdirectors and Executive Officers as a group. Unless otherwise noted, each person identified below possesses sole voting and investment power with respect to such shares. Except as noted below, we know of no agreements among our shareholders that relate to voting or investment power with respect to our common stock.
Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership (1) |
| Percent of Class (2) |
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|
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|
|
Ruth B. Wines, Trustee of the Ralph K. Wines & Ruth B. Wines Family Trust 216 Apolena, Newport Beach, California |
| 274,320 |
| 5.4% |
Bill D. Otis |
| 209,477 |
| 4.1 |
Perry L. Meyer |
| 25,933 |
| * |
James P. Jensen (3) |
| 25,065 |
| * |
Dennis E. Miller |
| 13,362 |
| * |
Wesley E. Schultz |
| 8,592 |
| * |
Duane D. Lambrecht (4) |
| 5,046 |
| * |
Suzanne M. Spellacy |
| 4,096 |
| * |
Barbara A.J. Bornhoft |
| 2,800 |
| * |
Colleen R. Skillings |
| 1,280 |
| * |
Curtis O. Kawlewski |
| 100 |
| * |
All nominees, Directors and Executive Officers as a group (11 persons) (5) |
| 295,751 |
| 5.8% |
The Company’s Articles of Incorporation restrict any one individual or entity from beneficially owning more than seven percent of the outstanding capital stock of the corporation. Specific details of this restriction are contained in Article III of the Company’s Articles of Incorporation.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | ||
Gabelli Asset Management, Inc. (3) |
| 310,348 |
| 6.0% |
One Corporate Center, Rye, New York 10580-1435 | ||||
Ruth B. Wines, Trustee of the Ralph K. Wines & |
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Ruth B. Wines Family Trust (4) | 274,320 | 5.3 | ||
216 Apolena, Newport Beach, California 92662 |
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Bill D. Otis | 218,235 | 4.2 | ||
Perry L. Meyer (5) |
| 64,552 |
| 1.2 |
Dennis E. Miller | 22,311 | * | ||
Wesley E. Schultz |
| 16,701 |
| * |
Suzanne M. Spellacy | 8,190 | * | ||
Barbara A.J. Bornhoft | 7,006 |
| * | |
Colleen R. Skillings | 5,333 | * | ||
Curtis O. Kawlewski | 3,977 |
| * | |
James J. Seifert | 2,634 | * | ||
Craig Anderson | 333 |
| * | |
All nominees, Directors and Executive Officers as a | ||||
group (10 persons) |
| 349,272 |
| 6.8% |
_________________________________
* Represents less than 1.0%
| |
| |
| |
| |
|
(2) Percentage of beneficial ownership is based on 5,164,274 shares outstanding as of March 31, 2018.
(3) Based on a Schedule 13D/A filed with the SEC on September 20, 2016. The aggregate number of shares includes 169,448 shares held by Gabelli Funds, LLC, 57,500 shares held by Teton Advisors, Inc., 50,400 shares held by ICTC Group Inc. and 33,000 shares held by GAMCO Asset Management Inc.
(4) Based on a Schedule 13G filed with the SEC on May 14, 2010.
(5) Includes 62,018 shares held by the Perry L. Meyer Living Trust.
19
20
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows compensation paid to or earned by the CEO, COOChief Operating Officer (COO), CFO and CFOChief Business Development Officer (CBDO) “Named Executive Officers” during 2014.2017. For more information regarding the Company’s salary policies and executive compensation plans, please review the information under the caption “Report of Compensation Committee on Executive Compensation,” on page 26.pages 30-31.
Non-Equity Incentive Plan Compensation ($) (b) | ||||||||||||
Stock Awards ($) (a) | All Other Compensation ($) (c) | |||||||||||
Name and Principal Position | Year | Salary ($) | Total ($) | |||||||||
Bill D. Otis |
| 2017 |
| 290,000 |
| 25,385 |
| 25,406 |
| 34,230 |
| 375,021 |
President and CEO | 2016 | 290,000 | 30,430 | 30,432 | 32,432 | 383,294 | ||||||
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Barbara A.J. Bornhoft | 2017 | 186,700 | 12,298 | 12,307 | 20,681 | 231,986 | ||||||
Vice President/COO |
| 2016 |
| 186,700 |
| 14,694 |
| 14,698 |
| 21,739 |
| 237,831 |
and Corporate Secretary | ||||||||||||
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| |
Curtis O. Kawlewski | 2017 | 173,250 | 11,407 | 11,426 | 13,714 | 209,797 | ||||||
CFO |
| 2016 |
| 173,250 |
| 13,634 |
| 13,641 |
| 10,857 |
| 211,382 |
Craig Anderson (d) |
| 2017 |
| 87,615 |
| 5,594 |
| 5,608 |
| 2,602 |
| 101,419 |
CBDO | ||||||||||||
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| ||||||||||
(a) As noted below, under "Cash/Common Stock-Based Incentive Compensation," Company Executive Officers are | ||||||||||||
required to receive 50% of their incentive compensation earned in Company Common Stock in lieu of cash. The value | ||||||||||||
shown is the number of shares awarded valued at the market price on their grant dates, in all cases computed in | ||||||||||||
accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. | ||||||||||||
(b) All amounts shown for 2017 under "Non-Equity Incentive Plan Compensation" were earned in 2017 under the | ||||||||||||
2006 Management Incentive Plan, as in effect in 2017. These amounts were paid in 2018. | ||||||||||||
(c) Represents taxable fringe benefits and contributions made by the Company under its 401(k) plan. | ||||||||||||
(d) Mr. Anderson joined the Company as its CBDO on June 12, 2017. | ||||||||||||
On July 25, 2017, our Board of Directors granted 6,077 shares of restricted stock units in the Common Stock of the Company to its executive officers under the 2017 Plan. The Company recognizes share-based compensation expense for these restricted stock units over the vesting period of the restricted stock units, which was determined by the Board. The 2017 restricted stock units will vest on December 31, 2019, at which point, the executives will receive Common Stock in the Company for the restricted stock units.
20
Non-Equity Incentive Plan Compensation ($) (a) | All Other Compensation ($) (b) | |||||||||
Name and Principal Position | Year | Salary ($) | Total ($) | |||||||
Bill D. Otis | 2014 | 276,000 | 59,459 | 33,950 | 369,409 | |||||
President and CEO | 2013 | 268,000 | 49,583 | 32,985 | 350,568 | |||||
Barbara A.J. Bornhoft | 2014 | 175,100 | 28,308 | 19,722 | 223,130 | |||||
Vice President/COO | 2013 | 170,000 | 23,593 | 19,773 | 213,366 | |||||
and Corporate Secretary | ||||||||||
Curtis O. Kawlewski | 2014 | 157,400 | 25,447 | 10,649 | 193,496 | |||||
CFO | 2013 | 149,350 | 20,734 | 10,077 | 180,161 | |||||
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| ||||||||
(a) All amounts shown for 2014 under "Non-Equity Incentive Plan Compensation" were earned in 2014 under the | ||||||||||
2006 Management Incentive Plan, as in effect in 2014. These amounts were paid in 2015. | ||||||||||
(b) Represents taxable fringe benefits and contributions made by the Company under its 401(k) plan. | ||||||||||
Grants of Plan-Based Awards in 20142017
The following table sets forth information relating to potential plan-based awards in 20142017 for Named Executive Officers under the 2006 Management Incentive Plan (MIP), as amended:
| Potential Payouts Under Non-Equity Incentive Plan Awards (1) | Potential Payouts Under Incentive Plan Awards (1) | ||||||
| Threshold |
| Target ($) |
| Maximum ($) | Threshold ($) | Target ($) | Maximum ($) |
Name |
|
| ||||||
|
|
|
|
|
| |||
Bill D. Otis | 27,600 |
| 55,200 |
| 110,400 | 29,000 | 58,000 | 116,000 |
Barbara A. J. Bornhoft | 13,133 |
| 26,265 |
| 52,530 | 14,003 | 28,005 | 56,010 |
Curtis O. Kawlewski | 11,805 |
| 23,610 |
| 47,220 | 12,994 | 25,988 | 51,976 |
|
|
| ||||||
Craig S. Anderson | 12,750 | 25,500 | 51,000 | |||||
|
21
Options and Warrants
The Company did not issue any options or stock awardswarrants to named executivesNamed Executive Officers during 20142017 and had no options or stock awardswarrants outstanding as of December 31, 2014.2017.
Employment Agreements
CEO Bill D. Otis. Mr. Otis and the Company entered into an employment agreement in July 2006 that providedprovides (i) for an annual base salary of no less than $170,000 and (ii) that Mr. Otis would be eligible for incentive compensation under the New Ulm Telecom Management Incentive PlanMIP in the form of a cash incentive (Annual Incentive Award) on an annual basis. The base salary for Mr. Otis was setremains at $284,000 for 2015.$290,000. The target incentive payout for Mr. Otis is set at 20% of his base salary. The maximum incentive award payable under the plan is 40% of base salary (2 times the target). The minimum incentive award payable under the plan is $0.
Under the employment agreement, as amended in March 2012, upon termination of Mr. Otis’ employment by the Company without cause or by Mr. Otis for good reason, Mr. Otis would receive 2.99 years of base salary at the annualized rate of pay at termination. Upon a change-in-control transaction, if the employment of Mr. Otis is terminated by the Company without cause or by Mr. Otis for good reason within 12 months of the change-in-control transaction, Mr. Otis would receive a lump sum payment equal to 2.99 years of base salary at the annualized rate of pay at termination. This amount would have been equal to $825,240$867,100 at December 31, 2014,2017, based on the employment agreement that was in effect at that time.
COO Barbara A.J. Bornhoft. Ms. Bornhoft and the Company entered into an employment agreement in July 2006 that providedprovides (i) for an annual base salary of no less than $110,000 and (ii) that Ms. Bornhoft would be eligible for incentive compensation under the New Ulm Telecom Management Incentive PlanMIP in the form of an Annual Incentive Award. The base salary for Ms. Bornhoft was setremains at $180,400 for 2015.$186,700. The target incentive for Ms. Bornhoft is 15% of her base salary. The maximum incentive award payable under the plan is 30% of base salary (2 times the target). The minimum incentive award payable under the plan is $0.
Under the employment agreement, as amended in March 2012, upon termination of Ms. Bornhoft’s employment by the Company, without cause or by Ms. Bornhoft for good reason;reason, Ms. Bornhoft would receive 24 months of base salary at the annualized rate of pay at termination. Upon a change-in-control transaction, if Ms. Bornhoft is terminated by the Company without cause or by Ms. Bornhoft for good reason within 12 months of the change-in-control transaction, Ms. Bornhoft would receive a lump sum payment equal to 24 months of base salary at the annualized rate of pay at termination. This amount would have been equal to $350,200$373,400 at December 31, 2014,2017, based on the employment agreement that was in effect at that time.
22
CFO Curtis O. Kawlewski. Mr. Kawlewski and the Company entered into an employment agreement in March 2012 that providedprovides (i) for an annual base salary of no less than $145,000 and (ii) that Mr. Kawlewski would be eligible for incentive compensation under the New Ulm Telecom Management Incentive PlanMIP in the form of an Annual Incentive Award. The base salary for Mr. Kawlewski was setremains at $165,000 for 2015.$173,250. The target incentive for Mr. Kawlewski is 15% of his base salary. The maximum incentive award payable under the plan is 30% of base salary (2 times the target). The minimum incentive award payable under the plan is $0.
21
UponUnder the employment agreement, as amended in July 2017, upon termination of Mr. Kawlewski’s employment by the Company without cause or by Mr. Kawlewski for good reason, Mr. Kawlewski would receive 1224 months of base salary at the annualized rate of pay at termination. Upon a change-in-control transaction, if Mr. Kawlewski is terminated by the Company, without cause or by Mr. Kawlewski for good reason within 1224 months of the change-in-control transaction, Mr. Kawlewski would receive a lump sum payment equal to 1224 months of base salary at the annualized rate of pay at termination. This amount would have been equal to $157,400$346,500 at December 31, 2014,2017, based on the employment agreement that was in effect at that time.
CBDO Craig S. Anderson. The Company does not have a written employment agreement with Mr. Anderson. Mr. Anderson currently receives an annual base salary of $170,000 and is eligible for incentive compensation as described in this proxy statement.
COMPENSATION POLICY
The Compensation Committee, which is comprised solely of Independent Directors, is responsible for evaluating and monitoring the Company’s general compensation policies and compensation plans, as well as the specific compensation levels for Executive Officers, including our CEO. The Compensation Committee reviews and recommends annual base salary levels and annual cash award opportunity levels for each Named Executive Officer to the Board.
General Compensation Philosophy
Under the supervision of the Board, the compensation philosophy is designed to:
· Attract and retain well-qualified executive talent;
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· Tie annual cash incentives to achievement of measurable corporate performance objectives; and
· Align executive incentives with shareholder value creation.
To achieve these objectives, the Compensation Committee implemented and maintains a compensation plan that ties a significant portion of an executive’s overall compensation to the Company’s financial performance. Overall, the total compensation opportunity is intended to create an executive compensation program that is set competitively compared to similar-sized companies, particularly telecommunication companies.
22
Each Executive Officer’s compensation package is generally comprised of three elements:
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· Base salary and fringe benefits, which reflects an individual’s qualifications, scope of responsibilities, experience level, expertise, performance and contribution to the Company’s financial results;
· Cash/common stock-based incentive compensation tied to measurable targets of the Company’s overall success; and
· The Company’s qualified 401(k) plan, in which the executives participate.
The Executive Officers were not present during, and did not participate in, deliberations or decisions involving their own compensation during 2014.2017. While Executive Officers do not play a role in setting their own compensation, the Company’s CEO does make recommendations to the Compensation Committee concerning individual performance of other Executive Officers.
As required by Section 14A of the Securities Exchange Act of 1934, the Company proposed an advisory vote to the shareholders approving executive compensation at the May 30, 2013 New Ulm Telecom, Inc. annual meeting. This proposal, commonly known as a “say-on-pay” proposal, gave the Company shareholders the opportunity to express their views on the Company’s Named Executive Officers’ compensation. The Company shareholders approved the proposal with 2,220,076 votes for, 296,247 votes against, 312,917 abstentions and 500,419 broker non-votes. While this vote was advisory, and was not binding on the Compensation Committee or the Board, it did provide valuable information to the Compensation Committee and the Board in setting the Company’s general compensation policies and compensation plans for the Company’s Named Executive Officers.
23
As required by Section 14A of the Securities Exchange Act of 1934, the Company also proposed an advisory vote to the shareholders at the May 30, 2013 New Ulm Telecom, Inc. annual meeting on the frequency of future advisory votes on the Company’s Named Executive Officers’ compensation. The Company asked the shareholders whether they would prefer an advisory vote on Named Executive Officers’ compensation every year, every two years, or every three years. The Company shareholders approved the vote for every three years with 1,828,357 for the three year selection compared to 610,642 votes for every one year, 36,247 votes for every two years, 353,994 abstentions and 500,419 broker non-votes. The Board adopted the recommendation of the shareholders and intends to have another advisory vote to approve executive compensation at the 2016 Annual Meeting of Shareholders.
Base Salary
The level of base salary is established primarily on the basis of an executive’s qualifications and relevant experience; the scope of his or her responsibilities; the strategic goals that he or she manages; the compensation levels of Executive Officers at similar-sized companies, particularly telecommunications companies; the relationship between the executive’s performance and the Company’s results; and market rates of compensation required to retain qualified management. The Company believes that executive base salaries should be competitive with salaries at similar-sized companies. The Compensation Committee reviews the base salary of each executive annually and makes recommendations to the Board pertaining to any adjustments in base salary that (i) take into account the individual’s performance and any changes in the individual’s responsibility and (ii) are necessary or appropriate to maintain a competitive salary structure.
Cash-Based
Cash/Common Stock-Based Incentive Compensation
The Company engaged an outside consultant in 2005 to advise the Company on its development of Employee Incentive Plans for (i) employees other than Executive Officers and (ii) Executive Officers. Both plans were implemented in 2006. Payments on each plan wereare based on achievement of objectives of measurable corporate performance, with financial and customer-related targets. The financial targets includedinclude achievement of specified certain operating revenue and netoperating income before interest, taxes, depreciation and amortization (OIBITDA) criteria based on the Company’s budget, whilebudget.
On May 28, 2015, the customer service targets were based on several factors, including (i) “uptime” (the amountshareholders of timeNew Ulm Telecom, Inc. approved the New Ulm Telecom, Inc. 2015 Employee Stock Plan (2015 Plan). The purpose of the 2015 Plan is to enable the Company and its Subsidiaries to attract and retain employees by aligning the financial interests of these individuals with the other shareholders of the Company. The Plan provides for the issuance of Company Common Stock upon the attainment of objectives under the Company’s 2006 Employee Incentive Plans, as amended. Under the 2015 Plan, each qualified employee of the Company may elect to receive up to 50% of their incentive compensation earned under the 2006 Employee Incentive Plans in Company Common Stock in lieu of cash. The Board subsequently determined that the Company’s phone, cable and Internet services were available to customers) and restoration time (the abilityExecutive Officers would receive 50% of thetheir incentive compensation earned in Company to restore service when an interruption occurs); (ii) customer retention and (iii) customer service (derived from customer service data).Common Stock in lieu of cash.
23
The Executive Officer potential awards under the 2006 Management Incentive Plan, as amended,MIP, and in effect in 2014, were as follows:2017, are set forth below. The MIP effective in 2018 differs slightly from the MIP effective in 2017. See “Awards to Named Executive Officers Under the 2018 Annual Bonus Plan” below.
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Position | Target Award | Maximum |
Bill D Otis | 20 | 40 |
Barbara A.J. Bornhoft | 15 | 30 |
Curtis O. Kawlewski | 15 | 30 |
Craig S. Anderson | 15 | 30 |
24 (1) Mr. Anderson’s potential 2017 MIP award was prorated, reflecting his June 2017 initial
hire date.
The award formula wasis weighted according to each of the percentages listed below.
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OIBITDA 50%
OIBITDA is defined as operating income excluding depreciation and amortization.Operating Revenue 50%
Total 100%
Substantially all of NU Telecom’s 148 full-time equivalent employees were eligible to participate in the Company’s 20142017 Incentive Plan. Under the 2006 Management Incentive Plan,MIP, as in effect for 2014,2017, the OIBITDA target was $13,986,268,$20,144,950 and the operating revenue target was $38,272,420 and the customer service target was 100%.$49,143,096. The Company achieved OIBITDA of $14,348,835,$19,112,837 and operating revenue of $39,987,409 and a customer service rating of 100%.$46,889,181.
GrantsGrant of Plan-Based Awards in 2015to Named Executive Officers Under the 2018 Annual Bonus Plan
On March 23, 2018, the Compensation Committee and Board adopted a plan for annual incentive compensation to the Company’s Named Executive Officers under its 2018 Management Incentive Plan (“2018 MIP”). Under the 2018 MIP, the Company established goals under which these Named Executive Officers have the opportunity to earn an annual bonus based on (i) OIBITDA, (ii) Operating Revenue, and (iii) specific non-financial individual objectives.
The following table sets forth certain information concerning plan-based potential awards to be awarded tothe threshold, target and maximum aggregate bonus opportunity under the 2018 MIP for the Named Executive Officers:
Named Executive Officer | Base Salary ($) | Bonus Opportunity | |||
Threshold | Target | Maximum ($) | |||
Bill D. Otis | 290,000 | 43,500 | 72,500 | 130,500 | |
Barbara A.J. Bornhoft | 186,700 | 23,338 | 37,340 | 65,345 | |
Curtis O. Kawlewski | 173,250 | 21,656 | 34,650 | 60,638 | |
Craig S. Anderson | 170,000 | 12,750 | 25,500 | 51,000 | |
24
The Board of Directors retains discretion under the 2018 MIP to make incentive plan cash payments in amounts higher or lower than would otherwise be required under the 2018 MIP. In addition, all payments under the 2018 MIP are subject to claw back to the extent required by federal law.
Grant of Awards to Named Executive Officers below duringUnder 2017 Omnibus Stock Plan
On March 23, 2018, the fiscal year endingBoard of Directors and Compensation Committee granted awards under the New Ulm Telecom, Inc. 2017 Omnibus Stock Plan (“Long Term Incentive Plan” or “LTIP”). Each Named Executive Officer received a time-based restricted stock unit (“RSU”) and a performance - based RSU. The time–based RSUs were computed as a percentage of the Named Executive Officer’s Base Salary based on the closing price of Company common stock of $17.00 on March 26, 2018. The RSUs will vest 100% on December 31, 2015. This information is2020.
2018 Time-Based RSU Grants Under Long Term Incentive Plan
Named Executive Officer | Time-Based RSU | Dollar Value | Number of |
Bill D. Otis | 10.0 | $29,000 | 1,706 |
Barbara A.J. Bornhoft | 7.5 | $14,003 | 824 |
Curtis O. Kawlewski | 7.5 | 12,994 | 764 |
Craig S. Anderson | 7.5 | $12,750 | 750 |
2018 Performance-Based RSU Grants Under Long Term Incentive Plan
The performance-based RSUs were computed as a percentage of the Named Executive Officer’s Base Salary based on criteria containedthe closing price of common stock of $17.00 on March 26, 2018. The RSUs will vest based on the Company’s average Return on Invested Capital (”ROIC”) for the three years ended December 31, 2020. The specific ROIC levels are confidential. The Board, in its sole discretion, may adjust the 2006 Management Incentive Plan,ROIC for the performance period, including adjustments that may result in non-GAAP financial measures, such as amended,the effect of changes in accounting standards, tax laws and described above.regulations, and extraordinary, non-recurring or unusual events specified by the Board, including write-offs or write-downs, capital gains or losses, acquisitions or divestitures, restructurings, and litigation judgments and settlements.
Award Range | Units Earned as Percent of |
Threshold | 50 |
Target | 100 |
Maximum | 150 |
25
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards | ||
| Threshold ($) | Target ($) | Maximum ($) |
Name | |||
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Bill D. Otis | 28,400 | 56,800 | 113,600 |
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Barbara A.J. Bornhoft | 13,530 | 27,060 | 54,120 |
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Curtis O. Kawlewski | 12,375 | 24,750 | 49,500 |
Named Executive Officer | Incentive-Based RSU as percentage of Base | Number of performance-based RSUs (#) | ||
Threshold | Target | Maximum | ||
Bill D. Otis | 20.0 | 1,706 | 3,412 | 5,118 |
Barbara A.J. Bornhoft | 7.5 | 412 | 824 | 1,236 |
Curtis O. Kawlewski | 7.5 | 382 | 764 | 1,147 |
Craig S. Anderson | 7.5 | 375 | 750 | 1,125 |
Other Compensation Programs
The Company has a qualified 401(k) Retirement Savings Plan (Retirement Plan). The Named Executive Officers, along with other employees who made contributions to the Retirement Plan, receive matching contributions of 50% of every dollar, up to 6% of all eligible employee contributions. The Company matches a portion of employee contributions to the Retirement Plan in order to encourage employees to participate in their own retirement savings and to provide another competitive recruiting tool to attract and retain employees.
In addition, on February 24, 2015,23, 2018, the Board authorized the Company to make a discretionary corporate contribution of 3% of eligible compensation for all eligible employees to their respective 401(k) plan accounts for the fiscal year 20142017 under the Company’s Retirement Plan.
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Elements of Post-Termination Compensation
As noted above under “Employment Agreements,” our Employment Agreements with Mr. Otis, Ms. Bornhoft and Mr. Kawlewski contain change-in-control provisions. The Compensation Committee believes that severance and change-in-control arrangements for these Named Executive Officers aids in the recruitment and retention of Executive Officers and provides incentives for Executive Officers to grow our business and maintain focus on creating value for our shareholders. The Compensation Committee believes that providing protection to Executive Officers whose employment may be terminated in connection with a change-in-control transaction strikes an appropriate balance between the interests of our Executive Officers and the interests of others if a change-in-control transaction occurs.
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NON-EMPLOYEE DIRECTOR COMPENSATION
The following table shows the compensation paid or accrued to each of the Company’s non-employee directors in 2017:
2017 DIRECTOR COMPENSATION | ||||||||||||
Fees Earned or Paid in Cash ($) | Fees Earned or Paid in Stock ($) (1) |
All Other Compensation ($) (2) |
Total ($) | |||||||||
Name | ||||||||||||
Perry L. Meyer | $ | 30,667 | $ | 29,995 | $ | - | $ | 60,662 | ||||
Duane D. Lambrecht (3) | 17,333 | - | - | 17,333 | ||||||||
Dennis Miller | 26,000 | 29,995 | 53,334 | 109,329 | ||||||||
Wesley E. Schultz | 30,500 | 29,995 | 33,334 | 93,829 | ||||||||
Colleen R. Skillings | 31,350 | 14,985 | 20,000 | 66,335 | ||||||||
Suzanne M. Spellacy | 31,833 | 14,985 | 33,334 | 80,152 | ||||||||
James J. Seifert | 9,000 | 29,995 | - | 38,995 | ||||||||
(1) As noted above, under the “2017 Omnibus Stock Plan,” all non-employee directors receive a portion of their board compensation in Company does notstock and have the ability to elect to have an additional amount paid in Company stock. All shares vest on the date of issuance. The value shown is the number of shares awarded valued at the market price on their grant dates, in all cases computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
(2) The amount listed in the All Other Compensation column represents the change in the non-employee director Compensation policy value accruing to each director for future payment under the Company’s Director Separation policy dated May 26, 2009. Future benefits under this plan were eliminated as of July 25, 2017. All amounts previously accrued became vested to the directors to be paid upon their separation from the Board.
(3) Mr. Lambrecht’s term ended at the 2017 Annual Meeting.
2017 Omnibus Stock Plan
On February 24, 2017, our Board adopted the New Ulm Telecom, Inc. 2017 Omnibus Stock Plan (2017 Plan). The Company’s shareholders approved the plan at the May 25, 2017 Annual Meeting of Shareholders and it became effective on that date. The purpose of the 2017 Plan is to attract and retain talented and experienced people, closely link employee compensation with performance realized by shareholders, and reward long-term results with long-term compensation.
The 2017 Plan enables the Company to grant stock incentive awards to employees, including officers, and does notto Board members and service providers. The 2017 Plan permits stock incentive awards in the form of incentive and non-qualified options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other awards in stock or cash. The 2017 Plan permits the issuance of up to 625,000 shares of our common stock in any of the above stock awards.
Prior to the adoption of the 2017 Plan, the Company and its subsidiaries maintained two plans: the 2012 Director Stock Plan (2012 Plan) and the 2015 Employee Stock Plan (2015 Plan). The 2012 Plan gave the Board (or a Committee) had the power to designate a portion of each non-employee director’s retainer that would be paid in Company common stock and allowed each non-employee director to designate an additional percentage of his or her retainer to be paid in Company common stock. The 2015 Plan provides that employees who earn a cash bonus under the Company’s incentive plans may elect to receive up to 50% of their bonus amount in the form of Company common stock in lieu of cash.
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Upon Company shareholder approval of the 2017 Plan, the 2012 Plan was terminated and no further shares will be issued under that plan. Any future election by the Board to pay, or by non-employee director to receive, a portion of Board retainers in stock will result in shares issued under the 2017 Plan. The 2015 Plan will remain in effect and continue to allow employees to elect stock in lieu of cash for earned bonuses. As of December 31, 2017, approximately 612,332 shares of common stock remain available for issuance under the 2017 Plan and as of March 31, 2018, approximately 177,631 shares of common stock remain available for issuance under the 2015 Plan.
In a manner similar to the 2012 Plan, the Board (or a Committee) has the power under the 2017 Plan to designate a portion of each non-employee director’s retainer that will be paid in Company common stock. Each non-employee director also has the ability to designate an additional percentage of his or her retainer to be paid in Company common stock. In 2017, the Board determined that 50% of each non-employee director’s retainer would be paid in Company common stock, and that each non-employee director would have any pension plansthe ability to designate an additional percentage of his or any nonqualified deferred compensation plansher retainer, up to a maximum of 100% of the retainer, to be paid in Company common stock.
For the 2017 - 2018 director term, each non-employee director was paid an annual retainer of $30,000. In addition, directors received $1,000 for its Executive Officerseach Board and Committee meeting they attended. The Chair of the Board receives an additional $20,000 annual retainer. The Audit Committee Chair receives an additional $7,500 annual retainer. The Compensation Committee Chair receives an additional $5,000 annual retainer. The Governance Committee Chair receives an additional $2,000 annual retainer.
On March 23, 2018, the Board of Directors increased the non-employee director annual retainer from $30,000 to $40,000 for the 2018 – 2019 director term, to be effective for all non-employee directors as of the date of the 2018 Annual Meeting of Shareholders. There are no planned 2018 changes in either meeting fees or employees.Board and Committee Chair retainers.
Compensation Consultant
In December 2016, the Company’s Board of Directors engaged Grant Thornton to analyze Company non-employee director compensation. After reviewing and analyzing the Grant Thornton study, the Board determined that Company non-employee director compensation was between the 25th and 50th percentiles of compensation for comparable companies. The Board increased the annual director retainer for non-employee directors from $20,000 to $30,000 in 2017, and is increasing the annual compensation by an additional $10,000 from $30,000 to $40,000 effective as of the date of the 2018 Annual Meeting of Shareholders. The Company believes this will put its non-employee director compensation at, or slightly above, the median for companies of comparable size. In connection with the 2017 increase, the Company terminated future accruals under the Director Separation Compensation Policy, as described below.
In addition, the Compensation Committee engaged Grant Thornton to analyze the Company’s executive compensation. As a result of the Grant Thornton study, the Board of Directors and the Compensation Committee adopted the 2017 Omnibus Stock Plan as the Company long term incentive plan and in 2017 and 2018 took the action described in this proxy statement.
In each instance, Grant Thornton was selected and hired by the Compensation Committee.
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Director Separation Compensation Policy
Under the Company’s Director Compensation established May 26, 2009, a director who served at least three full terms (nine years) was entitled to receive as compensation three times the Board annual retainer in effect at the time of separation from the Board. A director who serves full terms beyond the initial three terms was entitled to receive additional compensation of one-half times the annual Board retainer in effect at the time of separation for each additional full term served, not to exceed three additional terms. Separation includes retirement, resignation, death, disability or change of corporate ownership. This compensation to directors will generally be paid within sixty days of the director’s separation from the Board, and otherwise in accordance with Section 409A of the Internal Revenue Code. Effective July 25, 2017, the Board ended any future compensation earned under this plan. All compensation earned to date under this plan will be paid to the Board members who have earned this compensation, but no future compensation will be earned under this plan. The Company’s future obligations under this policy as of December 31, 2017 were $230,002. The Company developed this policy with the assistance of Organizational Concepts International (OCI), an outside compensation consultant, in an effort to remain competitive in attracting and retaining outside directors.
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REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation program for the CEO and the Board is the responsibility of the Compensation Committee of the Board. The Compensation Committee is comprised entirely of three independent members of the Board.Board – Dennis E. Miller (Chair), Wesley E. Schultz and Suzanne M. Spellacy. The Compensation Committee oversees the Company’s compensation practices and establishes the principles and strategies that guide the design of compensation plans and benefit programs for all Company employees, of the Company, and makes recommendations to the Board. The Compensation Committee is comprised of three Directors: Perry L. Meyer (Chair), Dennis E. Miller and Suzanne M. Spellacy.
The following discussion describes the Company’s approach pertaining to executive compensation. The Compensation Committee retains the right to consider factors other than those set forth below in setting executive compensation levels for individual officers.
The 2014 salary2017 compensation program consisted of twothree elements: (i) an annual base salary andsalary; (ii) a cash/common stock in lieu of cash awardbased incentive under athe Management Incentive Plan. The purposePlan and the 2015 Employee Stock Plan and (iii) the grant of restricted stock units in the Common Stock of the Plan wasCompany under the 2017 Omnibus Stock Plan. These restricted stock units will vest on December 31, 2019. These Management Incentive Plans are designed to reward key executives for the Company’s annual and long-term success of the Company and to assist in the recruitment and retention of key executives. The Plan wasThese Management Incentive Plans are also used to link total executive compensation to the Company’s financial performance.
Overall, the Company philosophy for theits executive compensation program is to pay executives competitively compared to similar-sized companies, particularly telecommunications companies.
The Compensation Committee considers Company performance and compensation levels of comparable companies when making its recommendations pertaining to annual base salaries and making awards under the incentive plan. The Compensation Committee’s goal is to remain reasonably competitive with comparable companies.Management Incentive Plans.
The Compensation Committee worked with a consultantconsultants to originally develop the Management Incentive Plan. This plan wasPlans, which were effective beginning in the year 2006. Thisyears 2006 and 2017. The Company believes the Management Incentive Plan enablesPlans enable the Company to motivate its Executive Officersexecutive officers to achieve key financial and strategic objectives.
TheIn 2015, upon Compensation Committee recommendation, the Board adopted and the Company’s shareholders approved the New Ulm Telecom, Inc. 2015 Employee Stock Plan under which employees participating in the Management Incentive Plan may elect to receive up to 50% of their short-term incentive paid in Company stock.
In 2017, upon Compensation Committee recommendation, the Board adopted and the Company’s shareholders approved the New Ulm Telecom, Inc. 2017 Plan. The purpose of the Board has reviewed2017 Plan was to enable New Ulm Telecom, Inc. and discussedits subsidiaries to attract and retain talented and experienced people, closely link employee compensation with management the Executive Compensation discussionperformance realized by shareholders, and analysis. Based on the review and discussions, the Compensation Committee recommended thatreward long-term results with long-term compensation. The plan enables the Board include the Executive Compensation discussionto grant stock incentive awards to current and analysisnew employees, including officers, and to Board members and service providers. The 2017 Plan permits stock incentive awards in the proxy statement.form of options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other awards in stock or cash. The 2017 Plan permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards.
In reviewing the CEO’s 20142017 performance, the Compensation Committee determined that Mr. Otis’ total compensation package was in alignmentaligned with the Company’s overall performance in 2014.2017 performance. The Compensation Committee also reviewed the compensation levels of executives in comparable companies, and determined that Mr. Otis’ salary, short-term and long-term incentive compensation waswere competitive within the industry.
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In addition, the Compensation Committee believes that the Company’s compensation practices and compensation philosophy align executive interests with those of its shareholders by linking total executive compensation to the Company’s overall financial performance and as evidenced by the Shareholder adoptionapproval of the “say-on- pay”“say-on-pay” proposal at the May 30, 201326, 2016 New Ulm Telecom, Inc. annual meeting.Annual Meeting of Shareholders.
Submitted by the Compensation Committee of the Board of Directors
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Suzanne M. Spellacy |
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REPORT OF THE AUDIT COMMITTEE DISCLOSURE
The Audit Committee is comprised of three Directors: Wesley E. Schultz (Chair), Duane D. LambrechtJames J. Seifert and Colleen R. Skillings. Each member of the Audit Committee has been determined by the Board to be independent under the rules of the SEC. The Board has determined that each Audit Committee member is independent under applicable SEC rules. The Board has also determined that Mr. Wesley E. Schultz and Colleen R.Ms. Skillings are qualified to be “Audit Committee Financial Experts,” as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Exchange Act of 1934.
The Audit Committee acts under a written charter that sets forth its responsibilities and duties as well as requirements for the Audit Committee’s composition and meetings. The Audit Committee Charter is available on the Company’s website at www.nutelecom.net and is also available in print, free of charge, upon request. Requests for a printed copy of the Audit Committee Charter should be submitted to the Corporate Secretary, New Ulm Telecom, Inc., at 27 North Minnesota Street, New Ulm, Minnesota 56073..
During the year ended December 31, 2014,2017, the Audit Committee met with the Company’s management at each of its regularly scheduled meetings. The Audit Committee also met with a representative from Olsen Thielen & Co., Ltd., the Company’s independent registered public accounting firm, at several of its meetings. Agendas for the Audit Committee’s meetings are established by the Chair of the Audit Committee in consultation with the CFO. At those meetings, the Audit Committee reviewed and discussed various financial and regulatory issues, accounting and financial management issues, developments in the accounting profession as well as a summary of anonymous reports received via the Company’s anonymous reporting process. The Audit Committee also had separate executive sessions from time to time. The Audit Committee provides reports of its activities at each regularly scheduled Board meeting.
The Audit Committee reviews each of the Company’s quarterly and annual reports, including Management’s Discussion and Analysis of Financial Condition and Results of Operations. As part of this review, the Audit Committee discusses these reports with the Company’s management and the Company’s independent registered public accounting firmOlsen Thielen & Co., Ltd prior to the filing of each report with the SEC. In addition, the Audit Committee also reviews related matters, such as the quality of the Company’s accounting practices and alternative methods of accounting under generally accepted accounting principles in the United States, and the preferences of the independent registered public accounting firm in this regard. The Company’s critical accounting policies and the clarity and completeness of the Company’s financial and other disclosures are also discussed.disclosures.
Management of the Company has the primary responsibility for the Company’s financial statements. The independent registered public accounting firm has responsibility for the audit of the Company’s financial statements. The responsibility of the Audit Committee is to oversee financial matters, among other responsibilities fulfilled by the Audit Committee under its charter. The Audit Committee meets periodically with representatives of Olsen Thielen & Co., Ltd. without the presence of management, to ensure candid and constructive discussions about the Company’s compliance with accounting standards and best practices among public companies comparable in size and scope to the Company.
The Audit Committee has also discussed with Olsen Thielen & Co., Ltd. that their firm is retained by the Audit Committee and that they must raise any concerns about the Company’s financial reporting and procedures directly with the Audit Committee.
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TheIn addition to its other duties described in the Committee’s Charter, the Audit Committee has:
· Reviewed and discussed with the Company’s management and the independent registered public accounting firm, the audited financial statements as of December 31, 2017 and for the year then ended;
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· Discussed with Olsen Thielen & Co., Ltd., the matters required to be discussed by Statement on Auditing Standards No. 114, the Auditor’s Communication with Those Charged with Governance, as amended and as adopted by the Public Company Accounting Oversight Board (PCAOB); and
· Received from the independent registered public accounting firm, the written disclosures and letter required by PCAOB Rule 3526, Communications with Audit Committees Concerning Independence, and discussed their independence with them.
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The Audit Committee has received written disclosures and a letter, required by PCAOB Rule 3526, Communications with Audit Committees Concerning Independence. The Audit Committee has also discussed with Olsen Thielen & Co., Ltd., its independence as it relates to the Company. The Audit Committee has concluded that Olsen Thielen & Co., Ltd. is independent with respect to the Company and its management.
The Audit Committee has reviewed and discussed the fees paid to Olsen Thielen & Co., Ltd. during the year ended December 31, 2014.2017. The fees paid were for services related to the audit and other services and are included on page 3034 under "Fees Billed and Paid to Independent Registered Public Accounting Firm."
The Audit Committee has adopted a policy that requires pre-approval of all services of Olsen Thielen & Co., Ltd. by the Audit Committee or the Chair of the Audit Committee. When services are pre-approved by the Chair of the Audit Committee, notice of this approval is given to the other members of the Audit Committee and presented to the full Audit Committee at its next scheduled meeting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
It is the Company's policy that all proposed transactions by the Company with Directors, Officers, five percent shareholders and their affiliates, be entered into only if these transactions are on terms no less favorable to the Company than could be obtained from unaffiliated parties, are reasonably expected to benefit the Company and are approved by a majority of the disinterested, independent members of its Board.
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REPORT OF AUDIT COMMITTEE
The Audit Committee assists the Board in its oversight of the Company’s financial reporting process. The Audit Committee operates under a written charter adopted by the Board.
In addition to its other duties described in the Committee’s Charter, the Audit Committee has:
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Based upon the review and discussions summarized above, together with the Committee’s other deliberations, the Audit Committee recommended to the Board that the audited financial statements of the Company, as of December 31, 20142017 and for the year then ended, be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20142017 to be filed with the SEC.
Management is responsible for the Company’s internal controls and financial reporting processes. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with auditing standards generally accepted in the United States and for expressing an opinion thereon. The Audit Committee’s responsibility is generally to monitor and oversee these processes, as described in the Audit Committee Charter.
Submitted by the Audit Committee of the Board of Directors
Services of Independent Registered Public Accounting Firm for 20142017
Olsen Thielen & Co., Ltd. served as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2014.2017. The Audit Committee of the Board appointed Olsen Thielen & Co., Ltd. as the independent registered public accounting firm for the Company beginning with the fiscal year ended December 31, 2008.
Fees Billed and Paid to Independent Registered Public Accounting Firm
The following is a summary of fees billed by Olsen Thielen & Co., Ltd. for professional services rendered for the fiscal years ended December 31, 20142017 and 2013,2016, respectively.
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Fee Category | 2014 Fees |
| 2013 Fees | ||
Audit Fees | $ | 151,145 |
| $ | 151,377 |
Audit - Related Fees |
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Tax Fees |
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All Other Fees |
| 110,230 |
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| 54,771 |
Total Fees | $ | 269,656 |
| $ | 219,333 |
Fee Category | 2017 Fees | 2016 Fees | |||
Audit Fees | $ | 161,700 |
| $ | 159,203 |
Audit - Related Fees | 6,700 | 6,500 | |||
Tax Fees |
| 1,915 |
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All Other Fees |
| 30,232 |
| 15,188 | |
Total Fees | $ | 200,547 |
| $ | 180,891 |
Audit Fees
Audit fees are those billed for professional services rendered for the audit of the Company’s annual consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports.
Audit-Related Fees
Audit-related fees billed for assurance and services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” The audit-related fees for 20142017 and 20132016 related to the audits of the Company’s employee benefit plan.
Tax Fees
Tax fees are those billed for professional services for tax compliance and tax advice.
All Other Fees
All other fees are those for products and services other than the services reported above. The fees billed for all other services paid in 20142017 and 2013,2016, respectively, were for general regulatory assistance. The Company typically does not engage its current independent registered public accounting firm directly for other fees or services.
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Independence
The Audit Committee of the Board has determined that the provision of the non-audit services described above is compatible with maintaining the independence of the independent registered public accounting firm’s independence.
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Audit Committee Pre-Approval Policy for Services of Independent Registered Public Accounting Firm
The Audit Committee annually approves the scope and fees payable for the year-end audit to be performed by the independent registered public accounting firm for the next fiscal year. The Audit Committee is required to pre-approve audit and non-audit services performed by the independent registered public accounting firm in order to assure thatensure the provision of suchthese services does not impair the independent registered public accounting firm’s independence. The Audit Committee does not delegate to management, its responsibilities to pre‑approvepre-approve services performed by the independent registered public accounting firm. The Audit Committee pre-approved all services the Company received from Olsen Thielen & Co., Ltd. during the year ended December 31, 2014.2017.
Appointment of Independent Registered Public Accounting Firm for 20152018
Subject to ratification by the shareholders at the May 28, 201524, 2018 Annual Meeting, the Audit Committee of the Board has appointed Olsen Thielen & Co., Ltd. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015.2018. In the event the shareholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the Company’s and its shareholders’ best interests.
Ratification of the appointment of Olsen Thielen & Co., Ltd. as the Company’s independent registered public accounting firm requires that a majority of the votes cast, whether in person or by proxy, be cast in favor of the proposal. Broker non-votes are counted in determining the votes present at a meeting for purposes of establishing a quorum, but are not considered votes cast and will not count either in favor or against the proposal. Abstentions are counted as present and entitled to vote for the purposes of determining a quorum, but are not counted for the purposes of determining whether shareholders have approved the matter. Therefore, if you abstain from voting on Proposal 2: Ratification of Olsen Thielen & Co., Ltd. as the Company’s Independent Registered Public Accounting Firm, it has the same effect as a vote against the proposal.
Representatives of Olsen Thielen & Co., Ltd. are expected to be present at the annual meeting and will have an opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions from shareholders in attendance.
THE BOARD AND THE AUDIT COMMITTEE RECOMMEND A VOTE "FOR" THE RATIFICATION OF APPOINTMENT OF OLSEN THIELEN & CO., LTD. AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. SHARES REPRESENTED BY PROXY WILL BE VOTED “FOR” THIS PROPOSAL, UNLESS YOU SPECIFY A DIFFERENT CHOICE ON THE ACCOMPANYING PROXY CARD.
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PROPOSAL 3 – APPROVAL OF THE NEW ULM TELECOM, INC. 2015 EMPLOYEE STOCK PLAN
On February 24, 2015, our Board adopted the New Ulm Telecom, Inc. 2015 Employee Stock Plan (the “2015 Plan”), subject to shareholder approval. A copy of the 2015 Plan is attached to this proxy statement as Appendix A.
Purpose of the 2015 Plan
The purpose of the 2015 Plan is to enable New Ulm Telecom, Inc. (the “Company”) and its Subsidiaries to attract and retain employees by allowing these employees to acquire Company common stock, thereby aligning the financial interests of the employees with the other shareholders of the Company. The 2015 Plan provides for the issuance of Company common stock upon the attainment of objectives under the Company’s 2006 Employee Incentive Plans, as amended (“2006 Incentive Plan”).
Key Terms of the 2015 Plan
The following is a brief summary of the key terms of the 2015 Plan:
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Key Plan Features Description
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Overview of 2015 Plan
The Company currently operates Employee Incentive Plans for (i) employees other than Executive Officers and (ii) Executive Officers. Both plans were implemented in 2006, operate on an annual basis and make cash payments to employees on achievement of objective measurable corporate performance, with financial and customer-related targets. See “Compensation Policy – Cash-Based Incentive Compensation” on page 24 for a description of these plans. These Employee Incentive Plans are collectively referred to in this section as the “2006 Incentive Plan.” Each year the Company's Board of Directors determines the goals for payments under the 2006 Incentive Plan.
Although the Company maintain operates a Director Stock Plan under which each non-employee director is paid a portion of director fees in common stock, the Company has no plan or program under which employees may be issued Common Stock.
The Board of Directors wishes to increase the ownership of common stock by Company employees. Therefore, after approval of the 2015 Plan by the Company shareholders, each participant in the 2006 Incentive Plan will be able to elect to receive a portion of his or her payment under the 2006 Incentive Plan in the form of Company common stock, with the first payout made in 2016. The 2015 Plan will not increase the amounts payable under the 2006 Incentive Plan, but will simply give Company employees the ability to receive a portion of the payout in Company common stock.
Who is Eligible for Stock
Only Employees participating in the 2006 Incentive Plan, or any successor plan or similar plan, are eligible to receive Common Stock under the 2015 Plan.
Types of Stock Incentives to be Awarded
Only Common Stock may be issued under the 2015 Plan.
Administration
The Board, or the Compensation Committee if one is in operation, will administer the 2015 Plan. The Committee will have the power and authority to designate by resolution to determine:
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The Committee also has the authority to:
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Tax Consequences of stock payments to Participants and the Company
Common Stock issued under the 2015 Plan will be subject to ordinary income tax on issuance. The Company is entitled to a corresponding deduction at the time the participant recognizes taxable income on the Common Stock.
Additional Matter
The Board believes the 2015 Stock Plan will enable employees to participate in the long-term success and growth of the Company by enabling them to obtain Company common stock, which otherwise may be difficult for them to obtain given (i) the limited depth and liquidity in the Company common stock and (ii) the strict insider trading laws that the Company operates under.
Registration with the SEC
If the 2015 Plan is approved by our shareholders, we intend to file a registration statement with the SEC pursuant to the Securities Act of 1933, as amended, covering the 200,000 share issuable under the Plan.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO ADOPT THE NEW ULM TELECOM, INC. 2015 EMPLOYEE STOCK PLAN
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
It is Company's policy that all proposed transactions by the Company with Directors, Officers, five percent shareholders and their affiliates, be entered into only if these transactions are on terms no less favorable to the Company than could be obtained from unaffiliated parties, are reasonably expected to benefit the Company and are approved by a majority of the disinterested, independent members of its Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's Officers, Directors and beneficial owners of more than ten percent of the Company’s common stock are required to file reports of their beneficial ownership with the SEC. Based on the Company's review of copies of such reports received by it, or written representations from reporting persons, the Company believes that during the fiscal year ended December 31, 2014,2017, Executive Officers and Directors of the Company filed all reports with the SEC required under Section 16(a) to report their beneficial ownership on a timely basis.
ANNUAL REPORT ON FORM 10-K
Upon written request to New Ulm Telecom, Inc., 27 North Minnesota Street, New Ulm, Minnesota 56073, Attention: President, the Company will send, without charge, a copy of its Annual Report on Form 10-K for the fiscal year ended December 31, 2014,2017, including the financial statements and the financial statement schedules as filed with the SEC, to any person whose proxy is being solicited. The Annual Report on Form 10-K can also be found on the Company’s website at www.nutelecom.net.www.nutelecom.net.
SHAREHOLDER PROPOSALS FOR 20162019 ANNUAL MEETING
The Company intends to mail the Proxy Statement for its 20162019 annual meeting of shareholders on or about April 15, 2016.2019. If any shareholder intends to present a proposal to be considered for inclusion in the Company’s proxy materials in connection with the Company’s 20162019 Annual Meeting of Shareholders, the proposal must be in proper form (per SEC Regulation 14A, Rule 14a-8 – Shareholder Proposals) and be received at the principal Executive Offices of the Company at 27 North Minnesota Street, New Ulm, Minnesota 56073, Attention: Bill Otis,CEO, no later than December 17, 2015.2018. In addition, if the Company is not notified by March 1, 2016,2019, of a proposal to be brought before the 20162019 Annual Meeting of Shareholders by a shareholder, the proxies held by management may provide the discretion to vote against the proposal even though it is not discussed in the proxy statement for the meeting.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING
The Proxy Statement, Proxy Form and Annual Report on Form 10-K, are available at the Company’s website, located at www.proxyvote.com.www.proxyvote.com.
OTHER MATTERS
The Company did not receive notice by December 15, 201418, 2017 of any shareholder proposals that are to be presented for a vote at the meeting.2018 Annual Meeting. Therefore, no shareholder proposals are included in this proxy statement and if any other matter requiring a vote properly comes before the meeting, the persons named on the accompanying proxy card will vote your shares on that matter in their discretion.
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YOUR VOTE IS IMPORTANT. Whether or not you expect to attend the meeting, please sign and date the proxy and return it promptly in the enclosed envelope, or take advantage of the option to vote by Internet or telephone. If you choose to return the proxy card by mail, we have enclosed an envelope, for which no postage is required if mailed in the United States. You may also vote your shares electronically either over the Internet at www.proxyvote.com or by touch tone telephone at 1-800-690-6903.
By Order of the Board of Directors
/s/ Barbara A.J. Bornhoft
Barbara A.J. Bornhoft
Corporate Secretary
New Ulm, Minnesota
April 15, 201513, 2018
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APPENDIX A
NEW ULM TELECOM, INC.
2015 EMPLOYEE STOCK PLAN
1.General Purpose of Plan; Definitions.
(a) The name of this Plan is the New Ulm Telecom, Inc. 2015 Employee Stock Plan (the “Plan”). The purpose of the Plan is to enable New Ulm Telecom, Inc. (the “Company”) and its Subsidiaries to attract and retain employees by aligning the financial interests of these individuals with the other shareholders of the Company. The Plan provides for the issuance of Company Common Stock upon the attainment of objectives under the Company’s 2006 Employee Incentive Plans, as amended (“2006 Incentive Plan”).
(b) For purposes of the Plan, the following terms are defined:
(i)“Board” means the Board of Directors of the Company.
(ii)“Committee” means the Committee referred to in Section 2 of the Plan. If at any time there is no Committee, then the functions of the Committee specified in the Plan will be exercised by the Board, unless the Plan specifically states otherwise.
(iii)“Common Stock” means the Common Stock, $1.66 par value per share, of the Company.
(iv)“Company” means New Ulm Telecom, Inc., a corporation organized under the laws of the State of Minnesota, and any successor corporation.
(v)“Employee” means an employee of New Ulm Telecom, Inc. or any subsidiary of New Ulm Telecom, Inc.
(vi)“Fair Market Value” means the value of the Share of Common Stock on a given date as determined by the Committee in good faith using reasonable valuation methods.
2.Administration.
(a) The Board has the power to delegate, by resolution, all or any portion of its authority under this Plan to any committee of the Board. Until such time as the Board delegates its authority under this Section 2, the Plan will be administered by the Board of Directors of the Company acting as a committee of the Whole.
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(b)The Committee will have the power and authority to designate by resolution to determine:
(i)The terms under which Common Stock may be issued under the 2006 Incentive Plan, or any successor plan, including the ability of Employees to elect to receive Common Stock.
(ii)The maximum percentage, if any, of the payout that an Employee can elect to receive in common stock.
(iii)The date or dates on which any Employee must elect whether to receive a payout under the 2006 Incentive Plan in Common Stock, which date or dates may be different for Employees that are executive officers of the Company or otherwise Reporting Persons subject to Section 16(a) of the Securities Exchange of 1934.
(c) The Committee also has the authority to:
(i)Adopt, alter and repeal administrative rules, guidelines and practices governing the Plan as it, from time to time, deems advisable;
(ii)Interpret the terms and provisions of the Plan; and
(iii)Otherwise supervise the administration of the Plan.
(d) All shares of Common Stock issued under the Plan are to be issued at Fair Market Value.
3.Stock Subject to Plan.
(a) The total number of shares of Common Stock reserved and available for issue under the Plan will be 200,000.
(b)Shares may be issued under the Plan only for achievement of objectives under the 2006 Incentive Plan, or any successor plan or similar plan, as operated by the Company on an annual basis.
(c) In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, other change in corporate structure affecting the Common Stock, or spin-off or other distribution of assets to shareholders, the Board will have the power to make such substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan, and in the number of outstanding unvested shares granted under the Plan, as may be determined to be appropriate by the Board, in its sole discretion.
4.Eligibility.
(a)Only Employees participating in the 2006 Incentive Plan, or any successor plan or similar plan, are eligible to receive Common Stock under the Plan.
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5.Amendments and Termination.
(a)This Plan may be amended by the Board from time to time to the extent that the Committee deems necessary or appropriate. No amendment that would increase the number of shares reserved under Section 3(a) may be made without the approval of the shareholders of the Company.
(b) No shares may be issued under the Plan for any purpose other than for issuance under the 2006 Incentive Plan or any successor plan or similar plan under which payments are based upon achievement of Company-defined objectives.
6.General Provisions.
(a) Common Stock delivered under the Plan will be subject to such restrictions, if any, as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to these restrictions.
(b) All shares received under this Plan will be subject to the Company’s Insider Trading Policy, as in effect from time to time.
(c) Nothing contained in the Plan will prevent the Board of Directors from adopting other or additional employee compensation arrangements, subject to shareholder approval if required.
7.Effective Date of the Plan; Termination Date of the Plan.
(a) The Plan will become effective on the date it is approved by a vote of the shareholders of the Company in accordance with Minnesota law.
(b) This Plan will operate for a period of ten years and will expire on May 31, 2025.
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