SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant | |
Check the appropriate box:
|X| Preliminary proxy statement. |_| Confidential, for use of the
Commission only (as permitted
by Rule 14a-6(e)(2)).
|_| Definitive proxy statement.
|_| Definitive additional materials.
|_| Soliciting material under Rule 14a-12.
COMMISSION FILE NO. 0-03024
NEW ULM TELECOM, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:_______
2) Aggregate number of securities to which transaction applies:__________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):____________
4) Proposed maximum aggregate value of transaction:______________________
5) Total fee paid:_______________________________________________________
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form, Schedule or Registration Statement No.:_________________________
3) Filing Party: 4) Date Filed:__________________________________________
NEW ULM TELECOM, INC.
27 NORTH MINNESOTA STREET
NEW ULM, MINNESOTA 56073
(507) 354-4111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of New Ulm
Telecom, Inc. (the "Company"), a Minnesota corporation, will be held at the New
Ulm Civic Center, 1212 N. Franklin Street, New Ulm, Minnesota, on Thursday, May
15, 2003 at 10:00 a.m. for the following purposes:
(1) To elect three (3) directors for a term of three (3) years, each to
hold office until the Annual Meeting of Shareholders to be held in
2006 or until their successors are elected;
(2) To consider and vote upon a proposal to amend Article III, Section 1
of the Company's Articles of Incorporation (the "Articles"):
(a) to increase the number of authorized shares of common stock from
19,200,000 shares to 90,000,000 shares, each having a par value
of $1.66 per share; and
(b) to authorize the issuance of up to 10,000,000 shares of preferred
stock having a par value of $1.66 per share and allow the Board
of Directors to fix the rights and preferences of preferred
shares of any class or series and to generally allow the Board of
Directors to authorize the issuance thereof by resolution in the
manner prescribed by law and to take other actions consistent
therewith;
(3) To consider and vote upon a proposal to amend Article III, Section 2
of the Articles, which currently provides that no individual
shareholder, partnership, corporation or fiduciary shall own either in
their, his or her own right or jointly with another party more than
seven percent (7%) of the outstanding capital stock of the Company, by
adding provisions which provide that (i) to the extent capital stock
is acquired in excess of such permitted limit ("Excess Shares"), such
Excess Shares may not be voted; and (ii) the Company shall have the
right to redeem Excess Shares;
(4) To consider and vote upon a proposal to amend Article IV of the
Articles to add a provision that an action required or permitted to be
taken at a meeting of the Board of Directors, other than an action
requiring shareholder approval, may be taken by written action signed,
or consented to by authenticated electronic communication, by the
number of directors that would be required to take the same action at
a meeting of the Board of Directors at which all directors were
present;
(5) To consider and vote upon a proposal to amend the Articles by adding
new Article VI thereof to provide that no shareholder shall be
entitled to any preemptive right to purchase, subscribe or otherwise
acquire any new or additional securities of the Company, or any
options or warrants to purchase, subscribe for or otherwise acquire
any such new additional securities before the Company may offer them
to other persons;
(6) To ratify the appointment of Kiesling Associates LLP as the Company's
independent public accountants for the fiscal year ending December 31,
2003; and
(7) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Under Section 302A.471 of the Minnesota Business Corporation Act (the
"MBCA"), holders of the Company's common stock have the right to dissent from
Proposal No. 5 to amend the Articles to eliminate preemptive rights and, if such
amendment is approved and made, to obtain payment of the fair value of their
shares. Proposal No. 5 will not be acted upon if the holders of more than 25,000
shares of common stock exercise dissenters' rights. Sections 302A.471 and
302A.473 of the MBCA are attached in full as Appendix A to the accompanying
Proxy Statement, which also includes a description of the procedures to be
followed under those sections by a shareholder wishing to dissent.
The Board of Directors has fixed the close of business on March 31, 2003,
as the record date for the determination of shareholders entitled to notice of,
and to vote, at the meeting.
A representative of the principal accountants for the current year and for
the most recently completed fiscal year is expected to be present at the Annual
Meeting of Shareholders. This representative will have the opportunity to make a
statement to shareholders and is expected to be available to respond to
appropriate questions that may arise at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Barbara A.J. Bornhoft
SECRETARY
New Ulm, Minnesota
April 18, 2003
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES
AND VOTE IN PERSON IF THEY SO DESIRE.
TABLE OF CONTENTS
PAGE
----
INFORMATION CONCERNING SOLICITATION AND VOTING............................... 1
PROPOSAL 1: ELECTION OF DIRECTORS........................................... 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............... 5
COMPENSATION OF EXECUTIVE OFFICERS........................................... 6
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION................... 7
REPORT OF THE AUDIT COMMITTEE................................................ 8
SHAREHOLDER RETURN PERFORMANCE GRAPH......................................... 9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 9
PROPOSAL 2: AMENDMENT OF ARTICLES TO INCREASE THE COMPANY'S AUTHORIZED SHARES
OF COMMON STOCK, TO AUTHORIZE THE ISSUANCE OF PREFERRED STOCK AND
TO GRANT THE BOARD OF DIRECTORS THE AUTHORITY TO FIX THE RIGHTS AND
PREFERENCES OF PREFERRED STOCK.......................................... 11
PROPOSAL 3: AMENDMENT OF ARTICLES TO PROVIDE THAT IF A SHAREHOLDER PURCHASES
MORE THAN SEVEN PERCENT OF THE OUTSTANDING STOCK OF THE COMPANY, SUCH
EXCESS SHARES MAY NOT BE VOTED AND THE COMPANY SHALL HAVE THE RIGHT TO
PURCHASE OR REDEEM SUCH EXCESS
SHARES.................................................................. 14
PROPOSAL 4: AMENDMENT OF ARTICLES TO PERMIT FEWER THAN ALL OF THE DIRECTORS TO
TAKE ACTIONS IN WRITING OR CONSENTED TO BY AUTHENTICATED ELECTRONIC
COMMUNICATION........................................................... 18
PROPOSAL 5: AMENDMENT OF ARTICLES TO ELIMINATE PREEMPTIVE RIGHTS............ 20
PROPOSAL 6: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS... 24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE...................... 25
ANNUAL REPORT ON FORM 10-K................................................... 25
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING................................ 25
OTHER MATTERS................................................................ 25
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................. 25
APPENDIX A: DISSENTERS' RIGHTS - SECTIONS 302A.471 AND 302A.473 OF THE
MINNESOTA BUSINESS CORPORATION ACT......................................A-1
APPENDIX B: NEW ULM TELECOM, INC. AUDIT COMMITTEE CHARTER...................B-1
CONSENT OF KIESLING ASSOCIATES LLP
CONSENT OF OLSEN THIELEN & CO., LTD
NEW ULM TELECOM, INC.
27 NORTH MINNESOTA STREET
NEW ULM, MINNESOTA 56073
(507) 354-4111
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 2003
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement and the enclosed Proxy are furnished in connection
with the solicitation of proxies by the Board of Directors of New Ulm Telecom,
Inc. (the "Company") for use at the Annual Meeting and any adjournment thereof
to be held commencing at 10:00 a.m., local time, on Thursday, May 15, 2003, at
the New Ulm Civic Center located at 1212 N. Franklin Street, New Ulm, Minnesota.
You are urged to sign and return the enclosed proxy whether or not you plan
to attend the meeting. You should specify your choices by marking the
appropriate boxes on the proxy. All shares of common stock represented by
properly executed and returned proxies, unless such proxies have previously been
revoked, will be voted at the Annual Meeting and, where the manner of voting is
specified on the proxy, will be voted in accordance with such specifications.
Shares represented by properly executed and returned proxies on which no
specification has been made will be voted in favor of each proposal.
The persons named as proxies were selected by the Board of Directors of the
Company and are directors or officers of the Company. If any other matters are
properly presented at the meeting for action, including a question of adjourning
or postponing the meeting from time to time, the persons named in the proxies
and acting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
The notice of Annual Meeting, this proxy statement and related proxy card
are first being mailed to shareholders on or about April 18, 2003.
RECORD DATE AND OUTSTANDING COMMON STOCK
The Board of Directors has fixed the close of business on March 31, 2003,
as the record date for determining the holders of outstanding common stock
entitled to notice of, and to vote at, the meeting. Only shareholders of record
at the close of business on March 31, 2003 will be entitled to vote at the
meeting. On that date, there were 5,115,585 shares of common stock issued,
outstanding and entitled to vote.
REVOCABILITY OF PROXIES
Any shareholder who executes and returns a proxy may revoke it at any time
before it is voted by receipt of a proxy properly signed and dated subsequent to
an earlier proxy, or by revocation of a written proxy by request in person at
the Annual Meeting. Any written notice or subsequent proxy should be delivered
to New Ulm Telecom, Inc., 27 North Minnesota Street, New Ulm, Minnesota 56073,
Attention: Bill Otis, or hand-delivered to Mr. Bill Otis before the vote at the
Annual Meeting.
1
VOTING AND SOLICITATION
Each shareholder is entitled to one vote, exercisable in person or by
proxy, for each share of common stock held of record on the record date.
Shareholders have the right to cumulate votes in the election of directors, as
described below. Shareholders are entitled to dissenters' rights under Minnesota
law in connection with the amendment of our Articles of Incorporation to
eliminate preemptive rights under Proposal No. 5. See Proposal No.
5--Dissenters' Rights.
We will pay the cost of this solicitation, including preparing, assembling
and mailing the proxies and solicitation materials. We are soliciting proxies
principally by mail. In addition, our directors, officers and regular employees
may solicit proxies personally or by telephone, for which they will receive no
consideration other than their regular compensation. We will also request
brokerage houses, nominees, custodians and fiduciaries to forward soliciting
material to the beneficial owners of shares of common stock held as of the
record date and will reimburse such persons for their reasonable expenses so
incurred.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence in person or by proxy of the holders of thirty-five percent
(35%) of the shares of common stock outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. All votes will be tabulated by the inspector of election for the
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 such 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 such matter.
If a properly executed proxy is returned by a broker holding shares in
street name which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, such 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 meeting for purposes
of calculating the vote with respect to such matter.
2
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
There are currently seven directors on our Board of Directors. Each
director serves a three-year term. Three directors will be elected at the Annual
Meeting. The terms of Rosemary Dittrich, Mary Ellen Domeier and Gary L. Nelson
expire in 2003; and the Board of Directors has nominated Ms. Dittrich, Ms.
Domeier and Mr. Nelson for re-election to the board for a three-year term. It is
intended that proxies will be voted for such nominees. The Board of Directors
believes that each nominee named herein will be able to serve, but should a
nominee be unable to serve as a Director, the persons named in the proxies have
advised that they will vote for the election of such substitute nominee as the
Board of Directors may propose.
The following table provides information with respect to our directors,
including information regarding their principal occupations. Information
concerning ownership of our common stock, as of March 31, 2003 can be found on
page 5. Each director serves for a one-year term and until his or her successor
has been duly elected and qualified. To the best of the Company's knowledge,
unless otherwise indicated, the persons indicated possess sole voting and
investment power with respect to their stock ownership. We are not aware of any
arrangement or understanding pursuant to which any individual is to be selected
as a director or nominee. There are no family relationships between any director
or executive officer.
NOMINEES PROPOSED FOR ELECTION FOR TERMS EXPIRING IN 2006
(including business experience during the past five years)
DIRECTOR TERM
NAME AGE OCCUPATION SINCE EXPIRES
- ------------------------------- --- ------------------------------------- ------------ -------
ROSEMARY DITTRICH 61 Corporate Secretary, D & A 1997 2003
Trucking, Inc.
MARY ELLEN DOMEIER 61 CEO, Valley Bank & Trust Co. 1999 2003
GARY NELSON 65 Retired President, The Insurance 1982 2003
Group
DIRECTORS SERVING UNEXPIRED TERMS
(including business experience during the past five years)
DIRECTOR TERM
NAME AGE OCCUPATION SINCE EXPIRES
- ------------------------------- --- ------------------------------------- ------------ -------
JAMES JENSEN 58 Marketing Consultant and Sales 1982 2004
Representative, Kohls-Weelborg
Dealerships
PERRY MEYER 48 Farmer 1995 2004
DUANE LAMBRECHT 56 Owner/CEO, Shelter Products, Inc. 1999 2005
ROBERT RANWEILER 55 Principal, Biebl, Ranweiler, 1989 2005
Christiansen, Meyer, Thompson & Co.
Chtd., Certified Public Accountants
3
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors consists of seven members with staggered terms of
three years for each Director. The Board holds regular monthly meetings and some
special meetings. The Board of Directors has established an Audit Committee,
Steering Committee, and Personnel Committee performing the functions described
below. The Company also has a Strategic Planning Committee and an Ad Hoc Stock
Committee. The Board of Directors as a whole is the Nominating Committee. The
Chairman of the Board is an ex officio member of all committees.
The Board held 12 meetings in 2002. All committees meet as required. Each
director attended 75% or more of the Board meetings and applicable committee
meetings.
Audit Committee consists of Robert Ranweiler, Chair, Rosemary Dittrich and
Perry Meyer. The Audit Committee reviews the activities and reports of the
independent auditors. The Audit Committee had 5 meetings in 2002.
Steering Committee consists of James Jensen, Gary Nelson, Robert Ranweiler.
This committee is responsible for the study and analysis of the Company's
financial needs and requirements and the evaluation of the future operations and
needs of the Company. The Steering Committee had 5 meetings in 2002.
Personnel Committee consists of Perry Meyer, Chair, Mary Ellen Domeier and
Duane Lambrecht. Its duties are to evaluate employee compensation and staffing.
The Personnel Committee also makes appropriate recommendations concerning
officers' and directors' compensation. This committee had 2 meetings in 2002.
COMPENSATION OF DIRECTORS
In 2002, the directors were paid an annual retainer of $13,600. In
addition, directors received $285 for each Board and Committee meeting they
attended. In 2003, the directors will be paid a $13,600 annual retainer and $500
for each Board and Committee meeting they attend.
The Chairman of the Board, who is not an employee of New Ulm Telecom, Inc.,
received an additional annual retainer of $6,600. This annual retainer will
increase to $12,000 in 2003.
We have a director retirement policy pursuant to which directors who leave
the Board will receive $1,000 for each year of service to the Board with a
maximum of $20,000 paid to any one director.
CUMULATIVE VOTING FOR DIRECTORS - VOTE REQUIRED
For each share held, shareholders may cast one vote for each of the three
directorships to be filled at this meeting. Each shareholder entitled to vote
has the right to cumulative vote their shares in the election of directors by
giving written notice of intent to cumulative vote to any officer of the
corporation before the meeting, or to the presiding officer at the meeting at
any time before the election. If notice of intent to cumulative vote occurs, the
presiding officer at the meeting shall announce, before the election of
directors, that shareholders shall cumulative vote their shares by multiplying
the number of shares held by the shareholder by the number of directors to be
elected. Each shareholder then may cast their votes for one candidate or may
distribute the votes among any number of candidates.
If no shareholder determines to cumulate votes, nominees who receive the
affirmative vote of the holders of a majority of the voting power of the shares
present and entitled to vote at the meeting will be
4
elected to serve on our Board of Directors. If any shareholder determines to
cumulate votes and nominates an individual other than the above-stated nominees
to serve as a director, then the three nominees who receive the largest number
votes, taking into account any such cumulative vote, will be elected to serve on
our Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE
FOR DIRECTOR SET FORTH IN PROPOSAL NO. 1.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 31, 2003, by (a) each person known by
us to own beneficially five percent (5%) or more of our common stock, (b) each
director and nominee for director, (c) each named executive officer, and (d)
directors 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
which relate to voting or investment power with respect to our common stock.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNERSHIP CLASS(2)
- ---------------------------------------------------------- --------- --------
Ruth B. Wines, Trustee of the............................ 274,320 5.362%
Ralph K. Wines & Ruth B. Wines Family Trust
216 Apolena, Newport Beach, California
Bill Otis................................................ 209,400 4.093
Robert Ranweiler (3)..................................... 64,350 1.258
Gary Nelson.............................................. 30,000 0.586
James Jensen (4)......................................... 16,743 0.327
Perry Meyer.............................................. 12,000 0.235
Rosemary Dittrich (5).................................... 11,028 0.235
Mary Ellen Domeier....................................... 1,350 *
Duane Lambrecht (6)...................................... 1,150 *
All Directors & Officers as a Group (11 persons) (7)..... 348,340 6.809
- -------------------
* Represents less than 0.1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to securities. Securities "beneficially owned" by a person may
include securities owned by or for, among others, the spouse, children or
certain other relatives of such person as well as other securities as to
which the person has or shares voting or investment power or has the option
to acquire within 60 days. Unless otherwise indicated, the address of each
shareholder is c/o New Ulm Telecom, Inc., 27 North Minnesota Street, New
Ulm, Minnesota 56073.
(2) Percentage of beneficial ownership is based on 5,115,585 shares outstanding
as of March 31, 2003.
(3) Includes 61,650 shares owned by Mr. Ranweiler's spouse.
(4) Includes 3,654 shares owned by Mr. Jensen's spouse.
(5) Includes 4,500 shares owned by Ms. Dittrich's spouse.
(6) Includes 250 shares owned by Mr. Lambrechts' spouse.
(7) Includes 70,054 shares owned by the spouses of directors and officers.
5
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows compensation for our named executive officer for
services in all capacities to our company and our subsidiaries during fiscal
years 2000, 2001 and 2002. Compensation, as reflected in this table and the
tables which follow, is presented on the basis of rules of the Securities and
Exchange Commission and does not, in the case of certain stock-based awards or
accruals, necessarily represent the amount of compensation realized or which may
be realized in the future. Our company has not issued any options or warrants
during the fiscal years 2002, 2001 and 2000. For more information regarding our
salary policies and executive compensation plans, please review the information
under the caption "Compensation Committee Report on Executive Compensation."
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------- --------------
AWARDS
--------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL COMPENSATION UNDERLYING
POSITION YEAR SALARY ($) BONUS ($) ($)(a) SARS (#)(b)
- ----------------------------- ---------- -------------- -------------- ----------------- --------------
Bill Otis..................... 2002 137,181 -0- 51,578 30,000
President 2001 132,812 20,000 49,048 30,000
2000 125,000 15,600 40,493 30,000
- --------------------
(a) Includes contributions made by our company under our 401(k) plan and fees
received for service as a member of the board of directors of our
partially-owned subsidiary, Midwest Wireless.
(b) Represents Appreciation Units granted pursuant to an Appreciation Unit
Plan. Appreciation Units expire on the third anniversary of the date of
grant, at which time the Units are converted to cash at the Board's
discretion based on appreciation of shareholder equity during the term of
the Units.
SAR GRANTS IN LAST FISCAL YEAR
The following table describes Appreciation Units granted in 2002 under
our Appreciation Unit Plan to the named executive officer. Our company has never
issued any options or warrants.
INDIVIDUAL GRANTS
----------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL ANNUAL RATES OF STOCK
UNDERLYING SAR'S PRICE APPRECIATION
SAR'S GRANTED TO EXERCISE FOR OPTION TERM (b)
GRANTED EMPLOYEES IN OR BASE EXPIRATION -----------------------
NAME (#)(a) 2002 PRICE ($/SH) DATE 5% ($) 10% ($)
- -------------------------- -------------- ------------- ------------- ----------- ---------- ----------
Bill Otis................. 90,000 66.67% ---- 1/1/2005 $42,559 $44,685
- --------------------
(a) Represents Appreciation Units granted pursuant to an Appreciation Unit
Plan. Appreciation Units expire on the third anniversary of the date of
grant, at which time the Units are converted to cash at the Board's
discretion based on appreciation of shareholder equity during the term of
the Units.
(b) The value attributable to each Appreciation Unit is based on the difference
between net income per share and dividends paid per share multiplied by
30,000 units for each year ending 12/31/00, 12/31/01 and 12/31/02.
Potential realizable value is based on assumed rates of appreciation, net
income per share and dividends paid per share over a three-year period.
6
AGGREGATED FISCAL YEAR-END SAR VALUES
The following table shows the number and value of Appreciation Units held
by our named executive officer during 2002. Our company has never issued any
options or warrants.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS HELD AT IN-THE-MONEY SARS AT
DECEMBER 31, 2002 (#)(a) DECEMBER 31, 2002 ($)(b)
---------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------------ ---------------------------- ----------------------------
Bill Otis............................................. -0- / 90,000 $27,000/$19,800
- --------------------
(a) Represents Appreciation Units granted pursuant to an Appreciation Unit
Plan. Appreciation Units expire on the third anniversary of the date of
grant, at which time the Units are converted to cash at the Board's
discretion based on appreciation of shareholder equity during the term of
the Units.
(b) Based on the cumulative increase in shareholder equity attributable to each
Appreciation Unit as of December 31, 2002. Our Board has sole discretion to
determine whether the named executive officer receives any payment upon
expiration of the Appreciation Units.
REPORT OF PERSONNEL COMMITTEE ON EXECUTIVE COMPENSATION
Board of Directors
New Ulm Telecom, Inc.
P. O. Box 697
New Ulm, MN 56073
The compensation program for the President and the Board of Directors is
the responsibility of the Personnel Committee of the Board of Directors (the
"Committee"). In 2002, the Committee was comprised of three directors: Messrs.
Meyer and Lambrecht and Ms. Domeier. Mr. Meyer is the Chairperson of the
Committee.
The philosophy for the executive compensation program is to pay
competitively compared to similar-sized companies, particularly technology
companies.
There are two elements to the salary program: annual base salary and cash
bonuses under an Appreciation Unit Plan (the "Plan"). The purpose of the Plan is
to reward senior management for the longer-term success of the Company. The Plan
is also intended to assist the Company in the recruitment and retention of key
executives.
When setting annual base salaries and making awards under incentive plans,
the Personnel Committee considers company performance and compensation levels of
comparable companies with a goal of remaining reasonably competitive with
comparable companies.
The Appreciation Unit Plan rewards an executive with a cash bonus which is
computed by multiplying the difference between net income per share and
dividends per share by appreciation rights units awarded.
7
In setting the 2002 salary, the Committee reviewed Mr. Otis' total
compensation program and determined that it was closely related to the Company's
performance in 2001. The Committee also reviewed the compensation of Mr. Otis to
determine that the compensation was competitive with compensation levels of
executives in comparable companies and was equitable to New Ulm Telecom, Inc.
and its shareholders.
March 31, 2003 Personnel Committee of the Board of Directors
Perry Meyer, Chair
Mary Ellen Domeier
Duane Lambrecht
REPORT OF AUDIT COMMITTEE
Board of Directors
New Ulm Telecom, Inc.
P. O. Box 697
New Ulm, MN 56073
The Audit Committee is responsible for overseeing management's financial
reporting practices and internal controls. The Committee operates under a
written charter adopted by the Board of Directors, a copy of which is attached
to this Proxy Statement.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and for issuing a report thereon. The Audit Committee's
responsibility is generally to monitor and oversee these processes, as described
in the Audit Committee Charter.
With respect to the year-end at December 31, 2002, in addition to its other
work, the Audit Committee:
o Reviewed and discussed with the Company's management and the
independent auditors the audited financial statements of the Company
as of December 31, 2002 and for the year then ended;
o Discussed with the independent auditors the matters required to be
discussed by auditing standards generally accepted in the United
States of America, including those matters required to be discussed by
SAS 61;
o Received from the independent accountants the written disclosures and
the letter required by Independence Standards Board Standard No. 1 and
discussed with the auditors the firm's independence; and
o Reviewed recent corporate governance initiatives, including provisions
of the recently enacted Sarbanes-Oxley Act.
Based upon the review and discussion summarized above, together with the
Committee's other deliberations, the Committee recommended to the Board of
Directors that the audited financial statements of the Company, as of December
31, 2002 and for the year then ended, be included in the Company's
8
Annual Report on Form 10-K for the year ended December 31, 2002 for filing with
the Securities and Exchange Commission.
March 25, 2003 Audit Committee of the Board of Directors
Robert J. Ranweiler, Chair
Rosemary Dittrich
Perry Meyer
A copy of the Audit Committee Charter that was adopted on October 26, 2002
is included in this proxy statement as Appendix B.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a graph that compares the cumulative total shareholder
return on our common stock to the Russell 2000 Index and to the NASDAQ
Telecommunications Index. The comparison covers the period from December 31,
1997 to December 31, 2002. Shareholder return assumes reinvestment of all
dividends.
[LINE GRAPH]
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
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New Ulm Telecom, Inc. $100 $ 97.25 $113.37 $149.57 $140.45 $156.41
NASDAQ Telecommunications Index $100 163.38 331.18 151.15 77.18 35.48
Russell 2000 Index $100 96.55 115.50 110.64 111.78 87.66
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS OF MANAGEMENT. Since the beginning of the Company's last
fiscal year, no director or executive officer of the Company has been indebted
to the Company or its subsidiaries except Bill Otis, President of the Company,
who was indebted to the Company in the amount of $674,037 under the terms of a
promissory note payable upon demand and secured by 153,690 shares of New Ulm
Telecom, Inc. common stock. The note bears interest at 6.09% and has not been
amended since the issuance of the note. The note was given to the Company by Mr.
Otis in October, 1998 and reissued January 1, 2002 to enable Mr. Otis to
purchase shares of the Company's stock.
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The largest amount outstanding of the note during fiscal year ending
December 31, 2002 was $687,402. Mr. Otis made all required payments of principal
and interest in accordance with the terms of the note during 2002.
POLICY. It is the Company's policy that all proposed transactions by the
Company with directors, officers, five percent stockholders and their affiliates
be entered into only if such 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 of Directors.
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PROPOSAL NO. 2 - AMENDMENT OF ARTICLES TO INCREASE THE COMPANY'S
AUTHORIZED SHARES OF COMMON STOCK, TO AUTHORIZE THE ISSUANCE OF
PREFERRED STOCK AND TO GRANT THE BOARD OF DIRECTORS THE AUTHORITY TO FIX
THE RIGHTS AND PREFERENCES OF PREFERRED STOCK
EXPLANATION OF THE AMENDMENT
The Board of Directors has adopted, subject to shareholder approval, an
amendment to Article III, Section 1 of the Company's Articles of Incorporation
(the "Articles"), to provide that the Company's number of authorized shares of
capital stock will be increased from 19,200,000 shares to 100,000,000 shares,
consisting of 90,000,000 shares of common stock, each having a par value of
$1.66 per share, and 10,000,000 shares of undesignated preferred stock, each
having a par value of $1.66 per share. The amendment further provides that the
Board of Directors may, from time to time, establish by resolution, different
classes or series of preferred shares and may fix the rights and preferences of
said shares in any class or series. Preferred shares of the Company may be
issued in one or more series, each of which series will have such designation or
title and such number of shares as shall be fixed by resolution of the Board
prior to the issuance thereof. Each such series of preferred shares will have
such voting powers, full or limited, or no voting powers, and such preferences
and relative, participating, optional or other special rights, and such
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the issuance of such
series of preferred shares as may be adopted from time to time by the Board. The
Board of Directors may also authorize the issuance of shares of a class or
series, shares of which may then be outstanding, to holders of shares of another
class or series to effectuate share dividends, splits, or conversion of its
outstanding shares.
The Company is presently authorized to issue 19,200,000 shares of common
stock, par value $1.66 per share, of which 5,115,585 are currently outstanding.
Under the Minnesota Business Corporation Act ("MBCA"), shares of common stock of
the Company may be issued by resolution of the Company's Board of Directors. The
Company is not authorized to issue preferred stock. The Company has no
commitment or present intent to issue additional shares of capital stock, common
or preferred.
REASONS FOR THE AMENDMENT
The Board of Directors believes that it is in the best interest of the
Company to have additional shares of common stock authorized and available for
issuance in order to meet future requirements of the Company, which may include
issuances of securities to fund acquisitions by the Company, to meet future
financing needs of the Company, to effect stock splits or declare stock
dividends, and for other corporate purposes. In addition, the Board of Directors
believes that the Company should have the flexibility to issue preferred stock
on such terms and conditions as may be prudent at a future date, for acquisition
or financing purposes. The Board of Directors believes that opportunities may
arise in the future which will require prompt action and in which any delay
incurred in seeking shareholder approval for issuance of additional shares could
be detrimental to the Company and its shareholders. An example of this would be
an opportunity to acquire from individuals, estates or by merger or other form
of acquisition, other companies involved in the telecommunications industry
including, but not limited to, family or locally-owned telephone companies. The
Company has no present plans, and is not negotiating for, any such acquisitions.
If the Company's shareholders fail to approve this proposed amendment and the
authorization of additional shares of common stock or preferred stock is
deferred until a future date when the need exists, the time and expense required
in connection with obtaining the necessary shareholder approval for each such
proposed issuance could deprive the Company of financing or acquisition
opportunities. Further, the Company could use additional authorized shares of
capital stock for the purpose of stock dividends or effecting rights offerings
to its shareholders, although it has no present plans to do so.
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In the Board's opinion, the proposed amendment will give the Company the
flexibility to take advantage of such opportunities and to operate more
effectively. The increase in the authorized number of common shares and the
authorization of undesignated preferred stock of the Company will not, in and of
itself, affect the rights of holders of presently issued and outstanding shares
of common stock. Shares of common stock or preferred stock would be issued only
as, if and when the Board of Directors believed the issuance to be in the best
interests of the Company and its shareholders. If an issuance of new securities
were planned, shareholders currently have preemptive rights to purchase new
securities, to the extent provided under the MBCA. The Company proposes,
however, to eliminate preemptive rights as discussed under Proposal No. 5 below.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
Adoption of Proposal No. 2 would increase the number of authorized but
unissued and unreserved shares of common stock by 70,800,000 shares. Adoption of
the proposal will also authorize 10,000,000 preferred shares the rights and
preferences of which can be designated by the Board. No further action or
authorization by the shareholders would be necessary prior to the issuance of
the additional shares authorized thereby, unless required for a particular
transaction by applicable law, regulatory agencies, or the rules of any stock
exchange or association of securities dealers on which the Company's securities
are then listed.
Any additional authorized shares that may be issued following the adoption
of Proposal No. 2 (if not designated by the Board as preferred shares) would be
shares identical to the existing common stock and would have the same rights and
privileges as the existing common stock. New undesignated preferred shares may
be issued following adoption of the amendment by resolution of the Board of
Directors without further action by the shareholders.
The proposed increase in the total number of authorized shares and the
authorization of shares that may be designated as preferred shares is not
designed to deter or to prevent a change in control of the Company and the
proposal is not being presented as an anti-takeover measure. Unissued shares,
however, could be used by incumbent directors to make such a change in control
more difficult. In the event of an unfriendly attempt to gain control of the
Company, the Board could issue additional shares or options to acquire
additional shares in an effort to dilute the stock ownership and voting power of
persons seeking to obtain control of the Company, which might have the effect of
discouraging or making less likely such a change in control. Such shares also
could be privately placed with purchasers who might be expected to side with the
Board in opposing a hostile takeover bid. Shares also could be issued with
rights and preferences that might impede such a takeover proposal by, for
example, authorizing a class vote, either separately or with the holders of
common stock, on any merger, sale or exchange of assets by the Company, or any
other extraordinary corporate transaction. To the extent any such actions could
have the effect of making a hostile takeover less likely, they also could assist
incumbent management in retaining their positions. It should be noted, however,
that the proposed amendment would not enlarge the already existing power of the
Board of Directors to issue common stock, but would increase the number and kind
of shares which could be used by the Board for such purpose.
The adoption of Proposal No. 2 would not be the first action taken by the
Company that could have the effect of deterring a hostile takeover. The
Company's Articles of Incorporation currently include a provision that could
make the consummation of a hostile takeover more difficult. Article III, Section
2 of the Company's Articles currently provides that no person may own more than
seven percent of the outstanding capital stock of the Company. As set forth in
Proposal No. 3, the Board proposes to strengthen Article III, Section 2 of the
Articles by providing that shares acquired in violation of that section may not
be voted and will be subject to redemption at the option of the Company.
Although the Board does not currently contemplate adopting or proposing for
shareholder approval any additional anti-takeover
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measures, it continues to study such measures and reserves the right to propose
such further amendments or to take actions in the future if, in its view,
circumstances should so warrant. The Board is not now aware of any effort by
third parties to effect a change in control or takeover of the Company.
TEXT OF AMENDMENT
The proposed amendment would be accomplished by restating and amending
Article III, Section 1 as follows:
Article III
Section 1. The total authorized shares of all classes which the
Corporation shall have authority to issue is 100,000,000, consisting of:
10,000,000 shares of preferred stock of the par value of One Dollar and
Sixty-Six Cents ($1.66) per share (hereinafter the "preferred shares"); and
90,000,000 shares of common stock of the par value of One Dollar and
Sixty-Six Cents ($1.66) per share (hereinafter the "common shares").
(a) The Board of Directors of the Corporation (hereinafter referred to
as the "Board of Directors" or "Board") may, from time to time, establish
by resolution, different classes or series of preferred shares and may fix
the rights and preferences of said shares in any class or series.
Specifically, preferred shares of the Corporation may be issued from time
to time in one or more series, each of which series shall have such
designation or title and such number of shares as shall be fixed by
resolution of the Board of Directors prior to the issuance thereof. Each
such series of preferred shares shall have such voting powers, full or
limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations or restrictions thereof as shall be stated and expressed in the
resolution or resolutions providing for the issuance of such series of
preferred shares as may be adopted from time to time by the Board of
Directors prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in the Board.
(b) Except as provided or required by law, or as provided in the
resolution or resolutions of the Board of Directors creating any series of
preferred shares, the common shares shall have the exclusive right to vote
for the election and removal of directors and for all other purposes.
Unless otherwise provided by resolution or resolutions of the Board of
Directors, each holder of common shares shall be entitled to one vote for
each share held.
(c) The Board of Directors shall have the authority to issue shares of
a class or series, shares of which may then be outstanding, to holders of
shares of another class or series to effectuate share dividends, splits, or
conversion of its outstanding shares.
VOTE REQUIRED
Approval of Proposal No. 2 requires the affirmative vote of the holders of
a majority of the voting power of the shares present and entitled to vote at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2.
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PROPOSAL NO. 3 - AMENDMENT OF ARTICLES TO PROVIDE THAT
IF A SHAREHOLDER PURCHASES MORE THAN SEVEN PERCENT
OF THE OUTSTANDING STOCK OF THE COMPANY, SUCH EXCESS SHARES
MAY NOT BE VOTED AND THE COMPANY SHALL HAVE THE RIGHT
TO PURCHASE OR REDEEM SUCH EXCESS SHARES
EXPLANATION OF THE AMENDMENT
In 1962, the shareholders of the Company adopted an amendment to the
Articles (currently Article III, Section 2) to provide that no shareholder shall
individually or jointly with another party own more than seven percent of the
outstanding capital stock of the Company. The Board of Directors believes that
the purpose of such provision was to prevent a concentration of ownership of the
Company's equity securities in the hands of an individual or small group of
individuals. The provision has the effect of enabling the Company to remain
independent and can serve as a deterrent to an unwanted or hostile takeover or
acquisition of control of the Company. In May 1997, this provision was amended
to provide that an amendment would require the affirmative vote of 66.67% of the
outstanding capital stock of the Company. The Board of Directors believes that
this provision should be retained, but recommends the following additions or
changes:
o Addition of a provision that provides that a person who violates the
Company's restriction on share ownership may not vote shares owned or
acquired that are in excess of seven percent of the Company's
outstanding stock ("Excess Shares").
o Addition of a provision that provides that Excess Shares may be
redeemed by the Company upon written notice given within 60 days after
the Company first has notice of such ownership of Excess Shares at
market value of the Excess Shares on the date the Company mails such
written notice, subject to any required approval of such redemption by
the Company's shareholders at any regular or special meeting of the
shareholders.
o To provide that shares acquired by a person in excess of seven percent
of the Company's outstanding capital stock should not constitute
Excess Shares if issued in a Board-approved transaction or a
shareholder-approved transaction.
o The definition of ownership should be amended to provide that
ownership will be based upon "beneficial" ownership as defined in MBCA
Section 302A.011, Subd. 41 which provides as follows:
SUBD. 41. BENEFICIAL OWNER; BENEFICIAL OWNERSHIP. (a) "Beneficial
owner," when used with respect to shares or other securities,
includes, but is not limited to, any person who, directly or
indirectly through any written or oral agreement, arrangement,
relationship, understanding, or otherwise, has or shares the
power to vote, or direct the voting of, the shares or securities
or has or shares the power to dispose of, or direct the
disposition of, the shares or securities, except that:
(1) a person shall not be deemed the beneficial owner of shares
or securities tendered pursuant to a tender or exchange offer
made by the person or any of the person's affiliates or
associates until the tendered shares or securities are accepted
for purchase or exchange; and
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(2) a person shall not be deemed the beneficial owner of shares
or securities with respect to which the person has the power to
vote or direct the voting arising solely from a revocable proxy
given in response to a proxy solicitation required to be made and
made in accordance with the applicable rules and regulations
under the Securities Exchange Act of 1934 and is not then
reportable under that act on a Schedule 13D or comparable report,
or, if the corporation is not subject to the rules and
regulations under the Securities Exchange Act of 1934, would have
been required to be made and would not have been reportable if
the corporation had been subject to the rules and regulations.
(b) "Beneficial ownership" includes, but is not limited to, the
right to acquire shares or securities through the exercise of
options, warrants, or rights, or the conversion of convertible
securities, or otherwise. The shares or securities subject to the
options, warrants, rights, or conversion privileges held by a
person shall be deemed to be outstanding for the purpose of
computing the percentage of outstanding shares or securities of
the class or series owned by the person, but shall not be deemed
to be outstanding for the purpose of computing the percentage of
the class or series owned by any other person. A person shall be
deemed the beneficial owner of shares and securities beneficially
owned by any relative or spouse of the person or any relative of
the spouse, residing in the home of the person, any trust or
estate in which the person owns ten percent or more of the total
beneficial interest or serves as trustee or executor or in a
similar fiduciary capacity, any corporation or entity in which
the person owns ten percent or more of the equity, and any
affiliate of the person.
(c) When two or more persons act or agree to act as a
partnership, limited partnership, syndicate, or other group for
the purposes of acquiring, owning, or voting shares or other
securities of a corporation, all members of the partnership,
syndicate, or other group are deemed to constitute a "person" and
to have acquired beneficial ownership, as of the date they first
so act or agree to act together, of all shares or securities of
the corporation beneficially owned by the person.
REASONS FOR AMENDMENT
The proposed amendment to Article III, Section 2 retains the limitation of
seven percent on share ownership that has been contained in the Company's
Articles for many years, which the Board believes benefits the shareholders by
providing a deterrent to a hostile or unwanted takeover of the Company. The
proposed amendment clarifies the meaning of ownership by incorporating the
definition of beneficial ownership contained in the MBCA. The proposed amendment
strengthens the limitation by providing that persons who acquire Excess Shares
in violation of this ownership restriction may not vote such shares. The
proposal also enables the Board to redeem Excess Shares, which will further
discourage persons from acquiring Excess Shares. The Board of Directors believes
that proposed amendment is needed to enable the Board to enforce Article III,
Section 2.
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EFFECT OF AMENDMENT
If Proposal No. 3 is adopted, the Company will have greater ability to
enforce its rights against persons who violate the restrictions on ownership
contained in Article III, Section 2 by providing that Excess Shares may not be
voted and may be subject to redemption by the Company. This provision of the
Articles, which has been in effect since 1962, has the effect of deterring or
preventing a change in control of the Company. This provision, coupled with
other actions which could be taken by the Board of Directors and existing
provisions of the MBCA which restrict control share acquisitions and business
combinations, would likely require a person seeking to obtain control of the
Company to negotiate with the Company a transaction which could be accepted and
approved by the Board and submitted to the shareholders of the Company for
approval. Because this provision has existed in the Company's Articles for many
years, Proposal No. 3 is only intended to implement the existing limitation on
share ownership. The proposal is not being presented as an anti-takeover
measure.
TEXT OF AMENDMENT
The proposed amendment would be accomplished by restating and amending
Article III, Section 2 as follows:
Section 2. Except as provided in this section, no person shall
beneficially own more than seven percent (7%) of the outstanding capital
stock of the Corporation. This restriction as to ownership shall not apply
to any stock acquired by the Corporation.
(a) For the purposes of this Section 2, the term "person" includes a
natural person and an organization, as defined in Minnesota Business
Corporation Act Section 302A.011, Subd. 19. The terms "ownership," or "own"
in this Section 2 shall mean and include "beneficial ownership" as defined
in Minnesota Business Corporation Act Section 302A.011, Subd. 41. The term
"Excess Shares" shall mean shares beneficially owned or acquired by a
person that are in excess of seven percent (7%) of the outstanding capital
stock of the Corporation. For purposes of this Section 2, the term "capital
stock" refers to common shares of the Corporation.
(b) A determination as to whether a person's ownership of capital
stock of the Corporation includes or constitutes Excess Shares shall be
made with reference to the number of shares of common stock outstanding as
reported by the Corporation in its most recent report filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which sets forth the number of
shares of common stock of the Corporation outstanding as of a specified
date, or, if the Corporation ceases to file reports pursuant to the
Exchange Act, the number of shares of outstanding common stock set forth in
any report, communication or financial statement sent by the Corporation to
the holders of record of its capital stock.
(c) No person who owns Excess Shares shall have voting rights with
respect to Excess Shares. Excess Shares may be counted before determining
whether a quorum exists for the transaction of business at meeting of
shareholders. Excess Shares may be voted following their transfer to
another person who is not the beneficial owner of seven percent (7%) or
more the Corporation's capital stock.
(d) The Corporation shall have the right, but not the obligation, upon
written notice to a person owning Excess Shares, to redeem Excess Shares at
a redemption price equal to the market value of the Excess Shares, as
determined in accordance with
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Minnesota Business Corporation Act Section 302A.011, Subd. 50, on the date
the Corporation mails such notice of redemption to the beneficial owner of
the Excess Shares. Such right of redemption shall be exercised by the
Corporation by giving notice in writing to the beneficial owner at the
address of the beneficial owner as the same appears in the records of the
Corporation or its transfer agent not later than the sixtieth (60th) day
following the Corporation's receipt of notice of a person's ownership of
Excess Shares. If the Corporation shall give notice to a person of its
intention to redeem Excess Shares, the beneficial owner of the Excess
Shares shall tender such shares to the Corporation, or its transfer agent,
duly endorsed for transfer, not later than twenty (20) days following the
date of such notice. Unless the Corporation is required by MBCA Section
302A.533, Subd. 3, to obtain shareholder approval for such redemption, the
Corporation shall pay such redemption price of the Excess Shares to such
shareholder, without interest, within twenty (20) days after receipt of the
tender of such shares. If the Corporation is required, pursuant to MBCA
Section 302A.533, Subd. 3 to obtain approval from its shareholders for such
redemption, the Corporation shall notify the beneficial owner of the Excess
Shares and, as a condition to such redemption, must obtain approval of the
shareholders by the affirmative vote of the holders of a majority of the
voting power of all shares entitled to vote at the Corporation's next
regular meeting or at any special meeting of shareholders, in which event
such beneficial owner of Excess Shares shall not be obligated to tender the
Excess Shares until such person has been notified by the Corporation that
the redemption has been approved by the shareholders. Promptly upon receipt
of notice of approval of redemption of the Excess Shares, the beneficial
owner of the Excess Shares shall tender such shares to the Corporation,
duly endorsed for transfer and not later than twenty (20) days thereafter,
the Corporation shall pay the redemption price to such tendering owner,
without interest.
(e) "Excess Shares" shall not include any shares of capital stock
authorized by the Board of Directors issued by the Corporation to persons
without shareholder approval ("Board-approved Transaction"), or any capital
stock issued by the Corporation to persons in a transaction approved by the
holders of a majority of the voting power of all classes of shares entitled
to vote at a shareholders' meeting ("Shareholder-approved Transaction");
provided, however, that such shares may constitute Excess Shares subject to
this Section 2 when transferred by the beneficial owners thereof following
a Board-approved Transaction or a Shareholder-approved Transaction, to
persons who, as a result of such transfers, would own more than seven
percent (7%) of the Corporation's capital stock.
VOTE REQUIRED
Approval of Proposal No. 3 requires the affirmative vote of 66 2/3% of the
outstanding common stock of the Company.
THE BOARD OF DIRECTORS RECOMMENDS VOTE "FOR" PROPOSAL NO. 3.
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PROPOSAL NO. 4 - AMENDMENT OF ARTICLES TO PERMIT FEWER THAN
ALL OF THE DIRECTORS TO TAKE ACTIONS IN WRITING OR
CONSENTED TO BY AUTHENTICATED ELECTRONIC COMMUNICATION
EXPLANATION OF AMENDMENT
Most actions taken by the Company's Board of Directors are taken by the
directors in person at board meetings. Pursuant to the MBCA, the Board takes
action by the affirmative vote of (1) a majority of the directors present at a
duly held meeting at the time the action is taken, or (2) a majority of the
minimum proportion of directors that would constitute a quorum for the
transaction of business at the meeting, except where the Articles require the
affirmative vote of a larger proportion or number. The MBCA Section 302A.239
provides that an action required or permitted to be taken at a board meeting may
be taken by written action signed, or consented to by authenticated electronic
communication, by all of the directors. From time to time, the Company's Board
of Directors has taken action in writing signed by all of the directors. MBCA
Section 302A.239 also provides that if the Articles of a corporation so provide,
any action, other than an action requiring shareholder approval, may be taken by
written action signed, or consented to by authenticated electronic communication
(e.g. email), by the number of directors that would be required to take the same
action at a meeting of the Board at which all directors were present. Written
action is effective when signed, or consented to by authentic electronic
communication, by the required number of directors, unless a different effective
time is provided in the written action.
The Board of Directors believes that the Articles should be amended to add
a paragraph to Article IV providing that any action, other than an action
requiring shareholder approval, may be taken by written action signed, or
consented to by authentic communication, by the number of directors that would
be required to take the same action at a meeting of the Board at which all
directors were present. This would permit the Board to take actions without the
necessity of holding a meeting of the Board of Directors if consented to in
writing, or by authenticated electronic communication, by a majority of the
directors. This would permit action to be taken without a meeting even if one or
two of the directors were absent or unavailable. It would further permit a
majority of the members to take action without a meeting, even if a minority of
the directors opposed the action.
REASONS FOR AMENDMENT
In the opinion of the Board, the ability of the Board to take action
without a meeting by a majority of the members promotes efficiency and
streamlines the operation of the Board. The Board believes that most
corporations operating under the MBCA have the ability to take action in writing
by a majority of the elected board members.
CERTAIN EFFECTS OF AMENDMENT
The proposed amendment will enable the Board, without a meeting, to take
action, other than an action requiring shareholder approval, in writing, or
consented to by authenticated electronic communication, by the number of
directors that would be required to take the same action at a meeting as long as
the number of directors taking such action is equal to or greater than the
number that would be required for passage at a meeting at which all directors
were present. MBCA Section 302A.239 requires that in such cases, all directors
are to be sent a copy of the text of the approved action, in order to provide
them with prompt notice of actions taken in their absence.
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TEXT OF PROPOSED AMENDMENT
The proposed amendment would be accomplished by adding the following
paragraph to existing Article IV pertaining to directors:
Any action required or permitted to be taken at a meeting of the Board
of Directors, other than an action requiring shareholder approval, may be
taken by written action signed, or consented to by authenticated electronic
communication, by the number of directors that would be required to take
the same action at a meeting of the Board at which all directors were
present.
VOTE REQUIRED
Approval of Proposal No. 4 requires the affirmative vote of the holders of
a majority of the voting power of the shares present and entitled to vote at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4.
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PROPOSAL NO. 5 - AMENDMENT OF ARTICLES TO ELIMINATE PREEMPTIVE RIGHTS
EXPLANATION OF AMENDMENT
Presently, the Company's Articles do not restrict preemptive rights of its
shareholders. Therefore, if the Company wishes to offer additional shares of its
common stock, it must, except for certain excluded issuances, first offer to
sell the stock proportionately to the current shareholders on the same terms.
Preemptive rights originated at a time when companies were small, had relatively
few shareholders and there was little opportunity to purchase shares except when
a new issue of stock was offered. As a community-owned telephone company, it was
common for the Company's shareholders to know many or all of its other
shareholders. Today, however, a number of generations have passed and the
Company's shareholder base is larger, with shareholders living both within and
outside the community, including states other than Minnesota. As a company whose
shares are publicly-traded and which may be held in street names or the names of
nominees, the Company does not know the name or location of all beneficial
owners of its capital stock. It is uncommon for publicly-held companies to have
preemptive rights. Under the MBCA, shareholders of a corporation have preemptive
rights unless denied in its Articles. A shareholder does not have a preemptive
right to purchase securities:
o issued for a consideration other than money;
o issued pursuant to a plan of merger or exchange;
o issued pursuant to an employee or incentive benefit plan approved at a
meeting by the affirmative vote of the holders of a majority of the
voting power of all shares entitled to vote;
o issued upon exercise of previously issued rights to purchase
securities of the corporation;
o issued pursuant to a public offering of the corporation's securities
or rights to purchase securities; or
o issued pursuant to a plan of reorganization approved by a court of
competent jurisdiction pursuant to a statute of Minnesota or of the
United States.
REASONS FOR AMENDMENT
The Board of Directors does not believe that preemptive rights serve the
best interests of the shareholders, since the preemptive rights procedure
involves considerable delay and substantial expense to the Company. For example,
it may be advisable that the Company be able to offer or sell unissued shares of
common stock to investors for the purpose of obtaining capital to finance
expansion of the Company's operations, such as cash purchases of other telephone
companies, in each instance to do so without observing pre-emptive rights. It is
important to note that under the MBCA, the Company has the right to issue shares
in connection with non-cash acquisitions or in connection with a merger or
exchange, a public offering or an employee incentive benefit plan approved by
the holders of a majority of all shares entitled to vote, without according
preemptive rights to its shareholders. With the elimination of preemptive
rights, the Company can respond flexibly and more efficiently to market
conditions. The elimination of preemptive rights from the Company's Articles
requires a statement to that effect in the Articles.
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CERTAIN EFFECTS OF AMENDMENT
If Proposal No. 5 is adopted, shareholders of the Company will not have a
preemptive right to purchase a fraction of unissued shares or rights to purchase
securities of the Company prior to the Company's offer to other persons. This
would allow the Company's Board of Directors to authorize the issuance and sale
of common stock or preferred stock in a variety of transactions to persons who
may not be existing shareholders of the Company. Such sales could be issued in
any amount authorized by the Board of Directors and could be made to persons who
would, thereafter, acquire substantial ownership of the Company. In the case of
a substantial issuance of shares, the effect thereof could result in a change of
control of the Company. The Company, however, has no present plans to effect any
issuances of its common stock that would result in a change of control of the
Company. Additionally, any acquisition of more than seven percent would be
prohibited (other than pursuit to a Board-approved Transaction or
Shareholder-approved Transaction).
DISSENTERS' RIGHTS
MBCA Section 302A.471 entitles any holder of the Company's capital stock
who objects to the amendment which denies preemptive rights to dissent and
obtain payment for the "fair value" (as defined in MBCA Section 302A.473, Subd.
1) of his, her or its shares of the Company capital stock ("Dissenters'
Rights"). Any shareholder contemplating the exercise of these dissenters' rights
should review carefully the provisions of Sections 302A.471 and 302A.473 set
forth in Appendix A to this Proxy Statement, particularly the procedural steps
required to perfect such rights. SUCH RIGHTS WILL BE LOST IF THE PROCEDURAL
REQUIREMENTS OF MINNESOTA STATUTES SECTION 302A.473 ARE NOT FULLY AND PRECISELY
SATISFIED.
The Company intends to seek approval of Proposal No. 5 and to the amendment
which eliminates preemptive rights unless it receives notices of the exercise of
Dissenters' Rights from shareholders owning more than 25,000 shares of common
stock. If such notices are received, Proposal No. 5 will be abandoned and the
amendment will not be made.
Set forth below (to be read in conjunction with the full text of Section
302A.473 appearing in Appendix A to this Proxy Statement) is a brief description
of the procedures relating to the exercise of Dissenter's Rights. The following
description does not purport to be a complete statement of the provisions of
Section 302A.473 and is qualified in its entirety by reference thereto.
Under Section 302A.473, Subd. 3, a shareholder, who wishes to exercise
dissenters' rights (a "dissenter") must file with the Company (at the Company
address set forth in this proxy statement, Attention: Bill Otis, President),
before the vote on the proposed amendment at the Annual Meeting, a written
notice of intent to demand the fair value of the Company common stock owned by
the shareholder. IN ADDITION, THE SHAREHOLDER MUST NOT VOTE HIS OR HER SHARES
FOR THE APPROVAL AND ADOPTION OF PROPOSAL NO. 5. A VOTE AGAINST PROPOSAL NO. 5
WILL NOT IN ITSELF CONSTITUTE SUCH A WRITTEN NOTICE AND A FAILURE TO VOTE WILL
NOT AFFECT THE VALIDITY OF A TIMELY WRITTEN NOTICE. HOWEVER, THE SUBMISSION OF A
PROPERLY-EXECUTED BLANK PROXY, UNLESS WITHDRAWN, WILL CONSTITUTE A VOTE FOR THE
APPROVAL AND ADOPTION OF PROPOSAL NO. 5 AND A WAIVER OF DISSENTERS' RIGHTS.
Under Section 302A.471, Subd. 2, a shareholder of the Company may not
assert dissenters' rights with respect to less than all of the shares of the
Company capital stock registered in the shareholder's name, unless the
shareholder dissents with respect to all of the shares beneficially owned by
another person but registered in the name of the shareholder and discloses the
name and address of each beneficial
21
owner on whose behalf the shareholder dissents. A beneficial owner of shares of
the Company's capital stock who is not the registered shareholder may assert
dissenters' rights with respect to such shares by following the procedures
described in Sections 302A.471 and 302A.473, IF THE BENEFICIAL OWNER SUBMITS TO
THE COMPANY AT THE TIME OF OR BEFORE THE ASSERTION OF DISSENTERS' RIGHTS A
WRITTEN CONSENT OF THE SHAREHOLDER IN WHOSE NAME THE SHARES ARE REGISTERED.
After the amendment is approved by the Company's shareholders, the Company
will send a notice containing the information required by Section 302A.473,
Subd. 4, to all dissenters who filed in a timely manner the necessary notice of
intent to demand the fair value of their shares and who did not vote their
shares in favor of the amendment. The Company's notice will contain: (1) the
address to which a demand for payment and certificates of certificated shares
must be sent in order to obtain payment and the date by which they must be
received; (2) any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received; (3) a form to be used to certify
the date on which the shareholder, or the beneficial owner on whose behalf the
shareholder dissents, acquired the shares or an interest in them and to demand
payment; and (4) a copy of Sections 302A.471 and 302A.473 and a brief
description of the procedures to be followed pursuant to those sections. In
order to receive the fair value of the shares under Section 302A.473, a
dissenter must demand payment and deposit certificates representing shares
within 30 days after such notice from the Company is given, but the dissenting
shareholders retains all other rights of a shareholder until the proposed
amendment takes effect. Under Minnesota law, notice by mail is given by the
Company when deposited in the United States mail. A SHAREHOLDER WHO FAILS TO
MAKE DEMAND FOR PAYMENT AND TO DEPOSIT CERTIFICATES AS REQUIRED BY SECTION
302A.473, SUBD. 4, WILL LOSE THE RIGHT TO RECEIVE THE FAIR VALUE OF HIS OR HER
SHARES UNDER SUCH SECTION NOTWITHSTANDING THE TIMELY FILING OF NOTICE OF INTENT
TO DEMAND PAYMENT UNDER SECTION 302A.473, SUBD. 3.
After the amendment eliminating preemptive rights is approved and filed
with the Minnesota Secretary of State, or after the Company receives a valid
demand for payment, whichever is later, the Company will remit to each dissenter
who has complied with Section 302A.473, Subds. 3 and 4, the amount the Company
estimates to be the fair value of the shares, with interest from five days after
the date of final effectiveness until the date of payment, calculated at the
rate of interest for verdicts and judgments in Minnesota. Such remittance will
be accompanied by certain financial statements, an estimate of fair value, a
description of the method used by the Company to reach such estimate, a copy of
Sections 302A.471 and 302A.473, and a brief description of the procedure to be
followed in demanding supplemental payment. The Company may withhold the
remittance described above from a person who was not a shareholder on the date
Proposal No. 5 was first announced to the public or who is dissenting on behalf
of a person who was not a beneficial owner on that date. If such a dissenter has
complied with Section 302A.473, Subds. 3 and 4, the Company will forward to the
dissenter the same materials sent to dissenters receiving a remittance, plus a
statement of the reason for withholding the remittance, and an offer to pay the
dissenter the amount listed in the materials if the dissenter agrees to accept
that amount in full satisfaction.
If a dissenter believes that the amount remitted or offered by the Company
is less than the fair value of the shares, with interest, the dissenter may give
written notice to the Company of the dissenter's estimate of fair value, with
interest, within 30 days after the Company mails such remittance or offer, and
demand payment of the difference. UNLESS A DISSENTER MAKES SUCH A DEMAND WITHIN
SUCH 30-DAY PERIOD, THE DISSENTER WILL BE ENTITLED ONLY TO THE AMOUNT REMITTED
OR OFFERED BY THE COMPANY.
Within 60 days after the Company receives such a demand from a dissenter,
it will be required to either pay the dissenter the amount demanded or agreed to
after discussion between the dissenter and the
22
Company or file in court a petition requesting that the court determine the fair
value of the shares, with interest. All dissenters who have demanded payment for
their shares, but have not reached agreement with the Company, will be made
parties to the proceeding. The court will then determine whether the dissenters
in question have fully complied with the provisions of Section 302A.473, and
will determine the fair value of the shares, taking into account any and all
factors the court finds relevant (including, without limitation, the
recommendation of any appraisers which may have been appointed by the court),
computed by any method or combination of methods that the court, in its
discretion, sees fit to use, whether or not used by the Company or a dissenter.
The fair value of the shares as determined by the court is binding on all
shareholders, but the dissenters will not be liable to the Company for the
amount, if any, by which the payment remitted to the dissenters exceeds the fair
value of the shares determined by the court, with interest. The costs and
expenses of the court proceeding will be assessed against the Company, except
that the court may assess part or all of those costs and expenses against a
dissenter whose action in demanding payment is found to be arbitrary, vexatious
or not in good faith.
TEXT OF AMENDMENT
The elimination of preemptive rights from the Company's Articles requires a
statement to that effect in the Articles. The amendment would be accomplished by
adding the following new Article VI the Articles:
The holders of shares of the Corporation shall have no preemptive
right to purchase, subscribe or otherwise acquire any new or additional
securities of the Corporation, or any options or warrants to purchase,
subscribe or otherwise acquire any such new or additional securities before
the Corporation may offer them to other persons.
VOTE REQUIRED
Approval of Proposal No. 5 requires the affirmative vote of the holders of
a majority of the voting power of the shares present and entitled to vote at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 5.
23
PROPOSAL NO. 6 - RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
GENERAL
Our Board of Directors has appointed Kiesling Associates LLP as independent
public accountants for the Company for the fiscal year ending December 31, 2003.
A proposal to ratify that appointment will be presented to shareholders at the
meeting. If the shareholders do not ratify such appointment, the board of
directors will select another firm of independent auditors.
Representatives of Kiesling Associates LLP are expected to be present at
the Annual Meeting, will have an opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions from
shareholders in attendance.
CHANGE IN ACCOUNTANTS
Effective November 18, 2002, Olsen Thielen &Co., Ltd. (O&T) was dismissed
as the Company's independent auditors. O&T's reports on the audited financial
statements for the year ended December 31, 2001, did not contain adverse,
qualified or modified opinions. The change in accountants was recommended by the
board of directors. There were no disagreements with O&T. On November 26, 2002,
the Board of Directors appointed Kiesling Associates LLP as the Company's
independent auditors.
AUDIT FEES
For professional services for the audit of the Company's annual
consolidated financial statements for 2002, Kiesling Associates LLP billed the
Company an aggregate of approximately $38,000. Olsen Thielen Co., Ltd. bill the
Company approximately $17,093 for the review of the consolidated financial
statements included in the Company's Forms 10-Q for 2002.
ALL OTHER FEES
The aggregate fees billed for services rendered by our principal
accountant, other than the services described in the preceding paragraph, for
our most recent fiscal year were $162,164. The non-audit fees were primarily for
tax services. In addition, we incurred non-audit fees regulatory services, cost
studies and other management advisory services. No other fees were paid to
Kiesling Associates LLP.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Neither Olsen Thielen & Co., Ltd. nor Kiesling Associates LLP billed the
Company for any financial information systems design and implementation for
2002.
INDEPENDENCE
The audit committee of our Board of Directors has considered whether the
provision of the services described in the preceding paragraph was compatible
with maintaining our principal accountant's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 6
24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's officers and directors are required to file reports of their
beneficial ownership with the Securities and Exchange Commission. 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 year
ended December 31, 2002, executive officers and directors of the Company filed
all reports with the Securities and Exchange Commission required under Section
16(a) to report their beneficial ownership on a timely basis except that
Statements Of Changes In Beneficial Ownership on Form 4 were not timely filed to
report acquisitions of common stock by Ms. Domeier on September 30, 2002 and
October 28, 2002 and acquisitions of common stock by Mr. Nelson on October 22,
2002 and November 12, 2002.
ANNUAL REPORT ON FORM 10-K
We will send, without charge, a copy of our Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, including the financial statements and
the financial statement schedules, as filed with the Securities and Exchange
Commission, to any person whose proxy is being solicited, upon written request
to New Ulm Telecom, Inc., Attention: Corporate Secretary, 27 North Minnesota
Street, New Ulm, Minnesota, 56073.
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
If a shareholder wishes to present a proposal for consideration for
inclusion in the proxy materials for the next annual meeting of shareholders,
the proposal must be sent by certified mail, return receipt requested, and must
be received at the executive offices of the Company at 27 North Minnesota
Street, Attention Bill Otis, no later than January 13, 2004. All proposals must
conform to the rules and regulations of the Securities and Exchange Commission.
Under Securities and Exchange Commission rules, if a shareholder notifies us of
his or her intent to present a proposal for consideration at the next annual
meeting of shareholders after March 29, 2004, we, acting through the persons
named as proxies in the proxy materials for such meeting, may exercise
discretionary authority with respect to such proposal without including
information regarding such proposal in our proxy materials.
OTHER MATTERS
The management of the Company is unaware of any other matters that are to
be presented for action at the Annual Meeting. Should any other matter properly
come before the Annual Meeting, however, the persons named in the enclosed proxy
will have discretionary authority to vote all proxies with respect to such
matter in accordance with their judgment.
All expenses incurred in connection with this solicitation, including the
cost of preparing, assembling, and mailing this proxy soliciting material and
notice of annual meeting, will be paid by the Company. In addition to the use of
the mails, proxies may be solicited by personal interview, telephone and
telegram by the directors, officers and regular employees of the Company. Such
persons will receive no additional compensation for such services.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission (the "Commission") allows the
company to incorporate by reference into this Proxy Statement information and
documents that the Company has separately filed with the Commission. The
information incorporated by reference is deemed to be a part of this Proxy
Statement. These documents contain important information about the Company and
its financial condition: Annual Report on Form 10-K for the year ended December
31, 2002.
25
APPENDIX A
DISSENTERS' RIGHTS
SECTIONS 302A.471 AND 302A.473
OF THE MINNESOTA BUSINESS CORPORATION ACT
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS
SUBD 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation may dissent
from, and obtain payment for the fair value of the shareholder's shares in the
event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but not
including a transaction permitted without shareholder approval in section
302A.661, subdivision 1, or a disposition in dissolution described in
section 302A.725, subdivision 2, or a disposition pursuant to an order of a
court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed to the
shareholders in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of the merger, whether under this chapter or under chapter
322B, to which the corporation is a constituent organization, except as
provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter
322B, to which the corporation is a party as the corporation whose shares
will be acquired by the acquiring corporation, except as provided in
subdivision 3; or
(e) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles, the bylaws, or a resolution approved by
the board directs that dissenting shareholders may obtain payment for their
shares.
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SUBD 2. BENEFICIAL OWNERS.
(a) A shareholder shall not assert dissenters' rights as to less than
all of the shares registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are beneficially
owned by another person but registered in the name of the shareholder and
discloses the name and address of each beneficial owner on whose behalf the
shareholder dissents. In that event, the rights of the dissenter shall be
determined as if the shares as to which the shareholder has dissented and
the other shares were registered in the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of
this section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
SUBD 3. RIGHTS NOT TO APPLY.
(a) Unless the articles, the bylaws, or a resolution approved by the
board otherwise provide, the right to obtain payment under this section
does not apply to a shareholder of (1) the surviving corporation in a
merger with respect to the shares of the shareholder that are not entitled
to be voted on the merger and are not canceled or exchanged in the merger
or (2) the corporation whose shares will be acquired by the acquiring
corporation in a plan of exchange with respect to shares of the shareholder
that are not entitled to be voted on the plan of exchange and are not
exchanged in the plan of exchange.
(b) If a date is fixed according to section 302A.445, subdivision 1,
for the determination of shareholders entitled to receive notice of and to
vote on an action described in subdivision 1, only shareholders as of the
date fixed, and beneficial owners as of the date fixed who hold through
shareholders, as provided in subdivision 2, may exercise dissenters'
rights.
SUBD 4. OTHER RIGHTS. The shareholders of a corporation who have a right under
this section to obtain payment for their shares do not have a right at law or in
equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
SUBD 5. DEFINITIONS.
(a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1
or the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
A-2
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision
1, up to and including the date of payment, calculated at the rate provided
in section 549.09 for interest on verdicts and judgments.
SUBD 6. NOTICE OF ACTION. If a corporation calls a shareholder meeting at which
any action described in section 302A.471, subdivision 1 is to be voted upon, the
notice of the meeting shall inform each shareholder of the right to dissent and
shall include a copy of section 302A.471 and this section and a brief
description of the procedure to be followed under these sections.
SUBD 7. NOTICE OF DISSENT. If the proposed action must be approved by the
shareholders, a shareholder who is entitled to dissent under section 302A.471
and who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand the
fair value of the shares owned by the shareholder and must not vote the shares
in favor of the proposed action.
SUBD 8. NOTICE OF PROCEDURE; DEPOSIT OF SHARES.
(a) After the proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all shareholders
who have complied with subdivision 3 and to all shareholders entitled to
dissent if no shareholder vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that
will apply after the demand for payment is received;
(3) A form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired the shares or an interest in them and to demand
payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply
with any restrictions on transfer of uncertificated shares within 30 days
after the notice required by paragraph (a) was given, but the dissenter
retains all other rights of a shareholder until the proposed action takes
effect.
SUBD 9. PAYMENT; RETURN OF SHARES.
(a) After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation
shall remit to each dissenting shareholder who has complied with
subdivisions 3 and 4 the amount the corporation estimates to be the fair
value of the shares, plus interest, accompanied by:
(1) The corporation's closing balance sheet and statement of
income for a fiscal year ending not more than 16 months before the
effective date of the corporate action, together with the latest
available interim financial statements;
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(2) An estimate by the corporation of the fair value of the
shares and a brief description of the method used to reach the
estimate; and
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph
(a) from a person who was not a shareholder on the date the action
dissented from was first announced to the public or who is dissenting on
behalf of a person who was not a beneficial owner on that date. If the
dissenter has complied with subdivisions 3 and 4, the corporation shall
forward to the dissenter the materials described in paragraph (a), a
statement of the reason for withholding the remittance, and an offer to pay
to the dissenter the amount listed in the materials if the dissenter agrees
to accept that amount in full satisfaction. The dissenter may decline the
offer and demand payment under subdivision 6. Failure to do so entitles the
dissenter only to the amount offered. If the dissenter makes demand,
subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and
cancel all transfer restrictions. However, the corporation may again give
notice under subdivision 4 and require deposit or restrict transfer at a
later time.
SUBD 10. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that the amount
remitted under subdivision 5 is less than the fair value of the shares plus
interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
SUBD 11. PETITION; DETERMINATION. If the corporation receives a demand under
subdivision 6, it shall, within 60 days after receiving the demand, either pay
to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
A-4
SUBD 12. COSTS; FEES; EXPENSES.
(a) The court shall determine the costs and expenses of a proceeding
under subdivision 7, including the reasonable expenses and compensation of
any appraisers appointed by the court, and shall assess those costs and
expenses against the corporation, except that the court may assess part or
all of those costs and expenses against a dissenter whose action in
demanding payment under subdivision 6 is found to be arbitrary, vexatious,
or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses
of any experts or attorneys as the court deems equitable. These fees and
expenses may also be assessed against a person who has acted arbitrarily,
vexatiously, or not in good faith in bringing the proceeding, and may be
awarded to a party injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if
any.
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APPENDIX B
NEW ULM TELECOM, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors of New Ulm Telecom,
Inc. (the "Company") to be known as the Audit Committee. The Audit Committee
shall be composed of three or more non-employee directors, appointed annually at
the annual organizational meeting of the Board of Directors. Each member of the
Audit Committee shall be an independent director and shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements at the time of their appointment to the Audit
Committee, and at least one member of the Committee shall have accounting or
related financial management expertise and qualify as a "financial expert" in
accordance with the requirements of the rules and regulations of the Securities
and Exchange Commission and the Marketplace Rules of The Nasdaq Stock Market or
such other listing organization or system on which the Company's securities are
listed or reported (as may be modified or supplemented).
STATEMENT OF POLICY
The Audit Committee shall, through regular or special meetings with
management and the Company's independent auditors, provide assistance to the
Board of Directors in fulfilling their responsibility to the shareholders,
potential shareholders, and investment community and provide oversight on
matters relating to (a) internal controls regarding finance, accounting,
auditing, and regulatory compliance activities, (b) public disclosure,
accounting, and financial reporting practices, (c) the quality and integrity of
the Company's financial reports, and (d) management's identification and control
of key business and financial risks. In so doing, the Audit Committee shall
maintain free and open means of communication among the directors, the
independent auditors and Company management.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles, which is the
responsibility of management and the independent auditors. It is also the
responsibility of management to assure compliance with laws and regulations and
the Company's corporate policies with oversight by the Audit Committee in the
areas covered by this Charter.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee's policies and
procedures will remain flexible, in order to best react to changing conditions
and to ensure the integrity of the Company's financial accounting and public
disclosure practices
In carrying out these responsibilities, the Audit Committee shall:
(a) Review and reassess the adequacy of this Charter at least annually and
submit the Charter to the Board of Directors for approval and cause the Charter
to be approved at least once every three years in accordance with the rules and
regulations of the Securities and Exchange Commission and the Marketplace Rules
of The Nasdaq Stock Market or such other listing organization or system on which
the Company's securities are listed or reported (as may be modified or
supplemented).
B-1
(b) Assess the quality of the Company's financial reporting and the
soundness of business risk controls.
(c) Review periodically any code of ethics adopted by the Company,
determine whether the conduct of the Company's management is consistent with
such code of ethics, and review any code of ethics with all Company directors
and senior management on an annual basis.
(d) Emphasize the adequacy of internal controls to identify any payments,
transactions, or procedures that might be deemed illegal or otherwise improper.
(e) Consider and review with the independent auditors:
o The adequacy of the Company's internal controls including
computerized information system controls and security.
o Any significant findings and recommendations of the independent
auditors together with management's responses thereto.
(f) Annually review and discuss with the independent auditors all
significant relationships they have with the Company that could impair the
auditors' independence. Such review should include receipt and review of a
report from the independent auditors regarding their independence consistent
with Independence Standards Board Standard I (as it may be modified or
supplemented). All engagements for non-audit services by the independent
auditors must be approved by the Audit Committee prior to the commencement of
services. The Audit Committee may designate a member of the Audit Committee to
represent the entire Audit Committee for purposes of approval of non-audit
services, subject to review by the full Committee at the next regularly
scheduled meeting. The Company's independent auditors may not be engaged to
perform activities prohibited under the rules of the Public Company Accounting
Oversight Board, the Sarbanes-Oxley Act of 2002, the rules and regulations of
the Securities and Exchange Commission, or the Marketplace Rules of The Nasdaq
Stock Market or such other listing organization or system on which the Company's
securities are listed or reported.
(g) Annually review and approve any conflicts of interest and related-party
transactions (unless the Board of Directors has established a separate committee
of independent directors to perform such functions).
(h) Establish procedures for:
o The receipt, retention, and treatment of complaints received by
the Company regarding accounting, internal accounting controls,
or auditing matters.
o The confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing
matters.
(i) Perform any other activities consistent with this Charter, the
Company's by-laws and governing law, as the Audit Committee or the Board of
Directors deems necessary or appropriate.
INDEPENDENT AUDITOR OVERSIGHT
The Audit Committee has the ultimate responsibility for the oversight of
the services provided by the independent auditors. The Company's independent
auditors are directly accountable to the Audit Committee and the Board of
Directors. The Audit Committee shall review the independence and
B-2
performance of the independent auditors, annually appoint the independent
auditors and approve any discharge of auditors when circumstances warrant.
AUDITOR QUALIFICATIONS
The Audit Committee shall appoint a public accounting firm to audit the
books of the Company. The audit firm shall meet the independence and
registration requirements of the Sarbanes-Oxley Act of 2002, the rules and
regulations of the Securities and Exchange Commission and the Marketplace Rules
of The Nasdaq Stock Market.
The Audit Committee shall periodically obtain from the independent auditor
a formal written statement delineating all relationships between the auditor and
the Company. The Audit Committee shall actively engage in dialogue with the
independent auditor with respect to any disclosed relationships or services that
may impact the objectivity and independence of the auditor and to take or
recommend that the full Board of Directors take appropriate action to ensure the
independence of the independent auditor.
ANNUAL AUDIT PLANNING AND SUPERVISION
The Audit Committee shall:
o Review the background and expertise of the independent auditor's
proposed executive partner and auditing personnel background and
expertise.
o Determine whether the independent auditor is registered with the
Public Company Accounting Oversight Board, when required, and the
AICPA's SEC practice section and participates in voluntary peer
review professional practice program.
o Review the independent auditor's litigation history and
professional liability insurance.
o Review the independent auditor's engagement letter, which shall
define the nature and scope of the audit engagement and
constitute a contract for that firm's professional services.
The Audit Committee also shall obtain and review at least annually a
written report from the independent auditors describing:
o All critical accounting policies and practices to be used by the
Company;
o All alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with the Company's management;
o Ramifications of the use of such alternative disclosures and
treatments, and the treatments preferred by the independent
auditors; and
o Other material written communications between the independent
auditors and management, such as any management letter or
schedule of unadjusted differences.
B-3
ANNUAL AUDIT REVIEW
The Audit Committee shall approve:
o The fees and other significant compensation to be paid to the
independent auditors.
o The independent auditors' annual audit plan, including scope,
staffing, locations and reliance upon management and internal
audit department.
In connection with the annual audit, the Audit Committee shall:
o Ascertain any disagreements about audit personnel or between
audit personnel and company management.
o Review the Company's annual audited financial statements prior to
filing or release. Such review shall include discussions with
management and the independent auditors of significant issues
regarding critical accounting estimates, accounting principles,
practices and judgments, including, without limitation, a review
with the independent auditors of any auditor report to the
Committee required under the rules of the Securities and Exchange
Commission (as may be modified or supplemented). Review should
also include review of the independence of the independent
auditors and a discussion with the independent auditors of the
conduct of their audit. Based on such review, the Audit Committee
shall determine whether to recommend to the Board of Directors
that the annual audited financial statements be included in the
Company's Annual Report filed under the rules of the Securities
and Exchange Commission.
QUARTERLY REVIEW
The Audit Committee shall review quarterly financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operation and ensure that the independent auditor reviews quarterly financial
statements based on SAS 71, Interim Financial Review.
The Audit Committee shall obtain from the independent auditor (prior to the
filing of the Form 10-Q and prior to the public announcement of the Company's
quarterly results) a written confirmation that the auditor determines all
matters are consistent with standards described in SAS 61, Communication with
Audit Committees, including significant adjustments and significant new
accounting policies. If concerns exist, the Audit Committee, or at least its
chairperson, will discuss with the independent auditor and a representative of
financial management, in person or by telephone conference call, the matters of
concern prior to the filing of the Form 10-Q and prior to the public
announcement of the Company's quarterly results.
ANNUAL REVIEW
The Audit Committee shall review and discuss with management and the
independent auditors the Company's annual financial statements and any other
significant reports or financial information prior to submission to any
governmental body, or the public, including without limitation:
o Any certification, report, opinion or review rendered by the
independent accountants, and
B-4
o The Annual Report on Form 10-K, with particular attention to
Management's Discussion and Analysis of Financial Condition and
Results of Operation contained therein.
The Audit Committee shall confirm that the annual report discusses changes
in corporate reporting or accounting practices (for example, departures from
GAAP, exceptions to the consistent application of accounting principles, etc.).
The Audit Committee shall review with Company's management, legal counsel,
and the independent auditors any use of the statutory "safe harbor" for
forward-looking information that relates to or derives from the Company's
financial statements.
The Audit Committee shall prepare an annual report for inclusion in the
Company's annual proxy statement as required by rules and regulations of the
Securities and Exchange Commission and submit such report to the Board of
Directors for approval.
ADDITIONAL MATTERS FOR REVIEW
The Audit Committee shall also:
o Receive a copy of outside counsel's letter to the auditor
regarding litigation, claims and assessments and review the
accounting treatment concerning contingency losses and any effect
on financial statements.
o Be informed via correspondence by the independent auditor or
counsel of the status of the Company's compliance with applicable
securities, tax, antitrust, labor and industry laws and
regulations.
o Ascertain the existence of and review any material non-arm's
length transactions.
o Review the Company's annual proxy statement for omissions of
critical information.
o Discuss the independent auditor's analysis of the Company's
internal controls.
OUTSIDE ADVISERS
The Audit Committee shall have the authority to engage independent counsel
and other advisers, as it determines necessary to carry out its
responsibilities. The Company shall provide for appropriate funding, as
determined by the Audit Committee, in its capacity as a committee of the Board
of Directors, for payment of compensation to:
o The independent auditors employed by the Company for the purpose
of rendering or issuing an audit report.
o Any advisers employed by the Audit Committee pursuant to this
Charter.
DEFINITIONS OF CERTAIN TERMS
The terms "independent director," "registered" (when referring to a public
accounting firm) and "non-audit services" shall have the meanings set forth in
the Sarbanes-Oxley Act of 2002, the rules and
B-5
regulations of the Securities and Exchange Commission, and the Marketplace Rules
of The Nasdaq Stock Market or such other listing organization or system on which
the Company's securities are listed or reported. The term "independent auditor"
shall mean the registered public accounting firm selected by the Audit Committee
to audit the books of the Company pursuant to the terms of this Charter.
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CONSENT OF KIESLING ASSOCIATES LLP
We consent to the incorporation by reference in Schedule 14A of our report
dated February 7, 2003, with respect to the consolidated financial statements of
New Ulm Telecom, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 2002.
- -----------------------
Kiesling Associates LLP
West Des Moines, Iowa
April , 2003
CONSENT OF OLSEN THIELEN & CO., LTD.
We consent to the incorporation by reference in Schedule 14A of our report
dated February 21, 2002, with respect to the consolidated financial statements
of New Ulm Telecom, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 2001.
- --------------------
Olsen Thielen & Co., Ltd.
St. Paul, Minnesota
April , 2003
affix label here
NEW ULM TELECOM, INC.
27 North Minnesota Street
New Ulm, Minnesota 56073
(507) 354-4111
PROXY
The undersigned hereby appoints James Jensen, Duane Lambrecht, Perry Meyer,
Robert Ranweiler or any of them, with power of substitution, as proxies to vote
the shares of common stock of the undersigned in NEW ULM TELECOM, INC. at the
Annual Meeting of Shareholders to be held on May 15, 2003 at 10:00 a.m. at the
New Ulm Civic Center located at 1212 N. Franklin Street, New Ulm, Minnesota, and
at any adjournment thereof, upon all business that may properly come before the
meeting, including the business identified (and in the manner indicated) on this
proxy and described in the proxy statement furnished herewith.
Indicate your vote by an (X). The Board of Directors recommends voting FOR
all items.
ITEM
1. Election of Directors _____ FOR - All Nominees
_____ WITHHELD - All Nominees
(Except as marked to the contrary below.)
Nominees: ROSEMARY DITTRICH, MARY ELLEN DOMEIER, GARY NELSON
INSTRUCTION: To withhold authority to vote for any nominee, mark
through that nominee's name.
2. To consider and vote upon a proposal to amend Article III,
Section 1 of the Company's Articles of Incorporation (the
"Articles"):
(a) to increase the number of authorized shares of common stock
from 19,200,000 shares to 90,000,000 shares, each having a
par value of $1.66 per share; and
(b) to authorize the issuance of up to 10,000,000 shares of
preferred stock of the par value of $1.66 per share and
allow the Board of Directors to fix the rights and
preferences of preferred shares of any class or series and
to generally allow the Board of Directors to authorize the
issuance thereof by resolution in the manner prescribed by
law and to take other actions consistent therewith;
_____ FOR _____ AGAINST _____ ABSTAIN
3. To consider and vote upon a proposal to amend Article III,
Section 2 of the Articles, which currently provides that no
individual shareholder, partnership, corporation or fiduciary
shall own either in their, his or her own right or jointly with
another party more than seven percent (7%) of the outstanding
capital stock of the Company, by adding provisions which provide
that (i) to the extent capital stock is acquired in excess of
such permitted limit ("Excess Shares"), such Excess Shares may
not be voted; and (ii) the Company shall have the right to redeem
Excess Shares;
_____ FOR _____ AGAINST _____ ABSTAIN
4. To consider and vote upon a proposal to amend Article IV of the
Articles to add a provision that an action required or permitted
to be taken at a meeting of the Board of Directors, other than an
action requiring shareholder approval, may be taken by written
action signed, or consented to by authenticated electronic
communication, by the number of directors that would be required
to take the same action at a meeting of the Board of Directors at
which all directors were present;
_____ FOR _____ AGAINST _____ ABSTAIN
5. To consider and vote upon a proposal to amend the Articles by
adding new Article VI thereof to provide that no shareholder
shall be entitled to any preemptive right to purchase, subscribe
or otherwise acquire any new or additional securities of the
Company, or any options or warrants to purchase, subscribe for or
otherwise acquire any such new additional securities before the
Company may offer them to other persons;
_____ FOR _____ AGAINST _____ ABSTAIN
6. To ratify the appointment of Kiesling Associates LLP as the
Company's independent public accountants for the fiscal year
ending December 31, 2003; and
_____ FOR _____ AGAINST _____ ABSTAIN
7. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WHICH
RECOMMENDS VOTING FOR ALL ITEMS. IT WILL BE VOTED AS SPECIFIED.
IF NOT SPECIFIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR ALL ITEMS.
PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED, PRE-ADDRESSED
ENVELOPE.
SIGNATURE ______________________________ DATE ________________________
SIGNATURE ______________________________ DATE ________________________
Please sign exactly as name(s) appear on the mailing label. If
joint account, each joint owner should sign. If signing for a
corporation or as an agent, attorney or fiduciary, indicate the
capacity in which you are signing.