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:
|_| Preliminary proxy statement. |_| Confidential, for use of the
|X| Definitive proxy statement. Commission only (as permitted
|_| Definitive additional materials. by Rule 14a-6(e)(2)).
|_| 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
/s/ Barbara A.J. Bornhoft
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....................8
REPORT OF THE AUDIT COMMITTEE.................................................9
SHAREHOLDER RETURN PERFORMANCE GRAPH.........................................10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................10
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..........................................C-1
CONSENT OF OLSEN THIELEN & CO., LTD.........................................D-1
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.
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 three-year term and until his or her
successor has been duly elected and qualified. 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. All members of the Audit Committee are independent, as defined
in Rule 4200(a)(15) of the NASD's listing standards. 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 elected to serve on our Board of Directors. If any
shareholder determines to cumulate votes and nominates an individual other
4
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 5.4%
Ralph K. Wines & Ruth B. Wines Family Trust
216 Apolena, Newport Beach, California
Bill Otis............................................... 209,400 4.1
Robert Ranweiler(3)..................................... 64,350 1.3
Gary Nelson............................................. 30,000 0.6
James Jensen(4)......................................... 16,743 0.3
Perry Meyer............................................. 12,000 0.2
Rosemary Dittrich(5).................................... 11,028 0.2
Mary Ellen Domeier...................................... 1,350 *
Duane Lambrecht(6)...................................... 1,150 *
All Directors & Officers as a Group (11 persons)(7)..... 348,340 6.8%
- -------------------
* 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.
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 did not
issue any options or warrants during 2002.
INDIVIDUAL GRANTS
-------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL ANNUAL RATES OF
UNDERLYING SAR'S APPRECIATION FOR SAR
SAR'S GRANTED TO EXERCISE TERM(b)
GRANTED EMPLOYEES IN OR BASE EXPIRATION --------------------
NAME (#)(a) 2002 PRICE ($/SH) DATE 5%($) 10%($)
- ----------------------- ---------- ------------ ------------ ---------- ------- --------
Bill Otis.............. 30,000 66.7% ---- 1/1/2005 $42,559 $44,685
- --------------------
(a) These Appreciation Units expire on the third anniversary of the date of
grant, at which time the Units are converted to cash at the Board's
discretion based on the difference between net income per share and
dividends paid per share at year end over each of the three years of the
Appreciation Units' term.
(b) Potential realizable value is based on assumed rates of appreciation over
each of the three years of the Appreciation Units' term.
6
AGGREGATED FISCAL YEAR-END SAR VALUES
The following table shows the number and value of Appreciation Units
held by our named executive officer during 2002. Our company did not have any
options or warrants outstanding at December 31, 2002.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SARS HELD AT IN-THE-MONEY SARS AT
DECEMBER 31, 2002(#)(a) DECEMBER 31, 2002($)(b)
--------------------------- ---------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------- --------------------------- ---------------------------
Bill Otis....................... -0- / 90,000 N/A /$60,300
- --------------------
(a) Appreciation Units are not considered exercisable at any time because our
Board has sole discretion to determine whether the named executive officer
receives payment upon expiration of the Appreciation Units.
(b) Based on the difference between net income per share and dividends paid per
share multiplied by outstanding units for each of 2000, 2001 and 2002.
7
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.
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
/s/ Perry Meyer, Chair
/s/ Mary Ellen Domeier
/s/ Duane Lambrecht
8
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 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
/s/ Robert J. Ranweiler, Chair
/s/ Rosemary Dittrich
/s/ Perry Meyer
A copy of the Audit Committee Charter that was adopted on October 26,
2002 is included with this proxy statement as Appendix B.
9
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.
[PLOT POINTS GRAPH]
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
--------- --------- --------- --------- --------- ---------
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.
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.
10
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.
11
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
12
anti-takeover 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.
13
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 2/3% 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
14
(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
the proposed amendment is needed to enable the Board to enforce Article III,
Section 2.
15
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 when
determining whether a quorum exists for the transaction of business at
a 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
16
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.
17
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.
18
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.
19
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.
20
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. O&T billed 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 O&T 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
25
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. ***
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.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Barbara A.J. Bornhoft
Barbara A.J. Bornhoft
SECRETARY
New Ulm, Minnesota
April 18, 2003
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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 1. 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.
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(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 2. 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 3. 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 4. 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 5. 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 6. 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 7. 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.
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SUBD 8. 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.
B-6
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.
/s/ Kiesling Associates LLP
West Des Moines, Iowa
April 18, 2003
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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.
/s/ Olsen Thielen & Co., Ltd.
St. Paul, Minnesota
April 18, 2003
D-1
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.