Table of Contents
Record Date and Outstanding Common Stock
The
Board of Directors has fixed the close of business on March 31, 2009, 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, 2009 will be entitled to vote at the meeting. On
that date, there were 5,115,435 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. Any shareholder who wishes to revoke a proxy can do so by (a)
executing a later-dated proxy relating to the same shares and delivering it to
the Chief Executive Officer (CEO) before the vote at the meeting, (b) filing a
written notice of revocation bearing a later date than the proxy with the CEO
before the vote at the meeting, or (c) appearing in person at the meeting,
filing a written notice of revocation and voting in person the shares to which
the proxy relates. 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
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. However,
shareholders have the right to cumulate votes in the election of directors, as
described on page 4.
The
Company will pay the cost of this solicitation, including preparing, assembling
and mailing the proxies and solicitation materials. The Company is soliciting
proxies principally by mail. In addition, the directors, officers and regular
employees may solicit proxies personally or by telephone, for which they will
receive no consideration other than their regular compensation. The Company
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 these 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 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 that proxy will be considered
present at the meeting for purposes of determining a quorum and for purposes of
calculating the vote, but will not be considered to have been voted in favor of
that matter.
If
a properly executed proxy that is returned by a broker holding shares in street
name indicates that the broker does not have discretionary authority as to
certain shares to vote on one or more matters, these shares will be considered
present at the 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 those matters.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
There are
currently seven directors on the Board of Directors. Each director serves a
three-year term. Three directors will be elected at the annual meeting. The
Board of Directors has nominated and recommends for election the three persons
named below. It is intended that proxies will be voted for these nominees. The
Board of Directors believes that each nominee named below will be able to
serve, but should a nominee be unable to serve as a director, the persons named
in the proxies have advised the Company that they will vote for the election of
such substitute nominee as the Board of Directors may propose.
The following
table sets forth information, including business experience during the past
five years, as to the nominees for election and as to the other directors.
Information concerning beneficial ownership of the Companys common stock, as
of March 31, 2009 can be found on page 7. 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 familial relationships between any director
or executive officer, except that the Chairman of the Board, Mr. James P.
Jensen, is the brother-in-law of Mr. Gary Nelson, one of the Companys other
current directors whose term will be expiring at the annual meeting.
TERMS ENDING IN 2009AND
NOMINEES FOR TERMS ENDING IN 2012
ROSEMARY
DITTRICH has served as a director since 1997. Ms. Dittrich, age 67, is a
co-owner and Corporate Secretary of D & A Truck Line.
MARY ELLEN
DOMEIER has served as a director since 1999. Ms. Domeier, age 67, currently
serves as the Board Chair of Bank Midwest and retired in 2009 as Vice-Chair of
the Board of American Artstone Company. Previously, Ms. Domeier served as the
Executive Officer of New Ulm Area Catholic Schools from 2004 until her
retirement in 2006. Prior to that, Ms. Domeier served as the CEO and Chair of
Frandsen Bank & Trust until her retirement in 2003.
DENNIS MILLER,
age 49, is currently owner of Mavericks Wireless, a telecommunications
consulting firm. He currently serves on the Board of Coughlan Companies, Inc.,
a Mankato, Minnesota based publishing firm. Mr. Miller served as President and
Chief Executive Officer for Midwest Wireless Holdings from 1995 until 2007,
when the company was successfully sold to Alltel Wireless. Mr. Miller graduated
from Minnesota State University with a degree in Business and in 1982, earned a
Mini-MBA from the University of Minnesota. Mr. Miller has served on various
boards for industry associations, including CTIA and RCA. He presently serves
on the Board of Directors at Immanuel St. Josephs Hospital-Mayo Health System.
Mr. Miller was the 2005 Ernst & Young Entrepreneur of the Year for
Minnesota and the Dakotas.
TERMS ENDING IN 2010
JAMES JENSEN
has served as a director since 1982 and as Chairman of the Board since 1999.
Mr. Jensen, age 64, has been the President of Jensen Consulting, Inc. since
2003 and a business partner in J Longs Clothing since January 2008. Prior to
that, Mr. Jensen served as a Marketing Consultant and Sales Representative for
Kohls-Weelborg Dealerships from March 2003 until January 2004, and as the
President of Jensen Clothing, Inc. until 2003. Mr. Jensen currently serves on
the Board of Directors of Alliance Bank.
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Table of Contents
PERRY MEYER
has served as a director since 1995. Mr. Meyer, age 54, is a farmer who raises
corn, soybeans and hogs. Since 2003, Mr. Meyer has served as the Board Chairman
of Heartland Corn Products, which owns and operates an Ethanol plant in
Winthrop, MN. Mr. Meyer has previously served as the Lafayette Township
Treasurer.
TERMS ENDING IN 2011
DUANE
LAMBRECHT has served as a director since 1999. Mr. Lambrecht, age 62, has been
the owner and CEO of Shelter Products, Inc. for more than five years. Mr.
Lambrecht is currently serving as the President of the North American Building
Material Distributors Association.
PAUL ERICK,
CPA has served as a director since 2005. Mr. Erick, age 65, was an officer and
shareholder of Olsen, Thielen & Co., Ltd. (a public accounting firm) until
his retirement in August 2000.
In addition to the persons nominated for election as directors, Mr.
Gary Nelson is currently a director whose term will end at the annual meeting.
Mr. Nelson is retiring after 27 years of service and the Company wishes to
express its gratitude.
Voting for Directors Vote Required
Cumulative Voting
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
also has the right to vote shares on a cumulative basis in the election of
directors by giving written notice of intent to do so to any officer of the
Company before the meeting, or to the presiding officer at the meeting at any
time before the election. If notice of this intent is given, the presiding
officer at the meeting will announce, before the election of directors that
shareholders will vote their shares on a cumulative basis by multiplying the
number of shares held by the shareholder by the number of directors to be
elected. Each shareholder then may cast that shareholders votes for one
candidate or may distribute the votes among any number of candidates.
If no
shareholder provides notice of such intent, the 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 the
Board of Directors. If any shareholder determines to vote on a cumulative basis
and an individual other than the above-stated nominees has been nominated to
serve as a director, then the three nominees who receive the largest number
votes, taking into account cumulative voting, will be elected to serve on the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR EACH NOMINEE FOR DIRECTOR.
THE BOARD OF
DIRECTORS AND COMMITTEES
The
Board of Directors consists of seven members with staggered terms of three
years. The Board holds regular monthly meetings and some special meetings. The
Board has established an Audit Committee, Steering Committee, Compensation
Committee, and Strategic Planning Committee performing the functions described below.
The Board also had an Ad Hoc Governance Committee. The Chairman of the Board is
an ex-officio member of all committees. The Board held 12 meetings in 2008.
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Table of Contents
All committees
meet as required. Each director attended 75% or more of the Board meetings and
applicable committee meetings.
Audit
Committee
consists of Paul Erick, Chair, Mary Ellen Domeier and Gary
Nelson. All members of the Audit Committee are independent, as defined in Rule
4200(a)(15) of the NASDs listing standards. Each member of the Audit Committee
is financially literate and at least one member of the Committee has accounting
or related financial management expertise. The Board of Directors has
determined that Mr. Paul Erick, the Chair of the Audit Committee, satisfies the
criteria adopted by the Securities and Exchange Commission to serve as audit
committee financial expert and is an independent director, pursuant to the
standards set forth in the Companys Corporate Governance Guidelines and the
requirements under the Securities Exchange Act of 1934. The Audit
Committee oversees the Companys accounting, financial reporting process,
internal controls and audit, and consults with management and the independent
auditors on, among other items, matters related to the annual audit, the
published financial statements and the accounting principles applied. As part
of its duties, the Audit Committee appoints, evaluates and retains the
Companys independent auditors and evaluates the independent auditors
qualifications, performance and independence. The Audit Committee has
established policies and procedures for the pre-approval of all services
provided by the independent auditors. The Audit Committees Report is included
on page 14 of this proxy statement. The Audit Committee had 15 meetings in
2008.
Steering
Committee
consists of James Jensen, Chair, Duane Lambrecht, and Perry
Meyer. This committee is responsible for the study and analysis of the
Companys financial needs and requirements and the evaluation of the future operations
and needs of the Company. The Steering Committee had 4 meetings in 2008.
Compensation
Committee
consists of Perry Meyer, Chair, Rosemary Dittrich and Duane
Lambrecht. Its duties are to evaluate employee compensation and staffing. The
Compensation Committee also makes appropriate recommendations concerning
director compensation. This committee had 6 meetings in 2008.
Strategic
Planning Committee
consists of Mary Ellen Domeier, Chair, Rosemary Dittrich
and Gary Nelson. This committee is to serve as a catalyst in ensuring Company
management and the Board of Directors engage in ongoing strategic thinking.
This committee had 4 meetings in 2008.
Nominations
The
Company does not have a formal Nominating Committee or Nominating Committee
Charter but as indicated below, used an Ad Hoc Governance Committee in
connection with its selection of Mr. Miller as a nominee. The Companys Board
of Directors, which is comprised completely of independent directors as defined
in Rule 4200(a)(15) of the NASDs listing standards, functions as the Companys
Nominating Committee. To date, the Company feels that the full Board best
represents the interests of the shareholders regarding nominations. However,
the Company may appoint a Nominating Committee in the future if it deems it is
appropriate.
The
Ad Hoc Governance Committee was appointed in February, 2008, for the purpose of
reviewing the Companys By-Laws, Articles of Incorporation and to assess the
expertise of its current Board members. While the Board itself serves as the
entity to screen nominee prospects, the Ad Hoc Governance Committee reviewed
the prospective nominee resumes as to complementary skill sets in light of its
assessment of current Board members. The Board (1) concurred with the
Committees recommendation as to bringing forward Proposal Number Two as to an
amendment to the Articles of Incorporation, allowing for a range of directors
between seven and nine; (2) after reviewing resumes of all prospective
nominees, weighing them against the selection criteria, which include:
integrity, education, corporate governance experience, business experience, and
understanding of the Companys industry, the Board concurred with the
Committees recommendation to propose Mr. Miller to the shareholders as its
recommended nominee.
5
Table of Contents
It
is the Boards policy to consider director candidates recommended by
shareholders who appear to be qualified to serve on the Board of Directors. The
Board may choose not to consider an unsolicited recommendation if no vacancy
exists on the Board and the Board does not perceive a need to increase the size
of the Board. In order for a Director candidate to be considered for nomination
at the Annual Meeting of Shareholders, the recommendation must be received by
the Company as provided under Shareholder Proposals for 2010 Annual Meeting,
on page 19.
Shareholder
Communications with Board
The
Board of Directors has implemented a process by which Company shareholders may
send written communications to the Boards attention. Any shareholder desiring
to communicate with the Board or one or more of its directors may send a letter
addressed to:
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|
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New Ulm
Telecom, Inc.
|
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27 North Minnesota Street
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New Ulm, Minnesota 56073
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Attention: Corporate
Secretary (Board Matters)
|
The
Corporate Secretary has been instructed by the Board to promptly forward all
communications so received to the full Board or the individual Board members
specifically addressed in the communication, without first screening those
communications.
The
Company encourages all of its directors and officers to attend the annual
meeting of shareholders. All of the Companys seven directors attended the 2008
Annual Meeting of Shareholders.
NON-EMPLOYEE
DIRECTOR COMPENSATION
In 2008, the
directors were paid an annual retainer of $16,800 and directors received $735
for each Board and Committee meeting they attended. In 2009, the directors will
be paid a $16,800 annual retainer and $735 for each Board and Committee meeting
they attend. In 2008, the Chairman of the Board, who is not an employee of the
Company, received an additional annual retainer of $12,000. This annual
retainer will be $12,000 in 2009. Also, in 2008, the Audit Committee Chair
received an additional annual retainer of $5,000. This annual retainer will be
$5,000 in 2009.
On
October 28, 2008, the Board of Directors adopted a policy of non-employee
director compensation. Under the new policy, a director who serves at least three full terms (nine years) is entitled to receive
as compensation three times the Board of Directors annual retainer that is in
effect at the time of separation from the Board of Directors. A director who
serves full terms beyond the initial three terms is entitled to receive
additional compensation of one-half times the annual Board of Directors
retainer in effect at the time of separation for each additional full term
served, not to exceed three additional terms. Separation includes retirement,
resignation, death, disability, or change of corporate ownership. This
compensation to directors will be paid within sixty days of the directors
separation from the Board or at a time acceptable to both the Company and the
separated director.
The new
policy replaces the Companys previous director retirement policy, which
provided that each director would receive $1,000 for each year of service to
the Board with a maximum of $20,000 per director. The Companys future
obligations under the new policy at December 31, 2008 were $310,800. The
Company developed the new policy with the assistance of an outside consultant
in an effort to remain competitive in attracting and retaining quality outside
Directors.
6
Table of Contents
The following
table shows the compensation paid to each of the Companys directors in 2008:
2008 DIRECTOR COMPENSATION
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|
|
|
|
|
|
|
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Name
|
|
|
Fees Earned
or Paid in
Cash ($)
|
|
All Other
Compensation
($) (1)
|
|
Total ($)
|
|
James Jensen
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|
$
|
61,140
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|
$
|
55,600
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|
$
|
116,740
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Perry Meyer
|
|
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36,645
|
|
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46,000
|
|
|
82,645
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Duane Lambrecht
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34,440
|
|
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42,400
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|
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76,840
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Paul Erick
|
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|
43,850
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|
|
0
|
|
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43,850
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|
Rosemary
Dittrich
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35,175
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|
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40,400
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|
|
75,575
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Mary Ellen
Domeier
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39,585
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|
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0
|
|
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39,585
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Gary Nelson
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41,790
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55,600
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97,390
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(1)
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The amount listed in the
All Other Compensation column represents the change in the non-employee
director compensation policy value accruing to each director as a result of
the Companys change in director compensation.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership
of the Companys common stock as of March 31, 2009, by (a) each person known by
us to own beneficially five percent (5%) or more of our common stock (five
percent shareholders), (b) each director and nominee for director, (c) each
executive officer, and (d) all 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.
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Table of Contents
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Name and
Address of Beneficial Owner
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Amount and
Nature of
Beneficial
Ownership (1)
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Percent of
Class (2)
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Ruth B. Wines, Trustee of the
Ralph K. Wines & Ruth B. Wines Family Trust
216 Apolena, Newport Beach, California
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274,320
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5.4
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%
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Bill Otis (3)
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206,477
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4.0
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Gary Nelson (4)
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34,509
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*
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James Jensen (5)
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16,743
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*
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Perry Meyer
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12,000
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*
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Rosemary Dittrich (6)
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14,470
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*
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Barbara Bornhoft
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2,100
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*
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Mary Ellen Domeier (7)
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2,220
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*
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Duane Lambrecht (8)
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1,150
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*
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Dennis Miller
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500
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*
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Paul Erick
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100
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*
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Nancy Blankenhagen
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90
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*
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All nominees, directors and officers as a group (11 persons)
(9)
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290,359
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5.7
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%
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* Represents less than 1.0%
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(1)
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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.
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(2)
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Percentage of beneficial
ownership is based on 5,115,435 shares outstanding as of March 31, 2009.
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(3)
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Of Mr. Otis shares,
155,247 shares are pledged to a financial institution for Mr. Otis
indebtedness.
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(4)
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Includes 4,509 shares owned
by Mr. Nelsons spouse.
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(5)
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Includes 3,654 shares owned
by Mr. Jensens spouse.
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(6)
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Includes 4,970 shares owned
by Ms. Dittrichs spouse.
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(7)
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Includes 370 shares owned
by Ms. Domeiers spouse.
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(8)
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Includes 250 shares owned
by Mr. Lambrechts spouse.
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(9)
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Includes 13,753 shares
owned by the spouses of directors and officers.
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Table of Contents
E
XECUTIVE COMPENSATION
Summary Compensation Table
The
following table shows compensation paid to or earned by the Chief Executive
Officer, the Chief Operating Officer and the Chief Financial Officer (the
Named Executive Officers) during 2008. For more information regarding the
Companys salary policies and executive compensation plans, please review the
information under the caption Report of Compensation Committee on Executive
Compensation, on page 13.
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Name and
Principal Position
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Year
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Salary
($)
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Bonus
($)
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Non-Equity
Incentive Plan
Compensation
($)
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All Other
Compensation
($)(a)
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Total
($)
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Bill Otis
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2008
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233,907
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0
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46,744
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15,929
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296,580
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President
and Chief
Executive Officer
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2007
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202,340
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|
0
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|
58,237
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15,750
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276,327
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|
|
|
|
|
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|
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Barbara Bornhoft
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2008
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136,548
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5,000
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20,549
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11,577
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173,674
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Vice President/Chief
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2007
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|
125,406
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|
0
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|
26,879
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|
9,975
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162,260
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Operating Officer and
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Corporate Secretary
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Nancy Blankenhagen
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2008
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|
91,884
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|
0
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|
14,021
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7,641
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113,546
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Chief Financial Officer
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2007
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|
80,354
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|
0
|
|
17,494
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|
6,227
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|
104,075
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(a)
|
Represents contributions
made by the Company under its 401(k) plan.
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Grants of Plan-Based Awards in 2008
The following table sets
forth certain information concerning the plan-based awards granted to the Named
Executive Officers during the fiscal year ended December 31, 2008 under the
2006 Management Incentive Plan as amended:
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Estimated Future Payouts Under Non-
Equity Incentive Plan Awards (1)
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Name
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|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
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Maximum
($)
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Bill Otis
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3/25/2008
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22,500
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45,000
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|
90,000
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Barbara Bornhoft
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3/25/2008
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9,893
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|
19,785
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39,570
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|
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|
|
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Nancy Blankenhagen
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3/25/2008
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|
6,750
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|
13,500
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27,000
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(1)
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Represents awards that may
have been earned by the Named Executive Officers under the Companys 2006
Management Incentive Plan as amended. For the actual award amounts earned and
paid under these plans, please see the Summary Compensation Table column
entitled Non-Equity Incentive Plan Compensation. For explanation of this
plan, refer to the description on pages 10 - 13 of this proxy statement
under the heading Compensation Discussion and Analysis - Cash-Based
Incentive Compensation.
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9
Table of Contents
Options and Warrants
The Company did not issue
any options or warrants during 2008, and at December 31, 2008, had no options
or warrants outstanding.
Employment Agreements
Mr. Otis and the Company
entered into an employment agreement in July 2006 that provided for an annual
base salary of no less than $170,000 and will be awarded incentive compensation
under the New Ulm Telecom Management Incentive Plan, in the form of a cash
incentive (Annual Incentive Award) on an annual basis. The base salary of Mr.
Otis for 2009 has been set at $250,000. The target incentive for Mr. Otis is 20%
of base salary. The maximum incentive award payable under the plan is 40% of
base salary (2 times the target). The minimum incentive award payable under the
plan is $0. Upon termination of Mr. Otis employment by the Company without
cause or by Mr. Otis for good reason, Mr. Otis will receive 24 months of base
salary at the annualized rate of pay at termination. Upon a change in control
transaction and if the employment of Mr. Otis is terminated by the Company
without cause or by Mr. Otis for good reason within 12 months of the change in
control transaction, Mr. Otis will receive a lump sum payment equal to 24
months of base salary at the annualized rate of pay at termination, which would
have been equal to $450,000 at December 31, 2008.
Ms. Bornhoft and the Company
entered into an employment agreement in July 2006 that provided for an annual
base salary of no less than $110,000 and will be awarded incentive compensation
under the New Ulm Telecom Management Incentive Plan, in the form of a cash
incentive (Annual Incentive Award) on an annual basis. The base salary for Ms.
Bornhoft for 2009 has been set at $147,000. The target incentive for Ms.
Bornhoft is 15% of base salary. The maximum incentive award payable under the
plan is 30% of base salary (2 times the target). The minimum incentive award
payable under the plan is $0. Upon termination of Ms. Bornhofts employment by
the Company without cause or by Ms. Bornhoft for good reason, Ms. Bornhoft will
receive 12 months of base salary at the annualized rate of pay at termination.
Upon a change in control transaction and if Ms. Bornhoft is terminated without
cause or by Ms. Bornhoft for good reason within 12 months of the change in
control transaction, Ms. Bornhoft will receive a lump sum payment equal to 12 months
of base salary at the annualized rate of pay at termination, which would have
been equal to $131,900 at December 31, 2008.
COMPENSATION DISCUSSION AND ANYALYSIS
The Compensation Committee,
which is comprised solely of Independent Directors, is responsible for
evaluating and monitoring the Companys general compensation policies and
compensation plans, as well as the specific compensation levels for executive
officers, including our Chief Executive Officer. The Compensation Committee
reviews and recommends annual base salary levels and annual cash award
opportunity levels for each Named Executive Officer to the Board of Directors.
General Compensation Philosophy
Under the supervision of the
Board of Directors, the compensation philosophy is designed to attract and
retain well-qualified executive talent, to tie annual cash incentives to
achievement of measurable corporate performance objectives and to align
executives incentives with shareholder value creation. To achieve these
objectives, the Compensation Committee implemented and maintains a compensation
plan that ties a significant portion of an executives overall compensation to
the Companys financial performance. Overall, the
total compensation opportunity is intended to create an executive compensation
program that is set competitively compared to similar-sized companies,
particularly telecommunication companies.
10
Table of Contents
Each executive officers
compensation package is generally comprised of three elements:
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Base salary, which
reflects an individuals qualifications, scope of responsibilities,
experience level, expertise, performance, and impact on the Companys
financial results;
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Cash-based incentive
compensation tied to measurable targets of the Companys overall success; and
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The Companys qualified
401(k) plan in which the executives participate along with all other Company
employees.
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The executive officers were
not present during, and did not participate in, deliberations or decisions involving
their own compensation during 2008. While executive officers do not play a role
in setting their own compensation, the Companys Chief Executive Officer does
make recommendations concerning individual performance of other executive
officers to the Compensation Committee.
Base Salary
The level of base salary is
established primarily on the basis of an executives qualifications and
relevant experience, the scope of his or her responsibilities, the strategic
goals that he or she manages, the compensation levels of executive officers at
similar-sized companies, particularly telecommunications companies, the
relationship between the executives performance and the Companys results, and
market rates of compensation required to retain qualified management. The
Company believes that executive base salaries should be competitive with
salaries at similar-sized companies. The Compensation Committee reviews the
base salary of each executive annually and makes recommendations to the Board
of Directors as to any adjustments in base salary to take into account the
individuals performance, any changes in responsibility, and to maintain a
competitive salary structure.
Cash-Based Incentive Compensation
The Company engaged an
outside consultant in 2005 to advise the Company in its development of an
Employee Incentive Plan for employees other than executive officers and a
Management Incentive Plan for its executive officers. Both plans were
implemented in 2006. Payments on each plan were based on achievement of objectives
of measurable corporate performance, with financial and customer related
targets. The financial targets were achievement of specified certain operating
revenue and net income based upon the Companys budget, while the customer
service targets were based upon several factors, including (i) uptime (the
amount of time that the Companys phone, cable and internet services were
available to customers) and restoration time (the ability of the Company to
restore service when an interruption occurs), (ii) customer retention and (iii)
customer service (derived from customer service data).
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Table of Contents
The executive
officers potential awards under the 2006 Management Incentive Plan as amended
and in effect in 2008 were as follows:
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Position
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Target Award
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Maximum Award
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Chief
Executive Officer
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20% of base
salary
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40% of base
salary
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Chief Operating
Officer
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15% of base
salary
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30% of base
salary
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Chief
Financial Officer
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15% of base
salary
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30% of base
salary
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The award
formula was weighted according to each of the percentages listed below.
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Net Income
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60
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%
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Operating
Revenue
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25
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%
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Customer
Service
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15
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%
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Total
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100
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%
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On March 31,
2009, the Compensation Committee recommended and Board of Directors approved
the payments of awards under the Plan of $46,744 to Mr. Otis, $20,549 to Ms.
Bornhoft and $14,021 to Ms. Blankenhagen for achievement of 100.0% of net
income, 103.1% of operating revenue and 100.0% customer service. The Company
expects to make these payments in April 2009.
The formulas
used for operating revenue and customer service were the same as approved by
the Board of Directors in early 2008. The net income factor used for
determining that portion of the award was adjusted to eliminate the effects on
net income of (i) the non-cash impairment charge of $2,291,000 related to its
Hutchinson Telephone Company subsidiary, as determined under FASB 142; and (ii)
the Companys October 28, 2008 adoption of a new non-employee director
compensation plan and the accrual of retirement payments under this director
plan. The Board of Directors determined that it was appropriate to make this
adjustment to the net income factor to fairly reflect the Companys performance
in 2008.
The Company
will continue the Management Incentive Plan in 2009 based upon similar factors
and the same performance ratios. Potential payouts under the Plan are set forth
below.
Grants of Plan-Based
Awards in 2009
The following
table sets forth certain information concerning plan-based awards granted to
the Named Executive Officers during the fiscal year ending December 31, 2009,
based upon the operation of the 2006 Management Incentive Plan as amended
described above.
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Estimated Future Payouts Under Non-
Equity Incentive Plan Awards
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Name
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Threshold
($)
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Target
($)
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Maximum
($)
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Bill Otis
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25,000
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50,000
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100,000
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Barbara Bornhoft
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11,025
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22,050
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44,100
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Nancy Blankenhagen
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7,500
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15,000
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30,000
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12
Table of Contents
Other Compensation Programs
New Ulm
Telecom, Inc. has a qualified 401(k) Retirement Savings Plan (Retirement
Plan). All of the Named Executive Officers, along with other employees who
made contributions into the Retirement Plan, received matching contributions of
50% of every dollar up to 6% of all eligible employee contributions. In
addition, the Company made a discretionary, profit sharing contribution of 4%
for 2008 to all Retirement Plan participants accounts in the first quarter of
2009. The purpose of the Companys matching contributions into the Retirement
Plan is to encourage employees to participate in their own retirement savings
and to provide another competitive recruiting tool to attract and retain
employees.
Elements of Post-Termination Compensation
As noted above
under Employment Agreements, our Employment Agreements with Bill Otis and
Barbara Bornhoft contain change in control provisions. The Compensation
Committee believes that severance and change in control arrangements for these
Named Executive Officers aid in the recruitment and retention of executive
officers and provide incentives for executive officers to grow our business and
maintain focus on returning value to shareholders. The Compensation Committee
believes that providing protection to executive officers whose employment is
terminated in connection with a change in control strikes an appropriate
balance among the interests of our executive officers and the interests of
others in a change in control transaction.
New Ulm
Telecom, Inc. does not grant stock awards and does not have any pension plans
or any nonqualified deferred compensation plans for its executive officers or
employees.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The
compensation program for the Chief Executive Officer and the Board of Directors
is the responsibility of the Compensation Committee of the Board of Directors
(the Committee). The Committee is comprised entirely of independent members
of the Board. The Committee oversees New Ulm Telecom, Inc.s compensation and
establishes the principles and strategies that guide the design of compensation
plans and benefit programs for all employees within New Ulm Telecom, Inc., and
makes its recommendations to the Board of Directors. In 2008, the Committee was
comprised of three directors: Mr. Meyer, Mr. Lambrecht and Ms. Dittrich. Mr.
Meyer is the Chair of the Committee.
The
following discussion describes New Ulm Telecom, Inc.s approach to executive
compensation. The Committee retains the right to consider factors other than
those set forth below in setting executive compensation levels for individual
officers.
The
2008 salary program consisted of two elements: an annual base salary and a cash
award under a Management Incentive Plan. The purpose of the Plan was to reward
key executives for the long-term success of the Company, and to assist in the
recruitment and retention of key executives. The Plan was also used to link
total executive compensation to New Ulm Telecom, Inc.s financial performance.
Overall, the philosophy for the executive compensation program is to pay
competitively compared to similar-sized companies, particularly telecommunications
companies.
When
setting its recommendations as to annual base salaries and making awards under
the incentive plan, the Compensation Committee considers Company performance
and compensation levels of comparable companies with a goal of remaining
reasonably competitive with comparable companies.
The
Committee worked with a consultant to develop the Management Incentive Plan.
This plan was effective beginning in the year 2006. The purpose of the
Management Incentive Plan is to enable New Ulm
Telecom, Inc. to motivate its executive officers to achieve key financial and
strategic objectives.
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Table of Contents
In
reviewing the Chief Executive Officers 2008 performance, the Committee
determined that Mr. Otis total compensation package was in alignment with the
Companys performance in 2008. The Committee also reviewed the compensation
levels of executives in comparable companies, and determined that Mr. Otis
compensation was competitive within the industry. In addition, the Committee
believes that New Ulm Telecom, Inc.s compensation practices and compensation
philosophy align executive interests with those of its shareholders by linking
total executive compensation to New Ulm Telecom, Inc.s financial performance.
The Committee
has reviewed and discussed the Compensation Discussion and Analysis with
management. Based on such review and discussions, the Committee recommended to
the Board that the Compensation Discussion and Analysis be included in the
Companys proxy statement for filing with the Securities and Exchange
Commission.
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Compensation Committee of the Board of Directors
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Perry Meyer, Chair
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Rosemary Dittrich
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Duane Lambrecht
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REPORT OF
AUDIT COMMITTEE
The
Audit Committee assists the Board of Directors in its oversight of the
Companys financial reporting process. The Committee operates under a written
charter adopted by the Board of Directors.
In
addition to its other duties described in the Committees Charter, the Audit
Committee has:
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Reviewed and
discussed with the Companys management and the independent auditors, the
audited financial statements as of December 31, 2008 and for the year then
ended;
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Discussed
with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61
Communication
with Audit Committees;
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Received
from the independent auditors the written disclosures and the letter required
by Independence Standards Board Standard No. 1
Independence Discussions with Audit Committees
and discussed
with them their independence.
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Based
upon the review and discussions summarized above, together with the Committees
other deliberations, the Committee recommended to the Board of Directors that
the audited financial statements of the Company, as of December 31, 2008 and
for the year then ended, be included in the Companys Annual Report on Form
10-K for the year ended December 31, 2008 to be filed with the Securities and
Exchange Commission.
Management
is responsible for the Companys internal controls and the financial reporting
process. The independent auditors are responsible for performing an independent
audit of the Companys consolidated financial statements in accordance with
auditing standards generally accepted in the United States and for expressing
an opinion thereon. The Audit Committees responsibility is generally to
monitor and oversee these processes, as described in the Audit Committee
Charter.
Submitted by the Audit Committee of the Board of Directors
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Paul
Erick, Chair
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Mary
Ellen Domeier
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Gary
Nelson
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14
Table of Contents
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
It
is the Companys policy that all proposed transactions by the Company with
directors, officers, five percent shareholders 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.
PROPOSAL NO. 2 AMENDMENT TO ARTICLE IV TO
PROVIDE THAT THE
NUMBER OF DIRECTORS ON THE BOARD SHALL BE NO FEWER THAN SEVEN, BUT NO
MORE THAN NINE.
Background Information
In
2000, the shareholders of the Company approved an amendment to Article IV of
the Articles of Incorporation of the Company that related to the number of
directors who would serve on the Board, reducing over time from nine directors
to seven directors. Prior to the 2000 Amendment, the Companys Board was comprised
of nine memebers.
Reasons for Amendment
Currently,
the Board is made up of seven directors who serve rotating three year terms.
The Company believes the current Board size of seven directors has effectively
served its shareholders. The Board recognizes, however, that there may be
future needs that would require an increase in the number of directors serving
on the Board. Therefore, the Board has determined that it is prudent to provide
flexibility in its number of directors in order to meet possible future needs.
The Board believes that a range of the number of directors serving from seven
to nine would provide this flexibility, at the same time maintaining an
effective and efficient Board group.
Any
additional directors above the current seven would be added to the Board in
accordance with the Companys Articles, By-laws and Minnesota corporate law.
The Board of Directors has no current intention to add additional members to
the Board of Directors.
Effect of Amendment
If
the Proposed Amendment is approved, its effect will be to provide the Company
with the ability to proactively meet future directorship needs.
15
Table of Contents
Text of Amendment
The
Proposed Amendment would be accomplished by amending Article IV to read in its
entirety as follows:
Article IV
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The
government of said corporation for the management of its affairs shall be
vested in a Board of Directors, who shall be stockholders. The number of
directors shall be no fewer than seven (7) but no more than nine (9), based
on need as determined by the Board. The directors shall be elected to office
at the Annual Meeting of the Shareholders of the corporation to be held in
New Ulm, Minnesota, or at such other place as designated by a Resolution of
the Board of Directors during the month of May in each year.
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Each
director shall be elected to office for a term of three (3) years and shall
continue to serve until the directors successor has been duly elected and
qualified. Any vacancy that may occur shall be filled by appointment by the
Board until the next Annual Meeting at which time a director will be elected
by the stockholders to fill the un-expired term.
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Any
action required or permitted to be taken at the 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 the Board at which all directors were present.
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Vote Required
To be
approved, Proposal No. 2 must receive the affirmative vote of the holders of a
greater of (a) a majority of shares of common stock present at the Annual
Meeting, either in person or by proxy, and entitled to vote on that proposal or
(b) the majority of the minimum number of shares of common stock that would
constitute a quorum for transacting business at the Annual Meeting.
The Board
of Directors has unanimously adopted a resolution approving the Proposed
Amendment and has directed that this matter be submitted to the shareholders
for their consideration.
ACCORDINGLY, THE BOARD RECOMMENDS A VOTE
FOR THE PROPOSED AMENDMENT TO ARTICLE IV OF THE ARTICLES OF INCORPORATION.
PROPOSAL NO. 3 AMENDMENT TO ARTICLE V OF
THE COMPANYS ARTICLES
OF INCORPORATION CONCERNING DIRECTOR LIABILITY TO UPDATE TO
REFERENCE THE CURRENT STATUTES.
Background Information and Reasons for
Amendment
Currently,
Article V of the Articles of Incorporation makes reference to outdated
Minnesota Statutes. The amendment to Article V will provide the necessary
update to make reference to current Minnesota Statutes.
Effect of Amendment
If
the Proposed Amendment is approved, its effect will be to reference correct
Minnesota Statutes in regards to director liability. Other than correcting and
updating these references, the Amendment would not affect any substantive
changes to the Companys articles.
16
Table of Contents
Text of Amendment
The
Proposed Amendment would be accomplished by amending Article V to read in its
entirety as follows:
Article V
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No
Director shall be personally liable to the corporation or its shareholders
for monetary damages for breach of fiduciary duty by such Director as a
director; provided, however, that this Article shall not eliminate or limit
the liability of a Director to the extent provided by applicable law:
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(a)
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For any
breach of the Directors duty of loyalty to the Corporation or its
shareholders;
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(b)
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For acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law;
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(c)
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Under
Section 302A.559, 80A.76 or 80A.77 of the Minnesota Statutes;
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(d)
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For any
transaction from which the Director derived an improper personal benefit; or
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(e)
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For any act
or omission occurring prior to the effective date of this Article.
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No amendment
to or repeal of this Article shall apply to or have any effect on the
liability or alleged liability of any Director for or with respect to any
acts or omissions of such Director occurring prior to such amendment or
repeal.
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Vote Required
To be
approved, Proposal No. 3 must receive the affirmative vote of the holders of a
greater of (a) a majority of shares of common stock present at the Annual
Meeting, either in person or by proxy, and entitled to vote on that proposal or
(b) the majority of the minimum number of shares of common stock that would
constitute a quorum for transacting business at the Annual Meeting.
The Board
of Directors has unanimously adopted a resolution approving the Proposed
Amendment and has directed that this matter be submitted to the shareholders
for their consideration.
ACCORDINGLY, THE BOARD RECOMMENDS A VOTE
FOR THE PROPOSED AMENDMENT TO ARTICLE V OF THE ARTICLES OF INCORPORATION.
17
Table of Contents
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
General
The
Audit Committee of the Board of Directors has appointed Olsen, Thielen &
Co., Ltd. as independent registered public accounting firm for the Company for
the fiscal year ending December 31, 2008. On June 24, 2008, New Ulm Telecom,
Inc. announced that it was replacing its prior auditor, Kiesling Associates,
LLP with Olsen, Thielen & Co., Ltd. A full discussion is contained in the
Companys Form 8-K filed on June 27, 2008 and in the Companys Form 10-K for
the year ended December 31, 2008.
Representatives
of Olsen, Thielen & Co., Ltd. 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.
The
following is a summary of fees billed by Olsen, Thielen & Co., Ltd. for
professional services rendered for the year ended 2008 and a summary of fees
billed by Kiesling Associates LLP for professional services rendered for the
year ended December 31, 2007.
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Fee Category
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Olsen, Thielen
2008 Fees
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Kiesling
2008 Fees
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Kiesling
2007 Fees
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Audit Fees
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$
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150,160
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$
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14,100
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|
$
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120,899
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Audit - Related Fees
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Tax Fees
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24,861
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All Other Fees
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35,868
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Total Fees
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$
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210,889
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$
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14,100
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$
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120,899
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Audit Fees
Consists
of fees billed for professional services rendered for the audit of the
Companys annual consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports.
Audit-Related Fees
Consists
of fees billed for assurance and related services that are reasonably related
to the performance of the audit or review of the Companys consolidated
financial statements and are not reported under Audit Fees. There were no
audit-related fees billed for 2008 or 2007.
Tax Fees
Consists
of fees billed for professional services for tax compliance and tax advice. The
tax fees for 2008 were for the completion of the Hutchinson Telephone Company
(HTC) tax return for 2007 that was completed after the acquisition of HTC by
New Ulm Telecom, Inc. on January 4, 2008. There were no tax fees billed for
2007 by the Companys Independent Registered Public Accounting Firm.
All Other Fees
Consists
of fees for products and services other than the services reported above. The
fees billed for all other services paid in 2008 consisted primarily of charges
related to services rendered for 2007 activities for HTC prior to the
acquisition and general regulatory assistance. There were no other fees billed
for 2007 by the Companys Independent Registered Public Accounting Firm.
The Company typically does not engage its current Independent Registered
Public Accounting firm directly for other fees or services.
Independence
The
Audit Committee of the Board of Directors has determined that the provision of
the services described above is compatible with maintaining the principal
registered public accounting firms independence.
18
Table of Contents
Pre-Approval
Policy for Services of Independent Registered Public Accounting Firm
As part of
its duties, the Audit Committee is required to pre-approve audit and non-audit
services performed by the independent registered public accounting firm in
order to assure that the provision of such services does not impair the registered
public accounting firms independence. The Audit Committee does not delegate to
management its responsibilities to pre-approve services performed by the
independent auditors. The Audit Committee pre-approved all of the services the
Company received from Kiesling Associates LLP and Olsen, Thielen & Co.,
Ltd. during the year ended December 31, 2008.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The
Companys officers, directors and beneficial owners of more than 5% of the Companys
common stock are required to file reports of their beneficial ownership with
the Securities and Exchange Commission. Based on the Companys review of copies
of such reports received by it, or written representations from reporting
persons, the Company believes that during the fiscal year ended December 31,
2008, 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.
ANNUAL REPORT
ON FORM 10-K
Upon
written request to New Ulm Telecom, Inc., 27 North Minnesota Street, New Ulm,
Minnesota, 56073, Attention: President, the Company will send, without charge,
a copy of its Annual Report on Form 10-K for the fiscal year ended December 31,
2008, 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. The Annual Report on Form 10-K can also be found on the
Companys website at www.nutelecom.net.
SHAREHOLDER
PROPOSALS FOR 2010 ANNUAL MEETING
The Company
intends to hold its 2010 Annual Meeting of Shareholders on or about May 27,
2010, and anticipates mailing its materials on or about April 9, 2010. If a
shareholder wishes to present a proposal for consideration for inclusion in the
proxy materials for the 2010 Annual Meeting of Shareholders, the proposal must
be sent by certified mail, return receipt requested, and must be received at
the principal executive offices of the Company at 27 North Minnesota Street,
New Ulm, Minnesota 56073, Attention Bill Otis, no later than December 12, 2009.
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 the Company of his or her intent to present a proposal for
consideration at the 2010 Annual Meeting of Shareholders after February 23,
2010, the Company, 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 its
proxy materials.
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR
THE ANNUAL MEETING
The
Proxy Statement, Proxy Form and Annual Report on Form 10-K are available at
www.proxyvote.com
.
19
Table of Contents
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 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.
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By Order of the Board of Directors
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/s/ Barbara
A.J. Bornhoft
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Barbara A.J.
Bornhoft
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Corporate Secretary
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New Ulm,
Minnesota
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|
April 13,
2009
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20
Table of Contents
NEW ULM TELECOM, INC.
27 NORTH MINNESOTA STREET
NEW ULM, MN 56073
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit the voting instructions and for electronic delivery of information
up until 10:59 P.M. Central Time the
day before the cut-off date or meeting date. Have the proxy card in hand when
accessing the web site and follow
the instructions
to obtain
the records
and to
create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone
to transmit the voting instructions up until 10:59 P.M. Central Time the day before the cut-off date
or meeting date. Have the proxy card in hand when you call and then
follow the instructions.
VOTE BY MAIL
Mark, sign and date the proxy card and return it in the postage-paid
envelope we have provided
or return it
to New
Ulm Telecom, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
MEETING ATTENDANCE
If it is your intention
to attend the meeting in person, you can vote using an
above option or you can bring the card with you to the meeting.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by New Ulm Telecom, Inc. in
mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M11277
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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NEW ULM TELECOM, INC.
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For
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Withhold
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For All
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To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on
the line below.
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All
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All
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Except
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The Board recommends voting
FOR
proposals 1, 2 and 3.
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Proposal 1 -
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To elect three directors for
a term of three years, each to hold office until the Annual Meeting of
Shareholders to be held in 2012, or until his/her successor is elected and qualified.
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O
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O
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O
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Nominees:
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01)
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Rosemary Dittrich
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02)
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Mary Ellen Domeier
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03)
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Dennis Miller
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For
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Against
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Abstain
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For
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Against
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Abstain
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Proposal 2 - To approve an amendment to Article IV of the Companys
Articles of Incorporation to provide that the number of
directors on the Board shall be no fewer than seven, but no more than nine.
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O
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O
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O
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Proposal 3 - To approve an amendment to Article V of the Companys Articles
of Incorporation regarding director liability to update
the language to refer to current statutes.
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O
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O
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O
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For address changes or comments, please check this box and write them on the back where indicated.
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Please indicate if you plan to attend this meeting.
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O
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O
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Yes
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No
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Please mark, sign and date and return promptly in the enclosed, pre-addressed envelope.
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator,
or other fiduciary, please
give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please
sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com
M11278
NEW ULM TELECOM, INC.
27 North Minnesota Street
New Ulm, MN 56073 (507)
354-4111
The
undersigned hereby appoints Paul Erick, James Jensen, Duane Lambrecht, Perry
Meyer and Gary Nelson, 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 28, 2009 at 10:00 a.m. at
Turner Hall, located at 102 South State 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.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS, WHICH RECOMMENDS VOTING FOR THE ITEMS ON THE REVERSE
SIDE. THIS PROXY WILL BE VOTED AS SPECIFIED. IF NOT SPECIFIED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ITEMS ON THE REVERSE SIDE.
ABSTENTIONS WILL BE COUNTED TOWARDS THE EXISTENCE OF A QUORUM.
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Address
Changes/Comments:
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(If you noted any Address Changes/Comments above, please mark
corresponding box on the reverse side.)
Continued and to be signed on reverse side
Nuvera Communications (QB) (USOTC:NUVR)
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