EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows compensation paid to or earned by the Company’s CEO, Chief Operating Officer (COO) and CFO (collectively “Named Executive Officers”) during 2022. For more information regarding the Company’s salary policies and executive compensation plans, please review the information under the caption “Report of Compensation Committee on Executive Compensation,” on pages 33-34.

Grants of Plan-Based Awards in 2022

On March 31, 2022, the Compensation Committee and Board adopted a plan for annual incentive compensation to the Company’s Named Executive Officers under its 2022 Management Incentive Plan (2022 MIP). Under the 2022 MIP, the Company established goals under which these Named Executive Officers have the opportunity to earn an annual bonus based on (i) 9,000 Fiber-to-the-home (FTTH) passings, (ii) 4,500 new fiber business-to-business connections (conversions and new) and (iii) 1,000 net Internet customer adds. In addition, the Company must obtain a 95% or higher of budget target of operating income before interest, taxes, depreciation and amortization (OIBITDA) for the plan to pay out. 

18

The following table sets forth information relating to potential plan-based awards in 2022 for Named Executive Officers under the 2022 MIP:

(1)    Represents awards that may have been earned during 2022 by the Named Executive Officers under the Company’s 2022 MIP. For actual award amounts earned and paid under all Company plans, please see the Summary Compensation Table columns entitled “Stock Awards” and “Non-Equity Incentive Plan Compensation” and related footnotes above. For explanation of this plan, refer to the description on pages 21‑22 of this proxy statement under the heading “Cash/Common Stock-Based Incentive Compensation.”

The Board retains discretion under the 2022 MIP to make incentive plan cash payments in amounts higher or lower than would otherwise be required under the 2022 MIP. In addition, all payments under the 2022 MIP are subject to claw back to the extent required by federal law.

Employment Agreements

CEO Glenn H. Zerbe: Mr. Zerbe and the Company entered into an employment agreement in August 2019 that provides (i) for an annual base salary and (ii) that Mr. Zerbe would be eligible for incentive compensation under the Nuvera MIP in the form of a cash incentive (Annual Incentive Award) on an annual basis. The base salary for Mr. Zerbe was set at $315,000 for 2023. The target incentive payout for Mr. Zerbe is set at 40% of his base salary. The maximum incentive award payable under the plan is 60.0% of base salary (1.5 times the target). The minimum incentive award payable under the plan is $0.     

Upon a change-in-control transaction, if the employment of Mr. Zerbe is terminated by the Company without cause or by Mr. Zerbe for good reason within 12 months of the change-in-control transaction, Mr. Zerbe would receive a lump sum payment equal to 24 months of base salary at the annualized rate of pay at termination. This amount would have been equal to $600,000 on December 31, 2022, based on the employment agreement that was in effect at that time.

COO Barbara A.J. Bornhoft. Ms. Bornhoft and the Company entered into an employment agreement in July 2006 that provides (i) for an annual base salary and (ii) that Ms. Bornhoft would be eligible for incentive compensation under the Nuvera MIP in the form of an Annual Incentive Award. The base salary for Ms. Bornhoft was set at $235,000 for 2023. The target incentive for Ms. Bornhoft is 30% of her base salary. The maximum incentive award payable under the plan is 45.0% of base salary (1.5 times the target). The minimum incentive award payable under the plan is $0.     

Under the employment agreement, as amended in March 2012, upon termination of Ms. Bornhoft’s employment by the Company, without cause or by Ms. Bornhoft for good reason, Ms. Bornhoft would receive 24 months of base salary at the annualized rate of pay at termination. Upon a change-in-control transaction, if Ms. Bornhoft is terminated by the Company without cause or by Ms. Bornhoft for good reason within 12 months of the change-in-control transaction, Ms. Bornhoft would receive a lump sum payment equal to 24 months of base salary at the annualized rate of pay at termination. This amount would have been equal to $460,000 on December 31, 2022, based on the employment agreement that was in effect at that time.

19

CFO Curtis O. Kawlewski. Mr. Kawlewski and the Company entered into an employment agreement in March 2012 that provides (i) for an annual base salary and (ii) that Mr. Kawlewski would be eligible for incentive compensation under the Nuvera MIP in the form of an Annual Incentive Award. The base salary for Mr. Kawlewski was set at $230,000 for 2022. The target incentive for Mr. Kawlewski is 30% of his base salary. The maximum incentive award payable under the plan is 45.0% of base salary (1.5 times the target). The minimum incentive award payable under the plan is $0.     

Under the employment agreement, as amended in July 2017, upon termination of Mr. Kawlewski’s employment by the Company without cause or by Mr. Kawlewski for good reason, Mr. Kawlewski would receive 24 months of base salary at the annualized rate of pay at termination. Upon a change-in-control transaction, if Mr. Kawlewski is terminated by the Company, without cause or by Mr. Kawlewski for good reason within 12 months of the change-in-control transaction, Mr. Kawlewski would receive a lump sum payment equal to 24 months of base salary at the annualized rate of pay at termination. This amount would have been equal to $460,000 on December 31, 2022, based on the employment agreement that was in effect at that time.

Transition and Retirement Agreement with Bill Otis

On August 27, 2019, the Company entered into a Transition and Retirement Agreement (Transition Agreement) with its then CEO Bill Otis. Under this Transition Agreement, effective September 3, 2019, Mr. Otis resigned as CEO and all other positions within the Company other than as a director. Mr. Otis remained an employee with the title of Special Advisor to the Board and was entitled to all employee benefits until his retirement on December 31, 2019. Mr. Otis’s employment agreement continued to govern his compensation until December 31, 2019, except for:

·         His change in position from CEO and his retirement on December 31, 2019, did not trigger severance under his employment agreement;

·         His transition pay of $310,000 annualized replaced his base salary effective September 3, 2019; and

·         The provisions on confidentiality and indemnification continued until he turned age 65 on April 27, 2022, and his non-compete will extend until 12 months after he attains age 65, or until April 27, 2023.

Effective January 1, 2020, Mr. Otis began receiving compensation under the Transition Agreement under which he was paid as a consultant at an annual rate of $310,000 per year until he turned 65 years old on April 27, 2022. Nuvera also agreed to continue to pay its portion of his health insurance premiums until he attained age 65, at his option, either pre-tax under COBRA continuation for the first 18 months or as a taxable benefit after COBRA ended. 

In addition, under the Transition Agreement, Mr. Otis agreed that until age 65, he would not engage with others to attempt to replace the Board or acquire additional stock in Nuvera, other than to privately advocate to continue serving as a director after his then-current term expired. At the 2022 annual meeting, Mr. Otis was re-elected for a three-year term ending at the 2025 annual meeting.

20

COMPENSATION POLICY

The Compensation Committee, which is comprised solely of Independent Directors, is responsible for evaluating and monitoring the Company’s general compensation policies and compensation plans, as well as the specific compensation levels for Executive Officers, including our CEO. The Compensation Committee reviews and recommends annual base salary levels and annual cash award opportunity levels for each Named Executive Officer to the Board.

General Compensation Philosophy

Under the supervision of the Board, the compensation philosophy is designed to:

·          Attract and retain well-qualified executive talent;
 

·          Tie annual cash incentives to achievement of measurable corporate performance objectives; and
 

·          Align executive incentives with shareholder value creation.   

To achieve these objectives, the Compensation Committee implemented and maintains a compensation plan that ties a significant portion of an executive’s overall compensation to the Company’s financial performance. Overall, the total compensation opportunity is intended to create an executive compensation program that is set competitively compared to similar-sized companies, particularly telecommunication companies. 

Each Executive Officer’s compensation package is generally comprised of three elements:

·       Base salary and fringe benefits, which reflects an individual’s qualifications, scope of responsibilities, experience level, expertise, performance and contribution to the Company’s financial results;

·         Cash/common stock-based incentive compensation tied to measurable targets of the Company’s overall success; and

·         The Company’s qualified 401(k) plan, in which the executives participate.

The Executive Officers were not present during, and did not participate in, deliberations or decisions involving their own compensation during 2022. While Executive Officers do not play a role in setting their own compensation, the Company’s CEO does make recommendations to the Compensation Committee concerning individual performance of other Executive Officers.

Base Salary

The level of base salary is established primarily on the basis of an executive’s qualifications and relevant experience; the scope of his or her responsibilities; the strategic goals that he or she manages; the compensation levels of Executive Officers at similar-sized companies, particularly telecommunications companies; the relationship between the executive’s performance and the Company’s results; and market rates of compensation required to retain qualified management. The Company believes that executive base salaries should be competitive with salaries at similar-sized companies. The Compensation Committee reviews the base salary of each executive annually and makes recommendations to the Board pertaining to any adjustments in base salary that (i) take into account the individual’s performance and any changes in the individual’s responsibility and (ii) are necessary or appropriate to maintain a competitive salary structure.

Cash/Common Stock-Based Incentive Compensation

Substantially all of Nuvera’s employees were eligible to participate in the Company’s 2022 Incentive Plan.

21

The Company engaged an outside consultant in 2005 to advise the Company on its development of Employee Incentive Plans for (i) employees other than Executive Officers and (ii) Executive Officers. Both plans were implemented in 2006. Payments on each plan are based on achievement of objectives of measurable corporate performance, with financial targets. The financial targets include achievement of specified certain operating revenue and OIBITDA criteria based on the Company’s budget. The Board and Compensation Committee, in their sole discretion, may adjust incentive plans for specific periods, including adjustments that may result in non-GAAP financial measures, such as the effect of changes in accounting standards, tax laws and regulations, and extraordinary, non-recurring or unusual events specified by the Board or Compensation Committee, including write-offs or write-downs, capital gains or losses, acquisitions or divestitures, restructurings, and litigation judgments and settlements.

The award formula is weighted according to each of the percentages listed below.

In addition, the Company must obtain a 95% or higher of budget target of OIBITDA for the plan to pay out.    

On May 28, 2015, the shareholders of the Company approved the Company’s 2015 Employee Stock Plan (2015 Plan). The purpose of the 2015 Plan is to enable the Company and its Subsidiaries to attract and retain employees by aligning the financial interests of these individuals with the other shareholders of the Company. The 2015 Plan provides for the issuance of Company Common Stock upon the attainment of objectives under the Company’s 2006 Employee Incentive Plans, as amended. Under the 2015 Plan, each qualified employee of the Company may elect to receive up to 50% of their incentive compensation earned under the 2006 Employee Incentive Plans in Company Common Stock in lieu of cash. The Board subsequently determined that the Company’s Executive Officers would receive 50% of their incentive compensation earned in Company Common Stock in lieu of cash.

Grant of Awards to Named Executive Officers under the 2023 Annual Bonus Plan

On March 23, 2023, the Compensation Committee and Board adopted a plan for annual incentive compensation to the Company’s Named Executive Officers under its 2023 Management Incentive Plan (2023 MIP). Under the 2023 MIP, the Company established goals under which these Named Executive Officers have the opportunity to earn an annual bonus based on (i) 17,000 FTTH passings, (ii) 8,000 new fiber broadband connections (conversions and new) and (iii) 1,300 net Internet customer adds. In addition, the Company must obtain a 95% or higher of budget target of OIBITDA for the plan to pay out. 

The following table sets forth information concerning the threshold, target and maximum aggregate bonus opportunity under the 2023 MIP for the Named Executive Officers:

The Board retains discretion under the 2023 MIP to make incentive plan cash payments in amounts higher or lower than would otherwise be required under the 2023 MIP. In addition, all payments under the 2023 MIP are subject to claw back to the extent required by federal law.

22

Grant of Awards to Named Executive Officers under the 2017 Omnibus Stock Plan (2017 Plan)

In 2022, after considerable study, discussion and interaction with our consultants, the Compensation Committee decided to replace restricted stock units (RSUs) with non-qualified stock Options (NQSOs or Options). The Compensation Committee believes that grants of Options more directly align management long-term equity compensation with increased shareholder value creation at a time when the Company is engaged in significant investment and transformation as part of its long-term strategy. The Compensation Committee also determined to extend the grant of Options to employee directors and senior employee directors as key members of the Company leadership team and contributors of overall success.

The key attributes of these new Options were:

• The exercise price will be the closing price on the last trading day of the month of the Plan Year as determined by the BOD;

• Options will vest one-third each on the day after the closing price is established of the first, second and third year after the grant date as determined by the BOD;

• Each Option will remain outstanding for ten years, subject to early termination, as described below:

• Options will generally be exercisable for 90 days following termination;
• If termination is a result of death or disability, the exercise period will be one year after termination of employment;
• If an employee retires at or after age 65, the Option will remain exercisable for the balance of the original term; and
• If an employee is terminated for cause, the Option will expire immediately.

• Tax withholding may be satisfied by withholding shares out of the amount exercised;

• Payment of the Option price may be made, among other ways, in cash, by delivery of other shares of common Stock, or by a “net exercise” share withholding arrangement; and

• The Option and any shares received, or any gain on the sale of any shares, is subject to the forfeiture and recoupment as described in Section 13.8 of the Plan.

The Company will use a Black-Scholes formula to determine the number of Options to grant to employee recipients including Named Executive Officers and other employees each year. These Black-Scholes inputs will be applied consistently.

2022 NQSO Grants under Long-Term Incentive Plan

On March 31, 2022, the Board and Compensation Committee authorized the issuance of Options under the 2017 Plan. Each Named Executive Officer and a number of other employees received Options. The number of Options awarded was computed as a percentage of the Named Executive Officer’s Base Salary using a Black-Scholes formula. Because this was the first time the Company had granted Options under the 2017 Plan, the Company proceeded deliberately to ensure it correctly determined the inputs used in the Black-Scholes analysis to determine the number of Options to be granted to each individual. On April 4, 2022, the Board and Compensation Committee completed its analysis. The number of Options awarded were computed as a percentage of the Named Executive Officer’s Base Salary using a Black-Scholes formula that used the closing price of Company common stock of $21.70 on March 31, 2022, as well as other applicable Black-Scholes inputs. Since the Board of Directors and Compensation Committee did not take final action until April 11, 2022, and the Options were not actually issued until April 11, 2022, the Board and Compensation Committee decided that April 11, 2022 would be the appropriate date to use for Option pricing and vesting. Accordingly, the Options were dated April 11, 2022, have an exercise price equal to the closing price of Company common stock of $21.20 on April 11, 2022, which was the same price as March 31,2022, and will vest one-third on each of April 11, 2023, 2024 and 2025.

23

The table below sets forth the percentage of the Named Executive Officer’s Base Salary issued in the form of Options, the dollar value of the Options granted and the number of Options granted.

Outstanding Equity Awards as of December 31, 2022

The following table sets forth certain information concerning outstanding Options granted to the Named Executive Officers as of December 31, 2022. There were no outstanding share awards and therefore, these columns are omitted from the table.

The Options had no intrinsic value as of December 31, 2022.

24

Other Compensation Programs

The Company has a qualified 401(k) Retirement Savings Plan (Retirement Plan). The Named Executive Officers, along with other employees who contributed to the Retirement Plan, receive matching contributions of 50% of every dollar, up to 6% of all eligible employee contributions. The Company matches a portion of employee contributions to the Retirement Plan in order to encourage employees to participate in their own retirement savings and to provide another competitive recruiting tool to attract and retain employees.

Elements of Post-Termination Compensation

As noted above under “Employment Agreements,” our Employment Agreements with Mr. Zerbe, Ms. Bornhoft and Mr. Kawlewski contain change-in-control provisions. The Compensation Committee believes that severance and change-in-control arrangements for these Named Executive Officers aid in the recruitment and retention of Executive Officers and provides incentives for Executive Officers to grow our business and maintain focus on creating value for our shareholders. The Compensation Committee believes that providing protection to Executive Officers whose employment maybe terminated in connection with a change-in-control transaction strikes an appropriate balance between the interests of our Executive Officers and the interests of others if a change-in-control transaction occurs.

25