Exhibit 10.8

 

SUREWEST COMMUNICATIONS

 

2000 EQUITY INCENTIVE PLAN

 

 

As Adopted Effective January 31, 2000

 

As Amended Effective May 17, 2002 and February 25, 2004

 

As Amended and Restated December 12, 2008

 

As Amended and Restated November 12, 2010

 

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SUREWEST COMMUNICATIONS

2000 EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

 

ARTICLE 1.           INTRODUCTION

1

 

 

ARTICLE 2.           DEFINITIONS

2

2.1

Account

2

2.2

Affiliate

3

2.3

Alternate Payee

3

2.4

Appendix

3

2.5

Award

4

2.6

Beneficiary

4

2.7

Benefit

5

2.8

Board or Board of Directors

5

2.9

Change in Control

5

2.10

Code or IRC

7

2.11

Committee

7

2.12

Company or SureWest

7

2.13

Company Contributions

8

2.14

Consultant

8

2.15

Deferred or Supplemental Compensation

8

2.16

Disabled or Disability

8

2.17

Earnings

8

2.18

Economic Emergency or Unforeseeable Emergency

9

2.19

Election or Deferral Election

9

2.20

Employee

9

2.21

ERISA

10

2.22

Exchange Act

10

2.23

Exercise Price

10

2.24

Fair Market Value

10

2.25

Investment Vehicle

11

2.26

ISO or Incentive Stock Option

11

2.27

NSO or Nonstatutory Stock Option

11

2.28

Option

11

2.29

Optionee

11

2.30

Outside Director

11

2.31

Parent

12

2.32

Participant

12

2.33

Performance Share

12

2.34

Performance Share Agreement

12

2.35

Plan

12

 

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2.36

QDRO or Qualified Domestic Relations Order

12

2.37

Restricted Share or Restricted Stock

13

2.38

Restricted Stock Agreement

13

2.39

SAR or Stock Appreciation Right

13

2.40

SAR Agreement

13

2.41

Separation from Service

13

2.42

Separation Without Cause

14

2.43

Share

15

2.44

Stock Option Agreement

15

2.45

Stock Unit

16

2.46

Stock Unit Agreement

16

2.47

Subsidiary

16

2.48

Unforeseeable Event

16

 

 

 

ARTICLE 3.           ADMINISTRATION

16

3.1

Committee Composition

16

3.2

Committee Responsibilities

17

3.3

Committee for Non-Officer Grants

17

3.4

Deference to Committee Decisions

17

3.5

Claims and Appeals Procedures

17

 

 

 

ARTICLE 4.           SHARES AVAILABLE FOR GRANTS

18

4.2

Forfeited Shares

18

4.3

Dividend Equivalents

18

 

 

 

ARTICLE 5.           ELIGIBILITY

19

5.1

Incentive Stock Options

19

5.2

Other Grants

19

 

 

ARTICLE 6.           OPTIONS

19

6.1

Stock Option Agreement

19

6.2

Number of Shares

20

6.3

Exercise Price

20

6.4

Exercisability and Term

20

6.5

Effect of Change in Control

21

6.6

Modification or Assumption of Options

21

6.7

Buyout Provisions

21

 

 

 

ARTICLE 7.           PAYMENT FOR OPTION SHARES

21

7.1

General

21

7.2

Surrender of Stock

22

7.3

Exercise/Sale

22

7.5

Promissory Note

22

 

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7.6

Other Forms of Payment

22

 

 

 

ARTICLE 8.           AUTOMATIC GRANTS TO OUTSIDE DIRECTORS

22

 

 

 

ARTICLE 9.           STOCK APPRECIATION RIGHTS

23

9.1

SAR Agreement

23

9.2

Number of Shares

23

9.3

Exercise Price

23

9.4

Exercisability and Term

23

9.5

Effect of Change in Control

24

9.6

Exercise of SARs

24

9.7

Modification or Assumption of SARs

24

 

 

 

ARTICLE 10.         RESTRICTED SHARES

25

10.1

Restricted Stock Agreement

25

10.2

Payment for Awards

25

10.3

Vesting Conditions

25

10.4

Voting and Dividend Rights

25

 

 

 

ARTICLE 11.         STOCK UNITS

26

11.1

Stock Unit Agreement

26

11.2

Payment for Awards

26

11.3

Vesting Conditions

26

11.4

Voting and Dividend Rights

26

11.5

Form and Time of Settlement of Stock Units

27

11.6

Death of Recipient

27

11.7

Creditors’ Rights

27

 

 

 

ARTICLE 12.         PERFORMANCE SHARES

28

12.1

Performance Share Agreement

28

12.2

Grant of Performance Shares

28

12.3

Modification of Grant

29

12.4

Terms of the Grant

29

12.5

Payment of Performance Shares

29

 

 

 

ARTICLE 13.         PROTECTION AGAINST DILUTION

30

13.1

Adjustments

30

13.2

Dissolution or Liquidation

31

13.3

Reorganizations

31

 

 

 

ARTICLE 14.         CONVERSION OF AWARDS TO NONQUALIFIED DEFERRED COMPENSATION,
ETC. SUBJECT TO IRC SECTION 409A

31

14.1

Committee Discretion Regarding Conversion

31

 

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14.2

Timing of Election to Defer Compensation

32

14.3

Modification of Certain Elections

32

14.4

Investment Earnings on Deferred Award

33

14.5.

Anti-Alienation

36

14.6.

Payment of Deferred or Supplemental Compensation

36

14.7

Payment Delays

37

 

 

 

ARTICLE 15.         AWARDS UNDER OTHER PLANS

37

 

 

 

ARTICLE 16.         PAYMENT OF DIRECTOR’S FEES IN SECURITIES

37

16.1

Effective Date

37

16.2

Elections to Receive NSOs, Restricted Shares or Stock Units

37

16.3

Number and Terms of NSOs, Restricted Shares or Stock Units

38

 

 

 

ARTICLE 17.         LIMITATION ON RIGHTS

38

17.1

Retention Rights

38

17.2

Shareholders’ Rights

38

17.3

Regulatory Requirements

38

 

 

 

ARTICLE 18.         WITHHOLDING TAXES

39

18.1

General

39

18.2

Share Withholding

39

18.3

Income and Wage Reporting

39

 

 

ARTICLE 19.         ADDITIONAL AND MISCELLANEOUS PROVISIONS

39

19.1

Term of the Plan

39

19.2

Amendment or Termination

39

19.3

Automatic Termination

40

19.4

Integration

40

19.5

Successor Employer

40

19.6

Beneficiary Designation After Plan Amendment or Termination

40

 

 

 

ARTICLE 20.         LIMITATION ON PARACHUTE PAYMENTS

40

20.1

Scope of Limitation

40

20.2

Basic Rule

41

20.3

Reduction of Payments

41

20.4

Overpayments and Underpayments

42

20.5

Related Corporations

42

20.6

Change in Control Agreements

42

 

 

 

ARTICLE 21.         EXECUTION

43

 

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SUREWEST COMMUNICATIONS

2000 EQUITY INCENTIVE PLAN

 

ARTICLE 1.                  INTRODUCTION.

 

This is an Amendment and Restatement of the Equity Incentive Plan adopted by the
Board of Directors (“Board”) of SureWest Communications (“SureWest” or
“Company”) effective January 31, 2000 (“Plan” or “Equity Incentive Plan”).  The
Board amended the Plan effective December 13, 2001, May 17, 2002, February 25,
2004, and November 12, 2010.  The purpose of the Plan is to promote the
long-term success of the Company and to create shareholder value by (a)
encouraging Employees, Outside Directors and Consultants (sometimes
“Participants”) to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Employees, Outside Directors and Consultants with
exceptional qualifications and ( c) linking Employees, Outside Directors and
Consultants directly to shareholder interests through increased share
ownership.  The Plan seeks to achieve this purpose by providing for Awards in
the form of Restricted Shares, Stock Units, Performance Shares, Options (which
may constitute Incentive Stock Options or Nonstatutory Stock Options) or Stock
Appreciation Rights.  The Plan shall be governed by, and construed in accordance
with, the laws of the State of California (except their choice-of-law
provisions).

 

The principal purpose of this Amendment and Restatement of the Plan in 2008
(sometimes “2008 Restatement”) is to modify Article 14 and other provisions of
the Plan that concern the deferral of compensation.  More specifically, the
Company intends that the deferral provisions of the Plan shall constitute a
nonqualified deferred compensation arrangement (“Arrangement” or “Deferral
Arrangement” that complies with the tax and substantive rules of federal and
California laws, including the Internal Revenue Code of 1986 as amended “IRC” or
“Code”).

 

In particular, the Company intends that the documentation and operation of the
deferral provisions of the Plan shall comply with IRC Section 409A.  More
specifically, the Company intends that any deferral of compensation under this
Plan shall be documented and implemented in accord with relevant pronouncements,
including final Treasury Regulations (“Treas Regs.”) Section 1.409A-1 et seq. 
The Company intends to adhere to IRC Section 409A and Treas. Regs. Section
1.409A-1 et seq. with respect to any Awards which may constitute or involve
nonqualified deferred compensation, e.g. the grant of certain Options at a
discount from Fair Market Value.

 

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The Company believes that, prior to the effective date of the final Treas. Regs.
under IRC Section 409A, any deferral of compensation occurred in a manner that
complies with then-applicable legal guidance.  The Company intends that, to the
extent of relief available from inadvertent noncompliance with IRC Section 409A,
the Company shall correct any deficiencies in the form or operation of the Plan.

 

If any Awards made to (or elections made by) Employees provide for the deferral
of payment to Separation from Service or beyond and if such Awards or elections
create or impose significant administrative burdens, such Awards shall be
treated as part of an arrangement subject to the Employee Retirement Income
Security Act of 1974 as amended (“ERISA”).

 

In light of the foregoing, the Company intends that any deferral of compensation
by Employees under this Plan shall be limited to individuals who are highly
compensated or who are members of a select group of management.  The Company
also intends that such deferrals by Employees shall constitute an unfunded “top
hat” arrangement exempt from the fiduciary, funding, vesting, and plan
termination insurance provisions of Title I and Title IV of ERISA.

 

The Company intends that the deferral of compensation under this Plan may be
elective or nonelective.  In elective deferrals, an Employee, Outside Director
or Consultant determines how much, if any, compensation is subject to deferral
under this Plan.  Additionally, in elective deferrals, the Employee, Outside
Director or Consultant determines the time, manner and form of paying
compensation within the limits imposed by the Plan.  By contrast, in nonelective
deferrals, the Company determines how much, if any, of a Participant’s
compensation is subject to deferral under this Plan.  Similarly, in nonelective
deferrals, the Company establishes criteria for determining when the
Participant’s interest in the compensation no longer shall be subject to a
substantial risk of forfeiture.  Moreover, in nonelective deferrals, the Company
determines the time, manner and form of paying compensation within the limits
imposed by this Plan.

 

ARTICLE 2.                  DEFINITIONS.

 

When used in this Plan document or in an Appendix hereto or in an Award or
Agreement under this Plan, the capitalized terms below have the following
meaning unless the Plan Administrator in its sole discretion determines that the
context in which the term appears requires a different meaning, interpretation
or construction.

 

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2.1          Account

 

“Account” refers to the balance credited to an Employee, Outside Director or
Consultant (“Participant”) under this Plan at any time, as elective or
nonelective deferrals, including amounts credited as hypothetical Company
Contributions for Deferred or Supplemental Compensation and any Earnings
credited on such amounts.  “Account” refers to the bookkeeping entries
established and maintained by the Company for the purpose of recording (i) the
amounts of compensation deferred, (ii) any investment earnings, losses, interest
accruals or administrative expenses with respect to those amounts, and (iii) any
distributions.

 

2.2          Affiliate

 

“Affiliate” refers to any entity other than a Subsidiary, if the Company and/or
one or more Subsidiaries own not less than 50% of such entity.

 

2.3                               Alternate Payee

 

The spouse, former spouse, child or other dependent of a Participant under a
Qualified Domestic Relations Order (QDRO).  Where applicable, the term “spouse”
shall include “registered domestic partner,” and the term “former spouse” shall
include “former registered domestic partner.”

 

2.4                               Appendix

 

One or more appendices to this Plan or to an Award which may fix, establish,
designate or describe any of the following:

 

(A)          The amount of hypothetical Company Contributions, if any, to be
added as elective or nonelective deferrals (sometimes individually or
collectively Supplemental Compensation) to a Participant’s Account,

 

(B)           The amount to be added hypothetically as Earnings on the
Supplemental Compensation in an Account,

 

( C)          The time when forfeitable Supplemental Compensation in an Account
shall vest and when vested Supplemental Compensation in an Account shall be paid
or become payable,

 

(D)          The time when the forfeitable Earnings in an Account shall vest and
when vested Earnings in an Account shall be paid or become payable,

 

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(E)           The form of payment of the vested Supplemental Compensation in an
Account,

 

(F)           The form of payment of the vested Earnings in an Account,

 

(G)           The Beneficiary who is to receive any undistributed balance in the
vested Account in the event of the death of a Participant; and

 

(H)          Investment preferences expressed by a Participant, Beneficiary or
Alternate Payee within the limits established under the Plan.

 

2.5          Award

 

“Award” refers to an Option, Stock Appreciation Right, Restricted Share, Stock
Unit or Performance Share under the Plan.  As a general rule, an Award shall
specify whether an Option, Stock Appreciation Right or other equity-based
compensation under this Plan shall include any feature for the deferral of
compensation under Article 14 or related provisions of the Plan.  If an Award
provides only a right to receive cash or stock immediately upon exercise, the
Award generally shall not be considered to provide a deferral of compensation. 
A right to receive substantially nonvested stock upon exercise of any right
granted in an Award shall not be considered a deferral of compensation. 
Similarly, a right to pay an exercise price with previously acquired shares
shall not be considered a deferral of compensation.  By contrast, certain rights
to dividends or other distributions may involve a deferral of compensation, such
as accumulations that offset an exercise price or that increase an amount
payable to a Participant under a Stock Appreciation Right.  Under all
circumstances, a determination of whether an Award provides for the deferral of
compensation shall be made in a manner consistent with IRC Section 409A and
Treas. Regs. Section 1.409A-1(b)(5).

 

2.6          Beneficiary

 

“Beneficiary” refers to the person or entity selected to receive any portion of
an Account that has not been distributed from the Plan at the time of the death
of a Participant.  The beneficiary or beneficiaries designated in an Appendix or
similar form shall receive the undistributed vested Supplemental Compensation
and Earnings, if any, in a Account in the event of the death of a Participant. 
If more than one designated beneficiary survives, payments shall be made equally
to the surviving beneficiaries, unless otherwise provided in an Appendix or
similar form.  A contingent beneficiary is a beneficiary designated to receive
benefits if the primary beneficiary does not survive the Participant for a
period of at least 30 days.  Any Beneficiary designation shall be in a written
form provided or approved by the Plan Administrator.  If an Employee, Outside

 

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Director or Consultant fails to designate a Beneficiary or no designated
Beneficiary survives, the Plan Administrator may direct payment of Benefits to
the following person or persons related to the Participant in the order given
below:

 

(i)                    spouse or registered domestic partner,

(ii)                   descendants, per stirpes,

(iii)                  parents,

(iv)                  brothers and sisters, or

(v)                   estate of the Participant.

 

2.7          Benefit

 

“Benefit” refers to the amount vested in the Participant under this Plan.  The
Participant’s Benefit shall consist of the putative accumulation of hypothetical
Company Contributions of Supplemental or Deferred Compensation, plus Earnings
(generally measured by the amounts payable under an Investment Vehicle) which
are allocable to the Participant’s Account, less applicable contract surrender
charges, similar fees or other reductions, if any.

 

2.8          Board or Board of Directors

 

“Board” refers to the Company’s Board of Directors, as constituted from time to
time.

 

2.9          Change in Control

 

A “Change in Control” shall be deemed to have occurred if (A) any “person” (as
such term is used in Section 13(d) and 14(d) of the Exchange Act), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing Thirty-five percent (35%) or more of the combined voting power of
the Company’s then outstanding voting securities; (B) there is a merger or
consolidation of the Company in which the Company does not survive as an
independent public company; or ( C) the business or businesses of the Company
for which a Participant’s services are principally performed are disposed of by
the Company pursuant to a partial or complete liquidation of the Company, a sale
of assets (including stock of a Subsidiary) of the Company, or otherwise.  A
transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company’s securities immediately before such transaction.

 

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a.                                      Specifications.

 

For purposes of the deferral of compensation under this Plan, a Change in
Control refers to one or more of the following three events as described in
Treas. Regs. Section 1.409A-3: 1) a change in ownership of the Company; 2) a
change in the effective control of the Company; or 3) a change in the ownership
of a substantial portion of the assets of the Company.  To qualify as a Change
in Control, the event must be objectively determinable.  To the extent required
by IRC Sections 409A or Treas. Regs. Section 1.409A-3, any requirement that any
person, such as a Committee or the full Board of Directors, certify the
occurrence of a Change in Control must be strictly ministerial and not involve
any discretionary authority.  An acceleration of payment will be treated as
occurring because of a Change in Control if the acceleration arises because of
the Company’s exercise of discretion to terminate the Deferral Arrangement and
distribute the Supplemental Compensation and Earnings within 12 months of the
Change in Control.

 

b.                                      Identification of Relevant Entities.

 

To constitute a Change in Control as to the Participant, the Change in Control
must relate to (I) the Company, i.e. the corporation for whom the Participant is
performing services at the time of the Change in Control, (II) another
corporation, if any, that is liable for the payment of the Supplemental
Compensation or Earnings (or all corporations liable for the payment if more
than one corporation is liable) or (III) an entity that controls the Company.

 

c.                                       Change in Ownership.

 

The phrase “change in ownership” shall be construed and interpreted in a manner
consistent with Treas. Regs. Section 1.409A-3.  As a general rule, a change in
the ownership of the Company occurs on the date that any one person, or more
than one person acting as a group, acquires ownership of stock of the Company
that, together with stock held by such person or group, constitutes more than 50
percent of the total fair market value or total voting power of the stock of the
Company.

 

d.                                      Change in Effective Control.

 

A change in the effective control of the Company occurs on the date that a
majority of members of the Company’s Board of Directors is replaced during any
12-month period by Directors whose appointment or election is opposed or not
endorsed by a majority of the members of the Company’s Board prior to the start
of the 12-month period preceding the appointment or election.

 

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e.                                       Change in Ownership of Assets.

 

A change in the ownership of a substantial portion of the Company’s assets
occurs on the date that any one person, or more than one person acting as a
group, acquires in one or more transactions (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value equal
to or more than forty percent (40%) of the total gross fair market value of all
of the assets of the Company immediately prior to such acquisition or
acquisitions.  For this purpose, gross fair market value means the value of the
assets of the Company, or the value of the assets being disposed of, determined
without regard to any liabilities associated with such assets.

 

f.                                          Scope of Acceleration.

 

The acceleration of payment upon a Change in Control shall apply, if at all, to
the entire amount of Supplemental Compensation and Earnings in a Participant’s
Account under the Deferral Arrangement and shall constitute a complete
termination of the Deferral Arrangement with respect to affected Participants.

 

2.10                                                                        Code
or IRC

 

“Code” or “IRC” means the Internal Revenue Code of 1986, as amended.

 

2.11                                                                       
Committee

 

“Committee” means the Compensation Committee of the Board, as described in
Article 3.  In discussing the administration of the Plan, references herein to
the Company or to the Plan Administrator shall be deemed to be references to the
Committee.

 

2.12                                                                       
Company or SureWest

 

“Company” or “SureWest” means SureWest Communications, a California corporation.

 

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2.13                                                                       
Company Contributions

 

“Company Contributions” refers to amounts (not otherwise payable to or for a
Participant in any year) which are credited hypothetically to the Participant’s
Account pursuant to the Deferral Arrangement under this Plan.

 

2.14                                                                       
Consultant

 

“Consultant” means a consultant or adviser who provides bona fide services to
the Company, a Parent, a Subsidiary or an Affiliate as an independent
contractor.  Service as a Consultant shall be considered employment for all
purposes of the Plan, except as provided in Section 5.1, regarding Incentive
Stock Options.

 

2.15                                                                       
Deferred or Supplemental Compensation

 

“Deferred Compensation” or “Supplemental Compensation” refers to amounts the
payment of which is postponed pursuant to the Deferral Arrangement under this
Plan.

 

2.16                                                                       
Disabled or Disability

 

The Participant is considered “Disabled” or afflicted with a “Disability” if the
Participant (I) is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months; or (II) by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, is
receiving income replacement benefits for a period of not less than three months
under an accident and health plan covering employees of the Company.

 

2.17                                                                       
Earnings

 

“Earnings” refers to putative amounts which increase or decrease an
Participant’s Account in accord with investment income, gains or losses
attributable to hypothetical Company Contributions placed into an Investment
Vehicle.  For any period in which the Company does not invest hypothetical
Company Contributions in an Investment Vehicle, Earnings shall be computed at a
rate of five percent (5%) compounded annually.

 

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2.18                        Economic Emergency or Unforeseeable Emergency

 

“Economic Emergency” or “Unforeseeable Emergency” refers to an unforeseeable
event causing severe financial hardship to the Participant and resulting from an
illness or accident involving the Participant or Beneficiary, the Participant’s
or Beneficiary’s spouse or registered domestic partner, or a dependent, as
defined in Code Section 152(a), of the Participant or Beneficiary; loss of the
Participant’s or Beneficiary’s property due to casualty (including the need to
rebuild a home following damage to a home not sufficiently covered by insurance,
for example, as a result of a natural disaster); imminent foreclosure of or
eviction from the Participant’s or Beneficiary’s primary residence; funeral
expenses of a spouse, domestic partner or dependent; or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the Participant’s or Beneficiary’s control.  An event will not constitute
an Unforeseeable Emergency to the extent costs, losses or liabilities may be
relieved through (A) reimbursement or compensation from insurance or otherwise,
(B) liquidation of assets in a manner that does not cause severe financial
hardship or ( C) cessation of deferrals under the Arrangement.

 

2.19                        Election or Deferral Election

 

“Election” or “Deferral Election” refers to the choice to postpone payment of
Company Contributions or other components of Supplemental Compensation.  The
elective deferral component of this Plan provides the Participant with the
opportunity to make elections with respect to the amount, time, manner, form or
medium of payment of Supplemental Compensation.  With respect to an
Participant’s first year of eligibility to participate in the Deferral
Arrangement, to the extent required by law, the Participant shall specify
irrevocably all such items no later than 30 days after the Participant first
becomes eligible to participate.  With respect to each subsequent year of
participation, the Participant shall specify such items irrevocably no later
than the time the Participant begins to acquire a legally binding right to the
Company Contributions or other elements of Supplemental Compensation with
respect to such year, i.e. generally prior to the start of the year in which the
Participant will render the services for which he or she will earn an Award or
other Supplemental Compensation.  Nothing herein prohibits the Participant after
an irrevocable election from 1) further postponing scheduled payments to the
extent permitted by IRC Section 409A or Treas. Regs. Section 1.409A-1 et seq. or
2) expressing certain preferences such as instructions with respect to the
investment of amounts set aside by the Company in the Participant’s Account.

 

2.20                        Employee

 

“Employee” means a common-law employee of the

 

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Company, a Parent, a Subsidiary or an Affiliate.  An individual is a common-law
employee for periods of time during which the Company, a Parent, a Subsidiary or
an Affiliate has an obligation to withhold and actually withholds income and
employment taxes through its ordinary payroll system.

 

2.21                        ERISA

 

“ERISA” refers to the Employee Retirement Income Security Act of 1974, as
amended, 29 U.S. Code Section 1001 et seq.

 

2.22                        Exchange Act

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

2.23                        Exercise Price

 

“Exercise Price,” in the case of an Option, means the amount for which one Share
may be purchased upon exercise of such Option, as specified in the applicable
Stock Option Agreement.  “Exercise Price,” in the case of an SAR, means an
amount, as specified in the applicable SAR Agreement, which is subtracted from
the Fair Market Value of one Share in determining the amount payable upon
exercise of such SAR.

 

2.24                        Fair Market Value

 

“Fair Market Value” means the market price of Shares, determined by the
Committee in good faith on such basis as it deems appropriate and consistent
with relevant laws, including IRC Section 409A and Treas. Regs. Section 1.409A-1
et seq.  Fair Market Value may mean (i) if the Company’s common stock is listed
on a securities exchange or is traded over the NASDAQ National Market System,
the closing sales price of one Share on such exchange or other such system on an
applicable date or, in the absence of reported sales on such date, the closing
sales price on the immediately preceding date on which sales were reported, or
(ii) if the Company’s common stock is not listed on a securities exchange or
traded over the NASDAQ National Market System, the mean between the bid and
offered prices of the Share as quoted by the National Association of Securities
Dealer through NASDAQ, provided, that if the Committee determines that the fair
market value is not properly reflected by such NASDAQ quotations, the Fair
Market Value will mean the fair market value as determined by such other method
as the Committee determines in good faith to

 

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be reasonable.  Such determination shall be conclusive and binding on all
persons.

 

2.25                        Investment Vehicle

 

“Investment Vehicle” refers to one or more individual or group investment
vehicles, including mutual funds, fixed, variable or hybrid annuity contracts,
insurance contracts or securities, if any, by which the Company may measure,
anticipate and provide for its obligations to a Participant, Beneficiary or
Alternate Payee pursuant to the Deferral Arrangement under this Plan.  The
Company shall be the owner of any Investment Vehicle.  Although the Company may
allow the Participant to measure the value of his or her Account by reference to
the value of the Investment Vehicle, the Participant’s only interest in the
Investment Vehicle or in the assets underlying the Investment Vehicle shall be
as a general unsecured creditor of the Company.

 

2.26                        ISO or Incentive Stock Option

 

“ISO” or “Incentive Stock Option” refers to a call option (i.e. an option to
purchase shares of Company stock) described in Section 422(b) of the Code.

 

2.27                        NSO or Nonstatutory Stock Option

 

“NSO” or “Nonstatutory Stock Option” refers to a call option (i.e. an option to
purchase shares of Company stock) that is not described in Sections 422 or 423
of the Code.

 

2.28                        Option

 

“Option” means an ISO or NSO granted under the Plan and entitling the holder to
purchase shares of Company stock.

 

2.29                        Optionee

 

“Optionee” means an individual or estate who holds an Option or SAR.

 

2.30                        Outside Director

 

“Outside Director” means a member of the Board who is not an Employee.  Service
as an Outside Director shall be considered employment for all purposes of the
Plan, except as provided in Section 5.1, regarding Incentive Stock Options.

 

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2.31                        Parent

 

“Parent” means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.  A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.

 

2.32                        Participant

 

“Participant” means an individual or estate who holds an Award or who defers
payment of all or part of the compensation in an Award under the Plan.

 

2.33                        Performance Share

 

“Performance Share” means an Award to a Participant under Article 12 of the
Plan.

 

2.34                        Performance Share Agreement

 

“Performance Share Agreement” means the agreement between the Company and a
Participant which contains the terms, conditions and restrictions pertaining to
such Performance Share.

 

2.35                        Plan

 

“Plan” means this SureWest Communications 2000 Equity Incentive Plan, as
modified from time to time.

 

2.36                        QDRO or Qualified Domestic Relations Order

 

“QDRO” or “Qualified Domestic Relations Order” refers to Domestic Relations
Order which creates or recognizes the existence of an Alternate Payee’s right
to, or assigns to an Alternate Payee the right to, receive all or a portion of
the vested or unvested compensation under this Plan.  The term Domestic
Relations Order or DRO means any judgment, decree, or order (including approval
of a property settlement agreement), which (I) relates to the

 

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provision of child support, alimony, or marital property rights to an Alternate
Payee, (II) is made pursuant to a State domestic relations law (including a
community property law), (III) except as required by law, makes the Alternate
Payee responsible for the payment of income taxes on amounts the Alternate Payee
receives, (IV) satisfies any applicable requirements of ERISA or the IRC and (V)
absent fraud or concealment, issues prior to the death of the Participant --
unless later issuance is permitted or required by law.

 

2.37                        Restricted Share or Restricted Stock

 

“Restricted Share” or “Restricted Stock” means a Share awarded under the Plan.

 

2.38                        Restricted Stock Agreement

 

“Restricted Stock Agreement” means the agreement between the Company and the
recipient of a Restricted Share which contains the terms, conditions and
restrictions pertaining to such Restricted Share.

 

2.39                        SAR or Stock Appreciation Right

 

“SAR” or “Stock Appreciation Right” refers to an item of compensation granted
under the Plan the value of which increases with gains in the Fair Market Value
or price of shares of Company stock.

 

2.40                        SAR Agreement

 

“SAR Agreement” means the agreement between the Company and an Optionee which
contains the terms, conditions and restrictions pertaining to his or her SAR.

 

2.41                        Separation from Service

 

“Separation from Service,” “Termination of Employment” or “Severance from
Employment” refers to the complete cessation of a Participant’s service with the
Company as contemplated by IRC Section 409A(a)(2) and Treas. Regs. Section
1.409A-1 et seq.  As a general rule, an Employee separates from service with the
Company if the Employee dies, retires, or otherwise has a termination of
employment with the Company.  For purposes of the payment and election
provisions of this Plan, an employment relationship is treated as continuing
while the Participant is on military leave, sick leave, or other bona fide leave
of absence if the period of such leave does not exceed six months.  If the leave
is longer than

 

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six months, the employment relationship generally is viewed as continuing while
the Participant retains a right to reemployment with the Company.

 

A Participant who is an Outside Director or Consultant is considered to have a
Separation from Service with the Company upon the expiration of the contract (or
in the case of more than one contract, all contracts) under which services are
performed for the Company if the expiration constitutes a good-faith and
complete termination of the contractual relationship.  As a general rule, if
compensation is payable upon the Separation of Service of a Participant who is
an Outside Director or Consultant, such compensation shall be paid no earlier
than 12 months after the day on which the contract expires under which the
Outside Director or Consultant performs services for the Company (or, in the
case of more than one contract, all such contracts expire); additionally, such
compensation shall not be paid to the Outside Director or Consultant if, after
the expiration of the contract (or contracts) and before the date scheduled for
payment under the preceding clause, the Outside Director or Consultant performs
services for the Company in any capacity.

 

2.42                        Separation Without Cause

 

An involuntary Separation from Service caused by the actual or constructive
termination of an Employee’s employment by the Company for reasons other than
the Employee’s conviction for embezzlement, vandalism or other misdemeanor or
felony against the Company.  An actual separation may occur by discharge,
lay-off, workforce reduction or other action initiated by the Company.  A
constructive separation may occur upon a significant adverse change (a) which
the Employee, reasonably and in good faith, perceives in his situation within
the Company, even if such adverse change does not constitute a constructive
termination of employment within the meaning of federal or California labor or
employment laws, and (b) which is attributable to circumstances such as (1) a
substantial change in the organization, operation, leadership or governance of
the Company, even if not constituting a Change in Control as defined above, (2)
termination or alteration of a sensitive primary reporting relationship
involving the Employee or (3) a material modification of the duties,
Compensation, terms or conditions of the Employee’s employment.

 

A Separation Without Cause includes a Separation from Service for good reason,
within the meaning of final Treas. Regs. Section 1.409A-1(n)(2).  A Separation
from Service for good reason may occur under limited bona fide conditions or
actions which are initiated by the Company and which result in a material
negative change to the Employee’s employment or other service relationship. 
Such conditions or actions include but are not limited to changes in the
Employee’s duties to be performed, the conditions under which

 

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such duties are to be performed or the compensation to be received from
performing such services.

 

Without limiting the foregoing, a voluntary Separation from Service shall be
treated as a Separation Without Cause and therefore an involuntary Separation
within the meaning of Treas. Regs. Section 1.409A-1(n)(1) under the following
circumstances.  The voluntary Separation occurs within two years following the
initial existence of one or more of the following conditions arising without the
advance written consent of the Employee: 1) a material diminution of the
Employee’s base compensation, 2) a material diminution of the Employee’s
authority, duties or responsibilities, 3) a material diminution in the
authority, duties or responsibilities of the person or persons to whom the
Employee reports, including a change resulting in the Employee’s no longer
reporting directly to the Board or similar governing body of the Company, 4) a
material diminution in the budget over which the Employee retains authority, 5)
a material change in the geographic location at which the Employee must perform
services, and 6) any actions or inactions that constitute a material breach of
the agreement under which the Employee renders services to the Company. 
Additionally, the amount, time and form of payment upon a voluntary Separation
Without Cause should be substantially identical to the amount, time and form of
payment upon an actual involuntary Separation Without Cause, to the extent such
a right exists.  Moreover, the Employee should provide notice to the Company of
the action or inaction of the Company that has resulted (or is likely to result)
in a material negative change in the circumstances under which the Employee
renders service to the Company.  The Employee should provide such notice within
90 days after the Employee determines that the action or inaction of the Company
has resulted (or is likely to result) in a material negative change in the
circumstances under which the Employee renders service to the Company.  The
notice should give the Company 30 days within which to remedy the situation(s)
to which the Employee refers.

 

2.43                        Share

 

“Share” means one share of the common stock of the Company.

 

2.44                        Stock Option Agreement

 

“Stock Option Agreement” means the agreement between the Company and an Optionee
that contains the terms, conditions and restrictions pertaining to his or her
Option.

 

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2.45        Stock Unit

 

“Stock Unit” means a bookkeeping entry representing the equivalent of one Share,
as awarded under the Plan.  A Stock Unit includes a Restricted Stock Unit, which
is a Stock Unit issued or granted under terms and conditions specified by the
Committee in a Stock Unit Agreement.

 

2.46        Stock Unit Agreement

 

“Stock Unit Agreement” means the agreement between the Company and the recipient
of a Stock Unit which contains the terms, conditions and restrictions pertaining
to such Stock Unit.

 

2.47        Subsidiary

 

“Subsidiary” means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.  A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

 

2.48        Unforeseeable Event

 

With respect to a delay in making any payment when due under this Plan or under
applicable law, as a general rule, the term Unforeseeable Event refers to
conditions described in final Treas. Regs. Section 1.409A-1(b)(4), including a
threat or jeopardy to the solvency of the Company or its ability to continue as
a going concern (or a threat or jeopardy to the solvency of a related entity
responsible for the payment or such related entity’s ability to continue as a
going concern) and also refers to administrative impracticability of payment if,
as of the date upon which the Participant obtains a legally binding right to the
compensation, the threat, jeopardy, insolvency or impracticability was
unforeseeable and if actual payment occurs as soon as administratively
practicable.

 

ARTICLE 3.                          ADMINISTRATION.

 

3.1          Committee Composition .  The Plan shall be administered by the
Committee.  The Committee shall consist exclusively of two or more directors of

 

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the Company, who shall be appointed by the Board.  In addition, the composition
of the Committee shall satisfy:

 

(a)           Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and

 

(b)           Such requirements as the Internal Revenue Service may establish
for Outside Directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code.

 

3.2          Committee Responsibilities.  The Committee shall (a) select the
Employees, Outside Directors and Consultants who are to receive Awards under the
Plan, (b) determine the type, number, vesting requirements and other features
and conditions of such Awards, ( c) interpret the Plan and (d) make all other
decisions relating to the operation of the Plan.  The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan.  The
Committee’s determinations under the Plan shall be final and binding on all
persons.

 

3.3          Committee for Non-Officer Grants.  The Board may also appoint a
secondary committee of the Board, which shall be composed of two or more
directors of the Company who need not satisfy the requirements of Section 3.1. 
Such secondary committee may administer the Plan with respect to Employees and
Consultants who are not considered officers or directors of the Company under
Section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and may determine all features and conditions of such
Awards.  Within the limitations of this Section 3.3, any reference in the Plan
to the Committee shall include such secondary committee.

 

3.4          Deference to Committee Decisions.  The Plan Administrator has
discretionary authority with respect to the construction and interpretation of
the Plan.  In any dispute between or among the Committee, Board, Company, Plan
Administrator, Participant, Beneficiary or Alternate Payee, the court,
arbitrator or other decision-maker with authority to resolve the dispute shall
defer to the Plan Administrator’s construction or interpretation of the Plan or
any Appendix, Award or Agreement hereunder. Similarly, the decision-maker shall
defer to any findings of fact by the Plan Administrator or other determinations
with respect to the Participant’s, Beneficiary’s or Alternate Payee’s
entitlement to Benefits hereunder.

 

3.5          Claims and Appeals Procedures.  If any Awards made

 

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to (or elections made by) Employees provide for the deferral of payment to
Separation from Service or beyond and if such Awards or elections create or
impose significant administrative burdens, such Awards shall be treated as part
of an arrangement subject to ERISA; and the Committee shall establish
administrative claims and appeal procedures consistent with ERISA Section 503
that a Participant, Beneficiary or Alternate Payee must exhaust before
initiating any civil action against the Company or related party with respect to
the Plan.  The Committee shall provide a copy of such procedures to any Employee
who receives an Award or makes an election subject to ERISA.

 

ARTICLE 4.                          SHARES AVAILABLE FOR GRANTS.

 

4.1          Basic Limitation.  Shares issued pursuant to the Plan shall be
authorized but unissued shares.  The aggregate number of Options, SARs, Stock
Units, Restricted Shares and Performance Shares awarded under the Plan shall not
exceed Nine Hundred Fifty Thousand (950,000) Shares until December 31, 2002, and
commencing with the first business day of each calendar year thereafter
beginning with January 2, 2003, such maximum number of Shares shall be increased
by a number equal to one percent (1%) of the number of Shares outstanding as of
December 31 of the immediately preceding calendar year.  The limitation of this
Section 4.1 shall be subject to adjustment pursuant to Article 13.

 

4.2          Forfeited Shares.  If Restricted Shares, Performance Shares or
Shares issued upon the exercise of Options are forfeited, then, to the extent if
any permitted by law, such Shares shall again become available for Awards under
the Plan.  If Stock Units, Options or SARs are forfeited or terminate for any
other reason before being exercised, then to the extent if any permitted by law,
the corresponding Shares shall again become available for Awards under the
Plan.  If Stock Units are settled, then only the number of Shares (if any)
actually issued in settlement of such Stock Units shall reduce the number
available under Section 4.1 and the balance shall again become available for
Awards under the Plan.  If SARs are exercised, then only the number of Shares
(if any) actually issued in settlement of such SARs shall reduce the number
available under Section 4.1 and the balance shall again become available for
Awards under the Plan.  Despite the foregoing, the aggregate number of Shares
that may be issued under the Plan upon the exercise of ISOs shall not be
increased when Restricted Shares, Performance Shares or other Shares are
forfeited.

 

4.3          Dividend Equivalents.  Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Restricted Shares,
Performance Shares, Stock Units, Options or SARs available for Awards, whether
or not such dividend equivalents are converted into Stock Units.  As a

 

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general rule, an Award shall specify rights to dividends or other distributions
in any item of compensation granted under this Plan.

 

Awards made between December 31, 2004 and January 1, 2009 reflect good-faith
efforts to comply with U.S. Treasury pronouncements under IRC Section 409A. An
Award made after December 31, 2008 shall specify whether the dividends or other
distributions constitute a feature for the deferral of compensation.  For
example, dividends or other distributions that offset an exercise price or that
increase an amount payable under a Stock Appreciation Right may be considered a
deferral of compensation.  A determination of whether dividend or distribution
rights under an Award provide for the deferral of compensation shall be made in
a manner consistent with IRC Section 409A and Treas. Regs.
Section 1.409A-1(b)(5) and shall be treated in a manner that complies with such
laws.

 

ARTICLE 5.                          ELIGIBILITY.

 

5.1          Incentive Stock Options.  Only Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs.  In addition, an Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any
of its Parents or Subsidiaries shall not be eligible for the grant of an ISO
unless the requirements set forth in Section 422(c)(5) of the Code are
satisfied.

 

5.2          Other Grants.  Only Employees, Outside Directors and Consultants
shall be eligible for the grant of Restricted Shares, Performance Shares, Stock
Units, NSOs or SARs.

 

ARTICLE 6.                          OPTIONS.

 

6.1          Stock Option Agreement.  Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company.  Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan.  The
Stock Option Agreement shall specify whether the Option is an ISO or an NSO. 
The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical.  Options may be granted in consideration of a
reduction in the Optionee’s other compensation.  A Stock Option Agreement may
provide that a new Option will be granted automatically to the Optionee when he
or she exercises a prior Option and pays the Exercise Price in the form
described in Section 7.2.

 

Option Agreements made between December 31, 2004 and January 1, 2009 reflect
good-faith efforts to comply with U.S. Treasury pronouncements

 

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under IRC Section 409A. Option Agreements entered after December 31, 2008 shall
identify any feature of the Option or Agreement constituting deferred
compensation subject to IRC Section 409A.  Additionally, any Option or Agreement
made after December 31, 2008 shall comply with IRC Section 409A and Treas. Regs.
Section 1.409A-1 et seq.

 

6.2          Number of Shares.  Each Stock Option Agreement shall specify the
number of Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 13.  Options granted to any Optionee in a
single fiscal year of the Company shall not cover more than 200,000 Shares,
except that Options granted to a new Employee in the fiscal year of the Company
in which his or her service as an Employee first commences shall not cover more
than 25,000 Shares.  The limitations set forth in the preceding sentence shall
be subject to adjustment in accordance with Article 13.

 

6.3          Exercise Price.  Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a  Share on the date of grant and
the Exercise Price under an NSO shall in no event be less than 85% of the Fair
Market Value of a  Share on the date of grant.  In the case of an NSO, a Stock
Option Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the NSO is outstanding.

 

6.4          Exercisability and Term.   Each Stock Option Agreement shall
specify the date or event when all or any installment of the Option is to become
exercisable, except that subject to and except for accelerated exercisability
set forth below, in no event shall an option be exercisable by an Executive
Officer of the Company, as defined by Rule 3b-7 of the Securities Exchange Act,
until 36 months after the date of grant of such Option.  The Stock Option
Agreement shall also specify the term of the Option; provided that the term of
an ISO shall in no event exceed 10 years from the date of grant.  A Stock Option
Agreement may provide for accelerated exercisability in the event of the
Optionee’s death, disability or retirement or other events and may provide for
expiration prior to the end of the term in the event of the Optionee’s service
or for any other reason.  Options may be awarded in combination with SAR’s, and
such an Award may provide that the Options will not be exercisable unless the
SAR’s are forfeited. Notwithstanding satisfaction of any stock ownership
guideline or requirements established by the Company, 50% of any shares obtained
by or through the exercise of any Option by an Executive Officer, (not to
include any options surrendered to pay or satisfy any local, state, or federal
income tax obligations arising out of the exercise of any options granted under
the Plan) must be held and retained by the Executive Officer for a period of one
year after the date of exercise, and, to implement and enforce this provision,
the Company shall enter a

 

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legend to that effect on 50% of any shares (net of shares used to satisfy tax
obligations) issued to any Executive Officer of the Company.

 

6.5          Effect of Change in Control.  The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company, subject to the
limitations that, in the case of an ISO, the acceleration of exercisability
shall not occur without the Optionee’s written consent.

 

6.6          Modification or Assumption of Options.  Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price.  The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.

 

Any Option granted or modification or assumption between December 31, 2004 and
January 1, 2009 reflect good-faith efforts to comply with U.S. Treasury
pronouncements under IRC Section 409A.  An Option granted after December 31,
2008 shall indicate whether the Option or any modification or assumption to
which the Option is subject constitutes a deferred compensation feature of the
Award.  Additionally, any Option, modification or assumption made after
December 31, 2008 shall comply with IRC Section 409A and Treas. Regs.
Section 1.409A-1 et seq.

 

6.7          Buyout Provisions.  In a manner consistent with IRC Section 409A
and Treas. Regs. Section 1.409A-1 et seq., the Committee may (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.

 

ARTICLE 7.                          PAYMENT FOR OPTION SHARES.

 

7.1          General Rule.  The entire Exercise Price of Shares issued upon
exercise of Options shall be payable in cash or cash equivalents at the time
when such  Shares are purchased, except as follows:

 

(a)           In the case of an ISO granted under the Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock

 

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Option Agreement.  The Stock Option Agreement may specify that payment may be
made in any form(s) described in this Article 7.

 

(b)           In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 7.

 

7.2          Surrender of Stock.  To the extent that this Section 7.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Shares that are already owned by the
Optionee.  Such Shares shall be valued at their Fair Market Value on the date
when the new Shares are purchased under the Plan.  The Optionee shall not
surrender, or attest to the ownership of, Shares in payment of the Exercise
Price if such action would cause the Company to recognize compensation expense
(or additional compensation expense) with respect to the Option for financial
reporting purposes.

 

7.3          Exercise/Sale.  To the extent that this Section 7.3 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the Shares
being purchased under the Plan and to deliver all or part of the sales proceeds
to the Company.

 

7.4          Exercise/Pledge.  To the extent that this Section 7.4 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) an irrevocable
direction to pledge all or part of the Shares being purchased under the Plan to
a securities broker or lender approved by the Company, as security for a loan,
and to deliver all or part of the loan proceeds to the Company.

 

7.5          Promissory Note.  To the extent that this Section 7.5 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) a full-recourse
promissory note.

 

7.6          Other Forms of Payment.  To the extent that this Section 7.6 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations
and rules.

 

ARTICLE 8.                                                                            
AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.

 

[Deleted]

 

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ARTICLE 9.                             STOCK APPRECIATION RIGHTS.

 

9.1          SAR Agreement.  Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company.  Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan.  The provisions of the
various SAR Agreements entered into under the Plan need not be identical.  SARs
may be granted in consideration of a reduction in the Optionee’s other
compensation.

 

SAR Agreements made between December 31, 2004 and January 1, 2009 reflect
good-faith efforts to comply with U.S. Treasury pronouncements under IRC
Section 409A.  SAR Agreements entered after December 31, 2008 shall identify any
feature of the SAR or Agreement which constitutes deferred compensation subject
to IRC Section 409A.  Additionally, any SAR or Agreement made after December 31,
2008 shall comply with IRC Section 409A and Treas. Regs. Section 1.409A-1 et
seq.

 

9.2          Number of Shares.  Each SAR Agreement shall specify the number of
Shares to which the SAR pertains and shall provide for the adjustment of such
number in accordance with Article 13.  SARs granted to any Optionee in a single
calendar year shall in no event pertain to more than 200,000 Shares, except that
SARs granted to a new Employee in the fiscal year of the Company in which his or
her service as an Employee first commences shall not pertain to more than 25,000
Shares. The limitations set forth in the preceding sentence shall be subject to
adjustment in accordance with Article 13.

 

9.3          Exercise Price.  Each SAR Agreement shall specify the Exercise
Price.  An SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.

 

9.4          Exercisability and Term.   Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable, except
that subject to and except for accelerated exercisability set forth below, in no
event shall a SAR be exercisable by an Executive Officer of the Company, as
defined by Rule 3b-7 of the Securities  Exchange Act, until 36 months after the
date of grant of such SAR. The SAR Agreement shall also specify the term of the
SAR. A SAR Agreement may provide for accelerated exercisability in the event of
the Optionee’s death, disability or retirement or other events and may provide
for expiration prior to the end of its term in the event of termination of
service or any other reason.  SAR’s may be awarded in combination with Options,
and such an Award may provide that the SAR’s will not be exercisable unless the
related

 

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Options are forfeited. A SAR may be included in an ISO only at the time of grant
but may be included in an NSO at the time of grant or thereafter.  A SAR granted
under the Plan may provide that it will be exercisable only in the event of a
Change in Control.

 

9.5          Effect of Change in Control.  The Committee may determine, at the
time of granting an SAR or thereafter, that such SAR shall become fully
exercisable as to all Shares subject to such SAR in the event that a Change in
Control occurs with respect to the Company.

 

9.6          Exercise of SARs.  Upon exercise of an SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Shares, (b) cash or ( c) a combination of Shares
and cash, as the Committee shall determine.  The amount of cash and/or the Fair
Market Value of Shares received upon exercise of SARs shall, in the aggregate,
be equal to the amount by which the Fair Market Value (on the date of surrender)
of the Shares subject to the SARs exceeds the Exercise Price.  If, on the date
when an SAR expires, the Exercise Price under such SAR is less than the Fair
Market Value on such date but any portion of such SAR has not been exercised or
surrendered, then such SAR shall automatically be deemed to be exercised as of
such date with respect to such portion.

 

9.7          Modification or Assumption of SARs.  Within the limitations of the
Plan and the terms of a specific Award, the Committee may modify, extend or
assume outstanding SARs or may accept the cancellation of outstanding SARs
(whether granted by the Company or by another issuer) in return for the grant of
new SARs for the same or a different number of shares and at the same or a
different exercise price.  The foregoing notwithstanding, no modification of an
SAR shall, without the consent of the Optionee, alter or impair his or her
rights or obligations under such SAR.

 

Any Award, modification or assumption made between December 31, 2004 and
January 1, 2009 reflect good-faith efforts to comply with U.S. Treasury
pronouncements under IRC Section 409A.  An Award issued after December 31, 2008
shall indicate whether the modification or assumption to which an SAR is subject
constitutes a deferred compensation feature of the Award.  Additionally, any
Award, modification or assumption made after December 31, 2008 shall comply with
IRC Section 409A and Treas. Regs. Section 1.409A-1 et seq.

 

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ARTICLE 10.                                                                     
RESTRICTED SHARES.

 

10.1        Restricted Stock Agreement.  Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company.  Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan.  The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.

 

Restricted Stock Agreements entered after December 31, 2008 shall identify any
feature of the Restrict Stock or Agreement constituting deferred compensation
subject to IRC Section 409A.  Additionally, any Restricted Stock or Agreement
made after December 31, 2008 shall comply with IRC Section 409A and Treas. Regs.
Section 1.409A-1 et seq.

 

10.2        Payment for Awards.  Restricted Shares may be sold or awarded under
the Plan for such consideration as the Committee may determine, including
(without limitation) cash, cash equivalents, full-recourse promissory notes,
past services and future services.

 

10.3        Vesting Conditions.  Each Award of Restricted Shares may or may not
be subject to vesting.  Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement.  A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant’s death, disability or retirement or other events permitted by
law.  The Committee may determine, at the time of granting Restricted Shares or
thereafter, that all or part of such Restricted Shares shall become vested in
the event that a Change in Control occurs with respect to the Company.

 

10.4        Voting and Dividend Rights.  The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Company’s other shareholders.  A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares.  Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.

 

Restricted Share Awards made between December 31, 2004 and January 1, 2009
reflect good-faith efforts to comply with U.S. Treasury pronouncements under IRC
Section 409A.  An Award made after December 31, 2008 shall specify whether the
dividends or other distributions thereunder constitute a feature for the
deferral of compensation.  A determination of whether dividend or distribution
rights under an Award provide for the deferral of compensation shall be made in
a manner consistent with IRC Section 409A and Treas. Regs.
Section 1.409A-1(b)(5) and shall be treated in a manner that complies with such
laws.

 

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ARTICLE 11.                                                                     
STOCK UNITS.

 

11.1                        Stock Unit Agreement.  Each grant of Stock Units
under the Plan shall be evidenced by a Stock Unit Agreement between the
recipient and the Company.  Such Stock Units shall be subject to all applicable
terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan.  The provisions of the various Stock Unit Agreements
entered into under the Plan need not be identical.  Stock Units may be granted
in consideration of a reduction in the recipient’s other compensation.

 

Stock Unit Agreements made between December 31, 2004 and January 1, 2009 reflect
good-faith efforts to comply with U.S. Treasury pronouncements under IRC
Section 409A. Stock Unit Agreements entered after December 31, 2008 shall
identify any feature of the Stock Unit or Agreement constituting deferred
compensation subject to IRC Section 409A.  Additionally, any Stock Unit or
Agreement made after December 31, 2008 shall comply with IRC Section 409A and
Treas. Regs. Section 1.409A-1 et seq.

 

11.2                        Payment for Awards.  To the extent that an Award is
granted in the form of Stock Units, no cash consideration shall be required of
the Award recipients.

 

11.3                        Vesting Conditions.  Each Award of Stock Units may
or may not be subject to vesting.  Vesting shall occur, in full or in
installments, upon satisfaction of the conditions specified in the Stock Unit
Agreement.  A Stock Unit Agreement may provide for accelerated vesting in the
event of the Participant’s death, disability or retirement or other events.  The
Committee may determine, at the time of granting Stock Units or thereafter, that
all or part of such Stock Units shall become vested in the event that a Change
in Control occurs with respect to the Company.

 

11.4                        Voting and Dividend Rights.  The holders of Stock
Units shall have no voting rights.  Prior to settlement or forfeiture, any Stock
Unit awarded under the Plan may, at the Committee’s discretion, carry with it a
right to dividend equivalents.  Such right entitles the holder to be credited
with an amount equal to all cash dividends paid on one  Share while the Stock
Unit is outstanding.  Dividend equivalents may be converted into additional
Stock Units.  Settlement of dividend equivalents may be made in the form of
cash, in the form of Shares, or in a combination of both.  Prior to
distribution, any dividend equivalents which are not paid shall be subject to
the same conditions and restrictions as the Stock Units to which they attach.

 

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Awards made between December 31, 2004 and January 1, 2009 reflect good-faith
efforts to comply with U.S. Treasury pronouncements under IRC Section 409A. 
Awards made after December 31, 2008 shall specify whether the dividends or other
distributions constitute a feature for the deferral of compensation.  A
determination of whether dividend or distribution rights under an Award provide
for the deferral of compensation shall be made in a manner consistent with IRC
Section 409A and Treas. Regs. Section 1.409A-1(b)(5).

 

11.5                        Form and Time of Settlement of Stock Units.
 Settlement of vested Stock Units may be made in the form of (a) cash,
(b) Shares or ( c) any combination of both, as determined by the Committee.  The
actual number of Stock Units eligible for settlement may be larger or smaller
than the number included in the original Award, based on predetermined
performance factors.  Methods of converting Stock Units into cash may include
(without limitation) a method based on the average Fair Market Value of Shares
over a series of trading days.  Vested Stock Units may be settled in a lump sum
or in installments.  The distribution may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have lapsed, or
it may be deferred to any later date.  The amount of a deferred distribution may
be increased by an interest factor or by dividend equivalents.  Until an Award
of Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Article 13.

 

11.6                        Death of Recipient.  Any Stock Units Award that
becomes payable after the recipient’s death shall be distributed to the
recipient’s beneficiary or beneficiaries.  Each recipient of a Stock Units Award
under the Plan shall designate one or more beneficiaries for this purpose by
filing the prescribed form with the Company.  A beneficiary designation may be
changed by filing the prescribed form with the Company at any time before the
Award recipient’s death.  If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units Award that
becomes payable after the recipient’s death shall be distributed to the
recipient’s estate.

 

11.7                        Creditors’ Rights.  A holder of Stock Units shall
have no rights other than those of a general creditor of the Company.  Stock
Units represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Stock Unit Agreement.

 

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ARTICLE 12.                      PERFORMANCE SHARES

 

12.1                        Performance Share Agreement.  Each grant of
Performance Shares under the Plan shall be evidenced by a Performance Share
Agreement between the Participant and the Company.  Such Performance Shares
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan.  The provisions of the
various Performance Share Agreements entered into under the Plan need not be
identical.

 

Performance Share Agreements made between December 31, 2004 and January 1, 2009
reflect good-faith efforts to comply with U.S. Treasury pronouncements under IRC
Section 409A. Performance Share Agreements entered after December 31, 2008 shall
identify any feature of the Performance Share or Agreement constituting deferred
compensation subject to IRC Section 409A.  Additionally, any Performance Share
or Agreement made after December 31, 2008 shall comply with IRC Section 409A and
Treas. Regs. Section 1.409A-1 et seq.

 

12.2                        Grant of Performance Shares.  Before, or within a
reasonable time after (not to exceed any applicable legal limit including
Section 409A of the Internal Revenue Code and applicable regulations) the grant
of Performance Units, the Committee shall:

 

(a)                                  determine objective performance goals,
which may consist of any one or more of the following goals deemed appropriate
by the Committee: earnings (either in the aggregate or on a per-share basis),
operating income, cash flow, including EBITDA (earnings before interest, taxes,
depreciation and amortization), return on equity, per share rate of return on
the Shares (including dividends), general indices relative to levels of general
customer service satisfaction, as measured through various randomly-generated
customer service surveys, market share (in one or more markets), customer
retention rates, market penetration rates, revenues, reductions in expense
levels, and the attainment by the Shares of a specified market value for a
specified period of time, in each case where applicable to be determined either
on a Company-wide basis or in respect of any one or more business units, and the
amount of compensation under the goals applicable to such grant;

 

(b)                                 designate a period for the measurement of
the extent to which performance goals are attained, which may begin prior to the
date of grant (the “Performance Period”); and

 

(c)                                  assign a “Performance Percentage” to each
level of attainment of performance goals during the Performance Period, with the
percentage applicable to minimum attainment being zero percent and the
percentage

 

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applicable to maximum attainment to the determined by the Committee from time to
time, but not in excess of 250%.

 

12.3                        Modification of Grant.  If a Participant is
promoted, demoted, or transferred to a different business unit of the Company
during a Performance Period, then, to the extent the Committee determines any
one or more of the performance goals, Performance Period, or Performance
Percentage are no longer appropriate, the Committee may make any changes thereto
as it deems appropriate in order to make them appropriate.  In addition, to the
extent permitted by law including Section 409A of the Internal Revenue Code and
applicable regulations, the Committee retains the discretion to modify, change
or alter Performance goals or targets, including decreasing or increasing
grants, during the performance term if circumstances or conditions develop
affecting the practicability, feasibility or ability to achieve performance
goals or targets which circumstances or conditions are beyond the reasonable
control of the participant. Modifications made between December 31, 2004 and
January 1, 2009 reflect good-faith efforts to comply with U.S. Treasury
pronouncements under IRC Section 409A. Modifications made between December 31,
2004 and January 1, 2009 reflect good-faith efforts to comply with U.S. Treasury
pronouncements under IRC Section 409A. Modifications made after December 31,
2008 shall identify any feature of the modification which constitutes deferred
compensation subject to IRC Section 409A.  Any modifications made after
December 31, 2008 shall comply with IRC Section 409A and Treas. Regs.
Section 1.409A-1 et seq.

 

12.4                        Terms of the Grant.  When granted, Performance
Shares may, but need not, be identified with Shares subject to a specific
Option, specific Restricted Shares, or specific SARs of the Participant granted
under the Plan in a number equal to or different from the number of the
Performance Shares so granted.  If Performance Shares are so identified, then,
unless otherwise provided in the applicable Award, the Participant’s associated
Performance Shares shall terminate upon (a) the expiration, termination,
forfeiture, or cancellation of the Option, Restricted Shares, or SARs with which
the Performance Shares are identified, (b) the exercise of such Option or SARs,
or 8 the date Restricted Shares become nonforfeitable.

 

12.5                        Payment of Performance Shares.  Unless otherwise
provided in the Performance Share Agreement, if the minimum performance goals
applicable to such Performance Shares have been achieved during the applicable
Performance Period, then the Company shall pay to the Participant that number of
Shares equal to the product of:

 

(a)                                  the sum of (i) number of Performance Shares
specified in the applicable Award agreement and (ii) the number of Shares that
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been issuable if such Performance Shares had been Shares outstanding throughout
the Performance Period and the stock dividends, cash dividends (except as
otherwise provided in the Performance Share Agreement) and other property paid
in respect of such shares had been reinvested in additional Shares as of each
dividend payment date, multiplied by

 

(b)                                 the Performance Percentage achieved during
such Performance Period.

 

The Committee may, in its discretion, determine that cash be paid in lieu of
some or all of such Shares.  The amount of cash payable in lieu of a Share shall
be determined by valuing such shares at its Fair Market Value on the business
day next preceding the date such cash is to be paid.  Payments pursuant to this
Section shall be made as soon as administratively practical after the end of the
applicable Performance Period.  Any Performance Shares with respect to which the
performance goals shall not have been achieved by the end of the applicable
Performance period shall expire, unless circumstances or conditions specified in
Section 12.3 arise or occur, in which event, the Committee retains discretion to
extend or modify the Performance Period, unless precluded by Section 409A of the
Internal Revenue Code and applicable regulations.

 

ARTICLE 13.                                                                     
PROTECTION AGAINST DILUTION.

 

13.1                        Adjustments.  In the event of a subdivision of the
outstanding Shares, a declaration of a dividend payable in Shares, a declaration
of a dividend payable in a form other than Shares in an amount that has a
material effect on the price of Shares, a combination or consolidation of the
outstanding Shares (by reclassification or otherwise) into a lesser number of
Shares, a recapitalization, a spin-off or a similar occurrence, the Committee
shall make such adjustments as it, in its sole discretion, deems appropriate in
one or more of:

 

(a)                                  The number of Options, SARs, Restricted
Shares, Performance Shares and Stock Units available for future Awards under
Article 4;

 

(b)                                 The limitations set forth in Sections 6.2
and 9.2;

 

(c)                                  The number of NSOs to be granted to Outside
Directors under Article 8;

 

(d)                                 The number of  Shares covered by each
outstanding Option and SAR;

 

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(e)                                  The Exercise Price under each outstanding
Option and SAR; or

 

(f)                                    The number of Stock Units included in any
prior Award which has not yet been settled.

 

Except as provided in this Article 13, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.

 

13.2                        Dissolution or Liquidation.  To the extent not
previously exercised or settled, Options, SARs and Stock Units shall terminate
immediately prior to the dissolution or liquidation of the Company, except to
extent dissolution or liquidation is incident to a Change in Control, in which
event provisions relating to Change in Control, shall govern disposition of
Options, SARs and Stock Units.

 

13.3                        Reorganizations.  In the event that the Company is a
party to a merger or other reorganization, outstanding Awards shall be subject
to the agreement of merger or reorganization Such agreement shall provide for:

 

(a)                                  The continuation of the outstanding Awards
by the Company, if the Company is a surviving corporation;

 

(b)                                 The assumption of the outstanding Awards by
the surviving corporation or its parent or subsidiary;

 

(c)                                  The substitution by the surviving
corporation or its parent or subsidiary of its own awards for the outstanding
Awards;

 

(d)                                 Full exercisability or vesting and
accelerated expiration of the outstanding Awards; or

 

(e)                                  Settlement of the full value of the
outstanding Awards in cash or cash equivalents followed by cancellation of such
Awards.

 

ARTICLE 14.                                                                     
CONVERSION OF AWARDS TO NONQUALIFIED DEFERRED COMPENSATION, ETC. SUBJECT TO IRC
SECTION 409A

 

14.1                        Committee Discretion Regarding Conversion.  The
Committee (in its sole discretion) may permit or require a Participant to:

 

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(a)                                  Have cash that otherwise would be paid to
such Participant as a result of the exercise of an SAR or the settlement of
Stock Units credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company’s books;

 

(b)                                 Have Shares that otherwise would be
delivered to such Participant as a result of the exercise of an Option or SAR
converted into an equal number of Stock Units; or

 

(c)                                  Have Shares that otherwise would be
delivered to such Participant as a result of the exercise of an Option or SAR or
the settlement of Stock Units converted into amounts credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company’s books.  Such amounts shall be determined by reference to
the Fair Market Value of such Shares as of the date when they otherwise would
have been delivered to such Participant.

 

14.2                        Timing of Election to Defer Compensation

 

As a general rule, any election to defer payment of (or otherwise convert) an
Award under this Plan shall be made and become irrevocable prior to the start of
the calendar year in which an Employee, Outside Director or Consultant renders
the services for which he or she obtains a legally binding right (fixed or
contingent) to receive the Award.  As an exception to the general rule, if an
Employee, Outside Director or Consultant has a legally binding right to an Award
in a subsequent year that is subject to a condition requiring continued services
for a period of at least 12 months to avoid forfeiture of the Award, an election
to defer payment of such an Award may be made on or before the 30th day after
the Employee, Outside Director or Consultant obtains the legally binding right
to the Award, provided that the election is made at least 12 months in advance
of the earliest date at which the forfeiture condition could lapse.

 

14.3                        Modification of Certain Elections

 

Except as provided under the Plan in a manner consistent with IRC Section 409A
and Treas. Regs. Section 1.409A-1 etc., after an election to defer payment of an
Award has become irrevocable, neither the Company nor the Participant has a
right to accelerate a payment date established with respect to Supplemental
Compensation attributable to the Award or Earnings accrued thereon.  Any delays
in a payment date, i.e. any additional deferral of payment, shall be made in
accord with IRC Section 409A.  As a general rule, a postponement of a scheduled
payment must be elected in writing at least one

 

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year before the first day on which the scheduled payment would have been made. 
Moreover, as a general rule, the postponement must extend for a least five years
after the first day on which the scheduled payment would have been made.

 

14.4                        Investment Earnings on Deferred Award

 

14.4 a.               For purposes of measuring and satisfying the Company’s
obligation to provide Benefits, the Company may cause a hypothetical Account to
be maintained with respect to the Supplemental Compensation of a Participant and
any Earnings thereon.

 

14.4 b.              The individual Account maintained for the Participant may
reflect hypothetical Company Contributions for Supplemental Compensation.  The
individual Account maintained for the Participant also may reflect the
hypothetical Earnings described in 1. or 2. below.

 

1.                                       If the Company does not designate an
Investment Vehicle for Supplemental Compensation with respect to a particular
period, the individual Account for the Participant shall reflect hypothetical
Earnings on such Supplemental Compensation for that period in the amount of at
least five percent (5%) compounded annually.

 

2.                                       In the alternative, if the Company does
designate an Investment Vehicle for Supplemental Compensation with respect to a
particular period, the individual Account maintained for the Participant shall
reflect hypothetical Earnings for that period in the same amount as if the
Company had invested such amounts in the Investment Vehicle and the investment
options under such Investment Vehicle were identical to those preferred by the
Participant under Section 14.4c below.  If the Company elects to invest the
Company Contributions in an Investment Vehicle, any such Investment Vehicle
shall be the property only of the Company, and shall not be held in trust for
the Participant or as security for the fulfillment of the Company’s obligation
under the Plan.  Any such Investment Vehicle shall be subject to the claims of
the general creditors of the Company.  The Participant, Beneficiary or Alternate
Payee shall not have any secured or preferred position with respect to such
Investment Vehicle or have any claim against the Company except as an unsecured
general creditor.  Nothing in the Plan shall require the Company to invest
Company Contributions or other amounts in any Investment Vehicle, to limit the
Company’s selection of investment media, if any, or to segregate Company
Contributions of Supplemental Compensation or Earnings from the Company’s
general assets.

 

14.4
c.                                                                                                              
Subject to such limitations as may

 

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from time to time be required by law, imposed by the Company, or contained
elsewhere in the Plan or Investment Vehicle, if any, the Participant may
communicate, to the Company or its authorized representative, a preference as to
how the Participant’s Account should be deemed to be invested among such
hypothetical investment options as may be available under the Investment
Vehicle.  Such direction shall designate the percentage (in any whole percent
multiples) of each portion of the Participant’s Account which is requested to be
deemed to be invested in such categories of hypothetical investment options, and
shall be subject to the following rules:

 

1)                                      Any initial deemed investment direction
shall be in writing or electronic medium in a form supplied or approved by and
filed with the Company or its authorized representative by the Participant or
his authorized representative.  Subsequent deemed investment directions may be
effected via toll-free telephone access, internet website or other means
arranged or approved by the Company.

 

2)                                      All amounts credited to the
Participant’s Account shall be deemed to be invested in accordance with the then
effective deemed investment direction.  As of the effective date specified by
the Participant or the Company for any new deemed investment direction, or as
soon thereafter as feasible, all or a portion of the Participant’s Account at
that date shall be reallocated among the designated hypothetical investment
options according to the percentages specified in the new deemed investment
direction unless and until a subsequent deemed investment direction shall be
filed and become effective.  An election concerning hypothetical investment
options shall continue indefinitely as provided in the Participant’s most recent
investment election form (or other form specified by the Company), or as
directed by the Participant via telephone, internet or other means arranged or
approved by the Company or its authorized representative.

 

3)                                      If the Company receives a Participant’s
deemed investment direction which the Company or its authorized representative
considers to be incomplete, unclear, or improper, the Participant’s investment
direction, if any, then in effect shall remain in effect (or, in the case of a
deficiency in an initial deemed investment direction, the Participant shall be
considered to have declined to file a deemed investment direction), unless the
Company provides for, and permits action to correct the deficiency.

 

4)                                      If the Company possesses at any time
directions as to the deemed investment of less than all of the Participant’s
Account, the Participant shall be deemed to have directed that the undesignated
portion of the Account be deemed to be invested in a fixed income, or similar
hypothetical

 

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investment option, if any, available under the Arrangement or Investment Vehicle
in the Company’s sole discretion.

 

5)                                      To the extent permitted by law, the
Participant agrees to indemnify and hold harmless the Company and its directors,
officers, attorneys, agents and representatives from any losses or damages of
any kind relating to the deemed investment of the Participant’s Account
hereunder.

 

6)                                      Each reference in this Plan to the
Participant shall be deemed to include, where applicable, a reference to a
Beneficiary or Alternate Payee.

 

7)                                      Nothing in the Plan shall require or
prohibit the Company from selecting an actual or hypothetical investment vehicle
that constitutes a qualified default investment alternative
(AQDIA[g12202lc07i001.gif]) within the meaning of ERISA Section 404 ( c )(5) or
to satisfy any notice or other obligations imposed by that statute or by
Department of Labor regulations thereunder.

 

14.4
d.                                                                                                             
Where applicable, Earnings on Supplemental Compensation will be credited from
time to time — but no less frequently than once each year as of the last
business day of such year — to the Participant’s Account based on interest
accruals or investment earnings as provided above.

 

14.4
e.                                                                                                              
The Benefit payable to a Participant, Beneficiary or Alternate Payee shall equal
the value of the portion of the Participant’s undistributed vested Account (i.e.
accumulated Supplemental Compensation adjusted for interest or Earnings).  As a
general rule, the Benefit payable shall equal the value of payments receivable
by the Company under the Investment Vehicle which are allocable to the
Participant based on the value of the Participant’s vested Account balance (less
contract surrender charges or similar reductions, if applicable).  Assuming that
the Company has complied substantially and consistently with the Participant’s
hypothetical investment directions as provided above, the Company’s liability to
pay benefits shall not exceed the value of payments under the Investment Vehicle
attributable to the Participant’s vested Account balance (less applicable
surrender charges or similar reductions); and the Company shall not be liable
for losses arising from any decline, depreciation or shrinkage in the value of
Investment Vehicles acquired or maintained under the Plan.

 

14.4
f.                                                                                                                
The Company may provide the Participant with periodic reports showing the value
of his or her individual Account as of the valuation date specified in the
report.

 

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14.4 g.                                     The establishment of an individual
Account for the Participant is for information purposes only, because any assets
reflect in the Account or in any report regarding the Account are the property
of the Company only.

 

14.5.       Anti-Alienation

 

14.5 a.               No Participant, Beneficiary or Alternate Payee shall have
any right to alienate, hypothecate, commute, sell, assign, pledge, transfer or
otherwise convey or encumber an unvested or vested right to receive any payments
hereunder.  Both unvested and vested rights are expressly declared to be
nonassignable and nontransferable.  Any unpaid benefits, whether vested or
unvested, shall not be subject to attachment, garnishment or execution, or be
transferable by operation of law in the event of the bankruptcy or insolvency of
the Participant, Beneficiary or Alternate Payee, except to the extent otherwise
required by law.

 

14.5 b.     Section 14.5a. shall not prevent the entry, implementation or
issuance of a Qualified Domestic Relations Order, nor shall it prevent the
Company or Participant from complying with any Qualified Domestic Relations
Order to which this Plan or the Participant’s Account may be subject.

 

14.5 c.                                     The entry, implementation or
issuance of a Qualified Domestic Relations Order shall not accelerate vesting or
payment of Supplemental Compensation or Earnings under this Plan except to the
extent, if any, required by such Order.

 

14.6.       Payment of Deferred or Supplemental Compensation

 

Pursuant to the terms of a timely irrevocable election, in a manner consistent
with IRC Section 409A and Treas. Regs. Section 1.409A-1 etc., Supplemental
Compensation and Earnings under the Deferral Arrangement shall be paid at a
specified time (or pursuant to a fixed schedule) established under the Plan at
the time of the election.  If no date or schedule is specified in an election,
payment shall occur upon Separation from Service.  Despite the foregoing,
payment may occur upon Disability, Death, Change in Control, Unforeseeable
Emergency or termination and complete liquidation of the Plan.  Benefits shall
be paid in the medium and form specified in the election to the extent
consistent with IRC Section 409A and Treas. Regs. Section 1.409A-1 et seq.  With
respect to any Key Employee of the Company, Parent, Subsidiary or Affiliate the
stock of which is publicly traded on an established securities market (or
otherwise), references to payment upon Separation from Service shall be deemed
to refer to

 

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payment six months after the Key Employee’s termination of employment (or if
earlier the date of death of the Key Employee).  For purposes of the preceding
sentence, Key Employee refers to an individual described in IRC
Section 416(i) without regard to paragraph (5) thereof, regarding the treatment
of beneficiaries.

 

14.7        Payment Delays

 

The Company intends that a payment due under this Plan or under applicable law
may be delayed under Treas. Regs. Section 1.409A-1(b)(4) or other legal
authority because of an Unforeseeable Event, i.e. if making the payment when due
is administratively impracticable or if making the payment when due would
jeopardize the solvency of the Company (or related entity responsible for the
payment) and if, as of the date upon which the Participant obtained a legally
binding right to the Supplemental Compensation, such impracticability or
insolvency was unforeseeable by the Board and if actual payment occurs as soon
as administratively practicable.  The Company also intends that a payment due
under this Plan or under applicable law may be delayed for reasons such as a
denial of deduction with respect to computation of unrelated business taxable
income, e.g. under IRC Section 162(m) if applicable, or if the payment would
violate a loan covenant, a similar contractual requirement, pertinent non-tax
federal, state or local law or for other events or conditions described by the
Commissioner of Internal Revenue Service in generally applicable guidance
published in the Internal Revenue Bulletin.

 

ARTICLE 15.                       AWARDS UNDER OTHER PLANS.

 

The Company may grant awards under other plans or programs.  Such awards may be
settled in the form of Shares issued under this Plan.  Such Shares shall be
treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of  Shares available under
Article 4.

 

ARTICLE 16.                       PAYMENT OF DIRECTOR’S FEES IN SECURITIES.

 

16.1        Effective Date.  No provision of this Article 16 shall be effective
unless and until the Board has determined to implement such provision.

 

16.2        Elections to Receive NSOs, Restricted Shares or Stock Units.  An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board.  Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan.

 

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An election under this Article 16 shall be filed with the Company on the
prescribed form.

 

16.3        Number and Terms of NSOs, Restricted Shares or Stock Units.  The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board.  The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.

 

ARTICLE 17.                       LIMITATION ON RIGHTS.

 

17.1        Retention Rights.  Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant.  The Company and its Parents, Subsidiaries and
Affiliates reserve the right to terminate the service of any Employee, Outside
Director or Consultant at any time, with or without cause, subject to applicable
laws, the Company’s articles of incorporation and bylaws and a written
employment agreement (if any).

 

17.2        Shareholders’ Rights.  A Participant shall have no dividend rights,
voting rights or other rights as a shareholder with respect to any Shares
covered by his or her Award prior to the time when a stock certificate for such
Shares is issued or, if applicable, the time when he or she becomes entitled to
receive such Shares by filing any required notice of exercise and paying any
required Exercise Price.  No adjustment shall be made for cash dividends or
other rights for which the record date is prior to such time, except as
expressly provided in the Plan.

 

17.3        Regulatory Requirements.  Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Shares under the Plan
shall be subject to all applicable laws, rules and regulations, including
without limitation IRC Section 409A and Treas. Regs. Section 1.409A-1 et seq.
and such approval by any regulatory body as may be required.  The Company
reserves the right to restrict, in whole or in part, the delivery of Shares
pursuant to any Award prior to the satisfaction of all legal requirements
relating to the issuance of such  Shares, to their registration, qualification
or listing or to an exemption from registration, qualification or listing.

 

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ARTICLE 18.                       WITHHOLDING TAXES.

 

18.1        General.  To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan.  The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.

 

18.2        Share Withholding.  The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that otherwise would
be issued to his or her or by surrendering all or a portion of any Shares that
he or she previously acquired.  Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash.

 

18.3        Income and Wage Reporting

 

As a general rule, all payments of the Participant’s interest in the
Supplemental Compensation and Earnings thereon shall be reported to the Internal
Revenue Service as income subject to ordinary income taxes (or, if applicable,
only as wages subject to Social Security or other employment taxes for the tax
year in which the Participant becomes vested in such amounts).  To the extent
permitted by law, Earnings credited to a Participant’s vested Account shall be
reported as ordinary income to the Participant only for the tax year in which
such amounts are paid or made available to the Participant.

 

ARTICLE 19.                       ADDITIONAL AND MISCELLANEOUS PROVISIONS.

 

19.1        Term of the Plan.  The Plan, as set forth herein, shall become
effective on January 31, 2000.  The Plan shall remain in effect until it is
terminated under Section 19.2, except that no ISOs shall be granted on or after
the 10th anniversary of the later of (a) the date when the Board adopted the
Plan or (b) the date when the Board adopted the most recent increase in the
number of Shares available under Article 4 which was approved by the Company’s
shareholders.

 

19.2        Amendment or Termination.  The Board may, at any time and for any
reason, amend or terminate the Plan.  Any amendment of the Plan shall be in
writing.  Additionally, any amendment to the Plan shall be subject to the
approval of the Company’s shareholders only to the extent required by applicable
laws, regulations or rules.   No Awards shall be granted under the Plan after
the

 

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termination thereof.  The termination of the Plan, or any amendment thereof,
shall not affect any Award previously granted under the Plan. Upon a complete
termination and liquidation of the Deferral Arrangement, to the extent provided
by IRC Section 409A, the full amount of the Participant’s Account shall be
distributed in the manner specified in a timely deferral election, to the
Participant, Beneficiary or Alternate Payee entitled to payment under the Plan
or, if the election did not specify a manner of payment, in a lump sum.

 

19.3        Automatic Termination.  The Arrangement shall automatically
terminate upon the dissolution of the Company or upon the Company’s merger into
or consolidation with any other entity which does not specifically adopt and
agree to continue the Arrangement; provided, however, that no such termination
shall deprive the Participant, Beneficiary or Alternate Payee of any rights
accrued under the Plan prior to the date of termination.  Upon such automatic
termination and complete liquidation of the Deferral Arrangement, to the extent
provided in IRC Section 409A, the full amount of the Participant’s Account shall
be distributed in the manner specified in a timely deferral election, to the
Participant, Beneficiary or Alternate Payee entitled to payment under the Plan
or, if the election did not specify a manner of payment, in a lump sum.

 

19.4        Integration.  Subject to Plan provisions regarding written
amendments, this Plan document, including Appendices hereto and Awards
hereunder, contains the entire agreement between the Company and each
Participant with respect to compensation under this Plan.

 

19.5 Successor Employer.  Any entity which is a successor to the Company by
reason of a consolidation, merger, or purchase of substantially all of the
assets of the Company shall have the right to become a party to the Deferral
Arrangement by adopting the same by resolution of the entity’s board of
directors or other appropriate governing body.  If, within thirty (30) days from
the effective date of such consolidation, merger, or sale of assets, such new
entity does not become a party hereto as provided herein, the Deferral
Arrangement shall be deemed to have terminated automatically.

 

19.6                        Beneficiary Designation After Plan Amendment or
Termination.  Nothing in this Article 19 or other provision of the Plan impairs
the right of a Participant to change his or her Beneficiary designation prior to
death or, if earlier, the distribution of his or her vested Account.

 

ARTICLE 20.                       LIMITATION ON PARACHUTE PAYMENTS.

 

20.1        Scope of Limitation.  This Article 20 shall apply to an Award only
if:

 

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(a)           The independent auditors most recently selected by the Board (the
“Auditors”) determine that the after-tax value of such Award to the Participant,
taking into account the effect of all federal, state and local income taxes,
employment taxes and excise taxes applicable to the Participant (including the
excise tax under section 4999 of the Code), will be greater after the
application of this Article 20 than it was before the application of this
Article 20, or

 

(b)           The Committee, at the time of making an Award under the Plan or at
any time thereafter, specifies in writing that such Award shall be subject to
this Article 20 (regardless of the after-tax value of such Award to the
Participant).

 

If this Article 20 applies to an Award, it shall supersede any contrary
provision of the Plan or of any Award granted under the Plan.

 

20.2        Basic Rule.  In the event that the independent auditors most
recently selected by the Board (the “Auditors”) determine that any payment or
transfer by the Company under the Plan to or for the benefit of a Participant (a
“Payment”) would be nondeductible by the Company for federal income tax purposes
because of the provisions concerning “excess parachute payments” in Section 28OG
of the Code, then the aggregate present value of all Payments shall be reduced
(but not below zero) to the Reduced Amount.  For purposes of this Article 20,
the “Reduced Amount” shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of Section 28OG of the Code.

 

20.3        Reduction of Payments.  If the Auditors determine that any Payment
would be nondeductible by the Company because of Section 28OG of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice.  If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election.  For purposes of this Article 20, present
value shall be determined in accordance with Section 28OG(d)(4) of the Code. 
All determinations made by the Auditors under this Article 20 shall be

 

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binding upon the Company and the Participant and shall be made within 60 days of
the date when a Payment becomes payable or transferable.  As promptly as
practicable following such determination and the elections hereunder, the
Company shall pay or transfer to or for the benefit of the Participant such
amounts as are then due to him or her under the Plan and shall promptly pay or
transfer to or for the benefit of the Participant in the future such amounts as
become due to him or her under the Plan.

 

20.4        Overpayments and Underpayments.  As a result of uncertainty in the
application of Section 28OG of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company that should not have been made (an “Overpayment”) or that additional
Payments that will not have been made by the Company could have been made (an
“Underpayment”), consistent in each case with the calculation of the Reduced
Amount hereunder.  In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the
Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount subject to taxation under Section 4999 of the Code. 
In the event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to or for the
benefit of the Participant, together with interest at the applicable federal
rate provided in Section 7872(f)(2) of the Code.

 

20.5        Related Corporations.  For purposes of this Article 20, the term
“Company” shall include affiliated corporations to the extent determined by the
Auditors in accordance with Section 28OG(d)(5) of the Code.

 

20.6        Change in Control Agreements.  Nothing in this Section 20 shall be
deemed to effect or impair the rights of any participant to benefits under a
separate change of control or separation agreement, such that if the benefits
hereunder would exceed 280G limits or their statutory or regulatory equivalent,
or such benefits in conjunction with other benefits or payments would exceed
such limits or their statutory or regulatory equivalent, and the separation or
change in control agreement provides for the payment of such payments, or
grosses up such payments, then the participant shall not be deprived of such
benefit by anything set forth in this section 20, and such benefits shall be
calculated hereunder, for purposes of benefits under the agreement, in
accordance with the terms of such agreement.

 

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ARTICLE 21.  EXECUTION.

 

To record the adoption of this Amendment and Restatement of the Plan by the
Board, the Company has caused its duly authorized officer to execute this
document in the name of the Company on the date set forth below.

 

 

SUREWEST COMMUNICATIONS

 

A California Corporation

 

 

 

 

 

By:

 

 

 

Darla J. Yetter

 

 

 

 

Title:

Corporate Secretary

 

 

 

 

Date: November 12, 2010

 

 

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