Exhibit 10.3

Commonwealth Telephone Enterprises, Inc.

 

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DEFERRED COMPENSATION PLAN

 

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Effective January 1, 2007

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TABLE OF CONTENTS

 

           Page

ARTICLE 1

  

Definitions

   1

ARTICLE 2

  

Selection, Enrollment, Eligibility

   5

2.1

  

Selection by Committee

   5

2.2

  

Enrollment and Eligibility Requirements; Commencement of Participation

   5

ARTICLE 3

  

Deferral Commitments/Company Contribution Amounts/Vesting/Crediting/ Taxes

   6

3.1

  

Maximum Deferrals

   6

3.2

  

Short Plan Year

   6

3.3

  

Election to Defer; Effect of Election Form

   7

3.4

  

Withholding and Crediting of Annual Deferral Amounts

   7

3.5

  

Company Contribution Amount

   8

3.6

  

Crediting of Amounts after Benefit Distribution

   8

3.7

  

Vesting

   8

3.8

  

Crediting of Account Balances

   8

3.9

  

FICA and Other Taxes

   9

ARTICLE 4

  

Scheduled Distribution; Unforeseeable Emergencies

   10

4.1

  

Scheduled Distribution and Form of Payment

   10

4.2

  

Postponing Scheduled Distributions

   10

4.3

  

Other Benefits Take Precedence Over Scheduled Distributions

   10

4.4

  

Withdrawal Payout/Suspensions for Unforeseeable Emergencies

   10

ARTICLE 5

  

Change In Control Benefit

   11

5.1

  

Change in Control Benefit

   11

5.2

  

Payment of Change in Control Benefit

   11

ARTICLE 6

  

Retirement Benefit

   11

6.1

  

Retirement Benefit

   11

6.2

  

Payment of Retirement Benefit

   11

ARTICLE 7

  

Termination Benefit

   12

7.1

  

Termination Benefit

   12

7.2

  

Payment of Termination Benefit

   12

ARTICLE 8

  

Disability Benefit

   13

8.1

  

Disability Benefit

   13

8.2

  

Payment of Disability Benefit

   13

ARTICLE 9

  

Death Benefit

   13

9.1

  

Death Benefit

   13

9.2

  

Payment of Death Benefit

   13

ARTICLE 10

  

Beneficiary Designation

   13

10.1

  

Beneficiary

   13

10.2

  

Beneficiary Designation; Change; Spousal Consent

   13

10.3

  

Acknowledgement

   13

 

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TABLE OF CONTENTS (Cont.)

 

           Page

10.4

  

No Beneficiary Designation

   13

10.5

  

Doubt as to Beneficiary

   13

10.6

  

Discharge of Obligations

   13

ARTICLE 11

  

Leave of Absence

   14

11.1

  

Paid Leave of Absence

   14

11.2

  

Unpaid Leave of Absence

   14

11.3

  

Leaves Resulting in Separation from Service

   14

ARTICLE 12

  

Termination of Plan, Amendment or Modification

   14

12.1

  

Termination of Plan

   14

12.2

  

Amendment

   14

12.3

  

Plan Agreement

   15

12.4

  

Effect of Payment

   15

ARTICLE 13

  

Administration

   15

13.1

  

Committee Duties

   15

13.2

  

Administration Upon Change In Control

   15

13.3

  

Agents

   15

13.4

  

Binding Effect of Decisions

   15

13.5

  

Indemnity of Committee

   16

13.6

  

Employer Information

   16

ARTICLE 14

  

Other Benefits and Agreements

   16

14.1

  

Coordination with Other Benefits

   16

ARTICLE 15

  

Claims Procedures

   16

15.1

  

Presentation of Claim

   16

15.2

  

Notification of Decision

   16

15.3

  

Review of a Denied Claim

   17

15.4

  

Decision on Review

   17

15.5

  

Legal Action

   17

ARTICLE 16

  

Trust

   17

16.1

  

Establishment of the Trust

   17

16.2

  

Interrelationship of the Plan and the Trust

   18

16.3

  

Distributions From the Trust

   18

ARTICLE 17

  

Miscellaneous

   18

17.1

  

Status of Plan

   18

17.2

  

Unsecured General Creditor

   18

17.3

  

Employer’s Liability

   18

17.4

  

Nonassignability

   18

17.5

  

Not a Contract of Employment

   18

17.6

  

Furnishing Information

   18

17.7

  

Terms

   19

17.8

  

Captions

   19

17.9

  

Governing Law

   19

17.10

  

Notice

   19

 

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TABLE OF CONTENTS (Cont.)

 

           Page

17.11

  

Successors

   19

17.12

  

Spouse’s Interest

   19

17.13

  

Validity

   19

17.14

  

Incompetent

   19

17.15

  

Court Order

   19

17.16

  

Distribution in the Event of Income Inclusion Under 409A

   20

17.17

  

Insurance

   20

 

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COMMONWEALTH TELEPHONE ENTERPRISES, INC.

DEFERRED COMPENSATION PLAN

Effective January 1, 2007

Purpose

The purpose of this Plan is to provide specified benefits to a select group of
management or highly compensated Employees who contribute materially to the
continued growth, development and future business success of Commonwealth
Telephone Enterprises, Inc., a Pennsylvania corporation, and its subsidiaries,
if any, that sponsor this Plan. The Plan offers certain executives of
Commonwealth Telephone Enterprises Inc. and its affiliated companies the
opportunity to defer the receipt of a portion of their compensation on a pre-tax
basis and to have the deferred amounts reflect the value of the common stock of
Commonwealth Telephone Enterprises, Inc. Further, Commonwealth Telephone
Enterprises, Inc., will credit matching contributions equal to 100% of the
executive’s deferrals. Subject to certain limitations, as described herein,
matching contributions will be credited to the executive’s matching account in
the form of share units of common stock of Commonwealth Telephone Enterprises,
Inc. Subject to the executive’s election regarding the timing of payment, a
number of shares of common stock of Commonwealth Telephone Enterprises, Inc.,
equal to the number of share units credited to the executive’s matching
contribution account will be paid to the executive if he or she remains an
employee for twelve (12) consecutive full calendar quarters following the
purchase. This Plan shall be unfunded for tax purposes and for purposes of Title
I of ERISA. Any unvested benefits accrued by participants prior to December 31,
2004 in the Commonwealth Telephone Enterprises, Inc., Executive Stock Purchase
Plan shall be transferred to this Plan effective as of January 1, 2007.

ARTICLE 1

Definitions

For the purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:

“Account Balance” shall mean, with respect to a Participant, an entry on the
records of the Employer equal to the sum of (i) the Deferral Account balance and
(ii) the Company Contribution Account balance. The Account Balance shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to a Participant, or his
or her designated Beneficiary, pursuant to this Plan. The Account Balance shall
also be credited as of the Effective Date with the Participant’s Transferred
Balance, if any.

“Annual Deferral Amount” shall mean that portion of a Participant’s Base Salary
and Bonus that a Participant defers in accordance with Article 3 for any one
Plan Year, without regard to whether such amounts are withheld and credited
during such Plan Year. In the event of a Participant’s Retirement, Disability,
death or Termination of Employment prior to the end of a Plan Year, such year’s
Annual Deferral Amount shall be the actual amount withheld prior to such event.

“Annual Installment Method” shall be an annual installment payment over the
number of years selected by the Participant in accordance with this Plan,
calculated as follows: (i) for the first annual installment, the Participant’s
vested Account Balance shall be calculated as of the close of business on or
around the Participant’s Benefit Distribution Date, as determined by the
Committee in its sole discretion, and (ii) for remaining annual installments,
the Participant’s vested Account Balance shall be calculated on every
anniversary of such calculation date, as applicable. Each annual installment
shall be calculated by multiplying this balance by a fraction, the numerator of
which is one and the denominator of which is the remaining number of annual
payments due the Participant. By way of example, if the Participant elects a ten
(10) year Annual Installment Method for the Retirement Benefit, the first
payment shall be 1/10 of the vested Account Balance, calculated as described in
this definition. The following year, the payment shall be 1/9 of the vested
Account Balance, calculated as described in this definition.

 

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“Base Salary” shall mean the annual cash compensation relating to services
performed during any calendar year, excluding distributions from nonqualified
deferred compensation plans, bonuses, commissions, overtime, fringe benefits,
stock options, relocation expenses, incentive payments, non-monetary awards,
director fees and other fees, and automobile and other allowances paid to a
Participant for employment services rendered (whether or not such allowances are
included in the Employee’s gross income). Base Salary shall be calculated before
reduction for compensation voluntarily deferred or contributed by the
Participant pursuant to all qualified or nonqualified plans of any Employer and
shall be calculated to include amounts not otherwise included in the
Participant’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b)
pursuant to plans established by any Employer; provided, however, that all such
amounts will be included in compensation only to the extent that had there been
no such plan, the amount would have been payable in cash to the Employee.

“Beneficiary” shall mean one (1) or more persons, trusts, estates or other
entities, designated in accordance with Article 10, that are entitled to receive
benefits under this Plan upon the death of a Participant.

“Beneficiary Designation Form” shall mean the form established from time-to-time
by the Committee that a Participant completes, signs and returns to the
Committee to designate one (1) or more Beneficiaries.

“Benefit Distribution Date” shall mean the date that triggers distribution of a
Participant’s vested Account Balance. A Participant’s Benefit Distribution Date
shall be determined upon the occurrence of any one (1) of the following:

 

  (a) If the Participant Retires, his or her Benefit Distribution Date shall be
(i) the last day of the six-month period immediately following the date on which
the Participant Retires if the Participant is a Key Employee, and (ii) for all
other Participants, the date on which the Participant Retires; provided,
however, in the event the Participant changes his or her Retirement Benefit
election in accordance with Section 6.2(b), his or her Benefit Distribution Date
shall be postponed in accordance with Section 6.2(b).

 

  (b) If the Participant experiences a Termination of Employment, his or her
Benefit Distribution Date shall be (i) the last day of the six-month period
immediately following the date on which the Participant experiences a
Termination of Employment if the Participant is a Key Employee, and (ii) for all
other Participants, the date on which the Participant experiences a Termination
of Employment; provided, however, in the event the Participant changes his or
her Termination Benefit election in accordance with Section 7.2(b), his or her
Benefit Distribution Date shall be postponed in accordance with Section 7.2(b);
or

 

  (c) The date on which the Committee is provided with proof that is
satisfactory to the Committee of the Participant’s death, if the Participant
dies prior to the complete distribution of his or her vested Account Balance; or

 

  (d) The date on which the Participant becomes Disabled; or

 

  (e) The date on which the Company experiences a Change in Control, as
determined by the Committee in its sole discretion, if (i) the Participant has
elected to receive a Change in Control Benefit, as set forth in Section 5.1
below, and (ii) if a Change in Control occurs prior to the Participant’s
Termination of Employment, Retirement, death or Disability.

“Board” shall mean the board of directors of the Company.

“Bonus” shall mean any compensation earned by a Participant for services
rendered during a Plan Year pursuant to the Employer’s annual bonus and cash
incentive plans.

“Change in Control” shall mean any “change in control event” as defined in
accordance with Code Section 409A and related Treasury guidance and Regulations.

“Change in Control Benefit” shall have the meaning set forth in Article 5.

 

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“Claimant” shall have the meaning set forth in Section 15.1.

“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from
time to time.

“Committee” shall mean the committee described in Article 13.

“Company” shall mean Commonwealth Telephone Enterprises, Inc., a Pennsylvania
corporation, and any successor to all or substantially all of the Company’s
assets or business.

“Company Contribution Account” shall mean (i) the sum of the Participant’s
Company Contribution Amounts, plus (ii) amounts credited or debited to the
Participant’s Company Contribution Account in accordance with this Plan, less
(iii) all distributions made to the Participant or his or her Beneficiary
pursuant to this Plan that relate to the Participant’s Company Contribution
Account.

“Company Contribution Amount” shall mean, for any one Plan Year, the amount
determined in accordance with Section 3.5.

“Death Benefit” shall mean the benefit set forth in Article 9.

“Deferral Account” shall mean (i) the sum of all of a Participant’s Annual
Deferral Amounts, plus (ii) amounts credited or debited to the Participant’s
Deferral Account in accordance with this Plan, less (iii) all distributions made
to the Participant or his or her Beneficiary pursuant to this Plan that relate
to his or her Deferral Account.

“Deferral Date” shall mean the date or dates on which Base Salary or Bonus, to
which any Election Form relates, would otherwise have been paid.

“Disability” or “Disabled” shall mean that a Participant is (i) 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, receiving income replacement benefits for a period
of not less than 3 months under an accident or health plan covering employees of
the Participant’s Employer. For purposes of this Plan, a Participant shall be
deemed Disabled if determined to be totally disabled by the Social Security
Administration, or if determined to be disabled in accordance with the
applicable disability insurance program of such Participant’s Employer, provided
that the definition of “disability” applied under such disability insurance
program complies with the requirements in the preceding sentence.

“Dividend Payment Date” shall mean the date on which a dividend is paid by the
Company with respect to Shares.

“Disability Benefit” shall mean the benefit set forth in Article 8.

“Election Form” shall mean the form, which may be in electronic format,
established from time-to-time by the Committee that a Participant completes,
signs and returns to the Committee to make an election under the Plan.

“Employee” shall mean a person who is an employee of any Employer.

“Employer(s)” shall mean the Company and/or any of its subsidiaries (now in
existence or hereafter formed or acquired) that have been selected by the Board
to participate in the Plan and have adopted the Plan as a sponsor.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.

 

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“Fair Market Value” of a Share on any given day means:

 

  (a) The closing price per Share on the national securities exchange on which
the Shares are principally traded on the next preceding date on which there was
a sale of Shares on such exchange; or

 

  (b) If the Shares are not listed or admitted to trading on any such exchange,
the closing price per Share on the Nasdaq National Market on the next preceding
date on which there was a sale of Shares, or if such closing price is not
available, the average of the highest reported bid and lowest reported asked
prices per Share as reported by NASDAQ on the next preceding date on which such
bid and asked prices were reported; or

 

  (c) If the Shares are not then listed on any securities exchange or prices
therefore are not then quoted in NASDAQ, the value determined by the Committee
in good faith.

“First Plan Year” shall mean the period beginning January 1, 2007 and ending
December 31, 2007.

“Fund” means the fund maintained under the Trust Agreement.

“Key Employee” shall mean any Participant who is a “key employee” (as defined in
Code Section 416(i) without regard to paragraph (5) thereof) of an Employer
whose stock is publicly traded on an established securities market or otherwise,
as determined by the Committee based upon the 12-month period ending on each
December 31st (such 12-month period is referred to below as the “identification
period”). All Participants who are determined to be key employees under Code
Section 416(i) (without regard to paragraph (5) thereof) during the
identification period shall be treated as a Key Employee for purposes of the
Plan during the 12-month period that begins on the first day of the 4th month
following the close of such identification period.

“Participant” shall mean any Employee (i) who is selected to participate in the
Plan, (ii) who submits an executed Plan Agreement, Election Form and Beneficiary
Designation Form, which is accepted by the Committee, and (iii) whose Plan
Agreement has not terminated.

“Plan” shall mean the Commonwealth Telephone Enterprises, Inc., Deferred
Compensation Plan, which shall be evidenced by this instrument and by each Plan
Agreement, as they may be amended from time-to-time.

“Plan Agreement” shall mean a written agreement, as may be amended from
time-to-time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant and the Participant’s
Employer shall provide for the entire benefit to which such Participant is
entitled under the Plan; should there be more than one (1) Plan Agreement, the
Plan Agreement bearing the latest date of acceptance by the Employer shall
supersede all previous Plan Agreements in their entirety and shall govern such
entitlement. The terms of any Plan Agreement may be different for any
Participant, and any Plan Agreement may provide additional benefits not set
forth in the Plan or limit the benefits otherwise provided under the Plan;
provided, however, that any such additional benefits or benefit limitations must
be agreed to by both the Employer and the Participant.

“Plan Year” shall, except for the First Plan Year, mean a period beginning on
January 1 of each calendar year and continuing through December 31 of such
calendar year.

“Purchase Date” shall mean, with respect to a Deferral Date or a Dividend
Payment Date, the date or dates on which the Trustee purchases Shares to reflect
the Deferral Amounts and Company Contribution Amounts made on such Deferral Date
or the dividends paid on such Dividend Payment Date. The Trustee may purchase
Shares from the Company or on the open market.

“Retirement”, “Retire(s)” or “Retired” shall mean, with respect to an Employee,
separation from service with all Employers for any reason other than death or
Disability, as determined in accordance with Code Section 409A and related
Treasury guidance and Regulations, on or after the earlier of the attainment of
(a) age sixty-five (65), or (b) age 55 with 5 Years of Service.

 

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“Retirement Benefit” shall mean the benefit set forth in Article 6.

“Scheduled Distribution” shall mean the distribution set forth in Section 4.1.

“Shares” means Common Stock of the Company, par value $1.00 per share. All
Shares that are distributable pursuant to this Plan shall originate only from
those Shares that were approved by stockholders, and remain available, pursuant
to the Commonwealth Telephone Enterprises, Inc., Equity Incentive Plan, as
amended and restated effective May 18, 2006.

“Share Units” means units credited to a Participant’s Deferral Account and
Company Contribution Account pursuant to Section 3.8

“Terminate the Plan”, “Termination of the Plan” shall mean a determination by an
Employer’s board of directors that (i) all of its Participants shall no longer
be eligible to participate in the Plan, (ii) no new deferral elections for such
Participants shall be permitted, and (iii) such Participants shall no longer be
eligible to receive company contributions under this Plan.

“Termination Benefit” shall mean the benefit set forth in Article 7.

“Termination of Employment” shall mean the separation from service with all
Employers, voluntarily or involuntarily, for any reason other than Retirement,
Disability or death, as determined in accordance with Code Section 409A and
related Treasury guidance and Regulations.

“Transferred Balance” shall mean any unvested benefits accrued by Participants
prior to December 31, 2004 in the Commonwealth Telephone Enterprises, Inc.,
Executive Stock Purchase Plan (the “ESPP”) that are transferred to this Plan
effective as of January 1, 2007. Such Transferred Balance will be governed by
the terms of this Plan, except for the vesting of such balance, which shall be
governed by the terms of the ESPP.

“Trust” shall mean one (1) or more trusts established by the Company in
accordance with Article 16.

“Trust Agreement” means the agreement of trust entered into between the Company
and the Trustee for purposes of this Plan.

“Trustee” shall mean the individual(s) or corporate trustee appointed as a
trustee under the Trust.

“Unforeseeable Emergency” shall mean a severe financial hardship of the
Participant or his or her Beneficiary resulting from (i) an illness or accident
of the Participant or Beneficiary, the Participant’s or Beneficiary’s spouse, or
the Participant’s or Beneficiary’s dependent (as defined in Code
Section 152(a)), (ii) a loss of the Participant’s or Beneficiary’s property due
to casualty, or (iii) such other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant or the Participant’s Beneficiary, all as determined in the sole
discretion of the Committee.

ARTICLE 2

Selection, Enrollment, Eligibility

 

2.1 Selection by Committee. Participation in the Plan shall be limited to, as
determined by the Committee in its sole discretion, a select group of management
or highly compensated Employees. From that group, the Committee shall select, in
its sole discretion, those individuals who may actually participate in this
Plan.

 

2.2 Enrollment and Eligibility Requirements; Commencement of Participation.

 

  (a)

As a condition to participation, each Employee who is eligible to participate in
the Plan effective as of the first day of a Plan Year shall complete, execute
and return to the Committee a Plan Agreement, an

 

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Election Form and a Beneficiary Designation Form, prior to the first day of such
Plan Year, or such other earlier deadline as may be established by the
Committee, in its sole discretion. In addition, the Committee shall establish
from time-to-time such other enrollment requirements as it determines, in its
sole discretion, are necessary. With respect to the First Plan Year, each
selected Employee must complete these requirements within thirty (30) days of
the date on which such Employee becomes eligible to participate in the Plan.
Except as provided in Section 2.2(a) below, with respect to any Plan Year after
the First Plan Year, each selected Employee must complete these requirements
prior to the first day of such Plan Year, or such other earlier deadline as may
be established by the Committee, in its sole discretion.

 

  (b) A selected Employee who first becomes eligible to participate in this Plan
after the first day of a Plan Year must complete, execute and return to the
Committee a Plan Agreement, an Election Form and Beneficiary Designation Form
within thirty (30) days after he or she first becomes eligible to participate in
the Plan, or within such other earlier deadline as may be established by the
Committee, in its sole discretion, in order to participate for that Plan Year.
In such event, such person’s participation in this Plan shall not commence
earlier than the date determined by the Committee pursuant to Section 2.2(c) and
such person shall not be permitted to defer under this Plan any portion of his
or her Base Salary or Bonus that are paid with respect to services performed
prior to his or her participation commencement date, except to the extent
permissible under Code Section 409A and related Treasury guidance or
Regulations.

 

  (c) Each selected Employee who is eligible to participate in the Plan shall
commence participation in the Plan on the date that the Committee determines, in
its sole discretion, that the Employee has met all enrollment requirements set
forth in this Plan and required by the Committee, including returning all
required documents to the Committee within the specified time period.
Notwithstanding the foregoing, the Committee shall process such Participant’s
deferral election as soon as administratively practicable after such deferral
election is submitted to and accepted by the Committee.

 

  (d) If an Employee fails to meet all requirements contained in this
Section 2.2 within the period required, that Employee shall not be eligible to
participate in the Plan during such Plan Year.

ARTICLE 3

Deferral Commitments/Company Contribution Amounts/

Vesting/Crediting/Taxes

 

3.1 Maximum Annual Deferral Amount for Plan Year. For each Plan Year, a
Participant may elect to defer, as his or her Annual Deferral Amount, up to 20%
of such Participant’s Base Salary, and up to 100% of such Participant’s Bonus,
provided, however, that the maximum Annual Deferral Amount for any Plan Year
shall not exceed twenty percent (20%) of the sum of the Participant’s Base
Salary and Bonus for such Plan Year. If the Committee determines, in its sole
discretion, prior to the beginning of a Plan Year that a Participant has made no
election, the amount deferred shall be zero.

 

3.2 Short Plan Year. Notwithstanding the foregoing, if a Participant first
becomes a Participant after the first day of a Plan Year, or in the case of the
First Plan Year of the Plan itself, the maximum Annual Deferral Amount shall be
limited to the amount of compensation not yet earned by the Participant as of
the date the Participant submits a Plan Agreement and Election Form to the
Committee for acceptance, except to the extent permissible under Code
Section 409A and related Treasury guidance or Regulations. For compensation that
is earned based upon a specified performance period, the Participant’s deferral
election will apply to the portion of such compensation that is equal to (i) the
total amount of compensation for the performance period, multiplied by (ii) a
fraction, the numerator of which is the number of days remaining in the service
period after the Participant’s deferral election is made, and the denominator of
which is the total number of days in the performance period.

 

6

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3.3 Election to Defer; Effect of Election Form.

 

  (a) First Plan Year. In connection with a Participant’s commencement of
participation in the Plan, the Participant shall make an irrevocable deferral
election for the Plan Year in which the Participant commences participation in
the Plan, along with such other elections, as the Committee deems necessary or
desirable under the Plan. For these elections to be valid, the Election Form
must be completed and signed by the Participant, timely delivered to the
Committee (in accordance with Section 2.2 above) and accepted by the Committee.

 

  (b) General Timing Rule for Deferral Elections in Subsequent Plan Years. For
each succeeding Plan Year, a Participant may elect to defer Base Salary and
Bonus and make such other elections as the Committee deems necessary or
desirable under the Plan by timely delivering a new Election Form to the
Committee, in accordance with its rules and procedures, before the December 31st
preceding the Plan Year in which such compensation is earned, or before such
other deadline established by the Committee in accordance with the requirements
of Code Section 409A and related Treasury guidance or Regulations. Any deferral
election(s) made in accordance with this Section 3.3(b) shall be irrevocable;
provided, however, that if the Committee requires Participants to make a
deferral election for “performance-based compensation” by the deadline(s)
described above, it may, in its sole discretion, and in accordance with Code
Section 409A and related Treasury guidance or Regulations, permit a Participant
to subsequently change his or her deferral election for such compensation by
submitting an Election Form to the Committee no later than the deadline
established by the Committee pursuant to Section 3.3(c) below.

 

  (c) Performance-Based Compensation. Notwithstanding the foregoing, the
Committee may, in its sole discretion, determine that an irrevocable deferral
election pertaining to “performance-based compensation” based on services
performed over a period of at least twelve (12) months, may be made by timely
delivering an Election Form to the Committee, in accordance with its rules and
procedures, no later than six (6) months before the end of the performance
service period. “Performance-based compensation” shall be compensation, the
payment or amount of which is contingent on pre-established organizational or
individual performance criteria, which satisfies the requirements of Code
Section 409A and related Treasury guidance or Regulations. In order to be
eligible to make a deferral election for performance-based compensation, a
Participant must perform services continuously from a date no later than the
date upon which the performance criteria for such compensation are established
through the date upon which the Participant makes a deferral election for such
compensation. In no event shall an election to defer performance-based
compensation be permitted after such compensation has become both substantially
certain to be paid and readily ascertainable.

 

  (d) Compensation Subject to Risk of Forfeiture. With respect to compensation
(i) to which a Participant has a legally binding right to payment in a
subsequent year, and (ii) that is subject to a forfeiture condition requiring
the Participant’s continued services for a period of at least twelve (12) months
from the date the Participant obtains the legally binding right, the Committee
may, in its sole discretion, determine that an irrevocable deferral election for
such compensation may be made by timely delivering an Election Form to the
Committee in accordance with its rules and procedures, no later than the
thirtieth (30th) day after the Participant obtains the legally binding right to
the compensation, provided that the election is made at least twelve (12) months
in advance of the earliest date at which the forfeiture condition could lapse.

 

3.4 Withholding and Crediting of Annual Deferral Amounts. For each Plan Year,
unless the Participant elects otherwise, the Base Salary portion of the Annual
Deferral Amount shall be withheld from each regularly scheduled Base Salary
payroll in equal amounts, as adjusted from time-to-time for increases and
decreases in Base Salary. The Bonus portion of the Annual Deferral Amount shall
be withheld at the time the Bonus is or otherwise would be paid to the
Participant, whether or not this occurs during the Plan Year itself. Annual
Deferral Amounts shall be credited to a Participant’s Deferral Account at the
time such amounts would otherwise have been paid to the Participant.

 

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3.5 Company Contribution Amount. As of each Deferral Date, the Company shall pay
the Trustee an amount, in cash or in shares, equal to the amount of the
Participant’s deferrals and the Committee shall credit to each Participant’s
Company Contribution Account, Share Units equal to the number of Share Units
credited to the Participant’s Deferral Account, as further described in
Section 3.8

 

3.6 Crediting of Amounts After Benefit Distribution. Notwithstanding any
provision in this Plan to the contrary, should the complete distribution of a
Participant’s vested Account Balance occur prior to the date on which any
portion of (i) the Annual Deferral Amount that a Participant has elected to
defer in accordance with Section 3.3 or (ii) the Company Contribution Amount,
would otherwise be credited to the Participant’s Account Balance, such amounts
shall not be credited to the Participant’s Account Balance, but shall be paid to
the Participant in a manner determined by the Committee, in its sole discretion.

 

3.7 Vesting.

 

  (a) A Participant shall at all times be 100% vested in his or her Deferral
Account.

 

  (b) A Participant shall be vested in each Share Unit credited to his or her
Company Contribution Account upon the expiration of the twelfth (12th) full
consecutive calendar quarter since such Share Units were credited to the Company
Contribution Account, unless otherwise provided in his or her Plan Agreement,
employment agreement or any other agreement entered into between the Participant
and his or her Employer.

 

  (c) Notwithstanding the foregoing, in the event of a Change in Control, or
upon a Participant’s Retirement, death while employed by an Employer, or
Disability, a Participant’s Company Contribution Account shall immediately
become 100% vested (if it is not already vested in accordance with the above
vesting schedules).

 

3.8 Crediting of Account Balances. In accordance with, and subject to, the rules
and procedures that are established from time to time by the Committee, in its
sole discretion, amounts shall be credited or debited to a Participant’s Account
Balance as follows:

 

  (a) Share Units. On any Purchase Date, but as of the applicable Deferral Date,
the Committee shall credit each Participant’s Deferral Account and Company
Contribution Account with a number of Share Units, rounded to the nearest .0001
of a Share, which shall equal the product of (1) and (2), as follows:

(1) an amount, rounded down to the next lowest whole number, obtained by
dividing:

(i) the amount of all Participants’ Annual Deferral Amounts and all Company
Contribution Amounts attributable to such Deferral Date that is invested on such
Purchase Date; by

(ii) the average per Share cost paid by the Trustee on such Purchase Date with
respect to such Deferral Date; provided, however, that if the Trustee purchases
(or notionally purchases) the Shares from the Company, the Trustee’s average per
Share cost, for purposes of this Section 3.8, shall be the Fair Market Value per
Share on such Deferral Date;

(2) a fraction:

(i) the numerator of which is the Participant’s Annual Deferral Amount and the
Participant’s Company Contribution Amount attributable to such Deferral Date;
and

(ii) the denominator of which is all Participants’ Annual Deferral Amounts and
all Company Matching Contributions attributable to such Deferral Date.

 

8

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  (b) Cash Dividends. If the Company pays a cash dividend with respect to
Shares, then as of the Dividend Payment Date, the Company shall credit each
Participant’s Deferral Account with a number of Share Units, which shall equal
the product of (1) and (2), as follows:

(1) an amount, rounded down to the nearest .0001 of a Share, obtained by
dividing:

(i) the amount of the dividend paid on such Dividend Payment Date with respect
to a Share multiplied by the number of Share Units credited to all Participants’
Deferral Accounts on the record date for such Dividend; by

(ii) the average per Share cost paid by the Trustee on such Purchase Date with
respect to such Dividend Payment Date; provided, however, that if the Trustee
purchases (or notionally purchases) the Shares from the Company, the Trustee’s
average per Share cost, for purposes of this Section 3.8(b), shall be the Fair
Market Value per Share on such Dividend Date;

(2) a fraction:

(i) the numerator of which is the number of Share Units credited to the
Participant’s Deferral Account on the record date for such Dividend; and

(ii) the denominator of which is the number of Share Units credited to all
Participants’ Deferral Accounts on the record date for such Dividend.

 

  (c) Share Dividends. If the Company pays a cash dividend with respect to
Shares in the form of additional Shares, then as of the Dividend Payment Date,
the Company shall credit each Participant’s Deferral Account with a number of
Share Units equal to the product of (1) the Share Units credited to the
Participant’s Deferral Account on the record date for such Dividend, and (2) the
number of Shares payable as a dividend for each outstanding Share.

 

  (d) No Actual Investment. Notwithstanding any other provision of this Plan
that may be interpreted to the contrary, the Share Units represent a number of
Shares for bookkeeping entry only, and shall not represent any investment made
on any Participant’s behalf by the Company or the Trust. The Participant shall
at all times remain an unsecured creditor of the Company. The Participant shall
have no voting rights or any other rights of a shareholder with respect to such
Share Units except that said Share Units will be taken into consideration for
purposes of a Participant’s compliance with the Company’s Stock Ownership
Guidelines.

 

3.9 FICA and Other Taxes.

 

  (a) Annual Deferral Amounts. For each Plan Year in which an Annual Deferral
Amount is being withheld from a Participant, the Participant’s Employer(s) shall
withhold from that portion of the Participant’s Base Salary and Bonus that is
not being deferred, in a manner determined by the Employer(s), the Participant’s
share of FICA and other employment taxes on such Annual Deferral Amount. If
necessary, the Committee may reduce the Annual Deferral Amount in order to
comply with this Section 3.9.

 

  (b) Company Contribution Account. When a Participant becomes vested in a
portion of his or her Company Contribution Account, the Participant’s
Employer(s) shall withhold from that portion of the Participant’s Base Salary
and Bonus that is not deferred, in a manner determined by the Employer(s), the
Participant’s share of FICA and other employment taxes on such Company
Contribution Amount. If necessary, the Committee may reduce the vested portion
of the Participant’s Company Contribution Account, as applicable, in order to
comply with this Section 3.9.

 

  (c) Distributions. The Participant’s Employer(s), or the trustee of the Trust,
shall withhold from any payments made to a Participant under this Plan all
federal, state and local income, employment and other taxes required to be
withheld by the Employer(s), or the trustee of the Trust, in connection with
such payments, in amounts and in a manner to be determined in the sole
discretion of the Employer(s) and the trustee of the Trust.

 

9

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ARTICLE 4

Scheduled Distribution; Unforeseeable Emergencies

 

4.1 Scheduled Distribution and Form of Payment. In connection with each election
to defer an Annual Deferral Amount, a Participant may irrevocably elect to
receive a Scheduled Distribution, in the form of a lump sum payment, from the
Plan with respect to all or a portion of the Annual Deferral Amount. The
Scheduled Distribution shall be a lump sum payment in an amount that is equal to
the portion of the Annual Deferral Amount the Participant elected to have
distributed as a Scheduled Distribution, plus vested amounts credited or debited
in the manner provided in Section 3.8 above on that amount, calculated as of the
close of business on or around the date on which the Scheduled Distribution
becomes payable, as determined by the Committee in its sole discretion. Subject
to the other terms and conditions of this Plan, each Scheduled Distribution
elected shall be paid out during a sixty (60) day period commencing immediately
after the first day of any calendar quarter designated by the Participant (the
“Scheduled Distribution Date”). The Scheduled Distribution shall be paid in the
form of Shares equal to the number of whole Share Units credited to the
Participant’s Account, plus an amount of cash in lieu of fractional Share Units
if no subsequent distribution dates are anticipated. The calendar quarter
designated by the Participant must be at least [one (1) Plan Year] after the end
of the Plan Year to which the Participant’s deferral election described in
Section 3.3 relates, unless otherwise provided on an Election Form approved by
the Committee in its sole discretion. By way of example, if a Scheduled
Distribution is elected for Annual Deferral Amounts that are earned in the Plan
Year commencing January 1, 2007, the earliest Scheduled Distribution Date that
may be designated by a Participant would be January 1, 2009, and the Scheduled
Distribution would become payable during the sixty (60) day period commencing
immediately after such Scheduled Distribution Date.

 

4.2 Postponing Scheduled Distributions. A Participant may elect to postpone a
Scheduled Distribution described in Section 4.1 above, and have such amount paid
out during a sixty (60) day period commencing immediately after an allowable
alternative distribution date designated by the Participant in accordance with
this Section 4.2. In order to make this election, the Participant must submit a
new Scheduled Distribution Election Form to the Committee in accordance with the
following criteria:

 

  (a) Such Scheduled Distribution Election Form must be submitted to and
accepted by the Committee in its sole discretion at least twelve (12) months
prior to the Participant’s previously designated Scheduled Distribution Date;

 

  (b) The new Scheduled Distribution Date selected by the Participant must be
the first day of a Plan Year, and must be at least five (5) years after the
previously designated Scheduled Distribution Date; and

 

  (c) The election of the new Scheduled Distribution Date shall have no effect
until at least twelve (12) months after the date on which the election is made.

 

4.3 Other Benefits Take Precedence Over Scheduled Distributions. Should a
Benefit Distribution Date occur that triggers a benefit under Articles 5, 6, 7,
8, or 9, any Annual Deferral Amount that is subject to a Scheduled Distribution
election under Section 4.1 shall not be paid in accordance with Section 4.1, but
shall be paid in accordance with the other applicable Article. Notwithstanding
the foregoing, the Committee shall interpret this Section 4.3 in a manner that
is consistent with Code Section 409A and related Treasury guidance and
Regulations.

 

4.4 Withdrawal Payout/Suspensions for Unforeseeable Emergencies.

 

  (a) If the Participant experiences an Unforeseeable Emergency, the Participant
may petition the Committee to receive a partial or full payout from the Plan,
subject to the provisions set forth below.

 

  (b)

The payout, if any, from the Plan shall not exceed the lesser of (i) the
Participant’s vested Account Balance, calculated as of the close of business on
or around the date on which the amount becomes payable, as determined by the
Committee in its sole discretion, or (ii) the amount necessary to satisfy the
Unforeseeable Emergency, plus amounts necessary to pay Federal, state, or local
income taxes or

 

10

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penalties reasonably anticipated as a result of the distribution.
Notwithstanding the foregoing, a Participant may not receive a payout from the
Plan to the extent that the Unforeseeable Emergency is or may be relieved
(A) through reimbursement or compensation by insurance or otherwise, (B) by
liquidation of the Participant’s assets, to the extent the liquidation of such
assets would not itself cause severe financial hardship or (C) by cessation of
deferrals under this Plan.

 

  (c) If the Committee, in its sole discretion, approves a Participant’s
petition for payout from the Plan, the Participant shall receive a payout from
the Plan within sixty (60) days of the date of such approval, and the
Participant’s deferrals under the Plan shall be terminated as of the date of
such approval.

 

  (d) In addition, a Participant’s deferral elections under this Plan shall be
terminated to the extent the Committee determines, in its sole discretion, that
termination of such Participant’s deferral elections is required pursuant to
Treas. Reg. §1.401(k)-1(d)(3) for the Participant to obtain a hardship
distribution from an Employer’s 401(k) Plan. If the Committee determines, in its
sole discretion, that a termination of the Participant’s deferrals is required
in accordance with the preceding sentence, the Participant’s deferrals shall be
terminated as soon as administratively practicable following the date on which
such determination is made.

 

  (e) Notwithstanding the foregoing, the Committee shall interpret all
provisions relating to a payout and/or termination of deferrals under this
Section 4.4, in a manner that is consistent with Code Section 409A and related
Treasury guidance and Regulations.

ARTICLE 5

Change in Control Benefit

 

5.1 Change in Control Benefit. A Participant, in connection with his or her
commencement of participation in the Plan, shall irrevocably elect on an
Election Form whether to (i) receive a Change in Control Benefit upon the
occurrence of a Change in Control, which shall be equal to the Participant’s
vested Account Balance, calculated as of the close of business on or around the
Participant’s Benefit Distribution Date, as determined by the Committee in its
sole discretion, or (ii) to have his or her Account Balance remain in the Plan
upon the occurrence of a Change in Control and to have his or her Account
Balance remain subject to the terms and conditions of the Plan. If a Participant
does not make any election with respect to the payment of the Change in Control
Benefit, then Participant shall receive a Change in Control Benefit as described
in Section 5.1(i), above.

 

5.2 Payment of Change in Control Benefit. The Change in Control Benefit, if any,
shall be paid to the Participant in a lump sum no later than sixty (60) days
after the Participant’s Benefit Distribution Date. Notwithstanding the
foregoing, the Committee shall interpret all provisions in this Plan relating to
a Change in Control Benefit in a manner that is consistent with Code
Section 409A and related Treasury guidance and Regulations.

ARTICLE 6

Retirement Benefit

 

6.1 Retirement Benefit. A Participant who Retires shall receive, as a Retirement
Benefit, his or her vested Account Balance, calculated as of the close of
business on or around the Participant’s Benefit Distribution Date, as determined
by the Committee, in its sole discretion.

 

6.2 Payment of Retirement Benefit.

 

  (a) A Participant, in connection with his or her commencement of participation
in the Plan, shall elect on an Election Form to receive the Retirement Benefit
in a lump sum or pursuant to an Annual Installment Method of up to fifteen
(15) years. If a Participant does not make any election with respect to the
payment of the Retirement Benefit, then such Participant shall be deemed to have
elected to receive the Retirement Benefit in a lump sum.

 

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  (b) A Participant may change the form of payment of the Retirement Benefit by
submitting an Election Form to the Committee in accordance with the following
criteria:

 

  (i) The election to modify the Retirement Benefit shall have no effect until
at least twelve (12) months after the date on which the election is made; and

 

  (ii) The first Retirement Benefit payment shall be delayed at least five
(5) years from the Participant’s originally scheduled Benefit Distribution Date
as described in Section 1.

For purposes of applying the requirements above, the right to receive the
Retirement Benefit in installment payments shall be treated as the entitlement
to a single payment. The Committee shall interpret all provisions relating to
changing the Retirement Benefit election under this Section 6.2 in a manner that
is consistent with Code Section 409A and related Treasury guidance or
Regulations.

The Election Form most recently accepted by the Committee that has become
effective shall govern the payout of the Retirement Benefit.

 

  (c) The lump sum payment shall be made, or installment payments shall
commence, no later than sixty (60) days after the Participant’s Benefit
Distribution Date. Remaining installments, if any, shall be paid no later than
sixty (60) days after each anniversary of the Participant’s Benefit Distribution
Date.

ARTICLE 7

Termination Benefit

 

7.1 Termination Benefit. A Participant who experiences a Termination of
Employment shall receive, as a Termination Benefit, his or her vested Account
Balance, calculated as of the close of business on or around the Participant’s
Benefit Distribution Date, as determined by the Committee in its sole
discretion.

 

7.2 Payment of Termination Benefit.

 

  (a) A Participant, in connection with his or her commencement of participation
in the Plan, shall elect on an Election Form to receive the Termination Benefit
in a lump sum or pursuant to an Annual Installment Method of up to five
(5) years. If a Participant does not make any election with respect to the
payment of the Termination Benefit, then such Participant shall be deemed to
have elected to receive the Termination Benefit in a lump sum.

 

  (b) A Participant may change the form of payment of the Termination Benefit by
submitting an Election Form to the Committee in accordance with the following
criteria:

 

  (i) The election to modify the Termination Benefit shall have no effect until
at least twelve (12) months after the date on which the election is made; and

 

  (ii) The first Termination Benefit payment is delayed at least five (5) years
from the Participant’s originally scheduled Benefit Distribution Date as
described in Section 1.

For purposes of applying the requirements above, the right to receive the
Termination Benefit in installment payments shall be treated as the entitlement
to a single payment. The Committee shall interpret all provisions relating to
changing the Termination Benefit election under this Section 7.2 in a manner
that is consistent with Code Section 409A and related Treasury guidance or
Regulations.

The Election Form most recently accepted by the Committee that has become
effective shall govern the payout of the Termination Benefit.

 

  (c) The lump sum payment shall be made, or installment payments shall
commence, no later than sixty (60) days after the Participant’s Benefit
Distribution Date. Remaining installments, if any, shall be paid no later than
sixty (60) days after each anniversary of the Participant’s Benefit Distribution
Date.

 

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ARTICLE 8

Disability Benefit

 

8.1 Disability Benefit. Upon a Participant’s Disability, the Participant shall
receive a Disability Benefit, which shall be equal to the Participant’s vested
Account Balance, calculated as of the close of business on or around the
Participant’s Benefit Distribution Date, as selected by the Committee, in its
sole discretion.

 

8.2 Payment of Disability Benefit. The Disability Benefit shall be paid to the
Participant in a lump sum payment no later than sixty (60) days after the
Participant’s Benefit Distribution Date.

ARTICLE 9

Death Benefit

 

9.1 Death Benefit. The Participant’s Beneficiary(ies) shall receive a Death
Benefit upon the Participant’s death which will be equal to the Participant’s
vested Account Balance, calculated as of the close of business on or around the
Participant’s Benefit Distribution Date, as selected by the Committee in its
sole discretion.

 

9.2 Payment of Death Benefit. The Death Benefit shall be paid to the
Participant’s Beneficiary(ies) in a lump sum payment no later than sixty
(60) days after the Participant’s Benefit Distribution Date.

ARTICLE 10

Beneficiary Designation

 

10.1 Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as contingent) to
receive any benefits payable under the Plan to a beneficiary upon the death of a
Participant. The Beneficiary designated under this Plan may be the same as or
different from the Beneficiary designation under any other plan of an Employer
in which the Participant participates.

 

10.2 Beneficiary Designation; Change. A Participant shall designate his or her
Beneficiary by completing and signing the Beneficiary Designation Form, and
returning it to the Committee or its designated agent. A Participant shall have
the right to change a Beneficiary by completing, signing and otherwise complying
with the terms of the Beneficiary Designation Form and the Committee’s rules and
procedures, as in effect from time-to-time. Upon the acceptance by the Committee
of a new Beneficiary Designation Form, all Beneficiary designations previously
filed shall be canceled. The Committee shall be entitled to rely on the last
Beneficiary Designation Form filed by the Participant and accepted by the
Committee prior to his or her death.

 

10.3 Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received and acknowledged in writing by the
Administrator or its designated agent.

 

10.4 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided in Sections 10.1, 10.2 and 10.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to complete
distribution of the Participant’s benefits, then the Participant’s designated
Beneficiary shall be deemed to be his or her surviving spouse. If the
Participant has no surviving spouse, the benefits remaining under the Plan to be
paid to a Beneficiary shall be payable to the executor or personal
representative of the Participant’s estate.

 

10.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall have
the right, exercisable in its discretion, to cause the Participant’s Employer to
withhold such payments until this matter is resolved to the Committee’s
satisfaction.

 

10.6 Discharge of Obligations. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the Committee
from all further obligations under this Plan with respect to the Participant,
and that Participant’s Plan Agreement shall terminate upon such full payment of
benefits.

 

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ARTICLE 11

Leave of Absence

 

11.1 Paid Leave of Absence. If a Participant is authorized by the Participant’s
Employer to take a paid leave of absence from the employment of the Employer,
and such leave of absence does not constitute a separation from service, as
determined by the Committee in accordance with Code Section 409A and related
Treasury guidance and Regulations, (i) the Participant shall continue to be
considered eligible for the benefits provided in Articles 4, 5, 6, 7, 8, or 9 in
accordance with the provisions of those Articles, and (ii) the Annual Deferral
Amount shall continue to be withheld during such paid leave of absence in
accordance with Section 3.3.

 

11.2 Unpaid Leave of Absence. If a Participant is authorized by the
Participant’s Employer to take an unpaid leave of absence from the employment of
the Employer for any reason, and such leave of absence does not constitute a
separation from service, as determined by the Committee in accordance with Code
Section 409A and related Treasury guidance and Regulations, such Participant
shall continue to be eligible for the benefits provided in Articles 4, 5, 6, 7,
8, or 9 in accordance with the provisions of those Articles. However, the
Participant shall be excused from fulfilling his or her Annual Deferral Amount
commitment that would otherwise have been withheld during the remainder of the
Plan Year in which the unpaid leave of absence is taken. During the unpaid leave
of absence, the Participant shall not be allowed to make any additional deferral
elections. However, if the Participant returns to employment, the Participant
may elect to defer an Annual Deferral Amount for the Plan Year following his or
her return to employment and for every Plan Year thereafter while a Participant
in the Plan, provided such deferral elections are otherwise allowed and an
Election Form is delivered to and accepted by the Committee for each such
election in accordance with Section 3.3 above.

 

11.3 Leaves Resulting in Separation from Service. In the event that a
Participant’s leave of absence from his or her Employer does constitute a
separation from service, as determined by the Committee in accordance with Code
Section 409A and related Treasury guidance and Regulations, the Participant’s
vested Account Balance shall be distributed to the Participant in accordance
with Article 6 or 7 of this Plan, as applicable.

ARTICLE 12

Termination of Plan, Amendment or Modification

 

12.1 Termination of Plan. The Plan shall remain in effect until termination by
the Board. The Board shall have the power to terminate the Plan at any time.
Following a Termination of the Plan, Participant Account Balances shall remain
in the Plan until the Participant becomes eligible for the benefits provided in
Articles 4, 5, 6, 7, 8 or 9 in accordance with the provisions of those Articles.
The Termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits under the
Plan as of the date of termination. Notwithstanding the foregoing, to the extent
permissible under Code Section 409A and related Treasury guidance or
Regulations, during the thirty (30) days preceding or within twelve (12) months
following a Change in Control an Employer shall be permitted to (i) terminate
the Plan by action of its board of directors, and (ii) distribute the vested
Account Balances to Participants in a lump sum no later than twelve (12) months
after the Change in Control, provided that all other substantially similar
arrangements sponsored by such Employer are also terminated and all balances in
such arrangements are distributed within twelve (12) months of the termination
of such arrangements.

 

12.2 Amendment.

 

  (a)

The Board may, at any time, amend or modify the Plan in whole or in part.
Notwithstanding the foregoing, (i) no amendment or modification shall be
effective to decrease the value of a Participant’s vested Account Balance in
existence at the time the amendment or modification is made, and (ii) no
amendment or modification of this Section 12.2 or Section 13.2 of the Plan shall
be effective unless

 

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and until two-thirds (2/3) of Participants with an Account Balance in the Plan
as of the date of such proposed amendment or modification provide prior written
consent in a time and manner determined by the Committee.

 

  (b) Notwithstanding any provision of the Plan to the contrary, in the event
that the Company determines that any provision of the Plan may cause amounts
deferred under the Plan to become immediately taxable to any Participant under
Code Section 409A, and related Treasury guidance or Regulations, the Company may
(i) adopt such amendments to the Plan and appropriate policies and procedures,
including amendments and policies with retroactive effect, that the Company
determines necessary or appropriate to preserve the intended tax treatment of
the Plan benefits provided by the Plan and/or (ii) take such other actions as
the Company determines necessary or appropriate to comply with the requirements
of Code Section 409A, and related Treasury guidance or Regulations.

 

12.3 Plan Agreement. Despite the provisions of Sections 12.1 and 12.2 above, if
a Participant’s Plan Agreement contains benefits or limitations that are not in
this Plan document, the Board may only amend or terminate such provisions with
the written consent of the Participant.

 

12.4 Effect of Payment. The full payment of the Participant’s vested Account
Balance under Articles 4, 5, 6, 7, 8, or 9 of the Plan shall completely
discharge all obligations to a Participant and his or her designated
Beneficiaries under this Plan, and the Participant’s Plan Agreement shall
terminate.

ARTICLE 13

Administration

 

13.1 Committee Duties. Except as otherwise provided in this Article 13, this
Plan shall be administered by the Compensation/Pension Committee of the Board of
Directors. Members of the Committee may be Participants under this Plan. The
Committee shall also have the discretion and authority to (i) make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Plan, and (ii) decide or resolve any and all questions,
including benefit entitlement determinations and interpretations of this Plan,
as may arise in connection with the Plan. Any individual serving on the
Committee who is a Participant shall not vote or act on any matter relating
solely to himself or herself. When making a determination or calculation, the
Committee shall be entitled to rely on information furnished by a Participant or
the Company.

 

13.2 Administration Upon Change In Control. Within one hundred and twenty
(120) days following a Change in Control, the individuals who comprised the
Committee immediately prior to the Change in Control (whether or not such
individuals are members of the Committee following the Change in Control) may,
by written consent of the majority of such individuals, appoint an independent
third party administrator (the “Administrator”) to perform any or all of the
Committee’s duties described in Section 13.1 above, including without
limitation, the power to determine any questions arising in connection with the
administration or interpretation of the Plan, and the power to make benefit
entitlement determinations. Upon and after the effective date of such
appointment, (i) the Company must pay all reasonable administrative expenses and
fees of the Administrator, and (ii) the Administrator may only be terminated
with the written consent of the majority of Participants with an Account Balance
in the Plan as of the date of such proposed termination.

 

13.3 Agents. In the administration of this Plan, the Committee or the
Administrator, as applicable, may, from time to time, employ agents and delegate
to them such administrative duties as it sees fit (including acting through a
duly appointed representative) and may from time to time consult with counsel.

 

13.4 Binding Effect of Decisions. The decision or action of the Committee or
Administrator, as applicable, with respect to any question arising out of or in
connection with the administration, interpretation and application of the Plan
and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the Plan.

 

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13.5 Indemnity of Committee. All Employers shall indemnify and hold harmless the
members of the Committee, any Employee to whom the duties of the Committee may
be delegated, and the Administrator against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with respect
to this Plan, except in the case of willful misconduct by the Committee, any of
its members, any such Employee or the Administrator.

 

13.6 Employer Information. To enable the Committee and/or Administrator to
perform its functions, the Company and each Employer shall supply full and
timely information to the Committee and/or Administrator, as the case may be, on
all matters relating to the Plan, the Trust, the Participants and their
Beneficiaries, the Account Balances of the Participants, the compensation of its
Participants, the date and circumstances of the Retirement, Disability, death or
Termination of Employment of its Participants, and such other pertinent
information as the Committee or Administrator may reasonably require.

ARTICLE 14

Other Benefits and Agreements

 

14.1 Coordination with Other Benefits. The benefits provided for a Participant
and Participant’s Beneficiary under the Plan are in addition to any other
benefits available to such Participant under any other plan or program for
employees of the Participant’s Employer. The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.

ARTICLE 15

Claims Procedures

 

15.1 Presentation of Claim. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a
“Claimant”) may deliver to the Committee a written claim for a determination
with respect to the amounts distributable to such Claimant from the Plan. If
such a claim relates to the contents of a notice received by the Claimant, the
claim must be made within sixty (60) days after such notice was received by the
Claimant. All other claims must be made within 180 days of the date on which the
event that caused the claim to arise occurred. The claim must state with
particularity the determination desired by the Claimant.

 

15.2 Notification of Decision. The Committee shall consider a Claimant’s claim
within a reasonable time, but no later than ninety (90) days after receiving the
claim. If the Committee determines that special circumstances require an
extension of time for processing the claim, written notice of the extension
shall be furnished to the Claimant prior to the termination of the initial
ninety (90) day period. In no event shall such extension exceed a period of
ninety (90) days from the end of the initial period. The extension notice shall
indicate the special circumstances requiring an extension of time and the date
by which the Committee expects to render the benefit determination. The
Committee shall notify the Claimant in writing:

 

  (a) that the Claimant’s requested determination has been made, and that the
claim has been allowed in full; or

 

  (b) that the Committee has reached a conclusion contrary, in whole or in part,
to the Claimant’s requested determination, and such notice must set forth in a
manner calculated to be understood by the Claimant:

 

  (i) the specific reason(s) for the denial of the claim, or any part of it;

 

  (ii) specific reference(s) to pertinent provisions of the Plan upon which such
denial was based;

 

  (iii) a description of any additional material or information necessary for
the Claimant to perfect the claim, and an explanation of why such material or
information is necessary;

 

  (iv) an explanation of the claim review procedure set forth in Section 15.3
below; and

 

  (v) a statement of the Claimant’s right to bring a civil action under ERISA,
Section 502(a), following an adverse benefit determination on review.

 

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15.3 Review of a Denied Claim. On or before sixty (60) days after receiving a
notice from the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant’s duly authorized representative) may file with the
Committee a written request for a review of the denial of the claim. The
Claimant (or the Claimant’s duly authorized representative):

 

  (a) may, upon request and free of charge, have reasonable access to, and
copies of, all documents, records and other information relevant (as defined in
applicable ERISA regulations) to the claim for benefits;

 

  (b) may submit written comments or other documents; and/or

 

  (c) may request a hearing, which the Committee, in its sole discretion, may
grant.

 

15.4 Decision on Review. The Committee shall render its decision on review
promptly, and no later than sixty (60) days after the Committee receives the
Claimant’s written request for a review of the denial of the claim. If the
Committee determines that special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished to the
Claimant prior to the termination of the initial sixty (60) day period. In no
event shall such extension exceed a period of sixty (60) days from the end of
the initial period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by which the Committee
expects to render the benefit determination. In rendering its decision, the
Committee shall take into account all comments, documents, records and other
information submitted by the Claimant relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination. The decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:

 

  (a) specific reasons for the decision;

 

  (b) specific reference(s) to the pertinent Plan provisions upon which the
decision was based;

 

  (c) a statement that the Claimant is entitled to receive, upon request and
free of charge, reasonable access to and copies of, all documents, records and
other information relevant (as defined in applicable ERISA regulations) to the
Claimant’s claim for benefits; and

 

  (d) a statement of the Claimant’s right to bring a civil action under ERISA,
Section 502(a).

 

15.5 Legal Action. A Claimant’s compliance with the foregoing provisions of this
Article 15 is a mandatory prerequisite to a Claimant’s right to commence any
legal action with respect to any claim for benefits under this Plan.

ARTICLE 16

Trust

 

16.1 Establishment of the Trust. The Company shall establish a trust by a trust
agreement with a third party, the Trustee. On or as soon as administratively
practicable following each Deferral Date, an amount equal to the amount, in cash
or in common shares of Commonwealth Telephone Enterprises, Inc., deferred by all
Participants and the Company Contribution Amount shall be paid by the Company to
the Trustee, and shall thereafter be held by the Trustee in accordance with the
terms of the Trust Agreement. Should the amount be paid in cash, the Trustee
will, as soon as practical, purchase the maximum number of common shares of
Commonwealth Telephone Enterprises, Inc. The Trustee shall have full discretion
in the purchase of these shares. Amounts contributed to the Trustee under the
Trust Agreement and assets purchased with such amounts shall be subject to the
claims of the Company’s creditors. To the extent that any benefits provided
under the Plan are actually paid from the Fund, the Company shall have no
further obligation with respect to such benefits. Neither a Participant, nor any
beneficiary nor any other person shall be deemed to have any property interest,
legal or equitable, in any specific asset of the Company or of the Fund with
respect to any right to payment of any amount pursuant to this Plan. To the
extent that any person acquires any right to receive payments under the Plan of
an amount credited to an Account, such right to payment shall be no greater
than, nor shall it have any preference or priority over, the rights, of any
unsecured general creditor of the Company.

 

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16.2 Interrelationship of the Plan and the Trust. The provisions of the Plan and
the Plan Agreement shall govern the rights of a Participant to receive
distributions pursuant to the Plan. The provisions of the Trust shall govern the
rights of the Employers, Participants and the creditors of the Employers to the
assets transferred to the Trust. Each Employer shall at all times remain liable
to carry out its obligations under the Plan.

 

16.3 Distributions From the Trust. Each Employer’s obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Employer’s obligations under
this Plan.

ARTICLE 17

Miscellaneous

 

17.1 Status of Plan. The Plan is intended to be a plan that is not qualified
within the meaning of Code Section 401(a) and that “is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees”
within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan
shall be administered and interpreted (i) in a manner consistent with that
intent, and (ii) in accordance with Code Section 409A and related Treasury
guidance and Regulations.

 

17.2 Unsecured General Creditor. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests or
claims in any property or assets of an Employer. For purposes of the payment of
benefits under this Plan, any and all of an Employer’s assets shall be, and
remain, the general, unpledged unrestricted assets of the Employer. An
Employer’s obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future.

 

17.3 Employer’s Liability. An Employer’s liability for the payment of benefits
shall be defined only by the Plan and the Plan Agreement, as entered into
between the Employer and a Participant. An Employer shall have no obligation to
a Participant under the Plan except as expressly provided in the Plan and his or
her Plan Agreement.

 

17.4 Nonassignability. Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate, alienate or convey in advance of
actual receipt, the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are expressly declared to be, unassignable
and non-transferable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure, attachment, garnishment or sequestration for the
payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, be transferable by operation of law in the
event of a Participant’s or any other person’s bankruptcy or insolvency or be
transferable to a spouse as a result of a property settlement or otherwise.

 

17.5 Not a Contract of Employment. The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between any Employer and
the Participant. Such employment is hereby acknowledged to be an “at will”
employment relationship that can be terminated at any time for any reason, or no
reason, with or without cause, and with or without notice, unless expressly
provided in a written employment agreement. Nothing in this Plan shall be deemed
to give a Participant the right to be retained in the service of any Employer,
or to interfere with the right of any Employer to discipline or discharge the
Participant at any time.

 

17.6 Furnishing Information. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information requested by
the Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of benefits
hereunder, including but not limited to taking such physical examinations as the
Committee may deem necessary.

 

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17.7 Terms. Whenever any words are used herein in the masculine, they shall be
construed as though they were in the feminine in all cases where they would so
apply; and whenever any words are used herein in the singular or in the plural,
they shall be construed as though they were used in the plural or the singular,
as the case may be, in all cases where they would so apply.

 

17.8 Captions. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.

 

17.9 Governing Law. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the internal laws of the Commonwealth of
Pennsylvania without regard to its conflicts of laws principles.

 

17.10 Notice. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and hand-delivered,
or sent by registered or certified mail, to the address below:

Commonwealth Telephone Enterprises, Inc.

100 CTE Drive

Dallas, PA 18612

Attn: Vice President of Human Resources

Such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification.

Any notice or filing required or permitted to be given to a Participant under
this Plan shall be sufficient if in writing and hand-delivered, or sent by mail,
to the last known address of the Participant.

 

17.11 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Participant’s Employer and its successors and assigns and the
Participant and the Participant’s designated Beneficiaries.

 

17.12 Spouse’s Interest. The interest in the benefits hereunder of a spouse of a
Participant who has predeceased the Participant shall automatically pass to the
Participant and shall not be transferable by such spouse in any manner,
including but not limited to such spouse’s will, nor shall such interest pass
under the laws of intestate succession.

 

17.13 Validity. In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
parts hereof, but this Plan shall be construed and enforced as if such illegal
or invalid provision had never been inserted herein.

 

17.14 Incompetent. If the Committee determines in its discretion that a benefit
under this Plan is to be paid to a minor, a person declared incompetent or to a
person incapable of handling the disposition of that person’s property, the
Committee may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such minor, incompetent
or incapable person. The Committee may require proof of minority, incompetence,
incapacity or guardianship, as it may deem appropriate prior to distribution of
the benefit. Any payment of a benefit shall be a payment for the account of the
Participant and the Participant’s Beneficiary, as the case may be, and shall be
a complete discharge of any liability under the Plan for such payment amount.

 

17.15 Court Order. The Committee is authorized to comply with any court order in
any action in which the Plan or the Committee has been named as a party,
including any action involving a determination of the rights or interests in a
Participant’s benefits under the Plan. Notwithstanding the foregoing, the
Committee shall interpret this provision in a manner that is consistent with
Code Section 409A and other applicable tax law. In addition, if necessary to
comply with a qualified domestic relations order, as defined in Code
Section 414(p)(1)(B), pursuant to which a court has determined that a spouse or
former spouse of a Participant has an interest in the Participant’s benefits
under the Plan, the Committee, in its sole discretion, shall have the right to
immediately distribute the spouse’s or former spouse’s interest in the
Participant’s benefits under the Plan to such spouse or former spouse.

 

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17.16 Distribution in the Event of Income Inclusion Under 409A. If any portion
of a Participant’s Account Balance under this Plan is required to be included in
income by the Participant prior to receipt due to a failure of this Plan to meet
the requirements of Code Section 409A and related Treasury guidance or
Regulations, the Participant may petition the Committee or Administrator, as
applicable, for a distribution of that portion of his or her Account Balance
that is required to be included in his or her income. Upon the grant of such a
petition, which grant shall not be unreasonably withheld, the Participant’s
Employer shall distribute to the Participant immediately available funds in an
amount equal to the portion of his or her Account Balance required to be
included in income as a result of the failure of the Plan to meet the
requirements of Code Section 409A and related Treasury guidance or Regulations,
which amount shall not exceed the Participant’s unpaid vested Account Balance
under the Plan. If the petition is granted, such distribution shall be made
within ninety (90) days of the date when the Participant’s petition is granted.
Such a distribution shall affect and reduce the Participant’s benefits to be
paid under this Plan.

 

17.17 Insurance. The Employers, on their own behalf or on behalf of the trustee
of the Trust, and, in their sole discretion, may apply for and procure insurance
on the life of the Participant, in such amounts and in such forms as the Trust
may choose. The Employers or the trustee of the Trust, as the case may be, shall
be the sole owner and beneficiary of any such insurance. The Participant shall
have no interest whatsoever in any such policy or policies, and at the request
of the Employers shall submit to medical examinations and supply such
information and execute such documents as may be required by the insurance
company or companies to whom the Employers have applied for insurance.

 

Commonwealth Telephone Enterprises, Inc.

By:

       Michael J. Mahoney   President and Chief Executive Officer

 

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