# **Exhibit10.23**

# ** **

SureWest CommunicationsP.O. Box 969Roseville, California 95661

 

 

October 4, 2004

 

 

Philip A. GrybasSureWest CommunicationsP.O. Box 969Roseville, California 95661

 

Dear Philip:

 

SureWest Communications (the “Company”) considers itessential to the best interests of the Company and its shareholders to fosterthe continued employment of key management personnel in a period of uncertaintyregarding the Company’s future in light of the consolidation in thetelecommunications industry.  In thisconnection, the Board of Directors of the Company (the “Board”) recognizes thatthe possibility of a change in control exists and that such possibility, andthe uncertainty and questions which it necessarily raises among management, mayresult in the departure or distraction of management personnel to the detrimentof the Company and its shareholders when their undivided attention andcommitment to the best interests of the Company and its shareholders areparticularly important.

 

Accordingly, the Board has determined that appropriatesteps should be taken to reinforce and encourage the continued attention anddedication of members of the Company’s management, including you, to theirassigned duties without distraction in the face of potentially disturbingcircumstances arising from the possibility of a change in control of theCompany.

 

In order to induce you to remain in the employ of theCompany and in consideration of your agreement set forth in Section 2 hereof,the Company agrees that you shall receive the benefits set forth in this letteragreement (“Agreement”) in the event of a “change in control of the Company”and a “constructive termination” (each as defined in Section 2 hereof) underthe circumstances described below.

 

1.             **Term of Agreement.** This Agreement shall commence on the date hereof and shall continue ineffect through December 31, 2004; *provided, however,*thatcommencing on January 1, 2005 and each January 1 thereafter, the term of thisAgreement shall automatically be extended for one additional year unless, notlater than by November 30 of the preceding year, the 

 

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Company shall have givennotice that it does not wish to extend this Agreement; *provided,further,*that following a change in control of the Company (ashereinafter defined) the term of this Agreement shall automatically extend tothe date which is two (2) years following such change in control.

 

2.             **Change in Control and Constructive Termination.**  No benefits shall be payable hereunder unlessthere shall have been a change in control of the Company and thereafter aconstructive termination, as set forth below. For purposes of this Agreement, a “change in control of the Company”shall be deemed to have occurred if (A) any “person” (as such term is used inSection 13(d) and 14(d) of the Exchange Act), other than a trustee or otherfiduciary holding securities under an employee benefit plan of the Company, isor becomes the “beneficial owner” (as defined in Rule 13d-3 under the ExchangeAct), directly or indirectly, of securities of the Company representing Twentypercent (20%) or more of the combined voting power of the Company’s thenoutstanding voting securities; (B) there is a merger or consolidation of theCompany in which the Company does not survive as an independent public company;or (C) the business or businesses of the Company for which your services areprincipally performed are disposed of by the Company pursuant to a partial orcomplete liquidation of the Company, a sale of assets (including stock of asubsidiary) of the Company, or otherwise. For purposes of this Agreement, “constructive termination” shall mean achange in control of the company, as well as, and as a direct result thereof,(i) a decrease in the total amount of your base salary below its level ineffect on the date hereof or as the same may be increased from time to time, ora decrease in the bonus percentage to which you are entitled, without yourconsent, provided, however, nothing herein shall be construed to guarantee yourbonus award if performance is below target, or (ii) a reduction in theimportance of your job responsibilities without your consent, with thedetermination of whether a reduction in job responsibility has taken place tobe in your discretion or, (iii) your geographical relocation without yourconsent.  Absent written consent, after achange in control of the Company, no action or inaction by you within ninety(90) days following the occurrence of the events described in (i), (ii) or (iii)hereof shall be deemed consent to such events.

 

3.             **Compensation Following Change of Control and Constructive Termination.**  Subject to the terms and conditions of thisAgreement, following a change in control of the Company and constructivetermination, as defined in Section 2, the Company shall pay you a lump sumpayment, within ten (10) days after the constructive termination, in the amountequal to the sum of:

 

(A)          The sum of your theneffective annual base salary through the termination date and any accrued paidtime off, plus

 

(B)           two times the sum of(I) your full annual base salary on the date of the constructive termination,plus (II) the greater of your target bonus or the most recent annual bonus paidto you.

 

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In addition, the Company shall continue to provide to you and yourfamily at the Company’s expense, for twenty-four (24) months following thechange in control and the constructive termination, the life insurance,medical, dental and other benefits provided to you and your family immediatelyprior to the change in control and constructive termination.  The Company also shall pay to you all legalfees and expenses incurred by you in seeking to obtain or enforce any right orbenefit provided by this Agreement.  Youshall not be required to mitigate the amount of any payment provided for inthis Section 3 by seeking other employment or otherwise, nor shall the amountof any payment or benefit provided for in this Section 3 be reduced by any compensationearned by you as the result of employment by another employer or by retirementbenefits after the date of termination, or otherwise.

 

4.             **Certain Additional Payments by the Company.**

 

(i)            Anythingin this Agreement to the contrary notwithstanding, in the event it shall bedetermined that any payment or distribution by the Company to or for yourbenefit (whether paid or payable or distributed or distributable pursuant tothe terms of this Agreement or otherwise, but determined without regard to any additionalpayments required under this Section 4) (a “Payment”) would be subject to theexcise tax imposed by Section 4999 of the Internal Revenue Code of 1986, asamended (the “Code”) or any corresponding provisions of state or local taxlaws, or any interest or penalties are incurred by you with respect to suchexcise tax (such excise tax, together with any such interest and penalties, arehereinafter collectively referred to as the “Excise Tax”), then you shall beentitled to receive an additional payment (a “Gross-Up Payment”) in an amountsuch that after your payment of all taxes (including any interest or penaltiesimposed with respect to such taxes), including, without limitation, any incometaxes (and any interest and penalties imposed with respect thereto) and ExciseTax imposed upon the Gross-Up Payment, you retain an amount of the Gross-UpPayment equal to the Excise Tax imposed upon the Payments.

 

(ii)           Subjectto the provisions of Section 4(iii), all determinations required to be madeunder this Section 4, including whether and when a Gross-Up Payment is requiredand the amount of such Gross-Up Payment and the assumptions to be utilized inarriving at such determination, shall be made by Ernst & Young LLP or suchother certified public accounting firm as may be designated by you (the “AccountingFirm”), which shall provide detailed supporting calculations both to theCompany and you within 15 business days of the receipt of notice from you thatthere has been a Payment, or such earlier time as is requested by theCompany.  In the event that theAccounting Firm is serving as accountant or auditor for the individual, entityor group effecting the change of control, you shall appoint another nationallyrecognized accounting firm to make the determinations required hereunder (whichaccounting firm shall then be referred to as the Accounting Firmhereunder).  All fees and expenses of theAccounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuantto this Section 4, shall be paid by the Company to you within five days of thereceipt of

 

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the Accounting Firm’sdetermination.  Any determination by theAccounting Firm shall be binding upon the Company and you.  As a result of the uncertainty in theapplication of Section 4999 of the Code at the time of the initialdetermination by the Accounting Firm hereunder, it is possible that Gross-UpPayments which will not have been made by the Company should have been made (“Underpayment”),consistent with the calculations required to be made hereunder. In the eventthat the Company exhausts its remedies pursuant to Section 4(iii) and youthereafter are required to make a payment of any Excise Tax, the AccountingFirm shall determine the amount of the Underpayment that has occurred and anysuch Underpayment shall be promptly paid by the Company to or for your benefit.

 

(iii)          Youshall notify the Company in writing of any claim by the Internal RevenueService that, if successful, would require the payment by the Company of theGross-Up Payment.  Such notificationshall be given as soon as practicable but no later than ten business days afteryou are informed in writing of such claim and shall apprise the Company of thenature of such claim and the date on which such claim is requested to bepaid.  You shall not pay such claim priorto the expiration of the 30-day period following the date on which you givesuch notice to the Company (or such shorter period ending on the date that anypayment of taxes with respect to such claim is due).  If the Company notifies you in writing priorto the expiration of such period that it desires to contest such claim, youshall:

 

(A)          give the Company anyinformation reasonably requested by the Company relating to such claim,

 

(B)           take such action inconnection with contesting such claim as the Company shall reasonably requestin writing from time to time, including, without limitation, accepting legalrepresentation with respect to such claim by an attorney reasonably selected bythe Company,

 

(C)           cooperate with theCompany in good faith in order effectively to contest such claim, and

 

(D)          permit the Company toparticipate in any proceedings relating to such claim; provided, however, thatthe Company shall bear and pay directly all costs and expenses (includingadditional interest and penalties) incurred in connection with such contest andshall indemnify and hold you harmless, on an after-tax basis, for any ExciseTax or income tax (including interest and penalties with respect thereto)imposed as a result of such representation and payment of costs and expenses.Without limitation on the foregoing provisions of this Section 4(iii), theCompany shall control all proceedings taken in connection with such contestand, at its sole option, may pursue or forego any and all administrativeappeals, proceedings, hearings and conferences with the taxing authority inrespect of such claim and may, at its sole option, either direct you to pay thetax

 

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claimed and sue for a refund or contest the claim inany permissible manner, and you agree to prosecute such contest to adetermination before any administrative tribunal, in a court of initialjurisdiction and in one or more appellate courts, as the Company shalldetermine; provided, however, that if the Company directs you to pay such claimand sue for a refund, the Company shall advance the amount of such payment toyou, on an interest-free basis and shall indemnify and hold you harmless, on anafter-tax basis, from any Excise Tax or income tax (including interest orpenalties with respect thereto) imposed with respect to such advance or withrespect to any imputed income with respect to such advance; and furtherprovided that any extension of the statute of limitations relating to paymentof taxes for your taxable year with respect to which such contested amount isclaimed to be due is limited solely to such contested amount. Furthermore, theCompany’s control of the contest shall be limited to issues with respect towhich a Gross-Up Payment would be payable hereunder and you shall be entitledto settle or contest, as the case may be, any other issue raised by theInternal Revenue Service or any other taxing authority.

 

(iv)          If,after your receipt of an amount advanced by the Company pursuant to Section4(iii), you become entitled to receive any refund with respect to such claim,you shall (subject to the Company’s complying with the requirements of Section4(iii)) promptly pay to the Company the amount of such refund (together withany interest paid or credited thereon after taxes applicable thereto). If,after your receipt of an amount advanced by the Company pursuant to Section4(iii), a determination is made that you shall not be entitled to any refundwith respect to such claim and the Company does not notify you in writing ofits intent to contest such denial of refund prior to the expiration of 30 daysafter such determination, then such advance shall be forgiven and shall not berequired to be repaid and the amount of such advance shall offset, to theextent thereof, the amount of Gross-Up Payment required to be paid.

 

5.             **Successors; Binding Agreement.**

 

(i)            TheCompany will require any successor (whether direct or indirect, by merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company to expressly agree to perform this Agreement.  Failure of the Company to obtain suchassumption and agreement prior to the effectiveness of any such successionshall be a breach of this Agreement and shall entitle you to compensation fromthe Company in the same amount and on the same terms as you would be entitledhereunder following a change in control of the Company and constructive termination,except that for purposes of implementing the foregoing, the date on which anysuch succession becomes effective shall be deemed the date on which you becomeentitled to such compensation from the Company. As used in this Agreement, “Company” shall mean the Company ashereinbefore defined and any successor to its business and/or assets asaforesaid which assumes and agrees to perform this Agreement by operation oflaw, or otherwise.

 

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(ii)           ThisAgreement shall inure to the benefit of and be enforceable by your executors,administrators, successors, heirs, distributees, devisees and legatees.  If you should die while any amount wouldstill be payable to you hereunder if you had continued to live, all suchamounts, unless otherwise provided herein, shall be paid in accordance with theterms of this Agreement to your devisee, legatee or other designee or, if thereis no such designee, to your estate.

 

6.             **Notice.** For purposesof this Agreement, notices and all other communications provided for in thisAgreement shall be in writing and shall be deemed to have been duly given whendelivered or mailed by United States registered mail, return receipt requested,postage prepaid, addressed to the respective addresses set forth on the firstpage of this Agreement, *provided*thatall notices to the Company shall be directed to the attention of the Board witha copy to the Secretary of the Company, or to such other address as eitherparty may have furnished to the other in writing in accordance herewith, exceptthat notice of a change of address shall be effective only upon receipt.

 

7.             **Miscellaneous.**  Noprovision of this Agreement may be modified, waived or discharged unless suchwaiver, modification or discharge is agreed to in writing and signed by you andsuch officer as may be specifically designated by the Board.  No waiver by either party hereto at any timeof any breach by the other party hereto of, or compliance with, any conditionor provision of this Agreement to be performed by such other party shall bedeemed a waiver of similar or dissimilar provisions or conditions at the sameor at any prior or subsequent time.  Noagreements or representations, oral or otherwise, express or implied, withrespect to the subject matter hereof have been made by either party which arenot expressly set forth in this Agreement. The validity, interpretation, construction and performance of thisAgreement shall be governed by the laws of the State of California.

 

8.             **Validity.**  Theinvalidity or unenforceability of any provision of this Agreement shall notaffect the validity or enforceability of any other provision of this Agreement,which shall remain in full force and effect.

 

9.             **Counterparts.**  ThisAgreement may be executed in several counterparts, each of which shall bedeemed to be an original but all of which together will constitute one and thesame instrument.

 

10.           **Supercedes Prior Agreements.** The Company and you agree that this Agreement supercedes all prioragreements, whether written or oral, relating to the subject matter of thisAgreement including, without limitation, any prior letter agreements relatingto payments in the event of a change in control of the Company, or anyprovisions of any letters of offer of employment with the Company.

 

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If this letter sets forth our agreement on the subjectmatter hereof, kindly sign and return to the Company the enclosed copy of thisletter which will then constitute our agreement on this subject.

 
|                                                                                                                                                                                                                                                 | Sincerely yours,        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                                                                                                                                                                 |                    |
|                                                                                                                                                                                                                                                 | SUREWEST COMMUNICATIONS |
|                                                                                                                                                                                                                                                 |                    |
|                                                                                                                                                                                                                                                 |                    |
|                                                                                                                                                                                                                                                 | By                      |   |
|                                                                                                                                                                                                                                                 |                    | Kirk C. Doyle |
|                                                                                                                                                                                                                                                 |                    | Chairman |
|                                                                                                                                                                                                                                                 |
| AGREED TO this               day                                                                                                                                                         |
|                                                                                                                                                                                                                                                 |
| of                                   ,  200     . |
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|                                                                                                                                                                                                                                                 |                    |
| Philip A. Grybas                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                      |                         |  |  |  |

 

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