Document:

exhibit10_56.htm

     

    Exhibit
10.56

    FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

     

    This
FIRST AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT (this “Agreement”), dated as
of October 30, 2008, is among CABOT MICROELECTRONICS
CORPORATION, a Delaware corporation (the “Company”), the
financial institutions parties to the Credit Agreement described below, as Banks
thereunder, BANK OF AMERICA,
N.A. (in its individual capacity, “Bank of America”), as
successor by merger to LaSalle Bank National Association, in its capacity as
Administrative Agent, Issuing Bank, and Swing Line Bank under such Credit
Agreement, and JPMORGAN CHASE
BANK, N.A., formerly known as Bank One, N.A. (in its individual capacity,
“JPMorgan”), in
its capacity as Syndication Agent under such Credit Agreement.

     

    R E C I T A L
S

     

    A.           The
Company, the Banks, the Administrative Agent, the Issuing Bank, the Swing Line
Bank, and National City Bank of Michigan/Illinois (“National City”), as
the original Syndication Agent thereunder, entered into an Amended and
Restated  Credit Agreement dated as of November 24, 2003 (the “Credit Agreement”),
pursuant and subject to the terms and conditions of which, among other things,
the Banks, the Issuing Bank, and the Swing Line Bank agreed to make loans and
other financial accommodations to the Company.

     

    B.           Concurrently
herewith, with the consent of both the Company and the Administrative Agent (i)
National City is assigning and delegating to JPMorgan all of its Loans and
Revolving Loan Commitment and the title of “Syndication Agent” under the Credit
Agreement and (ii) U.S. Bank National Association is assigning and delegating to
Bank of America all of its Loans and Revolving Loan Commitment under the Credit
Agreement.

     

    C.           The
Company has requested certain amendments to the Credit Agreement.

     

    D.           Subject
to the terms and conditions of this Agreement, the Banks, the Administrative
Agent, the Issuing Bank, the Swing Line Bank, and the Syndication Agent are
willing to agree to the requests of the Company.

     

    NOW, THEREFORE, in
consideration of the mutual agreements contained herein, and subject to the
terms and conditions hereof, the parties hereto hereby agree as
follows:

     

    1.           Incorporation
of Recitals.  The Recitals set
forth above are incorporated herein, are acknowledged by the Company to be true
and correct and are made a part hereof.

     

    2.           Definitions.  All capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Credit Agreement, as amended by this
Agreement.

     

    3.           Amendments
to Credit Agreement.  The Credit
Agreement is amended as set forth below:

     

    (a)           Preamble
– Amended Definitions.  The Preamble to
the Credit Agreement is amended by deleting the words “LASALLE BANK NATIONAL
ASSOCIATION (in its individual capacity, “LaSalle”), as
administrative agent and issuing bank for the Banks, and NATIONAL CITY BANK OF
MICHIGAN/ILLINOIS, a national banking association (in its individual capacity,
“National
City”), as syndication agent for the Banks” and substituting the words
“BANK OF AMERICA, N.A. (in its individual capacity, “Bank of America”), as
successor by merger to LaSalle Bank National Association (“LaSalle”), as
administrative agent, issuing bank, and swing line bank for the Banks, and
JPMORGAN CHASE BANK, N.A., a national banking association (in its individual
capacity, “JPMorgan”), as
successor to National City Bank of Michigan/Illinois, a national banking
association (“National
City”), as syndication agent for the Banks”.

     

     

    
      
        
        

      

      
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    (b)           Section
1.1 – Amended Definitions.  Section 1.1 of the
Credit Agreement is amended by deleting the current version of the following
definitions and substituting the following versions in lieu
thereof:

     

    Administrative Agent
means Bank of America, in its capacity as administrative agent for the Banks
hereunder, and any successor thereto in such capacity.

     

    Bank – see the
Preamble.  References to the “Banks” shall include
(a) Bank of America, for so long as it holds any Loans or has any Revolving Loan
Commitment hereunder, (b) JPMorgan Chase Bank, N.A., for so long as it holds any
Loans or has any Revolving Loan Commitment hereunder, (c) any Person who becomes
a party hereto pursuant to an Assignment Agreement or a Joinder Agreement, (d)
the Issuing Bank, and (e) the Swing Line Bank; for purposes of clarification
only, to the extent that Bank of America (or any successor Issuing Bank or Swing
Line Bank) may have any rights or obligations in addition to those of the other
Banks due to its status as Issuing Bank or Swing Line Bank, its status as such
will be specifically referenced.

     

    Business Day means
any day on which Bank of America is open for commercial banking business in
Chicago, Illinois and, in the case of a Business Day which relates to a
Eurodollar Loan, on which dealings are carried on in the London interbank
eurodollar market.

     

    Fee Letter Agreement
means the Fee Letter Agreement dated October 30, 2008 between the Company and
the Administrative Agent.

     

    Issuing Bank means
Bank of America, in its capacity as Issuing Bank hereunder, and any successor
thereto in such capacity.

     

    Prime Rate means, for
any day, the rate of interest in effect for such day as publicly announced from
time to time by Bank of America as its prime rate (whether or not such rate is
actually charged by Bank of America).  Any change in the Prime Rate
announced by Bank of America shall take effect at the opening of business on the
day specified in the public announcement of such change.

     

    Revolving Loan
Commitment means (a) the commitment of a Bank to make or otherwise fund a
Revolving Loan and (b) the commitment of a New Bank to make or otherwise fund
any New Revolving Loan, and, in each case, to acquire participations in Letters
of Credit and Swing Line Loans hereunder and “Revolving Loan
Commitments” means such commitments of all Banks and New Banks in the
aggregate.  The amount of each Bank’s Revolving Loan Commitment is set
forth on Schedule
2.1 or in the applicable Assignment Agreement or Joinder Agreement,
subject to any adjustment or reduction pursuant to the terms and conditions
hereof.  The aggregate amount of the Revolving Loan Commitments as of
the First Amendment Closing Date is $50,000,000.

     

    Scheduled Termination
Date means October 30, 2011, subject to extension pursuant to Section
2.6.

     

    Swing Line Bank means
Bank of America, in its capacity as Swing Line Bank hereunder, and any successor
thereto in such capacity.

     

    Syndication Agent
means JPMorgan, in its capacity as syndication agent for the Banks hereunder,
and any successor thereto in such capacity.

     

    (c)           Section
1.1 – Additional Definitions.  Section 1.1 of the
Credit Agreement is amended by inserting the following definitions in
appropriate alphabetical order:

     

    Bank of America – see
the Preamble.

     

    First Amendment Closing
Date means October 30, 2008.

     

    JPMorgan – see the
Preamble.

     

     

    
      
        
        

      

      
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    (d)           Section
2.2.2 – Identification of Sub-Paragraphs.  Section 2.2.2 of the
Credit Agreement is amended by inserting the letter “(a)” before the first
paragraph thereof and the letter “(b)” before the second paragraph
thereof.

     

    (e)           Section
2.6 – Renewal Options.  Section 2.6 of the
Credit Agreement is deleted in its entirety and the following is substituted in
lieu thereof:

     

    “2.6           Renewal
Options.

     

    (a)           Subject
to the terms and conditions of this Section 2.6, provided no Unmatured Event of
Default or Event of Default then exists and with the prior written consent of
the Banks (which consent shall not be unreasonably withheld or delayed and shall
not include any requirement of payment of any fee solely on account of the
exercise of such Renewal Option if no other term or provision of this Agreement
or the other Loan Documents is being amended) (i) prior to the second
anniversary of the First Amendment Closing Date the Company may elect to extend
the Scheduled Termination Date from October 30, 2011 to October 30, 2012 (the
“First Renewal
Option”) and (ii) if the Company has properly exercised the First Renewal
Option and the Banks have consented to the extension of the Scheduled
Termination Date from October 30, 2011 to October 30, 2012, prior to the third
anniversary of the First Amendment Closing Date the Company may elect to extend
further the Scheduled Termination Date from October 30, 2012 to October 30, 2013
(the “Second Renewal
Option” and, together with the First Renewal Option, the “Renewal
Options”).  The Company may exercise a Renewal Option solely by
delivering to the Administrative Agent not more than 120 days nor less than 60
days prior to the second anniversary of the First Amendment Closing Date (in the
case of the First Renewal Option) or the third anniversary of the First
Amendment Closing Date (in the case of the Second Renewal Option) written notice
of its election to exercise such Renewal Option.  Each such notice
shall be effective upon receipt by the Administrative Agent and shall be
irrevocable.  Promptly upon receipt of such notice, the Administrative
Agent shall advise the Banks thereof.  Each Bank shall deliver to the
Administrative Agent either its written consent or written refusal to the
applicable extension not later than the date (the “Determination Date”)
which is 30 days prior to the second anniversary of the First Amendment Closing
Date (in the case of the exercise by the Company of the First Renewal Option) or
the third anniversary of the First Amendment Closing Date (in the case of the
exercise by the Company of the Second Renewal Option).  Any Bank which
fails to deliver such written consent to the Administrative Agent not later than
the applicable Determination Date shall be deemed for all purposes irrevocably
to have consented to the applicable extension.  Under no circumstances
shall any Bank be liable to or under any obligation to the Company for the
failure of any other Bank to consent to the applicable extension, and in no
event shall the Scheduled Termination Date be extended unless all Banks consent
to such extension.

     

    (b)           If
any Bank other than Bank of America delivers to the Administrative Agent its
written refusal to any applicable extension as described in the preceding
paragraph (a), then, if no Event of Default has occurred and is continuing, the
Company may designate a Replacement Bank to purchase the Loans of such Bank and
such Bank’s rights hereunder, without recourse to or warranty by, or expense to,
such Bank, for a purchase price equal to the outstanding principal amount of the
Loans payable to such Bank plus any accrued but unpaid interest on such Loans
and all accrued but unpaid fees owed to such Bank and any other amounts payable
to such Bank under this Agreement (excluding, however, in the event the
aggregate Pro Rata Shares of the Banks being replaced are less than 25%, all
amounts, if any, which otherwise would be payable to such Bank pursuant to Section 8.4 hereof),
and to assume all the obligations of such Bank hereunder, and, upon such
purchase and assumption (pursuant to an Assignment Agreement), such Bank shall
no longer be a party hereto or have any rights hereunder (other than rights with
respect to indemnities and similar rights applicable to such Bank prior to the
date of such purchase and assumption) and shall be relieved from all obligations
to the Company hereunder, and the Replacement Bank shall succeed to the rights
and obligations of such Bank hereunder.”

     

    (f)           Upfront
Fees.  Section 5.3 of the
Credit Agreement is deleted in its entirety and the following is substituted in
lieu thereof:

     

    “5.3                      Upfront
Fees.  The Company agrees to pay to the Administrative Agent on
the First Amendment Closing Date an upfront fee as set forth in the Fee Letter
Agreement (and the Administrative Agent agrees to promptly forward to each Bank
a portion of such upfront fee in the amount previously agreed to between the
Administrative Agent and such Bank).  The Company further agrees to
pay to the Administrative Agent on the date each New Revolving Loan Commitment
becomes effective an upfront fee as set forth in the Fee Letter Agreement (and
the Administrative Agent agrees to promptly forward to each New Bank a portion
of such upfront fee in the amount agreed to between the Administrative Agent and
such New Bank).”

     

     

    
      
        
        

      

      
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    (g)           Section
9,14 – Subsidiaries.  Section 9.14 of the
Credit Agreement is deleted in its entirety and the following is substituted in
lieu thereof:

     

    “9.14                      Subsidiaries.  Except
as set forth on Schedule 9.14 hereto, as of the First Amendment Closing Date the
Company has no Subsidiaries.”

     

    (h)           Section
10.6.3 – Minimum Net Worth.  Section 10.6.3 of the
Credit Agreement is deleted in its entirety.

     

    (i)           Section
10.7 – Limitations on Debt.  Clause (a) of
Section 10.7 of
the Credit Agreement is deleted in its entirety and the following is substituted
in lieu thereof:

     

    “(a)           Debt
under this Agreement and the other Loan Documents;”

     

    (j)           Section
10.11 – Mergers, Consolidations, Acquisitions, Sales.  Clause (c)(2) of
Section 10.11
of the Credit Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

     

    “(2)           the
aggregate consideration to be paid by the Company and its Subsidiaries
(including any Debt assumed or issued in connection therewith and the value of
all capital stock issued in connection therewith, the amount thereof to be
calculated in accordance with GAAP) in connection with such Acquisition (or any
series of related Acquisitions) does not exceed $70,000,000 individually and
$150,000,000 in the aggregate when taking into consideration the aggregate
purchase price of all other purchases and acquisitions consummated after the
First Amendment Closing Date;”

     

    (k)           Section
10.11(d) – Mergers, Consolidations, Acquisitions, Sales.  Section 10.11(d) of
the Credit Agreement is deleted in its entirety and the following is substituted
in lieu thereof:

     

    “(d)           sales
and dispositions of assets (including the stock of Subsidiaries) for at least
fair market value (as determined by the Board of Directors of the Company for
any such sale or disposition outside the ordinary course of business) so long as
the net book value of all assets sold or otherwise disposed of prior to the
fifth anniversary of the First Amendment Closing Date does not exceed the
remainder of (1) 10% of the net book value of the consolidated tangible assets
of the Company and its Subsidiaries as of the most recently ended Fiscal Quarter
minus (2) the
aggregate value of all such sales and dispositions since the First Amendment
Closing Date.”

     

    (l)           Section
13.8 – Agents in Individual Capacity.  Section 13.8 of the
Credit Agreement is deleted in its entirety and the following is substituted in
lieu thereof:

     

    “13.8                      Agents in Individual
Capacity.  Bank of America, JPMorgan and their respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the
Company and its Subsidiaries and Affiliates as though Bank of America was not
the Administrative Agent or the Issuing Bank hereunder, JPMorgan was not the
Syndication Agent hereunder and without notice to or consent of the
Banks.  The Banks acknowledge that, pursuant to such activities, Bank
of America, JPMorgan and their respective Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Affiliate) and acknowledge that no Agent shall be under any obligation to
provide such information to them.  With respect to their Loans (if
any),  Bank of America, JPMorgan and their respective Affiliates shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though Bank of America was not the Administrative Agent and
the Issuing Bank, JPMorgan was not the Syndication Agent, and the terms “Bank”
and “Banks” include Bank of America, JPMorgan and their respective Affiliates,
to the extent applicable, in their individual capacities.”

     

     

    
      
        
        

      

      
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    (m)           Pricing
Schedule.  The Pricing
Schedule attached to the Credit Agreement is deleted in its entirety and the
Pricing Schedule attached hereto is substituted in lieu thereof.

     

    (n)           Schedule
2.1 – Banks and Pro Rata Shares.  Schedule 2.1 attached
to the Credit Agreement is deleted in its entirety and Schedule 2.1 attached
hereto is substituted in lieu thereof.

     

    (o)           Schedule
9.6 – Litigation and Contingent Liabilities.  Schedule 9.6 attached
to the Credit Agreement is deleted in its entirety and Schedule 9.6 attached
hereto is substituted in lieu thereof.

     

    (p)           Schedule
9.14 – Subsidiaries.  Schedule 9.14
attached to the Credit Agreement is deleted in its entirety and Schedule 9.14
attached hereto is substituted in lieu thereof.

     

    (q)           Schedule
10.19 – Investments.  Schedule 10.19
attached to the Credit Agreement is deleted in its entirety and Schedule 10.19
attached hereto is substituted in lieu thereof.

     

    (r)           Schedule
14.3 – Addresses for Notices.  Schedule 14.3
attached to the Credit Agreement is deleted in its entirety and Schedule 14.3
attached hereto is substituted in lieu thereof.

     

    (s)           Exhibits
A-1, A-2, B, C, D and F.  Exhibits A-1, A-2, B, C, D, and F attached to the
Credit Agreement are deleted in their entirety and Exhibits A-1, A-2, B, C, D, and F attached hereto are
substituted in lieu thereof.

     

    4.           Conditions
to Effectiveness.  The effectiveness
of this Agreement shall be subject to the satisfaction of all of the following
conditions in a manner, form and substance satisfactory to the Administrative
Agent:

     

     

    
      
        
        

      

      
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    (a)           Delivery
of Documents.  The following
shall have been delivered to the Administrative Agent, each duly authorized and
executed and each in form and substance satisfactory to the Administrative
Agent:

     

    (1)           this
Agreement;

     

    (2)           an
Assignment Agreement executed by the Company, National City and JPMorgan by
which National City assigns and delegates to JP Morgan all of its Loans and
Revolving Loan Commitment and the title of “Syndication Agent” under the Credit
Agreement;

     

    (3)           an
Assignment Agreement executed by the Company, U.S. Bank National Association and
Bank of America by which U.S. Bank National Association assigns and delegates to
Bank of America all of its Loans and Revolving Loan Commitment under the Credit
Agreement;

     

    (4)           a
replacement Revolving Note in the amount of $30,000,000 made by the Company
payable to the order of Bank of America in replacement of, and substitution for,
the Revolving Notes previously issued by the Company to U.S. Bank National
Association and LaSalle;

     

    (5)           a
replacement Revolving Note in the amount of $20,000,000 made by the Company
payable to the order of JPMorgan in replacement of, and substitution for, the
Revolving Notes previously issued by the Company to National City and to Bank
One, N.A.;

     

    (6)           a
replacement Swing Line Note in the amount of $5,000,000 made by the Company
payable to the order of Bank of America in replacement of, and substitution for,
the Swing Line Note previously issued by the Company to LaSalle;
and

     

    (7)           the
Fee Letter Agreement;

     

    (8)           a
replacement Guaranty executed by such of the Company’s Subsidiaries as are
required to execute the Guaranty pursuant to Section 10.14 of the Credit
Agreement in replacement of, and substitution for, the Guaranty delivered on the
Closing Date; and

     

    (9)           such
other instruments, documents, certificates, consents, waivers and opinions as
the Administrative Agent reasonably may request.

     

    (b)           Payment
of Fees.  The Company shall
have paid to the Administrative Agent the upfront fee and such other fees as are
payable on the First Amendment Closing Date pursuant to the Fee Letter
Agreement.

     

    (c)           No
Default.  No Event of
Default or Unmatured Event of Default shall exist.

     

    (d)           Material
Adverse Effect.  No event shall have occurred since September
30, 2007 which has had or could have a material adverse effect on the financial
condition or affairs of the Company.

     

    The date
on which all of the conditions set forth in this Section 4 have been satisfied
is referred to herein as the “Effective Date.”

     

     

    
      
        
        

      

      
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    5.           Loan
Document.  This Agreement
shall constitute a “Loan Document.”  From and after the Effective
Date, all terms used in the Loan Documents which are defined in the Credit
Agreement shall be deemed to refer to such terms as amended by this
Agreement.

     

    6.           Representations
and Warranties.  The Company
hereby confirms to the Banks, the Issuing Bank, the Swing Line Bank, and the
Administrative Agent that the representations and warranties set forth in the
Loan Documents are true and correct in all material respects as of the date
hereof (unless any such representation or warranty relates to a specific date,
in which case such representation or warranty is true and correct as of such
date), and shall be deemed to be remade as of the date hereof (unless any such
representation or warranty relates to a specific date, in which case such
representation or warranty shall be deemed to be remade as of such
date).  The Company represents and warrants to the Banks, the Issuing
Bank, the Swing Line Bank, and the Administrative Agent that (i) it has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder, (ii) upon the execution and delivery hereof, this
Agreement will be valid, binding and enforceable upon it in accordance with its
terms (except as such enforceability may be limited by (x) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect affecting the enforcement of creditors’ rights generally and
(y) equitable principles (whether or not any action to enforce this Agreement is
brought at law or in equity)), (iii) the execution and delivery of this
Agreement does not and will not contravene, conflict with, violate or constitute
a default under (A) its articles or certificate of incorporation, by-laws,
certificate of formation or operating agreement, as applicable, or (B) any
applicable law, rule, regulation, judgment, decree or order or any agreement,
indenture or instrument to which it is a party or is bound or which is binding
upon or applicable to all or any portion of its property and (iv) as of the date
hereof no Event of Default or Unmatured Event of Default exists.

     

    7.           No
Further Amendments; Ratification of Liability.  Except as amended
hereby, the Credit Agreement and each of the other Loan Documents shall remain
in full force and effect in accordance with their respective
terms.  The Company hereby ratifies and confirms its liabilities,
obligations and agreements under the Credit Agreement and the other Loan
Documents, all as amended by this Agreement, and the Liens created thereby, and
acknowledges that (i) it has no defenses, claims or set-offs to the enforcement
by the Administrative Agent of such liabilities, obligations and agreements,
(ii) the Banks, the Issuing Bank, the Swing Line Bank, and the Administrative
Agent have each fully performed all obligations to the Company which any of them
may have had or has on and as of the date hereof and (iii) other than as
specifically set forth herein, the Banks, the Issuing Bank, the Swing Line Bank,
and the Administrative Agent do not waive, diminish or limit any term or
condition contained in the Credit Agreement or the other Loan
Documents.  The Loan Documents, as amended by this Agreement, contain
the entire agreement between the Company, the Banks, the Issuing Bank, the Swing
Line Bank, and the Administrative Agent with respect to the transactions
contemplated hereby.

     

    8.           Release
of Claims.  In consideration
of the execution and delivery of this Agreement by the Banks, the Issuing Bank,
the Swing Line Bank, and the Administrative Agent, the sufficiency of which is
acknowledged, and excepting only the contractual obligations respecting future
performance by the Banks, the Issuing Bank, the Swing Line Bank, and the
Administrative Agent arising under the Credit Agreement and the other Loan
Documents, the Company hereby irrevocably releases and forever discharges the
Banks, the Issuing Bank, the Swing Line Bank, and the Administrative Agent and
each of their respective affiliates, subsidiaries, successors, assigns,
directors, officers, employees, agents, representatives and attorneys (each, a
“Released
Person”) of and from all damages, losses, claims, demands, liabilities,
obligations, actions and causes of action whatsoever which the Company may now
have or claim to have on and as of the date hereof against any Released Person,
whether presently known or unknown, liquidated or unliquidated, suspected or
unsuspected, contingent or non-contingent, and of every nature and extent
whatsoever (collectively, “Claims”).  The
Company represents and warrants to the Banks, the Issuing Bank, the Swing Line
Bank, and the Administrative Agent that it has not granted or purported to grant
to any other Person any interest whatsoever in any Claim, as security or
otherwise.  The Company shall indemnify, defend and hold harmless each
Released Person from and against any and all Claims and any loss, cost,
liability, damage or expense (including reasonable attorneys’ fees and expenses)
incurred by any Released Person in investigating, preparing for, defending
against, providing evidence or producing documents in connection with or taking
other action in respect of any commenced or threatened Claim.

     

    9.           Counterparts.  This Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same instrument.  Delivery of an executed signature page of this
Agreement by facsimile transmission or in a pdf or similar electronic file shall
be effective as delivery of a manually executed counterpart hereof.

     

    10.           Further
Assurances.  The Company
covenants and agrees that it will at any time and from time to time do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged and
delivered, all such further acts, documents and instruments as reasonably may be
required by the Administrative Agent in order to effectuate fully the intent of
this Agreement.

     

     

    
      
        
        

      

      
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    11.           Severability.  If any term or
provision of this Agreement or the application thereof to any party or
circumstance shall be held to be invalid, illegal or unenforceable in any
respect by a court of competent jurisdiction, the validity, legality and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby, and the affected term or provision
shall be modified to the minimum extent permitted by law so as most fully to
achieve the intention of this Agreement.

     

    12.           Captions.  The captions in
this Agreement are inserted for convenience of reference only and in no way
define, describe or limit the scope or intent of this Agreement or any of the
provisions hereof.

     

    13.           Entire
Agreement.  This Agreement, the Credit Agreement and the other
Loan Documents executed prior or pursuant hereto constitute the entire agreement
among the parties hereto with respect to the transactions contemplated hereby or
thereby and supersede any prior agreements, whether written or oral, relating to
the subject matter hereof.

     

    14.           Governing
Law.  This Agreement shall be a contract made under and
governed by the internal laws of the State of Illinois applicable to contracts
made and to be performed entirely within such State.

     

    15.           Forum Selection and Consent
to Jurisdiction.  ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF
ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS; PROVIDED THAT ANY
SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  THE COMPANY
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH
ABOVE.  THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF ILLINOIS.  THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     

    16.           Waiver of Jury
Trial.  EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT AND EACH
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.

     

    [remainder
of this page intentionally left blank; signature page follows]

     

    
      
        
          1004934/D/4

        

         

      

      
        8

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, this
Agreement has been executed and delivered by each of the parties hereto by a
duly authorized officer of each such party on the date first set forth
above.

     

    CABOT
MICROELECTRONICS CORPORATION

     

    By:           ____________________________________

    William
S. Johnson

    Vice
President, Chief Financial Officer

    

    

    BANK OF AMERICA, N.A., as
successor by merger to LaSalle Bank National Association, as Administrative
Agent, as Issuing Bank, and as Swing Line Bank

     

    By:           ____________________________________

    Tiffany
Shin

    Assistant
Vice President

     

    JPMORGAN CHASE BANK, N.A., as
Syndication Agent and as a Bank

     

    By:           ____________________________________

    Name:                      ____________________________________

    Title:                      ____________________________________

    

    

    BANK OF AMERICA, N.A., as a
Bank

     

    By:           ____________________________________

    Anne
Eahroshe

    Vice
President

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    PRICING
SCHEDULE

     

    The
Eurodollar Margin, the Base Rate Margin, the Non-Use Fee Rate and the LC Fee
Rate shall be determined as set forth below.

     

    Initially,
the Eurodollar Margin shall be 1.00% per annum, the Base Rate Margin shall be
0.00% per annum, the Non-Use Fee Rate shall be 0.1875% per annum and the LC Fee
Rate shall be 1.00% per annum.

     

    On and
after the first date on which an adjustment is required pursuant to the
penultimate Paragraph of this Pricing Schedule, the Eurodollar Margin, the Base
Rate Margin, the Non-Use Fee Rate and the LC Fee Rate shall be equal to the
applicable rate per annum set forth in the table below opposite the applicable
Leverage Ratio.

     

    

    
      	
               

              Leverage
      Ratio

            	
               

              Eurodollar

              Margin

            	
               

              Base
      Rate

              Margin

            	
               

              Non-Use

              Fee
      Rate

            	
               

              LC
      Fee

              Rate

            
	
              Greater
      than or equal to 1.50:1.00

            	
               

              1.50%

            	
               

              0.00%

            	
               

              0.30%

            	
               

              1.50%

            
	
              Greater
      than or equal to 1.00:1.00 but less than 1.50:1:00

            	
               

              1.25%

            	
               

              0.00%

            	
               

              0.25%

            	
               

              1.25%

            
	
              Less
      than 1.00:1.00

            	
              1.00%

            	
              0.00%

            	
              0.1875%

            	
              1.00%

            

    

    

    The
Eurodollar Margin, the Base Rate Margin, the Non-Use Fee Rate and the LC Fee
Rate shall be adjusted, to the extent applicable, on the 45th (or, in the case
of the last Fiscal Quarter of each Fiscal Year, 90th) day after the end of each
Fiscal Quarter ending on or after December 31, 2008 based on the Leverage Ratio
as of the last day of such Fiscal Quarter; it being understood
that if the Company fails to deliver the financial statements required by Section 10.1.1 or
10.1.2, as
applicable, and the related Compliance Certificate, required by Section 10.1.3, by
the 45th day (or, if applicable, the 90th day) after any Fiscal Quarter, upon
request of the Required Lenders, the Eurodollar Margin shall be 1.50% per annum,
the Base Rate Margin shall be 0.00% per annum, the Non-Use Fee Rate shall be
0.30% per annum, and the LC Fee Rate shall be 1.50% per annum until such
financial statements and Compliance Certificate are delivered. Notwithstanding
the foregoing, no reduction to the foregoing interest rate margins or fee rates
shall become effective at any time when an Event of Default or Unmatured Event
of Default has occurred and is continuing.

     

    Notwithstanding
the foregoing, if the Eurodollar Margin, the Base Rate Margin, the Non-Use Fee
Rate or the LC Fee Rate has been determined on the basis of any Compliance
Certificate delivered by the Company which contained any incorrect or inaccurate
financial data is less than the Eurodollar Margin, the Base Rate Margin, the
Non-Use Fee Rate or the LC Fee Rate which would have been determined had such
Compliance Certificate been based on financial data which was correct and
accurate, then the Eurodollar Margin, the Base Rate Margin, the Non-Use Fee Rate
and the LC Fee Rate at the appropriate higher rate shall be recalculated
retroactively for all affected periods and (to the extent not therefore paid)
the Company hereby agrees to pay all accrued interest as so recalculated on
demand.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    SCHEDULE
2.1

     

    BANKS AND PRO RATA
SHARES

    

    

    

    
      	
               

               

              Bank

            	
              Pro
      Rata Share

              of
      Revolving

              Commitment Amount

            	
               

               

              Pro Rata Share

            
	
              Bank
      of America, N.A.

            	
              $30,000,000

            	
              60%

            
	
              JPMorgan
      Chase Bank, N.A.

            	
              $20,000,000

            	
              40%

            
	
              TOTALS

            	
              $50,000,000

            	
              100%

            

    

    

    

    

    

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    SCHEDULE
9.6

     

    LITIGATION AND CONTINGENT
LIABILITIES

    

    

    DuPont Air Products NanoMaterials,
LLC v. Cabot Microelectronics Corporation
(CV06-2952-PHX-ROS).  Following Cabot Microelectronics’ refusal
to grant a patent license to DuPont Air Products NanoMaterials LLC (DA Nano), in
December, 2006, DA Nano filed a complaint in the United States District Court
for the District of Arizona seeking declaratory relief and alleging
non-infringement, invalidity and/or unenforceability of U.S. Patent Nos.
5,958,288; 5,980,775; 6,068,787 and 4,954,142.  In the same action,
the Company filed a complaint charging that DA Nano and its toll manufacturers
Precision Colloids, LLC and Virkler Corporation are infringing the named four
patents and also a fifth U.S. patent, No. 5,527,423.  The affected DA
Nano products include those used for tungsten CMP.  DA Nano's
complaint does not allege any infringement by Cabot Microelectronics' products
of intellectual property owned by DA Nano.  We believe that our claims
and defenses in the pending action are meritorious, and currently we do not
believe that this action is likely to have a material impact on our consolidated
financial position, results of operations or cash flows.

     

    Cabot Microelectronics Corporation
v. Cheil Industries, Inc. (Republic of Korea) (2007 Kahap 66557 and 2008 Heo
10856).  Cabot Microelectronics is involved in patent
enforcement litigation against Cheil Industries, Inc. with respect to Cheil’s
infringement of Cabot Microelectronics’ intellectual property related to its
international family of patents related to U.S. Patent No.
5,958,288.  The Company believes its claims and defenses in the
pending actions are meritorious, and currently does not believe that the actions
are likely to have a material impact on its consolidated financial position,
results of operations or cash flows.

     

    Jean Pol Delrue v. Cabot
Microelectronics Corporation (RG n° F 08/00884), Labor Court of Versailles,
France.  In September, 2008, a former employee of Cabot
Microelectronics Corporation’s French Branch Office, Mr. Jean Pol Delrue, filed
a wrongful termination claim against Cabot Microelectronics with a French labor
court.  Cabot Microelectronics believes the claim is without
merit.  The Company does not consider the action to be material, and
the parties are currently in discussions to resolve the matter.

     

    

    

    

    

    

    

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    SCHEDULE
9.14

     

    SUBSIDIARIES

    

    Cabot
Microelectronics Global Corporation – 100% owned by Cabot Microelectronics
Corporation

    

    Nihon
Cabot Microelectronics KK – 100% owned by Cabot Microelectronics Global
Corporation

    

    Cabot
Microelectronics Japan KK – 100% owned by Cabot Microelectronics Global
Corporation

    

    Cabot
Microelectronics Singapore Pte. Ltd. – 100% owned by Cabot Microelectronics
Global Corporation

    

    Cabot
Microelectronics Polishing Corporation – 100% owned by Cabot Microelectronics
Corporation

    

    QED
Technologies International, Inc. – 100% owned by Cabot Microelectronics
Corporation

    

    

    

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    SCHEDULE
10.19

     

    INVESTMENTS

    

    
      	
              As
      of September 30, 2008:

            	 
      
	 
      	 
      
	
              Aston
      Funds - ABN AMRO Institutional Prime Money Market Fund

            	
              $     3,999,138.47

            
	 
      	 
      
	
              Invesco
      Aim Funds -Tax Free Cash Reserve Portfolio

            	
              $   41,085,127.84

            
	 
      	 
      
	
              First
      American Funds - Tax Free Obligations Fund

            	
              $
        45,530,058.35

            
	 
      	 
      
	
              JP
      Morgan Funds - Tax Free Money Market Fund - Institutional

            	
              $
        53,555,581.38

            
	 
      	 
      
	
              Federated
      Funds - U.S. Treasury Cash Reserves Fund

            	
              $
        32,259,508.24

            
	 
      	 
      
	
              Dreyfus
      Funds -Tax-Exempt Cash Management

            	
              $   11,677,184.91

            
	 
      	 
      
	
              Auction
      Rate Securities

            	
              $
          8,400,000.00

            
	 
      	 
      
	
              Bank
      of America, N.A. - Automatic Investment Service Sweep Repurchase
      Agreements

            	
              $    877,125.71

            
	 
      	 
      
	
              National
      Westminster Bank, UK - USD

            	
              $       604,664.17

            
	 
      	 
      
	
              National
      Westminster Bank, UK - EUR

            	
              $       239,934.05

            
	 
      	 
      
	
              National
      Westminster Bank, UK - GBP

            	
              $         30,528.87

            
	 
      	 
      
	
              ABN
      AMRO Bank, France - EUR

            	
              $         15,189.89

            
	 
      	 
      
	
              Bank
      of Tokyo-Mitsubishi, Japan - USD

            	
              $       834,154.59

            
	 
      	 
      
	
              Bank
      of Tokyo-Mitsubishi, Japan - JPY

            	
              $
        14,072,001.07

            
	 
      	 
      
	
              Hyakugo
      Bank, Mie, Japan - JPY

            	
              $
                4,394.01

            
	 
      	 
      
	
              ABN
      AMRO Bank, Taiwan - USD

            	
              $   13,443,290.26

            
	 
      	 
      
	
              ABN
      AMRO Bank, Taiwan - TWD

            	
              $       191,317.98

            
	 
      	 
      
	
              International
      Commercial Bank of China, Taiwan - TWD

            	
              $       230,777.70

            
	 
      	 
      
	
              ABN
      AMRO Bank, Singapore - USD

            	
              $
          4,321,793.42

            
	 
      	 
      
	
              ABN
      AMRO Bank, Singapore - SGD

            	
              $
              41,462.92

            
	 
      	 
      
	
              China
      Construction Bank, China - RMB

            	
              $         54,252.46

            
	 
      	 
      
	
              Kookmin
      Bank, Korea - KRW

            	
              $           6,102.16

            
	 
      	 
      
	
              Total
      in United States Dollars

            	
              $ 231,473,588.45

            

    

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    SCHEDULE
14.3

     

    ADDRESSES FOR
NOTICES

     

    COMPANY:

     

    Cabot
Microelectronics Corporation

    870 North
Commons Drive

    Aurora,
Illinois  60504

    Attention:                                William
S. Johnson, Chief Financial Officer

    Telephone:                                (630)
375-5591

    Facsimile:                                (630)
499-2638

     

    with a
copy to:

    

    Cabot
Microelectronics Corporation

    870 North
Commons Drive

    Aurora,
Illinois  60504

    Attention:                                Carol
Bernstein, General Counsel

    Telephone:                                (630)
375-5461

    Facsimile:                                (630)
499-2644

    

    ADMINISTRATIVE
AGENT:

     

    Notices
of Borrowing, Payment, Conversion, Continuation, and
Continuation:

     

    Bank of
America, N.A.

    1 Federal
Street, Floor 6

    Mail
Code:                                MA5-503-06-04

    Boston,
Massachusetts  02110

    Attention:                                Jesse
M. Philips

    Telephone:                                (617)
434-3571

    Facsimile:                                (617)
310-2293

    

    Wire
Instructions:

    

    Bank of
America, N.A.

    New York,
NY

    ABA
#026009593

    MA wire
clearing account

    Reference:                                Cabot
Microelectronics

    Attention:                                Jesse
M. Philips

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    Other
Notices as Administrative Agent:

    

    Bank of
America, N.A.

    Agency
Management

    Global
Product Solutions

    Mail
Code:                                WA1-501-17-32

    800 Fifth
Avenue, Floor 17

    Seattle,
Washington  98104

    Attention:                                Tiffany
Shin, Assistant Vice President

    Telephone:                                (206)
358-0078

    Facsimile:                                (415)
343-0561

    Electronic
Mail:                                           tiffany.shin@bankofamerica.com

     

    ISSUING
BANK:

     

    Standby
Letters of Credit:

     

    Bank of
America, N.A.

    Trade
Operations – Los Angeles #22621

    1000 W.
Temple Street, 7th
Floor

    Mail
Code:                                CA9-705-07-05

    Los
Angeles, California  90012-1514

    Attention:                                Tai
Anh Lu, Officer

    Telephone:                                (213)
481-7840

    Facsimile:                                (213)
457-8841

    Electronic
Mail:                                           tai_anh.lu@bankofamerica.com

    

    Commercial
Letters of Credit:

     

    Bank of
America, N.A.

    Trade
Operations – Los Angeles #22621

    1000 W.
Temple Street, 7th
Floor

    Mail
Code:                                CA9-705-07-05

    Los
Angeles, California  90012-1514

    Attention:                                Frantz
Bellevue, Vice President

    Telephone:                                (213)
580-8476

    Facsimile:                                (213)
457-8841

    Electronic
Mail:                                           frantz.bellevue@bankofamerica.com

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    SWING LINE
BANK:

    

    Bank of
America, N.A.

    1 Federal
Street, Floor 6

    Mail
Code:                                MA5-503-06-04

    Boston,
Massachusetts  02110

    Attention:                                Jesse
M. Philips

    Telephone:                                (617)
434-3571

    Facsimile:                                (617)
310-2293

    

    Wire
Instructions:

    

    Bank of
America, N.A.

    New York,
NY

    ABA
#026009593

    MA wire
clearing account

    Reference:                                Cabot
Microelectronics

    Attention:                                Jesse
M. Philips

    

    BANKS:

     

    Bank of
America, N.A.:

    

    Bank of
America, N.A.

    Mail
Code:                                IL4-135-07-60

    135 South
LaSalle Street

     

    Chicago,
Illinois 60603

     

    Attention:                                Anne
Eharoshe, Vice President

     

    Telephone:                                (312)
904-4623

     

    Facsimile:                                (312)
904-6547

     

    JPMorgan
Chase Bank, N.A.:

     

    JPMorgan
Chase Bank, N.A.

    Mailcode:                                IL1-1742

    10 S.
Dearborn Street, 34th Floor

    Chicago,
IL 60603

    Attention:                                Carlos
R. Cardenas, CPA, Senior Vice President

    Telephone:                                (312)
732-7155

    Facsimile:                                (312)
732-7219

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    EXHIBIT
A-1

     

    FORM OF REVOLVING
NOTE

     

    

    Please
See Attached.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    REVOLVING
NOTE

     

    

    __________,
20__

     

    Chicago,
Illinois $____________

     

    FOR VALUE RECEIVED, the
undersigned, CABOT
MICROELECTRONICS CORPORATION, a Delaware corporation (the “Maker”), promises to
pay to the order of ____________________________________ (the “Bank”) at the
principal office of Bank of America, N.A., successor by merger to LaSalle Bank
National Association (the “Administrative
Agent”) in Chicago, Illinois the aggregate unpaid amount of all Revolving
Loans made to the undersigned by the Bank pursuant to the Credit Agreement
referred to below (as shown on the schedule attached hereto (and any
continuation thereof) or in the records of the Bank), such principal amount to
be payable on the dates set forth in the Credit Agreement.

     

    The Maker
further promises to pay interest on the unpaid principal amount of each
Revolving Loan from the date such Revolving Loan is made until the date such
Revolving Loan is paid in full, payable at the rate(s) and at the time(s) set
forth in the Credit Agreement.  Payments of both principal and
interest are to be made in lawful money of the United States of
America.

     

    This Note
evidences indebtedness incurred under, and is subject to the terms and
provisions of, the Amended and Restated Credit Agreement dated as of November
24, 2003 (the “Original Credit
Agreement”) among Maker, the financial institutions from time to time
parties thereto (including the Bank), as Banks thereunder, the Administrative
Agent, the Issuing Bank party thereto, the Swing Line Bank party thereto, and
National City Bank of Michigan/Illinois, a national banking association, as
original Syndication Agent, as amended by the First Amendment to Amended and
Restated Credit Agreement dated as of October 30, 2008 (the “First Amendment”)
among Maker, the Banks, the Administrative Agent, the Issuing Bank, the Swing
Line Bank, and JPMorgan Chase Bank, N.A., in its capacity as the successor
Syndication Agent thereunder (the Original Credit Agreement, as amended by the
First Amendment, and as the same hereafter may be amended, modified,
supplemented and/or restated from time to time, is referred to herein as the
“Credit
Agreement”), to which Credit Agreement reference is hereby made for a
statement of the terms and provisions under which this Note may or must be paid
prior to its due date or its due date accelerated.  Capitalized terms
used but not elsewhere defined in this Note shall have the respective meanings
ascribed to such terms in the Credit Agreement.

     

    This Note
is made under and governed by the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.

     

    CABOT
MICROELECTRONICS CORPORATION

    

    By:           ____________________________________

    Name:                      ____________________________________

    Title:                      ____________________________________

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    Schedule
attached to Revolving Note dated ______________, 20___ of CABOT MICROELECTRONICS
CORPORATION payable to the order of _____________

    
      	
              Date
      and Amount of Loan or of Conversion from another type of Loan

            	
              Date
      and Amount of Repayment or of Conversion into another type of Loan

            	
              Interest
      Period/Unpaid Maturity
      Date

            	
              Principal
      Balance

            	
              Notation
      Made by

            
	 
      	 
      	 
      	 
      	 
      
	
              1.                      BASE
      RATE LOANS

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              2.                      EURODOLLAR
      LOANS

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

    

    

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    EXHIBIT
A-2

     

    FORM OF SWING LINE
NOTE

     

    

    Please
See Attached.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    SWING
LINE NOTE

     

    October
30, 2008

     

    Chicago,
Illinois $5,000,000.00

     

    FOR VALUE RECEIVED, the
undersigned, CABOT
MICROELECTRONICS CORPORATION, a Delaware corporation (the “Maker”), promises to
pay to the order of Bank of America, N.A. (the “Bank”), at the
principal office of Bank of America, N.A., as successor by merger to LaSalle
Bank National Association (the “Administrative
Agent”), in Chicago, Illinois, the aggregate unpaid amount of all Swing
Line Loans made to the undersigned by the Bank pursuant to the Credit Agreement
referred to below (as shown on the schedule attached hereto (and any
continuation thereof) or in the records of the Bank), such principal amount to
be payable on the dates set forth in the Credit Agreement.

     

    The Maker
further promises to pay interest on the unpaid principal amount of each Swing
Line Loan from the date such Swing Line Loan is made until the date such Swing
Line Loan is paid in full, payable at the rate(s) and at the time(s) set forth
in the Credit Agreement.  Payments of both principal and interest are
to be made in lawful money of the United States of America.

     

    This Note
evidences indebtedness incurred under, and is subject to the terms and
provisions of, the Amended and Restated Credit Agreement dated as of November
24, 2003 (the “Original Credit
Agreement”) among Maker, the financial institutions from time to time
parties thereto (including the Bank), as Banks thereunder, the Administrative
Agent, the Issuing Bank party thereto, the Swing Line Bank party thereto, and
National City Bank of Michigan/Illinois, a national banking association, as the
original Syndication Agent, as amended by the First Amendment to Amended and
Restated Credit Agreement of even date herewith (the “First Amendment”)
among Maker, the Banks, the Administrative Agent, the Issuing Bank, the Swing
Line Bank, and JPMorgan Chase Bank, N.A., in its capacity as the successor to
National City Bank of Michigan/Illinois as the Syndication Agent thereunder (the
Original Credit Agreement, as amended by the First Amendment, and as the same
hereafter may be amended, modified, supplemented and/or restated from time to
time, is referred to herein as the “Credit Agreement”),
to which Credit Agreement reference is hereby made for a statement of the terms
and provisions under which this Note may or must be paid prior to its due date
or its due date accelerated.  Capitalized terms used but not elsewhere
defined in this Note shall have the respective meanings ascribed to such terms
in the Credit Agreement.

     

    This Note
is made under and governed by the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.

     

    This Note
is issued pursuant to the First Amendment in substitution for, and replacement
of, that certain Swing Line Note dated November 24, 2003 in the original
principal amount of Five Million Dollars ($5,000,000) made by Maker in favor of
LaSalle Bank National Association (the “Existing Note”) to
reflect merger of LaSalle Bank National Association with and into Bank of
America, N.A. (with Bank of America, N.A. being the surviving
entity).  This Note does not constitute a novation of the Debt
evidenced by the Existing Note, and is not given by the undersigned or accepted
by Bank in satisfaction of the undersigned’s obligations under the Existing Note
or as a novation with respect thereto.

     

    [remainder
of this page intentionally left blank; signature page follows]

     

    

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, this Note
has been executed and delivered by Maker as of the date first set forth
above.

     

    CABOT
MICROELECTRONICS CORPORATION

    

    

    By:           ____________________________________

    Name:                      ____________________________________

    Title:                      ____________________________________

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    Schedule
attached to Swing Line Note dated October 30, 2008 of CABOT MICROELECTRONICS
CORPORATION payable to the order of Bank of America, N.A.

    
      	
              Date
      and Amount of Loan or of Conversion from another type of Loan

            	
              Date
      and Amount of Repayment or of Conversion into another type of Loan

            	
              Interest
      Period/Unpaid Maturity
      Date

            	
              Principal
      Balance

            	
              Notation
      Made by

            
	 
      	 
      	 
      	 
      	 
      
	
              1.                      BASE
      RATE LOANS

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              2.                      EURODOLLAR
      LOANS

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

    

    

    

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    FORM OF COMPLIANCE
CERTIFICATE

     

    Please
See Attached.

     

    

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    COMPLIANCE
CERTIFICATE

     

    To:           Bank
of America, N.A., as Administrative Agent

     

    Reference
is made to the Amended and Restated Credit Agreement dated as of November 24,
2003 (the “Original
Credit Agreement”) among Cabot Microelectronics Corporation (the “Company”), Bank of
America, N.A., as successor by merger to LaSalle Bank National Association, in
its capacity as the Administrative Agent, the Issuing Bank, and the Swing Line
Bank thereunder, National City Bank of Michigan/Illinois, a national banking
association, as the original Syndication Agent thereunder, and the financial
institutions from time to time parties thereto, as Banks thereunder, as amended
by the First Amendment to Amended and Restated Credit Agreement dated as of
October 30, 2008 (the “First Amendment”)
among the Company, the Banks, the Administrative Agent, the Issuing Bank, the
Swing Line Bank, and JPMorgan Chase Bank, N.A., in its capacity as the successor
to National City Bank of Michigan/Illinois as the Syndication Agent thereunder
(the Original Credit Agreement, as amended by the First Amendment, and as the
same has been further amended, modified, supplemented and/or restated through
the date hereof, is referred to herein as the “Credit
Agreement”).

     

    Capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.

     

    I.           Reports.  Enclosed
herewith is a copy of the [annual audited/quarterly report]
of the Company as at, _____________, 20__ (the
“Computation Date”),
which report fairly presents in all material respects the financial condition
and results of operations [(subject to the absence of footnotes
and to normal year-end adjustments)] of the Company as of the Computation
Date and has been prepared in accordance with GAAP consistently
applied.

     

    II.           Financial
Tests.  The Company hereby certifies and warrants to you that
the following is a true and correct computation as at the Computation Date of
the following ratios and/or financial restrictions contained in the Credit
Agreement:

     

    A.           Section 10.6.1- Leverage
Ratio:

     

    1.           Total
Debt                                                                                                                   

     

    2.           Consolidated
Net Income (or Loss) (Item A.2(g))

     

    (a)           consolidated
net income (or loss)

    of the Company and its
Subsidiaries                                                                                                         

     

    (b)           non-cash
losses from sales, exchanges

    and other dispositions of
assets                                                                                                         

     

    (c)           other
extraordinary non-cash losses

    not in the ordinary course of
business                                                                 

     

    (d)           gains
from sales, exchanges and other

    dispositions of
assets                                                                                        

     

    (e)           other
gains                                                                           

     

    (f)           gains
from discontinued
operations                                                                                  

     

    (g)           sum
of items A.2(a) + A.2(b) + A.2(c) minus

    sum of items A.2(d) + A.2(e) +
A.2(f)                                                                                                        

     

    3.           EBITDA
(Item A.3(f))

     

    (a)           Consolidated
Net Income (Item
A.2(g))                                                                                                     

     

    (b)           Interest
Expense                                                                           

     

    (c)           income
tax
expense                                                                                                     

     

    (d)           depreciation                                                                                                   

     

    (e)           amortization                                                                                                         

     

    (f)           sum
of items A.3 (a) + A.3 (b) + A.3 (c) +

    A.3 (d) + A.3
(e)                                                                                                  

     

     

    
      
        
        

      

      
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    4.           Cash
and Cash Equivalent
Investments                                                                           

     

    5.           Item
A. l minus item
A.4                                                                                                       

     

    6.           Leverage
Ratio (ratio of item A.5 to item A.3(f))

    (not to exceed
2.25:1.00)                                                                                     

     

    B.           Section 10.6.2 - Interest Coverage
Ratio:

     

    1.           EBIT
(Item A.3(f) above minus items
A.3(d) and A.3(e)
above)                                                                                                                  

     

    2.           Interest
Expense (Item A.3 (b)
above)                                                                                     

     

    3.           Interest
Coverage Ratio (ratio of item B.
l                                                                                                             

    to item
B.2) (not to be less than 3.50:1.00)

     

    The
Company further certifies to you that no Event of Default or Unmatured Event of
Default has occurred and is continuing[.][, except: describe the nature of
each Event of Default or Unmatured Event of Default, the period of existence
thereof and the action taken or proposed to be taken with respect
thereto.]

     

    IN
WITNESS WHEREOF, the Company has caused this Certificate to be executed and
delivered by its duly authorized officer on ____________, 20___.

     

    CABOT MICROELECTRONICS CORPORATION

    

    

    By:           ____________________________________

    Name:                      ____________________________________

    Title:                      ____________________________________

    

    

     

    
      
         

      

      
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    EXHIBIT
C

     

    FORM OF
GUARANTY

     

    

    Please
See Attached.

     

    
      
         

      

      
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    GUARANTY

     

    This
GUARANTY (this “Guaranty”), dated as
of October 30, 2008, is made by and among each Subsidiary (as hereinafter
defined) of Cabot Microelectronics Corporation, a Delaware corporation (the
“Company”) from
time to time a party hereto (each, a “Guarantor” and
collectively, “Guarantors”), in
favor of Bank of America, N.A. (in its individual capacity, “Bank of America”), as
administrative agent for the Banks that are or may from time to time become
parties to the Credit Agreement described below.

     

    R E C I T A L
S:

     

    A.         Reference
is made to the Amended and Restated Credit Agreement dated as of November 24,
2003 (the “Original
Credit Agreement”) among the Company, Bank of America, as successor by
merger to LaSalle Bank National Association, in its capacity as the
Administrative Agent, the Issuing Bank, and the Swing Line Bank thereunder,
National City Bank of Michigan/Illinois, a national banking association, as the
original Syndication Agent thereunder, and the financial institutions from time
to time parties thereto, as Banks thereunder, as amended by the First Amendment
to Amended and Restated Credit Agreement of even date herewith (the “First Amendment”)
among the Company, the Banks, the Administrative Agent, the Issuing Bank, the
Swing Line Bank, and JPMorgan Chase Bank, N.A., in its capacity as the successor
to National City Bank of Michigan/Illinois as the Syndication Agent thereunder
(the Original Credit Agreement, as amended by the First Amendment, and as the
same hereafter may be amended, modified, supplemented and/or restated from time
to time, is referred to herein as the “Credit Agreement”),
pursuant and subject to the terms and conditions of which, among other things,
the Banks, the Issuing Bank, and the Swing Line Bank agreed to make loans and
other financial accommodations to the Company.

     

    B.           Each
Guarantor is a Subsidiary of the Company.  Accordingly, each Guarantor
has a direct financial interest in inducing the Banks to enter into the Credit
Agreement.

     

    C.           One
of the conditions precedent to the obligation of the Banks to enter into the
Credit Agreement is that each Guarantor shall have executed and delivered to the
Administrative Agent a counterpart of this Guaranty.

     

    NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, each Guarantor hereby agrees as follows:

     

    1.           Definitions. All capitalized terms used
but not elsewhere defined herein shall have the respective meanings ascribed to
such terms in the Credit Agreement.

     

    2.           Guaranty
of Payment.  Each Guarantor
hereby jointly and severally, unconditionally and irrevocably guarantees to the
Administrative Agent, for the benefit of the Banks, the full and complete
payment when due, whether at stated maturity or by acceleration or otherwise, of
the Debt of the Company arising under the Credit Agreement and the other Loan
Documents.  Each Guarantor agrees that this Guaranty is a present and
continuing guaranty of payment and not of collectibility, and that the
Administrative Agent shall not be required to prosecute collection, enforcement
or other remedies against the Company, any other Guarantor or any other Person
before calling such Guarantor for payment.  The obligations of each
Guarantor hereunder and under any of the other Loan Documents to which any
Guarantor hereinafter are referred to as such Guarantor’s “Obligations.”  Notwithstanding
any provisions of this Guaranty to the contrary, it is intended that this
Guaranty not constitute a “Fraudulent Conveyance” (as defined
below).  Consequently, each Guarantor agrees that if this Guaranty
would, but for the application of this sentence, constitute a Fraudulent
Conveyance, this Guaranty shall be valid and enforceable only to the maximum
extent that would not cause this Guaranty to constitute a Fraudulent Conveyance,
and this Guaranty shall automatically be deemed to have been amended accordingly
at all relevant times.  For purposes hereof, “Fraudulent
Conveyance” means a fraudulent conveyance under Section 548 of the
Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the
provisions of any applicable fraudulent conveyance or fraudulent transfer law,
order, ruling, decision or similar law, order, ruling or decision binding upon
any Guarantor of any foreign, federal, state, municipal or other government, or
any department, commission, board, bureau, agency, public authority or
instrumentality thereof or any court or arbitrator (each, a “Governmental Body”),
as in effect from time to time.

     

     

    
      
        
        

      

      
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    3.           Continuing
Guaranty. Each
Guarantor agrees such Guarantor’s Obligations shall be primary obligations of
such Guarantor, shall not be subject to any counterclaim, set-off, abatement,
deferment or defense based upon any claim that such Guarantor may have against
the Administrative Agent, any Bank, the Company, any other Guarantor or any
other Person, and shall remain in full force and effect without regard to, and
shall not be released, discharged, limited or affected in any way by any
circumstance or condition (whether or not such Guarantor shall have any
knowledge thereof), including, without limitation:

     

    (a)           any
lack of validity or enforceability of the Credit Agreement or any of the other
Loan Documents;

     

    (b)           any
termination, restatement, amendment, modification or other change in the Credit
Agreement or any of the other Loan Documents;

     

    (c)           any
furnishing, exchange, substitution or release of any collateral, if any, or any
failure to perfect any lien in any collateral, if any, given to secure the Debt
of the Company arising under the Credit Agreement and the other Loan
Documents;

     

    (d)           any
failure, omission or delay on the part of the Company, the Administrative Agent,
any Bank or any other Guarantor to conform or comply with any term of the Credit
Agreement or any of the other Loan Documents or any failure of the
Administrative Agent or any Bank to give notice of any Event of Default or any
Unmatured Event of Default;

     

    (e)           any
waiver, compromise, release, settlement or extension of time of payment or
performance or observance of any of the obligations or agreements contained in
the Credit Agreement or any of the other Loan Documents;

     

    (f)           any
action or inaction by the Administrative Agent or any Bank under or in respect
of the Credit Agreement or any of the other Loan Documents, any failure, lack of
diligence, omission or delay on the part of the Administrative Agent or any Bank
to enforce, assert or exercise any right, power or remedy conferred on the
Administrative Agent or any Bank in the Credit Agreement or any of the other
Loan Documents, or any other action or inaction on the part of the
Administrative Agent or any Bank;

     

    (g)           any
voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement,
readjustment, assignment for the benefit of creditors, composition,
receivership, liquidation, marshalling of assets and liabilities or similar
events or proceedings with respect to any Guarantor, the Company or any other
Person or any of their respective properties or creditors, or any action taken
by any trustee or receiver or by any court in any such proceeding;

     

    (h)           any
merger or consolidation of the Company, any Guarantor or any other Person into
or with any Person, or any sale, lease or transfer of any of the assets of the
Company, any Guarantor or any other person to any other Person;

     

    (i)           any
change in the ownership of any of the capital stock of or other equity interests
in the Company or any Guarantor or any change in the relationship between any
Guarantor and the Company or any other Guarantor, or any termination of any such
relationship;

     

    (j)           any
release or discharge by operation of law of any Guarantor or of the Company from
any obligation or agreement contained in the Credit Agreement or any of the
other Loan Documents;

     

    (k)           any
other occurrence, circumstance, happening or event, whether similar or
dissimilar to the foregoing and whether foreseen or unforeseen, which otherwise
might constitute a legal or equitable defense or discharge of the liabilities of
a guarantor or surety or which otherwise might limit recourse against any
Guarantor or the Company;

     

    (l)           any
election by the Administrative Agent or any Bank in any proceeding instituted
under Chapter 11 of the Bankruptcy Code;

     

    (m)           any
borrowing or grant of a security interest by the Company, any Guarantor or any
other Person, as debtor-in-possession, or extension of credit, under the
Bankruptcy Code;

     

    (n)           the
disallowance, under the Bankruptcy Code, of all or any portion of Banks’
claim(s) for repayment of the Debt of the Company arising under the Credit
Agreement and the other Loan Documents or of such Guarantor’s
Obligations;

     

    (o)           any
use of cash collateral under the Bankruptcy Code, and

     

    (p)           any
agreement or stipulation as to the provision of adequate protection in any
bankruptcy proceeding.

     

     

    
      
        
        

      

      
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    4.           Waivers.  Each Guarantor
unconditionally waives, to the extent permitted by law, (i) notice of any of the
matters referred to in Section
3 above, (ii) all notices which may be required by statute, rule of law
or otherwise, now or hereafter in effect, to preserve intact any rights against
such Guarantor, including, without limitation, any demand, presentment and
protest, proof of notice of non-payment under any of the Loan Documents and
notice of any Unmatured Event of Default, any Event of Default or any failure on
the part of any Guarantor or the Company to perform or comply with any covenant,
agreement, term or condition of the Credit Agreement or any of the other Loan
Documents, (iii) any right to the enforcement, assertion or exercise against any
Guarantor or the Company of any right or remedy conferred under the Credit
Agreement or any of the other Loan Documents, (iv) any requirement of diligence
on the part of any Person, (v) any requirement to exhaust any remedies or to
mitigate the damages resulting from any default under the Credit Agreement or
any of the other Loan Documents, and (vi) any notice of any sale, transfer or
other disposition of any right, title or interest of the Administrative Agent or
any Bank under the Credit Agreement or any of the other Loan
Documents.

     

    5.           Subordination. Each Guarantor agrees that
any and all present and future debts and obligations of the Company or any other
Guarantor to such Guarantor hereby are subordinated to the claims of the
Administrative Agent and the Banks and hereby are assigned by such Guarantor to
the Administrative Agent, as security for the payment and performance of the
Debt of the Company arising under the Credit Agreement and the other Loan
Documents.

     

    6.           Reinstatement.  The obligations
of each Guarantor pursuant to this Guaranty shall continue to be effective or
automatically be reinstated, as the case may be, if at any time payment of any
of the Debt of the Company arising under the Credit Agreement and the other Loan
Documents is rescinded or otherwise must be restored or returned by Bank upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Guarantor or the Company or for any other reason, all as though such payment had
not been made.

     

    7.           Representations
and Warranties.  Each Guarantor
represents and warrants to the Administrative Agent and the Banks that (i) it is
fully informed as to the nature and extent of the transactions contemplated by
the Credit Agreement and the other Loan Documents, (ii) it has received a copy
of the Credit Agreement and the other Loan Documents, together with copies of
the financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own decision and analysis
to enter into this Guaranty and (iii) the representations and warranties made by
the Company in the Credit Agreement with respect to such Guarantor are true and
correct in all material respects.

     

    8.           Covenants.  Until all Debt of
the Company arising under the Credit Agreement and the other Loan Documents and
all of each Guarantor’s Obligations are paid and performed in full, and the
Commitments have been terminated, each Guarantor agrees that it will observe,
perform and comply with all covenants contained in Section 10 of the
Credit Agreement with which the Company has agreed to cause such Guarantor to
observe, perform or comply.

     

    9.           Remedies
on Default.  If any Event of
Default occurs and is continuing, (i) each Guarantor shall pay such Guarantor’s
Obligations in full, immediately upon demand and (ii) the Administrative Agent,
on behalf of the Banks, at its option, may enforce its rights and remedies under
this Guaranty in accordance with its terms and enforce any other rights or
remedies accorded to the Administrative Agent or Banks at equity or law, by
virtue of statute or otherwise.  Each Guarantor agrees that the
Administrative Agent and each Bank have all rights of set-off and bankers’ lien
provided by applicable law, and in addition thereto, each Guarantor agrees that
at any time any Event of Default occurs and is continuing, the Administrative
Agent and each Bank may apply to the payment of any obligations of such
Guarantor hereunder, whether or not then due, any and all balances, credits,
deposits, accounts or moneys of such Guarantor then or thereafter with the
Administrative Agent or such Bank.

     

    10.           Successors
and Assigns.  This Guaranty shall inure to the benefit of the
Administrative Agent and the Banks and their respective successors and
assigns.  This Guaranty shall be binding on each Guarantor and its
successors and assigns, and shall continue in full force and effect until all
Debt of the Company arising under the Credit Agreement and the other Loan
Documents and each Guarantor’s Obligations are paid and performed in full and
the Commitments shall have been terminated.  Notwithstanding the
foregoing, no Guarantor may assign all or any of its obligations
hereunder.

     

    11.           No Waiver
of Rights.  Neither any delay in exercising, nor any failure on
the part of the Administrative Agent to exercise any right, power or privilege
under this Guaranty, the Credit Agreement or any of the other Loan Documents
shall operate as a waiver thereof, and no single or partial exercise of any
right, power or privilege shall preclude any other or further exercise thereof
or the exercise of any other power or right, or be deemed to establish a custom
or course of dealing or performance among the parties hereto.  The
rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.  No notice to or demand on any
Guarantor in any case shall entitle such Guarantor to any other or further
notice or demand in the same, similar or any other circumstance.

     

    12.           Modification.  The terms of this
Guaranty may be waived, discharged or terminated only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.  No amendment, modification,
waiver or other change of any of the terms of this Guaranty shall be effective
without the prior written consent of the Administrative Agent.

     

    13.           Costs and
Expenses.  Each Guarantor
agrees to pay on demand all documented costs and expenses incurred by or on
behalf of the Administrative Agent (including, without limitation, reasonable
attorneys’ fees and expenses) in enforcing such Guarantor’s
Obligations.

     

    14.           Governing
Law.  This Guaranty
shall be a contract made under and governed by the internal laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.

     

    15.           Forum
Selection and Consent to Jurisdiction.  ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS GUARANTY, THE AMENDED AND
RESTATED CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT’S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND.  EACH
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE.  EACH GUARANTOR
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
ILLINOIS.  EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.

     

     

    
      
        
        

      

      
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    16.           Waiver of Jury
Trial.  EACH GUARANTOR AND ADMINISTRATIVE AGENT, FOR ITSELF AND
ON BEHALF OF EACH BANK, HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY, THE AMENDED
AND RESTATED CREDIT AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.

     

    17.           No
Joinder. Each Guarantor agrees that any action to enforce this Guaranty
may be brought against such Guarantor without any reimbursement or joinder of
the Company in such action.

     

    18.           Severability.  In
the event that any provision of this Guaranty is deemed to be invalid by reason
of the operation of any law, or by reason of the interpretation placed thereon
by any court or any Governmental Body, as applicable, the validity, legality and
enforceability of the remaining terms and provisions of this Guaranty shall not
in any way be affected or impaired thereby, all of which shall remain in full
force and effect, and the affected term or provision shall be modified to the
minimum extent permitted by law so as to achieve most fully the intention of
this Guaranty.

     

    19.           Counterparts.  This Guaranty may
be executed in one or more counterparts, each of which shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same instrument.  Delivery of an executed signature page of this
Guaranty by facsimile transmission or in a pdf or similar electronic file shall
be effective as delivery of a manually executed counterpart hereof.

     

    20.           Subordination
of Subrogation Rights.  Each Guarantor unconditionally and
irrevocably (i) subordinates all rights it may have to be subrogated to the
rights of the Administrative Agent and the Banks as a result of any claim or
payment made on or in respect of this Guaranty to the prior payment in full of
the Debt of the Company arising under the Credit Agreement and the other Loan
Documents and (ii) waives any defense based upon an election of remedies by the
Administrative Agent and the Banks which destroys or otherwise impairs any
subrogation rights of such Guarantor and/or the right of such Guarantor to
proceed against the Company for reimbursement.

     

    [remainder
of this page intentionally left blank]

     

    
      
         

      

      
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    The undersigned, a Subsidiary of Cabot
Microelectronics Corporation, a Delaware corporation (the “Company”), in witness
of and intending to be bound by the foregoing Guaranty (the “Guaranty”) made by
various Subsidiaries of the Company in favor of Bank of America, N.A., in its
capacity as administrative agent (the “Administrative
Agent”) for the financial institutions (the “Banks”) that are or
may from time to time become parties to the Credit Agreement described in such
Guaranty, for the benefit of the Banks, hereby joins with and into the Guaranty
and executes and delivers to the Administrative Agent this counterpart signature
page to the Guaranty.

    

    ____________________________________

    

    

    By:           ______________________________

    Name:                      ______________________________

    Title:                      ______________________________

    

    

     

    
      
         

      

      
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    EXHIBIT
D

     

    FORM OF JOINDER
AGREEMENT

     

    

    Please
See Attached.

     

    
      
         

      

      
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    JOINDER
AGREEMENT

     

    This
JOINDER
AGREEMENT  (this “Agreement”), dated as
of ______________, ____, is between [New Banks] (each, a “New Bank” and
collectively the “New
Banks”), Cabot Microelectronics Corporation, a Delaware corporation (the
“Company”), and
Bank of America, N.A. (in its individual capacity, “Bank of America”), as
administrative agent for the Banks that are or may from time to time become
parties to the Credit Agreement referred to below.

     

    R E C I T A L
S:

     

    A.         Reference
is made to the Amended and Restated Credit Agreement dated as of November 24,
2003 (the “Original
Credit Agreement”) among the Company, Bank of America, as successor by
merger to LaSalle Bank National Association, in its capacity as the
Administrative Agent, the Issuing Bank, and the Swing Line Bank thereunder,
National City Bank of Michigan/Illinois, a national banking association, as the
original Syndication Agent thereunder, and the financial institutions from time
to time parties thereto, as Banks thereunder, as amended by the First Amendment
to Amended and Restated Credit Agreement dated as of October 30, 2008 (the
“First
Amendment”) among the Company, the Banks, the Administrative Agent, the
Issuing Bank, the Swing Line Bank, and JPMorgan Chase Bank, N.A., in its
capacity as the successor to National City Bank of Michigan/Illinois as the
Syndication Agent thereunder (the Original Credit Agreement, as amended by the
First Amendment, and as the same hereafter may be amended, modified,
supplemented and/or restated from time to time, is referred to herein as the
“Credit
Agreement”), pursuant and subject to the terms and conditions of which,
among other things, the Banks, the Issuing Bank, and the Swing Line Bank agreed
to make loans and other financial accommodations to the Company.

     

    B.           Subject
to the terms and conditions of the Credit Agreement, the Company may obtain New
Revolving Loan Commitments by entering into one or more Joinder Agreements with
the New Banks.

     

    NOW, THEREFORE, in
consideration of the premises and agreements, provisions and covenants herein
contained, the parties hereto agree as follows:

     

    1.           Definitions.                                All
capitalized terms used but not elsewhere defined herein shall have the
respective meanings ascribed to such terms in the Credit Agreement.

     

    2.           New
Revolving Loan Commitments.  Each New Bank
hereto hereby agrees to commit to provide its respective New Revolving Loan
Commitment as set forth on Schedule A annexed hereto, on the terms and subject
to the conditions set forth in this Agreement.  Each New Bank (i)
confirms that it has received a copy of the Credit Agreement and the other Loan
Documents, together with copies of the financial statements referred to therein
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Agreement; (ii) agrees
that it will, independently and without reliance upon the Administrative Agent,
the Issuing Bank, the Swing Line Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time, make and
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement and the other Loan Documents as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a New Bank.

     

    3.           Up-Front
Fees.  Upon the
execution and delivery of this Agreement by each New Bank, the Company agrees to
pay to the Administrative Agent, for the account of such New Bank, the upfront
fee required pursuant to Section 5.3 of the
Credit Agreement.

     

    [4.           Joinder.  Each New Bank
acknowledges and agrees that upon its execution of this Agreement that such New
Bank shall become a “Bank” under, and for all purposes of, the Credit Agreement
and the other Loan Documents, and shall be subject to and bound by the terms
thereof, and shall perform all the obligations of and shall have all rights of a
Bank thereunder.1]

     

    5.           Credit
Agreement Governs.  New Revolving
Loans shall be subject to the provisions of the Credit Agreement and the other
Loan Documents.

     

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    6.           Company’s
Certifications.  By its execution
of this Agreement, the Company hereby certifies that (i) the representations and
warranties contained in the Credit Agreement and the other Loan Documents are
true and correct in all material respects on and as of the date hereof to the
same extent as though made on and as of the date hereof, except to the extent
such representations and warranties specifically relate to an earlier date, in
which case such representations and warranties were true and correct in all
material respects on and as of such earlier date; (ii) no event has occurred and
is continuing or would result from the consummation of this Agreement and the
making of any New Revolving Loan that would constitute an Unmatured Event of
Default or an Event of Default; (iii) the Company has performed in all material
respects all agreements and satisfied all conditions which the Credit Agreement
provides shall be performed or satisfied by it on or before the date hereof; and
(iv) after making any New Revolving Loan on the requested on the date hereof
(and after giving effect to the application of the proceeds thereof), the
Revolving Outstandings will not exceed the Revolving Loan
Commitments.

     

    7.           Company’s
Covenants.  By its execution
of this Agreement, the Company hereby covenants that (i) the Company shall
deliver or cause to be delivered the following legal opinions and
documents:  to include Revolving Note, legal opinion and other
documents reasonably requested by the Administrative Agent, together with all
other legal opinions and other documents reasonably requested by the
Administrative Agent in connection with this Agreement; and (ii) attached hereto
is a compliance certificate, in the form required by Section 10.1.3 of the
Credit Agreement, containing a computation of each of the financial ratios and
restrictions contained in Section 10.6 of the
Credit Agreement as of the last day of the Fiscal Quarter immediately prior to
the date hereof.

     

    8.           Bank
Documents.  By its execution
of this Agreement, each New Bank represents and warrants that it has furnished
to the Company and the Administrative Agent such forms and documents, if any,
appropriately completed and duly executed by such New Bank, as are required
under the last paragraph of Section 7.6 of the
Credit Agreement.

     

    9.           Notices.  For purposes of
the Credit Agreement, the initial notice address of each New Bank shall be as
set forth below its signature below.

     

    10.           Recordation
of New Revolving Loan Commitments.  Upon the
execution and delivery of this Agreement, the Administrative Agent will maintain
a record of the New Revolving Loan Commitments made by the New
Banks.

     

    11.           Amendment,
Modification and Waiver.  This Agreement
may not be amended, modified or waived except by an instrument or instruments in
writing signed and delivered on behalf of each of the parties
hereto.

     

    12.           Entire
Agreement.  This Agreement,
the Credit Agreement and the other Loan Documents constitute the entire
agreement among the parties with respect to the subject matter hereof and
thereof and supersede all other prior agreements and understandings, both
written and verbal, among the parties or any of them with respect to the subject
matter hereof.

     

    13.           Governing
Law.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE.

     

    14.           Severability.  Any term or
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as would
be enforceable.

     

    15.           Counterparts.  This Agreement
may be executed in counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.

     

    [remainder
of this page left intentionally blank]

     

    

      

    

      
      
        	
                 
      

              	
                1
      Insert this Section 4 if the lending institution is not already a
      “Bank.”

              

      

       

    

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, each of
the undersigned has caused its duly authorized officer to execute and deliver
this Agreement as of ______________, 200_.

     

    [NAME OF NEW
BANK]

     

    By:           

    Name:                                                                           

    Title:                                                                           

    

    Notice
Address:                                           ________________________

    ________________________

    ________________________

    Attention:

    Telephone:

    Facsimile:

    

    

    CABOT
MICROELECTRONICS CORPORATION

     

    By:           

    Name:                                                                           

    Title:                                                                           

    

    

    Consented
to by:

    

    BANK OF AMERICA, N.A., as the
Administrative Agent

    

    By:           ______________________________

    Name:                                                                                                                                          ______________________________

    Title:                                                                                                                                          ______________________________

    

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    SCHEDULE
A

     

    

     

    
      	
              Name
      of Bank

            	
              Type
      of Commitment

            	
              Amount

            
	
              [_____________]

            	
              New
      Revolving Loan Commitment

            	
              $____________

            
	 
      	 
      	 
      
	 
      	 
      	
              Total:  $____________

            

    

    

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    EXHIBIT
F

     

    FORM OF ASSIGNMENT
AGREEMENT

     

    

    Please
See Attached.

     

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

    ASSIGNMENT AND ASSUMPTION
AGREEMENT

     

    This
Assignment and Assumption Agreement (this “Assignment”) is dated
as of the Effective Date set forth below and is entered into by and between
[Insert name of
Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”).  Capitalized
terms used but not defined herein shall have the meanings given to them in the
Credit Agreement identified below (the “Credit Agreement”),
receipt of a copy of which is hereby acknowledged by the
Assignee.  The Standard Terms and Conditions set forth in Annex 1
attached hereto are hereby agreed to and incorporated herein by reference and
made a part of this Assignment as if set forth herein in full.

     

    For an
agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by Agent as
contemplated below, (i) all of the Assignor's rights and obligations as a Lender
under the Credit Agreement and any other documents or instruments delivered
pursuant thereto to the extent related to the amount and percentage interest
identified below of all of such outstanding rights and obligations of the
Assignor under the respective facilities identified below (including, to the
extent included in any such facilities, Letters of Credit, and Swing Line Loans)
included in such facilities and, (ii) to the extent permitted to be assigned
under applicable law, all claims, including, without limitation, suits, causes
of action and any other right of the Assignor (in its capacity as a Lender)
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered pursuant
thereto or the loan transactions governed thereby or in any way based on or
related to any of the foregoing, including, but not limited to, contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned pursuant to
clauses (i) and (ii) above being referred to herein collectively as, (the “Assigned
Interest”).  Such sale and assignment is without recourse to
the Assignor and, except as expressly provided in this Assignment, without
representation or warranty by the Assignor.

     

    1.           Assignor:                      ______________________________

    

    2.           Assignee:                      ______________________________
[and is an Affiliate of
Assignor]

    

    3.           Borrower:                                Cabot
Microelectronics Corporation

    

    
      	
               
      

            	
              3.

            	
              Agent:

            	
              Bank
      of America, N. A., as the Administrative Agent under the Credit
      Agreement

            

    

    

    
      	
               
      

            	
              5.

            	
              Credit
      Agreement:

            	
              The
      Amended and Restated Credit Agreement dated as of November 24, 2003 among
      Borrower, the financial institutions from time to time parties thereto, as
      Banks thereunder, Bank of America, N.A., as successor by merger to LaSalle
      Bank National Association (the “Administrative
      Agent”), the Issuing Bank party thereto, the Swing Line Bank party
      thereto, and National City Bank of Michigan/Illinois, a national banking
      association, as the original Syndication Agent, as amended by the First
      Amendment to Amended and Restated Credit Agreement dated as of October 30,
      2008 among Borrower, the Banks, the Administrative Agent, the Issuing
      Bank, the Swing Line Bank, and JPMorgan Chase Bank, N.A., in its capacity
      as the successor to National City Bank of Michigan/Illinois as the
      Syndication Agent thereunder.

            

    

    

    6.           Assigned
Interest:

    

    
      	
               

               

               

              Facility
      Assigned

            	
              Aggregate

              Amount
      of

              Commitment/Loans

              for
      all Lenders

            	
               

              Amount
      of

              Commitment/Loans

              Assigned

            	
               

              Percentage

              Assigned
      of

              Commitment/Loans

            
	 
      	 
      	 
      	 
      
	
              _____________

            	
              $________________

            	
              $________________

            	
              ______________%

            
	
              _____________

            	
              $________________

            	
              $________________

            	
              ______________%

            
	
              _____________

            	
              $________________

            	
              $________________

            	
              ______________%

            

    

    

    Effective
Date: __________________, 20__. [TO BE INSERTED BY AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]

     

    The terms
set forth in this Assignment are hereby agreed to:

     

    ASSIGNOR:

    

    [NAME OF
ASSIGNOR]

    

    By:           ______________________________

    Name:                      ______________________________

    Title:                      ______________________________

    

    ASSIGNEE:

    

    [NAME OF
ASSIGNEE]

    

    By:           ______________________________

    Name:                      ______________________________

    Title:                      ______________________________

    [Consented to and]
Accepted:

    

    Bank of
America, N.A., as Administrative Agent

    

    By:           _________________________________

    Name:                      _________________________________

    Title:                      _________________________________

    

    [Consented
to:]

    

    Cabot
Microelectronics Corporation

    

    By:           _________________________________

    Name:                      _________________________________

    Title:                      _________________________________

    

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

    ANNEX
1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT

    

    STANDARD
TERMS AND CONDITIONS FOR ASSIGNMENT

    AND
ASSUMPTION AGREEMENT

     

    1. Representations and
Warranties.

    

    1.1. Assignor.  The
Assignor (a) represents and warrants that (i) it is the legal and beneficial
owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of
any lien, encumbrance or other adverse claim and (iii) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment and to consummate the transactions contemplated hereby; and (b)
assumes no responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or any other
Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents , or any collateral
thereunder, (iii) the financial condition of Borrower, any of its Subsidiaries
or Affiliates or any other Person obligated in respect of any Loan Document or
(iv) the performance or observance by Borrower, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Loan Document.

    

    1.2. Assignee.  The
Assignee (a) represents and warrants that (i) it has full power and authority,
and has taken all action necessary, to execute and deliver this Assignment and
to consummate the transactions contemplated hereby and to become a Lender under
the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee
under the Credit Agreement, (iii) from and after the Effective Date, it shall be
bound by the provisions of the Credit Agreement as a lender thereunder and, to
the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, and (iv) it has received a copy of the Credit Agreement, together
with copies of the most recent financial statements delivered pursuant to
Section 6.01 thereof, as applicable, and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and to purchase the Assigned Interest on the basis of which
it has made such analysis and decision independently and without reliance on
Agent or any other Lender; and (b) agrees that (i) it will, independently and
without reliance on Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.

    

    1.3. Assignee’s Address for
Notices, etc.  Attached hereto as Schedule 1 is all contact
information, address, account and other administrative information relating to
the Assignee.

    2. Payments.  From
and after the Effective Date, Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to or on or
after the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by Agent for periods prior to the Effective
Date or with respect to the making of this assignment directly between
themselves.

    3. General
Provisions.  This Assignment shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and
assigns.  This Assignment may be executed in any number of
counterparts, which together shall constitute one
instrument.  Delivery of an executed counterpart of a signature page
of this Assignment by telecopy shall be effective as delivery of a manually
executed counterpart of this Assignment.  This Assignment shall be
governed by, and construed in accordance with, the internal laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.

    

    

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

    SCHEDULE
1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT

    ADMINISTRATIVE
DETAILS

    

    (Assignee
to list names of credit contacts, addresses, phone and facsimile numbers,
electronic mail addresses and account and payment information)

     

     

     

    42Exhibit 10.1

 

SUREWEST COMMUNICATIONS

 

2000 EQUITY INCENTIVE PLAN

 

As Adopted Effective January 31, 2000

 

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

 

As Amended and Restated December 12, 2008

 

 

SUREWEST
COMMUNICATIONS

2000
EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

 

	
  ARTICLE 1.

  	
  INTRODUCTION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2.

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
  2.1

  	
  Account

  	
   

  	
  3

  
	
   

  	
  2.2

  	
  Affiliate

  	
   

  	
  3

  
	
   

  	
  2.3

  	
  Alternate Payee

  	
   

  	
  3

  
	
   

  	
  2.4

  	
  Appendix

  	
   

  	
  3

  
	
   

  	
  2.5

  	
  Award

  	
   

  	
  4

  
	
   

  	
  2.6

  	
  Beneficiary

  	
   

  	
  4

  
	
   

  	
  2.7

  	
  Benefit

  	
   

  	
  5

  
	
   

  	
  2.8

  	
  Board or Board of
  Directors

  	
   

  	
  5

  
	
   

  	
  2.9

  	
  Change in Control

  	
   

  	
  5

  
	
   

  	
  2.9

  	
  Change in Control

  	
   

  	
  5

  
	
   

  	
  2.10

  	
  Code or IRC

  	
   

  	
  7

  
	
   

  	
  2.11

  	
  Committee

  	
   

  	
  7

  
	
   

  	
  2.12

  	
  Company or SureWest

  	
   

  	
  7

  
	
   

  	
  2.13

  	
  Company Contributions

  	
   

  	
  8

  
	
   

  	
  2.14

  	
  Consultant

  	
   

  	
  8

  
	
   

  	
  2.15

  	
  Deferred or Supplemental
  Compensation

  	
   

  	
  8

  
	
   

  	
  2.16

  	
  Disabled or Disability

  	
   

  	
  8

  
	
   

  	
  2.17

  	
  Earnings

  	
   

  	
  8

  
	
   

  	
  2.18

  	
  Economic Emergency or
  Unforeseeable Emergency

  	
   

  	
  9

  
	
   

  	
  2.19

  	
  Election or Deferral
  Election

  	
   

  	
  9

  
	
   

  	
  2.20

  	
  Employee

  	
   

  	
  9

  
	
   

  	
  2.21

  	
  ERISA

  	
   

  	
  10

  
	
   

  	
  2.22

  	
  Exchange Act

  	
   

  	
  10

  
	
   

  	
  2.23

  	
  Exercise Price

  	
   

  	
  10

  
	
   

  	
  2.24

  	
  Fair Market Value

  	
   

  	
  10

  
	
   

  	
  2.25

  	
  Investment Vehicle

  	
   

  	
  11

  
	
   

  	
  2.26

  	
  ISO or Incentive Stock
  Option

  	
   

  	
  11

  
	
   

  	
  2.27

  	
  NSO or Nonstatutory Stock
  Option

  	
   

  	
  11

  
	
   

  	
  2.28

  	
  Option

  	
   

  	
  11

  
	
   

  	
  2.29

  	
  Optionee

  	
   

  	
  11

  
	
   

  	
  2.30

  	
  Outside Director

  	
   

  	
  11

  
	
   

  	
  2.31

  	
  Parent

  	
   

  	
  12

  
	
   

  	
  2.32

  	
  Participant

  	
   

  	
  12

  
	
   

  	
  2.33

  	
  Performance Share

  	
   

  	
  12

  
	
   

  	
  2.34

  	
  Performance Share Agreement

  	
   

  	
  12

  
	
   

  	
  2.35

  	
  Plan

  	
   

  	
  12

  
						

 

 

	
   

  	
  2.36

  	
  QDRO or Qualified Domestic
  Relations Order

  	
   

  	
  12

  
	
   

  	
  2.37

  	
  Restricted Share or Restricted Stock

  	
   

  	
  13

  
	
   

  	
  2.38

  	
  Restricted Stock Agreement

  	
   

  	
  13

  
	
   

  	
  2.39

  	
  SAR or Stock Appreciation
  Right

  	
   

  	
  13

  
	
   

  	
  2.40

  	
  SAR Agreement

  	
   

  	
  13

  
	
   

  	
  2.41

  	
  Separation from Service

  	
   

  	
  13

  
	
   

  	
  2.42

  	
  Separation Without Cause

  	
   

  	
  14

  
	
   

  	
  2.43

  	
  Share

  	
   

  	
  15

  
	
   

  	
  2.44

  	
  Stock Option Agreement

  	
   

  	
  15

  
	
   

  	
  2.45

  	
  Stock Unit

  	
   

  	
  16

  
	
   

  	
  2.46

  	
  Stock Unit Agreement

  	
   

  	
  16

  
	
   

  	
  2.47

  	
  Subsidiary

  	
   

  	
  16

  
	
   

  	
  2.48

  	
  Unforeseeable Event

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3.

  	
  ADMINISTRATION

  	
   

  	
  16

  
	
   

  	
  3.1

  	
  Committee Composition

  	
   

  	
  16

  
	
   

  	
  3.2

  	
  Committee Responsibilities

  	
   

  	
  17

  
	
   

  	
  3.3

  	
  Committee for Non-Officer
  Grants

  	
   

  	
  17

  
	
   

  	
  3.4

  	
  Deference to Committee
  Decisions

  	
   

  	
  17

  
	
   

  	
  3.5

  	
  Claims and Appeals
  Procedures

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4.

  	
  SHARES AVAILABLE FOR GRANTS

  	
   

  	
  18

  
	
   

  	
  4.2

  	
  Forfeited Shares

  	
   

  	
  18

  
	
   

  	
  4.3

  	
  Dividend Equivalents

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5.

  	
  ELIGIBILITY

  	
   

  	
  19

  
	
   

  	
  5.1

  	
  Incentive Stock Options

  	
   

  	
  19

  
	
   

  	
  5.2

  	
  Other Grants

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6.

  	
  OPTIONS

  	
   

  	
  19

  
	
   

  	
  6.1

  	
  Stock Option Agreement

  	
   

  	
  19

  
	
   

  	
  6.2

  	
  Number of Shares

  	
   

  	
  20

  
	
   

  	
  6.3

  	
  Exercise Price

  	
   

  	
  20

  
	
   

  	
  6.4

  	
  Exercisability and Term

  	
   

  	
  20

  
	
   

  	
  6.5

  	
  Effect of Change in
  Control

  	
   

  	
  20

  
	
   

  	
  6.6

  	
  Modification or Assumption
  of Options

  	
   

  	
  20

  
	
   

  	
  6.7

  	
  Buyout Provisions

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7.

  	
  PAYMENT FOR OPTION SHARES

  	
   

  	
  21

  
	
   

  	
  7.1

  	
  General

  	
   

  	
  21

  
	
   

  	
  7.2

  	
  Surrender of Stock

  	
   

  	
  21

  
	
   

  	
  7.3

  	
  Exercise/Sale

  	
   

  	
  22

  
	
   

  	
  7.5

  	
  Promissory Note

  	
   

  	
  22

  
						

 

 

	
   

  	
  7.6

  	
  Other Forms of Payment

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8.

  	
  AUTOMATIC GRANTS TO OUTSIDE
  DIRECTORS

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9.

  	
  STOCK APPRECIATION RIGHTS

  	
   

  	
  23

  
	
   

  	
  9.1

  	
  SAR Agreement

  	
   

  	
  23

  
	
   

  	
  9.2

  	
  Number of Shares

  	
   

  	
  23

  
	
   

  	
  9.3

  	
  Exercise Price

  	
   

  	
  23

  
	
   

  	
  9.4

  	
  Exercisability and Term

  	
   

  	
  23

  
	
   

  	
  9.5

  	
  Effect of Change in
  Control

  	
   

  	
  24

  
	
   

  	
  9.6

  	
  Exercise of SARs

  	
   

  	
  24

  
	
   

  	
  9.7

  	
  Modification or Assumption
  of SARs

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10.

  	
  RESTRICTED SHARES

  	
   

  	
  24

  
	
   

  	
  10.1

  	
  Restricted Stock Agreement

  	
   

  	
  24

  
	
   

  	
  10.2

  	
  Payment for Awards

  	
   

  	
  25

  
	
   

  	
  10.3

  	
  Vesting Conditions

  	
   

  	
  25

  
	
   

  	
  10.4

  	
  Voting and Dividend Rights

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11.

  	
  STOCK UNITS

  	
   

  	
  25

  
	
   

  	
  11.1

  	
  Stock Unit Agreement

  	
   

  	
  25

  
	
   

  	
  11.2

  	
  Payment for Awards

  	
   

  	
  26

  
	
   

  	
  11.3

  	
  Vesting Conditions

  	
   

  	
  26

  
	
   

  	
  11.4

  	
  Voting and Dividend Rights

  	
   

  	
  26

  
	
   

  	
  11.5

  	
  Form and Time of
  Settlement of Stock Units

  	
   

  	
  27

  
	
   

  	
  11.6

  	
  Death of Recipient

  	
   

  	
  27

  
	
   

  	
  11.7

  	
  Creditors’ Rights

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12.

  	
  PERFORMANCE SHARES

  	
   

  	
  27

  
	
   

  	
  12.1

  	
  Performance Share
  Agreement

  	
   

  	
  27

  
	
   

  	
  12.2

  	
  Grant of Performance
  Shares

  	
   

  	
  28

  
	
   

  	
  12.3

  	
  Modification of Grant

  	
   

  	
  28

  
	
   

  	
  12.4

  	
  Terms of the Grant

  	
   

  	
  29

  
	
   

  	
  12.5

  	
  Payment of Performance
  Shares

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13.

  	
  PROTECTION AGAINST DILUTION

  	
   

  	
  30

  
	
   

  	
  13.1

  	
  Adjustments

  	
   

  	
  30

  
	
   

  	
  13.2

  	
  Dissolution or Liquidation

  	
   

  	
  31

  
	
   

  	
  13.3

  	
  Reorganizations

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 14.

  	
  CONVERSION OF AWARDS TO
  NONQUALIFIED DEFERRED COMPENSATION, ETC. 

  	
   

  	
   

  
	
  SUBJECT TO IRC SECTION 409A

  	
   

  	
  31

  
	
   

  	
  14.1

  	
  Committee Discretion
  Regarding Conversion

  	
   

  	
  31

  
						

 

 

	
   

  	
  14.2

  	
  Timing of Election to
  Defer Compensation

  	
   

  	
  32

  
	
   

  	
  14.3

  	
  Modification of Certain
  Elections

  	
   

  	
  32

  
	
   

  	
  14.4

  	
  Investment Earnings on
  Deferred Award

  	
   

  	
  33

  
	
   

  	
  14.5

  	
  Anti-Alienation

  	
   

  	
  36

  
	
   

  	
  14.5.

  	
  Anti-Alienation

  	
   

  	
  36

  
	
   

  	
  14.6.

  	
  Payment of Deferred or
  Supplemental Compensation

  	
   

  	
  36

  
	
   

  	
  14.7

  	
  Payment Delays

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 15.

  	
  AWARDS UNDER OTHER PLANS

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 16.

  	
  PAYMENT OF DIRECTOR’S FEES IN SECURITIES

  	
   

  	
  37

  
	
   

  	
  16.1

  	
  Effective Date

  	
   

  	
  37

  
	
   

  	
  16.2

  	
  Elections to Receive NSOs,
  Restricted Shares or Stock Units

  	
   

  	
  37

  
	
   

  	
  16.3

  	
  Number and Terms of NSOs,
  Restricted Shares or Stock Units

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 17.

  	
  LIMITATION ON RIGHTS

  	
   

  	
  38

  
	
   

  	
  17.1

  	
  Retention Rights

  	
   

  	
  38

  
	
   

  	
  17.2

  	
  Shareholders’ Rights

  	
   

  	
  38

  
	
   

  	
  17.3

  	
  Regulatory Requirements

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 18.

  	
  WITHHOLDING TAXES

  	
   

  	
  39

  
	
   

  	
  18.1

  	
  General

  	
   

  	
  39

  
	
   

  	
  18.2

  	
  Share Withholding

  	
   

  	
  39

  
	
   

  	
  18.3

  	
  Income and Wage Reporting

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 19.

  	
  ADDITIONAL AND MISCELLANEOUS
  PROVISIONS

  	
   

  	
  39

  
	
   

  	
  19.1

  	
  Term of the Plan

  	
   

  	
  39

  
	
   

  	
  Termination

  	
   

  	
  39

  
	
   

  	
  19.3

  	
  Automatic Termination

  	
   

  	
  40

  
	
   

  	
  19.4

  	
  Integration

  	
   

  	
  40

  
	
   

  	
  19.5

  	
  Successor Employer

  	
   

  	
  40

  
	
   

  	
  19.6

  	
  Beneficiary Designation
  After Plan Amendment or

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 20.

  	
  LIMITATION ON PARACHUTE PAYMENTS

  	
   

  	
  40

  
	
   

  	
  20.1

  	
  Scope of Limitation

  	
   

  	
  40

  
	
   

  	
  20.2

  	
  Basic Rule

  	
   

  	
  41

  
	
   

  	
  20.3

  	
  Reduction of Payments

  	
   

  	
  41

  
	
   

  	
  20.4

  	
  Overpayments and
  Underpayments

  	
   

  	
  42

  
	
   

  	
  20.5

  	
  Related Corporations

  	
   

  	
  42

  
	
   

  	
  20.6

  	
  Change in Control Agreements

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 21. 

  	
  EXECUTION

  	
   

  	
  43

  
						

 

 

SUREWEST COMMUNICATIONS

2000 EQUITY INCENTIVE PLAN

 

ARTICLE 1.                                                     INTRODUCTION.

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

ARTICLE 2.                                                     DEFINITIONS.

 

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

 

2

 

2.1                               Account

 

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

 

2.2                               Affiliate

 

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

 

2.3                               Alternate Payee

 

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

 

2.4                               Appendix

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

2.5                               Award

 

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

 

2.6                               Beneficiary

 

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

 

4

 

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

 

(i)                                                             spouse or registered domestic partner,

(ii)                                                          descendants, per
stirpes,

(iii)                                                       parents,

(iv)                                                      brothers and sisters, or

(v)                                                         estate of the Participant.

 

2.7                               Benefit

 

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

 

2.8                               Board or Board of Directors

 

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

 

2.9                               Change in Control

 

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

 

5

 

a.                                      Specifications.

 

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

 

b.                                      Identification of Relevant
Entities.

 

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

 

c.                                       Change in Ownership.

 

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

 

d.                                      Change in Effective Control.

 

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

 

6

 

e.                                       Change in Ownership of
Assets.

 

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

 

f.                                          Scope of Acceleration.

 

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

 

2.10                        Code or IRC

 

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

 

2.11                        Committee

 

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

 

2.12                        Company or SureWest

 

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

 

7

 

2.13                        Company Contributions

 

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

 

2.14                        Consultant

 

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

 

2.15                        Deferred or Supplemental
Compensation

 

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

 

2.16                        Disabled or Disability

 

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

 

2.17                        Earnings

 

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

 

8

 

2.18                        Economic Emergency or
Unforeseeable Emergency

 

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

 

2.19                        Election or Deferral
Election

 

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

 

2.20                        Employee

 

“Employee” means a common-law employee of the 

 

9

 

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

 

2.21                        ERISA

 

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

 

2.22                        Exchange Act

 

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

 

2.23                        Exercise Price

 

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

 

2.24                        Fair Market Value

 

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

 

10

 

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

 

2.25                        Investment Vehicle

 

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

 

2.26                        ISO or Incentive Stock
Option

 

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

 

2.27                        NSO or Nonstatutory Stock Option

 

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

 

2.28                        Option

 

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

 

2.29                        Optionee

 

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

 

2.30                        Outside Director

 

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

 

11

 

2.31                        Parent

 

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

 

2.32                        Participant

 

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

 

2.33                        Performance Share

 

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

 

2.34                        Performance Share Agreement

 

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

 

2.35                        Plan

 

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

 

2.36                        QDRO or Qualified Domestic
Relations Order

 

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

 

12

 

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

 

2.37                        Restricted Share  or
Restricted Stock

 

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

 

2.38                        Restricted Stock Agreement

 

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

 

2.39                        SAR or Stock Appreciation
Right

 

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

 

2.40                        SAR Agreement

 

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

 

2.41                        Separation from Service

 

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

 

13

 

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

 

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

 

2.42                        Separation Without Cause

 

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

 

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

 

14

 

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

 

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

 

2.43                        Share

 

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

 

2.44                        Stock Option Agreement

 

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

 

15

 

2.45        Stock
Unit

 

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

 

2.46        Stock
Unit Agreement

 

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

 

2.47        Subsidiary

 

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

 

2.48        Unforeseeable
Event

 

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

 

ARTICLE 3.                                                     ADMINISTRATION.

 

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

 

16

 

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

 

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

 

(b)           Such requirements as
the Internal Revenue

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

 

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

 

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

 

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

 

3.5                               Claims and Appeals
Procedures.     If
any Awards made

 

17

 

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

 

ARTICLE 4.                                                     SHARES AVAILABLE FOR  GRANTS.

 

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

 

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

 

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

 

18

 

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

 

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

 

ARTICLE 5.                                                     ELIGIBILITY.

 

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

 

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

 

ARTICLE 6.                                                     OPTIONS.

 

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

 

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

 

19

 

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

 

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

 

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

 

6.4          Exercisability and Term.  Each Stock Option Agreement shall specify the
date or event when all or any installment of the Option is to become
exercisable.  The Stock Option Agreement
shall also specify the term of the Option; provided that the term of an ISO
shall in no event exceed 10 years from the date of grant.  A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee’s death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee’s service.  Options may be awarded in combination with
SARs, and such an Award may provide that the Options will not be exercisable
unless the related SARs are forfeited.

 

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

 

6.6          Modification or Assumption of Options.  Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or 

 

20

 

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

 

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

 

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

 

ARTICLE 7.                                                     PAYMENT FOR OPTION  SHARES.

 

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

 

(a)           In the case of an
ISO granted under the Plan, payment shall be made only pursuant to the express
provisions of the applicable Stock Option Agreement.  The Stock Option Agreement may specify that
payment may be made in any form(s) described in this Article 7.

 

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

 

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

 

21

 

compensation expense) with respect to the Option for financial
reporting purposes.

 

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

 

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

 

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

 

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

 

ARTICLE 8.                                                     AUTOMATIC GRANTS TO OUTSIDE
DIRECTORS.

 

[Deleted]

 

22

 

ARTICLE 9.                                                     STOCK APPRECIATION  RIGHTS.

 

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

 

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

 

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

 

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

 

9.4          Exercisability and Term.  Each SAR Agreement shall specify
the date when all or any installment of the SAR is to become exercisable.  The SAR Agreement shall also specify the term
of the SAR.  An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee’s death, disability
or retirement or other events and may provide for expiration prior to the end
of its term in the event of the termination of the Optionee’s service.  SARs may be awarded in combination with
Options, and such an Award may provide that the SARs will not be exercisable
unless the related Options are forfeited. 
An SAR may be included in an ISO only at the time of grant but may be
included in an NSO at the time of grant or thereafter.  An SAR granted under the Plan may provide
that it will be exercisable only in the event of a Change in Control.

 

23

 

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

 

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

 

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

 

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

 

ARTICLE 10.                                              RESTRICTED SHARES.

 

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

 

24

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 11.                                              STOCK UNITS.

 

11.1        Stock Unit Agreement. 
Each grant of Stock Units under the Plan shall be evidenced by a Stock
Unit Agreement between the recipient and the Company.  Such Stock Units shall be subject to all
applicable terms of the Plan 

 

25

 

and may be subject to any other terms that are not inconsistent with
the Plan.  The provisions of the various
Stock Unit Agreements entered into under the Plan need not be identical.  Stock Units may be granted in consideration
of a reduction in the recipient’s other compensation.

 

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

 

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

 

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

 

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

 

Awards made between December 31, 2004 and January 1, 2009
reflect good-faith efforts to comply with U.S. Treasury pronouncements under
IRC Section 409A.  Awards made after
December 31, 2008 shall specify whether the dividends or other
distributions constitute a feature for the deferral of compensation.  A determination of whether dividend or
distribution rights under 

 

26

 

an Award provide for the deferral of compensation shall be made in a
manner consistent with IRC Section 409A and Treas. Regs. Section 1.409A-1(b)(5).

 

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

 

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

 

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

 

ARTICLE 12.               PERFORMANCE SHARES

 

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

 

27

 

Performance Share Agreements entered into under the Plan need not be
identical.

 

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

 

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

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

 

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

 

(c)           assign a “Performance
Percentage” to each level of attainment of performance goals during the
Performance Period, with the percentage applicable to minimum attainment being
zero percent and the percentage applicable to maximum attainment to the
determined by the Committee from time to time, but not in excess of 250%.

 

12.3        Modification of Grant.  If a Participant is promoted, demoted, or
transferred to a different business unit of the Company during a Performance 

 

28

 

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

 

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

 

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

 

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

 

29

 

multiplied by

 

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

 

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

 

ARTICLE 13.                                                                      PROTECTION AGAINST  DILUTION.

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           Have cash that
otherwise would be paid to such Participant as a result of the exercise of an
SAR or the settlement of Stock Units credited 

 

31

 

to a deferred compensation account established for such Participant by
the Committee as an entry on the Company’s books;

 

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

 

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

 

14.2                        Timing of Election to Defer
Compensation

 

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

 

14.3                        Modification of Certain Elections

 

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

 

32

 

five years after the first day on which the scheduled payment would
have been made.

 

14.4        Investment Earnings on Deferred Award

 

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

 

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

 

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

 

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

 

14.4 c.                     Subject
to such limitations as may from time to time be required by law, imposed by the
Company, or contained elsewhere in the Plan or Investment Vehicle, if any, the
Participant may 

 

33

 

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

 

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

 

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

 

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

 

4)             If the Company
possesses at any time directions as to the deemed investment of less than all
of the Participant’s Account, the Participant shall be deemed to have directed
that the undesignated portion of the Account be deemed to be invested in a
fixed income, or similar hypothetical investment option, if any, available
under the Arrangement or Investment Vehicle in the Company’s sole discretion.

 

34

 

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

 

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

 

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

 

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

 

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

 

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

 

14.4
g.                       The establishment
of an individual

 

35

 

Account for the Participant is for information purposes only, because
any assets reflect in the Account or in any report regarding the Account are
the property of the Company only.

 

14.5.       Anti-Alienation

 

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

 

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

 

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

 

14.6.       Payment
of Deferred or Supplemental Compensation

 

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

 

36

 

earlier the date of death of the Key Employee).  For purposes of the preceding sentence, Key
Employee refers to an individual described in IRC Section 416(i) without
regard to paragraph (5) thereof, regarding the treatment of beneficiaries.

 

14.7        Payment
Delays

 

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

 

ARTICLE 15.       AWARDS
UNDER OTHER PLANS.

 

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

 

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

 

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

 

16.2         Elections to Receive NSOs,
Restricted Shares or  Stock Units.  An Outside Director may elect to receive his
or her annual retainer payments and/or meeting fees from the Company in the
form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof,
as determined by the Board.  Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan.  An election under this Article 16 shall
be filed with the Company on the prescribed form.

 

37

 

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

 

ARTICLE 17.       LIMITATION
ON RIGHTS.

 

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

 

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

 

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

 

38

 

ARTICLE 18.       WITHHOLDING
TAXES.

 

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

 

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

 

18.3        Income
and Wage Reporting

 

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

 

 

ARTICLE 19.       ADDITIONAL
AND MISCELLANEOUS PROVISIONS.

 

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

 

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

 

39

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 20.       LIMITATION
ON PARACHUTE  PAYMENTS.

 

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

 

40

 

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

 

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

 

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

 

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

 

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

 

41

 

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

 

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

 

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

 

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

 

42

 

ARTICLE 21. 
EXECUTION.

 

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

 

	
   

  	
  SUREWEST COMMUNICATIONS

  
	
   

  	
  A California Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darla J. Yetter

  
	
   

  	
   

  	
  Darla J. Yetter

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Corporate Secretary

  
	
   

  	
   

  
	
  Date: December 12, 2008

  	
   

  

 

43

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