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Corporate Governance

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Related Party Transaction Policies and Procedures

Policy

It is the policy of the Board of Directors of SureWest Communications (the “Company”) that all Interested Transactions with Related Parties, as those terms are defined in these Policies and Procedures, shall be subject to approval or ratification in accordance with the procedures set forth below, to be administered by the Audit Committee of the Board of Directors.

Procedures

The Audit Committee shall review the material facts of all Interested Transactions that require the Committee’s approval and either approve or disapprove of the entry into the Interested Transaction, subject to the exceptions described below.  If advance Committee approval of an Interested Transaction is not feasible, then the Interested Transaction shall be considered and, if the Committee determines it to be appropriate, ratified at the Committee’s next regularly scheduled meeting.  In determining whether to approve or ratify an Interested Transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the Related Person’s interest in the transaction.  The Audit Committee shall only approve transactions that are in, or not inconsistent with, the best interests of the Company and its shareholders.

The Board of Directors of the Company and the Audit Committee have reviewed the Interested Transactions described below in “Standing Pre-Approval for Certain Interested Transactions” and determined that each of the Interested Transactions described therein shall be deemed to be pre-approved or ratified (as applicable) by the Audit Committee under the terms of this policy.  In addition, the Board of Directors has delegated to the Chair of the Audit Committee the authority to pre-approve or ratify (as applicable) any Interested Transaction with a Related Party in which the aggregate amount involved is expected to be less than $25,000.  In connection with each regularly scheduled meeting of the Audit Committee, a summary of each new Interested Transaction deemed pre-approved pursuant to paragraph (3) or (4) under “Standing Pre-Approval for Certain Interested Transactions” below and each new Interested Transaction pre-approved by the Chair in accordance with this paragraph shall be provided to the Committee for its review.  Copies of all summaries will also be provided to the Chair of the Nominating and Governance Committee.

No director shall participate in any discussion or approval of an Interested Transaction for which he or she is a Related Party, except that the director shall provide all material information concerning the Interested Transaction to the Audit Committee.

If an Interested Transaction will be ongoing, the Audit Committee may establish guidelines for the Company’s management to follow in its ongoing dealings with the Related Party.  Thereafter, the Audit Committee, on at least an annual basis, shall review and assess ongoing relationships with the Related Party to see that they are in compliance with the Committee’s guidelines and that the Interested Transaction remains appropriate.

The Audit Committee will review these Policies and Procedures from time to time and, if appropriate, recommend amendments for consideration by the Board of Directors.  These Policies and Procedures are in addition to any similar policies or procedures applicable to all employees contained in the Company’s Code of Ethics and Business Conduct, Employee Handbook or other policies, and the requirement set forth herein are in addition to and not in substitution for any other similar policies, procedures or requests.

Nepotism Policy

No immediate family member of a director or executive officer shall be hired as an employee of the Company unless the employment arrangement is approved by the Audit Committee at the next Committee meeting or, in those instances which the Chief Executive Officer determines that it is not practicable or desirable for the Company to wait until the next Committee meeting, by the Chair of the Audit Committee.  If a person becomes a director or executive officer of the Company, and an immediate family member of such person is already an employee of the Company, no material change in the terms of employment, including compensation, may be made without the prior approval of the Audit Committee (except, if the immediate family member is himself or herself an executive officer of the Company, any proposed change in the terms of employment shall be reviewed and approved by the Compensation Committee in same manner as other executive officer compensation arrangements).

Definitions

An “Interested Transaction” is any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which (1) the aggregate amount involved will or may be expected to exceed $10,000 in any calendar year, (2) the Company (including any of its subsidiaries) is a participant, and (3) any Related Party has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of another entity).  Interested Transactions include, without limitation, any material related party transactions required to be disclosed in the Company's financial statements by Statement of Financial Accounting Standards No. 57 (FAS 57) Related Party Disclosures.

A “Related Party” is any (a) person who is, or was since the beginning of the Company’s last fiscal year an executive officer, director or nominee for election as a director, (b) greater than 5 percent beneficial owner of the Company’s common stock, (c) immediate family member of any of the foregoing (immediate family member includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughter-in-law, and brothers- and sisters-in-law and anyone residing in such person’s home (other than a tenant or employee)), or (d) any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or similar position or in which such person has a 5% or greater beneficial ownership interest.

Standing Pre-Approval for Certain Interested Transactions

The Board of Directors and Audit Committee have reviewed the types of Interested Transactions described below and determined that each of the following Interested Transactions shall be deemed to be pre-approved by the Committee, even if the aggregate amount involved will exceed $10,000.

1. Employment of executive officers.   Any employment by the Company of an executive officer of the Company if:

     a.     the related compensation is required to be reported in the Company’s proxy statement under Item 402 of the Securities and Exchange Commission’s (“SEC’s”) compensation disclosure requirements (generally applicable to “named executive officers”); or

     b.     the executive officer is not an immediate family member of another executive officer or director of the Company, the related compensation would be reported in the Company’s proxy statement under Item 402 of the SEC’s compensation disclosure requirements if the executive officer was a “named executive officer”, and the Company’s Compensation Committee approved (or recommended that the Board approve) such compensation;

2. Director compensation.  Any compensation paid to a director if the compensation is required to be reported in the Company’s proxy statement under Item 402 of the SEC’s compensation disclosure requirements;

3. Certain transactions with other companies. Any transaction with another company at which a Related Person’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of $ 25,000, or  5  percent of that company’s total annual revenues;

4. Certain Company charitable contributions.  Any charitable contribution, grant or endowment by the Company to a charitable organization, foundation or university at which a Related Person’s only relationship is as an employee (other than an executive officer) or a director, if the aggregate amount involved does not exceed the lesser of $ 25,000, or 5 percent of the charitable organization’s total annual receipts;

5. Transactions where all shareholders receive proportional benefits.  Any transaction where the Related Person’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock received the same benefit on a pro rata basis (e.g. dividends).

6. Transactions involving competitive bids.  Any transaction involving a Related Party where the rates or charges involved are determined by competitive bids.

7. Regulated and customer transactions.  Any transaction with a Related Party involving the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority, or services made available on the same terms and conditions to persons who are not a Related Party.

Disclosure

All Interested Transactions that are required to be disclosed in the Company’s filings with the Securities and Exchange Commission, as required by the Securities Act of 1933 or the Securities Exchange Act of 1934 and related rules and regulations, shall be so disclosed in accordance with such laws, rules and regulations.

The material features of these Policies and Procedures shall be disclosed in the Company’s Annual Report on Form 10-K or in the Company’s proxy statement, as required by applicable laws, rules and regulations.  In addition, the Company shall put these Policies and Proceedings on its website and update it as necessary.