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4. Grant of Awards And Award Agreement

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Sectors: Telecommunications
Effective Date: July 01, 1995
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APPENDIX A
CITIZENS UTILITIES COMPANY


MANAGEMENT EQUITY INCENTIVE PLAN


As Approved by the Compensation Committee
of the Board of Directors on
July 1, 1995
and Reflecting Amendments
Approved by the Board of Directors
Through July 1, 1995


CITIZENS UTILITIES COMPANY


MANAGEMENT EQUITY INCENTIVE PLAN


Table of Contents


Section Page


1. Purpose A-1


2. Definitions A-1


3. Shares Subject to the Plan A-2


4. Grant of Awards and Award Agreements A-3


5. Stock Options and Stock Appreciation Rights A-4


6. Performance Shares A-6


7. Restricted Stock A-7


8. Deferred Stock A-8


9. Other Stock-Based Awards A-8


10. Certificates for Awards of Stock A-8


11. Beneficiary A-9


12. Administration of the Plan A-10


13. Amendment or Discontinuance A-10


14. Adjustments in Event of Change in Common Stock A-11


15. Miscellaneous A-11


16. Effective Date and Stockholder Approval A-12


Section 1. Purpose


The purpose of the Citizens Utilities Company Management Equity Incentive Plan (the "Plan") is to provide additional compensation incentives for high levels of performance and productivity by management employees of the Company's operations. The Plan is intended to strengthen the Company's existing operations and its ability to attract and retain outstanding management employees upon whose judgment, initiative and efforts the continued success, growth and development of the Company is dependent. The Plan would constitute the first incentive award plan of its type adopted by the Company.


Section 2. Definitions


When used herein, the following terms shall have the following meanings:


(a) "Affiliate" means any company controlled by the
Company, controlling the Company or under common control with
the Company.


(b) "Award" means an award granted to any Eligible
Employee in accordance with the provisions of the Plan.


(c) "Award Agreement" means the written agreement
or certificate evidencing each Award granted to
an Eligible Employee under the Plan.


(d) "Beneficiary" means the beneficiary or
beneficiaries designated pursuant to Section 11 to
receive the amount, if any, payable under the
Plan upon the death of an Eligible Employee.


(e) "Board" means the Board of Directors of the Company.


(f) "Code" means the Internal Revenue Code of 1986, as
now in effect or as hereafter amended. (All citations to
Sections of the Code are to such Sections as they are
currently designated and reference to such Sections shall
include the provisions thereof as they may from time to time
be amended or renumbered and any successor provisions.)


(g) "Company" means Citizens Utilities Company, and its
successors and assigns.


(h) "Committee" means the Committee appointed by the
Board pursuant to Section 12.


(i) "Deferred Stock" means Stock credited to an
Eligible Employee under the Plan subject to the requirements
of Section 8 and such other restrictions as the
Committee deems appropriate or desirable.


(j) "Effective Date" means June 22, 1990.


(k) "Eligible Employee" means an employee of any
Participating Company whose responsibilities and
decisions in the judgment of the Committee, directly affect
the management, growth, performance or profitability of
any Participating Company. Where required by the context,
"Eligible Employee" includes an individual who has been
granted an Award but is no longer an employee of any
Participating Company.


A-1


(l) "Fair Market Value" means, unless another reasonable
method for determining fair market value is specified by the
Committee, the average of the high and low sales prices of a
share of the appropriate Series of Stock as reported by the
NASDAQ National Market System (or if such hares are listed on
a national stock exchange or another national quotation
system, as reported or quoted by such exchange or system) for
the date in question or, if no such sales were reported for
such date, for the most recent date on which sales prices
were quoted.


(m) "Option" means an option to purchase Stock, including
Restricted Stock or Deferred Stock, if the Committee so
determines, subject to the applicable provisions of Section 5
and awarded in accordance with the terms of the Plan and which
may be an incentive stock option qualified under Section 422A
of the Code or a nonqualified stock option.


(n) "Participating Company" means the Company or any
subsidiary or other affiliate of the Company; provided
however, for incentive stock options only, "Participating
Company" means the Company or any corporation which at the
time such option is granted under the Plan qualifies as a
subsidiary of the Company under the definition of "subsidiary
corporation" contained in Section 425(f) of the Code.


(o) "Performance Share" means a performance share subject to
the requirements of Section 6 and awarded in accordance with
the terms of the Plan.


(p) "Plan" means the Citizens Utilities Company Management
Equity Incentive Plan, as the same may be amended,
administered or interpreted from time to time.


(q) "Restricted Stock" means Stock delivered under the Plan
subject to the requirements of Section 7 and such other
restrictions as the Committee deems appropriate or desirable.


(r) "SAR" means a stock appreciation right subject to the
appropriate requirements under Section 5 and awarded in
accordance with the terms of the Plan.


(s) "Stock" means the Series A or Series B Common Stock
of the Company and any successor Common Stock.


(t) "Total Disability" means the complete and permanent
inability of an Eligible Employee to perform all of his or her
duties under the terms of his or her employment with any
Participating Company, as determined by the Committee upon the
basis of such evidence, including independent medical reports
and data, as the Committee deems appropriate or necessary.


Section 3. Shares Subject to the Plan


(a) The maximum number of shares of Stock which may be issued
pursuant to Awards under the Plan at any time is 5% of the
issued and outstanding shares of Stock as determined at that
time; provided that no more than 2.2 million shares of Stock
may be issued pursuant to incentive stock options under the
Plan. In the event that the number of shares of Stock subject
to Awards or issued at any time is in excess of the
above-stated 5% limit, the number need not be reduced if such
excess has resulted solely from a reduction in the amount of
issued and outstanding shares of Stock subsequent to the time
that such awards were granted or such shares were issued. Such
shares shall be made available either from authorized and
unissued shares, shares held by the Company in its treasury or
reacquired shares. The term "issued" shall include all
deliveries to an


A-2


Eligible Employee of shares of Stock pursuant
to Awards under the Plan. The Committee may, in its
discretion, decide to award other shares issued by the Company
that are convertible into Stock or make such shares subject to
purchase by an Option, in which event the maximum number of
shares of Stock into which such shares may be converted shall
be used in applying the aggregate share limit under this
Section 3 and all provisions of the Plan relating to Stock
shall apply with full force and effect with respect to such
convertible shares.


(b) If, for any reason, any shares of Stock awarded or subject
to purchase or issuance under the Plan are not delivered or
are reacquired by the Company for reasons including, but not
limited to, a forfeiture of Restricted Stock or Deferred Stock
or termination, expiration or a cancellation of an Option, SAR
or a Performance Share, such shares of Stock shall be deemed
not to have been issued pursuant to Awards under the Plan.


(c) Shares of Stock received by the Company in connection with
the exercise of Options by delivery of shares or in connection
with the payment of withholding taxes shall reduce the number
of shares deemed to have been issued pursuant to Awards under
the Plan for the purpose of the 5% limit, but not for the
purpose of the 2.2 million share limit, both discussed in
Section 3(a) hereof.


Section 4. Grant of Awards and Award Agreements


(a) Subject to the provisions of the Plan, the Committee shall
(i) determine and designate from time to time those Eligible
Employees or groups of Eligible Employees to whom Awards are
to be granted; (ii) grant Awards to Eligible Employees; (iii)
determine the form or forms of Award to be granted to any
Eligible Employee; (iv) determine the amount or number of
shares of Stock, including Restricted Stock or Deferred Stock
if the Committee so determines, subject to each Award; (v)
determine the terms and conditions (which need not be
identical) of each Award; (vi) establish and modify
performance objectives; (vii) determine whether and to what
extent Eligible Employees shall be allowed or required to
defer receipt of any Awards or other amounts payable under the
Plan to the occurrence of a specified date or event; (viii)
determine the price at which shares of Stock may be offered
under each Award which price may, except in the case of
Options, be zero; (ix) interpret, construe and administer the
Plan and any related award agreement and define the terms
employed therein; and (x) make all of the determinations
necessary or advisable with respect to the Plan or any award
granted thereunder.


(b) Each Award granted under the Plan shall be evidenced by a
written Award Agreement, in a form approved by the Committee.
Such agreement shall be subject to and incorporate the express
terms and conditions, if any, required under the Plan or as
required by the Committee for the form of Award granted and
such other terms and conditions as the Committee may specify.


(c) The Committee may modify or amend any Awards (by
cancellation and regrant or substitution of Awards or
otherwise and with terms and conditions more or less favorable
to Eligible Employees) or waive any restrictions or conditions
applicable to any Awards or the exercise or realization
thereof (except that the Committee may not undertake any such
modifications, amendments or waivers if the effect thereof,
taken as a whole, adversely and materially affects the rights
of any recipient of previously granted Awards without his or
her consent, unless such modification, amendment or waiver is
necessary or desirable for the continued validity of the Plan
or its compliance with Rule 16b-3 or any successor rule under
the Securities Exchange Act of 1934 or any other rule or
regulation).


(d) The Committee may permit the voluntary surrender of all or
a portion of any Award granted under the Plan to be
conditioned upon the granting of a new Award. Any such new
Award shall be


A-3


subject to such terms and conditions as are
specified by the Committee at the time the new Award is
granted, determined in accordance with the provisions of the
Plan without regard to the terms of the surrendered Award.


Section 5. Stock Options and Stock Appreciation Rights


(a) With respect to Options and SARs, the Committee shall (i)
authorize the granting of incentive stock options,
nonqualified stock options, SARs or a combination of incentive
stock options, non-qualified stock options and SARs; (ii)
determine the number of shares of Stock subject to each Option
or the number of shares of Stock that shall be used to
determine the value of a SAR; (iii) determine whether such
Stock shall be Restricted Stock or, with respect to
nonqualified stock options, Deferred Stock; (iv) determine the
time or times when and the manner in which each Option shall
be exercisable and the duration of the exercise period; and
(v) determine whether or not all or part of each Option may be
canceled by the exercise of a SAR; provided, however, that the
aggregate Fair Market Value (determined as of the date of
Option is granted) of the Stock (disregarding any restrictions
in the case of Restricted Stock) for which incentive stock
options granted to any Eligible Employee under this Plan may
first become exercisable in any calendar year shall not exceed
$100,000. Notwithstanding the foregoing, to the extent that
incentive stock options granted to an Eligible Employee under
this Plan for any reason exceed such limit on exercisability,
the options shall be treated as nonqualified stock options as
provided under Section 422A(d) of the Code, but shall in all
other respects remain outstanding and exercisable in
accordance with their terms.


(b) The exercise period for a nonqualified stock option or SAR
shall be ten years from the date of grant or such shorter
period as may be specified by the Committee at the time of
grant. The exercise period for an incentive stock option and
any related SAR, including any extension which the Committee
may from time to time decide to grant, shall not exceed ten
years from the date of grant; provided, however, that, in the
case of an incentive stock option granted to an Eligible
Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all
classes of stock of the Company (a "Ten Percent Stockholder"),
such period, including extensions, shall not exceed five years
from the date of grant.


(c) The Option or SAR price per share shall be determined by
the Committee at the time any Option is granted and shall be
not less than the Fair Market Value, or, in the case of an
incentive stock option granted to a Ten Percent Shareholder
and any related tandem SARs, 110 percent of the Fair Market
Value, disregarding any restrictions in the case of Restricted
Stock or Deferred Stock, on the date the Option is granted, as
determined by the Committee; provided, however, that such
price shall be at least equal to the par value of one share of
Stock.


(d) No part of any Option or SAR may be exercised until (i)
the Eligible Employee who has been granted the Award shall
have remained in the employ of a Participating Company for
such period, if any, after the date on which the Option or SAR
is granted, and (ii) achievement of such performance or other
criteria, if any, by the Eligible Employee, as the Committee
may specify, and during which a SAR or related Option is
exercisable shall commence no earlier than six months
following the date the Option or SAR is granted.


(e) Except as otherwise provided in the Plan, the purchase
price of the shares as to which an Option shall be exercised
shall be paid to the Company at the time of exercis
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