Consolidated Communications Holdings
Consolidated Communications Holdings, Inc. (Form: DEF 14A, Received: 04/27/2012 11:10:28)

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [   ]
Check the appropriate box:

[   ]       Preliminary Proxy Statement
[   ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[   ] Definitive Additional Materials
[   ]   Soliciting Material Pursuant to § 240.14a-12

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
      [   ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

           (1)  Title of each class of securities to which transaction applies:
 
(2) Aggregate number of securities to which transaction applies:
 
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
(4) Proposed maximum aggregate value of transaction:
 
(5) Total fee paid:
 
      [   ]  Fee paid previously with preliminary materials:
 
[   ]  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

           (1)  Amount previously paid:
 
(2) Form, Schedule or Registration Statement No.:
 
(3) Filing Party:
 
(4) Date Filed:
 



121 South 17th Street 8150 Industrial Avenue, Building A
Mattoon, Illinois 61938-3987 Roseville, California 95678

April 24, 2012

PROPOSED MERGERS – YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Consolidated Communications Holdings, Inc. and
the Shareholders of SureWest Communications:

      On February 5, 2012, Consolidated Communications Holdings, Inc. (“Consolidated”) and SureWest Communications (“SureWest”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Consolidated has agreed to acquire SureWest Communications (“SureWest”). The Merger Agreement provides for a two-step merger in which, first, a wholly-owned subsidiary of Consolidated will merge with and into SureWest, with SureWest as the surviving entity (the “First Merger”), and then SureWest will merge with and into a separate wholly-owned subsidiary of Consolidated (the “Second Merger” and together with the First Merger, the “Mergers”). As a result of these mergers, the separate corporate existence of SureWest will cease, and the wholly-owned subsidiary of Consolidated will continue as the surviving corporation and a wholly-owned subsidiary of Consolidated.

      In the proposed First Merger, each issued and outstanding share of SureWest common stock will be converted into the right to receive either (i) $23.00 in cash, without interest, or (ii) shares of Consolidated common stock having an equivalent value based on average trading prices for the 20-day period ending two days before the closing date of the First Merger, subject to a collar so that there will be a maximum exchange ratio of 1.40565 shares of Consolidated common stock for each share of SureWest common stock and a minimum of 1.03896 shares of Consolidated common stock for each share of SureWest common stock, subject to certain exceptions. On April 23, 2012, the latest practicable date before the printing of this joint proxy statement/prospectus, the closing price of Consolidated common stock was $18.77 per share. Overall elections are subject to proration so that 50% of the SureWest shares (treating equity award shares as outstanding shares) will be exchanged for cash and 50% for stock. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances.

      Consolidated common stock trades on the NASDAQ Global Select Market under the symbol “CNSL.”

      Consolidated will hold its annual meeting of stockholders on June 12, 2012 at 9:00 a.m., Central time, at Consolidated’s corporate headquarters, 121 South 17th Street, Mattoon, Illinois 61938. At the Consolidated annual meeting, Consolidated’s stockholders will be asked (i) to approve issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement, (ii) to elect Richard A. Lumpkin to Consolidated’s board of directors as Class I director to serve for a term of three years, in accordance with Consolidated’s amended and restated certificate of incorporation and amended and restated bylaws, (iii) to ratify the appointment of Ernst & Young LLP as Consolidated’s independent registered public accounting firm for the



fiscal year ending December 31, 2012, (iv) to adjourn or postpone the Consolidated annual meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies, and (v) to transact such other business as may properly be brought before the Consolidated annual meeting and any adjournment or postponement thereof.

      SureWest will hold a special meeting of its shareholders on June 12 , 2012 at 10:00 a.m., Pacific time, at SureWest’s corporate headquarters, 8150 Industrial Avenue, Building A, Roseville, California 95678. At the SureWest special meeting, SureWest’s shareholders will be asked (i) to approve the Merger Agreement, the agreement of merger (the “Merger Certificate”) satisfying the applicable requirements of the California General Corporation Law to be filed in connection with the First Merger and the transactions contemplated thereby, including the First Merger, (ii) to approve, by an advisory vote, the change in control severance payments to SureWest’s named executive officers, and (iii) to adjourn or postpone the SureWest special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies.

      The board of directors of Consolidated recommends that Consolidated’s stockholders vote “FOR” each of (i) the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement, (ii) the election of Richard A. Lumpkin as Class I director of Consolidated, (iii) the ratification of the appointment of Ernst & Young LLP as Consolidated’s independent registered public accounting firm for the fiscal year ending December 31, 2012, and (iv) the proposal to adjourn or postpone the Consolidated annual meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.

      The board of directors of SureWest recommends that SureWest’s shareholders vote “FOR” each of (i) the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, (ii) by an advisory vote, the change in control severance payments to SureWest’s named executive officers, and (iii) the proposal to adjourn or postpone the SureWest special meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.

      YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Consolidated annual meeting or the SureWest special meeting, as applicable, please take the time to vote by using the Internet or by telephone as described in this joint proxy statement/prospectus or by completing the enclosed proxy card and mailing it in the enclosed envelope. Information about the meetings, the Mergers and the other business to be considered at the meetings is contained in this joint proxy statement/prospectus. You are urged to read this joint proxy statement/prospectus carefully.

      In particular, you should read the “Risk Factors Relating to the Mergers” section beginning on page 37 for a discussion of the risks you should consider in evaluating the Merger Agreement and the Mergers and how they will affect you.

      Thank you for your cooperation and continued support.

      Sincerely,  

  Robert J. Currey Steven C. Oldham
      President and Chief Executive Officer President and Chief Executive Officer
Consolidated Communications Holdings, Inc. SureWest Communications

Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved the Merger Agreement and the Mergers described in this joint proxy statement/prospectus or the Consolidated common stock to be issued in the First Merger contemplated by the Merger Agreement or passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated April 24, 2012 and is first being mailed to Consolidated stockholders and SureWest shareholders on or about April 30, 2012.



REFERENCES TO ADDITIONAL INFORMATION

      This joint proxy statement/prospectus incorporates by reference important business and financial information about Consolidated and SureWest from documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your oral or written request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

SureWest Communications Consolidated Communications Holdings, Inc.
8150 Industrial Avenue, Building A 121 South 17th Street
Roseville, California 95678 Mattoon, Illinois 61938
Attention: Investor Relations Attention: Investor Relations
Telephone: (916) 786-1831 Telephone: (217) 235-3311

      If you would like to request documents, please do so by June 4, 2012 in order to receive them before the meetings.

      See “Where You Can Find More Information” on page 176 .

ABOUT THIS DOCUMENT

      This joint proxy statement/prospectus forms a part of a registration statement on Form S-4 (Registration No. 333-180407 ) filed by Consolidated and SureWest with the Securities and Exchange Commission. It constitutes a prospectus of Consolidated under Section 5 of the Securities Act of 1933, as amended, and the rules thereunder, with respect to the shares of Consolidated common stock to be issued to SureWest shareholders in the First Merger. In addition, it constitutes a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, and the rules thereunder, and a notice of meeting with respect to (i) the Consolidated annual meeting of stockholders at which Consolidated stockholders will consider and vote upon (a) the proposal to approve the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement, (b) the proposal to elect Richard A. Lumpkin as Class I director to Consolidated’s board of directors to serve for a term of three years, in accordance with Consolidated’s amended and restated certificate of incorporation and amended and restated bylaws, (c) the proposal to ratify the appointment of Ernst & Young LLP as Consolidated’s independent registered public accounting firm for the fiscal year ending December 31, 2012, (d) the proposal to adjourn or postpone the Consolidated annual meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies, and (e) such other business as may properly be brought before the Consolidated annual meeting and any adjournment or postponement thereof, and (ii) the special meeting of SureWest shareholders at which SureWest shareholders will consider and vote upon (a) the proposal to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, (b) the proposal to approve, by an advisory vote, the change in control severance payments to SureWest’s named executive officers and (c) the proposal to adjourn or postpone the SureWest special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies.



CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 2012

To Stockholders:

      The 2012 annual meeting of stockholders of Consolidated Communications Holdings, Inc. (“Consolidated”) will be held at Consolidated’s corporate headquarters, 121 South 17th Street, Mattoon, Illinois 61938 on June 12, 2012 at 9:00 a.m. , Central time. The 2012 annual meeting of stockholders is being held for the following purposes:

      1. To approve the issuance of Consolidated common stock to SureWest Communications (“SureWest”) shareholders in the First Merger contemplated by the Agreement and Plan of Merger, dated as of February 5, 2012 (the “Merger Agreement”), by and among Consolidated, SureWest, WH Acquisition Corp., a California corporation and a wholly-owned subsidiary of Consolidated (“Merger Sub I”), and WH Acquisition II Corp., a California corporation and a wholly-owned subsidiary of Consolidated (“Merger Sub II”), a copy of which is attached as Annex I to the accompanying joint proxy statement/prospectus, pursuant to which SureWest will merge with and into Merger Sub I (the “First Merger”), with SureWest as the surviving entity and then SureWest will merge with and into Merger Sub II, with Merger Sub II as the surviving entity (Consolidated Proposal No. 1);

      2. To elect Richard A. Lumpkin as Class I director to serve for a term of three years, in accordance with Consolidated’s amended and restated certificate of incorporation and amended and restated bylaws (Consolidated Proposal No. 2);

      3. To ratify the appointment of Ernst & Young LLP as Consolidated’s independent registered public accounting firm for the fiscal year ending December 31, 2012 (Consolidated Proposal No. 3);

      4. To approve the adjournment or postponement of the annual meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies in the event that there are not sufficient votes at the time of the annual meeting to approve the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement (Consolidated Proposal No. 4); and

      5. To transact such other business as may properly come before the annual meeting and any adjournment or postponement thereof.

      Only stockholders of record at the close of business on April 23, 2012 are entitled to vote at the meeting or at any adjournment or postponement thereof.

      We hope that as many stockholders as possible will personally attend the meeting. Whether or not you plan to attend the meeting, please complete the enclosed proxy card and sign, date and return it promptly so that your shares will be represented. You also may vote your shares by telephone or through the Internet by following the instructions set forth on the proxy card. Submitting your proxy in writing, by telephone or through the Internet will not prevent you from voting in person at the meeting.



      The board of directors of Consolidated unanimously recommends that you vote “FOR” each of (i) the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement; (ii) the election of Richard A. Lumpkin as Class I director of Consolidated; (iii) the ratification of the appointment of Ernst & Young LLP as Consolidated’s independent registered public accounting firm for the fiscal year ending December 31, 2012; and (iv) the proposal to adjourn or postpone the annual meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.  

By Order of the Board of Directors,

Steven J. Shirar
Senior Vice President & Secretary

April 24, 2012

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 12, 2012 — Our Proxy Statement and 2011 Annual Report to Stockholders are available at www.edocumentview.com/cnsl.



 
SUREWEST COMMUNICATIONS

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 12 , 2012

To Our Shareholders:

      A special meeting of shareholders of SureWest Communications (“SureWest”) will be held at SureWest’s offices at 8150 Industrial Avenue, Building A, Roseville, California, on June 12 , 2012 at 10:00 a.m. , Pacific time. The special meeting of shareholders is being held for the following purposes:

      1. To approve the Agreement and Plan of Merger, dated as of February 5, 2012 (the “Merger Agreement”), by and among Consolidated, SureWest, WH Acquisition Corp., a California corporation and a wholly-owned subsidiary of Consolidated (“Merger Sub I”), and WH Acquisition II Corp., a California corporation and a wholly-owned subsidiary of Consolidated (“Merger Sub II”), a copy of which is attached as Annex I to the accompanying joint proxy statement/prospectus, pursuant to which SureWest will merge with and into Merger Sub I (the “First Merger”), with SureWest as the surviving entity and then SureWest will merge with and into Merger Sub II, the agreement of merger (the “Merger Certificate”) satisfying the applicable requirements of the California General Corporation Law to be filed in connection with the First Merger and the transactions contemplated thereby, including the First Merger (SureWest Proposal No. 1);

      2. To approve, by an advisory vote, the change in control severance payments to SureWest’s named executive officers (SureWest Proposal No. 2); and

      3. To approve the adjournment or postponement of the special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve SureWest Proposal No. 1 (SureWest Proposal No. 3).

      Only shareholders of record at the close of business on April 23, 2012 are entitled to vote at the SureWest special meeting or at any adjournment or postponement thereof.

      We hope that as many shareholders as possible will personally attend the SureWest special meeting. Whether or not you plan to attend the special meeting, please complete the enclosed proxy card and sign, date and return it promptly so that your shares will be represented. You also may vote your shares by telephone or through the Internet by following the instructions set forth on the proxy card. Submitting your proxy in writing, by telephone or through the Internet will not prevent you from voting in person at the special meeting.

      The board of directors of SureWest, by unanimous vote, has determined that it is in the best interests of SureWest and its shareholders to consummate the transactions contemplated by the Merger Agreement, and unanimously recommends that shareholders vote FOR the proposal to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, FOR the proposal to approve, by an advisory vote, the change in control severance payments to SureWest’s named executive officers and FOR the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.

By Order of the Board of Directors,
DARLA J. YETTER
Secretary

SHAREHOLDERS WHO CANNOT ATTEND IN PERSON ARE REQUESTED TO VOTE
AS PROMPTLY AS POSSIBLE. YOU MAY VOTE OVER THE INTERNET,
BY TELEPHONE, OR BY U.S. MAIL.

April 24, 2012



TABLE OF CONTENTS

Page
DEFINED TERMS USED IN THIS JOINT PROXY STATEMENT/PROSPECTUS 1
QUESTIONS AND ANSWERS ABOUT THE MERGERS AND THE SUREWEST SPECIAL MEETING 2
QUESTIONS AND ANSWERS ABOUT THE CONSOLIDATED ANNUAL MEETING 10
SUMMARY 16
       General 16
       The SureWest Special Meeting 18
       The Consolidated Annual Meeting 18
       Record Dates; Shares Entitled to Vote; Required Vote with respect to the Mergers; Quorums 19
       Shares Owned by SureWest Directors and Executive Officers 19
       Shares Owned by Consolidated Directors and Executive Officers 19
       The Mergers 19
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF CONSOLIDATED
       COMMUNICATIONS HOLDINGS, INC 22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF SUREWEST COMMUNICATIONS 28
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 31
COMPARATIVE PER SHARE MARKET PRICE, DIVIDEND AND OTHER DATA 33
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 35
RISK FACTORS RELATING TO THE MERGERS 37
THE MERGERS 43
       The Companies 43
       Background of the Mergers 44
       SureWest’s Reasons for the Mergers and Recommendation of the SureWest Board of Directors 51
       Opinion of Financial Advisor to SureWest 56
       Financial Analyses 59
       Miscellaneous 62
       Consolidated’s Reasons for the Mergers 62
       Opinion of Financial Advisor to Consolidated 64
       Board of Directors of Consolidated after Completion of the Mergers 70
       Interests of SureWest Directors and Executive Officers in the Mergers 71
       Effect of the Mergers 76
       Merger Consideration 76
       Treatment of SureWest Equity Awards 77
       Ownership of Consolidated Following the Mergers 77
       SureWest Shareholders Making Cash and Stock Elections 77
       Conversion of Shares; Exchange Procedures; Fractional Shares 82
       Accounting Treatment 83
       Regulatory Approvals Required for the Mergers 83
       Dissenters’ Rights of SureWest Shareholders 84
       Stock Exchange Listing of Consolidated Common Stock 84
       Delisting and Deregistration of SureWest Common Stock 84
       Legal Proceedings Related to the Mergers 84
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES 85

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TABLE OF CONTENTS
(continued)

Page
THE MERGER AGREEMENT 89
       The Mergers 89
       Closing and Effectiveness of the Mergers 89
       Directors and Officers After the Mergers 89
       Consideration to be Received in the Mergers 90
       Dissenting Shares 90
       Treatment of SureWest Equity Awards 90
       Representations and Warranties 90
       SureWest’s Conduct of Business Before Completion of the Mergers 92
       Consolidated’s Forbearances Before Completion of the Mergers 94
       No Solicitation; Changes in Recommendations 94
       Commercially Reasonable Efforts to Complete the Mergers; Other Agreements 96
       Access to Information 96
       Financing 96
       Financing Cooperation 97
       Director and Officer Indemnification and Insurance 98
       Employee Matters 98
       Definition of Material Adverse Effect 98
       Conditions of the Mergers 99
       Termination; Termination Fees; Expenses 100
       Specific Performance; Remedies 102
       Amendment; Extension and Waiver 102
       Governing Law; Venue 102
DEBT FINANCING 103
       General 103
       Bridge Facility 103
       Initial Bridge Loans, Extended Term Loans and Exchange Notes 104
       Alternative Financing 104
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS 105
DESCRIPTION OF CONSOLIDATED CAPITAL STOCK 114
COMPARISON OF RIGHTS OF COMMON SHAREHOLDERS OF SUREWEST AND COMMON STOCKHOLDERS
      OF CONSOLIDATED 115
       Capitalization 115
       Number, Election, Vacancy and Removal of Directors 115
       Amendments to Charter Documents 116
       Amendments to Bylaws 116
       Action by Written Consent 117
        Notice of Stockholder/Shareholder Actions 117
       Special Stockholder/Shareholder Meetings 118
       Stockholder/Shareholder Inspection Rights 118
       Limitation of Personal Liability and Indemnification of Directors and Officers 119
       Dividends 120
       Conversion; Preemptive Rights 120
       Rights Plan 121
       Voting Rights; Required Vote for Authorization of Certain Actions 121
       Appraisal Rights and Dissenters’ Rights 123
       Interested Directors 124

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TABLE OF CONTENTS
(continued)

Page
DISSENTERS’ RIGHTS OF SUREWEST SHAREHOLDERS 125
THE SUREWEST SPECIAL MEETING 127
       Date, Time and Place 127
       Purpose of the SureWest Special Meeting 127
       SureWest Board Recommendation 127
        Who Can Vote at the SureWest Special Meeting 127
       Vote Required; Quorum 127
       Shares Owned by SureWest Directors and Executive Officers 128
       Voting by Proxy 128
       SureWest KSOP Participants 129
       Solicitation of Proxies 130
SUREWEST PROPOSAL NO. 1: APPROVAL OF THE MERGER AGREEMENT, THE MERGER CERTIFICATE AND
      THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE FIRST MERGER
131
SUREWEST PROPOSAL NO. 2: APPROVAL, BY AN ADVISORY VOTE, OF THE CHANGE IN
      CONTROL SEVERANCE PAYMENTS
132

SUREWEST PROPOSAL NO. 3: APPROVAL OF THE ADJOURNMENT OR POSTPONEMENT OF
      THE SUREWEST SPECIAL MEETING, IF NECESSARY OR APPROPRIATE

133
THE CONSOLIDATED ANNUAL MEETING 134
       Date, Time and Place 134
       Purpose of the Consolidated Annual Meeting 134
       Record Date; Shares Entitled to Vote; Required Vote; Quorum 134
       Shares Owned by Consolidated Directors and Executive Officers 135
       Voting of Proxies 135
       Changing Your Vote 136
       Solicitation of Proxies 137
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CONSOLIDATED 138
CONSOLIDATED PROPOSAL NO. 1: APPROVAL OF THE ISSUANCE OF CONSOLIDATED COMMON STOCK
      IN CONNECTION WITH THE FIRST MERGER 139
CONSOLIDATED PROPOSAL NO. 2: ELECTION OF RICHARD A. LUMPKIN AS DIRECTOR 140
CORPORATE GOVERNANCE AND BOARD COMMITTEES 142
REPORT OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS 150
PRINCIPAL INDEPENDENT ACCOUNTANT FEES AND SERVICES 151
CONSOLIDATED PROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
      PUBLIC ACCOUNTING FIRM 152
CONSOLIDATED PROPOSAL NO. 4: APPROVAL OF THE ADJOURNMENT OR POSTPONEMENT OF THE
      CONSOLIDATED ANNUAL MEETING, IF NECESSARY OR APPROPRIATE 153
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS 154
EQUITY COMPENSATION PLAN INFORMATION 155
COMPENSATION COMMITTEE REPORT 155
COMPENSATION DISCUSSION AND ANALYSIS 156
EXECUTIVE COMPENSATION 166

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TABLE OF CONTENTS
(continued)

Page
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL OF THE COMPANY 170
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 173
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 174
ANNUAL REPORT TO STOCKHOLDERS 174
GENERAL 175
LEGAL MATTERS 175
EXPERTS 175
OTHER MATTERS 175
FUTURE STOCKHOLDER PROPOSALS 176
WHERE YOU CAN FIND MORE INFORMATION 176
 
Merger Agreement ANNEX I
Fairness Opinion of UBS Securities LLC ANNEX II
Fairness Opinion of Wells Fargo Securities, LLC ANNEX III
California Statute Relating to Shareholders’ Dissenters’ Rights ANNEX IV

-iv-



DEFINED TERMS USED IN THIS JOINT PROXY STATEMENT/PROSPECTUS

Consolidated or the Company*       Consolidated Communications Holdings, Inc., a Delaware corporation
 
Exchange Act Securities Exchange Act of 1934, as amended
 
First Merger Business combination whereby Merger Sub I will merge with and into SureWest, with SureWest as the surviving entity, pursuant to the Merger Agreement
 
Mergers First Merger and Second Merger, collectively
  
Merger Agreement Agreement and Plan of Merger, dated as of February 5, 2012, as it may be amended from time to time, by and among Consolidated, SureWest, Merger Sub I and Merger Sub II
  
Merger Certificate The agreement of merger satisfying the applicable requirements of the California General Corporation Law to be filed in connection with the First Merger, attached as Exhibit A to the Merger Agreement
  
Merger Consideration With respect to a given share of SureWest common stock, the cash consideration (with respect to a share of SureWest common stock representing the right to receive the cash consideration) or the stock consideration (with respect to a share of SureWest common stock representing the right to receive the stock consideration)
  
Merger Sub I WH Acquisition Corp., a California corporation and a wholly-owned subsidiary of Consolidated
  
Merger Sub II WH Acquisition II Corp., a California corporation and a wholly-owned subsidiary of Consolidated
  
Merger Subs Merger Sub I and Merger Sub II
  
SEC Securities and Exchange Commission
  
Second Merger Business combination subsequent to the First Merger whereby SureWest will merge with and into Merger Sub II, with Merger Sub II as the surviving entity, pursuant to the Merger Agreement
  
Securities Act Securities Act of 1933, as amended
  
SureWest SureWest Communications, a California corporation

* In this joint proxy statement/prospectus, “we,” “us” or “our” refer to Consolidated.

1



QUESTIONS AND ANSWERS ABOUT THE MERGERS AND THE SUREWEST SPECIAL MEETING

      The following questions and answers address briefly some questions you may have regarding the Mergers and the SureWest special meeting. These questions and answers may not address all questions that may be important to you as a shareholder of SureWest or as a stockholder of Consolidated. Please refer to the more detailed information contained elsewhere in this joint proxy statement/prospectus, the annexes to this joint proxy statement/prospectus and the documents referred to in or incorporated by reference into this joint proxy statement/prospectus. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information” on page 176 .

      For certain questions and answers about the Consolidated annual meeting, see the section entitled “Questions and Answers about the Consolidated Annual Meeting” on page 10 .

What are the Mergers?

      In accordance with the terms and conditions of the Merger Agreement, if SureWest shareholders approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, and Consolidated stockholders approve the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement and the other closing conditions under the Merger Agreement are satisfied or waived, Merger Sub I will merge with and into SureWest, with SureWest surviving the First Merger, and following consummation of the First Merger, SureWest will merge with and into Merger Sub II, and Merger Sub II shall be the surviving corporation. A copy of the Merger Agreement is attached as Annex I to this joint proxy statement/prospectus.

Is my vote necessary to complete the Mergers?

      Yes. The companies have agreed to combine the two companies upon the terms and conditions of the Merger Agreement that is described in this joint proxy statement/prospectus. You are receiving these proxy materials to help you decide, among other matters, how to vote your shares of SureWest with respect to the proposed First Merger.

      The Mergers cannot be completed unless, among other things, SureWest shareholders approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger.

      The SureWest special meeting is being held to vote on, among other matters, the proposals necessary to complete the First Merger. Information about these meetings, the Mergers and the other business to be considered by SureWest shareholders is contained in this joint proxy statement/prospectus.

      Your vote is important. SureWest encourages you to vote as soon as possible.

Are there other matters related to the Mergers that require the vote of SureWest shareholders?

      Yes. At the SureWest special meeting, shareholders will be asked to consider and vote upon a proposal to approve, by an advisory vote, the agreements and understandings of SureWest and its named executive officers concerning compensation that is based on or otherwise relates to the First Merger contemplated by the Merger Agreement, and the aggregate total of all such compensation that may be paid or become payable to or on behalf of such executive officers, as disclosed in this joint proxy statement/prospectus under the heading “The Mergers—Interests of SureWest Directors and Executive Officers in the Mergers—Change of Control Severance Agreements with Executive Officers” (the “change in control severance payments”).

2



What will shareholders receive in the Mergers?

      SureWest shareholders may make one of the following elections, or a combination of the two, regarding the type of Merger Consideration they wish to receive in exchange for shares of SureWest common stock:

      If SureWest shareholders make a cash election or a stock election, the form of Merger Consideration that they actually receive as a SureWest shareholder may be adjusted as a result of the proration procedures contained in the Merger Agreement as described in this joint proxy statement/prospectus under “The Mergers — SureWest Shareholders Making Cash and Stock Elections” on page 77 . These proration procedures are designed to ensure that 50% of the SureWest shares outstanding immediately prior to the First Merger (treating restricted stock units and restricted stock awards—equity award shares—as outstanding) are converted in the First Merger into the right to receive cash and 50% of the SureWest shares outstanding immediately prior to the First Merger are converted into the right to receive Consolidated common stock. All holders of SureWest equity award shares will be paid in cash and shall not be subject to such proration. Because equity award shares reduce the number of outstanding SureWest shares that will convert to cash, it is expected that approximately 46% of outstanding SureWest shares (exclusive of equity award shares) will convert into the right to receive cash, and 54% will convert into the right to receive stock. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances, as further described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections — General Consideration Adjustment” on page 81 .

      Neither Consolidated nor SureWest is making any recommendation as to whether SureWest shareholders should elect to receive cash consideration or stock consideration in the First Merger. SureWest shareholders must make their own decision with respect to such election. No guarantee can be made that SureWest shareholders will receive the amount of cash consideration or stock consideration they elect. As a result of the proration procedures described in this joint proxy statement/prospectus and in the Merger Agreement, they may receive stock consideration or cash consideration in amounts that are different from the amounts they elect to receive. Because the value of the stock consideration and cash consideration may differ, they may receive consideration having an aggregate value less than what they elected to receive. SureWest shareholders should obtain current market quotations for Consolidated common stock before deciding what elections to make.

      Because other SureWest shareholders would likely take the relative values of the stock consideration and cash consideration into account in determining what form of election to make, if you fail to make an election you are likely to receive the form of consideration having the lower value (depending on the relative values of the stock consideration and cash consideration at the effective time of the First Merger).

      After completion of the First Merger, each Consolidated stockholder will have the same number of shares of Consolidated common stock that such stockholder held immediately prior to the completion of the First Merger. However, upon issuance of the shares of Consolidated common stock to SureWest shareholders in connection with the First Merger, each share of Consolidated common stock outstanding immediately prior to the completion of the First Merger will represent a smaller percentage of the aggregate number of shares of Consolidated common stock outstanding after the completion of the First Merger. On the other hand, each share of Consolidated common stock will then represent an interest in a company with more assets.

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How and when do SureWest shareholders make a cash election or a stock election?

      SureWest shareholders should carefully review and follow the instructions accompanying the form of election, which will be sent to you separately from this joint proxy statement/prospectus promptly after approval, if received, by SureWest shareholders of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger. To make a cash election or a stock election, SureWest shareholders of record must properly complete, sign and send the form of election and any stock certificates representing their SureWest shares, or a guarantee of delivery as described in the instructions accompanying the form of election, to Computershare Trust Company, N.A., the exchange agent, as follows:

By mail: By Facsimile Transmission: Overnight Courier:
   
Computershare Trust Company, N.A. For Eligible Institutions Only: Computershare Trust Company, N.A.
Attention: Corporate Actions (617) 360-6810 Attention: Corporate Actions
P.O. Box 43011 250 Royall Street, Suite V
Providence, RI 02940-3011 For Confirmation Only: Canton, MA 02021
(781) 575-2332

      The exchange agent must receive the form of election and any stock certificates representing SureWest shares, or a guarantee of delivery as described in the instructions accompanying the form of election, at or prior to the election deadline. The election deadline will be 5:00 p.m., Eastern time, on the date that is two business days immediately prior to the closing date of the First Merger (or such other date as Consolidated and SureWest mutually agree) . Consolidated and SureWest will publicly announce the anticipated election deadline at least five business days prior to the anticipated closing date of the First Merger.

      If you own SureWest shares in “street name” through a bank, broker or other nominee and you wish to make an election, you should seek instructions from the financial institution holding your shares concerning how to make your election.

Can SureWest shareholders elect to receive cash consideration for a portion of SureWest shares and stock consideration for remaining SureWest shares?

      Yes. The form of election allows an election to be made for cash consideration for a portion of SureWest shares and stock consideration for remaining SureWest shares.

Can SureWest shareholders change their election after the form of election has been submitted?

      Yes. SureWest shareholders may revoke an election at or prior to the election deadline by submitting a written notice of revocation to the exchange agent at or prior to the election deadline. Revocations must specify the name in which the shares are registered on the share transfer books of SureWest and such other information as the exchange agent may request. If SureWest shareholders wish to submit a new election, they must do so in accordance with the election procedures described in this joint proxy statement/prospectus and the form of election, which will be sent to you separately from this joint proxy statement/prospectus promptly after approval, if received, by SureWest shareholders of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger. If SureWest shareholders instructed a broker or other nominee holder to submit an election for their shares, they must follow the broker’s or other nominee’s directions for changing those instructions. The notice of revocation must be received by the exchange agent at or prior to the election deadline in order for the revocation to be valid.

May SureWest shareholders transfer SureWest shares after making a cash election or a stock election?

      No. Once a SureWest shareholder properly makes an election with respect to any shares of SureWest common stock, they will be unable to sell or otherwise transfer those shares, unless they properly revoke their election at or prior to the election deadline or unless the Merger Agreement is terminated.

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What happens if a SureWest shareholder does not send a form of election or it is not received by the election deadline?

      If the exchange agent does not receive a properly completed form of election from a SureWest shareholder at or prior to the election deadline (together with any stock certificates representing the shares of SureWest common stock covered by the election or a guarantee of delivery as described in the form of election), then such SureWest shareholder will be deemed not to have made an election and will have no control over the type of Merger Consideration they receive. As a result, SureWest shares may be exchanged for cash consideration, stock consideration or a combination of cash consideration and stock consideration in accordance with the proration procedures contained in the Merger Agreement and described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections” beginning on page 77 . SureWest shareholders bear the risk of delivery of all the materials that they are required to submit to the exchange agent in order to properly make an election.

      If a SureWest shareholder does not properly make an election with respect to all the SureWest shares they own of record, after the completion of the First Merger they will receive written instructions from the exchange agent on how to exchange SureWest stock certificates for the shares of Consolidated common stock and/or cash that they are entitled to receive in the First Merger as a non-electing SureWest shareholder.

      Because other SureWest shareholders would likely take the relative values of the stock consideration and cash consideration into account in determining what form of election to make, if a SureWest shareholder fails to make an election they are likely to receive the consideration having the lower value (depending on the relative values of the cash consideration and the stock consideration at the effective time of the First Merger).

May SureWest shareholders submit a form of election even if they do not vote to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger?

      Yes. SureWest shareholders may submit a form of election even if they vote against the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger or if they abstain or fail to vote with respect to the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger.

Where and when is the special meeting of SureWest shareholders?

      The special meeting will be held on June 12 , 2012 at 10:00 a.m., Pacific time, at SureWest’s offices at 8150 Industrial Avenue, Building A, Roseville, California 95678.

Who can vote at the SureWest special meeting?

      SureWest shareholders can vote at the SureWest special meeting if shareholders owned shares of SureWest common stock at the close of business on April 23, 2012, the record date for the special meeting.

What vote of SureWest shareholders is required to approve the proposals?

      To approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, holders of a majority of the outstanding shares of SureWest common stock must vote their shares “ FOR ” the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger.

      To approve, by an advisory vote, the change in control severance payments, holders of a majority of the shares of SureWest common stock casting votes at the special meeting must vote their shares “ FOR ” the proposal.

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      To approve adjournment of the special meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies, holders of a majority of the shares of SureWest common stock casting votes at the special meeting must vote their shares “ FOR ” the proposal.

What constitutes a quorum for the SureWest special meeting?

      A majority of the outstanding shares of SureWest’s common stock entitled to vote being present in person or represented by proxy constitutes a quorum for the special meeting. If a quorum is not present, the shareholders present, in person or by proxy, may adjourn the meeting, without notice other than announced at the meeting, to another place, if any, date or time.

How does the Board of Directors of SureWest recommend that SureWest shareholders vote?

      The SureWest board of directors has determined that the Merger Agreement and the transactions contemplated thereby are in the best interests of SureWest and its shareholders and recommends that SureWest shareholders vote “ FOR ” the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, “ FOR ” the approval, by advisory vote, of the change in control severance payments and “ FOR ” the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies. The board is soliciting shareholder votes consistent with the board’s recommendation. You should read the section entitled “The Mergers—SureWest’s Reasons for the Mergers and Recommendation of SureWest’s Board of Directors” for a discussion of the factors that the board considered in deciding to recommend voting “ FOR ” the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger.

How do I vote?

      If you are a SureWest shareholder of record (or if you hold any shares in the SureWest KSOP) after carefully reading and considering the information contained in this joint proxy statement/prospectus you may vote by any of the following methods:

      SureWest recommends that you vote in advance even if you plan to attend the meeting so that SureWest will know as soon as possible that enough votes will be present for SureWest to hold the meeting. If you are a shareholder of record and attend the meeting, you may vote at the meeting or deliver your completed proxy card

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in person. If you properly return or submit your proxy but do not indicate how you wish to vote, SureWest (or the KSOP trustee) will count your proxy as a vote “FOR” the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, “FOR” the approval, by advisory vote, of the change in control severance payments and “FOR” the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.

      If your shares are held in “street name,” please refer to the information forwarded to you by your bank, broker or other holder of record to see what you must do in order to vote your shares, including whether you may be able to vote electronically through your bank, broker or other record holder. If so, instructions regarding electronic voting will be provided by the bank, broker or other holder of record to you as part of the package that includes this joint proxy statement/prospectus. If you are a “street name” stockholder and you wish to vote in person at the meeting, you will need to obtain a proxy from the institution that holds your shares and present it to the inspector of elections with your ballot when you vote at the annual meeting.

What is the difference between a shareholder of record and a “street name” beneficial holder of shares?

      If your shares are registered directly in your name with SureWest’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered a shareholder of record with respect to those shares. If this is the case, the shareholder proxy materials have been sent or provided directly to you by SureWest.

      If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” If this is the case, the proxy materials have been forwarded to you by your brokerage firm, bank or other nominee, which is considered the shareholder of record with respect to these shares. As the beneficial holder, you have the right to direct your broker, bank or other nominee how to vote your shares. Please contact your broker, bank, or other nominee for instructions on how to vote any shares you beneficially own.

If my shares are held in “street name” by my broker, will my broker vote my shares for me?

      If your shares are held for you as a beneficial owner in “street name”, your broker will vote your shares on the proposals only if you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without instructions, your shares will not be voted on and will have the effect of an “Against” vote for the proposal to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, and will have no effect on the proposals to approve, by an advisory vote, of the change in control severance payments and to adjourn or postpone the special meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.

Can I change my vote after I have delivered my proxy?

      Yes. You can change your vote before the SureWest special meeting. If you are a SureWest shareholder of record (or if you hold any shares in the SureWest KSOP), you may change your proxy voting instructions prior to commencement of the special meeting by granting a new proxy (by mail, by phone or over the Internet), as described under “The SureWest Special Meeting — Voting by Proxy” on page 128 . You may also revoke a proxy by submitting a notice of revocation to the Secretary of SureWest at the address set forth under “The SureWest Special Meeting — Voting by Proxy” on page 128 prior to the commencement of the special meeting. Attendance at the special meeting will not in and of itself constitute revocation of a proxy.

      If your shares are held in “street name”, you may change your vote by submitting new voting instructions to your broker or other nominee holder in accordance with the procedures established by it. Please contact your broker or other nominee and follow its directions in order to change your vote.

Should I send in my SureWest stock certificates with my proxy card?

      No. Please DO NOT send your SureWest stock certificates with your proxy card.

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Should I send in my form of election with my proxy card?

      No. If you wish to make an election with respect to your SureWest shares, then, prior to the election deadline, you should send your completed, signed form of election (together with your SureWest stock certificates or a guarantee of delivery) to the exchange agent as described in the form of election. This form of election is not included with these proxy materials. Instead, it will be sent to you separately from this joint proxy statement/prospectus promptly after approval, if received, by SureWest shareholders of the Merger Agreement. If your shares are held in “street name”, you should follow your broker’s or other nominee’s instructions for making an election with respect to your shares.

      If you make no election with respect to your SureWest shares, after the completion of the First Merger you will receive a letter of transmittal for you to use in surrendering any SureWest stock certificates you have at that time.

What are the material U.S. federal income tax consequences of the Mergers to U.S. holders of SureWest shares?

      Each of Orrick, Herrington & Sutcliffe LLP, tax counsel to SureWest, and Schiff Hardin LLP, tax counsel to Consolidated, are delivering an opinion that the First Merger and the Second Merger taken together will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. However, neither SureWest nor Consolidated has requested or received a ruling from the Internal Revenue Service that the Mergers will qualify as a reorganization. The U.S. federal income tax consequences of a reorganization to a SureWest shareholder will depend on the relative mix of cash and Consolidated common stock received by such SureWest shareholder. Assuming that the Mergers qualify as a reorganization, SureWest shareholders should not recognize any gain or loss for U.S. federal income tax purposes if they exchange their SureWest shares solely for shares of Consolidated common stock in the First Merger, except with respect to cash received in lieu of fractional shares of Consolidated common stock. SureWest shareholders will recognize gain or loss if they exchange their SureWest shares solely for cash in the First Merger. SureWest shareholders will recognize gain, but not loss, if they exchange their SureWest shares for a combination of Consolidated common stock and cash, but their taxable gain in that case will not exceed the cash they receive in the First Merger.

      The tax opinions regarding the Mergers do not address any state, local or foreign tax consequences of the Mergers.

      Please carefully review the information set forth in the section titled “Material United States Federal Income Tax Consequences” beginning on page 85 for a description of the material United States federal income tax consequences of the Mergers. The tax consequences of the Mergers to each SureWest shareholder will depend on such SureWest shareholder’s own situation. SureWest shareholders should consult with their own tax advisors for a full understanding of the tax consequences of the Mergers to them.

When do SureWest and Consolidated expect the Mergers to be completed?

      SureWest and Consolidated are working to complete the Mergers as quickly as possible. If the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, are approved by SureWest shareholders, the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement is approved by Consolidated stockholders, and the other conditions to completion of the Mergers are satisfied or waived, including required regulatory approvals, it is anticipated that the Mergers will be completed in the third quarter of 2012. However, it is possible that factors outside the control of SureWest and Consolidated could require SureWest and Consolidated to complete the Mergers at a later time or not complete it at all. If the Mergers are not completed by November 5, 2012, either SureWest or Consolidated may terminate the Merger Agreement. The commitments that Consolidated received from lenders in connection with its financing of the Mergers and the transactions contemplated thereby terminate on November 5, 2012 unless an extension is agreed to by such lenders, as described further under “Debt Financing” on page 103 .

Will SureWest continue to pay dividends on its common stock until the Mergers are completed?

      SureWest paid cash dividends of $0.08 per share, $0.08 per share and $0.10 per share in the second, third and fourth quarters of 2011, respectively, and has declared a cash dividend of $0.10 per share to be paid in the first quarter of the year ending December 31, 2012. SureWest currently expects to pay comparable cash dividends in the future and is expressly permitted to continue to pay a quarterly dividend of $0.10 per share under the terms of the

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Merger Agreement. However, future dividend payments are at the discretion of the SureWest board and changes in the dividend program will continue to depend on SureWest’s earnings, capital requirements, financial condition, debt covenant and other factors considered relevant by the SureWest board.

Can SureWest shareholders dissent and require appraisal of their shares?

      Yes. Under California law, SureWest shareholders have the right to seek appraisal of the fair market value of their shares of SureWest common stock as determined by a California court if the Mergers are completed, but only if (a) they do not vote in favor of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, (b) they make a written demand for appraisal in compliance with California law within 30 days of notification that the Merger Agreement has been approved, (c) they submit the certificates representing their dissenting shares to SureWest within 30 days of notification that the Merger Agreement has been approved, (d) they hold shares of SureWest common stock on the record date and continuously hold such shares through the completion of the First Merger and (e) demands for payment are filed with respect to at least five percent of the outstanding shares of SureWest common stock. See “Dissenters’ Rights of SureWest Shareholders” beginning on page 125 .

Who can help answer my questions?

      If SureWest shareholders have any questions about the Mergers or the SureWest special meeting, or if they need additional copies of this joint proxy statement/prospectus or the enclosed proxy card or the form of election that will be sent separately from this joint proxy statement/prospectus promptly after approval, if received, by SureWest shareholders of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, they should contact:

      Okapi Partners LLC
      437 Madison Avenue, 28th Floor
      New York, New York 10022
      Banks and Brokerage Firms, please call: (212) 297-0720
      Stockholders and all others, call toll-free: (877) 796-5274
      Email: info@okapipartners.com

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QUESTIONS AND ANSWERS ABOUT THE CONSOLIDATED ANNUAL MEETING

      The following questions and answers address briefly some questions you may have regarding the Consolidated annual meeting. These questions and answers may not address all questions that may be important to you as a stockholder of Consolidated. Please refer to the more detailed information contained elsewhere in this joint proxy statement/prospectus, the annexes to this joint proxy statement/prospectus and the documents referred to in or incorporated by reference into this joint proxy statement/prospectus. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information” on page 176 .

      For certain questions and answers about the SureWest special meeting, see the section entitled “Questions and Answers about the Mergers and the SureWest Special Meeting” on page 2 .

What is the purpose of this joint proxy statement/prospectus?

      The purpose of this joint proxy statement/prospectus is to provide information regarding matters to be voted on at the 2012 annual meeting of Consolidated’s stockholders. Additionally, it contains certain information that the SEC requires Consolidated to provide annually to stockholders. This joint proxy statement/prospectus is also the document used by Consolidated’s board to solicit proxies to be used at the 2012 annual meeting. Proxies are solicited by Consolidated’s board to give all stockholders of record an opportunity to vote on the matters to be presented at the annual meeting, even if the stockholders cannot attend the meeting. The board has designated Steven J. Shirar and Matthew K. Smith as proxies, who will vote the shares represented by proxies at the annual meeting in the manner indicated by the proxies.

What proposals will be voted on at the Consolidated annual meeting?

      Consolidated stockholders will vote on the following proposals at the annual meeting:

Who is entitled to vote?

      Each outstanding share of Consolidated’s common stock entitles its holder to cast one vote on each matter to be voted upon at the annual meeting. Only stockholders of record at the close of business on the record date, April 23, 2012, are entitled to receive notice of the annual meeting and to vote the shares of common stock that they held on that date at the meeting, or any adjournment or postponement of the meeting. If your shares are held for you as a beneficial holder in “street name,” please refer to the information forwarded to you by your bank, broker or other holder of record to see what you must do to vote your shares.

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      A complete list of stockholders entitled to vote at the annual meeting will be available for examination by any stockholder at Consolidated’s corporate headquarters, 121 South 17th Street, Mattoon, Illinois 61938, during normal business hours for a period of ten days before the annual meeting and at the time and place of the annual meeting.

What is the difference between a stockholder of record and a beneficial holder of shares?

      If your shares are registered directly in your name with Consolidated’s transfer agent, Computershare Trust Company, N.A., you are considered a stockholder of record with respect to those shares. If this is the case, the stockholder proxy materials have been sent or provided directly to you by Consolidated.

     If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” If this is the case, the proxy materials have been forwarded to you by your brokerage firm, bank or other nominee, which is considered the stockholder of record with respect to these shares. As the beneficial holder, you have the right to direct your broker, bank or other nominee how to vote your shares. Please contact your broker, bank, or other nominee for instructions on how to vote any shares you beneficially own.

Who can attend the meeting?

     All stockholders of record as of April 23, 2012, or their duly appointed proxies, may attend the meeting. Cameras, recording devices and other electronic devices will not be permitted at the meeting. If you hold your shares in “street name,” you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date.

What constitutes a quorum?

     A quorum of stockholders is necessary to hold the annual meeting. The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding on the record date will constitute a quorum. As of April 23, 2012, the record date, 29,951,282 shares of Consolidated’s common stock were outstanding. Proxies received but marked as withheld, abstentions or broker non-votes will be included in the calculation of the number of shares considered present at the meeting for purposes of establishing a quorum. In the event that a quorum is not present at the annual meeting, Consolidated expects that the annual meeting will be adjourned or postponed to solicit additional proxies.

How do I vote?

     If you are a stockholder of record, you may vote by any of the following methods:

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     Consolidated recommends that you vote in advance even if you plan to attend the meeting so that Consolidated will know as soon as possible that enough votes will be present for Consolidated to hold the meeting. If you are a stockholder of record and attend the meeting, you may vote at the meeting or deliver your completed proxy card in person.

     If your shares are held in “street name,” please refer to the information forwarded to you by your bank, broker or other holder of record to see what you must do in order to vote your shares, including whether you may be able to vote electronically through your bank, broker or other record holder. If so, instructions regarding electronic voting will be provided by the bank, broker or other holder of record to you as part of the package that includes this joint proxy statement/prospectus. If you are a “street name” stockholder and you wish to vote in person at the meeting, you will need to obtain a proxy from the institution that holds your shares and present it to the inspector of elections with your ballot when you vote at the annual meeting.

Can I change my vote after I return my proxy card?

     Yes. Even after you have submitted your proxy, you may change your vote at any time before the proxy is voted by:

     If your shares are held in “street name,” you may vote in person at the annual meeting if you obtain a proxy as described in the answer to the previous question.

How many votes are required for the proposals to pass?

     Approval of the Issuance of Consolidated Common Stock to SureWest Shareholders in the First Merger contemplated by the Merger Agreement (Consolidated Proposal No. 1), Ratification of the Appointment of Ernst & Young LLP (Consolidated Proposal No. 3), Proposal to Adjourn or Postpone the Annual Meeting, if Necessary or Appropriate (Consolidated Proposal No. 4) and Approval of any Other Proposals. The vote required for each of (i) the approval of the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement (Consolidated Proposal No. 1), (ii) the ratification of the appointment of Ernst & Young LLP (Consolidated Proposal No. 3), (iii) the proposal to adjourn or postpone the Consolidated annual meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies (Consolidated Proposal No. 4), and (iv) the approval of any other proposal not presently anticipated that may properly come before the annual meeting or any adjournment or postponement of the meeting, is the approval of a majority of the votes present, in person or by proxy, and entitled to vote on the matter.

     Election of Director (Consolidated Proposal No. 2) . Directors are elected by a plurality vote. Accordingly, the one director nominee who receives the greatest number of votes cast will be elected.

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How are abstentions and broker non-votes treated?

     If a stockholder abstains from voting on Consolidated Proposal No. 1, Consolidated Proposal No. 3 or Consolidated Proposal No. 4, it will have the same effect as a vote “AGAINST” that proposal. With respect to Consolidated Proposal No. 2, abstentions will have no effect. Broker non-votes and shares as to which proxy authority has been withheld with respect to any matter are not entitled to vote for purposes of determining whether stockholder approval for that matter has been obtained and, therefore, will have no effect on the outcome of the vote on any such matter. A broker “non-vote” occurs on a proposal when shares held of record by a broker are present or represented at the meeting but the broker is not permitted to vote on that proposal without instruction from the beneficial owner of the shares and no instruction has been given.

What if I do not specify a choice for a matter when returning a proxy?

     Stockholders should specify their choice for each matter on the enclosed proxy. If no specific instructions are given, proxies that are signed and returned will be voted:

What are the board’s recommendations?

     The board’s recommendations, together with the description of each proposal, are set forth in this joint proxy statement/prospectus. In summary, the board recommends that you vote:

     You should read the section entitled “The Mergers—Consolidated’s Reasons for the Mergers” for a discussion of the factors that Consolidated’s board considered in deciding to recommend voting “FOR” the approval of the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement.

     Unless you give other instructions on your proxy card, the persons named as proxy holders on the enclosed proxy card will vote in accordance with the recommendations of the board of directors.

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What happens if additional matters are presented at the annual meeting?

     Other than the four proposals described in this joint proxy statement/prospectus, Consolidated is not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxy holders on the enclosed proxy card will vote your shares on any additional matters properly presented for a vote at the meeting as recommended by the board or, if no recommendation is given, in their own discretion.

     Pursuant to the provisions of Rule 14a-4(c) under the Exchange Act, with respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the board of directors or, if no recommendation is given, in their own discretion.

Will anyone contact me regarding this vote?

     The Company has retained Morrow & Co., LLC, 470 West Ave., Stamford, CT 06902 to aid in the solicitation of proxies and to verify certain records related to the solicitation. The Company will pay Morrow & Co., LLC a fee of $8,500 as compensation for its services and will reimburse it for its reasonable out-of-pocket expenses. Such solicitations may be made by mail, telephone, facsimile, e-mail, the Internet or personal interviews.

Who will tabulate and certify the vote?

     Representatives of Computershare Trust Company, N.A., Consolidated’s transfer agent, will tabulate the votes and act as Inspector of Elections.

Will I receive a copy of Consolidated’s 2011 Annual Report to Stockholders?

     Consolidated’s 2011 annual report to stockholders for the fiscal year ended December 31, 2011 is enclosed with this joint proxy statement/prospectus. The annual report includes Consolidated’s audited financial statements, along with other financial information about Consolidated, which Consolidated urges you to read carefully.

How can I receive a copy of Consolidated’s Annual Report on Form 10-K?

     Consolidated’s annual report on Form 10-K for the fiscal year ended December 31, 2011, as filed with the SEC on March 5, 2012, is included in the 2011 annual report to stockholders, which accompanies this joint proxy statement/prospectus.

     You can also obtain, free of charge, a copy of Consolidated’s annual report on Form 10-K, including all exhibits filed with it, by:

     You can also obtain a copy of Consolidated’s annual report on Form 10-K and other periodic filings that Consolidated makes with the SEC from the SEC’s EDGAR database at http://www.sec.gov.

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     Who can I contact if I have any questions?

        Morrow & Co., LLC
        470 West Ave.
        Stamford, CT 06902

     Banks and brokers please call: (203) 658-9400

     Stockholders please call: (800) 607-0088

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SUMMARY

     This summary highlights selected information from this joint proxy statement/prospectus and may not contain all the information that is important to you. To understand the Mergers fully and for a more complete description of the legal terms of the Mergers, you should carefully read this entire joint proxy statement/prospectus and the other documents to which you are referred. See also “Where You Can Find More Information” on page 176 . Page references are included to direct you to a more complete description of the topics presented in this summary.

General

What SureWest Shareholders Will Receive in the Mergers (page 76 )

     At the effective time of the First Merger, each issued and outstanding share of SureWest common stock (other than shares held in SureWest’s treasury or owned by any SureWest subsidiary, Consolidated, Merger Sub I or Merger Sub II) will be converted into the right to receive, at the holder’s election, either (i) $23.00 in cash, without interest, or (ii) shares of Consolidated common stock having an equivalent value based on average trading prices for the 20-day period ending two days before the closing date of the First Merger, subject to a collar so that there will be a maximum exchange ratio of 1.40565 shares of Consolidated common stock for each share of SureWest common stock and a minimum of 1.03896 shares of Consolidated common stock for each share of SureWest common stock, subject to certain exceptions and subject to proration so that 50% of the SureWest shares (treating equity award shares as outstanding) will be exchanged for cash and 50% for stock. All holders of SureWest equity award shares will be paid in cash and shall not be subject to such proration. Because equity award shares reduce the number of outstanding SureWest shares that will convert to cash, it is expected that approximately 46% of outstanding SureWest shares (exclusive of equity award shares) will convert into the right to receive cash, and 54% will convert into the right to receive stock. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances, as further described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections — General Consideration Adjustment” on page 81 .

     In this joint proxy statement/prospectus, when the term “Merger Consideration” is used with respect to a given share of SureWest common stock, it means either the cash consideration (with respect to a share of SureWest common stock representing the right to receive the cash consideration) or the stock consideration (with respect to a share of SureWest common stock representing the right to receive the stock consideration).

Ownership of Consolidated Following the Mergers (page 77 )

     Based on the number of shares of SureWest common stock and Consolidated common stock outstanding on the record date, it is anticipated that, immediately following the First Merger, SureWest shareholders who receive stock consideration in the First Merger will own in the aggregate between approximately 20.5% and 25.8% of the outstanding shares of Consolidated common stock.

Material United States Federal Income Tax Consequences (page 85 )

     Each of Orrick, Herrington & Sutcliffe LLP, tax counsel to Sure West, and Schiff Hardin LLP, tax counsel to Consolidated, are delivering an opinion that the First Merger and the Second Merger taken together will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. The U.S. federal income tax consequences of a reorganization to a SureWest shareholder will depend on the relative mix of cash and Consolidated common stock received by such SureWest shareholder. Assuming that the Mergers qualify as a reorganization, SureWest shareholders should not recognize any gain or loss for U.S. federal income tax purposes if they exchange their SureWest shares solely for shares of Consolidated common stock in the First Merger, except with respect to cash received in lieu of fractional shares of Consolidated common stock. SureWest shareholders will recognize gain or loss if they exchange their SureWest shares solely for cash in the First Merger. SureWest shareholders will recognize gain, but not loss, if they exchange their SureWest shares for a combination of Consolidated common stock and cash, but their taxable gain in that case will not exceed the cash they receive in the Mergers. The tax opinions regarding the Mergers do not address any state, local or foreign tax consequences of the Mergers. The tax opinions are subject to customary qualifications and assumptions, including that the Mergers will be completed according to the terms of the Merger Agreement. In rendering the tax opinions, each counsel rely on representations of Sure West,

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Merger Sub I, Merger Sub II and Consolidated. If any such assumption or representation is or becomes inaccurate, the U.S. federal income tax consequences of the Mergers could be adversely affected. An opinion of counsel represents counsel’s best legal judgment but is not binding on the Internal Revenue Service or on any court. Neither Sure West nor Consolidated intends to request any ruling from the Internal Revenue Service as to the U.S. federal income tax consequences of the Mergers. Consequently, no assurance can be given that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any of the tax consequences set forth in this joint proxy statement/prospectus. The tax consequences of the Mergers to each SureWest shareholder will depend on such SureWest shareholder’s own situation. SureWest shareholders should consult with their own tax advisors for a full understanding of the tax consequences of the Mergers to them.

Recommendation of the SureWest Board of Directors (page 51 )

     The board of directors of SureWest unanimously recommends that SureWest shareholders vote “FOR” each of (i) the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger; (ii) the approval, by an advisory vote, of the change in control severance payments to SureWest’s named executive officers; and (iii) the approval of the adjournment or postponement of the SureWest special meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.

Recommendations of the Consolidated Board of Directors (page 13 )

     The board of directors of Consolidated unanimously recommends that Consolidated stockholders vote “FOR” each of (i) the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement; (ii) the election of Richard A. Lumpkin as Class I director of Consolidated; (iii) the ratification of the appointment of Ernst & Young LLP as Consolidated’s independent registered public accounting firm for the fiscal year ending December 31, 2012; and (iv) the proposal to adjourn or postpone the annual meeting, if necessary or appropriate, to, among other reasons, solicit additional proxies.

Opinion of Financial Advisor to SureWest (page 56 and Annex II)

     On February 5, 2012, at a meeting of the SureWest board of directors held to evaluate the Mergers, UBS Securities LLC (“UBS”) delivered an oral opinion to the SureWest board of directors, which opinion was confirmed by delivery of a written opinion, dated February 5, 2012, to the effect that, as of that date and based upon and subject to the various assumptions, matters considered and limitations described in its opinion, the Merger Consideration, taken in the aggregate, to be received by holders of SureWest common stock in the First Merger was fair, from a financial point of view, to such holders.

     The full text of UBS’ opinion to the SureWest board of directors describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by UBS. This opinion is attached as Annex II to this joint proxy statement/prospectus and incorporated by reference herein. Holders of SureWest common stock are encouraged to read UBS’ opinion carefully in its entirety. UBS’ opinion was provided for the benefit of the SureWest board of directors (in its capacity as such) in connection with, and for the purpose of, its evaluation of the fairness of the Merger Consideration to be received by holders of SureWest common stock in the First Merger from a financial point of view and does not address any other aspect of the Mergers. The opinion does not address the relative merits of the Mergers as compared to other business strategies or transactions that might be available with respect to SureWest or SureWest’s underlying business decision to effect the Mergers. The opinion does not constitute a recommendation to any shareholder of SureWest as to how such shareholder should vote or act with respect to the Mergers. In addition, the opinion does not address, or constitute a recommendation with respect to, any particular shareholder election. You are encouraged to read the opinion in its entirety, which is attached to this joint proxy statement/prospectus as Annex II, and the description thereof in the section titled “The Mergers — Opinion of Financial Advisor to SureWest”.

Opinion of Financial Advisor to Consolidated (page 64 and Annex III)

     On February 5, 2012, Wells Fargo Securities, LLC (“Wells Fargo Securities”) delivered its written opinion to the board of directors of Consolidated to the effect that, as of February 5, 2012, and based on and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken by Wells

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Fargo Securities in connection with the opinion, the experience of its investment bankers and other factors it deemed relevant, the Merger Consideration to be paid pursuant to the Merger Agreement was fair, from a financial point of view, to Consolidated.

     The full text of the written opinion of Wells Fargo Securities sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion. This written opinion is attached as Annex III to this joint proxy statement/prospectus and is incorporated by reference in its entirety into this joint proxy statement/prospectus. Wells Fargo Securities provided its opinion for the information and use of the board of directors of Consolidated in connection with its evaluation of the Mergers. Wells Fargo Securities’ opinion only addresses the fairness, from a financial point of view, to Consolidated of the Merger Consideration to the extent expressly specified in its opinion, and does not address any other terms or aspects of the Mergers. Wells Fargo Securities’ opinion does not address the merits of the underlying decision by Consolidated to enter into the Merger Agreement or the relative merits of the Mergers or contemplated financings compared with other business strategies or transactions available or that have been or might be considered by the management or the board of directors of Consolidated. Wells Fargo Securities’ opinion did not and does not constitute a recommendation as to how any holder of shares of Consolidated common stock should vote with respect to the issuance of shares of Consolidated common stock pursuant to the First Merger and the Merger Agreement or any other matter. You are encouraged to read the opinion in its entirety, which is attached to this joint proxy statement/prospectus as Annex III, and the description thereof in the section titled “The Mergers — Opinion of Financial Advisor to Consolidated”.

Interests of SureWest Directors and Executive Officers in the Merger (page 71 )

     In considering the recommendation of the SureWest board of directors with respect to the Merger Agreement, you should be aware that some of SureWest’s directors and executive officers have interests in the Merger that are different from, or in addition to, those of SureWest shareholders generally. The SureWest board of directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger and to recommend that SureWest shareholders vote “ FOR ” the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger.

Comparison of Rights of Common Shareholders of SureWest and Common Stockholders of Consolidated (page 115 )

     SureWest shareholders’ rights are currently governed by the SureWest articles of incorporation, the SureWest bylaws and California law. Those SureWest shareholders who receive stock consideration in the First Merger will, upon completion of the First Merger, become stockholders of Consolidated and their rights will be governed by the Consolidated certificate of incorporation, the Consolidated bylaws and Delaware law.

The SureWest Special Meeting (page 127 )

     The special meeting of SureWest shareholders will be held on June 12 , 2012 at 10:00 a.m. , Pacific time, at SureWest’s corporate headquarters, 8150 Industrial Avenue, Building A, Roseville, California 95678. At the special meeting, SureWest shareholders will be asked to (i) vote upon the proposal to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger; (ii) cast an advisory vote to approve the change in control severance payments to SureWest’s named executive officers; and (iii) vote to approve the adjournment or postponement of the special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies.

The Consolidated Annual Meeting (page 134 )

     The 2012 annual meeting of stockholders of Consolidated will be held at Consolidated’s corporate headquarters, 121 South 17th Street, Mattoon, Illinois 61938 on June 12 , 2012 at 9:00 a.m. , Central time. The 2012 annual meeting of stockholders is being held for the following purposes: (i) to approve the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement; (ii) to elect Richard A. Lumpkin as Class I director to serve for a term of three years, in accordance with Consolidated’s amended and restated certificate of incorporation and amended and restated bylaws; (iii) to ratify the appointment of Ernst & Young LLP as Consolidated’s independent registered public accounting firm for the fiscal year ending

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December 31, 2012; (iv) to approve the adjournment or postponement of the annual meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies in the event that there are not sufficient votes at the time of the annual meeting to approve the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement; and (v) to transact such other business as may properly be brought before the Consolidated annual meeting and any adjournment or postponement thereof.

Record Dates; Shares Entitled to Vote; Required Vote with respect to the Mergers; Quorums (pages 127 and 134 )

     SureWest shareholders are entitled to vote at the special meeting if they owned shares of SureWest common stock at the close of business on April 23, 2012, the record date. On the record date, there were 14,330,035 shares of SureWest common stock outstanding. Shareholders will be entitled to one vote for each share of SureWest common stock that they owned on the record date on all matters submitted to a vote at the special meeting.

     To approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, holders of a majority of the outstanding shares of SureWest common stock must vote their shares “ FOR ” the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger. The presence at the special meeting on June 12 , 2012, in person or by proxy, of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast at the special meeting will constitute a quorum, which is necessary to hold the meeting. In the event that a quorum is not present at the special meeting, SureWest expects that the special meeting will be adjourned or postponed to solicit additional proxies.

     Consolidated stockholders are entitled to vote at the annual meeting if they owned shares of Common Stock common stock at the close of business on April 23, 2012, the record date. As of April 23, 2012, the record date, 29,951,282 shares of Consolidated’s common stock were outstanding. Each outstanding share of Consolidated’s common stock entitles its holder to cast one vote on each matter to be voted upon at the annual meeting.

     To approve the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement, the approval of a majority of the votes present, in person or by proxy, and entitled to vote is required. The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding on the record date will constitute a quorum. In the event that a quorum is not present at the annual meeting, Consolidated expects that the annual meeting will be adjourned or postponed to solicit additional proxies.

Shares Owned by SureWest Directors and Executive Officers (page 128 )

     At the close of business on the record date, directors and executive officers of SureWest beneficially owned and were entitled to vote, in the aggregate, 861,384 shares of SureWest common stock, which represented approximately 6.01% of the shares of SureWest common stock outstanding on that date. The directors and executive officers of SureWest have informed SureWest that they intend to vote all of their shares of SureWest common stock “ FOR ” the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger.

Shares Owned by Consolidated Directors and Executive Officers (page 135 )

     At the close of business on the record date, directors and executive officers of Consolidated beneficially owned and were entitled to vote, in the aggregate, 2,519,149 shares of Consolidated common stock, which represented approximately 8.4% of the shares of Consolidated common stock outstanding on that date. The directors and executive officers of Consolidated have informed Consolidated that they intend to vote all of their shares of Consolidated common stock “ FOR ” the approval of the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement.

The Mergers (page 43 )

     The Merger Agreement is attached as Annex I to this joint proxy statement/prospectus. You are encouraged to read the Merger Agreement carefully and in its entirety because it is the principal document governing the Mergers.

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Conditions to the Mergers (page 99 )

     SureWest and Consolidated are obligated to complete the Mergers only if certain conditions precedent are satisfied or waived, including the following:

  • the Merger Agreement has been approved by the affirmative vote of a majority of the outstanding shares of SureWest common stock at the special meeting;
     
  • the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or has been terminated (this condition has been satisfied—see “The Mergers — Regulatory Approvals Required for the Mergers — United States Antitrust”);
     
  • the approvals of the Federal Communications Commission (the “FCC”), the California Public Utility Commission (the “California PUC”) and any other state regulator required to permit consummation of the Mergers have been obtained;
     
  • no order, injunction, statute, rule, regulation or decree shall have been issued, enacted, entered, promulgated or enforced by a governmental entity that prohibits or makes illegal the consummation of the Mergers;
     
  • Consolidated’s registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, has been declared effective by the SEC and no stop order suspending the effectiveness of the registration statement is in effect, and no proceeding for such purpose is pending or threatened by the SEC;
     
  • the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement has been approved by a majority of the votes present, in person or by proxy, and entitled to vote at the annual meeting of stockholders of Consolidated;
     
  • the shares of Consolidated common stock to be issued in the First Merger have been approved for listing on NASDAQ Global Select Market; and
     
  • other contractual conditions set forth in the Merger Agreement have been satisfied or waived.

Termination; Termination Fees; Expenses (page 100 )

     The Merger Agreement contains provisions addressing the circumstances under which Consolidated or SureWest may terminate the Merger Agreement. In addition, the Merger Agreement provides that, in certain circumstances, SureWest may be required to pay Consolidated a termination fee of $14,675,000.

No Solicitation; Changes in Recommendation (page 94 )

     The Merger Agreement contains certain restrictions on SureWest’s ability to solicit or engage in discussions or negotiations with a third party regarding specified transactions involving SureWest. Notwithstanding these restrictions, under certain circumstances, the SureWest board of directors may (i) respond to an unsolicited bona fide proposal for an alternative acquisition or (ii) terminate the Merger Agreement and enter into an agreement with respect to a superior proposal (in which case SureWest will be required to pay to Consolidated the termination fee described above).

Regulatory Approvals Required for the Mergers (page 83 )

     United States antitrust laws prohibit Consolidated and SureWest from completing the Mergers until they have furnished certain information and materials to the Antitrust Division of the Department of Justice and the Federal Trade Commission under the HSR Act and a required waiting period has ended. SureWest and Consolidated filed the required notification and report forms with the Antitrust Division of the Department of Justice and the Federal Trade Commission on February 15, 2012. The required waiting period expired on March 16, 2012.

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     Completion of the Mergers is also conditioned upon the receipt of the following approvals of the FCC, the California PUC, the Kansas Corporation Commission (“KCC”) and certain local municipalities in Kansas. On February 10, 2012, SureWest and its subsidiaries that are regulated by the California PUC, and Consolidated and certain of its subsidiaries, jointly filed an application with the California PUC for required approvals in connection with the transfers of control of those subsidiaries to Consolidated, as required under the California Public Utility Code. On February 16, 17 and 22, 2012, Consolidated and SureWest jointly filed the applications to transfer control of SureWest’s FCC authorizations to Consolidated. On February 23, 2012, Consolidated and SureWest filed notice with the KCC requesting that a no action letter be issued indicating that no further action is required by the KCC because of SureWest’s statutory classification as a competitive local exchange carrier pursuant to K.S.A. 66-1,187, et seq. On February 23, 2012, Consolidated and SureWest filed notice with the Kansas municipalities of Lenexa, Overland Park and Shawnee, each of which require city council approval to transfer legacy local cable franchises there. SureWest’s authority to provide video service in the Kansas municipalities of Olathe, Fairway, Merriam, Mission, Prairie Village, Roeland Park and Westwood is pursuant to a Video Service Authorization issued by the KCC. Requisite notice on transferring the Video Service Authorization was provided to the KCC on February 23, 2012.

Debt Financing (page 103 )

     The Merger Agreement is not subject to any financing contingency. Consolidated intends to finance the cash portion of the Merger Consideration with debt and cash on hand. With respect to the debt financing, Consolidated has obtained a commitment for the financing necessary to complete the transaction from Morgan Stanley Senior Funding, Inc., which provides for a senior unsecured bridge facility in an aggregate principal amount of $350,000,000 that can be used to finance a portion of the aggregate cash consideration of, and to pay the fees and expenses in connection with, the transactions contemplated by the Merger Agreement and to repay existing indebtedness of SureWest. The terms of this commitment are described further under “Debt Financing” on page 103 . The financing commitment permits Consolidated to secure other funding in lieu of drawing on the financing commitment, and Consolidated’s current credit agreement also permits it to do so. Before or shortly after the completion of the Mergers, Consolidated expects to conduct a private placement of Rule 144A notes.

Dissenters’ Rights of SureWest Shareholders (page 125 )

     If you do not wish to accept the $23.00 per share Merger Consideration in the First Merger, you have the right under California law to have your shares appraised by a California court, provided that you comply with certain procedures. These dissenters’ rights are subject to a number of restrictions and technical requirements. Generally, in order to exercise dissenters’ rights, among other things, (a) you must not vote in favor of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, (b) you must make a written demand for appraisal in compliance with California law within 30 days of notification that the Merger Agreement has been approved, (c) you must submit the certificates representing your dissenting shares to SureWest within 30 days of notification that the Merger Agreement has been approved, (d) you must hold shares of SureWest common stock on the record date and continuously hold such shares through the completion of the First Merger and (e) demands for payment must be filed with respect to at least five percent of the outstanding shares of SureWest common stock. The fair value of your shares of SureWest common stock as determined in accordance with California law may be more or less than, or the same as, the Merger Consideration to be paid to non-dissenting shareholders in the First Merger. Annex IV to this proxy statement contains a copy of the California statute relating to shareholders’ dissenters’ rights. Failure to follow all of the steps required by this statute will result in the loss of your dissenters’ rights.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.

     The selected financial data set forth below has been derived from Consolidated’s audited historical financial statements and related notes. The selected historical financial information as of December 31, 2011 and 2010 and for the three years ended December 31, 2011 is derived from the audited historical financial statements and related notes of Consolidated incorporated by reference into this joint proxy statement/prospectus. The selected historical financial information as of December 31, 2009, 2008 and 2007 and for the two years ended December 31, 2008 is derived from audited historical financial statements and related notes of Consolidated which were previously filed with the SEC but are not included or incorporated by reference into this joint proxy statement/prospectus. Historical results are not necessarily indicative of the results to be expected in future periods.

Year ended December 31,
(In millions, except per share amounts)     2011     2010     2009     2008     2007 (5)
Telephone operations revenues   $    342.6     $     349.6     $     364.6     $     379.0     $     288.2  
Other operations revenues 31.7 33.8 41.6 39.4 41.0
Total operating revenues     374.3       383.4       406.2       418.4       329.2  
 
Cost of products and services (exclusive of depreciation                                        
       and amortization shown separately below)     139.3       142.3       145.5       143.5       107.3  
Selling, general and administrative expense 81.1 88.0 104.8 108.8 89.6
Debt refinancing costs     2.6       -       -       -       -  
Intangible asset impairment - - - 6.1 -
Depreciation and amortization     88.7       87.2       85.2       91.7       65.7  
Income from operations 62.6 65.9 70.7 68.3 66.6
 
Interest expense, net (1)     (49.4 )     (50.7 )     (57.9 )     (66.3 )     (46.5 )
Other income (loss), net (2) 28.6 27.0 25.5 10.8 (3.4 )
Income before income taxes and extraordinary item     41.8       42.2       38.3       12.8       16.7  
Income tax expense 14.8 9.0 12.4 6.6 4.7
Income before extraordinary item     27.0       33.2       25.9       6.2       12.0  
Extraordinary item, net of tax - - - 7.2 -
Net income     27.0       33.2       25.9       13.4       12.0  
Net income of noncontrolling interest (3) 0.6 0.6 1.0 0.9 0.6
Net income attributable to common shareholders (3)   $ 26.4     $ 32.6     $ 24.9     $ 12.5     $ 11.4  
 
Income per common share—basic: (4)                    
       Income per common share before extraordinary item $ 0.88 $ 1.09 $ 0.84 $ 0.18 $ 0.43
       Extraordinary item per share - - - 0.24 -
Net income per common share—basic $ 0.88 $ 1.09 $ 0.84 $ 0.42 $ 0.43
Basic weighted-average number of shares 29,600 29,490 29,396 29,321 25,764
 
Income per common share—diluted: (4)
       Income per common share before extraordinary item $ 0.88 $ 1.09 $ 0.84 $ 0.18 $ 0.43
       Extraordinary item per share - - - 0.24 -
Net income per common share—diluted $ 0.88 $ 1.09 $ 0.84 $ 0.42 $ 0.43
Diluted weighted-average number of common and  
              common equivalent shares 29,600 29,490 29,396 29,321 25,764
 
Cash dividends per common share $ 1.55 $ 1.55 $ 1.55 $ 1.55 $ 1.55

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Year ended December 31,
(In millions, except per share amounts)     2011     2010     2009     2008     2007 (5)
Consolidated cash flow data:
       Cash flows from operating activities $ 130.2 $ 115.0 $ 116.3 $ 92.4 $ 82.1
       Cash flows used for investing activities (41.5 ) (40.7 ) (41.6 ) (48.0 ) (305.3 )
       Cash flows used for/from financing activities (50.7 ) (49.4 ) (47.4 ) (63.3 ) 230.9
       Capital expenditures 42.6 41.8 42.4 48.0 33.5
 
Consolidated Balance Sheet:
       Cash and cash equivalents $ 105.7 $ 67.7 $ 42.8 $ 15.5 $ 34.3
       Total current assets 168.3 136.3 107.9 78.6 99.6
       Net property, plant and equipment (6) 332.0 356.1 377.2 400.3 411.6
       Total assets 1,194.1 1,209.5 1,226.6 1,241.6 1,304.6
       Total debt (including current portion)      884.7     884.1     880.3     881.3     892.6
       Stockholders’ equity 47.8 71.9 80.7 75.3 159.7
 
Other financial data (unaudited):
       Adjusted EBITDA (7) $     189.5 $    185.6 $    188.8 $    189.8 $    143.8
 
Other data (as of the end of the period) (Unaudited):
Local access lines
       Residential 137,179 140,660 146,766 162,067 183,070
       Business 90,813 96,481 100,469 102,256 103,116
Total local access lines 227,992 237,141 247,235 264,323 286,186
CLEC access line equivalents 89,774 81,090 72,681 74,687 70,063
VOIP subscribers 9,199 8,640 8,665 6,510 2,494
IPTV subscribers 34,356 29,236 23,127 16,666 12,241
ILEC DSL subscribers 110,913 106,387 100,122 91,817 81,337
Total connections 472,234 462,494 451,830 454,003 452,321

(1) Interest expense includes amortization of deferred financing costs totaling $1.4 million for the year ended December 31, 2011, $1.3 million for each of 2010 and 2009, $1.4 million for 2008 and $3.2 million for 2007.

(2) Other income, during 2009, showed improved earnings of approximately $4.8 million from Consolidated’s wireless partnerships. During 2008, Consolidated recognized income of $13.1 million from three cellular partnerships acquired as part of the acquisition of North Pittsburgh Systems, Inc. (“North Pittsburgh”). Consolidated also recognized, during 2008, $9.2 million loss on early extinguishment of debt related to the early redemption of Consolidated’s then outstanding senior notes and the related write-off of unamortized debt financing costs. During 2007, Consolidated recognized a loss on extinguishment of debt of $10.3 million related to the debt refinancing from the acquisition of North Pittsburgh.

(3) Consolidated adopted the Financial Accounting Standards Board’s (“FASB”) authoritative guidance on the presentation of noncontrolling interests in consolidated financial statements effective January 1, 2009. This presentation has been retrospectively applied to all periods presented.

(4) Consolidated adopted the FASB’s authoritative guidance on the treatment of participating securities in the calculation of earnings per share on January 1, 2009. This presentation has been retrospectively applied to all periods presented.

(5) Consolidated acquired all of the capital stock of North Pittsburgh on December 31, 2007. Balance sheet and other data as of that date include the accounts of North Pittsburgh. Consolidated’s results of operations include North Pittsburgh beginning January 1, 2008.

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(6) Property, plant and equipment are recorded at cost. The cost of additions, replacements, and major improvements is capitalized, while repairs and maintenance are charged to expenses. When property, plant and equipment are retired from Consolidated’s regulated subsidiaries, the original cost, net of salvage, is charged against accumulated depreciation, with no gain or loss recognized in accordance with composite group life remaining methodology used for regulated telephone plant assets.

(7) Consolidated presents Adjusted EBITDA (which is a non-GAAP financial measure) for three reasons: Consolidated believes it is a useful indicator of Consolidated’s historical debt capacity and Consolidated’s ability to service debt and pay dividends; it provides a measure of consistency in Consolidated’s financial reporting; and covenants in Consolidated’s credit facilities contain ratios based on Adjusted EBITDA.

Adjusted EBITDA is defined in Consolidated’s current credit facility as:

     Consolidated Net Income (as defined in Consolidated’s credit facility),

     (a) plus the following, to the extent deducted in arriving at Consolidated Net Income:

(i) interest expense, amortization, or write-off of debt discount and non-cash expense incurred in connection with equity compensation plans;

          (ii) foreign, federal, state and local income taxes;

          (iii) depreciation and amortization;

(iv) all non-cash charges (excluding any non-cash charge to the extent that it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period);

          (v) transaction fees;

     (b) minus (in the case of gains) or plus (in the case of losses) gain or loss on any disposition;

     (c) plus extraordinary losses; and

(d) minus the sum of interest income, extraordinary income or gains as defined by GAAP and all non-cash items increasing net income.

Prior to 2011, Consolidated’s credit facility defined Adjusted EBITDA as:

Consolidated Net Income (as defined in Consolidated’s credit facility)

(a) plus the following, to the extent deducted in arriving at Consolidated Net Income:

(i) interest expense, amortization, or write-off of debt discount and non-cash expense incurred in connection with equity compensation plans;

(ii) provision for income taxes;

(iii) depreciation and amortization;

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(iv) non-cash charges for asset impairment; all charges, expenses, and other extraordinary, non-recurring, and unusual integration costs or losses related to the acquisition of North Pittsburgh, including all severance payments in connection with the acquisition, so long as such costs or losses are incurred prior to December 31, 2009, and do not exceed $12.0 million in the aggregate;

(v) all non-recurring transaction fees, charges, and other amounts related to the acquisition of North Pittsburgh (excluding all amounts otherwise included in accordance with U.S. GAAP in determining Adjusted EBITDA), so long as such fees, charges, and other amounts do not exceed $18 million in the aggregate;

(b) minus (in the case of gains) or plus (in the case of losses) gain or loss on sale of assets;

(c) minus (in the case of gains) or plus (in the case of losses) non-cash income or charges relating to foreign currency gains or losses;

(d) plus (in the case of losses) or minus (in the case of income) non-cash minority interest income or loss;

(e) plus (in the case of items deducted in arriving at Consolidated Net Income) or minus (in the case of items added in arriving at Consolidated Net Income) non-cash charges resulting from changes in accounting principles;

(f) plus extraordinary losses and minus extraordinary gains as defined by GAAP;

(g) plus (in the case of any period ending on December 31, 2007, and any period ending during the seven immediately succeeding fiscal quarters of the Company, to the extent not otherwise included in Adjusted EBITDA) cost savings to be realized by the Company and its subsidiaries in connection with the acquisition of North Pittsburgh that are attributable to the integration of the Company’s operations and businesses in Illinois and Texas with the acquired Pennsylvania operations, which cost savings are deemed to be the amounts set forth on a schedule to the credit agreement for each such fiscal quarter; and

(h) minus interest income.

     If Consolidated’s Adjusted EBITDA were to decline below certain levels, there may be violations of covenants in Consolidated’s credit facilities that are based on this measure, including Consolidated’s total net leverage and interest coverage ratios covenants. The consequences could include a default or mandatory prepayment of debt or a prohibition on dividends.

     Consolidated believes that net cash provided by operating activities is the most directly comparable financial measure to Adjusted EBITDA under GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for consolidated statement of operations and cash flows data prepared in accordance with GAAP. Adjusted EBITDA is not a complete measure of profitability because it does not include costs and expenses identified above, and Adjusted EBITDA is not a complete net cash flow measure because it does not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, make capital expenditures, make acquisitions, or pay its income taxes and dividends.

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     The following table sets forth a reconciliation of Cash Provided by Operating Activities to Adjusted EBITDA:

      Year ended December 31,
(In millions, unaudited) 2011       2010       2009       2008       2007
Net cash provided by operating activities   $      130.2     $      115.0     $      116.3     $      92.4     $      82.1  
Non-cash, stock-based compensation (2.1 ) (2.4 ) (1.9 ) (1.9 ) (4.0 )
Other adjustments, net (a)     (11.0 )     (0.9 )     (1.0 )     3.8       (9.5 )
Changes in operating assets and liabilities (1.3 ) 8.6 (2.2 ) 9.9 8.5
Interest expense, net     49.4       50.7       57.9       66.3       46.5  
Income taxes 14.8 9.0 12.4 6.6 4.7
EBITDA (b)     180.0       180.0       181.5       177.1       128.3  
Adjustments to EBITDA (c):
Integration, restructuring and Sarbanes Oxley (d)     -       -       7.4       4.8       1.2  
Debt amendment fees (e) 2.6 - - - -
Other, net (f)     (23.6 )     (24.3 )     (24.4 )     (19.9 )     (6.6 )
Investment distributions (g) 28.4 27.5 22.4 17.8 6.6
Loss on extinguishment of debt (h)     -       -       -       9.2       10.3  
Intangible asset impairment (a) - - - 6.1 -
Extraordinary item (i)     -       -       -       (7.2 )     -  
Non-cash, stock-based compensation (j) 2.1 2.4 1.9 1.9 4.0
Adjusted EBITDA $ 189.5 $ 185.6 $ 188.8 $ 189.8 $ 143.8
____________________
  
      (a)       Other adjustments, net includes $8.5 million of change in income taxes for the year ended December 31, 2011. Also, other adjustments, net includes $6.1 million of intangible asset impairment charges for year ended December 31, 2008. During Consolidated’s annual impairment review for 2008, Consolidated determined that the projected future cash flows of the Consolidated Market Response (“CMR”) business would not be sufficient to support the carrying value of the goodwill. CMR was sold during 2010.
  
(b) EBITDA is defined as net earnings before interest expense, income taxes, depreciation and amortization on an unadjusted basis.
 
(c) These adjustments reflect those required or permitted by the lenders under the credit facility in place at the end of each of the years included in the periods presented.
 
(d) In connection with Consolidated’s acquisition of North Pittsburgh, Consolidated incurred certain expenses associated with integrating and restructuring the businesses. These expenses include severance and employee relocation expenses, Sarbanes-Oxley maintenance costs, costs to integrate Consolidated’s technology, administrative and customer service functions and billing systems.
 
(e) Debt amendment fees include $2.6 million in fees incurred in connection with Consolidated’s Amend and Extend refinancing in June 2011. See Note 11 to the Consolidated Financial Statements included in Consolidated’s Annual Report on Form 10-K for the year ended December 31, 2011.
 
(f) Other, net includes the equity earnings from Consolidated’s investments, dividend income, and certain other miscellaneous non-operating items. Key man life insurance proceeds of $0.6 million received in 2011 and $0.3 million received in 2007 is not deducted to arrive at Adjusted EBITDA.
 
(g) For purposes of calculating Adjusted EBITDA, Consolidated includes all cash dividends and other cash distributions received from Consolidated’s investments. These cash distributions are primarily from Consolidated’s interest in five Verizon Wireless Limited Partnerships. See Note 6 to the Consolidated Financial Statements included in Consolidated’s 2011 Annual Report on Form 10-K for the year ended December 31, 2011.

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      (h)       Represents the redemption premium and write-off of unamortized debt issuance costs in connection with the redemption and retirement of Consolidated’s senior notes during 2008 and the write-off of debt issuance costs in connection with retiring the obligations under Consolidated’s former credit facility and entering into a new credit facility contemporaneously with the North Pittsburgh acquisition.
 
(i) Upon making the election to discontinue the applicable accounting guidance for regulated enterprises in accounting for the effects of certain types of regulation, Consolidated recognized an extraordinary non-cash gain and began to apply the authoritative guidance required for the discontinuance of the application of regulatory accounting.
 
(j) Represents compensation expenses in connection with Consolidated’s Restricted Share Plan. Because of their non-cash nature, these expenses are excluded from Adjusted EBITDA.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL
INFORMATION OF SUREWEST COMMUNICATIONS

     The selected financial data set forth below has been derived from SureWest’s audited historical financial statements and related notes. The selected historical financial information as of December 31, 2011 and 2010 and for the three years ended December 31, 2011 is derived from the audited historical financial statements and related notes of SureWest incorporated by reference into this joint proxy statement/prospectus. The selected historical financial information as of December 31, 2009, 2008 and 2007 and for the two years ended December 31, 2008 is derived from audited historical financial statements and related notes of SureWest which were previously filed with the SEC but are not included or incorporated by reference into this joint proxy statement/prospectus. Historical results are not necessarily indicative of the results to be expected in future periods.

Year ended December 31,
(In millions, except per share amounts)     2011     2010     2009     2008 (1)     2007
Total operating revenues   $      248.1     $      243.5   $      241.7   $      230.3     $      174.3  
 
Cost of products and services (exclusive of depreciation                                    
       and amortization)     110.3       105.7     103.1     92.5       60.0  
Selling, general and administrative expense 59.1 60.8 65.3 67.7 56.8
Impairment loss     -       -     -     -       5.5  
Depreciation and amortization 64.0 61.8 59.7 55.0 43.6
Income from operations     14.7       15.2     13.6     15.1       8.4  
 
Interest expense, net     (11.6 )     (8.3 )   (11.3 )   (12.1 )     (6.5 )
Other income (expense), net - (0.1 ) 0.4 0.9 3.0
Income from continuing operations before income taxes     3.1       6.8     2.7     3.9       4.9  
Income tax expense (benefit) 1.3 3.4 2.0 3.1 (0.4 )
Net income:                                    
       Income from continuing operations 1.8 3.4 0.7 0.8 5.3
       Income from discontinued operations (2)(3)(4)     -       -     2.5     18.1       57.7  
Net income $ 1.8 $ 3.4 $ 3.2 $ 18.9 $ 63.0
 
Basic earnings per share:                                    
       Income per share from continuing operations (5) $ 0.13 $ 0.24 $ 0.05 $ 0.06 $ 0.36
       Income per share from discontinued operations (5)     -       -     0.18     1.28       3.99  
Net income per basic share $ 0.13 $ 0.24 $ 0.23 $ 1.34 $ 4.35
Diluted earnings per share:                                    
       Income per share from continuing operations (5) $ 0.13 $ 0.24 $ 0.05 $ 0.06 $ 0.36
       Income per share from discontinued operations (5)     -       -     0.18     1.28       3.98  
Net income per diluted share $ 0.13 $ 0.24 $ 0.23 $ 1.34 $ 4.34
Cash dividends per share (6)   $ 0.26     $ -   $ -   $ 0.50     $ 1.00  
 
Balance Sheet Data:                                    
       Total assets $ 612.1 $ 603.2 $ 622.9 $ 633.8 $ 484.8
       Long-term obligations     196.9       189.8     207.4     226.0       118.2  
        Shareholders’ equity 260.7 272.1 269.2 261.3 271.0
 
Statements of Cash Flows Data:                                    
       Cash flows from continuing operating activities $ 81.4 $ 63.6 $ 71.8 $ 50.8 $ 50.8
       Cash flows (used for)/from continuing investing activities     (70.4 )     (46.9 )   (46.6 )   (183.3 )     36.4  
       Cash flows (used for)/from financing activities (9.7 ) (21.2 ) (20.0 ) 106.0 (18.1 )
       Capital expenditures     72.5       52.6     58.3     86.5       53.3  
 
Other Data:                                    
       Adjusted EBITDA (7) $ 84.4 $ 82.5 $ 77.9 $ 69.2 $ 57.3

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____________________
 
     (1)      In February 2008, SureWest acquired 100% of the issued and outstanding stock of SureWest Kansas, Inc., formerly Everest Broadband, Inc. (the “Kansas City operations”) for a total purchase price of $181.5 million, including transaction costs. Subsequent to the acquisition date of February 13, 2008, the operating results for the Kansas City operations have been included in SureWest’s consolidated financial statements.
       
     (2)      In February 2009, SureWest sold its fifty-two wireless communication towers (“Tower Assets”). The operating results of its Tower Assets are included in income from discontinued operations for the years ended on or before December 31, 2009.
 
(3) In May 2008, SureWest sold the operating assets of its Wireless business, SureWest Wireless. The operating results and the net gain from the sale of SureWest Wireless are included in income from discontinued operations for the years ended on or before December 31, 2008.
 
(4) In February 2007, SureWest sold 100% of the stock of SureWest Directories, its directory publishing business. The operating results and the net gain from the sale of SureWest Directories are included in income from discontinued operations for the year ended on December 31, 2007.
 
(5) Basic earnings per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“diluted EPS”) is computed based on the weighted average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include time and performance based stock awards and stock units. Diluted EPS excludes the impact of potential common shares related to SureWest’s stock options in periods where the option exercise price is greater than the average market price of its common stock.
 
(6) Cash dividends per share were based on the actual dividends per share, as declared by SureWest’s board of directors. On each date that SureWest paid a cash dividend to the holders of its common stock, SureWest credited to the holders of restricted stock units (“RSUs”) and vested performance share units (collectively “units”) an additional number of restricted units equal to the total number of whole units and additional units previously credited to the holders multiplied by the dollar amount of the cash dividend per share of common stock and divided by the SureWest closing share price . Any fractional units resulting from such calculation were included in the additional units.
 
(7) In addition to the results reported in accordance with United States generally accepted accounting principles (“US GAAP” or “GAAP”), SureWest also uses certain non-GAAP measures including adjusted EBITDA to evaluate operating performance and to facilitate the comparison of its historical results and trends. These financial measures are not a measure of financial performance under US GAAP and should not be considered in isolation or as a substitute for net income from continuing operations as a measure of performance and net cash provided by operating activities as a measure of liquidity. The calculation of these non-GAAP measures may not be comparable to similarly titled measures used by other companies, including the reconciliation used by Consolidated. Reconciliations to the most directly comparable GAAP measure are provided below. Adjusted EBITDA represents net income from continuing operations excluding amounts for income taxes; depreciation and amortization; non-cash pension and certain post-retirement benefits; non-cash stock compensation; severance and other related termination costs; and all other non-operating income and expenses. Adjusted EBITDA is a common measure of operating performance in the telecommunications industry. Adjusted EBITDA helps SureWest evaluate its performance by removing from its operating results non-cash items and items which do not relate to its core operating performance.

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The following table is a reconciliation of income from continuing operations to adjusted EBITDA (in millions):
 
      Year ended December 31,
2011       2010       2009       2008       2007
Income from continuing operations   $      1.8   $      3.4   $      0.7   $      0.8     $      5.3  
Add (subtract):
      Income tax expense (benefit)     1.3     3.4     2.0     3.1       (0.4 )
      Other (income) expense, net 11.6 8.4 10.9 11.2 3.5
      Depreciation and amortization     64.0     61.8     59.7     55.0       43.6  
      Impairment loss 5.5
      Non-cash pension and post-retirement expense (income)     1.4     1.5     2.6     (1.8 )     (1.2 )
      Non-cash stock compensation expense 4.3 2.9 2.0 0.9 1.0
      Severance and other related termination costs         1.1                
Adjusted EBITDA $ 84.4 $ 82.5 $ 77.9 $ 69.2 $ 57.3

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     The following summary unaudited pro forma condensed combined financial information (“summary pro forma financial information”) is based upon the historical consolidated financial statements of Consolidated and SureWest, which are incorporated by reference into this proxy statement/prospectus and has been prepared to reflect the Mergers, based on the purchase method of accounting, with Consolidated treated as the acquirer. The historical consolidated financial statements have been adjusted to give effect to pro forma events that are directly attributable to the Mergers and factually supportable and, in the case of the statement of income, that are expected to have a continuing impact.

     The summary pro forma financial information is derived from the unaudited pro forma condensed combined financial statements contained in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Statements”. The summary pro forma financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of Consolidated and SureWest, incorporated by reference into this proxy statement/prospectus and the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined statement of income, which has been prepared for the year ended December 31, 2011, gives effect to the Mergers as if they had occurred on January 1, 2011. The unaudited pro forma condensed combined balance sheet has been prepared as of December 31, 2011 and gives effect to the Mergers as if they had occurred on that date.

     As of the date of this proxy statement/prospectus, Consolidated has not finalized the detailed valuation studies necessary to arrive at the required fair market value of the SureWest assets to be acquired and the liabilities to be assumed and the related allocations of the purchase price. Consolidated has made certain pro forma adjustments to the historical book values of the assets and liabilities of SureWest to reflect certain preliminary estimates of the fair value of the net assets acquired, with the excess of the estimated purchase price over the estimated fair values of SureWest’s acquired assets and assumed liabilities recorded as goodwill. See Note 1 to the “Unaudited Pro Forma Condensed Combined Financial Statements”. Actual results are expected to differ from these preliminary estimates once Consolidated has determined the final purchase price (as determined by the market price of Consolidated common stock on the closing date of the First Merger) for SureWest and completed the valuation studies necessary to finalize the required purchase price allocations. There can be no assurances that such finalization of the valuation studies will not result in material changes. Consolidated performed a preliminary assessment of accounting policies and financial statement presentation which has identified certain adjustments necessary to conform information in SureWest’s historical financial statements to Consolidated’s combined accounting policies and presentation. The review of the accounting policies is not yet complete and additional policy and presentation differences may be identified upon completion.

     The summary pro forma financial information is not intended to represent or be indicative of the consolidated results of operations or financial condition of the combined company that would have been reported had the Mergers been completed as of the dates presented and should not be taken as representative of the future consolidated results of operations or financial condition of the combined company.

     Upon completion of the Mergers, various triggering events will have occurred which result in the payment of various Change in Control Agreements to certain SureWest employees. The estimated payments under these agreements will range from approximately $12 million to $14 million. No adjustment has been included in the unaudited pro forma condensed combined financial statements for these payments.

     The summary pro forma financial information does not include the realization of future cost savings or synergies or restructuring charges that are expected to result from Consolidated’s acquisition of SureWest. The transaction is expected to generate annual operating synergies of approximately $25 million, which will be phased in over the first two years after closing as integration projects are completed. The transaction is also expected to generate annual capital expenditure synergies of $5 million to $10 million during the first full fiscal year following the close. Consolidated also expects to incur merger and integration costs, excluding closing costs, of approximately $20 million to $25 million over the first two years following the close. However, no assurance can be given with respect to the ultimate level of such synergies or the timing of their realization.

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Summary Pro Forma Financial Information:

      Year Ended
(In millions, except share and per share amounts) December 31, 2011
Statement of Income:        
Operating revenues $ 623.6
 
Operating expenses (exclusive of depreciation and amortization)     393.6  
Depreciation and amortization 160.0
Income from operations     70.0  
 
Interest expense     (84.9 )
Other income, net 28.7
Income before income taxes     13.8  
Income tax expense 5.0
Net income     8.8  
Less: Net income attributable to noncontrolling interest 0.6
Net income attributable to common stockholders   $                   8.2  
 
Net income per common share - basic and diluted   $ 0.21  
Shares of common stock used to calculate earnings per share (in thousands):
       Basic weighted-average number of shares     38,455  
       Diluted weighted-average number of common and common equivalent
       shares 38,455
 
Consolidated Balance Sheet (at period end):        
       Cash and cash equivalents $ 58.8
       Total current assets     159.8  
       Net property, plant and equipment 903.0
       Total assets     1,870.4  
       Total debt and capital lease obligations 1,234.7
       Total stockholders’ equity     198.1  

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COMPARATIVE PER SHARE MARKET PRICE, DIVIDEND AND OTHER DATA

     Consolidated common stock is listed and traded on the NASDAQ Global Select Market under the symbol “CNSL.” SureWest’s common stock is listed and traded on the NASDAQ Global Select Market under the symbol “SURW.” The following table sets forth, for the calendar quarters indicated, (1) the high and low sales price per share of Consolidated common stock as reported on the NASDAQ Global Select Market, and (2) the high and low closing sales price per share of SureWest common stock as reported on the NASDAQ Global Select Market. On April 23, 2012, the last practicable trading day prior to the date of this joint proxy statement/prospectus, there were 29,951,282 shares of Consolidated common stock outstanding and 14,330,035 shares of SureWest common stock outstanding.

      Consolidated SureWest
High       Low       High       Low
For the calendar quarter ended:                      
 
2010                      
       March 31, 2010 $      19.23 $       16.01 $      10.35 $      7.54
       June 30, 2010     19.50   16.31     8.70     5.97
       September 30, 2010 18.75 16.50 7.45 5.66
       December 31, 2010     19.44   18.20     10.75     7.11
 
2011                      
       March 31, 2011 19.50 17.25 14.38 10.60
       June 30, 2011     19.50   17.94     17.50     13.11
       September 30, 2011 20.02 16.77 16.99 9.33
       December 31, 2011     19.39   16.83     13.01     9.73
 
2012                      
       March 31, 2012 19.92 18.00 22.73 11.96
       June 30, 2012 (through April 23, 2012) 19.72 18.62 22.59 22.46
                       

     The following table sets forth the closing sale price per share of SureWest common stock and Consolidated common stock as of February 3, 2012, the last trading day prior to the public announcement of the proposed Mergers, and as of April 23, 2012, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus. The table also sets forth the implied value of the Merger Consideration proposed for each share of SureWest common stock as of the same two dates. This implied value was calculated by adding (a) 50% of the per share cash consideration, or $23.00 per share and (b) 50% of the value obtained by multiplying the closing sale price of Consolidated common stock on the relevant date by the applicable exchange ratio, and assuming an aggregate of 50% cash and 50% stock consideration. For purposes of determining the exchange ratio used in the table below, the closing sale price of Consolidated common stock on the relevant date was used.

Implied Value Per Share
            Consolidated       of SureWest
  SureWest Common Stock Common Stock Common Stock
February 3, 2012   $      15.59   $      19.25   $      23.00
April 23, 2012 $ 22.55 $ 18.77 $ 23.00

     The market value of the Consolidated common stock to be issued in exchange for shares of SureWest common stock upon the completion of the First Merger will not be known at the time of the SureWest special meeting. The above tables show only historical comparisons. Because the market prices of Consolidated common stock and SureWest common stock will likely fluctuate prior to the Mergers, these comparisons may not provide meaningful information to SureWest shareholders in determining whether to approve the Merger Agreement. Shareholders

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are encouraged to obtain current market quotations for Consolidated common stock and SureWest common stock and to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find Additional Information”.

     No assurance can be given as to the market price of Consolidated common stock or the market price of SureWest common stock at the effective time of the First Merger. Because the exchange ratio for the stock consideration is subject to minimum and maximum adjustments for changes in the market price of Consolidated common stock, the market value of the stock consideration at the effective time of the First Merger may vary significantly from the market value of the shares of Consolidated common stock that would have been issued in the First Merger if the First Merger had been consummated on the date of the Merger Agreement or on the date of this joint proxy statement/prospectus. The market price of Consolidated common stock will continue to fluctuate after the effective time of the First Merger. See “Risk Factors Relating to the Mergers”.

      As a result of the proration procedures in the Merger Agreement, even if you properly make a cash election for all of your SureWest shares, if more than 50% of the outstanding SureWest shares are subject to cash elections (treating equity award shares as outstanding, and as electing and receiving cash), you will receive Consolidated common stock in the First Merger in exchange for some of your SureWest shares. See “The Mergers — SureWest Shareholders Making Cash and Stock Elections”. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances, as further described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections — General Consideration Adjustment.”

      The following table sets forth for the period presented certain per share information for Consolidated common stock and SureWest common stock on a historical basis and on an unaudited pro forma basis after giving effect to the First Merger under the purchase method of accounting. The historical per share information for Consolidated and SureWest has been derived from, and should be read in conjunction with, the historical consolidated financial statements of Consolidated and SureWest incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information”. The unaudited pro forma per share information has been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information included in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Statements”.

      The unaudited pro forma SureWest equivalent information was calculated by multiplying the corresponding Consolidated unaudited pro forma combined information by 1.1948, which is the exchange ratio for the stock consideration in the pro forma condensed combined financial statements. See Note 2 in the “Unaudited Pro Forma Condensed Combined Financial Statements”. It does not reflect the $23.00 per share cash consideration that SureWest shareholders may elect to receive in the First Merger (subject to proration). See “The Mergers — SureWest Shareholders Making Cash and Stock Elections”. This data shows how each share of SureWest common stock that is converted in the First Merger into shares of Consolidated common stock would have participated in income from continuing operations, cash dividends declared and book value of Consolidated if SureWest and Consolidated had been combined for accounting and financial reporting purposes for the period presented. These amounts, however, are not intended to be indicative of the historical results that would have been achieved had the companies actually been combined for the period presented or of the future results of the combined company.

Consolidated SureWest
Unaudited Unaudited
Consolidated SureWest Pro Forma Pro Forma
For Year Ended December 31, 2011       Historical       Historical       Combined       Equivalent
Income from continuing operations per share (basic and
diluted)
  $ 0.88   $ 0.13   $ 0.21   $ 0.25
 
Book value per share at period end (unaudited)     1.62     18.79     5.15     6.15
 
Cash dividends per share     1.55     0.26     1.55     1.85

      Consolidated expects to continue to pay quarterly dividends at an annual rate of $1.5495 per share during 2012 but only if and to the extent declared by the Consolidated board and subject to various restrictions on Consolidated’s ability to do so. Dividends on Consolidated’s common stock are not cumulative.

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      SureWest is expressly permitted to continue to pay a quarterly dividend of $0.10 per share under the terms of the Merger Agreement. However, future dividend payments are at the discretion of the SureWest board and changes in the dividend program will depend on SureWest’s earnings, capital requirements, financial condition, debt covenant and other factors considered relevant by the SureWest board.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This joint proxy statement/prospectus, and the documents to which this joint proxy statement/prospectus refers, contain forward-looking statements within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Any statements contained in this joint proxy statement/prospectus, or any such documents, that are not statements of historical fact, including statements about Consolidated’s and/or SureWest’s beliefs and expectations, are forward-looking statements and should be evaluated as such.

      Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “intend”, “plan”, “may”, “estimate”, “target”, “project”, “should”, “will”, “can”, “likely”, similar expressions and any other statements that predict or indicate future events or trends or that are not statements of historical facts. These forward-looking statements are subject to numerous risks and uncertainties. Such forward-looking statements reflect, among other things, Consolidated’s and/or SureWest’s current expectations, plans, strategies and anticipated financial results and involve a number of known and unknown risks, uncertainties, and factors that may cause Consolidated’s and/or SureWest’s actual results to differ materially from those expressed or implied by these forward-looking statements. These risks, uncertainties and factors include, but are not limited to, the following:

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      These and other uncertainties related to the businesses of Consolidated and SureWest are described in greater detail in the section entitled “Risk Factors Relating to the Mergers” and in the filings of Consolidated and of SureWest with the SEC, including Consolidated’s and SureWest’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. See “Where You Can Find More Information”. Many of these risks are beyond each of Consolidated’s and SureWest’s management’s ability to control or predict. All forward-looking statements attributable to Consolidated, SureWest or persons acting on behalf of them are expressly qualified in their entirety by the cautionary statements contained, and risk factors identified, in this joint proxy statement/prospectus and the companies’ filings with the SEC. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, neither Consolidated nor SureWest undertakes any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

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RISK FACTORS RELATING TO THE MERGERS

      In addition to the other information included in and incorporated by reference into this joint proxy statement/prospectus, SureWest’s shareholders should consider carefully the matters described below in determining whether to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, and in determining whether to make a cash election or a stock election for each of their shares of SureWest common stock, and Consolidated’s stockholders should consider carefully the matters described below in determining whether to approve the issuance of Consolidated common stock to SureWest shareholders pursuant to the Merger Agreement and the First Merger. Please also refer to the information under the heading “Risk Factors” set forth in Item 1A in each of Consolidated’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and SureWest’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, each of which is incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” on page 176 .

      The value of the Consolidated common stock SureWest shareholders will receive may vary. If you elect to receive shares of Consolidated common stock in the First Merger, or if you receive shares of Consolidated common stock in the First Merger as a result of the proration procedure, an appropriate number of shares of SureWest common stock you own will be automatically converted into shares of Consolidated common stock based upon the exchange ratio. The exchange ratio will generally vary between 1.03896 and 1.40565 and will be equal to the number determined by dividing $23.00 by the average closing price of Consolidated’s common stock for the 20 consecutive trading days ending two trading days before the closing of the First Merger. As a result, the value of the shares of Consolidated common stock that you will receive in the First Merger will not be known at the time you make your election as to the form of Merger Consideration or at the time you vote on the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, at the special meeting, and the value may go up or down as the market price of Consolidated common stock fluctuates, subject to the minimum and maximum exchange ratios. The specific dollar value of Consolidated common stock you receive upon completion of the First Merger will depend on the market value of Consolidated common stock at the time of completion of the First Merger. The share price of Consolidated common stock is by nature subject to the general price fluctuations in the market for publicly traded equity securities which has historically experienced some degree of volatility. SureWest and Consolidated cannot predict the market price of Consolidated common stock at any time before or after the completion of the First Merger. Differences in the market price of Consolidated common stock may be the result of changes in the business, operations or prospects of Consolidated, market reactions to the proposed Mergers, regulatory considerations, general market and economic conditions or other factors.

      You may receive a form of consideration different from what you elect, which could have an effect on your tax situation. Regardless of the cash or stock elections made by SureWest shareholders, the Merger Agreement contains proration procedures that are designed to ensure that (i) 50% of the SureWest shares outstanding immediately prior to the First Merger, treating the outstanding SureWest equity award shares as outstanding, are converted in the First Merger into the right to receive cash and (ii) 50% of the SureWest shares outstanding immediately prior to the First Merger are converted in the First Merger into the right to receive Consolidated common stock. As a result, if more than 50% of SureWest’s shares are subject to cash elections (treating equity award shares as outstanding, and as electing and receiving cash), those shareholders who properly make cash elections will receive Consolidated common stock for a portion of their SureWest shares. If less than 50% of SureWest’s shares are subject to cash elections (treating equity award shares as outstanding, and as electing and receiving cash), those shareholders who properly make stock elections will receive cash consideration for a portion of their SureWest shares. See “The Mergers — SureWest Shareholders Making Cash and Stock Elections”. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances, as further described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections — General Consideration Adjustment.” There is a risk that you will receive a portion of the Merger Consideration in the form that you do not elect that could result in, among other things, tax consequences that differ from those that would have resulted had you received the form of consideration you elected, including with respect to the recognition of taxable gain to the extent cash is received.

      After making a cash election or a stock election, you will not be able to sell the SureWest shares covered by your election, unless you revoke your election at or prior to the election deadline or unless the Merger Agreement is terminated. The deadline for making cash elections and stock elections is 5:00 p.m., Eastern time, on the date that is two business days immediately prior to the closing date of the First Merger (or such other date

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as Consolidated and SureWest mutually agree). Consolidated and SureWest will publicly announce the anticipated election deadline at least five business days prior to the anticipated closing date of the First Merger. After you make a cash or stock election and prior to completion of the First Merger, the trading price of SureWest common stock or Consolidated common stock may decrease, and you may otherwise want to sell SureWest shares to gain access to cash, make other investments, or eliminate the potential for a decrease in the value of your investment. However, once you make an election with respect to any shares of SureWest common stock, you will not be able to sell those shares, unless you properly revoke your election at or prior to the election deadline or the Merger Agreement is terminated. See “The Mergers — SureWest Shareholders Making Cash and Stock Elections”.

      The price of Consolidated common stock may be affected by factors different from those affecting the price of SureWest common stock. Upon completion of the First Merger, holders of SureWest common stock who elect to receive Consolidated common stock and, if more than 50% of the SureWest shares are subject to cash elections, all of the holders of SureWest common stock (as a result of the proration procedures described herein), will become Consolidated stockholders. Consolidated’s business and results of operations and the market price of Consolidated common stock may be affected by factors different than those affecting SureWest’s business and results of operations and the market price of SureWest common stock. For a discussion of Consolidated’s and SureWest’s businesses and certain factors to consider in connection with their businesses, see the periodic reports and other documents of Consolidated and SureWest incorporated by reference into this joint proxy statement/prospectus and listed under “Where You Can Find More Information”.

      The Merger Agreement contains provisions that could discourage a potential competing acquiror that might be willing to pay more to effect a business combination with SureWest. The Merger Agreement contains “no solicitation” provisions that restrict SureWest’s ability to solicit or facilitate proposals regarding a merger or similar transaction with another party. Further, several conditions must be satisfied in order for the SureWest board of directors to withdraw, amend or modify its recommendation regarding the proposed Mergers. See “The Merger Agreement—No Solicitations; Changes in Recommendation”. If the SureWest board of directors withdraws, amends or modifies its recommendation regarding the proposed Mergers, Consolidated has the right to terminate the Merger Agreement and receive a $14,675,000 termination fee from SureWest. These provisions could discourage a potential competing acquiror from considering or proposing an acquisition of SureWest, even if it were prepared to pay consideration with a higher value than the cash and shares proposed to be issued in the First Merger, or might result in a potential competing acquiror proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

      Lawsuits have been filed against SureWest, members of SureWest’s board of directors, Consolidated and the Merger Subs challenging the Mergers. Any adverse judgment in such lawsuits may prevent the Mergers from becoming effective or from becoming effective within the expected timeframe. SureWest, the members of the SureWest board of directors, Consolidated and the Merger Subs have been named as defendants in six purported class action lawsuits brought by individual SureWest shareholders challenging the Mergers and seeking, among other things, to enjoin the defendants from completing the Mergers pursuant to the terms of the Merger Agreement. One of the conditions to the completion of the First Merger is that no temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the First Merger shall have been issued by any court of competent jurisdiction and be in effect. Consequently, if any plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the First Merger pursuant to the terms of the Merger Agreement, such an injunction may prevent the completion of the Mergers in the expected timeframe (or altogether), and any other adverse judgment could adversely affect the value of Consolidated’s common stock. See “The Mergers—Legal Proceedings Related to the Mergers”.

      The integration of Consolidated and SureWest following the Mergers may present significant challenges. Consolidated may face significant challenges in combining SureWest’s operations into its operations in a timely and efficient manner and in retaining key SureWest personnel. The failure to integrate successfully Consolidated and SureWest and to manage successfully the challenges presented by the integration process may result in Consolidated not achieving the anticipated benefits of the Mergers including operational and financial synergies.

      Restrictions in Consolidated’s debt agreements may prevent Consolidated from paying dividends. Consolidated’s ability to pay dividends will be restricted by current and future agreements governing its debt, including its current credit agreement and the financing agreements expected to be in place upon consummation of the Mergers. See “The Mergers — Debt Financing.” Consolidated expects that, giving pro forma effect to the

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Mergers and related transactions, including its proposed new credit facilities, as of January 1, 2012, it would have been able to pay aggregate dividends of $183.4 million on the approximately 39.6 million shares of Consolidated common stock expected to be outstanding upon consummation of the Mergers.

      Consolidated will have a substantial amount of debt outstanding and may incur additional indebtedness in the future, which could restrict Consolidated’s ability to pay dividends and fund working capital and planned capital expenditures. As of December 31, 2011, Consolidated had $880.0 million of long-term debt and $4.7 million of capital leases outstanding along with $47.8 million of stockholders’ equity. In addition to funding the Mergers with approximately $171.0 million in new Consolidated equity, Consolidated will incur additional debt in the approximate amount of $350.0 million in order to complete the Mergers and repay SureWest’s debt. This amount of leverage could have important consequences, including:

      Consolidated currently expects its cash interest expense to be approximately $62.0 to $65.0 million in fiscal year 2013 assuming consummation of the Mergers by December 31, 2012. Future interest expense will be significantly higher than historic interest expense as a result of higher levels of indebtedness incurred to consummate the Mergers. Consolidated’s ability to make payments on its debt and to pay dividends on its common stock will depend on its ability to generate cash in the future, which will depend on many factors beyond its control. Consolidated cannot assure you that:

      If Consolidated cannot generate sufficient cash from its operations to meet its debt service obligations, Consolidated may need to reduce or delay capital expenditures, the development of its business generally and any acquisitions. If Consolidated becomes unable to meet its debt service and repayment obligations, Consolidated would be in default under the terms of its credit agreement, which would allow its lenders to declare all outstanding borrowings to be due and payable. If the amounts outstanding under its credit facilities were to be accelerated, Consolidated cannot assure you that its assets would be sufficient to repay in full the money owed.

      Obtaining required approvals and satisfying closing conditions may delay or prevent completion of the Mergers. Completion of the Mergers is conditioned upon SureWest’s shareholders approving, at the special meeting, the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger and Consolidated’s stockholders approving, at the annual meeting, the issuance of the common stock to SureWest shareholders in the First Merger. If the shareholders of SureWest or the stockholders of Consolidated do not approve these matters at their respective meetings, the Mergers will not be consummated. Completion of

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the Mergers is conditioned upon, among other things, the receipt of certain governmental consents and approvals, including approval by the FCC and the California PUC. These consents and approvals may impose conditions on or require divestitures relating to the divisions, operations or assets of Consolidated or SureWest. Such conditions or divestitures may jeopardize or delay completion of the Mergers or may reduce the anticipated benefits of the Mergers. Further, no assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied. Even if all such consents and approvals are obtained, no assurance can be given as to the terms, conditions and timing of the consents and approvals or that they will satisfy the terms of the Merger Agreement. See “The Merger Agreement — Conditions to the Mergers” for a discussion of the conditions to the completion of the Mergers, “The Merger Agreement — Commercially Reasonable Efforts to Complete the Mergers; Other Agreements” for a discussion of the parties’ obligations to cooperate (including certain limitations thereon) with respect to the receipt of such consents and approvals, and “The Mergers — Regulatory Approvals Required for the Mergers” for a description of the regulatory approvals necessary in connection with the Mergers. If the Mergers are not completed by November 5, 2012, either SureWest or Consolidated may terminate the Merger Agreement. See “The Merger Agreement — Termination; Termination Fees; Expenses”.

      Consolidated will incur transaction, integration and restructuring costs in connection with the Mergers. Consolidated and SureWest expect to incur costs associated with transaction fees and other costs related to the Mergers. Specifically, Consolidated expects to incur approximately $22.2 million of transaction costs related to the Mergers. In addition, Consolidated will incur integration and restructuring costs following the completion of the Mergers as it integrates the businesses of SureWest with those of Consolidated. Although Consolidated expects that the realization of efficiencies related to the integration of the businesses will offset incremental transaction, integration and restructuring costs over time, Consolidated cannot give any assurance that this net benefit will be achieved in the near term.

      The Mergers may not be accretive and may cause dilution to the combined company’s earnings per share, which may negatively affect the price of the common stock of the combined company following completion of the Mergers. Consolidated currently anticipates that the Mergers will be accretive to the earnings per share of the combined company during the first full calendar year after the Mergers are completed. This expectation is based on preliminary estimates and assumes certain synergies expected to be realized by the combined company during such time. Such estimates and assumptions could materially change due to additional transaction-related costs, the failure to realize any or all of the benefits expected in the Mergers or other factors beyond the control of Consolidated and SureWest. All of these factors could delay, decrease or eliminate the expected accretive effect of the Mergers and cause resulting dilution to the combined company’s earnings per share or to the price of the common stock of the combined company.

      SureWest shareholders will have ownership and voting interests in Consolidated after the Mergers lower than they did in SureWest and will exercise less influence over management of Consolidated than they currently exercise over management of SureWest. After the effective time of the First Merger, SureWest shareholders who receive stock consideration in the First Merger will own in the aggregate a significantly smaller percentage of Consolidated than they currently own of SureWest. Immediately following the First Merger, those shareholders are expected to own between approximately 20.5% and 25.8% of the outstanding shares of Consolidated common stock, based on the number of shares of SureWest common stock and Consolidated common stock outstanding on the record date. Consequently, SureWest shareholders, as a general matter, will have less influence over the management and policies of Consolidated than they currently exercise over the management and policies of SureWest.

      The shares of Consolidated common stock to be received by SureWest shareholders as a result of the First Merger will have different rights from the shares of SureWest common stock. SureWest shareholders’ rights are currently governed by the SureWest articles of incorporation, the SureWest bylaws and California law. Those SureWest shareholders who receive stock consideration in the First Merger will, upon completion of the First Merger, become stockholders of Consolidated and their rights will be governed by the Consolidated certificate of incorporation, the Consolidated bylaws and Delaware law. See “Comparison of Rights of Common Shareholders of SureWest and Common Stockholders of Consolidated”.

      Certain directors and executive officers of SureWest may have potential conflicts of interest with respect to the approval of the Merger Agreement. Some of SureWest’s directors and executive officers have interests in the Mergers that are different from, or in addition to, those of SureWest shareholders generally. Consolidated

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has agreed to elect one director designated by SureWest to serve on the Consolidated board of directors after the consummation of the First Merger, and will take all actions necessary to appoint such individual to the board of directors of Consolidated in accordance and to cause the authorized size of the Consolidated board of directors to increase as of immediately following the Mergers. Although other SureWest directors will not become directors of Consolidated after the Mergers, Consolidated will indemnify and maintain liability insurance for all of the directors of SureWest for their services as directors before the Mergers. In addition, each of the executive officers of SureWest is a party to a change in control severance plan that contains change of control severance protections that entitle each such executive officer to enhanced severance if his employment were to terminate following the Mergers under specific circumstances. The Merger Agreement also provides that the equity awards held by SureWest executive officers will accelerate and be cashed out in connection with the Mergers. See “The Mergers — Interests of SureWest Directors and Executive Officers in the Mergers” for a discussion of these interests.

      Whether or not the Mergers are completed, the pendency of the transaction could cause disruptions in the businesses of SureWest and Consolidated, which could have an adverse effect on their businesses and financial results. These disruptions could include the following:

      The unaudited pro forma financial statements are presented for illustrative purposes only and should not be viewed as a forecast of Consolidated’s financial condition or results of operations following the Mergers. The unaudited pro forma financial statements have been derived from the historical financial statements of Consolidated and SureWest and certain adjustments and assumptions have been made regarding Consolidated after giving effect to the Mergers. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with complete accuracy. Moreover, the unaudited pro forma financial statements do not reflect all costs that are expected to be incurred or savings to be achieved by Consolidated in connection with the Mergers. For example, neither the impact of any incremental costs incurred in integrating the two companies, nor any potential cost savings is reflected in the unaudited pro forma financial statements. As a result, the actual financial condition and results of operations of Consolidated following the Mergers will likely not be consistent with, or evident from, these unaudited pro forma financial statements. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect Consolidated’s financial conditions or results of operations following the Mergers. Therefore, stockholders of Consolidated and the shareholders of SureWest should not place undue reliance on the pro forma financial statements when deciding whether to vote for their respective proposals relating to the Mergers. See “Summary Unaudited Pro Forma Financial Information”.

      Any delay in the completion of the Mergers may significantly reduce the benefits expected to be obtained from the Mergers or could adversely affect the market price of Consolidated or SureWest common stock or their future business and financial results. In addition to the required regulatory clearances and approvals, the Mergers are subject to a number of other conditions, including approvals of Consolidated stockholders and SureWest shareholders, that are beyond the control of Consolidated and SureWest and that may prevent, delay or otherwise materially and adversely affect completion of the Mergers. Consolidated and SureWest cannot predict whether and when these other conditions will be satisfied.

      Failure to complete the Mergers would prevent Consolidated and SureWest from realizing the anticipated benefits of the Mergers. Each company would also remain liable for significant transaction costs, including legal, accounting and financial advisory fees. Any delay in completing the Mergers may significantly reduce the synergies and other benefits that Consolidated expects to achieve if it successfully completes the

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Mergers within the expected timeframe and integrates the businesses. In addition, the market price of each company’s common stock may reflect various market assumptions as to whether and when the Mergers will be completed. Consequently, the completion of, the failure to complete, or any delay in the completion of the Mergers could result in a significant change in the market price of Consolidated or SureWest common stock.

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THE MERGERS

The Companies

Consolidated

      Consolidated, a Delaware corporation, through its operating companies, operates established rural local exchange companies (“RLECs”) offering a wide range of telecommunications services to residential and business customers in Illinois, Texas and Pennsylvania, including: local and long-distance service; high-speed broadband Internet access (“DSL”); standard and high-definition digital television (“IPTV”); digital telephone service (“VOIP”); custom calling features; private line services; carrier access services; network capacity services over Consolidated’s regional fiber optic network; directory publishing and Competitive Local Exchange Carrier (“CLEC”) services. At December 31, 2011, Consolidated had 227,992 local access lines, 110,913 DSL lines, 34,356 IPTV subscribers and an estimated 89,774 CLEC access line equivalents. Consolidated also operates two non-core complementary businesses: telephone services to correctional facilities and business equipment sales.

      Founded in 1894 as the Mattoon Telephone Company by the great-grandfather of the current chairman of Consolidated, Richard A. Lumpkin, it began as one of the nation’s first independent telephone companies. After several subsequent acquisitions, the Mattoon Telephone Company was incorporated as Illinois Consolidated Telephone Company (“ICTC”), on April 10, 1924.

      On September 24, 1997, McLeodUSA acquired ICTC and all related businesses from the Lumpkin family.

      In December 2002, ICTC and several related businesses were reacquired from McLeodUSA by a group of investors led by Mr. Lumpkin and including Spectrum Equity and Providence Equity.

      On April 14, 2004, Consolidated acquired the rural telephone operations in Lufkin, Conroe and Katy, Texas of TXU Communications Ventures Company from TXU Corporation, which had been operating in those markets for over 90 years. This acquisition approximately tripled the size of Consolidated.

      On July 27, 2005, Consolidated completed the initial public offering of its common stock. Concurrent with the initial public offering, Spectrum Equity sold its entire investment, and Providence Equity sold 50% of its investment, in Consolidated. On July 28, 2006, Consolidated repurchased the remaining shares owned by Providence Equity.

      On December 31, 2007, Consolidated acquired all of the capital stock of North Pittsburgh Systems, Inc. (“North Pittsburgh”). North Pittsburgh provides services to residential and business customers in several counties in western Pennsylvania and also operates a CLEC in the Pittsburgh metropolitan area.

      Consolidated was organized in 2002 and is the successor to businesses engaged in providing telecommunications services since 1894.

SureWest

      SureWest Communications is a California holding company with operating subsidiaries that provide a wide range of telecommunications, cable television, Internet, data and other facilities-based communications services in Northern California, primarily in the greater Sacramento region and in the greater Kansas City, Kansas and Missouri areas. SureWest was incorporated under the laws of the State of California in 1995, and through its predecessor has operated in the telecommunications business since 1914.

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WH Acquisition Corp. and WH Acquisition II Corp.

      Merger Sub I is a California corporation and a wholly-owned subsidiary of Consolidated. It was incorporated on February 6, 2012 solely for the purpose of effecting the First Merger with SureWest, pursuant to the Merger Agreement. Merger Sub II is a California corporation and a wholly-owned subsidiary of Consolidated. It was incorporated on February 6, 2012 solely for the purpose of effecting the Second Merger with SureWest, pursuant to the Merger Agreement.

Background of the Mergers

      Beginning in early 2009, the SureWest board of directors and management undertook an initiative to evaluate the status of its business and the outlook for SureWest on a stand-alone basis. The board and management concluded that given the scale and geographic concentration of the business and the trading liquidity of its stock, the time period for the shareholders to realize the full value of SureWest’s business plan may be extended. The board of directors and management determined it was in the best interests of SureWest and its shareholders to explore opportunities to provide greater value to the shareholders in the nearer term. As such, the SureWest board of directors authorized management to explore a range of strategic alternatives for the Company, including in particular: (1) executing on its current stand-alone organic growth plan (“status quo”), (2) pursuing a growth strategy focused on opportunistic acquisitions, (3) entering into a combination with another industry participant and (4) an outright sale of the business or portions of the business. While the SureWest board anticipated that SureWest would continue to pursue aggressively its status quo objectives during this process, the board also recognized a need to begin to assess other possible alternatives for SureWest on an ongoing basis. Subsequently and through the time when the SureWest board of directors approved the Merger Agreement, the board actively considered several specific strategic alternatives, including some proposed by third parties, which the board ultimately concluded were not in the best interests of SureWest and its shareholders.

      In the third quarter of 2009, representatives of UBS Securities LLC (“UBS”), SureWest’s financial advisor, at SureWest’s direction, began an initial exploratory process to assess interest from a number of parties that representatives of UBS and SureWest viewed as potential strategic partners, including Consolidated. Also in the third quarter of 2009, Orrick Herrington & Sutcliffe, LLP (“Orrick”), SureWest’s counsel, participated in a SureWest board of directors meeting and made a presentation to the board regarding its fiduciary duties with respect to a potential transaction.

      During the exploratory process, Consolidated expressed an interest in a possible transaction with SureWest, and on December 1, 2009, Consolidated executed a confidentiality agreement, which included a two-year “standstill” provision restricting Consolidated’s ability to purchase SureWest shares or engage in other actions which might affect control of SureWest.

      In addition, from 2006 Steven C. Oldham, the president and chief executive officer of SureWest, and Robert J. Currey, the president and chief executive officer of Consolidated, have both served as directors of the United States Telecom Association (“USTelecom Association”). As a result, they have had periodic contacts from time to time at meetings of the board of directors and annual meetings of the USTelecom Association. During such contacts, from time to time Mr. Oldham and Mr. Currey discussed the possibility of a transaction between SureWest and Consolidated. Mr. Oldham and Mr. Currey both continue to serve as directors of the USTelecom Association.

      On February 3, 2010, Consolidated provided to SureWest a proposal to purchase all of the outstanding shares of SureWest with an indicated range from $10.00 to $12.00 per share in a stock-for-stock transaction, with an implied exchange ratio of 0.593 to 0.712 of Consolidated common stock per share of SureWest common stock. Following discussions between SureWest and Consolidated and their respective advisors, on February 15, 2010, Consolidated provided to SureWest a revised proposal to purchase all of the outstanding shares of SureWest at an exchange ratio of 0.911 of Consolidated common stock per share of SureWest common stock in a stock-for-stock transaction. The proposal also requested that SureWest agree to a 45-day exclusivity period to allow Consolidated to proceed with confirmatory due diligence and negotiate a merger agreement.

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      Following receipt of Consolidated’s February 15, 2010 proposal, the SureWest board of directors held multiple special meetings to discuss the proposal and exclusivity period. During this time, SureWest, representatives of UBS and Consolidated and its financial advisor, Wells Fargo Securities, LLC (“Wells Fargo Securities”), continued to discuss and negotiate the exclusivity agreement and discuss the exchange ratio. On March 8, 2010, SureWest and Consolidated entered into an exclusivity agreement providing for a 21-day exclusivity period, which expired March 29, 2010, and a non-binding understanding on an exchange ratio of 0.911 of Consolidated common stock per share of SureWest common stock, subject to further due diligence.

      Following execution of the exclusivity agreement, both SureWest and Consolidated conducted extensive diligence on each other. On March 10, 2010, Consolidated and its advisors were granted access to a data room, which included both public and non-public information about SureWest. On March 15, 2010 through March 17, 2010, senior management of the companies participated in management presentations and diligence sessions in Sacramento, California, including other diligence work at SureWest’s headquarters. On March 24 and 25, 2010, Mr. Oldham and Kirk C. Doyle, the chairman of the SureWest board of directors, had dinner with Mr. Currey and Richard A. Lumpkin, the chairman of the Consolidated board of directors, to further discuss the potential transaction with Consolidated. On March 25, 2010, Mr. Oldham and Bill M. DeMuth, the then chief technology officer of SureWest, met with Mr. Currey at SureWest’s facilities in Roseville, California to give Mr. Currey an overview of SureWest’s operations and facilities. In addition, on March 25 and March 26, 2010, members of senior management of the companies participated in diligence sessions in Consolidated’s service areas in Mattoon, Illinois and Houston, Texas. During this period, the companies and their respective advisors continued to exchange information and discuss the terms of a possible transaction.

      Following these diligence meetings and ongoing discussions, SureWest and Consolidated mutually agreed to terminate discussions regarding a possible business combination transaction due to the relative movement in the trading prices of SureWest’s and Consolidated’s common stock during the exclusivity period, and on March 30, 2010, access to SureWest’s data room was disabled for Consolidated and its representatives.

      There were no substantive contacts between the two companies with respect to a possible business combination transaction between late March 2010 and late April 2010, and SureWest continued to discuss and pursue other strategic alternatives during this time. In late April 2010, Consolidated indicated that it was still interested in pursuing a transaction with SureWest, but remained concerned about the per share premium for SureWest common stock in the previously discussed price and valuation ranges.

      On May 15, 2010, Mr. Currey communicated to Mr. Oldham via email a new proposal to purchase all of the outstanding shares of SureWest at an indicated price of $13.50 per share in a stock-for-stock transaction, subject to a collar to provide a fixed value for up to a 10% change in the trading price of Consolidated’s common stock. Following receipt of this proposal, the SureWest board of directors reviewed the proposal, and after consideration determined to pursue other strategic alternatives that it believed could provide a higher value to SureWest’s shareholders than Consolidated’s proposal.

      There were no substantive contacts between the two companies with respect to a possible business combination transaction between late May 2010 and August 2011, though from time to time, Mr. Currey continued to express to Mr. Oldham an interest of Consolidated in a transaction between SureWest and Consolidated. During this time, SureWest continued to review and pursue a number of strategic alternatives, including exploring a possible sale of the Kansas City and California portions of the business separately to different purchasers and the possible purchase of complementary businesses. Ultimately, the SureWest board of directors determined that the presented opportunities were not in the best interests of SureWest and its shareholders at that time.

      On June 29, 2011, the financial advisor of a private equity-backed company in SureWest’s industry (“Company A”) contacted SureWest senior management and indicated that Company A was interested in meeting with SureWest at an upcoming industry conference to be held in Colorado to discuss potential business combinations. On July 27, 2011, Company A executed a confidentiality agreement, which included a two-year “standstill” provision.

      On August 15, 2011, members of senior management of SureWest held an introductory meeting with members of senior management of Company A while attending an industry conference in Colorado.

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      On August 16, 2011, Mr. Oldham and Mr. Currey met while attending the same conference and discussed again the possibility of a possible transaction between SureWest and Consolidated. Following this conversation, on August 18, 2011, Mr. Currey communicated to Mr. Oldham via email a new proposal to purchase all of the outstanding shares of SureWest at an indicated price of $18.00 per share in a stock-for-stock for transaction, though he noted that Consolidated would consider providing a small portion of cash as consideration.

      On August 24, 2011, the SureWest board of directors held a regular meeting. At the meeting, the board of directors reviewed and discussed the recent proposal from Consolidated. Representatives of UBS reviewed with the SureWest board of directors the various strategic alternatives that the SureWest board of directors had been considering, including the most recent proposal from Consolidated, as well as discussions with other parties, including Company A. Following discussion, the SureWest board of directors determined that the consideration Consolidated proposed did not provide sufficient value to the SureWest shareholders, but authorized management to continue discussions with Consolidated.

      On September 21 and 22, 2011, members of senior management of SureWest, including Scott K. Barber, vice president and chief operating officer, L. Scott Sommers, senior vice president, finance and corporate development, Dan T. Bessey, vice president and chief financial officer, Kenneth E. Johnson, vice president and chief technology officer, Greg R. Gierczak, executive director of public policy and government relations, and Charlie E. Sorensen, executive director of business planning and forecasting, met in Kansas with members of senior management of Consolidated including Steve Childers, senior vice president and chief financial officer, Steve Shirar, senior vice president and corporate secretary, C. Robert Udell, Jr., senior vice president and chief operating officer, Mike Shultz, vice president-regulatory and public policy, and Matthew K. Smith, treasurer and director of investor relations, to discuss each of their respective companies in more detail and conduct preliminary diligence. Following the meeting, members of management exchanged further financial and operational information.

      During this time, preliminary conversations continued between SureWest and Company A, and Company A commenced its diligence activities in October 2011.

      On October 6, 2011, Mr. Oldham and Mr. Currey met in Salt Lake City, Utah to continue discussions regarding a possible transaction between the two companies. Following this meeting, members of SureWest and Consolidated management continued to exchange diligence information about the companies. Following these discussions, the SureWest board of directors determined that it was not in the best interests of SureWest and its shareholders to further pursue a possible transaction with Consolidated on the terms Consolidated had proposed.

      From October through December 2011, representatives of UBS had additional informal discussions with Mr. Currey regarding the prospects of a possible transaction between SureWest and Consolidated.

      Also from October to early December 2011, Company A had periodic discussions with SureWest and representatives of UBS about SureWest’s business.

      On December 8, 2011, Mr. Oldham received a call from Company A’s president and chief financial officer who indicated he intended to send a proposal from Company A to acquire SureWest with a purchase price in the $16.00 to $18.00 range. Mr. Oldham replied that he did not believe that a proposal within this range would be accepted by SureWest’s board of directors. Later that day, Company A provided SureWest a written proposal to purchase all of the outstanding shares of SureWest for $18.00 per share in cash. On December 14, 2011, the SureWest board of directors reviewed and discussed Company A’s proposal, as well as the other strategic alternatives SureWest had been considering. Although the SureWest board of directors indicated that it continued to believe that $18.00 per share was not sufficient consideration for SureWest shareholders in an acquisition of SureWest, the board authorized management to continue discussions with Company A. Following this meeting, members of senior management of SureWest and representatives of UBS continued to discuss Company A’s proposal with Company A. On December 18, 2011, Company A provided to SureWest a revised proposal to purchase all of the outstanding shares of SureWest for $20.00 per share in cash.

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      On December 18, 2011, the SureWest board of directors reviewed and discussed Company A’s revised proposal through informal discussions. The SureWest board of directors directed management and representatives of UBS to proceed with discussions with Company A based on the revised proposal. At a board meeting held on December 21, 2011, to further consider Company A’s proposal, the directors again discussed Company A’s proposal and Orrick reviewed with the SureWest board of directors its fiduciary duties with respect to a potential transaction.

      On December 21, 2011, Company A and its advisors were granted access to a data room, which included both public and non-public information about SureWest. Diligence meetings and information exchanges continued with Company A through January 2012.

      On January 16, 2012, the SureWest board held a meeting at which it reviewed and discussed Company A’s proposal as well as an update on the diligence process with Company A, with representatives of UBS and Orrick participating in the meeting. Representatives of UBS reviewed certain financial aspects of Company A’s proposal and noted that on January 13, 2012, Company A communicated that it had completed a majority of its diligence and reaffirmed its proposal to purchase all of the outstanding shares of SureWest for $20.00 per share in cash, subject to certain stipulations. These stipulations included that the merger agreement would not include a “go shop” provision allowing SureWest to solicit additional offers following the signing of a merger agreement with Company A. Representatives of UBS also reviewed with the SureWest board of directors an illustrative timeline for a transaction with Company A that would include a “market check” to assess the interest of other parties in a transaction with SureWest, while concurrently negotiating a transaction with Company A. Orrick then reviewed with the board its fiduciary obligations relative to the proposal and a market check process. Orrick also reviewed with the board the principal terms of a draft of a proposed merger agreement prepared by Orrick to be presented to Company A. Following discussion, the board determined to proceed with the market check process and discussions with Company A concurrently.

      Following the January 16, 2012 board meeting and at the direction of the SureWest board of directors, representatives of UBS contacted 22 parties with which SureWest either had previous discussions regarding a possible transaction, including Consolidated, or that representatives of UBS and SureWest viewed as potentially interested parties. As a result of this process, Consolidated and three other parties executed confidentiality agreements, each of which included a two-year “standstill” provision, and received a packet of non-public information about SureWest. Consolidated executed the confidentiality agreement and received the packet of non-public information on January 20, 2012. Each of the interested parties was requested to complete initial diligence and provide a written indication of interest by January 24, 2012.

      On January 18, 2012, Company A received a draft merger agreement prepared by Orrick. Shortly thereafter, Orrick and counsel for Company A exchanged comments, and began to negotiate the terms of, the merger agreement.

      On January 20, 2012, the SureWest board of directors held a meeting at which it discussed the status of the market check process and negotiations with Company A.

      Between January 16 and 24, 2012, members of SureWest management conducted diligence sessions and/or held meetings with management of two of the three other parties that had executed a confidentiality agreement in connection with the market check process.

      On January 24, 2012, Consolidated provided to SureWest a written proposal to acquire all of the outstanding shares of SureWest for an indicated price of $22.00 per share, consisting of $11.00 in cash and $11.00 in shares of Consolidated common stock, subject to certain election and proration procedures and a collar to provide a fixed value for up to a 15% increase and 15% decrease in the trading price of Consolidated’s common stock. The proposal also included an offered right of SureWest to appoint one director to the Consolidated board of directors. Of the other three parties that signed a confidentiality agreement in connection with the market check process, two companies declined to submit a proposal and the third expressed a strong interest in a transaction, but did not submit a proposal.

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      On January 25, 2012, the SureWest board of directors held a regular meeting. During the meeting, representatives of UBS and Orrick participated for a portion of the meeting, during which the board of directors discussed and reviewed the Consolidated proposal. Representatives of UBS reviewed the results of the market check process. Representatives of UBS then summarized Consolidated’s proposal, including value and consideration mix, transaction structure and other considerations, and also reviewed preliminary financial analyses of SureWest and Consolidated, as well as a preliminary pro forma financial analysis of the combined company under different assumptions. Representatives of UBS also reviewed the status of the other party that expressed an interest in a strategic transaction with SureWest during the market check process (but did not submit a proposal). Orrick then again reviewed the board of director’s fiduciary duties with respect to the proposals from Consolidated and Company A. Orrick also commented from a legal perspective on certain terms of the merger agreement proposed by Company A. After discussion, the board of directors determined to move forward with concurrent negotiations with both Consolidated and Company A.

      On January 26, 2012, Consolidated received a draft merger agreement prepared by Orrick, and Consolidated and its advisors were again granted access to the data room, which included both public and non-public information about SureWest.

      On January 29, 2012, representatives of UBS and Orrick participated in a conference call with Company A and its counsel to review SureWest’s position with respect to certain terms of the merger agreement proposed by Company A.

      On January 30, 2012, Orrick participated in a conference call with Schiff Hardin, LLP (“Schiff Hardin”), counsel for Consolidated, to discuss Consolidated’s comments to the merger agreement.

      On January 31, 2012, members of SureWest’s senior management, including Mr. Oldham, participated in a management presentation and diligence session via conference call with members of Consolidated’s senior management, including Mr. Currey. Schiff Hardin also sent to Orrick a markup of the draft merger agreement. Over the next few days, SureWest, representatives of UBS and Orrick continued to negotiate the terms of a merger agreement with each of Consolidated and Company A, and to comply with remaining diligence requests.

      On February 2, 2012, the SureWest board of directors held a special meeting, with representatives of UBS, Orrick, and Cooper White & Cooper (“CWC”), SureWest’s regulatory counsel, participating. UBS reviewed the proposals of Consolidated and Company A. The SureWest board of directors then discussed the facts that Company A’s proposal was structured as an all cash, leveraged buyout transaction, where SureWest’s shareholders would have no exposure to the performance of Company A or SureWest following a transaction. They further observed that the Consolidated proposal was structured as a mix of cash and shares of Consolidated common stock, with SureWest’s shareholders owning approximately 22% of the combined company following a transaction and would thus be exposed to the future performance of the combined company. In addition, while both companies would be required to finance some or all of the cash consideration offered, Company A was proposing a six month financing commitment (inclusive of a 20 business day marketing period), while Consolidated had offered a nine month financing commitment without a marketing period. It was discussed that given the uncertainty of the timeline for regulatory approval, a longer financing commitment was preferential. Orrick then reviewed the key terms of the merger agreement markup proposed by Company A, noting that two key open subjects were with respect to the financing terms and the “deal protection” terms. With respect to the financing terms, Orrick reviewed in detail the interplay between the length of the financing commitment and the regulatory approval process. With respect to the “deal protection” terms, Orrick highlighted that in the event Company A was unable to obtain financing and close the transaction, SureWest’s only recourse would be a reverse termination fee payable to SureWest and that specific performance would not be an available remedy. Orrick further noted that Company A had decreased the amount of the proposed reverse termination fee as a result of SureWest’s proposal to decrease the termination fee in the event SureWest terminated the merger agreement to accept a superior offer. Orrick also noted that Consolidated had generally accepted the original proposed merger agreement. Members of the board of directors asked questions throughout the meeting and extensive discussion ensued regarding the proposed terms, financing and regulatory matters and other transaction considerations. Orrick further reviewed with the board of directors its fiduciary duties with respect to considering and evaluating the two proposals. CWC provided the board and management with a regulatory assessment of the Consolidated and Company A offers, including the California PUC approval processes, issues and timelines. SureWest management noted that certainty of the transaction closing was a key consideration in the transaction, and the board of directors concurred. The board, its advisors and management discussed the

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tactics for moving forward with negotiations, and the board of directors authorized management and representatives of UBS to continue negotiations with each of Consolidated and Company A and to seek a “best and final” offer from each party.

      During the afternoon of February 2, 2012, Orrick participated in a conference call with counsel for Company A to review the key open issues in the merger agreement and overall deal structure. During the morning of February 3, 2012, members of senior management of SureWest, Orrick and representatives of UBS participated in a conference call with members of senior management of Company A and its advisors to discuss certain open business covenants in the merger agreement.

      Later on February 3, 2012, at the direction of SureWest, representatives of UBS communicated to representatives of Company A that SureWest had received a bona fide competing proposal and thus was requesting a “best and final” offer by noon Eastern time on Saturday, February, 4, 2012, following which the SureWest board of directors would review the offers. At the direction of SureWest, representatives of UBS then communicated the same request and noon deadline to Consolidated and its advisors.

      During the evening of February 3, 2012, counsel for Company A sent to SureWest, representatives of UBS and Orrick a definitive offer letter reiterating its previous offer of $20.00 per share cash and stating that such offer was its “best and final” offer, together with a purportedly final version of the merger agreement and executed financing commitment papers with a nine month term. The letter stated that Company A had agreed to certain terms requested by SureWest, including a nine month financing commitment and an increased reverse termination fee. The offer letter further stated that the offer would expire at 9:00 pm Eastern time (approximately three hours after receipt) unless the SureWest board of directors approved the transaction and returned a countersigned merger agreement.

      Following receipt of Company A’s communication, the SureWest board of directors held a special meeting at which Company A’s offer was reviewed and discussed, with representatives of UBS and Orrick participating. Representatives of UBS and Orrick again reviewed the differences between the proposals and merger agreements from Company A and Consolidated. After discussion, the board of directors determined that it was not in the best interests of SureWest and its shareholders to accept the offer on the terms presented by Company A without first considering the “best and final” offer from Consolidated expected the following day. The board of directors directed management and representatives of UBS to communicate to Company A that the board would review the offer from Company A following the noon Eastern time deadline the following day. Shortly following this communication, counsel for Company A sent to SureWest, representatives of UBS and Orrick a letter revoking Company A’s offer.

      In regular meetings of the Consolidated board of directors during 2010 and 2011, including the March 2010, May 2010 and October 2011 meetings, Consolidated’s management had updated Consolidated’s directors on the status of the discussions with SureWest and discussed a possible acquisition of SureWest, separately and in the context of discussions of alternative acquisition possibilities.

      On the morning of February 4, 2012, the Consolidated board of directors held a special board meeting, with representatives of Wells Fargo Securities and Schiff Hardin participating, at which Consolidated’s management updated the directors on the status of discussions with SureWest and provided a detailed review of the proposed transaction, including the background of the discussions between Consolidated’s and SureWest’s management, the various diligence efforts Consolidated had completed on SureWest dating back to 2009, an overview of the SureWest business, terms of the proposed transaction, including consideration consisting of $11.00 in cash and $11.00 in shares of Consolidated common stock, the strategic rationale for the combination and the projected synergies and pro forma financial and operating projections for the combined company, the key risks and a downside scenario, Consolidated’s plans to secure committed financing for the transactions, since the proposed Merger Agreement would not contain a financing contingency, and the approval process should the Merger Agreement be executed, which would include regulatory approval and approval by stockholders of both companies. The Consolidated board of directors reached a consensus that it supported a transaction on the terms discussed.

      Also on the morning of February 4, 2012, the SureWest board of directors held a special meeting, with representatives of UBS and Orrick participating. Representatives of UBS summarized the events of the prior evening and Company A’s offer and subsequent revocation. At approximately 12:30 pm Eastern time on February 4, 2012, Wells Fargo Securities, on behalf of Consolidated, sent a definitive offer letter reaffirming Consolidated’s previous

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offer of $22.00 per share and stating that Consolidated had obtained a financing commitment with a nine month term. Representatives of UBS then reviewed the financial terms of the proposed transaction with Consolidated, the history of events since SureWest began the initial exploratory process in the third quarter of 2009 and the status of discussions with other parties, including Company A. Representatives of UBS then reviewed recent stock price performance and ownership of Consolidated, as well as an updated pro forma financial analysis of the combined company under different assumptions. Orrick then reviewed the material terms of the merger agreement, including the transaction structure, principal conditions of the merger, financing, deal protections, termination rights, break-up fee and employee and director matters. Orrick then made a presentation on the fiduciary duties of the board of directors. Members of the board asked questions throughout the meeting and extensive discussion ensued regarding the proposed transaction with Consolidated. Following this discussion, the SureWest board of directors indicated that it was supportive of a transaction with Consolidated at $22.00 per share and authorized management to move forward towards finalizing the merger agreement and transaction with Consolidated, with the goal of entering into a binding agreement with Consolidated prior to the market open on Monday, February 6, 2012. At SureWest’s direction, representatives of UBS then contacted Consolidated and Wells Fargo Securities to communicate that SureWest was prepared to accept Consolidated’s proposal and discussed the actions that were required to be completed by both sides to the meet the timeline set forth by SureWest’s board of directors.

      Late in the evening of February 4, 2012, representatives of Company A contacted representatives of UBS to inquire about the status of the SureWest board of director’s review of its offer. At SureWest’s direction, representatives of UBS informed Company A that SureWest understood that Company A’s offer had been revoked pursuant to its counsel’s letter received during the evening of February 3, and that SureWest was proceeding with another offer.

      On the morning of February 5, 2012, the Consolidated board of directors held a special board meeting. At the meeting, at the request of the Consolidated board of directors, representatives of Wells Fargo Securities delivered its oral opinion to the effect that, as of February 5, 2012, and based on and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken by Wells Fargo Securities in connection with the opinion, the experience of its investment bankers and other factors it deemed relevant, the consideration of $22.00 per share to be paid pursuant to the draft merger agreement reflecting the terms described in Consolidated’s February 4, 2012 offer letter was fair, from a financial point of view, to Consolidated. After further consideration and deliberation, the Consolidated board of directors unanimously approved the draft merger agreement and the transactions contemplated by it, including the issuance of Consolidated common stock, and resolved to recommend that the stockholders of Consolidated vote to approve these transactions, including the issuance of Consolidated common stock.

      Also on the morning of February 5, 2012, counsel for Company A sent to SureWest, representatives of UBS and Orrick an unsolicited revised definitive offer to acquire SureWest at a purchase price of $22.50 per share in cash, together with a revised merger agreement reflecting such price. The letter stated that it would expire in three hours unless SureWest’s board of directors approved the transaction and returned a countersigned merger agreement, though the deadline was later extended by another two hours to allow time for the SureWest board of directors to meet and consider the proposal. Following receipt of the offer, Mr. Oldham spoke with Company A to express the need for their commitment with respect to the regulatory process should Company A’s offer be accepted.

      Following receipt of the letter, the SureWest board of directors held a special meeting on February 5, 2012, to discuss the offer from Company A with representatives of UBS and Orrick. Following discussion, the board of directors instructed representatives of UBS to contact Consolidated and its advisors. The SureWest board of directors also noted concerns that Company A might again revoke its offer, as it had done with respect to its prior offer on February 3. At the direction of the board, representatives of UBS then informed Consolidated and Wells Fargo Securities that SureWest had received an unsolicited superior offer earlier that day that the SureWest board of directors determined it needed to consider. Mr. Oldham then reached out to the president and chief financial officer of Company A to confirm that $22.50 per share was Company A’s best and final offer and they discussed certain provisions in the merger agreement previously furnished by Company A. The president and chief financial officer confirmed the price as Company A’s best and final.

      Following receipt of the notification by representatives of UBS that Company A had made an offer higher than $22.00 per share, Consolidated’s management and its advisors discussed the possibility of increasing Consolidated’s offer to $23.00 per share, consisting of $11.50 in cash and $11.50 in shares of Consolidated common stock,

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and revising the draft merger agreement to reflect such proposed new offer. At the request of Consolidated’s management, representatives of Wells Fargo Securities delivered its oral opinion to the effect that, as of February 5, 2012, and based on and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken by Wells Fargo Securities in connection with the opinion, the experience of its investment bankers and other factors it deemed relevant, the consideration of $23.00 per share to be paid pursuant to the draft merger agreement revised to reflect the proposed new offer from Consolidated was fair, from a financial point of view, to Consolidated. Shortly thereafter, Consolidated increased its offer to $23.00 per share, consisting of $11.50 in cash and $11.50 in shares of Consolidated common stock and notified SureWest and its advisors.

      Following SureWest’s receipt of this revised proposal, the SureWest board of directors reconvened to discuss the proposal. Orrick and representatives of UBS reviewed with the board of directors the new offers from each of Company A and Consolidated, and again reviewed the differences between the two offers and merger agreements. Members of the board of directors asked questions throughout the discussion. Following additional discussion and deliberation, the SureWest board of directors determined that it believed that based on the merger consideration offered and the terms of the merger agreement proposed by Consolidated, that the proposal from Consolidated offered more value to the SureWest shareholders than Company A’s proposal. Representatives of UBS reviewed with the SureWest board of directors its financial analysis of the merger consideration proposed by Consolidated and delivered its oral opinion, which opinion was subsequently confirmed in writing, to the effect that, as of February 5, 2012, and based upon and subject to various assumptions, matters considered and limitations described in the opinion, the merger consideration, taken in the aggregate, to be received by holders of SureWest common stock in the First Merger was fair, from a financial point of view, to such holders. The SureWest board of directors then unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers, and, subject to the terms of the Merger Agreement, unanimously resolved to recommend that the shareholders of SureWest vote to approve and adopt the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers.

      Thereafter, on February 5, 2012, SureWest and Consolidated executed the Merger Agreement.

      Later on February 5, 2012, Consolidated’s management informed Consolidated’s board members of the final transaction terms and the execution of the Merger Agreement. Wells Fargo Securities delivered its written financial analyses and written opinion, confirming its oral opinion delivered to Consolidated’s management. Thereafter, after further consideration, and taking into account the factors described under “—Consolidated’s Reasons for the Mergers” beginning on page 62 , Consolidated’s board of directors, acting by unanimous written consent dated as of February 5, 2012, formally ratified the execution of the Merger Agreement.

      On February 6, 2012, prior to the opening of trading on NASDAQ, Consolidated and SureWest issued a joint press release announcing the Mergers.

      On February 7, 2012, each of the Merger Subs executed the Merger Agreement.

SureWest’s Reasons for the Mergers and Recommendation of the SureWest Board of Directors

Recommendation of the SureWest Board of Directors

      The SureWest board of directors, by the unanimous vote of all directors:

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      Accordingly, the SureWest board of directors recommends that the SureWest shareholders vote “FOR” approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger.

Reasons for the Mergers

      In reaching its determination to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, and to recommend that SureWest shareholders vote “ FOR ” the proposal to approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, the SureWest board of directors consulted with and received advice from its financial and legal advisors and SureWest’s management, and considered a number of factors, including the following material factors (which are not listed in any relative order of importance):

      Factors Relating to the Transaction Generally

      Factors Relating to the Specific Terms of the Merger Agreement

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     Potentially Negative Factors Relating to the Transaction :

     The SureWest board of directors also considered potential drawbacks or risks relating to the Mergers, including the following material risks and factors:

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     The foregoing discussion is not intended to be exhaustive, but SureWest believes it addresses the material information and factors considered by the SureWest board of directors in its consideration of the Mergers. In view of the number and variety of factors and the amount of information considered, the SureWest board of directors did not find it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, the SureWest board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of the SureWest board of directors may have given different weights to different factors.

Opinion of Financial Advisor to SureWest

     On February 5, 2012, at a meeting of SureWest’s board of directors held to evaluate the Mergers, UBS delivered to SureWest’s board of directors an oral opinion, which opinion was confirmed by delivery of a written opinion, dated February 5, 2012, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the Merger Consideration, taken in the aggregate, to be received by holders of SureWest common stock in the First Merger was fair, from a financial point of view, to such holders.

     The full text of UBS’ opinion to SureWest’s board of directors describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by UBS. This opinion is attached as Annex II and is incorporated into this joint proxy statement/prospectus by reference. Holders of SureWest common stock are encouraged to read UBS’ opinion carefully in its entirety. UBS’ opinion was provided for the benefit of SureWest’s board of directors (in its capacity as such) in connection with, and for the purpose of, its evaluation of the fairness of the Merger Consideration to be received by holders of SureWest common stock in the First Merger from a financial point of view and does not address any other aspect of the Mergers. The opinion does not address the relative merits of the Mergers as compared to other business strategies or transactions that might be available with respect to SureWest or SureWest’s underlying business decision to effect the Mergers. The opinion does not constitute a recommendation to any shareholder as to how such shareholder should vote or act with respect to the Mergers. In addition, the opinion does not address, or constitute a recommendation with respect to, any particular shareholder election. Holders of SureWest common stock are encouraged to read UBS’ opinion carefully in its entirety. The following summary of UBS’ opinion is qualified in its entirety by reference to the full text of UBS’ opinion.

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     In arriving at its opinion, UBS, among other things:

     In connection with its review, with the consent of SureWest’s board of directors, UBS assumed and relied upon, without independent verification, the accuracy and completeness in all material respects of the information provided to or reviewed by UBS for the purpose of its opinion. In addition, with the consent of SureWest’s board of directors, UBS did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of SureWest or Consolidated, and was not furnished with any such evaluation or appraisal. With respect to the financial forecasts, estimates and synergies referred to above, UBS assumed, at the direction of SureWest’s board of directors, that such forecasts, estimates and synergies had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of SureWest’s management as to the future financial performance of SureWest and Consolidated, respectively, and such synergies. In addition, UBS assumed, with the approval of SureWest’s board of directors, that such financial forecasts and estimates, including synergies, would be achieved at the times and in the amounts projected. UBS also assumed, with the consent of SureWest’s board of directors, that the Mergers would qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. UBS’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information available to UBS as of, the date of its opinion.

     At the request of SureWest’s board of directors, UBS contacted third parties to solicit indications of interest in a possible transaction with SureWest and held discussions with certain of these parties prior to the date of UBS’ opinion. In addition, at the direction of SureWest’s board of directors, UBS was not asked to, and it did not, offer any opinion as to the terms, other than the Merger Consideration to the extent expressly specified in UBS’ opinion, of the Merger Agreement or the form of the Mergers. In addition, UBS expressed no opinion as to the fairness of

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the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the Mergers, or any class of such persons, relative to the Merger Consideration. UBS expressed no opinion as to what the value of Consolidated common stock would be when issued pursuant to the Mergers or the prices at which Consolidated common stock or SureWest common stock would trade at any time. In rendering its opinion, UBS assumed, with the consent of SureWest’s board of directors, that (i) the parties to the Merger Agreement would comply with all material terms of the Merger Agreement and (ii) the Mergers would be consummated in accordance with the terms of the Merger Agreement without any adverse waiver or amendment of any material term or condition of the Merger Agreement. UBS also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Mergers would be obtained without any material adverse effect on SureWest, Consolidated or the Mergers. Except as described above, SureWest imposed no other instructions or limitations on UBS with respect to the investigations made or the procedures followed by UBS in rendering its opinion. The issuance of UBS’ opinion was approved by an authorized committee of UBS.

     In connection with rendering its opinion to SureWest’s board of directors, UBS performed a variety of financial and comparative analyses which are summarized below. The following summary is not a complete description of all analyses performed and factors considered by UBS in connection with its opinion. The preparation of a financial opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the selected companies analysis and the selected transactions analysis summarized below, no company or transaction used as a comparison was identical to SureWest, Consolidated or the Mergers. These analyses necessarily involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the values of the companies concerned.

     UBS believes that its analyses and the summary below must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying UBS’ analyses and opinion. UBS did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole.

     The estimates of the future performance of SureWest and Consolidated provided by SureWest in or underlying UBS’ analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than those estimates. In performing its analyses, UBS considered industry performance, general business and economic conditions and other matters, many of which were beyond the control of SureWest and Consolidated. Estimates of the financial value of companies do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold or acquired.

     The Merger Consideration was determined through negotiation between SureWest and Consolidated and the decision by SureWest to enter into the Mergers was solely that of SureWest’s board of directors. UBS’ opinion and financial analyses were only one of many factors considered by SureWest’s board of directors in its evaluation of the Mergers and should not be viewed as determinative of the views of SureWest’s board of directors or management with respect to the Mergers or the Merger Consideration.

     The following is a brief summary of the material financial analyses performed by UBS and reviewed with SureWest’s board of directors on February 5, 2012, in connection with its opinion relating to the proposed Mergers. The financial analyses summarized below include information presented in tabular format. In order for UBS’ financial analyses to be fully understood, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of UBS’ financial analyses.

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Financial Analyses

Selected Public Companies Analysis

     UBS compared selected financial and stock market data of SureWest with corresponding data of the following 15 publicly traded companies, which are incumbent local exchange carriers (“ILECs”), facility-based business telecom services providers or cable companies:

ILECs

Facility-based Business Telecom Services Providers

Cable Companies

     UBS reviewed, among other things, enterprise values, calculated as equity market value based on closing stock prices on February 3, 2012, plus debt at book value, preferred stock at liquidation value and minority interests at book value, less cash and cash equivalents, as multiples of estimated 2011, 2012 and 2013 (1) earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, and (2) EBITDA minus capital expenditures, referred to as operating free cash flow, or OpFCF. UBS then compared the multiples derived for the selected companies with corresponding multiples implied for SureWest. The multiples for SureWest were calculated using (i) the closing price of SureWest common stock on February 3, 2012 of $15.59 and (ii) the Merger Consideration of $23.00 per share of SureWest common stock. Financial data for the selected companies, other than Consolidated, were based on publicly available research analysts’ consensus estimates, public filings and other publicly available

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information. Estimated financial data for Consolidated were based on the estimates of SureWest’s management. Estimated financial data for SureWest were based on internal estimates of SureWest’s management, referred to as “SureWest Management Estimates.” This analysis indicated the following implied high, mean, median and low multiples for the selected companies, as compared to corresponding multiples implied for SureWest:

EV/EBITDA EV/OpFCF
      CY2011       CY2012       CY2013       CY2011       CY2012       CY2013
Selected Public Companies
       Total High 9.1 x 9.0 x 9.3 x 31.7 x   24.2 x 18.5 x
       Total Mean   6.6 x   6.4 x 6.3 x 12.2 x 11.0 x 10.0 x
       Total Median 6.7 x 6.5 x   6.2 x 10.3 x 9.8 x 9.1 x
       Total Low 3.8 x 3.9 x 3.9 x   5.7 x 6.4 x 7.0 x
Implied Multiples for SureWest Based 5.2 x 5.2 x 4.9 x 41.3 x 34.7 x 15.0 x
on Closing Price on February 3, 2012      
of $15.59
Implied Multiples for SureWest Based 6.6 x 6.6 x 6.1 x 51.9 x 43.5 x 18.8 x
on Merger Consideration of $23.00

Selected Transactions Analysis

     UBS reviewed publicly available information relating to the following 17 transactions announced between September 2008 and February 2012 involving ILECs, facility-based business telecom services providers or cable companies:

       ILECs

Announcement              
Date Target Acquiror
  • April 22, 2010
     
  • November 24, 2009
     
  • September 8, 2009  
  • May 13, 2009
     
     
  • May 11, 2009
  • November 21, 2008
     
  • October 27, 2008
  • Qwest Communications
    International, Inc.
  • Iowa Telecommunications
    Services, Inc.
  • Lexcom, Inc.
  • Certain wireline properties of
    Verizon Communications,
    Inc.
  • D&E Communications, Inc.
  • Sherburne Tele Systems, Inc.
     
  • Embarq Corp.
  • CenturyLink Inc.
     
  • Windstream Corp.
     
  • Windstream Corp.
  • Frontier Communications
    Corp.

     
  • Windstream Corp.
  • Iowa Telecommunications
    Services, Inc.
  • CenturyTel, Inc.
     
      Facility-based Business Telecom Services Providers
 
Announcement
Date Target Acquiror
  • August 1, 2011
  • December 20, 2010
  • October 1, 2010
  • September 13, 2010
  • November 3, 2009
  • Paetec Holding Corp.
  • One Communications Corp.
  • ITC Deltacom, Inc.
  • Cavalier Telephone LLC
  • NuVox Communications
  • Windstream Corp.
  • Earthlink Inc.
  • Earthlink Inc.
  • Paetec Holding Corp.
  • Windstream Corp.

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      Cable Companies        
          
Announcement
Date       Target       Acquiror
  • August 15, 2011
  • November 15, 2010

  • August 4, 2010
  • March 5, 2010
  • September 8, 2008
  • Insight Communications Co., Inc.
  • Mediacom Communications Corp.

  • Sunflower Broadband
  • RCN Corp.
  • 29% interest in Mediacom
    Communications Corp. owned by Morris
    Communications Co. LLC
  • Time Warner Cable, Inc.
  • Controlling shareholder Rocco
    Commisso
  • Knology, Inc.
  • ABRY Partners LLC
  • Mediacom Communications Corp.

     UBS reviewed the enterprise values, calculated as the purchase price paid for the target company’s equity, plus debt at book value, preferred stock at liquidation value and minority interests at book value, less cash and cash equivalents, as a multiple of latest twelve-months (“LTM”) EBITDA for the selected transactions. UBS then compared the multiples derived for the selected transactions with corresponding multiples for SureWest based on the closing price on February 3, 2012 and the Merger Consideration of $23.00 per share. Multiples for the selected transactions were based on publicly available information at the time of announcement of the relevant transaction. This analysis indicated the following implied high, mean, median and low multiples for the selected transactions, as compared to corresponding multiples implied for SureWest:

Implied Multiples for Selected Transactions
EV/LTM EBITDA
Total High 8.6 x
Total Mean 6.2 x
Total Median 5.8 x
Total Low 4.4 x
Implied Multiples for SureWest Based on Closing Price on February 3, 2010 of $15.59 5.2 x
Implied Multiples for SureWest Based on Merger Consideration of $23.00 6.6 x

Discounted Cash Flow Analyses

     SureWest Standalone

     UBS performed a discounted cash flow analysis of SureWest on a standalone basis using financial forecasts and estimates relating to SureWest prepared by SureWest’s management. UBS calculated a range of implied present values (as of December 31, 2011) of the standalone unlevered, after-tax free cash flows that SureWest was forecasted to generate from calendar year 2012 through calendar year 2016 and of terminal values for SureWest based on SureWest’s calendar year 2016 estimated EBITDA. Implied terminal values were derived by applying to SureWest’s calendar year 2016 estimated EBITDA a range of EBITDA terminal value multiples of 5.0x to 6.0x. Present values of cash flows and terminal values were calculated using discount rates ranging from 9.0% to 11.0%. The discounted cash flow analysis resulted in a range of implied present values of approximately $15.00 to $22.00 per share of SureWest common stock.

     Consolidated Standalone

     UBS performed a discounted cash flow analysis of Consolidated on a standalone basis using financial forecasts and estimates relating to Consolidated prepared by SureWest’s management. UBS calculated a range of implied present values as (as of December 31, 2011) of the standalone unlevered, after-tax free cash flows that Consolidated was forecasted to generate from calendar year 2012 through calendar year 2016 and of terminal values for Consolidated based on Consolidated’s calendar year 2016 estimated EBITDA. Implied terminal values were derived by applying to Consolidated’s calendar year 2016 estimated EBITDA a range of EBITDA terminal value multiples

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of 6.5x to 7.5x. Present values of cash flows and terminal values were calculated using discount rates ranging from 6.5% to 7.5%. The discounted cash flow analysis resulted in a range of implied present values of approximately $12.00 to $17.70 per share of Consolidated common stock.

     SureWest Pro Forma for the Mergers, based upon the Assumed Mixed Consideration (as defined below)

     UBS performed a discounted cash flow analysis of Consolidated pro forma for the Mergers using (i) financial forecasts and estimates for SureWest and Consolidated prepared by SureWest’s management and (ii) estimates of synergies anticipated to result from the proposed Mergers prepared by the management of Consolidated and discussed with SureWest. UBS calculated the implied present values (as of December 31, 2011) of the unlevered, after-tax free cash flows that Consolidated pro forma for the Mergers was forecasted to generate from calendar year 2012 through calendar year 2016 and of the terminal value for Consolidated pro forma for the Mergers based on Consolidated’s calendar year 2016 estimated EBITDA pro forma for the Mergers. Implied terminal values were derived by applying to Consolidated’s calendar year 2016 estimated EBITDA pro forma for the Mergers a range of EBITDA terminal value multiples of 5.9x to 6.9x. Present values of cash flows and terminal values were calculated using discount rates ranging from 7.1% to 8.1%. UBS then calculated a range of implied present values per share of SureWest common stock, pro forma for the Mergers, assuming for purposes of the calculation that all SureWest shareholders were prorated, pursuant to the cash election, to receive an identical mix of cash and Consolidated common stock for each share of SureWest common stock, calculated as follows: 0.5974 shares (one half the Exchange Ratio) of Consolidated common stock and $11.50 cash consideration per share of SureWest common stock (collectively, the “Assumed Mixed Consideration”). This discounted cash flow analysis resulted in a range of implied present values per share of SureWest common stock, pro forma for the Mergers, based upon the Assumed Mixed Consideration, of approximately $20.35 to $24.85.

     Based on the foregoing analyses, UBS then calculated the percentage increase between (i) the range of implied present values per share of SureWest common stock on a standalone basis and (ii) the range of implied present values per share of SureWest common stock pro forma for the Mergers, based upon the Assumed Mixed Consideration. UBS observed that such percentage increase ranged from approximately 13% (when comparing the high end of the first range to the high end of the second range) to 36% (when comparing the low end of the first range to the low end of the second range).

Miscellaneous

     Under the terms of UBS’ engagement, SureWest agreed to pay UBS for its financial advisory services in connection with the Mergers an aggregate fee currently estimated to be approximately $7.1 million, a portion of which was payable in connection with UBS’ opinion and approximately $5.3 million of which is contingent upon consummation of the Mergers. In addition, SureWest agreed to reimburse UBS for its reasonable expenses, including fees, disbursements and other charges of counsel, and to indemnify UBS and related parties against liabilities, including liabilities under federal securities laws, relating to, or arising out of, its engagement. In the past, UBS has provided investment banking services to SureWest unrelated to the proposed Mergers, for which UBS received compensation, including having acted as agent for SureWest in connection with a share repurchase. In the ordinary course of business, UBS and its affiliates may hold or trade, for their own accounts and the accounts of their customers, securities of SureWest and Consolidated, and, accordingly, may at any time hold a long or short position in such securities. SureWest selected UBS as its financial advisor in connection with the Mergers because UBS is an internationally recognized investment banking firm with substantial experience in similar transactions. UBS is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities and private placements.

Consolidated’s Reasons for the Mergers

     Consolidated was formed as an acquisition vehicle in July 2002, and completed its first transaction on December 31, 2002, when it acquired certain central-Illinois based assets of McLeodUSA. In April, 2004, Consolidated acquired TXUC from Texas Utlilities. In July, 2005, Consolidated completed its initial public offering

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of common stock, and on December 31, 2007, Consolidated acquired North Pittsburgh Systems, Inc. Throughout Consolidated’s history, Consolidated has focused on acquisitions as a core part of its strategy, and developed a set of evaluation criteria early on which it used and intends to continue to use to evaluate potential opportunities.

     At nearly every regular quarterly board of directors meeting, the Company’s management team has reviewed prospective acquisition targets and ranked them according to their attractiveness and alignment with the acquisition criteria. Where the opportunities were deemed attractive, the Company participated from time to time in auctions, made inquiries, and generally attempted to advance its long-standing strategy to grow through acquisition.

     As a part of that ongoing process, the management team and the Consolidated board of directors determined that SureWest met the Company’s criteria for potential acquisitions, and identified SureWest as an attractive potential acquisition candidate. Consolidated entered into a non-disclosure agreement with SureWest in December 2009 for the purpose of conducting due diligence on SureWest and evaluating a potential transaction.

     From time to time throughout the period from the time beginning with the initial merger discussions between Consolidated and SureWest in December 2009, and continuing through the time the Merger Agreement was executed on February 5, 2012, the Consolidated board of directors worked with the Consolidated management team to develop various strategies and approaches, including the approval of what became the terms of the Merger Agreement.

     In approving the Merger Agreement and the Mergers, Consolidated’s board of directors consulted with Consolidated’s management, as well as with Consolidated’s legal and financial advisors, and considered, among other things, the following material factors:

  • that the Mergers would combine Consolidated’s strong and stable cash flow business with SureWest’s growth-oriented broadband and overbuilder strategy;

  •  
  • that the Mergers would diversify Consolidated’s revenue and cash flow streams across multiple business lines and geographies and would reduce regulatory risk;

  •  
  • the expectation that the Mergers would be accretive to cash flow, after synergies, in the first full year of operations;

  •  
  • the expectation that the Mergers would result in a financially strong company with a robust balance sheet, attractive dividend payout ratio and the ability to deliver over time;

  •  
  • the expectation that, after the consummation of the Mergers, the combined companies would realize annual, operating and capital synergies;

  •  
  • the expectation that the Mergers would improve Consolidated’s leverage and dividend payout ratio;

  •  
  • that, after the Mergers, the Company would have the opportunity to utilize approximately $67 million of estimated SureWest net operating losses, as of September 30, 2011, recognizing that Section 382 of the Internal Revenue Code imposes timing and other limitations on the use of these net operating losses;

  •  
  • the expectation that the Mergers would create a platform for future growth through acquisitions to fill in Consolidated’s national footprint, and organically through investments in the combined company’s existing markets;

  •  
  • the opportunity to integrate SureWest’s business efficiently with Consolidated’s existing business.

  •  
  • Consolidated management’s prior record of successfully integrating acquired companies; and

  •  
  • that the Mergers would bring together two companies with a common history of family ownership and shared values of community involvement.

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     Consolidated’s board of directors also considered, among other things, the following risks:

  • regulatory and litigation risks associated with the Mergers or combining the two companies;

  •  
  • that there are risks associated with obtaining necessary approvals on terms that satisfy closing conditions to the respective parties’ obligations to complete the Mergers, and, as a result of certain conditions to the completion of the Mergers, it is possible that the Mergers may not be completed even if approved by Consolidated’s stockholders and SureWest’s shareholders (see “The Merger Agreement — Conditions of the Mergers”);

  •  
  • the challenges of combining the businesses of the two companies and the attendant risks of not achieving the expected strategic benefits and cost savings, other financial and operating benefits or improvement in earnings, and of diverting management focus and resources from other strategic opportunities and from operational matters for an extended period of time;

  •  
  • the perception of investors and the potential impact on Consolidated’s share price;

  •  
  • the level of capital expenditures that will be required with respect to the SureWest cable overbuilder business;

  •  
  • the ability to secure financing on terms satisfactory to Consolidated;

  •  
  • the terms and conditions of the Merger Agreement, which include restrictions on the conduct of Consolidated’s business pending the closing of the Mergers (see “The Merger Agreement — Consolidated’s Forbearances Before Completion of the Mergers”); and

  •  
  • the other risks of the type and nature discussed above under “Risk Factors Relating to the Mergers”.

Opinion of Financial Advisor to Consolidated

     Consolidated retained Wells Fargo Securities to act as Consolidated’s financial advisor in connection with a possible transaction involving Consolidated and SureWest and their respective affiliates. In connection with this engagement, the board of directors of Consolidated requested that Wells Fargo Securities provide its opinion as to the fairness, from a financial point of view, to Consolidated of the Merger Consideration to be paid pursuant to the Merger Agreement. In selecting Wells Fargo Securities as its financial advisor, Consolidated considered, among other things, the fact that Wells Fargo Securities is a widely recognized investment banking firm with substantial experience advising companies in the telecommunications industry and has familiarity with Consolidated and SureWest and has substantial experience providing strategic advisory services in similar transactions. Wells Fargo Securities, as part of its investment banking business, is continuously engaged in the evaluation of businesses and debt and equity securities in connection with mergers and acquisitions, underwritings, private placements and other securities offerings, senior credit financings, and general corporate advisory services.

     On February 5, 2012, Wells Fargo Securities delivered its written opinion to the board of directors of Consolidated to the effect that, as of February 5, 2012, and based on and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken by Wells Fargo Securities in connection with the opinion, the experience of its investment bankers and other factors it deemed relevant, the Merger Consideration to be paid pursuant to the Merger Agreement was fair, from a financial point of view, to Consolidated. The issuance of the opinion of Wells Fargo Securities was approved by an authorized committee of Wells Fargo Securities.

     The full text of the written opinion of Wells Fargo Securities sets forth, among other things, assumptions made, procedures followed, matters considered and limitations on the review undertaken by Wells Fargo Securities in connection with such opinion. This written opinion is attached as Annex III to this joint proxy statement/prospectus and is incorporated by reference in its entirety into this joint proxy statement/prospectus. The following summary is qualified in its entirety by reference to the full text of the opinion. Wells

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Fargo Securities provided its opinion for the information and use of the board of directors of Consolidated in connection with its evaluation of the Mergers. Wells Fargo Securities’ opinion did not and does not constitute a recommendation as to how any holder of shares of Consolidated common stock should vote with respect to the issuance of shares of Consolidated common stock pursuant to the First Merger and the Merger Agreement or any other matter.

          In arriving at its opinion, Wells Fargo Securities, among other things:

  • Reviewed a draft dated February 5, 2012 of the Merger Agreement, including the financial terms of the Merger Agreement;

  •  
  • Reviewed certain business, financial and other information regarding SureWest that was publicly available or was furnished to Wells Fargo Securities by SureWest or Consolidated;

  •  
  • Reviewed certain financial projections for SureWest prepared by the management of SureWest as reviewed and approved for Wells Fargo Securities’ use by the management of Consolidated, which are referred to in this joint proxy statement/prospectus as the “SureWest projections”;

  •  
  • Discussed with the managements of SureWest and Consolidated the operations and prospects of SureWest, including the historical financial performance and trends in the results of operations of SureWest;

  •  
  • Reviewed certain business, financial and other information regarding Consolidated that was publicly available or was furnished to Wells Fargo Securities by Consolidated;

  •  
  • Reviewed certain financial projections for Consolidated prepared by the management of Consolidated, which is referred to in this joint proxy statement/prospectus as the “Consolidated projections”;

  •  
  • Discussed with the management of Consolidated the operations and prospects of Consolidated, including the historical financial performance and trends in the results of operations of Consolidated;

  •  
  • Reviewed certain projections of the synergies expected to result from the Mergers prepared by the management of Consolidated, which are referred to in this joint proxy statement/prospectus as the “synergies projections,” and certain projections of the integration costs associated with implementing the expected synergies prepared by the management of Consolidated, which are referred to in this joint proxy statement/prospectus as the “integration costs”;

  •  
  • Reviewed certain information regarding the net operating losses held by SureWest prepared by the management of SureWest and certain estimates regarding the utilization of such net operating losses by Consolidated for U.S. federal income tax purposes approved for Wells Fargo Securities’ use by the management of Consolidated, which is referred to in this joint proxy statement/prospectus as the “NOL projections”;

  •  
  • Discussed with the management of Consolidated the strategic rationale for the Mergers;

  •  
  • Compared certain business, financial and other information regarding SureWest and Consolidated, respectively, that was publicly available or was furnished to Wells Fargo Securities by the respective managements of SureWest and Consolidated with publicly available business, financial and other information regarding certain publicly traded companies that Wells Fargo Securities deemed relevant;

  •  
  • Compared the proposed financial terms of the Merger Agreement with the financial terms of certain other business combinations and transactions that Wells Fargo Securities deemed relevant;

  •  
  • Prepared a discounted cash flow analysis of SureWest based upon the SureWest projections, the NOL projections, the synergies projections and the integration costs, as well as other assumptions discussed with and confirmed as reasonable by the management of Consolidated;

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  • Prepared a pro forma analysis estimating the financial impact on the combined company resulting from the Mergers based upon the SureWest projections, the NOL projections, the synergies projections, the integration costs, the Consolidated projections and the pro forma capital structure of Consolidated projected by the management of Consolidated, as well as other assumptions discussed with and confirmed as reasonable by the management of Consolidated; and

  •  
  • Considered other information such as financial studies, analyses and investigations, as well as financial, economic and market criteria that Wells Fargo Securities deemed relevant.

     In connection with its review, Wells Fargo Securities assumed and relied upon the accuracy and completeness of the financial and other information provided, discussed with or otherwise made available to it, including all accounting, tax and legal information, and Wells Fargo Securities did not make (and did not assume any responsibility for) any independent verification of such information. Wells Fargo Securities assumed, with the consent of the board of directors of Consolidated, that neither the management of SureWest nor of Consolidated was aware of any facts or circumstances that would make such information inaccurate or misleading in any way meaningful to the analysis of Wells Fargo Securities. With respect to the financial forecasts and estimates utilized in Wells Fargo Securities’ analyses, including the SureWest projections, the NOL projections, the synergies projections, the integration costs and the Consolidated projections, Wells Fargo Securities assumed, with the consent of the board of directors of Consolidated, that they were reasonably prepared and reflected the best current estimates, judgments and assumptions of the management of Consolidated as to the future financial performance of SureWest and Consolidated, the utilization of the net operating losses of SureWest, the synergies expected to result from the Mergers and the projected integration costs associated with implementing the expected synergies. Wells Fargo Securities assumed no responsibility for, and expressed no view as to, such forecasts or estimates or the judgments or assumptions upon which they are based. Wells Fargo Securities also assumed that there were no material changes in the condition (financial or otherwise), results of operations, business or prospects of SureWest or Consolidated since the date of the last financial statements provided to Wells Fargo Securities. In arriving at its opinion, Wells Fargo Securities did not conduct any physical inspection or appraisals of the assets or liabilities (contingent or otherwise) of SureWest or Consolidated.

     In rendering its opinion, Wells Fargo Securities assumed, with the consent of the board of directors of Consolidated, that the final form of the Merger Agreement, when signed by the parties thereto, would not differ from the draft reviewed by it in any respect material to its opinion, that the Mergers and financings contemplated to be undertaken by Consolidated in connection with the Mergers or otherwise would be consummated in accordance with the terms described in the Merger Agreement or as otherwise described to Wells Fargo Securities by representatives of Consolidated and in compliance with all applicable laws, without waiver of any material terms or conditions, and that in the course of obtaining any necessary legal, regulatory or third party consents or approvals for the Mergers or such contemplated financings, no restrictions would be imposed or actions would be taken that would have an adverse effect on Consolidated, SureWest or the expected benefits of the Mergers in any way meaningful to Wells Fargo Securities’ analysis. Wells Fargo Securities’ opinion was necessarily based on economic, market, financial and other conditions and the information made available to it as of the date hereof. Although subsequent developments may affect this opinion, Wells Fargo Securities’ does not have any obligation to update, revise or reaffirm this opinion.

     Wells Fargo Securities’ opinion only addresses the fairness, from a financial point of view, to Consolidated of the Merger Consideration to the extent expressly specified in its opinion, and does not address any other terms or aspects of the Mergers, including, without limitation, the form or structure of the Mergers, any allocation of the Merger Consideration, any tax or accounting matters relating to the Mergers or otherwise, any financing arrangements or any aspect or implication of any other agreement or arrangement entered into in connection with or contemplated by the Mergers or otherwise. In addition, Wells Fargo Securities’ opinion does not address the fairness of the amount or nature of, or any other aspects relating to, any compensation to be received by any officers, directors or employees of any parties to the Mergers, or class of such persons, relative to the Merger Consideration. Wells Fargo Securities’ opinion does not address the merits of the underlying decision by Consolidated to enter into the Merger Agreement or the relative merits of the Mergers or contemplated financings compared with other business strategies or transactions available or that have been or might be considered by the management or the board of directors of Consolidated.

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     In connection with rendering its opinion, Wells Fargo Securities performed certain financial, comparative and other analyses as summarized below. This summary is not a complete description of the financial analyses performed and factors considered in connection with such opinion. In arriving at its opinion, Wells Fargo Securities made its determinations as to the fairness, from a financial point of view, to Consolidated of the Merger Consideration to be paid pursuant to the Merger Agreement, on the basis of various financial and comparative analyses taken as a whole. The preparation of a financial opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a financial opinion is not readily susceptible to summary description.

     In arriving at its opinion, Wells Fargo Securities did not attribute any particular weight to any single analysis or factor considered but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered and in the context of the circumstances of the particular transaction. Accordingly, the analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying such opinion. The fact that any specific analysis has been referred to in the summary below is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary. No company, business or transaction reviewed is identical to SureWest or Consolidated or the Mergers. An evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or other values of the companies, business segments or transactions reviewed.

     In performing its analyses, Wells Fargo Securities considered industry performance, general business and economic conditions and other matters existing as of February 5, 2012, many of which are beyond the control of SureWest and Consolidated. None of SureWest, Consolidated or Wells Fargo Securities or any other person assumes responsibility if future results are different from those discussed whether or not any such difference is material. Any estimates contained in these analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or necessarily reflect the prices at which businesses or securities may actually be sold or acquired. Accordingly, the assumptions and estimates used in, and the results derived from, the following analyses are inherently subject to substantial uncertainty.

     The following is a summary of the material financial analyses provided on February 5, 2012 to the board of directors of Consolidated by Wells Fargo Securities in connection with its opinion . Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of such financial analyses .

Financial Analyses of SureWest

     Selected Publicly Traded Companies Analysis. Using publicly available information, Wells Fargo Securities compared certain financial and other information and financial multiples relating to SureWest to corresponding financial and other information and financial multiples for certain publicly traded telecommunications companies that Wells Fargo Securities, using its professional judgment and expertise, deemed comparable to SureWest. Although none of these companies is directly comparable to SureWest in all respects, Wells Fargo Securities selected these companies because they are publicly traded companies with operations that, for purposes of this analysis, may be considered similar to certain operations of SureWest. The companies included in the selected publicly traded companies analysis for SureWest were:

  • CenturyLink, Inc.

  •  
  • Consolidated Communications Holdings, Inc.

  •  
  • Frontier Communications Corporation

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  • Knology, Inc.

  •  
  • Windstream Corporation

     Wells Fargo Securities reviewed, among other information, enterprise values of the selected companies, which is referred to in this joint proxy statement/prospectus as “EV,” calculated as equity value based on closing stock prices on February 3, 2012, plus book value of net debt, capitalized leases, preferred stock and minority interest, as a multiple of calendar year 2012 estimated earnings before interest, taxes, depreciation, amortization and excluding stock-based compensation, which is referred to in this joint proxy statement/prospectus as “adjusted EBITDA.” Based on these analyses and utilizing its professional judgment and experience, Wells Fargo Securities then applied selected ranges of EV/calendar year 2012 estimated adjusted EBITDA multiples of 5.5x to 7.5x, derived from the analyses of the selected companies, to SureWest’s calendar year 2012 estimated adjusted EBITDA. Financial data of the selected companies were based on public filings, equity research and common stock closing prices on February 3, 2012. Financial data of SureWest were based on the SureWest projections prepared by the management of SureWest as reviewed and approved for Wells Fargo Securities’ use by the management of Consolidated, public filings, common stock closing prices on February 3, 2012 and other publicly available information. This analysis indicated the following implied per share equity reference ranges for SureWest, as compared to the implied Merger Consideration (based on common stock closing prices on February 3, 2012):

Implied Per Share Equity Reference Range for SureWest       Implied Merger Consideration
Based on:  
Calendar Year 2012 Adjusted EBITDA
$18.90 - $30.60 $23.00

     Selected Transactions Analysis. Utilizing publicly available information, Wells Fargo Securities analyzed certain information relating to the following selected transactions involving telecommunications companies announced since September 2006. Although none of the companies involved in the selected transactions are directly comparable to SureWest in all respects, nor are any of the selected transactions directly comparable to the Mergers in all respects, Wells Fargo Securities chose the transactions in the selected transactions analysis because the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of the results, market size or operations of SureWest.

Acquiror       Target
CenturyLink, Inc.   Qwest Communications
ABRY Partners, LLC   RCN Corporation
Windstream Corporation   Iowa Telecommunications Services, Inc.
Windstream Corporation Lexcom, Inc.
Frontier Communications Corporation   Verizon Communications Inc. (access lines assets)
Windstream Corporation D&E Communications
CenturyLink, Inc.   Embarq Corporation
Consolidated Communications Holdings, Inc. North Pittsburgh Systems, Inc.
Windstream Corporation   CT Communications, Inc.
CenturyLink, Inc. Madison River Communications Corp.
Frontier Communications Corporation   Commonwealth Telephone Enterprises, Inc.

     For each of the selected transactions, Wells Fargo Securities reviewed and analyzed, among other things, transaction value, calculated as the equity value implied for the target company based on the consideration payable in the selected transaction at the announcement, plus debt, less cash, as a multiple of the target company’s latest 12 months adjusted EBITDA. Based on these analyses and utilizing its professional judgment and experience, Wells Fargo Securities then applied a selected range of latest 12 months adjusted EBITDA multiples of 6.0x to 8.0x derived from the selected transactions to SureWest’s latest 12 months adjusted EBITDA as of December 31, 2011. Financial data of the selected transactions were based on public filings and other publicly available information at the time of announcement of the relevant transaction. Financial data of SureWest were based on SureWest projections prepared by the management of SureWest as reviewed and approved for Wells Fargo Securities’

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use by the management of Consolidated, public filings and other publicly available information. This analysis indicated the following implied per share equity reference range for SureWest, as compared to the implied Merger Consideration value:

Implied Per Share Equity Reference Range for SureWest       Implied Merger Consideration
Based on:  
Calendar Year 2011 Adjusted EBITDA
$20.71 - $32.03 $23.00

     Discounted Cash Flow Analysis. Wells Fargo Securities conducted a discounted cash flow analysis for SureWest for the purpose of determining an implied fully diluted equity value per share for SureWest common stock as of December 31, 2011. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flows generated by assets and taking into consideration the time value of money with respect to those future cash flows by calculating their “present value.” “Present value” refers to the current value of one or more future unlevered free cash flows from the asset, which is referred to as that asset’s cash flows, and is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital, capitalized returns and other appropriate factors. “Terminal value” refers to the capitalized value of all cash flows from an asset for periods beyond the final forecast period. Wells Fargo Securities calculated the value of the unlevered free cash flows that SureWest is expected to generate for fiscal year 2012 through 2016 implied by the SureWest projections prepared by the management of SureWest as reviewed and approved for Wells Fargo Securities’ use by the management of Consolidated. The unlevered free cash flows and range of terminal values were then discounted to present value using a range of discount rates from 9.0% to 11.0%, which were chosen by Wells Fargo Securities based on its experience and professional judgment taking into account an analysis of the weighted average cost of capital of SureWest and comparable companies which Wells Fargo Securities deemed to be relevant to its analysis. Wells Fargo Securities also calculated a range of terminal values for SureWest at the end of the five-year period ending 2016 by applying a perpetual free cash flow growth rate ranging from 1.0% to 3.0% selected based on Wells Fargo Securities’ experience and professional judgment. As part of the total implied equity value calculated for SureWest, Wells Fargo Securities also calculated the present value, as of December 31, 2011, of the tax benefit from SureWest’s estimated net operating loss carry-forwards balance and estimated pre-tax synergies expected to result from the transaction, net of estimated integration costs to achieve such pre-tax synergies. In performing its analysis of the present value of the tax benefit and estimated pre-tax synergies, Wells Fargo Securities relied on the NOL projections, the synergies projections and the integration costs provided by the management of Consolidated.

     A summary of the implied valuation ranges of the SureWest common stock that Wells Fargo Securities derived from such analyses, as compared to the implied Merger Consideration, is set forth below:

Implied Per Share Equity Reference Range
for SureWest Based on:
 
SureWest Projections       SureWest Projections       SureWest Projections       Implied Merger
  (including present value of (including present value of Consideration
estimated tax benefit)   estimated tax benefit and
pre-tax synergies)
$14.00 - $22.00 $15.29 - $23.35 $23.83 - $34.09 $23.00

Other Considerations

     Wells Fargo Securities prepared the analyses described above for purposes of providing its opinion to the board of directors of Consolidated as to the fairness, from a financial point of view, as of February 5, 2012, to Consolidated of the Merger Consideration to be paid pursuant to the Merger Agreement. The type and amount of consideration payable in the First Merger were determined through negotiations among the board of directors and management of each of Consolidated and SureWest and their respective financial advisors. Wells Fargo Securities did not recommend any specific consideration to the board of directors of Consolidated or state that any given consideration constituted the only appropriate consideration for the Mergers. The decision to enter into the Merger Agreement was solely that of the board of directors of Consolidated. As described above, Wells Fargo Securities’ opinion and analyses were only one of many factors taken into consideration by the board of directors of

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Consolidated in evaluating the Mergers. Wells Fargo Securities’ analyses summarized above should not be viewed as determinative of the views of the board of directors or management of Consolidated with respect to the Mergers or the consideration to be received in the First Merger.

Miscellaneous

     Wells Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities, LLC. Pursuant to an engagement letter between Consolidated and Wells Fargo Securities, Consolidated agreed to pay Wells Fargo Securities an aggregate fee of $5.0 million, a portion of which was payable upon delivery of its opinion and a significant portion of which will be payable upon consummation of the Mergers. Consolidated has also agreed to reimburse certain of Wells Fargo Securities’ expenses and indemnify it against certain liabilities that may arise out of its engagement. In addition, Wells Fargo Securities has acted as sole lead arranger and bookrunner for Consolidated’s amendment and restatement of its existing credit facilities in connection with the contemplated financing for the Mergers, and Wells Fargo Securities has received customary fees in connection therewith.

     Wells Fargo Securities and its affiliates provide a full range of financial advisory, securities and lending services in the ordinary course of business, for which Wells Fargo Securities and such affiliates receive customary fees. In that regard, Wells Fargo Securities or its affiliates in the past have provided, currently are providing, and in the future may provide, financial services to Consolidated and its affiliates and SureWest and its affiliates, respectively, for which Wells Fargo Securities and such affiliates have received and expect to receive fees, including having acted as or currently acting as a lender and administrative agent under the existing senior secured credit facilities of Consolidated, as the sole lead arranger in connection with the 2011 amendment and extension of such credit facilities, and as a counterparty to certain derivative transactions with Consolidated. In the ordinary course of business, Wells Fargo Securities and its affiliates may actively trade or hold the securities or financial instruments of Consolidated and SureWest for Wells Fargo Securities’ and its affiliates’ own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities or financial instruments.

Board of Directors of Consolidated after Completion of the Mergers

     Consolidated’s amended and restated certificate of incorporation provides for the classification of Consolidated’s board of directors into three classes of directors, designated Class I, Class II and Class III, as nearly equal in size as is practicable, serving staggered three-year terms. One class of directors is elected each year to hold office for a three-year term or until successors of such directors are duly elected and qualified. The current size of Consolidated’s board of directors is four directors, comprised of one Class I director, one Class II director and two Class III directors. Class II consisted of two directors until the February 29, 2012 death of Jack W. Blumenstein, an independent director of Consolidated, the Chairperson of Consolidated’s Audit Committee and a member of Consolidated’s Corporate Governance Committee and Compensation Committee. For more information regarding Consolidated’s directors, see “Consolidated Proposal No. 2: Election of Richard A. Lumpkin as Director”.

     Pursuant to the Merger Agreement, SureWest is entitled to select, and Consolidated has agreed to take all such action as may be reasonably necessary to cause, one individual from among the current members of the board of directors of SureWest to be elected to Consolidated’s board of directors as of the effective time of the Mergers. Prior to completion of the Mergers, SureWest will designate such director. For further information on SureWest’s directors, see SureWest’s Form 10-K for the year ended December 31, 2011. As a result, after completion of the Mergers, assuming Consolidated’s stockholders elect the nominee to the board described under “Consolidated Proposal No. 2: Election of Richard A. Lumpkin as Director”, Consolidated expects that the board of directors of Consolidated would consist of Roger H. Moore (Class II Director — term expiring in 2013), Robert J. Currey (Class III Director — term expiring in 2014), Maribeth S. Rahe (Class III Director — term expiring in 2014), Richard A. Lumpkin (Class I Director — term expiring in 2015) and an individual to be designated by SureWest (Class I Director — term expiring in 2015).

     On March 1, 2012, Consolidated notified The NASDAQ Stock Market LLC (“NASDAQ”) of Mr. Blumenstein’s death. As a result of Mr. Blumenstein’s death, Consolidated’s board of directors is no longer comprised of a majority of independent directors and Consolidated’s Audit Committee is no longer comprised of at least three independent directors, as required for continued listing by NASDAQ Listing Rules 5605(b)(1) and 5605(c)(2)(A),

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respectively. On March 5, 2012, Consolidated received a deficiency letter from NASDAQ acknowledging the failure of Consolidated to continue to satisfy the aforementioned NASDAQ Listing Rules. In accordance with NASDAQ Listing Rules 5605(b)(1)(A) and 5605(c)(4)(A) and the NASDAQ deficiency letter, and given the date of the Consolidated annual meeting, Consolidated has until August 28, 2012 to regain compliance with NASDAQ Listing Rules.

     Prior to the expiration of the applicable cure period, Consolidated’s board intends to add to the board either (i) the individual to be designated by SureWest or (ii) another new director, or both. The director or directors so appointed would not only satisfy the independence requirements of the NASDAQ Listing Rules, but would have no material connection to Consolidated (that is, no material financial, personal, business, or other relationship that a reasonable person could conclude could potentially influence boardroom objectivity) prior to being appointed to Consolidated’s board of directors. Consolidated’s board would increase the size of the board as necessary to accommodate the addition or additions to the board.

Interests of SureWest Directors and Executive Officers in the Mergers

     In considering the recommendation of the SureWest board of directors with respect to the Mergers, SureWest shareholders should be aware that certain executive officers and directors of SureWest have interests in the Mergers that may be different from, or in addition to, the interests of SureWest shareholders generally. The SureWest board of directors was aware of the interests described below and considered them, among other matters, when approving the Merger Agreement and recommending that SureWest shareholders vote to approve the Merger Agreement.

     Each of SureWest’s executive officers and non-employee directors holds equity awards. Pursuant to the terms of the applicable SureWest equity plan and agreements, and subject to the terms of the Merger Agreement, all such equity awards held by SureWest’s executive officers and non-employee directors will become fully vested on the date of the closing of the First Merger and will be cancelled in exchange for the right to receive an amount in cash (without interest) determined (A) with respect to stock options by multiplying (a) the excess (if any) of the cash Merger Consideration of $23.00 per share over the applicable exercise price per share of the option by (b) the number of shares subject to the option and (B) with respect to restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) by multiplying (b) the cash Merger Consideration of $23.00 per share by (b) the number of shares subject to such RSU or RSA, as applicable. In general, such awards will be treated the same as equity awards held by all other SureWest’s employees, as described in the section titled “The Mergers—Treatment of SureWest Equity Awards”. In addition, each of SureWest’s executive officers has an agreement with SureWest that provides for severance benefits, in the form of cash, health benefits, outplacement assistance and accelerated vesting of equity, if the executive’s employment is terminated in connection with this transaction under the circumstances described below.

Change of Control Severance Agreements with Executive Officers

     In February 2011, SureWest entered into new Change in Control Severance Agreements (the “Severance Agreements”) with Steven C. Oldham, SureWest’s president and chief executive officer, and certain employees, including its named executive officers (as set forth below). These Severance Agreements essentially renewed expiring Change in Control Severance Agreements, with certain modifications, including the elimination of Mr. Oldham’s former Internal Revenue Service Code (the “Code”) Section 280G excise tax gross-up benefit. Under the terms of these Severance Agreements, certain benefits are provided in the event of termination of employment, or a termination or resignation for good reason within one year following a change in control (“Qualifying Termination”) and upon signing a complete release of claims and liability in favor of SureWest, except for such claims as may not be legally released.

     A change in control is generally defined in the Severance Agreements as (i) the acquisition by any person (as defined in the Severance Agreements) of 50% or more of SureWest’s outstanding securities, (ii) replacement of a majority of the SureWest board by members not approved or recommended for nomination to the SureWest board by a majority of incumbent directors, (iii) a merger or consolidation, except in cases where SureWest’s shareholders prior to the change in control continue to own a majority of the new company, or (iv) consummation of a plan of complete liquidation of SureWest or sale of all or substantially all of SureWest’s assets unless the sale is to a company or entity that is owned by a majority of SureWest’s shareholders prior to such liquidation or sale.

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     A resignation or termination with good reason following a change in control is generally defined in the Severance Agreements as (i) a material reduction in authority, duties and responsibilities, (ii) material reduction in compensation, (iii) refusal of a successor corporation or entity to assume the obligations of the Severance Agreements, or (iv) a greater than 50 mile relocation of principal place of work. SureWest has the right to cure any good reason event for a period of 30 days after receiving proper notice of a good reason event.

     Payments due on a Qualifying Termination include (i) two times base salary (three times for Mr. Oldham), (ii) two times target annual incentive compensation (three times for Mr. Oldham), (iii) full vesting of outstanding unvested equity awards on the date of the Qualifying Termination, (iv) up to two years of continued medical, dental and accidental death and disability coverage (up to three years for Mr. Oldham), unless replacement coverage is obtained with a new employer, and (v) reasonable outplacement services for up to 12 months following the termination date.

     All Severance Agreements, except for Mr. Oldham’s, provide that if the total payments and benefits due or payable under the Severance Agreements would constitute an “excess parachute payment” within the meaning of Code Section 280G and regulations enacted thereunder, then any payments or benefits that would otherwise be due under the Severance Agreements’ formula shall be reduced to the maximum amount permitted under the Code, without incurring an “excess parachute payment” (a “Section 280G Cutback”). Mr. Oldham’s Severance Agreement provides that his payments and benefits will be cut back to the maximum amount permitted under the Code without incurring an “excess parachute payment”, if either the present value of his parachute payments before any reduction is less than 110% of his parachute threshold or if such reduction would be more economically advantageous to him. Finally, in the event an ”excess parachute payment” is made, Mr. Oldham would be responsible for paying all taxes due as a consequence of or arising out of such payment, including any excise taxes.

     All Severance Agreements terminate on the earlier of (i) February 7, 2014, unless a change in control event has occurred prior to such time, in which event the Severance Agreements shall continue until the earlier of termination of the change in control event, or one year after consummation of the change in control event; (ii) upon termination of employment if such termination is not a Qualifying Termination, or (iii) when SureWest has satisfied all of its obligations under the Severance Agreements.

Golden Parachute Compensation

     The following table sets forth the value of the benefits under the change of control severance agreements described above that would be received by each named executive officer who has a change of control severance agreement, assuming the Mergers close and the executive’s employment is terminated on April 20 , 2012. Fred A. Arcuri was considered a named executive officer for the year ended December 31, 2011, but retired from SureWest effective April 15, 2011, and consequently is not included in the tables below.

Pension/ Perquisites/ Tax
Cash Equity NQDC Benefits Reimbursement Other Total
Name        ($)(1)        ($)(7)        ($)        ($)(10)        ($)        ($)        ($)(11)
Steven C. Oldham 3,000,000 (2) 4,991,000 (8)   60,284 8,051,284
Dan T. Bessey   701,775 (3) 1,064,072 (9) 52,496     1,818,343
L. Scott Sommers 668,000 (4)   1,004,456 (9) 52,400 1,724,856
Scott K. Barber 803,824 (5) 1,182,706 (9)   59,696   2,046,226
Edwin B. Butler 660,000 (6) 805,874 (9) 52,640 1,518,514
____________________
 
(1)       The payments set forth in this column would be received in a lump sum upon the executive’s “double-trigger” termination without cause or resignation for good reason that occurs during the period beginning on the date the board approved the Mergers and ending twelve months following the closing of the Mergers. These payments are equal to (a) two times (three times for Mr. Oldham) the executive officer’s annual base salary in effect as of April 20, 2012 plus (b) two times (three times for Mr. Oldham) the most recently established annual incentive target cash award as of April 20, 2012. In addition, all of the named executive officers except for Mr. Oldham have Section 280G Cutback provisions in their Severance Agreements, which would first reduce their cash severance payments. Such cutbacks, to the extent applicable, are reflected in this column.

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(2)       Represents three times Mr. Oldham’s annual base salary of $500,000 plus three times the most recently established annual incentive target cash award of $500,000.
 
(3)   Represents two times Mr. Bessey’s annual base salary of $250,000 plus two times the most recently established annual incentive target cash award of $125,000, less $48,225 pursuant to the Section 280G Cutback provision.
 
(4)   Represents two times Mr. Sommer’s annual base salary of $230,000 plus two times the most recently established annual incentive target cash award of $104,000.
 
(5)   Represents two times Mr. Barber’s annual base salary of $300,000 plus two times the most recently established annual incentive target cash award of $150,000, less $96,176 pursuant to the Section 280G Cutback provision.
 
(6)   Represents two times Mr. Butler’s annual base salary of $180,000 plus two times the most recently established annual incentive target cash award of $150,000.
 
(7)   The payments set forth in this column would be received upon the closing of the First Merger pursuant to the terms of the Merger Agreement (i.e., they are “single-trigger” benefits). The value of the portion of outstanding stock options, RSUs and RSAs, that would receive accelerated vesting as of a closing date of April 20, 2012 is based on a per share value of the cash Merger Consideration of $23.00. All stock options held by the named executive officers would be underwater (i.e., have an exercise price higher than the per share cash consideration) and thus, the following underwater stock options (vested and unvested) would be cancelled at the effective time of the First Merger for no consideration:

                 Name       Number of Shares Subject to Underwater Stock Options
  Dan T. Bessey   1,000
Scott K. Barber 1,500

(8)       Represents the value of accelerated vesting of approximately 186,641 restricted stock units and the value of 30,359 restricted stock awards held by Mr. Oldham.
 
(9) Represents the value of accelerated RSAs held by Mr. Bessey, Mr. Sommers, Mr. Barber and Mr. Butler, respectively.
 
(10) The benefits set forth in this column would be received upon the executive’s “double-trigger” termination without cause or resignation for good reason that occurs during the period beginning on the date the board approved the Mergers and ending twelve months following the closing of the Mergers. The value of these benefits is equal to (a) the estimated continuation of health benefits for the executive officer and his dependents for two years (or three years for Mr. Oldham) plus (b) $20,000 attributable to the value of outplacement services for up to twelve months, following April 20, 2012.
 
(11) The payments and benefits that the executives’ are entitled to receive pursuant to their Severance Agreements is subject to their execution a release of claims, return of all Company property and agreement not to directly solicit any current employee of SureWest to leave the employ of SureWest for one year following the date of their termination of employment, not to disclose any proprietary information and not to disparage SureWest or its shareholders unless required by law or court order.

Payment for Outstanding Equity Awards for Executive Officers and Directors; Other Equity Holdings

     Executive Officers’ Equity Holdings . Each of SureWest’s executive officers holds equity awards in the form of stock options, RSUs and/or RSAs. As with equity awards held by all other employees, under the terms of the SureWest’s applicable equity plan, the stock option, RSU and/or RSA agreements with the executive officers and the Merger Agreement, all stock options, RSUs and RSAs held by the executive officers will become fully vested on the date of the closing of the First Merger. Pursuant to the Merger Agreement, each share subject to all such

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equity awards will be cancelled in exchange for the right to receive an amount in cash, without interest, determined (A) with respect to stock options by multiplying (x) the excess (if any) of the cash Merger Consideration of $23.00 per share over the applicable exercise price per share of the option by (y) the number of shares subject to the option and (B) with respect to RSUs and RSAs by multiplying (x) the cash Merger Consideration of $23.00 per share by (y) the number of shares subject to such RSU or RSA, as applicable. Stock options with an exercise price higher than the per share cash consideration will be cancelled at the time effective time of the First Merger for no consideration. The following table sets forth the intrinsic value of the acceleration of unvested stock options, RSUs and/or RSAs held by SureWest’s executive officers, as well as the intrinsic value of any vested stock options and other shares held by such executive.

Value of Value of Value of
Accelerated Accelerated Accelerated
Vesting of Vesting of Vesting of Value of Value of
Unvested Stock Unvested Unvested Vested Stock Other Shares
      Options       RSUs       RSAs       Options       Owned       Total Value
Name $ (1)(2) $ (1)(3) $ (1)(3) $ (1)(2) $ (1)   $
Steven C. Oldham 4,292,743   698,257 4,431,295 (4) 9,422,295
Dan T. Bessey   1,064,072 598,989 (5) 1,663,061
L. Scott Sommers   1,004,456   833,865 (6) 1,838,321
Scott K. Barber 1,182,706   557,336 (7) 1,740,042
Edwin B. Butler 805,874 169,855 (8) 975,729
____________________
 
(1)       Based on a per share value of the cash Merger Consideration of $23.00.
 
(2)   As described above, all options held by the named executive officers would be underwater stock options and thus, will be cancelled at the effective time of the Merger for no consideration.
 
(3)   The amounts reflected in the value of the accelerated vesting of unvested RSUs and RSAs are the same values disclosed under the “Equity” column of the Golden Parachute Compensation table above.
 
(4)   Represents the value of 192,665 shares held by Mr. Oldham.
 
(5)   Represents the value of 26,043 shares held by Mr. Bessey.
 
(6)   Represents the value of 36,255 shares held by Mr. Sommers.
 
(7)   Represents the value of 24,232 shares held by Mr. Barber.
 
(8)   Represents the value of 7,385 shares held by Mr. Butler.

     Non-Employee Director Equity Holdings . Under the terms of SureWest’s applicable equity plan and the stock option, RSU and RSA agreements with directors and the Merger Agreement, each share subject to all stock options held by non-employee directors will become fully vested on the date of the closing of the First Merger. Pursuant to the Merger Agreement, each share subject to all such equity awards will be cancelled in exchange for $23.00 in cash, without interest. Stock options with an exercise price higher than the per share cash consideration will be cancelled at the time effective time of the First Merger for no consideration. The following table sets forth the intrinsic value of the acceleration of this unvested stock options, RSUs and/RSAs held by SureWest’s non-employee directors, as well as the intrinsic value of any vested stock options, RSUs and/or RSAs and other shares held by such director.

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Value of Value of Value of
Accelerated Accelerated Accelerated
Vesting of Vesting of Vesting of Value of Value of
Unvested Stock Unvested Unvested Vested Stock    Other Shares
      Options       RSUs       RSAs       Options       Owned       Total Value
Name $ (1) $ (1) $ (1) $ (1) $ (1) $
Kirk C. Doyle     4,574,539 (2) 4,574,539
Guy R. Gibson 1,519,219 (3)   1,519,219
Robert D. Kittredge       784,691 (4) 784,691
John R. Roberts III 864,593 (5) 864,593
Timothy D. Taron 834,003 (6) 834,003
Roger J. Valine 1,230,592 (7) 1,230,592
____________________
 
(1)       Based on a per share value of the cash Merger Consideration of $23.00. Underwater stock options will be cancelled at the effective time of the First Merger for no consideration. All options held by the directors would be underwater stock options. These individuals would have the following underwater stock options (vested and unvested) that would be cancelled for no payment:
 
                 Name       Number of Shares Subject to Underwater Stock Options
  John R. Roberts III   2,500
Timothy D. Taron 2,500
____________________
 
(2)       Represents the value of 198,893 shares held by Mr. Doyle.
 
(3)    Represents the value of 66,053 shares held by Mr. Gibson.
     
(4)   Represents the value of 34,117 shares held by Mr. Kittredge.
 
(5)   Represents the value of 37,591 shares held by Mr. Roberts.
 
(6)   Represents the value of 36,261 shares held by Mr. Taron.
 
(7)   Represents the value of 53,504 shares held by Mr. Valine.

Indemnification; Directors’ and Officers’ Insurance

     The Merger Agreement provides that from and after the effective time of the Mergers and to the fullest extent permitted by law or provided under SureWest’s certificate of incorporation or bylaws, the surviving corporation will indemnify, and pay or advance expenses of the current or former officers, directors and certain other individuals of SureWest with respect to acts or omissions occurring at or prior to the effective time, provided that any person to whom expenses are advanced will provide an undertaking to repay any advances made if a court determines the person was not entitled to indemnification and for a period of six years after the effective time of the Mergers shall keep in full force and effect and comply with the terms and conditions of any agreement between SureWest and its current or former officers, directors and certain other individuals providing for indemnification of and advancement of expenses. The Merger Agreement further provides that, prior to the effective time of the Mergers, SureWest shall purchase a six-year “tail” officers’ and directors’ liability insurance policy on terms and conditions no less favorable in the aggregate than SureWest’s existing directors’ and officers’ liability insurance. The surviving corporation will pay all expenses, including reasonable fees and expenses of counsel, that an indemnified person may incur in enforcing the indemnity and other obligations described above, and the Merger Agreement provides that the foregoing rights of each indemnified person will survive the effective time of the Mergers and are enforceable by each indemnified person.

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Effect of the Mergers

     Subject to the terms and conditions of the Merger Agreement and in accordance with California law, at the effective time of the First Merger, Merger Sub I will merge with and into SureWest. SureWest will be the surviving corporation in the First Merger and will become a wholly-owned subsidiary of Consolidated. Subject to the terms and conditions of the Merger Agreement and in accordance with California law, at the effective time of the Second Merger (which shall be within one business day of the effective time of the First Merger), Merger Sub II will merge with and into SureWest. Merger Sub II will be the surviving corporation in the Second Merger and will remain a wholly-owned subsidiary of Consolidated.

Merger Consideration

     At the effective time of the First Merger, each issued and outstanding share of SureWest common stock (other than shares held in SureWest’s treasury or owned by any SureWest subsidiary, Consolidated, Merger Sub I or Merger Sub II) will be converted into the right to receive, at the holder’s election, either (i) $23.00 in cash, without interest (the “cash consideration”), or (ii) shares of Consolidated common stock (the “stock consideration”) having an equivalent value based on average trading prices for the 20 consecutive trading days ending two trading days before the closing date of the First Merger, subject to a collar so that there will be a maximum exchange ratio of 1.40565 shares of Consolidated common stock for each share of SureWest common stock and a minimum of 1.03896 shares of Consolidated common stock for each share of SureWest common stock. Overall elections are subject to proration so that 50% of the SureWest shares (treating equity award shares as outstanding) will be exchanged for cash and 50% for stock. All holders of SureWest equity award shares will be paid in cash and shall not be subject to the proration described above. Because equity award shares reduce the number of outstanding SureWest shares that will convert to cash, it is expected that approximately 46% convert intog SureWest shares (exclusive of equity award shares) will convert into the right to receive cash, and 54% will convert into the right to receive stock. See “— SureWest Shareholders Making Cash and Stock Elections” and “– Treatment of SureWest Equity Awards”. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances, as further described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections — General Consideration Adjustment” on page 81 .

     In this joint proxy statement/prospectus, when the term “Merger Consideration” is used with respect to a given share of SureWest common stock, it means either the cash consideration (with respect to a share of SureWest common stock representing the right to receive the cash consideration) or the stock consideration (with respect to a share of SureWest common stock representing the right to receive the stock consideration).

     The Merger Agreement provides that the stock consideration will be appropriately adjusted if, during the period between February 5, 2012 and the effective time of the First Merger, Consolidated splits, combines into a smaller number of shares, or issues by reclassification any shares of Consolidated common stock. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances. See “— General Consideration Adjustment”.

     The rights pertaining to Consolidated common stock will be different from the rights pertaining to SureWest common stock, because the certificate of incorporation and bylaws of Consolidated in effect immediately after the Mergers are completed will be different from the articles of incorporation and bylaws of SureWest and because Consolidated is a Delaware corporation and SureWest is a California corporation. For a description of the rights pertaining to Consolidated common stock and Consolidated’s certificate of incorporation and bylaws, see “Description of Consolidated Capital Stock” and “Comparison of Rights of Common Shareholders of SureWest and Common Stockholders of Consolidated.”

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Treatment of SureWest Equity Awards

     At the effective time of the First Merger, each option to purchase shares of SureWest common stock, to the extent it is outstanding and unexercised (“SureWest Options”), shall become fully vested and be automatically cancelled and cease to exist. Since all SureWest Options would be underwater (i.e., have an exercise price higher than the per share cash consideration), they would be cancelled at the effective time of the Merger for no consideration.

     At the effective time of the First Merger, each restricted stock unit granted under any SureWest stock plan (each a “SureWest RSU”) that is outstanding shall become fully vested and automatically cancelled and cease to exist (to the extent such SureWest RSU is not subject to Section 409A of the Internal Revenue Code). The holder of a SureWest RSU will receive, as soon as reasonably practicable following the effective time of the First Merger, a cash payment (without interest) equal to the product of (i) the aggregate number of shares of SureWest common stock subject to such SureWest RSU and (ii) the cash consideration. Each SureWest RSU that is subject to Section 409A of the Internal Revenue Code will be settled in cash pursuant to the timing terms of the applicable award agreement, and, therefore, the holder thereof will receive the consideration for such SureWest RSU at the time prescribed by the applicable award agreement. The consideration paid to all holders of SureWest RSUs will in all cases be paid in cash and shall not be subject to the proration described below under “ – SureWest Shareholders Making Cash and Stock Elections – Proration Procedures.”

     At the effective time of the First Merger, each restricted stock award granted under any SureWest stock plan (each a “SureWest RSA”) which is outstanding and unvested shall become fully vested be automatically cancelled and cease to exist. The holder of a SureWest RSA will receive, as soon as reasonably practicable following the effective time of the First Merger, a cash payment (without interest) with respect thereto equal to the product of (i) the aggregate number of shares of SureWest common stock represented by such SureWest RSA and (ii) the cash consideration. The consideration paid to all holders of SureWest RSAs will in all cases be paid in cash and shall not be subject to the proration described below under “ – SureWest Shareholders Making Cash and Stock Elections – Proration Procedures.”

Ownership of Consolidated Following the Mergers

     Based on the closing sale price for Consolidated’s shares on April 23, 2012, the latest practicable date before the printing of this joint proxy statement/prospectus, stockholders of Consolidated would hold approximately 76.7% in the aggregate, and shareholders of SureWest would hold approximately 23.3% in the aggregate, of the issued and outstanding shares of Consolidated common stock if the First Merger were to occur on such date, in each case as determined on a fully–diluted basis.

SureWest Shareholders Making Cash and Stock Elections

     SureWest shareholders of record on the record date will receive separately from this joint proxy statement/prospectus a form of election for purposes of making cash elections and stock elections. Any SureWest shareholder who became a SureWest shareholder after the record date for the special meeting, or who did not otherwise receive a form of election, should contact the Information Agent, Okapi Partners, or his, her or its broker, bank or other nominee to obtain a form of election. SureWest shareholders who vote against, or abstain or fail to vote with respect to, the approval of the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, are still entitled to make elections with respect to their shares.

     The form of election permits each person who, at or prior to the election deadline, is a record holder (or, in the case of nominee record holders, the beneficial owner, through proper instructions and documentation to the nominee record holder) of SureWest common stock to specify (i) the number of such holder’s shares of SureWest common stock with respect to which such holder makes a cash election and/or (ii) the number of such holder’s shares of SureWest common stock with respect to which such holder makes a stock election. A shareholder who submits a form of election is not required to elect the same form of Merger Consideration for all of his or her shares. The form of election allows an election to be made for cash consideration for a portion of the holder’s shares and stock consideration for the remaining portion of the holder’s shares.

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     If the Mergers are completed, shareholders who fail to submit properly completed elections at or prior to the election deadline will still be entitled to receive the Merger Consideration for each of their SureWest shares. See “— Conversion of Shares; Exchange Procedures; Fractional Shares”. However, any shares as to which the holder has not properly made an election at or prior to the election deadline will be treated as described below under “— Non-Electing Holders”.

     Exchange Agent. Computershare Trust Company, N.A. will serve as the exchange agent for purposes of receiving election forms, determining in accordance with the Merger Agreement the Merger Consideration to be received by each holder of shares of SureWest common stock, and exchanging the applicable Merger Consideration for certificates formerly representing shares of SureWest stock if the Mergers are completed.

     Election Deadline. The election deadline will be 5:00 p.m., Eastern time, on the date that is two business days immediately prior to the closing date of the First Merger (or such other date as Consolidated and SureWest mutually agree). Consolidated and SureWest will publicly announce the anticipated election deadline at least five business days prior to the anticipated closing date of the First Merger.

     Form of Election. The form of election must be properly completed and signed and accompanied by:

  • certificates representing all of the SureWest shares covered by the form of election, in a form acceptable for transfer on SureWest’s books; or
     
  • an appropriate guarantee of delivery of such certificates as set forth in the form of election from a firm that is an “eligible guarantor institution” (as defined in Rule 17Ad-15 under the Exchange Act); provided, that such certificates are in fact delivered to the exchange agent by the time set forth in such guarantee of delivery.

     In order to make a cash election or a stock election, the properly completed and signed form of election, together with one of the items described above, must be actually received by the exchange agent at or prior to the election deadline in accordance with the instructions accompanying the form of election. You bear the risk of delivery of all the materials that you are required to submit to the exchange agent in order to properly make an election.

     If your SureWest shares are held in “street name” through a bank, broker or other nominee and you wish to make an election, you should contact your bank, broker or other nominee and follow the instructions provided by it.

     If it is determined that any purported cash election or stock election was not properly made, the purported election will be deemed to be of no force or effect and the holder making the purported election will be deemed not to have made an election for these purposes, unless an election is subsequently properly made on a timely basis.

     Inability to Transfer SureWest Shares After an Election is Made. Once a cash election or a stock election is properly made with respect to any share of SureWest common stock, the electing shareholder will not be able to sell or otherwise transfer that share, unless the election is properly revoked or the Merger Agreement is terminated.

     Election Revocation and Changes . Generally, an election may be revoked with respect to all or any portion of the SureWest shares covered by the election by the holder who submitted the applicable form of election, but only in whole share amounts by written notice of revocation received by the exchange agent at or prior to the election deadline. If an election is revoked, or the Merger Agreement is terminated, and any stock certificates have been transmitted to the exchange agent, the exchange agent will promptly return those certificates to the shareholders who submitted them (except, in the case of a revocation, to the extent (if any) a subsequent cash election and/or stock election is properly made with respect to any or all of the shares of SureWest common stock represented by such certificates). SureWest shareholders will not be entitled to revoke or change their elections following the election deadline. As a result, during the interval between the election deadline and the effective time of the First Merger, SureWest shareholders who have properly made elections will not be able to revoke their elections or sell the SureWest shares covered by their elections.

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     Non-Electing Holders. SureWest shareholders who make no election to receive cash consideration or stock consideration in the First Merger, whose elections are not received by the exchange agent by the election deadline, or whose forms of election are not properly completed (subject to the exchange agent’s discretion to disregard immaterial defects) or are not signed will be deemed not to have made an election. Non-electing holders will have no control over the type of consideration they receive in the First Merger in exchange for their SureWest shares. Accordingly, these shareholders may receive cash consideration for all of their SureWest shares, stock consideration for all of their SureWest shares, or cash consideration for some of their SureWest shares and stock consideration for some of their SureWest shares, depending on elections that have been made by other SureWest shareholders. See “— Proration Procedures” below.

     Proration Procedures. SureWest shareholders should be aware that the cash elections and/or stock elections they make may be subject to the proration procedures contained in the Merger Agreement. Regardless of the cash or stock elections made by SureWest shareholders, these procedures are designed to ensure, subject to the limitation described below, that:

  • 50% of the SureWest shares outstanding immediately prior to the effective time of the First Merger (treating equity award shares as outstanding) will be converted into the right to receive the cash consideration per share, namely, $23.00, without interest; and
  • 50% of the SureWest shares outstanding immediately prior to the effective time of the First Merger will be converted into the right to receive the stock consideration per share, namely, a value based on average trading prices for the 20-day period ending two days before the closing date of the First Merger, subject to a collar so that there will be a maximum exchange ratio of 1.40565 shares of Consolidated common stock for each share of SureWest common stock and a minimum of 1.03896 shares of Consolidated common stock for each share of SureWest common stock (including cash in lieu of any fractional share, as described below under “— Conversion of Shares; Exchange Procedures; Fractional Shares”). While overall elections are subject to proration, all holders of SureWest equity award shares will be paid in cash and shall not be subject to proration. Because equity award shares reduce the number of outstanding SureWest shares that will convert to cash, it is expected that approximately 46% of outstanding SureWest shares (exclusive of equity award shares) will convert into the right to receive cash, and 54% will convert into the right to receive stock.

     Any shares of SureWest common stock held in SureWest’s treasury or owned by any SureWest subsidiary, Consolidated, Merger Sub I or Merger Sub II will be canceled in the Mergers and will not be subject to or affect these proration calculations.

     As previously described, the Merger Agreement provides that holders of employee stock options, restricted shares and restricted stock units will receive cash on a net settlement basis. For purposes of effecting the proration described below and in the description of the scenarios that illustrate possible effects of proration, the aggregate amount of cash to be paid in settlement of those rights will be converted into “equity award share equivalents” by dividing the aggregate amount of cash to be paid by $23.00, with the result expressed as a number of shares. That number of shares will be (1) added to the number of shares actually outstanding for purposes of proration and (2) treated as shares that have elected to receive cash and will do so. Accordingly, the number of shares actually outstanding that will receive cash will be reduced by the number of equity award share equivalents.

     For illustrative purposes, set forth below is a description of the proration procedures, and the effects on SureWest’s shareholders, including those who fail to properly make a cash or stock election, under certain alternative scenarios. As a result of these procedures, even if you properly make a cash election for all of your SureWest shares, if more than 50% of the outstanding SureWest shares are subject to cash elections (treating equity award shares as outstanding, and as electing and receiving cash), you will receive Consolidated common stock in the First Merger in exchange for some of your SureWest shares. Even if you properly make a stock election for all of your SureWest shares, if less than 50% of the outstanding SureWest shares are subject to cash elections (treating equity awards as outstanding, and as electing and receiving cash), you will receive cash in the First Merger in exchange for some of your SureWest shares. In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances, as further described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections — General Consideration Adjustment.”

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Scenario 1: If Cash Elections are Oversubscribed — More than 50% of SureWest Shares Elect to Receive Cash Consideration

     SureWest Shares Subject to Cash Elections. Each SureWest shareholder who properly elected to receive cash consideration will, due to proration, receive cash consideration for only a pro rata portion of the SureWest shares for which he or she properly made a cash election. The SureWest shareholder will receive stock consideration in the form of shares of Consolidated common stock (and cash in lieu of any fractional share) for his or her remaining SureWest shares.

     The precise number of SureWest shares for which a SureWest shareholder will receive cash consideration will be determined by multiplying the number of SureWest shares for which the shareholder properly made a cash election by a fraction with (i) a numerator equal to 50% of the sum of (a) the number of SureWest shares issued and outstanding immediately prior to the effective time of the First Merger and (b) the number of SureWest equity award shares immediately prior to the effective time of the First Merger, and (ii) a denominator equal to the number of SureWest shares for which cash elections are properly made by all SureWest shareholders, including equity award shares (the result of such calculation being the “Cash Conversion Number”). The total shares for which cash elections are properly made plus total equity award shares are referred to as the “Cash Election Number.”

EXAMPLE. Assume for illustrative purposes that 1,000,000 SureWest shares (including equity award shares) are outstanding at the effective time of the First Merger and SureWest shareholders properly make cash elections with respect to 900,000 SureWest shares (treating equity award shares as cash election shares). If you own 100 SureWest shares and have properly made a cash election for all of those shares, you would receive cash consideration for 55.56 of your SureWest shares [100 × ((50% × 1,000,000)/900,000)] and stock consideration (including cash in lieu of any fractional share) for your remaining 44.44 SureWest shares.

     SureWest Shares Subject to Stock Elections. Each SureWest shareholder who properly elected to receive stock consideration will receive stock consideration in the form of shares of Consolidated common stock for all of the SureWest shares for which he or she properly made a stock election (including cash in lieu of any fractional share).

     SureWest Shares Subject to No Election. Each SureWest shareholder who failed to properly make an election will receive stock consideration in the form of shares of Consolidated common stock for all of the SureWest shares for which he or she made no election (including cash in lieu of any fractional share).

Scenario 2: If Cash Elections are Undersubscribed — Less than 50% of SureWest Shares Elect to Receive Cash Consideration

     SureWest Shares Subject to Cash Elections . Each SureWest shareholder who properly elected to receive cash consideration will receive cash consideration for all of the SureWest shares for which he or she properly made a cash election.

     SureWest Shares Subject to Stock Elections . Each SureWest shareholder who properly elected to receive stock consideration will, due to proration, receive cash consideration for a pro rata portion of the SureWest shares for which he or she properly made a stock election. The shareholder will receive stock consideration in the form of shares of Consolidated common stock for his or her remaining SureWest shares (including cash in lieu of any fractional share).

     The precise number of SureWest shares for which a SureWest shareholder will receive cash consideration will depend on whether the amount by which the Cash Election Number is less the Cash Conversion Number (such difference being the “Shortfall Number”) is less than or equal to, or more than, the number of shares with respect to which no election is made (the “Non-Electing SureWest Shares”).

     If the Shortfall Number is less than or equal to the Non-Electing SureWest Shares, then (i) each SureWest shareholder will receive stock consideration in the form of shares of Consolidated common stock for all of the SureWest shares for which the shareholder properly made a stock election (including cash in lieu of any fractional share), and (ii) the precise number of Non-Electing SureWest Shares for which a SureWest shareholder will

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receive cash consideration will be determined by multiplying the number of Non-Electing Company Shares of such shareholder by a fraction with a numerator equal to the Shortfall Number and a denominator equal to the total number of Non-Electing SureWest Shares, and the shareholder will receive stock consideration in the form of shares of Consolidated common stock for his or her remaining SureWest shares (including cash in lieu of any fractional share).

     If the Shortfall Number exceeds the Non-Electing SureWest Shares, then (i) holders of Non-Electing SureWest Shares will receive cash consideration for all of such holder’s SureWest shares, and (ii) the precise number of SureWest shares for which a SureWest shareholder will receive cash consideration will be determined by multiplying the number of SureWest shares for which the shareholder properly made a stock election by a fraction with a numerator equal to difference between the Shortfall Number and the Non-Electing SureWest Shares and a denominator equal to the number of SureWest shares for which stock elections are properly made by all SureWest shareholders, and the shareholder will receive stock consideration in the form of shares of Consolidated common stock for his or her remaining SureWest shares (including cash in lieu of any fractional share).

EXAMPLE. Assume for illustrative purposes that 1,000,000 SureWest shares (including equity award shares) are outstanding at the effective time of the First Merger and SureWest shareholders properly make stock elections with respect to 900,000 SureWest shares, cash elections with respect to 75,000 shares (treating equity award shares as cash election shares) and no elections with respect to 25,000 shares. If you own 100 SureWest shares and have properly made a stock election for all of those shares, you would receive cash consideration for 44.44 of your SureWest shares [100 × ((50% × 1,000,000) – 75,000 –25,000) /900,000)] and stock consideration for your remaining 55.56 SureWest shares (including cash in lieu of any fractional share).

     SureWest Shares Subject to No Election . Each SureWest shareholder who failed to properly make an election will receive cash consideration for all of the SureWest shares for which he or she made no election.

     General Consideration Adjustment . Pursuant to the Merger Agreement and in order to preserve the tax-free nature of the transaction, the Cash Conversion Number described above will be reduced to the extent necessary so that the aggregate fair market value of Consolidated common stock (based on the closing price as reported on the NASDAQ Global Select Market on the trading day immediately preceding the closing date of the First Merger) received by the holders of SureWest common stock in the First Merger shall be equal to 42% of the aggregate amount of cash plus the fair market value of the Consolidated common stock received by the holders of SureWest common stock in the First Merger. For purposes of this adjustment, equity award shares are not considered, as they are not treated as outstanding shares, and the amount of cash paid for them is not included as consideration. To assure that the holders of SureWest common stock receive equivalent value of Consolidated common stock in consideration for the reduction of the Cash Conversion Number, for each share by which the Cash Conversion Number is reduced additional Consolidated common stock will be paid as part of the stock consideration so that the aggregate fair market value of the Consolidated common stock received with respect to such share is equal to the cash consideration.

     Neither Consolidated nor SureWest is making any recommendation as to whether SureWest shareholders should elect to receive cash consideration or stock consideration in the First Merger. SureWest shareholders must make their own decision with respect to such election. No guarantee can be made that SureWest shareholders will receive the amount of cash consideration or stock consideration they elect. As a result of the proration procedures described in this joint proxy statement/prospectus and in the Merger Agreement, they may receive stock consideration or cash consideration in amounts that are different from the amounts they elect to receive. Because the value of the stock consideration and cash consideration may differ, they may receive consideration having an aggregate value less than what they elected to receive. SureWest shareholders should obtain current market quotations for Consolidated common stock before deciding what elections to make.

     Because other SureWest shareholders would likely take the relative values of the stock consideration and cash consideration into account in determining what form of election to make, if you fail to make an election you are likely to receive the form of consideration having the lower value (depending on the relative values of the stock consideration and cash consideration at the effective time of the First Merger).

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Conversion of Shares; Exchange Procedures; Fractional Shares

     The conversion of SureWest common stock into the right to receive the Merger Consideration will occur automatically at the effective time of the First Merger. Prior to the effective time of the First Merger (and, with respect to Consolidated common stock, from time to time after the effective time of the First Merger as applicable), Consolidated will deposit with the exchange agent an amount in cash and certificates representing shares of Consolidated common stock sufficient to effect the conversion of each share of SureWest common stock into the Merger Consideration pursuant to the Merger Agreement.

     The exchange agent will take the following actions with respect to each holder of record of SureWest common stock as of immediately prior to the effective time of the First Merger:

  • If the shareholder properly made (and did not revoke) a cash election and/or stock election for shares of SureWest common stock, then within 10 business days after the effective time of the First Merger, the exchange agent will mail to such shareholder the aggregate Merger Consideration that the shareholder is entitled to receive pursuant to the Merger Agreement (including, if applicable, cash in lieu of any fractional share of Consolidated common stock).
     
  • If the shareholder did not properly make an unrevoked cash election and/or stock election for shares of SureWest common stock, then approximately 5 business days after the effective time of the First Merger, the exchange agent will mail to such shareholder a letter of transmittal containing instructions for obtaining the aggregate Merger Consideration that the shareholder is entitled to receive pursuant to the First Merger. The letter of transmittal will contain instructions for surrendering certificates representing shares of SureWest common stock to the exchange agent. The exchange agent will mail the aggregate Merger Consideration (including, if applicable, cash in lieu of any fractional share of Consolidated common stock) to the shareholder approximately 10 business days after the exchange agent has received all of the shareholder’s certificates representing shares of SureWest common stock, a properly signed and completed letter of transmittal in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions.

     After the effective time of the First Merger, each certificate that previously represented shares of SureWest common stock will represent only the right to receive the Merger Consideration as described above and dividends and distributions on, and cash in lieu of any fractional share of, Consolidated common stock as described below.

     Until holders of certificates previously representing shares of SureWest common stock have surrendered those certificates to the exchange agent, those holders will not receive dividends or distributions on any shares of Consolidated common stock into which such shares have been converted. When delivery of the Merger Consideration is made to such holders as described above, the exchange agent will also pay to such holders, without interest, all dividends and other distributions in respect of such Consolidated common stock with a record date after the effective time of the First Merger and a payment date on or after the date of surrender of certificates.

     No fractional shares of Consolidated common stock will be issued to any SureWest shareholder in the First Merger. Each SureWest shareholder who would otherwise have been entitled to receive a fraction of a share of Consolidated common stock in the First Merger will receive cash in an amount equal to the product obtained by multiplying (i) the fractional share interest which such holder would otherwise be entitled to by (ii) the average closing price on the NASDAQ Global Select Market for a share of Consolidated common stock for the 20 consecutive trading days ending on the second trading day preceding the closing date of the First Merger.

     Consolidated and the exchange agent will be entitled to deduct and withhold from the Merger Consideration, and pay to the appropriate taxing authorities, any applicable taxes. Any such amount which is properly withheld and paid to a taxing authority by Consolidated or the exchange agent will be treated for all purposes of the Merger Agreement as having been paid to the person from whom it is withheld.

     If any certificate representing shares of SureWest common stock has been lost, stolen or destroyed, upon the making of an affidavit attesting to that fact by the person claiming that such certificate has been lost, stolen or destroyed and, if required by Consolidated or the surviving corporation of the Mergers, the delivery by such person

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of a bond (in such amount as Consolidated or the surviving corporation may direct) as indemnity against any claim that may be made against the exchange agent, Consolidated or the surviving corporation with respect to on account of the alleged loss, theft or destruction of such certificate, the exchange agent will issue, in exchange for all rights to the lost, stolen or destroyed certificate, the total amount of Merger Consideration in respect of the shares of SureWest common stock represented by such certificate.

Accounting Treatment

     The Mergers will be accounted for by Consolidated using the purchase method of accounting. Under this method of accounting, the purchase price will be allocated to the fair value of the net assets acquired. The excess purchase price over the fair value of the assets acquired, if any, will be allocated to goodwill.

Regulatory Approvals Required for the Mergers

United States Antitrust

     United States antitrust laws prohibit Consolidated and SureWest from completing the Mergers until they have furnished certain information and materials to the Antitrust Division of the Department of Justice and the Federal Trade Commission under the HSR Act and a required waiting period has ended. SureWest and Consolidated filed the required notification and report forms with the Antitrust Division of the Department of Justice and the Federal Trade Commission on February 15, 2012. The required waiting period expired on March 16, 2012.

     At any time before or after the effective time of the Mergers, the Federal Trade Commission or others (including states and private parties) could take action under the antitrust laws, including seeking to prevent the Mergers, to rescind the Mergers or to conditionally approve the Mergers upon the divesture of assets of Consolidated or SureWest. There can be no assurances that a challenge to the Mergers on antitrust grounds will not be made or, if such challenge is made, that it will not be successful.

Other Laws

     In addition to the regulatory approvals described above, completion of the Mergers is also conditioned upon the receipt of the following approvals of the Federal Communications Commission (“FCC”), the California Public Utility Commission (the “California PUC”), the Kansas Corporation Commission (“KCC”) and certain local municipalities in Kansas.

     On February 16, 17 and 22, 2012, Consolidated and SureWest jointly filed the applications to transfer control of SureWest’s FCC authorizations to Consolidated.

     On February 10, 2012, SureWest and its subsidiaries that are regulated by the California PUC, and Consolidated and certain of its subsidiaries, jointly filed an application with the California PUC for required approvals in connection with the transfers of control of those subsidiaries to Consolidated, as required under the California Public Utility Code.

     On February 23, 2012, Consolidated and SureWest filed notice with the KCC requesting that a no action letter be issued indicating that no further action is required by the KCC in connection with the Mergers because of SureWest’s statutory classification as a competitive local exchange carrier pursuant to K.S.A. 66-1,187, et seq. On February 23, 2012, Consolidated and SureWest filed notice with the Kansas municipalities of Lenexa, Overland Park and Shawnee, each of which require city council approval to transfer legacy local cable franchises there. SureWest’s authority to provide video service in the Kansas municipalities of Olathe, Fairway, Merriam, Mission, Prairie Village, Roeland Park and Westwood is pursuant to a Video Service Authorization issued by the KCC. Requisite notice on transferring the Video Service Authorization was provided to the KCC on February 23, 2012.

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Dissenters’ Rights of SureWest Shareholders

     If the Mergers are completed, holders of SureWest common stock are entitled to dissenters’ rights under Chapter 13 of the California General Corporation Law, as the same exists or may hereafter be amended (“CGCL”), which is included with this joint proxy statement/prospectus as Annex IV, provided that they comply with the conditions established by Chapter 13 of the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (the “DGCL”). The shares of stock held by holders who have properly exercised dissenters’ rights will not be converted into the right to receive the consideration discussed above, but will instead be entitled to such rights as are granted by Chapter 13 of the CGCL. See “Dissenters’ Rights of SureWest Shareholders”.

Stock Exchange Listing of Consolidated Common Stock

     Shares of Consolidated common stock issuable to SureWest shareholders in the First Merger must have been approved for listing on The NASDAQ Global Select Market.

Delisting and Deregistration of SureWest Common Stock

     If the Mergers are completed, SureWest common stock will be delisted from the NASDAQ Global Select Market and deregistered under the Exchange Act, and SureWest will no longer file periodic reports with the SEC on account of SureWest common stock.

Legal Proceedings Related to the Mergers

     To date, SureWest, the SureWest board and Consolidated are named as defendants in six putative class action lawsuits brought by alleged SureWest shareholders challenging the proposed Mergers. Five shareholder actions were filed in the Superior Court of California, Placer County, and one shareholder action was filed in the United States District Court for the Eastern District of California. The actions are called Needles v. SureWest Communications, et al. , filed February 17, 2012, Case No. SCV0030665, Errecart v. Oldham, et al. , filed February 24, 2012, 2012, Case No. SCV0030703, Springer v. SureWest Communications, et al. , filed March 9, 2012, Case No. SCV0030669, Aievoli v. Oldham, et al. , filed March 15, 2012, Case No. SCV0030671 and Waterbury v. SureWest Communications, et al., filed March 26, 2012, Case No. SCV0030854, and the federal action is called Broering v. Oldham, et al. , filed April 18, 2012, Case No. 212-CV-01025-JAM-EFB. The actions generally allege, among other things, that each member of the SureWest board of directors breached fiduciary duties to SureWest and its shareholders by authorizing the sale of SureWest to Consolidated for consideration that allegedly is unfair to the SureWest shareholders and agreeing to terms that allegedly unduly restrict other bidders from making a competing offer. The complaints also allege that Consolidated and SureWest aided and abetted the breaches of fiduciary duties allegedly committed by the members of the SureWest board of directors. The Broering complaint also alleges, among other things, that the joint proxy statement/prospectus filed with the SEC on March 28, 2012 does not make sufficient disclosures regarding the Mergers, that SureWest’s board should have appointed an independent committee to negotiate the transaction and that SureWest should have gone back to another bidder to create a competitive bid process. The lawsuits seek equitable relief, including an order to prevent the defendants from consummating the Mergers on the agreed-upon terms and/or an award of unspecified money damages. The parties believe that these claims are without merit. On March 14, 2012, the Placer County Superior Court entered an order consolidating the Needles , Errecart and Springer actions into a single action under the caption In re SureWest Communications Shareholder Litigation , Case No. SCV-0030655. Under the terms of this order, all cases subsequently filed in the Superior Court for the State of California, County of Placer, that relate to the same subject matter and involve similar questions of law or fact are to be consolidated with these cases as well. Any party objecting to such consolidation must file its objection within ten days of receiving a copy of the order. Attorneys for the plaintiffs in Aievoli and Waterbury received copies of the order on or before March 29, 2012 and have not filed any objection. On April 10, 2012, the plaintiff in Waterbury filed a request for voluntary dismissal of her complaint without prejudice.

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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     The following discussion summarizes the material U.S. federal income tax consequences to U.S. Holders (as defined below) of the merger of Merger Sub I with and into SureWest, with SureWest surviving, followed immediately by the merger of SureWest with and into Merger Sub II, with Merger Sub II surviving, and, unless otherwise noted in the following discussion, expresses the opinion of Orrick, Herrington & Sutcliffe LLP, counsel for SureWest, and the opinion of Schiff Hardin LLP, counsel for Consolidated, insofar as it relates to matters of U.S. federal income tax law and legal conclusions with respect to those matters. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations promulgated thereunder (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the Internal Revenue Service (the “IRS”) and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. Such change could materially and adversely affect the tax consequences described below. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.

     This summary does not address all aspects of U.S. federal income taxation that may be important to a particular person in light of its investment or tax circumstances or to persons subject to special tax rules, such as partnerships, subchapter S corporations or other pass-through entities, banks, financial institutions, tax-exempt entities, insurance companies, regulated investment companies, real estate investment trusts, trusts and estates, dealers in stocks, securities or currencies, traders in securities that have elected to use the mark-to-market method of accounting for their securities, persons holding SureWest common stock as part of an integrated transaction, including a “straddle,” “hedge,” “constructive sale” or “conversion transaction,” persons whose functional currency for tax purposes is not the U.S. dollar, persons subject to the alternative minimum tax provisions of the Code and persons who acquired the SureWest common stock pursuant to the exercise of employee incentive stock options or otherwise as compensation. This summary does not include any description of the tax laws of any state or local government, or of any foreign government, that may be applicable to a particular person.

     This discussion is directed solely to U.S. Holders (as defined below) who hold SureWest common stock as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment.

     As used in this section, the term “U.S. Holder” means a beneficial owner of SureWest common stock who, for U.S. federal income tax purposes, is:

  • an individual who is a citizen or resident of the United States;
     
  • a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia;
     
  • an estate the income of which is subject to U.S. federal income taxation regardless of its source;
     
  • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust; or
     
  • a trust in existence on August 20, 1996 that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person (as defined in the Code).

     If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds SureWest common stock, the U.S. federal income tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. A partnership, and a partner of a partnership, holding SureWest common stock should consult its own tax advisor regarding the U.S. federal income tax consequences to it of the Mergers.

     This summary is not a comprehensive description of all of the U.S. federal income tax consequences that may be relevant to you. Neither Consolidated nor SureWest has requested a ruling from the IRS in connection with the Mergers or related transactions. Accordingly, the discussion below neither binds the IRS

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nor precludes it from adopting a contrary position. Consolidated and SureWest urge you to consult your own tax advisor regarding your particular circumstances and the U.S. federal income tax consequences to you of the Mergers, as well as any tax consequences arising under the laws of any state, local, foreign or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax laws.

Treatment of the Mergers as a Reorganization—General

     Consolidated and SureWest have adopted the Merger Agreement as a “plan of reorganization” and , based on the opinion of Orrick, Herrington & Sutcliffe LLP, counsel for SureWest, and the opinion of Schiff Hardin LLP, counsel for Consolidated, that the First Merger and the Second Merger taken together will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, will treat the Mergers as a “reorganization” for federal income tax purposes. However, no ruling has been or will be obtained from the IRS with respect to the Mergers, and therefore no assurance can be given that the IRS would not challenge the tax treatment of the Mergers as a reorganization. If the Mergers fail to qualify as a reorganization, U.S. Holders would be treated as if they sold their SureWest common stock in a taxable transaction. In such event, each U.S. Holder would recognize gain or loss with respect to the disposition of its shares of SureWest common stock equal to the difference between (i) the U.S. Holder’s basis in such shares and (ii) the amount of cash plus the fair market value (as of the date of the effective time of the First Merger) of the Consolidated common stock received in the First Merger. Such gain or loss would be determined separately for each identifiable block of SureWest common stock exchanged in the First Merger, and such gain or loss would be treated as capital gain or capital loss.

     The tax opinions provided by each of Orrick, Herrington & Sutcliffe LLP, tax counsel to SureWest, and Schiff Hardin LLP, tax counsel to Consolidated, regarding the Mergers do not address any state, local or foreign tax consequences of the Mergers. The tax opinions are subject to customary qualifications and assumptions, including that the Mergers will be completed according to the terms of the Merger Agreement. In rendering the tax opinions, each counsel rely on representations of Sure West, Merger Sub I, Merger Sub II and Consolidated. If any such assumption or representation is or becomes inaccurate, the U.S. federal income tax consequences of the Mergers could be adversely affected. An opinion of counsel represents counsel’s best legal judgment but is not binding on the Internal Revenue Service or on any court. Consequently, no assurance can be given that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any of the tax consequences set forth in this summary.

Consequences of the Mergers to SureWest and Consolidated

     Neither SureWest, Consolidated, Merger Sub I nor Merger Sub II will recognize gain or loss as a result of the Mergers.

Tax Consequences of the Mergers for U.S. Holders of SureWest Common Stock

     The U.S. federal income tax consequences of the Mergers to a U.S. Holder will depend on whether such U.S. Holder receives cash, shares of Consolidated common stock or a combination of cash and stock in exchange for such U.S. Holder’s SureWest common stock. At the time a U.S. Holder makes a cash or stock election pursuant to the terms of the Merger Agreement, such U.S. Holder will not know whether, and to what extent, the proration provisions of the Merger Agreement will alter the mix of consideration such U.S. Holder will receive. As a result, the tax consequences to such U.S. Holder will not be ascertainable with certainty until such U.S. Holder knows the precise amount of cash and shares of Consolidated common stock that such U.S. Holder will receive pursuant to the First Merger.

Exchange of SureWest common stock solely for Consolidated common stock

     Except as discussed below, see “—Cash in Lieu of Fractional Shares of Consolidated Common Stock,” a U.S. Holder who exchanges all of its shares of SureWest common stock solely for shares of Consolidated common stock pursuant to the First Merger will not recognize gain or loss in connection with such exchange.

     A U.S. Holder’s aggregate tax basis in the Consolidated common stock received in the First Merger in exchange for its SureWest common stock, including any fractional shares deemed received by the U.S. Holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Consolidated Common Stock,” generally will

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equal such U.S. Holder’s aggregate tax basis in the SureWest common stock surrendered by such U.S. Holder in the First Merger. The holding period for the shares of Consolidated common stock received by such U.S. Holder in the First Merger in exchange for its SureWest common stock, including any fractional shares deemed received by the U.S. holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Consolidated Common Stock,” generally will include the holding period for the shares of SureWest common stock exchanged therefor.

Exchange of SureWest common stock solely for cash

     A U.S. Holder who exchanges all of its shares of SureWest common stock solely for cash pursuant to the First Merger generally will recognize capital gain or loss equal to the difference between the amount of cash received by such U.S. Holder and the U.S. Holder’s adjusted tax basis in the SureWest common stock exchanged therefor.

     Any capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder held the shares of SureWest common stock for more than one year at the effective time of the First Merger. Currently, long-term capital gains of an individual generally are subject to a maximum U.S. federal income tax rate of 15% and short-term capital gains of an individual generally are subject to a maximum U.S. federal income tax rate of 35%. The deductibility of capital losses is subject to limitations.

Exchange of SureWest common stock for a combination of Consolidated common stock and cash

     Except as discussed below, a U.S. Holder who exchanges its shares of SureWest common stock for a combination of Consolidated common stock and cash pursuant to the First Merger will recognize gain (but not loss) equal to the lesser of (i) the excess, if any, of the amount of cash plus the fair market value of any Consolidated common stock received in the First Merger, over such U.S. Holder’s adjusted tax basis in the shares of SureWest common stock surrendered by such U.S. Holder in the First Merger and (ii) the amount of cash received by such U.S. Holder in the First Merger (other than cash received in lieu of fractional shares of Consolidated common stock).

     For purposes of this calculation, the fair market value of Consolidated common stock is based on the trading price of that stock on the date of the First Merger, rather than the methodology used in calculating the number of shares of Consolidated common stock to be issued to the stockholder. In the case of any U.S. Holder who acquired different blocks of SureWest common stock at different times and at different prices, any realized gain or loss will be determined separately for each identifiable block of shares exchanged in the First Merger. A loss realized on the exchange of one block of shares cannot be used to offset a gain realized on the exchange of another block of shares (or other gains) but a U.S. Holder will generally be able to reduce its capital gains by other capital losses in determining its income tax liability. Such U.S. Holder should consult its tax advisor prior to the exchange with regard to identifying the basis or holding periods of the particular shares of Consolidated common stock received in the First Merger.

     In addition, Treasury regulations under Section 358 of the Code provide that where a stockholder surrenders shares of target stock in an exchange and receives cash and shares of acquiror stock, then, to the extent the terms of the exchange specify that shares of acquiror stock or cash are received in exchange for a particular share of target stock surrendered, the terms of the exchange shall control for the purpose of determining the gain to the extent the terms of the exchange are economically reasonable. Therefore, a U.S. Holder might be permitted to calculate the amount of taxable gain separately for each share of SureWest common stock surrendered in the First Merger based on the specific consideration received for such share. This result might be permitted if the stockholder designates, on the letter of transmittal (and as specifically authorized by the Merger Agreement), specific shares of SureWest common stock to be exchanged for cash or to be exchanged for Consolidated common stock, as the case may be. Such a designation might result in less taxable gain to a U.S. Holder even if the holder holds a single block of SureWest common stock with a uniform tax basis. However, it is unclear whether a designation described in this paragraph will be treated as satisfying the requirements of the Treasury regulations, and whether the proration provisions of the Merger Agreement may affect such designation, and therefore there can be no assurance that the IRS would not successfully challenge a U.S. Holder that reports taxable gain on the basis of such a designation. U.S. Holders therefore should consult with their tax advisors with respect to the advisability, including any benefits or risks, of making an express designation in their letter of transmittal.

     Generally, a U.S. Holder’s aggregate tax basis in the Consolidated common stock received by such U.S. Holder in the First Merger in exchange for its SureWest common stock, including any fractional shares deemed received by the U.S. Holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Consolidated

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Common Stock,” will equal such U.S. Holder’s aggregate tax basis in the SureWest common stock surrendered in the First Merger, increased by the amount of taxable gain or dividend income (see below), if any, recognized by such U.S. Holder in the First Merger (other than with respect to cash received in lieu of fractional shares of Consolidated common stock), and decreased by the amount of cash, if any, received by such U.S. Holder in the First Merger (other than cash received in lieu of fractional shares of Consolidated common stock). The holding period for the shares of Consolidated common stock received in the First Merger, including any fractional shares deemed received by the U.S. Holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Consolidated Common Stock,” generally will include the holding period for the shares of SureWest common stock exchanged therefor.

     Any capital gain generally will be long-term capital gain if the U.S. Holder held the shares of SureWest common stock for more than one year at the effective time of the First Merger. Currently, long-term capital gains of an individual generally are subject to a maximum U.S. federal income tax rate of 15% and short term capital gains of an individual generally are subject to a maximum U.S. federal income tax rate of 35%. The deductibility of capital losses is subject to limitations. In some cases, such as if a U.S. Holder actually or constructively owns Consolidated common stock immediately after the First Merger that was not received in the First Merger, the gain recognized in connection with the Mergers may be treated as having the effect of the distribution of a dividend to such U.S. Holder, under the tests set forth in Section 302 of the Code, in which case such gain would be treated as dividend income. These rules are complex and dependent upon the specific factual circumstances particular to each U.S. Holder. Consequently, each U.S. Holder that may be subject to those rules should consult its tax advisor as to the application of these rules to the particular facts relevant to such U.S. Holder.

Cash in Lieu of Fractional Shares of Consolidated Common Stock

     A U.S. Holder who receives cash instead of a fractional share of Consolidated common stock will be treated as having received the fractional share of Consolidated common stock pursuant to the First Merger and then as having exchanged the fractional share of Consolidated common stock for cash in a redemption by Consolidated. In general, this deemed redemption will be treated as a sale or exchange and a U.S. Holder will recognize gain or loss equal to the difference between (i) the amount of cash received by such U.S. Holder and (ii) the portion of the basis of the shares of SureWest common stock allocable to such fractional interest. Such gain or loss generally will constitute capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period for the SureWest common stock exchanged by such U.S. Holder is greater than one year as of the effective time of the First Merger. Currently, long-term capital gains of an individual generally are subject to a maximum U.S. federal income tax rate of 15% and short term capital gains of an individual generally are subject to a maximum U.S. federal income tax rate of 35%. The deductibility of capital losses is subject to limitations.

Information Reporting and Backup Withholding

     Cash payments received in the First Merger by a U.S. Holder may, under certain circumstances, be subject to information reporting and backup withholding at a rate of 28% of the cash payable to the U.S. Holder, unless the U.S. Holder provides proof of an applicable exemption, furnishes its taxpayer identification number (in the case of individuals, their social security number) and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a U.S. Holder under the backup withholding rules are not additional tax and will be allowed as a refund or credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Reporting Requirements

     A U.S. Holder who receives shares of Consolidated common stock as a result of the First Merger will be required to retain records pertaining to the First Merger. Each U.S. holder who is required to file a U.S. tax return and who is a “significant holder” that receives Consolidated common stock in the First Merger will be required to file a statement with the significant holder’s U.S. federal income tax return setting forth such significant holder’s basis (determined immediately before the exchange) in the SureWest common stock surrendered and the fair market value (determined immediately before the exchange) of the SureWest common stock that is exchanged by such significant holder. Generally, a “significant holder” is a U.S. Holder who receives shares of Consolidated common stock in the First Merger and who, immediately before the First Merger, owned at least 5% of the outstanding stock of SureWest (by vote or value) or securities of SureWest with a tax basis of $1 million or more.

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THE MERGER AGREEMENT

     The following discussion sets forth the principal terms of the Merger Agreement, a copy of which is attached as Annex I to this joint proxy statement/prospectus and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the Merger Agreement and not by this discussion, which is summary by nature. This discussion is not complete and is qualified in its entirety by reference to the complete text of the Merger Agreement. You are encouraged to read the Merger Agreement carefully in its entirety, as well as this joint proxy statement/prospectus, before making any decisions regarding the Mergers.

The Mergers

     Subject to the terms and conditions of the Merger Agreement and in accordance with California law, the Mergers will proceed as follows: in the First Merger, Merger Sub I will merge with and into SureWest, with SureWest surviving, followed promptly by the merger of SureWest with and into Merger Sub II, with Merger Sub II surviving.

Closing and Effectiveness of the Mergers

     The closing of the First Merger will occur as soon as possible, but no later than two business days after the date of the conditions to its completion have been satisfied or waived. The First Merger will become effective at such time (the “effective time”) as the parties file an agreement of merger with the Secretary of State of the State of California (or at such later time as SureWest and Consolidated may agree and is specified in the agreement of merger). The Second Merger will become effective upon the filing of an agreement of merger with the Secretary of State of the State of California promptly following the effective time of the First Merger.

Directors and Officers After the Mergers

     Consolidated’s amended and restated certificate of incorporation provides for the classification of Consolidated’s board of directors into three classes of directors, designated Class I, Class II and Class III, as nearly equal in size as is practicable, serving staggered three-year terms. One class of directors is elected each year to hold office for a three-year term or until successors of such directors are duly elected and qualified. Consolidated’s board of directors currently consists of four directors, comprised of one Class I director, one Class II director and two Class III directors. Class II consisted of two directors until the February 29, 2012 death of Jack W. Blumenstein, an independent director of Consolidated, the Chairperson of Consolidated’s Audit Committee and a member of Consolidated’s Corporate Governance Committee and Compensation Committee. For more information regarding Consolidated’s directors, see “Consolidated Proposal No. 2: Election of Richard A. Lumpkin as Director”.

     Pursuant to the Merger Agreement, SureWest is entitled to select, and Consolidated has agreed to take all such action as may be reasonably necessary to cause, one individual from among the current members of the board of directors of SureWest to be elected to Consolidated’s board of directors as of the effective time of the Mergers. Prior to completion of the Mergers, SureWest will designate such director. For further information on SureWest’s directors, see SureWest’s Form 10-K for the year ended December 31, 2011. As a result, after completion of the Mergers, assuming Consolidated’s stockholders elect the nominee to the board described under “Consolidated Proposal No. 2: Election of Richard A. Lumpkin as Director” and no other directors are appointed, Consolidated expects that the board of directors of Consolidated would consist of Roger H. Moore (Class II Director — term expiring in 2013), Robert J. Currey (Class III Director — term expiring in 2014), Maribeth S. Rahe (Class III Director — term expiring in 2014), Richard A. Lumpkin (Class I Director — term expiring in 2015) and an individual to be designated by SureWest (Class I Director — term expiring in 2015).

     On March 1, 2012, Consolidated notified NASDAQ of Mr. Blumenstein’s death. As a result of Mr. Blumenstein’s death, Consolidated’s board of directors is no longer comprised of a majority of independent directors and Consolidated’s Audit Committee is no longer comprised of at least three independent directors, as required for continued listing by NASDAQ Listing Rules 5605(b)(1) and 5605(c)(2)(A), respectively. On March 5, 2012, Consolidated received a deficiency letter from NASDAQ acknowledging the failure of Consolidated to continue to satisfy the aforementioned NASDAQ Listing Rules. In accordance with NASDAQ Listing Rules 5605(b)(1)(A) and 5605(c)(4)(A) and the NASDAQ deficiency letter, and given the date of the Consolidated annual meeting, Consolidated has until August 28, 2012 to regain compliance with NASDAQ Listing Rules.

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     Prior to the expiration of the applicable cure period, Consolidated’s board intends to add to the board either (i) the individual to be designated by SureWest or (ii) another new director, or both. The director or directors so appointed would not only satisfy the independence requirements of the NASDAQ Listing Rules, but would have no material connection to Consolidated (that is, no material financial, personal, business, or other relationship that a reasonable person could conclude could potentially influence boardroom objectivity) prior to being appointed to Consolidated’s board of directors. Consolidated’s board would increase the size of the board as necessary to accommodate the addition or additions to the board.

     From the effective time of the Mergers until successors are duly elected or appointed and qualified in accordance with applicable law, the directors and officers of Merger Sub II at the effective time will be the directors of the surviving corporation resulting from the merger of Merger Sub II with and into SureWest. These directors are Richard A. Lumpkin (Chairman), Robert J. Currey, Steven J. Shirar and Matthew K. Smith, and the officers are Robert J. Currey (President and Chief Executive Officer), Steven J. Shirar (Senior Vice President and Corporate Secretary), C. Robert Udell, Jr. (Senior Vice President and Chief Operating Officer), Christopher A. Young (Chief Information Officer) and Steven L. Childers (Senior Vice President and Chief Financial Officer).

Consideration to be Received in the Mergers

     At the effective time of the First Merger, each outstanding share of SureWest common stock (other than treasury stock and shares of common stock owned by Consolidated, Merger Sub I or Merger Sub II) will be converted into the right to receive, at the election of the shareholder, subject to certain proration and reallocation procedures described below, either $23.00 in cash (without interest) or shares of Consolidated common stock as determined by the exchange ratio. The exchange ratio will be equal to the number determined by dividing $23.00 by the average closing price for the 20 consecutive trading days ending two trading days before the closing of the First Merger. However, in no event will the exchange ratio be less than 1.03896 or greater than 1.40565. Shareholder elections will be subject to proration to ensure that 50% of the SureWest shares are converted into the right to receive the cash consideration and 50% of the SureWest shares are converted into the right to receive the stock consideration, provided that all holders of SureWest options, restricted stock units and restricted stock awards will be paid in cash and shall not be subject to such proration. In order to achieve this 50%/50% stock-cash mix of consideration, the Merger Agreement provides for adjustments to and reallocation of the stock and cash elections made by SureWest shareholders, as well as the allocation of consideration to be paid with respect to SureWest shareholders who fail to make an election, as described above under “The Mergers—SureWest Shareholders Making Cash and Stock Elections” . In order to preserve the tax-free nature of the transaction, the Merger Agreement also provides for a general consideration adjustment in certain circumstances, as further described under “The Mergers — SureWest Shareholders Making Cash and Stock Elections — General Consideration Adjustment.”

Dissenting Shares

     If the Mergers are completed, holders of SureWest common stock are entitled to dissenters’ rights under Chapter 13 of the CGCL, which is included with this joint proxy statement/prospectus as Annex IV, provided that they comply with the conditions established by Chapter 13 of the DGCL. The shares of stock held by holders who have properly exercised dissenters’ rights will not be converted into the right to receive the consideration discussed above, but will instead be entitled to such rights as are granted by Chapter 13 of the CGCL.

Treatment of SureWest Equity Awards

     See the discussion of the treatment of SureWest equity awards under “The Mergers—Treatment of SureWest Equity Awards” above.

Representations and Warranties

     The Merger Agreement contains representations and warranties made by SureWest to Consolidated and by Consolidated to SureWest. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Merger Agreement. Accordingly, SureWest shareholders

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should not rely on representations and warranties as characterizations of the actual state of facts or circumstances, and should bear in mind that the representations and warranties were made solely for the benefit of the parties to the Merger Agreement, were negotiated for purposes of allocating contractual risk among the parties to the Merger Agreement rather than to establish matters as facts and may be subject to contractual standards of materiality different from those generally applicable to shareholders. Moreover, information concerning the subject matter of such representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be reflected in public disclosures of SureWest and Consolidated. This description of the representations and warranties is included to provide SureWest’s shareholders with information regarding the terms of the Merger Agreement. The representations and warranties in the Merger Agreement and the description of them in this joint proxy statement/prospectus should be read in conjunction with the other information contained in the reports, statements and filings SureWest and Consolidated publicly file with the SEC. See “Where You Can Find Additional Information”.

     In the Merger Agreement, SureWest and Consolidated made a number of representations and warranties to each other. The parties’ reciprocal representations and warranties relate to, among other things:

  • due incorporation, valid existence and good standing, and corporate authorization and power to enter into the Merger Agreement and consummate the transactions contemplated thereby;
     
  • the good standing and corporate power and authority of SureWest’s and Consolidated’s subsidiaries, respectively;
     
  • capitalization and capital structure;
     
  • the absence of any violation of or conflict with such party’s organizational documents or applicable laws as a result of entering into the Merger Agreement and consummating the Mergers;
     
  • required regulatory filings, consent and approval of governmental entities in connection with the Merger Agreement and the Mergers;
     
  • documents filed by SureWest and Consolidated, respectively, with the SEC since January 1, 2010 and the accuracy of information contained in those documents;
     
  • financial statements;
     
  • the absence of undisclosed finders’ fees;
     
  • the absence of certain changes or events, and the absence of a material adverse effect on SureWest and Consolidated, respectively, in each case since September 30, 2011;
     
  • the joint proxy statement/prospectus to be filed with the Securities and Exchange Commission under the Exchange Act and the accuracy of information contained in such document as provided by such party;
     
  • litigation and legal proceedings;
     
  • filing of tax returns, payment of taxes and other tax matters;
     
  • employee benefit plans;
     
  • Consolidated’s and SureWest’s respective compliance with applicable legal requirements and possession of permits and compliance with provisions of the Sarbanes-Oxley Act of 2002 and the listing standards of the NASDAQ Global Select Market;
     
  • certain material contracts;

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  • the absence of undisclosed liabilities; and
     
  • environmental matters.

In addition to the foregoing, the Merger Agreement contains representations and warranties made by SureWest to Consolidated, including:

  • SureWest’s possession of and compliance with, and the validity of, requisite communications regulatory permits, approvals, authorizes, certificates and licenses;
     
  • properties;
     
  • intellectual property;
     
  • receipt by SureWest of a fairness opinion from UBS;
     
  • the inapplicability of certain state takeover statutes;
     
  • affiliate transactions;
     
  • employment matters; and
     
  • insurance.

     In addition, the Merger Agreement contains representations and warranties made by Consolidated to SureWest including regarding the existence of a fully executed debt commitment letter confirming the commitments of Morgan Stanley Senior Funding, Inc. to provide a subsidiary of Consolidated with debt financing in connection with the Mergers and certain terms and conditions of that debt commitment letter, among other things.

SureWest’s Conduct of Business Before Completion of the Mergers

     From the date of the Merger Agreement until the effective time, SureWest has agreed, subject to certain exceptions, to conduct its business in the ordinary course. In addition, SureWest may not, among other things and subject to certain exceptions, without Consolidated’s consent:

  • adjust, split, combine or reclassify its capital stock;
     
  • set any record or payment dates for the payment of any dividends or distributions on its capital stock or make, declare or pay any dividend or make any other distribution on any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, except that (a) SureWest may declare and pay regular quarterly cash dividends of $0.10 per share and (b) any wholly owned subsidiary of SureWest may declare and pay dividends to its parent and other wholly owned subsidiaries of SureWest;
     
  • directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock (except pursuant to the exercise of stock options or vesting of restricted stock unites or restricted stock awards outstanding as of the date hereof or permitted to be issued or pursuant to the surrender of shares to SureWest or the withholding of shares by SureWest to cover tax withholding obligations);
     
  • grant any stock appreciation rights or grant any person any right to acquire any shares of its capital stock except in the ordinary course of business in accordance with past practice, or issue, or commit to issue, sell, grant, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale grant, disposition, pledge or other encumbrance of, any additional shares of capital stock (except pursuant to the exercise of

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stock options or vesting or settlement of awards under SureWest’s stock plans outstanding as of the date hereof or permitted to be issued), any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any additional shares of capital stock, or any other securities in respect of, in lieu of, or in substitution for, any shares of its capital stock outstanding on the date of the Merger Agreement;

  • sell, transfer, mortgage, encumber or otherwise dispose of any of its material assets or material properties to any person (other than a direct wholly owned Subsidiary), by merger, consolidation, asset sale or other business combination (including formation of a joint venture) or cancel, release or assign any indebtedness to any such person or any claims held by any such person, in each case, except (i) in the ordinary course of business consistent with past practice, including sales of repossessed assets, (ii) dispositions of obsolete or worthless assets, (iii) sales of loans, receivables and other assets in the ordinary course of business consistent with past practice and (iv) sales of immaterial assets which involve the sale of assets with a purchase price of $750,000 or less in any single case or $3,000,000 in all such cases;
     
  • make any investment or acquisition, by purchase or other acquisition of stock or other equity interests, by merger, consolidation, asset purchase or other business combination, or by contributions to capital; or make any material purchases of any property or assets, in or from any other Person other than a wholly owned subsidiary of SureWest, except (i) as expressly required by the terms of any contracts or agreements in force at the date of the Merger Agreement, (ii) as otherwise permitted, and (iii) other acquisitions in the ordinary course of business consistent with past practice and, in any case, involving consideration in an aggregate amount not in excess of $5,000,000;
     
  • enter into, renew, extend, amend or terminate any material contract or lease;
     
  • other than general pay increases, including in connection with promotions, made in the ordinary course of business consistent with past practice, for employees, directors or independent contractors generally or as provided by any agreement in effect on the date hereof, (i) increase, or commit to increase, the compensation or severance payable (including by granting or increasing the rate or terms of any salary, bonus, pension or other compensation pursuant to the terms of any employee benefit plan, policy, agreement or arrangement) to any of its employees, directors or independent contractors, (ii) pay any severance other than in the ordinary course of business consistent with past practice or (iii) except as may be required, or advisable, to comply with applicable law or contract, amend, establish or enter into any pension, retirement, profit-sharing, severance, retention or welfare benefit plan or agreement or incentive or employment, agreement with or for the benefit of any employee, director or independent contractor or accelerate the vesting of any stock options or other stock-based compensation;
     
  • amend its articles of incorporation, bylaws or similar governing documents or similar organizational documents of any of subsidiary of SureWest;
     
  • enter into any new material line of business outside of its existing business;
     
  • assign, transfer, lease, cancel, fail to renew or fail to extend any material permit issued by the FCC or any state or local regulator;
     
  • incur any indebtedness for borrowed money, issue any debt securities or assume, guarantee or endorse or otherwise become responsible for the obligations of another person, or make any loans, advances of capital contributions to, or investments in, any other person, except in the ordinary course of business consistent with past practice;
     
  • make or change any material tax election or settle or compromise any material tax liability of SureWest or any of its subsidiaries;
     
  • make any material changes in its accounting methods or method of tax accounting, practices or policies, except as may be required under applicable law, rule, regulation or GAAP;

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  • effect or permit, with respect to SureWest and any of its subsidiaries, a “plant closing” or “mass layoff”, as such terms are defined under the Worker Adjustment and Retraining Act of 1988, as amended;
     
  • except as otherwise permitted pursuant, take any action that is intended or may reasonably be expected to result in any of the conditions to the Mergers; or
     
  • agree or make any commitment to do any of the foregoing.

Consolidated’s Forbearances Before Completion of the Mergers

     From the date of the Merger Agreement until the effective time, Consolidated has agreed not to take the following actions, among other things and subject to certain exceptions, without SureWest’s consent:

  • engage in any material repurchase of, or any recapitalization or other change, restructuring or reorganization with respect to, Consolidated common stock, including payment of any dividend or other distribution in respect to shares of its common stock (other than Consolidated’s regular quarterly cash dividends);
     
  • (i) alter through merger, liquidation, reorganization, restructuring or in any other manner the corporate structure or organization of Consolidated, or (ii) engage in any action or enter into any transaction or series of transactions, or permit any action to be taken or transaction or series of transactions to be entered into, that, in the case of either clause (i) or clause (ii), could reasonably be expected to delay the consummation of, or otherwise adversely affect, the Mergers, including (x) withdrawing or modifying, in a manner adverse to SureWest, the approval by the Consolidated board of the Merger Agreement, the Mergers or the issuance of Consolidated common stock or (y) engaging in any action or entering into any transaction or series of transactions, or permitting any action to be taken or transaction or series of transactions to be entered into, that could reasonably be expected to delay or otherwise adversely affect the funding of the full amount of the debt financing or the ability of Consolidated, Merger Sub I and Merger Sub II to pay the aggregate amount of cash consideration for the shares of SureWest common stock;
     
  • acquire (whether through merger, consolidation, stock or asset purchase or otherwise), or agree to so acquire, any material amounts of assets of or any equity in any person or any business or division thereof, unless such acquisition or agreement would not (i) impose any delay in the obtaining of, or materially increase the risk of not obtaining, any authorizations, consents, orders, declarations or approvals of any governmental entity necessary to consummate the Mergers or the expiration or termination of any waiting period under the HSR Act or other law, (ii) increase the risk of any governmental entity entering an order prohibiting the consummation of the Mergers or any of the transactions contemplated by the Merger Agreement or (iii) increase the risk of not being able to remove any such order on appeal or otherwise;
     
  • adopt any amendments to the certificate of incorporation or bylaws of Consolidated (or similar organizational documents of any of its subsidiaries) which would alter any of the terms of the Consolidated common stock; or
     
  • agree or make any commitment to do any of the foregoing.

No Solicitation; Changes in Recommendations

     In the Merger Agreement, SureWest has agreed that the SureWest board will recommend that SureWest’s shareholders approve the Merger Agreement, and that none of SureWest, the SureWest board or any of its subsidiaries will, nor will any of SureWest, the SureWest board or any of its subsidiaries authorize or permit any of its representatives to, directly or indirectly:

  • solicit, initiate or knowingly encourage or facilitate any inquiry with respect to, or the making, submission or announcement of, any proposal or offer that constitutes, or is reasonably expected to lead to, an alternative proposal, including through the furnishing of non-public information;

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  • furnish any non-public information relating to SureWest or any of its subsidiaries or afford access to the business, properties, assets, books, records or other non-public information of SureWest or any of its subsidiaries, relating to an alternative proposal or any inquiries or the making of any proposal that could lead to an alternative proposal;
     
  • engage in, continue or otherwise participate in any discussions or negotiations regarding an alternative proposal;
     
  • resolve to or withdraw, modify of qualify in a manner adverse to Consolidated the SureWest board’s recommendation that SureWest’s shareholders approve the Merger Agreement (an “adverse recommendation change”); or
     
  • enter into any letter of intent, memorandum of understanding, agreement in principal, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement relating to an alternative proposal or authorize, approve or publicly recommend an alternative proposal or agreement relating to an alternative proposal.

     However, at any time prior to obtaining the SureWest shareholder approval, so long as none of SureWest, its subsidiaries or their representatives have breached or taken any actions inconsistent with SureWest’s above obligations regarding non-solicitation, SureWest and the SureWest board may, to the extent required by the SureWest board’s fiduciary duties:

  • in response to a bona fide alternative proposal (that did not arise out of a breach of SureWest’s non-solicitation obligations under the Merger Agreement) that the SureWest board determines in good faith after consultation with its financial advisor and outside legal counsel constitutes or could reasonably be expected to result in a superior proposal, (i) participate or engage in discussions or negotiations with such third party and its representatives and financing sources and (ii) furnish non-public information relating to SureWest to the person making such proposal pursuant to a confidentiality agreement with terms that are not materially less favorable to SureWest than SureWest’s confidentiality agreement with Consolidated; or
     
  • subject to compliance with the applicable terms of the Merger Agreement, make an adverse recommendation change and/or terminate the Merger Agreement to enter into a definitive agreement with respect to a bona fide alternative proposal that the board concludes in good faith after consultation with its financial advisor and outside legal counsel constitutes a superior proposal; provided that SureWest may take such action only if the board determines in good faith, after consultation with its financial advisor and outside legal counsel that the failure to take such action would be inconsistent with its fiduciary duties to SureWest’s shareholders and, in the case of a termination, SureWest pays Consolidated the $14,675,000 termination fee payable pursuant to the Merger Agreement.

     The term “alternative proposal” means, any proposal, indication or offer, including any proposal, indication or offer from or to SureWest’s shareholders, made by any person or group (as defined under Rule 13(d) of the Exchange Act) other than Consolidated or its subsidiaries and/or affiliates relating to, whether in a single transaction or series of related transactions, and whether directly or indirectly, any (i) transaction or series of transactions (including any merger, reorganization, share exchange, consolidation, business combination, joint venture, partnership, recapitalization, dissolution, liquidation or similar direct or indirect transaction involving SureWest and/or any of its subsidiaries or the issuance or acquisition of shares of SureWest common stock or other equity securities of SureWest whose business or businesses constitute 20% (in number or voting power) or more of the assets, revenues or earnings of SureWest and its subsidiaries, taken as a whole, (ii) acquisition, license or purchase of assets of SureWest and/or its subsidiaries equal to 20% or more of the consolidated assets of SureWest and its subsidiaries or to which 20% or more of SureWest’s revenues or earnings on a consolidated basis are attributable or (iii) acquisition of beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of equity interests representing a 20% or greater economic or voting interest in SureWest or tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any person or group (as defined under Rule 13(d) of the Exchange Act) beneficially owning equity interests representing a 20% (in number or voting power) or greater economic or voting interest in SureWest.

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     The term “superior proposal” means any bona fide Alternative Proposal (except that references to “20% or more” in the definition thereof will be deemed to be references to “50% or more”) made by any person that is on terms that the SureWest board determines in good faith (after consultation with its financial advisor and outside legal counsel and after taking into account all legal, financial (including the financing terms thereof)), regulatory, timing and other aspects of the proposal are more favorable to SureWest’s shareholders from a financial point of view than the transactions contemplated by the Merger Agreement.

     The Merger Agreement also provides that SureWest shall not take any of the actions described above unless SureWest shall have notified Consolidated that it intends to take such action and shall promptly make available any material non-public information that is provided to a third party that was not previously made available to Consolidated. In addition, SureWest shall notify Consolidated promptly after receipt by SureWest (or any of its representatives) of any alternative proposal, including of the material terms and conditions thereof, and shall, at Consolidated’s request, keep Consolidated informed on a reasonably current basis as to the status (including changes to the material terms) of such alternative proposal. SureWest shall also notify Consolidated promptly after receipt by SureWest of any request for non-public information relating to SureWest or any of its subsidiaries or for access to the business, properties, assets, books or records of SureWest or any of its subsidiaries by any third party that may be considering making, or has made, an alternative proposal.

Commercially Reasonable Efforts to Complete the Mergers; Other Agreements

     Commercially Reasonable Efforts. Consolidated and SureWest have each agreed to use their commercially reasonable best (i) to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the transactions contemplated by the Merger Agreement and (ii) to promptly prepare, file and provide to third parties and governmental entities all applications, statements, notices, petitions, registrations, requests, declarations and filings which are necessary or advisable to consummate the transactions contemplated by the Merger Agreement (including the Mergers), to obtain (and to cooperate with the other party to obtain) as promptly as practicable all material permits, consents, registrations, authorizations and exemptions of or from all third parties and governmental entities which are necessary or advisable to consummate the transactions contemplated by the Merger Agreement (including the Mergers), and to comply with the terms and conditions of all such permits, consents, registrations, authorizations and exemptions of all such third parties and governmental entities.

     Proxy Statement/Prospectus; Registration Statement; Shareholders’ Meeting. Consolidated and SureWest have agreed to prepare and file with the SEC this joint proxy statement/prospectus and the registration statement in which this joint proxy statement/prospectus is included as a prospectus as soon as is reasonably practicable after the execution of the Merger Agreement. Consolidated and SureWest have also agreed to use commercially reasonable efforts to have the registration statement declared effective. The Merger Agreement also provides that Consolidated and SureWest will each hold a meeting of their respective shareholders following SEC clearance of the joint proxy statement/prospectus and will recommend, in the case of SureWest, the approval of the Merger Agreement by shareholders and, in the case of Consolidated, the approval of the issuance of shares of Consolidated common stock to SureWest shareholder in the First Merger contemplated by the Merger Agreement, and SureWest and Consolidated will use commercially reasonable efforts to obtain such approvals.

Access to Information

     Under the Merger Agreement, until the effective time, subject to reasonable prior notice, applicable law and the confidentiality agreement between SureWest and Consolidated dated January 19, 2012, SureWest will give Consolidated and its authorized representatives access to the properties, books, contracts, commitments and records and to the officers, employees, accountants, counsel and other representatives of SureWest and its subsidiaries.

Financing

     Consolidated has agreed to take or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange and obtain the proceeds of the debt financing, including entering into definitive agreements with respect to debt financing as promptly as practicable after the date of the Merger

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Agreement, satisfying on a timely basis all conditions applicable to Consolidated or its subsidiaries that are within their control in such definitive agreements and using commercially reasonable efforts to cause the lenders or other persons providing the debt financing to fund the debt financing at the closing of the Mergers. Consolidated has also agreed not to agree to any amendments or modifications or grant any waivers of any conditions under the debt financing without the written consent of SureWest that would reduce the aggregate amount of the debt financing or impose new or additional conditions that would prevent or materially delay the ability of Consolidated to consummate the Mergers or adversely impact the ability of Consolidated and its subsidiaries to enforce its rights against the other parties to the debt financing. In the event the debt financing becomes unavailable, Consolidated shall promptly notify SureWest and shall use its commercially reasonable efforts to arrange and obtain alternative financing upon conditions not materially less favorable to Consolidated and its subsidiaries than the debt financing.

Financing Cooperation

     SureWest has agreed to and to cause its subsidiaries to and to use its reasonable best efforts to provide, and to use its reasonable best efforts to cause its representatives to cooperate as reasonably requested by Consolidated in connection with the debt financing (provided, that such requested cooperation does not unreasonably interfere with the ongoing operations of SureWest and its subsidiaries), including, among other things:

  • participation in meetings, drafting sessions, rating agency presentations, due diligence sessions, “road shows” and other customary marketing presentations;

  • furnishing in writing any financing sources as promptly as practicable with pertinent information regarding SureWest and its subsidiaries as reasonably requested in connection with the debt financing;

  • assisting any financing sources in the preparation of one or more customary offering documents, information memorandum and/or documents to be filed with the SEC in connection with the debt financing and materials for rating agency presentations;

  • executing and delivering any pledge and security documents and otherwise facilitating the pledge of collateral;

  • taking all reasonably required corporate actions, subject to the consummation of the Mergers, to permit the consummation of the debt financing;

  • providing authorization letters to any financing sources authorizing the distribution of information to prospective lenders and containing customary representation to the arranger of any financing that the information contained in any offering document does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and

  • using reasonable best efforts to obtain accountants’ comfort letters, to provide the accountants with customary representation letters and authority authorization to enable them to issue the comfort letters; to obtain the consent of such accounting for the including of its reports on SureWest in any document to be used in connection with the debt financing; and

  • using reasonable best efforts to cause the appropriate officers of SureWest to execute and deliver any definitive financing documents or other certificates or documents as may be reasonably requested by Consolidated for delivery at the consummation of the debt financing.

     SureWest is not required to enter into any definitive agreement or incur any other liability of obligation of the debt financing prior to the effective time of the Mergers. Consolidated has acknowledged and agreed that SureWest and its affiliates and its and their representatives shall not, prior to the effective time of the Mergers, incur any liability under the financing or any cooperation provided, and shall, on a joint and several basis, indemnify SureWest and its affiliates and its and their respective representatives in connection with the debt financing.

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     The obligations of Consolidated and the Merger Subs to consummate the Mergers and the other transactions contemplated by the Merger Agreement on the terms and subject to the conditions of the Merger Agreement are not conditioned upon the availability or consummation of the debt financing or receipt of the proceeds therefrom.

Director and Officer Indemnification and Insurance

     The Merger Agreement provides that from and after the effective time of the Mergers and to the fullest extent permitted by law or provided under SureWest’s certificate of incorporation or bylaws, the surviving corporation will indemnify, and pay or advance expenses of the current or former officers, directors and certain other individuals of SureWest with respect to acts or omissions occurring at or prior to the effective time, provided that any person to whom expenses are advanced will provide an undertaking to repay any advances made if a court determines the person was not entitled to indemnification and for a period of six years after the effective time of the Mergers shall keep in full force and effect and comply with the terms and conditions of any agreement between SureWest and its current or former officers, directors and certain other individuals providing for indemnification of and advancement of expenses. The Merger Agreement further provides that, prior to the effective time of the Mergers, SureWest shall purchase a six-year “tail” officers’ and directors’ liability insurance policy on terms and conditions no less favorable in the aggregate than SureWest’s existing directors’ and officers’ liability insurance. The surviving corporation will pay all expenses, including reasonable fees and expenses of counsel, that an indemnified person may incur in enforcing the indemnity and other obligations described above, and the Merger Agreement provides that the foregoing rights of each indemnified person will survive the effective time of the Mergers and are enforceable by each indemnified person.

Employee Matters

     The Merger Agreement provides that, for a period of one year after the effective time, Consolidated will provide to those employees of SureWest and its subsidiaries who are employed immediately prior to the effective time (the “continuing employees”) who remain employed by Consolidated after the effective time compensation and benefits arrangements that are no less favorable in the aggregate than the compensation and benefit arrangements that are provided to similarly situated employees of Consolidated, provided that in no event shall such compensation and benefits be less favorable in the aggregate than such continuing employee’s current compensation and benefits arrangements. The Merger Agreement also provides that Consolidated will give continuing employees who remain employed by Consolidated after the effective time, full credit for purposes of determining eligibility and vesting (but not for purposes of any benefit accruals) under any employee benefit plans or arrangements maintained by Consolidated (other than any defined benefit or equity-based plans) for such continuing employee’s service with SureWest or its subsidiaries, waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participate and coverage requirements applicable to the continuing employees under any welfare benefit plan maintained by Consolidated to the same extent waived by SureWest and its subsidiaries or otherwise not subject to limitation by SureWest and its subsidiaries, provide credit under any such welfare plan for any co-payments, deductible and out-of-pocket expenditures for the remainder of the coverage period during which any transfer of coverage occurs, and honor in accordance with their terms all employee benefit plans or arrangements maintained by SureWest immediately prior to the effective time.

Definition of Material Adverse Effect

     A “material adverse effect” is defined with respect to any entity as (a) a material adverse effect on the business, results of operations or financial condition of such entity and its subsidiaries, taken as a whole or (b) a material adverse effect on the ability of such entity to consummate the transactions contemplated by the Merger Agreement on a timely basis, excluding any effect on the entity or its subsidiary relating to or arising in connection with:

  • any adverse change, effect, event or occurrence, state of facts or developments to the extent the public announcement or the pendency of the Merger Agreement or the transactions contemplated thereby or any actions required to be taken (or refrained from being taken) in compliance with the Merger Agreement or otherwise with the consent of the other party, including the impact thereof on the relationships of the entity or any of its subsidiaries with customers, suppliers, distributors, consultants, employees or independent

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contractors or other third parties with whom the entity or any of its subsidiaries has any relationship and including any litigation brought by any shareholder of SureWest or Consolidated in connection with the transactions contemplated the Merger Agreement;

  • any failure by the entity to meet any projections or forecasts for any period ending (or for which revenues or earnings are released) on or after the date of the Merger Agreement;

  • any change in federal, state, non-U.S. or local law, regulations, policies or procedures, or interpretations thereof, GAAP or regulatory accounting requirements applicable or potentially applicable to the industries in which the entity or its subsidiaries operate;

  • changes generally affecting the industries in which the entity or its subsidiaries operate that are not specifically related to the entity and its subsidiaries and do not have a materially disproportionate adverse effect on such entity and its subsidiaries, taken as a whole;

  • changes in economic conditions (including changes in the prevailing interest rates) in the United States, in any region thereof, or in any non-U.S. or global economy; or

  • any attack on, or by, outbreak or escalation of hostilities or acts of terrorism involving, the United States, or any declaration of war by the United States Congress or any hurricane or other natural disaster.

Conditions of the Mergers

     Mutual Conditions . The obligations of SureWest, Consolidated and the Merger Subs to consummate the Mergers are subject to the satisfaction or waiver of various conditions on or prior to the effective time, including the following:

  • obtaining the SureWest shareholder approval;

  • the expiration or termination of the waiting period under the HSR Act;

  • the obtaining of all consents and authorization to be obtained by the FCC or any other state regulators in connection with the transactions contemplated by the Merger Agreement;

  • the absence of any injunctions or other legal prohibitions preventing the consummation of the Mergers;

  • the effectiveness of the registration statement on Form S-4 in which this joint proxy statement/prospectus is included as a prospectus and the lack of any stop order suspending the effectiveness of the Form S-4 or pending or threatened SEC proceedings to effect a stop order;

  • the issuance of Consolidated common stock to SureWest shareholders in the First Merger contemplated by the Merger Agreement has been approved by a majority of the votes present, in person or by proxy, and entitled to vote at the annual meeting of stockholders of Consolidated; and

  • the approval for listing on the NASDAQ Global Select Market of the shares of Consolidated common stock to be issued pursuant to the Merger Agreement.

     Consolidated Conditions . Consolidated’s, Merger Sub I’s and Merger Sub II’s obligations to consummate the Mergers are subject to the satisfaction or waiver of additional conditions, which include the following:

  • the accuracy (disregarding any materiality or material adverse effect qualifications contained in such representations and warranties) of such representations and warranties except for such inaccuracies as would not, individually or in the aggregate, have a material adverse effect on SureWest;

  • SureWest’s performance in all material respects of its obligations under the Merger Agreement; and

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  • the delivery to Consolidated of an officers’ certificate from SureWest confirming that the conditions described in the immediately preceding two bullets have been satisfied.

     SureWest Conditions . SureWest’s obligations to complete the Mergers are subject to the satisfaction or waiver of additional conditions, which include the following:

  • the accuracy (disregarding all materiality and material adverse effect qualifications contained in such representations and warranties) of such representations and warranties except for such inaccuracies as would not, individually or in the aggregate, have a material adverse effect on Consolidated;

  • Consolidated’s, Merger Sub I’s and Merger Sub II’s performance in all material respects of their obligations under the Merger Agreement; and

  • the delivery to SureWest of an officers’ certificate from Consolidated confirming that the conditions described in the immediately preceding two bullets have been satisfied.

     The Merger Agreement provides that certain of the conditions described above may be waived. Neither Consolidated nor SureWest currently expects to waive any material condition to the completion of the Mergers.

Termination; Termination Fees; Expenses

     Termination. The Merger Agreement may be terminated, and the Mergers may be abandoned at any time prior to its completion:

  • by mutual written consent of SureWest and Consolidated;

  • by either Consolidated or SureWest, if:

    • there is a final and nonappealable legal restraint or prohibition in effect that prevents the completion of the Mergers;

    • the Mergers have not been completed by November 5, 2012, provided that the right to terminate is not available to a party whose failure to fulfill any obligation under the Merger Agreement materially contributed to the failure to complete the Mergers by such date; or

    • the shareholder approval is not obtained at the special meeting or any adjournment or postponement thereof;

  • by SureWest, if:

    • the requirements of a termination in the event of a superior proposal as described in the section “No Solicitation; Changes in Recommendations” have been fully satisfied and SureWest pays to Consolidated the $14,675,000 termination fee described below; or

    • SureWest is not in material breach of any of its obligations under the Merger Agreement, and if Consolidated breaches any of its representations or warranties or fails to perform any covenant or obligation in the Merger Agreement in such a way as to cause the failure of the closing conditions relating thereto, and such failure cannot be cured within thirty business days after notice to Consolidated;

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  • by Consolidated, if:

  •  
    • neither Consolidated nor the Merger Subs are in material breach of its or their obligations under the Merger Agreement, and if SureWest breaches any of its representations or warranties or fails to perform any covenant or obligation in the Merger Agreement in such a way as to cause the failure of the closing conditions relating thereto, and such failure cannot be cured within thirty business days after notice to SureWest;

    • the SureWest board fails to include in the joint proxy statement/prospectus the recommendation that the shareholders approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, or makes an adverse recommendation change;

    • the SureWest board approves or recommends an alternative proposal or superior proposal and/or permits SureWest to enter into an alternative acquisition agreement related to an alternative proposal or a superior proposal;

    • SureWest fails to call a special meeting of its shareholders or to deliver the joint proxy statement/prospectus to its shareholders; or

    • a tender offer or exchange offer for the outstanding shares of SureWest common stock is commenced and the SureWest board recommends that the SureWest shareholders tender their shares in connection with such offer or within ten business days after the commencement of such tender or exchange offer, the SureWest board fails to recommend rejection of such offer.

     If the Merger Agreement is terminated as described in “The Merger Agreement Termination of the Merger Agreement” above, the Merger Agreement will be void, and there will be no liability or obligation of any party except that:

  • each party will remain liable for any willful and material breach of the Merger Agreement, and

  • certain provisions of the Merger Agreement, including the provisions relating to the allocation of fees and expenses (including, if applicable, the termination fees described above) and the confidentiality agreement dated January 19, 2012 between SureWest and Consolidated will survive termination.

     Termination Fees . SureWest has agreed to pay Consolidated a termination fee of $14,675,000 if the Merger Agreement is terminated:

  • by Consolidated or SureWest if the Mergers has not been consummated by the end date and prior to such termination, an alternative proposal was publicly announced or otherwise communicated to SureWest or the SureWest board and is not withdrawn or otherwise abandoned and such alternative offer is consummated within 12 months following the termination of the Merger Agreement;

  • by Consolidated or SureWest if the SureWest shareholder approval has not been obtained and prior to the special meeting an alternative proposal was publicly announced or otherwise communicated to SureWest or the SureWest board and is not withdrawn or otherwise abandoned and such alternative offer is consummated within 12 months following the termination of the Merger Agreement;

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  • by Consolidated if SureWest fails to perform any covenant or obligation described in “No Solicitation; Changes in Recommendations” above and prior to such termination an alternative proposal was publicly announced or otherwise communicated to SureWest or the SureWest board and is not withdrawn or otherwise abandoned and such alternative offer is consummated within 12 months following the termination of the Merger Agreement;

  • by SureWest, in connection with a accepting a superior proposal; or

  • by Consolidated, if (i) the SureWest board fails to include in the joint proxy statement/prospectus the recommendation that the shareholders approve the Merger Agreement, the Merger Certificate and the transactions contemplated thereby, including the First Merger, or makes an adverse recommendation change, (ii) the SureWest board approves or recommends an alternative proposal or superior proposal and/or permits SureWest to enter into an alternative acquisition agreement related to an alternative proposal or a superior proposal, (iii) SureWest fails to call a special meeting of its shareholders or to deliver the joint proxy statement/prospectus to its shareholders, or (iv) a tender offer or exchange offer for the outstanding shares of SureWest common stock and the SureWest board recommends that the SureWest shareholders tender their shares in connection with such offer or within ten business days after the commencement of such tender or exchange offer, the SureWest board fails to recommend rejection of such offer.

     Expenses . If SureWest fails promptly to pay any termination fee due to Consolidated, SureWest will also pay the costs and expenses (including reasonable legal fees and expenses) incurred by Consolidated in connection with any legal action take to collect payment, together with interest on the amount of any unpaid fee or obligation from the date such fee was required to be paid. Except as described above, all costs and expenses incurred in connection with the Merger Agreement will be paid by the party incurring the cost or expense.

Specific Performance; Remedies

     The parties to the Merger Agreement agreed that irreparable damage would occur if any provision of the Merger Agreement were not performed in accordance with its terms and that the parties will be entitled to an injunction or injunctions to prevent breaches of the Merger Agreement or to enforce specifically the performance of its terms and provisions in addition to any other remedy to which they are entitled at law or in equity.

Amendment; Extension and Waiver

     Any provision of the Merger Agreement may be amended or waived prior to the effective time if such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the Merger Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective. After the SureWest shareholder approval has been obtained, however, there will be no amendment or waiver that would require the further approval of SureWest shareholders under California law without such approval having been first obtained.

Governing Law; Venue

     The Merger Agreement is governed by and will be construed in accordance with the laws of the State of California. The parties to the Merger Agreement have submitted to the exclusive jurisdiction and venue of the courts of the State of California or federal courts located in the County of San Francisco, California.

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DEBT FINANCING

General

     The Merger Agreement is not subject to any financing contingency. Consolidated intends to finance the cash portion of the Merger Consideration with debt and cash on hand. With respect to the debt financing, Consolidated has obtained a commitment for the financing necessary to complete the transaction from Morgan Stanley Senior Funding, Inc. (“MSSF”). In connection with the execution of the Merger Agreement, Consolidated Communications, Inc., a wholly-owned subsidiary of Consolidated (“CCI”), entered into a Commitment Letter, dated February 5, 2012 (the “Commitment Letter”), from MSSF.

     The commitments and other obligations set forth in the Commitment Letter shall automatically terminate unless the lenders shall in their discretion agree to an extension, upon the earliest to occur of (a) the execution and delivery of financing documentation by all of the parties thereto and the consummation of the Mergers; (b) November 5, 2012, if the financing documentation shall not have been executed and delivered by all such parties thereto; and (c) the date of termination or abandonment of the Merger Agreement.

Bridge Facility

     The Commitment Letter provides for a senior unsecured bridge facility evidenced by promissory notes in an aggregate principal amount of $350,000,000 (the “Bridge Facility”). The Bridge Facility can be used to finance a portion of the aggregate cash consideration of, and to pay the fees and expenses in connection with, the transactions contemplated by the Merger Agreement and to repay existing indebtedness of SureWest.

     Pursuant to the terms of the Commitment Letter, the definitive agreement to be entered into with respect to the Bridge Facility will contain (i) representations and warranties applicable to CCI and its subsidiaries customary and substantially similar to the representations and warranties in the Amended and Restated Credit Agreement, dated as of June 8, 2011, among Consolidated, CCI, the lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent and other agents party thereto (the “Credit Agreement”), (ii) covenants that are customary for high yield debt securities of issuers of similar size and credit quality as CCI, as determined by the lead arranger thereunder in light of prevailing market conditions and other circumstances, provided that prior to the date which is one year from the closing date, the limitation on restricted payments and on debt will be more restrictive than customary high yield covenants, and (iii) events of default customary and usual for financings of this kind with customary exceptions, baskets and qualifications. The Bridge Facility will be guaranteed by certain subsidiaries of CCI.

     The closing of the Bridge Facility will be subject to the satisfaction of certain conditions, including no material adverse effect having occurred with respect to Consolidated or SureWest and their respective subsidiaries, in each case in the aggregate, the negotiation, execution and delivery of definitive loan documentation for the Bridge Facility and other customary closing conditions. CCI will pay all reasonable costs incurred in connection with the preparation, negotiation, execution and delivery of the Bridge Facility documentation and any security arrangements in connection therewith.

     CCI will indemnify the MSSF, the bridge lenders, the administrative agent and their respective affiliates, and hold them harmless from and against all reasonable out-of-pocket costs, expenses and liabilities arising out of or relating to the transactions described in the Commitment Letter and any actual or proposed use of the proceeds of any loans made under the Bridge Facility. No person will be indemnified for costs, expenses or liabilities to the extent determined by a final, non-appealable judgment of a court of competent jurisdiction to have been incurred solely from the gross negligence or willful misconduct of such person.

     Each lender may assign all or, subject to minimum amounts to be agreed, a portion of its loans and commitments under the Bridge Facility. Assignments will require payment of an administrative fee to the administrative agent and, except for an assignment to an existing lender or an affiliate of an existing lender, the consent of the administrative agent. In addition, each lender may sell participations in all or a portion of its loans and commitments un