Document:

exv10w36

Exhibit 10.36

GLOBAL WATER RESOURCES, LLC

2008 UNIT OPTION PLAN

 

 

GLOBAL WATER RESOURCES, LLC

2008 UNIT OPTION PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 1 DEFINITIONS	 	 	1	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	l.l	 	 	Definitions	 	 	1	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 2 THE OPTION PLAN	 	 	2	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	2.1	 	 	Purpose of the Plan	 	 	2	 
	 	2.2	 	 	Units Subject to the Plan	 	 	2	 
	 	2.3	 	 	Term of the Plan	 	 	3	 
	 	2.4	 	 	Administration of the Plan	 	 	3	 
	 	2.5	 	 	Eligibility and Limits	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 3 TERMS OF OPTIONS	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	3.1	 	 	Terms and Conditions of Options	 	 	3	 
	 	 	 	 	(a)
	 	General Terms and Conditions

	 	 	3	 
	 	 	 	 	(b)
	 	Option Price

	 	 	4	 
	 	 	 	 	(c)
	 	Option Term

	 	 	4	 
	 	 	 	 	(d)
	 	Payment

	 	 	4	 
	 	 	 	 	(e)
	 	Conditions to the Exercise of an Option

	 	 	4	 
	 	3.2	 	 	Treatment of Awards Upon Termination of Service	 	 	4	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 4 RESTRICTIONS ON UNITS	 	 	5	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	4.1	 	 	Escrow of Options	 	 	5	 
	 	4.2	 	 	Forfeiture of Options	 	 	5	 
	 	4.3	 	 	Restrictions on Transfer of Options	 	 	6	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 5 GENERAL PROVISIONS	 	 	6	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	5.1	 	 	Withholding	 	 	6	 
	 	5.2	 	 	Changes in Capital Structure; Merger; Liquidation	 	 	6	 
	 	5.3	 	 	Cash Awards	 	 	7	 
	 	5.4	 	 	Compliance with Code Section 409A	 	 	7	 
	 	5.5	 	 	Right to Terminate Employment or Service Relationship	 	 	8	 
	 	5.6	 	 	Non-alienation of Benefits	 	 	8	 
	 	5.7	 	 	Restrictions on Delivery and Sale of Units; Legends	 	 	8	 
	 	5.8	 	 	Listing and Legal Compliance	 	 	8	 
	 	5.9	 	 	Termination and Amendment of the Plan	 	 	8	 
	 	5.10	 	 	Unfunded Status of Awards	 	 	9	 
	 	5.11	 	 	Choice of Law	 	 	9	 
	 	5.12	 	 	Effective Date	 	 	9	 

i

 

GLOBAL WATER RESOURCES, LLC

2008 UNIT OPTION PLAN

SECTION 1 DEFINITIONS

     1.1 Definitions. Whenever used herein, the masculine pronoun will be deemed to
include the feminine, and the singular to include the plural, unless the context clearly indicates
otherwise, and the following capitalized words and phrases are used herein with the meaning
thereafter ascribed:

          (a) “Affiliate” means:

               (1) an entity that directly or through one or more intermediaries controls, is controlled by,
or is under common control with the Company, as determined by the Company; or

               (2) any entity in which the Company has such a significant equity interest that the Company
determines it should be deemed an “Affiliate,” as determined in the sole discretion of the
Company.

          (b) “Code” means the Internal Revenue Code of 1986, as amended.

          (c) “Committee” means the committee appointed by the Managers to administer the Plan
or, in lieu of any such appointment, the Managers, collectively.

          (d) “Company” means Global Water Resources, LLC, a Delaware limited liability
company.

          (e) “Disability” has the same meaning as provided in the long-term disability plan or
policy maintained or, if applicable, most recently maintained, by the Company or, if applicable,
any Affiliate of the Company, for the Participant. If no long-term disability plan or policy was
ever maintained on behalf of the Participant, Disability means that condition described in Code
Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of
Disability will be made by the Committee and will be supported by advice of a physician competent
in the area to which such Disability relates.

          (f) “Fair Market Value” means the amount of the cash distribution that would be made
by the Company to the Participant with respect to a Unit on a hypothetical sale, at fair market
value, of the assets of the Company for cash and the distribution of net proceeds thereof
(calculated assuming the payment of all Company indebtedness, and after deducting a reasonable
estimate of all costs and expenses that would be incurred by the Company upon such a sale of
assets) pursuant to the terms of the Operating Agreement; provided, however, that for purposes of
granting Options, Fair Market Value of Units shall be determined in accordance with the
requirements of Code Section 409A. Fair Market Value shall be determined by the Managers

 

 

and Fair Market Value as determined by the Managers shall be final, binding and conclusive upon
each Participant.

          (g) “Managers” means managers of the Company, as appointed from time to time pursuant
to the terms of the Operating Agreement.

          (h) “Operating Agreement” means the Second Amended and Restated Limited Liability
Company Agreement of Global Water Resources, LLC, as may be subsequently amended from time to
time.

          (i) “Option” means a right to purchase Units as described in Plan
Section 3.2.

          (j) “Option Agreement” means an agreement between the Company and a Participant or
other documentation evidencing an award of an Option.

          (k) “Participant” means an individual who receives an Option
hereunder.

          (1) “Plan” means the Global Water Resources, LLC 2008 Unit Option
Plan.

          (m) “Termination of Service” means the termination of the employment or other service
relationship between a Participant and the Company and its Affiliates, regardless of whether
severance or similar payments are made to the Participant for any reason, including, but not by way
of limitation, a termination by resignation, discharge, death, Disability or retirement. The
Committee will, in its absolute discretion, determine the effect of all matters and questions
relating to a Termination of Service as it affects an Option, including, but not by way of
limitation, the question of whether a leave of absence constitutes a Termination of Service.

          (n) “Unit” means an interest in the Company’s profits and losses defined in the
Operating Agreement as a “Common Unit.”

SECTION 2 THE OPTION PLAN

     2.1 Purpose of the Plan. The Plan is intended to (a) provide incentive to officers,
employees, managers, consultants and other service providers of the Company and its Affiliates to
stimulate their efforts toward the continued success of the Company and to operate and manage the
business in a manner that will provide for the long-term growth and profitability of the Company;
(b) encourage ownership by officers, key employees, managers, consultants and other service
providers by providing them with a means to acquire a proprietary interest in the Company, acquire
ownership, or to receive compensation which is based upon appreciation in the value of the Units;
and (c) provide a means of obtaining, rewarding and retaining officers, employees, managers,
consultants and other service providers.

     2.2 Units Subject to the Plan.

          (a) Subject to adjustment in accordance with Section 5.2, Two Hundred (200) Units are hereby
reserved exclusively for issuance pursuant to Options granted under the Plan.

2

 

          (b) To the extent that an Option is canceled, terminates, expires, is forfeited or lapses for
any reason, any unissued Units subject to the Option will again be available for issuance pursuant
to Option(s) granted under the Plan.

     2.3 Term of the Plan. The Plan shall continue until terminated by the Managers.

     2.4 Administration of the Plan. The Plan is administered by the Committee. The
Committee has full authority in its discretion to determine the officers, employees, managers,
consultants and other service providers of the Company or its Affiliates to whom Options will be
granted and the terms and provisions of Options, subject to the Plan. Subject to the provisions of
the Plan, the Committee has full and conclusive authority to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions
of the respective Option Agreements and to make all other determinations necessary or advisable for
the proper administration of the Plan. The Committee’s determinations under the Plan need not be
uniform and may be made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan (whether or not such persons are similarly situated). The Committee’s
decisions are final and binding on all Participants. Each member of the Committee shall serve at
the discretion of the Managers and the Managers may from time to time remove members from or add
members to the Committee. Vacancies on the Committee shall be filled by the Managers.

     2.5 Eligibility and Limits. Options may be granted only to officers, employees,
managers, consultants and other service providers of the Company, or any Affiliate of the Company.

SECTION 3 TERMS OF OPTIONS

     3.1 Terms and Conditions of Options.

          (a) General Terms and Conditions. Each Option will be evidenced by a written Option
Agreement in such form and containing such terms, conditions and restrictions as the Committee may
determine to be appropriate. Each Option Agreement is subject to the terms of the Plan and any
provisions contained in the Option Agreement that are inconsistent with the Plan are null and void.
The number of Units as to which an Option may be granted will be determined by the Committee in its
sole discretion, subject to the provisions of Section 2.2 as to the total number of Units available
for grants under the Plan. The date an Option is granted will be the date on which the Committee
has approved the terms and conditions of the Option and has determined the recipient of the Option
and the number of Units, if any, covered by the Option, and has taken all such other actions
necessary to complete the grant of the Option. Any Option may be granted in connection with all or
any portion of a previously or contemporaneously granted Option. Exercise or vesting of an Option
granted in connection with another Option may result in a pro rata surrender or cancellation of any
related Option, as specified in the applicable Option Agreement. Options are not transferable or
assignable except by will or by the laws of descent and distribution governing the State in which
the Participant was domiciled at the time of the Participant’s death, and are exercisable, during
the Participant’s lifetime, only by the

3

 

Participant; or in the event of the Disability of the Participant, by the legal representative of
the Participant; or in the event of death of the Participant, by the legal representative of the
Participant’s estate or if no legal representative has been appointed within ninety (90) days of
the Participant’s death, by the person(s) taking under the laws of descent and distribution
governing the State in which the Participant was domiciled at the time of the Participant’s death;
except to the extent that the Committee may provide otherwise in any Option Agreement.

          (b) Option Price. Subject to adjustment in accordance with Plan Section 5.2 and the
other provisions of this Section 3.2, the exercise price (the “Exercise Price”) per Unit
purchasable under any Option must be as set forth in the applicable Option Agreement.

          (c) Option Term. The term of each Option shall be for the period determined by the
Committee and must be specified in the applicable Option Agreement.

          (d) Payment. Subject to the terms of the Plan and any applicable law or Option
Agreement, payments or transfers to be made by the Company on the grant or exercise of an Option
may be made in such form as the Committee determines at or after the time of grant, including
without limitation, cash, Units, other Options, or other property, or any combination, and may be
made in a single payment or transfer, in installments, or on a deferred basis, in each case
determined in accordance with rules adopted by, and at the discretion of, the Committee.

          (e) Conditions to the Exercise of an Option. Each Option granted under the Plan is
exercisable by the Participant or any other designated person, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee specifies in the Option
Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any
time before complete termination of such Option, may modify the terms of an Option to the extent
not prohibited by the terms of the Plan, including without limitation, accelerating the time or
times at which such Option may be exercised in whole or in part, and may permit the Participant or
any other designated person to exercise the Option, or any portion thereof, for all or part of the
remaining Option term, notwithstanding any provision of the Option Agreement to the contrary.

     3.2 Treatment of Awards Upon Termination of Service.

          (a) Any award under this Plan to a Participant who has experienced a Termination of Service
may be cancelled, accelerated, paid or continued, as provided in the applicable Option Agreement,
or, as the Committee may otherwise determine to the extent not prohibited by the Plan. The portion
of any award exercisable in the event of continuation or the amount of any payment due under a
continued award may be adjusted by the Committee to reflect the Participant’s period of service
from the date of grant through the date of the Participant’s Termination of Service or such other
factors as the Committee determines are relevant to its decision to continue the award.

          (b) Notwithstanding any provision in the Plan or any Option Agreement to the contrary, to the
extent necessary to avoid the imposition of tax on a Participant under Code Section 409A:

          
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               (1) any payment or settlement of an Option under this Plan made upon a Participant’s
Termination of Service (but only to the extent that such Termination of Service is not treated as
an “involuntary separation from service” under Code Section 409A); and

               (2) any payment or settlement of an Option under this Plan made upon a Participant’s
Termination of Service (but only to the extent that such Termination of Services is treated as an
“involuntary separation from service” under Code Section 409A) that causes value of the payment or
settlement made to the Participant to exceed the lesser of two (2) times either (A) the
Participant’s base compensation for the calendar year prior to the year of the Participant’s
Termination of Service or (B) the adjusted compensation limit specified in Code Section 401(a)(17)
in the year of the Participant’s termination of employment;

that, in either case, is otherwise payable or deliverable to the Participant within the first six
(6) months following the effective date of Termination of Service, shall be suspended and paid or
settled as soon as practicable following the end of the six-month period following such effective
date if, immediately prior to the Participant’s Termination of Service, the Participant is
determined to be a “specified employee” (within the meaning of Code Section 409A(a)(2)(B)(i)) of
the Company or an Affiliate (or any related “service recipient” within the meaning of Code Section
409A and the regulations thereunder). Any payments or settlements suspended by operation of the
foregoing sentence shall be paid as a lump sum following the end of such six-month period.

SECTION 4 RESTRICTIONS ON UNITS

     4.1 Escrow of Options. Any certificates, if any, representing the Options issued
under the Plan will be issued in the Participant’s name, but, if the applicable Option Agreement
so provides, the Units will be held by a custodian designated by the Committee (the “Custodian”).
Each applicable Option Agreement providing for transfer of Units to the Custodian must appoint the
Custodian as the attorney-in-fact for the Participant for the term specified in the applicable
Option Agreement, with full power and authority in the Participant’s name, place and stead to
transfer, assign and convey to the Company any Options held by the Custodian for such Participant,
if the Participant forfeits the Units under the terms of the applicable Option Agreement. During
the period that the Custodian holds Options subject to this Section, the Participant is entitled
to all rights, except as provided in the applicable Option Agreement, applicable to Options not so
held. Any distributions declared on Options held by the Custodian must, as provided in the
applicable Option Agreement, be paid directly to the Participant or, in the alternative, be
retained by the Custodian or by the Company until the expiration of the term specified in the
applicable Option Agreement and shall then be delivered, together with any proceeds, with the
Options to the Participant or to the Company, as applicable.

     4.2 Forfeiture of Options. Notwithstanding any vesting schedule set forth in any
Option Agreement, in the event that the Committee determines that a Participant violated a
non-competition, non-solicitation or confidentiality agreement as set forth in the Option Agreement
or any other agreement to which the Participant is a party, all Options and Units issued to the
holder pursuant to the Plan shall be forfeited; provided, however, that the Company shall return

5

 

to the holder the lesser of any consideration paid by the Participant in exchange for Units issued
to the Participant pursuant to the Plan or the then Fair Market Value of the Units forfeited
hereunder.

     4.3 Restrictions on Transfer of Options. The Participant does not have the right to
make or permit to exist any disposition of the Options issued pursuant to the Plan except as
provided in the Plan or the applicable Option Agreement. Any disposition of the Options issued
under the Plan by the Participant not made in accordance with the Plan or the applicable Option
Agreement will be void. The Company will not recognize, or have the duty to recognize, any
disposition not made in accordance with the Plan and the applicable Option Agreement, and the
Units so transferred will continue to be bound by the Plan and the applicable Option Agreement.

SECTION 5 GENERAL PROVISIONS

     5.1 Withholding. The Company must deduct from all cash distributions under the
Plan any taxes required to be withheld by federal, state or local government. Whenever the
Company proposes or is required to issue or transfer under the Plan or upon the vesting of
any
Unit Award, the Company has the right to require the recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local tax withholding requirements prior
to the
delivery of any certificate or certificates for such Units or the vesting of such Unit Award.
A
Participant may pay the withholding obligation in cash, or, if the applicable Option
Agreement
provides, a Participant may elect to have the number of Units he is to receive reduced by, or
with
respect to a Unit Award, tender back to the Company, the smallest number of Units which, when
multiplied by the Fair Market Value of the Units determined as of the Tax Date (defined
below),
is sufficient to satisfy the minimum required federal, state and local, if any, withholding
taxes
arising from exercise or payment of an Option (a “Withholding Election”). A Participant may
make a Withholding Election only if both of the following conditions are met:

          (a) The Withholding Election must be made on or prior to the date on which the amount of tax
required to be withheld is determined (the “Tax Date”) by executing and delivering to the Company
a properly completed notice of Withholding Election as prescribed by the Committee; and

          (b) Any Withholding Election made will be irrevocable except on six months advance written
notice delivered to the Company; however, the Committee may in its sole discretion disapprove and
give no effect to the Withholding Election.

     5.2 Changes in Capital Structure; Merger; Liquidation.

          (a) The number of Units reserved for the grant of Options, the Units reserved for issuance
upon the exercise of each outstanding Option, and the Exercise Price of each outstanding Option
shall be proportionately adjusted for any nonreciprocal transaction between the Company and the
holders of equity interests of the Company that causes the per unit value of the Units underlying
an Option to change, such as a unit dividend, unit split, spin-off, rights offering, or
recapitalization through a large, nonrecurring cash dividend (each, an “Equity Restructuring”);
provided, however, that in the case of an Option, the Committee shall consider

6

 

any provisions of Code Section 409A and the regulations thereunder that are required to be
followed as a condition of the Option not being treated as the grant of a new Option or a change
in the form of payment. Any adjustment described in the preceding sentence may include a
substitution in whole or in part of other equity securities of the issuer and the class involved
in such Equity Restructuring in lieu of the Units that are subject to the Option.

          (b) In the event of any merger, consolidation, extraordinary distribution, reorganization,
recapitalization, sale of substantially all of the Company’s assets, other change in the capital
structure of the Company, tender offer, or a change in control of the Company, that in each case
does not constitute an Equity Restructuring, the Committee, in its sole discretion, may make such
adjustments with respect to awards and take such other action as it deems necessary or appropriate,
including without limitation, the assumption of other awards, the substitution of new awards, the
adjustment of outstanding awards, the acceleration of awards, the removal of restrictions on
outstanding awards, or the termination of outstanding awards in exchange for the cash value
determined in good faith by the Committee of the vested and/or unvested portion of the award, all
as may be provided in the applicable Option Agreement or, if not expressly addressed therein, as
the Committee subsequently may determine in its sole discretion. Any adjustment pursuant to this
Section 5.2 may provide, in the Committee’s discretion, for the elimination without payment
therefor of any fractional Units that might otherwise become subject to any Option, but except as
set forth in this Section may not otherwise diminish the then value of the Option. In making any
such adjustment, the Committee shall consider the impact of any adverse tax consequences that may
affect the Participant under Code Section 409A and any adverse financial accounting consequences
that may affect the Company.

          (c) The existence of the Plan and the Options granted pursuant to the Plan shall not affect
in any way the right or power of the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having preferences or
priorities as to the Units or the rights thereof, the dissolution or liquidation of the Company,
any sale or transfer of all or any part of its business or assets, or any other corporate act or
proceeding.

     5.3 Cash Awards. The Committee may, at any time and in its discretion, grant to any
holder of an Option the right to receive, at such times and in such amounts as determined by the
Committee in its discretion, a cash amount which is intended to reimburse such person for all or a
portion of the federal, state and local income taxes imposed upon such person as a consequence of
the receipt of the Option or the exercise of rights thereunder.

     5.4 Compliance with Code Section 409A. In designing, granting, modifying, extending,
settling, or paying any Option hereunder, the Committee may take into account any adverse tax
consequences to the Participant under Code Section 409A and any related adverse accounting impacts
to the Company and may, in its discretion, structure Options to be exempt from or be subject to
Code Section 409A; provided that to the extent an Option is structured so as to be subject to Code
Section 409A, the Committee shall take such reasonable good faith efforts as it deems necessary or
appropriate to cause the Option to comply with the time and

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form of payment and other requirements applicable to equity awards that are subject to Code
Section 409A.

     5.5 Right to Terminate Employment or Service Relationship. Nothing in the Plan or in
any Option Agreement confers upon any Participant the right to continue as an officer, employee,
manager, consultant or other service provider of the Company or any of its Affiliates or affect
the right of the Company or any of its Affiliates to terminate the Participant’s employment or
service relationship at any time.

     5.6 Non-alienation of Benefits. Other than as specifically provided herein, no
benefit under the Plan or Option may be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No
such benefit may, prior to receipt by the Participant, be in any manner liable for or subject to
the debts, contracts, liabilities, engagements or torts of the Participant.

     5.7 Restrictions on Delivery and Sale of Units; Legends. Each Option is subject to
the condition that if at any time the Committee, in its discretion, shall determine that the
listing, registration or qualification of the Units covered by such Option upon any securities
exchange or under any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Option or the purchase or delivery of Units thereunder, the
delivery of any or all Units pursuant to such Option may be withheld unless and until such
listing, registration or qualification shall have been effected. If a registration statement is
not in effect under the Securities Act of 1933 or any applicable state securities laws with
respect to the Units purchasable or otherwise deliverable under Options then outstanding, the
Committee may require, as a condition of exercise of any Option or as a condition to any other
delivery of Units pursuant to an Option, that the Participant or other recipient of an Option
represent, in writing, that the Units received pursuant to the Option are being acquired for
investment and not with a view to distribution and agree that the Units will not be disposed of
except pursuant to an effective registration statement, unless the Company shall have received an
opinion of counsel that such disposition is exempt from such requirement under the Securities Act
of 1933 and any applicable state securities laws. The Company may include on certificates
representing Units delivered pursuant to an Option such legends referring to the foregoing
representations or restrictions or any other applicable restrictions on resale as the Company, in
its discretion, shall deem appropriate.

     5.8 Listing and Legal Compliance. The Committee may suspend the exercise or payment
of any Option so long as it determines that securities exchange listing or registration or
qualification under any securities laws is required in connection therewith and has not been
completed on terms acceptable to the Committee.

     5.9 Termination and Amendment of the Plan.

          (a) Amendment, Modification and Termination. The Managers at any time may amend or
terminate the Plan without the approval of the Company’s members; provided, however, that the
Managers may condition any amendment or modification on the approval of the Company’s members if
such approval is necessary or deemed advisable with respect to tax,

8

 

securities or other applicable laws, policies or regulations. No termination, amendment, or
modification of the Plan shall adversely affect any Option previously granted under the Plan,
without the written consent of the Participant.

          (b) Awards Previously Granted. At any time and from time to time, the Managers may
amend, modify or terminate any outstanding Option without approval of the Participant; provided,
however, that, subject to the terms of the applicable Option Agreement, such amendment,
modification or termination shall not, without the Participant’s consent, reduce or diminish the
value of such Option or adversely affect the Participant’s rights under the Option Agreement.

     5.10 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for
incentive and deferred compensation. With respect to any payments not yet made to a Participant
pursuant to an Option, nothing contained in the Plan or any Option Agreement shall give the
Participant any rights that are greater than those of a general creditor of the Company.

     5.11 Choice of Law. The laws of the State of Delaware govern the Plan, to the extent
not preempted by federal law, without reference to the principles of conflict of laws.

     5.12 Effective Date. The Plan shall become effective upon the date the Plan is
approved by the Managers.

     IN WITNESS WHEREOF, the Company has executed this Plan on this 2nd day of June,
2008.

	 	 	 	 	 
	 	GLOBAL WATER RESOURCES, LLC

 	 
	 	By:  	/s/ Trevor T. Hill
 	 
	 	 	Title: PRESIDENT & CEO 	 
	 	 	 	 
	 

9exv10w37

Exhibit 10.37

UNIT OPTION AWARD

PURSUANT TO THE GLOBAL WATER RESOURCES, LLC

2008 UNIT OPTION PLAN

     THIS AWARD is made as of the Grant Date by Global Water Resources, LLC (the “Company”) to
Cindy M. Liles (the “Optionee”).

     Upon and subject to the Terms and Conditions attached hereto and incorporated herein by
reference, the Company hereby awards as of the Grant Date to Optionee an option to purchase common
limited liability company interests (“Common Units”) of the Company (the “Option”), as described
below.

	 	A.	 	Grant Date: June 24, 2008.
	 
	 	B.	 	Type of Option: Nonqualified Option to purchase Common Units.
	 
	 	C.	 	Plan under which granted: Global Water Resources, LLC 2008 Unit Option Plan
(the “Plan”).
	 
	 	D.	 	Option Units: All or any part of Fifty (50) Common Units, subject to
adjustment as provided in the attached Terms and Conditions. “Option Units,” as used herein,
refers to the Common Units subject to, and prior to their issuance under, the Option.
	 
	 	E.	 	Exercise Price: $7,500.00 per Common Unit, subject to adjustment as provided
in the attached Terms and Conditions. The Exercise Price is, in the judgment of the
Committee, not less than 100% of the Fair Market Value of a Unit on the Grant Date.
	 
	 	F.	 	Option Period: The vested portion of the Option may be exercised only during
the Option Period which commences on the Grant Date and ends on the earliest of:

	 	(i)	 	The tenth (10th) anniversary of the Grant Date;
	 
	 	(ii)	 	Thirty (30) days following the date the Optionee ceases to be
an employee of the Company or an Affiliate except due to death, Disability or
an involuntary termination of employment for Cause;
	 
	 	(iii)	 	The day before the date the Optionee ceases to be an employee
of the Company due to an involuntary termination of employment for Cause,
	 
	 	(iv)	 	One (1) year following the date the Optionee ceases to be an
employee of the Company due to death or Disability;

	 	 	 	provided, however, that the Option may be exercised as to no more than the vested
Option Shares determined pursuant to the Vesting Schedule. Note that other
limitations to exercising the Option, as described in the attached Terms and
Conditions, may apply.
	 
	 	G.	 	Vesting Schedule: The Option shall become vested in accordance with the vesting
schedule attached hereto as Exhibit 2. Any portion of the Option which is
not vested as of the date the Optionee ceases to be an employee of the Company or an Affiliate
shall be forfeited.

 

 

	 	H.	 	Restrictions on Transfer: Common Units acquired pursuant to the
Option are nontransferable except as provided in the Operating Agreement.

     IN WITNESS WHEREOF, the Company has executed and sealed this Award as of the Grant Date set
forth above.

	 	 	 	 	 
	 	GLOBAL WATER RESOURCES, LLC

 	 
	 	By:  	/s/ Trevor T. Hill
 	 
	 	 	Title: PRESIDENT & CEO 	 
	 	 	 	 
	 

     By signing below, the Optionee hereby accepts the Award and agrees to the Terms and
Conditions attached hereto and also agrees that this Award and the accompanying terms and
conditions hereby supersede any prior oral or written commitment (if any) that the Company has
made to the Optionee with respect to the grant of an option to acquire an equity interest in the
Company.

	 	 	 	 	 
	 	 	 
	 	                                          /s/ Cindy M. Liles
 	 
	 	Optionee 	 
	 	 	 

2

 

	 	 	 	 	 

TERMS AND CONDITIONS

TO THE

UNIT OPTION AWARD

PURSUANT TO THE GLOBAL WATER RESOURCES, LLC

2008 UNIT OPTION PLAN

     1. Exercise of Option. Subject to the provisions provided herein or in the Award
which is made pursuant to the Global Water Resources, LLC 2008 Unit Option Plan:

     (a) the Option may be exercised with respect to all or any portion of the vested
Option Units at any time during the Option Period by the Optionee’s delivery to the
Company, at its principal place of business, of (i) a written notice of exercise in
substantially the form attached hereto as Exhibit 1, which shall be actually
delivered to the Company; (ii) payment to the Company of the Exercise Price multiplied by
the number of Option Units being purchased (the “Purchase Price”) in the manner provided in
subsection (b); (iii) payment to the Company of the full amount of the tax withholding as
required in subsection (c); and (iv) execution of the Operating Agreement or any
supplemental common unitholders agreement as required by Subsection (d) below.

     (b) The Purchase Price shall be paid in full upon the Optionee’s delivery of written
notice of exercise and no Option Units shall be issued or delivered until full payment
therefor has been made. Payment of the Purchase Price for all Option Units purchased
pursuant to the exercise of an Option shall be made in:

     (i) cash or certified check; or

     (ii) at any time during which the Units are traded by brokers, by receipt of
the Purchase Price in cash from a broker, dealer or other “creditor” as defined by
Regulation T issued by the Board of Governors of the Federal Reserve System
following delivery by the Optionee to the Committee of instructions in a form
acceptable to the Committee regarding delivery to such broker, dealer or other
creditor of that number of Option Units with respect to which the Option is
exercised.

     (c) The Company will notify the Optionee following the receipt of the Optionee’s
written notice of exercise of the amount of the federal, state, and local tax withholding
obligations imposed by reason of the exercise of the Option. The Optionee will pay to the
Company the full amount of the withholding obligation in cash within five (5) days
following the date of the Company’s notice.

     (d) As a condition to the Company’s issuance of the Option Units, the Optionee shall
be required to execute the Operating Agreement by such date as may be required by the
Company, and may be required to execute any supplemental common unitholders agreement to
which unitholders of the Company are parties at such time.

     (e) Following the Optionee’s execution of the Operating Agreement, and any other
supplemental common unitholders agreement, the Company shall issue to the Optionee the
Option Units purchased pursuant to the exercise.

1

 

2. Rights as Member.

     (a) The Optionee shall not be considered a Member under the Operating Agreement or the
Delaware Limited Liability Company Act with respect to any Option Units until the Option
Units are issued in the Optionee’s name. Thus, the Optionee shall have no rights with
respect to any Option Units, and except to the extent Optionee is already a Member, no
right to require any information or an accounting of any Company transactions, to inspect
the Company books and records and to otherwise participate in the management of the
business and the affairs of the Company as a Member. The Company shall make no adjustment
for any or distributions or other rights on or with respect to Option Units prior to the
date that the Option Units are issued in the Optionee’s name, except as the Plan or the
attached Award otherwise provides.

     (b) With respect to Option Units, the Optionee shall be considered the owner of the
underlying Common Units and a partner for income tax purposes as of the date the Option
Units are issued in the Optionee’s name. As the owner and a partner for income tax
purposes, the Optionee shall share in the allocations of profits and losses (and items
thereof) in accordance with the terms of the Operating Agreement. The Optionee shall be
bound by the Operating Agreement and any other supplemental common unitholders agreement,
and all Option Units and Common Units which are issued upon exercise of the Option (even if
following termination of employment or death of the Optionee) shall be subject to the
provisions of such agreements. Upon an exercise of this Option and the issuance of the
Common Units, the Company shall reallocate or shift capital account balances and/or make a
special allocation of Company profits such that the capital account of the Optionee when
expressed as a percentage of total capital account balances of all Members and economic
interest owners of the Company will equal such Optionee’s ownership interest percentage, as
determined under the Operating Agreement immediately after the exercise of the Option.

     (c) The Optionee’s rights as an owner of the Common Units shall be governed by the
Operating Agreement and any other supplemental common unitholders agreement executed by the
Optionee.

     3. Restriction on Transfer of Option. Except as otherwise expressly permitted by the
Committee in writing, the Option evidenced hereby is nontransferable other than by will or the laws
of descent and distribution and shall be exercisable during the lifetime of the Optionee only by
the Optionee (or in the event of her Disability, by her personal representative) and after the
Optionee’s death, only by the Optionee’s legatee or the executor of her estate.

     4. Changes in Capitalization.

     (a) The number of Option Units and the Exercise Price shall be proportionately
adjusted for nonreciprocal transactions between the Company and the holders of outstanding
equity interests of the Company that causes the per share value of the Common Units
underlying the Option to change, such as a unit dividend, unit split, spinoff, rights
offering, or recapitalization through a large, nonrecurring cash dividend (each, an “Equity
Restructuring”).

     (b) In the event of a merger, consolidation, extraordinary distribution,
reorganization, recapitalization, sale of substantially all of the Company’s assets, other
change in the capital structure of the Company, tender offer for the Company’s equity
interests, or a Change in Control Transaction, that in each case is not an “Equity
Restructuring,” the Committee shall take such action to make such adjustments in the Option
or the terms of this Award as the Committee, in its sole discretion, determines in good
faith is necessary or appropriate, including,

2

 

without limitation, adjusting the number and class of securities subject to the Option,
with a corresponding adjustment in the Exercise Price, substituting a new option to replace
the Option, accelerating the termination of the Option Period or terminating the Option in
consideration of a cash payment to the Optionee in an amount equal to the excess of the
then Fair Market Value of the Option Units over the aggregate Exercise Price of the Option
Shares. Any determination made by the Committee pursuant to this Section 4(b) will be final
and binding on the Optionee. Any action taken by the Committee need not treat all optionees
equally.

     (c) The existence of the Plan and the Option granted pursuant to this Award shall not
affect in any way the right or power of the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital or business structure, any
merger or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Common Units or the rights thereof, the dissolution or
liquidation of the Company, any sale or transfer of all or any part of its business or
assets, or any other corporate act or proceeding.

     5. Special Limitation on Exercise. Any exercise of the Option is subject to the
condition that if at any time the Committee, in its discretion, shall determine that the listing,
registration or qualification of the Common Units covered by the Option upon any securities
exchange or under any state or federal law is necessary or desirable as a condition of or in
connection with the delivery of Common Units thereunder, the delivery of any or all Common Units
pursuant to the Option may be withheld unless and until such listing, registration or
qualification shall have been effected. The Optionee shall deliver to the Company, prior to the
exercise of the Option, such information, representations and warranties as the Company may
reasonably request in order for the Company to be able to satisfy itself that the Option Units
being acquired in accordance with the terms of an applicable exemption from the securities
registration requirements of applicable federal and state securities laws.

     6. Legend on Certificates. Certificates (if any) evidencing the Common Units, to the
extent appropriate at the time, shall have noted conspicuously on the certificates a legend
intended to give all persons full notice of the existence of the conditions, restrictions, rights
and obligations set forth herein and in the Plan.

     7. Governing Laws. This Award and the Terms and Conditions shall be construed,
administered and enforced according to the laws of the State of Delaware; provided, however, the
Option may not be exercised except in compliance with exemptions available under applicable state
securities laws of the state in which the Optionee resides and/or any other applicable securities
laws.

     8. Successors. This Award and the Terms and Conditions shall be binding upon and
inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the
Optionee and the Company.

     9. Notice. Except as otherwise specified herein, all notices and other communications
under this Award shall be in writing and shall be deemed to have been given if personally
delivered or if sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address of the recipient.
Any party may designate any other address to which notices shall be sent by giving notice of the
address to the other parties in the same manner as provided herein.

     10. Severability. In the event that any one or more of the provisions or portion
thereof contained in the Award and these Terms and Conditions shall for any reason be held to be
invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect
any other provisions of

3

 

the Award and these Terms and Conditions, and the Award and these Terms and Conditions shall be
construed as if the invalid, illegal or unenforceable provision or portion thereof had never been
contained herein.

     11. Entire Agreement. Subject to the terms and conditions of the Plan, the Award and
the Terms and Conditions and the Operating Agreement express the entire understanding of the
parties with respect to the Option.

     12. Violation. Except as provided in Section 3, any transfer, pledge, sale,
assignment, or hypothecation of the Option or any portion thereof shall be a violation of the
terms of the Award or these Terms and Conditions and shall be void and without effect.

     13. Headings. Section headings used herein are for convenience of reference only and
shall not be considered in construing the Award or these Terms and Conditions.

     14. Specific Performance. In the event of any actual or threatened default in, or
breach of, any of the terms, conditions and provisions of the Award and these Terms and
Conditions, the party or parties who are thereby aggrieved shall have the right to specific
performance and injunction in addition to any and all other rights and remedies at law or in
equity, and all such rights and remedies shall be cumulative.

     15. No Right to Continued Service. Neither the establishment of the Plan nor the award
of Option Units hereunder shall be construed as giving the Optionee the right to continued service
as an employee of the Company or in any other capacity.

     16. Definitions. Capitalized terms used, but not defined, in either the Award or the
Terms and Conditions shall be given the meaning ascribed to them in the Plan. As used in these
Terms and Conditions and the Award:

     (a) “Cause” has the same meaning as the term, or any substantially similar
term, is defined in the employment or other services agreement between the Optionee and the
Company or an Affiliate that is in effect at the date that an action constituting “Cause”
occurs, or if no such definition or agreement exists, “Cause” means (i) failure (other than
such failure resulting from Disability) by the Optionee to substantially perform her duties
with the Company or an Affiliate; (ii) conduct by the Optionee that amounts to fraud,
dishonesty, disloyalty or willful misconduct in the performance of the Optionee’s duties
and responsibilities; (iii) the Optionee being arrested for, charged in relation to (by
criminal information, indictment or otherwise), or convicted of a crime involving breach of
trust or moral turpitude or any felony; or (iv) conduct by the Optionee that amounts to
gross and willful insubordination or inattention to her duties and responsibilities.

     (b) “Change in Control Transaction” means any one of the following events: (i)
the sale of all, or substantially all, of the Company’s consolidated assets in any single
transaction or series of related transactions; (ii) the sale or issuance, or series of
related sales or issuances, of equity securities of the Company possessing the ordinary
voting power (on a fully-diluted basis) to elect or appoint a majority of the Managers to
an Independent Third Party or a group of affiliated Independent Third Parties; or (iii) any
merger or consolidation of the Company with or into another corporation (regardless of
which entity is the surviving corporation) if, after giving effect to such merger or
consolidation the holders of the Company’s equity securities (on a fully-diluted basis)
immediately prior to the merger or consolidation own equity securities of the surviving or
resulting corporation representing less than a majority of the ordinary voting power to
elect directors of the surviving or resulting corporation (on a fully-diluted basis).

4

 

     (c) “Independent Third Party” means any person who, immediately prior to the
contemplated transaction, does not own in excess of 5% of the Company’s equity securities on a
fully-diluted basis, who is not controlling, controlled by or under common control with any such 5%
owner of the Company’s equity securities and who is not the spouse, ancestor or descendant (by
birth or adoption) of any such 5% owner of the Company’s equity securities.

     (d) “Member” shall refer to the individuals set forth in Exhibit A of the Operating
Agreement, as the same may be amended from time to time.

5

 

EXHIBIT 1

NOTICE OF EXERCISE

UNIT OPTION AWARD

PURSUANT TO THE GLOBAL WATER RESOURCES, LLC

2008 UNIT OPTION PLAN

	 	 	 
	 

	 	Name 

	 

	 	Address 

	 

	 	
 

	 

	 	Date 

Global Water Resources, LLC (or its successor, if applicable)

	 	 	 
	 

	 	 
	 

	 	 
	Attn: 

	 	 

			
	Re:	 	Exercise of Unit Option

Gentlemen:

     Subject to acceptance hereof by Global Water Resources, LLC (or its successor, as the case
may be) (the “Company”) pursuant to the provisions of the Global Water Resources, LLC 2008 Unit
Option Plan (the “Plan”) I hereby give notice of my election to exercise options granted to me to
purchase                      Common
Units of the Company under the Unit Option Award (the “Award”) dated as
of                     .

     I have enclosed payment for the applicable purchase price as follows:

	 	o	 	by delivery of cash or a certified check for $        
                 for the full purchase price
payable to the order of the Global Water Resources, LLC or its successor, as the
case may be.
	 
	 	o	 	by delivery of the purchase price by                 
                
                
, a broker, dealer or
other “creditor” as defined by Regulation T issued by the Board of Governors of the
Federal Reserve System. I hereby authorize the Company to issue a certificate for
the number of Common Units indicated above in the name of said broker, dealer or
other creditor or its nominee pursuant to instructions received by the Company and
to deliver said certificate directly to that broker, dealer or other creditor (or to
such other party specified in the instructions received by the Company from the
broker, dealer or other creditor) upon receipt of the purchase price. NOTE: This
choice is only available if and when the Common Units are traded by brokers.

     As soon as the certificate is registered in my name, please deliver it to me at the above
address.

     If the Common Units being acquired is not registered for issuance to the Optionee pursuant to
an effective registration statement on Form  S-8 (or successor form) filed under the Securities Act
of 1933, as amended (the “1933 Act”), I understand and agree that I may be required to make such
additional representations, warranties, covenants, and agreements with the Company as follows:

Exhibit 1 — Page 1 of 3

 

 

The Common Units being acquired by me will be acquired for my own account without the
participation of any other person, with the intent of holding the Common Units for investment and
without the intent of participating, directly or indirectly, in a distribution of the Common Units
and not with a view to, or for resale in connection with, any distribution of the Common Units,
nor am I aware of the existence of any distribution of the Common Units;

I am not acquiring the Common Units based upon any representation, oral or written, by any person
with respect to the future value of, or income from, the Common Units but rather upon an
independent examination and judgment as to the prospects of the Company;

The Common Units were not offered to me by means of publicly disseminated advertisements or sales
literature, nor am I aware of any offers made to other persons by such means;

I am able to bear the economic risks of the investment in the Common Units, including the risk of
a complete loss of my investment therein;

I understand and agree that the Common Units will be issued and sold to me without registration
under any state law relating to the registration of securities for sale, and will be issued and
sold in reliance on the exemptions from registration under the 1933 Act, provided by Sections 3(b)
and/or 4(2) thereof and the rules and regulations promulgated thereunder;

The Common Units cannot be offered for sale, sold or transferred by me other than pursuant to: (A)
an effective registration under the 1933 Act or in a transaction otherwise in compliance with the
1933 Act; and (B) evidence satisfactory to the Company of compliance with the applicable securities
laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel
satisfactory to it with respect to compliance with the above laws;

The Company will be under no obligation to register the Common Units or to comply with any
exemption available for sale of the Common Units without registration or filing, and the
information or conditions necessary to permit routine sales of securities of the Company under
Rule 144 under the 1933 Act are not now available and no assurance has been given that it or they
will become available. The Company is under no obligation to act in any manner so as to make Rule
144 available with respect to the Common Units;

I have and have had complete access to and the opportunity to review and make copies of all
material documents related to the business of the Company, including, but not limited to,
contracts, financial statements, tax returns, leases, deeds and other books and records. I have
examined such of these documents as I wished and am familiar with the business and affairs of the
Company. I realize that the purchase of the Common Units is a speculative investment and that any
possible profit therefrom is uncertain;

I have had the opportunity to ask questions of and receive answers from the Company and any person
acting on its behalf and to obtain all material information reasonably available with respect to
the Company and its affairs. I have received all information and data with respect to the Company
which I have requested and which I have deemed relevant in connection with the evaluation of the
merits and risks of my investment in the Company;

I have such knowledge and experience in financial and business matters that I am capable of
evaluating the merits and risks of the purchase of the Common Units hereunder and I am able to bear
the economic risk of such purchase; and

Exhibit 1 — Page 2 of 3

 

 

The agreements, representations, warranties and covenants made by me herein extend to and
apply to all of the Common Units of the Company issued to me pursuant to the Award.
Acceptance by me of the certificate representing such Common Units shall constitute a
confirmation by me that all such agreements, representations, warranties and covenants made
herein shall be true and correct at that time.

     I understand that the certificates, if any, representing the Common Units being purchased by
me in accordance with this notice shall bear a legend referring to the foregoing covenants,
representations and warranties and restrictions on transfer, and I agree that a legend to that
effect may be placed on any certificate which may be issued to me as a substitute for the
certificates being acquired by me in accordance with this notice. I further understand that
capitalized terms used in this Notice of Exercise without definition shall have the meanings given
to them in the Award or the Plan.

	 	 	 
	Very truly yours,
	 	 
	 
	 	 
	
 

	 	 
	 
	 	 
	AGREED TO AND ACCEPTED:
	 	 
	 
	 	 
	GLOBAL WATER RESOURCES, LLC (or its successor, if applicable)
	 
	 	 
	By: 

	 	 
	        Title:  

	 	 
	 
	 	 
	Number of Common Units
	 	 
	Exercised: 

	 	 
	 
	 	 
	Number of Common Units
	 	 
	Remaining: 

	 	Date: 

Exhibit 1 — Page 3 of 3

 

 

EXHIBIT 2

VESTING SCHEDULE

UNIT OPTION AWARD

PURSUANT TO THE

GLOBAL WATER RESOURCES, LLC

2008 UNIT OPTION PLAN

	A.	 	The Option shall become vested as to a percentage of the Option Units following completion of
the years of service as an employee of the Company or an Affiliate after the Grant Date as
indicated in the schedule below.

	 	 	 	 	 	 	 
	Percentage of Option	 	Years of Service 
	Which is Vested	 	after the Grant Date
	 
	 	0	%	 	Less than 1
	 	25	%	 	1, but less than 2
	 	50	%	 	2, but less than 3
	 	75	%	 	3, but less than 4
	 	100	%	 	4 or more

	 	 	For purposes of the Vesting Schedule, Optionee shall be granted a year of service for each
twelve-consecutive-month period following the Grant Date, and during which Optionee
continues, at all times, as an employee of the Company or an Affiliate.
	 
	B.	 	Notwithstanding Item A above, if a Change in Control Transaction occurs when the Optionee is
an employee of the Company or an Affiliate, the Option shall become
fully vested upon the
effective date of such Change in Control Transaction.
	 
	C.	 	Any portion of the Option which is not vested as of the date the Optionee ceases to be an
employee of the Company or an Affiliate shall be forfeited.

Exhibit 2

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