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AMERICAN STATES WATER COMPANY
2016 STOCK INCENTIVE PLAN
2021 PERFORMANCE AWARD AGREEMENT 
 
THIS PERFORMANCE AWARD AGREEMENT (this “Agreement”) is dated as of [ ], 2021 by and between American States Water Company, a California corporation (the “Corporation”), and [ ] (the “Participant”).
 
W I T N E S S E T H
 
WHEREAS, pursuant to the American States Water Company 2016 Stock Incentive Plan (the “Plan”), the Corporation has granted to the Participant effective as of the date hereof (the “Award Date”), an award of Performance Awards under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.   
 
NOW, THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:
 
1. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan. The following phrases shall have the following meanings:
 
“Aggregate GSWC Operating Expense Level” means the cumulative operating expenses of GSWC as reported in the Corporation’s Form 10-Ks filed with the Securities and Exchange Commission for the period beginning January 1, 2021 and ending on the last day of the Performance Period, as adjusted to remove (i) Water Supply, depreciation and amortization and maintenance expenses as reported in such Form 10-Ks, (ii) public relations, legal and other professional services expenses of GSWC during the Performance Period applicable to defending GSWC from condemnation considerations and actions applicable to GSWC, (iii) any costs of defense, costs of settlement and judgments incurred in connection with claims arising from water quality incidences accruing during the Performance Period which are incurred in connection with claims determined by the Compensation Committee to be extraordinary events, (iv) write-offs associated with decisions or actions of the CPUC applicable to the financial statements in the Performance Period for GSWC, (v) gross-up of certain surcharges authorized by the CPUC to recover previously incurred costs recorded pursuant to generally accepted accounting principles, and (vi) pension cost net of any regulatory adjustment included in operating expenses resulting from the two-way pension balancing account as authorized by the CPUC. 
 
“ASUS” means American States Utility Services, Inc., a wholly subsidiary of the Corporation.

“ASUS Cumulative Net Earnings” means the cumulative net income of ASUS and its subsidiaries for the period beginning January 1, 2021 and ending on the last day of the Performance Period, less the amount, if any, of adjustments made to our contract pricing due to the Tax Cuts and Jobs Act of 2017. 
 

“ASUS New Base Acquisition Success Rate” means the percentage that results from dividing (1) the sum of the amounts of the contract awards announced by the Department of Defense for the Targeted New Bases set forth in the Targeted New Base Acquisition Table for the Targeted New Bases awarded to ASUS during 2021-2023 plus the sum of the Initial Joint Inventory Adjustment Difference for any Targeted New Bases  (the numerator), by (2) the sum of the amount of contract awards announced by the Department of Defense during 2021-2023 for the Targeted New Bases set forth in the Targeted New Base Acquisition Table for the Targeted New Bases awarded to all competitors during 2021-2023, including ASUS, plus the sum of the Initial Joint Inventory Adjustment Difference for any Targeted New Bases (the denominator).
 
“Board of Directors” means the Corporation’s board of directors.
 
“Compensation Committee” means the compensation committee of the Board.
 
“CPUC” means the California Public Utilities Commission.
 
“GSWC” means Golden State Water Company, a wholly owned subsidiary of the Corporation.

“Initial Joint Inventory Adjustment Difference” means, with respect to any Targeted New Base, the difference between (1) the amount of the contract award for such Targeted New Base at the time of the execution of the Bill of Sale for such Targeted New Base following a joint inventory of the assets at such Targeted New Base, and (2) the amount of the contract award for such Targeted New Base announced by the Department of Defense at the time of the contract award.
 
“Payout Percentage” means, with respect to each Performance Criteria, the percentage of the Participant’s Target Performance Award that is payable with respect to such Performance Criteria based on the degree of satisfaction of the Performance Target for such Performance Criteria.
 
“Peer Group” means the following seven companies: American Water Works Company, Inc., Essential Utilities, Inc., California Water Service Group, SJW Group, Middlesex Water Company, York Water Company and Artesian Resources Corporation.  For this purpose, total shareholder return for the Corporation and each of the other seven companies shall be calculated using the Securities and Exchange Commission guidelines for reporting financial performance.  If the stock of any of the members of the Peer Group is no longer traded or is suspended from trading as of the last business day of the Performance Period, that company shall not be included in the Peer Group.

“Performance Criteria” means ASUS Cumulative Net Earnings, ASUS New Base Acquisition Success Rate, Aggregate GSWC Operating Expense Level and Total Shareholder Return.

“Performance Period” means the period commencing on January 1, 2021 and ending on the earliest of (i) December 31, 2023, and (ii) if applicable, the date of vesting of the Performance Awards pursuant to Section 3(d); provided that the preceding clause (ii) shall not 

apply in the event of vesting of the Performance Awards on account of the termination of the Participant’s employment as a result of Total Disability pursuant to Section 3(d).

“Performance Target” means the specific goal established by the Compensation Committee with respect to each of the Performance Criteria set forth in Exhibit A.
 
“Retirement Age” means the time that the Participant is at least age 55 and the sum of the age of the Participant and the Participant’s years of service with the Corporation and/or one of its wholly owned subsidiaries is at least 75.
 
“Targeted New Base” means the bases set forth in the Targeted New Base Acquisition Table.
 
“Targeted New Base Acquisition Table” means the table presented to the Compensation Committee at its meeting on February 1, 2021.
 
“Target Performance Award” means with respect to each Performance Criteria, the number of Performance Awards set forth on Exhibit A as the target for such Performance Criteria.

“Total Shareholder Return” means the Corporation’s total shareholder return, including reinvestment of dividends, as compared to the total shareholder return, including reinvestment of dividends, of each of the members of the Peer Group.  If any of the stock of any of the members of the Peer Group is no longer traded or is suspended from trading as of the last business day in the Performance Period, the Performance Target for Total Shareholder Return set forth in subsection A of Exhibit A shall be adjusted as provided therein.
 
“Water Supply” means water purchased, power purchased for pumping, groundwater production assessment and the water supply balancing accounts.
 
2. Grant.
 
a. Amount of Award. Subject to the terms of this Agreement, the Corporation hereby grants to the Participant the performance awards set forth on Exhibit A (subject to adjustment as provided in Section 5.2 of the Plan (the “Performance Awards”).
 
b. Account. The Corporation will maintain a Performance Award bookkeeping account for the Participant (the “Account”).  The Performance Awards shall be used solely as a device for determination of the payment eventually to be made to the Participant if such Performance Awards vest pursuant to Section 3.  The Performance Awards shall not be treated as property or as a trust fund of any kind.

3. Vesting.
 
a. General. The Performance Awards (including any dividend equivalents thereon) shall vest and become nonforfeitable with respect to thirty-three percent (33%) of the total number of Performance Awards on the first Installment Vesting Date, thirty-

three percent (33%) of the total number of Performance Awards on the second Installment Vesting Date and thirty-four percent (34%) of the total number of Performance Awards on the last Installment Vesting Date; provided, however, that the final number of Performance Awards (including any Performance Awards credited as dividend equivalents thereon) shall be determined only upon completion of the Performance Period in accordance with Section 4.  Except as otherwise provided in this Agreement, the first Installment Vesting Date shall be December 31, 2021, the second Installment Vesting Date shall be December 31, 2022 and the last Installment Date Vesting Date shall be December 31, 2023 (each an “Installment Vesting Date”). 
 
b. Termination of Employment Prior to Vesting. Notwithstanding Section 3(a), the Participant’s Performance Awards (and any Performance Awards credited as dividend equivalents thereon) shall terminate to the extent that such Performance Awards have not become vested prior to the first date the Participant is no longer employed by the Corporation or one of its Subsidiaries, regardless of the reason for the termination of the Participant’s employment with the Corporation or a Subsidiary, subject to early vesting as provided in Sections 3(d) and 3(e).  If the Participant is employed by a Subsidiary and that entity ceases to be a Subsidiary, such event shall be deemed to be a termination of employment of the Participant for the purposes of this Agreement (unless the Participant otherwise continues to be employed by the Corporation or another of its Subsidiaries following such event).
 
c. Termination of Performance Awards. If any unvested Performance Awards are terminated under Section 3(b), such Performance Awards (and any Performance Awards credited as dividend equivalents thereon) shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Participant or the Participant’s beneficiary or personal representative, as the case may be.
 
d. Early Vesting as a Result of Death, Disability or a Change in Control Event. Notwithstanding Section 3(a), the Participant’s Performance Awards (and any Performance Awards credited as dividend equivalents thereon), to the extent such Performance Awards are not then vested, shall either (i) become fully vested upon the termination of employment as a result of death or Total Disability of the Participant, or (ii) if Participant’s employment is terminated by the Corporation without Cause or the Participant terminates his or her employment for Good Reason upon or within twenty four months after the occurrence of a Change in Control Event, be deemed fully vested immediately prior to the first date the Participant is no longer employed by the Corporation.  In the case of any inconsistency between this Section 3(d) and Section 5.2(c) of the Plan, this Section 3(d) shall control.
 
e. Early Vesting if Attained Retirement Age. Notwithstanding Section 3(a), the Participant’s Performance Awards (and any Performance Awards credited as dividend equivalents thereon), to the extent such Performance Awards are not then vested, shall become fully vested upon the Participant attaining Retirement Age.
  

4. Determination of Performance Awards Payable.
 
a. Basis of Determination. The number of Performance Awards payable to the Participant (and any Performance Awards credited as dividend equivalents thereon) shall be determined on the basis of the extent to which the Performance Targets for each of the Performance Criteria have been achieved.  The number of Performance Awards payable to the Participant shall be equal to the sum of the number of Performance Awards payable to the Participant with respect to each Performance Criteria, together with any dividend equivalents credited on such Performance Awards.  The number of Performance Awards payable with respect to each Performance Criteria shall be equal to the Target Performance Award for such Performance Criteria multiplied by the Payout Percentages set forth in Exhibit A for such Performance Criteria, together with any dividend equivalents credited on such Performance Awards.
 
b. Compensation Determination and Certification. As soon as practicable following the end of the Performance Period and, if applicable, the completion of the independent auditor’s report for the last year of the Performance Period, but in no event later than March 15 of the year following the end of the Performance Period, the Compensation Committee shall determine (i) the extent to which the Performance Targets for Performance Criteria are achieved, (ii) the Payout Percentages for each of the Performance Criteria and (iii) the number of Performance Awards (including any Performance Awards credited as dividend equivalents thereon) that have been earned, which determinations shall be made in accordance with Sections 7(b)(i) and 7(b)(iii), if applicable.  For levels of achievement between target and zero and target and the maximum, the Compensation Committee shall determine the Payout Percentage by interpolation, to the extent not otherwise expressly set forth in subsection A, B, C or D of Exhibit A.   

c. Adjustments and Limitations. Notwithstanding the foregoing, the number of Performance Awards payable to the Participant (and the Performance Awards credited as dividend equivalents thereon) shall be subject to the adjustments, limitations, the Compensation Committee’s discretionary authority to make adjustments and other terms and conditions set forth in the Plan, provided that in no event may the maximum number of shares of Common Stock subject to this Award exceed 100,000.  
 
5. Continuance of Employment. The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement.  Partial employment or service, even if substantial, during any vesting period will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services.
  
Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation, affects the Participant’s status as an employee at will who is subject to termination without cause, confers upon the Participant any right to remain employed by or in service to the Corporation or Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or services, or affects 

the right of the Corporation or any Subsidiary to increase or decrease the Participant’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Participant without his or consent hereto.
 
6. Dividend and Voting Rights.
 
a. Limitation of Rights Associated with Performance Awards. The Participant shall have no rights as a shareholder of the Corporation, no dividend rights (except as expressly provided in Section 6(b) with respect to dividend equivalent rights) and no voting rights, with respect to the Awards and any Common Shares underlying or issuable in respect of such Awards until such Common Shares are actually issued to and held of record by the Participant.  No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of the Common Shares.
 
b. Dividend Equivalents. The Participant shall be entitled to be credited with dividend equivalents in the form of additional Performance Awards with respect to the Awards credited to his or her Account as the Corporation declares and pays dividends in cash on its Common Shares.  The number of Performance Awards to be credited to the Participant’s Account as a dividend equivalent will equal (1) the sum of the per share cash dividends paid by the Corporation on its Common Shares during the Performance Period multiplied by the number of Awards credited to the Participant’s Account on the last day of the Performance Period divided by (2) the average of the Fair Market Value of the Common Shares on each dividend payment date during the Performance Period.  Performance Awards credited as dividend equivalents will become vested to the same extent as the Awards to which they relate.  For purposes of clarity, no dividend equivalents shall be credited for a dividend record date with respect to any Awards that were paid or terminated prior to such dividend record date and the dividend equivalents will vest only if and to the extent that the underlying Performance Awards vest.
 
7. Timing and Manner of Distribution.
 
a. General. On or soon as administratively practicable following the end of the Performance Period, but in no event later than March 15 of the year following the end of the Performance Period, the Corporation shall deliver to the Participant (or the Participant’s Beneficiary) a number of Common Shares equal to the number of Performance Awards subject to this Award that become vested on or prior to the end of the Performance Period (including any Performance Awards credited as dividend equivalents with respect to such vested Performance Awards), unless such Performance Awards terminate prior to such Installment Vesting Date pursuant to Section 3(b).
  
b. Payment of Performance Awards upon Early Vesting as a Result of Death, Disability or Termination of Employment following a Change in Control Event.   
Notwithstanding Section 7(a):

i. Upon termination of the Participant’s employment as a result of death of the Participant, the Corporation shall deliver to the Participant or his or her Beneficiary a number of Common Shares equal to the number of Performance Awards subject to this 

Award that become vested in accordance with Section 3 (including any Performance Awards credited as dividend equivalents with respect to such Performance Awards) as soon as administratively practicable following such termination of employment (but in no event later than 60 days following termination of employment or, to the extent applicable, the date specified in Section 7(e)).  Notwithstanding anything to the contrary contained herein, the number of Common Shares payable under any Performance Award pursuant to this Section 7(b)(i) shall be determined at an assumed result of performance with a Payout Percentage of 100% for each Performance Criteria (i.e., Payout as a Percentage of Target of 100%).

ii. Upon termination of the Participant’s employment as a result of Total Disability of the Participant, the Corporation shall deliver to the Participant or his or her Beneficiary a number of Common Shares equal to the number of Performance Awards subject to this Award that become vested in accordance with Section 3 (including any Performance Awards credited as dividend equivalents with respect to such Performance Awards) as soon as administratively practicable following the end of the Performance Period (i.e., December 31, 2023) (but in no event later than March 15, 2024 or, to the extent applicable, the date specified in Section 7(e)). 

iii. Upon termination of Participant’s employment upon or within twenty four months after the occurrence of a Change in Control Event (A) by the Corporation without Cause or (B) by the Participant for Good Reason, in each case, then the Corporation shall deliver to the Participant a number of Common Shares equal to the number of Performance Awards vested in accordance with Section 3 (including any Performance Awards credited as dividend equivalents with respect to such Awards) as soon as administratively possible following his or her termination of employment (but in no event later than 60 days following termination of employment or, to the extent applicable, the date specified in Section 7(e)).  Notwithstanding anything to the contrary contained herein, the number of Common Shares payable under any Performance Award pursuant to this Section 7(b)(iii) shall be determined at an assumed result of performance with a Payout Percentage of 100% for each Performance Criteria (i.e., Payout as a Percentage of Target of 100%).
     
c. Termination of Performance Awards Upon Payment. A Performance Award will terminate upon the payment of that Performance Award in accordance with the terms hereof, and the Participant shall have no further rights with respect to such Performance Award.

d. Form of Payment. The Corporation may deliver the Common Shares payable to the Participant under this Section 7 either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion.

e. Section 409A. Notwithstanding anything herein to the contrary, if the Corporation reasonably determines that the payment of Common Shares as a result of the Participant’s termination of employment is subject to Section 409A(a)(2)(B)(i) of the Code, such payment shall not be paid until the earlier of (i) six months after the Participant’s “separation from service” (within the meaning of Section 409A of the Code 

and Treasury Regulations Section 1.409A-1(h) without regard to optional alternative definitions available thereunder) and (ii) the Participant’s death.
 
8. Restrictions on Transfer. Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily.  The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, (b) transfers by will or the laws of descent and distribution, or (c) transfers pursuant to a QDRO order if approved or ratified by the Compensation Committee.
 
9. Adjustments Upon Specified Events. Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 5.2 of the Plan, the Compensation Committee shall make adjustments if appropriate in the number of Performance Awards then outstanding and the number and kind of securities that may be issued in respect of the Award.
 
10. Tax Withholding. Upon the vesting and/or distribution of Common Shares in respect to the Performance Awards, the Corporation (or the Subsidiary last employing the Participant) shall have the right at its option to (a) require the Participant to pay or provide for payment in respect of cash of the amount of any taxes that the Corporation or any Subsidiary may be required to withhold with respect to such vesting and/or distribution, or (b) deduct from any amount payable to the Participant the amount of any taxes which the Corporation or any Subsidiary may be required to withhold with respect to such vesting and/or distribution.  In any case where a tax is required to be withheld in connection with the delivery of Common Shares under this Agreement, the Compensation Committee may, in its sole discretion, direct the Corporation or the Subsidiary to reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then Fair Market Value (with the “Fair Market Value” of such shares determined in accordance with the applicable provisions of the Plan), to satisfy such withholding obligation at the minimum applicable withholding rates.
 
11. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s records, or at such other address as either party may hereafter designate in writing to the other.  Any such notice shall be given only when received, but if the Participant is no longer an employee of the Corporation, shall be deemed to have been duly given by the Corporation when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch office regularly maintained by the United States Government.

12. Plan. The Award and all rights of the Participant under this Agreement are subject to, and the Participant agrees to be bound by, all of the terms and conditions of the provisions of the Plan, incorporated herein by reference.  In the event of a conflict or inconsistency between the terms and conditions of this Agreement and of the Plan, the terms and conditions of the Plan shall govern, except as otherwise provided expressly herein.  The Participant agrees to be bound by the terms of the Plan and this Agreement. The Participant acknowledges having read and understood the Plan and this Agreement.  Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the 

Compensation Committee do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Compensation Committee so conferred by appropriate action of the Compensation Committee under the Plan after the date hereof.

Notwithstanding anything herein to the contrary, if pursuant to the terms of any written change in control or other agreement (the delivery of which has been authorized by the Board), between the Corporation (or any Subsidiary), on the one hand, and the Participant, on the other, the Participant’s Performance Awards hereunder would vest or become payable earlier or in a manner other than as provided in this Agreement, then (subject to Section 7(e)) the terms of such change in control or other agreement shall control the vesting and payment thereof.
 
13. Entire Agreement. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 5.6 of the Plan.  Such amendment must be in writing and signed by the Corporation.  The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

 14. Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  The Participant shall have only the rights of a general unsecured creditor of the Corporation, with respect to amounts credited and payable, if any, with respect to the Performance Awards, and rights no greater than the right to receive the Common Shares as a general unsecured creditor with respect to such Awards, as and when payable hereunder.
  
15. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
 
16. Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California without regard to conflict of law principles thereunder.
 
18. Construction. It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code.  This Agreement shall be construed and interpreted consistent with that intent.

19. Recoupment. The Award under this Agreement and the Common Shares received by the Participant upon the vesting of the Award, or the value, proceeds or other benefits received by the Participant upon the sale of such Common Shares, shall be subject to the Corporation’s Policy Regarding Recoupment of Certain Performance-Based Compensation Payments, as it may be amended from time to time, or as otherwise required by law or as may be necessary to enable the Corporation to comply with the rules of the New York Stock Exchange or the rules of any other national securities exchange or national securities association on which the securities of the Corporation or any of its subsidiaries may be listed.
 
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Participant has hereunto set his or her hand as of the date and year first above written.
						
	  
 
	

AMERICAN STATES WATER COMPANY, a California corporation
 

		
	 
 
	By:____________________________________
 

		
	 
 
	Print Name:_____________________________
 

		
	 
 
	Its:____________________________________
 

		
	 
 
	PARTICIPANT
 

		
	 
 
	Signature: ______________________________
 

	 
 
	 
 

	 
 
	Print Name: ____________________________
 

CONSENT OF SPOUSE
 
In consideration of the execution of the foregoing Performance Award Agreement by American States Water Company, I, __________________, the spouse of the Participant therein named, do hereby join with my spouse in executing the foregoing Performance Award Agreement and do hereby agree to be bound by all of the terms and provisions thereof and of the Plan.
 
Dated: ______________________________
 

						
	 
 
	Signature: ____________________________________
 

	 
 
	 
 

	 
 
	Print Name: __________________________________
 

  
 

 
EXHIBIT A
2021 PERFORMANCE AWARD AGREEMENT
 

																		
		Target Performance Award for Each Performance Criteria
	A.  Total Shareholder Return	B. Aggregate GSWC Operating Expense Level	C.  ASUS Cumulative Net Earnings	D.  ASUS New Base Acquisition Success Rate	Target
Total

	[     ]	[     ]	[     ]	[     ]	[     ]

A.Performance Targets and Payout Percentages for Total Shareholder Return:

1.If the Peer Group consists of seven companies at the end of the Performance Period: 

									
	Total Shareholder Return	Payout as a Percentage of Target
		≥ 7 members of the Peer Group	200%
		≥ 6 members of the Peer Group	171.43%
		≥ 5 members of the Peer Group	142.86%
		≥ 4 members of the Peer Group	114.29%
		≥ 3 members of the Peer Group	85.71%
		≥ 2 members of the Peer Group	57.14%
		≥ 1 member of the Peer Group	28.57%

2.If the Peer Group consists of six companies at the end of the Performance Period: 

									
	Total Shareholder Return	Payout as a Percentage of Target
		≥ 6 members of the Peer Group	200%
		≥ 5 members of the Peer Group	166.67%
		≥ 4 members of the Peer Group	133.33%
		≥ 3 members of the Peer Group	100%
		≥ 2 members of the Peer Group	66.67%
		≥ 1 member of the Peer Group	33.33%

3.If the Peer Group consists of five companies at the end of the Performance Period: 
									
	Total Shareholder Return	Payout as a Percentage of Target
		≥ 5 members of the Peer Group	200%
		≥ 4 members of the Peer Group	160%
		≥ 3 members of the Peer Group	120%
		≥ 2 members of the Peer Group	80%
		≥ 1 member of the Peer Group	40%

4.If the Peer Group consists of four companies at the end of the Performance Period: 
									
	Total Shareholder Return	Payout as a Percentage of Target
		≥ 4 members of the Peer Group	200%
		≥ 3 members of the Peer Group	150%
		≥ 2 members of the Peer Group	100%
		≥ 1 member of the Peer Group	50%

5.If the Peer Group consists of three companies at the end of the Performance Period: 
									
	Total Shareholder Return	Payout as a Percentage of Target
		≥ 3 members of the Peer Group	200%
		≥ 2 members of the Peer Group	133.33%
		≥ 1 member of the Peer Group	66.67%

6.If the Peer Group consists of two companies at the end of the Performance Period: 
									
	Total Shareholder Return	Payout as a Percentage of Target
		≥ 2 members of the Peer Group	200%
		≥ 1 member of the Peer Group	100%

7.If the Peer Group consists of one company at the end of the Performance Period: 
									
	Total Shareholder Return	Payout as a Percentage of Target
		≥ 1 member of the Peer Group	150%

B.Performance Targets and Payout Percentages for Aggregate GSWC Operating Expense Level

						
	Aggregate GSWC Operating Expense Level	Payout as a Percentage of Target
	≤$294.2 million	150%
	>$294.2 million and ≤$300.2 million	125%
	>$300.2 million and ≤$320.2 million	100%
	>$320.2 million and ≤$326.2 million	50%
	>$326.2 million	0%

C.Performance Targets and Payout Percentages for ASUS Cumulative Net Earnings

						
	ASUS Cumulative Net Earnings	Payout as a Percentage of Target
	≥$60.9 million	200%
	≥$55.9 million and <$60.9 million	150%
	≥$50.9 million and <$55.9 million	100%
	≥$45.9 million and <$50.9 million	50%
	<$45.9 million	0%

D.Performance Targets and Payout Percentages for ASUS New Base Acquisition Success Rate
						
	New Base Acquisition Success Rate	Payout as a Percentage of Target
	100.0%	250%
	77.8%	200%
	55.5%	150%
	33.3%	100%
	16.7%	50%
	0%	0%

If the U.S government does not award at least two of the Targeted New Bases to all competitors, including ASUS, during the 2021-2023 Performance Period, the payout will be at 100% of Target.

    Interpolation will be used for the payout on this metric.Document

Exhibit 4-B

DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934

As of January 29, 2021, Ford Motor Company (“Ford,” the “Company,” “we,” “our,” “us”) had three securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):  (i) Common Stock, $0.01 par value per share (“Common Stock”), (ii) 6.200% Notes due June 1, 2059 (the “June 2059 Notes”) and (iii) 6.000% Notes due December 1, 2059 (the “December 2059 Notes”).  Each of the Company’s securities registered under Section 12 of the Exchange Act is listed on The New York Stock Exchange.
DESCRIPTION OF CAPITAL STOCK
This section contains a description of our capital stock.  This description includes not only our Common Stock, but also our Class B Stock, par value $0.01 per share (“Class B Stock”) and preferred stock, certain terms of which affect the Common Stock , and the preferred share purchase rights, one of which is attached to each share of our Common Stock.  The following summary of the terms of our capital stock is not meant to be complete and is qualified by reference to our restated certificate of incorporation and the preferred share rights plan.
Our authorized capital stock currently consists of 6,000,000,000 shares of Common Stock, 530,117,376 shares of Class B Stock and 30,000,000 shares of preferred stock.
As of January 29, 2021, we had outstanding 3,907,842,941 shares of Common Stock and 70,852,076 shares of Class B Stock.  No shares of preferred stock were outstanding.
Common Stock and Class B Stock
Rights to Dividends and on Liquidation.  Each share of Common Stock and Class B Stock is entitled to share equally in dividends (other than dividends declared with respect to any outstanding preferred stock) when and as declared by our board of directors, except as stated below under the subheading “Stock Dividends.”
Upon liquidation, subject to the rights of any other class or series of stock having a preference on liquidation, each share of Common Stock will be entitled to the first $.50 available for distribution to common and Class B stockholders, each share of Class B Stock will be entitled to the next $1.00 so available, each share of Common Stock will be entitled to the next $.50 available and each share of common and Class B Stock will be entitled to an equal amount after that.  
Voting — General.  All general voting power is vested in the holders of Common Stock and the holders of Class B stock, voting together without regard to class, except as stated below in the subheading “Voting by Class.” The voting power of the shares of stock is determined as described below.  However, we could in the future create a series of preferred stock with voting rights equal to or greater than our Common Stock or Class B stock.
Each holder of Common Stock is entitled to one vote per share, and each holder of Class B Stock is entitled to a number of votes per share derived by a formula contained in our restated certificate of incorporation.  As long as at least 60,749,880 shares of Class B Stock remain outstanding, the formula will result in holders of Class B Stock having 40% of the general voting power and holders of Common Stock and, if issued, any preferred stock with voting power having 60% of the general voting power.
If the number of outstanding shares of Class B Stock falls below 60,749,880, but remains at least 33,749,932, then the formula will result in the general voting power of holders of Class B Stock declining to 30% and the general voting power of holders of Common Stock and, if issued, any preferred stock with voting power increasing to 70%.
If the number of outstanding shares of Class B Stock falls below 33,749,932, then each holder of Class B Stock will be entitled to only one vote per share.

Based on the number of shares of Class B Stock and Common Stock outstanding as of December 31, 2020, each holder of Class B Stock would be entitled to 36.768 votes per share on any matter submitted for a vote of shareholders.  Of the outstanding Class B Stock as of December 31, 2020, 70,778,212 shares were held in a voting trust.  The trust requires the trustee to vote all the shares in the trust as directed by holders of a plurality of the shares in the trust.
Non-Cumulative Voting Rights.  Our Common Stock and Class B stock  do not and will not have cumulative voting rights.  This means that the holders who have more than 50% of the votes for the election of directors can elect 100% of the directors if they choose to do so.
Voting by Class.  If we want to take any of the following actions, we must obtain the vote of the holders of a majority of the outstanding shares of Class B stock, voting as a class:
•issue any additional shares of Class B Stock (with certain exceptions);
•reduce the number of outstanding shares of Class B Stock other than by holders of Class B Stock converting Class B Stock into Common Stock  or selling it to the Company;
•change the capital stock provisions of our restated certificate of incorporation;
•merge or consolidate with or into another corporation;
•dispose of all or substantially all of our property and assets;
•transfer any assets to another corporation and in connection therewith distribute stock or other securities of that corporation to our stockholders; or
•voluntarily liquidate or dissolve.

Voting Provisions of Delaware Law.  In addition to the votes described above, any special requirements of Delaware law must be met.  The Delaware General Corporation Law contains provisions on the votes required to amend certificates of incorporation, merge or consolidate, sell, lease or exchange all or substantially all assets, and voluntarily dissolve.
Ownership and Conversion of Class B Stock.  In general, only members of the Ford family or their descendants or trusts or corporations in which they have specified interests can own or be registered as record holders of shares of Class B stock, or can enjoy for their own benefit the special rights and powers of Class B stock.  A holder of shares of Class B Stock can convert those shares into an equal number of shares of Common Stock for the purpose of selling or disposing of those shares.  Shares of Class B Stock acquired by the Company or converted into Common Stock cannot be reissued by the Company.
Preemptive and Other Subscription Right.  Holders of Common Stock do not have any right to purchase additional shares of Common Stock if we sell shares to others.  If, however, we sell Class B Stock or obligations or shares convertible into Class B Stock (subject to the limits on who can own Class B Stock described above), then holders of Class B Stock will have a right to purchase, on a ratable basis and at a price just as favorable, additional shares of Class B Stock or those obligations or shares convertible into Class B stock.
In addition, if shares of Common Stock  (or shares or obligations convertible into such stock) are offered to holders of Common Stock , then we must offer to the holders of Class B Stock shares of Class B Stock (or shares or obligations convertible into such stock), on a ratable basis, and at the same price per share.
Stock Dividends.  If we declare and pay a dividend in our stock, we must pay it in shares of Common Stock  to holders of Common Stock  and in shares of Class B Stock to holders of Class B stock.
Ultimate Rights of Holders of Class B Stock.  If and when the number of outstanding shares of Class B Stock falls below 33,749,932, the Class B Stock will become freely transferable and will become substantially equivalent to Common Stock.  At that time, holders of Class B Stock will have one vote for each share held, will have no special class vote, will be offered Common Stock if Common Stock is offered to holders of Common Stock, will receive Common Stock if a stock dividend is declared, and will have the right to convert such shares into an equal number of shares of Common Stock irrespective of the purpose of conversion.

Miscellaneous; Dilution.  If we increase the number of outstanding shares of Class B Stock (by, for example, doing a stock split or stock dividend), or if we consolidate or combine all outstanding shares of Class B Stock so that the number of outstanding shares is reduced, then the threshold numbers of outstanding Class B Stock (that is, 60,749,880 and 33,749,932) that trigger voting power changes will automatically adjust by a proportionate amount.
Preferred Stock

We may issue preferred stock from time to time in one or more series, without stockholder approval.  Subject to limiations prescribed by law, our board of directors is authorized to fix for any series of preferred stock the number of shares of such series and hte designation, relative powers, preferences and rights, and the qualifications, limitations, or restrictions of such series.
Preferred Share Purchase Rights
On September 11, 2009, we entered into a Tax Benefit Preservation Plan, which Tax Benefit Preservation Plan was amended on September 9, 2015 (as amended, the “Plan”) with Computershare Trust Company, N.A., as rights agent, and our Board of Directors declared a dividend of one preferred share purchase right (the “Rights”) for each outstanding share of Common Stock, and each outstanding share of Class B Stock under the terms of the Plan.  Each share of Common Stock we issue will be accompanied by a Right.  Each Right entitles the registered holder to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $1.00 per share at a purchase price of $35.00 per one one-thousandth of a share of Preferred Stock, subject to adjustment.  The description and terms of the Rights are set forth in the Plan.
Until the earlier to occur of (i) the close of business on the tenth business day following the public announcement that a person or group has become an “Acquiring Person” by acquiring beneficial ownership of 4.99% or more of the outstanding shares of Common Stock  (or the Board becoming aware of an Acquiring Person, as defined in the Plan) or (ii) the close of business on the tenth business day (or, except in certain circumstances, such later date as may be specified by the Board) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group (with certain exceptions) of 4.99% or more of the outstanding shares of Common Stock  (the earlier of such dates being called the “Distribution Date”), the Rights will be evidenced, with respect to Common Stock  and Class B Stock certificates outstanding as of the Record Date (or any book-entry shares in respect thereof), by such Common Stock  or Class B Stock certificate (or registration in book-entry form) together with the summary of rights (“Summary of Rights”) describing the Plan and mailed to stockholders of record on the Record Date, and the Rights will be transferable only in connection with the transfer of Common Stock  or Class B stock.  Any person or group that beneficially owned 4.99% or more of the outstanding shares of Common Stock on September 11, 2009 are not deemed an Acquiring Person unless and until such person or group acquires beneficial ownership of additional shares of Common Stock  representing one-half of one percent (0.5%) or more of the shares of Common Stock  then outstanding.  Under the Plan, the Board may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person for purposes of the Plan if the Board determines that such person’s or group’s ownership of Common Stock will not jeopardize or endanger our availability, or otherwise limit in any way the use of, our net operating losses, tax credits and other tax assets (the “Tax Attributes”).
The Plan provides that, until the Distribution Date (or earlier expiration or redemption of the Rights), the Rights will be attached to and will be transferred with and only with the Common Stock and Class B stock.  Until the Distribution Date (or the earlier expiration or redemption of the Rights), new shares of Common Stock and Class B Stock issued after the Record Date upon transfer or new issuances of Common Stock and Class B Stock will contain a notation incorporating the Plan by reference (with respect to shares represented by certificates) or notice thereof will be provided in accordance with applicable law (with respect to uncertificated shares).  Until the Distribution Date (or earlier expiration of the Rights), the surrender for transfer of any certificates representing shares of Common Stock and Class B Stock outstanding as of the Record Date, even without such notation or a copy of the Summary of Rights, or the transfer by book-entry of any uncertificated shares of Common Stock and Class B stock, will also constitute the transfer of the Rights associated with such shares.  As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Common Stock and Class B Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.

The Rights are not exercisable until the Distribution Date.  The Rights will expire upon the earliest of the close of business on September 30, 2018 (unless that date is advanced or extended by the Board), the time at which the Rights are redeemed or exchanged under the Plan, the repeal of Section 382 of the Internal Revenue Code of 1986, as amended, or any successor statute if the Board determines that the Plan is no longer necessary for the preservation of our Tax Attributes, or the beginning of our taxable year to which the Board determines that no Tax Attributes may be carried forward.
The Purchase Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights is subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or purchase Preferred Stock at a price, or securities convertible into Preferred Stock with a conversion price, less than the then-current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Preferred Stock) or of subscription rights or warrants.
The number of outstanding Rights is subject to adjustment in the event of a stock dividend on the Common Stock and Class B Stock payable in shares of Common Stock or Class B Stock or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will not be redeemable.  Each share of Preferred Stock will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $10.00 per share, and (b) an amount equal to 1,000 times the dividend declared per share of Common Stock .  In the event of our liquidation, dissolution or winding up, the holders of the Preferred Stock will be entitled to a minimum preferential payment of the greater of (a) $1.00 per share (plus any accrued but unpaid dividends), and (b) an amount equal to 1,000 times the payment made per share of Common Stock .  Each share of Preferred Stock will have 1,000 votes, voting together with the Common Stock and Class B stock.  Finally, in the event of any merger, consolidation or other transaction in which outstanding shares of Common Stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock.  These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock’s dividend, liquidation and voting rights, the value of the one one-thousandth interest in a share of Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock.
In the event that any person or group becomes an Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become null and void), will thereafter have the right to receive upon exercise of a Right (including payment of the Purchase Price) that number of shares of Common Stock having a market value of two times the Purchase Price.
At any time after any person or group becomes an Acquiring Person but prior to the acquisition by such Acquiring Person of beneficial ownership of 50% or more of the voting power of the shares of Common Stock  and Class B Stock then outstanding, the Board may exchange the Rights (other than Rights owned by such Acquiring Person, which will have become null and void), in whole or in part, for shares of Common Stock  or Preferred Stock (or a series of our preferred stock having equivalent rights, preferences and privileges), at an exchange ratio of one share of Common Stock  or Class B stock, or a fractional share of Preferred Stock (or other stock) equivalent in value thereto, per Right (subject to adjustment for stock splits, stock dividends and similar transactions).
With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price.  No fractional shares of Preferred Stock, Common Stock or Class B Stock will be issued (other than fractions of Preferred Stock which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at our election, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash will be made based on the current market price of the Preferred Stock, the Common Stock or Class B stock.

At any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”) payable, at our option, in cash, shares of Common Stock  or such other form of consideration as the Board shall determine.  The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.  Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.
For so long as the Rights are then redeemable, we may, except with respect to the Redemption Price, amend the Plan in any manner.  After the Rights are no longer redeemable, we may, except with respect to the Redemption Price, amend the Plan in any manner that does not adversely affect the interests of holders of the Rights (other than the Acquiring Person).
Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as our stockholder, including, without limitation, the right to vote or to receive dividends.
DESCRIPTION OF DEBT SECURITIES
We issue debt securities in one or more series under an Indenture dated as of January 30, 2002 (the “Indenture”) between us and The Bank of New York Mellon as successor trustee to JPMorgan Chase Bank.  The Indenture may be supplemented from time to time.
The Indenture is a contract between us and The Bank of New York Mellon acting as Trustee.  The Trustee has two main roles.  First, the Trustee can enforce debtholders’ rights against us if an “Event of Default” described below occurs.  Second, the Trustee performs certain administrative duties for us. The Indenture is summarized below.
The June 2059 Notes
We issued $750,000,000 aggregate principal amount of the June 2059 Notes on May 28, 2019.  The maturity date of the June 2059 Notes is June 1, 2059, and interest at a rate of 6.200% per annum is paid quarterly on March 1, June 1, September 1, and December 1 of each year, beginning on September 1, 2019, and on the maturity date.  The June 2059 Notes are redeemable at our option on June 1, 2024 and on any day thereafter, in whole or in part, at 100% of their principal amount plus accrued and unpaid interest. The June 2059 Notes are not subject to repayment at the option of the holder at any time prior to maturity.  As of February 1, 2020, $750,000,000 aggregate principal amount of the June 2059 Notes was outstanding.
The December 2059 Notes
We issued $800,000,000 aggregate principal amount of the December 2059 Notes on December 11, 2019.  The maturity date of the December 2059 Notes is December 1, 2059, and interest at a rate of 6.000% per annum is paid quarterly on March 1, June 1, September 1, and December 1 of each year, beginning on March 1, 2020, and on the maturity date.  The December 2059 Notes are redeemable at our option on December 1, 2024 and on any day thereafter, in whole or in part, at 100% of their principal amount plus accrued and unpaid interest. The December 2059 Notes are not subject to repayment at the option of the holder at any time prior to maturity.  As of February 1, 2020, $800,000,000 aggregate principal amount of the December 2059 Notes was outstanding.
General
The Indenture does not limit the amount of debt securities that may be issued under it.  Therefore, additional debt securities may be issued under the Indenture.
The debt securities are our unsecured obligations.  Senior debt securities rank equally with our other unsecured and unsubordinated indebtedness (parent company only).  
Principal (and premium, if any) and interest, if any, will be paid by us in immediately available funds.  The Indenture does not contain any provisions that give debtholders protection in the event we issue a large amount of debt or we are acquired by another entity.

Limitation on Liens
The Indenture restricts our ability to pledge some of our assets as security for other debt.  Unless we secure the debt securities on an equal basis, the restriction does not permit us to have or guarantee any debt that is secured by (1) any of our principal U.S. plants or (2) the stock or debt of any of our subsidiaries that own or lease one of these plants.  This restriction does not apply until the total amount of our secured debt plus the discounted value of the amount of rent we must pay under sale and leaseback transactions involving principal U.S. plants exceeds 5% of our consolidated net tangible automotive assets.  This restriction also does not apply to any of the following:
•liens of a company that exist at the time such company becomes our subsidiary;
•liens in our favor or in the favor of our subsidiaries;
•certain liens given to a government;
•liens on property that exist at the time we acquire the property or liens that we give to secure our paying for the property; and
•any extension or replacement of any of the above.

Limitation on Sales and Leasebacks

The Indenture prohibits us from selling and leasing back any principal U.S. plant for a term of more than three years.  This restriction does not apply if:
•we could create secured debt in an amount equal to the discounted value of the rent to be paid under the lease without violating the limitation on liens provision discussed above;
•the lease is with or between any of our subsidiaries; or
•within 120 days of selling the U.S. plant, we retire our funded debt in an amount equal to the net proceeds from the sale of the plant or the fair market value of the plant, whichever is greater.
Merger and Consolidation
The Indenture prohibits us from merging or consolidating with any company, or selling all or substantially all of our assets to any company, if after we do so the surviving company would violate the limitation on liens or the limitation on sales and leasebacks discussed above.  This does not apply if the surviving company secures the debt securities on an equal basis with the other secured debt of the company.
Events of Default and Notice Thereof
The Indenture defines an “Event of Default” as being any one of the following events:
•failure to pay interest for 30 days after becoming due;
•failure to pay principal or any premium for five business days after becoming due;
•failure to make a sinking fund payment for five days after becoming due;
•failure to perform any other covenant applicable to the debt securities for 90 days after notice;
•certain events of bankruptcy, insolvency or reorganization; and
•any other Event of Default provided in the prospectus supplement.
An Event of Default for a particular series of debt securities will not necessarily constitute an Event of Default for any other series of debt securities issued under the Indenture.
If an Event of Default occurs and continues, the Trustee or the holders of at least 25% of the total principal amount of the series may declare the entire principal amount (or, if they are Original Issue Discount Securities (as defined in the Indenture), the portion of the principal amount as specified in the terms of such series) of all of the debt securities of that series to be due and payable immediately.  If this happens, subject to certain conditions, the holders of a majority of the total principal amount of the debt securities of that series can void the declaration.
The Indenture provides that within 90 days after default under a series of debt securities, the Trustee will give the holders of that series notice of all uncured defaults known to it.  (The term “default” includes the events specified above without regard to any period of grace or requirement of notice.) The Trustee may withhold notice of any default (except a default in the payment of principal, interest or any premium) if it believes that it is in the interest of the holders.

Annually, we must send to the Trustee a certificate describing any existing defaults under the Indenture.
Other than its duties in case of a default, the Trustee is not obligated to exercise any of its rights or powers under the Indenture at the request, order or direction of any holders, unless the holders offer the Trustee reasonable protection from expenses and liability.  If they provide this reasonable indemnification, the holders of a majority of the total principal amount of any series of debt securities may direct the Trustee how to act under the Indenture.
Defeasance and Covenant Defeasance
We have two options to discharge our obligations under a series of debt securities before their maturity date.  These options are known as “defeasance” and “covenant defeasance”.  Defeasance means that we will be deemed to have paid the entire amount of the applicable series of debt securities and we will be released from all of our obligations relating to that series (except for certain obligations, such as registering transfers of the securities).  Covenant defeasance means that as to the applicable series of debt securities we will not have to comply with the covenants described above under Limitation on Liens, Limitation on Sales and Leasebacks and Merger and Consolidation.
To elect either defeasance or covenant defeasance for any series of debt securities, we must deposit with the Trustee an amount of money and/or U.S. government obligations that will be sufficient to pay principal, interest and any premium or sinking fund payments on the debt securities when those amounts are scheduled to be paid.  In addition, we must provide a legal opinion stating that as a result of the defeasance or covenant defeasance debtholders will not be required to recognize income, gain or loss for federal income tax purposes and debtholders will be subject to federal income tax on the same amounts, in the same manner and at the same times as if the defeasance or covenant defeasance had not occurred.  For defeasance, that opinion must be based on either an Internal Revenue Service ruling or a change in law since the date the debt securities were issued.  We must also meet other conditions, such as there being no Events of Default.  The amount deposited with the Trustee can be decreased at a later date if in the opinion of a nationally recognized firm of independent public accountants the deposits are greater than the amount then needed to pay principal, interest and any premium or sinking fund payments on the debt securities when those amounts are scheduled to be paid.
Our obligations relating to the debt securities will be reinstated if the Trustee is unable to pay the debt securities with the deposits held in trust, due to an order of any court or governmental authority.  It is possible that a series of debt securities for which we elect covenant defeasance may later be declared immediately due in full because of an Event of Default (not relating to the covenants that were defeased).  If that happens, we must pay the debt securities in full at that time, using the deposits held in trust or other money.
Modification of the Indenture
With certain exceptions, our rights and obligations and debtholders’ rights under a particular series of debt securities may be modified with the consent of the holders of not less than two-thirds of the total principal amount of those debt securities.  No modification of the principal or interest payment terms, and no modification reducing the percentage required for modifications, will be effective against debtholder without debtholders’ consent.
Global Securities
The debt securities of each series has been issued in the form of one or more global certificates which have been deposited with The Depository Trust Company, New York, New York (“DTC”), which acts as depositary for the global certificates.  Beneficial interests in global certificates will be shown on, and transfers of global certificates will be effected only through, records maintained by DTC and its participants.  Therefore, if debtholders wish to own debt securities that are represented by one or more global certificates, debtholders can do so only indirectly or “beneficially” through an account with a broker, bank or other financial institution that has an account with DTC (that is, a DTC participant) or through an account directly with DTC if such debtholder is a DTC participant.

While the debt securities are represented by one or more global certificates:
•Debtholders will not be able to have the debt securities registered in their name.
•Debtholders will not be able to receive a physical certificate for the debt securities.
•Our obligations, as well as the obligations of the Trustee and any of our agents, under the debt securities will run only to DTC as the registered owner of the debt securities.  For example, once we make payment to DTC, we will have no further responsibility for the payment even if DTC or a debtholder’s broker, bank or other financial institution fails to pass it on so that such debtholder receives it.
•Debtholders’ rights under the debt securities relating to payments, transfers, exchanges and other matters will be governed by applicable law and by the contractual arrangements between the debtholder and such debtholder’s broker, bank or other financial institution, and/or the contractual arrangements a debtholder or any debtholder’s broker, bank or financial institution has with DTC.  Neither we nor the Trustee has any responsibility for the actions of DTC or any debtholder’s broker, bank or financial institution.
•Debtholders may not be able to sell their interests in the debt securities to some insurance companies and others who are required by law to own their debt securities in the form of physical certificates.
•Because the debt securities will trade in DTC’s Same-Day Funds Settlement System, when a debtholder buys or sells interests in the debt securities, payment for them will have to be made in immediately available funds.  This could affect the attractiveness of the debt securities to others.

A global certificate generally can be transferred only as a whole, unless it is being transferred to certain nominees of the depositary or it is exchanged in whole or in part for debt securities in physical form.  If a global certificate is exchanged for debt securities in physical form, they will be in denominations of $1,000 and integral multiples thereof.

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