Document:

EXHIBIT 10.1

 

AMERICAN STATES WATER COMPANY

AMENDED AND RESTATED 2008 STOCK INCENTIVE PLAN, AS AMENDED

(Effective March 18, 2014)

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.
    	
 
    	
THE PLAN
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.1
    	
 
    	
Purpose
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.2
    	
 
    	
Administration and Authorization; Power and Procedure
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.3
    	
 
    	
Participation
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.4
    	
 
    	
Shares Available for Awards; Share Limits
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.5
    	
 
    	
Grant of Awards
    	
 
    	
4
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.6
    	
 
    	
Award Period
    	
 
    	
4
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.7
    	
 
    	
Limitations on Exercise and Vesting of Awards
    	
 
    	
4
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.8
    	
 
    	
No Transferability; Limited Exception to Transfer   Restrictions
    	
 
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.
    	
 
    	
OPTIONS
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.1
    	
 
    	
Grants
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.2
    	
 
    	
Option Price
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.3
    	
 
    	
Limitations on Grant and Terms of Incentive Stock Options
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.4
    	
 
    	
Limits on 10% Holders
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
 
    	
RESTRICTED STOCK AWARDS
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.1
    	
 
    	
Grants
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.2
    	
 
    	
Restrictions
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.3
    	
 
    	
Return to the Corporation
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.
    	
 
    	
STOCK UNIT AWARDS
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.1
    	
 
    	
Grants
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.2
    	
 
    	
Payouts
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.3
    	
 
    	
Non-Transferability
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.4
    	
 
    	
Dividend Equivalent Rights
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.5
    	
 
    	
Cancellation of Restricted Stock Units
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4A.
    	
 
    	
PERFORMANCE AWARDS
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4A.1
    	
 
    	
Generally
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4A.2
    	
 
    	
Earning of Performance Awards
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4A.3
    	
 
    	
Performance Criteria
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4A.4
    	
 
    	
Performance Awards and Code Section 162(m)
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4A.5
    	
 
    	
Payment of Awards
    	
 
    	
11
    

 

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4A.6
    	
 
    	
Newly Eligible Participants
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4A.7
    	
 
    	
Dividend Equivalent Rights
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
 
    	
OTHER PROVISIONS
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.1
    	
 
    	
Rights of Eligible Employees, Participants and   Beneficiaries
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.2
    	
 
    	
Adjustments; Acceleration
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.3
    	
 
    	
Effect of Termination of Service on Awards
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.4
    	
 
    	
Compliance with Laws
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.5
    	
 
    	
Tax Matters
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.6
    	
 
    	
Plan Amendment, Termination and Suspension
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.7
    	
 
    	
Privileges of Stock Ownership
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.8
    	
 
    	
Effective Date of the Plan
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.9
    	
 
    	
Term of the Plan
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.10
    	
 
    	
Governing Law/Construction/Severability
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.11
    	
 
    	
Captions
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.12
    	
 
    	
Stock-Based Awards in Substitution for Stock Options or   Awards Granted by Other Corporation
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.13
    	
 
    	
Non-Exclusivity of Plan
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.14
    	
 
    	
No Corporate Action Restriction
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.15
    	
 
    	
Other Company Benefit and Compensation Program
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.
    	
 
    	
DEFINITIONS
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.1
    	
 
    	
Definitions
    	
 
    	
20
    

 

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AMERICAN STATES WATER COMPANY

2008 STOCK INCENTIVE PLAN

 

1.              THE PLAN

 

1.1                               Purpose.

 

The purpose of this Plan is to promote the success of the Company by providing an additional means through the grant of Awards to attract, motivate, retain and reward key employees, including officers, whether or not directors, of the Company with awards and incentives for high levels of individual performance and improved financial performance of the Company.  Capitalized terms are defined in Article 6.

 

1.2                               Administration and Authorization; Power and Procedure.

 

(a)                     Committee.  This Plan shall be administered by and all Awards to Eligible Employees shall be authorized by the Committee.  Action of the Committee with respect to the administration of this Plan shall be taken pursuant to a majority vote or by written consent of its members.  With respect to Awards intended to satisfy the requirements of performance-based compensation under Section 162(m) of the Code, this Plan shall be administered by a committee consisting solely of two or more outside directors (as this requirement is applied under Section 162(m) of the Code); provided, however, that the failure to satisfy such requirement shall not affect the validity of the action of any committee otherwise duly authorized and acting in the matter.  Award grants, and transactions in or involving Awards, intended to be exempt under Rule 16b-3 under the Exchange Act must be duly and timely authorized by the Board or a committee consisting solely of two or more non-employee directors (as this requirement is applied under Rule 16b-3 promulgated under the Exchange Act).  To the extent required by any applicable listing agency, this Plan shall be administered by a committee composed entirely of independent directors (within the meaning of the applicable listing agency).

 

(b)                     Plan Awards; Interpretation; Powers of Committee.  Subject to the express provisions of this Plan, the Committee shall have the authority:

 

(i)                                     to determine eligibility and, from among those persons determined to be eligible, the particular Eligible Employees who will receive an Award;

 

(ii)                                  to grant Awards to Eligible Employees, determine the price at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons, and determine the other specific terms and conditions of such Awards consistent with the express limits of this Plan, and establish the installments (if any) in which such Awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, and establish the events of termination or reversion of such Awards;

 

(iii)                               to approve the forms of Award Agreements (which need not be identical either as to type of Award or among Participants);

 

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(iv)                              to construe and interpret this Plan and any agreements defining the rights and obligations of the Company and Participants under this Plan, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the Awards granted under this Plan;

 

(v)                                 to cancel, modify, or waive the Corporation’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding Awards held by Eligible Employees, subject to any required consent under Section 5.6;

 

(vi)                              to accelerate or extend the vesting or exercisability or extend the term of any or all such outstanding Awards (in the case of Options, within the original term of such Awards under Section 1.6), subject to Section 5.3;

 

(vii)                           to adjust the number of shares of Common Stock subject to any Award, adjust the price of any or all outstanding Awards or otherwise previously imposed terms and conditions, in such circumstances as the Committee may deem appropriate, in each case subject to Sections 1.4 and 5.6, and provided that in no case (except due to an adjustment contemplated by Section 5.2 or any repricing that may be approved by shareholders) shall such an adjustment constitute a repricing (by amendment, substitution, cancellation and regrant, exchange or other means) of the per share exercise or base price of any Option;

 

(viii)                        to determine the date of grant of an Award, which may be a designated date after but not before the date of the Committee’s action (unless otherwise designated by the Committee, the date of grant of an Award shall be the date upon which the Committee took the action granting the Award);

 

(ix)                              to determine whether, and the extent to which, adjustments are required pursuant to Section 5.2 hereof and authorize the termination, conversion, substitution or succession of Awards upon the occurrence of an event of the type described in Section 5.2;

 

(x)                                 to determine the Fair Market Value of the Common Stock of Awards under this Plan from time to time and/or the manner in which such value will be determined; and

 

(xi)                              to make all other determinations and take such other action as contemplated by this Plan or as may be necessary or advisable for the administration of this Plan and the effectuation of its purposes.

 

(c)                      Binding Determinations/Liability Limitation.  Any action taken by, or inaction of, the Corporation, any Subsidiary, the Board or the Committee relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons.  Neither the Board nor any Committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any Award made under this Plan), and all such persons

 

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shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.

 

(d)                     Reliance on Experts.  In making any determination or in taking or not taking any action under this Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including employees and professional advisors to the Corporation.  No director, officer or agent of the Company shall be liable for any such action or determination taken or made or omitted in good faith.

 

(e)                      Delegation.  The Committee may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or to third parties.

 

1.3                               Participation.

 

Awards may be granted by the Committee only to those persons that the Committee determines to be Eligible Employees.  An Eligible Employee who has been granted an Award may, if otherwise eligible, be granted additional Awards if the Committee shall so determine.

 

1.4                               Shares Available for Awards; Share Limits.

 

(a)                     Shares Available.  Subject to the provisions of Section 5.2, the capital stock that may be delivered under this Plan shall be shares of the Corporation’s authorized but unissued Common Stock.  The shares may be delivered for any lawful consideration.

 

(b)                     Share Limits.  The maximum number of shares of Common Stock that may be delivered pursuant to Awards granted to Eligible Employees under this Plan (the “Share Limit”) is equal to the sum of the following:  (i) 1,100,000 shares of Common Stock, plus (ii) the number of shares of Common Stock reserved for purposes of the Corporation’s 2000 Stock Incentive Plan (the “2000 Plan”) on March 31, 2008 that are in excess of the number of shares of Common Stock then subject to outstanding awards grants under the 2000 Plan reduced by the number of shares that at any time after March 21, 2008 are withheld to satisfy tax withholding obligations under the 2000 Plan and the number of shares that at any time after March 21, 2008 are subject to or underlie awards that expire or for any reason are cancelled, terminated, or forfeited, or fail to vest or for any other reason are not paid or delivered under the 2000 Plan.  Shares issued in respect of any “Full-Value Award” granted under this Plan shall be counted against the foregoing Share Limit as 2.45 shares for every one share actually issued in connection with such Award.  (For example, if an Award of 100 Restricted Stock shares is granted under this Plan, 245 shares shall be charged against the Share Limit in connection with that Award.)  For this purpose, a “Full-Value Award” means any Award under this Plan that is not an Option.  The following limits also apply with respect to Awards granted under this Plan:

 

(1)                                 The maximum number of shares of Common Stock that may be delivered pursuant to Options qualified as Incentive Stock Options granted under this Plan is 187,500 shares.

 

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(2)                                 The maximum number of shares of Common Stock subject to those Options that are granted during any calendar year to any individual under this Plan is 50,000 shares.

 

(c)                                  Share Reservation; Replenishment and Reissue of Unvested Awards.  No Award may be granted under this Plan unless, on the date of grant, the sum of (i) the maximum number of shares issuable at any time pursuant to such Award, plus (ii) the number of shares that have previously been issued pursuant to Awards granted under this Plan, plus (iii) the maximum number of shares that may be issued at any time after such date of grant pursuant to Awards that are outstanding on such date, does not exceed the Share Limit.  Shares that are subject to or underlie Awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall not be available for subsequent Awards under the Plan.  Shares that are withheld by the Corporation to satisfy the tax withholding obligations related to the Award shall not be available for subsequent Awards under this Plan.  Except as limited by law, if an Award is or may be settled only in cash, such Award need not be counted against any of the limits under this Section 1.4.

 

1.5                               Grant of Awards.

 

Subject to the express provisions of this Plan, the Committee shall determine the number of shares of Common Stock subject to each Award and the price (if any) to be paid for the shares or the Award.  Each Award shall be evidenced by an Award Agreement signed by the Corporation and, if required by the Committee, by the Participant.  The Award Agreement shall set forth the material terms and conditions of the Award established by the Committee consistent with the specific provisions of this Plan.

 

1.6                               Award Period.

 

Each Award and all executory rights or obligations under the related Award Agreement shall expire on such date (if any) as shall be determined by the Committee, but in the case of Options not later than ten (10) years after the Award Date.

 

1.7                               Limitations on Exercise and Vesting of Awards.

 

(a)                     Provisions for Exercise.  Unless the Committee otherwise expressly provides, no Award shall be exercisable or shall vest until at least six months after the initial Award Date, and once exercisable an Award shall remain exercisable until the expiration or earlier termination of the Award.

 

(b)                     Procedure.  Any exercisable Award shall be deemed to be exercised when the Secretary of the Corporation receives written notice of such exercise from the Participant, together with any required payment made in accordance with Section 2.2.

 

(c)                      Fractional Shares/Minimum Issue.  Fractional share interests shall be disregarded, but may be accumulated. The Committee, however, may determine in the case of Eligible Employees that cash, other securities, or other property will be paid or transferred in lieu of any fractional share interests.  No fewer than 100 shares may be purchased on exercise of any

 

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Award at one time unless the number purchased is the total number at the time available for purchase under the Award.

 

1.8                               No Transferability; Limited Exception to Transfer Restrictions.

 

(a)                     Limit On Exercise and Transfer.  Unless otherwise expressly provided in (or pursuant to) this Section 1.8, by applicable law and by the Award Agreement, as the same may be amended, (i) all Awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (ii) Awards shall be exercised only by the Participant; and (iii) amounts payable or shares issuable pursuant to an Award shall be delivered only to (or for the account of) the Participant.

 

(b)                     Exceptions.  The Committee may permit Awards to be exercised by and paid only to certain persons or entities related to the Participant, including but not limited to members of the Participant’s immediate family, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s immediate family, pursuant to such conditions and procedures as the Committee may establish in writing.  Any permitted transfer shall be (i) subject to compliance with applicable federal and state securities laws and (ii) subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for essentially estate and/or tax planning purposes on a gratuitous or donative basis and without consideration (other than nominal consideration or in exchange for an interest in a qualified transferee).  Notwithstanding the foregoing or anything to the contrary in Section 1.8(c), Incentive Stock Options and Restricted Stock Awards shall be subject to any and all additional transfer restrictions under the Code.

 

(c)                      Further Exceptions to Limits On Transfer.  The exercise and transfer restrictions in Section 1.8(a) shall not apply to:

 

(i)                                     transfers to the Corporation,

 

(ii)                                  the designation of a beneficiary to receive benefits in the event of the Participant’s death or, if the Participant has died, transfers to or exercise by the Participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution,

 

(iii)                               subject to applicable limits on Incentive Stock Options, transfers to a family member (or former family member) pursuant to a domestic relations order if approved or ratified by the Committee,

 

(iv)                              if the Participant has suffered a disability, permitted transfers or exercises on behalf of the Participant by his or her legal representative, or

 

(v)                                             the authorization by the Committee of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of Awards consistent with applicable laws and the express authorization of the Committee.

 

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2.              OPTIONS.

 

2.1                               Grants.

 

One or more Options may be granted under this Article to any Eligible Employee.  Each Option granted shall be designated in the applicable Award Agreement, by the Committee as either an Incentive Stock Option, subject to Section 2.3, or a Non-Qualified Stock Option.

 

2.2                               Option Price.

 

(a)                     Pricing Limits.  The purchase price per share of the Common Stock covered by each Option shall be determined by the Committee at the time of the Award, but shall not be less than 100% (110% in the case of an Incentive Stock Option granted to a Participant described in Section 2.4) of the Fair Market Value of the Common Stock on the date of grant.

 

(b)                     Payment Provisions. The purchase price of any shares purchased on exercise of an Option granted under this Article shall be paid in full at the time of each purchase in one or a combination of the following methods:  (i) in cash or by electronic funds transfer; (ii) by check payable to the order of the Corporation; (iii) by notice and third party payment in such manner as may be authorized by the Committee; or (iv) by the delivery of shares of Common Stock of the Corporation already owned by the Participant, provided, however, that the Committee may in its absolute discretion limit the Participant’s ability to exercise an Award by delivering such shares, and provided further that any shares delivered which were initially acquired upon exercise of a stock option must have been owned by the Participant at least six months as of the date of delivery.  Shares of Common Stock used to satisfy the exercise price of an Option shall be valued at their Fair Market Value on the date of exercise.

 

2.3                               Limitations on Grant and Terms of Incentive Stock Options.

 

(a)                     $100,000 Limit.  To the extent that the aggregate “Fair Market Value” of stock with respect to which Incentive Stock Options first become exercisable by a Participant in any calendar year exceeds $100,000, taking into account both Common Stock subject to Incentive Stock Options under this Plan and stock subject to incentive stock options under all other plans of the Company, such options shall be treated as Nonqualified Stock Options.  For this purpose, the “Fair Market Value” of the stock subject to Options shall be determined as of the date the Options were awarded.  In reducing the number of Options treated as Incentive Stock Options to meet the $100,000 limit, the most recently granted Options shall be reduced first.  To the extent a reduction of simultaneously granted Options is necessary to meet the $100,000 limit, the Committee may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an Incentive Stock Option.

 

(b)                     Option Period.  Each Option and all rights thereunder shall expire no later than 10 years after the Award Date.

 

(c)                      Other Code Limits.  Incentive Stock Options may only be granted to Eligible Employees of the Corporation or a Subsidiary that satisfies the other eligibility requirements of the Code.  There shall be imposed in any Award Agreement relating to Incentive

 

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Stock Options such other terms and conditions as from time to time are required in order that the Option be an “incentive stock option” as that term is defined in Section 422 of the Code.

 

2.4                               Limits on 10% Holders

 

No Incentive Stock Option may be granted to any person who, at the time the Option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of outstanding Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation, unless the exercise price of such Option is at least 110% of the Fair Market Value of the stock subject to the Option and such Option by its terms is not exercisable after the expiration of five years from the date such Option is granted.

 

3.              RESTRICTED STOCK AWARDS.

 

3.1                               Grants.

 

The Committee may, in its discretion, grant one or more Restricted Stock Awards to any Eligible Employee.  Each Restricted Stock Award Agreement shall specify the number of shares of Common Stock to be issued to the Participant, the date of such issuance, the consideration for such shares (but not less than the minimum lawful consideration under applicable state law) by the Participant, the extent (if any) to which and the time (if ever) at which the Participant shall be entitled to dividends, voting and other rights in respect of the shares prior to vesting, and the restrictions (which may be based on performance criteria, passage of time or other factors or any combination thereof) imposed on such shares and the conditions of release or lapse of such restrictions.  Such restrictions shall not lapse earlier than six months after the Award Date, except to the extent the Committee may otherwise provide.  Stock certificates evidencing shares of Restricted Stock pending the lapse of the restrictions (“Restricted Shares”) shall bear a legend making appropriate reference to the restrictions imposed hereunder and shall be held by the Corporation or by a third party designated by the Committee until the restrictions on such shares shall have lapsed and the shares shall have vested in accordance with the provisions of the Award and Section 1.7.  Upon issuance of the Restricted Stock Award, the Participant may be required to provide such further assurance and documents as the Committee may be required to enforce the restrictions.

 

3.2                               Restrictions.

 

(a)                     Pre-Vesting Restraints.  Except as provided in Section 3.1 and 1.8, Restricted Shares comprising any Restricted Stock Award may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered, either voluntarily or involuntarily, until the restrictions on such shares have lapsed and the shares have become vested.

 

(b)                     Dividend and Voting Rights.  Unless otherwise provided in the applicable Award Agreement, a Participant receiving a Restricted Stock Award shall be entitled to cash dividend and voting rights for all shares issued even though they are not vested, provided that such rights shall terminate immediately as to any Restricted Shares which cease to be eligible for vesting.

 

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(c)                      Cash Payments.  If the Participant shall have paid or received cash (including any dividends) in connection with the Restricted Stock Award, the Award Agreement shall specify whether and to what extent such cash shall be returned (with or without an earnings factor) as to any Restricted Shares which cease to be eligible for vesting.

 

3.3                               Return to the Corporation.

 

Unless the Committee otherwise expressly provides, Restricted Shares that remain subject to restrictions at the time of termination of employment or are subject to other conditions  vesting that have not been satisfied by the time specified in the applicable Award Agreement shall not vest and shall be returned to the Corporation in such manner and on such terms as the Committee shall therein provide.

 

4.              STOCK UNIT AWARDS

 

4.1                               Grants.

 

The Committee may, in its discretion, (a) authorize and grant to any Eligible Employee a Stock Unit Award, (b) credit to any Eligible Employee Stock Units, (c) permit an Eligible Employee to irrevocably elect to defer by means of Stock Units or receive in Stock Units all or a portion of any Award hereunder, or (d) grant Stock Units in lieu of, in exchange for, in respect of, or in addition to any other compensation or Award under this Plan.  The specific terms, conditions, and provisions relating to each Stock Unit grant or election, including the applicable vesting and payout provisions of the Stock Units and the form of payment to be made at or following the vesting thereof, shall be set forth in or pursuant to the applicable Award Agreement and any relevant Company bonus, performance or other service or deferred compensation plan, in form substantially as approved by the Committee, in each case subject to compliance with Section 409A of the Code.

 

4.2                               Payouts.

 

Subject to compliance with Section 409A of the Code, the Committee in the applicable Stock Unit Award Agreement or other Award Agreement or the relevant Company deferred compensation plan may permit the Eligible Employee to elect the form and time of payout of vested Stock Units on such conditions or subject to such procedures as the Committee may impose, and may permit Stock Unit offsets or other provision for payment of any applicable taxes that may be due on the crediting, vesting or payment in respect of the Stock Units.

 

4.3                               Non-Transferability.

 

Rights in respect of Stock Unit Awards may not be sold, pledged, assigned, hypothecated, transferred, or otherwise disposed of or encumbered, either voluntarily or involuntarily, other than by will or the laws of descent or distribution.

 

4.4                               Dividend Equivalent Rights.

 

In its discretion, the Committee may grant to any Eligible Employee “Dividend Equivalent Rights” concurrently with the grant of any Stock Unit Award, on such terms as set

 

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forth by the Committee in the Stock Unit Agreement or other applicable Award Agreement.  Dividend Equivalent Rights shall be based on all or part of the amount of dividends declared on shares of Common Stock and shall be credited as of dividend payment dates, during the period between the date of grant (or such later date as the Committee may set in the Award Agreement) and the date the Stock Unit Award expires (or such earlier date as the Committee may set in the Award Agreement), as determined by the Administrator.  Dividend Equivalent Rights shall be payable in cash or shares at the same time as the Stock Units to which they relate, and may be subject to such conditions, as may be determined by the Administrator.

 

4.5                               Cancellation of Restricted Stock Units.

 

Unless the Committee otherwise expressly provides, Restricted Stock Units that remain subject to conditions to vesting at the time of termination of employment or service or are subject to other conditions to vesting that have not been satisfied by the time specified in the applicable Award Agreement shall not vest and shall be cancelled, unless the Committee otherwise provides in or by amendment to the applicable terms of the Award.

 

4A.                             PERFORMANCE AWARDS.

 

4A.1                      Generally.

 

The Committee shall have the authority to determine (i) the Participants who shall receive Performance Awards, (ii) the size, number, amount or value, as applicable, of Performance Awards, and (iii) the Performance Criteria applicable in respect of such Performance Awards for each Performance Period.  The Committee shall determine the duration of each Performance Period (which may differ from each other), and there may be more than one Performance Period in existence at any one time as to any Participant or all or any class of Participants.  Each grant of Performance Awards shall be evidenced by an Award Agreement that shall specify the Performance Criteria applicable thereto and such other terms and conditions not inconsistent with the Plan as the Committee shall determine.

 

4A.2                      Earning of Performance Awards.

 

The grant and/or vesting of Performance Awards shall be contingent, in whole or in part, upon the attainment of specified Performance Criteria or the occurrence of any event or events involving a Change in Control Event, death or Total Disability, as the Committee shall determine either at or after the Award Date.  In addition to the achievement of the specified Performance Criteria, the Committee may, at the grant date, condition earning of Performance Awards on the Participant completing a minimum period of service following the Award Date or on such other conditions as the Committee shall specify.

 

4A.3                      Performance Criteria.

 

At the discretion of the Committee, Performance Criteria may be based upon the relative or comparative attainment of one or more of the following criteria during a Performance Period, whether in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies: total stockholder return (inclusive or exclusive of dividends paid); stock price; gross, operating or net

 

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earnings or margins; approved rate increases; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings or operating income before or after water purchase costs, power purchase costs, administrative expenses, interest, taxes, depreciation, amortization or construction costs; earnings per share; economic value added; ratio of operating earnings to capital spending; net sales; sales growth; return on assets, capital or equity; income; market share; level of expenses; revenue; revenue growth; cash flow; increases in customer base; capital expenditures; cost reductions and expense control objectives; compliance with environmental or regulatory goals or requirements; conservation; budget objectives; working capital; mergers, acquisitions and divestitures; attainment of objectives measured in terms of water quality, service reliability, efficiency, customer complaints or customer satisfaction, operations, maintenance and/or construction contract awards, and improvements in financial controls; and, in the case of persons who are not Executive Officers, such other criteria as may be determined by the Committee.  Performance Criteria may be established on a Company-wide basis or with respect to one or more business units or divisions or Subsidiaries.

 

At the time the Committee establishes Performance Criteria for a Performance Period, the Committee may exclude any or all “extraordinary items” as determined under U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of the Company or any Subsidiary, discontinued operations, other unusual or non-recurring items, the cumulative effects of accounting changes or such other objective factors as the Committee deems appropriate.  Unless otherwise explicitly stated by the Committee at the time Performance Criteria are established, each applicable performance goal shall be appropriately adjusted for one or more of the following items: (a) asset impairments or write downs; (b) litigation judgments or claim settlements; (c) the effect of changes in tax law, accounting principles or such laws or provisions affecting reported results; (d) accruals for reorganization and restructuring programs; (e) any extraordinary nonrecurring items as described in Accounting Standards Codification (ASC) 225-20 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; (f) the operations of any business acquired by the Company or any affiliate or of any joint venture in which the Company or affiliate participates; (g) the divestiture of one or more business operations or the assets thereof; or (h) the costs incurred in connection with such acquisitions or divestitures; or (i) charges for stock based compensation.

 

Except in the case of Awards to Executive Officers intended to be ‘performance-based compensation’ under Section 162(m)(4) of the Code, the Committee may at any time adjust the Performance Criteria for any Performance Period as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine.

 

4A.4                      Performance Awards and Code Section 162(m).

 

The provisions of this Section 4A.4 shall apply with respect to any Performance Award that is intended to be ‘performance-based compensation’ under Section 162(m)(4) of the Code.

 

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(a)           Establishment of Performance Criteria.

 

The Committee shall establish the Performance Criteria for the applicable Performance Period no later than the 90th day after the Performance Period begins (or by such other date as may be required under Section 162(m) of the Code) but in any event at a time when achievement of the Performance Criteria is substantially uncertain.  The Committee may not in any event increase the amount of compensation payable to an Executive Officer upon attainment of the Performance Criteria above the maximum amount approved by the Committee at the time the Performance Criteria is established.

 

(b)           Certification of Attainment of Performance Criteria.

 

As soon as practicable after the end of a Performance Period and prior to any payment in respect of such Performance Period, the Committee shall certify in writing the amount, number or value, as applicable, of the Performance Awards that have been earned on the basis of performance in relation to the established Performance Criteria.

 

(c)           Maximum Performance Award.

 

The maximum number of shares of Common Stock subject to Performance Awards that are granted during any calendar year to any individual under the Plan is 100,000, or if a Performance Award is measured in cash, the maximum dollar amount granted during any calendar year to any individual under shall not exceed $3,000,000.00.

 

4A.5       Payment of Awards.

 

Earned Performance Awards shall be distributed to the Participant or, if the Participant has died, to the Participant’s Designated Beneficiary as soon as practicable after the expiration of the Performance Period and the Committee’s certification under Section 4A.4(b) above, provided that, unless the payment of a Performance Award has been deferred in accordance with Section 409A of the Code, distributions of a Performance Award shall be made no later than March 15 of the year following the year in which the amount is earned.

 

4A.6       Newly Eligible Participants.

 

Notwithstanding anything in this Section 4A to the contrary, the Committee shall be entitled to make such rules, determinations and adjustments as it deems appropriate with respect to any Participant who becomes eligible to receive Performance Awards after the commencement of a Performance Period, except as would cause a Performance Award intended to qualify as ‘performance based compensation’ under Section 162(m) of the Code to fail to do so.

 

4A.7       Dividend Equivalent Rights.

 

In its discretion, the Committee may grant to any Participant ‘Dividend Equivalent Rights’ concurrently with the grant of any Performance Award on such terms as set forth by the Committee in the applicable Award Agreement.  Dividend Equivalent Rights shall be based in all or part of the amount of dividends declared on the shares of Common Stock and shall be

 

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credited as of dividend payment dates, during the date between the date of grant (or such later date as the Committee may set forth in the Award Agreement) and the date that the Performance Award expires (or such earlier date as the Committee may set in the Award Agreement) as determined by the Administrator.  Notwithstanding any provision of the Plan to the contrary, any Dividend Equivalent Rights granted with respect to a Performance Award shall vest upon the same conditions (including Performance Criteria) that apply to the underlying Performance Award.  Any Dividend Equivalent Right shall be subject to the terms set forth in the Award Agreement and this Section 4A.  Dividend Equivalent Rights shall be payable in cash or shares at the same time as the Performance Awards to which they relate, and shall be included as shares of Common Stock or cash, as applicable, for purposes of the limitations set forth in Section 4A.4(c) above.

 

5.     OTHER PROVISIONS

 

5.1          Rights of Eligible Employees, Participants and Beneficiaries.

 

(a)       Employment Status.  Status as an Eligible Employee shall not be construed as a commitment that any Award will be made under this Plan to an Eligible Employee or to Eligible Employees generally.

 

(b)       No Employment Contract.  Nothing contained in this Plan (or in any other documents under this Plan or in any Award) shall confer upon any Eligible Employee or Participant any right to continue in the employ or other service of the Company, constitute any contract or agreement of employment or other service or affect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Company to change a person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause.  Nothing in this Section, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract other than an Award Agreement.

 

(c)       Plan Not Funded.  Awards payable under this Plan shall be payable in shares or from the general assets of the Corporation, and (except as provided in Section 1.4(c)) no special or separate reserve, fund or deposit shall be made to assure payment of such Awards.  No Participant, Beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the Company by reason of any Award hereunder.  Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company and any Participant, Beneficiary or other person.  To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

 

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5.2          Adjustments; Acceleration

 

(a)       Adjustments.

 

(1)           Upon (or, as may be necessary to effect the adjustment, immediately prior to):  any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, or other reorganization; any spin-off, split-up or similar extraordinary dividend distribution in respect of the Common Stock; or any exchange of Common Stock or other securities of the Corporation, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; then the Committee shall equitably and proportionately adjust (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of Awards (including the specific share limits, maximums and numbers of shares set forth elsewhere in this Plan), (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any outstanding Awards, (3) the grant, purchase or exercise price of any outstanding Awards, and/or (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding Awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by the Plan and the then-outstanding Awards.

 

Unless otherwise expressly provided in the applicable Award Agreement, upon (or, as may be necessary to effect the adjustment, immediately prior to) any event or transaction described in the preceding paragraph or a sale of all or substantially all of the business or assets of the Corporation as an entirety, the Committee shall equitably and proportionately adjust the performance standards applicable to any then-outstanding performance-based Awards to the extent necessary to preserve (but not increase) the level of incentives intended by the Plan and the then-outstanding performance-based Awards.

 

It is intended that, if possible, any adjustments contemplated by the preceding two paragraphs be made in a manner that satisfies applicable legal, tax (including, without limitation and as applicable in the circumstances, Section 424 of the Code, Section 409A of the Code and Section 162(m) of the Code) and accounting (so as to not trigger any charge to earnings with respect to such adjustment) requirements.

 

Without limiting the generality of Section 1.2, any good faith determination by the Committee as to whether an adjustment is required under the circumstances pursuant to this Section 5.2(a)(1), and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.

 

(2)           Corporate Transactions-Assumption or Termination of Awards.  Upon the occurrence of any of the following:  any merger, combination, consolidation, or other reorganization; any exchange of Common Stock or other securities of the Corporation; a sale of all or substantially all the business, stock or assets of the Corporation; a dissolution of the Corporation; or any other event in which the Corporation does not survive (or does not survive as a public company in respect of its

 

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Common Stock); then the Committee may make provision for a cash payment in settlement of, or for the assumption, substitution or exchange of any or all outstanding share-based Awards or the cash, securities or property deliverable to the holder of any or all outstanding share-based Awards, based upon, to the extent relevant under the circumstances, the distribution or consideration payable to holders of the Common Stock upon or in respect of such event.

 

The Committee may adopt such valuation methodologies for outstanding Awards as it deems reasonable in the event of a cash or property settlement and, in the case of Options or similar rights, but without limitation on other methodologies, may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise or base price of the Award.

 

In any of the events referred to in this Section 5.2(a)(2), the Committee may take such action contemplated by this Section 5.2(a)(2) prior to such event (as opposed to on the occurrence of such event) to the extent that the Committee deems the action necessary to permit the participant to realize the benefits intended to be conveyed with respect to the underlying shares.

 

Without limiting the generality of Section 1.2, any good faith determination by the Committee pursuant to this Section 5.2(a)(2) shall be conclusive and binding on all persons.

 

(b)       Possible Early Termination of Accelerated Awards.  If any Option or other right to acquire Common Stock under this Plan has been fully accelerated as required or permitted by Section 5.2(c) but is not exercised prior to (1) a dissolution of the Company, or (2) an event described in Section 5.2(a) that the Company does not survive, or (3) the consummation of an event described in Section 5.2(a) involving a Change in Control Event approved by the Board, such Option or right shall terminate, subject to any provision that has been expressly made by the Board or the Committee, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange or other settlement of such Option or right.

 

(c)           Acceleration of Awards Upon Change in Control.  Unless prior to a Change in Control Event the Committee determines that, upon its occurrence, benefits under any or all Awards shall not be accelerated or determines that only certain or limited benefits under any or all Awards shall be accelerated and the extent to which they shall be accelerated, and/or establishes a different time in respect of such Change in Control Event for such acceleration, then upon the occurrence of a Change in Control Event:

 

(1)           each Option shall become immediately exercisable, and

 

(2)           Restricted Stock shall immediately vest free of restrictions, and

 

(3)           Restricted Stock Units shall immediately vest free of restrictions and become payable.

 

The Committee may override the limitations on acceleration in this Section 5.2(c) by express provision in the Award Agreement and may accord any Eligible Employee a right to

 

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refuse any acceleration, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve.  Any acceleration of Awards shall comply with applicable legal requirements and, if necessary to accomplish the purposes of the acceleration or if the circumstances require, may be deemed by the Committee to occur (subject to Section 5.2(d)) a limited period of time not greater than 30 days before the event.  Without limiting the generality of the foregoing, the Committee may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of an Award if an event giving rise to an acceleration does not occur.  Notwithstanding the foregoing, an Award shall not be accelerated and/or become payable pursuant to this Section 5.2(c) to the extent that such acceleration and/or payment would cause the holder of such Award to be subject to additional tax under Section 409A of the Code with respect to such Award.

 

(d)       Possible Rescission of Acceleration  If the vesting of an Award has been accelerated expressly in anticipation of an event or upon shareholder approval of an event and the Committee or the Board later determines that the event will not occur, the Committee may rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested Awards.

 

(e)       Acceleration Upon Termination of Service Following a Change in Control.  If any Participant’s employment is terminated by the Company upon or within one year after a Change in Control Event, and the termination is not the result of death, Total Disability, Retirement or a termination for Cause, then, subject to the other provisions of this Section 5.2 (including without limitation Section 5.2(b) and Section 5.4), all outstanding Options and other Awards held by the Participant shall be deemed fully vested immediately prior to the Severance Date and Stock Units shall become payable upon such Severance Date (or, to the extent applicable under Section 409A, upon the date that is six months after such Severance Date), unless the Award Agreement specifies a different result in the case of a Change in Control Event.  Notwithstanding the foregoing, an Award shall not be accelerated and/or become payable pursuant to this Section 5.2(e) to the extent that such acceleration and/or payment would cause the holder of such Award to be subject to additional tax under Section 409A of the Code with respect to such Award.

 

5.3          Effect of Termination of Service on Awards

 

(a)   General.  The Committee shall establish the effect of a termination of employment on the rights and benefits under each Award under this Plan and in so doing may make distinctions based upon the cause of termination.

 

(b)   Options - Resignation or Dismissal.  If the Participant’s employment by the Company terminates for any reason (the date of such termination being referred to as the “Severance Date”) other than Retirement, Total Disability or death, or for Cause (as determined in the discretion of the Committee), the Participant shall have, unless otherwise provided in the Award Agreement and subject to earlier termination pursuant to or as contemplated by Section 1.6 or 5.2, three months after the Severance Date to exercise any Option to the extent it shall have become exercisable on the Severance Date.  In the case of a termination for Cause, the Option shall terminate on the Severance Date.  In other cases, the Option, to the extent not exercisable on the Severance Date, shall terminate.

 

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(c)       Options - Death or Disability.  If the Participant’s employment by the Company terminates as a result of Total Disability or death, the Participant, Participant’s Personal Representative or his or her Beneficiary, as the case may be, shall have, unless otherwise provided in the Award Agreement and subject to earlier termination pursuant to or as contemplated by Section 1.6 or 5.2, until 12 months after the Severance Date to exercise any Option to the extent it shall have become exercisable by the Severance Date.  Any Option to the extent not exercisable on the Severance Date shall terminate.

 

(d)       Options - Retirement.  If the Participant’s employment by the Company terminates as a result of Retirement, the Participant, Participant’s Personal Representative or his or her Beneficiary, as the case may be, shall have, unless otherwise provided in the Award Agreement and subject to earlier termination pursuant to or as contemplated by Section 1.6 or 5.2, until 12 months after the Severance Date to exercise any Option to the extent it shall have become exercisable by the Severance Date.  The Option, to the extent not exercisable on the Severance Date, shall terminate.

 

(e)       Events Not Deemed Terminations of Service.  Unless Company policy or the Committee otherwise provides, the employment relationship shall not be considered terminated in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence authorized by the Company or the Committee; provided that unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than 90 days. In the case of any Eligible Employee on an approved leave of absence, continued vesting of the Award while on leave from the employ of the Company shall be suspended, unless the Committee otherwise provides or applicable law otherwise requires.  In no event shall an Award be exercised after the expiration of the term set forth in the Award Agreement.

 

(f)        Effect of Change of Subsidiary Status.  For purposes of this Plan and any Award, if an entity ceases to be a Subsidiary a termination of employment shall be deemed to have occurred with respect to each Eligible Employee in respect of the Subsidiary who does not continue as an Eligible Employee in respect of another entity within the Company.

 

(g)           Committee Discretion.  Notwithstanding the foregoing provisions of this Section 5.3, in the event of, or in anticipation of, a termination of employment with the Company for any reason, other than discharge for Cause, the Committee may, in its discretion, increase the portion of the Participant’s Option available to the Participant, or Participant’s Beneficiary or Personal Representative, as the case may be, or, subject to the provisions of Section 1.6, extend the exercisability period upon such terms as the Committee shall determine and expressly set forth in or by amendment to the Award Agreement; provided, however, that in no event shall any such extension of the exercisability period extend such period beyond the earlier of the following dates:  (i) the latest date the Option could have expired by its original terms or (ii) the 10th anniversary of the Award Date.

 

5.4          Compliance with Laws.

 

This Plan, the granting and vesting of Awards under this Plan, the offer, issuance and delivery of shares of Common Stock and/or the payment of money under this Plan or under Awards are subject to compliance with all applicable federal and state laws, rules and regulations

 

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(including but not limited to state and federal securities law) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  The person acquiring any securities under this Plan will, if requested by the Company, provide such assurances and representations to the Company as the Committee may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.

 

5.5          Tax Matters.

 

(a)   Provision for Tax Withholding or Offset.  Upon any exercise, vesting, or payment of any Award or upon the disposition of shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option prior to satisfaction of the holding period requirements of Section 422 of the Code, the Company shall have the right at its option to (i) require the Participant (or Personal Representative or Beneficiary, as the case may be) to pay or provide for payment of the minimum amount of any taxes which the Company may be required to withhold with respect to such Award event or payment or (ii) deduct from any amount payable in cash the minimum amount of any taxes which the Company may be required to withhold with respect to such cash payment.  In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Committee may in its sole discretion (subject to Section 5.4) grant (either at the time of the Award or thereafter) to the Participant the right to elect, pursuant to such rules and subject to such conditions as the Committee may establish, to have the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares valued at their Fair Market Value, necessary to satisfy such minimum withholding obligation, determined in each case as of the trading day next preceding the applicable date of exercise, vesting or payment.  In no event shall shares be withheld in excess of the minimum whole number required for tax withholding under applicable law.

 

5.6          Plan Amendment, Termination and Suspension.

 

(a)       Board Authorization.  The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part.  No Awards may be granted during any suspension of this Plan or after termination of this Plan, but the Committee shall retain jurisdiction as to Awards then outstanding in accordance with the terms of this Plan.

 

(b)       Shareholder Approval.  To the extent then required by applicable law or any applicable listing agency or required under Sections 162, 422 or 424 of the Code to preserve the intended tax consequences of the Plan, or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to shareholder approval.

 

(c)       Amendments to Awards.  Without limiting any other express authority of the Committee under (but subject to) the express limits of this Plan, the Committee by agreement or resolution may waive conditions of or limitations on Awards to Participants that the Committee in the prior exercise of its discretion has imposed, without the consent of a Participant, and (subject to the requirements of Section 1.2(b) and 5.6(d)) may make other changes to the terms and conditions of Awards that do not affect in any manner materially adverse to the Participant, the Participant’s rights and benefits under an Award.  Any amendment

 

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or other action that would constitute a repricing of an Award is subject to the limitations set forth in Section 1.2(b)(viii).

 

(d)       Limitations on Amendments to Plan and Awards.  No amendment, suspension or termination of this Plan or change affecting any outstanding Award shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of the Participant or obligations of the Company under any Award granted under this Plan prior to the effective date of such change.  Changes contemplated by Section 5.2 shall not be deemed to constitute changes or amendments for purposes of this Section 5.6.

 

5.7          Privileges of Stock Ownership.

 

Except as otherwise expressly authorized by the Committee or this Plan, a Participant shall not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the Participant.  No adjustment will be made for dividends or other rights as a shareholder for which a record date is prior to such date of delivery.

 

5.8          Effective Date of the Plan.

 

This Plan is effective as of April 1, 2008.  The Plan shall be submitted for and subject to shareholder approval no later than twelve months after the effective date.

 

5.9          Term of the Plan.

 

No Award will be granted under this Plan after March 31, 2018 (the “termination date”).  Unless otherwise expressly provided in this Plan or in an applicable Award Agreement, any Award granted prior to the termination date may extend beyond such date, and all authority of the Committee with respect to Awards hereunder, including the authority to amend an Award, shall continue during any suspension of this Plan and in respect of Awards outstanding on the termination date.

 

5.10        Governing Law/Construction/Severability

 

(a)       Choice of Law.  This Plan, the Awards, all documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with the laws of the State of California.

 

(b)       Severability.  If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.

 

(c)       Plan Construction.

 

(1)           Rule 16b-3.  It is the intent of the Corporation that the Awards and transactions permitted by Awards be interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange Act, satisfies the applicable requirements for exemptions under Rule 16b-3.  The exemption will not be available if the authorization of actions by any Committee of the Board with respect to

 

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such Awards does not satisfy the applicable conditions of Rule 16b-3.  Notwithstanding the foregoing, the Corporation shall have no liability to any Participant for Section 16 consequences of Awards or events under Awards.

 

(2)       Section 162(m).  It is the further intent of the Company that (to the extent the Company or Awards under this Plan may be or become subject to limitations on deductibility under Section 162(m) of the Code), Options granted with an exercise or base price not less than Fair Market Value on the date of grant will qualify as performance-based compensation or otherwise be exempt from deductibility limitations under Section 162(m) of the Code, to the extent that the authorization of the Award (or the payment thereof, as the case may be) satisfies any applicable administrative requirements thereof.

 

5.11        Captions.

 

Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.

 

5.12        Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other Corporation.

 

Awards may be granted to Eligible Employees under this Plan in substitution for employee stock options, stock appreciation rights, restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Employees in respect of the Company, in connection with a distribution, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company, directly or indirectly, or all or a substantial part of the stock or assets of the employing entity.  The awards so granted need not comply with other specific terms of this Plan, provided the awards reflect only adjustments giving effect to the assumption nor substitution consistent with the conversion applicable to the Common Stock in the transaction and any change in the issuer of the security.  Any shares that are delivered and any awards that are granted by, or become obligations of, the Corporation, as a result of the assumption by the Corporation of, or in substitution for, outstanding awards previously granted by an acquired company (or previously granted by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Corporation or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit in Section 1.4 or other limits on the number of shares available for issuance under the Plan.

 

5.13        Non-Exclusivity of Plan.

 

Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.

 

5.14        No Corporate Action Restriction.

 

The existence of the Plan, the Award Agreements and the Awards granted hereunder

 

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shall not limit, affect or restrict in any way the right or power of the Board or the shareholders of the Corporation to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the Corporation’s or any Subsidiary’s capital structure or its business, (b) any merger, amalgamation, consolidation or change in the ownership of the Corporation or any subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the Corporation’s or any Subsidiary’s capital stock or the rights thereof, (d) any dissolution or liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of all or any part of the Corporation or any Subsidiary’s assets or business, or (f) any other corporate act or proceeding by the Corporation or any Subsidiary.  No Participant, Beneficiary, Personal Representative or any other person shall have any claim under any Award or Award Agreement against any member of the Board or the Committee, or the Corporation or any employees, officers or agents of the Corporation or any Subsidiary, as a result of any such action.

 

5.15        Other Company Benefit and Compensation Program.

 

Payments and other benefits received by a Participant under an Award made pursuant to this Plan shall not be deemed a part of a Participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Corporation or any Subsidiary, except where the Committee or the Board expressly otherwise provides or authorizes in writing.  Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans or arrangements of the Corporation or the Subsidiaries.

 

6.     DEFINITIONS.

 

6.1          Definitions.

 

(a)       “Award” means an award of any Option, Restricted Stock, Stock Unit, or Performance Award, or any combination thereof, whether alternative or cumulative, authorized by and granted under this Plan.

 

(b)       “Award Agreement” means any writing setting forth the terms of an Award that has been authorized by the Committee.

 

(c)       “Award Date” means the date upon which the Committee took the action granting an Award or such later date as the Committee designates as the Award Date at the time of the Award.

 

(d)       “Award Period” means the period beginning on an Award Date and ending on the expiration date of such Award.

 

(e)       “Beneficiary” means the person, persons, trust or trusts designated by a Participant or, in the absence of a designation, entitled by will or the laws of descent and distribution, to receive the benefits specified in the Award Agreement and under this Plan in the event of a Participant’s death, and shall mean the Participant’s executor or administrator if no other Beneficiary is designated and able to act under the circumstances.

 

(f)        “Board” means the Board of Directors of the Corporation.

 

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(g)       “Cause” with respect to a Participant means (unless otherwise expressly provided in the applicable Award Agreement or another applicable contract with the Participant) a termination of employment based upon a finding by the Company, acting in good faith and based on its reasonable belief at the time, that the Participant:

 

(1)           has failed to render services to the Company where such failure amounts to gross negligence or misconduct of the Participant’s responsibility and duties; or

 

(2)           has committed an act of fraud or been dishonest against the Company or any affiliate of the Company; or

 

(3)           has been convicted of a felony or other crime involving moral turpitude.

 

A termination for Cause shall be deemed to occur (subject to reinstatement upon a contrary final determination by the Committee) on the date on which the Company first delivers written notice to the Participant of a finding of termination for Cause.

 

(h)       “Change in Control Event” means any of the following events:

 

(1)           the dissolution or liquidation of the Corporation, unless its business is continued by another entity in which holders of the Corporation’s voting securities immediately before the event own, either directly or indirectly, more than 55% of the continuing entity’s voting securities immediately after the event;

 

(2)           any sale, lease, exchange or other change in ownership (in one or a series of transactions) of all or substantially all of the assets of the Corporation, unless its business is continued by another entity in which holders of the Corporation’s voting securities immediately before the event own, either directly or indirectly, more than fifty-five percent (55%) of the continuing entity’s voting securities immediately after the event;

 

(3)           any reorganization or merger of the Corporation, unless (i) the holders of the Corporation’s voting securities immediately before the event own, either directly or indirectly, more than fifty-five percent (55%) of the continuing or surviving entity’s voting securities immediately after the event, and (ii) at least a majority of the members of the Board of Directors of the surviving entity resulting from such reorganization or merger were members of the incumbent Board of Directors of the Corporation at the time of the execution of the initial agreement or of the action of such incumbent Board of Directors providing for such reorganization or merger;

 

(4)           an acquisition by any person, entity or group acting in concert of more than forty-five percent (45%) of the voting securities of the Corporation, unless the holders of the Corporation’s voting securities immediately before the event own, either directly or indirectly, more than fifty-five percent (55%) of the acquirer’s voting securities immediately after the acquisition;

 

21

 

(5)           the consummation of a tender offer or exchange offer by an individual, entity or group which results in such individual, entity or group beneficially owning (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) twenty-five percent (25%) or more of the voting securities of the Corporation, unless the tender offer is made by the Corporation or any of its subsidiaries or the tender offer is approved by a majority of the members of the Board of Directors of the Corporation who were in office at the beginning of the twelve-month period preceding the commencement of the tender offer; or

 

(6)           a change of one-half or more of the members of the Board of Directors of the Corporation within a twelve-month period, unless the election or nomination for election by shareholders of new directors within such period constituting a majority of the applicable Board was approved by the vote of at least two-thirds (2/3) of the directors then still in office who were in office at the beginning of the twelve-month period.

 

(i)        “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

(j)        “Commission” means the Securities and Exchange Commission.

 

(k)       “Committee” means the Board or one or more committees appointed by the Board to administer all or certain aspects of this Plan, each committee to be comprised solely of one or more directors or such number as may be required under applicable law.

 

(l)        “Common Stock” means the Common Shares of the Corporation and such other securities or property as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 5.2 of this Plan.

 

(m)      “Company” means, collectively, the Corporation and its Subsidiaries.

 

(n)       “Corporation” means American States Water Company, a California corporation, and its successors.

 

(o)       “Eligible Employee” means an officer (whether or not a director) or key employee of the Company.

 

(p)       “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

(q)       “Executive Officer” means any “covered employee” within the meaning of Section 162(m)(3) of the Code.

 

(r)        “Fair Market Value” on any date means (1) if the stock is listed or admitted to trade on a national securities exchange, the closing price of the stock listed on The Wall Street Journal website (www.online.wsj.com), of the principal national securities exchange on which the stock is so listed or admitted to trade, on such date, or, if there is no trading of the stock on such date, then the closing price of the stock as quoted on such website on the next preceding

 

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date on which there was trading in such shares; (2) if the stock is not listed or admitted to trade on a national securities exchange, the last price for the stock on such date, as furnished by the National Association of Securities Dealers, Inc. (“NASD”) through the NASDAQ National Market Reporting System or a similar organization if the NASD is no longer reporting such information; (3) if the stock is not listed or admitted to trade on a national securities exchange and is not reported on the National Market Reporting System, the mean between the bid and asked price for the stock on such date, as furnished by the NASD or a similar organization; or (4) if the stock is not listed or admitted to trade on a national securities exchange, is not reported on the National Market Reporting System and if bid and asked prices for the stock are not furnished by the NASD or a similar organization, the value as established by the Committee at such time for purposes of this Plan.

 

(s)        “Incentive Stock Option” means an Option which is intended, as evidenced by its designation, as an incentive stock option within the meaning of Section 422 of the Code, the award of which contains such provisions and is made under such circumstances and to such persons as may be necessary to comply with that section.

 

(t)        “Nonqualified Stock Option” means an Option that is designated as a Nonqualified Stock Option and shall include any Option intended as an Incentive Stock Option that fails to meet the applicable legal requirements thereof.  Any Option granted hereunder that is not designated as an incentive stock option shall be deemed to be designated a Nonqualified Stock Option under this Plan and not an incentive stock option under the Code.

 

(u)       “Option” means an option to purchase Common Stock granted under this Plan.  The Committee shall designate any Option granted to an Eligible Employee as a Nonqualified Stock Option or an Incentive Stock Option.

 

(v)       “Participant” means an Eligible Employee who has been granted an Award under this Plan.

 

(w)      “Personal Representative” means the person or persons who, upon the disability or incompetence of a Participant, shall have acquired on behalf of the Participant, by legal proceeding or otherwise, the power to exercise the rights or receive benefits under this Plan and who shall have become the legal representative of the Participant.

 

(x)       “Plan” means this 2008 Stock Incentive Plan, as it may be amended from time to time.

 

(y)       “Performance Award” means an Award granted pursuant to Section 4A of the Plan of a contractual right to receive Stock or a fixed or variable amount of cash (as determined by the Committee) upon the achievement, in whole or in part, of the applicable Performance Criteria.  A grant of Restricted Stock Awards or Stock Unit Awards may be designed to qualify as Performance Awards.

 

(z)       “Performance Criteria” means the objectives established by the Committee for a Performance Period pursuant to Section 4A.3 of the Plan for the purpose of determining the extent to which an Award of Performance Awards has been earned.

 

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(aa)     “Performance Period” means the period of no less than six months selected by the Committee during which performance is measured for the purpose of determining the extent to which an Award of Performance Awards has been earned.

 

(bb)     “Restricted Shares” or “Restricted Stock” means shares of Common Stock awarded to a Participant under this Plan, subject to payment of such consideration, if any, and such conditions on vesting (which may include, among others, the passage of time, specified performance objectives or other factors) and such transfer and other restrictions as are established in or pursuant to this Plan and the related Award Agreement, for so long as such shares remain unvested under the terms of the applicable Award Agreement.

 

(cc)     “Restricted Stock Unit” means a Stock Unit subject to such conditions on vesting and payout as the Committee may determine.

 

(dd)     “Retirement” means retirement from active service as an employee or officer of the Company on or after attaining age 65.

 

(ee)     “Rule 16b-3”  means Rule 16b-3 as promulgated by the Commission pursuant to the Exchange Act, as amended from time to time.

 

(ff)      “Section 16 Person” means a person subject to Section 16(a) of the Exchange Act.

 

(gg)     “Securities Act” means the Securities Act of 1933, as amended from time to time.

 

(hh)     “Stock Unit” means a bookkeeping entry that serves as a unit of measurement relative to a share of Common Stock for purposes of determining the payment of the Stock Unit grant.  Stock Units are not outstanding shares of Common Stock and do not entitle a grantee to any dividend, voting or other rights in respect of any Common Stock.  Stock Units may, however, by express provision in the applicable Award Agreement, entitle a Participant to dividend equivalent rights, credited in the form of cash or additional Stock Units, as determined by the Committee.  Stock Units are payable in shares of Common Stock.

 

(ii)       “Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation.

 

(jj)   “Total Disability” means a “permanent and total disability” within the meaning of Section 22(e)(3) of the Code and such other disabilities, infirmities, afflictions or conditions as the Committee by rule may include.

 

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AMENDMENT TO THE AMERICAN STATES WATER COMPANY AMENDED AND RESTATED 2008 STOCK INCENTIVE PLAN

 

This Amendment to the American States Water Company Amended and Restated 2008 Stock Incentive Plan, effective as of May 22, 2012 (as amended, amended and restated or otherwise modified from time to time, the “Plan”), is made by the Board of Directors (the “Board”) of American States Water Company (the “Company”), effective as of March 18, 2014 (the “Effective Date”).  Capitalized terms used but and not otherwise defined herein shall have the respective meanings assigned to such terms in the Plan.

 

Section 1.  Amendment.  Pursuant to Section 5.6(a) of the Plan, the Plan is hereby amended by deleting and replacing Section 2.1 with the following:

 

2.1          Grants.  One or more Options may be granted under this Article to any Eligible Employee.  Each Option granted shall be designated in the applicable Award Agreement by the Committee as either an Incentive Stock Option, subject to Section 2.3 or a Non-Qualified Stock Option.  No Option once granted may be repurchased by the Company without the approval of shareholders.

 

Section 2. Effect of Amendment.  On and after the effectiveness of this Amendment, each reference in the Plan to “this Plan,” “hereunder,” “hereof,” or words of like import referring to the Plan, shall mean and be a reference to the Plan, as amended by this Amendment.  Except as amended hereby, the Plan continues and shall remain in full force and effect in all respects.

 

25Exhibit 10.1

 

Execution Version

 

VOTING AND SUPPORT AGREEMENT

 

This VOTING AND SUPPORT AGREEMENT (this “Agreement”) is entered into as of March 21, 2014, by and among LIN Media LLC, a Delaware limited liability company (“Lares”), Media General, Inc., a Virginia corporation (“Mercury”), Mercury New Holdco, Inc., a Virginia corporation (“New Holdco”), and the Persons listed on Schedule A hereto (collectively, the “Shareholders”).

 

W I T N E S S E T H:

 

WHEREAS, as of the date of this Agreement, each Shareholder is the record and a “beneficial owner” (as defined under Rule 13d-3 under the Exchange Act) of the Lares Class A Shares, Lares Class B Shares, and Lares Class C Shares (the “Lares Common Shares”) set forth opposite such Shareholder’s name or otherwise disclosed on Schedule A attached hereto (all such Lares Common Shares, the “Owned Shares”, and together with any Lares Common Shares over which a Shareholder acquires record or beneficial ownership after the date hereof, the Shareholder’s “Subject Shares”);

 

WHEREAS, concurrently herewith, Mercury, New Holdco, Mercury Merger Sub 1, Inc., a Virginia corporation and a direct, wholly owned subsidiary of New Holdco (“Merger Sub 1”), Mercury Merger Sub 2, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of New Holdco (“Merger Sub 2”), and Lares are entering into an Agreement and Plan of Merger, dated as of the date hereof (as it may be amended from time to time, the “Merger Agreement”), pursuant to which Mercury and Lares wish to effect a strategic business combination by means of (a) a merger of Merger Sub 1 with and into Mercury (the “First Merger”), with Mercury being the surviving company in the First Merger, and (b) a merger of Merger Sub 2 with and into Lares (the “Second Merger”, and together with the First Merger, the “Mergers”, and the effective time of the Second Merger, the “Second Merger Effective Time”), with Lares being the surviving limited liability company in the Second Merger;

 

WHEREAS, the affirmative vote of (a) holders of a majority of the votes entitled to be cast by the holders of the outstanding Lares Class A Shares and the holders of the outstanding Lares Class C Shares, voting together as a single class, and (b) the holders of a majority of the outstanding Lares Class B Shares, voting as a single class, are the only votes of the holders of any class or series of Lares’ limited liability company interests necessary to approve and adopt the Merger Agreement;

 

WHEREAS, pursuant to the Merger Agreement, at the Second Merger Effective Time, each Lares Common Share issued and outstanding immediately prior to the Second Merger Effective Time, other than any Lares Cancelled Shares and Lares Dissenting Shares, shall automatically be converted, at the election of the holder thereof in accordance with, and subject to, the terms, conditions and procedures set forth in the Merger Agreement, into the right to receive either the Cash Election Consideration or the Stock Election Consideration, subject to pro ration as provided in the Merger Agreement; and

 

WHEREAS, as a condition to the willingness of Mercury to enter into the Merger Agreement, and as inducement and in consideration therefor, Mercury has required that the

 

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Shareholders agree, and the Shareholders have agreed, in their capacity as Shareholders of Lares, to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained in this Agreement, the parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1  Defined Terms.  For purposes of this Agreement, capitalized terms used in this Agreement that are defined in the Merger Agreement but not in this Agreement shall have the respective meanings ascribed to them in the Merger Agreement.

 

SECTION 1.2  Other Definitions.  For purposes of this Agreement:

 

(a)  “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made.  For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise.  For purposes of this Agreement, neither Lares nor Mercury shall be deemed to be an Affiliate of any Shareholder.

 

(b)  “Group” has the meaning assigned to such term in Section 13(d)(3) of the Exchange Act and Regulation 13D-G thereunder.

 

(c)  “New Holdco Board” means the Board of Directors of New Holdco after the Second Merger Effective Time.

 

(d)  “New Holdco Common Stock” means the Voting Common Stock, no par value, and the Non-Voting Common Stock, no par value, of New Holdco, and shall also be deemed to refer to any securities of any kind whatsoever which may be issued in respect thereof, or in exchange therefor, pursuant to any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization.

 

(e)  “Representatives” shall mean, with respect to any Person, such Person’s officers, directors, employees, accountants, consultants, legal counsel, financial advisors, agents and other representatives.

 

(f)  “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(g)  “Voting Period” means the period from and including the date of this Agreement through and including the earlier to occur of (i) the Second Merger Effective Time, and (ii) the termination of the Merger Agreement in accordance with its terms.

 

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(h)  “Transfer” means (i) any direct or indirect sale, assignment, disposition or other transfer, either voluntary or involuntary, of any capital stock or limited liability company interests or any interest in any capital stock or limited liability company interests or (ii) in respect of any capital stock or limited liability company interests or interest in any capital stock or limited liability company interests, to enter into any swap or other agreement, transaction or series of transactions, in each case that has an exercise or conversion privilege or a settlement or payment mechanism determined with reference to, or derived from the value of, the capital stock or limited liability company interests of Lares or New Holdco, as applicable, and that hedges or transfers, in whole or in part, directly or indirectly, the economic consequences of such capital stock or limited liability company interest or interest in capital stock or limited liability company interest, whether any such transaction, swap or series of transactions is to be settled by delivery of securities, in cash or otherwise; provided, that no Transfer shall be deemed to have occurred as a result of the entry into, modification of or existence of any bona fide pledge of capital stock or limited liability company interest in connection with a secured borrowing transaction, the pledgee with respect to which is a financial institution in the business of engaging in secured lending and similar transactions and which has entered into such transaction in the ordinary course of business, or any foreclosure under any such pledge.

 

ARTICLE II

VOTING AGREEMENT AND IRREVOCABLE PROXY

 

SECTION 2.1  Agreement to Vote.

 

(a)  Each Shareholder hereby agrees that during the Voting Period, at any meeting of the shareholders of Lares, however called, or at any adjournment or postponement thereof, or in connection with any written consent of the shareholders of Lares or in any other circumstances upon which a vote, consent or other approval of all or some of the shareholders of Lares is sought with respect to the matters described in this Section 2.1, each Shareholder shall vote (or cause to be voted), or execute consents with respect to, as applicable, all of the Subject Shares owned by such Shareholder as of the applicable record date (x) in favor of the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Second Merger, and (y) against each of the matters set forth in clauses (i), (ii), (iii) and (iv) below, whether such vote or consent is required or requested pursuant to applicable Law or otherwise:

 

(i)  any Acquisition Proposal with respect to Lares or any other merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by Lares or any other business combination involving Lares or any of its Subsidiaries or any merger agreement or other definitive agreement with respect to any of the foregoing, in each case, other than the Second Merger and the other transactions contemplated by the Merger Agreement and other than the Merger Agreement;

 

(ii)  any action or proposal to amend the Lares Organizational Documents;

 

(iii)  any action, proposal, transaction or agreement that would reasonably be expected to result in a breach in any material respect of any covenant, representation or

 

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warranty or any other obligation or agreement of Lares contained in the Merger Agreement or of such Shareholder contained in this Agreement; and

 

(iv)  any action, proposal, transaction or agreement involving Lares or any of its Subsidiaries that is intended or would reasonably be expected to prevent, impede, frustrate, interfere with, delay, postpone or adversely affect the consummation of the Second Merger or the other transactions contemplated by the Merger Agreement.

 

(b)  With respect to any meeting of the shareholders of Lares held during the Voting Period, each Shareholder shall, or shall cause the holder of record of its Subject Shares on any applicable record date to, appear at such meeting or otherwise cause its Subject Shares to be counted as present thereat for purposes of establishing a quorum.  Any vote required to be cast or consent required to be executed pursuant to this Section 2.1 shall be cast or executed in accordance with the applicable procedures relating thereto so as to ensure that it is duly counted for purposes of recording the results of that vote or consent.

 

SECTION 2.2  Grant of Irrevocable Proxy.  Each Shareholder hereby irrevocably appoints Mercury and any of its respective designees, and each of them individually, as such Shareholder’s proxy, with full power of substitution and resubstitution, to vote or execute consents during the Voting Period, with respect to such Shareholder’s Subject Shares as of the applicable record date, in each case solely to the extent and in the manner specified in Section 2.1 (the “Proxy Matters”).  This proxy is given to secure the performance of the duties of such Shareholder under this Agreement.  Such Shareholder shall not directly or indirectly grant any Person any proxy (revocable or irrevocable), power of attorney or other authorization with respect to any of its Subject Shares that is inconsistent with Section 2.1 or this Section 2.2. It is expressly agreed that the proxy granted herein shall survive beyond the eleventh month after the date hereof to the extent the Voting Period is still in effect.

 

SECTION 2.3  Nature of Irrevocable Proxy.  The proxy granted pursuant to Section 2.2 by each Shareholder shall be irrevocable during the Voting Period, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by such Shareholder with regard to such Shareholder’s Subject Shares in respect of the Proxy Matters, and such Shareholder acknowledges that the proxy constitutes an inducement for Mercury to enter into the Merger Agreement.  The proxy granted by each Shareholder is a durable proxy and shall survive the bankruptcy, dissolution, death or incapacity of such Shareholder.  The proxy granted hereunder shall terminate only upon the expiration of the Voting Period.

 

SECTION 2.4  Certain Shares.  The 5,400 restricted Lares Class A Shares referenced on Schedule A attached hereto and held by John R. Muse shall not be subject to any of the provisions of this Article II.

 

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ARTICLE III

PRE-CLOSING COVENANTS

 

SECTION 3.1  Restriction on Transferring Subject Securities.

 

(a)  Each Shareholder agrees that such Shareholder shall not, during the Voting Period, Transfer, or cause or permit the Transfer of, any or all of such Shareholder’s Subject Shares, or any voting rights with respect thereto.

 

(b)  The restrictions set forth in Section 3.1(a) shall not apply to:

 

(i)  the Transfer of a Shareholder’s Subject Shares pursuant to the Second Merger;

 

(ii)  any Transfer by any Shareholder of any or all of such Shareholder’s Subject Shares that is approved in writing by Mercury;

 

(iii)  any Transfer by any Shareholder of any or all of such Shareholder’s Subject Shares either (x) in transactions that would be consistent with the requirements of Rule 144(e) and Rule 144(f) under the Securities Act or (y) to the limited or general partners of such Shareholder in full or partial liquidation of such Shareholder in accordance with the applicable provisions of the governing documents of such Shareholder, so long as the aggregate number of Subject Shares Transferred under this Section 3.1(b)(iii) does not exceed 3,000,000;

 

(iv)  any Transfer by any Shareholder of any or all of such Shareholder’s Subject Shares to one or more investment funds that are Affiliates of such Shareholder; provided that (x) if any such investment fund is not already a Shareholder hereunder, such investment fund shall concurrently with such Transfer execute a customary joinder in form and substance reasonably satisfactory to Mercury agreeing to be a “Shareholder” hereunder, and (y) the transferring Shareholder shall be responsible for such transferee’s (and its direct or indirect subsequent transferees’) performance of its (or their) obligations as a Shareholder under this Section 3.1; or

 

(v)  the 5,400 restricted Lares Class A Shares referenced on Schedule A attached hereto held by John R. Muse.

 

(c)  Each Shareholder agrees with, and covenants to, New Holdco and Mercury that such Shareholder shall not request that Lares register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any or all of the Shareholder’s Subject Shares, unless such Transfer is made in compliance with this Agreement.

 

(d)  Any Transfer or attempted Transfer of Subject Shares or voting rights with respect thereto in violation of Section 3.1 shall, to the fullest extent permitted by Law, be null and void ab initio, and Lares shall not, and shall instruct its transfer agent and other third parties not to, record or recognize any such purported transaction on the share register of Lares.

 

SECTION 3.2  No Shop Obligations of Each Shareholder.

 

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(a)  Each Shareholder shall, and each Shareholder shall cause each of its Representatives to, immediately cease and cause to be terminated any discussions existing as of the date of this Agreement with any Person that relate to any Acquisition Proposal or Acquisition Inquiry in respect of Lares. Each Shareholder agrees that, during the Voting Period, such Shareholder shall not, and such Shareholder shall use its reasonable best efforts to cause its Representatives acting on its behalf not to, directly or indirectly, (i) solicit, initiate, knowingly encourage or knowingly facilitate the making, submission or announcement of any Acquisition Proposal with respect to Lares or Acquisition Inquiry with respect to Lares, (ii) furnish any non-public information regarding Lares or any of its Subsidiaries (or such Shareholder’s Subject Shares, or any interest therein) to any Person who has made an Acquisition Proposal with respect to Lares or Acquisition Inquiry with respect to Lares, (iii) engage in discussions or negotiations with any Person who has made any Acquisition Proposal with respect to Lares or Acquisition Inquiry with respect to Lares (other than discussions in the ordinary course of business that are unrelated to an Acquisition Proposal or Acquisition Inquiry, which shall be permitted), or (iv) enter into any letter of intent, agreement in principle, merger, acquisition, purchase or joint venture agreement or other similar agreement for any Acquisition Transaction with respect to Lares (“Restricted Activities”).  A Shareholder shall promptly notify Mercury and Lares orally and in writing of any such Acquisition Proposal or Acquisition Inquiry received by the Shareholder (including the identity of the Person making or submitting such Acquisition Proposal or Acquisition Inquiry and the terms thereof and all modifications thereto).

 

(b)  Notwithstanding the foregoing, solely to the extent that Lares is permitted to engage in any Restricted Activities pursuant to Section 6.10(c) of the Merger Agreement, each Shareholder and its Representatives may participate in such Restricted Activities, provided that (i) such Shareholder has not breached this Section 3.2 and (ii) such action by such Shareholder and its Representatives would be permitted to be taken by Lares pursuant to Section 6.10(b) or Section 6.10(c) of the Merger Agreement.

 

SECTION 3.3  No Conversion of Lares Common Shares.  Except in connection with Transfers permitted under Section 3.1(b)(ii) or Section 3.1(b)(iii), each Shareholder agrees that, without the prior written consent of Mercury, such Shareholder shall not, during the Voting Period, convert, or permit or cause to be converted, (a) any Lares Class B Shares held of record or beneficially owned by such Shareholder into Lares Class A Shares or Lares Class C Shares, or (b) any Lares Class C Shares held of record or beneficially owned by such Shareholder into Lares Class A Shares. Except in connection with Transfers permitted under Section 3.1(b)(ii) or Section 3.1(b)(iii), each Shareholder agrees with, and covenants to, New Holdco and Mercury that such Shareholder shall not request that Lares register the conversion (book-entry or otherwise) of any certificate or uncertificated interest representing any or all of the Lares Class B Shares held of record or beneficially owned by such Shareholder into Lares Class A Shares or Lares Class C Shares, or (b) any Lares Class C Shares Subject Shares into Lares Class A Shares.  Any conversion of Lares Class B Shares or Lares Class C Shares in violation of this Section 3.3 shall, to the fullest extent permitted by Law, be null and void ab initio, and Lares shall not, and shall instruct its transfer agent and other third parties not to, record or recognize any such purported conversion on the share register of Lares.

 

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ARTICLE IV

POST-CLOSING COVENANTS

 

SECTION 4.1  Restriction on Transfers of New Holdco Common Stock.

 

(a)  Each Shareholder agrees that, from and after the Closing Date, such Shareholder shall not Transfer, or cause or permit the Transfer of, any or all of the shares of New Holdco Common Stock held of record or beneficially owned by such Shareholder, or any voting rights with respect thereto.

 

(b)  The restrictions set forth in Section 4.1(a) shall not apply to:

 

(i)  any Transfer by any Shareholder of any or all of such Shareholder’s shares of New Holdco Common Stock that is approved in writing by New Holdco;

 

(ii)  any Transfer (A) solely to tender any or all of the shares of New Holdco Common Stock held by such Shareholder into a tender or exchange offer to purchase shares of New Holdco Common Stock by any Person or Group, or (B) in connection with any merger, consolidation, share exchange, liquidation, dissolution or similar transaction, provided that, in the case of clause (A), such tender or exchange offer has been approved or recommended by the New Holdco Board or the New Holdco Board has expressed no opinion or remains neutral, or is unable to take a position, with respect to such tender or exchange offer, or, in the case of clause (B), such merger or similar transaction has been approved or recommended by the New Holdco Board;

 

(iii)  any Transfer by any Shareholder of any or all of such Shareholder’s shares of New Holdco Common Stock to one or more investment funds that are Affiliates of such Shareholder; provided that (x) if any such investment fund is not already a Shareholder hereunder, such investment fund shall concurrently with such Transfer execute a customary joinder in form and substance reasonably satisfactory to Mercury agreeing to be a “Shareholder” hereunder, and (y) the transferring Shareholder shall be responsible for such transferee’s (and its direct or indirect subsequent transferees’) performance of its (or their) obligations as a Shareholder under this Section 4.1;

 

(iv)  any Transfer by any Shareholder of any or all of such Shareholder’s shares of New Holdco Common Stock at any time at which such Shareholder and its Affiliates, together beneficially own less than five percent (5%) of the issued and outstanding shares of New Holdco Common Stock;

 

(v)  any Transfer by any Shareholder to the limited or general partners of such Shareholder in full or partial liquidation of such Shareholder in accordance with the applicable provisions of the governing documents of such Shareholder; or

 

(vi)  If John R. Muse is not a director of New Holdco at the time of the Transfer, any Transfer by a Shareholder in transactions that would be consistent with the requirements of Rule 144(e) and Rule 144(f) under the Securities Act, treating all Shareholders as Affiliates of New Holdco at the time of such transaction, whether or not such Shareholders are Affiliates of New Holdco at the time of such transaction.

 

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(c)  Transfers in Violation.  Any Transfer or attempted Transfer of shares of New Holdco Stock in violation of this Section 4.1 shall, to the fullest extent permitted by Law, be null and void ab initio.

 

SECTION 4.2  Restrictive Legend.  Certificates representing the shares of New Holdco Common Stock held by each Shareholder shall bear the following legend (unless such Shareholder and its Affiliates, together, beneficially own less than five percent (5%) of the issued and outstanding shares of New Holdco Common Stock):

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING AND SUPPORT AGREEMENT AMONG THE OWNER OF SUCH SECURITIES, [MERCURY NEW HOLDCO, INC.] AND CERTAIN OTHER PARTIES THERETO THAT MATERIALLY RESTRICTS THE TRANSFERABILITY OF THE SECURITIES.  A COPY OF THE AGREEMENT IS ON FILE WITH THE SECRETARY OF [MERCURY NEW HOLDCO, INC].”

 

In addition, with respect to any shares of New Holdco Common Stock held by each Shareholder in book-entry form, a notation comparable to the foregoing legend shall be reflected on the books and records of New Holdco and its transfer agent (unless such Shareholder and its Affiliates, together, beneficially own less than five percent (5%) of the issued and outstanding shares of New Holdco Common Stock).

 

SECTION 4.3  Certain Restrictions.  Each Shareholder shall not:

 

(a)  form, join or in any way participate in a Group (other than a Group consisting solely of the Shareholder and its Affiliates or the entities and individuals included in the Schedule 13D, as amended, currently filed by the Shareholders and others with respect to Lares), with respect to any shares of New Holdco Common Stock;

 

(b)  make, or in any way participate (other than voting New Holdco Common Stock) or engage in, any “solicitation” of “proxies” (as such terms are used in the proxy rules of the SEC) to vote, or call, or seek to call, a meeting of the shareholders of New Holdco or initiate any shareholder proposal for action by shareholders of New Holdco; or

 

(c)  publicly disclose any intention, plan, proposal or arrangement prohibited by, or inconsistent with, the foregoing or advise or knowingly assist or encourage or enter into any discussions, negotiations, agreements or arrangements with any other persons in connection with the foregoing (provided that Section 4.3(b) and this Section 4.3(c) shall in no way limit the activities of John R. Muse taken in solely in his capacity as a director of New Holdco).

 

ARTICLE V

GENERAL COVENANTS

 

SECTION 5.1  General Covenants.  Each Shareholder agrees that such Shareholder shall not:

 

8

 

(a)  enter into any agreement, commitment, letter of intent, agreement in principle or understanding with any Person or take any other action that violates or conflicts with or would reasonably be expected to violate or conflict with, such Shareholder’s covenants and obligations under this Agreement; or

 

(b)  take any action that restricts or otherwise adversely affects such Shareholder’s legal power, authority and right to comply with and perform such Shareholder’s covenants and obligations under this Agreement.

 

SECTION 5.2  Cooperation.  Each Shareholder shall reasonably cooperate with Lares and Mercury in connection with Lares and Mercury’s efforts to make any necessary filings and submissions with, and obtain any necessary consents, approvals, waivers and authorizations of, and actions or nonactions by, any Governmental Entity or any third party necessary to be made in connection with the transactions contemplated by the Merger Agreement, and shall provide to Lares and/or Mercury reasonably promptly any information regarding such Shareholder and its Affiliates as shall be reasonably requested by Lares or Mercury in connection with such efforts. Each Shareholder shall make as promptly as practicable all necessary filings and submissions required to be made by it with any Governmental Entity in connection with the transactions contemplated by the Merger Agreement.

 

SECTION 5.3  Payment of Cash Election Consideration.  Mercury and New Holdco shall cause the Exchange Agent to pay to each Shareholder the Cash Election Consideration owing to such Shareholder for Lares Common Shares with respect to which a Cash Election is properly made, and not revoked, and the exchange procedures determined by Mercury, New Holdco and the Exchange Agent have been completed in accordance with the Merger Agreement, by wire transfer of immediately available funds promptly following (but no later than the next Business Day after) the later of the Second Merger Effective Time or completion of such procedures, to the account or accounts designated in writing by such Shareholder to Mercury and the Exchange Agent.  No later than ten (10) Business Days before the Second Merger Effective Time, Mercury and New Holdco shall provide, or cause the Exchange Agent to provide, to each Shareholder the Lares Letter of Transmittal and all other documentation and instructions necessary for the Shareholder to complete the exchange procedures and receive such payment promptly following the Second Merger Effective Time.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

 

Each Shareholder hereby represents and warrants to Lares and Mercury as follows:

 

SECTION 6.1  Authorization.  Such Shareholder has all necessary legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  This Agreement has been duly executed and delivered by such Shareholder and, assuming it has been duly and validly authorized, executed and delivered by the other parties hereto, constitutes a legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or

 

9

 

other similar laws now or hereafter in effect relating to creditors’ rights generally, and (ii) general principles of equity.

 

SECTION 6.2  Ownership of Subject Shares.  As of the date hereof, such Shareholder does not own, beneficially or of record, any Lares Common Shares or any other securities of Lares other than such Shareholder’s Owned Shares listed opposite such Shareholder’s name or otherwise disclosed on Schedule A attached hereto.  As of the date hereof, such Shareholder is the sole record and a beneficial owner of all of such Shareholder’s Owned Shares, free and clear of all Liens of every nature whatsoever (including any restriction on the right to vote or otherwise transfer such Owned Shares), except as provided under this Agreement or pursuant to any applicable restrictions on transfer under the Securities Act and, as to the Lares Class A shares that are subject to forfeiture, except as provided in the applicable benefit plans and award agreements.

 

SECTION 6.3  Power to Dispose of Shares.  Such Shareholder has the voting power, the power to issue instructions with respect to the matters set forth in this Agreement, the power of disposition with respect to dispositions contemplated by this Agreement, and the power to agree to all of the matters set forth in this Agreement, in each case with respect to all of such Shareholder’s Subject Shares, with no limitations, qualifications, or restrictions on such rights, subject only to applicable securities laws and the terms of this Agreement and, as to the Lares Class A shares that are subject to forfeiture, except as provided in the applicable benefit plans and award agreements.  Any proxies granted by such Shareholder in respect of any or all of its Owned Shares prior to and including the date hereof (except as set forth herein) in respect of the Proxy Matters have been revoked.

 

SECTION 6.4  No Conflicts.  Except as set forth in the Merger Agreement (including, without limitation, filings as may be required under applicable securities laws), except for any filing required under Section 13 or 16 under the Exchange Act, and except for all necessary filings and submissions required to be made by a Shareholder with any Governmental Entity in connection with the transactions contemplated by the Merger Agreement, (x) no filing with, and no permit, authorization, consent or approval of, any Governmental Entity or any other Person (other than such approvals of such Shareholder’s Affiliates as have been obtained on or prior to the date hereof) is necessary for the execution of this Agreement by such Shareholder and the performance by such Shareholder of its obligations hereunder, and (y) none of the execution and delivery of this Agreement by such Shareholder, or the consummation by such Shareholder of the transactions contemplated by this Agreement or compliance by such Shareholder with any of the provisions of this Agreement shall (i) conflict with or result in any breach of the organizational documents, if applicable, of such Shareholder, (ii) result in, give rise to or constitute a violation or breach of or a default (or any event which with notice or lapse of time or both would become a violation, breach or default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the Subject Shares pursuant to, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, contract, lease, license, permit, agreement, commitment, arrangement, understanding,  or other obligation of any kind to which such Shareholder is a party or by which such Shareholder or any of its Subject Shares are bound, or (iii) violate any applicable law, rule, regulation, order, judgment, or decree applicable to such Shareholder, except for in each case

 

10

 

under clauses (i) and (ii) as would not impair such Shareholder’s ability to perform its obligations under this Agreement.

 

SECTION 6.5  Transaction Fee.  Except as otherwise disclosed by such Shareholder to Mercury in writing prior to the date of this Agreement, such Shareholder and its Affiliates have not employed any investment banker, broker or finder in connection with the transactions contemplated by the Merger Agreement who might be entitled to any fee or any commission in connection with or upon consummation of the Merger or the transactions contemplated by this Agreement.

 

SECTION 6.6  Acknowledgement.  Such Shareholder understands and acknowledges that each of New Holdco, Mercury, Merger Sub 1 and Merger Sub 2 is entering into the Merger Agreement in reliance upon such Shareholder’s execution, delivery and performance of this Agreement.

 

ARTICLE VII
 REPRESENTATIONS AND WARRANTIES OF MERCURY AND NEW HOLDCO

 

Each of Mercury and New Holdco hereby represents and warrants to the Shareholders as follows:

 

SECTION 7.1  Authorization.  Mercury and New Holdco have all necessary legal capacity, corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  This Agreement has been duly authorized, executed and delivered by Mercury and New Holdco and, assuming it has been duly and validly executed and delivered by the other parties hereto, constitutes a legal, valid and binding obligation of Mercury and New Holdco, enforceable against each in accordance with the terms of this Agreement, except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally, and (ii) general principles of equity.

 

SECTION 7.2  No Conflicts.  Except as set forth in the Merger Agreement (including, without limitation, filings as may be required under applicable securities laws), (x) no filing with, and no permit, authorization, consent or approval of, any Governmental Entity or any other Person is necessary for the execution of this Agreement by Mercury and New Holdco and the performance by Mercury and New Holdco of their respective obligations hereunder, and (y) none of the execution and delivery of this Agreement by Mercury and New Holdco, or the consummation by Mercury and New Holdco of the transactions contemplated by this Agreement or compliance by Mercury and New Holdco with any of the provisions of this Agreement shall (i) conflict with or result in any breach of the organizational documents of Mercury and New Holdco, (ii) conflict with, result in any violation of, require any consent under or constitute a default (whether with notice or lapse of time or both) under any of the terms, conditions or provisions of any note, contract, lease, license, permit, agreement, commitment, arrangement, understanding, mortgage, bond, indenture, or other obligation of any kind to which Mercury or New Holdco is a party or by which Mercury or New Holdco or any of their respective properties is bound; or (iii) violate any judgment, order, injunction, decree or award of any court, administrative agency or other Governmental Entity that is binding on Mercury or New Holdco

 

11

 

or any of their respective properties, except for in each case under clauses (i) through (iii) as would not impair the ability of such party to perform its obligations under this Agreement.

 

ARTICLE VIII
 TERMINATION

 

SECTION 8.1  This Agreement and all obligations of the parties hereunder shall automatically terminate upon the termination of the Merger Agreement in accordance with its terms. Article II and Article III of this Agreement shall automatically terminate upon the Second Merger Effective Time; and, except as set forth below, all other terms of this Agreement shall automatically terminate at such time after the Closing Date as the Shareholders and their Affiliates cease, in the aggregate, to beneficially own any issued and outstanding shares of New Holdco Common Stock.  Upon the termination of this Agreement, none of the parties hereto shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect; provided, however, that Sections 9.2, and 9.6 through 9.13 shall survive termination of this Agreement.  Notwithstanding the foregoing, termination of this Agreement shall not relieve any party from any liability, or prevent any party from seeking any remedies (at law or in equity) against any other party, for that party’s breach of any of its representations, warranties, covenants or obligations under this Agreement prior such termination.

 

ARTICLE IX
 MISCELLANEOUS

 

SECTION 9.1  No Agreement as Director or Officer.  Notwithstanding any provision of this Agreement to the contrary, the Shareholders have entered into this Agreement in their capacity as shareholders of Lares, and nothing in this Agreement shall limit, restrict or otherwise affect John R. Muse in his capacity as a director or officer of Lares from acting in such capacity or voting in such capacity in his sole discretion on any matter, including in exercising rights under the Merger Agreement.

 

SECTION 9.2  Publication.  Each Shareholder hereby consents to and authorizes New Holdco, Mercury and/or Lares to publish and disclose in any and all applicable filings with the SEC, the FCC or any other Governmental Entity, and any other announcements, disclosures or filings required by applicable Law such Shareholder’s identity and ownership of Lares Common Shares and the nature of such Shareholder’s commitments, arrangements and understandings pursuant to this Agreement and/or the Merger Agreement.

 

SECTION 9.3  Amendments, Waivers, etc.  This Agreement may be amended by an instrument in writing signed on behalf of Mercury and each of the Shareholders that would be bound by such amendment.  Any agreement on the part of any party hereto to any waiver of compliance with any representations, warranties, covenants or agreements contained in this Agreement shall be valid only if set forth in a written instrument signed on behalf of such party.  The waiver by any party of a breach of any provision hereunder shall not operate or be construed as a waiver of any prior or subsequent breach of the same or any other provision hereunder.

 

12

 

SECTION 9.4  Enforcement of Agreement; Specific Performance.  The Shareholders acknowledge and agree that Mercury would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached and that any non-performance, breach or threatened breach of this Agreement by any Shareholder could not be adequately compensated by monetary damages alone and that Mercury would not have any adequate remedy at law. Accordingly, each of Mercury and New Holdco shall be entitled (in addition to any other remedy that may be available to it whether in law or equity, including monetary damages) to seek and obtain (a) enforcement of any provision of this Agreement by a decree or order of specific performance and (b) a temporary, preliminary and/or permanent injunction to prevent breaches or threatened breaches of any provisions of this Agreement without posting any bond or undertaking. The Shareholders further agree that they shall not object to the granting of injunctive or other equitable relief on the basis that there exists adequate remedy at law. Each Shareholder hereby expressly further waives (i) any defense in any action for specific performance that a remedy at law would be adequate or that an award of specific performance is not an appropriate remedy for any reason at law or in equity and (ii) any requirement under any Law to post security as a prerequisite to obtaining equity relief. Each Shareholder agrees that Mercury’s initial choice of remedy will be to seek specific performance of this Agreement in accordance with its terms. If a court of competent jurisdiction denies such relief, Mercury may seek alternative remedies, including damages in the same or another proceeding.

 

SECTION 9.5  Notices.  All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given (i) on the date of delivery if delivered personally or if sent via facsimile (with confirmation via express courier utilizing next-day service), (ii) on the earlier of confirmed receipt or the third (3rd) Business Day following the date of mailing if mailed by registered or certified mail (return receipt requested) or (iii) on the first (1st) Business Day following the date of dispatch if delivered utilizing next-day service by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

(a) If to Mercury, addressed to it at:

 

	
 
    	
c/o Media   General, Inc.
    	
 
    
	
 
    	
333 E. Franklin   Street
    	
 
    
	
 
    	
Attention: Andrew C.   Carington, Esq., General Counsel
    
	
 
    	
Facsimile: (804)   887-7021
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
with a copy (which   shall not constitute notice) to:
    
	
 
    	
 
    	
 
    
	
 
    	
Fried, Frank,   Harris, Shriver & Jacobson LLP
    
	
 
    	
One New York Plaza
    
	
 
    	
New York, New York   10004
    
	
 
    	
Attention:
    	
Philip   Richter, Esq.
    
	
 
    	
 
    	
Abigail   Bomba, Esq.
    
	
 
    	
Facsimile:
    	
(212) 859-4000
    
				

 

13

 

(b) If to Lares, addressed to it at:

 

	
 
    	
c/o LIN Media LLC
    
	
 
    	
One West Exchange   Street, Suite 5A
    
	
 
    	
Providence, Rhode   Island 02903
    
	
 
    	
Attention: 
    	
Denise M. Parent,   Office of General Counsel
    
	
 
    	
Facsimile: 
    	
(401) 454-2817
    
	
 
    	
 
    
	
 
    	
with a copy (which   shall not constitute notice) to:
    
	
 
    	
 
    	
 
    
	
 
    	
Weil, Gotshal & Manges LLP
    
	
 
    	
200 Crescent Court,   Suite 300
    
	
 
    	
Dallas, TX 75201
    
	
 
    	
Attention:
    	
Glenn D. West, Esq.
    
	
 
    	
 
    	
James R. Griffin, Esq.
    
	
 
    	
Facsimile: 
    	
(214) 746-7777
    
				

 

(c)  If to any Shareholder, addressed to it at:

 

	
 
    	
2100 McKinney Avenue, Suite 1600
    
	
 
    	
Dallas, TX 75201
    
	
 
    	
Attention: 
    	
John R. Muse
    
	
 
    	
 
    	
David W. Knickel
    
	
 
    	
Facsimile: 
    	
(214) 720-7888
    
	
 
    	
 
    	
 
    
	
 
    	
with a copy (which   shall not constitute notice) to:
    
	
 
    	
 
    
	
 
    	
Vinson &   Elkins LLP
    
	
 
    	
3700 Trammell Crow   Center
    
	
 
    	
2001 Ross Avenue
    
	
 
    	
Dallas, TX 75201
    
	
 
    	
Attention: 
    	
Michael D.   Wortley, Esq.
    
	
 
    	
 
    	
Robert L.   Kimball, Esq.
    
	
 
    	
Facsimile: 
    	
(214) 999-7860
    
				

 

or to that other address as any party shall specify by written notice so given, and notice shall be deemed to have been delivered as of the date so telecommunicated or personally delivered.

 

SECTION 9.6  Headings; Titles. When a reference is made in this Agreement to Articles, Sections or Schedules, such reference shall be to an Article or Section of or Schedule to this Agreement unless otherwise indicated.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  This Agreement shall not be interpreted or construed to require any person to take any action, or fail to take any action, if to do so would violate any applicable Law.

 

14

 

SECTION 9.7  Severability.  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of this invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. Upon determination that any term or other provision is invalid or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement as to affect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 9.8  Entire Agreement.  This Agreement (together with the Merger Agreement, to the extent referred to in this Agreement, and any documents delivered by the parties in connection herewith), constitutes the entire agreement among the parties with respect to the subject matter of this Agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter of this Agreement.

 

SECTION 9.9  Assignment; Binding Effect; No Third Party Beneficiaries; Further Action.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties; provided that Mercury and New Holdco may assign their respective rights, interests or obligations hereunder to one or more of its Subsidiaries.  This Agreement shall be binding upon and shall inure to the benefit of New Holdco, Mercury, Lares and their respective successors and assigns and shall be binding upon the Shareholders and the Shareholders’ successors, assigns, heirs, executors and administrators.  Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person (other than, in the case of New Holdco, Lares and Mercury, their respective successors and assigns and, in the case of the Shareholders, the Shareholders’ successors, assigns, heirs, executors and administrators but, in the case of the Shareholders, excluding any transferees of New Holdco Common Stock pursuant to Section 4.1(b) other than John R. Muse) any rights, remedies, obligations or liabilities under or by reason of this Agreement.  Each of the Shareholders, Mercury and New Holdco shall take any further action and execute any other instruments as may be reasonably requested by the other parties to this Agreement to effectuate the intent of this Agreement.

 

SECTION 9.10  Mutual Drafting.  Each party has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. This Agreement shall not be deemed to have been prepared or drafted by any one party or another or any party’s attorneys.

 

SECTION 9.11  Governing Law and Consent to Jurisdiction. This Agreement and all claims or causes of action (whether in contract, tort or otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement) shall be governed and construed in accordance with the internal Laws of the Commonwealth of Virginia, without regard to any applicable conflicts of law principles that would result in the application of the Laws of any other jurisdiction.  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby

 

15

 

shall be brought exclusively in the United States District Court for the Eastern District of Virginia (or, if that court does not have jurisdiction, the Circuit Court for the City of Richmond, Virginia), and each of the parties hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 9.5 shall be deemed effective service of process on such party.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING (WHETHER IN CONTRACT OR TORT OR OTHERWISE) ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

SECTION 9.12  Counterparts; Facsimiles.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart.

 

SECTION 9.13  Liability.  The rights and obligations of each of the Shareholders under this Agreement shall be several and not joint. All references to actions to be taken by the Shareholders, or representations and warranties to be made, under this Agreement refer to actions to be taken or representations and warranties to be made by Shareholders acting severally and not jointly.  Except for any liability for claims, losses, damages, liabilities or other obligations arising out of an Shareholder’s failure to perform its obligations hereunder, Mercury agrees that no Shareholder (in its capacity as a Shareholder of Lares) will be liable for claims, losses, damages, liabilities or other obligations resulting from or relating to the Merger Agreement, including any breach by Lares of the Merger Agreement, and that Lares shall not be liable for claims, losses, damages, liabilities or other obligations resulting from or related to any Shareholder’s failure to perform its obligations hereunder.

 

(Signature page follows)

 

16

 

IN WITNESS WHEREOF, Mercury, New Holdco, Lares and the Shareholders have caused this Agreement to be duly executed as of the day and year first above written.

 

 

	
 
    	
MEDIA   GENERAL, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   James F. Woodward
    
	
 
    	
Name:
    	
James   F. Woodward
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MERCURY   NEW HOLDCO, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   James F. Woodward
    
	
 
    	
Name:
    	
James   F. Woodward
    
	
 
    	
Title:
    	
Treasurer   
    

 

Signature Page to Voting and Support Agreement (HMC)

 

 

IN WITNESS WHEREOF, Mercury, New Holdco, Lares and the Shareholders have caused this Agreement to be duly executed as of the day and year first above written.

 

 

	
 
    	
LIN   MEDIA LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Richard J. Schmaeling
    
	
 
    	
Name:
    	
Richard   J. Schmaeling
    
	
 
    	
Title:
    	
Senior   Vice President Chief Financial Officer
    

 

Signature Page to Voting and Support Agreement (HMC)

 

 

IN WITNESS WHEREOF, Mercury, New Holdco, Lares and the Shareholders have caused this Agreement to be duly executed as of the day and year first above written.

 

Shareholders:

 

HICKS, MUSE, TATE & FURST EQUITY FUND III, L.P.

 

	
By:
    	
HM3/GP Partners, L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
Hicks, Muse GP Partners III, L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
Hicks Muse Fund III Incorporated,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   David W. Knickel
    	
 
    
	
 
    	
David W. Knickel
    	
 
    
	
 
    	
Vice President and Chief Financial Officer
    	
 
    

 

 

	
HM3 COINVESTORS, L.P.
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks Muse GP Partners III, L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks Muse Fund III Incorporated,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   David W. Knickel
    	
 
    
	
 
    	
David W. Knickel
    	
 
    
	
 
    	
Vice President and Chief Financial Officer
    	
 
    
					

 

Signature Page to Voting and Support Agreement (HMC)

 

 

	
HICKS, MUSE, TATE & FURST EQUITY   FUND IV, L.P.
    	
 
    
	
 
    	
 
    
	
By:
    	
HM4 Partners, L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks, Muse GP Partners L.A., L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks, Muse Latin America Fund I   Incorporated,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   David W. Knickel
    	
 
    
	
 
    	
David W. Knickel
    	
 
    
	
 
    	
Vice President and Chief Financial Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
HICKS, MUSE, TATE & FURST PRIVATE   EQUITY FUND IV, L.P.
    
	
 
    	
 
    
	
By:
    	
HM4 Partners, L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks, Muse GP Partners L.A., L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks, Muse Latin America Fund I   Incorporated,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   David W. Knickel
    	
 
    
	
 
    	
David W. Knickel
    	
 
    
	
 
    	
Vice President and Chief Financial Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
HM4-EQ COINVESTORS, L.P.
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks, Muse GP Partners IV, L.P.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
By:
    	
Hicks, Muse Fund IV, LLC,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   David W. Knickel
    	
 
    
	
 
    	
David W. Knickel
    	
 
    
	
 
    	
Vice President and Chief Financial Officer
    	
 
    
								

 

Signature Page to Voting and Support Agreement (HMC)

 

 

	
HICKS, MUSE & CO. PARTNERS, L.P.
    	
 
    
	
 
    	
 
    
	
By:
    	
HM Partners Inc.,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   David W. Knickel
    	
 
    
	
 
    	
David W. Knickel
    	
 
    
	
 
    	
Vice President and Chief Financial Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
MUSE FAMILY ENTERPRISES, LTD.
    	
 
    
	
 
    	
 
    
	
By:
    	
JRM Management Company, LLC,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   John R. Muse
    	
 
    
	
 
    	
John R. Muse
    	
 
    
	
 
    	
President
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
JRM INTERIM INVESTORS, L.P.
    	
 
    
	
 
    	
 
    
	
By:
    	
JRM Management Company, LLC,
    	
 
    
	
 
    	
its general partner
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   John R. Muse
    	
 
    
	
 
    	
John R. Muse
    	
 
    
	
 
    	
President
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
JOHN R. MUSE
    	
 
    
	
 
    	
 
    
	
/s/ John R. Muse
    	
 
    

 

Signature Page to Voting and Support Agreement (HMC)

 

 

Schedule A

Ownership of Lares Common Shares(1)

 

	
Shareholder
    	
 
    	
Lares Class A
   Common Shares
    	
 
    	
Lares Class B
   Common Shares(2)
    	
 
    	
Lares Class C
   Common Shares
    	
 
    
	
Hicks, Muse, Tate & Furst Equity Fund   III, L.P.
    	
 
    	
0
    	
 
    	
16,195,611
    	
 
    	
1
    	
 
    
	
HM3 Coinvestors,   L.P.
    	
 
    	
0
    	
 
    	
211,787
    	
 
    	
0
    	
 
    
	
Hicks, Muse,   Tate & Furst Equity Fund IV, L.P.
    	
 
    	
0
    	
 
    	
4,193,504
    	
 
    	
0
    	
 
    
	
Hicks, Muse,   Tate & Furst Private Equity Fund IV, L.P.
    	
 
    	
0
    	
 
    	
28,207
    	
 
    	
0
    	
 
    
	
HM4-EQ   Coinvestors, L.P.
    	
 
    	
0
    	
 
    	
65,079
    	
 
    	
0
    	
 
    
	
Hicks,   Muse & Co. Partners, L.P.
    	
 
    	
0
    	
 
    	
114,586
    	
 
    	
0
    	
 
    
	
Muse Family   Enterprises, Ltd.
    	
 
    	
0
    	
 
    	
1,255
    	
 
    	
0
    	
 
    
	
JRM Interim   Investors, L.P.
    	
 
    	
0
    	
 
    	
9,013
    	
 
    	
0
    	
 
    
	
John R. Muse(3)
    	
 
    	
5,400
    	
(4)
    	
57,283
    	
 
    	
0
    	
 
    

 

(1)           The Shareholders jointly file a beneficial ownership report on Schedule 13D and may be deemed a group with beneficial ownership of shares held by other Shareholders in the group as and to the extent set forth in the Schedule 13D.

 

(2)           Each Class B Common Share may be converted at the option of the holder into a Class A Common Share or a Class C Common Share at any time, subject to the receipt of all requisite regulatory approvals and certain other conditions.  Each  Class C Common Share converts automatically into a  Class A Common Share on the date that a majority of the shares of Class B common stock of LIN TV Corp. that were outstanding on May 1, 2002 (also treating, for this purpose, the Class B Common Shares as shares of Class B common stock of LIN TV Corp.) shall have been converted into shares of Class B common stock of LIN TV Corp. or Class A Common Shares.  Accordingly, each Shareholder listed on this Schedule A has beneficial ownership over the number of Class A Common Shares equal to the number of  Class B Common Shares and Class C Common Shares beneficially owned by such Shareholder.  Accordingly, each Shareholder listed on this Schedule A has beneficial ownership over the number of Class C Common Shares equal to the number of Class B Common Shares beneficially owned by such Shareholder.

 

(3)           In addition to Mr. Muse’s shares owned of record, Mr. Muse is also the beneficial owner of all other shares listed in this Schedule A.

 

(4)           Mr. Muse holds 5,400 restricted Class A Common Shares, which vest over three years, with 25% of the shares vesting on the first and second anniversary of the grant date (which was September 10, 2013) and 50% of the shares vesting on the third anniversary of the date of grant.  In addition, Mr. Muse has an option to purchase 100,000 Class A Common Shares, which vest over three years, with 25% of the option vesting on the first and second anniversary of the grant date (which was September 8, 2012) and 50% of the option vesting on the third anniversary of the grant date.  As a result, Mr. Muse beneficially owns 25% of the shares subject to the option.

 

Schedule A

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