AMERICAN STATES WATER COMPANY 2017 SHORT-TERM INCENTIVE PROGRAM

“Adjusted EPS - AWR Consolidated” means the Corporation’s EPS for 2017 adjusted to remove 1) any write-offs associated with the CPUC’s 2017 procurement audit of GSWC arising out of the settlement of claims approved by the CPUC in December 2011 related to the capital projects contracting matter and 2) any transaction fees and/or gain or loss on sale recognized in the financial statements in 2017 associated with a sale of any of the Corporation’s business units or the acquisition of any new businesses.

“Adjusted EPS - Regulated Utilities” means the sum of the EPS of each of the Regulated Utilities for 2017 adjusted to remove 1) any write-offs associated with the CPUC’s 2017 procurement audit of GSWC arising out of the settlement of claims approved by the CPUC in December 2011 related to the capital projects contracting matter and 2) any transaction fees and/or gain or loss on sale recognized in the financial statements in 2017 associated with a sale of any of the Corporation’s business units or the acquisition of any new businesses.

“Aggregate Bonus” means the combination of a Participant’s Objective Bonus and his or her Discretionary Bonus.

“ASUS” means American States Utility Services, Inc., a California corporation, and wholly owned subsidiary of the Corporation, and its wholly owned subsidiaries.

“Award Agreement” means a written agreement setting forth the material terms and conditions of the Award as determined by the Committee consistent with the express limitations of the Plan and the 2017 STIP.

“Base Salary” means the Participant’s rate of annual base pay on the date the Committee approves the Business Criteria, the Additional Objective Criteria and the Performance Targets.

“Board of Directors” means the Corporation’s board of directors.

“Budget” or “Budgeted” means in the case of Adjusted EPS for the Corporation, the Regulated Utilities or ASUS, as the case may be, the projected Adjusted EPS for 2017 as set forth in the Operating Budget and for Construction Revenues — ASUS, Economic Value — ASUS, Expense Optimization — ASUS, and Direct Construction Margin — ASUS, the amounts included for these metrics in the Operating Budget.

“Business Criteria” means Adjusted EPS-AWR Consolidated, Adjusted EPS- Regulated Utilities, Adjusted EPS-ASUS, Customer Complaints-RU, Customer Complaint Standards-RU, Capital Expenditures-RU, Construction Revenues-ASUS, Expense Optimization-ASUS, SOX Deficiencies-RU, SOX Deficiencies-ASUS, Economic Value-ASUS, Field Office Overhead Rate-ASUS, Safety-Recordable Work Incidents-RU,  Satisfaction of Customers-Small Business Utilization (SBU)-ASUS and Supplier Diversity-RU.

“CAB” means the CPUC Consumer Affairs Branch.

“Capital Expenditures - RU” means the dollar amount of capital expenditures for 2017 for the Regulated Utilities.

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“Construction Revenues — ASUS” — means the total revenues from the construction segment of ASUS during 2017 for the military bases served by subsidiaries of ASUS.

“Committee” means the Compensation Committee of the Board of Directors.

“CPUC” means the California Public Utilities Commission.

“Customer Complaint Standards - RU” means the number of complaints on all matters on GSWC received by CAB in 2017 divided by the average number of customers served by GSWC during 2017.

“Customer Complaints - RU” means the number of water quality, pressure, and leak complaints received from water customers by GSWC divided by the average number of water customers served by GSWC during 2017.

“Direct Construction Margin — ASUS” means a percentage determined by dividing total construction revenues less ASUS construction costs (reported as expenses in the Company’s Form 10-K for 2017 filed with the Securities and Exchange Commission) adjusted to exclude construction revenues derived from (i) the Field Office Overhead Rate — ASUS and (ii) retroactive adjustment due to settlement of pending filings with the government by total construction revenues reduced for these two adjustments.

“Discretionary Bonus” means a bonus payable to a Participant based on that Participant’s Individual Performance Measures.

“Economic Value - ASUS” means the percentage increase in combined recorded operations and maintenance revenue and actual billed renewal and replacement fees for ASUS, other than for Eglin Air Force Base, over the Budgeted amount due to price redeterminations, economic price adjustments and asset transfers.

“EPS” means fully diluted earnings per share as reported in the Corporation’s consolidated financial statements for 2017.

“Expense Optimization — ASUS” means the sum of operations and maintenance and administrative and general expenses for ASUS in 2017 excluding expenses associated with the transfer of oil-water separators at Terrapin Utility Services, Inc. and general office expenses allocated to ASUS by GSWC based on the percentage of such expenses authorized by the CPUC to be allocated to ASUS.

“Field Office Overhead Rate — ASUS” means negotiated rate for field offices for each of the subsidiaries of ASUS as of December 31, 2016, other than Fort Bliss Water Services Company and Emerald Coast Utility Services, Inc. for renewal and replacement projects.

“GSWC” means Golden State Water Company, a California corporation and wholly owned subsidiary of the Corporation.

“Individual Performance Measures” means the criteria or goals utilized to determine the amounts of each Participant’s Discretionary Bonus.

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“Objective Bonus” means a bonus based on the degree of achievement of the Performance Targets for the Business Criteria and the Additional Objective Criteria.

“Operating Budget” means the Company’s operating budget for 2017 as presented to the Board of Directors at its January 31, 2017 meeting.

“Payout Percentage” means the percentage of a Participant’s Target Aggregate Bonus that is payable based on the degree of satisfaction of a Performance Target or the Individual Performance Measures.

“Performance Measures” means the Business Criteria, the Additional Objective Criteria and Individual Performance Measures.

“Performance Target” means a specific goal established by the Committee with respect to the Business Criteria or the Additional Objective Criteria as set forth in Section 6.

“Regulated Utilities” means GSWC and any other utility acquired by the Corporation which is designated a “regulated utility” by the Committee.

“Safety-Recordable Work Incidents - RU” means the number of work-related injuries and illnesses as reported on the OSHA Form 300 for GSWC.

“Satisfaction of Customers - Small Business Utilization (SBU) - ASUS” means the percentage of total contract awards during 2017 by subsidiaries of ASUS with qualified small business vendors for the purpose of meeting the requirements of the U.S. government’s small business utilization program divided by the total expenditures incurred with all vendors. Qualified vendors are 1) Service Disabled Veteran-owned, Small Business, 2) Veteran-owned Small Business, 3) Historically Underutilized Business Zones, 4) Women-owned small business, 5) Small Disadvantaged Business and 6) Small Business.

“SOX” means the Sarbanes-Oxley Act of 2002.

“SOX Deficiencies - ASUS” means the number of “control deficiencies” (each a “CD”), “significant deficiencies” (each an “SD”) and “material weaknesses” (each a “MW”) reported for ASUS in the independent auditor’s report for 2017 pursuant to Section 404 of SOX.

“SOX Deficiencies - RU” means the number of CDs, SDs and MWs reported for the Regulated Utilities in the independent auditor’s report for 2017 pursuant to Section 404 of SOX.

“Supplier Diversity - RU” means the percentage reported by GSWC to the CPUC annually by March 1 in its General Order 156 Compliance Filing.  The percentage is calculated by taking GSWC’s total procurement dollars for the reporting period with CPUC qualified women-owned, minority-owned, disabled veteran-owned, and lesbian, gay, bisexual and transgender-owned business enterprises divided by GSWC’s total procurement dollars (net of exclusions allowed under the General Order 156 Compliance Filing for the reporting period, such as payments for purchased water, purchased power, pump taxes, income taxes, franchise fees, and postage).

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“Target Aggregate Bonus” means the amount of bonus that would be payable if each of the Performance Targets were met at the targeted level and the Participant’s Individual Performance Measures were met at the targeted level.

5.                                      Participation and Individual Awards