2019 Short-Term Incentive Program

“Adjusted EPS - AWR Consolidated” means the Corporation’s EPS for 2019 adjusted to remove 1) any write-offs associated with the CPUC’s 2019 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, 2) any transaction fees and/or gain or loss on sale recognized in the financial statements in 2019 associated with a sale or restructuring of any of the Corporation’s business units or the acquisition of any new businesses, and 3) expenses associated with new business development at Regulated Utilities.

“Adjusted EPS - Regulated Utilities” means the sum of the EPS of each of the Regulated Utilities for 2019 adjusted to remove 1) any write-offs associated with the CPUC’s 2019 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, 2) any transaction fees and/or gain or loss on sale recognized in the financial statements in 2019 associated with a sale or restructuring of any of the Corporation’s business units or the acquisition of any new businesses, and 3) expenses associated with new business development.

“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 2019 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 2019 as set forth in the Operating Budget and for Expense Optimization — ASUS, Direct Construction Margin — ASUS and Direct Operating 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, Direct Construction Margin-ASUS, Expense Optimization-ASUS, SOX Deficiencies-RU, SOX Deficiencies-ASUS, Safety-Recordable Work Incidents-ASUS, Safety-Recordable Work Incidents-RU and Supplier Diversity-RU.

“CAB” means the CPUC Consumer Affairs Branch.

“Capital Expenditures - RU” means the dollar amount of capital expenditures for 2019 for the Regulated Utilities.

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“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 the Regulated Utilities received by CAB in 2019 divided by the average number of customers served by the Regulated Utilities during 2019.

“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 2019.

“Direct Construction Margin — ASUS” means a percentage determined by dividing total construction revenues less ASUS construction costs (reported as expenses in the Corporation’s Form 10-K for 2019 filed with the Securities and Exchange Commission) by total construction revenues. Construction revenues and construction costs for this purpose shall exclude the construction revenues and construction costs of any new base.

“Direct Operating Margin — ASUS” means a percentage determined by dividing total operations and maintenance revenues less direct operations and maintenance expense by total operations and maintenance revenues as recorded in the Corporation’s Form 10-K.  Total operations and maintenance revenues for this purpose shall exclude revenues of any new base awards received in 2019. Direct operations and maintenance expense for this purpose shall include other operation, administration and general, depreciation and amortization, maintenance and property and other taxes as reflected in the Corporation’s Form 10-K, but shall exclude (i) expenses of any new base awarded during 2019, (ii) expenses of ASUS administration and centralized functions, (iii) general office expenses of GSWC approved by the CPUC to be allocated to ASUS, and (iv) property and other taxes allocable to construction activities.

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

“EPS” means fully diluted earnings per share as reported in the Corporation’s consolidated financial statements for 2019.

“Expense Optimization — ASUS” means the sum of other operations, maintenance, and administrative and general expenses of ASUS in 2019 (as reflected in the Corporation’s 10-K) excluding (i) expenses of ASUS incurred in connection with any new base awards during 2019, (ii) general office expenses of GSWC approved by the CPUC to be allocated to ASUS, (iii) expenses incurred in connection with ASUS’s new business development cost center, (iv) expenses included in the Corporation’s Form 10-K for awards recorded under the plan and the 2016 Stock Incentive Plan, and (v) expenses in connection with managing additional assets if the asset transfers as Budgeted for these additional assets are not approved by the government in 2019.

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

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

“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 2019 as presented to the Board of Directors at its January 29, 2019 meeting as adjusted for the impact of decisions of the CPUC and other adjustments required to be made under Section 4.6 of the Plan.

“OSHA Violation” means an intentional or willful violation of the rules and regulations of the Occupational Health and Safety Administration which results in a serious injury, serious illness or death and arises out of a situation that the employer knew or should have known could result in serious injury, serious illness or death, provided that the situation could have reasonably been remedied by the employer.

“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 that becomes a direct or indirect subsidiary of the Corporation which is designated a “regulated utility” by the Committee.

“Safety-Recordable Work Incidents — ASUS” means the number of work-related injuries and illnesses as reported on the OSHA Form 300s for ASUS other than for new bases awarded in 2019.

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

“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 2019 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 2019 pursuant to Section 404 of SOX.

“Supplier Diversity - RU” means the percentage reported by the Regulated Utilities to the CPUC annually by March 1 in its General Order 156 Compliance Filing.  The percentage is calculated by taking the Regulated Utilities’ total procurement dollars for the reporting period with

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CPUC qualified women-owned, minority-owned, disabled veteran-owned, and lesbian, gay, bisexual and transgender-owned business enterprises divided by the Regulated Utilities’ 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).

“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