AMERICANSTATES WATER COMPANY 2003NON-EMPLOYEE DIRECTORS STOCK PLAN Amendedand Restated Effective as of January1, 2008

TABLE OF CONTENTS
SECTION 1.		GENERAL DESCRIPTION	1
SECTION 2.		DEFINITIONS	1
SECTION 3.		EFFECTIVE DATE; DURATION	3
SECTION 4.		STOCK OPTION AWARDS	3
	4.1	Annual Award	3
	4.2	Maximum Number of Shares.	3
	4.3	Option Price.	3
	4.4	Option Period and Exercisability.	4
	4.5	Termination of Directorship.	4
	4.6	Option Agreements.	4
	4.7	Dividend Equivalent Credits to Option Dividend Equivalent Accounts.	4
SECTION 5.		STOCK UNITS AWARDS	4
	5.1	2003 Awards	4
	5.2	Annual Award	5
	5.3	Crediting of Dividend Equivalents to Stock Unit Accounts	5
	5.4	Units and Other Amounts Vest Immediately	5
	5.5	Distribution of Benefits	5
SECTION 6.		CHANGES IN CAPITAL STRUCTURE	6
	6.1	Adjustments	6
	6.2	Corporate Transactions-Assumption or Termination of Awards	7
	6.3	Option Termination	7
SECTION 7.		SHARES SUBJECT TO THE PLAN; SHARE LIMITS	7
	7.1	Shares Available for Issuance	7
	7.2	Share Limits; Cut Backs	7
	7.3	Fractional Shares; Minimum Issue	8
SECTION 8.		ADMINISTRATION	8
	8.1	The Administrator	8
	8.2	Committee Action	8
	8.3	Rights and Duties; Delegation and Reliance; Decisions Binding	8
SECTION 9.		AMENDMENT AND TERMINATION; STOCKHOLDER APPROVAL	9
	9.1	Amendment and Termination	9
	9.2	Stockholder Approval	9
SECTION 10.		MISCELLANEOUS	9
	10.1	Limitation on Participants’ Rights	9
	10.2	Beneficiaries	9
	10.3	Non-Transferability	10
	10.4	Obligations Binding Upon Successors.	10
	10.5	Governing Law; Severability	10
	10.6	Compliance with Laws	11
	10.7	Limitations on Rights Associated with Units	11
	10.8	Plan Construction	11
	10.9	Headings Not Part of Plan	11

Section 1. General Description

 

The American States Water Company 2003 Non-Employee Directors Stock Plan (the “Plan”) provides for grants of stock units and stock options to non-employee directors.  The purposes of the Plan are (a) to attract, motivate and retain eligible directors of the Company by providing to them supplemental stock-based compensation and (b) to encourage eligible directors to increase their stock ownership in the Company.  The Plan is amended and restated in its entirety effective as of January 1, 2008.

Section 2. Definitions

 

Whenever the following terms are used in this Plan they shall have the meaning specified below unless the context clearly indicates to the contrary:

“Account or Accounts” means the Participant’s Stock Unit Account or Option Dividend Equivalent Account, as the context requires.

“Award Units” means Stock Units credited pursuant to Sections 5.1 and 5.2 and any Dividend Equivalents credited thereon pursuant to Section 5.3.

“Board” means the Board of Directors of the Company.

“Cause” has the same meaning as determined under Section 304 of the California Corporations Code or any successor thereof.

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

“Common Stock” means the Common Stock of the Company, subject to adjustment pursuant to Section 6.

“Committee” means the Board or a Committee of the Board acting under delegated authority from the Board.

“Company” means American States Water Company, a California corporation, and its successors and assigns.

“Dividend Equivalent” means (a), with respect to a Participant’s Option Dividend Equivalent Account, the amount of cash dividends or other cash distributions paid by the Company on that number of shares of Common Stock that is equal to the number of shares subject to each outstanding Option held by the Participant as of the applicable measurement date for the dividend or other distribution, which amount shall be allocated as Stock Units credited to the Participant’s Option Dividend Equivalent Account pursuant to Section 4.7; and (b), with respect to a Participant’s Stock Unit Account, the amount of cash dividends or other cash distributions paid by the Company on that number of shares of Common Stock that is equal to the number of Stock Units then credited to the Participant’s Stock Unit Account as of the applicable measurement date for the dividend or other distribution, which amount shall be allocated as additional Stock Units to the Participant’s Stock Unit Account pursuant to Section 5.3.

“Distribution Subaccount” means a subaccount of a Non-Employee Director’s Option Dividend Equivalent Account established to separately account for Dividend Equivalents credited in the form of Stock Units with respect to each outstanding Option.

 

 

“Effective Date” means May 20, 2003, subject to shareholder approval at the 2004 annual meeting of shareholders.

“Eligible Non-Employee Director” means each Non-Employee Director who first becomes a Non-Employee Director on or after the date of the 2003 Annual Meeting and each other Non-Employee Director who notifies the Company in writing of his or her election to waive all benefits under the Retirement Plan in exchange for participation in the Stock Unit Award feature under Section 5.2(a) of this Plan.

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

“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 on the Composite Tape, as published in the Western Edition of The Wall Street Journal, 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 Composite Tape on the next preceding 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.

“Grant Date” means the date on which an Option is granted pursuant to Section 4.

“Non-Employee Director” means a member of the Board who is not an officer or employee of the Company or a subsidiary.

“Option or Nonqualified Stock Option” means an option to purchase a number of shares of Common Stock granted to Non-Employee Directors pursuant to Section 4.1.

“Option Dividend Equivalent Account” means the bookkeeping account maintained by the Company on behalf of each Participant that is credited with Dividend Equivalents in accordance with Section 4.7, and includes each Distribution Subaccount.

“Participant” means any person who has been granted an Option or Award Units under this Plan.

“Plan” means the American States Water Company 2003 Non-Employee Directors Stock Plan.

“Retirement” means a retirement or resignation by a Non-Employee Director who either (a) has attained age 65 and has provided at least five years service as a member of the Board or (b) is required to retire from service on the Board and not seek reelection or nomination pursuant to the Company’s director retirement policy.

“Retirement Plan” means the Company’s Amended and Restated Retirement Plan for Non-Employee Directors of American States Water Company.

“Securities Act” means the Securities Act of 1933, as amended.

“Stock” means a share of Common Stock.

“Stock Unit or Unit” means a non-voting unit of measurement which is deemed for bookkeeping and payment purposes to represent one outstanding share of Common Stock of the Company solely for purposes of determining benefits under this Plan, established pursuant to the grant of Award Units under Sections 5.1 and 5.2, or in respect of Dividend Equivalents under Section 4.7 or Section 5.3, and payable solely in a share of Stock, on a one-for-one basis.

“Stock Unit Account” means the bookkeeping account maintained by the Company on behalf of each Participant that is credited with Award Units and Dividend Equivalents in accordance with Section 5.

“2003 Annual Meeting”  means the Company’s 2003 annual meeting of stockholders.

 

 of prior Board service or (ii) 10, divided by (3) the Fair Market Value of a share of Common Stock on the last trading date prior to the 2003 Annual Meeting.

 

(b) New Non-Employee Directors.  As of the date of the 2003 Annual Meeting, the Stock Unit Account of each person who first becomes a Non-Employee Director at the 2003 Annual Meeting shall be credited with a number of Stock Units equal to (1) the amount of the then-current annual retainer divided by (2) the Fair Market Value of a share of Common Stock on the last trading date prior to the 2003 Annual Meeting.

 

5.2 Annual Award.  

 

(a) As of the date of each annual meeting of stockholders commencing in 2004, the Stock Unit Account of each Eligible Non-Employee Director in office immediately following the annual meeting, shall be credited with a number of Stock Units equal (1) the amount of the then-current annual retainer payable by the Company for services rendered as a director for such year, divided by (2) the Fair Market Value of Common Stock on the last trading date prior to such annual meeting; provided, however, that in no event shall the Stock Unit Account of an Eligible Non-Employee Director be credited with Stock Units with respect to more than 10 years of service (including, for this purpose, the number of years of service taken into account under Section 5.1(a)).

 

(b) As of the date of each annual meeting of the stockholders commencing in 2007, the Stock Unit Account of each Eligible Non-Employee Director in office immediately following the annual meeting shall be credited with a number of Stock Units equal to (1) the amount of the then-current annual retainer payable by the Company for services rendered as a director for such year, divided by (2) the Fair Market Value of Common Stock on the last trading date prior to such annual meeting.

 

(c) Annual grants that would otherwise exceed the maximum number of shares allotted for issuance under the Plan contained in Section 7.1 shall be prorated within such limitation pursuant to Section 7.2.

 

5.3 Crediting of Dividend Equivalents to Stock Unit Accounts.  

 

(a) As of each dividend record date, an Eligible Non-Employee Director’s Stock Unit Account shall be credited with additional Stock Units in an amount equal to the Dividend Equivalents representing dividends payable as of such dividend record date on a number of shares equal to the aggregate number of Units credited to the Participant’s Stock Unit Account divided by the Fair Market Value of a share of Common Stock on the dividend record date.

 

(b) Stock Units credited in respect of Dividend Equivalents shall be paid in Stock at the same time and the same manner as the Stock Units to which they relate.

 

5.4 Units and Other Amounts Vest Immediately.  All Units or other amounts credited to an Eligible Non-Employee Director’s Stock Unit Account shall be at all times fully vested and not subject to a risk of forfeiture.

 

5.5 Distribution of Benefits.

 

(a) Notwithstanding anything herein to the contrary, the portion of a Non-Employee Director’s Stock Unit Account attributable to Stock Units granted pursuant to Section 5.1 or

5.2(a) (and any Dividend Equivalents attributable to such Stock Units) shall be distributed in accordance with this Section 5.5(a).

 

(1) Commencement of Benefits Distribution.  Subject to the terms of this Section 5.5(a) and Section 6, each Eligible Non-Employee Director shall be entitled to receive a distribution of his or her Stock Unit Account in the form of shares of Stock upon his or her termination of service as a director of the Company.

 

(2) Manner of Distribution.  Upon an Eligible Non-Employee Director’s termination of service as a director of the Company, the Company shall, subject to Section 7.2, deliver to the Participant (or his or her Beneficiary, as applicable) a number of shares of Stock equal to the number of Stock Units (as adjusted pursuant to Section 6, if applicable) to which the Participant is then entitled under the terms of Section 5.5(a).  Such distribution shall be made in a lump sum as soon as administratively practicable, but no later than 30 days, following the Participant’s termination of service.

 

(b) Notwithstanding anything herein to the contrary, the portion of a Non-Employee Director’s Stock Unit Account attributable to Stock Units granted pursuant to Section 5.2(b) (and any Dividend Equivalents attributable to such Stock Units) shall be distributed in accordance with this Section 5.5(b).

 

(1) Commencement of Benefits Distribution.  With respect to each grant of Stock Units to a Non-Employee Director, the Non-Employee Director shall be entitled to receive one-third of such Stock Units (including Dividend Equivalents applicable to such Stock Units) on each of the first, second and third anniversaries of such grant in the form of shares of Stock.  Notwithstanding the foregoing, if a Non-Employee Director terminates service as a director of the Company prior to the complete distribution of his or her Stock Unit Account, such Non-Employee Director shall be entitled to receive a distribution of his or her Stock Unit Account in the form of shares of Stock.

 

(2) Manner of Distribution.  Upon the first, second, and third anniversaries of the date of grant of Stock Units to a Non-Employee Director (or if earlier, the Non-Employee Director’s termination of service as a director of the Company), the Company shall, subject to Section 7.2, deliver to the Participant (or his or her Beneficiary, as applicable) a number of shares of Stock equal to the number of Stock Units (as adjusted pursuant to Section 6, if applicable) to which the Participant is then entitled under the terms of Section 5.5(b).  Such distribution shall be made in a lump sum as soon as administratively practicable, but no later than 30 days, following the applicable anniversary of the grant (or, if earlier, the Participant’s termination of service).

 

Section 6. Changes in Capital Structure.