Exhibit 10.18

SJW CORP.

STOCK OPTION

DIVIDEND EQUIVALENT RIGHTS AGREEMENT

AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2005

AS SUBSEQUENTLY AMENDED ON FEBRUARY 27, 2008 AND OCTOBER 22, 2008

EFFECTIVE AS OF JANUARY 1, 2008

RECITALS

A. Participant has been granted one or more stock options to purchase shares of
the Corporation’s Common Stock under the Plan (the “Options”). The Options also
provide Participant with dividend equivalent rights with respect to the shares
of Common Stock subject to those Options. Each such option is evidenced by a
Notice of Grant and Stock Option Agreement (collectively, the “Option
Agreement”).

B. The Options with such dividend equivalent rights are more particularly
identified in attached Schedule A.

C. The terms and conditions governing those dividend rights were originally set
forth in a Dividend Equivalent Rights Agreement for each such Option (or other
written document evidencing those dividend equivalent rights with respect to one
or more of the Options). Each such agreement or other written document shall
hereinafter be referred to collectively as the “Rights Agreements.”

D. Each of those separate Rights Agreements was first amended and restated on
February 28, 2006 through one consolidated agreement effective as of January 1,
2005 and thereafter amended and restated on February 27, 2008 effective as of
January 1, 2008 in order to bring the provisions of those Rights Agreements, to
the extent they pertained to Options that were not vested and exercisable as of
December 31, 2004, into compliance with the requirements of the proposed
Treasury Regulations under Section 409A of the Internal Revenue Code (the
“Code”) applicable to the payment of dividend equivalent rights.

E. The purpose of this amendment is to (i) bring each of the Rights Agreements,
as previously amended and restated retroactive to January 1, 2005, into
compliance with the applicable distribution requirements of Code Section 409A
and the final Treasury Regulations thereunder, effective as of January 1, 2008,
and (ii) terminate each of those Rights Agreements, effective with the
distribution date provided herein.

F. All capitalized terms in this Agreement shall have the meaning assigned to
them in the Plan and the applicable Option Agreements.

NOW, THEREFORE, it is hereby agreed as follows:

1. Each of the Rights Agreements pertaining to the Options, to the extent those
agreements pertain to Options (or portions thereof) which were not vested and
exercisable as of December 31, 2004 is hereby amended and restated as follows,
retroactive to January 1, 2008, with respect to each covered Option (or portion
thereof):

(i) An Option Deferred Stock Account with respect to each Option shall continue
to be maintained for the Participant on the books and records of the
Corporation.

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(ii) Each time a dividend is paid on the Corporation’s outstanding shares of
Common Stock after the Grant Date of that Option, the Option Deferred Stock
Account will be credited with a dollar amount equal to the amount of that
dividend paid per share multiplied by the number of shares of Common Stock at
the time subject to such Option (plus the number of shares previously credited
to the Option Deferred Stock Account pursuant to the dividend equivalent rights
hereunder) as of the record date for the dividend; provided, however, that no
further amounts shall be credited with respect to such option shares after the
earliest to occur of (x) the fourth anniversary of the Grant Date of that
Option, (y) the date that Option is first exercised or (z) December 31, 2008.

(iii) As of the first business day in January each year, the cash dividend
amounts credited to the Option Deferred Stock Account during the immediately
preceding calendar year shall be converted into a book entry of an additional
number of shares of Common Stock (rounded up to the next whole share) determined
by dividing (i) those cash dividend equivalent amounts by (ii) the average of
the Fair Market Value per share of Common Stock on each of the dates in the
immediately preceding calendar year on which those dividend amounts were
credited to the Option Deferred Stock Account.

(iv) The shares credited to the Option Deferred Stock Account will vest at the
same time and in the same manner as the Option Shares to which they are
attributable vest. The shares which so vest shall be distributed to the
Participant in the form of actual shares of Common Stock issued under the Plan
on the earliest to occur of the following dates (the “Distribution Date”):
(x) the fourth anniversary of the Grant Date of the Option, (y) the date of the
Participant’s Separation from Service or (z) January 7, 2009; provided, however,
that in the event of a Distribution Date under (x) or (y), the distribution
shall be made on such Distribution Date or as soon as administratively
practicable thereafter, but in no event later than the end of the calendar year
in which such Distribution Date occurs or (if later) the fifteenth day of the
third calendar month following such date. In the event of a Distribution Date
under (z), the vested shares at the time credited to the Option Deferred Stock
Account will be distributed, whether or not the Option is exercised before that
date.

(v) The distribution of the shares shall be subject to the Corporation’s
collection of all applicable withholding taxes. In no event shall any shares of
Common Stock credited to the Option Deferred Stock Account be distributed to the
Participant if and to the extent those shares do not vest in accordance with the
foregoing provisions.

 

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(vi) Notwithstanding any provision to the contrary in the Plan, the Option
Agreement or this Agreement, no distribution which becomes due and payable
hereunder by reason of the Participant’s Separation from Service shall be made
to the Participant prior to the earlier of (i) the first day of the seventh
(7th) month following the date of such Separation from Service or (ii) the date
of his or her death, if the Participant is a Specified Employee at the time of
such Separation from Service and such delayed commencement is otherwise required
in order to avoid a prohibited distribution under Code Section 409A(a)(2). Upon
the expiration of the applicable deferral period, all distributions deferred
pursuant to this subparagraph (v) shall be paid in a lump sum to the
Participant.

2. For purposes of this Agreement, the following definitions shall be in effect:

(i) Participant shall be deemed to be an Employee for so long as he or she is in
the employ of at least one member of the Employer Group, subject to the control
and direction of the employer entity as to both the work to be performed and the
manner and method of performance.

(ii) Employer Group means (i) the Corporation and (ii) each of the other members
of the controlled group that includes the Corporation, as determined in
accordance with Sections 414(b) and (c) of the Code, except that in applying
Sections 1563(1), (2) and (3) for purposes of determining the controlled group
of corporations under Section 414(b), the phrase “at least 50 percent” shall be
used instead of “at least 80 percent” each place the latter phrase appears in
such sections, and in applying Section 1.414(c)-2 of the Treasury Regulations
for purposes of determining trades or businesses that are under common control
for purposes of Section 414(c), the phrase “at least 50 percent” shall be used
instead of “at least 80 percent” each place the latter phrase appears in Section
1.4.14(c)-2 of the Treasury Regulations.

(iii) Separation from Service means the Participant’s cessation of Employee
status by reason of his or her death, retirement or termination of employment.
The Participant shall be deemed to have terminated employment for such purpose
at such time as the level of his or her bona fide services to be performed as an
Employee (or non-employee consultant) permanently decreases to a level that is
not more than twenty percent (20%) of the average level of services he or she
rendered as an Employee during the immediately preceding thirty-six (36) months
(or such shorter period for which he or she may have rendered such service). Any
such determination as to Separation from Service, however, shall be made in
accordance with the applicable standards of the Treasury Regulations issued
under Code Section 409A. In addition to the foregoing, a Separation from Service
will not be deemed to have occurred while an Employee is on military leave, sick
leave or other bona fide leave of absence if the period of such leave does not
exceed six (6) months or any longer period for which such Employee is provided,
either by statute or contract, with a right to reemployment with one or more
members of the Employer Group; provided,

 

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however, that in the event of an Employee’s leave of absence due to any
medically determinable physical or mental impairment that can be expected to
result in death or to last for a continuous period of not less than six
(6) months and that causes such individual to be unable to perform his or her
duties as an Employee, no Separation from Service shall be deemed to occur
during the first twenty-nine (29) months of such leave. If the period of leave
exceeds six (6) months (or twenty-nine (29) months in the event of disability as
indicated above) and the Employee’s right to reemployment is not provided either
by statute or contract, then such Employee will be deemed to have a Separation
from Service on the first day immediately following the expiration of such six
(6)-month or twenty-nine (29)-month period.

(iv) Specified Employee means any employee of the Employer Group who is,
pursuant to procedures established by Executive Compensation Committee of the
Board in accordance with the applicable standards of Code Section 409A and the
Treasury Regulations thereunder and applied on a consistent basis for all
non-qualified deferred compensation plans of the Employer Group subject to Code
Section 409A, deemed at the time of his or her Separation from Service to be a
“specified employee” under Code Section 409A. The Specified Employees shall be
identified on December 31 of each calendar year and shall include each employee
who is a “key employee” (within the meaning of that term under Code
Section 416(i)) of the Employer Group at any time during the twelve (12)-month
period ending with such date. An individual who is so identified as a Specified
Employee will have that status for the twelve (12)-month period beginning on
April 1 of the following calendar year.

3. This Amended and Restated Dividend Equivalent Rights Agreement shall, with
respect to each Option identified in attached Schedule A, replace the Rights
Agreement in effect for that Option immediately prior hereto, but only to the
extent that Option was not vested and exercisable as of December 31, 2004.
Except for the modifications effected by this Agreement, all the terms and
provisions of each Option shall continue in full force and effect and shall
continue to be governed by the terms of the Plan and the applicable Option
Agreement and (to the extent that Option was vested and exercisable as of
December 31, 2004) the Dividend Equivalent Rights Agreement in effect for that
Option on December 31, 2004.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the _______
day of _______________, 2008 to be effective as of January 1, 2008.

 

SJW CORP. By:     Title:             PARTICIPANT

 

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SCHEDULE A

LIST OF COVERED OPTIONS*

 

Grant

Date

  

Exercise Price

Per Share ($)

  

Option

Shares (#) Award

  

Option Shares

Unexercised As

Of 9/30/2008

  

Expiration

Date

 

* The listed options are subject to this Amended and Restated Dividend
Equivalent Rights Agreement only to the extent those options were not vested and
exercisable as of December 31, 2004.