Exhibit 10.4

 

[FORM OF CHANGE-IN-CONTROL AGREEMENT]

 

CHANGE-IN-CONTROL AGREEMENT

 

This Change-in-Control Agreement (the “Agreement”) is dated as of [   ], is
entered into by and between [     ] (the “Executive”) and [Golden State Water
Company, a California corporation][American States Utility Services, Inc., a
California corporation][NEEDS TO BE CHANGED TO BE SIGNED BY ACTUAL EMPLOYER]
(the “Company”).

 

RECITALS

 

The Company considers it essential to the best interest of the Company and its
shareholders that the Executive be encouraged to remain with the Company and
continue to devote full attention to the Company’s business notwithstanding the
possibility, threat or occurrence of a Change in Control (as defined in Section
3).  The Company believes that it is in the best interest of the Company, its
shareholder and the shareholders of its parent, American States Water Company, a
California corporation (“AWR”), to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control.  Accordingly,
to assure the Company that it will have the Executive’s undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of the Company’s Compensation Committee, caused the
Company to enter into this Agreement.

 

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TERMS AND CONDITIONS

 

The Executive and the Company hereby agree to the following terms and
conditions:

 

1.     Term of Agreement

 

If a Change in Control (as defined in Section 3) occurs on or before the
expiration date of this Agreement and while the Executive is still an employee
of the Company, then this Agreement will continue in effect for two years from
the date of such Change in Control and, if the Executive’s employment with the
Company is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company under
this Agreement shall have been fulfilled.  If no Change in Control occurs on or
before December 31, 2018, this Agreement shall expire; provided, however that
this Agreement shall be automatically extended for an additional two years to
December 31, 2020 if (i) a plan or agreement for a Change in Control has been
approved by the Board of Directors of AWR, on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company written notice at least 60 days prior to the expiration date that such
expiration date shall not be so extended.  This Agreement shall continue to be
automatically extended for an additional two-year period and each succeeding
two-year period if a plan or agreement for a Change in Control has been approved
by the Board of Directors of AWR, or the Company or the Executive fails to give
notice by the time and in the manner described in this Section 1.

 

2.     Change in Control Date

 

The “Change in Control Date” shall mean the first date during the term of this
Agreement on which a Change in Control (as defined in Section 3) occurs;
provided, however, that if a Change in Control occurs and if the Executive’s
employment with the Company is terminated after approval by the Board of
Directors of AWR of a plan or agreement for a Change in Control but prior to the
date on which the Change in Control occurs, the “Change in Control Date” shall
mean the date immediately preceding the date of such termination.

 

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3.     Change in Control

 

A “Change in Control” shall mean any of the following events:

 

(a)   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 AWR, unless its
business is continued by another entity in which holders of AWR’s voting
securities immediately before the event own, either directly or indirectly, more
than seventy percent (70%) of the continuing entity’s voting securities
immediately after the event;

 

(b)   any reorganization or merger of AWR, unless (i) the holders of AWR’s
voting securities immediately before the event own, either directly or
indirectly, more than seventy percent (70%) 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 AWR 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;

 

(c)   an acquisition by any person, entity or group acting in concert of more
than fifty percent (50%) of the voting securities of AWR, unless the holders of
AWR’s voting securities immediately before the event own, either directly or
indirectly, more than seventy percent (70%) of the acquirer’s voting securities
immediately after the acquisition;

 

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(d)   the consummation of a tender offer or exchange offer by any 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 AWR, unless the tender offer is made by AWR or any of its subsidiaries or the
tender offer is approved by a majority of the members of the Board of Directors
of AWR who were in office at the beginning of the twelve month period preceding
the commencement of the tender offer; or

 

(e)   a change of one-half or more of the members of the Board of Directors of
AWR 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 a 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.

 

4.     Effective Period

 

For the purpose of this Agreement, the “Effective Period” is the period
commencing on the Change in Control Date and ending on the date that is twenty
four months thereafter.

 

5.     Termination of Employment

 

(a)   Death or Disability:  The Executive’s employment shall terminate
automatically upon the Executive’s death.  If the Disability (as defined below)
of the Executive occurs during the Effective Period, the Company may give the
Executive written notice of its intention to terminate the Executive’s
employment.  In such event, the Executive’s employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the “Disability Effective Date”), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of his or her duties.  For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from his or her duties with the Company
on a full-time basis for 180 consecutive business days as a result of a physical
or mental condition which prevents the Executive from performing the Executive’s
normal duties of employment and which is (i) determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive’s legal representative and/or (ii) entitles
the Executive to the payment of long-term disability benefits from the Company’s
or AWR’s long-term disability plan commencing no later than the Disability
Effective Date.

 

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(b)   Cause:  The Company may terminate the Executive’s employment other than
for Cause or Disability during the Effective Period. The Company may also
terminate the Executive’s employment during the Effective Period for Cause. For
purposes of this Agreement, “Cause” shall be limited to the following:

 

(i)            the Executive’s failure to render services to the Company where
such failure amounts to gross neglect or gross misconduct of the Executive’s
responsibility and duties,

 

(ii)           the Executive’s commission of an act of fraud or dishonesty
against the Company or any affiliate of the Company, or

 

(iii)          the Executive’s conviction of a felony or other crime involving
moral turpitude.

 

(c)   Good Reason:  The Executive’s employment may be terminated by the
Executive during the Effective Period for Good Reason.  For purposes of this
Agreement, “Good Reason” shall mean:

 

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(i)            the assignment to the Executive of any duties inconsistent in any
respect with the Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as in effect on
the Change in Control Date, or any other action by the Company or AWR which
results in a diminution in such position, authority, duties or responsibilities;

 

(ii)           any failure by the Company or AWR to reappoint the Executive to a
position held by the Executive on the Change in Control Date, except as a result
of the termination of the Executive’s employment by the Company for Cause or
Disability, the death of the Executive, or the termination of the Executive’s
employment by the Executive other than for Good Reason;

 

(iii)          reduction by the Company or AWR in the Executive’s base salary in
effect on the date hereof or as the same may be increased from time-to-time;

 

(iv)          (A) elimination by the Company or AWR of any cash incentive or
other cash bonus compensation plan, without providing substantially equivalent
substitutes therefor, or (B) any modification of the terms thereof, that would
(in the case of either clause (A) or (B)) substantially diminish (in the
aggregate, taking into consideration changes in salary, etc.) the aggregate
amount of the base salary and cash incentive or other cash bonus and equity
incentives or other equity-based compensation that is reasonably expected to be
earned by the Executive during any calendar year from the aggregate amount that
would reasonably have been expected to be earned by the Executive, assuming the
maintenance of the cash incentive or cash bonus compensation plan or plans in
effect on the Change in Control Date;

 

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(v)           (A) elimination by the Company or AWR of any equity incentive or
other equity-based compensation plan, without providing substantially equivalent
substitutes therefor, or (B) any modification of the terms thereof that would
(in the case of either clause (A) or (B)) substantially diminish (in the
aggregate, taking into consideration changes in salary, etc.) the aggregate
amount of the base salary, cash incentive or cash bonus and equity incentive or
other equity-based compensation that is reasonably expected to be earned by the
Executive during any calendar year from the aggregate amount that would
reasonably have been expected to be earned by the Executive, assuming the
maintenance of the equity incentive or other equity-based compensation plan or
plans in effect on the Change in Control Date.

 

(vi)          the taking of any action by the Company or AWR (including the
elimination of benefit plans without providing substitutes therefor or the
reduction of the Executive’s benefits thereunder) that would substantially
diminish the aggregate value of the Executive’s other fringe benefits, including
the executive benefits and perquisites, from the levels in effect prior to the
Change in Control Date;

 

(vii)         the Company or AWR provides written notice to the Executive that
the Executive will be based at any office or location which increases the
distance from the Executive’s home to the office location by more than 35 miles
from the distance in effect as of the Change in Control Date; and

 

(viii)        any failure by the Company or AWR to comply with and satisfy
Section 12(c) of this Agreement;

 

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which condition in any event under (i)-(viii) is not cured within twenty (20)
days after written notice to the Company from the Executive.  Executive shall
provide notice of intent to terminate employment citing Good Reason not later
than thirty (30) business days after an initial occurrence of a condition that
Executive purports to constitute Good Reason, which termination shall be
effective no later than twenty-one (21) days thereafter, unless otherwise cured.

 

6.     Obligations of the Company upon Termination

 

(a)   Good Reason, Other Than for Cause or Disability:  If the Company shall
terminate the Executive’s employment other than for Cause or Disability during
the Effective Period, or the Executive shall terminate employment for Good
Reason during the Effective Period, the Company and AWR agree, subject to
Sections 6(f), 8 and 9, to make the payments and provide the benefits described
below:

 

(i)            The Company or AWR shall pay to the Executive in a cash lump sum
within 10 days from the date of the Executive’s termination of employment (the
“Date of Termination”), an amount equal to the product of (A) and (B), where (A)
is 2.99 and (B) is calculated as the sum of (i) the Executive’s annual base
salary at the highest rate in effect in any year of the three calendar years
immediately preceding the date of termination of employment, including the
calendar year in which the termination of employment occurred; plus (ii) the
payments made to the Executive pursuant to any “cash-pay” performance incentive
plan of the Company or AWR (a “Cash Incentive Payment”) during the calendar year
in which termination of employment occurred (and assuming that the performance
targets thereafter are achieved “at target”); and provided that if the Executive
is employed pursuant to any written employment agreement, the Cash Incentive
Payment in any year for purposes of calculations under this clause (ii) shall
not be less than any minimum incentive or annual cash bonus required thereunder;
provided that Cash Incentive Payments do not include (A) any extraordinary
bonus, including any holiday, year end, anniversary or signing bonus; (B) any
amounts paid or to be paid to the Executive under this Agreement, (C)
reimbursement of moving or other expenses; or (D) any other lump sum payment,
unless specifically designated as a Cash Incentive Payment pursuant to an
incentive plan of the Company or AWR by the Board of Directors of AWR or the
Company, or any committee thereof.  Unless otherwise provided pursuant to the
terms of the cash incentive compensation plan of AWR or the Company or the terms
of the award, the amount paid to the Executive pursuant to this Section 6(a)(i)
shall be in lieu of any Cash Incentive Payment to which the Executive would
otherwise be entitled under any cash incentive plan of the Company or AWR for
the year in which the Executive’s employment is terminated as a result of a
Change in Control.

 

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(ii)           The Company or AWR shall also pay to the Executive in a cash lump
sum within 10 days from the date of the Executive’s termination of employment,
an amount equal to the sum of (A) the Executive’s base salary through the date
of termination, plus (B) any accrued vacation pay, in each case to the extent
not theretofore paid (the amounts referred to in this paragraph (ii) are
hereinafter referred to as the “Accrued Obligations”).

 

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(iii)          The Company or AWR shall also pay the Executive in cash at the
end of each four-month period during the twelve-months immediately following the
date of the Executive’s termination of employment, an amount equal to the excess
of (A) over (B), divided by three, where (A) is equal to the single sum
actuarial equivalent of what would be the Executive’s accrued benefits under the
terms of the Golden State Water Company Pension Plan, or any successor thereto,
including the Golden State Water Company Pension Restoration Plan and any other
supplemental retirement plan providing pension benefits (hereinafter together
referred to as the “Pension Plan”) at the time of the Executive’s termination of
employment, without regard to whether such benefits would be vested thereunder,
if the Executive were credited with an additional three years of credited
service (as defined in the Pension Plan), and (B) is equal to the single sum
actuarial equivalent of the Executive’s vested accrued benefits under the
Pension Plan at the time of the Executive’s termination of employment; provided,
however, that the Corporation shall only be required to make any such payments
for so long as the Executive has not breached the covenants contained in Section
10.  For purposes of this paragraph (iii), the term “single sum actuarial
equivalent” shall, for Executives age 55 or older, be the lump sum value of the
immediate annuity determined (A) using an interest rate calculated at (i) the
sum of the monthly rates prevailing for the twelve full months prior to the
termination of employment, for the second segment rates published pursuant to
Section 417(e)(3)(D) of the Code, (ii) divided by 12; and (B) using the
applicable mortality table under Section 417(e)(3)(B) of the code for the plan
year of termination, after the reduction (if any), of the Executive’s benefit,
using the applicable factors under the terms of the Pension Plan (Regular
Factors under Section A.4, or Special Early Retirement Factors under Section A.4
if the Executive has 80 points, including the three additional years of service
provided under this agreement), and using the Executive’s age upon termination
of employment.  For Executives under age 55, the benefit shall be reduced to a
benefit payable at age 55, using the Regular Factors under Section A.4 of the
Pension Plan.  The “single sum actuarial equivalent” shall be calculated as an
annuity deferred to age 55, determined (A) using an interest rate calculated at
(i) the sum of the monthly rates prevailing for the twelve full months prior to
the termination of employment, for the second segment rates published pursuant
to Section 417(e)(3)(D) of the Code, (ii) divided by 12; and (B) using the
applicable mortality table under Section 417(e)(3)(B) of the Code for the plan
year of termination, using the Executive’s age upon termination of employment. 
Any payment under this paragraph (iii) shall not extinguish any rights the
Executive has to benefits under the Pension Plan.

 

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(iv)          For [three years for CEO and CFO]  two years after the date of the
Executive’s termination of employment, or such longer period as may be provided
by the terms of the appropriate plan, program, practice or policy, the Company
shall continue to provide medical, dental, vision, accidental death and
dismemberment, and life insurance coverage, and reimbursement of club dues to
the Executive and/or the Executive’s family at least equal to those which would
have been provided to them if the Executive’s employment had not been terminated
(in accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliates applicable generally to other peer executives and
their families immediately preceding the date of the Executive’s termination of
employment); provided, however, that if the Executive becomes employed by
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility.  For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
any retiree benefits pursuant to such plans, practices, programs and policies,
the Executive shall be considered to have remained employed until [three years
for CEO and CFO] two years after the date of termination of employment and to
have retired on the last day of such period.  Following the period of continued
benefits referred to in this subsection, the Executive and the Executive’s
covered family members shall be given the right provided in Section 4980B of the
Internal Revenue Code of 1986 (the “Code”) to elect to continue benefits in all
group medical plans.  In the event that the Executive’s participation in any of
the plans, programs, practices or policies of the Company referred to in this
subsection is barred by the terms of such plans, programs, practices or policies
or applicable law, the Company shall provide the Executive with benefits
substantially similar to those which the Executive would be entitled as a
participant in such plans, programs, practices or policies.  At the end of the
period of coverage, the Executive shall have the option to have assigned to the
Executive, at no cost and with no apportionment of prepaid premiums, any
assignable insurance policy owned by the Company and relating specifically to
the Executive.

 

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(v)           The Company and AWR shall enable the Executive to purchase within
10 days following the Executive’s termination of employment, the automobile, if
any, provided by the Company for the Executive’s use at the time of the
Executive’s termination of employment at the wholesale value of such automobile
at such time, as shown in the current edition of the National Auto Research
Publication Blue Book.

 

(vi)          To the extent not theretofore paid or provided, the Company or AWR
shall timely pay or provide the Executive any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under any
plan, program, policy, practice, contract or agreement of the Company and its
affiliates (such other amounts and benefits being hereinafter referred to as
“Other Benefits”) in accordance with the terms of such plan, program, policy,
practice, contract or agreement.

 

(vii)         The Executive shall be entitled to interest on any payments not
paid on a timely basis as provided in this Section 6(a) at the applicable
Federal Rate provided for in Section 7872(f)(2)(A) of the Code.

 

(viii)        Each stock option granted to an Executive under any stock
incentive plan of AWR or the Company shall be deemed fully vested immediately
prior to the date of termination and each restricted stock or other award under
any stock incentive plan of AWR or the Company shall immediately vest free of
restrictions and become payable upon the date of termination (or to the extent
applicable under Section 409A, in accordance with Section 6(f)).  If the number
of shares payable under any such option or award is dependent upon future
results or performance, the number shall be determined and established at an
assumed result or performance that achieves targeted amounts therefore.

 

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(b)           Death:  If the Executive’s employment is terminated by reason of
the Executive’s death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive’s legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits.  Accrued Obligations shall be
paid to the Executive’s estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive’s death.

 

(c)           Disability:  If the Executive’s employment is terminated by reason
of the Executive’s Disability during the Effective Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a cash lump sum within 10
days of the Executive’s termination of employment.

 

(d)           Cause, Other than for Good Reason:  If the Executive’s employment
shall be terminated for Cause during the Effective Period or, if the Executive
voluntarily terminates employment during the Effective Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and any
benefits payable to the Executive under a plan, policy, practice, etc., referred
to in Section 7 below.  Accrued Obligations shall be paid to the Executive in a
cash lump sum within 10 days of the Executive’s termination of employment.

 

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(e)   Payment of Club Dues.  This Section 6(e) shall apply to any club dues that
may be reimbursed pursuant to Section 6(a)(iv) that exceed the de minimus
amounts set forth in Treasury Regulations Section 1.409A-1(b)(9)(v)(D) (the
“Club Dues”).  The amount of Club Dues that the Executive receives in one
taxable year shall not affect the amount of Club Dues that the Executive
receives in any other taxable year.  To the extent the Executive is reimbursed
for any Club Dues, such reimbursement shall be paid to the Executive on or
before the last day of the Executive’s taxable year following the taxable year
in which the expense was incurred.  The Club Dues are not subject to liquidation
or exchange for another benefit.

 

(f)    Six-Month Delay.  Notwithstanding any other provisions of the Agreement,
any payment or benefit otherwise required to be made after the Executive’s
termination of employment that the Company reasonably determines is subject to
Section 409A(a)(2)(B)(i) of the Code, shall not be paid or payment commenced
until the later of (i) six months after the date of the Executive’s “separation
from service” (within the meaning of Section 409A of the Code and Treasury
Regulations Section 1.409A-1(h) without regard to optional alternative
definitions available thereunder) and (ii) the payment date or commencement date
specified in the Agreement for such payment(s).  With respect to any benefit
that the Company cannot provide during the six-month period following the
Executive’s separation from service pursuant to the preceding sentence, the
Executive shall pay the cost or premium for such benefit during such period and
be reimbursed by the Company therefor.  On the earliest date on which such
payments can be made or commenced without violating the requirements of
Section 409A(a)(2)(B)(i) of the Code, the Executive shall be paid, in a single
cash lump sum, an amount equal to the aggregate amount of all payments delayed
pursuant to this Section 6(f), including reimbursement for any premiums paid by
the Executive as a result of the delay.

 

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7.     Non-Exclusivity of Rights

 

Subject to Section 8, nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliates and for which the
Executive may qualify, nor, subject to Sections 6(f), 8 and 20, shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliates. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice, program, contract or agreement with the
Company or any of its affiliates at or subsequent to the date of termination of
the Executive’s employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.

 

8.     Limitation on Benefits

 

Notwithstanding anything in this Agreement to the contrary, if any payments or
benefits to be made to or for the Executive’s benefit, whether pursuant to this
Agreement or otherwise, whether by the Company or another entity or person,
would not be deductible by the Company due to limitations imposed by Section
162(m) of the Code, then to the extent permitted by Treasury Regulation
Section 1.409A-2(b)(7)(i) without subjecting the Executive to adverse tax
consequences, such payments or benefits shall be delayed.  The delayed amounts
shall be paid to the Executive at the earliest date the Company reasonably
anticipates that the deduction of the payment of the amount will not be limited
or eliminated by application of Section 162(m) of the Code; provided, however,
that if the Executive is a “Specified Employee,” as defined under Section 409A
of the Code, to the extent deemed necessary to comply with Treasury Regulations
Section 1.409A-3(i)(2), the delayed payment shall not be made before the end of
the six-month period following the Executive’s separation from service.  The
Executive shall also be entitled to interest on any payments deferred as a
result of the limitations on deductibility under Section 162(m) of the Code at
the applicable Federal Rate provided for in Section 7872(f)(2)(A) of the Code. 
Either the Company or the Executive may request a determination as to whether
any payments would be subject to limitations on deductibility under Section
162(m) of the Code and, if so requested, such determination shall be made by
independent legal counsel selected by the Company and approved by the Executive.

 

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9.     Best After Tax Position

 

(a)   If it is determined that any amount or benefit to be paid or payable to
the Executive under this Agreement (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) would give
rise to liability of the Executive for the excise tax imposed by Section 4999 of
the Code or any successor provision (the “Excise Tax”), then the amount or
benefits payable to the Executive (the total value of such amounts or benefits,
the “Payments”) shall be reduced by the Company to the extent necessary so that
no portion of the Payments to the Executive is subject to the Excise Tax;
provided, however, such reduction shall be made only if it results in Executive
retaining a greater amount of Payments on an after-tax basis (taking into
account the Excise Tax and applicable federal, state, and local income and
payroll taxes).  In the event Payments are required to be reduced pursuant to
this Section 9(a), they shall be reduced in the following order of priority in a
manner consistent with Section 409A: (i) first from cash compensation that is
exempt from Section 409A, (ii) next from equity compensation that is exempt from
Section 409A, then (iii) from payments that are subject to Section 409A in
reverse chronological order of scheduled distribution.

 

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(b)   In making any determination as to whether the Payments would be subject to
an Excise Tax, consideration shall be given to whether any portion of the
Payments could reasonably be considered, based on the relevant facts and
circumstances, to be reasonable compensation for services rendered (whether
before or after the consummation of the applicable Change in Control).

 

(c)   In the event that upon any audit by the Internal Revenue Service, or by a
state or local taxing authority, of the Payments, a change is formally
determined to be required in the amount of taxes paid by, or Payments made to,
the Executive, appropriate adjustments will be made under this Agreement such
that the net amount that is payable to the Executive after taking into account
the provisions of Code Section 4999 will reflect the intent of the parties as
expressed in this Section 9.

 

10.  Non-Compete

 

(a)   Executive agrees not to engage in any Competitive Activity until one year
after the Date of Termination. For purposes of this Agreement, the term
“Competitive Activity” shall mean Executive’s participation as an employee or
consultant, without the written consent of the Company’s Chief Executive Officer
or the Board of Directors of AWR or any authorized committee thereof, in the
management of any business enterprise anywhere in the world if such enterprise
is a “Significant Customer” of any product or service of the Company or engages
in competition with any product or service of the Company or is planning to
engage in such competition.  For purposes of this Agreement, the term
“Significant Customer” shall mean any customer who represents in excess of 5% of
the Company’s sales in any of the three calendar years prior to the date of
determination, but shall not include the United States Government or any branch,
agency or department thereof.  “Competitive Activity” shall not include the mere
ownership of, and exercise of rights appurtenant to, securities of a
publicly-traded company representing 5% or less of the total voting power and 5%
or less of the total value of such an enterprise.  Executive agrees that the
Company is a national business and that it is appropriate for this Section 10 to
apply to Competitive Activity conducted anywhere in the United States of
America.

 

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(b)   Executive shall not directly or indirectly, either on Executive’s own
account or with or for anyone else, (i) solicit or attempt to solicit any of the
Company’s customers,  (ii) solicit or attempt to solicit for any business
endeavor any employee of the Company, provided, however, that such limitations
will not prohibit Executive, directly or indirectly, either on Executive’s own
account or with or for anyone else, from placing public advertisements or
conducting any other form of general solicitation that is not specifically
targeted towards employees of the Company, and hiring any employee of the
Company that responds to such solicitation, (iii) except as permitted by clause
(ii) in response to a general solicitation, hire or attempt to hire any employee
of the Company, or (iv) otherwise divert or attempt to divert from the Company
any business whatsoever or interfere with any business relationship between the
Company and any other person, until one (1) year after the Date of Termination.

 

(c)   Executive acknowledges and agrees that damages in the event of a breach or
threatened breach of the covenants in this Section 10 will be difficult to
determine and will not afford a full and adequate remedy, and therefore agree
that the Company, in addition to seeking actual damages pursuant to Section 10
hereof, may seek specific enforcement of the covenant not to compete in any
court of competent jurisdiction, including, without limitation, by the issuance
of a temporary or permanent injunction, without the necessity of a bond. 
Executive and the Company agree that the provisions of this covenant not to
compete are reasonable.  However, should any court or arbitrator determine that
any provision of this covenant not to compete is unreasonable, either in period
of time, geographical area, or otherwise, the parties agree that this covenant
not to compete should be interpreted and enforced to the maximum extent which
such court or arbitrator deems reasonable.

 

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11.  Full Settlement

 

The obligation of the Company to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in
Section 6(a)(iv), such amounts shall not be reduced whether or not the Executive
obtains other employment.

 

12.  Successors

 

(a)           This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution.  This Agreement shall inure to the benefit of and be enforceable
by the Executive’s legal representatives.

 

(b)           This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

 

(c)           The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.  As used in this Agreement, the “Company” shall mean the
Company as defined and any successor to its business and/or assets which assumes
and agrees to perform this Agreement by operation of law, or otherwise, and
“AWR” shall mean AWR as defined and any successor to its business and/or assets
by operation of law or otherwise.

 

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13.  Arbitration

 

(a)           Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration.  This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion.  The “right to
select arbitration” is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court.  Once
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration.  During the lifetime of the
Executive only he or she can use the arbitration procedure set forth in this
section.

 

(b)           Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company regarding the interpretation of this
Agreement and the claim is finally denied by the Company in whole or in part,
such claim may be filed in writing with an arbitrator of the Executive’s choice
who is selected by the method described in the next three sentences. The first
step of the selection shall consist of the Executive submitting a list of 5
potential arbitrators to the Company.  Each of the five arbitrators must be
either (1) a member of the National Academy of Arbitrators located in the State
of California or (2) a retired California Superior Court or Appellate Court
judge.  Within 2 weeks after receipt of the list, the Company shall select one
of the five arbitrators as the arbitrator for the dispute in question.  If the
Company fails to select an arbitrator in a timely manner, the Executive shall
then designate one of the five arbitrators as the arbitrator for the dispute in
question.

 

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(c)           The arbitration hearing shall be held within 30 days (or as soon
thereafter as possible) after the picking of the arbitrator.  No continuance of
the hearing shall be allowed without the mutual consent of the Executive and the
Company. Absence from or nonparticipation at the hearing by either party shall
not prevent the issuance of an award.  Hearing procedures which will expedite
the hearing may be ordered at the arbitrator’s discretion, and the arbitrator
may close the hearing at his or her discretion when sufficient evidence to
satisfy issuance of an award has been presented.

 

(d)           The arbitrator’s award shall be rendered as expeditiously as
possible and in no event later than 30 days after the close of the hearing.  In
the event the arbitrator finds that the Company has breached this Agreement, he
or she shall order the Company to immediately take the necessary steps to remedy
the breach. The award of the arbitrator shall be final and binding upon the
parties.  The award may be enforced in any appropriate court as soon as possible
after it is rendered.  If an action is brought to confirm the award, the Company
and the Executive agree that no appeal shall be taken by either party from any
decision rendered in such action.

 

(e)           Each party will pay the fees of their respective attorneys, the
expenses of their witnesses, costs of any record or transcript of the
arbitration, and any other expenses connected with the arbitration that such
party might be expected to incur had the dispute been subject to resolution in
court, but all costs of the arbitration that would not be incurred by the
parties if the dispute was litigated in court, including fees of the arbitrator
and any arbitration association administrative fees will be paid by the Company.

 

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14.  Governing Law

 

The laws of California shall govern the validity and interpretation of this
Agreement, with regard to conflicts of laws.

 

15.  Captions

 

The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect.

 

16.  Amendment

 

This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.

 

17.  Notices

 

All notices and other communications regarding this Agreement shall be in
writing and shall be hand delivered to the other party or sent by prepaid
registered or certified mail, return receipt requested, addressed as follows:

 

If to the Executive:

[                                      ]

 

 

 

[                                      ]

 

 

 

[                                      ]

 

 

If to the Company:

[                                      ]

 

 

 

[                                      ]

 

 

 

[                                      ]

 

or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.

 

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18.  Severability

 

The lack of validity or enforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.

 

19.  Withholding Taxes

 

The Company may withhold required federal, state, local or foreign taxes from
any amounts payable under this Agreement.

 

20.  No Waiver

 

The Executive’s or the Company’s failure to insist upon strict compliance with
any provision of this Agreement or the failure to assert any right the Executive
or the Company may have under this Agreement, including, without limitation, the
right of the Executive to terminate employment for Good Reason, shall not be
deemed to be a waiver of such provision or right or any other provision or right
under this Agreement.

 

21.  At-Will Employment

 

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company prior to the Change in
Control Date is “at will” and, prior to the Change in Control Date, the
Executive’s employment may be terminated by either the Executive or the Company
at any time, in which case the Executive shall have no further rights under this
Agreement. From and after the Change in Control Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.

 

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22.  Counterparts

 

This Agreement may be executed simultaneously in one or more counterparts, each
of which shall be deemed an original, but all of which shall together constitute
one and the same Agreement.

 

23.  Section 409A

 

It is intended that any amounts payable under this Agreement shall either be
exempt from Section 409A of the Code or shall comply with Section 409A
(including Treasury regulations and other published guidance related thereto) so
as not to subject the Executive to payment of any additional tax, penalty or
interest imposed under Section 409A of the Code.  Each payment in a series of
payments hereunder shall be deemed to be a separate payment for purposes of
Section 409A of the Code.  The provisions of this Agreement shall be construed
and interpreted to avoid the imputation of any such additional tax, penalty or
interest under Section 409A of the Code yet preserve (to the nearest extent
reasonably possible) the intended benefit payable to the Executive.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first written above in San Dimas,
California.

 

 

[GOLDEN STATE WATER COMPANY]

 

 

 

[AMERICAN STATES UTILITY SERVICES, INC.]

 

 

 

By

 

 

Title

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

[                          ]

 

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