<PAGE>

                                                                    EXHIBIT 10.1

                          AMERICAN STATES WATER COMPANY
                            2000 STOCK INCENTIVE PLAN

<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>                                                                                         <C>
1.       THE PLAN........................................................................     1

         1.1      Purpose................................................................     1

         1.2      Administration and Authorization; Power and Procedure..................     1

         1.3      Participation..........................................................     2

         1.4      Shares Available for Awards; Share Limits..............................     3

         1.5      Grant of Awards........................................................     3

         1.6      Award Period...........................................................     3

         1.7      Limitations on Exercise and Vesting of Awards..........................     4

         1.8      Acceptance of Notes to Finance Exercise................................     4

         1.9      No Transferability; Limited Exception to Transfer Restrictions.........     5

2.       OPTIONS.........................................................................     6

         2.1      Grants.................................................................     6

         2.2      Option Price...........................................................     6

         2.3      Limitations on Grant and Terms of Incentive Stock Options..............     6

         2.4      Limits on 10% Holders..................................................     7

         2.5      Option Repricing/Cancellation and Regrant/Waiver.......................     8

         2.6      Effects of Termination of Employment; Termination of Subsidiary
                  Status; Discretionary Provisions.......................................     8

3.       RESTRICTED STOCK AWARDS.........................................................     9

         3.1      Grants.................................................................     9

         3.2      Restrictions...........................................................     9

         3.3      Return to the Corporation..............................................    10

4.       OTHER PROVISIONS................................................................    10

         4.1      Rights of Eligible Employees, Participants and Beneficiaries...........    10

         4.2      Adjustments; Acceleration..............................................    11

         4.3      Effect of Termination of Service on Awards.............................    13

         4.4      Compliance with Laws...................................................    13

         4.5      Tax Matters............................................................    14

         4.6      Plan Amendment, Termination and Suspension.............................    14

         4.7      Privileges of Stock Ownership..........................................    15
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                          <C>
         4.8      Effective Date of the Plan.............................................    15

         4.9      Term of the Plan.......................................................    15

         4.10     Governing Law/Construction/Severability................................    15

         4.11     Captions...............................................................    16

         4.12     Stock-Based Awards in Substitution for Stock Options or Awards
                  Granted by Other Corporation...........................................    16

         4.13     Non-Exclusivity of Plan................................................    16

         4.14     No Corporate Action Restriction........................................    16

         4.15     Other Company Benefit and Compensation Program.........................    17

5.       DEFINITIONS.....................................................................    17

         5.1      Definitions............................................................    17
</TABLE>

                                       ii
<PAGE>

                          AMERICAN STATES WATER COMPANY
                            2000 STOCK INCENTIVE PLAN
                          (AS AMENDED AS OF APRIL 2003)

1. THE PLAN

         1.1      Purpose

                  The purpose of this Plan is to promote the success of the
Company by providing an additional means through the grant of Awards to attract,
motivate, retain and reward key employees, including officers, whether or not
directors, of the Company with awards and incentives for high levels of
individual performance and improved financial performance of the Company.
"Corporation" means American States Water Company and "Company" means the
Corporation and its Subsidiaries, collectively. These terms and other
capitalized terms are defined in Article 5.

         1.2      Administration and Authorization; Power and Procedure.

                  (a)      Committee. This Plan shall be administered by and all
Awards to Eligible Employees shall be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by written consent of its members.

                  (b)      Plan Awards; Interpretation; Powers of Committee.
Subject to the express provisions of this Plan, the Committee shall have the
authority:

                           (i)      to determine eligibility and, from among
                  those persons determined to be eligible, the particular
                  Eligible Employees who will receive an Award;

                           (ii)     to grant Awards to Eligible Employees,
                  determine the price at which securities will be offered or
                  awarded and the amount of securities to be offered or awarded
                  to any of such persons, and determine the other specific terms
                  and conditions of such Awards consistent with the express
                  limits of this Plan, and establish the installments (if any)
                  in which such Awards shall become exercisable or shall vest,
                  or determine that no delayed exercisability or vesting is
                  required, and establish the events of termination or reversion
                  of such Awards;

                           (iii)    to approve the forms of Award Agreements
                  (which need not be identical either as to type of award or
                  among Participants);

                           (iv)     to construe and interpret this Plan and any
                  agreements defining the rights and obligations of the Company
                  and Participants under this Plan, further define the terms
                  used in this Plan, and prescribe, amend

<PAGE>

                  and rescind rules and regulations relating to the
                  administration of this Plan;

                           (v)      to cancel, modify, or waive the
                  Corporation's rights with respect to, or modify, discontinue,
                  suspend, or terminate any or all outstanding Awards held by
                  Eligible Employees, subject to any required consent under
                  Section 4.6;

                           (vi)     to accelerate or extend the exercisability
                  or extend the term of any or all such outstanding Awards
                  within the maximum ten-year term of Awards under Section 1.6;
                  and

                           (vii)    to make all other determinations and take
                  such other action as contemplated by this Plan or as may be
                  necessary or advisable for the administration of this Plan and
                  the effectuation of its purposes.

                  (c)      Binding Determinations/Liability Limitation. Any
action taken by, or inaction of, the Corporation, any Subsidiary, the Board or
the Committee relating or pursuant to this Plan and within its authority
hereunder or under applicable law shall be within the absolute discretion of
that entity or body and shall be conclusive and binding upon all persons.
Neither the Board nor any Committee, nor any member thereof or person acting at
the direction thereof, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with this Plan
(or any Award made under this Plan), and all such persons shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including, without limitation, attorneys' fees) arising or
resulting therefrom to the fullest extent permitted by law and/or under any
directors and officers liability insurance coverage that may be in effect from
time to time.

                  (d)      Reliance on Experts. In making any determination or
in taking or not taking any action under this Plan, the Committee or the Board,
as the case may be, may obtain and may rely upon the advice of experts,
including professional advisors to the Corporation. No director, officer or
agent of the Company shall be liable for any such action or determination taken
or made or omitted in good faith.

                  (e)      Delegation. The Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or employees of the
Company.

         1.3      Participation

                  Awards may be granted by the Committee only to those persons
that the Committee determines to be Eligible Employees. An Eligible Employee who
has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee shall so determine.

                                       2
<PAGE>

         1.4      Shares Available for Awards; Share Limits.

                  (a)      Shares Available. Subject to the provisions of
Section 4.2, the capital stock that may be delivered under this Plan shall be
shares of the Corporation's authorized but unissued Common Stock. The shares may
be delivered for any lawful consideration.

                  (b)      Share Limits. The maximum number of shares of Common
Stock that may be delivered pursuant to Awards granted to Eligible Employees
under this Plan shall not exceed 750,000 shares (the "Share Limit"). The maximum
number of shares of Common Stock that may be delivered pursuant to options
qualified as Incentive Stock Options granted under this Plan is 187,500 shares.
The maximum number of shares subject to those options that are granted during
any calendar year to any individual shall be limited to 50,000 and the maximum
individual limit on the number of shares in the aggregate subject to all Awards
that during any calendar year are granted under this Plan shall be 50,000. Each
of the four foregoing numerical limits shall be subject to adjustment as
contemplated by this Section 1.4 and Section 4.2.

                  (c)      Share Reservation; Replenishment and Reissue of
Unvested Awards. No Award may be granted under this Plan unless, on the date of
grant, the sum of (i) the maximum number of shares issuable at any time pursuant
to such Award, plus (ii) the number of shares that have previously been issued
pursuant to Awards granted under this Plan, other than reacquired shares
available for reissue consistent with any applicable legal limitations, plus
(iii) the maximum number of shares that may be issued at any time after such
date of grant pursuant to Awards that are outstanding on such date, does not
exceed the Share Limit. Shares that are subject to or underlie Awards which
expire or for any reason are cancelled or terminated, are forfeited, fail to
vest, or for any other reason are not paid or delivered under this Plan, as well
as reacquired shares, shall again, except to the extent prohibited by law, be
available for subsequent Awards under the Plan. Except as limited by law, if an
Award is or may be settled only in cash, such Award need not be counted against
any of the limits under this Section 1.4.

         1.5      Grant of Awards.

                  Subject to the express provisions of this Plan, the Committee
shall determine the number of shares of Common Stock subject to each Award and
the price (if any) to be paid for the shares or the Award. Each Award shall be
evidenced by an Award Agreement signed by the Corporation and, if required by
the Committee, by the Participant. The Award Agreement shall set forth the
material terms and conditions of the Award established by the Committee
consistent with the specific provisions of this Plan.

         1.6      Award Period.

                  Each Award and all executory rights or obligations under the
related Award Agreement shall expire on such date (if any) as shall be
determined by the

                                       3
<PAGE>

Committee, but in the case of Options or other rights to acquire Common Stock
not later than ten (10) years after the Award Date.

         1.7      Limitations on Exercise and Vesting of Awards.

                  (a)      Provisions for Exercise. Unless the Committee
otherwise expressly provides, no Award shall be exercisable or shall vest until
at least six months after the initial Award Date, and once exercisable an Award
shall remain exercisable until the expiration or earlier termination of the
Award.

                  (b)      Procedure. Any exercisable Award shall be deemed to
be exercised when the Secretary of the Corporation receives written notice of
such exercise from the Participant, together with any required payment made in
accordance with Section 2.2.

                  (c)      Fractional Shares/Minimum Issue. Fractional share
interests shall be disregarded, but may be accumulated. The Committee, however,
may determine in the case of Eligible Employees that cash, other securities, or
other property will be paid or transferred in lieu of any fractional share
interests. No fewer than 100 shares may be purchased on exercise of any Award at
one time unless the number purchased is the total number at the time available
for purchase under the Award.

         1.8      Acceptance of Notes to Finance Exercise.

                  The Corporation may, with the Committee's approval, accept one
or more notes from any Eligible Employee in connection with the exercise or
receipt of any outstanding Award; provided that any such note shall be subject
to the following terms and conditions:

                  (a)      The principal of the note shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of one or
more Awards under the Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.

                  (b)      The initial term of the note shall be determined by
the Committee; provided that the term of the note, including extensions, shall
not exceed a period of five years.

                  (c)      The note shall provide for full recourse to the
Participant and shall bear interest at a rate determined by the Committee but
not less than the interest rate necessary to avoid the imputation of interest
under the Code.

                  (d)      If the employment of the Participant terminates, the
unpaid principal balance of the note shall become due and payable on the 10th
business day after such termination; provided, however, that if a sale of such
shares would cause such Participant to incur liability under Section 16(b) of
the Exchange Act, the unpaid balance shall become due and payable on the 10th
business day after the first day on which a sale of such shares could have been
made without incurring such liability assuming for these

                                       4
<PAGE>

purposes that there are no other transactions (or deemed transactions in
securities of this Corporation) by the Participant subsequent to such
termination.

                  (e)      If required by the Committee or by applicable law,
the note shall be secured by a pledge of any shares or rights financed thereby
in compliance with applicable law.

                  (f)      The terms, repayment provisions, and collateral
release provisions of the note and the pledge securing the note shall conform
with applicable rules and regulations of the Federal Reserve Board as then in
effect.

         1.9      No Transferability; Limited Exception to Transfer
Restrictions.

                  (a)      Limit On Exercise and Transfer. Unless otherwise
expressly provided in (or pursuant to) this Section 1.9, by applicable law and
by the Award Agreement, as the same may be amended, (i) all Awards are
non-transferable and shall not be subject in any manner to sale, transfer,
anticipation, alienation, assignment, pledge, encumbrance or charge; Awards
shall be exercised only by the Participant; and (ii) amounts payable or shares
issuable pursuant to an Award shall be delivered only to (or for the account of)
the Participant.

                  (b)      Exceptions. The Committee may permit Awards to be
exercised by and paid only to certain persons or entities related to the
Participant, including but not limited to members of the Participant's immediate
family, or trusts or other entities whose beneficiaries or beneficial owners are
members of the Participant's immediate family, pursuant to such conditions and
procedures as the Committee may establish. Any permitted transfer shall be
subject to the condition that the Committee receive evidence satisfactory to it
that the transfer is being made for essentially estate and/or tax planning
purposes on a gratuitous or donative basis and without consideration (other than
nominal consideration or in exchange for an interest in a qualified transferee).
Notwithstanding the foregoing or anything to contrary in Section 1.9(c), ISOs
and Restricted Stock Awards shall be subject to any and all additional transfer
restrictions under the Code.

                  (c)      Further Exceptions to Limits On Transfer. The
exercise and transfer restrictions in Section 1.9(a) shall not apply to:

                           (i)      transfers to the Corporation,

                           (ii)     the designation of a beneficiary to receive
                  benefits in the event of the Participant's death or, if the
                  Participant has died, transfers to or exercise by the
                  Participant's beneficiary, or, in the absence of a validly
                  designated beneficiary, transfers by will or the laws of
                  descent and distribution,

                           (iii)    transfers pursuant to a QDRO order if
                  approved or ratified by the Committee,

                                       5
<PAGE>

                           (iv)     if the Participant has suffered a
                  disability, permitted transfers or exercises on behalf of the
                  Participant by his or her legal representative, or

                           (v)      the authorization by the Committee of
                  "cashless exercise" procedures with third parties who provide
                  financing for the purpose of (or who otherwise facilitate) the
                  exercise of Awards consistent with applicable laws and the
                  express authorization of the Committee.

2. OPTIONS.

         2.1      Grants.

                  One or more Options may be granted under this Article to any
Eligible Employee. Each Option granted shall be designated in the applicable
Award Agreement, by the Committee as either an Incentive Stock Option, subject
to Section 2.3, or a Non-Qualified Stock Option.

         2.2      Option Price.

                  (a)      Pricing Limits. The purchase price per share of the
Common Stock covered by each Option shall be determined by the Committee at the
time of the Award, but shall not be less than 100% (110% in the case of an ISO
granted to a Participant described in Section 2.4) of the Fair Market Value of
the Common Stock on the date of grant.

                  (b)      Payment Provisions. The purchase price of any shares
purchased on exercise of an Option granted under this Article shall be paid in
full at the time of each purchase in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by check payable to
the order of the Corporation; (iii) if authorized by the Committee or specified
in the applicable Award Agreement, by a promissory note of the Participant
consistent with the requirements of Section 1.8; (iv) by notice and third party
payment in such manner as may be authorized by the Committee; or (v) by the
delivery of shares of Common Stock of the Corporation already owned by the
Participant, provided, however, that the Committee may in its absolute
discretion limit the Participant's ability to exercise an Award by delivering
such shares, and provided further that any shares delivered which were initially
acquired upon exercise of a stock option must have been owned by the Participant
at least six months as of the date of delivery. Shares of Common Stock used to
satisfy the exercise price of an Option shall be valued at their Fair Market
Value on the date of exercise.

         2.3      Limitations on Grant and Terms of Incentive Stock Options.

                  (a)      $100,000 Limit. To the extent that the aggregate
"Fair Market Value" of stock with respect to which incentive stock options first
become exercisable by a Participant in any calendar year exceeds $100,000,
taking into account both Common Stock subject to Incentive Stock Options under
this Plan and stock subject to incentive stock options under all other plans of
the Company, such options shall be treated as

                                       6
<PAGE>

Nonqualified Stock Options. For this purpose, the "Fair Market Value" of the
stock subject to options shall be determined as of the date the options were
awarded. In reducing the number of options treated as incentive stock options to
meet the $100,000 limit, the most recently granted options shall be reduced
first. To the extent a reduction of simultaneously granted options is necessary
to meet the $100,000 limit, the Committee may, in the manner and to the extent
permitted by law, designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive Stock Option.

                  (b)      Option Period. Each Option and all rights thereunder
shall expire no later than 10 years after the Award Date.

                  (c)      Other Code Limits. Incentive Stock Options may only
be granted to Eligible Employees of the Corporation or a Subsidiary that
satisfies the other eligibility requirements of the Code. There shall be imposed
in any Award Agreement relating to Incentive Stock Options such other terms and
conditions as from time to time are required in order that the Option be an
"incentive stock option" as that term is defined in Section 422 of the Code.

         2.4      Limits on 10% Holders.

                  No Incentive Stock Option may be granted to any person who, at
the time the Option is granted, owns (or is deemed to own under Section 424(d)
of the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price of such Option is at least 110% of the Fair Market Value of
the stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.

                                       7
<PAGE>

         2.5      Option Repricing/Cancellation and Regrant/Waiver of
Restrictions.

                  Subject to Section 1.4 and Section 4.6 and the specific
limitations on Awards contained in this Plan, the Committee from time to time
may authorize, generally or in specific cases only, for the benefit of any
Eligible Employee any adjustment in the exercise or purchase price, the vesting
schedule, the number of shares subject to, the restrictions upon or the term of,
an Award granted under this Article by cancellation of an outstanding Award and
a subsequent regranting of an Award, by amendment, by substitution of an
outstanding Award, by waiver or by other legally valid means. Such amendment or
other action may result in, among other changes, an exercise or purchase price
which is higher or lower than the exercise or purchase price of the original or
prior Award, provide for a greater or lesser number of shares subject to the
Award, or provide for a longer or shorter vesting or exercise period; provided,
however, that, except for adjustments contemplated by Section 4.2, any such
amendment that results in the reduction of the exercise or purchase price below
the exercise price or purchase price of the original or prior Award shall be
subject to prior shareholder approval.

         2.6      Effects of Termination of Employment; Termination of
Subsidiary Status; Discretionary Provisions.

                  (a)      Options - Resignation or Dismissal. If the
Participant's employment by the Company terminates for any reason (the date of
such termination being referred to as the "Severance Date") other than
Retirement, Total Disability or death, or for Cause (as determined in the
discretion of the Committee), the Participant shall have, unless otherwise
provided in the Award Agreement and subject to earlier termination pursuant to
or as contemplated by Section 1.6 or 4.2, three months after the Severance Date
to exercise any Option to the extent it shall have become exercisable on the
Severance Date. In the case of a termination for Cause, the Option shall
terminate on the Severance Date. In other cases, the Option, to the extent not
exercisable on the Severance Date, shall terminate.

                  (b)      Options - Death or Disability. If the Participant's
employment by the Company terminates as a result of Total Disability or death,
the Participant, Participant's Personal Representative or his or her
Beneficiary, as the case may be, shall have, unless otherwise provided in the
Award Agreement and subject to earlier termination pursuant to or as
contemplated by Section 1.6 or 4.2, until 12 months after the Severance Date to
exercise any Option to the extent it shall have become exercisable by the
Severance Date. Any Option to the extent not exercisable on the Severance Date
shall terminate.

                  (c)      Options - Retirement. If the Participant's employment
by the Company terminates as a result of Retirement, the Participant,
Participant's Personal Representative or his or her Beneficiary, as the case may
be, shall have, unless otherwise provided in the Award Agreement and subject to
earlier termination pursuant to or as contemplated by Section 1.6 or 4.2, until
12 months after the Severance Date to exercise any Option to the extent it shall
have become exercisable by the Severance Date. The Option, to the extent not
exercisable on the Severance Date, shall terminate.

                                       8
<PAGE>

         (d)      Committee Discretion. Notwithstanding the foregoing provisions
of this Section 2.6, in the event of, or in anticipation of, a termination of
employment with the Company for any reason, other than discharge for Cause, the
Committee may, in its discretion, increase the portion of the Participant's
Award available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, or, subject to the provisions of Section
1.6, extend the exercisability period upon such terms as the Committee shall
determine and expressly set forth in or by amendment to the Award Agreement.

3. RESTRICTED STOCK AWARDS.

         3.1      Grants.

                  The Committee may, in its discretion, grant one or more
Restricted Stock Awards to any Eligible Employee. Each Restricted Stock Award
Agreement shall specify the number of shares of Common Stock to be issued to the
Participant, the date of such issuance, the consideration for such shares (but
not less than the minimum lawful consideration under applicable state law) by
the Participant, the extent (if any) to which and the time (if ever) at which
the Participant shall be entitled to dividends, voting and other rights in
respect of the shares prior to vesting, and the restrictions (which may be based
on performance criteria, passage of time or other factors or any combination
thereof) imposed on such shares and the conditions of release or lapse of such
restrictions. Such restrictions shall not lapse earlier than six months after
the Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("Restricted Shares") shall bear a legend making appropriate
reference to the restrictions imposed hereunder and shall be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares shall have lapsed and the shares shall have vested
in accordance with the provisions of the Award and Section 1.7. Upon issuance of
the Restricted Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require to enforce the
restrictions.

         3.2      Restrictions.

                  (a)      Pre-Vesting Restraints. Except as provided in Section
3.1 and 1.9, restricted shares comprising any Restricted Stock Award may not be
sold, assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until the restrictions on such shares have
lapsed and the shares have become vested.

                  (b)      Dividend and Voting Rights. Unless otherwise provided
in the applicable Award Agreement, a Participant receiving a Restricted Stock
Award shall be entitled to cash dividend and voting rights for all shares issued
even though they are not vested, provided that such rights shall terminate
immediately as to any Restricted Shares which cease to be eligible for vesting.

                                       9
<PAGE>

                  (c)      Cash Payments. If the Participant shall have paid or
received cash (including any dividends) in connection with the Restricted Stock
Award, the Award Agreement shall specify whether and to what extent such cash
shall be returned (with or without an earnings factor) as to any restricted
shares which cease to be eligible for vesting.

         3.3      Return to the Corporation.

                  Unless the Committee otherwise expressly provides, Restricted
Shares that remain subject to restrictions at the time of termination of
employment or are subject to other conditions to vesting that have not been
satisfied by the time specified in the applicable Award Agreement shall not vest
and shall be returned to the Corporation in such manner and on such terms as the
Committee shall therein provide.

4. OTHER PROVISIONS

                  4.1      Rights of Eligible Employees, Participants and
Beneficiaries.

                  (a)      Employment Status. Status as an Eligible Employee
shall not be construed as a commitment that any Award will be made under this
Plan to an Eligible Employee or to Eligible Employees generally.

                  (b)      No Employment Contract. Nothing contained in this
Plan (or in any other documents under this Plan or in any Award) shall confer
upon any Eligible Employee or Participant any right to continue in the employ or
other service of the Company, constitute any contract or agreement of employment
or other service or affect an employee's status as an employee at will, nor
shall interfere in any way with the right of the Company to change a person's
compensation or other benefits, or to terminate his or her employment or other
service, with or without cause. Nothing in this Section, however, is intended to
adversely affect any express independent right of such person under a separate
employment or service contract other than an Award Agreement.

                  (c)      Plan Not Funded. Awards payable under this Plan shall
be payable in shares or from the general assets of the Corporation, and (except
as provided in Section 1.4(c)) no special or separate reserve, fund or deposit
shall be made to assure payment of such Awards. No Participant, Beneficiary or
other person shall have any right, title or interest in any fund or in any
specific asset (including shares of Common Stock, except as expressly otherwise
provided) of the Company by reason of any Award hereunder. Neither the
provisions of this Plan (or of any related documents), nor the creation or
adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan shall create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company and any Participant, Beneficiary or other
person. To the extent that a Participant, Beneficiary or other person acquires a
right to receive payment pursuant to any Award hereunder, such right shall be no
greater than the right of any unsecured general creditor of the Company.

                                       10
<PAGE>

         4.2      Adjustments; Acceleration.

                  (a)      Adjustments. Upon or in contemplation of any
reclassification, recapitalization, stock split (including a stock split in the
form of a stock dividend) or reverse stock split; any merger, combination,
consolidation, or other reorganization; any spin-off, split-up, or similar
extraordinary dividend distribution ("spin-off") in respect of the Common Stock
(whether in the form of securities or property); any exchange of Common Stock or
other securities of the Corporation, or any similar, unusual or extraordinary
corporate transaction in respect of the Common Stock; or a sale of all or
substantially all the assets of the Corporation as an entirety ("asset sale");
then the Committee shall, in such manner, to such extent (if any) and at such
time as it deems appropriate and equitable in the circumstances:

                           (1)      proportionately adjust any or all of (a) the
                  number and type of shares of Common Stock (or other
                  securities) that thereafter may be made the subject of Awards
                  (including the specific maxima and numbers of shares set forth
                  elsewhere in this Plan), (b) the number, amount and type of
                  shares of Common Stock (or other securities or property)
                  subject to any or all outstanding Awards, (c) the grant,
                  purchase, or exercise price of any or all outstanding Awards,
                  (d) the securities, cash or other property deliverable upon
                  exercise of any outstanding Awards, or (e) (subject to
                  limitations under Section 4.10(c)) the performance standards
                  appropriate to any outstanding Awards, or

                           (2)      make provision for a cash payment or for the
                  assumption, substitution or exchange of any or all outstanding
                  share-based Awards or the cash, securities or property
                  deliverable to the holder of any or all outstanding
                  share-based Awards, based upon the distribution or
                  consideration payable to holders of the Common Stock upon or
                  in respect of such event.

The Committee may adopt such valuation methodologies for outstanding Awards as
it deems reasonable in the event of a cash or property settlement and, in the
case of Options, but without limitation on other methodologies, may base such
settlement solely upon the excess if any of the amount payable upon or in
respect of such event over the exercise or strike price of the Award.

In each case, with respect to Awards of Incentive Stock Options, no adjustment
shall be made in a manner that would cause the Plan to violate Section 422 or
424(a) of the Code or any successor provisions without the written consent of
holders materially adversely affected thereby.

In any of such events, the Committee may take such action prior to such event to
the extent that the Committee deems the action necessary to permit the
Participant to realize the benefits intended to be conveyed with respect to the
underlying shares in the same manner as is or will be available to shareholders
generally.

                                       11
<PAGE>

                  (b)      Possible Early Termination of Accelerated Awards. If
any Option or other right to acquire Common Stock under this Plan has been fully
accelerated as required or permitted by Section 4.2(c) but is not exercised
prior to (1) a dissolution of the Company, or (2) an event described in Section
4.2(a) that the Company does not survive, or (3) the consummation of an event
described in Section 4.2(a) involving a Change of Control Event approved by the
Board, such Option or right shall terminate, subject to any provision that has
been expressly made by the Board or the Committee, through a plan of
reorganization or otherwise, for the survival, substitution, assumption,
exchange or other settlement of such Option or right.

                  (c)      Acceleration of Awards Upon Change in Control. Unless
prior to a Change in Control Event the Committee determines that, upon its
occurrence, benefits under any or all Awards shall not be accelerated or
determines that only certain or limited benefits under any or all Awards shall
be accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Event for such acceleration,
then upon the occurrence of a Change in Control Event:

                           (1) each Option shall become immediately exercisable,
                           and

                           (2) Restricted Stock shall immediately vest free of
                           restrictions.

         Any discretion with respect to these events shall be limited to the
extent required by applicable accounting requirements in the case of a
transaction intended to be accounted for as a pooling of interests transaction.

         The Committee may override the limitations on acceleration in this
Section 4.2(c) by express provision in the Award Agreement and may accord any
Eligible Employee a right to refuse any acceleration, whether pursuant to the
Award Agreement or otherwise, in such circumstances as the Committee may
approve. Any acceleration of Awards shall comply with applicable legal
requirements and, if necessary to accomplish the purposes of the acceleration or
if the circumstances require, may be deemed by the Committee to occur (subject
to Section 4.2(d) a limited period of time not greater than 30 days before the
event. Without limiting the generality of the foregoing, the Committee may deem
an acceleration to occur immediately prior to the applicable event and/or
reinstate the original terms of an Award if an event giving rise to an
acceleration does not occur.

                  (d)      Possible Rescission of Acceleration. If the vesting
of an Award has been accelerated expressly in anticipation of an event or upon
shareholder approval of an event and the Committee or the Board later determines
that the event will not occur, the Committee may rescind the effect of the
acceleration as to any then outstanding and unexercised or otherwise unvested
Awards.

                  (e)      Acceleration Upon Termination of Service Following a
Change in Control.

                           (1)      Termination After Change in Control. If any
                  Participant's employment is terminated by the Company upon or
                  within one year after a

                                       12
<PAGE>

                  Change in Control Event, and the termination is not the result
                  of death, Total Disability, Retirement or a termination for
                  Cause, then, subject to the other provisions of this Section
                  4.2 (including without limitation Section 4.2(b) and Section
                  4.4), all outstanding Options and other Awards held by the
                  Participant shall be deemed fully vested immediately prior to
                  the Severance Date, irrespective of the vesting provisions of
                  the Participant's Award Agreement, unless the Award Agreement
                  specifies a different result in the case of a Change in
                  Control Event.

                           (2)      No Extension Beyond Expiration.
                  Notwithstanding the foregoing, in no event shall an Award be
                  reinstated or extended beyond its final expiration date.

         4.3      Effect of Termination of Service on Awards.

                  (a)      General. The Committee shall establish the effect of
a termination of employment on the rights and benefits under each Award under
this Plan and in so doing may make distinctions based upon the cause of
termination.

                  (b)      Events Not Deemed Terminations of Service. Unless
Company policy or the Committee otherwise provides, the employment relationship
shall not be considered terminated in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence authorized by the Company or the
Committee; provided that unless reemployment upon the expiration of such leave
is guaranteed by contract or law, such leave is for a period of not more than 90
days. In the case of any Eligible Employee on an approved leave of absence,
continued vesting of the Award while on leave from the employ of the Company
shall be suspended, unless the Committee otherwise provides or applicable law
otherwise requires. In no event shall an Award be exercised after the expiration
of the term set forth in the Award Agreement.

                  (c)      Effect of Change of Subsidiary Status. For purposes
of this Plan and any Award, if an entity ceases to be a Subsidiary a termination
of employment shall be deemed to have occurred with respect to each Eligible
Employee in respect of the Subsidiary who does not continue as an Eligible
Employee in respect of another entity within the Company.

         4.4      Compliance with Laws.

         This Plan, the granting and vesting of Awards under this Plan, the
offer, issuance and delivery of shares of Common Stock, the acceptance of
promissory notes and/or the payment of money under this Plan or under Awards are
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. In addition, any securities
delivered under this Plan may be subject to any special restrictions that the
Committee may require to preserve a pooling of interests under generally
accepted

                                       13
<PAGE>

accounting principles. The person acquiring any securities under this Plan will,
if requested by the Company, provide such assurances and representations to the
Company as the Committee may deem necessary or desirable to assure compliance
with all applicable legal and accounting requirements.

         4.5      Tax Matters.

                  (a)      Provision for Tax Withholding or Offset. Upon any
exercise, vesting, or payment of any Award or upon the disposition of shares of
Common Stock acquired pursuant to the exercise of an Incentive Stock Option
prior to satisfaction of the holding period requirements of Section 422 of the
Code, the Company shall have the right at its option to (i) require the
Participant (or Personal Representative or Beneficiary, as the case may be) to
pay or provide for payment of the minimum amount of any taxes which the Company
may be required to withhold with respect to such Award event or payment or (ii)
deduct from any amount payable in cash the minimum amount of any taxes which the
Company may be required to withhold with respect to such cash payment. In any
case where a tax is required to be withheld in connection with the delivery of
shares of Common Stock under this Plan, the Committee may in its sole discretion
(subject to Section 4.4) grant (either at the time of the Award or thereafter)
to the Participant the right to elect, pursuant to such rules and subject to
such conditions as the Committee may establish, to have the Corporation reduce
the number of shares to be delivered by (or otherwise reacquire) the appropriate
number of shares valued at their Fair Market Value, to satisfy such minimum
withholding obligation, determined in each case as of the trading day next
preceding the applicable date of exercise, vesting or payment. Shares in no
event shall be withheld in excess of the minimum number required for tax
withholding under these provisions.

         4.6      Plan Amendment, Termination and Suspension.

                  (a)      Board Authorization. The Board may, at any time,
terminate or, from time to time, amend, modify or suspend this Plan, in whole or
in part. No Awards may be granted during any suspension of this Plan or after
termination of this Plan, but the Committee shall retain jurisdiction as to
Awards then outstanding in accordance with the terms of this Plan.

                  (b)      Shareholder Approval. To the extent then required
under Sections 162, 422 or 424 of the Code or any other applicable law, or by
the provisions of Section 2.5 of the Plan, or deemed necessary or advisable by
the Board, any amendment to this Plan shall be subject to shareholder approval.

                  (c)      Amendments to Awards. Without limiting any other
express authority of the Committee under (but subject to) the express limits of
this Plan, the Committee by agreement or resolution may waive conditions of or
limitations on Awards to Participants that the Committee in the prior exercise
of its discretion has imposed, without the consent of a Participant, and
(subject to the requirements of Section 1.2(b)) may make other changes to the
terms and conditions of Awards that do not affect in any

                                       14
<PAGE>

manner materially adverse to the Participant, the Participant's rights and
benefits under an Award.

                  (d)      Limitations on Amendments to Plan and Awards. No
amendment, suspension or termination of this Plan or change of or affecting any
outstanding Award shall, without written consent of the Participant, affect in
any manner materially adverse to the Participant any rights or benefits of the
Participant or obligations of the Company under any Award granted under this
Plan prior to the effective date of such change. Changes contemplated by Section
4.2 shall not be deemed to constitute changes or amendments for purposes of this
Section 4.6.

         4.7      Privileges of Stock Ownership.

         Except as otherwise expressly authorized by the Committee or this Plan,
a Participant shall not be entitled to any privilege of stock ownership as to
any shares of Common Stock not actually delivered to and held of record by the
Participant. No adjustment will be made for dividends or other rights as a
shareholder for which a record date is prior to such date of delivery.

         4.8      Effective Date of the Plan.

         This Plan is effective as of January 27, 2000 the date of approval by
the Board. The Plan shall be submitted for and subject to shareholder approval.

         4.9      Term of the Plan.

         No Award will be granted under this Plan after January 26, 2010 (the
"termination date"). Unless otherwise expressly provided in this Plan or in an
applicable Award Agreement, any Award granted prior to the termination date may
extend beyond such date, and all authority of the Committee with respect to
Awards hereunder, including the authority to amend an Award, shall continue
during any suspension of this Plan and in respect of Awards outstanding on the
termination date.

         4.10     Governing Law/Construction/Severability.

                  (a)      Choice of Law. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with the laws of the State of California.

                  (b)      Severability. If a court of competent jurisdiction
holds any provision invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.

                  (c)      Plan Construction.

                           (1)      Rule 16b-3. It is the intent of the
                  Corporation that the Awards and transactions permitted by
                  Awards be interpreted in a manner that, in the case of
                  Participants who are or may be subject to Section 16 of the
                  Exchange Act, satisfies the applicable requirements for
                  exemptions

                                       15
<PAGE>

                  under Rule 16b-3. The exemption will not be available if the
                  authorization of actions by any Committee of the Board with
                  respect to such Awards does not satisfy the applicable
                  conditions of Rule 16b-3. Notwithstanding the foregoing, the
                  Corporation shall have no liability to any Participant for
                  Section 16 consequences of Awards or events under Awards.

                           (2)      Section 162(m). It is the further intent of
                  the Company that (to the extent the Company or Awards under
                  this Plan may be or become subject to limitations on
                  deductibility under Section 162(m) of the Code), Options
                  granted with an exercise or base price not less than Fair
                  Market Value on the date of grant will qualify as
                  performance-based compensation or otherwise be exempt from
                  deductibility limitations under Section 162(m) of the Code, to
                  the extent that the authorization of the Award (or the payment
                  thereof, as the case may be) satisfies any applicable
                  administrative requirements thereof.

         4.11     Captions.

         Captions and headings are given to the sections and subsections of this
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
this Plan or any provision thereof.

         4.12     Stock-Based Awards in Substitution for Stock Options or Awards
Granted by Other Corporation.

         Awards may be granted to Eligible Employees under this Plan in
substitution for employee stock options, stock appreciation rights, restricted
stock or other stock-based awards granted by other entities to persons who are
or who will become Eligible Employees in respect of the Company, in connection
with a distribution, merger or other reorganization by or with the granting
entity or an affiliated entity, or the acquisition by the Company, directly or
indirectly, or all or a substantial part of the stock or assets of the employing
entity.

         4.13     Non-Exclusivity of Plan.

         Nothing in this Plan shall limit or be deemed to limit the authority of
the Board or the Committee to grant awards or authorize any other compensation,
with or without reference to the Common Stock, under any other plan or
authority.

         4.14     No Corporate Action Restriction.

         The existence of the Plan, the Award Agreements and the Awards granted
hereunder shall not limit, affect or restrict in any way the right or power of
the Board or the shareholders of the Corporation to make or authorize: (a) any
adjustment, recapitalization, reorganization or other change in the
Corporation's or any Subsidiary's capital structure or its business, (b) any
merger, amalgamation, consolidation or change

                                       16
<PAGE>

in the ownership of the Corporation or any subsidiary, (c) any issue of bonds,
debentures, capital, preferred or prior preference stock ahead of or affecting
the Corporation's or any Subsidiary's capital stock or the rights thereof, (d)
any dissolution or liquidation of the Corporation or any Subsidiary, (e) any
sale or transfer of all or any part of the Corporation or any Subsidiary's
assets or business, or (f) any other corporate act or proceeding by the
Corporation or any Subsidiary. No participant, beneficiary or any other person
shall have any claim under any Award or Award Agreement against any member of
the Board or the Committee, or the Corporation or any employees, officers or
agents of the Corporation or any Subsidiary, as a result of any such action.

         4.15     Other Company Benefit and Compensation Program.

         Payments and other benefits received by a Participant under an Award
made pursuant to this Plan shall not be deemed a part of a Participant's
compensation for purposes of the determination of benefits under any other
employee welfare or benefit plans or arrangements, if any, provided by the
Corporation or any Subsidiary, except where the Committee or the Board expressly
otherwise provides or authorizes in writing. Awards under this Plan may be made
in addition to, in combination with, as alternatives to or in payment of grants,
awards or commitments under any other plans or arrangements of the Company or
the Subsidiaries.

5. DEFINITIONS.

         5.1      Definitions.

                  (a)      "Award" means an award of any Option or Restricted
Stock, or any combination thereof, whether alternative or cumulative, authorized
by and granted under this Plan.

         (b)      "Award Agreement" means any writing setting forth the terms of
an Award that has been authorized by the Committee.

                  (c)      "Award Date" means the date upon which the Committee
took the action granting an Award or such later date as the Committee designates
as the Award Date at the time of the Award.

                  (d)      "Award Period" means the period beginning on an Award
Date and ending on the expiration date of such Award.

                  (e)      "Beneficiary" means the person, persons, trust or
trusts designated by a Participant or, in the absence of a designation, entitled
by will or the laws of descent and distribution, to receive the benefits
specified in the Award Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's executor or administrator
if no other Beneficiary is designated and able to act under the circumstances.

                  (f)      "Board" means the Board of Directors of the
Corporation.

                                       17
<PAGE>

                  (g)      "Cause" with respect to a Participant means (unless
otherwise expressly provided in the applicable Award Agreement or another
applicable contract with the Participant) a termination of employment based upon
a finding by the Company, acting in good faith and based on its reasonable
belief at the time, that the Participant:

                  (1)      has failed to render services to the Company where
         such failure amounts to gross negligence or misconduct of the
         Participant's responsibility and duties; or

                  (2)      has committed an act of fraud or been dishonest
         against the Company or any affiliate of the Company; or

                  (3)      has been convicted of a felony or other crime
         involving moral turpitude.

A termination for Cause shall be deemed to occur (subject to reinstatement upon
a contrary final determination by the Committee) on the date on which the
Company first delivers written notice to the Participant of a finding of
termination for Cause.

                  (h)      "Change in Control Event" means any of the following
events

                           (1)      the dissolution or liquidation of either the
                  Company, unless its business is continued by another entity in
                  which holders of the Company's voting securities immediately
                  before the event own, either directly or indirectly, more than
                  50% of the continuing entity's voting securities immediately
                  after the event;

                           (2)      any sale, lease, exchange or other transfer
                  (in one or a series of transactions) of all or substantially
                  all of the assets of either the Company, unless its business
                  is continued by another entity in which holders of the
                  Company's voting securities immediately before the event own,
                  either directly or indirectly, more than 50% of the continuing
                  entity's voting securities immediately after the event;

                           (3)      any reorganization or merger of the Company,
                  unless the holders of the Company's voting securities
                  immediately before the event own, either directly or
                  indirectly, more than 50% of the continuing or surviving
                  entity's voting securities immediately after the event;

                           (4)      an acquisition by any person, entity or
                  group acting in concert of more than 50% of the voting
                  securities of the Company, unless the holders of the Company's
                  voting securities immediately before the event own, either
                  directly or indirectly, more than 50% of the acquirer's voting
                  securities immediately after the acquisition; or

                           (5)      a change of one-half or more of the members
                  of the Board of Directors of the Company within a twelve-month
                  period, unless the election or nomination for election by
                  shareholders of new directors within

                                       18
<PAGE>

                  such period constituting a majority of the applicable Board
                  was approved by the vote of at least two-thirds of the
                  directors then still in office who were in office at the
                  beginning of the twelve-month period.

                  (i)      "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

                  (j)      "Commission" means the Securities and Exchange
Commission.

                  (k)      "Committee" means the Board or one or more committees
appointed by the Board to administer all or certain aspects of this Plan, each
committee to be comprised solely of one or more directors or such number as may
be required under applicable law.

                  (l)      "Common Stock" means the Common Stock of the
Corporation and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4.2 of this Plan.

                  (m)      "Company" means, collectively, the Corporation and
its Subsidiaries.

                  (n)      "Corporation" means American States Water Company, a
California corporation, and its successors.

                  (o)      "Eligible Employee" means an officer (whether or not
a director) or key employee of the Company, including participants in the
American States Water Company Annual Incentive Plan.

                  (p)      "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.

                  (q)      "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.

                                       19
<PAGE>

                  (r)      "Incentive Stock Option" means an Option which is
intended, as evidenced by its designation, as an incentive stock option within
the meaning of Section 422 of the Code, the award of which contains such
provisions (including but not limited to the receipt of shareholder approval of
this Plan, if the Award is made prior to such approval) and is made under such
circumstances and to such persons as may be necessary to comply with that
section.

                  (s)      "Nonqualified Stock Option" means an Option that is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as an
incentive stock option shall be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.

                  (t)      "Option" means an option to purchase Common Stock
granted under this Plan. The Committee shall designate any Option granted to an
Eligible Employee as a Nonqualified Stock Option or an Incentive Stock Option.

                  (u)      "Participant" means an Eligible Employee who has been
granted an Award under this Plan.

                  (v)      "Personal Representative" means the person or persons
who, upon the disability or incompetence of a Participant, shall have acquired
on behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.

                  (w)      "Plan" means this 2000 Stock Incentive Plan, as it
may be amended from time to time.

                  (x)      "QDRO" means a qualified domestic relations order.

                  (y)      "Restricted Shares" or "Restricted Stock" means
shares of Common Stock awarded to a Participant under this Plan, subject to
payment of such consideration, if any, and such conditions on vesting (which may
include, among others, the passage of time, specified performance objectives or
other factors) and such transfer and other restrictions as are established in or
pursuant to this Plan and the related Award Agreement, for so long as such
shares remain unvested under the terms of the applicable Award Agreement.

                  (z)      "Retirement" means retirement from active service as
an employee or officer of the Company on or after attaining age 65.

                  (aa)     "Rule 16b-3" means Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act, as amended from time to time.

                  (bb)     "Section 16 Person" means a person subject to Section
16(a) of the Exchange Act.

                                       20
<PAGE>

                  (cc)     "Securities Act" means the Securities Act of 1933, as
amended from time to time.

                  (dd)     "Subsidiary" means any corporation or other entity a
majority of whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.

                  (ee)     "Total Disability" means a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Code and such other
disabilities, infirmities, afflictions or conditions as the Committee by rule
may include.

                                       21