**Exhibit 10.1**

 

January 30, 2006 Grants

 

**AMERICAN STATES WATER COMPANY**

**2000 STOCK INCENTIVE PLAN**

**FORM OF****NONQUALIFIED STOCK OPTION AGREEMENT**

 

**THIS NONQUALIFIED STOCK OPTIONAGREEMENT** (this “**Option Agreement**”)by and between **AMERICAN STATES WATER COMPANY**, a Californiacorporation (the “**Corporation**”),and                                    (the “**Participant**”) evidences thenonqualified stock option (the “**Option**”)granted by the Corporation to the Participant as to the number of shares of theCorporation’s common shares, no par value (the “**Common Shares**”), first set forth below.

 
| **Number  of Common Shares**:(1)                                                                                                                                                                                                                                                                                                                            | ** **                  | **Award  Date:**        |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|------------------------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                        |                        |                         |   |   |
| **Exercise  Price per Share**:(1)                                      $                | ** **                  | **Expiration  Date:**(1),(2) |   |   |
|                                                                                                                                                                                                                                                                                                                                                        |                        |                         |   |   |
| **%  Vesting**                                                                                                                                                                                                                                                                                                                                              | **Date of  Vesting**(1),(2) | ** **                   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                        |                        |                         |   |   |   |
|             %                                                                                                                                                                                                                                                                                   |                        |                         |   |   |   |
|             %                                                                                                                                                                                                                                                                                   |                        |                         |   |   |   |
|             %                                                                                                                                                                                                                                                                                   |                        |                         |   |   |   |

 

TheOption is granted under the American States Water Company 2000 Stock IncentivePlan, as amended (the **“Plan”**) andsubject to the Terms and Conditions of Option (the “**Terms**”)attached to this Option Agreement (incorporated herein by this reference) andto the Plan. The Option has been granted to the Participant in addition to, andnot in lieu of, any other form of compensation otherwise payable or to bepaid to the Participant. The Option is not and shall not be deemed to be anincentive stock option within the meaning of Section 422 of the Code. Capitalizedterms are defined in the Plan if not defined herein. The parties agree to theterms of the Option set forth herein, and the Participant acknowledges receiptof a copy of the Terms and the Plan.

 
| **“PARTICIPANT”** | ** ** | **AMERICAN  STATES WATER  COMPANY,** |
|-----------------------------|------------|--------------------------------------|
| ** **                  | ** ** | ** **                           | a California  corporation |
| *Signature*                 | ** ** | ** **                           | ** ** |
| ** **                  | ** ** | ** **                           | ** ** |
| *Print  Name*               | ** ** | By:                                  | ** ** | ** ** |
| * *                    | * *   | ** **                           | ** ** |
| *Address*                   | ** ** | Its:                                 | ** ** | ** ** |
| ** **                  | ** ** | ** **                           | ** ** |
| *City,  State, Zip Code*    | ** ** | ** **                           |

 

**CONSENT OF SPOUSE**

 

Inconsideration of the Corporation’s execution of this Option Agreement, theundersigned spouse of the Participant agrees to be bound by all of the termsand provisions hereof and of the Plan.

 
|                   |   |   |   |
|------------------------|--------|--------|--------|
| *Signature  of Spouse* | *Date* |

 

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(1)   Subjectto adjustment under Section 5.2 of the Plan.

(2)   Subjectto early termination as provided in Section 4 below.

 

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**TERMS AND CONDITIONS OF OPTION**

 

**1.****                                      Vesting;Limits on Exercise.**

 

As setforth in the Option Agreement, the Option shall vest and become exercisable inpercentage installments of the aggregate number of Common Shares subject to theOption. The Option may be exercised only to the extent the Option isvested and exercisable.

 

•                  Cumulative Exercisability. Tothe extent that the Option is vested and exercisable, the Participant has the rightto exercise the Option (to the extent not previously exercised), and such rightshall continue, until the expiration or earlier termination of the Option.

 

•                  No Fractional Shares. Fractionalshare interests shall be disregarded, but may be cumulated.

 

•                  Minimum Exercise. No fewerthan 100(1) Common Shares may be purchased at any one time, unlessthe number purchased is the total number at the time exercisable under theOption.

 

**2.****                                      Continuanceof Employment Required; No Employment Commitment.**

 

Exceptas provided in Section 4.2 below, (a) the vesting schedule requirescontinued service through each applicable vesting date as a condition to thevesting of the applicable installment of the Option and the rights and benefitsunder this Option Agreement and (b) employment or service for only aportion of the vesting period, even if a substantial portion, will not entitlethe Participant to any proportionate vesting or avoid or mitigate a terminationof rights and benefits upon or following a termination of employment or serviceas provided in Section 4.2 below or under the Plan.

 

Nothingcontained in this Option Agreement or the Plan constitutes an employmentcommitment by the Company, affects the Participant’s status as an employee atwill who is subject to termination without cause, confers upon the Participantany right to remain employed by the Corporation or any Subsidiary, interferesin any way with the right of the Corporation or any Subsidiary at any time toterminate such employment, or affects the right of the Corporation or anySubsidiary to increase or decrease the Participant’s other compensation.

 

**3.****                                      Methodof Exercise of Option.**

 

TheOption shall be exercisable by the delivery to the Secretary of the Corporationof a written notice stating the number of Common Shares to be purchasedpursuant to the Option and accompanied by:

 

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•                  delivery of an executed ExerciseAgreement in substantially the form attached hereto as Exhibit A orsuch other form as from time to time may be required by the Committee(the “**Exercise Agreement**”);

 

•                  payment in full for the ExercisePrice of the shares to be purchased, by check or electronic funds transfer tothe Corporation, subject to such specific procedures or directions as theCommittee may establish;

 

•                  satisfaction of the tax withholdingprovisions of Section 5.5 of the Plan; and

 

•                  any written statements or agreementsrequired pursuant to Section 5.4 of the Plan.

 

The Committee also may butis not required to authorize a non-cash payment alternative specified below ator prior to the time of exercise, in which case, the Exercise Price and/orapplicable withholding taxes, to the extent so authorized, may be paid infull or in part by Common Shares already owned by the Participant, valuedat their Fair Market Value on the exercise date; provided, however,that any shares acquired upon exercise of a stock option or otherwise directlyfrom the Corporation must have been owned by the Participant for at least six (6) monthsbefore the date of such exercise.

 

**4.****                                      EarlyTermination of Option.**

 

**4.1****                               PossibleTermination of Option upon Change in Control.**The Option is subject totermination in connection with a Change in Control Event or certain similarreorganization events as provided in Section 5.2 of the Plan.

 

**4.2****                               Terminationof Option upon a Termination of Participant’s Employment or Services.**Subjectto earlier termination on the Expiration Date of the Option or pursuant to Section 4.1above, if the Participant ceases to be employed by or ceases to provideservices to the Corporation or a Subsidiary, the following rules shallapply (the last day that the Participant is employed by or provides services tothe Corporation or a Subsidiary is referred to as the Participant’s “**Severance Date**”):

 

•                  if the termination of the Participant’semployment or services is the result of any reason other than the Participant’sdeath, Total Disability, Retirement or a termination by the Corporation or aSubsidiary for Cause, (a) the Participant will have until the date that isthree months after his or her Severance Date to exercise the Option (or portionthereof) to the extent that it was vested on the Severance Date, (b) theOption, to the extent not vested on the Severance Date, shall terminate on theSeverance Date, and (c) the Option, to the extent exercisable for the 3-monthperiod following the Severance Date and not exercised during such period, shallterminate at the close of business on the last day of the 3-month period;

 

•                  if the termination of the Participant’semployment or services is the result of the Participant’s death, Total Disabilityor the Participant’s Retirement, (a) the

 

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Optionwill continue to vest and become exercisable in accordance with the vesting schedule setforth in the Option Agreement, (b) the Participant (or his or herbeneficiary or personal representative, as the case may be) will haveuntil the close of business on the date immediately prior to the Expiration Date,to the extent it is then vested, to exercise the Option, and (c) theOption, to the extent not exercised during such period, shall terminate on theExpiration Date; and

 

•                  if the Participant’s employment orservices are terminated by the Company for Cause, the Option, to the extent notexercised, whether vested or unvested, on the Severance Date shall terminate onthe Severance Date.

 

Forpurposes of the Option, “**Total****Disability**” and “**Cause**” have themeanings given to such terms in the Plan. For purposes of the Option, “**Retirement**” means retirement by the Participant from activeservice as an officer or employee of the Corporation and/or its Subsidiariesafter attaining age 55 and having 20 or more years of service with theCorporation and/or its Subsidiaries.

 

In allevents the Option is subject to earlier termination on the Expiration Date ofthe Option or as contemplated by Section 4.1. The Administrator shall bethe sole judge of whether the Participant continues to render employment orservices for purposes of this Option Agreement.

 

**5.****                                      Non-Transferabilityand Other Restrictions.**

 

TheOption and any other rights of the Participant under this Option Agreement orthe Plan are nontransferable and exercisable only by the Participant, except asset forth in Section 1.9 of the Plan.

 

**6.****                                      Notices.**

 

Anynotice to be given under the terms of this Option Agreement or the ExerciseAgreement shall be in writing and addressed to the Corporation at its principaloffice to the attention of the Secretary, and to the Participant at the addressgiven beneath the Participant’s signature hereto, or at such other address aseither party may hereafter designate in writing to the other. Any suchnotice shall be given only when received, but if the Participant is no longeran Eligible Employee, shall be deemed to have been duly given when enclosed ina properly sealed envelope addressed as aforesaid, registered or certified, anddeposited (postage and registry or certification fee prepaid) in a post officeor branch post office regularly maintained by the United States Government.

 

**7.****                                      Plan.**

 

TheOption and all rights of the Participant under this Option Agreement aresubject to, and the Participant agrees to be bound by, all of the terms andconditions of the Plan, incorporated herein by this reference. In the event ofa conflict or inconsistency between the terms and conditions of this OptionAgreement and of the Plan, the terms and conditions of the Plan shall govern. TheParticipant acknowledges receipt of a copy

 

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of the Plan and agrees tobe bound by the terms thereof. The Participant acknowledges reading andunderstanding the Plan. Unless otherwise expressly provided in other sectionsof this Option Agreement, provisions of the Plan that confer discretionaryauthority on the Board or the Committee do not and shall not be deemed tocreate any rights in the Participant unless such rights are expressly set forthherein or are otherwise in the sole discretion of the Board or the Committee soconferred by appropriate action of the Board or the Committee under the Plan afterthe date hereof.

 

**8.****                                      EntireAgreement.**

 

ThisOption Agreement (together with the form of Exercise Agreement attachedhereto) and the Plan together constitute the entire agreement and supersede allprior understandings and agreements, written or oral, of the parties heretowith respect to the subject matter hereof. The Plan, this Option Agreement andthe Exercise Agreement may be amended pursuant to Section 5.6 of thePlan. Such amendment must be in writing and signed by the Corporation. TheCorporation may, however, unilaterally waive any provision hereof or of theExercise Agreement in writing to the extent such waiver does not adverselyaffect the interests of the Participant hereunder, but no such waiver shalloperate as or be construed to be a subsequent waiver of the same provision or awaiver of any other provision hereof.

 

**9.****                                      GoverningLaw; Limited Rights.**

 

**9.1.****CaliforniaLaw.**This Option Agreement shall be governed by and construed andenforced in accordance with the laws of the State of California without regardto conflict of law principles thereunder.

 

**9.2. LimitedRights.**The Participant has no rights as a shareholder of theCorporation with respect to the Option as set forth in Section 5.7 of thePlan. The Option does not place any limit on the corporate authority of theCorporation as set forth in Section 5.14 of the Plan.

 

*(Remainderof Page Intentionally Left Blank)*

 

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EXHIBIT A

 

**AMERICAN STATES WATER COMPANY**

**2000 STOCK INCENTIVE PLAN**

**OPTION EXERCISE AGREEMENT**

 

Theundersigned (the “**Purchaser**”)hereby irrevocably elects to exercise his/her right, evidenced by that certainNonqualified Stock Option Agreement dated as of                        (the“**Option Agreement**”) under the AmericanStates Water Company 2000 Stock Incentive Plan, as amended (the “**Plan**”), as follows:

 

•                  the Purchaser hereby irrevocablyelects to purchase                         shares of Common Shares (the “**Shares**”), ofAmerican States Water Company (the “**Corporation**”),and

 

•                  such purchase shall be at the priceof $                       per share, for an aggregate amount of $                       (subject to applicable withholding taxes pursuant to Section 5.5 of thePlan).

 

Capitalizedterms are defined in the Plan if not defined herein.

 

**Deliveryof Shares**. The Purchaser requests that (1) a certificaterepresenting the Common Shares be registered to Purchaser and delivered to:                                or (2) that the Common Shares be registered in the Purchaser’s name andelectronically delivered to:                                                                                                                                     .

 

**Plan andOption Agreement**. The Purchaser acknowledges that all ofhis/her rights are subject to, and the Purchaser agrees to be bound by, all ofthe terms and conditions of the Plan and the Option Agreement, both of whichare incorporated herein by this reference. If a conflict or inconsistencybetween the terms and conditions of this Exercise Agreement and of the Plan orthe Option Agreement shall arise, the terms and conditions of the Plan and/orthe Option Agreement shall govern. The Purchaser acknowledges receipt of a copyof all documents referenced herein and acknowledges reading and understandingthese documents and having an opportunity to ask any questions that he/she may havehad about them.

 
| **“PURCHASER”** | ** ** | **ACCEPTED  BY:**                                                                          |
|---------------------------|------------|--------------------------------------------------------------------------------------------|
| ** **                | ** ** | **AMERICAN  STATES WATER**                                                                 |
| ** **                | ** ** | ** **                                                                                 | **COMPANY,** |
| *Signature*               | ** ** | a California  corporation                                                                  |
| * *                  | ** ** |                                                                                       |
| ** **                | ** ** | ** **                                                                                 | By: | ** ** | ** ** |
| *Print  Name*             | ** ** | ** **                                                                                 |   | ** ** | ** ** |
| ** **                | ** ** | Print Name:                                                                                | ** ** | ** ** |
| * *                  | * *   | ** **                                                                                 | ** ** | ** ** | ** ** |
| *Address*                 | ** ** | Title:                                                                                     | ** ** | ** ** |
| ** **                | ** ** | ** **                                                                                 | ** ** | ** ** | ** ** |
| ** **                | ** ** | ** **                                                                                 | *(To be  completed by the Corporation after the price (including* |
| *City,  State, Zip Code*  | ** ** | *applicable  withholding taxes), value (if applicable) and receipt of funds is verified.)* |
|                           |            |                                                                                            |  |  |  |  |  |

 

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