a6018654ex10-1.htm


    
      Exhibit
10.1

      


      AMERICAN
STATES WATER COMPANY

      


      2009
SHORT-TERM INCENTIVE PROGRAM

      


      


      
        	
                1.  

              	
                Purpose
      of 2009 Short-Term Incentive
Program

              


      

       

      American
States Water Company, a California corporation, (the “Corporation”) has adopted the
American States Water Company Performance Incentive Plan (the “Plan”) to promote the success
of the Corporation by (a) motivating executives selected to participate in
the Plan to maximize the performance of the Corporation both from a financial
perspective and in serving its customers and (b) rewarding them with cash
Objective Bonuses directly related to such performance.  The
Corporation’s board of directors recognizes that the ability of the Corporation
and its subsidiaries to attract capital at a low cost is based on its financial
performance and that the Corporation’s customers benefit through its ability to
attract low cost capital.  This 2009 Short-Term Incentive Program (the
“2009 STIP”) sets forth
the names of the individuals selected to be Participants who are eligible to
earn Objective Bonuses under the Plan for the 2009 calendar year and the
applicable Business Criteria, Performance Targets, and Payout Percentages for
the 2009 calendar year.  The 2009 STIP also provides for Discretionary
Bonuses, which when added to the Objective Bonuses under the Plan, equal the
Aggregate Bonuses payable under the 2009 STIP for the 2009 calendar
year.

       

      
        	
                2.  

              	
                Term
      of 2009 STIP

              


      

       

      The
Performance Period covered by the 2009 STIP (the “Term”) began on
January 1, 2009 and will end on December 31, 2009.

       

      
        	
                3.  

              	
                Relationship
      to American States Water Company Performance Incentive
  Plan

              


      

       

      The
Objective Bonuses payable under Awards granted under the 2009 STIP are granted
under the authority of the Plan and are subject to all of the terms and
conditions of the Plan, as it may be amended from time to time, and any rules
adopted by the Committee in accordance with the terms of the Plan, as such rules
are in effect from time to time.  The Discretionary Bonuses are
granted under the general authority of the Compensation Committee to determine
the compensation payable to Executives.

       

      
        	
                4.  

              	
                Definitions

              


      

       

      Capitalized
terms used and not otherwise defined herein have the meanings set forth in the
Plan.  In addition, the following phrases shall have the meanings
specified below:

       

      “Adjusted EPS-ASUS” means the
EPS of ASUS for 2009 adjusted to remove the amount by which the actual Pension
Expense allocated from Golden State Water Company (“GSWC”) and charged to ASUS for
2009 exceeds the amount of the Budgeted Pension Expense allocated from GSWC and
charged to ASUS for 2009.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      “Adjusted EPS-AWR Consolidated”
means the Corporation’s EPS for 2009 adjusted to remove (a) settlement
charges and outside expenses associated with the California Public Utilities
Commission subpoena regarding the capital projects contracting matter and the
pending litigation with two former officers of the Corporation, (b) any
derivative gains or losses attributable to fixed-price purchase contracts as
reported in the Corporation’s consolidated financial statements for 2009, and
(c) the amount by which the actual companywide Pension Expense for 2009
exceeds the companywide Budgeted Pension Expense for 2009.

       

      “Adjusted EPS-Regulated
Utilities” means the sum of the EPS of each of the Regulated Utilities
for 2009 adjusted to remove the portion of the following expenses that are
otherwise included in each such EPS
determination:  (a) settlement charges and outside expenses
associated with the California Public Utilities Commission subpoena regarding
the capital projects contracting matter and the pending litigation with two
former officers of the Company, (b) any derivative gains or losses
attributable to fixed-rate purchase contracts as reported in the Corporation’s
consolidated financial statements for 2009, and (c) the amount by which the
actual Pension Expense charged or allocated to the Regulated Utilities for 2009
exceeds the Budgeted Pension Expense charged or allocated to the Regulated
Utilities for 2009.

       

      “Aggregate Bonus” means the
combination of a Participant’s Objective Bonus and his or her Discretionary
Bonus.

       

      “Award Agreement” means a
written agreement setting forth the material terms and conditions of the Award
as determined by the Committee consistent with the express limitations of the
Plan and the 2009 STIP.

       

      “Base Salary” means the
Participant’s rate of annual base pay on the date the Committee approves the
Business Criteria and Performance Targets.

       

      “Board of Directors” means the
Corporation’s board of directors.

       

      “Budget” or “Budgeted” means (a) in
the case of Adjusted EPS for the Corporation, the Regulated Utilities or ASUS,
as the case may be, the projected Adjusted EPS for 2009 as set forth in the
Operating Budget, (b) in the case of Capital Expenditures, the projected
capital expenditures as set forth in the Capital Budget, and (c) in the
case of Pension Expense, the projected Pension Expense for 2009 as set forth in
the Operating Budget.

       

      “Business Criteria” means
Adjusted EPS-AWR Consolidated, Adjusted EPS - Regulated Utilities, Adjusted EPS
- ASUS, Relative Stock Price, Customer Complaints, Capital Expenditures, SOX
Deficiencies - Regulated Utilities, SOX Deficiencies - ASUS, Equitable
Adjustment and Price Redetermination.

       

      Capital Budget means the
Company’s capital budget for 2009 as approved by the Audit and Finance Committee
of the Board of Directors at its meeting on October 30, 2008.

       

      “Capital Expenditures” means
the dollar amount of Budgeted capital expenditures for 2009 for the Regulated
Utilities including the Budgeted capital expenditures for 2009 for the
Wrightwood project only to the extent that the Division of Ratepayer Advocates
of the California Public Utilities Commission does not oppose the Wrightwood
project in the 2008-2009 Region III rate case.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      “Compensation Committee” means
the Compensation Committee of the Board of Directors.

       

      “Customer Complaints” means the
number of water quality, pressure and service complaints reported by customers
to the California Department of Public Health during 2009.

       

      “Discretionary Bonus” means a
bonus payable to a Participant based on that Participant’s Individual
Performance Measures.

       

      “EPS” means fully diluted
earnings per share as reported in the Corporation’s consolidated financial
statements for 2009.

       

      “Equitable Adjustment” means
the execution, during calendar year 2009, of an agreement with the U.S.
government that provides for a permanent increase in the Company’s operation and
maintenance fees at Old North Utility Services (Fort Bragg) to recognize that
the Company is managing more inventory than was included in the government’s
initial request for proposal.

       

      “Individual Performance
Measures” means the criteria or goals utilized to determine the amounts
of each Participant’s Discretionary Bonus.

       

      “Objective Bonus” means a bonus
based on the degree of achievement of the Performance Targets for the Business
Criteria.

       

      “Operating Budget” means the
Company’s operating budget for 2009 as presented to and reviewed by the Board of
Directors at its meeting on October 31, 2008.

       

      “Payout Percentage” means the
percentage of a Participant’s Target Aggregate Bonus that is payable based on
the degree of satisfaction of a Performance Target or the Individual Performance
Measures.

       

      “Pension Expense” means the
expense recognized for accounting purposes with respect to the Golden State
Water Company Pension Plan as reported in the Corporation’s consolidated
financial statements for 2009.

       

      “Performance Measures” means
the Business Criteria and Individual Performance Measures.

       

      “Performance Target” means a
specific goal established by the Committee with respect to the Business Criteria
as set forth in Section 6.

       

      “Price Redetermination” means
the execution, during calendar year 2009, of an agreement with the U.S.
government that provides for a permanent increase in the monthly fees payable to
the Company for operations and maintenance with respect to its operations at
Terrapin Utility Services (Andrews AFB).

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

         

      

      “Relative Stock Price” means
the Corporation’s total shareholder return as compared to the total shareholder
return of each of the following 12 companies for 2009:  UIL Holdings,
South Jersey Industries, Aqua America, MGE Energy, Empire District Electric, ITC
Holdings, California Water Service, Central Vermont Public Service, Unitil,
Chesapeake Utilities, Southwest Water and SJW Corp.  For this purpose,
total shareholder return for the Corporation and each of the other 12 companies
shall be calculated using the Securities and Exchange Commission guidelines for
reporting financial performance.  If the stock of any of the 12
companies is no longer traded or is suspended from trading as of December 31,
2009, that company shall not be included in the calculation of Relative Stock
Price, but the exclusion of such company shall not affect the Performance
Targets for Relative Stock Price set forth in Section A of Exhibit
A.

       

      “SOX” means the Sarbanes-Oxley
Act of 2002.

       

      “SOX Deficiencies-ASUS” means
the number of “significant deficiencies” (each an “SD”) and “material weaknesses”
(each a “MW”) reported
for ASUS in the independent auditor’s report for 2009 pursuant to Section 404 of
SOX.

       

      “SOX Deficiencies-Regulated
Utilities” means the number of SDs and MWs reported for the Regulated
Utilities in the independent auditor’s report for 2009 pursuant to Section 404
of SOX.

       

      “Target Aggregate Bonus” means
the amount of bonus that would be payable if each of the Performance Targets
were met at the targeted level and the Participant’s Individual Performance
Measures were met at the targeted level.

       

      
        	
                5.  

              	
                Participation
      and Individual Awards

              


      

       

      The
individuals who have been selected as Participants in the 2009 STIP are set
forth below together with the amount of their Target Aggregate Bonuses as a
percentage of Base Salary:

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      


       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	 
      	
                                            Participant

                                          	
                                            Target

                                            Aggregate
      Bonus

                                          
	 
      	
                                            GSWC
      Officers

                                          	 
      
	
                                            Administrative
      and General

                                          	
                                            Robert
      J. Sprowls

                                          	
                                            30%

                                          
	
                                            Eva
      G. Tang

                                          	
                                            20%

                                          
	
                                            Gladys
      M. Farrow

                                          	
                                            15%

                                          
	
                                            Diane
      D. Rentfrow

                                          	
                                            15%

                                          
	
                                            Bryan
      K. Switzer (Keith)

                                          	
                                            15%

                                          
	
                                            Operations

                                          	
                                            Denise
      L. Kruger

                                          	
                                            20%

                                          
	
                                            Patrick
      R. Scanlon

                                          	
                                            15%

                                          
	
                                            William
      C. Gedney

                                          	
                                            15%

                                          
	
                                            Shengder
      D. Chang (David)

                                          	
                                            15%

                                          
	
                                            Roland
      S. Tanner

                                          	
                                            15%

                                          
	 
      	
                                            ASUS
      Officers

                                          	 
      
	 
      	
                                            McClellan
      Harris III (Bud)

                                          	
                                            20%

                                          
	 
      	
                                            Granville
      R. Hodges, Jr. (Rusty)

                                          	
                                            15%

                                          
	 
      	
                                            James
      B. Gallagher

                                          	
                                            15%

                                          
	 
      	
                                            Gregory
      S. Thomas

                                          	
                                            15%

                                          


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      


      For
purposes of this 2009 STIP, the GSWC officers will be divided into (1)
Administrative and General Officers and (2) Operations Officers.

       

      The
Corporation will enter into an Award Agreement with each Participant that
(a) describes his or her Individual Performance Measures and sets forth his
or her Target Aggregate Bonus, (b) sets forth his or her threshold, target
and maximum Performance Targets and (c) incorporates the terms and
conditions of the Plan and this 2009 STIP by reference.  The Target
Aggregate Bonus amount set forth in each Participant’s Award Agreement shall
represent the aggregate amount of two separate bonuses:  an Objective
Bonus (under the Plan) and a Discretionary Bonus.

       

      
        	
                6.  

              	
                Performance
      Targets for Objective Bonuses

              


      

       

      The
threshold, target and maximum Performance Targets for the 2009 STIP are set
forth in Exhibit A to this 2009 STIP.

      
         

      

      
        	
                7.

              	
                Determination
      of Participants’ Aggregate Bonuses

              


      

       

      The
Aggregate Bonus payable to each Participant shall be determined on the basis of
the extent to which the Performance Targets for the Business Criteria and that
Participant’s Individual Performance Measures are achieved.  The
amount of Aggregate Bonus payable is equal to the amount of the Target Aggregate
Bonus multiplied by the sum of the Payout Percentages for each of the
Performance Measures as determined pursuant to the tables in (a) Section B
of Exhibit A for Participants that are Administrative and General Officers
employed by GSWC, (b) Section C for Participants that are Operations Officers
employed by GSWC and (c) Section D for Participants employed by
ASUS.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      As soon as
practicable following the end of the Term of the 2009 STIP and the completion of
the independent auditor’s report for 2009, the Committee shall determine the
extent to which the Performance Targets for the Business Criteria are achieved
and the extent to which the Individual Performance Measures are achieved, and
determine the Payout Percentage for each of the Performance
Measures.  In order for a Participant to receive any payment with
respect to the Participant’s Discretionary Bonus, the Participant must meet the
standards established for the Participant’s position, which standards shall be
one of the components of the Participant’s Individual Performance
Measures.  The determination of whether the standards established for
the Participant’s position are achieved shall be made by the Committee, which
(other than for the Company’s President and Chief Executive Officer)
determination shall be based on the recommendations of the President and Chief
Executive Officer or other direct supervisor of the Participant.

       

      For levels
of achievement between threshold and maximum, the Committee shall determine the
Payout Percentage by interpolation.  Subject to Section 8 below,
the Aggregate Bonus for each Participant shall be the sum of the Payout
Percentages determined with respect to each Performance Measure multiplied by
the amount of Participant’s Target Aggregate Bonus.

       

      
        	
                8.  

              	
                Payment
      of Accounts

              


      

       

      At the
time the Committee makes the determinations described in Section 7, it shall
certify, in accordance with Section 4.8 of the Plan, the amounts of the
Objective Bonuses payable to Participants.  The Committee shall, at
the same time, determine the amount of the Discretionary Bonus payable to
Participants.  Payment of such bonuses (the Aggregate Bonuses) shall
be made as soon as practicable following the Committee’s determination and
certification, but in no event later than December 31, 2010.

       

      Notwithstanding
the foregoing, any Objective Bonus otherwise payable to any Participant under
this 2009 STIP shall be subject to the adjustments, limitations (including the
dollar limitation under Section 4.3 of the Plan), Committee’s discretionary
authority to make downward adjustments and other terms and conditions set forth
in the Plan.  Any Discretionary Bonus otherwise payable under this
2009 STIP shall be subject to any adjustments, limitations, upward or downward
adjustments in amounts and any other terms or conditions that the Committee may
impose in its sole discretion.

       

      
        	
                9.  

              	
                Effect
      of Termination of Employment

              


      

       

      Except as
otherwise provided in an employment agreement, memorandum of understanding,
other contract between a Participant and the Corporation or one of its
Subsidiaries, or by the Committee in its sole discretion, the bonuses payable
under a Participant’s Award will be forfeited, and the Participant will not be
entitled to any bonus payments with respect to such Award if the Participant
ceases to be employed by the Corporation or one of its Subsidiaries for any
reason prior to the date the bonuses payments under the 2009 STIP are paid to
Participants.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      
        	
                10.  

              	
                Recoupment
      of Bonuses

              


      

       

      Any payment of an Objective Bonus,
Discretionary Bonus or Aggregate Bonus under this 2009 STIP is subject to
recoupment pursuant to the Corporation’s Policy Regarding the Recoupment of
Certain Performance-Based Compensation Payments as in effect from time to time,
and a Participant shall promptly make any reimbursement requested by the Board
of Directors or the Committee pursuant to such policy with respect to any such
bonuses.  Further, each Participant shall agree, by accepting an Award
under the 2009 STIP and executing an Award Agreement, that the Corporation
and/or any of its affiliates may deduct from any amounts it may owe the
Participant from time to time (such as wages or other compensation) any and all
amounts the Participant is required to reimburse the Corporation pursuant to
such policy with respect to the Award.

      


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
A

      


      2009
STIP

      PERFORMANCE
TARGETS AND PAYOUT PERCENTAGES


      


      A.           Performance
Targets for Objective Bonuses

      


      
        
          
            
              	
                      Performance

                      Measure

                    	
                      Performance
      Targets

                    
	
                      Threshold

                    	
                      Target

                    	
                      Maximum

                    
	
                      Adjusted
      EPS - AWR Consolidated

                    	
                      80%
      Budget

                    	
                      100%
      Budget

                    	
                      120%
      Budget

                    
	
                      Adjusted
      EPS - Regulated Utilities

                    	
                      80%
      Budget

                    	
                      100%
      Budget

                    	
                      120%
      Budget

                    
	
                      Adjusted
      EPS - ASUS

                    	
                      Adjusted
      EPS > $0.00

                    	
                      100%
      Budget

                    	
                      120%
      Budget

                    
	
                      Relative
      Stock Price

                    	
                      Equal
      to or greater than 3 companies

                    	
                      Equal
      to or greater than 6 companies

                    	
                      Equal
      to or greater than 9 companies

                    
	
                      Customer
      Complaints

                    	
                      782
      or fewer

                    	
                      742
      or fewer

                    	
                      703
      or fewer

                    
	
                      Capital
      Expenditures

                    	
                      80%
      Budget

                    	
                      100%
      Budget

                    	
                      120%
      Budget

                    
	
                      SOX
      -- RU

                    	
                      No
      MW &

                      2 or
      fewer SDs

                    	
                      No
      MW &

                      1
      SD

                    	
                      No
      MW &

                      No
      SD

                    
	
                      SOX
      -- ASUS

                    	
                      No
      MW &

                      2 or
      fewer SDs

                    	
                      No
      MW &

                      1
      SD

                    	
                      No
      MW &

                      No
      SD

                    
	
                      Equitable
      Adjustment

                    	
                      N/A

                    	
                      Completed

                    	
                      N/A

                    
	
                      Price
      Redetermination

                    	
                      N/A

                    	
                      Completed

                    	
                      N/A

                    


            

          

        

      

       

      
 

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

       

      B.           Payout
Percentages for Performance Measures - GSWC Administrative and General
Officers

       

      
        
          
            
              	
                      Performance

                      Measure

                    	
                      Payout
      Percentage

                    
	
                      Threshold

                    	
                      Target

                    	
                      Maximum

                    
	
                      Adjusted
      EPS - AWR Consolidated

                    	
                      10%

                    	
                      20%

                    	
                      30%

                    
	
                      Relative
      Stock Price

                    	
                      5%

                    	
                      15%

                    	
                      20%

                    
	
                      Adjusted
      EPS - RU

                    	
                      7.5%

                    	
                      15%

                    	
                      22.5%

                    
	
                      Customer
      Complaints

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Capital
      Expenditures

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      SOX
      - RU

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Adjusted
      EPS-ASUS

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      SOX
      - ASUS

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Objective
      Bonus Total

                    	
                      35%

                    	
                      75%

                    	
                      110%

                    
	
                      Individual
      Performance Measure

                      (Discretionary
      Bonus)

                    	
                      15%

                    	
                      25%

                    	
                      40%

                    
	
                      Aggregate
      Bonus

                    	
                      50%

                    	
                      100%

                    	
                      150%

                    


            

          

        

      

       

       

      
        
          
          

        

        
          A-2

          
            

          

        

        
          
          

        

      

       

      C.           Payout
Percentages for Performance Measures - GSWC Operations
Officers

       

      
        
          
            
              	
                      Performance

                      Measure

                    	
                      Payout
      Percentage

                    
	
                      Threshold

                    	
                      Target

                    	
                      Maximum

                    
	
                      Adjusted
      EPS - AWR Consolidated

                    	
                      10%

                    	
                      20%

                    	
                      30%

                    
	
                      Relative
      Stock Price

                    	
                      5%

                    	
                      10%

                    	
                      15%

                    
	
                      Adjusted
      EPS - RU

                    	
                      10%

                    	
                      20%

                    	
                      30%

                    
	
                      Customer
      Complaints

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Capital
      Expenditures

                    	
                      2.5%

                    	
                      10%

                    	
                      12.5%

                    
	
                      SOX
      - RU

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Adjusted
      EPS-ASUS

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Objective
      Bonus Total

                    	
                      35%

                    	
                      75%

                    	
                      110%

                    
	
                      Individual
      Performance Measure

                      (Discretionary
      Bonus)

                    	
                      15%

                    	
                      25%

                    	
                      40%

                    
	
                      Aggregate
      Bonus

                    	
                      50%

                    	
                      100%

                    	
                      150%

                    


            

          

        

      

       

       

      
        
          
          

        

        
          A-3

          
            

          

        

        
          
          

        

      

       

      D.           Payout
Percentages for Performance Measures - ASUS

       

      
        
          
            
              	
                      Performance

                      Measure

                    	
                      Payout
      Percentage

                    
	
                      Threshold

                    	
                      Target

                    	
                      Maximum

                    
	
                      Adjusted
      EPS - AWR Consolidated

                    	
                      10%

                    	
                      20%

                    	
                      30%

                    
	
                      Relative
      Stock Price

                    	
                      5%

                    	
                      10%

                    	
                      15%

                    
	
                      Adjusted
      EPS - RU

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Adjusted
      EPS - ASUS

                    	
                      15%

                    	
                      20%

                    	
                      35%

                    
	
                      Equitable
      Adjustment

                    	
                      N/A

                    	
                      7.5%

                    	
                      7.5%

                    
	
                      Price
      Redetermination

                    	
                      N/A

                    	
                      7.5%

                    	
                      7.5%

                    
	
                      SOX
      - ASUS

                    	
                      2.5%

                    	
                      5%

                    	
                      7.5%

                    
	
                      Objective
      Bonus Total

                    	
                      35%

                    	
                      75%

                    	
                      110%

                    
	
                      Individual
      Performance Measure

                      (Discretionary
      Bonus)

                    	
                      15%

                    	
                      25%

                    	
                      40%

                    
	
                      Aggregate
      Bonus

                    	
                      50%

                    	
                      100%

                    	
                      150%

                    


            

          

        

      

      


      


      

        A-4