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                                                                     EXHIBIT 4.1

                          AMERICAN STATES WATER COMPANY

                     2003 NON-EMPLOYEE DIRECTORS STOCK PLAN
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                          AMERICAN STATES WATER COMPANY
                     2003 NON-EMPLOYEE DIRECTORS STOCK PLAN

SECTION 1. GENERAL DESCRIPTION

      The American States Water Company 2003 Non-Employee Directors Stock Plan
(the "Plan") provides for grants of stock units and stock options to
non-employee directors. The purposes of the Plan are (a) to attract, motivate
and retain eligible directors of the Company by providing to them supplemental
stock-based compensation and (b) to encourage eligible directors to increase
their stock ownership in the Company.

SECTION 2. DEFINITIONS

      Whenever the following terms are used in this Plan they shall have the
meaning specified below unless the context clearly indicates to the contrary:

      "ACCOUNT OR ACCOUNTS" means the Participant's Stock Unit Account or Option
Dividend Equivalent Account, as the context requires.

      "AWARD UNITS" means Stock Units credited pursuant to Sections 5.1 and 5.2
and any Dividend Equivalents credited thereon pursuant to Section 5.3.

      "BOARD" means the Board of Directors of the Company.

      "CAUSE" has the same meaning as determined under Section 304 of the
California Corporations Code or any successor thereof.

      "CODE" means the Internal Revenue Code of 1986, as amended.

      "COMMON STOCK" means the Common Stock of the Company, subject to
adjustment pursuant to Section 6.

      "COMMITTEE" means the Board or a Committee of the Board acting under
delegated authority from the Board.

      "COMPANY" means American States Water Company, a California corporation,
and its successors and assigns.

      "DIVIDEND EQUIVALENT" means (a), with respect to a Participant's Option
Dividend Equivalent Account, the amount of cash dividends or other cash
distributions paid by the Company on that number of shares of Common Stock that
is equal to the number of shares subject to each outstanding Option held by the
Participant as of the applicable measurement date for the dividend or other
distribution, which amount shall be allocated as Stock Units credited to the
Participant's Option Dividend Equivalent Account pursuant to Section 4.7; and
(b), with respect to a Participant's Stock Unit Account, the amount of cash
dividends or other cash distributions paid by the Company on that number of
shares of Common Stock that is equal to the number of Stock Units then credited
to the Participant's Stock Unit Account as of the applicable measurement date
for the dividend or other distribution, which amount shall be
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allocated as additional Stock Units to the Participant's Stock Unit Account
pursuant to Section 5.3.

      "DISTRIBUTION SUBACCOUNT" means a subaccount of a Non-Employee Director's
Option Dividend Equivalent Account established to separately account for
Dividend Equivalents credited in the form of Stock Units with respect to each
outstanding Option.

      "EFFECTIVE DATE" means May 20, 2003, subject to shareholder approval at
the 2004 annual meeting of shareholders.

      "ELIGIBLE NON-EMPLOYEE DIRECTOR" means each Non-Employee Director who
first becomes a Non-Employee Director on or after the date of the 2003 Annual
Meeting and each other Non-Employee Director who notifies the Company in writing
of his or her election to waive all benefits under the Retirement Plan in
exchange for participation in the Stock Unit Award feature under Section 5 of
this Plan.

      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.

      "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.

      "GRANT DATE" means the date on which an Option is granted pursuant to
Section 4.

      "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an officer
or employee of the Company or a subsidiary.

      "OPTION OR NONQUALIFIED STOCK OPTION" means an option to purchase a number
of shares of Common Stock granted to Non-Employee Directors pursuant to Section
4.1.

      "OPTION DIVIDEND EQUIVALENT ACCOUNT" means the bookkeeping account
maintained by the Company on behalf of each Participant that is credited with
Dividend Equivalents in accordance with Section 4.7, and includes each
Distribution Subaccount.

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      "PARTICIPANT" means any person who has been granted an Option or Award
Units under this Plan.

      "PLAN" means the American States Water Company 2003 Non-Employee Directors
Stock Plan.

      "RETIREMENT" means a retirement or resignation by a Non-Employee Director
who either (a) has attained age 65 and has provided at least five years service
as a member of the Board or (b) is required to retire from service on the Board
and not seek reelection or nomination pursuant to the Company's director
retirement policy.

      "RETIREMENT PLAN" means the Company's Amended and Restated Retirement Plan
for Non-Employee Directors of American States Water Company.

      "SECURITIES ACT" means the Securities Act of 1933, as amended.

      "STOCK" means a share of Common Stock.

      "STOCK UNIT OR UNIT" means a non-voting unit of measurement which is
deemed for bookkeeping and payment purposes to represent one outstanding share
of Common Stock of the Company solely for purposes of determining benefits under
this Plan, established pursuant to the grant of Award Units under Sections 5.1
and 5.2, or in respect of Dividend Equivalents under Section 4.7 or Section 5.3,
and payable solely in a share of Stock, on a one-for-one basis.

      "STOCK UNIT ACCOUNT" means the bookkeeping account maintained by the
Company on behalf of each Participant that is credited with Award Units and
Dividend Equivalents in accordance with Section 5.

      "2003 ANNUAL MEETING" means the Company's 2003 annual meeting of
stockholders.

SECTION 3. EFFECTIVE DATE; DURATION

      The effective date of the Plan is May 20, 2003, subject to approval of the
Company's stockholders at their 2004 annual meeting. No awards may be granted
under the Plan after May 19, 2013. The Plan shall continue in effect until all
matters relating to Options, Stock Units and the administration of the Plan have
been completed and all payments of benefits have been made.

SECTION 4. STOCK OPTION AWARDS

      4.1 ANNUAL AWARD.

            (a) On the date of each annual meeting of stockholders during the
      term of the Plan, commencing with the 2003 Annual Meeting, each
      Non-Employee Director in office immediately following the annual meeting
      shall be granted, without further action by the Committee, a Nonqualified
      Stock Option to purchase 1,000 shares of Common Stock.

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            (b) If any person who was not a Non-Employee Director at the
      immediately preceding annual meeting of stockholders at which a grant is
      made pursuant to Section 4.1(a) becomes a Non-Employee Director within six
      months following such annual meeting, then such Non-Employee Director
      shall be granted, without any further action by the Committee, a
      Nonqualified Stock Option to purchase 1,000 shares of Common Stock, the
      Grant Date of which shall be the date the person takes office.

      4.2 MAXIMUM NUMBER OF SHARES. Annual grants that would otherwise exceed
the maximum number of shares allotted for issuance under the Plan contained in
Section 7.1 shall be prorated within such limitation pursuant to Section 7.2.

      4.3 OPTION PRICE. The exercise price per share of the Stock covered by
each Option granted pursuant to this Section 4 shall be 100% of the Fair Market
Value of the Stock on the Grant Date. The exercise price of any Option granted
under this Section 4 shall be paid in full at the time of each purchase in cash,
by electronic funds transfer, or by check or in shares of Stock valued at their
Fair Market Value on the date the Participant exercises the Option, or partly in
such shares and partly in cash, provided that any such shares used in payment
that were previously acquired by the Participant from the Company upon exercise
of an Option or otherwise shall have been owned by the Participant at least six
months prior to the date of exercise. The Company shall not be obligated to
deliver shares of Stock unless and until it receives full payment of the
exercise price therefor and any related conditions of the Option have been
satisfied.

      4.4 OPTION PERIOD AND EXERCISABILITY. Each Option granted under this
Section 4 and all rights or obligations thereunder shall expire 10 years after
the Grant Date and shall be subject to earlier termination as provided below.
Each Option shall be fully exercisable upon the Grant Date.

      4.5 TERMINATION OF DIRECTORSHIP.

            (a) If a Non-Employee Director's services as a member of the Board
      terminate for any reason other than Cause, then any Option granted
      pursuant to this Section 4 held by such Participant shall remain
      exercisable for the period of time set forth in the option agreement
      evidencing his or her Option.

            (b) If a Non-Employee Director's services as a member of the Board
      terminate for Cause, all unexercised Options shall terminate on the date
      of termination of services.

      4.6 OPTION AGREEMENTS. Each Option granted to a Non-Employee Director
shall be evidenced by an agreement in a form approved by the Committee and shall
contain the terms and conditions consistent with the Plan as approved by the
Committee relating to the Option.

      4.7 DIVIDEND EQUIVALENT CREDITS TO OPTION DIVIDEND EQUIVALENT ACCOUNTS.

            (a) As of each dividend record date, a Participant's Option Dividend
      Equivalent Account shall be credited with Stock Units in an amount equal
      to the Dividend Equivalents representing dividends payable as of such
      dividend record date on

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      a number of shares equal to the aggregate number of shares subject to each
      outstanding Option granted to such Participant divided by the then Fair
      Market Value of a share of Common Stock on the dividend record date. The
      Dividend Equivalents attributable to each Option granted to a Participant
      shall be credited to a separate Distribution Subaccount established for
      such Participant.

            (b) Stock Units credited to the Participant's Distribution
      Subaccount with respect to an Option shall become payable to the
      Participant upon the earlier to occur of (1) the date the Option is
      exercised or (2) three years from the Grant Date.

            (c) Stock Units credited to a Non-Employee Director's Option
      Dividend Equivalent Account shall at all times be fully vested and
      non-forfeitable and shall be distributed in an equivalent whole number of
      shares of Stock. Any fractional share interests shall be accumulated and
      paid in cash on the distribution date.

SECTION 5. STOCK UNITS AWARDS

      5.1 2003 AWARDS

            (a) Continuing Eligible Non-Employee Directors. As of the date of
      the 2003 Annual Meeting, the Stock Unit Account of each person who is
      continuing in office as an Eligible Non-Employee Director immediately
      following such meeting shall be credited with a number of Stock Units
      equal to (1) $15,000, multiplied by (2) the lesser of (i) the Non-Employee
      Director's years of prior Board service or (ii) 10, divided by (3) the
      Fair Market Value of a share of Common Stock on the last trading date
      prior to the 2003 Annual Meeting.

            (b) New Non-Employee Directors. As of the date of the 2003 Annual
      Meeting, the Stock Unit Account of each person who first becomes a
      Non-Employee Director at the 2003 Annual Meeting shall be credited with a
      number of Stock Units equal to (1) the amount of the then-current annual
      retainer divided by (2) the Fair Market Value of a share of Common Stock
      on the last trading date prior to the 2003 Annual Meeting.

      5.2 ANNUAL AWARD. As of the date of each annual meeting of stockholders
commencing in 2004, the Stock Unit Account of each Eligible Non-Employee
Director in office immediately following the annual meeting, shall be credited
with a number of Stock Units equal (1) the amount of the then-current annual
retainer payable by the Company for services rendered as a director for such
year, divided by (2) the Fair Market Value of Common Stock on the last trading
date prior to such annual meeting; provided, however, that in no event shall the
Stock Unit Account of an Eligible Non-Employee Director be credited with Stock
Units with respect to more than 10 years of service (including, for this
purpose, the number of years of service taken into account under Section
5.1(a)). Annual grants that would otherwise exceed the maximum number of shares
allotted for issuance under the Plan contained in Section 7.1 shall be prorated
within such limitation pursuant to Section 7.2.

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      5.3 CREDITING OF DIVIDEND EQUIVALENTS TO STOCK UNIT ACCOUNTS.

            (a) As of each dividend record date, an Eligible Non-Employee
      Director's Stock Unit Account shall be credited with additional Stock
      Units in an amount equal to the Dividend Equivalents representing
      dividends payable as of such dividend record date on a number of shares
      equal to the aggregate number of Units credited to the Participant's Stock
      Unit Account divided by the Fair Market Value of a share of Common Stock
      on the dividend record date.

            (b) Stock Units credited in respect of Dividend Equivalents shall be
      paid in Stock at the same time and the same manner as the Stock Units to
      which they relate.

      5.4 UNITS AND OTHER AMOUNTS VEST IMMEDIATELY. All Units or other amounts
credited to an Eligible Non-Employee Director's Stock Unit Account shall be at
all times fully vested and not subject to a risk of forfeiture.

      5.5 DISTRIBUTION OF BENEFITS.

            (a) Commencement of Benefits Distribution. Subject to the terms of
      this Section 5.5 and Section 6, each Eligible Non-Employee Director shall
      be entitled to receive a distribution of his or her Stock Unit Account in
      the form of shares of Stock upon his or her termination of service as a
      director of the Company.

            (b) Manner of Distribution. Upon an Eligible Non-Employee Director's
      termination of service as a director of the Company, the Company shall,
      subject to Section 7.2, deliver to the Participant (or his or her
      Beneficiary, as applicable) a number of shares of Stock equal to the
      number of Stock Units (as adjusted pursuant to Section 6, if applicable)
      to which the Participant is then entitled under the terms of this Section
      5 of the Plan. Such distribution shall be made in a lump sum as soon as
      administratively practicable, but no later than 30 days, following the
      Participant's termination of service, unless the Participant elects in
      writing, as provided in Section 5.5(c), to receive a distribution of his
      or her benefits in respect of such Units in up to ten substantially equal
      annual installments.

            (c) Election for Installment Distribution; Changes in Elections. A
      Participant may elect to receive his or her benefits in up to ten annual
      installments, and to subsequently change any prior distribution election,
      by filing a written election with the Committee on a form provided by the
      Committee; provided, however, that no such election shall be effective
      until at least twelve months after such election is filed with the
      Committee, and no such election shall become effective after a
      Non-Employee Director's termination of service. An election made pursuant
      to this Section 5.5(c) shall not affect the date of the commencement of
      benefits. Notwithstanding the foregoing, if the number of Stock Units
      credited to a Non-Employee Director's Stock Unit Account at the time of
      the termination of his or her service is less than 1,000, then his or her
      benefit under this Section 5 shall be paid in a lump sum.

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SECTION 6. CHANGES IN CAPITAL STRUCTURE.

      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 Company, 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 Company 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
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 Options,
Stock Units and Accounts (including the specific maximums 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
Options and payable in respect of Stock Units, (c) the grant, purchase, or
exercise price of any or all outstanding Options, and the number and type of
Stock Units credited under the Plan, or (d) the securities, cash or other
property deliverable upon exercise of any outstanding Options and payable in
respect of Stock Units or make provision for a cash payment or for the
assumption, substitution or exchange of any or all outstanding Options and Stock
Units or the cash, securities or property deliverable to the holder of any or
all outstanding Options and Stock Units, 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
Options and Stock Units 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 price of the
Option.

      To the extent that any vested Option is not exercised prior to (i) a
dissolution of the Company or (ii) a merger or other corporate event, and no
provision is made for the assumption, conversion, substitution or exchange of
the Option, the Option shall terminate upon the occurrence of such event.

SECTION 7. SHARES SUBJECT TO THE PLAN; SHARE LIMITS

      7.1 SHARES AVAILABLE FOR ISSUANCE. Subject to adjustment under Section 6,
the aggregate number of shares of Stock that may be issued or delivered under
the Plan shall not exceed 250,000 shares. Stock delivered by the Company under
the Plan shall be shares of authorized and unissued shares of Stock and/or
previously issued Stock held as treasury shares and shall be fully paid and
non-assessable when issued. Shares issuable on exercise of Options or payment of
Stock Units shall be reserved for issue, and to the extent that awards terminate
or expire without payment in shares, the shares will be available for subsequent
grants or accretions.

      7.2 SHARE LIMITS; CUT BACKS. If any grant of an Option or the award or
crediting of Stock Units would cause the sum of the shares of Stock previously
issued and shares issuable

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under outstanding awards under the Plan to exceed the maximum number of shares
authorized under the Plan, the Company shall prorate among the Non-Employee
Directors the grant of new Options or award of Stock Units and allocate the
number of remaining shares available for issuance first to the grant of Options
and second toward the award of Award Units. If and for so long as no available
share authorization remains, no additional Options shall be granted or Stock
Units credited and cash shall be paid in lieu of dividend equivalents under
Sections 4.7 and 5.3 for such duration.

      7.3 FRACTIONAL SHARES; MINIMUM ISSUE. Fractional share interests may be
accumulated but shall not be issued. Cash will be paid or transferred in lieu of
any fractional share interests that remain upon a final distribution under the
Plan. No fewer than 100 shares may be purchased on exercise of an Option at any
one time unless the number purchased is the total number at the time available
for purchase under the Option.

SECTION 8. ADMINISTRATION

      8.1 THE ADMINISTRATOR.

      The Administrator of this Plan shall be the Board as a whole or a
Committee as appointed from time to time by the Board to serve as administrator
of this Plan. The participating members of any Committee so acting shall
include, as to decisions in respect of participants who are subject to Section
16 of the Exchange Act, only those members who are Non-Employee Directors (as
defined in Rule 16b-3 promulgated under the Exchange Act). Members of the
Committee shall not receive any additional compensation for administration of
this Plan.

      8.2 COMMITTEE ACTION.

      A member of the Committee shall not vote or act upon any matter which
relates solely to himself or herself as a Participant in this Plan. Action of
the Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or (assuming compliance with Section 8.1) by
unanimous written consent of its members.

      8.3 RIGHTS AND DUTIES; DELEGATION AND RELIANCE; DECISIONS BINDING.

      Subject to the limitations of this Plan, the Committee shall be charged
with the general administration of this Plan and the responsibility for carrying
out its provisions, and shall have powers necessary to accomplish those
purposes, including, but not by way of limitation, the following:

            (a) To construe and interpret this Plan;

            (b) To resolve any questions concerning the amount of benefits
      payable to a Participant (except that no member of the Committee shall
      participate in a decision relating solely to his or her own benefits);

            (c) To make adjustments under Section 6 and all other determinations
      required by this Plan;

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            (d) To maintain all the necessary records for the administration of
      this Plan; and

            (e) To make and publish forms, rules and procedures for the
      administration of this Plan.

      The determination of the Committee made in good faith as to any disputed
question or controversy and the Committee's determination of benefits payable to
Participants, including decisions as to adjustments under Section 6, shall be
conclusive and binding for all purposes of this Plan. In performing its duties,
the Committee shall be entitled to rely on information, opinions, reports or
statements prepared or presented by: (i) officers or employees of the Company
whom the Committee believes to be reliable and competent as to such matters; and
(ii) counsel (who may be employees of the Company), independent accountants and
other persons as to matters which the Committee believes to be within such
persons' professional or expert competence. The Committee shall be fully
protected with respect to any action taken or omitted by it in good faith
pursuant to the advice of such persons. The Committee may delegate ministerial,
bookkeeping and other non-discretionary functions to individuals who are
officers or employees of the Company.

SECTION 9. AMENDMENT AND TERMINATION; STOCKHOLDER APPROVAL

      9.1 AMENDMENT AND TERMINATION. Subject to Section 9.2, the Board shall
have the right to amend this Plan in whole or in part from time to time or may
at any time suspend or terminate this Plan; provided, however, that, except as
contemplated by Section 6, no amendment or termination shall cancel or otherwise
adversely affect in any way, without his or her written consent, any
Participant's rights with respect to Stock Units credited to his or her Accounts
or Options granted; and provided further that neither Section 4 nor any other
provision of the Plan or an award shall be amended to permit the reduction (by
amendment, substitution, cancellation and regrant or other means) of the
exercise price of any Option without prior stockholder approval. Any amendments
authorized hereby shall be stated in an instrument in writing, and all
Participants shall be bound by such amendment. Changes contemplated by Section 6
shall not be deemed to constitute changes or amendments for purposes of this
Section 9.1.

      9.2 STOCKHOLDER APPROVAL. The Plan, any grant, election, action, crediting
or vesting prior to stockholder approval, shall be subject to approval of the
Plan by the stockholders of the Company and, to the extent required under
applicable law or listing agency rule, required by the provisions of Section
9.1, or deemed necessary or advisable by the Board, any amendment to the Plan
shall be subject to stockholder approval.

SECTION 10. MISCELLANEOUS

      10.1 LIMITATION ON PARTICIPANTS' RIGHTS. Participation in this Plan shall
not give any person the right to continue to serve as a member of the Board or
any rights or interests other than as expressly provided herein. This Plan shall
create only a contractual obligation on the part of the Company as to such
amounts and shall not be construed as creating a trust or fiduciary relationship
between the Company, the Board, the Committee, and any Participant or other

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person. This Plan, in and of itself, has no assets. Participants shall have only
the rights of a general unsecured creditor of the Company with respect to
amounts credited and benefits payable, if any, on their Accounts, and rights no
greater than the right to receive the Common Stock (or equivalent value as a
general unsecured creditor) with respect to Accounts. Participants shall not be
entitled to receive actual dividends or to vote Shares until after delivery of a
certificate representing the Shares.

      10.2 BENEFICIARIES.

            (a) Beneficiary Designation. Upon forms provided by the Company each
      Non-Employee Director may designate in writing the Beneficiary or
      Beneficiaries (as defined in Section 10.2(b)) whom such Non-Employee
      Director desires to receive any amounts payable under the Plan after his
      or her death. Beneficiary designation forms shall be effective on the date
      that the form is received by the Corporate Secretary. A Non-Employee
      Director may from time to time change his or her designated Beneficiary or
      Beneficiaries without the consent of such Beneficiary or Beneficiaries by
      filing a new designation in writing with the Corporate Secretary. However,
      if a married Non-Employee Director wishes to designate a person other than
      his or her spouse as Beneficiary, such designation shall be consented to
      in writing by the spouse. The Non-Employee Director may change any
      election designating a Beneficiary or Beneficiaries without any
      requirement of further spousal consent if the spouse's consent so
      provides. Notwithstanding the foregoing, spousal consent shall not be
      necessary if it is established that the required consent cannot be
      obtained because the spouse cannot be located or because of other
      circumstances prescribed by the Committee. The Company and the Committee
      may rely on the Non-Employee Director's designation of a Beneficiary or
      Beneficiaries last filed in accordance with the terms of the Plan.

            (b) Definition of Beneficiary. A Participant's "Beneficiary" or
      "Beneficiaries" shall be the person, persons, trust or trusts (or similar
      entity) designated by the Participant or, in the absence of a designation,
      entitled by will or the laws of descent and distribution to receive the
      Participant's benefits under this Plan in the event of the Participant's
      death, and shall mean the Participant's executor or administrator if no
      other Beneficiary is identified and able to act under the circumstances.

      10.3 NON-TRANSFERABILITY. A Participant's rights and interests under the
Plan in respect of Options and Stock Units, including amounts payable or Stock
deliverable under or in respect thereof, may not be assigned, pledged, or
transferred except:

            (a) in the event of a Participant's death, to a designated
      beneficiary as provided in Section 10.2(b) above, or in the absence of
      such designation, by will or the laws of descent and distribution; or

            (b) in the case of Options, with the consent of the Committee
      evidenced in writing or by duly adopted resolution, to certain persons or
      entities related to the Participant, including but not limited to members
      of the Participant's immediate family, charitable institutions, or trusts
      or other entities whose beneficiaries or beneficial owners are members of
      the Participant's immediate family and/or charitable institutions,
      pursuant

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      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 or a gratuitous or
      donative basis and without consideration (other than nominal consideration
      or in exchange for an interest in a qualified transferee) and only if such
      transfer would not adversely affect the Company's eligibility to use Form
      S-8 to register under the Securities Act of 1933, as amended, the offering
      of shares issuable under the Plan by the Company.

The above exercise and transfer restrictions shall not apply to transfers to the
Company or transfers pursuant to a court order.

      10.4 OBLIGATIONS BINDING UPON SUCCESSORS.

      Obligations of the Company under this Plan shall be binding upon
successors of the Company.

      10.5 GOVERNING LAW; SEVERABILITY.

      The validity of this Plan and any agreements entered into under the Plan
or any of its provisions shall be construed, administered and governed in all
respects under the laws of the State of California. If any provisions of this
Plan shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.

      10.6 COMPLIANCE WITH LAWS.

      This Plan and the offer, issuance and delivery of shares of Common Stock
and/or the payment of benefits under this Plan 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 to such approvals by any
listing, agency or any regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to prior
registration or such restrictions as the Company may deem necessary or desirable
to assure compliance with all applicable legal requirements, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as it may reasonably request to
assure such compliance.

      10.7 LIMITATIONS ON RIGHTS ASSOCIATED WITH UNITS. A Non-Employee
Director's Accounts shall be a memorandum account on the books of the Company.
The Units credited to a Non-Employee Director's Accounts shall be used solely as
a device for the determination of the number of shares of Stock to be
distributed to the Participant in accordance with this Plan following his or her
termination of service as a director of the Company. The Units shall not be
treated as property or as a trust fund of any kind. No Participant shall be
entitled to any voting or other stockholder rights with respect to Units
credited under this Plan. The number of Units credited to a Participant's
Accounts shall be subject to adjustment in accordance with Section 6 and the
terms of this Plan.

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      10.8 PLAN CONSTRUCTION.

      It is the intent of the Company that transactions pursuant to this Plan
satisfy and be interpreted in a manner that satisfies the applicable conditions
for exemption under Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3")
so that, to the extent consistent therewith, the crediting of Units and the
payment of Stock as well as grants of Options will be entitled to the benefits
of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to avoidable liability thereunder.

      10.9 HEADINGS NOT PART OF PLAN.

      Headings and subheadings in this Plan are inserted for reference only and
are not to be considered in the construction of the provisions hereof.

                                       13
<PAGE>
CERTIFICATION

      The undersigned Secretary of the Company certifies that the foregoing
constitutes a complete and correct copy of the 2003 Non-Employee Directors Stock
Plan adopted on _____________, 2003 by the Board of Directors of American States
Water Company.

                                       -----------------------------------------
                                       Secretary

                                       Date:
                                             -----------------------------------

                                       14
<PAGE>
                     2003 NON-EMPLOYEE DIRECTORS STOCK PLAN

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
SECTION 1.    GENERAL DESCRIPTION................................................2

SECTION 2.    DEFINITIONS........................................................2

SECTION 3.    EFFECTIVE DATE; DURATION...........................................4

SECTION 4.    STOCK OPTION AWARDS................................................4

    4.1   Annual Award...........................................................4

    4.2   Maximum Number of Shares. .............................................5

    4.3   Option Price. .........................................................5

    4.4   Option Period and Exercisability. .....................................5

    4.5   Termination of Directorship. ..........................................5

    4.6   Option Agreements. ....................................................5

    4.7   Dividend Equivalent Credits to Option Dividend Equivalent Accounts.....5

SECTION 5.    STOCK UNITS AWARDS.................................................6

    5.1   2003 Awards............................................................6

    5.2   Annual Award...........................................................6

    5.3   Crediting of Dividend Equivalents to Stock Unit Accounts...............7

    5.4   Units and Other Amounts Vest Immediately...............................7

    5.5   Distribution of Benefits...............................................7

SECTION 6.    CHANGES IN CAPITAL STRUCTURE.......................................8

    7.1   Shares Available for Issuance. ........................................8

    7.2   Share Limits; Cut Backs. ..............................................8

    7.3   Fractional Shares; Minimum Issue. .....................................9

SECTION 8.    ADMINISTRATION.....................................................9

    8.1   The Administrator......................................................9

    8.2   Committee Action.......................................................9

    8.3   Rights and Duties; Delegation and Reliance; Decisions Binding..........9

SECTION 9.    AMENDMENT AND TERMINATION; STOCKHOLDER APPROVAL...................10

    9.1   Amendment and Termination.............................................10

    9.2   Stockholder Approval..................................................10

SECTION 10.   MISCELLANEOUS.....................................................10
</TABLE>

                                       -i-
<PAGE>
                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
    10.1  Limitation on Participants' Rights....................................10

    10.2  Beneficiaries.........................................................11

    10.3  Non-Transferability...................................................11

    10.4  Obligations Binding Upon Successors...................................12

    10.5  Governing Law; Severability...........................................12

    10.6  Compliance with Laws..................................................12

    10.7  Limitations on Rights Associated with Units...........................12

    10.8  Plan Construction.....................................................13

    10.9  Headings Not Part of Plan.............................................13
</TABLE>

                                      -ii-<PAGE>
                                                                     EXHIBIT 4.2

                          AMERICAN STATES WATER COMPANY
                            2000 STOCK INCENTIVE PLAN
                         (AS AMENDED AS OF MAY 20, 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
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      Page
                                                                                                      ----
<S>      <C>      <C>                                                                                 <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

         4.8      Effective Date of the Plan...........................................................15
</TABLE>

                                        i
<PAGE>
<TABLE>
<CAPTION>
                                                                                                      Page
                                                                                                      ----
<S>      <C>      <C>                                                                                 <C>
         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

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