Document:

a6018654ex10-3.htm

    Exhibit
10.3

    

    Policy Regarding the
Recoupment of Certain

    Performance-Based
Compensation Payments

    

    The Board
of Directors or Compensation Committee shall, in such circumstances as it
determines to be appropriate, require reimbursement of all or a portion of any
performance-based short or long-term cash or equity incentive payments to an
employee at the level of vice-president or above where: (1)  the
amount of, or the number of shares included in, any such payment was calculated
based on the achievement of financial results that were subsequently the subject
of an accounting restatement due to material noncompliance with any financial
reporting requirement under the securities laws; (2) the need for the accounting
restatement was identified within 3 years after the date of the first public
issuance or filing of the financial results that were subsequently restated; and
(3) a lesser payment of cash or shares would have been made to the employee
based upon the restated financial results.  This policy does not limit
any other remedies the Company may have available to it in the circumstances,
which may include, without limitation, dismissing the employee or initiating
other disciplinary procedures.  The provisions of this policy are in
addition to (and not in lieu of) any rights to repayment the Company may have
under Section 304 of the Sarbanes-Oxley Act of 2002 and other applicable
laws.a6018654ex10-4.htm

    
      Exhibit
10.4

       

      AMERICAN
STATES WATER COMPANY

      PERFORMANCE
INCENTIVE PLAN

       

      Section
1.               Purpose
of Plan

       

      The
purpose of the American States Water Company Performance Incentive Plan (the
“Plan”) is to promote
the success of American States Water Company, a California corporation, (the
“Corporation”) by
(a) motivating executives selected to participate in the Plan to maximize
the performance of the Corporation both from a financial perspective and in
serving its customers and (b) rewarding the executives with cash bonuses
directly related to such performance.  The Corporation’s board of
directors recognizes that the ability of the Corporation and its subsidiaries to
attract capital at a low cost is based on its financial performance and that the
Corporation’s utility customers benefit through lower rates when the Corporation
is able to attract low cost capital.

       

      This Plan
is intended to provide Bonuses for Performance Periods beginning after December
31, 2009, that qualify as performance-based compensation within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section
162(m)”).  The Bonuses payable for the year ending on December
31, 2009, are not intended to satisfy Section 162(m).

       

      This Plan
is adopted effective as of January 1, 2009; provided, however, that its
continued effectiveness after December 31, 2009, is subject to shareholder
approval of the Plan before December 31, 2010.

       

      Section
2.               Definitions
and Terms

       

      2.1           Accounting
Terms.  Except as otherwise expressly provided or the context
otherwise requires, financial and accounting terms in this Plan and the Awards
granted under this Plan are used as defined for purposes of, and shall be
determined in accordance with, generally accepted accounting principles, as from
time to time in effect, as applied and included in the consolidated financial
statements of the Corporation, prepared in the ordinary course of
business.

       

      2.2           Specific
Terms.  The following words and phrases as used herein shall
have the following meanings unless a different meaning is plainly required by
the context:

       

      “ASUS” means American States
Utility Services, Inc. and its subsidiaries.

       

      “Award” means an award under
this Plan of a conditional opportunity to receive a Bonus if the applicable
Performance Targets are satisfied in the applicable Performance
Period.

       

      “Bonus” means a cash payment
or a cash payment opportunity under the Plan, as the context
requires.

       

      
        
           

        

        
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      “Business Criteria” means any
one or any combination of the following business criteria:  earnings
per share, shareholder return, customer satisfaction, customer complaints,
capital expenditures, capital investments, significant deficiencies and material
weaknesses under Section 404 of the Sarbanes-Oxley Act of 2002, operating
revenue, revenues from specific facilities, net income from operations, net
income, earnings (before or after interest, taxes, depreciation and/or
amortization), growth in earnings, return on equity, return on capital, economic
value added, and cash flow.

       

      “Code” means the Internal
Revenue Code of 1986, as amended from time to time.

       

      “Committee” means the
Compensation Committee of the Corporation’s Board of Directors.

       

      “Company” means American
States Water Company, a California corporation, and its
subsidiaries.

       

      “Corporation” means American
States Water Company, a California corporation.

       

      “Executive” means the Chief
Executive Officer of the Corporation and any other key employee (including any
officer) of the Company who is a Senior Vice President or Vice
President.

       

      “Participant” means an
Executive selected to participate in the Plan by the Committee.

       

      “Performance Period” means the
Year or Years (or portions thereof) with respect to which the Performance
Targets are set by the Committee.

       

      “Performance Targets” means
the specific objective goal or goals that are timely set in writing by the
Committee pursuant to Section 4.2 for each Participant for the applicable
Performance Period in respect of any one or more of the Business
Criteria.

       

      “Plan” means this American
States Water Company Performance Incentive Plan.

       

      “Regulated Utility” means
Golden State Water Company and Chaparral City Water Company and any other
regulated utility acquired by the Company.

       

      “Section 162(m)” means Section
162(m) of the Code, and the regulations promulgated thereunder, all as amended
from time to time.

       

      “Section 409A” means Section
409A of the Code, and the regulations and any interpretative guidance
promulgated thereunder, all as amended from time to time.

       

      “Year” means a calendar year
commencing on or after January 1, 2009.

       

      Section
3.               Administration
of the Plan

       

      3.1           Powers of the
Committee.  The Committee shall have the sole authority to
establish and administer the Business Criteria and Performance Targets and the
responsibility of determining from among the Executives those persons who will
participate in and receive Awards under the Plan and, subject to the terms of
the Plan, the amount of Awards, and the time or times at which and the manner in
which Awards will be paid (which may include elective or mandatory deferral
alternatives subject to Section 409A) and shall otherwise be responsible for the
administration of the Plan, in accordance with its terms.  The
Committee shall have the authority to construe and interpret the Plan (except as
otherwise provided herein) and any agreement or other document relating to any
Awards under the Plan, may adopt rules and regulations governing the
administration of the Plan, and shall exercise all other duties and powers
conferred on it by the Plan, or which are incidental or ancillary
thereto.

       

      
        
           

        

        
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      Section
4.               Bonus
Awards

       

      4.1           Provision for
Bonus.  Each Participant may receive a Bonus if the Performance
Targets established by the Committee, relative to the applicable Business
Criteria, are attained in the applicable Performance Period established by the
Committee.  The applicable Performance Period and Performance Targets
shall be determined by the Committee consistent with the terms of the Plan and,
after December 31, 2009, Section 162(m).  Notwithstanding the fact
that the Performance Targets have been attained, the Company may pay a Bonus of
less than the amount determined by the formula or standard established pursuant
to Section 4.2 or may pay no Bonus at all.

       

      4.2           Selection of Performance
Targets.  With respect to Performance Periods beginning after
December 31, 2009, the Committee must establish the specific Performance Targets
with respect to the Business Criteria within the first 90 days of the
Performance Period (and, in the case of any Performance Period of less than one
year, in no event after 25% or more of the Performance Period has elapsed) and
while the performance relating to the Performance Targets remains substantially
uncertain within the meaning of Section 162(m).  The Committee may
establish the Performance Targets with respect to any Performance Period on a
stand-alone basis with respect to the Corporation or on a relative basis with
respect to any peer companies or index selected by the Committee.  The
Committee may establish the Performance Targets with respect to any Performance
Period on the basis of one or more of the Business Criteria for the Corporation
on a consolidated basis or for one or more of the Corporation’s subsidiaries,
divisions, segments, facilities or business units or any combination of the
foregoing.  At the time the Committee selects the Performance Targets,
the Committee shall provide, in terms of an objective formula or standard for
each Participant the method of computing the specific amount that will represent
the maximum amount of Bonus payable to the Participant if the Performance
Targets are attained, subject to Sections 4.1, 4.3, 4.7, 5.1 and
5.7.  The objective formula or standard shall preclude the use of
discretion to increase the amount of any Bonus earned pursuant to the terms of
the Award.

       

      4.3           Maximum Annual
Bonuses.  Notwithstanding any other provision hereof, the
maximum amount that may be payable in respect of all Awards under this Plan to
any single Executive for any one Year shall not exceed $400,000.

       

      4.4           Selection of
Participants.  For each Performance Period, the Committee shall
determine, at the time it sets the Business Criteria and the Performance
Target(s), those Executives who will participate in the Plan.  At the
time that the Committee establishes the applicable Performance Targets for any
Year, the Committee shall also specify, subject to the limitation specified in
Section 4.3, the maximum individual amount payable to each Executive for such
Year.

       

      
        
           

        

        
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      4.5           Termination of
Employment.  In the event of the termination of employment of a
Participant prior to the payment of a Bonus, the Participant shall not be
entitled to any payment in respect of the Bonus, unless otherwise expressly
provided by the terms of the applicable Award, another written contract with the
Corporation or by the Committee in its sole discretion.

       

      4.6           Adjustments.  To
preserve the intended incentives and benefits of an Award, the Committee shall
adjust the Performance Targets or Business Criteria to eliminate the effects of
the following:  (i) the gain, loss, income or expense resulting
from changes in accounting principles that become effective during the
Performance Period, and (ii) the gains or losses resulting from, and the
direct expenses incurred in connection with, the purchase or disposition of a
business.  The Committee may, however, provide at the time it
establishes the Performance Targets that one or both of the foregoing
adjustments will not be made as to a specific Award.  In addition, the
Committee may determine at the time it establishes the Performance Targets that
other adjustments shall apply to the objective formula or standard with respect
to the applicable Performance Target to take into account, in whole or in part,
in any manner specified by the Committee, any one or more of the following with
respect to the Performance Period: (a) gain or loss from all or certain
claims and/or litigation and all or certain insurance recoveries relating to
claims or litigation, (b) the impact of impairment of tangible or
intangible assets, (c) the impact of investments or acquisitions made
during the year or, to the extent provided by the Committee, any prior year,
(d) derivative gains or losses attributable to fixed-price purchase
contracts and (e) the impact of significant adverse market conditions on pension
expenses.  Each of the adjustments described in this Section 4.6 may
relate to the Company as a whole or any part of the Company’s business or
operations, as determined by the Committee at the time the Performance Targets
are established.  The adjustments are to be determined in accordance
with generally accepted accounting principles and standards, unless another
objective method of measurement is designated by the Committee.  In
addition to the foregoing, the Committee shall adjust any Business Criteria,
Performance Targets or other features of an Award that relate to or are wholly
or partially based on the number of, or the value of, any shares of stock of the
Corporation or any of its subsidiaries, to reflect a change in the
capitalization, such as a stock split or dividend, or a corporate transaction,
such as a merger, consolidation, separation (including a spin-off or other
distribution of stock or property), or a reorganization.

       

      4.7           Committee Discretion to Determine
Bonuses.  The Committee has the sole discretion to determine
the standard or formula pursuant to which each Participant’s Bonus shall be
calculated (in accordance with Sections 4.1 and 4.2), whether all or any portion
of the amount so calculated will be paid, and the specific amount (if any) to be
paid to each Participant, subject in all cases to the terms, conditions and
limits of the Plan and of any other written commitment authorized by the
Committee.  To this same extent, the Committee may at any time
establish (and, once established, rescind, waive or amend) additional conditions
and terms of payment of Bonuses (including but not limited to the achievement of
other financial, strategic or individual goals, which may be objective or
subjective) as it may deem desirable in carrying out the purposes of the Plan
and may take into account such other factors as it deems appropriate in
administering any aspect of the Plan.  The Committee may not, however,
increase the maximum amount permitted to be paid to any individual under
Section 4.2, 4.3, 4.4 or 4.5 of the Plan or award a Bonus under this Plan
if the applicable Performance Targets have not been satisfied.

       

      
        
           

        

        
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      4.8           Committee
Certification.  No Executive shall receive any payment under
the Plan unless the Committee has certified, by resolution or other appropriate
action in writing, that the amount thereof has been accurately determined in
accordance with the terms, conditions and limits of the Plan and that the
Performance Targets and any other material terms previously established by the
Committee or set forth in the Plan were in fact satisfied.

       

      4.9           Time of Payment; Deferred
Amounts.  Any Bonuses granted by the Committee under the Plan
shall be paid as soon as practicable following the Committee’s determinations
under this Section 4 and the certification of the Committee’s findings under
Section 4.8.  Any such payment shall be in cash or cash equivalent or
in such other form of equal value on such payment date as the Committee may
approve or require, subject to applicable withholding
requirements.  Notwithstanding the foregoing, the Committee, in its
sole discretion (but subject to compliance with Section 162(m) and the
applicable provisions of Section 409A and to any prior written commitments and
to any conditions consistent with Sections 4.3 and 5.7 that it deems
appropriate), may defer the payout or vesting of any Bonus and/or provide to
Participants the opportunity to elect to defer the payment of any Bonus under a
nonqualified deferred compensation plan.  Any action by the Committee
or any election made by an Executive to defer payment of any Bonus shall be made
not later than the date(s) required to avoid the acceleration of income
recognition and the imposition of an additional rate of tax under Section
409A.  In the case of any deferred payment of a Bonus after the
attainment of the applicable Performance Target(s), any amount in excess of the
amount otherwise payable shall be based on either Moody’s Average Corporate Bond
Yield (or such other rate of interest that is deemed to constitute a “reasonable
rate of interest” for purposes of Section 162(m)) over the deferral period or
the return over the deferral period of one or more predetermined actual
investments such that the amount payable at the later date will be based upon
actual returns, including any decrease or increase in the value of the
investment(s), unless the alternative deferred payment is otherwise exempt from
the limitations under Section 162(m).

       

      Section
5.               General
Provisions

       

      5.1           No Right to Awards or Continued
Employment.  Neither the establishment of the Plan nor the
provision for or payment of any amounts hereunder nor any action of the Company
(including, for purposes of this Section 5.1, any predecessor or subsidiary),
the Board of Directors of the Corporation or the Committee in respect of the
Plan shall be held or construed to confer upon any person any legal right to
receive, or any interest in, an Award or any other benefit under the Plan, or
any legal right to be continued in the employ of the Company.  The
Company expressly reserves any and all rights to discharge an Executive in its
sole discretion, without liability of any person, entity or governing body under
the Plan or otherwise.  Nothing in this Section 5.1, however, is
intended to adversely affect any express independent right of any person under a
separate employment agreement.  Notwithstanding any other provision
hereof and notwithstanding the fact that the Performance Targets have been
attained and/or the individual maximum amounts hereunder have been calculated,
the Company shall have no obligation to pay any Bonus hereunder nor to pay the
maximum amount so calculated or any prorated amount based on service during the
period, unless the Committee otherwise expressly provides by written contract or
other written commitment.

       

      
        
           

        

        
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      5.2           Discretion of Company, Board of
Directors and Committee.  Any decision made or action taken by
the Company or by the Board of Directors of the Corporation or by the Committee
arising out of or in connection with the creation, amendment, construction,
administration, interpretation and effect of the Plan shall be within the
absolute discretion of such entity and shall be conclusive and binding upon all
persons.  No member of the Committee shall have any liability for
actions taken or omitted under the Plan by the member or any other
person.

       

      5.3           No Funding of
Plan.  The Company shall not be required to fund or otherwise
segregate any cash or any other assets which may at any time be paid to
Participants under the Plan.  The Plan shall constitute an “unfunded”
plan of the Company.  The Company shall not, by any provisions of the
Plan, be deemed to be a trustee of any property, and any rights of any
Participant or former Participant shall be no greater than those of a general
unsecured creditor or shareholder of the Company, as the case may
be.

       

      5.4           Non-Transferability of Benefits and
Interests.  Except as expressly provided by the Committee, no
benefit payable under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
such attempted action shall be void and no such benefit shall be in any manner
liable for or subject to debts, contracts, liabilities, engagements or torts of
any Participant or former Participant.  This Section 5.4 shall
not apply to an assignment of a contingency or payment due (i) after the
death of a Participant to the deceased Participant’s legal representative or
beneficiary or (ii) after the disability of a Participant to the disabled
Participant’s personal representative.

       

      5.5           Law to Govern.  All
questions pertaining to the construction, regulation, validity and effect of the
provisions of the Plan shall be determined in accordance with the laws of the
State of California.

       

      5.6           Non-Exclusivity.  The
Plan does not limit the authority of the Company, the Board or the Committee, or
any subsidiary of the Company to grant awards or authorize any other
compensation to any person under any other plan or authority.

       

      5.7           Section 162(m)
Conditions.  It is the intent of the Company that the Plan and
Awards made hereunder satisfy and be interpreted in a manner, that, in the case
of Participants who are persons whose compensation is subject to Section 162(m),
satisfies any applicable requirements as performance-based
compensation.  Any provision, application or interpretation of the
Plan inconsistent with this intent to satisfy the standards in Section 162(m) of
the Code shall be disregarded.

       

      Section
6.               Amendments,
Suspension or Termination of Plan

       

      The Board
of Directors or the Committee may from time to time amend, suspend or terminate
in whole or in part, and if suspended or terminated, may reinstate, any or all
of the provisions of the Plan.  Notwithstanding the foregoing, no
amendment shall be effective without Board of Directors and/or shareholder
approval if such approval is necessary to comply with the applicable provisions
of Section 162(m).  To the extent applicable, it is intended that the
Plan and all Awards hereunder comply with the requirements of Section 409A of
the Code, and the Plan and all award agreements shall be interpreted and applied
by the Committee in a manner consistent with this intent in order to avoid the
imposition of any additional tax under Section 409A of the
Code.

       

      
        
           

        

        
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      Section
7.               Expiration
of Authority to Grant Awards

       

      As
required pursuant to Section 162(m), the Committee’s authority to grant new
Awards under the Plan shall terminate upon the first meeting of the
Corporation’s shareholders that occurs in the fifth year following the year in
which the Corporation’s shareholders first approve this Plan, subject to any
subsequent extension that may be approved by shareholders.

       

       

      
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