Document:

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                                                                  EXHIBIT 10.105

                                DRKOOP.COM, INC.

                         2000 EQUITY PARTICIPATION PLAN

                      NON-QUALIFIED STOCK OPTION AGREEMENT

        Unless otherwise defined herein, the terms defined in the drkoop.com,
Inc. 2000 Equity Participation Plan (the "Plan") shall have the same defined
meanings in this Stock Option Agreement.

I.      NOTICE OF STOCK OPTION GRANT

        Richard Rosenblatt

        You ("Optionee") have been granted an option to purchase Common Stock of
the Company, subject to the terms and conditions of the Plan and this Stock
Option Agreement. The terms of your grant are set forth below:

<TABLE>
<S>                                                  <C>
         Date of Grant:                              August 6, 2001
         Vesting Commencement Date:                  August 6, 2001
         Exercise Price per Share:                   $0.128 per share
         Total Number of Shares Granted:             1,500,000
         Total Exercise Price:                       $192,000.00
         Type of Option:                             Non-Qualified Stock Option
         Term/Expiration Date:                       August 6, 2008 (Seventh anniversary of
                                                     Date of Grant)
</TABLE>

        Exercise and Vesting Schedule:

        This Option shall vest and become exercisable according to the following
schedule:
<PAGE>   2
        Subject to the following paragraphs, this Option shall vest and become
exercisable with respect to twenty-five percent (25%) of the shares of the
Company's Common Stock subject to the Option (the "Shares") on the Option's
Vesting Commencement Date, and thereafter, with respect to twenty-five percent
(25%) of the Shares on each successive twelve-month anniversary following the
one-year anniversary of the Option's Vesting Commencement Date (each, a "Vesting
Date"), commencing with the first such anniversary, such that this Option shall
be vested and exercisable with respect to one hundred percent (100%) of the
Shares on the third anniversary of the Option's Vesting Commencement Date;
provided, however, that Optionee has remained in Continuous Status as an
Employee, Director or Consultant as of each Vesting Date.

        Notwithstanding the foregoing, this Option shall vest and become
exercisable with respect to one hundred percent (100%) of the Shares subject to
the Option immediately prior to the earlier of (i) Optionee's termination of
employment with the Company for Good Reason or by the Company for any reason
other than Cause, death or Disability (each such term as defined in that certain
Employment Agreement between the Company and Optionee, dated as of August 22,
2000, as may be amended from time to time), (ii) in addition to the conditions
upon which the Option may automatically accelerate and become exercisable in
accordance with the Plan, upon the consummation of the following: (a) any sale,
merger, consolidation, tender offer or similar acquisition of shares, or other
transaction or series of related transactions (each a "Transaction") as a result
of which at least a majority of the voting power of the Company is not held,
directly or indirectly, by the persons or entities who held the Company's
securities with voting power before such Transaction; (b) a sale or other
disposition of all or substantially all of the Company's assets, whether in one
transaction or a series of related transactions; or (c) individuals who on the
date hereof constitute the Board of Directors and any new Director (other than a
Director designated by a person or entity who has entered into an agreement to
effect a transaction described in clause (a) or (b) above) whose nomination
and/or election to the Board of Directors was approved by a vote of at least a
majority of the Directors then still in office who either were Directors on the
date hereof or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board of
Directors.

        Termination Period:

        This Option may be exercised, to the extent vested, (i) twelve months
following the date that Optionee ceases to be a Service Provider or (ii) if
Optionee remains in Continuous Status as a Service Provider for a period of 18
months following the Date of Grant, three years after the date that Optionee
ceases to be a Service Provider; provided that in no event shall this Option be
exercisable following the Term/Expiration Date provided above.

II. AGREEMENT

        1. Grant of Option. The Company hereby grants to the Optionee an Option
to purchase the number of Shares set forth in the Notice of Stock Option Grant
(the "Notice of Grant"), at the exercise price per share set forth in the Notice
of Grant (the "Exercise Price"). Notwithstanding anything to the contrary
anywhere else in this Stock Option Agreement, this grant of an Option is subject
to the terms, definitions and provisions of the Plan adopted by the Company,
which is incorporated herein by reference. This Option is not intended to, and
does

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not, qualify as an Incentive Stock Option as defined in Section 422 of the Code.

        2. Exercise of Option. This Option is exercisable as follows:

               (a) Right to Exercise.

                      (i) This Option shall be exercisable cumulatively
according to the vesting schedule set out in the Notice of Grant. For purposes
of this Stock Option Agreement, Shares subject to this Option shall vest based
on Optionee's Continuous Status as an Employee, Director or Consultant.

                      (ii) This Option may not be exercised for a fraction of a
Share.

                      (iii) In the event of Optionee's termination of Continuous
Status as an Employee, Director or Consultant, the exercisability of the Option
is governed by Section 5 below.

                      (iv) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in the Notice of
Grant.

               (b) Method of Exercise. This Option shall be exercisable by
written Notice (in the form attached as Exhibit A). The Notice must state the
number of Shares for which the Option is being exercised, and such other
representations and agreements with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan or as may
be necessary in order for the Company to comply with Applicable Laws. The Notice
must be signed by the Optionee and shall be delivered in person or by certified
mail to the Secretary of the Company. The Notice must be accompanied by payment
of the Exercise Price, including payment of any applicable withholding tax. This
Option shall be deemed to be exercised upon receipt by the Company of such
written Notice accompanied by the Exercise Price and payment of any applicable
withholding tax.

               No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise comply with Applicable Laws and the
requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.

        3. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

               (a) cash;

               (b) check;

               (c) with the consent of the Administrator, other shares of Common
Stock that (i) in the case of shares acquired upon exercise of an option granted
by the Company either have been owned by the Optionee for more than six months
on the date of surrender or were not

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acquired, directly or indirectly, from the Company, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
shares as to which said Option shall be exercised;

               (d) with the consent of the Administrator in its sole and
absolute discretion, authorization from the Company to retain from the total
number of shares as to which the Option is exercised that number of shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of shares as to which the Option is exercised;

               (e) with the consent of the Administrator, delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds required to
pay the exercise price;

               (f) with the consent of the Administrator, a combination of any
of the foregoing methods of payment;

               (g) with the consent of the Administrator, a combination of any
of the foregoing methods of payment at least equal in value to the stated
capital represented by the Shares to be issued, plus a promissory note for the
balance of the exercise price; or

               (h) with the consent of the Administrator, such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws.

        4. Restrictions on Exercise. If the issuance of Shares upon such
exercise or if the method of payment for such shares would constitute a
violation of any applicable federal or state securities or other law or
regulation, then the Option may also not be exercised. The Company may require
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation before allowing the Option to be
exercised.

        5. Termination of Relationship. If Optionee terminates Continuous Status
as an Employee, Director or Consultant for any reason, Optionee may exercise
this Option during the Termination Period set out in the Notice of Grant, to the
extent the Option was vested at the date of such termination. To the extent that
Optionee was not vested in this Option at the date on which Optionee terminates
Continuous Status as an Employee, Director or Consultant, or if Optionee does
not exercise this Option within the time specified herein, the Option shall
terminate.

        6. Non-Transferability of Option. This Option may not be transferred in
any manner except by will or by the laws of descent or distribution . It may be
exercised during the lifetime of Optionee only by Optionee. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.

        7. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant.

                            [SIGNATURE PAGE FOLLOWS]

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               This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which shall constitute one
document.

                                       DRKOOP.COM, INC.

                                       By: /s/ EDWARD A. CESPEDES
                                          --------------------------------------
                                       Name: Edward A. Cespedes
                                            ------------------------------------
                                       Title: President
                                             -----------------------------------

        OPTIONEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN
        THE COMPANY'S 2000 EQUITY PARTICIPATION PLAN WHICH IS INCORPORATED
        HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT
        TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
        IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
        TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR
        WITHOUT CAUSE.

        Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof. Optionee hereby accepts
this Option subject to all of the terms and provisions hereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

Dated: August 6, 2001

                                            /s/ RICHARD M. ROSENBLATT
                                            ------------------------------------
                                            Richard M. Rosenblatt

                                            Residence Address:

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                                    EXHIBIT A

                                DRKOOP.COM, INC.

                         2000 EQUITY PARTICIPATION PLAN

                                 EXERCISE NOTICE

drkoop.com, Inc.

Attention:  Secretary

        1. Exercise of Option. Effective as of today, ___________, _____, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of drkoop.com, Inc. (the
"Company") under and pursuant to the drkoop.com, Inc. 2000 Equity Participation
Plan (the "Plan") and the Non-Qualified Stock Option Agreement dated
_____________, _____, (the "Option Agreement").

        2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement. Optionee agrees
to abide by and be bound by their terms and conditions.

        3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to Shares subject to the Option, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section IV of Article One of the
Plan. Optionee shall enjoy rights as a stockholder until such time as Optionee
disposes of the Shares.

        4. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

        5. Restrictive Legends.

               (a) Legends. Optionee understands and agrees that the Company
shall cause any other legends that may be required by state or federal
securities laws to be placed upon any certificate(s) evidencing ownership of the
Shares.

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               (b) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

        6. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

        7. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
the Company and on Optionee.

        8. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas excluding that body
of law pertaining to conflicts of law. Should any provision of this Agreement be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

        9. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

        10. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

        11. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares, as well as any applicable withholding tax.

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        12. Entire Agreement. The Plan and Option Agreement are incorporated
herein by reference. This Agreement, the Plan and the Option Agreement
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof.

Submitted by:                          Accepted by:

OPTIONEE:                              DRKOOP.COM, INC.

                                       By:
                                          --------------------------------------

                                       Its:
                                            ------------------------------------

Address:

--------------------

--------------------

--------------------

                                       2<PAGE>   1

                                                                   EXHIBIT 10.17

                          American States Water Company
                              Annual Incentive Plan

                            As Amended April 23, 2001

<PAGE>   2

                          AMERICAN STATES WATER COMPANY
                              ANNUAL INCENTIVE PLAN
                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                       <C>
ARTICLE I    THE PLAN...............................................................      I-1
    1.1      Purpose................................................................      I-1
    1.2      Definitions............................................................      I-1
    1.3      Administration and Authorization; Power and Procedure..................      I-3
    1.4      Payment/Grant of Awards................................................      I-4
    1.5      Non-Transferability....................................................      I-4
    1.6      Beneficiary Designation................................................      I-4

ARTICLE II   AWARDS.................................................................      II-1
    2.1      Award Determination....................................................      II-1
    2.2      Vesting................................................................      II-2
    2.3      Award Payment..........................................................      II-2
    2.4      Acceleration of Awards upon Change in Control..........................      II-2

ARTICLE III  OTHER PROVISIONS.......................................................      III-1
    3.1      Rights of Eligible Employees, Participants and Beneficiaries...........      III-1
    3.2      Compliance with Laws...................................................      III-1
    3.3      Withholding; Payroll Taxes.............................................      III-1
    3.4      Plan Amendment, Termination and Suspension.............................      III-1
    3.5      Effective Date of the Plan.............................................      III-1
    3.6      Governing Law..........................................................      III-1
    3.7      Captions...............................................................      III-2
    3.8      Terms..................................................................      III-2
    3.9      Non-Exclusivity of Plan................................................      III-2
</TABLE>

<PAGE>   3

                          AMERICAN STATES WATER COMPANY
                              ANNUAL INCENTIVE PLAN

I.     THE PLAN

       1.1    Purpose: The purpose of this Plan is to promote the success of the
              Company by contributing to a team culture, focusing attention on
              increasing shareholder value, and creating an incentive program
              that will support future growth.

       1.2    Definitions: For purposes of this Plan, the following terms shall
              have the meanings indicated below:

              (a)    "Actual Return on Rate Base" shall mean the Company's
                     actual annual rate of return on net assets included in the
                     Company's rate filings, determined on a consolidated basis.

              (b)    "Authorized Return on Rate Base" shall mean the composite
                     annual rate of return on equity authorized for the Company
                     during the Plan Year by the California Public Utilities
                     Commission. The Authorized Rate of Return shall be
                     calculated by the Company in accordance with the rules
                     and/or examples approved by the Committee, and will be
                     reviewed by the Company's external auditors.

              (c)    "Award" shall mean an award of a specified amount of cash
                     or restricted stock to a Participant under the Plan.

              (d)    "Base Compensation" shall mean the salary and hourly wages,
                     exclusive of overtime and bonuses, paid to an Eligible
                     Employee during the calendar year proceeding the
                     Determination Date.

              (e)    "Board" shall mean the Board of Directors of the Company.

              (f)    "Change in Control Event": Shall have the meaning given
                     such term in the Company's 2000 Stock Incentive Plan.

              (g)    "Code" shall mean the Internal Revenue Code of 1986, as
                     amended from time to time.

              (h)    "Committee" shall mean the Compensation Committee of the
                     Board of Directors.

                                      I-1
<PAGE>   4

              (i)    "Company" shall mean American States Water Company.

              (j)    "Consolidated Total Operating Revenues" shall be as set
                     forth in the Company's audited consolidated financial
                     statements.

              (k)    "Determination Date" shall mean the last day of each Plan
                     Year.

              (l)    "Eligible Employee" shall mean an employee of the Company,
                     or a Subsidiary, designated by the Committee at the
                     beginning of a Plan Year as eligible to receive an Award
                     under this Plan.

              (m)    "Employer" shall mean the Company, or a Subsidiary of the
                     Company which directly employs an Eligible Employee.

              (n)    "Financial Performance" shall mean the Company's Actual
                     Return on Rate Base as a percentage of its Authorized
                     Return on Rate Base, determined on a consolidated basis.

              (o)    "Individual Adjustment" shall be the adjustment determined
                     in accordance with section 2.1(a)(iv) of this document.

              (p)    "Increase in Total Operating Revenues from Acquisition"
                     shall mean the projected increase in Consolidated Total
                     Operating Revenues from the Company's acquisition of
                     another firm during the Plan Year.

              (q)    "Maintenance Adjustment" shall be calculated in accordance
                     with section 2.1(a)(ii) of this document.

              (r)    "Participant" shall mean an Eligible Employee whose last
                     performance appraisal was satisfactory.

              (s)    "Personal Representative" shall mean the person or persons
                     who, upon the Total 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.

              (t)    "Plan" shall mean this Annual Incentive Plan.

              (u)    "Plan Year" shall mean the calendar year.

              (v)    "Restricted Stock" shall mean shares of the common stock of
                     the Company that are non-transferable and subject to
                     forfeiture upon termination of employment within a
                     specified period of time following the date of grant.

                                      I-2
<PAGE>   5

              (w)    "Strategic Adjustment" shall be a factor based on Company
                     performance. At the beginning of each plan year the
                     Committee will establish performance criteria reflecting
                     progress towards the Company's strategic goals. The
                     Committee will, at that time, also establish the amount of
                     the adjustment (no more than 50% in total) to be made to
                     Awards otherwise payable under the Plan based on the
                     achievement of these criteria.

              (x)    "Subsidiary" shall mean any corporation or other entity a
                     majority of whose outstanding voting stock or voting power
                     is beneficially owned directly or indirectly by the
                     Company.

              (y)    "Target Award" shall mean the amount equal to a
                     Participant's Base Compensation multiplied by a percentage
                     determined at the beginning of each Plan Year by the
                     Committee. For 2001, the target award for the Chief
                     Executive Officer is 30%; the target award for Vice
                     Presidents is 25%; and the target award for managers is
                     12.5% equally weighted between the Company's financial
                     performance and the manager's individual performance.

       1.3    Administration and Authorization; Power and Procedure:

              (a)    Committee: This Plan shall be administered by, and all
                     granting of Awards to Eligible Employees shall be
                     authorized by, the Committee. Action with respect to the
                     administration of this Plan shall be the sole and absolute
                     discretion and responsibility of the Committee.

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

                     (i)    to determine which employees are eligible to
                            participate in the Plan for a Plan Year;

                     (ii)   to determine the amount of the Award payable to each
                            Participant for a Plan Year;

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

                     (iv)   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: The Committee shall have full
                     discretion to construe and interpret the terms and
                     provisions of the Plan, which interpretation or
                     construction shall be final and binding on all parties,
                     including but not limited to the Company, any Subsidiary
                     and any Participants or Beneficiaries. Any action taken
                     by, or inaction of, the

                                      I-3
<PAGE>   6

                     Company, or the Committee relating or pursuant to this Plan
                     shall be within the absolute discretion of that entity or
                     body and shall be conclusive and binding upon all persons.
                     No member of the Committee, or officer of the Company,
                     shall be liable for any such action or inaction of the
                     entity or body, of another person or, except in
                     circumstances involving bad faith, of himself or herself.

              (d)    Reliance on Experts: In making any determination or in
                     taking or not taking any action under this Plan, the
                     Committee may obtain and may rely upon the advice of
                     experts, including professional advisors to the Company.

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

              (f)    Absence of Liability; Indemnity: No member of the
                     Committee, director, officer or agent of the Company shall
                     be liable for any action or determination taken, made or
                     omitted in good faith. To the extent permitted under
                     applicable state law, the Company shall indemnify and hold
                     harmless the members of the Committee and any delegate
                     against any and all claims, loss, damage, expense or
                     liability arising from any action or failure to act with
                     respect to this Plan, except in the case of gross
                     negligence or willful misconduct.

       1.4    Payment/Grant of Awards: Subject to the express provisions of this
              Plan, the Committee shall determine the amount of each Award.

       1.5    Non-Transferability: Neither a Participant nor any other person
              shall have the right to commute, sell, assign, transfer, pledge,
              anticipate, mortgage or otherwise encumber, transfer, hypothecate
              or convey in advance of actual receipt of the amounts, if any,
              payable hereunder, or any part thereof, part thereof, which are,
              and all rights to which are, expressly declared to be unassignable
              and non-transferable. No part of the amounts payable shall, prior
              to actual payment, be subject to seizure or sequestration for the
              payment of any debts, judgments, alimony or separate maintenance
              owed by a Participant or any other person, nor be transferable by
              operation of law in the event of a Participant's or any other
              person's bankruptcy or insolvency.

       1.6    Beneficiary Designation:

              (a)    "Beneficiary" or "Beneficiaries" shall mean the person or
                     persons, including a trustee, Personal Representative or
                     other fiduciary, last designated in writing by a
                     Participant in accordance with procedures established by
                     the Committee to receive the benefits, if any, specified
                     hereunder in the event of the Participant's death. No
                     beneficiary designation shall become effective

                                      I-4
<PAGE>   7

                     until it is filed with the Committee, and no Beneficiary
                     designation of someone other than the Participant's spouse
                     shall be effective unless such designation is consented to
                     by the Participant's spouse on a form provided by and in
                     accordance with procedures established by the Committee. If
                     there is no valid Beneficiary designation in effect, or if
                     there is no surviving designated Beneficiary, then the
                     Participant's surviving spouse shall be the Beneficiary. If
                     there is no surviving spouse to receive any benefits
                     payable in accordance with the preceding sentence, the duly
                     appointed and currently acting personal representative of
                     the Participant's estate (which shall include either the
                     Participant's probate estate or living trust) shall be the
                     Beneficiary. In any case where there is no such personal
                     representative of the Participant's estate duly appointed
                     and acting in that capacity within 90 days after the
                     Participant's death (or such extended period as the
                     Committee determines is reasonably necessary to allow such
                     personal representative to be appointed but not to exceed
                     180 days after the Participant's death), then Beneficiary
                     shall mean the person or persons who can verify by
                     affidavit or court order to the satisfaction of the
                     Committee that they are legally entitled to receive the
                     benefits specified hereunder. In the event any amount is
                     payable under the Plan to a minor, payment shall not be
                     made to the minor, but instead be paid (a) to that person's
                     living parent(s) to act as custodian, (b) if that person's
                     parents are then divorced, and one parent is the sole
                     custodial parent, to such custodial parent, or (c) if no
                     parent of that person is then living, to a custodian
                     selected by the Committee to hold the funds for the minor
                     under the Uniform Transfers of Gifts to Minors Act in
                     effect in the jurisdiction in which the minor resides. If
                     no parent is living and the Committee decides not to select
                     another custodian to hold the funds for the minor, then
                     payment shall be made to the duly appointed and currently
                     acting guardian of the estate for the minor or, if no
                     guardian of the estate for the minor is duly appointed and
                     currently acting within 60 days after the date the amount
                     becomes payable, payment shall be deposited with the court
                     having jurisdiction over the estate of the minor.

              (b)    Effect of Payment: The payment to the Beneficiary or deemed
                     Beneficiary, in accordance with the provisions of this
                     Plan, shall completely discharge all obligations under this
                     Plan of the Committee, the Company and any Subsidiary.

                                      I-5
<PAGE>   8

II.    AWARDS

       2.1    Award Determination:

              (a)    Performance Evaluation:

                     (i)    Financial Performance: Performance shall first be
                            evaluated based on the Company's Actual Return on
                            Rate Base, determined on a consolidated basis, as a
                            percentage of its Authorized Return on Rate Base as
                            determined by the California Public Utilities
                            Commission. In 2001, the following schedule shall
                            apply:

              Actual/Authorized Return         Financial Performance Percentage
              ------------------------         --------------------------------
                 Greater than 120%                 At Committee's Discretion
                       120%                                120%
                       115%                                115%
                       110%                                110%
                       105%                                105%
                  Equal to 100%                            100%

                            Note: Percentages will be interpolated for
                            performance between levels.

                     (ii)   Maintenance Adjustment: If the Company's maintenance
                            costs are significantly less than estimated for rate
                            base purposes (more than .5% of the Authorized
                            Return on Rate Base), the Actual Return on Rate Base
                            will be adjusted downwards by the amount of the
                            shortfall.

                     (iii)  Strategic Adjustment: For Executives (Vice
                            Presidents and above), the Company's Financial
                            Performance shall be adjusted (up or down) based on
                            factors including the achievement of strategic goals
                            such as acquisitions of other firms. The maximum
                            adjustment for strategic performance in one year
                            shall be capped at 50%. In 2001, the following
                            schedule shall apply:

         Increase in Total Operating Revenues
                  from Acquisition                   Strategic Adjustment
         -------------------------------------       --------------------
                    Less than 10%                             0%
                         10%                                 10%
                         13%                                 12%
                         16%                                 14%
                         19%                                 16%
                         22%                                 18%
                         25%                                 20%
                         28%                                 22%
                         31%                                 24%
                   Greater than 33%                          25%

                                      II-1
<PAGE>   9

                     (iv)   Individual Adjustment: For Managers, the individual
                            award consists of two equal parts - a Financial
                            Performance component and an Individual Performance
                            component. The Individual Performance component
                            shall be based on the accomplishment of goals that
                            are established by the Employer at the beginning of
                            each Plan Year. The degree to which goals are
                            accomplished could impact one-half of the Award for
                            managers from 0% to 100%.

              (b)    Determination of Individual Awards: For Executives, the
                     Award to be paid to any Participant will be equal to (i)
                     the Participant's base salary times (i) the applicable
                     Target Award times (ii) the Financial Performance
                     adjustment factor times (iii) the Strategic Adjustment
                     factor. For Managers, the Award to be paid to any
                     Participant is determined in two parts. One-half of the
                     Award will be equal to (i) the Participant's bases salary
                     times (ii) the Financial Performance Adjustment factor
                     times (iii) 50% of the applicable Target Award; and
                     one-half of the Award will be equal to (i) the
                     Participant's base salary times (ii) the Individual
                     Adjustment factor times (iii) 50% of the applicable Target
                     Award.

              (c)    Participant's Award: A Participant's Award shall be
                     pro-rated in the event he/she participates in the Plan for
                     less than the full year, moves into a position covered
                     under a different schedule of awards, and/or moves into or
                     from a position not currently included under this Plan. The
                     pro-rated amount will be calculated by multiplying the
                     Award otherwise payable to the Participant for the entire
                     year by a fraction, the numerator of which is the number
                     months completed by the Participant during the Plan Year ,
                     and the denominator of which is 12.

       2.2    Vesting: There is no vested right to receive an Award and no Award
              is earned until paid. A Participant who terminates employment for
              any reason before the payment of the Awards shall forfeit any
              unpaid Awards, except in the cases of death or disability.

       2.3    Award Payment: Awards will be paid by the Employer following the
              completion of the audit of the financials, normally within 75 days
              of the end of the fiscal year. Payment shall be provided in cash
              and/or Restricted Stock. All payments less than 20% of Base
              Compensation shall be paid cash. Payments above 20% of Base
              Compensation may be paid, at the discretion of the Committee, in
              Restricted Stock issued in accordance with the provisions of the
              American States Water Company Long-Term Incentive Plan (the
              "Long-Term Incentive Plan"). The number of shares of Restricted
              Stock (if any) to be issued shall equal the difference between the
              amount of the Award and the amount paid in cash divided by the
              Fair Market Value (as defined in the Long-Term Incentive Plan) of
              a share of the Company common stock determined as of the
              Determination Date. Unless the Committee otherwise provides, the
              rights of a Participant with respect to Restricted Stock issued
              hereunder shall vest, and the applicable restrictions shall

                                      II-2
<PAGE>   10

              lapse, in a series of three successive equal annual installments
              commencing on the first anniversary of the Determination Date.

       2.4    Acceleration of Awards upon Change in Control: Notwithstanding the
              foregoing, 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, then upon the
              occurrence of a Change in Control Event, the Awards shall be
              vested and the Participant shall be entitled to the payment
              thereof within 75 days after the Change in Control Event. The
              Award to be paid to any Participant will be equal to (i) the
              Financial Performance for the 12 month period preceding the Change
              in Control Event times (ii) one hundred percent (100%) plus the
              Strategic Adjustment or Individual Adjustment, whichever is
              applicable, for the 12 month period preceding the Change in
              Control Event, times the Target Award times (iii) a fraction, the
              numerator of which is the number of months completed by the
              Participant during the Plan Year, and the denominator of which is
              12. 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 and may accord any Participant the
              right to refuse any acceleration in such circumstances as the
              Committee may approve.

                                      II-3
<PAGE>   11

III.   OTHER PROVISIONS

       3.1    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 related to this Plan or to any
                     Award) shall confer upon any Eligible Employee or
                     Participant any right to continue in the employ or other
                     service of the Company, or any Subsidiary, or constitute
                     any contract or agreement of employment or other service,
                     nor shall interfere in any way with the right of the
                     Company, or any Subsidiary, to change such person's
                     compensation or other benefits or to terminate the
                     employment of such person, with or without cause, but
                     nothing contained in this Plan or any document related
                     hereto shall adversely affect any independent contractual
                     right of such person without his or her consent thereto.

       3.2    Compliance with Laws: This Plan, the granting and vesting of
              Awards under this Plan and the payment of money under this Plan or
              under Awards granted hereunder are subject to compliance with all,
              applicable federal and state laws, rules and regulations 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.

       3.3    Withholding; Payroll Taxes: The Employer shall withhold from
              payments made hereunder any taxes required to be withheld from
              such payments under federal, state or local law.

       3.4    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. Any Restricted Stock outstanding at
                     that time will be governed by the terms of the American
                     States Water Company Long-Term Incentive Plan.

       3.5    Effective Date of the Plan: This Plan shall be effective as of
              January 1, 1999.

       3.6    Governing Law: Severability

              (a)    Choice of Law: This Plan shall be governed by, and
                     construed in accordance with the laws of the State of
                     California applicable to contracts made and performed
                     within such State, except as such laws may be preempted by
                     the

                                     III-1
<PAGE>   12

                     laws of the United States of America, which laws shall then
                     govern its effect and its construction to the extent they
                     preempt California law.

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

       3.7    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 the Plan or
              any provision thereof.

       3.8    Terms: Whenever any words are used herein in the masculine, they
              shall be construed as though they were used in the feminine in all
              cases where they would so apply; and wherever any words are used
              herein in the singular or plural, they shall be construed as
              though they were used in the plural or the singular, as the case
              may be, in all cases where they would so apply.

       3.9    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.

EXECUTED this 1st day of April 23, 2001.

       AMERICAN STATES WATER COMPANY

       By:
               -------------------------------------

       Title:
               -------------------------------------

                                     III-2

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