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                                                                   EXHIBIT 10.15

                AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENTS,
       BETWEEN SOUTHERN CALIFORNIA WATER COMPANY AND CERTAIN EXECUTIVES,
                          DATED AS OF OCTOBER 25, 1999

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                AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT

               This Amended and Restated Change-in-Control Agreement (the
"Agreement") is dated as of October 25, 1999, is entered into by and between
Susan L. Conway (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.

                                    RECITALS

               The Company considers it essential to the best interest of the
Company and its shareholders that the Executive be encouraged to remain with the
Company and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.

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                              TERMS AND CONDITIONS

               The Executive and the Company hereby agree to the following terms
and conditions:

        1. TERM OF AGREEMENT

               If a Change in Control (as defined in Section 3) occurs on or
before the expiration date of this Agreement and while the Executive is still an
employee of the Company, then this Agreement will continue in effect for two
years from the date of such Change in Control and, if the Executive's employment
with the Company is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company under
this Agreement shall have been fulfilled. If no Change in Control occurs on or
before December 31, 2000, this Agreement shall expire; provided, however that
this Agreement shall be automatically extended for an additional two years to
December 31, 2002 if (i) a plan or agreement for a Change in Control has been
approved by the Board of Directors of the Company or American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company written notice at least 60 days prior to the expiration date that such
expiration date shall not be so extended. This Agreement shall continue to be
automatically extended for an additional two-year period and each succeeding
two-year period if a plan or agreement for a Change in Control has been approved
by the Board of Directors of the Company or AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.

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        2. CHANGE IN CONTROL DATE

               The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company is terminated after approval by the
Board of Directors of the Company or AWR of a plan or agreement for a Change in
Control but prior to the date on which the Change in Control occurs, the "Change
in Control Date" shall mean the date immediately preceding the date of such
termination.

        3. CHANGE IN CONTROL

               A "Change in Control" shall mean any of the following events:

               (a) the dissolution or liquidation of either the Company or AWR,
unless its business is continued by another entity in which holders of AWR'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;

               (b) 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 or AWR, unless its business is continued by another entity in which
holders of AWR'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;

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               (c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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;

               (d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or AWR, unless
the holders of AWR'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

               (e) a change of one-half or more of the members of the Board of
Directors of the Company or AWR within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within 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.

        4. EFFECTIVE PERIOD

               For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.

        5. TERMINATION OF EMPLOYMENT

               (a) Death or Disability: The Executive's employment shall
terminate automatically upon the Executive's death. If the Disability (as
defined below) of the Executive occurs during the Effective Period, the Company
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,

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the Executive shall not have returned to full-time performance of his or her
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from his or her duties with the Company on a full-time basis for
180 consecutive business days as a result of a physical or mental condition
which prevents the Executive from performing the Executive's normal duties of
employment and which is (i) determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative and/or (ii) entitles the Executive to the
payment of long-term disability benefits from the Company's or AWR's long-term
disability plan commencing no later than the Disability Effective Date.

               (b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company may also terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall be
limited to the following:

                        (i) the Executive's failure to render services to the
                Company where such failure amounts to gross neglect or gross
                misconduct of the Executive's responsibility and duties,

                        (ii) the Executive's commission of an act of fraud or
                dishonesty against the Company or any affiliate of the Company,
                or

                        (iii) the Executive's conviction of a felony or other
                crime involving moral turpitude.

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               (c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:

                      (i) the assignment to the Executive of any duties
               inconsistent in any respect with the Executive's position
               (including status, offices, titles and reporting requirements),
               authority, duties or responsibilities as in effect on the Change
               in Control Date, or any other action by the Company which results
               in a diminution in such position, authority, duties or
               responsibilities, excluding for this purpose an isolated,
               insubstantial and inadvertent action not taken in bad faith and
               which is remedied by the Company promptly after receipt of notice
               thereof given by the Executive;

                      (ii) any failure by the Company to reappoint the Executive
               to a position held by the Executive on the Change in Control
               Date, except as a result of the termination of the Executive's
               employment by the Company for Cause or Disability, the death of
               the Executive, or the termination of the Executive's employment
               by the Executive other than for Good Reason;

                      (iii) reduction by the Company in the Executive's base
               salary as in effect on the date hereof or as the same may be
               increased from time-to-time;

                      (iv) the taking of any action by the Company (including
               the elimination of benefit plans without providing substitutes
               therefore or the reduction of the Executive's benefits
               thereunder) that would substantially diminish the aggregate value
               of the Executive's incentive awards and other fringe benefits
               including the

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               executive benefits and perquisites from the levels in effect
               prior to the Change in Control Date;

                      (v) the Company's requiring the Executive to be based at
               any office or location which increases the distance from the
               Executive's home to the office location by more than 35 miles
               from the distance in effect as of the Change in Control Date;

                      (vi) any failure by the Company to comply with and satisfy
               Section 11(c) of this Agreement.

        6. OBLIGATIONS OF THE COMPANY UPON TERMINATION

               (a) Good Reason, Other Than for Cause or Disability: If the
Company shall terminate the Executive's employment other than for Cause or
Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company agrees,
subject to Section 8, to make the payments and provide the benefits described
below:

                      (i) The Company shall pay to the Executive in a cash lump
               sum within 10 days from the date of the Executive's termination
               of employment an amount equal to the product of (A) and (B),
               where (A) is 2.99 and (B) is the Executive's annual base salary
               at the highest of the rate in effect at any time during the three
               years preceding the date of termination. (ii) The Company shall
               also pay to the Executive in a cash lump sum within 10 days from
               the date of termination an amount equal to the sum of (A)
               Executive's base salary through the date of termination, plus (B)
               any

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               compensation previously deferred by the Executive (together with
               any accrued earnings or interest thereon), plus (C) any accrued
               vacation pay, in each case to the extent not theretofore paid
               (the amounts referred to in this paragraph (ii) are hereinafter
               referred to as the "Accrued Obligations").

                      (iii) The Company shall also pay to the Executive in a
               cash lump sum within 10 days from the date of termination an
               amount equal to the excess of (A) over (B), where (A) is equal to
               the single sum actuarial equivalent of what would be the
               Executive's accrued benefits under the terms of the Southern
               California Water Company Pension Plan (or any successor thereto),
               including any supplemental retirement plan providing additional
               pension benefits, (hereinafter together referred to as the
               "Pension Plan") at time of the Executive's termination of
               employment, without regard to whether such benefits are "vested"
               thereunder, if the Executive were credited with an additional two
               years of continuous service after the termination of Executive's
               employment with the Company at the Executive's highest annual
               rate of compensation covered by such Pension Plan within the
               three years preceding the date of the termination of the
               Executive's employment with the Company and (B) is equal to the
               single sum actuarial equivalent of the Executive's accrued
               benefits under the Pension Plan at the time of the Executive's
               termination of employment. The payment under this paragraph (iii)
               shall not extinguish any rights the Executive has to benefits
               under the Pension Plan. For purposes of this paragraph,
               "actuarial equivalent" shall be determined using the actuarial
               assumptions used under the Pension Plan for determining the

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               actuarial equivalence of different annuity forms of benefits. In
               no event shall the additional two years of continuous service
               referred to above cause the Executive to be deemed to be older
               than the Executive's actual age for any purpose under this
               Agreement.

                      (iv) For two years after the Executive's date of
               termination, or such longer period as may be provided by the
               terms of the appropriate plan, program, practice or policy, the
               Company shall continue to provide welfare benefits and fringe
               benefits and other perquisites to the Executive and/or the
               Executive's family at least equal to those which would have been
               provided to them if the Executive's employment had not been
               terminated (in accordance with the most favorable plans,
               practices, programs or policies of the Company and its affiliates
               applicable generally to other peer executives and their families
               immediately preceding the date of the Executive's termination of
               employment); provided, however, that if the Executive becomes
               employed by another employer and is eligible to receive medical
               or other welfare benefits under another employer-provided plan,
               the medical and other welfare benefits described herein shall be
               secondary to those provided under such other plan during such
               applicable period of eligibility. For purposes of determining
               eligibility (but not the time of commencement of benefits) of the
               Executive for any retiree benefits pursuant to such plans,
               practices, programs and policies, the Executive shall be
               considered to have remained employed until two years after the
               date of termination of employment and to have retired on the last
               day of such period. Following the period of

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               continued benefits referred to in this subsection, the Executive
               and the Executive's family shall be given the right provided in
               Section 4980B of the Internal Revenue Code of 1986, as amended
               (the "Code"), to elect to continue benefits in all group medical
               plans. In the event that the Executive's participation in any of
               the plans, programs, practices or policies of the Company
               referred to in this subsection is barred by the terms of such
               plans, programs, practices or policies, the Company shall provide
               the Executive with benefits substantially similar to those which
               the Executive would be entitled as a participant in such plans,
               programs, practices or policies. At the end of the period of
               coverage, the Executive shall have the option to have assigned to
               the Executive, at no cost and with no apportionment of prepaid
               premiums, any assignable insurance policy owned by the Company
               and relating specifically to the Executive.

                      (v) The Company shall enable the Executive to purchase, at
               the end of the Effective Period, the automobile, if any, provided
               by the Company for the Executive's use at the time of the
               Executive's termination of employment at the wholesale value of
               such automobile at such time, as shown in the current addition of
               the National Auto Research Publication Blue Book. At the
               Executive's election, the Executive may retain any existing club
               memberships of the Executive purchased by the Company upon
               reimbursement to the Company of any membership costs paid by the
               Company.

                      (vi) To the extent not theretofore paid or provided, the
               Company shall timely pay or provide the Executive any other
               amounts or benefits required to be

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               paid or provided or which the Executive is eligible to receive
               under any plan, program, policy, practice, contract or agreement
               of the Company and its affiliates (such other amounts and
               benefits being hereinafter referred to as "Other Benefits") in
               accordance with the terms of such plan, program, policy,
               practice, contract or agreement.

                      (vii) The Executive shall be entitled to interest on any
               payments not paid on a timely basis as provided in this Section
               6(a) at the applicable Federal Rate provided for in Section
               7872(f)(2)(A) of the Code.

               (b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.

               (c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.

               (d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates

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employment during the Effective Period, excluding a termination for Good Reason,
this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and any benefits payable to Executive under a
plan, policy, practice, etc., referred to in Section 7 below. Accrued
Obligations shall be paid to the Executive in a cash lump sum within 60 days of
the Executive's termination of employment.

        7. NON-EXCLUSIVITY OF RIGHTS

               Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.

        8. LIMITATION ON BENEFITS

               Notwithstanding anything in this Agreement to the contrary, if
any payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company or another
entity or person, would not be deductible by the Company due to limitations
imposed by Section 162(m) of the Code, then such payments or benefits shall be
deferred to the extent necessary until such time as such payments would be

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deductible under Section 162(m) of the Code. Either the Company or the Executive
may request a determination as to whether any payments would be subject to
limitations on deductibility under Section 162(m) of the Code and, if so
requested, such determination shall be made by independent legal counsel
selected by the Company and approved by the Executive. Payment may be delayed
pending any such determination, provided that the Executive shall be entitled to
interest on any delayed payment at the applicable Federal Rate provided for in
Section 7872(f)(2)(A) of the Code. The Executive shall also be entitled to
interest on any payments deferred as a result of the limitations on
deductibility under Section 162(m) of the Code at the applicable Federal Rate
provided for in Section 7872(f)(2)(A) of the Code.

        9. PARACHUTE PAYMENTS

               (a) Gross-Up Payment. In the event that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
under this Section 9(a)) (a "Payment") is determined to be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to the Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
such Payments.

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               (b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.

               (c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such

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claim and shall apprise the Company of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:

                      (i) Give the Company any information reasonably requested
               by it relating to such claim,

                      (ii) Take such action in connection with contesting such
               claim as the Company shall reasonably request in writing from
               time to time, including, without limitation, accepting legal
               representation with respect to such claim by an attorney
               reasonably selected by the Company,

                      (iii) Cooperate with the Company in good faith in order to
               contest such claim effectively, and

                      (iv) Permit the Company to participate in any proceedings
               relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection

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with such contests and, at their sole discretion, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the control by the Company of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

               (d) Refunds. If , after the receipt by Executive of an amount
advanced by the Company pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Executive of
an

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amount advanced by the Company pursuant to Section 9(c), a determination is made
that Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

        10. FULL SETTLEMENT

               The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(iv), such amounts shall not be reduced whether or not Executive obtains
other employment.

        11. SUCCESSORS

               (a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.

               (b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

               (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or

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assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean the Company as defined and any successor to its business
and/or assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

        12. ARBITRATION

               (a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion. The "right to
select arbitration" is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Executive
only he or she can use the arbitration procedure set forth in this section.

               (b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company regarding the interpretation of this
Agreement and the claim is finally denied by the Company in whole or in part,
such claim may be filed in writing with an arbitrator of the Executive's choice
who is selected by the method described in the next three sentences. The first
step of the selection shall consist of the Executive submitting a list of five
potential arbitrators to the Company. Each of the five arbitrators must be
either (1) a member of the National Academy of Arbitrators located in the State
of California or (2) a retired California

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Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails to select an arbitrator in a
timely manner, the Executive shall then designate one of the five arbitrators as
the arbitrator for the dispute in question.

               (c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator may close the hearing at his or her discretion when
sufficient evidence to satisfy issuance of an award has been presented.

               (d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company has breached this Agreement,
he or she shall order the Company to immediately take the necessary steps to
remedy the breach. The award of the arbitrator shall be final and binding upon
the parties. The award may be enforced in any appropriate court as soon as
possible after it is rendered. If an action is brought to confirm the award,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.

               (e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'

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fees incurred by the Company) including stenographic reporter, if employed,
shall be paid by the Executive. In the event that Executive is the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(including all attorneys' fees incurred by the Executive), including the fees of
a stenographic reporter if employed, shall be paid by the Company.

        13. GOVERNING LAW

               The laws of California shall govern the validity and
interpretation of this Agreement, with regard to conflicts of laws.

        14. CAPTIONS

               The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.

        15. AMENDMENT

               This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.

        16. NOTICES

               All notices and other communications regarding this Agreement
shall be in writing and shall be hand delivered to the other party or sent by
prepaid registered or certified mail, return receipt requested, addressed as
follows:

               If to the Executive:
                                    ----------------------------------

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

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

               If to the Company:   Southern California Water Company
                                    630 East Foothill Boulevard
                                    San Dimas, CA  91773
                                    Attn:  Secretary

                                      -20-
<PAGE>   22
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.

        17. SEVERABILITY

               The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

        18. WITHHOLDING TAXES

               The Company may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.

        19. NO WAIVER

               The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have under this Agreement, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right under this Agreement.

        20. AT-WILL EMPLOYMENT

               The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company prior to the
Change in Control Date is "at will" and, prior to the Change in Control Date,
the Executive's employment may be terminated by either the Executive or the
Company at any time, in which case the Executive shall have no

                                      -21-
<PAGE>   23
further rights under this Agreement. From and after the Change in Control Date,
this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.

        21. COUNTERPARTS

               This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.

                                      -22-
<PAGE>   24
               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above in
Los Angeles, California.

                                        SOUTHERN CALIFORNIA WATER COMPANY

                                        By      /s/  Floyd E. Wicks
                                                --------------------------------
                                        Title   President and C.E.O.

                                        EXECUTIVE

                                        /s/ Susan L. Conway
                                        ----------------------------------------

                                      -23-
<PAGE>   25
                AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT

               This Amended and Restated Change-in-Control Agreement (the
"Agreement") is dated as of October 25, 1999, is entered into by and between
Denise L. Kruger (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.

                                    RECITALS

               The Company considers it essential to the best interest of the
Company and its shareholders that the Executive be encouraged to remain with the
Company and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.

                                      -24-
<PAGE>   26
                              TERMS AND CONDITIONS

               The Executive and the Company hereby agree to the following terms
and conditions:

        1. TERM OF AGREEMENT

               If a Change in Control (as defined in Section 3) occurs on or
before the expiration date of this Agreement and while the Executive is still an
employee of the Company, then this Agreement will continue in effect for two
years from the date of such Change in Control and, if the Executive's employment
with the Company is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company under
this Agreement shall have been fulfilled. If no Change in Control occurs on or
before December 31, 2000, this Agreement shall expire; provided, however that
this Agreement shall be automatically extended for an additional two years to
December 31, 2002 if (i) a plan or agreement for a Change in Control has been
approved by the Board of Directors of the Company or American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company written notice at least 60 days prior to the expiration date that such
expiration date shall not be so extended. This Agreement shall continue to be
automatically extended for an additional two-year period and each succeeding
two-year period if a plan or agreement for a Change in Control has been approved
by the Board of Directors of the Company or AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.

                                      -25-
<PAGE>   27
        2. CHANGE IN CONTROL DATE

               The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company is terminated after approval by the
Board of Directors of the Company or AWR of a plan or agreement for a Change in
Control but prior to the date on which the Change in Control occurs, the "Change
in Control Date" shall mean the date immediately preceding the date of such
termination.

        3. CHANGE IN CONTROL

               A "Change in Control" shall mean any of the following events:

               (a) the dissolution or liquidation of either the Company or AWR,
unless its business is continued by another entity in which holders of AWR'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;

               (b) 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 or AWR, unless its business is continued by another entity in which
holders of AWR'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;

                                      -26-
<PAGE>   28
               (c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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;

               (d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or AWR, unless
the holders of AWR'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

               (e) a change of one-half or more of the members of the Board of
Directors of the Company or AWR within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within 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.

        4. EFFECTIVE PERIOD

               For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.

        5. TERMINATION OF EMPLOYMENT

               (a) Death or Disability: The Executive's employment shall
terminate automatically upon the Executive's death. If the Disability (as
defined below) of the Executive occurs during the Effective Period, the Company
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,

                                      -27-
<PAGE>   29
the Executive shall not have returned to full-time performance of his or her
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from his or her duties with the Company on a full-time basis for
180 consecutive business days as a result of a physical or mental condition
which prevents the Executive from performing the Executive's normal duties of
employment and which is (i) determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative and/or (ii) entitles the Executive to the
payment of long-term disability benefits from the Company's or AWR's long-term
disability plan commencing no later than the Disability Effective Date.

               (b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company may also terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall be
limited to the following:

                      (i) the Executive's failure to render services to the
               Company where such failure amounts to gross neglect or gross
               misconduct of the Executive's responsibility and duties,

                      (ii) the Executive's commission of an act of fraud or
               dishonesty against the Company or any affiliate of the Company,
               or

                      (iii) the Executive's conviction of a felony or other
               crime involving moral turpitude.

                                      -28-
<PAGE>   30
               (c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:

                      (i) the assignment to the Executive of any duties
               inconsistent in any respect with the Executive's position
               (including status, offices, titles and reporting requirements),
               authority, duties or responsibilities as in effect on the Change
               in Control Date, or any other action by the Company which results
               in a diminution in such position, authority, duties or
               responsibilities, excluding for this purpose an isolated,
               insubstantial and inadvertent action not taken in bad faith and
               which is remedied by the Company promptly after receipt of notice
               thereof given by the Executive;

                      (ii) any failure by the Company to reappoint the Executive
               to a position held by the Executive on the Change in Control
               Date, except as a result of the termination of the Executive's
               employment by the Company for Cause or Disability, the death of
               the Executive, or the termination of the Executive's employment
               by the Executive other than for Good Reason;

                      (iii) reduction by the Company in the Executive's base
               salary as in effect on the date hereof or as the same may be
               increased from time-to-time;

                      (iv) the taking of any action by the Company (including
               the elimination of benefit plans without providing substitutes
               therefore or the reduction of the Executive's benefits
               thereunder) that would substantially diminish the aggregate value
               of the Executive's incentive awards and other fringe benefits
               including the

                                      -29-
<PAGE>   31
               executive benefits and perquisites from the levels in effect
               prior to the Change in Control Date;

                      (v) the Company's requiring the Executive to be based at
               any office or location which increases the distance from the
               Executive's home to the office location by more than 35 miles
               from the distance in effect as of the Change in Control Date;

                      (vi) any failure by the Company to comply with and satisfy
               Section 11(c) of this Agreement.

        6. OBLIGATIONS OF THE COMPANY UPON TERMINATION

               (a) Good Reason, Other Than for Cause or Disability: If the
Company shall terminate the Executive's employment other than for Cause or
Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company agrees,
subject to Section 8, to make the payments and provide the benefits described
below:

                      (i) The Company shall pay to the Executive in a cash lump
               sum within 10 days from the date of the Executive's termination
               of employment an amount equal to the product of (A) and (B),
               where (A) is 2.99 and (B) is the Executive's annual base salary
               at the highest of the rate in effect at any time during the three
               years preceding the date of termination.

                      (ii) The Company shall also pay to the Executive in a cash
               lump sum within 10 days from the date of termination an amount
               equal to the sum of (A) Executive's base salary through the date
               of termination, plus (B) any

                                      -30-
<PAGE>   32

               compensation previously deferred by the Executive (together with
               any accrued earnings or interest thereon), plus (C) any accrued
               vacation pay, in each case to the extent not theretofore paid
               (the amounts referred to in this paragraph (ii) are hereinafter
               referred to as the "Accrued Obligations").

                      (iii) The Company shall also pay to the Executive in a
               cash lump sum within 10 days from the date of termination an
               amount equal to the excess of (A) over (B), where (A) is equal to
               the single sum actuarial equivalent of what would be the
               Executive's accrued benefits under the terms of the Southern
               California Water Company Pension Plan (or any successor thereto),
               including any supplemental retirement plan providing additional
               pension benefits, (hereinafter together referred to as the
               "Pension Plan") at time of the Executive's termination of
               employment, without regard to whether such benefits are "vested"
               thereunder, if the Executive were credited with an additional two
               years of continuous service after the termination of Executive's
               employment with the Company at the Executive's highest annual
               rate of compensation covered by such Pension Plan within the
               three years preceding the date of the termination of the
               Executive's employment with the Company and (B) is equal to the
               single sum actuarial equivalent of the Executive's accrued
               benefits under the Pension Plan at the time of the Executive's
               termination of employment. The payment under this paragraph (iii)
               shall not extinguish any rights the Executive has to benefits
               under the Pension Plan. For purposes of this paragraph,
               "actuarial equivalent" shall be determined using the actuarial
               assumptions used under the Pension Plan for determining the

                                      -31-
<PAGE>   33
               actuarial equivalence of different annuity forms of benefits. In
               no event shall the additional two years of continuous service
               referred to above cause the Executive to be deemed to be older
               than the Executive's actual age for any purpose under this
               Agreement.

                      (iv) For two years after the Executive's date of
               termination, or such longer period as may be provided by the
               terms of the appropriate plan, program, practice or policy, the
               Company shall continue to provide welfare benefits and fringe
               benefits and other perquisites to the Executive and/or the
               Executive's family at least equal to those which would have been
               provided to them if the Executive's employment had not been
               terminated (in accordance with the most favorable plans,
               practices, programs or policies of the Company and its affiliates
               applicable generally to other peer executives and their families
               immediately preceding the date of the Executive's termination of
               employment); provided, however, that if the Executive becomes
               employed by another employer and is eligible to receive medical
               or other welfare benefits under another employer-provided plan,
               the medical and other welfare benefits described herein shall be
               secondary to those provided under such other plan during such
               applicable period of eligibility. For purposes of determining
               eligibility (but not the time of commencement of benefits) of the
               Executive for any retiree benefits pursuant to such plans,
               practices, programs and policies, the Executive shall be
               considered to have remained employed until two years after the
               date of termination of employment and to have retired on the last
               day of such period. Following the period of

                                      -32-
<PAGE>   34
               continued benefits referred to in this subsection, the Executive
               and the Executive's family shall be given the right provided in
               Section 4980B of the Internal Revenue Code of 1986, as amended
               (the "Code"), to elect to continue benefits in all group medical
               plans. In the event that the Executive's participation in any of
               the plans, programs, practices or policies of the Company
               referred to in this subsection is barred by the terms of such
               plans, programs, practices or policies, the Company shall provide
               the Executive with benefits substantially similar to those which
               the Executive would be entitled as a participant in such plans,
               programs, practices or policies. At the end of the period of
               coverage, the Executive shall have the option to have assigned to
               the Executive, at no cost and with no apportionment of prepaid
               premiums, any assignable insurance policy owned by the Company
               and relating specifically to the Executive.

                      (v) The Company shall enable the Executive to purchase, at
               the end of the Effective Period, the automobile, if any, provided
               by the Company for the Executive's use at the time of the
               Executive's termination of employment at the wholesale value of
               such automobile at such time, as shown in the current addition of
               the National Auto Research Publication Blue Book. At the
               Executive's election, the Executive may retain any existing club
               memberships of the Executive purchased by the Company upon
               reimbursement to the Company of any membership costs paid by the
               Company.

                      (vi) To the extent not theretofore paid or provided, the
               Company shall timely pay or provide the Executive any other
               amounts or benefits required to be

                                      -33-
<PAGE>   35
               paid or provided or which the Executive is eligible to receive
               under any plan, program, policy, practice, contract or agreement
               of the Company and its affiliates (such other amounts and
               benefits being hereinafter referred to as "Other Benefits") in
               accordance with the terms of such plan, program, policy,
               practice, contract or agreement.

                      (vii) The Executive shall be entitled to interest on any
               payments not paid on a timely basis as provided in this Section
               6(a) at the applicable Federal Rate provided for in Section
               7872(f)(2)(A) of the Code.

               (b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.

               (c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.

               (d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates

                                      -34-
<PAGE>   36
employment during the Effective Period, excluding a termination for Good Reason,
this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and any benefits payable to Executive under a
plan, policy, practice, etc., referred to in Section 7 below. Accrued
Obligations shall be paid to the Executive in a cash lump sum within 60 days of
the Executive's termination of employment.

        7. NON-EXCLUSIVITY OF RIGHTS

               Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.

        8. LIMITATION ON BENEFITS

               Notwithstanding anything in this Agreement to the contrary, if
any payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company or another
entity or person, would not be deductible by the Company due to limitations
imposed by Section 162(m) of the Code, then such payments or benefits shall be
deferred to the extent necessary until such time as such payments would be

                                      -35-
<PAGE>   37
deductible under Section 162(m) of the Code. Either the Company or the Executive
may request a determination as to whether any payments would be subject to
limitations on deductibility under Section 162(m) of the Code and, if so
requested, such determination shall be made by independent legal counsel
selected by the Company and approved by the Executive. Payment may be delayed
pending any such determination, provided that the Executive shall be entitled to
interest on any delayed payment at the applicable Federal Rate provided for in
Section 7872(f)(2)(A) of the Code. The Executive shall also be entitled to
interest on any payments deferred as a result of the limitations on
deductibility under Section 162(m) of the Code at the applicable Federal Rate
provided for in Section 7872(f)(2)(A) of the Code.

        9. PARACHUTE PAYMENTS

               (a) Gross-Up Payment. In the event that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
under this Section 9(a)) (a "Payment") is determined to be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to the Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
such Payments.

                                      -36-
<PAGE>   38
               (b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.

               (c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such

                                      -37-
<PAGE>   39
claim and shall apprise the Company of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:

                      (i) Give the Company any information reasonably requested
               by it relating to such claim,

                      (ii) Take such action in connection with contesting such
               claim as the Company shall reasonably request in writing from
               time to time, including, without limitation, accepting legal
               representation with respect to such claim by an attorney
               reasonably selected by the Company,

                      (iii) Cooperate with the Company in good faith in order to
               contest such claim effectively, and

                      (iv) Permit the Company to participate in any proceedings
               relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection

                                      -38-
<PAGE>   40
with such contests and, at their sole discretion, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the control by the Company of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

               (d) Refunds. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Executive of
an

                                      -39-
<PAGE>   41
amount advanced by the Company pursuant to Section 9(c), a determination is made
that Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

        10. FULL SETTLEMENT

               The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(iv), such amounts shall not be reduced whether or not Executive obtains
other employment.

        11. SUCCESSORS

               (a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.

               (b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

               (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or

                                      -40-
<PAGE>   42
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean the Company as defined and any successor to its business
and/or assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

        12. ARBITRATION

               (a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion. The "right to
select arbitration" is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Executive
only he or she can use the arbitration procedure set forth in this section.

               (b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company regarding the interpretation of this
Agreement and the claim is finally denied by the Company in whole or in part,
such claim may be filed in writing with an arbitrator of the Executive's choice
who is selected by the method described in the next three sentences. The first
step of the selection shall consist of the Executive submitting a list of five
potential arbitrators to the Company. Each of the five arbitrators must be
either (1) a member of the National Academy of Arbitrators located in the State
of California or (2) a retired California

                                      -41-
<PAGE>   43
Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails to select an arbitrator in a
timely manner, the Executive shall then designate one of the five arbitrators as
the arbitrator for the dispute in question.

               (c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator may close the hearing at his or her discretion when
sufficient evidence to satisfy issuance of an award has been presented.

               (d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company has breached this Agreement,
he or she shall order the Company to immediately take the necessary steps to
remedy the breach. The award of the arbitrator shall be final and binding upon
the parties. The award may be enforced in any appropriate court as soon as
possible after it is rendered. If an action is brought to confirm the award,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.

               (e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'

                                      -42-
<PAGE>   44
fees incurred by the Company) including stenographic reporter, if employed,
shall be paid by the Executive. In the event that Executive is the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(including all attorneys' fees incurred by the Executive), including the fees of
a stenographic reporter if employed, shall be paid by the Company.

        13. GOVERNING LAW

               The laws of California shall govern the validity and
interpretation of this Agreement, with regard to conflicts of laws.

        14. CAPTIONS

               The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.

        15. AMENDMENT

               This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.

        16. NOTICES

               All notices and other communications regarding this Agreement
shall be in writing and shall be hand delivered to the other party or sent by
prepaid registered or certified mail, return receipt requested, addressed as
follows:

               If to the Executive:
                                    ----------------------------------

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

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

               If to the Company:   Southern California Water Company
                                    630 East Foothill Boulevard
                                    San Dimas, CA  91773
                                    Attn:  Secretary

                                      -43-
<PAGE>   45
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.

        17. SEVERABILITY

               The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

        18. WITHHOLDING TAXES

               The Company may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.

        19. NO WAIVER

               The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have under this Agreement, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right under this Agreement.

        20. AT-WILL EMPLOYMENT

               The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company prior to the
Change in Control Date is "at will" and, prior to the Change in Control Date,
the Executive's employment may be terminated by either the Executive or the
Company at any time, in which case the Executive shall have no

                                      -44-
<PAGE>   46
further rights under this Agreement. From and after the Change in Control Date,
this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.

        21. COUNTERPARTS

               This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.

                                      -45-
<PAGE>   47
               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above in
Los Angeles, California.

                                        SOUTHERN CALIFORNIA WATER COMPANY

                                        By      /s/  Floyd E. Wicks
                                                --------------------------------
                                        Title   President and C.E.O.

                                        EXECUTIVE

                                        /s/ Denise L. Kruger
                                        ----------------------------------------

                                      -46-
<PAGE>   48
                AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT

               This Amended and Restated Change-in-Control Agreement (the
"Agreement") is dated as of October 25, 1999, is entered into by and between
James B. Gallagher (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.

                                    RECITALS

               The Company considers it essential to the best interest of the
Company and its shareholders that the Executive be encouraged to remain with the
Company and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.

                                      -47-
<PAGE>   49
                              TERMS AND CONDITIONS

               The Executive and the Company hereby agree to the following terms
and conditions:

        1. TERM OF AGREEMENT

               If a Change in Control (as defined in Section 3) occurs on or
before the expiration date of this Agreement and while the Executive is still an
employee of the Company, then this Agreement will continue in effect for two
years from the date of such Change in Control and, if the Executive's employment
with the Company is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company under
this Agreement shall have been fulfilled. If no Change in Control occurs on or
before December 31, 2000, this Agreement shall expire; provided, however that
this Agreement shall be automatically extended for an additional two years to
December 31, 2002 if (i) a plan or agreement for a Change in Control has been
approved by the Board of Directors of the Company or American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company written notice at least 60 days prior to the expiration date that such
expiration date shall not be so extended. This Agreement shall continue to be
automatically extended for an additional two-year period and each succeeding
two-year period if a plan or agreement for a Change in Control has been approved
by the Board of Directors of the Company or AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.

                                      -48-
<PAGE>   50
        2. CHANGE IN CONTROL DATE

               The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company is terminated after approval by the
Board of Directors of the Company or AWR of a plan or agreement for a Change in
Control but prior to the date on which the Change in Control occurs, the "Change
in Control Date" shall mean the date immediately preceding the date of such
termination.

        3. CHANGE IN CONTROL

               A "Change in Control" shall mean any of the following events:

               (a) the dissolution or liquidation of either the Company or AWR,
unless its business is continued by another entity in which holders of AWR'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;

               (b) 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 or AWR, unless its business is continued by another entity in which
holders of AWR'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;

                                      -49-
<PAGE>   51
               (c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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;

               (d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or AWR, unless
the holders of AWR'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

               (e) a change of one-half or more of the members of the Board of
Directors of the Company or AWR within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within 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.

        4. EFFECTIVE PERIOD

               For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.

        5. TERMINATION OF EMPLOYMENT

               (a) Death or Disability: The Executive's employment shall
terminate automatically upon the Executive's death. If the Disability (as
defined below) of the Executive occurs during the Effective Period, the Company
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,

                                      -50-
<PAGE>   52
the Executive shall not have returned to full-time performance of his or her
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from his or her duties with the Company on a full-time basis for
180 consecutive business days as a result of a physical or mental condition
which prevents the Executive from performing the Executive's normal duties of
employment and which is (i) determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative and/or (ii) entitles the Executive to the
payment of long-term disability benefits from the Company's or AWR's long-term
disability plan commencing no later than the Disability Effective Date.

               (b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company may also terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall be
limited to the following:

                      (i) the Executive's failure to render services to the
               Company where such failure amounts to gross neglect or gross
               misconduct of the Executive's responsibility and duties,

                      (ii) the Executive's commission of an act of fraud or
               dishonesty against the Company or any affiliate of the Company,
               or

                      (iii) the Executive's conviction of a felony or other
               crime involving moral turpitude.

                                      -51-
<PAGE>   53
               (c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:

                      (i) the assignment to the Executive of any duties
               inconsistent in any respect with the Executive's position
               (including status, offices, titles and reporting requirements),
               authority, duties or responsibilities as in effect on the Change
               in Control Date, or any other action by the Company which results
               in a diminution in such position, authority, duties or
               responsibilities, excluding for this purpose an isolated,
               insubstantial and inadvertent action not taken in bad faith and
               which is remedied by the Company promptly after receipt of notice
               thereof given by the Executive;

                      (ii) any failure by the Company to reappoint the Executive
               to a position held by the Executive on the Change in Control
               Date, except as a result of the termination of the Executive's
               employment by the Company for Cause or Disability, the death of
               the Executive, or the termination of the Executive's employment
               by the Executive other than for Good Reason;

                      (iii) reduction by the Company in the Executive's base
               salary as in effect on the date hereof or as the same may be
               increased from time-to-time; (iv) the taking of any action by the
               Company (including the elimination of benefit plans without
               providing substitutes therefore or the reduction of the
               Executive's benefits thereunder) that would substantially
               diminish the aggregate value of the Executive's incentive awards
               and other fringe benefits including the

                                      -52-
<PAGE>   54
               executive benefits and perquisites from the levels in effect
               prior to the Change in Control Date;

                      (v) the Company's requiring the Executive to be based at
               any office or location which increases the distance from the
               Executive's home to the office location by more than 35 miles
               from the distance in effect as of the Change in Control Date;

                      (vi) any failure by the Company to comply with and satisfy
               Section 11(c) of this Agreement.

        6. OBLIGATIONS OF THE COMPANY UPON TERMINATION

               (a) Good Reason, Other Than for Cause or Disability: If the
Company shall terminate the Executive's employment other than for Cause or
Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company agrees,
subject to Section 8, to make the payments and provide the benefits described
below:

                      (i) The Company shall pay to the Executive in a cash lump
               sum within 10 days from the date of the Executive's termination
               of employment an amount equal to the product of (A) and (B),
               where (A) is 2.99 and (B) is the Executive's annual base salary
               at the highest of the rate in effect at any time during the three
               years preceding the date of termination. (ii) The Company shall
               also pay to the Executive in a cash lump sum within 10 days from
               the date of termination an amount equal to the sum of (A)
               Executive's base salary through the date of termination, plus (B)
               any

                                      -53-
<PAGE>   55
               compensation previously deferred by the Executive (together with
               any accrued earnings or interest thereon), plus (C) any accrued
               vacation pay, in each case to the extent not theretofore paid
               (the amounts referred to in this paragraph (ii) are hereinafter
               referred to as the "Accrued Obligations").

                      (iii) The Company shall also pay to the Executive in a
               cash lump sum within 10 days from the date of termination an
               amount equal to the excess of (A) over (B), where (A) is equal to
               the single sum actuarial equivalent of what would be the
               Executive's accrued benefits under the terms of the Southern
               California Water Company Pension Plan (or any successor thereto),
               including any supplemental retirement plan providing additional
               pension benefits, (hereinafter together referred to as the
               "Pension Plan") at time of the Executive's termination of
               employment, without regard to whether such benefits are "vested"
               thereunder, if the Executive were credited with an additional two
               years of continuous service after the termination of Executive's
               employment with the Company at the Executive's highest annual
               rate of compensation covered by such Pension Plan within the
               three years preceding the date of the termination of the
               Executive's employment with the Company and (B) is equal to the
               single sum actuarial equivalent of the Executive's accrued
               benefits under the Pension Plan at the time of the Executive's
               termination of employment. The payment under this paragraph (iii)
               shall not extinguish any rights the Executive has to benefits
               under the Pension Plan. For purposes of this paragraph,
               "actuarial equivalent" shall be determined using the actuarial
               assumptions used under the Pension Plan for determining the

                                      -54-
<PAGE>   56
               actuarial equivalence of different annuity forms of benefits. In
               no event shall the additional two years of continuous service
               referred to above cause the Executive to be deemed to be older
               than the Executive's actual age for any purpose under this
               Agreement.

                      (iv) For two years after the Executive's date of
               termination, or such longer period as may be provided by the
               terms of the appropriate plan, program, practice or policy, the
               Company shall continue to provide welfare benefits and fringe
               benefits and other perquisites to the Executive and/or the
               Executive's family at least equal to those which would have been
               provided to them if the Executive's employment had not been
               terminated (in accordance with the most favorable plans,
               practices, programs or policies of the Company and its affiliates
               applicable generally to other peer executives and their families
               immediately preceding the date of the Executive's termination of
               employment); provided, however, that if the Executive becomes
               employed by another employer and is eligible to receive medical
               or other welfare benefits under another employer-provided plan,
               the medical and other welfare benefits described herein shall be
               secondary to those provided under such other plan during such
               applicable period of eligibility. For purposes of determining
               eligibility (but not the time of commencement of benefits) of the
               Executive for any retiree benefits pursuant to such plans,
               practices, programs and policies, the Executive shall be
               considered to have remained employed until two years after the
               date of termination of employment and to have retired on the last
               day of such period. Following the period of

                                      -55-
<PAGE>   57
               continued benefits referred to in this subsection, the Executive
               and the Executive's family shall be given the right provided in
               Section 4980B of the Internal Revenue Code of 1986, as amended
               (the "Code"), to elect to continue benefits in all group medical
               plans. In the event that the Executive's participation in any of
               the plans, programs, practices or policies of the Company
               referred to in this subsection is barred by the terms of such
               plans, programs, practices or policies, the Company shall provide
               the Executive with benefits substantially similar to those which
               the Executive would be entitled as a participant in such plans,
               programs, practices or policies. At the end of the period of
               coverage, the Executive shall have the option to have assigned to
               the Executive, at no cost and with no apportionment of prepaid
               premiums, any assignable insurance policy owned by the Company
               and relating specifically to the Executive.

                      (v) The Company shall enable the Executive to purchase, at
               the end of the Effective Period, the automobile, if any, provided
               by the Company for the Executive's use at the time of the
               Executive's termination of employment at the wholesale value of
               such automobile at such time, as shown in the current addition of
               the National Auto Research Publication Blue Book. At the
               Executive's election, the Executive may retain any existing club
               memberships of the Executive purchased by the Company upon
               reimbursement to the Company of any membership costs paid by the
               Company.

                      (vi) To the extent not theretofore paid or provided, the
               Company shall timely pay or provide the Executive any other
               amounts or benefits required to be

                                      -56-
<PAGE>   58
               paid or provided or which the Executive is eligible to receive
               under any plan, program, policy, practice, contract or agreement
               of the Company and its affiliates (such other amounts and
               benefits being hereinafter referred to as "Other Benefits") in
               accordance with the terms of such plan, program, policy,
               practice, contract or agreement.

                      (vii) The Executive shall be entitled to interest on any
               payments not paid on a timely basis as provided in this Section
               6(a) at the applicable Federal Rate provided for in Section
               7872(f)(2)(A) of the Code.

               (b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.

               (c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.

               (d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates

                                      -57-
<PAGE>   59
employment during the Effective Period, excluding a termination for Good Reason,
this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and any benefits payable to Executive under a
plan, policy, practice, etc., referred to in Section 7 below. Accrued
Obligations shall be paid to the Executive in a cash lump sum within 60 days of
the Executive's termination of employment.

        7. NON-EXCLUSIVITY OF RIGHTS

               Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.

        8. LIMITATION ON BENEFITS

               Notwithstanding anything in this Agreement to the contrary, if
any payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company or another
entity or person, would not be deductible by the Company due to limitations
imposed by Section 162(m) of the Code, then such payments or benefits shall be
deferred to the extent necessary until such time as such payments would be

                                      -58-
<PAGE>   60
deductible under Section 162(m) of the Code. Either the Company or the Executive
may request a determination as to whether any payments would be subject to
limitations on deductibility under Section 162(m) of the Code and, if so
requested, such determination shall be made by independent legal counsel
selected by the Company and approved by the Executive. Payment may be delayed
pending any such determination, provided that the Executive shall be entitled to
interest on any delayed payment at the applicable Federal Rate provided for in
Section 7872(f)(2)(A) of the Code. The Executive shall also be entitled to
interest on any payments deferred as a result of the limitations on
deductibility under Section 162(m) of the Code at the applicable Federal Rate
provided for in Section 7872(f)(2)(A) of the Code.

        9. PARACHUTE PAYMENTS

               (a) Gross-Up Payment. In the event that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
under this Section 9(a)) (a "Payment") is determined to be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to the Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
such Payments.

                                      -59-
<PAGE>   61
               (b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.

               (c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such

                                      -60-
<PAGE>   62
claim and shall apprise the Company of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:

                      (i) Give the Company any information reasonably requested
               by it relating to such claim,

                      (ii) Take such action in connection with contesting such
               claim as the Company shall reasonably request in writing from
               time to time, including, without limitation, accepting legal
               representation with respect to such claim by an attorney
               reasonably selected by the Company,

                      (iii) Cooperate with the Company in good faith in order to
               contest such claim effectively, and

                      (iv) Permit the Company to participate in any proceedings
               relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection

                                      -61-
<PAGE>   63
with such contests and, at their sole discretion, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the control by the Company of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

               (d) Refunds. If , after the receipt by Executive of an amount
advanced by the Company pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Executive of
an

                                      -62-
<PAGE>   64
amount advanced by the Company pursuant to Section 9(c), a determination is made
that Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

        10. FULL SETTLEMENT

               The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(iv), such amounts shall not be reduced whether or not Executive obtains
other employment.

        11. SUCCESSORS

               (a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.

               (b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

               (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or

                                      -63-
<PAGE>   65
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean the Company as defined and any successor to its business
and/or assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

        12. ARBITRATION

               (a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion. The "right to
select arbitration" is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Executive
only he or she can use the arbitration procedure set forth in this section.

               (b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company regarding the interpretation of this
Agreement and the claim is finally denied by the Company in whole or in part,
such claim may be filed in writing with an arbitrator of the Executive's choice
who is selected by the method described in the next three sentences. The first
step of the selection shall consist of the Executive submitting a list of five
potential arbitrators to the Company. Each of the five arbitrators must be
either (1) a member of the National Academy of Arbitrators located in the State
of California or (2) a retired California

                                      -64-
<PAGE>   66
Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails to select an arbitrator in a
timely manner, the Executive shall then designate one of the five arbitrators as
the arbitrator for the dispute in question.

               (c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator may close the hearing at his or her discretion when
sufficient evidence to satisfy issuance of an award has been presented.

               (d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company has breached this Agreement,
he or she shall order the Company to immediately take the necessary steps to
remedy the breach. The award of the arbitrator shall be final and binding upon
the parties. The award may be enforced in any appropriate court as soon as
possible after it is rendered. If an action is brought to confirm the award,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.

               (e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'

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<PAGE>   67
fees incurred by the Company) including stenographic reporter, if employed,
shall be paid by the Executive. In the event that Executive is the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(including all attorneys' fees incurred by the Executive), including the fees of
a stenographic reporter if employed, shall be paid by the Company.

        13. GOVERNING LAW

               The laws of California shall govern the validity and
interpretation of this Agreement, with regard to conflicts of laws.

        14. CAPTIONS

               The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.

        15. AMENDMENT

               This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.

        16. NOTICES

               All notices and other communications regarding this Agreement
shall be in writing and shall be hand delivered to the other party or sent by
prepaid registered or certified mail, return receipt requested, addressed as
follows:

               If to the Executive:
                                    ----------------------------------

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

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

               If to the Company:   Southern California Water Company
                                    630 East Foothill Boulevard
                                    San Dimas, CA  91773
                                    Attn:  Secretary

                                      -66-
<PAGE>   68
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.

        17. SEVERABILITY

               The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

        18. WITHHOLDING TAXES

               The Company may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.

        19. NO WAIVER

               The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have under this Agreement, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right under this Agreement.

        20. AT-WILL EMPLOYMENT

               The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company prior to the
Change in Control Date is "at will" and, prior to the Change in Control Date,
the Executive's employment may be terminated by either the Executive or the
Company at any time, in which case the Executive shall have no

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<PAGE>   69
further rights under this Agreement. From and after the Change in Control Date,
this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.

        21. COUNTERPARTS

               This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.

                                      -68-
<PAGE>   70
               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above in
Los Angeles, California.

                                        SOUTHERN CALIFORNIA WATER COMPANY

                                        By      /s/  Floyd E. Wicks
                                                --------------------------------
                                        Title   President and C.E.O.

                                        EXECUTIVE

                                        /s/ James B. Gallagher
                                        ----------------------------------------

                                      -69-
<PAGE>   71
                AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT

               This Amended and Restated Change-in-Control Agreement (the
"Agreement") is dated as of October 25, 1999, is entered into by and between
Donald K. Saddoris (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.

                                    RECITALS

               The Company considers it essential to the best interest of the
Company and its shareholders that the Executive be encouraged to remain with the
Company and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.

                                      -70-
<PAGE>   72
                              TERMS AND CONDITIONS

               The Executive and the Company hereby agree to the following terms
and conditions:

        1. TERM OF AGREEMENT

               If a Change in Control (as defined in Section 3) occurs on or
before the expiration date of this Agreement and while the Executive is still an
employee of the Company, then this Agreement will continue in effect for two
years from the date of such Change in Control and, if the Executive's employment
with the Company is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company under
this Agreement shall have been fulfilled. If no Change in Control occurs on or
before December 31, 2000, this Agreement shall expire; provided, however that
this Agreement shall be automatically extended for an additional two years to
December 31, 2002 if (i) a plan or agreement for a Change in Control has been
approved by the Board of Directors of the Company or American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company written notice at least 60 days prior to the expiration date that such
expiration date shall not be so extended. This Agreement shall continue to be
automatically extended for an additional two-year period and each succeeding
two-year period if a plan or agreement for a Change in Control has been approved
by the Board of Directors of the Company or AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.

                                      -71-
<PAGE>   73
        2. CHANGE IN CONTROL DATE

               The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company is terminated after approval by the
Board of Directors of the Company or AWR of a plan or agreement for a Change in
Control but prior to the date on which the Change in Control occurs, the "Change
in Control Date" shall mean the date immediately preceding the date of such
termination.

        3. CHANGE IN CONTROL

               A "Change in Control" shall mean any of the following events:

               (a) the dissolution or liquidation of either the Company or AWR,
unless its business is continued by another entity in which holders of AWR'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;

               (b) 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 or AWR, unless its business is continued by another entity in which
holders of AWR'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;

                                      -72-
<PAGE>   74
               (c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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;

               (d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or AWR, unless
the holders of AWR'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

               (e) a change of one-half or more of the members of the Board of
Directors of the Company or AWR within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within 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.

        4. EFFECTIVE PERIOD

               For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.

        5. TERMINATION OF EMPLOYMENT

               (a) Death or Disability: The Executive's employment shall
terminate automatically upon the Executive's death. If the Disability (as
defined below) of the Executive occurs during the Effective Period, the Company
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,

                                      -73-
<PAGE>   75
the Executive shall not have returned to full-time performance of his or her
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from his or her duties with the Company on a full-time basis for
180 consecutive business days as a result of a physical or mental condition
which prevents the Executive from performing the Executive's normal duties of
employment and which is (i) determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative and/or (ii) entitles the Executive to the
payment of long-term disability benefits from the Company's or AWR's long-term
disability plan commencing no later than the Disability Effective Date.

               (b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company may also terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall be
limited to the following:

                      (i) the Executive's failure to render services to the
               Company where such failure amounts to gross neglect or gross
               misconduct of the Executive's responsibility and duties,

                      (ii) the Executive's commission of an act of fraud or
               dishonesty against the Company or any affiliate of the Company,
               or

                      (iii) the Executive's conviction of a felony or other
               crime involving moral turpitude.

                                      -74-
<PAGE>   76
               (c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:

                      (i) the assignment to the Executive of any duties
               inconsistent in any respect with the Executive's position
               (including status, offices, titles and reporting requirements),
               authority, duties or responsibilities as in effect on the Change
               in Control Date, or any other action by the Company which results
               in a diminution in such position, authority, duties or
               responsibilities, excluding for this purpose an isolated,
               insubstantial and inadvertent action not taken in bad faith and
               which is remedied by the Company promptly after receipt of notice
               thereof given by the Executive;

                      (ii) any failure by the Company to reappoint the Executive
               to a position held by the Executive on the Change in Control
               Date, except as a result of the termination of the Executive's
               employment by the Company for Cause or Disability, the death of
               the Executive, or the termination of the Executive's employment
               by the Executive other than for Good Reason;

                      (iii) reduction by the Company in the Executive's base
               salary as in effect on the date hereof or as the same may be
               increased from time-to-time;

                      (iv) the taking of any action by the Company (including
               the elimination of benefit plans without providing substitutes
               therefore or the reduction of the Executive's benefits
               thereunder) that would substantially diminish the aggregate value
               of the Executive's incentive awards and other fringe benefits
               including the

                                      -75-
<PAGE>   77
               executive benefits and perquisites from the levels in effect
               prior to the Change in Control Date;

                      (v) the Company's requiring the Executive to be based at
               any office or location which increases the distance from the
               Executive's home to the office location by more than 35 miles
               from the distance in effect as of the Change in Control Date;

                      (vi) any failure by the Company to comply with and satisfy
               Section 11(c) of this Agreement.

        6. OBLIGATIONS OF THE COMPANY UPON TERMINATION

               (a) Good Reason, Other Than for Cause or Disability: If the
Company shall terminate the Executive's employment other than for Cause or
Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company agrees,
subject to Section 8, to make the payments and provide the benefits described
below:

                      (i) The Company shall pay to the Executive in a cash lump
               sum within 10 days from the date of the Executive's termination
               of employment an amount equal to the product of (A) and (B),
               where (A) is 2.99 and (B) is the Executive's annual base salary
               at the highest of the rate in effect at any time during the three
               years preceding the date of termination.

                      (ii) The Company shall also pay to the Executive in a cash
               lump sum within 10 days from the date of termination an amount
               equal to the sum of (A) Executive's base salary through the date
               of termination, plus (B) any

                                      -76-
<PAGE>   78
               compensation previously deferred by the Executive (together with
               any accrued earnings or interest thereon), plus (C) any accrued
               vacation pay, in each case to the extent not theretofore paid
               (the amounts referred to in this paragraph (ii) are hereinafter
               referred to as the "Accrued Obligations").

                      (iii) The Company shall also pay to the Executive in a
               cash lump sum within 10 days from the date of termination an
               amount equal to the excess of (A) over (B), where (A) is equal to
               the single sum actuarial equivalent of what would be the
               Executive's accrued benefits under the terms of the Southern
               California Water Company Pension Plan (or any successor thereto),
               including any supplemental retirement plan providing additional
               pension benefits, (hereinafter together referred to as the
               "Pension Plan") at time of the Executive's termination of
               employment, without regard to whether such benefits are "vested"
               thereunder, if the Executive were credited with an additional two
               years of continuous service after the termination of Executive's
               employment with the Company at the Executive's highest annual
               rate of compensation covered by such Pension Plan within the
               three years preceding the date of the termination of the
               Executive's employment with the Company and (B) is equal to the
               single sum actuarial equivalent of the Executive's accrued
               benefits under the Pension Plan at the time of the Executive's
               termination of employment. The payment under this paragraph (iii)
               shall not extinguish any rights the Executive has to benefits
               under the Pension Plan. For purposes of this paragraph,
               "actuarial equivalent" shall be determined using the actuarial
               assumptions used under the Pension Plan for determining the

                                      -77-
<PAGE>   79
               actuarial equivalence of different annuity forms of benefits. In
               no event shall the additional two years of continuous service
               referred to above cause the Executive to be deemed to be older
               than the Executive's actual age for any purpose under this
               Agreement.

                      (iv) For two years after the Executive's date of
               termination, or such longer period as may be provided by the
               terms of the appropriate plan, program, practice or policy, the
               Company shall continue to provide welfare benefits and fringe
               benefits and other perquisites to the Executive and/or the
               Executive's family at least equal to those which would have been
               provided to them if the Executive's employment had not been
               terminated (in accordance with the most favorable plans,
               practices, programs or policies of the Company and its affiliates
               applicable generally to other peer executives and their families
               immediately preceding the date of the Executive's termination of
               employment); provided, however, that if the Executive becomes
               employed by another employer and is eligible to receive medical
               or other welfare benefits under another employer-provided plan,
               the medical and other welfare benefits described herein shall be
               secondary to those provided under such other plan during such
               applicable period of eligibility. For purposes of determining
               eligibility (but not the time of commencement of benefits) of the
               Executive for any retiree benefits pursuant to such plans,
               practices, programs and policies, the Executive shall be
               considered to have remained employed until two years after the
               date of termination of employment and to have retired on the last
               day of such period. Following the period of

                                      -78-
<PAGE>   80
               continued benefits referred to in this subsection, the Executive
               and the Executive's family shall be given the right provided in
               Section 4980B of the Internal Revenue Code of 1986, as amended
               (the "Code"), to elect to continue benefits in all group medical
               plans. In the event that the Executive's participation in any of
               the plans, programs, practices or policies of the Company
               referred to in this subsection is barred by the terms of such
               plans, programs, practices or policies, the Company shall provide
               the Executive with benefits substantially similar to those which
               the Executive would be entitled as a participant in such plans,
               programs, practices or policies. At the end of the period of
               coverage, the Executive shall have the option to have assigned to
               the Executive, at no cost and with no apportionment of prepaid
               premiums, any assignable insurance policy owned by the Company
               and relating specifically to the Executive.

                      (v) The Company shall enable the Executive to purchase, at
               the end of the Effective Period, the automobile, if any, provided
               by the Company for the Executive's use at the time of the
               Executive's termination of employment at the wholesale value of
               such automobile at such time, as shown in the current addition of
               the National Auto Research Publication Blue Book. At the
               Executive's election, the Executive may retain any existing club
               memberships of the Executive purchased by the Company upon
               reimbursement to the Company of any membership costs paid by the
               Company.

                      (vi) To the extent not theretofore paid or provided, the
               Company shall timely pay or provide the Executive any other
               amounts or benefits required to be

                                      -79-
<PAGE>   81
               paid or provided or which the Executive is eligible to receive
               under any plan, program, policy, practice, contract or agreement
               of the Company and its affiliates (such other amounts and
               benefits being hereinafter referred to as "Other Benefits") in
               accordance with the terms of such plan, program, policy,
               practice, contract or agreement.

                      (vii) The Executive shall be entitled to interest on any
               payments not paid on a timely basis as provided in this Section
               6(a) at the applicable Federal Rate provided for in Section
               7872(f)(2)(A) of the Code.

               (b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.

               (c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.

               (d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates

                                      -80-
<PAGE>   82
employment during the Effective Period, excluding a termination for Good Reason,
this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and any benefits payable to Executive under a
plan, policy, practice, etc., referred to in Section 7 below. Accrued
Obligations shall be paid to the Executive in a cash lump sum within 60 days of
the Executive's termination of employment.

        7. NON-EXCLUSIVITY OF RIGHTS

               Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.

        8. LIMITATION ON BENEFITS

               Notwithstanding anything in this Agreement to the contrary, if
any payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company or another
entity or person, would not be deductible by the Company due to limitations
imposed by Section 162(m) of the Code, then such payments or benefits shall be
deferred to the extent necessary until such time as such payments would be

                                      -81-
<PAGE>   83
deductible under Section 162(m) of the Code. Either the Company or the Executive
may request a determination as to whether any payments would be subject to
limitations on deductibility under Section 162(m) of the Code and, if so
requested, such determination shall be made by independent legal counsel
selected by the Company and approved by the Executive. Payment may be delayed
pending any such determination, provided that the Executive shall be entitled to
interest on any delayed payment at the applicable Federal Rate provided for in
Section 7872(f)(2)(A) of the Code. The Executive shall also be entitled to
interest on any payments deferred as a result of the limitations on
deductibility under Section 162(m) of the Code at the applicable Federal Rate
provided for in Section 7872(f)(2)(A) of the Code.

        9. PARACHUTE PAYMENTS

               (a) Gross-Up Payment. In the event that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
under this Section 9(a)) (a "Payment") is determined to be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to the Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
such Payments.

                                      -82-
<PAGE>   84

               (b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.

               (c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such

                                      -83-
<PAGE>   85
claim and shall apprise the Company of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:

                      (i) Give the Company any information reasonably requested
               by it relating to such claim,

                      (ii) Take such action in connection with contesting such
               claim as the Company shall reasonably request in writing from
               time to time, including, without limitation, accepting legal
               representation with respect to such claim by an attorney
               reasonably selected by the Company,

                      (iii) Cooperate with the Company in good faith in order to
               contest such claim effectively, and

                      (iv) Permit the Company to participate in any proceedings
               relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection

                                      -84-
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with such contests and, at their sole discretion, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the control by the Company of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

               (d) Refunds. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Executive of
an

                                      -85-
<PAGE>   87
amount advanced by the Company pursuant to Section 9(c), a determination is made
that Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

        10. FULL SETTLEMENT

               The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(iv), such amounts shall not be reduced whether or not Executive obtains
other employment.

        11. SUCCESSORS

               (a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.

               (b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

               (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or

                                      -86-
<PAGE>   88
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean the Company as defined and any successor to its business
and/or assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

        12. ARBITRATION

               (a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion. The "right to
select arbitration" is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Executive
only he or she can use the arbitration procedure set forth in this section.

               (b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company regarding the interpretation of this
Agreement and the claim is finally denied by the Company in whole or in part,
such claim may be filed in writing with an arbitrator of the Executive's choice
who is selected by the method described in the next three sentences. The first
step of the selection shall consist of the Executive submitting a list of five
potential arbitrators to the Company. Each of the five arbitrators must be
either (1) a member of the National Academy of Arbitrators located in the State
of California or (2) a retired California

                                      -87-
<PAGE>   89
Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails to select an arbitrator in a
timely manner, the Executive shall then designate one of the five arbitrators as
the arbitrator for the dispute in question.

               (c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator may close the hearing at his or her discretion when
sufficient evidence to satisfy issuance of an award has been presented.

               (d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company has breached this Agreement,
he or she shall order the Company to immediately take the necessary steps to
remedy the breach. The award of the arbitrator shall be final and binding upon
the parties. The award may be enforced in any appropriate court as soon as
possible after it is rendered. If an action is brought to confirm the award,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.

               (e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'

                                      -88-
<PAGE>   90
fees incurred by the Company) including stenographic reporter, if employed,
shall be paid by the Executive. In the event that Executive is the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(including all attorneys' fees incurred by the Executive), including the fees of
a stenographic reporter if employed, shall be paid by the Company.

        13. GOVERNING LAW

               The laws of California shall govern the validity and
interpretation of this Agreement, with regard to conflicts of laws.

        14. CAPTIONS

               The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.

        15. AMENDMENT

               This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.

        16. NOTICES

               All notices and other communications regarding this Agreement
shall be in writing and shall be hand delivered to the other party or sent by
prepaid registered or certified mail, return receipt requested, addressed as
follows:

               If to the Executive:
                                    ----------------------------------

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

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

               If to the Company:   Southern California Water Company
                                    630 East Foothill Boulevard
                                    San Dimas, CA  91773
                                    Attn:  Secretary

                                      -89-
<PAGE>   91
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.

        17. SEVERABILITY

               The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

        18. WITHHOLDING TAXES

               The Company may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.

        19. NO WAIVER

               The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have under this Agreement, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right under this Agreement.

        20. AT-WILL EMPLOYMENT

               The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company prior to the
Change in Control Date is "at will" and, prior to the Change in Control Date,
the Executive's employment may be terminated by either the Executive or the
Company at any time, in which case the Executive shall have no

                                      -90-
<PAGE>   92
further rights under this Agreement. From and after the Change in Control Date,
this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.

        21. COUNTERPARTS

               This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.

                                      -91-
<PAGE>   93
               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above in
Los Angeles, California.

                                        SOUTHERN CALIFORNIA WATER COMPANY

                                        By      /s/  Floyd E. Wicks
                                                --------------------------------
                                        Title   President and C.E.O.

                                        EXECUTIVE

                                        /s/ Donald K. Saddoris
                                        ----------------------------------------

                                      -92-
<PAGE>   94
                AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT

               This Amended and Restated Change-in-Control Agreement (the
"Agreement") is dated as of October 25, 1999, is entered into by and between
Joseph F. Young (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.

                                    RECITALS

               The Company considers it essential to the best interest of the
Company and its shareholders that the Executive be encouraged to remain with the
Company and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.

                                      -93-
<PAGE>   95
                              TERMS AND CONDITIONS

               The Executive and the Company hereby agree to the following terms
and conditions:

        1. TERM OF AGREEMENT

               If a Change in Control (as defined in Section 3) occurs on or
before the expiration date of this Agreement and while the Executive is still an
employee of the Company, then this Agreement will continue in effect for two
years from the date of such Change in Control and, if the Executive's employment
with the Company is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company under
this Agreement shall have been fulfilled. If no Change in Control occurs on or
before December 31, 2000, this Agreement shall expire; provided, however that
this Agreement shall be automatically extended for an additional two years to
December 31, 2002 if (i) a plan or agreement for a Change in Control has been
approved by the Board of Directors of the Company or American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company written notice at least 60 days prior to the expiration date that such
expiration date shall not be so extended. This Agreement shall continue to be
automatically extended for an additional two-year period and each succeeding
two-year period if a plan or agreement for a Change in Control has been approved
by the Board of Directors of the Company or AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.

                                      -94-
<PAGE>   96
        2. CHANGE IN CONTROL DATE

               The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company is terminated after approval by the
Board of Directors of the Company or AWR of a plan or agreement for a Change in
Control but prior to the date on which the Change in Control occurs, the "Change
in Control Date" shall mean the date immediately preceding the date of such
termination.

        3. CHANGE IN CONTROL

               A "Change in Control" shall mean any of the following events:

               (a) the dissolution or liquidation of either the Company or AWR,
unless its business is continued by another entity in which holders of AWR'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;

               (b) 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 or AWR, unless its business is continued by another entity in which
holders of AWR'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;

                                      -95-
<PAGE>   97
               (c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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;

               (d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or AWR, unless
the holders of AWR'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

               (e) a change of one-half or more of the members of the Board of
Directors of the Company or AWR within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within 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.

        4. EFFECTIVE PERIOD

               For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.

        5. TERMINATION OF EMPLOYMENT

               (a) Death or Disability: The Executive's employment shall
terminate automatically upon the Executive's death. If the Disability (as
defined below) of the Executive occurs during the Effective Period, the Company
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,

                                      -96-
<PAGE>   98
the Executive shall not have returned to full-time performance of his or her
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from his or her duties with the Company on a full-time basis for
180 consecutive business days as a result of a physical or mental condition
which prevents the Executive from performing the Executive's normal duties of
employment and which is (i) determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative and/or (ii) entitles the Executive to the
payment of long-term disability benefits from the Company's or AWR's long-term
disability plan commencing no later than the Disability Effective Date.

               (b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company may also terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall be
limited to the following:

                      (i) the Executive's failure to render services to the
               Company where such failure amounts to gross neglect or gross
               misconduct of the Executive's responsibility and duties,

                      (ii) the Executive's commission of an act of fraud or
               dishonesty against the Company or any affiliate of the Company,
               or

                      (iii) the Executive's conviction of a felony or other
               crime involving moral turpitude.

                                      -97-
<PAGE>   99
               (c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:

                      (i) the assignment to the Executive of any duties
               inconsistent in any respect with the Executive's position
               (including status, offices, titles and reporting requirements),
               authority, duties or responsibilities as in effect on the Change
               in Control Date, or any other action by the Company which results
               in a diminution in such position, authority, duties or
               responsibilities, excluding for this purpose an isolated,
               insubstantial and inadvertent action not taken in bad faith and
               which is remedied by the Company promptly after receipt of notice
               thereof given by the Executive;

                      (ii) any failure by the Company to reappoint the Executive
               to a position held by the Executive on the Change in Control
               Date, except as a result of the termination of the Executive's
               employment by the Company for Cause or Disability, the death of
               the Executive, or the termination of the Executive's employment
               by the Executive other than for Good Reason;

                      (iii) reduction by the Company in the Executive's base
               salary as in effect on the date hereof or as the same may be
               increased from time-to-time; (iv) the taking of any action by the
               Company (including the elimination of benefit plans without
               providing substitutes therefore or the reduction of the
               Executive's benefits thereunder) that would substantially
               diminish the aggregate value of the Executive's incentive awards
               and other fringe benefits including the

                                      -98-
<PAGE>   100
               executive benefits and perquisites from the levels in effect
               prior to the Change in Control Date;

                      (v) the Company's requiring the Executive to be based at
               any office or location which increases the distance from the
               Executive's home to the office location by more than 35 miles
               from the distance in effect as of the Change in Control Date;

                      (vi) any failure by the Company to comply with and satisfy
               Section 11(c) of this Agreement.

        6. OBLIGATIONS OF THE COMPANY UPON TERMINATION

               (a) Good Reason, Other Than for Cause or Disability: If the
Company shall terminate the Executive's employment other than for Cause or
Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company agrees,
subject to Section 8, to make the payments and provide the benefits described
below:

                      (i) The Company shall pay to the Executive in a cash lump
               sum within 10 days from the date of the Executive's termination
               of employment an amount equal to the product of (A) and (B),
               where (A) is 2.99 and (B) is the Executive's annual base salary
               at the highest of the rate in effect at any time during the three
               years preceding the date of termination.

                      (ii) The Company shall also pay to the Executive in a cash
               lump sum within 10 days from the date of termination an amount
               equal to the sum of (A) Executive's base salary through the date
               of termination, plus (B) any

                                      -99-
<PAGE>   101
               compensation previously deferred by the Executive (together with
               any accrued earnings or interest thereon), plus (C) any accrued
               vacation pay, in each case to the extent not theretofore paid
               (the amounts referred to in this paragraph (ii) are hereinafter
               referred to as the "Accrued Obligations").

                      (iii) The Company shall also pay to the Executive in a
               cash lump sum within 10 days from the date of termination an
               amount equal to the excess of (A) over (B), where (A) is equal to
               the single sum actuarial equivalent of what would be the
               Executive's accrued benefits under the terms of the Southern
               California Water Company Pension Plan (or any successor thereto),
               including any supplemental retirement plan providing additional
               pension benefits, (hereinafter together referred to as the
               "Pension Plan") at time of the Executive's termination of
               employment, without regard to whether such benefits are "vested"
               thereunder, if the Executive were credited with an additional two
               years of continuous service after the termination of Executive's
               employment with the Company at the Executive's highest annual
               rate of compensation covered by such Pension Plan within the
               three years preceding the date of the termination of the
               Executive's employment with the Company and (B) is equal to the
               single sum actuarial equivalent of the Executive's accrued
               benefits under the Pension Plan at the time of the Executive's
               termination of employment. The payment under this paragraph (iii)
               shall not extinguish any rights the Executive has to benefits
               under the Pension Plan. For purposes of this paragraph,
               "actuarial equivalent" shall be determined using the actuarial
               assumptions used under the Pension Plan for determining the

                                     -100-
<PAGE>   102
               actuarial equivalence of different annuity forms of benefits. In
               no event shall the additional two years of continuous service
               referred to above cause the Executive to be deemed to be older
               than the Executive's actual age for any purpose under this
               Agreement.

                      (iv) For two years after the Executive's date of
               termination, or such longer period as may be provided by the
               terms of the appropriate plan, program, practice or policy, the
               Company shall continue to provide welfare benefits and fringe
               benefits and other perquisites to the Executive and/or the
               Executive's family at least equal to those which would have been
               provided to them if the Executive's employment had not been
               terminated (in accordance with the most favorable plans,
               practices, programs or policies of the Company and its affiliates
               applicable generally to other peer executives and their families
               immediately preceding the date of the Executive's termination of
               employment); provided, however, that if the Executive becomes
               employed by another employer and is eligible to receive medical
               or other welfare benefits under another employer-provided plan,
               the medical and other welfare benefits described herein shall be
               secondary to those provided under such other plan during such
               applicable period of eligibility. For purposes of determining
               eligibility (but not the time of commencement of benefits) of the
               Executive for any retiree benefits pursuant to such plans,
               practices, programs and policies, the Executive shall be
               considered to have remained employed until two years after the
               date of termination of employment and to have retired on the last
               day of such period. Following the period of

                                     -101-
<PAGE>   103
               continued benefits referred to in this subsection, the Executive
               and the Executive's family shall be given the right provided in
               Section 4980B of the Internal Revenue Code of 1986, as amended
               (the "Code"), to elect to continue benefits in all group medical
               plans. In the event that the Executive's participation in any of
               the plans, programs, practices or policies of the Company
               referred to in this subsection is barred by the terms of such
               plans, programs, practices or policies, the Company shall provide
               the Executive with benefits substantially similar to those which
               the Executive would be entitled as a participant in such plans,
               programs, practices or policies. At the end of the period of
               coverage, the Executive shall have the option to have assigned to
               the Executive, at no cost and with no apportionment of prepaid
               premiums, any assignable insurance policy owned by the Company
               and relating specifically to the Executive.

                      (v) The Company shall enable the Executive to purchase, at
               the end of the Effective Period, the automobile, if any, provided
               by the Company for the Executive's use at the time of the
               Executive's termination of employment at the wholesale value of
               such automobile at such time, as shown in the current addition of
               the National Auto Research Publication Blue Book. At the
               Executive's election, the Executive may retain any existing club
               memberships of the Executive purchased by the Company upon
               reimbursement to the Company of any membership costs paid by the
               Company.

                      (vi) To the extent not theretofore paid or provided, the
               Company shall timely pay or provide the Executive any other
               amounts or benefits required to be

                                     -102-
<PAGE>   104
               paid or provided or which the Executive is eligible to receive
               under any plan, program, policy, practice, contract or agreement
               of the Company and its affiliates (such other amounts and
               benefits being hereinafter referred to as "Other Benefits") in
               accordance with the terms of such plan, program, policy,
               practice, contract or agreement.

                      (vii) The Executive shall be entitled to interest on any
               payments not paid on a timely basis as provided in this Section
               6(a) at the applicable Federal Rate provided for in Section
               7872(f)(2)(A) of the Code.

               (b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.

               (c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.

               (d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates

                                     -103-
<PAGE>   105
employment during the Effective Period, excluding a termination for Good Reason,
this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and any benefits payable to Executive under a
plan, policy, practice, etc., referred to in Section 7 below. Accrued
Obligations shall be paid to the Executive in a cash lump sum within 60 days of
the Executive's termination of employment.

        7. NON-EXCLUSIVITY OF RIGHTS

               Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.

        8. LIMITATION ON BENEFITS

               Notwithstanding anything in this Agreement to the contrary, if
any payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company or another
entity or person, would not be deductible by the Company due to limitations
imposed by Section 162(m) of the Code, then such payments or benefits shall be
deferred to the extent necessary until such time as such payments would be

                                     -104-
<PAGE>   106
deductible under Section 162(m) of the Code. Either the Company or the Executive
may request a determination as to whether any payments would be subject to
limitations on deductibility under Section 162(m) of the Code and, if so
requested, such determination shall be made by independent legal counsel
selected by the Company and approved by the Executive. Payment may be delayed
pending any such determination, provided that the Executive shall be entitled to
interest on any delayed payment at the applicable Federal Rate provided for in
Section 7872(f)(2)(A) of the Code. The Executive shall also be entitled to
interest on any payments deferred as a result of the limitations on
deductibility under Section 162(m) of the Code at the applicable Federal Rate
provided for in Section 7872(f)(2)(A) of the Code.

        9. PARACHUTE PAYMENTS

               (a) Gross-Up Payment. In the event that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
under this Section 9(a)) (a "Payment") is determined to be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to the Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
such Payments.

                                     -105-
<PAGE>   107
               (b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.

               (c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such

                                     -106-
<PAGE>   108

claim and shall apprise the Company of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:

                      (i) Give the Company any information reasonably requested
               by it relating to such claim,

                      (ii) Take such action in connection with contesting such
               claim as the Company shall reasonably request in writing from
               time to time, including, without limitation, accepting legal
               representation with respect to such claim by an attorney
               reasonably selected by the Company,

                      (iii) Cooperate with the Company in good faith in order to
               contest such claim effectively, and

                      (iv) Permit the Company to participate in any proceedings
               relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection

                                     -107-
<PAGE>   109
with such contests and, at their sole discretion, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the control by the Company of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

               (d) Refunds. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Executive of
an

                                     -108-
<PAGE>   110
amount advanced by the Company pursuant to Section 9(c), a determination is made
that Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

        10. FULL SETTLEMENT

               The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(iv), such amounts shall not be reduced whether or not Executive obtains
other employment.

        11. SUCCESSORS

               (a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.

               (b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

               (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or

                                     -109-
<PAGE>   111
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean the Company as defined and any successor to its business
and/or assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

        12. ARBITRATION

               (a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion. The "right to
select arbitration" is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Executive
only he or she can use the arbitration procedure set forth in this section.

               (b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company regarding the interpretation of this
Agreement and the claim is finally denied by the Company in whole or in part,
such claim may be filed in writing with an arbitrator of the Executive's choice
who is selected by the method described in the next three sentences. The first
step of the selection shall consist of the Executive submitting a list of five
potential arbitrators to the Company. Each of the five arbitrators must be
either (1) a member of the National Academy of Arbitrators located in the State
of California or (2) a retired California

                                     -110-
<PAGE>   112
Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails to select an arbitrator in a
timely manner, the Executive shall then designate one of the five arbitrators as
the arbitrator for the dispute in question.

               (c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator may close the hearing at his or her discretion when
sufficient evidence to satisfy issuance of an award has been presented.

               (d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company has breached this Agreement,
he or she shall order the Company to immediately take the necessary steps to
remedy the breach. The award of the arbitrator shall be final and binding upon
the parties. The award may be enforced in any appropriate court as soon as
possible after it is rendered. If an action is brought to confirm the award,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.

               (e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'

                                     -111-
<PAGE>   113
fees incurred by the Company) including stenographic reporter, if employed,
shall be paid by the Executive. In the event that Executive is the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(including all attorneys' fees incurred by the Executive), including the fees of
a stenographic reporter if employed, shall be paid by the Company.

        13. GOVERNING LAW

               The laws of California shall govern the validity and
interpretation of this Agreement, with regard to conflicts of laws.

        14. CAPTIONS

               The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.

        15. AMENDMENT

               This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.

        16. NOTICES

               All notices and other communications regarding this Agreement
shall be in writing and shall be hand delivered to the other party or sent by
prepaid registered or certified mail, return receipt requested, addressed as
follows:

               If to the Executive:
                                    ----------------------------------

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

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

               If to the Company:   Southern California Water Company
                                    630 East Foothill Boulevard
                                    San Dimas, CA  91773
                                    Attn:  Secretary

                                     -112-
<PAGE>   114
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.

        17. SEVERABILITY

               The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

        18. WITHHOLDING TAXES

               The Company may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.

        19. NO WAIVER

               The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have under this Agreement, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right under this Agreement.

        20. AT-WILL EMPLOYMENT

               The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company prior to the
Change in Control Date is "at will" and, prior to the Change in Control Date,
the Executive's employment may be terminated by either the Executive or the
Company at any time, in which case the Executive shall have no

                                     -113-
<PAGE>   115
further rights under this Agreement. From and after the Change in Control Date,
this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.

        21. COUNTERPARTS

               This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.

                                     -114-
<PAGE>   116
               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above in
Los Angeles, California.

                                        SOUTHERN CALIFORNIA WATER COMPANY

                                        By      /s/  Floyd E. Wicks
                                                --------------------------------
                                        Title   President and C.E.O.

                                        EXECUTIVE

                                        /s/ Joseph F. Young
                                        ----------------------------------------

                                     -115-<PAGE>   1

                                                                   EXHIBIT 10.16

           SOUTHERN CALIFORNIA WATER COMPANY PENSION RESTORATION PLAN

<PAGE>   2

                       SOUTHERN CALIFORNIA WATER COMPANY
                            PENSION RESTORATION PLAN
<PAGE>   3

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>                                                                                           <C>
ARTICLE I..................................................................................      1
        1.1 - Title........................................................................      1
        1.2 - Purpose......................................................................      1
        1.3 - Definitions..................................................................      1
ARTICLE II.................................................................................      2
        2.1 - Eligibility Requirements.....................................................      3
ARTICLE III................................................................................      3
        3.1 - Payment......................................................................      3
ARTICLE IV.................................................................................      3
        4.1 - Retirement Benefit...........................................................      3
        4.2 - Benefit Limitation...........................................................      4
        4.3 - Payment of Retirement Benefits...............................................      4
        4.4 - Small Benefit................................................................      5
        4.5 - Forfeiture of Benefits.......................................................      5
        4.6 - Spouse Pre-Retirement Death Benefit..........................................      5
ARTICLE V..................................................................................      6
        5.1 - Committee....................................................................      6
        5.2 - Agents.......................................................................      6
        5.3 - Binding Effect of Decisions..................................................      7
        5.4 - Indemnity....................................................................      7
        5.5 - Claim Procedure..............................................................      7
ARTICLE VI.................................................................................      8
        6.1 - Amendments and Termination...................................................      8
        6.2 - Protection of Accrued Benefits...............................................      8
ARTICLE VII................................................................................      9
        7.1 - Unfunded Plan................................................................      9
        7.2 - Unsecured General Creditor...................................................      9
        7.3 - Trust Fund...................................................................     10
        7.4 - Nonassignability.............................................................     10
        7.5 - Limitation on Participants' Rights...........................................     10
        7.6 - Participants Bound...........................................................     11
        7.7 - Receipt and Release..........................................................     11
        7.8 - Federal Law Governs..........................................................     11
        7.9 - Headings and Subheadings.....................................................     12
        7.10 -  Successors and Assigns.....................................................     12
</TABLE>

<PAGE>   4

                        SOUTHERN CALIFORNIA WATER COMPANY
                            PENSION RESTORATION PLAN

        THIS PLAN is adopted, effective the 1st day of January, 1997, by
SOUTHERN CALIFORNIA WATER COMPANY, a California corporation ("Company"), and
evidences the terms of a Pension Restoration Plan for certain executives.

                               W I T N E S S E T H

                                    ARTICLE I
                         TITLE, PURPOSE AND DEFINITIONS

1.1 - Title.

        This plan shall be known as the "Southern California Water Company
Pension Restoration Plan."

1.2 - Purpose.

        The purpose of this Plan is to supplement retirement benefits payable to
certain participants in the Southern California Water Company Pension Plan, as
amended and in effect from time to time ("Pension Plan") by making up benefits
which are reduced by virtue of Sections 401(a)(17) or 415 of the Internal
Revenue Code of 1986. No payment shall be made under this Plan which duplicates
a benefit payable under any other deferred compensation plan or employment
agreement of the Company.

1.3 - Definitions.

<PAGE>   5

               Unless defined herein, any word, phrase or term used in this Plan
with initial capitals shall have the meaning given therefor in the Pension Plan.

               "Company" means Southern California Water Company or any
successor corporation by merger, consolidation, or otherwise.

               "Employer" means the Company and any subsidiary or any other
member of its consolidated group (for federal tax purposes) designated by the
Board of Directors to participate in the Plan.

               "Eligible Employee" means each individual who meets each of the
following requirements: (1) he or she is an officer of the Employer; (2) he or
she is a participant in the Pension Plan; (3) his or her Pension Plan benefits
are reduced by the application of Sections 401(a)(17) or 415 of the Code; and
(4) he or she is designated as an Eligible Employee by the Board of Directors.

               "Participant" means any Eligible Employee who is eligible for
participation in this Plan as specified in Section 2.1.

               "Plan" means the Southern California Water Company Pension
Restoration Plan as set forth in this Agreement and all subsequent amendments
hereto.

               "Plan Year" means the calendar year.

                                   ARTICLE II
                                  PARTICIPATION

                                       2
<PAGE>   6

2.1 - Eligibility Requirements.

        An Employee who is an Eligible Employee shall become a Participant on
the later of the date he or she becomes vested under the Pension Plan or becomes
an Eligible Employee.

                                   ARTICLE III
                               PAYMENT OF BENEFITS

3.1 - Payment.

        There shall be no funding of any benefit which may become payable
hereunder. The Company may, but is not obligated to, invest in any assets or in
life insurance policies which it deems desirable to provide assets for payments
under this Plan but all such assets or life insurance policies shall remain the
general assets of the Company. In connection with any such investments and as a
condition of further participation in this Plan, Participants shall execute any
documentation reasonably requested by the Company.

                                   ARTICLE IV
                               RETIREMENT BENEFITS

4.1 - Retirement Benefit.

        Subject to Section 4.3, a Participant's retirement benefit under this
Plan shall equal the excess of A over B where:

                                       3
<PAGE>   7

        A equals the Participant's vested retirement benefit under the Pension
        Plan, commencing on the date benefits commence under the Pension Plan,
        and payable in form of benefit elected by the Participant (and spouse,
        if applicable) under the Pension Plan, calculated by ignoring Sections
        401(a)(17) and 415 of the Code (and the Pension Plan provisions
        implementing those Code sections), and

        B equals the vested retirement benefit actually payable under the
        Pension Plan, commencing on the date benefits commence under the Pension
        Plan, and payable in form of benefit elected by the Participant (and
        spouse, if applicable) under the Pension Plan.

4.2 - Benefit Limitation.

        Notwithstanding any other provisions of the Plan, in the event that any
benefit provided under this agreement would, in the opinion of counsel for the
Company, not be deductible in whole or in part in the calculation of the federal
income tax of the Company by reason of Section 280G of the Internal Revenue Code
of 1986 (the "Code"), the aggregate benefits provided hereunder shall be reduced
so that no portion of any amount which is paid to the Participant or Beneficiary
is not deductible for tax purposes by reason of Section 280G of the Code.

4.3 - Payment of Retirement Benefits.

        Upon a Participant's commencement of benefits under the Pension Plan,
the Employer shall commence to pay to such retired Participant (or beneficiary,
if applicable, after

                                       4
<PAGE>   8

the Participant's death) the monthly retirement benefit to which the Participant
is entitled under this Plan, commencing on the date benefits commence under the
Pension Plan, and payable in form of benefit elected by the Participant (and
spouse, if applicable) under the Pension Plan. No benefits shall be payable
under this Plan while the Participant is an Employee.

4.4 - Small Benefit.

        Notwithstanding any other provision or provisions of this Plan to the
contrary, if any benefit hereunder is for an amount of less than fifty dollars
per month, such benefit shall instead be paid in a lump sum which is the
Actuarial Equivalent of such monthly benefit.

4.5 - Forfeiture of Benefits.

        Notwithstanding any provision of this Plan to the contrary, no benefits
shall be payable under this Plan with respect to any Participant if the
Participant confesses to, is convicted of, or pleads no contest to, any act of
fraud, theft or dishonesty arising in the course of, or in connection with, his
or her employment with the Employer.

4.6 - Spouse Pre-Retirement Death Benefit.

        If a Participant's spouse is entitled to a pre-retirement death benefit
under Section 4.12 of the Pension Plan, the monthly benefit, if any, payable
upon the death of a Participant to the Participant's spouse, commencing upon the
date that monthly benefits to such spouse commence under Section 4.12 of the
Pension Plan and payable for the period such benefit is payable under the
Pension Plan, shall be equal to the excess, if any, of:

                                       5
<PAGE>   9

        (a) The monthly death benefit determined in accordance with Section 4.12
        of the Pension Plan, calculated by ignoring Sections 401(a)(17) and 415
        of the Code (and the Pension Plan provisions implementing those Code
        sections),

                                      over

        (b) The amount of the monthly spouse death benefit payable to the
        Participant's spouse pursuant to Section 4.12 of the Pension Plan.

No benefits under this Section 4.7 shall be paid if the benefits payable
pursuant to any other provisions of this Article IV have already commenced.

                                    ARTICLE V
                                    COMMITTEE

5.1 - Committee.

        This Plan shall be administered by the Committee. The Committee shall
have the authority to (i) make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Plan and (ii) decide or
resolve any and all questions, including interpretations and constructions of
this Plan as may arise in connection with the Plan. The Committee shall also
have all rights and duties set forth in Section 6.3 of the Pension Plan. The
Committee shall have full discretion to construe and interpret the terms and
provisions of this Plan. The Committee members may be Participants under this
Plan.

5.2 - Agents.

                                       6
<PAGE>   10

        The Committee may, from time to time, employ other agents and delegate
to them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Company.

5.3 - Binding Effect of Decisions.

        The decision or action of the Committee in respect of any questions
arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all persons having any interest
in the Plan.

5.4 - Indemnity.

        To the extent permitted by applicable federal and state laws the Company
shall indemnify and save harmless the Board of Directors, the Committee and each
member of each thereof, and any employee appointed pursuant to Section 5.2,
against any and all expenses, liabilities and claims, including legal fees to
defend against such liabilities and claims, arising out of their discharge in
good faith of responsibilities under or incident to the Plan, excepting only
expenses and liabilities arising out of willful misconduct or gross negligence.
This indemnity shall not preclude such further indemnities as may be available
under insurance purchased by the Company or provided by the Company under any
Bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
as such indemnities are permitted under state law.

5.5 - Claim Procedure.

                                       7
<PAGE>   11

        The entire claim procedure set forth in Section 6.3(g) of the Pension
Plan, as amended from time to time, is hereby incorporated by reference.

                                   ARTICLE VI
                            AMENDMENT AND TERMINATION

6.1 - Amendments and Termination.

        The Company shall have the right to amend this Plan (and to amend or
cancel any amendments) from time to time by resolution of the Board of
Directors. Such amendment shall be stated in an instrument in writing, executed
by the Company in the same manner as this Plan. The Company also reserves the
right to terminate this Plan at any time by resolution of the Board of
Directors.

6.2 - Protection of Accrued Benefits.

        This Plan is strictly a voluntary undertaking on the part of the Company
and shall not be deemed to constitute a contract between the Company and any
Eligible Employee (or any other employee) or a consideration for, or an
inducement or condition of employment for the performance of services by any
Eligible Employee or employee. Although the Company reserves the right to amend
or terminate this Plan at any time and, subject at all times to the provisions
of Section 4.3, no such amendment or termination shall result in the forfeiture
of benefits accrued pursuant to this Plan as of the date of termination. The
benefits accrued at that time shall be the lesser of (1) the benefit that would
be payable if the Participant terminated employment on the date of

                                       8
<PAGE>   12

termination, or (2) the benefit that would be payable at actual retirement under
the Pension Plan (or death, if earlier) if this Plan were terminated.

                                   ARTICLE VII
                                  MISCELLANEOUS

7.1 - Unfunded Plan.

        All benefits due under this Plan to a Participant shall be paid by the
Employer that employed that Participant. This Plan is intended to be an unfunded
plan maintained primarily to provide deferred compensation benefits for a select
group of "management or highly compensated employees" within the meaning of
Section 201, 301 and 401 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and therefore to be exempt from the provisions of Parts 2,
3 and 4 of Title I of ERISA.

7.2 - Unsecured General Creditor.

        In the event of an Employer's insolvency, Participants and their
Beneficiaries, heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of Employer, nor shall they
be beneficiaries of, or have any rights, claims or interest in any life
insurance policies, annuity contracts or the proceeds therefrom owned or which
may be acquired by Employer. In that event, any and all of Employer's assets and
policies shall be, and remain, unrestricted by the provisions of this Plan. An
Employer's obligation under the Plan shall be that of an unfunded and unsecured
promise of Employer to pay money in the future.

                                       9
<PAGE>   13

7.3 - Trust Fund.

        Each Employer shall be responsible for the payment of all benefits
provided under the Plan to Participants employed by it. At its discretion, the
Company may establish one or more trusts, with such trustees as the Board may
approve, for the purpose of providing for the payment of such benefits. Such
trust or trusts may be irrevocable, but the assets thereof shall be subject to
the claims of the Company's creditors. To the extent any benefits provided under
the Plan are actually paid from any such trust, the Employer shall have no
further obligation with respect thereto, but to the extent not so paid, such
benefits shall remain the obligation of, and shall be paid by, the Employer.

7.4 - Nonassignability.

        None of the benefits, payments, proceeds or claims of any Participant or
Beneficiary shall be subject to any claim of any creditor and, in particular,
the same shall not be subject to attachment or garnishment or other legal
process by any creditor, nor shall any Participant or Beneficiary have any right
to alienate, anticipate, commute, pledge, encumber or assign any of the benefits
or payments or proceeds which he may expect to receive, contingently or
otherwise, under this agreement.

7.5 - Limitation on Participants' Rights.

        Participation in this Plan shall not give any Eligible Employee the
right to be retained in the Employer's employ or any right or interest in the
Plan other than as herein

                                       10
<PAGE>   14

provided. The Employer reserves the right to dismiss any Eligible Employee
without any liability for any claim against the Employer, except to the extent
provided herein.

7.6 - Participants Bound.

        Any action with respect to this Plan taken by the Committee or by the
Company, or any action authorized by or taken at the direction of the Committee
or the Company, shall be conclusive upon all Participants and Beneficiaries
entitled to benefits under the Plan.

7.7 - Receipt and Release.

        Any payment to any Participant or Beneficiary in accordance with the
provisions of this Plan shall, to the extent thereof, be in full satisfaction of
all claims against the Employer and the Committee, and the Committee may require
such Participant or Beneficiary, as a condition precedent to such payment, to
execute a receipt and release to such effect. If any Participant or Beneficiary
is determined by the Committee to be incompetent by reason of physical or mental
disability (including minority) to give a valid receipt and release, the
Committee may cause the payment or payments becoming due to such person to be
made to another person for his or her benefit without responsibility on the part
of the Committee or the Company to follow the application of such funds.

7.8 - Federal Law Governs.

        This Plan shall be construed, administered, and governed in all respects
under federal law (except as otherwise provided by Section 5.4), and to the
extent that federal law is inapplicable, under the laws of the State of
California, provided, however, that if any provision is

                                       11
<PAGE>   15

susceptible to more than one interpretation, such interpretation shall be given
thereto as consistent with this Plan being an unfunded plan described in Section
7.1. If any provision shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions hereof shall continue to be
fully effective.

7.9 - Headings and Subheadings.

        Headings and subheadings in this agreement are inserted for convenience
of records only and are not to be considered in the construction of the
provisions hereof.

7.10 - Successors and Assigns.

        This agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their successors and assigns.

                                       12
<PAGE>   16

        IN WITNESS WHEREOF, the Company has caused these presents to be executed
by its duly authorized officers and the corporate seal to be hereunto affixed
this ____ day of ________________, 1997.

                                       SOUTHERN CALIFORNIA WATER COMPANY

                                       By ________________________________

                                       By ________________________________

                                       13

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