AMERICAN WATER WORKS COMPANY, INC. 2007 OMNIBUS EQUITY COMPENSATION PLAN NONQUALIFIED STOCK OPTION GRANT

Exhibit 10.4

FORM FOR 2009 LTIP – FOR ML1 – ML3B

“OPTION GRANT”

AMERICAN WATER WORKS COMPANY, INC.

2007 OMNIBUS EQUITY COMPENSATION PLAN

NONQUALIFIED STOCK OPTION GRANT

This STOCK OPTION GRANT, dated as of February        , 2009 (the “ Date of Grant ”), is delivered by American Water Works Company, Inc. (the “ Company ”) to             (the “ Participant ”).

RECITALS

WHEREAS, the Committee (as defined in the American Water Works Company, Inc. 2007 Omnibus Equity Compensation Plan) has adopted a 2009 long-term incentive program (“ 2009 LTIP ”) pursuant to which designated employees will be granted equity awards (the “ Equity Award ”) for shares of Common Stock of the Company, par value $0.01 per share, (the “ Company Stock ”);

WHEREAS, the Equity Award is comprised of two separate grants, a nonqualified stock option and a performance stock unit grant;

WHEREAS, the Committee has determined that the Participant is eligible to participate in the 2009 LTIP and to grant the Participant an Equity Award under the 2009 LTIP; and

WHEREAS, the Committee has determined that the nonqualified stock option portion of the Equity Award granted to the Participant pursuant to the 2009 LTIP shall be issued under the American Water Works Company, Inc. 2007 Omnibus Equity Compensation Plan (the “ Plan ”) and the terms and conditions of such nonqualified stock option shall be memorialized in this grant (the “ Grant ”).

NOW, THEREFORE, the parties to this Grant, intending to be legally bound hereby, agree as follows:

1. Grant of Option . Subject to the terms and conditions set forth in this Grant and in the Plan, the Company hereby grants to the Participant a nonqualified stock option (the “ Option ”) to purchase             shares of Company Stock, at an exercise price of $            per share of Company Stock.

2. Exercisability of Option .

(a) Except as provided in subparagraphs (b) or (c) below, the Option shall become exercisable on the following dates, if the Participant continues to be employed by, or providing service to, the Employer (as defined in the Plan) from the Date of Grant through the applicable date:

The exercisability of the Option is cumulative, but shall not exceed 100% of the shares of Company Stock subject to the Option. If the foregoing schedule would produce fractional shares of Company Stock, the number of shares of Company Stock for which the Option becomes exercisable shall be rounded down to the nearest whole share of Company Stock. The Option shall become fully exercisable on January 1, 2012, if the Participant is employed by, or providing service to, the Employer on such date.

(b) If at any time prior to the date the Participant’s Option becomes exercisable as described in subparagraph (a) above, the Participant’s employment or service with the Employer is terminated on account of death or Total Disability (as defined below), the Option shall become fully exercisable on the date of the Participant’s termination of employment or service with the Employer on account of death or Total Disability. For purposes of this Grant, the term “ Total Disability ” shall mean that the Participant has been determined to be totally disabled by the Social Security Administration.

(c) If a Change of Control (as defined in the Plan) occurs while the Participant is employed by or providing service to the Employer, then the Option shall become fully exercisable as of the date of the Change of Control.

3. Term of Option .

(a) The Option shall have a term from the Date of Grant through December 31, 2015, and shall terminate at the expiration of that period, unless it is terminated at an earlier date pursuant to the provisions of this Grant or the Plan .

(b) The Option shall automatically terminate upon the happening of the first of the following events:

(i) If the Participant’s employment or service with the Employer terminates on account of death or Total Disability, the expiration of the one year period following the date of the Participant’s termination of employment or service on account of death or Total Disability.

(ii) If the Participant’s employment or service with the Employer terminates on account of Normal Retirement (as defined below), the expiration of the one year period following the date of the Participant’s termination on employment or service on account of Normal Retirement. For purposes of this Grant, the term “ Normal Retirement ” shall mean, at the time of the Participant’s termination of employment or service with the Employer, that the Participant has attained both (A) at least age 55, and (B) total years of employment and service with the Employer equals or exceeds 10.

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(iii) If the Participant’s employment or service with the Employer terminates for any reason other than on account of Cause (as defined below), Normal Retirement, death or Total Disability, the expiration of the ninety (90) day period following the date of the Participant’s termination of employment or service for any reason other than on account of termination for Cause, death, Total Disability or Normal Retirement.

(iv) The date on which the Participant ceases to be employed by, or provide service to, the Employer for Cause. In addition, notwithstanding the prior provisions of this Paragraph 3, if the Participant engages in conduct that constitutes Cause after the Participant’s employment or service terminates, the Option shall immediately terminate. For purposes of this Grant, the term “ Cause ” shall mean a finding by the Committee that the Participant (A) has breached his or her employment or service contract with the Employer, if any; (B) has engaged in disloyalty to the Employer, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty; (C) has disclosed trade secrets or confidential information of the Employer to persons not entitled to receive such information; (D) has breached any written noncompetition or nonsolic