SOUTHWEST WATER CO
EX-10.4
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<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 10.4</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">AMENDMENT TO THE</font></b></p>

<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;">AMENDED AND RESTATED STOCK OPTION PLAN</font></b></p>

<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;">FOR NON-EMPLOYEE DIRECTORS</font></b></p>

<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;">OF</font></b></p>

<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;">SOUTHWEST WATER COMPANY</font></b></p>

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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Amendment (&#147;<u>Amendment</u>&#148;) to the Amended and Restated Stock
Option Plan for Non-Employee Directors of Southwest Water Company (the &#147;<u>Plan</u>&#148;)
is adopted by Southwest Water Company, a Delaware corporation (the &#147;<u>Company</u>&#148;),
effective as of May 13, 2004.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;">RECITALS</font></b></p>

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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, the Board of Directors (the &#147;<u>Board</u>&#148;) originally adopted
the Stock Option Plan for Non-Employee Directors on March&nbsp;27, 1996 and the
Plan, as amended, was approved by the stockholders on May 23, 2000;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, Section&nbsp;7.2 of the Plan provides that the Plan may be
amended from time to time by the Board, subject in certain circumstances to
stockholder approval of such amendment; and</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, the Board believes it is in the best interests of the
stockholders to: (i) increase the number of shares issuable under the Plan by
an additional 250,000 shares, (ii) increase the number of options to purchase
shares automatically granted to Non-Employee Directors upon initial election or
appointment and annually (subject to continued service on the Board) to 10,000
shares, subject to adjustment in the event of future stock splits, stock
dividends or stock combinations, and (iii) extend the Plan&#146;s termination date
to May 13, 2014.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NOW, THEREFORE, the following amendments to the Plan are adopted by the
Company.</font></p>

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<p style="font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-variant:normal;">AMENDMENTS</font></b></p>

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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Effective as of May 13, 2004, Section&nbsp;2.1 of the Plan is hereby
amended and replaced in its entirety as follows:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section&nbsp;2.1</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>&#147;Shares
Subject to Restated Director Option Plan</u>.</p>

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<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Subject to Section&nbsp;4.6 (relating to
adjustments in shares upon a Recapitalization, as defined therein), the shares
of stock subject to Options shall be shares of Common Stock.&#160; The aggregate number of shares of Common
Stock which may be issued upon exercise of Options shall not exceed Six Hundred
Eighty Seven Thousand Five Hundred Fifty Five (687,555).&#160; The foregoing gives effect to stock splits
and stock dividends through February&nbsp;12, 2004.</font></p>

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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Effective as of May 13, 2004, the Section&nbsp;3.2 of the Plan is
hereby amended and replaced in its entirety as follows:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;Subject to Section&nbsp;3.3 below, effective
as of the 2004 Annual Meeting of Stockholders, each person who is a
Non-Employee Director immediately as of and following the 2004 Annual Meeting
of Stockholders shall be granted automatically on the date of the 2004 Annual
Meeting of Stockholders an additional option to purchase 10,000 of Common
Stock.&#160; Each person who first becomes a
Non-Employee Director after the 2004 Annual Meeting of Stockholders by election
or appointment to the Board shall be granted automatically on the date of such
person&#146;s election or appointment to the Board, an initial Option to purchase
10,000 shares of Common Stock. Each Non-Employee Director shall thereafter be
automatically granted on the date of each subsequent Company Annual Meeting of
Stockholders as of and following which such person continues as a Non-Employee
Director, an additional option to purchase 10,000 shares of Common Stock.&#160; The 10,000 share option grants provided by
this paragraph are subject to anti-dilution adjustments in connection with any
stock split, stock dividend, or stock combination as governed by Section&nbsp;4.6
hereof.&#148;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Effective as of May 13, 2004, Section&nbsp;4.6 of the Plan is hereby
amended and replaced in its entirety as follows:</font></p>

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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;Section&nbsp;4.6 &#150; Adjustments in Outstanding Securities</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the event that the outstanding shares of
the Common Stock subject to Options are changed into or exchanged for a
different number or kind of shares of the Company or other securities of the
Company by reason of merger (including reincorporation by means of merger),
consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares (a &#147;Recapitalization&#148;), the Board shall make
an appropriate and equitable adjustment in (i) the number and kind of shares as
to which all outstanding Options, or portions thereof then unexercised, shall
be exercisable, to the end that after such event the Optionee&#146;s proportionate
interest shall be maintained as before the occurrence of such event; (ii) the
limitations Section&nbsp;2.1 above on the maximum number and kind of shares
which may be issued under this Plan; and (iii) the number of options specified
in Section&nbsp;3.2 automatically granted to Directors.&#160; Any adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in option price per share.&#160; Any such adjustment made by the Board shall
be final and binding upon all Optionees, the Company and all other interested persons.&#148;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Effective as of May 13, 2004, the last sentence of Section&nbsp;7.2 of
the Plan is hereby amended and replaced in its entirety as follows:</font></p>

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<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;No Option may be granted during any period
of suspension nor after termination of the Restated Director Option Plan, and
in no event may any Option be granted under this Restated Director Option Plan
after May 13, 2014.&#148;</font></p>

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*&#160; *&#160; *&#160; *</font></b></p>

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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The undersigned, Shelley A. Farnham, Secretary of the Company, hereby
certifies that amendments described above were adopted by the Board on
February&nbsp;12, 2004, and that the amendment increasing the number of shares
authorized under the Plan was approved by the Company&#146;s stockholders on May 13,
2004.</font></p>

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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Executed at Los Angeles, California this 13<sup>th</sup> day of May,
2004.</font></p>

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  <td width="47%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:47.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Southwest Water Company,</font></p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <td width="47%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:47.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a Delaware corporation</font></p>
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  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.58%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
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  <td width="27%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:27.34%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <td width="44%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:44.34%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Shelley A. Farnham</font></p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Secretary</font></p>
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