Exhibit
10.1


 


February 23, 2006


 


Walter Industries, Inc.


4211 West Boy Scout Boulevard


Tampa, Florida 33607


Attention:  General Counsel


 


Mueller Water Products, Inc.


4211 West Boy Scout Boulevard


Tampa, Florida 33607


Attention: Jeffery W. Sprick


 


Ladies and Gentlemen:


 


Reference is made to the Agreement and Plan
of Merger dated as of June 17, 2005 (as amended, the “Merger
Agreement”) among Mueller Water Products, Inc., Walter Industries,
Inc., JW MergerCo, Inc. and DLJ Merchant Banking II, Inc., as the Stockholders’
Representative. Capitalized terms used but not defined herein shall have the
meanings specified in the Merger Agreement.


 


Following the delivery of the Closing
Statements by the Surviving Corporation, and delivery of a notice of
disagreement therewith by the Stockholders’ Representative, the parties hereto
have resolved all disputed items and amounts required to determine Final
Closing Cash and Final Working Capital and have agreed that the Shortfall
Amount is $10,527,000. Accordingly, the parties hereto have agreed that in
accordance with the Escrow Agreement, an officer of Buyer and an officer of the
Stockholders’ Representative shall, contemporaneously with the execution of
this letter agreement, execute and deliver the notice attached as Annex A
hereto to the Escrow Agent, to direct the Escrow Agent to release and
distribute all funds remaining in the Escrow Account in accordance with the
instructions set forth on such notice.


 


Upon the completion of the payments set forth
above, the parties confirm that all obligations of the parties under Sections
2.12 and 2.13 of the Merger Agreement shall have been performed and satisfied
in full.


 


This letter agreement shall not constitute an
amendment or waiver of any term or condition of the Merger Agreement or any
other Transaction Agreement, and all of such terms and conditions shall remain
in full force and effect. This letter agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts entered into and performed entirely in such state. This letter
agreement may be signed in any number of counterparts, each of which shall be
deemed an original, and all such counterparts shall together constitute one and
the same instrument.


 


[Signature Page Follows]


 

















 


IN WITNESS WHEREOF, the parties hereto have caused this letter
agreement to be duly executed by their respective authorized officers as of the
day and year first above written.


 


 


	
   

  	
  DLJ MERCHANT BANKING II, INC.,

  
	
   

  	
  as the Stockholders’ Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ MICHAEL S. ISIKOW

  	
   

  
	
   

  	
   

  	
  Name: Michael S. Isikow

  
	
   

  	
   

  	
  Title:   Vice President

  



 


 


Agreed and Acknowledged


 


	
  WALTER INDUSTRIES, INC.

  
	
   

  
	
   

  
	
  By:

  	
    /s/  JOSEPH J. TROY

  	
   

  
	
   

  	
  Name: Joseph J. Troy

  
	
   

  	
  Title:   Senior Vice President

  
	
   

  
	
   

  
	
  MUELLER WATER PRODUCTS, INC.

  
	
   

  
	
   

  
	
  By:

  	
    /s/  VICTOR P. PATRICK

  	
   

  
	
   

  	
  Name: Victor P. Patrick

  
	
   

  	
  Title:   Vice President

  
				



 

















 


Annex A


 


February 23, 2006


 


The Bank of New York


101 Barclay Street - 8W/Escrow


New York, NY 10286


Attention:  Carlos Luciano


 


Ladies and Gentlemen:


 


Reference is made to the Escrow Agreement dated as of October 3, 2005
among Mueller Water Products, Inc., Walter Industries, Inc., DLJ Merchant
Banking II, Inc., as the Stockholders’ Representative, and The Bank of New York
(the “Escrow Agreement”). Capitalized terms
used but not defined herein shall have the meanings specified in the Escrow
Agreement. This certificate is executed by Buyer and the Stockholders’
Representative pursuant to Section 5(a) of the Escrow Agreement.


 


The Escrow Agent is hereby directed to promptly release and deliver all
funds remaining in the Escrow Account as follows:


 


a)                                     $11,223,543.07,
plus 26.975% of all interest earned on the Escrow Amount to the date of payment,
to the Stockholders’ Representative, who shall distribute such amount to the
DLJ Entities in accordance with the provisions of the Merger Agreement:


 


	
  Bank:

  	
   

  	
  Citibank, N.A.

  
	
   

  	
   

  	
  399 Park Avenue

  
	
   

  	
   

  	
  New York, NY 10036

  
	
  ABA:  021000089

  
	
  Account Name:  DLJ Merchant
  Banking II, Inc.

  
	
  Account Number:  30554143

  
	
  Reference:  Mueller Water
  Products

  



 


b)                                    $3,228,793.03,
plus 7.760% of all interest earned on the Escrow Amount to the date of payment,
to the Company, which shall distribute such amount to the Stockholders and
holders of Company Warrants (in each case, other than the DLJ Entities),
subject to the deduction of the applicable withholding taxes, in accordance
with the provisions of the Merger Agreement:


 


	
  Bank:

  	
   

  	
  Mellon Bank

  
	
   

  	
   

  	
  Pittsburgh, PA

  
	
  ABA:

  	
   

  	
  043000261

  
	
  Account Name:  Mueller Water
  Products, Inc.

  
	
  Account Number: 077-1243

  



 

















 


c)                                     $20,663.90 to
Davis Polk & Wardwell in respect of Transaction Expenses incurred after the
Effective Time (in each case, as defined in the Merger Agreement); and


 


	
  Bank:

  	
   

  	
  JPMorgan Chase Bank

  
	
   

  	
   

  	
  500 Stanton Christiana Rd.

  
	
   

  	
   

  	
  Newark, DE  19713

  
	
  ABA:  021 000021

  
	
  Account Name:  Davis Polk &
  Wardwell

  
	
  Account Number:  001533316

  
	
  Reference:  Mueller Water
  Products 14530/006

  



 


d)                                    $10,527,000,
plus 65.265% of all interest earned on the Escrow Amount to the date of payment,
to:


 


	
  Bank:

  	
   

  	
  Bank of America

  
	
   

  	
   

  	
  Charlotte, NC

  
	
  ABA:

  	
   

  	
  111000012

  
	
  Account Name:  Walter
  Industries, Inc.

  
	
  Account Number:  3750658039

  



 


The Escrow Agreement shall terminate in accordance with its terms when
the Escrow Agent shall have released all amounts in the Escrow Account pursuant
to the instructions set forth above.


 


[Signature Page Follows]


 

















 


IN WITNESS WHEREOF, the parties hereto have
caused this certificate to be duly executed by their respective authorized
officers as of the day and year first above written.


 


	
   

  	
  DLJ MERCHANT BANKING II, INC.,

  
	
   

  	
  as the Stockholders’ Representative

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ MICHAEL S. ISIKOW

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael S. Isikow

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WALTER INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOSEPH J. TROY

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph J. Troy

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President