Exhibit 10.3


 


TRANSITION SERVICES AGREEMENT


 


This Transition Services Agreement (this “Services Agreement”)
is made as of the 26th day of May, 2006, by and among (i) Walter
Industries, Inc., a Delaware corporation (“Walter”) on behalf of
itself and each of the other Walter Entities, and (ii) Mueller Water
Products, Inc., a Delaware corporation (“Mueller”), on behalf of
itself and each of the other Mueller Entities. The Mueller Entities currently
receive certain services from and provide certain services to the Walter
Entities. Each of the Walter Entities and the Mueller Entities desire that
these services continue to be provided after the initial public offering of
shares of Mueller and the subsequent spin-off of Mueller’s common stock to
Walter’s shareholders, upon the terms and conditions set forth in this Services
Agreement.


 


In consideration of the mutual covenants and agreements contained in
this Services Agreement, the parties hereto hereby agree as follows:


 


ARTICLE 1.


 


DEFINITIONS


 


1.1                                 Unless
the context otherwise requires, the following terms and their singular or
plural, used in this Services Agreement shall have the meanings set forth
below:


 


a)              “Force Majeure” shall have the
meaning set forth in Section 7.1 of this Services Agreement.


 


b)             “Mueller” shall have the meaning
set forth in the preamble to this Services Agreement.


 


c)              “Mueller Entities” means,
collectively, Mueller and any of its Affiliates that are listed as Recipients
on Schedule A or as Providers on Schedule B.


 


d)             “Mueller Provided Services” shall
have the meaning set forth in Section 2.2 of this Services Agreement.


 


e)              “Person” means an individual,
partnership, corporation, trust, unincorporated association, or other entity or
association.


 


f)                “Provider” shall mean the
particular Walter Entity or Mueller Entity, in any Services Agreement.


 


g)             “Recipient” shall mean the
particular Walter Entity or Mueller Entity, in any given location, that is
receiving services or leasing or subleasing property (as tenant) pursuant to
this Services Agreement.


 

















 


h)             “Term” shall have the meaning set
forth in Section 5.1 of this Services Agreement.


 


i)                 “Walter” shall have the meaning
set forth in the preamble to this Services Agreement.


 


j)                 “Walter Entities” means,
collectively, Walter and any of its Affiliates that are listed as Providers on Schedule A
or as Recipients on Schedule B.


 


k)              “Walter Provided Services” shall
have the meaning set forth in Section 2.1 of this Services Agreement.


 


Other terms are used as defined elsewhere herein.


 


ARTICLE 2.


 


SERVICES


 


2.1                                 Walter
Provided Services. Pursuant to the terms of this Services Agreement, the
Walter Entities agree to provide, or cause to be provided, to the respective
Mueller Entities the services described in Schedule A to this Services
Agreement (the “Walter Provided Services”).


 


2.2                                 Mueller
Provided Services. Pursuant to the terms of this Services Agreement, the
Mueller Entities agree to provide, or cause to be provided, the services
described in Schedule B to this Services Agreement (the “Mueller Provided
Services”).


 


2.3                                 Other
Services. If, after the execution of this Services Agreement, the parties
determine that a service provided by the Walter Entities to the Mueller
Entities or by the Mueller Entities to the Walter Entities prior to the date
hereof was omitted from the Schedules to this Services Agreement, then the
parties shall negotiate in good faith to agree to the terms and conditions upon
which such services would be added to this Services Agreement, it being agreed
that the charges for such services should be determined on a basis consistent
with the methodology for determining the initial prices provided for in Section 3.3.


 


ARTICLE 3.


 


COMPENSATION


 


3.1                                 Compensation
for Walter Provided Services. Subject to Section 3.4, the compensation
for the Walter Provided Services for the duration of the Term shall be as
described for each individual service provided as set forth on Schedule A
plus applicable sales or value-added taxes, if any.


 


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3.2                                 Compensation
for Mueller Provided Services. Subject to Section 3.4, the
compensation for the Mueller Provided Services for the duration of the term
shall be as described for each individual service as set forth on Schedule B
plus applicable sales or value-added taxes, if any.


 


3.3                                 Methodology
for Determining Prices. The parties agree that the prices charged by a
Provider for any Service provided hereunder shall be sufficient to cover such
Provider’s reasonable estimate of its actual costs and, if applicable, consistent
with the prices such provider would charge to an Affiliate, in each case
without taking into account any profit margin or projected savings from
increased efficiency.


 


3.4                                 Price
Adjustments. It is the intent of the parties that the prices set forth on
the Schedules hereto are consistent with the methodology for determining prices
as described in Section 3.3. If the parties determine in good faith that
the initial prices set forth on the Schedules hereto are not consistent with
such methodology, then the parties shall negotiate in good faith to adjust such
prices in a manner that is consistent with such methodology.


 


3.5                                 Allocation
of Certain Expenses.


 


(a)             (i)  In respect of software
applications which are resident in the Mueller Entities while they are
affiliates of the Walter Entities, Mueller shall bear the costs and expenses of
obtaining any and all licenses for such software applications for Mueller.


 


(ii)  Walter and Mueller cooperate in good faith to minimize the
costs and expenses to be incurred pursuant to this Section 3.5(a).


 


(b)                                 Walter
and Mueller shall each bear the costs and expenses of obtaining any and all
consents from third parties which may be necessary in connection with the
other party’s provision of services to the Recipient hereunder.


 


3.6                                 Terms
of Payment; Dispute Resolution.


 


(a)                                  Except
as otherwise expressly provided herein, Providers shall invoice Recipients
monthly (or, if mutually agreeable to Provider and Recipient, quarterly or
semi-annually) in arrears for the services provided by them under this Services
Agreement. Payment in U.S. dollars shall be made by Recipients within 30 days
after receipt of any invoice. No Recipient shall withhold any payments to its
Provider under this Services Agreement, and no Provider shall withhold the
provision of any services to its Recipient, notwithstanding any dispute that may be
pending between them, whether under this Services Agreement or otherwise (any
required adjustment being made on subsequent invoices), unless such withholding
is provided for in an arbitral award in accordance with Section 9.6 of
this Services Agreement.


 


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(b)                                 If
there is a dispute between any Recipient and any Provider regarding the amounts
shown as billed to such Recipient on any invoice, such Provider shall furnish
to such Recipient reasonable documentation to substantiate the amounts billed
including, but not limited to listings of the dates, times and amounts of the
services in question where applicable and practicable. Upon delivery of such
documentation, such Recipient and such Provider shall cooperate and use their
best efforts to resolve such dispute among themselves. If such disputing
parties are unable to resolve their dispute within thirty (30) calendar days of
the initiation of such procedure, and such Recipient believes in good faith and
with a reasonable basis that the amounts shown as billed to such Recipient are
inaccurate or are otherwise not in accordance with the terms of this Services
Agreement, then such Recipient shall have the right, as its own expense, to
commence arbitration in accordance with Section 9.1 of this Services
Agreement.


 


ARTICLE 4.


 


OCCUPANCY RIGHTS


 


4.1                                 Any
Employee of a Walter Entity or Mueller Entity who is located at a facility of
the other party may remain at such location for a period not to exceed 180
days after the date of the spin-off; provided, however, that such
employee shall be required to adhere to all applicable security restrictions
and guidelines at such facility. Thereafter, the owner of such facility may require
such employee(s) to vacate the premises unless, prior to such time, the parties
have executed a formal lease or other occupancy arrangements upon commercially
reasonable terms that are mutually acceptable to the parties.


 


ARTICLE 5.


 


TERM


 


5.1                                 Term.
Except as expressly provided otherwise in this Services Agreement, or with
respect to specific services as indicated on the Schedules hereto, the term of
this Services Agreement shall commence immediately and shall expire
automatically at the time the term of every service described on the Schedules
hereto has terminated (the “Term”). The obligation of any Recipient to
make a payment for services previously rendered shall not be affected by the
expiration of the term and shall continue until full payment is made.


 


5.2                                 Termination
of Individual Services. (a)  Each of the individual services described
on the schedules hereto has a separate term which, in respect of some services,
includes a right of extension. Unless earlier terminated pursuant to the
following sentence, the obligation of a Provider to provide a service will
terminate upon the expiration of the term of such service. Effective between
the respective Provider and Recipient, a Recipient may terminate at any
time during the Term any individual service provided under this Services
Agreement on a service-by-service basis (and/or location-by-location basis
where an individual service is provided to multiple locations of a Recipient)
upon 


 


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written notice
to the Provider identifying the particular service (or location) to be
terminated and the effective date of termination, which date shall not be less
than 30 days after receipt of such notice unless the Provider otherwise agrees.
Effective upon the termination of any service, an appropriate reduction will be
made in the fees charged to such Recipient.


 


ARTICLE 6.


 


CERTAIN COVENANTS


 


6.1                                 Points
of Contact. Each Provider and Recipient shall name a point of contact which
shall be added to the Schedules hereto. Such points of contact shall be
responsible for the implementation of this Services Agreement between the
respective Provider and its Recipient, including resolutions of any issues that
may arise during the performance hereunder on a day-to-day basis.


 


6.2                                 Cooperation;
Reasonable Care.


 


(a)                                  The
parties will cooperate (using reasonable commercial efforts) to effect a smooth
and orderly transition of the services provided hereunder from the Providers to
the respective Recipients including, without limitation, the separation of the
Mueller Entities from the Walter Entities; provided, however,
that this Section 6.2 shall not require any party hereto to incur any
out-of-pocket expenses unless and except as expressly provided otherwise
herein.


 


(c)                                  Each
Provider shall perform the services that it is required to provide to its
respective Recipient(s) under this Services Agreement with reasonable skill and
care and shall use at least that degree of skill and care that it would
exercise in similar circumstances in carrying out its own business. Each
Provider shall take necessary measures to protect the respective Recipient’s
data that is processed by such Provider from destruction, deletion or
unauthorized change and allow its recovery in events of Force Majeure; provided,
however, that a Provider shall be deemed to have satisfied this
obligation if the measures taken to protect and recover recipient’s data are
equivalent to what it uses in carrying out its own business.


 


6.3                                 Migration
Projects. Each Provider will provide the respective Recipient with
reasonable support necessary to transition the services, which may include
consulting and training and providing reasonable access to data and other
information and to Providers employees; provided, however, that
such activities shall not unduly burden or interfere with Provider’s business
and operations. Where required for transitioning the services, the Recipient’s
employees will be granted reasonable access to the respective Provider’s
facilities during normal business hours.


 


6.4                                 Further
Assurances. From time to time after the date hereof, without further
consideration, each party shall execute and deliver such formal lease or
license 


 


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agreements as
another party may reasonably request to evidence any lease or license
provided for herein or contemplated hereby.


 


6.5                                 Certain
disbursements/receipts. The parties hereto contemplate that, from time to
time, Walter-related entities and/or Mueller-related entities (any such party,
the “Paying  Party”), as a convenience to another Mueller-related
entity or Walter-related entity, as the case may be (the “Responsible
Party”), in connection with the transactions contemplated by this Services
Agreement, may make certain payments that are properly the responsibility
of the Responsible Party (any such payment made, a “Disbursement”). Similarly,
from time to time, Walter Entities and/or Mueller Entities (any such party, the
“Receiving Party”) may receive from third parties certain payments
to which another Mueller-related entity or Walter-related entity, as the case may be,
is entitled (any such party, the “Other Party”, and any such payment received,
a “Receipt”).


 


(a)                                  Disbursements.


 


(i)                                     For
Disbursements made by check, the Responsible Party will reimburse the Paying
Party within seven (7) business days after written notice of such
Disbursement has been given to the Responsible Party.


 


(ii)                                  In
case of a Disbursement by wire, if written notice has been given by 2:00 p.m.
on the business day prior to the payment of such Disbursement, the Responsible
Party shall reimburse the Paying Party for the amount of such payment on the
date the Disbursement is made by the Paying Party. If notice as provided above
has not been given prior to the payment of such Disbursement, the Responsible
Party shall reimburse the Paying party for the amount of such payment within
one business day after receipt of the Responsible Party of such notice from the
Paying Party.


 


(iii)                               A
Paying Party shall provide such supporting documentation regarding
Disbursements for which it is seeking reimbursement as the Responsible Party may reasonably
request.


 


(b)                                 Receipts.
A Receiving Party shall remit Receipts to the Other Party within one business
day of receipt thereof. Concerning the cash collection of outstanding
receivables, the Receiving Party shall remit such cash on a weekly basis with
interest at the prime rate stated in 6.5(e).


 


(c)                                  Certain
Exceptions. Notwithstanding anything to the contrary set forth above, if
with respect to any particular transaction(s), it is impossible or
impracticable under the circumstances to comply with the procedures set forth
in subsections (a) and (b) of this Section 6.5 (including the
time periods specified therein), the parties will cooperate to find a mutually
agreeable alternative that will achieve substantially similar economic results
from the point of view of the Paying Party or the Other Party, as the case may be
(i.e., an alternative pursuant to which the Paying Party will not incur any
material interest expense or the Other Party will not be deprived of any
material interest income); provided, however, that if a Receiving
party cannot comply with the procedures 


 


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set forth in
subsection (b) of this Section because it does not become aware
of a Receipt on behalf of the Other Party shall remit such Receipt (without
interest thereon) to the Other Party within one business day after the Receiving
Party becomes aware of such Receipt.


 


(d)                                 Funding
of Payroll. Notwithstanding anything which may be to the contrary set
forth in Section 6(a) or 6(c) above, payroll checks disbursed by
or at the direction of a Walter Entity as part of the Walter Provided
Services shall be funded in immediately available funds to an account as
directed by such Walter Entity on the day the checks are issued to Mueller
employees, provided such Walter Entity notifies the respective Mueller Entity
by 3:00 p.m. on the business day prior to check issuance of the funding
requirement amount (which amount shall be grossed up to include any social
charges and other accessories on salaries). Direct deposit of payroll will have
the same notice requirement and be funded on payday (alternately referred to as
the settlement date).


 


(e)                                  Interest
Rate. The rate for any interest or expense that is paid or payable pursuant
to Section 6.5(b) shall be the prime rate as published by the Wall
Street Journal.


 


ARTICLE 7.


 


FORCE MAJEURE


 


7.1                                 Force
Majeure. No Provider shall bear any responsibility or liability for any
losses, damages, liabilities, claims, costs or expenses, including attorneys’,
accountants’ or experts’ fees (“Damages”) arising out of any delay, inability
to perform or interruption of its performance of obligations under this
Services Agreement due to any acts or omissions of Recipient or for events
beyond its reasonable control (herinafter referred to as “Force Majeure”)
including, without limitation, acts of God, act of governmental authority, act
of the public enemy or due to war, riot, flood, civil commotion, insurrection,
labor difficulty, severe or adverse weather conditions, lack of or shortage of
electrical power, malfunctions of equipment or software programs or any other cause
beyond the reasonable control of the Provider whose performance is affected by
the Force Majeure event.


 


ARTICLE 8.


 


INDEMNITY


 


8.1                                 Indemnity.


 


(a)  The Walter Entities and Mueller Entities, in both instances
jointly and severally, will each indemnify and hold harmless the other, their
agents, employees and invitees, against all liabilities, claims, losses,
damages, death or personal injury of 


 


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whatever
nature or kind, arising out of their respective performance of this Services
Agreement or the entry of their respective agents, employees or invitees in the
premises of the other, to the extent occasioned by their own willful misconduct
or negligent actions or omissions or the willful misconduct or negligent
actions or omissions of their respective agents, employees or invitees.


 


(b)                                 Notwithstanding
the foregoing, no party shall be entitled to any damages with respect to lost
profits or other consequential damages or punitive damages with respect to the
performance by any other party under this Services Agreement.


 


ARTICLE 9.


 


MISCELLANEOUS


 


9.1                                 Resolution
of Disputes; Continuation of Services Pending Outcome of Dispute. In the
event of any dispute between the parties or between Providers and Recipients, the
parties agree to be bound by the arbitration procedures set forth in Section 9.6
of this Services Agreement. Notwithstanding the existence of any dispute
between the parties, no Provider shall discontinue the supply of any service
provided for herein, unless so provided in an arbitral determination that the
respective Recipient is in default of an obligation under this Services
Agreement.


 


9.2                                 Notices.
All notices, consents, waiver, claims and other communications hereunder (each
a “Notice”) shall be in writing and shall be (a) personally
delivered, (b) deposited, prepaid in a nationally established overnight
delivery firm such as Federal Express, (c) mailed by certified mail,
return receipt requested, or (d) transmitted by facsimile as follows:


 


	
  As to Walter
  or any other Walter Entity:

  
	
   

  	
  Walter
  Industries, Inc.

  
	
   

  	
  4211 W. Boy
  Scout Blvd.

  
	
   

  	
  Tampa, FL
  33607

  
	
   

  	
  Attention:

  	
  Victor P.
  Patrick

  
	
   

  	
   

  	
  Senior Vice
  President and General Counsel

  
	
   

  	
  Fax No.:
  (813) 871-4420

  
	
   

  	
   

  	
   

  
	
  As to
  Mueller or any other Mueller Entity:

  
	
   

  	
  Mueller
  Water Products, Inc.

  
	
   

  	
  4211 W. Boy
  Scout Blvd.

  
	
   

  	
  Tampa, FL
  33607

  
	
   

  	
  Attention: 

  	
  Chief
  Executive Officer

  
	
   

  	
  Fax No.:
  (813) 871-4430

  
				



 


or to any
other address which such party may have subsequently communicated to the
other party by a Notice given in accordance with the provisions of this Section.
Each Notice shall be deemed given and effective upon receipt (or refusal or
receipt).


 


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9.3                                 Entire
Agreement. This Services Agreement and the Schedules attached hereto
contain every obligation and understanding between the parties relating to the
subject matter hereof and merge all prior discussion, negotiations and
agreement, if any, between them, and none of the parties shall be bound by any
representations, warranties, covenants or other understandings, other than as
expressly provided herein or therein.


 


9.4                                 Waiver
and Amendment. Any representation, warranty, covenant, term or condition of
this Services Agreement which may legally be waived, may be waived,
or the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereto may be
amended by the parties hereto at any time. Any such waiver, extension or
amendment shall be evidenced by an instrument in writing executed on behalf of
the appropriate party by a Person who has been authorized by such party to
execute waivers, extensions or amendments on its behalf. No waiver by any party
hereto, whether express or implied, of its rights under any provisions at any
other time or a waiver of such party’s rights under any other provision of this
Services Agreement. No failure by any party hereto to take any action against
any breach of this Services Agreement or default by another party shall
constitute a waiver of the former party’s right to enforce any provision of
this Services Agreement or to take action against such breach or default or any
subsequent breach or default by such other party.


 


9.5                                 Severability.
In the event that any one or more of the provisions contained in this Services
Agreement shall be declared invalid, void or unenforceable, the remainder of
the provisions of this Services Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written.


 


9.6                                 Governing
Law; Jurisdiction. This Services Agreement shall be interpreted and
construed in accordance with the laws of New York without giving effect to the
principles of conflicts of laws thereof. Neither party shall commence any
proceeding against the other party under this Services Agreement unless and
until the parties shall have attempted in good faith to settle the underlying
dispute through negotiation or mediation for a period of not less than 30 days.
If the parties have not resolved the dispute within 30 days, then either party may initiate
arbitration by notifying the other party in writing that arbitration is
demanded. The arbitration shall be conducted in accordance with the CPR
Institute for Dispute Resolution Rules for Non-Administered Arbitration
(the “Rules”) by one arbitrator. Unless the parties agree on an
individual arbitrator by name, each party shall appoint one arbitrator,
obtain its appointee’s acceptance of such appointment, and deliver written
notification of such appointment and acceptance to the other party within 10
days after delivery of the written notice demanding arbitration. The two party
appointed arbitrators shall then jointly appoint a third arbitrator, obtain the
appointee’s acceptance of such appointment and notify the parties in writing of
such appointment and acceptance within 10 days after their appointment and
acceptance. The arbitrator appointed by the two party-appointed arbitrators
shall serve as the sole arbitrator. If the party appointed arbitrators fail to
appoint an arbitrator within the time limits specified herein, the CPR
Institute for Dispute 


 


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Resolution
shall appoint the arbitrator in accordance with Article 6 of the Rules. Judgment
upon the award rendered by the arbitrator may be entered by any court
having jurisdiction thereof. Unless otherwise agreed, the place of the
arbitration shall be Jacksonville, Florida.


 


9.7                                 Counterpart Execution.
This Services Agreement may be executed in counterparts with the same
effect as if all of the parties had signed the same document. Such counterparts
shall be construed together and shall constitute one and the same instrument,
notwithstanding that all of the parties are not signatories to the original or
the same instrument, or that signature pages from different counterparts
are combined. The signature of any party to one counterpart shall be
deemed to be a signature to and may be appended to any other counterpart.


 


9.8                                 Assignment.
This Services Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided that
this Agreement may not be assigned by either party to any Person without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, either party may assign
any of its rights and obligations under this Services Agreement, in whole or in
part, to one or more wholly owned subsidiaries of such party. Any party so
assigning this Services Agreement shall remain fully liable to the other party
for the performance by any assignee of any obligation of such party so assigned.
Any purported assignment in violation of this Section 9.8 shall be void.


 


9.9                                 No
Third Party Beneficiary. Nothing expressed or implied in this Services
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the parties hereto, their respective successors and permitted
assigns and the indemnities, any rights or remedies under or by reason of this
Services Agreement.


 


9.10                           Headings
and Interpretation. Titles and headings to articles and sections herein and
titles to the Schedules are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of
this Services Agreement. The Schedules referred to herein shall be construed
with and as an integral part of this Services Agreement to the same extent
as if they were set forth verbatim herein.


 


9.11                           Survival.
Notwithstanding anything to the contrary herein, the rights and obligations of
the parties under this Services Agreement which by their nature would continue
beyond the termination of this Services Agreement, including but not limited to
rights and obligations those set forth in Sections 3.6, 6.5, 8.1, 9.1 and 9.6,
shall survive termination of this Services Agreement.


 


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IN WITNESS WHEREOF, the duly authorized officers or representatives of
the parties hereto have duly executed this Services Agreement as of the date
first written above.


 


 


	
  MUELLER
  ENTITIES:

  	
  WALTER
  ENTITIES:

  
	
   

  	
   

  
	
  MUELLER
  WATER PRODUCTS, INC.

  	
  WALTER
  INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
              /s/
  Victor P. Patrick

  	
   

  	
             /s/
  William F. Ohrt

  
	
  Name: Victor
  P. Patrick

  	
   

  	
  Name:
  William F. Ohrt

  
	
  Title: Vice
  President and Secretary

  	
  Title: Executive Vice President and Chief
  Financial Officer