Exhibit 10.5


 


MUELLER
WATER PRODUCTS, INC.


 


2006
EMPLOYEE STOCK PURCHASE PLAN


 


Approved by the Board of
Directors on May 24, 2006


 


Approved by Stockholders on May 25,
2006


 


Termination Date: May 24,
2016


 


The following constitute the provisions of
the 2006 Employee Stock Purchase Plan of Mueller Water Products, Inc.


 


1.                                       Purpose. The purpose of the Plan is to
provide employees of the Company and its Designated Subsidiaries with an
opportunity to purchase Common Stock of the Company. The Company intends that the
Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the
Code. The provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.


 


2.                                       Definitions.


 


(a)                                  “Applicable Law” means the legal
requirements relating to the administration of an employee stock purchase plan
under applicable U.S. state corporate and securities laws, U.S. federal
securities laws, the Code, any stock exchange rules or regulations, and
the applicable laws of any other country or jurisdiction, as such laws, rules,
regulations and requirements shall be in place from time to time.


 


(b)                                 “Board” means the board of directors of
the Company.


 


(c)                                  “Code” means the Internal Revenue Code
of 1986, as amended from time to time.


 


(d)                                 “Committee” means the Board or a
committee named by the Board.


 


(e)                                  “Common Stock” means the Series A
common stock of the Company, par value $0.01 per Share, or any securities into
which such stock may be converted.


 


(f)                                    “Company” means Mueller Water Products, Inc.,
a Delaware corporation.


 


(g)                                 “Compensation” means base cash
compensation and commissions earned by an Employee from the Company or a
Designated Subsidiary, but excluding overtime, shift differentials, bonuses,
incentive compensation, relocation, expense reimbursements, tuition and other
reimbursements and income realized as a result of participation in any stock
option, stock purchase, or similar plan of the Company or any Designated Subsidiary.


 


(h)                                 “Continuous Status as an Employee” means
the absence of any interruption or termination of service as an Employee. Continuous
Status as an Employee shall 


 

















 


not be considered interrupted in the case of (i) sick leave; (ii) military
leave; (iii) any other bona fide leave of absence approved by the
Administrator, provided that such leave is for a period of not more than three
months, unless reemployment upon the expiration of such leave is guaranteed by
contract (including Company policy) or statute; or (iv) transfers between
the Company and its Designated Subsidiaries.


 


(i)                                     “Contributions” means all amounts
credited to the account of a Participant pursuant to the Plan.


 


(j)                                     “Corporate Transaction” means a sale
of all or substantially all of the Company’s assets, a merger, a consolidation,
a tender offer, or other capital reorganization of the Company with or into
another corporation, including but not limited to:


 


(i)                                     The sale,
exchange, lease or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company to a
person or group of related persons, as such terms are defined or described in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act;


 


(ii)                                  A merger or
consolidation or similar transaction involving the Company if the stockholders
of the Common Stock of the Company immediately prior to such transaction do not
own a majority of the outstanding common stock of the surviving company or its
parent immediately after the transaction in substantially the same proportions
relative to each other as immediately prior to such transaction;


 


(iii)                               Any
person or group becomes the “beneficial owner” (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of more than 50% of
the total voting power of the voting stock of the Company, including by way of
merger, consolidation or otherwise (for the purposes of this clause (iii),
a member of a group will not be considered to be the “beneficial owner” of the
securities owned by other members of the group other than in response to a
contested proxy or other control battle); or


 


(iv)                              During any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board
(together with any new directors whose election by such Board or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office, who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board then in office.


 


(k)                                  “Designated Subsidiary” means a
Subsidiary that has been designated by the Committee in its sole discretion,
from time to time, as eligible to participate in the Plan with respect to its
Employees.


 


(l)                                     “Effective Date” means the date on which
the registration statement on Form S-1 filed with the Securities and
Exchange Commission pursuant to Rule 424 under the Securities Act for the
initial public offering of the Company’s Common Stock (the “Registration
Statement”) becomes effective; provided, however, except as otherwise
determined by the 


 


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Committee to the extent permitted under the Plan, that no Offering
Period shall commence under the Plan until, and the first Offering Date under
the Plan shall be, August 1, 2006.


 


(m)                               “Employee” means any person, including
an Officer, who is an employee of the Company or its Designated Subsidiaries
for tax purposes and who is customarily employed for at least twenty (20) hours
per week and more than five (5) months in a calendar year by the Company
or one of its Designated Subsidiaries; provided, however, that the Committee may establish
administrative rules requiring that employment commence some minimum
period (not to exceed 30 days) prior to an Offering Date in order to be
eligible to participate in the Offering Period beginning on that Offering Date.


 


(n)                                 “Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time.


 


(o)                                 “Fair Market Value” means, as of a given
date, the value of the Common Stock determined as follows:  (1) if the Common Stock is listed on any
established stock exchange or national market system, the Fair Market Value
shall be the closing sales price per Share of the Common Stock (or the closing
bid, if no sales were reported) on the date of determination as quoted on such
exchange or system on which the Common Stock has the highest average trading
volume, as reported in the The Wall Street Journal or such other source
as the Committee deems reliable, (2) if the Common Stock is regularly
quoted by a recognized securities dealer but selling prices are not reported,
the Fair Market Value shall be the mean of the closing bid and asked prices for
the Common Stock on the date of such determination, as reported in The Wall
Street Journal or such other source as the Committee deems reliable, or (3) in
the absence of an established market for the Common Stock, the Fair Market
Value shall be determined in good faith by the Committee.


 


(p)                                 “Offering Date” means the first Trading
Day of each Offering Period of the Plan, except as further described in Section 4.


 


(q)                                 “Offering Period” means a period of
approximately three (3) months generally commencing on February 1, May 1,
August 1 and November 1 of each year and generally ending on the
following April 30, July 31, October 31 and January 31,
respectively, except as further described in Section 4.


 


(r)                                    “Officer” means a person who is an
officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.


 


(s)                                  “Participant” shall mean an Employee who
is eligible to, and elects to, be a participant in the Plan as provided in Section 5
and whose participation has not terminated in accordance with the terms of the
Plan.


 


(t)                                    “Plan” means this 2006 Employee Stock
Purchase Plan.


 


(u)                                 “Purchase Date” means the last Trading
Day of each Offering Period of the Plan.


 


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(v)                                 “Purchase Price” means, with respect to
an Offering Period, an amount equal to a percentage (not less than 85%)
established by the Committee (the “Designated Percentage”) of the lesser
of (i) the Fair Market Value of a Share of Common Stock on the Offering
Date or (ii) the Fair Market Value of a Share of Common Stock on the
Purchase Date, as adjusted by the Committee pursuant to Section 18 in
accordance with Section 424(a) of the Code. The Committee may change
the Designated Percentage with respect to any future Offering Period, and the
Committee may determine with respect to any prospective Offering Period
that the option price shall be the Designated Percentage of the Fair Market Value
of a Share of the Common Stock on the Purchase Date (without reference to the
Fair Market Value of a Share of Common Stock on the Offering Date).


 


(w)                               “Securities Act” shall mean the U.S.
Securities Act of 1933, as amended from time to time.


 


(x)                                   “Share” means a share of Common Stock,
as adjusted in accordance with Section 18 of the Plan.


 


(y)                                 “Subsidiary” means any entity treated as
a corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, within the meaning of Code Section 424(f),
whether or not such corporation now exists or is hereafter organized or
acquired by the Company or a Subsidiary.


 


(z)                                   “Trading Day” shall mean a day on which
U.S. national stock exchanges and the National Market System are open for
trading and the Common Stock is being publicly traded on one or more of such
markets.


 


3.                                       Eligibility.


 


(a)                                  Any person who is an
Employee as of the Offering Date of a given Offering Period shall be eligible
to participate in such Offering Period under the Plan, subject to the
requirements of this Section 3, Section 5(a) and the limitations
imposed by Section 423(b) of the Code.


 


(b)                                 Any provisions of the
Plan to the contrary notwithstanding, no Employee shall be granted an option
under the Plan (i) if, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
Subsidiary, or (ii) if such option would permit his or her rights to
purchase Common Stock under all employee stock purchase plans (described in Section 423
of the Code) of the Company and its Subsidiaries to accrue at a rate that
exceeds Twenty-Five Thousand Dollars ($25,000) of the Fair Market Value of such
Common Stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.


 


(c)                                  All Employees who
participate in the Plan shall have the same rights and privileges under the
Plan, except for differences that may be mandated by local law and that
are consistent with Code Section 423(b)(5); provided that individuals
participations in a sub-plan 


 


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adopted pursuant to Section 24 which is not designed to qualify
under Code Section 423 need not have the same rights and privileges as
Employees participating in the Code Section 423 Plan.


 


4.                                       Offering Periods. The Plan shall be
implemented by a series of Offering Periods of approximately three (3) months’
duration, with new Offering Periods commencing on February 1, May 1, August 1
and November 1 of each year and ending on the following April 30, July 31,
October 31 and January 31, respectively. Except as otherwise
determined by the Committee to the extent permitted under the Plan, the first
Offering Period shall commence on August 1, 2006. The Committee shall have
the power to change the duration and/or the frequency of Offering Periods with
respect to future Offering Periods if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected,
subject to compliance with Applicable Laws.


 


5.                                       Participation.


 


(a)                                  An eligible Employee may become
a Participant in the Plan by completing a subscription agreement and any other
required documents (“Enrollment Documents”) provided by the Company and
submitting them to the Company or, as applicable, the stock brokerage or other
financial services firm designated by the Company (“Designated Broker”)
within the period set by the Committee with respect to a given Offering Period.
The Enrollment Documents and their submission may be electronic, as
directed by the Company.


 


(b)                                 Payroll deductions
shall commence on the date of the first paycheck paid on or after the Offering
Date and shall end on the date of the last paycheck paid on or prior to the
Purchase Date of the Offering Period to which the Enrollment Documents are
applicable, unless sooner terminated by the Participant as provided in Section 10.


 


(c)                                  Once an eligible
Employee becomes a Participant in the Plan, he or she will automatically
participate in all subsequent Offering Periods at the same Contribution rate,
unless he or she (i) submits new Enrollment Documents or (ii) withdraws
from participation in the Plan as provided in Section 10 of the Plan.


 


6.                                       Method of Payment of Contributions.


 


(a)                                  A Participant shall
elect to have payroll deductions made on each payday during the Offering Period
at the rate of any whole percentage of the Participant’s Compensation not less
than one percent (1%) and not more than ten percent (10%) (or such greater
percentage as the Committee may establish from time to time before an
Offering Date). All Contributions made by a Participant will be credited to a
bookkeeping account in his or her name under the Plan. A Participant may not
make any additional payments into the Plan. Notwithstanding the foregoing, in
locations in which Applicable Law prohibits payroll deductions, an eligible
Employee may elect to participate through contributions to his or her
account under the Plan in a form acceptable to the Committee, and such
Employees shall be deemed to be participating in a sub-plan, unless the
Committee otherwise expressly provides that such Employees shall be treated as
participating in the Plan.


 


(b)                                 The Committee may establish
rules pertaining to the changes to the rate of a Participant’s
Contributions, limiting the frequency with which Participants may change
his or 


 


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her rate of participation, the timing of the elections for such
changes, and whether or not changes may effectuate an increase in
Contributions or only a decrease in Contributions. A Participant may change
his or her rate of Contributions with respect to current or future Offering
Periods by filing new Enrollment Documents at such times and on such terms as
specified by the Committee.


 


(c)                                  To the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) herein,
a Participant’s payroll deductions may be decreased by the Company to 0%
during any Offering Period scheduled to end during the current calendar year. Payroll
deductions shall re-commence at the rate provided in such Participant’s
then-effective Enrollment Documents at the beginning of the first Offering
Period that is scheduled to end in the following calendar year. In addition, a
Participant’s payroll deductions may be decreased by the Company to 0% at
any time during an Offering Period in order to avoid unnecessary payroll
contributions as a result of application of the maximum share limit set forth
in Section 8, in which case payroll deductions shall re-commence at the
rate provided in such Participant’s then-effective Enrollment Documents at the
beginning of the next Offering Period.


 


7.                                       Grant of Option. On the Offering Date
of each Offering Period, each eligible Employee shall be granted an option to
purchase on each Purchase Date a number of Shares of the Company’s Common Stock
determined by dividing the accumulated Contributions credited to the
Participant’s account as of the Purchase Date by the applicable Purchase Price.
An option will expire upon the earliest to occur of (i) the failure of a
newly eligible Employee to complete and submit the Enrollment Documents by the
date determined by the Committee with respect to that Offering Period, (ii) the
termination of a Participant’s participation in the Plan, (iii) the
exercise of the option on the Purchase Date or (iv) the termination of the
Offering Period as provided in the Plan.


 


8.                                       Exercise of Option.


 


(a)                                  Unless a Participant
withdraws from the Plan as provided in Section 10, and except as otherwise
provided in Sections 7, 18 or 19, the Participant’s option for the purchase of
Shares will be exercised automatically on the Purchase Date of the Offering
Period for the purchase of that number of whole Shares that can be purchased
under the option with the accumulated Contributions credited to the Participant’s
account at the applicable Purchase Price. Notwithstanding the foregoing, and in
addition to any other limitations set forth in the Plan and under Applicable
Law, the maximum number of Shares a Participant may purchase during each
Offering Period shall be 1,000 Shares and the maximum number of Shares that all
Participant may purchase in the aggregate during each Offering Period
shall be 100,000 Shares, in each case subject to any adjustment pursuant to Section 18
below. The Company shall retain the full amount of Contributions used to
purchase Common Stock as payment for the Common Stock.


 


(b)                                 For tax purposes, the
Shares purchased upon exercise of an option hereunder shall be deemed to be
sold to the Participant on the Purchase Date. The Company or its designee may make
such provisions and take such action as it deems necessary or appropriate for
the withholding of taxes and/or social insurance as required by Applicable Law.
Each Participant is responsible for the payment of all individual tax
liabilities arising under the Plan, including with respect to the sale or other
disposition of Shares acquired under the Plan.


 


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9.                                       Delivery.


 


(a)                                  The Company will
deliver Shares purchased under the Plan (or a record thereof) as promptly as
possible. The Committee may permit or require that Shares purchased under
the Plan be deposited directly with the Designated Broker, and the Committee may utilize
electronic or automated methods of Share transfer. The Committee may require
that Shares be retained with the Designated Broker for a designated period of
time and/or may establish other procedures to permit tracking of “disqualifying
dispositions” of such Shares. A “disqualifying disposition” is any sale or
other disposition which is made within two years after the Offering Date or
within one year after the Purchase Date. A “qualifying disposition” will occur
if the sale or other disposition of the Shares is made after the Shares have
been held for more than two years after the Offering Date and more than one
year after the Purchase Date. Participants are urged to consult their personal
tax advisors regarding the specific U.S. federal, state, local and foreign
income and other tax consequences applicable to dispositions.


 


(b)                                 The Committee may in
its discretion direct the Company to retain in a Participant’s account for the
subsequent Offering Period any payroll deductions which are not sufficient to
purchase a whole Share of Common Stock or return such amount to the
Participant. Any other amounts left over in a Participant’s account after a
Purchase Date shall be returned to the Participant.


 


(c)                                  No Participant shall
have any voting, dividend, or other stockholder rights with respect to Shares
subject to any option granted under the Plan until the Shares subject to the
option have been purchased and delivered to the Participant as provided in this
Section 9.


 


10.                                 Voluntary Withdrawal; Termination of Employment.


 


(a)                                  A Participant may terminate
his or her participation in the Plan and withdraw all of the Contributions
credited to his or her account under the Plan prior to a Purchase Date by
submitting a completed “Notice of Withdrawal” form to the Company (or, as
applicable, the Designated Broker). As soon as practicable following the
Company’s receipt of the Notice of Withdrawal, all of the Participant’s
Contributions credited to his or her account will be returned without any
interest thereon, and no further Contributions for the purchase of Shares will
be made during the Offering Period. The Committee may establish rules (i) pertaining
to the timing of withdrawals, (ii) limiting the frequency with which
Participants may withdraw and re-enroll and (iii) imposing a waiting
period on Participants wishing to re-enroll following withdrawal.


 


(b)                                 Upon termination of
the Participant’s Continuous Status as an Employee prior to the Purchase Date
of an Offering Period for any reason, the Contributions credited to his or her
account will be returned to him or her or, in the case of his or her death, to
the person or persons entitled thereto, and his or her option will be
automatically terminated.


 


(c)                                  The Committee may establish
rules regarding when leaves of absence or changes of employment status
will be considered to be a termination of employment, and the Committee may establish
termination-of-employment procedures for this Plan that are independent of
similar rules established under other benefit plans of the Company and its



 


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Designated Subsidiaries; provided that such procedures are not in
conflict with the requirements of Section 423 of the Code.


 


11.                                 Interest. No interest shall accrue on
the Contributions of a Participant in the Plan.


 


12.                                 Stock.


 


(a)                                  Subject to adjustment
as provided in Section 18, the maximum number of Shares that may be
made available for sale and which may be issued under the Plan shall be
4,000,000 Shares. The Shares may consist, in whole or in part, of unissued
Shares, treasury Shares, or Shares purchased by the Company on the open market.
The issuance of Shares pursuant to the Plan shall reduce the total number of
Shares that may be made available for sale and which may be issued under
the Plan.


 


(b)                                 If the Committee
determines that, on a given Purchase Date, the number of Shares with respect to
which options are to be exercised may exceed (1) the number of Shares
of Common Stock that were available for sale under the Plan as of the Offering
Date, or (2) the number of Shares available for sale under the Plan with
respect to that Offering Period, the Committee may in its sole discretion
provide for a pro rata allocation of the Shares of Common Stock available for
purchase in that Offering Period in as uniform a manner as shall be
practicable and equitable among all Participants in that Offering Period and
either (i) continue the Plan or (ii) terminate the Plan pursuant to Section 19
below.


 


13.                                 Administration.


 


(a)                                  The Committee will have
the authority and responsibility for the day-to-day administration of the Plan
as well as the authority and responsibility specifically provided in this Plan,
in addition to any other duties, responsibilities and authority delegated to
the Committee by the Board. The Committee may delegate to one or more
individuals the day-to-day administration of the Plan. The Committee shall have
full power and authority to (i) adopt, amend and rescind any Plan rules which
it deems desirable and appropriate for the proper administration of the Plan, (ii) construe
and interpret the provisions of the Plan, (iii) supervise the
administration of the Plan, (iv) make factual determinations relevant to
Plan entitlements and (v) take all other actions in connection with administration
of the Plan as it deems necessary or advisable, consistent with any delegation
from the Board. Decisions of the Board and the Committee shall be final and
binding upon all participants.


 


(b)                                 Without stockholder
consent and without regard to whether any Participant rights may be
considered to have been adversely affected, the Committee shall be entitled to
change the timing of future Offering Periods, limit the frequency and/or number
of changes in the amount withheld during an Offering Period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
Participant in order to adjust for delays or mistakes in the Company’s
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
Participant properly correspond 


 


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with amounts withheld from the Participant’s Compensation, and
establish such other limitations or procedures as the Committee determines in
its sole discretion advisable that are consistent with the Plan.


 


14.                                 Designation of Beneficiary. The
Committee may establish rules pertaining to the designation by the
Participant of a beneficiary who is to receive any Shares and cash, if any,
from the Participant’s account under the Plan in the event of such Participant’s
death subsequent to the end of an Offering Period.


 


15.                                 Transferability. During his or her
lifetime, a Participant’s option to purchase Shares hereunder is exercisable
only by him or her. Neither Contributions credited to a Participant’s account
nor any rights with regard to the exercise of an option or the receipt of
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to
withdraw from the Plan in accordance with Section 10.


 


16.                                 Use of Funds. All Contributions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
Contributions.


 


17.                                 Reports. Individual accounts will be
maintained for each Participant in the Plan. Statements of account will be
provided to Participants by the Company or the Designated Broker at least
annually, which statements will set forth the amounts of Contributions, the per
Share Purchase Price, the number of Shares purchased and the remaining cash
balance, if any.


 


18.                                 Adjustments Upon Changes in Capitalization; Corporate
Transactions.


 


(a)                                  Adjustment. Subject to any required
action by the stockholders of the Company, in the event of any change in the
Common Stock subject to the Plan or subject to or underlying any outstanding
option, by reason of any stock dividend, stock split, reverse stock split,
reorganization, recapitalization, merger, consolidation, spin-off, combination,
exchange of Shares of Common Stock or other corporate exchange, or any distribution
or dividend to stockholders of Common Stock (whether paid in cash or otherwise)
or any transaction similar to the foregoing, the Board in its sole discretion
and without liability to any person may make such substitution or
adjustment, if any, as it deems to be equitable to (i) the number and kind
of Shares or other securities that have been authorized for issuance under the
Plan but have not yet been placed under option, including the number of Shares
of Common Stock set forth in Section 12(a) above (collectively, the “Reserves”),
(ii) the maximum number of Shares of Common Stock that may be
purchased by a Participant and/or by all Participants in an Offering Period as
set forth in Section 8, (iii) the number and kind of Shares or other
securities covered by each option under the Plan that has not yet been
exercised, (iv) the Purchase Price per Share of Common Stock covered by
each option under the Plan that has not yet been exercised and (v) any
other affected terms of the Plan or any outstanding option. Such adjustment
shall be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities 


 


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convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.


 


(b)                                 Corporate Transactions.


 


(i)                                     In
the event of a dissolution or liquidation of the Company, and unless otherwise
provided by the Board, (i) any Offering Period then in progress, and any
options outstanding thereunder will terminate prior to the consummation of such
transaction and (ii) all Contributions will be refunded to the
Participants.


 


(ii)                                  In
the event of a Corporate Transaction, then in the sole discretion of the Board,
(1) each option shall be assumed or an equivalent option shall be
substituted by the successor corporation or parent or subsidiary of such
successor entity, (2) a date established by the Board on or before the
date of consummation of such Corporate Transaction shall be treated as a
Purchase Date, and all outstanding options shall be exercised on such date, (3) all
outstanding options shall terminate and all Contributions will be refunded to
the Participants, or (4) all outstanding options shall continue unchanged.


 


19.                                 Amendment or Termination. The Board
may, at any time and for any reason, terminate, suspend or amend the Plan;
provided, however, that no such actions may adversely affect outstanding
options except as provided in Section 18 and this Section 19. Notwithstanding
the foregoing, the Board may terminate or suspend the Plan and/or an
on-going Offering Period if the Board determines that such action is in the
best interests of the Company and the stockholders. Upon a termination or
suspension of the Plan, the Board may in its discretion (i) return
without interest, the Contributions credited to Participants’ accounts to such
Participants or (ii) set an earlier Purchase Date with respect to an
Offering Period then in progress. The Company shall obtain stockholder approval
of any amendments or terminations in such a manner and to such a degree as
required by Applicable Law.


 


20.                                 Notices. All notices or other
communications by an Employee to the Company under or in connection with the
Plan shall be deemed to have been duly given when received in the form specified
by the Company at the location, or by the person, designated by the Company for
the receipt thereof.


 


21.                                 Conditions Upon Issuance of Shares. Shares
shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such Shares pursuant thereto shall
comply with all Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance. In connection with the
granting or exercise of an option, the Company may require a Participant
to make such representations and warranties which, in the opinion of counsel
for the Company, are required by Applicable Law.


 


22.                                 Term of Plan; Effective Date. This Plan
shall be effective on the Effective Date, subject to approval of the
stockholders of the Company within twelve (12) months before or after its date
of adoption by the Board. It shall continue in effect for a term of ten (10) years
from the Effective Date unless sooner terminated under Section 19.


 


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23.                                 Additional Restrictions of Rule 16b-3.
The terms and conditions of options granted hereunder to, and the purchase
of Shares by, persons subject to Section 16 of the Exchange Act shall
comply with the applicable provisions of Rule 16b-3. This Plan shall be
deemed to contain, and such options shall contain, and the Shares issued upon
exercise thereof shall be subject to, such additional conditions and
restrictions as may be required by Rule 16b-3 to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.


 


24.                                 Rules for Foreign Jurisdictions. The
Committee may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of
Applicable Laws. Without limiting the generality of the foregoing, the
Committee is specifically authorized to adopt rules and procedures
regarding handling of payroll deductions or other contributions by
Participants, payment of interest, conversion of local currency, payroll tax,
withholding procedures and handling of stock certificates which vary with local
requirements; however, if such varying provisions are not in accordance with
the provisions of Section 423(b) of the Code, including but not
limited to the requirement of Section 423(b)(5) of the Code that all
options granted under the Plan shall have the same rights and privileges unless
otherwise provided under the Code and the regulations promulgated thereunder,
then the individuals affected by such varying provisions shall be deemed to be
participating under a sub-plan and not the Plan. The Committee may also
adopt sub-plans applicable to particular Designated Subsidiaries or locations,
which sub-plans may be designed to be outside the scope of Code section 423.
The rules of such sub-plans may take precedence over other provisions
of this Plan, with the exception of Section 12, but unless otherwise
superseded by the terms of such sub-plan, the provisions of this Plan shall
govern the operation of such sub-plan.


 


25.                                 No Enlargement of Rights. Nothing contained
in this Plan shall be deemed to give any Employee or other individual the right
to be retained in the employ or service of the Company or any Subsidiary or to
interfere with the right of the Company or any Subsidiary to discharge any
Employee or other individual at any time, for any reason or no reason, with or
without notice.


 


26.                                 Lock-Up. By electing to participate in
the Plan, the Participant agrees that the Company (or a representative of the
underwriter(s)) may, in connection with any underwritten registration of the
offering of any securities of the Company under the Securities Act, require
that the Participant not sell, dispose of, transfer, make any short sale of,
grant any option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale, any shares of Common Stock or other
securities of the Company held by the Participant (including but not limited to
any Shares purchased under the Plan), for a period of time specified by the
underwriter(s) (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement of the Company filed under the
Securities Act. The Participant further agrees to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop transfer instructions with respect to Shares of
Common Stock until the end of such period. The underwriters of the Company’s
stock are intended third party beneficiaries of this section and shall
have the right, power and authority to enforce the provisions hereof as though
they were a party hereto.


 


11

















 


27.                                 Governing Law. This Plan shall be
governed by applicable laws of the State of Delaware.


 


12

















 


MUELLER
WATER PRODUCTS, INC.


 


2006
EMPLOYEE STOCK PURCHASE PLAN


SUBSCRIPTION
AGREEMENT


 




	
  New Election

  	
   

  
	
  Change of
  Election

  	
   

  






 


1.                                       I,                         ,
hereby elect to participate in the Mueller Water Products, Inc. 2006
Employee Stock Purchase Plan (the “Plan”) effective as of the Offering
Period commencing on               
    ,       , and
subscribe to purchase Shares of the Company’s Common Stock in accordance with
this Subscription Agreement and the Plan.


 


2.                                       I elect to have
Contributions in the amount of     % of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).


 


3.                                       I hereby
authorize payroll deductions from each paycheck during each Offering Period at
the rate stated in Item 2 of this Subscription Agreement. I understand
that all payroll deductions made by me shall be credited to my account under
the Plan and that I may not make any additional payments into such account.
I understand that all Contributions made by me shall be accumulated for the
purchase of Shares of Common Stock at the applicable Purchase Price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, Shares will be purchased for me automatically on the
Purchase Date of each Offering Period unless my employment is terminated prior
to the Purchase Date or I otherwise withdraw from the Plan by giving written
notice to the Company for such purpose.


 


4.                                       I understand
that I may discontinue at any time prior to the Purchase Date my
participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can decrease the rate of my Contributions on one occasion only
during any Offering Period by completing and filing a new Subscription
Agreement with such decrease taking effect as of the beginning of the payroll
period following the date of filing of the new Subscription Agreement, if filed
at least five (5) business days prior to the beginning of such payroll
period. Further, I may change the rate of deductions for future Offering
Periods by filing a new Subscription Agreement, and any such change will be
effective as of the beginning of the next Offering Period. In addition, I
acknowledge that, unless I discontinue my participation in the Plan as provided
in Section 10 of the Plan, my election will continue to be effective for
each successive Offering Period.


 


5.                                       I have received
a copy of the Company’s most recent Plan summary and prospectus and a copy of
the complete “Mueller Water Products, Inc. 2006 Employee Stock Purchase
Plan.”  I understand that my
participation in the Plan is in all respects subject to the terms of the Plan.


 


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6.                                       Shares purchased
for me under the Plan should be issued in the name(s) of (name of employee or
employee and spouse only):


 


                                                                                      


 


                                                                                      


 


7.                                       In the event of
my death, and to the extent permitted by Applicable Law, I hereby designate the
following as my beneficiary(ies) to receive all payments and Shares due to me
under the Plan:


 


	
   

  	
   

  
	
  (First)          (Middle)          (Last)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Relationship)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Address)

  	
   

  



 


8.                                       I understand
that if I dispose of any Shares received by me pursuant to the Plan within 2
years after the Offering Date (the first day of the Offering Period during
which I purchased such Shares) or within 1 year after the Purchase Date, I will
be treated for US federal income tax purposes as having received ordinary
compensation income at the time of such disposition in an amount equal to the
excess of the fair market value of the Shares on the Purchase Date over the
price that I paid for the Shares, regardless of whether I disposed of the
Shares at a price less than their fair market value at the Purchase Date. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.


 


I hereby agree to notify the Company in
writing within 30 days after the date of any such disposition, and I will make
adequate provision for federal, state or other tax withholding obligations, if
any, that arise upon the disposition of the Common Stock.
The Company may, but will not be obligated to, withhold from my compensation
the amount necessary to meet any applicable withholding obligation including
with respect to taxes attributable to the sale or early disposition of Common
Stock by me.


 


I understand that this tax summary is only a
summary and is subject to change. I acknowledge that I
have received a copy of the Plan prospectus, and that additional information
regarding the tax consequences of my participation in the Plan can be found in
the prospectus. I further understand that I should consult a tax advisor
concerning the tax implications of the purchase and sale of stock under the
Plan.


 


10.                                 I hereby agree to be
bound by the terms of the Plan. The effectiveness of this Subscription
Agreement is dependent upon my eligibility to participate in the Plan.


 


14

















 


	
  SIGNATURE:

  	
   

  	
   

  
	
   

  
	
  EMPLOYEE ID#:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SPOUSE’S SIGNATURE (necessary

  
	
  if beneficiary is not spouse):

  
	
   

  
	
   

  
	
   

  	
   

  
	
  (Signature)

  
	
   

  
	
   

  
	
   

  	
   

  
	
  (Print name)

  
						



 


15

















 


MUELLER
WATER PRODUCTS, INC.


 


2006
EMPLOYEE STOCK PURCHASE PLAN


 


NOTICE
OF WITHDRAWAL


 


I,                           ,
hereby elect to:


 


o
WITHDRAWAL AS OF CURRENT OFFERING PERIOD:  Withdraw my participation in the Mueller
Water Products, Inc. 2006 Employee Stock Purchase Plan for the Offering
Period that began on              ,
     . This withdrawal covers all Contributions
credited to my account for this Offering Period and is effective on the date
designated below. I understand that all Contributions credited to my account
for this Offering Period will be paid to me as soon as practicable following
the Company’s receipt of this Notice of Withdrawal and that my option for this
Offering Period will automatically terminate, and that no further Contributions
for the purchase of Shares can be made by me during the Offering Period.


 


o
WITHDRAWAL AS OF NEXT OFFERING PERIOD:
 Withdraw my participation in the Mueller
Water Products, Inc. 2006 Employee Stock Purchase Plan as of the Offering
Period that will begin on          
   ,      . I understand
that no further Contributions will be credited to my account after the Purchase
Date of the Offering Period immediately preceding this Offering Period.


 


 


The undersigned further understands and
agrees that he or she shall be eligible to participate in succeeding Offering
Periods only by delivering to the Company a new Subscription Agreement.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  Signature of Employee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Employee ID Number