EXHIBIT 10.7


 


MUELLER WATER
PRODUCTS, INC. 


DIRECTORS’
DEFERRED FEE PLAN


 


Effective
Date: April 26, 2006


 


1.                                       Establishment
of Plan


 


The Mueller Water Products, Inc. Directors’ Deferred Fee Plan (the
“Plan”) has been established by Mueller Water Products. Inc. (the “Company”)
for eligible members of the Board of Directors (the “Board”) of the Company.  The Plan shall become effective as of the
date the Board approves the Plan, or such later date as is designated by the
Board (such date, as set forth above, the “Effective Date”).


 


2.                                       Eligibility


 


Each person who is elected to be a member of the Board and who is not
an employee of the Company or any of its subsidiaries (each, a “Director”) is
eligible to elect to participate in the Plan.


 


3.                                       Participation


 


a)                                      Form of Election. 
A Director may elect to become a Participant (as defined below) and, as
such, to defer all or a portion of the fees to which he may thereafter be
entitled to receive as a Director (not including expense reimbursement) by
completing and signing an “Election to Participate in the Mueller Water
Products, Inc. Directors’ Deferred Fee Plan”.  A Director electing to participate (a “Participant”)
shall designate whether his fees are to be credited to an “Income Account” or
to a “Stock Equivalent Account,” or divided in any manner between such two
accounts.


 


b)                                     Initial Election.  A
Director’s initial election to participate in the Plan must be made no later
than 30  days following the date on which the individual becomes
eligible to participate in the Plan (i.e., either following the initial
adoption of the Plan or upon first becoming a Director).  If the Director does not elect to participate
in the Plan upon first becoming eligible to participate, the Director may only
elect to participate in the Plan with respect to subsequent terms of
office.  Any such initial election with
respect to a subsequent term of office must be made no later than December 31st
of the year preceding the year in which the Director will commence services for
the subsequent term of office.


 

















 


c)                                      Elections as to Future Services.  The Director’s most-recently filed election
shall be deemed to be irrevocable and effective for fees to be earned with
respect to services to be provided in future terms of office unless the
Director files a new election in the manner and form established by the
Committee on or before December 31st of the year preceding the
year in which the Director expects to commence services for the future term of
office.


 


d)                                     Elections as to Prior Services.  A Director’s election as to fees previously
earned and deferred under the Plan may be amended or revoked only in a manner
established by the Committee (as defined below) and on such terms as comply
with applicable law.


 


4.                                       Operation of
Plan


 


a)                                      Income Account


 


A Participant’s fees otherwise payable shall be credited as a dollar
amount to the Participant’s Income Account on the date the fee would have
otherwise been paid.  At the end of each
calendar quarter, the Participant’s Income Account will be credited with interest
at an annual rate equal to the yield of a 10-year U.S. Treasury Note as of the
beginning of such calendar quarter plus 1.00%.  Interest shall be computed on the basis of the
beginning monthly credit balance in the Participant’s Income Account during
such quarter.


 


b)                                Stock Equivalent Account


 


On the first business day of each calendar quarter, a Participant’s
fees otherwise payable during the preceding calendar quarter shall be credited
as “Stock Equivalent Shares” in the Participant’s Stock Equivalent
Account.  The Stock Equivalent Shares
credited shall be equal in number to the maximum number of shares of the
Company’s Class A common stock (the “Common Stock”), or fraction thereof,
to the nearest one hundredth of one share, which could be purchased with the dollar
amount of the deferred fees at the closing market price for such stock on that
date, or if that date is not a trading date, on the next date that is a trading
date.


 


If the Participant is not serving as a Director on the first business
day of any calendar quarter due to death, resignation or removal (a “Termination
Event”), such Participant’s fees otherwise payable prior to the Termination
Event shall, no later than the tenth day after the Termination Event, be
converted into Stock Equivalent Shares equal in number to the maximum number of
shares of the Company’s Common Stock, or fraction thereof, to the nearest one
hundredth of one share, which could be purchased with such dollar amount at the
closing market price for such


 


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stock on that date, or if that date is not a trading date, on the next
date that is a trading date.


 


Stock Equivalent Shares shall be appropriately adjusted in the event of
any stock dividends, stock splits or any other similar changes in the Company’s
Common Stock (such change, a “Change in the Capital Structure”).  In the event that the Company’s Common Stock
is converted into other securities or property in connection with a Change in
the Capital Structure, all references herein to the Company’s “Common Stock”
shall be deemed references to the new security or property.  With respect to the payment of any cash
dividends, on each dividend payment date, an amount equal to the cash dividend
which would have been payable had the Participant been the actual owner of the
number of shares of the Company’s Common Stock reflected as Stock Equivalent
Shares in his Stock Equivalent Account shall be credited to such account, and
such amount shall be converted to Stock Equivalent Shares, in the manner
described in this Section 4 based on the market price of the Company’s
Common Stock on such dividend payment date.


 


5.                                       Payments


 


In January of the year determined by the Participant pursuant to a
valid election filed with the Secretary of the Company, which may be any
calendar year in which or after which the Participant has his 72nd birthday
or which may be the year of the Participant’s first termination of his services
as a Director (such date, the “Payment Date”), the Company shall make the payment
of the Income Account and the Stock Equivalent Account in cash to the
Participant in one, five, ten or fifteen annual installments, as shall be
determined by the Participant in accordance with the terms of his election form.
 Each annual installment payment shall be
made no later than January 30, beginning with the first Payment
Date.  Until complete payment of a Participant’s Deferred Fee Accounts,
such accounts shall be appropriately adjusted from time to time in accordance
with paragraphs 4(a) and 4(b) above.  In the event of a Participant’s death, payment
of all or the remaining portion of his Deferred Fee Accounts will continue to
be made to his beneficiary or beneficiaries in the series of annual
installments as determined by the Participant in the last election form on file
with the Secretary.  In the absence of an
election filed by the Participant with the Secretary of the Company, the entire
balance of a Participant’s Income Account and Stock Equivalent Account shall be
paid in a lump sum to the Participant (or in the event of a Participant’s
death, to his beneficiary or beneficiaries) between January 1 and January 30
of the calendar year following the year of the Participant’s first termination
of services as a director.


 


6.                                       General


 


a)                                      Each Participant
or former Participant entitled to payment of deferred fees hereunder from time
to time may name any beneficiary or


 


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beneficiaries (who may be named contingently or successively) to whom
any such deferred fees are to be paid in case of his death before he receives
any or all of such fees.  Each beneficiary
designation will revoke all prior designations by the same Participant or
former Participant, shall be in form prescribed by the Company, and will be
effective only when filed by the Participant or former Participant in writing
with the Committee during his lifetime.  In
the absence of any such designation, any fees remaining unpaid at a Participant’s
or former Participant’s death shall be paid to his estate.


 


b)                                     The establishment
of the Plan and the eligibility of or participation by any person shall not be
construed to confer any right on the part of such person to be nominated for
re-election, or to be re-elected, to the Board or to otherwise remain in the
service of the Company.


 


c)                                      Deferred fees
hereunder are not in any way subject to the debts or other obligations of
persons entitled thereto, and may not be voluntarily or involuntarily sold,
transferred or assigned. When a person entitled to a payment under the Plan is
under legal disability or, in the Company’s opinion, is in any way
incapacitated so as to be unable to manage his financial affairs, the Committee
may direct that payment be made to such person’s legal representative, if any,
and if none the Committee may at its election make payment to such person’s
spouse or otherwise apply such payment for such person’s benefit in any manner
it deems proper. Any payment made in accordance with the preceding sentence
shall be in complete discharge of the obligation of the Company or any of its
subsidiaries to make such payment under the Plan.


 


d)                                     This plan is an
unfunded plan that is either not classified as an “employee pension benefit
plan” or “pension plan” within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or is an
unfunded plan maintained primarily to provide deferred compensation benefits
for a select group of “management or highly-compensated employees” within the
meaning of Sections 201, 301, and 401 of ERISA, and therefore may be exempt
from the provisions of Parts 2, 3 and 4 of Title I of ERISA upon the making of
certain filings with the Department of Labor. 
Accordingly, the Company may terminate the Plan and make no further
benefit payments or amend the Plan to prevent certain individuals from
participating in the Plan if it is determined that such steps are necessary to
bring the Plan into compliance with certain requirements under ERISA.


 


e)                                      The establishment
of Deferred Fee Accounts for a Participant shall give him no right or security
interest in any asset of the Company or any of its subsidiaries, and no trust
relationship with respect to such accounts is intended. The right of the
Participant or his beneficiary to receive a


 


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distribution under this Plan shall be an unsecured claim against the
general assets of the Company, and neither the Participant nor his beneficiary
shall have any rights in or against any amounts credited to his Deferred Fee
Accounts or any other specific asset of the Company.  All amounts credited to the Deferred Fee
Accounts shall constitute general assets of the Company.


 


f)                                        A Stock
Equivalent Account for a Participant shall give him no right to receive either
treasury or unissued shares of Common Stock or any other classes of stock of
the Company and no rights as a stockholder of the Company.


 


7.                                       Section 409A


 


Notwithstanding anything in the Plan to the contrary, it is intended
that the administration of the Plan, and the deferral and payment of all
amounts under this Plan, shall be done in accordance with Section 409A of
the Internal Revenue Code of 1986, as amended from time to time (the “Code”)
and the Department of Treasury regulations and other interpretive guidance
issued thereunder, including any guidance or regulations that may be issued
after the effective date of this Plan, and shall not cause the acceleration of,
or the imposition of the additional, taxes provided for in Section 409A of
the Code.  Any amounts shall be deferred,
paid out or modified under this Plan in a manner that shall be intended to
avoid resulting in the acceleration of taxation, or the imposition of penalty
taxation, under Section 409A upon a Participant.  In the event that it is reasonably determined
by the Committee that any amounts payable under the Plan will be taxable to a
Participant under Section 409A of the Code prior to the payment and/or
delivery to such Participant of such amounts, or will be subject to the
acceleration of taxation or the imposition of penalty taxation under Section 409A
of the Code, the Committee may either (i) adopt such amendments to the
Plan and appropriate policies and procedures, including amendments and policies
with retroactive effect, that the Committee determines necessary or appropriate
to preserve the intended tax treatment of the benefits provided by the Plan
hereunder, and/or (ii) take such other actions as the Committee determines
necessary or appropriate to comply with the requirements of Section 409A
of the Code.


 


8.                                       Administration
and Choice of Law.


 


The Plan shall be administered by the Board, or a committee of one or
more members of the Board (or other individuals who are not members of the
Board to the extent allowed by law) duly appointed by the Board in accordance
with the Plan and applicable law (the “Committee”).  At any time that no such committee has been
appointed, the Board shall constitute the “Committee” hereunder.  The Committee is authorized to interpret the
Plan, to establish, amend and rescind any rules and regulations relating
to the Plan, and to make any other determinations that it deems necessary or
desirable for the administration of the Plan. 
The


 


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Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan in the manner and to the extent the Committee
deems necessary or desirable.  Any
decision of the Committee in the interpretation and administration of the Plan,
as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned (including, but
not limited to, Participants and their beneficiaries or successors).  The law of the State of Delaware shall govern
all questions concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of laws rules.


 


9.                                       Amendment and
Discontinuance


 


The Committee hereby reserves the right to amend or discontinue the
Plan at any time; provided, however, that any amendment or discontinuance of
the Plan shall be prospective in operation only and shall not affect the
payment of any deferred fees theretofore earned by any Participant or former
Participant unless the person affected shall expressly consent thereto.


 


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