Document:

Exhibit 10.1

 

CORPORATE
AGREEMENT

 

THIS CORPORATE AGREEMENT (“Agreement”)
is entered into as of May 26, 2006 by and between WALTER INDUSTRIES, INC.,
a Delaware corporation (“Walter”), and MUELLER WATER PRODUCTS, INC.,
a Delaware corporation (“Mueller”).

 

RECITALS

 

A.                                   Walter beneficially
owns all of the issued and outstanding shares of capital stock of Mueller, and
Mueller is a member of Walter’s “affiliated group” of corporations (the “Walter
Group”) for federal income tax purposes.

 

B.                                     The parties are
contemplating the possibility that (i) Mueller will sell shares of Series A
Common Stock, par value $0.01 per share (“Series A Common Stock”),
in an initial public offering (the “Initial Public Offering”) registered
under the Securities Act of 1933, as amended, and (ii) immediately
following the Initial Public Offering, Walter will own all of the outstanding
shares of Series B Common Stock, par value $0.01 per share (“Series B
Common Stock”), of Mueller, which will have eight votes per share and will
be a series of common stock separate from the Series A Common Stock.

 

C.                                     The parties desire
to enter into this Agreement to set forth their agreement regarding (i) Walter’s
rights to purchase additional shares of Series B Common Stock upon any
issuance of certain classes of capital stock of Mueller to any person to permit
Walter to maintain its percentage ownership interest in Mueller, (ii) Walter’s
rights to purchase shares of non-voting classes of capital stock of Mueller to
permit Walter to own eighty percent (80%) of each class of such stock
outstanding, (iii) certain registration rights with respect to Series B
Common Stock (and any other securities issued in respect thereof or in exchange
therefor) and (iv) certain representations, warranties, covenants and agreements
applicable so long as Mueller is a subsidiary of Walter.

 

AGREEMENTS

 

NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Walter and Mueller, for themselves, their successors and assigns, hereby agree
as follows:

 

ARTICLE I

DEFINITIONS

 

1.1.                              Definitions. As
used in this Agreement, the following terms will have the following meanings,
applicable both to the singular and the plural forms of the terms described:

 

“Affiliate” means, with respect to a
given Person, any Person controlling, controlled by or under common control
with such Person. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”),
as applied to any Person, means the possession, directly or indirectly, of the
power to vote a majority of the securities having voting power for the election
of directors (or 

 

 

other Persons acting in similar capacities) of such Person or otherwise
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.

 

“Agreement” has the meaning ascribed
thereto in the preamble hereto, as such agreement may be amended and supplemented
from time to time in accordance with its terms.

 

“Applicable Stock” means at any time
the (i) shares of Common Stock owned by the Walter Entities that were
owned on the date hereof, plus (ii) shares of Series B Common
Stock purchased by the Walter Entities pursuant to Article II of this
Agreement, plus (iii) shares of Common Stock that were issued to
Walter Entities in respect of shares described in either clause (i) or
clause (ii) in any reclassification, share combination, share subdivision,
share dividend, share exchange, merger, consolidation or similar transaction or
event.

 

“Series A Common Stock” has the
meaning ascribed thereto in the recitals to this Agreement.

 

“Series B Common Stock” has the
meaning ascribed thereto in the recitals to this Agreement.

 

“Series B Common Stock Option”
has the meaning ascribed thereto in Section 2.1(a).

 

“Series B Common Stock Option Notice”
has the meaning ascribed thereto in Section 2.2.

 

“Series B Transferee” shall have
the meaning ascribed thereto in Mueller’s Restated Certificate of
Incorporation.

 

“Common Stock” means the Series A
Common Stock, the Series B Common Stock, any other class of Mueller’s
capital stock representing the right to vote generally for the election of
directors and, for so long as Mueller continues to be a subsidiary corporation
includable in a consolidated federal income tax return of the Walter Group, any
other security of Mueller treated as stock for purposes of Section 1504 of
the Internal Revenue Code of 1986, as amended.

 

 “Company
Securities” has the meaning ascribed thereto in Section 3.2(b).

 

“Disadvantageous Condition” has the
meaning ascribed thereto in Section 3.1(a).

 

 “Holder”
means Walter, the other Walter Entities and any Transferee.

 

“Holder Securities” has the meaning
ascribed thereto in Section 3.2(b).

 

“Initial Public Offering” has the
meaning ascribed thereto in the recitals to this Agreement.

 

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“Initial Public Offering Date” means
the date of completion of the initial sale of Series A Common Stock in the
Initial Public Offering.

 

“Issuance Event” has the meaning
ascribed thereto in Section 2.2.

 

“Issuance Event Date” has the meaning
ascribed thereto in Section 2.2.

 

“Market Price” of any shares of Series A
Common Stock on any date means (i) the average of the last sale price of
such shares on each of the five trading days immediately preceding such date on
the New York Stock Exchange, Inc. or, if such shares are not listed
thereon, on the principal national securities exchange or automated interdealer
quotation system on which such shares are traded or (ii) if such sale
prices are unavailable or such shares are not so traded, the value of such
shares on such date determined in accordance with agreed-upon procedures
reasonably satisfactory to Mueller and Walter.

 

“Mueller” has the meaning ascribed
thereto in the preamble hereto.

 

“Mueller Entities” means Mueller and
its Subsidiaries, and “Mueller Entity” shall mean any of the Mueller
Entities.

 

“Nonvoting Stock” means any class of
Mueller’s capital stock not representing the right to vote generally for the
election of directors.

 

“Nonvoting Stock Option” has the
meaning ascribed thereto in Section 2.1(c).

 

“Nonvoting Stock Option Notice” has
the meaning ascribed thereto in Section 2.2.

 

“Other Holders” has the meaning
ascribed thereto in Section 3.2(c).

 

“Other Securities” has the meaning
ascribed thereto in Section 3.2.

 

“Ownership Percentage” means, at any
time, the fraction, expressed as a percentage and rounded to the next highest
thousandth of a percent, whose numerator is the aggregate Value of the
Applicable Stock and whose denominator is the aggregate Value of the
then-outstanding shares of Common Stock of Mueller; provided, however,
that any shares of Common Stock issued by Mueller in violation of its
obligations under Article II of this Agreement shall not be deemed
outstanding for the purpose of determining the Ownership Percentage. For
purposes of this definition, “Value” means, with respect to any share of
stock, the value of such share determined by Walter under principles applicable
for purposes of Section 1504 of the Internal Revenue Code of 1986, as
amended.

 

“Person” means any individual,
partnership, limited liability company, joint venture, corporation, trust,
unincorporated organization, government (and any department or agency thereof)
or other entity.

 

“Registrable Securities” means shares
of Series A Common Stock, shares of Series B Common Stock and any
stock or other securities into which or for which such Common 

 

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Stock may hereafter be changed, converted or exchanged and any
other shares or securities issued to Holders of such Common Stock (or such
shares or other securities into which or for which such shares are so changed,
converted or exchanged) upon any reclassification, share combination, share
subdivision, share dividend, share exchange, merger, consolidation or similar
transaction or event or pursuant to the Nonvoting Stock Option. As to any
particular Registrable Securities, such Registrable Securities shall cease to
be Registrable Securities when (i) a registration statement with respect
to the sale by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to
the public in accordance with Rule 144, (iii) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by Mueller and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or any state securities or blue sky law then
in effect or (iv) they shall have ceased to be outstanding.

 

“Registration Expenses” means any and
all expenses incident to performance of or compliance with any registration of
securities pursuant to Article III, including, without limitation, (i) the
fees, disbursements and expenses of Mueller’s counsel and accountants and the
fees and expenses of counsel selected by the Holders in accordance with this
Agreement in connection with the registration of the securities to be disposed
of, such fees and expenses of such counsel selected by the Holders to be
reasonable in the reasonable discretion of Mueller; (ii) all expenses,
including filing fees, in connection with the preparation, printing and filing
of the registration statement, any preliminary prospectus or final prospectus,
any other offering document and amendments and supplements thereto and the
mailing and delivering of copies thereof to any underwriters and dealers; (iii) the
cost of printing or producing any underwriting agreements and blue sky or legal
investment memoranda and any other documents in connection with the offering,
sale or delivery of the securities to be disposed of; (iv) all expenses in
connection with the qualification of the securities to be disposed of for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters or the Holders of securities in
connection with such qualification and in connection with any blue sky and
legal investment surveys; (v) the filing fees incident to securing any
required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the securities to be disposed of; (vi) transfer
agents’ and registrars’ fees and expenses and the fees and expenses of any
other agent or trustee appointed in connection with such offering; (vii) all
security engraving and security printing expenses; (viii) all fees and
expenses payable in connection with the listing of the securities on any
securities exchange or automated interdealer quotation system or the rating of
such securities, (ix) any other fees and disbursements of underwriters
customarily paid by the sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any, and (x) other reasonable
out-of-pocket expenses of Holders other than legal fees and expenses referred
to in clause (i) above.

 

“Rule 144” means Rule 144
(or any successor rule to similar effect) promulgated under the Securities
Act.

 

“Rule 415 Offering” means an
offering on a delayed or continuous basis pursuant to Rule 415 (or any
successor rule to similar effect) promulgated under the Securities Act.

 

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“SEC” means the United States
Securities and Exchange Commission.

 

“Securities Act” means the Securities
Act of 1933, as amended, or any successor statute.

 

“Selling Holder” has the meaning
ascribed thereto in Section 3.4(e).

 

“Subsidiary” means, as to any Person,
any corporation, association, partnership, joint venture or other business
entity of which more than 50% of the voting capital stock or other voting
ownership interests is owned or controlled, directly or indirectly, by such
Person or by one or more of the Subsidiaries of such Person or by a combination
thereof. “Subsidiary,” when used with respect to Walter or Mueller, shall also
include any other entity affiliated with Walter or Mueller, as the case may be,
that Walter and Mueller may hereafter agree in writing shall be treated as
a “Subsidiary” for the purposes of this Agreement.

 

“Transferee” has the meaning ascribed
thereto in Section 3.9.

 

“Walter Entities” means Walter and
Subsidiaries of Walter (other than Subsidiaries that constitute Mueller
Entities), and “Walter Entity” shall mean any of the Walter Entities.

 

“Walter Ownership Reduction” means any
decrease at any time in the Ownership Percentage to less than forty-five
percent (45%).

 

“Walter Transferee” has the meaning
ascribed thereto in Section 3.9.

 

“Walter” has the meaning ascribed
thereto in the preamble hereto.

 

“Walter Group” has the meaning
ascribed thereto in the recitals to this Agreement.

 

1.2.                              Internal References.
Unless the context indicates otherwise, references to Articles, Sections and
paragraphs shall refer to the corresponding articles, sections and paragraphs
in this Agreement and references to the parties shall mean the parties to this
Agreement.

 

ARTICLE II

OPTIONS

 

2.1.                              Options. (a) 
Mueller hereby grants to Walter, on the terms and conditions set forth herein,
a continuing right (the “Series B Common Stock Option”) to purchase
from Mueller, at the times set forth herein, such number of shares of Series B
Common Stock as is necessary to allow the Walter Entities to maintain the
percentage of the then-outstanding Common Stock of Mueller that is equal to the
Ownership Percentage. The Series B Common Stock Option shall be
assignable, in whole or in part and from time to time, by Walter to any
Walter Entity. The exercise price for the shares of Series B Common Stock
purchased pursuant 

 

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to the Series B Common Stock Option shall be the Market Price of
the Series A Common Stock as of the date of first delivery of notice of
exercise of the Series B Common Stock Option by Walter (or its permitted
assignee hereunder) to Mueller; provided, however, that the exercise price
shall be at least equal to the aggregate par value of the shares of Series B
Common Stock purchased thereby.

 

(b)                                 The provisions of Section 2.1(a) hereof
notwithstanding, the Series B Common Stock Option granted pursuant to Section 2.1(a) shall
not apply and shall not be exercisable in connection with the issuance by
Mueller of any shares of Common Stock pursuant to any stock option or other
executive or employee benefit or compensation plan maintained by Mueller, so long
as, from and after the date hereof and prior to the issuance of such shares,
Mueller has repurchased from shareholders and not subsequently reissued a
number of shares equal or greater to the number of shares to be issued in any
such issuance.

 

(c)                                  Mueller hereby grants
to Walter, on the terms and conditions set forth herein, a continuing right
(the “Nonvoting Stock Option” and, together with the Series B
Common Stock Option, the “Options”) to purchase from Mueller, at the
times set forth herein, such number of shares of Nonvoting Stock as is
necessary to allow the Walter Entities to own eighty percent (80%) of each class of
outstanding Nonvoting Stock. The Nonvoting Stock Option shall be assignable, in
whole or in part and from time to time, by Walter to any Walter Entity. The
exercise price for the shares of Nonvoting Stock purchased pursuant to the
Nonvoting Stock Option shall be the price at which such Nonvoting Stock is then
being sold to third parties, or, if no Nonvoting Stock is being sold, the fair
market value thereof as determined in good faith by the Board of Directors of
Mueller; provided, however, that the exercise price shall be at least equal to
the aggregate par value of the shares of Nonvoting Stock purchased thereby.

 

2.2.                              Notice. At least
20 business days prior to the issuance of any shares of Common Stock (other
than in connection with the Initial Public Offering, including the full
exercise of all underwriters’ over-allotment options granted in connection
therewith and other than issuances of Common Stock to any Walter Entity) or the
first date on which any event could occur that, in the absence of a full or
partial exercise of the Series B Common Stock Option, would result in a
reduction in the Ownership Percentage, Mueller will notify Walter in writing (a
“Series B Common Stock Option Notice”) of any plans it has to issue
such shares or the date on which such event could first occur. At least 20
business days prior to the issuance of any shares of Nonvoting Stock (other
than issuances of Nonvoting Stock to any Walter entity) or the first date on
which any event could occur that, in the absence of a full or partial exercise
of the Nonvoting Stock Option, would result in the Walter Entities owning less
than eighty percent (80%) of each class of outstanding Nonvoting Stock,
Mueller will notify Walter in writing (a “Nonvoting Stock Option Notice”
and, together with a Series B Common Stock Option Notice, an “Option
Notice”) of any plans it has to issue such shares or the date on which such
event could first occur. Each Option Notice must specify the date on which
Mueller intends to issue such additional shares or on which such event could
first occur (such issuance or event being referred to herein as an “Issuance
Event” and the date of such issuance or event as an “Issuance Event Date”),
the number of shares Mueller intends to issue or may issue and the other
terms and conditions of such Issuance Event.

 

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2.3.                              Option Exercise and
Payment. The Series B Common Stock Option may be exercised by
Walter (or any Walter Entity to which all or any part of the Series B
Common Stock Option has been assigned) for a number of shares equal to or less
than the number of shares that are necessary for the Walter Entities to
maintain, in the aggregate, the percentage of the then-outstanding shares of
Common Stock of Mueller that is equal to the then-current Ownership Percentage.
The Nonvoting Stock Option may be exercised by Walter (or any Walter
Entity to which all or any part of the Nonvoting Stock Option has been
assigned) for a number of shares equal to or less than the number of shares
that are necessary for the Walter Entities to own, in the aggregate, eighty
percent (80%) of each class of outstanding Nonvoting Stock. Each Option may be
exercised at any time after receipt of an applicable Option Notice and prior to
the applicable Issuance Event Date by the delivery to Mueller of a written
notice to such effect specifying (i) the number of shares of Series B
Common Stock or Nonvoting Stock, as the case may be, to be purchased by
Walter, or any of the Walter Entities and (ii) a calculation of the
exercise price for such shares; provided, however, that if
Mueller shall have issued any shares of Common Stock in violation of its
obligations under this Article II, the Option may be exercised at any
time by the delivery to Mueller of a written notice to such effect specifying
the information described in clauses (i) and (ii) above. Upon any
exercise of an Option, Mueller will promptly (and in any event on or prior to
the applicable Issuance Event Date) (i) deliver to Walter (or any Walter
Entity designated by Walter), against payment therefor, certificates (issued in
the name of Walter or its permitted assignee hereunder or as directed by
Walter) representing the shares of Series B Common Stock or Nonvoting
Stock, as the case may be, being purchased upon such exercise, and (ii) record
the issuance of such shares, upon payment therefor, in Mueller’s stock ledger. Payment
for such shares shall be made by wire transfer or intrabank transfer of
immediately-available funds to such account as shall be specified by Mueller,
for the full purchase price for such shares.

 

2.4.                              Effect of Failure to
Exercise. Except as provided in Section 2.6, any failure by Walter to
exercise either Option, or any exercise for less than all shares purchasable
under either Option, in connection with any particular Issuance Event shall not
affect Walter’s right to exercise the relevant Option in connection with any
subsequent Issuance Event.

 

2.5.                              Initial Public
Offering. Notwithstanding the foregoing, Walter shall not be entitled to
exercise the Series B Common Stock Option in connection with the Initial
Public Offering of the Series A Common Stock if, upon the completion of
the Initial Public Offering, including the full exercise of all underwriters’
over-allotment options granted in connection therewith, the Ownership
Percentage would be no less than eighty percent (80%).

 

2.6.                              Termination of Options.
The Options shall terminate upon the occurrence of any Issuance Event that,
after considering Walter’s response thereto and to any other Issuance Events,
results in the Ownership Percentage being less than twenty percent (20%), other
than any Issuance Event in violation of this Agreement. Each Option, or any
portion thereof assigned to any Walter Entity other than Walter, also shall
terminate in the event that the Person to whom such Option, or such portion
thereof has been transferred, ceases to be a Walter Entity for any reason
whatsoever.

 

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ARTICLE III

REGISTRATION RIGHTS

 

3.1.                              Demand Registration -
Registrable Securities. (a)  Upon written notice provided at any time
after the Initial Public Offering Date from any Holder of Registrable
Securities requesting that Mueller effect the registration under the Securities
Act of any or all of the Registrable Securities held by such Holder, which
notice shall specify the intended method or methods of disposition of such
Registrable Securities, Mueller shall use its best efforts to effect the
registration under the Securities Act and applicable state securities laws of
such Registrable Securities for disposition in accordance with the intended
method or methods of disposition stated in such request (including in a Rule 415
Offering, if Mueller is then eligible to register such Registrable Securities
on Form S-3 (or a successor form) for such offering); provided,
that:

 

(i)                                     with respect to
any registration statement filed, or to be filed, pursuant to this Section 3.1,
if Mueller shall furnish to the Holders of Registrable Securities that have
made such request a certified resolution of the Board of Directors of Mueller
(adopted by the affirmative vote of a majority of the total number of
directors, without any vacancies) stating that in the Board of Directors’ good
faith judgment it would (because of the existence of, or in anticipation of,
any acquisition or financing activity, or the unavailability for reasons beyond
Mueller’s reasonable control of any required financial statements, or any other
event or condition of similar significance to Mueller) be significantly
disadvantageous (a “Disadvantageous Condition”) to Mueller for such a
registration statement to be maintained effective, or to be filed and become
effective, and setting forth the general reasons for such judgment, Mueller
shall be entitled to cause such registration statement to be withdrawn and the
effectiveness of such registration statement terminated, or, in the event no
registration statement has yet been filed, shall be entitled not to file any
such registration statement, until such Disadvantageous Condition no longer
exists (notice of which Mueller shall promptly deliver to such Holders). Upon
receipt of any such notice of a Disadvantageous Condition, such Holders shall
forthwith discontinue use of the prospectus contained in such registration
statement and, if so directed by Mueller, each such Holder will deliver to
Mueller all copies, other than permanent file copies then in such Holder’s
possession, of the prospectus then covering such Registrable Securities current
at the time of receipt of such notice; provided, that the filing of any
such registration statement may not be delayed for a period in excess of
six months due to the occurrence of any particular Disadvantageous Condition;

 

(ii)                                  after any Walter
Ownership Reduction, the Holders of Registrable Securities may collectively
exercise their rights under this Section 3.1 (through notice delivered by
Holders owning in the aggregate a majority in economic interest of the
Registrable Securities then held by Holders) on not more than three occasions
(it being acknowledged that prior to any Walter Ownership Reduction, there
shall be no limit to the number of occasions on which such Holders (other than
any Walter Transferees and their Affiliates (other than Walter Entities)) may exercise
such rights);

 

(iii)                               except as otherwise
provided herein, the Holders of Registrable Securities shall not have the right
to exercise registration rights pursuant to this Section

 

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3.1 within the 180-day period following the
registration and sale of Registrable Securities effected pursuant to a prior
exercise of the registration rights provided in this Section 3.1; and

 

(iv)                              the Holders of
Registrable Securities shall not have the right to exercise registration rights
pursuant to this Section 3.1 within the 180-day period following the
effective date of the Registration Statement in connection with the Initial
Public Offering.

 

(b)                                 Notwithstanding any
other provision of this Agreement to the contrary, a registration requested by
a Holder of Registrable Securities pursuant to this Section 3.1 shall not
be deemed to have been effected (and, therefore, not requested for purposes of
paragraph (a) above), (i) unless it has become effective, (ii) if,
after it has become effective, such registration is interfered with by any stop
order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason other than a misrepresentation or
an omission by such Holder and, as a result thereof, the Registrable Securities
requested to be registered cannot be completely distributed in accordance with
the plan of distribution set forth in the related registration statement or (iii) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied
or waived other than by reason of some act or omission by such Holder of
Registrable Securities.

 

(c)                                  In the event that any
registration pursuant to this Section 3.1 shall involve, in whole or in
part, an underwritten offering, the Holders of a majority of the Registrable
Securities to be registered shall have the right to designate an underwriter or
underwriters reasonably acceptable to Mueller as the lead or managing
underwriters of such underwritten offering and, in connection with each
registration pursuant to this Section 3.1, such Holders may select
one counsel reasonably acceptable to Mueller to represent all such Holders.

 

(d)                                 Mueller shall have the
right to cause the registration of additional equity securities for sale for
its account, the account of any Mueller Entity or any existing or former
directors, officers or employees of the Mueller Entities in any registration of
Registrable Securities requested by the Holders pursuant to paragraph (a) above;
provided, however, that if the registration and sale of such
additional equity securities would require Walter or any Walter Entity to
exercise the Options to maintain the then-current Ownership Percentage or
ownership of eighty percent (80%) of each class of outstanding Nonvoting
Stock, then the number of such additional equity securities shall be reduced so
that exercise of the Options would not be necessary for Walter or any Walter
Entity to maintain such ownership levels and, provided, further,
that if such Holders are advised in writing (with a copy to Mueller) by a nationally
recognized investment banking firm selected by such Holders reasonably
acceptable to Mueller (which shall be the lead underwriter or a managing
underwriter in the case of an underwritten offering) that, in such firm’s good
faith view, all or a part of such additional equity securities cannot be
sold and the inclusion of such additional equity securities in such
registration would be likely to have an adverse effect on the price, timing or
distribution of the offering and sale of the Registrable Securities then
contemplated by any Holder, the registration of such additional equity
securities or part thereof shall not be permitted. The Holders of the
Registrable Securities to be offered may require that any such additional
equity securities be included in the offering proposed by such Holders on the
same conditions as the Registrable Securities that are included 

 

9

 

therein. In the event that the number of Registrable Securities
requested to be included in a registration statement by the Holders thereof
exceeds the number which, in the good faith view of such investment banking
firm, can be sold without adversely affecting the price, timing, distribution
or sale of securities in the offering, the number shall be allocated pro rata
among the requesting Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any number in excess of
a Holder’s request may be reallocated among the remaining requesting
Holders in a like manner).

 

3.2.                              Piggyback Registration.
In the event that Mueller at any time after the Initial Public Offering Date
proposes to register any of its Common Stock, any other of its equity
securities or securities convertible into or exchangeable for its equity
securities (collectively, including Common Stock, “Other Securities”)
under the Securities Act, whether or not for sale for its own account, in a
manner that would permit registration of Registrable Securities for sale for
cash to the public under the Securities Act, it shall at each such time give
prompt written notice to each Holder of Registrable Securities of its intention
to do so and of the rights of such Holder under this Section 3.2. Subject
to the terms and conditions hereof, such notice shall offer each such Holder
the opportunity to include in such registration statement such number of
Registrable Securities as such Holder may request. Upon the written
request of any such Holder made within 15 days after the receipt of Mueller’s
notice (which request shall specify the number of Registrable Securities
intended to be disposed of and the intended method of disposition thereof),
Mueller shall use its best efforts to effect, in connection with the
registration of the Other Securities, the registration under the Securities Act
of all Registrable Securities which Mueller has been so requested to register,
to the extent required to permit the disposition (in accordance with such
intended method of disposition thereof) of the Registrable Securities so
requested to be registered; provided, that:

 

(a)                                  if, at any time after
giving such written notice of its intention to register any Other Securities
and prior to the effective date of the registration statement filed in
connection with such registration, Mueller shall determine for any reason not
to register the Other Securities, Mueller may, at its election, give written
notice of such determination to such Holders and thereupon Mueller shall be
relieved of its obligation to register such Registrable Securities in
connection with the registration of such Other Securities, without prejudice,
however, to the rights of the Holders of Registrable Securities immediately to
request that such registration be effected as a registration under Section 3.1
to the extent permitted thereunder;

 

(b)                                 if the registration
referred to in the first sentence of this Section 3.2 is to be an
underwritten registration on behalf of Mueller, and a nationally recognized
investment banking firm selected by Mueller advises Mueller in writing that, in
such firm’s good faith view, all or a part of such Registrable Securities
cannot be sold and the inclusion of all or a part of such Registrable
Securities in such registration would be likely to have an adverse effect upon
the price, timing or distribution of the offering and sale of the Other
Securities then contemplated, Mueller shall include in such registration:  (i) first, all Other Securities Mueller
proposes to sell for its own account (“Company Securities”), (ii) second,
up to the full number of Registrable Securities held by Holders constituting
Walter Entities that are requested to be included in such registration
(Registrable Securities that are so held being sometimes referred to herein as “Holder
Securities”) in excess of the number of Company Securities to be sold in
such offering which, in the good faith view of such investment banking firm,
can be sold without adversely affecting 

 

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such offering (and (x) if such number is less than the full number of
such Holder Securities, such number shall be allocated by Walter among such
Walter Entities and (y) in the event that such investment banking firm advises
that less than all of such Holder Securities may be included in such
offering, such Walter Entities may withdraw their request for registration
of their Registrable Securities under this Section 3.2 and 90 days
subsequent to the effective date of the registration statement for the
registration of such Other Securities request that such registration be
effected as a registration under Section 3.1 to the extent permitted
thereunder), (iii) third, up to the full number of Registrable Securities
held by Holders (other than Walter Entities) of Registrable Securities that are
requested to be included in such registration in excess of the number of
Company Securities and Holder Securities to be sold in such offering which, in
the good faith view of such investment banking firm, can be so sold without so
adversely affecting such offering (and (x) if such number is less than the full
number of such Registrable Securities, such number shall be allocated pro rata
among such Holders on the basis of the number of Registrable Securities
requested to be included therein by each such Holder and (y) in the event that
such investment banking firm advises that less than all of such Registrable
Securities may be included in such offering, such Holders may withdraw
their request for registration of their Registrable Securities under this Section 3.2
and 90 days subsequent to the effective date of the registration statement for
the registration of such Other Securities request that such registration be
effected as a registration under Section 3.1 to the extent permitted
thereunder) and (iv) fourth, up to the full number of the Other Securities
(other than Company Securities), if any, in excess of the number of Company
Securities and Registrable Securities to be sold in such offering which, in the
good faith view of such investment banking firm, can be so sold without so
adversely affecting such offering (and, if such number is less than the full
number of such Other Securities, such number shall be allocated pro rata among
the holders of such Other Securities (other than Company Securities) on the
basis of the number of securities requested to be included therein by each such
Holder);

 

(c)                                  if the registration
referred to in the first sentence of this Section 3.2 is to be an
underwritten secondary registration on behalf of holders of Other Securities
(the “Other Holders”), and the lead underwriter or managing underwriter
advises Mueller in writing that in their good faith view, all or a part of
such additional securities cannot be sold and the inclusion of such additional
securities in such registration would be likely to have an adverse effect on
the price, timing or distribution of the offering and sale of the Other
Securities then contemplated, Mueller shall include in such registration the
number of securities (including Registrable Securities) that such underwriters
advise can be so sold without adversely affecting such offering, allocated pro
rata among the Other Holders and the Holders of Registrable Securities on the
basis of the number of securities (including Registrable Securities) requested
to be included therein by each Other Holder and each Holder of Registrable
Securities; provided, that if such registration statement is to be filed
at any time after a Walter Ownership Reduction, if such Other Holders have
requested that such registration statement be filed pursuant to demand
registration rights granted to them by Mueller, Mueller shall include in such
registration (i) first, Other Securities sought to be included therein by
the Other Holders pursuant to the exercise of such demand registration rights, (ii) second,
the number of Holder Securities sought to be included in such registration in
excess of the number of Other Securities sought to be included in such
registration by the Other Holders which in the good faith view of such investment
banking firm, can be so sold without so adversely affecting such offering (and
(x) if such number is less than the full number of such Holder Securities, such
number shall be allocated by Walter among 

 

11

 

such Walter Entities and (y) in the event that such investment banking
firm advises that less than all of such Holder Securities may be included
in such offering, such Walter Entities may withdraw their request for
registration of their Registrable Securities under this Section 3.2 and 90
days subsequent to the effective date of the registration statement for the
registration of such Other Securities request that such registration be
effected as a registration under Section 3.1 to the extent permitted thereunder)
and (iii) third, the number of Registrable Securities sought to be
included in such registration by Holders (other than Walter Entities) of
Registrable Securities in excess of the number of Other Securities and the
number of Holder Securities sought to be included in such registration which,
in the good faith view of such investment banking firm, can be so sold without
so adversely affecting such offering (and (x) if such number is less than the
full number of such Registrable Securities, such number shall be allocated pro
rata among such Holders on the basis of the number of Registrable Securities
requested to be included therein by each such Holder and (y) in the event that
such investment banking firm advises that less than all of such Registrable
Securities may be included in such offering, such Holders may withdraw
their request for registration of their Registrable Securities under this Section 3.2
and 90 days subsequent to the effective date of the registration statement for
the registration of such Other Securities request that such registration be
effected as a registration under Section 3.1 to the extent permitted
thereunder);

 

(d)                                 Mueller shall not be
required to effect any registration of Registrable Securities under this Section 3.2
incidental to the registration of any of its securities in connection with
mergers, acquisitions, exchange offers, subscription offers, dividend
reinvestment plans or stock option or other executive or employee benefit or
compensation plans; and

 

(e)                                  no registration of
Registrable Securities effected under this Section 3.2 shall relieve
Mueller of its obligation to effect a registration of Registrable Securities
pursuant to Section 3.1.

 

3.3.                              Expenses. Except
as provided herein, Mueller shall pay all Registration Expenses with respect to
a particular offering (or proposed offering). Notwithstanding the foregoing,
each Holder and Mueller shall be responsible for its own internal
administrative and similar costs, which shall not constitute Registration
Expenses.

 

3.4.                              Registration and
Qualification. If and whenever Mueller is required to effect the
registration of any Registrable Securities under the Securities Act as provided
in Sections 3.1 or 3.2, Mueller shall as promptly as practicable:

 

(a)                                  prepare, file and use
its reasonable best efforts to cause to become effective a registration
statement under the Securities Act relating to the Registrable Securities to be
offered;

 

(b)                                 prepare and file with
the SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
until the earlier of (A) such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of 

 

12

 

disposition set forth in such registration statement and (B) the
expiration of six months after such registration statement becomes effective; provided,
that such six-month period shall be extended for such number of days that
equals the number of days elapsing from (x) the date the written notice
contemplated by paragraph (f) of this Section 3.4 is given by Mueller
to (y) the date on which Mueller delivers to the Holders of Registrable
Securities the supplement or amendment contemplated by paragraph (f) of
this Section 3.4;

 

(c)                                  furnish to the
Holders of Registrable Securities and to any underwriter of such Registrable
Securities such number of conformed copies of such registration statement and
of each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus),
in conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and
such other documents, as the Holders of Registrable Securities or such
underwriter may reasonably request, and upon request a copy of any and all
transmittal letters or other correspondence to or received from, the SEC or any
other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating
to such offering;

 

(d)                                 use its reasonable
best efforts to register or qualify all Registrable Securities covered by such
registration statement under the securities or blue sky laws of such U.S.
jurisdictions as the Holders of such Registrable Securities or any underwriter
to such Registrable Securities shall request, and use its reasonable best
efforts to obtain all appropriate registrations, permits and consents in
connection therewith, and do any and all other acts and things which may be
necessary or advisable to enable the Holders of Registrable Securities or any
such underwriter to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such registration statement; provided,
that Mueller shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any such jurisdiction wherein it is not
so qualified or to consent to general service of process in any such
jurisdiction;

 

(e)                                  (i) use its best
efforts to furnish to each Holder of Registrable Securities included in such
registration (each, a “Selling Holder”) and to any underwriter of such
Registrable Securities an opinion of counsel for Mueller addressed to each
Selling Holder and dated the date of the closing under the underwriting
agreement (if any) (or if such offering is not underwritten, dated the
effective date of the registration statement) and (ii) use its best
efforts to furnish to each Selling Holder a “cold comfort” letter addressed to
each Selling Holder and signed by the independent public accountants who have
audited the financial statements of Mueller included in such registration
statement, in each such case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein) as
are customarily covered in opinions of issuer’s counsel and in accountants’
letters delivered to underwriters in underwritten public offerings of
securities and such other matters as the Selling Holders may reasonably
request and, in the case of such accountants’ letter, with respect to events
subsequent to the date of such financial statements;

 

(f)                                    as promptly as
practicable, notify the Selling Holders in writing (i) at any time when a
prospectus relating to a registration pursuant to Sections 3.1 or 3.2 is
required to be 

 

13

 

delivered under the Securities Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) of any request by the SEC or any other regulatory
body or other body having jurisdiction for any amendment of or supplement to
any registration statement or other document relating to such offering, and in
either such case, at the request of the Selling Holders prepare and furnish to
the Selling Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;

 

(g)                                 if reasonably
requested by the lead or managing underwriters, use its best efforts to list
all such Registrable Securities covered by such registration on each securities
exchange and automated inter-dealer quotation system on which a class of
common equity securities of Mueller is then listed;

 

(h)                                 to the extent
reasonably requested by the lead or managing underwriters, cause appropriate
officers of Mueller to participate in any “road shows” scheduled in connection
with any such registration, with all out-of-pocket costs and expense incurred
by Mueller or such officers in connection with such participation to be paid by
Mueller; and

 

(i)                                     furnish for
delivery in connection with the closing of any offering of Registrable
Securities pursuant to a registration effected pursuant to Sections 3.1 or 3.2
unlegended certificates representing ownership of the Registrable Securities
being sold in such denominations as shall be requested by the Selling Holders
or the underwriters.

 

3.5.                              Conversion of Other
Securities, Etc. In the event that any Holder offers any options, rights,
warrants or other securities issued by it or any other Person that are offered
with, convertible into or exercisable or exchangeable for any Registrable
Securities, the Registrable Securities underlying such options, rights,
warrants or other securities shall continue to be eligible for registration
pursuant to Sections 3.1 and 3.2.

 

3.6.                              Underwriting; Due
Diligence. (a)  If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration requested under
this Article III, Mueller shall enter into an underwriting agreement with
such underwriters for such offering, which agreement will contain such
representations and warranties by Mueller and such other terms and provisions
as are customarily contained in underwriting agreements of Mueller to the
extent relevant and as are customarily contained in underwriting agreements
generally with respect to secondary distributions to the extent relevant,
including, without limitation, indemnification and contribution provisions
substantially to the effect and to the extent provided in Section 3.7, and
agreements as to the provision of opinions of counsel and accountants’ letters
to the effect and to the extent provided in Section 3.4(e). The Selling
Holders on whose behalf the Registrable Securities are to be distributed by
such underwriters shall be parties to any such underwriting agreement and the representations
and warranties by, and the other agreements on 

 

14

 

the part of, Mueller to and for the benefit of such underwriters,
shall also be made to and for the benefit of such Selling Holders. Such underwriting
agreement shall also contain such representations and warranties by such
Selling Holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
when relevant, including, without limitation, indemnification and contribution
provisions substantially to the effect and to the extent provided in Section 3.7.

 

(b)                                 In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act pursuant to this Article III, Mueller
shall give the Holders of such Registrable Securities and the underwriters, if
any, and their respective counsel and accountants, such reasonable and
customary access to its books and records and such opportunities to discuss the
business of Mueller with its officers and the independent public accountants
who have certified the financial statements of Mueller as shall be necessary,
in the opinion of such Holders and such underwriters or their respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.

 

3.7.                              Indemnification and
Contribution. (a)  In the case of each offering of Registrable
Securities made pursuant to this Article III, Mueller agrees to indemnify
and hold harmless, to the extent permitted by law, each Selling Holder, each
underwriter of Registrable Securities so offered and each Person, if any, who
controls any of the foregoing Persons within the meaning of the Securities Act
and the officers, directors, affiliates, employees and agents of each of the
foregoing, against any and all losses, liabilities, costs (including reasonable
attorney’s fees and disbursements), claims and damages, joint or several, to
which they or any of them may become subject, under the Securities Act or
otherwise, including any amount paid in settlement of any litigation commenced
or threatened, insofar as such losses, liabilities, costs, claims and damages
(or actions or proceedings in respect thereof, whether or not such indemnified
Person is a party thereto) arise out of or are based upon any untrue statement
by Mueller or alleged untrue statement by Mueller of a material fact contained
in the registration statement (or in any preliminary or final prospectus
included therein) or in any offering memorandum or other offering document
relating to the offering and sale of such Registrable Securities prepared by
Mueller or at its direction, or any amendment thereof or supplement thereto, or
in any document incorporated by reference therein, or any omission by Mueller
or alleged omission by Mueller to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; provided,
however, that Mueller shall not be liable to any Person in any such case
to the extent that any such loss, liability, cost, claim or damage arises out
of or relates to any untrue statement or alleged untrue statement, or any
omission, if such statement or omission shall have been made in reliance upon and
in conformity with information relating to a Selling Holder, another holder of
securities included in such registration statement or underwriter furnished to
Mueller by or on behalf of such Selling Holder, other holder or underwriter
specifically for use in the registration statement (or in any preliminary or
final prospectus included therein), offering memorandum or other offering
document, or any amendment thereof or supplement thereto. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Selling Holder, any other holder or any underwriter and shall
survive the transfer of such securities. The foregoing indemnity agreement is
in addition to any liability that Mueller may otherwise have to each Selling
Holder, other holder or underwriter of the Registrable Securities or any
controlling person of the foregoing and the officers, directors, affiliates,
employees and agents of each of the foregoing; provided, further,

 

15

 

that, in the case of an offering with respect to which a Selling Holder
has designated the lead or managing underwriters (or a Selling Holder is
offering Registrable Securities directly, without an underwriter), this
indemnity does not apply to any loss, liability, cost, claim or damage arising
out of or relating to any untrue statement or alleged untrue statement or
omission or alleged omission in any preliminary prospectus or offering
memorandum if a copy of a final prospectus or offering memorandum was not sent
or given by or on behalf of any underwriter (or such Selling Holder or other
holder, as the case may be) to such Person asserting such loss, liability,
cost, claim or damage at or prior to the written confirmation of the sale of
the Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such final prospectus or offering
memorandum.

 

(b)                                 In the case of each
offering made pursuant to this Agreement, each Selling Holder, by exercising
its registration rights hereunder, agrees to indemnify and hold harmless, and
to cause each underwriter of Registrable Securities included in such offering
(in the same manner and to the same extent as set forth in Section 3.7(a))
to agree to indemnify and hold harmless, Mueller, each other underwriter who
participates in such offering, each other Selling Holder or other holder with
securities included in such offering and in the case of an underwriter, such
Selling Holder or other holder, and each Person, if any, who controls any of
the foregoing within the meaning of the Securities Act and the officers,
directors, affiliates, employees and agents of each of the foregoing, against
any and all losses, liabilities, costs (including reasonable attorney’s fees
and disbursements), claims and damages to which they or any of them may become
subject, under the Securities Act or otherwise, including any amount paid in
settlement of any litigation commenced or threatened, insofar as such losses,
liabilities, costs, claims and damages (or actions or proceedings in respect
thereof, whether or not such indemnified Person is a party thereto) arise out
of or are based upon any untrue statement or alleged untrue statement by such
Selling Holder or underwriter, as the case may be, of a material fact
contained in the registration statement (or in any preliminary or final
prospectus included therein) or in any offering memorandum or other offering
document relating to the offering and sale of such Registrable Securities
prepared by Mueller or at its direction, or any amendment thereof or supplement
thereto, or any omission by such Selling Holder or underwriter, as the case may be,
or alleged omission by such Selling Holder or underwriter, as the case may be,
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that
such untrue statement of a material fact is contained in, or such material fact
is omitted from information relating to such Selling Holder or underwriter, as
the case may be, furnished to Mueller by or on behalf of such Selling
Holder or underwriter, as the case may be, specifically for use in such
registration statement (or in any preliminary or final prospectus included
therein), offering memorandum or other offering document, or any amendment
thereof or supplement thereto. The foregoing indemnity is in addition to any
liability which such Selling Holder or underwriter, as the case may be, may otherwise
have to Mueller, or controlling persons and the officers, directors,
affiliates, employees, and agents of each of the foregoing; provided, however,
that, in the case of an offering made pursuant to this Agreement with respect
to which Mueller has designated the lead or managing underwriters (or Mueller
is offering securities directly, without an underwriter), this indemnity does
not apply to any loss, liability, cost, claim, or damage arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary prospectus or offering memorandum if a copy
of a final prospectus or offering memorandum was not sent or given by or on
behalf of any underwriter (or Mueller, as the case may be) to such Person 

 

16

 

asserting such loss, liability, cost, claim or damage at or prior to
the written confirmation of the sale of the Registrable Securities as required
by the Securities Act and such untrue statement or omission had been corrected
in such final prospectus or offering memorandum.

 

(c)                                  Each party
indemnified under paragraph (a) or (b) of this Section 3.7
shall, promptly after receipt of notice of a claim or action against such
indemnified party in respect of which indemnity may be sought hereunder,
notify the indemnifying party in writing of the claim or action; provided, that
the failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party on account of the
indemnity agreement contained in paragraph (a) or (b) of this Section 3.7
otherwise than under such paragraphs. If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying party thereof, unless in such indemnified party’s reasonable
judgment a conflict of interest between such indemnified party and indemnifying
parties may exist in respect of such claim, the indemnifying party shall
be entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel satisfactory to the indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party). After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 3.7 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation. If the indemnifying party does not assume
the defense of such claim or action, it is understood that the indemnifying
party shall not, in connection with any one such claim or action or separate
but substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
one separate firm of local attorneys in each such jurisdiction) at any time for
all such indemnified parties. Any indemnifying party against whom indemnity may be
sought under this Section 3.7 shall not be liable to indemnify an
indemnified party if such indemnified party settles such claim or action
without the consent of the indemnifying party, which consent shall not be
unreasonably withheld.

 

(d)                                 If the indemnification
provided for in this Section 3.7 shall for any reason be unavailable
(other than in accordance with its terms) to an indemnified party in respect of
any loss, liability, cost, claim or damage referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party, contribute
to the amount paid or payable by such indemnified party as a result of such
loss, liability, cost, claim or damage in such proportion as shall be
appropriate to reflect (i) the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other hand
or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or if the indemnified party failed to give the
notice required under paragraph (c) of this Section 3.7, the relative
benefits and the relative fault of the indemnifying party on the one hand and
the indemnified party on the other with respect to the statements or omissions
which resulted in such loss, liability, cost, claim or damage as well as any
other relevant equitable considerations. The relative benefits received by the
indemnifying party and the indemnified party shall be deemed to be in the same
respective proportion as the net proceeds (before deducting expenses) of the
offering received by such party (or, in the case of an underwriter, such
underwriter’s discounts and commissions) bear to the aggregate offering price
of the Registrable Securities or Other Securities. The relative fault shall be
determined by 

 

17

 

reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the indemnifying party on the one hand or the
indemnified party on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission, but not by reference to any indemnified party’s stock
ownership in Mueller. The amount paid or payable by an indemnified party as a
result of the loss, cost, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph (d) shall be deemed to
include, for purposes of this paragraph (d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

 

(e)                                  Indemnification and
contribution similar to that specified in the preceding paragraphs of this Section 3.7
(with appropriate modifications) shall be given by Mueller, the Selling Holders
and underwriters with respect to any required registration or other
qualification of securities under any state law or regulation or governmental
authority.

 

(f)                                    The obligations of
the parties under this Section 3.7 shall be in addition to any liability
which any party may otherwise have to any other party.

 

3.8.                              Rule 144 and Form S-3.
Commencing 90 days after the Initial Public Offering Date, Mueller shall use
its best efforts to ensure that the conditions to the availability of Rule 144
set forth in paragraph (c) thereof shall be satisfied. Upon the request of
any Holder of Registrable Securities, Mueller will deliver to such Holder a
written statement as to whether it has complied with such requirements. Mueller
further agrees to use its reasonable efforts to cause all conditions to the
availability of Form S-3 (or any successor form) under the Securities Act
of the filing of registration statements under this Agreement to be met as soon
as practicable after the Initial Public Offering Date. Notwithstanding anything
contained in this Section 3.8, Mueller may deregister under Section 12
of the Securities Exchange Act of 1934, as amended, if it then is permitted to
do so pursuant to said Act and the rules and regulations thereunder.

 

3.9.                              Transfer of
Registration Rights. Any Holder may transfer all or any portion of its
rights under Article III to any transferee of a number of Registrable
Securities owned by such Holder exceeding three percent (3%) of the outstanding
class or series of such securities at the time of transfer (each transferee
that receives such minimum number of Registrable Securities, a “Transferee”);
provided, that each Transferee of Registrable Securities (other than
Walter Entities) to which Registrable Securities are transferred, sold or
assigned directly by a Walter Entity (such Transferee, a “Walter Transferee”),
together with any Affiliate of such Walter Transferee (and any subsequent
direct or indirect Transferees of Registrable Securities from such Walter
Transferee and any Affiliates thereof) shall be entitled to request the
registration of Registrable Securities pursuant to this Section 3.9 only
once prior to a Walter Ownership Reduction and thereafter shall only be
entitled to request the registration of Registrable Securities pursuant to Section 3.1(a)(ii) and,
provided, further, that no Transferee shall be entitled to request registration
pursuant to this Section 3.9 for an amount of Registrable Securities equal
to less than $50,000,000. Any transfer of registration rights pursuant to this Section 3.9
shall be effective upon receipt by Mueller of (i) written notice from such
Holder 

 

18

 

stating the name and address of any Transferee and identifying the
number of Registrable Securities with respect to which the rights under this
Agreement are being transferred and the nature of the rights so transferred and
(ii) a written agreement from such Transferee to be bound by the terms of
this Article III and Sections 5.3, 5.4, 5.9, 5.10, and 5.11 of this
Agreement. The Holders may exercise their rights hereunder in such
priority as they shall agree upon among themselves.

 

3.10.                        Holdback Agreement. If
any registration pursuant to this Article III shall be in connection with
an underwritten public offering of Registrable Securities, each Selling Holder
agrees not to effect any public sale or distribution, including any sale under Rule 144,
of any equity security of Mueller or any security convertible into or
exchangeable or exercisable for any equity security of Mueller, in the case of
Registrable Securities (otherwise than through the registered public offering
then being made), within 7 days prior to or 90 days (or such lesser period as
the lead or managing underwriters may permit) after the effective date of
the registration statement (or the commencement of the offering to the public
of such Registrable Securities in the case of Rule 415 offerings). Mueller
hereby also so agrees; provided, that, subject to Section 3.6(a) hereof,
Mueller shall not be so restricted from effecting any public sale or
distribution of any security in connection with any merger, acquisition,
exchange offer, subscription offer, dividend reinvestment plan or stock option
or other executive or employee benefit or compensation plan.

 

3.11.                        Registration of Preferred
Stock. Mueller agrees that it shall from time to time enter into one or
more agreements with Walter and/or the Series B Transferee, if any, in form and
substance reasonably satisfactory to the parties thereto, granting to Walter or
the Series B Transferee, as the case may be, registration rights for
the registration of any shares of preferred stock of Mueller that may hereafter
be owned, directly or indirectly, by Walter or the Series B Transferee, as
the case may be, substantially upon the same terms and conditions as those
contained in Article III for the benefit of Walter.

 

ARTICLE IV

CERTAIN COVENANT AND AGREEMENTS

 

4.1.                              No Violations. (a) 
For so long as the Walter Entities collectively own shares of capital stock of
Mueller having more than fifty percent (50%) of the total voting power of all
capital stock of Mueller outstanding, Mueller covenants and agrees that it will
not take any action or enter into any commitment or agreement which may reasonably
be anticipated to result, with or without notice and with or without lapse of
time or otherwise, in a contravention or event of default by any Walter Entity
of (i) any provisions of applicable law or regulation, including but not
limited to provisions pertaining to the Internal Revenue Code of 1986, as
amended, or the Employee Retirement Income Security Act of 1974, as amended, (ii) any
provision of Walter’s certificate of incorporation or bylaws, (iii) any
credit agreement or other material instrument binding upon Walter or (iv) any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over Walter or any of its assets.

 

(b)                                 Mueller and Walter
agree to provide to the other any information and documentation requested by
the other for the purpose of evaluating and ensuring compliance with Section 4.1(a) hereof.

 

19

 

(c)                                  Notwithstanding the
foregoing Sections 4.1(a) and 4.1(b), nothing in this Agreement is
intended to limit or restrict in any way Walter’s rights as a shareholder of
Mueller.

 

4.2.                              Confidentiality. Except
as required by law, regulation or legal or judicial process, Walter agrees that
neither it nor any Walter Entity nor any of their respective directors,
officers or employees will without the prior written consent of Mueller
disclose to any Person any material, non-public information concerning the
business or affairs of Mueller acquired from any director, officer or employee
of Mueller (including any director, officer or employee of Mueller who is also a
director, officer or employee of Walter).

 

ARTICLE V

MISCELLANEOUS

 

5.1.                              Limitation of
Liability. Neither Walter nor Mueller shall be liable to the other for any
special, indirect, incidental or consequential damages of the other arising in
connection with this Agreement.

 

5.2.                              Subsidiaries. Walter
agrees and acknowledges that Walter shall be responsible for the performance by
each Walter Entity of the obligations hereunder applicable to such Walter
Entity.

 

5.3.                              Amendments. This
Agreement may not be amended or terminated orally, but only by a writing
duly executed by or on behalf of the parties hereto. Any such amendment shall
be validly and sufficiently authorized for purposes of this Agreement if it is
signed on behalf of Walter and Mueller by any of their respective presidents or
vice presidents.

 

5.4.                              Term. This
Agreement shall remain in effect until all Registrable Securities held by
Holders have been transferred by them to Persons other than Transferees; provided,
that the provisions of Section 3.7 shall survive any such expiration.

 

5.5.                              Severability. If
any provision of this Agreement or the application of any such provision to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid, illegal or unenforceable to any extent, the
remainder of this Agreement or such provision of the application of such
provision to such party or circumstances, other than those to which it is so
determined to be invalid, illegal or unenforceable, shall remain in full force
and effect to the fullest extent permitted by law and shall not be affected
thereby, unless such a construction would be unreasonable.

 

5.6.                              Notices. All
notices and other communications required or permitted hereunder shall be in
writing, shall be deemed duly given upon actual receipt, and shall be delivered
(a) in person, (b) by registered or certified mail, postage prepaid,
return receipt requested or (c) by facsimile or other generally accepted
means of electronic transmission (provided that a copy of any notice delivered
pursuant to this clause (c) shall also be sent pursuant to clause (b)),
addressed as follows:

 

20

 

	
  (a)

  	
  if to Mueller, to:

  
	
   

  	
   

  
	
   

  	
  Mueller Water Products, Inc.

  
	
   

  	
  4211 W. Boy Scout Blvd.

  
	
   

  	
  Tampa, FL 33607

  
	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
  Tel: (813) 871-4455

  
	
   

  	
  Fax: (813) 871-4430

  
	
   

  	
   

  
	
  (b)

  	
  If to Walter, to:

  
	
   

  	
   

  
	
   

  	
  Walter Industries, Inc.

  
	
   

  	
  4211 W. Boy Scout Blvd.

  
	
   

  	
  Tampa, FL 33607

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Tel: (813) 871-4120

  
	
   

  	
  Fax: (813) 871-4420

  

 

or to such other addresses or telecopy numbers as may be specified
by like notice to the other parties.

 

5.7.                              Further Assurances.
Walter and Mueller shall execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such instruments and take such other
action as may be necessary or advisable to carry out their obligations
under this Agreement and under any exhibit, document or other instrument
delivered pursuant hereto.

 

5.8.                              Counterparts. This
Agreement may be executed in any number of counterparts, each of which
shall be deemed an original instrument, but all of which together shall
constitute but one and the same agreement.

 

5.9.                              Governing Law. This
Agreement and the transactions contemplated hereby shall be construed in accordance
with, and governed by, the laws of the State of Delaware.

 

5.10.                        Entire Agreement. This
Agreement constitutes the entire understanding of the parties hereto with
respect to the subject matter hereof.

 

5.11.                        Series B Transferee.
Mueller agrees that it shall enter into an agreement with the Series B
Transferee (as defined in Mueller’s Restated Certificate of Incorporation), if
any, in form and substance reasonably satisfactory to the Series B
Transferee and Mueller (i) granting to the Series B Transferee
options for the purchase of Series B Common Stock and Nonvoting Stock
substantially upon the same terms and conditions as those contained in Article II,
(ii) granting to the Series B Transferee registration rights for the
registration of Registrable Securities substantially upon the same terms and
conditions as those contained in Article III for the benefit of Walter and
(iii) containing other covenants and agreement for the benefit of the Series B
Transferee that are substantially similar to the other covenants and agreements
contained in this Agreement for the benefit of Walter; provided, that
such agreement shall contain terms (including covenants and agreements of the Series B
Transferee) for the benefit of 

 

21

 

Mueller that are substantially similar to the terms (including the
covenants and agreements of Walter) for the benefit of Mueller contained
herein.

 

5.12.                        Successors. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns. Nothing contained in this
Agreement, express or implied, is intended to confer upon any other person or
entity any benefits, rights or remedies.

 

5.13.                        Specific Performance. The
parties hereto acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
it is agreed that they shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any
other remedy to which they may be entitled at law or equity.

 

22

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement the day and year first above written.

 

 

	
   

  	
  WALTER INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/

  	
  William F. Ohrt

  	
   

  
	
   

  	
   

  	
  Name:

  	
  William F. Ohrt

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and

  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MUELLER WATER PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/

  	
  Victor P. Patrick

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Victor P. Patrick

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Secretary

  

 

23Exhibit 10.2

 

INCOME TAX ALLOCATION AGREEMENT

 

THIS INCOME TAX ALLOCATION AGREEMENT (this “Agreement”)
dated as of May 26, 2006 is made and entered into by Walter Industries, Inc.,
a Delaware corporation (“Walter”) and the Walter Affiliates (as defined below),
and Mueller Water Products, Inc., a Delaware corporation (“Mueller”) and
the Mueller Affiliates (as defined below).

 

RECITALS

 

WHEREAS, Walter is the common parent
corporation of an “affiliated group” of corporations within the meaning of Section 1504(a) of
the Internal Revenue Code of 1986, as amended (the “Code”) and of certain
combined groups as defined under similar laws of other jurisdictions and
Mueller and the Mueller Affiliates are, as of the date hereof, and have been
members of such groups;

 

WHEREAS, the groups of which Walter is the
common parent and Mueller and the Mueller Affiliates are members file or intend
to file Consolidated Returns and Combined Returns (each as defined below);

 

WHEREAS, Mueller intends to effect the
initial public offering by Mueller of Mueller common stock that will reduce
Walter’s ownership of Mueller, on a fully diluted basis, to less than eighty
percent (80%) of the value of Mueller’s common stock (the “IPO”);

 

WHEREAS, as a result of the reduction in
Walter’s ownership, Mueller and the Mueller Affiliates will cease to be members
of the Consolidated Group and may cease to be members of one or more
Combined Groups (each as defined below);

 

WHEREAS, Walter intends to make a
distribution of the issued and outstanding shares of Mueller stock pro rata to
the holders of Walter capital stock in a transaction that is intended to
qualify as a tax-free distribution under Section 355 of the Code; and

 

WHEREAS, Walter and Mueller desire to set
forth their agreement regarding the allocation of taxes, the filing of tax
returns, the administration of tax contests and other related matters and to
replace in its entirety the Income Tax Allocation Agreement, dated as of October 3,
2005, between Walter and Mueller setting forth their agreement with respect to
certain tax matters (the “Original Income Tax Allocation Agreement”) with the
terms of this Agreement.

 

NOW, THEREFORE, in consideration of the
mutual covenants and promises contained herein, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

 

SECTION 1.                                DEFINITIONS

 

1.1                                 “AUDIT” includes any
audit, assessment of Taxes, other examination by any Tax Authority, proceeding,
or appeal of such proceeding relating to Taxes, whether administrative or judicial.

 

 

1.2                                 “COMBINED GROUP” means
a group of corporations or other entities that files a Combined Return.

 

1.3                                 “COMBINED RETURN”
means any Tax Return with respect to Non-Federal Taxes filed on a consolidated,
combined (including nexus combination, worldwide combination, domestic
combination, line of business combination or any other form of
combination) or unitary basis wherein one or more members of the Mueller Group
join in the filing of a Tax Return with Walter or a Walter Affiliate that is
not also a member of the Mueller Group.

 

1.4                                 “CONSOLIDATED GROUP”
means the affiliated group of corporations within the meaning of Section 1504(a) of
the Code of which Walter is the common parent and which includes the Mueller
Group.

 

1.5                                 “CONSOLIDATED RETURN”
means any Tax Return with respect to Federal Income Taxes filed by the
Consolidated Group pursuant to Section 1501 of the Code.

 

1.6                                 “DECONSOLIDATION”
means any event pursuant to which Mueller and the Mueller Group cease to be
includible in either the Consolidated Group or any Combined Group, as the
context requires.

 

1.7                                 “DECONSOLIDATION DATE”
means the close of business on the day on which a Deconsolidation occurs.
Unless otherwise required by the relevant Tax Authority or a court of competent
jurisdiction, Walter and Mueller, for itself and the Mueller Group, agree to
file all Tax Returns, and to take all other actions, relating to Federal Income
Taxes or Non-Federal Combined Taxes in a manner consistent with the position
that Mueller and the Mueller Group are includible in the Consolidated Group and
any applicable Combined Group for all days from the date hereof through and
including a Deconsolidation Date.

 

1.8                                 “DISTRIBUTION” means
any distribution by Walter of the issued and outstanding shares of Mueller
stock that Walter holds at such time in a transaction intended to qualify as a
tax-free distribution under Section 355 of the Code.

 

1.9                                 “DISTRIBUTION TAXES”
means any (i) Taxes imposed on, or increase in Taxes incurred by, Walter
or any Walter Affiliate and (ii) any Taxes of a Walter shareholder (or
former Walter shareholder) that are required to be paid or reimbursed by Walter
or any Walter Affiliate pursuant to a legal determination, resulting from, or
arising in connection with, the failure of a Distribution to qualify as a
tax-free transaction under Section 355 of the Code (including, without
limitation, any Tax resulting from the application of Section 355(d) or
Section 355(e) of the Code to a Distribution) or corresponding
provisions of the laws of any other jurisdictions. Any Tax referred to in the
immediately preceding sentence shall be determined using the highest applicable
statutory Tax rate for the relevant taxable period (or portion thereof).

 

1.10                           “ESTIMATED TAX INSTALLMENT
DATE” means the installment due dates prescribed in Section 6655(c) of
the Code (presently April 15, June 15, September 15 and December 15).

 

1.11                           “FEDERAL INCOME TAX” or “FEDERAL
INCOME TAXES” means any tax imposed under Subtitle A of the Code (including the
taxes imposed by Sections 11, 55, 59A, and 1201(a) of the Code), including
any interest, additions to Tax, or penalties 

 

2

 

applicable thereto, and any other income based United States Federal
Tax which is hereinafter imposed upon corporations.

 

1.12                           “FEDERAL TAX” means any Tax
imposed under the Code or otherwise under United States federal Tax law.

 

1.13                           “FINAL DETERMINATION” means (a) the
final resolution of any Tax (or other matter) for a taxable period, including
any related interest or penalties, that, under applicable law, is not subject
to further appeal, review or modification through proceedings or otherwise,
including (1) by the expiration of a statute of limitations (giving effect
to any extension, waiver or mitigation thereof) or a period for the filing of
claims for refunds, amended returns, appeals from adverse determinations, or
recovering any refund (including by offset), (2) by a decision, judgment,
decree, or other order by a court of competent jurisdiction, which has become
final and unappealable, (3) by a closing agreement or an accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable
agreements under laws of other jurisdictions, (4) by execution of an IRS Form 870-AD,
or by a comparable form under the laws of other jurisdictions (excluding,
however, any such form that reserves (whether by its terms or by operation
of law) the right of the taxpayer to file a claim for refund and/or the right
of the Tax Authority to assert a further deficiency), or (5) by any
allowance of a refund or credit, but only after the expiration of all periods
during which such refund or credit may be recovered (including by way of
offset) or (b) the payment of Tax by any member of the Consolidated Group
or Combined Group with respect to any item disallowed or adjusted by a Tax
Authority provided that Walter determines that no action should be taken to
recoup such payment.

 

1.14                           “IRS” means the Internal
Revenue Service.

 

1.15                           “MARKET VALUATION” means as
of the first business day immediately following the date on which the
Distribution is effected (i) with respect to Mueller, the fair market
value of all of its issued and outstanding stock (measured using the mean of
the high and low of the public trading price as published in The Wall Street
Journal) as of such date, or (ii) with respect to Walter, the fair market
value of all of its issued and outstanding stock (measured using the mean of
the high and low of the public trading price as published in The Wall Street
Journal) as of such date.

 

1.16                           “MUELLER AFFILIATE” means
any corporation or other entity, including any entity that is a disregarded
entity for federal income tax purposes, directly or indirectly “controlled” by
Mueller where “control” means the ownership of fifty percent (50%) or more of
the ownership interests of such corporation or other entity (by vote or value)
or the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such corporation or other entity.

 

1.17                           “MUELLER BUSINESS” means the
business and operations conducted by Mueller and its Affiliates as such
business and operations will continue after the date of the IPO.

 

1.18                           “MUELLER GROUP” means the
affiliated group of corporations, including any entity that is a disregarded
entity for federal income tax purposes, as defined in Section 1504(a) of
the Code, or similar group of entities as defined under similar laws of other
jurisdictions, of which Mueller would be the common parent if it were not a
subsidiary of Walter, and any corporation or other entity, including any entity
that is a disregarded entity 

 

3

 

for federal income tax purposes, which may be or become a member
of such group from time to time.

 

1.19                           “MUELLER GROUP COMBINED TAX
LIABILITY” means, with respect to any taxable year, the Mueller Group’s
liability for Non-Federal Combined Taxes as determined under Section 3.6
of this Agreement.

 

1.20                           “MUELLER GROUP FEDERAL
INCOME TAX LIABILITY” means, with respect to any taxable year, the Mueller
Group’s liability for Federal Income Taxes as determined under Section 3.5
of this Agreement.

 

1.21                           “NON-FEDERAL COMBINED TAXES”
means any Non-Federal Taxes with respect to which a Combined Return is filed.

 

1.22                           “NON-FEDERAL SEPARATE TAXES”
means any Non-Federal Taxes that are not Non-Federal Combined Taxes.

 

1.23                           “NON-FEDERAL TAXES” means
any Tax other than a Federal Tax.

 

1.24                           “OFFICER’S CERTIFICATE” means
a letter executed by an officer of Walter or Mueller and provided to Tax
Counsel as a condition for the completion of a Tax Opinion or Supplemental Tax
Opinion.

 

1.25                           “POST-DECONSOLIDATION PERIOD”
means a taxable period beginning after the applicable Deconsolidation Date.

 

1.26                           “PRE-DECONSOLIDATION PERIOD”
means any taxable period beginning on or prior to the applicable
Deconsolidation Date.

 

1.27                           “PRO FORMA MUELLER GROUP
COMBINED RETURN” means a pro forma non-federal combined tax return or other schedule prepared
pursuant to Section 3.6 of this Agreement.

 

1.28                           “PRO FORMA MUELLER GROUP
CONSOLIDATED RETURN” means a pro forma consolidated federal income tax return
prepared pursuant to Section 3.5(b) of this Agreement.

 

1.29                           “REDETERMINATION AMOUNT”
means, with respect to any taxable year, the amount determined under Section 3.10
of this Agreement.

 

1.30                           “RULING” means (i) any
private letter ruling issued by the IRS in connection with a Distribution in
response to a request for such a private letter ruling filed by Walter (or any
Walter Affiliate) prior to the date of a Distribution, and (ii) any
similar ruling issued by any other Tax Authority addressing the application of
a provision of the laws of another jurisdiction to a Distribution.

 

1.31                           “RULING DOCUMENTS” means (i) the
request for a Ruling filed with the IRS, together with any supplemental filings
or other materials subsequently submitted on behalf of Walter, its Affiliates
and shareholders to the IRS, or on behalf of Mueller, its Affiliates and
shareholders to the IRS the appendices and exhibits thereto, and any Ruling
issued by the IRS to Walter (or any Walter Affiliate) or Mueller (or any
Mueller Affiliate) in 

 

4

 

connection with a Distribution and (ii) any similar filings
submitted to, or rulings issued by, any other Tax Authority in connection with
a Distribution.

 

1.32                           “SUPPLEMENTAL RULING” means (i) any
ruling (other than the Ruling) issued by the IRS in connection with a
Distribution, and (ii) any similar ruling issued by any other Tax
Authority addressing the application of a provision of the laws of another
jurisdiction to a Distribution.

 

1.33                           “SUPPLEMENTAL RULING
DOCUMENTS” means (i) the request for a Supplemental Ruling, together with
any supplemental filings or other materials subsequently submitted, the
appendices and exhibits thereto, and any Supplemental Rulings issued by the IRS
in connection with a Distribution and (ii) any similar filings submitted
to, or rulings issued by, any other Tax Authority in connection with a Distribution.

 

1.34                           “SUPPLEMENTAL TAX OPINION”
has the meaning set forth in Section 4.2(c) of this Agreement.

 

1.35                           “TAX ASSET” means any net
operating loss, net capital loss, investment tax credit, foreign tax credit,
charitable deduction or any other deduction, credit or tax attribute which
could reduce Taxes (including without limitation deductions and credits related
to alternative minimum taxes).

 

1.36                           “TAX AUTHORITY” includes the
IRS and any state, local, or other governmental authority responsible for the
administration of any Taxes.

 

1.37                           “TAX COUNSEL” means a
nationally recognized law firm or accounting firm selected by Walter to provide
a Tax Opinion or a Supplemental Tax Opinion.

 

1.38                           “TAX” or “TAXES” means any
charges, fees, levies, imposts, duties, or other assessments of a similar
nature, including without limitation, income, alternative or add-on minimum,
gross receipts, excise, employment, sales, use, transfer, license, payroll,
franchise, severance, stamp, occupation, windfall profits, withholding, Social
Security, unemployment, disability, ad valorem, estimated, highway use,
commercial rent, capital stock, paid up capital, recording, registration,
property, real property gains, value added, business license, custom duties, or
other tax or governmental fee of any kind whatsoever, imposed or required to be
withheld by any Tax Authority including any interest, additions to Tax, or
penalties applicable thereto.

 

1.39                           “TAX RETURN” OR “TAX RETURNS”
means any return, declaration, statement, report, schedule, certificate, form,
information return or any other document (and any related or supporting
information) including an amended tax return required to be supplied to, or
filed with, a Tax Authority with respect to Taxes.

 

1.40                           “TAX OPINION” means an opinion
issued by Tax Counsel as one of the conditions to completing a Distribution
addressing certain United States federal income tax consequences of a
Distribution under Section 355 of the Code.

 

1.41                           “WALTER AFFILIATE” means any
corporation or other entity, including any entity that is disregarded for
federal income tax purposes, directly or indirectly “controlled” by Walter
where “control” means the ownership of fifty percent (50%) or more of the
ownership interests of such corporation or other entity (by vote or value) or
the possession, 

 

5

 

directly or indirectly, of the power to direct or cause the direction
of the management or policies of such corporation or other entity, but at all
times excluding Mueller or any Mueller Affiliate.

 

1.42                           “WALTER BUSINESS” means all
of the businesses and operations conducted by Walter and its Affiliates,
excluding the Mueller Business, at any time, whether prior to, or after the
date of the IPO.

 

SECTION 2.                                PREPARATION
AND FILING OF TAX RETURNS

 

2.1                                 IN GENERAL. (a) 
Walter shall have the sole and exclusive responsibility for the preparation and
filing of any Consolidated Return or Combined Return.

 

(b) Mueller shall, subject to Section 2.2
of this Agreement, be responsible for preparing and filing all Tax Returns of
Mueller and the Mueller Affiliates other than those described in Section 2.1(a) of
this Agreement.

 

2.2                                 PREPARATION AND FILING
OF RETURNS. (a) All Tax Returns filed after the date of this Agreement by
Walter, any Walter Affiliate, Mueller, or any Mueller Affiliate shall (1) be
prepared in a manner that is consistent with Section 4 of this Agreement and the Code, and (2) filed
on a timely basis (taking into account applicable extensions) by the party
responsible for such filing under Section 2.1 of this Agreement.

 

(b)                                 In its sole
discretion, Walter shall have the exclusive right with respect to any
Consolidated Return or Combined Return (a) to determine (1) the
manner in which such Tax Return shall be prepared and filed, including, without
limitation, the manner in which any item of income, gain, loss, deduction or
credit shall be reported, (2) whether any extensions may be
requested, (3) the elections that will be made by any member of the
Consolidated Group or applicable Combined Group, and (4) whether any
amended Tax Returns should be filed, (b) to control, contest, and
represent the interests of the Consolidated Group and any Combined Group in any
Audit and to resolve, settle, or agree to any adjustment or deficiency
proposed, asserted or assessed as a result of any Audit, (c) to file,
prosecute, compromise or settle any claim for refund, and (d) to determine
whether any refunds, to which the Consolidated Group or applicable Combined
Group may be entitled, shall be paid by way of refund or credited against
the Tax liability of the Consolidated Group or applicable Combined Group.
Mueller, for itself and its subsidiaries, hereby irrevocably appoints Walter as
its agent and attorney-in-fact to take such action (including the execution of
documents) as Walter may deem appropriate to effect the foregoing.

 

2.3                                 FURNISHING INFORMATION.
Mueller (or the applicable Mueller Affiliate) shall (a) furnish to Walter
in a timely manner such information and documents as Walter may reasonably
request for purposes of (1) preparing any original or amended Consolidated
Return or Combined Return, (2) contesting or defending any Audit relating
to a Consolidated Return or a Combined Return, and (3) making any
determination or computation necessary or appropriate under this Agreement, (b) cooperate
in any Audit of any Consolidated Return or Combined Return, (c) retain and
provide on demand books, records, documentation or other information relating
to any tax return until the later of (1) the expiration of the applicable
statute of limitations (giving effect to any extension, waiver, or mitigation
thereof) and (2) in the event any claim is made under this Agreement for
which such information is relevant, until a Final Determination with respect to
such claim, and (d) take such action as Walter may deem appropriate
in connection therewith. Walter shall provide Mueller (or the 

 

6

 

applicable Mueller Affiliate) any assistance reasonably required in
providing any information requested pursuant to this Section 2.3.

 

2.4                                 EXPENSES. Mueller
shall reimburse Walter for any outside legal and accounting expenses incurred
by Walter in the course of the conduct of any Audit regarding the Tax liability
of the Consolidated Group or any Combined Group, and for any other expense
incurred by Walter in the course of any litigation relating thereto, to the
extent such costs are reasonably attributable to Mueller or any Mueller
Affiliate and provided Walter has conferred with Mueller as to the portion of
the Audit relating to Mueller or the Mueller Affiliate. Notwithstanding the
foregoing, Walter shall have the sole discretion to control, contest,
represent, file, prosecute, challenge or settle any Audit pursuant to Section 2.2
of this Agreement.

 

SECTION 3.                                PAYMENT
OF TAXES AND TAX SHARING AMOUNTS

 

3.1                                 FEDERAL INCOME TAXES.
Walter shall pay (or cause to be paid) to the IRS all Federal Income Taxes, if
any, of the Consolidated Group.

 

3.2                                 NON-FEDERAL COMBINED
TAXES. Walter shall pay (or cause to be paid) to the appropriate Tax
Authorities all Non-Federal Combined Taxes, if any, of any Combined Group.

 

3.3                                 NON-FEDERAL SEPARATE
TAXES AND OTHER TAXES. Mueller shall pay to the appropriate Tax Authorities all
Non-Federal Separate Taxes and any other Taxes (other than those described in Section 3.1
and Section 3.2 of this Agreement), if any, of Mueller and the Mueller
Affiliates.

 

3.4                                 MUELLER LIABILITY FOR
FEDERAL INCOME TAXES AND NON-FEDERAL COMBINED TAXES. For each taxable year (or
portion thereof ending on the applicable Deconsolidation Date) during a
Pre-Deconsolidation Period, Mueller shall pay to Walter an amount equal to the
sum of the Mueller Group Federal Income Tax Liability and the Mueller Group
Combined Tax Liability for such period.

 

3.5                                 MUELLER GROUP FEDERAL
INCOME TAX LIABILITY. (a)  IN GENERAL. The Mueller Group Federal Income
Tax Liability for each taxable year (or portion thereof ending on the
applicable Deconsolidation Date) shall be the Mueller Group’s liability for
Federal Income Taxes as determined on a Pro Forma Mueller Group Consolidated
Return prepared in accordance with Section 3.5(b) of this Agreement.

 

(b)                                 PRO FORMA FEDERAL
RETURN. For each taxable year (or portion thereof ending on the applicable
Deconsolidation Date) during a Pre-Deconsolidation Period, Walter shall prepare
or cause to be prepared (and, as requested by Walter, Mueller shall cooperate
in preparing) a Pro Forma Mueller Group Consolidated Return as if the Mueller
Group were not and never were part of the Consolidated Group, but rather
were a separate affiliated group of corporations of which Mueller were the
common parent filing a consolidated federal income tax return pursuant to Section 1501
of the Code. For purposes of this Section 3.5(b), the Mueller Group’s
Federal Income Tax Liability shall not be reduced by the Mueller Group’s
carrybacks and carryovers of federal Tax Assets from other taxable years (such
items being addressed by Section 3.5(c) herein).

 

7

 

(c)                                  FEDERAL TAX ASSETS. Walter
shall pay to the Mueller Group, not later than 15 business days after Walter
makes a payment to, or receives a payment, credit or offset from any Tax
Authority pursuant to this Section 3, the amount, if any, by which one or
more federal Tax Assets of the Mueller Group reduced the Federal Income Tax
liability of the Consolidated Group for any taxable year. For purposes of
computing the amount of the payment described in this Section 3.5(c), one
or more federal Tax Assets of the Mueller Group shall be considered to have
reduced the Consolidated Group’s Federal Income Tax liability in a given year
by an amount equal to the difference, if any, between (i) the amount of
the Consolidated Group’s Federal Income Tax liability for the year computed
without regard to such Tax Asset or Tax Assets and (ii) the amount of the
Consolidated Group’s Federal Income Tax liability for the year computed with
regard to such Tax Asset or Tax Assets.

 

3.6                                 MUELLER GROUP COMBINED
TAX LIABILITY. (a) IN GENERAL. The Mueller Group Combined Tax Liability
for each taxable year (or portion thereof ending on the applicable
Deconsolidation Date) shall be the sum for such taxable period of the Mueller
Group’s liability for each Non-Federal Combined Tax, as determined on Pro Forma
Mueller Group Combined Returns prepared in a manner consistent with the
principles and procedures set forth in Section 3.5 hereof.

 

(b)                                 STATE TAX ASSETS. Walter
shall pay to the Mueller Group, not later than 15 business days after Walter
makes a payment to, or receives a payment, credit or offset from any Tax
Authority pursuant to this Section 3, the amount, if any, by which one or
more state or local Tax Assets of Mueller and the Mueller Affiliates reduced
the Combined Tax liability of the applicable Combined Group for any taxable
year. For purposes of computing the amount of the payment described in this Section 3.6(b),
one or more state or local Tax Assets of Mueller and the Mueller Affiliates
shall be considered to have reduced the Combined Group’s Tax liability in a
given year by an amount equal to the difference, if any, between (i) the
amount of the Combined Group’s Tax liability for the year computed without
regard to such Tax Asset or Tax Assets and (ii) the amount of the Combined
Group’s Tax liability for the year computed with regard to such Tax Asset or
Tax Assets.

 

3.7                                 FOREIGN TAX ASSETS. Any
other Tax Assets (other than Tax Assets described in Sections 3.5(c) and
3.6(b)) will be reimbursed at the time of use by Walter or Walter Affiliates in
accordance with principles set forth in Sections 3.5(c) and 3.6(b).

 

3.8                                 TAX SHARING
INSTALLMENT PAYMENTS. (a)  FEDERAL INCOME TAXES. Not later than five
business days prior to each Estimated Tax Installment Date with respect to any
Pre-Deconsolidation Period, Walter shall determine under Section 6655 of
the Code the estimated amount of the related installment of the Mueller Group
Federal Income Tax Liability. Mueller shall then pay to Walter, not later than
such Estimated Tax Installment Date, the amount thus determined.

 

(b)                                 NON-FEDERAL COMBINED
TAXES. Not later than five business days prior to any estimated tax installment
date with respect to Non-Federal Combined Taxes for any Pre-Deconsolidation
Period, Walter shall determine the estimated amount of the related installment
of the Mueller Group Combined Tax Liability for the taxable year. Mueller shall
pay to Walter, not later than the due date for such installment, the amount
thus determined.

 

3.9                                 TAX SHARING TRUE-UP
PAYMENTS. (a)  FEDERAL INCOME TAXES. Not later than 15 business days after
the Consolidated Return is filed with respect 

 

8

 

to any Pre-Deconsolidation Period, Walter shall deliver to Mueller a
Pro Forma Mueller Group Consolidated Return or other comparable schedule reflecting
the Mueller Group Federal Income Tax Liability for such taxable year (or
portion thereof ending on the applicable Deconsolidation Date). Not later than
10 business days after the date such Pro Forma Mueller Group Consolidated
Return or other schedule is delivered, Mueller shall pay to Walter, or
Walter shall pay to Mueller, as appropriate, an amount equal to the difference,
if any, between the Mueller Group Federal Income Tax Liability for such taxable
year (or portion thereof ending on the applicable Deconsolidation Date) and the
aggregate amount paid by Mueller with respect to such taxable year (or portion
thereof ending on the applicable Deconsolidation Date) under Section 3.8(a) of
this Agreement.

 

(b)                                 NON-FEDERAL COMBINED
TAXES. Not later than 15 business days after the Combined Return is filed with
respect to any period that includes any Pre-Deconsolidation Period, Walter
shall deliver to Mueller a Pro Forma Mueller Group Combined Return or other
comparable schedule reflecting the Mueller Group Combined Tax Liability
for such taxable year (or portion thereof ending on the applicable
Deconsolidation Date). Not later than 10 business days following delivery of
such Pro Forma Mueller Group Combined Return or other schedule, Mueller shall
pay to Walter, or Walter shall pay to Mueller, as appropriate, an amount equal
to the difference, if any, between the Mueller Group Combined Tax Liability for
such taxable year (or portion thereof ending on the applicable Deconsolidation
Date) and the amount paid by Mueller with respect to such taxable year (or
portion thereof ending on the applicable Deconsolidation Date) under Section 3.8(b) of
this Agreement.

 

3.10                           REDETERMINATION AMOUNT. (a) 
IN GENERAL. In the event of any redetermination of any item of income, gain,
loss, deduction or credit of any member of the Consolidated Group or any
Combined Group as a result of a Final Determination or any settlement or
compromise with any Tax Authority (including any amended Tax Return or claim
for refund filed by Walter), Mueller shall pay Walter or Walter shall pay
Mueller, as the case may be, the Redetermination Amount.

 

(b)                                 COMPUTATION. The
Redetermination Amount shall be the difference, if any, between all amounts
previously determined under Section 3 of this Agreement and all amounts
that would have been determined under Section 3 of this Agreement taking
such redetermination into account (including any additions to Tax or penalties
applicable thereto), together with interest for each day calculated (1) with
respect to redeterminations affecting Federal Income Taxes, at the rate
determined, in the case of payment by Mueller to Walter, under Section 6621(a)(2) of
the Code and, in the case of payment by Walter to Mueller, under Section 6621(a)(1)
of the Code, and (2) with respect to redeterminations affecting
Non-Federal Combined Taxes, under similar laws, if any, of other jurisdictions.

 

(c)                                  PAYMENT. Walter shall
deliver to Mueller a schedule reflecting the computation of any
Redetermination Amount with respect to any taxable year. Not later than 5
business days after the date such schedule is delivered, Mueller shall pay
Walter, or Walter shall pay Mueller, such Redetermination Amount.

 

3.11.                        INTEREST. Payments under this Section 3
that are not made within the prescribed period shall thereafter bear interest
at the Federal short-term rate established pursuant to Section 6621 of the
Code.

 

9

 

3.12.                        CARRYBACKS. (a) In the
event any Tax Asset of the Mueller Group for any Post-Deconsolidation Period is
eligible to be carried back to a Pre-Deconsolidation Period, Mueller shall, to
the extent permitted by applicable law, elect to carry such amounts forward to
any Post-Deconsolidation Period. If Mueller is required by law to carry back
any such Tax Asset to a taxable Pre-Deconsolidation Period, Walter agrees to
make a payment to Mueller to the extent that such a payment would be required
under the terms of Section 3.5(c), Section 3.6(b) or Section 3.7
of this Agreement, net of any expenses incurred by Walter or Walter Affiliates.
If subsequent to the payment by Walter to Mueller of any such amount, there
shall be (a) a Final Determination which results in a disallowance or a reduction
of the Tax Asset so carried back or (b) a reduction in the amount of the
benefit realized by the Walter Group for any reason, Mueller shall repay to
Walter, within 30 business days of such event any amount which would not have
been payable to Mueller pursuant to this Section 3.12 had the amount of
the benefit been determined in light of these events. Mueller shall hold Walter
harmless for any penalty, addition to Tax or interest payable by any member of
the Walter Group as a result of any such event. Any such amount shall be paid
by Mueller to Walter within 30 business days of the payment by Walter or any
member of the Consolidated Group or Combined Group of any such penalty,
addition to Tax, or interest.

 

SECTION 4.                                DECONSOLIDATION
AND DISTRIBUTION TAXES

 

4.1                                 CONTINUING COVENANTS. Mueller,
for itself and the Mueller Affiliates, covenants that on or after a
Deconsolidation it will not (nor will it cause or permit any member of the
Mueller Group ), in respect of any Pre-Deconsolidation Period, (i) make or
change any tax election, (ii) change any accounting method, (iii) amend
any Tax Return or take any Tax position on any Tax Return that is inconsistent
with any Tax position on any Tax Return of the Walter Group, or (iv) take
any action, omit to take any action or enter into any transaction that results
in any increased Tax liability or reduction of any Tax Asset of the Walter
Group.

 

4.2                                 ADDITIONAL CONTINUING
COVENANTS. (a)  MUELLER RESTRICTIONS. Mueller agrees that, until such time
as the stock of Mueller owned by Walter and Walter Affiliates constitutes fifty
percent (50%) or less of the total combined voting power of all of the
outstanding stock of Mueller, Mueller (1) will not knowingly take or fail
to take, or permit any Mueller Affiliate to knowingly take or fail to take, any
action that could reasonably be expected to preclude Walter’s ability to
effectuate a Distribution, and (2) will not issue any stock of Mueller (or
any instrument that is convertible, exercisable or exchangeable into any such stock)
in an acquisition or public or private offering if, immediately after such
issuance, Walter would, or would reasonably be expected to, not own stock of
Mueller that, on a fully diluted basis, constitutes “control” (within the
meaning of Section 368(c) of the Code) of Mueller. In the event of a
Distribution, Mueller agrees that (1) it will take, and cause each Mueller
Affiliate to take, any action reasonably requested by Walter in order to enable
Walter to effectuate a Distribution (including, without limitation, any
internal restructuring necessary to satisfy the active trade or business
requirement of Section 355(b) of the Code) and (2) it will not
take or fail to take, or permit any Mueller Affiliate to take or fail to take,
any action where such action or failure to act would be inconsistent with any
written representations of an officer of Mueller pursuant to Section 4.2(e) of
this Agreement with respect to any material, information, covenant or
representation that relates to facts or matters related to Mueller, any Mueller
Affiliate, or the Mueller Business in an Officer’s Certificate, Tax Opinion,
Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents,
Ruling, or Supplemental Ruling other than as 

 

10

 

permitted by Section 4.2(c) of this Agreement. For this
purpose an action is considered inconsistent with a representation if the
representation states that there is no plan or intention to take such action. In
the event of a Distribution, Mueller agrees that it will not take (and it will
cause the Mueller Affiliates to refrain from taking) any position on a Tax
Return that is inconsistent with the treatment of a Distribution as a tax-free
transaction under Section 355 of the Code.

 

(b)                                 WALTER RESTRICTIONS. In
the event of a Distribution, Walter agrees that it will not take or fail to
take, or permit any Walter Affiliate to take or fail to take, any action where
such action or failure to act would be inconsistent with any material, information,
covenant or representation that relates to facts or matters related to Walter
(or any Walter Affiliate) or within the control of Walter and is contained in
an Officer’s Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling
Documents, Supplemental Ruling Documents, Ruling, or Supplemental Ruling. For
this purpose an action is considered inconsistent with a representation if the
representation states that there is no plan or intention to take such action. In
the event of a Distribution, Walter agrees that it will not take (and it will
cause the Walter Affiliates to refrain from taking) any position on a Tax
Return that is inconsistent with the treatment of a Distribution as a tax-free
transaction under Section 355 of the Code.

 

(c)                                  CERTAIN MUELLER
ACTIONS FOLLOWING A DISTRIBUTION. In the event of a Distribution, Mueller
agrees that, during the 2-year period following a Distribution, without first
obtaining, at Mueller’s own expense, either a supplemental opinion from Tax
Counsel that such action will not result in Distribution Taxes (a “Supplemental
Tax Opinion”) or a Supplemental Ruling that such action will not result in
Distribution Taxes, unless in any such case Walter and Mueller agree otherwise,
Mueller shall not (1) sell all or substantially all of the assets of
Mueller or any Mueller Affiliate, (2) merge Mueller or any Mueller
Affiliate with another entity, without regard to which party is the surviving
entity, (3) transfer any assets of Mueller in a transaction described in Section 351
(other than a transfer to a corporation which files a consolidated return with
Mueller and which is wholly-owned, directly or indirectly, by Mueller) or
subparagraph (C) or (D) of Section 368(a)(1) of the Code, (4) issue
stock of Mueller or any Mueller Affiliate (or any instrument that is
convertible or exchangeable into any such stock) in an acquisition or public or
private offering, or (5) facilitate or otherwise participate in any
acquisition of stock in Mueller that would result in any shareholder owning five
percent (5%) or more of the outstanding stock of Mueller. Mueller or any
Mueller Affiliate shall only undertake any of such actions after Walter’s
receipt of such Supplemental Tax Opinion or Supplemental Ruling and pursuant to
the terms and conditions of any such Supplemental Tax Opinion or Supplemental
Ruling or as otherwise consented to in writing in advance by Walter. The
parties hereby agree that they will act in good faith to take all reasonable
steps necessary to amend this Section 4.2(c), from time to time, by mutual
agreement, to (i) add certain actions to the list contained herein, or (ii) remove
certain actions from the list contained herein, in either case, in order to
reflect any relevant change in law, regulation or administrative interpretation
occurring after the date of this Agreement.

 

(d)                                 NOTICE OF SPECIFIED
TRANSACTIONS. Not later than 30 days prior to entering into any oral or written
contract or agreement, and not later than 5 days after it first becomes aware
of any negotiations, plan or intention (regardless of whether it is a party to
such negotiations, plan or intention), regarding any of the transactions
described in Section 4.2(c) of this Agreement, Mueller shall provide
written notice of its intent to consummate 

 

11

 

such transaction or the negotiations, plan or intention of which it
becomes aware, as the case may be, to Walter.

 

(e)                                  MUELLER COOPERATION. Mueller
agrees that, at the request of Walter, Mueller shall cooperate fully with
Walter to take any action necessary or reasonably helpful to effectuate a
Distribution, including seeking to obtain, as expeditiously as possible, a Tax
Opinion, Supplemental Tax Opinion, Ruling, and/or Supplemental Ruling. Such
cooperation shall include the execution of any documents that may be
necessary or reasonably helpful in connection with obtaining any Tax Opinion,
Supplemental Tax Opinion, Ruling, and/or Supplemental Ruling (including,
without limitation, any (i) power of attorney, (ii) Officer’s
Certificate, (iii) Ruling Documents, (iv) Supplemental Rulings
Documents, and/or (v) reasonably requested written representations
confirming that (a) Mueller has read the Officer’s Certificate, Ruling
Documents, and/or Supplemental Ruling Documents and (b) all information
and representations, if any, relating to Mueller, any Mueller Affiliate, or the
Mueller Business contained in the Officer’s Certificate, Ruling Documents,
and/or Supplemental Ruling Documents are true, correct and complete in all
material respects).

 

4.3                                 DISTRIBUTION TAXES. The
parties have set forth how certain Tax matters with respect to a Distribution
would be handled in the event that a Distribution is pursued at some future
time.

 

(a)                                  WALTER’S LIABILITY
FOR DISTRIBUTION TAXES. In the event of a Distribution, notwithstanding Section 3
of this Agreement, Walter and each Walter Affiliate shall be jointly and
severally liable for any Distribution Taxes, to the extent that such
Distribution Taxes are attributable to, caused by, or result from, one or more
of the following:

 

(1)                                  any action or
omission by Walter (or any Walter Affiliate) inconsistent with any material,
information, covenant or representation related to Walter, any Walter
Affiliate, or the Walter Business in an Officer’s Certificate, Tax Opinion,
Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents,
Ruling, or Supplemental Ruling (for the avoidance of doubt, disclosure of any
action or fact that is inconsistent with any material, information, covenant or
representation submitted to Tax Counsel, the IRS, or other Tax Authority, as
applicable, in connection with an Officer’s Certificate, Tax Opinion,
Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents,
Ruling, or Supplemental Ruling shall not relieve Walter (or any Walter
Affiliate) of liability under this Agreement);

 

(2)                                  any action or
omission by Walter (or any Walter Affiliate), including a cessation, transfer
to affiliates, or disposition of its active trades or businesses, or an issuance
of stock, stock buyback or payment of an extraordinary dividend by Walter (or
any Walter Affiliate) following a Distribution;

 

(3)                                  any acquisition of
any stock or assets of Walter (or any Walter Affiliate) by one or more other
persons (other than Mueller or a Mueller Affiliate) prior to or following a
Distribution; or

 

(4)                                  any issuance of stock
by Walter (or any Walter Affiliate).

 

(b)                                 MUELLER’S LIABILITY
FOR DISTRIBUTION TAXES. In the event of a Distribution, notwithstanding Section 3
of this Agreement, Mueller and each Mueller Affiliate shall be jointly and
severally liable for any Distribution Taxes, to the extent that 

 

12

 

such Distribution Taxes are attributable to, caused by, or result from,
one or more of the following:

 

(1)                                  any action or
omission by Mueller (or any Mueller Affiliate) after a Distribution at any
time, that is inconsistent with any written representations of an officer of
Mueller pursuant to Section 4.2(e) of this Agreement with respect to
any material, information, covenant or representation related to Mueller, any
Mueller Affiliate, or the Mueller Business in an Officer’s Certificate, Tax
Opinion, Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling
Documents, Ruling, or Supplemental Ruling (for the avoidance of doubt,
disclosure by Mueller (or any Mueller Affiliate) to Walter (or any Walter
Affiliate) of any action or fact that is inconsistent with any material,
information, covenant or representation submitted to Tax Counsel, the IRS, or
other Tax Authority, as applicable, in connection with an Officer’s
Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling Documents,
Supplemental Ruling Documents, Ruling, or Supplemental Ruling shall not relieve
Mueller (or any Mueller Affiliate) of liability under this Agreement);

 

(2)                                  any action or
omission by Mueller (or any Mueller Affiliate) after the date of a Distribution
(including any act or omission that is in furtherance of, connected to, or part of
a plan or series of related transactions (within the meaning of Section 355(e) of
the Code) occurring on or prior to the date of a Distribution) including a
cessation, transfer to affiliates or disposition of the active trades or
businesses of Mueller (or any Mueller Affiliate), stock buyback or payment of
an extraordinary dividend;

 

(3)                                  any acquisition of
any stock or assets of Mueller (or any Mueller Affiliate) by one or more other
persons (other than Walter or any Walter Affiliate) prior to or following a
Distribution; or

 

(4)                                  any issuance of stock
by Mueller (or any Mueller Affiliate) after a Distribution, including any
issuance pursuant to the exercise of employee stock options or other employment
related arrangements or the exercise of warrants.

 

(c)                                  JOINT LIABILITY FOR
REMAINING DISTRIBUTION TAXES. Walter and each Walter Affiliate shall be liable
for a percentage of any Distribution Taxes (not otherwise allocated by Sections
4.3(a) or (b) of this Agreement) equal to the quotient of (i) Walter’s
Market Valuation, divided by (ii) the sum of (x) Walter’s Market
Valuation, and (y) Mueller’s Market Valuation. Mueller and each Mueller
Affiliate shall be jointly and severally liable for a percentage of any
Distribution Taxes (not otherwise allocated by Sections 4.3(a) or (b) of
this Agreement) equal to the quotient of (i) Mueller’s Market Valuation,
divided by (ii) the sum of (x) Walter’s Market Valuation, and (y) Mueller’s
Market Valuation.

 

SECTION 5.                                MISCELLANEOUS

 

5.1                                 TERM. All rights and
obligations arising hereunder shall survive until they are fully effectuated or
performed provided that, notwithstanding anything in this Agreement to the
contrary, this Agreement shall remain in effect and its provisions shall
survive for the full period of all applicable statutes of limitation (giving
effect to any extension, waiver or mitigation thereof).

 

5.2                                 ALLOCATIONS. (a) 
IN GENERAL. All computations with respect to any Pre-Deconsolidation Period
shall be made pursuant to the principles of Treasury Regulations 

 

13

 

Section 1.1502-76(b), taking into account such elections
thereunder as Walter, in its sole discretion, shall make.

 

(b)                                 TAX ASSETS. Walter
shall advise Mueller in writing within 90 days after the filing of the
Consolidated Return for the taxable year that includes the Deconsolidation Date
of the allocation of any Tax Assets among Walter, each Walter Affiliate,
Mueller, and each Mueller Affiliate. The parties hereby agree that, for
purposes of determining such allocation, Walter shall be free to use any
legally permissible method of allocation in its sole discretion.

 

5.3                                 CHANGES IN LAW. Any
reference to a provision of the Code or a similar law of another jurisdiction
shall include a reference to any successor provision to such provision.

 

5.4                                 CONFIDENTIALITY. Each
party shall hold and cause its advisors and consultants to hold in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, all information
(other than any such information relating solely to the business or affairs of
such party) concerning the other parties hereto furnished it by such other
party or its representatives pursuant to this Agreement (except to the extent
that such information can be shown to have been (a) previously known by
the party to which it was furnished, (b) in the public domain through no
fault of such party, or (c) later lawfully acquired from other sources not
under a duty of confidentiality by the party to which it was furnished), and
each party shall not release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants who shall be advised of and agree to be bound by the provisions of
this Section 5.4. Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or supplied by the other
party if it exercises the same care as it takes to preserve confidentiality for
its own similar information.

 

5.5                                 SUCCESSORS. This
Agreement shall be binding on and inure to the benefit of any successor, by
merger, acquisition of assets or otherwise, to any of the parties hereto
(including any successor of Walter and Mueller succeeding to the tax attributes
of such party under Section 381 of the Code), to the same extent as if
such successor had been an original party.

 

5.6                                 AUTHORIZATION, ETC. Each
of the parties hereto hereby represents and warrants that it has the power and
authority to execute, deliver and perform this Agreement, that this
Agreement has been duly authorized by all necessary corporate action on the part of
such party, that this Agreement constitutes a legal, valid and binding
obligation of each such party and that the execution, delivery and performance
of this Agreement by such party does not contravene or conflict with any
provision of law or of its charter or bylaws or any agreement, instrument or
order binding on such party.

 

5.7                                 ENTIRE AGREEMENT. This
Agreement contains the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements.

 

5.8                                 SECTION CAPTIONS.
Section captions used in this Agreement are for convenience and reference
only and shall not affect the construction of this Agreement.

 

14

 

5.9                                 GOVERNING LAW. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to laws and principles relating to
conflicts of law.

 

5.10                           COUNTERPARTS. This Agreement
may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
Agreement.

 

5.11                           WAIVERS AND AMENDMENTS. This
Agreement shall not be waived, amended or otherwise modified except in writing,
duly executed by all of the parties hereto.

 

5.12                           SEVERABILITY. In case any
one or more of the provisions in this Agreement should be invalid, illegal or
unenforceable, the enforceability of the remaining provisions hereof will not
in any way be effected or impaired thereby.

 

5.13                           NO THIRD PARTY BENEFICIARIES.
This Agreement is solely for the benefit of the parties to this Agreement and
each Walter Affiliate and Mueller Affiliate and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claim of action
or other rights in excess of those existing without this Agreement.

 

5.14                           OTHER REMEDIES. Mueller
recognizes that any failure by it or any Mueller Affiliate to comply with its
obligations under Section 4 of this Agreement would, in the event of a
Distribution, result in Distribution Taxes that would cause irreparable harm to
Walter, Walter Affiliates, and their stockholders. Accordingly, Walter shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which Walter is entitled at law or in
equity.

 

15

 

IN WITNESS WHEREOF, each of the parties
hereto has caused this Agreement to be executed by a duly authorized officer as
of the date first above written.

 

	
   

  
	
   

  	
  WALTER INDUSTRIES, INC.

  
	
   

  	
  on behalf of itself and the Walter
  Affiliates

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  William F. Ohrt

  	
   

  
	
   

  	
  Name:

  	
  William F. Ohrt

  
	
   

  	
  Title:

  	
  Executive Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  MUELLER WATER PRODUCTS, INC.

  
	
   

  	
  on behalf of itself and the Mueller
  Affiliates

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Victor P. Patrick

  	
   

  
	
   

  	
  Name:

  	
  Victor P. Patrick

  
	
   

  	
  Title:

  	
  Vice President and Secretary

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