Document:

EXHIBIT
10.12

[Form of Mueller Water Products,
Inc. 2006 Employee Stock Purchase Plan]

MUELLER
WATER PRODUCTS, INC.

2006 EMPLOYEE STOCK PURCHASE PLAN

Approved
by the Board of Directors on          ,
2006

Approved
by Stockholders on                          ,
2006

Termination
Date:                , 2016

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

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

2.             Definitions.

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

(l)            “Effective Date” means the date on
which the registration statement on Form S-1 filed with the Securities and
Exchange Commission pursuant to Rule 424 under 

 

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the Securities Act for the
initial public offering of the Company’s Common Stock (the “Registration
Statement”) becomes effective; provided, however, except as otherwise
determined by the Committee to the extent permitted under the Plan, that no
Offering Period shall commence under the Plan until, and the first Offering
Date under the Plan shall be, August 1, 2006.

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

3.             Eligibility.

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

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

 

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(c)           All
Employees who participate in the Plan shall have the same rights and privileges
under the Plan, except for differences that may be mandated by local law and
that are consistent with Code Section 423(b)(5); provided that individuals
participations in a sub-plan adopted pursuant to Section 24 which is not
designed to qualify under Code Section 423 need not have the same rights and
privileges as Employees participating in the Code Section 423 Plan.

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

5.             Participation.

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

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

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

6.             Method of
Payment of Contributions.

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

 

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sub-plan, unless the
Committee otherwise expressly provides that such Employees shall be treated as
participating in the Plan.

(b)           The
Committee may establish rules pertaining to the changes to the rate of a
Participant’s Contributions, limiting the frequency with which Participants may
change his or her rate of participation, the timing of the elections for such
changes, and whether or not changes may effectuate an increase in Contributions
or only a decrease in Contributions.  A
Participant may change his or her rate of Contributions with respect to current
or future Offering Periods by filing new Enrollment Documents at such times and
on such terms as specified by the Committee.

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

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

8.             Exercise of Option.

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

 

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

9.             Delivery.

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

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

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

10.           Voluntary Withdrawal;
Termination of Employment.

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

(b)           Upon
termination of the Participant’s Continuous Status as an Employee prior to the
Purchase Date of an Offering Period for any reason, the Contributions credited
to his 

 

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or her account will be
returned to him or her or, in the case of his or her death, to the person or
persons entitled thereto, and his or her option will be automatically
terminated.

(c)           The
Committee may establish rules regarding when leaves of absence or changes of
employment status will be considered to be a termination of employment, and the
Committee may establish termination-of-employment procedures for this Plan that
are independent of similar rules established under other benefit plans of the
Company and its Designated Subsidiaries; provided that such procedures are not
in conflict with the requirements of Section 423 of the Code.

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

12.           Stock.

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

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

13.           Administration.

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

(b)           Without stockholder consent and without regard to whether
any Participant rights may be considered to have been adversely affected, the
Committee shall be entitled to change the timing of future Offering Periods,
limit the frequency and/or number of 

 

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changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a Participant in order to
adjust for delays or mistakes in the Company’s processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each Participant properly correspond
with amounts withheld from the Participant’s Compensation, and establish such
other limitations or procedures as the Committee determines in its sole
discretion advisable that are consistent with the Plan.

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

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

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

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

18.           Adjustments Upon Changes
in Capitalization; Corporate Transactions.

(a)           Adjustment.  Subject to any required action by the stockholders
of the Company, in the event of any change in the Common Stock subject to the
Plan or subject to or underlying any outstanding option, by reason of any stock
dividend, stock split, reverse stock split, reorganization, recapitalization,
merger, consolidation, spin-off, combination, exchange of Shares of Common
Stock or other corporate exchange, or any distribution or dividend to
stockholders of Common Stock (whether paid in cash or otherwise) or any
transaction similar to the foregoing, the Board in its sole discretion and
without liability to any person may make such substitution or adjustment, if
any, as it deems to be equitable to (i) the number and kind of Shares or other
securities that have been authorized for issuance under the Plan but have not
yet been placed under option, including the number of Shares of Common Stock
set forth in Section 12(a) above (collectively, the “Reserves”), (ii)
the maximum number of Shares of Common Stock that may be purchased by a
Participant and/or by all Participants in an Offering Period as set forth in 

 

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Section 8, (iii) the number
and kind of Shares or other securities covered by each option under the Plan
that has not yet been exercised, (iv) the Purchase Price per Share of Common
Stock covered by each option under the Plan that has not yet been exercised and
(v) any other affected terms of the Plan or any outstanding option.  Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided
herein, no issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an option.

(b)           Corporate Transactions.

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

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

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

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

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

 

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

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

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

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

26.           Lock-Up.  By electing to participate in the Plan, the
Participant agrees that the Company (or a representative of the underwriter(s))
may, in connection with any underwritten registration of the offering of any
securities of the Company under the Securities Act, require that the
Participant not sell, dispose of, transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale, any shares of Common Stock or other
securities of the Company held by the Participant (including but not limited to
any Shares purchased under the Plan), for a period of time specified by the
underwriter(s) (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement of the Company filed under the
Securities Act.  The Participant further
agrees to execute and deliver such other agreements as may be reasonably
requested by the Company and/or the underwriter(s) that are consistent with the
foregoing or that are 

 

11

 

necessary to give further
effect thereto.  In order to enforce the
foregoing covenant, the Company may impose stop transfer instructions with
respect to Shares of Common Stock until the end of such period. The underwriters
of the Company’s stock are intended third party beneficiaries of this section
and shall have the right, power and authority to enforce the provisions hereof
as though they were a party hereto.

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

 

 

12EXHIBIT 10.13

[Form of Mueller Water Products, Inc. Directors’ Deferred Fee Plan]

 

MUELLER WATER PRODUCTS, INC. 

DIRECTORS’ DEFERRED FEE PLAN

 

Effective Date:      , 2006

1.           Establishment
of Plan

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

2.             Eligibility

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

3.             Participation

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

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

 

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

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

4.             Operation
of Plan

a)             Income Account

 

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

 

b)           Stock Equivalent Account

 

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

 

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

 

2

 

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

 

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

5.             Payments

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

 

6.             General

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

 

3

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

7.                                       Section 409A

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

8.                                       Administration
and Choice of Law.

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

 

5

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

9.             Amendment
and Discontinuance

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

 

 

6

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