UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrantx                            Filed by a Party other than the Registrant¨

Check the appropriate box:

Mueller Water Products, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

December 18, 200821, 2009

To My Fellow Stockholders:

It is my pleasure to invite you to attend the 20092010 Annual Meeting of Stockholders of Mueller Water Products, Inc. to be held on Wednesday,Thursday, January 28, 20092010 at 10:00 A.M. local time at the Four SeasonsCrowne Plaza Hotel Atlanta Perimeter at Ravinia in Atlanta, Georgia. The meeting will begin with a discussion of and voting on the matters described in the attached Proxy Statement and Notice of Annual Meeting, followed by my report on Mueller Water Products’ financial performance and operations.

The attached Proxy Statement is a critical element of theto our corporate governance process. Its purpose isWe use this document to answersolicit your questions,vote, and also to provide you with information about our Board of Directors and certain executive officers, inform you of steps we are taking to fulfill our responsibilities to you as stockholders, and a discussion ofdiscuss the proposals that require your vote.

Your vote is important to us. It is important that your views be represented whether or not you plan to attend the Annual Meeting. The Board’s recommendations are included with the description of each proposal in this Proxy Statement. In summary,Statement and the Board recommends that stockholders vote “FOR” proposals 1, 2 3 and 4.3. We encourage you to take the time to read each of the proposals and vote promptly by using either the Internet, orby telephone, or by returning a completed proxy card.card or voting instruction form.

We look forward to seeing you at the 20092010 Annual Meeting. For your convenience, a map and directions are provided on the back of this document. On behalf of theour management and directors, of Mueller Water Products, I want to thank you for your continued support and confidence in our company.

Sincerely,

GregoryGREGORY E. HylandHYLAND

Chairman of the Board, President and Chief Executive Officer

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JANUARY 28, 20092010

To the Stockholders:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Mueller Water Products, Inc., a Delaware corporation (“Mueller Water Products” or the “Company”), will be held at 10:00 A.M., local time, on Wednesday,Thursday, January 28, 20092010 at the Four SeasonsCrowne Plaza Hotel 75 Fourteenth Street,Atlanta Perimeter at Ravinia, 4355 Ashford Dunwoody Road, Atlanta, Georgia 30309,30346, for the following purposes:

Holders of record of the Company’s common stock at the close of business on December 3, 2008,November 30, 2009, the record date for voting at the Annual Meeting, are entitled to notice of and to vote at the Annual Meeting or any adjournmentadjournments thereof.

By Order of the Board of Directors

ROBERT BARKER

Corporate Secretary

Atlanta, Georgia

December 18, 200821, 2009

TABLE OF CONTENTS

1200 Abernathy Road, N.E.

Suite 1200

Atlanta, Georgia 30328

PROXY STATEMENT

The Company is furnishing this Proxy Statement in connection with the solicitation by the Board of Directors (the “Board” or the “Board��Board of Directors”) of Mueller Water Products, Inc. (“Mueller Water Products” or the “Company”) of proxies for its Annual Meeting of Stockholders and any adjournments of the meeting (the “Annual Meeting”) for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held on Wednesday,Thursday, January 28, 20092010 at 10:00 A.M., local time, at the Four SeasonsCrowne Plaza Hotel 75 Fourteenth Street,Atlanta Perimeter at Ravinia, 4355 Ashford Dunwoody Road, Atlanta, Georgia 30309.30346.

QUESTIONS ABOUT VOTING AND THE ANNUAL MEETING

What is the purpose of this Proxy Statement?

This Proxy Statement provides information regarding matters to be voted on at the Annual Meeting. Additionally, it contains certain information that the Securities and Exchange Commission (the “SEC”) requires the Company to provide annually to its stockholders. The Proxy Statement is also used by the Company’s Board of Directors to solicit proxies to be used at the Annual Meeting. Proxies are solicited to give all stockholders of record an opportunity to vote on the matters to be presented at the Annual Meeting, even if they cannot attend the meeting in person. The Board has designated a Proxy Committee, which will vote the shares represented by proxies at the Annual Meeting in the manner indicated by the proxies. The members of the Proxy Committee are Gregory E. Hyland, Evan L. Hart and Robert Barker.

The Proxy Statement is being made available to the holders of theour Series A Common Stock and Series B Common Stockcommon stock (“common stock”) beginning on or about December 18, 2008.21, 2009.

Who is entitled to vote on the matters discussed in the Proxy Statement?

The Company has issued and outstanding shares of two series of common stock: Series A Common Stock and Series B Common Stock, which are together referred to as the “common stock”. You are entitled to vote if you were a stockholder of record of Series A Common Stock or Series B Common Stockcommon stock of Mueller Water Products as of the close of business on December 3, 2008. There are differences in the voting rights of the Series A Common Stock and the Series B Common Stock, which are described in this Proxy Statement.November 30, 2009. Your shares can be voted at the meeting only if you are present in person or represented by a valid proxy.

What constitutes a quorum for the Annual Meeting?

The holders of a majority of the voting power of the outstanding shares of common stock as of the close of business on the record date, December 3, 2008,November 30, 2009, must be present, either in person

or represented by proxy, to constitute a quorum necessary to conduct the Annual Meeting. On the record date, there were issued and outstanding 29,643,521153,887,751 shares of Series A Common Stock and 85,844,920 shares of Series B Common Stock.common stock. This total excludes treasury shares, which are not considered outstanding for financial reporting purposes.outstanding. Shares represented by proxies received but marked as abstentions or as withholding voting authority for any or all director nominees, and shares represented by proxies received but reflecting broker non-votes, will be counted as present at the meeting for purposes of establishing a quorum.

How many votes am I entitled to for each share I hold?

With respect to the election of directors, the amendment of the Amended and Restated 2006 Stock Incentive Plan and the ratification of the appointment of the independent registered public accounting firm, eachEach share of Series A Common Stockcommon stock represented at the Annual Meeting is entitled to one vote and each share of Series B Common Stock represented at the Annual Meeting is entitled to eight votes. With respect to the conversion of all outstanding shares of Series B Common Stock into shares of Series A Common Stock, each share of Series A Common Stock and Series B Common Stock represented at the Annual Meeting is entitled to one vote. All shares entitled to vote and represented by properly executed proxies received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions indicated by those proxies.

What proposals will require my vote?

You are being asked to vote on the following:

What vote is required to approve each proposal, and how will my vote be counted?

Proposal 1: Election of Directors

Directors are elected by a plurality of the votes, which means that theThe ten nominees who receive the highest number of properly executed votes will be elected as directors.

Proposal 2: Conversion of All Outstanding Shares of Series B Common Stock into Shares of Series A Common Stock

Approval of this proposal requires the affirmative vote of a majority of the votes entitled to be cast by the holders of Series A Common Stock and Series B Common Stock, voting together as a single class. Any share that is not voted (whether by abstention or otherwise) will have the effect of a vote against the proposal.

Proposal 3: Amendment to the Amended and Restated 2006 Stock2010 Management Incentive Plan

Approval of this proposal requires the affirmative vote of a majority of the votes cast.cast for and against the proposal. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the vote.

Proposal 4:3: Ratification of the Appointment of the Independent Registered Public Accounting Firm

Approval of this proposal requires the affirmative vote of a majority of the votes cast.cast for and against the proposal. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the vote.

How does the Board of Directors recommend that I vote?

The Board recommends that you vote:

How can I vote?

You can vote in person by completing a ballot at the Annual Meeting, or you can vote prior to the meeting by proxy. Even if you plan to attend the meeting, we encourage you to vote your shares as soon as possible by proxy. You can vote by proxy using the Internet, by telephone or by mail, as discussed below.

How do I vote by proxy?

Vote by Internet: You can vote your shares using the Internet. Go to the website indicated on the proxy card or voting instruction form and follow the instructions. Internet voting is available twenty-four24 hours a day, seven days a week until 11:59 p.m. Eastern time on January 27, 2009.2010. You will be given the opportunity to confirm that your instructions have been properly recorded. If you vote onusing the Internet, you doNOT need to return a proxy card or voting instruction form. Please follow the instructions on the proxy card or voting instruction form carefully.

If you hold your shares in “street name” or “beneficial name” (that is, you hold your shares through a broker, bank, or other nominee), your ability to vote byusing the Internet depends on the voting processes of the broker, bank or other nominee.

Vote by Telephone: You can vote your shares by telephone if you have a touch-tone phone.telephone. Dial the toll-free telephone number indicated on the proxy card or voting instruction form and follow the instructions. Telephone voting is available twenty-four24 hours a day, seven days a week until 11:59 p.m. Eastern time on January 27, 2009. Easy-to-follow voice2010. Voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by telephone, you doNOT need to return a proxy card or voting instruction form. Please follow the instructions on the proxy card or voting instruction form carefully.

If you hold your shares in “street name” or “beneficial name” (that is, you hold your shares through a broker, bank, or other nominee), your ability to vote by telephone depends on the voting processes of the broker, bank or other nominee.

Vote by Mail:Mail If you prefer to: You can vote your shares by mail, markmail. Mark the proxy card or voting instruction form, sign and date it, and return it in the postage-paid envelope provided. If you sign the proxy card but do not specify how you want your shares to be voted, your shares will be voted by the Proxy Committee in favor of the election of all of the director nominees named in this Proxy Statement and in accordance with the Board’s recommendations on the other proposals listed on the proxy card. All properly executed proxy cards received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions indicated by those proxy cards.

Shares Held by Employee Stock Purchase Plans:If you hold (i) shares of the Company’s Series A Common Stockcommon stock through the Mueller Water Products Employee Stock Purchase Plan or (ii) shares of the Company’s Series B Common Stock through the Walter IndustriesEnergy Employee Stock Purchase Plan, then your vote must be received by 11:59 p.m. Eastern time on January 27, 2009,25, 2010, unless you vote in person at the Annual Meeting.

Can I assign my proxy to someone else?

If you want to assign your proxy to someone other than the Proxy Committee, you should cross out the names of the Proxy Committee members appearing on the proxy card and insert the name(s) of up to three other people. The person(s) you have assigned to represent you must present your signed proxy card and a completed ballot at the meeting to vote your shares.

Can I change my mind after I vote?

If you vote by proxy, you can revoke that proxy at any time before it is voted at the meeting. You can do this in one of the following three ways:

How will a proposal or other matter that was not included in the Proxy Statement be handled for voting purposes if it comes up at the Annual Meeting?

If any matter that is not described in this Proxy Statement should properly come before the meeting, the Proxy Committee will vote the shares represented by it in accordance with its members’ best judgment. The Proxy Committee will not use its discretionary voting authority with respect to any validly conducted solicitation in opposition. In addition, shares represented by proxy cards that are marked to deny discretionary authority to the Proxy Committee on other matters considered at the meetingAnnual Meeting will not be voted on these matters and will not be counted in determining the number of votes cast with respect to those matters. At the time this Proxy Statement was printed, the Companymanagement did not know of any other matters that might be presented for stockholder action at the Annual Meeting.

Who will tabulate and certify the vote?

Representatives of Broadridge Financial Solutions, Inc. will tabulate and certify the vote, and Carl T. Hagberg and AssociatesMs. Belinda Massafra will act as the independent inspector of elections for the Annual Meeting.

What is the difference between a registered stockholder and a beneficial holder of shares?

If your shares are registered directly in your name with our transfer agent, BNY Mellon, you are considered a “registered stockholder” with respect to those shares. If this is the case, the proxy materials have been sent or provided to you directly by Mueller Water Products. “Proxy materials” may include an annual report, a proxy statement and a proxy card or voting instruction form, as applicable.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street

name.” If this is the case, the proxy materials have been forwarded to you by your brokerage firm, bank or other nominee, or their agent which is considered the stockholder of record with respect to these shares. As the beneficial holder, you have the right to direct your broker, bank or other nominee as to how to vote your shares by using the voting instruction form included in the proxy materials, or by voting viausing the Internet, by telephone, or the Internet.by mail. Follow the voting instructions provided in your proxy materials.

I am a beneficial holder. How are my shares voted if I do not return voting instructions?

Your shares may be voted if they are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority, under the rules of the New York Stock Exchange, to vote shares on certain “routine”routine matters for which their customers do not provide voting instructions by the tenth day before the meeting. The election of directors and the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2009 are2010 is considered a routine matters.matter.

Because of a recent regulatory change, the election of directors is no longer considered routine. The conversion of all outstanding shares of Series B Common Stock into shares of Series A Common Stock and the amendmentapproval of the Amended and Restated 2006 Stock2010 Management Incentive Plan areis also not considered “routine”routine under the applicable rules. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial holder of the shares with respect to that proposal, the brokerage firm cannot CANNOTvote the shares on that proposal. This is called a “broker non-vote.” In tabulating the voting result for any particular proposal, shares that are subject to broker non-votes with respect to that proposal will not be considered votedvotes either for or against it. With respect to the three proposals scheduledIt is very important that you cast your vote if you want your shares to be voted onrepresented at the Annual Meeting that will be decided by a majority or plurality of the votes cast, broker non-votes on any proposal will have no effect on the outcome of the vote on that proposal at the Annual Meeting, assuming that a quorum is obtained. With respect to the proposal to convert all outstanding shares of Series B Common Stock into shares of Series A Common Stock, broker non-votes will have the effect of a vote against the proposal.Meeting.

What does it mean if I receive more than one Mueller Water Products stockholder package?

If you receive more than one package of proxy materials, this means that you have multiple accounts holding Mueller Water Products shares with brokers and/or our transfer agent. Please vote all of your shares by voting the control number on the proxy card or voting instruction form included in each package that you receive.

How are my Employee Stock Purchase Plan shares voted?

If you are a registered stockholder and/or you own Mueller Water Products shares in an Employee Stock Purchase Plan, and the accounts are registered in the same name, you will receive one package of proxy materials representing your combined shares. If your accounts are registered in different names, you will receive different packages of proxy materials. If you own shares only through an Employee Stock Purchase Plan, you will receive a package of proxy materials representing those shares.

What happens if I abstain from voting?

If your shares are represented at the Annual Meeting, in person or by proxy, but you abstain from voting on a matter, or include instructions in your proxy to abstain from voting on a matter, your shares will be counted for the purpose of determining if a quorum is present, but

will not be counted as either an affirmative vote or a negative vote with respect to that matter. With respect to the three proposals, scheduled to be voted on at the Annual Meeting thateach of which will be decided by a majority or plurality of the votes cast, abstentions will have no effect on the outcome of the vote, on that proposal at the Annual Meeting, assuming that a quorum is

obtained. With respect to the proposal to convert all outstanding shares of Series B Common Stock into shares of Series A Common Stock, abstentions will have the effect of a vote against the proposal.

What do I need to do if I want to attend the Annual Meeting?

You do not need to make a reservation to attend the Annual Meeting. However, attendance at the Annual Meeting is limited to Mueller Water Products stockholders, members of their immediate families or their named representatives. You will be required to provide the admission ticket that is detachable from your proxy card or provide other evidence of ownership. If your shares are held by a bank or broker, please bring to the meetingAnnual Meeting your bank or broker statement evidencing your beneficial ownership of the Company’s common stock as of the record date to gain admission to the meeting. The Company reserves the right to limit the number of representatives who may attend the meeting.

Who is soliciting proxies?

The Company will bear the cost of soliciting proxies. In addition to soliciting stockholders by mail, the Company will request banks, brokerage houses, and other custodians, nominees, and fiduciaries to forward solicitation materials to the beneficial owners of the common stock held of record by such persons and the Company will reimburse them for their reasonable out-of-pocket expenses incurred in doing so. The Company may use the services of its officers and other employees of the Company, who will receive no compensation for their services, other than their regular compensation, to solicit proxies personally, by telephone or by facsimile transmission. The Company has retained the services of The Altman Group, Inc. to aid in the solicitation of proxies, including the solicitation of proxies from brokerage firms, banks, nominees, custodians, and fiduciaries, for a fee not anticipated to exceed $7,000 plus expenses. Your cooperation in promptly voting by proxy via the medium of your choice will help to avoid additional expense.

IN ORDER THAT YOUR SHARES OF COMMON STOCK MAY BE REPRESENTED AT THIS MEETING IN CASE YOU ARE NOT PERSONALLY PRESENT, YOU ARE REQUESTED TO PLEASE SIGN, DATE, AND MAIL THE PROXY CARD OR VOTING INSTRUCTION FORM PROMPTLY OR FOLLOW THE DIRECTIONS PROVIDED ON YOUR PROXY CARD OR VOTING INSTRUCTION FORM.

76

MATTERS TO BE VOTED ON

PROPOSAL ONE:

ELECTION OF DIRECTORS

The Board of Directors currently consists of ten members, each of whom will serve until the Annual Meeting and until his or her successor shall have been elected and qualified. These ten directors have been nominated to be elected at the Annual Meeting for an additional one year term. The ten nominees for election as directors are named below.

In the event that any such nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by the present Board of Directors to fill the vacancy. Management is not aware of any nominee who will be unable or will decline to serve as a director. The term of office for each person elected as a director will continue until the next Annual Meeting of Stockholders and until his or her successor has been elected and qualified.

The names of the nominees and certain information about them are set forth below:

		Donald N. Boyce has been a member of our Board of Directors since April 2006. He was a director of Walter Energy, Inc. (“Walter Energy”, formerly Walter Industries, Inc.), a homebuilding, financial and natural resources company, from August 1998 to April 2006. Mr. Boyce served as Chairman of the Board of Walter Energy from November 2000 to March 2002 and as Chairman of the Board, President and Chief Executive Officer of Walter Energy from August 2000 to November 2000. During this time, Walter Energy owned United States Pipe and Foundry Company, LLC, one of the Company’s current subsidiaries. Mr. Boyce was Chairman of the Board of Directors of IDEX Corporation, a proprietary engineered industrial products manufacturing company, from April 1999 until March 2000, Chairman of the Board of Directors and Chief Executive Officer of IDEX Corporation from March 1998 until March 1999, and Chairman of the Board of Directors, President and Chief Executive Officer of IDEX Corporation from January 1988 until March 1998.

		Howard L. Clark, Jr. has been a member of our Board of Directors since April 2006. He has been a director of Walter Energy since March 1995. Mr. Clark has been a Vice Chairman in the Investment Banking Division of Barclays Capital, an investment banking firm, since September 2008. He previously served as Vice Chairman of Lehman Brothers Inc., an investment banking firm, from February 1993 to September 2008 and, before that, as Chairman and Chief Executive Officer of Shearson Lehman Brothers Inc., an investment banking firm. Mr. Clark is also a director of United Rentals, Inc., an equipment rental company, and White Mountains Insurance Group, Ltd., a financial services holding company. Mr. Clark is a director of NIBCO Inc., a privately held company that provides flow control solutions.
		Gregory E. Hyland has served as Chairman of our Board of Directors since October 2005 and as President and Chief Executive Officer since January 2006. Mr. Hyland served as Chairman, President and Chief Executive Officer of Walter Energy from September 2005 until December 2006. Prior to that time, Mr. Hyland served as President, U.S. Fleet Management Solutions of Ryder System, Inc., a transportation and logistics company, from June 2005 to September 2005. He served as Executive Vice President, U.S. Fleet Management Solutions of Ryder from October 2004 to June 2005. Mr. Hyland was recently elected as a director of Ferro Corporation, a global supplier of technology-based performance materials for manufacturers.
		Jerry W. Kolb has been a member of our Board of Directors since April 2006. He has been a director of Walter Energy since June 2003. Mr. Kolb previously served as a Vice Chairman of Deloitte & Touche LLP, a registered public accounting firm, from 1986 to 1998.
		Joseph B. Leonard has been a member of our Board of Directors since April 2006. He was a director of Walter Energy from June 2005 to April 2007 and he rejoined that board in February 2009. Mr. Leonard was Chairman of AirTran Holdings, Inc., an airline holding company, from November 2007 to June 2008, Chairman and Chief Executive Officer of AirTran Holdings, Inc. from January 1999 to November 2007 and President of AirTran Holdings, Inc. from January 1999 through January 2001. Mr. Leonard is a director of Air Canada, a full service airline company.

		Mark J. O’Brien has been a member of our Board of Directors since April 2006. He was a director of Walter Energy from June 2005 to April 2009. Since March 2006, Mr. O’Brien has served as Chairman and Chief Executive Officer of Walter Investment Management Corp. (formerly Walter Industries’ Homes Business). Mr. O’Brien has served as President and Chief Executive Officer of Brier Patch Capital and Management, Inc., a real estate management and investment firm, since September 2004. Mr. O’Brien served in various executive capacities at Pulte Homes, Inc., a home building company, for 21 years, retiring as President and Chief Executive Officer in June 2003.
		Bernard G. Rethore has been a member of our Board of Directors since April 2006. He has been a director of Walter Energy since March 2002. He has been Chairman Emeritus of Flowserve Corporation, a manufacturer of pumps, valves, seals and components, since April 2000. From January 2000 to April 2000, he served as Flowserve Corporation’s Chairman. He had previously served as Chairman, Chief Executive Officer and President of Flowserve Corporation. Mr. Rethore is a director of Belden, Inc., a manufacturer of signal transmission products, and Dover Corp., a diversified manufacturer of a wide range of proprietary products.
		Neil A. Springer has been a member of our Board of Directors since April 2006. He was a director of Walter Energy from August 2000 to April 2006. Mr. Springer has been managing director of Springer & Associates, a board consulting and executive recruitment company, since 1994. Mr. Springer is also a director of IDEX Corporation, a proprietary engineered industrial products manufacturing company.
		Lydia W. Thomashas been a member of our Board of Directors since January 2008. She served as President and Chief Executive Officer of Noblis, Inc., a public interest research and development company, from 1996 to September 2007. She was previously with The MITRE Corporation, Center for Environment, Resources and Space, serving as Senior Vice President and General Manager from 1992 to 1996, Vice President from 1989 to 1992 and Technical Director from 1982 to 1989. She is a director of Cabot Corporation, a global performance materials company.

		Michael T. Tokarz has been a member of our Board of Directors since April 2006. He has served as non-executive Chairman of the Board of Walter Energy since December 2006. Since February 2002, he has been a member of the Tokarz Group, LLC, a venture capital investment company. From January 1996 until February 2002, Mr. Tokarz was a member of the limited liability company that serves as the general partner of Kohlberg Kravis Roberts & Co. L.P., a private equity company. Mr. Tokarz also is a director of IDEX Corporation, a proprietary engineered industrial products manufacturing company, Conseco, Inc., an insurance provider, MVC Capital, Inc., a registered investment company, Dakota Growers Pasta Company, Inc., a manufacturer and marketer of dry pasta products, and Walter Investment Management Corp., a mortgage portfolio owner and mortgage servicer.

A plurality of the votes cast in respect of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote shall be required to elect the foregoing nominees (or their replacements as designated by the Board of Directors) to serve as directors. Unless otherwise instructed, the proxy holders will vote proxies held by themFOR the election of the nominees listed above.

The Board recommends a vote FOR the election of the ten nominees set forth above.

PROPOSAL TWO:

APPROVAL OF THE 2010 MANAGEMENT INCENTIVE PLAN

The Compensation and Human Resources Committee of the Board of Directors (the “Compensation Committee”) adopted the 2010 Management Incentive Plan (the “Incentive Plan”) in December 2009. The Board is recommending that stockholders approve the Incentive Plan at the Annual Meeting. If adopted by the stockholders, the Incentive Plan will replace the Company’s existing incentive bonus plans – the Executive Incentive Plan (for executives whose compensation may be subject to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and the Management Incentive Program (for all other executives and key employees).

The Incentive Plan is integral to the Company’s compensation strategies and programs. The Board believes that the Incentive Plan provides the flexibility that the Company needs to keep pace with its competitors and effectively recruit, motivate and retain the caliber of employees and directors essential for the Company’s success.

The Incentive Plan permits the grant of incentive cash awards. Stockholder approval of the Incentive Plan is intended to permit the performance-based awards discussed below to qualify for deductibility under Section 162(m) of the Internal Revenue Code. Key employees are eligible to receive awards under the Incentive Plan.

A summary of the principal features of the Incentive Plan is provided below, but is qualified in its entirety by reference to the full text of the Incentive Plan that is attached to this Proxy Statement as Exhibit A.

Administration and Eligibility

The Incentive Plan is administered by the Compensation Committee or, with respect to certain employees, the Chief Executive Officer or his designee (in either case, the “Administrator”). The Administrator determines who is eligible to participate in the Incentive Plan, prescribes the terms and conditions of all awards, and construes and interprets the terms of the Incentive Plan. Determinations of the Administrator are final, binding, and conclusive.

Performance Measures

The Incentive Plan requires the Administrator to establish performance goals for each participant at the beginning of each performance period. Performance goals will be selected from the list of possible performance measures contained in the Incentive Plan. Performance goals may be based on a combination of individual performance objectives and business objectives, and may relate, in whole or in part, to the performance of a segment, subsidiary or division rather than to the Company as a whole.

Any one or more of the following performance measures may be used by the Administrator as a goal for a bonus award, based on the relative or absolute attainment of specified levels of one or any combination of the performance measures:

—

Earnings, as determined by GAAP or before or after discontinued operations, or before interest, taxes, and depreciation and/or amortization (“EBITDA”),

The selected levels may be absolute in their terms or measured against or in relationship to net sales or other companies comparably, similarly or otherwise situated. Wherever feasible, the Administrator will establish target, threshold and maximum objectives for each performance goal.

At the time the performance goal is established, the Administrator will determine how the performance measure will be calculated. Unless otherwise determined by the Administrator, the following items will be excluded from the calculations:

—

Charges for reorganization and restructuring,

Awards

The Incentive Plan requires the Administrator to assign a target bonus to each participant, and the relative percentage weight to be assigned to the achievement of specific performance goals. In the event that a participant achieves more than the target assigned to a particular goal, the participant may receive up to twice the percentage weight allocated to such performance goal. In no event may a maximum bonus amount that a participant may be awarded for a fiscal year exceed $4 million. The Administrator may reduce, but may not increase, the maximum award for any participant under the Incentive Plan. The Administrator will approve the amounts of all final incentive awards.

New Incentive Plan Benefits

Because benefits under the Incentive Plan will depend on the Administrator’s actions and Company and individual performance against pre-established objectives, it is not possible to determine the benefits that will be received by executive officers and other key employees if the Incentive Plan is approved by the stockholders.

Million Dollar Deduction Limit

Pursuant to Section 162(m) of the Internal Revenue Code, the Company may not deduct compensation of more than $1 million that is paid to certain “covered employees” (i.e., any individual who, on the last day of the taxable year, is either the Company’s principal executive officer or an employee whose total compensation for the tax year is required to be reported to stockholders because they are among the three highest compensated officers for the tax year, other than the principal executive officer or principal financial officer). The limitation on deductions does not apply, however, to qualified “performance-based compensation.” The Incentive Plan is designed such that awards under the Incentive Plan may constitute qualified performance-based compensation and, as such, be exempt from the $1 million limitation on deductible compensation.

Approval by Stockholders

In order to be effective, the Incentive Plan must be approved by the affirmative vote of a majority of the votes cast in respect of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote. Unless otherwise instructed, the proxy holders will vote proxies held by themFOR the approval of the 2010 Management Incentive Plan.

The Board recommends a vote FOR the 2010 Management Incentive Plan.

PROPOSAL THREE:

RATIFICATION OF THE APPOINTMENT OF THE

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has authority to retain and terminate the Company’s independent registered public accounting firm. The Audit Committee has appointed Ernst & Young LLP as the independent registered public accounting firm to audit the consolidated financial statements of the Company and its subsidiaries for the fiscal year ending September 30, 2010. Although stockholder ratification of the appointment of Ernst & Young LLP is not required, the Board of Directors believes that submitting the appointment to the stockholders for ratification is a matter of good corporate governance. For a description of the fees paid to Ernst & Young LLP, see “Fees and Services of the Independent Registered Public Accounting Firm.”

One or more representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. The representatives will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.

In order to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2010, a majority of the votes cast in respect of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote must be voted in favor of ratification. Unless otherwise instructed, the proxy holders will vote proxies held by themFOR the ratification of Ernst & Young LLP.

The Board recommends a vote FOR the ratification of Ernst & Young LLP.

CORPORATE GOVERNANCE

The Board has adopted Corporate Governance Guidelines that are posted on the corporate governance page of the Company’s website atwww.muellerwaterproducts.com and are available in print to stockholders who request a copy. The Corporate Governance Guidelines set forth the practices the Board will follow with respect to matters such as director responsibilities, compensation, and access to management. In addition, the Corporate Governance Guidelines address the use of outside advisors, management succession and anthe annual self-evaluationself-assessment of the Board.

Independence of Directors

Mr. Gregory E. Hyland, our Chairman, President and Chief Executive Officer, is not independent because he is a member of management and an employee of the Company. Because of his past affiliation as an executive officer of our former parent, Walter Energy, Mr. Mark J. O’Brien iswas not independentconsidered “independent” under Section 303A.02(b)the rules applicable to listed companies on the New York Stock Exchange under the rules of the New York Stock Exchange Listed Company Manual because he has served as an employeeExchange. That rule applies to officers of former parent corporations for three years. As of December 15, 2009 (and therefore at the time of the Company’s former parent within the last three years.Annual Meeting), we believe Mr. O’Brien has been Chairman and Chief Executive Officerwill be considered independent under the rules of Walter Industries’ Homes and Finance Business since March 2006; other than his service as a director, he currently has no material relationship with the Company.New York Stock Exchange.

The Board annually assesses the outside affiliations of each director to determine if any of these affiliations could cause a potential conflict of interest or could interfere with the independence of the director. Based on information furnished by all directors regarding their relationships with Mueller Water Products and its subsidiaries and research conducted by management with respect to outside affiliations, the Board has determined that none of the directors has a material relationship with Mueller Water Products other than through his or her role as director, and, except as set forth above, each is independent because:

A determination of independence under these standards does not mean that a director is “disinterested” under Section 144 of the Delaware General Corporation Law. Each director, relevant Committee and the full Board may also consider whether any director is “disinterested” in any transaction brought before the Board ofor any Committee.

Categorical Standards of Independence

The Company has established categorical standards of independence for the Board of Directors.Board. These standards are outlined in the Company’s Corporate Governance Guidelines. To be considered “independent” for purposes of the director qualification standards, (A) the director

must meet bright-line independence standards under the New York Stock Exchange Listed Company Manual and (B) the Board must affirmatively determine that the director otherwise has no material relationship with the Company, directly or as an officer, shareowner or partner of an organization that has a relationship with the Company.

The Board of Directors considers the following relationships to be immaterial relationships that would not impair a director’s independence if they are conducted in the ordinary course of business:

Independence of Committee Members

Each of the members of the Audit, Compensation and Human Resources, (“Compensation Committee”), and Nominating and Corporate Governance Committees is independent in accordance with the New York Stock Exchange Listed Company Manual and the director independence standards set forth above. No member of the Audit Committee receives any compensation from Mueller Water Products other than directors’ fees and no member of the Audit Committee is an affiliated person of Mueller Water Products (other than by virtue of his or her directorship). Members of the Audit Committee meet the additional standards forof audit committee members of publicly traded companies required by the Sarbanes-Oxley Act of 2002. Members of the Compensation Committee meet the additional standards applicable to “outside directors” under Section 162(m) of the Internal Revenue Code and qualify as “non-employee directors” as defined in Rule 16b-3 under the Exchange Act.

Policy for Approval of Related Person Transactions

The Board of Directors has adopted a written Related Person Transaction Policy that is administered by the Nominating and Corporate Governance Committee.Committee (the “Nominating Committee”). This policy applies to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds or may be expected to exceed $120,000 and a related person has a direct or indirect material interest. Under the

Related Person Transaction Policy, a “related person” includes (A) any person who is or was, since the beginning of the last fiscal year, an executive officer, director or nominee for election as a director of the Company, (B) a greater than 5% beneficial owner of either series of the Company’s common stock or (C) an immediate family member of either of the foregoing. Under the Related Person Transaction Policy, management will determine whether a transaction meets the requirements of a Related Person Transaction requiring review by the Nominating Committee. Transactions that fall within this definition will be referred

to the Nominating Committee for approval, ratification or other action. Based on its consideration of all of the relevant facts and circumstances, the Nominating Committee will decide whether or not to approve such transaction and will approve only those transactions that are in the best interests of the Company. In addition, the Board of Directors has delegated to the Chair of the Nominating Committee the authority to pre-approve or ratify any transaction with a related person in which the aggregate amount involved is expected to be less than $500,000.

Related Person Transactions

Except as described below, theThe Company did not engage in any transaction during the fiscal year ended September 30, 2008,2009, and has no currently proposed transaction, in which the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest.

Mr. Howard Clark was a Vice Chairman of Lehman Brothers Inc. until September 2008. During fiscal 2008, Mueller Co.’s pension plans paid investment management fees of approximately $232,000 to Neuberger Berman, LLC, a subsidiary of Lehman Brothers Inc. The fees paid to Neuberger Berman are comparable to those paid to other investment management firms for similar services, and the amount of fees paid to Neuberger Berman is insignificant both to the Company and to Lehman Brothers. The Mueller Co. pension plans have used Neuberger Berman since before the Company’s initial public offering in May 2006. Under the New York Stock Exchange Listed Company Manual, this interest does not affect Mr. Clark’s independence.

Director Attendance at Board, Committee and Annual Meetings

During the fiscal year ended September 30, 2008,2009, the Board held nineseven meetings. Each director attended at least 75% of all meetings of the Board and of the Committees of the Board on which he or she served during fiscal 2008.2009. The non-management directors meet in executive session on at least a quarterly basis and the independent directors meet in executive session at least annually. The Chair of the Nominating and Corporate Governance Committee, currently Howard L. Clark, Jr., presides at the executive sessions of the non-management directors and the independent directors. In October 2009, Mr. Clark was elected the lead director of the Board of Directors of the Company.

Directors are expected to attend annual meetings of the stockholders of the Company. All of the directors except Mr. Tokarz attended the Company’s Annual Meeting of Stockholders held on January 30, 2008.28, 2009.

Committees of the Board

The Board has four standing Committees that assist the Board in carrying out its duties: the Audit Committee; the Compensation and Human Resources Committee; the Nominating and Corporate Governance Committee; and the Environmental, Health and Safety Committee. An additional Committee, the Executive Committee, meets only when called by the Chairman of the Board. The charter of each of these CommitteesCommittee (other than the Executive Committee) is available on the Company’s website atwww.muellerwaterproducts.com and may be obtained, without charge, by contacting the Corporate Secretary, Mueller Water Products, Inc., 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328.

The Board of Directors has affirmatively determined that the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee consist entirely of independent directors under the rules established by the New York Stock Exchange and, as applicable, the Securities and Exchange Commission.SEC. The following chart shows information regarding the membership of each of the Board’s standing Committees:

Audit Committee

The Audit Committee’s primary purpose is to assist the Board in fulfilling its responsibility to the Company’s stockholders relating to the Company’s financial reporting processes and systems of internal control. The Audit Committee is also responsible for determining whether the Company’s financial systems and reporting practices are in accordance with applicable requirements. Further, the Audit Committee retains and terminates the Company’s independent auditors and approves services and fees of the independent auditors.

The Board of Directors has determined that all Audit Committee members are financially literate under the New York Stock Exchange Listed Company Manual. The Board of Directors has further determined that all of the members of the Audit Committee qualify as audit committee financial experts within the meaning of the rules and regulations of the Securities and Exchange Commission,SEC, and that all of such members are independent as required by the New York Stock Exchange Listed Company Manual.

The Audit Committee has adopted procedures for pre-approving all audit and non-audit services provided by the independent auditors. For both types of pre-approval, the Audit Committee considers whether such services are consistent with the Securities and Exchange Commission’sSEC’s rules on auditor independence. The Audit Committee also considers whether the independent auditors are able to provide the most effective services, for reasons such as their familiarity with the Company’s current and past business, accounting systems and internal operations, and whether the services enhance the Company’s ability to manage or control risks and improve auditfinancial reporting quality. The Audit Committee has delegated pre-approval

authority to the Chair of the Audit Committee with respect to individual projects up to $100,000. The Audit Committee periodically monitors the services rendered and actual fees paid to the

independent auditors to ensure that such services are within the parameters approved by the Audit Committee.

Compensation and Human Resources Committee

The Compensation Committee is responsible for overseeing the Company’s overall strategic human resources programs, including executive compensation, benefit plans and equity plans. The Compensation Committee approves and oversees the administration of the Company’s material benefit plans, policies and programs, including all of our equity-related incentiveequity plans and senior executive bonus plans. The Compensation Committee also reviews and approves principal elements of total compensation for the Company’s named executive officers and other executive officers and employment, severance, and change–in-control arrangements for the Company’s executive officers. Further, the Compensation Committee is responsible for reviewing and recommending compensation of non-employee directors to the full Board, as well as reviewing and recommending director’sdirectors’ and officer’sofficers’ indemnification and insurance matters.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for, among other things, establishing the criteria for and the qualifications of persons suitable for nomination as directors and reporting its recommendations to the Board. The Board determines the number of directors that shall constitute the Board of Directors, subject to the requirement set forth in the Company’s Bylaws that the number of directors shall be not less than six nor more than eleven. The Nominating and Corporate Governance Committee will consider candidates for election as directors of the Company submitted by stockholders. In identifying candidates for membership on the Board of Directors, the Nominating Committee takes into account all factors it considers appropriate, which may include strength of character, mature judgment, career specializations, relevant technical skills, diversity, and the extent to which a candidate would fill a need on the Board of Directors. The Nominating Committee’s policy with regard to director candidates submitted by stockholders is to consider such submissions in accordance with the procedures described below under “Director“– Director Nomination Process.”

Environmental, Health and Safety Committee

The Environmental, Health and Safety Committee reviews and updates, as appropriate, the policies and procedures of the Company regarding compliance with the various laws, regulations and rules pertaining to the environment and employee health safety and the environment.safety. The Environmental, Health and Safety Committee also monitors the Company’s compliance with Company policies and procedures concerning health, safety and the environment, and obtains regular reports from Company and subsidiary management, environmental counsel and health and safety personnel, as well as special reports when necessary or relevant to special projects. The Environmental, Health and Safety Committee reviews and approves the proposed scope of internal and independent environmental, health and safety audits and encourages activities that demonstrate sound environmental stewardship initiatives within the Company and with its customers and suppliers.

Executive Committee

The Executive Committee’s principal function is to exercise the interim powers delegated to the Executive Committee at any time when any matter requires expeditious action by the Board or when it would not be practical for the full Board to meet to review or act upon any matter. In addition, if the Board of Directors expressly provides by resolution, the Executive Committee can declare dividends payable on the securities of the Company during months when the Board does not meet.

The Executive Committee has and may exercise, during the intervals between meetings of the Board, all the powers and authority vested in the Board of Directors except the following: (A) the power or authority to amend the Company’s Certificate of Incorporation; (B) the power or authority to amend the Company’s Bylaws; (C) the power or authority to adopt an agreement of merger; (D) the power or authority to exchange, consolidate, sell, lease, pledge or exchange all or substantially all of the Company’s assets; (E) the power or authority to adopt or revoke a plan of dissolution; (F) the power or authority delegated to any other Committee of the Board of Directors; and (G) such other powers or authority as are restricted in the Delaware General Corporation Law or the Bylaws.

Role of Compensation Consultant

For fiscal 2008,2009, the Compensation Committee retained Hewitt Associates LLC (“Hewitt”) as its independent consultant to advise the Compensation Committee on executive compensation and related matters. Hewitt performed no other work for the Company in fiscal 2009. Pursuant to its charter, the Compensation Committee has the sole authority to approve the consultant’s fees and retention terms.

Hewitt assists the Compensation Committee by, among other things, providing external market data on compensation practices and programs of peer group companies. Specifically, the Compensation Committee asked Hewitt to collect data from the peer group companies to assess base pay,salary, bonus opportunity, bonus paid, long-term incentive practice and perquisites. For a description of Hewitt’s responsibilities, see “Role“Compensation Discussion and Analysis – Role of Compensation Consultant in Compensation Decisions.”

Prior to the Company’s spin-off from Walter Industries, Inc. (“Walter Industries”) in December 2006 (the “Spin-off”), Hewitt served as the actuary with respect to U.S. Pipe’s pension plans. In addition, through a competitive bidding process, Hewitt was considered for other engagements in fiscal 2008 but the Compensation Committee determined that the Company would not retain Hewitt in other capacities while the Committee was using Hewitt as its independent consultant. The Compensation Committee retained Hewitt as its consultant for fiscal 20092010 and determined that the Company would not retain Hewitt for any other projects in fiscal 20092010 without the prior consideration and consent of the Compensation Committee, based on any actual or perceived effects on the ability of Hewitt to act independently of the Company and management.Committee.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee consists of Donald N.Messrs. Boyce, Jerry W. Kolb, Bernard G. Rethore and Neil A. Springer. None of the members of the Compensation Committee is a former or current officer or employee of the Company or any of its subsidiaries.

Communicating with our Board of Directors

Stockholders and other interested persons may communicate towith the Chair of the Audit Committee or the Chair of the Nominating Committee (who has been designated as the Company’s lead director and Corporate Governance Committee,presides over meetings of independent directors and

non-management directors), in care of the Company’s Corporate Secretary at the Company’s principal executive office address —– 1200 Abernathy Road, N.E., Suite 1200, Atlanta, Georgia 30328. Further, stockholders and other interested persons may communicate with the Company’s non-management directors as a group in care of the Company’s Corporate Secretary at the Company’s principal executive office address.

Stockholders and other interested persons may also communicate with any of the independent directors, in care of the Company’s Corporate Secretary at the Company’s principal executive office address or by sending an e-mail message to the directors atboardofdirectors@muellerwp.com, or towith the Audit Committee at auditcommittee@muellerwp.com.by sending an e-mail message toauditcommittee@muellerwp.com. If the correspondence is specifically marked as a private communication for the Board of Directors (or a specific member or members of the Board), the Corporate Secretary will not open or read the correspondence, but will forward it to the addressee or the Chair of the Audit Committee. These procedures may change from time to time, and you are encouraged to visit our website for the most current means of contacting our directors.

Director Nomination Process

In discharging its responsibility, the Nominating and Corporate Governance Committee (the “Nominating Committee”) receives input from the Chairman of the Board, other directors and the Nominating Committee’s professional search firm. It also considers and evaluates any candidates recommended by stockholders, as described below.

The Nominating Committee decides whether to further evaluate each candidate and may select an independent recruitingprofessional search firm to assist in the discharge of its duties. The evaluation includes a thorough reference check, interaction and interviews, and discussions about the candidate’s qualifications, availability and commitment. After discussion of each candidate’s qualifications, the Chair of the Nominating Committee interviews each candidate. The Nominating Committee Chair will select certain candidates to be interviewed by the Chairman of the Board and other members of the Nominating Committee. The Nominating Committee reviews the results of all interviews and makes a recommendation to the full Board thatwith respect to the election of the candidate be elected to the Board. The Board expects all candidates recommended to the full Board to have received the approval of all members of the Nominating Committee.

In order to identify the best candidates, the Board has directed the Nominating Committee to consider the key criteria and competencies for the directors described below. In addition, the Board has determined that its members should bring to the Company a broad range of experience, knowledge and judgment. The candidate must be prepared to represent the interests of the Company and all its stockholders, not the interests of particular constituencies.

The Nominating Committee uses a matrix of key criteria and competencies to evaluate potential candidates. The Nominating Committee carefully reviews all current directors and director candidates in light of these qualifications based on the context of the current and anticipated composition of the Board, the current and anticipated operating requirements of the Company and the long-term interests of the stockholders. In reviewing a candidate, the Nominating Committee considers the integrity of the candidate and whether the candidate would be

independent as defined in the Corporate Governance Guidelines and in the New

York Stock Exchange Listed Company Manual. The Nominating Committee expects a high level of involvement from its directors and reviews, if applicable, a candidate’s service on other boards to assess whether the candidate has sufficient time to devote to Board duties.

Key characteristics that are required for all directors are personal ethics and integrity, leadership, capabilities, business acumen, collaborative skills, interpersonal skills, commitment, and independence.

Key competencies that are not necessary for all directors but are necessary for the Board as a whole are general management expertise, financial expertise, multiple-part production/manufacturing/operations expertise, merger and acquisition experience, strategic planning expertise, corporate governance expertise, diversity of viewpoints, offshore sourcing expertise, marketing expertise, international business expertise, and government and regulatory affairs expertise.

Any stockholder who wishes to have the Nominating Committee consider a candidate is required to give written notice of the stockholder’s intention to make such a nomination. For a description of the procedures required to be followed for a stockholder to nominate a director, see “Procedures“Stockholder Information – Procedures for Business Matters and Director Nominations for Consideration at the 20102011 Annual Meeting of Stockholders – Notice Requirements for Nomination of Directors” of this Proxy Statement.Directors.” A proposed nomination that does not comply with these requirements will not be considered.

Code of Business Conduct Policy and Compliance ProgramEthics

The Board revised its Code of Business Conduct and Ethics (“Code of Conduct”) in June 2008. The Code of Conduct applies to all employees, directors, and officers of the Company and its subsidiaries. The Code of Conduct is posted on the corporate governance page of the Company’s website atwww.muellerwaterproducts.com and is available in print to stockholders who request a copy. The Company also has made available an Ethics Hotline, whereby employees can anonymously report a violation of the Code of Conduct. Any changes to the Code of Conduct will be posted on the Company’s website.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the compensation philosophy and structure under which the Company compensated its executive officers and othersPlease refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 20082009 (“fiscal 2008”2009”) for additional information regarding the fiscal 2009 financial results discussed below.

Table of Contents

Executive Summary

UnderThe following summary provides an introduction to the oversight ofmore detailed disclosure set forth in this “Compensation Discussion and Analysis” (“CD&A”) section. This CD&A section is required to provide information about those executive officers whose names appear in the Summary Compensation Table on page 46 (our “named executive officers” or “NEOs”), but it also provides insight into the considerations the Compensation Committee and the Company maintains an executive compensation program for its executive officers that focuses on performance. The design and operationBoard use in overseeing the implementation of the program reflect the following objectives:Company’s compensation philosophy.

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Create alignment with executives and stockholders by rewarding executives for taking actions that are designed to enhance stockholder value; andvalue.

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We believe in “pay-for-performance” and link short-term and long-term incentive compensation to the achievement of measurable performance goals.

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We have never backdated or re-priced equity awards, which are generally awarded in late November/early December every year after the completion of the audit of the financial statements for the prior fiscal year. We do not time our equity award grants relative to the release of material, non-public information.

To accomplishOverview

Our Business in Fiscal 2009

During fiscal 2009, the operating subsidiaries of the Company faced unique business challenges due to the recession, the historic decline in new home construction, and the unprecedented drop in year-over-year state and municipal spending, all of which negatively affected our Mueller Co. and U.S. Pipe operating subsidiaries. The general recession negatively affected non-residential construction, which affected the end markets of our Anvil operating subsidiary.

Economic conditions deteriorated rapidly in fiscal 2009, negatively affecting our financial results. Our fiscal 2009 net sales were $1.428 billion, down 23% from $1.859 billion in fiscal 2008. The Company’s adjusted net loss was $35.7 million in fiscal 2009 compared to an adjusted net income of $53.1 million in fiscal 2008. We incurred $47.8 million in restructuring charges in fiscal 2009 as we attempted to better align our organization and cost structure with economic conditions. We recognized impairment charges of $970.9 million, fully writing off our goodwill and reducing the value of our trademarks and trade names by $101.4 million. Despite these objectives,results, during fiscal 2009, the Company had $90.8 million in free cash flow and reduced outstanding indebtedness by $355.3 million, using $166 million of the proceeds of an equity offering. The Company also amended its credit agreement in fiscal 2009 to provide more financial covenant flexibility resulting in, among other things, increased interest rates and new financial covenants.

Financial metrics accounted for 70% of each executive’s annual cash incentive opportunity. The Compensation Committee approved financial metrics for incentive compensation in the fall of 2008, before the severity of the deterioration that would affect the Company’s end markets in fiscal 20082009 had become apparent. Due to those conditions, the Company and the operating segments did not meet any of the financial performance goals and, as a result, the Compensation Committee did not award any cash incentive awards tied to those specific financial goals to the NEOs or other executives.

As discussed below, the Compensation Committee awarded NEOs cash incentive awards based on reaching certain individual goals and for their collective efforts in generating cash, repaying debt and managing working capital during the year.

Compensation Philosophy

The overall objective of our executive compensation program is to encourage and reward the creation of sustainable, long-term stockholder value. The Compensation Committee follows the following principles in overseeing the compensation program for the Company’s executives:

value of our stock; (2) require significant ownership of our stock; and (3) emphasize both short- and long-term financial performance.

2009 Compensation Actions

Considering the financial challenges of fiscal 2009, the Compensation Committee took actions to align compensation with our peer group and appropriately adjust compensation, but also to compensate executives for individual efforts that promoted long-term value for our stockholders. In fiscal 2009, the Compensation Committee took the following actions:

Action		Considerations		Reason for Action
—Redesigned incentive compensation plan to base 70% on financial results and 30% on the achievement of personal goals —No incentive compensation payments were made under the financial metrics portion of the plan		—Previously 80% of incentive compensation had been based on financial results and 20% had been based on the achievement of personal goals		—To help maintain effective incentives in light of the volatile economic environment —To help align the goals of the executive with the strategic goals of the Company —Although the achievement of personal goals is inherently more subjective than the achievement of financial goals, the Compensation Committee seeks to ensure that the personal goals are as objective as possible, and that rewards are based on its objective review of those goals
—10% reduction in base salary (or hours worked for other salaried employees) coupled with voluntary 20% base salary reductions for executives (other than President of Anvil) from February to May 2009		—Executives received 100% of base salary in fiscal 2008		—Cost-cutting initiative as a response to economic conditions; voluntary executive reductions maintained pay equities with loss of income opportunities for other salaried employees
—20% reduction of cash compensation for non- employee directors for a three month period		—Directors had formerly been paid as described in “Director Compensation” below		—Directors deemed it important to share in cost-cutting initiatives of executives and other Company personnel
—Base salary freeze instituted for over a year to control costs		—Annual salary increases based on performance and cost of living will be renewed in fiscal 2010, with appropriate adjustments to be made for the time elapsed since the last salary review		—Cost-cutting initiative in response to economic conditions and the related declines in revenues in our businesses
—Temporary suspension of 401(k) match from April 1, 2009 through December 31, 2009		—Company generally provided a match of 100% on contributions up to 4% of each employee’s eligible compensation —The 401(k) match will be reinstated on January 1, 2010		—Cost-cutting initiative in response to economic conditions and the related declines in revenues in our businesses

Compensation Elements

Each element of our direct compensation program is reviewed and approved by the Compensation Committee and is intended to encourage and foster the following results and behaviors. The Compensation Committee reviews and approves the following elements of compensation for executives:

The following charts set forth, for our CEO and for our other NEOs on average, the amount of each major element of the base salary, total cashfiscal 2009 target direct compensation and economic grant valuethe percentage of fiscal 2009 total target direct compensation represented by each major element, indicating the percentage of fiscal 2009 direct compensation that was at risk. The amounts and percentages are based upon the fiscal 2009 target levels for long-term equity incentives,each element at the time of approval.

Total Compensation

The Compensation Committee targets total compensation at the 50^th percentile plus or minus 15%, subject to individual adjustments based on experience, length of service, individual performance and other factors deemed appropriate by the Committee, at the 50^th percentile of the comparable position in the approved peer group. In May 2008, the Compensation Committee clarified that it targets the median plus or minus 15%, and not the 50^th percentile specifically, in order to reflect the Compensation Committee’s original intention that the targets be a range of compensation and not a specific dollar amount.Committee. Depending on business and individual performance results, an executive officer’sexecutive’s total compensation may be within, below or above the target range for that position. If the Company’s or operating subsidiary’s performance does not meet the financial targets, or the individual does not meet personal goals, executives may receive only a fraction of their targeted total compensation

In OctoberThe Compensation Committee regularly reviews the total compensation of each executive and November 2007,compares it to the Board anticipatedtotal compensation of comparable executives in the Company’s peer group. The Committee regularly discusses the comparable total compensation data from its peer group with Hewitt, based on data collected by Hewitt. Based on information provided by Hewitt, we believe that the Company might facefiscal 2009 target total compensation opportunity for the NEOs (in an aggregate basis) was approximately 6% below the regressed 50^th percentile target total compensation for similar executive positions in the peer group based on the most current available information.

Risk and Incentive Compensation

Because performance-based incentives play a difficult fiscal 2008 duelarge role in the Company’s executive compensation program, we believe it is important to ensure that incentives do not result in actions that may conflict with the continuing downturn in residential construction activity and other difficult economic conditions, including increased raw material costs. Management also forecasted that commercial construction spending would improve slightly in fiscal 2008. Executive compensation targets reflected these expectations. For fiscal 2008, 80%long-term best interests of the Company. The base salaries of the NEOs, reviewed against similar salaries at comparable companies, are a sufficient component of total compensation to discourage excessive risk taking. Annual bonuses are capped at 200% of the applicable target, amount of incentive-based compensation for corporate executives was tied to the Company’s adjusted net income and return on operating assets, and 20% was tied to the achievement of personal goals. For operating executives, the financial and operating targets wereunder our cash incentive plans are based on segment income from operationsupon budgeted earnings levels that are reviewed, carefully monitored and workingapproved by the Compensation Committee. The Compensation Committee approves financial or operational and personal targets that it and management believe can be achieved without the need to take inappropriate risks or make material changes to the Company’s business or strategy. Long-term incentive awards are granted in equity and value is realized through long-term appreciation of the Company’s stock price. Executives generally cannot sell shares until specified ownership levels have been met.

We use financial performance measures – such as “working capital as a percent of net sales.

Thesales” and “return on net operating assets” – to encourage the efficient use of the Company’s adjustedresources while discouraging excessive risk-taking. We believe that the use of operating income requires managers to consider the cost of their operations, and the use of consolidated net income for fiscal 2008 was $53.1 million and return on operating assets was 6.0% for fiscal 2008. These amounts were belowpromotes the compensation targets set by theuse of strategies to enhance stockholder value. The Compensation Committee for incentive-based compensation. With respectannually considers revisions to the segments, Anvil achieved bothmetrics used – and reviews progress against them at least once during the year – to ensure that incentive compensation is aligned with stockholder interests without excessive risk taking.

We believe the use of itswidely-used financial metrics for financial targets makes it unlikely that the attainment of those financial targets would be reasonably likely to increase the risk to the Company in a material way. The targets used in establishing personal incentive goals are intended to benefit the Company and we do not use goals that are reasonably likely to increase material risk to the Company over a longer period of time than the potential payout

of compensation targets, Mueller Co. achieved only its working capital targetfor the attainment of those goals. We believe that having incentive compensation components that represent a large percentage of total compensation and U.S. Pipe did not achieve either of its compensation targets.that vest over an extended period also discourages unnecessary or excessive risk taking.

Role and AuthorityResponsibilities of the Compensation Committee

The Compensation Committee oversees the Company’s executive compensation program and is composedcomprised entirely of independent directors. The Compensation Committee also is responsible for developingdevelops and reviewingreviews the Company’s executive compensation philosophy. The Compensation Committee’s responsibilities are described in its Charter, which is available on the corporate governance page of our website atwww.muellerwaterproducts.com. The Compensation Committee reviewsFor a description of the Charter annually and recommends to the Board any changes to the Charter that it considers necessary or important. The Board annually determines membershipresponsibilities of the Compensation Committee.

Under the Compensation Committee’s Charter, the Compensation Committee, is responsible for overseeing the Company’s overall strategic human resources programs, including executive compensation, benefit plans and equity plans. The Compensation Committee approves and oversees the administrationsee “Corporate Governance – Committees of the Company’s material benefit plans, policies and programs, including all of our equity-related incentive plans and senior executive bonus

plans. The Compensation Committee also reviews and approves principal elements of total compensation for the Company’s named executive officers and other executive officers and employment, severance, and change-in-control arrangements for the Company’s executive officers.Board”.

Role of Management in Compensation Decisions

The Compensation Committee engages in active discussions with ourand the Chief Executive Officer concerningdiscuss the metrics that closely align performance targets of the business units and the Company with the strategic goals of the Company. The Compensation Committee and the Chief Executive Officer also discuss the individual personal goals and desired initiatives of each executive, to determine the extent to which performance metrics should be used in connection with different operational groups and the determination of performance targets as well as individual goals and initiatives and whether and to what extent criteria for the previous year have been achieved. With respect to our executive incentive compensation program, senior management plays an important role in our decision-making process, due to its direct involvement in and knowledge of the business goals, strategies, experiences and performance of the Company and its various operational units.

With respect to equity grants, theThe Compensation Committee reviews datainformation provided by Hewitt its independent compensation consultant, and uses that datainformation as a reference point for all equity grants. Thecomponents of compensation. Our Chief Executive Officer provides input on and makes recommendations to the Compensation Committee aswith respect to appropriate grant levels for executives other than himself.the compensation, including annual salary adjustments, short-term incentive adjustments and grants of awards under our incentive plans, of the executives. The Compensation Committee reviewsapproves the appropriatenesscompensation of these officers taking into consideration the Chief Executive Officer’s input and recommendations.

The Chairman of the recommendations ofCompensation Committee and another Committee member designated by him meet with the Chief Executive Officer with respect to such grantsdiscuss his performance and accepts or modifies recommendations as it deems appropriate.

In addition, senior executives regularly prepare meeting information forcompensation based on evaluations received from the Compensation Committee. Our Chief Executive Officer proposes toentire Board of Directors. These discussions are considered by the Compensation Committee compensation packages for new executive officers and annual salary increases for eachin setting all elements of the executive officers other than himself.From time to time,compensation for our Chief Executive Officer has recommended that the Compensation Committee consider additional compensation arrangements for one or more executive officers. See “Compensation Elements – Perquisites and Other Personal Benefits – Compensation Program for Anvil International Executives.”Officer.

Our Chief Executive Officer is not a member of the Compensation Committee and does not vote at Compensation Committee meetings. Although our Chief Executive Officer may call meetings of the Compensation Committee and he regularly attends Compensation Committee meetings, he is present only by invitation of the Compensation Committee; heCommittee and has no independent right to attend such meetings. In fiscal 2008,2009, our Chief Executive Officer was present at all of the Compensation Committee meetings. He doesmeetings, but he did not attendparticipate in the executive sessions of the Committee or participate in discussions aboutwhen his own compensation. Our Chief Executive Officer also participated in meetings between management, Hewitt and the chairman of the Compensation Committee.compensation was discussed.

Role of Compensation Consultant in Compensation Decisions

The Compensation Committee is authorized byUnder its Charter to engage its own independent advisors to assist in carrying out its responsibilities. Pursuant to that Charter, the Compensation Committee has sole authority to select and retain an independent compensation consultant. The consultant may not have any other relationship with the independent consultant. InCompany or management without the prior written approval of the Compensation

Committee. For each of fiscal 2009, fiscal 2008 and fiscal 2007, the Compensation Committee selected Hewitt to be theits independent compensation

consultant to the Committee. consultant. Hewitt continued to act as the compensation consultant to the Compensation Committee through fiscal 2008 and has been retained by the Committee for fiscal 2009. The independent consultant is precluded from providing any other services to the Company and will receive compensation from the Company only for services it provides to the Compensation Committee, except as identified to and approved by the Compensation Committee.2010.

In fiscal 2009, Hewitt’s responsibilities include:included:

The Compensation Committee typically invites representatives of Hewitt to attend its meetings. During fiscal 2008,2009, Hewitt attended twoall of the Compensation Committee’s three regular meetings and one special meeting. The Compensation Committee expects Hewitt to provide advice on executive and director compensation matters as the Committee deems appropriate and/in person or as requested.by telephone. In the course of fulfilling its consulting responsibilities, representatives of Hewitt regularly communicatescommunicate with the Chairman of the Compensation Committee outside of regular committee meetings. Representatives of Hewitt meet with the Compensation Committee in executive sessions at most meetings. Hewitt also meets with management from time to time to gather information on and to review proposals that management may make to the Compensation Committee. However, Hewitt reports its findings to the Compensation Committee, not to management.

During fiscal 2008,2009, Hewitt advised the Compensation Committee on the appropriateness and merit of the recommendations made by management (primarily our Chief Executive Officer, as well as the Company’s Senior Vice President of Human Resources and other members of the Company’s executive compensation and benefits group), and provided supplementary background data with respect to management’s recommendations. During fiscal 2008,2009, Hewitt also provided the Compensation Committee and management with competitive compensation data for management to consider in setting or making recommendations regarding compensation levels. In providing management with

survey data and the Compensation Committee with advice, Hewitt relied on information it gathered directly, publicly available information regarding peer group companies, (see below), and Hewitt’s experience with companies inside and outside the peer group.

Hewitt uses a proprietary modified Black-Scholes model to value stock options and a discounted value methodology to value restricted stock units, taking into account the likelihood of forfeiture. During fiscal 2009, Hewitt calculated the number of stock options and restricted stock units to be provided to executives and other employees based on the value of the grants approved by the Compensation Committee. Those calculations reflect the value of the grants using Hewitt’s methodologies based on the closing stock price on the date of grant and may not represent the value at any other point in time or the value required by the SEC in the compensation tables below, or used for financial reporting purposes.

Factors Considered by the Compensation Committee

Peer Group Benchmarking

The Compensation Committee reviewed the fiscal 2008 peer group and requested that management and Hewitt consider certain revisions. Hewitt considered companies that were likely to compete with the Company for executive talent and investors, companies with similar organizational structures, strategic focus, and other considerations. Hewitt also only considered companies where there was sufficient data available to make comparisons, and where the size and scope of operations were sufficiently comparable.

For fiscal 2008,2009, the Compensation Committee identified aapproved the 26-company peer group of 26 companies whose executive compensation programs would be analyzed for benchmarking purposes based on companies selected by Hewitt and reviewed by management and the Compensation Committee.listed below. The peer group companies have a primary manufacturing component to their businesses, are publicly traded and registered with the Securities and Exchange Commission,SEC, and have annual revenue between $800$280 million and $6.5$7.0 billion. The median annual revenue for the peer group iswas $2.4 billion and the median market capitalization was $1.6 billion. Hewitt and management proposed companies that they believed, based on their industries and size, could potentially compete withWhere a company was smaller or larger than the Company, for talented executives. The Compensation Committee selected the followingHewitt used a market regression analysis to adjust peer group for fiscal 2008:

In October 2008,pay data to make the Compensation Committee reviewed the fiscal 2008 peer group and determined that, based on several factors including company size, industry, and business model, a number of companies should be removed and replaced with adata more representative group of companies. The following companies will be excluded from the fiscal 2009 peer group: Dover Corporation, Hubbell Incorporated, Joy Global Inc., Lincoln Electric Holdings, Inc., Molex Incorporated, Nalco Holding Company, Tecumseh Products Company, Temple-Inland Inc., Thomas & Betts Corporation and Vulcan Materials Company. The following companies will be added to the fiscal 2009 peer group: Allegheny Technologies Incorporated, Armstrong World Industries, Inc., Badger Meter, Inc., EnPro Industries, Inc., Mueller

Industries, Inc., Otter Tail Corporation, Quanex Building Products Corporation, Robbins & Myers, Inc., The Shaw Group Inc. and Valmont Industries, Inc.comparable.

Tally SheetsFiscal 2009 Peer Group

In November 2007 and May 2008, the Compensation Committee reviewed compensation tally sheets for each executive officer. The tally sheets, which were prepared by management, contain information concerning current and historical dollar amounts of each component of the executive officer’s compensation, including salary, annual incentive pay (target and actual), outstanding equity awards, other benefits, potential change-in-control payments, severance payments and any other compensation arrangement. The tally sheets assist the Compensation Committee in tracking changes in an executive officer’s total direct compensation from year to year, and remaining aware of the compensation historically paid to each executive officer. The Compensation Committee expects to review updated tally sheets at least annually, and generally reviews them twice a year.

During 2008, the Compensation Committee reviewed a wealth accumulation analysis prepared by Hewitt. The Committee requisitioned the analysis to help it decide how elements of compensation affect long-term wealth accumulation by executives. The Compensation Committee reviews past awards and the potential for future awards in making present compensation decisions, including equity grants.

Compensation Elements

The five major elements that comprise the Company’s compensation program, along with a description and the purpose of each element, are set forth below. The Compensation Committee chose these particular elements of compensation after considering a number of factors, including competitive practices in the Company’s peer group and the Company’s objective to motivate executives to maximize operational and financial performance.

Long-term equity		Awarded in November/ December timeframe. For fiscal 2008, consistedName of 50% value in nonqualified stock options and 50% value in restricted stock units.Company		Provides an incentive and reward for the achievement of long-term business objectives.Annual Revenue (last fiscal year) Aligns executive and stockholder interests. Motivates high business performance. Provides for executive ownership of stock. Assists in retaining executive talent.
Retirement benefits		Voluntary 401(k) plan.		Provides employees with an opportunity to save for retirement in a tax-efficient manner up to statutory limits.
Perquisites		Executive benefits, such as automobile allowance, financial planning and executive physical.		Competitive market practice.Market Capitalization (as of last fiscal year end)
Other personal benefits IDEX Corporation		Firm-wide benefits, such as life insurance, medical, dental and disability insurance.$1.5 billion		Provides employees with health, disability and life insurance coverage.$2.0 billion
Lennox International Inc.		$3.5 billion		$1.8 billion
Mueller Industries, Inc.		$2.6 billion		$931.5 million
Otter Tail Corporation		$1.3 billion		$825.5 million
Pentair, Inc.		$3.4 billion		$2.3 billion
Quanex Building Products Corporation		$868.9 million		$344.9 million
Robbins & Myers, Inc		$787.2 million		$1.5 billion
Roper Industries, Inc.		$2.3 billion		$3.9 billion
Sauer-Danfoss Inc.		$2.1 billion		$422.4 million
The Shaw Group Inc.		$7.0 billion		$4.1 billion
The Stanley Works		$4.4 billion		$2.7 billion
Valmont Industries, Inc.		$1.9 billion		$1.6 billion
Watts Water Technologies, Inc.		$1.5 billion		$730.4 million
Worthington Industries, Inc.		$2.6 billion		$1.1 billion

In October 2009, the Compensation Committee reviewed the fiscal 2009 peer group and decided to retain the same peer group for fiscal 2010.

Tally Sheets

The Compensation Committee annuallyregularly reviews tally sheets for each executive, which are prepared by management and reviewed by Hewitt. They contain information concerning prior year compensation, proposed compensation for the current year and various termination-of-employment scenarios, including termination with or without cause, voluntary termination, retirement and termination after a change in control. The tally sheets also highlight multiple elements of compensation, including base salary, annualcash severance, value receivable under the cash incentive long-termplan, vesting of outstanding equity awards, health and perquisiteswelfare continuation, outplacement services and other personal benefits. the value of any tax gross-ups.

The tally sheets enable the Compensation Committee to see and evaluate the full range of executive compensation, understand the magnitude of potential payouts as a result of termination-of-employment scenarios and consider changes to our compensation program, arrangements and plans in light of emerging trends. The tally sheets, in certain circumstances, show different information than the information that is required to be shown under the heading “Executive Compensation – Potential Payments Upon Termination or Change-in-Control”. The tally sheets may show more or different information than is required by SEC regulations, or use current or projected stock prices, as opposed to year-end stock prices, and may use different assumptions than those used in preparing the table.

Wealth Accumulation Review

The Compensation Committee looks at “wealth accumulation” calculations – how much an executive is projected to earn or accrue over time through cash and equity compensation or receive through certain benefits – but reviews retirement benefitsit in the context of several relevant factors. The most significant vehicle for wealth accumulation is equity awards, and executives receive the full benefit from timeequity awards only with improved Company performance and the resulting improvement in stock price. This review is intended to time to maintain competitive benefit levels and complianceensure that management’s interests are aligned with applicable provisionsthe long-term interests of the Internal Revenue Code. Company and its stockholders.

The Compensation Committee currently expects to continue its policy of reviewingconsiders other factors such as whether the principal elementsmix of compensation at least annuallyshould change over time to reflect changing Company and retirement benefits onindividual circumstances. It also considers whether existing long-term awards already provide sufficient incentives to retain and motivate our executives, such that awards should be reduced or eliminated in a less frequent basis. In determiningparticular period, and makes assumptions as to the current value of the awards that have already been granted to the executives.

Rewarding Performance: Compensation Elements

The Compensation Committee oversees the various forms of compensation to reward performance and encourage the achievement of the Company’s near-term objectives and long term strategic goals.Base Salary provides a stable amount of fixed compensation to the executive, whileAnnual Cash Incentive Awards are used to reward financial and personal performance to achieve Company objectives. The Compensation Committee usesLong-Term Equity-Based Compensation to reward the executives for overall Company performance, and to align a significant portion of the overall compensation with the long-term interests of investors in the Company’s common stock. Finally, the Compensation Committee consideredoverseesRetirement Benefits andOther Benefits to promote the impact on each executive officer’s total compensationhealth, well-being and financial security of its decisions with respectour executives and their families, and, in some cases, to each specific element of compensation, as well as the executive’s past and expected future contributionsprovide perquisites comparable to our business.those available to other similarly-situated executives.

Base Salary

The Compensation Committee targetedregularly compares the base salary forof each executive officer (other than Mr. Smith) atto the 50^th percentile of the comparable positionexecutives in the approved peer group plus or minus 15%group. In response to economic conditions, in December 2008 the Compensation Committee implemented a salary freeze applicable to most salaried employees of the median. The Compensation Committee assessed Mr. Smith’s compensation based on his yearsCompany. In addition, most of service to the Company’s divisions before the acquisition of Mueller Co. and Anvil International by the Company’s predecessor, his compensationexecutives took voluntary 20% base salary reductions for three months during prior periods when Mueller Co. and Anvil International were owned by private interests, his pending retirement from the Company and his rolefiscal 2009. It is currently expected that increases in providing transitional leadership to the Mueller Co. segment.salary will be processed in February 2010.

In determining actualbase salary for each executive, officer, the Compensation Committee assessedassesses the responsibilities associated with the position, individual contribution and performance, skill set, prior experience and external pressures to attract and retain talent and the compensation paid to other executives in the other executive officers. Duringpeer group companies and in the Company. Based on information provided by Hewitt, we believe that the aggregate fiscal 2008,2009 base salaries for the named executive officers were between 19.8%NEOs was approximately 5% below and 1.8% above the 50^th percentile. On an aggregate basis, the base salary of the named executive officers in fiscal 2008 was 5.6% below theregressed 50^th percentile ofbase salary for similar executive positions in the approved peer group.group based on the most current available information. Salaries earned by named executive officers in fiscal 20082009 are reflected in the “Salary” column (Column C) of the Summary Compensation Table on page 3446 of this Proxy Statement.

The following table shows, for each named executive officer who was employed by the Company at September 30, 2008, the percentage increase in his base salary from fiscal 2007 to fiscal 2008, and a comparison of his fiscal 2008 base salary to the peer group.

Annual Cash Incentive CompensationAwards

Annual incentive compensation for fiscal 2008 was awarded toCertain of our named executive officers, other than our Chief Financial Officer, underexecutives were participants in our Executive Incentive Plan (the “Top Executive Bonus Plan”). and were awarded an opportunity to earn an annual incentive award for fiscal 2009. The Top Executive Bonus Plan, which was approved by our stockholders in January 2008, establishes an annual award pool of three percent (3%) of the Company’s operating income. In November or December of each year,For fiscal 2009, the Compensation Committee allocatesallocated the award pool to the participating employeesexecutives to establish a maximum incentive award for each such participant. For fiscal 2008, the pool was allocatedparticipant as follows:

TheIn order to qualify as performance-based compensation for purposes of the Top Executive Bonus Plan, the Compensation Committee may reduce, but may not increase, the maximum award for any participant and the size of the award pool. In determining the amount of incentive compensation that will be awarded toearned by each participant for the fiscal year, the Compensation Committee considers many factors including the pre-established financial/financial or operational goals and individual objectives that are described with respect to the Management Bonus Plan below.

The Compensation Committee awarded discretionary, non-incentive bonuses to Messrs. Smith and Fish in fiscal 2008. Mr. Smith received a discretionary bonus based on his years of service to the Company’s divisions before the acquisition of Mueller Co. and Anvil International by the Company’s predecessor, to make his compensation more closely approximate his compensation during prior periods when Mueller Co. and Anvil International were owned by private interests, and for his role in providing transitional leadership to the Mueller Co. segment. Mr. Fish received a discretionary bonus to compensate him for providing leadership, and for the performance of the Anvil International segment, which exceeded certain targets established by the Compensation Committee.

Annual incentive compensation opportunities for fiscal 2008 was2009 were awarded to our executive officersexecutives who are not covered by the Top Executive Bonus Plan under a different bonus plan called our Management Incentive Program (the “Management Incentive Program” (and referred to herein as the “Management Bonus Plan”). For consistency, the Compensation Committee uses the same types of goals and measurements for the Management Bonus Plan and the Top Executive Bonus Plan.

The Management Bonus PlanIncentive Program provides executive officersexecutives and other key employees with the opportunity to earn cash awards based on the achievement of pre-established measurable financial/operational and individual objectives. The Compensation Committee sets target bonuses to motivate and focus each executive on the achievement of annual financial/operational and individual performance goals and to remain competitive with the approved peer group.

For corporate-level executive officersexecutives and Mr. Torok, fromthe President of our U.S. Pipe segment, total cash compensation was targeted atsubsidiary, the Compensation Committee uses the 50^th percentile relative toof the approved peer group plus or minus 15% of that median.

Prior to the acquisition of Mueller Co. and Anvil International by the Company’s predecessor,as a guide in setting target annual cash incentive compensation. The annual incentive opportunitiestarget for executive of those divisions wereMr. Fish is based on a designated percentage of athe pre-established bonus pool. That bonus pool was calculated as a designated percentage of a financial metric that measured overall profitability, and that metric varied over time. As a result, for Mr. Gaskin from Mueller Co. and Mr. Fish from Anvil International, total cash compensation for fiscal 2008 was not targeted at the 50^th percentile relative to the approved peer group, and the Compensation Committee considered, in addition to its median targets, the services of Messrs. Gaskin and Fish to the Company’s divisionsexisted before the acquisition of Mueller Co. and Anvil International by the Company’s predecessor,predecessor. The Compensation Committee’s goal is to use appropriate opportunities to bring all executive compensation for the NEOs and theirother officers in line with the Company’s compensation during prior periods when Mueller Co.philosophies outlined above. Thus, the Committee uses the financial and Anvil International were owned by private interests.operational goals discussed below for each of the NEOs.

The Compensation Committee approved annual financial/operational and specific individual goals for each executive officer in the first quarter of fiscal 2008. In fiscal 2008, the2009. The potential incentive opportunity for each executive under the Management Bonus Plan was weighted 80%70% on the achievement of two financial/operational goals described below, and 20%30% on the achievement of specific individual goals. The amounts payable based on attainment of those goals is capped by the amount permitted under the Top Executive Bonus Plan. Under that Plan, the

Committee may decrease (using negative discretion) the amounts payable to participants in that Plan but may not increase the amounts payable. In fiscal 2009, the Company’s operating income was insufficient to permit any annual cash incentive payments to the participants under the Top Executive Bonus Plan.

Financial/Financial or Operational Goals

TheDuring the fourth quarter of 2008, the Board anticipated that the Company might face a difficult fiscal 2009 due to the continuing downturn in residential construction activity and the expected slowdown in both municipal spending and non-residential construction. Recognizing that business conditions would remain very challenging, the Compensation Committee uses “consolidated net income” and “return on operating assets” to determine whether corporate executives have satisfiedestablished financial and operational goals.performance targets for fiscal 2009 that were lower than actual results for fiscal 2008, taking into account expected revenue declines, the level of fixed costs and the potential for cost reductions. The Committee believed that the targets would be difficult to reach, but that they could be achieved with strong effort, based on the known economic conditions present at that time.

For corporate executives, the Compensation Committee selected consolidated“return on net income to reflect that corporate management is responsible for overall Company performance. The Compensation Committee selected return on operating assets,assets”, which represents (A) consolidated adjusted net income divided by (B) the average of the sum of certain components of working capital and fixed assets for each month during the year, and “consolidated net income” (as adjusted) as the financial metrics. Return on net assets was selected to ensure that management focuses on the efficient use of resources available to the Company.

For operating executives, the financial/operationalfinancial metrics arewere segment income from operations and working capital as a percent of net sales. The Compensation Committee selected segment income from operations to reflect that segment management hasthose executives have direct responsibility for only a portiontheir respective parts of the business, and segment results do not include an allocation of interest or income taxes.Company’s business. The Compensation Committee selected working capital as a percent of net sales to ensure that the operating executives strive to use Company assets efficiently. For Mr. Fish, the president of Anvil International, target income from operations would be achieved if Anvil International’s operating income improved by 8% over fiscal 2007. This target reflected the market expectation in November 2007 that commercial construction would grow in 2008. For the Mueller Co. and U.S. Pipe operating executives, target income from operations would be achieved if it remained equal to fiscal 2007. This target reflected the expectation in November 2007 that residential construction would decline in 2008.

All executives arewere entitled to receive a minimumthreshold incentive compensation payment if consolidated adjusted net income or segment adjusted income from operations, as applicable, in fiscal 2008 reached a specified percentage of the value of such metric in fiscal 2007,target, with a maximum payout as set forth in the chart below. Further, all executives arewere entitled to a minimum

threshold incentive compensation payment if return on net operating assets or working capital as a percent of net sales, as applicable, in fiscal 2008 improves2009 improved by a specified percentage over fiscal 2007,2008, with a maximum payout as set forth in the chart below.

The Compensation Committee chose relatively low threshold amounts becauseeconomic conditions in the Company’s end markets were even more severe than those contemplated in the fall of expectations in November 2007 that fiscal 2008, would be difficult forand the Company due toexperienced significant declines in revenues in fiscal 2009. Primarily as a result of the severity of the economic conditionsdownturn, the Company did not meet the financial or operating targets set for fiscal 2009 and the declineno bonuses were paid on account of financial or operating performance in the housing market.

fiscal 2009. The following table shows the fiscal 20082009 performance targets for each executive officer along with the attained results. The Compensation Committee considered these results in setting bonus payments under the Top Executive Bonus Plan. The Compensation Committee made certain adjustments to the fiscal 2008 calculations under the Management Bonus Plan to account for restructuring charges during fiscal 2008.

Financial/Operational Performance

(Financial/Operational Goals Have a Total Weight of 80%70% of the Incentive Target)

Individual Goals

With regard to individualIndividual goals have a total weight of 30% of the table below showstotal cash incentive target, and executives can earn between 0% and 200% of the performance range and percenttarget amount depending on the level of target that may be earned in connection with the satisfactionachievement of individual goals by the executive officers.goals. Individual goals are quantifiable to the extent practicable. All individual

goalspracticable and are also reviewed subjectively and thesubjectively. The percent of goal achieved is determined by the executive’s direct supervisor and agreed to or modified by the Chief Executive Officer and the Compensation Committee. In the case of the Chief Executive Officer, the Compensation Committee determines the percent achievement of any individual goal. Performance results may fall withingoals.

During fiscal 2009, the specified amounts indicated inCompany had no operating income, and therefore no performance bonuses could be paid to the table below andparticipants under the Compensation Committee may apply discretion so long as the award complies with the terms of the ManagementTop Executive Bonus Plan. The Compensation Committee considers matters such as market conditions, strategic plansreviewed the financial and executive contribution in using discretion to determine individual awards.

Individual Performance

(Individual Goals Have a Total Weight of 20%operating results of the Incentive Target)

Payout Amounts

IndividualCompany and the attainment by the participants in the Top Executive Bonus Plan of certain goals that had been assigned to them at the start of the fiscal year. The Compensation Committee also considered the performance of the Company during the year, the effects of external financial pressures on the Company’s end markets, the wealth accumulation models and comparisons of salaries and bonuses paid to comparable executives in peer group companies. The Compensation Committee also considered the collective efforts of the management team, including its efforts in generating cash, incentiverepaying debt and managing working capital during the year. Based on that review, the Compensation Committee determined to award payments to the following executives, which would not be payable under the Top Executive Bonus Plan, but which represents twice the target incentives for personal goals for these executives under the Management Bonus Plan were determined usingIncentive Program:

In addition, Mr. Fish was entitled to receive an additional 25% of his 2008 and 2009 bonus payments, or $165,708, under the following calculation:

Incentive Payout =

(Income Goal: 50% of Target Bonus x Payout Factor)

+ (Other Financial/Operational Goal: 30% of Target Bonus x Payout Factor)

+ (Personal Goals: 20% of Target Bonus x Payout Factor)

For services rendered toAnvil Retention Program. See “ – Other Benefits – Compensation Program for Anvil Executives.” Because the Company in fiscal 2008, the Compensation Committee approved payment of an aggregate of $1,219,410 in performance-based and discretionary bonus awards to ten executive officers. These amounts were paid in December 2008.Actual amounts earned by the named executive officerspayments will not qualify as “performance-based” compensation under the Top Executive Bonus Plan or Management Bonus PlanSection 162(m) of the Internal Revenue Code, all of the bonus payments made to Messrs. Hyland and Fish will not be tax deductible.

Cash incentive awards paid to the NEOs for performance in fiscal 20082009 are reflected in the “Bonus” column (Column D) and the “Non-Equity Incentive Plan Compensation” column (Column G) of the Summary Compensation Table on page 3446 of this Proxy Statement. These amounts were paid in December 2009 following completion of the annual audit of the Company’s financial statements.

Long-Term Equity-Based Compensation

The Compensation Committee awards long-term equity-based incentive compensation to executive officersexecutives and certain key employees under the Company’s 2006 Stock Incentive Plan. The Compensation Committee believes that providing equity as a component of executive compensation assuresensures external competitiveness of total compensation, and motivates executive officersexecutives and key employees to focus on long-term Company performance, and aligns the interests of key employees with the interests of the stockholders. In addition, equity awards serve to retain executives during the vesting period since, in most circumstances, the awards will be forfeited if the executive leaves the employ of the Company before the award vestsawards vest or the applicable restrictions lapse.

Value of Fiscal 20082009 Equity Awards

The Compensation Committee based the annual equity awards made during fiscal 2008 on an economic value of the award targeted atused the 50^th percentile relative to the approved peer group plus or minus 15%as a guide in setting the dollar amounts of the median,annual equity awards during fiscal 2009, but made adjustments as appropriateadvised by Hewitt based on the responsibilitieslevel of each executive officer,executive’s respective responsibilities with the Company and that executive’s potential ability to help the Company attain its strategic and operational goalsgoals. The Compensation Committee uses a dollar value to award the long-term equity-based compensation to the NEOs and performance of each executive officer. other executives.

In determining the actual number of stock options and restricted stock units to be granted, the Compensation Committee relied upon a detailed and consistent methodology, developedcalculations provided by Hewitt, to assign a value (the “economic value”) to each equity award.Hewitt. The economic value calculated for each award is based on aHewitt’s proprietary modified Black-Scholes methodology determined by Hewittfor options and discounted value methodology for restricted stock units. The economic value depends, in part, on the actual design features of the grant, includingand includes assumptions relating to term, vesting schedule, and the impact of certain employment terminations, among others. The Compensation Committee annually reviews the assumptions used by Hewitt in determining the economic value. The Committee reviewsvalues of those assumptions,awards and the economic value derived by using those assumptions, as well as the economic value derivedvalues used for each award under Statement of Financial Accounting Standard No. 123R (“FAS 123R”), which is used to determine the fair value for accountingfinancial reporting purposes. The(The economic values derived using the Hewitt modified Black-Scholes calculations do not necessarily match the fair values derived under FAS 123R.for financial reporting purposes.)

Before determining final awards, the Compensation Committee also considered the evaluation of each executive officer by our CEO. The followingChief Executive Officer.

During the last two fiscal years, the Company’s stock price has decreased as the Company’s businesses have faced a severe economic downturn caused by a decline in residential housing markets, deteriorating economic conditions in the Company’s end markets, and resulting decreases in revenues in the Company’s core businesses. This has resulted in a significant negative impact on the value of stock options and restricted stock units that were granted to executives over the past several years. This decline in value based on a closing stock price of $5.48 per share on September 30, 2009, as summarized in the table shows, for each named executive officer whobelow, was employedreviewed and considered by the Company at September 30, 2008, the grant date value of his equity award, and a comparison of hisCompensation Committee in making executive compensation decisions for fiscal 2008 equity award to the peer group.2009.

Timing of Equity Awards

Equity awards are made to our named executive officers under our stockholder-approved incentive compensation plan. TheWhile the Compensation Committee may grant equity awards at its scheduled meetings or by unanimous written consent.consent, it generally grants annual awards at its November/December meeting each year, except for awards related to promotions and new hires. Grants approved during scheduled meetings become effective and are priced as of the date of approval or a predetermined future date (for example, new hire grants are effective as of the later of the date of approval or

the newly hired employee’s start date). Grants approved by unanimous written consent become effective and are priced as of the dateday following the date of the last Compensation Committee member’s signature or as of a predetermined future date. Except for the options granted to replace the cancelled Walter Industries (currently Walter Energy) options at the time of the Spin-off,distribution of the remaining stock of the Company held by Walter Industries (the “Spin-off”), all stock options have a per share exercise price equal to the closing stock price on the New York Stock Exchange on the effective date of the grant.

The Compensation Committee awarded each executive officer an annual grant of non-qualified stock options and restricted stock units at its meeting in November 2007. The economic value of these long-term equity grants was divided equally between non-qualified stock options and time-based restricted stock units. Information related to these awards is reflected in the Grants of Plan-Based Awards Table on page 41 of this Proxy Statement.

Retirement Benefits

The Company offers retirement benefits to its executive officersexecutives and other employees to provide a competitive source of retirement income. These retirement benefits are provided through the vehicles described below.

Retirement Savings Plan Applicable to Employees Generally

The Mueller Water Products, Inc. Retirement Savings Plan (“Savings Plan”) provides retirement benefits for non-union employees of the Company and participating subsidiaries after such employees complete a specified period of service. Messrs. Hyland, Hart, Leggett and Torok participate in the Savings Plan. Messrs. Smith andMr. Fish participateparticipates in the Mueller Group, Inc. Retirement Savings and Investment Plan I, a 401(k) plan sponsored by Mueller Water Products, Inc. (the “Mueller Savings Plan”).I.

Deferred Compensation Plans

Retirement Plan Applicable toAgreement with Mr. Hyland

. In accordance with the terms of Mr. Hyland’s employment agreement with Walter IndustriesEnergy dated as of September 9, 2005, the Company adopted a limited retirement savings plan effective April 1, 2007 (the “Retirement Plan”) for the benefit of Gregory E. Hyland, the Company’s Chairman and Chief Executive Officer.Mr. Hyland. That employment agreement was assigned to and assumed by the Company on December 14, 2006 in connection with the completion of the Spin-off.and was subsequently amended and restated.

The Retirement Plan is intended to constitute an unfunded plan of deferred compensation for Mr. Hyland. Under the Retirement Plan, the Company credits a bookkeeping account for Mr. Hyland. Commencing April 16, 2007 and as of the 16^th day of each calendar month thereafter until the earlier of September 16, 2010 or Mr. Hyland’s death, disability or termination of employment for any reason other than cause, an amount equal to 10% of Mr. Hyland’s then current base salary is credited to such account. The amounts credited to the Retirement Plan bear interest at 120% of the long-term Applicable Federal Rate (as defined in the Internal Revenue Code) until payment. As ofAt September 30, 2008, $328,8752009, $423,812 has been accrued and credited to Mr. Hyland’s deferral account.

Upon termination of Mr. Hyland’s employment at the Company, other than for cause, all deferred compensation under the Retirement Plan will be paid as a lump sum to Mr. Hyland or his designated beneficiary, subject to early withdrawal and deferral rights detailed in the

terms of the Retirement Plan. Upon a termination of employment for cause, the entire Retirement Plan account will be forfeited.

The Company’s current year contributions to the Retirement Plan for Mr. Hyland can be found inwere $94,937. See the “Company Sponsored“Company-Sponsored Retirement Plan” column and footnote 2 of the All Other Compensation Table on page 3950 of this Proxy Statement.

Deferred Compensation Plan for All Executives. The Mueller Water Products, Inc. Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) provides executive officers the opportunity to defer up to 70% of base salary and 100% of amounts earned under the Top Executive Bonus Plan or the Management Bonus Plan, as applicable. Taxes on deferred amounts are deferred until the amounts are withdrawn so that savings accumulate on a pre-tax basis. At the time the employee commences participation in the Deferred Compensation Plan, the employee may elect to receive payments upon termination of employment, death, disability or retirement in a lump sum or in equal installments. If the participating employee fails to make an election, deferred amounts are payable, at the discretion of the Company, in either a lump sum or equal installments. In fiscal 2009, none of our named executive officers participated in the Deferred Compensation Plan.

Perquisites and Other Personal Benefits

PerquisitiesPerquisites

The Company provides certain limited perquisites to the named executive officersNEOs that the Compensation Committee believes are reasonable and consistent with its overall compensation program. The limited perquisites provided are intended to better enablecontribute to the Companyimproved health of the executives, facilitate business development, enhance personal financial management, or represent a competitive practice that helps to attract and retain superior employees for key positions. executives.

In fiscal 2008,2009, the Compensation Committee offered its named executive officersNEOs and certain other executives either an automobile allowance or Company-leased vehicle, financial planning services, an executive physical exam and other perquisites. In limited cases, the Company has in some cases,the past provided for club memberships. memberships for NEOs. The two NEOs with club memberships use those clubs for business purposes, although they may use them for personal use as well.

The Compensation Committee annually reviews the level of perquisites provided to the named executive officersexecutives against the approved peer group. Effective in fiscal 2009, each executive officer will be reimbursed $3,000 for an executive physical exam upon completion of such exam. Certain perquisitesPerquisites provided to the named executive officersNEOs in fiscal 20082009 are set forth in the “AllAll Other Compensation” column of the Summary Compensation Table on page 3450 of this Proxy Statement.

Compensation Program for Anvil International Executives

In December 2007, the Company adopted a new compensation program for its Anvil Internationalbusiness segment (the “Anvil Retention Program”) in which Mr. Fish, Anvil International’sAnvil’s President, participates. This program iswas intended to incentivize Anvil International’sAnvil’s executives to remain with the Company and maximize the earnings of the Anvil International business.Mr.business. Mr. Fish iswas entitled to receive (a) a special bonus award equal to 100% of his base salary on October 1, 2007 if he remainsremained employed by Anvil International through September 30, 2009;2009 and (b) an incentive award equal to 25% of his annual bonus for the period between October 1, 2007 and September 30, 2009 (or an earlier date, under certain circumstances) so long as he (i) remains(1) remained continuously employed by Anvil International through the date of payment of such award and (ii) achieves(2) achieved his annual performance targets. 

The Anvil Retention Program expired pursuant to its terms on September 30, 2009. Mr. Fish is also entitled toreceived an aggregate of $460,288 under the special bonus award if there is a changeAnvil Retention Program, consisting of control of Anvil International, and he is entitled to a termination payment equal to(A) $294,580, representing 100% of his base salary on October 1, 2007, and 100% of the greater(B) $165,708, representing 25% of his target bonusannual bonuses for fiscal 2008 and most recently paid bonus, if there is a change of control of Anvil International and his employment is terminated without cause during the two year period thereafter. Cause is defined as (a) conviction of a felony or any other crime involving dishonesty, fraud or moral turpitude; (b) fiduciary breach against the Company, Anvil International or the successor to Anvil International; (c) failure to adequately perform his duties; and (d) negligence in the performance of his duties.

Change of Control means that (a) any person that is not affiliated with the Company and is not a trustee or other fiduciary holding securities under an employee benefit plan of the Company becomes the beneficial owner of partnership interests of Anvil International

representing more than 51% of the combined voting power of Anvil International’s then outstanding partnership interests or (b) the Company sells or disposes of 51% or more of Anvil International’s assets to a person that is not an affiliate of the Company.fiscal 2009.

Severance Benefits

All of the named executive officers are entitled to general severance benefits. Information regarding applicable payments under such arrangements and agreements for the named executive officers is provided under the heading “Potential“Executive Compensation – Potential Payments Upon Termination or Change-in-Control” on page 4959 of this Proxy Statement.

Change-in-Control Agreements

The Compensation Committee believes that change-in-control agreements are an important component of executive officer compensation. Specifically, the Compensation Committee adopted change-in-control agreements that are intended to create incentives for certain members of our executive team to build stockholder value and to obtain the highest value possible for stockholders should wethe Company be acquired in the future, despite the risk of losing employment and potentially not having the opportunity to otherwise vest in equity awards which comprise a significant component of each executive’s compensation. The change-in-control arrangementsagreements for our executive officersexecutives are “double trigger,” meaning that acceleration of vesting and severance payments do not occur upon a change of control unless the executive’s employment is involuntarily terminated (other than for cause or for termination for good reason) within 24 months following thea change-in-control transaction. The Compensation Committee believes this structure strikes aan appropriate balance between the incentives and the executive hiring and retention effects described above,of incentivizing executives without providing these benefits to executives who continue to enjoy

employment with an acquiring company in the event of a change of controlchange-in-control transaction. The Compensation Committee also believes this structure is more attractive to potential acquiring companies, who may place significant value on retaining members of our executive team and who may perceive this goal to be undermined if executives receive significant acceleration payments in connection with such a transaction and are no longer required to continue employment to earn the remainder of their equity awards.

Change-in-controlMost change-in-control agreements with the Company’s executive officers who were employed by theoriginally entered into between Walter Energy and Company executives prior to the Spin-off were entered into when the Company was wholly-owned by Walter Industries.Spin-off. The Compensation Committee approved change-in-control agreements for executive officersexecutives who were hired or promoted by the Company subsequent to the Spin-off. Key terms, such as triggering events, multiples of pay that would be paid upon the occurrence of those events and the acceleration of equity awards, were based on the agreements previously adopted by Walter Industries. Mr. Smith does not have a change-in-control agreement because his severance arrangement generally protects him in the event of a termination following a change-in-control of the Company.Energy.

In September and October 2008, the Company entered into new change-in-control agreements with the Company’s named executive officers.NEOs. The revised agreements generally restaterestated the existing agreements, and includeincluded certain technical amendments to bring them into compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder. For a description of the change-in-control agreements, see “Employment,“Executive Compensation – Employment, Severance and Change-in-Control Arrangements.”

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (“ESPP”) is a non-qualified stock purchase plan that provides all Company employees an opportunity to purchase our common stock through regular payroll deductions. Participation requires a minimum monthly deduction and cannot exceed 10% of monthly base salary. Further, no more than 1,000 shares can be purchased for any offering period and no more than $25,000 of common stock may be purchased by a participant in any calendar year. The ESPP is implemented through a series of three-month offering periods. The purchase price is equal to 85% of the lesser of the closing price of the common stock on the first trading day of the offering period and the closing price of the common stock on the last trading day of the offering period.

Messrs. Hart and Leggett are the only NEOs who participated in the ESPP in fiscal 2009.

Health and Welfare Benefits

The Company generally offers group medical, dental, vision and group life and long-term disability insurance in a flexible benefits package to all active U.S. Company employees, except as otherwise required by collective bargaining agreements. Every employee is provided life insurance up to one times his or her base salary at no charge to the employee. For an additional charge, the employee may obtain coverage up to four times base salary. Competitive health and welfare benefits are offered to non-U.S. employees.

Income Tax Consequences of Executive Compensation

Section 162(m) of the Internal Revenue Code limits the tax deductibility of compensation paid to each of the principal executive officer and the next three highest paid executive officers (excluding the chief financial officer) to $1 million in any year. However, performance-based

compensation that has been approved by stockholders is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals. Performance-based compensation such as annual cash incentive compensation under the Top Executive Bonus Plan and stock option awards meet these requirements, and as such are deductible by the Company when they are paid to the named executive officer. It is the intent of theCompany. The Compensation Committee intends to maximize the extent of tax deductibility of executive compensation under the provisions of Section 162(m) of the Internal Revenue Code so long as doing so is compatible with its determinations as to the most appropriate methods and approaches for the design and delivery of compensation. TheIn fiscal 2009, the Compensation Committee used the Top Executive Bonus Plandetermined to establish performance goals for management that meet the requirementspay non-deductible incentive-based compensation in lieu of the regulations promulgated under Section 162(m).performance-based compensation to Messrs. Hyland and Fish.

Compensation Recovery (“Clawback”) Policy

The Company’s revised employment agreements contain a provision that requires the executive, officer, to the extent required by law, to reimburse the Company following the publication of a restatement of the Company’s financial statements due to material noncompliance with any financial reporting requirement under the securities laws as a result of misconduct for (a) incentive-based or equity-based compensation received and (b) any profits realized from the sale of securities, in each case during the 12 months followingprior to discovery of the restatement.noncompliance. The Compensation Committee has exclusive authority to interpret and enforce this provision.

The Compensation Committee has adopted a “Clawback Policy” to recover pay that is determined to have been wrongfully earned by managerial or executive employees. As a result, all restricted stock units granted after November 30, 2009 will include a clause that reduces the number of equity awards upon the occurrence of certain events. The proposed 2010 Management Incentive Plan includes a similar clawback clause applicable to the grant of incentive awards under that plan. The Compensation Committee has the exclusive authority to interpret the Clawback Policy, and may offset compensation as necessary to recover amounts due under the Policy.

Stock Ownership Policy

The Compensation Committee believes that equity ownership serves a fundamental role in aligning the interests of executives and outside directors with the Company’s stockholders. Under the Company’s stock ownership guidelines for executive officersexecutives and outside directors, the total stock value of the participant’s holdings of shares of common stock of the Company (including direct ownership, ownership by immediate family members and shares owned in retirement, savings and profit sharing plans) must equal or exceed the specified target value, as follows:

In determining the value of shares held by any executive or outside director for purposes of this policy, the Compensation Committee considers (A) the higher of (1) the current market value or (2) the tax basis of vested restricted stock units and (B) the higher of (1) the market value of shares held by the participant or (2) the cost of shares purchased by the participant or otherwise acquired by vesting. Each individual has until the later of July 30, 2012, or five years from his or her date of employment, to achieve his or her respective ownership targets. If a participant is promoted,

he or she will have at least three years to increase his or her holdings to meet the new higher ownership requirement. Outstanding stock options and unvested restricted stock units for which the restrictions have not lapsed do not count toward the achievement of target ownership levels. Further long-term incentive grants can be modified in size and/or vehicle types to either penalize or to assist an executive in fulfilling the guidelines. The CEO and the Compensation Committee review the ownership of each executive officer and outside director annually.

Prior to attaining the target ownership levels, each executive officer and outside director may not sell shares of stock obtained through the Company’s compensation programs unless he or she holds (and after such sale will continue to hold) shares representing at least 60% of his or her ownership target. Any sales in excess of the allowable amount must be approved in advance by the Compensation Committee. Tendering shares to pay taxes, selling shares pursuant to a previously executed agreement to cover the payment of taxes, and tendering shares to pay the exercise price upon stock option exercises are permitted to the extent, in the Compensation Committee’s discretion, the individual is making adequate progress in achieving his or her ownership target.permitted.

Information regarding the beneficial stock ownership of the directors and named executive officers can be found under the heading “Beneficial Ownership of Common Stock — Ownership of Directors and Executive Officers.Stock.”

EXECUTIVE COMPENSATION

Named Executive Officers

Throughout this proxy statement, the following individuals are collectively referred to as the “named executive officers”:

Corporate Executives

Operations Executives

The Company is currently organized into three business segments, each led by a senior executive. The operations executives report to the Company’s Executive Vice President and Chief Operating Officer, Robert G. Leggett, who joined the Company on September 2, 2008.

Summary Compensation Table

The following table describes total compensation earned during the year ended September 30, 20082009 (“fiscal 2008”2009”) for our named executive officers.NEOs. In addition, we provide supplemental tables below as additional information for our stockholders. These tables are not intended as a substitute for the information presented in the Summary Compensation Table, which is required by the rules of the Securities and Exchange Commission.SEC.

Summary Compensation Table