Exhibit 10.26

 

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April 1, 2011

 

Neil Winklemann

5410 Keith Road

West Vancouver BC Canada V7W 2N2

 

Dear Neil,

 

We are pleased that you have accepted the position of President — Walter Energy
Canadian & European Operations of Western Coal Corp. (“Western” or the
“Company”) effective as of the date of the consummation of the transactions
contemplated by the Arrangement Agreement, dated December 2, 2010 between
Western and Walter Energy, Inc. (“Walter”). The attached schedules outline the
remuneration and benefits and terms and conditions of your continued employment
in your new position.

 

As the President — Canadian & European Operations of Western, you will have such
duties, responsibilities and authorities as the Chief Executive Officer of
Walter (the “CEO”) determines are appropriate for your position. You will report
to the CEO or to his designee.

 

It is agreed and understood that this letter agreement (including the schedules
and exhibits attached hereto) (collectively, the “Agreement”) and the other
agreements referred to in this Agreement shall constitute our entire agreement
with respect to the subject matter hereof and shall supersede all prior
agreements, discussions, understandings and proposals (written or oral) relating
to your employment with the Company and its affiliates, including, for the
avoidance of doubt, Walter. This Agreement may only be amended or modified by a
written agreement executed by you and Western (or any of its respective
successors) and will be interpreted under and in accordance with the laws of the
Province of British Columbia without regard to conflicts of laws.

 

This Agreement may be executed by fax or pdf and in any number of counterparts,
all of which, when taken together, will constitute one and the same instrument.

 

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Neil, we are delighted that you have accepted the position of President — Walter
Energy Canadian & European Operations and we look forward to working with you.
If the terms contained within this Agreement are acceptable, please sign one of
the enclosed copies and return it to me in the envelope provided.

 

Best regards,

 

 

 

 

 

 

 

 

 

 

 

/s/ Keith Calder

 

 

‘May 3 / 2011

Keith Calder

 

 

Date

Chief Executive Officer

 

 

 

Walter Energy, Inc.

 

 

 

 

 

ACCEPTANCE

 

I have read the Agreement, have been advised to consult with counsel of my
choice concerning the same, and I fully understand the same. I approve and
accept the terms set forth in the Agreement as governing my employment
relationship with Western.

 

/s/ Neil Winklemann

 

 

13th May 2011

Neil Winklemann

 

 

Date

 

 

Enclosures:

 

Schedule A - Remuneration & Benefits

Schedule B - Terms and Conditions

 

 

Initials

 

/s/

 

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SCHEDULE A

 

REMUNERATION & BENEFITS

 

Name:

Neil Winklemann

 

 

Role Title:

President — Walter Energy Canadian & European Operations

 

 

Role Band:

n/a

 

 

Department:

Corporate

 

 

Employer:

Western

 

 

Date of Appointment:

Date of consummation of the transaction contemplated by the Arrangement
Agreement, dated December 2, 2010 between Walter and Western.

 

 

Continuous Employment Date:

July 5, 2010

 

This schedule should be read in conjunction with the remainder of the Agreement.
The policies covering these benefits and their terms and conditions may be
varied from time to time by the Company in its sole discretion, with or without
notice.

 

Base Salary and Remuneration:

The remuneration for this position is a base salary of CDN$400,000 per annum
which will be subject to review and adjustment by the Compensation and Human
Resources Committee of the Board of Directors of Walter (the “Compensation
Committee”) and paid in accordance with Western’s payroll practices, as they may
change from time to time. Your annual base salary, as in effect from time to
time, is hereinafter referred to as the “Base Salary.”

 

 

 

The remuneration structure is designed to provide competitive levels of total
remuneration for strong individual and corporate performance and achieve a close
alignment between personal and business performance and remuneration.

 

 

Annual Bonus (EIP):

You will continue to participate in the Western annual bonus plan on the same
terms and conditions as you currently enjoy until the end of the current fiscal
year on June 30,

 

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2011. Thereafter, you will be eligible to participate in Walter’s Executive
Incentive Plan, as it may be amended from time to time (the “EIP”) and will be
eligible to earn an annual target bonus of 80% of your Base Salary (the “Target
Bonus”), with an upside potential of 2 times your Target Bonus for top
performance. The actual amount of your bonus, if any, will fluctuate based upon
actual performance under the performance metrics associated with the EIP.
Participation in the bonus pool is dependent upon the achievement of Walter’s
and Western’s annual performance goals, as well as the accomplishment of
individual objectives mutually agreed upon in writing each year. In order to
receive a bonus under the EIP, you must be employed at the time the bonus is
paid. For greater certainty, you will not be entitled to a bonus under the EIP
if your employment is terminated for any reason (including without Cause) prior
to the date of payment. Notwithstanding anything in this Agreement to the
contrary, your bonus, if any, under the EIP, earned in respect of the year
ending December 31, 2011, will be pro-rated based upon the percentage of such
fiscal year that will have elapsed from July 1, 2011 through the last day of
such fiscal year and based solely on the Base Salary actually earned in such
fiscal year from your commencement date through the last day of such fiscal
year.

 

 

 

Please note that participation in Walter’s Employee Stock Purchase Plan is a
condition to participation in the bonus pool under the EIP.

 

 

Long Term Incentive:

Subject to your continued active employment with Western, you will be eligible
to participate in Walter’s Amended and Restated 2002 Long-Term incentive Award
Plan, as it may be amended and restated from time to time (and any successor
long term incentive award plan) (collectively, the “LTIP”), and will be eligible
to receive annual equity grants from Walter.

 

 

 

Your annual equity grant in respect of the 2011 fiscal year will be valued at
130% of Base Salary, based on the Black-Scholes value at the date of grant,
fifty percent (50%) of which will be in the form of non-qualified stock options
and fifty percent (50%) of which will be in the form of restricted stock units.
Such equity grants will be awarded under and subject to the terms and conditions
of the LTIP and the terms and conditions applicable to other awards granted by

 

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Walter under the LTIP to employees of Walter.

 

 

 

For greater certainty, you shall cease to participate in any Western stock
option or other long term incentive plans immediately upon the effective date of
this Agreement.

 

 

Expenses:

Reimbursement for all reasonable and customary out-of-pocket business expenses
incurred by you in the performance of your duties hereunder, in accordance with
the policies, practices and procedures of Western relating to reimbursement of
business expenses incurred by Western employees in effect at any time during the
12 month period preceding the date you incur the expenses; provided, however,
that any such expense reimbursement will be made no later than the last day of
the calendar year following the calendar year in which you incur the expense,
will not affect the expenses eligible for reimbursement in any other calendar
year, and cannot be liquidated or exchanged for any other benefit.

 

 

Health Care:

You will be eligible to participate in Western’s life and health insurance
benefit programs made available to other executive employees in Canada. Your
participation will be in accordance with the terms of the applicable plan
documents, as they may change from time to time. Additional benefit plan
information will be available for your review upon request. After you are
enrolled in the benefit plans, you and all eligible family members will be
eligible for coverage in accordance with the plan terms.

 

 

Retirement Plan:

You will continue to be eligible to participate in Western’s Group RRSP
according to its terms as they may change from time to time. Information on the
retirement plan will be available for your review upon request.

 

 

Vacation:

Your vacation entitlement will accrue at the rate of 25 days of paid vacation
per year.

 

 

Change in Control:

You will execute an Executive Change-in-Control Severance Agreement in a form
substantially similar to the form attached hereto as Exhibit A (the “CIC
Agreement”).

 

 

Separation Package:

In the event the CIC Agreement does not apply, and subject to (a) your
compliance with the restrictive covenants set forth in Sections 4 through 6 of
Schedule B and (b) your

 

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execution, delivery and non-revocation of a waiver and release of claims in a
form substantially similar to the form attached hereto as Exhibit B (the
“Release”) on or prior to the 10th day following the date on which your
employment with Western terminates due to (x) the termination of your employment
by Western, other than for “Cause” (as defined below) or (y) the termination of
your employment by you for “Good Reason” (as defined below), but in each case,
excluding any cessation of employment by reason of your death or Disability (as
defined below) (such date, without regard to any notice period, the “Severance
Date”), you will be entitled to receive the following severance payments and
benefits:

 

 

 

·   For the period commencing on the day immediately following the Severance
Date and ending on the first anniversary of the Severance Date, monthly pay
continuation with each monthly payment equal to one-twelfth (1/12) times the sum
of your Base Salary and Target Bonus, in each case, as in effect on the
Severance Date. Monthly payments will occur in accordance with the payroll dates
in effect on the Severance Date, and such payment dates will not be affected by
any subsequent change in payroll practices.

 

 

 

·   Except as provided below and subject to the terms of the applicable plans,
continuation of group medical, dental, and vision benefits, provided, to the
extent applicable, regular contributions are made, at the level in effect on the
Severance Date, in each case, for a period (such period, the “Continuation
Coverage Period”) beginning immediately upon the Severance Date and continuing
until the earliest to occur of (A) the first anniversary of the Severance Date,
(B) the last date you are eligible to participate in the benefit under
applicable statute, or (C) the date you are eligible to receive comparable
benefits from a subsequent employer, as determined solely by Western in good
faith; provided, however, that if you fail to execute and deliver the Release or
revoke the Release, in either case, the Continuation Coverage Period shall cease
immediately upon such date. Such benefits shall be provided to you at the same
coverage and cost to you as in effect on the Severance Date. Notwithstanding the
foregoing, your participation in the Employee Stock Purchase Plan, long-term
disability insurance plan and all

 

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other benefits will cease effective on the Severance Date. For purposes of this
subsection, you shall send written notice of the terms and conditions of any
subsequent employment and the corresponding benefits earned from such employment
and shall provide, or cause to be provided, to Western, in writing, correct,
complete and timely information concerning the same to the extent requested by
Western.

 

 

 

provided, however, that, subject to applicable employment standards legislation,
Western shall have the right to cease making such payments and you shall be
obligated to repay any such amounts to Western already paid if you fail to
execute and deliver the Release within the time period provided for above or,
after timely delivery, revoke it within the time period specified in such
Release.

 

 

 

Notwithstanding anything in this Agreement to the contrary and for the avoidance
of doubt, you shall not be entitled to severance payments or benefits under this
Severance Package provisions of the Agreement in the event your employment is
terminated without Cause within twenty-four (24) months following a Change in
Control of the Company (as defined in the CIC Agreement). Severance payments and
benefits payable upon such a termination of employment, if any, shall be
determined and paid under the CIC Agreement.

 

 

 

For purposes of this Agreement, the term “Cause” shall mean any grounds at
common law for which an employer is entitled to dismiss an employee summarily,
and includes, without limitation, the following: (i) your willful and continued
refusal to perform the duties of your position (other than any such failure
resulting from your incapacity due to physical or mental illness); (ii) your
conviction or guilty plea of an indictable offence involving fraud or
dishonesty; (iii) theft or embezzlement by you of property from Walter or any
subsidiary or affiliate; or (iv) fraudulent preparation by you of financial
information of Walter or any subsidiary or affiliate.

 

 

 

For purposes of this Agreement, the term “Good Reason” shall mean the occurrence
of any of the following conditions (in each case arising without your consent):
(A) a material breach of this Agreement by Western or (B) a

 

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material diminution in your authority, duties or responsibilities.
Notwithstanding the foregoing, your voluntary separation from service shall be
for “Good Reason” only if (x) you provide written notice of the facts or
circumstances constituting a “Good Reason” condition to Western within 30 days
after the initial existence of the Good Reason condition, (y) the Company does
not remedy the Good Reason condition within 30 days after it receives such
notice and (z) the voluntary separation from service occurs within 90 days after
the initial existence of the Good Reason condition. For purposes of this
Agreement, the parties agree that “Good Reason” will not exist solely because
the amount of your bonus fluctuates due to performance considerations under the
EIP or other Walter or Western incentive plan applicable to you and in effect
from time to time.

 

 

 

For purposes of this Agreement, the term “Disability” shall mean any medical
condition whatsoever which leads to your absence from your job function for a
continuous period of six months without you being able to resume such functions
on a full time basis at the expiration of such period, it being understood that
unsuccessful attempts to return to work for periods under thirty days shall not
be deemed to have interrupted said continuity.

 

 

 

You acknowledge that the Separation Package provided pursuant to this Agreement
is reasonable and supersedes and replaces any and all rights to reasonable
notice of termination that you might otherwise be entitled to at common law. You
agree that the payments include all amounts owing in connection with the
termination of your employment, including termination pay, severance pay and/or
any vacation pay which may accrue after the Severance Date, whether under any
contract, statute (including the British Columbia Employment Standards Act),
common law or otherwise.

 

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SCHEDULE B

 

TERMS AND CONDITIONS

 

1.                                         Outside Interest. While employed by
Western, you agree to devote your full business time and best efforts to the
performance of your duties hereunder and will not engage in any other business,
profession or occupation for compensation or otherwise which would conflict or
interfere with the rendition of such services either directly or indirectly
without the prior written consent of the CEO of Walter or his designee. You
recognize and agree that you are a fiduciary of Western.

 

2.                                         You agree that all inventions,
improvements, trade secrets, reports, manuals, computer programs, systems, tapes
and other ideas and materials developed or invented by you during the period of
your employment with Walter, either solely or in collaboration with others,
which relate to the actual or anticipated business or research of Walter or any
of its subsidiaries or affiliates, which result from or are suggested by any
work you may do for Walter or any of its subsidiaries or affiliates, or which
result from use of Walter’s or any of its subsidiaries’ or affiliates’ premises
or Walter’s, its subsidiaries’, its affiliates’, or its customers’ property
(collectively, the “Developments”) shall be the sole and exclusive property of
Walter. You hereby assign to the Company your entire right and interest in any
such Developments, and will hereafter execute any documents in connection
therewith that Walter may reasonably request. This section does not apply to any
inventions that you made prior to your employment by Walter or Western, or to
any inventions that you develop entirely on your own time without using any of
Walter’s or Western’s equipment, supplies or facilities, or Walter’s or
Western’s or their respective subsidiaries’, affiliates’, or customers’
confidential information which do not relate to Walter’s, Western’s, their
respective subsidiaries’ or its affiliates’ business, anticipated research and
development, or the work you have performed for Walter, Western and their
respective subsidiaries and affiliates.

 

3.                                         As an inducement of Western to make
this offer to you, you represent and warrant that there exists no impediment or
restraint, contractual or otherwise on your power, right or ability to accept
this offer and to perform the duties and obligations specified in this
Agreement.

 

4.                                         Non-Compete/Non-Solicit. It is
understood and agreed that you will have substantial relationships with specific
businesses and personnel, prospective and existing, vendors, contractors,
customers, and employees of Walter and its subsidiaries that result in the
creation of customer goodwill. Therefore, during the term of your employment and
for a period of twelve (12) months after your employment terminates for any
reason, you shall not anywhere in (a) Wales, (b) British Columbia or (c) any
other Canadian province or territory in which Western does business on the
Severance Date (collectively, the

 

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“Restricted Area”): (i) directly or indirectly act in concert or conspire with
any person employed by Walter or any of its subsidiaries in order to engage in
or prepare to engage in or to have a financial or other interest in any business
or any activity which he knows (or reasonably should have known) to be directly
competitive with the business of the Company as then being carried on; or (ii)
serve as an employee, agent, partner, shareholder, director or consultant for,
or in any other capacity participate, engage, or have a financial or other
interest in, any business or any activity which he knows (or reasonably should
have known) to be directly competitive with the business of the Company as then
being carried on (provided, however, that notwithstanding anything to the
contrary contained in this Agreement, you may own up to two percent (2%) of the
outstanding shares of the capital stock of a company whose securities are
publicly traded). In addition, during the term of your employment and for a
period of twelve (12) months after your employment terminates for any reason,
you shall not employ or retain or solicit for employment or arrange to have any
other person, firm, or other entity employ or retain or solicit for employment
or otherwise participate in the employment or retention of any person who is an
employee or consultant of Walter or any of its subsidiaries.

 

5.                                         Non-Disparagement. Following the
termination of your employment for any reason and continuing for so long as
Waiter or any affiliate, successor or assigns thereof carries on the name or
like business within the Restricted Area, you shall not, directly or indirectly,
for yourself or on behalf of, or in conjunction with, any other person, persons,
company, partnership, corporation, business entity or otherwise:

 

(a)          Make any statements or announcements or permit anyone to make any
public statements or announcements concerning the termination of your employment
with Walter, or

 

(b)          Make any statements that are inflammatory, detrimental, slanderous,
or negative in any way to the interests of Walter or its affiliated entities.

 

6.                                         You acknowledge and agree that you
will respect and safeguard Walter’s and its subsidiaries’ property, trade
secrets and confidential information. You acknowledge that Walter’s electronic
communication systems (such as email and voicemail) are maintained to assist in
the conduct of Walter’s and its subsidiaries’ business and that such systems and
data exchanged or stored thereon are Walter property. In the event you leave the
employ of Walter, you will not disclose any trade secrets or confidential
information you acquired while an employee of Walter to any other person or
entity, including without limitation, a subsequent employer, or use such
information in any manner.

 

7.                                         Compensation Recovery Policy. You
understand and agree that if any of Walter’s or Western’s financial statements
are required to be restated due to errors, omissions, fraud or misconduct, the
Compensation Committee may, in its sole discretion but acting in good faith,
direct that Walter and/or Western recover all or a portion of any cash
incentive, equity compensation or severance disbursements paid to you with
respect to any fiscal year for which the financial results are negatively
affected by such restatement. For purposes of

 

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this provision, errors, omissions, fraud or misconduct may include and are not
limited to circumstances where Walter or Western has been required to prepare an
accounting restatement due to material non-compliance with any financial
reporting requirement, as enforced by the Securities and Exchange Commission,
and the Compensation Committee has determined in its sole discretion that you
had knowledge of the material noncompliance or the circumstances that gave rise
to such noncompliance and failed to take reasonable steps to bring it to the
attention of the appropriate individuals within Walter, or you personally and
knowingly engaged in practices which materially contributed to the circumstances
that enabled a material noncompliance to occur.

 

8.                                         Walter shall withhold from any
amounts payable hereunder all Federal, provincial or other taxes as legally
shall be required.

 

9.                                         You acknowledge and agree that you
have read this Agreement carefully, have been advised by the Company to consult
with an attorney regarding its contents, and that you fully understand the same.

 

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