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  November 5, 2019 VIA FEDERAL EXPRESS AND E-MAIL VIA E-MAIL Lynne M. Murphy
William F. Barry Trial Attorney, Tax Division Senior Trial Attorney U.S.
Department of Justice Internal Revenue Service 555 Fourth Street, N.W. Office of
Division Counsel (LB&I) Room 6219 400 W. Bay Street Washington, D.C. 20001 Suite
240 Jacksonville, Florida 32202 Re: In re New WEI, Inc., et al. Case No.
15-02741-TOM-7 Hillsborough Holdings Corp. v. United States Adv. Proc. No.
15-00127-TOM (Bankr. N.D. Ala.) Dear Ms. Murphy and Mr. Barry: I, as the Trustee
for the Chapter 7 Debtor, New WEI, Inc. (“Chapter 7 Trustee”), submit this offer
on behalf of the Debtor, New WEI, Inc. (“New WEI”), as common parent and agent
for its consolidated group and subsidiaries (together, the “New WEI Group”
(formerly, the Walter Energy, Inc., Walter Industries, Inc., Hillsborough
Holdings Corp., and Jim Walter Corporation consolidated group)), to settle and
compromise the unpaid consolidated income tax liabilities of the New WEI Group
for the tax years ended August 31, 1983, through 1987; May 31, 1988, through
2000; and December 31, 2000, through 2017, plus interest thereon (collectively,
the “New WEI Group Tax Liabilities”), based on the following terms: (1) The
Chapter 7 Trustee of New WEI, as common parent and agent for its consolidated
group and subsidiaries, and the United States (collectively, referred to herein
as the “parties”) agree to settle the New WEI Group Tax Liabilities for the sum
of $39,015,404.60 as of October 31, 2019, plus interest thereon until paid (the
“New WEI Settled Tax Liabilities”), subject to and conditioned upon approval of
a full and controlling written settlement agreement by the United States
Bankruptcy Court for the Northern District of Alabama (“Alabama Bankruptcy
Court”) in In re New WEI, Inc., et al., Case No. 15-02741-TOM-7 and Hillsborough
Holdings Corp. v. United States, Adv. Proc. No. 15-00127-TOM (the “New WEI
Settlement”).     DOCSBHM\2298454\2  Case 15-02741-TOM7 Doc 3554 Filed 11/05/19
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  (2) Within five calendar days of entry of an order by the Alabama Bankruptcy
Court approving the New WEI Settlement, Ditech Holding Corporation (“Ditech”)
and Mueller Water Products, Inc. (“MWP”) shall pay in full the New WEI Settled
Tax Liabilities in the following manner and in accordance with the terms of the
Order Confirming Third Amended Joint Chapter 11 Plan of Ditech Holding
Corporation and its Affiliated Debtors entered in In re Ditech Holding
Corporation, et al., Case No. 19-10412 (JLG) (Bankr. S.D.N.Y.) on September 26,
2019 (“Ditech Confirmation Order”), at paragraphs 42 through 48: (a) Ditech
shall cause the sum of $2,735,000.00 to be disbursed from the escrow account
that Ditech established for the benefit of the Internal Revenue Service (“IRS”)
pursuant to the Ditech Confirmation Order, to the United States. (b) The IRS
shall set off the overpayments of consolidated income taxes of Ditech Holding
Corporation and its subsidiaries (together, the “Ditech Group”) for the tax
years 2013 and 2014, net of the agreed tax deficiencies of the Ditech Group for
the tax years 2015 and 2016 in the approximate amounts of $280,000 and $204,000,
respectively (subject to interest netting, if applicable, pursuant to 26 U.S.C.
§ 6621(d)) (the “Ditech Group Overpayments”), an amount estimated to be
$14,215,709.32, including interest thereon as of October 31, 2019, against the
New WEI Settled Tax Liabilities. (c) MWP shall pay the balance of the New WEI
Settled Tax Liabilities after taking into account the payments made by Ditech
pursuant to subparagraphs (2)(a) and (b), above, an amount estimated to be
approximately $22,064,695.28 as of October 31, 2019, to the United States in
accordance with the instructions set forth in paragraph (10), below. (3) The
Chapter 7 Trustee, on behalf of New WEI, as common parent and agent for its
consolidated group and subsidiaries, including but not limited to Ditech and
MWP, waives any and all rights to file an administrative refund claim, seeking
to recover a refund of any or all payments or setoffs made in satisfaction of
the New WEI Settled Tax Liabilities pursuant to subparagraphs (2)(a), (b) and
(c), above. Further, Ditech, on its behalf and as common parent and agent for
its consolidated group and subsidiaries, known as the Ditech Group, has fully,
finally and forever surrendered, relinquished and released any right, title or
interest in the Ditech Group Overpayments. See ¶ 2(b), supra; Ditech
Confirmation Order, at ¶ 44. Ditech also has waived any and all rights to
challenge the IRS’s ability to collect from the escrow account once the Alabama
Bankruptcy Court approves the New WEI Settlement. See ¶ 2(a), supra; Ditech
Confirmation Order, at ¶ 44. 2   DOCSBHM\2298454\2  Case 15-02741-TOM7 Doc 3554
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  (4) Within five calendar days of entry of an order by the Alabama Bankruptcy
Court approving the New WEI Settlement, the Chapter 7 Trustee, on behalf of New
WEI, as common parent and agent for its consolidated group and subsidiaries,
shall execute and return to the United States, by and through Lynne M. Murphy,
the trial attorney assigned to handle this case: (a) a Form 870, “Waiver of
Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of
Overassessment,” for the New WEI Group Tax Liabilities for the tax years ended
May 31, 2000; December 31, 2000, through 2002; and December 31, 2004, through
2006; (b) a Joint Stipulation of Dismissal, dismissing the adversary proceeding,
Hillsborough Holdings, Adv. Proc. No. 15-00127-TOM, with prejudice; and (c) a
Joint Stipulation of the Withdrawal of the United States’ Motion To Enforce
Settlement, Enter Judgment and Lift Stay (Doc. 3166) filed in In re New WEI,
Case No. 15-02741-TOM-7, with prejudice. (5) Upon the United States’ receipt of
all payments identified in paragraph (2), above, New WEI and the New WEI Group,
including but not limited to Ditech and MWP, shall be deemed fully and forever
released and discharged from any and all civil liabilities or obligations
arising out of or in connection with the New WEI Group Tax Liabilities. (6)
Within ten calendar days of the United States’ receipt of all payments
identified in paragraph (2), above, the United States, by and through the IRS,
shall: (a) withdraw its Proofs of Claim filed in In re New WEI, Case No.
15-02741- TOM-7, with prejudice; (b) withdraw its Proof of Claim filed in In re
Ditech, Case No. 19-10412 (JLG), with prejudice; and (c) issue Form 866,
“Agreement As to Final Determination of Tax Liability,” for the New WEI Group
Tax Liabilities for the tax years ended May 31, 1996, through 2000; and December
31, 2000, through 2017 (“Closing Agreement”), to the Chapter 7 Trustee for him
to execute, on behalf of New WEI, as common parent and agent for its
consolidated group and subsidiaries, in triplicate, and return to the IRS, by
and through Lynne M. Murphy, via overnight mail. Within ten (10) calendar days
of the IRS receiving the properly executed Closing Agreements, the Commissioner
of Internal Revenue or his delegate will 3   DOCSBHM\2298454\2  Case
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  execute the agreements, and the IRS will send signed Closing Agreements to
counsel for the Chapter 7 Trustee, Ditech and MWP. (7) Within ten calendar days
of the United States’ receipt of all payments identified in paragraph (2),
above, the United States shall file: (a) the Joint Stipulation of Dismissal,
dismissing the adversary proceeding, Hillsborough Holdings, Adv. Proc. No.
15-00127-TOM, with prejudice; and (b) the Joint Stipulation of the Withdrawal of
the United States’ Motion To Enforce Settlement, Enter Judgment and Lift Stay
(Doc. 3166) filed in In re New WEI, Case No. 15-02741-TOM-7, with prejudice. (8)
Within fifteen calendar days of entry of an order by the Alabama Bankruptcy
Court approving the New WEI Settlement, MWP shall pay to the Chapter 7 Trustee
$53,168.38 on account of certain tax credits included in the computation of the
New WEI Settled Tax Liabilities identified in paragraph (1), above. This payment
represents the amount of certain tax credits owed to the Debtors’ estates on
account of the 2015 tax year – an amount consisting of $48,720 as of March 2016,
plus accrued interest through November 15, 2019. (9) The parties acknowledge and
agree that the IRS has not examined, verified or determined: (a) the amount of
New WEI Group’s consolidated net operating losses (“NOLs”) available from the
tax years ended December 31, 2013, through 2017; (b) the amount of the NOLs
available for carryforward to tax periods after December 31, 2017; and (c) how
and whether 26 U.S.C. §§ 108, 381, 382, the SRLY rules, or any other provisions
may prevent or limit the use of any of such NOLs by any other entity for any
year. Specifically, the IRS has not determined whether Warrior Met Coal LLC
(f/k/a Coal Acquisition, LLC) (“Warrior Met”) and/or Seminole Coal Resources,
LLC, ERP Compliant Coke, LLC and ERP Environmental (collectively, “Seminole”) in
connection with the asset sales that closed on March 31, 2016, are entitled to
deduct or use any NOLs, credits or other tax attributes that may or may not be
available. Accordingly, this settlement shall not prevent or otherwise bar the
IRS from challenging any use or deduction of the NOLs or any other tax
attributes that Warrior Met, Seminole or any other entity may claim on their
returns. (10) The payment identified in subparagraph (2)(c), above, shall be
made, via Fedwire Electronic Funds Transfer (“FEFT”). Upon approval of the New
WEI Settlement by the Alabama Bankruptcy Court, William E. Thompson of the
Financial Litigation Unit for the U.S. Department of Justice, Tax Division, will
forward a FEFT form, including instructions, to counsel for MWP for transmission
to MWP. MWP, in turn, shall give the FEFT form to its bank from which the funds
are being 4   DOCSBHM\2298454\2  Case 15-02741-TOM7 Doc 3554 Filed 11/05/19
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  electronically transferred so that the bank may ensure that the funds are
properly credited to the U.S. Department of Justice, Tax Division, in accordance
with the terms of this global settlement. (11) This agreement constitutes the
entire and complete settlement agreement of the parties. The parties acknowledge
and agree that there are no communications or oral understandings contrary,
different, or that in any way restrict this settlement agreement, and that all
prior agreements or understandings within the scope of the subject matters of
this settlement agreement are, upon execution of this agreement, superseded,
null and void. (12) No waiver, modification or amendment of the terms of the New
WEI Settlement shall be valid or binding unless made in writing, signed by all
parties, and then only to the extent as set forth in such written waiver,
modification or amendment. (13) The parties may execute this settlement
agreement in whole or in counterparts, and execution of the counterparts shall
have the same force and effect as if the parties have signed the same
instrument. Signatures transmitted electronically or by facsimile shall have the
same effect as original signatures. (14) In the event that there is any dispute
over the interpretation of any terms of this settlement agreement, all parties,
collectively, shall be considered the drafting party and any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall be inapplicable. (15) Each party shall bear its own costs,
including any attorneys’ fees. (16) Notwithstanding any other provisions to the
contrary herein, the New WEI Settlement is conditioned upon acceptance of this
offer by the United States, by and through the Attorney General of the United
States or his delegate, and the Commissioner of Internal Revenue or his
delegate. (17) Notwithstanding the possible application of Bankruptcy Rule 8007,
the terms and conditions of the New WEI Settlement shall become immediately
effective and enforceable upon entry of an order by the Alabama Bankruptcy Court
approving the settlement pursuant to Bankruptcy Rule 9019(a). In the event,
however, that the Alabama Bankruptcy Court does not approve the settlement, the
New WEI Settlement shall be deemed null and void, and the parties shall be
returned to the status quo prior to entry of this agreement. (18) The Chapter 7
Trustee and his counsel shall be responsible for preparing and filing all
documents, including notices, that are necessary to secure court approval of the
New WEI Settlement in form and substance reasonably satisfactory to all parties.
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