Exhibit
10.3





WALTER INDUSTRIES, INC.


4211 West Boy Scout Blvd.


Tampa, FL 33607


GREG HYLAND


Chairman, President and


Chief Executive
Officer


CONFIDENTIAL


August 1, 2006


Mr. Joseph J. Troy


4211 W. Boy Scout Blvd


Tampa, FL 33607


Dear Joe:


Confirming our
recent discussions, we are pleased that you have accepted our position as
Executive Vice President and Chief Financial Officer of Walter Industries, Inc.
(the Company) effective August 15, 2006. 
The following outlines the terms of your employment.  This document supersedes all previous
agreements, except your Change in Control Agreement dated February, 2004, you
had with the Company or any of its affiliates and this will be final and
binding on the date you sign.


1.                                       You
will serve as Executive Vice President and Chief Financial Officer of Walter
Industries, Inc. reporting to the Chairman, President and Chief Executive
Officer of the Company until the spin-off of Mueller Water Products, Inc., and
then you will report to the Vice Chairman of the Company.  You will be responsible for the management of
all financial matters affecting the Company, including financial reporting,
balance sheet management, capital structure, strategic issues and working with
the Audit Committee of the Board of Directors of Walter Industries, Inc.


2.                                       Your
compensation package will be as follows:


(a)                                  Effective
August 15, 2006 your annualized base salary will be $340,000 per year.  Your salary and performance will be reviewed
annually consistent with the practices of the Company.


(b)                                 You
will participate in the Walter Industries, Inc. Executive Incentive Plan (EIP)
with a bonus target of 60% of your base salary to a maximum of 2 times
target.  The amount of your incentive
will fluctuate based upon actual performance under the performance metrics
associated with the EIP. In situations other than those described in section 3
of this agreement, a bonus will not be paid or payable in the event you are not
employed by the Company on the date the bonus is paid.  Please note that participation in the
Employee Stock Purchase Plan is a requirement of the EIP.









 



 


(c)                              You
will be eligible for the Walter Industries, Inc. annual long term incentive
program.  You will receive an initial
award of 40,000 non-qualified stock options subject to vesting one-third per
year over three years.  These options
will be awarded and priced as of August 4, 2006.


(d)                                 You
will receive a vehicle allowance of $1,500 per month, subject to usual
withholding taxes.


(e)                                  You
will receive the following additional benefits:


·                  Reimbursement
for all reasonable and customary business-related travel and entertainment
expenses in accordance with the terms of the policy generally applicable to the
executives in the location in which you are primarily based, as it may change
from time to time.


·                  Participation
in the group life and health insurance benefit programs, generally applicable
to executives employed in the location in which you are primarily based, in
accordance with their terms, as they may change from time to time.


·                  Participation
in the Company’s retiree medical plan as it may change from time to time and in
accordance with its terms by using Joe’s original hire date (i.e. March 3,
1998) for determining his eligibility, as agreed to at the time of his rehire.


·                  Participation
in the Company’s Retirement Savings Plan, as it may change from time to time
and in accordance with its terms.


·                  Participation
in the Employee Stock Purchase Plan, as it may change from time to time and in
accordance with its terms.


·                  Eligibility
for 30 days of annual vacation to be used each year in accordance with policy
generally applicable to executives employed in the location in which you are
primarily based, as it may change from time to time.


3.                                       In
the event of your involuntary termination, other than for “Cause” (defined
below), in the event of your Constructive Termination (also defined below), or
if you are required to relocate more than 50 miles from the current
headquarters location in Tampa, Florida, in each case, other than as a result
of death or disability, you will be entitled to (i) payment of base salary for
18 months, (ii) payment of the target amount of your cash bonus for 18 months,
and (iii) continued participation in benefits until the earlier of the 18-month
anniversary of the termination date or until you are eligible to receive
comparable benefits from subsequent employment. 
Payment must be in accordance with all government regulations e.g. IRC
409A.



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4.                                       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 the Company, either solely or in
collaboration with others, which relate to the actual or anticipated business
or research of the Company, which result from or are suggested by any work you
may do for the Company, or which result from use of the Company’s premises or
the Company’s or its customers’ property (collectively, the “Developments”)
shall be the sole and exclusive property of the Company.  You hereby assign to the Company your entire
right and interest in any Developments and will hereafter execute any documents
in connection therewith that the Company may reasonably request.  This section does not apply to any inventions
that you made prior to your employment by the Company or any of its
predecessors or affiliates, or to any inventions that you develop entirely on
your own time without using any of the Company’s equipment, supplies,
facilities or the Company’s or its customers’ confidential information and
which do not relate to the Company’s business, anticipated research and
developments or the work you have performed for the Company.


5.                                       Non-Compete/Non-Solicit.
It is understood and agreed that the nature and methods employed in the Company’s
business are such that you will have substantial relationships with specific
businesses and personnel, prospective and existing, vendors, contractors,
customers, and employees of the Company that result in the creation of customer
goodwill.  Therefore, following the
termination of employment under this agreement for any reason that results in
the payment of severance and continuing for a period of eighteen (18) months
from the date of such termination, so long as the Company or any affiliate,
successor or assigns thereof carries on the name or like business within the
Restricted Area (defined below), including the states that the Company operates
in as of the date of your separation, 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)                                  Call
upon, solicit, write, direct, divert, influence, or accept business (either
directly or indirectly) with respect to any account or customer or prospective
customer of the Company or any corporation controlling, controlled by, under
common control with, or otherwise related to Company, including but not limited
to any other affiliated companies; or


(b)                                 Hire
away any independent contractors or personnel of Company and/or entice any such
persons to leave the employ of Company or its affiliated entities without the prior
written consent of Company.


Notwithstanding the foregoing, following the
termination of employment under this agreement for any reason and continuing
for a period of eighteen (18) months from the date of such termination, you
shall not, directly or indirectly, for yourself



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or on behalf of, or in conjunction with, any other
person, persons, company, partnership, corporation, business entity or
otherwise, hire away any independent contractors or personnel of Employer
and/or entice any such persons to leave the employ of Employer or its
affiliated entities without the prior written consent of Company.


6.                                       Non-Disparagement.  Following the termination of employment under
this agreement for any reason and continuing for so long as the Company 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 your termination with Company, or


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


7.                                       As
an inducement to the Company to make this offer to you, you represent and
warrant that you are not a party to any agreement or obligation for personal
services and 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 herein.


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


9.                                       Definitions:


 “Cause” shall
mean: (a) material failure to act in accordance with the reasonable
instructions of the Board of Directors or the President and CEO or the Vice
Chairman of the Company, (b) conviction of a felony arising from any act of
fraud, embezzlement or willful dishonesty in relation to the business or
affairs of the Company or any other felonious conduct on your part that is
demonstrably detrimental to the best interests of the Company or any subsidiary
or affiliate, (c) being repeatedly under the influence of illegal drugs or
alcohol while performing



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your duties, or (d) commission of any other willful
act that is demonstrably injurious to the financial condition or business
reputation of the Company or any subsidiary or affiliate.


“Constructive Termination”
shall mean, without your written consent: (a) a material failure of the Company
to comply with the provisions of this agreement, (b) a material diminution of
your position (including status, offices, title and reporting relationships),
duties or responsibilities, (c) any purported termination of your employment
other than for Cause, or (d) the failure of a successor corporation to assume
the Company’s obligations under this agreement.


For purposes of this agreement, a significant
diminution in pay or responsibility shall not have occurred if: (i) the
amount of your bonus fluctuates due to performance considerations under the EIP
or other Company incentive plan applicable to you and in effect from time to
time or (ii) you are transferred to a position of comparable responsibility and
compensation with Walter Industries, even though that position nay report to an
officer who in turn reports to the Chairman.


“Restricted Area” shall mean in those industries that
we compete at the time of your separation, unless management approves an
exception.


10.                                 As
discussed, the Company desires to have you, as a senior executive of the
Company, make a meaningful investment in the Company.  In this regard, you have committed to maintain
at least $100,000 in the Company’s common stock while employed by the Company.
The details of how this investment should be made will need to be determined
with input from Vic Patrick, the Company’s Senior Vice President, General
Counsel and Secretary.


11.                                 In the event that any portion of any payment under
this agreement, or under any other agreement with, or plan of the Company (in
the aggregate, Total Payments) would constitute an “excess parachute payment,”
such that a golden parachute excise tax is due, the Company shall provide to
you, in cash, an additional payment in an amount sufficient to cover the full
cost of any excise tax and all of your additional federal, state, and local
income, excise, and employment taxes that arise on this additional payment
(cumulatively, the Full Gross-Up Payment), such that you are in the same
after-tax position as if you had not been subject to the excise tax. For this
purpose, you shall be deemed to be in the highest marginal rate of federal,
state, and local income taxes in the state and locality of your residence on
the date of your termination. This payment shall be made as soon as possible
following the date of your termination, but in no event later than ten (10)
calendar days from such date.  For
purposes of this agreement, the term “excess parachute payment” shall have the
meaning assigned to such term in Section 280G of the Internal Revenue Code, as
amended (the Code), and the term “excise tax” shall mean the tax imposed on
such excess parachute payment pursuant to Sections 280G and 4999 of the Code.



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12.                                 It
is agreed and understood that this offer letter, if and when accepted, shall
constitute our entire agreement with respect to the subject matter herein and
shall supersede all prior agreements, discussions, understandings and proposals
(written or oral) relating to your employment with Walter Industries, Inc. and
related business units.


Joe, your
signature below confirms your acceptance of this employment agreement. Please
sign one of the enclosed copies and return it to me in the envelope provided.


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gregory E.
  Hyland

  
	
   

  	
  Gregory E.
  Hyland

  
	
   

  	
  Chairman,
  President and Chief Executive Officer

  



 


GH: jtp


Enclosures


Agreed and
Accepted


	
  /s/ Joseph J. Troy

  	
   

  
	
  Joseph J. Troy

  	
   

  
	
   

  	
   

  
	
  8/4/06

  	
   

  
	
  Date

  	
   

  



 


 



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