Exhibit 10.2


 


CONFIDENTIAL


 


March 2, 2006


 


Mr. Mark O’Brien


Tampa, Florida


 


Dear Mark,


 


We are delighted to offer you the position of Chairman and Chief
Executive Officer of the combined Homebuilding and Financing Segments (the “Homes
Group”) of Walter Industries, Inc. (“Walter”).  The terms of your employment will be as
follows:


 


1.                                       We anticipate that you will remain a
director of Walter (subject to your reelection by the shareholders). In your
capacity as Chairman and Chief Executive Officer of the Homes Group, you will
report to Gregory E. Hyland, Chairman, President and Chief Executive Officer of
Walter, or to his successor as Walter’s Chairman.  You will be responsible for all aspects of
the business of the Homes Group. If the Homes Group is spun off to Walter’s
shareholders, it is contemplated that you will continue to be its Chairman and
Chief Executive Officer, reporting to its Board of Directors.


 


2.                                       Your employment will commence as of March 2,
2006.


 


3.                                       Your compensation package will be as
follows:


 


a)                                      Your
base salary will be $150,000 per year, subject to review and adjustment by the
Compensation Committee of Walter’s Board of Directors.


 


b)                                     Your
annual target bonus under the Walter Industries Executive Incentive Plan (EIP)
will be 100% of base pay. The amount of your annual bonus will fluctuate based
upon actual performance under Walter’s EIP as in effect from time to time.


 


c)                                      You
will receive a one-time grant of non-qualified stock options on the equivalent
of 7.5% of the total combined equity of the Homes Group (or another vehicle
that will deliver equivalent value).  The
per share strike price of these options shall be calculated by reference to a
valuation of the Homes Group as a going concern conducted as soon as possible
by a mutually agreeable, experienced valuation firm of national
reputation.  These options will vest at
the rate of 1/3 per year over a three-year period.  The options will be evidenced by an option agreement
and option plan which are substantially equivalent to the form of plan and
agreement currently used by Walter, with such revisions as are necessary to
conform to this agreement.  Except as
provided below, these options will expire ten years from the grant date.  The options will vest on any change in
control of the Homes Group.  A spin-off
or other transaction separating the Homes Group from Walter shall not be
considered a change in control and in the case of such a transaction your
options and this agreement will continue in full force and effect.  In the event of your termination by the Homes
Group for cause or your voluntary termination of employment other than for a
reason specified in the next sentence, your unvested options will expire
immediately, and you will have 90 days to exercise any options which are vested
on the date


 

















 


your
employment terminates.  In the event of
your termination by the Homes Group for any other reason, your resignation
because of a significant diminution in pay or responsibilities, your normal
retirement after the third anniversary of the date of this agreement, your
resignation because of the Homes Group’s or Walter’s material breach of this
agreement which is not cured within a reasonable period after notice, or your
death, your options will accelerate and fully vest on the date of termination
and you will have two years after termination to exercise your vested
options.  If you have vested options at
any time when there is no public market for the common stock of the Homes Group
and you notify the Homes Group of your intention to exercise such options, the
per share price of the common stock of the Homes Group shall be calculated by
reference to a valuation of the Homes Group as a going concern conducted by a
mutually agreeable, experienced valuation firm of national reputation.  The Homes Group shall not be required to
conduct more than one such valuation in any calendar year.  Following receipt of such valuation, the
Homes Group shall, upon your request, pay you an amount in cash equal to the
difference between the price of the common stock as so calculated and the
strike price of the options you wish to exercise, upon your surrender of such
options to the Homes Group.


 


d)  You will receive a car
allowance of $2,000 per month, subject to usual withholding taxes.


 


e) You will receive the benefits generally applicable to senior
executives of Walter in the location in which you are primarily based, as well
as 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 Retirement Savings Plan, generally applicable to salaried employees in
the location in which you are primarily based, as it may change from time to
time and in accordance with its terms.


 


• Participation
in the Employee Stock Purchase Plan, generally applicable to salaried employees
in the location in which you are primarily based, as it may change from time to
time and in accordance with its terms.


 


• 4
weeks of annual vacation to be used each year, without carryover of unused
vacation days.


 


• Reimbursement
of reasonable attorneys fees required in the negotiation of this agreement, up
to $10,000.


 


You may contact Walter’s General Counsel with
any questions regarding Walter’s compensation and benefit plans.


 


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4.                                       You will have the right to allocate up to
the equivalent of 7.5% of the total combined equity of the Homes Group (in
addition to the award granted to you under paragraph 3(c) above)  as equity awards for members of your senior
management team (or provide them with another vehicle that will deliver
equivalent value).  The valuation, strike
price and other terms of these equity awards shall be calculated as described
in paragraph 3(c).


 


5.                                       You will have access to Walter’s corporate
aircraft for your business travel, or in the event Walter’s aircraft is not
available, you may use leased or chartered aircraft. You will not use any
company-owned, leased or chartered aircraft for personal travel at company
expense, except in the case of a family emergency and with the prior approval
of the Chairman of the Compensation and Human Resources Committee of the Board,
or in the event of his unavailability, the Chairman of the Corporate Governance
Committee. You will not be required to reimburse the cost of any such
pre-approved emergency travel to Walter, but the value of such travel will be taxable
to you in accordance with applicable IRS regulations.  You shall not pilot company aircraft or
leased or chartered aircraft used for company business.


 


6.                                       In
the event of your involuntary termination or your resignation following a
significant diminution in pay or responsibilities, you will be entitled to be
paid for your services to the date of termination and for any unused vacation
days.


 


7.                                       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 Industries,
either solely or in collaboration with others, which relate to the actual or
anticipated business or research of Walter, result from or are suggested by any
work you may do for Walter, or which result from use of Walter’s premises or
Walter’s or its customers’ property (collectively, the “Developments”) shall be
the sole and exclusive property of Walter.


 


You hereby assign to Walter your entire right
and interest in any such Development, 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 to any inventions that you develop entirely on your own time without using
any of Walter’s equipment, supplies, facilities or Walter’s or its customers’
confidential information and which do not relate to Walter’s business,
anticipated research and development, the work you have performed for Walter.


 


8.                                       As
an inducement to Walter Industries 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.


 


9.                                       You
acknowledge and agree that you will respect and safeguard Walter’s 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 business and that such systems and data
exchanged or stored thereon are Walter property. In the event that you leave
the employ of Walter, you will not disclose any trade secrets or confidential


 


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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.


 


10.                                 During
the term of your employment and, unless your employment is terminated by the
Company without cause, for a period of three years after termination of your
employment, you shall not: (i) directly or indirectly act in concert or
conspire with any person employed by Walter 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 you knows (or reasonably should have known) to be directly
competitive with the business of Walter 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 you know (or reasonably should have
known) to be directly competitive with the business of Walter 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
registered under Section 12 of the Securities Exchange Act of 1934).  Notwithstanding the foregoing, in the event
of a sale of the Homes Group that does not result in the payment to you of an
amount in respect of your options at least equal to the strike price of your
options times the number of options granted, the period during which the
covenant set forth in this paragraph 10 shall endure shall be six months after
closing of the sale.


 


11.                                 Definitions


 


a)                                      “Cause”
shall mean your (i) conviction or guilty plea of a felony involving fraud
or dishonesty, (ii) theft or embezzlement of property from the company (iii) 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)
or (iv) fraudulent preparation of financial information of the Homes Group
which took place with your actual knowledge.


 


b)                                     For
purposes of this agreement, a significant diminution in pay or responsibilities
shall not have occurred if (i) the amount of your bonus or equity
opportunity fluctuates due to performance considerations under the company’s
bonus and long term incentive plans in effect from time to time, or (ii) Walter
or the Homes Group undergoes a strategic realignment of its businesses (such as
a split-up or spin-off transaction), with or without a shareholder vote, and
you remain the senior executive of the business that carries on the business of
the Homes Group with the same compensation arrangements and equivalent equity
interests that existed prior to such strategic realignment.


 


12.                                 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


 


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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.


 


13.                                 It
is agreed and understood that this offer letter, if and when accepted, 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 Walter.


 


14.                                 This
agreement will be governed by Florida law.


 


Mark, let us assure you that the Board of Directors is delighted at the
prospect of your leadership of the Homes Group. If you are in agreement, please
sign and return one copy of this letter, and retain one for your records.


 


 


Very truly yours,


 


 


	
  /s/ Donald N. Boyce

  	
   

  
	
  Donald N. Boyce

  
	
  For the Board of Directors

  
	
   

  
	
  Agreed and Accepted:

  
	
   

  
	
  /s/ Mark O’Brien

  	
   

  
	
  Mark O’Brien

  
			



 


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