Exhibit 10.2


 


December 23, 2008


 


Charles E. Cauthen


[home address]


Tampa, FL [zip]


 


Dear Charles:


 


We
are pleased that you have accepted the position of President and Chief
Operating Officer of Walter Investment Management Corporation, the surviving
entity following the merger of JWH Holding Company, LLC (“JWHHC”) with Hanover
Capital Mortgage Holdings, Inc. (“HCM”) pursuant to the Agreement and Plan
of Merger entered into between JWHHC and HCM (the “Company”).   This agreement will be the sole obligation of
the survivor corporation following the merger of JWHHC and HCM. While employed,
you agree to devote your full time and efforts to advancing the Company’s
interests.


 


The purpose of this
letter is to confirm your acceptance of the terms of your employment, effective
October 1, 2008, as follows:


 


1.                                       As
President and Chief
Operating Officer  of
the Company, you shall report to and serve at the direction of the Chairman and
Chief Executive Officer of the Company. In your capacity as President and Chief Operating Officer,
you will be responsible for managing all aspects of the business including
financial and strategic issues, as well as growth and return objectives.


 


2.                                       Your
compensation package will be as follows:


 


(a)                                  Base Salary


 


$400,000 per year
commencing October 1, 2008, which will be subject to periodic review and
adjustment by the Compensation Committee of the Board of Directors of the Company and paid in accordance with the payroll
practices of the Company, as they may change from time to time.


 


(b)                                 Bonus


 


Your annual target
bonus will be 70% of your base salary or $280,000 at your current base pay. The
amount of your bonus


 


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will fluctuate
based upon actual performance under the Company’s bonus plan as in effect from
time to time. The amount of your bonus is dependent upon the achievement of the
Company’s annual financial and other goals, as well as the accomplishment of
individual objectives, each mutually agreed upon in writing each year. To
receive a bonus, you must be employed through the end of the year for which the
bonus is payable (the “Bonus Year”).  The
bonus for a Bonus Year will be payable to you during the next following year
(the “Bonus Payment Year”) immediately upon the closing of the Company’s books
for the Bonus Year, but not later than March 14 of the Bonus Payment Year.


 


For calendar year
2008, your annual bonus will be $400,000, which will be paid to you no later
than December 31, 2008.


 


(c)           Benefits


 


(i)    You
will be entitled to receive from the Company prompt reimbursement for all
reasonable out-of-pocket business expenses incurred by you in the performance
of your duties hereunder, in accordance with the most favorable policies,
practices and procedures of the Company relating to reimbursement of business
expenses incurred by Company directors, officers or 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.


 


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


 


(iii)  Participation
in the Company’s retirement 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. Your eligibility to participate will be
consistent with the requirements of ERISA.


 


(iv)  Participation
in the Company’s long-term incentive plan as it applies to other executives and
subject to terms of the Company’s Long-Term Incentive Plan. For 2009, your
annual


 


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long-term incentive
opportunity will have an economic value of $400,000.


 


You understand and agree
that the Jim Walter Homes Holding Company, LLC equity grant you received under
your previous employment letter agreement dated November 2, 2006 will be
cancelled at the Effective Time of the Merger and the Company will issue you
equity equivalent to 0.833% of the shares in the Company in fully vested restricted stock
units, with deferral for a minimum of three years. The number of restricted
stock units granted will be based on the total number of shares outstanding in
the Company. Your right to receive
the 0.833% stock interest is fully vested and not subject to forfeiture, as of
the Effective Time of the Merger. Dividend equivalents will be paid to you in
cash until the end of the deferral period. In accordance with Treas. Reg.
1.409A-3(e), the dividend equivalents will be treated separately from your
right to the 0.833% stock interest and the dividend
equivalents, if any, must be paid contemporaneously with actual dividends, if
any, but at least annually.


 


(v)         30 days of annual vacation to be used
each year, without carryover of unused vacation days, and in accordance with
the Company’s vacation policy, as it may change from time to time.


 


(vi)      You
will receive a monthly auto allowance of $1,500, subject to the usual
withholding taxes.


 


Your Benefits under this
Agreement, including grants to you under the Company’s Long-Term Incentive
Plan, will be subject to periodic review and increase by the Compensation Committee
of the Board of Directors of the Company.


 


3.             It is
agreed and understood that your employment with the Company is to be at will,
and either you or the Company may terminate the employment relationship at any
time for any reason, with or without cause, and with or without notice to the
other; nothing herein or elsewhere constitutes or shall be construed as a
commitment to employ you for any period of time.


 


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 


 


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hereby assign to the
Company your entire right and interest in any such Developments, and will
hereafter execute any documents in connection therewith that the Company may
reasonably request.


 


5.             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 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.


 


6.             In the event of your Involuntary Termination (as defined
below), other than for “Cause” (also defined below), in the event of your
Constructive Termination (also defined below), other than as a result of death
or disability, you will be entitled to the following severance benefits, in
accordance with all government regulations, e.g. IRC 409A:


 


·                  18 months of base salary continuation and
target bonus, including your vehicle allowance


 


·                  Continued participation in benefits, to
the extent the plans allow, until the earlier of the 18-month anniversary of
the termination date or until you are eligible to receive comparable benefits
from subsequent employment.  The COBRA
election period will not commence until the expiration of that 18-month
period.  If continued participation in
any benefit plan will result in taxable reimbursement payments to you, the
payment will be provided only if the filing of the claim for payment and
completion of the reimbursement payment can reasonably be completed by the end
of the calendar year following the year in which the expense is incurred.


 


“Involuntary Termination” shall mean your termination from
employment due to the independent exercise of unilateral authority by Company to
terminate your services, other than due to your implicit or explicit request,
where you are willing and able to continue performing services. The
determination of whether a termination of employment is involuntary is based on
all the facts and circumstances. Any reference in this Agreement to “termination
of employment” shall mean “separation from service” within the meaning of
Treas. Reg. 1.409A-1(h).


 


“Cause” shall mean
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.”


 


“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 or pay, (c) any
purported termination of your employment other than for Cause, or (d) forced
relocation of your primary job location more than 50 miles from the
Company’s Tampa, Florida location.


 


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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 Company’s
executive incentive plan 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 within the Company.


 


To be entitled to severance benefits under this paragraph
you must terminate employment from the Company. 
For this purpose, your termination of employment
must be considered a “separation from service” within the meaning of Code
§409A(a)(2)(A)(i) and any guidance or regulations issued thereunder.


 


To be entitled to severance benefits on the basis of
Constructive Termination the event causing Constructive Termination must not be
implemented for the purpose of avoiding the restrictions of the Code Section 409A
restrictions and you must terminate employment from the Company within one year
following the initial existence of the Constructive Termination event.  In addition, your termination of employment
may not occur before you have given the Company notice of the existence of the
Constructive Termination event and a period of at least 30 days to remedy the
situation.  Your notice to the Company
must occur within the 90 day period following the initial existence of the
Constructive Termination event.


 


Payments of severance pay made pursuant to this paragraph
shall be paid to you at the Company’s normal payroll dates as if you were still
employed by the Company.  The Company
will not accelerate or delay payment of such amounts to an earlier or later
date except to the extent such change in payment date is permissible under Section 409A
of the Code.


 


7.             Non-Compete.  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 the
Company that result in the creation of customer goodwill. Therefore, 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, so long as the Company or any affiliate, successor or assigns
thereof is in the real estate investment trust/mortgage servicing
business/insurance agency or like business within the Restricted Area (defined
as the real estate investment trust/mortgage industries in which the Company
competes at the time of your separation), unless the Board of Directors
approves an exception. 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 the Company, including but not 


 


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limited to Walter Investment Management Corporation, Hanover Capital
Mortgage Holdings, Inc., Walter Mortgage Company, or any other affiliated
companies; or


 


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


 


8.             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
Employee’s termination with the 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.


 


9.             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 Company 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.


 


10.           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. 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 


 


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to
Sections 280G and 4999 of the Code.  Any
Full Gross-Up Payment made under this paragraph will be made by December 31
of the year next following the calendar year in which you pay the taxes to the
applicable taxing authority.


 


11.           Tax Compliance Delay in Payment.  If the Company reasonably determines that any
payment or benefit due under this Agreement, or any other amount that may
become due to you after termination of employment, is subject to Section 409A
of the Code, and also determines that you are a “specified employee,” as
defined in Section 409A(a)(2)(B)(i) of the Code, upon your
termination of employment for any reason other than death (whether by resignation
or otherwise), no amount may be paid to you or on your behalf earlier than six
months after the date of your termination of employment (or, if earlier, your
death) if such payment would violate the provisions of Section 409A of the
Code and the regulations issued thereunder, and payment shall be made, or
commence to be made, as the case may be, on the date that is six months and one
day after your termination of employment (or, if earlier, one day after your
death).  For this purpose, you will be considered
a “specified employee” if you are employed by an employer that has its stock
publicly traded on an established securities market or certain related entities
have their stock traded on an established securities market and you are a “key
employee”, with the exact meaning of “specified employee”, “key employee” and “publicly
traded” defined in Section 409A(a)(2)(B)(i) of the Code and the
regulations thereunder.   
Notwithstanding the above, the Company hereby retains discretion to make
determinations regarding the identification of “specified employees” and to
take any necessary corporate action in connection with such determination.


 


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


 


13.           It is agreed and understood that this
acceptance letter 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. This letter agreement will be interpreted under and in accordance
with the laws of the State of Florida without regard to conflicts of laws.


 


14.           You and the Company intend that
payments and benefits under this Agreement comply with Code Section 409A
and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”)
and, accordingly, to the maximum extent permitted, this Agreement shall be
interpreted to be in compliance therewith. 
In the event that any provision of this Agreement is determined by you
or the Company to not comply with Code Section 409A, the Company shall
fully cooperate with you to reform the Agreement to correct such noncompliance
to the extent permitted under any guidance, procedure, or other method
promulgated by the Internal Revenue Service now or in the future that provides
for such correction as a means to avoid or mitigate any taxes, interest, or
penalties that would otherwise be incurred by you on account of such
non-compliance.


 


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Charles, we are delighted
that you have accepted this opportunity. If the terms contained within this
letter are acceptable, please sign one of the enclosed copies and return it to
me in the envelope provided and retain one copy for your records.


 


Very truly yours,


 


JWH Holding Company, LLC


 


	
  /s/ Mark J. O’Brien

  	
   

  
	
   

  
	
  By: Mark J. O’Brien

  
	
  Its: Chairman and Chief
  Executive Officer

  



 


 


ACCEPTANCE


 


I have read the
foregoing, 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 above as governing my
employment relationship with the Company.


 


	
  Signature

  	
  Charles Cauthen

  	
   

  	
  Date

  	
  December 23, 2008

  



 


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