Document:

Exhibit 10.4.1

 

 

Executive Change-in-Control Severance
 Agreement for [Name of Executive]

 

Walter Energy, Inc.

 

Adopted: [  ]

 

 

Contents

 

	
Article 1. Definitions
    	
 
    	
1
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 2. Severance   Benefits
    	
 
    	
5
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 3. Form and   Timing of Severance Benefits
    	
 
    	
10
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 4. Restrictive   Covenants
    	
 
    	
11
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 5. Claw-Back
    	
 
    	
12
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 6. The Company’s   Payment Obligation
    	
 
    	
12
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 7. Legal Remedies
    	
 
    	
13
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 8. Successors
    	
 
    	
13
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Article 9. Miscellaneous
    	
 
    	
13
    	
 
    

 

 

Walter Energy, Inc. 
 Executive Change-in-Control Severance Agreement

 

THIS EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT is made and entered into this [  ] day of [   ], 201[  ], by and between Walter Energy, Inc. (the “Company”), a Delaware corporation, and [   ] (the “Executive”), and will be effective as of the date the Executive’s employment with the Company commences.

 

WHEREAS, effective [    ], 201[ ], the Executive will commence employment with the Company and will possess considerable experience and knowledge of the business and affairs of the Company concerning its policies, methods, personnel and operations; and

 

WHEREAS, the Company is desirous of assuring, insofar as possible, that it will have the benefit of the Executive’s services; and the Executive is desirous of having such assurances; and

 

WHEREAS, the Company recognizes that circumstances may arise in which a Change in Control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty of employment without regard to the Executive’s competence or past contributions. Such uncertainty may result in the loss of the valuable services of the Executive to the detriment of the Company and its shareholders; and

 

WHEREAS, both the Company and the Executive are desirous that any proposal for a Change in Control will be considered by the Executive objectively and with reference only to the business interests of the Company and its shareholders; and

 

WHEREAS, the Executive will be in a better position to consider the Company’s best interests if the Executive is afforded reasonable assurances, as provided in this Agreement, against altered conditions of employment which could result from any such Change in Control.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

 

Article 1. Definitions

 

Wherever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:

 

(a)                            “Agreement” means this Executive Change-in-Control Severance Agreement, as it may be amended from time to time.

 

(b)                           “Base Salary” means “Base Salary” as defined in the Employment Letter Agreement.

 

(c)                            “Board” means the Board of Directors of the Company.

 

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(d)                           “Cause” shall be determined solely by the Committee in the exercise of good faith and reasonable judgment, and shall mean the occurrence of any one or more of the following:

 

(i)                                     willful and continued refusal to perform the duties of the Executive’s position (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness);

 

(ii)                                  the Executive’s conviction or guilty plea of a felony involving fraud or dishonesty;

 

(iii)                               theft or embezzlement by the Executive of property from the Company; or

 

(iv)                              fraudulent preparation by the Executive of financial information of the Company or any subsidiary or affiliate.

 

(e)                      “Change in Control” of the Company shall mean the occurrence of any one or more of the following events:

 

(i)             A change in the effective control of the Company, which occurs only on either of the following dates:

 

(A)                              The date any Person or Group (other than the Company, any Subsidiary of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or any trustee or other fiduciary holding securities under an employee benefit plan of the Company, such Subsidiary or such proportionately owned corporation), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by any such Person or Group) ownership of stock of the Company representing more than thirty percent (30%) of the total voting power of the stock of the Company; or

 

(B)                                The date a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election;

 

provided that, in any event, the transaction must constitute a “change in the effective control” of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code and Treasury Regulation Section 1.409A-3(i)(5)(vi).

 

(ii)                           The date any Person or Group (other than the Company, any Subsidiary of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock

 

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of the Company, or any trustee or other fiduciary holding securities under an employee benefit plan of the Company, such Subsidiary or such proportionately owned corporation) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Group) all or substantially all of the Company’s assets; provided that the transaction must constitute a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code and Treasury Regulation Section 1.409A-3(i)(5)(vii).

 

(f)                              “Code” means the Internal Revenue Code of 1986, as amended.

 

(g)                           “Committee” means the Compensation and Human Resources Committee of the Board, or, if no Compensation and Human Resources Committee exists, then the full Board, or a committee of Board members, as appointed by the full Board to administer this Agreement.

 

(h)                           “Company” means Walter Energy, Inc., a Delaware corporation, or any successor thereto as provided in Article 8 herein.

 

(i)                               “Constructive Termination” means the Executive’s voluntary Separation from Service for Good Reason; provided that a voluntary Separation from Service shall be a Constructive Termination only if (x) Executive provides written notice of the facts or circumstances constituting a Good Reason condition to the Company 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. The foregoing definition of Constructive Termination is intended to qualify for the safe harbor under Treasury Regulation Section 1.409A-1(n)(2)(ii) for treating a voluntary separation from service as an involuntary separation from service.

 

(j)                               “Disability” or “Disabled” means “Disability” as defined in the Employment Letter Agreement.

 

(k)                            “Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein, which triggers the payment of Severance Benefits hereunder.

 

(l)                               “Employment Letter Agreement” means that certain letter agreement, dated [ ], by and between the Executive and the Company, as it may be amended from time to time.

 

(m)                         “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(n)                           “Good Reason” means the occurrence of any of the following conditions after a Change in Control of the Company (in each case arising without the Executive’s consent):

 

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(i)          A material diminution of the Executive’s authority, duties or responsibilities from those in effect as of ninety (90) calendar days prior to the Change in Control;

 

(ii)                           The Company requiring the Executive to be based at a location in excess of fifty (50) miles from the location of the Executive’s principal job location or office immediately prior to the Change in Control; except for required travel on the Company’s business to an extent substantially consistent with the Executive’s then present business travel obligations;

 

(iii)                            A material reduction by the Company of the Executive’s Base Salary; or

 

(iv)                           A material breach of this Agreement by the Company, including Section 8.1.

 

Unless the Executive becomes Disabled, the Executive’s right to terminate employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not, by itself, constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein.

 

(o)                           “Group” means “group,” as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

(p)                           “Involuntary Termination” means the Executive’s involuntary Separation from Service within the meaning of Treasury Regulation Section 1.409A-1(n)(1).

 

(q)                           “Normal Retirement Age” means the earliest normal retirement age available under the established rules of the Company’s tax-qualified retirement plans, as they may be amended from time to time, in which the Executive is eligible to participate.

 

(r)                              “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

 

(s)                            “Person” means “person,” as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

(t)                              “Qualifying Termination” means a Separation from Service described in Section 2.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder.

 

(u)                           “Separation from Service” means the Executive’s “separation from service” from Executive’s employer within the meaning of Section 409A(a)(2)(A)(i) of the Code and the default rules of Treasury Regulation Section 1.409A-1(h). For this purpose, Executive’s “employer” is the Company  and every entity or other person which collectively with the

 

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Company  constitutes a single “service recipient” (as that term is defined in Treasury Regulation Section 1.409A-1(g)) as the result of the application of the rules of Treasury Regulation Section 1.409A-1(h)(3); provided that an 80% standard (in lieu of the default 50% standard) shall be used for purposes of determining the service recipient / employer for this purpose.

 

(v)                           “Specified Employee” means a “specified employee” of the service recipient that includes the Company (as determined under Treasury Regulation Section 1.409A-1(g)) within the meaning of Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(i), as determined in accordance with the procedures adopted by such service recipient that are then in effect, or, if no such procedures are then in effect, in accordance with the default procedures set forth in Treasury Regulation Section 1.409A-1(i).

 

(w)                         “Severance Benefits” mean the payment of severance compensation as provided in Section 2.3 herein.

 

(x)                             “Subsidiary” means “subsidiary,” as defined in Section 3 of the Exchange Act.

 

(y)                           “Target Bonus” means “Target Bonus” as defined in the Employment Letter Agreement.

 

Article 2. Severance Benefits

 

2.1                         Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months thereafter, the Executive experiences a Qualifying Termination.

 

The Executive shall not be entitled to receive Severance Benefits if he experiences an Involuntary Termination for Cause, a Separation from Service by reason of his death or Disability, a voluntary Separation from Service after attaining his Normal Retirement Age, or a voluntary Separation from Service that is not a Constructive Termination.

 

2.2                         Qualifying Termination. The occurrence of any one of the following events within twenty-four (24) calendar months after a Change in Control of the Company shall trigger the payment of Severance Benefits to the Executive under this Agreement:

 

(a)                            An Involuntary Termination without Cause; or

 

(b)                           A Constructive Termination.

 

For purposes of this Agreement, a Qualifying Termination shall not include a Separation from Service by reason of the Executive’s death or Disability, a voluntary Separation from Service after attaining his Normal Retirement Age, a voluntary Separation from Service that is not a Constructive Termination, or an Involuntary Termination for Cause.

 

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2.3        Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 2.1 and 2.2 herein, subject to the Executive’s execution, delivery and non-revocation of a waiver and release of claims in a form substantially similar to the form attached hereto as Exhibit A on or prior to the 45th day following the Effective Date of Termination, the Company shall pay or provide, as the case may be, to the Executive the following Severance Benefits:

 

(a)                            A lump-sum amount equal to the Executive’s accrued but unpaid Base Salary, accrued but unused vacation pay and unreimbursed business expenses (in accordance with the standard reimbursement policy applicable to the Executive then in effect) earned by and owed to the Executive through and including the Effective Date of Termination.

 

(b)                           A lump-sum amount equal to one and one-half (1.5) multiplied by the sum of the following: (i) the higher of: (A) the Executive’s Base Salary in effect upon the Effective Date of Termination, or (B) the Executive’s Base Salary in effect on the date of the Change in Control; and (ii) the average of the actual annual bonus earned (whether or not deferred) by the Executive under the Company’s Executive Incentive Plan (or successor annual bonus plan) (“EIP”) (excluding any special bonus payments) in respect of the three (3) years preceding the year in which the Executive’s Effective Date of Termination occurs. If the Executive has less than three (3) years of annual bonus participation preceding the year in which the Executive’s Effective Date of Termination occurs, then the Executive’s Target Bonus for the bonus plan year in which the Executive’s Effective Date of Termination occurs shall be used for each year that the Executive did not participate in the EIP, up to a maximum of three (3) years, to calculate the three (3) year average bonus payment.

 

(c)                            A lump-sum amount equal to one-half (.5) multiplied by the sum of the following: (i) the higher of: (A) the Executive’s Base Salary in effect upon the Effective Date of Termination, or (B) the Executive’s Base Salary in effect on the date of the Change in Control; and (ii) the average of the actual annual bonus earned (whether or not deferred) by the Executive under the EIP (excluding any special bonus payments) in respect of the three (3) years preceding the year in which the Executive’s Effective Date of Termination occurs. If the Executive has less than three (3) years of annual bonus participation preceding the year in which the Executive’s Effective Date of Termination occurs, then the Executive’s Target Bonus for the bonus plan year in which the Executive’s Effective Date of Termination occurs shall be used for each year that the Executive did not participate in the EIP, up to a maximum of three (3) years, to calculate the three (3) year average bonus payment. Such amount shall be in consideration for the Executive agreeing to the restrictive covenants contained in Article 4.

 

(d)                           The Executive shall continue to be entitled to receive payments or benefits under any annual bonus plan and/or long-term incentive plans, whether cash-based or

 

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equity-based, or retirement plans and insurance plans in which Executive is a participant, if any, in each case in accordance with the terms and conditions of such plans.

 

(e)                            A pro-rata bonus under the EIP based on the portion of the year actually worked up to the Effective Date of Termination and computed based on actual annual performance.  Such pro-rata bonus shall be paid during the year following the year that includes the Effective Date of Termination in accordance with the terms of the EIP.

 

(f)                              Continuation for twenty-four (24) months of the Executive’s medical insurance and life insurance coverage. These benefits shall be provided by the Company to the Executive beginning immediately upon the Effective Date of Termination. Such benefits shall be provided to the Executive at the same coverage level and cost to the Executive as in effect immediately prior to the Executive’s Effective Date of Termination.

 

To the extent permitted by law, the Executive shall qualify for COBRA health care continuation coverage under Section 4980B of the Code or any replacement or successor provision of United States tax law, beginning upon the expiration of the aforementioned twenty-four (24) month period.

 

Notwithstanding the above, these medical and life insurance benefits shall be discontinued prior to the end of the stated continuation period in the event the Executive receives substantially similar benefits from a subsequent employer, as determined solely by the Committee in good faith. For purposes of enforcing this offset provision, the Executive 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 provide, to the Company, in writing, correct, complete, and timely information concerning the same to the extent requested by the Company.

 

(g)                           For a period of up to twenty-four (24) months following the Effective Date of Termination, the Executive shall be entitled, at the expense of the Company, to receive standard outplacement services through DBM or such other nationally recognized outplacement firm as may be reasonably selected by the Company. However, the Company’s total obligation shall not exceed thirty-five percent (35%) of the Executive’s Base Salary in effect upon the Effective Date of Termination, and such Company obligation shall end prior to the end of the twenty-four (24) month period upon the Executive becoming employed by a subsequent employer.

 

2.4        Termination due to Disability. Following a Change in Control, if the Executive experiences a Separation from Service due to Disability, the Executive’s benefits shall be

 

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determined in accordance with the Company’s retirement, insurance, and other applicable plans and programs then in effect.

 

2.5        Termination due to Retirement or Death. Following a Change in Control, if the Executive experiences a Separation from Service by reason of a voluntary Separation from Service after attaining his Normal Retirement Age, or by reason of his death, the Executive’s benefits shall be determined in accordance with the Company’s retirement, survivor’s benefits, insurance, and other applicable plans and programs then in effect.

 

2.6        Termination for Cause or by the Executive Other Than for Good Reason. Following a Change in Control, if the Executive experiences (i) an Involuntary Termination for Cause, or (ii) a voluntary Separation from Service that is not a Constructive Termination, the Company shall pay the Executive his accrued but unpaid Base Salary at the rate then in effect and accrued but unused vacation pay. Further, the Executive shall continue to be entitled to receive payments or benefits under any annual bonus plan and/or long-term incentive plans, whether cash-based or equity-based, or retirement plans and insurance plans in which Executive is a participant, if any, in each case in accordance with the terms and conditions of such plans.

 

2.7        Notice of Termination. Any Involuntary Termination by the Company for Cause or voluntary Separation from Service by the Executive that is not a Constructive Termination shall be communicated by Notice of Termination to the other party.

 

2.8        Limitation on Severance Benefits.

 

(a)                            Notwithstanding any other provision of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive’s employment with the Company (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person) (all such payments and benefits being hereinafter called “Total Payments”) would be an “excess parachute payment” pursuant to Section 280G of the Code or any successor or substitute provision of the Code, with the effect that the Executive would be liable for the payment of the excise tax described in Section 4999 of the Code or any successor or substitute provision of the Code, or any interest or penalties are incurred by the Executive with respect to such Total Payments (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash payments provided in Section 2.3 herein shall first be reduced, and the non-cash payments and benefits shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax.  Notwithstanding the foregoing, no payments or benefits under this Agreement will be reduced unless: (i) the net amount of the Total Payments, as so reduced (and after subtracting

 

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the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than (ii) the excess of (A) the net amount of such Total Payments, without reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments), over (B) the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments.

 

(b)                           Subject to the provisions of Section 2.8(c) below, all determinations required to be made under this Section 2.8, and the assumptions to be utilized in arriving at such determinations shall be made by the public accounting firm that serves the Company’s auditors (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Company or the Executive that there have been Total Payments, or such earlier time as is requested by the Company.  In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Executive shall designate another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company.  If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty.  Any determination by the Accounting Firm shall be binding upon the Company and the Executive, except as provided in Section 2.8(c) below.

 

(c)                            As a result of an uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that the Internal Revenue Service (“IRS”) or other agency may claim that an Excise Tax, or a greater Excise Tax, is due, and thus the Company should have made a lesser amount of Total Payments than that determined pursuant to Section 2.8(a) above.  The Executive shall notify the Company in writing of any claim by the IRS or other agency that, if successful, would require the Executive to pay an Excise Tax or an additional Excise Tax.  If the IRS or other agency makes a claim that, if successful, could require the Executive to pay an Excise Tax or an additional Excise Tax, the Company shall reduce or further reduce the Executive’s payments and benefits in accordance with this Section 2.8 to the amount necessary to eliminate such Excise Tax or additional Excise Tax.  Any reduction will be made by the end of the second calendar year following the Change in Control.

 

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Article 3. Form and Timing of Severance Benefits

 

3.1                          Form and Timing of Severance Benefits.

 

(a)                           The amount described in Section 2.3(a) herein and, except as provided in Section 3.1(b) herein, the amounts described in Sections 2.3(b) and 2.3(c) herein shall be paid in cash to the Executive in a single lump sum on the 60th day following the Effective Date of Termination.

 

(b)                           Notwithstanding anything to the contrary in this Agreement, if the Executive is a Specified Employee on the Effective Date of Termination, to the extent that the Executive is entitled to receive any benefit or payment under this Agreement that constitutes deferred compensation within the meaning of Section 409A of the Code before the date that is six (6) months after the Effective Date of Termination, such benefits or payments shall not be provided or paid to the Executive on the date otherwise required to be provided or paid. Instead, all such amounts shall be accumulated and paid in a single lump sum to the Executive on the first business day after the date that is six (6) months after the Effective Date of Termination (or, if earlier, within fifteen (15) days following the Executive’s date of death). If the Executive is required to pay for a benefit that is otherwise required to be provided by the Company under this Agreement by reason of this Section 3.1(b), the Executive shall be entitled to reimbursement for such payments on the first business day after the date that is six (6) months after the Effective Date of Termination (or, if earlier, within fifteen (15) days following the Executive’s date of death). All benefits or payments otherwise required to be provided or paid on or after the date that is six (6) months after the Effective Date of Termination shall not be affected by this Section 3.1(b) and shall be provided or paid in accordance with the payment schedule applicable to such benefit or payment under this Agreement.  Prior to the imposition of the six month delay as set forth in this Section 3.1(b), it is intended that (i) each installment under this Agreement be regarded as a separate “payment” for purposes of Section 409A of the Code, and (ii) all benefits or payments provided under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code provided under Treasury Regulation Section 1.409A-1(b)(4) (short-term deferral) or 1.409A-1(b)(9) (certain separation pay plans). This Section 3.1(b) is intended to comply with the requirements of Section 409A(a)(2)(B)(i) of the Code.

 

3.2        Withholding of Taxes. The Company shall withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as legally shall be required.

 

3.3        Reimbursement and In-Kind Benefits. Notwithstanding anything to the contrary in this Agreement, to the extent this Agreement provides for reimbursements of expenses incurred by the Executive or in-kind benefits the provision of which are not exempt from the requirements of Section 409A of the Code, the following terms apply with respect to such reimbursements or benefits: (1) the reimbursement of expenses or provision of in-kind benefits will be made or provided only during the period of time specifically provided herein; (2) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year will not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;

 

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(3) all reimbursements will be made upon the Executive’s request in accordance with the Company’s normal policies but no later than the last day of the calendar year immediately following the calendar year in which the expense was incurred; and (4) the right to the reimbursement or the in-kind benefit will not be subject to liquidation or exchange for another benefit.

 

Article 4. Restrictive Covenants

 

In consideration of the Severance Benefits, the following shall apply:

 

(a)                           Noncompetition. During the term of employment and for a period of twelve (12) months after the Executive’s employment terminates for any reason, the Executive shall not with respect to the coal industry: (i) directly or indirectly act in concert or conspire with any person employed by the Company 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 and its subsidiaries 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 and its subsidiaries as then being carried on (provided, however, that notwithstanding anything to the contrary contained in this Agreement, the Executive 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 Exchange Act).

 

(b)                           Confidentiality. The Company has advised the Executive and the Executive acknowledges that it is the policy of the Company to maintain as secret and confidential all Protected Information (as defined below), and that Protected Information has been and will be developed at substantial cost and effort to the Company. All Protected Information shall remain confidential permanently and the Executive shall not at any time, directly or indirectly, divulge, furnish, or make accessible to any person, firm, corporation, association, or other entity (otherwise than as may be required in the regular course of the Executive’s employment with the Company), nor use in any manner, either during the term of employment or after termination, at any time, for any reason, any Protected Information, or cause any such information of the Company or any of its subsidiaries to enter the public domain.

 

For purposes of this Agreement, “Protected Information” means trade secrets, confidential and proprietary business information of the Company and its subsidiaries, and any other information of the Company, including, but not limited to, customer lists (including potential customers), sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its subsidiaries and their respective agents or employees, including the Executive; provided, however, that information that is in the public domain (other than as a result of a breach of this Agreement), approved for release by the Company or lawfully obtained from third

 

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parties who are not bound by a confidentiality agreement with the Company, is not Protected Information.

 

(c)                            Nonsolicitation. During the term of employment and for a period of twelve (12) months after the Executive’s employment terminates for any reason, the Executive 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 the Company or any of its subsidiaries.

 

(d)                           Cooperation. The Executive agrees to cooperate with the Company and its attorneys in connection with any and all lawsuits, claims, investigations, or similar proceedings that have been or could be asserted at any time arising out of or related in any way to the Executive’s employment by the Company or any of its subsidiaries.

 

(e)                            Nondisparagement. At all times, the Executive agrees not to disparage the Company or any of its subsidiaries or otherwise make comments harmful to the Company’s reputation.

 

Article 5. Claw-Back

 

5.1        Claw-Backs.  If any of the Company’s financial statements are required to be restated due to errors, omissions, fraud, or misconduct, the Committee may, in its sole discretion but acting in good faith, direct that the Company recover all or a portion of the Severance Benefits under this Agreement from the Executive with respect to any fiscal year in which the Company’s financial statements are restated to reflect adverse results from those previously released financial statements, as a consequence of errors, omissions, fraud, or misconduct.  For purposes of this Section 5.1, errors, omissions, fraud, or misconduct may include and is not limited to circumstances where the Company has been required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement, as enforced by the Securities and Exchange Commission, and the Committee has determined in its sole discretion that the Executive 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 the Company, or the Executive personally and knowingly engaged in practices which materially contributed to the circumstances that enabled a material noncompliance to occur.

 

Article 6. The Company’s Payment Obligation

 

6.1        Payment Obligations Absolute. The Company’s obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and, except as expressly provided for in Section 5.1, the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever.

 

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The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Sections 2.3(f) and 2.3(g) herein.

 

6.2        Contractual Rights to Benefits. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

 

Article 7. Legal Remedies

 

7.1        Dispute Resolution. The Executive shall have the right and option to elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by litigation or arbitration. If arbitration is selected, such proceeding shall be conducted by final and binding arbitration before a panel of three (3) arbitrators in accordance with the laws then in effect and under the administration of the American Arbitration Association.  The Executive shall be entitled to reimbursement by the Company of all reasonable legal fees incurred by the Executive in connection with any such litigation or arbitration, so long as the Executive prevails on any material issues.

 

Article 8. Successors

 

8.1        Successors to the Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) of all or substantially all the assets of the Company by agreement, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding upon any successor in accordance with the operation of law and such successor shall be deemed the “Company” for purposes of this Agreement.

 

8.2        Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee, or if there is no such designee, to the Executive’s estate.

 

Article 9. Miscellaneous

 

9.1        Entire Agreement. This Agreement contains the entire understanding of the Company and the Executive with respect to the termination of the Executive’s employment and the consequences thereof (including, without limitation, severance, benefits and other programs maintained by the Company).

 

13

 

9.2        Notices. All notices, requests, demands, and other communications hereunder shall be sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices.

 

9.3        Execution in Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

 

9.4        Conflicting Agreements. The Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of, any other employment or other agreement to which he is a party, except to the extent any such conflict, breach, or violation under any such agreement has been disclosed to the Board in writing in advance of the signing of this Agreement.

 

9.5        Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect.

 

Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have no obligation to make any payment to the Executive hereunder to the extent, but only to the extent, that such payment is prohibited by the terms of any final order of a federal or state court or regulatory agency of competent jurisdiction; provided, however, that such an order shall not affect, impair, or invalidate any provision of this Agreement not expressly subject to such order.

 

9.6        Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by a member of the Board, as applicable, or by the respective parties’ legal representatives or successors.

 

9.7        Applicable Law. To the extent not preempted by the laws of the United States, the laws of Delaware shall be the controlling law in all matters relating to this Agreement without giving effect to principles of conflicts of laws.

 

[signature page follows]

 

14

 

IN WITNESS WHEREOF, the parties have executed this Agreement on this [  ] day of [  ], 201[].

 

	
ATTEST
    	
Walter   Energy, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Corporate   Secretary
    	
 
    	
Walter   J. Scheller, III
    
	
 
    	
 
    	
Chief   Executive Officer
    
	
 
    	
 
    	
Walter   Energy Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Executive]
    
					

 

15Exhibit 10.5

 

WALTER INDUSTRIES

EXECUTIVE DEFERRED COMPENSATION

AND

SUPPLEMENTAL RETIREMENT PLAN

 

AMENDED & RESTATED

AS OF

JANUARY 1, 2005

 

 

WALTER INDUSTRIES

EXECUTIVE DEFERRED COMPENSATION

AND

SUPPLEMENTAL RETIREMENT PLAN

 

Table of Contents

 

	
Article
    	
 
    	
Title
    	
 
    	
Page
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE I
    	
 
    	
Purpose
    	
 
    	
I-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II
    	
 
    	
Definitions
    	
 
    	
II-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III
    	
 
    	
Administration
    	
 
    	
III-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
 
    	
Eligibility   and Participation
    	
 
    	
IV-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V
    	
 
    	
Deferral   Elections and Supplemental Retirement Contributions
    	
 
    	
V-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
 
    	
Participant   Accounts and Investment of Deferred Amounts
    	
 
    	
VI-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
 
    	
Plan   Benefits and Distributions
    	
 
    	
VII-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
 
    	
Amendment   and Termination
    	
 
    	
VIII-1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
 
    	
Miscellaneous
    	
 
    	
IX-1
    	
 
    

 

 

WALTER INDUSTRIES

EXECUTIVE DEFERRED COMPENSATION

AND

SUPPLEMENTAL RETIREMENT PLAN

 

ARTICLE I

 

Purpose

 

Walter Industries, Inc. (the “Company”) previously established the Walter Industries Executive Deferred Compensation Plan (the “Plan”) and the Walter Industries, Inc. Supplemental Profit Sharing Plan (the “Supplemental Plan”) for a select group of key management and highly compensated personnel to ensure that the Company’s and its Related Employer’s compensation program will attract, retain and motivate qualified personnel. The Plan is hereby amended and restated effective as of January 1, 2005 to provide for the merger of the Supplemental Plan into the Plan and to rename the Plan the “Walter Industries Executive Deferred Compensation and Supplemental Retirement Plan”. The purpose of this Plan is to provide certain key management and highly compensated employees who contribute or who are expected to contribute substantially to the success of the Company and its Related Employers with the opportunity to defer the receipt of compensation and to permit certain employees of the Company and its Related Employers who participate in the Walter Industries, Inc. Retirement Savings Plan to receive contributions equal to amounts in excess of the limitations on contributions imposed by Section 415 and 401(a)(17) of the Code, on defined contribution plans. The Plan is intended to be an unfunded plan.

 

I-1

 

ARTICLE II

 

Definitions

 

Whenever used hereinafter, the following terms shall have the meaning set forth below.

 

(a)           “Account” or “Accounts” shall mean a Participant’s Deferred Compensation Account, and/or Supplemental Retirement Account as described in Article VI. These Accounts are bookkeeping accounts that represent a Participant’s hypothetical interest with respect to the amounts credited to such Accounts in accordance with Article VI.

 

(b)           “Beneficiary” shall mean the person or persons designated by the Participant made on a form prescribed by and filed with the Plan Administrator, and may be changed at any time by filing a new form with the Plan Administrator. If the Participant has designated no beneficiary, or if no beneficiary that he has designated survives him, then such unpaid amounts shall be paid to his estate. In the event of any dispute as to the entitlement of any beneficiary, the Plan Administrator’s determination shall be final, and the Plan Administrator may withhold any payment until such dispute has been resolved.

 

(c)           “Board” or “Board of Directors” shall mean the board of directors of the Company.

 

(d)           “Change in Control” of the Company shall mean the occurrence of any one (1) or more of the following events:

 

(1)           A change in the effective control of the Company, which occurs only on either of the following dates:

 

(A)          The date any Person or more than one Person acting as a group (other than the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, and any trustee or other fiduciary holding securities under an employee benefit plan of the Company or such proportionately owned corporation), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of the Company representing more than thirty percent (30%) of the total voting power of the stock of the Company; or

 

(B)          The date a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election;

 

II-1

 

provided that, in any event, the transaction must constitute a “change in the effective control” of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code and Treasury Regulations Section 1.409A-3(i)(5)(vi).

 

(2)           The date any Person or more than one Person acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) all or substantially all of the Company’s assets; provided that the transaction must constitute a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code and Treasury Regulations Section 1.409A-3(i)(5)(vii).

 

Notwithstanding the foregoing, in no event shall a Change in Control of the Company be deemed to have occurred if the Company undergoes a strategic realignment of its businesses (such as a split-up or spin-off transaction), with or without a shareholder vote.

 

(e)           “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(f)            “Company” shall mean Walter Industries, Inc. and its successors.

 

(g)           “Compensation” shall mean the same as “Compensation” under the Qualified Plan.

 

(h)           “Deferred Compensation Account” shall mean the Account established pursuant to Article VI, Section (a)(1), to hold Participant deferrals under the Plan.

 

(i)            “Effective Date” shall mean, for purposes of this amendment and restatement, January 1, 2005. The Plan was originally effective January 1, 2002. The Walter Industries, Inc. Supplemental Profit Sharing Plan was originally effective June 16, 1983.

 

(j)            “Participant” shall mean any employee of the Company or a Related Employer who is covered by this Plan as provided in Article IV.

 

(k)           “Performance Based Compensation” shall mean compensation where the amount of, or entitlement to, the compensation is contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least 12 months in which the Participant performs services. Organizational or individual performance criteria are considered preestablished if established, in writing, by not later than 90 days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established. Performance Based Compensation may include payments based on performance criteria that are not approved by a compensation committee of the Board of Directors, or by the shareholders or members

 

II-2

 

of the Company. Notwithstanding any provisions above to the contrary, Performance Based Compensation does not include any amount or portion of any amount that shall be paid either regardless of performance, or based upon the level of performance that is substantially certain to be met at the time the criteria is established.

 

(l)            “Person” shall have the meaning ascribed to such term in the Code and Treasury Regulations.

 

(m)          “Plan” shall mean the Walter Industries Executive Deferred Compensation and Supplemental Retirement Plan hereby amended and restated and as it may be further amended from time to time.

 

(n)           “Plan Administrator” shall mean the Retirement Plans Administrative Committee that has been appointed from time to time by the Board of Directors of the Company to serve as the Plan Administrator for the Plan.

 

(o)           “Plan Year” shall mean the 12-month period ending on December 31.

 

(p)           “Qualified Plan” shall mean the Walter Industries, Inc. Retirement Savings Plan, as amended, and each predecessor, successor or replacement profit sharing arrangement.

 

(q)           “Qualified Plan Contribution” shall mean the total of all profit sharing contributions and/or matching contributions made by the Company or a Related Employer for the benefit of a Participant as well as any forfeitures allocated to a Participant’s Account under and in accordance with the terms of the Qualified Plan in any Plan Year.

 

(r)            “Related Employer” shall mean any affiliate of the Company who adopts the Plan with the consent of the Company.

 

(s)            “Separation from Service” shall mean the Participant’s termination of employment with the employer within the meaning of Section 409A(a)(2)(A)(i) of the Code and the default rules of Treasury Regulations Section 1.409A-1(h). For this purpose, the “employer” is the Company and every entity or other person which collectively with the Company constitutes a single service recipient (as that term is defined in Treasury Regulations Sections 1.409A-1(g)) as the result of the application of the rules of Treasury Regulations Sections 1.409A-1 (h)(3); provided that an 80% standard (in lieu of the default 50% standard) shall be used for purposes of determining the service recipient/employer for this purpose.

 

(t)            “Service Recipient” means the Company or an affiliate of the Company for which the Employee performs services and any affiliates of the Company or a subsidiary of the Company that are required to be considered a single employer under Sections 414(b) and 414(c) of the Code.

 

II-3

 

(u)           “Specified Employee” means a key employee of the Service Recipient within the meaning of Section 409A(a)(2)(B)(i) of the Code and Treasury Regulations Section 1.409A-1(i), as determined in accordance with the procedures adopted by the Company that are then in effect, or, if no such procedures are then in effect, in accordance with the default procedures set forth in Treasury Regulations Section 1.409A-1(i).

 

(v)           “Supplemental Retirement Account” shall mean the Account established pursuant to Article VI, Section (a)(2) to hold Supplemental Retirement Contributions.

 

(w)          “Supplemental Retirement Contribution” shall mean the contribution made by the Company or a Related Employer for the benefit of a Participant under and in accordance with the terms of the Plan in any Plan Year.

 

(x)           “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance); or other similar extraordinary and unforeseeable circumstances arising from the events beyond the control of the Participant. The need to pay for medical expenses, including nonrefundable deductibles, as well as for the cost of prescription drug medication may constitute an unforeseeable emergency. The need to pay for the funeral expenses of a spouse, a Beneficiary, or a dependent (as defined in Code Section 152, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)) may also constitute an unforeseeable emergency. Except as otherwise provided in this paragraph, the purchase of a home and payment of college tuition are not unforeseeable emergencies.

 

II-4

 

ARTICLE III

 

Administration

 

(a)           Plan Administrator. The Plan Administrator shall have complete control and discretion to manage the operation and administration of the Plan. Not in limitation, but in amplification of the foregoing, the Plan Administrator shall have the following powers:

 

(1)           To determine all questions relating to the eligibility of employees to participate or continue to participate;

 

(2)           To maintain all records and books of account necessary for the administration of the Plan;

 

(3)           To interpret the provisions of the Plan and to make and to publish such interpretive or procedural rules as are not inconsistent with the Plan and applicable law;

 

(4)           To compute, certify and arrange for the payment of benefits to which any Participant or Beneficiary is entitled;

 

(5)           To process claims for benefits under the Plan by Participants or beneficiaries;

 

(6)           To engage consultants and professionals to assist the Plan Administrator in carrying out its duties under this Plan; and

 

(7)           To develop and maintain such instruments as may be deemed necessary from time to time by the Plan Administrator to facilitate payment of benefits under the Plan.

 

(b)           Plan Administrator’s Authority. The Plan Administrator may consult with Company officers, legal and financial advisers to the Company and others, but nevertheless the Plan Administrator shall have the full authority and discretion to act, and the Plan Administrator’s actions shall be final and conclusive on all parties.

 

(c)           Claims and Appeal Procedure for Denial of Benefits. A Participant or a Beneficiary (the “Claimant”) may file with the Plan Administrator a written claim for benefits if the Participant determines the distribution procedures of the Plan have not provided him his proper interest in the Plan. The Plan Administrator must render a decision on the claim within a reasonable period of time of the Claimant’s written claim for benefits. The Plan Administrator must provide adequate notice in writing to the Claimant whose claim for benefits under the Plan the Plan Administrator has denied. Notice must be provided to the Claimant within a reasonable period of time, but not later than 90 days (45 days in the case of a claim for disability benefits) after the receipt of a claim. If the Plan Administrator determines the additional time is needed,

 

III-1

 

written notice will be forwarded to the Participant prior to the expiration of the 90-day period (45 days in the case of a claim for disability benefits). The extension will not exceed 90 days (30 days in the case of a claim for disability benefits) from the end of the initial period. The Plan Administrator’s notice to the Claimant must set forth:

 

(1)           The specific reason for the denial;

 

(2)           Specific references to pertinent Plan provisions on which the Plan Administrator based its denial;

 

(3)           A description of any additional material and information needed for the Claimant to perfect his claim and an explanation of why the material or information is needed;

 

(4)           Appropriate information as to the steps to be taken if the Claimant wants to submit the claim for review; and

 

(5)           In the case of disability benefits, where disability is determined by a physician appointed by the Plan Administrator, the specific basis for the determination of the physician.

 

Any appeal the Claimant wishes to make of an adverse determination must be made in writing to the Plan Administrator within sixty (60) days (or 180 days in the case of a claim for disability benefits where the disability is determined by a physician chosen by the Plan Administrator) after receipt of the Plan Administrator’s notice of denial of benefits. The Plan Administrator’s notice must further advise the Claimant that his failure to appeal the action to the Plan Administrator in writing will render the Plan Administrator’s determination final, binding and conclusive. The Plan Administrator’s notice of denial of benefits must identify the name and address of the Plan Administrator to whom the Claimant may forward his appeal.

 

If the Claimant should appeal to the Plan Administrator, he, or his duly authorized representative, must submit, in writing, whatever issues and comments he, or his duly authorized representative, believes are pertinent. The Claimant, or his duly authorized representative, may review pertinent Plan documents free of charge. The Plan Administrator will re-examine all facts related to the appeal and make a final determination as to whether the denial of benefits is justified under the circumstances. The Plan Administrator must advise the Claimant of its decision within 60 days following (45 days in the case of a claim for disability benefits) the Claimant’s written request for review. If the Plan Administrator determines the additional time is needed, written notice will be forwarded to the Participant prior to the expiration of the 60-day period. The extension will not exceed 60 days (45 days in the case of a claim for disability benefits) from the end of the initial period.

 

III-2

 

ARTICLE IV

 

Eligibility and Participation

 

(a)           Deferral Contributions. For purposes of making deferral elections in accordance with paragraph (a) of Article V, the Plan Administrator, in its sole discretion, shall determine those employees of the Company or a Related Employer eligible to participate in the Plan. Accordingly, an employee of the Company or a Related Employer who, in the opinion of the Plan Administrator based upon its then current guidelines, has contributed or is expected to contribute significantly to the growth and successful operations of the Company or a Related Employer and who meets any additional criteria for eligibility that the Plan Administrator, in its sole discretion, may adopt from time to time. An eligible employee shall become a Participant for purposes of making deferral elections upon being notified by the Company and making the required elections under Article V.

 

(b)           Supplemental Retirement Contributions. Notwithstanding anything in the Plan to the contrary, Employees of the Company or Related Employer who participate in the Qualified Plan and who are restricted by the limitations on employer matching or profit sharing contributions imposed by Code Sections 415 and 401 (a)(17) shall automatically become Participants in the Plan for purposes of receiving Supplemental Retirement Contributions a described in paragraph (d) of Article V.

 

IV-1

 

ARTICLE V

 

Deferral Elections and Supplemental Retirement Contributions

 

(a)                                  Deferral Procedures.

 

(1)                                  Any Participant may elect to defer for any calendar year all or any portion of his base salary and/or cash bonus payable during such calendar year as may be permitted by the Plan Administrator in its discretion; provided, however, that the minimum annual deferral amount from a Participant’s base salary shall be $2,000.

 

(2)                                  (A)                              Any deferral election permitted under this paragraph (a) shall be in writing, signed by the Participant. Any election to defer a portion of base salary or cash bonus (including Performance Based Compensation) must be delivered to the Plan Administrator prior to the January 1 of the calendar year in which the base salary or cash bonus (including Performance Based Compensation) to be deferred is otherwise earned.

 

(B)                                Notwithstanding the foregoing, an election may be made by a Participant to defer base salary or cash bonuses earned subsequent to his deferral election within the 30-day period following a Participant’s initial eligibility to participate in the Plan.

 

(3)                                  A Participant’s deferral election shall remain in effect until modified or revoked. Except as provided in subparagraph (4) below, any modification or revocation will not be effective until the January 1 next following the date the modification or revocation is received by the Plan Administrator.

 

(4)                                  A Participant may only cancel a deferral election during the Plan Year with respect to which such election is in effect due to an Unforeseeable Emergency or if necessary to receive a hardship distribution from a qualified cash or deferred arrangement pursuant to income Treasury Regulation Section 1.401(k)-1(d)(3). The Participant may make a new deferral election pursuant to the provision of subparagraph (2) above, which new election shall only apply to amounts earned by the Participant after the end of the calendar year in which such new election is delivered to the Plan Administrator.

 

(b)                                 Election Forms. Any election by a Participant under this Article V shall be made on a form or forms prescribed by the Plan Administrator (the terms of which are incorporated herein by reference), and shall specify the amount of compensation to be deferred.

 

V-1

 

(c)                                  Revocation or Change. Any permitted revocation of or change in any deferral election under this Article V shall be in writing and shall be on such form as may be approved by the Plan Administrator.

 

(d)                                 Supplemental Retirement Contributions.

 

(1)                                  For any Plan Year, the Company or a Related Employer may, in its discretion, credit a Participant with a Supplemental Retirement Contribution in an amount equal to the difference between (1) and (2) below:

 

(A)                              The Qualified Plan Contribution which would have been contributed to the Qualified Plan on behalf of the Participant for the Plan Year without giving effect to any reduction in the Qualified Plan Contribution required by the limitations imposed by Code Sections 415 or 401(a)(17) on the Qualified Plan;

 

LESS

 

(B)                                The amount of the Qualified Plan Contribution actually contributed to the Qualified Plan on behalf of the Participant for the Plan Year.

 

(2)                                  Supplemental Retirement Contributions made for the benefit of a Participant for any Plan Year shall be credited to a Supplemental Retirement Contribution Account maintained under the Plan in the name of such Participant within thirty (30) days after the profit sharing contribution under the Qualified Plan is allocated to the Participant’s accounts in the Qualified Plan.

 

V-2

 

ARTICLE VI

 

Participant Accounts and Investment of Deferred Amounts

 

(a)                                  In General.

 

(1)                                  Any compensation deferred pursuant to Section (a) of Article V of this Plan shall be recorded by the Plan Administrator in a Deferred Compensation Account maintained in the name of the Participant. The Deferred Compensation Account shall be credited with all amounts that have been deferred by the Participant during the Plan Year pursuant to Article V, Section (a), and such Account shall be charged from time to time with amounts that are distributed to the Participant from such Account.

 

(2)                                  Any Supplemental Retirement Contributions credited pursuant to this Plan shall be recorded by the Plan Administrator in a Supplemental Retirement Account maintained in the name of the Participant. The Supplemental Retirement Account shall be credited with all Supplemental Retirement Contributions that have been credited to the Participant during the Plan Year pursuant to Article V, and such Account shall be charged from time to time with all amounts that are distributed to the Participant from such Account.

 

(3)                                  All amounts that are credited to a Participant’s Accounts shall be credited solely for purposes of accounting and computation. A Participant shall not have any interest in or right to such Accounts at any time.

 

(b)                                 Subject to Claims. The Plan constitutes an unsecured promise by the Company or Related Employer to pay benefits in the future. Participants shall have the status of general unsecured creditors of the Company or Related Employer. The Plan is unfunded for Federal tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974. All amounts credited to a Participant’s Accounts will remain the general assets of the Company or Related Employer and shall remain subject to the claims of the Company’s or Related Employer’s creditors until such amounts are distributed to the Participants.

 

(c)                                  Crediting of Interest.

 

(1)                                  The Plan Administrator shall allow a Participant to make a hypothetical allocation of the amounts credited to his Accounts among investment options/indices that the Plan Administrator shall make available from time to time. The Plan Administrator shall establish procedures regarding Participant investment allocations as are necessary, which procedures shall be communicated to the Participants.

 

VI-1

 

(2)                                  A Participant’s Accounts shall be credited at least monthly with interest equal to the aggregate/weighted average return on the investment options/indices selected by the Participant, less expenses.

 

(d)                                 Valuation; Annual Statement. The value of a Participant’s Accounts shall be determined by the Plan Administrator and the Plan Administrator may establish such accounting procedures as are necessary to account for the Participant’s interest in the Plan. Each Participant’s Account shall be valued as of the last day of each Plan Year or more frequently as determined by the Plan Administrator. The Plan Administrator shall furnish each Participant with an annual statement of his Accounts.

 

(e)                                  Accounting Procedures. The Plan Administrator shall establish such accounting procedures as are necessary to implement the provisions of the Plan.

 

(f)                                    Establishment of Trust.

 

(1)                                  The Company may establish one or more trusts located in the United States substantially in conformance with the terms of the model trust described in Revenue Procedure 92-64 to assist in meeting its obligations to Participants under this Plan. Except as provided in paragraph (b) above and the terms of the trust agreement, any such trust or trusts shall be established in such manner as to permit the use of assets transferred to the trust and the earnings thereon to be used by the trustee solely to satisfy the liability of the Company in accordance with the Plan.

 

(2)                                  The Company, in its sole discretion, and from time to time, may make contributions to the trust. Unless otherwise paid by the Company, all benefits under the Plan and expenses chargeable to the Plan shall be paid from the trust.

 

(3)                                  The powers, duties and responsibilities of the trustee shall be as set forth in the trust agreement and nothing contained in the Plan. either expressly or by implication, shall impose any additional powers, duties or responsibilities upon the trustee.

 

VI-2

 

ARTICLE VII

 

Plan Benefits and Distributions

 

(a)                                  Plan Benefit. Subject to the remainder of this Article, a Participant shall be entitled to receive a benefit under this Plan equal to the amounts credited to his Accounts upon a Separation from Service, death or a Change in Control.

 

(b)                                 Timing of Payment.

 

(1)                                  Unless a Participant makes an election in accordance with paragraph (2) below, a Participant’s distributions on account of a Separation from Service shall commence as of the first day of the second month following such Participant’s Separation from Service; provided, however, that any distribution to Specified Employees of the Company or a Related Employer will commence on the first day of the seventh month following the date that the Participant incurs a Separation from Service. In the event that a Specified Employee dies prior to his benefit commences under this paragraph, the distributions shall be made to the Beneficiary in accordance with paragraph (3) below.

 

(2)                                  (A)                              Notwithstanding anything in this Article VII to the contrary, at the time of each election to defer under paragraph (a) of Article V, a Participant may elect to receive a distribution of such deferred amounts (plus earnings or losses thereon) in a lump sum as of a specified future calendar year date. The date of distribution elected by the Participant shall be at least five full calendar years following the Participant’s deferral election. Any distribution pursuant to this subparagraph shall be made as of January 1 of the calendar year selected by the Participant for the receipt of his distribution.

 

(B)                                Effective as of January 1, 2009, an election made pursuant to paragraph (b)(2)(A) above is generally irrevocable unless the Participant requests a change and (i) the change does not take effect until at least 12 months after the date on which the election is made, (ii) the change is made at least 12 months prior to the date the payment is scheduled to commence, and (iii) payment is deferred for a period of not less than 5 years from the date payment would otherwise have been made (unless payment is being made for death) and such request is permitted under Section 409A of the Code.

 

(C)                                If the Participant dies or there is a Change in Control prior to the distribution date or dates elected in accordance with subparagraph (3) and (4) below and the election made under this subparagraph (2) shall be null and void.

 

VII-1

 

(3)                                  Distributions on account of a Change in Control shall commence on the first day of the second month following the Change in Control.

 

(4)                                  Distributions on account of a Participant’ death shall commence on the first day of the second month following the date of the Participant’s death.

 

(c)                                  Form of Benefit Payment.

 

(1)                                  (A)                              If the Participant incurs a Separation from Service, a Participant shall elect one of the following forms of payment for his benefit upon commencing participation in the Plan or prior to December 31, 2008, if later:

 

(i)                                     a lump sum, or

 

(ii)                                  annual installments over a period of 5, 10 or 15 years.

 

(B)                                In the event a Participant elects installment payments, each such payment shall be equal to the balance in the Participant’s Account as of the end of the valuation date immediately preceding the date of payment, divided by the number of payment years remaining. The initial installment payment shall be paid on the date specified in (b) above and therefrom, on the anniversary of the Participant’s Separation from Service.

 

(C)                                Effective as of January 1, 2009, an election made pursuant to (c)(1) above is generally irrevocable unless the Participant requests a change and (i) the change does not take effect until at least 12 months after the date on which the election is made, (ii) the change is made at least 12 months prior to the date the payment is scheduled to commence, and (iii) payment is deferred for a period of not less than 5 years from the date payment would otherwise have been made (unless payment is being made for death) and such request is permitted under Section 409A of the Code.

 

(2)                                  In the event that the Participant (or in the case of death, the Participant’s Beneficiary) is entitled to a benefit under this Plan as a result of a Change in Control, the Participant’s benefit shall be paid in a lump sum. If the Participant dies before he has commenced receiving benefits under the Plan, the death benefit shall be paid to his Beneficiary or Beneficiaries designated to receive such benefits in a lump sum. If a Participant dies after benefits have commenced, but before he has received all of his benefits under the Plan, all unpaid amounts shall be paid to his Beneficiary or Beneficiaries in a lump sum.

 

(d)                                 Vesting of Amounts Credited to Participants. A Participant shall be fully vested in all of his Accounts at all times.

 

VII-2

 

(e)                                  Accelerated Distribution for Unforeseeable Emergency. If a Participant suffers an unforeseeable emergency, the Plan Administrator may, in its discretion, accelerate the distribution of all or a portion of the amounts credited to his Accounts. Any such accelerated distribution shall be made in a lump sum as soon as administratively practicable following a determination that the Participant has incurred an unforeseeable emergency. The amount of any such distribution shall be limited to the amount necessary to satisfy the emergency need, including any amounts necessary to pay any federal, state or local income taxes reasonably anticipated to result from the distribution.

 

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ARTICLE VIII

 

Amendment and Termination

 

(a)                                  Amendment and Termination. The Plan may be amended at any time, or from time to time, by the Company, and the Plan may be terminated at any time by the Company. Any such amendment or termination shall be ratified and approved by the Company’s Board of Directors. Notice of any such amendment or termination shall be given in writing to each Participant having an interest in the Plan. The ability of the Company to terminate the Plan shall comply with Section 409A of the Code and the regulations thereunder.

 

(b)                                 Effect of Amendment or Termination.

 

(1)                                  No amendment or termination of the Plan shall affect the rights of any Participant with respect to any Accrued Benefits determined as of the date of such amendment or termination.

 

(2)                                  In the event that the Plan is terminated, the Participant’s Accrued Benefit shall be distributed to the extent permitted under Section 409A of the Code. The timing and manner of the distribution of benefits in connection with any termination of the Plan shall comply with Section 409A of the Code and the regulations thereunder. No payment of any Participant’s benefit under the Plan may be accelerated as a result of the termination of the Plan unless:

 

(A)                              the Plan is terminated within the period of 30 days preceding or the 12 months following a “Change in Control” event (as the term is defined in Treasury Regulations Section 1.409A-2(g)(4));

 

(B)                                the Plan is terminated within 12 months of a corporate dissolution or is terminated with the approval of a bankruptcy court overseeing a bankruptcy of the Company;

 

(C)                                The Company terminates this Plan and all other similar deferred compensation arrangements that would be aggregated with the Plan under Treasury Regulation Section 1.409A-1(c), provided that (i) any benefits payable as a result of the termination (other than benefits that would have been payable under the terms of the Plan without regard to the termination) are not paid until at least 12 months after the date of termination of the Plan, (ii) all benefit payments under the Plan are completed within 24 months after the date of termination of the Plan, and (iii) the Company does not adopt a new or replacement deferred compensation plan within 5 years after the date of termination of the Plan.

 

VIII-1

 

ARTICLE IX

 

Miscellaneous

 

(a)                                  Payments to Minors and Incompetents. if the Plan Administrator receives satisfactory evidence that a person who is entitled to receive any benefit under the Plan, at the time such benefit becomes available, is a minor or is physically unable or mentally incompetent to receive such benefit and to give a valid release therefore, and that another person or an institution is then maintaining or has custody of such person, and that no guardian committee, or other representative of the estate of such person shall have been duly appointed, the Plan Administrator may authorize payment of such benefit otherwise payable to such person to such other person or institution; and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit.

 

(b)                                 Plan Not a Contract of Employment. The Plan shall not be deemed to constitute a contract between the Company or a Related Employer and any Participant, nor to be consideration for the employment of any Participant. Nothing in the Plan shall give a Participant the right to be retained in the employ of the Company or a Related Employer; all Participants shall remain subject to discharge or discipline as employees to the same extent as if the Plan had not been adopted.

 

(c)                                  No Interest in Assets. Nothing contained in the Plan shall be deemed to give any Participant any equity or other interest in the assets, business or affairs of the Company or a Related Employer. No Participant in the Plan shall have a security interest in assets of the Company or a Related Employer used to make contributions or pay benefits.

 

(d)                                 Recordkeeping. Appropriate records shall be maintained for the Plan, subject to the supervision and control of the Plan Administrator.

 

(e)                                  Non-Alienation of Benefits. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void. No benefit under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person. If any person entitled to benefits under the Plan shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit under the Plan, or if any attempt shall be made to subject any such benefit to the debts, contracts, liabilities, engagements or torts of the person entitled to any such benefit, except as specifically provided in the Plan, then such benefits shall cease and terminate at the discretion of the Plan Administrator. The Plan Administrator may then hold or apply the same or any part thereof to or for the benefit of such person or any dependent or beneficiary of such person in such manner and proportions as it shall deem proper.

 

IX-1

 

(f)                                    Severability. The invalidity of any portion of this Plan shall not invalidate the remainder and the remainder shall continue in full force and effect.

 

(g)                                 Section 409A Compliance. The Company intends for this Plan to conform in all respects to the requirements under Section 409A of the Code, the failure of which would result in the imposition or accrual of penalties, interest or additional taxes under Section 409A of the Code (the “Section 409A Requirements”). Accordingly, the Company intends for this Plan to be interpreted, construed, administered and applied in a manner as shall meet and comply with the Section 409A Requirements, and in the event of any inconsistency between this Plan and the Section 409A Requirements, this Plan shall be reformed so as to meet the Section 409A Requirements. Any reference in this Plan to Section 409A of the Code, or any subsection thereof, shall be deemed to mean and include, to the extent then applicable and then in force and effect (but not to the extent overruled, limited or superseded), published rulings, notices and similar announcements issued by the Internal Revenue Service under or interpreting Section 409A of the Code and regulations (proposed, temporary or final) issued by the Secretary of the Treasury under or interpreting Section 409A of the Code.

 

(h)                                 State Law. This Plan shall be construed in accordance with the laws of Florida.

 

(i)                                     Corporate Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or a Related Employer or by the merger or consolidated of the Company or a Related Employer into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Article VIII.

 

(j)                                     Liability Limited. In administering the Plan, neither the Plan Administrator nor any officer, director or employee thereof, shall be liable for any act or omission performed or omitted, as the case may be, by such person with respect to the Plan; provided, that the foregoing shall not relieve any person of liability for gross negligence, fraud or bad faith. The Plan Administrator, its officers, directors and employees shall be entitled to rely conclusively on all tables, valuations, certificates, opinions and reports that shall be furnished by any actuary, accountant, trustee, insurance company, consultant, counsel or other expert who shall be employed or engaged by the Plan Administrator in good faith.

 

(k)                                  Protective Provisions. Each Participant shall cooperate with the Plan Administrator by furnishing any and all information requested by the Plan Administrator in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Plan Administrator may deem necessary and taking such other relevant action as may be requested by the Plan Administrator. If a Participant refuses

 

IX-2

 

so to cooperate or makes any material misstatement of information or nondisclosure of medical history, then no benefits will be payable hereunder to such Participant or his Beneficiary, provided that, in the Plan Administrator’s sole discretion, benefits may be payable in an amount reduced to compensate the Company or a Related Employer for any loss, cost, damage or expense suffered or incurred by the Company as a result in any way of such action, misstatement or nondisclosure.

 

(l)                                     General Conditions. Any Qualified Plan Contribution shall be made solely in accordance with the terms and conditions of the Qualified Plan and nothing in this Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Qualified Plan.

 

(m)                               Plan Benefits Not Compensation. The benefit payable to an Employee under this Plan shall not be deemed salary or other compensation for the purpose of computing any benefit to which an Employee may be entitled under the Company’s Qualified Plan, group insurance plan or any other benefit program maintained by the Company.

 

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officers on this 17th day of December, 2008.

 

	
 
    	
WALTER   INDUSTRIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Larry E. Williams
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
SVP Human Resources
    
	
 
    	
 
    	
 
    
	
 
    	
“COMPANY”
    

 

IX-3

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