Document:

Exhibit
10.4

 

Walter
Industries, Inc.

Walter
Investment Management LLC

FORM OF
JOINT LITIGATION AGREEMENT

 

THIS
JOINT LITIGATION AGREEMENT (this “Agreement”) is made between Walter
Industries, Inc., a Delaware corporation (“WLT”), and Walter Investment Management LLC, a
Delaware limited liability company (“WIMLLC” and, together with WLT, the
“Principals”), and by each of them for their respective subsidiaries
(the “Subsidiary Parties” and, together with the Principals, the “Parties”),
and the Parties’ respective directors, officers, partners, employees, advisors,
affiliates, representatives and agents (“Representatives”), all to the
extent reflected in this Agreement, effective as of April 17, 2009 (the “Distribution
Date”).

 

WHEREAS, WLT owns all the limited liability
company units of WIMLLC;

 

WHEREAS,  WLT, JWH Holding Company,
LLC, a Delaware limited liability company (“JWHHC”), WIMLLC and Hanover
Capital Mortgage Holdings, Inc., a Maryland corporation (“Hanover”),
are party to that certain Second Amended and Restated Agreement and Plan of
Merger (as further amended, supplemented, restated or otherwise modified from
time to time, the “Merger Agreement”), pursuant to which in connection
with related transactions, (i) certain assets and businesses of JWHHC will
be acquired by WLT and transferred to WIMLLC, (ii) prior to the Effective
Time on the Closing Date, WLT shall distribute all of the  outstanding limited liability company
interests in WIMLLC to WLT’s stockholders (such time of the distribution, the “Distribution”
or the “Distribution Date”) and (iii) at the Effective Time, WIMLLC
shall merge into Hanover, with Hanover being the Surviving Corporation
following the Merger.  Capitalized terms
used but not defined herein shall have the meaning ascribed to such terms in
the Merger Agreement;

 

WHEREAS, the Parties have been involved in, or
may in the future be involved in, pending or potential claims and litigation
made by third parties unaffiliated with the Principals, including, without
limitation, claims and litigation specifically referred to herein and in the
schedules hereto (collectively referred to as “Litigation”) that involve
or could potentially involve Parties that will not be affiliated with each
other after the Distribution;

 

WHEREAS, the Parties and their Representatives
have developed a substantial amount of evidence and work product relating to
the Litigation and have, prior to the effective date of the Distribution,
engaged in communications that are protected by the attorney work product, attorney-client,
and joint defense privileges;

 

WHEREAS, the Parties and their Representatives
currently share certain information that is protected as confidential, or under
attorney-client privileges, or as attorney work product, and the Parties agree
that after the Distribution such information should continue to be treated as
confidential, or protected by attorney work product or attorney-client
privileges;

 

WHEREAS, the Parties are willing to, and are
willing to cause their respective 

 

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Representatives to,
provide access to such evidence and work product on certain conditions; and

 

WHEREAS, the Parties desire to allocate
responsibilities for the Litigation as provided herein and to share insurance
coverages and indemnification from third parties that may be available to the
Parties;

 

NOW,
THEREFORE, in
consideration of the foregoing premises and of the mutual agreements and for
other good and valuable consideration hereinafter set forth, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:

 

1.      Statement of Intent. The Parties
acknowledge that the intent of the Distribution will be to separate the
mortgage lending, mortgage servicing and insurance businesses of WIMLLC from
the homebuilding, coal mining, natural gas and other businesses of WLT. 
The Parties note that such businesses are, and have historically been, unique
and separate businesses, and that it is the intent of the Parties that the
Litigation referred to herein, and any subsequent Litigation related to any of
the businesses of any of the Parties, should be allocated as much as possible
to the type of business out of which the Litigation arose.  Thus, it is
the intent of the Parties that WIMLLC and its Subsidiary Parties be responsible
for all Litigation arising from the mortgage lending, mortgage servicing and
insurance business of WIMLLC, and that WLT and its Subsidiary Parties be
responsible for all Litigation arising from the homebuilding, coal mining,
natural gas and other businesses, including the business of Cardem Insurance
Co. Ltd. (except to the extent such Litigation relates to and arises from the
mortgage lending, mortgage servicing or insurance businesses of WIMLLC), and
that Litigation that relates to both WIMLLC and WLT businesses shall be
allocated and shared as agreed to by the Principals, or as determined by the
Arbitrator as set out below.

 

2.      Allocation of Responsibility for
Litigation and Claims.

 

(a)                                       Schedule A Litigation.  WLT shall indemnify, defend and
hold harmless WIMLLC and its Subsidiary Parties and its and their
Representatives as of and following the effective time of the Distribution (the
“WIMLLC Corporate Entities”), from and against any costs, expenses and
damages assessed as a result of the Litigation listed on Schedule A
hereto.  Such Litigation shall be referred to herein as the “Schedule A
Litigation”.

 

(b)                                      Schedule B Litigation.  WIMLLC shall indemnify, defend
and hold harmless WLT and its Subsidiary Parties and its and their
Representatives as of and following the effective time of the Distribution (the
“WLT Corporate Entities”), from and against any costs, expenses and
damages assessed as a result of the Litigation listed on Schedule B
hereto.  Such Litigation shall be referred to herein as the “Schedule B
Litigation”.

 

(c)                                       Schedule C Litigation.  The Parties shall share the
costs, expenses and damages assessed as a result of the Litigation listed on
Schedule C hereto, according to the allocations set out in Schedule C hereto,
or, if no allocations have been 

 

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agreed between the
Principals, then in such amounts as the Principals may agree in the future, or
as their interests in the Litigation may ultimately be decided (the “Allocated
Share”).  Such Litigation shall be referred to herein as the “Schedule
C Litigation”.

 

3.      Future Litigation.

 

(a)                                       With respect to future Litigation, as
soon as practicable after the identification of such Litigation by any Party,
the Principals and any other relevant Party shall consult in good faith for the
purpose of securing an agreement between the Principals regarding an
appropriate allocation of responsibility for such Litigation among the Parties
in accordance with the statement of intent set forth in Section 1 of this
Agreement.  It is the intent of the Parties that the responsibility for
the Litigation be assumed fully by one Party, or that the Principals agree to
allocate responsibility for such Litigation among the Parties in the same
fashion as envisioned for the Schedule C Litigation.

 

(b)                                      If the Principals are unable to allocate
responsibility for any Litigation within a reasonable period of time following
identification of such Litigation, but in any event by the
earlier to occur of  (x) the date by
which action must be taken in connection with such Litigation to avoid
prejudice to one of the Parties in connection therewith or (y) the 30th
day after identification of the Litigation, then the Principals may agree that such allocations
shall be as determined by any third party (such as an outside law firm) who has
been granted authority by the Principals to determine such allocation, or any
party may elect to cause any such allocation of responsibility to be determined
by an Arbitrator as described in Section 9 hereof.

 

4.      Fees and Expenses.

 

(a)                                       Except as provided herein or otherwise
agreed among the Principals, the Parties agree to pay their own expenses in
connection with any Litigation, including attorneys’ fees and the fees and
expenses of their respective affiliates and agents.

 

(b)                                      WLT shall be responsible for all
out-of-pocket costs and expenses associated with the Schedule A Litigation,
including the costs of depositions, testimony and discovery imposed on WIMLLC
and its Subsidiary Parties and their respective Representatives. For the
avoidance of doubt, WIMLLC and its Subsidiary Parties shall, and shall cause
their respective Representatives to, bear the costs of their respective
internal legal counsel and other personnel.

 

(c)                                       WIMLLC shall be responsible for all
out-of-pocket costs and expenses associated with the Schedule B Litigation,
including the costs of depositions, testimony and discovery imposed on WLT and
its Subsidiary Parties and their respective Representatives. For the
avoidance of doubt, WLT and its Subsidiary

 

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Parties
shall, and shall cause their respective Representatives to, bear the costs of
their respective internal legal counsel and other personnel.

 

(d)                                      Except as provided on Schedule C, each of
the Principals agrees to share the expenses of the Schedule C Litigation in
proportion to their Allocated Share, with each bearing their own expenses as
they are incurred, sharing (in proportion to their Allocated Share) other more
extraordinary expenses (such as expert witness fees), and then reconciling
their expenses incurred for their common benefit when any Litigation is finally
concluded or at such other time as agreed by the Principals.

 

(e)                                       The Principals shall regularly discuss
the need for payments hereunder, or to offset the payments incurred by the
Subsidiary Parties.  Unless otherwise
agreed by the Principals, with respect to any specific Litigation or series of
related Litigations, no payments hereunder are required until the amount to be
paid is greater than $10,000 (unless the Principals agree on a final settlement
of the amounts to be paid in respect of such Litigation or series of related
Litigations under this Agreement), or until the amount owed to either Principal
(including, for this purpose, its Subsidiary Parties and its and their
Representatives) hereunder exceeds $50,000.  The Principals shall consult
with each other at least once each quarter during the first year following the
execution of this Agreement and semi-annually thereafter regarding any payments
required or proposed to be made hereunder and any proposed modification of the
terms of this Agreement or the schedules hereto.

 

(f)                                         Any amounts owing hereunder shall, to the
extent not paid within 30 days after any agreement by the Principals regarding
payment, bear interest at the Prime Rate until such amounts are paid in
full.  As used herein, “Prime Rate” shall mean the fluctuating interest
rate announced from time to time as published in the Wall Street Journal as the
U.S. Prime Rate.

 

5.    Protection of Information.

 

(a)                                       For purposes of this Agreement, the
Parties record that they have a common interest in the Litigation, recognizing
that they were under common control and ownership in connection with prior
actions and communications with respect to the Litigation.

 

(b)                                      The Parties agree to share evidence and
work product in connection with the Litigation, including with their respective
counsel, provided, however, that in the event of disagreements regarding
whether to settle any Litigation, the Parties shall be free to settle any such
Litigation, provided that the work product, evidence, privileged materials and
confidential information retained by the settling Party shall not be shared
with any third parties without the consent of any Party that would have the
right to prevent the disclosure of any such information had the Distribution
not occurred.

 

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(c)                                       Each Party agrees to protect, and shall
cause its Representatives to protect, any work product, evidence, privileged
materials and confidential information related to the Litigation against
disclosure as if it were their own information and to assert the joint
litigation privilege as a bar to the production of any such information.

 

6.    Prior Coverages and Indemnification.

 

(a)                                       Prior Coverage

 

(i)                                         With respect to Litigation or other
liabilities against a Party and its Representatives (such Party, an “Exposed
Entity”) that are or may be, in the reasonable judgment of the Principal that
is affiliated with such Exposed Entity, covered by insurance policies held by
an unaffiliated Party or by indemnification otherwise available to an unaffiliated
Party (a “Covered Entity”) in respect of periods prior to the Distribution Date
(“Prior Coverage”), such Exposed Entity may pursue, or, to the extent possible,
such Covered Entity shall be authorized to pursue, claims in respect of such
Litigation or other liabilities on behalf of the Exposed Entity in the amounts
and in accordance with the terms of such Prior Coverage, provided that such
claims relate to matters that arose on or prior to the Distribution Date. Each
Principal affiliated with a Covered Entity agrees that it will not, and will
not permit any affiliate (including any Covered Entity) to, terminate any Prior
Coverage without the other Principal’s consent.  Promptly upon receipt of
the proceeds of any such Prior Coverage resulting from such claims, the Covered
Entity shall cause such proceeds to be paid to the Exposed Entity; provided
that the amount of such proceeds paid by the Covered Entity to the Exposed
Entity shall be, without duplication, (i) reduced by the amount of any
fees and expenses reasonably incurred, or incurred with the Exposed Entity’s
written consent, by the Covered Entity in pursuit of such claims, (ii) adjusted
in good faith by the Covered Entity to reflect the present value of any
increased fees and expenses associated with continuing to maintain the policy
or indemnity from which the Prior Coverage arises that is attributable to the
pursuit of such claim and (iii) adjusted in good faith by the Covered
Entity to reflect any likely benefit to the Covered Entity attributable to the
pursuit of such claim including, without limitation, any estimated benefits
associated with the satisfaction of a deductible under any policy or indemnity
providing the Prior Coverage.

 

(ii)                                      Any Covered Entity pursuing a claim for
Prior Coverage will, or will cause its affiliates to, diligently pursue all
claims for Prior Coverage at the Exposed Entity’s expense, provided that in no
event shall the Covered Entity be obligated to litigate or pursue any other
extraordinary 

 

5

 

remedies against any
insurer or indemnitor, except as provided in (iii) below.  The
Principals agree to consult in good faith with respect to the pursuit of any
claim for Prior Coverage hereunder.  Each Party shall, and shall cause its
Representatives to, take all reasonable and necessary steps not inconsistent
with its or their own interests to maintain the availability of Prior Coverage
to the Parties and their Representatives.

 

(iii)                               If the Principal affiliated with an Exposed Entity, in
its sole discretion, determines that it is necessary to pursue litigation or
make a claim for Prior Coverage against any insurer or indemnitor in order to
protect its and its affiliates’ and Representatives’ rights hereunder with
respect to any claim, it shall so advise the Principal affiliated with the
applicable Covered Entity, and the Principal affiliated with the Exposed
Entity, the Exposed Entity and their respective Representatives may pursue such
litigation or claim.

 

(c)                                       WIMLLC Policies

 

WLT shall cause to be transferred all stand-alone
insurance policies applicable to WIMLLC and its subsidiaries, subject to
insurance company approval and agreement to transfer.

 

(d)                                      First Come/First Served

 

The Parties acknowledge
that the provisions set forth in Section 6(a) hereof could result in
the exhaustion of Prior Coverage policy or indemnity limits by one or a small
number of Exposed Parties as a result of the “first come/first served” nature
of the provision.  With respect to the application of the provisions set
forth in Section 6(a), the Parties agree to, and shall cause their
respective Representatives to, act in good faith and to avoid taking any
actions for the purpose of, or with the intention of, accelerating or delaying
claims payments or losses in order to obtain some advantage vis-à-vis the other
Parties and their Representatives in connection with the Prior Coverage,
including, without limitation, anticipated exhaustion of applicable Prior
Coverage limits and the anticipated costs associated with satisfying Prior
Coverage deductible requirements.  In addition, the Parties shall not, and
shall cause their Representatives not to, enter into any written settlement
agreement with any insurer that has the effect of reducing Prior Coverage limits
or increasing Prior Coverage deductibles, including “tipping basket”
deductibles that would otherwise be potentially available under this Agreement
to any Party and its Representatives without first giving the affected Party at
least thirty (30) days’ advance written notice of its intention to enter into
such settlement accompanied by a copy of the proposed settlement so that the
other Party may have an opportunity to consider the impact of such proposed
settlement on its interests and those of its Representatives.  The Parties
agree to, and shall cause their respective Representatives to, consult with
each other and negotiate in good 

 

6

 

faith about such impacts.

 

7.   Directors and Officers Liability
Insurance. For
the six-year period commencing immediately after the Distribution Date, WLT
shall maintain in effect WLT’s current directors’ and officers’ liability
insurance policies providing coverage for acts or omissions occurring prior to
the Distribution Date with respect to those Persons who are currently covered
by WLT’s directors’ and officers’ liability insurance policy on terms and at
limits no less favorable to WIMLLC’s current and former directors and officers
currently covered by policies in effect on the Distribution Date; provided
that, if WLT’s current directors’ and officers’ liability insurance expires, is
terminated or is canceled during such six-year period, WLT shall obtain
directors’ and officers’ liability insurance covering such acts or omissions
with respect to each such Person on terms and at limits no less favorable to
WIMLLC’s directors and officers currently covered by policies in effect
immediately prior to the date of such expiration, termination or cancellation
(the “Existing D&O Policy”);  provided further, that: (i)  WLT
may substitute for the Existing D&O Policy a policy or policies of
comparable coverage, including a “tail” insurance policy; and (ii) WLT
shall not be required to pay annual premiums for any substitute or “tail” policies
in excess of two times the annual premiums paid for the Existing D&O Policy
as of the Distribution Date (the “Maximum
Premium”).  In the event any future annual premiums for the
Existing D&O Policy (or any substitute policies) exceed the Maximum Premium,
WLT shall be entitled to reduce the amount of coverage of the Existing D&O
Policy (or any substitute or “tail” policies) to the amount of coverage that
can be obtained for a premium equal to the Maximum Premium. This Section is
intended to benefit each of the current and former directors and officers of
WIMLLC covered by the Existing D&O Policy as of the Distribution Date, and
shall be enforceable by each such Person and his or her heirs and
representatives.

 

8.    Further Assurances.

 

(a)                                       Each Party shall, and shall cause its
respective Representatives to (i) cooperate with each other Party and its
Representatives, (ii) use commercially reasonable efforts to take or cause
to be taken all appropriate actions required of such Party and its
Representatives hereunder, (iii) do or cause to be done all things
reasonably necessary or appropriate to effectuate the provisions and purposes
of this Agreement and the transactions contemplated hereby (including, without
limitation, the execution of additional documents or instruments of any kind
and the obtaining of consents that, in each case, may be reasonably necessary
or appropriate in furtherance of the provisions hereof) and (iv) take all
such other actions as may be reasonably requested by another Party, for itself
and its Representatives, from time to time consistent with and in furtherance
of the terms of this Agreement.  Each Party shall, and shall cause its
Representatives to, furnish to the other Parties all information and
documentation as may reasonably be required in the pursuit of any Litigation or
litigation under this Section.  Each Principal shall regularly, and in any
event no less frequently than quarterly or as otherwise agreed by the
Principals, consult with the other with respect to any Litigation, and each
Principal shall promptly advise the other as to 

 

7

 

any material
developments.    Each of the Principals shall take all action
reasonably required to ensure that any former subsidiary shall have access to
the Prior Coverage following any merger or liquidation of either of the
Principals.

 

(b)                                      By way of enumeration and not of
limitation, each Party shall, and shall cause its Representatives to, upon the
reasonable request of any other Party (whether for itself or on behalf of its
Representatives), promptly:  (i)  provide copies of insurance
policies or evidence of the existence of insurance to any other Party; (ii) 
provide information reasonably necessary or helpful to any other Party and its
Representatives (including, without limitation, currently valued loss runs on
an annual basis for all lines of insurance for five calendar years after the
Distribution Date) in connection with any requesting Party’s efforts to obtain
insurance coverage; (iii)  provide information to any other Party
regarding amounts applied to the limits of policies or self-insured retentions
potentially applicable to both, and the basis for the application of such
amounts to such limits, so that each Party can monitor the exhaustion of such
limits; and (iv)  execute further reasonable assignments or allow any
other Party to reasonably pursue reasonable claims in its name (subject to
rights of participation and consultation in respect of the pursuit of such
claims) at the sole expense of the requesting Party, including by means of
arbitration or litigation, to the extent necessary or helpful to the other
Party’s efforts to obtain Prior Coverage to which it or its Representatives are
entitled under this Agreement.

 

(c)                                       Each Party shall, and shall cause its
Representatives to, reimburse each other for out-of-pocket costs and expenses
reasonably incurred in connection with providing cooperation and assistance to
the other pursuant to this Agreement in accordance with Section 4 of this Agreement.

 

9.    Arbitration.

 

(a)                                       Commencement.  In the event of any dispute
arising out of or in connection with this Agreement or relating to the subject
matter hereof (a “Dispute”), including without limitation a breach, default,
misrepresentation or failure to agree pursuant to any provision which expressly
requires agreement among the Parties, the disputing Party shall notify the
other relevant Parties and the Principals of, and shall describe in reasonable
detail, the Dispute, and shall indicate in such notice that such disputing
Party wishes to resolve such Dispute by mediation or arbitration.  If the
relevant Parties are unable to reach a mutually acceptable resolution of the
Dispute within thirty (30) days of the receipt of notice by the relevant Parties,
any of the relevant Parties may elect to submit the Dispute for final, binding
settlement by arbitration by a single arbitrator (the “Arbitrator”) by delivering a
notice of such election to each of the other relevant Parties and by requesting
from the International Institute for Conflict Prevention and Resolution (“CPR”),
simultaneously with or as soon as reasonably practical (and in no event more
than ten (10) days) following delivery of such notice of election, a list
of qualified arbitrators pursuant to 

 

8

 

paragraph (b) of
this Section 9.

 

(b)                                      Rules of Arbitration.  Such arbitration shall be
presided over by a sole arbitrator (the “Arbitrator”), appointed by mutual
agreement of the relevant Parties from a list proposed by CPR in response to
the request described in paragraph (a) of this Section 9 of no less
than 10 members of the CPR Panels of Distinguished Neutrals qualified to
arbitrate the Dispute.  If the relevant
Parties are unable to agree upon a sole arbitrator prior to the later to occur
of (i) the thirtieth (30th) day after
receipt by the all relevant Parties of the notice of intent to arbitrate and (ii) the
tenth (10th) day after receipt by the relevant
Parties of a proposed list of arbitrators from CPR, the sole arbitrator shall
be chosen by CPR in accordance with Article 6 of the 2007 CPR Rules for Non-Administered
Arbitration (the “Rules”).

 

(c)                                       Arbitration Procedure.  The place and situs of
arbitration shall be Tampa, Florida, or such other location as the relevant
Parties may agree to.   The arbitration shall be
conducted in accordance with the Rules. The parties agree to facilitate the arbitration by (i) making
available to each other and to the Arbitrator for inspection and extraction all
documents, books and records as the Arbitrator shall determine to be relevant
to the dispute, (ii) making personnel under their control available to
other parties and the Arbitrator and (iii) observing strictly the time
periods established by the Arbitrator for the submission of evidence and
pleadings.  The Arbitrator may impose sanctions in its discretion
to enforce compliance with discovery and other obligations imposed by the
Arbitrator and the Rules.  Once the
Arbitrator has been selected, such arbitration shall be the exclusive manner
pursuant to which any Dispute shall or may be resolved except by mutual
agreement of the relevant Parties.  The Arbitrator
shall have the power to render declaratory judgments in accordance with the
Rules, to grant, temporary, preliminary and permanent relief, including,
without limitation, injunctive relief and specific performance, as well as to
award monetary claims or to render claims that the Arbitrator deems equitable
and just, provided that the Arbitrator shall not have the power to act (x) outside
the prescribed scope of this Agreement, or (y) without providing an
opportunity to each Party to be represented before the Arbitrator.  The
Arbitrator shall endeavor to render final decisions in writing within sixty (60)
days of the selection of the Arbitrator.

 

(d)                                      Arbitration Award; Enforcement.  The Arbitrator’s final decision
shall be delivered in writing to each of the relevant Parties.  The
Arbitrator may allocate the costs and expenses of the proceedings between the
relevant Parties and shall award interest as the Arbitrator deems
appropriate.  The arbitration judgment shall be final and binding on each
of the relevant Parties.  Judgment on the Arbitrator’s award may be
entered in any court of competent jurisdiction by any of the relevant Parties.

 

10.                                      Immunities. This Agreement may not be introduced in any court to
establish 

 

9

 

any fact   of this Agreement except to permit any Party
hereto to secure its rights and the rights of its Representatives under this
Agreement.  The terms of this Agreement have been reached as a settlement
between the Parties and its terms are without prejudice to the ability of any
Party hereto to assert claims against any third party, or defend itself against
claims asserted it by any third party.

 

11.                                      Authority. Each Principal represents and warrants that it has
the right, power and authority to enter into this Joint Litigation Agreement,
and to cause its affiliates, including, without limitation, its Subsidiary
Parties, and its Representatives to abide by this Agreement to the extent
necessary to enforce the terms hereof as fully as if they were signatories to
this Agreement.

 

12.                                      Amendments. This Agreement may be amended, supplemented, restated
or otherwise modified by the mutual written agreement of the Principals, and
all parties who derive rights under this Agreement shall be bound by such
written agreement.  This Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the Party that would otherwise benefit from such performance
if properly discharged.

 

13.                                      Assignments. 
This Agreement shall be binding on the successors and assigns of the
Principals and their respective Subsidiary Parties, and each Party
hereto acknowledges and consents to the assignment, by operation of law or
otherwise, of this Agreement to the successor in interest of WIMLLC pursuant to
the Merger, and this Agreement shall remain binding and in full force and
effect following the Merger.

 

14.                                      Third Party Rights. This Agreement shall not confer any
rights or benefit upon any person or entity other than the Parties and their
respective successors and permitted assigns.

 

15.                                      Legal Enforceability. If any provision of this Agreement or
the application of any such provision to any person or circumstance shall be
declared to be invalid, unenforceable or void, such declaration shall not have
the effect of invalidating or voiding the remainder of this Agreement, it being
the intent and agreement of the Parties that this Agreement shall be deemed
amended by modifying such provision to the extent necessary to render it valid,
legal and enforceable while preserving its intent or, if such modification is
not possible, by substituting therefor another provision that is valid, legal
and enforceable and that achieves the same objective.  Any such prohibition or unenforceability in
any jurisdiction shall not invalidate, render unenforceable such provision in
any other jurisdiction.

 

16.                                      Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts made and to be performed therein. Each of the Parties hereby waive
personal service of any and all process upon it and consent that all such
service of process may be 

 

10

 

made by registered or
certified mail (return receipt requested) directed to the Principal affiliated
with such Party at its address set forth on the signature pages below, and
service so made shall be deemed to be completed three (3) days after the
same shall have been so deposited in the U.S. Mails, or on one day following
delivery by email or by telecopy as provided below, with evidence of delivery,
provided that any delivery by email or telecopy shall be followed by a
telephone call alerting the recipient to the notice being so delivered.

 

[Signature pages to
follow]

 

11

 

IN
WITNESS WHEREOF,
each of the parties hereto has executed this Agreement as of the day and year
first above written.

 

	
  WALTER INDUSTRIES, INC.

  	
  WALTER INVESTMENT
  MANAGEMENT LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature: 

  	
  /s/

  	
   

  	
  Signature: 

  	
  /s/

  
	
  Name: 

  	
  Victor P. Patrick

  	
  Name: 

  	
  Mark J. O’Brien

  
	
  Title: 

  	
  Vice Chairman and Chief
  Financial Officer

  	
  Title: 

  	
  President and Chief
  Executive Officer

  
	
  Address: 

  	
  4211 W. Boy Scout
  Boulevard

  	
  Address: 

  	
  4211 W. Boy Scout
  Blvd., 4th Floor

  
	
   

  	
  Tampa, FL 33607

  	
   

  	
  Tampa, FL 33607

  
	
  Facsimile:
  

  	
  813-871-4420

  	
  Facsimile:
  

  	
  813-871-4420

  
					

 

12Exhibit 10.1

 

April 17, 2009

PRIVATE &
CONFIDENTIAL

 

Mr. Stephen J. McCasey

4 Eversley Hall

King City, ON  L7B 1L8

 

Dear Steve:

 

Re: 
Employment with Magna Entertainment Corp.

 

We wish to confirm your
employment with Magna Entertainment Corp. (the “Corporation”) as follows:

 

1.                                      Position: As of April 3, 2009, you are appointed as Chief
Operating Officer, East Coast reporting to the Chief Executive Officer or his
designee(s).

 

2.                                      Base Salary:  Your Base
Salary shall be US $200,000 per annum (less statutorily required deductions)
payable in accordance with the Corporation’s standard payroll practices.  Your Base Salary shall be renewed annually
each January in accordance with the Corporation’s standard practice.

 

3.                                      Benefits:  During your
employment by the Corporation, you will be entitled to:

 

(a)                                  participate in all group insurance and benefit
programs generally applicable to salaried employees of the Corporation from
time to time;

 

(b)                                 four (4) weeks vacation in respect of each
completed twelve (12) month period of employment during the term of this
agreement, to be taken at such time or times as are mutually convenient to you
and the Corporation, but not payment in lieu thereof; and

 

(c)                                             reimbursement
for all reasonable and documented business expenses incurred on behalf of the
Corporation in carrying out your duties, in accordance with MEC’s policies from
time to time, but excluding automobile operating costs.

 

5.                                      Conditions for Continued Employment: It is acknowledged by you that as a condition of
your continued employment you will comply in every respect with MEC’s Capital
Expenditure Guidelines, Health, Safety and Environmental Policy, Code of
Business Conduct and the MEC Insider Reporting and Trading Policy, as amended
from time to time, together with such other policies that may be established by
MEC and be in effect from time to time.

 

6.                                      Termination:  Your
employment and this agreement, including all benefits provided for under this
agreement, will terminate on:  (a) the
acceptance by the Corporation of your voluntary resignation; (b) at the
Corporation’s option, your disability for an aggregate of twelve (12) months or
more in any twenty-four (24) month period, subject to any statutory requirement
to accommodate such disability or provide compensation upon 

 

 

such termination; (c) your death; or (d) your dismissal for
cause or by reason of your breach of the terms of this agreement.

 

Otherwise,
you or the Corporation may, at any time for any reason, terminate your
employment and this agreement without cause by providing the other party with
six (6)  months’ prior written notice of intention to terminate.  Alternatively, the Corporation may elect to
terminate your employment immediately by paying you a retiring allowance  equivalent to six (6) months’ Base
Salary (less statutorily required deductions) either in a lump sum within
thirty (30) days of the day of termination or monthly in arrears in six (6) 
equal instalments commencing thirty (30) days after the day of
termination.  The Corporation may also terminate
your employment and this agreement by providing you a combination of working
notice and retiring allowance equivalent to the notice period described
above.  If your employment is terminated
pursuant to this paragraph except in the cases of voluntary resignation,
disability, death or the completion of working notice, the Corporation shall
maintain on your behalf the benefits referred to in paragraph 4(a), except for
life and disability insurance benefit coverage, for a period of six (6) months.  Your life and disability insurance benefit
coverage shall be maintained for a period of not less than the period required
by applicable statute.  In the case of
voluntary resignation, disability, death or the completion of working notice,
your benefits will terminate on the last day of your employment.

 

In the event that you breach the provisions of paragraph 8, the payment
of any further amounts under this agreement will immediately cease.  Further, subject to your statutory
entitlements, the amount paid in each instalment will be offset by any income
earned by you, during the period you are entitled to receive instalments,
regardless of whether such income is earned from alternate or self-employment.

 

The
termination provisions set forth above are inclusive of any and all statutory,
common law and/or contractual entitlement to severance pay, notice of
termination or pay in lieu thereof, salary, bonuses, vacation and/or vacation
pay and other remuneration and benefits payable or otherwise provided to you in
relation to your employment by the Corporation (including, specifically, any
preceding employment by the Corporation and its affiliated or associated
Corporations and/or their respective predecessors, (all of the foregoing are
hereinafter collectively referred to as the “MEC Group”)), and the termination
of your employment and this agreement.

 

7.                                      Confidentiality:  You shall
keep confidential at any time during or after your employment, any information
(including proprietary or confidential information) about the business and
affairs of, or belonging to, the Corporation or any member of the MEC Group or
their respective customers or suppliers, including information which, though
technically not trade secrets, the dissemination or knowledge whereof might
prove prejudicial to any of them.  In addition, if requested at any
time, you shall execute a separate form of Employee Confidentiality Agreement
as a condition of your continued employment.

 

8.                                      Other Conditions:  You hereby
acknowledge as reasonable, in terms of both scope and duration, and agree that
you shall abide by the following terms and conditions:

 

i)                                        Technology, Know-How, Inventions,
Patents:  That all designs, devices, improvements,
inventions and ideas made or conceived by you resulting from 

 

 

your access to the business of the MEC Group shall be the exclusive
property of the MEC Group and you and your estate agree to take all necessary
steps to ensure that such property rights are protected.

 

ii)                                     Confidentiality:  You shall
keep confidential at all times during and after your employment, all
information (including proprietary or confidential information) about the
business and affairs of, or belonging to, the Corporation or any member of the
MEC Group or their respective customers or suppliers, including information
which, though technically not trade secrets, the dissemination or knowledge
whereof might prove prejudicial to any of them. 
In addition, if requested at any time, you shall immediately execute a
separate form of Employee Confidentiality Agreement in the Corporation’s
standard form as a condition of your continued employment.

 

iii)                                  Conflict of Interest:  You shall not
engage in any business activities, either through yourself or through immediate
family member(s), which may place you in an actual or apparent conflict of
interest with your duty to act, at all times, in the best interests of the
Corporation.

 

iv)                                 Non-Competition:  During the
term of your employment with the Corporation and for a period of six (6) months
after the termination of your employment, you shall not, directly or
indirectly, in any capacity compete with the business of the Corporation or of
any member of the MEC Group in respect of which you have had access to
proprietary or confidential information.

 

v)                                    Non-Solicitation: 
During the term of your employment with the Corporation and for a period
of twelve (12) months after the termination of your employment, you shall not,
directly or indirectly solicit, attempt to solicit or call upon any firm,
person or company who is or was a customer or client of the Corporation or any
member of the MEC Group or otherwise solicit, attempt to solicit, or
communicate in any way with employees of the Corporation or any member of the
MEC Group for the purpose of having such employees employed or in any way
engaged by another person, firm, corporation, or other entity.

 

9.                                      Severability: You acknowledge and agree that should any provision
in this agreement be held to be invalid, void or unenforceable, it shall be
declared separate and distinct, and the remaining provisions shall continue in
full force and effect.

 

10.                                Assignability: This agreement may be assigned by the Corporation in
its sole discretion to any other member of the MEC Group or any MEC affiliate
without your prior consent.  Upon completion
of such assignment, the Corporation shall be automatically released from any
obligation, liability or responsibility under this agreement.  Upon such assignment, your title and position
may be changed to reflect the organizational structure of the Corporation to
which you are being assigned.

 

11.                                Governing Law:  This
Agreement and the legal relations hereby created between you and the
Corporation shall be governed by and construed under and in accordance with the
internal laws of the Province of Ontario without regard to conflicts of law
principles.

 

 

12.                                Start Date: Your employment under the terms of this agreement
shall commence on April 16, 2009, subject to your employment arrangements
with Magna International being severed, or such earlier or later date as may be
mutually agreed upon in writing.  Upon
cessation of your employment or other termination of this agreement, paragraph
9 shall continue in full force and effect.

 

If the terms as set out in
this agreement are acceptable to you, please sign and date three (3) copies
in the places indicated and return two (2) fully signed copies to the
attention of April 20, 2009, after which, if not so signed and returned,
this agreement shall be withdrawn.  Upon
execution by you, this agreement (i) replaces any prior written or oral
employment agreement or other agreement concerning remuneration between you and
the Corporation or any member of the MEC Group and (ii) will continue to
apply to your employment in a similar or other capacity with the Corporation or
any member of the MEC Group and (iii) will continue to be applicable in
the event that your employment with the Corporation continues beyond the expiry
date of the term specified above without this agreement being formally extended
or replaced.

 

Yours very truly,

 

	
  /s/William G. Ford

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  William G. Ford

  	
   

  
	
  Executive Vice-President,

  	
   

  
	
  General Counsel &
  Secretary

  	
   

  

 

	
  /lo

  	
  

  

  

 

 

I hereby accept the terms
and conditions set out above and acknowledge that this agreement contains all
the terms and conditions of my employment with Magna Entertainment Corp. (the “Corporation”)
and that no other terms, conditions or representations other than those within
this letter form part of this agreement and confirm that I am not subject to
any restrictions (contractual or otherwise) arising from my former employment
which would present or impair me in carrying out my duties and functions with
the Corporation.  Furthermore, I confirm
that during the term of my employment I will not offer to the Corporation any
confidential or proprietary information that I have knowledge of with respect
to my former employers, nor will I provide such information to the Corporation
should I be requested to do so, until such time as such information is no
longer confidential, propriety or comes into the public domain.

 

I understand
that in order to manage the employment relationship, it will be necessary for
the Corporation to collect and use certain personal information about me, as
well as my beneficiaries and dependents. 
I grant my consent to the collection and use of this information, as
well as to the disclosure of relevant personal information to employees,
affiliates and agents of the Corporation where necessary for legitimate
business reasons, including performance and attendance management, and
administration of the Corporation’s compensation, employee benefit, profit
sharing and retirement programs.

 

 

	
  April 21, 2009

  	
   

  	
  /s/Stephen McCasey

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Stephen McCasey

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