-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SxXMhYJZXw1LuwN9BA+luZpzZGg1kHolTf1xhfGHeoxBOGXzvMIqQcN/F2SsNTvA EfUGEblyys+G7HkORzVkLg== 0000899681-95-000023.txt : 19950501 0000899681-95-000023.hdr.sgml : 19950501 ACCESSION NUMBER: 0000899681-95-000023 CONFORMED SUBMISSION TYPE: T-3 PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19950206 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALTER INDUSTRIES INC/NEW/ CENTRAL INDEX KEY: 0000837173 STANDARD INDUSTRIAL CLASSIFICATION: IRON & STEEL FOUNDRIES [3320] IRS NUMBER: 133429953 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22199 FILM NUMBER: 95505758 BUSINESS ADDRESS: STREET 1: 1500 N DALE MABRY HGWY CITY: TAMPA STATE: FL ZIP: 33607 BUSINESS PHONE: 8138714811 MAIL ADDRESS: STREET 1: 1500 NORTH MABRY HGWY STREET 2: 1500 NORTH MABRY HGWY CITY: TAMPA STATE: FL ZIP: 33607 FORMER COMPANY: FORMER CONFORMED NAME: HILLSBOROUGH HOLDINGS CORP DATE OF NAME CHANGE: 19910814 T-3 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 - ----------- FORM T-3 FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE TRUST INDENTURE ACT OF 1939 - ---------- Walter Industries, Inc. (Name of applicant) 1500 North Dale Mabry Highway Tampa, Florida 33607 (Address of Principal Executive Offices) - ------------ SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED - ----------------------------------------------------------- TITLE OF CLASS AMOUNT Senior Notes Due 2000 $490,000,000 (Series B, Series B-1) Approximate date of proposed public offering: On or as soon as practicable after the Effective Date (as defined in the Amended Joint Plan of Reorganization, dated as of December 9, 1994, of Walter Industries, Inc. and the other debtors named therein). Name and address of agent for service: Kenneth J. Matlock Executive Vice President and Chief Financial Officer Walter Industries, Inc. 1500 North Dale Mabry Highway Tampa, Florida 33607 The applicant hereby amends this application for qualification on such date or dates as may be necessary to delay its effectiveness until (i) the 20th day after the filing of a further amendment which specifically states that it shall supersede this amendment, or (ii) such date as the Commission, acting pursuant to Section 307(c) of the Act, may determine upon the written request of the applicant. GENERAL 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE APPLICANT: a. Form of organization: A corporation. b. State or other sovereign power under the laws of which organized: Delaware 2. SECURITIES ACT EXEMPTION APPLICABLE. STATE BRIEFLY THE FACTS RELIED UPON BY THE APPLICANT AS A BASIS FOR THE CLAIM THAT REGISTRATION OF THE INDENTURE SECURITIES UNDER THE SECURITIES ACT OF 1933 IS NOT REQUIRED. The applicant, Walter Industries, Inc. (the "Company"), formerly known as Hillsborough Holdings Corporation ("Hillsborough"), proposes to issue, as part of its Amended Joint Plan of Reorganization dated as of December 9, 1994 (the "Consensual Plan"), pursuant to Section 1121(a) of the United States Bankruptcy Code, up to $490,000,000 of its Series B Senior Notes due 2000 (the "Series B Notes"). The Series B Notes will be issued to discharge in part claims of existing creditors in the Bankruptcy Proceedings described below. The Series B Notes may be exchanged pursuant to an offer which may be made by the Company following effectiveness of the Consensual Plan, under a Registration Rights Agreement to be executed as part of the Consensual Plan, for Series B-1 Senior Notes due 2000 (the "Series B-1 Notes" and, together with the Series B Notes, the "Notes"). As further described below, the Series B Notes are proposed to be issued in reliance upon the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), set forth in Section 1145(a)(1) of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), applicable to the offer or sale under a Chapter 11 reorganization plan by an entity that is not an underwriter of a security of a debtor in exchange for a claim against such debtor. On December 27, 1989 (the "Petition Date"), Hillsborough and thirty-one of its affiliates (together with the corporation referred to in the next sentence, the "Debtors") filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Court"). On December 3, 1990, one additional subsidiary filed a voluntary petition for reorganization under Chapter 11 with the Court. Under provisions of the Bankruptcy Code and an order of the Court dated December 28, 1989, the Debtors continue to own and manage their respective properties and assets as debtors in possession. Pursuant to an order of the Court dated November 5, 1990, certain asset transfers were made among the Debtors and certain of the Debtors were merged with one another, including the merger of a subsidiary of Hillsborough into Hillsborough, which thereafter changed its name to Walter Industries, Inc., and was the surviving entity. On December 9, 1994, the Consensual Plan was filed as a modification of the Creditors' Joint Plan of Reorganization dated as of August 1, 1994 (the "Creditors' Plan"). The Debtors, which had filed a competing Fifth Amended Plan of Reorganization dated as of July 25, 1994 (the "Debtors' Plan"), and Kohlberg Kravis Roberts & Co. and certain of its affiliates ("KKR"), which had joined as proponents of the Debtors' Plan, agreed not to pursue confirmation of the Debtor's Plan and became proponents of the Consensual Plan. At a hearing before the Court on December 15, 1994, the Court, pursuant to Section 1125 of the Bankruptcy Code, approved the Supplement to Disclosure Statement for the Amended Joint Plan dated as of December 9, 1994 (the "Supplemental Disclosure Statement") as containing adequate information. On January 24, 1995, the proponents of the Consensual Plan completed soliciting vote changes in light of the modifications to the Creditors' Plan contained in the Consensual Plan. The voting for a class of claims relating to the "Veil Piercing Settlement Agreement" described in the Plan and Supplemental Disclosure Statement related thereto is expected to be completed on February 22, 1995. A copy of the Supplemental Disclosure Statement is attached as Exhibit T3E2 to this Form T-3; the Consensual Plan is attached as Exhibit 1 to the Disclosure Statement. Section 1145 of the Bankruptcy Code exempts the offer or sale of securities under a plan of reorganization from registration under the Securities Act and state law. Under Section 1145, the issuance of securities is exempt from registration if three principal requirements are satisfied: (1) the securities are issued by a debtor, its successor, or an affiliate participating in a joint plan with the debtor (provided that such entity is not an underwriter as defined in section 1145(b) of the Bankruptcy Code) under a plan of reorganization; (2) the recipients of the securities hold a claim against the debtor or such affiliate, an interest in the debtor or such affiliate, or a claim for an administrative expense against the debtor or such affiliate; and (3) the securities are issued entirely in exchange for the recipients' claim against or interest in the debtor or such affiliate, or "principally" in such exchange and "partly" for cash or property. The applicant believes that the issuance of the Series B Notes under the Indenture to holders of various creditor classes under the Consensual Plan will satisfy all three conditions of Section 1145 of the Bankruptcy Code because (a) the issuances are expressly contemplated under the Consensual Plan as part of the reorganization; (b) the recipients are holders of "Claims" against the Debtors; and (c) the recipients would obtain such Notes in exchange for their prepetition claims. Under the terms of the Registration Rights Agreement, the Series B-1 Notes are to be issued, if at all, pursuant to an exchange offer by the Company which would be registered in conformity with the Securities Act and any relevant state law. The applicant does not hereby claim any exemption from the Securities Act or any state law for the issuance of the Series B-1 Notes. AFFILIATIONS 3. AFFILIATES. FURNISH A LIST OR DIAGRAM OF ALL AFFILIATES OF THE APPLICANT AND INDICATE THE RESPECTIVE PERCENTAGES OF VOTING SECURITIES OR OTHER BASES OF CONTROL. AS OF FEBRUARY 2, 1995 WALTER INDUSTRIES, INC. (DE) (formerly named Hillsborough Holdings Corporation (DE)) - owns all of the stock of the subsidiary companies numbered 1 through 19. 1. BEST INSURORS, INC. (FL) Wholly owned subsidiaries of Best Insurors, Inc.: Best Insurors of Mississippi, Inc. (MS) Jim Walter Insurance Services, Inc. (FL) 2. CARDEM INSURANCE CO., LTD. (Bermuda) 3. COAST TO COAST ADVERTISING, INC. (FL) 4. COMPUTER HOLDINGS CORPORATION (DE) Wholly owned subsidiary of Computer Holdings Corporation: Jim Walter Computer Services, Inc. (DE) 5. DIXIE BUILDING SUPPLIES, INC. (FL) 6. HAMER HOLDINGS CORPORATION (DE) Wholly owned subsidiary of Hamer Holdings Corporation: Hamer Properties, Inc. (WV) 7. HOMES HOLDINGS CORPORATION (DE) Wholly owned subsidiary of Homes Holdings Corporation: Jim Walter Homes, Inc. (FL) Wholly owned subsidiaries of Jim Walter Homes, Inc.: Jim Walter Homes of Louisiana, Inc. (LA) Walter Home Improvement, Inc. (FL) 8. JW ALUMINUM COMPANY (DE) 9. JIM WALTER RESOURCES, INC. (AL) (formerly named JW Resources Inc. (AL)) Jim Walter Resources, Inc. has a 50% stock ownership interest in Black Warrior Transmission Corp. and Black Warrior Methane Corp. 10. JW WINDOW COMPONENTS, INC. (DE) Wholly owned subsidiaries of JW Window Components, Inc.: D. J. Dinsmore Co. (SD) (inactive) Jim Walter Window Components, Inc. (WI) Warren Industries, Inc. (FL) (inactive) 11. J.W.I. HOLDINGS CORPORATION (DE) Wholly owned subsidiary of J.W.I. Holdings Corporation: J. W. Walter, Inc. (DE) 12. LAND HOLDINGS CORPORATION (DE) Wholly owned subsidiary of Land Holdings Corporation: Walter Land Company (DE) 13. MID-STATE HOLDINGS CORPORATION (DE) Wholly owned subsidiary of Mid-State Holdings Corporation: Mid-State Homes, Inc. (FL) 14. RAILROAD HOLDINGS CORPORATION Wholly owned subsidiary of Railroad Holdings Corporation: Jefferson Warrior Railroad Company, Inc. (AL) 15. SLOSS INDUSTRIES CORPORATION (DE) 16. SOUTHERN PRECISION CORPORATION (DE) 17. UNITED LAND CORPORATION (DE) (formerly named U.S. Pipe Realty, Inc. (DE)) 18. UNITED STATES PIPE AND FOUNDRY COMPANY (DE) (formerly named Pipe Holdings Corporation (DE)) 19. VESTAL MANUFACTURING COMPANY (DE) AS OF EFFECTIVE DATE Same As That Of February 2, 1995 MANAGEMENT AND CONTROL 4. DIRECTORS AND EXECUTIVE OFFICERS. LIST THE NAMES AND COMPLETE MAILING ADDRESSES OF ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE APPLICANT AND ALL PERSONS CHOSEN TO BECOME DIRECTORS OR EXECUTIVE OFFICERS. INDICATE ALL OFFICES WITH THE APPLICANT HELD OR TO BE HELD BY EACH PERSON NAMED. AS OF FEBRUARY 2, 1995 Name Address Office James W. Walter (a) Chairman Henry R. Kravis (b) Director Paul E. Raether (b) Director George R. Roberts (c) Director G. Robert Durham (a) Director, President and Chief Executive Officer Kenneth J. Matlock (a) Director, Executive Vice President and Chief Financial Officer Perry Golkin (b) Director and Vice President Michael T. Tokarz (b) Director and Vice President William H. Weldon (a) Senior Vice President - Finance and Chief Accounting Officer William N. Temple (d) Senior Vice President and Group Executive Robert W. Michael (f) Senior Vice President and Group Executive David L. Townsend (a) Vice President - Human Resources/Public Relations John F. Turbiville (a) Vice President - Legal and Secretary Donald M. Kurucz (a) Vice President and Treasurer AS OF EFFECTIVE DATE1 Name Address Office James W. Walter (a) Chairman G. Robert Durham (a) Director, Chief Executive Officer and President Michael T. Tokarz (b) Director Elliot M. Fried (e) Director Howard L. Clark (e) Director Kenneth A. Buckfire (e) Director Kenneth J. Matlock (a) Director, Executive Vice President and Chief Financial Officer William H. Weldon (a) Senior Vice President - Finance and Chief Accounting Officer William N. Temple (d) Senior Vice President and Group Executive Robert W. Michael (f) Senior Vice President and Group Executive David L. Townsend (a) Vice President - Human Resources/Public Relations John F. Turbiville (a) Vice President - Legal and Secretary Donald M. Kurucz (a) Vice President and Treasurer 1 In addition to the directors listed below, pursuant to the Consensual Plan, the current management of Company will designate two independent directors at a later date. (a) Walter Industries 1500 North Dale Mabry Highway Tampa, FL 33607 (b) Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 (c) Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road (Suite 200) Menlo Park, CA 94025 (d) United States Pipe and Foundry Company 3300 First Avenue North Birmingham, AL 35202 (e) Lehman Brothers Inc. 3 World Financial Center New York, NY 10285 (f) Jim Walter Homes, Inc. 1500 North Dale Highway Tampa, Florida 33607 5. PRINCIPAL OWNERS OF VOTING SECURITIES. FURNISH THE FOLLOWING INFORMATION AS TO EACH PERSON OWNING 10% OR MORE OF THE VOTING SECURITIES OF THE APPLICANT.
AS OF FEBRUARY 2, 1995 Name and Complete Title of Class Amount Percentage of Mailing Address Owned Owned Voting Securities Owned JWC Associates, L.P. Common Shares 27,646,600 88.84% c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 JWC Associates II, L.P. Common Shares 183,200 .59 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 KKR Partners II, L.P. Common Shares 670,200 2.15 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Henry R. Kravis Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 George R. Roberts Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road Suite 200 Menlo Park, CA 94025 Robert I. MacDonnell Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road Suite 200 Menlo Park, CA 94025 Michael W. Michelson Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road Suite 200 Menlo Park, CA 94025 Paul E. Raether Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Michael T. Tokarz Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 James H. Greene, Jr. Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road Suite 200 Menlo Park, CA 94025 Perry Golkin Common Shares 28,500,000(1)(2) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Scott M. Stewart Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Clifton S. Robbins Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Edward A. Gilhuly Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road Suite 200 Menlo Park, CA 94025 Saul A. Fox Common Shares 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 (1) Messrs. Kravis, Roberts, MacDonnell, Michelson, Fox, Raether, Tokarz, Greene, Golkin, Stewart, Robbins and Gilhuly are general partners of KKR Associates, the sole general partner of each of JWC Associates, L.P., JWC Associates II, L.P. and KKR Partners II, L.P. (the "KKR Investors"). Such persons may be deemed to be "beneficial owners" of the shares owned by the KKR Investors within the meaning of Rule 13d-3 under the Exchange act, although each such person disclaims beneficial ownership of such shares. (2) Mr. Golkin currently is an officer and director of the Company and certain of its subsidiaries.
AS OF EFFECTIVE DATE Name and Complete Title of Class Amount Percentage of Mailing Address Owned Owned Voting Securities Owned The Celotex Settlement Fund Recipient Common Shares 10,941,000(3) 21.7%(3) 1 Metro Center 4010 Boy Scout Boulevard Tampa, Florida 33607 Lehman Brothers Inc. Common Shares 7,746,000(1) 15.3%(1) 3 World Financial Center New York, NY 10285 The KKR Investors (JWC Associates, Common Shares 5,901,000(2) 11.7%(2) L.P., JWC Associates II L.P. and KKR Partners II, L.P.) c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019
(1) Approximate amounts based on a March 15, 1995 effective date for the reorganization and $555 million of "Qualified Securities" (as defined in the Consensual Plan, consisting of cash and Notes) being issued under the Consensual Plan. To the extent that less than $555 million of Qualified Securities are issued (minimum amount is $530 million), the number of shares and percentage would increase. If all the shares of common stock that may be issued to the KKR Investors (see note (2) below) are issued, the percentage would be reduced to approximately 14.1%. (2) Approximate amounts based on a March 15, 1995 effective date and $555 million of Qualified Securities being issued under the Consensual Plan. To the extent that less than $555 million of Qualified Securities are issued (minimum amount is $530 million), the number of shares and percentages would decrease. Approximately 452,000 additional shares of common stock will be issued to the KKR Investors six months after the Effective Date. In addition, approximately 3,553,000 shares of common stock will be issued after six months into an escrow account. The KKR Investors will have the right to vote the escrowed shares. To the extent that certain contingencies regarding Federal income tax claims of the Company are resolved satisfactorily, the escrowed shares will be distributed to the KKR Investors. To the extent such matters are not settled satisfactorily, the escrowed shares will be returned to the Company and canceled. If all such shares are distributed to the KKR Investors, the KKR Investors would hold approximately 9,907,000 shares of common stock, or 18.1% of the then outstanding shares of common stock. (3) Approximate amounts based on a March 15, 1995 effective date for the reorganization and $555 million of Qualified Securities being issued under the Consensual Plan. To the extent that less than $555 million of Qualified Securities are issued (minimum amount is $530 million) the number of shares and percentage would increase. If all the shares of common stock that may be issued to the KKR Investors (see note 2 above) are issued, the percentage would be reduced to approximately 19.9%. UNDERWRITERS 6. UNDERWRITERS. GIVE THE NAME AND COMPLETE MAILING ADDRESS OF (A) EACH PERSON WHO, WITHIN THREE YEARS PRIOR TO THE DATE OF FILING THE APPLICATION, ACTED AS AN UNDERWRITER OF ANY SECURITIES OF THE OBLIGOR WHICH WERE OUTSTANDING ON THE DATE OF FILING THE APPLICATION, AND (B) EACH PROPOSED PRINCIPAL UNDERWRITER OF THE SECURITIES PROPOSED TO BE OFFERED. AS TO EACH PERSON SPECIFIED IN (A) GIVE THE TITLE OF EACH CLASS OF SECURITIES UNDERWRITTEN. a. Merrill Lynch & Co.; World Financial Center, North Tower, New York, NY 10281 b. The Series B Notes proposed to be offered will be exchanged with certain holders of claims against the applicant and the applicant's affiliates, as set forth in the Consensual Plan, without the assistance of any underwriter. CAPITAL SECURITIES 7. CAPITALIZATION. (A) FURNISH THE FOLLOWING INFORMATION AS TO EACH AUTHORIZED CLASS OF SECURITIES OF THE APPLICANT.
AS OF FEBRUARY 2, 1995 AMOUNT AMOUNT TITLE OF CLASS AUTHORIZED OUTSTANDING Mortgage-Backed Notes $1,450,000,000 $605,750,000 Asset-Backed Notes $ 249,864,000 $179,065,213 Series B Senior Extendible Reset Notes $ 180,000,000 $176,300,000 Series C Senior Extendible Reset Notes $ 20,000,000 $5,000,000 Senior Subordinated Extendible Reset Notes $ 350,000,000(1) $350,000,000 Subordinated Notes $ 350,000,000 $350,000,000 13-1/8% Subordinated Notes $ 50,000,000 $50,000,000 13-3/4% Subordinated Notes $ 100,000,000 $100,000,000 10-7/8% Subordinated Notes $ 90,000,000 $ 90,000,000 Common Stock, $.01 par value 50,000,000 shares 31,120,773 shares (1) Plus the amount of such Notes issued in payment of interest thereon
AS OF EFFECTIVE DATE AMOUNT AMOUNT TITLE OF CLASS AUTHORIZED OUTSTANDING Series B Senior Notes $ 490,000,000 $490,000,000(1) Due 2000 Mortgage-Backed Notes $1,450,000,000 $605,750,000 Asset-Backed Notes $ 249,864,000 $179,065,213 Asset and Residual Backed Notes $ 925,000,000(2) $925,000,000(2) Common Stock, $.01 par value 200,000,000 shares 50,484,000 shares(3) (1) This is the maximum amount to be issued under the Indenture. If $555 million of Qualified Securities are issued under the Consensual Plan, this amount will be reduced by any cash in excess of $45 million available to pay subordinated note claims after paying all other claims that have to be paid in cash. (2) This is an estimate of the amount to be issued to the public on or prior to the effective date in a public offering being registered under the Securities Act by Mid- State Trust IV and Mid-State Trust V, business trusts owned by Mid-State Homes, Inc., a subsidiary of the Company. Such offering is being underwritten by Lehman Brothers, Inc., Merrill Lynch Pierce Fenner & Smith Incorporated, NatWest Capital Markets Group and Nomura Securities, Inc. Approximate amount based on a March 15, 1995 effective date, and $555 million of Qualified Securities. (3) If all of the shares of common stock that may be issued to the KKR Investors, described in note (2) to Item 5 above, were issued as of the effective date, a total of approximately 54,869,000 shares of common stock will be outstanding.
(B) GIVE A BRIEF OUTLINE OF THE VOTING RIGHTS OF EACH CLASS OF VOTING SECURITIES REFERRED TO IN PARAGRAPH (A) ABOVE. AS OF FEBRUARY 2, 1995 With respect to the voting rights of the common stock of the Company, each holder of a share of such common stock is entitled to one vote on all matters on which such shareholders are entitled to vote. AS OF EFFECTIVE DATE With respect to the voting rights of the common stock of the Company, including the shares to be issued into escrow (as described in Note 2 to Item 5 above as of the effective date), each holder of a share of such common stock will be entitled to one vote on all matters on which such shareholders are entitled to vote, except that pursuant to a Shareholders' Agreement all shares of such common stock issued to the Celotex Settlement Fund Recipient under the Consensual Plan will be voted by the Celotex Settlement Fund Recipient (or by the beneficiaries of the Celotex Settlement Fund ), except with respect to matters that only affect such shares held by the Celotex Settlement Fund Recipient, in the same proportion as the votes cast by all other holders of shares of common stock on all matters and for all purposes. Upon transfer of such shares to a person not affiliated with a beneficiary of the Celotex Settlement Fund, such shares shall receive normal voting rights. INDENTURE SECURITIES Capitalized terms used in this Section 8, "Analysis of Indenture Provisions," and not otherwise defined herein shall have the meaning ascribed to them in the Indenture. 8. ANALYSIS OF INDENTURE PROVISIONS. INSERT AT THIS POINT THE ANALYSIS OF INDENTURE PROVISIONS REQUIRED UNDER SECTION 305(A)(2) OF THE ACT. (a) Definition of Default: Withholding of Notice. The following events are defined in the Indenture as "Events of Default": (i) failure by the Company to pay interest on the Notes for 5 days after becoming due; (ii) failure by the Company to pay the principal of or premium on the Notes (whether due to failure to make payment pursuant to a Change of Control Offer or Asset Sale Offer or otherwise) when due and payable; (iii) failure by the Company to perform any of its obligations under the Pledge Agreement or failure by any Subsidiary to perform any of its obligations under its Subsidiary Pledge Agreement or the Trustee is entitled to exercise any remedies pursuant to Section 11 of the Pledge Agreement or any Subsidiary Pledge Agreement; (iv) failure by the Company or any of its Subsidiaries to comply with any other covenant for 30 days after written notice from the Trustee or Holders of 25% in principal amount of the Notes outstanding (except failure to comply with the provisions of Sections 4.08, 4.09 and 5.01 of the Indenture which failure shall constitute an Event of Default with notice but without passage of time); (v) failure by the Company or any of its Significant Subsidiaries to make any payments when due (after giving effect to any applicable grace period and whether by reason of maturity, acceleration or otherwise) under any issue or issues of Indebtedness of the Company and/or one or more of its Significant Subsidiaries having an outstanding principal amount of $25 million or more individually or $50 million or more in the aggregate for all such issues of all such Persons; (vi) any final judgment or order (not covered by insurance) is entered against the Company or any Significant Subsidiary in excess of $25 million individually or $50 million in the aggregate for all such final judgments or orders against all such Persons and remains undischarged or unstayed for 60 days; (vii) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case or proceeding, (b) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding, (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, (d) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (e) makes a general assignment for the benefit of its creditors, or (f) takes any corporate action to authorize or effect any of the foregoing; (viii) a court of competent jurisdiction enters a judgment, decree or order under any Bankruptcy Law that is for relief against the Company or any Significant Subsidiary of the Company, in an involuntary case or proceeding which shall: (a) approve a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any Significant Subsidiary of the Company, (b) appoint a Custodian for the Company or any Significant Subsidiary of the Company or for all or substantially all of the property of any of them, or (c) order the merger, winding-up or liquidation of the Company or any Significant Subsidiary of the Company, and in each case the judgment, order or decree remains unstayed and in effect for 60 days; and (ix) any Lien granted or purported to be granted pursuant to the Pledge Agreement or any Subsidiary Pledge Agreement shall be or become unenforceable or invalid, or the priority thereof shall become diminished, or the Company or any Subsidiary or any Person acting by or on behalf of the Company or any Subsidiary shall contest or disaffirm any such Lien. (Section 6.01) If an Event of Default occurs and is continuing, the Trustee by written notice to the Company, or the Holders of at least 25% of the aggregate principal amount of the then outstanding Notes, by written notice to the Company and the Trustee, may declare all of the Notes to be due and payable immediately. Upon such declaration, the unpaid principal of, premium, if any, and accrued interest on the Notes shall be due and payable. Notwithstanding the foregoing, in the case of an Event of Default specified in clause (vii) or (viii) above with respect to the Company or any Significant Subsidiary, such an amount shall ipso facto become immediately due and payable without any declaration, notice or other act on the part of the Trustee or any Holder. (Section 6.02) If a Default or an Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. (Section 7.05) (b) Authentication and Delivery: Application of Proceeds. Securities may be authenticated and delivered from time to time pursuant to the Indenture and upon confirmation of the Consensual Plan to (i) Holders of Subordinated Note Claims that claim entitlement thereto based upon the making of or the failure to make the Subordinated Note Claim Election (and the Class U-4 Exchange Election, if applicable) with respect to a portion of such Holders' Subordinated Note Claim and (ii) the Celotex Settlement Fund Recipient for the benefit of the Holders of Veil Piercing Claims (Class U-7) with respect to a portion of such Holders' Veil Piercing Claim. The Trustee shall, upon a written order of the Company signed by two Officers, authenticate Series B Notes for original issue up to the aggregate principal amount stated above. The aggregate principal amount of Notes outstanding at any time may not exceed such amount. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate the Notes. An authenticating agent may authenticate the Notes whenever the Trustee may do so. Each reference in the Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. (Section 2.02) The Notes will be issued in exchange for claims against the Company or its affiliates as provided in the Consensual Plan, and accordingly, the issuance of the Notes will not result in proceeds to the applicant. (c) Release and Substitution of Property Subject to the Lien of the Indenture. The Company will not, and will not permit any of its Subsidiaries to, sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of the Company's Subsidiaries (other than pursuant to the Pledge Agreement or Subsidiary Pledge Agreement governing the Pledged Shares) except for the sale by the Company or a Subsidiary of all or part of the Capital Stock of a Non-Core Subsidiary and except for the sale of 100% of the Capital Stock of any other Subsidiary owned collectively by the Company and/or its Subsidiaries; provided that in either case such sale complies with the requirements of Section 4.09 of the Indenture. (Section 4.17) Section 7 of the Pledge Agreement and Section 7 of each Subsidiary Pledge Agreement provides that the Company and each Subsidiary, respectively, agrees that it will not (i) sell, pledge, hypothecate or otherwise convey or dispose of any or all of the Pledged Collateral, (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the Lien and security interest under such Pledge Agreement, or (iii) permit any of the Subsidiaries to merge or consolidate, unless all the outstanding capital stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged under such Pledge Agreement and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; provided, however, that the Company and its Subsidiaries may conduct Asset Sales in accordance with Section 4.09 of the Indenture, and upon the consummation of any such Asset Sale, any Pledged Collateral subject to such Asset Sale shall be released from the Lien of the Pledge Agreement or Subsidiary Pledge Agreement, as the case may be. (d) Satisfaction and Discharge. The Indenture shall cease to be of further effect other than with respect to: (A)(i) the Company's compensation and indemnity obligations and the Lien granted by the Company to the Trustee to secure such obligations (Section 7.07), and (ii) the Company's, the Trustee's and any Paying Agent's obligations with respect to money remaining unclaimed for two years (Section 8.06); when all outstanding Notes theretofore authenticated and issued have been delivered (other than destroyed, lost or stolen Notes that have been replaced or paid) to the Trustee for cancellation and the Company has paid all sums payable under the Indenture (Section 8.01). (B)(i) the Company's compensation and indemnity obligations and the Lien granted by the Company to the Trustee to secure such obligations (Section 7.07), (ii) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 of the Indenture, and as more fully set forth in such Section, payments in respect of the principal, of, premium, if any, and interest on such Notes when such payments are due, (Section 8.02(a)), (iii) the Company's obligations with respect to such Notes under Article Two and Section 4.02 of the Indenture (Section 8.02(b)) and (iv) Article Eight of the Indenture (Section 8.03(c)); upon the Company's exercise of its option to legally defease the Notes pursuant to Section 8.02 of the Indenture and when the Company has complied with all the conditions to such exercise set forth in Section 8.04 of the Indenture (Section 8.02), including the condition that the Company irrevocably deposit for the benefit of the Holders of the Notes such amounts as will be sufficient to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal, premium, if any, or interest on the outstanding Notes. (e) Evidence of Compliance. (i) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that to the best of each such officer's knowledge no Default or Event of Default has occurred (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited (or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto). (ii) The Company shall deliver to the Trustee within 3 Business Days of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. (Section 4.04) 9. OTHER OBLIGORS. GIVE THE NAME AND COMPLETE MAILING ADDRESS OF ANY PERSON, OTHER THAN THE APPLICANT, WHO IS AN OBLIGOR UPON THE INDENTURE SECURITIES. There are no other obligors with respect to the Notes. Certain Subsidiaries will pledge shares of common stock of Subsidiaries of the Company owned by them as security for the obligations of the Company under the Indenture and the Notes issued thereunder. CONTENTS OF APPLICATION FOR QUALIFICATION. This application for qualification comprises: a. Pages numbered 1 to 21, consecutively. b. The statement of eligibility and qualification of the trustee under the Indenture to be qualified. c. The following exhibits in addition to those filed as a part of the statement of eligibility and qualification of each trustee. Exhibit T3A1.* Certificate of Incorporation of the Company filed with Delaware Secretary of State on ______ __, ____ Exhibit T3A2.* Restated Certificate of Incorporation of the Company filed with Delaware Secretary of State on ___________ __, ____ Exhibit T3B.* Amended and Restated By Laws of the Company Exhibit T3C. Form of indenture including exhibits thereto Exhibit T3E1.* Disclosure Statement for Creditors Plan dated as of August 1, 1994, including Creditors Plan of Reorganization as an exhibit thereto, as filed with the United States Bankruptcy Court, Middle District of Florida, Tampa Division Exhibit T3E2. Supplement to Disclosure Statement for Amended Joint Plan of Reorganization, dated as of December 9, 1994, including the Amended Joint Plan of Reorganization (the "Consensual Plan") as an exhibit thereto, as filed with the United States Bankruptcy Court, Middle District of Florida, Tampa Division Exhibit T3E3. Notice of Order (A) approving Debtors' disclosure statement and Creditors' disclosure statement, (B) establishing procedures and deadlines for voting on and objecting to the debtors' joint plan of reorganization, (C) fixing the date of the initial confirmation hearing and of the scheduling of related hearings, and (D) approving related relief Exhibit T3E4. Notice of Order (A) approving disclosure statement supplement respecting consensual plan, (B) establishing procedures and deadlines regarding acceptances and rejections of, and objections to, the consensual plan and objections to the veil piercing settlement, (C) fixing the date of the hearing on confirmation of the consensual plan and on the veil piercing settlement and (D) approving related relief Exhibit T3E5.* Individual Ballot for Class S-6 (for accepting or rejecting the Creditors' Plan) Exhibit T3E6.* Master Ballot for Class S-6 (for accepting or or rejecting the Creditors' Plan) Exhibit T3E7.* Individual Ballot for Class U-4 (for accepting or rejecting the Creditors' Plan) Exhibit T3E8.* Master Ballot for Class U-4 (for accepting or rejecting the Creditors' Plan) Exhibit T3E9.* Individual Ballot for Class U-5 (for accepting or rejecting the Creditors' Plan) Exhibit T3E10.* Master Ballot for Class U-5 (for accepting or rejecting the Creditors' Plan) Exhibit T3E11.* Individual Ballot for Class U-6 (for accepting or rejecting the Creditors' Plan) Exhibit T3E12.* Master Ballot for Class U-6 (for accepting or rejecting the Creditors' Plan) Exhibit T3E13. Individual Class U-4 Vote Change Certification for the Consensual Plan Exhibit T3E14. Master Class U-4 Vote Change Certification for the Consensual Plan Exhibit T3E15. Individual Class U-5 Exchange Election Form for the Consensual Plan Exhibit T3E16. Master Class U-5 Exchange Election Form for the Consensual Plan Exhibit T3E17. Individual Class U-6 Vote Change Certification for the Consensual Plan Exhibit T3E18. Master Class U-6 Vote Change Certification for the Consensual Plan Exhibit T3E19.* Class U-7 Ballot for Accepting or Rejecting the Consensual Plan Exhibit T3E20. Individual Class S-6 Vote Change Certification for the Consensual Plan Exhibit T3E21. Master Class S-6 Vote Change Certification for the Consensual Plan Exhibit T3E22. Class U-4 Exchange Election Form for the Consensual Plan Exhibit T3E23. Master Class U-4 Exchange Election Form for the Consensual Plan Exhibit T3F. See Cross Reference Sheet showing the location in the Indenture of the provisions inserted therein pursuant to Section 310 through 318(a), inclusive, of the Trust Indenture Act of 1939 (included in Exhibit T3C hereof) * To be filed by amendment. SIGNATURE Pursuant to the requirements of the Trust indenture Act of 1939, the applicant, Walter Industries, Inc., a corporation organized and existing under the laws of the State of Delaware, has duly caused this application to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Tampa and State of Florida, on the sixth day of February, 1995. WALTER INDUSTRIES, INC. By:/s/ G. Roberth Durham G. Robert Durham Chief Executive Officer and President By:/s/ Kenneth J. Matlock Kenneth J. Matlock Executive Vice President and Chief Financial Officer Attest: /s/ John F. Turbiville FORM T-1 =================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE __________________ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _______ UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5459866 (Jurisdiction of incorporation (I.R.S. employer if not a U.S. national bank) identification No.) 114 West 47th Street 10036-1532 New York, NY (Zip Code) (Address of principal executive offices) __________________ Walter Industries, Inc. (Exact name of obligor as specified in its charter) Dellaware 13-3429953 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 1500 North Dale Mabry Highway Tampa, FL 33607 (Address of principal executive offices) (Zip Code) New Senior Notes Due 2000 (Title of the indenture securities) GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Washington, D.C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None 3. Voting Securities of the Trustee 2,999,020 shares of Common Stock - par value $5 per share 4. Trusteeships under Other Indentures Not applicable. 5. Interlocking Directorates and Similar Relationships with the Obligor or Underwriters Not applicable. 6. Voting Securities of the Trustee Owned by the Obligor or its Officials Not applicable. 7. Voting Securities of the Trustee Owned by Underwriters or their Officials Not applicable. 8. Securities of the Obligor Owned or Held by the Trustee Not applicable. 9. Securities of Underwriters Owned or Held by the Trustee Not applicable. 10. Ownership or Holdings by the Trustee of Voting Securities of Certain Affiliates or Securities Holders of the Obligor Not applicable. 11. Ownership or Holdings by the Trustee of any Securities of a Person Owning 50 Percent or More of the Voting Securities of the Obligor Not applicable. 12. Indebtedness of the Obligor to the Trustee Not applicable. 13. Defaults by the Obligor Not applicable. 14. Affiliations with the Underwriters Not applicable. 15. Foreign Trustee Not applicable. 16. List of Exhibits. T-1.1 - "Chapter 204, Laws of 1853, An Act to Incorporate the United States Trust Company of New York, as Amended", is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 20, 1991 with the Securities and Exchange Commission (the "Commission") pursuant to the Trust Indenture Act of 1939 (Registration No. 2221291). T-1.2 - The trustee was organized by a special act of the New York Legislature in 1853 prior to the time that the New York Banking Law was revised to require a Certificate of authority to commence business. Accordingly, under New York Banking Law, the Charter (Exhibit T-1.1) constitutes an equivalent of a certificate of authority to commence business. T-1.3 - The authorization of the trustee to exercise corporate trust powers is contained in the Charter (Exhibit T-1.1). T-1.4 - The By-laws of the United States Trust Company of New York, as amended to date, are incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 20, 1991 with the Commission pursuant to the Trust Indenture Act of 1939 (Registration No. 2221291). T-1.6 - The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939. T-1.7 - A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. NOTE As of February 3, 1995, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U.S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U.S. Trust Corporation. In answering Item 2 in this statement of eligibility as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 3rd day of February, 1995. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: William Eising Assistant Vice President Exhibit T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 March 19, 1992 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: S/Gerard F. Ganey Senior Vice President EXHIBIT T-1.7 Consolidated Report of Condition of United States Trust Company of New York and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business on September 30, 1994, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depository institutions: a. Noninterest bearing balances and currency and coin: $ 356,398 b. Interest bearing balances: 70,000 Held to maturity securities: 448,254 Available for sale securities: 1,021,191 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: a: Federal funds sold: 24,448 b: Securities purchased under agreements to resell: 0 Loans and lease financing receivables: a. Loans and leases, net of unearned income: 1,392,864 b. LESS: Allowance for loan and lease losses: 12,619 c. Loans and leases, net of unearned income, allowance and reserve: 1,380,245 Assets held in trading accounts: 0 Premises and fixed assets (including capitalized leases): 95,900 Other real estate owned: 11,418 Investments in unconsolidated subsidiaries and associated companies: 581 Customers' liability to this bank on acceptance outstanding: 0 Intangible assets: 1,854 Other assets: 123,230 TOTAL ASSETS: $ 3,533,519 LIABILITIES Deposits: a. In domestic offices: $ 2,032,684 (1) Non interest bearing: 898,457 (2) Interest bearing: 1,134,227 b. In foreign offices, Edge and Agreement subsidiaries, and IBF's: 7,611 (1) Noninterest bearing 0 (2) Interest bearing: 7,611 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: a. Federal funds purchased: 1,148,301 b. Securities sold under agreements to repurchase: 8,099 Demand notes issued to the U.S. Treasury: 2,000 Trading Liabilities 0 Other Borrowed Money: With original maturity of one year or less: 35,035 With original maturity of more than one year: 0 Mortgage indebtedness and obligations under capitalized leases: 1,243 Bank's liability on acceptances executed and outstanding: 0 Subordinated notes and debentures: 12,453 Other liabilities: 84,934 TOTAL LIABILITIES: $ 3,332,360 Limited life preferred stock and related surplus: 0 EQUITY CAPITAL Perpetual preferred stock and related surplus: 0 Common Stock: $ 14,995 Surplus: 41,500 Undivided profits and capital reserves: 148,014 Net unrealized holding gains (losses) on available-for-sale securities (3,350) Cumulative foreign currency translation adjustments: 0 TOTAL EQUITY CAPITAL: $ 201,159 TOTAL LIABILITIES, LIMITED LIFE PREFERRED STOCK, AND EQUITY CAPITAL: $ 3,533,519 I, RICHARD E. BRINKMANN, SENIOR VICE PRESIDENT & CONTROLLER, of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. RICHARD E. BRINKMANN, SVP & CONTROLLER October 31, 1994 We, the undersigned directors, attest the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. H. MARSHALL SCHWARZ : Directors JEFFREY S. MAURER : FREDERICK S. WONHAM : EX-99 2 Exhibit T3C [DRAFT - 02/03/95] WALTER INDUSTRIES, INC. ____________________ $490,000,000 SENIOR NOTES DUE 2000 Series B and Series B-1 ____________________ INDENTURE Date as of _______ __, 1995 ____________________ ____________________ UNITED STATES TRUST COMPANY OF NEW YORK Trustee CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310(a)(1). . . . . . . . . . . . . . . . . . . 7.10 (a)(2). . . . . . . . . . . . . . . . . . . 7.10 (a)(3). . . . . . . . . . . . . . . . . . . N.A. (a)(4). . . . . . . . . . . . . . . . . . . N.A. (a)(5). . . . . . . . . . . . . . . . . . . 7.10 (b) . . . . . . . . . . . . . . . . . . . . 7.10 (c) . . . . . . . . . . . . . . . . . . . . N.A. 311(a) . . . . . . . . . . . . . . . . . . . . 7.11 (b) . . . . . . . . . . . . . . . . . . . . 7.11 (c) . . . . . . . . . . . . . . . . . . . . N.A. 312(a) . . . . . . . . . . . . . . . . . . . . 2.05 (b) . . . . . . . . . . . . . . . . . . . . 11.03 (c) . . . . . . . . . . . . . . . . . . . . 11.03 313(a) . . . . . . . . . . . . . . . . . . . . 7.06 (b)(1). . . . . . . . . . . . . . . . . . . N.A. (b)(2). . . . . . . . . . . . . . . . . . . 7.06 (c) . . . . . . . . . . . . . . . . . . . . 7.06, 11.02 (d) . . . . . . . . . . . . . . . . . . . . 7.06 314(a) . . . . . . . . . . . . . . . . . . . . 4.03, 4.04, 11.02 (b) . . . . . . . . . . . . . . . . . . . . N.A. (c)(1). . . . . . . . . . . . . . . . . . . 11.04 (c)(2). . . . . . . . . . . . . . . . . . . 11.04 (c)(3). . . . . . . . . . . . . . . . . . . N.A. (d) . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . N.A. (f) . . . . . . . . . . . . . . . . . . . . N.A. 315(a) . . . . . . . . . . . . . . . . . . . . 7.01 (b) . . . . . . . . . . . . . . . . . . . . 7.05, 11.02 (c) . . . . . . . . . . . . . . . . . . . . 7.01 (d) . . . . . . . . . . . . . . . . . . . . 7.01 (e) . . . . . . . . . . . . . . . . . . . . 6.11 316(a)(last sentence). . . . . . . . . . . . . 2.09 (a)(1)(A) . . . . . . . . . . . . . . . . . 6.05 (a)(1)(B) . . . . . . . . . . . . . . . . . 6.04 (a)(2). . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . 6.07 (c) . . . . . . . . . . . . . . . . . . . . 2.12 317(a)(1). . . . . . . . . . . . . . . . . . . 6.08 (a)(2). . . . . . . . . . . . . . . . . . . 6.09 (b) . . . . . . . . . . . . . . . . . . . . 2.04 318(a) . . . . . . . . . . . . . . . . . . . . 11.01 (b) . . . . . . . . . . . . . . . . . . . . N.A. (c) . . . . . . . . . . . . . . . . . . . . 11.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS Page ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions . . . . . . . . . . . . . . . . . 1 Section 1.02. Other Definitions . . . . . . . . . . . . . . 18 Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . 18 Section 1.04. Rules of Construction . . . . . . . . . . . . 19 ARTICLE TWO THE NOTES Section 2.01. Form and Dating . . . . . . . . . . . . . . . 19 Section 2.02. Execution and Authentication. . . . . . . . . 20 Section 2.03. Registrar and Paying Agent. . . . . . . . . . 20 Section 2.04. Paying Agent to Hold Money in Trust . . . . . 21 Section 2.05. Holder Lists. . . . . . . . . . . . . . . . . 21 Section 2.06. Transfer and Exchange . . . . . . . . . . . . 21 Section 2.07. Replacement Notes . . . . . . . . . . . . . . 22 Section 2.08. Outstanding Notes . . . . . . . . . . . . . . 23 Section 2.09. Treasury Notes. . . . . . . . . . . . . . . . 23 Section 2.10. Temporary Notes . . . . . . . . . . . . . . . 23 Section 2.11. Cancellation. . . . . . . . . . . . . . . . . 24 Section 2.12. Defaulted Interest. . . . . . . . . . . . . . 24 Section 2.13. Exchange Offer. . . . . . . . . . . . . . . 24 ARTICLE THREE REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee. . . . . . . . . . . . . . 25 Section 3.02. Selection of Notes to Be Redeemed . . . . . . 26 Section 3.03. Notice of Redemption. . . . . . . . . . . . . 26 Section 3.04. Effect of Notice of Redemption. . . . . . . . 27 Section 3.05. Deposit of Redemption Price . . . . . . . . . 27 Section 3.06. Notes Redeemed in Part. . . . . . . . . . . . 27 Section 3.07. Optional Redemption . . . . . . . . . . . . . 28 Section 3.08. Mandatory Redemption. . . . . . . . . . . . . 28 Section 3.09. Offers to Purchase By Application of Excess Proceeds. . . . . . . . . . . . . 28 ARTICLE FOUR COVENANTS Section 4.01. Payment of Notes. . . . . . . . . . . . . . . 30 Section 4.02. Maintenance of Office or Agency . . . . . . . 31 Section 4.03. Reports . . . . . . . . . . . . . . . . . . . 31 Section 4.04. Compliance Certificate. . . . . . . . . . . . 32 Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . 33 Section 4.06. Stay, Extension and Usury Laws. . . . . . . . 33 Section 4.07. Corporate Existence . . . . . . . . . . . . . 33 Section 4.08. Change of Control . . . . . . . . . . . . . . 34 Section 4.09. Limitation on Asset Sales . . . . . . . . . . 35 Section 4.10. Limitation on Restricted Payments . . . . . . 37 Section 4.11. Limitation on Incurrence of Indebtedness; Issuance of Capital Stock . . . . . . . . . 39 Section 4.12. Limitation on Liens . . . . . . . . . . . . . 39 Section 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . 40 Section 4.14. Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . . . 40 Section 4.15. Limitation on Sale and Leaseback Transactions. . . . . . . . . . . . . . . . 41 Section 4.16. Compliance with Laws. . . . . . . . . . . . . 41 Section 4.17. Limitation on Sale of Capital Stock of Subsidiaries. . . . . . . . . . . . . . . . 41 ARTICLE FIVE SUCCESSORS Section 5.01. Limitation on Mergers, Consolidations and Sales of Assets . . . . . . . . . . . . 42 Section 5.02. Successor Corporation Substituted . . . . . . 42 ARTICLE SIX DEFAULTS AND REMEDIES Section 6.01. Events of Default . . . . . . . . . . . . . . 43 Section 6.02. Acceleration. . . . . . . . . . . . . . . . . 45 Section 6.03. Other Remedies. . . . . . . . . . . . . . . . 45 Section 6.04. Waiver of Past Defaults . . . . . . . . . . . 45 Section 6.05. Control by Majority . . . . . . . . . . . . . 46 Section 6.06. Limitation on Suits . . . . . . . . . . . . . 46 Section 6.07. Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . 47 Section 6.08. Collection Suit by Trustee. . . . . . . . . . 47 Section 6.09. Trustee May File Proofs of Claim. . . . . . . 47 Section 6.10. Priorities. . . . . . . . . . . . . . . . . . 48 Section 6.11. Undertaking for Costs . . . . . . . . . . . . 48 Section 6.12. Event of Default from Willful Action. . . . . 48 ARTICLE SEVEN TRUSTEE Section 7.01. Duties of Trustee . . . . . . . . . . . . . . 49 Section 7.02. Rights of Trustee . . . . . . . . . . . . . . 50 Section 7.03. Individual Rights of Trustee. . . . . . . . . 51 Section 7.04. Trustee's Disclaimer. . . . . . . . . . . . . 51 Section 7.05. Notice of Defaults. . . . . . . . . . . . . . 51 Section 7.06. Reports by Trustee to Holders of the Notes . . . . . . . . . . . . . . . . . . . 52 Section 7.07. Compensation and Indemnity. . . . . . . . . . 52 Section 7.08. Replacement of Trustee. . . . . . . . . . . . 53 Section 7.09. Successor Trustee by Merger, etc. . . . . . . 54 Section 7.10. Eligibility; Disqualification . . . . . . . . 54 Section 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . 55 ARTICLE EIGHT DISCHARGE OF INDENTURE Section 8.01. Discharge of Indenture; Option to Effect Legal Defeasance or Covenant Defeasance . . 55 Section 8.02. Legal Defeasance and Discharge. . . . . . . . 55 Section 8.03. Covenant Defeasance . . . . . . . . . . . . . 56 Section 8.04. Conditions to Legal or Covenant Defeasance. . 57 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. . . . . . . . . . . . . . . . . 58 Section 8.06. Repayment to Company. . . . . . . . . . . . . 59 Section 8.07. Reinstatement . . . . . . . . . . . . . . . . 59 ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes . . . . . 60 Section 9.02. With Consent of Holders of Notes. . . . . . . 61 Section 9.03. Compliance with Trust Indenture Act . . . . . 62 Section 9.04. Revocation and Effect of Consents . . . . . . 62 Section 9.05. Notation on or Exchange of Notes. . . . . . . 63 Section 9.06. Trustee to Sign Amendments, etc.. . . . . . . 63 ARTICLE TEN SECURITY Section 10.01. Pledge Agreement . . . . . . . . . . . . . . 63 Section 10.02. Recording, Etc. . . . . . . . . . . . . . . . 64 Section 10.03. Suits to Protect the Pledged Shares. . . . . 66 ARTICLE ELEVEN MISCELLANEOUS Section 11.01. Trust Indenture Act Controls. . . . . . . . . 66 Section 11.02. Notices . . . . . . . . . . . . . . . . . . . 67 Section 11.03. Communication by Holders of Notes with Other Holders of Notes. . . . . . . . . . . 68 Section 11.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . 68 Section 11.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . 68 Section 11.06. Rules by Trustee and Agents . . . . . . . . . 69 Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders. . . . . . . . . 69 Section 11.08. Governing Law . . . . . . . . . . . . . . . . 69 Section 11.09. No Adverse Interpretation of Other Agreements. . . . . . . . . . . . . . . . . 69 Section 11.10. Successors. . . . . . . . . . . . . . . . . . 70 Section 11.11. Severability. . . . . . . . . . . . . . . . . 70 Section 11.12. Counterpart Originals . . . . . . . . . . . . 70 Section 11.13. Table of Contents, Headings, etc. . . . . . . 70 EXHIBITS Exhibit A FORM OF SERIES B AND SERIES B-1 NOTES Exhibit B FORM OF PLEDGE AGREEMENT Exhibit C FORM OF SUBSIDIARY PLEDGE AGREEMENT Exhibit D SUBORDINATION PROVISIONS FOR SUBORDINATED INDEBTEDNESS SCHEDULE I INDENTURE dated as of __________, 1995 between WALTER INDUSTRIES, INC., a Delaware corporation (the "Company"), and United States Trust Company of New York as trustee (the "Trustee"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Company's Series B Senior Notes due 2000 (the "Series B Notes") and the Company's Series B-1 Senior Notes due 2000 (the "Series B-1 Notes" and, together with the Series B Notes, the "Notes"): ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Subsidiary of the Company (or such Person is merged into the Company or one of its Subsidiaries) or assumed in connection with the acquisition of assets from any such Person and not incurred in connection with, or in the contemplation of, such Person becoming a Subsidiary or such acquisition. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a publicly traded company shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Asset Sale" means any sale, lease, transfer or other disposition or series of related sales, leases, transfers or other dispositions, including, without limitation, by merger or consolidation, pursuant to any sale and leaseback transaction (other than to the extent included in clause (vi) of the definition of Permitted Indebtedness) or by exchange of assets and whether by operation of law or otherwise (other than sales in the ordinary course of business consistent with past practice), made by the Company or any of its Subsidiaries to any Person other than the Company or one of its Wholly Owned Subsidiaries of any assets of the Company or any of its Subsidiaries including, without limitation, assets consisting of any Capital Stock or other securities held by the Company or any of its Subsidiaries, to the extent that any such sale, lease, transfer, or other disposition or series of related sales, leases, transfers or other dispositions relates to properties or assets having a Fair Market Value in excess of $5 million or results in net proceeds in excess of $5 million. "Attributable Debt" means, in respect of a sale and leaseback transaction, at the time of determination, the greater of (a) the Fair Market Value of the property subject to such transaction and (b) the present value (discounted at the actual rate of interest implicit in such transaction) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or foreign law for the relief of debtors. "Bank Revolving Credit Facility" means the line of credit in a principal amount not to exceed $150,000,000 extended to the Company and certain of its Subsidiaries pursuant to an agreement dated as of _______, 1995, among the Company, certain of its Subsidiaries and _____________. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be so required to be capitalized on the balance sheet in accordance with GAAP. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the Issue Date, including, without limitation, all Preferred Stock. "Cash Equivalents" means (i) United States dollars, (ii) securities issued directly or fully Guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Thomson Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition. "Change of Control" means (i) any sale, lease or other transfer of all or substantially all of the assets of the Company to any Person (other than a Wholly Owned Subsidiary of the Company) in one transaction or a series of related transactions; (ii) the Company consolidates or merges with or into another Person pursuant to a transaction in which the outstanding Voting Stock of the Company is changed into or exchanged for cash, securities or other property, other than any such transaction where (a) the outstanding Voting Stock of the Company is changed into or exchanged for Voting Stock of the surviving corporation which is not Disqualified Stock and (b) the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving corporation immediately after such transaction; (iii) a Person or group becomes the beneficial owner of Capital Stock of the Company representing more than 50% of the voting power of such Capital Stock; provided, however, that this clause (iii) shall not apply to Lehman Brothers Inc. and its Affiliates and Kohlberg Kravis Roberts & Co. and its Affiliates or any group including any of the foregoing; (iv) Continuing Directors cease to constitute at least a majority of the Board of Directors of the Company; provided, however, that this clause (iv) shall not be applicable if the Continuing Directors do not constitute at least a majority of the Board of Directors as a result of the election of directors nominated by Lehman Brothers Inc. or its Affiliates or KKR or its Affiliates or any group including any of the foregoing; or (v) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company. "Commodity Agreement" means the obligation of any Person pursuant to any commodity purchase agreement, commodity swap agreement or other similar agreement designed to protect such Person or any of its Subsidiaries against fluctuations in commodity values. "Company" means the party named as such above, until a successor replaces such Person in accordance with the terms of this Indenture, and thereafter means such successor. "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, President or Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee. "Consensual Plan" means the Amended Joint Plan of Reorganization dated as of December 9, 1994, adopted with respect to the Company. "Consolidated Depreciation and Amortization Expense" of the Company and its Subsidiaries means, for any period for which the determination thereof is to be made, the depreciation and amortization expense (including, without limitation, amortization of goodwill, other intangibles, debt discount and debt issue costs) of the Company and such Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" means, for any period, on a consolidated basis for the Company and its Subsidiaries, the sum (without duplication) for such period of (i) Consolidated Net Income plus, to the extent deducted in determining Consolidated Net Income, each of (ii) Consolidated Income Tax Expense, (iii) Consolidated Depreciation and Amortization Expense, and (iv) Consolidated Fixed Charges. "Consolidated Fixed Charges" means, for the Company and its Subsidiaries, for any period, the sum (without duplication) of (i) the aggregate amount of interest, whether expensed or capitalized, paid, accrued or scheduled to be paid or accrued during such period (including any non-cash interest payments or accruals, the interest portion of Capital Lease Obligations, all amortization of original issue discount, net cash costs pursuant to Interest Rate Agreements, Currency Agreements and Commodity Agreements (including amortization of fees) and the interest component of any deferred payment obligation) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP and (ii) dividends in respect of Preferred Stock. "Consolidated Income Tax Expense" of the Company and its Subsidiaries means, for any period for which the determination thereof is to be made, the aggregate of the income tax expense of the Company and such Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP[; provided, however, that amounts payable for any period by Mid-State Homes, Inc. and its Subsidiaries pursuant to the Tax Sharing Agreement shall be excluded from the foregoing to the extent excluded in determining Consolidated Net Income of the Company and its Subsidiaries]. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided, that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of any Subsidiary that is subject to any Payment Restriction shall be excluded to the extent such Payment Restriction would limit the amount that otherwise could be paid to, or received by, such Person or a Wholly Owned Subsidiary of such Person not subject to any Payment Restriction, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of Preferred Stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such Preferred Stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Continuing Directors" means, with respect to the Company or any Subsidiary of the Company, a director who either was a member of the Board of Directors of the Company or such Subsidiary, as the case may be, on the Issue Date or who became a director of the Company or such Subsidiary subsequent to such date and whose election, or nomination for election by the Company's or such Subsidiary's stockholders, was duly approved by a majority of the Continuing Directors then on the Board of Directors of the Company or such Subsidiary, either by a specific vote or, with respect to the Company only, by approval of the proxy statement issued by the Company on behalf of the entire Board of Directors of the Company in which such individual is named as nominee for director. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 11.02 hereof or such other address as to which the Trustee may give notice to the Company. "Currency Agreement" means the obligation of any Person pursuant to any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect such Person or any of its Subsidiaries against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Disqualified Stock" means any Capital Stock of the Company or any Subsidiary of the Company which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event or with the passage of time, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the maturity date of the Notes, or which is exchangeable or convertible (whether at the option of the Company or the holder thereof or upon the happening of any event) into debt securities of the Company or any Subsidiary of the Company, except to the extent and only to the extent that such exchange or conversion rights cannot be exercised prior to the maturity of the Notes. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries outstanding on the Issue Date, until such Indebtedness is repaid. "Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Series B Notes for Series B-1 Notes. "Fair Market Value" means with respect to any asset, property or Capital Stock, the price which could be negotiated in an arm's length free market transaction between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. "Fair Market Value" shall be determined by the Board of Directors of the Company acting in good faith and shall be evidenced by a duly and properly adopted resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; except that any determination of the Fair Market Value made with respect to any real property or personal property which is customarily appraised shall be based upon an appraisal by an independent qualified appraiser when such property is material to the transaction giving rise to the need to determine Fair Market Value. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Note" means the temporary global certificate initially issued to the Trustee representing all the Series B Notes initially issued pursuant to the Consensual Plan. "Government Securities" means direct obligations of, or obligations Guaranteed by, the United States of America for the payment of which Guarantee or obligations the full faith and credit of the United States is pledged. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other liabilities. "Holder" means the owner of the Notes as reflected on the books of the Company. "incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee (including the Guarantee of the Indebtedness of a Subsidiary or other Affiliate) or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "incurrence, incurred," "incurrable" and "incurring" shall have meanings correlative to the foregoing), provided that the accrual of interest (whether such interest is payable in cash or in kind) and the accretion of original issue discount shall not be deemed an incurrence of Indebtedness, provided, further that (a) any Indebtedness or Disqualified Stock of a Person existing at the time such Person becomes (after the Issue Date) a Subsidiary (whether by merger, consolidation, acquisition or otherwise) of the Company shall be deemed to be incurred by such Subsidiary at the time it becomes a Subsidiary of the Company and (b) any amendment, modification or waiver of any document pursuant to which Indebtedness was previously incurred shall be deemed to be an incurrence of Indebtedness unless such amendment, modification or waiver does not (i) increase the principal or premium thereof or interest rate thereon (including by way of original issue discount), (ii) change to an earlier date the stated maturity thereof or the date of any scheduled or required principal payment thereon or the time or circumstances under which such Indebtedness may or shall be redeemed, (iii) if such Indebtedness is subordinated to the Notes, modify or affect, in any manner adverse to the holders, such subordination, (iv) if the Company is the obligor thereon, provide that a Subsidiary of the Company not already an obligor thereon shall be an obligor thereon or (v) violate, or cause the Indebtedness to violate, the provisions of Sections 4.12 or 4.13. "Indebtedness" means, with respect to any Person, without duplication, (i) all liabilities contingent or otherwise, of such Person (a) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures, drafts accepted or similar instruments or letters of credit or representing the balance deferred and unpaid of the purchase price of any property (other than any such balance that represents a Trade Payable which is not overdue by more than 90 days, according to the original terms of sale, unless such Trade Payable is being contested or has been renegotiated in good faith) or (c) for the payment of money relating to a Capital Lease Obligation; (ii) reimbursement obligations of such Person with respect to letters of credit; (iii) obligations of such Person with respect to Interest Rate Agreements, Currency Agreements or Commodity Agreements; (iv) all liabilities of others of the kind described in the preceding clause (i), (ii) or (iii) that such Person has Guaranteed, that have been incurred by a partnership in which it is a general partner (to the extent such Person is liable, contingently or otherwise therefor) or that is otherwise its legal liability (other than endorsements for collection in the ordinary course of business); and (v) all obligations of others secured by a Lien to which any of the properties or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of such Person are subject, whether or not the obligations secured thereby shall have been assumed by such Person or shall otherwise be such Person's legal liability. "Indenture" means this Indenture, as amended or supplemented from time to time. "Interest Rate Agreement" means the obligation of any Person pursuant to any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect such Person or any of its Subsidiaries against fluctuations in interest rates. "Investment" of any Person means (i) all investments by such Person in any other Person in the form of loans, advances or capital contributions, (ii) all Guarantees of Indebtedness or other obligations of any other Person by such Person, (iii) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Capital Stock or other securities of any other Person and (iv) all other items that would be classified as investments (including, without limitation, purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP. "Issue Date" means March 15, 1995, the date on which Notes are first to be issued under this Indenture. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Marketable Securities" means securities listed and trading on any national securities exchange or listed and trading on the NASDAQ National Market. "Maturity Date" means ___________, 2000. "Net Cash Proceeds" means, with respect to any Asset Sale, the cash proceeds of such Asset Sale, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash (except to the extent such obligations are financed or sold with recourse to the Company or any Subsidiary of the Company) and proceeds from the conversion of other property received when converted to cash, net of (a) reasonable third-party brokerage commissions and other reasonable third-party fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (b) provisions for all taxes as a result of such Asset Sale, as computed on a consolidated basis, and (c) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that was incurred in accordance with this Indenture and that either (i) is secured by a Lien incurred in accordance with this Indenture on the property or assets sold or (ii) is, by terms in effect on the Issue Date, required to be paid as a result of such sale, in each case to the extent actually repaid in cash. "Net Equity Proceeds" means (a) in the case of any sale by the Company of Qualified Capital Stock of the Company, the aggregate net cash proceeds received by the Company, after payment of expenses, commissions and the like incurred in connection therewith, and (b) in the case of any exchange, exercise, conversion or surrender of any outstanding Indebtedness of the Company or any Subsidiary for or into shares of Qualified Capital Stock of the Company, the amount of such Indebtedness (or, if such Indebtedness was issued at an amount less than the stated principal amount thereof, the accrued amount thereof as determined in accordance with GAAP) as reflected in the consolidated financial statements of the Company prepared in accordance with GAAP as of the most recent date next preceding the date of such exchange, exercise, conversion or surrender (plus any additional amount required to be paid by the holder of such Indebtedness to the Company or to any Wholly Owned Subsidiary of the Company upon such exchange, exercise, conversion or surrender and less any and all payments made to the holders of such Indebtedness, and all other expenses incurred by the Company in connection therewith), in the case of each of clauses (a) and (b)to the extent consummated after the Issue Date. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, excluding, however, (i) any gain (but not loss), together with any related provisions for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions and, for purposes of this definition only, disregarding limitations in the definition of "Asset Sale" with respect to Fair Market Value and net proceeds), or (b) the disposition of any securities or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries, (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss), (iii) for purposes of Section 4.10 only, amortization of existing goodwill of the Company on the Issue Date in the amount of $450 million [and (iv) in the case of the Company and its Subsidiaries, income tax expense payable for any period by Mid- State Homes, Inc. and its Subsidiaries pursuant to the Tax Sharing Agreement so long as such Persons are not in default thereunder]. "Non-Core Assets" means any assets other than those used directly or indirectly in the same or a similar line of business as the Company and the Persons listed on Schedule I hereto were engaged in on the Issue Date. "Non-Core Subsidiary" means any Subsidiary substantially all of whose assets consist of Non-Core Assets. "Note Custodian" means the Trustee, as custodian of the Global Note, or any successor entity thereto. "Notes" means, collectively, the Series B Notes and the Series B-1 Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer or the treasurer of the Company, that meets the requirements of Section 11.05 hereof. "Opinion of Counsel" means a written opinion from legal counsel acceptable to the Trustee that meets the requirements of Section 11.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Other Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made, which (x) do not in the aggregate materially detract from the value of the property or assets subject thereto or materially impair the use thereof in the operation of the business of the Company or any Subsidiary or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (ii) statutory Liens of landlords, and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate process of law, for which a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made which (x) do not in the aggregate materially detract from the value of the property or assets subject thereto or materially impair the use thereof in the operation of the business of the Company or any Subsidiary or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); and (v) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the business of the Company or any Subsidiary incurred in the ordinary course of business. "Payment Restriction" means with respect to a Subsidiary of any Person, any encumbrance, restriction or limitation, whether by operation of the terms of its charter or by reason of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation, on the ability of (i) such Subsidiary to (a) pay dividends or make other distributions on its Capital Stock or make payments on any obligation, liability or Indebtedness owed to such Person or any other Subsidiary of such Person, (b) make loans or advances to such Person or any other Subsidiary of such Person, or (c) transfer any of its properties or assets to such Person or any other Subsidiary of such Person, or (ii) such Person or any other Subsidiary of such Person to receive or retain any such (a) dividends, distributions or payments, (b) loans or advances, or (c) transfer of properties or assets. "Permitted Indebtedness" means (i) Indebtedness of the Company and its Subsidiaries under the Bank Revolving Credit Facility; (ii) Existing Indebtedness; (iii) unsecured Indebtedness of the Company to any Wholly Owned Subsidiary of the Company and unsecured Indebtedness of any Subsidiary of the Company to the Company or another Wholly Owned Subsidiary of the Company to the extent permitted by Section 4.10; (iv) obligations with respect to Interest Rate Agreements, Currency Agreements and Commodity Agreements; (v) Permitted Refinancing Indebtedness; and (vi) the incurrence by the Company or any Subsidiary of Indebtedness represented by Capital Lease Obligations, Attributable Debt, mortgage financings or Purchase Money Obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction of property newly acquired or constructed for use in the business of the Company or such Subsidiary, in an aggregate principal amount not to exceed $[25] million at any time outstanding. "Permitted Investments" means (i) any Investments in the Company or in a Wholly Owned Subsidiary of the Company that is engaged primarily in the same or a similar line of business as the Company and its Subsidiaries were engaged in on the Issue Date; (ii) any Investments in Cash Equivalents; (iii) Investments by the Company or any Wholly Owned Subsidiary of the Company in a Person, if as a result of such Investment (a) such Person becomes a Wholly Owned Subsidiary of the Company that is engaged primarily in the same or a similar line of business as the Company and its Subsidiaries were engaged in on the Issue Date; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of the Company (which remains a Wholly Owned Subsidiary following consummation of the transaction) and is engaged primarily in the same or a similar line of business as the Company and its Subsidiaries were engaged in on Issue Date; and (iv) other Investments in one or more Persons that do not exceed $25 million in the aggregate at any time outstanding. "Permitted Liens" means (i) Liens existing on the Issue Date; (ii) Liens now or hereafter securing Indebtedness outstanding under the Bank Revolving Credit Facility; (iii) Liens now or hereafter securing any obligations with respect to Interest Rate Agreements, Currency Agreements or Commodity Agreements; (iv) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company or at the time such Person becomes a Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Subsidiary of the Company; (v) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such acquisition; (vi) Purchase Money Liens and Liens to secure Capital Lease Obligations and mortgage financings included in clause (vi) of the definition of Permitted Indebtedness covering only the property acquired with such Indebtedness; (vii) Liens on assets of Subsidiaries securing Indebtedness of Subsidiaries (other than Permitted Indebtedness) incurred in compliance with Section 4.11; (viii) Liens securing Permitted Refinancing Indebtedness; provided that such Liens extend to or cover only the property or assets then securing the Indebtedness being refinanced; and (ix) Other Permitted Liens in the ordinary course of business. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Subsidiaries; provided that, except in the case of the redemption of all of the outstanding Notes, in which case none of the following shall be applicable, (l) the principal amount of such Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith), (2) such Indebtedness has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, (3) with respect to Subordinated Indebtedness, such Indebtedness is subordinated in right of payment pursuant to terms at least as favorable to the Holders of Notes as those, if any, contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, and (4) such Indebtedness is incurred only by the Company or the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "Pledge Agreement" means the Pledge Agreement dated as of the date of this Indenture, as amended, amended and restated or otherwise modified from time to time, pursuant to which the Company pledged the Pledged Shares owned by it to the Trustee, a copy of which is attached hereto as Exhibit B. "Pledged Shares" means all the outstanding shares of Common Stock of _________, _________ and _________, and of all other direct or indirect Subsidiaries of the Company, owned by the Company and/or its Subsidiaries, whether currently owned or hereafter acquired or created. "Preferred Stock" means, with respect to any Person, all Capital Stock of such Person which has a preference in liquidation or a preference with respect to the payment of dividends to another class of Capital Stock. "principal" of a Note means the principal of such Note plus the premium, if any, thereon. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act. "Purchase Money Liens" means Liens to secure or securing Purchase Money Obligations permitted to be incurred under this Indenture. "Purchase Money Obligations" means Indebtedness representing, or incurred to finance, the cost (a) of acquiring any assets and (b) of construction or improvement of property, in each case for use in the business of the Company and its Subsidiaries (including Purchase Money Obligations of any other Person at the time such other Person is merged with or into or is otherwise acquired by the Company or a Subsidiary), provided that (i) the principal amount of such Indebtedness does not exceed 100% of such cost, including construction charges, (ii) any Lien securing such Indebtedness does not extend to or cover any other asset or property other than the asset or property being so acquired or constructed and (iii) such Indebtedness is incurred, and any Liens with respect thereto are granted, within 180 days of the acquisition of such property or asset. "Qualified Capital Stock" means, with respect to any Person, any Equity Interest of such Person that is not Disqualified Stock. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of , 1995, relating to the Notes, for the benefit of certain Holders, as such agreement may be amended, modified or supplemented from time to time. "Responsible Officer," when used with respect to the Trustee, means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payment" means, with respect to any Person, any of the following: (i) any dividend or other distribution in respect of such Person's Capital Stock (other than (a) dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) and (b) in the case of Subsidiaries of the Company, dividends or distributions payable to the Company or to a Wholly Owned Subsidiary of the Company); (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock, or any option, warrant, or other right to acquire shares of Capital Stock, of the Company or any of its Subsidiaries; (iii) the making of any principal payment on, or the purchase, defeasance, repurchase, redemption or other acquisition or retirement for value, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, of any Indebtedness which is subordinated in right of payment to the Notes; and (iv) the making of any Investment (other than a Permitted Investment). "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Series B Notes" means the Series B Notes issued pursuant to this Indenture. "Series B-1 Notes" means the Series B-1 Notes issued pursuant to this Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule l-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Specified Holder" means a Holder to which one or more Notes is initially issuable pursuant to the Consensual Plan. "Subordinated Indebtedness" means any Indebtedness of the Company that (i) has a final maturity date after, and a Weighted Average Life to Maturity longer than, that of the Notes, (ii) is subordinated in right of payment to the Notes pursuant to subordination provisions contained in the agreements or instruments evidencing such Indebtedness or pursuant to which such Indebtedness is issued, which subordination provisions are not less favorable to the Holders than the subordination provisions set forth in Exhibit D to this Indenture and (iii) is not Guaranteed by any Subsidiary of the Company. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof has at least a majority ownership interest; provided, however, that Mid-State Homes, Inc. and its Subsidiaries shall not be deemed to be a Subsidiary of the Company for purposes of the Indenture. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of a Subsidiary. "Subsidiary Pledge Agreements" means the Subsidiary Pledge Agreements to be executed by the Subsidiaries of the Company with respect to any Pledged Shares owned by them, substantially in the form of Exhibit C attached hereto, as amended, amended and restated or otherwise modified from time to time. ["Tax Sharing Agreement" means that certain tax sharing agreement by and among the Company and its Subsidiaries and Mid-State Homes, Inc. and its Subsidiaries dated as of the Issue Date.] "TIA" means the Trust Indenture Act of 1939(15 U.S.C. sections 77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is qualified under the TIA. "Trade Payables" means any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by a Person arising in the ordinary course of business of such Person in connection with the acquisition of goods and services. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Voting Stock" means, with respect to any Person, (i) one or more classes of the Capital Stock of such Person having general voting power to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency) and (ii) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (i) above. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" means, with respect to any Person, a Subsidiary of such Person all of the outstanding Capital Stock of which (and all options, warrants or other rights to acquire any shares of such Capital Stock) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02. OTHER DEFINITIONS. Defined in Term Section "Affiliate Transaction. . . . . . . . . 4.14 "Asset Sale Offer". . . . . . . . . . . 3.09 "Change of Control Offer" . . . . . . . 4.08 "Change of Control Payment" . . . . . . 4.08 "Change of Control Payment Date". . . . 4.08 "Covenant Defeasance" . . . . . . . . . 8.03 "Event of Default". . . . . . . . . . . 6.01 "Excess Proceeds" . . . . . . . . . . . 4.09 "Legal Defeasance". . . . . . . . . . . 8.02 "Offer Amount". . . . . . . . . . . . . 3.09 "Offer Period". . . . . . . . . . . . . 3.09 "Paying Agent". . . . . . . . . . . . . 2.03 "Purchase Date" . . . . . . . . . . . . 3.09 "Registrar" . . . . . . . . . . . . . . 2.03 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the indenture securities means the Company and any successor obligor. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04 RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE TWO THE NOTES SECTION 2.01. FORM AND DATING. The Series B Notes and the Series B-1 Notes and the related Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, which is part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. On the Issue Date the Global Note representing all the initially issued Series B Notes shall be issued to the Note Custodian. The Global Note shall provide that it shall represent the aggregate amount of outstanding Series B Notes from time to time endorsed thereon and that the aggregate amount of outstanding Series B Notes represented thereby may from time to time be reduced, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any decrease in the amount of Series B Notes represented thereby shall be made by the Note Custodian. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers, authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the respective Notes. The aggregate principal amount of Notes outstanding at any time may not exceed $490,000,000. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate the Notes. An authenticating agent may authenticate the Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where the Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where the Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints the Trustee to act as the Registrar and Paying Agent. SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee, at least fifteen Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders. SECTION 2.06 TRANSFER AND EXCHANGE. When Notes are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge to the Holder shall be made for any registration of transfer or exchange, but the Company or the Trustee may require from the transferring or exchanging Holder payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charges payable upon exchanges pursuant to Section 2.13, 3.06, 4.08, 4.09 or 9.05). The Registrar shall not be required (A) to issue, to register the transfer of, or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.07 hereof and ending at the close of business on the day of selection; or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C)to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. The Note Custodian shall, in accordance with the instructions and procedures contained in an Agreement dated _______________, 1995 between the Company and the Note Custodian, cause the aggregate principal amount of the Global Note to be reduced and, following such reduction, the Company shall execute and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver to the Holder a definitive Series B Note in the appropriate principal amount. SECTION 2.07. REPLACEMENT NOTES. If the Holder claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company or Trustee may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. SECTION 2.09. TREASURY NOTES. (a) In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, by any Subsidiary, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company (other than a Specified Holder), shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. (b) In determining whether the Holders of the required principal amount of Notes have (i) directed the time, method or place of conducting any proceeding for any remedy available to the Trustee hereunder, or exercised any trust or power conferred upon the Trustee; (ii) consented to the waiver of any past Event of Default and its consequences; or (iii) consented to the postponement of any interest payment, Notes owned by a Specified Holder shall be disregarded and considered as though not outstanding only if such Specified Holder directly or indirectly controls, or is controlled by or under direct or indirect common control with, the Company, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by two Officers of the Company. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and, unless otherwise directed by the Company, shall retain or destroy canceled Notes in accordance with its normal practices. If such notes are destroyed, certification of the destruction of all canceled Notes shall be delivered to the Company, at the Company's request. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. EXCHANGE OFFER. The Series B Notes may be exchanged for Series B-1 Notes pursuant to the terms of the Exchange Offer. The Trustee and Registrar shall make the exchange as follows: (i) The Company shall present the Trustee with an Officers' Certificate certifying the following: (A) upon issuance of the Series B-1 Notes, the transactions contemplated by the Exchange Offer have been consummated; and (B) the principal amount at maturity of Series B Notes properly tendered in the Exchange Offer (together with such Notes), the name of each Holder of such Notes, the principal amount at maturity properly tendered in the Exchange Offer by each such Holder and the name and address to which Series B-1 Notes shall be registered and sent for each such Holder. (ii) The Trustee, upon receipt of such Officers' Certificate, an Opinion of Counsel satisfactory to the Trustee that the Series B-1 Notes have been registered under Section 5 of the Securities Act and the Indenture has been qualified under the TIA, and a Company Order, shall authenticate Series B-1 Notes registered in the names, and in the principal amounts at maturity, indicated in such Officers' Certificate. (iii) The Trustee shall deliver such Series B-1 Notes to the Holders thereof as indicated in such Officers' Certificate. ARTICLE THREE REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of the Notes and Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date (unless a shorter notice shall be satisfactory to the Trustee), an Officers' Certificate setting forth (i) the redemption date, (ii) the principal amount of Notes to be redeemed and (iii) the redemption price. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed among the Holders of the Notes on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate (and in such manner as complies with applicable legal and stock exchange requirements, if any). The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; and (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. Whichever of the Trustee or the Paying Agent receiving the money shall promptly return to the Company any money deposited with it by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at a redemption price of 101% of the principal amount then outstanding, plus accrued and unpaid interest thereon to the applicable date of redemption, provided, however, that if a redemption is made from the Excess Proceeds of any Asset Sales as described in Section 4.09, the redemption price will be 100% of the principal amount then outstanding, plus accrued and unpaid interest thereon to the applicable date of redemption; and provided further, however, that if such redemption is in part, not less than $150 million principal amount of the Notes in the aggregate remain outstanding after giving effect to such redemption. SECTION 3.08. MANDATORY REDEMPTION. Except as set forth under Sections 4.08 and 4.09 hereof, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.09. OFFERS TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.09 hereof, the Company shall commence an offer to all Holders of Notes to purchase such Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.09 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Within 10 days of each date on which the aggregate, amount of Excess Proceeds exceeds $25 million, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders of the Notes, with a copy to the Trustee and shall specify the purchase date, which shall be no earlier than 30 days nor later than 40 days from the date such notice is mailed. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders of Notes. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.09 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Asset Sale Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuit to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary if appointed by the Company, or a Paying Agent at the address specified in the notice at least three Business Days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes in connection with an Asset Sale Offer. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. ARTICLE FOUR COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds at least one Business Day before that date, money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of, the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03. REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders (i) all reports that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information and reports with the SEC for public availability (unless the SEC will not accept such a filing) for so long as any Notes are outstanding. The Company will also make such information available to investors who request it in writing. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it will furnish to the Holders and to beneficial holders of Notes and to prospective purchasers of Notes designated by the Holders, upon their request, the information required to be delivered pursuant to Rule 144(A)(d)(4) under the Securities Act. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Article Five hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, promptly, but in any case within 3 Business Days of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants, or the performance, of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted SECTION 4.07. CORPORATE EXISTENCE. Subject to Article Five and Section 4.17 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders. SECTION 4.08. CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company will mail a notice to each Holder stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.08 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 40 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes in connection with a Change of Control. On the Change of Control Payment Date, the Company shall (1) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof tendered to the Company. The Paying Agent shall promptly mail to each Holder of Notes so accepted the Change of Control payment for such Notes, and the Trustee shall promptly authenticate and mail to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. SECTION 4.09. LIMITATION ON ASSET SALES. The Company shall not, and shall not permit any of its Subsidiaries to, consummate any Asset Sale, unless (i) the Company (or its Subsidiaries, as the case may be) receives consideration at the time of such sale or other disposition at least equal to the Fair Market Value thereof; (ii) not less than 85% of the consideration received by the Company (or its Subsidiaries, as the case may be) is in the form of cash or Cash Equivalents; provided, however, that the amount of (a) any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet or in the notes thereto), of the Company or any Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets, (b) any notes or other obligations received by the Company or its Subsidiaries from such transferee that are immediately converted by the Company or such Subsidiary into cash (to the extent of the cash received) and (c) any Marketable Securities received by the Company or its Subsidiaries from such transferee that are converted by the Company or such Subsidiary into cash within 90 days following receipt (to the extent of the cash received), shall be deemed to be cash for purposes of this clause (ii); and (iii) the Net Cash Proceeds received by the Company (or its Subsidiaries, as the case may be) from such Asset Sale are applied in accordance with the following paragraphs. The Company may, (i) within 60 days following the receipt of Net Cash Proceeds from any Asset Sale, apply such Net Cash Proceeds to the repayment of Indebtedness of the Company under the Bank Revolving Credit Facility to the extent required by the terms thereof as in effect on the Issue Date, provided that any such repayment shall result in a permanent reduction in the revolving credit or other commitment relating thereto in an amount equal to the principal amount so repaid; or (ii) in the case of the sale of Non-Core Assets or Capital Stock of Non-Core Subsidiaries to the extent the aggregate proceeds are less than $25 million in any twelve consecutive months, within 180 days following the receipt of Net Cash Proceeds from any such Asset Sale, apply such Net Cash Proceeds to make an investment in the same or similar lines of business as the Company and its Subsidiaries were engaged in on the Issue Date. If, upon completion of the applicable period, any portion of the Net Cash Proceeds of any Asset Sale shall not have been applied by the Company as described in clause (i) or (ii) above (the "Excess Proceeds") and such Excess Proceeds, together with any remaining unapplied Excess Proceeds from any prior Asset Sale, exceed $25 million, then the Company will be obligated either to (A) redeem the Notes pursuant to Sections 3.01 through 3.07 (on a pro rata basis if the amount available for such redemption is less than the outstanding principal amount of the Notes plus accrued and unpaid interest, if any, to the date of redemption) at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption or (B) make an offer to repurchase the Notes pursuant to Section 3.09 (on a pro rata basis if the amount available for such repurchase is less than the outstanding principal amount of the Notes plus accrued and unpaid interest, if any, to the date of repurchase) at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase; provided, however, that if following such a redemption or an offer to repurchase, assuming 100% acceptance, the outstanding principal amount of the Notes would be less than $150 million in the aggregate, the Excess Proceeds shall be utilized as provided in the following paragraph until such time as the aggregate of all unapplied Excess Proceeds from all Asset Sales is sufficient to redeem or repurchase 100% of the outstanding principal amount of the Notes, at which time the Company will be obligated to either redeem or offer to repurchase the Notes as provided above. If the aggregate principal amount of Notes surrendered by Holders thereof plus accrued and unpaid interest, if any, exceeds the amount of Excess Proceeds, the Company shall select the Notes to be purchased on a pro rata basis. If the aggregate principal amount of Notes surrendered by Holders thereof plus accrued and unpaid interest, if any, is less than the amount of Excess Proceeds, the unused portion of such Excess Proceeds may be used by the Company for general corporate purposes. This Section 4.09 does not apply to a transaction which is governed by Sections 4.08 or 5.01 hereof. Pending application pursuant to the above paragraphs, including to the extent unapplied Excess Proceeds do not exceed $25 million, Net Cash Proceeds shall be either invested in Cash Equivalents or remitted to the applicable lender to pay down any Indebtedness outstanding under the Bank Revolving Credit Facility. SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall cause each of its Subsidiaries not to, directly or indirectly, make any Restricted Payment unless: (i) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Restricted Payment; (ii) at the time of and immediately after giving effect to such Restricted Payment, at least $1.00 of additional Indebtedness could be incurred under the Consolidated EBITDA to Consolidated Fixed Charges test applicable to Indebtedness incurred by the Company (other than Subordinated Indebtedness) or a Subsidiary pursuant to Section 4.11 hereof; (iii) immediately after giving effect to such Restricted Payment, the aggregate amount of all Restricted Payments declared or made after the Issue Date does not exceed the sum of (a) 50% of the Consolidated Net Income of the Company (or in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit) during the period (treated as one accounting period) beginning with _______________, 1995 and ending on the last day of the fiscal quarter immediately preceding the date of declaration or making of such Restricted Payment; plus (b) 100% of the aggregate Net Equity Proceeds received by the Company from the issue or sale, after the Issue Date, of Capital Stock of the Company (other than the issue or sale of (1) Disqualified Stock or (2) Capital Stock of the Company to any Subsidiary of the Company or (3) Capital Stock issued pursuant to the Consensual Plan) and any Indebtedness or other securities of the Company (other than the issue or sale to any Subsidiary of the Company) convertible into or exercisable for Qualified Capital Stock of the Company which has been so converted or exercised, as the case may be; plus (c) 100% of the aggregate net cash proceeds received by the Company or any Subsidiary, after payment of expenses, commissions and the like incurred in connection therewith, in repayment and termination of any Investment made after the Issue Date which was a Restricted Payment not to exceed the amount of such Restricted Payment and less any such amounts included in Consolidated Net Income of the Company; plus (d) $25 million. Notwithstanding the foregoing, the above limitations will not prevent: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment complied with the provisions hereof; (ii) the purchase, redemption, acquisition or retirement of any shares of Capital Stock of the Company in exchange for, or out of the net proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, shares of Qualified Capital Stock of the Company; (iii) the redemption or retirement of Indebtedness of the Company which is subordinate in right of payment to the Notes, in exchange for, by conversion into, or out of the net proceeds of the substantially concurrent issue or sale (other than to a Subsidiary of the Company) of Qualified Capital Stock of the Company or Permitted Refinancing Indebtedness; or (iv) commencing on or after the first anniversary of the Issue Date, the declaration or payment of a regular quarterly dividend in respect of the Common Stock of the Company at a rate not to exceed $.025 per share; provided that no Default or Event of Default has occurred and is continuing at the time, or shall occur as a result, of any of the actions contemplated in clauses (i) through (iv) above, and provided further, in the case of clause (iv) above, at the time of and immediately after giving effect to such Restricted Payment, at least $1.00 of additional indebtedness could be incurred under the Consolidated EBITDA to Consolidated Fixed Charges test applicable to Indebtedness incurred by the Company (other than Subordinated Indebtedness) or a Subsidiary pursuant to Section 4.11 hereof. SECTION 4.11. LIMITATION ON INCURRENCE OF INDEBTEDNESS; ISSUANCE OF CAPITAL STOCK. (a) The Company will not, and will not permit any Subsidiary to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness); provided the Company or any Subsidiary may incur Indebtedness, including Acquired Indebtedness, if (i) at the time of such incurrence, the ratio of Consolidated EBITDA to Consolidated Fixed Charges for the period of the four consecutive fiscal quarters then ended immediately prior to such incurrence, taken as one period and calculated on a pro forma basis as if such Indebtedness had been incurred and the proceeds therefrom applied on the first day of such four-quarter period and, in the case of Acquired Indebtedness, as if the related acquisition (whether by means of purchase, merger or otherwise) also had occurred on such date with the appropriate adjustments with respect to such acquisition being included in such pro forma calculation, would have been, in the case of an incurrence of Subordinated Indebtedness by the Company, greater than 2.25 to 1 and, in the case of an incurrence of any other Indebtedness by the Company or of any Indebtedness by a Subsidiary, greater than 3.0 to 1 and (ii) no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of such Indebtedness. For purposes of making the computation referred to above, acquisitions and divestitures that have been made by the Company or any of its Subsidiaries, including all mergers or consolidations, during such four-quarter period or subsequent to such four-quarter period and on or prior to the time of such incurrence shall be calculated on a pro forma basis assuming that all such acquisitions, divestitures, mergers and consolidations had occurred on the first day of such four- quarter period. The foregoing limitation will not apply to the incurrence of Permitted Indebtedness. (b) The Company will not permit any of its Subsidiaries to issue any Capital Stock (other than to the Company or to a Wholly Owned Subsidiary of the Company). The Company will not issue Disqualified Stock. SECTION 4.12. LIMITATION ON LIENS. The Company shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any property or assets of the Company or of any Subsidiary of the Company or any Capital Stock or Indebtedness of any Subsidiary of the Company, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Company to (i) pay dividends or make any other distributions on its Capital Stock, or any other interest or participation in or measured by its profits, owned by the Company or a Subsidiary; (ii) pay any Indebtedness owed to the Company or a Subsidiary of the Company; (iii) make loans or advances to the Company or a Subsidiary of the Company or Guarantee Indebtedness of the Company or a Subsidiary; or (iv) transfer any of its properties or assets to the Company or a Subsidiary of the Company, except for (a) [describe any existing agreements which must remain in place]; (b) consensual encumbrances binding upon any Person at the time such Person becomes a Subsidiary of the Company (unless the agreement creating such consensual encumbrance was entered into in connection with, or in contemplation of, such entity becoming a Subsidiary); (c) consensual encumbrances or restrictions under any agreement that refinances or replaces any agreement described in clauses (a) or (b) above, provided that the terms and conditions of any such restrictions are no less favorable to the Holders than those under the agreement so refinanced or replaced; (d) customary non-assignment provisions in leases, purchase money financings and any encumbrance or restriction due to applicable law; (e) restrictions imposed by law; (f) restrictions imposed on a Subsidiary pursuant to a bona fide contract for sale of such Subsidiary by the Company; and (g) restrictions on the transfer of assets subject to Liens permitted by this Indenture. SECTION 4.14. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any transaction or series of transactions (including, without limitation, the sale, purchase or lease of any assets or properties or the rendering of any services) with any Affiliate or holder of 5% or more of the Company's or any Subsidiary's common stock (other than with a Wholly Owned Subsidiary of the Company) (an "Affiliate Transaction"), on terms that are less favorable to the Company or such Subsidiary, as the case may be, than would be available in a comparable transaction negotiated on an arm's length basis with an unrelated Person. In addition, the Company will not, and will not permit any Subsidiary of the Company to, enter into an Affiliate Transaction, or any series of related Affiliate Transactions, unless (i) with respect to such Affiliate Transaction or Transactions involving or having a value of more than $1 million, the Company has obtained the approval of a majority of the Board of Directors of the Company (including a majority of the Company's disinterested directors) and (ii) with respect to such Affiliate Transaction or Transactions involving or having a value of more than $5 million, the Company has delivered to the Trustee an opinion of an independent investment banking firm or appraisal firm of national standing to the effect that such Transaction or Transactions are fair to the Company or such Subsidiary, as the case may be, from a financial point of view. SECTION 4.15. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. Except to the extent included in clause (vi) of the definition of Permitted Indebtedness, the Company will not, and will not permit any of its Subsidiaries to, enter into any sale and leaseback transaction with respect to any property (whether now owned or hereafter acquired) unless (i) the sale or transfer of the property to be leased complies with the requirements of Section 4.09 hereof and (ii) the Company or such Subsidiary would be entitled pursuant to Section 4.11 hereof to incur additional Indebtedness under the Consolidated EBITDA to Consolidated Fixed Charges test applicable to Indebtedness incurred by the Company (other than Subordinated Indebtedness) or a Subsidiary in an amount at least equal to the Attributable Debt in respect of such sale and leaseback transaction. SECTION 4.16. COMPLIANCE WITH LAWS The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except such as are being contested in good faith and by appropriate proceedings and except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. SECTION 4.17. LIMITATION ON SALE OF CAPITAL STOCK OF SUBSIDIARIES The Company will not, and will not permit any of its Subsidiaries to, sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of the Company's Subsidiaries (other than pursuant to the Pledge Agreement or Subsidiary Pledge Agreement governing the Pledged Shares) except for the sale by the Company or a Subsidiary of all or part of the Capital Stock of a Non-Core Subsidiary and except for the sale of 100% of the Capital Stock of any other Subsidiary owned collectively by the Company and/or its Subsidiaries; provided that in either case such sale complies with the requirements of Section 4.09. ARTICLE FIVE SUCCESSORS SECTION 5.01. LIMITATION ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS The Company will not consolidate or merge with or into any other Person, or permit any other Person to consolidate or merge with or into the Company, nor will the Company sell, lease, convey or otherwise dispose of all or substantially all of its assets unless (i) the entity formed by or surviving any such consolidation or merger, or to which such sale, lease, conveyance or other sale shall have been made (the "Surviving Entity"), is a corporation organized and existing under the laws of the United States, any state thereof, or the District of Columbia; (ii) the Surviving Entity assumes by supplemental indenture all of the obligations of the Company under the Notes and this Indenture; (iii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iv) immediately after giving effect to such transaction (but prior to any purchase accounting adjustments resulting from the transaction), the Consolidated Net Worth of the Company or the Surviving Entity, as the case may be, would be at least equal to the Consolidated Net Worth of the Company immediately prior to such transaction; and (v) immediately after giving effect to such transaction, the Company or the Surviving Entity, as the case may be, could incur at least $1.00 of additional Indebtedness under the Consolidated EBITDA to Consolidated Fixed Charges test applicable to Indebtedness incurred by the Company (other than Subordinated Indebtedness) or a Subsidiary pursuant to Section 4.11. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture and the Notes referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. When a successor corporation assumes all of the obligations of the Company hereunder and under the Notes and agrees to be bound hereby and thereby, the predecessor Company shall be released from such obligations. ARTICLE SIX DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" shall occur upon: (i) failure by the Company to pay interest on the Notes for 5 days after becoming due; (ii) failure by the Company to pay the principal of or premium on the Notes (whether due to failure to make payment pursuant to a Change of Control Offer or Asset Sale Offer or otherwise) when due and payable; (iii) failure by the Company to perform any of its obligations under the Pledge Agreement or failure by any Subsidiary to perform any of its obligations under its Subsidiary Pledge Agreement or the Trustee is entitled to exercise any remedies pursuant to Section 11 of the Pledge Agreement or any Subsidiary Pledge Agreement; (iv) failure by the Company or any of its Subsidiaries to comply with any other covenant for 30 days after written notice from the Trustee or Holders of 25% in principal amount of the Notes outstanding (except failure to comply with the provisions of Sections 4.08, 4.09 and 5.01 which failure shall constitute an Event of Default with notice but without passage of time); (v) failure by the Company or any of its Significant Subsidiaries to make any payments when due (after giving effect to any applicable grace period and whether by reason of maturity, acceleration or otherwise) under any issue or issues of Indebtedness of the Company and/or one or more of its Significant Subsidiaries having an outstanding principal amount of $25 million or more individually or $50 million or more in the aggregate for all such issues of all such Persons; (vi) any final judgment or order (not covered by insurance) is entered against the Company or any Significant Subsidiary in excess of $25 million individually or $50 million in the aggregate for all such final judgments or orders against all such Persons and remains undischarged or unstayed for 60 days; (vii) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case or proceeding, (b) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding, (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, (d) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (e) makes a general assignment for the benefit of its creditors, or (f) takes any corporate action to authorize or effect any of the foregoing; (viii) a court of competent jurisdiction enters a judgment, decree or order under any Bankruptcy Law that is for relief against the Company or any Significant Subsidiary of the Company, in an involuntary case or proceeding which shall: (a) approve a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any Significant Subsidiary of the Company, (b) appoint a Custodian for the Company or any Significant Subsidiary of the Company or for all or substantially all of the property of any of them, or (c) order the winding-up or liquidation of the Company or any Significant Subsidiary of the Company, and in each case the judgment, order or decree remains unstayed and in effect for 60 days; and (ix) any Lien granted or purported to be granted pursuant to the Pledge Agreement or any Subsidiary Pledge Agreement shall be or become unenforceable or invalid, or the priority thereof shall become diminished, or the Company or any Subsidiary or any Person acting by or on behalf of the Company or any Subsidiary shall contest or disaffirm any such Lien. SECTION 6.02. ACCELERATION. If an Event of Default occurs and is continuing, the Trustee by written notice to the Company, or the Holders of at least 25% of the aggregate principal amount of the then outstanding Notes, by written notice to the Company and the Trustee, may declare all of the Notes to be due and payable immediately. Upon such declaration, the unpaid principal of, premium, if any, and accrued interest on the Notes shall be due and payable. Notwithstanding the foregoing, in the case of an Event of Default specified in clause (vii) or (viii) of Section 6.01 with respect to the Company or any Significant Subsidiary, such an amount shall ipso facto become immediately due and payable without any declaration, notice or other act on the part of the Trustee or any Holder. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the principal of, premium, if any, and interest on the Notes and to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 6.07 and 9.02, the Holders of not less than a majority in aggregate principal amount of the then outstanding Notes, by written notice to the Trustee, may on behalf of the Holders of all of the Notes (a) waive any existing Default or Event of Default and its consequences, except a continuing Default or Event of Default in the payment of interest on, premium, if any, or the principal of, the Notes and/or (b)rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it under this Indenture; provided that the Trustee may take any other actions it deems proper that are not inconsistent with these directions. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal, premium, if any, and interest on the Notes, on or after the respective due dates expressed in the Notes (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 and 6.09 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claim or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. SECTION 6.12. EVENT OF DEFAULT FROM WILLFUL ACTION. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem any series of Notes pursuant to Section 3.07 hereof, a one percent premium shall also become and be immediately due and payable to the extent permitted by law. The Trustee will have no responsibility for making, or obligation to make, any determination that any such Event of Default has occurred by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company pursuant to this Section 6.12. The Company will provide the Trustee with an Officers' Certificate setting forth the date such premium is required to be paid at least 45 days prior to such payment date. ARTICLE SEVEN TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which, by any provision hereof, are required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) No provision of this Indenture shall be construed to relieve the Trustee from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to the Trustee against any cost, loss, liability or expense. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (f) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, shall not be accountable for any money paid to the Company or upon the Company's direction under any provision of this Indenture, shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or an Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each [__________] 15 beginning with the [__________] 15 following the date of this Indenture, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA section 313(a) (but if no event described in TIA section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA section 313(c). A copy of each report at the time of its mailing to the Holders shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed. The Company shall promptly notify the Trustee whenever the Notes become listed on any stock exchange or of any delisting thereof. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, damages, claims, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, damage, claim, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(vii) or Section 6.01(viii), the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of the Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not accept its appointment within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million or, in the event that the Trustee is part of a bank holding company system, the bank holding company must have a combined capital and surplus of at least $ 100 million, in either case as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA section 310(a)(1), (2) and (5). The Trustee is subject to TIA section 310(b), including the provision permitted by the second sentence of TIA section 310(b)(9). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA section 311(a), excluding any creditor relationship listed in TIA section 311(b). A Trustee who has resigned or been removed shall be subject to TIA section 311(a) to the extent indicated therein. ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. DISCHARGE OF INDENTURE; OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. (a) This Indenture shall cease to be of further effect (except that the Company's obligations under Section 7.07 and the Company's, the Trustee's and any Paying Agent's obligations under Section 8.06 shall survive) when all outstanding Notes theretofore authenticated and issued have been delivered (other than destroyed, lost or stolen Notes that have been replaced or paid) to the Trustee for cancellation and the Company has paid all sums payable hereunder. (b) In addition, the Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes, this Indenture, the Pledge Agreement and any Subsidiary Pledge Agreement (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal, of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article Two and Section 4.02 hereof and (c) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15 and 4.17 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(iv) through 6.01(vi) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, or interest on the outstanding Notes; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article Eight concurrently with such incurrence) or insofar as Section 6.01(vii) or 6.01(viii) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non- callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States Dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's obligations to Holders in the case of a merger or consolidation or sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the Company's properties or assets pursuant to Article Five hereof; (d) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights hereunder of any Holder; or (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. The Company and the Trustee may amend or supplement this Indenture, the Pledge Agreement or any Subsidiary Pledge Agreement and the Notes may be amended or supplemented, with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Pledge Agreement or any Subsidiary Pledge Agreement or the Notes, may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of the Notes a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture, the Pledge Agreement or any Subsidiary Pledge Agreement or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver of any provision of this Indenture, the Pledge Agreement or any Subsidiary Pledge Agreement or the Notes; (b) reduce the principal of or change the fixed maturity of any Note; (c) alter any of the provisions with respect to the redemption of the Notes except with respect to Sections 4.08 and 4.09 hereof or reduce the purchase price payable in connection with repurchases of Notes pursuant to Sections 4.08 or 4.09 hereof; (d) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (e) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (f) make the principal of, or the interest on, any Note payable in money other than that stated in the Notes; (g) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of, premium, if any, or interest on the Notes; (h) waive a redemption payment with respect to any Note except for a payment required by Section 4.08 or 4.09; (i) alter the ranking of the Notes relative to other Indebtedness of the Company; or (j) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. Upon the direction of the Company, the Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee need not sign any supplemental indenture adversely affecting its rights. The Company may not sign an amendment or supplemental Indenture until its Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE TEN SECURITY SECTION 10.01. PLEDGE AGREEMENT. In order to secure the due and punctual payment of the principal of, premium, if any, and interest on the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, call for redemption, or otherwise, and interest on the overdue principal, premium and interest, if any, of the Notes and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, the Company will, and to the extent applicable will cause each Subsidiary to, make an assignment of its right, title and interest in and to the Pledged Shares to the Trustee pursuant to the Pledge Agreement or a Subsidiary Pledge Agreement, as the case may be, and to the extent therein provided, no later than the Issue Date. The Company shall cause each Subsidiary not a party to a Subsidiary Pledge Agreement to execute a Subsidiary Pledge Agreement at the time such Subsidiary acquires any Pledged Shares. At the time the Pledge Agreement or any Subsidiary Pledge Agreement is executed, the Company or the Subsidiary, as the case may be, will have full right, power and lawful authority to grant, bargain, sell, release, convey, hypothecate, assign, mortgage, pledge, transfer and confirm, absolutely, the Pledged Shares owned by it in the manner and form done, or intended to be done, in the Pledge Agreement or the Subsidiary Pledge Agreement, as the case may be, free and clear of all Liens whatsoever, except the Liens created by the Pledge Agreement or the Subsidiary Pledge Agreement, as the case may be, and except to the extent otherwise provided therein, and (a) will forever warrant and defend the title to the same against the claims of all Persons whatsoever, (b) will execute, acknowledge and deliver to the Trustee such further assignments, transfer, assurances, or other instruments as the Trustee may require or request, and (c) will do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the Trustee, to assure and confirm to the Trustee the security interest in the Pledged Shares contemplated hereby, and by the Pledge Agreement or the Subsidiary Pledge Agreement, as the case may be, or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purposes herein expressed. The Pledge Agreement and each Subsidiary Pledge Agreement, as the case may be, will create a direct and valid Lien on the Pledged Shares, as set forth therein. To the extent applicable, the Pledge Agreement and any Subsidiary Pledge Agreement will be governed by the Uniform Commercial Code. SECTION 10.02. RECORDING, ETC. The Company will cause, at its own expense, the Pledge Agreement, any Subsidiary Pledge Agreement, this Indenture and all amendments or supplements thereto to be registered, recorded and filed or re-recorded, re-filed and renewed in such manner and in such place or places, if any, as may be required by law in order fully to preserve and protect the security interest created under the Pledge Agreement and any Subsidiary Pledge Agreement in the Pledged Shares and to effectuate and preserve the security therein of the Holders and all rights of the Trustee. The Company shall furnish to the Trustee: (1) promptly after the execution and delivery of the Pledge Agreement and any Subsidiary Pledge Agreement covering the Pledged Shares, an Opinion of Counsel either (a) stating that, in the opinion of such Counsel, this Indenture and the assignment of the Pledged Shares intended to be made by the Pledge Agreement and any Subsidiary Pledge Agreement and all other instruments of further assurance or amendment have been properly recorded, registered and filed to the extent necessary to make effective the security interest in the Pledged Shares intended to be created by the Pledge Agreement and any Subsidiary Pledge Agreement, and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given, and stating that as to the security interests in the Pledged Shares created pursuant to the Pledge Agreement and any Subsidiary Pledge Agreement such recording, registering and filing are the only recordings, registering and filings necessary to give notice thereof and that no re-recordings, re- registering or refilings are necessary to maintain such notice, and further stating that all financing statements and continuation statements have been executed and filed that are necessary to preserve and protect fully the rights of the Holders and the Trustee with respect to the security interests in the Pledged Shares hereunder and under the Pledge Agreement and any Subsidiary Pledge Agreement or (b) stating that, in the opinion of such counsel, no such action is necessary to make such Lien and assignment effective; and (2) within 30 days after __________ 1 in each year beginning with __________ 1, 1996, an Opinion of Counsel, dated as of such date, either (a) stating that, in the opinion of such counsel, such action has been taken with respect to the recording, registering, filing, re-recording, re-registering and refiling of all supplemental indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Lien of the Pledge Agreement and any Subsidiary Pledge Agreement and reciting with respect to the security interests in the Pledged Shares the details of such action or referring to prior Opinions of Counsel in which such details are given, and stating that all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the rights of the Holders and the Trustee hereunder and under the Pledge Agreement and any Subsidiary Pledge Agreement with respect to the security interests in the Pledged Shares or (b) stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien and assignment. If at any time the Notes are no longer secured pursuant to the Pledge Agreement and any Subsidiary Pledge Agreement, whether due to the payment in full or defeasance of the Notes, the release of the collateral thereunder or otherwise, and if all amounts due the Trustee under the Pledge Agreement, any Subsidiary Pledge Agreement and hereunder have been paid, the security interest hereunder and under the Pledge Agreement for the benefit of the Notes may be released at the sole option of the Company. The release of any Pledged Shares from the terms hereof and the Pledge Agreement and any Subsidiary Pledge Agreement will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Pledged Shares are released pursuant to the Pledge Agreement and any Subsidiary Pledge Agreement. The Trustee and each of the Holders acknowledge that a release of Pledged Shares in accordance with the terms of the Pledge Agreement and any Subsidiary Pledge Agreement will not be deemed for any purpose to be an impairment of the security under this Indenture. To the extent applicable, the Company shall cause TIA section 314(d) relating to the release of property or securities from the Lien of the Pledge Agreement and any Subsidiary Pledge Agreement to be complied with. Any certificate or opinion required by TIA section 314(d) may be made by an Officer of the Company, except in cases in which TIA section 314(d) requires that such certificate or opinion be made by an independent Person. SECTION 10.03. SUITS TO PROTECT THE PLEDGED SHARES. At the expense of the Company, the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Pledged Shares by any acts which may be unlawful or in violation of the Pledge Agreement or any Subsidiary Pledge Agreement or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Pledged Shares (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security hereunder or be prejudicial to the interest of the Holders or the Trustee). ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by the TIA, the TIA controls. SECTION 11.02. NOTICES. Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company: WALTER INDUSTRIES, INC. With a copy to: If to the Trustee: UNITED STATES TRUST COMPANY OF NEW YORK With a copy to: Each of the Company and the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA section 312(c). SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA section 314(a)(4)) shall comply with the provisions of TIA section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 11.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. SECTION 11.08. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CHOICE OF LAW PROVISIONS. SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. Dated as of __________ __, 1995 WALTER INDUSTRIES, INC. Attest:_____________________ By:_______________________ Name: Title: (SEAL) UNITED STATES TRUST COMPANY OF NEW YORK Attest:_____________________ By:________________________ Name: Title: (SEAL) EXHIBIT A (Face of Series B and Series B-1 Note) [Series B] [Series B-1] Senior Note due 2000 No. WALTER INDUSTRIES, INC. promises to pay to or registered assigns. the principal sum of Dollars on __________, 2000. Interest Payment Dates: August 15 and February 15 Record Dates: August 1 and February 1 Dated:___________________________ WALTER INDUSTRIES, INC. By:_______________________ Name: Title: By:_______________________ Trustee's Certificate of Name: Authentication Title: (SEAL) This is one of the Notes referred to in the within- mentioned Indenture: UNITED STATES TRUST COMPANY NEW YORK, as Trustee By:___________________________________ Authorized Signatory (Back of Note) [Series B] [Series B-1] Senior Note due 2000 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Walter Industries, Inc., a Delaware corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), promises to pay interest on the principal amount of this Note at ____% per annum from the Issue Date until maturity. The Company will pay interest semi-annually on August 15 and February 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be August 15, 1995. The Company shall pay interest (including post-petition interest in any proceeding under Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the interest rate then in effect on the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the August 1 or February 1 preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, United States Trust Company of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of ____________, 1995 (the"Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The [Series B] [Series B-1] Notes are secured obligations of the Company limited to $490,000,000 in aggregate principal amount, plus amounts, if any, sufficient to pay interest and premium, if any, on outstanding Notes as set forth in Paragraph 2 hereof. The Notes are secured by the outstanding Capital Stock of each of the Company's direct and indirect Subsidiaries (which term excludes Mid-State Homes, Inc. and its Subsidiaries), whether currently owned or hereafter acquired or created, which Capital Stock has been pledged by the Company and certain of its Subsidiaries pursuant to the Pledge Agreement and certain Subsidiary Pledge Agreements dated __________, 1995. 5. OPTIONAL REDEMPTION. The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at a redemption price of 101% of the principal amount then outstanding, plus accrued and unpaid interest thereon to the applicable date of redemption; provided, however, that if a redemption is made from the Excess Proceeds of any Asset Sales as described in paragraph 9 below, the redemption price will be 100% of the principal amount then outstanding, plus accrued and unpaid interest thereon to the applicable date of redemption; and provided, further, however, that if any such redemption is in part, not less than $150 million principal amount of the Notes in the aggregate remain outstanding after giving affect to such redemption. 6. MANDATORY REDEMPTION. Except as set forth under Sections 4.08 or 4.09 of the Indenture, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 8. CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company will be required to make an offer to repurchase all or any part (equal to $1,000 principal amount or an integral multiple thereof) of a Holder's Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. Within 10 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. Holders of Notes may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 9. ASSET SALES. If the Company consummates any Asset Sales, and when the aggregate amount of Excess Proceeds exceeds $25 million, the Company shall either (A) redeem the Notes (on a pro rata basis if the amount available for such redemption is less than the outstanding principal amount of the Notes plus accrued and unpaid interest, if any, to the date of redemption) at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption or (B) make an offer to all Holders of Notes to purchase the maximum principal amount of Notes that may be purchased out of such Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase; provided, however, that if following such a redemption or an offer to repurchase, assuming 100% acceptance, the outstanding principal amount of the Notes would be less than $150 million in the aggregate, the Excess Proceeds shall be utilized as provided in the Indenture until such time as the aggregate of all unapplied Excess Proceeds from all Asset Sales is sufficient to redeem or repurchase 100% of the outstanding Notes, at which time the Company will be obligated to either redeem or offer to purchase the Notes as provided above. Holders of Notes that are the subject of an offer to purchase shall receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Registrar shall not be required (A) to issue, to register the transfer of, or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.07 of the Indenture and ending at the close of business on the day of selection; or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders in case of a merger or consolidation or sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the Company's properties or assets, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, pay dividends or make certain other Restricted Payments, incur additional Indebtedness or Liens, enter into transactions with Affiliates, make payments in respect of its Capital Stock or issue additional or sell Capital Stock, merge or consolidate with any other person or sell, lease, transfer or otherwise dispose of substantially all of its properties or assets or enter into sale and leaseback transactions. The limitations are subject to certain qualifications and exceptions. The Company must annually report to the Trustee regarding compliance with such limitations. 14. SUCCESSOR CORPORATION. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor corporation will be released from those obligations. 15. DEFAULTS AND REMEDIES. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding may declare all the Notes to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest. 16. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 17. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 18. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 19. NOTES. The term "Notes" refers to, collectively, the Series B Notes and the Series B-1 Notes issuable under the Indenture. 20. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests for such documents and for additional information may be made to: Walter Industries, Inc. __________________________________. ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to (Insert assignee's soc. sec. or tax I.D. no.) (Print or type assignee's name, address and zip code) and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _____________ Your Signature: (Sign exactly as your name appears on the face of this Note) Signature Guarantee: ________________ OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.08 or 4.09 of the Indenture, check the box below*: / / Section 4.08 / / Section 4.09 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.09 of the Indenture, state the amount you elect to have purchased: $__________ Date:__________________ Your Signature:_________________ (Sign exactly as your name appears on the Note) Tax Identification No.:___________ Signature Guarantee: _______________ ___________________ * Check applicable box. EXHIBIT B FORM OF PLEDGE AGREEMENT This PLEDGE AGREEMENT (as amended, amended and restated or otherwise modified from time to time, herein called the "Agreement") is dated as of ____ __, 1995, between Walter Industries, Inc., a Delaware corporation (the "Pledgor"), and United States Trust Company of New York, a ____________, as trustee (the "Trustee") for and representative of the holders of the Series B Notes and Series B-1 Notes (each as hereinafter defined) under the Indenture (as hereinafter defined). RECITALS WHEREAS, the Pledgor is the legal and beneficial owner of the issued and outstanding Capital Stock (the "Pledged Shares") of the Subsidiaries listed on Schedule I; WHEREAS, the Pledgor, in order to retire certain debt obligations as part of its emergence in proceedings under Chapter 11 of the U.S. Bankruptcy Code, and the Trustee have entered into an indenture dated as of ________ __, 1995 (the "Indenture") pursuant to which the Pledgor has issued approximately $490,000,000 in aggregate principal amount of Series B Senior Notes due 2000 (the "Series B Notes"); WHEREAS, the Pledgor may offer to issue Series B-1 Senior Notes due 2000 (the "Series B-1 Notes" and, with the Series B Notes, the "Notes") in exchange for outstanding Series B Notes; WHEREAS, in order to induce the Trustee to execute and deliver the Indenture, the Pledgor has agreed to pledge the Pledged Shares as collateral security for the performance of the Secured Obligations (as hereinafter defined); and WHEREAS, the Pledgor will derive direct and indirect economic benefit from the issuance of the Notes pursuant to the Indenture; NOW THEREFORE, in consideration of the premises herein set forth the parties hereto agree as follows: SECTION 1. Pledge. The Pledgor hereby pledges to the Trustee and grants to the Trustee for the benefit of the holders of the Notes (the "Noteholders") a first priority security interest in the following (the "Pledged Collateral") to secure the Secured Obligations: (i) the Pledged Shares and the certificates representing the Pledged Shares and, subject to Section 6, all dividends, cash, options, warrants, rights, instruments and other property and proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; and (ii) all additional shares of Capital Stock of any Subsidiary now owned or hereafter acquired from time to time acquired by the Pledgor in any manner (which shares shall be deemed to be part of the Pledged Shares) and the certificates representing such additional shares and, subject to Section 6, all dividends, cash, options, warrants, rights, instruments and other property and proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares. The foregoing pledge and grant of a security interest confirms the pledge and grant of a first priority security interest in the Pledged Collateral to secure the Secured Obligations. SECTION 2. Secured Obligations. This Agreement secures, and the Pledged Collateral is collateral security for, the prompt payment or performance in full when due, whether at stated maturity, by acceleration or otherwise (including the payment of amounts which would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. section 362(a)), of all obligations of the Pledgor now or hereafter existing under the Indenture and the Notes issued thereunder, whether for principal, premium, interest (including, without limitation, interest which, but for the filing of a petition in a bankruptcy, or other similar proceeding with respect to the Pledgor, would accrue on such obligations), fees, expenses, including, without limitation, all amounts due the Trustee under the Indenture, or otherwise and all obligations of the Pledgor now or hereafter existing under this Agreement (all such obligations being the "Secured Obligations"). SECTION 3. Delivery of Pledged Collateral. (i) All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of the Trustee pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank and (ii) each of the certificates, instruments, certifications or other documents delivered pursuant to (i) shall be in form and substance satisfactory to the Trustee. At any time upon or after the occurrence of an Event of Default (as defined in the applicable Indenture) with respect to the Notes, the Trustee shall have the right, without notice to the Pledgor, to transfer to or to register in the name of the Trustee or any of its nominees any or all of the Pledged Collateral. In addition, the Trustee shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations. SECTION 4. Representations and Warranties. The Pledgor represents and warrants as follows: (i) The Pledgor has full corporate power and authority to enter into this Agreement. This Agreement has been duly authorized, executed and delivered by the Pledgor and constitutes a valid and binding agreement of the Pledgor and is enforceable against the Pledgor in accordance with the terms hereof. The performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not result in the creation or imposition of any Lien upon any of the assets of the Pledgor or any of its Subsidiaries pursuant to the terms or provisions of, or result in a breach or violation of or conflict with any of the terms or provisions of, or constitute a default under, or give any other party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, (i) the certificate of incorporation or by-laws of the Pledgor or any of its Subsidiaries; or (ii) any contract or other agreement to which the Pledgor or any of its Subsidiaries is a party or by which the Pledgor or any of its Subsidiaries or any of its properties is bound or affected, or any judgment, ruling, decree, order, law, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Pledgor or any of its Subsidiaries. (ii) The Pledgor is, and at the time of delivery of any Pledged Collateral to the Trustee pursuant to Section 3 of this Agreement will be, the legal and beneficial owner of the Pledged Collateral free and clear of any Lien except for the Lien and security interest created by this Agreement. (iii) The Pledgor has full power, authority and legal right to pledge all the Pledged Collateral pursuant to this Agreement. (iv) No consent of any other party (including, without limitation, stockholders or creditors of the Pledgor) and no consent, authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (x) for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or (y) for the exercise by the Trustee of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement; except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally. (v) All of the Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. (vi) The pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral securing the payment of the Secured Obligations. (vii) All information set forth herein relating to the Pledged Collateral is accurate and complete in all material respects. SECTION 5. Supplements, Further Assurances. The Pledgor agrees that at any time and from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Trustee may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. The Pledgor further agrees that it will (a) upon the creation or acquisition of a Subsidiary promptly deliver to the Trustee the shares of Capital Stock of such Subsidiary owned by it and an amended Schedule I (each, a "Schedule I Amendment") which shall include such Subsidiary therein and (b) upon obtaining any shares of Capital Stock of any company required to be pledged pursuant to Section 1(ii), promptly deliver to the Trustee such shares and a pledge amendment, duly executed by the Pledgor, in substantially the form of Schedule II hereto (a "Pledged Share Amendment"), in respect of the additional Pledged Shares which are to be pledged pursuant to this Agreement. The Pledgor hereby authorizes the Trustee to attach each Schedule I Amendment and Pledged Share Amendment to this Agreement and the Pledgor agrees that all Pledged Shares listed, respectively, on any Pledged Share Amendment and any Pledged Shares delivered to the Trustee shall for all purposes hereunder be considered Pledged Collateral. SECTION 6. Voting Rights; Dividends; Etc. (a) As long as no Event of Default (as defined in the Indenture) shall have occurred and be continuing with respect to the Notes: (i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Indenture. It is understood, however, that neither (A) the voting by the Pledgor of any Pledged Shares for, or the Pledgor's consent to, the election of directors at an annual or other meeting of stockholders or with respect to incidental matters at any such meeting nor (B) the Pledgor's consent to or approval of any action otherwise permitted under this Agreement and the Indenture shall be deemed inconsistent with the terms of this Agreement or the Indenture within the meaning of this Section 6(a)(i), and no notice of any such voting or consent need be given to the Trustee. (ii) The Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien and security interest under this Agreement, any and all dividends, distributions, principal, interest or other amounts paid in respect of the Pledged Collateral. (iii) In order to permit the Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 6(a)(i) above and to receive the dividends, distributions, principal, interest or other payments which it is authorized to receive and retain pursuant to Section 6(a)(ii) above, the Trustee shall, if necessary, upon written request of the Pledgor, from time to time execute and deliver (or cause to be executed and delivered) to the Pledgor all such proxies, dividend payment orders and other instruments as the Pledgor may reasonably request. (b) Upon the occurrence and during the continuance of an Event of Default under the Indenture: (i) Upon written notice from the Trustee to the Pledgor, all rights of the Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) above shall cease, and all such rights shall thereupon become vested in the Trustee which shall thereupon have the sole right to exercise such voting and other consensual rights during the continuance of such Event of Default. (ii) All rights of the Pledgor to receive the dividends, distributions, principal, interest and other payments which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) above shall cease and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends, distribu- tions, principal, interest and other payments during the continuance of such Event of Default. (iii) In order to permit the Trustee to exercise the voting and other consensual rights which it may be entitled to exercise pursuant to Section 6(b)(i) above, and to receive all dividends, distributions, principal, interest and other payments which it may be entitled to receive under section 6(b)(ii) above, the Pledgor shall, if necessary, upon the request of the Trustee, from time to time execute and deliver to the Trustee appropriate proxies, dividend payment orders and other instruments as the Trustee may reasonably request. (c) All dividends, distributions, principal, interest and other payments which are received by the Pledgor contrary to the provisions of Section 6(b)(ii) above shall be received in trust for the benefit of the Trustee, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Trustee as Pledged Collateral in the same form as so received (with any necessary endorsement). SECTION 7. Transfers and Other Liens; Additional Shares. A. Transfers and Other Liens. The Pledgor agrees that it will not (i) sell, pledge, hypothecate or otherwise convey or dispose of any of the Pledged Collateral, (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the Lien and security interest under this Agreement, or (iii) permit any of the Subsidiaries to merge or consolidate, unless all the outstanding Capital Stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; provided, however, that the Company and its Subsidiaries may conduct Asset Sales in accordance with Section 4.09 of the Indenture, and upon the consummation of any such Asset Sale, any Pledged Collateral subject to such Asset Sale shall be released from the Lien of this Pledge Agreement. B. Additional Shares. The Pledgor agrees that it will (i) cause each of the Subsidiaries not to issue any shares, interests, participations, rights or other equivalents (however designated) of corporate stock in addition to or in substitution for the Pledged Shares issued by the Subsidiaries and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other equity securities of the Subsidiaries. SECTION 8. Trustee Appointed Attorney-in-Fact. The Pledgor hereby appoints the Trustee the Pledgor's attorney-in- fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Trustee's discretion to take any action and to execute any instrument which the Trustee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to the Pledgor representing any dividend, interest payment or other distribution or payment in respect of the Pledged Collateral or any part thereof and to give full discharge for the same. SECTION 9. Trustee May Perform. If the Pledgor fails to perform any agreement contained herein after receipt of a written request to do so from the Trustee, the Trustee may, within thirty days after such notice is effective pursuant to Section 20, itself perform, or cause performance of, such agreement and the reasonable expenses of the Trustee, including the reasonable fees and expenses of its agents and counsel, incurred in connection therewith shall be payable by the Pledgor under Section 13 hereof. SECTION 10. Reasonable Care. The Trustee shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equivalent to that which the Trustee, in its individual capacity, accords its own property consisting of negotiable securities, it being understood that the Trustee shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Trustee is deemed to have knowledge of such matters or (ii) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Pledged Collateral) to preserve any rights respecting any of the Pledged Collateral. SECTION 11. Remedies Upon Default; Decisions Relating to Exercise of Remedies; Payments Under Notes. A. Remedies Upon Default. Subject to Section 11B, if any Event of Default under the Indenture shall have occurred and be continuing: (i) The Trustee may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") in effect in the State of New York at that time, and the Trustee may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at a public or private sale, at any exchange, broker's board or at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Trustee may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. The Trustee or any Noteholder may be the purchaser of any or all of the Pledged Collateral at any such sale but shall not be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to use and apply any of the Secured Obligations owed to such person as a credit on account of the purchase price of any Pledged Collateral payable by such person at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claim against the Trustee arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Pledged Collateral to more than one party. (ii) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, the Trustee may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Trustee than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any private sale shall be deemed to have been made in a commercially reasonable manner and that the Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if the Pledgor would agree to do so. (iii) If the Trustee determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, the Pledgor shall and shall cause each issuer of any Pledged Collateral to be sold hereunder from time to time to furnish to the Trustee all such information as the Trustee may request and to cause any financial intermediary to furnish any such information, in order to determine the number of shares, notes and other instruments included in the Pledged Collateral, which may be sold by the Trustee as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. B. Decisions Relating to Exercise of Remedies. Notwithstanding anything in this Agreement to the contrary, the Trustee shall exercise, or shall refrain from exercising, any remedy provided for in Section 11A as provided in Article Ten of the Indenture. SECTION 12. Application of Proceeds. During and after the continuance of an Event of Default, any cash held by the Trustee as Pledged Collateral and all cash proceeds received by the Trustee (all such cash being "Proceeds") in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by the Trustee of its remedies as a secured creditor as provided in Section 11 of this Agreement shall be applied promptly from time to time by the Trustee as follows: First, to the payment of the costs and expenses of such sale, collection or other realization, including reasonable compensation to the Trustee and its agents and counsel, and all expenses, liabilities and advances made or incurred by the Trustee in connection therewith including all amounts due to the Trustee under Article Seven of the Indenture; Second, to the payment of the Secured Obligations as provided pursuant to the Indenture; and Third, after payment in full of all Secured Obligations, to the Pledgor. SECTION 13. Expenses. The Pledgor will, upon demand, pay to the Trustee the amount of any and all reasonable expenses, disbursements and advances, including reasonable fees and expenses of its counsel and of any experts and agents, which the Trustee may incur in connection with (i) the acceptance and administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Trustee or the Noteholders hereunder or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof. SECTION 14. No Waiver. No failure on the part of the Trustee to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Trustee of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are to the fullest extent permitted by law cumulative and are not exclusive of any other remedies provided by law. SECTION 15. Trustee. The Trustee has been appointed as Trustee hereunder pursuant to the Indenture. The Trustee shall be obligated, and shall have the right, hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral) solely in accordance with this Agreement and the Indenture. The Trustee may resign and a successor Trustee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as a Trustee by a successor Trustee, that successor Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Trustee under this Agreement, and the retiring Trustee shall thereupon be discharged from its duties and obligations under this Agreement and, after payment to it of all amounts due it hereunder, shall deliver any Pledged Collateral in its possession to the successor Trustee. After any retiring Trustee's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Trustee. Anything contained in this Agreement to the contrary notwithstanding, in the event of any conflict between the express terms and provisions of this Agreement and the express terms and provisions of the Indenture, such terms and provisions of the Indenture shall control. SECTION 16. Indemnification. The Pledgor hereby agrees to indemnify the Trustee for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Trustee in any way relating to or arising out of this Agreement or the Notes, the Indenture or any instrument relating thereto, or any other documents contemplated by or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms hereof or of any such other documents or otherwise arising or relating in any manner to the pledges, dispositions of Pledged Collateral or proceeds of Pledged Collateral, or other actions of any nature with respect to the Pledged Collateral contemplated hereunder and under the Indenture to secure the payment of the Secured Obligations; provided, however, that the Pledgor shall not be liable for any of the foregoing to the extent they arise from the negligence or willful misconduct of the Trustee or failure by the Trustee to exercise reasonable care in the custody and preservation of the Pledged Collateral as provided in Section 10. SECTION 17. Lien Created. To secure Pledgor's obligations under Sections 13 and 16, the Trustee shall have a Lien against the Pledged Collateral. SECTION 18. Amendments, Etc. Prior to such time as all Secured Obligations shall have been indefeasibly paid in full, this Agreement may be amended by a writing duly signed for and on behalf of the Trustee and with the consent of the Note- holders as provided in the Indenture. SECTION 19. Termination. When all Secured Obligations have been indefeasibly paid in full, this Agreement shall terminate, and the Trustee shall, upon the request and at the expense of the Pledgor, forthwith assign, transfer and deliver, against receipt and without recourse to the Trustee, such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof to or on the order of the Pledgor. SECTION 20. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered, if to the Pledgor, addressed to it at the address set forth on the signature page of this Agreement, and if to the Trustee, addressed to it at the address set forth on the signature page of this Agreement. All such notices and other communications shall, when mailed or telegraphed, be effective when deposited in the mails or delivered to the telegraph company, respectively, and shall, when delivered or telecopied, be effective when received. SECTION 21. Continuing Security Interest; Transfer of Notes. Subject to Section 18, this Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until indefeasible payment in full of all Secured Obligations, (ii) be binding upon the Pledgor, its successors and assigns, and (iii) inure, together with the rights and remedies of the Trustee hereunder, to the benefit of the Trustee and the Noteholders and each of their respective successors, transferees and assigns. SECTION 22. Governing Law, Terms. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Unless otherwise defined herein or in the Indenture, terms defined in Articles 8 and 9 of the Uniform Commercial Code as in effect in the State of New York are used herein as therein defined. SECTION 23. Consent to Jurisdiction and Service of Process. All judicial proceedings brought against the Pledgor with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York, and by execution and delivery of this Agreement the pledgor accepts for itself and in connection with its properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Nothing herein shall limit the right of the Trustee to bring proceedings against the Pledgor in the courts of any other jurisdiction. SECTION 24. Advances. The Trustee shall not be obligated or required to expend, advance or risk any of its own funds in the performance of its obligations hereunder. SECTION 25. Agents, Attorneys. The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. The Trustee may consult with counsel of its selection and the advice of such counsel or a written opinion rendered by such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. SECTION 26. Waiver. Pledgor waives presentment, demand, protest or notice of any kind. SECTION 27. Security Interest Absolute. All rights of the Trustee and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of any of the Notes, the Indenture or any instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any of the Notes or the Indenture; (iii) any exchange, release or non-perfection of any other collateral securing, or any release or amendment or waiver of or consent to departure from any guaranty of, all or any of the Secured Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Pledgor. SECTION 28. Defined Terms. Terms used but not defined herein shall have the meaning ascribed to them in the Indenture. IN WITNESS WHEREOF, the Pledgor and the Trustee have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the date first above written Pledgor WALTER INDUSTRIES, INC. By: _____________________________ Name: Title: Notice Address: [address] Attn: Chief Financial Officer Trustee UNITED STATES TRUST COMPANY OF NEW YORK By: _____________________________ Name: Title: Notice Address: [address] Attn: Corporate Trust Department SCHEDULE I LIST OF SUBSIDIARIES Percentage of Class Stock Number All Capital of Certificate Par of Stock Issuer Stock No(s). Value Shares Outstanding SCHEDULE II To the Pledge Agreement PLEDGED SHARE AMENDMENT This Pledged Share Amendment, dated as of ______, is delivered pursuant to Section 5 of the Pledge Agreement referred to below. The undersigned hereby agrees that this Pledged Share Amendment may be attached to the Pledge Agreement dated as of ____ __, 1995, between the undersigned and United States Trust Company of New York, as Trustee (the "Pledge Agreement"; capitalized terms defined therein being used herein as therein defined), and that the Pledged Shares listed on this Pledged Share Amendment shall be deemed to be part of the Pledged Shares and shall become part of the Pledged Collateral and shall secure all Secured Obligations as provided in the Pledge Agreement. WALTER INDUSTRIES, INC. By: _________________________ Name: Title: Percentage of Class Stock Number All Capital of Certificate Par of Stock Issuer Stock No(s). Value Shares Outstanding EXHIBIT C FORM OF SUBSIDIARY PLEDGE AGREEMENT This SUBSIDIARY PLEDGE AGREEMENT (as amended, amended and restated or otherwise modified from time to time, herein called the "Agreement") is dated as of ____ __, 1995, between _______________________________________________ (the "Pledgor"), and United States Trust Company of New York, a ____________, as trustee (the "Trustee") for and representative of the holders of the Series B Notes and Series B-1 Notes (each as hereinafter defined) under the Indenture (as hereinafter defined). RECITALS WHEREAS, the Pledgor is the legal and beneficial owner of the issued and outstanding Capital Stock (the "Pledged Shares") of the Subsidiaries of the Company (as hereinafter defined) listed on Schedule I; WHEREAS, the Pledgor is a Subsidiary of Walter Industries, Inc., a Delaware corporation (the "Company"); WHEREAS, the Company, in order to retire certain debt obligations as part of its and certain of its Subsidiaries emergence in proceedings under Chapter 11 of the U.S. Bankruptcy Code, and the Trustee have entered into an indenture dated as of ________ __, 1995 (the "Indenture") pursuant to which the Company has issued approximately $490,000,000 in aggregate principal amount of Series B Senior Notes due 2000 (the "Series B Notes"); WHEREAS, the Company may offer to issue its Series B-1 Senior Notes due 2000 (the "Series B-1 Notes" and, with the Series B Notes, the "Notes") in exchange for outstanding Series B Notes; WHEREAS, in order to induce the Trustee to execute and deliver the Indenture, the Company has agreed to cause the Pledgor to pledge the Pledged Shares as collateral security for the performance of the Secured Obligations (as hereinafter defined); and WHEREAS, the Pledgor will derive direct and indirect economic benefit from the issuance of the Notes pursuant to the Indenture; NOW THEREFORE, in consideration of the premises herein set forth the parties hereto agree as follows: SECTION 1. Pledge. The Pledgor hereby pledges to the Trustee and grants to the Trustee for the benefit of the holders of the Notes (the "Noteholders") a first priority security interest in the following (the "Pledged Collateral") to secure the Secured Obligations: (i) the Pledged Shares and the certificates representing the Pledged Shares and, subject to Section 6, all dividends, cash, options, warrants, rights, instruments and other property and proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; and (ii) all additional shares of Capital Stock of any Subsidiary of the Company now owned or hereafter acquired from time to time acquired by the Pledgor in any manner (which shares shall be deemed to be part of the Pledged Shares) and the certificates representing such additional shares and, subject to Section 6, all dividends, cash, options, warrants, rights, instruments and other property and proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares. The foregoing pledge and grant of a security interest confirms the pledge and grant of a first priority security interest in the Pledged Collateral to secure the Secured Obligations. SECTION 2. Secured Obligations. This Agreement secures, and the Pledged Collateral is collateral security for, the prompt payment or performance in full when due, whether at stated maturity, by acceleration or otherwise (including the payment of amounts which would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. section 362(a)), of all obligations of the Company now or hereafter existing under the Indenture and the Notes issued thereunder, whether for principal, premium, interest (including, without limitation, interest which, but for the filing of a petition in a bankruptcy, or other similar proceeding with respect to the Company, would accrue on such obligations), fees, expenses, including, without limitation, all amounts due the Trustee under the Indenture, or otherwise and all obligations of the Pledgor now or hereafter existing under this Agreement (all such obligations being the "Secured Obligations"). SECTION 3. Delivery of Pledged Collateral. (i) All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of the Trustee pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank and (ii) each of the certificates, instruments, certifications or other documents delivered pursuant to (i) shall be in form and substance satisfactory to the Trustee. At any time upon or after the occurrence of an Event of Default (as defined in the applicable Indenture) with respect to the Notes, the Trustee shall have the right, without notice to the Pledgor, to transfer to or to register in the name of the Trustee or any of its nominees any or all of the Pledged Collateral. In addition, the Trustee shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations. SECTION 4. Representations and Warranties. The Pledgor represents and warrants as follows: (i) The Pledgor has full corporate power and authority to enter into this Agreement. This Agreement has been duly authorized, executed and delivered by the Pledgor and constitutes a valid and binding agreement of the Pledgor and is enforceable against the Pledgor in accordance with the terms hereof. The performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not result in the creation or imposition of any Lien upon any of the assets of the Pledgor or any of its Subsidiaries pursuant to the terms or provisions of, or result in a breach or violation of or conflict with any of the terms or provisions of, or constitute a default under, or give any other party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, (i) the certificate of incorporation or by-laws of the Pledgor or any of its Subsidiaries; or (ii) any contract or other agreement to which the Pledgor or any of its Subsidiaries is a party or by which the Pledgor or any of its Subsidiaries or any of its properties is bound or affected, or any judgment, ruling, decree, order, law, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Pledgor or any of its Subsidiaries. (ii) The Pledgor is, and at the time of delivery of any Pledged Collateral to the Trustee pursuant to Section 3 of this Agreement will be, the legal and beneficial owner of the Pledged Collateral free and clear of any Lien except for the Lien and security interest created by this Agreement. (iii) The Pledgor has full power, authority and legal right to pledge all the Pledged Collateral pursuant to this Agreement. (iv) No consent of any other party (including, without limitation, stockholders or creditors of the Pledgor) and no consent, authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (x) for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or (y) for the exercise by the Trustee of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement; except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally. (v) All of the Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. (vi) The pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral securing the payment of the Secured Obligations. (vii) All information set forth herein relating to the Pledged Collateral is accurate and complete in all material respects. SECTION 5. Supplements, Further Assurances. The Pledgor agrees that at any time and from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Trustee may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. The Pledgor further agrees that it will (a) upon the creation or acquisition of a Subsidiary of the Company promptly deliver to the Trustee the shares of Capital Stock of such Subsidiary owned by it and an amended Schedule I (each, a "Schedule I Amendment") which shall include such Subsidiary therein and (b) upon obtaining any shares of Capital Stock of any company required to be pledged pursuant to Section 1(ii), promptly deliver to the Trustee such shares and a pledge amendment, duly executed by the Pledgor, in substantially the form of Schedule II hereto (a "Pledged Share Amendment"), in respect of the additional Pledged Shares which are to be pledged pursuant to this Agreement. The Pledgor hereby authorizes the Trustee to attach each Schedule I Amendment and Pledged Share Amendment to this Agreement and the Pledgor agrees that all Pledged Shares listed, respectively, on any Pledged Share Amendment and any Pledged Shares delivered to the Trustee shall for all purposes hereunder be considered Pledged Collateral. SECTION 6. Voting Rights; Dividends; Etc. (a) As long as no Event of Default (as defined in the Indenture) shall have occurred and be continuing with respect to the Notes: (i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Indenture. It is understood, however, that neither (A) the voting by the Pledgor of any Pledged Shares for, or the Pledgor's consent to, the election of directors at an annual or other meeting of stockholders or with respect to incidental matters at any such meeting nor (B) the Pledgor's consent to or approval of any action otherwise permitted under this Agreement and the Indenture shall be deemed inconsistent with the terms of this Agreement or the Indenture within the meaning of this Section 6(a)(i), and no notice of any such voting or consent need be given to the Trustee. (ii) The Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien and security interest under this Agreement, any and all dividends, distributions, principal, interest or other amounts paid in respect of the Pledged Collateral. (iii) In order to permit the Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 6(a)(i) above and to receive the dividends, distributions, principal, interest or other payments which it is authorized to receive and retain pursuant to Section 6(a)(ii) above, the Trustee shall, if necessary, upon written request of the Pledgor, from time to time execute and deliver (or cause to be executed and delivered) to the Pledgor all such proxies, dividend payment orders and other instruments as the Pledgor may reasonably request. (b) Upon the occurrence and during the continuance of an Event of Default under the Indenture: (i) Upon written notice from the Trustee to the Pledgor, all rights of the Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) above shall cease, and all such rights shall thereupon become vested in the Trustee which shall thereupon have the sole right to exercise such voting and other consensual rights during the continuance of such Event of Default. (ii) All rights of the Pledgor to receive the dividends, distributions, principal, interest and other payments which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) above shall cease and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends, distributions, principal, interest and other payments during the continuance of such Event of Default. (iii) In order to permit the Trustee to exercise the voting and other consensual rights which it may be entitled to exercise pursuant to Section 6(b)(i) above, and to receive all dividends, distributions, principal, interest and other payments which it may be entitled to receive under section 6(b)(ii) above, the Pledgor shall, if necessary, upon the request of the Trustee, from time to time execute and deliver to the Trustee appropriate proxies, dividend payment orders and other instruments as the Trustee may reasonably request. (c) All dividends, distributions, principal, interest and other payments which are received by the Pledgor contrary to the provisions of Section 6(b)(ii) above shall be received in trust for the benefit of the Trustee, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Trustee as Pledged Collateral in the same form as so received (with any necessary endorsement). SECTION 7. Transfers and Other Liens; Additional Shares. A. Transfers and Other Liens. The Pledgor agrees that it will not (i) sell, pledge, hypothecate or otherwise convey or dispose of any of the Pledged Collateral, (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the Lien and security interest under this Agreement, or (iii) permit any of the Subsidiaries to merge or consolidate, unless all the outstanding Capital Stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; provided, however, that the Pledgor and its Subsidiaries may conduct Asset Sales in accordance with Section 4.09 of the Indenture, and upon the consummation of any such Asset Sale, any Pledged Collateral subject to such Asset Sale shall be released from the Lien of this Pledge Agreement. B. Additional Shares. The Pledgor agrees that it will (i) cause each of its Subsidiaries not to issue any shares, interests, participations, rights or other equivalents (however designated) of corporate stock in addition to or in substitution for the Pledged Shares issued by the Subsidiaries and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other equity securities of the Subsidiaries of the Company. SECTION 8. Trustee Appointed Attorney-in-Fact. The Pledgor hereby appoints the Trustee the Pledgor's attorney-in- fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Trustee's discretion to take any action and to execute any instrument which the Trustee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to the Pledgor representing any dividend, interest payment or other distribution or payment in respect of the Pledged Collateral or any part thereof and to give full discharge for the same. SECTION 9. Trustee May Perform. If the Pledgor fails to perform any agreement contained herein after receipt of a written request to do so from the Trustee, the Trustee may, within thirty days after such notice is effective pursuant to Section 20, itself perform, or cause performance of, such agreement and the reasonable expenses of the Trustee, including the reasonable fees and expenses of its agents and counsel, incurred in connection therewith shall be payable by the Pledgor under Section 13 hereof. SECTION 10. Reasonable Care. The Trustee shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equivalent to that which the Trustee, in its individual capacity, accords its own property consisting of negotiable securities, it being understood that the Trustee shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Trustee is deemed to have knowledge of such matters or (ii) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Pledged Collateral) to preserve any rights respecting any of the Pledged Collateral. SECTION 11. Remedies Upon Default; Decisions Relating to Exercise of Remedies; Payments Under Notes. A. Remedies Upon Default. Subject to Section 11B, if any Event of Default under the Indenture shall have occurred and be continuing: (i) The Trustee may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") in effect in the State of New York at that time, and the Trustee may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Trustee may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. The Trustee or any Noteholder may be the purchaser of any or all of the Pledged Collateral at any such sale but shall not be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to use and apply any of the Secured Obligations owed to such person as a credit on account of the purchase price of any Pledged Collateral payable by such person at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claim against the Trustee arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Pledged Collateral to more than one party. (ii) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, the Trustee may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Trustee than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any private sale shall be deemed to have been made in a commercially reasonable manner and that the Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if the Pledgor would agree to do so. (iii) If the Trustee determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, the Pledgor shall and shall cause each issuer of any Pledged Collateral to be sold hereunder from time to time to furnish to the Trustee all such information as the Trustee may request and to cause any financial intermediary to furnish any such information, in order to determine the number of shares, notes and other instruments included in the Pledged Collateral, which may be sold by the Trustee as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. B. Decisions Relating to Exercise of Remedies. Notwithstanding anything in this Agreement to the contrary, the Trustee shall exercise, or shall refrain from exercising, any remedy provided for in Section 11A as provided in Article Ten of the Indenture. SECTION 12. Application of Proceeds. During and after the continuance of an Event of Default, any cash held by the Trustee as Pledged Collateral and all cash proceeds received by the Trustee (all such cash being "Proceeds") in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by the Trustee of its remedies as a secured creditor as provided in Section 11 of this Agreement shall be applied promptly from time to time by the Trustee as follows: First, to the payment of the costs and expenses of such sale, collection or other realization, including reasonable compensation to the Trustee and its agents and counsel, and all expenses, liabilities and advances made or incurred by the Trustee in connection therewith including all amounts due to the Trustee under Article Seven of the Indenture; Second, to the payment of the Secured Obligations as provided pursuant to the Indenture; and Third, after payment in full of all Secured Obligations, to the Pledgor. SECTION 13. Expenses. The Pledgor will, upon demand, pay to the Trustee the amount of any and all reasonable expenses, disbursements and advances, including reasonable fees and expenses of its counsel and of any experts and agents, which the Trustee may incur in connection with (i) the acceptance and administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Trustee or the Noteholders hereunder or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof. SECTION 14. No Waiver. No failure on the part of the Trustee to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Trustee of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are to the fullest extent permitted by law cumulative and are not exclusive of any other remedies provided by law. SECTION 15. Trustee. The Trustee has been appointed as Trustee hereunder pursuant to the Indenture. The Trustee shall be obligated, and shall have the right, hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral) solely in accordance with this Agreement and the Indenture. The Trustee may resign and a successor Trustee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as a Trustee by a successor Trustee, that successor Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Trustee under this Agreement, and the retiring Trustee shall thereupon be discharged from its duties and obligations under this Agreement and, after payment to it of all amounts due it hereunder, shall deliver any Pledged Collateral in its possession to the successor Trustee. After any retiring Trustee's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Trustee. Anything contained in this Agreement to the contrary notwithstanding, in the event of any conflict between the express terms and provisions of this Agreement and the express terms and provisions of the Indenture, such terms and provisions of the Indenture shall control. SECTION 16. Indemnification. The Pledgor hereby agrees to indemnify the Trustee for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Trustee in any way relating to or arising out of this Agreement or the Notes, the Indenture or any instrument relating thereto, or any other documents contemplated by or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms hereof or of any such other documents or otherwise arising or relating in any manner to the pledges, dispositions of Pledged Collateral or proceeds of Pledged Collateral, or other actions of any nature with respect to the Pledged Collateral contemplated hereunder and under the Indenture to secure the payment of the Secured Obligations; provided, however, that the Pledgor shall not be liable for any of the foregoing to the extent they arise from the negligence or willful misconduct of the Trustee or failure by the Trustee to exercise reasonable care in the custody and preservation of the Pledged Collateral as provided in Section 10. SECTION 17. Lien Created. To secure Pledgor's obligations under Sections 13 and 16, the Trustee shall have a Lien against the Pledged Collateral. SECTION 18. Amendments, Etc. Prior to such time as all Secured Obligations shall have been indefeasibly paid in full, this Agreement may be amended by a writing duly signed for and on behalf of the Trustee and with the consent of the Noteholders as provided in the Indenture. SECTION 19. Termination. When all Secured Obligations have been indefeasibly paid in full, this Agreement shall terminate, and the Trustee shall, upon the request and at the expense of the Pledgor, forthwith assign, transfer and deliver, against receipt and without recourse to the Trustee, such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof to or on the order of the Pledgor. SECTION 20. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered, if to the Pledgor, addressed to it at the address set forth on the signature page of this Agreement, and if to the Trustee, addressed to it at the address set forth on the signature page of this Agreement. All such notices and other communications shall, when mailed or telegraphed, be effective when deposited in the mails or delivered to the telegraph company, respectively, and shall, when delivered or telecopied, be effective when received. SECTION 21. Continuing Security Interest; Transfer of Notes. Subject to Section 18, this Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until indefeasible payment in full of all Secured Obligations, (ii) be binding upon the Pledgor, its successors and assigns, and (iii) inure, together with the rights and remedies of the Trustee hereunder, to the benefit of the Trustee and the Noteholders and each of their respective successors, transferees and assigns. SECTION 22. Governing Law, Terms. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Unless otherwise defined herein or in the Indenture, terms defined in Articles 8 and 9 of the Uniform Commercial Code as in effect in the State of New York are used herein as therein defined. SECTION 23. Consent to Jurisdiction and Service of Process. All judicial proceedings brought against the Pledgor with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York, and by execution and delivery of this Agreement the pledgor accepts for itself and in connection with its properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Nothing herein shall limit the right of the Trustee to bring proceedings against the Pledgor in the courts of any other jurisdiction. SECTION 24. Advances. The Trustee shall not be obligated or required to expend, advance or risk any of its own funds in the performance of its obligations hereunder. SECTION 25. Agents, Attorneys. The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. The Trustee may consult with counsel of its selection and the advice of such counsel or a written opinion rendered by such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. SECTION 26. Waiver. Pledgor waives presentment, demand, protest or notice of any kind. SECTION 27. Security Interest Absolute. All rights of the Trustee and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of any of the Notes, the Indenture or any instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any of the Notes or the Indenture; (iii) any exchange, release or non-perfection of any other collateral securing, or any release or amendment or waiver of or consent to departure from any guaranty of, all or any of the Secured Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Pledgor. SECTION 28. Limitation of Liability. It is the intention of the parties that in no event shall Pledgor's obligations hereunder constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction. Therefore, in the event that this Agreement would, but for this sentence, constitute or result in such a violation, then the liability of Pledgor hereunder shall be reduced to the extent necessary to eliminate such violation under the applicable fraudulent conveyance or similar law. SECTION 29. Defined Terms. Terms used but not defined herein shall have the meaning ascribed to them in the Indenture. IN WITNESS WHEREOF, the Pledgor and the Trustee have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the date first above written Pledgor [NAME] By: _____________________________ Name: Title: Notice Address: [address] Attn: Chief Financial Officer Trustee UNITED STATES TRUST COMPANY OF NEW YORK By: _____________________________ Name: Title: Notice Address: [address] Attn: Corporate Trust Department SCHEDULE I LIST OF COMPANY SUBSIDIARIES Percentage of Class Stock Number All Capital of Certificate Par of Stock Issuer Stock No(s). Value Shares Outstanding SCHEDULE II To the Pledge Agreement PLEDGED SHARE AMENDMENT This Pledged Share Amendment, dated as of ______, is delivered pursuant to Section 5 of the Pledge Agreement referred to below. The undersigned hereby agrees that this Pledged Share Amendment may be attached to the Pledge Agreement dated as of ____ __, 1995, between the undersigned and United States Trust Company of New York, as Trustee (the "Pledge Agreement"; capitalized terms defined therein being used herein as therein defined), and that the Pledged Shares listed on this Pledged Share Amendment shall be deemed to be part of the Pledged Shares and shall become part of the Pledged Collateral and shall secure all Secured Obligations as provided in the Pledge Agreement. [NAME] By: _________________________ Name: Title: Percentage of Class Stock Number All Capital of Certificate Par of Stock Issuer Stock No(s). Value Shares Outstanding EXHIBIT D SUBORDINATION PROVISIONS FOR SUBORDINATED INDEBTEDNESS "Subordinated Notes" means any notes of the Company subject to the following provisions. The Subordinated Notes will be Subordinated Indebtedness of the Company. The payment of the Subordinated Obligations (as defined below) will, to the extent set forth herein, be subordinated in right of payment to the prior payment in full, in Cash or Cash Equivalents, of the Notes. "Subordinated Obligations" is defined to mean any principal of, premium, if any, and interest on the Subordinated Notes payable pursuant to the terms of the Subordinated Notes or upon acceleration, including any amounts received upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise, to the extent relating to the purchase price of the Subordinated Notes or amounts corresponding to such principal, premium, if any, or interest on the Subordinated Notes. Upon any payment or distribution of assets or securities of the Company, of any kind or character, whether in cash, property or securities, in connection with any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon the Notes (including any interest accruing subsequent to an event of bankruptcy, whether or not such interest is an allowed claim enforceable against the debtor under the United States Bankruptcy Code) shall first be paid in full, in cash or Cash Equivalents, before the holders of the Subordinated Notes or any trustee on their behalf shall be entitled to receive any payment by the Company on account of Subordinated Obligations, or any payment to acquire any of the Subordinated Notes for cash, property or securities, or any distribution with respect to the Subordinated Notes of any cash, property, or securities. Before any payment may be made by, or on behalf of, the Company on any Subordinated Obligations in connection with any such dissolution, winding up, liquidation or reorganization, any payment or distribution of assets or securities of the Company of any kind or character, whether in cash, property or securities, to which the holders of Subordinated Notes or any trustee on their behalf would be entitled, but for the subordination provisions hereof, shall be made by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person making such payment or distribution or by the holders of Subordinated Notes or any trustee if received by them or it, directly to the Holders of the Notes (pro rata to such Holders on the basis of the respective amounts of Notes held by such Holders) or their representatives or to the Trustee under the Indenture, as their respective interests appear, to the extent necessary to pay all such Notes in full, in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the Holders of the Notes. No direct or indirect payment by or on behalf of the Company of Subordinated Obligations, whether pursuant to the terms of the Subordinated Notes or upon acceleration or otherwise, shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Senior Indebtedness, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the Holders of the Notes. In addition, during the continuance of any other Event of Default with respect to the Notes (a) if such Event of Default under the Notes results from the acceleration of the Subordinated Notes, from and after the date of such acceleration, or (b) with respect to any other Event of Default upon receipt by the trustee of written notice from the Trustee or other representative for the Holders of the Notes (or the Holders of at least a majority in principal amount of the outstanding Notes), no payment of Subordinated Obligations may be made by or on behalf of the Company upon or in respect of the Subordinated Notes for a period (a "Payment Blockage Period") commencing on the earlier of the date of receipt of such notice or the date of such acceleration and ending [179] days thereafter (unless such Payment Blockage Period shall be terminated by written notice to the trustee from the Trustee or other representative of the Holders or by repayment in full in cash or Cash Equivalents of the Notes). Not more than one Payment Blockage Period may be commenced with respect to the Subordinated Notes during any period of 360 consecutive days. Notwithstanding anything herein to the contrary, there must be 180 consecutive days in any 360-day period in which no Payment Blockage Period is in effect. No Event of Default that existed or was continuing (it being acknowledged that any subsequent action that would give rise to an Event of Default pursuant to any provision under which an Event of Default previously existed or was continuing shall constitute a new Event of Default for this purpose) on the date of commencement of any Payment Blockage Period shall be, or shall be made, the basis for the commencement of a second Payment Blockage Period by the representative for, or the Holders of, the Notes, whether or not within a period of 360 consecutive days, unless such Event of Default shall have been cured or waived for a period of not less than 90 consecutive days. To the extent any payment of Notes (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Notes or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Notes is declared to be fraudulent, invalid, or otherwise set aside (and all other amounts that would come due with respect thereto had such obligation not been so affected), the Notes shall be deemed to be reinstated and outstanding as Notes for all purposes hereof as if such declaration, invalidity or setting aside had not occurred. Schedule I Best Insurors, Inc. Coast to Coast Advertising, Inc. Dixie Building Supplies, Inc. Hamer Holdings Corporation Hamer Properties, Inc. Homes Holdings Corporation Jim Walter Computer Services, Inc. Jim Walter Homes, Inc. Jim Walter Insurance Services, Inc. Jim Walter Resources, Inc. Jim Walter Window Components, Inc. JW Aluminum Company JW Resources, Inc. JW Resources Holdings Corporation JW Window Components, Inc. Land Holdings Corporation Mid-State Homes, Inc. Mid-State Holdings Corporation Railroad Holdings Corporation Sloss Industries Corporation Southern Precision Corporation United States Pipe and Foundry Company U.S. Pipe Realty, Inc Vestal Manufacturing Company Walter Home Improvement, Inc. Walter Industries, Inc. Walter Land Company Exhibit T3E2 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS CORPORATION, Case No. 89-9715-8P1 BEST INSURORS, INC., Case No. 89-9740-8P1 BEST INSURORS OF MISSISSIPPI, INC., Case No. 89-9737-8P1 COAST TO COAST ADVERTISING, INC., Case No. 89-9727-8P1 COMPUTER HOLDINGS CORPORATION, Case No. 89-9724-8P1 DIXIE BUILDING SUPPLIES, INC., Case No. 89-9741-8P1 HAMER HOLDINGS CORPORATION, Case No. 89-9735-8P1 HAMER PROPERTIES, INC., Case No. 89-9739-8P1 HOMES HOLDINGS CORPORATION, Case No. 89-9742-8P1 JIM WALTER COMPUTER SERVICES, INC., Case No. 89-9723-8P1 JIM WALTER HOMES, INC., Case No. 89-9746-8P1 JIM WALTER INSURANCE SERVICES, INC., Case No. 89-9731-8P1 JIM WALTER RESOURCES, INC., Case No. 89-9738-8P1 JIM WALTER WINDOW COMPONENTS, INC., Case No. 89-9716-8P1 JW ALUMINUM COMPANY, Case No. 89-9718-8P1 JW RESOURCES, INC., Case No. 90-11997-8P1 JW RESOURCES HOLDINGS CORPORATION, Case No. 89-9719-8P1 J.W.I. HOLDINGS CORPORATION, Case No. 89-9721-8P1 J.W. WALTER, INC., Case No. 89-9717-8P1 JW WINDOW COMPONENTS, INC., Case No. 89-9732-8P1 LAND HOLDINGS CORPORATION, Case No. 89-9720-8P1 MID-STATE HOMES, INC., Case No. 89-9725-8P1 MID-STATE HOLDINGS CORPORATION, Case No. 89-9726-8P1 RAILROAD HOLDINGS CORPORATION, Case No. 89-9733-8P1 SLOSS INDUSTRIES CORPORATION, Case No. 89-9743-8P1 SOUTHERN PRECISION CORPORATION, Case No. 89-9729-8P1 UNITED LAND CORPORATION, Case No. 89-9730-8P1 UNITED STATES PIPE AND FOUNDRY COMPANY,Case No. 89-9744-8P1 U.S. PIPE REALTY, INC., Case No. 89-9734-8P1 VESTAL MANUFACTURING COMPANY, Case No. 89-9728-8P1 WALTER HOME IMPROVEMENT, INC., Case No. 89-9722-8P1 WALTER INDUSTRIES, INC. and Case No. 89-9745-8P1 WALTER LAND COMPANY, Case No. 89-9736-8P1 Debtors. SUPPLEMENT TO DISCLOSURE STATEMENT FOR AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN", FORMERLY THE "CREDITORS' PLAN") AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. Co-Counsel to Apollo 65 East 55th Street 33rd Floor New York, NY 10022 (212) 872-1000 STUTMAN, TRIESTER & GLATT, P.C. Co-Counsel to Apollo 3699 Wilshire Boulevard Suite 900 Los Angeles, CA 90010 (213) 251-5100 JONES, DAY, REAVIS & POGUE Counsel to Official Committee of General Unsecured Creditors 599 Lexington Avenue New York, NY 10022 (212) 326-3939 PAUL, WEISS, RIFKIND, WHARTON & GARRISON Counsel to Lehman Brothers Inc. 1285 Avenue of the Americas New York, NY 10019 (212) 373-3000 STROOCK & STROOCK & LAVAN Counsel to Official Bondholders Committee Seven Hanover Square New York, NY 10004-2594 (212) 806-5400 MARCUS MONTGOMERY WOLFSON P.C. Counsel to Ad Hoc Committee of Pre-LBO Bondholders 53 Wall Street New York, NY 10005 (212) 858-5200 KAYE, SCHOLER, FIERMAN, HAYS & HANDLER Co-Counsel to the Debtors 425 Park Ave. New York, NY 10022 (212) 836-8000 STICHTER, RIEDEL, BLAIN & PROSSER, P.A. Co-Counsel to the Debtors 110 E. Madison St. Suite 200 Tampa, FL 33602 (813) 229-0144 CARLTON, FIELDS, WARD, EMMANUEL, SMITH & CUTLER, P.A. Counsel to KKR One Harbour Place Tampa, FL 33602 (813) 223-7000 THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN") WHICH IS THE SUBJECT OF THIS DISCLOSURE STATEMENT SUPPLEMENT MODIFIES THE "CREDITORS' JOINT PLAN OF REORGANIZATION DATED AS OF AUGUST 1, 1994" (THE "CREDITORS' PLAN"). ON AUGUST 2, 1994, THE BANKRUPTCY COURT APPROVED THE "DISCLOSURE STATEMENT FOR CREDITORS' PLAN DATED AS OF AUGUST 1, 1994" (THE "CREDITORS' DISCLOSURE STATEMENT"), WHICH WAS TRANSMITTED TO CREDITORS AND EQUITY HOLDERS ENTITLED TO VOTE ON THE CREDITORS' PLAN. THIS SUPPLEMENT TO DISCLOSURE STATEMENT (THE "DISCLOSURE STATEMENT SUPPLEMENT") SHOULD BE CONSIDERED IN CONJUNCTION WITH THE CREDITORS' DISCLOSURE STATEMENT. ON DECEMBER 9, 1994, THE CONSENSUAL PLAN AND THIS DISCLOSURE STATEMENT SUPPLEMENT WERE FILED WITH THE BANKRUPTCY COURT. PURSUANT TO AN ORDER DATED DECEMBER 15, 1994, THE BANKRUPTCY COURT DETERMINED THAT, WHEN TAKEN TOGETHER WITH THE CREDITORS' DISCLOSURE STATEMENT, WHICH WAS PREVIOUSLY APPROVED BY THE BANKRUPTCY COURT, THIS DISCLOSURE STATEMENT SUPPLEMENT COMPLIES WITH THE REQUIREMENTS OF THE BANKRUPTCY CODE. ALL CLAIMANTS ARE HEREBY ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT SUPPLEMENT AND THE CONSENSUAL PLAN IN THEIR ENTIRETY. CONSENSUAL PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT SUPPLEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE CONSENSUAL PLAN, THE CREDITORS' DISCLOSURE STATEMENT, OTHER EXHIBITS ANNEXED HERETO AND THERETO AND OTHER DOCUMENTS REFERENCED AS FILED WITH THE COURT PRIOR TO OR CONCURRENT WITH THE FILING OF THIS DISCLOSURE STATEMENT SUPPLEMENT. DELIVERY OF THIS DISCLOSURE STATEMENT SUPPLEMENT SHALL NOT CREATE THE IMPLICATION THAT THERE HAS BEEN NO CHANGE IN RESPECT OF THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS DISCLOSURE STATEMENT SUPPLEMENT AND THE DATE OF THE MATERIALS RELIED UPON IN PREPARATION OF THIS DISCLOSURE STATEMENT SUPPLEMENT OR THE CREDITORS' DISCLOSURE STATEMENT. NO REPRESENTATION IS MADE HEREIN REGARDING THE TRADING VALUE OR OTHER MARKET VALUE OF ANY SECURITY TO BE ISSUED PURSUANT TO OR IN CONNECTION WITH THE CONSENSUAL PLAN. THIS DISCLOSURE STATEMENT SUPPLEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTIONS 1125 AND 1127(C) OF THE BANKRUPTCY CODE AND NOT IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER APPLICABLE NONBANKRUPTCY LAW. PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING OR TRANSFERRING SECURITIES OF THE DEBTORS SHOULD EVALUATE THIS DISCLOSURE STATEMENT SUPPLEMENT AND THE CONSENSUAL PLAN ONLY IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE PREPARED. THIS DISCLOSURE STATEMENT SUPPLEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SUPPLEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE STATEMENT SUPPLEMENT SHALL NOT BE ADMISSIBLE IN ANY PROCEEDING INVOLVING THE PROPONENTS OR ANY OTHER PARTY NOR SHALL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN THE DEBTORS. TABLE OF CONTENTS Page I. INTRODUCTION 1 A. Settlement Reached Among Representatives of Bondholders Committee, Apollo, Lehman Brothers Inc., Debtors, KKR and Veil Piercing Claimants 1 B. Events Preceding The Settlement 3 1. Competing Debtor and Creditor Plans 3 2. Balloting Results 4 3. Debtors' Motion Challenging Ballots and Seeking Invalidation of the Balloting Process 4 4. Creditor Proponents' and Debtors' Motions Regarding Post-Petition Interest 4 5. Litigation Regarding Veil Piercing Settlement and Settlement Claims 4 6. Adversary Proceeding Commenced by KKR et al., against Apollo, Leon Black et al 5 7. October 17, 1994 Hearing; Negotiation of Settlement 6 C. Option for Holders of Claims and Interests in Certain Classes to Change Vote on Creditors' Plan on or Prior to January 24, 1995 6 D. Election for Holders of Class U-4 Claims that Made the Subordinated Note Claim Election to Receive Qualified Securities 8 E. Voting on Consensual Plan by Holders of Settlement Claims 8 F. Confirmation Hearing 9 G. Approval of Supplement to Disclosure Statement 10 II. DESCRIPTION OF MATERIAL AMENDMENTS TO CREDITORS' PLAN CONTAINED IN CONSENSUAL PLAN 10 A. Allocation of New Common Stock 10 1. Distribution in Respect of Settlement Claims (Veil Piercing Claimants) 10 2. Allocation of Initial Issuance of 50 Million Shares of New Common Stock On The Effective Date 13 3. Issuance of Additional New Common Stock To Holders of Old Common Stock Interests 14 4. Issuance of Additional New Common Stock to Holders of Pre-LBO Debenture Claims In Connection With Dismissal of Fraudulent Conveyance Lawsuit, Related Releases and Pre-LBO Bondholders Settlement Agreement 16 5. Valuation of Debtors and of Equity Represented by New Common Stock 18 B. Allocation of Qualified Securities 19 C. Terms of Qualified Securities and New Senior Notes 20 D. Amount of Qualified Securities 22 E. Illustration of Effect of Plan Amendment on Recovery to Impaired Classes 22 F. Sources and Uses of Consideration Relating to Consummation of Consensual Plan 24 G. Matters Relating to Financing 26 H. Matters Relating to Corporate Governance 27 1. Elimination of High-Vote Class of New Common Stock 27 2. Designation of New Board of Directors of Walter Industries 27 I. Mutual Releases by and Among Apollo, Lehman Brothers Inc., Debtors and KKR 29 J. Releases Granted by Holders of Claims and Interests to Stockholders, Directors, Officers, etc. of Debtors 29 K. Conditions Precedent to Confirmation and Effectiveness of the Consensual Plan 30 L. Material Amendments to Amended and Restated Veil Piercing Settlement Agreement 31 III. UPDATED INFORMATION CONCERNING BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS 32 IV. UPDATED INFORMATION REGARDING CERTAIN FEDERAL INCOME TAX CONSEQUENCES 33 INDEX OF EXHIBITS 1. Amended Joint Plan of Reorganization (the "Consensual Plan") Exhibits: 1. Restated Certificate of Incorporation of Walter Industries 2. Summary of Terms for the New Senior Notes 3A. Second Amended and Restated Veil Piercing Settlement Agreement 3B. Pre-LBO Bondholders Settlement Agreement 4. Form of New Common Stock Registration Rights Agreement 5. Form of Qualified Securities Registration Rights Agreement 6. Rejected Executory Contracts 7. Mutual Releases 8. List of Record Holders of Subordinated Note Claims That Made Subordinated Note Claim Election and Aggregate Amount of Claim of Each Such Holder Elected to be Received in the Form of Qualified Securities Pursuant to Subordinated Note Claim Election 2. Summary of Classes and Treatment of Claims Under the Consensual Plan for Each Debtor 3. Consolidated Financial Statements of Walter Industries: A.1. Year ended May 31, 1994 (audited) A.2. Management's Discussion and Analysis of Financial Condition and Results of Operations For Year Ended May 31, 1994 B.1. Three Months Ended August 31, 1994 (unaudited) B.2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three Months ended August 31, 1994 C. Financial Projections for the Five Fiscal Years ending May 31, 1995 through May 31, 1999 UNLESS OTHERWISE INDICATED HEREIN, CAPITALIZED TERMS NOT DEFINED HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN THE CONSENSUAL PLAN OR, IF NOT DEFINED IN THE CONSENSUAL PLAN, IN THE CREDITORS' DISCLOSURE STATEMENT. I. INTRODUCTION This Supplement to Disclosure Statement For Amended Joint Plan of Reorganization Dated as of December 9, 1994 (the "Consensual Plan", formerly the "Creditors' Plan") (the "Supplement") supplements the Disclosure Statement for Creditors' Plan dated as of August 1, 1994 (the "Creditors' Disclosure Statement"). The Supplement is submitted jointly by the proponents of the Consensual Plan (the "Consensual Plan Proponents") pursuant to Sections 1125 and 1127(c) of Title 11 of the United States Code, 11 U.S.C. Section 101, et seq. (the "Code"). The Consensual Plan has been filed with the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Court") in connection with the Debtors' pending Chapter 11 Cases. The Consensual Plan amends the Creditors' Plan to include the terms of a settlement reached among: (i) the proponents of the Creditors' Plan (the "Creditor Proponents"), consisting of the Creditors Committee, the Bondholders Committee, Apollo, Lehman Brothers Inc. and the Ad Hoc Committee of Pre-LBO Bondholders; (ii) the Debtors; (iii) KKR; and (iv) representatives of the Veil Piercing Claimants. The Debtors and KKR have agreed not to pursue confirmation of the Debtors' Fifth Amended Plan of Reorganization dated as of July 25, 1994 (the "Debtors' Plan"), but instead to become Consensual Plan Proponents with the Creditor Proponents. KKR and senior management shareholders of Walter Industries have represented that they intend to change their votes as Holders of Class E-1 Interests so as to accept the Consensual Plan. Voting on the Creditors' Plan and the Debtors' Plan took place from August 12, 1994 through September 23, 1994. All Classes of Claims and Interests that were characterized as impaired under the Creditors' Plan, other than Class E-1 and seven Classes of Other Unsecured Claims (which rejecting creditor classes consist principally of professionals hired by the Debtors and present management and directors of the Debtors) voted to accept the Creditors' Plan. Under Section 1127(d) of the Code, each holder of a claim or interest that has accepted or rejected the Creditors' Plan is deemed to have accepted or rejected, as the case may be, the Creditors' Plan as it has been modified to become the Consensual Plan unless, within the time fixed by the Court, such holder changes such holder's previous acceptance or rejection. Classes of Claims that accepted the Creditors' Plan and whose treatment is not adversely changed in the Consensual Plan will be deemed to have accepted the Consensual Plan, without any provision for changing votes previously cast. See "Option for Holders of Claims and Interests in Certain Classes to Change Vote on Creditors' Plan on or Prior to January 24, 1995." In addition, although the Consensual Plan characterizes Class U-7 (Settlement Claims, i.e., Veil Piercing Claims and claims based on or arising from LBO-Related Issues raised or assertable by Veil Piercing Claimants) as being unimpaired (on the basis that Class U-7 is being treated in accordance with the Second Amended and Restated Veil Piercing Settlement Agreement), the Consensual Plan Proponents are nevertheless affording Holders of Class U-7 Claims the opportunity to complete and return ballots upon which they may cast a vote to accept or reject the Consensual Plan. See "Voting on Consensual Plan by Holders of Settlement Claims." A. SETTLEMENT REACHED AMONG REPRESENTATIVES OF BONDHOLDERS COMMITTEE, APOLLO, LEHMAN BROTHERS INC., DEBTORS, KKR AND VEIL PIERCING CLAIMANTS On October 17, 1994, the Court commenced the trial of certain preliminary issues relating to the then-pending Debtors' Plan and Creditors' Plan. On October 20, 1994, representatives of the Bondholders Committee, Apollo, Lehman Brothers Inc., the Debtors, KKR and the Veil Piercing Claimants reached an agreement in principle on the terms of an amendment to the Creditors' Plan (now embodied in the Consensual Plan) and an amendment to the Amended and Restated Veil Piercing Settlement Agreement (now embodied in the Second Amended and Restated Veil Piercing Settlement Agreement dated as of November 22, 1994) that would resolve their disputes regarding plan confirmation. The terms of the settlement were read into the record (but placed under seal) on the same day, and the Court thereupon adjourned the hearings that had begun on October 17, 1994, pending efforts to document the settlement. The principal terms of the settlement, which are discussed more fully below under "MATERIAL AMENDMENTS TO CREDITORS' PLAN CONTAINED IN CONSENSUAL PLAN" are as follows: * The Debtors and KKR join with the Creditor Proponents as co-proponents of the Consensual Plan. * The Allowed Claim of the Veil Piercing Claimants is reduced from $450 million to $375 million. * The Negotiated Enterprise Value is increased from $2.525 billion to $2.6 billion (and the New Common Stock Value is fixed at $2.6 billion, less the sum of $902 million and the aggregate principal amount of Qualified Securities distributed pursuant to the Consensual Plan), except that the New Common Stock used to satisfy a part of the $375 million Veil Piercing Claims Amount will be calculated so as to prevent any dilution that would otherwise have resulted from the increase in the Negotiated Enterprise Value. * If Holders of Old Common Stock Interests (Class E-1) accept the Consensual Plan, then such Holders will receive their Pro Rata share of shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the sum of: (a) Approximately $75 million as a result of the decrease in the Allowed Claim of the Veil Piercing Claimants; (b) Approximately $75 million as a result of the increase in the Negotiated Enterprise Value from $2.525 billion to $2.6 billion; (c) The extent by which Federal Income Tax Claims are reduced to below $27 million in the aggregate (the Creditors' Disclosure Statement estimated these claims at $27 million for purposes of estimating the amount of Senior Claims at December 31, 1993 (which were estimated at $902 million), whereas the Debtors' Disclosure Statement estimated these claims at $14 million); and (d) The amount of the tax benefits claimed as a deduction or a refund by the Debtors as a result of distributions made pursuant to the Veil Piercing Settlement (such shares to initially be placed into escrow and released to Holders of Class E-1 Interests only when, as and if such claimed deductions or refunds are actually realized), but limited to an amount that, when added to (a)-(c) above, does not exceed $250 million; provided, however, that $11.3 million of such New Common Stock will be distributed directly to Holders of Class E-1 Interests not later than 180 days after the Effective Date, regardless of whether any tax benefits have been claimed or realized. * The initial board of directors of Walter Industries (serving for a three-year term) will be initially designated as follows: (a) One KKR designee; (b) Three Lehman Brothers Inc. designees; (c) Three members of senior management (Messrs. Walter, Durham and Matlock); and (d) Two Independent Directors selected by existing management from a list prepared by an independent executive search firm. * There will be only one class of common stock of reorganized Walter Industries, with each share entitled to one vote. * The following amendments have been made to the Veil Piercing Settlement Agreement: (a) The Allowed Claim of the Veil Piercing Claimants is reduced from $450 million to $375 million. (b) The amount of the New Common Stock to be received by the Celotex Settlement Fund Recipient under the Veil Piercing Settlement Agreement is calculated based upon a $2.525 billion Negotiated Enterprise Value so that such recipient will be unaffected by the $75 million increase in the Negotiated Enterprise Value (the effect of this will be to nominally dilute the percentage of New Common Stock to be distributed to other Classes; See "DESCRIPTION OF MATERIAL AMENDMENTS TO CREDITORS' PLAN CONTAINED IN CONSENSUAL PLAN-- Allocation of Initial Issuance of 50 Million Shares of New Common Stock on the Effective Date." (c) The Debtors and KKR agree to support the request by Caplin and Drysdale, one of the law firms representing the Veil Piercing Claimants, for an award from the Debtors of $15 million in attorneys' fees on behalf of Caplin & Drysdale and the other Claimants' Attorneys. To the extent that the Court awards less than $15 million, the settlement distribution to the Celotex Settlement Fund Recipient will include a cash payment equal to this differential. (d) The Debtors, KKR and existing senior management shareholders will become signatories to, and receive the benefits of, the Second Amended and Restated Veil Piercing Settlement Agreement and Walter Industries and the Bondholders Committee will cooperate in good faith to insure that such agreement results in finality with respect to all past, present and future asbestos litigation. The procedures to be followed in pursuing finality will include those specifically described in the amended agreement. * In connection with the final settlement of all Pre-LBO Issues and the dismissal with prejudice of the pending fraudulent transfer lawsuit instituted by the Indenture Trustees for the Pre-LBO Debenture Claims, if Class U-6 accepts the Consensual Plan and if the existing Pre-LBO Bondholders Settlement Agreement expires by its terms as contemplated (because the Confirmation Order will not have been entered on or before December 31, 1994), the recovery to Class U-6 will be increased by the issuance of New Common Stock having an aggregate New Common Stock Value Per Share equal to $11.3 million, consisting of (a) $6.3 million, representing the estimated amount by which the Allowed Amount of the Series B & C Senior Note Claims is reduced by paying part of these claims in cash rather than by the issuance of New Senior Notes as permitted under the Series B & C Senior Note Claim Election; and (b) $5 million, representing the savings that are estimated to result from the agreement of Apollo and Lehman Brothers Inc., as part of the Consensual Plan only, not to file administrative expense claims which had been estimated at $5 million in the aggregate. B. EVENTS PRECEDING THE SETTLEMENT 1. COMPETING DEBTOR AND CREDITOR PLANS Since mid-May 1994, the Debtors and the Creditor Proponents have been the only proponents actively pursuing competing plans of reorganization. On August 2, 1994, the Court approved, under Section 1125 of the Code, (i) the Creditors' Disclosure Statement and related ballots and solicitation materials, and (ii) the Debtors' Fifth Amended Disclosure Statement dated as of July 25, 1994 (the "Debtors' Disclosure Statement") relating to the Debtors' Plan, and related ballots and solicitation materials. In connection with the confirmation process for the Creditors' Plan and the Debtors' Plan, the Court scheduled a hearing to commence on October 17, 1994 to consider three preliminary items: (i) the contested matter filed by the Debtors asserting that unsecured creditors are not entitled to post-petition interest on account of their Claims and any response or motion filed by the Creditor Proponents with respect to the issue of post-petition interest; (ii) the application by the Creditor Proponents seeking approval of the Amended and Restated Veil Piercing Settlement Agreement and the Debtors' motion to void that agreement; and (iii) any properly asserted challenges or objections to the vote of any party on either plan. Extensive discovery was taken on these issues during August, September and the first half of October 1994. The Court also scheduled a status conference for November 16, 1994 for the purpose of scheduling the date on which the confirmation hearing would begin. 2. BALLOTING RESULTS Disclosure statements, ballots and other solicitation materials with respect to the Debtors' Plan and the Creditors' Plan were mailed to creditors and interest holders on August 12, 1994, and ballots were required to be returned no later than September 23, 1994. The balloting results for the Creditors' Plan and the Debtors' Plan were as follows: * 98 classes of creditors accepted the Creditors' Plan. * One class of interest holders (Class E-1) and seven unsecured creditor classes (subclasses within Class U-3 (collectively, the "Non-Accepting U-3 Debtor Classes")) rejected the Creditors' Plan. * 99 classes preferred the Creditors' Plan over the Debtors' Plan. * No class of creditors accepted the Debtors' Plan; 74 creditor classes rejected the Debtors' Plan. * One class of interest holders accepted the Debtors' Plan (Class E-1). * Seven classes of creditors (subclasses within Class U-3) preferred the Debtors' Plan over the Creditors' Plan. 3. DEBTORS' MOTION CHALLENGING BALLOTS AND SEEKING INVALIDATION OF THE BALLOTING PROCESS On October 6, 1994, the Debtors filed a motion with the Court requesting that the ballots cast by every member of the Creditors Committee, the Bondholders Committee, and the Ad Hoc Committee of Pre-LBO Bondholders (a total of 26 creditors) be designated under Section 1126(e) of the Code and excluded from the computation of the vote on the Debtors' Plan and the Creditors' Plan, and also sought to invalidate the voting process as a whole and require a resolicitation of votes, based on various theories, including alleged improprieties by certain Creditor Proponents. The Creditor Proponents and others filed objections or responses in opposition to this motion. This matter was one of the matters set for trial at the hearings scheduled to commence on October 17, and would be resolved by the settlement and the releases to be exchanged under the Consensual Plan. 4. CREDITOR PROPONENTS' AND DEBTORS' MOTIONS REGARDING POST-PETITION INTEREST On September 9, 1994, the Creditor Proponents filed a motion seeking a determination that (i) unsecured creditors are entitled to post-petition interest before interest Holders may receive any distribution under a chapter 11 plan for the Debtors, and (ii) it is permissible for a chapter 11 plan for the Debtors to provide for post-petition interest to unsecured creditors before any distribution to interest Holders. The hearing on this motion, and on the Debtors' proceeding seeking a determination that unsecured creditors in these cases are not entitled to post-petition interest, was also part of the October 17 hearings and would be resolved by the settlement under the Consensual Plan. - ----------------- [FN] These subclasses consist of Class U-3 Claims against Hillsborough Holdings Corporation, Walter Home Improvement, Inc., Mid-State Homes, Inc., United Land Corporation, Walter Land Company, Walter Industries, Inc. and Jim Walter Homes, Inc. 5. LITIGATION REGARDING VEIL PIERCING SETTLEMENT AND SETTLEMENT CLAIMS A. MOTIONS REGARDING APPROVAL OF VEIL PIERCING SETTLEMENT On September 8, 1994, the Creditor Proponents filed a motion with the Court for an order approving the Amended and Restated Veil Piercing Settlement Agreement. On August 5, 1994, the Debtors filed a motion seeking to have that settlement agreement voided. The Creditor Proponents filed a response to this motion on October 12, 1994. Among the arguments made by the Debtors in their motion is the argument that, because the Settlement Claims (i.e., Veil Piercing Claims and claims based on or arising from LBO-Related Issues raised or assertable by Veil Piercing Claimants) were found by the Court to have no merit, and because, according to the Debtors and KKR, unsecured creditors are not legally entitled to receive post-petition interest in these Chapter 11 Cases, the Debtors' shareholders would be entitled to receive all of the value in the Debtors in excess of the Allowed prepetition Claims of all Unsecured Creditors (the Debtors estimated this value to be in excess of $600 million using a $2.805 billion enterprise value) and that, therefore, the settlement reached by the Creditor Proponents improperly and unreasonably distributed value to the Veil Piercing Claimants that allegedly belonged to the shareholders. Those arguments were among the matters scheduled to be heard at the October 17 hearings, and would be resolved by the settlement under the Consensual Plan. B. DISTRICT COURT AFFIRMANCE OF COURT'S DECISION AGAINST CERTAIN VEIL PIERCING CLAIMANTS IN DECLARATORY JUDGMENT PROCEEDING In its opinion dated April 18, 1994, the Court had determined, in the Declaratory Judgment Proceeding filed by the Debtors against certain parties asserting Settlement Claims against the Debtors, that such claims lacked merit. The defendants in that action had appealed that determination to the District Court for the Middle District of Florida (the "District Court"). On October 13, 1994, the District Court affirmed the Court's decision in favor of the Debtors in the Declaratory Judgment Proceeding. On or about November 14, 1994, representatives of the Veil Piercing Claimants filed a timely notice of appeal of the District Court's decision. A copy of the District Court's 71-page opinion can be obtained by making a request therefor to the Balloting Agent at the address or telephone number set forth in Section I.C. below. Counsel for the defendants in the Declaratory Judgment Proceeding have stated that, absent the settlement, they intend to pursue their appeal of the District Court's ruling. Absent a settlement, the Debtors would oppose the appeal and seek a final affirmance of the determination by the Court and the District Court that the Settlement Claims are without merit. C. DISMISSAL OF CELOTEX DECLARATORY JUDGMENT ACTION On April 28, 1994, the Debtors filed a complaint for declaratory relief against Celotex in the Celotex Chapter 11 Proceeding (the "Celotex DJ Action") which sought a determination that (i) Celotex alone has standing to assert Settlement Claims against any of the Debtors, and (ii) all creditors of Celotex are bound by the outcome of the Court's decision in the Declaratory Judgment Proceeding. Following a hearing held on October 13, 1994, the Celotex Bankruptcy Court dismissed without prejudice the Debtors' request for declaratory relief in the Celotex DJ Action, on the grounds that it failed to state a case or controversy and that it failed to join necessary parties (the individual Veil Piercing Claimants who do not agree that Celotex has sole standing to assert Settlement Claims). The Celotex Bankruptcy Court granted the Debtors until December 22, 1994 to file an amended complaint, and if such an amended complaint is filed, fixed January 20, 1995 as the last date by when the named defendants shall be permitted to file their answers or other responsive pleadings to the amended complaint. 6. ADVERSARY PROCEEDING COMMENCED BY KKR ET AL., AGAINST APOLLO, LEON BLACK ET AL. On September 8, 1994, KKR, certain affiliates of KKR and certain Debtors instituted an adversary proceeding (Adv. Pro. No. 94-562) against Apollo (a proponent of the Creditors' Plan) and certain affiliated entities and individuals (the "KKR-Apollo Action"). The KKR-Apollo Action asserts claims based on the alleged misuse of certain information allegedly obtained by certain individuals affiliated with Apollo from KKR and certain Debtors prior to the filing of these Chapter 11 Cases. The KKR-Apollo Action seeks various forms of relief, including a reduction in the allowed amount of the Subordinated Note Claims held by Apollo to the consideration paid therefor and the recovery of any profits made by Apollo on its Subordinated Note Claims. The time by which an answer must be filed has been extended, and an answer denying all of the substantive allegations of the complaint will be filed within the applicable time period. The Consensual Plan provides that the KKR-Apollo Action will be dismissed with prejudice, and the parties thereto will exchange mutual releases. 7. OCTOBER 17, 1994 HEARING; NEGOTIATION OF SETTLEMENT On October 17 and 18, 1994, the Court heard evidence on the issue of whether unsecured creditors are entitled to, or may receive, post-petition interest before any distribution to interest holders under a chapter 11 plan for the Debtors. On October 18, 1994, the Court began hearing evidence regarding the approval of the Amended and Restated Veil Piercing Settlement Agreement. On the morning of October 19, 1994, the Court advised counsel of the Court's view that the issues under consideration could and should be consensually resolved, and held separate meetings with representatives of each of the Debtors, KKR, Apollo, counsel to the Bondholders Committee and the Veil Piercing Claimants. At the conclusion of these individual meetings, the parties agreed to attempt to reach a consensual resolution and the hearing was adjourned temporarily to give them an opportunity to do so. The parties, consisting primarily of representatives of each of Apollo, Lehman Brothers Inc., the Bondholders Committee, the Veil Piercing Claimants and Walter Industries and KKR, spent the remainder of October 19, 1994 and most of the morning of October 20, 1994 negotiating a potential settlement. At mid-afternoon on October 20, 1994 these parties reached a consensus in principle on the terms of a proposed settlement and reported those terms to the Court under seal and to representatives of the other creditor constituencies. Thereafter, the settlement was documented in the form of a modification of the Creditors' Plan to become the Consensual Plan, and a modification of the Amended and Restated Veil Piercing Settlement Agreement to become the Second Amended and Restated Veil Piercing Settlement Agreement. C. OPTION FOR HOLDERS OF CLAIMS AND INTERESTS IN CERTAIN CLASSES TO CHANGE VOTE ON CREDITORS' PLAN ON OR PRIOR TO JANUARY 24, 1995 Pursuant to Section 1127(d) of the Code, a Holder's vote cast to accept or reject the Creditors' Plan shall be deemed binding on such Holder with respect to the Consensual Plan (which represents a modification of the Creditors' Plan), except to the extent that a previous acceptance or rejection is permitted to be changed and is changed by such Holder within the time fixed by the Court. Under Bankruptcy Rule 3019, if the Court finds that the Consensual Plan does not adversely change the treatment provided under the Creditors' Plan of the claim of any creditor or the interest of any equity security holder, the Consensual Plan will be deemed accepted by all such creditors and equity security holders who had previously accepted the Creditors' Plan. The modification of the Creditors' Plan contained in the Consensual Plan does not adversely change the treatment or consideration to be afforded to Holders of Other Unsecured Claims, including Creditors in the 26 Classes of Other Unsecured Claims that accepted the Creditors' Plan (i.e., the Classes of Class U-3 Claims other than the Non-Accepting U-3 Debtor Classes; hereinafter the "Accepting Other Unsecured Classes"). As a result, the Court has ordered that the Consensual Plan is deemed accepted by all Creditors in the Accepting Other Unsecured Classes who voted to accept the Creditors' Plan. The distribution on account of Claims in Classes S-1 (Revolving Credit Bank Claims), S-2 (Working Capital Bank Claims), S-6 (Series B & C Senior Note Claims), U-4 (Senior Subordinated Note Claims), U-5 (17% Subordinated Note Claims) and U-6 (Pre-LBO Debenture Claims) (the "Voting Creditor Classes") is reduced by the modification of the Creditors' Plan contained in the Consensual Plan, because the allocation of New Common Stock to each of those classes has been changed from the allocation contained in the Creditors' Plan. Although this reallocation affects the Voting Creditor Classes in varying degrees, it generally has the effect of reducing the percentage of the New Common Stock to be received by each of the Voting Creditor Classes, as a result of the distribution to Holders of Old Common Stock Interests of the approximately $75 million of New Common Stock resulting from the increase in the Negotiated Enterprise Value, and the fact that the number of shares of New Common Stock to be issued to Class U-7 is calculated under the Consensual Plan so as to avoid any dilution that would otherwise occur as a result of such increase in the Negotiated Enterprise Value and such share issuance to Holders of Old Common Stock Interests. The Consensual Plan also changes the treatment of Old Common Stock Interests (Class E-1) to provide for the allocation of specified amounts of New Common Stock (including the aforementioned amount) to Class E-1. The Consensual Plan also changes the treatment of Class U-6 to provide for the allocation of an additional amount ($11.3 million) of New Common Stock if, among other things, Class U-6 accepts the Consensual Plan; however, after considering the reallocation of New Common Stock described above, the net effect of the modification of the Creditors' Plan contained in the Consensual Plan on Class U-6 is adverse. The Court has ordered that each Holder of a Claim or Interest in any of the Voting Creditor Classes, the Non-Accepting U-3 Debtor Classes and in Class E-1 (collectively, the "Resolicitation Classes") who voted to accept or reject the Creditors' Plan will have an opportunity to change its vote under Section 1127(d) of the Code in light of the modification to the Creditors' Plan contained in the Consensual Plan, within a time fixed by the Court. In particular, any Holder of a Claim or Interest in the Resolicitation Classes that accepted or rejected the Creditors' Plan will be deemed to have accepted or rejected, as the case may be, the Consensual Plan, unless such Holder changes such Holder's previous acceptance or rejection by returning a properly completed Vote Change Certification to the Balloting Agent in accordance with the following deadlines: Each record holder of a claim or interest in any of the Resolicitation Classes who is also the beneficial owner thereof and who voted on the Creditors' Plan is required to transmit the applicable Vote Change Certification to the Balloting Agent, so as to be actually received by the Balloting Agent, on or before 5:00 p.m. Eastern Time, on January 24, 1995 (the "Vote Change Deadline"). The beneficial owners of securities held through Record Holder Nominees are required to transmit the applicable Vote Change Certification to their respective Record Holder Nominee so as to be received by the beneficial owners' Record Holder Nominee on or before January 19, 1995 at 5:00 p.m. Eastern Time. Master Vote Change Certifications completed by Record Holder Nominees must be forwarded so as to be received by the Balloting Agent on or before the Vote Change Deadline. Any attempted vote change received after the applicable deadline set forth above will not be counted. If you voted to accept or reject the Creditors' Plan and have not received a Vote Change Certification form, please contact the Balloting Agent immediately. The Balloting Agent's address and phone number are as follows: If by Mail: Donlin, Recano & Company, Inc. P.O. Box 2022 Murray Hill Station New York, NY 10156-0701 If by Courier or Hand: Donlin, Recano & Company, Inc. 419 Park Avenue South Suite 206 New York, NY 10016 Telephone: 1-800-489-7444 The Consensual Plan Proponents believe that because only a small portion of the distribution to Classes S-1, S-2, and S-6 under the Consensual Plan consists of New Common Stock, the effect on those three Classes of the modification of the Creditors' Plan contained in the Consensual Plan is sufficiently de minimus that the modification does not "adversely change" their treatment within the meaning of Bankruptcy Rule 3019, and that, having accepted the Creditors' Plan, those three Classes should be deemed to have accepted the Consensual Plan. Although Creditors in those three Classes are being given an opportunity to change their votes, that opportunity is without prejudice to the ability of the Consensual Plan Proponents to argue that those three Classes are so minimally affected by the plan modification that they should be deemed to have accepted the Consensual Plan. The Creditors' Plan also provided for certain elections to be made by the Holders of Series B & C Senior Note Claims, Subordinated Note Claims, and Other Unsecured Claims. The Consensual Plan provides that such elections are binding and does not provide for an opportunity to change any such elections at any time. D. ELECTION FOR HOLDERS OF CLASS U-4 CLAIMS THAT MADE THE SUBORDINATED NOTE CLAIM ELECTION TO RECEIVE QUALIFIED SECURITIES The Consensual Plan provides for a new election regarding distributions to Class U-4. The election can be made only by completing the election form transmitted with this Supplement and returning it to the Balloting Agent by the Vote Change Deadline. Under the "Class U-4 Exchange Election", Holders of Senior Subordinated Note Claims (Class U-4) that had elected to receive all or part of their Class U-4 Claims in Qualified Securities pursuant to the Subordinated Note Claim Election under the Creditors' Plan (other than Lehman Brothers Inc.) (the "Electing Class U-4 Holders") will be entitled to "exchange" their pro rata share of New Common Stock having an aggregate New Common Stock Value Per Share of $39.4 million that they otherwise would have received on account of their Class U-4 Claims (unless a lesser principal amount of Qualified Securities is sufficient to satisfy all Class U-4 Subordinated Note Claim Elections for Qualified Securities, in which event such lesser amount shall apply), for an identical aggregate principal amount of Qualified Securities that would otherwise have been issued to Lehman Brothers Inc. on the Effective Date in respect of the Class U-4 Claim held by Lehman Brothers Inc., with any New Senior Notes that would otherwise have been so issued to Lehman Brothers Inc. to be reallocated before any Cash that would otherwise have been so distributed is reallocated. E. VOTING ON CONSENSUAL PLAN BY HOLDERS OF SETTLEMENT CLAIMS Although the Consensual Plan characterizes the Settlement Claims (Class U-7) as not being impaired under the Consensual Plan, the Consensual Plan Proponents are nevertheless affording to Holders of Settlement Claims in Class U-7 (Veil Piercing Claimants) the opportunity to complete and return ballots upon which they may cast a vote to accept or reject the Consensual Plan. Holders of Class U-7 Claims did not vote on the Creditors' Plan, nor on the Debtors' Plan (which did not provide for a recovery or a class in respect of Settlement Claims). Holders of Class U-7 Claims are being given an opportunity to vote on the Consensual Plan as a precautionary measure, so that if the position of the Consensual Plan Proponents that Class U-7 Claims are unimpaired under the Consensual Plan is challenged, such a challenge could be rendered moot if Class U-7 votes on and accepts the Consensual Plan. The Court has ordered that, solely for purposes of voting on the Consensual Plan: (i) each individual or entity voting in Class U-7 must certify in the appropriate space on the Class U-7 Ballot either that it holds a Class U-7 Claim, or that it is authorized to vote on behalf of a Class U-7 Claimant that has certified that it holds a Class U-7 Claim; (ii) each Holder of a Class U-7 Claim is deemed to be added to the Debtors' Schedule of Assets and Liabilities as a creditor holding a Claim in the amount of one dollar ($1.00); and (iii) each such Class U-7 Claim is deemed provisionally to be an Allowed Claim in the amount of one dollar ($1.00) against each Debtor for purposes of voting on the Consensual Plan. The affording of Class U-7 Claims the opportunity to cast a vote to accept or reject the Consensual Plan is without prejudice to the right of the Consensual Plan Proponents to assert, as they have asserted, that Class U-7 Claims are not impaired under the Consensual Plan. - --------------- [FN] See "INTRODUCTION--Summary--Other Ballot Elections" at pp. 11-12 of the Creditors' Disclosure Statement. Unlike the Creditors' Plan, the Consensual Plan does not provide for the Series B & C Senior Note Claim Election or the Subordinated Note Claim Election to be reconducted if the Effective Date does not occur prior to December 31, 1994. HOLDERS OF CLASS U-7 CLAIMS ALSO MAY OBTAIN OR REVIEW A COPY OF THE CREDITORS' DISCLOSURE STATEMENT THAT WAS TRANSMITTED TO HOLDERS OF CLAIMS AND INTERESTS THAT VOTED ON THE CREDITORS' PLAN. HOLDERS OF CLASS U-7 CLAIMS ARE ENCOURAGED TO CAREFULLY READ THE CREDITORS' DISCLOSURE STATEMENT, AS SUPPLEMENTED BY THIS SUPPLEMENT. THE CREDITORS' DISCLOSURE STATEMENT MAY BE REVIEWED WEEKDAYS FROM 9:00 A.M. TO 4:30 P.M. AT THE OFFICE OF THE CLERK OF THE COURT FOR THE U.S. BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF FLORIDA, TAMPA DIVISION, LOCATED AT 4921 MEMORIAL HIGHWAY, TAMPA, FLORIDA 33634, AND A COPY OF THE CREDITORS' DISCLOSURE STATEMENT WILL BE MAILED FREE OF CHARGE TO ANY PERSON THAT MAKES A REQUEST THEREFOR BY MAIL OR TELEPHONE TO THE BALLOTING AGENT AT: DONLIN, RECANO & COMPANY, INC., P.O. BOX 2022, MURRAY HILL STATION, NEW YORK, NY 10156-0701, TELEPHONE 1-800-489-7444. ALTHOUGH HOLDERS OF CLASS U-7 CLAIMS ARE ENCOURAGED TO REVIEW THOSE DOCUMENTS IN THEIR ENTIRETY, THE CONSENSUAL PLAN PROPONENTS BELIEVE THAT THE FOLLOWING SECTIONS OF THE CREDITORS' DISCLOSURE STATEMENT ARE PARTICULARLY RELEVANT TO HOLDERS OF CLASS U-7 CLAIMS: "INTRODUCTION--LITIGATION OF VEIL PIERCING PROCEEDINGS" (PAGES 25-29); "OVERVIEW OF THE CREDITORS' PLAN--SPECIAL FEATURES OF THE CREDITORS' PLAN-- SETTLEMENT OF THE VEIL PIERCING/FRAUDULENT CONVEYANCE ISSUES AND OTHER ISSUES" (PAGES 38-50); AND "--DISTRIBUTION OF COMBINATION OF QUALIFIED SECURITIES AND NEW COMMON STOCK TO HOLDERS OF SUBORDINATED NOTE CLAIMS AND TO VEIL PIERCING CLAIMANTS" (PAGES 50-73). The procedure for Holders of Class U-7 Claims to cast a vote to accept or reject the Consensual Plan is as follows: Each holder of a claim in Class U-7 is required to transmit a completed and executed Class U-7 Ballot to the Balloting Agent, so as to be actually received by the Balloting Agent, on or before 5:00 p.m. Eastern Time, on February 22, 1995 (the "Class U-7 Voting Deadline"). Any Class U-7 Ballot received after the Class U-7 Voting Deadline set forth above will not be counted. If you believe that you hold a Claim in Class U-7 and have not received a Class U-7 Ballot, please contact the Balloting Agent immediately. The Balloting Agent's address and phone number are as follows: If by Mail: Donlin, Recano & Company, Inc. P.O. Box 2022 Murray Hill Station New York, NY 10156-0701 If by Courier or Hand: Donlin, Recano & Company, Inc. 419 Park Avenue South Suite 206 New York, NY 10016 Telephone: 1-800-489-7444 F. CONFIRMATION HEARING The confirmation hearing on the Consensual Plan (the "Confirmation Hearing") has been scheduled to begin at 9:00 a.m. on March 1, 1995 and continuing, if necessary, through March 3, 1995, at the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, 4921 Memorial Highway, Tampa, Florida 33634. The Confirmation Hearing may be adjourned from time to time by the Court without further notice except for an announcement of the adjournment made at the Confirmation Hearing. At the Confirmation Hearing, the Court will (i) determine whether the Consensual Plan has been accepted by the requisite majorities of each Voting Class after considering any permitted and timely vote changes, and whether Class U-7 has accepted the Consensual Plan by the requisite majority, (ii) hear and determine any objections to Confirmation of the Consensual Plan, (iii) determine whether the Consensual Plan meets the requirements of the Code, (iv) determine whether the conditions to Confirmation have occurred, have been satisfied or have been waived, (v) determine whether to approve the Second Amended and Restated Veil Piercing Settlement Agreement, and (vi) confirm or deny Confirmation of the Consensual Plan. Objections to Confirmation of the Consensual Plan, if any, must be in writing and must be filed with the Court, and personally served upon the parties identified in the notice that accompanies this Supplement so that they are received by such parties, on or before 5:00 p.m., Eastern Time, on January 24, 1995 with respect to objections made by persons other than Holders of Class U-7 Claims (in their capacity as Holders of Class U-7 Claims), and on or before 5:00 p.m., Eastern Time, on February 22, 1995 with respect to Holders of Class U-7 Claims (in their capacity as Holders of Class U-7 Claims). Objections to Confirmation of the Consensual Plan are governed by Bankruptcy Rule 9014 and Local Bankruptcy Rule 3.05. G. APPROVAL OF SUPPLEMENT TO DISCLOSURE STATEMENT This Supplement was filed with the Court on November 22, 1994 and amended on December 9, 1994. Pursuant to an order of the Court entered on November 22, 1994, a notice of the deadline for objecting to the Supplement and of the hearing thereon was transmitted to Creditors and Interest Holders and was published in various newspapers and journals. The Notice stated that, among other things, objections to the Supplement other than objections to disclosure therein regarding the Second Amended and Restated Veil Piercing Settlement Agreement were required to be in writing and were required to be filed with the Court, and personally served upon the parties identified in the notice so that they would be received by such parties, on or before 5:00 p.m. Eastern Time on December 12, 1994, and that objections to the Supplement based on disclosure therein regarding the Second Amended and Restated Veil Piercing Settlement Agreement were required to be in writing and were required to be filed with the Court, and personally served upon the parties identified in the notice so that they would be received by such parties, on or before 5:00 p.m. Eastern Time on December 14, 1994. Three objections were timely filed with respect to the Supplement. Two objections were filed by Holders of Subordinated Note Claims arguing, among other things, that the Subordinated Note Claim Election should be reconducted and that Holders of Subordinated Note Claims that did not make the Subordinated Note Claim Election should be able to make the Class U-4 Exchange Election. The third objection, filed by the Aetna Casualty and Surety Company, requested that disclosure be added regarding the possible appointment of a future asbestos claimants representative in the Celotex Chapter 11 Proceeding. At a hearing held on December 15, 1994, the Court overruled the two objections filed by Holders of Subordinated Note Claims, and approved certain language to be added to the Supplement in response to the Aetna objection. On December 15, 1994, the Court entered an order determining that, when taken together with the Creditors' Disclosure Statement, which was previously approved by the Court, the Supplement complies with the requirements of the Code. II. DESCRIPTION OF MATERIAL AMENDMENTS TO CREDITORS' PLAN CONTAINED IN CONSENSUAL PLAN The following is a summary of what, in the view of the Consensual Plan Proponents, are the material amendments to the Creditors' Plan that are contained in the Consensual Plan. These descriptions are summaries only, do not purport to be complete, and do not describe all changes contained in the Consensual Plan. Such summaries are qualified in their entirety by reference to the Consensual Plan and the exhibits thereto, a copy of which is attached as Exhibit I hereto. A. ALLOCATION OF NEW COMMON STOCK The principal changes in the treatment of Claims and Interests effected by the modification of the Creditors' Plan contained in the Consensual Plan relate to the allocation of New Common Stock, and include the following: (i) the increase by $75 million of the Negotiated Enterprise Value; (ii) the decrease by $75 million of the Allowed Claim of the Veil Piercing Claimants; (iii) if Class E-1 accepts the Consensual Plan, the distribution of New Common Stock having an aggregate New Common Stock Value Per Share of at least $150 million and (depending on the outcome of certain contingencies) as much as $250 million to interest holders (Class E-1); and (iv) the distribution of additional New Common Stock having an aggregate New Common Stock Value Per Share equal to $11.3 million to Holders of Pre-LBO Debenture Claims (Class U-6) if, among other things, Class U-6 accepts the Consensual Plan. - ---------------------- [FN] Under the Consensual Plan, such increase in the Negotiated Enterprise Value will not dilute the percentage of the 50 million shares of New Common Stock to be initially issued on the Effective Date that will be distributed to and retained by the Celotex Settlement Fund Recipient in respect of Veil Piercing Claims. 1. DISTRIBUTION IN RESPECT OF SETTLEMENT CLAIMS (VEIL PIERCING CLAIMANTS) The Creditors' Plan and the Amended and Restated Veil Piercing Settlement Agreement provided for a distribution in respect of Settlement Claims (Class U-7) of $450 million, payable in a combination of Qualified Securities and New Common Stock. The Debtors' Plan did not provide for any distribution on account of Settlement Claims. The Consensual Plan reduces the amount of this distribution to $375 million. In addition, the Celotex Settlement Fund Recipient will receive (i) a contingent cash payment in the event that the application of Caplin & Drysdale (counsel to the Veil Piercing Claimants in the Declaratory Judgment Proceeding) for payment of $15 million in attorney's fees on behalf of itself and the Claimants' Attorneys is not granted in full by the Court (the amount of the additional cash payment to the Celotex Settlement Fund Recipient will equal that part of the $15 million fee request not granted by the Court), and (ii) in the event that the Effective Date occurs after March 31, 1995, additional New Senior Notes (or, if no New Senior Notes are issued as Qualified Securities, Cash) as compensation for any delay in receiving distributions of Qualified Securities beyond March 31, 1995. See "Allocation of Qualified Securities." Although the aggregate Class U-7 Claim (other than the contingent cash payment) is still payable in Qualified Securities and New Common Stock, the Consensual Plan changes the method of allocating each component of the distribution. With respect to Qualified Securities, the Creditors' Plan provided that Qualified Securities would be divided between Settlement Claims and Subordinated Note Claims on the basis of a 450/1548 fraction to Holders of Settlement Claims, and the balance to Holders of Subordinated Note Claims. Under the Consensual Plan, this fraction has been changed to 375/1473, resulting in a relatively smaller principal amount of Qualified Securities for Veil Piercing Claimants and a relatively larger principal amount of Qualified Securities for Subordinated Noteholders at any given level of Qualified Securities. With respect to New Common Stock, the Creditors' Plan provided that shares of New Common Stock would be allocated based upon a per-share stock value derived from a $2.525 billion Negotiated Enterprise Value. Although the Consensual Plan now generally provides that the Negotiated Enterprise Value will be increased from $2.525 billion to $2.6 billion, this change does not apply to the determination of the number of shares of New Common Stock to be distributed on account of that part of the $375 million Veil Piercing Claims Amount that is not satisfied by the issuance of Qualified Securities. Consequently, the $2.525 billion enterprise value used for purposes of allocating New Common Stock under the Creditors' Plan will continue to apply solely for the purpose of determining the number of shares of New Common Stock to be received by the Celotex Settlement Fund Recipient under the Veil Piercing Settlement, with the result that the Celotex Settlement Fund Recipient will receive and retain the same percentage of the 50 million shares of New Common Stock to be issued initially on the Effective Date (which does not include the Pre-LBO Settlement Equity Amount) as would have been received at a $2.525 billion Negotiated Enterprise Value. The example set forth on the following page illustrates the Class U-7 recovery under the Consensual Plan, assuming that $530 million of Qualified Securities are available for distribution thereunder. ALLOCATION OF QUALIFIED SECURITIES AND NEW COMMON STOCK TO VEIL PIERCING CLAIMANTS (CLASS U-7) ALLOWED CLAIM OF CLASS U-7 $ 375,000,000 ALLOCATION OF QUALIFIED SECURITIES Qualified Securities Available to Classes U-4 through U-7 $ 530,000,000 Allocation Percentage for Class U-7(a) 25.5% - -------------- QUALIFIED SECURITIES ALLOCATED TO CLASS U-7 $ 134,928,717 ALLOCATION OF NEW COMMON STOCK Allowed Claim of Class U-7 $ 375,000,000 Qualified Securities Allocated to Class U-7 (134,928,717) - -------------- "Veil Piercing Residual Claim Amount" $ 240,071,283 Negotiated Enterprise Value per Creditors' Plan $2,525,000,000 Amount of Senior Claims per Creditors' Plan and Consensual Plan 902,000,000 Amount of Qualified Securities Available to Classes U-4 to U-7 530,000,000 "Veil Piercing New Common Stock Value" $1,093,000,000 Shares to be Initially Issued 50,000,000 "Veil Piercing New Common Stock Value Per Share"(b) $ 21.86 New Common Stock Shares to Be Issued to Veil Piercing Claimants-- "Veil Piercing New Common Stock Amount"(c) 10,982,218 New Common Stock Value Per Share(d) $ 23.36 NEW COMMON STOCK VALUE ALLOCATED TO CLASS U-7 $ 256,544,612 TOTAL VALUE ALLOCATED TO CLASS U-7(E) $ 391,473,329 (a) Represents proportional sharing amount of Class U-7 pursuant to Section 2.a.ii. of the Second Amended and Restated Veil Piercing Settlement Agreement ($375,000,000/$1,473,000,000). (b) Veil Piercing New Common Stock Value divided by Shares to be Initially Issued. (c) Veil Piercing Residual Claim Amount divided by Veil Piercing New Common Stock Value Per Share. (d) Negotiated Enterprise Value of $2.600 billion less Senior Claim amount of $902 million and Qualified Securities of $530 million divided by 50 million shares to be initially issued. (e) Represents total Qualified Securities and New Common Stock Value allocated to Class U-7. The allocation to individual veil piercing claimants of the consideration to be distributed to the Celotex Settlement Recipient Fund under the Consensual Plan will be determined by the Celotex Bankruptcy Court as part of the Celotex Chapter 11 Proceeding, and not by the Court in the Chapter 11 Cases. The Consensual Plan, the Second Amended and Restated Veil Piercing Settlement Agreement and the restated certificate of incorporation of Walter Industries provide that shares of New Common Stock issued to the Celotex Settlement Fund Recipient under the Consensual Plan and not yet transferred to persons other than Veil Piercing Claimants shall be voted only in the same percentage as the other shares of New Common Stock are voted on the matter in question. The Consensual Plan Proponents anticipate that this provision will be enforced through the issuance of a separate class of New Common Stock to the beneficiaries of the Celotex Settlement Fund Recipient that has all of the rights and privileges of the class of New Common Stock issued to other Creditors and Interest Holders, except that the shares of such class shall be voted only in the same percentage as the shares of the other class of New Common Stock are voted on the matter in question (the shares of this class will be automatically converted into the other class of New Common Stock upon transfer to a Person other than a Veil Piercing Claimant or its Affiliate). These shares may also be deposited in a voting trust in connection with the Celotex Chapter 11 Proceeding. 2. ALLOCATION OF INITIAL ISSUANCE OF 50 MILLION SHARES OF NEW COMMON STOCK ON THE EFFECTIVE DATE A. IN GENERAL Before the Creditors' Plan was modified to become the Consensual Plan, it provided that 50 million shares of New Common Stock would be issued on the Effective Date and would be allocated among the Voting Creditor Classes (Classes S-1, S-2, S-6, U-4, U-5 and U-6) and the Veil Piercing Claimants in the manner specified therein. The Creditors' Plan also provided that Holders of Old Common Stock Interests would receive (i) the "Equity Call Option" and (ii) any "excess" shares of New Common Stock that remained after Holders of Subordinated Note Claims received Qualified Securities and New Common Stock with an aggregate value equal to the Allowed Amount of their Claims, which would have included post-petition interest to the extent permitted by law. The Creditor Proponents anticipated that no New Common Stock would be issued to the Holders of Old Common Stock Interests under the Creditors' Plan (other than upon any exercise of an Equity Call Option). Under the Consensual Plan, a specified portion of the 50 million shares of New Common Stock to be issued initially on the Effective Date will be allocated to the Holders of Old Common Stock Interests, based on the formula described below. In addition, depending on certain occurrences and contingencies, additional shares of New Common Stock (which shall not be part of the initial 50 million share issuance) will be issued to such Holders. The effect of these modified provisions for the distribution of New Common Stock to Class E-1 will be dilutive as to the Voting Creditor Classes, when compared to the distribution of New Common Stock that they would have received under the Creditors' Plan (before it was modified to become the Consensual Plan), had the Court adopted the "Negotiated Enterprise Value" of $2.525 billion contained in the Creditors' Plan. The Debtors claimed, however, that the use of this "Negotiated Enterprise Value" significantly undervalued the Debtors. The Consensual Plan provides for a $2.6 billion Negotiated Enterprise Value. See "Allocation of New Common Stock--Valuation of Debtors and of Equity Represented by New Common Stock". B. FORMULA FOR ALLOCATING THE INITIAL ISSUANCE OF 50 MILLION SHARES OF NEW COMMON STOCK TO BE ISSUED ON THE EFFECTIVE DATE. Under the Consensual Plan, 50 million shares of New Common Stock will be issued on the Effective Date and will be allocated among the Voting Creditor Classes, the Holders of Settlement Claims and Holders of Old Common Stock Interests in the following manner: Initially, a determination will be made of the number of shares of New Common Stock to be allocated to the Celotex Settlement Fund Recipient so that it receives the same percentage of the 50 million shares of New Common Stock that it would have received absent the increase in the Negotiated Enterprise Value. This determination is made by first calculating the amount by which the $375 million Veil Piercing Claims Amount exceeds the principal amount of the Qualified Securities issued on account thereof (the remainder being the "Veil Piercing Residual Claim Amount"), and providing for the Celotex Settlement Fund Recipient to receive that number of shares of New Common Stock which has a value equal to the Veil Piercing Residual Claim Amount, determined by using a value per share for the New Common Stock which is derived on the basis of a $2.525 billion enterprise value. This result is accomplished by using a New Common Stock value per share (the "Veil Piercing New Common Stock Value Per Share") which is derived by subtracting the sum of $902 million and the aggregate principal amount of the Qualified Securities issued to all Classes from $2.525 billion, and dividing that amount by 50 million shares. This results in the "Veil Piercing New Common Stock Value Per Share." The number of shares to be distributed to the Celotex Settlement Fund Recipient will have an aggregate Veil Piercing New Common Stock Value Per Share equal to the Veil Piercing Residual Claim Amount. The aggregate number of shares thus derived, which will be distributed to the Celotex Settlement Fund Recipient, is the "Veil Piercing New Common Stock Amount." - ---------------- This provision will result in the distribution of additional shares to Class U-7 having an aggregate New Common Stock Value Per Share of approximately $16 million (assuming total Qualified Securities available for distribution under the Consensual Plan of $530 million), compared to the number of shares that Class U-7 would have received under the Consensual Plan absent this anti-dilution provision. The number of shares of New Common Stock that remain after deducting the shares allocated to the Celotex Settlement Fund Recipient from 50 million shares (the "New Common Stock Residual Amount") will then be prorated among the Classes listed below by assigning the following dollar amounts to each of them for purposes of this proration in order to determine their respective percentages of the New Common Stock Residual Amount. a. Revolving Credit Bank Claims (Class S-1)--$28,220,625; b. Working Capital Bank Claims (Class S-2)--$9,279,375; c. Series B & C Senior Note Claims (Class S-6)-- $37,500,000; d. Subordinated Note Claims (Classes U-4, U-5 and U-6) -- the difference between the aggregate principal amount of the Qualified Securities distributed on account of the Subordinated Note Claims and the Allowed Amount thereof (this difference being known as the "Subordinated Note Claims Residual Amount"); and e. Old Common Stock Interests (Class E-1)--$150 million (but only if Class E-1 accepts the Consensual Plan; otherwise zero). The sum of (a)-(e) is referred to as the "New Common Stock Residual Allocation Denominator." The number of shares to be allocated to each of these Classes (or, in the case of Subordinated Note Claims, a group of Classes) out of the aggregate number of shares available to them is determined by multiplying the New Common Stock Residual Amount by a fraction, the numerator of which is the dollar amount assigned to that Class or group of Classes, as set forth above, and the denominator of which is the New Common Stock Residual Allocation Denominator. With respect to the stock allocated to the Holders of Subordinated Note Claims (the "Subordinated Note Claims New Common Stock Amount"), each Holder of a Subordinated Note Claim will share ratably in that number of shares, based on the following proration: the difference between the principal amount of the Qualified Securities distributed to that Holder and the total Allowed Amount of that Holder's Claim is calculated (the "Subordinated Note Claim Deficiency Amount"). That Holder's share of the New Common Stock allocated to the Subordinated Note Claims under the above formula is determined by using a fraction, the numerator of which is that particular Holder's Subordinated Note Claim Deficiency Amount, and the denominator of which is the total Subordinated Note Claims Residual Amount. 3. ISSUANCE OF ADDITIONAL NEW COMMON STOCK TO HOLDERS OF OLD COMMON STOCK INTERESTS In addition to the 50 million shares of New Common Stock to be initially issued on the Effective Date and allocated as described above, if Class E-1 accepts the Consensual Plan, Holders of Old Common Stock Interests (Class E-1) will receive additional shares of New Common Stock, the amount of which depends on certain contingencies. Class E-1 will receive shares of New Common Stock with an aggregate New Common Stock Value Per Share equal to the sum of: (a) The extent by which Federal Income Tax Claims are reduced to below $27 million in the aggregate by a Final Order (the Creditors' Disclosure Statement estimated these claims at $27 million for purposes of estimating the total Senior Claims at December 31, 1993 (which was estimated at $902 million), whereas the Debtors' Disclosure Statement estimated these claims at $14 million; the total amount of such claims asserted by the IRS is over $186 million) (the "Federal Income Tax Claims Differential"); and (b) The amount of federal, state and local tax benefits when, as and if actually realized by the Debtors (as described in more detail below) in respect of the distribution made pursuant to the Veil Piercing Settlement (the "Veil Piercing Settlement Tax Savings Amount"). This amount will be determined by the Tax Oversight Committee upon the filing of a tax return or a refund claim by the Walter Industries consolidated tax group or a member thereof for each taxable year ending after the Effective Date (or for a prior taxable year for which a carryback claim is filed), which tax return or refund claim includes a deduction or refund claim for a Veil Piercing Settlement Tax Savings Amount; at such time, shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to such Veil Piercing Settlement Tax Savings Amount will be issued and placed in escrow with an independent financial institution acceptable to KKR and the Tax Oversight Committee, and released from escrow as soon as practicable after the Tax Oversight Committee determines that the applicable Veil Piercing Settlement Tax Savings Amount is no longer subject to adjustment because (i) the statutory period during which assessments (or denial of a refund claim) can be made with respect to such Veil Piercing Settlement Tax Savings Amount has passed, (ii) Walter Industries and the Internal Revenue Service or other relevant taxing authority have entered into a closing or similar agreement governing the years or issues in question with respect to such Veil Piercing Settlement Tax Savings Amount, or (iii) a court decision determining the income tax liability (or the right to such refund) with respect to such Veil Piercing Settlement Tax Savings Amount has been rendered and the time period for the filing of an appeal has passed. Notwithstanding and in addition to the foregoing, the Consensual Plan provides that in the event that, on or prior to the 160th day following the Effective Date, (i) one or more Veil Piercing Settlement Tax Savings Events shall not have occurred in respect of (and the Tax Oversight Committee shall not have determined) the maximum Veil Piercing Settlement Tax Savings Amount that could result from a good faith claim by the Walter Industries consolidated tax group both of (a) a refund with respect to tax years prior to the tax year in which the Effective Date occurs, and (b) a deduction with respect to the tax year in which the Effective Date occurs (collectively, the "Initial Claim"), or (ii) Walter Industries shall not have issued and delivered into escrow certificates representing shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the full amount of such maximum Veil Piercing Settlement Tax Savings Amount, then not later than the 180th day after the Effective Date, Walter Industries shall issue and deliver into escrow certificates representing New Common Stock having an aggregate New Common Stock Value Per Share equal to the sum of (i) that part of the Veil Piercing Settlement Tax Savings Amount arising from the Initial Claim in respect of which shares of New Common Stock had not theretofore been issued into escrow, as such Veil Piercing Settlement Tax Savings Amount (whether or not a Veil Piercing Settlement Tax Savings Event shall previously have occurred) shall be estimated in good faith by the Chief Financial Officer of Walter Industries and set forth in a certificate delivered to the Tax Oversight Committee (and such amount shall be the Veil Piercing Settlement Tax Savings Amount for purposes of this sentence) and (ii) an additional amount equal to the lesser of (A) $13 million and (B) an amount that would cause the total number of shares of New Common Stock to be issued into escrow to have an aggregate New Common Stock Value Per Share equal to $88.7 million; provided, that $11.3 million of New Common Stock (using the New Common Stock Value Per Share) shall be issued directly to Holders of Class E-1 Interests on a Pro Rata basis, at the same time as shares are first issued into escrow. Holders of Class E-1 Interests, on a Pro Rata basis, shall be entitled to exercise all voting rights of, and receive dividends and other distributions on, the New Common Stock held in escrow. The amount of such dividends and other distributions must be returned to Walter Industries if such shares are subsequently cancelled prior to release from escrow. The Consensual Plan limits the number of shares issuable under (a) and (b) above to that number of Shares that, when added to the shares to be issued to Class E-1 out of the initial issuance of 50 million shares on the Effective Date, has an aggregate New Common Stock Value Per Share of $250 million. The Consensual Plan also contains an arbitration provision for the final determination of any dispute that may arise between KKR and the Tax Oversight Committee with respect to any determination made by the Tax Oversight Committee under Section 3.26 of the Consensual Plan. For purposes of calculating the distribution of these additional shares of New Common Stock to Class E-1 under (a) and (b) above, the New Common Stock Value Per Share will be determined based on a Negotiated Enterprise Value of $2.6 billion. In order to derive the New Common Stock Value Per Share, two amounts are deducted from the Negotiated Enterprise Value of $2.6 billion: (i) $902 million; and (ii) the principal amount of the Qualified Securities to be distributed on the Effective Date. The net remaining amount is divided by 50 million to calculate the New Common Stock Value Per Share. The $902 million represents an estimate of administrative, priority, secured and Other Unsecured Claims as of December 31, 1993. This amount is estimated to increase to approximately $987 million as of December 31, 1994 (exclusive of the amount of such Claims to be satisfied in the form of shares of New Common Stock), based primarily on the increase in postpetition interest on Secured Claims and the increase in Administrative and Priority Claims over this period. As a result, in order for the aggregate value per share of the New Common Stock to equal the aggregate New Common Stock Value Per Share derived by using the Negotiated Enterprise Value of $2.6 billion, the value of the Debtors as of December 31, 1994, would in fact have to be approximately $2.706 billion, which amount reflects and takes into account the allocation of New Common Stock to Class U-7 that neutralizes the otherwise dilutive effect of the increase in the Negotiated Enterprise Value and the distribution of approximately $75 million of New Common Stock to Class E-1 from such increase in the Negotiated Enterprise Value. See "Valuation of Debtors and of Equity Represented by New Common Stock." The $902 million and $987 million amounts referred to above assume $27 million in Federal Income Tax Claims. The IRS has asserted Federal Income Tax Claims of over $186 million. Of the Federal Income Tax Claims asserted by the IRS, the Court has ruled in the Debtors' favor on claims aggregating approximately $50 million, but has not yet ruled on the remainder. While the Debtors and the other Consensual Plan Proponents believe that the Debtors have meritorious defenses against the Federal Income Tax Claims, neither the Debtors nor the other Consensual Plan Proponents can predict the amount of such Claims that will be allowed, or the timing of any such allowance or allowances. The Consensual Plan provides that, for purposes of the Federal Income Tax Claims Differential, the amount of Federal Income Tax Claims shall not be reduced by any Veil Piercing Settlement Tax Savings Amount. The Consensual Plan also provides that the Allowed Amount of, and any other terms of any settlement or agreement regarding, Federal Income Tax Claims shall not be agreed to by any Debtor without the prior consent of the Tax Oversight Committee. The Tax Oversight Committee is a committee of the New Board of Walter Industries, consisting at all times of the two Independent Directors and a director (or other person) designated by Lehman Brothers Inc. (the initial appointment of the Lehman Brothers Inc. designee is required to be made on or prior to the Effective Date). The Tax Oversight Committee is given oversight authority under the Consensual Plan with respect to the Federal Income Tax Claim Differential and the Veil Piercing Settlement Tax Savings Amount. The Tax Oversight Committee has the right to select and retain legal and financial professionals at the expense of Walter Industries. Walter Industries intends to take the position that payments made under the Consensual Plan to the Celotex Settlement Fund Recipient will be deductible in full in the year of payment, subject to applicable limitations, by the Walter Industries consolidated tax group. The Consensual Plan Proponents believe that such payments are properly deductible, but there can be no assurance that the IRS will not challenge the amount or timing of such deduction, and if it does so whether such challenge will succeed. The Consensual Plan Proponents estimate that, assuming full deductibility (without limitation) for federal and state income tax purposes of the $375 million veil piercing settlement amount in the year in which such amount is paid, the tax benefits to Walter Industries would be approximately $114 million. 4. ISSUANCE OF ADDITIONAL NEW COMMON STOCK TO HOLDERS OF PRE-LBO DEBENTURE CLAIMS IN CONNECTION WITH DISMISSAL OF FRAUDULENT CONVEYANCE LAWSUIT, RELATED RELEASES AND PRE-LBO BONDHOLDERS SETTLEMENT AGREEMENT Also in addition to the 50 million shares of New Common Stock to be issued on the Effective Date, if the "Pre-LBO Condition" does not occur, then Holders of Pre-LBO Debenture Claims (Class U-6) will receive additional shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to $11.3 million, consisting of the following (the "Pre-LBO Settlement Equity Amount"): (a) $6.3 million, representing the estimated claim amount differential for the Series B & C Senior Note Claims (i.e., savings to the Debtors) that results from paying part of these claims in cash rather than by the issuance of New Senior Notes (the "Series B & C Senior Note Interest Differential"). The differential arises because that portion of the Allowed Amount of such claims that is satisfied by cash is calculated using a post-petition interest rate from the Filing Date through June 30, 1994 that is one percent (1.0%) lower than that used to calculate the Allowed Amount of the portion of such claims that is satisfied by New Senior Notes; and (b) $5 million, representing the savings which are estimated to result from the agreement of Apollo and Lehman Brothers Inc., as part of the Consensual Plan only, not to file administrative expense claims which had been estimated at $5 million in the aggregate (the "Bondholder Proponents Expense Differential"). The Pre-LBO Settlement Equity Amount is fixed at $11.3 million, regardless of the actual amount of the foregoing differentials. Assuming $530 million of Qualified Securities available for distribution under the Consensual Plan, this would result in the issuance of an additional 483,733 shares of New Common Stock to Class U-6. If the Pre-LBO Condition occurs: (i) the Pre-LBO Settlement Equity Amount will not be distributed to Class U-6; (ii) the Qualified Securities that Class U-6 would otherwise receive if the Pre-LBO Condition does not occur will instead be reallocated to Classes U-4 and U-5, with the result that Holders of Class U-6 Claims would receive only shares of New Common Stock in respect of such Claims (see "Allocation of Qualified Securities"); and (iii) the waiver of subordination rights by Classes U-4 and U-5 will not be applicable to any post-petition interest that is claimed by, or distributed to, Holders of Pre-LBO Debenture Claims. The "Pre-LBO Condition" will occur if either (i) Class U-6 rejects the Consensual Plan, or (ii) the Pre-LBO Bondholders Settlement Agreement is not terminated prior to or as of December 31, 1994 pursuant to Section 7C or Section 7D thereof. As more fully set forth in the Creditors' Disclosure Statement, in March 1994, the Bondholder Proponents, the Ad Hoc Committee of Pre-LBO Bondholders, The Acacia Group ("Acacia") and Gabriel Capital, L.P. ("Gabriel") (Acacia and Gabriel being significant Holders of Pre-LBO Debenture Claims) and other Holders of Pre-LBO Debenture Claims entered into the Pre-LBO Bondholders Settlement Agreement. That Agreement includes, among other provisions, the agreement of the signatories thereto to support a creditor-proposed plan of reorganization that includes certain distributive provisions and provides for a release of all LBO-Related Issues and a dismissal of the Fraudulent Conveyance Lawsuit. Section 7C of the Pre-LBO Bondholders Settlement Agreement permits the Bondholder Proponents or Acacia and Gabriel to terminate that Agreement at any time after December 31, 1994 if the Court has not entered the Confirmation Order on or prior to December 31, 1994. Section 7D of the Pre-LBO Bondholders Settlement Agreement permits termination thereof if all of the parties thereto mutually agree in writing to terminate the Agreement. If the Pre-LBO Condition occurs, notwithstanding the fact that Gabriel and Acacia did not change their prior vote in favor of the Creditors' Plan, and that the Ad Hoc Committee of Pre-LBO Bondholders was a co-proponent of the Consensual Plan, such parties reserve all of their rights to object to Confirmation of the Consensual Plan. Based on statements made in November 1994 by a significant Holder of Pre-LBO Debenture Claims, the Consensual Plan Proponents had reason to believe that certain Holders of Pre-LBO Debenture Claims would have rejected a previous draft of the Consensual Plan that did not provide for a distribution of New Common Stock equal to the Pre-LBO Settlement Equity Amount, and would have pursued the LBO-Related Issues and the Fraudulent Conveyance Lawsuit. The Consensual Plan Proponents believe that the provision in the Consensual Plan for the additional distribution to Class U-6 of New Common Stock having an aggregate New Common Stock Value Per Share equal to the Pre-LBO Settlement Equity Amount will result in the release of all LBO-Related Issues contained in Section 6.1 of the Consensual Plan being obtained without objection by Class U-6, and that such release will be of substantial value to creditors and interest holders. In addition, the release in Section 6.3 of the Consensual Plan provides for the dismissal, with prejudice, of the Fraudulent Conveyance Lawsuit that was commenced in January 1994 by the Indenture Trustees for the Pre-LBO Debentures. While the Consensual Plan Proponents (other than the Ad Hoc Committee of Pre-LBO Bondholders) believe that meritorious defenses could have been asserted against the allegations made in the Fraudulent Conveyance Lawsuit, the Consensual Plan Proponents concluded that the possibility of an adverse outcome (which could have a substantially adverse effect on distributions contemplated under the Consensual Plan), the risk of potential delay in consummation of the Consensual Plan and the uncertainty as to whether a release of LBO-Related Issues would be found to be fair and reasonable if Class U-6 did not accept the Consensual Plan, justified the provision of additional New Common Stock having an aggregate New Common Stock Value Per Share equal to the Pre-LBO Settlement Equity Amount to Class U-6 if it accepts the Consensual Plan. The Holders of a substantial amount of Class U-6 Claims have indicated that they will support the Consensual Plan and the Consensual Plan Proponents anticipate that Class U-6 will accept the Consensual Plan. It should be noted that the Pre-LBO Settlement Equity Value is based on the amount of savings realized by the Debtors from foregone expense claims that could have been made by the Bondholder Proponents, and from savings in the Class S-6 distribution realized by satisfying part of those Claims in Cash rather than in New Senior Notes. As of November 22, 1994, the Bondholder Proponents, Acacia, Gabriel and the Ad Hoc Committee of Pre-LBO Bondholders entered into a letter agreement providing, among other things, that (i) the parties would support the Consensual Plan; (ii) the Ad Hoc Committee of Pre-LBO Bondholders would continue to be a co-proponent of the Consensual Plan; (iii) the parties agreed to terminate the Pre-LBO Bondholders Settlement Agreement pursuant to its terms as of December 31, 1994; (iv) the parties agreed that because of, inter alia, such termination, the filing of the Consensual Plan does not breach or contravene any of the terms of the Pre-LBO Bondholders Settlement Agreement; and (v) each of the parties agreed to release each of the other parties from and against any claim or liability under the Pre-LBO Bondholders Settlement Agreement. 5. VALUATION OF DEBTORS AND OF EQUITY REPRESENTED BY NEW COMMON STOCK At the hearing that began on October 17, 1994, the Debtors presented evidence of an enterprise valuation for the Debtors of $2.805 billion as of May 31, 1995. This enterprise valuation was arrived at by adding to the midpoint of the valuation range of the Debtors' and non-Debtor subsidiaries' operating businesses and other miscellaneous assets at May 31, 1993 exclusive of cash ($2.347 billion) (i) the projected cash balance of the Debtors and non-Debtor subsidiaries as of May 31, 1995 ($149.8 million) and (ii) the projected increase in the Economic Balance of the unencumbered mortgage notes to be purchased by Mid-State Homes from Jim Walter Homes from June 1, 1993 to May 31, 1995 ($308.2 million). The Debtors' valuation range at May 31, 1993 (including cash balances) was $2.293 billion to $2.757 billion. The Debtors' experts testified that, at December 31, 1994, such $2.805 billion valuation would be reduced by an estimated $60 million (to $2.745 billion), representing the estimated increase in the Economic Balance of unencumbered mortgage notes from December 31, 1994 to May 31, 1995. These valuations did not include the value of any tax benefits that are expected to result from distributions to be made under the Consensual Plan. At the same hearing, Ernst & Young, the financial advisor to the Bondholders Committee, presented evidence of an enterprise valuation range, as of December 31, 1994, of between $2.344 billion and $2.700 billion, prior to giving effect to tax benefits that are expected to result from consummation of the Consensual Plan. Given the uncertainty as to the enterprise valuation that the Court would have adopted, and the potential effect of that valuation on creditor recoveries, the Consensual Plan Proponents agreed (for purposes of the Consensual Plan) on a Negotiated Enterprise Value of $2.6 billion as of December 31, 1993. At a valuation at December 31, 1994 of $2.706 billion or more, all Creditors will receive at least 100% of the Allowed Amount of their Claims under the Consensual Plan. A valuation amount of $2.706 billion as of December 31, 1994 is within the Debtors' valuation range. B. ALLOCATION OF QUALIFIED SECURITIES As noted in Section II.A.1, above, the proportion of Qualified Securities to be received on account of Settlement Claims has been changed from 450 divided by 1548 (that is, the sum of 1,098 plus 450), to 375 divided by 1473 (that is, the sum of 1,098 plus 375) (the 1,098 amount is derived from the aggregate pre-Filing Date amount of Subordinated Note Claims, which is approximately $1,098 million). This change will result in the distribution of a relatively greater amount of Qualified Securities in respect of Subordinated Note Claims, and a relatively smaller amount of Qualified Securities in respect of Settlement Claims. Except as provided below, the Consensual Plan does not change the method for allocating the Qualified Securities to be distributed among the three Classes of Subordinated Note Claims. In the event that the Pre-LBO Condition occurs, then (i) the $80 million aggregate principal amount of Qualified Securities (subject to adjustment based upon the amount of Qualified Securities available for distribution under the Consensual Plan) that would otherwise have been distributed to Holders of Class U-6 Claims under paragraph (b)(i) of the definition of "Applicable Consideration" in Section 1.26 of the Consensual Plan shall instead be distributed to Holders of Class U-4 and Class U-5 Claims until all unsatisfied elections of, first, Holders of Class U-4 and, second, Holders of Class U-5 Claims to receive Qualified Securities under the Subordinated Note Claims Election are satisfied; and (ii) shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the principal amount of the Qualified Securities which are reallocated from Class U-6 to Holders of Class U-4 and Class U-5 Claims pursuant to this provision will be deducted from the number of shares of New Common Stock that would otherwise have been distributable to such Holders and distributed to Class U-6 in lieu of the Qualified Securities which are reallocated to Classes U-4 and U5 pursuant to this provision. The "preferred" allocation of the $80 million (which amount is subject to adjustment) in Qualified Securities to Class U-6 which is eliminated by this provision was originally incorporated into the Creditors' Plan from the Pre-LBO Bondholders Settlement Agreement. In addition, and after taking into account the foregoing, the Consensual Plan provides that Holders of Senior Subordinated Note Claims (Class U-4) that elected to receive all or part of their Class U-4 Claims in Qualified Securities pursuant to the Subordinated Note Claim Election (other than Lehman Brothers Inc.) (the "Electing Class U-4 Holders") will be entitled to "exchange" (the "Class U-4 Exchange Option") their pro rata share of New Common Stock having an aggregate New Common Stock Value Per Share of $39.4 million (assuming Qualified Securities available for distribution under the Consensual Plan to Classes U-4 through U-7 of $530 million), $0 (assuming Qualified Securities available for distribution under the Consensual Plan to Classes U-4 through U-7 of $700 million or more), or if Qualified Securities available for distribution under the Consensual Plan to Classes U-4 through U-7 are greater than $530 million but less than $700 million, then the proportionate ratio of $39.4 million and $0, that they otherwise would have received on account of their Class U-4 Claim (unless a lesser principal amount of Qualified Securities is sufficient to satisfy all Subordinated Note Claim Elections for Qualified Securities, in which event such lesser amount shall apply), for an identical aggregate principal amount of Qualified Securities that would otherwise have been issued to Lehman Brothers Inc. on the Effective Date in respect of the Class U-4 Claim held by Lehman Brothers Inc., with any New Senior Notes that would otherwise have been so issued to Lehman Brothers Inc. to be reallocated before any Cash that would otherwise have been so distributed is reallocated. The willingness of Lehman Brothers Inc. to reallocate up to $39.4 million of Qualified Securities, that it would otherwise be entitled to receive is based on its and the Debtors' desire to strengthen the Debtors' balance sheet. In this connection, Lehman Brothers Inc. and the Debtors agreed that the Debtors would emerge from Chapter 11 with a stronger balance sheet if the total amount of Qualified Securities to be distributed on the Effective Date were reduced to an anticipated $530 million. If, however, the amount of Qualified Securities available for distribution under the Consensual Plan is greater than $530 million but less than $700 million, this $39.4 million number decreases proportionately as the aggregate principal amount of Qualified Securities increases, declining to zero at a $700 million level of Qualified Securities. Exercise of the Class U-4 Exchange Option will result in an increase in the principal amount of Qualified Securities and an identical decrease in the amount of New Common Stock (measured using the New Common Stock Value Per Share) to be distributed to each Electing Class U-4 Holder, and an identical (but opposite) decrease in the principal amount of Qualified Securities, and increase in the amount of New Common Stock (based on the New Common Stock Value Per Share) to be distributed to Lehman Brothers Inc. in respect of its Class U-4 Claim. The "exchange" will not, therefore, require an actual transaction between the Holder and Lehman Brothers Inc., but will be accounted for in the allocations actually made under the Consensual Plan on the Effective Date. The Class U-4 Exchange Option can be exercised only by a Holder of an Eligible Class U-4 Claim and only by completing and returning (in accordance with the instructions contained therein) the Class U-4 Exchange Option Form, which is being transmitted to each Holder of an Eligible Class U-4 Claim together with this Supplement, so that it is received by the Balloting Agent no later than 5:00 P.M. Eastern Time on January 24, 1995 (if the record Holder is a bank, broker or nominee on behalf of a beneficial holder, the beneficial holder must complete and return its ballot to such bank, broker or nominee so that it is received no later than 5:00 P.M. on January 19, 1995). The aggregate New Common Stock Value Per Share of New Common Stock that an Electing Class U-4 Holder may exchange for an identical principal amount of Qualified Securities is equal to (a) the product of multiplying the aggregate principal amount of the Qualified Securities to be reallocated from Lehman Brothers Inc. to Holders that exercise the Class U-4 Exchange Option by the quotient of (i) the amount of such Holder's Class U-4 Claim that such Holder requested to be satisfied by Qualified Securities, divided by (ii) the aggregate amount of all Class U-4 Claims that were requested to be satisfied by Qualified Securities (other than Class U-4 Claims held by Lehman Brothers Inc.), in each case pursuant to the prior Subordinated Note Claim Election, or (b) if less, the amount necessary to enable such Holder to receive the full principal amount of the Qualified Securities for which such Holder made the Subordinated Note Claim Election. In order to compensate Creditors that are to be issued Qualified Securities under the Consensual Plan for any delay in the Effective Date beyond March 31, 1995, during which time the value of the Debtors (and thus the New Common Stock) is expected to appreciate in value (while the amount of Qualified Securities remains constant), in the event that the Effective Date occurs after March 31, 1995 each Holder of a Subordinated Note Claim who receives Qualified Securities in accordance with subparagraphs (a)-(e) of Section 1.26 of the Consensual Plan, and the Celotex Settlement Fund Recipient on behalf of Veil Piercing Claimants under Section 3.22 of the Consensual Plan, shall also receive an additional distribution consisting of New Senior Notes of the same series and with all of the same terms and provisions as the New Senior Notes issued as Qualified Securities, in a principal amount equal to the product of multiplying the principal amount of Qualified Securities to be received by such Holder (in the case of Holders of Subordinated Note Claims, after applying all of the provisions, calculations and elections of subparagraphs (a)-(e) of Section 1.26 of the Consensual Plan) by the Qualified Securities Adjuster; provided, however, that if no New Senior Notes are issued as Qualified Securities as a result of the issuance of Replacement Indebtedness under Section 4.19 of the Consensual Plan, such additional distribution shall be made solely in Cash. "Qualified Securities Adjuster" is defined under the Consensual Plan to mean the product of multiplying the rate of interest on the New Senior Notes to be issued as Qualified Securities (or, if no New Senior Notes are issued as Qualified Securities, a rate equal to the rate of interest per annum of five year U.S. Treasury Notes on the Effective Date plus 487.5 basis points) by a fraction, the numerator of which is the number of days after March 31, 1995 on which the Effective Date occurs, and the denominator of which is 360. C. TERMS OF QUALIFIED SECURITIES AND NEW SENIOR NOTES The Creditors' Plan provided that Qualified Securities were to have consisted of (a) Cash, or (b) one or more types of debt securities having the following terms: (i) if secured by real property mortgages and the promissory notes secured thereby, rated BB or higher by either Rating Service, and if not so secured, rated B or higher by either Rating Service, in each case as of the Effective Date (unless neither Rating Service provides a rating after proper application was made therefor), and (ii) valued at par as of the Effective Date (on a fully distributed basis) by Lehman Brothers Inc. and a qualified valuation expert selected by Apollo (provided that, if Lehman Brothers Inc. and the qualified valuation expert selected by Apollo did not agree, the Bondholders Committee would select a third qualified valuation expert of national reputation, whose determination would be binding). The Qualified Securities were expected to consist primarily of mortgage-backed debt instruments. However, because a substantial portion of the Mid-State Homes mortgage portfolio is to be financed in connection with the Consensual Plan, a relatively greater portion of Qualified Securities will consist of Cash under the Consensual Plan compared to what was anticipated under the Creditors' Plan. Under the Consensual Plan, the debt securities constituting Qualified Securities will consist of 5-year New Senior Notes issued under the New Senior Note Indenture. Rather than requiring that the New Senior Notes issued as Qualified Securities be valued at par on the Effective Date in the same manner as Qualified Securities under the Creditors' Plan, the Consensual Plan provides that the annual interest on the New Senior Notes will be equal to the interest rate on 5-year U.S. Treasury Notes on the Effective Date plus 450 basis points if the New Senior Notes are rated BB or higher, or plus 525 basis points if the New Senior Notes are rated lower than BB or if Walter Industries does not apply for a rating of the New Senior Notes issued as Qualified Securities, and if neither Rating Service provides a rating of the security proposed to be rated after proper application is made therefor, such interest rate shall be the average of the two foregoing rates. The Consensual Plan further provides that such rate will in no event be less than the rate selected for the New Senior Notes issued in respect of Series B & C Senior Note Claims. - ------------------ The Consensual Plan provides that, in the event of a material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States, or outbreak or material escalation of hostilities such that it is inadvisable to price the New Senior Notes in such manner, then Lehman Brothers Inc. and a qualified valuation expert selected by Apollo will fix the rate of the New Senior Notes so that such New Senior Notes are valued by Lehman Brothers Inc. and such qualified valuation expert selected by Apollo at par as of the Effective Date, and if they cannot agree on such a rate, the Bondholders Committee will select a third qualified valuation expert of national reputation, whose determination of such rate will be binding. The Consensual Plan Proponents anticipate that Walter Industries will apply for a rating for the New Senior Notes from the Rating Services, although Walter Industries is not obligated to do so and no minimum rating is required to be obtained for the New Senior Notes issued as Qualified Securities. Such New Senior Notes will be redeemable in whole or in part by the issuer at any time at 101% of principal amount plus accrued but unpaid interest (in the case of partial redemptions, the remaining unredeemed securities must have an aggregate principal amount of not less than $150 million). Such New Senior Notes are anticipated to be secured by the common stock of certain subsidiaries of Walter Industries or by equivalent collateral. The other anticipated terms of the New Senior Notes, which will be customary and reasonable for securities of this type and quality under then-existing market conditions, are set forth in Exhibit 2 to the Consensual Plan. The Consensual Plan provides that the aggregate principal amount of New Senior Notes to be issued as Qualified Securities on the Effective Date shall be equal to the amount of Qualified Securities that do not consist of Cash; provided, that the aggregate principal amount of New Senior Notes to be issued as Qualified Securities, when added to the aggregate principal amount of New Senior Notes to be issued in respect of Class S-6 Claims ($94.9 million as at December 31, 1994) shall not exceed $490 million, unless a greater aggregate principal amount is agreed to by Lehman Brothers Inc.; provided, further, that the Debtors shall use their best efforts to minimize, to the extent consistent with obtaining a BB rating for the New Senior Notes issued as Qualified Securities, the aggregate principal amount of New Senior Notes required to be issued as Qualified Securities under the Consensual Plan. However, the Consensual Plan permits the Debtors to raise additional indebtedness (the "Replacement Indebtedness") in order to pay in Cash either or both of the following: (i) all, but not less than all, of the Claims that would otherwise have been satisfied by New Senior Notes issued as Qualified Securities, and/or (ii) all, but not less than all, of the Class S-6 Claims that would otherwise have been satisfied by New Senior Notes. See "Matters Relating to Financing." If New Senior Notes are issued as Qualified Securities under the Consensual Plan, then the amount of Cash that will be distributed as Qualified Securities will be equal to the Cash of the Debtors on hand as of the Effective Date (after giving effect to the mortgage financing(s) that are part of the Exit Financing), other than Reserved Cash, after giving effect to Cash payments to be made (other than as part of Qualified Securities) on or promptly after the Effective Date under the Consensual Plan, and the remaining Qualified Securities will consist of New Senior Notes. The Consensual Plan defines "Reserved Cash" to mean (i) restricted Cash that the Debtors have paid, segregated or identified as a deposit, as security or otherwise reasonably reserved for a particular purpose, and (ii) at the Debtors' option, up to $45 million of Cash (excluding bank overdrafts) that may be reserved by the Debtors for general corporate purposes, in each case as of the Effective Date; provided, however, that Reserved Cash does not include any Cash that is to be paid (or is reserved for payment of Disputed Claims) pursuant to the terms of the Consensual Plan. The Creditors' Plan provided that Holders of Senior B & C Senior Note Claims (Class S-6 Claims) would receive, on account of such Claims, Cash and New Senior Notes (as that term was defined under the Creditors' Plan) in the proportion determined by the Bondholders Committee, except that a Holder that made the Series B & C Senior Note Claim Election would have had all of such Holder's Class S-6 Claim (other than such Holder's Pro Rata share of the Class S-6 Fund) satisfied by New Senior Notes. The Consensual Plan changes the terms of the New Senior Notes that may be issued in respect of Class S-6 Claims by providing that in the event that neither Rating Service provides a rating of BB or higher for such New Senior Notes (or if Walter Industries elects in its sole discretion to make payment in Cash), then the Class S-6 Claims that would otherwise have been satisfied by such New Senior Notes will instead be satisfied by an amount of Cash equal to the principal amount of New Senior Notes that would otherwise have been issued. The Consensual Plan also provides that all Class S-6 Claims will be paid in Cash, other than those Class S-6 Claims as to which the Series B & C Senior Note Claim Election was made, which, except as partially satisfied by Cash from the Class S-6 Fund and by New Common Stock, will be satisfied in full by New Senior Notes (which differ from the New Senior Notes to be issued as Qualified Securities with respect to the method of establishing the interest rate, the rating, the optional redemption provision and, possibly, other terms) unless satisfied by Cash as described in the preceding sentence. Holders of Class S-6 Claims having an aggregate Allowed Amount of approximately $94.9 million (as of December 31, 1994) made the Series B & C Senior Note Claim Election. The Consensual Plan permits these Holders to exchange, within 90 days after the Effective Date, all of the New Senior Notes that are issued to such Holder for an identical principal amount of New Senior Notes issued as Qualified Securities. This exchange right allows such Holders to participate in a significantly larger issuance that may result in more liquidity. The exchange will not be available, however, if no New Senior Notes are issued as Qualified Securities. D. AMOUNT OF QUALIFIED SECURITIES Under the Consensual Plan, the minimum aggregate principal amount of Qualified Securities that is required to be available for distribution to Classes U-4, U-5, U-6 and U-7 in order to satisfy a condition to the Effective Date of the Consensual Plan is equal to the sum of: (i) $530 million; (ii) the net proceeds of the Mid-State Trust IV mortgage financing(s) described below in excess of $900 million, if any, up to but not in excess of $25 million, and (iii) the amount, if any, by which the Replacement Indebtedness exceeds the amount of Cash necessary to pay all Claims that would otherwise have been satisfied by New Senior Notes issued as Qualified Securities. The Creditors' Plan, which required $700 million of Qualified Securities, permitted this condition to be waived by the Bondholder Proponents. The Consensual Plan does not permit this condition to be waived. THERE CAN BE NO ASSURANCE AS TO THE AMOUNT, IF ANY, OR TRADING VALUE OF QUALIFIED SECURITIES THAT WILL BE AVAILABLE FOR DISTRIBUTION UNDER THE CONSENSUAL PLAN, NOR CAN THERE BE ANY ASSURANCE THAT THE SHARES OF NEW COMMON STOCK ISSUED ON THE EFFECTIVE DATE WILL TRADE AT OR ABOVE THE VALUES INDICATED HEREIN AT ANY TIME. TRADING PRICES WILL DEPEND ON NUMEROUS FACTORS, INCLUDING MARKET CONDITIONS, PREVAILING INTEREST RATES AND THE FINANCIAL CONDITION AND PERFORMANCE OF WALTER INDUSTRIES AND ITS SUBSIDIARIES. E. ILLUSTRATION OF EFFECT OF PLAN AMENDMENT ON RECOVERY TO IMPAIRED CLASSES The example set forth on the following two pages illustrates the application of the formula for allocating the Qualified Securities and the 50 million shares of New Common Stock to be initially issued on the Effective Date under the Consensual Plan, based on an assumed amount of $530 million of Qualified Securities available for distribution under the Consensual Plan. This illustration does not include the additional shares of New Common Stock that will be issued to Holders of Old Common Stock Interests beyond their distribution out of the initial 50 million shares, that is described in Section II.A.3. above, or to Holders of Pre-LBO Debenture Claims with respect to the Pre-LBO Settlement Equity Amount that is described in Section II.A.4. above. ALLOCATION OF QUALIFIED SECURITIES ALLOCATION BETWEEN SUBORDINATED NOTE HOLDERS AND VEIL PIERCING CLAIMANTS
PROPORTIONAL PROPORTIONAL AVAILABLE ALLOCATION VEIL PIERCING SHARING SHARING QUALIFIED OF QUALIFIED RESIDUAL CLAIM AMOUNTS(A) PERCENTAGES SECURITIES SECURITIES AMOUNT"(B) Subordinated Notes (Classes U-4, U-5, U-6) $1,098,000,000 74.5% X $530,000,000 = $395,071,283 Veil Piercing Claimants (Class U-7) 375,000,000 25.5% X 530,000,000 = 134,928,717 $240,071,283 --------------- ------ - ------------- Total $1,473,000,000 100.0% $530,000,000 =============== ====== =============
ALLOCATION AMONG SUBORDINATED NOTE HOLDERS
PRIORITY ALLOCATION OF ALLOCATION OF REMAINING TOTAL QUALIFIED QUALIFIED QUALIFIED REMAINDER CLASS CLAIM SECURITIES(C) SECURITIES(D) SECURITIES OF CLAIM ----------- -------------- ------------- ------------ ------------ U-4 $ 479,260,923 $240,000,000 $34,642,156 $274,642,156 $204,618,767 U-5 379,254,167 0 54,911,524 54,911,524 324,342,643 U-6 239,471,887 65,517,603 0 65,517,603 173,954,285 -------------- ------------- ----------- ------------ ------------ Total $1,097,986,977 305,517,603 $89,553,680 $395,071,283 $702,915,694 ============== ============= =========== ============ ============ Total Qualified Securities Available 395,071,283 -------------- Remaining Qualified Securities $ 89,553,680(d) ==============
(a) Proportional sharing amounts of $1,098 million for Subordinated Note Holders and $375 million for Class U-7 per Section 2.a.ii. of the Second Amended and Restated Veil Piercing Settlement Agreement. (b) Represents Veil Piercing Allowed Claim less allocation of Qualified Securities. (c) Priority Allocations pursuant to Section 1.26(b) of the Consensual Plan. (d) Allocated pro rata between Class U-4 and U-5 based on claim remaining after priority allocations. ALLOCATION OF NEW COMMON STOCK
Total Shares to Be Issued 50,000,000 Shares to Be Issued to Veil Piercing Claimants(a) (10,982,218) New Common Stock Residual Amount 39,017,782 REMAINDER OF % OF TOTAL CLAIM OR NEW COMMON INTEREST TO BE STOCK NEW COMMON NEW COMMON % OF RECEIVED IN NEW RESIDUAL STOCK RESIDUAL STOCK SHARES TO EQUITY CLASS COMMON STOCK(B) AMOUNT AMOUNT BE RECEIVED OWNED S-1 $ 28,220,625 3.0% X 39,017,782 = 1,186,645 2.4% S-2 9,279,375 1.0% X 39,017,782 = 390,187 0.8% S-6 37,500,000 4.0% X 39,017,782 = 1,576,832 3.2% U-4 204,618,767 22.1% X 39,017,782 = 8,603,982 17.2% U-5 324,342,643 35.0% X 39,017,782 = 13,638,233 27.3% U-6 173,954,285 18.7% X 39,017,782 = 7,314,576 14.6% E-1 150,000,000 16.2% X 39,017,782 = 6,307,327 12.6% Total $927,915,694 100.0% 39,017,782 78.0% Shares Issued to Veil Piercing Claimants (Class U-7) 10,982,218 22.0% Total New Common Stock Issued at Confirmation 50,000,000 100.0%
(a) See Section II.A.1. of the Supplement for allocation of New Common Stock to Class U-7. (b) Represents claim or interest remaining after the allocation of Qualified Securities and other consideration to each class. F. SOURCES AND USES OF CONSIDERATION RELATING TO CONSUMMATION OF CONSENSUAL PLAN In light of the consensual nature of the Consensual Plan, and the beneficial effect that this consensus is expected to have on financing, the Consensual Plan Proponents anticipate that the sources and uses of consideration relating to consummation of the Consensual Plan will be as follows, assuming a December 31, 1994 Effective Date: ESTIMATED AMOUNT AS OF DECEMBER 31, 1994(1) (IN MILLIONS) SOURCES OF FUNDS Unrestricted Cash $ 125 Financing of unencumbered mortgages (Mid-State Trust IV)(2) 900 Total $1,025 USES OF FUNDS Estimated Cash necessary to satisfy Claims of Administrative, Priority, Secured and Other Unsecured (trade) Claims(3) $ 837 Cash reserved for general corporate purposes 45 Cash available as part of Qualified Securities 143 Total $1,025 (1) This chart is provided for illustrative purposes only, and there can be no assurance that financing will be available in the foregoing forms and amounts. (2) This financing is expected to be effected through an underwritten offering or private placement to be completed in connection with the Consensual Plan. Lehman Brothers will be the lead manager in such underwriting or private placement. It is expected that any underwriter retained in connection with these financings, including Lehman Brothers, would be required to seek the approval of the Court, under Section 1129(a)(4) of the Code, for their fees and reimbursement of expenses. (3) This amount is derived by subtracting, from the estimated Senior Claims of approximately $987 million as of December 31, 1994, $44 million for reinstated and assumed claims described in the immediately following chart, $5 million of savings resulting from the Bondholder Proponents Expense Differential, and approximately $6.3 million of savings resulting from the Series B & C Senior Note Interest Differential; the remaining Senior Claims not satisfied by New Common Stock will be satisfied by New Senior Notes having an aggregate principal amount of approximately $94.9 million. As a result of the foregoing sources and uses, Cash and New Senior Notes issued as Qualified Securities are estimated as follows (in millions): Cash $143.0 New Senior Notes 387.0 Total $530.0 The amount of New Senior Notes issued as Qualified Securities will be equal to the aggregate amount of Qualified Securities, less that part of Qualified Securities consisting of Cash, except that no such New Senior Notes will be issued if the Cash component of Qualified Securities is increased so that all Claims that would otherwise have been paid in New Senior Notes issued as Qualified Securities are instead paid in Cash. This Cash may be financed by the "Replacement Indebtedness." See "Matters Relating to Financing." The aggregate principal amount of New Senior Notes to be issued under the Consensual Plan is limited to $490 million, unless a greater principal amount is agreed to by Lehman Brothers Inc. Using this estimate, the anticipated capitalization of the Debtors on the Effective Date would be as follows (in millions): Reinstated/Assumed Claims $ 44.0 New Senior Notes issued in respect of Class S-6 Claims 94.9 New Senior Notes issued as Qualified Securities 387.0 Total $525.9 - ---------------- [FN] Assumed trade claims refers to the payment of 25% of the Allowed Amount of Class U-3 Claims (plus interest for such period at the Chemical Bank Prime Rate as from time to time in effect, but not to exceed 10% per annum) six months after the Effective Date, as provided in the Consensual Plan. [FN] This amount will be increased by the amount of post-petition interest accrued after December 31, 1994 on Class S-6 Claims that are to be satisfied by New Senior Notes. To the extent that (i) the net proceeds of the Mid-State Trust IV mortgage financing are greater than $900 million (up to a cap of $25 million) or (ii) the Replacement Indebtedness exceeds the amount necessary to pay all Claims that would otherwise have been satisfied by New Senior Notes issued as Qualified Securities, any such Cash will be added to the amount of Qualified Securities to be distributed under the Consensual Plan. Given the foregoing, and the amount of Cash expected to be available to the Debtors at and immediately after Confirmation, the Consensual Plan Proponents do not anticipate paying, prior to the Effective Date, that portion of the Allowed Amount of the Revolving Credit Bank Claims and the Working Capital Bank Claims described in clauses (a) and (b) of Sections 3.6 and 3.7 of the Consensual Plan, respectively (these clauses describe post-petition interest accruing on such claims from the Filing Date through the date of payment of such post-petition interest); the Consensual Plan provides that such amounts are to be paid within 5 days following the Confirmation Date and on the last Business Day of each subsequent calendar quarter until the Effective Date, or such other date as the Court may order (but in any event not later than the Effective Date). The Consensual Plan Proponents intend to request that the Court order that such payments be made on the Effective Date. G. MATTERS RELATING TO FINANCING Recognizing that Holders of Subordinated Note Claims will receive the majority of the Qualified Securities and New Common Stock to be issued under the Consensual Plan, and that Lehman Brothers Inc. will be entitled to designate only three of the nine directors that will comprise the New Board (under the Creditors' Plan, the Creditor Proponents were to have designated eight of eleven directors), the Consensual Plan provides that Walter Industries and the Bondholder Proponents shall consult and cooperate for purposes of obtaining the Exit Financing and entering into the New Working Capital Facility and the Mid-State Homes Warehouse Credit Facility, in each case as of the Effective Date. The Consensual Plan defines "Exit Financing" as (i) any third party financing to be obtained as of the Effective Date in connection with funding distributions to be made under the Consensual Plan, which shall be directly or indirectly secured by the unencumbered notes and mortgages held by Mid-State Homes and/or the residual interests held by Mid- State Homes in Mid-State Trust II and Mid-State Trust III, and (ii) any New Senior Notes. The Consensual Plan provides that the Bondholder Proponents shall determine and fix the amount (subject to the limitation contained in the definition of New Senior Notes contained in the Consensual Plan), terms and conditions of, and shall select the underwriters, placement and/or other financing sources with respect to, the Exit Financing, all of which shall be on commercially reasonable terms consistent with then- existing market conditions and be reasonably satisfactory to Walter Industries; provided, that Lehman Brothers Inc. shall act as lead manager for, and Merrill Lynch, National Westminster Bank, plc and Nomura Securities shall be given the opportunity to act as co-manager of, any Exit Financing described in clause (i) of the definition thereof, and in each case the terms of any such manager or co-manager arrangement shall be on commercially reasonable terms consistent with then-existing market conditions. Subject to the immediately following sentence, Walter Industries shall determine and fix the amount, terms and conditions of, and shall select the lenders and/or other financing sources with respect to, the New Working Capital Facility (subject to the limitation as to amount of $150 million contained in the definition thereof in the Consensual Plan) and the Mid-State Homes Warehouse Credit Facility (subject to the limitation as to amount of $500 million contained in the definition thereof in the Consensual Plan), all of which shall be on commercially reasonable terms consistent with then-existing market conditions and be reasonably satisfactory to the Bondholder Proponents; provided, that Walter Industries shall select Bank of Boston as lead agent or co-agent for the New Working Capital Facility, and National Westminster Bank, plc as lead agent or co-agent for the Mid-State Homes Warehouse Credit Facility, in each case if such lenders are willing to participate in such financings on terms no less favorable to Walter Industries than the terms proposed by any other financial institution previously agreed to by Walter Industries, and in each case the terms of any such agency or co-agency shall be on commercially reasonable terms consistent with then-existing market conditions; provided, further, that the Debtors may incur additional indebtedness (the "Replacement Indebtedness") in an amount sufficient to permit them to pay (and which shall be used to pay) either or both of the following: (i) all, but not less than all, amounts in Cash that would otherwise be satisfied by New Senior Notes issued as Qualified Securities on the Effective Date, and/or (ii) all, but not less than all, amounts in Cash that would otherwise be satisfied by New Senior Notes issued to Holders of Series B & C Senior Note Claims on the Effective Date, which may include additional indebtedness of up to $50 million in excess of such amount (unless the Debtors and Lehman Brothers Inc. shall agree to an greater amount of indebtedness), the terms and conditions of which indebtedness shall be reasonably satisfactory to the Bondholder Proponents. Notwithstanding the preceding sentence, if either (i) on or prior to January 15, 1995, the Debtors shall not have obtained fully executed and binding written commitment letters from one or more financial institutions for each of the Mid-State Homes Warehouse Credit Facility and the New Working Capital Facility, which commitment letters shall have, as conditions to funding, no conditions other than conditions customary for financings of this size and nature, which shall be consistent with the Exit Financing and which may include a customary material adverse change condition, but which may not include any condition(s) or other provision(s) that require or would require, as a condition to funding, directly or indirectly, the Confirmation Order (as described in Section 10.1(a) of the Consensual Plan) having become a Final Order, whether any such condition(s) or provision(s) relates to issuance of opinions of counsel, officers' certificates or other certificates, any representation, warranty or covenant, or otherwise; or (ii) on or prior to the second Business Day prior to the commencement of the hearing on confirmation of the Consensual Plan, the Debtors shall not have obtained fully executed and binding definitive documents evidencing the New Working Capital Facility and the Mid-State Homes Warehouse Credit Facility, which agreements shall have, as conditions to funding, no conditions other than conditions customary for financings of this size and nature, which shall be consistent with the Exit Financing and which may include a customary material adverse change condition, but which may not include any condition(s) or other provision(s) that require or would require, as a condition to funding, directly or indirectly, the Confirmation Order (as described in Section 10.1(a) of the Consensual Plan) having become a Final Order, whether any such condition(s) or provision(s) relates to issuance of opinions of counsel, officers' certificates or other certificates, any representation, warranty or covenant, or otherwise (collectively, such documents are referred to herein as the "Definitive Financing Documents"), then, in each case from and after such date, the Bondholder Proponents shall be entitled to negotiate on behalf of and deliver to the Debtors, and the Bondholder Proponents shall exercise responsibility with respect to determining the terms and conditions of, the Mid-State Homes Warehouse Credit Facility and/or the New Working Capital Facility, as the case may be, provided that such facilities shall be reasonably satisfactory to Walter Industries, but need not be on the terms previously accepted by Walter Industries or the best available terms. H. MATTERS RELATING TO CORPORATE GOVERNANCE 1. ELIMINATION OF HIGH-VOTE CLASS OF NEW COMMON STOCK The Creditors' Plan provided for the issuance to Classes U-4 and U-5 of a high-vote class of New Common Stock (Class A) that would be entitled to five votes per share. Other Classes that were to receive New Common Stock under the Creditors' Plan were to receive shares of Class B Common Stock having one vote per share. The Consensual Plan eliminates the high-vote class of stock and provides for a single class of New Common Stock, each carrying one vote per share. 2. DESIGNATION OF NEW BOARD OF DIRECTORS OF WALTER INDUSTRIES The Creditors' Plan provided for the appointment of a new board of directors for each of the Debtors on the Confirmation Date. Each new board was to have eleven members, consisting of eight directors appointed by the Creditor Proponents and three current senior officers of Walter Industries (James W. Walter, Chairman, G. Robert Durham, President, Chief Executive Officer and Director, and Kenneth J. Matlock, Executive Vice President, Chief Financial Officer and Director). The Consensual Plan provides for the appointment of a new board of directors for Walter Industries on the Effective Date, rather than on the Confirmation Date (the boards of directors for the other Debtors will not be changed under the Consensual Plan other than as determined by the applicable shareholders in accordance with applicable nonbankruptcy law). The New Board of Walter Industries is to initially consist of the following nine members: (i) Messrs. Walter, Durham and Matlock; (ii) One director designated by KKR; (iii) Three directors designated by Lehman Brothers Inc., a Creditor Proponent that is the largest holder of Subordinated Note Claims; and (iv) two Independent Directors who shall be independent of any Debtor, KKR, any KKR Affiliate, any KKR Party, and any Bondholder Proponent, and who shall be selected by current management of Walter Industries from a list of qualified candidates provided by an independent search firm that shall be selected by Walter Industries and Lehman Brothers Inc. and retained by Walter Industries, copies of which list are to be provided to the Bondholders Committee contemporaneously with its submission to Walter Industries. The Consensual Plan provides that the New Board may initially consist of seven directors until the Independent Directors are selected in accordance with the procedures set forth above. The initial term of office for each such director is three years; thereafter, directors will serve one-year terms. If any initially designated director fails for any reason to complete his initial three year term, then substitute director(s) shall be designated for the remainder of such three year term by the entity (or, in the case of independent directors, by the procedure) that initially designated the director as set forth above, except that in the case of the three director seats initially held by Messrs. Walter, Durham and Matlock, substitutes shall be senior officers(s) of Walter Industries designated by the remaining directors of Walter Industries then in office. - ----------------- [FN] The Consensual Plan defines "Independent Director" as follows: "Independent Director" means a director of Walter Industries who is not (apart from such directorship) (i) an officer, Affiliate, employee, Interested Stockholder, consultant or partner of any Significant Stockholder or any Affiliate of any Significant Stockholder or of any entity that was dependent upon any Significant Stockholder or any Affiliate of any Significant Stockholder for more than 5% of its revenues or earnings in its most recent fiscal year, (ii) an officer, employee, consultant or partner of Walter Industries or any of its Affiliates or an officer, employee, Interested Stockholder, consultant or partner or an entity that was dependent upon Walter Industries or any of its Affiliates for more than 5% of its revenues or earnings in its most recent fiscal year, or (iii) any relative or spouse of any of the foregoing persons or a relative of a spouse of any of the foregoing persons. Notwithstanding the foregoing, after six months following the Effective Date, Lehman Brothers Inc. intends to relinquish to KKR the right to appoint one of the three Board positions initially allotted to Lehman Brothers Inc. Such decision will be in Lehman Brothers Inc.'s sole discretion, although Lehman Brothers Inc. intends to take into account the Debtors' performance, adherence to their business plans, projections and other operational and planning factors. Upon notification of such relinquishment by Lehman Brothers Inc., KKR shall have the right to compel the director identified by Lehman Brothers Inc. to resign as a member of the Board and to appoint the successor to such directorship pursuant to Section 5.2 of the Consensual Plan. In addition, during the initial three-year term of the New Board, (i) in the event that at any time after the Effective Date, Lehman Brothers Inc. and its Affiliates fail to have "beneficial" ownership, as that term is used in Rule 13d-3 under the Securities Exchange Act of 1934, as amended ("Beneficial Ownership" and its correlative meaning "Beneficially Owned") of 8% or more of the outstanding common stock of Walter Industries (or its successor by merger, consolidation or otherwise) (without including any shares held in escrow pursuant to Section 3.26 of the Consensual Plan) (the "Outstanding Common Stock"), then if KKR and its Affiliates have, at such time, Beneficial Ownership of 8% or more of the Outstanding Common Stock, KKR shall have the right to (a) compel the director identified by Lehman Brothers Inc. (from among those designated by Lehman Brothers Inc.) to resign his or her position as a member of the New Board and (b) appoint the successor to such directorship pursuant to Section 5.2 of the Consensual Plan; (ii) in the event that at any time after the Effective Date, if two members of the New Board are KKR designees and if KKR and its Affiliates fail to have Beneficial Ownership of 8% or more of the Outstanding Common Stock, and Lehman Brothers Inc. and its Affiliates have, at such time, Beneficial Ownership of 8% or more of the Outstanding Common Stock, then Lehman Brothers Inc. shall have the right to (a) compel the director identified by KKR (from among those designated by KKR) to resign his or her position as a member of the New Board and (b) appoint the successor to such directorship pursuant to Section 5.2 of the Consensual Plan; and (iii) in the event that at any time after the Effective Date either Lehman Brothers Inc. and its Affiliates, or KKR and its Affiliates, fail to have Beneficial Ownership of 5% or more of the Outstanding Common Stock, then the directors appointed under this Section 5.2 by Lehman Brothers Inc. or by KKR, respectively, shall resign and the remaining directors of Walter Industries shall appoint their successor(s) for the reminder of the initial three-year term; provided, however, that notwithstanding the preceding clauses (i)-(iii), a KKR designee shall at all times be on the New Board (until the third anniversary of the Effective Date) if, and so long as, the shares of New Common Stock Beneficially Owned by KKR and its Affiliates, together with shares held in escrow under Section 3.26(c) of the Consensual Plan that would be distributed to KKR or its Affiliates upon release from escrow, shall together equal 5% or more of the then outstanding common stock of Walter Industries (or its successor by merger, consolidation or otherwise) (including as part of the then outstanding common stock, for purposes of this calculation only, any shares held in escrow pursuant to Section 3.26 of the Consensual Plan). The person designated as a director by KKR is Michael T. Tokarz, a current Vice President and Director of Walter Industries and a general partner of KKR. The persons designated as directors by Lehman Brothers Inc. are as follows: Elliot M. Fried, 61, Managing Director of Lehman Brothers Inc. and Co-chairman of Investment Committee. Director of American Marketing Industries Inc., Bridgeport Machines Inc., Energy Ventures Inc., Lear Seating Corporation and Vernitron. Howard L. Clark, Jr., 50, Vice Chairman of Lehman Brothers Inc. Director of Plasti-Line Inc., Maytag Corporation and Fund American Companies, Inc. Kenneth A. Buckfire, 36, Senior Vice President of Lehman Brothers Inc. Director of Great Bay Power Corporation and Pike Advertising Services, Inc. I. MUTUAL RELEASES BY AND AMONG APOLLO, LEHMAN BROTHERS INC., DEBTORS AND KKR Section 6.3 of the Consensual Plan now includes provision for the dismissal with prejudice of the KKR-Apollo Action, and the exchange of mutual releases among KKR and the Debtors, on the one hand, and Apollo and Lehman Brothers Inc., on the other hand, which releases cover the Debtors, the KKR Parties, the Apollo Parties and the Lehman Parties. The form of such releases is attached as Exhibit 7 to the Consensual Plan. J. RELEASES GRANTED BY HOLDERS OF CLAIMS AND INTERESTS TO STOCKHOLDERS, DIRECTORS, OFFICERS, ETC. OF DEBTORS The releases contained in Section 6.1 of the Creditors' Plan did not cover the officers, directors or shareholders of the Debtors, The Celotex Corporation or Old Jim Walter except to the extent that they held Allowed Indemnity Claims against the Debtors or timely became a signatory to the Veil Piercing Settlement Agreement, and thereby became a Settling Equityholder (in the case of releases regarding the Debtors) or a Celotex/JWC Released Party (in the case of releases regarding The Celotex Corporation or Old Jim Walter). The Consensual Plan provides that, on the Effective Date, Holders of Claims and Interests will be deemed to grant releases to the Debtors, their respective present and former parents, subsidiaries, Affiliates, officers, directors, shareholders, partners, employees, agents, advisors, predecessors in interest and representatives (except that no release is granted to The Celotex Corporation and its subsidiaries, which is a former Affiliate of the Debtors, although releases are granted to its present and former shareholders, directors, officers, employees, etc.). As in the Creditors' Plan, among the shareholders receiving releases under Section 6.1 of the Consensual Plan are "Existing Equityholders" (defined as "Settling Equityholders" under the Creditors' Plan). Existing Equityholders are defined in the Second Amended and Restated Veil Piercing Settlement Agreement (at definition "L.") to mean each record or beneficial holder of an Old Common Stock Interest; provided, that, in the event that the Court shall enter an order finding (i) that such Holder acted in bad faith so as to materially breach the Second Amended and Restated Veil Piercing Settlement Agreement or to obstruct confirmation of the Consensual Plan by the date determined by operation of Section 10.1(a) of the Consensual Plan or the occurrence of the Plan Effective Date by March 31, 1995, or such later date as may be determined by operation of Section 10.2(i) of the Consensual Plan and (ii) that denial of the benefits afforded an Existing Equityholder under the Second Amended and Restated Veil Piercing Settlement Agreement and the Consensual Plan is an appropriate remedy for such misconduct, then such Holder shall not be an Existing Equityholder. If each of the KKR Entities and the senior management stockholders identified in Recital (h) of the Second Amended and Restated Veil Piercing Settlement Agreement are signatories to the Second Amended and Restated Veil Piercing Settlement Agreement, then each other record or beneficial Holder of Old Common Stock Interests will be deemed to be an Existing Equityholder under the Consensual Plan. K. CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS OF THE CONSENSUAL PLAN The Consensual Plan contains the following conditions to Confirmation: a. The Court shall have entered the Confirmation Order on or prior to March 3, 1995, which order shall, among other things, include (i) the approval of the Veil Piercing Settlement and the Second Amended and Restated Veil Piercing Settlement Agreement and (ii) a finding that the filing of the Consensual Plan did not constitute a breach of the Pre-LBO Bondholders Settlement Agreement (the March 3, 1995 date may be extended until March 31, 1995 by either the Debtors or the Bondholder Proponents, and such date may be further extended solely by the Bondholder Proponents, and the finding referred to in clause (ii) above may be waived solely by the Bondholder Proponents); and b. the Reorganization Documents (other than the New Senior Note Indenture, the instrument(s) evidencing the Qualified Securities, the New Common Stock Registration Rights Agreement and the Qualified Securities Registration Rights Agreement) shall have been executed (this condition may be waived solely by the Bondholder Proponents). These conditions differ from the conditions to Confirmation of the Creditors' Plan in the following respects: (i) the condition relating to the entry of the Confirmation Order contained in the Creditors' Plan required that the Confirmation Order be entered by December 31, 1994, with such condition waivable solely by the Bondholders Committee (the Confirmation Order was not required to contain the approvals or finding set forth in condition (a) above; such approvals were contemplated to be obtained through entry of a separate order); (ii) the Creditors' Plan contained conditions requiring (x) that the Allowed Amount of Federal Income Tax Claims shall have been estimated by the Court or settled in an amount not in excess of $40,000,000; (y) that there shall not have occurred, in the sole determination of the Bondholders Committee, a material adverse change in the business, results of operations, condition (financial or otherwise), properties, Assets or prospects of the Debtors, taken together, from the date of the Creditors' Plan to the Confirmation Date; and (z) that the Court shall have entered an order settling and resolving all of the LBO-Related Issues as to the Released Parties, as provided in the Creditors' Plan (these conditions were waivable solely by the Bondholders Committee). In addition, the Creditors' Plan did not contain condition (b) set forth above. The Consensual Plan contains the following conditions to effectiveness: a. The Confirmation Order shall have become a Final Order (this condition may be waived solely by the Bondholder Proponents); b. All conditions precedent set forth in the Second Amended and Restated Veil Piercing Settlement Agreement and all procedures set forth in Section 4(d)(ii)(A)-(J) of the Second Amended and Restated Veil Piercing Settlement Agreement shall have been complied with or waived (as provided therein); it being understood that none of the procedures set forth in such Section 4(d)(ii)(A)-(J) may be waived or modified except with the written consent of the Debtors; c. Qualified Securities having an aggregate principal amount of not less than the sum of: (i) $530 million; (ii) the net proceeds of the financing(s) described in clause (i) of the definition of "Exit Financing" contained in the Consensual Plan in excess of $900 million, if any, up to but not in excess of $25 million, and (iii) the amount, if any, by which the Replacement Indebtedness exceeds the amount of Cash necessary to pay all Claims that would otherwise have been satisfied by New Senior Notes issued as Qualified Securities, shall be available for distribution to Classes U-4, U-5, U-6 and U-7 under the Consensual Plan; d. The Reorganization Documents shall have been executed and delivered by all of the parties thereto and the Court shall have entered a Final Order (which may be the Confirmation Order) approving the Reorganization Documents (this condition may be waived solely by the Bondholder Proponents); e. Mid-State Homes shall have obtained the Mid-State Homes Warehouse Credit Facility and the Debtors shall have obtained the New Working Capital Facility; f. The Charter shall have been filed with the Secretary of State of the State of Delaware; g. The adversary proceeding described in subparagraph (ii) of Section 6.3 shall have been dismissed with prejudice, and the releases described in subparagraph (iii) of Section 6.3 shall have been delivered; h. The New Senior Note Indenture shall be qualified under the Trust Indenture Act of 1939; and i. The Effective Date shall occur not later than March 31, 1995 (this date may be extended solely by the Bondholder Proponents). These conditions differ from the conditions to effectiveness of the Creditors' Plan in the following respects: (i) the Creditors' Plan contained a condition, waivable solely by the Bondholders Committee, that the order approving the settlement and resolution of all LBO-Related Issues as to Released Parties shall have become a Final Order (the Consensual Plan does not contain a similar condition); (ii) the Creditors' Plan required a different amount of Qualified Securities to be available for distribution to Creditors than that required under the Consensual Plan, as discussed above, and permitted that condition to be waived; (iii) the Consensual Plan requires that the Debtors shall have obtained the New Working Capital Facility; (iv) the Creditors' Plan did not contain conditions (f) through (i) set forth above; and (v) the Creditors' Plan contained conditions, not contained in the Consensual Plan, regarding the fulfillment of all conditions to effectiveness of each of the Reorganization Documents (except for conditions relating to payment of money or the issuance of debt securities or New Common Stock on the Effective Date). In addition, certain conditions that were waivable solely by the Bondholders Committee under the Creditors' Plan are waivable solely by the Bondholder Proponents under the Consensual Plan. L. MATERIAL AMENDMENTS TO AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT The Amended and Restated Veil Piercing Settlement, which became effective upon approval thereof by the Celotex Bankruptcy Court on September 21, 1994, has been amended and is now embodied in the Second Amended and Restated Veil Piercing Settlement Agreement, dated as of November 22, 1994. The Second Amended and Restated Veil Piercing Settlement Agreement is subject to approval by the Court at a hearing scheduled to begin on March 1, 1995, and by the Celotex Bankruptcy Court at a hearing not yet scheduled. The following amendments are incorporated in the Second Amended and Restated Veil Piercing Settlement Agreement: (a) The Allowed Claim of the Veil Piercing Claimants is reduced from $450 million to $375 million; (b) The number of shares of New Common Stock to be received under the Veil Piercing Settlement Agreement will be calculated based upon the $2.525 billion Negotiated Enterprise Value; (c) The Debtors and KKR agree to support the request by Caplin and Drysdale, one of the law firms representing the Veil Piercing Claimants, for an award from the Debtors of $15 million in attorneys' fees on behalf of Caplin & Drysdale and the Claimants' Attorneys. To the extent that the Court awards less than $15 million, the settlement distribution will include a cash payment equal to this differential; (d) The Debtors, their existing senior management shareholders and KKR will become signatories to the Second Amended and Restated Veil Piercing Settlement Agreement and cooperate in good faith to insure that such agreement results in finality with respect to all past, present and future asbestos litigation, but that the Bondholder Proponents (after consultation with the Debtors) will make and implement all strategic decisions that relate directly or indirectly to, among other things, finality. Section 4(d)(ii)(A)-(J) of the amended agreement describes the procedures required to be taken in order to achieve finality, the waiver or modification of which is not permitted without the Debtors' written consent. The Court has not appointed a representative of "future asbestos claimants" in the Chapter 11 Cases, and it is not contemplated that such a representative will be appointed in the Chapter 11 Cases. One creditor in the Celotex Chapter 11 Proceeding, Aetna Casualty and Surety Company, has on two occasions contended that such a "futures representative" must be appointed in that proceeding by the Celotex Bankruptcy Court before the Celotex Bankruptcy Court could approve and authorize The Celotex Corporation to render performance under any veil piercing settlement agreement approved by the Court in the Chapter 11 Cases. In each instance, the Celotex Bankruptcy Court denied Aetna's request, finding it to be premature in that all creditors of The Celotex Corporation, present and future, have identical interests in the Veil Piercing Settlement, which provides a single fund for all Veil Piercing Claimants, present and future; distribution of that fund among present and future Veil Piercing Claimants will be determined at a later date by the Celotex Bankruptcy Court. Recently, The Celotex Corporation and an Official Celotex Committee have each requested the appointment of a future asbestos claimants representative in the Celotex Chapter 11 Proceeding. These motions are currently scheduled to be heard by the Celotex Bankruptcy Court in early 1995. The Consensual Plan Proponents believe that the appointment of a future claimants representative in the Celotex Chapter 11 Proceeding will not affect the approval of the Second Amended and Restated Veil Piercing Settlement Agreement by either the Court or the Celotex Bankruptcy Court. HOWEVER, A REPRESENTATIVE OF FUTURE ASBESTOS CLAIMANTS, IF APPOINTED IN THE CELOTEX CHAPTER 11 PROCEEDING, MAY TAKE THE POSITION THAT FUTURE CLAIMANTS ARE NOT BOUND BY THE SECOND AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT. The Consensual Plan Proponents take the position that such future Veil Piercing Claimants will be bound by the Second Amended and Restated Veil Piercing Settlement Agreement and the Consensual Plan. III. UPDATED INFORMATION CONCERNING BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS Attached hereto as Exhibit 3 are consolidated financial statements of Walter Industries and management's discussion and analysis of financial condition and results of operations for the year ended May 31, 1994 (audited) and for the three months ended August 31, 1994 (unaudited). This information was prepared by the Debtors and supplements the financial disclosure and analysis attached to the Creditors' Disclosure Statement, which covered the year ended May 31, 1993 and the nine months ended February 28, 1994. Included in Exhibit VII to the Creditors' Disclosure Statement (pages VII-1 through VII-6) is certain information as to consolidated projections of operations and cash flow of Walter Industries that is based on projections prepared by the Debtors. As a supplement thereto, Exhibit 3.C. hereto is a summary of Walter Industries' unaudited long range plan for the five years ending May 31, 1995 through 1999. These projections were prepared by the Debtors in accordance with formalized corporate planning program guidelines and procedures. NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THE PROJECTED FINANCIAL INFORMATION OR THE ABILITY OF THE DEBTORS TO ACHIEVE THE PROJECTED RESULTS. PROJECTIONS SET FORTH IN THIS DISCLOSURE STATEMENT SUPPLEMENT REPRESENT A PREDICTION OF FUTURE EVENTS BY THE DEBTORS BASED UPON CERTAIN ASSUMPTIONS. THESE FUTURE EVENTS MAY OR MAY NOT OCCUR AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS A GUARANTEE OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. BECAUSE OF THE NUMEROUS RISKS AND INHERENT UNCERTAINTIES THAT AFFECT THE OPERATIONS OF THE DEBTORS, THE ACTUAL RESULTS OF OPERATIONS UNDOUBTEDLY WILL BE DIFFERENT FROM THOSE PROJECTED, AND SUCH DIFFERENCES MAY BE MATERIAL AND MAY BE ADVERSE. For the five months ended October 31, 1994, consolidated net sales and revenues of $588.1 million were $29.8 million, or 4.8%, lower than plan, and EBIT (earnings before interest and taxes) of $100.5 million were $25.1 million, or 20.0%, lower than plan. The reduced EBIT was largely the result of lower than anticipated earnings of Mid-State Homes and Jim Walter Resources' Mining Division, coupled with higher Chapter 11 costs. Mid-State Homes' lower EBIT performance was principally due to a decrease in time charge income reflecting lower than projected payoffs received in advance of maturity. Jim Walter Resources Mining Division's reduced EBIT performance resulted from lower than anticipated shipments of coal to the Japanese steel mills and other export customers and reduced coal mining productivity which resulted in higher costs per ton of coal produced, partially offset by higher coal selling prices. Reduced coal mining productivity was the result of limited production at Blue Creek Mine No. 5 due to the recurrence of spontaneous combustion heatings that shut down the mine from early April 1994 until May 16, 1994, together with various geological problems at Blue Creek Mines No. 3 and No. 4. Development mining for the two remaining longwall panels in the northwest section of Mine No. 5 resumed on May 16, 1994 and the first longwall panel will be ready for mining in January 1995. Chapter 11 costs exceeded plan due to the filing of three amended plans of reorganization, printing, mailing and noticing costs associated with the Debtors' Plan and the Creditors' Plan and litigation expenses associated with the trial of certain preliminary issues relating to the then-pending Debtors' Plan and the Creditors' Plan. It is Walter Industries' current estimate that EBIT for the year ending May 31, 1995 will probably be moderately below plan. Included in Exhibit VII to the Creditors' Disclosure Statement (pages VII-7 through VII-9) is a Pro Forma Consolidated Balance Sheet of Walter Industries at December 31, 1994 on a "Fresh Start" accounting basis. At the present time it has not been finally determined whether "Fresh Start" accounting or a continuation of the present "Historical Cost" accounting will be used. However, except for changes relating to modifications in the Consensual Plan from the Creditors' Plan, as set forth herein, such as amounts of debt securities to be issued and other minor plan revisions, the only significant change to such "Fresh Start" Pro Forma Consolidated Balance Sheet if "Historical Cost" accounting is used, would be a reduction of approximately $750 million from "Reorganization Value in Excess of Amounts Allocable to Unidentifiable Assets" as shown in the Pro Forma Consolidated Balance Sheet and an equal reduction in "Total Stockholders Equity". IV. UPDATED INFORMATION REGARDING CERTAIN FEDERAL INCOME TAX CONSEQUENCES The discussion of the tax treatment of the Equity Call Option contained in Article IV of the Creditor's Disclosure Statement is no longer relevant since the Consensual Plan does not provide for the issuance of Equity Call Options. Holders of Class E-1 Interests that receive New Common Stock (either directly or through issuance to the escrow account to be established on behalf of the Holders of the Class E-1 Interests (the "Escrow Account") pursuant to paragraph (c) of Section 3.26 of the Consensual Plan (the "Contingent Shares")) in exchange for the surrender (or cancellation) of shares of Old Common Stock held by such Holder should be regarded as participating in a tax-free exchange or recapitalization, the tax consequences of which are described in Section IV.B.2.(b) of the Creditors' Disclosure Statement ("Tax Treatment of Exchanging Holders by Class"). Thus, the Class E-1 Interest Holders should not recognize gain or loss on the exchange of their Interests for New Common Stock (including the Contingent Shares). However, if and to the extent that any Contingent Shares are issued to the Holders of Class E-1 Interests or to the Escrow Account on a date that is later than one year after the Effective Date, a portion of the Contingent Shares received by such Holder or the Escrow Account may be treated as ordinary interest income to the Holder in an amount equal to the IRC-imputed interest on any Contingent Shares issued to the Holder or the Escrow Account more than six months after the Effective Date. Qualified Securities to be issued under the Consensual Plan will consist solely of cash and New Senior Notes of Walter Industries, Inc. and/or one or more other Debtors. If such New Senior Notes are issued by Walter Industries and if they qualify as "tax securities," the tax consequences of the exchange to Holders of Claims in Class U-6 will be as described in Section IV.B.2(c) of the Creditor's Disclosure Statement ("Tax Treatment of Exchanging Holders by Class"). Although the issue is not free from doubt, the New Senior Notes issued as Qualified Securities are not likely to be considered to be "tax securities" because such Notes have features that are not indicative of a tax security; for example, the New Senior Notes issued as Qualified Securities will have a maturity date of five years and may be redeemed at any time by the issuer. Thus, Holders of Claims in Class U-6 that receive a combination of Qualified Securities (including Cash) and New Common Stock in exchange for their Class U-6 Claims may recognize gain (but not loss) on the exchange but not in excess of the fair market value of the "boot" (i.e., the Qualified Securities) received in the exchange. Class U-6 Claim Holders that do not receive any New Common Stock will recognize gain or loss in full on the exchange in the manner described in Section IV.B.2(a) of the Creditor's Disclosure Statement. The tax treatment of Holders of Claims in Classes U-4, U-5 and U-7 is not affected by the change in the nature of Qualified Securities and thus Section IV.B.2.(a) of the Creditor's Disclosure Statement continues to apply to such Holders. If and to the extent that a Holder is deemed to receive any shares of New Common Stock in exchange for other than such Holder's Claim against or Interest in the Debtor, the fair market value of such shares may represent taxable income to such Holder. The Consensual Plan Proponents expect that the Celotex Settlement Fund Recipient will be a trust structured to qualify under Code Section 524(g) (the "Trust"). For Federal income tax purposes, the Trust may be considered to be a "Qualified Settlement Fund" within the meaning of IRC Section 468B and Regulations Section 1.468B (a "QSF") or, if the Trust does not qualify as a QSF, as a "grantor trust" that is transparent for tax purposes. Irrespective of the classification of the Trust for tax purposes, Walter Industries generally will not recognize gain or loss upon the transfer of New Common Stock and Qualified Securities to the Trust. Walter Industries should be entitled to a deduction in an amount equal to the value of the New Common Stock and Qualified Securities, although the timing of such deduction depends upon whether the Trust is treated as a QSF or a grantor trust. In general, an accrual-basis taxpayer such as Walter Industries may not deduct an expense until (i) all events have occurred that determine the fact of the liability and (ii) the amount of the liability can be estimated with reasonable accuracy. The "all-events" test will not be considered to be met until "economic performance" with respect to the item occurs. If the Trust is a QSF, economic performance would be deemed to occur as New Common Stock is transferred to the Trust but, with respect to the Qualified Securities, would not occur until Walter Industries (or any obligor-Debtor that is a related party) makes principal payments on the Qualified Securities. If the Trust is not a QSF but qualifies as a grantor trust, economic performance should be held to occur in the year that Walter Industries transfers New Common Stock and Qualified Securities of an issuer other than Walter Industries to the Trust. If the Trust is a QSF, the Trust will be treated as a separate taxpayer for income tax purposes. The Trust will have a fair market value basis in the shares of New Common Stock received pursuant to the Consensual Plan and constituting its corpus, and any dividends paid on the New Common Stock (and interest paid on the Qualified Securities) before such corpus is distributed will be taxable to the Trust. The Trust will be required to treat distributions of New Common Stock to the Veil Piercing Claimants as a sale at fair market value on the date of the distribution, thus recognizing taxable gain or loss on the distribution if the New Common Stock value is greater or less than the Trust's adjusted tax basis in such Stock on the distribution date. Although the issue is not free from doubt, the Trust should neither have basis in, nor recognize gain or loss upon the distribution of, Qualified Securities (other than Cash) since the transfer of Qualified Securities will not be treated as a transfer of property for purpose of IRC Section 468B. The New Common Stock and Qualified Securities distributed by the Trust, under IRC Section 104, may be excludible from the gross income of the Veil Piercing Claimants and such New Common Stock and Qualified Securities would have a fair market value basis to the Claimants. Alternatively, if the Trust does not qualify as a QSF but instead qualifies as a grantor trust, the Trust will be transparent for tax purposes and the beneficiaries thereof will be treated as the owners of the Trust property. In such case, payments by Walter Industries to the Trust would be treated as being paid directly to the Claimants, and may be excludible from the gross income of the Claimants pursuant to IRC Section 104. Dividends paid on the New Common Stock and interest paid on the Qualified Securities during the period they are held by the Trust would be treated as received by (and would be taxable to) the beneficiaries thereof (even if not distributed during the same taxable period to such beneficiaries). Dated: December 9, 1994 New York, New York OFFICIAL BONDHOLDERS COMMITTEE OF HILLSBOROUGH HOLDINGS CORPORATION, ET AL. By: /s/ Daniel H. Golden Daniel H. Golden, Esq. OFFICIAL COMMITTEE OF GENERAL UNSECURED CREDITORS OF HILLSBOROUGH HOLDINGS CORPORATION, ET AL. By: /s/ Marc S. Kirschner Marc S. Kirschner, Esq. PAUL, WEISS, RIFKIND, WHARTON & GARRISON By: /s/ Robert Drain Robert Drain 1285 Avenue of the Americas New York, New York 10019-6064 (212) 373-3236 For Lehman Brothers Inc. AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. By: /s/ Steven M. Pesner Steven M. Pesner, P.C. Ellen R. Werther 65 East 55th Street, 33rd Floor New York, New York 10022 (212) 872-1010 For Apollo MARCUS MONTGOMERY WOLFSON P.C. By: /s/ Peter Wolfson Peter Wolfson Sara Chenetz 53 Wall Street New York, New York 10005 (212) 858-5200 For Ad Hoc Committee of Pre-LBO Bondholders KAYE, SCHOLER, FIERMAN, HAYS & HANDLER By: /s/ Andrew A. Kress Andrew A. Kress, Esq. 425 Park Avenue New York, New York 10022 (212) 836-8000 For: HILLSBOROUGH HOLDINGS CORPORATION, BEST INSURORS, INC., BEST INSURORS OF MISSISSIPPI, INC., COAST TO COAST ADVERTISING, INC., COMPUTER HOLDINGS CORPORATION, DIXIE BUILDING SUPPLIES, INC., HAMER HOLDINGS CORPORATION, HAMER PROPERTIES, INC., HOMES HOLDINGS CORPORATION, JIM WALTER COMPUTER SERVICES, INC., JIM WALTER HOMES, INC., JIM WALTER INSURANCE SERVICES, INC., JIM WALTER RESOURCES, INC., JIM WALTER WINDOW COMPONENTS, INC., JW ALUMINUM COMPANY, JW RESOURCES, INC., JW RESOURCES HOLDINGS CORPORATION, J.W.I. HOLDINGS CORPORATION, J.W. WALTER, INC., JW WINDOW COMPONENTS, INC., LAND HOLDINGS CORPORATION, MID-STATE HOMES, INC., MID-STATE HOLDINGS CORPORATION, RAILROAD HOLDINGS CORPORATION, SLOSS INDUSTRIES CORPORATION, SOUTHERN PRECISION CORPORATION, UNITED LAND CORPORATION, UNITED STATES PIPE AND FOUNDRY COMPANY, U.S. PIPE REALTY, INC., VESTAL MANUFACTURING COMPANY, WALTER HOME IMPROVEMENT, INC., WALTER INDUSTRIES, INC., and WALTER LAND COMPANY JWC ASSOCIATES, L.P. JWC ASSOCIATES II, L.P. KKR PARTNERS II, L.P. By: KKR Associates By: /s/ Henry R. Kravis Name: Henry R. Kravis Title: General Partner EXHIBIT 1: AMENDED JOINT PLAN OF REORGANIZATION MARKED TO SHOW CHANGES FROM CREDITORS' PLAN DATED AS OF AUGUST 1, 1994 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION Chapter 11 Jointly Administered In re HILLSBOROUGH HOLDINGS CORPORATION, Case No. 89-9715-8P1 BEST INSURORS, INC., Case No. 89-9740-8P1 BEST INSURORS OF MISSISSIPPI, INC., Case No. 89-9737-8P1 COAST TO COAST ADVERTISING, INC., Case No. 89-9727-8P1 COMPUTER HOLDINGS CORPORATION, Case No. 89-9724-8P1 DIXIE BUILDING SUPPLIES, INC., Case No. 89-9741-8P1 HAMER HOLDINGS CORPORATION, Case No. 89-9735-8P1 HAMER PROPERTIES, INC., Case No. 89-9739-8P1 HOMES HOLDINGS CORPORATION, Case No. 89-9742-8P1 JIM WALTER COMPUTER SERVICES, INC., Case No. 89-9723-8P1 JIM WALTER HOMES, INC., Case No. 89-9746-8P1 JIM WALTER INSURANCE SERVICES, INC., Case No. 89-9731-8P1 JIM WALTER RESOURCES, INC., Case No. 89-9738-8P1 JIM WALTER WINDOW COMPONENTS, INC., Case No. 89-9716-8P1 JW ALUMINUM COMPANY, Case No. 89-9718-8P1 JW RESOURCES, INC., Case No. 90-11997-8P1 JW RESOURCES HOLDINGS CORPORATION, Case No. 89-9719-8P1 J.W.I. HOLDINGS CORPORATION, Case No. 89-9721-8P1 J.W. WALTER, INC., Case No. 89-9717-8P1 JW WINDOW COMPONENTS, INC., Case No. 89-9732-8P1 LAND HOLDINGS CORPORATION, Case No. 89-9720-8P1 MID-STATE HOMES, INC., Case No. 89-9725-8P1 MID-STATE HOLDINGS CORPORATION, Case No. 89-9726-8P1 RAILROAD HOLDINGS CORPORATION, Case No. 89-9733-8P1 SLOSS INDUSTRIES CORPORATION, Case No. 89-9743-8P1 SOUTHERN PRECISION CORPORATION, Case No. 89-9729-8P1 UNITED LAND CORPORATION, Case No. 89-9730-8P1 UNITED STATES PIPE AND FOUNDRY COMPANY, Case No. 89-9744-8P1 U.S. PIPE REALTY, INC., Case No. 89-9734-8P1 VESTAL MANUFACTURING COMPANY, Case No. 89-9728-8P1 WALTER HOME IMPROVEMENT, INC., Case No. 89-9722-8P1 WALTER INDUSTRIES, INC. and Case No. 89-9745-8P1 WALTER LAND COMPANY, Case No. 89-9736-8P1 Debtors. AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN") AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. Co-Counsel to Apollo 65 East 55th Street 33rd Floor New York, NY 10022 (212) 872-1000 STUTMAN, TRIESTER & GLATT, P.C. Co-Counsel to Apollo 3699 Wilshire Boulevard Suite 900 Los Angeles, CA 90010 (213) 251-5100 JONES, DAY, REAVIS & POGUE Counsel to Official Committee of General Unsecured Creditors 599 Lexington Avenue New York, NY 10022 (212) 326-3939 PAUL, WEISS, RIFKIND, WHARTON & GARRSON Counsel to Lehman Brothers Inc. 1285 Avenue of the Americas New York, NY 10019 (212) 373-3000 STROOCK & STROOCK & LAVAN Counsel to Official Bondholders Committee Seven Hanover Sq. New York, NY 10004-2594 (212) 806-5400 MARCUS MONTGOMERY WOLFSON P.C. Counsel to Ad Hoc Committee of Pre-LBO Bondholders 53 Wall Street New York, NY 10005 (212) 858-5200 KAYE, SCHOLER, FIERMAN, HAYS & HANDLER Co-Counsel to the Debtors 425 Park Avenue New York, NY 10022 (212) 836-8000 STICHTER, RIEDEL, BLAIN & PROSSER, P.A. Co-Counsel to the Debtors 110 East Madison St. Suite 200 Tampa, FL 33602 (813) 229-0144 CARLTON, FIELDS, WARD, EMMANUEL, SMITH & CUTLER, P.A. Counsel to KKR One Harbour Place Tampa, FL 33602 (813) 223-7000 (This page intentionally left blank) TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS 3 ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS 28 2.1 Administrative Claims 28 2.2 Federal Income Tax Claims 28 2.3 Federal Excise Tax and Reclamation Claims 28 2.4 State and Local Tax Claims 28 2.5 Class S-1 Claims: Revolving Credit Bank Claims 28 2.6 Class S-2 Claims: Working Capital Bank Claims 30 2.7 Class S-3 Claims: Grace Street Note Claims 31 2.8 Class S-4 Claims: Sloss IRB Claim 31 2.9 Class S-5 Claims: Secured Equipment Purchase Claims 31 2.10 Class S-6 Claims: Series B & C Senior Note Claims 31 2.11 Class S-7 Claims: Provident Life & Accident Insurance Company Claims 32 2.12 Class S-8 Claims: Revolving Credit Agents Claims 32 2.13 Class S-9 Claims: Working Capital Agents Claims 33 2.14 Class S-10 Claims: Other Secured Claims 34 2.15 Class U-1 Claims: Old Walter Industries IRB Claims 36 2.16 Class U-2 Claims: Convenience Class Claims 36 2.17 Class U-3 Claims: Other Unsecured Claims 38 2.18 Class U-4 Claims: Senior Subordinated Note Claims 39 2.19 Class U-5 Claims: 17% Subordinated Note Claims 40 2.20 Class U-6 Claims: Pre-LBO Debenture Claims 40 2.21 Class U-7 Claims: Settlement Claims 40 2.22 Class I-1 Claims: Intercompany IRB Claims 42 2.23 Class I-2 Claims: Pre-Filing Date Intercompany Notes Payable Claims 42 2.24 Class I-3 Claims: Post-Filing Date Intercompany Notes Payable Claims 44 2.25 Class E-1 Interests: Old Common Stock Interests in Hillsborough 46 2.26 Class E-2 Interests: Stock Acquisition Rights in Hillsborough 46 2.27 Class SE-1 Interests: Subsidiary Common Stock Interests in Debtors other than Hillsborough 46 2.28 Class SE-2 Interests: Subsidiary Stock Acquisition Rights in Debtors other than Hillsborough 48 ARTICLE III TREATMENT OF ALLOWED CLAIMS AND INTERESTS UNDER THE CONSENSUAL PLAN 50 3.1 Satisfaction of Allowed Claims and Interests 50 3.2 Administrative Claims 50 3.3 Federal Income Tax Claims 51 3.4 Federal Excise Tax and Reclamation Claims 51 3.5 State and Local Tax Claims 51 3.6 Class S-1 Claims: Revolving Credit Bank Claims 51 3.7 Class S-2 Claims: Working Capital Bank Claims 52 3.8 Class S-3 Claims: Grace Street Note Claims 52 3.9 Class S-4 Claims: Sloss IRB Claim 52 3.10 Class S-5 Claims: Secured Equipment Purchase Claims 52 3.11 Class S-6 Claims: Series B & C Senior Note Claims 52 3.12 Class S-7 Claims: Provident Life & Accident Insurance Company Claims 53 3.13 Class S-8 Claims: Revolving Credit Agents Claims 53 3.14 Class S-9 Claims: Working Capital Agents Claims 53 3.15 Class S-10 Claims: Other Secured Claims 54 3.16 Class U-1 Claims: Old Walter Industries IRB Claims 54 3.17 Class U-2 Claims: Convenience Class Claims 54 3.18 Class U-3 Claims: Other Unsecured Claims 54 3.19 Class U-4 Claims: Senior Subordinated Note Claims 55 3.20 Class U-5 Claims: 17% Subordinated Note Claims 55 3.21 Class U-6 Claims: Pre-LBO Debenture Claims 55 3.22 Class U-7 Claims: Settlement Claims 55 3.23 Class I-1 Claims: Intercompany IRB Claims 56 3.24 Class I-2 Claims: Pre-Filing Date Intercompany Notes Payable Claims 56 3.25 Class I-3 Claims: Post-Filing Date Intercompany Notes Payable Claims 56 3.26 Class E-1 Interests: Old Common Stock Interests in Hillsborough 56 3.27 Class E-2 Interests: Stock Acquisition Rights in Hillsborough 59 3.28 Class SE-1 Interests: Subsidiary Common Stock Interests in Debtors other than Hillsborough 59 3.29 Class SE-2 Interests: Stock Acquisition Rights in Debtors other than Hillsborough 59 ARTICLE IV MEANS FOR IMPLEMENTATION OF THE CONSENSUAL PLAN 59 4.1 Charter; Common Stock 59 4.2 Amendments to Charter 59 4.3 Nonvoting Equity Securities 59 4.4 Surrender and Cancellation of Instruments 59 4.5 Distributions to Holders of Allowed Claims and Interests 61 4.6 All Distributions to be Made by Walter Industries 62 4.7 Fractional Shares; New Senior Notes Less Than $1,000 62 4.8 Execution and Delivery of Reorganization Documents 63 4.9 New Capital Stock of Debtors 63 4.10 Resolution of Disputed Claims 63 4.11 Reserves for Disputed Claims 63 4.12 Investment of Reserves 63 4.13 Excess Reserves 63 4.14 Unclaimed Property 63 4.15 Non-Negotiated Checks 63 4.16 Returned Distributions 64 4.17 Claims Against Two or More Debtors 64 4.18 Direction to Parties 64 4.19 Financing Matters 64 4.20 Federal Tax Claim Matters 65 4.21 "Promptly After the Effective Date." 65 ARTICLE V MANAGEMENT OF WALTER INDUSTRIES 65 5.1 Corporate Governance; Directors and Officers 65 5.2 Reconstitution of Board of Directors of Walter Industries 66 5.3 Management Stock; New Incentive Plans 67 5.4 Funding of Retiree Health Benefits 67 5.5 Effective Date Bonus Awards 67 ARTICLE VI RELEASES AND INDEMNIFICATION 67 6.1 Release by Holders of Claims or Interests 67 6.2 Release By Debtors 68 6.3 Dismissal of Lawsuits and Related Releases 68 6.4 Indemnification 68 ARTICLE VII ENTERPRISE VALUE 69 7.1 Enterprise Value 69 ARTICLE VIII EXECUTORY CONTRACTS 69 8.1 Assumption of Executory Contracts 69 8.2 Cure of Defaults 69 8.3 Claims for Damages 69 8.4 Classification of Claims 70 ARTICLE IX RETENTION OF JURISDICTION 70 9.1 Jurisdiction of Court 70 ARTICLE X CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS 71 10.1 Conditions to Confirmation 71 10.2 Conditions to Effectiveness 71 ARTICLE XI CRAM DOWN 72 11.1 Cram Down 72 ARTICLE XII EFFECTS OF PLAN CONFIRMATION; TITLE TO PROPERTY AND DISCHARGE 72 12.1 Vesting of Property 72 12.2 Discharge 72 12.3 Injunction 72 12.4 Effectiveness and Enforcement of Settlement Agreements 73 ARTICLE XIII MISCELLANEOUS PROVISIONS 73 13.1 Revocation 73 13.2 Amendments 73 13.3 No Consolidation 73 13.4 Provisions as to Interest 74 13.5 Exhibits 74 13.6 No Attorneys' Fees 74 13.7 Post Confirmation Effect of Evidences of Claims or Interests 74 13.8 Official Committees 74 13.9 Construction 74 13.10 Time 74 13.11 Tax Allocation of Consideration Paid to Holders 74 13.12 Governing Law 74 13.13 Headings 74 13.14 Notice of Effectiveness 74 13.15 Notices 75 13.16 Not Admissible 76 13.17 Successors and Assigns 76 EXHIBITS 1. Restated Certificate of Incorporation of Walter Industries 2. Summary of Terms for the New Senior Notes 3A. Second Amended and Restated Veil Piercing Settlement Agreement 3B. Pre-LBO Bondholders Settlement Agreement 4. Form of New Common Stock Registration Rights Agreement 5. Form of Qualified Securities Registration Rights Agreement 6. Rejected Executory Contracts 7. Form of Mutual Releases 8. List of Record Holders of Subordinated Note Claims That Made Subordinated Note Claim Election and Aggregate Amount of Claim of Each Such Holder Elected to be Received in the Form of Qualified Securities Pursuant to Subordinated Note Claim Election < P A G E > AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 The Bondholders Committee (as defined), Lehman Brothers Inc., Apollo (as defined), the Creditors Committee (as defined), the Ad Hoc Committee of Pre-LBO Bondholders (as defined), the Debtors (as defined) and the KKR Proponents (as defined) (collectively, the "Proponents") hereby propose the following joint plan of reorganization (as defined herein, the "Consensual Plan") pursuant to the provisions of chapter 11 of title 11 of the United States Code, 11 U.S.C. section 101 et seq. Capitalized terms shall have the meanings set forth in Article I hereof. UNCONSOLIDATED PLAN The Debtors' Chapter 11 Cases are being jointly administered pursuant to an order of the Court and the Consensual Plan is being presented as a joint plan of reorganization of the Debtors for administrative purposes only. The Consensual Plan is not predicated upon a substantive consolidation of the Chapter 11 Cases and nothing herein shall be otherwise construed. Pursuant to the Consensual Plan, Claims and/or Interests with respect to any Debtor shall be satisfied by such Debtor or its successor, except that, as an element of the settlements provided for in the Consensual Plan, with respect to the distribution of New Senior Notes to Holders of Allowed Claims in Classes S-6, U-4, U-5, U-6 and U-7, the issuer of such securities may be a Debtor other than the Debtor against which the Claim is asserted. Accordingly, except as noted in the previous sentence, Claims and Interests have been classified in Article II hereof with respect to each Debtor, and Article III hereof provides for the treatment of such Allowed Claims and/or Interests by the Debtor to which such Claims and/or Interests relate. MIRROR LIQUIDATION PLAN Pursuant to an order of the Court dated November 5, 1990 (the "Mirror Liquidation Order"), certain of the Debtors, including Hillsborough, Old Walter Industries, Jim Walter Resources, JW Resources, Resources Holdings, United Land, and Pipe Realty, completed plans of liquidation or merger, or effected or received other distributions which had been approved and adopted by them prior to the Filing Date as part of the Debtors' mirror liquidation plans (the "Mirror Liquidation Plan"). As a result of the completion of the Mirror Liquidation Plan, certain Debtors have been completely liquidated or merged with other Debtors and no longer exist as separate legal entities. Pursuant to the Mirror Liquidation Order, all rights of Creditors of Hillsborough, Old Walter Industries, Jim Walter Resources, Resources Holdings, JW Resources, United Land, Pipe Realty and any other Debtor affected by the Mirror Liquidation Plan have been classified, and, except as otherwise set forth in this paragraph, are addressed in the Consensual Plan without giving effect to corporate changes resulting from the completion of the Mirror Liquidation Plan. Obligations, financial and nonfinancial, of a Debtor under the Consensual Plan shall automatically be assumed and performed by its successor, if any, under the Mirror Liquidation Plan. Where the Assets and liabilities of a Debtor have been transferred to more than one other Debtor pursuant to the Mirror Liquidation Plan, the obligations under the Consensual Plan of the transferring Debtor shall be assumed and performed by the successor Debtors, each successor Debtor being responsible for satisfying Allowed Claims of a predecessor Debtor to the extent that the liabilities of the predecessor Debtor were expressly assumed by such successor Debtor pursuant to the Mirror Liquidation Plan. CROSS REFERENCES For ease of reference in the Consensual Plan, any Allowed Claim against any Debtor in any Class is lettered consistently throughout all Classes, as indicated below. For example, Allowed Claims with respect to U.S. Pipe in Class S-1 are included in Class S-1AA, those in Class U-3 are included in Class U-3AA, and so on. Allowed Claims and/or Interests with respect to each Debtor are set forth in the following Classes: A. Hillsborough--Classes S-1A, S-2A, S-6A, S-8A, S-9A, S-10A, U-2A, U-3A, U-4A, U-5A, U-7A, I-2A, I-3A, E-1A and E-2A; B. Best--Classes S-1B, S-8B, S-10B, U-2B, U-3B, I-2B, U-7B, I-3B, SE-1B and SE-2B; C. Best (Miss.)--Classes S-1C, S-8C, S-10C, U-2C, U-3C, U-7C, I-2C, I-3C, SE-1C and SE-2C; D. Coast to Coast--Classes S-1D, S-8D, S-10D, U-2D, U-3D, U-7D, I-2D, I-3D, SE-1D and SE-2D; E. Computer Holdings--Classes S-1E, S-2E, S-8E, S-9E, S-10E, U-2E, U-3E, U-7E, I-2E, I-3E, SE-1E and SE-2E; F. Dixie--Classes S-1F, S-8F, S-10F, U-2F, U-3F, U-7F, I-2F, I-3F, SE-1F and SE-2F; G. Hamer Holdings--Classes S-1G, S-2G, S-8G, S-9G, S-10G, U-2G, U-3G, U-7G, I-2G, I-3G, SE-1G and SE-2G; H. Hamer Properties--Classes S-1H, S-8H, S-10H, U-2H, U-3H, U-7H, I-2H, I-3H, SE-1H and SE-2H; I. Homes Holdings--Classes S-1I, S-2I, S-6I, S-8I, S-9I, S-10I, U-2I, U-3I, U-4I, U-5I, U-7I, I-2I, I-3I, SE-1I and SE-2I; J. Computer Services--Classes S-1J, S-5J, S-8J, S-10J, U-2J, U-3J, U-7J, I-2J, I-3J, SE-1J and SE-2J; K. Jim Walter Homes--Classes S-1K, S-6K, S-8K, S-10K, U-2K, U-3K, U-4K, U-5K, U-7K, I-2K, I-3K, SE-1K and SE-2K; L. JW Insurance--Classes S-1L, S-8L, S-10L, U-2L, U-7L, U-3L, I-3L, SE-1L and SE-2L; M. Jim Walter Resources--Classes S-1M, S-2M, S-6M, S-8M, S-9M, S-10M, U-2M, U-3M, U-7M, I-2M, I-3M, SE-1M and SE-2M; N. Window Components (Wisc.)--Classes S-1N, S-8N, S-10N, U-2N, U-3N, U-7N, I-2N, I-3N, SE-1N and SE-2N; O. JW Aluminum--Classes S-1O, S-2O, S-5O, S-8O, S-9O, S-10O, U-2O, U-3O, U-7O, I-2O, I-3O, SE-1O and SE-2O; P. Resources Holdings--Classes S-1P, S-2P, S-6P, S-8P, S-9P, S-10P, U-2P, U-3P, U-7P, I-2P, I-3P, SE-1P and SE-2P; Q. JWI Holdings--Classes S-1Q, S-2Q, S-8Q, S-9Q, S-10Q, U-2Q, U-3Q, U-7Q, I-2Q, I-3Q, SE-1Q and SE-2Q; R. JW Walter -- Classes S-1R, S-8R, S-10R, U-2R, U-3R, U-7R, I-2R, I-3R, SE-1R and SE-2R; S. Window Components--Classes S-1S, S-2S, S-5S, S-8S, S-9S, S-10S, U-2S, U-3S, U-7S, I-2S, I-3S, SE-1S and SE-2S; T. Land Holdings--Classes S-1T, S-2T, S-8T, S-9T, S-10T, U-2T, U-3T, U-7T, I-2T, I-3T, SE-1T and SE-2T; U. Mid-State Homes--Classes S-10U, U-2U, U-3U, U-7U, I-2U, I-3U, SE-1U and SE-2U; V. Mid-State Holdings--Classes S-1V, S-2V, S-8V, S-9V, S-10V, U-2V, U-3V, U-7V, I-2V, I-3V, SE-1V and SE-2V; W. Railroad Holdings -- Classes S-1W, S-2W, S-8W, S-9W, S-10W, U-2W, U-3W, U-7W, I-2W, I-3W, SE-1W and SE-2W; X. Sloss--Classes S-1X, S-2X, S-4X, S-5X, S-8X, S-9X, S-10X, U-2X, U-3X, U-7X, I-1X, I-2X, I-3X, SE-1X and SE-2X; Y. Southern Precision--Classes S-1Y, S-2Y, S-5Y, S-8Y, S-9Y, S-10Y, U-2Y, U-3Y, U-7Y, I-2Y, I-3Y, SE-1Y and SE-2Y; Z. United Land--Classes S-1Z, S-2Z, S-6Z, S-8Z, S-9Z, S-10Z, U-2Z, U-3Z, U-4Z, U-5Z, U-7Z, I-2Z, I-3Z, SE-1Z and SE-2Z; AA. U.S. Pipe--Classes S-1AA, S-2AA, S-5AA, S-6AA, S-8AA, S-9AA, S-10AA, U-2AA, U-3AA, U-4AA, U-5AA, U-7AA, I-2AA, I-3AA, SE-1AA and SE-2AA; BB. Pipe Realty--Classes S-1BB, S-2BB, S-8BB, S-9BB, S-10BB, U-2BB, U-3BB, U-7BB, I-2BB, I-3BB, SE-1BB and SE-2BB; CC. Vestal--Classes S-1CC, S-2CC, S-8CC, S-9CC, S-10CC, U-2CC, U-3CC, U-7CC, I-2CC, I-3CC, SE-1CC and SE-2CC; DD. Home Improvement--Classes S-10DD, U-2DD, U-3DD, U-7DD, I-2DD, I-3DD, SE-1DD and SE-2DD; EE. Old Walter Industries--Classes S-1EE, S-2EE, S-3EE, S-6EE, S-7EE, S-8EE, S-9EE, S-10EE, U-1EE, U-2EE, U-3EE, U-4EE, U-5EE, U-6EE, U-7EE, I-2EE, I-3EE, SE-1EE and SE-2EE; FF. Walter Land--Classes S-1FF, S-2FF, S-8FF, S-9FF, S-10FF, U-2FF, U-3FF, U-7FF, I-2FF, I-3FF, SE-1FF and SE-2FF; GG. JW Resources--Classes S-1GG, S-8GG, S-10GG, U-2GG, U-3GG, U-7GG, I-3GG, SE-1GG and SE-2GG. ARTICLE I DEFINITIONS Unless otherwise provided in the Consensual Plan, all terms used herein shall have the meanings assigned to such terms in the Code. For purposes of the Consensual Plan, the following terms (which appear in the Consensual Plan as capitalized terms) shall have the meanings set forth below, and such meanings shall be equally applicable to the singular and plural forms of the terms defined, unless the context otherwise requires. 1.1 "10 7/8% Indenture Trustee" shall mean the trustee under the 10% Subordinated Debenture Indenture. 1.2 "10 7/8% Subordinated Debenture Claims" shall mean all Claims arising under the 10% Subordinated Debentures and the 10% Subordinated Debenture Indenture, other than Claims for fees and expenses of the 10% Indenture Trustee. 1.3 "10 7/8% Subordinated Debenture Indenture" shall mean the Indenture dated as of May 1, 1983, as amended, between Original Jim Walter and Mellon Bank, N.A., as trustee, as assumed as of January 7, 1988 by Old Walter Industries. 1.4 "10 7/8% Subordinated Debentures" shall mean the 10% Subordinated Debentures due 2008 of Old Walter Industries, as successor to Original Jim Walter, issued pursuant to the 10% Subordinated Debenture Indenture. 1.5 "13 1/8% Indenture Trustee" shall mean the trustee under the 13% Subordinated Note Indenture. 1.6 "13 1/8% Subordinated Note Claims" shall mean all Claims arising under the 13 1/8% Subordinated Notes and the 13 1/8% Subordinated Note Indenture, other than Claims for fees and expenses of the 13 1/8% Indenture Trustee. 1.7 "13 1/8% Subordinated Note Indenture" shall mean the Indenture dated as of February 1, 1983, as amended, between Original Jim Walter and The Bank of New York, as successor trustee to Irving Trust Company, as assumed as of January 7, 1988 by Old Walter Industries. 1.8 "13 1/8% Subordinated Notes" shall mean the 13 1/8% Subordinated Notes due 1993 of Old Walter Industries, as successor to Original Jim Walter, issued pursuant to the 13 1/8% Subordinated Note Indenture. 1.9 "13 3/4% Indenture Trustee" shall mean the trustee under the 13 3/4% Subordinated Debenture Indenture. 1.10 "13 3/4% Subordinated Debenture Claims" shall mean all Claims arising under the 13 3/4% Subordinated Debentures and the 13 3/4% Subordinated Debenture Indenture, other than Claims for fees and expenses of the 13 3/4% Indenture Trustee. 1.11 "13 3/4% Subordinated Debenture Indenture" shall mean the Indenture dated as of February 1, 1983, as amended, between Original Jim Walter and The Bank of New York, as successor trustee to Irving Trust Company, as assumed as of January 7, 1988 by Old Walter Industries. 1.12 "13 3/4% Subordinated Debentures" shall mean the 13 3/4% Subordinated Debentures due 2003 of Old Walter Industries, as successor to Original Jim Walter, issued pursuant to the 13 3/4% Subordinated Debenture Indenture. 1.13 "17% Indenture Trustee" shall mean the trustee under the 17% Subordinated Note Indenture. 1.14 "17% Subordinated Note Claims" shall mean all Claims arising under the 17% Subordinated Notes and the 17% Subordinated Note Indenture, other than Claims for fees and expenses of the 17% Indenture Trustee. 1.15 "17% Subordinated Note Indenture" shall mean the Indenture dated as of January 1, 1988, as amended, among Jim Walter Homes, United Land and U.S. Pipe, as issuers, Hillsborough, Old Walter Industries and Homes Holdings, as guarantors, and IBJ Schroder Bank & Trust Company, as successor trustee to Southeast Bank, N.A. 1.16 "17% Subordinated Notes" shall mean the Subordinated Notes due 1996 of Jim Walter Homes, United Land and U.S. Pipe, issued pursuant to the 17% Subordinated Note Indenture. 1.17 "Ad Hoc Committee of Pre-LBO Bondholders" shall mean the unofficial committee of certain holders of 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and 13 3/4% Subordinated Debentures, the members of which consist of, as of the date hereof, Gabriel Capital, L.P. and The Acacia Mutual Life Insurance Company, each as voting members, and Mellon Bank, N.A., as indenture trustee and The Bank of New York, as indenture trustee, each as non-voting ex officio members. 1.18 "Administrative Claims" shall mean and be the collective reference to, to the extent entitled to and allowed priority in payment under Section 507(a)(1) of the Code or as may be allowed by a Final Order: (a) all of the costs and expenses of administration of the Chapter 11 Cases, including, without limitation, the costs and expenses allowed under Section 503(b) of the Code, the actual and necessary costs and expenses of preserving the estate of each of the Debtors and operating the business of each of the Debtors, all Fee Claims, any indebtedness or obligations incurred or assumed by any of the Debtors, and any fees or charges assessed against the estate of any of the Debtors under 28 U.S.C. section 1930; (b) Executory Contract Claims; (c) Indenture Trustees Claims (of which the Claims of the Series B & C Senior Note Trustee shall be Allowed Claims under Section 506(b) of the Code); and (d) if the Pre-LBO Condition does not occur, all of the Proponents Expenses. 1.19 "Affiliate" of a Person means any Person that controls, is under direct or indirect common control with, or is controlled by, such other Person. For purposes of this definition, "control" means the ability of one Person to direct the management and policies of another Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. 1.20 "Allowed Amount" shall mean: (a) with respect to any Administrative Claim or Priority Claim, the amount of such Claim as agreed to by Walter Industries (subject to Section 4.20 of the Consensual Plan with respect to Federal Income Tax Claims) and the Holder of such Claim and approved by a Final Order of the Court to the extent required by the Code or, failing agreement, the amount thereof as fixed by a Final Order of the Court, including with respect to an Executory Contract Claim, the amount of such Claim as determined in accordance with the procedures set forth in Section 8.2 of the Consensual Plan; (b) with respect to any Revolving Credit Bank Claim, an amount equal to a Pro Rata portion of the sum of (i) the Adjusted Revolving Loan Claim (as defined below) as of the Effective Date, (ii) interest on the Adjusted Revolving Loan Claim for the period from December 27, 1989 through October 31, 1992 at the Chemical Bank Prime Rate plus 1.5% per annum (the "Stub Period Interest," and together with the Adjusted Revolving Loan Claim, the "Revolving Credit Bank Claim Stub Period Amount"), (iii) interest on the Revolving Credit Bank Claim Stub Period Amount for the period November 1, 1992 through the earlier to occur of (A) the date of the Initial Revolving Credit Bank Claim Payment and (B) June 30, 1994 at the Chemical Bank Prime Rate plus 1.5% per annum, compounded on each January 1, April 1, July 1 and October 1 (the "Post-Stub Period Interest"), (iv) in the event that all or any portion of the Initial Revolving Bank Claim Payment is not made on or prior to June 30, 1994, the sum of (A) interest on the sum of the Stub Period Interest and the Post-Stub Period Interest (or the unpaid portion of either thereof) for the period from July 1, 1994 through the date on which the Initial Revolving Credit Claim Payment is made (or such portion is paid), at 13% per annum, and (B) interest on the Adjusted Revolving Loan Claim for the period from July 1, 1994 through the date on which the Initial Revolving Credit Claim Payment is made, at the Chemical Bank Prime Rate plus 1.5% per annum, in the case of each of (A) and (B), compounded on each January 1, April 1, July 1 and October 1, (v) interest on the Adjusted Revolving Loan Claim from the date of the Initial Revolving Credit Bank Claim Payment through the Effective Date at the Chemical Bank Prime Rate plus 1.5% per annum, compounded on each January 1, April 1, July 1 and October 1 if not paid currently in accordance with Section 3.6(b) and (vi) additional interest consisting of that number of shares of New Common Stock which is the product of multiplying the New Common Stock Residual Amount by a fraction, the numerator of which is $28,220,625, and the denominator of which is the New Common Stock Residual Allocation Denominator (the term "Adjusted Revolving Loan Claim" shall mean, as of any date commencing on December 27, 1989, $243,666,041 as reduced from time to time by repayments of principal thereof and interest thereon, including payments of $5,794,016 of Beijer Proceeds and Bank Setoff Proceeds as of October 19, 1990 and $8,248,821 of Apache Note Proceeds as of June 18, 1991); (c) with respect to any Working Capital Bank Claim, an amount equal to a Pro Rata portion of the sum of (i) the Adjusted Working Capital Claim (as defined below) as of the Effective Date, (ii) interest on the Adjusted Working Capital Claim for the period from December 27, 1989 through October 31, 1992 at the Chemical Bank Prime Rate plus 1.5% per annum (the "Stub Period Interest," and together with the Adjusted Working Capital Claim, the "Working Capital Bank Claim Stub Period Amount"), (iii) interest on the Working Capital Bank Claim Stub Period Amount for the period November 1, 1992 through the earlier to occur of (A) the date of the Initial Working Capital Bank Claim Payment and (B) June 30, 1994 at the Chemical Bank Prime Rate plus 1.5% per annum, compounded on each January 1, April 1, July 1 and October 1 (the "Post-Stub Period Interest"), (iv) in the event that all or any portion of the Initial Working Capital Bank Claim Payment is not made on or prior to June 30, 1994, the sum of (A) interest on the sum of the Stub Period Interest and the Post-Stub Period Interest (or the unpaid portion of either thereof) for the period from July 1, 1994 through the date on which the Initial Working Capital Bank Claim Payment is made (or such portion is paid), at 13% per annum, and (B) interest on the Adjusted Working Capital Claim for the period from July 1, 1994 through the date on which the Initial Working Capital Bank Claim Payment is made, at the Chemical Bank Prime Rate plus 1.5% per annum, in the case of each of (A) and (B), compounded on each January 1, April 1, July 1 and October 1, (v) interest on the Adjusted Working Capital Claim from the date of the Initial Working Capital Bank Claim Payment through the Effective Date at the Chemical Bank Prime Rate plus 1.5% per annum, compounded on each January 1, April 1, July 1 and October 1 if not paid currently in accordance with Section 3.7(b) and (vi) additional interest consisting of that number of shares of New Common Stock which is the product of multiplying the New Common Stock Residual Amount by a fraction, the numerator of which is $9,279,375, and the denominator of which is the New Common Stock Residual Allocation Denominator (the term "Adjusted Working Capital Claim" shall mean, as of any date commencing on December 27, 1989, $80,245,869 as (x) increased from time to time by letter of credit draws, including draws of $2,000,000 as of January 3, 1990 and $900,000 as of June 11, 1990 and (y) reduced from time to time by repayments of principal thereof and interest thereon, including payments of $1,561,751 of Beijer Proceeds and Bank Setoff Proceeds as of October 19, 1990 and $2,805,305 of Apache Note Proceeds as of June 18, 1991); (d) with respect to any Revolving Credit Agents Claim and Working Capital Agents Claim, the amount thereof determined in accordance with the Revolving Credit Agreement and Working Capital Agreement, respectively; (e) with respect to any Series B & C Senior Note Claim, an amount equal to the sum of (i) the principal amount thereof due and owing as of the Filing Date, (ii) interest on such principal amount accrued and unpaid as of the Filing Date calculated at the non-default contract rate, (iii) (a) with respect to amounts paid in Cash under Section 3.11 of the Consensual Plan, interest on such principal amount and interest, accrued from the Filing Date to June 30, 1994 calculated at a rate of 13.0% per annum, and accrued from July 1, 1994 to the Effective Date calculated at a rate of 14 5/8% per annum; and (b) with respect to amounts elected to be paid in New Senior Notes under Section 3.11 of the Consensual Plan (whether or not such Claims are satisfied by New Senior Notes or by Cash), interest on such principal amount and interest, accrued from the Filing Date to June 30, 1994 calculated at a rate of 14.0% per annum, and accrued from July 1, 1994 to the Effective Date at a rate of 14 5/8% per annum, and (iv) additional interest consisting of such Holder's Pro Rata portion of that number of shares of New Common Stock which is the product of multiplying the New Common Stock Residual Amount by a fraction, the numerator of which is $37,500,000, and the denominator of which is the New Common Stock Residual Allocation Denominator; (f) with respect to any Grace Street Note Claim, an amount equal to (i) as to a Claim for principal and interest, the sum of (x) the principal amount thereof due and owing as of the Filing Date, (y) interest on such principal amount accrued and unpaid as of the Filing Date, calculated at the non-default contract rate and (z) interest on such principal amount accrued and unpaid from the Filing Date to the Effective Date calculated at the non-default contract rate, plus (ii) as to a Claim for reasonable fees and expenses of payees under the Grace Street Notes, (x) the amount agreed to by Walter Industries and such payees and approved by a Final Order of the Court or (y) the amount fixed by a Final Order of the Court, minus in either case (iii) any amounts applied by Walter Industries to repay any such Claim subsequent to the Filing Date and prior to the Effective Date; (g) with respect to any Secured Equipment Purchase Claim, an amount equal to (i) as to a Claim for principal and interest, the sum of (x) the principal amount thereof due and owing as of the Filing Date, (y) interest on such principal amount accrued and unpaid as of the Filing Date, calculated at the non-default contract rate and (z) interest on such principal amount accrued and unpaid from the Filing Date to the Effective Date calculated at the non-default contract rate, minus (ii) any amounts applied by the applicable Debtor to repay any such Claim subsequent to the Filing Date and prior to the Effective Date; (h) with respect to any IRB Claim other than the Sloss IRB Claim, an amount equal to the sum of the principal payments thereunder due and owing as of the Effective Date together with interest payments thereunder accrued and unpaid as of the Effective Date, calculated at the non-default contract rate, which principal payments or interest payments became due either prior to or subsequent to the Filing Date and prior to the Effective Date in accordance with the applicable indenture (without giving effect to the acceleration, if any, of the obligations underlying the applicable IRBs); (i) with respect to the Sloss IRB Claim, an amount equal to (i) as to a Claim for principal and interest, the sum of (x) the principal amount thereof due and owing as of the Filing Date, (y) interest on such principal amount accrued and unpaid as of the Filing Date, calculated at the non-default contract rate and (z) interest on such principal amount accrued and unpaid from the Filing Date to the Effective Date calculated at the non-default contract rate, minus (ii) any amounts applied by Sloss to repay any such Claim subsequent to the Filing Date and prior to the Effective Date; (j) with respect to any Provident Life & Accident Insurance Company Claim, an amount necessary to cure all defaults and pay all damages in respect of the agreement underlying such Provident Life & Accident Insurance Company Claim (without giving effect to the acceleration, if any, of the obligations underlying such agreement) such that any remaining amount of such Provident Life & Accident Insurance Company Claim may be reinstated in accordance with Section 1124(2) of the Code; (k) with respect to any Subordinated Note Claim, an amount equal to the unpaid principal amount of such Subordinated Note due and owing as of the Filing Date (less, in the case of any 10 7/8% Subordinated Debenture Claims, the unamortized discount associated with such 10 7/8% Subordinated Debenture as of the Filing Date) together with interest thereon accrued and unpaid as of the Filing Date, calculated at the contract rate then in effect; (l) with respect to any Deficiency Claim, the amount thereof as agreed to by Walter Industries and the Holder of such Claim and approved by a Final Order of the Court or the amount thereof as fixed by a Final Order of the Court; (m) with respect to any Convenience Class Claim or Other Unsecured Claim, the sum of (i) (A) if the Holder of such Claim did not File a proof of claim with respect thereto on or before the Bar Date the amount of such Claim as listed in the Debtors' Schedules as not disputed, contingent or unliquidated; or (B) if the Holder of such Claim Filed a proof of claim with respect thereto on or before the Bar Date, the amount of such Claim as agreed to by Walter Industries and the Holder of such Claim and approved by a Final Order of the Court, or, in the absence of such an agreement, (x) the amount stated in such proof of claim if no objection to such proof of claim was interposed within the applicable period of time fixed by the Code, the Bankruptcy Rules or the Court, or (y) the amount thereof as fixed by a Final Order of the Court if an objection to such proof of claim was interposed within the applicable period of time fixed by the Code, the Bankruptcy Rules or the Court ("Pre-Filing Date Unsecured Allowed Amount"), plus (ii) interest on the Pre-Filing Date Unsecured Allowed Amount from the Filing Date to the Effective Date, calculated at the General Unsecured Interest Rate as from time to time in effect; (n) with respect to any Other Secured Claim, (i) if a Holder of such Claim did not File a proof of claim with respect thereto with the Court on or before the Bar Date, the amount of such Claim as listed in the Debtors' Schedules as not disputed, contingent or unliquidated; or (ii) if the Holder of such Claim did File a proof of claim with respect thereto with the Court on or before the Bar Date, the amount of such Claim as agreed to by Walter Industries and the Holder of such Claim and approved by a Final Order, or, in the absence of such agreement, (A) the amount stated in such proof of claim if no objection to such proof of claim was interposed within the applicable period of time fixed by the Code, the Bankruptcy Rules or the Court or (B) the amount thereof as fixed by a Final Order, if an objection to such proof of claim was interposed within the applicable period of time fixed by the Code, the Bankruptcy Rules or the Court; (o) with respect to all of the Settlement Claims in the aggregate, the sum of (A) the Veil Piercing Claims Amount, and (B) such additional amount (but not to exceed $15 million) provided for in Section 2(a)(i) of the Second Amended and Restated Veil Piercing Settlement Agreement, in each case in the form of consideration set forth in Section 3.22 hereof; and (p) with respect to any Allowed Claim not otherwise specified in (a) through (o) above, the amount of such Claim as agreed to by Walter Industries and the Holder of such Claim and approved by a Final Order, or, in the absence of such an agreement, the amount thereof as fixed by a Final Order of the Court. 1.21 "Allowed Claim" shall mean any Claim for which an Allowed Amount has been determined. 1.22 "Allowed Old Common Stock Interest" shall mean any interest in the Old Common Stock, exclusive of any shares of such stock held in treasury, which is registered as of the Effective Date in such stock register as may be maintained by or on behalf of Walter Industries. 1.23 "Apache Note Proceeds" shall mean Cash collections received by Jim Walter Resources subsequent to the Filing Date from Jasper Corp. in the amount of $10,704,000 from payments on the non-recourse promissory note dated May 26, 1988 payable to Jim Walter Resources in the original principal amount of $25,000,000, together with $350,126 of interest earned thereon prior to application thereof to amounts owed to the Revolving Credit Banks and the Working Capital Banks, or a total of $11,054,126. 1.24 "Apollo" shall mean AIF II, L.P., certain Affiliates of AIF II, L.P. and certain accounts managed or controlled by such Affiliates. 1.25 "Apollo Parties" shall mean Leon Black, Marc J. Rowan, AIF II, L.P., Lion Advisors, L.P., Apollo Advisors, L.P., Apollo Capital Management, Inc., Lion Capital Management, Inc., Altus Finance, and their respective Affiliates, and any person that is or has ever been a director, officer, partner, stockholder, employee, agent, or representative of any of them, and any accounts managed or controlled by any of them or any of their Affiliates. 1.26 "Applicable Consideration" shall mean consideration, limited exclusively to Qualified Securities and New Common Stock, available for distribution on account of Subordinated Note Claims, which shall be allocated to Holders of Class U-4 Allowed Claims, Class U-5 Allowed Claims and Class U-6 Allowed Claims, as follows: (a) To the extent elected by Holders of Class U-4 Claims pursuant to the Subordinated Note Claim Election, the first $240,000,000 principal amount of such Qualified Securities (to the extent available) shall be used to satisfy the Allowed Claims of Class U-4; (b) To the extent elected by Holders of Class U-4 Claims (other than as to Class U-4 Claims satisfied with Qualified Securities pursuant to paragraph (a) of this Section), Class U-5 Claims and Class U-6 Claims pursuant to the Subordinated Note Claim Election, the remaining principal amount of such Qualified Securities (to the extent available), plus the principal amount, if any, of Qualified Securities provided for in clause (a) above but not elected by Holders of Class U-4 Claims, shall be used to satisfy the Allowed Claims of Class U-4, U-5 and U-6, as follows: (i) The next $80,000,000 (plus, whether positive or negative, 80/700 of the difference between the amount of Qualified Securities actually available for distribution under this paragraph (b), and the amount of Qualified Securities that would be available under this paragraph (b) if there were $700,000,000 principal amount of Qualified Securities available, in the aggregate, for distribution to Classes U-4 through U-7) principal amount of such Qualified Securities (to the extent available) shall be used to satisfy the Allowed Claims of Class U-6; (ii) the remaining principal amount of such Qualified Securities (to the extent available) shall be used to satisfy the remaining Class U-4 and Class U-5 Allowed Claims, pro rata (after deducting from Class U-4 the amount of Claims satisfied by paragraph (a) of this Section) among Classes U-4 and U-5; and (iii) the remaining principal amount of such Qualified Securities (to the extent available) shall be used to satisfy the remaining Class U-6 Claims; (c) any of such Qualified Securities remaining after giving effect to (a) and (b) above shall be applied to satisfy the Allowed Claims of Classes U-4, U-5 and U-6 to the extent not already satisfied by Qualified Securities after giving effect to (a) and (b) above, pro rata, based on the amount of Allowed Claims not satisfied by Qualified Securities pursuant to (a) and (b) above, among all such remaining Subordinated Note Claims; provided, however, that notwithstanding the foregoing, in the event that the Pre-LBO Condition occurs, then the Qualified Securities that would otherwise have been distributed to Holders of Class U-6 Claims under paragraph (b)(i) of this Section shall instead be distributed to Holders of Class U-4 Claims until all unsatisfied elections of Holders of Class U-4 Claims to receive Qualified Securities pursuant to the Subordinated Note Claim Election are satisfied, and then to Holders of Class U-5 Claims until all unsatisfied elections of Holders of Class U-5 Claims to receive Qualified Securities pursuant to the Subordinated Note Claim Election are satisfied. (d) The total number of shares of New Common Stock available for distribution on account of Subordinated Note Claims shall be the Subordinated Note Claims New Common Stock Amount. Each Holder of a Subordinated Note Claim shall receive that number of shares of New Common Stock which is the product of multiplying the Subordinated Note Claims New Common Stock Amount by a fraction, the numerator of which is such Holder's Subordinated Note Claim Deficiency Amount, and the denominator of which is the Subordinated Note Claims Residual Amount. (e) After giving effect to the allocations set forth above in this Section 1.26, if any Holder of a Class U-4 Claim that had affirmatively elected to receive all or part of its Class U-4 Claim in the form of Qualified Securities pursuant to the Subordinated Note Claim Election (other than Lehman Brothers Inc.) (the names of such Holders and the amount of the part of such Holder's Class U-4 Claim elected to be received in Qualified Securities pursuant to the Subordinated Note Claim Election are as set forth in Exhibit 8 attached hereto (each such Claim in such amount, an "Eligible Class U-4 Claim")) exercises its Class U-4 Exchange Election (an "Electing Class U-4 Holder"), then the foregoing method of allocating Qualified Securities and New Common Stock to Electing Class U-4 Holders in respect of their Class U-4 Claims, and to Lehman Brothers Inc. in respect of its Class U-4 Claim, shall be modified as follows: (i) the aggregate principal amount of Qualified Securities to be issued to such Electing Class U-4 Holder shall be increased (provided, that such additional amount of Qualified Securities shall be solely in the form of New Senior Notes, unless no New Senior Notes are issued as Qualified Securities under the Consensual Plan, in which case such additional amount of Qualified Securities shall be in the form of Cash), and the New Common Stock to be issued to such Electing Class U-4 Holder shall be decreased by a number of shares having an aggregate New Common Stock Value Per Share, in each case in an amount equal to the lesser of (a) the Qualified Securities Deficiency of such Electing Class U-4 Holder and (b) the product (rounded down to the nearest thousand) of (I) $39.4 million (assuming Qualified Securities available for distribution under the Consensual Plan to Classes U-4 through U-7 of $530 million), $0 (assuming Qualified Securities available for distribution under the Consensual Plan to Classes U-4 through U-7 of $700 million or more), or if Qualified Securities available for distribution under the Consensual Plan to Classes U-4 through U-7 are greater than $530 million but less than $700 million, then the proportionate midpoint of $39.4 million and $0; and (II) a fraction, the numerator of which is the amount of such Holder's Class U-4 Claim that such Holder requested to be satisfied by Qualified Securities pursuant to the Subordinated Note Claim Election, and the denominator of which is the aggregate amount of all Class U-4 Claims (excluding Class U-4 Claims held by Lehman Brothers Inc.) that were requested to be satisfied by Qualified Securities pursuant to the Subordinated Note Claim Election; and (ii) the aggregate Qualified Securities to be issued to Lehman Brothers Inc. shall be decreased (provided, that such decrease in the amount of Qualified Securities shall be solely in the form of New Senior Notes, unless no New Senior Notes are issued as Qualified Securities under the Consensual Plan, in which case such decrease in the amount of Qualified Securities shall be in the form of Cash), and the New Common Stock to be issued to Lehman Brothers Inc. shall be increased by a number of shares having an aggregate New Common Stock Value Per Share, in each case in the amount required to make the additional distribution of Qualified Securities to Electing Class U-4 Holders required under the preceding clause (i). (f) In the event that the Effective Date occurs after March 31, 1995, each Holder of a Subordinated Note Claim who receives Qualified Securities in accordance with subparagraphs (a) - (e) above shall also receive an additional distribution consisting of New Senior Notes of the same series and with all of the same terms and provisions as the New Senior Notes issued as Qualified Securities, in a principal amount equal to the product of multiplying the principal amount of Qualified Securities to be received by such Holder after applying all of the provisions, calculations and elections of subparagraphs (a) - (e) above by the Qualified Securities Adjuster; provided, however that if no New Senior Notes are issued as Qualified Securities as a result of the issuance of Replacement Indebtedness under Section 4.19 of the Consensual Plan, such additional distribution shall be made solely in Cash. 1.27 "Assets" shall mean, collectively, all of the property of a Debtor's estate under Section 541 of the Code, including the assets, property, interests (including equity interests) and effects, real and personal, tangible and intangible, wherever situated of the applicable Debtor as of the Confirmation Date, including, but not limited to, all rights, claims and causes of action arising under the Code or other applicable law, if any, including, but not limited to, claims and causes of action under Sections 510, 544, 545, 547, 548, 549, 550 and 553 of the Code; which rights, claims and causes of action may be pursued by the reorganized Debtors, as appropriate, in accordance with what is in the best interests, and for the benefit, of the reorganized Debtors. 1.28 "Associate" has the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. 1.29 "Ballot Date" shall mean September 23, 1994. 1.30 "Bank Agents" shall mean, collectively, the Working Capital Agents and the Revolving Credit Agents. 1.31 "Bank Setoff Proceeds" shall mean the Cash balances as at the Filing Date in the aggregate amount of $1,481,772 in accounts maintained by certain of the Debtors with the Revolving Credit Banks and the Working Capital Banks, as the case may be, against which Cash balances the Revolving Credit Banks and the Working Capital Banks, as the case may be, were authorized to exercise their respective rights of setoff pursuant to an order of the Court. 1.32 "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure, as amended from time to time, and the local rules of the Court, as applicable to the Chapter 11 Cases. 1.33 "Bar Date" shall mean the last day to file a proof of claim with the Court as fixed with respect to such claim by a Final Order of the Court issued pursuant to Bankruptcy Rule 3003(c)(3). 1.34 "Beijer Proceeds" shall mean the net Cash proceeds received by Old Walter Industries from the sale, pursuant to a tender offer, of all shares of stock of Beijer Industries AB owned by Old Walter Industries in the amount of $5,605,000, together with $268,995 of interest earned thereon prior to application thereof to amounts owed to the Revolving Credit Banks and the Working Capital Banks, or a total of $5,873,995. 1.35 "Best" shall mean Best Insurors, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9740-8P1. 1.36 "Best (Miss.)" shall mean Best Insurors of Mississippi, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9737-8P1. 1.37 "Bondholder Proponents" shall mean and be the collective reference to Lehman Brothers Inc. and Apollo, solely in their individual capacity. 1.38 "Bondholder Proponents Expense Differential" shall mean $5 million. The Bondholder Proponents will not file any claim for reimbursement of expenses with the Court (other than with respect to expenses incurred in their capacity as members of the Bondholders Committee, which shall not include any professional fees, and other than in connection with their participation in any Exit Financing). 1.39 "Bondholders Committee" shall mean the Official Bondholders Committee of the Debtors appointed by the United States Trustee in the Chapter 11 Cases pursuant to Section 1102 of the Code, as such committee may be constituted from time to time. 1.40 "Business Day" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in the State of Florida are authorized or required by law to close. 1.41 "Cash" shall mean lawful currency of the United States of America, or any equivalent thereof. 1.42 "Celotex" shall mean The Celotex Corporation, and/or any predecessor thereof or successor thereto and all of their respective present and former parents, Affiliates and subsidiaries. 1.43 "Celotex Bankruptcy Court" shall mean (a) the United States Bankruptcy Court for the Middle District of Florida, Tampa Division with jurisdiction over the reorganization case of The Celotex Corporation (or such other court as may be administering such cases), (b) to the extent of any withdrawal of reference made pursuant to 28 U.S.C. section 157, the United States District Court for the Middle District of Florida, and (c) with respect to any particular proceeding within any such case, any other court which may be exercising jurisdiction over such proceeding. 1.44 "Celotex Settlement Fund Recipient" shall mean The Celotex Corporation for the exclusive benefit of the Veil Piercing Claimants, or such other Person(s) designated by a Final Order entered by the Celotex Bankruptcy Court to act in the place and stead and on behalf of The Celotex Corporation, including without limitation, any entity established pursuant to a confirmed plan of reorganization for The Celotex Corporation to hold, manage, liquidate, distribute or otherwise assume responsibility for the consideration to be distributed in respect of Settlement Claims under the Second Amended and Restated Veil Piercing Settlement Agreement and/or the Consensual Plan and any liabilities arising therefrom or in connection therewith. 1.45 "Chapter 11 Cases" shall mean each of the reorganization cases of the Debtors listed in the caption on the cover page of the Consensual Plan, all of which are being jointly administered under Case No. 89-9715-8P1. 1.46 "Charter" shall mean the Restated Certificate of Incorporation of Walter Industries, which shall be substantially in the form of Exhibit 1 attached hereto. 1.47 "Chemical Bank Prime Rate" shall mean the rate of interest publicly announced by Chemical Bank in New York, New York from time to time as its reference rate. The reference rate is not intended to be the lowest rate of interest charged by Chemical Bank in connection with extensions of credit. 1.48 "Claim" shall mean a claim against one or more of the Debtors within the meaning of Section 101(5) of the Code excluding current commercial payables incurred in the ordinary course of business after the Filing Date. 1.49 "Class" shall mean any group of Claims or Interests, as classified pursuant to Article II of the Consensual Plan. 1.50 "Class S-6 Fund" shall have the meaning set forth in Section 3.11 of the Consensual Plan. 1.51 "Class U-4 Exchange Election" shall mean the election, by a Holder of an Eligible Class U-4 Claim (other than Lehman Brothers Inc.), made on the Class U-4 Exchange Election Form in accordance with the instructions thereon to affirmatively elect to receive its Qualified Securities Deficiency in the form of additional Qualified Securities in lieu of New Common Stock having an aggregate New Common Stock Value Per Share equal to the principal amount of such additional Qualified Securities in accordance with the definition of "Applicable Consideration" contained in Section 1.26(e) of the Consensual Plan. 1.52 "Class U-4 Exchange Election Form" shall mean the election form, sent to each Holder of an Eligible Class U-4 Claim (other than Lehman Brothers Inc.), concurrently with the supplement to the Disclosure Statement dated as of November 22, 1994, upon which such Holder of an Eligible Class U-4 Claim may exercise its Class U-4 Exchange Election. 1.53 "Coast to Coast" shall mean Coast to Coast Advertising, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9727-8P1. 1.54 "Code" shall mean title 11 of the United States Code, 11 U.S.C. sections 101 et seq., as in effect on the Filing Date, together with all amendments, modifications and replacements as the same exist on any relevant date to the extent applicable to the Chapter 11 Cases. 1.55 "Computer Holdings" shall mean Computer Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9724-8P1. 1.56 "Computer Services" shall mean Jim Walter Computer Services, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9723-8P1. 1.57 "Confirmation" shall mean the entry by the Court of the Confirmation Order. 1.58 "Confirmation Date" shall mean the date on which the Court enters the Confirmation Order. 1.59 "Confirmation Order" shall mean the order of the Court confirming the Consensual Plan and approving the transactions and settlements contemplated therein. 1.60 "Consensual Plan" shall mean the Amended Joint Plan of Reorganization dated as of December 9, 1994, as it may be further amended or modified from time to time, together with all exhibits thereto, which are incorporated herein and made a part hereof in their entirety, including without limitation the Second Amended and Restated Veil Piercing Settlement Agreement. 1.61 "Convenience Class Claims" shall mean (a) any Unsecured Claim (other than an Old Walter Industries IRB Claim) having a Pre-Filing Date Unsecured Amount equal to or less than $1,000 and (b) any Other Unsecured Claim as to which the Holder thereof agrees to reduce the Pre-Filing Date Unsecured Allowed Amount to $1,000. 1.62 "Court" shall mean (a) the United States Bankruptcy Court for the Middle District of Florida, Tampa Division with jurisdiction over the Chapter 11 Cases (or such court as may be administering the Chapter 11 Cases), (b) to the extent of any withdrawal of reference made pursuant to 28 U.S.C. section 157, the United States District Court for the Middle District of Florida, and (c) with respect to any particular proceeding arising in or related to a Chapter 11 Case, any other court which may be exercising jurisdiction over such proceeding. 1.63 "Creditor" shall mean a creditor of one or more of the Debtors within the meaning of Section 101(10) of the Code. 1.64 "Creditors Committee" shall mean the Official Committee of General Unsecured Creditors of the Debtors appointed by the United States Trustee in the Chapter 11 Cases pursuant to Section 1102 of the Code, as such committee may be constituted from time to time. 1.65 "Creditors' Plan" shall mean the Creditors' Joint Plan of Reorganization dated as of August 1, 1994 and filed with the Court on August 2, 1994. This Consensual Plan constitutes a modification of the Creditors' Plan. To the extent that any votes were cast or elections made with respect to the Creditors' Plan, such votes or elections shall be deemed binding with respect to this Consensual Plan, except to the extent that a previous acceptance or rejection is changed in accordance with Section 1127(d) of the Code and Rule 3019 of the Bankruptcy Rules. 1.66 "Debtor in Possession" shall mean any of the Debtors, as debtor in possession in the applicable Chapter 11 Case. 1.67 "Debtors" shall mean Hillsborough, Best, Best (Miss.), Coast to Coast, Computer Holdings, Dixie, Hamer Holdings, Hamer Properties, Homes Holdings, Computer Services, Jim Walter Homes, JW Insurance, Jim Walter Resources, Window Components (Wisc.), JW Aluminum, JW Resources, Resources Holdings, JWI Holdings, JW Walter, Window Components, Land Holdings, Mid-State Homes, Mid-State Holdings, Railroad Holdings, Sloss, Southern Precision, United Land, U.S. Pipe, Pipe Realty, Vestal, Home Improvement, Old Walter Industries and Walter Land. 1.68 "Deficiency Claim" shall mean the unsecured portion of any Claim determined in accordance with Section 506(a) of the Code which is unsecured, in whole or in part, as of the Confirmation Date. 1.69 "Definitive Financing Documentation" shall have the meaning set forth in Section 4.19 of the Consensual Plan. 1.70 "Demand" shall mean a demand for or right to payment, present or future, that was not a Claim during the proceedings leading to the Confirmation of the Consensual Plan, arising out of the same or similar conduct or events that gave rise to the Settlement Claims. 1.71 "Director and Officer Indemnification Agreement" shall mean the indemnification agreement to be entered into as of the Effective Date by Walter Industries and its direct and indirect subsidiaries and the directors and certain officers thereof. 1.72 "Disbursing Agent" shall mean the disbursing agent, selected by Walter Industries and the Bondholder Proponents, whose duties shall include the disbursement of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims pursuant to the Consensual Plan. 1.73 "Disclosure Statement" shall mean the disclosure statement (and all exhibits and schedules annexed thereto or referenced therein) that relate to the Creditors' Plan (which, as modified, has become the Consensual Plan) and that was approved pursuant to Section 1125 of the Code and an Order entered by the Court on August 2, 1994, as such disclosure statement may be amended, modified or supplemented. 1.74 "Disputed Claim" shall mean any Claim or any portion thereof which is not an Allowed Claim. In the event that any part of a Claim is disputed, such Claim in its entirety shall be deemed a Disputed Claim for purposes of distribution under the Consensual Plan unless Walter Industries and the Holder thereof otherwise agree or the Court otherwise orders. 1.75 "Dixie" shall mean Dixie Building Supplies, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9741-8P1. 1.76 "Effective Date" shall mean the first Business Day after all conditions set forth in Section 10.2 of the Consensual Plan have been satisfied or waived, but which shall be not less than eleven days after the Confirmation Order is entered. 1.77 "Electing Class U-4 Holder" shall have the meaning set forth in Section 1.26(e) of the Consensual Plan. 1.78 "Election Procedure" shall mean, for each of the Series B & C Senior Note Claim Election and the Subordinated Note Claim Election, the following procedure: (i) applicable election forms shall have been mailed together with, and at the same time as, the mailing of ballots for the purpose of accepting or rejecting the Creditors' Plan (which, as modified, has become the Consensual Plan); and (ii) the applicable election form shall have been returned so as to be received on or before the Ballot Date. 1.79 "Eligible Class U-4 Claim" shall have the meaning assigned to that term in Section 1.26(e) of the Consensual Plan. 1.80 "Executory Contract" shall mean any unexpired contract or lease entered into prior to the Filing Date, including, but not limited to, any employment or severance contract or agreement, as contemplated by Section 365 of the Code, in effect on the Confirmation Date, between any of the Debtors and any other Person or Persons. 1.81 "Executory Contract Claim" shall mean any Claim arising under Section 365(b)(1)(A) and (B) of the Code with respect to an Executory Contract heretofore or hereafter assumed by the Debtors pursuant to Section 365(a) or Section 1123(b)(2) of the Code. An Executory Contract Claim shall not mean or include any Claim arising as a result of any Debtor's rejection of an Executory Contract pursuant to Section 365(a) or Section 1123(b)(2) of the Code. 1.82 "Existing Equityholder" shall have the meaning set forth in the Second Amended and Restated Veil Piercing Settlement Agreement. 1.83 "Exit Financing" shall mean (i) any third party financing to be obtained as of the Effective Date in connection with funding distributions to be made under the Consensual Plan, which shall be directly or indirectly secured by the unencumbered notes and mortgages held by Mid-State Homes and/or the residual interest held by Mid-State Homes in Mid-State Trust II and Mid-State Trust III, and (ii) any New Senior Notes. 1.84 "Federal Excise Tax and Reclamation Claims" shall mean, collectively, Claims of the Federal Government for the Black Lung Excise Tax under the Black Lung Benefits Act of 1977 and of the United States Department of the Interior, Office of Surface Mining, for reclamation fees under Title IV of the Surface Mining Control and Reclamation Act of 1977, that are entitled to priority in payment under Section 507(a)(7) of the Code. 1.85 "Federal Income Tax Claims" shall mean all Claims of the Internal Revenue Service that are entitled to priority in payment under Section 507(a)(7) of the Code. 1.86 "Federal Income Tax Claims Differential" shall mean the amount, if any, by which (a) $27,000,000 exceeds (b) the aggregate Allowed Amount of Federal Income Tax Claims, determined after all Federal Income Tax Claims have been allowed or disallowed by Final Order; provided, however, that any amount by which the Allowed Amount of Federal Income Tax Claims is increased or decreased as a result of any direct or indirect understanding or agreement prohibited by Section 4.20 of the Consensual Plan shall not be included in the Federal Income Tax Claims Differential; provided, further, that no part of the Veil Piercing Settlement Tax Savings Amount shall be used to effect, or be counted toward, a reduction in the amount of Federal Income Tax Claims for purposes of this definition. 1.87 "Fee Applications" shall mean applications of Professional Persons under Section 330, 331, 503(b) or 1129(a)(4) of the Code for allowance of compensation and reimbursement of expenses in the Chapter 11 Cases. 1.88 "Fee Claim" shall mean a Claim under Section 330, 503(b) or 1129(a)(4) of the Code for allowance of final compensation and reimbursement of expenses in the Chapter 11 Cases. 1.89 "Filed" shall mean delivered to, received by and entered upon the legal docket of any of the Debtors by the Clerk of the Court. 1.90 "Filing Date" shall mean with respect to each of the Debtors, other than JW Resources, December 27, 1989, and with respect to JW Resources, December 3, 1990. 1.91 "Final Order" shall mean an order, judgment, ruling or decree issued and entered by the Court or by any state or other federal court or other tribunal located in one of the states, territories or possessions of the United States or the District of Columbia that has not been reversed, stayed, modified or amended and as to which the time to appeal or petition for reargument, rehearing or certiorari has expired, and as to which no appeal, reargument, petition for certiorari, or rehearing is pending or as to which any right to appeal, reargue, petition for certiorari or seek rehearing has been waived in writing or, if an appeal, reargument, petition for certiorari, or rehearing thereof has been denied, the time to take any further appeal or to seek certiorari or further reargument or rehearing has expired. 1.92 "General Unsecured Interest Rate" shall mean (i) 6 1/2% per annum from the Filing Date until the Confirmation Date, and (ii) thereafter, either (x) a variable rate equal to the Chemical Bank Prime Rate as from time to time in effect, not to exceed 10% per annum, or (y) a fixed rate equal to 6 1/2% per annum. The option specified in clause (ii) shall be selected in accordance with the Other Unsecured Claim Election. 1.93 "Governmental Unit" shall mean a governmental unit as such term is defined in Section 101(27) of the Code. 1.94 "Grace Street Note Claims" shall mean all Claims arising under the Grace Street Notes, including Claims thereunder for fees and expenses of the payees thereof. 1.95 "Grace Street Notes" shall mean, collectively, the two promissory notes, each dated March 19, 1971 and made by Paul G. Goodman in the original principal amount of $50,000, one in favor of D. Crawford Freeman and the other in favor of Fred Halling, as assumed by Old Walter Industries. 1.96 "Hamer Holdings" shall mean Hamer Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9735-8P1. 1.97 "Hamer Properties" shall mean Hamer Properties, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9739-8P1. 1.98 "Hillsborough" shall mean Hillsborough Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9715-8P1, prior to its merger with Old Walter Industries pursuant to the Mirror Liquidation Plan. 1.99 "Holder" shall mean the owner of any Claim or Interest, including the Celotex Settlement Fund Recipient on behalf of the Veil Piercing Claimants. 1.100 "Home Improvement" shall mean Walter Home Improvement, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9722-8P1. 1.101 "Homes Holdings" shall mean Homes Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9742-8P1. 1.102 "IDB of Birmingham" shall mean the Industrial Development Board of the City of Birmingham, Alabama. 1.103 "Indenture Trustees" shall mean, collectively, the 10 7/8% Indenture Trustee, the 13 1/8% Indenture Trustee, the 13 3/4% Indenture Trustee, the 17% Indenture Trustee, the Senior Subordinated Indenture Trustee, the Series B & C Senior Note Trustee, the Intercompany IRB Trustee, the Sloss IRB Trustee and the Old Walter Industries IRB Trustees. 1.104 "Indenture Trustees Claims" shall mean all Claims for reasonable fees and expenses of the Indenture Trustees under the relevant indenture(s) as to which they are the trustee. 1.105 "Independent Director" means a director of Walter Industries who is not (apart from such directorship) (i) an officer, Affiliate, employee, Interested Stockholder, consultant or partner of any Significant Stockholder or any Affiliate of any Significant Stockholder or of any entity that was dependent upon any Significant Stockholder or any Affiliate of any Significant Stockholder for more than 5% of its revenues or earnings in its most recent fiscal year, (ii) an officer, employee, consultant or partner of Walter Industries or any of its Affiliates, or an officer, employee, Interested Stockholder, consultant or partner of an entity that was dependent upon Walter Industries or any of its Affiliates for more than 5% of its revenues or earnings in its most recent fiscal year or (iii) any relative or spouse of any of the foregoing persons or a relative of a spouse of any of the foregoing persons. 1.106 "Initial Revolving Credit Bank Claim Payment" shall have the meaning set forth in Section 3.6(a) of the Consensual Plan. 1.107 "Initial Working Capital Bank Claim Payment" shall have the meaning set forth in Section 3.7(a) of the Consensual Plan. 1.108 "Intercompany IRB" shall mean the Series A Industrial Revenue Bonds issued under the Intercompany IRB Indenture in the original aggregate principal amount of $5,000,000. 1.109 "Intercompany IRB Claims" shall mean all Claims arising under the Intercompany IRB and the Intercompany IRB Indenture, other than Claims thereunder for fees and expenses of the Intercompany IRB Trustee. 1.110 "Intercompany IRB Indenture" shall mean the indenture dated as of May 1, 1983 among Sloss, the IDB of Birmingham and AmSouth Bank N.A., as trustee. 1.111 "Intercompany IRB Trustee" shall mean the trustee under the Intercompany IRB Indenture. 1.112 "Interest" shall mean the rights arising out of any equity securities of any of the Debtors, including Old Common Stock and Subsidiary Common Stock. 1.113 "Interested Stockholder" means, with respect to any Person, any other Person that together with its Affiliates and Associates beneficially owns (as defined in Rule 13d-3 under the Securities Exchange Act, as amended) 5.0% or more of the equity securities of such Person. 1.114 "IRB Claims" shall mean, collectively, the Sloss IRB Claim, the Old Walter Industries IRB Claims and the Intercompany IRB Claims. 1.115 "IRBs" shall mean, collectively, the Sloss IRB, the Old Walter Industries IRBs and the Intercompany IRB. 1.116 "JW Aluminum" shall mean JW Aluminum Company, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9718-8P1. 1.117 "JW Insurance" shall mean Jim Walter Insurance Services, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9731-8P1. 1.118 "JW Resources" shall mean JW Resources, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 90-11997-8P1. 1.119 "JW Walter" shall mean J.W. Walter, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9717-8P1. 1.120 "JWI Holdings" shall mean J.W.I. Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9721-8P1. 1.121 "Jim Walter Homes" shall mean Jim Walter Homes, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9746-8P1. 1.122 "Jim Walter Resources" shall mean Jim Walter Resources, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9738-8P1. 1.123 "KKR" shall mean Kohlberg Kravis Roberts & Co. 1.124 "KKR Affiliates" shall mean and be the collective reference to KKR, KKR Associates and any Person that is or has ever been a director, officer, partner, employee, agent or representative of either of them. 1.125 "KKR Parties" shall mean KKR, KKR Associates, JWC Associates, L.P., JWC Associates II, L.P., KKR Partners II, L.P., all other KKR Affiliates, and any Person that is or has ever been a director, officer, partner, employee, agent, or representative of any of them. 1.126 "KKR Proponents" shall mean and be the collective reference to KKR Partners II, L.P., JWC Associates, L.P. and JWC Associates II, L.P., and any other KKR Affiliate that holds or may in the future hold shares of Old Common Stock or Allowed Old Common Stock Interests. 1.127 "Land Holdings" shall mean Land Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under the Case No. 89-9720-8P1. 1.128 "LBO-Related Issues" shall mean and be the collective reference to all theories or bases of recovery recognizable at law, in admiralty or in equity under the laws of any jurisdiction that are held or asserted by or that may be held or asserted by any Debtor or any Holder of a Claim or Interest , in respect of such Claim or Interest, directly or indirectly based upon, arising out of or in connection with the leveraged acquisition in 1987 of Original Jim Walter by a group of investors led by KKR and all transactions consummated as a part thereof or in connection therewith, including without limitation the acquisition of the capital stock of the Debtors, the consummation of the transactions contemplated by the Agreement and Plan of Merger dated as of August 12, 1987, and the financing, reorganization, asset disposition and other transactions consummated as a part thereof or in connection therewith, whether based upon theories of piercing the corporate veil of any Debtor, or its predecessor and/or any of its respective present or former parents, subsidiaries or Affiliates, alter ego, alternate entity, agency, instrumentality, the transfer (fraudulent or otherwise) of any assets or property by any Debtor (or other non-Debtor that had at any time been an Affiliate of any Debtor), preference, fraud, conspiracy, substantive consolidation, successor liability, or any other legal or equitable theory whatsoever, or any theory or basis of recovery asserted in Mellon Bank, N.A. and Bank of New York v. Kohlberg Kravis Roberts & Co., et al., Adv. Pro. No. 94-17. 1.129 "Lehman Parties" shall mean Lehman Brothers Inc., any subsidiaries or Affiliates thereof, any Person that is or has ever been a director, officer, partner, stockholder, employee, agent, or representative of any of them, and any accounts managed or controlled by any of them. 1.130 "Lien" shall mean, with respect to the Assets of the Debtors, a "lien" or "judicial lien" as said terms are defined in Sections 101(36) and 101(37) of the Code. 1.131 "Management Incentive Compensation Plan" shall mean the management incentive compensation plan to be established by Walter Industries pursuant to Section 5.3 of the Consensual Plan to be effective as of the Effective Date. 1.132 "Mid-State Holdings" shall mean Mid-State Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9726-8P1. 1.133 "Mid-State Homes" shall mean Mid-State Homes, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9725-8P1. 1.134 "Mid-State Homes Warehouse Credit Facility" shall mean a warehouse credit facility, or the equivalent thereof, in an aggregate amount not to exceed $500 million, to be entered into as of the Effective Date by Mid-State Homes and one or more financial institutions. 1.135 "Mirror Liquidation Order" shall have the meaning specified in the forepart of the Consensual Plan. 1.136 "Mirror Liquidation Plan" shall have the meaning specified in the forepart of the Consensual Plan. 1.137 "Negotiated Enterprise Value" shall mean $2,600,000,000, representing a good faith negotiated estimate of the going concern enterprise value of the Debtors on a consolidated basis, arrived at after extensive analysis and negotiations among the Proponents and Holders of Claims in other Classes. 1.138 "New Board" shall have the meaning set forth in Section 5.2 of the Consensual Plan. 1.139 "New Common Stock" shall mean the Common Stock, par value $.01 per share, of Walter Industries, to be issued on the Effective Date. 1.140 "New Common Stock Registration Rights Agreement" shall mean the registration rights agreement relating to the New Common Stock issued pursuant to the Consensual Plan, to be entered into as of the Effective Date by Walter Industries, for the benefit of all Persons to which New Common Stock is issued on the Effective Date, containing provisions not less favorable to the Holders of New Common Stock as those contained in the form of agreement attached as Exhibit 4 hereto. 1.141 "New Common Stock Residual Allocation Denominator" shall mean the sum of (a) $225 million; plus (b) the Subordinated Note Claims Residual Amount. 1.142 "New Common Stock Residual Amount" shall mean the number of shares of New Common Stock which remains after deducting the Veil Piercing New Common Stock Amount from 50 million. 1.143 "New Common Stock Value" shall mean the Negotiated Enterprise Value less the sum of (a) $902 million and (b) the aggregate principal amount of Qualified Securities to be distributed under the terms of the Consensual Plan on the Effective Date. 1.144 "New Common Stock Value Per Share" shall mean the New Common Stock Value divided by 50 million, representing the number of shares of New Common Stock to be issued and outstanding on the Effective Date before considering any additional distribution under Section 3.21 or Section 3.26(b)-(c). 1.145 "New Senior Note Indenture" shall mean the Indenture to be dated as of the Effective Date between Walter Industries and the trustee thereunder, governing the New Senior Notes. 1.146 "New Senior Notes" shall mean, with respect to any Debtor, secured senior debt securities issued under one indenture in two series or under two separate indentures (i) to satisfy a part of the Class S-6 Claims and (ii) as Qualified Securities to satisfy a part of the Subordinated Note Claims and the Settlement Claims. The New Senior Notes referred to in clause (i) above shall be (x) rated BB or higher by either Rating Service, as of the Effective Date; provided, that Walter Industries shall not be obligated to apply for any such rating (and, as set forth below, if such rating is not obtained then the Class S-6 Claims that would otherwise be satisfied by such New Senior Notes will be paid in Cash); and (y) valued at par as of the Effective Date (on a fully distributed basis) by Lehman Brothers Inc. and a qualified valuation expert selected by the Series B & C Senior Note Trustee; provided, that if Lehman Brothers Inc. and the qualified valuation expert selected by the Series B & C Senior Note Trustee do not agree as to whether such securities are valued at par as of the Effective Date, the Bondholders Committee and the Senior Note Trustee shall select a third qualified valuation expert of national reputation, whose determination under the Consensual Plan will be binding. The New Senior Notes referred to in clause (ii) above shall bear interest at a fixed rate per annum equal to the rate of interest per annum of five year U.S. Treasury Notes on the Effective Date plus 450 basis points if rated BB or higher, or 525 basis points if rated lower than BB or if no application for a rating is made by Walter Industries, but such rate shall in no event be less than the rate selected for the New Senior Notes issued in respect of Series B & C Senior Note Claims; provided, however, that if neither Rating Service provides a rating of the security proposed to be rated after proper application is made therefor, such interest rate shall be the average of the two foregoing rates; provided, further, that in the event of a material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States, or outbreak or material escalation of hostilities such that it is inadvisable to price the New Senior Notes issued as Qualified Securities in such manner, then Lehman Brothers Inc. and a qualified valuation expert selected by Apollo shall fix the rate of such New Senior Notes so that such New Senior Notes are valued by Lehman Brothers Inc. and such qualified valuation expert selected by Apollo at par as of the Effective Date, and if they cannot agree on such a rate, the Bondholders Committee shall select a third qualified valuation expert of national reputation, whose determination of such rate shall be binding. The aggregate principal amount of New Senior Notes to be issued on the Effective Date under clause (i) of the first sentence of this Section shall be equal to the Allowed Amount (less amounts to be paid in Cash from the Class S-6 Fund and to be satisfied by New Common Stock) on the Effective Date of the Class S-6 Claims as to which the Series B & C Senior Note Claim Election was timely made (estimated to be approximately $94.9 million in the aggregate as of December 31, 1994); provided, that in the event that neither Rating Service provides a rating of BB or higher for such New Senior Notes, whether because Walter Industries does not make application for such a rating or otherwise (or if Walter Industries so elects in its sole discretion), then the Class S-6 Claims that would otherwise have been satisfied by such New Senior Notes shall instead be satisfied by an amount of Cash equal to the principal amount of such New Senior Notes that would otherwise have been issued. The aggregate principal amount of New Senior Notes to be issued as Qualified Securities on the Effective Date shall be equal to the amount of Qualified Securities that do not consist of Cash; provided, that the aggregate principal amount of New Senior Notes to be issued as Qualified Securities, when added to the aggregate principal amount of New Senior Notes to be issued under the next preceding sentence of this Section, shall not exceed $490 million, unless a greater aggregate principal amount is agreed to by Lehman Brothers Inc.; provided, further, that the Debtors shall use their best efforts to minimize, to the extent consistent with obtaining a BB rating for the New Senior Notes issued as Qualified Securities, the aggregate principal amount of New Senior Notes required to be issued as Qualified Securities under the Consensual Plan. It is currently contemplated that the New Senior Notes will be issued under one indenture in two Series, with each series having the currently anticipated (although not required) terms summarized on Exhibit 2 attached hereto, which terms will be customary and reasonable for securities of this type and quality under the then-existing market conditions; provided, however, that the Maturity, Amortization, Optional Redemption and Rate terms set forth in Exhibit 2 shall not be altered or modified. 1.147 "New Working Capital Facility" shall mean the working capital facility, or equivalent thereof, in an aggregate amount not to exceed $150 million, to be entered into as of the Effective Date by certain subsidiaries of Walter Industries and one or more financial institutions. 1.148 "Official Committees" shall mean, collectively, the Bondholders Committee and the Creditors Committee. 1.149 "Old Common Stock" shall mean the common stock, $.01 par value per share, of Walter Industries, as the surviving corporation of the merger between Hillsborough and Old Walter Industries. 1.150 "Old Walter Industries" shall mean Walter Industries, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9745-8P1, prior to its merger with and into Hillsborough pursuant to the Mirror Liquidation Plan. 1.151 "Old Walter Industries IRB Claims" shall mean the Claims arising under the Old Walter Industries IRBs and the Old Walter Industries IRB Indentures, other than Claims thereunder for fees and expenses of the Old Walter Industries IRB Trustees. 1.152 "Old Walter Industries IRB Indentures" shall mean, collectively, (a) the two indentures dated as of March 1, 1977 between the Industrial Development Board of the City of Chattanooga, Tennessee and Sun Bank, as successor trustee to American National Bank and Trust Company of Chattanooga; (b) the indenture dated as of December 1, 1977 between Adams County, Colorado and Norwest Bank Denver f/k/a United Bank of Denver National Association, as trustee; (c) the indenture dated as of August l, 1979 between Adams County, Colorado and Norwest Bank Denver, f/k/a United Bank of Denver National Association, as trustee; (d) the Indenture dated as of June 1, 1977 between the New Jersey Economic Development Authority and Fidelity Union Trust Company, as trustee; and (e) the indenture dated as of December l, 1977 between the City of Texarkana, Arkansas and Commercial National Bank of Little Rock, as trustee, each as amended and all as assumed by Old Walter Industries. 1.153 "Old Walter Industries IRB Trustees" shall mean, collectively, the trustees under the Old Walter Industries IRB Indentures. 1.154 "Old Walter Industries IRBs" shall mean, collectively, (a) the 6.4% Industrial Revenue Bonds and the 6.5% Pollution Control Revenue Bonds issued by the Industrial Development Board of the City of Chattanooga, Tennessee, (b) the 6.4% and 6.95% Industrial Revenue Bonds issued by Adams County, Colorado, (c) the 6.4% Industrial Revenue Bonds issued by the New Jersey Economic Development Authority and (d) the 6.4% Industrial Development Bonds issued by the City of Texarkana, Arkansas. 1.155 "Original Jim Walter" shall mean Jim Walter Corporation, a Florida corporation, prior to its acquisition by Hillsborough. 1.156 "Other Secured Claims" shall mean, collectively, only Secured Claims not otherwise separately classified in the Consensual Plan, including but not limited to Secured Claims of Governmental Units with authority to tax the Debtors or their property. 1.157 "Other Unsecured Claim Ballot" shall mean the ballot sent to all Holders of Other Unsecured Claims for purposes of voting to accept or reject the Creditors' Plan (which, as modified, has become the Consensual Plan) and upon which a Holder of an Other Unsecured Claim shall have already exercised its Other Unsecured Claim Election. 1.158 "Other Unsecured Claim Election" shall mean the election by a Holder of an Other Unsecured Claim made on the Other Unsecured Claim Ballot in accordance with the instructions provided thereon, to select the rate of interest to accrue under the Creditors' Plan (which, as modified, has become the Consensual Plan) on the Pre-Filing Date Unsecured Allowed Amount of Other Unsecured Claims and Convenience Class Claims from and after the Confirmation Date, which was to have been either (i) a variable rate of interest equal to the Chemical Bank Prime Rate as from time to time in effect, not to exceed 10% per annum, or (ii) a fixed rate of interest equal to 6 1/2% per annum. The interest rate option selected, which is the variable rate of interest described in clause (i) of the preceding sentence, was based upon the option selected by a majority in number of the Holders of Other Unsecured Claims (voting for this purpose as a single Class for all of the Debtors) who actually made the Other Unsecured Claim Election and is binding for purposes of the Consensual Plan. 1.159 "Other Unsecured Claims" shall mean, collectively, the Unsecured Claims of trade and service Creditors due and owing by the Debtors for goods provided and services rendered to the Debtors in the ordinary course of business prior to the Filing Date and all other Unsecured Claims not otherwise separately classified in the Consensual Plan, including Claims arising as a result of any rejection of an Executory Contract pursuant to Section 365(a) or 1123(b)(2) of the Code. 1.160 "Person" shall mean a natural person, corporation, partnership, joint-stock company, trust, association, unincorporated association, governmental agency, instrumentality or subdivision, or any other entity. 1.161 "Pipe Realty" shall mean U.S. Pipe Realty, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9734-8P1. 1.162 "Post-Filing Date Intercompany Notes Payable Claims" shall mean all Claims arising after the Filing Date held by any Debtor against any other Debtor. 1.163 "Pre-Filing Date Intercompany Notes Payable Claims" shall mean all Claims arising on or before the Filing Date held by any Debtor against any other Debtor, other than the Intercompany IRB Claims. 1.164 "Pre-Filing Date Unsecured Allowed Amount" shall have the meaning set forth in Section 1.20(m)(i) hereof. 1.165 "Pre-LBO Bondholders Settlement Agreement" shall mean and be the collective reference to the agreement, dated as of March 23, 1994, attached as Exhibit 3B hereto, as the same may be amended from time to time. 1.166 "Pre-LBO Condition" shall mean the occurrence of either of the following events: (i) the rejection of the Consensual Plan by Class U-6; or (ii) the failure to terminate the Pre-LBO Bondholders Settlement Agreement prior to or as of December 31, 1994 pursuant to Section 7C or 7D therein. 1.167 "Pre-LBO Debenture Claims" shall mean the 10 7/8% Subordinated Debenture Claims, the 13 1/8% Subordinated Note Claims and the 13 3/4% Subordinated Debenture Claims. 1.168 "Pre-LBO Settlement Equity Amount" shall mean the sum of (i) $5 million in respect of the Bondholder Proponents Expense Differential, and (ii) $6.3 million, representing the estimated amount of the Series B & C Senior Note Interest Differential; the total Pre-LBO Settlement Equity Amount is $11.3 million. 1.169 "Priority Claims" shall mean, collectively, Federal Income Tax Claims, Federal Excise Tax and Reclamation Claims and State and Local Tax Claims. 1.170 "Pro Rata" shall mean: (a) with respect to any Series B & C Senior Note Claim, a fraction, the numerator of which is the Allowed Amount of such Series B & C Senior Note Claim and the denominator of which is the aggregate Allowed Amount of all Series B & C Senior Note Claims; (b) with respect to any Revolving Credit Bank Claim, a fraction, the numerator of which is the pre-Filing Date principal and interest component of such Revolving Credit Bank Claim and the denominator of which is the aggregate amount of pre-Filing Date principal and interest due under the Revolving Credit Agreement, in each case without giving effect to the receipt and application of the Beijer Proceeds, the Apache Note Proceeds and the Bank Setoff Proceeds by the Revolving Credit Banks; (c) with respect to any Working Capital Bank Claim, a fraction, the numerator of which is the pre-Filing Date principal and interest component of such Working Capital Bank Claim and the denominator of which is the aggregate amount of pre-Filing Date principal and interest due under the Working Capital Agreement, in each case without giving effect to (i) receipt and application of the Beijer Proceeds, the Apache Note Proceeds and the Bank Setoff Proceeds by the Working Capital Banks, (ii) the Claim of the Working Capital Agents for fees and expenses under the Working Capital Agreement arising prior to the Filing Date and (iii) that portion of the Working Capital Bank Claims resulting from the post-Filing Date draw-downs on letters of credit issued under the Working Capital Agreement prior to the Filing Date; (d) with respect to any Subordinated Note Claim, a fraction, the numerator of which is the Allowed Amount of such Subordinated Note Claim and the denominator of which is the aggregate Allowed Amount of all Subordinated Note Claims; and (e) with respect to any other Allowed Claim or Interest, the proportion that such Allowed Claim or Interest in a particular Class bears to the aggregate amount of Allowed Claims or Interests in such Class. 1.171 "Professional Person" shall mean any Person retained by the Debtors or any of the Official Committees pursuant to an order of the Court or any Person seeking compensation from the Debtors pursuant to Section 503(b) or 1129(a)(4) of the Code, for professional services. 1.172 "Proponents" shall have the meaning set forth in the first paragraph hereof. 1.173 "Proponents Expenses" shall mean all of the costs and expenses incurred by the Proponents, other than the Bondholder Proponents (and the Affiliates of either of them), the KKR Proponents and the KKR Affiliates, arising after the Filing Date, not previously reimbursed by any Debtor, in connection with (a) the formulation, drafting and negotiation of the Consensual Plan (including settlement agreements contemplated thereby or provided for therein), the Disclosure Statement and the Reorganization Documents, (b) the consideration by the Court of the Consensual Plan, the Disclosure Statement and the Reorganization Documents, (c) the effectuation of the Consensual Plan and the Disclosure Statement; and (d) any and all other actions taken in connection with the Consensual Plan, the Disclosure Statement and the Reorganization Documents, including without limitation litigation, contested matters, declaratory judgment actions, appellate litigation and the like; in each case including without limitation, attorneys' and other professionals' fees and expenses (references in this definition to the Consensual Plan and the Disclosure Statement shall include all prior and any future versions, amendments and/or supplements thereto). 1.174 "Provident Life & Accident Insurance Company Claims" shall mean Claims of Provident Life & Accident Insurance Company arising under loans secured by the Cash surrender value of various life insurance policies on certain present and prior key officers of the Debtors or corporations formerly owned by the Debtors. 1.175 "Qualified Securities" means with respect to any Debtor, (a) Cash, or (b) New Senior Notes described in clause (ii) of the definition thereof. The amount of Qualified Securities that shall consist of Cash shall be no less than the amount of Cash of the Debtors on hand as of the Effective Date (after giving effect to the consummation of the financing(s) described in clause (i) of the definition of Exit Financing contained in the Consensual Plan) other than Reserved Cash, after giving effect to Cash payments to be made (other than as part of Qualified Securities) on or promptly after the Effective Date under the Consensual Plan, and the remaining Qualified Securities shall consist of New Senior Notes; provided, that at the Debtors' option, all (but not less than all) Claims that would otherwise be satisfied by New Senior Notes issued as Qualified Securities may be paid in Cash on the Effective Date from the proceeds of the Replacement Indebtedness. Each Class receiving Qualified Securities under the Consensual Plan shall receive the same proportion of New Senior Notes and of Cash, as each other Class receiving Qualified Securities under the Consensual Plan, except as modified by the Class U-4 Exchange Election. Notwithstanding the foregoing, the term "Qualified Securities" shall not include any Cash or New Senior Notes distributed or to be distributed as additional consideration under Section 1.26(f) or 3.22(b) of the Consensual Plan, and any calculation under the Consensual Plan which includes a reference to a principal amount of Qualified Securities or a similar reference shall not include as part of such calculation any Cash or New Senior Notes distributed or to be distributed under Section 1.26(f) or 3.22(b) of the Consensual Plan. 1.176 "Qualified Securities Adjuster" shall mean the product of multiplying the rate of interest on the New Senior Notes to be issued as Qualified Securities (or, if no New Senior Notes are issued as Qualified Securities, a rate equal to the rate of interest per annum of five year U.S. Treasury Notes on the Effective Date plus 487.5 basis points) by a fraction, the numerator of which is the number of days after March 31, 1995 on which the Effective Date occurs, and the denominator of which is 360. 1.177 "Qualified Securities Deficiency" shall mean, with respect to each Electing Class U-4 Holder, the amount by which such Holder's Eligible Class U-4 Claim exceeds the principal amount of the Qualified Securities that such Holder would have received under Section 1.26(a)-(c) of the Consensual Plan absent the reallocation of Qualified Securities from Lehman Brothers Inc. to Electing Class U-4 Holders under Section 1.26(e) of the Consensual Plan. 1.178 "Qualified Securities Registration Rights Agreement" shall mean the registration rights agreement relating to the Qualified Securities distributed pursuant to the Consensual Plan, to be entered into as of the Effective Date by Walter Industries, for the benefit of all Persons to which Qualified Securities are distributed on the Effective Date, containing provisions not less favorable to the Holders of Qualified Securities as those contained in the form of agreement attached as Exhibit 5 hereto. 1.179 "Railroad Holdings" shall mean Railroad Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9733-8P1. 1.180 "Rating Service" shall mean Standard and Poor's Corporation or Moody's Investor Service, Inc. 1.181 "Record Date" shall mean July 13, 1994. 1.182 "Released Parties" shall have the meaning set forth in Section 6.1 of the Consensual Plan. 1.183 "Reorganization Documents" shall mean, collectively, the New Senior Note Indenture, the Definitive Financing Documentation, the Qualified Securities Registration Rights Agreement, the New Common Stock Registration Rights Agreement, the instrument(s) evidencing the Qualified Securities, the Management Incentive Compensation Plan, the Director and Officer Indemnification Agreement and the Charter. 1.184 "Replacement Indebtedness" shall have the meaning assigned to such term in Section 4.19 of the Consensual Plan. 1.185 "Reserved Cash" shall mean (i) restricted Cash that the Debtors have paid, segregated or identified as a deposit, as security or otherwise reasonably reserved for a particular purpose, and (ii) at the Debtors' option, up to $45 million of Cash (excluding bank overdrafts) that may be reserved by the Debtors for general corporate purposes, in each case as of the Effective Date; provided, however, that Reserved Cash shall not include any Cash that is to be paid (or that is reserved for the payment of Disputed Claims) pursuant to the terms of the Consensual Plan. 1.186 "Resources Holdings" shall mean JW Resources Holdings Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9719-8P1. 1.187 "Revolving Credit Agents" shall mean the co-agents for the Revolving Credit Banks under the Revolving Credit Agreement. 1.188 "Revolving Credit Agents Claims" shall mean all Claims for fees and expenses of the Revolving Credit Agents under the Revolving Credit Agreement including without limitation the fees and expenses of attorneys, accountants and financial advisors retained by or on behalf of the Revolving Credit Agents in connection with the Chapter 11 Cases, and including amounts payable to White & Case (to the extent not included in Working Capital Agents Claims) for legal services rendered prior to the Filing Date, in the amount previously disclosed by the Working Capital Agents to the Bondholder Proponents. 1.189 "Revolving Credit Agreement" shall mean the Bank Credit Agreement dated as of September 10, 1987, as amended, among Hillsborough, Old Walter Industries, the Debtors which are signatory parties thereto and the Revolving Credit Banks, as amended from time to time. 1.190 "Revolving Credit Bank Claims" shall mean the Claims arising under the Revolving Credit Agreement, other than Revolving Credit Agents Claims. 1.191 "Revolving Credit Bank Claim Stub Period Amount" shall have the meaning set forth in Section 1.20(b) of the Consensual Plan. 1.192 "Revolving Credit Banks" shall mean, as of any date, the parties to the Revolving Credit Agreement, other than the Debtors, excluding such parties which were not parties to such agreement as of such date. 1.193 "Revolving Loan" shall mean the amount of loans outstanding under the Revolving Credit Agreement from time to time. 1.194 "Schedules" shall mean the schedules heretofore filed by the Debtors with the Court pursuant to Bankruptcy Rule 1007 as they have been and may be amended or supplemented from time to time in accordance with Bankruptcy Rule 1009. 1.195 "Second Amended and Restated Veil Piercing Settlement Agreement" shall mean an agreement in substantially the form attached as Exhibit 3A hereto (with such drafting, technical and conforming changes as the parties thereto shall negotiate and agree to in good faith), as the same may be amended from time to time. 1.196 "Secured Claim" shall mean the portion of any Claim, determined in accordance with Section 506(a) of the Code, as of the Confirmation Date, secured by a valid and perfected Lien, express or implied, arising by contract, operation of law, or otherwise, including but not limited to the secured portion of any Revolving Credit Bank Claim, Working Capital Bank Claim and Series B & C Senior Note Claim. 1.197 "Secured Equipment Purchase Claims" shall mean any Secured Claim held by a vendor of equipment sold to any Debtor with respect to the purchase of such equipment, which Secured Claim is secured by such equipment. 1.198 "Securities Act" shall mean the Securities Act of 1933, as amended. 1.199 "Senior Subordinated Indenture Trustee" shall mean the trustee under the Senior Subordinated Note Indenture. 1.200 "Senior Subordinated Note Claims" shall mean all Claims arising under the Senior Subordinated Notes and the Senior Subordinated Note Indenture, other than Claims for fees and expenses of the Senior Subordinated Indenture Trustee. 1.201 "Senior Subordinated Note Indenture" shall mean the indenture dated as of January 1, 1988 among Jim Walter Homes, U.S. Pipe and United Land, as issuers, and Hillsborough, Old Walter Industries and Homes Holdings, as guarantors, and Barnett Banks Trust Company, N.A., as trustee. 1.202 "Senior Subordinated Notes" shall mean the Senior Subordinated Extended Reset Notes of Jim Walter Homes, U.S. Pipe and United Land issued pursuant to the Senior Subordinated Note Indenture. 1.203 "Series B & C Senior Note Claims" shall mean all Claims arising under the Series B & C Senior Notes and the Series B & C Senior Note Indenture, other than Claims thereunder for fees and expenses of the Series B & C Senior Note Trustee. 1.204 "Series B & C Senior Note Claim Election" shall mean the election by a Holder of a Series B & C Senior Note Claim made on the Series B & C Senior Note Claim Election Form by a Holder of a Series B & C Senior Note Claim in accordance with the instructions thereon to elect to receive all of such Holder's Series B & C Senior Note Claim in the form of New Senior Notes, such election to have been made in accordance with the Election Procedure, which election shall be binding for purposes of the Consensual Plan. 1.205 "Series B & C Senior Note Claim Election Form" shall mean the election form, sent in accordance with the Election Procedure, to all Holders of Series B & C Senior Note Claims, upon which a Holder of a Series B & C Senior Note Claim shall have exercised its Series B & C Senior Note Claim Election, the form of which election form has been approved by the Court. 1.206 "Series B & C Senior Note Indenture" shall mean the Indenture dated as of January l, 1988, as amended, among Jim Walter Resources, Jim Walter Homes, U.S. Pipe and United Land, as issuers, and Hillsborough, Old Walter Industries, Homes Holdings and Resources Holdings, as guarantors, and LaSalle National Bank, as successor trustee to Continental Illinois National Bank and Trust Company of Chicago. 1.207 "Series B & C Senior Note Interest Differential" shall mean the amount, if any, by which (a) the amount which the aggregate Allowed Amount of the Series B & C Senior Note Claims would be as of December 31, 1994 if all Holders of a Series B & C Senior Note Claim exercised the Series B & C Senior Note Claim Election, exceeds (b) the actual aggregate Allowed Amount of the Series B & C Senior Note Claims, calculated as of December 31, 1994. For purposes of the Consensual Plan, this amount shall be fixed at $6.3 million. 1.208 "Series B & C Senior Note Trustee" shall mean the trustee under the Series B & C Senior Note Indenture. 1.209 "Series B & C Senior Notes" shall mean, collectively, the Series B Senior Notes and the Series C Senior Notes which were issued pursuant to the Series B & C Senior Note Indenture. 1.210 "Settlement Claims" shall have the meaning set forth in the Second Amended and Restated Veil Piercing Settlement Agreement. 1.211 "Significant Stockholder" means any stockholder of Walter Industries that together with its Affiliates and Associates beneficially owns (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) 5.0% or more of the outstanding common equity interests of Walter Industries. 1.212 "Sloss" shall mean Sloss Industries Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9743-8P1. 1.213 "Sloss IRB" shall mean the Series 1983 Industrial Revenue Bonds issued under the Sloss IRB Indenture in the original aggregate principal amount of $1,000,000. 1.214 "Sloss IRB Claim" shall mean the Claim arising under the Sloss IRBs and the Sloss IRB Indenture, other than Claims thereunder for fees and expenses of the Sloss IRB Trustee. 1.215 "Sloss IRB Indenture" shall mean the Mortgage Indenture dated as of May 1, 1983 among Sloss, the IDB of Birmingham and NationsBank, as successor trustee to NCNB National Bank of Florida. 1.216 "Sloss IRB Trustee" shall mean the trustee under the Sloss IRB Indenture. 1.217 "Southern Precision" shall mean Southern Precision Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9729-8P1. 1.218 "State and Local Tax Claims" shall mean Unsecured Claims of Governmental Units, other than the Federal Government and the Internal Revenue Service, with authority to tax the Debtors or their property. 1.219 "Stock Acquisition Rights" shall mean any and all rights to acquire Old Common Stock or Subsidiary Common Stock or any other equity or similar ownership interest in any Debtor, whether in the form of an option, warrant, purchase right, subscription agreement or otherwise, but shall not include any right to receive New Common Stock under the Consensual Plan. 1.220 "Subordinated Note Claim Deficiency Amount" shall mean, with respect to each Holder of a Subordinated Note Claim, the amount which remains after subtracting the aggregate principal amount of the Qualified Securities to be distributed to such Holder on account of such Holder's Subordinated Note Claim, from the Allowed Amount of such Holder's Subordinated Note Claim. 1.221 "Subordinated Note Claim Election" shall mean the election by a Holder of a Subordinated Note Claim made on the Subordinated Note Claim Election Form by a Holder of a Subordinated Note Claim in accordance with the instructions thereon to affirmatively select that part of such Holder's Claim that such Holder desires to be satisfied by Qualified Securities pursuant to the Creditors' Plan (which, as modified, has become the Consensual Plan), which election shall be binding for purposes of the Consensual Plan. The Holders of Subordinated Note Claims identified in Exhibit 8 attached hereto have elected to receive Qualified Securities in the amounts set forth therein in accordance with the requirements applicable to the Subordinated Note Claims Election. 1.222 "Subordinated Note Claim Election Form" shall mean the election form, sent in accordance with the Election Procedure, to all Holders of Subordinated Note Claims, upon which a Holder of a Subordinated Note Claim may have exercised its Subordinated Note Claim Election, the form of which election form has been approved by the Court. 1.223 "Subordinated Note Claims New Common Stock Amount" shall mean that number of shares of New Common Stock which is the product of multiplying the New Common Stock Residual Amount by a fraction, the numerator of which is the Subordinated Note Claims Residual Amount, and the denominator of which is the New Common Stock Residual Allocation Denominator. 1.224 "Subordinated Note Claims Residual Amount" shall mean the amount which remains after subtracting the aggregate principal amount of the Qualified Securities to be distributed to the Holders of Subordinated Note Claims from the aggregate Allowed Amount of the Subordinated Note Claims. 1.225 "Subordinated Note Claims" shall mean, collectively, the Senior Subordinated Note Claims, the 17% Subordinated Note Claims, the 10 7/8% Subordinated Debenture Claims, the 13 1/8% Subordinated Note Claims and the 13 3/4% Subordinated Debenture Claims. 1.226 "Subordinated Note Trustees" shall mean, collectively, the Senior Subordinated Indenture Trustee, the 17% Indenture Trustee, the 10 7/8% Indenture Trustee, the 13 1/8% Indenture Trustee and the 13 3/4% Indenture Trustee. 1.227 "Subordinated Notes" shall mean, collectively, the Senior Subordinated Notes, the 17% Subordinated Notes, the 10 7/8% Subordinated Debentures, the 13 1/8% Subordinated Notes and the 13 3/4% Subordinated Debentures. 1.228 "Subsidiary Common Stock" shall mean the common stock of each of the Debtors, other than Walter Industries as the surviving corporation of the merger between Hillsborough and Old Walter Industries, issued and outstanding as of the Filing Date. 1.229 "Tax Oversight Committee" shall mean a committee of the New Board consisting at all times of the two Independent Directors and a director (or other person) designated by Lehman Brothers Inc. (such director or other person initially designated by Lehman Brothers Inc. shall be identified on or before the Effective Date), which committee shall have the right to select and retain legal and financial advisors at the expense of Walter Industries to assist it in the fulfillment of its duties, which duties shall consist solely of the duties set forth in Sections 3.26 and 4.20 of the Consensual Plan. 1.230 "The Celotex Corporation" shall mean The Celotex Corporation, as debtor and debtor-in-possession. 1.231 "United Land" shall mean United Land Corporation, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9730-8P1. 1.232 "Unsecured Claim" shall mean a Claim other than (a) a Secured Claim, (b) a Subordinated Note Claim, (c) a Post-Filing Date Intercompany Notes Payable Claim, Pre-Filing Date Intercompany Notes Payable Claim or Intercompany IRB Claim, (d) a Priority Claim, or (e) an Administrative Claim. 1.233 "U.S. Pipe" shall mean United States Pipe and Foundry Company, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9744-8P1. 1.234 "Veil Piercing Claimant" shall mean Celotex and any other Person that may have or may assert in the future a Settlement Claim. 1.235 "Veil Piercing Claims" shall mean and be the collective reference to all Claims and Demands, and all claims and Demands that may be asserted in the future, whether known or unknown, based upon, arising out of or in connection with any of the Veil Piercing-Related Issues but shall not include any claim based upon a valid, binding and enforceable obligation by any or all of the Debtors to indemnify any Person. 1.236 "Veil Piercing Claims Amount" shall have the meaning set forth in the Second Amended and Restated Veil Piercing Settlement Agreement. 1.237 "Veil Piercing New Common Stock Amount" shall mean that number of shares of New Common Stock having an aggregate Veil Piercing New Common Stock Value Per Share equal to the Veil Piercing Residual Claims Amount. 1.238 "Veil Piercing New Common Stock Value" shall mean $2,525,000,000, less the sum of (a) $902 million and (b) the aggregate principal amount of Qualified Securities to be distributed under the terms of the Consensual Plan on the Effective Date. 1.239 "Veil Piercing New Common Stock Value Per Share" shall mean the Veil Piercing New Common Stock Value divided by 50 million, representing the number of shares of New Common Stock to be issued and outstanding on the Effective Date before considering any additional distribution under Section 3.21 or Section 3.26(b)-(c). 1.240 "Veil Piercing Proceedings" shall mean and be the collective reference to all lawsuits, actions and other judicial and administrative proceedings that have been, or may in the future be, instituted against any Person that directly or indirectly seek or could seek any remedy from any or all of the Released Parties based upon, arising out of or in connection with any of the Veil Piercing-Related Issues and/or Settlement Claims. 1.241 "Veil Piercing Residual Claims Amount" shall mean the excess of $375,000,000 over the aggregate principal amount of the Qualified Securities to be distributed on account of the Settlement Claims under the Consensual Plan. 1.242 "Veil Piercing-Related Issues" shall mean and be the collective reference to all theories or bases of recovery recognizable at law, in equity or in admiralty under the laws of any jurisdiction that are held or asserted by, or may be held or asserted by, Celotex or any Holder of a Claim in Class U-7 or any creditor or interest holder of Celotex, directly or indirectly based upon, arising out of or in connection with asbestos, any product manufactured, sold or distributed by Celotex, any other liability or obligation of any nature of Celotex, or any act or failure to act by Celotex or any officer, director, employee, agent or other representative of Celotex, whether based upon alter ego, agency, alternate entity, instrumentality, successor liability, conspiracy, indemnification, contribution, any theories of piercing the corporate veil of any Debtor or its predecessor and/or any of its respective present or former parents, subsidiaries, or Affiliates, or the transfer (fraudulent or otherwise) of any assets or property to or by any Debtor (or other non-Debtor that had at any time been a parent, subsidiary or Affiliate of any Debtor or its predecessor), whether in connection with any of the transactions constituting or relating to the financing or the acquisition of any of the Debtors or any of their respective predecessors, parents, subsidiaries or Affiliates by the current Holders of Old Common Stock, the divestiture by Celotex of any of its assets or property at any time, or in connection with any other transactions, events or circumstances, or otherwise; provided, however, that the Veil Piercing-Related Issues shall not include any of the LBO-Related Issues raised by Holders of Claims other than Settlement Claims. 1.243 "Veil Piercing Settlement" shall mean the full and complete settlement, satisfaction, release and discharge of all Settlement Claims and Veil Piercing Proceedings; provided, however, that any order or orders approving the settlement must, either singularly or taken together, contain findings that (i) the terms of the settlement are final and binding on all Veil Piercing Claimants, (ii) provide for the dismissal, with prejudice, of all pending Veil Piercing Proceedings, and (iii) provide for the full release of all Released Parties with respect to the Veil Piercing-Related Issues. 1.244 "Veil Piercing Settlement Tax Savings Amount" shall mean, for any taxable year that ends after the Effective Date (or for any taxable year ending on or before the Effective Date for which a carryback claim is filed), the difference between (a) the aggregate amount of federal, state, and local income tax payable by members of the Walter Industries consolidated group as reported on the federal, state and local income tax returns filed by such members for the taxable year (the "WI Tax Return Liability") and (b) the aggregate amount of federal, state and local income tax that would have been reported on such returns if the distribution under the Second Amended and Restated Veil Piercing Settlement Agreement had not been made; provided, however, that any amount by which the income tax reduction or refund used to calculate the Veil Piercing Settlement Tax Savings Amount would otherwise have been increased or decreased as part of any direct or indirect understanding or agreement prohibited by Section 4.20 of the Consensual Plan shall not be taken into consideration in determining any Veil Piercing Settlement Tax Savings Amount. 1.245 "Veil Piercing Settlement Tax Savings Event" shall mean, (i) for any tax return filed by the Walter Industries consolidated group or any member thereof for a taxable year ending on or after May 31, 1995, the date on which the tax return is filed with the applicable taxing authority, or (ii) for any tax years ending prior to May 31, 1995, the date on which a claim for refund or deduction is filed; provided that the tax due on such return (without regard to prior payments) was reduced, or such refund claim was increased, by a Veil Piercing Settlement Tax Savings Amount. Walter Industries shall claim deductions, for federal income tax purposes and for purposes of all other relevant tax calculations, in respect of the distribution under the Second Amended and Restated Veil Piercing Settlement Agreement in a manner that will maximize the Veil Piercing Settlement Tax Savings Amount, including, without limitation, the claim of a carryback, where available, of any net operating losses resulting from such deductions. 1.246 "Vestal" shall mean Vestal Manufacturing Company, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9728-8P1. 1.247 "Walter Industries" shall mean Walter Industries, Inc., the surviving corporation of the merger between Hillsborough and Old Walter Industries. 1.248 "Walter Land" shall mean Walter Land Company, a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9736-8P1. 1.249 "Window Components" shall mean JW Window Components, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9732-8P1. 1.250 "Window Components (Wisc.)" shall mean Jim Walter Window Components, Inc., a Debtor in Possession in the jointly administered Chapter 11 Cases pending in the Court under Case No. 89-9716-8P1. 1.251 "WI Tax Return Liability" shall have the meaning set forth in Section 1.244 of the Consensual Plan. 1.252 "Working Capital Agents" shall mean the co-agents for the Working Capital Banks under the Working Capital Agreement. 1.253 "Working Capital Agents Claims" shall mean all Claims for fees and expenses of the Working Capital Agents under the Working Capital Agreement, including without limitation the fees and expenses of attorneys, accountants and financial advisors retained by or on behalf of the Working Capital Agents in connection with the Chapter 11 Cases, and including amounts payable to White & Case (to the extent not included in Revolving Credit Agents Claims) for legal services rendered prior to the Filing Date, in the amount previously disclosed by the Working Capital Agents to the Bondholder Proponents. 1.254 "Working Capital Agreement" shall mean the Working Capital Credit Agreement dated as of December 29, 1987, as amended, among Hillsborough, Old Walter Industries, the other Debtors which are signatories thereto and the Working Capital Banks, as amended from time to time. 1.255 "Working Capital Bank Claim Stub Period Amount" shall have the meaning set forth in Section 1.20(c). 1.256 "Working Capital Bank Claims" shall mean all Claims arising under the Working Capital Agreement, other than Working Capital Agents Claims. 1.257 "Working Capital Banks" shall mean, as of any date, the parties to the Working Capital Agreement, other than the Debtors, excluding such parties which were not parties to such agreement as of such date. 1.258 "Working Capital Loans" shall mean the amount of loans outstanding under the Working Capital Agreement from time to time. ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS UNCLASSIFIED CLAIMS In accordance with Section 1123(a)(1) of the Code, Administrative Claims, Federal Income Tax Claims, Federal Excise Tax and Reclamation Claims and State and Local Tax Claims are not classified. ADMINISTRATIVE CLAIMS 2.1 Administrative Claims. Administrative Claims apply separately to each Debtor. PRIORITY CLAIMS Priority Claims include Federal Income Tax Claims, Federal Excise Tax and Reclamation Claims and State and Local Tax Claims. 2.2 Federal Income Tax Claims. Federal Income Tax Claims apply separately to each Debtor. 2.3 Federal Excise Tax and Reclamation Claims. Federal Excise Tax and Reclamation Claims apply only to Jim Walter Resources. 2.4 State and Local Tax Claims. State and Local Tax Claims apply separately to each Debtor, except Best, Coast to Coast, JW Insurance, Home Improvement and JW Resources. CLASSIFIED CLAIMS Claims against, and Interests in, the Debtors are classified in the Classes listed below. SECURED CLAIMS Secured Claims consist of Revolving Credit Bank Claims, Working Capital Bank Claims, the Grace Street Note Claims, the Sloss IRB Claim, Secured Equipment Purchase Claims, Series B & C Senior Note Claims, Provident Life & Accident Insurance Company Claims, Revolving Credit Agents Claims, Working Capital Agents Claims and Other Secured Claims. 2.5 Class S-1 Claims: Revolving Credit Bank Claims. Class S-1 Claims shall consist of all Revolving Credit Bank Claims. Class S-1A Claims: Hillsborough Revolving Credit Bank Claims. Class S-1A Claims shall consist of all Revolving Credit Bank Claims against Hillsborough. Class S-1B Claims: Best Revolving Credit Bank Claims. Class S-1B Claims shall consist of all Revolving Credit Bank Claims against Best. Class S-1C Claims: Best (Miss.) Revolving Credit Bank Claims. Class S-1C Claims shall consist of all Revolving Credit Bank Claims against Best (Miss.). Class S-1D Claims: Coast to Coast Revolving Credit Bank Claims. Class S-1D Claims shall consist of all Revolving Credit Bank Claims against Coast to Coast. Class S-1E Claims: Computer Holdings Revolving Credit Bank Claims. Class S-1E Claims shall consist of all Revolving Credit Bank Claims against Computer Holdings. Class S-1F Claims: Dixie Revolving Credit Bank Claims. Class S-1F Claims shall consist of all Revolving Credit Bank Claims against Dixie. Class S-1G Claims: Hamer Holdings Revolving Credit Bank Claims. Class S-1G Claims shall consist of all Revolving Credit Bank Claims against Hamer Holdings. Class S-1H Claims: Hamer Properties Revolving Credit Bank Claims. Class S-1H Claims shall consist of all Revolving Credit Bank Claims against Hamer Properties. Class S-1I Claims: Homes Holdings Revolving Credit Bank Claims. Class S-1I Claims shall consist of all Revolving Credit Bank Claims against Homes Holdings. Class S-1J Claims: Computer Services Revolving Credit Bank Claims. Class S-1J Claims shall consist of all Revolving Credit Bank Claims against Computer Services. Class S-1K Claims: Jim Walter Homes Revolving Credit Bank Claims. Class S-1K Claims shall consist of all Revolving Credit Bank Claims against Jim Walter Homes. Class S-1L Claims: JW Insurance Revolving Credit Bank Claims. Class S-1L Claims shall consist of all Revolving Credit Bank Claims against JW Insurance. Class S-1M Claims: Jim Walter Resources Revolving Credit Bank Claims. Class S-1M Claims shall consist of all Revolving Credit Bank Claims against Jim Walter Resources. Class S-1N Claims: Window Components (Wisc.) Revolving Credit Bank Claims. Class S-1N Claims shall consist of all Revolving Credit Bank Claims against Window Components (Wisc.). Class S-1O Claims: JW Aluminum Revolving Credit Bank Claims. Class S-1O Claims shall consist of all Revolving Credit Bank Claims against JW Aluminum. Class S-1P Claims: Resources Holdings Revolving Credit Bank Claims. Class S-1P Claims shall consist of all Revolving Credit Bank Claims against Resources Holdings. Class S-1Q Claims: JWI Holdings Revolving Credit Bank Claims. Class S-1Q Claims shall consist of all Revolving Credit Bank Claims against JWI Holdings. Class S-1R Claims: JW Walter Revolving Credit Bank Claims. Class S-1R Claims shall consist of all Revolving Credit Bank Claims against JW Walter. Class S-1S Claims: Window Components Revolving Credit Bank Claims. Class S-1S Claims shall consist of all Revolving Credit Bank Claims against Window Components. Class S-1T Claims: Land Holdings Revolving Credit Bank Claims. Class S-1T Claims shall consist of all Revolving Credit Bank Claims against Land Holdings. Class S-1V Claims: Mid-State Holdings Revolving Credit Bank Claims. Class S-1V Claims shall consist of all Revolving Credit Bank Claims against Mid-State Holdings. Class S-1W Claims: Railroad Holdings Revolving Credit Bank Claims. Class S-1W Claims shall consist of all Revolving Credit Bank Claims against Railroad Holdings. Class S-1X Claims: Sloss Revolving Credit Bank Claims. Class S-1X Claims shall consist of all Revolving Credit Bank Claims against Sloss. Class S-1Y Claims: Southern Precision Revolving Credit Bank Claims. Class S-1Y Claims shall consist of all Revolving Credit Bank Claims against Southern Precision. Class S-1Z Claims: United Land Revolving Credit Bank Claims. Class S-1Z Claims shall consist of all Revolving Credit Bank Claims against United Land. Class S-1AA Claims: U.S. Pipe Revolving Credit Bank Claims. Class S-1AA Claims shall consist of all Revolving Credit Bank Claims against U.S. Pipe. Class S-1BB Claims: Pipe Realty Revolving Credit Bank Claims. Class S-1BB Claims shall consist of all Revolving Credit Bank Claims against Pipe Realty. Class S-1CC Claims: Vestal Revolving Credit Bank Claims. Class S-1CC Claims shall consist of all Revolving Credit Bank Claims against Vestal. Class S-1EE Claims: Old Walter Industries Revolving Credit Bank Claims. Class S-1EE Claims shall consist of all Revolving Credit Bank Claims against Old Walter Industries. Class S-1FF Claims: Walter Land Revolving Credit Bank Claims. Class S-1FF Claims shall consist of all Revolving Credit Bank Claims against Walter Land. Class S-1GG Claims: JW Resources Revolving Credit Bank Claims. Class S-1GG Claims shall consist of all Revolving Credit Bank Claims against JW Resources. 2.6 Class S-2 Claims: Working Capital Bank Claims. Class S-2 Claims shall consist of all Working Capital Bank Claims. Class S-2A Claims: Hillsborough Working Capital Bank Claims. Class S-2A Claims shall consist of all Working Capital Bank Claims against Hillsborough. Class S-2E Claims: Computer Holdings Working Capital Bank Claims. Class S-2E Claims shall consist of all Working Capital Bank Claims against Computer Holdings. Class S-2G Claims: Hamer Holdings Working Capital Bank Claims. Class S-2G Claims shall consist of all Working Capital Bank Claims against Hamer Holdings. Class S-2I Claims: Homes Holdings Working Capital Bank Claims. Class S-2I Claims shall consist of all Working Capital Bank Claims against Homes Holdings. Class S-2M Claims: Jim Walter Resources Working Capital Bank Claims. Class S-2M Claims shall consist of all Working Capital Bank Claims against Jim Walter Resources. Class S-2O Claims: JW Aluminum Working Capital Bank Claims. Class S-2O Claims shall consist of all Working Capital Bank Claims against JW Aluminum. Class S-2P Claims: Resources Holdings Working Capital Bank Claims. Class S-2P Claims shall consist of all Working Capital Bank Claims against Resources Holdings. Class S-2Q Claims: JWI Holdings Working Capital Bank Claims. Class S-2Q Claims shall consist of all Working Capital Bank Claims against JWI Holdings. Class S-2S Claims: Window Components Working Capital Bank Claims. Class S-2S Claims shall consist of all Working Capital Bank Claims against Window Components. Class S-2T Claims: Land Holdings Working Capital Bank Claims. Class S-2T Claims shall consist of all Working Capital Bank Claims against Land Holdings. Class S-2V Claims: Mid-State Holdings Working Capital Bank Claims. Class S-2V Claims shall consist of all Working Capital Bank Claims against Mid-State Holdings. Class S-2W Claims: Railroad Holdings Working Capital Bank Claims. Class S-2W Claims shall consist of all Working Capital Bank Claims against Railroad Holdings. Class S-2X Claims: Sloss Working Capital Bank Claims. Class S-2X Claims shall consist of all Working Capital Bank Claims against Sloss. Class S-2Y Claims: Southern Precision Working Capital Bank Claims. Class S-2Y Claims shall consist of all Working Capital Bank Claims against Southern Precision. Class S-2Z Claims: United Land Working Capital Bank Claims. Class S-2Z Claims shall consist of all Working Capital Bank Claims against United Land. Class S-2AA Claims: U.S. Pipe Working Capital Bank Claims. Class S-2AA Claims shall consist of all Working Capital Bank Claims against U.S. Pipe. Class S-2BB Claims: Pipe Realty Working Capital Bank Claims. Class S-2BB Claims shall consist of all Working Capital Bank Claims against Pipe Realty. Class S-2CC Claims: Vestal Working Capital Bank Claims. Class S-2CC Claims shall consist of all Working Capital Bank Claims against Vestal. Class S-2EE Claims: Old Walter Industries Working Capital Bank Claims. Class S-2EE Claims shall consist of all Working Capital Bank Claims against Old Walter Industries. Class S-2FF Claims: Walter Land Working Capital Bank Claims. Class S-2FF Claims shall consist of all Working Capital Bank Claims against Walter Land. 2.7 Class S-3 Claims: Grace Street Note Claims. Class S-3 Claims shall consist of the Grace Street Note Claims. Class S-3EE Claims: Old Walter Industries Grace Street Note Claims. Class S-3EE Claims shall consist of the Grace Street Note Claims against Old Walter Industries. 2.8 Class S-4 Claims: Sloss IRB Claim. Class S-4 Claims shall consist of the Sloss IRB Claim. Class S-4X Claims: Sloss IRB Claim. Class S-4X Claims shall consist of the Sloss IRB Claim against Sloss. 2.9 Class S-5 Claims: Secured Equipment Purchase Claims. Class S-5 Claims shall consist of all Secured Equipment Purchase Claims. Class S-5J Claims: Computer Services Secured Equipment Purchase Claims. Class S-5J Claims shall consist of all Secured Equipment Purchase Claims against Computer Services. Class S-5O Claims: JW Aluminum Secured Equipment Purchase Claims. Class S-5O Claims shall consist of all Secured Equipment Purchase Claims against JW Aluminum. Class S-5S Claims: Window Components Secured Equipment Purchase Claims. Class S-5S Claims shall consist of all Secured Equipment Purchase Claims against Window Components. Class S-5X Claims: Sloss Secured Equipment Purchase Claims. Class S-5X Claims shall consist of all Secured Equipment Purchase Claims against Sloss. Class S-5Y Claims: Southern Precision Secured Equipment Purchase Claims. Class S-5Y Claims shall consist of all Secured Equipment Purchase Claims against Southern Precision. Class S-5AA Claims: U.S. Pipe Secured Equipment Purchase Claims. Class S-5AA Claims shall consist of all Secured Equipment Purchase Claims against U.S. Pipe. 2.10 Class S-6 Claims: Series B & C Senior Note Claims. Class S-6 Claims shall consist of all Series B & C Senior Note Claims. Class S-6A Claims: Hillsborough Series B & C Senior Note Claims. Class S-6A Claims shall consist of all Series B & C Senior Note Claims against Hillsborough. Class S-6I Claims: Homes Holdings Series B & C Senior Note Claims. Class S-6I Claims shall consist of all Series B & C Senior Note Claims against Homes Holdings. Class S-6K Claims: Jim Walter Homes Series B & C Senior Note Claims. Class S-6K Claims shall consist of all Series B & C Senior Note Claims against Jim Walter Homes. Class S-6M Claims: Jim Walter Resources Series B & C Senior Note Claims. Class S-6M Claims shall consist of all Series B & C Senior Note Claims against Jim Walter Resources. Class S-6P Claims: Resources Holdings Series B & C Senior Note Claims. Class S-6P Claims shall consist of all Series B & C Senior Note Claims against Resources Holdings. Class S-6Z Claims: United Land Series B & C Senior Note Claims. Class S-6Z Claims shall consist of all Series B & C Senior Note Claims against United Land. Class S-6AA Claims: U.S. Pipe Series B & C Senior Note Claims. Class S-6AA Claims shall consist of all Series B & C Senior Note Claims against U.S. Pipe. Class S-6EE Claims: Old Walter Industries Series B & C Senior Note Claims. Class S-6EE Claims shall consist of all Series B & C Senior Note Claims against Old Walter Industries. 2.11 Class S-7 Claims: Provident Life & Accident Insurance Company Claims. Class S-7 Claims shall consist of all Provident Life & Accident Insurance Company Claims. Class S-7EE Claims: Old Walter Industries Provident Life & Accident Insurance Company Claims. Class S-7EE Claims shall consist of all Provident Life & Accident Insurance Company Claims against Old Walter Industries. 2.12 Class S-8 Claims: Revolving Credit Agents Claims. Class S-8 Claims shall consist of all Revolving Credit Agents Claims. Class S-8A Claims: Hillsborough Revolving Credit Agents Claims. Class S-8A Claims shall consist of all Revolving Credit Agents Claims against Hillsborough. Class S-8B Claims: Best Revolving Credit Agents Claims. Class S-8B Claims shall consist of all Revolving Credit Agents Claims against Best. Class S-8C Claims: Best (Miss.) Revolving Credit Agents Claims. Class S-8C Claims shall consist of all Revolving Credit Agents Claims against Best (Miss.). Class S-8D Claims: Coast to Coast Revolving Credit Agents Claims. Class S-8D Claims shall consist of all Revolving Credit Agents Claims against Coast to Coast. Class S-8E Claims: Computer Holdings Revolving Credit Agents Claims. Class S-8E Claims shall consist of all Revolving Credit Agents Claims against Computer Holdings. Class S-8F Claims: Dixie Revolving Credit Agents Claims. Class S-8F Claims shall consist of all Revolving Credit Agents Claims against Dixie. Class S-8G Claims: Hamer Holdings Revolving Credit Agents Claims. Class S-8G Claims shall consist of all Revolving Credit Agents Claims against Hamer Holdings. Class S-8H Claims: Hamer Properties Revolving Credit Agents Claims. Class S-8H Claims shall consist of all Revolving Credit Agents Claims against Hamer Properties. Class S-8I Claims: Homes Holdings Revolving Credit Agents Claims. Class S-8I Claims shall consist of all Revolving Credit Agents Claims against Homes Holdings. Class S-8J Claims: Computer Services Revolving Credit Agents Claims. Class S-8J Claims shall consist of all Revolving Credit Agents Claims against Computer Services. Class S-8K Claims: Jim Walter Homes Revolving Credit Agents Claims. Class S-8K Claims shall consist of all Revolving Credit Agents Claims against Jim Walter Homes. Class S-8L Claims: JW Insurance Revolving Credit Agents Claims. Class S-8L Claims shall consist of all Revolving Credit Agents Claims against JW Insurance. Class S-8M Claims: Jim Walter Resources Revolving Credit Agents Claims. Class S-8M Claims shall consist of all Revolving Credit Agents Claims against Jim Walter Resources. Class S-8N Claims: Window Components (Wisc.) Revolving Credit Agents Claims. Class S-8N Claims shall consist of all Revolving Credit Agents Claims against Window Components (Wisc.). Class S-8O Claims: JW Aluminum Revolving Credit Agents Claims. Class S-8O Claims shall consist of all Revolving Credit Agents Claims against JW Aluminum. Class S-8P Claims: Resources Holdings Revolving Credit Agents Claims. Class S-8P Claims shall consist of all Revolving Credit Agents Claims against Resources Holdings. Class S-8Q Claims: JWI Holdings Revolving Credit Agents Claims. Class S-8Q Claims shall consist of all Revolving Credit Agents Claims against JWI Holdings. Class S-8R Claims: JW Walter Revolving Credit Agents Claims. Class S-8R Claims shall consist of all Revolving Credit Agents Claims against JW Walter. Class S-8S Claims: Window Components Revolving Credit Agents Claims. Class S-8S Claims shall consist of all Revolving Credit Agents Claims against Window Components. Class S-8T Claims: Land Holdings Revolving Credit Agents Claims.Class S-8T Claims shall consist of all Revolving Credit Agents Claims against Land Holdings. Class S-8V Claims: Mid-State Holdings Revolving Credit Agents Claims. Class S-8V Claims shall consist of all Revolving Credit Agents Claims against Mid-State Holdings. Class S-8W Claims: Railroad Holdings Revolving Credit Agents Claims. Class S-8W Claims shall consist of all Revolving Credit Agents Claims against Railroad Holdings. Class S-8X Claims: Sloss Revolving Credit Agents Claims. Class S-8X Claims shall consist of all Revolving Credit Agents Claims against Sloss. Class S-8Y Claims: Southern Precision Revolving Credit Agents Claims. Class S-8Y Claims shall consist of all Revolving Credit Agents Claims against Southern Precision. Class S-8Z Claims: United Land Revolving Credit Agent Claims. Class S-8Z Claims shall consist of all Revolving Credit Agents Claims against United Land. Class S-8AA Claims: U.S. Pipe Revolving Credit Agents Claims. Class S-8AA Claims shall consist of all Revolving Credit Agents Claims against U.S. Pipe. Class S-8BB Claims: Pipe Realty Revolving Credit Agents Claims. Class S-8BB Claims shall consist of all Revolving Credit Agents Claims against Pipe Realty. Class S-8CC Claims: Vestal Revolving Credit Agents Claims. Class S-8CC Claims shall consist of all Revolving Credit Agents Claims against Vestal. Class S-8EE Claims: Old Walter Industries Revolving Credit Agents Claims. Class S-8EE Claims shall consist of all Revolving Credit Agents Claims against Old Walter Industries. Class S-8FF Claims: Walter Land Revolving Credit Agents Claims. Class S-8FF Claims shall consist of all Revolving Credit Agents Claims against Walter Land. Class S-8GG Claims: JW Resources Revolving Credit Agents Claims. Class S-8GG Claims shall consist of all Revolving Credit Agents Claims against JW Resources. 2.13 Class S-9 Claims: Working Capital Agents Claims. Class S-9 Claims shall consist of all Working Capital Agents Claims. Class S-9A Claims: Hillsborough Working Capital Agents Claims. Class S-9A Claims shall consist of all Working Capital Agents Claims against Hillsborough. Class S-9E Claims: Computer Holdings Working Capital Agents Claims. Class S-9E Claims shall consist of all Working Capital Agents Claims against Computer Holdings. Class S-9G Claims: Hamer Holdings Working Capital Agents Claims. Class S-9G Claims shall consist of all Working Capital Agents Claims against Hamer Holdings. Class S-9I Claims: Homes Holdings Working Capital Agents Claims. Class S-9I Claims shall consist of all Working Capital Agents Claims against Homes Holdings. Class S-9M Claims: Jim Walter Resources Working Capital Agents Claims. Class S-9M Claims shall consist of all Working Capital Agents Claims against Jim Walter Resources. Class S-9O Claims: JW Aluminum Working Capital Agents Claims. Class S-9O Claims shall consist of all Working Capital Agents Claims against JW Aluminum. Class S-9P Claims: Resources Holdings Working Capital Agents Claims. Class S-9P Claims shall consist of all Working Capital Agents Claims against Resources Holdings. Class S-9Q Claims: JWI Holdings Working Capital Agents Claims. Class S-9Q Claims shall consist of all Working Capital Agents Claims against JWI Holdings. Class S-9S Claims: Window Components Working Capital Agents Claims. Class S-9S Claims shall consist of all Working Capital Agents Claims against Window Components. Class S-9T Claims: Land Holdings Working Capital Agents Claims. Class S-9T Claims shall consist of all Working Capital Agents Claims against Land Holdings. Class S-9V Claims: Mid-State Holdings Working Capital Agents Claims. Class S-9V Claims shall consist of all Working Capital Agents Claims against Mid-State Holdings. Class S-9W Claims: Railroad Holdings Working Capital Agents Claims. Class S-9W Claims shall consist of all Working Capital Agents Claims against Railroad Holdings. Class S-9X Claims: Sloss Working Capital Agents Claims. Class S-9X Claims shall consist of all Working Capital Agents Claims against Sloss. Class S-9Y Claims: Southern Precision Working Capital Agents Claims. Class S-9Y Claims shall consist of all Working Capital Agents Claims against Southern Precision. Class S-9Z Claims: United Land Working Capital Bank Claims. Class S-9Z Claims shall consist of all Working Capital Agents Claims against United Land. Class S-9AA Claims: U.S. Pipe Working Capital Agents Claims. Class S-9AA Claims shall consist of all Working Capital Agents Claims against U.S. Pipe. Class S-9BB Claims: Pipe Realty Working Capital Agents Claims. Class S-9BB Claims shall consist of all Working Capital Agents Claims against Pipe Realty. Class S-9CC Claims: Vestal Working Capital Agents Claims. Class S-9CC Claims shall consist of all Working Capital Agents Claims against Vestal. Class S-9EE Claims: Old Walter Industries Working Capital Agents Claims. Class S-9EE Claims shall consist of all Working Capital Agents Claims against Old Walter Industries. Class S-9FF Claims: Walter Land Working Capital Agents Claims. Class S-9FF Claims shall consist of all Working Capital Agents Claims against Walter Land. 2.14 Class S-10 Claims: Other Secured Claims. Class S-10 Claims shall consist of all Other Secured Claims. Class S-10A Claims: Hillsborough Other Secured Claims. Class S-10A Claims shall consist of all Other Secured Claims against Hillsborough. Class S-10B Claims: Best Other Secured Claims. Class S-10B Claims shall consist of all Other Secured Claims against Best. Class S-10C Claims: Best (Miss.) Other Secured Claims. Class S-10C Claims shall consist of all Other Secured Claims against Best (Miss.). Class S-10D Claims: Coast to Coast Other Secured Claims. Class S-10D Claims shall consist of all Other Secured Claims against Coast to Coast. Class S-10E Claims: Computer Holdings Other Secured Claims. Class S-10E Claims shall consist of all Other Secured Claims against Computer Holdings. Class S-10F Claims: Dixie Other Secured Claims. Class S-10F Claims shall consist of all Other Secured Claims against Dixie. Class S-10G Claims: Hamer Holdings Other Secured Claims. Class S-10G Claims shall consist of all Other Secured Claims against Hamer Holdings. Class S-10H Claims: Hamer Properties Other Secured Claims. Class S-10H Claims shall consist of all Other Secured Claims against Hamer Properties. Class S-10I Claims: Homes Holdings Other Secured Claims. Class S-10I Claims shall consist of all Other Secured Claims against Homes Holdings. Class S-10J Claims: Computer Services Other Secured Claims. Class S-10J Claims shall consist of all Other Secured Claims against Computer Services. Class S-10K Claims: Jim Walter Homes Other Secured Claims. Class S-10K Claims shall consist of all Other Secured Claims against Jim Walter Homes. Class S-10L Claims: JW Insurance Other Secured Claims. Class S-10L Claims shall consist of all Other Secured Claims against JW Insurance. Class S-10M Claims: Jim Walter Resources Other Secured Claims. Class S-10M Claims shall consist of all Other Secured Claims against Jim Walter Resources. Class S-10N Claims: Window Components (Wisc.) Other Secured Claims. Class S-10N Claims shall consist of all Other Secured Claims against Window Components (Wisc.). Class S-10O Claims: JW Aluminum Other Secured Claims. Class S-10O Claims shall consist of all Other Secured Claims against JW Aluminum. Class S-10P Claims: Resources Holdings Other Secured Claims. Class S-10P Claims shall consist of all Other Secured Claims against Resources Holdings. Class S-10Q Claims: JWI Holdings Other Secured Claims. Class S-10Q Claims shall consist of all Other Secured Claims against JWI Holdings. Class S-10R Claims: JW Walter Other Secured Claims. Class S-10R Claims shall consist of all Other Secured Claims against JW Walter. Class S-10S Claims: Window Components Other Secured Claims. Class S-10S Claims shall consist of all Other Secured Claims against Window Components. Class S-10T Claims: Land Holdings Other Secured Claims. Class S-10T Claims shall consist of all Other Secured Claims against Land Holdings. Class S-10U Claims: Mid-State Homes Other Secured Claims. Class S-10U Claims shall consist of all Other Secured Claims against Mid-State Homes. Class S-10V Claims: Mid-State Holdings Other Secured Claims. Class S-10V Claims shall consist of all Other Secured Claims against Mid-State Holdings. Class S-10W Claims: Railroad Holdings Other Secured Claims. Class S-10W Claims shall consist of all Other Secured Claims against Railroad Holdings. Class S-10X Claims: Sloss Other Secured Claims. Class S-10X Claims shall consist of all Other Secured Claims against Sloss. Class S-10Y Claims: Southern Precision Other Secured Claims. Class S-10Y Claims shall consist of all Other Secured Claims against Southern Precision. Class S-10Z Claims: United Land Other Secured Claims. Class S-10Z Claims shall consist of all Other Secured Claims against United Land. Class S-10AA Claims: U.S. Pipe Other Secured Claims. Class S-10AA Claims shall consist of all Other Secured Claims against U.S. Pipe. Class S-10BB Claims: Pipe Realty Other Secured Claims. Class S-10BB Claims shall consist of all Other Secured Claims against Pipe Realty. Class S-10CC Claims: Vestal Other Secured Claims. Class S-10CC Claims shall consist of all Other Secured Claims against Vestal. Class S-10DD Claims: Home Improvement Other Secured Claims. Class S-10DD Claims shall consist of all Other Secured Claims against Home Improvement. Class S-10EE Claims: Old Walter Industries Other Secured Claims. Class S-10EE Claims shall consist of all Other Secured Claims against Old Walter Industries. Class S-10FF Claims: Walter Land Other Secured Claims. Class S-10FF Claims shall consist of all Other Secured Claims against Walter Land. Class S-10GG Claims: JW Resources Other Secured Claims. Class S-10GG Claims shall consist of all Other Secured Claims against JW Resources. UNSECURED CLAIMS Unsecured Claims consist of Old Walter Industries IRB Claims, Convenience Class Claims, Other Unsecured Claims, Senior Subordinated Note Claims, 17% Subordinated Note Claims, Pre-LBO Debenture Claims and Settlement Claims. 2.15 Class U-1 Claims: Old Walter Industries IRB Claims. Class U-1 Claims shall consist of the Old Walter Industries IRB Claims. Class U-1EE: Old Walter Industries IRB Claims. Class U-1EE Claims shall consist of the Old Walter Industries IRB Claims against Old Walter Industries. 2.16 Class U-2 Claims: Convenience Class Claims. Class U-2 Claims shall consist of all Convenience Class Claims. Class U-2A Claims: Hillsborough Convenience Class Claims. Class U-2A Claims shall consist of all Convenience Class Claims against Hillsborough. Class U-2B Claims: Best Convenience Class Claims. Class U-2B Claims shall consist of all Convenience Class Claims against Best. Class U-2C Claims: Best (Miss.) Convenience Class Claims. Class U-2C Claims shall consist of all Convenience Class Claims against Best (Miss.). Class U-2D Claims: Coast to Coast Convenience Class Claims. Class U-2D Claims shall consist of all Convenience Class Claims against Coast to Coast. Class U-2E Claims: Computer Holdings Convenience Class Claims. Class U-2E Claims shall consist of all Convenience Class Claims against Computer Holdings. Class U-2F Claims: Dixie Convenience Class Claims. Class U-2F Claims shall consist of all Convenience Class Claims against Dixie. Class U-2G Claims: Hamer Holdings Convenience Class Claims. Class U-2G Claims shall consist of all Convenience Class Claims against Hamer Holdings. Class U-2H Claims: Hamer Properties Convenience Class Claims. Class U-2H Claims shall consist of all Convenience Class Claims against Hamer Properties. Class U-2I Claims: Homes Holdings Convenience Class Claims. Class U-2I Claims shall consist of all Convenience Class Claims against Homes Holdings. Class U-2J Claims: Computer Services Convenience Class Claims. Class U-2J Claims shall consist of all Convenience Class Claims against Computer Services. Class U-2K Claims: Jim Walter Homes Convenience Class Claims. Class U-2K Claims shall consist of all Convenience Class Claims against Jim Walter Homes. Class U-2L Claims: JW Insurance Corporation Convenience Class Claims. Class U-2L Claims shall consist of all Convenience Class Claims against JW Insurance. Class U-2M Claims: Jim Walter Resources Convenience Class Claims. Class U-2M Claims shall consist of all Convenience Class Claims against Jim Walter Resources. Class U-2N Claims: Window Components (Wisc.) Convenience Class Claims. Class U-2N Claims shall consist of all Convenience Class Claims against Window Components (Wisc.). Class U-2O Claims: JW Aluminum Convenience Class Claims. Class U-2O Claims shall consist of all Convenience Class Claims against JW Aluminum. Class U-2P Claims: Resources Holdings Convenience Class Claims. Class U-2P Claims shall consist of all Convenience Class Claims against Resources Holdings. Class U-2Q Claims: JWI Holdings Convenience Class Claims. Class U-2Q Claims shall consist of all Convenience Class Claims against JWI Holdings. Class U-2R Claims: JW Walter Convenience Class Claims. Class U-2R Claims shall consist of all Convenience Class Claims against JW Walter. Class U-2S Claims: Window Components Convenience Class Claims. Class U-2S Claims shall consist of all Convenience Class Claims against Window Components. Class U-2T Claims: Land Holdings Convenience Class Claims. Class U-2T Claims shall consist of all Convenience Class Claims against Land Holdings. Class U-2U Claims: Mid-State Homes Convenience Class Claims. Class U-2U Claims shall consist of all Convenience Class Claims against Mid-State Homes. Class U-2V Claims: Mid-State Holdings Convenience Class Claims. Class U-2V Claims shall consist of all Convenience Class Claims against Mid-State Holdings. Class U-2W Claims: Railroad Holdings Convenience Class Claims. Class U-2W Claims shall consist of all Convenience Class Claims against Railroad Holdings. Class U-2X Claims: Sloss Convenience Class Claims. Class U-2X Claims shall consist of all Convenience Class Claims against Sloss. Class U-2Y Claims: Southern Precision Convenience Class Claims. Class U-2Y Claims shall consist of all Convenience Class Claims against Southern Precision. Class U-2Z Claims: United Land Convenience Class Claims. Class U-2Z Claims shall consist of all Convenience Class Claims against United Land. Class U-2AA Claims: U.S. Pipe Convenience Class Claims. Class U-2AA Claims shall consist of all Convenience Class Claims against U.S. Pipe. Class U-2BB Claims: Pipe Realty Convenience Class Claims. Class U-2BB Claims shall consist of all Convenience Class Claims against Pipe Realty. Class U-2CC Claims: Vestal Convenience Class Claims. Class U-2CC Claims shall consist of all Convenience Class Claims against Vestal. Class U-2DD Claims: Home Improvement Convenience Class Claims. Class U-2DD Claims shall consist of all Convenience Class Claims against Home Improvement. Class U-2EE Claims: Old Walter Industries Convenience Class Claims. Class U-2EE Claims shall consist of all Convenience Class Claims against Old Walter Industries. Class U-2FF Claims: Walter Land Convenience Class Claims. Class U-2FF Claims shall consist of all Convenience Class Claims against Walter Land. Class U-2GG Claims: JW Resources Convenience Class Claims. Class U-2GG Claims shall consist of all Convenience Class Claims against JW Resources. 2.17 Class U-3 Claims: Other Unsecured Claims. Class U-3 Claims shall consist of all Other Unsecured Claims. Class U-3A Claims: Hillsborough Other Unsecured Claims. Class U-3A Claims shall consist of all Other Unsecured Claims against Hillsborough. Class U-3B Claims: Best Other Unsecured Claims. Class U-3B Claims shall consist of all Other Unsecured Claims against Best. Class U-3C Claims: Best (Miss.) Other Unsecured Claims. Class U-3C Claims shall consist of all Other Unsecured Claims against Best (Miss.). Class U-3D Claims: Coast to Coast Other Unsecured Claims. Class U-3D Claims shall consist of all Other Unsecured Claims against Coast to Coast. Class U-3E Claims: Computer Holdings Other Unsecured Claims. Class U-3E Claims shall consist of all Other Unsecured Claims against Computer Holdings. Class U-3F Claims: Dixie Other Unsecured Claims. Class U-3F Claims shall consist of all Other Unsecured Claims against Dixie. Class U-3G Claims: Hamer Holdings Other Unsecured Claims. Class U-3G Claims shall consist of all Other Unsecured Claims against Hamer Holdings. Class U-3H Claims: Hamer Properties Other Unsecured Claims. Class U-3H Claims shall consist of all Other Unsecured Claims against Hamer Properties. Class U-3I Claims: Homes Holdings Other Unsecured Claims. Class U-3I Claims shall consist of all Other Unsecured Claims against Homes Holdings. Class U-3J Claims: Computer Services Other Unsecured Claims. Class U-3J Claims shall consist of all Other Unsecured Claims against Computer Services. Class U-3K Claims: Jim Walter Homes Other Unsecured Claims. Class U-3K Claims shall consist of all Other Unsecured Claims against Jim Walter Homes. Class U-3L Claims: JW Insurance Other Unsecured Claims. Class U-3L Claims shall consist of all Other Unsecured Claims against JW Insurance. Class U-3M Claims: Jim Walter Resources Other Unsecured Claims. Class U-3M Claims shall consist of all Other Unsecured Claims against Jim Walter Resources. Class U-3N Claims: Window Components (Wisc.) Other Unsecured Claims. Class U-3N Claims shall consist of all Other Unsecured Claims against Window Components (Wisc.). Class U-3O Claims: JW Aluminum Other Unsecured Claims. Class U-3O Claims shall consist of all Other Unsecured Claims against JW Aluminum. Class U-3P Claims: Resources Holdings Other Unsecured Claims. Class U-3P Claims shall consist of all Other Unsecured Claims against Resources Holdings. Class U-3Q Claims: JWI Holdings Other Unsecured Claims. Class U-3Q Claims shall consist of all Other Unsecured Claims against JWI Holdings. Class U-3R Claims: JW Walter Other Unsecured Claims. Class U-3R Claims shall consist of all Other Unsecured Claims against JW Walter. Class U-3S Claims: Window Components Other Unsecured Claims. Class U-3S Claims shall consist of all Other Unsecured Claims against Window Components. Class U-3T Claims: Land Holdings Other Unsecured Claims.Class U-3T Claims shall consist of all Other Unsecured Claims against Land Holdings. Class U-3U Claims: Mid-State Homes Other Unsecured Claims. Class U-3U Claims shall consist of all Other Unsecured Claims against Mid-State Homes. Class U-3V Claims: Mid-State Holdings Other Unsecured Claims. Class U-3V Claims shall consist of all Other Unsecured Claims against Mid-State Holdings. Class U-3W Claims: Railroad Holdings Other Unsecured Claims. Class U-3W Claims shall consist of all Other Unsecured Claims against Railroad Holdings. Class U-3X Claims: Sloss Other Unsecured Claims. Class U-3X Claims shall consist of all Other Unsecured Claims against Sloss. Class U-3Y Claims: Southern Precision Other Unsecured Claims. Class U-3Y Claims shall consist of all Other Unsecured Claims against Southern Precision. Class U-3Z Claims: United Land Other Unsecured Claims. Class U-3Z Claims shall consist of all Other Unsecured Claims against United Land. Class U-3AA Claims: U.S. Pipe Other Unsecured Claims. Class U-3AA Claims shall consist of all Other Unsecured Claims against U.S. Pipe. Class U-3BB Claims: Pipe Realty Other Unsecured Claims. Class U-3BB Claims shall consist of all Other Unsecured Claims against Pipe Realty. Class U-3CC Claims: Vestal Other Unsecured Claims. Class U-3CC Claims shall consist of all Other Unsecured Claims against Vestal. Class U-3DD Claims: Home Improvement Other Unsecured Claims. Class U-3DD Claims shall consist of all Other Unsecured Claims against Home Improvement. Class U-3EE Claims: Old Walter Industries Other Unsecured Claims. Class U-3EE Claims shall consist of all Other Unsecured Claims against Old Walter Industries. Class U-3FF Claims: Walter Land Other Unsecured Claims. Class U-3FF Claims shall consist of all Other Unsecured Claims against Walter Land. Class U-3GG Claims: JW Resources Other Unsecured Claims. Class U-3GG Claims shall consist of all Other Unsecured Claims against JW Resources. 2.18 Class U-4 Claims: Senior Subordinated Note Claims. Class U-4 Claims shall consist of all Senior Subordinated Note Claims. Class U-4A Claims: Hillsborough Senior Subordinated Note Claims. Class U-4A Claims shall consist of all Senior Subordinated Note Claims against Hillsborough. Class U-4I Claims: Homes Holdings Senior Subordinated Note Claims. Class U-4I Claims shall consist of all Senior Subordinated Note Claims against Homes Holdings. Class U-4K Claims: Jim Walter Homes Senior Subordinated Note Claims. Class U-4K Claims shall consist of all Senior Subordinated Note Claims against Jim Walter Homes. Class U-4Z Claims: United Land Senior Subordinated Note Claims. Class U-4Z Claims shall consist of all Senior Subordinated Note Claims against United Land. Class U-4AA Claims: U.S. Pipe Senior Subordinated Note Claims. Class U-4AA Claims shall consist of all Senior Subordinated Note Claims against U.S. Pipe. Class U-4EE Claims: Old Walter Industries Senior Subordinated Note Claims. Class U-4EE Claims shall consist of all Senior Subordinated Note Claims against Old Walter Industries. 2.19 Class U-5 Claims: 17% Subordinated Note Claims. Class U-5 Claims shall consist of all 17% Subordinated Note Claims. Class U-5A Claims: Hillsborough 17% Subordinated Note Claims. Class U-5A Claims shall consist of all 17% Subordinated Note Claims against Hillsborough. Class U-5I Claims: Homes Holdings 17% Subordinated Note Claims. Class U-5I Claims shall consist of all 17% Subordinated Note Claims against Homes Holdings. Class U-5K Claims: Jim Walter Homes 17% Subordinated Note Claims. Class U-5K Claims shall consist of all 17% Subordinated Note Claims against Jim Walter Homes. Class U-5Z Claims: United Land 17% Subordinated Note Claims. Class U-5Z Claims shall consist of all 17% Subordinated Note Claims against United Land. Class U-5AA Claims: U.S. Pipe 17% Subordinated Note Claims.Class U-5AA Claims shall consist of all 17% Subordinated Note Claims against U.S. Pipe. Class U-5EE Claims: Old Walter Industries 17% Subordinated Note Claims. Class U-5EE Claims shall consist of all 17% Subordinated Note Claims against Old Walter Industries. 2.20 Class U-6 Claims: Pre-LBO Debenture Claims. Class U-6 Claims shall consist of all Pre-LBO Debenture Claims. Class U-6EE Claims: Old Walter Industries Pre-LBO Debenture Claims. Class U-6EE Claims shall consist of all Pre-LBO Debenture Claims against Old Walter Industries. 2.21 Class U-7 Claims: Settlement Claims. Class U-7 Claims shall consist of Settlement Claims. Class U-7A Claims: Hillsborough Settlement Claims. Class U-7A Claims shall consist of all Settlement Claims against Hillsborough. Class U-7B Claims: Best Settlement Claims. Class U-7B Claims shall consist of all Settlement Claims against Best. Class U-7C Claims: Best (Miss.) Settlement Claims. Class U-7C Claims shall consist of all Settlement Claims against Best (Miss.). Class U-7D Claims: Coast to Coast Settlement Claims. Class U-7D Claims shall consist of all Settlement Claims against Coast to Coast. Class U-7E Claims: Computer Holdings Settlement Claims. Class U-7E Claims shall consist of all Settlement Claims against Computer Holdings. Class U-7F Claims: Dixie Settlement Claims. Class U-7F Claims shall consist of all Settlement Claims against Dixie. Class U-7G Claims: Hamer Holdings Settlement Claims. Class U-7G Claims shall consist of all Settlement Claims against Hamer Holdings. Class U-7H Claims: Hamer Properties Settlement Claims. Class U-7H Claims shall consist of all Settlement Claims against Hamer Properties. Class U-7I Claims: Homes Holdings Settlement Claims. Class U-7I Claims shall consist of all Settlement Claims against Homes Holdings. Class U-7J Claims: Computer Services Settlement Claims. Class U-7J Claims shall consist of all Settlement Claims against Computer Services. Class U-7K Claims: Jim Walter Homes Settlement Claims. Class U-7K Claims shall consist of all Settlement Claims against Jim Walter Homes. Class U-7L Claims: JW Insurance Settlement Claims. Class U-7L Claims shall consist of all Settlement Claims against JW Insurance. Class U-7M Claims: Jim Walter Resources Settlement Claims. Class U-7M Claims shall consist of all Settlement Claims against Jim Walter Resources. Class U-7N Claims: Window Components (Wisc.) Settlement Claims. Class U-7N Claims shall consist of all Settlement Claims against Window Components (Wisc.). Class U-7O Claims: JW Aluminum Settlement Claims. Class U-7O Claims shall consist of all Settlement Claims against JW Aluminum. Class U-7P Claims: Resources Holdings Settlement Claims. Class U-7P Claims shall consist of all Settlement Claims against Resources Holdings. Class U-7Q Claims: JWI Holdings Settlement Claims. Class U-7Q Claims shall consist of all Settlement Claims against JWI Holdings. Class U-7R Claims: JW Walter Settlement Claims. Class U-7R Claims shall consist of all Settlement Claims against JW Walter. Class U-7S Claims: Window Components Settlement Claims. Class U-7S Claims shall consist of all Settlement Claims against Window Components. Class U-7T Claims: Land Holdings Settlement Claims. Class U-7T Claims shall consist of all Settlement Claims against Land Holdings. Class U-7U Claims: Mid-State Homes Settlement Claims. Class U-7U Claims shall consist of all Settlement Claims against Mid-State Homes. Class U-7V Claims: Mid-State Holdings Settlement Claims. Class U-7V Claims shall consist of all Settlement Claims against Mid-State Holdings. Class U-7W Claims: Railroad Holdings Settlement Claims. Class U-7W Claims shall consist of all Settlement Claims against Railroad Holdings. Class U-7X Claims: Sloss Settlement Claims. Class U-7X Claims shall consist of all Settlement Claims against Sloss. Class U-7Y Claims: Southern Precision Settlement Claims. Class U-7Y Claims shall consist of all Settlement Claims against Southern Precision. Class U-7Z Claims: United Land Settlement Claims. Class U-7Z Claims shall consist of all Settlement Claims against United Land. Class U-7AA Claims: U.S. Pipe Settlement Claims. Class U-7AA Claims shall consist of all Settlement Claims against U.S. Pipe. Class U-7BB Claims: Pipe Realty Settlement Claims. Class U-7BB Claims shall consist of all Settlement Claims against Pipe Realty. Class U-7CC Claims: Vestal Settlement Claims. Class U-7CC Claims shall consist of all Settlement Claims against Vestal. Class U-7DD Claims: Home Improvement Settlement Claims. Class U-7DD Claims shall consist of all Settlement Claims against Home Improvement. Class U-7EE Claims: Old Walter Industries Settlement Claims. Class U-7EE Claims shall consist of all Settlement Claims against Old Walter Industries. Class U-7FF Claims: Walter Land Settlement Claims. Class U-7FF Claims shall consist of all Settlement Claims against Walter Land. Class U-7GG Claims: JW Resources Settlement Claims. Class U-7GG Claims shall consist of all Settlement Claims against JW Resources. INTERCOMPANY CLAIMS Intercompany Claims consist of Intercompany IRB Claims, Pre-Filing Date Intercompany Notes Payable Claims and Post-Filing Date Intercompany Notes Payable Claims. 2.22 Class I-1 Claims: Intercompany IRB Claims. Class I-1 Claims shall consist of all Intercompany IRB Claims. Class I-1X Claims: Sloss Intercompany IRB Claims. Class I-1X Claims shall consist of all Intercompany IRB Claims against Sloss. 2.23 Class I-2 Claims: Pre-Filing Date Intercompany Notes Payable Claims. Class I-2 Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims. Class I-2A Claims: Hillsborough Pre-Filing Date Intercompany Notes Payable Claims. Class I-2A Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Hillsborough. Class I-2B Claims: Best Pre-Filing Date Intercompany Notes Payable Claims. Class I-2B Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Best. Class I-2C Claims: Best (Miss.) Pre-Filing Date Intercompany Notes Payable Claims. Class I-2C Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Best (Miss.). Class I-2D Claims: Coast to Coast Pre-Filing Date Intercompany Notes Payable Claims. Class I-2D Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Coast to Coast. Class I-2E Claims: Computer Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2E Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Computer Holdings. Class I-2F Claims: Dixie Pre-Filing Date Intercompany Notes Payable Claims. Class I-2F Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Dixie. Class I-2G Claims: Hamer Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2G Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Hamer Holdings. Class I-2H Claims: Hamer Properties Pre-Filing Date Intercompany Notes Payable Claims. Class I-2H Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Hamer Properties. Class I-2I Claims: Homes Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2I Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Homes Holdings. Class I-2J Claims: Computer Services Pre-Filing Date Intercompany Notes Payable Claims. Class I-2J Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Computer Services. Class I-2K Claims: Jim Walter Homes Pre-Filing Date Intercompany Notes Payable Claims. Class I-2K Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Jim Walter Homes. Class I-2M Claims: Jim Walter Resources Pre-Filing Date Intercompany Notes Payable Claims. Class I-2M Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Jim Walter Resources. Class I-2N Claims: Window Components (Wisc.) Pre-Filing Date Intercompany Notes Payable Claims. Class I-2N Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Window Components (Wisc.). Class I-2O Claims: JW Aluminum Pre-Filing Date Intercompany Notes Payable Claims. Class I-2O Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against JW Aluminum. Class I-2P Claims: Resources Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2P Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Resources Holdings. Class I-2Q Claims: JWI Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2Q Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against JWI Holdings. Class I-2R Claims: JW Walter Pre-Filing Date Intercompany Notes Payable Claims. Class I-2R Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against JW Walter. Class I-2S Claims: Window Components Pre-Filing Date Intercompany Notes Payable Claims. Class 1-2S Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Window Components. Class I-2T Claims: Land Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2T Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Land Holdings. Class I-2U Claims: Mid-State Homes Pre-Filing Date Intercompany Notes Payable Claims. Class I-2U Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Mid-State Homes. Class I-2V Claims: Mid-State Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2V Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Mid-State Holdings. Class I-2W Claims: Railroad Holdings Pre-Filing Date Intercompany Notes Payable Claims. Class I-2W Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Railroad Holdings. Class I-2X Claims: Sloss Pre-Filing Date Intercompany Notes Payable Claims. Class I-2X Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Sloss. Class I-2Y Claims: Southern Precision Pre-Filing Date Intercompany Notes Payable Claims. Class I-2Y Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Southern Precision. Class I-2Z Claims: United Land Pre-Filing Date Intercompany Notes Payable Claims. Class I-2Z Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against United Land. Class I-2AA Claims: U.S. Pipe Pre-Filing Date Intercompany Notes Payable Claims. Class I-2AA Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against U.S. Pipe. Class I-2BB Claims: Pipe Realty Pre-Filing Date Intercompany Notes Payable Claims. Class I-2BB Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Pipe Realty. Class I-2CC Claims: Vestal Pre-Filing Date Intercompany Notes Payable Claims. Class I-2CC Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Vestal. Class I-2DD Claims: Home Improvement Pre-Filing Date Intercompany Notes Payable Claims. Class I-2DD Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Home Improvement. Class I-2EE Claims: Old Walter Industries Pre-Filing Date Intercompany Notes Payable Claims. Class I-2EE Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Old Walter Industries. Class I-2FF Claims: Walter Land Pre-Filing Date Intercompany Notes Payable Claims. Class I-2FF Claims shall consist of all Pre-Filing Date Intercompany Notes Payable Claims against Walter Land. 2.24 Class I-3 Claims: Post-Filing Date Intercompany Notes Payable Claims. Class I-3 Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims. Class I-3A Claims: Hillsborough Post-Filing Date Intercompany Notes Payable Claims. Class 1-3A Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Hillsborough. Class I-3B Claims: Best Post-Filing Date Intercompany Notes Payable Claims. Class I-3B Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Best. Class I-3C Claims: Best (Miss.) Post-Filing Date Intercompany Notes Payable Claims. Class I-3C Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Best (Miss.). Class I-3E Claims: Computer Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3E Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Computer Holdings. Class I-3F Claims: Dixie Post-Filing Date Intercompany Notes Payable Claims. Class I-3F Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Dixie. Class I-3G Claims: Hamer Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3G Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Hamer Holdings. Class I-3H Claims: Hamer Properties Post-Filing Date Intercompany Notes Payable Claims. Class I-3H Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Hamer Properties. Class I-3I Claims: Homes Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3I Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Homes Holdings. Class I-3J Claims: Computer Services Post-Filing Date Intercompany Notes Payable Claims. Class I-3J Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Computer Services. Class I-3K Claims: Jim Walter Homes Post-Filing Date Intercompany Notes Payable Claims. Class I-3K Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Jim Walter Homes. Class I-3L Claims: JW Insurance Post-Filing Date Intercompany Notes Payable Claims. Class I-3L Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against JW Insurance. Class I-3M Claims: Jim Walter Resources Post-Filing Date Intercompany Notes Payable Claims. Class I-3M Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Jim Walter Resources. Class I-3N Claims: Window Components (Wisc.) Post-Filing Date Intercompany Notes Payable Claims. Class I-3N Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Window Components (Wisc.). Class I-3O Claims: JW Aluminum Post-Filing Date Intercompany Notes Payable Claims. Class I-3O Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against JW Aluminum. Class I-3P Claims: Resources Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3P Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Resources Holdings. Class I-3Q Claims: JWI Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3Q Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against JWI Holdings. Class I-3R Claims: JW Walter Post-Filing Date Intercompany Notes Payable Claims. Class I-3R Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against JW Walter. Class I-3S Claims: Window Components Post-Filing Date Intercompany Notes Payable Claims. Class I-3S Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Window Components. Class I-3T Claims: Land Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3T Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Land Holdings. Class I-3U Claims: Mid-State Homes Post-Filing Date Intercompany Notes Payable Claims. Class I-3U Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Mid-State Homes. Class I-3V Claims: Mid-State Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3V Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Mid-State Holdings. Class I-3W Claims: Railroad Holdings Post-Filing Date Intercompany Notes Payable Claims. Class I-3W Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Railroad Holdings. Class I-3X Claims: Sloss Post-Filing Date Intercompany Notes Payable Claims. Class I-3X Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Sloss. Class I-3Y Claims: Southern Precision Post-Filing Date Intercompany Notes Payable Claims. Class I-3Y Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Southern Precision. Class I-3Z Claims: United Land Post-Filing Date Intercompany Notes Payable Claims. Class I-3Z Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against United Land. Class I-3AA Claims: U.S. Pipe Post-Filing Date Intercompany Notes Payable Claims. Class I-3AA Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against U.S. Pipe. Class I-3BB Claims: Pipe Realty Post-Filing Date Intercompany Notes Payable Claims. Class I-3BB Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Pipe Realty. Class I-3CC Claims: Vestal Post-Filing Date Intercompany Notes Payable Claims. Class I-3CC Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Vestal. Class I-3DD Claims: Home Improvement Post-Filing Date Intercompany Notes Payable Claims. Class I-3DD Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Home Improvement. Class I-3EE Claims: Old Walter Industries Post-Filing Date Intercompany Notes Payable Claims. Class I-3EE Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Old Walter Industries. Class I-3FF Claims: Walter Land Post-Filing Date Intercompany Notes Payable Claims. Class I-3FF Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Walter Land. Class I-3GG Claims: JW Resources Post-Filing Date Intercompany Notes Payable Claims. Class I-3GG Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against JW Resources. INTERESTS IN HILLSBOROUGH Interests in Hillsborough consist of all Interests of Holders of Old Common Stock and Holders of Stock Acquisition Rights in Hillsborough. 2.25 Class E-1 Interests: Old Common Stock Interests in Hillsborough. Class E-l Interests shall consist of all Interests of Holders of Old Common Stock. Class E-1A Interests: Old Common Stock Interests in Hillsborough. Class E-1A Interests shall consist of all Interests of Holders of Old Common Stock. 2.26 Class E-2 Interests: Stock Acquisition Rights in Hillsborough. Class E-2 Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Hillsborough. Class E-2A Interests: Stock Acquisition Rights in Hillsborough. Class E-2A Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Hillsborough. INTERESTS IN DEBTORS OTHER THAN HILLSBOROUGH Interests in the Debtors other than Hillsborough consist of all Interests of Holders of Subsidiary Common Stock and Holders of Stock Acquisition Rights in each Debtor other than Hillsborough. 2.27 Class SE-1 Interests: Subsidiary Common Stock Interests in Debtors other than Hillsborough. Class SE-1 Interests shall consist of all Interests of Holders of Subsidiary Common Stock. Class SE-1B Interests: Subsidiary Common Stock Interests in Best. Class SE-1B Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Best issued and outstanding as of the Filing Date. Class SE-1C Interests: Subsidiary Common Stock Interests in Best (Miss.). Class SE-1C Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Best (Miss.) issued and outstanding as of the Filing Date. Class SE-1D Interests: Subsidiary Common Stock Interests in Coast to Coast. Class SE-1D Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Coast to Coast issued and outstanding as of the Filing Date. Class SE-1E Interests: Subsidiary Common Stock Interests in Computer Holdings. Class SE-1E Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Computer Holdings issued and outstanding as of the Filing Date. Class SE-1F Interests: Subsidiary Common Stock Interests in Dixie. Class SE-1F Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Dixie issued and outstanding as of the Filing Date. Class SE-1G Interests: Subsidiary Common Stock Interests in Hamer Holdings. Class SE-1G Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Hamer Holdings issued and outstanding as of the Filing Date. Class SE-1H Interests: Subsidiary Common Stock Interests in Hamer Properties. Class SE-1H Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Hamer Properties issued and outstanding as of the Filing Date. Class SE-1I Interests: Subsidiary Common Stock Interests in Homes Holdings. Class SE-1I Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Homes Holdings issued and outstanding as of the Filing Date. Class SE-1J Interests: Subsidiary Common Stock Interests in Computer Services. Class SE-1J Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Computer Services issued and outstanding as of the Filing Date. Class SE-1K Interests: Subsidiary Common Stock Interests in Jim Walter Homes. Class SE-1K Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Jim Walter Homes issued and outstanding as of the Filing Date. Class SE-1L Interests: Subsidiary Common Stock Interests in JW Insurance. Class SE-1L Interests shall consist of all Interests of Holders of Subsidiary Common Stock of JW Insurance issued and outstanding as of the Filing Date. Class SE-1M Interests: Subsidiary Common Stock Interests in Jim Walter Resources. Class SE-1M Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Jim Walter Resources issued and outstanding as of the Filing Date. Class SE-1N Interests: Subsidiary Common Stock Interests in Window Components (Wisc.) Class SE-1N Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Window Components (Wisc.) issued and outstanding as of the Filing Date. Class SE-1O Interests: Subsidiary Common Stock Interests in JW Aluminum. Class SE-1O Interests shall consist of all Interests of Holders of Subsidiary Common Stock of JW Aluminum issued and outstanding as of the Filing Date. Class SE-1P Interests: Subsidiary Common Stock Interests in Resources Holdings. Class SE-1P Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Resources Holdings issued and outstanding as of the Filing Date. Class SE-1Q Interests: Subsidiary Common Stock Interests in JWI Holdings. Class SE-1Q Interests shall consist of all Interests of Holders of Subsidiary Common Stock of JWI Holdings issued and outstanding as of the Filing Date. Class SE-1R Interests: Subsidiary Common Stock Interests in JW Walter. Class SE-1R Interests shall consist of all Interests of Holders of Subsidiary Common Stock of JW Walter issued and outstanding as of the Filing Date. Class SE-1S Interests: Subsidiary Common Stock Interests in Window Components. Class SE-1S Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Window Components issued and outstanding as of the Filing Date. Class SE-1T Interests: Subsidiary Common Stock Interests in Land Holdings. Class SE-1T Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Land Holdings issued and outstanding as of the Filing Date. Class SE-1U Interests: Subsidiary Common Stock Interests in Mid-State Homes. Class SE-1U Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Mid-State Homes issued and outstanding as of the Filing Date. Class SE-1V Interests: Subsidiary Common Stock Interests in Mid-State Holdings. Class SE-1V Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Mid-State Holdings issued and outstanding as of the Filing Date. Class SE-1W Interests: Subsidiary Common Stock Interests in Railroad Holdings. Class SE-1W Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Railroad Holdings issued and outstanding as of the Filing Date. Class SE-1X Interests: Subsidiary Common Stock Interests in Sloss. Class SE-1X Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Sloss issued and outstanding as of the Filing Date. Class SE-1Y Interests: Subsidiary Common Stock Interests in Southern Precision. Class SE-1Y Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Southern Precision issued and outstanding as of the Filing Date. Class SE-1Z Interests: Subsidiary Common Stock Interests in United Land. Class SE-1Z Interests shall consist of all Interests of Holders of Subsidiary Common Stock of United Land issued and outstanding as of the Filing Date. Class SE-1AA Interests: Subsidiary Common Stock Interests in U.S. Pipe. Class SE-1AA Interests shall consist of all Interests of Holders of Subsidiary Common Stock of U.S. Pipe issued and outstanding as of the Filing Date. Class SE-1BB Interests: Subsidiary Common Stock Interests in Pipe Realty. Class SE-1BB Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Pipe Realty issued and outstanding as of the Filing Date. Class SE-1CC Interests: Subsidiary Common Stock Interests in Vestal. Class SE-1CC Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Vestal issued and outstanding as of the Filing Date. Class SE-1DD Interests: Subsidiary Common Stock Interests in Home Improvement. Class SE-1DD Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Home Improvement issued and outstanding as of the Filing Date. Class SE-1EE Interests: Subsidiary Common Stock Interests in Old Walter Industries. Class SE-1EE Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Old Walter Industries issued and outstanding as of the Filing Date. Class SE-1FF Interests: Subsidiary Common Stock Interests in Walter Land. Class SE-1FF Interests shall consist of all Interests of Holders of Subsidiary Common Stock of Walter Land issued and outstanding as of the Filing Date. Class SE-1GG Interests: Subsidiary Common Stock Interests in JW Resources. Class SE-1GG Interests shall consist of all Interests of Holders of Subsidiary Common Stock of JW Resources issued and outstanding as of the Filing Date. 2.28 Class SE-2 Interests: Subsidiary Stock Acquisition Rights in Debtors other than Hillsborough. Class SE-2 Interests shall consist of all Interests of Holders of Stock Acquisition Rights in each Debtor other than Hillsborough. Class SE-2B Interests: Subsidiary Stock Acquisition Rights in Best. Class SE-2B Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Best. Class SE-2C Interests: Subsidiary Stock Acquisition Rights in Best (Miss.). Class SE-2C Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Best (Miss.). Class SE-2D Interests: Subsidiary Stock Acquisition Rights in Coast to Coast. Class SE-2D Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Coast to Coast. Class SE-2E Interests: Subsidiary Stock Acquisition Rights in Computer Holdings. Class SE-2E Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Computer Holdings. Class SE-2F Interests: Subsidiary Stock Acquisition Rights in Dixie. Class SE-2F Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Dixie. Class SE-2G Interests: Subsidiary Stock Acquisition Rights in Hamer Holdings. Class SE-2G Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Hamer Holdings. Class SE-2H Interests: Subsidiary Stock Acquisition Rights in Hamer Properties. Class SE-2H Interests shall consist of all Other Secured Claims against Hamer Properties. Class SE-2I Interests: Subsidiary Stock Acquisition Rights in Homes Holdings. Class SE-2I Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Homes Holdings. Class SE-2J Interests: Subsidiary Stock Acquisition Rights in Computer Services. Class SE-2J Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Computer Services. Class SE-2K Interests: Subsidiary Stock Acquisition Rights in Jim Walter Homes. Class SE-2K Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Jim Walter Homes. Class SE-2L Interests: Subsidiary Stock Acquisition Rights in JW Insurance. Class SE-2L Interests shall consist of all Interests of Holders of Stock Acquisition Rights in JW Insurance. Class SE-2M Interests: Subsidiary Stock Acquisition Rights in Jim Walter Resources. Class SE-2M Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Jim Walter Resources. Class SE-2N Interests: Subsidiary Stock Acquisition Rights in Window Components (Wisc.). Class SE-2N Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Window Components (Wisc.). Class SE-2O Interests: Subsidiary Stock Acquisition Rights in JW Aluminum. Class SE-2O Interests shall consist of all Interests of Holders of Stock Acquisition Rights in JW Aluminum. Class SE-2P Interests: Subsidiary Stock Acquisition Rights in Resources Holdings. Class SE-2P Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Resources Holdings. Class SE-2Q Interests: Subsidiary Stock Acquisition Rights in JWI Holdings. Class SE-2Q Interests shall consist of all Interests of Holders of Stock Acquisition Rights in JWI Holdings. Class SE-2R Interests: Subsidiary Stock Acquisition Rights in JW Walter. Class SE-2R Interests shall consist of all Interests of Holders of Stock Acquisition Rights in JW Walter. Class SE-2S Interests: Subsidiary Stock Acquisition Rights in Window Components. Class SE-2S Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Window Components. Class SE-2T Interests: Subsidiary Stock Acquisition Rights in Land Holdings. Class SE-2T Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Land Holdings. Class SE-2U Interests: Subsidiary Stock Acquisition Rights in Mid-State Homes. Class SE-2U Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Mid-State Homes. Class SE-2V Interests: Subsidiary Stock Acquisition Rights in Mid-State Holdings. Class SE-2V Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Mid-State Holdings. Class SE-2W Interests: Subsidiary Stock Acquisition Rights in Railroad Holdings. Class SE-2W Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Railroad Holdings. Class SE-2X Interests: Subsidiary Stock Acquisition Rights in Sloss. Class SE-2X Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Sloss. Class SE-2Y Interests: Subsidiary Stock Acquisition Rights in Southern Precision. Class SE-2Y Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Southern Precision. Class SE-2Z Interests: Subsidiary Stock Acquisition Rights in United Land. Class SE-2Z Interests shall consist of all Interests of Holders of Stock Acquisition Rights in United Land. Class SE-2AA Interests: Subsidiary Stock Acquisition Rights in U.S. Pipe. Class SE-2AA Interests shall consist of all Interests of Holders of Stock Acquisition Rights in U.S. Pipe. Class SE-2BB Interests: Subsidiary Stock Acquisition Rights in Pipe Realty. Class SE-2BB Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Pipe Realty. Class SE-2CC Interests: Subsidiary Stock Acquisition Rights in Vestal. Class SE-2CC Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Vestal. Class SE-2DD Interests: Subsidiary Stock Acquisition Rights in Home Improvement. Class SE-2DD Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Home Improvement. Class SE-2EE Interests: Subsidiary Stock Acquisition Rights in Old Walter Industries. Class SE-2EE Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Old Walter Industries. Class SE-2FF Interests: Subsidiary Stock Acquisition Rights in Walter Land. Class SE-2FF Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Walter Land. Class SE-2GG Interests: Subsidiary Stock Acquisition Rights in JW Resources. Class SE-2GG Interests shall consist of all Interests of Holders of Stock Acquisition Rights in JW Resources. ARTICLE III TREATMENT OF ALLOWED CLAIMS AND INTERESTS UNDER THE CONSENSUAL PLAN 3.1 Satisfaction of Allowed Claims and Interests. The treatment of and the consideration received by Holders of Allowed Claims or Interests pursuant to this Article III shall be in full satisfaction, release and discharge of (i) such Holder's respective Allowed Claims against or Interests in each and all of the Debtors, and (ii) any other claims, Demands, obligations, rights, causes of action and liabilities which such Holder may be entitled to assert against any Debtor, whether known or unknown, foreseen or unforeseen, then existing or thereafter arising, based in whole or in part upon any act, omission or other occurrence taking place on or prior to the Effective Date (including without limitation, any such claims, obligations, rights, causes of action and liabilities based upon any of the Veil Piercing-Related Issues or the LBO-Related Issues), except as provided in the Consensual Plan and the Confirmation Order. UNCLASSIFIED CLAIMS ADMINISTRATIVE CLAIMS 3.2 Administrative Claims. Each Holder of an Allowed Administrative Claim shall receive, in full satisfaction thereof, (1) Cash in an amount equal to the Allowed Amount of such Claim, without interest, on or promptly after the Effective Date, or (2) such amount, at such other date and upon such other terms as shall have been agreed upon between the Holder of such Allowed Claim and the applicable Debtor and approved by a Final Order of the Court; provided, however, that Allowed Administrative Claims representing obligations incurred in the ordinary course of business of a Debtor or assumed by any Debtor subsequent to the Filing Date shall be paid or performed by such Debtor in accordance with the terms and conditions of each agreement relating thereto in the ordinary course of such Debtor's business. PRIORITY CLAIMS 3.3 Federal Income Tax Claims. The Holder of the Allowed Federal Income Tax Claims shall receive, in full satisfaction thereof, Cash payments in an aggregate amount equal to the Allowed Amount of such Allowed Federal Income Tax Claim. The Allowed Amount shall be payable in equal quarterly installments over a six-year period from the earlier to occur of (i) the date of the assessment by the Internal Revenue Service of such Claim, and (ii) the date on which such Claim becomes an Allowed Claim, with interest on unpaid amounts from the later of the Effective Date, the date of assessment and the date on which the Claim becomes an Allowed Claim, at an annual rate equal to the Chemical Bank Prime Rate in effect on such date, in accordance with the provisions of Section 1129(a) of the Code and, if applicable, a Final Order of the Court; provided that if the date of any assessment shall have occurred prior to the Effective Date, then the Holder of the Federal Income Tax Claims shall receive Cash in an amount equal to the aggregate amount of all deferred Cash payments which were due and payable in accordance with the foregoing on or prior to the Effective Date, on or promptly after the Effective Date, unless such Holder and the Debtors (subject to Section 4.20 of the Consensual Plan) shall have agreed to a less favorable treatment of such Claim. 3.4 Federal Excise Tax and Reclamation Claims. Each Holder of an Allowed Federal Excise Tax and Reclamation Claim shall receive, in full satisfaction thereof, Cash in an amount equal to the Allowed Amount of such Claim, without interest, on or promptly after the Effective Date, unless such Holder and Jim Walter Resources shall have agreed to a less favorable treatment of such Claim. 3.5 State and Local Tax Claims. Each Holder of an Allowed State and Local Tax Claim shall receive, in full satisfaction thereof, Cash in an amount equal to the Allowed Amount of such Claim, without interest, on or promptly after the Effective Date, unless such Holder and the applicable Debtor shall have agreed to a less favorable treatment of such Claim. CLASSIFIED CLAIMS SECURED CLAIMS 3.6 Class S-1 Claims: Revolving Credit Bank Claims. Class S-1 Claims are impaired. Each Holder of a Class S-1 Allowed Claim shall receive, in full satisfaction thereof, Cash and New Common Stock as follows: (a) Within 5 days following the Confirmation Date, or such other date as the Court may order (but in any event not later than the Effective Date), Cash in the amount of the portion of such Holder's Allowed Claim described in clauses (ii) and (iii) of Section 1.20(b) (the "Initial Revolving Credit Bank Claim Payment"); provided, however, that if the Initial Revolving Credit Bank Claim Payment is not made on or prior to June 30, 1994, then the Initial Revolving Credit Bank Claim Payment shall also include the portion of such Holder's Allowed Claim described in clause (iv) of Section 1.20(b); (b) On the last Business Day of each calendar quarter occurring between the date of the Initial Revolving Credit Bank Claim Payment and the Effective Date, Cash in the amount of the unpaid portion of such Holder's Allowed Claim described in clause (v) of Section 1.20(b) which accrued during such calendar quarter and was not paid pursuant to Section 3.6(a); and (c) On the Effective Date, Cash and, to the extent set forth in Section 1.20(b)(vi), New Common Stock in the amount of the Allowed Amount of such Holder's Allowed Claim to the extent not theretofore paid pursuant to Section 3.6(a) and (b), unless such Holder and the Debtors shall have agreed to a less favorable treatment of such Claim. Upon receipt of the distribution specified in this Section 3.6, all Holders of Class S-1 Claims shall be deemed to have waived any and all subordination rights which they may otherwise have with respect to the distributions to be made pursuant to the Consensual Plan to Holders of Subordinated Note Claims and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Consensual Plan on account of Subordinated Note Claims shall not be subject to levy, garnishment, attachment or other legal process by any Holder of a Class S-1 Claim by reason of any subordination rights. 3.7 Class S-2 Claims: Working Capital Bank Claims. Class S-2 Claims are impaired. Each Holder of a Class S-2 Allowed Claim shall receive, in full satisfaction thereof, Cash and New Common Stock as follows: (a) Within 5 days following the Confirmation Date, or such other date as the Court may order (but in any event not later than the Effective Date), Cash in the amount of the portion of such Holder's Allowed Claim described in clauses (ii) and (iii) of Section 1.20(c) (the "Initial Working Capital Bank Claim Payment"); provided, however, that if the Initial Working Capital Bank Claim Payment is not made on or prior to June 30, 1994, then the Initial Working Capital Bank Claim Payment shall also include the portion of such Holder's Allowed Claim described in clause (iv) of Section 1.20(c); (b) On the last Business Day of each calendar quarter occurring between the date of the Initial Working Capital Bank Claim Payment and the Effective Date, Cash in the amount of the unpaid portion of such Holder's Allowed Claim described in clause (v) of Section 1.20(c) which accrued during such calendar quarter and was not paid pursuant to Section 3.7(a); and (c) On the Effective Date, Cash and, to the extent set forth in Section 1.20(c)(vi), New Common Stock in the amount of the Allowed Amount of such Holder's Allowed Claim to the extent not theretofore paid pursuant to Section 3.7(a) and (b), unless such Holder and the Debtors shall have agreed to a less favorable treatment of such Claim. Upon receipt of the distribution specified in this Section 3.7, all Holders of Class S-2 Claims shall be deemed to have waived any and all subordination rights which they may otherwise have with respect to the distributions to be made pursuant to the Consensual Plan to Holders of Subordinated Note Claims and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Consensual Plan on account of Subordinated Note Claims shall not be subject to levy, garnishment, attachment or other legal process by any Holder of a Class S-2 Claim by reason of any subordination rights. 3.8 Class S-3 Claims: Grace Street Note Claims. The Class S-3 Claims are not impaired. Each Holder of a Class S-3 Allowed Claim shall receive, in full satisfaction thereof, Cash in an amount equal to the Allowed Amount of such Claim on or promptly after the Effective Date, unless the Holder thereof and the Debtors shall have agreed to a less favorable treatment of such Claim. 3.9 Class S-4 Claims: Sloss IRB Claim. Class S-4 Claims are not impaired. The Holder of a Class S-4 Allowed Claim shall receive, in full satisfaction thereof, Cash in an amount equal to the Allowed Amount of such Claim, on or promptly after the Effective Date, unless the Holder thereof and the Debtors shall have agreed to a less favorable treatment of such Claim. 3.10 Class S-5 Claims: Secured Equipment Purchase Claims. Class S-5 Claims are not impaired. Each Holder of a Class S-5 Allowed Claim shall receive, in full satisfaction thereof, Cash in an amount equal to the Allowed Amount of such Claim, on or promptly after the Effective Date, unless such Holder and the Debtors shall have agreed to a less favorable treatment of such Claim. 3.11 Class S-6 Claims: Series B & C Senior Note Claims. Class S-6 Claims are impaired. Each Holder of a Class S-6 Allowed Claim shall receive, in full satisfaction thereof, (a) Cash in an amount equal to such Holder's Pro Rata share of the Class S-6 Fund, (b) such Holder's Pro Rata share of the New Common Stock set forth in Section 1.20(e)(iv), and (c) with respect to the difference between the Allowed Amount of such Holder's Class S-6 Claim and the amount of Cash and New Common Stock received pursuant to clauses (a) and (b), (i) if such Holder elected to receive all of the remainder of its Series B & C Senior Note Claim in New Senior Notes pursuant to the Series B & C Senior Note Claim Election, an aggregate principal amount of New Senior Notes equal to such difference (or, if Cash is used to satisfy the Claims that would otherwise have been satisfied by New Senior Notes, an amount of Cash equal to the principal amount of New Senior Notes that would otherwise have been issued in respect of such Claim), or (ii) if such Holder did not make such election, an aggregate amount of Cash equal to such difference, on or promptly after the Effective Date, unless such Holder and Walter Industries shall have agreed to a less favorable treatment of such Claim. As used herein, the "Class S-6 Fund" means the funds held by Chemical Bank, as successor to Manufacturers Hanover Trust Company, in a restricted Cash account, for the benefit of the holders of Series B & C Senior Notes, which funds represent a portion of (a) the cash collections received by Jim Walter Resources prior to the Filing Date from Jasper Corp. in connection with the non-recourse promissory note dated May 26, 1988 payable to Jim Walter Resources and (b) the proceeds from the sale of Oil Holdings Corporation by Hillsborough and other proceeds deposited with Manufacturers Hanover Trust Company, as predecessor to Chemical Bank, prior to the Filing Date, together with all earnings thereon to the date of distribution. Upon receipt of the distribution specified in this Section 3.11, all Holders of Class S-6 Claims shall be deemed to have waived any and all subordination rights which they may otherwise have with respect to the distributions to be made pursuant to the Consensual Plan to Holders of Subordinated Note Claims and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Consensual Plan on account of Subordinated Note Claims shall not be subject to levy, garnishment, attachment or other legal process by any Holder of a Class S-6 Claim by reason of any subordination rights. 3.12 Class S-7 Claims: Provident Life & Accident Insurance Company Claims. Class S-7 Claims are not impaired. The Holder of the Class S-7 Allowed Claims shall receive, in full satisfaction thereof, Cash in an amount equal to the Allowed Amount of such Claims on or promptly after the Effective Date, unless such Holder and the Debtors shall have agreed to a less favorable treatment of such Claim. Upon payment in Cash of the Allowed Amount of the Provident Life & Accident Insurance Company Claims, Walter Industries shall assume all unsatisfied obligations with respect to the loans underlying such Provident Life & Accident Insurance Company Claims in accordance with their original contractual terms. Upon the making of such payment and such assumption, any acceleration of any obligation and/or instrument or default in connection with the loans underlying such Provident Life & Accident Insurance Company Claims shall be deemed to be rescinded, waived or cured and of no force or effect, and the terms of such obligation and/or instrument shall be reinstated as if no such acceleration or default had occurred. 3.13 Class S-8 Claims: Revolving Credit Agents Claims. Class S-8 Allowed Claims are not impaired. Each Holder of a Class S-8 Allowed Claim shall receive on the Effective Date, in full satisfaction of such Claim, Cash in an amount equal to the Allowed Amount of such Claim. This Consensual Plan shall not affect the obligation of any such Holder to remit any such Cash so received to other Persons who have previously paid, or reimbursed such Holder in respect of, fees and expenses comprising a portion of such Claim. Upon receipt of the distribution specified in this Section 3.13, all Holders of Class S-8 Claims shall be deemed to have waived any and all subordination rights which they may otherwise have with respect to the distributions to be made pursuant to the Consensual Plan to Holders of Subordinated Note Claims and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Consensual Plan on account of Subordinated Note Claims shall not be subject to levy, garnishment, attachment or other legal process by any Holder of a Class S-8 Claim by reason of any subordination rights. 3.14 Class S-9 Claims: Working Capital Agents Claims. Class S-9 Claims are not impaired. Each Holder of a Class S-9 Claim shall receive on the Effective Date, in full satisfaction of such Claim, Cash in an amount equal to the Allowed Amount of such Claim. This Consensual Plan shall not affect the obligation of any such Holder to remit any such Cash so received to other Persons who have previously paid, or reimbursed such Holder in respect of, fees and expenses comprising a portion of such Claim. Upon receipt of the distribution specified in this Section 3.14, all Holders of Class S-9 Claims shall be deemed to have waived any and all subordination rights which they may otherwise have with respect to the distributions to be made pursuant to the Consensual Plan to Holders of Subordinated Note Claims and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Consensual Plan on account of Subordinated Note Claims shall not be subject to levy, garnishment, attachment or other legal process by any Holder of a Class S-9 Claim by reason of any subordination rights. 3.15 Class S-10 Claims: Other Secured Claims. Class S-10 Claims are not impaired. Each Holder, if any, of a Class S-10 Allowed Claim shall, in full satisfaction thereof, receive one of the following treatments: (i) the legal, equitable and contractual rights to which such Claim entitles the Holder shall be left unaltered; (ii) notwithstanding any contractual provision or applicable law that entitles the Holder of such Claim to demand or receive accelerated payment of such Claim after the occurrence of a default: (A) any such default that occurred before or after the Filing Date (other than a default of the kind specified in Section 365(b)(2) of the Code) shall be cured; (B) the maturity of such Claim shall be reinstated (as such maturity existed before such default); (C) the Holder of such Claim shall be compensated for any damages incurred as a result of any reasonable reliance by such Holder on such contractual provision or such applicable law; and (D) the legal, equitable or contractual rights to which such Claim entitles the Holder of such Claim shall not otherwise be altered; or (iii) on the Effective Date, the Holder of such Claim shall receive, on account of such Claim, Cash equal to the Allowed Amount of such Claim; in each case unless such Holder and the applicable Debtor shall have agreed to a less favorable treatment of such Claim. UNSECURED CLAIMS 3.16 Class U-1 Claims: Old Walter Industries IRB Claims. Class U-1 Claims are not impaired. Each Holder of a Class U-1 Allowed Claim shall receive Cash in an amount equal to the Allowed Amount of such Claim, on or promptly after the Effective Date, unless the Holder thereof and Walter Industries shall have agreed to a less favorable treatment of such Claim. Upon payment in Cash of the Allowed Amount of the Old Walter Industries IRB Claims, Walter Industries shall assume all unsatisfied obligations under the Old Walter Industries IRBs in accordance with their original contractual terms. Upon the making of such payment and such assumption, any acceleration of any obligation and/or instrument or default in connection with the Old Walter Industries IRBs shall be deemed to be rescinded, waived or cured and of no force or effect and the terms of the Old Walter Industries IRBs shall be reinstated as if no such acceleration or default had occurred. 3.17 Class U-2 Claims: Convenience Class Claims. Class U-2 Claims are not impaired. Each Holder of a Class U-2 Allowed Claim shall receive, in full satisfaction thereof, Cash in an amount equal to the Allowed Amount of such Claim (of which the Pre-Filing Date Unsecured Allowed Amount shall not be in excess of $1,000), on or promptly after the Effective Date, unless such Holder and the applicable Debtor shall have agreed to a less favorable treatment of such Claim. 3.18 Class U-3 Claims: Other Unsecured Claims. Class U-3 Claims are impaired. Each Holder of a Class U-3 Allowed Claim shall receive, in full satisfaction thereof, cash in an amount equal to the Allowed Amount of such Claim payable as follows: (1) 75% of the Allowed Amount of such Claim, on or promptly after the Effective Date, unless such Holder and the applicable Debtor shall have agreed to a less favorable treatment of such Claim; and (2) the balance of such Allowed Amount, together with interest accrued at the General Unsecured Interest Rate from the Effective Date to the date of actual payment of the 25% portion of the Pre-Filing Date Unsecured Allowed Amount not paid pursuant to clause (1) above, within six (6) months following the payment pursuant to clause (1) above unless such Holder and the applicable Debtor shall have agreed to a less favorable treatment of such Claim. 3.19 Class U-4 Claims: Senior Subordinated Note Claims. Class U-4 Claims are impaired. Each Holder of a Class U-4 Allowed Claim shall receive, in full satisfaction thereof, the Applicable Consideration allocated on account of such Claim, on or promptly after the Effective Date, unless such Holder and the applicable Debtors shall have agreed to a less favorable treatment of such Claim. Upon receipt of the distribution specified in this Section 3.19, all Holders of Class U-4 Claims shall be deemed to have waived any and all subordination rights which they may otherwise have with respect to the distributions to be made to Holders of 17% Subordinated Note Claims and Pre-LBO Debenture Claims, pursuant to the Consensual Plan and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Consensual Plan on account of 17% Subordinated Note Claims and Pre-LBO Debenture Claims, shall not be subject to levy, garnishment, attachment or other legal process by any Holder of a Class U-4 Claim by reason of any subordination rights. Notwithstanding the foregoing two sentences, if and only if the Pre-LBO Condition occurs, the foregoing waiver and injunction shall not apply to any claim or right of Holders of Class U-4 Claims to fully enforce any and all subordination rights as to any post-Filing Date interest claimed by or distributed to Holders of Class U-6 Claims, and such subordination rights shall be fully preserved. 3.20 Class U-5 Claims: 17% Subordinated Note Claims. Class U-5 Claims are impaired. Each Holder of a Class U-5 Allowed Claim shall receive, in full satisfaction thereof, the Applicable Consideration allocated on account of such Claim, on or promptly after the Effective Date, unless such Holder and the applicable Debtors shall have agreed to a less favorable treatment of such Claim. Upon the receipt of the distribution specified in this Section 3.20, all Holders of Class U-5 Claims shall be deemed to have waived any and all subordination rights which they may otherwise have with respect to the distributions to be made pursuant to the Consensual Plan to Holders of Pre-LBO Debenture Claims and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Consensual Plan on account of Pre-LBO Debenture Claims shall not be subject to levy, garnishment, attachment or other legal process by any Holder of a Class U-5 Claim by reason of any subordination rights. Notwithstanding the foregoing two sentences, if and only if the Pre-LBO Condition occurs, the foregoing waiver and injunction shall not apply to any claim or right of Holders of Class U-5 Claims to fully enforce any and all subordination rights as to any post-Filing Date interest claimed by or distributed to Holders of Class U-6 Claims, and such subordination rights shall be fully preserved. 3.21 Class U-6 Claims: Pre-LBO Debenture Claims. Class U-6 Claims are impaired. Each Holder of a Class U-6 Allowed Claim shall receive, in full satisfaction thereof, (i) the Applicable Consideration allocated on account of such Claim, and (ii) if and only if the Pre-LBO Condition does not occur, in consideration of the full settlement and release of all LBO-Related Issues that have or could be asserted against Released Parties as provided in the Consensual Plan, such Holder's Pro Rata share of shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the Pre-LBO Settlement Equity Amount, on or promptly after the Effective Date, unless such Holder and Walter Industries shall have agreed to a less favorable treatment of such Claim. 3.22 Class U-7 Claims: Settlement Claims. Class U-7 Claims are not impaired and shall be treated as follows: (a) On or promptly after the Effective Date, the Celotex Settlement Fund Recipient shall receive, in full satisfaction of all Class U-7 Claims, consideration described herein equal to the aggregate Allowed Amount of the Class U-7 Claims, of which (i) $375 million shall be satisfied by a combination of Qualified Securities and New Common Stock, in the proportion described in the following sentence, together having an aggregate principal amount (in the case of Qualified Securities) and Veil Piercing New Common Stock Value Per Share (in the case of New Common Stock) equal to $375 million, on or promptly after the Effective Date, and (ii) such additional amount (but not to exceed $15 million) provided for in Section 2(a)(i) of the Second Amended and Restated Veil Piercing Settlement Agreement shall be satisfied by Cash. The aggregate principal amount of Qualified Securities used to satisfy a portion of the Veil Piercing Claims Amount shall be equal to 375/1473 times the aggregate principal amount of Qualified Securities to be distributed to Holders of Subordinated Note Claims and Settlement Claims under the Consensual Plan; and the excess of $375 million over the portion thereof satisfied by Qualified Securities (which portion shall be equal to the principal amount of such Qualified Securities) shall be satisfied by that number of shares of New Common Stock which is equal to the Veil Piercing New Common Stock Amount. (b) In the event that the Effective Date occurs after March 31, 1995, the Celotex Settlement Fund Recipient shall also receive an additional distribution consisting of New Senior Notes of the same series and with all of the same terms and provisions as the New Senior Notes issued as Qualified Securities, in a principal amount equal to the product of multiplying the principal amount of Qualified Securities to be received by the Celotex Fund Recipient pursuant to subparagraph (a) above by the Qualified Securities Adjuster; provided, however, that if no New Senior Notes are issued as Qualified Securities as a result of the issuance of Replacement Indebtedness under Section 4.19 of the Consensual Plan, such additional distribution shall be made solely in Cash. (c) The Second Amended and Restated Veil Piercing Settlement Agreement and the Charter provide that all shares of New Common Stock issued to the Celotex Settlement Fund Recipient under the Consensual Plan will be required to be voted by the Celotex Settlement Fund Recipient (or by the beneficiaries of the Celotex Settlement Fund Recipient) in the same proportion as the votes are cast by all other shares of New Common Stock on all matters and for all purposes. INTERCOMPANY CLAIMS 3.23 Class I-1 Claims: Intercompany IRB Claims. Class I-1 Allowed Claims are not impaired. The Holder of the Class I-1 Allowed Claims shall receive Cash in an amount equal to the Allowed Amount of such Claim, on or promptly after the Effective Date, unless the Holder thereof and Sloss shall have agreed to a less favorable treatment of such Claim. Upon payment in Cash of the Allowed Amount of the Intercompany IRB Claim, Sloss shall assume all unsatisfied obligations with respect to such Intercompany IRB in accordance with its original contractual terms. Upon the making of such payment and such assumption, any acceleration of any obligation and/or instrument or default in connection with such Intercompany IRB shall be rescinded, waived or cured and of no force or effect and the terms of such obligations and/or instrument shall be reinstated as if no such acceleration or default had occurred. 3.24 Class I-2 Claims: Pre-Filing Date Intercompany Notes Payable Claims. Class I-2 Claims are not impaired. Pre-Filing Date Intercompany Notes Payable Claims will be reinstated on the books and records of the respective Debtors. There will be no distributions under the Consensual Plan made in respect of any Pre-Filing Date Intercompany Notes Payable Claims, but such Claims may be paid after the Effective Date in the ordinary course of business. 3.25 Class I-3 Claims: Post-Filing Date Intercompany Notes Payable Claims. Class I-3 Claims are not impaired. Post-Filing Date Intercompany Notes Payable Claims will be reinstated on the books and records of the respective Debtors. There will be no distributions under the Consensual Plan made in respect of any Post-Filing Date Intercompany Notes Payable Claims, but such Claims may be paid after the Effective Date in the ordinary course of business. INTERESTS 3.26 Class E-1 Interests: Old Common Stock Interests in Hillsborough. Class E-1 Interests are impaired. All shares of Old Common Stock held by Holders of Class E-1 Interests shall be cancelled, annulled and extinguished as of the Effective Date. If Class E-1 accepts the Consensual Plan, each Holder of a Class E-1 Allowed Interest shall receive, in full satisfaction thereof, on or promptly after the Effective Date (except with respect to paragraphs (b) and (c) below), unless such Holder and Walter Industries shall have agreed to a less favorable treatment of such Interest: a. Such Holder's Pro Rata share of that number of shares of New Common Stock which is the product of multiplying the New Common Stock Residual Amount by a fraction, the numerator of which is $150 million, and the denominator of which is the New Common Stock Residual Allocation Denominator; b. As soon as practicable after all Federal Income Tax Claims have been allowed or disallowed by Final Order, such Holder's Pro Rata share of shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the Federal Income Tax Claims Differential; provided, however, that if shares of New Common Stock become issuable under this paragraph (b) and at such time shares are held in escrow pursuant to paragraph (c) below, shares issuable under this paragraph (b) shall, first, be issued directly to Holders of Class E-1 Interests up to a number of shares having an aggregate New Common Stock Value Per Share equal to the excess, if any, of (A) $88.7 million over (B) the aggregate New Common Stock Value Per Share of all shares theretofore issued into escrow under paragraph (c) below, and, second, be satisfied by the release from escrow of any remaining shares issuable under this paragraph (b); and provided, further, that the aggregate New Common Stock Value Per Share of the shares of New Common Stock issued to Holders of Class E-1 Interests pursuant to this paragraph (b) shall not exceed the amount which remains after subtracting (i) the aggregate New Common Stock Value Per Share of the shares of New Common Stock issued to Holders of Class E-1 Interests (excluding any shares issued to the Escrow Agent but not released to Holders of Class E-1 Interests) pursuant to paragraphs (a) and (c) of this Section 3.26, from (ii) $250,000,000; and c. As soon as practicable after the Tax Oversight Committee shall have determined that a Veil Piercing Settlement Tax Savings Event has occurred, Walter Industries shall issue and deliver into escrow to an escrow agent selected by Walter Industries and the Bondholder Proponents (the "Escrow Agent") certificates representing shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the Veil Piercing Settlement Tax Savings Amount which results from the Veil Piercing Settlement Tax Savings Event (as such amount is determined by the Tax Oversight Committee); provided, however, that in the event that, on or prior to the 160th day following the Effective Date, (i) one or more Veil Piercing Settlement Tax Savings Events shall not have occurred in respect of (and the Tax Oversight Committee shall not have determined) the maximum Veil Piercing Settlement Tax Savings Amount that could result from a good faith claim by the Walter Industries consolidated group, of both (a) a refund with respect to tax years prior to the tax year in which the Effective Date occurs, and (b) a deduction with respect to the tax year in which the Effective Date occurs (collectively, the "Initial Claim"), or (ii) Walter Industries shall not have issued and delivered into escrow certificates representing shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the full amount of such maximum Veil Piercing Settlement Tax Savings Amount, then not later than the 180th day after the Effective Date, Walter Industries shall issue and deliver into escrow certificates representing New Common Stock having an aggregate New Common Stock Value Per Share equal to the sum of (i) that part of the Veil Piercing Settlement Tax Savings Amount arising from the Initial Claim in respect of which shares of New Common Stock had not theretofore been issued into escrow, as such Veil Piercing Settlement Tax Savings Amount (whether or not a Veil Piercing Settlement Tax Savings Event shall previously have occurred) shall be estimated in good faith by the Chief Financial Officer of Walter Industries and set forth in a certificate delivered to the Tax Oversight Committee (and such amount shall be the Veil Piercing Settlement Tax Savings Amount for purposes of this sentence) and (ii) an additional amount equal to the lesser of (A) $13 million and (B) an amount that would cause the limit in clause (i) of the last sentence of this paragraph to be reached. In determining whether and in what amount deposits to the Escrow Agent shall be made hereunder, it shall be assumed that (1) the fair market value of the New Common Stock and Qualified Securities transferred to the Celotex Settlement Fund Recipient shall be equal to their aggregate New Common Stock Value Per Share and aggregate face amount, respectively; and (2) the transfer to the Celotex Settlement Fund Recipient constitutes economic performance under all relevant provisions of the Internal Revenue Code. Notwithstanding and in addition to the foregoing, $11.3 million of New Common Stock (using the New Common Stock Value Per Share) shall be issued directly to Holders of Class E-1 Interests on a Pro Rata basis, at the same time as shares are first issued into escrow. Any such shares of New Common Stock held in escrow shall be voted Pro Rata by the Holders of Class E-1 Interests, and any and all dividends and other distributions made thereon shall promptly be distributed Pro Rata to Holders of Class E-1 Interests, provided, that each such direct or indirect recipient of any such dividend or distribution shall be obligated to promptly return the amount of any dividends and other distributions received by such recipient in respect of shares of New Common Stock that were held in escrow and subsequently cancelled prior to release from escrow as provided below. As soon as practicable after the Tax Oversight Committee determines that a Veil Piercing Settlement Tax Savings Amount that had resulted from a Veil Piercing Settlement Tax Savings Event is no longer subject to adjustment because (i) the statutory period during which assessments (or denial of a refund claim) can be made with respect to such Veil Piercing Settlement Tax Savings Amount has passed, (ii) Walter Industries and the Internal Revenue Service or other relevant taxing authority have entered into a closing or similar agreement governing the years or issues in question with respect to such Veil Piercing Settlement Tax Savings Amount, or (iii) a court decision determining the income tax liability (or the right to such refund) with respect to such Veil Piercing Settlement Tax Savings Amount has been rendered and the time period for the filing of an appeal has passed, the Tax Oversight Committee shall give written notice instructing the Escrow Agent to release from escrow, and to deliver to Holders of Class E-1 Interests, their Pro Rata share of shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the Veil Piercing Settlement Tax Savings Amount that had satisfied the applicable condition set forth in (i), (ii) or (iii) of this sentence. On each date on which the Tax Oversight Committee ascertains whether any of the three conditions enumerated in the previous sentence has been met, or such other date(s) as the Tax Oversight Committee shall determine to be appropriate, the Tax Oversight Committee shall also determine whether (i) any maximum Veil Piercing Settlement Tax Savings Amount, taking into account all deductions then claimed with respect to the distribution under the Second Amended and Restated Veil Piercing Settlement Agreement, the then current status of any audits or challenges to such claimed deductions, and the maximum number of shares permitted to be issued under this paragraph (c) (taking into account shares previously issued or released from escrow pursuant to the provisions of paragraphs (a) and (b) above) and (ii) any maximum amount (not in excess of $13 million) that may be payable pursuant to paragraph (b) above, and reducing the aggregate of (i) and (ii) by the aggregate New Common Stock Value Per Share of all shares of New Common Stock previously released from escrow (the "Maximum") can be calculated, and if so, shall calculate such Maximum. At each such time as the Maximum is less than the aggregate New Common Stock Value Per Share of shares of New Common Stock then held in escrow, then the Tax Oversight Committee shall give written notice to the Escrow Agent (i) to return to Walter Industries for cancellation, and Walter Industries shall cause to be cancelled, shares of New Common Stock having an aggregate New Common Stock Value Per Share equal to the excess of the Maximum over the aggregate New Common Stock Value Per Share of the New Common Stock then held in escrow, and (ii) to return to Walter Industries any and all dividends or other distributions on such shares returned for cancellation. Notwithstanding anything else contained in this paragraph (c), the aggregate New Common Stock Value Per Share of the shares of New Common Stock (i) held in escrow by the Escrow Agent shall at no time exceed $88.7 million, and (ii) issued (directly or out of escrow) to Holders of Class E-1 Interests (together with shares then held in escrow on their behalf) pursuant to this paragraph (c) shall not exceed the amount which remains after subtracting (x) the aggregate New Common Stock Value Per Share of the shares of New Common Stock previously issued to Holders of Class E-1 Interests pursuant to paragraphs (a) and (b) of this Section 3.26, from (y) $250,000,000. The Company will give KKR prompt written notice of each determination made by the Tax Oversight Committee as required or permitted under Section 3.26 of the Consensual Plan (which notice shall set forth in reasonable detail the basis therefor). If KKR reasonably believes that any such determination is not in compliance with the terms of the Consensual Plan, including without limitation the provisions of Section 4.20, it shall, within forty-five days of its receipt of the applicable notice referred to in the preceding sentence, give prompt written notice to the Tax Oversight Committee thereof (which notice shall set forth in reasonable detail the basis for such belief). To the extent that the Tax Oversight Committee and KKR cannot resolve any disputed matters within fifteen days after the Tax Oversight Committee's receipt of KKR's notice, the remaining previously described disputed matters shall be submitted promptly to a nationally recognized accounting firm which shall be jointly selected by the Tax Oversight Committee and KKR as soon as practicable (the "Arbitrator"). Each of the Tax Oversight Committee and KKR shall be afforded the opportunity by the Arbitrator to present its case to the Arbitrator at its own expense (in the case of the Tax Oversight Committee, at the expense of Walter Industries) as soon as practicable, and the determination of the Arbitrator on whether the disputed determinations were made in compliance with the terms of the Consensual Plan shall be final and binding on all parties. The Arbitrator shall render its decision as soon as practicable, but in no event later than sixty days after its selection. The fees and expenses of the Arbitrator shall be borne equally by Walter Industries, on the one hand, and the holders of Old Common Stock Interests (on a Pro Rata basis), on the other hand. If Class E-1 rejects the Consensual Plan, Holders of Class E-1 Interests shall receive no distribution or consideration under the Consensual Plan. 3.27 Class E-2 Interests: Stock Acquisition Rights in Hillsborough. Class E-2 Interests are impaired. All Stock Acquisition Rights in Hillsborough shall be cancelled, annulled and extinguished as of the Effective Date. Holders of Class E-2 Interests shall receive or retain no property under the Consensual Plan on account of their Class E-2 Interests. 3.28 Class SE-1 Interests: Subsidiary Common Stock Interests in Debtors other than Hillsborough. Class SE-1 Interests are not impaired. Each Holder of a Class SE-1 Interest shall retain its Subsidiary Common Stock and shall not receive any distribution under the Consensual Plan in respect of its Class SE-1 interest. 3.29 Class SE-2 Interests: Stock Acquisition Rights in Debtors other than Hillsborough. Class SE-2 Interests are impaired. All Stock Acquisition Rights in Debtors other than Hillsborough shall be cancelled, annulled and extinguished as of the Effective Date. Holders of Class SE-2 Interests shall receive or retain no property under the Consensual Plan on account of their Class SE-2 Interests. ARTICLE IV MEANS FOR IMPLEMENTATION OF THE CONSENSUAL PLAN 4.1 Charter; Common Stock. (a) On or prior to the Effective Date, Walter Industries shall adopt and file the Charter with the Secretary of State of the State of Delaware. (b) All stock distributed pursuant to the Consensual Plan will be New Common Stock. Except as otherwise expressly provided in the Charter and the Consensual Plan, all shares of New Common Stock shall enjoy the same rights, benefits and privileges and shall not bear any restrictive legends on the stock certificates (except for legends prohibiting transfer other than in accordance with the Securities Act). 4.2 Amendments to Charter. From and after the Effective Date, amendments to the Charter shall be made in accordance with Delaware law, the terms of the Charter and the Bylaws and the Reorganization Documents. 4.3 Nonvoting Equity Securities. The certificates of incorporation of Walter Industries and each of the Debtors shall be amended, on or prior to the Effective Date, to prohibit the issuance by each Debtor of nonvoting capital stock to the extent required by the provisions of Section 1123(a)(6) of the Code. 4.4 Surrender and Cancellation of Instruments. (a) As of the close of business on the Effective Date, the transfer ledgers or registers and any other records determining record ownership maintained by the Bank Agents, the Indenture Trustees, Walter Industries or any Debtor (or any other trustees, transfer agents or registrars which may have been employed in connection therewith) for the Revolving Loans, the Working Capital Loans, the Series B & C Senior Notes, the Grace Street Notes, the Sloss IRB, the Subordinated Notes and all Interests shall be deemed to be closed, and for purposes of the Consensual Plan, there shall be no further changes in the record Holders of any Revolving Loans, Working Capital Loans, Series B & C Senior Notes, Grace Street Notes, Sloss IRB, Subordinated Notes or Interests on the books of the Bank Agents, the Indenture Trustees, Walter Industries or any Debtor (or any other trustees, transfer agents or registrars which may have been employed in connection therewith). Neither Walter Industries nor any other Debtor shall have any obligation to recognize any transfer of Revolving Credit Loans, Working Capital Loans, Series B & C Senior Notes, Grace Street Notes, Sloss IRB, Subordinated Notes or Interests occurring thereafter, but shall be entitled instead to recognize and deal with, for all purposes under the Consensual Plan, except as otherwise provided herein, only those Persons who were Holders of such loans, notes or Interests as of the close of business on the Effective Date, as reflected on the books of the Bank Agents, the Indenture Trustees, Walter Industries or any Debtor (or such other trustees, transfer agents or registrars), as the case may be. (b) No Holder of any Revolving Loans, Working Capital Loans, Series B & C Senior Notes, the Sloss IRB, Grace Street Notes, Subordinated Notes or Interests shall be entitled to any rights or distribution under the Consensual Plan unless and until such Holder shall have first surrendered or caused to be surrendered the relevant instrument, if any, held by such Holder to (i) the applicable Bank Agent, (ii) in the case of the Series B & C Senior Notes, the Series B & C Senior Note Trustee, (iii) in the case of the Subordinated Notes, the Disbursing Agent, (iv) in the case of the Grace Street Notes or Interests in the Old Common Stock, Walter Industries, or (v) in the case of the Sloss IRB, Sloss. To the extent any such Holder is not the holder of record of such relevant instrument, such Holder must deliver to the Person specified in the preceding sentence, together with the relevant instrument, documents reasonably satisfactory to Walter Industries evidencing succession of title from the record holder thereof. In the event that any such instrument has been lost, destroyed, stolen or mutilated, the Holder thereof may instead execute and deliver an affidavit of loss and indemnity with respect thereto in a form customarily utilized for such purposes that is reasonably satisfactory to Walter Industries together with, if Walter Industries so requests, a bond in form and substance (including, without limitation, amount) reasonably satisfactory to Walter Industries. (c) Promptly upon surrender of the relevant instruments referred to in Section 4.4(b), the applicable Bank Agent, Indenture Trustee or Walter Industries shall cancel such instruments, and the applicable Bank Agent or Indenture Trustee shall deliver such cancelled instruments to Walter Industries or otherwise dispose of such instruments in such manner as Walter Industries may request. At the times specified in Article III of the Consensual Plan, (i) the applicable Bank Agent, (ii) the applicable Indenture Trustee, (iii) the Disbursing Agent, (iv) Walter Industries or (v) Sloss, as the case may be, shall make the distributions provided for in Sections 4.5 and 4.6 of the Consensual Plan in accordance with Article III of the Consensual Plan. (d) Until a Holder of record on the Effective Date or its successor by operation of law surrenders the relevant instruments, if any, evidencing its Revolving Loans, Working Capital Loans, Series B & C Senior Notes, Grace Street Notes, Sloss IRB, Subordinated Notes or Interests, as the case may be, pursuant to Section 4.4(b) hereof, and the debt and/or equity securities to be issued in satisfaction thereof are issued and delivered by or on behalf of the applicable Debtors to such Holder, the Bank Agent, the Indenture Trustee or the Disbursing Agent for the account of such Holder as required by Section 4.5 of the Consensual Plan, such Holder shall have no rights under the debt and/or equity securities to be received by such Holder under the Consensual Plan. (e) Notwithstanding any other provision of the Consensual Plan, no Holder of a Secured Claim who is to receive a distribution under the Consensual Plan in respect of such Secured Claim shall receive such distribution until such Holder executes and delivers or causes to be executed and delivered any documents (in recordable form if appropriate) and/or surrenders or causes to be surrendered any personal property or other collateral (including shares of capital stock) in its possession or the possession of its agent or trustee or the applicable Bank Agent or Indenture Trustee, necessary to release any Lien(s) and retransfer all collateral held by it in connection with such Secured Claim. (f) As of the Effective Date, the Revolving Credit Agreement, the Working Capital Agreement, the Sloss IRB Indenture, the Series B & C Senior Note Indenture and each Indenture with respect to the Subordinated Notes, shall be terminated, deemed null and void and of no further force and effect as to the Debtors. Each Bank Agent or Indenture Trustee, on the one hand, and the Debtors, on the other hand, shall have no further obligations to each other under such Agreements and Indentures, except that the applicable nBank Agent or Indenture Trustee shall be entitled to assert any charging liens to which it may be entitled under such Agreements or Indentures. 4.5 Distributions to Holders of Allowed Claims and Interests. Walter Industries shall deliver or cause to be delivered, on behalf of the applicable Debtors, at the applicable times specified in Article III subject to compliance with the provisions of Section 4.4 hereof: (a) to each Holder of an Administrative Claim, a Priority Claim and an Allowed Claim in Classes S-1, S-2, S-3, S-4, S-5, S-7, S-8, S-9, S-10, U-1, U-2, U-3, and I-1, Cash in accordance with Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, and 3.23 respectively, hereof; (b) to the trustee under the New Senior Note Indenture on behalf of the Holders of Allowed Claims in Class S-6 as to which Claims the Series B & C Senior Note Claim Election was made, a global certificate representing the New Senior Notes to be delivered in accordance with Section 3.11 hereof (unless no New Senior Notes are issued on account of Series B & C Senior Note Claims); provided, however, that the Series B & C Senior Note Trustee shall be entitled to require, as a condition to issuance of New Senior Notes (or Cash in an amount based on having made the Series B & C Senior Note Claim Election if no New Senior Notes are issued on account of Series B & C Senior Note Claims) to any Holder of a Series B & C Senior Note Claim that claims entitlement thereto based upon the making of the Series B & C Senior Note Claim Election with respect to such Holders' Series B & C Senior Note Claim, that such Holder make such representations and provide such documentary proof as the Series B & C Senior Note Trustee may reasonably request demonstrating whether such Holder (or a predecessor Holder, as the case may be) timely made the Series B & C Senior Note Claim Election with respect to such Series B & C Senior Note Claim; and in connection therewith, the Series B & C Senior Note Trustee shall use commercially reasonable efforts, which may include the sending of notices and the review and updating of record holder lists and Depository Trust Company participants security position listings, to keep a current list of record holders of Series B & C Senior Note Claims as to which the Series B & C Senior Note Claim Election was timely made, in order to identify such record holders as of the Effective Date; (c) to the Disbursing Agent on behalf of the Holders of Subordinated Note Claims, instruments (which may include Cash) representing Qualified Securities and certificates representing New Common Stock, to be delivered in accordance with Sections 3.19, 3.20 and 3.21 hereof; provided, however, that the Disbursing Agent shall be entitled to require, as a condition to issuance of Qualified Securities and/or New Common Stock to any Holder of a Subordinated Note Claim that claims entitlement thereto based upon the making of or the failure to make the Subordinated Note Claim Election (and the Class U-4 Exchange Election, if applicable) with respect to such Holders' Subordinated Note Claim, that such Holder make such representations and provide such documentary proof as the Disbursing Agent may reasonably request demonstrating whether such Holder (or a predecessor Holder, as the case may be) timely made (or did not make) the Subordinated Note Claim Election (and the Class U-4 Exchange Election, if applicable) with respect to such Subordinated Note Claim; and in connection therewith, the Disbursing Agent shall use commercially reasonable efforts, which may include the sending of notices and the review and updating of record holder lists and Depository Trust Company participants security position listings, to keep a current list of record holders of Subordinated Note Claims as to which the Subordinated Note Claim Election (and the Class U-4 Exchange Election, if applicable) was timely made, in order to identify such record holders as of the Effective Date; provided, further, that in the event that the Disbursing Agent is not provided with evidence that would allow it to determine in a commercially reasonable manner whether the Subordinated Note Claim Election had been made with respect to one or more Subordinated Note Claims (each a "Non-Conforming Claim"), then the Disbursing Agent shall treat each such Subordinated Note Claim as though the Subordinated Note Claim Election (and the Class U-4 Exchange Election) had not been made with respect to such Subordinated Note Claim; provided, further, that the amount of Qualified Securities and New Common Stock to be distributed to each Holder of a Subordinated Note Claim (other than Non-Conforming Claims) and to the Celotex Settlement Fund Recipient under the Consensual Plan shall be determined on the assumption that the immediately preceding proviso will not apply to any Subordinated Note Claim, with the result that the amount of the Qualified Securities and New Common Stock to be distributed to any Holder of a Subordinated Note Claim (other than a Non-Conforming Claim) and the Celotex Settlement Fund Recipient will not be altered as a result of the fact that one or more Subordinated Note Claims are Non-Conforming Claims. (d) to the Series B & C Senior Note Trustee on behalf of the Holders of Allowed Claims in Class S-6, Cash and certificates representing New Common Stock in accordance with Section 3.11 hereof (it being understood that nothing in the Consensual Plan shall in any way modify or prejudice the right of the Series B & C Senior Note Trustee to assert its rights under the Series B & C Senior Note Indenture, including but not limited to Section 6.07 thereof, against the Holders of Class S-6 Claims); (e) to the Celotex Settlement Fund Recipient, instruments representing Qualified Securities and certificates representing New Common Stock and, if payable pursuant to Section 2(a)(i) of the Second Amended and Restated Veil Piercing Settlement Agreement, Cash, in accordance with Section 3.22 hereof; (f) to the Holders of Class E-1 Interests, certificates representing New Common Stock, in accordance with Section 3.26 hereof; and (g) to the Holders of Revolving Credit Bank Claims and Working Capital Bank Claims, certificates representing New Common Stock in accordance with Sections 3.6 and 3.7 hereof. 4.6 All Distributions to be Made by Walter Industries. (a) Walter Industries shall make all payments required to be made by any Debtor under the Consensual Plan on behalf of such Debtor. All Allowed Claims paid by Walter Industries hereunder shall be allocated by Walter Industries to the Debtor for whose benefit such Claims were satisfied in the same manner in which Allowed Claims incurred by the Debtors and paid by Walter Industries in the ordinary course of business are allocated to the Debtors. Intercompany accounts shall be established for any amounts paid by a Debtor on behalf of any other Debtor hereunder on the books and records of such Debtors. (b) At the option of Walter Industries, except as otherwise required or provided in the Consensual Plan or by any applicable agreement, any Cash payment to be made by or on behalf of any Debtor pursuant to the Consensual Plan may be made by a check drawn on a United States bank mailed by first class mail or by wire transfer. (c) Payments in respect of all Revolving Credit Bank Claims and Revolving Credit Agents Claims (other than to White & Case) shall be made by wire transfer of immediately available funds to the Revolving Credit Agents, and payments in respect of all Working Capital Bank Claims and Working Capital Agents Claims (other than to White & Case) shall be made by wire transfer of immediately available funds to the Working Capital Agents, in each case for distribution to Holders of Allowed Revolving Credit Bank Claims and Allowed Working Capital Bank Claims, respectively, in accordance with the Consensual Plan. All consideration paid or distributed by Walter Industries on behalf of the Debtors to the Bank Agents on account of Allowed Claims shall be for the account of each Holder of such Allowed Claims, and any Claims filed by individual Holders shall be disallowed as duplicative. Such consideration shall be subject to any rights of the applicable Bank Agent for compensation and reimbursement of its fees and expenses (including the reasonable fees and expenses of its counsel) asserted by such Bank Agent to the extent that such Bank Agent does not receive payment of such fees and expenses from the Debtors. 4.7 Fractional Shares; New Senior Notes Less Than $1,000. Fractional shares of New Common Stock will not be issued or distributed; instead, fractional amounts will be rounded down to the nearest whole share, and the New Common Stock Value Per Share of fractional shares shall be satisfied by Cash. New Senior Notes will not be issued in denominations of less than $1,000, and amounts less than $1,000 that would otherwise be satisfied by New Senior Notes under the Consensual Plan shall be satisfied by an equal amount of Cash. 4.8 Execution and Delivery of Reorganization Documents. On or before the Effective Date, each of the Reorganization Documents shall be executed and delivered by each of the parties thereto. 4.9 New Capital Stock of Debtors. Except with respect to the issuance of New Common Stock and the cancellation, annulment and extinguishment of the Old Common Stock, in accordance with the terms of the Consensual Plan, no change in the ownership of the capital stock of any of the Debtors shall be required in connection with the implementation of the Consensual Plan. 4.10 Resolution of Disputed Claims. All objections to Disputed Claims shall be filed by the Debtors and/or the Bondholders Committee on or before the date established in the Confirmation Order as the last date for filing objections to Disputed Claims. The objecting party shall serve a copy of each such objection upon the Holder of the Disputed Claim to which it pertains. 4.11 Reserves for Disputed Claims. On or promptly after the Effective Date, the applicable Debtor shall reserve or cause to be reserved, in an account, segregated in trust, for the account of each Holder of a Disputed Claim (a) (i) that property other than Cash which would otherwise be distributable to such Holder on the Effective Date were such Disputed Claim an Allowed Claim on the Effective Date (i.e., Qualified Securities other than Cash, New Common Stock and/or New Senior Notes), or such other property as the Holder of such Disputed Claim and Walter Industries may agree upon, or (ii) in the case of Cash, such amount as the Court shall order, or (b) that property specified by a Final Order. The property so reserved for the Holder of such Disputed Claim shall be distributed to such Holder, to the extent such Disputed Claim is allowed, only after such Disputed Claim becomes an Allowed Claim. To the extent interest is earned on reserved Cash, such interest shall be held by or on behalf of the applicable Debtor as additional reserved Cash for the account of the Holder for whom such reserved Cash is held; reserved Cash, net of federal and state income taxes and costs and expenses incurred with respect thereto, shall be distributed to the Holder of a Disputed Claim which becomes an Allowed Claim in accordance with Sections 4.5 and 4.13 of the Consensual Plan. 4.12 Investment of Reserves. The Debtors shall deposit or invest all Cash held from time to time in reserve consistent with their customary investment policies giving due regard to the Debtors' likely need for such monies to satisfy Disputed Claims. 4.13 Excess Reserves. As each Disputed Claim becomes an Allowed Claim, the Debtor from which the reserved property derived shall become vested with all right, title and interest in that property, if any, reserved for, but not distributed to, the Holder of such Disputed Claim (including interest, if any earned thereon) as a consequence of the Allowed Amount of such Disputed Claim having been fixed at less than the amount stated in such Disputed Claim. 4.14 Unclaimed Property. Subject to Section 4.16 hereof, in accordance with Sections 347 and 1143 of the Code, any Holder that fails to surrender the instrument, if any, evidencing its Claim or Interest, as provided herein, within two (2) years from and after the Effective Date shall be deemed to have forfeited all rights and Claims and Interests and shall not participate in any distribution on account of the Consensual Plan. Any Cash, including interest earned thereon, that is unclaimed for two (2) years after being held by the applicable Bank Agent or Indenture Trustee or Walter Industries for absence of a mailing address shall be returned to and revested in Walter Industries. 4.15 Non-Negotiated Checks. If a Holder of an Allowed Claim fails to negotiate a check issued to such Holder pursuant to the provisions of Article III of the Consensual Plan within one (1) year of the date such check was issued, then the amount of Cash attributable to such check shall be deemed to be unclaimed property in respect of such Holder's Claims and shall be revested in Walter Industries. 4.16 Returned Distributions. If a distribution to any Holder of an Allowed Claim or Interest made pursuant to the Consensual Plan is returned to the applicable Bank Agent or Indenture Trustee or to Walter Industries or the Debtors, due to an incorrect or incomplete address for the Holder of such Allowed Claim, then such Bank Agent or Indenture Trustee shall promptly so notify Walter Industries and Walter Industries, on behalf of the Debtors, shall publish a notice once in The Wall Street Journal (National Edition) and The New York Times (National Edition) not later than two (2) years after the date on which such distribution was made listing the name of such Holder and the distribution due such Holder and stating that unless such Holder contacts Walter Industries or the applicable Debtor within sixty (60) days following the date such notice appears in such newspapers and provides Walter Industries or the applicable Debtor with an accurate address, such distribution shall be deemed to be unclaimed property in respect of such Holder's Allowed Claim or Interest and such Holder shall be deemed to have no further entitlement in respect of such distribution and shall not participate in any further distributions under the Consensual Plan. 4.17 Claims Against Two or More Debtors. Solely for the purpose of determining the allowed status of such Claims, to the extent any Creditor holds Claims against two or more Debtors arising out of a single debt or liability, whether by virtue of joint-and-several liability, or status as co-obligors or cross-guarantors, such Claims may be Allowed Claims against each such Debtor, subject to all defenses and rights of each such Debtor, but such Creditor shall not be entitled to recover, in the aggregate, more than the amount of such single debt or liability. This section shall not affect any rights of contribution or reimbursement among Debtors or affect any determination of the solvency of any Debtors under the Code. 4.18 Direction to Parties. From and after the Effective Date, any Holder and any of the Debtors may apply to the Court for an order directing any of the Debtors or any necessary party, as the case may be, to execute or deliver or to join in the execution or delivery of any instrument required to effect a transfer of property in accordance with the Consensual Plan, and to perform any other act, including the satisfaction of any Lien, that is necessary for the Confirmation of the Consensual Plan, pursuant to Section 1142(b) of the Code. 4.19 Financing Matters. Walter Industries and the Bondholder Proponents shall consult and cooperate for purposes of obtaining the Exit Financing and entering into the New Working Capital Facility and the Mid-State Homes Warehouse Credit Facility, in each case as of the Effective Date. The Bondholder Proponents shall determine and fix the amount (subject to the limitation contained in the definition of New Senior Notes contained herein), terms and conditions of, and shall select the underwriters, placement and/or other financing sources with respect to, the Exit Financing, all of which shall be on commercially reasonable terms consistent with then-existent market conditions and be reasonably satisfactory to Walter Industries; provided, that Lehman Brothers Inc. shall act as lead manager for, and Merrill Lynch, National Westminster Bank, plc and Nomura Securities shall be given the opportunity to act as co-manager of, any Exit Financing described in clause (i) of the definition thereof and in each case the terms of any such manager or co-manager arrangement shall be on commercially reasonable terms consistent with then-existing market conditions. Subject to the immediately following sentence, Walter Industries shall determine and fix the amount, terms and conditions of, and shall select the lenders and/or other financing sources with respect to, the New Working Capital Facility (subject to the limitation as to amount contained in the definition thereof contained herein) and the Mid-State Homes Warehouse Credit Facility (subject to the limitation as to amount contained in the definition thereof contained herein), all of which shall be on commercially reasonable terms consistent with then-existing market conditions and be reasonably satisfactory to the Bondholder Proponents; provided, that Walter Industries shall select Bank of Boston as lead agent or co-agent for the New Working Capital Facility, and National Westminster Bank, plc as lead agent or co-agent for the Mid-State Homes Warehouse Credit Facility, in each case if such lenders are willing to participate in such financings on terms no less favorable to Walter Industries than the terms proposed by any other financial institution and previously agreed to by Walter Industries, and in each case the terms of any such agency or co-agency shall be on commercially reasonable terms consistent with then-existing market conditions; provided, further, that the Debtors may incur additional indebtedness (the "Replacement Indebtedness") in an amount sufficient to permit them to pay (and which shall be used to pay) either or both of the following: (i) all (but not less than all) amounts in Cash that would otherwise be satisfied by New Senior Notes issued as Qualified Securities on the Effective Date, and/or (ii) all (but not less than all) amounts in Cash that would otherwise be satisfied by New Senior Notes issued to Holders of Series B & C Senior Note Claims on the Effective Date, which may include additional indebtedness of up to $50 million in excess of such amount (unless the Debtors and Lehman Brothers Inc. shall agree to a greater amount of indebtedness), the terms and conditions of which indebtedness shall be reasonably satisfactory to the Bondholder Proponents. Notwithstanding the preceding sentence, if either (i) on or prior to January 15, 1995, the Debtors shall not have obtained fully executed and binding written commitment letters from one or more financial institutions for each of the Mid-State Homes Warehouse Credit Facility and the New Working Capital Facility, which commitment letters shall have, as conditions to funding, no conditions other than conditions customary for financings of this size and nature, which shall be consistent with the Exit Financing and which may include a customary material adverse change condition, but which may not include any condition(s) or other provision(s) that require or would require, as a condition to funding, directly or indirectly, the Confirmation Order (as described in Section 10.1(a) of the Consensual Plan) having become a Final Order, whether any such condition(s) or provision(s) relates to issuance of opinions of counsel, officers' certificates or other certificates, any representation, warranty or covenant, or otherwise; or (ii) on or prior to the second Business Day prior to the commencement of the hearing on confirmation of the Consensual Plan, the Debtors shall not have obtained fully executed and binding definitive documents evidencing the New Working Capital Facility and the Mid-State Homes Warehouse Credit Facility, which agreements shall have, as conditions to funding, no conditions other than conditions customary for financings of this size and nature, which shall be consistent with the Exit Financing and which may include a customary material adverse change condition, but which may not include any condition(s) or other provision(s) that require or would require, as a condition to funding, directly or indirectly, the Confirmation Order (as described in Section 10.1(a) of the Consensual Plan) having become a Final Order, whether any such condition(s) or provision(s) relates to issuance of opinions of counsel, officers' certificates or other certificates, any representation, warranty or covenant, or otherwise; (collectively, such documents are referred to herein as the "Definitive Financing Documents"), then, in each case from and after such date, the Bondholder Proponents shall be entitled to negotiate on behalf of and deliver to the Debtors, and the Bondholder Proponents shall exercise responsibility with respect to determining the terms and conditions of, the Mid-State Homes Warehouse Credit Facility and/or the New Working Capital Facility, as the case may be, provided that such facilities shall be reasonably satisfactory to Walter Industries but need not be on the terms previously accepted by Walter Industries or the best available terms. Any provisions of this Section 4.19 to the contrary notwithstanding, it is understood that the amount, terms and conditions of any New Senior Notes comprising part of the Exit Financing shall be consistent with the requirements set forth in the definition of "New Senior Notes" in the Consensual Plan and that such New Senior Notes may be secured by a pledge of all of the common stock of the subsidiaries of Walter Industries. 4.20 Federal Tax Claim Matters. The Allowed Amount of, and any other terms of any settlement or agreement regarding, Federal Income Tax Claims shall not be agreed to by any Debtor without the prior consent of the Tax Oversight Committee. Any settlement or agreement in respect of Federal Income Tax Claims shall be wholly independent of and separate from any settlement or understanding or agreement in respect of any deduction or other tax benefit that may be realized by any Debtor on account of distributions made under the Second Amended and Restated Veil Piercing Settlement Agreement. 4.21 "Promptly After the Effective Date. "The term "promptly after the Effective Date" as used in the Consensual Plan shall mean as soon as practicable after the Effective Date, but in no event later than thirty (30) days after the Effective Date or, if later, thirty (30) days after a Claim shall have become an Allowed Claim or thirty (30) days after compliance with Section 4.4 of the Consensual Plan, if applicable. ARTICLE V MANAGEMENT OF WALTER INDUSTRIES 5.1 Corporate Governance; Directors and Officers. Except where otherwise expressly provided in the Consensual Plan, the corporate governance of the Debtors and the election and appointment of the directors and officers of the Debtors shall be carried out in accordance with the respective articles of incorporation and bylaws of the Debtors and the laws of the respective states in which the Debtors are incorporated. 5.2 Reconstitution of Board of Directors of Walter Industries. On the Effective Date, the Board of Directors of Walter Industries shall be replaced by a New Board of Directors (the "New Board"). The full size of the New Board shall be nine (9) Directors; provided, that, until the two Independent Directors are selected as provided below, the New Board may initially be composed of seven (7) directors not including the two Independent Directors. The New Board shall consist of the following: (i) G. Robert Durham, the present President, Chief Executive Officer and Director of Walter Industries; (ii) James W. Walter, the present Chairman of Walter Industries; (iii) Kenneth J. Matlock, the present Executive Vice President, Chief Financial Officer and Director of Walter Industries; (iv) one director designated by KKR; (v) three directors designated by Lehman Brothers Inc.; and (vi) two Independent Directors who shall be selected by current management of Walter Industries from a list of qualified candidates provided by an independent search firm that shall be selected as promptly as practicable by Walter Industries and Lehman Brothers Inc. and retained by Walter Industries, copies of which list shall be provided to the Bondholders Committee contemporaneously with its submission to Walter Industries. If any director initially designated pursuant to the preceding sentence fails for any reason to complete his initial three year term, then substitute director(s) shall be designated for the remainder of such three year term by the entity (or, in the case of Independent Directors, by the procedure) that initially designated the director under this Section 5.2, except that in the case of the three director seats initially held by Messrs. Durham, Walter and Matlock, substitutes shall be senior officers(s) of Walter Industries designated by the remaining directors of Walter Industries then in office. Notwithstanding the foregoing, during the initial three-year term of the New Board, (i) if, at any time after six months after the Effective Date of the Consensual Plan, Lehman Brothers Inc. notifies KKR that it has determined to transfer to KKR the right to appoint one of the three Directors initially to be appointed under the Consensual Plan by Lehman Brothers Inc., KKR shall have the right to (a) compel the director identified by Lehman Brothers Inc. (from among those designated by Lehman Brothers Inc.) to resign his or her position as a member of the New Board and (b) appoint the successor to such directorship pursuant to this Section 5.2; (ii) in the event that at any time after the Effective Date, Lehman Brothers Inc. and its Affiliates fail to have "beneficial" ownership, as that term is used in Rule 13d-3 under the Securities Exchange Act of 1934, as amended ("Beneficial Ownership" and its correlative meaning "Beneficially Owned"), of 8% or more of the outstanding common stock of Walter Industries (or its successor by merger, consolidation or otherwise) (without including any shares held in escrow pursuant to Section 3.26 of the Consensual Plan) (the "Outstanding Common Stock"), then if KKR and its Affiliates have, at such time, Beneficial Ownership of 8% or more of the Outstanding Common Stock, KKR shall have the right to (a) compel the director identified by Lehman Brothers Inc. (from among those designated by Lehman Brothers Inc.) to resign his or her position as a member of the New Board and (b) appoint the successor to such directorship pursuant to this Section 5.2; (iii) in the event that at any time after the Effective Date, if two members of the New Board are KKR designees and if KKR and its Affiliates fail to have Beneficial Ownership of 8% or more of the Outstanding Common Stock, and Lehman Brothers Inc. and its Affiliates have, at such time, Beneficial Ownership of 8% or more of the Outstanding Common Stock, then Lehman Brothers Inc. shall have the right to (a) compel the director identified by KKR (from among those designated by KKR) to resign his or her position as a member of the New Board and (b) appoint the successor to such directorship pursuant to this Section 5.2; and (iv) in the event that at any time after the Effective Date either Lehman Brothers Inc. and its Affiliates, or KKR and its Affiliates, fail to have Beneficial Ownership of 5% or more of the Outstanding Common Stock, then the directors appointed under this Section 5.2 by Lehman Brothers Inc. or by KKR, respectively, shall resign and the remaining directors of Walter Industries shall appoint their successor(s) for the remainder of the initial three-year term; provided, however, that notwithstanding the preceding clauses (i)-(iv), a KKR designee shall at all times be on the New Board (until the third anniversary of the Effective Date) if, and so long as, the shares of New Common Stock Beneficially Owned by KKR and its Affiliates, together with shares held in escrow under Section 3.26(c) of the Consensual Plan that would be distributed to KKR or its Affiliates upon release from escrow, shall together equal 5% or more of the then outstanding common stock of Walter Industries (or its successor by merger, consolidation or otherwise) (including as part of the then outstanding common stock, for purposes of this calculation only, any shares held in escrow pursuant to Section 3.26 of the Consensual Plan). The Debtors shall file with the Court the list of proposed directors (other than Independent Directors) not later than ten (10) days prior to the commencement of the confirmation hearing regarding the Consensual Plan. 5.3 Management Stock; New Incentive Plans. As of the Effective Date, a number of shares of New Common Stock equal to 6% of the New Common Stock which would be outstanding on the Effective Date after giving effect to the issuance of shares of New Common Stock pursuant to the Consensual Plan shall be reserved for issuance and delivery, from time to time, in the discretion of the New Board to the management of Walter Industries and its subsidiaries and certain other employees of Walter Industries and its subsidiaries upon the terms and subject to the conditions of certain incentive agreements and/or plans to be entered into and/or adopted, as the case may be, on or about the Effective Date by Walter Industries in the form agreed to by the New Board. Such incentive agreements and/or plans may also provide for the granting of restricted stock rights, stock appreciation rights or other incentive awards. To the extent, if any, that Court approval is necessary under Section 1129(a) of the Code, such approval shall be deemed to have been granted by entry of a Confirmation Order. 5.4 Funding of Retiree Health Benefits. On the Effective Date, Walter Industries and Computer Services shall set aside, in trust(s), funds (not to exceed $7 million in the aggregate) sufficient to provide reasonable assurance (on an actuarial basis in the judgment of the Boards of Directors of Walter Industries and Computer Services) of the continued funding of medical benefits, under the post-retirement medical benefit plans of Walter Industries and Computer Services from time to time in effect, upon the retirement of current employees whose benefits in such plan have vested and to retired employees of Walter Industries and Computer Services following the dissolution of Walter Industries and/or Computer Services, divestiture of Walter Industries' operating subsidiaries or other event which would render Walter Industries and/or Computer Services unable to continue the current funding of such benefits. 5.5 Effective Date Bonus Awards. No later than 20 days prior to the commencement of the confirmation hearing on the Consensual Plan, the Board of Directors of Walter Industries may, in its sole discretion, prepare a schedule of Cash bonuses (and shall transmit a copy of such schedule to the Bondholders Committee and file the same with the Court) to be paid on or after the Effective Date to the management of Walter Industries and its subsidiaries who are employed by Walter Industries or such subsidiaries on the Effective Date, provided, that the aggregate amount of such bonuses shall not exceed $5 million. To the extent that Court approval is necessary under Section 1129(a) of the Code, such approval shall be deemed to have been granted by entry of a Confirmation Order. ARTICLE VI RELEASES AND INDEMNIFICATION 6.1 Release by Holders of Claims or Interests. As of the Effective Date, Holders of any Claims or Interests (and all trustees and/or agents on behalf of such Holders): (i) that receive (or on whose behalf the Celotex Settlement Fund Recipient receives) any property or New Common Stock to be distributed to or for the benefit of a Holder of any Claims, Demands or Interests pursuant to Article III of the Consensual Plan and in consideration therefor; (ii) in a Class that accepts or is deemed to have accepted the Consensual Plan; or (iii) that marked a box on the ballot sent to such Holder for purposes of voting whether to accept or reject the Creditors' Plan, indicating such Holder's agreement to grant the release provided in Section 6.1 of the Creditors' Plan shall be deemed to have released, to the extent permitted by the Court, the Debtors, the Existing Equityholders, the Proponents, the KKR Parties, the Apollo Parties, the Lehman Parties, the other Parties (as that term is used in the Second Amended and Restated Veil Piercing Agreement) to the Second Amended and Restated Veil Piercing Settlement Agreement, the Holders of Revolving Credit Bank Claims, the Holders of Working Capital Bank Claims, the Revolving Credit Agents, the Working Capital Agents, the Holders of Series B & C Senior Note Claims, the Holders of Subordinated Note Claims, the Series B & C Senior Note Trustee, the Subordinated Note Trustees, the members of the Official Committees, the members of the Ad Hoc Committee of Pre-LBO Bondholders and the respective present and former parents, subsidiaries, Affiliates, directors, officers, partners (general and limited), shareholders (record and beneficial), employees, agents, advisors, predecessors in interest and representatives of all of the foregoing, in each case in any and all of such released Person's aforementioned capacities (including, without limitation, with respect to each of the Bondholder Proponents and the Series B & C Senior Note Trustee, any action or inaction related to or set forth in the definition of Qualified Securities or New Senior Notes herein or in the description of "Financing Matters" in Section 4.19 hereof); provided, however, that the foregoing release shall not include The Celotex Corporation and its subsidiaries (in any capacity), but shall include the respective present and former shareholders (record and beneficial), directors, officers, partners (general and limited), employees, agents, advisors and representatives of The Celotex Corporation and its subsidiaries (but excluding The Celotex Corporation and its subsidiaries) (collectively, the Persons released in this Section 6.1 are referred to herein as the "Released Parties"), of and from any and all Claims, claims, obligations, rights, causes of action, Demands and liabilities (other than the right to enforce the Debtors' obligations under the Consensual Plan) which such Holder may be entitled to assert, whether known or unknown, foreseen or unforeseen, then existing or thereafter arising, based in whole or in part upon any act, omission or other occurrence taking place from the beginning of time to and including the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Consensual Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO- Related Issues). 6.2 Release By Debtors. (a) As of the Effective Date, the Debtors shall be deemed to have waived and released any and all claims, obligations, rights, causes of action and liabilities, whether known or unknown, foreseen or unforeseen, then existing or thereafter arising, which are based in whole or in part upon any act, omission or other occurrence taking place on or prior to the Effective Date and which may be asserted by or on behalf of any of the Debtors, against any of the Released Parties, in any of their respective capacities, and (b) on the Effective Date, the Debtors, for good and valuable consideration, the adequacy of which is hereby confirmed, shall be deemed to have waived and released any and all claims, obligations, rights, causes of action and liabilities (including, without limitation, causes of action arising under Sections 544, 547 and 548 of the Code, but excluding any rights of the Debtors to enforce the Consensual Plan), whether known or unknown, foreseen or unforeseen, then existing or thereafter arising, which are based in whole or in part upon any act, omission or other occurrence taking place on or prior to the Effective Date and which may be asserted by or on behalf of any of the Debtors against any Released Party; provided, however, that the foregoing release shall not apply to claims, obligations, rights, causes of action and liabilities arising in the ordinary course of the Debtors' business in connection with the conduct thereof. 6.3 Dismissal of Lawsuits and Related Releases. Without limiting the scope or the generality of the foregoing Sections 6.1 and 6.2, and without limiting any rights against Persons that are not Released Parties, (i) the Debtors and the other named parties in such lawsuits shall cause to be dismissed with prejudice, as to all Released Parties on the Effective Date, Mellon Bank, N.A. and Bank of New York v. Kohlberg Kravis Roberts & Co., et al, Adversary Proceeding No. 94-17 pending before the Court; (ii) the Debtors, KKR, and all other parties named as plaintiffs in Hillsborough Holdings Corp., et al., v. Leon Black, et al., Adversary Proceeding No. 94-562, pending before the Court, shall cause said adversary proceeding to be dismissed with prejudice as to all defendants therein on the Effective Date; and (iii) the Debtors and the KKR Parties shall deliver to Apollo and Lehman Brothers Inc., for the benefit of the Apollo Parties and the Lehman Parties, respectively, and Apollo and Lehman Brothers Inc., for the Apollo Parties and the Lehman Parties, respectively, shall deliver to Walter Industries, for the benefit of the Debtors and the KKR Parties, executed releases in substantially the form of Exhibit 7 hereto. Said releases shall not apply to the right to enforce the Debtors' obligations and those of any other person or entity under the Consensual Plan, and shall not affect any party's right to receive distributions under the Consensual Plan. 6.4 Indemnification. The articles of incorporation and/or the bylaws of each of the Debtors shall provide that each of the Debtors shall jointly and severally indemnify, hold harmless and reimburse its present and former officers and directors and such other natural Persons as are described therein from and against any and all losses, claims, damages, fees, expenses, liabilities and actions pursuant to the terms of such indemnity. All rights of Persons indemnified pursuant to contract, corporate charter or bylaws, or applicable law by any one or more of the Debtors as of the Filing Date, or at any time during these Chapter 11 Cases, shall survive Confirmation of the Consensual Plan, shall not be discharged pursuant to Section 1141 of the Code, and shall not be subject to disallowance due to the contingent or unliquidated nature of such right under Section 502(e)(1) of the Code. However, any such right of indemnification shall be enforceable only to the extent that it is valid and enforceable under applicable nonbankruptcy law, and shall be subject to any and all defenses available under applicable nonbankruptcy law. The failure to object to the allowance of any such right (or claim) for indemnity shall in no way preclude, bar or otherwise affect any defense or other challenge to any such indemnity under applicable nonbankruptcy law. The Debtors may confirm any such contractual indemnification by contract, resolution or otherwise as they may deem appropriate, in accordance with applicable nonbankruptcy law. ARTICLE VII ENTERPRISE VALUE 7.1 Enterprise Value. Except as expressly provided in the definition of New Common Stock Value and in Section 3.22 herein, the Negotiated Enterprise Value shall be used for all purposes of the Consensual Plan relating to the allocation or value of New Common Stock, and shall not be increased or decreased at any time or for any reason, including, without limitation, any change in the business, results of operations, condition (financial or otherwise), properties, Assets or prospects of any Debtor. ARTICLE VIII EXECUTORY CONTRACTS 8.1 Assumption of Executory Contracts. All Executory Contracts that have not been rejected before ninety (90) days after the Effective Date shall be deemed assumed as of the Confirmation Date; provided, however, that the Proponents reserve the right to assume or reject after the 90th day after the Effective Date any Executory Contract which is subject to a motion pending as of such 90th day to assume or reject such Executory Contract. The Executory Contracts listed on Exhibit 6 attached hereto are expressly rejected under the Consensual Plan, without admitting that any of the items listed on Exhibit 6 is an Executory Contract, and without admitting any liability as a result of such rejection or otherwise. 8.2 Cure of Defaults. As to any Executory Contract assumed pursuant to this Consensual Plan, Walter Industries and/or the applicable Debtor, as the case may be, shall, pursuant to the provisions of Section 1123(a)(5)(G) of the Code, cure or demonstrate the ability to cure all defaults (except those specified in Section 365(b)(2) of the Code) existing under and pursuant to such Executory Contract by paying or demonstrating the ability to pay the amount, if any, of such Executory Contract Claim. Payment of any such Executory Contract Claim shall be in full satisfaction, release, discharge and cure of all such defaults (including any other Claims Filed by any such party as a result of such existing defaults); provided, however, that if any Person Files, within thirty (30) days of the Filing of a proof of claim with respect to any Executory Contract Claim, an objection in writing to the amount set forth, the Court shall determine the amount actually due and owing in respect of the defaults or shall approve the settlement of any such Executory Contract Claim. 8.3 Claims for Damages. Each Person that is a party to an Executory Contract rejected pursuant to this Article VIII shall be entitled to File, not later than thirty (30) days after the issuance of a Final Order of the Court authorizing such rejection, a proof of claim for damages alleged to have arisen from the rejection of the Executory Contract to which such Person is a party, or be forever barred. Objections to any such proof of claim shall be Filed not later than sixty (60) days after such proof of claim is Filed, and the Court shall determine any such objections. Notwithstanding the foregoing, no Person that is a party to any Executory Contract listed on Exhibit 6 to the Consensual Plan shall have any Claim (whether an Administrative Claim, an Other Unsecured Claim or otherwise) or any claim for damages or any other relief against any Debtor on account of any such Executory Contract or the rejection thereof, and any and all such Claims or claims are forever released by all such Persons, discharged and enjoined and no distribution shall be made thereon; provided, that this sentence shall not apply to Claims or claims for directors' fees or expenses, or business expenses incurred by officers or other employees of the Debtors. 8.4 Classification of Claims. Unsecured Claims arising out of the rejection of Executory Contracts shall be Class U-3 Claims (Other Unsecured Claims). ARTICLE IX RETENTION OF JURISDICTION 9.1 Jurisdiction of Court. Notwithstanding the entry of the Confirmation Order or the Effective Date having occurred, the Court will retain jurisdiction of the Chapter 11 Cases for the following purposes: (a) To hear and determine any and all pending applications for the rejection and disaffirmance, assumption or assignment of Executory Contracts, any objections to Claims resulting therefrom, and the allowance of any Claims resulting therefrom; (b) To hear and determine any and all applications, adversary proceedings, contested matters and other litigated matters pending on the Confirmation Date; (c) To ensure that the distributions to Holders of Allowed Claims and Interests are accomplished as provided herein and in the Reorganization Documents; (d) To hear and determine any objections to Claims filed, before or after Confirmation; to allow or disallow, in whole or in part, any Disputed Claim, and to hear and determine other issues presented by or arising under the Consensual Plan; (e) To enter and implement such orders as may be appropriate in the event implementation of the Confirmation Order or Consensual Plan is for any reason stayed, or the Confirmation Order is reversed, revoked, modified or vacated; (f) To hear and determine all applications for compensation of professionals and reimbursement of expenses under Sections 330, 331, 503(b) or 1129(a)(4) of the Code; (g) To hear the Proponents' application, if any, to modify the Consensual Plan in accordance with Section 1127 of the Code (after Confirmation, any Proponent may also, so long as it does not adversely affect the interest of Holders, institute proceedings in the Court to remedy any defect or omission or reconcile any inconsistencies in the Consensual Plan, Disclosure Statement or Confirmation Order, in such manner as may be necessary to carry out the purposes and effects of the Consensual Plan); (h) To enforce and to hear and determine disputes arising in connection with the Consensual Plan or its implementation, including disputes among Holders and disputes arising under the Reorganization Documents, the Second Amended and Restated Veil Piercing Settlement Agreement, the Pre-LBO Bondholders Settlement Agreement, or any other agreements, documents or instruments executed in connection with the Consensual Plan; (i) To construe and to take any action to enforce the Consensual Plan, Reorganization Documents and Confirmation Order, and issue such orders as may be necessary for the implementation, execution and consummation of the Consensual Plan and the execution, delivery and performance of the Reorganization Documents; (j) To construe and to take any action to enforce the Second Amended and Restated Veil Piercing Settlement Agreement and the Pre-LBO Bondholders Settlement Agreement, including without limitation, the enforcement of the settlement injunction and the releases contained or provided for therein, and issue such orders as may be necessary for the implementation of the Second Amended and Restated Veil Piercing Settlement Agreement and the Pre-LBO Bondholders Settlement Agreement; (k) To determine such other matters and for such other purposes as may be provided in the Confirmation Order; (l) Except as provided in Section 3.26(c) herein with respect to the Arbitrator, to hear and determine any motions, contested matters or adversary proceedings involving taxes, tax refunds, tax attributes and tax benefits and similar or related matters, with respect to the Debtors or their estates arising prior to the Effective Date or relating to the period of administration of the Chapter 11 Cases; (m) To hear and determine any other matters related hereto and not inconsistent with Chapter 11 of the Code; and (n) To enter a final decree closing the Chapter 11 Cases. ARTICLE X CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS 10.1 Conditions to Confirmation. Confirmation of this Consensual Plan shall not occur unless and until each of the following conditions shall have been satisfied or have been waived by all of the Proponents (or, if specified, solely by certain of the Proponents): (a) The Court shall have entered the Confirmation Order on or prior to March 3, 1995, which order shall, among other things, include (i) the approval of the Veil Piercing Settlement and the Second Amended and Restated Veil Piercing Settlement Agreement and (ii) a finding that the filing of the Consensual Plan did not constitute a breach of the Pre-LBO Bondholders Settlement Agreement (the March 3, 1995 date may be extended to March 31, 1995 by either the Debtors or the Bondholder Proponents, and such date may be further extended solely by the Bondholder Proponents, and the finding referred to in clause (ii) above may be waived solely by the Bondholder Proponents); and (b) the Reorganization Documents (other than the New Senior Note Indenture, the instrument(s) evidencing the Qualified Securities, the New Common Stock Registration Rights Agreement and the Qualified Securities Registration Rights Agreement) shall have been executed (this condition may be waived solely by the Bondholder Proponents). 10.2 Conditions to Effectiveness. Notwithstanding any other provision of the Consensual Plan or the Confirmation Order, the Effective Date of the Consensual Plan shall not occur unless and until each of the following conditions shall have been satisfied or have been waived by all of the Proponents (or, if specified, solely by certain of the Proponents): (a) The Confirmation Order shall have become a Final Order (this condition may be waived solely by the Bondholder Proponents); (b) All conditions precedent set forth in the Second Amended and Restated Veil Piercing Settlement Agreement and all procedures set forth in Section 4(d)(ii)(A)-(J) of the Second Amended and Restated Veil Piercing Settlement Agreement shall have been complied with or waived (as provided therein); it being understood that none of the procedures set forth in such Section 4(d)(ii)(A)-(J) may be waived or modified except with the written consent of the Debtors; (c) Qualified Securities having an aggregate principal amount of not less than the sum of: (i) $530 million; (ii) the net proceeds of the financing(s) described in clause (i) of the definition of "Exit Financing" contained in the Consensual Plan in excess of $900 million, if any, up to but not in excess of $25 million, and (iii) the amount, if any, by which the Replacement Indebtedness exceeds the amount of Cash necessary to pay all Claims that would otherwise have been satisfied by New Senior Notes issued as Qualified Securities, shall be available for distribution to Classes U-4, U-5, U-6 and U-7 under the Consensual Plan; (d) The Reorganization Documents shall have been executed and delivered by all of the parties thereto and the Court shall have entered a Final Order (which may be the Confirmation Order) approving the Reorganization Documents (this condition may be waived solely by the Bondholder Proponents); (e) Mid-State Homes shall have obtained the Mid-State Homes Warehouse Credit Facility and the Debtors shall have obtained the New Working Capital Facility; (f) The Charter shall have been filed with the Secretary of State of the State of Delaware; (g) The adversary proceeding described in subparagraph (ii) of Section 6.3 shall have been dismissed with prejudice, and the releases described in subparagraph (iii) of Section 6.3 shall have been delivered; (h) The New Senior Note Indenture shall be qualified under the Trust Indenture Act of 1939; and (i) The Effective Date shall occur not later than March 31, 1995 (this date may be extended solely by the Bondholder Proponents). ARTICLE XI CRAM DOWN 11.1 Cram Down. If all of the applicable requirements for Confirmation of the Consensual Plan are met as set forth in Sections 1129(a)(l) through (13) of the Code except subsection (8) thereof, the Proponents hereby request that the Court confirm the Consensual Plan pursuant to Section 1129(b) of the Code, notwithstanding the requirements of subsection (8) thereof, on the basis that, among other things, the Consensual Plan is fair and equitable, and does not discriminate unfairly, with respect to each nonaccepting impaired Class. ARTICLE XII EFFECTS OF PLAN CONFIRMATION; TITLE TO PROPERTY AND DISCHARGE 12.1 Vesting of Property. Except as otherwise provided in the Consensual Plan or the Confirmation Order, on the Effective Date, all Assets of the estates of each of the Debtors (including, without limitation, any and all claims and causes of action against Persons that are not Released Parties) shall vest in such Debtors, and subsequently will be retained by such entities subject to the provisions of the Consensual Plan, the Confirmation Order and the Reorganization Documents and shall be free and clear of all Claims and Interests of all Holders, except the obligations to perform according to the Consensual Plan, the Confirmation Order, the Reorganization Documents and the Liens and security interests granted pursuant to the Consensual Plan or any of the Reorganization Documents. Except as otherwise provided in the Consensual Plan or the Confirmation Order, on the Effective Date and thereafter, each of the Debtors may operate its business free of any restrictions imposed by the Code. 12.2 Discharge. The issuance of the Confirmation Order shall (a) operate as a discharge, pursuant to Section 1141(d)(1) of the Code, effective as of the Effective Date, of any and all debts (as such term is defined in Section 101(12) of the Code) of or Claims against one or more of the Debtors that arose at any time before the Effective Date, including, but not limited to, all principal and all interest, whether accrued before, on or after the Filing Date. Without limiting the generality of the foregoing, on the Effective Date, the Debtors shall be discharged from any debt that arose before the Effective Date, and any debt of a kind specified in Section 502(g), 502(h) or 502(i) of the Code, to the full extent permitted by Section 1141(d)(1)(A) of the Code. Nothing in the Consensual Plan shall be deemed to waive, limit or restrict in any way the discharge granted upon Confirmation of the Consensual Plan pursuant to Section 1141 of the Code and effective as of the Effective Date. 12.3 Injunction. In order to preserve and promote the settlements contemplated by and provided for in the Consensual Plan, effective on the Effective Date, all Persons who have held, hold or may hold a Demand, debt or Claim, or who have held, hold or may hold Interests, shall be permanently enjoined, to the fullest extent permitted by law, from taking any of the following actions against or affecting the Released Parties or the Assets (or assets or other property) of the Released Parties with respect to such Claims, Demands or Interests (other than actions brought to enforce any rights or obligations under the Consensual Plan or any of the Reorganization Documents or appeals, if any, from the Confirmation Order): (i) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind against the Released Parties or the Assets (or assets or other property) of the Released Parties or any direct or indirect successor in interest to any of the Released Parties, or any Assets (or assets or other property) of any such successor; (ii) enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order against the Released Parties or the Assets (or assets or other property) of the Released Parties or any direct or indirect successor in interest to any of the Released Parties or any Assets (or assets or other property) of any such transferee or successor; (iii) creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any encumbrance of any kind against the Released Parties or the Assets (or assets or other property) of the Released Parties or any direct or indirect successor in interest to any of the Released Parties, or any Assets (or assets or other property) of any such transferee or successor other than as contemplated by the Consensual Plan or any of the Reorganization Documents; (iv) asserting any set-off, right of subrogation or recoupment of any kind, directly or indirectly against any obligation due the Released Parties or the Assets (or assets or other property) of the Released Parties, or any direct or indirect transferee of any Assets (or assets or other property) of, or successor in interest to, any of the Released Parties; and (v) proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Consensual Plan or any of the Reorganization Documents. 12.4 Effectiveness and Enforcement of Settlement Agreements. The terms of the Second Amended and Restated Veil Piercing Settlement Agreement and the settlements contained in the Consensual Plan with respect to the LBO-Related Issues, the Other Unsecured Claims, the Series B & C Senior Note Claims, the Working Capital Bank Claims and the Revolving Credit Bank Claims shall be incorporated by reference in and made an inextricable and essential part of the Consensual Plan in their entirety, and shall be binding and enforceable by the Court against the Debtors, all of the respective parties thereto and all Holders of Settlement Claims. ARTICLE XIII MISCELLANEOUS PROVISIONS 13.1 Revocation. The Proponents reserve the right, all of them acting jointly, to revoke and withdraw the Consensual Plan prior to the Confirmation Date. If the Proponents revoke or withdraw the Consensual Plan, then the Consensual Plan shall be null and void and, in such event, nothing contained herein shall be deemed to constitute a waiver or release of any Claims by or against the Proponents or any other Person or to prejudice in any manner the rights of any of the Proponents or any Person in any further proceedings involving the Proponents. 13.2 Amendments. This Consensual Plan may be amended, modified or supplemented by (a) all of the Proponents acting jointly or (b) the Bondholder Proponents and the Debtors or (c) in the event that the Court declines to confirm the Consensual Plan, any one or more of the Proponents other than as provided in the preceding clauses (a) and (b) (provided that, in the case of this clause (c), such amendment shall bind only the Proponent(s) filing such amendment, modification or supplement), in each case before or after the Confirmation Date, and by the Bondholder Proponents and the Debtors (all of them acting jointly) after the Effective Date, in each case in the manner provided for by Section 1127 of the Code or as otherwise permitted by law. Notwithstanding the foregoing or any other provision hereof, nothing in this Consensual Plan shall in any way prohibit or restrict any Proponent from filing a plan of reorganization on its own behalf. 13.3 No Consolidation. The Chapter 11 Cases shall not be substantively consolidated and (i) the legal, equitable, and contractual rights relating to intercompany Claims between the Debtors shall be unaltered; (ii) the Assets and liabilities of the Debtors will not be merged or treated as though they were merged; (iii) any obligation of any Debtor will be deemed to be an obligation of such Debtor only and any Claim which is Filed in connection with any such obligation will be an Allowed Claim only against the Debtor against which such Claim has been Filed; (iv) each and every Claim which is Filed in the Chapter 11 Case of any Debtor will be deemed Filed only against the Debtor with respect to which such Claim has been Filed; and (v) for purposes of determining the availability of the right of recoupment or set-off under Section 553 of the Code, the Debtors shall not be treated as one entity so that, subject to the other provisions of Section 553 of the Code, debts due to any of the Debtors may not be recouped or set-off against the debts of any of the other Debtors. Notwithstanding the foregoing, on the Effective Date, and in accordance with the terms of the Consensual Plan, all Allowed Claims based upon guarantees of collection, payment or performance made by any of the Debtors with respect to the obligations of another Debtor shall be discharged and released. 13.4 Provisions as to Interest. Except as expressly stated in this Consensual Plan, no interest, penalty or late charge is to be allowed on any Claim subsequent to the Filing Date; and except as expressly stated in this Consensual Plan, post-Filing Date interest allowed on any Claim shall be simple interest and not compounded for any period. 13.5 Exhibits. The Exhibits attached to the Consensual Plan are incorporated by reference in and made an inextricable and essential part of the Consensual Plan in their entirety. 13.6 No Attorneys' Fees. No attorneys' fees will be paid by any Debtor with respect to any Claim except as specified herein, in any of the Reorganization Documents or as allowed by a Final Order of the Court. 13.7 Post Confirmation Effect of Evidences of Claims or Interests. Except as otherwise provided in the Consensual Plan, effective upon the Effective Date, all evidences of Claims or Interests shall represent only the right to participate in the distributions, if any, contemplated by the Consensual Plan. 13.8 Official Committees. The Official Committees shall continue in existence until the commencement of distributions to Holders of Subordinated Note Claims under the Consensual Plan, for the principal purpose of overseeing the implementation of the Consensual Plan. The members of the Official Committees shall serve without compensation, but shall be reimbursed for all expenses incurred in their capacity as members of the Official Committees. 13.9 Construction. The rules of construction set forth in Section 102 of the Code shall apply to the construction of the Consensual Plan. 13.10 Time. In computing any period of time prescribed or allowed by this Consensual Plan, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is not a Business Day or, when the act to be done is the Filing of a paper in court, a day on which weather or other conditions have made the clerk's office inaccessible, in which event the period runs until the end of the next day which is not one of the aforementioned days. 13.11 Tax Allocation of Consideration Paid to Holders. In the case of Holders of Allowed Claims who receive consideration in respect of the Allowed Amount of such Claims, other than, or in addition to, Cash, the consideration received shall be allocated and applied to such Claims in the following order: any New Common Stock, any New Senior Notes or Qualified Securities (other than Cash), and any Cash shall, in that order, be applied to reduce, satisfy and discharge first the principal amount of the Allowed Claim, then any pre-Filing Date interest included in such Allowed Claim and last any post-Filing Date interest included in such Claim. 13.12 Governing Law. Except to the extent the Code or Bankruptcy Rules are applicable, the rights and obligations arising under this Consensual Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. 13.13 Headings. The headings of the Articles, paragraphs, and sections of this Consensual Plan are inserted for convenience only and shall not affect the interpretation hereof. 13.14 Notice of Effectiveness. Upon the satisfaction of all of the conditions to the Effectiveness of the Consensual Plan, Walter Industries shall give notice thereof to (a) the Holders of Revolving Credit Bank Claims, c/o Chemical Bank, 270 Park Avenue, New York, New York 10017, Attention: Elizabeth Kelley, (b) the Holders of Working Capital Bank Claims, c/o Bankers Trust Company, 280 Park Avenue, 19 West, New York, New York 10017, Attention: Susan Forst, (c) the Holders of Series B & C Senior Note Claims, c/o LaSalle National Bank, 135 South LaSalle Street, Chicago, Illinois 60603, Attention: Lars Anderson, (d) the Creditors' Committee, c/o Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York 10016, Attention: Marc Kirschner, Esq. and (e) the Bondholders Committee c/o Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004, Attention: Daniel Golden, Esq., and shall publish notice thereof once in The Wall Street Journal (National Edition) and The New York Times (National Edition). 13.15 Notices. All notices, requests or demands in connection with this Consensual Plan shall be in writing and shall be mailed by registered or certified mail, return receipt requested to: Bondholders Committee c/o Stroock & Stroock & Lavan 7 Hanover Square New York, New York 10004 Attention: Daniel H. Golden, Esq. and Official Committee of General Unsecured Creditors c/o Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 Attention: Marc S. Kirschner, Esq. and Lehman Brothers Inc. American Express Tower World Financial Center 18th Floor New York, New York 10285-0018 Attention: Mr. Kenneth A. Buckfire and Lion Advisors, L.P. 1301 Avenue of the Americas 38th Floor New York, New York 10019 Attention: Mr. Marc J. Rowan Mr. Robert H. Falk and Ad Hoc Committee of Pre-LBO Bondholders c/o Marcus Montgomery Wolfson P.C. 53 Wall Street New York, New York 10005 Attention: Peter D. Wolfson, Esq. Sara L. Chenetz, Esq. and Walter Industries, Inc. 1500 N. Dale Mabry Hwy. Tampa, Florida 33607 Attention: Chief Financial Officer and Kohlberg Kravis Roberts & Co. 9 West 57th Street, 42nd Floor New York, New York 10019 With copies to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Robert D. Drain, Esq. and Akin, Gump, Strauss, Hauer & Feld, L.L.P. 65 East 55th Street, 33rd Floor New York, New York 10022 Attention: Ellen R. Werther, Esq. Steven M. Pesner, P.C. and Kaye, Scholer, Fierman, Hays & Handler 425 Park Avenue New York, New York 10022 Attention: Andrew A. Kress, Esq. and Stichter, Riedel, Blain & Prosser, P.A. 110 East Madison Street - Suite 200 Tampa, Florida 33602 Attention: Don M. Stichter, Esq. and Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A. One Harbour Place Tampa, Florida 33602 Attention: Leonard H. Gilbert, Esq. 13.16 Not Admissible. This Consensual Plan shall not be admissible in any cases or proceedings involving the Proponents or any of them for any purpose (other than for enforcing its terms), nor shall it be deemed as an admission or waiver of any Proponent for any purpose. 13.17 Successors and Assigns. The rights, benefits and obligations of any Person named or referred to in the Consensual Plan will be binding upon, and will inure to the benefit of, the heir, executor, administrator, representative, successor or assign of such Person. Dated: December 9, 1994 New York, New York OFFICIAL BONDHOLDERS COMMITTEE OF HILLSBOROUGH HOLDINGS CORPORATION, ET AL. By: /s/ Daniel H. Golden Daniel H. Golden, Esq. OFFICIAL COMMITTEE OF GENERAL UNSECURED CREDITORS OF HILLSBOROUGH HOLDINGS CORPORATION, ET AL. By: /s/ Marc S. Kirschner Marc S. Kirschner, Esq. PAUL, WEISS, RIFKIND, WHARTON & GARRISON By: /s/ Robert Drain Robert Drain 1285 Avenue of the Americas New York, New York 10019-6064 (212) 373-3236 For Lehman Brothers Inc. AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. By: /s/ Steven M. Pesner Steven M. Pesner, P.C. Ellen R. Werther 65 East 55th Street, 33rd Floor New York, New York 10022 (212) 872-1010 For Apollo MARCUS MONTGOMERY WOLFSON P.C. By: /s/ Peter Wolfson Peter Wolfson Sara Chenetz 53 Wall Street New York, New York 10005 (212) 858-5200 For Ad Hoc Committee of Pre-LBO Bondholders KAYE, SCHOLER, FIERMAN, HAYS & HANDLER By: /s/ Andrew A. Kress Andrew A. Kress 425 Park Avenue New York, New York 10022 (212) 836-8000 For: HILLSBOROUGH HOLDINGS CORPORATION, BEST INSURORS, INC., BEST INSURORS OF MISSISSIPPI, INC., COAST TO COAST ADVERTISING, INC., COMPUTER HOLDINGS CORPORATION, DIXIE BUILDING SUPPLIES, INC., HAMER HOLDINGS CORPORATION, HAMER PROPERTIES, INC., HOMES HOLDINGS CORPORATION, JIM WALTER COMPUTER SERVICES, INC., JIM WALTER HOMES, INC., JIM WALTER INSURANCE SERVICES, INC., JIM WALTER RESOURCES, INC., JIM WALTER WINDOW COMPONENTS, INC., JW ALUMINUM COMPANY, JW RESOURCES, INC., JW RESOURCES HOLDINGS CORPORATION, J.W.I. HOLDINGS CORPORATION, J.W. WALTER, INC., JW WINDOW COMPONENTS, INC., LAND HOLDINGS CORPORATION, MID-STATE HOMES, INC., MID-STATE HOLDINGS CORPORATION, RAILROAD HOLDINGS CORPORATION, SLOSS INDUSTRIES CORPORATION, SOUTHERN PRECISION CORPORATION, UNITED LAND CORPORATION, UNITED STATES PIPE AND FOUNDRY COMPANY, U.S. PIPE REALTY, INC., VESTAL MANUFACTURING COMPANY, WALTER HOME IMPROVEMENT, INC., WALTER INDUSTRIES, INC., and WALTER LAND COMPANY JWC ASSOCIATES, L.P. JWC ASSOCIATES II, L.P. KKR PARTNERS II, L.P. By: KKR ASSOCIATES By: /s/ Henry R. Kravis Name: Henry R. Kravis Title: General Partner EXHIBIT 1: RESTATED CERTIFICATE OF INCORPORATION OF WALTER INDUSTRIES EXHIBIT 1 RESTATED CERTIFICATE OF INCORPORATION OF WALTER INDUSTRIES, INC. WALTER INDUSTRIES, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), DOES HEREBY CERTIFY THAT: FIRST: The name of the Corporation is WALTER INDUSTRIES, Inc. The Corporation was originally incorporated under the name "HILLSBOROUGH HOLDINGS CORPORATION" and the date of filing of the Corporation's original Certificate of Incorporation with the Secretary of State of Delaware was September 8, 1987. SECOND: Pursuant to Section 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Certificate of Incorporation of the Corporation. THIRD: The text of the Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as follows: 1. The name of the Corporation is WALTER INDUSTRIES, INC. 2. The registered office and registered agent of the Corporation is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 3. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock that the Corporation is authorized to issue is Two Hundred Million (200,000,000) shares of Common Stock, par value $.01 each. 5. The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating powers of the Corporation and its directors and stockholders: (a) The Board of directors of the Corporation, acting by majority vote, may alter, amend or repeal the bylaws of the Corporation. (b) Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide. 6. Except as otherwise provided by the Delaware General Corporation Law as the same exists or may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this Article 6 by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. - ---------------- [FN] The Corporation will also be authorized to issue a second class of Common Stock that would be exchanged for the stock held by the Celotex Settlement Fund Recipient immediately prior to the distribution by the Celotex Settlement Fund Recipient of Common Stock to its beneficiaries. The second class of Common Stock would be identical to the original class except that shares of the second class (i) would be deemed to be voted in the same proportions as the original Common Stock on all matters except matters that only affected adversely the second class, in which case the second class would have a class vote, and (ii) would be converted into an equal number of shares of the original class upon transfer to a person not affiliated with a beneficiary of the Celotex Settlement Fund Recipient. 7. To the fullest extent permitted by applicable law, the Corporation shall indemnify (including the advancement of defense expenses as incurred) any current or former director, officer, employee or agent of the Corporation, and such director's, officer's, employee's or agent's heirs, executors and administrators, against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such indemnified party in connection with any threatened, pending or completed action, suit or proceeding brought by or in the right of the Corporation, or otherwise, to which such indemnified party was or is a party or is threatened to be made a party by reason of such indemnified party's current or former position with the Corporation or by reason of the fact that such indemnified party is or was serving, at the request of the Corporation, as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust or the enterprise. 8. The number of directors constituting the full board of directors shall be nine (9), and the initial term of the directors (and their successors) designated pursuant to the Amended Joint Plan of Reorganization, dated as of November 22, 1994, as the same may be amended or supplemented from time to time (the "Consensual Plan"), shall be three(3) years; thereafter, the term of each director shall be one (1) year. 9. Shares of Common Stock issued to the Celotex Settlement Fund Recipient under the Consensual Plan and not yet transferred to persons other than Veil Piercing Claimants shall be voted only in the same percentages of votes as the other shares of Common Stock are voted on the matter in question. IN WITNESS WHEREOF, WALTER INDUSTRIES, Inc. has caused this Restated Certificate of Incorporation to be signed by , its President, and attested by , its secretary, this day of , 19. ATTEST: WALTER INDUSTRIES, INC. By: Name: Name: Title: Secretary Title: President EXHIBIT 2: SUMMARY OF TERMS FOR THE NEW SENIOR NOTES EXHIBIT 2 SUMMARY OF TERMS FOR NEW SENIOR NOTES Issuer Walter Industries, Inc. and/or one or more other Debtors (each the "Company" or the "Issuer"). Issue New Senior Notes. To be issued in two series--Series A and Series B. Principal Amount Series A--Will be equal to the Allowed Amount on the Effective Date (less Cash to be paid from the Class S-6 Fund and the part of such Claim to be satisfied by New Common Stock) in respect of the approximately $58 million of principal amount of Series B & C Senior Notes as to which the Series B & C Senior Note Claim Election was made (such Allowed Amount, which includes pre-petition and post-petition interest, will be approximately $94.9 million as of December 31, 1994). No Series A New Senior Notes will be issued if such notes are not rated BB or higher by either Rating Service or if Walter Industries so elects in its sole discretion, in which case all Class S-6 Claims that would otherwise have been satisfied by Series A New Senior Notes will instead be satisfied by an amount of Cash equal to the principal amount of such Series A New Senior Notes that would otherwise have been issued. Series B--The difference between the aggregate amount of Qualified Securities and the part of Qualified Securities consisting of Cash; not greater than $490 million without consent of Lehman Brothers Inc. No Series B New Senior Notes will be issued if on the Effective Date all but not less than all claims that would have otherwise been satisfied by Series B New Senior Notes are paid in Cash, whether from the proceeds of a financing (the "Replacement Indebtedness") or otherwise. Exchange Election Holders of Series B & C Senior Notes who receive Series A New Senior Notes may, at any time within 90 days after the Effective Date, exchange all of such Holder's Series A New Senior Notes for an equal principal amount of Series B New Senior Notes. Maturity 5 years. Rate To be determined in accordance with the procedures set forth in the definition of "New Senior Notes" in the Consensual Plan. Security The Series A and Series B New Senior Notes will be secured on a pari passu basis by all collateral presently securing the Series B & C Senior Notes, consisting of all of the stock of Jim Walter Resources, U.S. Pipe, Jim Walter Homes and United Land, or by other collateral of equal or greater value (provided, that any such method of valuation shall be reasonably acceptable to the Series B & C Senior Note Trustee). If no Series B New Senior Notes are issued, the Replacement Indebtedness may be secured on a pari passu basis with the Series A New Senior Notes. Interest Payment Dates Semi-annually, interest paid in cash in arrears, on August 15 and February 15 of each year, commencing August 15, 1995. Optional Redemption The Series A New Senior Notes are not redeemable prior to four years after original issuance thereof, and may be redeemed thereafter in whole or in part at the option of the Company upon prior notice at 101% of the outstanding principal amount plus accrued and unpaid interest to the redemption date; provided that, if at the time of issuance of the Series A New Senior Notes, market conditions and the equivalent terms of similar debt instruments commonly issued and carrying a BB rating contain a shorter no-call period, then the no-call period may be shortened, but in any event not to less than 18 months after issuance, and/or the redemption premium shall be increased, but in any event the redemption premium shall not be less than 103% of the outstanding principal amount in the case of an 18 month no-call period. The Series B New Senior Notes may be redeemed at any time in whole or in part (but in the case of partial redemptions, only if the unredeemed principal amount of the Series B New Senior Notes is at least $150 million) at the option of the Company upon prior notice at 101% of the outstanding principal amount plus accrued and unpaid interest to the redemption date. Amortization All of the outstanding principal amount and accrued but unpaid interest thereon shall be due and payable at maturity. Covenants Covenants shall include but not be limited to: (i) limitations on indebtedness, (ii) limitations on the creation of liens, (iii) limitations on restricted payments, (iv) limitation on dividends, (v) limitations on transactions with affiliates and (vi) limitations on asset sales, mergers and consolidations; provided, that such covenants shall expressly permit the Issuer and its subsidiaries to make asset sales out of the ordinary course of business and to enter into other non-ordinary course transactions (including the sale of collateral securing the New Senior Notes, free and clear of any liens, claims and encumbrances, provided that the net proceeds thereof are used to redeem, pari passu, Series A and Series B New Senior Notes at par plus accrued interest); provided, further, that such covenants, consistent with the foregoing, shall be reasonably acceptable to the Series B & C Senior Note Trustee. Ranking The New Senior Notes will be senior Indebtedness of the Company and will rank senior in right of payment to certain other Indebtedness of the Issuer and rank pari passu with certain other Indebtedness of the Issuer. Events of Default and Remedies Events of Default shall include but not be limited to (a) default in the payment of principal on any New Senior Notes when the same becomes due and payable; (b) default in the payment of interest on any New Senior Notes when the same becomes due and payable, and such default continues for a period of five (5) days, (c) the Company defaults in the performance of or breaches any other material covenant or material agreement of the Company under the New Senior Notes and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the New Senior Notes then outstanding; (d) failure by the Company or any of its Significant Subsidiaries to make any payments when due (after giving effect to any applicable grace period and whether by reason of maturity, acceleration or otherwise) under any issue or issues of indebtedness of the Company and/or one or more of its Significant Subsidiaries having an outstanding principal amount of $25 million or more individually or $50 million or more in the aggregate for all such issues of all such persons; (e) any final judgment or order (not covered by insurance) for the payment of money in excess of $25 million individually or $50 million in the aggregate for all such final judgments or orders against all such persons shall be rendered against the Company or any of its Significant Subsidiaries and shall not be paid or discharged; and (f) with respect to the Company and its Significant Subsidiaries, the occurrence of certain acts of bankruptcy or insolvency or failure to pay debts generally as they come due. If an Event of Default (other than an Event of Default specified in clause (f) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the New Senior Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of the Holders shall, declare the entire unpaid principal of and accrued interest on the New Senior Notes shall be immediately due and payable. Upon a declaration of acceleration, such principal of and accrued interest on the New Senior Notes to be immediately due and payable. In the event a declaration of acceleration because an Event of Default set forth in clause (d) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (d) shall be remedied, cured by the Company or waived by the holders of the relevant indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (f) above occurs, all unpaid principal of and accrued interest on the New Senior Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding New Senior Notes, by written notice to the Company and the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of and interest on the New Senior Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Documentation The Series B & C Senior Note Trustee shall have the right to reasonably approve all documents under the Consensual Plan regarding the treatment of Series B & C Senior Note Claims. EXHIBIT 3A: SECOND AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT EXHIBIT 3A SECOND AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT THIS SECOND AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT (as the same may be amended, modified or supplemented from time to time, the "Agreement") amends and restates that certain Amended and Restated Veil Piercing Settlement Agreement (the "Amended Agreement") made and entered into as of the 1st day of August, 1994, which amended and restated that certain Veil Piercing Settlement Agreement (the "Original Agreement") made and entered into as of the 18th day of April, 1994, and is made and entered into as of the 22nd day of November, 1994, by and among: (a) Certain asbestos victim defendants (the "AVDs") named as defendants in Adversary Proceeding No. 90-0003 and Adversary Proceeding No. 90-0004 (collectively, the "Adversary Proceedings"), and represented in the Adversary Proceedings by Caplin & Drysdale, Chartered ("Caplin & Drysdale"), commenced in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Court"), in the Chapter 11 cases of Hillsborough Holdings Corporation ("Hillsborough") and the other Debtors (as defined herein) in their administratively consolidated Case Nos. 89-9715-8P1 through 89-9746-8P1, and 90-11997-8P1; (b) Caplin & Drysdale, Baron & Budd, Greitzer and Locks, Ness Motley Loadholt Richardson & Poole ("Ness Motley"), each on behalf of itself, its individual lawyers and its clients that may be Veil Piercing Claimants (as defined herein) (Baron & Budd, Greitzer and Locks, and Ness Motley are collectively referred to herein as the "Claimants' Attorneys", and Caplin & Drysdale and the Claimants' Attorneys are collectively referred to herein as the "Veil Piercing Claimants' Representatives"); (c) The Celotex Corporation, a defendant in the Adversary Proceedings and a debtor and debtor-in-possession in a Chapter 11 case ("The Celotex Corporation") pending in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Celotex Bankruptcy Court"), Case No. 90-10016-8B1 (the "Celotex Chapter 11 Case"), the Celotex Committee of Unsecured Creditors, the Celotex Asbestos Property Damage Claimants Committee and the Celotex Asbestos Bodily Injury Claimants Committee (the Celotex Committee of Unsecured Creditors, the Celotex Asbestos Property Damage Claimants Committee and the Celotex Asbestos Bodily Injury Claimants Committee are collectively referred to herein as the "Official Celotex Committees"); (d) Jim Walter Corporation, a defendant in the Adversary Proceedings ("JWC"), on behalf of itself and its subsidiaries other than The Celotex Corporation and its subsidiaries, (collectively referred to without The Celotex Corporation and its subsidiaries as the "JWC Companies"); (e) the HHC Bondholders Committee (as defined herein), the HHC Creditors Committee (as defined herein) (the HHC Bondholders Committee and the HHC Creditors Committee are collectively referred to herein as the "HHC Official Committees"), Lehman Brothers Inc., Apollo (as defined herein) (together, Lehman Brothers Inc. and Apollo are referred to herein, solely in their capacity as creditors in the Chapter 11 Cases (as defined herein) and in no other capacity, as the "Bondholder Proponents"); (f) Hillsborough (n/k/a Walter Industries, Inc.), Best Insurors, Inc., Best Insurors of Mississippi, Inc., Coast to Coast Advertising, Inc., Computer Holdings Corporation, Dixie Building Supplies, Inc., Hamer Holdings Corporation, Hamer Properties, Inc., Homes Holdings Corporation, Jim Walter Computer Services, Inc., Jim Walter Homes, Inc., Jim Walter Insurance Services, Inc., Jim Walter Resources, Inc., Jim Walter Window Components, Inc., JW Aluminum Company, JW Resources, Inc., JW Resources Holdings Corporation, J.W.I. Holdings Corporation, J.W. Walter, Inc., JW Window Components, Inc., Land Holdings Corporation, Mid-State Homes, Inc., Mid-State Holdings Corporation, Railroad Holdings Corporation, Sloss Industries Corporation, Southern Precision Corporation, United Land Corporation, United States Pipe and Foundry Company, U.S. Pipe Realty, Inc., Vestal Manufacturing Company, Walter Home Improvement, Inc., Walter Industries, Inc. and Walter Land Company, debtors and debtors-in-possession in the Chapter 11 Cases (collectively, the "Debtors"); (g) JWC Associates L.P., JWC Associates II L.P. and KKR Partners II L.P., on behalf of themselves and their general and limited partners (the "KKR Entities"); and (h) James W. Walter, Kenneth J. Matlock, William H. Weldon, Gilberto Aleman, W. Kendall Baker, William Carr, Joseph F. Hegerich, Wayne Hornsby, Kenneth E. Hyatt, Donald M. Kurucz, Robert W. Michael, Timothy M. Pariso, Michael Roberts, Dennis M. Ross, Sam J. Salario, James M. Sims, William N. Temple and David L. Townsend (the "Signing Management"). (All of the foregoing (a) through (h) are referred to herein collectively as the "Parties" and individually as a "Party"). W I T N E S S E T H: WHEREAS, the Debtors initiated the Adversary Proceedings seeking (a) a final declaration and adjudication that the corporate veil between JWC and The Celotex Corporation may not be pierced; (b) a final declaration and adjudication that the leveraged buy-out of JWC (the "LBO") was not a fraudulent conveyance, nor were any subsequent transactions entered into as a part of the LBO fraudulent transfers; (c) a final declaration and adjudication that neither the Debtors nor any of their subsidiaries or affiliates is the successor-in-interest to the asbestos-related liabilities of either JWC or The Celotex Corporation; (d) a final declaration and adjudication that neither the Debtors nor any of their subsidiaries or affiliates is liable for the asbestos-related liabilities of either JWC or The Celotex Corporation; and (e) such injunctive relief as may be necessary and appropriate to effectuate the declaratory relief sought by the Debtors; and WHEREAS, the AVDs have defended and opposed the relief sought by the Debtors in the Adversary Proceedings and have asserted Settlement Claims (as defined herein) against the Debtors and JWC in various forums; and WHEREAS, The Celotex Corporation participated as a defendant in the Adversary Proceedings; and WHEREAS, The Celotex Corporation has asserted that (a) it has the exclusive right and standing to assert the Settlement Claims against the Debtors and JWC for the benefit of its estate and its creditors because such claims are asserted by it to be the property of its bankruptcy estate and (b) bankruptcy policy is furthered by ensuring that all similarly situated creditors are treated fairly; and WHEREAS, the Veil Piercing Claimants' Representatives have asserted that each of the Veil Piercing Claimants has the right and standing to assert his/her/its Veil Piercing Claim (as defined herein) and/or claims based upon LBO-Related Issues (as defined herein) against the Debtors and JWC for his/her/its own benefit; and WHEREAS, the Claimants' Attorneys are authorized to act as the negotiating group for the law firms which have assented and will in the future assent to this Agreement by executing Exhibit A attached hereto, all of which represent persons and entities that have asserted or may assert Settlement Claims; and WHEREAS, the Celotex Committee of Unsecured Creditors, the Celotex Asbestos Property Damage Claimants Committee and the Celotex Asbestos Bodily Injury Claimants Committee are officially authorized by the Code (as defined herein) to represent the interests of persons or entities having general unsecured and trade claims, asbestos property damage claims and present asbestos bodily injury claims, respectively, against The Celotex Corporation in the Celotex Chapter 11 Case; and WHEREAS, on December 9, 1993, the Veil Piercing Claimants' Representatives and the Bondholder Proponents entered into a Term Sheet for Settlement of Veil Piercing Claims Pursuant to Chapter 11 Plan (the "Term Sheet"), which Term Sheet embodied certain agreements in principle and contemplated the prompt preparation and execution of a definitive agreement that would embody the terms of and supersede the Term Sheet; and WHEREAS, on December 16, 1993, the Original Plan Proponents (as defined herein) filed with the Court a Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents (the "Original Creditor Plan"), which incorporated, inter alia, the terms of the Term Sheet and which contemplated the prompt preparation and execution of a definitive agreement that would embody the terms of and supersede the Term Sheet; and WHEREAS, the Term Sheet contemplated, and the Original Creditor Plan embodied, a settlement under which distributions of New Common Stock (as defined herein) and Qualified Securities (as defined herein) would be made in full and complete settlement, satisfaction, release and discharge of all Settlement Claims on the basis of (a) a negotiated enterprise value of $2,525,000,000 and (b) the fractions set forth in Section 2(a) of the Original Agreement; it being understood that $2,525,000,000 represented a good faith estimate at that time of the going concern enterprise value of the Debtors on a consolidated basis arrived at after extensive analysis by Original Plan Proponents, and taking into account the possibility of delay between the Confirmation Date (as defined herein) and the Plan Effective Date (as defined herein), and the potential increase in the value of the Debtors over time; and WHEREAS, the time for The Celotex Corporation to file a proof of claim in the Chapter 11 Cases on behalf of itself and/or its creditors who are Veil Piercing Claimants has not yet expired, and The Celotex Corporation has demonstrated its intention to timely file such proof of claim, including, without limitation, the Celotex Proof of Claim (as defined herein); and WHEREAS, the time for Veil Piercing Claimants to file their respective proofs of claim in the Chapter 11 Cases has not yet expired, and the Veil Piercing Claimants' Representatives have demonstrated their intention to timely file such proof(s) of claims, or to support the timely filing of such proof(s) of claim, on a representative class basis on behalf of all Veil Piercing Claimants pursuant to the Veil Piercing Proof of Claim (as defined herein); and WHEREAS, the Parties are mutually desirous of settling with Finality (as defined herein) and compromising, satisfying, releasing and discharging, any and all Settlement Claims, specifically including, without limitation, the Veil Piercing Claims including, without limitation, those which are the subject of the Adversary Proceedings; and WHEREAS, it is the specific intention and desire of the Parties that the Settlement Fund (as defined herein) be paid to the Celotex Settlement Fund Recipient (as defined herein) for the exclusive benefit of the Veil Piercing Claimants, and that, inter alia, all Settlement Claims, including, without limitation, all Veil Piercing Claims, shall channel, transfer and attach to the Settlement Fund which shall be administered by, and, together with the Celotex Settlement Fund Recipient shall be subject to the jurisdiction of, the Celotex Bankruptcy Court and which shall be utilized in a Chapter 11 plan in the Celotex Chapter 11 Case so that all Released Parties (as defined herein) shall have the full protections accorded by Section 524(g) of the Code (as defined herein); and WHEREAS, a trial on the issues raised in the Adversary Proceedings took place before the Court from December 13, 1993 through December 17, 1993; and WHEREAS, on April 18, 1994, the Court issued its opinion on the issues raised in the trial of the Adversary Proceedings, ruling in favor of the Debtors (the "April 18 Order"); and WHEREAS, the Original Agreement, embodying the Term Sheet, was executed and delivered by the parties thereto as of April 18, 1994; and WHEREAS, on June 16, 1994, the Celotex Bankruptcy Court entered an order authorizing and directing The Celotex Corporation to enter into and to perform its obligations under the Original Agreement; and WHEREAS, the Veil Piercing Claimants' Representatives filed a timely notice of appeal of the April 18 Order to the United States District Court for the Middle District of Florida, Tampa Division (the "District Court"); and WHEREAS, amendments to the Original Creditor Plan were filed with the Court on April 20, 1994, May 11, 1994, May 17, 1994 , June 9, 1994 and August 2, 1994 (the amendment filed on August 2, 1994 is referred to herein as the "Creditors' Plan"); and WHEREAS, on August 2, 1994 the proponents of the Creditors' Plan, with the assent of the Veil Piercing Claimants' Representatives and in response to the Debtors' Fifth Amended Joint Plan of Reorganization dated July 25, 1994 (the "Debtors' Fifth Amended Plan"), which increased the allowed amount thereunder of each of (a) the Class S-1 and Class S-2 Claims, and (b) the Class S-6 Claims, filed the Creditors' Plan and entered into the Amended Agreement to increase the allowed amount of Class S-1, Class S-2 and Class S-6 Claims, by providing that the $75 million of Class B Common Stock (as defined in the Amended Agreement) that was to have been distributed to the Celotex Settlement Fund Recipient (as defined herein) under Section 2(a)(i)(A) of the Original Agreement (and that was to have been subject to assignment to Settling Equityholders (as defined in the Amended Agreement), if any, under the Original Agreement), instead be distributed in the manner specified in the Creditors' Plan and to provide that 100% of the Senior Claim Differential (as defined in the Amended Agreement), if any, be distributed to the Celotex Settlement Fund Recipient; and WHEREAS, on September 21, 1994 the Celotex Bankruptcy Court entered an order authorizing and directing The Celotex Corporation to enter into and to perform its obligations under the Amended Agreement; and WHEREAS, on October 13, 1994, the District Court (Nimmons, J.) issued an order affirming the April 18 Order (the "District Court's Order"); and WHEREAS, the Veil Piercing Claimants' Representatives have timely filed an appeal from, inter alia, the District Court's Order; and WHEREAS, the Court commenced hearings on October 17, 1994 to consider certain preliminary issues related to the confirmation of the Creditors' Plan and the Debtors' Fifth Amended Plan, including (a) the unsecured creditors' entitlement to post-petition interest before any retention of property by the holders of Old Common Stock Interests (as defined herein) under a Chapter 11 plan, (b) the motion by the proponents of the Creditors' Plan seeking approval of the Amended Agreement and the Debtors' motion to void the Amended Agreement and (c) challenges to ballots cast on the Creditors' Plan and the Debtors' Fifth Amended Plan (the "October 17 Hearings"); and WHEREAS, after substantial discovery and two and one-half days of trial in the October 17th Hearings, the Original Plan Proponents, the Veil Piercing Claimants' Representatives, the Debtors, the KKR Entities and the Signing Management deemed it advisable to amend the Creditors' Plan and to amend and restate the Amended Agreement so as to provide for, inter alia, the Debtors and the KKR Entities to become co- proponents with the Original Plan Proponents and perhaps others of the Creditors' Plan as amended in the form of Exhibit B attached hereto as amended from time to time in accordance with the terms thereof (the "Consensual Plan") and to set forth the terms of the compromise and settlement contained herein; and WHEREAS, the parties to the Amended Agreement desire to amend and restate it to facilitate the confirmation and consummation of the Consensual Plan or a Plan (as defined herein) and to incorporate the understandings between such entities and the Debtors, the Signing Management and the KKR Entities, all on the terms and subject to the conditions set forth herein; and WHEREAS, the HHC Official Committees and the Bondholder Proponents have contended that it is not likely that the Veil Piercing Claimants in such capacity have any valid Settlement Claims against any or all of the Debtors, any or all of the Signing Management (in their respective capacities as present or former officers, directors, employees or shareholders of any or all of the Debtors), and any or all of the holders of Old Common Stock Interests of Hillsborough in such capacity; and WHEREAS, the HHC Official Committees and the Bondholder Proponents have contended that general unsecured creditors of the Debtors are entitled to receive post-petition interest on the amounts owed to them as of the date of the filing of the Chapter 11 Cases (the "Post-Petition Interest") pursuant to the law as applied to the facts of the Chapter 11 Cases; and WHEREAS, the HHC Official Committees and the Bondholder Proponents have contended that the general unsecured creditors of the Debtors are entitled to Post-Petition Interest in the amount of approximately $160,000,000 per year, for approximately 5 years to date aggregating in excess of $800,000,000; and WHEREAS, as a result of the payment of the Settlement Fund to be made to the Celotex Settlement Fund Recipient, the general unsecured creditors of the Debtors, including, without limitation, Lehman Brothers Inc., and Apollo (as defined herein), will receive at least $390,000,000 less in Post-Petition Interest than they have contended they otherwise would be entitled to receive; and WHEREAS, the Debtors, the KKR Entities and the Signing Management have contended that the Veil Piercing Claimants have no valid Settlement Claims against any or all of the Debtors, any or all of the Signing Management (in their respective capacities as present or former officers, directors, employees or shareholders of any or all of the Debtors), and any or all of the holders of Old Common Stock Interests in such capacity; and WHEREAS, the KKR Entities and the Signing Management, on behalf of themselves and all other holders of Old Common Stock Interests have contended that the general unsecured creditors of the Debtors are not entitled to any Post-Petition Interest pursuant to the law as applied to the facts of the Chapter 11 Cases and that the value to be retained by holders of Old Common Stock Interests under a Chapter 11 plan would include any amounts claimed by general unsecured creditors of the Debtors to be payable as Post-Petition Interest; and WHEREAS, pursuant to this Agreement, each of the Debtors, each of the Signing Management and each of the KKR Entities withdraws any and all objections each and all of them had or has to the Amended Agreement, including, without limitation, the payment of the Settlement Fund, the creation of the Celotex Settlement Fund Recipient and the settlements provided for in the Agreement; and WHEREAS, as a result of the payment of the Settlement Fund, the KKR Entities and the Signing Management believe that all of the holders of Old Common Stock Interests, including, without limitation, themselves, will receive at least $390,000,000 less in value than they have contended they otherwise would be entitled to receive; and WHEREAS, the allocation of value under the Consensual Plan and this Agreement among the Celotex Settlement Fund Recipient, the holders of Old Common Stock Interests and the Debtors' general unsecured creditors is a result of the compromise of, inter alia, the foregoing competing claims to such value by the Parties; and WHEREAS, the resolution of the Settlement Claims is the critical issue in the Chapter 11 Cases and no plan of reorganization could be confirmed for the Debtors without an effective resolution of the Settlement Claims; and WHEREAS, this Agreement is inextricably intertwined with the Consensual Plan, of which it is an integral and essential component; and WHEREAS, all of the mutual promises, releases, conditions and other terms and provisions of this Agreement are understood and intended by the Parties to be interdependent, non-severable and reciprocal parts of the overall settlement embodied herein and by the Consensual Plan; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Defined Terms. Capitalized terms not defined in the body of this Agreement or in the Consensual Plan shall have the meanings ascribed to them in Appendix A attached hereto. 2. Settlement of Veil Piercing Claims Pursuant to Plan of Reorganization. (a) All Settlement Claims (i.e. all Veil Piercing Claims and all claims and causes of action held or assertable by the Veil Piercing Claimants based upon LBO-Related Issues) shall be fully and completely settled, satisfied, released and discharged in exchange for an aggregate amount of consideration (as calculated below), to be paid and satisfied through the distribution of Qualified Securities, New Common Stock and possibly additional cash under the Plan (the "Settlement Fund") to the Celotex Settlement Fund Recipient, as follows: (i) Allowed Amount of the Settlement Claims. The allowed amount of all of the Settlement Claims in the aggregate shall be equal to the sum of (A) the Veil Piercing Claims Amount (which shall be $375 million), plus (B) the Attorneys' Fees Differential, if any. (ii) Consideration Used to Satisfy the Settlement Claims. The Veil Piercing Claims Amount shall be paid by the distribution of a combination of Qualified Securities and New Common Stock to the Celotex Settlement Fund Recipient. The amount of Qualified Securities to be so distributed under the Plan in respect of the Veil Piercing Claims Amount shall be calculated as follows: $375 million $1098 million + $375 million multiplied by the aggregate principal amount of Qualified Securities available for distribution to holders of Subordinated Note Claims and the Celotex Settlement Fund Recipient under the Plan. The amount of Settlement Claims that is deemed to be paid, and settled, satisfied, released and discharged, by Qualified Securities shall be equal to the aggregate principal amount of Qualified Securities issued in respect of the Veil Piercing Claims Amount. The excess of the Veil Piercing Claims Amount over the part thereof paid, and settled, satisfied, released and discharged, by Qualified Securities shall be paid, and settled, satisfied, released and discharged, by that number of shares of New Common Stock having a value which is equal to the Veil Piercing New Common Stock Amount. The amount of Settlement Claims that is to be paid, and settled, satisfied, released and discharged, by the Attorneys' Fees Differential shall be paid in cash. (iii) Example. The following example is provided solely for the purpose of illustrating the operation of clauses (i) and (ii) above. Assuming that the actual amount of distributions made under the Plan in respect of Subordinated Note Claims is equal to $1098 million, then (a) the aggregate allowed amount of the Settlement Claims would consist of (i) the Veil Piercing Claims Amount (that is, $375 million) plus (ii) the Attorneys' Fees Differential, if any, and (b) such allowed amount would be settled, satisfied, released and discharged by the distribution of 375/1473 of the aggregate principal amount of Qualified Securities available for distribution to holders of Subordinated Note Claims and the Celotex Settlement Fund Recipient (for example, if $700 million of Qualified Securities were so available, 375/1473 of such total, or $178,207,680, would be paid in Qualified Securities in respect of Veil Piercing Claims), and the distribution, in respect of the remainder of the Veil Piercing Claims Amount, of shares of New Common Stock equal to the Veil Piercing New Common Stock Amount (following the preceding example $196,792,320). The amount of the Attorneys' Fees Differential, if any, would be paid in cash. (b) "Plan" Defined. (i) The term "Plan", as used in this Agreement, shall mean the Consensual Plan or any other plan(s) of reorganization filed in the Chapter 11 Cases as to which the Bondholder Proponents and the Debtors are proponents and that does not contravene the terms and conditions of this Agreement (subject to Sections 2(b)(ii) and 2(c) herein). (ii) The term "Plan" shall not include a plan of reorganization (other than the Consensual Plan) or an amendment to or modification of a plan of reorganization unless (A) a notice specifying the intended date of filing of the plan of reorganization, amendment or modification, together with a copy of such plan of reorganization, amendment or modification, in substantially final form, are sent to the Bondholder Proponents, the Debtors, the Veil Piercing Claimants' Representatives, The Celotex Corporation, the Celotex Asbestos Property Damage Claimants Committee and the Celotex Asbestos Bodily Injury Claimants Committee not less than three (3) business days prior to filing thereof with the Court and (B) in the event that such plan of reorganization, amendment or modification materially contravenes the terms and conditions of this Agreement as they relate to The Celotex Corporation, the Bondholder Proponents, the Debtors, the KKR Entities, the Management, or the persons or entities represented by the Veil Piercing Claimants' Representatives, the Celotex Asbestos Property Damage Claimants Committee or the Celotex Asbestos Bodily Injury Committee, it being understood that an adverse modification of the anti-dilution protection relating to the increase in the Negotiated Enterprise Value to $2.6 billion as set forth in the Consensual Plan in the calculation of the Veil Piercing New Common Stock Value Per Share shall constitute a contravention of this Agreement, such plan of reorganization, amendment or modification is consented to by each such Party (or, in the case of the Veil Piercing Claimants represented by the Veil Piercing Claimants' Representatives, the Celotex Asbestos Property Damage Claimants Committee and/or the Celotex Asbestos Bodily Injury Claimants Committee, such Parties) that is adversely affected by such proposed contravention; it being further understood that such plan of reorganization, amendment or modification shall not constitute a Plan unless the Bondholder Proponents shall be a proponent of the plan of reorganization so filed, amended or modified, after giving effect to such amendment or modification. (iii) Neither the confirmation nor the effectiveness of the Consensual Plan or any other Plan shall be conditioned upon the confirmation or effectiveness of a plan of reorganization in any proceedings pursuant to the Code other than in the Chapter 11 Cases. (c) Nothing in this Agreement shall impair in any way the ability of the Parties or any of them to file, modify or amend a plan of reorganization in any respect; provided, that no such modification or amendment contravenes the terms and conditions of this Agreement, unless consented to pursuant to Section 2(b)(ii) herein. (d) The Plan shall provide for a registration rights agreement substantially in the form of Exhibit C attached hereto, which shall provide, among other things, for the registration of all of the Qualified Securities and the New Common Stock for sale promptly after the Plan Effective Date pursuant to a registration statement or statements under the Securities Act of 1933, as amended. Nothing in this Agreement shall impair in any way the ability of the Bondholder Proponents and the Debtors to modify or amend the registration rights agreement; provided, that such modification or amendment shall not delay the timing of the initial shelf registrations or adversely affect the number and timing of demand or piggy-back registrations available to the Celotex Settlement Fund Recipient or the right of the Celotex Settlement Fund Recipient to participate in any such registrations. (e) Lehman Brothers Inc., Apollo and the Celotex Settlement Fund Recipient shall enter into an agreement as of the Plan Effective Date, substantially in the form of Exhibit D attached hereto, which shall provide, among other things, that if any of Lehman Brothers Inc., Apollo or the Celotex Settlement Fund Recipient (in the case of the Celotex Settlement Fund Recipient, only with the consent of the Veil Piercing Claimants' Representatives) determines to transfer shares of New Common Stock to a non-Affiliate other than (i) as an exchange under the Plan, (ii) on a national securities exchange or (iii) through a registered broker-dealer, then the other parties to such agreement shall have the "tag-along" rights specified in the agreement attached hereto as Exhibit D to participate in such transfer on a pro rata basis. (f) (i) In the event that the Plan provides for a call option or other right of purchase to be granted pursuant to the Plan with respect to all shares of New Common Stock otherwise to be issued to holders of Subordinated Note Claims pursuant to the Plan, and such call option or other right of purchase provides for the purchase of such New Common Stock at any time not later than five (5) business days after the Plan Effective Date, for a cash purchase price per share not less than the New Common Stock Value Per Share, then the Celotex Settlement Fund Recipient shall grant an identical call option or other right of purchase with respect to all shares of New Common Stock otherwise to be issued to the Celotex Settlement Fund Recipient pursuant to the Plan and (ii) in the event that the Bondholder Proponents grant, other than pursuant to the Plan with respect to all shares of New Common Stock otherwise issued to holders of Subordinated Note Claims, a call option or other right of purchase with respect to any shares of New Common Stock otherwise to be issued to the Bondholder Proponents under the Plan, and such call option or other right of purchase provides for the purchase of such New Common Stock at any time not later than five (5) business days after the Plan Effective Date, for a cash purchase price per share not less than the New Common Stock Value Per Share, then the Celotex Settlement Fund Recipient shall have the option to grant an identical call option or other right of purchase with respect to a proportional amount of shares of New Common Stock otherwise to be issued to the Celotex Settlement Fund Recipient pursuant to the Plan, such option to be exercisable in writing not later than the earlier to occur of (A) thirty (30) days after written notice of the grant, or proposed grant, of a call option or other purchase right by the Bondholder Proponents pursuant to this Section 2(f)(ii) herein is given to the Veil Piercing Claimants' Representatives and the Celotex Settlement Fund Recipient, which notice shall specify the principal terms of such call option or other purchase right, including the identity of the grantee(s), the timing and method of exercise, and the form, amount and timing of payment of the exercise price, and (B) such other period of time required by the terms of the call option or other right of purchase, which shall in no event be less than ten (10) days after notice thereof is given to the Veil Piercing Claimants' Representatives and the Celotex Settlement Fund Recipient. 3. Conditions to Effectiveness of the Settlement. In order to provide for the full and complete settlement, satisfaction, release and discharge of all Settlement Claims, this Agreement and the settlement contained herein shall be conditioned on the satisfaction (or the written waiver or modification as specified below in each subsection) of all of the following conditions: (a) Entry by the Court of the Confirmation Order, which Order shall (unless this requirement, or any part thereof, is waived or modified by the Bondholder Proponents and the Debtors): (i) achieve Finality (as defined in Section 3(c) herein) with respect to the full and complete settlement, satisfaction, release and discharge of all Settlement Claims against any and all of the Released Parties, in each case to the fullest extent permitted in the Confirmation Order and without, inter alia, any waiver or limitation or restriction in any way on the discharge granted upon confirmation of the Plan pursuant to Section 1141 of the Code and effective on the Plan Effective Date; (ii) include an injunction providing that all Settlement Claims shall channel, transfer and attach to the Settlement Fund and permanently enjoining to the fullest extent permitted in the Confirmation Order the taking of any action against the Released Parties or their assets or other property to pursue or enforce, directly or indirectly, any Settlement Claims; (iii) retain continuing jurisdiction by the Court to enforce the provisions of the Confirmation Order and this Agreement, including exclusive jurisdiction over any challenges to the scope of the releases, discharges and injunctions contained in the Confirmation Order and the releases contained in this Agreement; (iv) find that Class U-7 received full and adequate disclosure as required by statute of the Plan and the Agreement in connection with voting on the Plan; (v) find that Class U-7 received notice of the Class U-7 Bar Date (as defined in Section 4(d)(ii)(A) herein) and the hearings to consider confirmation of the Plan and approval of the Agreement as required by statute and the standards of constitutional due process; (vi) include a provision certifying a class for settlement purposes only comprising all Veil Piercing Claimants (the "Settlement Class") pursuant to Fed. R. Civ. P. 23(b) and approving the settlement of the Settlement Claims as provided in this Agreement, and finding that all requirements of Fed. R. Civ. P. 23(a) have been satisfied and that notice to the Settlement Class was provided as required by statute and the standards of constitutional due process; (vii) allow the Veil Piercing Proof of Claim filed on behalf of the Settlement Class, together with the Celotex Proof of Claim, but only to the extent of the allowed amount of the Settlement Claims as provided in Section 2(a) herein and only to the extent that all Settlement Claims represented by such Veil Piercing Proof of Claim and Celotex Proof of Claim will be paid by distribution of the Settlement Fund to the Celotex Settlement Fund Recipient (the validity and amount of claims to or Demands against the Settlement Fund to be determined by the Celotex Bankruptcy Court) and shall have no other claim to or against the Debtors or their estates; (viii) approve the indemnification provisions contained in the Plan and in any exhibits thereto for the Existing Equityholders and past and present officers and directors of the Debtors; (ix) provide that the Settlement Fund shall be administered by, and be subject to the jurisdiction of, the Celotex Bankruptcy Court; and (x) enjoin any use of the record of the Adversary Proceedings, including the transcript of the trial and all depositions taken in such Proceedings, against any or all of the Released Parties (but specifically permitting the use of such record by the Court, the Celotex Bankruptcy Court and any appellate court of competent jurisdiction for the sole purpose of such court's review and/or enforcement of the settlement embodied in this Agreement and the Confirmation Order); (b) The Confirmation Order shall have become a Final Order (unless this requirement is waived or modified by the Bondholder Proponents); (c) "Finality" shall have been achieved with respect to the full and complete settlement, satisfaction, release and discharge of all Settlement Claims when all of the following conditions shall have been satisfied (unless this requirement, or any part thereof, is waived or modified by the Bondholder Proponents and the Debtors): (i) The Confirmation Order and the Plan shall provide for the full and complete settlement, satisfaction, discharge and release of, and an injunction prohibiting the commencement or continuation of, any claim or cause of action or Demand based upon a Veil Piercing-Related Issue against, in each case to the fullest extent permitted in the Confirmation Order, any and all of the Released Parties of and from any and all claims, obligations, rights, causes of action, Demands and liabilities (other than the right to enforce obligations under this Agreement and the Plan) which any person or entity may be entitled to assert, whether known or unknown, foreseen or unforeseen, then existing or thereafter arising, directly or indirectly, based in whole or in part upon any act, omission or other occurrence taking place on or prior to the Plan Effective Date in any way relating to the Debtors, the Chapter 11 Cases, the Plan or The Celotex Corporation and its subsidiaries (including, without limitation, any of the Settlement Claims); (ii) The Confirmation Order and the Plan shall provide for the full and complete settlement, satisfaction, discharge and release of, and an injunction prohibiting the commencement or continuation of, any claim or cause of action or Demand based upon a LBO-Related Issue raised or assertable by the Veil Piercing Claimants against any and all of the Released Parties, in each case to the fullest extent permitted in the Confirmation Order, including, without limitation, all claims, indemnities and causes of action that any or all of the Debtors, or any person(s) or entity(ies) claiming through any or all of them, have in connection with the LBO, action taken in contemplation of the LBO, or any contemporaneous or subsequent transaction(s) entered into as part of, arising out of or relating to the LBO or any or all of the LBO transaction(s) or transfer(s), including, without limitation, any and all obligations of any nature contemplated by, arising out of or related to the Stock Purchase Agreement between Hillsborough Holdings Corporation and Jasper Corp. dated as of April 21, 1988, as amended pursuant to amendments dated May 26, 1988 and January 25, 1989, and the related Undertaking of Jasper Corp. (including, without limitation, any of the Settlement Claims); (iii) The Confirmation Order shall provide that the settlement of the Settlement Claims under this Agreement is fair, equitable and reasonable and in good faith; (iv) The Celotex Bankruptcy Court shall have entered an order approving this Agreement and authorizing and directing The Celotex Corporation to render performance in accordance with the terms and conditions hereof; (v) Class U-7 shall have voted to accept the Plan in accordance with the Code or the Court shall have determined that Class U-7 is unimpaired under the Consensual Plan and under Section 1124 of the Code; and (vi) The Confirmation Order shall provide that the Settlement Class shall be deemed to have provided the Mutual Release set forth in Section 4(b) herein; and (d) In the event that any of the conditions set forth in Sections 3(b) and/or (c) herein is not fully satisfied, the Bondholder Proponents (in consultation with the Debtors) may request, consistent with Section 4(d) herein, that the Celotex Settlement Fund Recipient and any and all Parties to this Agreement take such actions as the Bondholder Proponents may reasonably request, which actions are reasonably believed by the Bondholder Proponents to be necessary to the realization of Finality. 4. Agreements. (a) The Parties shall seek the prompt confirmation and consummation of the Consensual Plan or any other Plan, including the prompt approval by the Court of this Agreement in connection with the confirmation of the Plan. (b) Mutual Releases. As of the Plan Effective Date, (i) (A) each of the Veil Piercing Claimants' Representatives, on its own behalf and on behalf of all Veil Piercing Claimants whom it represents or whom it has the authority to bind by virtue of its standing as attorney for such persons and entities, whether in their individual capacity(ies) or as representative(s) of the Settlement Class, (B) The Celotex Corporation, acting on behalf of its estate and all Veil Piercing Claimants, and (C) the Settlement Class, and (ii) each of the other Parties, hereby fully and freely RELEASE the Debtors, the Existing Equityholders, the KKR Entities and every other Released Party solely from any and all Settlement Claims and/or any claims and causes of action arising from the assertion of any or all of the Settlement Claims; provided, that there shall not be released any claims against The Celotex Corporation and its subsidiaries or any other manufacturer, seller or distributor of asbestos or an asbestos-containing product; provided, further, that nothing contained herein shall limit in any way the rights of indemnification from the Debtors of any present or former officer, director, employee or shareholder of the Debtors or any other person, to the extent such rights of indemnification have been preserved under Section 6.4 of the Plan or the Charter (as defined in the Consensual Plan). Each individual or entity granting a release ("Releasor") to any Released Party pursuant to this Agreement agrees as follows: (1) THE RELEASOR EXPRESSLY UNDERSTANDS THAT Section 1542 of the Civil Code of the State of California provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtors." (2) To the extent that, notwithstanding paragraph 9(d) hereof, California or other law may be applicable, THE RELEASOR HEREBY AGREES THAT THE PROVISIONS OF SECTION 1542 of the Civil Code of the State of California and all similar federal or state laws, rights, rules, or legal principles of any other jurisdiction which may be applicable hereto, to the extent they apply to any of the matters released herein, ARE HEREBY KNOWINGLY AND VOLUNTARILY WAIVED AND RELINQUISHED BY THE RELEASOR, in each and every capacity, to the full extent that such rights and benefits pertaining to the matters released herein may be waived, and the Releasor hereby agrees and acknowledges that this waiver is an essential term of this release, without which the consideration provided to it would not have been given. (3) In connection with such waiver and relinquishment, the Releasor acknowledges that it is aware that it may hereafter discover claims presently unknown or unsuspected, or facts in addition to or different from those which it now knows or believes to be true, with respect to the matters released herein. Nevertheless, it is its intent in executing this release fully, finally, and forever to settle and release all such matters, and all claims relative thereto, which exist, may exist or might have existed (whether or not previously or currently asserted in any action). (c) Dismissal of Lawsuits. (i) The HHC Official Committees (as may be necessary respecting the Adversary Proceedings only), the Debtors, the Veil Piercing Claimants' Representatives, The Celotex Corporation, the JWC Companies and the Official Celotex Committees shall use their respective reasonable efforts to bring about the prompt dismissal, with prejudice, as soon as practicable after the Plan Effective Date, of all known pending suits, appeals, proceedings and other actions, including the Adversary Proceedings, against each and all of the Released Parties solely to the extent such suits, appeals, proceedings or other actions are based upon, arise out of or are in connection with the Settlement Claims as to the Released Parties covered by the mutual release specified in Section 4(b) herein. Upon request therefor, any Party shall provide the Bondholder Proponents and the Debtors with a certificate of a responsible person of such Party, in form and substance reasonably acceptable to the Bondholder Proponents and the Debtors, to the effect that such Party has fully complied with this Section 4(c). (ii) Promptly after the execution of this Agreement by the Parties (subject to Section 7(b) herein), the Parties who are parties to the Adversary Proceedings shall jointly seek an order from the Court of Appeals for the Eleventh Circuit ("Court of Appeals") (A) staying the appeal (the "Appeal") of the District Court's Order pending the Plan Effective Date or (B) dismissing the Appeal in light of the proposed settlement, but with the express proviso that in the event of the termination of this Agreement prior to the Plan Effective Date, the Appeal shall automatically be reinstated upon 15 days' notice to the Court of Appeals and all counsel to the parties to the Appeal. (iii) In the event the Appeal of the District Court's Order has been dismissed pursuant to this Agreement, after the Plan Effective Date the Parties who are parties to the Adversary Proceedings, upon demand by the Debtors, shall stipulate to the entry of an order of final judgment (the "Preclusive Order") in the District Court, the Court or other appropriate court, for the purpose of giving full preclusive effect to the April 18 Order and the District Court's Order in favor of the Released Parties to the fullest extent permitted by law, consistent with this Agreement and the Consensual Plan. (d) Process Toward Realization of Finality. (i) The Parties acknowledge that the prompt realization of Finality will require considerable strategic planning and the cooperation of all of the Parties. In view of these considerations, the Parties intend that the Bondholder Proponents (after consultation with the Debtors) shall make and implement all strategic decisions (including, without limitation, decisions as to the content and timing of any and all applications, filings or other documents filed with or otherwise submitted to (or statements made before) the Court, or releases or statements to the press (or that are reasonably calculated to be made publicly available through the press) that relate directly or indirectly to the Plan, the Agreement, the settlement contained herein or to Finality, in each case in consultation with the other Parties to the extent appropriate and/or practicable under the circumstances; and the other Parties agree to use their respective best efforts to assist and cooperate with the Bondholder Proponents and the Debtors in implementing such decisions and in promptly realizing Finality, (including, without limitation, to consult with the Bondholder Proponents respecting the content and timing of any and all applications, filings or other documents to be filed with or otherwise submitted to (or statements to be made before) the Celotex Bankruptcy Court prior to making any such submission or statement), in all cases consistent with this Agreement. (ii) In furtherance of Section 4(d)(i) herein, the following procedures and efforts shall be utilized to obtain Finality and cannot be materially modified by the Bondholder Proponents without the Debtors' written consent: (A) The HHC Official Committees, the Bondholder Proponents, the Debtors and the KKR Entities shall promptly seek an order from the Court establishing a bar date for filing proofs of claim in the Chapter 11 Cases in respect of the Settlement Claims, which shall require that such proofs of claim must be filed no later than 60 days from the date of first giving of the Notice of such bar date (the "Class U-7 Bar Date") or be forever barred from asserting such Settlement Claims; (B) The HHC Official Committees, the Bondholder Proponents, the Debtors and the KKR Entities shall promptly seek an order from the Court, for settlement purposes only, (1) deeming Hillsborough's schedules to be amended by the addition thereto of each of the Veil Piercing Claimants with a claim in the provisionally allowed amount, only for purposes of voting on the Plan, of $1 each, (2) finding that, because of the Celotex Proof of Claim and the Veil Piercing Proof of Claim, individual Veil Piercing Claimants that do not "opt out" of the Settlement Class need not file a proof of claim in the Chapter 11 Cases in order to assert a claim against the Settlement Fund and (3) determining that in the event the Plan is confirmed and following the Plan Effective Date, the right of any individual Veil Piercing Claimant to share in any of the Settlement Fund will be determined in accordance with the rulings and procedures set forth by the Celotex Bankruptcy Court in the Celotex Chapter 11 Case; (C) The Celotex Corporation will file the Celotex Proof of Claim; (D) Such individual(s) and/or entity(ies) (other than AVDs) as shall be acceptable to the Bondholder Proponents after consultation with the Debtors, shall file the Veil Piercing Proof of Claim and shall promptly seek an order from the Court requesting, for settlement purposes only, (1) the certification of a class of all Veil Piercing Claimants (the "Settlement Class") pursuant to, at a minimum, Rule 23(b) of the Federal Rules of Civil Procedure and Rule 7023 of the Federal Rules of Bankruptcy Procedure, which Settlement Class shall provide members thereof with the right to "opt out"; (2) the appointment of the Veil Piercing Claimant(s) who filed the Veil Piercing Proof of Claim as a class representative(s) for the Veil Piercing Proof of Claim and the Settlement Class (which representative(s) shall comprise, at a minimum, one of an asbestos personal injury claimant, an asbestos property damage claimant or a general unsecured trade creditor of The Celotex Corporation); and (3) the appointment of counsel for the Settlement Class (to serve without compensation except as may be awarded pursuant to Section 4(i) herein and/or by the Celotex Bankruptcy Court in the Celotex Chapter 11 Case). The Parties shall cooperate, and use their best efforts, to achieve the entry of the aforementioned order; (E) The Debtors shall promptly object to the Celotex Proof of Claim and the Veil Piercing Proof of Claim, (such objections, the "Contested Matters"); (F) The Parties shall seek the Court's authorization to compromise and settle the Contested Matters pursuant to, inter alia, Rules 9019 and 7023 of the Federal Rules of Bankruptcy Procedure as provided in this Agreement, including, without limitation, under the Consensual Plan and in the amount and under the treatment provided in Section 2(a) herein; (G) The HHC Official Committees, the Bondholder Proponents, the Debtors and the KKR Entities shall permit the Veil Piercing Claimants to vote in favor of or to reject the Consensual Plan (as Class U-7 creditors); provided that such Parties' individual and collective right to assert that the Veil Piercing Claimants (as Class U-7 creditors) are unimpaired under the Consensual Plan and under Section 1124 of the Code is not thereby waived and is preserved; (H) Notice of this Agreement, the Consensual Plan, the proposed certification of the Settlement Class, the Class U-7 Bar Date and the Confirmation Hearing, in the form(s) approved by the Court (the "Notice"), shall be given to the Veil Piercing Claimants pursuant to an order of the Court in accordance with at least the following: (1) where possible, the mailing of the Notice to each of the Veil Piercing Claimants at his/her/its address listed in the proofs of claim or schedules of liabilities filed in the Celotex Chapter 11 Case and in the Chapter 11 Cases, and in the case of each person or entity who commenced a legal action against The Celotex Corporation or the Debtors, to each such person's or entity's counsel of record in such action; (2) the publication of the Notice as directed by the Court; and (3) the mailing in the manner provided in Section 4(d)(ii)(H)(1) herein of a disclosure statement approved pursuant to Section 1125 of the Code; (I) The Parties shall recommend to the Court that with respect to those Veil Piercing Claimants referred to in Section 4(d)(ii)(H)(1) herein that one package be mailed to each of them which shall contain, inter alia: (1) notice of the time, date and place of the confirmation hearing on the Plan, and the right and last date to object to confirmation of the Plan; (2) the Class U-7 ballot and voting instructions; (3) the disclosure statement referred to in Section 4(d)(ii)(H)(3) herein; (4) notice of the filing of the Veil Piercing Proof of Claim and the Celotex Proof of Claim; (5) notice of the certification of the Settlement Class, for settlement purposes only, the appointment of the representative(s) of the Settlement Class and the appointment of counsel for the Settlement Class; (6) notice of the right to "opt out" of the Settlement Class and the consequence thereof; (7) notice of the time, date and place of the hearing to approve the Agreement and the settlement contained therein (the "Fairness Hearing"); (8) notice of the right to object to the Agreement, the certification of the Settlement Class, the appointment of the representative(s) of the Settlement Class, the appointment of counsel for the Settlement Class and the granting of the releases to the Released Parties; and (9) notice of the Class U-7 Bar Date; (J) The Parties shall recommend to the Court that the Fairness Hearing and the hearing on final certification of the Settlement Class be held simultaneously with or prior to the confirmation hearing on the Plan and that the relief sought therein be granted in one order; and (K) Without limiting the provisions of Section 4(e) herein, each of the Parties states to the other Parties, after careful consideration, that each believes: (1) each and all of the Released Parties are among the type of third parties who may receive the benefit of an injunction of the type provided for by Section 524(g) of the Code in the Celotex Chapter 11 Case; (2) the Settlement Claims that are settled, satisfied, released and discharged pursuant to this Agreement and the Plan are among the type of claims that may be dealt with by an injunction of the type provided for by Section 524(g) of the Code in the Celotex Chapter 11 Case; and (3) the Settlement Fund is among the type of contributions contemplated under Section 524(g) of the Code. (e) Covenants. The Celotex Corporation, JWC, the Official Celotex Committees and the Veil Piercing Claimants' Representatives each agrees to propose and use its respective best efforts to obtain confirmation of a Chapter 11 plan in the Celotex Chapter 11 Case that includes a provision for an injunction pursuant to Section 524(g) of the Code that shall apply to, cover, protect and benefit, inter alia, each and all of the Released Parties in his/her/its respective capacity as a Released Party or an injunction acceptable to the Released Parties that provides for the same protections afforded by Section 524(g) to the Released Parties. Without limiting the foregoing, such Chapter 11 plan in the Celotex Case shall include: (i) an injunction pursuant to Section 524(g) of the Code that channels all claims being settled herein to a trust contemplated by Section 524(g) of the Code and applies to and covers all of the Released Parties or an injunction acceptable to the Released Parties that provides for the same protections afforded by Section 524(g) to the Released Parties; (ii) the appointment in the Celotex Chapter 11 Case of a legal representative of the type contemplated by Section 524(g)(5); (iii) a contribution of the Settlement Fund (together with all earnings and accretions thereto), or such part of the Settlement Fund as found to be fair and equitable by the Celotex Court, to a trust fund established under, or as a result of, a Chapter 11 plan for The Celotex Corporation in the Celotex Chapter 11 Case pursuant to Section 524(g) of the Code or a contribution to a trust which results in the same protections for the Released Parties as those afforded by Section 524(g) of the Code; (iv) a proposed confirmation order that establishes that the contribution referred to in Section 4(e)(iii) herein shall be found to be a benefit contributed on behalf of each and all of the Released Parties; (v) a proposed confirmation order that establishes that each and all of the Released Parties comes within the scope of and is covered, protected and benefitted by the injunction referred to in Section 4(e) herein; and (vi) an injunction pursuant to Section 524(g) of the Code which injunction shall apply to and protect each and all of the Released Parties or an injunction acceptable to the Released Parties that provides for the same protections afforded by Section 524(g) to the Released Parties. (f) Announcement. The Parties shall jointly announce the existence and the terms of this Agreement as soon as possible after this Agreement shall have become effective pursuant to Section 7 herein. (g) Use of Evidence From Trial. The Parties shall support the use by the Court and by the Celotex Bankruptcy Court of the evidence presented during the trial held in the Adversary Proceedings that commenced on December 13, 1993 and the October 17 Hearings in determining that the settlement of the Settlement Claims set forth in this Agreement and in the Plan (i) is fair, equitable and reasonable, and in good faith and constitutes the full and complete settlement, satisfaction, release and discharge of all Settlement Claims, and (ii) to the extent applicable, should be approved as part of confirmation of the Plan. (h) Support of Plan. The Parties shall support the Plan and shall not support, directly or indirectly or through one or more intermediaries, any other proposed plan in respect of any or all of the Debtors or any other settlement of any of the Settlement Claims. (i) Attorneys' Fees. The Parties shall support an application in the Chapter 11 Cases by Caplin & Drysdale, on behalf of itself and the Claimants' Attorneys, for an award of reasonable attorneys' fees and costs in an amount equal to $15 million pursuant to Code Sections 503(b) and/or 1129(a)(4), or otherwise, based on factors including the contingent nature of the representation, the favorable results achieved, the difficulty of the issues presented and the fact that counsel were representing clients brought involuntarily into the Chapter 11 Cases through the Adversary Proceedings. (j) Confidentiality. From and after the Plan Effective Date, the Veil Piercing Claimants' Representatives shall keep confidential, and shall not use in any manner inconsistent with this Agreement, all files and memoranda relating to cases against any or all of the Released Parties based upon, arising out of or relating to the Settlement Claims. (k) The Celotex Corporation shall (i) promptly seek appropriate approval from the Celotex Bankruptcy Court for authority to be bound by this Agreement, for the support of the Plan by The Celotex Corporation, and for the authorization and direction by the Celotex Bankruptcy Court for The Celotex Corporation to render performance in accordance with the terms and conditions of this Agreement, (ii) request that the Celotex Bankruptcy Court promptly issue an injunction directing that all claims of the type being settled by this Agreement shall attach solely to the Settlement Fund and enjoining and restraining all persons and entities from commencing and/or continuing any suit, arbitration or other proceeding of any type against any and all of the Released Parties arising out of any such claims; (iii) shall provide notice of such motion for approval to the same persons and entities, and in the same manner, but not necessarily in the same package, as the Notice referred to in Section 4(d)(ii)(H)(1) herein, (iv) at the request of the Bondholder Proponents, promptly file the Celotex Proof of Claim against the Debtors for the benefit of the Veil Piercing Claimants and its estate, (v) accept treatment under the Plan of its Settlement Claims against the Debtors pursuant to this Agreement and (vi) if it is the Celotex Settlement Fund Recipient, and consistent with Sections 4(d)(ii)(K) and 4(e) of this Agreement, receive and hold the Settlement Fund for the exclusive benefit of the Veil Piercing Claimants except to the extent a confirmed plan of reorganization in the Celotex Chapter 11 Case shall direct otherwise, and manage the Settlement Fund in accordance with this Agreement and all applicable orders of the Celotex Bankruptcy Court, and distribute the Settlement Fund pursuant to its confirmed plan of reorganization or an order(s) of the Celotex Bankruptcy Court. (l) The Parties shall support The Celotex Corporation in its efforts to obtain the approvals from the Celotex Bankruptcy Court that are specified in Section 4(k) of this Agreement. 5. Representations. (a) Apollo represents and warrants that it owns or controls debt obligations of the Debtors in the approximate aggregate principal amount of $160 million. (b) Lehman Brothers Inc. represents and warrants that it owns or controls debt obligations of the Debtors in the approximate aggregate principal amount of $271 million. (c) Each of the Veil Piercing Claimants' Representatives represents and warrants that it is authorized to enter into this Agreement on behalf of all of its clients or principals that are or may be Veil Piercing Claimants. (d) Each of the Debtors represents and warrants that it is authorized to enter into and render performance in accordance with this Agreement, subject only to approval by the Court. (e) Each of the KKR Entities represents and warrants that it is authorized to enter into and render performance in accordance with this Agreement. (f) Each of the Management represents and warrants that he is authorized to enter into and render performance in accordance with this Agreement. (g) The Celotex Corporation represents and warrants that it is authorized to enter into and render performance in accordance with this Agreement, subject only to approval by the Celotex Bankruptcy Court. (h) The KKR Entities represent and warrant that collectively they own approximately 91% of the issued and outstanding Old Common Stock. (i) The members of the Signing Management severally but not jointly represent that they each own the number of shares of Old Common Stock set forth opposite their respective names on Exhibit E hereto. 6. [INTENTIONALLY OMITTED] 7. Effectiveness of this Agreement. (a) The Amended Agreement became effective by its terms (without the execution thereof by any Existing Equityholder or by JWC). The Amended Agreement shall be amended and restated and become effective as set forth in this Agreement only upon the satisfaction of the following conditions on or prior to the Plan Effective Date: (i) This Agreement shall have been executed by all of the Parties; and (ii) The Celotex Bankruptcy Court shall have entered an order (A) approving this Agreement and (B) authorizing and directing The Celotex Corporation to render performance in accordance with the terms and conditions of this Agreement. (b) The Bondholder Proponents, in their sole and exclusive discretion prior to the Plan Effective Date, may waive any or all of the provisions contained in Section 7(a)(i) herein. (c) Prior to the satisfaction of all of the foregoing conditions, the Amended Agreement shall remain in full force and effect in accordance with its terms. 8. Termination. This Agreement shall terminate upon the earlier to occur of the following: (a) Upon the giving of a notice by (i) the Bondholder Proponents, (ii) the Debtors or (iii) the Veil Piercing Claimants' Representatives and The Celotex Corporation, to the others at any time after an order shall have been entered which shall have become a Final Order that (x) disapproves this Agreement or the Plan substantially in its entirety provided that such disapproval shall not be based on the failure of any or all of the conditions contained in Section 10.1(a) or 10.1(b) of the Consensual Plan, (y) confirms a plan of reorganization in any or all of the Chapter 11 Cases other than the Plan or (z) finds or declares that the Veil Piercing Claims are without merit or grants substantially the relief requested in Adversary Proceeding No. 90-0003 and/or 90-0004, except that, the stay, withdrawal or dismissal of any appeal from the Adversary Proceedings pursuant to Section 4(c)(ii) or (iii) herein or otherwise shall not cause either the April 18 Order or the District Court's Order to become a Final Order for the purposes of Section 8(a) herein; (b) On or after March 31, 1995, provided the Court has not entered the Confirmation Order, upon the giving of a notice by the Bondholder Proponents to the other Parties; (c) The Bondholder Proponents, the Debtors, The Celotex Corporation and the Veil Piercing Claimants' Representatives shall mutually agree in writing to terminate this Agreement; (d) In the event of a termination of this Agreement by the Debtors pursuant to Section 8(a) above, the Amended Agreement shall again become valid, binding and enforceable in accordance with its terms with respect to the parties thereto; and (e) In the event of a termination of this Agreement by the Bondholder Proponents pursuant to Section 8(b) above, the Amended Agreement shall again become valid, binding and enforceable in accordance with its terms with respect to the parties thereto. 9. Miscellaneous. (a) Fiduciary Duty. Notwithstanding any other provision contained herein, in the event the Consensual Plan is amended or modified without the consent required by this Agreement, no such Party shall be required to fulfill any of its agreements, rights, duties or obligations hereunder to the extent that such Party has reasonably determined, on advice of counsel, that the fulfillment of such agreement or duty in connection with any amendment to or modification of the Consensual Plan would violate such Party's fiduciary duty arising out of such Party's status as an official committee or a debtor-in-possession in the Chapter 11 Cases or in The Celotex Chapter 11 Case. (b) Further Assurances. Without limiting Section 4 of this Agreement, each Party, as applicable, shall promptly execute and deliver such agreements, certificates, receipts, instruments, acknowledgements and other documents, including, without limitation, the Celotex Proof of Claim and the Veil Piercing Proof of Claim, and to promptly take such actions or cause to be taken such actions, as may be reasonably requested by the Bondholder Proponents (in consultation with the Debtors) to fully and promptly effect Finality and the agreements and other provisions contained herein. (c) Amendments. This Agreement may not be amended except in a writing signed by the Party against which such amendment is sought to be enforced. (d) Governing Law. Except to the extent the Code or Bankruptcy Rules are applicable, the rights and obligations arising under this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. (e) Headings. The headings of the Sections, paragraphs and subsections of this Agreement are inserted for convenience only and shall not affect the interpretation hereof. (f) Notices. All notices, requests or demands under or in connection with this Agreement shall be in writing and shall be delivered by hand, sent by recognized overnight courier or sent by telecopier, telex or similar electronic means to the address or telecopier number of the Party as set forth under its signature hereto, or to such other address or telecopier number as such Party shall provide to all Parties hereto in writing, and shall be deemed sent or given hereunder, in the case of delivery by recognized overnight courier, on the date of actual delivery, in the cases of transmission by telecopier, telex or similar electronic means on the date of actual transmission, and in the case of personal delivery, on the date of actual delivery. (g) No Admissions. No part of this Agreement shall be deemed as an admission of any Party for any purpose, whether in any of the Veil Piercing Proceedings or otherwise. (h) No Waiver. The Parties hereto do not waive or release any rights, claims, defenses or remedies until all conditions of this Agreement and the Plan have been satisfied or waived. Without limiting the foregoing, nothing herein shall constitute an admission or waiver with respect to the Chapter 11 Cases, any Veil Piercing Proceedings or the Celotex Chapter 11 Case. (i) No Solicitation. Notwithstanding any other provision in this Agreement, nothing in this Agreement is intended to be or constitute, and shall not be deemed to be or constitute, a solicitation of any vote or an agreement to vote for or against the Consensual Plan or any other plan of reorganization, and nothing in this Agreement shall impair the right or the ability of any Party to vote for or against, or abstain or refrain from voting with respect to, the Consensual Plan or any other plan of reorganization. (j) Extraterritoriality. It is the intention of the Parties that the settlements and other agreements contained in this Agreement be given application both to claims, causes of action and suits within and without the jurisdiction of the United States of America. (k) Successors and Assigns. This Agreement is intended to bind and inure to the benefit of the Parties and the other signatories, if any, hereof and their respective successors, assigns, heirs, executors, administrators and representatives. (l) Complete Agreement. This document, including the appendix and exhibits hereto, embodies the complete agreement and understanding between the Parties and the other signatories, if any, with respect to the subject matter hereof and, subject to Sections 7(c) and 8(d) and (e) hereof, supersedes and preempts any prior agreement, understanding or representation made by and between any or all of such Parties and the other signatories, if any, whether written or oral, which may have related to the subject matter hereof in any way whatsoever. (m) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. CAPLIN & DRYSDALE, Chartered By:/s/ Elihu Inselbuch Elihu Inselbuch 399 Park Avenue New York, Ny 10022 (212) 319-7125 (212) 644-6755 (telecopier) For Itself and the AVDs BARON & BUDD By:/s/ Fred Baron Fred Baron 3102 Oak Lawn Avenue Suite 1100 Dallas, TX 75219-4281 (214) 521-3605 (214) 520-1181 (telecopier) NESS MOTLEY LOADHOLT RICHARDSON & POOLE By:/s/ Joseph Rice Joseph Rice P.O. Box 365 Barnwell, SC 29812 (803) 259-9900 (803) 577-7513 (telecopier) GREITZER AND LOCKS By:/s/ Gene Locks Gene Locks 1500 Walnut Street Philadelphia, PA 19102 (215) 893-0100 (215) 985-2960 (telecopier) AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. By:/s/ Steven M. Pesner Steven M. Pesner, P.C. 65 East 55th Street, 33rd Flr. New York, NY 10022 (212) 872-1070 (212) 872-1003 (telecopier) For Apollo PAUL, WEISS, RIFKIND, WHARTON & GARRISON By:/s/ ROBERT DRAIN Robert Drain 1285 Avenue of the Americas New York, NY 10019-6064 (212) 373-3236 (212) 373-2366 (telecopier) For Lehman Brothers Inc. BUSH ROSS GARDNER WARREN & RUDY, P.A. By:/s/ JEFFREY W. WARREN Jeffrey W. Warren 220 South Franklin Street Tampa, FL 33602 (813) 224-9255 (813) 223-9620 (telecopier) For The Celotex Corporation HOYT, COLGAN & ANDREU, P.A. By:/s/ MICHAEL B. COLGAN Michael B. Colgan 2900 Barnett Plaza 101 E. Kennedy Blvd. Tampa, FL 33602 (813) 229-6688 (813) 229-3331 (telecopier) For Jim Walter Corporation, on behalf of itself and the JWC Companies, G.N. Drummond, Sr., E.A. Drummond, Drummond Company, Inc., Jasper Corp. and its shareholders, William B. Long and Walter F. Johnsey STROOCK & STROOCK & LAVAN By:/s/ Daniel H. Golden Daniel H. Golden Seven Hanover Square New York, NY 10004-2594 (212) 806-5423 (212) 806-6606 (telecopier) For HHC Bondholders Committee JONES, DAY, REAVIS & POGUE By:/s/ Marc S. Kirschner Marc. S. Kirschner 599 Lexington Avenue New York, NY 10025 (212) 326-3939 (212) 755-7306 (telecopier) For HHC Creditors Committee JOHNSON, BLAKELY, POPE, BOKOR, RUPPEL & BURNS, P.A. By:/s/ Charles M. Tatelbaum Charles M. Tatelbaum 911 Chestnut Street Clearwater, FL 33616 (813) 461-1818 (813) 441-8617 (telecopier) For Celotex Unsecured Trade Creditors Committee KOZYAK TROPIN & THROCKMORTON, P.A. By:/s/ John W. Kozyak John W. Kozyak 200 S. Biscayne Boulevard Suite 2850 Miami, FL 33131-2335 (305) 372-1800 (305) 372-3508 (telecopier) For Celotex Asbestos Property Damage Claimants Committee HONIGMAN MILLER SCHWARTZ & COHN By:/s/ Sheldon S. Toll Sheldon S. Toll 2290 First National Building Detroit, MI 48226 For Celotex Asbestos Bodily Injury Claimants Committee (313) 256-7800 (313) 962-0176 (telecopier) HILLSBOROUGH HOLDINGS CORPORATION, BEST INSURORS, INC., BEST INSURORS OF MISSISSIPPI, INC., COAST TO COAST ADVERTISING, INC., COMPUTER HOLDINGS CORPORATION, DIXIE BUILDING SUPPLIES, HAMER HOLDINGS CORPORATION, HAMER PROPERTIES, INC., HOMES HOLDINGS CORPORATION, JIM WALTER COMPUTER SERVICES, INC., JIM WALTER HOMES, INC., JIM WALTER INSURANCE SERVICES, INC., JIM WALTER RESOURCES, INC., JIM WALTER WINDOW COMPONENTS, INC., JW ALUMINUM COMPANY, JW RESOURCES, INC., JW RESOURCES HOLDINGS CORPORATION, J.W.I. HOLDINGS CORPORATION, J.W. WALTER, INC., JW WINDOW COMPONENTS, INC., LAND HOLDINGS CORPORATION, MID-STATE HOMES, INC., MID-STATE HOLDINGS CORPORATION, RAILROAD HOLDINGS CORPORATION, SLOSS INDUSTRIES CORPORATION, SOUTHERN PRECISION CORPORATION, UNITED LAND CORPORATION, UNITED STATES PIPE AND FOUNDRY COMPANY, U.S. PIPE REALTY, INC., VESTAL MANUFACTURING COMPANY, WALTER HOME IMPROVEMENT, INC. WALTER INDUSTRIES, Inc. and WALTER LAND COMPANY By:/s/ Kenneth J. Matlock Name: Kenneth J. Matlock Title: Vice President JWC ASSOCIATES, L.P. JWC ASSOCIATES II, L.P. KKR PARTNERS II, L.P. By: KKR ASSOCIATES, L.P., a general partner By:/s/ Michael T. Tokarz Name: Michael T. Tokarz Title: A general partner SIGNING MANAGEMENT /s/ James W. Walter James W. Walter /s/ Kenneth J. Matlock Kenneth J. Matlock /s/ William H. Weldon William H. Weldon /s/ Gilberto Aleman Gilberto Aleman /s/ W. Kendall Baker W. Kendall Baker /s/ William Carr William Carr /s/ Joseph F. Hegerich Joseph F. Hegerich /s/ Wayne Hornsby Wayne Hornsby /s/ Kenneth E. Hyatt Kenneth E. Hyatt /s/ Donald M. Kurucz Donald M. Kurucz /s/ Robert W. Michael Robert W. Michael /s/ Timothy M. Pariso Timothy M. Pariso /s/ Michael Roberts Michael Roberts /s/ Dennis M. Ross Dennis M. Ross /s/ Sam J. Salario Sam J. Salario /s/ James M. Sims James M. Sims /s/ William N. Temple William N. Temple /s/ David L. Townsend David L. Townsend APPENDIX A A. "Affiliate" shall have the meaning set forth in Rule 501, promulgated under the Securities Act of 1933, as amended. B. "Apollo" shall mean AIF II, L.P., certain affiliates (as defined in the Plan) of AIF II, L.P. and certain accounts managed or controlled by such affiliates. C. "Attorneys' Fees Differential" shall mean the amount equal to the difference between $15 Million and the actual amount of attorneys' fees and costs awarded by the Court in the Chapter 11 Cases to Caplin & Drysdale on behalf of itself and the Claimants' Attorneys (as referred to in Section 4(i) herein). D. "Celotex" shall mean The Celotex Corporation and/or any predecessor thereof or successor thereto and all of their respective present and former parents, Affiliates and subsidiaries, other than JWC and any and all of the JWC Companies. E. "Celotex Proof of Claim" shall mean, consistent with Section 4 hereof, a proof(s) of claim(s) filed in the Chapter 11 Cases asserting that any or all of the Debtors are or may be liable for any or all claims or Demands which Celotex holds or which may be asserted against Celotex in the future, direct, indirect or derivative, caused by products manufactured, sold or distributed by Celotex, or otherwise (i) based on any of the Veil Piercing-Related Issues and/or (ii) based on the LBO-Related Issues, such proof(s) of claim(s) to be in form and substance reasonably acceptable to the Bondholder Proponents and settled, satisfied, released and discharged by distribution of the Settlement Fund to the Celotex Settlement Fund Recipient. The liability of the Debtors described in the Celotex Proof of Claim shall include (i) claims in the nature of or sounding in piercing the corporate veil, alter ego, alternate entity, successor liability, conspiracy, instrumentality, agency and any other theory of law, equity or admiralty that seeks to hold the stockholder of a corporation liable for all or part of any claims against that corporation; (ii) claims resulting from or arising out of or relating to the LBO, actions taken in contemplation of the LBO or any contemporaneous or subsequent transaction(s) entered into as a part of, arising out of, or relating to the LBO or any or all of the LBO transaction(s) or transfer(s); and (iii) claims resulting or arising from the transfer of assets of Celotex for less than reasonably equivalent value to the extent available remedies exist in favor of Celotex as to such transfers, including, without limitation, the Settlement Claims. F. "Celotex Settlement Fund Recipient" shall mean The Celotex Corporation for the exclusive benefit of the Veil Piercing Claimants, or such other person(s) or entity(ies) designated by an order entered by the Celotex Bankruptcy Court which becomes a Final Order to act in the place and stead and on behalf of The Celotex Corporation, including, without limitation, any entity established pursuant to a confirmed plan of reorganization for The Celotex Corporation to hold, manage, liquidate, distribute or otherwise assume responsibility for and the liabilities of the Settlement Fund and any liabilities arising therefrom or in connection therewith. G. "Chapter 11 Cases" shall mean each of the reorganization cases of the Debtors listed in the caption on the cover page of the Consensual Plan, all of which are being jointly administered under Case No. 89-9715-8P1. H. "Code" shall mean Title 11 of the United States Code, 11 U.S.C. sections 101 et seq., together with all amendments, modifications and replacements as the same exist on any relevant date to the extent applicable to the Chapter 11 Cases. I. "Confirmation Date" shall mean the date on which the Court enters the Confirmation Order. J. "Confirmation Order" shall mean the order(s) of the Court confirming the Plan and approving the transactions and settlements contemplated therein. K. "Demand" shall mean a demand for or right to payment, present or future, that was not a claim during the proceedings leading to confirmation of the Plan, arising out of the same or similar conduct or events that gave rise to the Settlement Claims. L. "Existing Equityholder" shall mean each holder (record or beneficial) of an Old Common Stock Interest; provided, that, in the event that the Court shall enter an order finding (i) that such holder acted in bad faith so as to materially breach this Agreement or to obstruct confirmation of the Consensual Plan by the date determined by operation of Section 10.1(a) of the Consensual Plan or the occurrence of the Plan Effective Date by March 31, 1995, or such later date as may be determined by operation of Section 10.2(i) of the Consensual Plan and (ii) that denial of the benefits afforded an Existing Equityholder under this Agreement and the Consensual Plan is an appropriate remedy for such misconduct, then such Holder shall not be an Existing Equityholder. If each of the KKR Entities and the Signing Management are signatories to this Agreement, then all other holders (record or beneficial) of the Old Common Stock shall be deemed to be a beneficiary of this Agreement as an Existing Equityholder. K. "Final Order" shall mean an order, judgment, ruling or decree issued and entered by the Court or by any state or other federal court or other tribunal located in one of the states, territories or possessions of the United States of America or the District of Columbia that has not been reversed, stayed, modified or amended and as to which the time to appeal or petition for reargument, rehearing or certiorari has expired, and as to which no appeal, reargument, petition for certiorari or rehearing is pending or as to which any right to appeal, reargue, petition for certiorari or seek rehearing has been waived in writing or, if an appeal, reargument, petition for certiorari or rehearing thereof has been denied, the time to take any further appeal or to seek certiorari or further reargument or rehearing has expired; provided that, the stay, withdrawal or dismissal of any appeal from the Adversary Proceedings pursuant to Section 4(c)(ii) or (iii) herein or otherwise shall not cause either the April 18 Order or the District Court's Order to become a Final Order for the purposes of Section 8(a) herein. M. "HHC Bondholders Committee" shall mean the Official Bondholders Committee of the Debtors appointed by the United States Trustee in the Chapter 11 Cases pursuant to Section 1102 of the Code, as such Committee may be constituted from time to time. N. "HHC Creditors Committee" shall mean the Official Committee of General Unsecured Creditors of the Debtors appointed by the United States Trustee in the Chapter 11 Cases pursuant to Section 1102 of the Code, as such Committee may be constituted from time to time. O. "LBO-Related Issues" shall mean and be the collective reference to all theories or bases of recovery recognizable at law, in equity or in admiralty under the laws of any jurisdiction that are held or asserted by or that may be held or asserted by any of the Debtors or any holder of a claim or interest in the Chapter 11 Cases, in respect of such claim or interest, directly or indirectly based upon, arising out of or in connection with the LBO or any of the LBO transactions or transfers consummated in contemplation of or as a part thereof or in connection therewith, including, without limitation, the acquisition of the capital stock of any of the Debtors, the consummation of the transactions contemplated by the Agreement and Plan of Merger dated as of August 12, 1987, and the financing, reorganization, asset disposition and other transactions consummated as a part thereof or in connection therewith, whether based upon theories of piercing the corporate veil of any Debtor or its predecessor and/or any of its respective present or former parents, subsidiaries or Affiliates, alter ego, alternate entity, agency, instrumentality, the transfer (fraudulent or otherwise) of any assets or property by any Debtor (or other non-Debtor that had at any time been an Affiliate of any Debtor), preference, fraud, conspiracy, substantive consolidation, successor liability, or any other legal or equitable theory whatsoever. P. "New Common Stock" shall mean the common stock, par value $.01 per share, of Walter Industries, Inc. to be issued on the Plan Effective Date. The New Common Stock held by the Celotex Settlement Fund Recipient or by any creditor of The Celotex Corporation, in its capacity as such, shall be voted in the same percentage as the shares of the other New Common Stock, taken together, is voted (based upon the number of votes cast). Q. [INTENTIONALLY OMITTED] R. "New Common Stock Value Per Share" shall mean the New Common Stock Value divided by 50 million, representing the number of shares of New Common Stock to be issued and outstanding on the Plan Effective Date before considering any additional distribution under either Section 3.21 or Section 3.26(b)-(c) of the Consensual Plan. S. "Old Common Stock" shall mean the outstanding common stock, $0.01 par value per share, of Walter Industries, Inc., as the surviving corporation of the merger between Hillsborough and the Old Walter Industries. T. "Old Common Stock Interest" shall mean all interests in the Old Common Stock exclusive of any shares of such stock held in treasury, which is registered as of the Plan Effective Date in such stock register as may be maintained by or on behalf of Walter Industries. U. "Original Plan Proponents" shall mean Apollo, Lehman Brothers, Inc., the HHC Bondholders Committee and the HHC Creditors Committee. V. "Plan Effective Date" shall mean the first business day all conditions set forth in Section 10.2 of the Consensual Plan have been satisfied or waived but which shall not be less than eleven days after the date on which the Confirmation Order is entered. W. "Qualified Securities" shall have the meaning assigned to that term (or another term serving the same or a similar function) under the Plan. X. "Released Parties" shall mean each and every Party and each and all of its present and former parents, subsidiaries, shareholders (record or beneficial), partners (general and limited), officers, directors, employees, agents, advisors, Affiliates and representatives in each case in such person's or entity's capacity as a holder of a claim or interest in the Chapter 11 Cases, as a Plan proponent, if applicable, as an Existing Equityholder or in any other capacity, including, without limitation, Kohlberg Kravis Roberts & Co., KKR Associates, Henry R. Kravis, George R. Roberts, Paul E. Raether, Michael T. Tokarz, Perry Golkin, G.N. Drummond, Sr., E.A. Drummond, Drummond Company, Inc., Jasper Corp. and its shareholders, William B. Long and Walter F. Johnsey (it being understood that (i) The Celotex Corporation and its subsidiaries are not included in any capacity, but that each and all of the respective present and former shareholders (record and beneficial), partners (general and limited), officers, directors, employees, agents, advisors, Affiliates and representatives of The Celotex Corporation and its subsidiaries which are not The Celotex Corporation or its subsidiaries are specifically included and (ii) the JWC Companies, G.N. Drummond, Sr., E.A. Drummond, Drummond Company, Inc., Jasper Corp. and its shareholders, William B. Long and Walter F. Johnsey are not Released Parties regarding any of their respective conduct arising out of a transaction(s) or an act(s) occurring after May 26, 1988). Y. "Settlement Claims" shall mean and be the collective reference to all Veil Piercing Claims and all claims and causes of action held or assertable by the Veil Piercing Claimants based upon LBO-Related Issues. Z. "Subordinated Note Claims" shall mean, collectively, the Senior Subordinated Note Claims, the 17% Subordinated Note Claims, the 10% Subordinated Debenture Claims, the 13% Subordinated Note Claims and the 13 Subordinated Debenture Claims (as each of such terms is defined in the Consensual Plan). AA. "Veil Piercing Claimants" shall mean The Celotex Corporation and any other person or entity who may have or may assert in the future a Veil Piercing Claim. AB. "Veil Piercing Claims" shall mean and be the collective reference to all existing claims and Demands and all claims and Demands that may be asserted in the future, whether known or unknown, against any or all of the Debtors or any other Released Party based upon, arising out of or in connection with any of the Veil Piercing-Related Issues, but shall not include any claim based upon a valid, binding and enforceable obligation by any or all of the Debtors to indemnify any person or entity. AC. "Veil Piercing New Common Stock Amount" shall mean that number of shares of New Common Stock having an aggregate Veil Piercing New Common Stock Value Per Share equal to the Veil Piercing Residual Claims Amount. AD. "Veil Piercing New Common Stock Value" shall mean $2,525,000,000, less the sum of (a) $902 million and (b) the aggregate principal amount of Qualified Securities to be distributed under the terms of the Consensual Plan on the Plan Effective Date. AE. "Veil Piercing New Common Stock Value Per Share" shall mean the Veil Piercing New Common Stock Value divided by 50 million, representing the number of shares of New Common Stock to be issued and outstanding on the Effective Date before considering any additional distribution under either Section 3.21 or Section 3.26(b)-(c) of the Consensual Plan. AF. "Veil Piercing Proceedings" shall mean and be the collective reference to all lawsuits, actions and other judicial and administrative proceedings that have been, or may in the future be, instituted against any person or entity that directly or indirectly seek or could seek any remedy from any or all of the Released Parties based upon, arising out of or in connection with any of the Veil Piercing-Related Issues and/or Settlement Claims. AG. "Veil Piercing Proof of Claim" shall mean, consistent with Section 4 hereof, a proof(s) of claim(s) filed in the Chapter 11 Cases by such individual(s) and/or entity(ies) (other than AVDs) as shall be acceptable to the Bondholder Proponents (after consultation with the Debtors) on behalf of the Settlement Class asserting that any or all of the Debtors are or may be liable for the Settlement Claims, to be filed upon the request of the Bondholder Proponents and solely in connection with and for the purpose of the confirmation of the Plan, the approval of this Agreement and the realization of Finality, which proof(s) of claim(s) shall be in form and substance reasonably acceptable to the Bondholder Proponents (in consultation with the Debtors) and which proof(s) of claim(s) will be settled, satisfied, released and discharged by distribution of the Settlement Fund to the Celotex Settlement Fund Recipient. AH. "Veil Piercing-Related Issues" shall mean and be the collective reference to all theories or bases of liability or recovery recognizable at law, in equity or in admiralty, under the laws of any jurisdiction, directly or indirectly based upon, arising out of or in connection with asbestos, any product manufactured, sold or distributed by Celotex, any other liability or obligation of any nature of Celotex, or any act or failure to act by Celotex or any officer, director, employee, agent or other representative of Celotex, whether based upon alter ego, agency, alternate entity, instrumentality, successor liability, conspiracy, indemnification, contribution, any theories of piercing the corporate veil of any Debtor or its predecessor and/or any and all of its respective present or former parents, subsidiaries or Affiliates, or the transfer (fraudulent or otherwise) of any assets or property to or by any Debtor (or other non-Debtor that had at any time been a parent, subsidiary or Affiliate of any Debtor or its predecessor), whether in connection with any of the transactions constituting or relating to the financing or the acquisition of any of the Debtors or any of their respective predecessors, parents, subsidiaries or Affiliates by the current holders of Old Common Stock, the divestiture by Celotex of any of its assets or property at any time, or in connection with any other transactions, events or circumstances, or otherwise; provided, however, that the Veil Piercing-Related Issues shall not include any of the LBO-Related Issues. AI. "Veil Piercing Residual Claims Amount" shall mean the excess of $375,000,000 over the aggregate principal amount of the Qualified Securities to be distributed on account of the Settlement Claims under the Plan. AJ. "Veil Piercing Settlement" shall mean the full and complete settlement, satisfaction, release and discharge of all Settlement Claims and Veil Piercing Proceedings as provided in this Agreement and the Plan. EXHIBIT A , 1994 Re: Hillsborough Holdings Corporation, et al. The undersigned law firm: (1) represents one or more persons or entities with Veil Piercing Claims [as defined in the Second Amended and Restated Veil Piercing Settlement Agreement dated as of November 22, 1994 ("VPSA")]; (2) hereby agrees on behalf of itself, each of its lawyers, and each of its clients who have such claims, irrevocably to comply with, assent to and support the VPSA and the Plan (as defined in the VPSA) and (3) to promptly become a signatory to the VPSA upon the request of the Bondholder Proponents (as defined in the VPSA). Very truly yours, [LAW FIRM] By: A Member of the Firm EXHIBIT B [CONSENSUAL PLAN] ATTACHED AS EXHIBIT 1 TO THE SUPPLEMENT TO DISCLOSURE STATEMENT EXHIBIT C [REGISTRATION RIGHTS AGREEMENT] ATTACHED AS EXHIBITS 4 AND 5 TO THE CONSENSUAL PLAN EXHIBIT D [TAG-ALONG RIGHTS AGREEMENT] TAG-ALONG AND VOTING AGREEMENT BY AND AMONG THE STOCKHOLDERS NAMED HEREIN DATED AS OF , 1995
TABLE OF CONTENTS PAGE 1. Definitions 1 2. Tag-along Rights 2 3. Voting of Common Stock Owned by the Celotex Entity 3 4. Representations and Warranties of the Parties 4 4.1 Authority 4 4.2 Binding Obligation 4 4.3 No Conflicts/Approvals 4 5. Legends 4 6. Other Securities 4 7. Further Assurances 4 8. Headings 4 9. Remedies 4 10. Entire Agreement 5 11. Notices 5 12. Governing Law 5 13. Severability 5 14. Assignment 5 15. Amendments; Waivers 5 16. Termination 5 17. Counterparts 5
SCHEDULES: Schedule 1--Common Stock Schedule 2--Notices TAG-ALONG AND VOTING AGREEMENT TAG-ALONG AND VOTING AGREEMENT dated as of , 1995 by and among the stockholders listed on the signature pages hereof (in the case of The Celotex Corporation, on behalf of the Celotex Entity (as defined herein)) (each a "party" and together, the "parties"; together with their respective Restricted Transferees (as defined in Section 2(h)), heirs and successors, the "Stockholders"). This Agreement is being entered into in connection with the Second Amended and Restated Veil Piercing Settlement Agreement, dated as of November 22, 1994, by and among, inter alia, the Debtors (as defined therein), the KKR Entities (as defined therein), the Signing Management (as defined therein), the HHC Bondholders Committee (as defined therein), the HHC Creditors Committee (as defined therein), Lehman Brothers Inc., a corporation ("Lehman Brothers"), AIF II, L.P. a limited partnership ("AIF"), certain Affiliates of AIF and certain accounts managed or controlled by such Affiliates ("AIF Affiliates" and, together with AIF, "Apollo"), The Celotex Corporation, a corporation ("Celotex"), Jim Walter Corporation, certain attorneys and agents signatory thereto and/or listed on Exhibit C attached thereto representing persons and entities that hold Settlement Claims (as defined therein), the Celotex Committee of Unsecured Creditors, the Celotex Asbestos Property Damage Claimants Committee and the Celotex Asbestos Bodily Injury Claimants Committee (the "Settlement Agreement"), and is attached as an exhibit thereto. All capitalized terms not otherwise defined herein have the meaning ascribed to them in the Settlement Agreement. Each Stockholder will acquire that number of shares of New Common Stock, par value $.01 per share of Walter Industries, Inc., a Delaware corporation (the "Company") specified with respect to such Stockholder in Schedule 1 hereto pursuant to the Amended Joint Plan of Reorganization for the Debtors dated as of December 9, 1994 (the "Consensual Plan"). In consideration of the premises and the mutual agreements set forth herein, the parties hereto hereby agree as follows: 1. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: "Affiliate" of a Person means any Person that controls, is under common control with, or is controlled by, such other Person. For purposes of this definition, "control" means the ability of one Person to direct the management and policies of another Person. "Bankruptcy Court" means (i) the United States Bankruptcy Court for the Middle District of Florida, Tampa Division with jurisdiction over the Chapter 11 Cases (as defined in the Consensual Plan) (or such other court as may be administering the Chapter 11 Cases), (ii) to the extent of any withdrawal of the reference made pursuant to 28 U.S.C. Section 157, the United States District Court for the Middle District of Florida, and (iii) with respect to any particular proceeding within a Chapter 11 Case, any other court which may be exercising jurisdiction over such proceeding. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are required or authorized by law to be closed. "Celotex Entity" means the Celotex Settlement Fund Recipient as defined in the Settlement Agreement. "Commission" means the U.S. Securities and Exchange Commission. "Effective Date" means the Effective Date of the Consensual Plan, as defined therein. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar or successor statute. "Exempt Transaction" means a Transfer (i) of Restricted Common Stock effected on a national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System or through a registered broker-dealer; (ii) made by a Stockholder to an Affiliate of that Stockholder; (iii) made pursuant to a Public Offering; (iv) in the case of the Celotex Entity only, made to any other Celotex Entity or made from the Celotex Entity to holders of Settlement Claims; or (v) made pursuant to a call option or other purchase right described in Section 2(f) of the Settlement Agreement. "Person" means any individual, corporation, partnership, firm, joint venture, association, joint stock company, trust, unincorporated organization, governmental or regulatory body or subdivision thereof or other entity. "Public Offering" means a public offering and sale of Common Stock pursuant to an effective registration statement under the Securities Act. "Restricted Common Stock" means the shares of New Common Stock issued to the Stockholders on the Effective Date; provided, that any share of New Common Stock shall cease to be Restricted Common Stock upon a Transfer of such Common Stock (i) in an Exempt Transaction or (ii) in compliance with the provisions of Sections 2(a) through 2(g) hereof. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar or successor statute. "Transfer" means any transfer, sale, assignment, or other disposition. "Transferor" and "Transferee" have correlative meanings. 2. Tag-along Rights. (a) In the event that a Stockholder (the "Selling Stockholder") proposes to enter into a transaction to Transfer any of its Restricted Common Stock to a third party (the "Third Party Transferee"), other than pursuant to an Exempt Transaction, the Selling Stockholder shall offer to include in such transaction (the "Tag-along Transaction") the number of shares of Restricted Common Stock owned by each of the other Stockholders determined in accordance with this Section 2. In connection with any proposed Tag-along Transaction, the Selling Stockholder will send written notice (the "Selling Stockholder Notice") to each of the other Stockholders setting forth in reasonable detail the terms of the Tag-along Transaction, including, without limitation, (i) the identity of the Selling Stockholder, (ii) the name and address of the Third Party Transferee, (iii) the total number of shares that the Third Party Transferee proposes to purchase, (iv) the amount and form of consideration, (v) the date on which the Tag-along Transaction is expected to close and (vi) the conditions, if any, to which the Tag-along Transaction is subject. At any time within 15 days after the receipt of the Selling Stockholder Notice, each of the other Stockholders may, subject to Section 2(g) below, in its sole discretion, elect to participate in the Tag-along Transaction by sending to the Selling Stockholder written notice (the "Other Stockholder Notice") stating that such other Stockholder has elected to participate and setting forth (i) the number of shares of Restricted Common Stock held by such other Stockholder and (ii) the maximum number of shares that such other Stockholder desires to include in the Tag-along Transaction. Subject to the provisions of this Section 2, if the Selling Stockholder shall receive an Other Stockholder Notice from one or more of the other Stockholders within the time specified in the sentence above, the Selling Stockholder shall cause the maximum number of shares of Restricted Common Stock specified in such Other Stockholder Notice or Notices to be included in the Tag-along Transaction; provided that if the total number of shares of Restricted Common Stock of all Stockholders electing to participate in the Tag-along Transaction, including the Selling Stockholder (each a "Participating Stockholder"), shall exceed the number of shares that the Third Party Transferee proposes to purchase, then each Participating Stockholder shall be entitled to include in the Tag-along Transaction up to the number of shares determined pursuant to subsection 2(c) below. Notwithstanding the foregoing, nothing herein shall obligate the Selling Stockholder to consummate any proposed Tag-along Transaction, and, in the event that the Selling Stockholder determines not to consummate any Tag-along Transaction, the other Stockholders will not have any rights to participate therein, regardless of whether any of other Stockholders has given an Other Stockholder Notice with respect thereto. (b) If within 15 days after the receipt of the Selling Stockholder Notice any of the other Stockholders has not given the Other Stockholder Notice, such other Stockholder shall be deemed to have waived any and all rights with respect to the sale or other disposition of shares in the Tag-along Transaction described in the Selling Stockholder Notice. The failure by any other Stockholder to give an Other Stockholder Notice shall not constitute a waiver of any rights hereunder with respect to any Tag-along Transaction other than that described in the Selling Stockholder Notice. (c) Each Participating Stockholder shall have a right to sell a number of shares equal to the product of (i) the total number shares that the Third Party Transferee has offered to acquire, as set forth in the Selling Stockholder Notice, multiplied by (ii) a fraction, the numerator of which is the Percentage Interest of such Participating Stockholder and the denominator of which is the aggregate Percentage Interests of all Participating Stockholders. As used herein, the term "Percentage Interest" shall mean, with respect to any Participating Stockholder, the percentage (expressed as a decimal rounded to the nearest one hundredth) then held by such Participating Stockholder of all outstanding Restricted Common Stock. (d) The Transfer by each of the other Stockholders pursuant to this Section 2 shall be on the same terms and conditions, including the per share price and the date of Transfer, as the Transfer by the Selling Stockholder and as stated in the Selling Stockholder Notice provided to the other Stockholders. (e) The Selling Stockholder shall notify the other Stockholders who have exercised their tag-along rights pursuant to this Section 2 within five days of the end of the 15-day period referred to in subsection 2(a), of the number of shares of Restricted Common Stock each Stockholder has been allocated to sell. Each other Stockholder, within five days of receipt of such notice, shall deliver to the Selling Stockholder the certificate or certificates representing the shares to be sold in the Tag-along Transaction by such other Stockholder, together with a limited power-of-attorney authorizing the Selling Stockholder to sell or otherwise dispose of the shares to be sold pursuant to the terms of the Selling Stockholder Notice. If any other Stockholder fails to deliver stock certificates within the time specified in the immediately preceding sentence, such other Stockholder shall be deemed to have waived any and all rights with respect to the sale or other disposition of the shares in the Tag-along Transaction described in the Selling Stockholder Notice. (f) Simultaneously with the consummation of Transfer of the shares of the Selling Stockholder and the shares of the other Stockholders who have exercised their tag-along rights pursuant to this Section 2, the Selling Stockholder shall notify the other Stockholders who have exercised their tag-along rights pursuant to Section 2 that the consummation of such Tag-along Transaction has occurred and shall promptly, but in any event not later than 3 Business Days thereafter, remit to such other Stockholders the total sales price of the shares of such other Stockholders sold pursuant thereto, net of such other Stockholder's pro rata share of all out-of-pocket fees, expenses and costs incidental to such sale and shall furnish such other evidence of the completion and time of completion of such Transfer and the terms thereof as may be reasonably requested by such other Stockholders. (g) Notwithstanding any other provision of this Section 2, if the Selling Stockholder is Lehman Brothers or Apollo, neither Lehman Brothers nor Apollo shall have any tag-along rights pursuant to this Section 2 with respect to such Transfer. (h) In the case of any Exempt Transfer described in clause (ii) or (iv) of the definition of Exempt Transfer herein, the Transferee of any shares of Restricted Common Stock pursuant to such Exempt Transfer (a "Restricted Transferee") shall, prior to such Transfer, execute an instrument agreeing to be bound by all of the terms and provisions of this Agreement as if such Restricted Transferee had been an original signatory hereto, whereupon such Restricted Transferee thereafter shall have all of the rights and obligations of the transferring Stockholder under this Agreement. 3. Voting of Common Stock Owned by the Celotex Entity. In any vote or action by written consent by the holders of New Common Stock voting or taking action by written consent, the Celotex Entity will, and will cause each of its Affiliates, if any, to vote or execute written consents with respect to their shares of New Common Stock, in proportion to the votes cast or consents executed and delivered by the other holders of New Common Stock. - ---------------- [FN] Appropriate modifications to be made to rights and obligations of the Celotex Entity if a second class of Common Stock is authorized, as contemplated by footnote 1 to the form of Restated Certificate of Incorporation attached to the Consensual Plan. 4. Representations and Warranties of the Parties. Each Stockholder represents and warrants, subject to obtaining any necessary approvals of the Bankruptcy Court and the Celotex Bankruptcy Court with respect to the Settlement Agreement and the Consensual Plan, to each other that: 4.1 Authority. The execution, delivery and performance of this Agreement has been duly authorized by all necessary action of such Stockholder. 4.2 Binding Obligation. It has duly and validly executed and delivered this Agreement and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. 4.3 No Conflicts/Approvals. The execution, delivery and performance of this Agreement will not conflict with or result in the breach or violation of any of the terms or conditions of, or constitute (or with notice or lapse of time or both, would constitute) a default under, (i) its constituting documents; (ii) any instrument, contract or other agreement by or to which it is a party or its assets are bound or subject; (iii) any statute or regulation, order, judgment or decree of any court or governmental or regulatory body; or (iv) any license, permit, order or approval of any governmental or regulatory body respecting its business. No approval or consent of any foreign, Federal, state, county, local or other governmental or regulatory body or court and no approval or consent of any other Person is required in connection with the execution, delivery or performance of this Agreement by it. 5. Legends. Except as otherwise permitted by this Section 5, the parties hereto shall cause the Company to legend each certificate evidencing outstanding shares of the New Common Stock issued to any Stockholder with the following legend: THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF THE STOCKHOLDERS AGREEMENT DATED AS OF , 1994 BY AND AMONG THE HOLDER AND THE OTHER STOCKHOLDERS NAMED THEREIN, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. If any shares of New Common Stock issued to any Stockholder cease to be Restricted Common Stock, the parties hereto shall cause the Company, upon the written request of the holder thereof, to issue to such holder a new certificate evidencing such shares without the legend above endorsed thereon. 6. Other Securities. The terms "New Common Stock" and "Restricted Common Stock" include any securities of the Company issued or issuable with respect to any shares of the foregoing by way of a dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. 7. Further Assurances. Each of the parties hereto shall execute such documents and other papers and perform such further acts as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby. 8. Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof. 9. Remedies. Each Stockholder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. 10. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and there are no restrictions, promises, representations, warranties, covenants, or undertakings with respect to the subject matter hereof, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. 11. Notices. Any notices or other communications to be given hereunder by any party to another party shall be in writing, shall be delivered personally, by telecopy, by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other comparable delivery service, to the address of the party set forth on Schedule 2 hereto or to such other address as the party to whom notice is to be given may provide in a written notice to the other parties hereto, a copy of which shall be on file with the Secretary of the Company. Receipt of notice shall be effective when delivered if given personally, when receipt is acknowledged if telecopied, three days after mailing if given by registered or certified mail as described above and, one business day after deposit if given by Federal Express or comparable delivery service. Notwithstanding the foregoing, none of Lehman Brothers, Apollo or any of their respective Restricted Transferees shall be obligated to give any notice to the holders of Settlement Claims other than the Celotex Entity, and any notice given to the Celotex Entity by Lehman Brothers, Apollo or any of their respective Restricted Transferees shall, for all purposes hereof, be deemed to constitute effective notice to all Restricted Transferees of the Celotex Entity, including all holders of Settlement Claims. 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made to be performed entirely in such State. 13. Severability. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. 14. Assignment. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Except as provided in Section 2(d), neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any of the parties hereto without the prior written consent of the other parties hereto. 15. Amendments; Waivers. No amendment to this Agreement or any waiver or discharge of any provision hereof shall be made without the prior written consent of each party hereto. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. 16. Termination. This Agreement shall terminate and be of no further force and effect on the earlier of (i) the date that the Celotex Entity shall have Transferred or otherwise distributed to the individual holders of Settlement Claims, or to any holders of claims against Celotex, 50% or more of the New Common Stock held by the Celotex Entity, in the aggregate, on the Effective Date, or the proceeds thereof (ii) the tenth anniversary of this Agreement, and (iii) the termination of the Settlement Agreement pursuant to Section 8 thereof. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. AIF II, L.P. By________________________ Name: Title: [other AIF Affiliates] LEHMAN BROTHERS INC. By________________________ Name: Title: THE CELOTEX CORPORATION On Behalf of the Celotex Entity By________________________ Name: Title: SCHEDULE 1 COMMON STOCK STOCKHOLDER NUMBER OF SHARES OWNED ----------- ---------------------- AIF II, L.P. (and/or other of its Affiliates) Lehman Brothers Inc. The Celotex Entity SCHEDULE 2 NOTICES If to AIF II, L.P., to: If to the Celotex Entity to: AIF II, L.P. THE CELOTEX CORPORATION Attention: Attention: Tel: Tel: Fax: Fax: with a copy to: with a copy to: Attention: Attention: Tel: Tel: Fax: Fax: If to LEHMAN BROTHERS, Inc. to: and a copy to: LEHMAN BROTHERS, INC. Attention: Attention: Tel: Tel: Fax: Fax: with a copy to: Attention: Tel: Fax: EXHIBIT E TO SECOND AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT--SHARES HELD BY SIGNING MANAGEMENT NAME NUMBER OF SHARES - ---- ---------------- Gilberto Aleman 20,000 W. Kendall Baker 20,000 William Carr 35,000 Joseph F. Hegerich 20,000 Wayne Hornsby 10,000 Kenneth E. Hyatt 50,000 Donald M. Kurucz 12,000 Kenneth J. Matlock 25,000 Robert W. Michael 35,000 Timothy M. Pariso 10,000 Michael Roberts 10,000 Dennis M. Ross 15,000 Sam J. Salario 25,000 James M. Sims 10,000 William N. Temple 10,000 David L. Townsend 8,000 James W. Walter 190,000 William H. Weldon 20,000 EXHIBIT 3B: PRE-LBO BONDHOLDERS SETTLEMENT AGREEMENT AGREEMENT FOR SETTLEMENT OF PRE-LBO ISSUES AND TREATMENT OF SUBORDINATED NOTES PURSUANT TO CHAPTER 11 PLAN This Agreement (as the same may be amended, modified or supplemented from time to time, the "Agreement") is entered into by the parties set forth below (each a "party") to set forth the terms of a settlement respecting alleged fraudulent transfer and related claims, including all claims asserted against Released Parties in Mellon Bank, N.A. and Bank of New York v. Kohlberg Kravis Roberts & Co., et al., Adv. Pro. No. 94-17 (the "Adversary Proceeding"), and the related treatment of holders of Subordinated Note Claims, all pursuant to an amendment (the "Amended Plan") to the Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents, dated as of December 16, 1993 (the "Original Plan"), for Hillsborough Holdings Corporation and its subsidiaries and affiliates (the "Debtors"). NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1. Defined Terms. Unless otherwise indicated, all capitalized terms shall have the meanings ascribed to them in the Original Plan. 2. Support of Amended Plan. The parties will support, and, in the case of The Acacia Group, Gabriel Capital L.P. (as members of the ad hoc committee of the pre-LBO bondholders), Apollo and Lehman Brothers, become co-proponents of, the Amended Plan (which, except as set forth in sections 3.B., 6 and 7 below, will be in substantially the form of the Original Plan). The parties shall support any plan as to which the Bondholder Proponents are proponents so long as the relative treatment set forth herein is maintained for them. 3. Treatment of Subordinated Note Claims. A. Pro Rata Treatment of Subordinated Note Claims. If the actual amount of distributions under the Amended Plan in respect of all Allowed Subordinated Note Claims is different than the aggregate Allowed Amount of all Subordinated Note Claims, then the aggregate amount of distributions in respect of Allowed Subordinated Note Claims in Classes U-4, U-5 and U-6 shall be calculated as follows: Actual amount of distributions in respect of all Allowed Subordinated Note Claims Aggregate amount of all Allowed Subordinated Note Claims X Aggregate Amount of all Allowed Class U-4 Claims (or Class U-5 Claims or Class U-6 Claims, as the case may be) For the purposes of the fraction used in this subparagraph A., the actual amount of distributions shall be valued at the aggregate principal amount in the case of Qualified Securities, and at the aggregate New Common Stock Value Per Share in the case of the New Common Stock. B. Allocation of Qualified Securities Available for Distribution. Qualified Securities available for distribution (i.e., after allocation to Class U-7) shall be allocated to Classes U-4, U-5 and U-6 as follows: i. Class U-4 shall have the right to elect distribution of the first $240 million in principal amount of Qualified Securities available for distribution in satisfaction of the same amount of Allowed Class U-4 Claims; thereafter ii. Classes U-4, U-5 and U-6 shall have the right to make the election to receive the remaining Qualified Securities available for distribution on the pro rata basis described in 3.A., above, subject to the following sentence (the Allowed Amount of Class U-4 Claims shall have been reduced for purposes of this calculation by the aggregate principal amount of Qualified Securities previously elected under subsection 3.B.i.). The foregoing pro rata calculation shall be modified as follows: (a) if there are $700 million of Qualified Securities available for distribution to Classes U-4, U-5, U-6 and U-7, Class U-6 shall have the right to elect $80 million of Qualified Securities available for distribution to Classes U-4, U-5 and U-6 in the aggregate (after allocation to Class U-7 and after allocation pursuant to 3.B.i.), (b) if either less or more than $700 million of Qualified Securities are available for distribution to Classes U-4, U-5, U-6 and U-7, Class U-6 shall have the right to elect $80 million of the Qualified Securities available for distribution to Classes U-4, U-5 and U-6 in the aggregate (after allocation to Class U-7 and after allocation pursuant to 3.B.i.), minus or plus, as the case may be, 80/700 of the difference between (x) the Qualified Securities available for distribution to Classes U-4, U-5 and U-6 in the aggregate (after allocation to Class U-7 and after allocation pursuant to 3.B.i.) and (y) the Qualified Securities available for distribution to Classes U-4, U-5 and U-6 in the aggregate (after allocation to Class U-7 and after allocation pursuant to 3.B.i.) if there were $700 million of Qualified Securities available for distribution to Classes U-4, U-5, U-6 and U-7, and (c) the right to elect Qualified Securities by Classes U-4 and U-5 shall be correspondingly adjusted to reflect the disproportionate right of election of Class U-6 pursuant to this sentence. Examples, assuming Allowed Claims as follows: U-4: $480 U-5: 390 U-6: 240 $1.10 billion $487.5 divided by (1,098+487.5)=30% of Qualified Securities to U-7; 70% of Qualified Securities to U-4 through U-6
QUALIFIED SECURITIES $700 $900 $600 U-7: 210 270 180 ---- --- ---- 490 630 420 U-4: 240 240 240 ---- --- ---- 250 390 180 U-6: 80 80+(80/700x140)=96 80-(80/700x70)=72 U-5: 105 182 67 U-4: 65+240=305 112+240=35 241+240=281 - ---------------- For purposes of the examples, calculations are rounded to nearest $.5 million.
C. Allocation of Qualified Securities Among Persons Making Election. If Holders of Class U-4 Subordinated Notes elect to receive Qualified Securities in respect of Class U-4 Subordinated Notes in an aggregate principal amount in excess of $240 million or Holders of Class U-6 Subordinated Notes elect to receive Qualified Securities in respect of Class U-6 Subordinated Notes in an aggregate principal amount in excess of $80 million, pursuant to sections 3.B.i. and 3.B.ii., respectively, the Qualified Securities so elected shall be allocated among such electing Holders pro rata, based upon the aggregate principal amount of Subordinated Notes elected by each such Holder to be applied to such Qualified Securities over the aggregate principal amount of Subordinated Notes elected by all such Holders to be applied to such Qualified Securities times $240 million or $80 million, as the case may be. 4. Effectiveness of this Agreement. This Agreement shall become effective when executed by the parties designated "Original Parties" on the signature page hereof (the "Original Parties") and additional holders of Subordinated Notes in Class U-6 whose Subordinated Notes, together with the Subordinated Notes owned or controlled by The Acacia Group and Gabriel Capital L.P. or for which such parties are authorized to execute this Agreement, represent not less than two-thirds in principal amount of all Subordinated Notes in Class U-6; provided that such Additional Parties shall have executed this Agreement no later than April 15, 1994, unless such date shall be extended by written notice given by the Bondholder Proponents to The Acacia Group and Gabriel Capital L.P. Each of The Acacia Group, Gabriel Capital L.P. and each of the other holders of Subordinated Notes in Class U-6 which becomes a party to this Agreement represents that it owns, controls or is authorized to execute this Agreement on behalf of such party, the principal amount of Subordinated Notes in Class U-6 set forth under its name on the signature page hereof (which amounts shall not be publicly disclosed except as may be required by applicable law). 5. Effective Settlement. A. Unless otherwise agreed by the Bondholder Proponents, and except as provided in section 9 hereof, the Class U-6 parties hereto will not support any proposed plan for any or all of the Debtors or settlement of the LBO-Related Issues (the definition of LBO-Related Issues in the Plan shall be amended by adding the words "except claims and causes of action against persons who are not Released Parties") other than the Amended Plan, or as contained in the Amended Plan as amended from time to time with the consent of the Bondholder Proponents, so long as such Amended Plan provides for relative treatment of the Class U-6 Claims that is at least as favorable as the relative treatment provided herein. B. Binding on Transferees. Each of the Class U-6 parties hereto agrees not to sell or otherwise transfer the Subordinated Notes in Class U-6 owned or controlled by such party unless either (i) such Subordinated Notes shall be legended as follows or effective arrangements shall first have been made pursuant to an escrow or trust certificate agreement to cause the certificate(s) evidencing such Subordinated Notes in Class U-6 to be legended as follows: "The obligations evidenced hereby are subject to the Agreement For Settlement of Pre-LBO Issues and Treatment of Subordinated Notes Pursuant to Chapter 11 Plan dated as of March 23, 1994, and may not be transferred except in compliance therewith. A copy of such Agreement is on file at the offices of The Bank of New York, as escrow agent and trustee, or (ii) such holder's buyer or transferee confirms in writing to such holder as follows: "[Buyer or Transferee] agrees to comply with the Pre-LBO Agreement dated as of March 23, 1994 to which (Seller or Transferor) is a party. All parties to such Agreement are third-party beneficiaries of this Agreement." Within five (5) business days of such holder's receipt of such confirmation, such holder shall furnish a copy of the confirmation to The Bank of New York at 101 Barclay Street, 21st Floor, NY, NY 10286, Attn: David G. Sampson. Upon the written request of the Bondholder Proponents, acting in good faith to monitor compliance with the Agreement. The Bank of New York shall provide a copy of such confirmation to the Bondholder Proponents. The sole function of The Bank of New York shall be to hold copies of confirmations actually delivered to it by the holders and to provide copies of such confirmations as set forth herein. If such sale is conducted through a broker-dealer, such agreement may be set forth on the "confirmation" of the sale or transfer of such Subordinated Note. C. Fraudulent Transfer Litigation. The parties acknowledge that the indenture trustees for the Class U-6 parties have commenced the Adversary Proceeding for the stated purpose of preserving LBO-Related Issues; however, such parties agree that, so long as this Agreement shall remain in effect, they will not actively pursue any litigation of the LBO-Related Issues against any or all of the Released Parties, and that such LBO-Related Issues shall be settled to the extent and as provided herein and in the Amended Plan upon the Effective Date of the Amended Plan. The Amended Plan shall provide for a clear reservation of rights against any and all non-Released Parties. 6. Other Plan and Disclosure Statement Amendments. The Original Plan shall, in addition, be amended as follows: A. The Certificate of Incorporation for reorganized WII shall be amended as provided in Exhibit 1 hereto. B. "Proponents and Trustee Expenses" shall include reasonable fees and expenses of all Proponents and the trustees for the Pre-LBO Debentures, not previously reimbursed by the Debtors, which in the Disclosure Statement for the Amended Plan shall be set forth for each Proponent and trustee in an estimated, lump-sum amount and which the Proponents and trustees shall support. C. Any postponement of the date by which the condition to confirmation set forth in section 10.1(a) of the Original Plan after December 31, 1994 must be agreed to by all Plan Proponents. D. The parties shall agree on technical amendments to be reflected in the Amended Plan and the disclosure statement therefor to implement and describe the terms of this Agreement. 7. Termination. This Agreement shall terminate upon the earlier of the following: A. Either (i) any of the Class U-6 parties hereto shall breach any of its obligations hereunder and such breach shall not be cured within twenty (20) calendar days after written notice of such breach shall have been given by the Bondholder Proponents to the indenture trustees for the Pre-LBO Debentures and The Acacia Group and Gabriel Capital L.P.; or (ii) any of the Bondholder Proponents shall breach any of its obligations hereunder and such breach shall not be cured within twenty (20) calendar days after written notice of such breach shall have been given by the indenture trustees for the Pre-LBO Debentures and The Acacia Group and Gabriel Capital L.P. to the Bondholder Proponents. B. Any holder of Class U-6 Claims is permitted by the Court to pursue, and actively pursues, litigation in respect of the LBO-Related issues against any of the Debtors or any other Released Party and such holder shall not cease to actively pursue such litigation (and shall not cause any motions or other legal process filed in connection with such active pursuit to be withdrawn) within ten (10) calendar days after written notice shall have been given by the Bondholder Proponents to The Acacia Group and Gabriel Capital L.P. C. On December 31, 1994, at the election of the Bondholder Proponents or The Acacia Group and Gabriel Capital L.P., provided that the Court has not previously entered the Confirmation Order. D. All the parties hereto shall mutually agree in writing to terminate this Agreement. 8. Amendments. This Agreement may not be amended except in a writing signed by the parties hereto. 9. No Solicitation. Notwithstanding any other provision of this Agreement, nothing in this Agreement is intended to be or constitute, and shall not be deemed to be or constitute, a solicitation of any vote or any agreement to vote for or against any plan of reorganization, and nothing in this Agreement shall impair the right or the ability of any party to vote for or against, or abstain from voting with respect to, any plan of reorganization. 10. No Admissions or Waivers. No part of this Agreement shall be deemed as an admission of any party for any purpose. The parties hereto do not waive or release any rights, claims, defenses or remedies, including in respect of any "cram down" under section 1129(b) of the Bankruptcy Code, until all conditions to the effectiveness of the Amended Plan have been satisfied or waived. 11. Announcement. The Original Parties shall coordinate the announcement of their entry into this Agreement promptly after its execution by them. 12. Governing Law. Except to the extent the Code or Bankruptcy Rules are applicable, the rights and obligations arising under this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. 13. Headings. The headings of the Sections, paragraphs, and subsections of this Agreement are inserted for convenience only and shall not affect the interpretation hereof. 14. Notices. All notices, requests or demands under or in connection with this Agreement shall be in writing and shall be delivered by hand, sent by recognized overnight courier or sent by telecopier, telex or similar electronic means to the party as set forth under its signature hereto, or to such other address or telecopier number as such party shall provide to all parties hereto in writing, and shall be deemed sent or given hereunder, in the case of delivery by recognized overnight courier, on the date of actual delivery, in the cases of transmission by telecopier, telex or similar electronic means on the date of actual transmission, and in the case of personal delivery, on the date of actual delivery. 15. Extraterritoriality. It is the intention of the parties that the settlements and other agreements contained in this Agreement be given application both to suits within and without the jurisdiction of the United States. 16. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of the parties hereof and their respective successors, assigns, heirs, executors, administrators and representatives. 17. Complete Agreement. This document, including the exhibit hereto, embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior agreement, understanding or representation made by and between any or all of such parties, whether written or oral, which may have related to the subject matter hereof in any way whatsoever, including without limitation the Term Sheet. 18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Dated: As of March 23, 1994 ORIGINAL PARTIES Institution: LEHMAN BROTHERS, INC., in its individual capacity By:/s/ Institution: APOLLO ADVISORS, L.P., in its individual capacity By:/s/ Institution: GABRIEL CAPITAL L.P. Principal Amount of Subordinated Notes in Class U-6: By:/s/ Institution: THE ACACIA GROUP. in its individual capacity Principal Amount of Subordinated Notes in Class U-6: By:/s/ Institution: MELLON BANK, N.A., as Indenture Trustee By:/s/ Institution: THE BANK OF NEW YORK, as Indenture Trustee By:/s/ ADDITIONAL PARTIES Institution: Principal Amount of Subordinated Notes in Class U-6: By: Institution: Principal Amount of Subordinated Notes in Class U-6: By: Institution: Principal Amount of Subordinated Notes in Class U-6: By: Institution: Principal Amount of Subordinated Notes in Class U-6: By: Institution: Principal Amount of Subordinated Notes in Class U-6: By: EXHIBIT 4: NEW COMMON STOCK REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT BY AND AMONG WALTER INDUSTRIES, INC. AND THE HOLDERS NAMED HEREIN DATED AS OF , 1994 TABLE OF CONTENTS PAGE 1. Definitions 1 2. Initial Registration Under the Securities Act 2 (a) Shelf Registration 2 (b) Effective Registration Statement 3 3. Securities Act Registration on Request 3 (a) Request 3 (b) Registration of Other Securities 4 (c) Registration Statement Form 4 (d) Effective Registration Statement 4 (e) Selection of Underwriters 4 (f) Priority in Requested Registration 5 (g) Shelf Registrations 5 4. Piggyback Registration 5 5. Expenses 6 6. Registration Procedures 6 7. Underwritten Offerings 9 (a) Requested Underwritten Offerings 9 (b) Piggyback Underwritten Offerings; Priority 9 (c) Holders of Registrable Common Stock to be Parties to Underwriting Agreement 9 (d) Selection of Underwriters for Piggyback Underwritten Offering 9 (e) Holdback Agreements 10 8. Preparation; Reasonable Investigation 10 (a) Registration Statements 10 (b) Confidentiality 10 9. Postponements 10 10. Indemnification 11 (a) Indemnification by the Company 11 (b) Indemnification by the Offerors and Sellers 12 (c) Notices of Losses, etc. 12 (d) Contribution 13 (e) Other Indemnification 13 (f) Indemnification Payments 13 11. Registration Rights to Others 13 12. Adjustments Affecting Registrable Common Stock 13 13. Rule 144 and Rule 144A 13 14. Amendments and Waivers 14 15. Nominees for Beneficial Owners 14 16. Assignment 14 17. Calculation of Percentage or Number of Shares of Registrable Common Stock 14 18. Miscellaneous 14 (a) Further Assurances 14 (b) Headings 14 (c) No Inconsistent Agreements 15 (d) Remedies 15 (e) Entire Agreement 15 (f) Notices 15 (g) Governing Law 15 (h) Severability 15 (i) Counterparts 15 Schedules: Schedule A--Holders of Registrable Common Stock REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of , 1994 (this "Agreement"), by and among Walter Industries, Inc., a Delaware corporation (the "Company"), and the holders of Registrable Common Stock (as hereinafter defined) who are signatories to this Agreement (the "Holders"). This Agreement is being entered into in connection with the acquisition of Common Stock (as hereinafter defined) on the date hereof by certain holders (the "Original Holders") pursuant to the Plan (as hereinafter defined). Upon the issuance of the Common Stock, each Original Holder will own the number of shares of Common Stock specified with respect to such Original Holder in Schedule A hereto. To induce the holders of Registrable Common Stock (as hereinafter defined) to vote in favor of the Plan and to accept the issuance of the Common Stock by the Company under the Plan, the Company has undertaken to register Registrable Common Stock under the Securities Act (as hereinafter defined) and to take certain other actions with respect to the Registrable Common Stock. This Agreement sets forth the terms and conditions of such undertaking. In consideration of the premises and the mutual agreements set forth herein, the parties hereto hereby agree as follows: 1. Definitions. Unless otherwise defined herein, capitalized terms used herein and in the recitals above shall have the following meanings: "Affiliate" of a Person means any Person that controls, is under common control with, or is controlled by, such other Person. For purposes of this definition, "control" means the ability of one Person to direct the management and policies of another Person. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to be closed. "Commission" means the U.S. Securities and Exchange Commission. "Common Stock" means the shares of common stock, $.01 par value per share, of the Company, as adjusted to reflect any merger, consolidation, recapitalization, reclassification, split-up, stock dividend, rights offering or reverse stock split made, declared or effected with respect to the Common Stock. "Effective Date" means the effective date of the Plan pursuant to the terms thereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar or successor statute. - ---------------- [FN] The signatories shall include each holder of Registrable Common Stock which on the Effective Date is an Affiliate of KKR Associates or is an officer or director of the Company. "Expenses" means, except as set forth in Section 5 hereof, all expenses incident to the Company's performance of or compliance with its obligations under this Agreement, including, without limitation, all registration, filing, listing, stock exchange and NASD fees, all fees and expenses of complying with state securities or blue sky laws (including fees, disbursements and other charges of counsel for the underwriters in connection with blue sky filings), all word processing, duplicating and printing expenses, messenger and delivery expenses, all rating agency fees, the fees, disbursements and other charges of counsel for the Company and of its independent public accountants, including the expenses incurred in connection with "cold comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by issuers or sellers of securities and the reasonable fees, disbursements and other charges of one firm of counsel (per registration prepared) to the holders of Registrable Common Stock making a request pursuant to Section 3(a) hereof (selected by the Holders holding a majority of the shares of Registrable Common Stock covered by such registration), but excluding underwriting discounts and commissions and applicable transfer taxes, if any, which discounts, commissions and transfer taxes shall be borne by the seller or sellers of Registrable Common Stock in all cases; provided, that, in the event the Company shall, in accordance with Section 4 or Section 9 hereof, not register any securities with respect to which it had given written notice of its intention to register to holders of Registrable Common Stock, notwithstanding anything to the contrary in the foregoing, all of the reasonable out-of-pocket costs incurred by Requesting Holders in connection with such registration (other than counsel fees, disbursements and other charges not referred to above) shall be deemed to be Expenses. "Initiating Holders" has the meaning set forth in Section 3(a) hereof. "NASD" means the National Association of Securities Dealers, Inc. "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotation System. "Note Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, among the Company and the holders of Registrable Notes (as defined therein) who are signatories or are deemed to be signatories thereto. "Notes" means $[] in aggregate principal amount of [] issued on the date hereof, and includes any securities of the Company issued or issuable with respect to such securities by way of a recapitalization, merger, consolidation or other reorganization or otherwise. "Person" means any individual, corporation, partnership, firm, joint venture, association, joint stock company, trust, unincorporated organization, governmental or regulatory body or subdivision thereof or other entity. "Plan" means the Amended Joint Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code for Walter Industries, Inc., as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Public Offering" means a public offering and sale of Common Stock pursuant to an effective registration statement under the Securities Act. "Registrable Common Stock" means any of the Common Stock held by the Holders from time to time as to which registration pursuant to the Securities Act is required for public sale. "Requesting Holders" has the meaning set forth in Section 4 hereof. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar or successor statute. "Selling Holders" means the holders of Registrable Common Stock requested to be registered pursuant to Section 3(a) hereof. "Transfer" means any transfer, sale, assignment, pledge, hypothecation or other disposition of any interest. "Transferor" and "Transferee" have correlative meanings. - ---------------- [FN] Insert principal amount and title of Notes issued by the Company. 2. Initial Registration Under the Securities Act. (a) Shelf Registration. The Company shall (i) cause to be filed not later than 45 days after the Effective Date a shelf registration statement pursuant to Rule 415 promulgated under the Securities Act (a "Shelf Registration") providing for the sale by the Holders of all of the Registrable Common Stock and (ii) use its reasonable best efforts to have such Shelf Registration thereafter declared effective by the Commission not later than 90 days after the Effective Date. Subject to Section 9(b), the Company agrees to use its reasonable best efforts to keep the Shelf Registration continuously effective until the first anniversary of the date such Shelf Registration is declared effective by the Commission or such shorter period which will terminate when all of the Registrable Common Stock covered by the Shelf Registration have been sold pursuant to the Shelf Registration. The Company further agrees, if necessary, to supplement or amend the Shelf Registration, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration or by the Securities Act or by any other rules and regulations thereunder for shelf registration, and the Company agrees to furnish to the Holders copies of any such supplement or amendment promptly after its being issued or filed with the Commission. (b) Effective Registration Statement. A Shelf Registration pursuant to Section 2(a) hereof shall not be deemed to have been effected (i) unless a registration statement with respect thereto has been declared effective by the Commission and remains effective in compliance with the provisions of the Securities Act and the laws of any state or other jurisdiction applicable to the disposition of all Registrable Common Stock covered by such registration statement until such time as all of such Registrable Common Stock have been disposed of in accordance with such registration statement (provided that such period need not exceed one year), or, (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental or regulatory agency or court for any reason other than a violation of applicable law solely by the Holders and has not thereafter become effective. 3. Securities Act Registration on Request. (a) Request. At any time and from time to time after the expiration of the Shelf Registration filed by the Company pursuant to Section 2(a) hereof (the "Initial Shelf"), one or more Holders (the "Initiating Holders") may make a written request (the "Initiating Request") to the Company for the registration with the Commission under the Securities Act of all or part of such Initiating Holders' Registrable Common Stock; provided, however, that such request shall be made by one or more Holders of at least 5% of the outstanding shares of Registrable Common Stock, which request shall specify the number of shares to be disposed of and the proposed plan of distribution therefor. Upon the receipt of any Initiating Request for registration pursuant to this paragraph, the Company promptly shall notify in writing all other Holders of the receipt of such request and will use its best efforts to effect, at the earliest possible date (taking into account any delay that may result from any special audit required by applicable law), such registration under the Securities Act, including a Shelf Registration, of (i) the Registrable Common Stock which the Company has been so requested to register by such Initiating Holder, and (ii) all other Registrable Common Stock which the Company has been requested to register by any other Holders by written request given to the Company within 30 days after the giving of written notice by the Company to such other Holders of the Initiating Request, all to the extent necessary to permit the disposition (in accordance with Section 3(c) hereof) of the Registrable Common Stock so to be registered; provided, that, (A) the Company shall not be required to effect more than a total of two registrations pursuant to this Section 3(a), (B) if the intended method of distribution is an underwritten public offering, the Company shall not be required to effect such registration pursuant to this Section 3(a) unless such underwriting shall be conducted on a "firm commitment" basis, (C) if the Company shall have previously effected a registration pursuant to this Section 3(a) or shall have previously effected a registration of which notice has been given to the Holders pursuant to Section 4 hereof, a Holder shall not request and the Company shall not be required to effect any registration pursuant to this Section 3(a) or Section 4 hereof until a period of 180 days shall have elapsed from the date on which such registration ceased to be effective, (D) subject to the last sentence of Section 5(a) hereof, any Holder whose Registrable Common Stock was to be included in any such registration, by written notice to the Company, may withdraw such request and, on receipt of such notice of the withdrawal of such request from Holders holding a percentage of Common Stock, such that the Holders that have not elected to withdraw do not hold, in the aggregate, the requisite percentage of the Common Stock to initiate a request under this Section 3(a), the Company shall not effect such registration, and (E) the Company shall not be required to effect any registration to be effected pursuant to this Section 3(a) unless at least 5% of the shares of Registrable Common Stock outstanding at the time of such request is to be included in such registration. (b) Registration of Other Securities. Whenever the Company shall effect a registration pursuant to Section 3(a) hereof, no securities other than (i) Registrable Common Stock and (ii) subject to Section 3(f), Common Stock to be sold by the Company for its own account shall be included among the securities covered by such registration unless the Selling Holders holding not less than a majority of the shares of Registrable Common Stock to be covered by such registration shall have consented in writing to the inclusion of such other securities. (c) Registration Statement Form. Registrations under Section 3(a) hereof shall be on such appropriate registration form prescribed by the Commission under the Securities Act as shall be selected by the Company and as shall permit the disposition of the Registrable Common Stock pursuant to an underwritten offering unless the Selling Holders holding at least a majority of the shares of Registrable Common Stock requested to be included in such registration statement determine otherwise, in which case pursuant to the method of disposition determined by such Selling Holders. The Company agrees to include in any such registration statement filed pursuant to Section 3(a) hereof all information which any Selling Holder, upon advice of counsel, shall reasonably request. The Company may, if permitted by law, effect any registration requested under this Section 3 by the filing of a registration statement on Form S-3 (or any successor or similar short form registration statement). (d) Effective Registration Statement. A registration requested pursuant to Section 3(a) hereof shall not be deemed to have been effected (i) unless a registration statement with respect thereto has been declared effective by the Commission and remains effective in compliance with the provisions of the Securities Act and the laws of any state or other jurisdiction applicable to the disposition of all Registrable Common Stock covered by such registration statement until such time as all of such Registrable Common Stock have been disposed of in accordance with such registration statement, provided, that, except with respect to any Shelf Registration, such period need not exceed 90 days, and, provided, further, that with respect to any Shelf Registration, such period need not extend beyond the period provided for in Section 3(g) hereof, (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental or regulatory agency or court for any reason other than a violation of applicable law solely by the Selling Holders and has not thereafter become effective or (iii) if, in the case of an underwritten offering, the conditions to closing specified in an underwriting agreement to which the Company is a party are not satisfied other than by reason of any breach or failure by the Selling Holders, or are not otherwise waived. The holders of Registrable Common Stock to be included in a registration statement may at any time terminate a request for registration made pursuant to Section 3(a) in accordance with Section 3(a)(ii)(D). Expenses incurred in connection with a request for registration terminated pursuant to this paragraph shall be paid in accordance with the last sentence of Section 5(a) hereof. (e) Selection of Underwriters. The underwriter or underwriters of each underwritten offering, if any, of the Registrable Common Stock to be registered pursuant to Section 3(a) hereof (i) shall be a nationally recognized underwriter (or underwriters), (ii) shall be selected by the Selling Holders owning at least a majority of the shares of Registrable Common Stock to be registered and (iii) shall be reasonably acceptable to the Company. (f) Priority in Requested Registration. If a registration under Section 3 hereof involves an underwritten public offering, and the managing underwriter of such underwritten offering shall advise the Company in writing (with a copy to each Holder requesting that Registrable Common Stock be included in such registration statement) that, in its opinion, the number of shares of Registrable Common Stock requested to be included in such registration exceeds the number of such securities that can be sold in such offering within a price range stated to such managing underwriter by Selling Holders owning at least a majority of the shares of Registrable Common Stock requested to be included in such registration to be acceptable to such Selling Holders, the Company shall include in such registration, to the extent of the number and type of securities which the Company is advised can be sold in such offering, all Registrable Common Stock requested to be registered pursuant to Section 3(a) hereof, pro rata among the Selling Holders on the basis of the number of shares of Registrable Common Stock requested to be registered by all such holders, and no other shares of Common Stock, whether to be sold by the Company or any other Person. (g) Shelf Registrations. If the first demand made pursuant to Section 3(a) hereof is for a Shelf Registration, the period for which such Shelf Registration must remain effective need not extend beyond one year from the date on which such Shelf Registration is declared effective by the Commission and the period for which any subsequent Shelf Registration must remain effective need not extend beyond nine months from the date on which such Shelf Registration is declared effective by the Commission. 4. Piggyback Registration. If the Company at any time after the termination of the Initial Shelf, proposes to register any of its securities (other than any registration of Registrable Notes pursuant to the Note Registration Rights Agreement) under the Securities Act by registration on any forms other than Form S-4 or S-8 (or any successor or similar forms), whether or not pursuant to registration rights granted to other holders of its securities and whether or not for sale for its own account, it shall give prompt written notice to all of the Holders of its intention to do so and of such Holders' rights (if any) under this Section 4, which notice, in any event, shall be given at least 30 days prior to such proposed registration. Upon the written request of any Holder receiving notice of such proposed registration that is a holder of Registrable Common Stock (a "Requesting Holder") made within 20 days after the receipt of any such notice (10 days if the Company states in such written notice or gives telephonic notice to the relevant securityholders, with written confirmation to follow promptly thereafter, stating that (i) such registration will be on Form S-3 and (ii) such shorter period of time is required because of a planned filing date), which request shall specify the Registrable Common Stock intended to be disposed of by such Requesting Holder and the minimum offering price per share at which the Holder is willing to sell its Registrable Common Stock, the Company shall, subject to Section 7(b) hereof, effect the registration under the Securities Act of all Registrable Common Stock which the Company has been so requested to register by the Requesting Holders thereof; provided, that, (A) prior to the effective date of the registration statement filed in connection with such registration, promptly following receipt of notification by the Company from the managing underwriter of the price at which such securities are to be sold, the Company shall so advise each Requesting Holder of such price, and if such price is below the minimum price which any Requesting Holder shall have indicated to be acceptable to such Requesting Holder, such Requesting Holder shall then have the right irrevocably to withdraw its request to have its Registrable Common Stock included in such registration statement, by delivery of written notice of such withdrawal to the Company within five business days of its being advised of such price, without prejudice to the rights of any holder or holders of Registrable Common Stock to include Registrable Common Stock in any future registration (or registrations) pursuant to this Section 4 or to cause such registration to be effected as a registration under Section 3(a) hereof, as the case may be; (B) if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Requesting Holder and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Common Stock in connection with such registration (but not from any obligation of the Company to pay the Expenses in connection therewith), without prejudice, however, to the rights of any Holder to include Registrable Common Stock in any future registration (or registrations) pursuant to this Section 4 or to cause such registration to be effected as a registration under Section 3(a) hereof, as the case may be, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Common Stock, for the same period as the delay in registering such other securities; and (C) if such registration involves an underwritten offering, each Requesting Holder shall sell its Registrable Securities on the same terms and conditions as those that apply to the Company. No registration effected under this Section 4 shall relieve the Company of its obligation to effect any registration upon request under Section 3(a) hereof and no registration effected pursuant to this Section 4 shall be deemed to have been effected pursuant to Section 3(a) hereof. 5. Expenses. The Company shall pay all Expenses in connection with any registration initiated pursuant to Section 2(a), 3(a) or 4 hereof, whether or not such registration shall become effective and whether or not all or any portion of the Registrable Common Stock originally requested to be included in such registration are ultimately included in such registration. Notwithstanding the foregoing, if any request for registration made pursuant to Section 3(a) hereof is withdrawn or terminated by the Selling Holders prior to the registration becoming effective, the Expenses incurred in connection with such request shall be borne by the Selling Holders pro rata on the basis of the number of shares of Registrable Common Stock requested to be registered pursuant to such demand by each Selling Holder; provided, however, that, in the case of an underwritten Public Offering, if such request for registration is withdrawn or terminated by the Selling Holders prior to the registration becoming effective because the offering price of the Registrable Common Stock requested to be registered would, in the opinion of the managing underwriter of such offering, be less than 90% of the estimated offering price of the Common Stock as indicated in writing by the managing underwriter prior to the initial filing of such registration statement with the Commission, the Company shall pay 50% of the Expenses in connection with such registration and the Selling Holders shall pay the remaining 50% on a pro rata basis. 6. Registration Procedures. If and whenever the Company is required to effect any registration under the Securities Act as provided in Sections 2(a), 3(a) and 4 hereof, the Company shall, as expeditiously as possible: (a) prepare and file with the Commission (promptly and, in the case of any registration pursuant to Section 3(a), in any event on or before the date that is (i) 90 days after the end of the period within which requests for registration may be given to the Company or (ii) if, as of such ninetieth day, the Company does not have the audited financial statements required to be included in the registration statement, 30 days after the receipt by the Company from its independent public accountants of such audited financial statements, which the Company shall use its reasonable best efforts to obtain as promptly as practicable) the requisite registration statement to effect such registration and thereafter use its reasonable best efforts to cause such registration statement to become effective; provided, however, that the Company may discontinue any registration of its securities that are not shares of Registrable Common Stock (and, under the circumstances specified in Sections 4 and 9(b) hereof, its securities that are shares of Registrable Common Stock) at any time prior to the effective date of the registration statement relating thereto; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Common Stock covered by such registration statement until such time as all of such Registrable Common Stock has been disposed of in accordance with the method of disposition set forth in such registration statement; provided, that, except with respect to any Shelf Registration, such period need not extend beyond 90 days after the effective date of the registration statement; and provided, further, that with respect to the Initial Shelf, such period need not extend beyond one year after the effective date of such registration statement and, with respect to any Shelf Registration other than the Initial Shelf, such period need not exceed the applicable period provided for in Section 3(g) hereof; (c) furnish to each seller of Registrable Common Stock covered by such registration statement such number of copies of such drafts and final conformed versions of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits and any documents incorporated by reference), such number of copies of such drafts and final versions of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in writing; (d) use its reasonable best efforts (i) to register or qualify all Registrable Common Stock and other securities covered by such registration statement under such other securities or blue sky laws of such states or other jurisdictions of the United States of America as the sellers of Registrable Common Stock covered by such registration statement shall reasonably request in writing, (ii) to keep such registration or qualification in effect for so long as such registration statement remains in effect and (iii) to take any other action that may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subsection (d) be obligated to be so qualified, to subject itself to taxation in such jurisdiction or to consent to general service of process in any such jurisdiction; (e) use its best efforts to cause all Registrable Common Stock and other securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the seller or sellers of Registrable Common Stock to enable the seller or sellers thereof to consummate the disposition of such Registrable Common Stock; (f) use its best efforts to obtain and, if obtained, furnish to each seller of Registrable Common Stock, and each such seller's underwriters, if any, a signed (i) opinion of counsel for the Company, dated the effective date of such registration statement (and, if such registration involves an underwritten offering, dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (ii) "comfort" letter, dated the effective date of such registration statement (and, if such registration involves an underwritten offering, dated the date of the closing under the underwriting agreement) and signed by the independent public accountants who have certified the Company's financial statements included or incorporated by reference in such registration statement, reasonably satisfactory in form and substance to such seller, in each case, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' comfort letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' comfort letters delivered to underwriters in underwritten Public Offerings of securities and, in the case of the accountants' comfort letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as the sellers of the Registrable Common Stock covered by such registration statement or the underwriters, if any, may reasonably request; (g) notify each seller of Registrable Common Stock and other securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and, at the request of any such seller of Registrable Common Stock, promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus, as supplemented or amended, shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (h) otherwise comply with all applicable rules and regulations of the Commission and any other governmental agency or authority having jurisdiction over the offering, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and furnish to each seller of Registrable Common Stock at least ten days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus; (i) upon a request of the Holders of a majority of the shares of Registrable Common Stock requested to be included in a registration pursuant to Section 3(a) or 4 hereof, made at any time on and after the first anniversary of the date hereof, use its best efforts to cause all such Registrable Common Stock covered by such registration statement (i) to be listed on a national securities exchange on which similar securities issued by the Company are then listed, if the listing of such Registrable Common Stock is then permitted under the rules of such exchange or (ii) if the Company is not required pursuant to clause (i) above to list such securities covered by such registration statement on a national securities exchange, use its best efforts to secure designation of all Registrable Common Stock covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization for such Registrable Common Stock and, without limiting the generality of the foregoing, to arrange for at least two market makers to register with the NASD as such with respect to such Registrable Common Stock; (j) provide a transfer agent and registrar for such Registrable Common Stock covered by such Registration Statement no later than the effective date thereof; and (k) enter into such agreements and take such other actions as any Holder or Holders of Registrable Common Stock covered by such registration statement shall reasonably request in order to expedite or facilitate the disposition of such Registrable Common Stock. The Company may require each seller of Registrable Common Stock as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of the securities covered by such registration statement as the Company may from time to time reasonably request in writing and as is required by applicable laws and regulations. Each Holder agrees that as of the date that a final prospectus is made available to it for distribution to prospective purchasers of Registrable Common Stock it shall cease to distribute copies of any preliminary prospectus prepared in connection with the offer and sale of such Registrable Common Stock. Each Holder further agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in subsection (g) of this Section 6, such Holder shall forthwith discontinue such Holder's disposition of Registrable Common Stock pursuant to the registration statement relating to such Registrable Common Stock until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by subsection (g) of this Section 6 and, if so directed by the Company, shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus relating to such Registrable Common Stock current at the time of receipt of such notice. If any event of the kind described in subsection (g) of this Section 6 occurs and such event is the fault solely of a Holder (or Holders), such Holder (or Holders) shall pay all Expenses attributable to the preparation, filing and delivery of any supplemented or amended prospectus contemplated by subsection (g) of this Section 6. 7. Underwritten Offerings. (a) Requested Underwritten Offerings. If requested by the underwriters in connection with a request for a registration under Section 3 hereof, the Company shall enter into a firm commitment underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company and a majority of the Selling Holders whose Registered Common Stock is included in such registration, and the underwriters and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnification and contribution to the effect and to the extent provided in Section 10 hereof. (b) Piggyback Underwritten Offerings; Priority. If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 4 hereof and such securities are to be distributed by or through one or more underwriters, the Company shall, if requested by any Requesting Holders, use its best efforts to arrange for such underwriters to include all of the Registrable Common Stock to be offered and sold by such Requesting Holders among the securities of the Company to be distributed by such underwriters; provided, that, if the managing underwriter of such underwritten offering shall advise the Company in writing (with a copy to the Requesting Holders) that if all the Registrable Common Stock requested to be included in such registration were so included, in its opinion, the number and type of securities proposed to be included in such registration would exceed the number and type of securities which could be sold in such offering within a price range acceptable to the Company (such writing to state the basis of such opinion and the approximate number and type of securities which may be included in such offering without such effect), then the Company shall include in such registration, to the extent of the number and type of securities which the Company is so advised can be sold in such offering, (i) first, securities that the Company proposes to issue and sell for its own account and (ii) second, Registrable Common Stock requested to be registered by Requesting Holders pursuant to Section 4 hereof, pro rata among the Requesting Holders on the basis of the number of shares of Registrable Common Stock requested to be registered by all such Requesting Holders. Any Requesting Holder may withdraw its request to have all or any portion of its Registrable Common Stock included in any such offering by notice to the Company within 10 Business Days after receipt of a copy of a notice from the managing underwriter pursuant to this Section 7(b). (c) Holders of Registrable Common Stock to be Parties to Underwriting Agreement. The holders of Registrable Common Stock to be distributed by underwriters in an underwritten offering contemplated by subsections (a) or (b) of this Section 7 shall be parties to the underwriting agreement between the Company and such underwriters and any such Holder, at its option, may require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders. No such Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such Holder's Registrable Common Stock and such Holder's intended method of distribution. (d) Selection of Underwriters for Piggyback Underwritten Offering. The underwriter or underwriters of each piggyback underwritten offering pursuant to this Section 7 shall be a nationally recognized underwriter (or underwriters) selected by the Company. (e) Holdback Agreements. Each Holder agrees, if so required by the managing underwriter for any underwritten offering pursuant to this Agreement, not to effect any sale or distribution of any equity securities of the Company or securities convertible into or exchangeable or exercisable for equity securities of the Company issued after the date hereof, including any sale under Rule 144 under the Securities Act, during the 10 days prior to the date on which an underwritten registration of Registrable Common Stock pursuant to Section 2(a), 3 or 4 hereof has become effective and until 120 days after the effective date of such underwritten registration, except as part of such underwritten registration or to the extent that such Holder is prohibited by applicable law from agreeing to withhold securities from sale or is acting in its capacity as a fiduciary or an investment adviser. Without limiting the scope of the term "fiduciary," a holder shall be deemed to be acting as a fiduciary or an investment adviser if its actions or the securities proposed to be sold are subject to the Employee Retirement Income Security Act of 1974, as amended, the Investment Company Act of 1940, as amended, or the Investment Advisers Act of 1940, as amended, or if such securities are held in a separate account under applicable insurance law or regulation. The Company agrees (i) not to effect any Public Offering or distribution of any equity securities of the Company or securities convertible into or exchangeable or exercisable for equity securities of the Company, during the 10 days prior to the date on which any underwritten registration pursuant to Section 2(a), 3 or 4 hereof has become effective and until 120 days after the effective date of such underwritten registration, except as part of such underwritten registration, and (ii) to cause each holder of any equity securities, or securities convertible into or exchangeable or exercisable for equity securities, in each case, acquired from the Company at any time on or after the date of this Agreement (other than in a Public Offering), to agree not to effect any Public Offering or distribution of such securities, during such period. 8. Preparation; Reasonable Investigation. (a) Registration Statements. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company shall give each holder of Registrable Common Stock registered under such registration statement, the underwriters, if any, and its respective counsel and accountants the reasonable opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and shall give each of them such reasonable access to its books and records and such reasonable opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of any such Holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. (b) Confidentiality. Each Holder of Registrable Common Stock shall maintain the confidentiality of any confidential information received from or otherwise made available by the Company to such Holder of Registrable Common Stock and identified in writing by the Company as confidential. Information that (i) is or becomes available to a Holder of Registrable Common Stock from a public source, (ii) is disclosed to a Holder of Registrable Common Stock by a third-party source who the Holder of Registrable Common Stock reasonably believes has the right to disclose such information or (iii) is or becomes required to be disclosed by a holder of Registrable Common Stock by law, including by court order, shall not be deemed to be confidential information for purposes of this Agreement. The Holders of Registrable Common Stock shall not grant access, and the Company shall not be required to grant access, to information under this Section 8 to any Person who will not agree to maintain the confidentiality (to the same extent a Holder is required to maintain confidentiality) of any confidential information received from or otherwise made available to it by the Company or the holders of Registrable Common Stock under this Agreement and identified in writing by the Company as confidential. 9. Postponements. (a) If the Company shall fail to file any registration statement to be filed pursuant to a request for registration under Section 3(a) hereof, the Holders requesting such registration shall have the right to withdraw the request for registration if such withdrawal shall be made by holders of Common Stock holding an amount of Common Stock such that the Holders that have not elected to withdraw do not hold the requisite percentage of shares of Common Stock to initiate a request under Section 3. Any such withdrawal shall be made by giving written notice to the Company within 20 days after, in the case of a request pursuant to Section 3(a) hereof, the date on which a registration statement would otherwise have been required to have been filed with the Commission under clause (i) of Section 6(a) hereof (i.e., 20 days after the date that is 90 days after the conclusion of the period within which requests for registration may be given to the Company, or, if, as of such ninetieth day, the Company does not have the audited financial statements required to be included in the registration statement, 30 days after the receipt by the Company from its independent public accountants of such audited financial statements). In the event of such withdrawal, the request for registration shall not be counted for purposes of determining the number of registrations to which Holders are entitled pursuant to Section 3 hereof. The Company shall pay all Expenses incurred in connection with a request for registration withdrawn pursuant to this paragraph. (b) The Company shall not be obligated to file any registration statement other than the Initial Shelf, or file any amendment or supplement to any registration statement other than the Initial Shelf, and may suspend any seller's rights to make sales pursuant to any effective registration statement (provided that it may not suspend any Holder's rights to make sales pursuant to the Initial Shelf prior to the nineteenth day following the date on which the Initial Shelf is initially declared effective), at any time when the Company, in the good faith judgment of its Board of Directors, reasonably believes that the filing thereof at the time requested, or the offering of securities pursuant thereto, would adversely affect a pending or proposed public offering of the Company's securities, a material financing, or a material acquisition, merger, recapitalization, consolidation, reorganization or similar transaction, or negotiations, discussions or pending proposals with respect thereto. The filing of a registration statement, or any amendment or supplement thereto, by the Company cannot be deferred, and the sellers' rights to make sales pursuant to an effective registration statement cannot be suspended, pursuant to the provisions of the preceding sentence for more than ten days after the abandonment or consummation of any of the foregoing proposals or transactions or for more than 60 days after the date of the Board's determination referenced in the preceding sentence. If the Company suspends the sellers' rights to make sales pursuant hereto, the applicable registration period shall be extended by the number of days of such suspension. 10. Indemnification. (a) Indemnification by the Company. In connection with any registration statement filed by the Company pursuant to Section 2(a), 3(a) or 4 hereof, the Company shall, and hereby agrees to, indemnify and hold harmless, each Holder and seller of any Registrable Common Stock covered by such registration statement and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such Holder or seller or any such underwriter, and their respective directors, officers, partners, agents and Affiliates (each, a "Company Indemnitee" for purposes of this Section 10(a)), against any losses, claims, damages, liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof and whether or not such Indemnified Party is a party thereto), joint or several, and expenses, including, without limitation, the reasonable fees, disbursements and other charges of legal counsel and reasonable costs of investigation, to which such Company Indemnitee may become subject under the Securities Act or otherwise (collectively, a "Loss" or "Losses"), insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered or otherwise offered or sold under the Securities Act or otherwise, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto (collectively, "Offering Documents"), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances in which they were made not misleading; provided, that, the Company shall not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Offering Documents in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Company Indemnitee specifically stating that it is expressly for use therein; and provided, further, that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Common Stock or any other Person, if any, who controls such underwriter, in any such case to the extent that any such Loss arises out of such Person's failure to send or give a copy of the final prospectus (including any documents incorporated by reference therein), as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Common Stock to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnitee and shall survive the transfer of such securities by such Company Indemnitee. (b) Indemnification by the Offerors and Sellers. In connection with any registration statement filed by the Company pursuant to Section 2(a), 3(a) or 4 hereof in which a Holder has registered for sale Registrable Common Stock, each such Holder or seller of Registrable Common Stock shall, and hereby agrees to, indemnify and hold harmless the Company and each of its directors, officers, employees and agents, each other Person, if any, who controls the Company and each other seller and such seller's directors, officers, stockholders, partners, employees, agents and affiliates (each, a "Holder Indemnitee" for purposes of this Section 10(b)), against all Losses insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Offering Documents (or any document incorporated by reference therein) or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of circumstances in which they were made not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such Holder or seller of Registrable Common Stock specifically stating that it is expressly for use therein; provided, however, that the liability of such indemnifying party under this Section 10(b) shall be limited to the amount of the net proceeds received by such indemnifying party in the offering giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Holder Indemnitee and shall survive the transfer of such securities by such Holder. (c) Notices of Losses, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a Loss referred to in the preceding subsections of this Section 10, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subsections of this Section 10, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Loss, to assume and control the defense thereof, in each case at its own expense, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after its assumption of the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall be liable for any settlement of any such action or proceeding effected without its written consent, which shall not be unreasonably withheld. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such Loss or which requires action on the part of such indemnified party or otherwise subjects the indemnified party to any obligation or restriction to which it would not otherwise be subject. (d) Contribution. If the indemnification provided for in this Section 10 shall for any reason be unavailable to an indemnified party under subsection (a) or (b) of this Section 10 in respect of any Loss, then, in lieu of the amount paid or payable under subsection (a) or (b) of this Section 10, the indemnified party and the indemnifying party under subsection (a) or (b) of this Section 10 shall contribute to the aggregate Losses (including legal or other expenses reasonably incurred in connection with investigating the same) (i) in such proportion as is appropriate to reflect the relative fault of the Company and the prospective sellers of Registrable Common Stock covered by the registration statement which resulted in such Loss or action in respect thereof, with respect to the statements, omissions or action which resulted in such Loss or action in respect thereof, as well as any other relevant equitable considerations, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and such prospective sellers, on the other hand, from their sale of Registrable Common Stock; provided, that, for purposes of this clause (ii), the relative benefits received by the prospective sellers shall be deemed not to exceed the amount received by such sellers. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The obligations, if any, of the selling holders of Registrable Common Stock to contribute as provided in this subsection (d) are several in proportion to the relative value of their respective Registrable Common Stock covered by such registration statement and not joint. In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or Loss effected without such Person's consent. (e) Other Indemnification. The Company and, in connection with any registration statement filed by the Company pursuant to Section 2(a) each Holder shall, and, in connection with any registration statement filed by the Company pursuant to Section 3(a) or 4, each Holder who has registered for sale Registrable Common Stock, shall, with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority other than the Securities Act, indemnify Holder Indemnitees and Company Indemnitees, respectively, against Losses, or, to the extent that indemnification shall be unavailable to a Holder Indemnitee or Company Indemnitee, contribute to the aggregate Losses of such Holder Indemnitee or Company Indemnitee in a manner similar to that specified in the preceding subsections of this Section 10 (with appropriate modifications). (f) Indemnification Payments. The indemnification and contribution required by this Section 10 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when bills are received or any Loss is incurred. 11. Registration Rights to Others. If the Company shall at any time hereafter, other than pursuant to the Note Registration Rights Agreement, provide to any holder of any securities of the Company rights with respect to the registration of such securities under the Securities Act or the Exchange Act, such rights shall not be in conflict with or adversely affect any of the rights provided in this Agreement to the holders of Registrable Common Stock. 12. Adjustments Affecting Registrable Common Stock. The Company shall not effect or permit to occur any combination, subdivision or reclassification of Registrable Common Stock that would materially adversely affect the ability of the Holders to include such Registrable Common Stock in any registration of its securities under the Securities Act contemplated by this Agreement or the marketability of such Registrable Common Stock under any such registration or other offering. 13. Rule 144 and Rule 144A. The Company shall take all actions reasonably necessary to enable Holders to sell Registrable Common Stock without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (c) any similar rules or regulations hereafter adopted by the Commission, including, without limiting the generality of the foregoing, filing on a timely basis all reports required to be filed under the Exchange Act. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. 14. Amendments and Waivers. Any provision of this Agreement may be amended, modified or waived if, but only if, the written consent to such amendment, modification or waiver has been obtained from (i) except as provided in clause (ii) below, the Holder or Holders of at least 66 2/3% of the shares of Registrable Common Stock affected by such amendment, modification or waiver and (ii) in the case of any amendment, modification or waiver of any provision of Section 5 or 9 hereof or this Section 14 or any provisions as to the number of requests for registration to which holders of Registrable Common Stock are entitled under Section 3 or 4 hereof, or as to the percentages of Holders required for any amendment, modification or waiver, or any amendment, modification or waiver which adversely affects any right and/or obligation under this Agreement of any Holder, the written consent of each Holder so affected. 15. Nominees for Beneficial Owners. In the event that any Registrable Common Stock is held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company, be treated as the Holder of such Registrable Common Stock for purposes of any request or other action by any Holder or Holders pursuant to this Agreement or any determination of the number or percentage of shares of Registrable Common Stock held by any Holder or Holders contemplated by this Agreement. If the beneficial owner of any Registrable Common Stock so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Common Stock. 16. Assignment. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Any Holder may assign to any permitted Transferee (as permitted under applicable law) of its Registrable Common Stock its rights and obligations under this Agreement, provided that such Transferee shall agree in writing with the parties hereto prior to the assignment to be bound by this Agreement as if it were an original party hereto, whereupon such assignee shall for all purposes be deemed to be a Holder under this Agreement. Except as provided above or otherwise permitted by this Agreement, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any Holder without the prior written consent of the other parties hereto. The Company may not assign this Agreement or any right, remedy, obligation or liability arising hereunder or by reason hereof. 17. Calculation of Percentage or Number of Shares of Registrable Common Stock. For purposes of this Agreement, all references to a percentage or number of shares of Registrable Common Stock or Common Stock shall be calculated based upon the number of shares of Registrable Common Stock or Common Stock, as the case may be, outstanding at the time such calculation is made and shall exclude any Registrable Common Stock or Common Stock, as the case may be, owned by the Company or any subsidiary of the Company. 18. Miscellaneous. (a) Further Assurances. Each of the parties hereto shall execute such documents and other papers and perform such further acts as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby. (b) Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof. (c) No Inconsistent Agreements. The Company will not hereafter enter into any agreement which is inconsistent with the rights granted to the Holders in this Agreement. (d) Remedies. Each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (e) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and there are no restrictions, promises, representations, warranties, covenants, or undertakings with respect to the subject matter hereof, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. (f) Notices. Any notices or other communications to be given hereunder by any party to another party shall be in writing, shall be delivered personally, by telecopy, by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other comparable delivery service, to the address of the party set forth on Schedule B hereto or to such other address as the party to whom notice is to be given may provide in a written notice to the other parties hereto, a copy of which shall be on file with the Secretary of the Company. Notice shall be effective when delivered if given personally, when receipt is acknowledged if telecopied, three days after mailing if given by registered or certified mail as described above, and one business day after deposit if given by Federal Express or comparable delivery service. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made to be performed entirely in such State. (h) Severability. Notwithstanding any provision of this Agreement, neither the Company nor any other party hereto shall be required to take any action which would be in violation of any applicable Federal or state securities law. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. (i) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WALTER INDUSTRIES, INC. By Name: Title: HOLDERS: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: SCHEDULE A HOLDERS OF REGISTRABLE COMMON STOCK NUMBER AND TYPE OF HOLDER SHARES OWNED - ------ ------------- SCHEDULE B NOTICES If to the Company, to: [ ] Attention: Tel: Fax: with a copy to: Attention: Tel: Fax: If to the Holders, to: with a copy to: EXHIBIT 5: QUALIFIED SECURITIES REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT BY AND AMONG WALTER INDUSTRIES, INC. AND THE HOLDERS NAMED HEREIN DATED AS OF , 1994 TABLE OF CONTENTS Page ---- 1. Definitions 1 2. Initial Registration Under the Securities Act 2 (a) Shelf Registration 2 (b) Exchange Registration 3 (c) 3 (d) Effective Registration Statement 4 3. Securities Act Registration on Request 4 (a) Request 4 (b) Registration of Other Securities 5 (c) Registration Statement Form 5 (d) Effective Registration Statement 5 (e) Selection of Underwriters 6 (f) Priority in Requested Registration 6 (g) Shelf Registrations 6 4. Piggyback Registration 6 5. Expenses 7 6. Registration Procedures 7 7. Underwritten Offerings 10 (a) Requested Underwritten Offerings 10 (b) Piggyback Underwritten Offerings; Priority 10 (c) Holders of Registrable Notes to be Parties to Underwriting Agreement 10 (d) Selection of Underwriters for Piggyback Underwritten Offering 11 (e) Holdback Agreements 11 8. Preparation; Reasonable Investigation 11 (a) Registration Statements 11 (b) Confidentiality 11 9. Postponements 12 10. Indemnification 12 (a) Indemnification by the Company 12 (b) Indemnification by the Offerors and Sellers 13 (c) Notices of Losses, etc. 13 (d) Contribution 14 (e) Other Indemnification 14 (f) Indemnification Payments 14 11. Registration Rights to Others 14 12. Adjustments Affecting Registrable Notes 14 13. Rule 144 and Rule 144A 15 14. Amendments and Waivers 15 15. Nominees for Beneficial Owners 15 16. Assignment 15 17. Calculation of Percentage of Principal Amount of Registrable Notes 15 18. Miscellaneous 15 (a) Further Assurances 15 (b) Headings 16 (c) No Inconsistent Agreements 16 (d) Remedies 16 (e) Entire Agreement 16 (f) Notices 16 (g) Governing Law 16 (h) Severability 16 (i) Counterparts 16 Schedules: Schedule A--Holders of Registrable Notes Schedule B--Notices REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of , 1994 (this "Agreement"), by and among Walter Industries, Inc., a Delaware corporation (the "Company"), and the holders of Registrable Notes (as hereinafter defined) who are signatories to this Agreement (the "Holders"). This Agreement is being entered into in connection with the acquisition of Notes (as hereinafter defined) on the date hereof by certain holders (the "Original Holders") pursuant to the Plan (as hereinafter defined). Upon the issuance of the Notes, each Original Holder will own the aggregate principal amount of Notes specified with respect to such Original Holder in Schedule A hereto. To induce the holders of Registrable Notes (as hereinafter defined) to vote in favor of the Plan and to accept the issuance of the Notes by the Company under the Plan, the Company has undertaken to register Registrable Notes under the Securities Act (as hereinafter defined) and to take certain other actions with respect to the Registrable Notes. This Agreement sets forth the terms and conditions of such undertaking. In consideration of the premises and the mutual agreements set forth herein, the parties hereto hereby agree as follows: 1. Definitions. Unless otherwise defined herein, capitalized terms used herein and in the recitals above shall have the following meanings: "Affiliate" of a Person means any Person that controls, is under common control with, or is controlled by, such other Person. For purposes of this definition, "control" means the ability of one Person to direct the management and policies of another Person. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to be closed. "Commission" means the U.S. Securities and Exchange Commission. "Common Stock" means the shares of common stock, $.01 par value per share, of the Company, as adjusted to reflect any merger, consolidation, recapitalization, reclassification, split-up, stock dividend, rights offering or reverse stock split made, declared or effected with respect to the Common Stock. "Common Stock Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, among the Company and the holders of Registrable Common Stock (as defined therein) who are signatories or are deemed to be signatories thereto. "Effective Date" means the effective date of the Plan pursuant to the terms thereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar or successor statute. "Exchange Offer" shall mean the exchange offer by the Company of Exchange Securities for Registrable Notes pursuant to Section 2(b) hereof. "Exchange Securities" means securities issued by the Company containing terms substantially identical to the Registrable Notes, to be offered to holders of Registrable Notes in exchange for Registrable Notes pursuant to the Exchange Offer. "Expenses" means, except as set forth in Section 5 hereof, all expenses incident to the Company's performance of or compliance with its obligations under this Agreement, including, without limitation, all registration, filing, listing, stock exchange and NASD fees, all fees and expenses of complying with state securities or blue sky laws (including fees, disbursements and other charges of counsel for the underwriters in connection with blue sky filings), all word processing, duplicating and printing expenses, messenger and delivery expenses, all rating agency fees, the fees, disbursements and other charges of counsel for the Company and of its independent public accountants, including the expenses incurred in connection with "cold comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by issuers or sellers of securities and the reasonable fees, disbursements and other charges of one firm of counsel (per registration prepared) to the holders of Registrable Notes making a request pursuant to Section 3(a) hereof (selected by the Holders holding a majority of the aggregate principal amount of Registrable Notes covered by such registration), but excluding underwriting discounts and commissions and applicable transfer taxes, if any, which discounts, commissions and transfer taxes shall be borne by the seller or sellers of Registrable Notes in all cases; provided, that, in the event the Company shall, in accordance with Section 4 or Section 9 hereof, not register any securities with respect to which it had given written notice of its intention to register to holders of Registrable Notes, notwithstanding anything to the contrary in the foregoing, all of the reasonable out-of-pocket costs incurred by Requesting Holders in connection with such registration (other than counsel fees, disbursements and other charges not referred to above) shall be deemed to be Expenses. "Indenture" means the Indenture between the Company and , as trustee (the "Trustee"), dated , 1994, as amended from time to time, relating to the Notes. "Initiating Holders" has the meaning set forth in Section 3(a) hereof. "NASD" means the National Association of Securities Dealers, Inc. "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotation System. "Notes" means $[] in aggregate principal amount of [] issued on the date hereof, and includes any securities of the Company issued or issuable with respect to such securities by way of a recapitalization, merger, consolidation or other reorganization or otherwise. "Person" means any individual, corporation, partnership, firm, joint venture, association, joint stock company, trust, unincorporated organization, governmental or regulatory body or subdivision thereof or other entity. "Plan" means the Amended Joint Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code for Walter Industries, Inc., as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Public Offering" means a public offering and sale of Common Stock pursuant to an effective registration statement under the Securities Act. "Registrable Notes" means any of the Notes held by the Holders from time to time as to which registration pursuant to the Securities Act is required for a public sale. "Requesting Holders" has the meaning set forth in Section 4 hereof. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar or successor statute. "Selling Holders" means the holders of Registrable Notes requested to be registered pursuant to Section 3(a) hereof. "Transfer" means any transfer, sale, assignment, pledge, hypothecation or other disposition of any interest. "Transferor" and "Transferee" have correlative meanings. 2. Initial Registration Under the Securities Act. (a) Shelf Registration. The Company shall (i) cause to be filed not later than 45 days after the Effective Date a shelf registration statement pursuant to Rule 415 promulgated under the Securities Act (a "Shelf Registration") providing for the sale by the Holders of all of the Registrable Notes and (ii) use its reasonable best efforts to have such Shelf Registration thereafter declared effective by the Commission not later than 90 days after the Effective Date. Subject to Section 9(b), the Company agrees to use its reasonable best efforts to keep the Shelf Registration continuously effective until the first anniversary of the date such Shelf Registration is declared effective by the Commission or such shorter period which will terminate when all of the Registrable Notes covered by the Shelf Registration have been sold pursuant to the Shelf Registration. The Company further agrees, if necessary, to supplement or amend the Shelf Registration, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration or by the Securities Act or by any other rules and regulations thereunder for shelf registration, and the Company agrees to furnish to the Holders copies of any such supplement or amendment promptly after its being issued or filed with the Commission. - ---------------- [FN] Insert principal amount and title of Notes issued by the Company. (b) Exchange Registration. Notwithstanding the provisions of Section 2(a), if the Company receives within the time period referred to in Section 2(c) the notice described therein, the Company shall, in lieu of causing a Shelf Registration with respect to the Registrable Notes to be filed and declared effective, cause to be filed with the Commission, and use its reasonable best efforts to have declared effective, not later than 45 days and 90 days, respectively, after receipt of such notice, a registration statement on an appropriate form (the "Exchange Registration") for the registration of the Exchange Securities to be offered in exchange for the Registrable Notes. The Company shall commence the Exchange Offer promptly after the Exchange Registration has been declared effective by the Commission by mailing the related exchange offer prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law: (i) that the Exchange Offer is being made pursuant to this Agreement and that any and all Registrable Notes validly tendered will be accepted for exchange; (ii) the date of acceptance for exchange (which shall be not less than 20 Business Days and not more than 30 Business Days from the date such notice is mailed, unless otherwise required by applicable law)(the "Exchange Date"); (iii) that Holders electing to have a Registrable Note exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Note, together with the enclosed letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice prior to the close of business on the Exchange Date; and (iv) that Holders will be entitled to withdraw their election, not later than the close of business on the Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Notes delivered for exchange and a statement that such Holder is withdrawing its election to have such Notes exchanged. As soon as practicable after the Exchange Date, the Company shall: (i) accept for exchange Registrable Notes or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; and (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Notes or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee under the Indenture to promptly authenticate and mail to each Holder, a new Exchange Security, equal in principal amount to the principal amount of the Registrable Notes surrendered by such Holder. The Company shall complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws in connection with the Exchange Offer. (c) The Company shall effect an Exchange Registration pursuant to Section 2(b) if, not later than the close of business on the 30th calendar day next succeeding the Effective Date of the Plan, the Company receives a notice from any Holder requesting the Company to effect the Exchange Registration and accompanied by a letter from legal counsel to such Holder to the effect that the operative facts surrounding such Exchange Registration are not materially different than the operative facts described in the interpretive letters of the Commission referred to in clause (i) below. In connection with the Exchange Registration, the Company (i) will provide a letter to the staff of the Commission that contains statements and representations substantially in the form set forth in Mary Kay Cosmetics, Inc. (no-action letter available June 5, 1991), Morgan Stanley & Co. Incorporated (no-action letter available June 5, 1991), Warnaco, Inc. (no-action letter available October 11, 1991), Epic Properties, Inc. (no-action letter October 21, 1991) and no-action letters to similar effect and (ii) will not seek a "no-action" or interpretive position from the Commission with respect to the Exchange Registration without the consent of the Holders of a majority of the outstanding aggregate principal amount of Registrable Notes. (d) Effective Registration Statement. A Shelf Registration pursuant to Section 2(a) or an Exchange Registration pursuant to Section 2(b) hereof shall not be deemed to have been effected (i) unless a registration statement with respect thereto has been declared effective by the Commission and remains effective in compliance with the provisions of the Securities Act and the laws of any state or other jurisdiction applicable to the disposition of all Registrable Notes covered by such registration statement, in the case of a Shelf Registration pursuant to Section 2(a) hereto, until such time as all of such Registrable Notes have been disposed of in accordance with such registration statement (provided that such period need not exceed one year) and, in the case of an Exchange Offer Registration pursuant to Section 2(b) hereof, until the closing of the Exchange Offer, or, (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental or regulatory agency or court for any reason other than a violation of applicable law solely by the Holders and has not thereafter become effective. 3. Securities Act Registration on Request. (a) Request. At any time and from time to time after the completion of the Exchange Offer or the expiration of the Shelf Registration filed by the Company pursuant to Section 2(a) hereof (the "Initial Shelf"), one or more Holders (the "Initiating Holders") may make a written request (the "Initiating Request") to the Company for the registration with the Commission under the Securities Act of all or part of such Initiating Holders' Registrable Notes; provided, however, that such request shall be made by one or more Holders of at least 20% of the outstanding aggregate principal amount of Registrable Notes, which request shall specify the aggregate principal amount of Registrable Notes to be disposed of and the proposed plan of distribution therefor. Upon the receipt of any Initiating Request for registration pursuant to this paragraph, the Company promptly shall notify in writing all other Holders of the receipt of such request and will use its best efforts to effect, at the earliest possible date (taking into account any delay that may result from any special audit required by applicable law), such registration under the Securities Act, including a Shelf Registration, of (i) the Registrable Notes which the Company has been so requested to register by such Initiating Holder, and (ii) all other Registrable Notes which the Company has been requested to register by any other Holders by written request given to the Company within 30 days after the giving of written notice by the Company to such other Holders of the Initiating Request, all to the extent necessary to permit the disposition (in accordance with Section 3(c) hereof) of the Registrable Notes so to be registered; provided, that, (A) the Company shall not be required to effect more than a total of two registrations pursuant to this Section 3(a), (B) if the intended method of distribution is an underwritten public offering, the Company shall not be required to effect such registration pursuant to this Section 3(a) unless such underwriting shall be conducted on a "firm commitment" basis, (C) if the Company shall have previously effected a registration pursuant to this Section 3(a) or shall have previously effected a registration of which notice has been given to the Holders pursuant to Section 4 hereof, a Holder shall not request and the Company shall not be required to effect any registration pursuant to this Section 3(a) or Section 4 hereof until a period of 180 days shall have elapsed from the date on which such registration ceased to be effective, (D) subject to the last sentence of Section 5(a) hereof, any Holder whose Registrable Notes was to be included in any such registration, by written notice to the Company, may withdraw such request and, on receipt of such notice of the withdrawal of such request from Holders holding a percentage of Registrable Notes, such that the Holders that have not elected to withdraw do not hold, in the aggregate, the requisite percentage of the Registrable Notes to initiate a request under this Section 3(a), the Company shall not effect such registration, and (E) the Company shall not be required to effect any registration to be effected pursuant to this Section 3(a) unless at least 20% of the principal amount of Registrable Notes outstanding at the time of such request is to be included in such registration. (b) Registration of Other Securities. Whenever the Company shall effect a registration pursuant to Section 3(a) hereof, no securities other than Registrable Notes shall be included among the securities covered by such registration unless the Selling Holders holding not less than a majority of the aggregate principal amount of Registrable Notes to be covered by such registration shall have consented in writing to the inclusion of such other securities. (c) Registration Statement Form. Registrations under Section 3(a) hereof shall be on such appropriate registration form prescribed by the Commission under the Securities Act as shall be selected by the Company and as shall permit the disposition of the Registrable Notes pursuant to an underwritten offering unless the Selling Holders holding at least a majority of the aggregate principal amount of Registrable Notes requested to be included in such registration statement determine otherwise, in which case pursuant to the method of disposition determined by such Selling Holders. The Company agrees to include in any such registration statement filed pursuant to Section 3(a) hereof all information which any Selling Holder, upon advice of counsel, shall reasonably request. The Company may, if permitted by law, effect any registration requested under this Section 3 by the filing of a registration statement on Form S-3 (or any successor or similar short form registration statement). (d) Effective Registration Statement. A registration requested pursuant to Section 3(a) hereof shall not be deemed to have been effected (i) unless a registration statement with respect thereto has been declared effective by the Commission and remains effective in compliance with the provisions of the Securities Act and the laws of any state or other jurisdiction applicable to the disposition of all Registrable Notes covered by such registration statement until such time as all of such Registrable Notes have been disposed of in accordance with such registration statement, provided, that, except with respect to any Shelf Registration, such period need not exceed 90 days, and, provided, further, that with respect to any Shelf Registration, such period need not extend beyond the period provided for in Section 3(g) hereof, (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental or regulatory agency or court for any reason other than a violation of applicable law solely by the Selling Holders and has not thereafter become effective or (iii) if, in the case of an underwritten offering, the conditions to closing specified in an underwriting agreement to which the Company is a party are not satisfied other than by reason of any breach or failure by the Selling Holders, or are not otherwise waived. The holders of Registrable Notes to be included in a registration statement may at any time terminate a request for registration made pursuant to Section 3(a) in accordance with Section 3(a)(ii)(D). Expenses incurred in connection with a request for registration terminated pursuant to this paragraph shall be paid in accordance with the last sentence of Section 5(a) hereof. (e) Selection of Underwriters. The underwriter or underwriters of each underwritten offering, if any, of the Registrable Notes to be registered pursuant to Section 3(a) hereof (i) shall be a nationally recognized underwriter (or underwriters), (ii) shall be selected by the Selling Holders owning at least a majority of the aggregate outstanding principal amount of Registrable Notes to be registered and (iii) shall be reasonably acceptable to the Company. (f) Priority in Requested Registration. If a registration under Section 3 hereof involves an underwritten public offering, and the managing underwriter of such underwritten offering shall advise the Company in writing (with a copy to each Holder requesting that Registrable Notes be included in such registration statement) that, in its opinion, the aggregate principal amount of Registrable Notes requested to be included in such registration exceeds the aggregate principal amount of such securities that can be sold in such offering within a price range stated to such managing underwriter by Selling Holders owning at least a majority of the aggregate principal amount of Registrable Notes requested to be included in such registration to be acceptable to such Selling Holders, the Company shall include in such registration, to the extent of the number and type of securities which the Company is advised can be sold in such offering, (i) all Registrable Notes requested to be registered pursuant to Section 3(a) hereof, pro rata among the Selling Holders on the basis of the aggregate principal amount of Registrable Notes requested to be registered by all such holders, and no other Notes, whether to be sold by the Company or any other Person. (g) Shelf Registrations. If the first demand made pursuant to Section 3(a) hereof is for a Shelf Registration, the period for which such Shelf Registration must remain effective need not extend beyond one year from the date on which such Shelf Registration is declared effective by the Commission and the period for which any subsequent Shelf Registration must remain effective need not extend beyond nine months from the date on which such Shelf Registration is declared effective by the Commission. 4. Piggyback Registration. If the Company at any time after the completion of the Exchange Offer or the termination of the Initial Shelf, as the case may be, proposes to register any of its securities (other than any registration of Registrable Common Stock pursuant to the Common Stock Registration Rights Agreement) under the Securities Act by registration on any forms other than Form S-4 or S-8 (or any successor or similar forms(s)), whether or not pursuant to registration rights granted to other holders of its securities and whether or not for sale for its own account, it shall give prompt written notice to all of the Holders of its intention to do so and of such Holders' rights (if any) under this Section 4, which notice, in any event, shall be given at least 30 days prior to such proposed registration. Upon the written request of any Holder receiving notice of such proposed registration that is a holder of Registrable Notes (a "Requesting Holder") made within 20 days after the receipt of any such notice (10 days if the Company states in such written notice or gives telephonic notice to the relevant securityholders, with written confirmation to follow promptly thereafter, stating that (i) such registration will be on Form S-3 and (ii) such shorter period of time is required because of a planned filing date), which request shall specify the Registrable Notes intended to be disposed of by such Requesting Holder and the minimum offering price per $1,000 principal amount of Note at which the Holder is willing to sell its Registrable Notes, the Company shall, subject to Section 7(b) hereof, effect the registration under the Securities Act of all Registrable Notes which the Company has been so requested to register by the Requesting Holders thereof; provided, that, (A) prior to the effective date of the registration statement filed in connection with such registration, promptly following receipt of notification by the Company from the managing underwriter of the price at which such securities are to be sold, the Company shall so advise each Requesting Holder of such price, and if such price is below the minimum price which any Requesting Holder shall have indicated to be acceptable to such Requesting Holder, such Requesting Holder shall then have the right irrevocably to withdraw its request to have its Registrable Notes included in such registration statement, by delivery of written notice of such withdrawal to the Company within five business days of its being advised of such price, without prejudice to the rights of any holder or holders of Registrable Notes to include Registrable Notes in any future registration (or registrations) pursuant to this Section 4 or to cause such registration to be effected as a registration under Section 3(a) hereof, as the case may be; (B) if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Requesting Holder and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Notes in connection with such registration (but not from any obligation of the Company to pay the Expenses in connection therewith), without prejudice, however, to the rights of any Holder to include Registrable Notes in any future registration (or registrations) pursuant to this Section 4 or to cause such registration to be effected as a registration under Section 3(a) hereof, as the case may be, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Notes, for the same period as the delay in registering such other securities; and (C) if such registration involves an underwritten offering, each Requesting Holder shall sell its Registrable Securities on the same terms and conditions as those that apply to the Company. No registration effected under this Section 4 shall relieve the Company of its obligation to effect any registration upon request under Section 3(a) hereof and no registration effected pursuant to this Section 4 shall be deemed to have been effected pursuant to Section 3(a) hereof. 5. Expenses. The Company shall pay all Expenses in connection with any registration initiated pursuant to Section 2(a), 2(b), 3(a) or 4 hereof, whether or not such registration shall become effective and whether or not all or any portion of the Registrable Notes originally requested to be included in such registration are ultimately included in such registration. Notwithstanding the foregoing, if any request for registration made pursuant to Section 3(a) hereof is withdrawn or terminated by the Selling Holders prior to the registration becoming effective, the Expenses incurred in connection with such request shall be borne by the Selling Holders pro rata on the basis of the aggregate principal amount of Registrable Notes requested to be registered pursuant to such demand by each Selling Holder; provided, however, that, in the case of an underwritten Public Offering, if such request for registration is withdrawn or terminated by the Selling Holders prior to the registration becoming effective because the offering price of the Registrable Notes requested to be registered would, in the opinion of the managing underwriter of such offering, be less than 90% of the estimated offering price of the Notes as indicated in writing by the managing underwriter prior to the initial filing of such registration statement with the Commission, the Company shall pay 50% of the Expenses in connection with such registration, and the Selling Holders shall pay the remaining 50% on a pro rata basis. 6. Registration Procedures.If and whenever the Company is required to effect any registration under the Securities Act as provided in Sections 2(a), 2(b), 3(a) and 4 hereof, the Company shall, as expeditiously as possible: (a) prepare and file with the Commission (promptly and, in the case of any registration pursuant to Section 3(a), in any event on or before the date that is (i) 90 days after the end of the period within which requests for registration may be given to the Company or (ii) if, as of such ninetieth day, the Company does not have the audited financial statements required to be included in the registration statement, 30 days after the receipt by the Company from its independent public accountants of such audited financial statements, which the Company shall use its reasonable best efforts to obtain as promptly as practicable) the requisite registration statement to effect such registration and thereafter use its reasonable best efforts to cause such registration statement to become effective; provided, however, that the Company may discontinue any registration of its securities that are not Registrable Notes (and, under the circumstances specified in Sections 4 and 9(b) hereof, its securities that are Registrable Notes) at any time prior to the effective date of the registration statement relating thereto; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Notes covered by such registration statement until such time as all of such Registrable Notes has been disposed of in accordance with the method of disposition set forth in such registration statement; provided, that, except with respect to any Shelf Registration, such period need not extend beyond 90 days after the effective date of the registration statement; and provided, further, that with respect to the Initial Shelf, such period need not extend beyond one year after the effective date of such registration statement and, with respect to any Shelf Registration other than the Initial Shelf, such period need not exceed the applicable period provided for in Section 3(g) hereof; (c) in the case of a registration pursuant to Section 2(a), 3(a) or 4 hereof, furnish to each seller of Registrable Notes covered by such registration statement such number of copies of such drafts and final conformed versions of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits and any documents incorporated by reference), such number of copies of such drafts and final versions of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in writing; (d) use its reasonable best efforts (i) to register or qualify all Registrable Notes and other securities covered by such registration statement under such other securities or blue sky laws of such states or other jurisdictions of the United States of America as the sellers of Registrable Notes covered by such registration statement shall reasonably request in writing, (ii) to keep such registration or qualification in effect for so long as such registration statement remains in effect and (iii) to take any other action that may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subsection (d) be obligated to be so qualified, to subject itself to taxation in such jurisdiction or to consent to general service of process in any such jurisdiction; (e) use its best efforts to cause all Registrable Notes and other securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the seller or sellers of Registrable Notes to enable the seller or sellers thereof to consummate the disposition of such Registrable Notes; (f) use its best efforts to obtain and, if obtained, furnish to each seller of Registrable Notes, and each such seller's underwriters, if any, a signed (i) opinion of counsel for the Company, dated the effective date of such registration statement (and, if such registration involves an underwritten offering, dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (ii) "comfort" letter, dated the effective date of such registration statement (and, if such registration involves an underwritten offering, dated the date of the closing under the underwriting agreement) and signed by the independent public accountants who have certified the Company's financial statements included or incorporated by reference in such registration statement, reasonably satisfactory in form and substance to such seller, in each case, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' comfort letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' comfort letters delivered to underwriters in underwritten Public Offerings of securities and, in the case of the accountants' comfort letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as the sellers of the Registrable Notes covered by such registration statement or the underwriters, if any, may reasonably request; (g) notify each seller of Registrable Notes and other securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and, at the request of any such seller of Registrable Notes, promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus, as supplemented or amended, shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (h) otherwise comply with all applicable rules and regulations of the Commission and any other governmental agency or authority having jurisdiction over the offering, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and furnish to each seller of Registrable Notes at least ten days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus; (i) upon a request of the Holders of a majority of the aggregate principal amount of Registrable Notes requested to be included in a registration pursuant to Section 3(a) or 4 hereof, made at any time on and after the first anniversary of the date hereof, use its best efforts to cause all such Registrable Notes covered by such registration statement (i) to be listed on a national securities exchange on which similar securities issued by the Company are then listed, if the listing of such Registrable Notes is then permitted under the rules of such exchange or (ii) if the Company is not required pursuant to clause (i) above to list such securities covered by such registration statement on a national securities exchange, use its best efforts to secure designation of all Registrable Notes covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization for such Registrable Notes and, without limiting the generality of the foregoing, to arrange for at least two market makers to register with the NASD as such with respect to such Registrable Notes; (j) obtain a CUSIP number for all Exchange Securities or Registrable Notes, as the case may be, not later than the effective date of the registration statement with respect to such Exchange Securities or Registrable Notes, as the case may be; (k) use its best efforts to cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Securities or Registrable Notes, as the case may be, and cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute and use its best efforts to cause the Trustee to execute all documents as may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable the Indenture to be so qualified in a timely manner; and (l) enter into such agreements and take such other actions as any Holder or Holders of Registrable Notes covered by such registration statement shall reasonably request in order to expedite or facilitate the disposition of such Registrable Notes. The Company may require each seller of Registrable Notes as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of the securities covered by such registration statement as the Company may from time to time reasonably request in writing and as is required by applicable laws and regulations. In the case of a registration pursuant to Section 2(a), 3(a) or 4 hereof, each Holder agrees that as of the date that a final prospectus is made available to it for distribution to prospective purchasers of Registrable Notes it shall cease to distribute copies of any preliminary prospectus prepared in connection with the offer and sale of such Registrable Notes. Each Holder further agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in subsection (g) of this Section 6, such Holder shall forthwith discontinue such Holder's disposition of Registrable Notes pursuant to the registration statement relating to such Registrable Notes until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by subsection (g) of this Section 6 and, if so directed by the Company, shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus relating to such Registrable Notes current at the time of receipt of such notice. If any event of the kind described in subsection (g) of this Section 6 occurs and such event is the fault solely of a Holder (or Holders), such Holder (or Holders) shall pay all Expenses attributable to the preparation, filing and delivery of any supplemented or amended prospectus contemplated by subsection (g) of this Section 6. 7. Underwritten Offerings. (a) Requested Underwritten Offerings. If requested by the underwriters in connection with a request for a registration under Section 3 hereof, the Company shall enter into a firm commitment underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company and a majority of the Selling Holders whose Registrable Notes are included in such registration, and the underwriters and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnification and contribution to the effect and to the extent provided in Section 10 hereof. (b) Piggyback Underwritten Offerings; Priority. If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 4 hereof and such securities are to be distributed by or through one or more underwriters, the Company shall, if requested by any Requesting Holders, use its best efforts to arrange for such underwriters to include all of the Registrable Notes to be offered and sold by such Requesting Holders among the securities of the Company to be distributed by such underwriters; provided, that, if the managing underwriter of such underwritten offering shall advise the Company in writing (with a copy to the Requesting Holders) that if all the Registrable Notes requested to be included in such registration were so included, in its opinion, the number and type of securities proposed to be included in such registration would exceed the number and type of securities which could be sold in such offering within a price range acceptable to the Company (such writing to state the basis of such opinion and the approximate number and type of securities which may be included in such offering without such effect), then the Company shall include in such registration, to the extent of the number and type of securities which the Company is so advised can be sold in such offering, (i) first, securities that the Company proposes to issue and sell for its own account and (ii) second, Registrable Notes requested to be registered by Requesting Holders pursuant to Section 4 hereof, pro rata among the Requesting Holders on the basis of the aggregate principal amount of Registrable Notes requested to be registered by all such Requesting Holders. Any Requesting Holder may withdraw its request to have all or any portion of its Registrable Notes included in any such offering by notice to the Company within 10 Business Days after receipt of a copy of a notice from the managing underwriter pursuant to this Section 7(b). (c) Holders of Registrable Notes to be Parties to Underwriting Agreement. The holders of Registrable Notes to be distributed by underwriters in an underwritten offering contemplated by subsections (a) or (b) of this Section 7 shall be parties to the underwriting agreement between the Company and such underwriters and any such Holder, at its option, may require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders. No such Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such Holder's Registrable Notes and such Holder's intended method of distribution. (d) Selection of Underwriters for Piggyback Underwritten Offering. The underwriter or underwriters of each piggyback underwritten offering pursuant to this Section 7 shall be a nationally recognized underwriter (or underwriters) selected by the Company. (e) Holdback Agreements. Each Holder agrees, if so required by the managing underwriter for any underwritten offering pursuant to this Agreement, not to effect any sale or distribution of any debt securities of the Company issued after the date hereof during the 10 days prior to the date on which an underwritten registration of Registrable Notes pursuant to Section 2(a), 3 or 4 hereof has become effective and until 120 days after the effective date of such underwritten registration, except as part of such underwritten registration or to the extent that such Holder is prohibited by applicable law from agreeing to withhold securities from sale or is acting in its capacity as a fiduciary or an investment adviser. Without limiting the scope of the term "fiduciary," a holder shall be deemed to be acting as a fiduciary or an investment adviser if its actions or the securities proposed to be sold are subject to the Employee Retirement Income Security Act of 1974, as amended, the Investment Company Act of 1940, as amended, or the Investment Advisers Act of 1940, as amended, or if such securities are held in a separate account under applicable insurance law or regulation. The Company agrees (i) not to effect any Public Offering or distribution of any debt securities of the Company during the 10 days prior to the date on which any underwritten registration pursuant to Section 2(a), 3 or 4 hereof has become effective and until 120 days after the effective date of such underwritten registration, except as part of such underwritten registration, and (ii) to cause each holder of any debt securities acquired from the Company at any time on or after the date of this Agreement (other than in a Public Offering), to agree not to effect any Public Offering or distribution of such securities, during such period. 8. Preparation; Reasonable Investigation. (a) Registration Statements. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company shall give each holder of Registrable Notes registered under such registration statement, the underwriters, if any, and its respective counsel and accountants the reasonable opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and shall give each of them such reasonable access to its books and records and such reasonable opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of any such Holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. (b) Confidentiality. Each Holder of Registrable Notes shall maintain the confidentiality of any confidential information received from or otherwise made available by the Company to such Holder of Registrable Notes and identified in writing by the Company as confidential. Information that (i) is or becomes available to a Holder of Registrable Notes from a public source, (ii) is disclosed to a Holder of Registrable Notes by a third-party source who the Holder of Registrable Notes reasonably believes has the right to disclose such information or (iii) is or becomes required to be disclosed by a holder of Registrable Notes by law, including by court order, shall not be deemed to be confidential information for purposes of this Agreement. The Holders of Registrable Notes shall not grant access, and the Company shall not be required to grant access, to information under this Section 8 to any Person who will not agree to maintain the confidentiality (to the same extent a Holder is required to maintain confidentiality) of any confidential information received from or otherwise made available to it by the Company or the holders of Registrable Notes under this Agreement and identified in writing by the Company as confidential. 9. Postponements. (a) If the Company shall fail to file any registration statement to be filed pursuant to a request for registration under Section 3(a) hereof, the Holders requesting such registration shall have the right to withdraw the request for registration if such withdrawal shall be made by holders of Notes holding an aggregate principal amount of Notes such that the Holders that have not elected to withdraw do not hold the requisite percentage of Notes to initiate a request under Section 3. Any such withdrawal shall be made by giving written notice to the Company within 20 days after, in the case of a request pursuant to Section 3(a) hereof, the date on which a registration statement would otherwise have been required to have been filed with the Commission under clause (i) of Section 6(a) hereof (i.e., 20 days after the date that is 90 days after the conclusion of the period within which requests for registration may be given to the Company, or, if, as of such ninetieth day, the Company does not have the audited financial statements required to be included in the registration statement, 30 days after the receipt by the Company from its independent public accountants of such audited financial statements). In the event of such withdrawal, the request for registration shall not be counted for purposes of determining the number of registrations to which Holders are entitled pursuant to Section 3 hereof. The Company shall pay all Expenses incurred in connection with a request for registration withdrawn pursuant to this paragraph. (b) The Company shall not be obligated to file any registration statement other than the Initial Shelf or the Exchange Registration, or file any amendment or supplement to any registration statement other than the Initial Shelf or the Exchange Registration, and may suspend any seller's rights to make sales pursuant to any effective registration statement (provided that it may not suspend the Company's or any Holder's rights to make exchanges or sales pursuant to the Exchange Registration or the Initial Shelf, respectively, prior to the ninetieth day following the date on which the Exchange Registration or the Initial Shelf initially is declared effective), at any time when the Company, in the good faith judgment of its Board of Directors, reasonably believes that the filing thereof at the time requested, or the offering of securities pursuant thereto, would adversely affect a pending or proposed public offering of the Company's securities, a material financing, or a material acquisition, merger, recapitalization, consolidation, reorganization or similar transaction, or negotiations, discussions or pending proposals with respect thereto. The filing of a registration statement, or any amendment or supplement thereto, by the Company cannot be deferred, and the sellers' rights to make sales pursuant to an effective registration statement cannot be suspended, pursuant to the provisions of the preceding sentence for more than ten days after the abandonment or consummation of any of the foregoing proposals or transactions or for more than 60 days after the date of the Board's determination referenced in the preceding sentence. If the Company suspends the sellers' rights to make sales pursuant hereto, the applicable registration period shall be extended by the number of days of such suspension. 10. Indemnification. (a) Indemnification by the Company. In connection with any registration statement filed by the Company pursuant to Section 2(a), 3(a) or 4 hereof, the Company shall, and hereby agrees to, indemnify and hold harmless, each Holder and seller of any Registrable Notes covered by such registration statement and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such Holder or seller or any such underwriter, and their respective directors, officers, partners, agents and Affiliates (each, a "Company Indemnitee" for purposes of this Section 10(a)), against any losses, claims, damages, liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof and whether or not such Indemnified Party is a party thereto), joint or several, and expenses, including, without limitation, the reasonable fees, disbursements and other charges of legal counsel and reasonable costs of investigation, to which such Company Indemnitee may become subject under the Securities Act or otherwise (collectively, a "Loss" or "Losses"), insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered or otherwise offered or sold under the Securities Act or otherwise, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto (collectively, "Offering Documents"), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances in which they were made not misleading; provided, that, the Company shall not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Offering Documents in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Company Indemnitee specifically stating that it is expressly for use therein; and provided, further, that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Notes or any other Person, if any, who controls such underwriter, in any such case to the extent that any such Loss arises out of such Person's failure to send or give a copy of the final prospectus (including any documents incorporated by reference therein), as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Notes to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnitee and shall survive the transfer of such securities by such Company Indemnitee. (b) Indemnification by the Offerors and Sellers. In connection with any registration statement filed by the Company pursuant to Section 2(a), 3(a) or 4 hereof in which a Holder has registered for sale Registrable Notes, each such Holder or seller of Registrable Notes shall, and hereby agrees to, indemnify and hold harmless the Company and each of its directors, officers, employees and agents, each other Person, if any, who controls the Company and each other seller and such seller's directors, officers, stockholders, partners, employees, agents and affiliates (each, a "Holder Indemnitee" for purposes of this Section 10(b)), against all Losses insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Offering Documents (or any document incorporated by reference therein) or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of circumstances in which they were made not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such Holder or seller of Registrable Notes specifically stating that it is expressly for use therein; provided, however, that the liability of such indemnifying party under this Section 10(b) shall be limited to the amount of the net proceeds received by such indemnifying party in the offering giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Holder Indemnitee and shall survive the transfer of such securities by such Holder. (c) Notices of Losses, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a Loss referred to in the preceding subsections of this Section 10, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subsections of this Section 10, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Loss, to assume and control the defense thereof, in each case at its own expense, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after its assumption of the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall be liable for any settlement of any such action or proceeding effected without its written consent, which shall not be unreasonably withheld. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such Loss or which requires action on the part of such indemnified party or otherwise subjects the indemnified party to any obligation or restriction to which it would not otherwise be subject. (d) Contribution. If the indemnification provided for in this Section 10 shall for any reason be unavailable to an indemnified party under subsection (a) or (b) of this Section 10 in respect of any Loss, then, in lieu of the amount paid or payable under subsection (a) or (b) of this Section 10, the indemnified party and the indemnifying party under subsection (a) or (b) of this Section 10 shall contribute to the aggregate Losses (including legal or other expenses reasonably incurred in connection with investigating the same) (i) in such proportion as is appropriate to reflect the relative fault of the Company and the prospective sellers of Registrable Notes covered by the registration statement which resulted in such Loss or action in respect thereof, with respect to the statements, omissions or action which resulted in such Loss or action in respect thereof, as well as any other relevant equitable considerations, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and such prospective sellers, on the other hand, from their sale of Registrable Notes; provided, that, for purposes of this clause (ii), the relative benefits received by the prospective sellers shall be deemed not to exceed the amount received by such sellers. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The obligations, if any, of the selling holders of Registrable Notes to contribute as provided in this subsection (d) are several in proportion to the relative value of their respective Registrable Notes covered by such registration statement and not joint. In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or Loss effected without such Person's consent. (e) Other Indemnification. The Company and, in connection with any registration statement filed by the Company pursuant to Section 2(a), each Holder shall, and, in connection with any registration statement filed by the Company pursuant to Section 3(a) or 4, each Holder who has registered for sale Registrable Notes, shall, with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority other than the Securities Act, indemnify Holder Indemnitees and Company Indemnitees, respectively, against Losses, or, to the extent that indemnification shall be unavailable to a Holder Indemnitee or Company Indemnitee, contribute to the aggregate Losses of such Holder Indemnitee or Company Indemnitee in a manner similar to that specified in the preceding subsections of this Section 10 (with appropriate modifications). (f) Indemnification Payments. The indemnification and contribution required by this Section 10 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when bills are received or any Loss is incurred. 11. Registration Rights to Others. If the Company shall at any time hereafter, other than pursuant to the Common Stock Registration Rights Agreement, provide to any holder of any securities of the Company rights with respect to the registration of such securities under the Securities Act or the Exchange Act, such rights shall not be in conflict with or adversely affect any of the rights provided in this Agreement to the holders of Registrable Notes. 12. Adjustments Affecting Registrable Notes. The Company shall not effect or permit to occur any combination, subdivision or reclassification of Registrable Notes that would materially adversely affect the ability of the Holders to include such Registrable Notes in any registration of its securities under the Securities Act contemplated by this Agreement or the marketability of such Registrable Notes under any such registration or other offering. 13. Rule 144 and Rule 144A. The Company shall take all actions reasonably necessary to enable Holders to sell Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (c) any similar rules or regulations hereafter adopted by the Commission, including, without limiting the generality of the foregoing, filing on a timely basis all reports required to be filed under the Exchange Act. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. 14. Amendments and Waivers. Any provision of this Agreement may be amended, modified or waived if, but only if, the written consent to such amendment, modification or waiver has been obtained from (i) except as provided in clause (ii) below, the Holder or Holders of at least 66 2/3% of the aggregate principal amount of Registrable Notes affected by such amendment, modification or waiver and (ii) in the case of any amendment, modification or waiver of any provision of Section 5 or 9 hereof or this Section 14 or any provisions as to the number of requests for registration to which holders of Registrable Notes are entitled under Section 3 or 4 hereof, or as to the percentages of Holders required for any amendment, modification or waiver, or any amendment, modification or waiver which adversely affects any right and/or obligation under this Agreement of any Holder, the written consent of each Holder so affected. 15. Nominees for Beneficial Owners. In the event that any Registrable Note is held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company, be treated as the Holder of such Registrable Note for purposes of any request or other action by any Holder or Holders pursuant to this Agreement or any determination of the number or percentage of principal amount of Registrable Notes held by any Holder or Holders contemplated by this Agreement. If the beneficial owner of any Registrable Notes so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Notes. 16. Assignment. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Any Holder may assign to any permitted Transferee (as permitted under applicable law) of its Registrable Notes its rights and obligations under this Agreement, provided that such Transferee shall agree in writing with the parties hereto prior to the assignment to be bound by this Agreement as if it were an original party hereto, whereupon such assignee shall for all purposes be deemed to be a Holder under this Agreement. Except as provided above or otherwise permitted by this Agreement, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any Holder without the prior written consent of the other parties hereto. The Company may not assign this Agreement or any right, remedy, obligation or liability arising hereunder or by reason hereof. 17. Calculation of Percentage of Principal Amount of Registrable Notes. For purposes of this Agreement, all references to an aggregate principal amount of Registrable Notes or a percentage thereof shall be calculated based upon the aggregate principal amount of Registrable Notes outstanding at the time such calculation is made and shall exclude any Registrable Notes or Notes, as the case may be, owned by the Company or any subsidiary of the Company. 18. Miscellaneous. (a) Further Assurances. Each of the parties hereto shall execute such documents and other papers and perform such further acts as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby. (b) Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof. (c) No Inconsistent Agreements. The Company will not hereafter enter into any agreement which is inconsistent with the rights granted to the Holders in this Agreement. (d) Remedies. Each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (e) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and there are no restrictions, promises, representations, warranties, covenants, or undertakings with respect to the subject matter hereof, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. (f) Notices. Any notices or other communications to be given hereunder by any party to another party shall be in writing, shall be delivered personally, by telecopy, by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other comparable delivery service, to the address of the party set forth on Schedule B hereto or to such other address as the party to whom notice is to be given may provide in a written notice to the other parties hereto, a copy of which shall be on file with the Secretary of the Company. Notice shall be effective when delivered if given personally, when receipt is acknowledged if telecopied, three days after mailing if given by registered or certified mail as described above, and one business day after deposit if given by Federal Express or comparable delivery service. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made to be performed entirely in such State. (h) Severability. Notwithstanding any provision of this Agreement, neither the Company nor any other party hereto shall be required to take any action which would be in violation of any applicable Federal or state securities law. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. (i) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WALTER INDUSTRIES, INC. By Name: Title: HOLDERS: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: [ ] By Name: Title: SCHEDULE A HOLDERS OF REGISTRABLE NOTES AGGREGATE PRINCIPAL HOLDER AMOUNT - ------ --------- SCHEDULE B NOTICES If to the Company, to: [ ] Attention: Tel: Fax: with a copy to: Attention: Tel: Fax: If to the Holders, to: with a copy to: EXHIBIT 6: REJECTED EXECUTORY CONTRACTS REJECTED EXECUTORY CONTRACTS 1. The agreement (or agreements) under which KKR provides financial, financial advisory, consulting and/or any other services to Hillsborough and/or any other Debtor or Affiliate thereof[CAD 252]. 2. Letter Agreement (as defined in the Disclosure Statement), dated September 18, 1987, between the KKR Investors and the Drexel Burnham Lambert Group and the related agreement with purchasers of Securities. 3. All Management Common Stock Subscription Agreements (as defined in the Disclosure Statement). 4. The Registration Rights Agreement (as defined in the Disclosure Statement). 5. All agreements containing or evidencing Stock Acquisition Rights, including without limitation all options granted under the Stock Option Plan for Key Employees of Walter Industries and its Subsidiaries approved in October 1987; such plan; and all Old Option Agreements (as defined in the Disclosure Statement). EXHIBIT 7: FORM OF MUTUAL RELEASES RELEASE (Lehman Brothers Inc.--Releasor) WHEREAS, the following entities (collectively, the "Debtors") are Debtors in the consolidated bankruptcy cases captioned "In re Hillsborough Holdings Corporation, et al., Bankr. M.D. Fla., Case Nos. 89-9715-8P1 through 89-9746-8P1, and 90-11997-8P1" ("In re Hillsborough Holdings"): Hillsborough Holdings Corporation Best Insurors, Inc. Best Insurors of Mississippi, Inc. Coast to Coast Advertising, Inc. Computer Holdings Corporation Dixie Building Supplies, Inc. Hamer Holdings Corporation Hamer Properties, Inc. Homes Holdings Corporation Jim Walter Computer Services, Inc. Jim Walter Homes, Inc. Jim Walter Insurance Services, Inc. Jim Walter Resources, Inc. Jim Walter Window Components, Inc. JW Aluminum Company JW Resources, Inc. JW Resources Holdings Corporation J.W.I. Holdings Corporation J.W. Walter, Inc. JW Windows Components, Inc. Land Holdings Corporation Mid-State Homes, Inc. Mid-State Holdings Corporation Railroad Holdings Corporation Sloss Industries Corporation Southern Precision Corporation United Land Corporation United States Pipe and Foundry Company U.S. Pipe Realty, Inc. Vestal Manufacturing Company Walter Home Improvement, Inc. Walter Industries, Inc. Walter Land Company; WHEREAS, Lehman Brothers Inc. (the "Releasor") is a substantial creditor of the Debtors and has actively participated in the Debtors' chapter 11 cases, including in respect of plan negotiations and formulation; WHEREAS, the Debtors and Kohlberg Kravis Roberts & Co., KKR Associates, JWC Associates, L.P., JWC Associates II, L.P. and KKR Partners II, L.P. (collectively with the Debtors listed above, the "Releasees") have actively participated in the Debtors' chapter 11 cases, including in respect of plan negotiations and formulation; WHEREAS, the Releasor and the Releasees have settled all claims related to the Debtors under the terms of the Amended Joint Plan of Reorganization, dated as of November 22, 1994, filed in In re Hillsborough Holdings, et al. (the "Consensual Plan"); WHEREAS, the Releasor is executing this Release pursuant to the terms of the Consensual Plan and for good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged; NOW, THEREFORE, intending to be legally bound hereby, the Releasor agrees as follows: 1. Consensual Plan and Defined Terms. All terms shall have the meanings specified herein or (if not specified herein) in the Consensual Plan. 2. Effective Date. This Release shall be effective and binding as of the Effective Date provided for under the terms of the Consensual Plan and covers activities occurring prior to and including the Effective Date. 3. Release. The Releasor, being duly authorized, hereby fully and forever irrevocably releases, relieves, quitclaims and discharges each and all of the Releasees and each of their respective subsidiaries and Affiliates and each of their present or former directors, officers, partners, stockholders, employees, agents, representatives, successors and assigns (collectively, the "Related Parties"), from any and all claims, causes of action, remedies and rights of any kind whatsoever, at common law, equity, by statute or otherwise, whether they may be asserted directly or indirectly, whether known or unknown, concealed or hidden, and whether suspected or unsuspected, which the Releasor ever had, currently has or hereafter may have against each and all of the Releasees and their Related Parties which in any way relate to any present or prior relationship with any and all of the Releasees and any and all of their Related Parties with respect to any or all of the Debtors, which otherwise in any way relate to any or all of the Debtors or which in any way relate to any of the matters, facts or transactions alleged by the Releasor as serving as the basis for a claim, cause of action, remedy [CAD 252]or right against any or all of the Releasees or any or all of their Related Parties with respect to any or all of the Debtors, provided, however, that nothing in this Release shall release or otherwise affect any (a) rights, debts, liabilities, obligations or promises created by or arising under or out of the Consensual Plan; and (b) preexisting rights, debts, obligations, liabilities or promises unrelated to any or all of the Debtors. 4. Waiver Under Section 1542 of the California Civil Code and Similar Provisions. (a) THE RELEASOR EXPRESSLY UNDERSTANDS THAT Section 1542 of the Civil Code of the State of California provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtors." (b) To the extent that, notwithstanding paragraph 7 hereof, the laws of California or the laws of any other jurisdiction may be applicable, THE RELEASOR HEREBY AGREES THAT THE PROVISIONS OF SECTION 1542 of the Civil Code of the State of California and all similar federal or state laws, rights, rules or legal principles which may be applicable hereto, to the extent they apply to any of the matters released herein, ARE HEREBY KNOWINGLY AND VOLUNTARILY WAIVED AND RELINQUISHED BY THE RELEASOR, in each and every capacity, to the full extent that such rights and benefits pertaining to the matters released herein may be waived, and the Releasor hereby agrees and acknowledges that this waiver is an essential term of this Release, without which the consideration provided to it would not have been given. (c) In connection with such waiver and relinquishment, the Releasor acknowledges that it is aware that it may hereafter discover claims presently unknown or unsuspected, or facts in addition to or different from those which it now knows or believes to be true, with respect to the matters released herein. Nevertheless, it is its intent in executing this Release fully, finally and forever to settle, release and discharge all such matters, and all claims, causes of actions, remedies and rights relative thereto, which the Releasor ever had, currently has or hereafter may have (whether or not previously or currently asserted in any action or proceeding). 5. Nonassignment of Claims. The Releasor hereby represents and warrants that every claim, cause of action, remedy and right released herein has not heretofore been assigned, transferred or encumbered. The Releasor agrees to indemnify each and all of the Releasees and each and all of their Related Parties, and hold each and all of them harmless, from and against any and all claims, causes of action, remedies or rights released hereby based upon or arising in connection with any such prior assignment, transfer or encumbrance. 6. Litigation Relating to this Release. In the event it becomes necessary for any person or entity for whose benefit this Release is executed to initiate or respond to any action or proceeding to enforce the terms of this Release, the prevailing party in any such action or proceeding shall be entitled, in addition to any other relief awarded by the court or other tribunal, to costs and expenses, including attorneys' fees, actually incurred in any such action or proceeding by such person or entity. 7. Governing Law. This Release and the obligations arising hereunder shall be governed in all respects including all matters of construction, validity and performance by, and construed and enforced in accordance with, the laws of the State of New York without regard to the principles thereof regarding choice of law. IN WITNESS WHEREOF, this Release has been executed this day of , 1995. LEHMAN BROTHERS INC. By:____________________ Name: Title: RELEASE (KKR and Debtors--Releasors) WHEREAS, the following entities (collectively, the "Debtors") are Debtors in the consolidated bankruptcy cases captioned "In re Hillsborough Holdings Corporation, et al., Bankr. M.D. Fla., Case Nos. 89-9715-8P1 through 89-9746-8P1, and 90-11997-8P1" ("In re Hillsborough Holdings"): Hillsborough Holdings Corporation Best Insurors, Inc. Best Insurors of Mississippi, Inc. Coast to Coast Advertising, Inc. Computer Holdings Corporation Dixie Building Supplies, Inc. Hamer Holdings Corporation Hamer Properties, Inc. Homes Holdings Corporation Jim Walter Computer Services, Inc. Jim Walter Homes, Inc. Jim Walter Insurance Services, Inc. Jim Walter Resources, Inc. Jim Walter Window Components, Inc. JW Aluminum Company JW Resources, Inc. JW Resources Holdings Corporation J.W.I. Holdings Corporation J.W. Walter, Inc. JW Windows Components, Inc. Land Holdings Corporation Mid-State Homes, Inc. Mid-State Holdings Corporation Railroad Holdings Corporation Sloss Industries Corporation Southern Precision Corporation United Land Corporation United States Pipe and Foundry Company U.S. Pipe Realty, Inc. Vestal Manufacturing Company Walter Home Improvement, Inc. Walter Industries, Inc. Walter Land Company; WHEREAS, the Debtors and Kohlberg Kravis Roberts & Co., KKR Associates, JWC Associates, L.P., JWC Associates II, L.P. and KKR Partners II, L.P. (collectively with the Debtors listed above, the "Releasors") have actively participated in the Debtors' chapter 11 cases, including in respect of plan negotiations and formulation; WHEREAS, Lehman Brothers Inc. (the "Releasee") is a substantial creditor of the Debtors and has actively participated in the Debtors' chapter 11 cases, including in respect of plan negotiations and formulation; WHEREAS, the Releasors and the Releasee have settled all claims related to the Debtors under the terms of the Amended Joint Plan of Reorganization, dated as of November 22, 1994, filed in In re Hillsborough Holdings, et al. (the "Consensual Plan"); WHEREAS, the Releasors are executing this Release pursuant to the terms of the Consensual Plan and for good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged; NOW, THEREFORE, intending to be legally bound hereby, the undersigned Releasors agree as follows: 1. Consensual Plan and Defined Terms. All terms shall have the meanings specified herein or (if not specified herein) in the Consensual Plan. 2. Effective Date. This Release shall be effective and binding as of the Effective Date provided for under the terms of the Consensual Plan and covers activities occurring prior to and including the Effective Date. 3. Release. All of the Releasors and each of them, being duly authorized, hereby fully and forever irrevocably release, relieve, quitclaim and discharge the Releasee and its respective subsidiaries and Affiliates and each of their present and former directors, officers, partners, stockholders, employees, agents, representatives, successors and assigns and any accounts managed or controlled by any of them (collectively, the "Related Parties"), from any and all claims, causes of action, remedies and rights of any kind whatsoever, at common law, equity, by statute or otherwise, whether they may be asserted directly or indirectly, whether known or unknown, concealed or hidden, and whether suspected or unsuspected, which each and all of the Releasors or any of them ever had, currently have or hereafter may have against any of the Releasee and any and all of its Related Parties which in any way relate to any present or prior relationship with any of the Releasee and any and all of its Related Parties with respect to any or all of the Debtors, which otherwise in any way relate to any or all of the Debtors or which in any way relate to any of the matters, facts or transactions alleged by any and all of the Releasors as serving as the basis for a claim, cause of action, remedy or right against any of the Releasee or any and all of its Related Parties with respect to any or all of the Debtors, provided, however, that nothing in this Release shall release or otherwise affect any (a) rights, debts, liabilities, obligations or promises created by or arising under or out of the Consensual Plan; and (b) preexisting rights, debts, obligations, liabilities or promises unrelated to any or all of the Debtors. 4. WAIVER UNDER SECTION 1542 OF THE CALIFORNIA CIVIL CODE AND SIMILAR PROVISIONS. (a) THE RELEASORS EXPRESSLY UNDERSTAND THAT Section 1542 of the Civil Code of the State of California provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtors." (b) To the extent that, notwithstanding paragraph 7 hereof, the laws of California or the laws of any other jurisdiction may be applicable, THE RELEASORS HEREBY AGREE THAT THE PROVISIONS OF SECTION 1542 of the Civil Code of the State of California and all similar federal or state laws, rights, rules or legal principles which may be applicable hereto, to the extent they apply to any of the matters released herein, ARE HEREBY KNOWINGLY AND VOLUNTARILY WAIVED AND RELINQUISHED BY THE RELEASORS, in each and every capacity, to the full extent that such rights and benefits pertaining to the matters released herein may be waived, and the Releasors hereby agree and acknowledge that this waiver is an essential term of this Release, without which the consideration provided to term would not have been given. (c) In connection with such waiver and relinquishment, all of the Releasors and each of them acknowledge that they are aware that they may hereafter discover claims presently unknown or unsuspected, or facts in addition to or different from those which they now know or believe to be true, with respect to the matters released herein. Nevertheless, it is their intent in executing this Release fully, finally and forever to settle, release and discharge all such matters, and all claims, causes of action, remedies and rights relative thereto, which any and all of the Releasors ever had, currently has or hereafter may have (whether or not previously or currently asserted in any action or proceeding). 5. Nonassignment of Claims. The Releasors hereby represent and warrant that every claim, cause of action, remedy and right released herein has not heretofore been assigned, transferred or encumbered. The Releasors agree to indemnify any of the Releasee and any and all of its Related Parties, and hold each and all of them harmless, from and against any and all claims, causes of action, remedies and rights released hereby based upon or arising in connection with any such prior assignment, transfer or encumbrance. 6. Litigation Relating to this Release. In the event it becomes necessary for any person or entity for whose benefit this Release is executed to initiate or respond to any action or proceeding to enforce the terms of this Release, the prevailing party in any such action or proceeding shall be entitled, in addition to any other relief awarded by the court or other tribunal, to costs and expenses, including attorneys' fees, actually incurred in any such action or proceeding by such person or entity. 7. Governing Law. This Release and the obligations arising hereunder shall be governed in all respects including all matters of construction, validity and performance by, and construed and enforced in accordance with, the laws of the State of New York without regard to the principles thereof regarding choice of law. 8. Counterparts. This Release may be executed in multiple counterparts, each of which shall be deemed to be an original as to the Releasor on whose behalf it is executed. IN WITNESS WHEREOF, this Release has been executed this day of , 1995. HILLSBOROUGH HOLDINGS CORPORATION, BEST INSURORS, INC., BEST INSURORS OF MISSISSIPPI, INC., COAST TO COAST ADVERTISING, INC., COMPUTER HOLDINGS CORPORATION, DIXIE BUILDING SUPPLIES, INC., HAMER HOLDINGS CORPORATION, HAMER PROPERTIES, INC., HOMES HOLDINGS CORPORATION, JIM WALTER COMPUTER SERVICES, INC., JIM WALTER HOMES, INC. JIM WALTER INSURANCE SERVICES, INC., JIM WALTER RESOURCES, INC., JIM WALTER WINDOW COMPONENTS, INC., JW ALUMINUM COMPANY, JW RESOURCES, INC., JW RESOURCES HOLDINGS CORPORATION, J.W.I. HOLDINGS CORPORATION J.W. WALTER, INC. JW WINDOW COMPONENTS, INC., LAND HOLDINGS CORPORATION, MID-STATE HOMES, INC., MID-STATE HOLDINGS CORPORATION, RAILROAD HOLDINGS CORPORATION, SLOSS INDUSTRIES CORPORATION, SOUTHERN PRECISION CORPORATION, UNITED LAND CORPORATION, UNITED STATES PIPE AND FOUNDRY COMPANY, U.S. PIPE REALTY, INC., VESTAL MANUFACTURING COMPANY, WALTER HOME IMPROVEMENT, INC., and WALTER LAND COMPANY By: Name: Kenneth J. Matlock Title: Vice President KOHLBERG KRAVIS ROBERTS & CO. KKR ASSOCIATES JWC ASSOCIATES, L.P. JWC ASSOCIATES II, L.P. KKR PARTNERS II, L.P. By: KKR ASSOCIATES By:__________________ Name: Title: [Additional Forms of Release to be filed at a later date] EXHIBIT 8: RECORD HOLDERS OF SUBORDINATED NOTE CLAIMS THAT MADE THE SUBORDINATED NOTE CLAIM ELECTION AND AGGREGATE AMOUNT OF CLAIM OF EACH SUCH HOLDER ELECTED TO BE RECEIVED IN THE FORM OF QUALIFIED SECURITIES PURSUANT TO SUBORDINATED NOTE CLAIM ELECTION EXHIBIT 8 SUBORDINATED NOTE CLAIM ELECTION CLASS U-4 AGGREGATE PRINCIPAL AMOUNT OF ALLOWED SUBORDINATED NOTE CLAIMS ELECTED TO BE RECORD HOLDERS OF SATISFIED BY SUBORDINATED NOTE CLAIMS QUALIFIED SECURITIES - ------------------------ -------------------- GOLDMAN SACHS & CO $ 3,008,000.00 LEWCO SECURITIES CORP 4,925,000.00 BEAR STEARNS SEC CORP 1,700,000.00 BEAR STEARNS SEC CORP 54,454.00 SMITH BARNEY SHEARSON INC 158,790,466.00 SMITH BARNEY SHEARSON INC 3,525,000.00 OPPENHEIMER & CO INC 1,000,000.00 SPEAR LEEDS & KELLOG 2,300,000.00 BOSTON SAFE DEPOSIT & TR CO 271,657.00 MORGAN STANLEY & CO INC 20,810,000.00 ATWELL & CO 60,222,859.00 BOOTH & CO 2,400,000.00 CATAMARAN & CO 630,000.00 TRUST OF GE RETIRE TRUST 18,991,161.00 HUDD & CO 7,550,000.00 MAC & CO 997,790.00 MAC & CO 13,245,580.00 MOMINT 2,104,000.00 SMOG & CO 2,000,000.00 TES & CO 7,000,000.00 UMBWAD & CO 5,275,000.00 HARE & CO 60,222,859.00 --------------- TOTAL $377,023,826.00 --------------- CLASS U-5 AGGREGATE PRINCIPAL AMOUNT OF ALLOWED SUBORDINATED NOTE CLAIMS ELECTED TO BE RECORD HOLDERS OF SATISFIED BY SUBORDINATED NOTE CLAIMS QUALIFIED SECURITIES - ------------------------ -------------------- GOLDMAN SACHS & CO $ 6,540,000.00 GOLDMAN SACHS & CO 2,000,000.00 MORGAN STANLEY & CO INC 13,734,000.00 KIDDER PEABODY & CO INC 2,050,000.00 NEUBERGER & BERMAN 4,860,000.00 BEAR STEARNS SEC CORP 1,146,000.00 SMITH BARNEY SHEARSON INC 111,948,000.00 SMITH BARNEY SHEARSON INC 1,540,000.00 OPPENHEIMER & CO INC 17,000.00 BROWN ALEX & SONS INC 40,000.00 OCONNOR & ASSOCIATES 2,677,000.00 BANK OF NEW YORK 7,685,000.00 UNITED STATES TRUST CO NY 14,000,000.00 BOSTON SAFE DEPOSIT & TR CO 1,510,000.00 FIRST NATIONAL BANK OF BOSTON 600,000.00 SSB CUSTODIAN 5,000,000.00 SSB CUSTODIAN 5,000,000.00 SSB CUSTODIAN 600,000.00 BANK OF AMERICA NATL TR & SAV 1,250,000.00 BANK OF AMERICA NT & SA FRANKLIN 1,000,000.00 UNITED MISSOURI BANK NA 27,045,000.00 HARRIS TRUST & SAVINGS BANK 1,300,000.00 NATWEST SECURITIES CORP 3 2,745,000.00 BANKERS TRUST COMPANY 3,550,000.00 CRAIG, LINDA E. CUST MILES ERICSON 10,000.00 CRAIG, LINDA E. CUST SAMUEL CALVIN 30,000.00 ML LEE ACQUISITION FUND 12,000,000.00 PITT & CO 500,000.00 PITT & CO 17,200,000.00 HARE & CO 12,500,000.00 --------------- TOTAL $260,077,000.00 --------------- CLASS U-6 AGGREGATE PRINCIPAL AMOUNT OF ALLOWED SUBORDINATED NOTE CLAIMS ELECTED TO BE RECORD HOLDERS OF SATISFIED BY SUBORDINATED NOTE CLAIMS QUALIFIED SECURITIES - ------------------------ -------------------- MORGAN STANLEY & CO INC $ 28,520,000.00 GOLDMAN SACHS & CO 6,570,000.00 MORGAN STANLEY & CO INC 6,250,000.00 BANKERS TRUST COMPANY 11,200,000.00 CITICORP SECURITIES INC 630,000.00 BT SECURITIES CORP 3,140,000.00 BANK OF AMERICA NT & SA 3,000,000.00 FIRST TRUST NATL ASSOC 500,000.00 SSB CUSTODIAN 600,000.00 BOSTON SAFE DEPOSIT & TR CO 730,000.00 SMITH BARNEY SHEARSON INC 1,325,000.00 FIRST BOSTON CORP 150,000.00 BEAR STEARNS SEC CORP 45,000.00 NEUBERGER & BERMAN 300,000.00 BROWN ALEX & SONS INC 5,000.00 BANKERS TRUST COMPANY 2,925,00.00 MERRILL LYNCH PIERCE FENNER 15,000.00 NORTHERN TRUST CO TRUST 250,000.00 FIRST NATIONAL BANK OF BOSTON 420,000.00 BOSTON SAFE DEPOSIT & TR CO 545,000.00 UNITED STATES TRUST CO NY 1,000,000.00 GOLDMAN SACHS & CO 3,605,000.00 GOLDMAN SACHS & CO 850,000.00 MORGAN STANLEY & CO INC 19,919,000.00 NEUBERGER & BERMAN 1,400,000.00 SCHWAB CHARLES & CO INC 30,000.00 BEAR STEARNS SEC CORP 3,567,000.00 SMITH BARNEY SHEARSON INC 200,000.00 FAHNESTOCK & CO INC 146,000.00 BANKERS TRUST COMPANY 7,600,000.00 UNITED STATES TRUST CO NY 6,187,000.00 BOSTON SAFE DEPOSIT & TR CO 750,000.00 FIRST NATIONAL BANK OF BOSTON 450,000.00 SSB CUSTODIAN 1,240,000.00 MERRILL LYNCH-DEBT SECURITIES 1,000.00 BT SECURITIES CORP 5,000,000.00 MORGAN STANLEY & CO INC 24,248,000.00 SCHWAB CHARLES & CO INC 3,000.00 LAZARD FRERES & CO 20,000.00 BEAR STEARNS SEC CORP 4,275,000.00 SMITH BARNEY SHEARSON INC 400,000.00 FAHNESTOCK & CO INC 418,000.00 OCONNOR & ASSOCIATES 3,000,000.00 CHASE MANHATTAN BANK NA 10,000,000.00 SAGE MARTIN L & GLORIA W. SAGE JT TEN 10,000.00 COLLINS, RUSSELL C. 10,000.00 GREENBERG, VIVIAN P. 30,000.00 MCHATTON, PATRICK E. 10,000.00 PETERSEN CONSULTANTS LTD. DEFINED 25,000.00 HARE & CO 6,188,000.00 --------------- TOTAL $167,702,000.00 ---------------
SUMMARY OF TREATMENT AND CLASSES ($000'S) ADMINISTRATIVE & PRIORITY CLAIMS SUMMARY CLASS A-1 CLASS P-1 CLASS P-2 CLASS P-3 FEDERAL EXCISE TAX AND STATE AND LOCAL ADMINISTRATIVE CLAIMS FEDERAL INCOME TAX CLAIMS RECLAMATION CLAIMS TAX CLAIMS TREATMENT OF Payment of cash in an amount ALLOWED equal to the Allowed Amount CLAIMS UNDER of the claim without interest. PLAN Payment of Allowed Amounts in equal quarterly installments over a 6 year period from earlier to occur of (i) date of the Assessment by the IRS of such Claim and (ii) the date on which such Claim becomes an Allowed Claim with interest on unpaid amounts from the later of the Effective Date, the date of Assessment and the date on which the Claim becomes an Allowed Claim equal to the Prime Lending Rate. Payment of cash in an amount of the claim without interest. Payment of cash in an amount equal to the Allowed Amount of the claim without interest. ESTIMATE OF $32,000 $14,000-$40,000 $756 $8,384 ALLOWED AMOUNT AS OF DECEMBER 31, 1994
EXACT CLASS AMOUNTS ENTITY: Best Best (Miss.) Class P-3C 1 Coast to Coast Computer Holdings Class P-3E 0 Computer Services Class P-3J 0 Dixie Class P-3F 123 Hamer Holdings Class P-3G 0 Hamer Properties Class P-3H 1 Hillsborough Class P-3A 31 Home Improvement Homes Holdings Class P-3I 0 Jim Warrior Railroad Jim Walter Homes Class P-3K 214 Jim Walter Resources, Inc. Class P-3M 4,099 JW Aluminum Class P-3O 192 JW Insurance JW Resources JW Walter Class P-3R 11 Window Components Class P-3S 18 Window Components (Wisc.) Class P-3N 2 JWI Holdings Class P-3Q 0 Land Holdings Class P-3T 0 Mid-State Holdings Class P-3V 0 Mid-State Homes Class P-3U 7 Old Walter Industries Class P-3EE 7 Pipe Realty Class P-3BB 0 Railroad Holdings Class P-3W 0 Resources Holdings Class P-3P 0 Sloss Class P-3X 611 Southern Precision Class P-3Y 42 U.S. Pipe Class P-3AA 2,113 United Land Class P-3Z 846 Vestal Class P-3CC 64 Walter Industries/Other Walter Land Class P-3FF 0
SUMMARY OF TREATMENT AND CLASSES ($000'S) SECURED CLAIMS SUMMARY CLASS S-1 CLASS S-2 CLASS S-3 CLASS S-4 REVOLVING CREDIT WORKING CAPITAL GRACE STREET BANK CLAIMS BANK CLAIMS NOTE CLAIMS SLOSS IRB CLAIMS TREATMENT OF ALLOWED CLAIMS UNDER PLAN Payment of Allowed Amounts in full in cash except for $28,221 to be paid in Common Stock. Payment of Allowed Amounts in full in cash less any amounts applied by the Debtors to repay any such claim subsequent to the Stub Period and prior to the Effective Date except for $9,279 to be paid in Common Stock. Payment of Allowed Amounts in full in cash. Payment of Allowed Amounts in full in cash.
ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $382,248 $130,622 $5 $715 CLASS STATUS CLASS STATUS CLASS CLASS ENTITY: Best Class S-1B Borrower Best (Misc.) Class S-1C Borrower Coast to Coast Class S-1D Borrower Computer Holdings Class S-1E Guarantor Class S-2E Guarantor Computer Services Class S-1J Borrower Dixie Class S-1F Borrower Hamer Holdings Class S-1G Guarantor Class S-2G Guarantor Hamer Properties Class S-1H Borrower Hillsborough Class S-1A Borrower Class S-2A Guarantor Home Improvement Homes Holdings Class S-1I Guarantor Class S-2I Guarantor Jefferson Warrior Railroad Jim Walter Homes Class S-1K Borrower Jim Walter Resources, Inc. Class S-1M Borrower Class S-2M Borrower JW Aluminum Co. Class S-1O Borrower Class S-2O Guarantor JW Insurance Class S-1L Borrower JW Resources Class S-1GG Guarantor JW Walter Class S-1R Borrower JW Window Components, Inc. Class S-1S Borrower Class S-2S Guarantor JW Window Components (Wisc.) Class S-1N Borrower JWI Holdings Class S-1Q Borrower Class S-2Q Guarantor Land Holdings Class S-1T Guarantor Class S-2T Guarantor Mid-State Holdings Class S-1V Guarantor Class S-2V Guarantor Mid-State Homes, Inc. Old Walter Industries Class S-1EE Borrower Class S-2EE Guarantor Class S-JEE Pipe Realty Class S-1BB Borrower Class S-2BB Guarantor Railroad Holdings Class S-1W Guarantor Class S-2W Guarantor Resources Holdings Class S-1P Guarantor Class S-2P Guarantor Sloss Industries Corp. Class S-1X Borrower Class S-2X Guarantor Class S-4X Southern Precision Corp. Class S-1Y Borrower Class S-2Y Guarantor U.S. Pipe and Foundry Co. Class S-1AA Borrower Class S-2AA Borrower United Land Corp. Class S-1Z Borrower Vestal Manufacturing Co. Class S-1CC Borrower Class S-2CC Guarantor Walter Industries/Other Walter Land Class S-1FF Borrower Class S-2FF Borrower
- ---------------- [FN] Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $152.6 million.[CAD 252] [FN] Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $51.9 million.[CAD 252]
SUMMARY OF TREATMENT AND CLASSES ($000'S) SECURED CLAIMS SUMMARY CLASS S-5 CLASS S-6 CLASS S-7 CLASS S-8 CLASS S-9 SECURED SERIES B & C PROVIDENT LIFEW & ACCIDENT REVOLVING CREDIT WORKING CAPITAL EQUIPMENT PURCHASE SENIOR NOTE CLAIMS ISSURANCE COMPANY CLAIMSAGENTS CLAIMS AGENTS CLAIMS TREATMENT OF ALLOWED CLAIMS UNDER PLAN Payment of Allowed Amounts in full in cash. Payment of Allowed Amounts in cash in an amount equal to such Holder's Pro Rata Share of Class S-6 Fund and a principal amount of New Senior Notes equal to the difference between the Allowed Amount of such Holder's Sereis B & C Note Claim and the amount of cash received except for $37,500 to be paid in Common Stock. Payment of Allowed Amounts in cash and balance of Allowed Claims reinstated. Payment of Allowed Amounts in full in cash. Payment of Allowed Amounts in full in cash.
ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $48 $359,729-$368,474 $7,494 EXACT CLASS AMOUNTS CLASS STATUS CLASS CLASS CLASS ENTITY: Best Class S-8B Class S-8B Best (Miss.) Class S-8C Coast to Coast Class S-8D Computer Holdings Class S-8E Class S-9E Computer Services Class S-5J 29 Class S-8J Dixie Class S-8F Hamer Holdings Class S-8G Class S-9G Hamer Properties Class S-8H Hillsborough Class S-6A Guarantor Class S-8A Class S-9A Home Improvement Homes Holdings Class S-6I Guarantor Class S-8I Class S-9I Jefferson Warrior Railroad Jim Walter Homes Class S-6K Issuer Class S-6K Jim Walter Resources, Inc. Class S-6M Issuer Class S-8M Class S-9M JW Aluminum Co. Class S-5O 11 Class S-8O Class S-9O JW Insurance Class S-8L JW Resources Class S-6GG JW Walter Class S-8R JW Window Components, Inc. Class S-58 0 Class S-8S JW Window Components (Wisc.) Class S-8N JWI Holdings Class S-8Q Class S-9Q Land Holdings Class S-8T Class S-9T Mid-State Holdings Class S-8V Class S-9V Mid-State Homes, Inc. Old Walter Industries Class S-6EE Guarantor Class S-7EE Class S-8EE Class S-9EE Pipe Realty Class S-6BB Class S-9BB Railroad Holdings Class S-8W Class S-9W Resources Holdings Class S-6P Guarantor Class S-8P Class S-9P Sloss Industries Corp. Class S-5X 1 Class S-8X Class S-9X Southern Precision Corp. Class S-5Y 3 Class S-8Y Class S-9Y U.S. Pipe and Foundry Co. Class S-5AA 5 Class S-6AA Issuer Class S-8AA Class S-9AA United Land Corp. Class S-6Z Issuer Class S-8Z Class S-9Z Vestal Manufacturing Co. Class S-8CC Class S-9CC Walter Industries/Other Walter Land Class S-8FF Class S-9FF
- ---------------- [FN] Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $165.4 million-[CAD 252]$174.1 million.[CAD 252] [FN] The Holders of Class S-8 and S-9 Claims have not provided the amount of fees and expenses incurred since the Filing Date. As a result, there is insufficient information upon which to estimate Class S-8 and S-9 Claims.
SUMMARY OF TREATMENT AND CLASSES ($000'S) UNSECURED CLAIMS SUMMARY CLASS U-1 CLASS U-2 CLASS U-3 OLD WALTER INDUSTRIES CONVENIENCE OTHER IRB CLAIMS CLASS CLAIMS UNSECURED CLAIMS TREATMENT OF ALLOWED CLAIMS UNDER PLAN Payment of Allowed Amounts in cash and balance of Allowed Claims reinstated. Payment of Pre-Filing Date Unsecured Allowed Amounts plus Post-Filing Date interest from the Filing Date to the Effective Date at the General Unsecured Interest Rate in full in cash. Payment of 75% of Pre-Filing Date Unsecured Allowed Amounts on or promptly after the Effective Date, payment within six months thereafter of the balance of the Pre-Filing Date Unsecured Allowed Amounts plus Post-Filing Date interest on the Pre-Filing Date Unsecured Allowed Amounts from the Filing Date to the Effective Date at the General Unsecured Interest Rate together with Post-Filing Date interest on the remaining 25% of Pre-Filing Date Unsecured Allowed Amounts from the Effective Date to the Payment Date at the General Unsecured Interest rate in full in cash.
ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $8,792 $1,704 $93,775 EXACT EXACT CLASS CLASS AMOUNTS CLASS AMOUNTS ENTITY: Best Class U-2B 6 Class U-3B 15 Best (Miss.) Class U-3C 0 Coast to Coast Class U-2D 159 Class U-3D 281 Computer Holdings Class U-3E 0 Computer Services Class U-2J 4 Class U-3J 34 Dixie Class U-2F 7 Class U-3F 913 Hamer Holdings Class U-3G 0 Hamer Proportion Class U-3H 0 Hillsborough Class U-3A 2,550 Home Improvement Class U-2DD 9 Class U-2DD 32 Homes Holdings Class U-3I 0 Jefferson Warrior Railroad 0 Jim Walter Homes Class U-2K 250 Class U-3K 7,223 Jim Walter Resources, Inc. Class U-2M 87 Class U-3M 19,061 JW Aluminum Co. Class U-2O 72 Class U-3O 6,413 JW Insurance Class U-2L 5 Class U-3L 6 JW Resources Class U-3GG 0 JW Walter Class U-3R 0 JW Window Components, Inc. Class U-2S 64 Class U-3S 2,221 JW Window Components (Wisc.) Class U-2N 8 Class U-3N 123 JWI Holdings Class U-3Q 0 Land Holdings Class U-3T 0 Mid-State Holdings Class U-3V 0 Mid-State Homes, Inc. Class U-2U 21 Class U-3U 121 Old Walter Industries Class U-1EE Class U-2EE 439 Class U-3EE 14,385 Pipe Realty Class U-3BB 0 Railroad Holdings Class U3W 0 Resources Holdings Class U-3P 0 Sloss Industries Corp. Class U-2X 103 Class U-3X 5,614 Southern Precision Corp. Class U-2Y 27 Class U-3Y 381 U.S. Pipe and Foundry Co. Class U-2AA 370 Class U-3AA 30,783 United Land Corp. Class U-2Z 4 Class U-3Z 1 Vestal Manufacturing Co. Class U-2CC 35 Class U-3CC 754 Walter Industries/Other 0 Walter Land Class U-2FF 2 Class U-3FF 32
- ---------------- [FN] Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $23.0 million which has been allocated pro rata across each Entity in Class U-3.
SUMMARY OF TREATMENT AND CLASSES ($000'S) UNSECURED CLAIMS AND OLD COMMON STOCK INTERESTS SUMMARY CLASS U-4 CLASS U-5 CLASS U-6 CLASS U-7 CLASS E-1 SENIOR SUBORDINATED 17% SUBORDINATED PRO IBO VEIL PIERCING OLD COMMON RESET NOTES NOTES DEBENTURE CLAIMS CLAIMS STOCK INTERVALS TREATMENT OF ALLOWED CLAIMS UNDER PLAN Payments of Allowed Amount in Full in combination of Qualified Securities and Common Stock Payments of Allowed Amount in Full in combination of Qualified Securities and Common Stock Payments of Allowed Amount in Full in combination of Qualified Securities and Common Stock Payment of Allowed Amounts in full in a combination of Qualified Securities and Common Stock to the Veil Piercing Claims Trust on behalf of Holders of Class U-7 Claims Payment of Common Stock
ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $479,261 $379,254 $239,472 $375,000 $150,000 CLASS STATUS CLASS STATUS CLASS STATUS ENTITY Best Best (Miss) Coast to Coast Computer Holdings Computer Services Dixie Hamer Holdings Hamer Properties Hillsborough Class U-4A Guarantor Class U-5A Guarantor Home Improvement Homes Holdings Class U-4I Guarantor Class U-5I Guarantor Jefferson Warrior Railroad Jim Walter Homes Class U-4K Issuer Class U-5K Issuer Jim Walter Resources, Inc. JW Aluminum Co. JW Insurance JW Resources JW Walter JW Window Components, Inc. JW Window Components (Wisc.) JWI Holdings Land Holdings Mid-State Holdings Mid-State Homes, Inc. Old Walter Industries Class U-4EE Guarantor Class U-SEE Guarantor Class U-6EE Issuer Pipe Realty Railroad Holdings Resources Holdings Sloss Industries Corp. Southern Precision Corp. U.S. Pipe and Foundry Co. Class U-4AA Issuer Class U-5AA Issuer United Land Corp. Class U-4Z Issuer Class U-SZ Issuer Vestal Manufacturing Co. Walter Industries/Other Walter Land
- ---------------- [FN] This represents the aggregate of Allowed Amounts against all Debtors. [FN] Old Common Stock [CAD 252]Interests may receive up to an additional $100,000 according to the terms set forth in Section II A.3 of the Supplement.
Summary of Treatment and Classes ($000's) Secured Intercompany Claims Summary CLASS I-1CLASS I-2CLASS I-3 TREATMENT OF ALLOWED CLAIMS UNDER PLAN Payment of cash in an amount equal to the Allowed Amount of the claim without interest. Class I-2 Claims will be reinstated on the books and records of the respective Debtors. Pre- Filing Date Intercompany Notes Payable may be paid after the Effective Date in the ordinary course of business. Class I-3 Claims will be reinstated on the books and records of the respective Debtors. Pre-Filing Date Intercompany Notes Payable may be paid after the Effective Date in the ordinary course of business.
ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $7,350 $1,248,631 $2,006,003 EXACT EXACT CLASS AMOUNTS CLASS AMOUNTS ENTITY: Best Class I-2B 1,018 Class I-3B 2,389 Best (Miss.) Class I-2C 64 Class I-3C 24 Coast to Coast Class I-2D 135 Class I-3D 72 Computer Holdings Class I-2E 6 Class I-3E 2 Computer Services Class I-2J 1,164 Dixie Class I-2F 232 Class I-3F 220 Hamer Holdings Class I-2G 6 Class I-3G 2 Hamer Proportion Class I-2H 204 Class I-3H 5 Hillsborough Class I-2A 100,653 Class I-3A 130,988 Home Improvement Class I-2DD 1,923 Class I-3DD 2,852 Homes Holdings Class I-2I 6 Jefferson Warrior Railroad Jim Walter Homes Class I-2K 194,401 Class I-3K 191,971 Jim Walter Resources, Inc. Class I-2M 127,199 Class I-3M 7,838 JW Aluminum Co. Class I-2O 24,464 Class I-3O 7,066 JW Insurance JW Resources JW Walter Class I-2R 198 Window Components Class I-2S 49,712 Class I-3S 14,400 Window Components (Wisc.) Class I-2N 1,165 Class I-3N 1,734 JWI Holdings Class I-2Q 677 Land Holdings Class I-2T 6 Class I-3T 2 Mid-State Holdings Class I-2V 6 Mid-State Homes Class I-2U 106,061 Class I-3U 744,944 Old Walter Industries Class I-2EE 466,913 Class I-3EE 481,734 Pipe Realty Class I-2BB 126 Class I-3BB 24 Railroad Holdings Class I-2W 6 Class I-3W 1 Resources Holdings Class I-2P 23 Class I-3P 1 Sloss Class I-2X 27,768 Class I-3X 8,399 Southern Precision Class I-2Y 21,895 Class I-3Y 12,760 U.S. Pipe Class I-2AA 35,357 Class I-3AA 175,968 United Land Class I-2Z 63,636 Class I-3Z 17,424 Vestal Class I-2CC 12,053 Class I-3CC 3,385 Walter Industries/Other Walter Land Class I-2FF 11,555 Class I-3FF 1,799
EXHIBIT 3.A.1. WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS MAY 31, 1994 INDEX TO FINANCIAL STATEMENTS PAGES Walter Industries, Inc. and Subsidiaries Report of Independent Certified Public Accountants F-2 Consolidated Balance Sheet--May 31, 1994 and 1993 F-3 Consolidated Statement of Operations and Retained Earnings (Deficit) for the Three Years Ended May 31, 1994 F-4 Consolidated Statement of Cash Flows for the Three Years Ended May 31, 1994 F-5 Notes To Financial Statements F-6 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders Walter Industries, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and retained earnings (deficit) and of cash flows present fairly, in all material respects, the financial position of Walter Industries, Inc. and its subsidiaries at May 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 1994 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 2 and 10 to the financial statements, on December 27, 1989, Walter Industries, Inc. and substantially all of its subsidiaries each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code, thereby raising substantial doubt about their ability to continue as a going concern. The Company filed a fourth amended joint plan of reorganization and a related disclosure statement with the Bankruptcy Court on June 22, 1994 and June 29, 1994, respectively. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of the petitions for reorganization. As discussed in Note 11 to the Consolidated Financial Statements, the Company changed its method of accounting for postretirement benefits other than pensions in fiscal year 1993. PRICE WATERHOUSE Tampa, Florida July 8, 1994 WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
MAY 31, ------------------------------- 1994 1993 ----------- ------------ (IN THOUSANDS) ASSETS Cash (includes short-term investments of $177,040,000 and $172,553,000) (Note 5) $ 203,303 $ 190,370 Short-term investments, restricted (Note 3) 107,552 105,620 Instalment notes receivable (Notes 3, 5 and 6) 4,176,040 4,187,316 Less-- Provision for possible losses (26,301) (26,579) Unearned time charges (2,790,560) (2,773,878) ----------- ------------ Net 1,359,179 1,386,859 Trade receivables 135,431 143,259 Less--Provision for possible losses (7,392) (7,324) ----------- ------------ Net 128,039 135,935 Other notes and accounts receivable 10,774 15,625 Inventories, at lower of cost (first in, first out or average) or market: Finished goods 95,270 94,360 Goods in process 27,090 23,421 Raw materials and supplies 48,533 47,153 Houses held for resale 1,686 1,705 ----------- ------------ Total inventories 172,579 166,639 Prepaid expenses 11,335 7,902 Property, plant and equipment, at cost (Note 4) 1,123,939 1,075,068 Less--Accumulated depreciation, depletion and amortization (466,076) (412,028) ----------- ------------ Net 657,863 663,040 Investments 5,753 5,568 Unamortized debt expense 31,656 46,622 Other assets 39,936 37,616 Excess of purchase price over net assets acquired (Note 1) 412,923 461,438 $ 3,140,892 $ 3,223,234 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Bank overdrafts (Note 5) $ 29,879 $ 17,921 Accounts payable (Note 2) 59,468 52,696 Accrued expenses (Note 2) 122,665 116,238 Income taxes payable (Notes 2 and 6) 21,543 19,135 Deferred income taxes (Note 6) 73,152 85,833 Long-term senior debt (Notes 2 and 5) 871,970 1,046,971 Accrued postpetition interest on secured obligations (Notes 2 and 5) 258,032 210,199 Accumulated postretirement health benefits obligation (Note 11) 209,962 189,905 Other long-term liabilities 48,890 46,442 Liabilities subject to Chapter 11 proceedings (Notes 2, 3 and 5) 1,727,684 1,725,631 Stockholders' equity (deficit) (Notes 1, 5, 7 and 8): Common stock, $.01 par value per share: Authorized--50,000,000 shares Issued--31,120,773 shares 311 311 Capital in excess of par value 155,293 155,293 Retained earnings (deficit), per accompanying statement (434,520) (441,695) Excess of additional pension liability over unrecognized prior years service cost (3,437) (1,646) ----------- ------------ Total stockholders' equity (deficit) (282,353) (287,737) ----------- ------------ $ 3,140,892 $ 3,223,234 =========== ============
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) FOR THE YEARS ENDED MAY 31, ---------------------------------------- 1994 1993 1992 (IN THOUSANDS) Sales and revenues: Net sales $1,068,387 $1,072,615 $1,139,048 Time charges (Note 3) 238,097 218,696 195,001 Miscellaneous 17,383 23,160 28,172 Interest income from Chapter 11 proceedings (Note 2) 4,657 4,515 4,360 ----------- ----------- ----------- 1,328,524 1,318,986 1,366,581 ----------- ----------- ----------- Cost and expenses: Cost of sales 845,061 804,411 891,882 Depreciation, depletion and amortization (Note 4) 71,035 70,483 82,801 Selling, general and administrative 127,901 124,616 129,372 Postretirement health benefits (Note 11) 25,585 23,474 -- Provision for possible losses 4,611 4,236 5,787 Chapter 11 costs (Note 2) 14,254 9,802 5,172 Interest and amortization of debt discount and expense (Interest on unsecured debt obligations not accrued since December 27, 1989--$163,685,000 in each year) (Notes 2, 4 and 5) 155,470 171,581 177,060 Amortization of excess of purchase price over net assets acquired (Note 1) 48,515 39,461 39,702 ----------- ----------- ----------- 1,292,432 1,248,064 1,331,776 ----------- ----------- ----------- 36,092 70,922 34,805 Provision for income taxes (Note 6): Current (41,598) (48,141) (35,957) Deferred 12,681 23,813 23,494 ----------- ----------- ----------- Income from operations before cumulative effect of accounting change 7,175 46,594 22,342 Cumulative effect of change in accounting principle--postretirement benefits other than pensions (net of income tax benefit of $61,823,000) (Note 11) -- (104,608) -- Net income (loss) 7,175 (58,014) 22,342 Retained earnings (deficit) at beginning of year (441,695) (383,681) (406,023) =========== =========== =========== Retained earnings (deficit) at end of year $ (434,520) $ (441,695) $ (383,681) =========== =========== ===========
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED MAY 31, ---------------------------------------- 1994 1993 1992 (IN THOUSANDS) OPERATIONS Net income (loss) $ 7,175 $ (58,014) $ 22,342 Charges to income not affecting cash: Depreciation, depletion and amortization 71,035 70,483 82,801 Provision for deferred income taxes (12,681) (23,813) (23,494) Accumulated postretirement health benefits obligation (Note 11) 20,057 189,905 -- Adjustment to deferred taxes for accounting change (Note 11) -- (61,823) -- Provision for other long-term liabilities 280 (781) 6,782 Amortization of excess of purchase price over net assets acquired (Note 1) 48,515 39,461 39,702 Amortization of debt discount and expense 17,597 22,148 19,715 --------- --------- --------- 151,978 177,566 147,848 Decrease (increase) in: Short-term investments, restricted (1,932) 1,334 4,374 Instalment notes receivable, net 27,680 (23,607) (47,835) Trade and other receivables, net 12,747 1,429 (457) Inventories (5,940) 627 12,118 Prepaid expenses (3,433) 236 1,404 Increase (decrease) in: Bank overdrafts (Note 5) 11,958 (9,758) 7,906 Accounts payable 6,772 (1,692) 425 Accrued expenses 6,427 (1,682) 15,663 Income taxes payable 2,408 9,111 (18,036) Accrued postpetition interest on secured obligations 47,833 32,605 47,868 Liabilities subject to Chapter 11 proceedings (Note 2): Accounts payable 1,438 811 714 Accrued expense (152) 4 (136) Income taxes payable -- -- 1,429 Other long-term liabilities -- -- (244) --------- --------- --------- Cash flows from operations 257,784 186,984 173,041 --------- --------- --------- FINANCING ACTIVITIES Issuance of long-term senior debt 2,000 256,128 -- Addition to unamortized debt expense -- (4,794) -- Retirement of long-term senior debt (Note 5)(178,865) (161,959) (127,258) Decrease in liabilities subject to Chapter 11 proceedings (Notes 2 and 5): Short-term notes payable -- -- (2,805) Long-term senior debt -- (121,217) (37,958) --------- --------- --------- Cash flows from financing activities (176,865) (31,842) (168,021) --------- --------- --------- INVESTING ACTIVITIES Additions to property, plant and equipment, net of normal retirements (65,858) (68,901) (63,646) Decrease (increase) in investments (185) (128) 1,137 (Increase) in other assets (1,943) (1,617) (5,485) --------- --------- --------- Cash flows from investing activities (67,986) (70,646) (67,994) --------- --------- --------- Net increase (decrease) in cash and cash equivalents 12,933 84,496 (62,974) Cash and cash equivalents at beginning of year 190,370 105,874 168,848 --------- --------- --------- Cash and cash equivalents at end of year (Note 5) $ 203,303 $ 190,370 $ 105,874 ========= ========= =========
- ---------------- [FN] Consists of sales and resales, net of repossessions and provision for possible losses, of $197,472,000, $207,340,000, and $207,648,000 and cash collections on account and payouts in advance of maturity of $225,152,000, $183,733,000, and $159,813,000 for the years ended May 31, 1994, 1993 and 1992, respectively. WALTER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1--ORGANIZATION AND ACQUISITION Walter Industries, Inc. (formerly Hillsborough Holdings Corporation) (the "Company") was organized in August 1987 by a group of investors led by Kohlberg Kravis Roberts & Co. ("KKR") for the purpose of acquiring Jim Walter Corporation, a Florida corporation ("Original Jim Walter"). Following its organization, the Company organized and acquired all of the outstanding capital stock of a group of direct wholly-owned subsidiaries (the "First Tier Subsidiaries"). The First Tier Subsidiaries (except JWC Holdings Corporation) and the Company organized and acquired all of the outstanding capital stock of Walter Industries, Inc. ("Old Walter Industries"). JWC Holdings Corporation, a Florida corporation and a First Tier Subsidiary ("JWC Holdings"), organized and acquired all of the outstanding shares of J-II Acquisition Corporation, a Florida corporation ("J-II"). Old Walter Industries and J-II, in turn, organized and acquired all of the outstanding capital stock of Hillsborough Acquisition Corporation ("HAC"). On September 18, 1987, HAC acquired approximately 95% of the outstanding common stock of Original Jim Walter at a price of $60 per share in cash, pursuant to an Agreement and Plan of Merger dated as of August 12, 1987 (the "Acquisition"). On January 7, 1988, the Company caused Original Jim Walter to be merged (the "Merger") into HAC (which changed its name to "Jim Walter Corporation") and the remaining 5% of its common stock was converted into the right to receive $60 in cash for each share. On that same date: (i) HAC distributed substantially all of its assets (principally excluding the stock of certain subsidiaries of Original Jim Walter engaged in building materials businesses) to Old Walter Industries in redemption of all of its shares of capital stock owned by Old Walter Industries; (ii) HAC merged into J-II; and (iii) J-II changed its name to "Jim Walter Corporation". On April 1, 1991, Old Walter Industries merged into Hillsborough Holdings Corporation thereby completing its previously adopted plan of liquidation. The Company changed its name to Walter Industries, Inc. in connection with such merger. Prior to September 18, 1987, the Company had no significant assets or liabilities and did not engage in any activities other than those related to the Acquisition. The purchase price of the shares of Original Jim Walter was approximately $2,425,000,000, plus expenses of the Acquisition and assumption of certain outstanding indebtedness. For financial statement purposes, the Acquisition has been accounted for as a purchase as of September 1, 1987 and, accordingly, the purchase price has been allocated based upon the fair value of assets acquired and liabilities assumed. The excess of purchase price over net assets acquired in connection with the Acquisition is being amortized over periods ranging up to twenty years. The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany balances have been eliminated. NOTE 2--REORGANIZATION PROCEEDINGS On December 27, 1989, the Company and 31 of its subsidiaries (including the subsidiary in the next sentence, the "Debtors") each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court (the "Bankruptcy Court") for the Middle District of Florida, Tampa Division (the "Reorganization Proceedings"). On December 3, 1990, one additional small subsidiary filed a voluntary petition for reorganization under the Bankruptcy Code. Two other small subsidiaries did not file petitions for reorganization. The Debtors' Chapter 11 cases resulted from a sequence of events stemming primarily from an inability of the Company's interest reset advisors to reset interest rates on approximately $624 million of outstanding Senior Extendible Reset Notes and Senior Subordinated Extendible Reset Notes on which interest rates were scheduled to be reset effective January 2, 1990. The inability to reset the interest rates was primarily attributable to pending asbestos-related litigation which prevented the Debtors from completing a refinancing or from selling assets to reduce their debt which, together with turmoil in the high yield bond markets, depressed the bid value of such notes. The consolidated financial statements of the Company have been prepared on a "going-concern" basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business; however, as a result of the Chapter 11 filings, such realization of assets and liquidation of liabilities are subject to a significant number of uncertainties. These financial statements include adjustments and reclassifications that have been made to reflect the liabilities which have been deferred under the Reorganization Proceedings. Interest in the amount of $724,306,000 ($163,685,000 in the current fiscal year) on unsecured debt obligations has not been accrued in the consolidated financial statements since the date of the filing of petitions for reorganization. This estimate is based on the balances of the unsecured debt obligations and their interest rates as of the petition date. Such interest rates do not necessarily presently govern the respective rights of the Company, its subsidiaries and the various lenders. Instead, the rights of the parties will be determined in connection with the Reorganization Proceedings. The discussion below sets forth various aspects of the Reorganization Proceedings, but is not intended to be an exhaustive summary. For additional information regarding the effect on the Debtors of the Reorganization Proceedings, reference should be made to the Bankruptcy Code, the rules and regulations promulgated pursuant to the Bankruptcy Code and the case law thereunder. Each creditor should consult with its own counsel regarding the impact of the Reorganization Proceedings on such creditor's claims. Pursuant to provisions of the Bankruptcy Code and an order of the Bankruptcy Court dated December 28, 1989, the Debtors were authorized to continue to operate their businesses and own and manage their properties and assets as debtors in possession. The Bankruptcy Code authorizes the Debtors to enter into transactions, including the sale or lease of property of their estates and to use property of their estates, in the ordinary course of their businesses without prior approval of the Bankruptcy Court. The sale or lease of property of the estates other than in the ordinary course of business and certain other transactions (for example, secured financing), whether or not in the ordinary course of business, are subject to prior approval by the Bankruptcy Court. As a result of the filing of petitions for reorganization, the maturity of all unpaid principal of, and interest on, the senior and subordinated indebtedness of the Debtors became immediately due and payable in accordance with the terms of the instruments governing such indebtedness. The Debtors will not be able to borrow additional funds under any of their prepetition credit arrangements. Pursuant to the applicable provisions of the Bankruptcy Code, all pending legal proceedings against the Debtors were automatically stayed upon the filing of such petitions. Under the Chapter 11 filings, a significant portion of claims in existence at the filing date ("prepetition") are stayed ("deferred") while the Company continues to manage the business. The Bankruptcy Code defines "claim" to include a right to payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. Claims which were contingent or unliquidated at the commencement of the Reorganization Proceedings constitute claims under the Bankruptcy Code. Such claims, including, without limitation, those that may arise in connection with rejection of executory contracts, including leases, as well as those that might arise in connection with environmental and pension-related matters, could be significant. It is not possible to quantify the amount of such claims at this time. Under the Bankruptcy Code, a creditor's claim is treated as secured only to the extent of the value of such creditor's collateral, and the balance of such creditor's claim is treated as unsecured. Depending upon the outcome of the Reorganization Proceedings and the value of a secured creditor's collateral, if any, secured creditors may not be entitled to claim interest on their claims for the period after December 27, 1989. Generally, unsecured debt does not accrue interest after the filing. Only holders of "allowed claims" may vote on and participate in distributions under any plan or plans of reorganization that may be proposed. A claim is allowed to the extent (i) the claim is not listed as contingent, disputed or unliquidated on the Debtors bankruptcy schedules filed in January 1990, as amended, or (ii) a proof of claim is filed and not successfully objected to by a party in interest. Additional prepetition claims and liabilities may arise, some of which may be significant, subsequent to the filing date for various reasons. To the extent a creditor must file a proof of claim, such proof must be filed by a date fixed by the Bankruptcy Court as the last day to file proofs of claim (the "Bar Date"). At a hearing on July 23, 1992, the Bankruptcy Court set a Bar Date of October 30, 1992 in the Reorganization Proceedings for all claims other than any potential claims related to asbestos personal injury or property damage. At a hearing on December 16, 1992, the Bankruptcy Court set a second Bar Date of March 1, 1993 in the Reorganization Proceedings for new creditors added by amended schedules filed by certain of the Debtors on November 23, 1992. On August 31, 1993, the Bankruptcy Court set a third Bar Date of November 30, 1993 for creditors added by amended schedules filed by the Debtors on July 12, 1993. No provision has been included in the accompanying financial statements for any prepetition claims and additional liabilities that may arise from resolution of any claims filed. The amount included as liabilities subject to Chapter 11 proceedings reflected on the Company's consolidated balance sheet consists of the following: MAY 31, 1994 1993 -------- ------- (IN THOUSANDS) Short-term notes payable $ 78,033 $ 78,033 Accounts payable 64,338 62,900 Accrued expenses 95,847 95,999 Income taxes payable 47,066 47,066 Long-term senior debt (Notes 3 and 5) 416,629 416,629 Long-term subordinated debt (Note 5) 1,025,533 1,024,766 Other long-term liabilities 238 238 $1,727,684 $1,725,631 As debtors in possession, the Debtors have the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject certain executory contracts, including unexpired leases. In this context, "assumption" means that the Debtors agree to perform their obligations and cure certain existing defaults under the contract or lease, and "rejection" means that the Debtors are relieved from their obligations to perform further under the contract or lease and are subject only to a claim for damages for the breach thereof. Any claim for damages resulting from the rejection of an executory contract or an unexpired lease is treated as a general unsecured claim in the Reorganization Proceedings. Unless the Bankruptcy Court, upon request of a non-Debtor party and after notice and a hearing, fixes a date by when the Debtors must elect to assume or reject an executory contract, the Debtors may assume or reject such contracts in a plan or plans of reorganization. With respect to unexpired non-residential real property leases, including mineral leases and interests, the Bankruptcy Code provides that a Debtor has 60 days after the commencement of a Chapter 11 case in which to assume or reject such leases unless the Bankruptcy Court, for cause shown, extends such 60 day period. Pursuant to an order of the Bankruptcy Court dated August 31, 1993, the time within which the Debtors must assume or reject their non-residential real property leases was extended through and including October 31, 1993. The Debtors filed a motion to extend, until confirmation of a plan of reorganization, the time for assumption or rejection of their non-residential real property leases. On March 4, 1994, the Bankruptcy Court entered an order approving the Debtors motion. On February 25, 1991, the Debtors received Bankruptcy Court approval to assume substantially all of their mineral leases and interests. The Bankruptcy Code permits the Bankruptcy Court to appoint a trustee on request of a party in interest (including a creditor, equity security holder, committee or indenture trustee) or the United States Trustee. In order for a trustee to be appointed, a requesting party, after notice and a hearing, must show cause, such as gross mismanagement by current management, or demonstrate that such appointment is in the best interest of creditors, equity security holders and other interests of the estates. In addition, the Bankruptcy Code permits the Bankruptcy Court to appoint an examiner on request of a party in interest (including a creditor, equity security holder, committee or indenture trustee) or the United States Trustee, if the Bankruptcy Court does not order the appointment of a trustee, to conduct such investigation of a debtor as is appropriate. For 120 days after the date of the filing of a voluntary Chapter 11 petition, a debtor has the exclusive right to file a plan of reorganization with the Bankruptcy Court (the "Exclusivity Period"). If a debtor files a plan of reorganization during the 120-day Exclusivity Period, no other party may file a plan of reorganization until 180 days after the date of filing of the Chapter 11 petition. Until the end of this 180-day period (the "Acceptance Period") the debtor has the exclusive right to solicit acceptances of the plan. The Bankruptcy Court may shorten or extend the 120- and 180-day periods for cause shown. If a debtor fails to file a plan during the Exclusivity Period or, if such plan has been filed, fails to obtain acceptance of such plan from impaired classes of its creditors and equity security holders during the Acceptance Period, any party in interest, including a creditor, an equity security holder, a committee of creditors or equity security holders or an indenture trustee may file a plan. Additionally, if the Bankruptcy Court were to appoint a trustee, the Exclusivity Period, if not previously terminated, would terminate. The initial Exclusivity Period for each of the Debtors would have expired on April 26, 1990 and the initial Acceptance Period would have expired on June 26, 1990. The Debtors filed various motions to extend the Exclusivity Period which were granted. Pursuant to an order of the Bankruptcy Court dated April 15, 1992, the Exclusivity Period expired June 15, 1992 and the Acceptance Period was to expire on August 14, 1992. On June 15, 1992, the Debtors filed with the Bankruptcy Court and presented to the creditor constituencies a joint plan of reorganization and related disclosure statement prior to the expiration of the Exclusivity Period. Subsequent to August 1992, the Debtors were granted various extensions of the Acceptance Period and adjournments of the hearing for approval of the disclosure statement dated June 15, 1992, while negotiations continued with the various creditor constituencies toward a consensual plan of reorganization. Pursuant to an order of the Bankruptcy Court dated July 7, 1993, the Bankruptcy Court extended the Acceptance Period until August 2, 1993, ruling that no further extensions would be granted beyond August 2, 1993. On July 14, 1993, the Bankruptcy Court entered an order fixing January 1, 1994 as the last date when a plan of reorganization and disclosure statement could be filed by a party in interest and that all plans of reorganization and disclosure statements filed by such date would be heard on a date and time to be fixed by future order of the Bankruptcy Court. On September 22, 1993, the Debtors filed with the Bankruptcy Court and presented to the creditor constituencies their first amended joint plan of reorganization (the "Debtors First Amended Plan") and first amended related disclosure statement. The Debtors First Amended Plan provided for payment in full of all allowed claims (plus post-petition interest at varying rates) using cash, issuance of new indebtedness, issuance of common stock equal to approximately a 46% ownership interest (subject to Debtors option to substitute additional debt securities in lieu of common stock proposed to be issued under the Debtors First Amended Plan), or a combination thereof. In addition, the Debtors First Amended Plan provided that holders of subordinated debt claims would additionally share in a portion of any increase in the Debtors unencumbered instalment notes receivable portfolio after May 31, 1993 through issuance of additional debt securities ("Value Sharing"). Such Value Sharing was designed to provide compensation to holders of subordinated debt claims during the delay in consummation of the Debtors First Amended Plan required in order to resolve the asbestos-related litigation. Under the Debtors First Amended Plan certain claims and the equity interest in the Company were impaired; therefore the Debtors First Amended Plan was subject to acceptance by vote of the holders of each such class of impaired claims and the holders of the Company's common stock. Confirmation and consummation of the Debtors First Amended Plan were subject to the satisfaction of various conditions including dismissal with prejudice of any and all claims and actions against the Debtors or any assets of the Debtors relating to or in connection with the asbestos-related litigation (see Note 10). On December 16, 1993, AIF II, L.P., certain affiliates of AIF II, L.P. and certain accounts managed or controlled by such affiliates; Lehman Brothers Inc.; the Official Bondholders Committee and the Official Committee of General Unsecured Creditors (collectively, the "Bondholders Plan Proponents") filed a Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents dated as of December 16, 1993 (the "Bondholders Plan"). The Bondholders Plan was predicated upon a settlement of the Veil Piercing Litigation which contemplated a distribution of debt and equity securities having a value equal to $525 million, subject to reduction in the event the shareholders of the Company supported the Bondholders Plan and executed the Veil Piercing Settlement Agreement (as said term was defined in the Bondholders Plan) by a date certain, to the Veil Piercing Claims Trust (as said term was defined in the Bondholders Plan). The Bondholders Plan was premised upon a negotiated estimate of the going concern enterprise value of the Debtors on a consolidated basis in an amount equal to $2.525 billion. The Bondholders Plan provided for payment in full of all allowed claims (plus post-petition interest at varying rates with respect to certain secured and unsecured claims) using cash, issuance of new indebtedness, issuance of common stock, or a combination thereof. The Bondholders Plan provided for no recovery by the shareholders of the Company unless the shareholders supported the Bondholders Plan and executed the Veil Piercing Settlement Agreement by a date certain. Confirmation and effectiveness of the Bondholders Plan were subject to the satisfaction of various conditions including the final resolution and settlement, approved by final orders, of all asserted and unasserted claims arising out of or relating to the asbestos-related litigation and all LBO-Related Issues (as said term was defined in the Bondholders Plan). On December 28, 1993, Chemical Bank and Bankers Trust Company (collectively, the "Bank Agents"), as agents under the Bank Credit Agreement dated as of September 10, 1987, as amended, and the Working Capital Credit Agreement dated as of December 29, 1987, as amended, filed the Bank Agents' Joint Plan of Reorganization dated as of December 28, 1993 (the "Bank Agents Plan"). The Bank Agents Plan is predicated upon a settlement of the asbestos-related litigation which contemplates a distribution of common stock having a value equal to the allowed amount of the "Celotex Disputed Claims" (as said term is defined in the Bank Agents Plan). The Bank Agents Plan contemplates that the allowed amount of the Celotex Disputed Claims shall be determined by: (a) agreement between the holders of such claims and the Bank Agents, (b) a final order of the Bankruptcy Court or (c) an order of the Bankruptcy Court estimating the allowed amount of such claims. The Bank Agents Plan provides for payment in full in cash of all secured allowed claims (including post-filing date interest at varying rates of interest) and the distribution of common stock to holders of unsecured allowed claims (including trade creditors and subordinated bondholders) in full satisfaction of unsecured allowed claims (including post-filing date interest at rates to be agreed to by the Bank Agents or, if no agreement, rates to be determined by the Bankruptcy Court). The Bank Agents Plan provides for a recovery by the shareholders of the Company only to the extent shares of common stock are available after payment in full of unsecured allowed claims. Effectiveness of the Bank Agents Plan is subject to various conditions including the Company's ability to obtain third party financing in an amount sufficient to enable the Debtors to make the cash payments required under the Bank Agents Plan and to meet the Debtors contemplated working capital and letter of credit needs. On December 30, 1993, LaSalle National Bank (the "Senior Note Trustee"), as the successor trustee under the indenture dated as of January 1, 1988, as amended, filed the Series B & C Senior Note Trustee's Joint Plan of Reorganization of Debtors dated as of December 30, 1993 (the "Senior Note Trustee Plan"). While the Senior Note Trustee Plan was not predicated upon a settlement of the asbestos-related litigation, the plan provided for the issuance of "New Notes" (as said term was defined in the Senior Note Trustee Plan) to fund any settlement which might be approved by the Debtors and the Series B & C Senior Note Trustee. The Senior Note Trustee Plan was premised upon an "Equity Value" (as said term was defined in the Senior Note Trustee Plan) of $783.8 million. The Senior Note Trustee Plan provided for payment in full in cash of all secured allowed claims (including post-filing date interest at varying rates) and payment in full of unsecured allowed claims (including post-filing date interest at varying rates) by using cash, issuance of new indebtedness, issuance of common stock (subject to dilution in the event a settlement of the asbestos-related litigation was achieved), or a combination thereof. In addition, the Senior Note Trustee Plan provided that the shareholders of the Company would retain their common stock interests, subject to dilution in the event a settlement of the asbestos-related litigation was reached. Effectiveness of the Senior Note Trustee Plan was subject to various conditions which were similar to the conditions set forth in the Debtors First Amended Plan. By order dated February 25, 1994, the Bankruptcy Court (i) fixed April 20, 1994 as the last date to file any further amendments or supplements to the Plan, the Bondholders Plan, the Bank Agents Plan or the Senior Note Trustee Plan, (ii) allowed one additional party to file, by April 20, 1994, a plan of reorganization and related disclosure statement on behalf of his clients, (iii) fixed April 20, 1994 as the last date for requesting a copy of a plan and disclosure statement filed by the above noted parties, (iv) fixed May 6, 1994 as the last date for any party in interest to file objections to the disclosure statements and (v) scheduled a hearing for May 19, 1994 and continuing, if necessary, through May 20, 1994 to consider approval of disclosure statements. On April 20, 1994, the Debtors, the Senior Note Trustee and the Bondholders Plan Proponents each filed an amended plan of reorganization and an amended disclosure statement. The Bank Agents did not file any further amendment or supplement to the Bank Agents Plan. The one additional party did not file a plan of reorganization and disclosure statement on behalf of his clients. The Debtors Second Amended Joint Plan of Reorganization dated as of April 19, 1994 (the "Debtors Second Amended Plan") modified the Debtors First Amended Plan in four significant ways. First, the Debtors Second Amended Plan amended the formula for calculating post-filing date interest with respect to the secured claims of the Revolving Credit Banks (as defined in the Debtors Second Amended Plan) and the Working Capital Banks (as defined in the Debtors Second Amended Plan). The Debtors Second Amended Plan provided for interest on the adjusted pre-filing date principal claims of the Revolving Credit Banks and the Working Capital Banks to accrue at the Chemical Bank Prime Rate (as defined in the Debtors Second Amended Plan) in effect from time to time plus 1 1/2% per annum, compounded on each of January 1, April 1, July 1 and October 1 commencing April 1, 1990. Second, with respect to pre-filing date unsecured claims, other than Subordinated Note Claims (as defined in the Debtor's Second Amended Plan), the Debtors Second Amended Plan no longer provided for the payment of post-filing date interest. Third, with respect to Subordinated Note Claims, the Debtors Second Amended Plan did not provide for the payment of post-filing date interest nor for Value Sharing. Finally, the Debtors Second Amended Plan provided for the shareholders of the Company to retain approximately 75% interest in the Company (subject to the Debtors option to substitute additional debt securities in lieu of common stock presently proposed to be issued under the Debtors Second Amended Plan). The Senior Note Trustee's First Amended Joint Plan of Reorganization of Debtors dated as of April 20, 1994 (the "Senior Note Trustee Amended Plan") did not in any material way amend the provisions of the Senior Note Trustee Plan. The First Amended Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents dated as of April 20, 1994 (the "Bondholders Amended Plan") amended the Bondholders Plan in three significant ways. First, the Bondholders Amended Plan annexed to it a Veil Piercing Settlement Agreement dated as of April 18, 1994. Second, the treatment of Subordinated Note Claims was amended to reflect an Agreement for Settlement of Pre-LBO Issues and Treatment of Subordinated Notes Pursuant to Chapter 11 Plan dated as of March 23, 1994. Finally, the Bondholders Amended Plan amended the definition of "Qualified Securities" (debt instruments to be issued under the Bondholders Amended Plan to holders of Subordinated Note Claims and as part of the consideration to be paid under the Veil Piercing Settlement Agreement) to provide for subordinated unsecured notes to be issued by the Company. On April 25, 1994, the Bank Agents filed a motion to defer the Bankruptcy Court's consideration of the Bank Agents Plan and the related disclosure statement until the earlier of December 31, 1994, and the date on which the Bankruptcy Court denies approval of the Bondholders Plan Proponents disclosure statement. The Bank Agents motion was granted by the Bankruptcy Court on May 18, 1994. On May 6, 1994, objections to the Company's disclosure statement were filed by the Bondholders Plan Proponents, the California Department of Toxic Substances Control and California Regional Water Quality Control Board (the "California EPA"), Mississippi State Tax Commission, Raul Delgado, et al, (the "Texas Homeowners"), the Senior Note Trustee and Purnie Melcher, Mary Melcher, Richard Melcher and Curtis Melcher. Objections to the Bondholders Plan Proponents disclosure statement were filed by the Company, the California EPA, the Senior Note Trustee and the Texas Homeowners. Objections to the Senior Note Trustee's disclosure statement were filed by the Company, the Bondholders Plan Proponents, the California EPA and the Texas Homeowners. On May 11, 1994, the Bondholders Plan Proponents filed with the Bankruptcy Court their (i) Second Amended Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents dated as of May 11, 1994; (ii) Second Amended Disclosure Statement for Creditor Proponents' Settlement Plan; and (iii) Supplement to Second Amended Disclosure Statement for Creditor Proponents' Settlement Plan (collectively, the "Bondholders Plan Proponents Second Amended Plan Documents") and on May 17, 1994, the Bondholders Plan Proponents filed with the Bankruptcy Court their (i) Third Amended Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents dated as of May 17, 1994; (ii) Third Amended Disclosure Statement for Creditor Proponents' Settlement Plan; and (iii) Supplement to Third Amended Disclosure Settlement for Creditor Proponents' Settlement Plan (collectively, the "Bondholders Plan Proponents Third Amended Plan Documents"). By motion dated May 13, 1994, the Company sought the entry of an order striking the Bondholders Plan Proponents Second Amended Plan Documents on the basis that the filing of such documents was in violation of the Bankruptcy Court's February 25, 1994 order. At the hearing held on May 18, 1994, the Bankruptcy Court denied the Company's motion to strike but determined that the Bankruptcy Court would not consider the Bondholders Plan Proponents Second Amended Plan Documents or the Bondholders Plan Proponents Third Amended Plan Documents at the May 19, 1994 disclosure statement hearing. On May 18, 1994, the Senior Note Trustee filed a motion to defer the Bankruptcy Court's consideration of the Senior Note Trustee Amended Plan and related disclosure statement, which motion was granted on May 19, 1994. On May 19, 1994, the Bankruptcy Court held a hearing to consider approval of the disclosure statements filed on April 20, 1994, by the Company and the Bondholders Plan Proponents. At the conclusion of the hearing, the Bankruptcy Court fixed June 9, 1994 as the last day to file any further amendments to the Debtors Second Amended Plan and related disclosure statement and the Bondholders Amended Plan and related disclosure statement and fixed June 17, 1994 as the date by when objections to the Company's and the Bondholders Plan Proponents amended disclosure statements could be filed. In addition, the Bankruptcy Court scheduled a status conference for June 15, 1994 to consider further procedures with respect to the Company's and Bondholders Plan Proponents amended plans of reorganization and disclosure statements. On June 9, 1994, the Debtors filed the Debtors Third Amended Joint Plan for Reorganization dated as of June 9, 1994 (the "Debtors Third Amended Plan") and the Third Amended Disclosure Statement dated June 9, 1994. The Debtors Third Amended Plan modified the Debtors Second Amended Plan in two significant ways. First, the Debtors Third Amended Plan modified the formula for calculating post-petition interest with respect to the secured claims of the Revolving Credit Banks and the Working Capital Banks. The Debtors Third Amended Plan provides for interest on the adjusted pre-filing date principal claims of the Revolving Credit Banks and the Working Capital Banks to accrue at the (i) Chemical Bank Prime Rate in effect from time to time plus 2 1/2% per annum, compounded on each of January 1, April 1, July 1 and October 1 commencing on April 1, 1990 for the period from the Filing Date to December 31, 1994 and (ii) rate of 13% per annum, compounded on each of January 1, April 1, July 1 and October 1 commencing April 1, 1995 for the period from January 1, 1995 to the Effective Date. In addition, the Debtors Third Amended Plan modified the formula for calculating post-petition interest with respect to and treatment of Series B & C Senior Note Claims. If the Holders of Series B & C Senior Note Claims accept the Debtors Third Amended Plan, interest on the principal amount accrued and unpaid from the Filing Date to the Effective Date will accrue at the rate of either (i) 14 5/8% per annum for the Series B Senior Extendible Reset Notes and 14 1/2% per annum for the Series C Senior Extendible Reset Notes if the holders of such notes receive a combination of cash and debt securities on account of their Allowed Claims or (ii) 13 5/8% per annum for the Series B Senior Extendible Reset Notes and 13 1/2% per annum for the Series C Senior Extendible Reset Notes if the holders of such notes receive all cash on account of their Allowed Claims. In the event holders of Series B & C Senior Note Claims do not accept the Debtors Third Amended Plan, then post-filing date interest will accrue at the rate of 9% per annum. On June 9, 1994, the Bondholders Plan Proponents filed their Second Amended Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents (the "Bondholders Second Amended Plan") and their Second Amended Disclosure Statement for Creditor Proponents' Settlement Plan. The Bondholders Second Amended Plan modified the Bondholders Amended Plan in two significant ways. First, post-filing date interest on Series B & C Senior Note Claims (principal amount due and owing on the Filing Date together with interest on such principal amount accrued and unpaid as of the Filing Date) will accrue (i) with respect to the amount of such Claims paid in cash, at the rate of 13% per annum for the period from the Filing Date to June 30, 1994 and 14 5/8% per annum from July 1, 1994 to the Effective Date or (ii) with respect to the amount of such claims paid in debt securities, at the rate of 14% per annum for the period from the Filing Date to June 30, 1994 and 14 5/8% per annum for the period from July 1, 1994 to the Effective Date. In addition, the Bondholders Second Amended Plan provides that the shareholders of the Company may purchase their pro rata share of the shares of the Class B Common Stock that would otherwise be distributable to holders of Subordinated Note Claims or distributable under the Veil Piercing Settlement Agreement at a cash exercise price equal to the "New Common Stock Value Per Share." On June 15, 1994, the Bankruptcy Court held a status conference with respect to the disclosure statements filed by the Debtors and the Bondholders Plan Proponents on June 9, 1994. At the status conference, the Debtors and the Bondholders Plan Proponents suggested the following procedures and the fixing of the following dates in connection with the disclosure statement approval process: (i) June 21, 1994 was fixed as the last date by which the Debtors and the Bondholders Plan Proponents could serve amended and restated plans of reorganization, which amended and restated plans of reorganization were to be filed with the Bankruptcy Court on June 22, 1994; (ii) June 28, 1994 was fixed as the last date by which the Debtors and the Bondholders Plan Proponents could serve amended and restated disclosure statements, which amended and restated disclosure statements were to be filed with the Bankruptcy Court on June 29, 1994; (iii) July 6, 1994 was fixed as the last date by which parties in interest, other than the clients of Allen Potter, Esq., could serve written objections to the amended and restated disclosure statements filed by the Debtors and the Bondholders Plan Proponents on June 29, 1994, which objections are to be filed with the Bankruptcy Court no later than July 7, 1994; (iv) July 8, 1994 was fixed as the last date by which the clients of Allen Potter, Esq. could serve and file written objections to amended and restated disclosure statements filed by the Debtors and the Bondholders Plan Proponents; (v) during the period July 7 through July 11, 1994, the Debtors and the Bondholders Plan Proponents are to confer and attempt in good faith to resolve any objections to the amended and restated disclosure statements; (vi) prior to July 7, 1994, the Debtors and the Bondholders Plan Proponents are to attempt to resolve technical balloting and solicitation issues and serve and file, either jointly or separately, a motion regarding such issues and procedures which motion is scheduled to be heard on July 13, 1994; (vii) on July 12, 1994, the Debtors and the Bondholders Plan Proponents shall each file with the Bankruptcy Court a pleading setting forth, without legal argument, unresolved objections to the amended and restated disclosure statements filed by the Debtors and the Bondholders Plan Proponents; and (viii) a hearing is scheduled for July 13, 1994 at which the Bankruptcy Court will hear argument concerning any unresolved objections to the amended and restated disclosure statements filed by the Debtors and the Bondholders Plan Proponents. On June 28, 1994, the Bankruptcy Court entered an order confirming the aforementioned procedures and dates. On June 22, 1994, the Debtors filed their Fourth Amended Joint Plan of Reorganization dated as of June 21, 1994 (the "Debtors Fourth Amended Plan"). The Debtors Fourth Amended Plan did not materially modify the Debtors Third Amended Plan. The Bondholder Plan Proponents did not file a further amended plan of reorganization. On June 29, 1994, the Debtors and the Bondholders Plan Proponents each filed an amended disclosure statement. The process pursuant to which the Debtors Fourth Amended Plan or any further amended plan of reorganization filed by the Debtors and the Bondholders Second Amended Plan or any further amended plan of reorganization filed by the Bondholders Plan Proponents may be confirmed necessarily will be complex and may be delayed pending further developments in the asbestos-related litigation involving the Company (see Note 10). Accordingly, the timing of such confirmation necessarily cannot be predicted. The Debtors Fourth Amended Plan and/or the Bondholders Second Amended Plan will be sent, along with a disclosure statement approved by the Bankruptcy Court to all members of classes of impaired creditors and equity security holders for acceptance or rejection. In general, the Bankruptcy Code provides that a claim or interest is impaired under a plan unless such plan proposes to pay such claim or interest in full or leave it unaltered. In order to be accepted, at least two-thirds in amount and a majority in number of holders of allowed claims or interests in each class that is impaired who actually vote, must accept the plan. Following acceptance or rejection of any plan by impaired classes of creditors and equity security holders, the Bankruptcy Court at a noticed hearing would consider whether to confirm the plan. Among other things, for confirmation the Bankruptcy Court at a noticed hearing is required to find that (i) each holder of a claim or interests in each impaired class of creditors and equity security holders will, pursuant to the plan, receive at least as much as the class would have received in a liquidation under Chapter 7 of the Bankruptcy Code, (ii) each impaired class of creditors and equity security holders has accepted the plan by the requisite vote and (iii) confirmation of the plan is not likely to be followed by the liquidation or need for further financial reorganization of the debtor or any successor unless the plan proposes such liquidation or reorganization. If any impaired class of creditors or equity security holders does not accept a plan, and assuming that all of the other requirements of the Bankruptcy Code are met, the proponent of the plan may invoke the so-called "cram down" provisions of the Bankruptcy Code. Under these provisions, the Bankruptcy Court may confirm a plan notwithstanding the nonacceptance of the plan by an impaired class of creditors or equity security holders if certain requirements of the Bankruptcy Code are met including but not limited to finding that the proposed plan and any settlement contemplated therein (i.e. the Veil Piercing Settlement Agreement) is fair and equitable. These requirements may necessitate provision in full for senior classes of creditors and/or equity security holders before provision for a junior class could be made. The Company cannot now predict whether, or at what time, the Debtors Fourth Amended Plan, the Bondholders Second Amended Plan or any further amended plans by either party may be confirmed or the ultimate terms thereof. NOTE 3--INSTALMENT NOTES RECEIVABLE The instalment notes receivable arise from sales of partially-finished homes to customers for time payments primarily over periods of twelve to thirty years and are secured by first mortgages or similar security instruments. Revenue and income from the sale of homes is included in income upon completion of construction and legal transfer to the customer. The buyer's ownership of the land and the improvements necessary to complete the home constitute a significant equity investment which the Company has access to should the buyer default on payment of the instalment note obligation. Of the gross amount of $4,176,040,000 an amount of $3,870,826,000 is due after one year. Instalment payments estimated to be receivable within each of the five years from May 31, 1994 are $305,214,000, $295,254,000, $287,645,000, $281,172,000 and $274,592,000, respectively, and $2,732,163,000 after five years. Time charges are included in equal parts in each monthly payment and are taken into income as collected. This method approximates the interest method since a much larger provision for loan losses and other expenses would be required if time charge income were accelerated. The aggregate amount of instalment notes receivable having at least one payment ninety or more days delinquent was 3.23% and 3.12% of total instalment notes receivable at May 31, 1994 and 1993, respectively. Mid-State Homes, Inc. ("Mid-State"), an indirect wholly-owned subsidiary of the Company, is the settlor and sole beneficiary of two business trusts established under the laws of Delaware, Mid-State Trust II ("Trust II") and Mid-State Trust III ("Trust III"). The Trusts were organized for the purpose of purchasing instalment notes receivable from Mid-State from the net proceeds from the issuance of the Mortgage-Backed Notes and the Asset Backed Notes described in Note 5. Assets of Trust II and Trust III, including the instalment notes receivable, are not available to satisfy claims of general creditors of the Company and its subsidiaries. Of the gross amount of instalment notes receivable at May 31, 1994 of $4,176,040,000 with an economic balance of $2,051,261,000, receivables owned by Trust II had a gross book value of $1,631,212,000 and an economic balance of $972,093,000 and receivables owned by Trust III had a gross book value of $523,048,000 and an economic balance of $256,904,000. Restricted short-term investments include (i) temporary investment of reserve funds and collections on instalment notes receivable owned by Trust II which are available only to pay expenses of Trust II and principal and interest on the Mortgage-Backed Notes ($73,000,000), (ii) temporary investment of reserve funds and collections on instalment notes receivable owned by Trust III which are available only to pay expenses of Trust III and principal and interest on the Asset Backed Notes ($12,971,000), (iii) cash securing letters of credit ($3,037,000) and (iv) miscellaneous other segregated accounts restricted to specific uses ($18,544,000), including $6,271,000 from proceeds of sale of assets set aside to offer to purchase Series B and Series C Senior Extendible Reset Notes. NOTE 4--PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are summarized as follows (see Note 1 regarding purchase accounting): MAY 31, 1994 1993 (IN THOUSANDS) Land and mine $ 200,337 $ 200,000 Land improvements 18,941 17,349 Buildings and leasehold improvements 104,999 99,597 Mine development costs 123,761 116,576 Machinery and equipment 663,898 617,987 Construction in progress 12,003 23,559 Total $1,123,939 $1,075,068 The Company provides depreciation for financial reporting purposes principally on the straight line method over the useful lives of the assets. Assets (primarily mine development costs) extending for the full life of a coal mine are depreciated on the unit of production basis. For federal income tax purposes accelerated methods are used for substantially all eligible properties. Depletion of minerals is provided based on estimated recoverable quantities. The Company has capitalized interest on qualifying properties in accordance with Financial Accounting Standards Board Statement No. 34. Interest capitalized for the years ended May 31, 1994, 1993 and 1992 was immaterial. Interest paid in cash for the years ended May 31, 1994, 1993 and 1992 was $91,293,000, $117,853,000 and $109,477,000, respectively. NOTE 5--DEBT The Company's cash management system provides for the reimbursement of all major bank disbursement accounts on a daily basis. Checks issued but not yet presented to the banks for payment are classified as bank overdrafts. As a result of the Reorganization Proceedings, the maturity of all unpaid principal of, and interest on, substantially all of the indebtedness of the Debtors became immediately due and payable in accordance with the terms of the instruments governing such indebtedness. While the Reorganization Proceedings are pending, the Debtors are prohibited from making any payments of obligations owing as of the petition date, except as permitted by the Bankruptcy Court. Furthermore, the Debtors will not be able to borrow additional funds under any of their prepetition credit arrangements. At the date of the filing of the Reorganization Proceedings the Company and various of its subsidiaries were borrowing under a Working Capital Agreement which also provided for the issuance of letters of credit. An aggregate of $78,033,000 of borrowings and $17,549,000 of letters of credit are outstanding under this agreement at May 31, 1994. Under the terms of the Working Capital Agreement, overdue principal and, to the extent permitted by law, overdue interest bear interest at a rate equal to 3 1/2% per annum in excess of the reference rate of Chemical Bank (the "Reference Rate") in effect from time to time, provided that no loan will bear interest after maturity at a rate per annum less than 1% in excess of the rate of interest applicable thereto at maturity. Since the beginning of the Reorganization Proceedings certain of the Debtors have consummated an agreement, as amended, with two commercial banks with respect to a $25 million letter of credit facility. Pursuant to the terms of such "New Letter of Credit Agreement", upon issuance of a letter of credit, the applicable Debtors will deposit with the issuing bank an amount of cash equal to the stated amount of the letter of credit. At May 31, 1994, $3,037,000 of letters of credit were outstanding under this agreement. Since the beginning of the Reorganization Proceedings certain of the Debtors have also consummated an agreement with the lenders pursuant to which the lenders agree to renew letters of credit issued under the Working Capital Agreement that were outstanding at the time of filing of the petitions for reorganization (the "Replacement Letter of Credit Agreement"). To the extent that the letters of credit under the Replacement Letter of Agreement are renewed during the Reorganization Proceedings, these Debtors have agreed to reimburse the issuing bank for any draws under such letters of credit, which obligation shall be entitled to an administrative expense claim under the Bankruptcy Code. In addition, the obligations of the Debtors under such Replacement Letter of Credit Agreement shall continue to be secured by the collateral which secures the Debtors' obligations under the Bank Credit Agreement and the Working Capital Agreement. The Bankruptcy Court approved the Debtors' entering into the New Letter of Credit Agreement in May 1990. The New Letter of Credit Agreement currently terminates on June 30, 1995. Long-term debt, in accordance with its contractual terms, consisted of the following at each year end:
MAY 31, 1994 1993 (IN THOUSANDS) Senior debt: Mortgage-Backed Notes (less unamortized discount of $1,864,000 in 1993) $ 671,000 $ 811,122 Asset Backed Notes 200,970 229,585 Revolving Credit Agreement 228,249 228,249 Series B Senior Extendible Reset Notes 176,300 176,300 Series C Senior Extendible Reset Notes 5,000 5,000 Other 7,080 13,344 Total senior debt 1,288,599 1,463,600 Subordinated debt: Senior Subordinated Extendible Reset Notes 443,046 443,046 Subordinated Notes 350,000 350,000 13-1/8% Subordinated Notes 50,000 50,000 13-3/4% Subordinated Debentures 100,000 100,000 10-7/8% Subordinated Debentures (less unamortized discount of $7,513,000 and $8,280,000) 82,487 81,720 Total subordinated debt 1,025,533 1,024,766 Less: Amount included as liabilities subject to Chapter 11 proceedings (Note 2) (1,442,162) (1,441,395) Total consolidated long-term debt $ 871,970 $ 1,046,971
The Mortgage-Backed Notes (see Note 3) were issued by Trust II (which did not file a petition for reorganization) in five classes in varying principal amounts. Three of the classes have been fully repaid. The two remaining classes A3 and A4 bear interest at the rates of 9.35% and 9.625%, respectively. Interest on each class of notes is payable quarterly on each January 1, April 1, July 1 and October 1 (each a "Payment Date"). On each Payment Date, regular scheduled principal payments will be made on the Class A3 and Class A4 Notes in order of maturity. Maturities of the balance of these Mortgage-Backed Notes range from April 1, 1998 for the Class A3 Notes to April 1, 2003 for the Class A4 Notes. The Class A3 and Class A4 Notes are subject to special principal payments and the Class A4 Notes may be subject to optional redemption under specified circumstances. The scheduled principal amount of notes maturing in each of the five years from May 31, 1994 is $87,000,000, $87,000,000, $87,000,000, $87,000,000 and $64,600,000, respectively. The Asset Backed Notes (see Note 3) issued by Trust III, bear interest at 7 5/8%, constitute a single class and have a final maturity date of April 1, 2022. Payments are made quarterly on January 1, April 1, July 1 and October 1, based on collections on the underlying collateral less amounts paid for interest on the notes and Trust III expenses. Set forth in the following paragraphs is a description of the terms of the Company's various senior, senior subordinated and subordinated debt agreements as in effect on the petition date. Such provisions do not necessarily presently govern the respective rights of the Company, its subsidiaries and the various lenders. Instead, the rights of the parties will be determined in connection with the Reorganization Proceedings. The Company, Old Walter Industries and certain operating subsidiaries of the Company (the "Revolving Loan Borrowers"), on a joint and several basis, were initially permitted to borrow up to an aggregate of $800,000,000 under the terms of a credit agreement dated as of September 10, 1987, as amended, with various banks (the "Revolving Credit Agreement"), of which $700,000,000 was a term loan and $100,000,000 was a revolving loan. The commitment under the Revolving Credit Agreement had been reduced to $242,292,000 at the petition date and was scheduled to be fully repaid by quarterly payments through June 30, 1991. Additionally, the commitment would have been reduced by the proceeds of certain asset sales. Interest, at the option of the Revolving Loan Borrowers, was at (i) the Reference Rate plus 1 1/2%, (ii) a LIBOR rate plus 2 1/4% or (iii) a certificate of deposit rate plus 2 1/2%. A commitment fee of 1/2 of 1% per annum was required based on the daily average unutilized commitment. In fiscal 1991, pursuant to an order of the Bankruptcy Court, $7,356,000 of proceeds from the sale of an asset held as security for the Revolving Credit Agreement and setoff of bank accounts were turned over to the lenders with reservation of rights as to application of such payment. The Company has applied such payment to a reduction of principal ($5,794,000 to the Revolving Credit Agreement and $1,562,000 to the Working Capital Agreement). In June 1991, pursuant to an order of the Bankruptcy Court, $10,704,000 of proceeds from the prepayment of the promissory note received in connection with the sale of Apache Building Products Company in 1988, plus $350,000 of interest earned thereon, held in a segregated escrow account were applied as a reduction of principal ($8,249,000 to the Revolving Credit Agreement and $2,805,000 to the Working Capital Agreement). Bankers Trust Company and Chemical Bank, as agents for the various bank lenders under the Revolving Credit Agreement (the "Revolving Credit Banks"), appealed the Bankruptcy Court's order, permitting the application of proceeds to the principal of the indebtedness only, to the District Court (as defined in Note 10). On April 29, 1992, the District Court reversed the Bankruptcy Court's order and remanded the case to the Bankruptcy Court for further proceedings and determinations on the issues of whether the Revolving Credit Banks are oversecured creditors, the reasonable, relevant, applicable interest rate and whether the Debtors will ultimately prove to be solvent. At May 31, 1994, $228,249,000 principal amount of loans were outstanding. Under the terms of the Revolving Credit Agreement, overdue principal and, to the extent permitted by law, overdue interest bear interest at a rate equal to 3 1/2% per annum in excess of the Reference Rate in effect from time to time, provided that no loan will bear interest after maturity at a rate per annum less than 1% in excess of the rate of interest applicable thereto at maturity. The Series B Senior Extendible Reset Notes and Series C Senior Extendible Notes were bearing interest at rates of 14 5/8% and 14 1/2%, respectively, on the petition date, payable semi-annually, in cash, on January 1 and July 1 and were to mature on January 1, 1990 unless the Senior Note Issuers (three subsidiaries of the Company) elected to extend the notes for one or more additional one-year periods. In the event the maturity was extended, the interest rate would be reset to the interest rate per annum these notes should bear in order to have a bid value of 101% of the principal amount as of the reset date. In no event, however, would the interest rate be reset below the interest rate then in effect. The Senior Note Issuers are the following principal operating subsidiaries: Jim Walter Homes, Inc., Jim Walter Resources, Inc. ("Jim Walter Resources") and United States Pipe and Foundry Company ("U.S. Pipe"). See Note 14 for Summarized Financial Information of the Senior Note Issuers. The Senior Subordinated Extendible Reset Notes were bearing interest at a rate of 16 5/8% per annum on the petition date until reset as described herein, payable semi-annually on January 1 and July 1, in cash or, at the option of the Subordinated Note Issuers (two subsidiaries of the Company who are also the issuers of the Subordinated Notes) on or before January 1, 1993, by delivering additional Senior Subordinated Extendible Reset Notes (valued at their principal amount). The Senior Subordinated Extendible Reset Notes were to mature on January 1, 1990, unless the Subordinated Note Issuers elected to extend the notes for one or more additional one-year periods. In the event the maturity was extended, the interest rate would be reset to the interest rate per annum these notes should bear in order to have a bid value of 101% of the principal amount as of the reset date. In no event, however, would the interest rate be reset below the interest rate then in effect. The Subordinated Notes were bearing interest at a rate of 17% per annum on the petition date payable semi-annually, in cash, on January 1 and July 1. The Subordinated Note Issuers are the following principal operating subsidiaries: Jim Walter Homes, Inc. and U.S. Pipe. See Note 14 for Summarized Financial Information of the Subordinated Note Issuers. Subordinated debt assumed by Old Walter Industries from Original Jim Walter in connection with the Acquisition includes the (i) 13% Subordinated Notes, (ii) 13% Subordinated Debentures and (iii) 10% Subordinated Debentures (which were sold at a discount to yield 12% to maturity). The Company's various debt agreements had covenants which, among other things, restricted incurrence of additional indebtedness, dividend payments, mergers, consolidations and sales of assets by the Company and its subsidiaries, and required the Company to maintain certain financial ratios. However, as a result of the automatic stay resulting from the filing of the Reorganization Proceedings, neither the indenture trustees nor the holders of the Company's debt may enforce any rights, exercise any remedies or realize on any claims in the event the Company or any of its subsidiaries fails to comply with any of the covenants contained in the various debt agreements. NOTE 6--INCOME TAXES Income tax expense (benefit) is made up of the following components:
MAY 31, 1994 MAY 31, 1993 MAY 31, 1992 CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED (IN THOUSANDS) United States $38,712 $(11,716) $44,093 $(22,682) $34,349 $(23,494) State and local 2,886 (965) 4,048 (1,131) 1,608 -- Total $41,598 $(12,681) $48,141 $(23,813) $35,957 $(23,494)
Federal income tax paid for fiscal 1994, 1993 and 1992 was approximately $37.1 million, $35.9 million, and $52.7 million. State income tax payments approximated the amounts provided above. The Company adopted Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes" in 1993. FAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events which have been recognized in the Company's financial statements or tax returns. FAS 109 generally considers all expected future events other than changes in tax law or rates. Previously, the Company used the FAS 96 asset and liability method that gave no recognition to future events other than the recovery of assets against liabilities which reversed in the same time period. The change to FAS 109 did not require any change to the financial statements. Deferred income taxes result from timing differences in the recognition of revenue and expense for tax and financial reporting purposes. The tax effect of such timing differences is summarized as follows:
MAY 31, 1994 1993 1992 (IN THOUSANDS) Effect of tax loss and tax credit carryforwards $ -- $ -- $ 4,779 Revenues recognized on the instalment sales method for tax purposes and on the accrual basis for financial reporting (11,899) (11,271) (13,123) Excess of book over tax depreciation (3,197) (6,149) (10,850) Postretirement benefit obligation (6,690) (7,594) -- Amortization of investment tax credit -- (219) (384) Mine development expense 1,936 913 573 Timing differences relating to accrued expenses 5,156 2,364 (3,542) Enacted tax rate change 2,833 -- -- Other, net 145 (726) (947) Total $(11,716) $(22,682) $(23,494) Statutory tax rate 35.0% 34.0% 34.0% Effect of: Adjustment to deferred taxes 5.3 -- -- State and local income tax 3.3 2.7 3.0 Percentage depletion (1.7) (8.3) (13.8) Enacted tax rate change 9.4 -- -- Amortization of net investment tax credit -- (.3) (1.1) Nonconventional source fuel credit (10.8) (7.7) (15.2) MAY 31, 1994 1993 1992 (IN THOUSANDS) Amortization of excess of purchase price over net assets acquired 47.1 19.0 38.9 Benefit of capital loss carryforward (8.5) (4.7) (10.2) Other, net 1.0 (.4) .2 Effective tax rate 80.1% 34.3% 35.8%
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law raising the federal corporate income tax rate to 35% from 34%, retroactive to January 1, 1993. FAS 109 requires that deferred tax liabilities and assets be adjusted in the period of enactment for the effect of an enacted change in the tax laws or rates. The effect of the change was $2,833,000 and such amount is included in the provision for deferred income taxes for the year ended May 31, 1994. Deferred tax liabilities (assets) are comprised of the following:
MAY 31, 1994 1993 (IN THOUSANDS) Instalment sales method for instalment notes receivable in prior years $ 52,549 $ 62,608 Depreciation 117,053 93,701 Difference in basis of assets under purchase accounting 27,269 28,119 Capital loss carryforward (12,600) (15,800) Accrued expenses (43,716) (28,044) Postretirement benefits other than pensions (80,003) (70,551) Valuation allowance 12,600 15,800 Total deferred tax liability $ 73,152 $ 85,833
The Revenue Act of 1987 eliminated the instalment sales method of tax reporting for instalment sales after December 31, 1987. For book purposes the Company recognized a long-term capital loss of approximately $75.0 million in fiscal 1989. This loss was recognized for tax purposes in fiscal 1992 and is deductible to the extent of capital gains of approximately $8.8 million, $9.9 million and $10.4 million in years ended May 31, 1994, 1993 and 1992, respectively. The remaining capital loss is available as a carryback to fiscal 1991 to be offset against capital gains of approximately $8.3 million and as a carryforward to the succeeding three years. The Company has established a valuation allowance of $12.6 million to offset the deferred tax asset related to the carryforward since the Company cannot predict whether capital gains sufficient to offset the carryforward will be realized in the three year carryforward period. If certain substantial changes in the Company's ownership should occur, there would be an annual limitation on the amount of such loss carryforward which could be utilized. The Company allocates federal income tax expense (benefit) to its subsidiaries based on their separate taxable income (loss). A substantial controversy exists with regard to federal income taxes allegedly owed by the Company. Proofs of claim have been filed by the Internal Revenue Service in the amounts of $110,560,883 with respect to fiscal years ended August 31, 1980 and August 31, 1983 through August 31, 1987, $31,468,189 with respect to fiscal years ended May 31, 1988 (nine months) and May 31, 1989 and $44,837,693 with respect to fiscal years ended May 31, 1990 and May 31, 1991. Objections to the proofs of claim have been filed by the Company and the various issues are being litigated in the Bankruptcy Court. The Company believes that such proofs of claim are substantially without merit and intends to defend such claims against the Company vigorously. NOTE 7--STOCKHOLDERS' EQUITY KKR Associates, a New York limited partnership, is the sole general partner of three partnerships which own a total of 28,500,000 shares of the outstanding common stock of the Company. The Company entered into common stock subscription agreements, dated as of December 1, 1987 (the "Management Common Stock Subscription Agreements"), with certain individuals who are former or current members of management (the "Management Investors") under which an aggregate of 893,500 shares of common stock remain outstanding. The Management Common Stock Subscription Agreements generally provide the Company with a right of first refusal with respect to any bona fide offer from a third party to purchase any or all of such Management Investor's shares of common stock commencing after January 7, 1993; provided that such transfer restrictions and right of first refusal will terminate in the event of a public offering of the Company's common stock. NOTE 8--STOCK OPTIONS Under stock option plans approved by stockholders in October 1987, an aggregate of 3,318,182 shares of the Company's common stock have been reserved for the grant and issuance of incentive and non-qualified stock options (the "Options"). Options for 1,618,568 shares, all of which are exercisable, were outstanding at May 31, 1994. The exercise price of each Option granted is $5.00 per share, the fair market value at date of grant. During 1994, 1993 and 1992 options for 59,727, 384,909 and 16,591 shares were cancelled. NOTE 9--RELATED PARTY TRANSACTIONS Following its incorporation, the Company retained KKR to provide financial, financial advisory and consulting services to the Company in connection with the Acquisition and the Merger, for which the Company paid to KKR a fee of $35 million. KKR has agreed to provide management consulting and financial services to the Company and its subsidiaries on an annually renewable basis. Effective with the commencement of the Reorganization Proceedings, current payment of these consulting fees was suspended. The annual rate at such time was $550,000. NOTE 10--LITIGATION AND OTHER MATTERS Note 1 contains a description of the organization of the Company and the acquisition of Original Jim Walter. On April 21, 1988, the Company sold all of the outstanding capital stock of JWC Holdings, the parent corporation of Jim Walter Corporation (formerly J-II) and its subsidiaries, including The Celotex Corporation ("Celotex") and its subsidiaries. Celotex is a co-defendant with other miners, manufacturers and distributors of asbestos-containing products in a very large number of lawsuits filed throughout the United States alleging injuries to the health of persons exposed to asbestos-containing products. Original Jim Walter had been named as a defendant in certain asbestos-related lawsuits from time to time and the Company understands that Original Jim Walter's corporate successor, Jim Walter Corporation, currently is a co-defendant in a number of the asbestos-related lawsuits filed against Celotex. As discussed below, the Company and certain of its subsidiaries and other affiliates have been served with process as a co-defendant in a number of these lawsuits. The Company understands that prior to the Tender Offer Celotex ceased to be engaged in the mining, manufacturing and distribution of the asbestos-containing products that have given rise to the aforementioned asbestos-related lawsuits against Celotex. Because Jim Walter Corporation, Celotex and their respective affiliates are not affiliates of the Company, neither the Company, Old Walter Industries nor any of their respective affiliates can make any representation as to the status of the asbestos-related litigation pending against Jim Walter Corporation, Celotex and their respective affiliates, the amount of the alleged damages sought from Jim Walter Corporation, Celotex and their respective affiliates in those lawsuits, the insurance coverage available to them to satisfy asbestos-related claims, or any other matter related to such litigation. The Company understands that the extent of the alleged injuries in the asbestos-related lawsuits filed against Celotex varies from case to case, many of the complaints against Celotex request punitive damages in addition to the compensatory damages and the aggregate damages sought in these cases is very substantial. In addition to these personal injury cases, a substantial number of actions, some of which are styled as class actions, have been filed against Celotex and numerous co-defendants seeking very substantial aggregate damages for the cost of detecting, analyzing, repairing and/or removing asbestos-containing materials in buildings owned or operated by the plaintiffs. The Company understands that the number of asbestos-related lawsuits filed against Celotex has continued to grow in recent years and the magnitude of the additional claims that are expected to be asserted against Celotex in the future cannot be accurately predicted at this time. The Company understands that the cost to Celotex to date of settling or otherwise disposing of asbestos-related lawsuits has been very substantial and that a substantial portion of such cost has been borne by insurance carriers pursuant to their insurance policies or settlement agreements with Celotex. The Company believes, however, that (i) most of Celotex' available insurance coverage prior to late 1977 has been exhausted, (ii) since late 1977, most of Celotex' insurance policies have excluded coverage for asbestosis, which is the basis for most of the personal injury claims pending against Celotex, (iii) beginning in late 1977, an increasing number of Celotex' policies have excluded coverage for other asbestos-related diseases and Celotex and its insurers dispute the scope of most of those exclusions, (iv) since late 1984, coverage for asbestos-related personal injury and property damage claims generally have been excluded from Celotex policies, (v) Celotex' insurers dispute whether any of Celotex' policies cover any asbestos-related property damage claims and (vi) no insurance is available for punitive damages in many jurisdictions. The insurance coverage disputes referred to above are the subject of litigation. The uncertain outcome and possible adverse consequences of the insurance coverage disputes referred to above, the continued growth in the number of asbestos-related lawsuits filed against Celotex and the very substantial aggregate damages alleged therein and the possibility that future disposition costs could exceed those experienced to date by Celotex, could impair the ability of Celotex to continue to satisfy asbestos-related claims. On October 12, 1990, Celotex and its wholly-owned subsidiary, Carey Canada, Inc. each filed a petition for reorganization under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the Middle District of Florida, Tampa Division. The Chapter 11 cases were assigned to the Honorable Thomas E. Baynes, Jr. As a result thereof and pursuant to the automatic stay provisions contained in section 362 of the Bankruptcy Code, all actions (other than those actions set forth in section 362(b) and, as discussed below, other than, for certain limited purposes, the Declaratory Judgment Proceeding commenced by the Debtors) commenced against Celotex prior to October 12, 1990 were stayed pending any future modification of the automatic stay under the Bankruptcy Code. On May 8, 1991, the Debtors filed a motion in the Celotex Chapter 11 case seeking to have the automatic stay lifted so as to allow the Debtors to continue to prosecute the Declaratory Judgment Proceeding against Celotex and others. On June 4, 1991, Judge Baynes granted the Debtors motion for the limited purpose of permitting them to file and proceed with a motion for summary judgment and to prosecute or defend any appeals arising from or related to such motion. A substantial number of the asbestos-related lawsuits filed against Celotex relate to the asbestos-related operations of a predecessor corporation of Rapid-American Corporation, a Delaware corporation ("Rapid-American"), which subsequently were transferred by Rapid-American to a corporation which was merged into Celotex in 1972. According to Rapid-American's Annual Report on Form 10-K for the fiscal year ended January 31, 1989, Rapid-American is a co-defendant in a number of personal injury and property damage cases. Each of Celotex and its predecessor corporation had indemnified RapidAmerican and its predecessor corporation against all liabilities relating to those operations for a limited time period. The extent of the indemnification is currently a matter of dispute. As stated above, the Company and certain of its subsidiaries and other affiliates have been served with process as a codefendant in a number of the asbestos-related lawsuits described above. One of these lawsuits is a class action filed in federal court in Beaumont, Texas that involves approximately 3,000 plaintiffs alleging asbestos-related personal injuries. Plaintiffs in the class action added Old Walter Industries as a defendant alleging, among other things, that (i) Original Jim Walter and its successors, including Jim Walter Corporation and HAC, are liable for all damages caused by the products manufactured, sold and distributed by Celotex by reason, among other things, of operating Celotex as a division, and conspiring with Celotex and other co-defendants to market harmful products; (ii) the distribution by HAC of substantially all of its assets to Old Walter Industries constituted a fraudulent conveyance; and (iii) Old Walter Industries is a successor to the liabilities of HAC and is thus liable to the plaintiffs for injuries caused by Celotex and certain named subsidiaries and/or predecessor companies of Celotex, and Original Jim Walter and its successors, including HAC and Jim Walter Corporation. Another asbestos-related lawsuit is a purported class action filed on July 13, 1989 in state court in Beaumont, Texas against the Company, Old Walter Industries, KKR, KKR Associates, Jim Walter Corporation, HAC, Celotex, Drexel Burnham Lambert Incorporated ("Drexel Burnham"), Drexel Burnham Lambert Group, Inc. ("Drexel Burnham Group"), and certain directors and executive officers of the Company, Old Walter Industries and Original Jim Walter (i.e., John B. Carter, Jr., Perry Golkin, Henry R. Kravis, Paul E. Raether, George R. Roberts, Michael T. Tokarz and Gene M. Woodfin) that purports to involve all persons pursuing unsatisfied personal injury or wrongful death claims against Celotex or Jim Walter Corporation based upon exposure to asbestos. The action originally named as defendants, in addition to those individuals and entities named above, James O. Alston, Joe B. Cordell and James W. Walter, directors and executive officers of the Company, Old Walter Industries and Original Jim Walter. Subsequently, plaintiffs voluntarily dismissed their claims against Messrs. Alston, Cordell and Walter. On December 26, 1989, plaintiffs filed their Second Amended Original Petition and Application for Temporary Injunction. Plaintiffs allege, among other things, that (i) Original Jim Walter and its successors, including Jim Walter Corporation and HAC, are liable for all damages caused by the products manufactured, sold and distributed by Celotex by reason, among other things, of operating Celotex as a division; (ii) the distribution by HAC of substantially all of its assets to Old Walter Industries constituted a fraudulent conveyance; (iii) Old Walter Industries is a successor to the liabilities of HAC and the corporate separateness of Old Walter Industries and HAC should be disregarded, and thus Old Walter Industries is liable to the plaintiffs for injuries caused by Celotex and its predecessors and Original Jim Walter and its successors, including HAC and Jim Walter Corporation; (iv) the corporate separateness of the Company and Old Walter Industries should be disregarded; (v) the sales and transfers of assets by Old Walter Industries are fraudulent; and (vi) the individual defendants, KKR, KKR Associates, Drexel Burnham, Drexel Burnham Group and the Company conspired to effect the allegedly fraudulent transfers of assets from and to Old Walter Industries. The relief requested by the plaintiffs includes, among other things, (i) enjoining each defendant from transferring any assets formerly owned by Original Jim Walter (and any proceeds from the disposition thereof); (ii) requiring each defendant to account for all transfers of such assets or proceeds; (iii) requiring each defendant to transfer such assets and proceeds to Celotex to be held in trust for the benefit of the plaintiffs; (iv) appointing a receiver to take charge of such assets and proceeds or of any other property of any defendant; (v) holding the defendants jointly and severally liable for damages equal to the fair market value of any assets formerly owned by Original Jim Walter which have been sold and cannot be recovered; and (vi) punitive damages, interest and costs. Plaintiffs also requested the Beaumont state court to issue a temporary injunction enjoining the Company from selling or otherwise transferring or encumbering its stock in any corporation that owns assets formerly owned by Original Jim Walter or Old Walter Industries. The Company agreed to give the plaintiffs 15 days prior notice of any closing of any disposition of stock of a corporation which owns assets formerly owned by Original Jim Walter or its subsidiaries. On September 12 through 15, 1989, the Beaumont state court held a hearing on the defendants' motions to dismiss the action for lack of personal jurisdiction. These motions were denied. On October 11, 1989, plaintiffs filed a motion for class certification. On October 16, 1989, defendants KKR, KKR Associates, and Messrs. Kravis, Roberts, Raether, Tokarz and Golkin filed a motion for a change of venue. Discovery was conducted with respect to the class certification and venue motions. The Beaumont state court did not hold a hearing on either the motion for Class Certification or the motion to change venue. Some of the other asbestos-related lawsuits pending against the Company and its subsidiaries involve claims against the Company and its subsidiaries and request relief from the Company and its subsidiaries similar to one or more of the claims involved and remedies requested in the lawsuits pending against the Company and its subsidiaries in Beaumont, Texas. On December 27, 1989, the Debtors commenced the Reorganization Proceedings. As a result of the automatic stay provisions of the Bankruptcy Code, all pending litigation against the Debtors was automatically stayed. On December 29, 1989, plaintiffs moved before the Beaumont state court to sever the claims against the Company and Old Walter Industries from their claims against the remaining defendants. On January 2, 1990, the Beaumont state court action was removed to the United States Bankruptcy Court for the Eastern District of Texas, Beaumont Division. On January 5, 1990, certain defendants in that action moved to transfer the lawsuit to the United States District Court for the Middle District of Florida, Tampa Division (the "District Court"). The plaintiffs in that action moved to remand that action to state court. All proceedings in that action have been stayed by agreement of the parties and order of the District Court pending resolution of the abstention issues in the Reorganization Proceedings in the Bankruptcy Court. Other asbestos-related lawsuits pending against the Company and its subsidiaries allege personal injuries arising out of exposure to asbestos and further allege, among other things, that (i) each named defendant has been or is now engaged, directly or indirectly, in the manufacture, supply, sale or otherwise placing into the stream of commerce, asbestos or asbestos-containing products and (ii) defendants should be held liable on the theories of strict products liability and negligence for plaintiffs' injuries. None of the complaints filed in such latter actions contain, at this time, corporate veil-piercing or fraudulent conveyance claims. The relief requested by the plaintiffs in these actions includes, among other things, general damages, punitive damages and special damages in amounts to be proven at the time of trial. There can be no assurance that the Company, its subsidiaries or other affiliates will not, in the future, be named as co-defendants in other asbestos-related lawsuits, whether currently pending or subsequently commenced, or that temporary or preliminary injunctive relief against the sale by the Company of any of its assets will not be granted in any such pending or future lawsuit prior to judgment. Based on the advice of outside counsel, the Company believes that it and its affiliates have and would have a variety of meritorious procedural and substantive defenses to the claims made or any claims which may be made against them in pending or future asbestos-related lawsuits. Accordingly, the Company believes that such claims are and would be without foundation or merit and intends to defend such cases vigorously. Plaintiffs have not specified the amount of compensatory and punitive damages they seek from the Company and its affiliates in the lawsuits pending in Beaumont, Texas and most of the other asbestos-related lawsuits against the Company and its affiliates referred to above. Such alleged damages are expected to be very substantial and, accordingly, if judgments against the Company and its subsidiaries are rendered in such lawsuits, the Company and its subsidiaries could be materially adversely affected. On January 2, 1990, the Debtors commenced the Declaratory Judgment Proceeding against Jim Walter Corporation, Celotex and all known individuals who had filed suit against the Debtors seeking to hold them liable for asbestos-related liabilities of Celotex. The Declaratory Judgment Proceeding requested the Bankruptcy Court to declare and adjudicate that (i) the corporate veil between Jim Walter Corporation and Celotex may not be pierced, (ii) the leveraged buyout of Original Jim Walter was not a fraudulent conveyance, nor were any subsequent transactions entered into as a part of that leveraged buyout fraudulent transfers, (iii) neither the Company, Old Walter Industries nor any of their subsidiaries or affiliates is the successor in interest to the asbestos-related liabilities of either Jim Walter Corporation or Celotex and (iv) neither the Company, Old Walter Industries nor any of their subsidiaries or affiliates is liable for the asbestos-related liabilities of either Jim Walter Corporation or Celotex. On January 2, 1990, the Debtors also commenced another proceeding by filing in the Bankruptcy Court a Complaint to Extend the Automatic Stay (the "Injunction Proceeding") wherein the Debtors sought to enjoin all actions against Jim Walter Corporation and all other non-debtors on corporate veil piercing or related theories, and further seeking a permanent injunction staying all such actions, including the previously disclosed proposed class-action lawsuit filed in state court in Beaumont, Texas. That action was removed to the United States Bankruptcy Court for the Eastern District of Texas, Beaumont Division by certain of the defendants after the Debtors commenced the Reorganization Proceedings. A motion to transfer said action to the Bankruptcy Court is now pending, as well as a motion filed by the plaintiffs to remand said action to the state court in Beaumont. On January 9, 1990, the Debtors filed their Motion for Preliminary Injunction in the Injunction Proceeding seeking a preliminary injunction extending the automatic stay under section 362 of the Bankruptcy Code to enjoin the prosecution of any action in which plaintiffs seek to hold Jim Walter Corporation and other non-Debtors responsible for the asbestos-related liabilities of Jim Walter Corporation's subsidiary, Celotex, on a piercing the corporate veil or similar legal theory. On January 19, 1990, an asbestos claimant filed a motion in the Bankruptcy Court requesting the Bankruptcy Court to dismiss and abstain from deciding or, in the alternative, to stay the Declaratory Judgment Proceeding. The asbestos claimant also opposed the Debtors' motion for a preliminary injunction. A hearing on the pending motions was held on January 22, 1990. Subsequently, the asbestos claimant, joined by four additional claimants, also moved to dismiss the Injunction Proceeding. On April 13, 1990, and as amended, the Bankruptcy Court issued its proposed findings of fact, conclusions of law and recommendation pursuant to Bankruptcy Rule 9011 which recommended, among other things, that the District Court deny the asbestos claimants' motion to abstain from deciding, or to stay, the Declaratory Judgment Proceeding as to the Debtors. The asbestos claimants subsequently filed objections to the proposed findings of fact, conclusions of law and recommendations with the District Court. On April 20, 1990, the Bankruptcy Court entered orders (i) deferring a ruling on the asbestos claimants' motion to dismiss the Injunction Proceeding until the District Court decided whether or not to adopt the Bankruptcy Court's recommendation and (ii) preliminarily enjoining all asbestos-related personal injury and property damage claimants and their attorneys and agents and all other persons acting on their behalf from commencing or continuing any civil action in any United States federal or state court in which such persons are attempting to assert claims against non-Debtors that are based on the right to pierce the corporate veil between Celotex and Jim Walter Corporation or that relate to or are connected with claims that attempt to impose liability on the Debtors for asbestos-related claims. The asbestos claimants filed an appeal of the preliminary injunction with the District Court. On February 5, 1991, the District Court entered an order denying the asbestos claimants' action for leave to appeal an interlocutory order, thus letting stand the preliminary injunction of the Bankruptcy Court entered on April 20, 1990 enjoining all asbestos-related personal injury and property damage claimants and their attorneys and agents and all other persons acting on their behalf from commencing or continuing any civil action in any United States federal or state court in which such persons are attempting to assert claims against non-Debtors that are based on the right to pierce the corporate veil between Celotex and Jim Walter Corporation or that relate to or are connected with claims that attempt to impose liability on the Debtors for asbestos-related claims. On May 17, and May 22, 1990, the asbestos claimants filed motions in the Bankruptcy Court and in the District Court, respectively, each seeking stay of the Declaratory Judgment Proceeding, each of which was denied by those courts on May 17 and June 5, 1990, respectively. Also on May 17, 1990, certain asbestos defendants filed a motion in District Court for withdrawal of reference as to the Declaratory Judgment Proceeding from the Bankruptcy Court. On July 11, 1990, the District Court issued an order dated June 29, 1990 which declined to rule on the asbestos claimants' motion for withdrawal of reference until after the Bankruptcy Court ruled on any motion for summary judgment. On September 2, 1992, the asbestos claimants filed a renewed request to withdraw the reference in the District Court. On September 14, 1992, the Debtors filed a memorandum of law responsive to the asbestos claimants' renewal request. On September 15, 1992, the District Court entered an order denying the asbestos claimants' motion to withdraw the reference. The District Court held that while the asbestos claimants could have their claims heard by a jury, they were not entitled to a jury trial on the claims of piercing the corporate veil and fraudulent conveyance because those claims are equitable in nature. On September 22, 1992, the asbestos claimants filed a motion for reconsideration and, pleading in the alternative, requested the District Court to certify the order for interlocutory review in the United States Circuit Court of Appeals for the Eleventh Circuit ("Court of Appeals"). On October 5, 1992, the Debtors filed their Memorandum of Law in opposition to the asbestos claimants' motion for reconsideration. On February 23, 1993, the District Court entered an order denying the motion for reconsideration and request for certification of interlocutory appeal. On March 3, 1993, the asbestos claimants filed a petition for a writ of mandamus with the Court of Appeals. On April 13, 1993, the Debtors filed their response to the writ of mandamus. On April 19, 1993, the Court of Appeals denied the asbestos claimants' petition for such writ of mandamus. On July 11, 1990, the District Court adopted the Bankruptcy Court's proposed findings of fact, conclusions of law and recommendation pursuant to Bankruptcy Rule 9011, and denied the asbestos claimants' motion to abstain from deciding, or to stay, the Declaratory Judgment Proceeding. As a result of the District Court's decisions, absent any reversal on reconsideration or appeal, the Bankruptcy Court was empowered to rule on a motion for summary judgment in the Declaratory Judgment Proceeding. On July 17, 1990, the asbestos claimants filed a motion in the District Court seeking reconsideration of the July 11, 1990 order denying the motion for abstention, and, in the alternative, seeking certification of that order for interlocutory appeal to the Court of Appeals pursuant to 28 U.S.C. section 1292. The asbestos claimants also sought a stay pending determination of their motion. On July 30, 1990, the Debtors opposed the July 17, 1990 motion. On December 6, 1990, the District Court entered an order (a) denying the asbestos claimants' motion to reconsider the District Court's decision of July 11, 1990 which adopted the Bankruptcy Court's recommendation to deny the asbestos defendants' motion to require the Bankruptcy Court to abstain from considering the Declaratory Judgment Proceeding commenced by the Debtors against the asbestos defendants; (b) giving the asbestos claimants ten (10) days from the date of the order to seek interlocutory appeal to the Court of Appeals and (c) granting the asbestos claimants' motion to stay further prosecution of the Declaratory Judgment Proceeding pending the outcome of the interlocutory appeal. On December 17, 1990, the asbestos claimants filed their Petition for Permission to Appeal with the Court of Appeals. On February 5, 1991, the Court of Appeals denied the asbestos claimants' Petition for Permission to Appeal. By so ruling, the Court of Appeals let stand the District Court's ruling of December 6, 1990 denying the asbestos claimants' motion to reconsider the District Court's decision of July 11, 1990, which adopted the Bankruptcy Court's recommendation to deny the asbestos claimants' motion to abstain in such proceeding. On March 19, 1991, the asbestos claimants filed with the District Court a Renewed Motion for Reconsideration of their Motion to Abstain, which also sought to continue the stay in the Bankruptcy Court. On April 16, 1991, the District Court entered an order confirming that its stay of proceedings in the Bankruptcy Court had expired. In addition, the District Court denied the asbestos claimants' Renewed Motion for Reconsideration of their Motion to Abstain. Because the District Court's stay was lifted, the Declaratory Judgment Proceeding went forward in the Bankruptcy Court under schedules that were set by the Bankruptcy Court. Discovery in the Declaratory Judgment Proceeding was to have been concluded on July 6, 1990 pursuant to a Bankruptcy Court order. Subsequent to issuance of that order, certain discovery disputes arose between Jim Walter Corporation and the asbestos claimants centered upon issues relating to whether or not certain documentation was subject to various privileges and thus protected. After protracted litigation wherein various issues were appealed to the District Court and the Court of Appeals, on June 15, 1992 Jim Walter Corporation and the asbestos claimants entered into a stipulation regarding the resolution of all their then pending discovery disputes, without either party waiving their right for further review, if necessary. Following a hearing on January 8, 1992, the Bankruptcy Court ordered that any motions for summary judgment in the Declaratory Judgment Proceeding be filed by March 1, 1992 and set oral arguments for April 16, 1992. On February 28, 1992, the Debtors filed their Motion for Summary Judgment and supporting affidavits. On April 9, 1992, the asbestos claimants filed their Response to Debtors' Motion for Summary Judgment, and on May 7, 1992, filed a Supplemental Response to the Debtors' Motion for Summary Judgment. On April 16, 1992, oral arguments were heard by the Bankruptcy Court on the Debtors' Motion for Summary Judgment. On May 29, 1992, the Debtors filed their Statement of Undisputed Facts and Memorandum of Law in Support of their Motion for Summary Judgment. On May 29, 1992, asbestos claimants filed their Brief in Opposition to Debtors' Motion for Summary Judgment. On August 25, 1992, the Bankruptcy Court entered an order denying the Debtors' Motion for Summary Judgment. On September 3, 1992, the Debtors filed a motion to reopen the record to make additional findings of fact pursuant to Rule 43(e) of the Federal Rules of Civil Procedure. On September 18, 1992, the asbestos claimants filed their opposition to the Debtors' motion. On October 8, 1992, the Bankruptcy Court denied the Debtors' motion to reopen the record to make additional findings of fact. On September 14, 1992, the Debtors filed a motion to strike the asbestos claimants' demand for a jury trial and on September 21, 1992, the Debtors filed a motion for a pre-hearing conference to resolve all motions pending before the Bankruptcy Court. On October 7, 1992, the Bankruptcy Court entered an order granting the Debtors' motion to strike the asbestos claimants demand for jury trial. On July 29, 1992, the asbestos claimants served discovery requests upon the Debtors, Celotex, Jim Walter Corporation and other parties not defendants to the Declaratory Judgment Proceeding. Upon a motion for protective order by one of the non-party witnesses, which was granted by order dated October 7, 1992, the Bankruptcy Court suspended all discovery in the adversary proceeding, and indicated that it would enter, without a hearing, an order on the issue of additional permitted discovery, if any, on the veil piercing question and, if appropriate, describe the scope of any production of documents. On October 5, 1992, the asbestos claimants filed a motion for pre-trial conference to address a number of issues, including but not limited to the nature and scope of discovery. On October 30, 1992, the Bankruptcy Court entered orders denying all pending motions for pre-trial conference stating that the parties had not obtained further relief from the automatic stay in the Celotex bankruptcy case. On October 30, 1992, Celotex filed Proofs of Claim in each of the Debtor's bankruptcy cases claiming that each Debtor is liable for all claims which Celotex may hold (1) predicated upon a piercing the corporate veil, alter ego, instrumentality, agency, conspiracy and any related theory of law, equity or admiralty; (2) arising out of the leveraged buyout of Original Jim Walter which resulted in the January 7, 1988 transfer by Hillsborough Acquisition Corporation of substantially all of its assets to the Company; (3) arising out of the transfer of Celotex assets for less than reasonably equivalent value; and (4) arising out of that certain Stock Purchase Agreement dated April 21, 1988 and amendments thereto. The total amount of the Proofs of Claim included all scheduled and filed claims against Celotex in their bankruptcy proceedings, all unfiled present asbestos-related personal injury and property damage claims and all future asbestos-related personal injury claims against Celotex. On November 6, 1992, the Debtors filed their objections to the claims of Celotex. On November 25, 1992, the Bankruptcy Court sustained the Debtors objections to the Proofs of Claim filed by Celotex without prejudice to the right to file Proofs of Claim, if appropriate, at the conclusion of the veil piercing litigation. On November 13, 1992, the Debtors filed a motion in the Celotex bankruptcy case for limited relief from the automatic stay for the sole purpose of permitting a trial on the veil piercing claims in the Declaratory Judgment Proceeding and the prosecution or defense of any appeals arising from or relating to the decision in such trial. On December 4, 1992, the asbestos claimants filed a cross-motion for relief from the automatic stay requesting that the automatic stay be lifted to permit Celotex to participate in all aspects of the Declaratory Judgment Proceeding. On December 9, 1992, Judge Baynes granted relief from the automatic stay, permitting Celotex to participate in all aspects of the Declaratory Judgment Proceeding up through final judgment. On December 15, 1992, the Debtors, asbestos claimants, Celotex and Jim Walter Corporation filed a Joint Motion for Pre-Trial Conference which the Bankruptcy Court granted. On January 13, 1993, a pre-trial conference was held. As a result of the pre-trial conference, the Bankruptcy Court entered two orders on February 3, 1993. One order identified five discrete issues to be tried. The other order set forth a detailed schedule for any discovery which remained. On February 16, 1993, the Debtors filed a Motion for Reconsideration in the Bankruptcy Court seeking a reconsideration of the discovery schedule which the Debtors believe to be unnecessarily long. In the motion for reconsideration, the Debtors proposed a more condensed discovery schedule which would lead to a trial of the remaining issues by July 1993. The Bankruptcy Court granted the motion for reconsideration and held a hearing on March 17, 1993, wherein the Bankruptcy Court agreed to review the issue and enter an order accordingly. At a hearing held on April 22, 1993, the Bankruptcy Court stated that the trial on the remaining issues would commence December 13, 1993. On February 18, 1993, the Debtors served upon the asbestos claimants discovery requests in the form of interrogatories and requests for production of documents. On February 18, 1993, the asbestos claimants served upon the Debtors (i) discovery requests in the form of interrogatories and requests for production of documents and (ii) deposition notices which included document production requests on certain parties not defendants to the Declaratory Judgment Proceeding. The Debtors, Jim Walter Corporation, the asbestos claimants, and other non-party defendants filed responses and motions for protective orders regarding certain discovery requests which motions were heard on March 17, 1993. The Bankruptcy Court entered an order from the bench both granting and denying particular subject matters contained in the motions for protective orders. The Bankruptcy Court gave all parties until April 10, 1993 to comply with the discovery requests in accordance with the Bankruptcy Court's guidance. The Debtors produced additional documents in accordance with the Bankruptcy Court's order and answered additional interrogatories. On April 15, 1993, the asbestos claimants filed motions to compel the Debtors, Jim Walter Corporation and Celotex to respond to their discovery requests with more detailed financial documents. At a hearing on April 22, 1993, the Bankruptcy Court denied in almost its entirety the asbestos claimants motion to compel filed against the Debtors. The motions to compel filed against Jim Walter Corporation and Celotex were continued to allow the parties to comply by April 30, 1993. On April 21, 1993, the asbestos claimants served Request for Admissions on the Debtors, Jim Walter Corporation and Celotex. On May 21, 1993, all parties served their responses to said Request for Admissions. On June 14, 1993, the Debtors filed a pre-conference statement requesting the Bankruptcy Court to set definite dates for discovery and all other pretrial matters. Prior to the June 16, 1993 status conference, the Debtors, asbestos claimants and other interested parties agreed to stipulate to certain dates contained within the Debtor's proposal. On June 21, 1993, the asbestos claimants served additional discovery on the Debtors, Celotex and Jim Walter corporation. The Debtors served responses thereto on July 1, 1993. On July 7, 1993, the Debtors filed a motion for protective order striking certain of the asbestos claimants' discovery requests. On July 14, 1993, the Debtors, Jim Walter Corporation, Celotex and the asbestos claimants entered into a stipulation that modified the previously agreed upon discovery dates in the Declaratory Judgment Proceeding and set a firm pre-trial schedule leading to a December 13, 1993 trial date, which the Bankruptcy Court approved by order dated August 17, 1993. On July 16, 1993, the asbestos claimants filed a Petition for Writ of Certiorari with the United States Supreme Court, seeking review of the decision of the Court of Appeals for the Eleventh Circuit denying the asbestos claimants' Writ of Mandamus on the issue of their right to a jury trial on veil piercing issues. On August 18, 1993, the Company filed its brief in opposition to the asbestos claimants Petition for Writ of Certiorari. On August 25, 1993, the asbestos claimants filed a reply brief. On October 4, 1993, the United States Supreme Court denied the petition for certiorari. On August 12, 1993, the Bankruptcy Court entered an order which denied the asbestos claimants motions to compel discovery against one non-party which, in effect, upheld the accountant-client privilege. On October 5, 1993, the Debtors filed a motion in the Bankruptcy Court which sought to limit the trial on the veil piercing claims in the Declaratory Judgment Proceeding to six days which was denied by the Bankruptcy Court at a hearing held November 3, 1993. On October 18, 1993, the Debtors, Jim Walter Corporation and the asbestos claimants filed their designation of testifying experts. On October 22, 1993, the Company filed a motion seeking to preclude the testimony of certain of the asbestos claimants designated experts. On November 16, 1993, the Bankruptcy Court entered an order that precluded the testimony of three of the asbestos claimants designated experts and limited the testimony of two of the other asbestos claimants designated experts. On October 21, 1993, the Bankruptcy Court entered an order which directed that, in order to assure the trial in the veil piercing adversary proceeding not be unduly prolonged, all parties must file all mutually agreed upon exhibits, premarked and accompanied by a log identifying each, no later than November 15, 1993. The parties thereafter entered into a stipulation which extended the time to file exhibits to December 7, 1993. A hearing to decide the admissibility of those exhibits in dispute was held November 29, 1993. The Bankruptcy Court ruled on the appropriate submission of certain grouped documents and limited by date the admissibility of other exhibits. The Bankruptcy Court scheduled a hearing for December 6, 1993 to consider any other motions which had been filed and to consider the admissibility of any other exhibits not decided at the November 29, 1993 hearing. On December 13, 1993, the Bankruptcy Court entered an order disposing of all outstanding motions relating to testimony by experts. On October 25, 1993, the asbestos claimants filed certain motions to compel production of documents and compliance with subpoena from third parties which were not parties to the adversary proceeding. At a hearing held November 3, 1993, the Bankruptcy Court allowed production of certain documents which were withheld under attorney-client privilege. By order dated November 5, 1993, the Bankruptcy Court denied the asbestos claimants motion to compel production of certain accountant's workpapers, holding that the accountant-client privilege was applicable. On November 24, 1993, the Bankruptcy Court entered an order denying the asbestos claimants motion to reschedule the pretrial conference scheduled for November 29, 1993 and the final evidentiary hearing scheduled to commence December 13, 1993. On December 6, 1993, the asbestos claimants filed a renewed motion for continuance which sought to continue the final evidentiary hearing until January 1994. On December 8, 1993, the Bankruptcy Court entered an order denying the renewed motion to reschedule the final evidentiary hearing. On December 8,1993, the asbestos claimants filed an Emergency Petition for Writ of Mandamus in the District Court which sought to have the District Court enter an order continuing the final evidentiary hearing. At a hearing held on December 9, 1993, the District Court denied the asbestos claimants' Emergency Petition for Writ of Mandamus. On December 13, 1993, the final evidentiary hearing commenced in the Bankruptcy Court and concluded on December 17, 1993. Post-trial briefs were submitted by the Company, Jim Walter Corporation and the asbestos claimants on March 16, 1994. On April 18, 1994, the Bankruptcy Court issued its Findings of Fact, Conclusions of Law and Memorandum Decision (the "Veil Piercing Decision"). In the Veil Piercing Decision, the Bankruptcy Court found that there was no basis for piercing the corporate veil, finding for the Debtors on every contested factual issue. In every case, the Bankruptcy Court found that Original Jim Walter's actions were motivated by sound business judgment and were consistent with sound business practices as recognized in the corporate business world. The Veil Piercing Decision addressed six specific factual issues: * Cash Management. Original Jim Walter had maintained a cash management system for all subsidiaries, including Celotex. The Bankruptcy Court found that the cash management system was totally consistent with sound business practices widely recognized in the corporate business world. * Corporate Assessment. Original Jim Walter recovered certain costs, including interest costs, through a corporate assessment charged to all subsidiaries, including Celotex. The Bankruptcy Court found nothing inherently improper in the assessment by a parent of charges incurred on behalf of the subsidiary. The Bankruptcy Court further stated that forcing the subsidiary to seek services from third parties would not have been either an efficient or economic manner to conduct its business. * Line of Business Reporting. Original Jim Walter and its subsidiaries reported results according to lines of business. The Bankruptcy Court found this to be a proper manner for a parent to oversee the operation of its subsidiaries. * Decision Making Process. The Bankruptcy Court rejected claims that Original Jim Walter management was improperly involved in the decision making processes of its subsidiaries, including capital acquisition and disposition decisions, instead finding that the involvement by Original Jim Walter in these areas was proper within the accepted standards of the corporate business world. * Motivation to Sell Assets. The Bankruptcy Court found that the asbestos claimants failed to prove that Original Jim Walter took any actions intended to evade any possible liability resulting from the asbestos litigation. The Bankruptcy Court found that the liquidation process was a result of sound proper business judgment and not motivated by any desire to injure the Asbestos Claimants or denude Celotex of its assets. * Repayment of Intercompany Payables. The Bankruptcy Court rejected the claim that it was improper for Celotex to have repaid intercompany payables owing to Original Jim Walter. The Bankruptcy Court found that those Original Jim Walter receivables were debts of Celotex. The Bankruptcy Court explicitly rejected the argument that there was an obligation to leave funds in Celotex, rather than repay valid debts to Original Jim Walter, because of Celotex' asbestos liabilities. A Final Judgment was also entered on April 18, 1994 holding that the corporate veil between Celotex and Jim Walter Corporation shall not be pierced. On April 26, 1994, the asbestos claimants filed a Notice of Appeal with the District Court appealing the Final Judgment entered by the Bankruptcy Court on April 18, 1994. On May 7, 1994, the asbestos claimants filed their statement of issues and designated those items which were to be included in the record on appeal. On May 19, 1994, the Debtors filed their counter designation of items to be included in the record on appeal. On June 3, 1994, the asbestos claimants filed emergency motions in the District Court to modify the briefing schedule and to modify page limits in the filing of briefs. On June 6, 1994, the District Court granted the asbestos claimants' emergency motion to modify the briefing schedule. On June 21, 1994, the Debtors filed an emergency motion on consent to expedite ruling on the asbestos claimants motion to modify page limits. On June 23, 1994, the District Court denied the asbestos claimants' motion to modify the page limits in the filing of briefs and ordered that the asbestos claimants serve and file their principal brief on or before July 18, 1994 and the Debtors file and serve their brief within 15 days thereafter. The asbestos claimants may then serve and file a reply brief within 10 days of the Debtors' service of their brief. On April 28, 1994, the Debtors commenced an adversary proceeding in the Celotex Chapter 11 Proceeding seeking the entry of a judgment declaring that under applicable law, an action to pierce the corporate veil between Celotex and Original Jim Walter is property of Celotex' Chapter 11 estate and therefore Celotex, as a debtor in possession, has the exclusive right to assert a corporate veil piercing action against Original Jim Walter on behalf of all Celotex creditors. The adversary proceeding seeks the entry of judgment declaring that all creditors of Celotex are therefore bound by the Veil Piercing Decision. Contemporaneous with the adversary proceeding, the Debtors filed a motion for summary judgment with respect to its complaint. On May 18, 1994, Celotex filed a motion to strike the Debtors' motion for summary judgment as being untimely filed. On June 17, 1994, Celotex and Carey Canada filed motions to dismiss Count (iii) of the complaint for failure to state an actual case or controversy with any named defendant, or, in the alternative, require the complaint to be amended. Further, Celotex and Carey Canada state that the adversary proceeding is properly stayed, and therefore their time to answer or otherwise respond should be deferred. While the Bankruptcy Court has granted the Debtors the relief sought, there can be no assurance that its ruling will be affirmed upon appeal. Moreover, the Debtors necessarily cannot predict the timing of any appellate proceedings. If the asbestos health and/or asbestos property damage claimants ultimately prevail on their allegations that the Debtors may be liable for claims asserted against Celotex, it is not possible at this time: (i) to quantify the amount of these claims, although the Debtors believe these claims will be substantial; (ii) to predict how these claims will be treated in any plan or plans of reorganization; (iii) to determine the impact of these claims on the operations of the Debtors; or (iv) to predict their ability to confirm a plan or plans of reorganization. JWC Holdings, Jim Walter Corporation, Celotex and the other subsidiaries of JWC Holdings have indemnified the Company and its affiliates against any liability or expense incurred as a result of any asbestos-related lawsuit. However, there can be no assurance that the Company and its affiliates will be reimbursed by Jim Walter Corporation and its subsidiaries pursuant to the aforementioned indemnity for any liability or expense resulting therefrom. The Company is a party to a number of other lawsuits arising in the ordinary course of its business. While the results of litigation cannot be predicted with certainty, the Company believes that the final outcome of such other litigation will not have a materially adverse effect on the Company's consolidated financial condition. NOTE 11--PENSION AND OTHER EMPLOYEE BENEFITS The Company has various pension and profit sharing plans covering substantially all employees. In addition to its own pension plans, the Company contributes to certain multi-employer plans. Total pension expense for the years ended May 31, 1994, 1993 and 1992, was $9.7 million, $16.5 million and $20.1 million, respectively. The decrease in pension expense in fiscal 1994 from the prior year is due principally to no contributions being required to be made to the United Mine Workers of America 1950 Pension Plan Trust as such trust had no unfunded vested benefits. The funding of retirement and employee benefit plans is in accordance with the requirements of the plans and, where applicable, in sufficient amounts to satisfy the "Minimum Funding Standards" of the Employee Retirement Income Security Act of 1974 ("ERISA"). The plans provide benefits based on years of service and compensation or at stated amounts for each year of service. The net pension costs for Company administered plans are as follows:
FOR THE YEARS ENDED MAY 31, 1994 1993 1992 (IN THOUSANDS) Service cost-benefits earned during the period $ 5,334$ 5,233 $ 4,849 Interest cost on projected benefit obligation 16,333 15,634 14,695 Actual return on assets (19,352) (18,131) (25,212) Net amortization and deferral 3,145 3,174 11,954 Net pension costs $ 5,460 $ 5,910 $ 6,286
The following table sets forth the funded status of Company administered plans: MAY 31, 1994 MAY 31, 1993 PLANS IN WHICH PLANS IN WHICH ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS Actuarial present value of accumulated benefit obligations: Vested benefits $133,348 $ 41,353 $115,915 $ 37,492 Non-vested benefits 5,599 1,604 4,639 1,626 $138,947 $ 42,957 $120,554 $ 39,118 Plan assets at fair value, primarily stocks and bonds $187,443 $ 27,012 $176,551 $ 24,926 Projected benefit obligations 166,386 42,957 149,258 39,118 Plan assets in excess of (less than) projected benefit obligations 21,057 (15,945) 27,293 (14,192) Unamortized portion of transition (asset) obligation at June 1, 1986 (11,281) 5,002 (12,546) 5,709 Unrecognized net loss (gain) from actual experience different from that assumed 808 2,903 (5,318) 79 Prior service cost not recognized 836 2,487 985 2,540 Contribution to plans after measurement date 879 819 1,369 771 Prepaid (accrued) pension cost 12,299 (4,734) 11,783 (5,093) Additional liability -- (10,393) -- (8,224) Prepaid pension cost (pension liability) recognized in the balance sheet $ 12,299 $(15,127) $ 11,783 $(13,317)
The projected benefit obligations were determined using an assumed discount rate of 8.0% in fiscal 1994 and 9.0% in fiscal 1993 and, where applicable, an assumed rate of increase in future compensation levels of 5% in fiscal 1994 and 6% in fiscal 1993. The assumed long-term rate of return on plan assets is 8%. Under the labor contract with the United Mine Workers of America, Jim Walter Resources makes payments into multi-employer pension plan trusts established for union employees. Under ERISA, as amended by the Multiemployer Pension Plan Amendments Act of 1980, an employer is liable for a proportionate part of the plans' unfunded vested benefits liabilities. The Company estimates that its allocated portion of the unfunded vested benefits liabilities of these plans amounted to approximately $43.0 million at May 31, 1994. However, although the net liability can be estimated, its components, the relative position of each employer with respect to actuarial present value of accumulated benefits and net assets available for benefits, are not available to the Company. The Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in fiscal 1993. Upon adoption, the Company elected to record the transition obligation of $166.4 million pre-tax ($104.6 million after tax) as a one-time charge against earnings, rather than amortize it over a longer period. This obligation is primarily related to the health benefits for eligible retirees. Post-retirement benefit costs were $25.6 million in 1994 and $23.5 million in 1993. Amounts paid for postretirement benefits were $5.5 million in 1994, $6.5 million in 1993 and $3.9 million in 1992. The net periodic postretirement benefit cost includes the following components: FOR THE YEARS ENDED MAY 31, 1994 1993 (IN THOUSANDS) Service cost $ 9,302 $ 8,495 Interest cost 16,283 14,979 Net periodic postretirement benefit cost $25,585 $23,474 The accumulated postretirement benefits obligation at May 31, 1994 and 1993 are as follows: MAY 31, 1994 1993 (IN THOUSANDS) Retirees $ 72,779 $ 70,220 Fully eligible, active participants 26,234 23,493 Other active participants 122,228 96,192 Accumulated postretirement benefit obligation 221,241 189,905 Unrecognized net loss (11,279) -- Postretirement benefit liability recognized in the balance sheet $209,962 $189,905 The principal assumptions used to measure the accumulated postretirement benefit obligation include a discount rate of 8% in fiscal 1994 and 9% in fiscal 1993 and a health care cost trend rate of 13% declining to 6.0% over a twelve year period and remaining level thereafter in fiscal 1994 and a health care cost trend rate of 14% declining to 6.5% in fiscal 1993. The change in the assumptions used to calculate the accumulated postretirement benefits obligation resulted in an unrecognized net loss of $11.3 million. A one percent increase in the health care cost component would increase the accumulated postretirement benefit obligation by approximately $35.1 million and increase net periodic postretirement benefit cost for 1994 by approximately $5.1 million. Certain subsidiaries of the Company maintain profit sharing plans. The total cost of these plans for the years ended May 31, 1994, 1993 and 1992 was $3.1 million, $3.0 million and $2.7 million, respectively. NOTE 12--FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("FAS 107") requires disclosure of estimated fair values for all financial instruments for which it is practicable to estimate fair value. Considerable judgment is necessary in developing estimates of fair value and a variety of valuation techniques are allowed under FAS 107. The derived fair value estimates resulting from the judgments and valuation techniques applied cannot be substantiated by comparison to independent materials or to disclosures by other companies with similar financial instruments. Furthermore, FAS 107 fair value disclosures do not purport to be the amount which could be attained in immediate settlement of the financial instrument. Fair value estimates are not necessarily more relevant than historical cost values and have limited usefulness in evaluating long-term assets and liabilities held in the ordinary course of business. Accordingly, management believes that the disclosures required by FAS 107 have limited relevance to the Company and its operations. In addition, because of the Company's petition for reorganization (see Note 2) and the asbestos-related litigation (see Note 10) estimates are either not practicable or are subject to a much wider degree of uncertainty than would normally be the case. The following methods and assumptions were used to estimate fair value disclosures: Cash (including short-term investments) and short-term investments-restricted--The carrying amount reported in the balance sheet approximates fair value. Instalment notes receivable--In connection with the Reorganization Proceedings, the Debtors financial advisor made a valuation of the mortgage portfolio at May 31, 1993, which has been adjusted to reflect the estimated increase in value resulting from the addition of net new mortgage notes during fiscal 1994. This estimated value ranges from $1.065 billion to $1.104 billion as compared to a net carrying value of $487.2 million (net of indebtedness of $872 million secured by certain of the instalment notes receivable). Value of mortgage-backed instruments such as instalment notes receivable are very sensitive to changes in interest rates. Debt--Due to the uncertainties arising from the Debtors' petitions for reorganization, the asbestos-related litigation and the preliminary status of plan of reorganization negotiations there are no reliable market quotations or other valid market comparisons and accordingly, it is impracticable to estimate a fair value of the Company's various outstanding debt instruments. NOTE 13--SEGMENT INFORMATION Information relating to the Company's business segments is set forth on pages F-37 and F-38. NOTE 14--SUMMARIZED FINANCIAL INFORMATION The consolidated financial statements presented herein are of the Company, which is a guarantor of the obligations of the Senior Note Issuers and the Subordinated Note Issuers (see Note 5). Summarized financial information for the Senior Note Issuers and the Subordinated Note Issuers is set forth below:
SENIOR NOTES ISSUERS SUBORDINATED NOTE ISSUERS FOR THE YEARS ENDED FOR THE YEARS ENDED MAY 31, MAY 31, 1994 1993 1992 1994 1993 1992 (IN THOUSANDS) (IN THOUSANDS) INCOME DATA Net sales and revenues $839,146 $858,560 $932,056 $524,840 $510,944 $516,368 Cost of sales (exclusive of depreciation, depletion and amortization) 661,748 630,917 730,655 404,761 390,550 384,346 Other operating expenses 103,187 103,257 119,224 77,242 74,221 77,013 Postretirement health benefits (Note 11) 20,931 19,307 -- 6,281 5,870 -- Chapter 11 costs 7,048 4,845 3,000 4,350 2,933 1,664 Interest and amortization of debt expense 42,803 43,092 45,990 28,304 28,625 30,226 Amortization of excess purchase price 21,436 21,498 21,431 23,182 23,244 23,181 (18,007) 35,644 11,756 (19,280) (14,499) (62) Provision for income taxes (Note 6) 396 (14,785) 392 (3,215) (3,469) (8,000) Income (loss) from operations before cumulative effect of accounting change (17,611) 20,859 12,148 (22,495) (17,968) (8,062) Cumulative effect of change in accounting principle--postretirement benefits other than pensions (net of income tax benefit) (Note 11) -- (82,513) -- -- (26,725) -- Net income (loss) $(17,611) $(61,654) $ 12,148 $(22,495) $(44,693) $ (8,062)
SENIOR NOTES ISSUERS SUBORDINATED NOTE ISSUERS MAY 31, MAY 31, 1994 1993 1992 1994 1993 1992 (IN THOUSANDS) (IN THOUSANDS) ASSETS Cash (includes short-term investments) $ 22,673 $ 23,753 $ 21,531 $ 22,638 $ 23,714 $ 21,479 Short-term investments, restricted 6,927 8,652 10,986 3,910 5,699 8,195 Trade and other receivables, net 100,490 114,169 112,877 82,197 72,582 70,436 Inventories 132,850 128,647 129,848 102,986 93,384 90,534 Prepaid expenses 8,177 4,921 5,531 3,610 3,300 3,938 Intercompany receivables 1,914,257 1,723,343 1,545,659 1,419,685 1,264,689 1,153,071 Property, plant and equipment, net 522,070 525,779 523,763 169,186 172,962 173,930 Unamortized debt expense and other assets 27,269 33,563 39,520 18,171 25,671 32,433 Excess of purchase price over net assets acquired 284,238 305,673 327,171 307,386 330,568 353,812 $3,018,951 $2,868,500 $2,716,886 $2,129,769 $1,992,569 $1,907,828 LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) Bank overdrafts $ 21,752 $ 13,590 $ 21,347 $ 12,184 $ 9,758 $ 14,108 Accounts payable and accrued expenses 113,235 115,162 123,105 60,285 57,694 61,878 Income taxes payable (Note 6) 7,548 7,209 6,557 5,600 5,036 4,853 Deferred income taxes (Note 6) 56,282 63,514 128,401 34,146 40,812 66,433 Intercompany payables 693,786 578,132 483,491 698,066 570,337 483,369 Long-term senior debt -- 6,264 -- -- -- -- Accrued postpetition interest on secured obligations 194,621 152,633 110,821 132,683 104,665 76,741 Accumulated postretirement health benefits obligation (Note 11) 166,631 150,904 -- 53,009 48,492 -- Other long-term liabilities 37,368 36,178 37,404 7,543 6,949 7,598 Liabilities subject to Chapter 11 proceedings 1,733,187 1,731,865 1,731,406 1,445,394 1,444,575 1,444,253 Stockholder's equity (deficit) (5,459) 13,049 74,354 (319,141) (295,749) (251,405) $3,018,951 $2,868,500 $2,716,886 $2,129,769 $1,992,569 $1,907,828
WALTER INDUSTRIES, INC. AND SUBSIDIARIES SEGMENT INFORMATION FOR THE YEARS ENDED MAY 31, 1994 1993 1992 (IN THOUSANDS) Sales and Revenues: Homebuilding and related financing $ 424,530 $ 419,378 $ 409,071 Building materials 56,111 51,539 46,887 Industrial products 180,615 171,541 165,007 Water and waste water transmission products 345,136 320,740 324,400 Natural resources(e) 319,410 351,017 419,274 Corporate 2,722 4,771 1,942 Consolidated sales and revenues(a)(f) $1,328,524 $1,318,986 $1,366,581 Contributions to Operating Income: Homebuilding and related financing $ 101,954 $ 88,902 $ 82,718 Building materials 2,074 2,354 2,343 Industrial products 11,873 9,997 11,226 Water and waste water transmission products 25,545 14,990 24,492 Natural resources (1,175) 50,807 16,020 140,271 167,050 136,799 Less-Unallocated corporate interest and other expense(b) (104,179) (96,128) (101,994) Income taxes (28,917) (24,328) (12,463) Income from operations(c) $ 7,175 $ 46,594 $ 22,342 Depreciation, Depletion and Amortization: Homebuilding and related financing $ 3,093 $ 3,113 $ 3,059 Building materials 1,570 1,421 1,103 Industrial products 8,915 8,654 9,118 Water and waste water transmission products 15,399 15,079 14,492 Natural resources 40,326 40,714 53,556 Corporate 1,732 1,502 1,473 Total $ 71,035 $ 70,483 $ 82,801 Gross Capital Expenditures: Homebuilding and related financing $ 3,210 $ 6,284 $ 6,357 Building materials 1,115 998 709 Industrial products 9,752 8,344 7,284 Water and waste water transmission products 13,613 12,084 16,379 Natural resources 40,224 42,941 36,993 Corporate 1,917 1,057 627 Total $ 69,831 $ 71,708 $ 68,349 Identifiable Assets: Homebuilding and related financing $1,832,919 $1,907,199 $1,899,737 Building materials 55,568 57,343 57,564 Industrial products 132,685 129,392 129,723 Water and waste water transmission products 475,369 478,234 496,890 Natural resources 450,468 475,533 477,150 Corporate(d) 193,883 175,533 110,202 Total $3,140,892 $3,223,234 $3,171,266
(a) Inter-segment sales (made primarily at prevailing market prices) are deducted from sales of the selling segment and are insignificant in amount with the exception of the sales of the Industrial Products Group to the Water and Waste Water Transmission Products Group of $19,359,000, $18,667,000 and $16,661,000 and sales of the Natural Resources Group to the Industrial Products Group of $5,650,000, $7,121,000 and $9,552,000 in 1994, 1993 and 1992, respectively. (b) Excludes interest expense incurred by the Homebuilding and Related Financing Group of $128,828,000, $137,945,000 and $136,955,000 in 1994, 1993 and 1992, respectively. The balance of unallocated expenses is attributable to all groups and cannot be reasonably allocated to specific groups. (c) Includes postretirement health benefits of $25,585,000 and $23,474,000 in 1994 and 1993. A breakdown by segment is as follows: FOR THE YEARS ENDED MAY, 31, 1994 1993 (IN THOUSANDS) Homebuilding and related financing $ 2,170 $ 1,991 Building materials 504 463 Industrial products 3,158 2,821 Water and waste water transmission products 4,391 4,136 Natural resources 14,681 13,437 Corporate 681 626 $25,585 $23,474 (d) Primarily cash and corporate headquarters buildings and equipment. (e) Includes sales of coal of $289,279,000, $321,834,000 and $392,674,000 in 1994, 1993 and 1992, respectively. (f) Export sales, primarily coal, were $155,966,000, $183,188,000 and $206,546,000 in 1994, 1993 and 1992, respectively. Export sales to any single geographic area do not exceed 10% of consolidated net sales and revenues. EXHIBIT A.2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion should be read in conjunction with the consolidated financial statements and notes thereto of Walter Industries, Inc. and subsidiaries (see Index to Financial Statements on Page F-1), particularly the "Segment Information" on pages F-37 and F-38 which presents sales and operating income by operating group. The "Segment Information" is prepared on the basis of product markets rather than legal corporate structures and thus does not reflect separate data for the issuers and guarantors of certain of the Company's outstanding indebtedness. However, see Note 14 of Notes to Financial Statements as to combined financial data for such issuers. The guarantors are holding companies and neither one currently, with the exception of Walter Industries, Inc., which provides certain corporate staff functions and owns a twin-tower, eight story office building located on a plot of land in excess of 13 acres in Tampa, Florida, has any substantial properties or engages in any substantial business other than through subsidiaries. RESULTS OF OPERATIONS: YEARS ENDED MAY 31, 1994 AND 1993 Net sales and revenues for the year ended May 31, 1994 were $9.5 million, or .7%, greater than the prior year. The improved performance was the result of increased pricing and/or product mix as sales volumes were level with the prior year. The increase in net sales and revenues resulted from improved sales and revenues in the Homebuilding and Related Financing, Building Materials, Industrial Products and Water and Waste Water Transmission Products Groups, partially offset by lower sales and revenues in the Natural Resources Group. Homebuilding and Related Financing Group sales and revenues were $5.2 million, or 1.2%, greater than the prior year. This performance reflects a 3.5% increase in the average selling price per home sold from $37,000 in 1993 to $38,300 in 1994, which was more than offset by a 9.5% decrease in the number of homes sold, from 4,784 units in 1993 to 4,331 units in 1994. The higher average selling price in 1994 reflects a price increase instituted April 1, 1993 to compensate for higher lumber costs and a greater percentage of "90% complete" homes sold this year versus last year. The decrease in unit sales reflects continuing strong competition in virtually every Jim Walter Homes sales region. Jim Walter Homes' backlog at May 31, 1994 was 2,065 units (all of which are expected to be completed prior to the end of fiscal 1995) compared to 1,831 units at May 31, 1993. Time charge income (revenues received from Mid-State Home's instalment note portfolio) increased from $218.7 million in 1993 to $238.1 million in 1994. The increase in time charge income is attributable to increased payoffs received in advance of maturity and to an increase in the average balance per account in the portfolio. The Group's operating income of $102.0 million exceeded the prior year period by $13.1 million. This improvement resulted from the increase in the average selling price per home sold, the higher time charge income and lower interest expense in 1994 ($128.8 million) compared to that incurred in 1993 ($137.9 million), partially offset by the lower number of homes sold, reduced homebuilding gross profit margins and higher selling, general and administrative expenses. The lower gross profit margins were the result of higher average lumber prices, the effect of discounts relating to sales promotions on certain models instituted during the period February 1994 through May 1994 and the decision in October 1992 to reduce gross profit margins on five smaller basic shelter homes to generate additional sales. Building Materials Group sales and revenues were $4.6 million, or 8.9%, greater than the prior year. The increase principally resulted from improved sales prices and volumes for window components and greater metal building and foundry products sales volumes. The Group's operating income of $2.1 million was $280,000 below the prior year. The lower performance was the result of the increased manufacturing costs in the window components and metal building and foundry businesses, partially offset by the increased sales. Industrial Products Group sales and revenues were $9.1 million, or 5.3%, ahead of the prior year. Increased sales volumes of aluminum foil, foundry coke, castings, resin coated sand and chemicals and higher selling prices for furnace coke were partially offset by lower sales volumes of mineral wool and patterns and tooling and lower selling prices for aluminum foil and sheet. The Group's operating income of $11.9 million was $1.9 million greater than the prior year. The improved performance resulted from the sales increase and higher gross profit margins for furnace coke and mineral wool, partially offset by reduced margins for chemicals, foundry coke, castings, resin coated sand and patterns and tooling. Water and Waste Water Transmission Products Group sales and revenues were $24.4 million, or 7.6%, ahead of the prior year. The increase was the result of higher selling prices and volumes for ductile iron pressure pipe and valves and hydrants and increased selling prices for fittings, partially offset by lower fittings volume. The order backlog of pressure pipe at May 31, 1994 was 111,907 tons, which represents approximately three months shipments, compared to 121,173 tons at May 31, 1993. Operating income of $25.5 million exceeded the prior year period by $10.6 million. The improved performance resulted from the increased sales prices and volumes, partially offset by higher raw material costs, especially scrap, a major raw material component. Natural Resources Group sales and revenues were $31.6 million, or 9.0%, below the prior year. The decrease resulted from lower sales volumes and prices for coal and reduced methane gas selling prices, partially offset by increased methane gas sales volume and an increase in outside gas and timber royalty income. A total of 6.56 million tons of coal was sold in 1994 versus 7.18 million tons in 1993. The decrease in tonnage sold was the result of lower shipments to Alabama Power Company ("Alabama Power") and Japanese steel mills. Reduced shipments to Alabama Power were the result of an agreement reached with Alabama Power to ship only the Reduced Base Tonnage Coal (2 million tons per year) and Period 2 Tonnage Coal (500,000 tons) for the contract year ending June 30, 1994 (see Financial Condition for further discussion). The average price per ton of coal decreased 1.6%, from $44.84 in 1993 to $44.13 in 1994 due to lower prices realized on shipments to Japanese steel mills and other export customers. Blue Creek Mine No. 5 ("Mine No. 5") was shut down from November 17, 1993 through December 16, 1993 as a precautionary measure as a result of air monitoring tests detecting evidence of spontaneous combustion heatings in a section of the mine. Mine No. 5 was shut down for a substantial portion of the period from July 9, 1990 through September 16, 1990 when a similar problem occurred. The heatings were a result of pyritic sulfur concentrations occurring in the coal seam being exposed to air. Representatives of Jim Walter Resources, the Mine Safety and Health Administration ("MSHA"), Alabama State Mine Inspectors and the United Mine Workers of America ("UMWA") investigated the problem. Since the area of the suspected heatings was inaccessible, a decision was made to drill vertical holes from the surface and flood the area with combinations of water, carbon dioxide, foam and cementitious mixtures to neutralize the spontaneous combustion heatings. MSHA approved the resumption of operations at the mine on December 17, 1993. In early April 1994 the spontaneous heatings recurred and the mine was shut down. Representatives of Jim Walter Resources, MSHA, Alabama State Mine Inspectors and the UMWA agreed that the longwall coal panel being mined at the time the spontaneous heatings recurred would be abandoned and sealed off. Development mining for the two remaining longwall coal panels in this section of the mine resumed May 16, 1994 and the first panel will be ready for mining approximately January 1, 1995. Production will be adversely impacted until January 1, 1995; however a portion of the costs will be recovered from business interruption insurance. The Group incurred an operating loss of $1.2 million in 1994 compared to operating income of $50.8 million in 1993. The lower performance reflects the decrease in sales volumes and prices for coal, lower methane gas selling prices, reduced coal mining productivity as a result of various geological problems in all mines during portions for the year which resulted in higher costs per ton of coal produced and idle plant costs of $5.7 million associated with the Mine No. 5 shut downs which more than offset the effect of increased methane gas sales volumes and the greater outside gas and timber royalty income. Cost of sales, exclusive of depreciation, of $845.1 million was 79.1% of net sales versus $804.4 million and 75.0% in 1993. The cost of sales percentage increase was primarily the result of lower gross profit margins on home sales, coal, chemicals, foundry coke, industrial castings, resin coated sand, patterns and tooling, window components and metal building and foundry products, partially offset by improved margins on furnace coke, mineral wool and pipe products. Selling, general and administrative expenses (exclusive of postretirement health benefits) of $127.9 million were 9.6% of net sales and revenues in 1994 versus $124.6 million and 9.4% in 1993. The Company adopted Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS 106") in 1993 (see Note 11 of Notes to Financial Statements). Upon adoption the Company elected to record the transition obligation of $166.4 million pre-tax ($104.6 million after tax) as a one time charge against earnings rather than amortize it over a longer period. The annual accrual for postretirement health benefit costs in 1994 was $25.6 million versus $23.5 million in 1993. Interest and amortization of debt discount and expense decreased $16.1 million. The decrease was principally the result of reductions in the outstanding debt balances on the Mortgage-Backed Notes and Asset Backed Notes (see Note 5 of Notes to Financial Statements) and lower amortization of debt discount and expense, partially offset by higher interest rates. Interest in the amount of $724.3 million ($163.7 million in the current year) on unsecured obligations has not been accrued in the consolidated financial statements since the date of the filing of petitions for reorganization. This amount is based on the balances of the unsecured debt obligations and their interest rates as of December 27, 1989 and does not consider fluctuations in the level of short-term debt and interest rates and the issuance of commercial paper that would have occurred to meet the working capital requirements of the Homebuilding and Related Financing Group (see Notes 2, 3 and 5 of Notes to Financial Statements). Such interest rates do not presently govern the respective rights of the Company, its subsidiaries and the various lenders. Instead the rights of the parties will be determined in connection with the Reorganization Proceedings. Amortization of excess of purchase price over net assets acquired (goodwill) increased $9.1 million. The increase resulted from adjustments to amortization of the goodwill due to greater payoffs received in advance of maturity on the instalment note portfolio (see Note 1 of Notes to Financial Statements). The Omnibus Budget Reconciliation Act of 1993 increased the federal corporate tax rate to 35% from 34%. Also, Statement of Financial Accounting Standards No. 109 requires that deferred tax liabilities and assets be adjusted whenever there is a rate change. The effect of the rate change resulted in a $2.8 million charge to deferred tax expense. The rate change effect combined with reduced percentage depletion and increased amortization of goodwill (both permanent book/tax differences) resulted in an effective tax rate of 80.1% in 1994 versus an effective tax rate of 34.3% in 1993. The net income for 1994 and the net loss 1993 reflects all of the previously mentioned factors as well as the $4.5 million increase in Chapter 11 costs, partially offset by slightly higher interest income from Chapter 11 proceedings. The increase in Chapter 11 costs was due to the veil piercing litigation and the filing of two amended plans of reorganization (see Notes 2 and 10 of Notes to Financial Statements). YEARS ENDED MAY 31, 1993 AND 1992 As previously mentioned, the Company adopted FAS 106 in 1993. Accordingly, operating income presented in the "Segment Information" includes postretirement health benefits of $23.5 million in 1993. However, for purposes of the following discussion of results of operations for the years ended May 31, 1993 and 1992, the fiscal 1993 operating income referred to in each business segment excludes such postretirement health benefits expense (hereinafter referred to as "1993 adjusted operating income"). Net sales and revenues for the year ended May 31, 1993 decreased $47.6 million, or 3.5%. A 5.9% decrease in volume was partially offset by a 2.4% increase in price and/or product mix. The decrease in net sales and revenues resulted from lower sales and revenues in the Water and Waste Water Transmission Products and Natural Resources Groups, partially offset by improved sales in the Homebuilding and Related Financing, Building Materials and Industrial Products Groups. Water and Waste Water Transmission Products Group sales and revenues were $3.7 million, or 1.1%, below the prior year. The decrease was basically the result of lower ductile iron pressure pipe sales volume due to continued weak construction activity and rehabilitation work, partially offset by improved selling prices. The order backlog of pressure pipe at May 31, 1993 was 121,173 tons compared to 121,956 tons at May 31, 1992. The 1993 adjusted operating income of $19.1 million was $5.4 million below the prior year. The effect of lower ductile iron pressure pipe sales volume on this highly capital intensive product group was the primary reason for the decline in operating profit which was partially offset by lower scrap costs, a major raw material component, improved selling prices and reduced selling, general and administrative expenses (due principally to legal and settlement costs in 1992 associated with a lawsuit filed by the City of Atlanta). Natural Resources Group sales and revenues were $68.3 million, or 16.3%, below the prior year. The decrease was the result of lower coal shipments and a decrease in outside coal royalties, partially offset by higher average selling prices for coal and methane gas and greater methane gas sales volume. A total of 7.18 million tons of coal was sold in 1993 versus 9.18 million tons in 1992, a 22% decrease. On June 17, 1992 a major production hoist accident occurred at Blue Creek Mine No. 3 ("Mine No. 3") causing extensive damage. The mine did not resume production until August 31, 1992. The hoist accident resulted in a mutually agreed postponement of shipments of 400,000 tons to Alabama Power from the period July through September 1992 to the period January through June 1993. Fiscal 1992 tonnage shipments to Alabama Power were favorably impacted by a separate lower selling price short-term contract for 964,000 tons. Shipments to the Japanese steel mills and other export customers were also below the prior year due to the hoist accident and an April 1992 workforce reduction which reduced production tonnage available for sale. The average price per ton of coal sold increased 4.9%, from $42.76 in 1992 to $44.84 in 1993. The higher price realization in 1993 was the result of coal shipped to Alabama Power in 1992 under the previously mentioned separate lower selling price short-term contract, partially offset by lower selling prices to the Japanese and other export customers in 1993. The Group's 1993 adjusted operating income of $64.2 million exceeded the prior year by $48.2 million. The improved performance resulted from the increased coal and methane gas average selling prices, higher methane gas sales volume, lower selling, general and administrative expenses and improved mining productivity, including the effect of the April 1992 workforce reduction, which resulted in lower costs per ton of coal produced, partially offset by the reduced coal sales volume and the decrease in outside coal royalties. Prior year results were also adversely impacted by severance, vacation pay and ongoing medical benefits associated with the April 1992 workforce reduction ($6.2 million), accelerated depreciation on the remaining assets at a previously closed small coal mine ($5.6 million) and idle plant costs associated with a three week shutdown of Blue Creek Mine No. 4 ("Mine No. 4") due to an accident which damaged the production hoist ($4.4 million) and wildcat strikes by the UMWA ($2.4 million) in August 1991. Homebuilding and Related Financing Group sales and revenues were $10.3 million, or 2.5%, greater than 1992. This performance reflects a 6.9% increase in the average selling price per home sold, from $34,600 in 1992 to $37,000 in 1993, which was more than offset by a 9.8% decrease in the number of homes sold, from 5,305 units in 1992 to 4,784 units in 1993. The increase in average selling price in 1993 was attributable to higher average prices realized on both the standard line and the larger sized Regency homes combined with a greater percentage of Regency homes sold. The decrease in unit sales reflected strong competition in virtually every Jim Walter Homes sales region and 1993 having a one week shorter sales period than 1992. Jim Walter Homes' backlog at May 31, 1993 was 1,831 units compared to 1,637 units at May 31, 1992. Time charge income (revenues received from Mid-State's instalment note portfolio) increased from $195.0 million in 1992 to $218.7 million in 1993. The increase in time charge income was attributable to the growth of the mortgage portfolio, increased payoffs received in advance of maturity and new mortgages having a higher yield than the older mortgages paying out. The Group's 1993 adjusted operating income of $90.9 million exceeded the prior year by $8.2 million. This improvement resulted from the increase in average selling price per home sold, the higher time charge income and lower selling, general and administrative expenses, partially offset by the lower number of homes sold, reduced homebuilding gross profit margins (due principally to the sales of the larger sized, lower margin Regency homes and increased lumber prices) and slightly higher interest expense in 1993 ($137.9 million) as compared to that incurred in 1992 ($137.0 million). Lumber prices rose from $259 per thousand board feet in June 1992 to a high of $506 in March 1993 and ended the year at $325. A price increase was instituted effective April 1, 1993 to compensate for these increased costs. Building Materials Group sales and revenues were $4.7 million, or 9.9%, ahead of the prior year. The increase resulted from improved window components and metal building and foundry products sales volumes, partially offset by lower overall sales prices and/or mix. The Group's 1993 adjusted operating income of $2.8 million was $500,000 greater than the prior year as the increased sales volumes and improved operating efficiencies in the metal building and foundry business more than offset the lower selling prices and increased manufacturing costs in the window components business. Industrial Products Group sales and revenues were $6.5 million, or 4.0%, greater than the prior year. Increased sales volumes of foundry coke, chemicals, castings and aluminum foil were partially offset by lower sales volumes of aluminum sheet, resin coated sand, patterns and tooling, furnace coke and mineral wool and lower selling prices for aluminum foil and sheet, furnace coke, resin coated sand and patterns and tooling. The Group's 1993 adjusted operating income of $12.8 million exceeded the prior year by $1.6 million. The improved performance was the result of the increased sales volumes and improved gross profit margins for castings, partially offset by lower margins for chemicals, resin coated sand and patterns and tooling. Cost of sales, exclusive of depreciation, of $804.4 million was 75.0% of net sales versus $891.9 million and 78.3% in 1992. The cost of sales percentage decrease was primarily the result of improved gross profit margins on coal, metal building and foundry products and industrial castings, partially offset by lower margins on home sales, ductile iron pressure pipe, chemicals, resin coated sand and patterns and tooling. Results in 1992 were adversely affected by the impact of charges resulting from the previously mentioned Jim Walter Resources mining operations workforce reduction and idle plant costs associated with the wildcat strikes by the UMWA. Selling, general and administrative expenses of $124.6 million were 9.4% of net sales and revenues in 1993 as compared to $129.4 million and 9.5% in 1992. Expenses in 1992 were adversely impacted by legal and settlement costs associated with a lawsuit filed by the City of Atlanta. As previously mentioned, the Company adopted FAS 106 in 1993. Upon adoption, the Company elected to record the transition obligation of $166.4 million pre-tax ($104.6 million after tax) as a one time charge against earnings rather than amortize it over a longer period. The annual accrual under the new accounting method amounted to $23.5 million in the year ended May 31, 1993. See Note 11 of the Notes to Financial Statements. Interest and amortization of debt discount and expense decreased $5.5 million. The decrease was the result of lower outstanding debt balances on secured obligations (see Notes 2, 3 and 5 of Notes to Financial Statements) and lower interest rates, partially offset by greater amortization of debt discount and expense. Interest in the amount of $560.6 million ($163.7 million in 1993) on unsecured obligations has not been accrued in the consolidated financial statements since the date of the filing of petitions for reorganization. This amount is based on the balances of the unsecured debt obligations and their interest rates as of December 27, 1989 and does not consider fluctuations in the level of short term debt and interest rates and the issuance of commercial paper that would have occurred to meet the working capital requirements of the Homebuilding and Related Financing Group (see Notes 2, 3 and 5 of Notes to Financial Statements). Such interest rates do not presently govern the respective rights of the Company, its subsidiaries and the various lenders. Instead the rights of the parties will be determined in connection with the Reorganization Proceedings. The net loss for 1993 and the net income for 1992 reflects all of the previously mentioned factors as well as the impact of a slightly lower effective income tax rate (see Note 6 of Notes to Financial Statements) and slightly higher interest income from Chapter 11 proceedings, partially offset by a $4.6 million increase in Chapter 11 costs. YEARS ENDED MAY 31, 1992 AND 1991 Net sales and revenues for the year ended May 31, 1992 increased $40.2 million, or 3.0%. A 4.8% increase in volume was partially offset by a 1.8% decrease in price and/or product mix. The increase in net sales and revenues resulted from improved sales and revenues in the Homebuilding and Related Financing, Building Materials, Industrial Products and Water and Waste Water Transmission Products Groups, partially offset by lower sales in the Natural Resources Group and lower Corporate revenues (basically lower interest income from Chapter 11 proceedings). There is no identifiable reason for the increase in volume of the many different product lines of the Company's subsidiaries other than improved activity in the markets for these products. Homebuilding and Related Financing Group net sales and revenues were $19.9 million, or 5.1%, greater than 1991. The improved performance includes a 3.6% increase in the average price per home sold, from $33,400 in 1991 to $34,600 in 1992 and a 1.5% increase in the number of homes sold, from 5,229 units in 1991 to 5,305 units in 1992. The increase in average selling price in 1992 is primarily attributable to an improved sales mix resulting from the sale of larger sized homes. Jim Walter Homes' backlog at May 31, 1992 was 1,637 units compared to 1,588 units at May 31, 1991. Time charge income (revenues received from Mid-State's mortgage portfolio) increased from $180.3 million in 1991 to $195.0 million in 1992. The increase in time charge income is attributable to the growth of the mortgage portfolio and to new mortgages having a higher yield than the older mortgages paying out. The Group's operating income of $82.7 million exceeded the prior year by $15.7 million. This improvement reflects the increases in average selling price and number of homes sold, the higher time charge income and lower interest expense in 1992 ($137.0 million) compared to that incurred in 1991 ($140.6 million), partially offset by reduced gross profit margins (due principally to the sale of larger sized, but lower margin Regency homes and increased lumber prices). Building Materials Group sales and revenues were $2.9 million, or 6.6%, ahead of the prior year. The increase resulted from improved window components sales (increased volume, partially offset by lower selling prices) and greater foundry products sales volume. Operating income of $2.3 million was $1.2 million greater than the prior year reflecting the increased sales, improved efficiencies in the metal building and foundry business due to the increased sales volume and reduced aluminum costs, a major raw material used in the window components business. Industrial Products Group sales and revenues were $12.0 million, or 7.8%, greater than the prior year. The increase was the result of higher sales volumes of aluminum foil and sheet products, furnace and foundry coke, mineral wool, chemicals, resin coated sand and tooling, partially offset by lower selling prices for aluminum foil and sheet and furnace coke. Operating income of $11.2 million exceeded the prior year by $2.3 million. The improved performance resulted from the increased volume and increased operating margins for mineral wool and chemicals, partially offset by lower margins for aluminum foil and sheet, furnace coke, resin coated sand and tooling. Fiscal 1991 results were adversely impacted by reduced operating efficiencies at the Charleston, South Carolina aluminum rolling mill due to roof failures over the melting furnaces which were a delayed effect of Hurricane Hugo in September 1989; a 102 day strike at the Sloss Industries manufacturing facilities in Birmingham, Alabama, during which period salaried personnel operated the facilities; and an abnormal $1.6 million bad debt expense in the aluminum operation. Water and Waste Water Transmission Products Group sales and revenues were $18.9 million, or 6.2%, ahead of the prior year, due to improved sales volumes, partially offset by slightly lower pricing. The order backlog of pressure pipe at May 31, 1992 was 121,956 tons compared to 136,807 tons at May 31, 1991. Operating income of $24.5 million was level with the prior year. Increased sales volumes and lower scrap costs, a major raw material component, were offset by the lower selling prices and higher selling, general and administrative expenses due principally to legal and settlement costs associated with a lawsuit filed by the City of Atlanta. Natural Resources Group sales and revenues were $4.6 million, or 1.1%, below the prior year. The decrease was the result of lower selling prices for coal and methane gas and a decrease in outside coal royalty income, partially offset by greater coal shipments and increased methane gas sales volume. A total of 9.18 million tons of coal was sold in 1992 versus 8.89 million tons in 1991, a 3.3% increase. The average price per ton of coal sold decreased 2.8%, from $43.99 in 1991 to $42.76 in 1992, due to coal shipped to Alabama Power in fiscal 1992 under a separate short-term contract and to lower prices to the Japanese and other export customers. Shipments in the prior year were adversely affected by reduced availability from Mine No. 5. Mine No. 5 was shut down for a substantial portion of the period from July 9, 1990 through September 16, 1990 as a result of safety concerns arising from spontaneous combustion heatings which were a result of pyritic sulfur concentrations occurring in the coal seam in the southern part of the mine being exposed to air by the mining process. The exposure of the sulfur deposits and its reaction with oxygen contained in the ventilation air currents caused the heatings to occur. Throughout this period, Jim Walter Resources was engaged in discussions with the MSHA regarding a new ventilating arrangement, designed to reduce the contact between oxygen and sulfur, for the longwall faces at Mine No. 5. Although MSHA approved the resumption of operations at the mine on September 15, 1990, providing for a modified conventional ventilation system, productivity was poor and costs were therefore high. In February 1991, Mine No. 5's one longwall unit was moved from the southern part of the mine to a longwall coal panel in the northern area and productivity improved. The southwestern area of the mine was subsequently abandoned and sealed off as efforts to design a ventilation arrangement acceptable to MSHA which properly controlled the spontaneous combustion heatings and provided acceptable productivity and costs of operations were not successful. The Group's operating income of $16.0 million was $45.1 million below the prior year. The lower performance reflected the decrease in coal and methane gas selling prices, reduced outside coal royalty income, lower productivity which resulted in higher costs per ton of coal produced, severance, vacation pay and ongoing medical benefits associated with the workforce reduction described in the following paragraph ($6.2 million), accelerated depreciation on the remaining assets at a previously closed small coal mine ($5.6 million) and slightly higher idle plant costs associated with the three week shutdown of Mine No. 4 due to an accident which damaged the production hoist ($4.4 million) and wildcat strikes by the UMWA ($2.4 million) in 1992 versus the previously mentioned Mine No. 5 problem in 1991 ($6.5 million), partially offset by the improved coal and methane gas sales volumes. On April 10, 1992, Jim Walter Resources announced that it was reducing its workforce by approximately 720 hourly and salaried employees (approximately 25%) in a major cost reduction move to increase mine productivity and strengthen its competitiveness in worldwide coal markets. The cutback, effective April 13, 1992, applied to all four mines as well as above ground support functions. Cost of sales, exclusive of depreciation, of $891.9 million was 78.3% of net sales in 1992 versus $826.5 million and 75.3% in 1991. The cost of sales percentage increase was primarily the result of lower margins on coal, homes, aluminum foil and sheet, furnace coke, resin coated sand and tooling, combined with the impact of charges resulting from the previously mentioned Jim Walter Resources mining operations workforce cutback, and higher idle plant costs associated with the Mine No. 4 production hoist problem and the UMWA wildcat strikes in 1992 versus the Mine No. 5 spontaneous combustion heatings problem in 1991. These increases were partially offset by improved margins for window components, metal building and foundry products, mineral wool and chemicals. Selling, general and administrative expenses of $129.4 million were 9.5% of net sales and revenues in 1992 versus $122.9 million and 9.3% in 1991. Expenses in 1992 were adversely impacted by legal and settlement costs associated with a lawsuit filed by the City of Atlanta. Interest and amortization of debt discount and expense decreased $32.5 million. The decrease is the result of a reduction in the amounts outstanding under the Mid-State credit facility (see Financial Condition) and the Mortgage-Backed Notes (see Note 5 of Notes to Financial Statements) and lower amortization of debt discount and expense. Interest in the amount of $396.9 million ($163.7 million in 1992) on unsecured debt obligations has not been accrued in the consolidated financial statement since the date of the filing of petitions for reorganization. This amount is based on the balances of the unsecured debt obligations and their interest rates as of December 27, 1989 and does not consider fluctuations in the level of short-term debt and interest rates and the issuance of commercial paper that would have occurred to meet the working capital requirements of the Homebuilding and Related Financing Group (see Notes 2, 3 and 5 of Notes to Financial Statements). Such interest rates do not necessarily presently govern the respective rights of the Company, its subsidiaries and the various lenders. Instead, the rights of the parties will be determined in connection with the Reorganization Proceedings. The net income for 1992 and 1991 reflects all of the previously mentioned factors as well as the impact of a lower effective income tax rate (see Note 6 of Notes to Financial Statements) and the effect of discontinued operations (in 1991), partially offset by decreased interest income from Chapter 11 proceedings ($8.9 million) due to lower funds available for investment and lower interest rates. FINANCIAL CONDITION On December 27, 1989, the Debtors each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court (the "Bankruptcy Court") for the Middle District of Florida, Tampa Division (the "Reorganization Proceedings"). On December 3, 1990, one additional small subsidiary filed a voluntary petition for reorganization under the Bankruptcy Code. Two other small subsidiaries have not filed petitions for reorganization. Pursuant to the applicable provisions of the Bankruptcy Code, all pending legal proceedings and collection of outstanding claims against the Debtors were automatically stayed upon filing of the Chapter 11 petitions while the Debtors continue business operations as debtors in possession (see Note 2 of Notes to Financial Statements). The Debtors' Chapter 11 petitions resulted from a sequence of events stemming primarily from an inability of the Company's interest reset advisors to reset interest rates on approximately $624 million of outstanding Senior Extendible Reset Notes and Senior Subordinated Extendible Reset Notes (collectively, the "Old Notes") on which interest rates were scheduled to be reset effective January 2, 1990. The Company believes that the reset advisors' inability to reset the interest rates was primarily attributable to pending asbestos-related litigation which prevented the Debtors from completing a refinancing or from selling assets to reduce their debt which, together with turmoil in the high yield bond markets, depressed the bid value of such notes. This created the potential for a sharply higher reset rate that, in turn, would have caused interest expense to rise above the Debtors' ability to pay. To mitigate these factors, the Company, on November 7, 1989, offered to exchange the Old Notes for a combination of cash and new Senior Extendible Reset Notes and new Senior Subordinated Reset Notes. The interest reset advisors, Drexel Burnham and Merrill Lynch, advised the Company in early December 1989 that, in their opinion, there was no interest rate at which the Old Notes could be reset to have a bid value of 101% as called for in the terms of the Old Notes. Trustees for the Old Notes, citing the inability of the interest reset advisors to establish a new rate, subsequently advised the Company that the failure to reset the Old Notes not tendered in the exchange offers would likely constitute non-compliance under the indentures for the Old Notes. Later, the exchange offer was supplemented to strengthen certain covenants of the new Senior Extendible Reset Notes and new Senior Subordinated Reset Notes and, in addition, an offer of 10% equity in the Company was made to the holders of old Senior Subordinated Extendible Reset Notes. The Company received less than the percentages of each of the outstanding classes of Old Notes required under terms of the exchange offers, which expired at 7:00 p.m. New York City time on December 27, 1989. As a result, the exchange offers were terminated and all tendered Old Notes were returned. As a result of the Reorganization Proceedings, the maturity of all unpaid principal of, and interest on, the senior and subordinated indebtedness of the Debtors became immediately due and payable in accordance with the terms of the instruments governing such indebtedness. The amount of indebtedness that was accelerated on the petition date aggregated approximately $1.7 billion. The Debtors are currently accruing, but not paying, interest on senior secured indebtedness and not accruing interest on unsecured indebtedness. At May 31, 1994, interest in the amount of $724.3 million ($163.7 million in the current fiscal year) had not been accrued on unsecured obligations. These amounts are based on the balances of the unsecured debt obligations and their interest rates as of the petition date. Such interest rates do not necessarily govern the respective rights of the Company, its subsidiaries and the various lenders. Instead, the rights of the parties will be determined in connection with the Reorganization Proceedings. While the Reorganization Proceedings are pending, the Debtors are prohibited from making any payments of prepetition obligations owing as of the petition date, except as permitted by the Bankruptcy Court. Furthermore, the Debtors will not be able to borrow additional funds under any of their prepetition credit arrangements. Since the beginning of the Reorganization Proceedings certain of the Debtors have consummated an agreement, as amended, with two commercial banks with respect to a $25 million letter of credit facility. Pursuant to the terms of such "New Letter of Credit Agreement", upon issuance of a letter of credit, the applicable Debtors will deposit with the issuing bank an amount of cash equal to the stated amount of the letter of credit. At May 31, 1994, $3,037,000 of letters of credit were outstanding under this agreement. Since the beginning of the Reorganization Proceedings certain of the Debtors have also consummated an agreement with the lenders pursuant to which the lenders agree to renew letters of credit issued under the Working Capital Agreement that were outstanding at the time of filing of the petitions for reorganization (the "Replacement Letter of Agreement"). To the extent that the letters of credit under the Replacement Letter of Agreement ($17,549,000 outstanding at May 31, 1994) are renewed during the Reorganization Proceedings, these Debtors have agreed to reimburse the issuing bank for any draws under such letters of credit, which obligation shall be entitled to an administrative expense claim under the Bankruptcy Code. In addition, the obligations of the Debtors under such Replacement Letter of Credit Agreement shall continue to be secured by the collateral which secures the Debtors' obligations under the Bank Credit Agreement and the Working Capital Agreement. The Bankruptcy Court approved the Debtors' entering into the New Letter of Credit Agreement in May 1990. The New Letter of Credit Agreement currently terminates on June 30, 1995. See Note 5 of Notes to Financial Statements. For a discussion of the plans of reorganization which have been filed in the Reorganization Proceedings see Note 2 of Notes to Financial Statements. On May 10, 1994, Jim Walter Resources and Alabama Power signed a new agreement for the sale and purchase of coal replacing the 1979 contract and the 1988 amendment thereto (the "New Contract"). The New Contract resolves the various legal disputes between Jim Walter Resources and Alabama Power reported in previous years. On May 23, 1994, the Bankruptcy Court issued an order approving the New Contract, and such order became final on June 3, 1994. Under the New Contract, Alabama Power will purchase 4.0 million tons of coal per year from Jim Walter Resources during the period July 1, 1994 through August 31, 1999. In addition, Jim Walter Resources will have the option to extend the New Contract through August 31, 2004, subject to mutual agreement on the market pricing mechanism and other terms and conditions of such extension. The New Contract will have a fixed price subject to an escalation based on the Consumer Price Index and adjustments for governmental impositions and quality. The New Contract includes modifications of specifications and shipping deviations and changes in transportation arrangements. The New Contract provides for the dismissal of Jim Walter Resources' declaratory judgment action and Alabama Power's dismissal of its appeal regarding Jim Walter Resources' assumption of the 1979 contract. In accordance with the New Contract, a joint motion has been filed by Jim Walter Resources and Alabama Power with the District Court seeking the entry of an order dismissing Alabama Power's appeal from the March 4, 1991 order; and a joint motion was filed by Jim Walter Resources and Alabama Power with the Bankruptcy Court seeking the entry of an order dismissing Jim Walter Resources' declaratory judgment action. By order dated June 24, 1994, the Bankruptcy Court granted the joint motion of Jim Walter Resources and Alabama Power to dismiss Jim Walter Resources' declaratory judgment action. The long-term contracts with the six (6) Japanese steel mills for 2.75 to 3.0 million tons annually, depending on the level of steel production in Japan, expired on March 31, 1994. The pricing mechanisms in such contracts were market driven and reflected changes in the prices of four (4) specific coal indices. The composite change in market prices of these coal indices from the base point was then reflected in the billing price to the steel mills. Tentative agreements have been reached with some of the Japanese steel mills as to one-year contracts for shipment of approximately 1.2 million tons of coal at a current market price. In addition, approximately 800,000 tons of coal not previously shipped under terms of the long-term contracts will be shipped from April 1994 through March 1996 at the long-term contract price, which is substantially higher than the current market price. A substantial controversy exists with regard to federal income taxes allegedly owed by the Company. Proofs of claim have been filed by the Internal Revenue Service in the amounts of $110,560,883 with respect to fiscal years ended August 31, 1980 and August 31, 1983 through August 31, 1987, $31,468,189 with respect to fiscal years ended May 31, 1988 (nine months) and May 31, 1989 and $44,837,693 with respect to fiscal years ended May 31, 1990 and May 31, 1991. Objections to the proofs of claim have been filed by the Company and the various issues are being litigated in the Bankruptcy Court. The Company believes that such proofs of claim are substantially without merit and intends to defend such claims against the Company vigorously. LIQUIDITY The Debtors did not commence the Reorganization Proceedings as a result of their inability to fund normal operating liabilities either on a short-term or long-term basis; therefore, the following discussion of liquidity presents a somewhat unusual position compared to that normally associated with many bankruptcy filings. The Company normally uses its cash flows for three principal purposes: (1) for working capital requirements (including the financing of home sales); (2) for capital expenditures for business expansion, productivity improvement, cost reduction and replacements necessary to maintain the business; and (3) to provide a return to lenders and shareholders. Working capital is required to fund adequate levels of inventories and accounts receivable, including instalment notes receivable arising from the homebuilding business. At May 31, 1994, the Company had free cash balances and short-term investments of approximately $125 million available for operations. On July 1, 1992, pursuant to approval by the Bankruptcy Court, instalment notes receivable having a gross amount of $638,078,000 were sold by Mid-State to Mid-State Trust III ("Trust III"), a business trust established under the laws of Delaware, in exchange for the net proceeds from the public issuance of $249,864,000 of Asset Backed Notes by Trust III which bear an interest rate of 7-5/8%. Net proceeds were utilized to repay in full all outstanding indebtedness due under the Mid-State credit facility with the excess cash to be used to fund the ongoing operations of the Debtors. Under the Mid-State Trust II ("Trust II") indenture for the Mortgage-Backed Notes, if certain criteria as to performance of the pledged instalment notes are met, Trust II is allowed to make distributions of cash to Mid-State Homes, its sole beneficial owner, to the extent that cash collections on such instalment notes exceed Trust II's cash expenditures for its operating expenses, interest expense and mandatory debt payments on the Mortgage-Backed Notes. In addition to the performance based distribution, the indenture permits distribution of additional excess funds, if any, provided such distributions are consented to by the guarantor of the Mortgage-Backed Notes. The guarantor approved an additional distribution of approximately $20.6 million for the July 1, 1994 distribution. During the period from formation of Trust II through July 1, 1994 such distributions amounted to $81.2 million. At the present time, 97% of all home sales made by Jim Walter Homes are for credit. Jim Walter Homes obtains funds necessary to operate its home construction business primarily using cash flow from operations of the Company. The Company believes that, under present operating conditions, sufficient cash flow will be generated, together with some use of free cash balances, to finance home sales,to make planned capital expenditures and to meet all operating needs, including any cash deposits to collateralize letters of credit. There are no material commitments for capital expenditures; however, the Debtors' business plans for 1995 include capital expenditures of approximately $96 million. The Reorganization Proceedings have had no adverse impact on capital expenditures. Greater cash flow from operations in future years is dependent upon the Company's ability to grow and to improve its profitability. The effects that the Reorganization Proceedings will have on the levels of cash flow generated by future operations are unknown at this time. EXHIBIT 3.B.1. WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 1994 WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE MONTHS ENDED AUGUST, 31, 1994 1993 (IN THOUSANDS) Sales and revenues Net sales $ 95,187 $ 100,582 Time charges 19,135 19,420 Miscellaneous 1,161 2,341 Interest income from Chapter 11 proceedings (Note 2) 475 430 115,958 122,773 Costs and expenses: Cost of sales 74,744 77,970 Depreciation, depletion and amortization 5,874 5,893 Selling, general and administrative 10,838 10,644 Postretirement health benefits 2,315 2,133 Provision for possible losses 559 395 Chapter 11 costs (Note 2) 2,367 963 Interest and amortization of debt discount and expense (Interest on unsecured obligations not accrued-- $13,640,000 in 1994 and 1993) (Note 2) 12,137 13,306 Amortization of excess of purchase price over net assets acquired (Note 1) 3,538 3,355 112,372 114,659 3,586 8,114 Provision for income taxes (Note 7): Current (4,545) (6,247) Deferred 1,931 (532) Net income 972 1,335 Retained earnings (deficit) at beginning of period (434,059) (441,638) Retained earnings (deficit) at end of period$(433,087) $(440,303)
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) FOR THE THREE MONTHS ENDED AUGUST, 31, 1994 1993 (IN THOUSANDS) Sales and revenues Net sales $ 277,152 $ 268,676 Time charges 56,749 58,112 Miscellaneous 5,321 5,789 Interest income from Chapter 11 proceedings (Note 2) 1,418 1,193 340,640 333,770 Costs and expenses: Cost of sales 224,119 212,716 Depreciation, depletion and amortization 16,757 16,386 Selling, general and administrative 32,350 31,989 Postretirement health benefits 6,647 6,396 Provision for possible losses 1,297 1,530 Chapter 11 costs (Note 2) 4,149 2,923 Interest and amortization of debt discount and expense (Interest on unsecured obligations not accrued-- $40,921,000 in 1994 and 1993) (Note 2) 36,463 40,112 Amortization of excess of purchase price over net assets acquired (Note 1) 10,568 9,936 332,350 321,988 8,290 11,782 Provision for income taxes (Note 7): Current (12,895) (13,373) Deferred 6,038 2,983 Net income 1,433 1,392 Retained earnings (deficit) at beginning of period (434,520) (441,695) Retained earnings (deficit) at end of period $(433,087) $(440,303)
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AUGUST 31, 1994 1993 (IN THOUSANDS) ASSETS Cash (includes short-term investments of $183,996,000 and $203,741,000) (Note 3) $ 209,557 $ 220,199 Short-term investments restricted (Note 4) 98,665 104,553 Instalment notes receivable (Note 4) 4,187,486 4,209,674 Less--Provision for possible losses (26,316) (26,663) Unearned time charges (2,804,523) (2,795,466) Trade receivables, less $7,701,000 and $7,691,000 provision for possible losses 127,973 123,072 Other notes and accounts receivable 16,950 15,696 Inventories at lower of cost (first in, first out or average) or market: Finished goods 82,448 74,663 Goods in process 27,267 23,143 Raw materials and supplies 48,327 44,838 Houses held for resale 1,737 1,967 Prepaid expenses 9,109 6,397 Property, plant and equipment, at cost 1,130,185 1,085,395 Less--Accumulated depreciation, depletion and amortization (477,799) (426,305) Investments 5,852 5,590 Unamortized debt expense 28,533 42,609 Other assets 39,853 37,424 Excess of purchase price over net assets acquired (Note 1) 402,355 451,502 $ 3,107,659 $ 3,198,288 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Bank overdrafts (Note 3) $ 17,946 $ 12,452 Accounts payable (Note 2) 57,993 54,743 Accrued expenses (Note 2) 112,632 109,412 Income taxes payable (Notes 2 and 7) 28,367 31,453 Deferred income taxes (Note 7) 67,114 82,850 Long-term senior debt (Notes 2, 4 and 5) 841,254 1,003,240 Accrued postpetition interest on secured obligations (Note 2) 270,657 221,638 Accumulated postretirement health benefits obligation 216,161 196,301 Other long-term liabilities (Note 2) 48,566 46,592 Liabilities subject to Chapter 11 proceedings (Notes 2, 4 and 5) 1,727,889 1,725,952 Stockholders' equity (deficit)(Note 1): Common stock, $.01 par value per share: Authorized--50,000,000 shares Issued--31,120,773 shares 311 311 Capital in excess of par value 155,293 155,293 Retained earnings (deficit), per accompanying statement (433,087) (440,303) Excess of additional pension liability over unrecognized prior years service cost (3,437) (1,646) Total stockholders' equity (deficit) (280,920) (286,345) $ 3,107,659 $3,198,288
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE MONTH ENDED AUGUST, 31, 1994 1993 (IN THOUSANDS) OPERATIONS Net income $ 972 $ 1,335 Charges to income not affecting cash: Depreciation, depletion and amortization 5,874 5,893 Provision for deferred income taxes (Note 7) (1,931) 532 Accumulated postretirement health benefits obligation 2,157 2,133 Provision for other long-term liabilities (93) 45 Amortization of excess of purchase price over net assets acquired (Note 1) 3,538 3,355 Amortization of debt discount and expense 1,107 1,558 11,624 14,851 Decrease (increase) in: Short-term investments, restricted (Note 4) (21,797) (23,990) Instalment notes receivable, net 679 1,010 Trade and other receivables, net (1,547) (11,672) Inventories (6,682) 5,614 Prepaid expenses 1,123 609 Increase (decrease) in: Bank overdrafts (Note 3) (3,523) (734) Accounts payable 5,398 5,700 Accrued expenses (3,534) (242) Income taxes payable (Note 7) (1,482) 5,197 Accrued postpetition interest on secured obligations 11,007 11,726 Liabilities subject to Chapter 11 proceedings (Note 2): Accounts payable 11 4 Cash flows from operations (8,723) 8,073 FINANCING ACTIVITIES Retirement of long-term senior debt -- (1,000) Cash flows from financing activities -- (1,000) INVESTING ACTIVITIES Additions to property, plant and equipment, net of normal retirements (5,749) (3,768) (Increase) in investments (18) (19) Decrease (increase) in other assets (22) 88 Cash flows from investing activities (5,789) (3,699) Net increase (decrease) in cash and cash equivalents (14,512) 3,374 Cash and cash equivalents at beginning of period 224,069 216,825 Cash and cash equivalents at end of period (Note 3) $209,557 $220,199
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED AUGUST, 31, 1994 1993 (IN THOUSANDS) OPERATIONS Net income $ 1,433 $ 1,392 Charges to income not affecting cash: Depreciation, depletion and amortization 16,757 16,386 Provision for deferred income taxes (Note 7) (6,038) (2,983) Accumulated postretirement health benefits obligation 6,199 6,396 Provision for other long-term liabilities (324) 150 Amortization of excess of purchase price over net assets acquired (Note 1) 10,568 9,936 Amortization of debt discount and expense 3,318 4,667 31,913 35,944 Decrease (increase) in: Short-term investments, restricted (Note 4) 8,887 1,067 Instalment notes receivable, net 2,532 (686) Trade and other receivables, net (6,110) 12,792 Inventories 12,800 22,028 Prepaid expenses 2,226 1,505 Increase (decrease) in: Bank overdrafts (Note 3) (11,933) (5,469) Accounts payable (1,475) 2,047 Accrued expenses (10,033) (6,826) Income taxes payable (Note 7) 6,824 12,318 Accrued postpetition interest on secured obligations 12,625 11,439 Liabilities subject to Chapter 11 proceedings (Note 2): Accounts payable 10 139 Cash flows from operations 48,266 86,298 FINANCING ACTIVITIES Issuance of long-term senior debt -- 2,000 Retirement of long-term senior debt (30,716) (46,203) Cash flows from financing activities (30,716) (44,203) INVESTING ACTIVITIES Additions to property, plant and equipment, net of normal retirements (11,280) (12,436) (Increase) in investments (99) (22) Decrease in other assets 83 192 Cash flows from investing activities (11,296) (12,266) Net increase in cash and cash equivalents 6,254 29,829 Cash and cash equivalents at beginning of period 203,303 190,370 Cash and cash equivalents at end of period (Note 3) $209,557 $220,199
WALTER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 1994 NOTE 1--ORGANIZATION Walter Industries, Inc. (formerly Hillsborough Holdings Corporation) (the "Company") was organized in August 1987 by a group of investors led by Kohlberg Kravis Roberts & Co. ("KKR") for the purpose of acquiring Jim Walter Corporation, a Florida corporation ("Original Jim Walter") through a tender offer and a subsequent merger, consummated on January 7, 1988 (the "Merger"). On April 1, 1991, Walter Industries, Inc., a subsidiary of the Company, merged into the Company thereby completing its previously adopted plan of reorganization. The Company changed its name to Walter Industries, Inc. in connection with such merger. The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany balances have been eliminated. The Company's financial statements reflect the allocation of the purchase price of Original Jim Walter based upon fair market value of the assets acquired and liabilities assumed. NOTE 2--REORGANIZATION PROCEEDINGS On December 27, 1989, the Company and 31 of its subsidiaries (including the subsidiary in the next sentence, the "Debtors") each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court (the "Bankruptcy Court") for the Middle District of Florida, Tampa Division (the "Reorganization Proceedings"). On December 3, 1990, one additional small subsidiary filed a voluntary petition for reorganization under the Bankruptcy Code. Two other small subsidiaries did not file petitions for reorganization. The Debtors' Chapter 11 cases resulted from a sequence of events stemming primarily from an inability of the Company's interest reset advisors to reset interest rates on approximately $624 million of outstanding Senior Extendible Reset Notes and Senior Subordinated Extendible Reset Notes on which interest rates were scheduled to be reset effective January 2, 1990. The inability to reset the interest rates was primarily attributable to pending asbestos-related litigation which prevented the Debtors from completing a refinancing or from selling assets to reduce their debt which, together with turmoil in the high yield bond markets, depressed the bid value of such notes. The consolidated financial statements of the Company have been prepared on a "going-concern" basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business; however, as a result of the Chapter 11 filings, such realization of assets and liquidation of liabilities are subject to a significant number of uncertainties. These financial statements include adjustments and reclassifications that have been made to reflect the liabilities which have been deferred under the Reorganization Proceedings. Interest in the amount of $765,227,000 at August 31, 1994 and $601,542,000 at August 31, 1993 ($40,921,000 for the three months ended August 31, 1994 and 1993) on unsecured debt obligations has not been accrued in the consolidated financial statements since the date of the filing of petitions for reorganization. This estimate is based on the balances of the unsecured debt obligations and their interest rates as of the petition date. Such interest rates do not necessarily presently govern the respective rights of the Company, its subsidiaries and the various lenders. Instead, the rights of the parties will be determined in connection with the Reorganization Proceedings. The discussion below sets forth various aspects of the Reorganization Proceedings, but is not intended to be an exhaustive summary. For additional information regarding the effect on the Debtors of the Reorganization Proceedings, reference should be made to the Bankruptcy Code, the rules and regulations promulgated pursuant to the Bankruptcy Code and the case law thereunder. Each creditor should consult with its own counsel regarding the impact of the Reorganization Proceedings on such creditor's claims. Pursuant to provisions of the Bankruptcy Code and an order of the Bankruptcy Court dated December 28, 1989, the Debtors were authorized to continue to operate their businesses and own and manage their properties and assets as debtors in possession. The Bankruptcy Code authorizes the Debtors to enter into transactions, including the sale or lease of property of their estates and to use property of their estates, in the ordinary course of their businesses without prior approval of the Bankruptcy Court. The sale or lease of property of the estates other than in the ordinary course of business and certain other transactions (for example, secured financing), whether or not in the ordinary course of business, are subject to prior approval by the Bankruptcy Court. As a result of the filing of petitions for reorganization, the maturity of all unpaid principal of, and interest on, the senior and subordinated indebtedness of the Debtors became immediately due and payable in accordance with the terms of the instruments governing such indebtedness. The Debtors will not be able to borrow additional funds under any of their prepetition credit arrangements. Pursuant to the applicable provisions of the Bankruptcy Code, all pending legal proceedings against the Debtors were automatically stayed upon the filing of such petitions. Under the Chapter 11 filings, a significant portion of claims in existence at the filing date ("prepetition") are stayed ("deferred") while the Company continues to manage the business. The Bankruptcy Code defines "claim" to include a right to payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. Claims which were contingent or unliquidated at the commencement of the Reorganization Proceedings constitute claims under the Bankruptcy Code. Such claims, including, without limitation, those that may arise in connection with rejection of executory contracts, including leases, as well as those that might arise in connection with environmental and pension-related matters, could be significant. It is not possible to quantify the amount of such claims at this time. Under the Bankruptcy Code, a creditor's claim is treated as secured only to the extent of the value of such creditor's collateral, and the balance of such creditor's claim is treated as unsecured. Depending upon the outcome of the Reorganization Proceedings and the value of a secured creditor's collateral, if any, secured creditors may not be entitled to claim interest on their claims for the period after December 27, 1989. Generally, unsecured debt does not accrue interest after the filing. Only holders of "allowed claims" may vote on and participate in distributions under any plan or plans of reorganization that may be proposed. A claim is allowed to the extent (i) the claim is not listed as contingent, disputed or unliquidated on the Debtors bankruptcy schedules filed in January 1990, as amended, or (ii) a proof of claim is filed and not successfully objected to by a party in interest. Additional prepetition claims and liabilities may arise, some of which may be significant, subsequent to the filing date for various reasons. To the extent a creditor must file a proof of claim, such proof must be filed by a date fixed by the Bankruptcy Court as the last day to file proofs of claim (the "Bar Date"). At a hearing on July 23, 1992, the Bankruptcy Court set a Bar Date of October 30, 1992 in the Reorganization Proceedings for all claims other than any potential claims related to asbestos personal injury or property damage. At a hearing on December 16, 1992, the Bankruptcy Court set a second Bar Date of March 1, 1993 in the Reorganization Proceedings for new creditors added by amended schedules filed by certain of the Debtors on November 23, 1992. On August 31, 1993, the Bankruptcy Court set a third Bar Date of November 30, 1993 for creditors added by amended schedules filed by the Debtors on July 12, 1993. No provision has been included in the accompanying financial statements for any prepetition claims and additional liabilities that may arise from resolution of any claims filed. The amount included as liabilities subject to Chapter 11 proceedings reflected on the Company's consolidated balance sheet consists of the following: AUGUST 31, 1994 1993 (IN THOUSANDS) Short-term notes payable $ 78,033 $ 78,033 ccounts payable 64,348 63,039 ccrued expenses 95,847 95,999 ncome taxes payable 47,066 47,066 Long-term senior debt (Note 5) 416,629 416,629 Long-term subordinated debt 1,025,728 1,024,948 Other long-term liabilities 238 238 $1,727,889 $1,725,952 As debtors in possession, the Debtors have the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject certain executory contracts, including unexpired leases. In this context, "assumption" means that the Debtors agree to perform their obligations and cure certain existing defaults under the contract or lease, and "rejection" means that the Debtors are relieved from their obligations to perform further under the contract or lease and are subject only to a claim for damages for the breach thereof. Any claim for damages resulting from the rejection of an executory contract or an unexpired lease is treated as a general unsecured claim in the Reorganization Proceedings. Unless the Bankruptcy Court, upon request of a non-Debtor party and after notice and a hearing, fixes a date by when the Debtors must elect to assume or reject an executory contract, the Debtors may assume or reject such contracts in a plan or plans of reorganization. With respect to unexpired non-residential real property leases, including mineral leases and interests, the Bankruptcy Code provides that a Debtor has 60 days after the commencement of a Chapter 11 case in which to assume or reject such leases unless the Bankruptcy Court, for cause shown, extends such 60 day period. Pursuant to an order of the Bankruptcy Court dated August 31, 1993, the time within which the Debtors must assume or reject their nonresidential real property leases was extended through and including October 31, 1993. The Debtors filed a motion to extend, until confirmation of a plan of reorganization, the time for assumption or rejection of their non-residential real property leases. On March 4, 1994, the Bankruptcy Court entered an order approving the Debtors motion. On February 25, 1991, the Debtors received Bankruptcy Court approval to assume substantially all of their mineral leases and interests. For 120 days after the date of the filing of a voluntary Chapter 11 petition, a debtor has the exclusive right to file a plan of reorganization with the Bankruptcy Court (the "Exclusivity Period"). If a debtor files a plan of reorganization during the 120-day Exclusivity Period, no other party may file a plan of reorganization until 180 days after the date of filing of the Chapter 11 petition. Until the end of this 180-day period (the "Acceptance Period") the debtor has the exclusive right to solicit acceptances of the plan. The Bankruptcy Court may shorten or extend the 120- and 180-day periods for cause shown. If a debtor fails to file a plan during the Exclusivity Period or, if such plan has been filed, fails to obtain acceptance of such plan from impaired classes of its creditors and equity security holders during the Acceptance Period, any party in interest, including a creditor, an equity security holder, a committee of creditors or equity security holders or an indenture trustee may file a plan. Additionally, if the Bankruptcy Court were to appoint a trustee, the Exclusivity Period, if not previously terminated, would terminate. The initial Exclusivity Period for each of the Debtors would have expired on April 26, 1990 and the initial Acceptance Period would have expired on June 26, 1990. The Debtors filed various motions to extend the Exclusivity Period which were granted. Pursuant to an order of the Bankruptcy Court dated April 15, 1992, the Exclusivity Period expired June 15, 1992 and the Acceptance Period was to expire on August 14, 1992. For information concerning (a) the plans of reorganization filed by the Debtors on June 15, 1992, September 22, 1993, April 20, 1994, June 9, 1994 and June 22, 1994 (the "Debtors Fourth Amended Plan"), (b) the plans of reorganization filed by LaSalle National Bank (as the successor trustee under the indenture dated as of January 1, 1988, as amended for the Series B & C Senior Notes) on December 30, 1993 and April 20, 1994, (c) the plan of reorganization filed by Chemical Bank and Bankers Trust Company (as agents under the Bank Credit Agreement dated as of September 10, 1987, as amended, and the Working Capital Credit Agreement dated as of December 29, 1987, as amended) on December 28, 1993, (d) the plans of reorganization filed by AIF II, L.P., certain affiliates of AIF II, L.P. and certain accounts managed or controlled by such affiliates, Lehman Brothers Inc., the Official Bondholders Committee and the Official Committee of General Unsecured Creditors (collectively, the "Bondholders Plan Proponents") on December 16, 1993, April 20, 1994, May 11, 1994, May 17, 1994 and June 9, 1994 (the "Bondholders Second Amended Plan"), and (e) hearings to consider approval of the disclosure statements filed by the Debtors and the Bondholders Plan Proponents in connection with such plans that were held on May 19, 1994 and June 15, 1994, reference is made to Note 2 of Notes to Financial Statements for the year ended May 31, 1994. The Debtors are pursuing confirmation of the Debtors' Fifth Amended Joint Plan of Reorganization Dated As Of July 25, 1994 (the "Debtors' Fifth Amended Plan") and the Bondholders Plan Proponents are pursuing confirmation of the Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994 (the "Bondholders Third Amended Plan"). Information concerning the Debtors' Fifth Amended Plan and the Bondholders Third Amended Plan, is included below. On July 7, 1994, the Debtors and the Pension Benefit Guaranty Corporation filed objections to the Bondholders Plan Proponents amended disclosure statement for the Bondholders Second Amended Plan. In addition, on July 7, 1994, the Bondholders Plan Proponents and the Pension Benefit Guaranty Corporation filed objections to the Debtors amended disclosure statement for the Debtors Fourth Amended Plan. On July 8, 1994, the Texas Homeowners filed objections to such Debtors amended disclosure statement and such Bondholders Plan Proponents amended disclosure statement. Prior to the July 13, 1994 hearing, the Debtors and the Bondholders Plan Proponents each resolved with the Pension Benefit Guaranty Corporation the objections filed to their respective disclosure statements. At the hearing held on July 13, 1994 the Bankruptcy Court, inter alia,: (i) overruled the objections filed by the Texas Homeowners to the Debtors amended disclosure statement and the Bondholders Plan Proponents amended disclosure statement; (ii) sustained in part and overruled in part the objections filed by the Debtors to the Bondholders Plan Proponents' amended disclosure statement and the objections filed by the Bondholders Plan Proponents to the Debtors amended disclosure statement; (iii) fixed voting and solicitation procedures, which procedures were to be set forth in the Confirmation Hearing Notice; (iv) fixed September 23, 1994 as the last date for voting on the Debtors Fourth Amended Plan and the Bondholders Second Amended Plan; (v) fixed October 7, 1994 as the last date to challenge individual ballots cast for accepting or rejecting the Debtors Fourth Amended Plan or the Bondholders Second Amended Plan; (vi) scheduled hearings to commence October 17, 1994 to hear and determine: (a) the declaratory judgment action commenced by the Debtors for a determination that unsecured creditors are not entitled to post-petition interest under the facts of these Chapter 11 cases, (b) whether the Veil Piercing Settlement is fair and equitable and (c) any challenge to whether a class of claims has accepted or rejected the Debtors Fourth Amended Plan or the Bondholders Second Amended Plan; (vii) fixed November 10, 1994 as the last date to file objections to Confirmation of the Debtors Fourth Amended Plan and/or the Bondholders Second Amended Plan; (viii) scheduled an initial Confirmation Hearing for November 16, 1994 at which time the Bankruptcy Court will fix a date when the Confirmation Hearing will commence; and (ix) approved such disclosure statements, as supplemented, consistent with the Bankruptcy Court's rulings made at the July 13, 1994 hearing. On July 25, 1994, the Debtors filed an emergency motion seeking authorization to file the Debtors Fifth Amended Plan and the Debtors Fifth Amended Disclosure Statement Dated As Of July 25, 1994 Pursuant to Section 1125 of the Bankruptcy Code (the "Debtors Fifth Amended Disclosure Statement"). On July 28, 1994, the Bankruptcy Court: (i) granted the Debtors emergency motion; (ii) directed the Debtors to serve the Debtors Fifth Amended Plan on August 1, 1994 and to file said plan with the Bankruptcy Court by August 2, 1994; (iii) directed the Debtors to serve the Debtors Fifth Amended Disclosure Statement by August 2, 1994 and to file said disclosure statement with the Bankruptcy Court by August 3, 1994; (iv) permitted the Bondholder Plan Proponents to further amend the Bondholders Second Amended Plan and related disclosure statement provided such amended plan and disclosure statement must be served by August 1, 1994 and filed with the Bankruptcy Court on August 2, 1994; and (v) prohibited the filing of any further amended plans of reorganization until September 26, 1994. On August 1, 1994, the Debtors served the Debtors Fifth Amended Plan and filed said plan with the Bankruptcy Court on August 2, 1994. On August 2, 1994, the Debtors served the Debtors Fifth Amended Disclosure Statement and filed said disclosure statement with the Bankruptcy Court on August 3, 1994. The Debtors Fifth Amended Plan modified the Debtors Fourth Amended Plan in two respects. First, the Debtors Fifth Amended Plan modifies the Allowed Amount (as said term is defined in the Debtors Fifth Amended Plan) of the Series B & C Senior Note Claims by including post-filing date interest on interest accrued and unpaid as of the Filing Date, plus providing for additional interest in an amount equal to 5% of the Net Enterprise Value (as said term is defined in the Debtors Fifth Amended Plan). Payment of the additional interest will be in the form of shares of Common Stock having an aggregate value equal to 5% of the Net Enterprise Value. In addition, the Allowed Amount of the Working Capital Bank Claims and Revolving Credit Bank Claims has been modified to include post-filing date interest on interest accrued and unpaid as of the Filing Date and additional interest in an amount equal to 3.726% of the Net Enterprise Value with respect to the Revolving Credit Bank Claims and 1.274% of the Net Enterprise Value with respect to the Working Capital Bank Claims. Payment of such additional interest will be in the form of shares of Common Stock having an aggregate value equal to 5% of the Net Enterprise Value. As a result of said modifications, the current shareholders' interest in the reorganized Debtors will decline from approximately 75% to 68%. On August 1, 1994, the Bondholders Plan Proponents served the Bondholders Third Amended Plan and the Disclosure Statement For Creditors' Plan Dated As Of August 1, 1994 (the "Bondholders Amended Disclosure Statement"), which documents were filed with the Bankruptcy Court on August 2, 1994. The Bondholders Third Amended Plan modified the Bondholders Second Amended Plan in four respects. First, the Bondholders Plan Proponents have agreed in principle with certain alleged asbestos claimants and the official committees appointed in the Chapter 11 case of The Celotex Corporation ("Celotex") to an Amended and Restated Veil Piercing Settlement Agreement dated as of August 1, 1994 (the "Restated Veil Piercing Settlement Agreement") pursuant to which the shares of "Class B Common Stock" having an aggregate value of $75 million which was to have been distributed to the alleged asbestos claimants subject to the rights of any "settling equity holders" will instead be distributed to Holders of Revolving Credit Bank Claims ($28,220,625), Working Capital Bank Claims ($9,279,375) and Series B & C Senior Note Claims ($37,500,000). The Restated Veil Piercing Settlement Agreement will become effective upon (i) execution of the agreement by the parties thereto and (ii) approval by the Bankruptcy Court in the Celotex Chapter 11 case. At a hearing on September 1, 1994, by the Bankruptcy Court in the Celotex Chapter 11 case, approval was given to the Restated Veil Piercing Settlement Agreement. Second, the provisions with respect to the Allowed Amount and treatment of Revolving Credit Bank Claims have been modified to include as additional interest such amount of $28,220,625 which shall be satisfied by shares of "Class B Common Stock". Third, the provisions with respect to the Allowed Amount and treatment of Working Capital Bank Claims have been modified to include as additional interest such amount of $9,279,375 which shall be satisfied by shares of "Class B Common Stock". Finally, the provisions with respect to the Allowed Amount and treatment of Series B & C Senior Note Claims have been modified to include as additional interest such amount of $37,500,000 which shall be satisfied by shares of "Class B Common Stock". On August 2, 1994, the Bankruptcy Court entered an order approving the Debtors Fifth Amended Disclosure Statement and the Bondholders Amended Disclosure Statement. The process pursuant to which the Debtors Fifth Amended Plan or any further amended plan of reorganization filed by the Debtors and the Bondholders Third Amended Plan or any further amended plan of reorganization filed by the Bondholders Plan Proponents may be confirmed necessarily will be complex and may be delayed pending further developments in the asbestos-related litigation involving the Company. Accordingly, the timing of such confirmation necessarily cannot be predicted. The Debtors Fifth Amended Plan and/or the Bondholders Third Amended Plan were sent, along with the disclosure statements approved by the Bankruptcy Court, to all members of classes of impaired creditors and equity security holders for acceptance or rejection. In general, the Bankruptcy Code provides that a claim or interest is impaired under a plan unless such plan proposes to pay such claim or interest in full or leave it unaltered. In order to be accepted, at least two-thirds in amount and a majority in number of holders of allowed claims or interests in each class that is impaired who actually vote, must accept the plan. Following acceptance or rejection of any plan by impaired classes of creditors and equity security holders, the Bankruptcy Court at a noticed hearing would consider whether to confirm the plan. Among other things, for confirmation the Bankruptcy Court at a noticed hearing is required to find that (i) each holder of a claim or interests in each impaired class of creditors and equity security holders will, pursuant to the plan, receive at least as much as the class would have received in a liquidation under Chapter 7 of the Bankruptcy Code, (ii) each impaired class of creditors and equity security holders has accepted the plan by the requisite vote and (iii) confirmation of the plan is not likely to be followed by the liquidation or need for further financial reorganization of the debtor or any successor unless the plan proposes such liquidation or reorganization. If any impaired class of creditors or equity security holders does not accept a plan, and assuming that all of the other requirements of the Bankruptcy Code are met, the proponent of the plan may invoke the so-called "cram down" provisions of the Bankruptcy Code. Under these provisions, the Bankruptcy Court may confirm a plan notwithstanding the nonacceptance of the plan by an impaired class of creditors or equity security holders if certain requirements of the Bankruptcy Code are met, including but not limited to finding that the proposed plan and any settlement contemplated therein (i.e. the Restated Veil Piercing Settlement Agreement) is fair and equitable. These requirements may necessitate provision in full for senior classes of creditors and/or equity security holders before provision for a junior class could be made. Donlin, Recano & Company, Inc., the ballot agent, filed with the Bankruptcy Court the Declaration of Carole G. Donlin Certifying the Ballots Accepting and Rejecting the Creditors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code and the Declaration of Carol G. Donlin Certifying the Ballots Accepting and Rejecting the Debtor's Fifth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code which indicated that: (a) each impaired class of creditors voted to accept the Bondholders Third Amended Plan and (b) no impaired class of creditors voted to accept the Debtors' Fifth Amended Plan. In addition to challenging the unsecured creditors' alleged entitlement to post-petition interest in the Debtors' Chapter 11 cases and the fairness of the Restated Veil Piercing Settlement Agreement, the Debtors have filed objections to certain individual ballots and a motion to disallow all ballots cast and voiding the entire solicitation process. The objections to individual ballots and the motion to disallow all ballots cast and to void the solicitation process are scheduled to be heard during the week of October 17, 1994. The Company cannot now predict whether, or at what time, the Debtors Fifth Amended Plan, the Bondholders Third Amended Plan or any further amended plans by either party may be confirmed or the ultimate terms thereof. NOTE 3--CLASSIFICATION OF CASH The Company's cash management system provides for the reimbursement of all major bank disbursement accounts on a daily basis. Checks issued but not yet presented to the banks for payment are classified as bank overdrafts. NOTE 4--INSTALMENT NOTES RECEIVABLE AND RESTRICTED INVESTMENTS The net change in instalment notes receivable consists of sales and resales, net of repossessions and provision for possible losses, of $38,792,000 and $42,059,000 and cash collections on account and payouts in advance of maturity of $41,324,000 and $41,373,000 for the three months ended August 31, 1994 and 1993, respectively. Mid-State Homes, Inc. ("Mid-State"), an indirect wholly-owned subsidiary of the Company, is the settlor and sole beneficiary of two business trusts established under the laws of Delaware, Mid-State Trust II ("Trust II") and Mid-State Trust III ("Trust III"). Trust II and Trust III were organized for the purpose of purchasing instalment notes receivable from Mid-State from the net proceeds from, respectively, the issuance of the Mortgage-Backed Notes ($649,250,000 outstanding at August 31, 1994) and the Asset Backed Notes ($192,004,000 outstanding at August 31, 1994). Assets of Trust II and Trust III, including the instalment notes receivable, are not available to satisfy claims of general creditors of the Company and its subsidiaries. Of the gross amount of instalment notes receivable at August 31, 1994 of $4,187,486,000, receivables owned by Trust II had a gross book value of $1,566,688,000 and an economic balance of $937,245,000 and receivables owned by Trust III had a gross book value of $508,295,000 and an economic balance of $251,440,000. Restricted short-term investments include (i) temporary investment of reserve funds and collections on instalment notes receivable owned by Trust II which are available only to pay expenses of Trust II and principal and interest on the Mortgage-Backed Notes ($65,597,000), (ii) temporary investment of reserve funds and collections on instalment notes receivable owned by Trust III which are only available to pay expenses of Trust III and principal and interest on the Asset Backed Notes ($10,783,000), (iii) cash securing letters of credit $2,985,000 and (iv) miscellaneous other segregated accounts restricted to specific uses ($19,300,000, including $6,332,000 from proceeds of sale of assets set aside to offer to purchase Series B and Series C Senior Extendible Reset Notes). NOTE 5--DEBT In June 1991, pursuant to an order of the Bankruptcy Court, $10,704,000 of proceeds from the prepayment of the promissory note received in connection with the sale of Apache Building Products Company ("Apache") in 1988, plus $350,000 of interest earned thereon, held in a segregated escrow account, were applied as a reduction of principal ($8,249,000 to the Revolving Credit Agreement and $2,805,000 to the Working Capital Agreement). The Bank Agents for the Revolving Credit and Working Capital Banks appealed the Bankruptcy Court's order permitting the application of proceeds to the principal of the indebtedness only, to the United States District Court for the Middle District of Florida, Tampa Division (the "District Court"). On April 29, 1992, the District Court reversed the Bankruptcy Court's order and remanded the case to the Bankruptcy Court for further proceedings and determinations on the issues of whether the Revolving Credit and Working Capital Banks are oversecured creditors, the reasonable, relevant, applicable interest rate and whether the Debtors will ultimately prove to be solvent. During fiscal 1991, pursuant to an order of the Bankruptcy Court, $7,356,000 of proceeds from the sale of an asset, held as security for the Revolving Credit Agreement and the Working Capital Agreement, and setoff of bank accounts were turned over to the Revolving Credit and Working Capital Banks with reservation of rights as to application of such payment. The Company has applied such payment to a reduction of principal ($5,794,000 to the Revolving Credit Agreement and $1,562,000 to the Working Capital Agreement). NOTE 6--LITIGATION AND OTHER MATTERS The Company has previously discussed in Note 10 of Notes to Financial Statements for the year ended May 31, 1994, the background and status of the Declaratory Judgment Proceeding which the Company filed on January 2, 1990 in the Bankruptcy Court against Jim Walter Corporation, Celotex and certain known individuals who had filed suit against the Company and/or certain of its subsidiaries seeking to hold them liable for asbestos-related liabilities of Celotex. On July 18, 1994, the asbestos claimants filed their brief in the District Court. On August 2, 1994, the Debtors filed their Brief in Opposition to the appeal of the asbestos claimants in the District Court. On August 2, 1994, Jim Walter Corporation also filed their Brief in Opposition to the appeal of the asbestos claimants. On August 12, 1994, the asbestos claimants filed their reply brief. On August 11, 1994, the Debtors filed an Emergency Motion to Expedite Appeal, to which the asbestos claimants filed a response on August 18, 1994. On August 19, 1994, the District Court ordered that oral arguments would be heard on September 13, 1994. On August 22, 1994, the Bondholders Plan Proponents filed a motion and memorandum seeking to intervene for sole purpose of clarifying and correcting the record on the Debtors Emergency Motion to Expedite Appeal or, alternatively, to file as an Amicus Curiae. On September 9, 1994, the District Court denied the Debtors emergency motion as moot. On September 9, 1994, the District Court also denied the Bondholders Plan Proponents motion to intervene. On September 13, 1994, the District Court heard oral arguments of the parties. On October 13, 1994, the District Court issued its opinion affirming the Bankruptcy Court's April 18, 1994 "Veil Piercing Decision" in which the Bankruptcy Court found that there was no basis of piercing the corporate veil, finding for the Debtors on every contested factual issue. The Company is a party to a number of other lawsuits arising in the ordinary course of its business. While the results of litigation cannot be predicted with certainty, the Company believes that the final outcome of such other litigation will not have a materially adverse effect on the Company's consolidated financial condition. NOTE 7--INCOME TAXES On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law raising the federal corporate income tax rate to 35% from 34%, retroactive to January 1, 1993. The provision for income taxes for the month of August 1993 included federal income tax at the 35% statutory rate for the month and three months ended August 31, 1993. In addition, Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" requires that deferred tax liabilities and assets be adjusted in the period of enactment for the effect of an enacted change in tax laws or rates. The Company estimated that such one-time charge was approximately $2.5 million and such amount was included in the provision for deferred income taxes for the month and three months ended August 31, 1993. NOTE 8--SUMMARIZED FINANCIAL INFORMATION The consolidated financial statements presented herein are of the Company, which is a guarantor of the obligations of the Senior Note Issuers (the principal operating subsidiaries consisting of Jim Walter Homes, Inc. ["Jim Walter Homes"], Jim Walter Resources, Inc. and United States Pipe and Foundry Company ["U.S. Pipe"]) and the Subordinated Note Issuers (Jim Walter Homes and U.S. Pipe). Summarized unaudited financial information of the Senior Note Issuers and the Subordinated Note Issuers is set forth as follows:
SENIOR NOTE ISSUERS SUBORDINATED NOTES ISSUERS THREE MONTHS ENDED THREE MONTHS ENDED AUGUST 31, AUGUST 31, 1994 1993 1994 1993 ($ IN THOUSANDS) OPERATIONS DATA Net sales and revenues $216,145 $215,250 $147,594 $136,432 Cost of sales (exclusive of depreciation, depletion and amortization) 171,442 167,939 114,813 103,097 Other operating expenses 20,940(a) 25,739(a) 17,621(b) 20,456(b) Postretirement health benefits 5,488 5,235 1,596 1,574 Chapter 11 costs 17 (15) 11 (21) Interest and amortization of debt expense 11,121 10,840 7,287 7,170 Amortization of excess purchase price 5,402 5,402 5,842 5,842 1,735 110 424 (1,686) Provision for income taxes (Note 7) (2,656) (4,182) (2,389) (2,881) Net loss $ (921) $ (4,072) $ (1,965) $ (4,567) (a) Net of $10,608 and $7,735 intercompany income, respectively. (b) Net of $3,268 and $2,097 intercompany income, respectively.
BALANCE SHEET DATA SENIOR NOTE ISSUERS SUBORDINATED NOTE ISSUERS AUGUST 31, MAY 31, AUGUST 31, MAY 31, 1994 1994 1994 1994 ($ IN THOUSANDS) ASSETS Cash $ 3,339 $ 22,673 $ 3,303 $ 22,638 Short-term investments, restricted 7,221 6,927 3,740 3,910 Trade and other receivables, net 108,530 100,490 81,748 82,197 Inventories 119,147 132,850 94,789 102,986 Prepaid expenses 6,202 8,177 2,618 3,610 Intercompany receivables 1,977,481 1,914,257 1,483,435 1,419,685 Property, plant and equipment, net 513,370 522,070 167,524 169,186 Unamortized debt expense and other assets 25,671 27,269 16,546 18,171 Excess of purchase price over net assets acquired 278,836 284,238 301,544 307,386 $3,039,797 $3,018,951 $ 2,155,247 $ 2,129,769 LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) Bank overdrafts $ 12,878 $ 21,752 $ 12,068 $ 12,184 Accounts payable and accrued expenses 105,581 113,235 60,118 60,285 Income taxes payable (Note 7) 14,033 7,548 10,278 5,600 Deferred income taxes (Note 7) 52,490 56,282 31,895 34,146 Intercompany payables 713,366 693,786 714,633 698,066 Accrued postpetition interest on secured obligations 205,769 194,621 140,040 132,683 Accumulated postretirement health benefits obligation 171,839 166,631 54,513 53,009 Other long-term liabilities 37,024 37,368 7,404 7,543 Liabilities subject to Chapter 11 proceedings 1,733,196 1,733,187 1,445,403 1,445,394 Stockholder's equity (deficit) (6,379) (5,459) (321,105) (319,141) $3,039,797 $3,018,951 $2,155,247 $2,129,769
NOTE 9--SEGMENT INFORMATION Information relating to the Company's business segments is set forth as follows: THREE MONTHS ENDED AUGUST, 31, 1994 1993 (IN THOUSANDS) Sales and Revenues: Homebuilding and related financing $103,082 $109,246 Building materials 16,519 14,556 Industrial products 48,566 41,286 Water and waste water transmission products 102,200 86,798 Natural resources(e) 68,612 80,399 Corporate 1,661 1,485 Consolidated sales and revenues(a) $340,640 $333,770 Contributions to Operating Income(b): Homebuilding and related financing $ 19,889 $ 24,177 Building materials 46 465 Industrial products 2,536 1,614 Water and waste water transmission products 10,257 7,385 Natural resources (2,459) 801 30,269 34,442 Less--Unallocated corporate interest and other expense(c) (21,979) (22,660) Income taxes (6,857) (10,390) Net income $ 1,433 $ 1,392 Depreciation, Depletion and Amortization: Homebuilding and related financing $ 836 $ 824 Building materials 436 383 Industrial products 2,310 2,175 Water and waste water transmission products 3,574 3,814 Natural resources 9,126 8,798 Corporate 475 392 Total $ 16,757 $ 16,386 Gross Capital Expenditures: Homebuilding and related financing $ 1,024 $ 1,003 Building materials 2,513 167 Industrial products 4,447 1,116 Water and waste water transmission products 2,508 2,657 Natural resources 4,138 8,307 Corporate 34 429 Total $ 14,664 $ 13,679
AUGUST, 31, 1994 1993 (IN THOUSANDS) Identifiable Assets: Homebuilding and related financing $1,790,301 $1,877,904 Building materials 59,076 56,746 Industrial products 131,093 122,932 Water and waste water transmission products 461,184 462,513 Natural resources 445,704 452,377 Corporate(d) 220,301 225,816 Total $3,107,659 $3,198,288
(a) Inter-segment sales (made primarily at prevailing market prices) are deducted from sales of the selling segment and are insignificant in amount with the exception of the sales of the Industrial Products Group to the Water and Waste Water Transmission Products Group of $5,146,000 and $3,960,000 and sales of the Natural Resources Group to the Industrial Products Group of $1,375,000 and $1,111,000 in the three months ended August 31, 1994 and 1993, respectively. (b) Includes postretirement health benefits of $6,647,000 and $6,396,000 for the three months ended August 31, 1994 and 1993, respectively. A breakdown by segment is as follows:
THREE MONTHS ENDED AUGUST, 31, 1994 1993 (IN THOUSANDS) Homebuilding and related financing $ 573 $ 542 Building materials 129 126 Industrial products 775 790 Water and waste water transmission products 1,091 1,098 Natural resources 3,901 3,670 Corporate 178 170 $6,647 $6,639
(c) Excludes interest expense incurred by the Homebuilding and Related Financing Group of $31,120,000 and $32,573,000 in the three months ended August 31, 1994 and 1993, respectively. (d) Primarily cash and corporate headquarters buildings and equipment. (e) Includes sales of coal of $61,890,000, and $72,554,000 in the three months ended August 31, 1994 and 1993, respectively. EXHIBIT 3.B.2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion should be read in conjunction with the consolidated financial statements and notes thereto of Walter Industries, Inc. and subsidiaries for the three months ended August 31, 1994, particularly Note 9--Segment Information which presents sales and operating income by operating group. RESULTS OF OPERATIONS Three months ended August 31, 1994 and 1993 Net sales and revenues for the three months ended August 31, 1994 increased $6.9 million, or 2.1%, over the prior year period, with a 1.5% increase in volume and a .6% increase in pricing and/or mix. The increase in net sales and revenues was the result of improved sales and revenues in the Building Materials, Industrial Products and Water and Waste Water Transmission Products Groups, partially offset by lower sales and revenues in the Homebuilding and Related Financing and Natural Resources Groups. Building Materials Group sales and revenues were $2.0 million, or 13.5%, greater than the prior year period. The increase resulted from improved sales volumes and prices for window components and metal building and foundry products. The Group's operating income performance, however, of $46,000 was $419,000 below the 1993 period. This performance was largely the result of higher manufacturing costs in the window components business due to increased raw material costs, especially aluminum, a major raw material component, and costs associated with the consolidation and relocation of the Hialeah, Florida and Columbus, Ohio operations to Elizabethton, Tennessee which is expected to be completed by the end of calendar 1994. Increased manufacturing costs for metal building products, which resulted in slightly lower operating income, were the result of higher raw material costs, primarily scrap metal, and reduced efficiencies reflecting start-up problems associated with the relocation of the steel fabrication operation in May 1994. Industrial Products Group sales and revenues were $7.3 million, or 17.6%, ahead of the prior year period. Increased sales volumes of aluminum foil and sheet products, foundry coke, chemicals, industrial castings, patterns and tooling and resin coated sand and higher selling prices for aluminum foil and sheet products and furnace coke were partially offset by lower sales volumes of furnace coke and mineral wool. The Group's operating income of $2.5 million was $922,000 greater than the prior year period. The improved performance resulted from the sales increase and higher gross profit margins for furnace coke, chemicals and patterns and tooling, partially offset by reduced margins for foundry coke, mineral wool, industrial castings and resin coated sand. Water and Waste Water Transmission Products Group sales and revenues were $15.4 million, or 17.7%, ahead of the prior year period. The increase was the result of higher sales prices and volumes for ductile iron pressure pipe, fittings and valves and hydrants. The order backlog for pressure pipe at August 31, 1994 was 127,885 tons, which represents approximately three months shipments, compared to 129,108 tons at August 31, 1993. Operating income of $10.3 million exceeded the prior year period by $2.9 million. The improved performance resulted from the increased sales prices and volumes, partially offset by higher raw material costs, especially scrap, a major raw material component. Homebuilding and Related Financing Group sales and revenues were $6.2 million, or 5.6%, below the prior year period. This performance reflects a 12.8% decrease in the number of homes sold, from 1,218 units in 1993 to 1,062 units in 1994, partially offset by an increase in the average selling price per home sold from $37,600 in 1993 to $39,400 in 1994. The decrease in unit sales reflects continuing strong competition in virtually every Jim Walter Homes sales region. The higher average selling price in 1994 reflects a greater percentage of "90% complete" homes sold and a smaller percentage of the lower priced Affordable Line homes sold. Jim Walter Homes' backlog at August 31, 1994 was 2,019 units compared to 1,830 units at August 31, 1993. Time charge income (revenues received from Mid-State Homes' instalment note portfolio) decreased from $58.1 million in 1993 to $56.7 million in 1994. The decrease in time charge income is attributable to a reduction in the total number of accounts, partially offset by an increase in the average balance per account in the portfolio. The Group's operating income of $19.9 million was $4.3 million below the prior year period. This decrease resulted from the lower number of homes sold, reduced homebuilding gross profit margins and the decrease in time charge income, partially offset by the increase in average selling price per home sold and lower interest expense in 1994 ($31.1 million) as compared to that incurred in 1993 ($32.6 million). The lower gross profit margins reflect higher lumber prices and the effect of discounts related to sales promotions on certain models. Natural Resources Group sales and revenues were $11.8 million, or 14.7%, below the 1993 period. The decrease resulted from lower sales volumes and prices for coal, reduced methane gas selling prices and decreases in outside coal, gas and timber royalty income, partially offset by greater methane gas sales volume. A total of 1.403 million tons of coal was sold in the 1994 period versus 1.539 million tons in the 1993 period, an 8.8% decrease. The decrease in tonnage sold was the result of lower shipments to Japanese steel mills and other export customers, partially offset by greater shipments to Alabama Power Company ("Alabama Power"). Increased shipments to Alabama Power were the result of a new agreement signed May 10, 1994 for the sales and purchase of coal replacing the 1979 contract and the 1988 amendment thereto. On May 23, 1994, the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Bankruptcy Court") issued an order approving the new contract, such order becoming final on June 3, 1994. Under the new contract, Alabama Power will purchase 4.0 million tons of coal per year from Jim Walter Resources during the period July 1, 1994 through August 31, 1999. In addition, Jim Walter Resources will have the option to extend the new contract through August 31, 2004, subject to mutual agreement on the market pricing mechanism and certain other terms and conditions of such extension. The new contract has a fixed price subject to an escalation based on the Consumer Price Index or another appropriate published index and adjustments for government impositions and quality. The new contract includes modifications of specifications, shipping deviations and changes in transportation arrangements. The new contract provides for the dismissal of Jim Walter Resources' declaratory judgment action and Alabama Power's dismissal of its appeal regarding Jim Walter Resources' assumption of the 1979 contract. A joint motion was filed by Jim Walter Resources and Alabama Power with the District Court seeking the entry of an order dismissing Alabama Power's appeal from the March 4, 1991 order; and a joint motion was filed by Jim Walter Resources and Alabama Power with the Bankruptcy Court seeking the entry of an order dismissing Jim Walter Resources' declaratory judgment action. By order dated June 23, 1994, the District Court granted the motion to dismiss Alabama Power's appeal. By order dated June 24, 1994, the Bankruptcy Court granted the joint motion to dismiss the declaratory judgment action. The average price per ton of coal decreased 6.4%. from $47.13 in the 1993 period to $44.11 in the 1994 period due to lower prices realized on shipments to Alabama Power, Japanese steel mills and other export customers. The Group incurred an operating loss of $2.5 million in the 1994 period compared to operating income of $801,000 in the 1993 period. The lower performance reflects the decreases in sales volumes and prices for coal, lower methane gas selling prices, reduced coal mining productivity which resulted in higher costs per ton of coal produced and lower outside coal, gas and timber royalty income, partially offset by greater methane gas sales volume. Reduced coal mining productivity was principally the result of limited production at Blue Creek Mine No. 5 due to the recurrence of spontaneous combustion heatings that shut down the mine from early April 1994 until May 16, 1994, together with geological problems at Mine No. 4. Representatives of Jim Walter Resources, the Mine Safety and Health Administration, Alabama State Mine Inspectors and the United Mine Workers of America agreed that the longwall coal panel being mined in Mine No. 5 at the time the spontaneous heating recurred would be abandoned and sealed off. Development mining for the two remaining longwall coal panels in this section of the mine resumed May 16, 1994 and the first longwall panel will be ready for mining in January 1995. Production will be adversely impacted until such date; however, a portion of the increased costs will be recovered from business interruption insurance. Cost of sales, exclusive of depreciation, of $224.1 million was 80.9% of net sales versus $212.7 million and 79.2% in the 1993 period. The cost of sales percentage increase was primarily the result of lower gross profit margins on home sales, coal, foundry coke, mineral wool, industrial castings, resin coated sand, window components and metal building products, partially offset by improved margins for furnace coke, chemicals and patterns and tooling. Selling, general and administrative expenses (exclusive of postretirement health benefits) of $32.3 million were 9.5% of net sales and revenues in the 1994 period versus $32.0 million and 9.6% in 1993. Chapter 11 costs of $4.1 million were $1.2 million greater than the prior year period due to the filing of three amended plans of reorganization and printing, mailing and noticing costs associated with the Debtors Fifth Amended Plan and the Bondholders Third Amended Plan, along with the disclosure statements approved by the Bankruptcy Court, that were sent to all members of classes of impaired creditors and equity security holders for acceptance or rejection (see Note 2 of Notes to Consolidated Financial Statements). Interest and amortization of debt discount and expense decreased $3.6 million. The decrease was principally the result of reductions in the outstanding debt balance on the Mortgage-Backed Notes and Asset Backed Notes and lower amortization of debt discount and expense, partially offset by higher interest rates. Interest in the amount of $765.2 million ($40.9 million in the three months ended August 31, 1994) on unsecured obligations has not be accrued in the consolidated financial statements since the date of the filing of petitions for reorganization. This amount is based on the balances of the unsecured debt obligations and their interest rates as of December 27, 1989 and does not consider fluctuations in the level of short-term debt and interest rates and the issuance of commercial paper that would have occurred to meet the working capital requirements of the Homebuilding and Related Financing Group (see Notes 2 and 4 of the Notes to Consolidated Financial Statements). Such interest rates do not presently govern the respective rights of the Company, its subsidiaries and the various lenders. Instead the rights of the parties will be determined in connection with the Reorganization Proceedings. On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law raising the federal corporate income tax rate to 35% from 34%, retroactive to January 1, 1993. The provision for income taxes for the 1993 period included federal income taxes at the 35% statutory rate. In addition, Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" requires that deferred tax liabilities and assets be adjusted in the period of enactment for the effect of an enacted change in tax laws or rates. The Company estimated that such one-time charge was $2.5 million and such amount was included in the provision for deferred income taxes in the 1993 period. The net income for the three months ended August 31, 1994 was $1.433 million as compared to $1.392 million in the 1993 period reflecting all of the previously mentioned factors as well as the impact of lower miscellaneous income and slightly higher postretirement health benefits, partially offset by greater Chapter 11 interest income. FINANCIAL CONDITION On December 27, 1989, the Debtors each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the Bankruptcy Court (the "Reorganization Proceedings"). On December 3, 1990, one additional small subsidiary filed a voluntary petition for reorganization under the Bankruptcy Code. Two other small subsidiaries have not filed petitions for reorganization. Pursuant to the applicable provisions of the Bankruptcy Code, all pending legal proceedings and collection of outstanding claims against the Debtors were automatically stayed upon filing of the Chapter 11 petitions while the Debtors continue business operations as debtors in possession (see Note 2 of Notes to Consolidated Financial Statements). The Debtors' Chapter 11 petitions resulted from a sequence of events stemming primarily from an inability of the Company's interest reset advisors to reset interest rates on approximately $624 million of outstanding Senior Extendible Reset Notes and Senior Subordinated Extendible Reset Notes (collectively, the "Old Notes") on which interest rates were scheduled to be reset effective January 2, 1990. The Company believes that the reset advisors' inability to reset the interest rates was primarily attributable to pending asbestos-related litigation which prevented the Debtors from completing a refinancing or from selling assets to reduce their debt which, together with turmoil in the high yield bond markets, depressed the bid value of such notes. This created the potential for a sharply higher reset rate that, in turn, would have caused interest expense to rise above the Debtors' ability to pay. To mitigate these factors, the Company, on November 7, 1989, offered to exchange the Old Notes for a combination of cash and new Senior Extendible Reset Notes and new Senior Subordinated Reset Notes. The interest reset advisors, Drexel Burnham and Merrill Lynch, advised the Company in early December 1989 that, in their opinion, there was no interest rate at which the Old Notes could be reset to have a bid value of 101% as called for in the terms of the Old Notes. Trustees for the Old Notes, citing the inability of the interest reset advisors to establish a new rate, subsequently advised the Company that the failure to reset the Old Notes not tendered in the exchange offers would likely constitute non-compliance under the indentures for the Old Notes. Later, the exchange offer was supplemented to strengthen certain covenants of the new Senior Extendible Reset Notes and new Senior Subordinated Reset Notes and, in addition, an offer of 10% equity in the Company was made to the holders of old Senior Subordinated Extendible Reset Notes. The Company received less than the percentages of each of the outstanding classes of Old Notes required under terms of the exchange offers, which expired at 7:00 p.m. New York City time on December 27, 1989. As a result, the exchange offers were terminated and all tendered Old Notes were returned. As a result of the Reorganization Proceedings, the maturity of all unpaid principal of, and interest on, the senior and subordinated indebtedness of the Debtors became immediately due and payable in accordance with the terms of the instruments governing such indebtedness. The amount of indebtedness that was accelerated on the petition date aggregated approximately $1.7 billion. The Debtors are currently accruing, but not paying, interest on senior secured indebtedness and not accruing interest on unsecured indebtedness. At August 31, 1994, interest in the amount of $765.2 million ($40.9 million in the three months ended August 31, 1994) had not been accrued on unsecured obligations. These amounts are based on the balances of the unsecured debt obligations and their interest rates as of the petition date. Such interest rates do not necessarily govern the respective rights of the Company, its subsidiaries and the various lenders. Instead, the rights of the parties will be determined in connection with the Reorganization Proceedings. While the Reorganization Proceedings are pending, the Debtors are prohibited from making any payments of prepetition obligations owing as of the petition date, except as permitted by the Bankruptcy Court. Furthermore, the Debtors will not be able to borrow additional funds under any of their prepetition credit arrangements. Since the beginning of the Reorganization Proceedings certain of the Debtors have consummated an agreement, as amended, with two commercial banks with respect to a $25 million letter of credit facility. Pursuant to the terms of such "New Letter of Credit Agreement," upon issuance of a letter of credit, the applicable Debtors will deposit with the issuing bank an amount of cash equal to the stated amount of the letter of credit. At August 31, 1994, $2,985,000 of letters of credit were outstanding under this agreement. Since the beginning of the Reorganization Proceedings certain of the Debtors have also consummated an agreement with the lenders pursuant to which the lenders agree to renew letters of credit issued under the Working Capital Agreement that were outstanding at the time of filing of the petitions for reorganization (the "Replacement Letter of Agreement"). To the extent that the letters of credit under the Replacement Letter of Agreement ($17,549,000 outstanding at August 31, 1994) are renewed during the Reorganization Proceedings, these Debtors have agreed to reimburse the issuing bank for any draws under such letters of credit, which obligation shall be entitled to an administrative expense claim under the Bankruptcy Code. In addition, the obligations of the Debtors under such Replacement Letter of Credit Agreement shall continue to be secured by the collateral which secures the Debtors' obligations under the Bank Credit Agreement and the Working Capital Agreement. The Bankruptcy Court approved the Debtors' entering into the New Letter of Credit Agreement in May 1990. The New Letter of Credit Agreement currently terminates on June 30, 1995. For further discussion on the background and status of the Reorganization Proceedings see Note 2 of Notes to Consolidated Financial Statements. A substantial controversy exists with regard to federal income taxes allegedly owed by the Company. Proofs of claim have been filed by the Internal Revenue Service in the amounts of $110,560,883 with respect to fiscal years ended August 31, 1980 and August 31, 1983 through August 31, 1987, $31,468,189 with respect to fiscal years ended May 31, 1988 (nine months) and May 31, 1989 and $44,837,693 with respect to fiscal years ended May 31, 1990 and May 31, 1991. Objections to the proofs of claim have been filed by the Company and the various issues are being litigated in the Bankruptcy Court. The Company believes that such proofs of claim are substantially without merit and intends to defend such claims against the Company vigorously. LIQUIDITY The Debtors did not commence the Reorganization Proceedings as a result of their inability to fund normal operating liabilities either on a short-term or long-term basis; therefore, the following discussion of liquidity presents a somewhat unusual position compared to that normally associated with many bankruptcy filings. The Company normally uses its cash flows for three principal purposes: (1) for working capital requirements (including the financing of home sales); (2) for capital expenditures for business expansion, productivity improvement, cost reduction and replacements necessary to maintain the business; and (3) to provide a return to lenders and shareholders. Working capital is required to fund adequate levels of inventories and accounts receivable, including instalment notes receivable arising from the homebuilding business. At August 31, 1994, the Company had free cash balances and short-term investments of approximately $143 million available for operations. On July 1, 1992, pursuant to approval by the Bankruptcy Court, instalment notes receivable having a gross amount of $638,078,000 were sold by Mid-State to Mid-State Trust III ("Trust III"), a business trust established under the laws of Delaware, in exchange for the net proceeds from the public issuance of $249,864,000 of Asset Backed Notes by Trust III which bear an interest rate of 7 5/8%. Net proceeds were utilized to repay in full all outstanding indebtedness due under the Mid-State credit facility with the excess cash to be used to fund the ongoing operations of the Debtors. Under the Mid-State Trust II ("Trust II") indenture for the Mortgage-Backed Notes, if certain criteria as to performance of the pledged instalment notes are met, Trust II is allowed to make distributions of cash to Mid-State Homes, its sole beneficial owner, to the extent that cash collections on such instalment notes exceed Trust II's cash expenditures for its operating expenses, interest expense and mandatory debt payments on the Mortgage-Backed Notes. In addition to the performance based distribution, the indenture permits distribution of additional excess funds, if any, provided such distributions are consented to by the guarantor of the Mortgage-Backed Notes. The guarantor approved additional distributions of approximately $20.6 million on July 1, 1994 and $13.9 million for the October 1, 1994 distribution. During the period from formation of Trust II through October 1, 1994 such distributions amounted to $98.8 million. At the present time, 97% of all home sales made by Jim Walter Homes are for credit. Jim Walter Homes obtains funds necessary to operate its home construction business primarily using cash flow from operations of the Company. The Company believes that, under present operating conditions, sufficient cash flow will be generated, together with some use of free cash balances, to finance home sales,to make planned capital expenditures and to meet all operating needs, including any cash deposits to collateralize letters of credit. There are no material commitments for capital expenditures; however, the Debtors' business plans for 1995 include capital expenditures of approximately $72 million for the balance of the fiscal year ending May 31, 1995. The Reorganization Proceedings have had no adverse impact on capital expenditures. Greater cash flow from operations in future years is dependent upon the Company's ability to grow and to improve its profitability. The effects that the Reorganization Proceedings will have on the levels of cash flow generated by future operations are unknown at this time.
EXHIBIT 3.C. WALTER INDUSTRIES, INC. AND SUBSIDIARIES SEGMENT INFORMATION 1994 PROJECTED FOR THE YEARS ENDING MAY 31, ACTUAL 1995 1996 1997 1998 1999 (IN THOUSANDS) Sales and Revenues: Homebuilding and related financing $ 424,530 $ 457,704 $473,346 $ 494,099 $ 519,296 546,071 Building materials 56,111 60,840 66,073 66,986 67,943 68,486 Industrial products 180,615 203,876 221,858 243,353 255,004 272,462 Water and waste water transmission products 345,136 375,839 401,662 429,137 452,935 476,799 Natural resources 319,410 364,882 382,404 399,370 410,179 405,589 Corporate 2,722 5,461 5,511 6,814 9,236 12,833 Total $1,328,524 $1,468,602 $1,550,854 $1,639,759 $1,714,593 $1,782,240 Earnings Before Interest and Taxes (EBIT): Homebuilding and related financing $ 230,782 $ 237,349 $246,110 $ 257,208 $ 266,696 $ 277,728 Building materials 2,074 2,660 5,451 5,808 6,526 7,294 Industrial products 11,873 13,064 19,806 24,080 29,117 31,239 Water and waste water transmission products 25,545 30,636 38,987 47,335 51,381 55,280 Natural resources (1,175) 36,841 46,579 58,649 63,922 68,232 Corporate (24,233) (22,634) (22,349) (20,719) (15,970) (12,549) Total $ 244,866 $ 297,916 $ 334,584 $ 372,361 $ 401,672 $ 427,224
WALTER INDUSTRIES, INC. AND SUBSIDIARIES SEGMENT INFORMATION 1994 PROJECTED FOR THE YEARS ENDING MAY 31, ACTUAL 1995 1996 1997 1998 1999 (IN THOUSANDS) Depreciation, Depletion and Amortization(a): Homebuilding and related financing$ 3,380 $ 3,420 $ 3,520 $ 3,620 $ 3,720 $ 3,820 Building materials 1,035 1,234 1,467 1,518 1,610 1,643 Industrial products 8,205 9,060 10,228 11,230 12,082 12,900 Water and waste water transmission products 12,878 13,317 14,690 15,442 16,43717,731 Natural resources 42,433 44,880 46,987 47,183 48,305 47,085 Corporate 1,025 1,215 1,247 1,304 1,321 1,353 Total $68,956 $73,126 $78,139 $80,297 $83,475 $84,532 Capital Expenditures: Homebuilding and related financing$ 3,210 $ 6,156 $ 5,000 $ 5,000 $ 5,000 $ 5,000 Building materials 1,115 2,310 1,540 929 807 520 Industrial products 9,752 19,670 15,697 13,526 11,456 13,240 Water and waste water transmission products 13,613 19,340 19,170 19,777 20,60021,775 Natural resources 40,224 47,197 46,159 53,731 28,597 33,176 Corporate 1,917 1,730 905 580 420 355 Total $69,831 $96,403 $88,471 $93,543 $66,880 $74,066 (a) Excludes Excess of Purchase Price Depreciation of: $ 2,079 $ 4,049 $ 4,368 $ 4,498 $ 4,439 $ 4,889
Exhibit T3E3 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION Chapter 11 In re Jointly Administered HILLSBOROUGH HOLDINGS CORPORATION, Case No. 89-9715-8P1 BEST INSURORS, INC., Case No. 89-9740-8P1 BEST INSURORS OF MISSISSIPPI, INC., Case No. 89-9737-8P1 COAST TO COAST ADVERTISING, INC., Case No. 89-9727-8P1 COMPUTER HOLDINGS CORPORATION, Case No. 89-9724-8P1 DIXIE BUILDING SUPPLIES, INC., Case No. 89-9741-8P1 HAMER HOLDINGS CORPORATION, Case No. 89-9735-8P1 HAMER PROPERTIES, INC., Case No. 89-9739-8P1 HOMES HOLDINGS CORPORATION, Case No. 89-9742-8P1 JIM WALTER COMPUTER SERVICES, INC., Case No. 89-9723 8P1 JIM WALTER HOMES, INC., Case No. 89-9746-8P1 JIM WALTER INSURANCE SERVICES, Case No. 89-9731-8P1 INC., Case No. 89-9738-8P1 JIM WALTER RESOURCES, INC., JIM WALTER WINDOW COMPONENTS, INC., Case No. 89-9716-8P1 JW ALUMINUM COMPANY, Case No. 89-9718-8P1 JW RESOURCES, INC., Case No. 90-11997-8P1 JW RESOURCES HOLDINGS CORPORATION, Case No. 89-9719-8P1 J.W.I. HOLDINGS CORPORATION, Case No. 89-9721-8P1 J.W. WALTER, INC., Case No. 89-9717-8P1 JW WINDOW COMPONENTS, INC., Case No. 89-9732-8P1 LAND HOLDINGS CORPORATION, Case No. 89-9720-8P1 MID-STATE HOMES, INC., Case No. 89-9725-8P1 MID-STATE HOLDINGS CORPORATION, Case No. 89-9726-8P1 RAILROAD HOLDINGS CORPORATION, Case No. 89-9733-8P1 SLOSS INDUSTRIES CORPORATION, Case No. 89-9743-8P1 SOUTHERN PRECISION CORPORATION, Case No. 89-9729-8P1 UNITED LAND CORPORATION, Case No. 89-9730-8P1 UNITED STATES PIPE AND FOUNDRY COMPANY, Case No. 89-9744-8P1 U.S. PIPE REALTY, INC., Case No. 89-9734-8P1 VESTAL MANUFACTURING COMPANY, Case No. 89-9728-8P1 WALTER HOME IMPROVEMENT, INC., Case No. 89-9722-8P1 WALTER INDUSTRIES, INC. and Case No. 89-9745-8P1 WALTER LAND COMPANY Case No. 89-9736-8P1 Debtors.
NOTICE OF ORDER (A) APPROVING DEBTORS' DISCLOSURE STATEMENT AND CREDITORS' DISCLOSURE STATEMENT, (B) ESTABLISHING PROCEDURES AND DEADLINES FOR VOTING ON AND OBJECTING TO THE DEBTORS' JOINT PLAN OF REORGANIZATION AND THE CREDITORS' JOINT PLAN OF REORGANIZATION, (C) FIXING THE DATE OF THE INITIAL CONFIRMATION HEARING AND OF THE SCHEDULING OF RELATED HEARINGS, AND (D) APPROVING RELATED RELIEF TO ALL CREDITORS, EQUITY SECURITY HOLDERS AND PARTIES-IN- INTEREST: PLEASE TAKE NOTICE that the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) (the "Bankruptcy Court") has approved the Debtors' Fifth Amended Disclosure Statement dated as of July 25, 1994 (the "Debtors' Disclosure Statement") relating to the Debtors' Fifth Amended Joint Plan of Reorganization dated as of July 25, 1994 (the "Debtors' Plan"), and the Disclosure Statement for Creditors' Plan dated as of August 1, 1994 (the "Creditors' Disclosure Statement") relating to the Creditors' Joint Plan of Reorganization dated as of August 1, 1994 (the "Creditors' Plan"), as containing adequate information within the meaning of Section 1125 of Title 11 of the United States Code (the "Bankruptcy Code"). PLEASE TAKE FURTHER NOTICE that separate ballots for the purpose of voting to accept or reject the Debtors' Plan and/or the Creditors' Plan will be transmitted to those holders of claims and interests entitled to vote thereon. Creditors and equity security holders whose votes are solicited with respect to either Plan may vote to accept both Plans, may vote to reject both Plans, or may vote to accept one Plan and reject the other Plan. PLEASE TAKE FURTHER NOTICE that each ballot with respect to either the Debtors' Plan or the Creditors' Plan will allow the voter to indicate its preference as between the Debtors' Plan and the Creditors' Plan. You may indicate a preference between Plans even if you vote in favor of both Plans. PLEASE TAKE FURTHER NOTICE that each ballot cast to accept or reject the Debtors' Plan, and each ballot cast to accept or reject the Creditors' Plan, by the beneficial owner of a claim against or interest in any Debtor which is also the record holder of such claim or interest must be properly completed, executed, and mailed or delivered to the Balloting Agent at the address indicated in the voting instructions accompanying such ballot so that the ballot is actually received no later than 5:00 p.m. Eastern Time, on September 23, 1994 (the "Voting Deadline"). If you are the beneficial owner of a claim against or interest in any Debtor which is held of record by a bank, broker or other record nominee, you must properly complete and execute each separate ballot transmitted to you, and mail or deliver such ballot to your record holder nominee at the address indicated in the voting instructions accompanying such ballot, so that the ballot is actually received by your record holder nominee no later than 5:00 p.m. Eastern Time, on September 19, 1994 (the "Beneficial Owners Voting Deadline"). If any ballot either is not properly completed or is not actually received by the Voting Deadline or the Beneficial Owners Voting Deadline, as may be applicable, such untimely ballot will not be counted as a vote to accept or reject the Plan to which such ballot relates, nor will any preference for one Plan over the other Plan that is indicated on such ballot be counted. PLEASE TAKE FURTHER NOTICE that the holders of Series B & C Senior Note Claims (Class S-6) under the Debtors' Plan, and the holders of Other Unsecured Claims (Class U-3), Series B & C Senior Note Claims (Class S-6), Subordinated Note Claims (Classes U-4, U-5 and U-6) and Old Common Stock Interests (Class E-1) under the Creditors' Plan may exercise certain elections. These elections are located on the ballots transmitted to such creditors and equity security holders to accept or reject the Debtors' Plan or the Creditors' Plan, as is applicable. If the applicable election is not properly completed on the ballot, it will be treated as if the election had not been made. PLEASE TAKE FURTHER NOTICE that any objection or challenge to the vote cast by any holder of a claim or interest on the Debtors' Plan or the Creditors' Plan (a "Voting Objection") must be in writing and (a) state the name and address of the objecting party and the amount of its claim or the nature of its interest in the Debtors' Chapter 11 cases, (b) state with particularity the basis and nature of the objection or challenge and (c) be filed with the Clerk of the Bankruptcy Court, 4921 Memorial Highway, Tampa, Florida 33634, together with proof of service, and served on the following parties (the "Notice Parties") at the following addresses, so as to be actually received by each of them on or before 5:00 p.m. Eastern Time on October 7, 1994 (the "Voting Objection Deadline"): Counsel for the Official Counsel for Lehman Brothers Bondholders' Committee Inc. Stroock & Stroock & Lavan Paul, Weiss, Rifkind, Seven Hanover Square Wharton & New York, New York 10004-2696 Garrison Attn: Daniel H. Golden, Esq. 1285 Avenue of the Americas New York, New York 10019-6064 Counsel for the Official Attn: Robert D. Drain, Esq. Committee of General Unsecured Creditors and Jones, Day, Reavis & Pogue 599 Lexington Avenue Hill, Ward & Henderson New York, New York 10016 Suite 3700 Barnett Plaza Attn: Marc S. Kirschner, Esq. 101 East Kennedy Boulevard Tampa, Florida 33602 Counsel for Apollo Advisors, L.P. Attn: Douglas McClurg, Esq. Akin, Gump, Strauss, Hauer & Feld, Counsel for the Debtors L.L.P. Kaye, Scholer, Fierman, Hays 65 East 55th Street & Handler 33rd Floor 425 Park Avenue New York, New York 10022 New York, New York 10022 Attn: Ellen R. Werther, Esq. Attn: Andrew A. Kress, Esq. Steven M. Pesner, P.C. and and Stichter, Riedel, Blain & Stutman, Treister & Glatt Prosser, P.A. 3699 Wilshire Boulevard 110 East Madison Street Suite 900 Suite 200 Los Angeles, CA 90010 Tampa, Florida 33602 Attn: Kenneth Klee, Esq. Attn: Don M. Stichter, Esq. Isaac Pachulski, Esq. Counsel for Kohlberg Kravis Counsel for the Ad Hoc Committee Roberts & Co. of Carlton, Fields, Ward, Pre-LBO Bondholders Emmanuel, Smith & Cutler, Marcus Montgomery Wolfson P.C. P.A. 53 Wall Street One Harbour Place New York, New York 10005 P.O. Box 3239 Attn: Peter D. Wolfson, Esq. Tampa, Florida 33601 Sara L. Chenetz, Esq. Attn: Leonard Gilbert, Esq. Office of the United States Trustee Assistant U.S. Trustee Suite 110 4919 Memorial Highway Tampa, Florida 33634 Attn: Cynthia P. Burnette, Esq.
Any Voting Objection not filed and served as set forth above shall be deemed waived and shall not be considered by the Bankruptcy Court. PLEASE TAKE FURTHER NOTICE that commencing on October 17, 1994, and continuing day to day until concluded, hearings shall be held before the Honorable Alexander L. Paskay, Chief Bankruptcy Judge at 9:00 a.m. at the United States Bankruptcy Court, 4921 Memorial Highway, Tampa, Florida 33634 to consider the following confirmation-related matters: a. the issues raised by the Debtors in Adversary Proceeding No. 94-278, which action the Court has ruled should be deemed to be a contested matter governed by Bankruptcy Rule 9014, and the issues raised in any response and/or motion filed by any of the defendants thereto; b. the application by the Proponents of the Creditors' Plan seeking approval of the Veil Piercing Settlement Agreement annexed as Exhibit 3A or 3C, as applicable, to the Creditors' Plan, which, among other things, provides for the settlement of all Veil Piercing Claims, as defined therein, including, inter alia, all claims asserted in Adversary Proceeding Numbers 90-0003 and 90-0004 in the Debtors' Chapter 11 cases, and any related application or response filed by any party-in-interest thereto; and c. any Voting Objection properly filed on or before the Voting Objection Deadline. PLEASE TAKE FURTHER NOTICE that pursuant to Rule 3020(b) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), November 10, 1994 is fixed as the last day for filing and serving written objections to confirmation of the Debtors' Plan and/or the Creditors' Plan (a "Confirmation Objection"). Any Confirmation Objection must be in writing and (a) state the name and address of the objecting party and the amount of its claim or the nature of its interest in the Debtors' Chapter 11 cases, (b) state with particularity the basis and nature of the objection and (c) be filed with the Clerk of the Bankruptcy Court, together with proof of service, and served on the Notice Parties, so as to be actually received by each of them on or before 5:00 p.m. Eastern Time on November 10, 1994. Any Confirmation Objection not filed and served as set forth above shall be deemed waived and shall not be considered by the Bankruptcy Court. PLEASE TAKE FURTHER NOTICE that the initial hearing to consider confirmation of the Debtors' Plan and the Creditors' Plan will be held before the Honorable Alexander L. Paskay, Chief Bankruptcy Judge, on November 16, 1994 at 1:30 p.m. at the United States Bankruptcy Court, 4921 Memorial Highway, Tampa, Florida 33634 (the "Initial Confirmation Hearing") at which time the Court will conduct only a status conference to schedule the date on which the hearing on the confirmation of the Debtors' Plan and the Creditors' Plan will continue, and to consider other issues appropriate for consideration at such status conference. The Initial Confirmation Hearing may be adjourned from time to time without further notice other than an announcement made at the Initial Confirmation Hearing or at any adjourned hearing thereon, and the continued confirmation hearing will be held without any further notice other than as provided at the Initial Confirmation Hearing. PLEASE TAKE FURTHER NOTICE that if you are the holder of a Disputed Claim (as set forth below) you will not be allowed to vote to accept or reject either the Debtors' Plan or the Creditors' Plan. However, if you wish to vote on the Debtors' Plan and/or the Creditors' Plan, you must file a motion pursuant to Bankruptcy Rule 3018(a) (the "Allowance Motion") with the Bankruptcy Court requesting that the Bankruptcy Court temporarily allow your claim for the purpose of voting to accept or reject such Plans. If your claim (a) is listed on the Proof of Claim Register maintained by the Clerk of the Court without a dollar amount (reflecting that the claim filed specified no dollar amount) or in a zero dollar amount (reflecting that the claim was filed as contingent, disputed or unliquidated), or (b) has been objected to by any or all of the Debtors, your claim is a Disputed Claim. If your claim is a Disputed Claim on or prior to July 13, 1994, the Allowance Motion must be filed with the Clerk of the Bankruptcy Court, 4921 Memorial Highway, Tampa, Florida 33634, together with proof of service, and served on the Notice Parties so as to be received by each of them on or before September 14, 1994. If the Debtors file an objection to your claim after July 13, 1994 but prior to the Voting Deadline, your Allowance Motion must be filed and served on the Notice Parties not later than 30 days after service of the Debtors' objection. Dated: at Tampa, Florida on August 2, 1994. BY THE COURT Clerk, U.S. Bankruptcy Court 4921 Memorial Highway Suite 200 Tampa, FL 33634 Exhibit T3E4 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re In Proceedings For A Reorganization Under Chapter 11 Hillsborough Holdings Corporation No. 89-9715-8P1 Best Insurors, Inc. No. 89-9740-8P1 Best Insurors Of Mississippi, Inc. No. 89-9737-8P1 Coast To Coast Advertising, Inc. No. 89-9727-8P1 Computer Holdings Corporation No. 89-9724-8P1 Dixie Building Supplies, Inc. No. 89-9741-8P1 Hamer Holdings Corporation No. 89-9735-8P1 Hamer Properties, Inc. No. 89-9739-8P1 Homes Holding Corporation No. 89-9742-8P1 Jim Walter Computer Services, Inc. No. 89-9723-8P1 Jim Walter Homes, Inc. No. 89-9746-8P1 Jim Walter Insurance Services, Inc. No. 89-9731-8P1 Jim Walter Resources, Inc. No. 89-9738-8P1 Jim Walter Window Components, Inc. No. 89-9716-8P1 JW Aluminum Company No. 89-9718-8P1 JW Resources, Inc. No. 90-11997-8P1 JW Resources Holdings Corporation No. 89-9719-8P1 J.W.I. Holdings Corporation No. 89-9721-8P1 J.W. Walter, Inc. No. 89-9717-8P1 JW Window Components, Inc. No. 89-9732-8P1 Land Holdings Corporation No. 89-9720-8P1 Mid-State Homes, Inc. No. 89-9725-8P1 Mid-State Holdings Corporation No. 89-9726-8P1 Railroad Holdings Corporation No. 89-9733-8P1 Sloss Industries Corporation No. 89-9743-8P1 Southern Precision Corporation No. 89-9729-8P1 United Land Corporation No. 89-9730-8P1 United States Pipe And Foundry CompanyNo. 89-9744-8P1 U.S. Pipe Realty, Inc. No. 89-9734-8P1 Vestal Manufacturing Company No. 89-9728-8P1 Walter Home Improvement, Inc. No. 89-9722-8P1 Walter Industries, Inc. No. 89-9745-8P1 Walter Land Company, No. 89-9736-8P1 (Jointly Administered) Debtors. NOTICE OF ORDER (A) APPROVING DISCLOSURE STATEMENT SUPPLEMENT RESPECTING CONSENSUAL PLAN, (B) ESTABLISHING PROCEDURES AND DEADLINES REGARDING ACCEPTANCES AND REJECTIONS OF, AND OBJECTIONS TO, THE CONSENSUAL PLAN AND OBJECTIONS TO THE VEIL PIERCING SETTLEMENT, (C) FIXING THE DATE OF THE HEARING ON CONFIRMATION OF THE CONSENSUAL PLAN AND ON THE VEIL PIERCING SETTLEMENT AND (D) APPROVING RELATED RELIEF TO: ALL CREDITORS, EQUITY SECURITY HOLDERS AND PARTIES IN INTEREST: PLEASE TAKE NOTICE that the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Bankruptcy Court") has approved the "Supplement to Disclosure Statement for Amended Joint Plan of Reorganization Dated As Of December 9, 1994" (the "Disclosure Statement Supplement") relating to the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 (the "Consensual Plan"), as containing adequate information within the meaning of Section 1125 of Title 11 of the United States Code (the "Bankruptcy Code"). The Consensual Plan is a modification of the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan"). Acceptances and rejections of the Creditors' Plan were previously solicited pursuant to prior order of the Bankruptcy Court, which approved the "Disclosure Statement for Creditors' Plan Dated As Of August 1, 1994" (the "Creditors' Disclosure Statement"). PLEASE TAKE FURTHER NOTICE that by Order dated December 15, 1994 (the "Resolicitation Order"), the Bankruptcy Court has ordered that (i) each holder of a claim against or interest in any Debtor as of July 13, 1994, the record date previously established by the Bankruptcy Court with respect to voting on the Creditors' Plan (a "Record Date Holder") in Classes S-1 (Revolving Credit Bank Claims), S-2 (Working Capital Bank Claims), S-6 (Series B & C Senior Note Claims), U-3A, U-3DD, U-3U, U-3Z, U-3FF, U-3EE, U-3K (the foregoing U-3 Classes consisting of Other Unsecured Claims against certain Debtors), U-4 (Senior Subordinated Note Claims), U-5 (17% Subordinated Note Claims), U-6 (Pre-LBO Debenture Claims) and E-1 (Old Common Stock Interests in Hillsborough) (collectively, the "Resolicitation Classes"), that timely voted to accept or to reject the Creditors' Plan (a "Qualified Resolicitation Holder") shall have the opportunity to change the vote such Holder cast on the Creditors' Plan, and to have the revised vote applied in respect of the Consensual Plan; (ii) each Qualified Resolicitation Holder which voted to accept or reject the Creditors' Plan which does not complete, execute and return a vote change certification prior to the deadline which is set forth later in this Notice shall be deemed to have voted to accept or reject the Consensual Plan in the same way as it previously voted to accept or reject the Creditors' Plan; (iii) each Record Date Holder of a claim or interest in any of the Resolicitation Classes which was entitled to but did not cast a timely vote to either accept or reject the Creditors' Plan shall not be provided with the opportunity to vote on the Consensual Plan; (iv) each holder of a claim or interest in any of the Resolicitation Classes who was not a holder of such claim or interest as of July 13, 1994 shall not be entitled to vote with respect to the Consensual Plan; and (v) each Record Date Holder of a claim in any of the U-3 Classes, other than those U-3 Classes which are included within the Resolicitation Classes, which previously voted to accept or reject the Creditors' Plan, is not entitled to change its prior vote, and the vote as previously cast will be deemed to have been cast on the Consensual Plan in the same manner as cast on the Creditors' Plan. Separate forms of Vote Change Certification for the purpose of enabling Qualified Resolicitation Holders to change their prior acceptances or rejections of the Creditors' Plan with respect to the modification of the Creditors' Plan contained in the Consensual Plan, are being transmitted to Qualified Resolicitation Holders. The foregoing is without prejudice to the right of any party in interest to contend that the effect on Classes S-1, S-2 and S-6 of the modification of the Creditors' Plan contained in the Consensual Plan is sufficiently de minimus that, having accepted the Creditors' Plan, those three classes should be deemed to have accepted the Consensual Plan. [FN] Capitalized terms not otherwise defined herein have the meanings set forth in the Consensual Plan. PLEASE TAKE FURTHER NOTICE that holders of claims in Class U-7 (Veil Piercing Claimants), who were not previously given an opportunity to vote to accept or reject the Creditors' Plan, are being given an opportunity to vote to accept or reject the Consensual Plan. Ballots on which Class U-7 Holders (as defined below) may vote to accept or reject the Consensual Plan are being transmitted to such Holders. The foregoing is without prejudice to the right of any party in interest to contend that Class U-7 is not impaired under, and is therefore deemed to have accepted, the Consensual Plan, and that there is no need to solicit the vote of Class U-7 on the Consensual Plan. [FN] The term "Veil Piercing Claimant" has the meaning set forth in the Second Amended and Restated Veil Piercing Settlement Agreement (the "Amended Veil Piercing Settlement Agreement") dated as of November 22, 1994 and refers generally to The Celotex Corporation and to any other person or entity who may have asserted or may assert a claim against any Debtor based upon various theories of liability for claims against The Celotex Corporation, including theories of piercing the corporate veil between The Celotex Corporation and any Debtor or its predecessor. PLEASE TAKE FURTHER NOTICE that if you are the holder of a claim in Class U-7 (i.e., a Veil Piercing Claimant), you should have received two additional notices with this notice: (a) notice of the bar date for filing proofs of Class U-7 claims against the Debtors and (b) notice of the proposed settlement of a class proof of claim filed against the Debtors on behalf of all of the Veil Piercing Claimants. PLEASE TAKE FURTHER NOTICE that pursuant to the Resolicitation Order, each Holder of a claim in Class U-7 (Veil Piercing Claimants) (a "Class U-7 Holder") is deemed to have, for purposes of voting on the Consensual Plan only, a provisionally allowed claim against each Debtor in the amount of one dollar, with the result that each Class U-7 Holder may cast a vote to accept or reject the Consensual Plan in the amount of one dollar per Holder. The foregoing temporary allowance is without prejudice to the amount of any distribution which any Class U-7 Holder may ultimately be entitled to receive out of the settlement fund that will be created under the Amended Veil Piercing Settlement Agreement, if the Consensual Plan and that Agreement become effective. PLEASE TAKE FURTHER NOTICE that, except for (i) the opportunity accorded to each Qualified Resolicitation Holder to change its prior acceptance or rejection of the Creditors' Plan and have such changed vote count for purposes of accepting or rejecting the Consensual Plan and (ii) voting on the Consensual Plan by Class U-7 Holders, no holder of any claim or interest is entitled to change a prior vote or to cast a new ballot with respect to the Consensual Plan, which is a modification of the Creditors' Plan. Accordingly, Vote Change Certification forms are being transmitted only to Qualified Resolicitation Holders, and ballots for voting to accept or reject the Consensual Plan are being transmitted only to holders of claims in Class U-7. PLEASE TAKE FURTHER NOTICE that each holder of a Senior Subordinated Note Claim (Class U-4) who previously elected on the Subordinated Note Claim Election Form to receive Qualified Securities under the Creditors' Plan may exercise an additional election under the Consensual Plan with respect to the form of the distribution to be received by such holder under the Consensual Plan (the "Additional Election"). An Additional Election may be exercised only by a Class U-4 creditor who exercised the prior Subordinated Note Claim Election, which is a predicate for making the Additional Election ("Qualified U-4 Holder"), and only by timely completing, executing and returning the Class U-4 Exchange Election form (the "Additional Election Form") which is being transmitted to Qualified U-4 Holders. Each Additional Election Form must contain a certification that the signatory or the holder for whom it acts is a Qualified U-4 Holder. Under the Consensual Plan, any election previously exercised by a Class U-4 claim holder under the Creditors' Plan will remain effective whether or not such claim holder exercises an Additional Election. PLEASE TAKE FURTHER NOTICE that each Vote Change Certification to change a prior vote to accept or reject the Creditors' Plan for purposes of the Consensual Plan, and each Additional Election Form to exercise an Additional Election, by the beneficial owner of a claim against or interest in any Debtor which is also the record holder of such claim or interest, must be properly completed, executed, mailed and delivered to Donlin, Recano & Company, Inc. (the "Balloting Agent") at the address indicated in the instructions accompanying such Vote Change Certification or the Additional Election Form, so that the Vote Change Certification and/or the Additional Election Form is actually received no later than 5:00 p.m., Eastern Time, on January 24, 1995 (the "Vote Change/Additional Election Deadline"). If you are the beneficial owner of a claim against or interest in any Debtor which is held of record by a bank, broker or other record nominee (a "Record Holder Nominee"), then in order to have a Vote Change Certification or an Additional Election Form be counted, you must properly complete and execute each separate Vote Change Certification and/or each Additional Election Form transmitted to you, as may be applicable, and mail and deliver such Vote Change Certification and/or Additional Election Form to your Record Holder Nominee at the address indicated in the instructions accompanying such Vote Change Certification and/or Additional Election Form, so that the Vote Change Certification and/or Additional Election Form is actually received by your Record Holder Nominee no later than 5:00 p.m., Eastern Time, on January 19, 1995 (the "Beneficial Owner Vote Change/Additional Election Deadline"). If any Vote Change Certification either is not properly completed or is not actually received by the Vote Change/Additional Election Deadline or the Beneficial Owner Vote Change/Additional Election Deadline, as may be applicable, such Vote Change Certification will not be counted as a change of a prior vote to accept or reject the Creditors' Plan, and the holder of a claim or interest who submitted such untimely Vote Change Certification shall be deemed to have voted to accept or reject the Consensual Plan in the same way as it previously voted to accept or reject the Creditors' Plan. If any Additional Election Form either is not properly completed or is not actually received by the Vote Change/Additional Election Deadline or the Beneficial Owner Vote Change/Additional Election Deadline, as may be applicable, such Additional Election Form will not be counted as making an Additional Election, and the claim of the applicable holder will be treated under the Consensual Plan as if such Additional Election had not been made. PLEASE TAKE FURTHER NOTICE that each Class U-7 ballot cast to accept or reject the Consensual Plan must be properly completed, executed, mailed and delivered to the Balloting Agent at the address indicated in the voting instructions accompanying such ballot so that the ballot is actually received no later than 5:00 p.m., Eastern Time, on February 22, 1995 (the "Class U-7 Voting Deadline"). If any ballot either is not properly completed or is not actually received by the Class U-7 Voting Deadline, such untimely ballot will not be counted as a vote to accept or reject the Consensual Plan. PLEASE TAKE FURTHER NOTICE that the proponents of the Consensual Plan ("Consensual Plan Proponents") have filed a motion (the "Veil Piercing Settlement Motion") which seeks approval of the Amended Veil Piercing Settlement Agreement, which is annexed as Exhibit "3A" to the Consensual Plan. This proposed settlement (the "Veil Piercing Settlement") pertains to present and future claims by asbestos victims and others who assert claims against The Celotex Corporation ("Celotex"), a manufacturer of home building materials which is a former affiliate of the Debtors and is itself a debtor in its own chapter 11 case (the "Celotex Chapter 11 Case"), and which seek to pierce the corporate veil between Celotex and its former parent, Jim Walter Corporation ("JWC"). After a leveraged buyout of JWC in 1987 (the "LBO"), Hillsborough Holdings Corporation ("HHC") emerged as the parent company of all of the former subsidiaries of JWC, with the exception of Celotex, which HHC did not retain. Veil Piercing Claimants have sought to assert fraudulent conveyance claims against the Debtors and others based on the LBO. By the Veil Piercing Settlement, the Consensual Plan Proponents seek to settle the "Settlement Claims", which are defined in the Amended Veil Piercing Settlement Agreement to include all Veil Piercing Claims (present and future) and all claims and demands (present or future) held or assertable by the Veil Piercing Claimants based upon the LBO-Related Issues (each as defined in the Amended Veil Piercing Settlement Agreement). PLEASE TAKE FURTHER NOTICE that under the Amended Veil Piercing Settlement Agreement and the Veil Piercing Settlement, all Settlement Claims against the Debtors and the other Released Parties (defined in the Amended Veil Piercing Settlement Agreement) will be settled, satisfied, released and discharged in exchange for the allowance of a claim against the Debtors in the "Settlement Amount" (defined as $375 million plus, under certain conditions, an additional amount of up to $15 million, as calculated in the Amended Veil Piercing Settlement Agreement), the satisfaction of $375 million of that allowed claim by a combination of cash, New Senior Notes and New Common Stock, and, to the extent that the Settlement Amount exceeds $375 million, cash in the amount of such excess (not to exceed an additional $15 million), all under the terms and conditions set forth in the Amended Veil Piercing Settlement Agreement. All of the consideration to be distributed on account of the Settlement Claims will be distributed to the "Celotex Settlement Fund Recipient", which is defined as an entity designated by order of the Bankruptcy Court in the Celotex Chapter 11 Case (the "Celotex Bankruptcy Court"), for the benefit of all Veil Piercing Claimants. The Celotex Bankruptcy Court (not the Bankruptcy Court presiding over the Hillsborough Debtors' chapter 11 cases) will determine how, the amount, when and to whom the consideration distributed on account of the Settlement Amount will be distributed. The Amended Veil Piercing Settlement Agreement also contains numerous provisions addressing other aspects of the proposed settlement, including, among other things, the registration, voting and transfer of New Common Stock distributed to the Celotex Settlement Fund Recipient and the granting of broad releases to the Released Parties (as defined therein). The Consensual Plan provides for a broad release and injunction protecting the Debtors, the other Released Parties and other specified third parties from the Settlement Claims and other claims related to the Debtors or their chapter 11 cases. PLEASE TAKE FURTHER NOTICE that the foregoing is only a brief summary of the terms of the Amended Veil Piercing Settlement Agreement and is qualified in its entirety by the terms of that Agreement, which shall control in the event that it is approved by the Bankruptcy Court, and the Consensual Plan and that Agreement become effective. A copy of the Veil Piercing Settlement Motion, which more fully describes the proposed settlement and the reasons why the Consensual Plan Proponents believe that the proposed settlement is fair, equitable and reasonable, is available for inspection during normal business hours at the Office of the Clerk of the Bankruptcy Court, United States Bankruptcy Court for the Middle District of Florida, Tampa Division, 4921 Memorial Highway, Tampa, Florida 33634, and may be obtained by sending a written request therefor to Walter Industries, Inc. c/o Legal Department, 1500 N. Dale Mabry Highway, Tampa, Florida 33607. PLEASE TAKE FURTHER NOTICE that the Consensual Plan Proponents will seek the entry of a single order both confirming the Consensual Plan and approving the Amended Veil Piercing Settlement Agreement at the hearing described later in this Notice. PLEASE TAKE FURTHER NOTICE that the Bankruptcy Court has fixed the last day for filing and serving written objections to confirmation of the Consensual Plan (a "Confirmation Objection") and written objections to approval of the Amended Veil Piercing Settlement Agreement (a "Veil Piercing Settlement Objection") as follows: 1. Any Confirmation Objection and any Veil Piercing Settlement Objection by any holder of a claim or interest against any Debtor and any other party in interest, other than the holder of a Class U-7 (Veil Piercing Claimants) Claim (in its capacity as a Class U-7 Holder), must be filed with the Clerk of the Bankruptcy Court, United States Bankruptcy Court for the Middle District of Florida, Tampa Division, 4921 Memorial Highway, Tampa, Florida 33634, together with proof of service, and served on the parties identified below (the "Notice Parties"), so as to be actually received by each of them on or before 5:00 p.m., Eastern Time, on January 24, 1995.
The Notice Parties on whom any Confirmation Objection and any Veil Piercing Settlement Objection must be served are as follows: Counsel for the Official Bondholders' Committee Counsel for Apollo Stroock & Stroock & Lavan Akin, Gump, Strauss, Hauer & Feld, L.L.P. Seven Hanover Square 65 East 55th Street, 33rd Floor New York, New York 10004-2696 New York, New York 10022 Attn: Daniel H. Golden, Esq. Attn: Steven M. Pesner, P.C. Counsel for the Official Committee of General and Unsecured Creditors Jones, Day, Reavis & Pogue Stutman, Treister & Glatt 599 Lexington Avenue Professional Corporation New York, New York 10016 3699 Wilshire Boulevard Attn: Marc S. Kirschner, Esq. Suite 900 Los Angeles, California 90010 Counsel for Lehman Brothers Inc. Attn: Kenneth N. Klee, Esq. Paul, Weiss, Rifkind, Wharton & Garrison Isaac M. Pachulski, Esq. 1285 Avenue of the Americas New York, New York 10022 Counsel for the Ad Hoc Attn: Robert D. Drain, Esq. Committee of Pre-LBO Bondholders Marcus Montgomery Wolfson P.C. 53 Wall Street New York, New York 10005 Attn: Peter D. Wolfson, Esq. Sara L. Chenetz, Esq. Counsel for the Debtors Counsel for the KKR Proponents Kaye, Scholer, Fierman, Hays & Handler Carlton, Fields, Ward, Emmanuel, 425 Park Avenue Smith & Cutler, P.A. New York, New York 10022 One Harbour Place Attn:Michael J. Crames, Esq. P.O. Box 3239 Andrew A. Kress, Esq. Tampa, Florida 33602 Attn: Leonard H. Gilbert, Esq. and Office of the U.S. Trustee Stichter, Riedel, Blain & Prosser, P.A. Assistant U.S. Trustee 110 East Madison Street 4919 Memorial Highway Suite 200 Suite 110 Tampa, Florida 33602 Tampa, Florida 33634 Attn: Don M. Stichter, Esq. Attn: Sara L. Kistler, Esq. and Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York Attn: Charles Koob, Esq.
2. Any Confirmation Objection and any Veil Piercing Settlement Objection by the Holder of a Class U-7 (Veil Piercing Claimants) Claim (in its capacity as such) must be filed with the Clerk of the Bankruptcy Court, United States Bankruptcy Court for the Middle District of Florida, Tampa Division, 4921 Memorial Highway, Tampa, Florida 33634, together with proof of service, and served on the Notice Parties, so as to be actually received by each of them on or before 5:00 p.m., Eastern Time, on February 22, 1995. Each Confirmation Objection and each Veil Piercing Settlement Objection must be in writing and (a) state the name and address of the objecting party and the amount of its claim or the nature of its interest in the Debtors' chapter 11 cases and (b) state with particularity the basis and nature of the objection. Any Confirmation Objection and any Veil Piercing Settlement Objection which is not filed and served in the time and manner set forth above shall be deemed waived and shall not be considered by the Bankruptcy Court. PLEASE TAKE FURTHER NOTICE that the hearing to consider confirmation of the Consensual Plan and approval of the Amended Veil Piercing Settlement Agreement will be held before the Honorable Alexander L. Paskay, Chief Bankruptcy Judge, and shall commence on March 1, 1995, at 9:00 a.m., and, if not completed on that date, shall continue, on March 1 and March 2, 1995 until completed, at the United States Bankruptcy Court, 4921 Memorial Highway, Tampa, Florida 33634, Courtroom "C" (the "Confirmation/Veil Piercing Settlement Hearing"). The Confirmation/Veil Piercing Settlement Hearing may be adjourned from time to time without further notice other than an announcement made at the Confirmation/Veil Piercing Settlement Hearing or at any adjourned hearing thereon, and any continued Confirmation/Veil Piercing Settlement Hearing will be held without any further notice other than as provided at the Confirmation/Veil Piercing Settlement Hearing. DATED: at Tampa, Florida, on December 15, 1994. BY THE COURT Clerk, United States Bankruptcy Court 4921 Memorial Highway Suite 200 Tampa, FL 33634 Exhibit T3E13 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ INDIVIDUAL VOTE CHANGE CERTIFICATION FOR CLASS U-4 (SENIOR SUBORDINATED NOTE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ THE FOLLOWING CAREFULLY. IF YOU WANT TO CHANGE THE VOTE YOU PREVIOUSLY CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN") PLEASE COMPLETE, SIGN, AND DATE THIS CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR CERTIFICATION HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 24, 1995, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 19, 1995, IT WILL NOT BE COUNTED. IF YOU DO NOT WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED DO NOTHING. The records of the Balloting Agent reflect that you previously cast a timely ballot to either accept or reject the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan") proposed by the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"). The Creditor Proponents, the Debtors, and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. The changes made to the Creditors' Plan which are embodied in the Consensual Plan are reflected in the black- lined version of the Consensual Plan which has been transmitted to you and are further described in the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As Of December 9, 1994 (the "Disclosure Statement Supplement"). On December 15, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Disclosure Statement Supplement as containing adequate information. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the court. IF YOU WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN, AND THEREFORE HAVE A DIFFERENT VOTE CAST WITH RESPECT TO THE CONSENSUAL PLAN PLEASE CHECK THE APPROPRIATE BOX BELOW: Item 1. Principal Amount of Senior Subordinated Notes As To Which Votes Were Cast and Vote Change Applies. This Certification is cast by or on behalf of the Beneficial Owner of the aggregate principal amount of the Senior Subordinated Notes indicated immediately below. The undersigned hereby certifies that the undersigned was the beneficial holder of such Senior Subordinated Notes as of July 13, 1994 (the "Beneficial Owner"), and voted the claim represented thereby to accept or reject the Creditors' Plan. Please fill out the following as may be appropriate: Account Number (if known) Aggregate Principal Amount Total = $ Or, if you do not hold your Senior Subordinated Notes through an account or accounts, $ in aggregate principal amount. Item 2. Class U-4 (Senior Subordinated Note Claims) ORIGINAL VOTE. The Beneficial Owner of the aggregate principal amount of Senior Subordinated Notes set forth in Item 1 originally voted to (please check one box below): Accept the Creditors' Plan / / Reject the Creditors' Plan / / Item 3. Class U-4 (Senior Subordinated Note Claims) VOTE CHANGE. The Beneficial Owner of the aggregate principal amount of Senior Subordinated Notes set forth in Item 1 does not want the vote it cast on or before September 23, 1994 on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan (please check the appropriate box): Accept the Consensual Plan / / Reject the Consensual Plan / / Item 4. By signing this Certification, the undersigned certifies that (i) the Beneficial Owner of the Senior Subordinated Notes set forth in Item 1 has full power and authority to vote to accept or reject the Consensual Plan, (ii) such Beneficial Owner has voted to accept or reject the Consensual Plan as set forth in Item 3 above, (iii) the vote cast by such Beneficial Owner in Item 3 above reflects a change from the vote that was previously cast by the Beneficial Owner on the Creditors' Plan, and (iv) this Certification has been executed on behalf of a single Beneficial Owner. The undersigned also acknowledges that (i) the Beneficial Owner has been provided with a copy of the Disclosure Statement Supplement, including all Exhibits thereto, and (ii) this Certification shall be counted as the undersigned's changed vote with respect to all Debtors against which the undersigned has an Allowed Class U-4 Claim. Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE INDIVIDUAL VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for the Beneficial Owner to indicate that it wishes to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such claimholder cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. Only a holder of Senior Subordinated Notes in whose name such notes are held on the books of the Senior Subordinated Indenture Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of Senior Subordinated Notes and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. If you do not want the vote you cast on the Creditors' Plan to be deemed to have been cast on the Consensual Plan, you must complete, sign and return this Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have your vote change count, you must complete, sign and return this Certification so that it is received either (i) by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995, or (ii) if you are not also the record holder, by your broker, bank or nominee not later than 5:00 p.m., Eastern Time, on January 19, 1995. Your original signature is required on the Certification in order for your vote change to count. All capitalized terms used herein shall have the meanings ascribed to them in the Consensual Plan. To properly complete the Certification, you must follow the procedures described below: (a) make sure that the information required in Item 1 has been inserted; if you do not know the amount of your claim, please contact either the Balloting Agent, or, if you are not the record holder, your broker, your bank, or your nominee; (b) indicate whether you had voted to accept or reject the Creditors' Plan by checking the proper box in Item 2; if you do not remember how you voted, please contact either the Balloting Agent, or, if you are not the record holder, your broker, bank or your nominee; (c) indicate your changed vote to accept or reject the Consensual Plan by checking the appropriate box in Item 3; (d) if you are completing this Certification on behalf of another entity, indicate your relationship with such entity and the capacity in which you are signing; (e) please use additional Certifications (available from the Balloting Agent) if additional space is required to respond to any item on the Certification or use additional sheets of papers clearly marked to indicate the applicable item of the Certification (if you elect to use additional Certifications because additional space is required, you must complete and sign each such Certification); (f) return your Certification using the enclosed return envelope. If you received a return envelope addressed directly to the Balloting Agent, please mail or deliver your Certification so that it will be received by January 24, 1995. If you received a return envelope addressed to a broker, bank or nominee, you must return your Certification to such entity by January 19, 1995. Please allow additional time; and (g) if you hold claims or interests in more than one class, and you previously cast a ballot to either accept or reject the Creditors' Plan in more than one of those classes, you may receive more than one Certification, labeled for different classes of claims or interests. Your changed vote will be counted in determining acceptance or rejection of the Consensual Plan by a particular class only if you fill out and return the Certification labeled for that class in accordance with the instructions on that Certification. IF YOU WANT THE VOTE YOU ORIGINALLY CAST TO ACCEPT OR REJECT THE CREDITORS' PLAN TO BE COUNTED AS CAST IN DETERMINING ACCEPTANCE OR REJECTION OF THE CONSENSUAL PLAN, YOU NEED NOT DO ANYTHING. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR CERTIFICATION, OR YOU DID NOT RECEIVE A COPY OF THE DISCLOSURE STATEMENT SUPPLEMENT OR CONSENSUAL PLAN, OR IF YOU BELIEVE THAT YOU HAVE NOT RECEIVED THE CORRECT CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444 OR YOUR BANK, BROKER OR NOMINEE. IF YOU HAVE ANY QUESTIONS REGARDING THIS CERTIFICATION PLEASE CALL 1 (800) 489-7444. Exhibit T3E14 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ MASTER VOTE CHANGE CERTIFICATION FOR USE BY RECORD HOLDERS OF CLASS U-4 (SENIOR SUBORDINATED NOTE) CLAIMS PLEASE READ THE FOLLOWING CAREFULLY. IF ANY BENEFICIAL OWNER OF THE SENIOR SUBORDINATED NOTES FOR WHICH YOU WERE THE RECORD HOLDER AS OF JULY 13, 1994 WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN"), PLEASE COMPLETE, SIGN AND DATE THIS MASTER CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME, ON OR BEFORE JANUARY 24, 1995 OR IT WILL NOT BE COUNTED. IF NONE OF THE BENEFICIAL OWNERS FOR WHICH YOU WERE THE RECORD HOLDER WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED NOT TRANSMIT THIS MASTER CERTIFICATION TO THE BALLOTING AGENT. The records of the Balloting Agent reflect that you previously cast a timely master ballot on which was recorded, among other items, acceptances and/or rejections of the Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994 (the "Creditors' Plan") cast by the beneficial owners as of July 13, 1994, of the Senior Subordinated Notes for which you are the recordholder. The proponents of the Creditors' Plan comprised of the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"), the Debtors and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. Item 1. Principal Amount of Senior Subordinated Notes as to Which Votes Were Cast and Vote Change Opportunity Applies. The undersigned hereby certifies that the undersigned was the registered recordholder of Senior Subordinated Notes as of July 13, 1994 and transmitted to the Balloting Agent a schedule of the following votes cast to accept or reject the Creditors' Plan by the beneficial owners of such Senior Subordinated Notes as of July 13, 1994. Please complete the schedule immediately below. Principal Principal Amount of Amount of $ $ Name Accepted Rejected (Optional) Account No. Creditors'Plan Creditors' Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 2. Principal Amount of Senior Subordinated Notes as to Which There Has Been A VOTE CHANGE. The undersigned hereby certifies that the schedule set forth immediately below is a true and accurate schedule of each of the beneficial owners of the Senior Subordinated Notes set forth in Item 1 (a "Beneficial Owner") which does not want the vote it previously cast on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan. Please complete the following as may be appropriate. Principal Principal Amount of Amount of $ $ Name Accepts the Rejects the (Optional) Account No. Consensual Plan Consensual Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 3. By signing this Master Certification, the undersigned certifies that each Beneficial Owner of the Senior Subordinated Notes described above whose votes are being transmitted along with this Master Certification has been provided with a black-lined copy of the Consensual Plan inclusive of all exhibits thereto and of the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As of December 9, 1994 (the "Disclosure Statement Supplement"). Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE MASTER VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for a record holder of Senior Subordinated Notes as of July 13, 1994, holding on behalf of another, to record such Beneficial Owner's instruction to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such Beneficial Owner cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of Section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of Senior Subordinated Note Claims and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the Court. Only a holder of Senior Subordinated Notes in whose name such notes are held on the books of the Senior Subordinated Indenture Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. This Master Certification is to be used by brokerage firms, banks, or nominees for summarizing those Individual Vote Change Certifications received from the Beneficial Owners of Senior Subordinated Notes for which you were the record holder as of July 13, 1994, and who previously timely transmitted Individual Ballots to you on the Creditors' Plan. Only Individual Vote Change Certifications received by you by 5:00 p.m., Eastern Time, on January 19, 1995 are to be counted by you. Individual Vote Change Certifications received after such time must not be counted. Please retain all executed Individual Vote Change Certifications for one year. Please forward this Master Vote Change Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 TO HAVE THE INDIVIDUAL VOTE CHANGE CERTIFICATIONS TRANSMITTED TO YOU BY YOUR BENEFICIAL OWNERS, IF ANY, COUNT, YOU MUST COMPLETE, SIGN AND RETURN THIS MASTER CERTIFICATION SO THAT IT IS RECEIVED BY THE BALLOTING AGENT NOT LATER THAN 5:00 P.M., EASTERN TIME, ON JANUARY 24, 1995. YOU NEED NOT TRANSMIT THIS MASTER CERTIFICATION TO THE BALLOTING AGENT IF YOU DO NOT RECEIVE ANY INDIVIDUAL VOTE CHANGE CERTIFICATIONS FROM YOUR BENEFICIAL OWNERS. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER VOTE CHANGE CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER VOTE CHANGE CERTIFICATION OR THE VOTE CHANGE PROCEDURES, PLEASE CALL 1 (800) 489-7444. Exhibit T3E15 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ INDIVIDUAL VOTE CHANGE CERTIFICATION FOR CLASS U-5 (17% SUBORDINATED NOTE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ THE FOLLOWING CAREFULLY. IF YOU WANT TO CHANGE THE VOTE YOU PREVIOUSLY CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN") PLEASE COMPLETE, SIGN, AND DATE THIS CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR CERTIFICATION HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 24, 1995, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 19, 1995, IT WILL NOT BE COUNTED. IF YOU DO NOT WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED DO NOTHING. The records of the Balloting Agent reflect that you previously cast a timely ballot to either accept or reject the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan") proposed by the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"). The Creditor Proponents, the Debtors, and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. The changes made to the Creditors' Plan which are embodied in the Consensual Plan are reflected in the black- lined version of the Consensual Plan which has been transmitted to you and are further described in the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As Of December 9, 1994 (the "Disclosure Statement Supplement"). On December 15, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Disclosure Statement Supplement as containing adequate information. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the court. IF YOU WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN, AND THEREFORE HAVE A DIFFERENT VOTE CAST WITH RESPECT TO THE CONSENSUAL PLAN PLEASE CHECK THE APPROPRIATE BOX BELOW: Item 1. Principal Amount of 17% Subordinated Notes As To Which Votes Were Cast and Vote Change Applies. This Certification is cast by or on behalf of the Beneficial Owner of the aggregate principal amount of the 17% Subordinated Notes indicated immediately below. The undersigned hereby certifies that the undersigned was the beneficial holder of such 17% Subordinated Notes as of July 13, 1994 (the "Beneficial Owner"), and voted the claim represented thereby to accept or reject the Creditors' Plan. Please fill out the following as may be appropriate: Account Number (if known) Aggregate Principal Amount Total = $ Or, if you do not hold your 17% Subordinated Notes through an account or accounts, $ in aggregate principal amount. Item 2. Class U-5 (17% Subordinated Note Claims) ORIGINAL VOTE. The Beneficial Owner of the aggregate principal amount of 17% Subordinated Notes set forth in Item 1 originally voted to (please check one box below): Accept the Creditors' Plan / / Reject the Creditors' Plan / / Item 3. Class U-5 (17% Subordinated Note Claims) VOTE CHANGE. The Beneficial Owner of the aggregate principal amount of 17% Subordinated Notes set forth in Item 1 does not want the vote it cast on or before September 23, 1994 on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan (please check the appropriate box): Accept the Consensual Plan / / Reject the Consensual Plan / / Item 4. By signing this Certification, the undersigned certifies that (i) the Beneficial Owner of the 17% Subordinated Notes set forth in Item 1 has full power and authority to vote to accept or reject the Consensual Plan, (ii) such Beneficial Owner has voted to accept or reject the Consensual Plan as set forth in Item 3 above, (iii) the vote cast by such Beneficial Owner in Item 3 above reflects a change from the vote that was previously cast by the Beneficial Owner on the Creditors' Plan, and (iv) this Certification has been executed on behalf of a single Beneficial Owner. The undersigned also acknowledges that (i) the Beneficial Owner has been provided with a copy of the Disclosure Statement Supplement, including all Exhibits thereto, and (ii) this Certification shall be counted as the undersigned's changed vote with respect to all Debtors against which the undersigned has an Allowed Class U-5 Claim. Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE INDIVIDUAL VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for the Beneficial Owner to indicate that it wishes to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such claimholder cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. Only holders of 17% Subordinated Notes in whose name such notes are held on the books of the 17% Indenture Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of 17% Subordinated Notes and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. If you do not want the vote you cast on the Creditors' Plan to be deemed to have been cast on the Consensual Plan, you must complete, sign and return this Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have your vote change count, you must complete, sign and return this Certification so that it is received either (i) by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995, or (ii) if you are not also the record holder, by your broker, bank or nominee not later than 5:00 p.m., Eastern Time, on January 19, 1995. Your original signature is required on the Certification in order for your vote change to count. All capitalized terms used herein shall have the meanings ascribed to them in the Consensual Plan. To properly complete the Certification, you must follow the procedures described below: (a) make sure that the information required in Item 1 has been inserted; if you do not know the amount of your claim, please contact either the Balloting Agent, or, if you are not the record holder, your broker, your bank, or your nominee; (b) indicate whether you had voted to accept or reject the Creditors' Plan by checking the proper box in Item 2; if you do not remember how you voted, please contact either the Balloting Agent, or, if you are not the record holder, your broker, bank or your nominee; (c) indicate your changed vote to accept or reject the Consensual Plan by checking the appropriate box in Item 3; (d) if you are completing this Certification on behalf of another entity, indicate your relationship with such entity and the capacity in which you are signing; (e) please use additional Certifications (available from the Balloting Agent) if additional space is required to respond to any item on the Certification or use additional sheets of papers clearly marked to indicate the applicable item of the Certification (if you elect to use additional Certifications because additional space is required, you must complete and sign each such Certification); (f) return your Certification using the enclosed return envelope. If you received a return envelope addressed directly to the Balloting Agent, please mail or deliver your Certification so that it will be received by January 24, 1995. If you received a return envelope addressed to a broker, bank or nominee, you must return your Certification to such entity by January 19, 1995. Please allow additional time; and (g) if you hold claims or interests in more than one class, and you previously cast a ballot to either accept or reject the Creditors' Plan in more than one of those classes, you may receive more than one Certification, labeled for different classes of claims or interests. Your changed vote will be counted in determining acceptance or rejection of the Consensual Plan by a particular class only if you fill out and return the Certification labeled for that class in accordance with the instructions on that Certification. IF YOU WANT THE VOTE YOU ORIGINALLY CAST TO ACCEPT OR REJECT THE CREDITORS' PLAN TO BE COUNTED AS CAST IN DETERMINING ACCEPTANCE OR REJECTION OF THE CONSENSUAL PLAN, YOU NEED NOT DO ANYTHING. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR CERTIFICATION, OR YOU DID NOT RECEIVE A COPY OF THE DISCLOSURE STATEMENT SUPPLEMENT OR CONSENSUAL PLAN, OR IF YOU BELIEVE THAT YOU HAVE NOT RECEIVED THE CORRECT CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444 OR YOUR BANK, BROKER OR NOMINEE. IF YOU HAVE ANY QUESTIONS REGARDING THIS CERTIFICATION PLEASE CALL 1 (800) 489-7444. Exhibit T3E16 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ MASTER VOTE CHANGE CERTIFICATION FOR USE BY RECORD HOLDERS OF CLASS U-5 (17% SUBORDINATED NOTE) CLAIMS PLEASE READ THE FOLLOWING CAREFULLY. IF ANY BENEFICIAL OWNER OF THE 17% SUBORDINATED NOTES FOR WHICH YOU WERE THE RECORD HOLDER AS OF JULY 13, 1994 WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN"), PLEASE COMPLETE, SIGN AND DATE THIS MASTER CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME, ON OR BEFORE JANUARY 24, 1995 OR IT WILL NOT BE COUNTED. IF NONE OF THE BENEFICIAL OWNERS FOR WHICH YOU WERE THE RECORD HOLDER WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED NOT TRANSMIT THIS MASTER CERTIFICATION TO THE BALLOTING AGENT. The records of the Balloting Agent reflect that you previously cast a timely master ballot on which was recorded, among other items, acceptances and/or rejections of the Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994 (the "Creditors' Plan") cast by the beneficial owners as of July 13, 1994, of the 17% Subordinated Notes for which you are the recordholder. The proponents of the Creditors' Plan comprised of the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"), the Debtors and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. Item 1. Principal Amount of 17% Subordinated Notes As To Which Votes Were Cast and Vote Change Opportunity Applies. The undersigned hereby certifies that the undersigned was the registered recordholder of 17% Subordinated Notes as of July 13, 1994 and transmitted to the Balloting Agent a schedule of the following votes cast to accept or reject the Creditors' Plan by the beneficial owners of such 17% Subordinated Notes as of July 13, 1994. Please complete the schedule immediately below. Principal Principal Amount of Amount of $ $ Name Accepted Rejected (Optional) Account No. Creditors'Plan Creditors' Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 2. Principal Amount of 17% Subordinated Notes As To Which There Has Been A VOTE CHANGE. The undersigned hereby certifies that the schedule set forth immediately below is a true and accurate schedule of each of the beneficial owners of the 17% Subordinated Notes set forth in Item 1 (a "Beneficial Owner") which does not want the vote it previously cast on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan. Please complete the following as may be appropriate. Principal Principal Amount of Amount of $ $ Name Accepts the Rejects the (Optional) Account No. Consensual Plan Consensual Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 3. By signing this Master Certification, the undersigned certifies that each Beneficial Owner of the 17% Subordinated Notes described above whose votes are being transmitted along with this Master Certification has been provided with a black-lined copy of the Consensual Plan inclusive of all exhibits thereto and of the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As of December 9, 1994 (the "Disclosure Statement Supplement"). Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE MASTER VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for a record holder of 17% Subordinated Notes as of July 13, 1994, holding on behalf of another, to record such Beneficial Owner's instruction to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such Beneficial Owner cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of 17% Subordinated Note Claims and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the Court. Only a holder of 17% Subordinated Notes in whose name such notes are held on the books of the 17% Indenture Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. This Master Certification is to be used by brokerage firms, banks, or nominees for summarizing those Individual Vote Change Certifications received from the Beneficial Owners of 17% Subordinated Notes for which you were the record holder as of July 13, 1994, and who previously timely transmitted Individual Ballots to you on the Creditors' Plan. Only Individual Vote Change Certifications received by you by 5:00 p.m., Eastern Time, on January 19, 1995 are to be counted by you. Individual Vote Change Certifications received after such time must not be counted. Please retain all executed Individual Vote Change Certifications for one year. Please forward this Master Vote Change Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have the Individual Vote Change Certifications transmitted to you by your Beneficial Owners, if any, count, you must complete, sign and return this Master Certification so that it is received by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995. You need not transmit this Master Certification to the Balloting Agent if you do not receive any Individual Vote Change Certifications from your Beneficial Owners. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER VOTE CHANGE CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER VOTE CHANGE CERTIFICATION OR THE VOTE CHANGE PROCEDURES, PLEASE CALL 1 (800) 489-7444. Exhibit T3E17 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ INDIVIDUAL VOTE CHANGE CERTIFICATION FOR CLASS U-6 (PRE-LBO DEBENTURE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ THE FOLLOWING CAREFULLY. IF YOU WANT TO CHANGE THE VOTE YOU PREVIOUSLY CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN") PLEASE COMPLETE, SIGN, AND DATE THIS CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR CERTIFICATION HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 24, 1995, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 19, 1995, IT WILL NOT BE COUNTED. IF YOU DO NOT WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED DO NOTHING. The records of the Balloting Agent reflect that you previously cast a timely ballot to either accept or reject the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan") proposed by the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"). The Creditor Proponents, the Debtors, and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. The changes made to the Creditors' Plan which are embodied in the Consensual Plan are reflected in the black- lined version of the Consensual Plan which has been transmitted to you and are further described in the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As Of December 9, 1994 (the "Disclosure Statement Supplement"). On December 15, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Disclosure Statement Supplement as containing adequate information. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the court. IF YOU WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN, AND THEREFORE HAVE A DIFFERENT VOTE CAST WITH RESPECT TO THE CONSENSUAL PLAN PLEASE CHECK THE APPROPRIATE BOX BELOW: Item 1. Principal Amount of 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and 13 3/4% Subordinated Debentures As To Which Votes Were Cast and Vote Change Applies. This Certification is cast by or on behalf of the Beneficial Owner of the aggregate principal amount of the 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and 13 3/4% Subordinated Debentures indicated immediately below. The undersigned hereby certifies that the undersigned was the beneficial holder of such Subordinated Debentures and/or Subordinated Notes as of July 13, 1994 (the "Beneficial Owner"), and voted the claim represented thereby to accept or reject the Creditors' Plan. Please fill out the following as may be appropriate: (a) 10 7/8% Subordinated Debentures. Account Number (if known) Aggregate Principal Amount Total = $ Or, if you do not hold your 10 7/8% Subordinated Debentures through an account or accounts, $ in aggregate principal amount. (b) 13 1/8% Subordinated Notes. Account Number (if known) Aggregate Principal Amount Total = $ Or, if you do not hold your 13 1/8% Subordinated Notes through an account or accounts, $ in aggregate principal amount. (c) 13 3/4% Subordinated Debentures. Account Number (if known) Aggregate Principal Amount Total = $ Or, if you do not hold your 13 3/4% Subordinated Debentures through an account or accounts, $ in aggregate principal amount. Grand Total Aggregate Principal Amount = $ . Item 2. Class U-6 (Pre-LBO Debenture Claims) ORIGINAL VOTE. The Beneficial Owner of the aggregate principal amount of Subordinated Debentures and/or Subordinated Notes set forth in Item 1 originally voted to (please check one box below): The Beneficial Owner of the aggregate principal amount of 10 7/8% Subordinated Debentures set forth in Item 1 originally voted to (please check one box below): Accept the Creditors' Plan / / Reject the Creditors' Plan / / The Beneficial Owner of the aggregate principal amount of 13 1/8% Subordinated Notes set forth in Item 1 originally voted to (please check one box below): Accept the Creditor's Plan / / Reject the Creditor's Plan / / The Beneficial Owner of the aggregate principal amount of 13 3/4% Subordinated Debentures set forth in Item 1 originally voted to (please check one box below): Accept the Creditors' Plan / / Reject the Creditors' Plan / / Item 3. Class U-6 (Pre-LBO Debenture Claims) VOTE CHANGE. The Beneficial Owner of the aggregate principal amount of 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and/or 13 3/4% Subordinated Debentures set forth in Item 1 does not want the vote it cast on or before September 23, 1994 on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan (please check the appropriate box): The Beneficial Owner of the aggregate principal amount of 10 7/8% Subordinated Debentures set forth in Item 1 votes to (please check one box below): Accept the Consensual Plan / / Reject the Consensual Plan / / The Beneficial Owner of the aggregate principal amount of 13 1/8% Subordinated Notes set forth in Item 1 votes to (please check one box below): Accept the Consensual Plan / / Reject the Consensual Plan / / The Beneficial Owner of the aggregate principal amount of 13 3/4% Subordinated Debentures set forth in Item 1 votes to (please check one box below): Accept the Consensual Plan / / Reject the Consensual Plan / / Item 4. By signing this Certification, the undersigned certifies that (i) the Beneficial Owner of the Subordinated Debentures and/or Subordinated Notes set forth in Item 1 has full power and authority to vote to accept or reject the Consensual Plan, (ii) such Beneficial Owner has voted to accept or reject the Consensual Plan as set forth in Item 3 above, (iii) the vote cast by such Beneficial Owner in Item 3 above reflects a change from the vote that was previously cast by the Beneficial Owner on the Creditors' Plan, and (iv) this Certification has been executed on behalf of a single Beneficial Owner. The undersigned also acknowledges that (i) the Beneficial Owner has been provided with a copy of the Disclosure Statement Supplement, including all Exhibits thereto, and (ii) this Certification shall be counted as the undersigned's changed vote with respect to all Debtors against which the undersigned has an Allowed Class U-6 Claim. Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE INDIVIDUAL VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for the Beneficial Owner to indicate that it wishes to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such claimholder cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. Only a holder of 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and/or 13 3/4% Subordinated Debentures, in whose name such notes are held on the books of the 10 7/8% Indenture Trustee, the 13 1/8% Indenture Trustee and/or the 13 3/4% Indenture Trustee, as applicable, on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of Pre-LBO Debenture Claims and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. If you do not want the vote you cast on the Creditors' Plan to be deemed to have been cast on the Consensual Plan, you must complete, sign and return this Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have your vote change count, you must complete, sign and return this Certification so that it is received either (i) by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995, or (ii) if you are not also the record holder, by your broker, bank or nominee not later than 5:00 p.m., Eastern Time, on January 19, 1995. Your original signature is required on the Certification in order for your vote change to count. All capitalized terms used herein shall have the meanings ascribed to them in the Consensual Plan. To properly complete the Certification, you must follow the procedures described below: (a) make sure that the information required in Item 1 has been inserted; if you do not know the amount of your claim, please contact either the Balloting Agent, or, if you are not the record holder, your broker, your bank, or your nominee; (b) indicate whether you had voted to accept or reject the Creditors' Plan by checking the proper box in Item 2; if you do not remember how you voted, please contact either the Balloting Agent, or, if you are not the record holder, your broker, bank or your nominee; (c) indicate your changed vote to accept or reject the Consensual Plan by checking the appropriate box in Item 3; (d) if you are completing this Certification on behalf of another entity, indicate your relationship with such entity and the capacity in which you are signing; (e) please use additional Certifications (available from the Balloting Agent) if additional space is required to respond to any item on the Certification or use additional sheets of papers clearly marked to indicate the applicable item of the Certification (if you elect to use additional Certifications because additional space is required, you must complete and sign each such Certification); (f) return your Certification using the enclosed return envelope. If you received a return envelope addressed directly to the Balloting Agent, please mail or deliver your Certification so that it will be received by January 24, 1995. If you received a return envelope addressed to a broker, bank or nominee, you must return your Certification to such entity by January 19, 1995. Please allow additional time; and (g) if you hold claims or interests in more than one class, and you previously cast a ballot to either accept or reject the Creditors' Plan in more than one of those classes, you may receive more than one Certification, labeled for different classes of claims or interests. Your changed vote will be counted in determining acceptance or rejection of the Consensual Plan by a particular class only if you fill out and return the Certification labeled for that class in accordance with the instructions on that Certification. IF YOU WANT THE VOTE YOU ORIGINALLY CAST TO ACCEPT OR REJECT THE CREDITORS' PLAN TO BE COUNTED AS CAST IN DETERMINING ACCEPTANCE OR REJECTION OF THE CONSENSUAL PLAN, YOU NEED NOT DO ANYTHING. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR CERTIFICATION, OR YOU DID NOT RECEIVE A COPY OF THE DISCLOSURE STATEMENT SUPPLEMENT OR CONSENSUAL PLAN, OR IF YOU BELIEVE THAT YOU HAVE NOT RECEIVED THE CORRECT CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444 OR YOUR BANK, BROKER OR NOMINEE. IF YOU HAVE ANY QUESTIONS REGARDING THIS CERTIFICATION PLEASE CALL 1 (800) 489-7444. Exhibit T3E18 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ MASTER VOTE CHANGE CERTIFICATION FOR USE BY RECORD HOLDERS OF CLASS U-6 (PRE-LBO DEBENTURE) CLAIMS PLEASE READ THE FOLLOWING CAREFULLY. IF ANY BENEFICIAL OWNER OF THE PRE-LBO DEBENTURE CLAIMS FOR WHICH YOU WERE THE RECORD HOLDER AS OF JULY 13, 1994 WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN"), PLEASE COMPLETE, SIGN AND DATE THIS MASTER CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME, ON OR BEFORE JANUARY 24, 1995 OR IT WILL NOT BE COUNTED. IF NONE OF THE BENEFICIAL OWNERS FOR WHICH YOU WERE THE RECORD HOLDER WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED NOT TRANSMIT THIS MASTER CERTIFICATION TO THE BALLOTING AGENT. The records of the Balloting Agent reflect that you previously cast a timely master ballot on which was recorded, among other items, acceptances and/or rejections of the Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994 (the "Creditors' Plan") cast by the beneficial owners as of July 13, 1994, of the Pre-LBO Debenture Claims for which you are the recordholder. The proponents of the Creditors' Plan comprised of the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"), the Debtors and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. Item 1. Principal Amount of Pre-LBO Debenture Claims As To Which Votes Were Cast and Vote Change Opportunity Applies. The undersigned hereby certifies that the undersigned was the registered recordholder of 10% Subordinated Debentures, 13 1/8% Subordinated Notes and/or 13 3/4 Subordinated Debentures as of July 13, 1994 and transmitted to the Balloting Agent a schedule of the following votes cast to accept or reject the Creditors' Plan by the beneficial owners of such Pre-LBO Debenture Claims as of July 13, 1994. Please complete the schedule immediately below. a. 10 7/8 Subordinated Debentures Principal Principal Amount of Amount of $ $ Name Accepted Rejected (Optional) Account No. Creditors' Plan Creditors' Plan 1 2 3 4 5 6 7 Total = N/A b. 13 1/8 Subordinated Notes Principal Principal Amount of Amount of $ $ Name Accepted Rejected (Optional) Account No. Creditors' Plan Creditors' Plan 1 2 3 4 5 6 7 Total = N/A c. 13 3/4 Subordinated Debentures Principal Principal Amount of Amount of $ $ Name (Optional) Account No. Accepted Rejected Creditors' Plan Creditors' Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 2. Principal Amount of Pre-LBO Debenture Claims As To Which There Has Been A VOTE CHANGE. The undersigned hereby certifies that the schedule set forth immediately below is a true and accurate schedule of each of the beneficial owners of the Pre-LBO Debenture Claims set forth in Item 1 (a "Beneficial Owner") which does not want the vote it previously cast on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan. Please complete the following as may be appropriate. a. 10 7/8 Subordinated Debentures Principal Principal Amount of Amount of $ $ Name (Optional) Account No. Accepts the Rejects the Consensual Plan Consensual Plan 1 2 3 4 5 6 7 Total = N/A b. 13 3/4 Subordinated Notes Principal Principal Amount of Amount of $ $ Name (Optional) Account No. Accepts the Rejects the Consensual Plan Consensual Plan 1 2 3 4 5 6 7 Total = N/A c. 13 3/4 Subordinated Debentures Principal Principal Amount of Amount of $ $ Name (Optional) Account No. Accepts the Rejects the Consensual Plan Consensual Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 3. By signing this Master Certification, the undersigned certifies that each Beneficial Owner of the Pre-LBO Debenture Claims described above whose votes are being transmitted along with this Master Certification has been provided with a black-lined copy of the Consensual Plan inclusive of all exhibits thereto and of the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As of December 9, 1994 (the "Disclosure Statement Supplement"). Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE MASTER VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for a record holder of 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and/or 13 3/4% Subordinated Debentures as of July 13, 1994, holding on behalf of another, to record such Beneficial Owners instruction to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such Beneficial Owner cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of Pre-LBO Debenture Claims and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the Court. Only a holder of 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and/or 13 3/4% Subordinated Debentures in whose name such notes are held on the books of the 10 7/8% Indenture Trustee, 13 1/8% Indenture Trustee or 13 3/4% Indenture Trustee, as applicable, on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. This Master Certification is to be used by brokerage firms, banks, or nominees for summarizing those Individual Vote Change Certifications received from the Beneficial Owners of 10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes and/or 13 3/4% Subordinated Debentures for which you were the record holder as of July 13, 1994, and who previously timely transmitted Individual Ballots to you on the Creditors' Plan. Only Individual Vote Change Certifications received by you by 5:00 p.m., Eastern Time, on January 19, 1995 are to be counted by you. Individual Vote Change Certifications received after such time must not be counted. Please retain all executed Individual Vote Change Certifications for one year. Please forward this Master Vote Change Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have the Individual Vote Change Certifications transmitted to you by your Beneficial Owners, if any, count, you must complete, sign and return this Master Certification so that it is received by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995. You need not transmit this Master Certification to the Balloting Agent if you do not receive any Individual Vote Change Certifications from your Beneficial Owners. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER VOTE CHANGE CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER VOTE CHANGE CERTIFICATION OR THE VOTE CHANGE PROCEDURES, PLEASE CALL 1 (800) 489-7444. Exhibit T3E20 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ INDIVIDUAL VOTE CHANGE CERTIFICATION FOR CLASS S-6 (SERIES B & C SENIOR NOTE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ THE FOLLOWING CAREFULLY. IF YOU WANT TO CHANGE THE VOTE YOU PREVIOUSLY CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN") PLEASE COMPLETE, SIGN, AND DATE THIS CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR CERTIFICATION HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 24, 1995, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE JANUARY 19, 1995, IT WILL NOT BE COUNTED. IF YOU DO NOT WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED DO NOTHING. The records of the Balloting Agent reflect that you previously cast a timely ballot to either accept or reject the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan") proposed by the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"). The Creditor Proponents, the Debtors, and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. The changes made to the Creditors' Plan which are embodied in the Consensual Plan are reflected in the black- lined version of the Consensual Plan which has been transmitted to you and are further described in the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As Of December 9, 1994 (the "Disclosure Statement Supplement"). On December 15, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Disclosure Statement Supplement as containing adequate information. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the court. IF YOU WANT TO CHANGE THE VOTE YOU CAST ON THE CREDITORS' PLAN, AND THEREFORE HAVE A DIFFERENT VOTE CAST WITH RESPECT TO THE CONSENSUAL PLAN PLEASE CHECK THE APPROPRIATE BOX BELOW: Item 1. Principal Amount of Series B & C Senior Notes As To Which Votes Were Cast and Vote Change Applies. This Certification is cast by or on behalf of the Beneficial Owner of the aggregate principal amount of the Series B & C Senior Notes indicated immediately below. The undersigned hereby certifies that the undersigned was the beneficial holder of such Series B & C Senior Notes as of July 13, 1994 (the "Beneficial Owner"), and voted the claim represented thereby to accept or reject the Creditors' Plan. Please fill out the following as may be appropriate: Account Number (if known) Aggregate Principal Amount Total = $ Or, if you do not hold your Series B & C Senior Notes through an account or accounts, $ in aggregate principal amount. Item 2. Class S-6 (Series B & C Senior Note Claims) ORIGINAL VOTE. The Beneficial Owner of the aggregate principal amount of Series B & C Senior Notes set forth in Item 1 originally voted to (please check one box below): Accept the Creditors' Plan / / Reject the Creditors' Plan / / Item 3. Class S-6 (Series B & C Senior Note Claims) VOTE CHANGE. The Beneficial Owner of the aggregate principal amount of Series B & C Senior Notes set forth in Item 1 does not want the vote it cast on or before September 23, 1994 on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan (please check the appropriate box): Accept the Consensual Plan / / Reject the Consensual Plan / / Item 4. By signing this Certification, the undersigned certifies that (i) the Beneficial Owner of the Series B & C Senior Notes set forth in Item 1 has full power and authority to vote to accept or reject the Consensual Plan, (ii) such Beneficial Owner has voted to accept or reject the Consensual Plan as set forth in Item 3 above, (iii) the vote cast by such Beneficial Owner in Item 3 above reflects a change from the vote that was previously cast by the Beneficial Owner on the Creditors' Plan, and (iv) this Certification has been executed on behalf of a single Beneficial Owner. The undersigned also acknowledges that (i) the Beneficial Owner has been provided with a copy of the Disclosure Statement Supplement, including all Exhibits thereto, and (ii) this Certification shall be counted as the undersigned's changed vote with respect to all Debtors against which the undersigned has an Allowed Class S-6 Claim. Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE INDIVIDUAL VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for the Beneficial Owner to indicate that it wishes to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such claimholder cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. Only a holder of Series B & C Senior Notes in whose name such notes are held on the books of the Series B & C Senior Note Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of Series B & C Senior Notes and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. If you do not want the vote you cast on the Creditors' Plan to be deemed to have been cast on the Consensual Plan, you must complete, sign and return this Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have your vote change count, you must complete, sign and return this Certification so that it is received either (i) by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995, or (ii) if you are not also the record holder, by your broker, bank or nominee not later than 5:00 p.m., Eastern Time, on January 19, 1995. Your original signature is required on the Certification in order for your vote change to count. All capitalized terms used herein shall have the meanings ascribed to them in the Consensual Plan. To properly complete the Certification, you must follow the procedures described below: (a) make sure that the information required in Item 1 has been inserted; if you do not know the amount of your claim, please contact either the Balloting Agent, or, if you are not the record holder, your broker, your bank, or your nominee; (b) indicate whether you had voted to accept or reject the Creditors' Plan by checking the proper box in Item 2; if you do not remember how you voted, please contact either the Balloting Agent, or, if you are not the record holder, your broker, bank or your nominee; (c) indicate your changed vote to accept or reject the Consensual Plan by checking the appropriate box in Item 3; (d) if you are completing this Certification on behalf of another entity, indicate your relationship with such entity and the capacity in which you are signing; (e) please use additional Certifications (available from the Balloting Agent) if additional space is required to respond to any item on the Certification or use additional sheets of papers clearly marked to indicate the applicable item of the Certification (if you elect to use additional Certifications because additional space is required, you must complete and sign each such Certification); (f) return your Certification using the enclosed return envelope. If you received a return envelope addressed directly to the Balloting Agent, please mail or deliver your Certification so that it will be received by January 24, 1995. If you received a return envelope addressed to a broker, bank or nominee, you must return your Certification to such entity by January 19, 1995. Please allow additional time; and (g) if you hold claims or interests in more than one class, and you previously cast a ballot to either accept or reject the Creditors' Plan in more than one of those classes, you may receive more than one Certification, labeled for different classes of claims or interests. Your changed vote will be counted in determining acceptance or rejection of the Consensual Plan by a particular class only if you fill out and return the Certification labeled for that class in accordance with the instructions on that Certification. IF YOU WANT THE VOTE YOU ORIGINALLY CAST TO ACCEPT OR REJECT THE CREDITORS' PLAN TO BE COUNTED AS CAST IN DETERMINING ACCEPTANCE OR REJECTION OF THE CONSENSUAL PLAN, YOU NEED NOT DO ANYTHING. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR CERTIFICATION, OR YOU DID NOT RECEIVE A COPY OF THE DISCLOSURE STATEMENT SUPPLEMENT OR CONSENSUAL PLAN, OR IF YOU BELIEVE THAT YOU HAVE NOT RECEIVED THE CORRECT CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444 OR YOUR BANK, BROKER OR NOMINEE. IF YOU HAVE ANY QUESTIONS REGARDING THIS CERTIFICATION PLEASE CALL 1 (800) 489-7444. Exhibit T3E21 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ MASTER VOTE CHANGE CERTIFICATION FOR USE BY RECORD HOLDERS OF CLASS S-6 (SERIES B & C SENIOR NOTE) CLAIMS PLEASE READ THE FOLLOWING CAREFULLY. IF ANY BENEFICIAL OWNER OF THE SERIES B & C SENIOR NOTES FOR WHICH YOU WERE THE RECORD HOLDER AS OF JULY 13, 1994 WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' JOINT PLAN OF REORGANIZATION FOR PURPOSES OF THE VOTE ON THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN"), PLEASE COMPLETE, SIGN AND DATE THIS MASTER CERTIFICATION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME, ON OR BEFORE JANUARY 24, 1995 OR IT WILL NOT BE COUNTED. IF NONE OF THE BENEFICIAL OWNERS FOR WHICH YOU WERE THE RECORD HOLDER WANTS TO CHANGE THE VOTE IT CAST ON THE CREDITORS' PLAN FOR PURPOSES OF THE VOTE ON THE CONSENSUAL PLAN, YOU NEED NOT TRANSMIT THIS MASTER CERTIFICATION TO THE BALLOTING AGENT. The records of the Balloting Agent reflect that you previously cast a timely master ballot on which was recorded, among other items, acceptances and/or rejections of the Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994 (the "Creditors' Plan") cast by the beneficial owners as of July 13, 1994, of the Series B & C Senior Notes for which you are the recordholder. The proponents of the Creditors' Plan comprised of the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"), the Debtors and Kohlberg Kravis Roberts & Co. ("KKR") have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan represents a modification of the Creditors' Plan. Item 1. Principal Amount of Series B & C Senior Notes As To Which Votes Were Cast and Vote Change Opportunity Applies. The undersigned hereby certifies that the undersigned was the registered recordholder of Series B & C Senior Notes as of July 13, 1994 and transmitted to the Balloting Agent a schedule of the following votes cast to accept or reject the Creditors' Plan by the beneficial owners of such Series B & C Senior Notes as of July 13, 1994. Please complete the schedule immediately below. Principal Principal Amount of Amount of $ $ Name (Optional) Account No. Accepted Rejected Creditors' Creditors' Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 2. Principal Amount of Series B & C Senior Notes As To Which There Has Been A VOTE CHANGE. The undersigned hereby certifies that the schedule set forth immediately below is a true and accurate schedule of each of the beneficial owners of the Series B & C Senior Notes set forth in Item 1 (a "Beneficial Owner") which does not want the vote it previously cast on the Creditors' Plan to be applied to the Consensual Plan, and wishes instead to have the following vote applied to the Consensual Plan. Please complete the following as may be appropriate. Principal Principal Amount of Amount of $ $ Name (Optional) Account No. Accepts the Rejects the Consensual Plan Consensual Plan 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 3. By signing this Master Certification, the undersigned certifies that each Beneficial Owner of the Series B & C Senior Notes described above whose votes are being transmitted along with this Master Certification has been provided with a black-lined copy of the Consensual Plan inclusive of all exhibits thereto and of the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As of December 9, 1994 (the "Disclosure Statement Supplement"). Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE MASTER VOTE CHANGE CERTIFICATION The Certification on the reverse side is not a letter of transmittal and may not be used for any purpose other than for a record holder of Series B & C Senior Notes as of July 13, 1994, holding on behalf of another, to record such Beneficial Owner's instruction to change from a rejection to an acceptance, or an acceptance to a rejection, as may be applicable, the vote such Beneficial Owner cast on the Creditors' Plan, with the result that the changed vote shall be utilized in respect of determining whether the Consensual Plan has been accepted by the requisite amount and number of claims. Accordingly, holders should not surrender certificates representing their securities in connection with this Certification, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Certification. The Consensual Plan may be confirmed by the Bankruptcy Court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on such plan. In the event the requisite acceptances are not obtained, the Bankruptcy Court may nevertheless confirm the Consensual Plan if the Bankruptcy Court finds that such plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of section 1129(b) of the Code. If the Consensual Plan is confirmed by the Bankruptcy Court, all holders of Series B & C Senior Notes and any and all other holders of claims against and equity interests in the Debtors (including those who abstain or reject such plan or are not entitled to vote thereon) will be bound by the confirmed plan and the transactions contemplated thereby. Under the Bankruptcy Code, a holder of a claim or interest that cast a vote to accept or reject a plan of reorganization, is deemed to have accepted or rejected, as may be applicable, such plan as modified, unless such holder who voted to accept or reject such plan changes that vote within the time fixed by the Court. Only a holder of Series B & C Senior Notes in whose name such notes are held on the books of the Series B & C Senior Note Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and who timely cast a vote to either accept or reject the Creditors' Plan has the opportunity to change the vote it originally cast on the Creditors' Plan. This Master Certification is to be used by brokerage firms, banks, or nominees for summarizing those Individual Vote Change Certifications received from the Beneficial Owners of Series B & C Senior Notes for which you were the record holder as of July 13, 1994, and who previously timely transmitted Individual Ballots to you on the Creditors' Plan. Only Individual Vote Change Certifications received by you by 5:00 p.m., Eastern Time, on January 19, 1995 are to be counted by you. Individual Vote Change Certifications received after such time must not be counted. Please retain all executed Individual Vote Change Certifications for one year. Please forward this Master Vote Change Certification in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have the Individual Vote Change Certifications transmitted to you by your Beneficial Owners, if any, count, you must complete, sign and return this Master Certification so that it is received by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995. You need not transmit this Master Certification to the Balloting Agent if you do not receive any Individual Vote Change Certifications from your Beneficial Owners. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER VOTE CHANGE CERTIFICATION, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER VOTE CHANGE CERTIFICATION OR THE VOTE CHANGE PROCEDURES, PLEASE CALL 1 (800) 489-7444. Exhibit T3E22 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ CLASS U-4 EXCHANGE ELECTION FORM FOR THE CONSENSUAL PLAN FOR USE BY BENEFICIAL OWNERS AS OF JULY 13, 1994 WHO PREVIOUSLY ELECTED TO BE DISTRIBUTED QUALIFIED SECURITIES IN CLASS U-4 (SENIOR SUBORDINATED NOTES) PLEASE READ THE FOLLOWING CAREFULLY. IF YOU WANT TO ELECT TO EXERCISE THE CLASS U-4 EXCHANGE ELECTION (HAVING PREVIOUSLY ELECTED TO RECEIVE QUALIFIED SECURITIES UNDER THE CREDITORS' PLAN) AND RECEIVE A PROPORTIONATELY INCREASED AGGREGATE PRINCIPAL AMOUNT OF QUALIFIED SECURITIES UNDER THE TERMS OF THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN") INSTEAD OF NEW COMMON STOCK HAVING AN IDENTICAL AGGREGATE NEW COMMON STOCK VALUE PER SHARE THAT YOU WOULD OTHERWISE RECEIVE UNDER THE CONSENSUAL PLAN, PLEASE COMPLETE, SIGN, AND DATE THIS CLASS U-4 EXCHANGE ELECTION AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR EXCHANGE ELECTION FORM HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME, ON OR BEFORE JANUARY 24, 1995, OR IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M. EASTERN TIME, ON OR BEFORE JANUARY 19, 1995, IT WILL NOT BE COUNTED. Item 1. Principal Amount of Senior Subordinated Notes As to Which A Prior Subordinated Note Claim Election Was Made. This Class U-4 Exchange Election is being exercised by or on behalf of the Beneficial Owner of the aggregate principal amount of the Senior Subordinated Notes indicated below. The undersigned hereby certifies that the undersigned was the beneficial owner of such Senior Subordinated Notes as of July 13, 1994 (the "Beneficial Owner") and previously elected to have the aggregate principal amount of its Allowed Senior Subordinated Note Claim indicated immediately below satisfied by Qualified Securities. Please fill out the following as may be appropriate: Account Number Aggregate Principal (if known) Amount $ Elected to Receive Qualified Securities in $ Principal Amount Total = $ Or, if you do not hold your Senior Subordinated Notes through an account or accounts; $ in aggregate principal amount and elected to receive Qualified Securities in respect of $ principal amount of its Allowed Class U-4 Claim. Item 2. Class U-4 Exchange Election. Pursuant to Section 1.26(e) of the Consensual Plan, each holder of a Class U-4 Claim that had affirmatively elected to receive all or part of its Class U-4 Claim in the form of Qualified Securities pursuant to the Subordinated Note Claim Election (other than Lehman Brothers Inc.) (a holder of an "Eligible Class U-4 Claim") may elect to modify the allocation of Qualified Securities and New Common Stock that would otherwise be issued to such holder of an Eligible Class U-4 Claim under the Consensual Plan, so as to increase the aggregate amount of Qualified Securities and decrease by an identical aggregate New Common Stock Value Per Share the New Common Stock to be issued to such holder, to the extent set forth in Section 1.26(e) of the Consensual Plan. Such additional amount of Qualified Securities shall be solely in the form of New Senior Notes, unless no New Senior Notes are issued as Qualified Securities under the Consensual Plan, in which case such additional amount of Qualified Securities shall be in the form of Cash. I wish to exercise the Class U-4 Exchange Election / / The Subordinated Note Claim Election that you previously exercised remains effective whether or not you elect to exercise the Class U-4 Exchange Election. Item 3. By signing this Class U-4 Exchange Election Form, the undersigned certifies that (i) the Beneficial Owner of the Senior Subordinated Note Claim set forth in Item 1 as, or on behalf of, the holder of an Eligible Class U-4 Claim has full power and authority to execute this Exchange Election Form, (ii) the amounts and other information listed herein about such Eligible Class U-4 Claims are accurate, and (iii) this Exchange Election Form has been executed on behalf of a single Beneficial Owner. The undersigned also acknowledges that the Beneficial Owner has been provided with a copy of the Disclosure Statement Supplement, the Consensual Plan and all Exhibits thereto. Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE CLASS U-4 EXCHANGE ELECTION FORM The Class U-4 Exchange Election on the reverse side is not a letter of transmittal and may not be used for any purpose other than for the Beneficial Owner of an Eligible Class U-4 Claim to indicate that it wishes to exercise the Class U-4 Exchange Election provided for under the Consensual Plan. Accordingly, holders should not surrender certificates representing their securities in connection with this Class U-4 Exchange Election and the Balloting Agent will not accept delivery of any such certificates tendered together with this Class U-4 Exchange Election. Only a holder of Senior Subordinated Notes (other than Lehman Brothers Inc.) (a) in whose name such notes were held on the books of the Senior Subordinated Indenture Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and (b) who previously elected on or before September 23, 1994 to receive all or any part of its Allowed Claim in Qualified Securities (a "Beneficial Owner of an Eligible Class U-4 Claim") has the opportunity to exercise the Class U-4 Exchange Election under the Consensual Plan. To have your Class U-4 Exchange Election count, you must complete, sign and return this Class U-4 Exchange Election so that it is received either (i) by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995, or (ii) if you are not also the record holder, by your broker, bank or nominee not later than 5:00 p.m., Eastern Time, on January 19, 1995. Your original signature is required on the Class U-4 Exchange Election in order for your election to count. If you are both the Beneficial Owner and record holder, the Class U-4 Exchange Election is to be returned to the Balloting Agent, as follows: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc.Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701New York, New York 10016 All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Consensual Plan. To properly complete the Class U-4 Exchange Election, you must follow the procedures described below: (a) make sure that the information required in Item 1 has been inserted; if you do not know the principal amount of your claim and/or the portion of that amount which you previously elected to have satisfied by Qualified Securities, please contact either the Balloting Agent, or, if you are not the record holder, your broker, your bank, or your nominee; (b) indicate whether you wish to exercise the Class U-4 Exchange Election by checking the appropriate box in Item 2; (c) if you are completing this Class U-4 Exchange Election on behalf of another entity, indicate your relationship with such entity and the capacity in which you are signing; (d) please use additional Class U-4 Exchange Elections (available from the Balloting Agent) if additional space is required to respond to any item on the Class U-4 Exchange Election or use additional sheets of paper clearly marked to indicate the applicable item of the Class U-4 Exchange Election (if you elect to use additional Class U-4 Exchange Elections because additional space is required, you must complete and sign each such Class U-4 Exchange Election); and (e) return your Class U-4 Exchange Election using the enclosed postage-paid return envelope. If you received a return envelope addressed directly to the Balloting Agent, please mail or deliver your Class U-4 Exchange Election so that it will be received by January 24, 1995. If you received a return envelope addressed to a broker, bank or nominee, you must return your Class U-4 Exchange Election to such entity by January 19, 1995. Please allow additional time. IF YOU DO NOT WANT TO MODIFY THE ALLOCATION OF QUALIFIED SECURITIES AND NEW COMMON STOCK THAT WOULD OTHERWISE BE ISSUED TO YOU UNDER THE CONSENSUAL PLAN, YOU NEED NOT DO ANYTHING. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR CLASS U-4 EXCHANGE ELECTION, OR YOU DID NOT RECEIVE A COPY OF THE DISCLOSURE STATEMENT SUPPLEMENT OR CONSENSUAL PLAN, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444 OR YOUR BANK, BROKER OR NOMINEE. Exhibit T3E23 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION ____________________________ In re Chapter 11 Hillsborough Holdings Jointly Administered Corporation, et al., Case Nos. 89-9715-8P1 to 89-9746-8P1 and Debtors. 90-11997-8P1 Inclusive ____________________________ MASTER CLASS U-4 EXCHANGE ELECTION FORM FOR THE CONSENSUAL PLAN FOR USE BY RECORD HOLDERS OF CLASS U-4 (SENIOR SUBORDINATED NOTE) CLAIMS PLEASE READ THE FOLLOWING CAREFULLY. IF ANY BENEFICIAL OWNER OF THE SENIOR SUBORDINATED NOTES FOR WHICH YOU WERE THE RECORD HOLDER AS OF JULY 13, 1994 HAS PROPERLY INSTRUCTED YOU TO EXERCISE THE CLASS U-4 EXCHANGE ELECTION AND MODIFY THE AGGREGATE PRINCIPAL AMOUNT OF QUALIFIED SECURITIES AND NEW COMMON STOCK THAT SUCH HOLDER WOULD OTHERWISE RECEIVE UNDER THE TERMS OF THE AMENDED JOINT PLAN OF REORGANIZATION DATED AS OF DECEMBER 9, 1994 (THE "CONSENSUAL PLAN"), PLEASE COMPLETE, SIGN AND DATE THIS MASTER CLASS U-4 EXCHANGE ELECTION FORM AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME, ON OR BEFORE JANUARY 24, 1995. IF THIS MASTER EXCHANGE FORM HAS NOT BEEN RECEIVED BY THE BALLOTING AGENT BY SUCH DEADLINE, IT WILL NOT BE COUNTED. IF NONE OF THE BENEFICIAL OWNERS FOR WHICH YOU WERE THE RECORD HOLDER HAS PROPERLY INSTRUCTED YOU TO EXERCISE THE CLASS U-4 EXCHANGE ELECTION, YOU NEED NOT TRANSMIT THIS MASTER CLASS U-4 EXCHANGE ELECTION FORM TO THE BALLOTING AGENT. The records of the Balloting Agent reflect that you previously cast a timely master ballot on which was recorded, among other items, the Subordinated Note Claim Elections exercised by the beneficial owners as of July 13, 1994, of the Senior Subordinated Notes for which you were the record holder, in connection with the Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994 (the "Creditors' Plan"). The proponents of the Creditors' Plan comprised of the statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Creditor Proponents"), the Debtors and Kohlberg Kravis Roberts & Co. have now settled their disputes and reached agreement on the terms of a joint plan of reorganization for the Debtors which is based on a modification of the Creditors' Plan. The terms of the settlement are embodied in the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 and exhibits thereto (the "Consensual Plan"), which is jointly proposed by the Creditor Proponents, the Debtors and the KKR Proponents (as defined in the Consensual Plan). The Consensual Plan is a modification of the Creditors' Plan. Item 1. Principal Amount of Senior Subordinated Notes As To Which A Prior Subordinated Note Claim Election Was Made To Receive Qualified Securities. The undersigned hereby certifies that the undersigned was the registered record holder of Senior Subordinated Notes as of July 13, 1994 and transmitted to the Balloting Agent a schedule of the following Subordinated Note Claim Elections made to receive Qualified Securities by the beneficial owners of such Senior Subordinated Notes as of July 13, 1994. Please complete the schedule immediately below. Name Elected to Receive (Optional) Account No. Principal Amount Qualified Securites $ in $ Principal Amount 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 2. Principal Amount of Senior Subordinated Notes Which Have Exercised the Class U-4 Exchange Election. The undersigned hereby certifies that the schedule set forth immediately below is a true and accurate schedule of each of the beneficial owners of the Senior Subordinated Notes set forth in Item 1 (other than Lehman Brothers Inc.) (each an "Eligible Class U-4 Beneficial Owner") which has elected under the Consensual Plan to modify the allocation of Qualified Securities and New Common Stock that would otherwise be issued to such Eligible Class U-4 Beneficial Owner. Please complete the following as may be appropriate. Name Exercised Class U-4 (Optional) Account No. Principal Amount Exchange Election of $ 1 2 3 4 5 6 7 Total = N/A (ATTACH ADDITIONAL PAGES IF NECESSARY) Item 3. By signing this Master Exchange Election, the undersigned certifies that each Beneficial Owner of the Senior Subordinated Notes described above whose Class U-4 Exchange Elections are being transmitted along with this Master Class U-4 Exchange Election Form has been provided with a black-lined copy of the Consensual Plan inclusive of all exhibits thereto and a copy of the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As of December 9, 1994 (the "Disclosure Statement Supplement"). Name:________________________________ (Print or Type) ________________________________ Federal Tax I.D. No. Signature:___________________________ By:__________________________________ (If Appropriate) Title:_______________________________ (If Appropriate) Address:_____________________________ Street _____________________________ City, State and Zip Code Telephone Number: ( )_____________ Date Completed: _____________________ INSTRUCTIONS FOR COMPLETING THE MASTER CLASS U-4 EXCHANGE ELECTION FORM The Class U-4 Exchange Election on the reverse side is not a letter of transmittal and may not be used for any purpose other than for a record holder of Senior Subordinated Notes as of July 13, 1994, holding on behalf of another who had previously elected to received Qualified Securities under the Consensual Plan, to record such Beneficial Owner's instruction to exercise the Class U-4 Exchange Election provided for under the Consensual Plan. Accordingly, holders should not surrender certificates representing their securities in connection with this Class U-4 Exchange Election, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Class U-4 Exchange Election. Only a holder of Senior Subordinated Notes (other than Lehman Brothers Inc.) (a) in whose name such notes were held on the books of the Senior Subordinated Indenture Trustee on July 13, 1994, the record date previously established by the Bankruptcy Court, or any person who has obtained a properly completed proxy from such person, and (b) who elected to receive all or any part of its Allowed Claim in Qualified Securities on or before September 23, 1994, has the opportunity to exercise the Class U-4 Exchange Election under the Consensual Plan. This Master Class U-4 Exchange Election Form is to be used by brokerage firms, banks, or nominees for summarizing those Class U-4 Exchange Election Forms received from (a) the Eligible Class U-4 Beneficial Owners of Senior Subordinated Notes for which you were the record holder as of July 13, 1994, and (b) who previously timely transmitted Individual Ballots to you on the Creditors' Plan on which elections to receive Qualified Securities were made. Only Class U-4 Exchange Election Forms received by you by 5:00 p.m., Eastern Time, on January 19, 1995 are to be counted by you and reflected on the Master Class U-4 Exchange Election Form. Class U-4 Exchange Election Forms received after such time must not be counted. Please retain all executed Class U-4 Exchange Election Forms for one year. Please forward this completed and executed Master Class U-4 Exchange Election Form in the enclosed return envelope to: If By Mail If By Courier or Hand Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc. P.O. Box 2022 419 Park Avenue South Murray Hill Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have the Class U-4 Exchange Election Forms transmitted to you by your Beneficial Owners, if any, count, you must complete, sign and return this Master Class U-4 Exchange Election Form so that it is received by the Balloting Agent not later than 5:00 p.m., Eastern Time, on January 24, 1995. You need not transmit this Master Class U-4 Exchange Election Form to the Balloting Agent if you do not receive any Class U-4 Exchange Election Forms from your Beneficial Owners. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER CLASS U-4 EXCHANGE ELECTION FORM, CONTACT DONLIN, RECANO & COMPANY, INC. AT 1 (800) 489-7444. -----END PRIVACY-ENHANCED MESSAGE-----