-----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, plOjGey7nFzI9ynZncuYk4c0IyYbb9ADnxD8hC5TNM0VxJe8AE089SVEX3fvcwuz V467Cbr2gUbvbKYO1fuCbw== 0000899681-95-000043.txt : 19950302 0000899681-95-000043.hdr.sgml : 19950302 ACCESSION NUMBER: 0000899681-95-000043 CONFORMED SUBMISSION TYPE: T-3/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19950228 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/A SEC ACT: 1939 Act SEC FILE NUMBER: 022-22199 FILM NUMBER: 95515981 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/A 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 - ----------- AMENDMENT NO. 1 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 INSURERS, INC. (FL) Wholly owned subsidiaries of Best Insurers, Inc.: Best Insurers 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) Wholly owned subsidiary of Mid-State Homes, Inc.: Mid-State Trust IV Mid-State Trust V 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)(2) 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) 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. 2800 Sand Hill Road Suite 200 Menlo Park, CA 94025 (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) Messrs. Tokarz and Golkin are currently directors and officers of the Company and certain of its subsidiaries. It is anticipated that as of the effective date, (i) Messrs. Tokarz and Golkin will no longer be officers or directors of any subsidiary, (ii) Mr. Golkin will neither be an officer nor a director of the Company and (iii) Mr. Tokarz will remain a director, but not an officer of the Company. 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 7,772,000(1) 15.4%(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 10009
(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 14.2%. (2) 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 percentages would decrease. Approximately 453,000 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) $443,046,488 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 $ 945,000,000(2) $945,000,000(2) Common Stock, $.01 par value 200,000,000 shares 50,494,000 shares(3)
(1) This is the maximum amount to be issued under the Indenture. This amount will be reduced by cash available in excess of $45 million 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. (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. Approximate amounts based on a March 15, 1995 closing date and $555 million of Qualified Securities. (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 Recipient or the creditors of The Celotex Corporation, in their capacities as such), 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 Recipient or a creditor of The Celotex Corporation, in thier capacities as such, such shares shall receive normal voting rights. INDENTURE SECURITIES [FN] 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 Business Days after becoming due; (ii) failure by the Company to pay the principal of or premium, if any, on the Notes, whether at maturity or upon acceleration, redemption or otherwise (including the failure to repurchase the Notes tendered pursuant to a Change of Control Offer or Asset Sale Offer); (iii) failure by the Company to perform any of its obligations under the second paragraph of Section 5 or Section 7 of the Pledge Agreement or failure by any Subsidiary to perform any of its obligations under the second paragraph of Section 5 or Section 7 of any 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 the provisions of Section 4.08, 4.09, or 5.01 of the Indenture; (v) failure by the Company or any of its Subsidiaries to comply with the provisions of Section 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17 or 4.18 of the Indenture for 30 days after written notice specifying the failure and that the same is a Default shall have been given to the Company by the Trustee or Holders of 25% in principal amount of the Notes outstanding; (vi) failure by the Company or any of its Subsidiaries to comply with any covenants or the breach by the Company or any of its Subsidiaries of any representation or warranty hereunder or under the Pledge Agreement or any Subsidiary Pledge Agreement (other than a covenant, representation or warranty, a Defalut in the compliance with which is specifically dealt with elsewhere in this Section 6.01) for 60 days after written notice specifying the failure and that the same is a Default shall have been given to the Company by the Trustee or Holders of 25% in principal amount of the Notes outstanding; (vii) default or defaults (including a payment default) under one or more agreements, instruments, mortgages, bonds, debentures or other evidence of Indebtedness under which the Company or any of its Significant Subsidiaries has an outstanding principal amount of Indebtedness in excess of $25 million individually or $50 million in the aggregate for all such issues of all such Persons and either (x) such Indebtedness is already due and payable in full or (y) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness; (viii) 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; (ix) 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 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; (x) 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 (xi) 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 (ix) or (x) 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). 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, the Trustee's and the Paying Agent's obligations with respect to such Notes under Sections 2.03 through 2.07, 4.02 and 7.07 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 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, a certificate of the principal executive officer, the principal financial officer or the principal accounting officer of the Company 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 and is pending, 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. [FN] Certain Subsidiaries will pledge shares of common stock of Subsidiaries of the Company owned by them as sceurity 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 22, 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 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 Vote Change Certification for the Consensual Plan Exhibit T3E16.** Master Class U-5 Vote Change Certification 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. ** Previously filed 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 twenty-fourth day of February, 1995. WALTER INDUSTRIES, INC. By:_______________________ G. Robert Durham Chief Executive Officer and President By:_______________________ Kenneth J. Matlock Executive Vice President and Chief Financial Officer Attest: ___________________ Name: Title: 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. DISCLOSURE STATEMENT FOR CREDITORS' PLAN DATED AS OF AUGUST 1, 1994 AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. Counsel to Apollo 65 East 55th Street 33rd Floor New York, NY 10022 (212) 872-1000 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 10019-6064 (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 NO PERSON MAY GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN OR THE SOLICITATION OF ACCEPTANCES OF THE CREDITORS' PLAN. PURSUANT TO AN ORDER DATED AUGUST 2, 1994, THE BANKRUPTCY COURT DETERMINED THAT THIS DISCLOSURE STATEMENT COMPLIES WITH THE REQUIREMENTS OF THE BANKRUPTCY CODE. ALL CLAIMANTS ARE HEREBY ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND THE CREDITORS' PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE CREDITORS' PLAN. CREDITORS' PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE CREDITORS' PLAN, OTHER EXHIBITS ANNEXED HERETO AND OTHER DOCUMENTS REFERENCED AS FILED WITH THE COURT PRIOR TO OR CONCURRENT WITH THE FILING OF THIS DISCLOSURE STATEMENT. EXCEPT AS OTHERWISE INDICATED HEREIN, THE FACTUAL AND FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT (INCLUDING THE EXHIBITS HERETO) REGARDING THE DEBTORS, THEIR BUSINESSES AND CLAIMS AGAINST SUCH DEBTORS IN THIS BANKRUPTCY PROCEEDING HAS BEEN PROVIDED BY MANAGEMENT OF THE DEBTORS TO THE PROPONENTS AND THEIR REPRESENTATIVES, AND HAS ALSO BEEN COMPILED FROM THE PLEADINGS AND DOCUMENTS ON FILE WITH THE BANKRUPTCY COURT. EXCEPT AS OTHERWISE INDICATED, SUCH INFORMATION HAS NOT BEEN SUBJECT TO AUDIT OR INDEPENDENT REVIEW. WHILE THE PROPONENTS HAVE TAKEN REASONABLE STEPS UNDER THE CIRCUMSTANCES TO ENSURE THAT SUCH INFORMATION IS ACCURATE, THE PROPONENTS AND THEIR PROFESSIONAL ADVISORS, INCLUDING THEIR COUNSEL, ACCOUNTANTS, AND FINANCIAL ADVISORS, DO NOT WARRANT THE ACCURACY OF SUCH INFORMATION. STATEMENTS MADE HEREIN IDENTIFYING SPECIFIC INFORMATION AS HAVING BEEN TAKEN FROM THE DEBTORS' DISCLOSURE STATEMENT OR OTHERWISE OBTAINED FROM THE DEBTORS OR BASED UPON INFORMATION FURNISHED BY THE DEBTORS SHALL NOT LIMIT THE GENERALITY OF THE FOREGOING. DELIVERY OF THIS DISCLOSURE STATEMENT 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 AND THE DATE OF THE MATERIALS RELIED UPON IN PREPARATION OF THIS DISCLOSURE STATEMENT. ALL HOLDERS OF CLAIMS SHOULD READ CAREFULLY AND CONSIDER FULLY THE "RISK FACTORS" SECTION HEREOF BEFORE VOTING FOR OR AGAINST THE CREDITORS' PLAN. NO REPRESENTATION IS MADE HEREIN REGARDING THE TRADING OR OTHER MARKET VALUE OF ANY SECURITY TO BE ISSUED PURSUANT TO OR IN CONNECTION WITH THE CREDITORS' PLAN. THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE AND RULE 3016(c) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE 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 AND THE CREDITORS' PLAN IN LIGHT OF THE PURPOSE FOR WHICH IT WAS PREPARED. THIS DISCLOSURE STATEMENT 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 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 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. General 1 1. Introduction and Recommendations 1 2. Comparison of the Creditors' Plan With the Debtors' Plan 3 3. Asbestos/Veil Piercing Settlement 7 4. Background to Filing of Creditors' Plan 9 5. Summary 11 6. Voting Instructions 12 7. Confirmation Hearing 14 B. Acceptance or Rejection of the Creditors' Plan 14 C. Recommendations With Respect to the Creditors' Plan 15 D. Summary of Businesses, Properties and Other Information With Respect to the Debtors 15 E. The Chapter 11 Cases 17 1. General 17 2. Debtors-in-Possession Order 17 3. Retention of Professionals for Debtors 17 4. Committees 17 5. Claims 18 6. Bar Date for Filing of Claims 19 7. Automatic Stay 19 8. Executory Contracts 19 9. Exclusivity Period and Acceptance Period 20 10. Negotiations With KKR Associates and Debtors' Representatives With Respect to Plan of Reorganization, and Negotiations and Agreement With Representatives of Veil Piercing Claimants With Respect to Settlement of Those Claims 21 11. Filing of Currently Pending Plans; Disclosure Statement Hearing 22 12. Negotiations and Agreement with Ad Hoc Committee of Pre-LBO Bond-holders 25 13. Negotiations and Agreement With Holders of Series B & C Senior Note Claims and Series B & C Senior Note Trustee 25 F. Litigation of Veil Piercing Proceedings 25 G. Objections To Confirmability of Creditors' Plan Asserted by Debtors 29 II. OVERVIEW OF THE CREDITORS' PLAN 31 A. Summary of Claims and Class Treatment Under the Creditors' Plan 34 B. Special Features of the Creditors' Plan 38 1. Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues 38 a. Terms of the Veil Piercing Settlement Agreement 39 b. Reasonableness of the Settlement: Certainty and Prompt Payment vs. Uncertainty and Additional Years of Delay 42 c. Funding of the Settlement Payment by Creditors 45 d. Pre-LBO Bondholders Settlement Agreement 46 e. Negotiated Enterprise Value and Equity Call Option 47 f. Other Features of the Creditors' Plan 48 2. Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants 50 a. Qualified Securities 51 b. Method of Allocation of Qualified Securities and New Common Stock 51 c. Creation and Anticipated Range of Amount of Qualified Securities 54 d. Examples of Possible Allocations of Qualified Securities and New Common Stock 55 e. New Common Stock 70 3. Post-Filing Date Interest Claims 73 C. Classification and Treatment of Claims and Interests 75 1. Administrative Claims 75 2. Priority Claims 75 3. Secured Claims 79 4. Unsecured Claims 94 5. Intercompany Claims 105 6. Equity Interests 108 D. Distributions at Consummation 110 1. Distributions to Holders of Allowed Claims and Interests 110 2. Surrender and Cancellation of Instruments 111 3. Reserves for Disputed Claims 112 E. Description of Securities to be Issued Under the Creditors' Plan 113 1. New Senior Notes 113 2. Qualified Securities 114 a. Mid-State Trust IV Secured Notes 114 b. Mid-State Trust II Residual Bonds 115 c. New Unsecured Notes 116 3. New Common Stock 117 F. Impaired Classes of Claims and Interests 118 G. Unimpaired Classes of Claims and Interests 119 H. Assumption or Rejection of Executory Contracts 119 I. Assumption or Termination of Loan Agreements and Indentures 119 J. Indemnification 120 K. Releases 120 1. Release by Holders of Claims 120 2. Release by Debtors 121 3. Dismissal of Lawsuits 121 L. Unclaimed Property 121 1. Unclaimed Instruments 121 2. Unclaimed Cash 122 3. Non-Negotiated Checks 122 4. Returned Distributions 122 M. Vesting of Property 122 N. No Substantive Consolidation 123 1. Joint Administration of Chapter 11 Cases 123 2. No Consolidation 123 O. Retention of Jurisdiction 123 P. Fractional Shares of New Common Stock 124 Q. Amendments to the Creditors' Plan 124 R. Amendments to the Charter 124 S. Confirmation Bonus Award 125 T. Conditions Precedent 125 1. To Confirmation of the Creditors' Plan 125 2. To Effectiveness of the Creditors' Plan 126 3. Waiver of Conditions Precedent 129 U. Certain Information Regarding Apollo and Lehman Brothers Inc. 129 III. POST-CONSUMMATION 133 A. Business 133 B. Management 133 1. Directors and Officers of the Debtors 133 2. Executive Compensation 140 a. Directors 140 b. Officers 141 (1) Cash Compensation Relating to Year Ended May 31, 1993 141 (2) Profit Sharing Plan 148 (3) Pension Plan 149 (4) Common Stock Incentive Plans--Present and Proposed 150 (5) Certain Employment Agreements 152 (6) Other Benefit Plans 154 3. Certain Related Transactions 154 4. Security Ownership of Directors, Officers and Certain Beneficial Owners 155 a. Ownership of Common Stock 155 b. Agreements Regarding Common Stock 158 IV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES 161 A. Tax Consequences to Walter Industries and its Subsidiaries 161 1. Cancellation of Indebtedness Income 161 2. Net Operating Loss ("NOL") Carryforwards 163 3. Alternative Minimum Tax 164 4. High-Yield Debt Obligation ("HYDO") Rules 164 5. Deductibility of Payments to Celotex Settlement Fund Recipient 165 B. Federal Income Tax Consequences To Holders 165 1. In General 165 2. Tax Treatment of Exchanging Holders by Class 165 3. Certain Other Tax Considerations for Holders 167 a. Receipt of Interest 167 b. Accrued Market Discount 167 c. Installment Method 168 d. Reinstatement of Claims 168 e. Original Issue Discount ("OID") 168 f. Bad Debt and/or Worthless Securities Deduction 169 g. Future Stock Gains 169 h. Future Sales of New Debt 169 i. Backup Withholding 169 C. The Mid-State Trusts 170 D. Celotex Settlement Fund Recipient 170 V. THE CHARTER 171 VI. APPLICABILITY OF FEDERAL AND STATE SECURITIES LAWS 172 A. Issuance of Reorganization Securities 172 B. Post-Consummation Transfers of Reorganization Securities 172 1. Control Persons 173 2. Syndicators 173 3. Accumulators and Distributors 173 C. Current Information 174 VII. BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS 175 A. Organization of Hillsborough and Acquisition of Original Jim Walter 175 1. Organization of Hillsborough 175 2. Acquisition of Original Jim Walter 175 3. Financing of the Tender Offer and Merger 175 4. Source and Use of Funds 177 5. Certain Events Preceding the Reorganization Proceedings 178 B. Corporate Reorganizations and Asset Dispositions 178 1. General 178 2. Completed Transactions 178 a. Mid-State Homes 178 b. Jim Walter Papers 180 c. JWC Holdings Corporation 180 d. JWC Holding Corporation 180 e. U.S. Pipe 181 f. United Land 181 g. Wedlo Holdings 181 h. Concrete 182 i. Georgia Marble 182 j. Jim Walter Resources 183 k. Cherokee and Sanford Brick Companies 183 l. Shore Oil 183 C. Post-Filing Date Sales of Assets 183 1. Beijer Industries AB Stock Investment 184 2. Lease of Certain Rights to Coal Bed Methane Gas 184 3. Certain Assets of Industrial Products Division of U.S. Pipe 184 4. Certain Assets of Soil Pipe and Southeastern Assembly Divisions of U.S. Pipe 184 D. Post-Filing Date Financing Efforts 184 1. Post-Petition Replacement Letter of Credit Agreement 184 2. Post-Petition New Letter of Credit Agreement 185 3. Periodic Payments of Mid-State Homes Pre-Filing Date Debt 185 4. Application of Certain Proceeds 186 5. Release of Certain Funds 186 6. Sale of Installment Notes--Mid-State Homes 186 7. Installment Purchase of Mining Equipment 187 E. Businesses and Properties of the Debtors 187 1. General 187 2. Hillsborough 187 3. Walter Industries 187 4. Jim Walter Homes 187 5. Home Improvement 189 6. Mid-State Homes 189 7. Jim Walter Resources 191 a. Mining Division 191 b. De-Gas Division 195 8. U.S. Pipe 196 a. Pressure Pipe Division 196 b. Castings Division 198 9. Sloss 198 10. JW Aluminum 199 11. Window Components and Window Components (Wisc.) 199 12. Southern Precision 200 13. Vestal 200 14. United Land 200 15. Walter Land 201 16. Best; Best (Miss.) and JW Insurance 201 17. Coast to Coast 202 18. Dixie 202 19. Computer Services 202 20. Hamer Properties 202 21. Pipe Realty 202 22. JW Walter 203 23. Holding Companies 203 a. Computer Holdings 203 b. Hamer Holdings 203 c. Homes Holdings 203 d. Mid-State Holdings 203 e. Resources Holdings 203 f. JW Resources 203 g. JWI Holdings 203 h. Land Holdings 203 i. Railroad Holdings 203 24. Non-Debtor Affiliates 203 a. Cardem 203 b. J.W. Railroad 204 c. Mid-State Trust II and Mid-State Trust III 204 d. Black Warrior Methane 204 e. Black Warrior Transmission 205 F. Employees 205 G. Seasonality 206 H. Trade Names, Trademarks and Patents 206 I. Research and Development 206 J. Raw Materials 206 K. Labor Agreements 206 1. Jim Walter Resources 206 2. U.S. Pipe 207 3. Sloss 207 4. Window Component 207 5. Vestal 207 6. Southern Precision 207 L. Pension Plans 207 M. Profit Sharing Plan 209 N. Other Employee Benefit Plans 209 1. Group Medical Plans 209 2. Life Insurance 209 3. Long-Term Disability 209 4. Temporary Disability 210 5. Retiree Medical Insurance 210 6. Paid Vacations 210 7. Paid Holidays 210 8. Severance Pay 210 9. Employee Educational Assistance Program 210 O. Completion Of Mirror Liquidation Plan 210 1. General 210 2. Completion of the Pipe Liquidation Plan 211 3. Completion of the Resources Liquidation Plan 211 4. Distribution of the Capital Stock of Jim Walter Homes 212 5. Distribution of the Capital Stock of Mid-State Homes 212 6. Merger of Old Walter Industries into Hillsborough 212 7. Status of Creditors of Certain Debtors 212 8. Summary of Mirror Liquidation Order 212 P. Risk Factors Relating to Businesses of the Debtors 213 1. General 213 2. Major Debtors 213 a. U.S. Pipe 213 b. Jim Walter Homes 213 c. Jim Walter Resources 213 d. Vestal 214 e. Window Components 214 f. JW Aluminum 214 g. Southern Precision 214 h. Sloss 214 Q. Workers' Compensation 214 R. Tort Claims Resolution Procedure 214 S. Litigation 215 1. U.S. Pipe Antitrust Lawsuits 215 2. Texas Lawsuits Relating to Property of Jim Walter Homes and Mid-State Homes 215 3. Federal Income Tax 218 4. Lawsuits Relating to Jim Walter Resources 219 5. United Concrete Pipe Corporation 221 T. Environmental 221 1. General 221 2. Sloss 222 3. U.S. Pipe 223 a. Burlington, New Jersey 223 b. Union City, California 223 VIII. PROJECTED FINANCIAL INFORMATION 225 IX. VOTING ON AND CONFIRMATION OF THE CREDITORS' PLAN 226 A. Confirmation of the Creditors' Plan 226 B. Feasibility 226 C. Best Interests of Holders of Claims and Holders of Interests 226 D. Classification of Claims and Interests 227 E. Voting; Acceptance 227 F. Confirmation Without Acceptance by All Impaired Classes 228 X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE CREDITORS' PLAN 229 A. Alternatives to the Creditors' Plan 229 B. Liquidation Under Chapter 7 229 XI. DEFINITIONS 233 XII. CHART OF DEBTORS 242 XIII. CONCLUSION 244 INDEX OF EXHIBITS I. Creditors' Joint Plan of Reorganization Exhibits: 1. Restated Certificate of Incorporation of Walter Industries 2. Summary of Terms for the New Senior Notes 3A. Veil Piercing Settlement Agreement 3B. Pre-LBO Bondholders Settlement Agreement 3C. Amended and Restated Veil Piercing Settlement Agreement 4. Summary of Terms for the Mid-State Trust IV Secured Notes 5. Summary of Terms for the Mid-State Trust II Residual Bonds 6. Summary of New Unsecured Notes 7. Form of New Common Stock Registration Rights Agreement 8. Form of Qualified Securities Registration Rights Agreement 9. Rejected Executory Contracts II. Official Committees III. Order Authorizing Debtors to Complete Their Mirror Liquidation Plan IV. Summary of Classes and Treatment of Claims Under the Creditors' Plan for Each Debtor V. Directors and Officers of Each of the Debtors VI. Liquidation Analysis VII. Projected Statements of Operations of Debtors for 1993 through 2001 VIII. Chart of Corporate Structure on Filing Date IX. Chart of Corporate Structure after Completion of Mirror Liquidation Plan X. Consolidated Financial Statements of Walter Industries: A.1. Year ended May 31, 1993 (audited) A.2. Management's Discussion and Analysis of Financial Condition and Results of Operations For Year Ended May 31, 1993 B.1. Nine Months Ended February 28, 1994 (unaudited) B.2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months ended February 28, 1994. XI. Bank Agents Agreement, dated as of April 18, 1994 XII. Findings of Fact, Conclusions of Law and Memorandum Opinion of Alexander L. Paskay, Chief Bankruptcy Judge, in In re Hillsborough Holdings Corporation, et al. v. The Celotex Corporation, et al., Adv. No. 90-03 & 90-04, United States Bankruptcy Court for the Middle District of Florida, dated April 18, 1994 I. INTRODUCTION A. General THE DEBTORS HAVE INFORMED THE PROPONENTS THAT THEY DISAGREE WITH THE CHARACTERIZATION AND/OR ACCURACY OF MANY OF THE FACTUAL AND LEGAL STATEMENTS CONTAINED HEREIN. FOR A DESCRIPTION OF THE DEBTORS' VIEWS ON SUCH MATTERS, SEE THE DEBTORS' FIFTH AMENDED DISCLOSURE STATEMENT DATED AS OF JULY 25, 1994, A COPY OF WHICH IS INCLUDED IN THE SAME MAILING AS THIS DISCLOSURE STATEMENT. UNLESS OTHERWISE INDICATED HEREIN, CAPITALIZED TERMS NOT DEFINED HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN THE CREDITORS' PLAN. A TABLE OF CONTENTS OF DEFINED TERMS IS CONTAINED HEREIN AT ARTICLE XI. 1. Introduction and Recommendations The Official Committee of General Unsecured Creditors of the Debtors (the "Creditors Committee"), the Official Bondholders Committee of Hillsborough Holdings Corporation, et al. (the "Bondholders Committee"), Apollo (as defined), Lehman Brothers Inc., and the unofficial Ad Hoc Committee of Pre-LBO Bondholders (collectively, the "Proponents") have filed the Creditors' Joint Plan of Reorganization dated as of August 1, 1994 (the "Creditors' Plan") in connection with the Debtors' pending Chapter 11 Cases in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Court"). The Proponents jointly submit this Disclosure Statement for Creditors' Plan dated as of August 1, 1994 (together with all attachments and exhibits hereto, the "Disclosure Statement") pursuant to Section 1125 of Title 11 of the United States Code, 11 U.S.C. Section 101, et seq. (the "Code") in connection with the solicitation of acceptances of the Creditors' Plan from the Holders of impaired Classes of Claims and Interests and the hearing related to confirmation of the Creditors' Plan scheduled to commence on October 17, 1994 and to continue day to day until concluded, and the initial confirmation hearing status conference scheduled for November 16, 1994 and any adjournment thereof. By order of the Court dated August 2, 1994, the Disclosure Statement has been approved as containing "adequate information" for a creditor of one or more of the Debtors within the meaning of Section 101(10) of the Code (a "Creditor") and a Holder of Interests in any of the Debtors in accordance with Section 1125(b) of the Code. The treatment provided in the Creditors' Plan is supported by the following creditor constituencies in the Chapter 11 Cases: (i) Chemical Bank and Bankers Trust Company, the co-agents for the Revolving Credit Banks and the Working Capital Banks (together, the "Bank Agents") (the Bank Agents have also recommended the treatment provided in the Debtors' Plan); (ii) the Creditors Committee; (iii) the Bondholders Committee, which consists of The Acacia Mutual Life Insurance Company, General Electric Investment Corporation, Apollo and Lehman Brothers Inc., each as voting members, and The Bank of New York, Barnett Banks Trust Company, N.A., Mellon Bank, N.A. and IBJ Schroeder Bank & Trust Company, each as non-voting, ex officio members in their capacity as indenture trustees; (iv) the unofficial Ad Hoc Committee of Pre-LBO Bondholders, which consists of 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 in their capacity as indenture trustees; (v) Apollo and Lehman Brothers Inc. (collectively, the "Bondholder Proponents"), the two largest holders of Subordinated Note Claims, which collectively hold approximately $428 million principal amount of the approximately $1,023 million in principal amount of Subordinated Note Claims; (vi) the holders of more than 2/3 outstanding principal amount of Pre-LBO Debenture Claims (who are signatories to the Pre-LBO Bondholders Settlement Agreement); (vii) the holders of over 75% outstanding principal amount of Series B & C Senior Note Claims (as evidenced by letters of direction furnished to the Series B & C Senior Note Trustee); and (viii) the Series B & C Senior Note Trustee. The Proponents believe that these Holders and representatives represent the vast majority of creditors and Claims in the Chapter 11 Cases. In addition to the support of the Proponents and the vast majority of the creditor constituencies, the Bank Agents have agreed that they will recommend to the Holders of Revolving Credit Bank Claims and Working Capital Bank Claims that they accept the treatment provided for such Claims under the Creditors' Plan. The Proponents believe that the Creditors' Plan would promptly and finally resolve all asbestos-related claims against the Debtors pursuant to the settlement agreed to in principle on December 9, 1993 and embodied in the definitive Veil Piercing Settlement Agreement entered into on April 18, 1994 (the "Veil Piercing Settlement Agreement"). For a description of the Veil Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement"; for a description of the Court's decision in the asbestos-related, veil piercing litigation, see "INTRODUCTION--Litigation of Veil Piercing Proceedings." As discussed below, the asbestos-related claims are the primary reason that the Debtors sought Chapter 11 relief. Unlike the other plans filed in the Chapter 11 Cases, the Creditors' Plan is the only plan that is capable of confirmation and consummation in the near term--as early as the end of calendar year 1994. All other plans depend on either (i) a final litigated resolution of these cases, which, because of the appellate process, will prolong these cases for years to come, or (ii) an unspecified settlement to be reached on unspecified terms at an unspecified date. The Creditors' Plan is conditioned on the Court's approval of the Veil Piercing Settlement Agreement. If such approval is not obtained the Creditors' Plan cannot be confirmed in its present form. THE PROPONENTS STRONGLY URGE YOU TO VOTE IN FAVOR OF THE CREDITORS' PLAN AND AGAINST THE DEBTORS' JOINT PLAN OF REORGANIZATION (THE "DEBTORS' PLAN"), FOR THE FOLLOWING PRINCIPAL REASONS: The Creditors' Plan pays in full (including post-petition interest) all Secured Claims. The Creditors' Plan pays in full (including the rate of post-petition interest agreed to by the Creditors Committee) all general unsecured Claims, including trade creditor claims. The Creditors' Plan envisions the payment in full of all pre-Filing Date principal and interest on Subordinated Note Claims. The Proponents believe that the Creditors' Plan provides favorable and the earliest possible recoveries to Holders of Claims. The Creditors' Plan is the only filed plan that resolves, through an existing settlement, the asbestos-related veil piercing litigation (as defined in the Creditors' Plan, the "Veil Piercing Proceedings") that forced the Debtors into bankruptcy over four years ago, and is therefore the only filed plan that, by its terms, can be confirmed and consummated in calendar 1994. Approval of the Veil Piercing Settlement Agreement is a condition to confirmation of the Creditors' Plan. See "OVERVIEW OF THE CREDITORS' PLAN--Conditions Precedent." The Veil Piercing Settlement Agreement entered into in connection with the Creditors' Plan provides the stockholders and management of Walter Industries with the opportunity to receive certain releases, provided that certain conditions are met. For a discussion regarding the conditions imposed on such releases, see "OVERVIEW OF THE CREDITORS' PLAN--Releases--Releases by Holders of Claims." See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." The Creditors' Plan is the only filed plan that consensually resolves the intercreditor issues relating to the 1987 leveraged buyout. The Proponents believe that the Creditors' Plan is more desirable than the Debtors' Plan because, among other things: (i) Consummation of the Debtors' Plan depends on either (a) the final litigated resolution, in favor of the Debtors, of the Veil Piercing Proceedings, including all appeals, which the Proponents believe are not expected to be completed for years, or (b) a settlement of the asbestos-related claims that is satisfactory to the Debtors and that is consistent with the other terms of the Debtors' Plan; (ii) The Debtors' Plan subjects creditors to the risk of enormous loss--potentially in the billions of dollars--if the Debtors do not ultimately prevail in the Veil Piercing Proceedings, including prosecution of all appeals; and (iii) The Debtors' Plan offers creditors no return for the years of additional delay in receiving payment of their Claims while the Debtors litigate the appeal of the Declaratory Judgment Proceeding, and confers the benefits of litigation success on current shareholders. The Creditors' Plan will de-leverage Walter Industries' balance sheet and allow it to emerge from bankruptcy as a viable company with a strong future. The Creditors' Plan is the only filed plan that has the support of the Bondholders Committee, the Creditors Committee and the Ad Hoc Committee of Pre-LBO Bondholders. The Bank Agents and the Series B & C Senior Note Trustee support the treatment provided to their respective constituencies in the Creditors' Plan. The Debtors, senior management of the Debtors and the Debtors' largest shareholder support the Debtors' Plan. 2. Comparison of the Creditors' Plan With the Debtors' Plan The Creditors' Plan and the Debtors' Plan have certain significant points in common; for example, under each Plan the reorganized Debtors will continue to be managed by existing senior and operational management. However, in general, Creditors in Voting Classes have a choice between substantially different results and treatment under each Plan. The Proponents believe that the primary differences between the Creditors' Plan and the Debtors' Plan are set forth below. The Debtors and their controlling stockholder, KKR Associates, the record holder of 91.6% of the Hillsborough common stock (and which has sole voting power with respect to such stock) dispute the characterization, accuracy and significance of most of these differences. The Debtors have stated that KKR Associates holds such stock on behalf of beneficial owners comprised primarily of state pension plans, corporate pension plans, college endowments, insurance companies and commercial banks. Creditors' Plan Resolves by compromise and settlement all Veil Piercing Claims and potential asbestos claims against the Debtors. Avoids delay of appeals by asbestos litigants. Avoids risk of remand or reversal on appeal of April 18, 1994 decision in the Declaratory Judgment Proceeding. Debtors' Plan Unless settled on currently unspecified terms satisfactory to the Debtors, consummation of the Plan requires (a) continued litigation of appeals of April 18, 1994 decision in the Declaratory Judgment Proceeding until there is a final order favorable to the Debtors, and (b) further litigation to determine whether that decision in the Declaratory Judgment Proceeding binds all Veil Piercing Claimants and asbestos claimants against the Debtors, including persons who were not parties to the Declaratory Judgment Proceeding. Creditors' Plan Resolves by compromise and settlement intercreditor issues raised by 1987 LBO and subsequent Chapter 11 filings, including Fraudulent Conveyance Lawsuit against Banks, Series B & C Senior Noteholders and Senior Subordinated Noteholders, and provides a release of the foregoing Creditors. Debtors' Plan Does not resolve intercreditor issues raised by 1987 LBO, the Chapter 11 filings and the Fraudulent Conveyance Lawsuit, which does not depend on a veil piercing theory. Creditors' Plan Resolves by compromise and settlement the treatment of Series B & C Senior Note Claims. Debtors' Plan Plan supported only by Shareholders (KKR Associates), Debtors, Debtors' senior management and Bank Agents (who also support Creditors' Plan). Creditors' Plan Creditors' Plan supported by the Bondholders Committee, Creditors Committee and Ad Hoc Committee of Pre-LBO Bondholders; Bank Agents and Series B & C Senior Note Trustee support treatment provided to their respective constituencies under the Creditors' Plan. Debtors' Plan Plan cannot become effective until either (a) all appeals of veil piercing/asbestos litigation are finally resolved in the Debtors' favor, or (b) the veil piercing/asbestos litigation is resolved on terms satisfactory to the Debtors that are consistent with the other terms of the Debtors' Plan. Creditors' Plan Treatment of Series B & C Senior Note Claims (S-6) All summaries are qualified by the descriptions in Section II below and by the terms of the respective Plans. Allowed Claims include (i) post-petition interest at 13% simple (if paid in Cash) or 14% simple (if paid in New Senior Notes) from Filing Date to 6/30/94 and 14.625% simple thereafter and (ii) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, shares of Class B Common Stock having an aggregate New Common Stock Value Per Share of $37.5 million (if the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value). Payment is not subject to litigation delay and other risks inherent in the Debtors' Plan (the Proponents believe that a shareholder appeal of the Confirmation Order can be mooted). Debtors' Plan Treatment of Series B & C Senior Note Claims (S-6) Although allowed Claims include (i) post-petition interest at 13.0% simple if paid in cash, and 14.625% simple (14.5% simple for Series C) if paid in New Senior Notes from Filing Date to 6/30/94 and 14.625% simple thereafter, and (ii) an aggregate of 5% of the post-Effective Date common stock, the Proponents believe that there is no material difference in value between this facially higher recovery and the recovery under the Creditors' Plan, principally because the Debtors' Plan uses a higher enterprise value than the Creditors' Plan for purposes of allocating post-effective date common stock. In addition, the Proponents believe that the recovery under the Debtors' Plan is subject to the significant litigation delay and other risks in the Debtors' Plan (which requires either (a) final litigated resolution, favorable to the Debtors, of all asbestos-related, veil piercing claims or (b) settlement of such claims on terms acceptable to the Debtors that are consistent with the other terms of the Debtors' Plan). The Proponents amended their Plan on August 1, 1994 to provide the additional recovery described in the foregoing clause (ii) in response to a similar increase made by the Debtors after an emergency hearing held by the Court on July 28, 1994. Due to the last-minute timing of the Debtors' amendment, the Proponents were unable to complete all of the actions necessary for the Amended and Restated Veil Piercing Settlement Agreement to become effective by its terms within the time frame established by the Court for the mailing of plans and disclosure statements. Nevertheless, the Proponents expect that the Amended and Restated Veil Piercing Settlement Agreement will become effective by its terms in the near future. For a discussion of the conditions precedent to effectiveness of the Amended and Restated Veil Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." Creditors' Plan Treatment of Bank Claims (S-1 and S-2) Allowed Claims include (i) post-petition interest from Filing Date to 6/30/94 at prime + 1 1/2% (non-default contract rate), compounding quarterly on and after 11/1/92, plus 13% on accrued but unpaid post-Filing Date interest to extent not paid after 6/30/94, compounding quarterly until paid, and (ii) if the Amended and Restated Vail Piercing Settlement Agreement becomes effective by its terms , shares of Class B Common Stock having an aggregate New Common Stock Value Per Share of $37.5 million (if the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value). Payment is not subject to litigation delay and other risks inherent in the Debtors' Plan (the Proponents believe that a shareholder appeal of the Confirmation Order can be mooted). See footnote 5 above. Debtors' Plan Treatment of Bank Claims (S-1 and S-2) Although Debtors' Plan includes (i) post-petition interest at prime + 2 1/2%, compounding quarterly after Filing Date, and (ii) an aggregate of 5% of the post-Effective Date common stock, the Proponents believe that this higher recovery is subject to the significant litigation delay and other risks in the Debtors' Plan (which requires either (a) final litigated resolution, favorable to the Debtors, of all asbestos-related, veil piercing claims or (b) settlement of such claims on terms acceptable to the Debtors that are consistent with the other terms of the Debtors' Plan). Creditors' Plan Treatment of Other Unsecured Claims (U-3) Allowed Claims include post-petition interest at General Unsecured Interest Rate (generally 6 1/2% simple). Paid in Cash (a) 75% on Effective Date and (b) 25%, plus interest on that amount, 6 months after Effective Date. Debtors' Plan Treatment of Other Unsecured Claims (U-2). Allowed Claims do not include any post-petition interest. Paid in Cash as soon as practicable following Effective Date but no earlier than 10 Business Days following closing of Syndication Agreement. Creditors' Plan Treatment of Subordinated Note Claims (U-4 through U-6) Allowed Claims include post-petition interest (payable after all other Allowed Claims, including Veil Piercing Claims, are paid), if there is sufficient value to pay such post-petition interest and permitted by the Court. Based on the Negotiated Enterprise Value of $2.525 billion, however, the Proponents do not believe that post-petition interest will be paid under the Creditors' Plan. Debtors' Plan Treatment of Subordinated Note Claims (U-4 through U-6) Allowed Claims do not include any post-petition interest, irrespective of the going concern value of the Debtors. Paid in (a) hybrid mortgage-backed securities (Mid-State Homes New PIK Debentures and Mid-State Homes New Notes) (requiring no minimum ratings and valued at par as of the Effective Date by a qualified valuation expert selected by the Debtors) and (b) approximately 22% of all Common Stock. Creditors' Plan Paid in (a) Qualified Securities (requiring minimum ratings by a Rating Service and valued at par as of Effective Date by Lehman Brothers Inc. and a qualified valuation expert selected by Apollo), and (b) New Common Stock. Debtors' Plan Debtors retain option on Effective Date to substitute Mid-State Homes New Notes for Common Stock otherwise to be received by Subordinated Noteholders. Current shareholders (including KKR Associates and senior management) are not required to accept substitution of same debt securities for Common Stock to be retained by current shareholders. The Proponents believe that the option therefore creates uncertainty for holders of Subordinated Note Claims and may increase the value of the Common Stock to be retained by the current shareholders. Creditors' Plan Treatment of Old Common Stock Interests Will receive New Common Stock after all Creditors are paid in full to the extent permitted by law, if there is sufficient value to support such payment. Based upon the Negotiated Enterprise Value, the Proponents do not anticipate that there will be any such distributions of New Common Stock to Holders of Old Common Stock Interests. Will receive Equity Call Option to purchase New Common Stock at New Common Stock Value Per Share. Will receive a release if not a Settling Equityholder only if holds an Allowed Indemnity Claim. Proponents believe that Debtors' pre-Filing Date indemnity of current shareholders is invalid as a matter of law and/or as against public policy. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, Holders of Old Common Stock Interests still eligible to become Settling Equityholders will receive pro rata portion of $75 million of New Common Stock under Veil Piercing Settlement Agreement from Veil Piercing Claimants if such Holders become Settling Equityholders. Debtors' Plan Treatment of Old Common Stock Interests Will retain approximately 68% of all Common Stock (68% is valued by Debtors to be worth approximately $623 million as of 5/31/95). Proponents believe that value will grow over time until Effective Date, particularly given absence of post-petition interest to unsecured Creditors. KKR will seek $550,000 annual "consulting fee" for each year beginning with the Filing Date until Effective Date and will continue fee arrangement post-Effective Date. Will receive a release whether or not they provide any consideration therefor. The Proponents believe that the Debtors' Plan imposes the cost and risk of resolving the veil piercing, asbestos-related litigation and issues on the unsecured trade creditors and bondholders while it confers the benefits of litigation success over the asbestos victims primarily on the current shareholders (including KKR Associates and senior management). The Proponents believe that the successful fully litigated resolution of the veil piercing, asbestos-related issues--required before there can be any distributions to Creditors under the Debtors' Plan--will not occur for years, if ever. On the other hand, the Proponents believe that distributions to Creditors will be made significantly earlier under the Creditors' Plan because the only opponent of the Creditors' Plan appears to be KKR Associates, and the Proponents believe that they will be able to consummate the Creditors' Plan despite an appeal of the Confirmation order by KKR Associates. For those reasons, the Proponents believe that the Creditors' Plan provides significantly better treatment for unsecured creditors and bondholders than the Debtors' Plan; under the terms of the Debtors' Plan, unsecured creditors and bondholders will not receive any compensation in the form of post-petition interest or otherwise for the delayed conclusion of all veil piercing appeals and related litigation. Moreover, under the Debtors' litigation strategy, if the Debtors ultimately lose on the merits of the veil piercing, asbestos-related issues, the Proponents believe that in excess of $10 billion of additional claims could be added to the Debtors' liabilities and, as a result, Creditors' recoveries would be reduced to a small fraction of their pre-Filing Date claims. The Proponents believe that the avoidance of these risks means that the Creditors' Plan also is superior to the Debtors' Plan from the perspective of Secured Creditors. The Proponents believe that any stay of the Confirmation Order would require a substantial bond. The Debtors' Plan substantially enhances the value only of the Old Common Stock, most of which is held by KKR Associates, in the event that the Debtors finally prevail on the veil piercing, asbestos-related issues, by depriving unsecured creditors and bondholders of post-petition interest during the period required to fully litigate those issues. The Debtors' Plan also confers on the current shareholders (including KKR Associates and senior management) approximately 68% of the Old Common Stock that would be outstanding after the Effective Date. The Debtors estimate that at 5/31/95, without assuming any growth thereafter in the Debtors' businesses, the Old Common Stock to be retained by the current shareholders under the Debtors' Plan is worth approximately $623 million. The Debtors and KKR Associates, their controlling shareholder, caused the incurrence of over a billion dollars of unsecured debt when they were aware of the pendency of asbestos-related lawsuits against Celotex, which was, immediately prior to the LBO, a subsidiary of Jim Walter Corporation. The Debtors will be able to pay both that debt and post-petition interest accrued on it if they ultimately prevail in the veil piercing litigation, but they have chosen to file a Plan that does not make such payments. The Proponents believe that by failing to compensate unsecured creditors for the delay in achieving a successful fully litigated resolution of the asbestos issues, the Debtors' Plan is proposed in bad faith to confer a windfall on the current shareholders (including KKR Associates and senior management). Faced with, in effect, the alternative of a forced $1 billion non-interest-bearing loan without a fixed term, payable only if and when all the asbestos-related issues are finally litigated in the Debtors' favor, the Proponents believe that the prompt settlement of the veil piercing, asbestos-related issues under the Creditors' Plan is fair, without even considering the risks to Creditors raised by continued litigation of the asbestos-related issues. In the final analysis, therefore, the Creditors' Plan is based on the proposition that the Creditors should not be compelled to wait years for only an uncertain distribution that they can readily obtain or exceed now with certainty, and that it is inequitable for the Debtors and the current shareholders to retain value when they can pay, but refuse to pay, validly incurred obligations. 3. Asbestos/Veil Piercing Settlement On April 18, 1994, the Court rendered its decision in the Debtors' adversary proceedings to obtain a declaratory judgment that the corporate veil between Old Walter Industries (a predecessor of Walter Industries) and The Celotex Corporation could not be pierced (the "Declaratory Judgment Proceeding"). As expected, the Court ruled in favor of the Debtors. See "INTRODUCTION--Litigation of Veil Piercing Proceedings." The Proponents believe that, regardless of the Court's decision in the Declaratory Judgment Proceeding, the Veil Piercing Settlement Agreement is critical to allowing the Debtors to successfully emerge from Chapter 11. Assuming the non-default contract rate and the applicable judgment rate in the absence of a contract rate, lost opportunity cost in respect of unsecured claims grows by approximately $120 million a year, or by more than $10 million a month. On October 12, 1990, The Celotex Corporation and one of its affiliates filed petitions for reorganization under Chapter 11 of the Code with the Court (the "Celotex Chapter 11 Proceeding"). The Celotex Corporation is a former subsidiary of Original Jim Walter. The Proponents have always anticipated that, absent a settlement, given the enormous amounts involved, the Court's decision (whether in favor of the Debtors or the Veil Piercing Claimants) would be appealed by one or more parties to the Declaratory Judgment Proceeding until all avenues of appeal have been exhausted. This is expected to include appeals to the U.S. District Court for the Middle District of Florida, the 11th Circuit Court of Appeals and the United States Supreme Court, as well as possible remands and/or retrials, which could result in additional discovery, another trial and another round of appeals to the same higher courts. Counsel to the Veil Piercing Claimants have filed a timely notice of appeal of the Court's decision, and have raised, among other issues on appeal, issues relating to (a) choice of law, (b) the right to a jury trial, (c) accountant-client privilege and waiver, (d) attorney-client privilege and waiver, (e) the applicable standards for veil piercing, and (f) corollary issues such as a shareholder's obligations to creditors of an insolvent debtor. Given the complexity of these issues and the delays inherent in the judicial system, the Proponents expect that the appellate process will not be completed for many years, even if the Veil Piercing Claimants are not successful in any of their appeals. Even the Court has noted the significant delay of the appellate process: THE COURT: Ladies and gentlemen, Mr. Crames, I believe I have stated it several times and--I cannot for the life of me see how anyone could possibly file a meaningful Disclosure Statement and a meaningful Plan until the asbestos litigation is resolved by stipulation; and if not by stipulation, litigation. And this Court is the lowest on the totem pole, and I can assure you whatever I decide after December, if that is going to be tried in December, that's going to be appealed and going to go to District Court. And knowing the speed over there, that whatever and whenever that is going to be decided affirming me or reversing me, that is going to go to the Court of Appeals. And whenever they go the Court of Appeals and there's going to be a decision by the Court of Appeals, there's going to be a request for hearing en banc--or at least first step, Motion for Rehearing. And then a hearing en banc for the entire panel. And then whatever the outcome is, there will be a Petition for Cert and that would be the term of the Supreme Court in 1996, or thereabouts, and so going to be granted or denied. And that will end the litigation. (July 14, 1993 Trans. 23:6-24:2.) Although the Proponents of the Creditors' Plan have always believed that the Debtors will ultimately prevail in the Veil Piercing Proceedings, the settlement represents their collective judgment that the uncertainty and cost of protracted litigation far outweigh the very substantial cost of the settlement. The settlement was negotiated by the Bondholder Proponents, which, as the two largest holders of Subordinated Note Claims (approximately $428 million principal amount), will bear the largest burden of a litigation loss or extended delay in finally resolving the Veil Piercing Claims. The settlement represents a reasonable assessment of (i) the uncertainty inherent in the litigation, i.e., the possibility of an ultimately adverse judgment against the Debtors, and (ii) the probability that distributions to creditors will be delayed for additional years pending completion of the appellate process. In negotiating the settlement, the Bondholder Proponents took into consideration the risk to creditors of losing billions of dollars if the asbestos claimants were to prevail, as well as the time and expense (in terms of the time value of money and otherwise) of the completion of the lengthy appellate process. In this connection, counsel to the Proponents read and analyzed thousands of pages of transcripts and documents and have analyzed certain legal issues expected to be raised on appeal. The Debtors assert that this Disclosure Statement allegedly misleadingly contends that, under the Debtors' Plan, the alleged asbestos-related claims will "never be promptly resolved." The Debtors further assert that the Debtors have already taken steps to achieve "finality" with respect to alleged asbestos related liabilities, not only as to parties to the Veil Piercing Proceedings but also with respect to all creditors of Celotex. The Proponents believe that the foregoing factors, in and of themselves, demonstrate that the settlement is fair and equitable. In addition to these factors, however, it is important to note that, notwithstanding the Debtors' assertions to the contrary, all or substantially all of the value being used to settle the Veil Piercing Claims is, in effect, coming from distributions to which Subordinated Noteholders would otherwise be legally entitled on account of post-petition interest accrued during the Debtors' more than four-year old bankruptcy proceedings. Such an award of post-petition interest is proper under the Code and existing case law where, as here, the Debtors' estates would have remaining value, after satisfaction of all Claims (other than post-petition interest on Subordinated Note Claims), if it is assumed that the Veil Piercing Claims have a value of zero. The Proponents believe that it would not be in good faith or fair and equitable to delay distributions until a final litigated result is obtained with respect to the Veil Piercing-Related Issues, and then not pay creditors post-petition interest on their Claims. Moreover, notwithstanding Debtors' assertions to the contrary, neither approval of the settlement nor confirmation of the Creditors' Plan is conditioned upon a determination by the Court that Subordinated Noteholders are legally entitled to post-petition interest on account of their Claims. The Proponents believe that the settlement satisfies the fair and equitable test independent of the Subordinated Noteholders' legal right to receive post-petition interest on account of their Claims. The Creditors' Plan expressly provides that the Allowed Amount of Subordinated Note Claims includes all pre-petition amounts as well as post-petition interest, but only to the extent that the payment of post-petition interest is permitted by law and to the extent available after payment of all other Claims under the Creditors' Plan. Based upon the Negotiated Enterprise Value and the estimated amount of Allowed Claims, including Veil Piercing Claims pursuant to the Veil Piercing Settlement Agreement, the Proponents do not expect that any value will remain for payment of post-petition interest on account of Subordinated Note Claims. Therefore, not only does the Creditors' Plan envision that no post-petition interest will be paid on account of Subordinated Note Claims, in the event that there is any residual value in the Debtors' estates after payment of all other Allowed Claims, post-petition interest is payable on account of Subordinated Note Claims only to the extent permitted by law. Thus, although the Creditors' Plan is flexible enough to accommodate any finding by the Court with respect to Subordinated Noteholders' right to post-petition interest, because the Proponents do not believe that there will be any residual value in the Debtors' estates after payment of all other Allowed Claims, it will not be necessary for the Court to rule on the merits of Subordinated Noteholders' right to post-petition interest in order to confirm the Creditors' Plan. The Proponents believe that the Veil Piercing Settlement is reasonable and is in the best interests of all creditors and the Debtors. Nothing in the Court's decision in the Declaratory Judgment Proceeding in any way prevents or precludes the settlement of the Veil Piercing Claims under the Veil Piercing Settlement Agreement. 4. Background to Filing of Creditors' Plan The commencement of the Debtors' Chapter 11 Cases resulted from a sequence of events stemming primarily from an inability of Hillsborough's interest reset advisors to reset interest rates on approximately $624 million of outstanding debt on which interest rates were scheduled to be reset effective January 2, 1990, based in part on uncertainties arising from the pending Veil Piercing Proceedings. In that litigation, thousands of persons claiming asbestos-related damages sought to pierce the corporate veil between The Celotex Corporation, against which their claims could be asserted, and Original Jim Walter, which relied on its corporate separateness as a defense to such claims. The Debtors have been unable to resolve the claims underlying these litigations during the more than four years since the Debtors commenced the Chapter 11 Cases. A trial on the merits of the Declaratory Judgment Proceeding was held during the week of December 13, 1993. On April 18, 1994, the Court rendered a decision in this proceeding in favor of the Debtors. See "INTRODUCTION--Litigation of Veil Piercing Proceedings." Following the decision, counsel to the Veil Piercing Claimants have stated that they will appeal the decision and, unless a settlement is reached, the Debtors' ability to emerge from Chapter 11 will be delayed for a further number of years, whether or not the Debtors win all issues on appeal. The trial record presents a number of complex legal and factual issues, and there can be no assurance that the Debtors will prevail on some or all of these issues. Even if the Debtors were to prevail on all appealable legal and factual issues, additional uncertainties will remain, such as whether the trial, involving only a few thousand specified asbestos claimants, binds all asbestos claimants, and whether the economic premises underlying the Debtors' Plan will still apply when the appellate process is finally completed. From February through October 1993, the Bondholder Proponents engaged in frequent and protracted negotiations with representatives of KKR Associates and representatives of Walter Industries in an effort to reach an agreement, inter alia, on the terms of a plan of reorganization and the financial parameters for settling the asbestos litigation that could be supported by the Bondholder Proponents, and that would provide the basis for support by other Holders of Claims. Despite these negotiations, an agreement was not reached with KKR Associates. Thereafter, commencing in October 1993, the Bondholder Proponents actively began to develop the Creditors' Plan, as an alternative to the Debtors' Plan, and entered into the negotiation of a settlement of the Veil Piercing Proceedings and the Veil Piercing-Related Issues with representatives of the Holders of a significant number of the Holders of asserted Veil Piercing Claims. These negotiations resulted in the execution of an agreement in principle dated December 9, 1993, setting forth the terms of the settlement, and the execution of the definitive Veil Piercing Settlement Agreement in April 1994 (a copy of which is attached as Exhibit 3A to the Creditors' Plan). Over thirty-five law firms, representing the vast majority of Veil Piercing Claimants, have agreed to be bound by the Veil Piercing Settlement Agreement. On December 16, 1993, the Bondholder Proponents, together with the other Proponents (which at that time did not include the Ad Hoc Committee of Pre-LBO Bondholders), filed a plan of reorganization (the "Original Creditors' Plan") with the Court. On April 20, 1994 the Proponents filed the First Amendment to the Original Creditors' Plan, on May 11, 1994, the Proponents filed the Second Amendment to the Original Creditors' Plan, on May 17, 1994, the Proponents filed the Third Amendment to the Original Creditors' Plan and on June 9, 1994 the Proponents filed the Creditors' Plan. Support for the Creditors' Plan is expressly provided for in four critical agreements, described below. Under the terms of the Veil Piercing Settlement Agreement, the Creditors' Plan is supported by the attorneys representing the vast majority of the persons asserting asbestos-related claims, the Official Committees appointed in the Celotex Chapter 11 Proceeding to represent the interests of asbestos-related claimants and The Celotex Corporation. The support of the Ad Hoc Committee of Pre-LBO Bondholders is provided for in the settlement agreement reached between the Committee and the Bondholder Proponents as of March 23, 1994 (the "Pre-LBO Bondholders Settlement Agreement"), which settles certain litigation and intercreditor issues relating to the alleged fraudulent conveyances by the Debtors in connection with the 1987 leveraged buyout of Hillsborough. A copy of the Pre-LBO Bondholders Settlement Agreement is attached as Exhibit 3B to the Creditors' Plan. On April 18, 1994, an agreement was reached between the Proponents and the Bank Agents, providing for, among other things, the recommendation by the Bank Agents to the Holders of Bank Claims of the treatment of Bank Claims in the Creditors' Plan, and the filing of a motion by the Bank Agents to defer the Court's consideration of the plan of reorganization filed by the Bank Agents in December 1993 (the "Bank Agents Agreement"). This motion has been filed and granted by the Court. A copy of the Bank Agents Agreement is attached as Exhibit XI to the Disclosure Statement. Finally, on May 19, 1994, the Series B & C Senior Note Trustee reached an agreement with the Proponents regarding the rate of post-petition interest to be paid on account of the Series B & C Senior Notes Claims and the form of consideration (Cash and/or New Senior Notes) to be used to satisfy such Claims under the Creditors' Plan. This agreement is supported by the Holders of a substantial amount of Series B & C Senior Note Claims. The terms of this agreement have been incorporated into the Creditors' Plan. At the request of the Series B & C Senior Note Trustee, the Court has agreed to defer consideration of the plan of reorganization filed by the Series B & C Senior Note Trustee in December 1993 and amended in April 1994. The Proponents believe that implementation of the settlements contained in the Creditors' Plan and confirmation of the Creditors' Plan would resolve protracted litigation and enable the Debtors to emerge from Chapter 11 in the near future. The Proponents further believe that implementation of the settlements contained in the Creditors' Plan and confirmation of the Creditors' Plan do not require confirmation of a Chapter 11 plan for Celotex. 5. Summary Accompanying the Disclosure Statement are copies of: a. the Creditors' Plan which is included as Exhibit I hereto; b. the notice fixing (i) the time for filing of acceptances or rejections of the Creditors' Plan, (ii) the date and time of the hearing to consider confirmation of the Creditors' Plan and related matters and (iii) the time for filing objections to Confirmation (as defined in Section II.N.(d).) of the Creditors' Plan (the "Confirmation Hearing Notice"); and c. in the case of Holders of Class S-1 Claims, Class S-2 Claims, Class S-6 Claims, Class U-3 Claims, Class U-4 Claims, Class U-5 Claims, Class U-6 Claims and Class E-1 Interests (the "Voting Classes"), one or more ballots for acceptance or rejection of the Creditors' Plan (a "Ballot"). All Ballots provide for the Holders to elect to grant certain releases, and on certain Ballots, Holders are also given the opportunity to make certain elections, described in more detail below. Pursuant to the provisions of the Code, only Classes (as defined in the Creditors' Plan) of Claims and Interests which are "impaired" under the Code by the terms and provisions of the Creditors' Plan are entitled to vote to accept or reject the Creditors' Plan. Classes E-2 and SE-2 do not receive or retain any property under the Creditors' Plan, and are deemed to have rejected the Creditors' Plan. For purposes of the Creditors' Plan, only the Voting Classes and Classes E-2 and SE-2 are deemed to be impaired. ACCORDINGLY, A BALLOT FOR ACCEPTANCE OR REJECTION OF THE CREDITORS' PLAN IS BEING PROVIDED ONLY TO MEMBERS OF THE VOTING CLASSES. The Holder of any Claim or Interest in a Voting Class should read the Disclosure Statement, together with the exhibits hereto, including the Creditors' Plan, in their entirety. After carefully reviewing the Disclosure Statement, please indicate your vote with respect to the Creditors' Plan on the enclosed Ballot and return it in the envelope provided. If you have an impaired Claim or Interest in more than one Class, you will receive a separate Ballot for each such Claim or Interest. See "INTRODUCTION--General-- Voting Instructions." PLEASE VOTE EACH BALLOT YOU RECEIVE. Ballot Elections--Acceptance or Rejection of Plan of Reorganization The Ballot will permit members of Voting Classes to accept or reject the Creditors' Plan, and to indicate their preference between the Creditors' Plan and the Debtors' Plan. Creditors may vote in favor of both plans, and still indicate a preference between the Creditors' Plan and the Debtors' Plan. Other Ballot Elections Other Unsecured Claim Election. Holders of Class U-3 Allowed Claims are requested to designate on the Ballots sent to them the General Unsecured Interest Rate to apply to Class U-2 Allowed Claims and Class U-3 Allowed Claims subsequent to the Confirmation Date. Subordinated Note Claim Election. The voting Ballots for the Holders of Class U-4, U-5 and U-6 Allowed Claims contain an election form (the "Subordinated Note Claim Election Form"), as approved by the Court, that will allow such Holders to elect to receive all or any part of their Claim in Qualified Securities (the "Subordinated Note Claim Election"). Any part of such Claim that is not satisfied by Qualified Securities will be satisfied by Class A Common Stock, in the case of Classes U-4 and U-5, and Class B Common Stock, in the case of Class U-6. Series B & C Senior Note Claim Election. The voting Ballot for the Holders of Allowed Series B & C Senior Note Claims contains an election form (the "Series B & C Senior Note Claim Election Form"), as approved by the Court, that will allow such Holders to elect to receive all, but not part, of their Series B & C Senior Note Claim in the form of New Senior Notes. If the election to receive all of such Claim in New Senior Notes is not made, then the Holder will receive Cash, New Senior Notes or a combination thereof in respect of such Holder's Series B & C Senior Note Claim, with the relative amount of Cash and/or New Senior Notes to be decided in the sole discretion of the New Board of Walter Industries (or, if such New Board has not yet been appointed, by the Bondholders Committee). Equity Call Option Election. The voting Ballot for Holders of Allowed Old Common Stock Interests as of the date on which the order approving the Disclosure Statement is entered contains an election form (the "Equity Call Option Election Form"), as approved by the Court, that will allow eligible Holders of Class E-1 Allowed Interests (i.e., Holders that do not transfer their Class E-1 Allowed Interests) to exercise their Equity Call Options. In the event that the Effective Date does not, or is not anticipated to, occur until after December 31, 1994, the previously completed election forms for the Subordinated Note Claim Election, the Series B & C Senior Note Claim Election and the Equity Call Option Election shall be disregarded, such elections shall be reconducted and the applicable election forms shall be sent to Holders as of a recent date selected by the Bondholders Committee. Such Holders will be given thirty (30) days to complete and return the election forms, with such 30-day period expiring not more than forty-five (45) days prior to the Effective Date. Release. The general release set forth in Section 6.1 of the Creditors' Plan is deemed by the Creditors' Plan to be granted by a Holder upon receipt of a distribution under the Creditors' Plan by that Holder or the acceptance of the Creditors' Plan by the Holder's Class of Claims. This release will be valid and enforceable to the extent permitted by law, including res judicata. In addition, each Ballot contains the full text of the release and a space for the Holder to specifically agree to grant the release. None of the elections need be made for you to vote to accept or reject the Creditors' Plan, and a Holder need not vote to accept the Creditors' Plan in order to make any of the elections. The importance and effect of these elections are more fully described below. For a summary description of the treatment of each Class of Claims and Interests and the estimated value of distributions to each Class of Claims and Interests provided for in the Creditors' Plan, see "OVERVIEW OF THE CREDITORS' PLAN--Summary of Claims and Class Treatment Under the Creditors' Plan." The Court has scheduled a hearing to commence on October 17, 1994 and continuing day to day until concluded, to consider (i) the issues raised by the Debtors in Adversary Proceeding No. 94-278 (as defined herein, the "New DJ Action"), 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; (ii) the application by the Proponents seeking approval of the Veil Piercing Settlement Agreement, which, among other things, provides for a settlement of all Veil Piercing Claims including, among others, all claims asserted in the Declaratory Judgment Proceeding, and any related application or response filed by any party-in-interest thereto; and (iii) any properly asserted challenges or objections to the vote of any party with respect to the Creditors' Plan. The Court has further scheduled an initial hearing to consider Confirmation of the Creditors' Plan and the Debtors' Plan for November 16, 1994, at 1:30 P.M., at the United States Bankruptcy Court, Middle District of Florida, Tampa Division, 4921 Memorial Highway, Tampa, Florida 33634 (the "Confirmation Hearing"), at which time the Court will conduct only a status conference to schedule the date on which the Confirmation Hearing will continue, and to consider other issues appropriate for consideration at such status conference. The Court has directed that objections, if any, to Confirmation of the Creditors' Plan be served and filed on or before November 10, 1994 in the manner described in the Confirmation Hearing Notice accompanying the Disclosure Statement. The date of the Confirmation Hearing may be adjourned from time to time in open Court without further notice. 6. Voting Instructions The Ballot(s) have been specifically designed for the purpose of soliciting votes on the Creditors' Plan from the Voting Classes. Accordingly, in voting for or against the Creditors' Plan, please use only the Ballot(s) sent to you with the Disclosure Statement. Please complete and sign your original Ballot(s) (copies will not be accepted) and return it in the enclosed envelope so that it is received on or before the Voting Deadline. Banks, brokers and other nominees will be requested to transmit a Ballot with a copy of the Disclosure Statement to each beneficial owner of the Debtors' securities and other indebtedness held in the names of such nominees. Instructions for returning Ballots will also be requested to be sent to beneficial owners by nominees. If you have a question concerning the voting procedure for beneficial owners, contact your bank or broker or the balloting agent, Donlin, Recano & Company, Inc., at 1-800-433-3868. Do not return your securities with your Ballot(s). The Proponents and the Debtors have been authorized by the Court to retain Donlin, Recano & Company, Inc. as balloting agent to mail, receive and tabulate Ballots and materials relating thereto. Instructions for the return of Ballots to the balloting agent accompany the Ballots. The record date for determining which Holders of Claims and Interests are entitled to vote on the Creditors' Plan is July 13, 1994 (the "Voting Record Date"). THE INDENTURE TRUSTEES FOR THE DEBTORS' DEBT SECURITIES WILL NOT VOTE ON BEHALF OF THE HOLDERS OF THESE SECURITIES AND CONSEQUENTLY EACH HOLDER MUST SUBMIT ITS OWN BALLOT(S). DO NOT RETURN YOUR SECURITIES WITH YOUR BALLOT(S). Ballots are being sent to the known Holders of all Claims and Interests which are impaired (including fully or partially Disputed Claims (as defined in the Creditors' Plan) to which objections have been or will be filed). Under the Code only Holders of Allowed Claims and Interests whose Claims or Interests are "impaired" will be entitled to vote on the Creditors' Plan. The Code also provides that the Court may temporarily allow a Disputed Claim for purposes of voting on the Creditors' Plan. If a Holder of a Claim to which an objection has been filed wishes to vote on the Plan, such Holder must file a motion with the Court pursuant to Rule 3018(a) of the Federal Rules of Bankruptcy Procedure requesting the Court to temporarily allow such Claim for the purpose of accepting or rejecting the Plan. If the Court temporarily allows such Claim, the Court will fix the Allowed Amount of such Claim only for purposes of accepting or rejecting the Plan. Such motion must be filed with the Court on or before (i) September 14, 1994 if such Claim is a Disputed Claim on or prior to the Voting Record Date, or (ii) thirty (30) days after service of the Debtors' objection to such Claim, if the Claim is objected to after the Voting Record Date but prior to the Voting Deadline. If a Creditor has an Allowed Claim against more than one of the Debtors, or in more than one Class, such Creditor may receive multiple Ballots. IF YOU RECEIVE MORE THAN ONE BALLOT YOU SHOULD ASSUME THAT EACH BALLOT IS FOR A SEPARATE CLAIM OR INTEREST AND SHOULD COMPLETE AND RETURN EACH OF THE BALLOTS YOU RECEIVE. IF A BALLOT IS DAMAGED OR LOST OR IF YOU HAVE ANY QUESTIONS CONCERNING VOTING PROCEDURES, YOU MAY CONTACT DONLIN, RECANO & COMPANY, INC. AT 1-800-433-3868. IN ORDER FOR YOUR BALLOT TO BE COUNTED, IT MUST BE COMPLETED AS SET FORTH ABOVE, MAILED, AND RECEIVED AT THE FOLLOWING ADDRESS NO LATER THAN SEPTEMBER 23, 1994 BY 5:00 P.M. EASTERN TIME (THE "VOTING DEADLINE"): 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 1206 New York, NY 10016 PLEASE NOTE THAT BENEFICIAL OWNERS WHOSE SECURITIES OR OTHER INDEBTEDNESS ARE HELD BY A NOMINEE OR OTHER AGENT MUST ENSURE THAT THEIR COMPLETED BALLOTS ARE RECEIVED BY SUCH NOMINEE OR OTHER AGENT NO LATER THAN SEPTEMBER 19, 1994 AT 5:00 P.M. EASTERN TIME. Pursuant to Section 3.05 of the Rules of the United States Bankruptcy Court for the Middle District of Florida, any Ballots received which do not indicate either an acceptance or rejection of the Creditors' Plan or which indicate both an acceptance and rejection of the Creditors' Plan will not be counted as either an acceptance or a rejection of the Creditors' Plan. The Court has directed that objections or challenges, if any, to the vote of any party with respect to the Creditor's Plan, must be in writing and must be filed with the Court and personally served upon the parties identified in the order approving the Disclosure Statement dated August 2, 1994 so that they are received by such parties on or before October 7, 1994. 7. Confirmation Hearing The Code requires the Court to hold a hearing on Confirmation of the Creditors' Plan after Ballots have been cast. The initial Confirmation Hearing has been scheduled for November 16, 1994 at 1:30 P.M., Eastern Time, at the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, 4921 Memorial Highway, Tampa, Florida 33634. At the Initial Confirmation Hearing, the Court will conduct only a status conference to schedule the date on which the Confirmation Hearing will continue, and to consider other issues appropriate for consideration at such status conference. 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 Creditors' Plan has been accepted by the requisite majorities of each Voting Class, (ii) hear and determine any objections to Confirmation of the Creditors' Plan, (iii) determine whether the Creditors' Plan meets the requirements of the Code and has been proposed in good faith, (iv) determine that conditions to Confirmation have occurred, have been satisfied or have been waived, (v) confirm or deny Confirmation of the Creditors' Plan, (vi) determine the results of the Other Unsecured Claim Election, the Subordinated Note Claim Election, the Series B & C Senior Note Claim Election and the Equity Call Option Election. Objections to Confirmation of the Creditors' Plan, if any, must be in writing and must be filed with the Court, and personally served upon the parties identified in the order approving the Disclosure Statement dated August 2, 1994 so that they are received by such parties on or before November 10, 1994. Objections to Confirmation of the Creditors' Plan are governed by Bankruptcy Rule 9014 and Local Bankruptcy Rule 3.05. B. Acceptance or Rejection of the Creditors' Plan As a Holder of a Claim or Interest, your vote on the Creditors' Plan is important. In order for the Creditors' Plan to be accepted and thereafter confirmed by the Court without resort to the "cram-down" provisions of the Code, votes representing at least two-thirds in amount and more than one-half in number of Allowed Claims under the Creditors' Plan of each Voting Class that are voted must be cast for the acceptance of the Creditors' Plan. The Proponents are soliciting acceptances from Holders of Claims in Class S-1, Class S-2, Class S-6, Class U-3, Class U-4, Class U-5 and Class U-6, and Holders of Interests in Class E-1. If an impaired Class of Claims or Interests votes to reject the Creditors' Plan (a "Rejecting Class"), the Proponents have the right to seek confirmation of the Creditors' Plan under the "cram-down" provisions of Section 1129(b) of the Code. Because Classes E-2 and SE-2 are deemed to have rejected the Creditors' Plan, since the Holders of such Interests will receive or retain no property under the Creditors' Plan, the Proponents will be required to exercise this right as against those Classes to effect Confirmation of the Creditors' Plan. Under Section 11.1 of the Creditors' Plan, the Proponents have elected to exercise this right with respect to Classes E-2 and SE-2 and each Rejecting Class, if any. To meet the requirements for Confirmation of the Creditors' Plan under the "cram-down" provisions of Section 1129(b) of the Code, the Creditors' Plan would, at a minimum, have to be shown to provide either that all Classes junior to the Rejecting Class will not receive or retain any property under the Creditors' Plan or that all Holders of Claims or Interests in the Rejecting Class will receive under the Creditors' Plan property having a value equal to the full amount of their Allowed Claims or Interests. The Proponents expect to be able to confirm the Creditors' Plan under the "cram-down" provisions of the Code. As a result, the Proponents anticipate that the distributions described herein in respect of Allowed Claims will not be modified for any Class of Claims or Interests in the event the Proponents seek Confirmation of the Creditors' Plan under the "cram-down" provisions of Section 1129(b) of the Code. The Proponents, however, reserve their rights to modify the distributions described herein in the event the Proponents seek confirmation of the Creditors' Plan under the "cram-down" provisions of Section 1129(b) of the Code. C. Recommendations With Respect to the Creditors' Plan THE PROPONENTS BELIEVE THAT THE CREDITORS' PLAN PROVIDES FAVORABLE TREATMENT AND THE EARLIEST POSSIBLE RECOVERIES TO HOLDERS OF CLAIMS AND INTERESTS AND THAT ACCEPTANCE OF THE CREDITORS' PLAN IS IN THE BEST INTERESTS OF ALL HOLDERS OF CLAIMS AND HOLDERS OF INTERESTS. THE PROPONENTS STRONGLY URGE YOU TO ACCEPT THE CREDITORS' PLAN AND VOTE AGAINST THE DEBTORS' PLAN. THE DEBTORS, THEIR SENIOR MANAGEMENT AND A MAJORITY OF THE HOLDERS OF THE DEBTORS' COMMON STOCK RECOMMEND REJECTION OF THE CREDITORS' PLAN. For a description of certain events leading to the filing of the Creditors' Plan and Disclosure Statement, see "INTRODUCTION--The Chapter 11 Cases--Negotiations With KKR Associates and Debtors' Representatives With Respect to Plan of Reorganization, and Negotiations and Agreement With Representatives of Veil Piercing Claimants With Respect to Settlement of Those Claims." D. Summary of Businesses, Properties and Other Information With Respect to the Debtors NOTE: SUBSTANTIALLY ALL OF THE INFORMATION (AND THE CHARACTERIZATION THEREOF) IN THIS SECTION I.D. IS TAKEN FROM THE DEBTORS' DISCLOSURE STATEMENT. Hillsborough 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") pursuant to a leveraged buyout. Following its organization, Hillsborough organized and acquired all of the outstanding shares of capital stock of a group of direct wholly owned subsidiaries (the "First Tier Subsidiaries") including JWC Holdings Corporation, a Florida corporation ("JWC"). Each of the First Tier Subsidiaries was intended to reflect a separate business operation of Original Jim Walter. The First Tier Subsidiaries (other than JWC) and Hillsborough organized and acquired all of the outstanding shares of capital stock of Walter Industries, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Hillsborough ("Old Walter Industries"). JWC organized and acquired all of the outstanding shares of capital stock 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 shares of capital stock of Hillsborough Acquisition Corporation ("HAC"). On August 18, 1987, pursuant to an Agreement and Plan of Merger dated as of August 12, 1987, as amended (the "Agreement and Plan of Merger"), HAC commenced an offer (the "Tender Offer") to purchase all of the outstanding shares of common stock of Original Jim Walter at $60 per share in Cash. On September 18, 1987, HAC acquired approximately 95% of the outstanding shares of common stock of Original Jim Walter pursuant to the Tender Offer. On January 7, 1988, Hillsborough caused Original Jim Walter to be merged (the "Merger") into HAC (which changed its name to "Jim Walter Corporation"). On that same date: (1) 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 for all of the shares of capital stock of HAC owned by Old Walter Industries; (2) HAC merged into J-II; and (3) J-II changed its name to "Jim Walter Corporation" (and is hereinafter referred to as "J-II" or "Jim Walter Corporation"). See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Organization of Hillsborough and Acquisition of Original Jim Walter;" and "-- Corporate Reorganizations and Asset Dispositions--Completed Transactions--JWC Holdings Corporation." Following the Merger and prior to the commencement of the Chapter 11 Cases, Hillsborough undertook a program of corporate reorganizations and asset dispositions, which were contemplated by all of the debt agreements entered into in connection with the Tender Offer and the Merger. Pursuant to this program Hillsborough restructured and/or disposed of certain of the businesses of Original Jim Walter. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Corporate Reorganizations and Asset Dispositions;" and "--Completion of Mirror Liquidation Plan." On December 27, 1989, 32 of the Debtors each filed a voluntary petition for reorganization under Chapter 11 of the Code ("Chapter 11") (collectively, together with the voluntary petition for reorganization filed by JW Resources, the "Chapter 11 Cases"). On December 3, 1990, JW Resources filed a voluntary petition for reorganization under Chapter 11 (such dates, with respect to such Debtors, the "Filing Date") (collectively, the "Reorganization Proceedings"). Two active subsidiaries, Cardem and J.W. Railroad, have not filed petitions for reorganization. The commencement of the Debtors' Chapter 11 Cases resulted from a sequence of events stemming primarily from an inability of Hillsborough's interest reset advisors to reset interest rates on approximately $624 million of outstanding debt on which interest rates were scheduled to be reset effective January 2, 1990, based largely on uncertainties arising from pending veil piercing and asbestos-related litigation, and the possibility either that such litigation would lead to the prohibition of further asset sales and debt repayment or that substantial new asbestos-related claims might become assertible against Hillsborough. On November 7, 1989, certain of the Debtors commenced exchange offers for all such outstanding debt that contained interest reset provisions which exchange offers were subsequently amended and extended (the "Exchange Offers"). The primary purpose of the Exchange Offers was to mitigate the possible impact of resetting the interest rates on such debt at rates significantly higher than the then current interest rates on such debt. The terms of such debt required that the interest rates thereon be reset to the rate per annum such debt should bear in order to have a bid value of 101% of the principal amount thereof as of December 2, 1989. The Exchange Offers constituted one of a number of recapitalization alternatives that were considered by Hillsborough, but not successfully consummated, during the second half of calendar 1989. In early December 1989, during the pendency of the Exchange Offers, the reset advisors for such debt with interest reset provisions, Drexel Burnham Lambert Incorporated ("Drexel Burnham" or "DBL") and Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("Merrill Lynch"), the Debtors' current investment banker, advised Hillsborough that, in their opinion, there were no interest rates at which such debt could be reset to have bid values of 101% as called for by their terms. The Debtors state in the Debtors' Disclosure Statement that Hillsborough believes that the reset advisors' inability to reset the interest rates was primarily attributable to two factors: pending veil piercing-related litigation, which materially hindered the ability of the Debtors to pursue a refinancing or sell assets to reduce debt, and general turmoil in the high yield bond markets. The Exchange Offers expired at 7:00 p.m., New York City time, on December 27, 1989, without satisfaction of the conditions precedent to their consummation and without the acceptance for exchange of any of such debt tendered thereunder. In light of possible defaults under indebtedness of the Debtors arising as a result of the inability to reset interest rates, consummate the Exchange Offers or effect alternate recapitalizations, the Reorganization Proceedings were commenced later that evening. The Debtors currently offer a diversified line of products and services for home building, water and waste water transmission, residential and non-residential construction and industrial markets. As of May 31, 1993, the Debtors employed 7,522 people at 18 manufacturing facilities, 4 underground coal mines and its network of sales and administrative offices nationwide. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS." E. The Chapter 11 Cases 1. General On December 27, 1989, Hillsborough and 31 of its subsidiaries each filed a voluntary petition for reorganization under Chapter 11 with the Court. On December 3, 1990, one additional subsidiary, JW Resources, also filed a voluntary petition for reorganization under Chapter 11 with the Court. Two other small subsidiaries did not file petitions for reorganization under Chapter 11. 2. Debtors-in-Possession Order Pursuant to provisions of the Code and an order of the Court dated December 28, 1989, the Debtors were authorized to operate their businesses and to continue to own and manage their properties and assets as debtors in possession (the "Debtors in Possession"). The Code authorized 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 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 of the Court. In late December 1989, the Court entered, among other orders, (i) an order permitting the Debtors to operate their cash management system during the Reorganization Proceedings; (ii) orders (which have since been amended) permitting payments for certain pre-Filing Date employee related expenses; (iii) an order authorizing Jim Walter Homes to continue the practice of sale of notes and mortgages to Mid-State Homes; (iv) an order authorizing payment by Jim Walter Homes to subcontractors of pre-Filing Date Claims carrying lien rights; (v) an order procedurally consolidating the Chapter 11 Cases; and (vi) orders authorizing use of pre-Filing Date bank accounts and continuation of investment practices. 3. Retention of Professionals for Debtors The Court authorized the Debtors to retain Levin, Weintraub & Crames (now part of Kaye, Scholer, Fierman, Hays & Handler) and Stichter, Riedel, Blain & Prosser, P.A. as bankruptcy counsel. Simpson Thacher & Bartlett was retained as special counsel to represent the Debtors in the declaratory judgment veil piercing-related litigation described below and as to selected corporate matters, and Shackleford, Farrior, Stallings & Evans was retained as special counsel for corporate matters. The Debtors have retained a number of other law firms to represent them in ordinary course transactions and/or special litigation. From time to time, the Debtors have sought to retain additional counsel to deal with new legal matters as they arise and that are not within the expertise or geographical areas covered by the present slate of retained professionals. The Debtors, with Court approval, have retained Price Waterhouse as accountants, and Merrill Lynch as financial advisors, for the Debtors. The expenses of these professionals are being paid by the Debtors, to the extent allowed by the Court after submission of fee applications. From time to time, the Debtors have sought to retain professionals, usually accountants, business brokers or real estate brokers with respect to specific sales, litigation or administrative matters. Utilization of these professionals has occurred after their retention has been approved by the Court. The fees and expenses of these professionals are being paid by the Debtors, to the extent allowed by the Court after submission of fee applications. 4. Committees The United States Trustee (the "U.S. Trustee") has appointed two unsecured creditor committees, consisting of the Creditors Committee and the Bondholders Committee (collectively, the "Official Committees"). The Official Committees have played an extensive role in reviewing the business activities of the Debtors and assessing and serving the interests of the Creditors. An unofficial committee was formed to represent a group of banks holding Secured Claims (as defined in the Creditors' Plan) against the Debtors and another unofficial committee was formed to represent Holders of the Series B & C Senior Notes (as defined in Section II.C.3.). In addition, the Ad Hoc Committee of Pre-LBO Bondholders constitutes an unofficial committee of Holders of Pre-LBO Debentures. The U.S. Trustee's office has been active throughout the Reorganization Proceedings. The Official Committees have been represented by counsel and accountants, and the Bondholders Committee, in addition, has retained a financial advisor. The Debtors are required to pay such expenses of the Official Committees, as well as expenses of members of the Official Committees, including all professional fees, to the extent allowed by the Court. The Debtors have paid all required statutory fees to the U.S. Trustee. Lists of the present members of the Official Committees are annexed hereto as Exhibit II. At the request of certain members of the Bondholders Committee holding Original Jim Walter debt, the Bondholders Committee established a subcommittee (the "Pre-LBO Subcommittee") to represent the interests of the holders of Original Jim Walter debt. On September 10, 1991, the Pre-LBO Subcommittee filed an application seeking authorization from the Court to retain separate counsel. On September 24, 1991, the Court denied that application. The Pre-LBO Subcommittee subsequently filed a motion for reconsideration of the Court's denial of the application, which was denied by the Court. The Ad Hoc Committee of Pre-LBO Bondholders has retained its own counsel, as have the Bondholder Proponents. 5. Claims NOTE: UNLESS SPECIFICALLY INDICATED OTHERWISE HEREIN, ALL CLAIMS INFORMATION CONTAINED HEREIN IS BASED UPON THE DEBTORS' DISCLOSURE STATEMENT. As of June 28, 1994, in addition to the Claims listed in the Schedules (as defined in the Creditors' Plan), the Debtors' Disclosure Statement states that approximately 8,200 proofs of claim have been filed in the Chapter 11 Cases. Because the bar date fixed by the Court for filing proofs of claim excluded asbestos claims or other claims based on veil piercing theories, such claims are not included in the Debtors' Claim calculations, although they would be resolved under the Creditors' Plan. Although the Debtors are in the process of reconciling and resolving Claims that differ in amounts from the Debtors' records, a large number of these Claims remain unresolved. Many of the Claims against various Debtors are believed to be duplicative of other Claims, erroneously filed against the wrong Debtor or otherwise not properly allowable by the Court. The Debtors have begun the process of reviewing and objecting to Claims erroneous in amounts or as to the Debtor involved. The Debtors filed a motion to approve Claim objection procedures, to deal expeditiously with Claims to be challenged as paid, duplicates, transfers and other similar objections involving eleven Debtors. Debtors have further filed a motion to approve a compromise of Claim procedure, seeking an expedited procedure for adjusting controversies as to amounts of Claims. Both motions were approved at a hearing held on August 11, 1993. Further motions to approve Claim objection procedures involving other Debtors were approved by the Court on February 14 and on June 15, 1994. The Debtors filed their motion to approve a Claims resolution procedure relating to the liquidation of bodily injury and wrongful death Claims (excluding asbestos Claims or any other Claims based on veil piercing theories). The Court order dated August 12, 1992 approved such procedure which included the requirement of a special Claim form, a period for negotiating settlements, a period for mediation, and a lifting of the Automatic Stay (as defined in Section I.E.7.) in the event Claims have not been resolved after application of the procedure. Numerous Claims have been settled and are the subject of past and future motions to approve compromises. Mediation proceedings have been scheduled before the Court-appointed mediator. The Debtors' best evaluation of outstanding Claims (excluding asbestos Claims or any other Claims based on veil piercing theories) are as listed in their respective Schedules filed by the Debtors with the Court and are as described herein under "OVERVIEW OF THE CREDITORS' PLAN--Summary of Claims and Class Treatment Under the Creditors' Plan." Some Claims have been filed, or will be filed, seeking substantial recoveries on Claims that are unliquidated or which are in dispute. A number of the Disputed Claims involve significant dollar amounts and thus the total amount of all Claims, including Disputed Claims, is substantially in excess of the total amount of Claims that the Creditors' Plan assumes will be Allowed Claims. Resolution of certain Disputed Claims will be a prerequisite to confirmation of the Creditors' Plan, unless waived by the Proponents. See "BUSINESSES PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS- - -Litigation--Federal Income Tax" and "--Lawsuits Relating to Jim Walter Resources." It is anticipated that the Debtors or the Official Committees will seek to resolve or estimate Disputed Claims in advance of Confirmation of the Creditors' Plan to avoid delay in such Confirmation, where non-resolution might affect a Debtor's ability to perform under the Creditors' Plan. Numerous Claims exist with regard to property taxes, sales taxes and intangible taxes for the year 1989. Many of these taxes were not due and owing as of the Filing Date and payment post-Filing Date has been precluded by the filing of the Chapter 11 Cases. Proofs of claim have been filed by the Internal Revenue Service (the "IRS") 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. These Claims and the objections thereto have been consolidated with adversary proceeding no. 91-313, Hillsborough Holdings Corporation v. United States. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Litigation--Federal Income Tax." 6. Bar Date for Filing of Claims The Debtors filed their motion requesting a Bar Date (as defined in the Creditors' Plan) be set for October 30, 1992, for all Claims other than Claims relating to the veil piercing-related litigation or any other asbestos-related Claims (no bar date has been fixed for these other Claims). The motion was approved by order of August 14, 1992, establishing October 30, 1992 as a Bar Date. The Debtors filed a motion to set a Bar Date for the filing of bodily injury and wrongful death Claims, which Bar Date was also set for October 30, 1992. The Debtors have filed subsequent amendments to the Schedules, with subsequent Bar Dates for the Creditors listed in such amendments. 7. Automatic Stay Pursuant to the provisions of Section 362 of the Code, upon commencement of the Chapter 11 Cases all actions other than actions set forth in Section 362(b) of the Code which existed against the Debtors at the Filing Date and all actions taken against the Debtors' property were automatically stayed (the "Automatic Stay"). The Court has granted relief from the Automatic Stay in three areas. First, Holders of certain Claims have been allowed by the Court to liquidate Claims in respect of personal injury or wrongful death in other forums. The Debtors state in the Debtors' Disclosure Statement that the Debtors believe that a majority of these Claims will be satisfied from insurance proceeds. The second exception relates to Jim Walter Homes, a Debtor engaged in the business of constructing and financing new homes, and Mid-State Homes, a Debtor engaged in the purchasing and servicing of mortgage installment notes generated by Jim Walter Homes in the ordinary course of its business. The Court has granted relief from the Automatic Stay to allow the claimants to resolve, in appropriate non-bankruptcy courts, disputes involving priority of lien or other real property issues where either Jim Walter Homes or Mid-State Homes held a mortgage on property. The third exception relates to the claims resolution procedure approved by order of the Court dated August 12, 1992 whereby tort claimants may be authorized to proceed to liquidate their Claims in appropriate state or federal courts when negotiation and mediation efforts have failed to resolve the dispute. 8. Executory Contracts As Debtors in Possession, the Debtors have the right, subject to Court approval, to assume or reject any executory contract or unexpired lease, including, but not limited to, any employment or severance contract or agreement, as contemplated by Section 365 of the Code, in effect on the Filing Date between any of the Debtors and any other Person (as defined in the Creditors' Plan) (an "Executory Contract"). In this context, assumption means that the Debtors agree to perform their obligations and cure existing defaults under an Executory Contract. Rejection of an Executory Contract relieves the Debtors from their obligation to perform further under such Executory Contract. Damages resulting to the other party from the rejection of an Executory Contract are treated as an Other Unsecured Claim (as defined in the Creditors' Plan) arising prior to the Filing Date and are included in the appropriate Class to the extent such Claim is allowed by the Court. Certain Debtors have already assumed substantially all of their real property and mineral leases as part of the complete liquidation of Old Walter Industries and certain of its subsidiaries pursuant to Section 332 of the Internal Revenue Code of 1986, as amended (the "IRC"), as set forth in plans of complete liquidation adopted by their respective stockholders (the "Mirror Liquidation Plan"), approved by Court order of November 5, 1990, a copy of which is annexed hereto as Exhibit III (the "Mirror Liquidation Order"). In connection with the Mirror Liquidation Plan, Jim Walter Resources sought approval to assume and assign certain leases and Executory Contracts, including a lease with S.E. Belcher and a sales contract with Alabama Power Company ("Alabama Power"). Alabama Power asserted that Jim Walter Resources could not assume a coal supply contract as a matter of law and, alternatively, that Jim Walter Resources had not cured defaults in the contract prior to assumption. The Court granted Jim Walter Resources' motion for summary judgment and authorized the assumption and assignment of the coal supply contract. Alabama Power's appeal of that order is pending in the United States District Court for the Middle District of Florida ("District Court"). See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Litigation--Lawsuits Relating to Jim Walter Resources" and "OVERVIEW OF THE CREDITORS' PLAN--Conditions Precedent--To Confirmation of the Creditors' Plan." As discussed herein, on May 10, 1994, Jim Walter Resources and Alabama Power signed a new agreement for the sale and purchase of coal which was approved by order of the Court dated May 23, 1994, which order became final on June 3, 1994. The new agreement provides that Alabama Power will dismiss its appeal. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS-- Businesses and Properties of the Debtors--Jim Walter Resources--Mining Division." With respect to the lease with S.E. Belcher, an objection of S.E. Belcher was resolved by agreement of the parties and Court approval of that settlement. The remaining unassumed real property leases of the Debtors consist mainly of land under model home display parks operated by Jim Walter Homes and sales office leases of U.S. Pipe. The Debtors have made monthly payments in accordance with the existing leases throughout the Reorganization Proceedings. The last day to assume or reject the remaining unassumed real property leases was extended by the Court to the Confirmation Date. Certain other Executory Contracts, apart from those assumed in connection with the Mirror Liquidation Plan, have been assumed by the Debtors with Court approval, where necessary to assure continuity of service and supply requirements and construction contracts. Under the Creditors' Plan, all other Executory Contracts will be assumed unless specifically rejected on or before the 90th day after the Effective Date or such other date specified in the Confirmation Order, or unless a motion to reject is pending as of such date. Attached as Exhibit 9 to the Creditors' Plan is a nonexhaustive list of Executory Contracts that are rejected under the Creditors' Plan. The Debtors state in the Debtors' Disclosure Statement that the Debtors do not expect to reject any Executory Contracts which would give rise to any material rejection damages. 9. Exclusivity Period and Acceptance Period Pursuant to Section 1121(b) of the Code, a debtor is given the exclusive right to file a plan of reorganization until the expiration of the 120 day period following the date of the order for relief (the "Exclusivity Period"), unless such Exclusivity Period is extended by the Court. In addition, pursuant to Section 1121(c)(3) of the Code, a debtor is given the exclusive right to solicit acceptances to its plan for 180 days following the date of the order for relief (the "Acceptance Period"). 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 and the Acceptance Period which were granted. By order dated April 15, 1992, the Exclusivity Period expired June 15, 1992 and the Acceptance Period was to expire on August 14, 1992. A joint plan of reorganization and disclosure statement each dated as of June 15, 1992, were filed by the Debtors with the Court on June 15, 1992 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. By order of July 7, 1993, the Court extended the Acceptance Period until August 2, 1993, but ruled that no further extensions would be granted beyond August 2, 1993. On August 23, 1993, the Court entered an order fixing January 1, 1994 as the last date when a plan of reorganization and disclosure statement may be filed by any party in interest and that all disclosure statements filed by such date will be heard on a date and time to be fixed by future order of the Court. The Court subsequently permitted one additional creditor plan to be filed by April 20, 1994. The August 2, 1993 order further provided that no hearings for approval of disclosure statements filed on or before January 1, 1994 would be scheduled until after conclusion of the trial in the Declaratory Judgment Proceeding (as defined in Section I.A.2.). On February 16, 1994, the Court denied the Debtors' motion to delay approval of disclosure statements and confirmation of a plan of reorganization. The motion, which was opposed in separate objections filed by the Bondholders Committee, the Creditors Committee, Apollo, Lehman Brothers Inc., the Bank Agents and the Series B & C Senior Note Trustee, had sought to delay consideration of the adequacy of the pending disclosure statements until the Court rendered a decision in the Declaratory Judgment Proceeding, and sought to have the Debtors' Disclosure Statement considered prior to consideration of any other disclosure statement. On February 25, 1994, the Court entered an order scheduling a disclosure statement hearing on May 19, 1994, establishing April 20, 1994 as the last day prior to the disclosure statement hearing date for filing amendments to the disclosure statements and their related plans of reorganization filed prior to January 1, 1994, permitting the filing of a creditor plan of reorganization and related disclosure statement by Allan L. Potter, Esq. (which was not timely filed), and establishing May 6, 1994 as the last day for filing objections to disclosure statements to be considered at the hearing. The order also established procedures for obtaining copies of previously filed plans and disclosure statements. 10. Negotiations With KKR Associates and Debtors' Representatives With Respect to Plan of Reorganization, and Negotiations and Agreement With Representatives of Veil Piercing Claimants With Respect to Settlement of Those Claims From February through October 1993, the Bondholder Proponents engaged in frequent and protracted negotiations with representatives of KKR Associates, which is the sole general partner of three partnerships that hold over 91% of the Old Common Stock Interests in Walter Industries, and representatives of Walter Industries in an effort to reach an agreement on, inter alia, the terms of a plan of reorganization and the financial parameters for settling the asbestos-related veil piercing litigation that could be supported by the Bondholder Proponents, and that would provide the basis for support by other Holders of Claims. Despite these negotiations, an agreement was not reached with KKR Associates. Thereafter, commencing in October 1993, the Bondholder Proponents actively began to develop the Creditors' Plan, as an alternative to the Debtors' Plan, and entered into the negotiation of a settlement of the Veil Piercing Proceedings and the Veil Piercing-Related Issues with representatives of the Holders of a significant number of asserted Veil Piercing Claims. These negotiations resulted in the execution of an agreement in principle dated December 9, 1993, setting forth the terms of the settlement, and the execution of the definitive Veil Piercing Settlement Agreement on April 18, 1994 with such persons and the official committees in the Celotex Chapter 11 Proceeding. Over thirty-five law firms, which have represented to the Proponents that they collectively represent the vast majority of Veil Piercing Claimants, have agreed to be bound by the Veil Piercing Settlement Agreement. The settlement is subject to, among other things, the confirmation and consummation of a plan of reorganization of the Debtors reflecting the terms of the settlement. The settlement is not, however, conditioned on confirmation of a Chapter 11 plan for The Celotex Corporation. The terms of the Veil Piercing Settlement Agreement are described at "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." 11. Filing of Currently Pending Plans; Disclosure Statement Hearing On or about August 3, 1994, the Debtors filed with the Court the Debtors' Plan and the Debtors' Fifth Amended Disclosure Statement dated as of July 25, 1994 pursuant to Section 1125 of the Bankruptcy Code (the "Debtors' Disclosure Statement"). The Debtors' original and first, second and third amended joint plans of reorganization and disclosure statements were filed on June 15, 1992, September 21, 1993, April 20, 1994 and June 9, 1994, respectively. The Debtors' Fourth Amended Plan was filed on June 22, 1994 and the Debtors' Fourth Amended Disclosure Statement was filed on June 29, 1994. On August 2, 1994, the Proponents filed the Creditors' Plan and the Disclosure Statement, which amends a plan filed on June 9, 1994 and a disclosure statement filed on June 29, 1994, respectively. On December 16, 1993, the Proponents (which at that time did not include the Ad Hoc Committee of Pre-LBO Bondholders) filed the Original Creditors' Plan and accompanying disclosure statement, and on April 20, 1994, May 11, 1994 and May 17, 1994, the Proponents filed the first, second and third amended Original Creditors' Plan and accompanying disclosure statements, respectively. On June 9, 1994, the Proponents filed a disclosure statement that amended their third amended disclosure statement. On or about December 31, 1993, the Ad Hoc Committee of Pre-LBO Bondholders filed a joinder to the Original Creditors' Plan. To the extent that the Ad Hoc Committee of Pre-LBO Bondholders has preserved its right to file a separate plan of reorganization in the Chapter 11 Cases, it does not intend to exercise such right so long as it is a Proponent of the Creditors' Plan. On December 28, 1993, the Bank Agents filed a plan of reorganization (the "Bank Agents Plan") and accompanying disclosure statement. The Bank Agents' disclosure statement stated that the purpose of the Bank Agents Plan is to preserve the rights of the Working Capital Banks and the Revolving Credit Banks in view of the January 1, 1994 deadline for filing plans of reorganization with the Court. The Bank Agents stated in the same filing that they support the treatment provided for the banks in the Creditors' Plan. On April 17, 1994, the Bank Agents and the Proponents entered into the Bank Agents Agreement. In the Bank Agents Agreement, the Bank Agents state that they will recommend to the Holders of Revolving Credit Bank Claims and Working Capital Bank Claims that they accept the treatment provided for such Claims under the Settlement Agreement, and agreed that they would file a motion with the Court to defer the Court's consideration of the Bank Agents Plan and the related disclosure statement and would not request the Court to renew consideration thereof until the earlier of December 31, 1994 and the date, if any, on which the Court denies approval of the Disclosure Statement for the Creditors' Plan. The Court granted such deferral at a hearing held on May 18, 1994. The Bank Agents Agreement further provides that the Proponents will not adversely modify or amend the treatment of any or all of the Claims of the Revolving Credit Banks, the Working Capital Banks or the Bank Agents under the Creditors' Plan until after December 31, 1994 and until either (a) both of the following conditions occur, if ever: (i) there shall have occurred 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 Bank Agents Agreement, and (ii) the treatment of the Subordinated Note Claims under the Creditors' Plan is materially adversely modified or amended, or (b) the Court disapproves such treatment on motion of a party to the Bank Agents Agreement other than a Proponent. On April 20, 1994, the Series B & C Senior Note Trustee filed a plan of reorganization (the "Senior Note Plan") and accompanying disclosure statement, amending the plan and disclosure statement filed on December 30, 1993. Like the Bank Agents Plan, which focuses on the treatment of the Bank Claims, the Senior Note Plan focuses on the treatment of the Holders of Series B & C Senior Note Claims. On May 19, 1994, in connection with an agreement reached with the Proponents on the rate of post-petition interest to be paid on account of Series B & C Senior Note Claims and the form of consideration to be used to satisfy such Claims under the Creditors' Plan, the Series B & C Senior Note Trustee agreed to seek to defer the Court's consideration of the Senior Note Plan, and the Court granted such deferral at a hearing held on May 19, 1994. As set forth above, see "INTRODUCTION--Exclusivity Period and Acceptance Period," the February 25, 1994 order of the Court fixed May 6, 1994 as the last day to file objections to the disclosure statements filed on April 20, 1994 and scheduled a hearing for May 19, 1994 to approve such disclosure statements. On or prior to May 6, 1994, objections to the Debtors' April 19, 1994 disclosure statement were filed by the Proponents, the California Department of Toxic Substances Control ("DTSC") and the California Regional Water Quality Control Board ("CRWQCB"), the Mississippi State Tax Commission, Raul Delgado, et al. and other Texas homeowners (the "Texas Homeowners"), the Series B & C Senior Note Trustee, the Securities and Exchange Commission (the "SEC") and Purnie Melcher, Mary Melcher, Richard Melcher and Curtis Melcher. Objections to the Proponents' April 20, 1994 disclosure statement were filed by the Debtors, DTSC and CRWQCB, the Texas Homeowners, the Series B & C Senior Note Trustee and the SEC. Objections to the Series B & C Senior Note Trustee's April 20, 1994 disclosure statement were filed by the Debtors, the Proponents, the DTSC and CRWQCB, the Texas Homeowners and the SEC. On May 19, 1994, a hearing was held to consider approval of the Proponents' April 20, 1994 disclosure statement and the Debtors' April 19, 1994 disclosure statement. At the conclusion of the hearing, the Court sustained in part and overruled in part the objections filed, permitted the Debtors and the Proponents to file amended plans of reorganization and disclosure statements not later than June 9, 1994, fixed June 17, 1994 as the date by when objections to the amended disclosure statements must be filed and scheduled a status conference for June 15, 1994 to further consider the confirmation process. An objection to the Proponents' April 20, 1994 disclosure statement was filed on June 8, 1994 by the Aetna Casualty and Surety Company. On May 23, 1994, the Court entered an order (i) sustaining in part and overruling in part the objections filed to the Proponents' April 20, 1994 disclosure statement and the Debtors' April 19, 1994 disclosure statement; (ii) fixing June 9, 1994 as the last day to file supplements to the amended disclosure statements filed by the Proponents and the Debtors; (iii) fixing June 17, 1994 as the last day to file objections to the disclosure statements filed by the Proponents and the Debtors on June 9, 1994; (iv) providing that in the event additional objections are filed on or before June 17, 1994, the Court may schedule a hearing to consider such objections; and (v) providing that once the Proponents' and the Debtors' disclosure statements are approved, the Court will enter an order scheduling a Confirmation Hearing. On June 15, 1994, the Court held a status conference with respect to the disclosure statements filed by the Debtors and the Proponents on June 9, 1994. At the status conference, the Debtors and the 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 Proponents could serve amended and restated plans of reorganization, which amended and restated plans of reorganization were to be filed with the Court on June 22, 1994; (ii) June 28, 1994 was fixed as the last date by which the Debtors and the Proponents could serve amended and restated disclosure statements, which amended and restated disclosure statements were to be filed with the 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 Allan Potter, Esq., were to serve written objections to the amended and restated disclosure statements filed on June 29, 1994, which objections were to be filed with the Court no later than July 7, 1994; (iv) July 8, 1994 was fixed as the last date by which the clients of Allan Potter, Esq. could serve and file written objections to amended and restated disclosure statements filed by the Debtors and the Proponents; (v) during the period July 7 through July 11, 1994, the Debtors and the Proponents were 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 Proponents were 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 was scheduled to be heard on July 13, 1994; (vii) on July 12, 1994, the Debtors and the Proponents were each to file with the Court a pleading setting forth, without legal argument, unresolved objections to the amended and restated disclosure statements filed by the Debtors and the Proponents; and (viii) a hearing was scheduled for July 13, 1994 at which the Court heard argument concerning any unresolved objections to the amended and restated disclosure statements filed by the Debtors and the Proponents. On June 28, 1994, the Court entered an order confirming the aforementioned procedures and dates. Objections to the Debtors' and the Proponents' June 9, 1994 disclosure statements were filed by the Pension Benefit Guaranty Corporation on June 16, 1994 and by the Texas Homeowners on June 20, 1994. Objections to the Debtors' June 29, 1994 disclosure statement were filed on or prior to July 7, 1994 by the Proponents and the Texas Homeowners, and objections to the Proponents' June 29, 1994 disclosure statement were filed on or prior to July 7, 1994 by the Debtors and the Texas Homeowners. In early July 1994, the Debtors and the Proponents separately negotiated and reached agreement with the PBGC on changes to the Debtors' and the Proponents' respective June 29, 1994 disclosure statements, which changes satisfied all of the PBGC's filed objections. On July 8, 1994, counsel for the Proponents and counsel for the Debtors conferred and attempted to resolve their respective objections to the other's disclosure statement. Such counsel resolved all but two of the 11 objections raised by the Proponents, and some of the numerous objections raised by the Debtors. On July 12, 1994, the Proponents and the Debtors each filed separate statements with the Court indicating the remaining outstanding objections of each of them to the other's June 29, 1994 disclosure statement. On July 13, 1994, the Court held a hearing at which the Court (i) ruled on all outstanding objections to the Creditors' and the Debtors' respective June 29, 1994 disclosure statements; (ii) fixed July 13, 1994 as the Voting Record Date; fixed August 5, 1994 as the last date for mailing of disclosure statements to Creditors and Interest holders; fixed August 15, 1994 as the deadline for publication of notice of the Confirmation Hearing; fixed September 23, 1994 as the Voting Deadline; fixed October 7, 1994 as the last day to file challenges or objections to the vote of any party with respect to the Creditors' Plan; fixed October 17, 1994 as the date on which the Court will commence hearings, continuing day to day until concluded to consider the following confirmation-related matters (it being understood that when and whether the Court will issue one or more orders in respect of these matters is not determined by the Court's order scheduling such hearing): (a) the issues raised by the Debtors in Adversary Proceeding No. 94-278 (as defined herein, the "New DJ Action"), 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 seeking approval of the Veil Piercing Settlement Agreement, which, among other things, provides for a settlement of all Veil Piercing claims including, among others, all claims asserted in the Declaratory Judgment Proceeding, and any related application or response filed by any party-in-interest thereto; and (c) any properly asserted challenges or objections to the vote of any party with respect to the Creditors' Plan; fixed November 10, 1994 as the last day to file objections to confirmation of the Creditors' Plan or the Debtors' Plan; and fixed November 16, 1994 as the date on which the initial Confirmation Hearing will take place, at which hearing the Court will conduct only a status conference to schedule the date on which the Confirmation Hearing will continue, and to consider other issues appropriate for consideration at such status conference. On July 28, 1994, the Court, inter alia, (i) granted the Debtors' emergency motion for leave to file a further amended plan of reorganization and disclosure statement, which motion was opposed by the Proponents, (ii) granted the Proponents permission to serve an amended plan and an amended disclosure statement on or prior to August 1, 1994, and file the same with the Court on August 2, 1994, and (iii) extended, by as few days as necessary, but to no later than August 12, 1994, the August 5, 1994 deadline for mailing solicitation packages to Creditors. The Proponents and the Debtors have agreed on the text of a proposed order, which the Proponents expect the Court to sign on or about August 1, 1994, that, inter alia, authorizes the Debtors to serve on or before August 2, 1994 and file on or before August 3, 1994 (i) an amended plan of reorganization that contains only those changes set forth in Exhibit B to the Debtors' Emergency Motion dated July 25, 1994, and (ii) an amended disclosure statement that contains only those changes set forth in Exhibit C to the Debtors' Emergency Motion dated July 25, 1994 and those changes that must necessarily be made as a result of the changes made to the Creditors' Plan served on August 1 and filed on August 2, 1994. 12. Negotiations and Agreement with Ad Hoc Committee of Pre-LBO Bondholders From January through March 1994, the Bondholder Proponents engaged in negotiations with members of the Ad Hoc Committee of Pre-LBO Bondholders, which includes the Indenture Trustees for the Pre-LBO Debentures and holders of a significant amount of Pre-LBO Subordinated Note Claims, regarding the treatment of Class U-6 Claims under the Creditors' Plan and the continued prosecution of the fraudulent conveyance lawsuit, Mellon Bank, N.A. and The Bank of New York v. Kohlberg Kravis Roberts & Co., et al., Adv. Pro. No. 94-17 (the "Fraudulent Conveyance Lawsuit"), filed by the Indenture Trustees for the Pre-LBO Debentures in January 1994. The Fraudulent Conveyance Lawsuit, brought by the plaintiffs for the benefit of the Hillsborough estate and its creditors, alleges, among other things, that the issuance of debt in connection with the 1988 leveraged buy-out of Hillsborough constituted a fraudulent conveyance under New York and Florida law. The plaintiffs sought to avoid the obligations incurred by the Debtors in the leveraged buy-out, which, among other results, the plaintiffs allege would effectively make the Pre-LBO Debenture Claims senior to the other Subordinated Note Claims, the Bank Claims and the Series B & C Note Claims, would entitle the Holders of Pre-LBO Debenture Claims to certain funds paid after the Filing Date in repayment of debt owed to the Working Capital Banks and the Revolving Credit Banks, and would invalidate the liens of such Banks with respect to the Pre-LBO Debenture Claims. The order of the Court granting leave for the filing of the Fraudulent Conveyance Lawsuit provided that the litigation could not be further pursued without leave of the Court, and specifically reserved the right of all parties in interest to object to the plaintiffs' right to file the lawsuit and prosecute the litigation. According to the plaintiffs' motion filed with the Court, the lawsuit was filed at the time it was in order to avoid the passage of a possible statute of limitations expiration date of January 7, 1994, the sixth anniversary of the merger that consummated the leveraged buy-out of Hillsborough. The negotiations resulted in the execution of the Pre-LBO Bondholders Settlement Agreement. The terms of the Pre-LBO Bondholders Settlement Agreement are described at "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Pre-LBO Bondholders Settlement Agreement." 13. Negotiations and Agreement With Holders of Series B & C Senior Note Claims and Series B & C Senior Note Trustee After negotiations that had been conducted from time to time since February, 1994, on May 19, 1994, the Series B & C Senior Note Trustee reached an agreement with the Proponents regarding the rate of post-petition interest to be paid on account of the Series B & C Senior Note Claims and the form of consideration (Cash and/or New Senior Notes) to be used to satisfy such Claims under the Creditors' Plan. This agreement is supported by the Holders of a substantial amount of Series B & C Senior Note Claims. The terms of this agreement have been incorporated into the Creditors' Plan. The Series B & C Senior Note Trustee sought to defer the Court's consideration of the plan of reorganization filed by the Series B & C Senior Note Trustee in December 1993 and amended in April 1994, and the Court granted such deferral at a hearing held on May 19, 1994. F. Litigation of Veil Piercing Proceedings Prior to the Filing Date, certain of the Debtors were named as co-defendants in lawsuits brought against Celotex alleging, inter alia, that (i) Original Jim Walter and its successors, including certain of the Debtors, are liable for all damages caused by products manufactured, sold and distributed by Celotex, by reason of Claims sounding in piercing the corporate veil, alter ego and related theories, and (ii) the distribution by HAC of substantially all of its assets to Old Walter Industries constituted a fraudulent conveyance. On January 2, 1990, the Debtors commenced the Declaratory Judgment Proceeding against Original Jim Walter, Celotex and all known individuals who have filed suit against the Debtors seeking to hold the Debtors liable for asbestos-related liabilities of Celotex. The Declaratory Judgment Proceeding requested that the Court declare and adjudicate that (i) the corporate veil between Original Jim Walter 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 part of the leveraged buyout fraudulent transfers; (iii) neither the Debtors nor any of their non-Debtor subsidiaries or affiliates is the successor in interest to either Original Jim Walter or Celotex; and (iv) neither the Debtors nor any of their non-Debtor subsidiaries or affiliates is liable for the asbestos-related liabilities of either Original Jim Walter or Celotex. On the same date, the Debtors also filed a Complaint to Extend Automatic Stay (the "Injunction Proceeding") wherein the Debtors sought to enjoin all actions against Original Jim Walter and all other non-Debtors on corporate veil piercing or related theories, and further seeking a permanent injunction staying all actions. On January 9, 1990, the Debtors filed a motion for preliminary injunction in the Injunction Proceeding. Such motion sought a preliminary injunction extending the Automatic Stay to enjoin the prosecution of any action in which a plaintiff seeks to hold the Debtors, any of their non-Debtor subsidiaries or affiliates or other non-Debtors responsible for asbestos-related liabilities of Celotex, on piercing the corporate veil or similar legal theory. The veil piercing claimants filed a motion with the Court requesting that the Court dismiss or abstain, or, in the alternative, stay the Declaratory Judgment Proceeding. The veil piercing claimants opposed the Debtors' motion for preliminary injunction. On April 13, 1990, the Court issued proposed findings of fact, conclusions of law and recommendations pursuant to Bankruptcy Rule 9011 which recommended, among other things, that the District Court deny the veil piercing claimants' motion to abstain from deciding, or to stay, the Declaratory Judgment Proceeding as to the Debtors. On April 20, 1990, the Court entered orders (i) deferring the ruling on the veil piercing claimants' motion to dismiss the Injunction Proceeding until the District Court decided whether or not to adopt the Court's recommendation, and (ii) preliminarily enjoining all asbestos related personal injury and property damage claimants and their attorneys and agents and all others acting on their behalf from commencing or continuing any civil action in any United States federal or state court in which persons are attempting to assert Claims against non-Debtors that are based on the right to pierce the corporate veil between Celotex and Original Jim Walter or that relate to or are connected with claims that attempt to impose liability on the Debtors for asbestos-related liabilities. The veil piercing claimants sought relief from the District Court as to both the April 13, 1990 and April 20, 1990 orders. On July 11, 1990, the District Court adopted the Court's findings of fact, conclusions of law and recommendations pursuant to Bankruptcy Rule 9011 and denied the veil piercing claimants' motion to abstain from deciding, or to stay, the Declaratory Judgment Proceeding. On February 5, 1991 the District Court entered its Order Denying Motion to Appeal the preliminary injunction as being interlocutory in nature. The Debtors filed a motion for summary judgment on February 28, 1992. The Court heard oral argument in connection with the summary judgment motion on April 16, 1992. On August 25, 1992, the Court entered an order denying the Debtors' motion for summary judgment but in its decision made certain findings of fact supportive of the Debtors' position in the Declaratory Judgment Proceeding. Following the Court's denial of the Debtors' motion for summary judgment, on September 2, 1992, the veil piercing claimants filed a renewed request with the District Court to withdraw the Declaratory Judgment Proceeding from the Court. On September 14, 1992, the Debtors filed a motion in the Court to strike the veil piercing claimants' jury demand, which was granted on October 7, 1992. On September 15, 1992, the District Court entered an order denying the veil piercing claimants' motion to withdraw the proceeding. On September 22, 1992, the veil piercing claimants filed a motion in the District Court for reconsideration of its September 15th order, or, in the alternative, for certification of the order for interlocutory review in the United States Circuit Court of Appeals for the Eleventh Circuit (the "Court of Appeals"), which was denied on February 23, 1993. On March 3, 1993, the veil piercing claimants petitioned the Court of Appeals for a writ of mandamus ordering the District Court to withdraw the Declaratory Judgment Proceeding from the Court, and to conduct a jury trial on the veil piercing and fraudulent conveyance claims. On April 18, 1993, the Court of Appeals denied the veil piercing claimants' request for mandamus. On October 30, 1992, Celotex filed proofs of claim in each of the Debtor's Chapter 11 Cases claiming that each Debtor is liable for all Claims which Celotex may hold. On November 6, 1992, the Debtors filed their objections to the Claims of Celotex. On December 9, 1992, the Court signed an order sustaining the Debtor's objections to the proofs of claim filed by Celotex, without prejudice to the right of Celotex, or any other person alleging a veil piercing claim, to file proofs of claim, if the Court deems appropriate, at the conclusion of the Declaratory Judgment Proceeding. On November 13, 1992, the Debtors filed a motion in the Celotex Chapter 11 Proceeding 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 9, 1992, United States Bankruptcy Judge Thomas E. Baynes granted relief from the Automatic Stay, permitting Celotex to participate in all aspects of the Declaratory Judgment Proceeding up through and including any appeals. On February 18, 1993, the veil piercing claimants filed new discovery requests on the Debtors, Celotex, Jim Walter Corporation and certain parties not defendants in the Declaratory Judgment Proceeding. Further discovery ensued, as well as litigation over whether the Debtors had waived the attorney--client and accountant--client privileges in connection with certain material sought to be reviewed by the asbestos claimants. The Court denied the asbestos claimants' requests to obtain such discovery. On June 14, 1993, the Debtors filed a pre-conference statement requesting the Court to set a definite trial date of December 13, 1993 (which the Court had earlier indicated was its goal) and to set dates for all remaining discovery and other pretrial matters. On July 14, 1993, all parties entered into a stipulation that modified the previously agreed upon discovery dates and set a firm pre-trial schedule leading to a December 13, 1993 trial date in the Declaratory Judgment Proceeding. On July 16, 1993, the veil piercing claimants filed a Petition for Writ of Certiorari with the United States Supreme Court, seeking review of the decision of the Court of Appeals denying the veil piercing claimants' Petition for Writ of Mandamus on the issue of their right to a jury trial on the veil piercing issues, which Debtors received on July 19, 1993. On August 18, 1993, Debtors filed their opposition to the Petition for Writ of Certiorari. On August 25, 1993, the veil piercing claimants filed their reply brief. On October 4, 1993, the United States Supreme Court denied the veil piercing claimants' Petition for Writ of Certiorari. On November 24, 1993, the Court entered an order denying the asbestos claimants' motion to reschedule the pre-trial conference scheduled for November 29, 1993 and the trial scheduled to commence December 13, 1993. On December 6, 1993, the asbestos claimants filed a renewed motion for continuance which sought to continue the trial until January 1994. On December 8, 1993, the Court entered an order denying the renewed motion to reschedule the trial. 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 trial. At a hearing held on December 9, 1993, the District Court denied the asbestos claimants' Emergency Petition for Writ of Mandamus. The Court held a trial in the Declaratory Judgment Proceeding during the week of December 13, 1993. A transcript of the trial may be obtained from Pacific Photo at a cost of $1,000. Post-trial briefs were filed by the parties on March 16, 1994. On April 18, 1994, the Court issued its decision on the veil piercing issues raised in the Declaratory Judgment Proceeding. As expected, the Court ruled in favor of the Debtors. A copy of Bankruptcy Judge Paskay's 38 page Findings of Fact, Conclusions of Law and Memorandum Opinion is annexed hereto as Exhibit XII. The Court found and determined that the burden of proof on the veil piercing issue was on the asbestos claimants (see p. 4) and that the proof presented on the five specific issues which were the subject of the December 1993 trial (see pp. 3-4) was insufficient to carry the asbestos claimants' burden of proof (see p. 37). The Court determined that the veil piercing issue was a threshold issue and that since it decided this issue against the asbestos claimants, it did not have to consider the fraudulent transfer claim (see p. 5). Among other things, the Court also found that: (a) it would apply the laws of the States of Delaware and Florida (which it stated were "functionally the same") (see pp. 16-17); (b) "The management of Celotex, and of JWC were fully aware of the impact of the asbestos litigation on the economic health of Celotex and of course also indirectly upon JWC. In fact, the JWC legal department regularly distributed reports on the number of claims and the cost of settlements and the prospect of litigation to the officers and to the Board of Directors of JWC. In addition, JWC's annual reports and Forms 10-K filed with the SEC regularly disclosed the key facts concerning asbestos litigation." (see p. 15); (c) "It is clear that all asbestos manufacturers were aware of the media coverage of the asbestos litigation, especially when Johns-Manville filed for protection under the Bankruptcy Code, the first major asbestos related Chapter 11 case. Everybody who had a connection with asbestos or asbestos related products was fully aware of the progress of the Johns-Manville Chapter 11 case. One would be less than candid not to admit that this threat to enterprises who were connected and involved with asbestos would raise concern in the minds of the management of JWC and the legal department of JWC." (see pp. 28-39); and (d) "... there is a lot of smoke, but not sufficient fire and the proof presented in support of the veil piercing claim is a slender reed, indeed, upon which to hang a sword with sufficient strength required under law to pierce the corporation veil.... Even on points viewed in the most favorable light which would support the Debtors' claims, such as JWC's motivation and its involvement in the asset disposition of Celotex, the record equally supports the theory urged by the Asbestos Claimants." (p. 37). Nothing in the Court's decision in the Declaratory Judgment Proceeding in any way prevents or precludes the settlement of the Veil Piercing Claims under the Veil Piercing Settlement Agreement. On April 26, 1994, counsel to the Veil Piercing Claimants filed a timely notice of appeal of the Court's decision. On May 7, 1994, counsel to the Veil Piercing Claimants filed their statement of issues and designated those items which were to be included in the record on appeal. Such counsel have raised, among other issues on appeal, issues relating to (a) choice of law, (b) the right to a jury trial, (c) accountant--client privilege and waiver, (d) attorney--client privilege and waiver, (e) the applicable standards for veil piercing, and (f) corollary issues such as a shareholder's obligations to creditors of an insolvent debtor. On May 19, 1994, the Debtors filed their counter designation of items to be included in the record on appeal. By notice dated June 2, 1994, the asbestos claimants filed a motion with the District Court seeking the entry of an order modifying the page limits applicable to briefs on the merits of their appeal from the Court's decision in the Declaratory Judgment Proceeding so as to permit the asbestos claimants to file a principal brief not exceeding seventy-five (75) pages and a reply brief not exceeding thirty (30) pages. The Debtors have filed a memorandum of law in opposition to the asbestos claimants' motion and have filed an emergency motion to expedite ruling on the asbestos claimants' motion. By order dated June 24, 1994, the District Court denied the asbestos claimants' motion to modify the page limits applicable to briefs, denied the Debtors' emergency motion as moot, modified the District Court's June 6, 1994 order described below to the extent that the asbestos claimants shall serve and file their principal brief on or before July 18, 1994 and that Bankruptcy Rule 8009 shall govern the dates by which the remaining appellate briefs shall be filed. By motion dated June 2, 1994, the asbestos claimants filed a motion with the District Court seeking the entry of an order extending their time to file their principal brief until thirty (30) days following the District Court's ruling on their motion to modify the page limits applicable to briefs on the merits of their appeal from the Court's decision in the Declaratory Judgment Proceeding. The Debtors filed a memorandum of law in opposition to the motion. By order dated June 6, 1994, the District Court granted the asbestos claimants' motion. Notwithstanding the Court's ruling in the Declaratory Judgment Proceeding, the Proponents believe that the Veil Piercing Settlement Agreement is in the best interest of all creditors and the Debtors. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Reasonableness of the Settlement: Certainty and Prompt Payment vs. Uncertainty and Additional Years of Delay." On April 28, 1994, the Debtors filed with the Celotex Bankruptcy Court a complaint for declaratory relief and a motion for summary judgment in the Celotex Chapter 11 Proceeding on the issues of whether (i) Celotex alone has standing to assert a veil piercing claim 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. The Proponents believe that, among other issues, it is unclear whether the complaint describes a judicially reviewable "case or controversy" since it names, as defendants, only parties that may be predisposed to agree with the judgment sought by the Debtors, and whether the relief, if granted, would bind all persons that may challenge any such declaratory judgment at a later date. On May 18, 1994, Celotex filed a motion to strike the Debtors' motion for summary judgment as being prematurely filed. Celotex has also filed a motion to dismiss the complaint based on several grounds, including that it did not state a case or controversy. The motion is scheduled to be heard by the Celotex Bankruptcy Court on October 13, 1994. On June 16, 1994 Judge Thomas M. Baynes entered an order in the Celotex Chapter 11 Proceeding authorizing and directing Celotex's entry into and performance of the Veil Piercing Settlement Agreement. G. Objections To Confirmability of Creditors' Plan Asserted by Debtors In the Debtors' Objection to Approval of First Amended Disclosure Statement For Creditor Proponents' Settlement Plan filed with the Court on May 5, 1994, the Debtors allege that the First Amendment to the Original Creditors' Plan is not confirmable because certain terms of the Creditors' Plan are invalid, as follows: (i) The Veil Piercing Settlement Agreement is allegedly not reasonable in light of the Court's ruling in the Declaratory Judgment Proceeding in favor of the Debtors; (ii) Unsecured Creditors are allegedly not entitled to post-petition interest as a matter of law given the alleged values of the Debtors' estates; (iii) The Veil Piercing Settlement allegedly improperly dictates the terms of a future plan of reorganization and the Proponents allegedly improperly solicited Holders of equity interests in Walter Industries to execute the Veil Piercing Settlement Agreement, support the Creditors' Plan and reject all other plans of reorganization; (iv) The structure of the New Common Stock allegedly does not provide an appropriate distribution under Section 1123(a)(6) of the Code of voting power between the two classes of common stock to be distributed to the three classes of unsecured bondholders under the Creditors' Plan; (v) The Pre-LBO Bondholders Settlement Agreement allegedly improperly dictates the terms of a future plan of reorganization and the Proponents improperly solicited Holders of Pre-LBO Debenture Claims to support the Creditors' Plan and reject the Debtors' Plan and the Senior Note Plan; (vi) The Creditors' Plan was allegedly proposed in bad faith; and (vii) Apollo and Lehman Brothers Inc. have allegedly breached their duties to all bondholders. The Proponents believe that none of these grounds, if and when they are properly raised and briefed at a hearing on the confirmation of the Creditors' Plan, provides a basis upon which the confirmation of the Creditors' Plan can be successfully challenged. The Proponents expect that the factual and legal issues relating to the confirmability of the Creditors' Plan will be decided by the Court at the confirmation hearing. The Proponents believe that, purportedly in furtherance of pursuing one of these grounds for objection, on May 5, 1994, the Debtors filed a complaint with the Court (Adv. Proc. No. 94-278) (the "New DJ Action") requesting a declaratory judgment that (i) on a Chapter 7 liquidation basis, the Debtors are insolvent, and (ii) under the provisions of the Code and applicable law, unsecured creditors in the Chapter 11 Cases are therefore not legally entitled to receive post-petition interest on their Claims. The complaint in the New DJ Action names as defendants each of the Proponents and each of the Indenture Trustees, including the Series B & C Senior Note Trustee. The complaint alleges that, if the Court grants the relief requested by the Debtors, the Creditors' Plan and the Senior Note Plan would be unconfirmable as a matter of law. The Proponents believe that the issues raised in the complaint are irrelevant to the confirmability of the Creditors' Plan; that certain factual and legal conclusions contained in the complaint are erroneous; and that the issues raised in the New DJ Action are properly the subject of a confirmation hearing rather than a declaratory judgment proceeding. As discussed herein at "OVERVIEW OF THE CREDITORS' PLAN," confirmation of the Creditors' Plan is not conditioned on whether Holders of Subordinated Note Claims are permitted to be paid or will receive post-petition interest, although the Proponents believe that this is the correct legal conclusion under the circumstances. On June 6, 1994, the Series B & C Senior Note Trustee filed a motion to dismiss the New DJ Action, and the Proponents filed a motion seeking to dismiss the complaint in the New DJ Action or, alternatively, to consolidate the New DJ Action with the Confirmation Hearing. The Debtors filed a response to these motions on July 7, 1994. At a hearing held on July 13, 1994, the Court ruled that the New DJ Action should be deemed to be a contested matter governed by Bankruptcy Rule 9014 and that as part of the confirmation process the issues raised by the New DJ Action be considered at a hearing scheduled to begin on October 17, 1994. II. OVERVIEW OF THE CREDITORS' PLAN The Proponents believe that the Creditors' Plan is the only plan filed in these Chapter 11 Cases that is capable of confirmation and consummation in the near term--as early as the end of calendar year 1994. Unlike the other plans filed to date, including the Debtors' Plan, the Creditors' Plan would promptly and finally resolve all asbestos-related claims against the Debtors pursuant to the settlement agreed to in principle on December 9, 1993 and embodied in the definitive Veil Piercing Settlement Agreement entered into on April 18, 1994. The asbestos-related claims are the primary reason that the Debtors sought Chapter 11 relief. All other plans depend on either (i) a final litigated resolution of these cases, which, because of the appellate process, will prolong these cases for years to come, or (ii) an unspecified settlement to be reached on unspecified terms at an unspecified date. The rationale and basis for the veil piercing settlement are discussed below in greater detail. On April 18, 1994, the Court rendered its decision in the Declaratory Judgment Proceeding. As expected, the Court ruled in favor of the Debtors. On April 27, 1994, counsel for the Veil Piercing Claimants filed a timely appeal of the Court's decision. Far from resolving the litigation, this decision marks only the beginning of what the Proponents expect to be a lengthy and costly appeals process. Nothing in the Court's decision in the Declaratory Judgment Proceeding in any way prevents or precludes the settlement of the Veil Piercing Claims under the Veil Piercing Settlement Agreement. See "INTRODUCTION--Litigation of Veil Piercing Proceedings." Although the Proponents of the Creditors' Plan have always believed that the Debtors will ultimately prevail in the Veil Piercing Proceedings, the settlement represents their collective judgment that the uncertainty and cost of protracted litigation far outweigh the very substantial cost of the settlement. The settlement was negotiated by the Bondholder Proponents, who, as the two largest holders of Subordinated Note Claims (approximately $428 million principal amount), will see their recoveries most adversely impacted by a litigation loss or extended delay in finally resolving the Veil Piercing Claims. The settlement represents a reasonable assessment of (i) the uncertainty inherent in the litigation, i.e., the possibility of an ultimately adverse judgment against the Debtors, and (ii) the probability that distributions to Creditors will be delayed for additional years pending completion of the appellate process. In negotiating the settlement, the Bondholder Proponents took into consideration the risk to Creditors of losing billions of dollars if the asbestos claimants were to prevail, as well as the time and expense (in terms of the time value of money and otherwise) of the completion of the lengthy appellate process. In this connection, counsel to the Proponents read and analyzed thousands of pages of transcripts and documents and have analyzed certain legal issues raised on appeal. The Proponents believe that the foregoing factors, in and of themselves, demonstrate that the settlement is fair and equitable. In addition to these factors, however, it is important to note that, notwithstanding the Debtors' assertions to the contrary, all or substantially all of the value being used to settle the Veil Piercing Claims is, in effect, coming from distributions to which Subordinated Noteholders would otherwise be legally entitled on account of post-petition interest accrued during the Debtors' more than four-year old bankruptcy proceedings. Such an award of post-petition interest is proper under the Code and existing case law where, as here, the Debtors' estates would have remaining value, after satisfaction of all Claims (other than post-petition interest on Subordinated Note Claims), if it is assumed that the Veil Piercing Claims have a value of zero. The Proponents believe that it would not be in good faith or fair and equitable to delay distributions until a final litigated result or settlement negotiated on terms satisfactory to the Debtors and approved by the Court is obtained with respect to the Veil Piercing-Related Issues, and then not pay creditors post-petition interest on their Claims. Moreover, notwithstanding Debtors' assertions to the contrary, neither approval of the settlement nor confirmation of the Creditors' Plan is conditioned upon a determination by the Court that Subordinated Noteholders are legally permitted to receive post-petition interest on account of their Claims. The Proponents believe that the settlement satisfies the fair and equitable test independent of the Subordinated Noteholders' legal right to receive post-petition interest on account of their Claims. The Creditors' Plan expressly provides that the Allowed Amount of Subordinated Note Claims includes all pre-petition amounts as well as post-petition interest, but only to the extent that the payment of post-petition interest is permitted by law and to the extent available after payment of all other Claims under the Creditors' Plan. Based upon the Negotiated Enterprise Value and the estimated amount of Allowed Claims, including Veil Piercing Claims pursuant to the Veil Piercing Settlement Agreement, the Proponents do not expect that any value will remain for payment of post-petition interest on account of Subordinated Note Claims. Therefore, not only does the Creditors' Plan envision that no post-petition interest will be paid on account of Subordinated Note Claims, in the event that there is any residual value in the Debtors' estates after payments of all other Allowed Claims, post-petition interest is payable on account of Subordinated Note Claims only to the extent permitted by law. Thus, although the Creditors' Plan is flexible enough to accommodate any finding by the Court with respect to Subordinated Noteholders' right to post-petition interest, because the Proponents do not believe that there will be any residual value in the Debtors' estates after payment of all other Allowed Claims, it will not be necessary for the Court to rule on the merits of Subordinated Noteholders' right to post-petition interest in order to confirm the Creditors' Plan. The veil piercing settlement does not require confirmation of a plan of reorganization in the Celotex Chapter 11 Proceeding before it becomes effective, nor will the Debtors' estates be burdened with any issues regarding the allocation of the settlement proceeds. The Creditors' Plan also settles fraudulent conveyance claims asserted by the Ad Hoc Committee of Pre-LBO Bondholders, now a Proponent of the Creditors' Plan, against the Released Parties. The claims asserted in the Fraudulent Conveyance Lawsuit raise issues of priority that are not consensually resolved by the Debtors' Plan or any other creditor plan. Like the veil piercing litigation, the fraudulent conveyance litigation would otherwise result in further delay and uncertainty to creditors. The Creditors' Plan, and the terms of the settlements it embodies, are premised on a Negotiated Enterprise Value of $2,525,000,000, which represents a good faith negotiated estimate of the going concern enterprise value of the Debtors on a consolidated basis. This value is critical to the allocation of New Common Stock and Qualified Securities among holders of Subordinated Note Claims (i.e., those who are effectively funding the veil piercing settlement) and the holders of Veil Piercing Claims. All other creditor classes are paid in full, including post-petition interest, either in Cash or debt securities. The Proponents believe that, given the amount of Claims, including post-petition interest, and the value of the Debtors, the current stockholders no longer have an economic stake in the Debtors or in the Chapter 11 Cases. Even if no consideration were paid in settlement of the Veil Piercing Claims, the Debtors' estate would still have insufficient remaining value to satisfy post-petition interest to which the Subordinated Noteholders are legally entitled, leaving no residual value for stockholders on account of their equity interests. Accordingly, the Creditors' Plan provides a recovery for Holders of Old Common Stock Interests only if and to the extent that there are shares of New Common Stock remaining after giving effect to all distributions to be made to Creditors under the Creditors' Plan (a result that would occur only if the Court finds that the going concern enterprise value of the Debtors is significantly greater than the Negotiated Enterprise Value of $2,525,000,000 and that Holders of Subordinated Note Claims are not permitted by law to be paid post-petition interest on account of their Claims). In an effort to promote a fully consensual resolution of these Chapter 11 Cases, the Veil Piercing Settlement Agreement requires the Celotex Settlement Fund Recipient to assign to Settling Equityholders, pro rata among such Settling Equityholders, the Celotex Settlement Fund Recipient's right to receive shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to the sum of (a) $75,000,000 and (b) 50% of the Senior Claim Differential, multiplied by a fraction, the numerator of which is the aggregate Allowed Old Common Stock Interests of Settling Equityholders, and the denominator of which is the aggregate Allowed Old Common Stock Interests. KKR Associates, the beneficial holder (with sole power to vote) of over 91% of the Old Common Stock, did not agree to become a Settling Equityholder within the time period specified in the Veil Piercing Settlement Agreement. In view of this fact, and in view of the Debtors' last-minute increase in the recoveries of Classes S-1 and S-2 and Class S-6 pursuant to an amendment to the Debtors' Plan after an emergency hearing held by the Court on July 28, 1994, the Proponents decided to amend the Creditors' Plan and to seek the agreement of the other parties to the Veil Piercing Settlement Agreement to amend the Veil Piercing Settlement Agreement, in each case to decrease by $75 million the amount of Class B Common Stock that was to have been issued to the Celotex Settlement Fund Recipient (and that was to have been subject to pro rata assignment to Settling Equityholders, if any), and increase by a total of $75 million the post-petition interest recovery (in the form of Class B Common Stock) of Class S-6 and of Classes S-1 and S-2, taken together. This amendment to the Veil Piercing Settlement Agreement has already been agreed to in principle by all but one of the parties thereto, and must be executed and then approved by the Celotex Bankruptcy Court in order to become effective. The Proponents expect that the amended agreement will become effective in the near future. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." In addition, each Person that was a Holder of a Class E-1 Interest on the date on which the order approving this Disclosure Statement is entered and that did not transfer such Interest on or prior to the Effective Date (other than to an Affiliate of such Person, which Affiliate shall have the right to exercise the Equity Call Option) shall have a nontransferable Equity Call Option, entitling such person to purchase all, but not part, of such Holder's Pro Rata share of all of the 50 million shares of New Common Stock (each of which shall be shares of Class B Common Stock) that are to be issued on the Effective Date, at a Cash exercise price per share equal to the New Common Stock Value Per Share (provided, that in calculating the New Common Stock Value Per Share for this purpose, the New Common Stock Value shall be calculated using a going concern enterprise value equal to the greater of (i) the Negotiated Enterprise Value and (ii) if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount), such right to be exercisable by properly completing and returning the Equity Call Option Election Form in accordance with the Election Procedure and by paying the Cash exercise price in full on the Effective Date. Under certain circumstances, Persons exercising the Equity Call Option may, as a condition to such exercise, be required to make certain customary investment representations. A. Summary of Claims and Class Treatment Under the Creditors' Plan Set forth below is a summary of Claims and Class treatment under the Creditors' Plan. Summaries of Claims and Class treatment under the Creditors' Plan for each Debtor are annexed hereto as Exhibit IV. Unless otherwise indicated, all amounts are estimated from the Debtors' records.
Estimated Allowed Amount Treatment of Allowed of Claims as of Claims Under the Class of Creditors (Debtors)( Dec. 31, 1994 Creditors' Plan Impairment Administrative Claims: Administrative Claims (all Debtors) $32,000,000 Payment of Allowed Amounts in full, in Cash Not Applicable Priority Claims: Federal Income Tax Claims (all Debtors) $14,000,000- $40,000,000 Payment of Allowed Amounts in full, pursuant to Section 1129(a)(9)(C) of the Code Not Applicable Federal Excise Tax and Reclamation Claims (Jim Walter Resources) $ 756,481 Payment of Allowed Amounts in full, in Cash Not Applicable State and Local Tax Claims (all Debtors except JW Resources, Home Improvement, Coast to Coast, Best and JW Insurance) $ 8,383,542 Payment of Allowed Amounts in full, in Cash Not Applicable Secured Claims: Class S-1 Revolving Credit Bank Claims (all Debtors except Home Improvement and Mid-State Homes) $354,027,530 plus $28,220,625 of Class B Common Stock if Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms Payment of Allowed Amounts in full, in Cash and, if Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, also in Class B Common Stock Impaired Substantially all Claim amounts are derived from information contained in the Debtors' Disclosure Statement. Allowed Amounts and Classes are defined in the Creditors' Plan for each Class of Creditors. The Proponents do not believe that the $12,000,000 amount for Administrative Claims set forth in the Debtors' Disclosure Statement is adequate. The primary reason for this difference is the inclusion in the Creditors' Plan of certain types of expenses as Administrative Claims that are not so included in the Debtors' Plan. See "OVERVIEW OF THE CREDITORS' PLAN--Classification of Claims and Interests--Administrative Claims." Proofs of claim have been filed for a total of approximately $185,000,000 in asserted Federal Income Tax Claims. These amounts have been and continue to be contested by the Debtors. The Debtors' Disclosure Statement estimates that the Federal Income Tax Claims, including pre-Filing Date interest thereon, will not exceed $14,000,000. The Proponents believe that, based upon their preliminary analysis of the disputed issues, $40,000,000 (or approximately 22% of the aggregate proof of claim amount) represents a reasonable estimate of the upper range for the Federal Income Tax Claims given the number of issues involved and the uncertainty of their resolution. The Debtors strongly disagree with this estimate. The Proponents amended their Plan on August 1, 1994 to provide the additional Class B Common Stock recovery in response to a similar increase made by the Debtors after an emergency hearing held by the Court on July 28, 1994. Due to the last-minute timing of the Debtors' amendment, the Proponents were unable to complete all of the actions necessary for the Amended and Restated Veil Piercing Settlement Agreement to become effective by its terms within the time frame established by the Court for the mailing of plans and disclosure statements. Nevertheless, the Proponents expect that the Amended and Restated Veil Piercing Settlement Agreement will become effective by its terms in the near future. For a discussion of the conditions precedent to effectiveness of the Amended and Restated Veil Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." If the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value.
Estimated Allowed Amount Treatment of Allowed of Claims as of Claims Under the Class of Creditors (Debtors) Dec. 31, 1994 Creditors' Plan Impairment Class S-2 Working Capital Bank Claims (Hillsborough, Old Walter Industries, Resources Holdings, Jim Walter Resources, U.S. Pipe, Homes Holdings, JW Aluminum, Sloss, Mid-State Holdings, Window Components, Southern Precision, Vestal, Pipe Realty, Hamer Holdings, JWI Holdings, Land Holdings, Computer Holdings, Railroad Holdings and Walter Land) $121,343,120 plus $9,279,375 of Class B Common Stock if Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms Payment of Allowed Amounts in full, in Cash and, if Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, also in Class B Common Stock Impaired Class S-3 Grace Street Note Claims (Old Walter Industries) $5,379 Payment of Allowed Amounts in full, in Cash Unimpaired Class S-4 Sloss IRB Claim (Sloss) $715,207 Payment of Allowed Amounts in full, in Cash Unimpaired Class S-5 Secured Equipment Purchase Claims (U.S. Pipe, JW Aluminum, Sloss, Window Components, Southern Precision and Computer Services) $47,677 Payment of Allowed Amounts in full, in Cash Unimpaired Class S-6 Series B & C Senior Note Claims (Hillsborough, Old Walter Industries, Resources Holdings, Jim Walter Resources, U.S. Pipe, Homes Holdings, Jim Walter Homes and United Land) $330,974,293 plus $37,500,000 of Class B Common Stock if Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms Payment of Allowed Amounts in full, partially in Cash from the S-6 Fund, and the remainder in Cash, New Senior Notes or a combination thereof, and, if Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, also in Class B Common Stock Impaired Class S-7 Provident Life & Accident Insurance Company Claims (Old Walter Industries) $7,493,856 Payment of Allowed Amounts in Cash and balance of Allowed Claims reinstated Unimpaired Class S-8 Revolving Credit Agents Claims (All Debtors except Home Improvement and Mid-State Homes) Payment of Allowed Amounts in full, in Cash Unimpaired Class S-9 Working Capital Agents Claims (Hillsborough, Old Walter Industries, Resources Holdings, Jim Walter Resources, U.S. Pipe, Home Holdings, JW Aluminum, Mid-State Holdings, Sloss, Window Components, Southern Precision, Vestal, Pipe Realty, Hamer Holdings, JWI Holdings, Land Holdings, Computer Holdings, Railroad Holdings and Walter Land) Payment of Allowed Amounts in full, in CashUnimpaired Class S-10 Other Secured Claims (all Debtors) $0 Either: (i) legal, equitable and contractual rights left unaltered; or (ii) defaults cured and contractual rights reinstated; or (iii) payment of Allowed Amounts in full, in Cash Unimpaired Estimated Allowed Amount Treatment of Allowed of Claims as of Claims Under the Class of Creditors (Debtors) Dec. 31, 1994 Creditors' Plan Impairment Unsecured Claims: Class U-1 Old Walter Industries IRB Claims (Old Walter Industries) $8,792,450 Payment of delinquent amounts in Cash with balance of Allowed Claims reinstated Unimpaired Class U-2 Convenience Class Claims (all Debtors) $1,703,603 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 Unimpaired Class U-3 Other Unsecured Claims (all Debtors) $93,775,323 Payment of 75% of Pre-Filing Date Unsecured Allowed Amounts on the Effective Date, payment six (6) months later 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 Impaired Class U-4 Senior Subordinated Note Claims (Hillsborough, Old Walter Industries, U.S. Pipe, Homes Holdings, Jim Walter Homes and United Land) $479,260,923 Satisfaction of Allowed Amounts in combination of Qualified Securities and Class A Common Stock Impaired Class U-5 17% Subordinated Note Claims (Hillsborough, Old Walter Industries, U.S. Pipe, Homes Holdings, Jim Walter Homes and United Land) $379,254,167 Satisfaction of Allowed Amounts in combination of Qualified Securities and Class A Common Stock Impaired Class U-6 Pre-LBO Debenture Claims (Old Walter Industries) $239,471,887 Satisfaction of Allowed Amounts in combination of Qualified Securities and Class B Common Stock Impaired Class U-7 Veil Piercing Claims (all Debtors) As provided in the Veil Piercing Settlement Agreement, $450,000,000 ($525,000,000 if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms) plus the Senior Claim Differential, if any. Payment of Allowed Amount in full in combination of Qualified Securities and Class B Common Stock to the Celotex Settlement Fund Recipient on behalf of Holders of Class U-7 Claims Unimpaired Intercompany Claims: Class I-1 Intercompany IRB Claims (Sloss) $7,350,000 Payment of Allowed Amounts in Cash and balance of Allowed Claim reinstated Unimpaired Class I-2 Pre-Filing Date Intercompany Notes Payable Claims (all Debtors except for JW Resources and JW Insurance) $1,248,631,219 Payment in the ordinary course of business Unimpaired Class I-3 Post-Filing Date Intercompany Notes Payable Claims (all Debtors) $2,006,003,414 Payment in the ordinary course of business Unimpaired Equity Claims: Class E-1 Interests (Hillsborough) $0 Grant of Equity Call Option for Cash purchase of Class B Common Stock; in addition, distribution of Class B Common Stock, if any, remaining after giving effect to all distributions to Creditors under Creditors' Plan Impaired Class E-2 Interests (Hillsborough) Not Applicable Holder will receive and retain no propertyImpaired Class SE-1 Interests in Debtors other than Hillsborough (all Debtors other than Hillsborough) Not Applicable Retention of existing Subsidiary Common Stock Unimpaired Estimated Allowed Amount Treatment of Allowed of Claims as of Claims Under the Class of Creditors (Debtors) Dec. 31, 1994 Creditors' Plan Impairment Class SE-2 Interests in Debtors other than Hillsborough (all Debtors other than Hillsborough) Not Applicable Holders will receive and retain no property Impaired If the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value. Reflects payment in full in New Senior Notes, in which case post-petition interest to 6/30/94 accrues at 14.0%, simple. Post-petition interest to 6/30/94 accrues at 13.0%, simple, for any part of the Class S-6 Claim that is paid in Cash (other than from the Class S-6 Fund). In either case, post-petition interest from 6/30/94 to the Effective Date accrues at 14 5/8%, simple. If the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value. The Proponents are unable to estimate the amount of this Claim. The Proponents are not aware of any Other Secured Claims. Does not reflect post-petition interest, which the Proponents believe that the Class is permitted to receive under applicable law, but which will not be paid under the Creditors' Plan assuming the utilization of the Negotiated Enterprise Value for purposes of allocation of New Common Stock and Qualified Securities. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants--New Common Stock." See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants."
B. Special Features of the Creditors' Plan The Creditors' Plan reflects, among other things, the Proponents' desire to resolve contentious and difficult issues that could potentially delay the Debtors' emergence from the Chapter 11 Cases for a substantial period of time, and to enable the reorganized Debtors to conduct their businesses free from the adverse influences of such issues. 1. Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues The Creditors' Plan incorporates, and implements the terms of, two settlements of existing and potential claims based upon Veil Piercing-Related Issues and LBO-Related Issues, a settlement of a dispute regarding the rate of post-petition interest to be paid in respect of Series B & C Senior Note Claims (and the form of consideration to be used to satisfy those Claims), and the allowance of the Claims of the Working Capital Banks and the Revolving Credit Banks, described in more detail below. An agreement in principle was reached on December 9, 1993, and the Veil Piercing Settlement Agreement was entered into on April 18, 1994, with counsel to a majority of the plaintiffs in the pending Veil Piercing Proceedings and the Official Committees in the Celotex Chapter 11 Proceeding. Over thirty-five law firms, representing the vast majority of the Veil Piercing Claimants, have agreed to be bound by the Veil Piercing Settlement Agreement. An agreement regarding LBO-Related Issues was executed as of March 23, 1994 with the members of the Ad Hoc Committee of Pre-LBO Bondholders and Holders of over aggregate principal amount of Pre-LBO Debenture Claims. In addition, an agreement regarding the rate of post-petition interest to be paid in respect of Series B & C Senior Note Claims (and the form of consideration to be used to satisfy those Claims) was entered into on May 19, 1994 with the Series B & C Senior Note Trustee, which agreement is supported by Holders of a substantial amount of Series B & C Senior Note Claims. The terms of each of these agreements are reflected in the Creditors' Plan (a copy of the Veil Piercing Settlement Agreement is attached as Exhibit 3A to the Creditors' Plan and a copy of the Pre-LBO Bondholders Settlement Agreement is attached as Exhibit 3B to the Creditors' Plan). Implementation of these settlements would resolve protracted litigation and enable the Debtors to emerge from Chapter 11 in the near future. These settlements are to be made effective and operative under Section 1123(b)(3)(A) of the Code, which expressly permits a plan of reorganization to provide for the settlement or adjustment of any claim or interest belonging to the debtor or to the estate. a. Terms of the Veil Piercing Settlement Agreement The Veil Piercing Settlement Agreement provides that all Veil Piercing Claims and all claims held 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 and Class B Common Stock under the Creditors' Plan to the Celotex Settlement Fund Recipient. The Veil Piercing Settlement Agreement provides that the Allowed Amount of the Veil Piercing Claims shall be equal to the sum of (A) $450 million, as the same may be increased or decreased as described below (defined as the "Veil Piercing Claims Amount"), (B) $75 million in New Common Stock and (C) the Senior Claim Differential, if any, subject to the following: (x) the assignment to the Settling Equityholders, if any, on a pro rata On an after-tax basis, assuming full deductibility for federal and state income tax purposes of the $450 million settlement amount in the year in which payment by the Debtors is made, the effective cost of the settlement would be approximately $270 million (assuming an effective combined tax rate of 40%). However, see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES--Tax Consequences to Walter Industries and its Subsidiaries--Deductibility of Payments to Celotex Settlement Fund Recipient" and "--Net Operating Loss ("NOL") Carryforwards," for a discussion of possible limitations on deductibility and other issues regarding the availability and timing of this deduction. basis of the right to receive their pro rata share of $75 million plus 50% of the Senior Claim Differential, if any (as described below); and (y) in the event that the actual amount of distributions under the Plan in respect of the Subordinated Note Claims is different than $1098 million, then the Veil Piercing Claims Amount shall be calculated as follows: Actual amount of distributions in respect of Subordinated Note Claims $1098 million X $450 million For purposes of the foregoing fraction, the actual amount of distributions is 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 New Common Stock. The Veil Piercing Settlement Agreement provides that the Veil Piercing Claims shall be paid and satisfied by the distribution of a combination of Qualified Securities and Class B Common Stock to the Celotex Settlement Fund Recipient. The amount of Qualified Securities to be so distributed under the Plan in respect of Veil Piercing Claims is calculated as follows: $450 million + $37.5 million $1098 million + $450 million + $37.5 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 Creditors' Plan; provided, that if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms (as discussed below), $37.5 million shall be subtracted from the numerator and from the denominator of the foregoing fraction, and provided, further, that if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, if any holder of an Allowed Old Common Stock Interest becomes a Settling Equityholder under the Veil Piercing Settlement Agreement, then the numerator and denominator in the foregoing fraction shall each be reduced by $1 for each $2 of Class B Common Stock assigned to Settling Equityholders under clause (i) of Section 6(a) of the Veil Piercing Settlement Agreement (it being further provided that in no event shall the numerator in the foregoing fraction be less than $450 million or the denominator less than $1548 million). The amount of Veil Piercing 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 Veil Piercing Claims. The excess of the Allowed Amount of Veil Piercing Claims over the part thereof paid, and settled, satisfied, released and discharged, by Qualified Securities shall be paid, and settled, satisfied, released and discharged, by shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants." Although the Celotex Settlement Fund Recipient will be organized and administered in conjunction with the Celotex Chapter 11 Proceeding, the Creditors' Plan is not conditioned upon the confirmation of a plan of reorganization in the Celotex Chapter 11 Proceeding. It is believed that a consensual resolution of the Chapter 11 Cases is in the best interests of all constituencies, and, accordingly, the Veil Piercing Settlement Agreement offers existing stockholders an opportunity to receive substantial value and releases if they support the settlement and the Creditors' Plan. While the Creditors' Plan does not provide a certain recovery for Holders of Old Common Stock Interests, as discussed above, the Veil Piercing Settlement Agreement requires the Celotex Settlement Fund Recipient to assign to any Settling Equityholders, pro rata among such Settling Equityholders, the Celotex Settlement Fund Recipients' right to receive shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to the sum of (a) $75,000,000 and (b) 50% of the Senior Claim Differential, multiplied by a fraction, the numerator of which is the aggregate Allowed Old Common Stock Interests of Setting Equityholders, and the denominator of which is the aggregate Allowed Old Common Stock Interests. Under the terms of the Veil Piercing Settlement Agreement, KKR Associates, the beneficial holder (with sole power to vote) of over 91% of the Old Common Stock, was given the opportunity to become a Settling Equityholder during the 28 day period from April 20, 1994 to May 18, 1994. KKR Associates failed to timely become a signatory to the Veil Piercing Settlement Agreement and is, therefore, precluded from becoming a Settling Equityholder, unless the Court finds that the settlement set forth in the Veil Piercing Settlement Agreement is not reasonable or the Creditors' Plan is not confirmable unless each or any of the Holder(s) of an Allowed Old Common Stock Interest is given a further opportunity to become a Settling Equityholder by becoming a signatory to the Veil Piercing Settlement Agreement by a specific date or dates set by the Court. In view of this fact, and in response to the Debtors' last-minute amendment of their plan and disclosure statement to increase the recoveries (i) to Class S-6 and (ii) to Classes S-1 and S-2, collectively, in each case by 5% of the common stock of the reorganized Debtors, the Proponents decided to amend their plan and disclosure statement to increase the recoveries to Class S-6, and to Classes S-1 and S-2, collectively, by increasing the interest to be paid on account of such Claims in each case by an amount of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $37.5 million. These increases, however, require the amendment of the Veil Piercing Settlement Agreement to authorize a total of $75 million of Class B Common Stock to be redistributed from the Celotex Settlement Fund Recipient (where such shares were subject to pro rata assignment to Settling Equityholders) to Classes S-6, S-1 and S-2. The rationale for this redistribution was in part due to the failure of KKR Associates to timely become a signatory to the Veil Piercing Settlement Agreement and thereby become a Settling Equityholder. Due to the last-minute timing of the Debtors' plan amendment, the Proponents were unable to complete all of the actions necessary for the Amended and Restated Veil Piercing Settlement Agreement to become effective by its terms within the time frame established by the Court for the mailing of plans and disclosure statements. Nevertheless, the Proponents believe that the Amended and Restated Veil Piercing Settlement Agreement will become effective by its terms in the near future. Accordingly, the Creditors' Plan is drafted so that, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective, the amended treatment, described above and elsewhere herein, will apply and become effective. Otherwise, the existing treatment will apply. The Amended and Restated Veil Piercing Settlement Agreement becomes effective, by its terms, only upon the satisfaction of both of the following conditions on or prior to the Effective Date: (i) the execution of the Amended and Restated Veil Piercing Settlement Agreement substantially in the form of Exhibit 3C to the Creditors' Plan by all of the parties to the Veil Piercing Settlement Agreement other than any Settling Equityholders and other than the Jim Walter Corporation, which amended and restated agreement permits the $75 million of Class B Common Stock otherwise to have been distributed to the Celotex Settlement Fund Recipient (subject to Assignment to Settling Equityholders) to be distributed under the Creditors' Plan; and (ii) the entry of an order by the Celotex Bankruptcy Court that (a) approves such Amended and Restated Veil Piercing Settlement Agreement, and (b) authorizes and directs The Celotex Corporation to render performance under such Amended and Restated Veil Piercing Settlement Agreement. The parties that must execute the Amended and Restated Veil Piercing Settlement Agreement in order for it to become effective are as follows: (i) each of the "Veil Piercing Claimants' Representatives," which consist of the law firms of Caplin & Drysdale, Baron & Budd, Greitzer and Locks and Ness Motley Loadholt Richardson & Poole; (ii) The Celotex Corporation; (iii) the Celotex Committee of Unsecured Creditors; (iv) the Celotex Asbestos Property Damage Claimants Committee; (v) the Celotex Asbestos Bodily Injury Claimants Committee; and (vi) the Bondholders Committee, the Creditors Committee, Lehman Brothers Inc. and Apollo. Each of the foregoing parties, other than The Celotex Corporation, has already agreed in principle to execute the Amended and Restated Veil Piercing Settlement Agreement. The Celotex Corporation has not been able to act on this matter in the limited time available to do so, but the Proponents expect The Celotex Corporation to act shortly and to agree in principle to execute the Amended and Restated Veil Piercing Settlement Agreement, especially in light of the agreement in principle of Celotex's three official creditors committees to do so. The Celotex Bankruptcy Court has scheduled a hearing for September 1, 1994 at 1:30 P.M., Eastern Time, before Judge Thomas M. Baynes at the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, 4921 Memorial Highway, Tampa, Florida 33634, to consider granting the order described above approving the Amended and Restated Veil Piercing Settlement Agreement. WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED OTHERWISE, HOLDERS OF REVOLVING CREDIT BANK CLAIMS, WORKING CAPITAL BANK CLAIMS AND SERIES B & C SENIOR NOTE CLAIMS SHOULD ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION INTEREST IN THE FORM OF CLASS B COMMON STOCK THAT IS CONTINGENT ON THE EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL 1-800-489-7444 AT ANY TIME FOR A RECORDING PROVIDING CURRENT INFORMATION AS TO WHETHER SUCH AGREEMENT HAS BECOME EFFECTIVE, INCLUDING THE RESULT OF THE SEPTEMBER 1, 1994 HEARING TO BE HELD BY THE CELOTEX BANKRUPTCY COURT TO CONSIDER APPROVAL THEREOF. IN ADDITION, WHEN VOTING ON THE CREDITORS' PLAN, HOLDERS OF OLD COMMON STOCK INTERESTS SHOULD ASSUME THAT THEY WILL NOT BE ENTITLED TO RECEIVE ANY CONSIDERATION (OTHER THAN SPECIFIED RELEASES) UNDER THE VEIL PIERCING SETTLEMENT AGREEMENT EVEN IF THEY BECOME SETTLING EQUITYHOLDERS THEREUNDER. The Creditors' Plan defines "Settling Equityholder" to mean a Holder of an Allowed Old Common Stock Interest (a) that, subject to certain contingencies described below, shall have become a signatory to the Veil Piercing Settlement Agreement on or prior to the later of (i) twenty (20) days after a copy of the Veil Piercing Settlement Agreement is sent to such Holder of an Allowed Old Common Stock Interest or a representative thereof, and (ii) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Creditors' Plan and the plan filed by the Debtors), and (b) that shall have taken no action(s) subsequent to becoming a signatory to the Veil Piercing Settlement Agreement which, in the determination of the Bondholder Proponents, would be reasonably likely to (i) impede the prompt distribution or approval of the Disclosure Statement; (ii) impede the prompt confirmation and effectiveness of the Creditors' Plan; (iii) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Creditors' Plan and the Chapter 11 Cases; (iv) impede the prompt realization of Finality (as defined in the Veil Piercing Settlement Agreement); or (v) result in a breach of the Veil Piercing Settlement Agreement. If the Court finds that the settlement set forth in the Veil Piercing Settlement Agreement is not reasonable or the Creditors' Plan is not confirmable unless each or any of the Holders of an Allowed Old Common Stock Interest is given a further opportunity to become a Settling Equityholder by becoming a signatory to the Veil Piercing Settlement Agreement and receiving the benefits specified therein for a Setting Equityholder by a specified date(s) set by the Court, then the date specified in (a) above shall be the date(s) set by the Court. Notwithstanding the foregoing, the Bondholder Proponents will have the right, exercisable on or before the Effective Date, to waive the date(s) specified above for any Person who is a Holder of less than 5% of the issued and outstanding Old Common Stock, exclusive of any shares of such stock held in treasury. A copy of the Veil Piercing Settlement Agreement was sent to KKR Associates on April 20, 1994 but was not executed prior to the May 18, 1994 deadline or thereafter, and as of the date of this Disclosure Statement the Court has not acted to extend such deadline. A copy of the Veil Piercing Settlement has not, as of the date of this Disclosure Statement, been sent to other Holders of Allowed Old Common Stock Interests. The Proponents anticipate that such other Holders will be permitted to execute the Veil Piercing Settlement Agreement at any time up to the Effective Date. The Veil Piercing Settlement Agreement also provides for releases of The Celotex Corporation, Old Jim Walter and, with certain exceptions, their respective present or former directors, officers, partners, shareholders, employees, agents, advisers and representatives and their respective subsidiaries. b. Reasonableness of the Settlement: Certainty and Prompt Payment vs. Uncertainty and Additional Years of Delay On April 18, 1994, the Court rendered its decision in the Declaratory Judgment Proceeding. As expected, the Court ruled in favor of the Debtors. On April 27, 1994, counsel for the Veil Piercing Claimants filed a timely notice of appeal of the Court's decision. Nothing in the Court's decision in the Declaratory Judgment Proceeding in any way prevents or precludes the settlement of the Veil Piercing Claims under the Veil Piercing Settlement Agreement. Far from resolving the litigation, this decision marks only the beginning of what the Proponents expect to be a lengthy and costly appeals process. See "INTRODUCTION--Litigation of Veil Piercing Proceedings." Although the Proponents of the Creditors' Plan have always believed that the Debtors will ultimately prevail in the Veil Piercing Proceedings, the settlement represents their collective judgment that the uncertainty and cost of protracted litigation far outweigh the very substantial cost of the settlement. The settlement was negotiated by the Bondholder Proponents, who, as the two largest holders of Subordinated Note Claims (approximately $428 million principal amount), will see their recoveries most adversely impacted by a litigation loss or extended delay in finally resolving the Veil Piercing Claims. The settlement represents a reasonable assessment of (i) the uncertainty inherent in the litigation, i.e., the possibility of an ultimately adverse judgment against the Debtors, and (ii) the probability that distributions to Creditors will be delayed for additional years pending completion of the appellate process. In negotiating the settlement, the Bondholder Proponents took into consideration the risk to Creditors of losing billions of dollars if the asbestos claimants were to prevail, as well as the time and expense (in terms of the time value of money and otherwise) of the completion of the lengthy appellate process. In this connection, counsel to the Proponents read and analyzed thousands of pages of transcripts and documents and have analyzed certain legal issues raised on appeal. Based on the foregoing, the Proponents believe that they will be able to demonstrate, at the hearing on confirmation of the Creditors' Plan, that the settlement is fair, equitable and reasonable and should be approved by the Court. Under applicable law, a court considers four main factors in determining whether to approve a compromise and settlement, such as the settlement of the Veil Piercing-Related Issues under the Creditors' Plan. They are: the probability of ultimate success on the merits if the settled issues were instead fully litigated; the likely cost of continued litigation; the likely delay caused by continued litigation; and the wishes of creditors. As noted above, the Proponents believe that the vast majority of creditors or their representatives support the Creditors' Plan or the treatments provided for in the Creditors' Plan. The Creditors' Plan is the only filed plan that has the support of the Bondholders Committee, the Creditors Committee and the Ad Hoc Committee of Pre-LBO Bondholders. The Bank Agents and the Series B & C Senior Note Trustee support the treatment provided to their respective constituencies in the Creditors' Plan. The Debtors, senior management of the Debtors and the Debtors' largest shareholder support the Debtors' Plan. Given the sophistication of the Creditors and their representatives, this fact, and the fact that the settlement was negotiated by the Bondholder Proponents, who, as the holders of approximately $428 million principal amount of Subordinated Note Claims will see their recoveries most adversely affected by a litigation loss or extended delay in finally resolving the Veil Piercing Claims, probably provide the strongest proof of the reasonableness of the settlement. In pursuing the Debtors' litigation strategy, the Proponents believe that the Debtors are betting with the Creditors' money. Moreover, even if the Debtors ultimately prevail in the Declaratory Judgment Proceeding, under the Debtors' Plan, Creditors will bear the full cost of the protracted appeals process but substantially all of the benefits of a victory by the Debtors will be transferred to the old shareholders. The Proponents have always anticipated that, given the potentially enormous amounts involved, the Court's decision in the Declaratory Judgment Proceeding (whether in favor of the Debtors or the Veil Piercing Claimants) would be appealed and that further appeals will be taken from appellate court decisions until all avenues of appeal have been exhausted. On April 27, 1994, counsel for the Veil Piercing Claimants timely filed notice of appeal in the Declaratory Judgment Proceeding. Counsel for the Veil Piercing Claimants have raised a number of legal issues on appeal, including (a) the choice of law, (b) the right to a jury trial, (c) accountant--client privilege and waiver, (d) attorney--client privilege and waiver, (e) the applicable standards for veil piercing and (f) corollary issues, such as a shareholder's obligation to creditors of an insolvent debtor. In the past, the Debtors have been unwilling to agree to a settlement that would grant significant monetary or other relief to the veil piercing claimants, and it is the Proponents' belief, based upon prior negotiations by the Bondholder Proponents with both of the parties, that the Veil Piercing Claimants would not agree to forego their claims against the Debtors except in consideration of a significant damages award or settlement. As a result, the Proponents believe that under current circumstances there are no real prospects for a settlement of this litigation by the Debtors with the veil piercing claimants. Moreover, even though the Proponents believe that the Debtors have the better legal argument in this litigation, the possibility of an ultimately adverse judgment, which could be in the billions of dollars, cannot be ignored. The Proponents believe that the foregoing factors, in and of themselves, demonstrate that the settlement is fair and equitable. In addition to these factors, however, it is important to note that, notwithstanding the Debtors' assertions to the contrary, all or substantially all of the value being used to settle the Veil Piercing Claims is, in effect, coming from distributions which Subordinated Noteholders would otherwise be legally permitted to be paid on account of post-petition interest accrued during the Debtors' more than four-year old bankruptcy proceedings. Such an award of post-petition interest is proper under the Code and existing case law where, as here, the Debtors' estates would have remaining value, after satisfaction of all Claims (other than post-petition interest on Subordinated Note Claims), if it is assumed that the Veil Piercing Claims have a value of zero. The Proponents believe that it would not be in good faith or fair and equitable to delay distributions until a final litigated result is obtained with respect to the Veil Piercing-Related Issues, and then not pay Creditors post-petition interest on their Claims. Moreover, notwithstanding Debtors' assertions to the contrary, neither approval of the settlement nor confirmation of the Creditors' Plan is conditioned upon a determination by the Court that Subordinated Noteholders are legally entitled to post-petition interest on account of their Claims. The Proponents believe that the settlement satisfies the fair and equitable test independent of the Subordinated Noteholders' legal right to receive post-petition interest on account of their Claims. The Creditors' Plan expressly provides that the Allowed Amount of Subordinated Note Claims includes all pre-petition amounts as well as post-petition interest, but only to the extent that the payment of post-petition interest is permitted by law and to the extent available after payment of all other Claims under the Creditors' Plan. Based upon the Negotiated Enterprise Value and the estimated amount of Allowed Claims, including Veil Piercing Claims pursuant to the Veil Piercing Settlement Agreement, the Proponents do not expect that any value will remain for payment of post-petition interest on account of Subordinated Note Claims. Therefore, not only does the Creditors' Plan envision that no post-petition interest will be paid on account of Subordinated Note Claims, in the event that there is any residual value in the Debtors' estates after payments of all other Allowed Claims, post-petition interest is payable on account of Subordinated Note Claims only to the extent permitted by law. Thus, although the Creditors' Plan is flexible enough to accommodate any finding by the Court with respect to Subordinated Noteholders' right to be paid post-petition interest, because the Proponents do not believe that there will be any residual value in the Debtors' estates after payment of all other Allowed Claims, it will not be necessary for the Court to rule on the merits of Subordinated Noteholders' right to post-petition interest in order to confirm the Creditors' Plan. The Proponents believe that, in addition to the merits of the Declaratory Judgment Proceedings, there are ancillary legal issues that will engender further delay if litigated to conclusion. Notably, the Debtor's lawsuit names as defendants only a handful of the estimated 250,000 present and future asbestos claimants that could assert liability against the Debtors. Thus, even if the litigation in the Declaratory Judgment Proceedings ultimately results in a final order favorable to the Debtors, it is unclear whether this order would be binding on more than perhaps 1% of the veil piercing claimants. If not, further litigation with the remaining 99% would be inevitable. Added to this is the lengthy delay that will occur in litigating other issues of law, such as the right to a jury trial, which may go to the Supreme Court, and issues regarding whether the Debtors waived the attorney--client and accountant--client privileges, which, if a waiver is found on appeal, could lead to a retrial of the merits. A settlement with the asbestos claimants' representatives, including the official committees in the Celotex Case, is believed to greatly enhance the likelihood that such issues will not further delay the Debtors' emergence from Chapter 11. The Debtors assert that this Disclosure Statement does not demonstrate that the Veil Piercing Settlement Agreement or the Pre-LBO Bondholder Settlement Agreement satisfies the "fair and equitable" and "best interests of the estate" standards. The Proponents disagree and believe that the settlement agreements meet the applicable legal standards for all of the reasons set forth in this Section II.B.1.(b). This issue, however, should be decided by the Court at the hearing on confirmation of the Creditors' Plan. The Debtors further assert that (i) the settlements contained in the Veil Piercing Settlement Agreement and the Pre-LBO Bondholders Settlement Agreement cannot be approved because they constitute an improper solicitation of support for the Creditors' Plan and rejection of all other plans, and (ii) the Creditors' Plan cannot be consummated should the Court determine that the Holders of Unsecured Claims are not entitled to post-petition interest. The Proponents disagree. First, both the Veil Piercing Settlement Agreement and the Pre-LBO Bondholders Settlement Agreement expressly provide that the parties to the agreement are not bound to vote for or against any plan of reorganization. Far from constituting a "solicitation," the agreements expressly allow any signatory to vote for or against (or even abstain from voting on) any plan of reorganization. See section 9(i) of the Veil Piercing Settlement Agreement and section 9 of the Pre-LBO Bondholders Settlement Agreement (attached as Exhibits 3A. and 3B. to the Creditors' Plan). Moreover, the Proponents believe that the Debtors are mistaken in their belief that a determination that the Holders of Subordinated Note Claims and unsecured trade Claims (Other Unsecured Claims) are legally permitted to be paid post-petition interest is a condition to confirmation of the Creditors' Plan. The Creditors' Plan does, however, recognize the unique nature of the unsecured trade Claims against the Debtors' Operating Businesses. The Proponents believe that it is appropriate to settle these unsecured trade Claims, without litigation, based on the facts that these post-LBO Claims are asserted solely and directly against the Debtors' Operating Businesses, including Debtors against which no Subordinated Note Claims are asserted, and the potential fraudulent transfer claims that such Creditors would assert. Such allowance, constituting the payment in full of such Claims including post-petition interest at a compromised rate that is below applicable legal rates, is contained in the Proponents' liquidation analysis. These issues, if properly raised, should be decided by the Court at the hearing on confirmation of the Creditors' Plan. c. Funding of the Settlement Payment by Creditors As described above, the Proponents believe that, under the circumstances, the settlement of the Veil Piercing-Related Issues is reasonable. Moreover, all or substantially all of the consideration provided for in the Veil Piercing Settlement Agreement, and embodied in the Creditors' Plan, will effectively be funded by post-petition interest foregone by certain Creditors, primarily by Holders of Subordinated Note Claims, and not by value that might otherwise be received by the Holders of Old Common Stock Interests. The Proponents believe that the Debtors' controlling stockholder has a strong financial interest in causing the Debtors to pursue a time-consuming litigation-only strategy. The Debtors' Plan is designed to extract from bondholders, for the controlling stockholder's benefit, interest-free financing. The treatment of the bondholders' claims under the Debtors' Plan is the equivalent of a forced, non-interest bearing loan without a fixed maturity, that will be paid only if and when the veil piercing litigation is finally resolved in favor of the Debtors. The Debtors' Plan also confers on the current stockholders, including the controlling stockholder, substantially all of the benefits of this interest-free financing, together with the growth in the Debtors' enterprise value which the controlling stockholder anticipates will occur over the next several years while appeals of the veil piercing litigation are litigated. Thus, the controlling stockholder stands to profit from delay. The Proponents believe that this reason has played a significant part in the Debtors' decision to pursue a litigation strategy which the controlling stockholder knows will postpone resolution of these cases indefinitely. The Proponents believe that the Debtors have deliberately chosen to gamble with the bondholders' money, even though creditors will be deprived of their lawful recoveries and these cases may become one of the longest running Chapter 11 cases in history. The Proponents believe that the following table demonstrates that the amount of post-petition interest to which the Holders of Subordinated Note Claims are legally entitled, under any of three rates of interest that may reasonably be used, exceeds the payment to be made to the Celotex Settlement Trust Recipient under the Veil Piercing Settlement Agreement, and that a settlement amount of zero would still result in a negative equity value for the Holders of Old Common Stock Interests if post-petition interest were paid at any of these rates on the Subordinated Note Claims. This is true whether post-petition interest on Subordinated Note Claims is calculated at the New York legal rate (9%), the Florida legal rate (12%), or the non-default contract rate (ranging from 10% to 17%). The table makes certain assumptions with respect to the resolution of a dispute involving the proper amount of Federal Income Tax Claims. There can be no assurance that this dispute will be resolved in the manner assumed. Estimated Aggregate Claims as of 12/31/94 (in thousands)
POST-PETITION INTEREST RATE ON SUBORDINATED NOTE CLAIMS Non-Default NY Legal FL Legal Contract 9% 12% Rate Administrative & Priority $ 68,140 $ 68,140 $ 68,140 Trade Claims 93,775 93,775 93,775 Other Claims 18,758 18,758 18,758 Secured Bank Claims: Bank Credit Agreement 354,027 354,027 354,027 Working Capital Facility 121,343 121,343 121,343 Total Secured Bank Claims 475,370 475,370 475,370 Senior Reset Notes: 14 5/8% Series B 317,600 317,600 317,600 14 1/2% Series C 9,002 9,002 9,002 Total Senior Reset Notes 326,602 326,602 326,602 Total of Foregoing Claims 982,645 982,645 982,645 Unsecured Bondholders 1,592,081 1,756,779 1,970,060 TOTAL CLAIMS 2,574,726 2,739,424 2,952,705 Negotiated Enterprise Value $2,525,000 $2,525,000 $2,525,000 Value to Existing Equity Assuming $0 for the Asbestos Settlement $ (49,726) $ (214,424) $ (427,705)
[FN] The amount of Federal Income Tax Claims is in dispute. Although proofs of claim of approximately $185,000,000 have been filed, for purposes of this chart the average of the Debtors' estimate ($14,000,000) and approximately 22% of the proof of claim (or approximately $40,000,000) is used. The Debtors strongly disagree with this estimate. Assumed to accrue from filing at 6.5% simple interest. Includes IRB Claims ($9.5), Convenience Class Claims ($1.7), and Provident Insurance Claims ($7.5), among others. Accrual assumed to be prime +1.5% compounded quarterly, with interest on previously accrued but unpaid post-petition interest accruing at 13% after 6/30/94. For purposes of this chart, post-petition interest is calculated at the midpoint of the interest rates that will apply to an all Cash and an all New Senior Notes payment. Although old equity is technically entitled to $0 value assuming the payment of post-petition interest at the above described accrual rates, nevertheless, the Veil Piercing Settlement Agreement provides for Holders of Old Common Stock Interests to receive at least $75 million of value from the Celotex Settlement Fund Recipient, assuming a prompt consensual resolution of these Chapter 11 Cases, and the Creditors' Plan provides for Holders of Old Common Stock Interests to receive the Equity Call Option and New Common Stock representing any "excess" value not already distributed to Creditors. The foregoing chart should be read in conjunction with the discussion in "New Common Stock" regarding the sensitivity of common stock recoveries to increases in the amount of claims in all Classes other than U-4 through U-7. d. Pre-LBO Bondholders Settlement Agreement From January through March 1994, the Bondholder Proponents engaged in negotiations with members of the Ad Hoc Committee of Pre-LBO Bondholders regarding the treatment of Class U-6 Claims under the Creditors' Plan and the continued prosecution of the Fraudulent Conveyance Lawsuit filed by the Indenture Trustees for the Pre-LBO Debentures in January 1994. The negotiations resulted in the execution of an agreement, dated as of March 23, 1994, by and among Lehman Brothers Inc., Apollo and the members of the Ad Hoc Committee of Pre-LBO Bondholders. A copy of the Pre-LBO Bondholders Settlement Agreement is attached to the Creditors' Plan as Exhibit 3B. The Pre-LBO Bondholders Settlement Agreement provides that the parties thereto will support the Creditors' Plan, and any other plan of reorganization that provides for the relative treatment of Holders of Class U-6 Claims set forth in the agreement and as to which the Bondholders Proponents are proponents, and that the Ad Hoc Committee of Pre-LBO Bondholders will become a co-proponent of the Creditors' Plan. The Pre-LBO Bondholders Settlement Agreement does not obligate Holders of Pre-LBO Debenture Claims to vote for the Creditors' Plan. The agreement sets forth certain features of the treatment of Pre-LBO Debenture Claims that are incorporated in the Creditors' Plan, which primarily consist of a reallocation of Qualified Securities among Classes U-4, U-5 and U-6 that is not strictly governed by contractual priority. Depending on the amount of Qualified Securities, such allocation is not necessarily pro rata by Class. These allocations are set forth in Section 1.28 of the Creditors' Plan and are described herein at Section II.B.2. The Proponents believe that such allocation is reasonable given the circumstances, including the assumed New Common Stock Value. The Pre-LBO Bondholders Settlement Agreement further provides that, so long as the agreement remains in effect, the indenture trustees for the Pre-LBO Debenture indentures will not actively pursue any litigation, including the Fraudulent Conveyance Lawsuit, of the LBO-Related Issues against Released Parties, and that such LBO-Related Issues shall be settled to the extent and as provided in the Pre-LBO Bondholders Settlement Agreement and in the Creditors' Plan on the Effective Date. The Pre-LBO Bondholders Settlement Agreement resolves certain pending litigation and intercreditor issues that no other filed plan addresses. The Bondholder Proponents have argued that the merits of the Fraudulent Conveyance Lawsuit are tied to the merits of the Declaratory Judgment Proceeding, settled by the Veil Piercing Settlement Agreement. However, the Ad Hoc Committee of Pre-LBO Bondholders took a different position, and the Pre-LBO Bondholders Settlement Agreement therefore resolves issues that might otherwise have been raised regarding the value of the Debtors and potential disputes about consideration provided to various creditor groups under a Chapter 11 plan for the Debtors. Under the Pre-LBO Bondholders Settlement Agreement, on the Effective Date the Fraudulent Transfer Lawsuit will be dismissed with respect to all creditors, including the Holders of Bank Claims, Series B & C Senior Note Claims, Holders of Subordinated Note Claims, and stockholders, to the extent that stockholders agree to become Settling Equityholders under the Veil Piercing Settlement Agreement. e. Negotiated Enterprise Value and Equity Call Option The Creditors' Plan, and the terms of the Veil-Piercing Settlement Agreement, are premised upon a Negotiated Enterprise Value of $2,525,000,000, which represents a good faith negotiated estimate of the going concern enterprise value of the Debtors on a consolidated basis. Because this value takes into account the possibility of delay between the Confirmation Date and the Effective Date, and the likely increase in the value of the Debtors over time, and because the Negotiated Enterprise Value is fundamental to the distributions provided for under the negotiated veil piercing settlement that is incorporated in the Creditors' Plan, the Creditors' Plan provides that, except if the Court finds that the going concern enterprise value of the Debtors is equal to a different amount, the Negotiated Enterprise Value shall not be increased or decreased at any time or for any reason with respect to the Creditors' Plan. The Debtors and their controlling stockholder have stated their belief that the going concern enterprise value of the Debtors is greater than the Negotiated Enterprise Value. Notwithstanding this assertion, the Creditors' Plan nevertheless provides the existing equityholders with an Equity Call Option to purchase their pro rata share of all of the New Common Stock that would otherwise be issued to Holders of Subordinated Note Claims and to the Celotex Settlement Fund Recipient, in Cash on the Effective Date, at an exercise price per share equal to the New Common Stock Value Per Share, which is derived from a valuation of $2,525,000,000, the Negotiated Enterprise Value. If existing stockholders really believe that the Negotiated Enterprise Value is too low, they can purchase the New Common Stock at a price directly based on the Negotiated Enterprise Value (or, if higher, the going concern enterprise value of the Debtors found by the Court). While the Proponents continue to believe that the Negotiated Enterprise Value is a reasonable estimate of the going concern enterprise value of the Debtors, and that the Equity Call Option therefore has minimal value, they have provided this call option to existing equityholders to clearly demonstrate their belief in the reasonableness of the Negotiated Enterprise Value, and to offer current equityholders the opportunity to put their words into action by purchasing New Common Stock for Cash at a price based on the Negotiated Enterprise Value. The Proponents believe that the Equity Call Option provides a reasonable safeguard for the existing equityholders against any possible undervaluing of the New Common Stock to be issued to unsecured bondholders under the Creditors' Plan. Exercise of the Equity Call Option will also have the beneficial effect of paying Creditors, in Cash, the value that they would otherwise have received in New Common Stock, thereby giving them immediate liquidity at a previously agreed-upon price. The Debtors assert that this Disclosure Statement provides inadequate disclosure with respect to the use of a Total Gross Asset Value of $2.645 to $2.652 billion in the Proponents' liquidation analysis. As discussed above, the Negotiated Enterprise Value is $2,525,000,000, 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, and taking into account the possibility of delay between the Confirmation Date and the Effective Date, and the likely increase in the value of the Debtors over time. The Proponents' liquidation analysis assumes that the Chapter 11 Cases are converted to cases under Chapter 7 on December 31, 1994 (the assumed Effective Date under the Creditors' Plan) and that the sale of the stock of the Operating Businesses occurs on or before December 31, 1995, at which time the Chapter 7 trustee would make distributions to Creditors. Accordingly, the Proponents' liquidation analysis assumes an additional year of growth of the Debtors' Operating Businesses. However, the Claims of Creditors that are entitled to post-petition interest will be accruing post-petition interest during the liquidation period and therefore will increase at a significant rate, which would partially offset the increase in asset value. The Debtors further assert that this Disclosure Statement provides inadequate disclosure in that, according to the Debtors, if the Negotiated Enterprise Value is less than the actual value of the Debtors' businesses, (A) Apollo and Lehman Brothers Inc. will allegedly receive values to which they are not legally entitled, and (B) if the Court determines that Holders of Subordinated Note Claims and Other Unsecured Claims are not entitled to post-petition interest, the Creditors' Plan cannot be confirmed because Holders of such Claims would be receiving more than they are legally entitled to receive under Section 1129(b) of the Code. If the Holders of Old Common Stock believe that the Negotiated Enterprise Value is less than the actual value of the Debtors, they can either exercise the Equity Call Option or seek to have the Court determine the actual value of the Debtors. As set forth elsewhere herein, post-petition interest is only payable to the Holders of Subordinated Note Claims to the extent permitted by law, and is clearly not a condition to confirmation or effectiveness of the Creditors' Plan. As to trade creditors and other Holders of Other Unsecured Claims, the Creditors' Plan does provide that they will receive post-petition interest at the rate of 6.5% per annum--which is less than the legal rate of interest under Florida law (12%) or New York law (9%). The Proponents believe that this represents a fair, equitable and reasonable settlement of the potential claims of trade and other general, unsecured creditors for post-petition interest in light of (i) the possibility that some of the Debtors are solvent on a stand-alone basis even on a Chapter 7 liquidation basis; and (ii) potential LBO-related fraudulent conveyance claims that might be asserted on behalf of trade creditors (including in a hypothetical Chapter 7 liquidation). Moreover, in the event excess equity value (New Common Stock Value Per Share) exists after all amounts permitted by law are distributed to Creditors under the Creditors' Plan, shares of New Common Stock will be distributed to Holders of Allowed Old Common Stock Interests, so that no Creditor receives in excess of the amount permitted to be distributed to such Creditor by law. These provisions are specifically designed to provide safeguards against overpayment to Creditors in respect of their Claims. f. Other Features of the Creditors' Plan The Creditors' Plan embodies and provides for the final settlement and resolution of (a) all veil piercing/fraudulent conveyance issues raised in the pending Declaratory Judgment Proceeding (Hillsborough Holdings Corp., et al. v. Celotex Corp., et al., No. 90-0003, now pending in the Court), all pre-petition litigations (including, without limitation, Larned, et al. v. Kohlberg Kravis Roberts & Co., et al., and Cimino, et al. v. Raymark Industries, Inc. et al., both now pending in the Eastern District of Texas), and all possible future such litigations (as defined in Section II.C.4, the "Veil Piercing-Related Issues"), as the Veil Piercing-Related Issues relate to any or all of the Settling Parties, which include the Debtors, their predecessors and their respective present or former subsidiaries and affiliates, persons and entities who have valid and enforceable indemnities from any or all of the Debtors arising out of or relating to the Veil Piercing-Related Issues (as defined herein, holders of "Allowed Indemnity Claims"), and other parties to the Veil Piercing Settlement Agreement, (b) the Fraudulent Conveyance Lawsuit and (c) certain issues relating to bank debt claims, to Series B & C Senior Note Claims and to general unsecured claims. The confirmation and effectiveness of the Creditors' Plan is conditioned upon, among other things, the entry of an order by the Court approving the Veil Piercing Settlement and the Veil Piercing Settlement Agreement. On June 10, 1994, acting upon a motion filed by Celotex, the Celotex Bankruptcy Court approved the Veil Piercing Settlement Agreement and authorized and directed Celotex to perform its obligations thereunder. The Veil Piercing Settlement Agreement is not, however, conditioned on confirmation of a Chapter 11 plan for Celotex. The confirmation and effectiveness of the Creditors' Plan is also conditioned upon the final resolution and settlement, approved by an order of the Court, of all LBO-Related Issues as to the Released Parties, as provided in the Pre-LBO Bondholders Settlement Agreement and the Creditors' Plan. It should also be noted that the Veil Piercing Settlement Agreement binds not only present claimants, but also binds any and all future claimants asserting any claim based on a Veil Piercing-Related Issue against any Debtor or other Released Party. On June 8, 1994, the Aetna Casualty and Surety Company ("Aetna"), an insurer of Old Jim Walter and an alleged creditor and party in interest in the Chapter 11 Cases, filed an untimely written objection to the Disclosure Statement requesting that certain language be added to the Disclosure Statement. Aetna had previously filed a motion with the Celotex Bankruptcy Court in which, among other things, Aetna stated that it had no objection to the economic terms of the Veil Piercing Settlement Agreement. The language requested by Aetna to be included herein is reproduced in its entirety below: "The Veil Piercing Settlement Agreement (the "Settlement Agreement") contemplates, among other things, for the compromise of the claims of the "Veil Piercing Claimants" who are is [sic] defined on page 29 of the Settlement Agreement as follows: "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. (emphasis added) The term "Veil Piercing Claims" is defined on page 29 of the Settlement Agreement as follows: "Veil Piercing Claims" shall mean and be the collective reference to all existing claims and all claims that may be asserted in the future 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 Allowed Indemnity Claims. (emphasis added) Page 8 of the Settlement Agreement at paragraph 3(a) provides, in relevant part, the following condition: Entry by the [Hillsborough] Court of the Confirmation Order, which order shall (unless this requirement, or any part thereof, is waived or modified by the Bondholder Proponents and any Party whose rights under this Agreement would be contravened by such waiver or modification) specifically contain (i) all releases and injunctions necessary and appropriate to realize the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims against any and all of the Released Parties, the form and substance of which to be acceptable to the Bondholder Proponents, whether or not all the Veil Piercing Claims are known to or knowable by the Veil Piercing Claimants. The settlement, satisfaction, release and discharge of the Veil Piercing Claims against the Released Parties will become effective as to each Veil Piercing Claim, whether or not the Veil Piercing Claim constituted an allowed claim in the [Hillsborough] Chapter 11 Cases or the Celotex Chapter 11 Case and whether or not the holder of the Veil Piercing Claim received actual notice of the Plan and the proceedings for approval of the Plan and entry of the Confirmation Order. (emphasis added) It should be noted, that certain of the holders of Veil Piercing Claims may hold "future claims" against Celotex. "Future claimants" may be defined as those parties who may in the future manifest an injury or harm based upon alleged acts or omissions (either pre-petition or post-petition) by Celotex or the Debtor arising out of the manufacture and/or distribution of asbestos and asbestos products. Although such "future claimants" are not represented in either the bankruptcy proceedings for the Debtor or Celotex, their rights are being significantly affected by the Settlement Agreement. Notwithstanding the attempted compromise of such claims, it is possible that some or all of such claimants may be represented at some point in the future. It is also possible that such claimants may argue that they did not receive notice and an opportunity for hearing in connection with the compromise of their rights and that their fundamental constitutional right of due process has been violated. It is further possible that such "future claimants" may commence an action against the Debtor seeking to "pierce the corporate veil" and allege that the Debtor is liable to such claimants for their alleged injuries. There can be no certainty as to what the outcome might be of such a litigation." The Proponents disagree with Aetna.The Proponents believe that the procedures to be followed under the Veil Piercing Settlement Agreement in achieving Finality (as defined therein), and the procedures that the Proponents believe will be followed by the Celotex Settlement Fund Recipient in connection with the distribution, under the auspices of the Celotex Bankruptcy Court, of the payment to be made to the Celotex Settlement Fund Recipient under the Creditors' Plan, will fully satisfy all constitutional due process rights of, and will prevent any future litigation against the Debtors or Released Parties by, any and all possible future asbestos claimants. 2. Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants Holders of Allowed Subordinated Note Claims (Classes U-4, U-5 and U-6) and Veil Piercing Claimants (Class U-7) will receive consideration under the Creditors' Plan consisting of a combination of (i) "Qualified Securities" and (ii) shares of one of two newly-created classes of common stock of Walter Industries--Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), which will be distributed to Holders of Class U-4 and Class U-5 Claims and which is entitled to five (5) votes per share--or Class B Common Stock, par value $.01 per share (the "Class B Common Stock"), which will be distributed to Holders of Class U-6 and Class U-7 Claims and which is entitled to one (1) vote per share. Other than voting rights, and certain optional and mandatory conversion rights of the Class A Common Stock into Class B Common Stock, the terms of the Class A Common Stock and Class B Common Stock are identical. See "OVERVIEW OF THE CREDITORS' PLAN--Description of Securities to be Issued Under the Creditors' Plan--New Common Stock." Each share of Class A Common Stock automatically converts into one share of Class B Common Stock upon transfer by the original recipient (except to an Affiliate), and the Charter is designed to protect against any amendment to this Charter provision by the holders of Class A Common Stock. As described in more detail below, to the extent that Holders of Allowed Old Common Stock Interests exercise the Equity Call Options granted to them under the Creditors' Plan, Creditors will receive, in lieu of some of the shares of New Common Stock that they otherwise would have received under the Creditors' Plan, Cash in an amount equal to the New Common Stock Value Per Share, for each share that is not received as a result of the exercise of the Equity Call Options. a. Qualified Securities "Qualified Securities" are defined under the Creditors' Plan to mean, with respect to any Debtor, either Cash (other than Cash proceeds from the exercise of Equity Call Options) or debt securities issued by such Debtor that meet the following requirements: (1) Independent Rating. If the debt securities are secured by real property mortgages and the promissory notes secured thereby, such securities must be rated BB or higher by either Standard & Poor's Corporation or Moody's Investors Service, Inc. (a "Rating Service"); and if the debt securities are not so secured, such securities must be rated B or higher by a Rating Service, in each case as of the Effective Date (provided, that the obtaining of such Rating Service ratings shall not be required in the event that, after proper application is made therefor, neither Rating Service provides a rating of the debt securities proposed to be rated); and (2) Valuation at Par. Such debt securities must be valued by Lehman Brothers Inc. and a qualified valuation expert selected by Apollo at par as of the Effective Date, on a fully distributed basis. In the event that Lehman Brothers Inc. and such qualified valuation expert selected by Apollo do not agree as to whether such securities are valued at par as of the Effective Date, the New Board of such Debtor (or, if the New Board has not yet been appointed, the Bondholders Committee) shall select a third qualified valuation expert of national reputation, whose determination will be binding. THERE CAN BE NO ASSURANCE THAT ANY QUALIFIED SECURITY WILL TRADE AT OR ABOVE PAR AT ANY TIME. TRADING PRICES WILL DEPEND ON NUMEROUS FACTORS, INCLUDING MARKET CONDITIONS, PREVAILING INTEREST RATES AND THE FINANCIAL CONDITION AND PERFORMANCE OF THE OBLIGORS THEREOF. If more than one type of Qualified Security is distributed, each Class receiving Qualified Securities under the Creditors' Plan will receive the same proportion of the various types of debt securities qualifying as Qualified Securities, and of Cash, as each other Class receiving Qualified Securities under the Creditors' Plan. See "OVERVIEW OF THE CREDITORS' PLAN--Description of Securities to be Issued Under the Creditors' Plan--Qualified Securities." b. Method of Allocation of Qualified Securities and New Common Stock The Creditors' Plan provides for Qualified Securities and New Common Stock (part of which will be replaced by Cash if Equity Call Options are exercised) to be distributed to Holders of Allowed Subordinated Note Claims according to: (i) the election made by each such Holder on the place indicated on such Holder's Subordinated Note Claim Election Form under which the Holder may specify the dollar amount of its Allowed Claim that is desired to be satisfied by Qualified Securities, with the remainder to be satisfied by shares of the applicable class of New Common Stock; and (ii) the preferences given by the Creditors' Plan under the Pre-LBO Bondholders Settlement Agreement to Classes U-4, U-5 and U-6. The Creditors' Plan provides that Qualified Securities and New Common Stock available for distribution in respect of Allowed Subordinated Note Claims do not include Qualified Securities and New Common Stock to be distributed to satisfy Allowed Veil Piercing Claims as described below. Specifically, the Creditors' Plan provides for the allocation of Qualified Securities and New Common Stock available for distribution to Holders of Subordinated Note Claims and Holders of Veil Piercing 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) above), 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; and (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. (d) The New Common Stock available for distribution on account of Subordinated Note Claims shall be allocated as follows: each Holder shall receive shares of New Common Stock (which shall be Class A Common Stock in the case of Class U-4 and Class U-5 Claims, and Class B Common Stock in the case of Class U-6 Claims) having an aggregate New Common Stock Value equal to (i) such Holder's Pro Rata share of the aggregate principal amount of Qualified Securities and the aggregate New Common Stock Value Per Share of the New Common Stock, in each case available for distribution in respect of Subordinated Note Claims after all distributions are made in respect of Veil Piercing Claims and, with respect to New Common Stock, Revolving Credit Bank Claims, Working Capital Bank Claims and Series B & C Senior Note Claims; less (ii) the aggregate principal amount of Qualified Securities to be distributed in respect of such Subordinated Note Claim, provided, however, that in the event that the distributions to be made to Holders of Subordinated Note Claims under the Creditors' Plan would result in the receipt by such Holders of securities having a value in excess of their Allowed Claims, any such excess shall be distributed to Holders of Class E-1 Interests pursuant to Section 3.26 of the Creditors' Plan in shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess; provided, further, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Subordinated Note Claim shall receive Cash in an amount equal to such Subordinated Noteholder's pro rata share (based on the number of shares of New Common Stock that would otherwise have been issued to such Holder under this paragraph (d), divided by all shares of New Common Stock that would otherwise have been issued to all Holders of Subordinated Note Claims under this paragraph (d)) of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Subordinated Note Claims under this paragraph (d), and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder of Subordinated Note Claims shall receive under this paragraph (d) shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share. The sum of the aggregate principal amount of Qualified Securities, the aggregate New Common Stock Value Per Share of New Common Stock and Cash paid in lieu of New Common Stock cannot, however, be greater than the Allowed Amount of any Subordinated Note Claim. The Creditors' Plan provides for Qualified Securities and Class B Common Stock to be distributed to the Celotex Settlement Fund Recipient in respect of all Allowed Veil Piercing Claims (Class U-7) as follows: (1) With respect to the "Veil Piercing Claims Amount," which is an amount equal to $450,000,000 (assuming that the Negotiated Enterprise Value is used for allocation purposes, and subject to adjustment under the Veil Piercing Settlement Agreement if it is not--see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveynce Issuer and Other Issues--Terms of the Veil Piercing Settlement Agreement"), such amount shall be satisfied by a combination of Qualified Securities and shares of Class B Common Stock, such that the aggregate principal amount of Qualified Securities used to satisfy a portion of the Veil Piercing Proceedings Claim amount shall bear the same ratio to the aggregate principal amount of Qualified Securities used to satisfy a portion of the Subordinated Note Claims as $487.5 million (or, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, $450 million) bears to $1,098 million; provided that if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, the $487.5 million component of such ratio shall be reduced (but to no lower than $450 million) one dollar for every two dollars in value of Class B Common Stock assigned by the Celotex Settlement Fund Recipient to Settling Equityholders from the $75,000,000 of Class B Common Stock identified in Section 1.22(o) (B) (i) of the Creditors' Plan (for example, if all Holders of Old Common Stock Interests become Settling Equityholders, the ratio will be $450 million to $1,098 million); and the excess of the Veil Piercing Claims Amount over the portion thereof satisfied by Qualified Securities shall be satisfied by that number of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess, provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) the Celotex Settlement Fund Recipient shall receive Cash in an amount equal to the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to the Celotex Settlement Fund Recipient under Section 3.22 of the Creditors' Plan, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that the Celotex Settlement Fund Recipient shall receive under this paragraph 1 shall be reduced by an amount equal to the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share; and (2) with respect to (i) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, 100% of the Senior Claim Differential (defined below), or (ii) if the Amended and Restated Veil Piercing Agreement does not become effective by its terms, the sum of (a) $75,000,000 and (b) the Senior Claim Differential, shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such sum. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, the shares described in this clause (ii), other than shares having an aggregate New Common Stock Value Per Share equal to 50% of the Senior Claim Differential are subject to assignment to Settling Equityholders, pro rata as though all Holders of Class E-1 Interests were Settling Equityholders. For a discussion of the conditions precedent to effectiveness of the Amended and Restated Veil Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." The "Senior Claim Differential" means the excess, if any, of $902,000,000 over the difference between (a) the Allowed Amount of Claims for all Classes other than Classes U-4 through U-7 and Classes I-1 through I-3 (excluding any interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6), accrued or owed on the Effective Date (including without limitation any part thereof paid or to be paid after the Effective Date) (the "Senior Claims"), and (b) the interest paid or accrued under the Creditors' Plan in respect of the Senior Claims for the period from January 1, 1994 to the Effective Date (excluding any interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6). The amount of $902,000,000 represents a negotiated reasonable estimate of the aggregate Allowed Amount of all Claims in Classes other than Classes U-4 through U-7 and I-1 through I-3 (excluding any interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6), as of December 31, 1993. This estimate was arrived at by the Bondholder Proponents in their negotiations with certain representatives of Veil Piercing Claimants, and was believed to be a realistic estimate at that time. While there can be no assurance as to the actual amount of such Claims that will ultimately be allowed by the Court, the Proponents estimate that the Allowed Amount of Senior Claims assuming a 12/31/94 Effective Date will be in excess of $902 million. However, this will have no effect on the allocation of New Common Stock and Qualified Securities under the Creditors' Plan. But see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants--New Common Stock," for a discussion of the sensitivity of common stock recoveries to increases in Senior Claims. The Debtors assert that this Disclosure Statement provides inadequate disclosure in that, if the Court determines that the Qualified Securities are worth more than face value, the recipients of Qualified Securities would receive more than the Allowed Amount of their Claims and the Creditors' Plan would violate Section 1129(b) of the Code. The Debtors further assert that under certain circumstances, Apollo and Lehman Brothers Inc. will be the entities setting the terms and conditions of the Qualified Securities, and may have sole discretion in establishing the value of the Qualified Securities. The Proponents disagree. The Creditors' Plan expressly prohibits Creditors from receiving distributions in excess of the maximum amount permitted by law. In the event that excess equity value (New Common Stock Value Per Share) exists after all amounts permitted by law are distributed to Creditors under the Creditors' Plan, that excess equity value is distributed to existing equityholders in the form of New Common Stock. c. Creation and Anticipated Range of Amount of Qualified Securities The Creditors' Plan provides that each of the New Boards, in addition to the other duties of each New Board not inconsistent with the following under applicable law and the applicable articles of incorporation and bylaws of each Debtor, shall cause its Debtor to be managed and operated in a manner calculated to (i) maximize the value of the Debtor, and (ii) raise Cash from operations or other commercially reasonable sources, create Qualified Securities in accordance with customary industry practice, and take such other actions to facilitate consummation of the Creditors' Plan. The Proponents do not anticipate that the Creditors' Plan will require the Debtors to significantly alter their current business plan, and they currently do not intend that such business plan will be significantly altered after the Effective Date. The Proponents believe that the form and amount of Cash and other Qualified Securities available for distribution under the Creditors' Plan will be within the ranges set forth below, based upon the financial information publicly disclosed by the Debtors, and assuming (i) an Effective Date of December 31, 1994, (ii) average loan production by Mid-State Homes through the Effective Date, and (iii) utilization of the Debtors' unrestricted Cash balances and borrowing capacity as of the Effective Date in accordance with prudent business judgment and the customary practices of the Debtors. THERE CAN BE NO ASSURANCE, HOWEVER, AS TO THE AMOUNT, IF ANY, OF QUALIFIED SECURITIES THAT WILL BE AVAILABLE FOR DISTRIBUTION UNDER THE CREDITORS' PLAN.
Estimated Range of Amounts as of 12/31/94 (in millions) SOURCES OF FUNDS Cash and Cash equivalents on hand $ 125 $ 150 Walter Industries indebtedness distributed to Creditors 525 600 Securitization of unencumbered mortgages and mortgage residuals 850 900 Total 1,500 1,650 USES OF FUNDS Estimated Cash and indebtedness necessary to satisfy Claims of Classes other than U-4 through U-7 (975) (975) Amount of Qualified Securities available for distribution to Classes U-4 through U-7 $ 525 $ 675
[FN] This chart is provided for illustrative purposes only, and there can be no assurance that Qualified Securities will be available in the foregoing forms and amounts. Projected cash available for distribution is based on the actual cash balance as of March 30, 1994 adjusted for planned cash flows through December 31, 1994 and the release of currently restricted Cash that would become available upon the Debtors' emergence from Chapter 11. To the extent that the Mid-State Homes' subsidiary finances more mortgage loans than planned, the actual Cash balance at December 31, 1994 may be lower than anticipated. This decrease, however, would be offset by a greater amount of mortgages available for securitization. This indebtedness is expected to include New Senior Notes and Qualified Securities. The actual amount of indebtedness will be determined prior to the Effective Date based on input from the Rating Services and management of Walter Industries and is subject to approval by the New Board of Walter Industries (or if the New Board is not appointed, the Bondholders Committee). As an alternative, the New Board of Walter Industries (or if the New Board is not yet appointed, the Bondholders Committee) may seek to have debt obligations of Walter Industries sold in an underwritten public offering or private placement and distribute the cash proceeds from such offering to creditors in lieu of New Senior Notes and indebtedness constituting Qualified Securities. These obligations are intended to be created through the securitization of currently unencumbered mortgages of Mid-State Homes and through the securitization of the residuals of Mid-State Homes Trust II and III and the residuals created by the securitization of the aforementioned unencumbered mortgages. The actual amount of securities created will be determined prior to the Effective Date based on input from the Rating Services and management of Walter Industries and is subject to approval by the New Board of Walter Industries (or if the New Board is not appointed, the Bondholders Committee). As an alternative, the New Board of Walter Industries (or if the New Board is not yet appointed, the Bondholders Committee) may seek to have all or part of these securities sold in an underwritten offering or private placement and distribute the cash proceeds from such offering to creditors in lieu of indebtedness constituting Qualified Securities. The Bondholders Committee has initiated discussions with prospective financing sources regarding the underwriting or private placement of the Walter Industries debt obligations and the mortgage-backed securities discussed above. It is anticipated that Lehman Brothers will be a participant in any 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 Rule 1129(a)(4) of the Code, for their fees and reimbursement of expenses. See chart of Claims set forth in "Reasonableness of the Settlement: Certainty and Prompt Payment vs. Uncertainty and Additional Years of Delay--Funding of the Settlement Payment by Creditors." The Proponents and their financial advisors believe that the Cash and securities required to fund the consummation of the Creditors' Plan can be obtained even in the event of a pending appeal of the Confirmation Order by the Debtors or their controlling stockholder, KKR Associates. In order to consummate the Creditors' Plan, Holders of Senior Claims must be paid in Cash or, in the case of Class S-6, Cash and/or New Senior Notes. If Class S-6 Claims are satisfied in full by New Senior Notes, then approximately $660 million in Cash will be required to satisfy remaining Senior Claims. Cash on hand reduces this amount to approximately $500 million; assuming that no Qualified Securities are issued to Classes U-4 through U-7, the Cash required to pay $500 million in Senior Claims and provide post-consummation working capital for the Debtors could either be provided by bank financing (which the Proponents believe could be obtained even in the face of such an appeal) or, if bank financing was not available due to the pending appeal, then Cash well in excess of the required amount could be raised from the financing or sale of Mid-State Homes' unencumbered mortgage portfolio. Additionally, if the Proponents sell unencumbered mortgages to fund Senior Claims, there may be less Qualified Securities available for distribution to Holders of Subordinated Note Claims and Veil Piercing Claims. If, however, as the result of appeals from the Confirmation Order and (if not contained in the Confirmation Order) the order approving the Veil Piercing Settlement, the Proponents are unable to obtain financing and are unable to finance or sell Mid-State Homes' unencumbered mortgage portfolio, there would be substantial delay in consummating the Creditors' Plan, if it can be consummated at all, due to the time involved in resolving such appeals. d. Examples of Possible Allocations of Qualified Securities and New Common Stock The method of allocating Qualified Securities and New Common Stock among Classes U-4, U-5, U-6 and U-7 is illustrated in the following charts through the use of three examples. The first example assumes that $700,000,000 aggregate principal amount of Qualified Securities (representing the minimum amount necessary to satisfy a condition to the Effective Date, which condition may be waived solely by the Bondholder Proponents) are available for distribution under the Creditors' Plan, while the second example assumes that $900,000,000 aggregate principal amount of Qualified Securities are available for distribution under the Creditors' Plan. For the sake of illustration, the third example assumes that $500,000,000 aggregate principal amount of Qualified Securities are available for distribution under the Creditors' Plan. In each example, the allocation of Qualified Securities between the Holders of Allowed Subordinated Note Claims, on the one hand, and the Celotex Settlement Fund Recipient, on the other hand, must first be determined. The allocation of Qualified Securities to the Celotex Settlement Fund Recipient is described above in "OVERVIEW OF THE CREDITORS' PLAN--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants--Qualified Securities." As illustrated by the examples set forth in the following Exhibits I.A., II.A. and III.A., in the event that the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, more Qualified Securities will be allocated to Holders of Subordinated Note Claims and fewer Qualified Securities will be allocated to the Celotex Settlement Fund Recipient, to the extent that more Holders of Old Common Stock become Settling Equityholders (that is, as the aggregate amount of Old Common Stock held by Settling Equityholders increases). Qualified Securities and New Common Stock distributed to the Celotex Settlement Fund Recipient will be allocated to the veil piercing claimants in accordance with the Veil Piercing Settlement Agreement and any Chapter 11 plan for Celotex, under the supervision of the court administering the Celotex Chapter 11 Proceeding. The specific amount of Qualified Securities and New Common Stock allocated among Classes U-4, U-5 and U-6 will depend on (a) the amount of Qualified Securities available for distribution to Holders of Allowed Subordinated Note Claims (i.e., after distribution is made of Qualified Securities to the Celotex Settlement Fund Recipient), and (b) the result of the Subordinated Note Claim Election. Exhibits I., II. and III. B., C. and D. further illustrate the allocation of Qualified Securities and New Common Stock among Classes U-4 through U-7. In each case, it is assumed (i) that all Holders of Subordinated Note Claims elect to receive all of their distribution in Qualified Securities; (ii) that the Court does not find that the going concern enterprise value of the Debtors is equal to an amount other than the Negotiated Enterprise Value; and (iii) that the Senior Claims Differential is equal to zero; and (iv) that there is no exercise of the Equity Call Options.
EXHIBIT I.A. Allocation of Qualified Securities Between Unsecured Bondholders and Veil Piercing Claimants Amount of Qualified Securities $700,000,000 Percentage of Allowed Claim Proportional Proportional Available Allocation Received in Sharing Sharing Qualified of Qualified Qualified Allowed Claim Amounts Percentages Securities Securities Securities Subordinated Notes (Classes U-4, U-5, U-6) $1,097,986,977(a) $1,097,986,977 70.9% X $700,000,000 = $496,509,916 45.2% Veil Piercing Claimants (Class U-7) $ 450,000,000 $ 450,000,000 29.1% X $700,000,000 = $203,490,084 45.2% Total $1,547,986,977 $1,547,986,977 100.0% $700,000,000 If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Percentage of Allowed Claim Proportional Proportional Available Allocation Received in Sharing Sharing Qualified of Qualified Qualified Allowed Claim Amounts Percentages Securities Securities Securities Subordinated Notes (Classes U-4, U-5, U-6) $1,097,986,977 $1,097,986,977 69.3% X $700,000,000 = $484,766,444 44.2% Veil Piercing Claimants (Class U-7) $ 525,000,000 $ 487,500,000 30.7% X $700,000,000 = $215,233,556 41.0% Total $1,622,986,977 $1,585,486,977 100.0% $700,000,000 Allowed Claim represents Filing Date amount only. Assumes that no holders of Class E-1 interests become settling equityholders. NOTE: Assumes that Senior Claim Differential equals zero and that all claimants elect to receive full amount of Qualified Securities available to them.
EXHIBIT I.B. Consideration Received By Unsecured Bondholders Amount of Qualified Securities $700,000,000 Percentage of Claim Percentage Priority Allocation Received Value of of Claim Allocation of Remaining Total in Common Received of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage Class Claim Securities Securities Securities Securities Received Stock Consideration of Claim U-4 $ 479,260,923 $240,000,000 $ 68,279,539 $308,279,539 64.3% $170,981,384 35.7% $ 479,260,923 100.0% U-5 379,254,167 0 108,230,377 108,230,377 28.5% 271,023,790 71.5% 379,254,167 100.0% U-6 239,471,887 80,000,000 0 80,000,000 33.4% 159,471,887 66.6% 239,471,887 100.0% $1,097,986,977 $320,000,000 $176,509,916 $496,509,916 $601,477,061 $1,097,986,977 100.0% Remaining Qualified Securities 176,509,916 Total Qualified Securities $496,509,916 If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Percentage of Claim Percentage Priority Allocation Received Value of of Claim Allocation of Remaining Total in Common Received of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage Class Claim Securities Securities Securities Securities Received Stock Consideration of Claim U-4 $ 479,260,923 $240,000,000 $ 63,736,798 $303,736,798 63.4% $175,524,125 36.6% $ 479,260,923 100.0% U-5 379,254,167 0 101,029,646 101,029,646 26.6% 278,224,521 73.4% 379,254,167 100.0% U-6 239,471,887 80,000,000 0 80,000,000 33.4% 159,471,887 66.6% 239,471,887 100.0% $1,097,986,977 $320,000,000 $164,766,444 $484,766,444 $613,220,533 $1,097,986,977 100.0% Remaining Qualified Securities 164,766,444 Total Qualified Securities $484,766,444 NOTE: Calculations assume that each class elects to receive full amount of Qualified Securities available to it. See Exhibit IV for calculation of minimum guaranteed amount of Qualified Securities for Class U-6. See Exhibit I.A. for calculation of Qualified Securities available for distribution to Classes U-4, U-5 and U-6 after allocation of Qualified Securities to Class U-7. See Exhibit I.C. for allocation of remaining Qualified Securities. See Exhibit I.D. for allocation of New Common Stock. These calculations assume an aggregate of $902 million of senior claims.
EXHIBIT I.C.
Allocation of Remaining Qualified Securities Amount of Qualified Securities $700,000,000 Remaining Claims after Priority Allocation for which Qualified Securities Are Available Priority Amount of Allocation of Allocation Remaining Remaining of Qualified Remaining % Qualified Qualified Class Claim Securities Claim $ Total Securities Securities U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $176,509,916 = $ 68,279,539 U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 176,509,916 = 108,230,377 U-6 239,471,887 80,000,000 159,471,887 $1,097,986,977 $320,000,000 $777,986,977 $618,515,090 100.0% $176,509,916 Remaining Qualified Securities 176,509,916 Total Qualified Securities $496,509,916 If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Remaining Claims after Priority Allocation for which Qualified Securities Are Available Priority Amount of Allocation of Allocation Remaining Remaining of Qualified Remaining % Qualified Qualified Class Claim Securities Claim $ Total Securities Securities UU-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $164,766,444 = $ 63,736,798 U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 164,766,444 = 101,029,646 U-6 239,471,887 80,000,000 159,471,887 $1,097,986,977 $320,000,000 $777,986,977 $618,515,090 100.0% $164,766,444 Remaining Qualified Securities 164,766,444 Total Qualified Securities $484,766,444 Claim based on Filing Date amount; does not include post-petition interest.
EXHIBIT I.D.
Allocation of New Common Stock Negotiated Enterprise Value $2,525,000,000 Amount of Senior Claims 902,000,000 Amount of Qualified Securities 700,000,000 New Common Stock Value $ 923,000,000 Total Value of % of Qualified Common Common Number Allocation of Votes % of Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting Class Amount Received Received Received to be Issued Issued Share Power Power U-4 $ 479,260,923 - $308,279,539 = $170,981,384 18.5% X 50,000,000 = 9,262,394 X 5 = 46,311,971 31.8% U-5 379,254,167 - 108,230,377 = 271,023,790 29.4% X 50,000,000 = 14,681,886 X 5 = 73,409,430 50.4% U-6 239,471,887 - 80,000,000 = 159,471,887 17.3% X 50,000,000 = 8,638,902 X 1 = 8,638,902 5.9% U-7 450,000,000 - 203,490,084 = 246,509,916 26.7% X 50,000,000 = 13,353,922 X 1 = 13,353,922 9.2% S-1/S-2 37,500,000 - 0 = 37,500,000 4.1% X 50,000,000 = 2,031,448 X 1 = 2,031,448 1.4% S-6 37,500,000 - 0 = 37,500,000 4.1% X 50,000,000 = 2,031,448 X 1 = 2,031,448 1.4% Total $1,622,986,977 $700,000,000 $922,986,977 100.0% 50,000,000 145,777,120 100.0% If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Total Value of % of Qualified Common Common Number Allocation of Votes % of Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting Class Amount Received Received Received to be Issued Issued Share Power Power U-4 $ 479,260,923 - $303,736,798 = $175,524,125 19.0% X 50,000,000 = 9,508,483 X 5 = 47,542,416 32.1% U-5 379,254,167 - 101,029,646 = 278,224,521 30.1% X 50,000,000 = 15,071,964 X 5 = 75,359,818 50.8% U-6 239,471,887 - 80,000,000 = 159,471,887 17.3% X 50,000,000 = 8,638,902 X 1 = 8,638,902 5.8% U-7 525,000,000 - 215,233,556 = 309,766,444 33.6% X 50,000,000 = 16,780,651 X 1 = 16,780,651 11.3% E-1 0 - 0 = 0 0.0% X 50,000,000 = 0 X 1 = 0 0.0% Total $1,622,986,977 $700,000,000 $922,986,977 100.0% 50,000,000 148,321,787 100.0% Assumes that no holders of Class E-1 interests become settling equityholders.
EXHIBIT II.A.
Allocation of Qualified Securities Between Unsecured Bondholders and Veil Piercing Claimants Amount of Qualified Securities $900,000,000 Percentage of Allowed Claim Proportional Proportional Available Allocation Received in Sharing Sharing Qualified of Qualified Qualified Allowed Claim Amounts Percentages Securities Securities Securities Subordinated Notes (Classes U-4, U-5, U-6) $1,097,986,977 $1,097,986,977 70.9% X $900,000,000 = $638,369,892 58.1% Veil Piercing Claimants (Class U-7) $ 450,000,000 $ 450,000,000 29.1% X $900,000,000 = $261,630,108 58.1% Total $1,547,986,977 $1,547,986,977 100.0% $900,000,000 If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Percentage of Allowed Claim Proportional Proportional Available Allocation Received in Sharing Sharing Qualified of Qualified Qualified Allowed Claim Amounts Percentages Securities Securities Securities Subordinated Notes (Classes U-4, U-5, U-6) $1,097,986,977 $1,097,986,977 69.3% X $900,000,000 = $623,271,142 56.8% Veil Piercing Claimants (Class U-7) $ 525,000,000 $ 487,500,000 30.7% X $900,000,000 = $276,728,858 52.7% Total $1,622,986,977 $1,585,486,977 100.0% $900,000,000 Allowed Claim represents Filing Date amount only. Assumes that no holders of Class E-1 interests become settling equityholders. NOTE: Assumes that Senior Claim Differential equals zero and that all claimants elect to receive full amount of Qualified Securities available to them.
EXHIBIT II.B. Consideration Received By Unsecured Bondholders Amount of Qualified Securities $900,000,000 Percentage of Claim Percentage Priority Allocation Received Value of of Claim Allocation of Remaining Total in Common Received of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage Class Claim Securities Securities Securities Securities Received Stock Consideration of Claim U-4 $ 479,260,923 $240,000,000 $116,883,874 $356,883,874 74.5% $122,377,049 25.5% $ 479,260,923 100.0% U-5 379,254,167 0 185,273,449 185,273,449 48.9% 193,980,718 51.1% 379,254,167 100.0% U-6 239,471,887 96,212,569 0 96,212,569 40.2% 143,259,318 59.8% 239,471,887 100.0% $1,097,986,977 $336,212,569 $302,157,323 $638,369,892 $459,617,085 $1,097,986,977 100.0% Remaining Qualified Securities 302,157,323 Total Qualified Securities $638,369,892 If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Percentage of Claim Percentage Priority Allocation Received Value of of Claim Allocation of Remaining Total in Common Received of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage Class Claim Securities Securities(c) Securities Securities Received Stock Consideration of Claim U-4 $ 479,260,923 $240,000,000 $111,191,542 $351,191,542 73.3% $128,069,381 26.7% $ 479,260,923 100.0% U-5 379,254,167 0 176,250,492 176,250,492 46.5% 203,003,675 53.5% 379,254,167 100.0% U-6 239,471,887 95,829,108 0 95,829,108 40.0% 143,642,779 60.0% 239,471,887 100.0% $1,097,986,977 $335,829,108 $287,442,034 $623,271,142 $474,715,835 $1,097,986,977 100.0% Remaining Qualified Securities 287,442,034 Total Qualified Securities $623,271,142 NOTE: Calculations assume that each class elects to receive full amount of Qualified Securities available to it. See Exhibit IV for calculation of minimum guaranteed amount of Qualified Securities for Class U-6. See Exhibit I.A. for calculation of Qualified Securities available for distribution to Classes U-4, U-5 and U-6 after allocation of Qualified Securities to Class U-7. See Exhibit II.C. for allocation of remaining Qualified Securities. See Exhibit II.D. for allocation of New Common Stock. These calculations assume an aggregate of $902 million of senior claims.
EXHIBIT II.C. Allocation of Remaining Qualified Securities Amount of Qualified Securities $900,000,000 Remaining Claims after Priority Allocation for which Qualified Securities Are Available Priority Amount of Allocation of Allocation Remaining Remaining of Qualified Remaining % Qualified Qualified Class Claim(a) Securities Claim $ Total Securities Securities U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $302,157,323 = $116,883,874 U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 302,157,323 = 185,273,449 U-6 239,471,887 96,212,569 143,259,318 $1,097,986,977 $336,212,569 $761,774,408 $618,515,090 100.0% $302,157,323 Remaining Qualified Securities 302,157,323 Total Qualified Securities $638,369,892 If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Remaining Claims after Priority Allocation for which Qualified Securities Are Available Priority Amount of Allocation of Allocation Remaining Remaining of Qualified Remaining % Qualified Qualified Class Claim Securities Claim $ Total Securities Securities U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $287,442,034 = $111,191,542 U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 287,442,034 = 176,250,492 U-6 239,471,887 95,829,108 143,642,779 $1,097,986,977 $335,829,108 $762,157,869 $618,515,090 100.0% $287,442,034 Remaining Qualified Securities 287,442,034 Total Qualified Securities $623,271,142 Claim based on Filing Date amount; does not include post-petition interest.
EXHIBIT II.D. Allocation of New Common Stock Negotiated Enterprise Value $2,525,000,000 Amount of Senior Claims 902,000,000 Amount of Qualified Securities 900,000,000 New Common Stock Value $ 723,000,000 Total Value of % of Qualified Common Common Number Allocation of Votes % of Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting Class Amount Received Received Received to be Issued Issued Share Power Power U-4 $ 479,260,923 - $356,883,874 = $122,377,049 16.9% X 50,000,000 = 8,463,296 X 5 = 42,316,478 30.8% U-5 379,254,167 - 185,273,449 = 193,980,718 26.8% X 50,000,000 = 13,415,229 X 5 = 67,076,145 48.8% U-6 239,471,887 - 96,212,569 = 143,259,318 19.8% X 50,000,000 = 9,907,462 X 1 = 9,907,462 7.2% U-7 450,000,000 - 261,630,108 = 188,369,892 26.1% X 50,000,000 = 13,027,198 X 1 = 13,027,198 9.5% S-1/S-2 37,500,000 - 0 = 37,500,000 5.2% X 50,000,000 = 2,593,408 X 1 = 2,593,408 1.9% S-6 37,500,000 - 0 = 37,500,000 5.2% X 50,000,000 = 2,593,408 X 1 = 2,593,408 1.9% Total $1,622,986,977 $900,000,000 $722,986,977 100.0% 50,000,000 137,514,098 100.0% If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Total Value of % of Qualified Common Common Number Allocation of Votes % of Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting Class Amount Received Received Received to be Issued Issued Share Power Power U-4 $ 479,260,923 - $351,191,542 = $128,069,381 17.7% X 50,000,000 = 8,856,963 X 5 = 44,284,816 31.3% U-5 379,254,167 - 176,250,492 = 203,003,675 28.1% X 50,000,000 = 14,039,235 X 5 = 70,196,173 49.6% U-6 239,471,887 - 95,829,108 = 143,642,779 19.9% X 50,000,000 = 9,933,981 X 1 = 9,933,981 7.0% U-7 525,000,000 - 276,728,858 = 248,271,142 34.3% X 50,000,000 = 17,169,821 X 1 = 17,169,821 12.1% E-1 0 - 0 = 0 0.0% X 50,000,000 = 0 X 1 = 0 0.0% Total $1,622,986,977 $900,000,000 $722,986,977 100.0% 50,000,000 141,584,791 100.0% Assumes that no holders of Class E-1 interests become settling equityholders.
EXHIBIT III.A. Allocation of Qualified Securities Between Unsecured Bondholders and Veil Piercing Claimants Amount of Qualified Securities $500,000,000 ============ Percentage of Allowed Claim Proportional Proportional Available Allocation Received in Sharing Sharing Qualified of Qualified Qualified Allowed Claim Amounts Percentages Securities Securities Securities Subordinated Notes (Classes U-4, U-5, U-6) $1,097,986,977 $1,097,986,977 70.9% X $500,000,000 = $354,649,940 32.3% Veil Piercing Claimants (Class U-7) $ 450,000,000 $ 450,000,000 29.1% X $500,000,000 = $145,350,060 32.3% Total $1,547,986,977 $1,547,986,977 100.0% $500,000,000 If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Percentage of Allowed Claim Proportional Proportional Available Allocation Received in Sharing Sharing Qualified of Qualified Qualified Allowed Claim Amounts Percentages Securities Securities Securities Subordinated Notes (Classes U-4, U-5, U-6) $1,097,986,977 $1,097,986,977 69.3% X $500,000,000 = $346,261,746 31.5% Veil Piercing Claimants (Class U-7) $ 525,000,000 $ 487,500,000 30.7% X $500,000,000 = $153,738,254 29.3% Total $1,622,986,977 $1,585,486,977 100.0% $500,000,000 Allowed Claim represents Filing Date amount only. Assumes that no holders of Class E-1 interests become settling equityholders. NOTE: Assumes that Senior Claim Differential equals zero and that all claimants elect to receive full amount of Qualified Securities available to them.
EXHIBIT III.B. Consideration Received By Unsecured Bondholders Amount of Qualified Securities $500,000,000 ============ Percentage Percentage of Claim of Claim Priority Allocation Received Value of Received Allocation of Remaining Total in Common in of Qualified Qualified Qualified Qualified Stock to be Common Total Percentage Class Claim Securities Securities Securities Securities Received Stock Consideration of Claim - ----- ----- ------------ -------------- ---------- ---------- ------------ ----- ------------- ---------- U-4 $ 479,260,923 $240,000,000 $19,675,204 $259,675,204 54.2% $219,585,719 45.8% $ 479,260,923 100.0% U-5 379,254,167 0 31,187,304 31,187,304 8.2% 348,066,863 91.8% 379,254,167 100.0% U-6 239,471,887 63,787,431 0 63,787,431 26.6% 175,684,456 73.4% 239,471,887 100.0% -------------- ------------ ----------- ------------ ------------ -------------- ------ $1,097,986,977 $303,787,431 $50,862,509 $354,649,940 $743,337,037 $1,097,986,977 100.0% ============== ============ =========== ============ ============ ============== ====== Remaining Qualified Securities 50,862,509 ------------ Total Qualified Securities $354,649,940 ============ If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Percentage Percentage of Claim of Claim Priority Allocation Received Value of Received Allocation of Remaining Total in Common in of Qualified Qualified Qualified Qualified Stock to be Common Total Percentage Class Claim Securities Securities Securities Securities Received Stock Consideration of Claim - ----- ----- ------------ -------------- ---------- ---------- ------------ ----- ------------- ---------- U-4 $ 479,260,923 $240,000,000 $16,282,055 $256,282,055 53.5% $222,978,868 46.5% $ 479,260,923 100.0% U-5 379,254,167 0 25,808,799 25,808,799 6.8% 353,445,368 93.2% 379,254,167 100.0% U-6 239,471,887 64,170,892 0 64,170,892 26.8% 175,300,995 73.2% 239,471,887 100.0% -------------- ------------ ----------- ------------ ------------ -------------- ------ $1,097,986,977 $304,170,892 $42,090,854 $346,261,746 $751,725,231 $1,097,986,977 100.0% ============== ============ =========== ============ ============ ============== ====== Remaining Qualified Securities 42,090,854 ------------ Total Qualified Securities $346,261,746 NOTE: Calculations assume that each class elects to receive full amount of Qualified Securities available to it. - ---------------- See Exhibit IV for calculation of minimum guaranteed amount of Qualified Securities for Class U-6. See Exhibit III.A. for calculation of Qualified Securities available for distribution to Classes U-4, U-5 and U-6 after allocation of Qualified Securities to Class U-7. See Exhibit III.C. for allocation of remaining Qualified Securities Exhibit III.D. for allocation of New Common Stock. These calculations assume an aggregate of $902 million of senior claims.
EXHIBIT III.C. Allocation of Remaining Qualified Securities Amount of Qualified Securities $500,000,000 ============ Remaining Claims after Priority Allocation for which Qualified Securities Are Available -------------------------- Priority Amount of Allocation of Allocation Remaining Remaining of Qualified Remaining % Qualified Qualified Class Claim Securities Claim $ Total Securities Securities - ----- ---------- ----------- --------- --------- ----- ---------- ------------ U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $50,862,509 = $19,675,204 U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 50,862,509 = 31,187,304 U-6 239,471,887 63,787,431 175,684,456 -------------- ------------ ------------ ------------ ------ ----------- $1,097,986,977 $303,787,431 $794,199,546 $618,515,090 100.0% $50,862,509 ============== ============ ============ ============ ===== =========== Remaining Qualified Securities 50,862,509 ------------ Total Qualified Securities $354,649,940 ============ If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Remaining Claims after Priority Allocation for which Qualified Securities Are Available -------------------------- Priority Amount of Allocation of Allocation Remaining Remaining of Qualified Remaining % Qualified Qualified Class Claim Securities Claim $ Total Securities Securities - ----- ---------- ----------- --------- --------- ----- ---------- ------------ U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $42,090,854 = $16,282,055 U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 42,090,854 = 25,808,799 U-6 239,471,887 64,170,892 175,300,995 -------------- ------------ ------------ ------------ ------ ----------- $1,097,986,977 $304,170,892 $793,816,085 $618,515,090 100.0% $42,090,854 ============== ============ ============ ============ ===== =========== Remaining Qualified Securities 42,090,854 -------------- Total Qualified Securities $346,261,746 ============== - ---------------- Claim based on Filing Date amount; does not include post-petition interest.
EXHIBIT III.D. Allocation of New Common Stock Negotiated Enterprise Value $2,525,000,000 Amount of Senior Claims 902,000,000 Amount of Qualified Securities 500,000,000 -------------- New Common Stock Value $1,123,000,000 ============== Total Value of % of Qualified Common Common Number Allocation Votes % of Allowed Securities Stock to be Stock of Shares of New Shares Per Voting Voting Class Amount Received Received Received to be Issued Issued Share Power Power - ------ -------------- ------------ -------------- -------- ----------- ----------- ---- ----------- ------ U-4 $ 479,260,923 - $259,675,204 = $ 219,585,719 19.6% X 50,000,000 = 9,776,860 X 5 = 48,884,298 32.4% U-5 379,254,167 - 31,187,304 = 348,066,863 31.0% X 50,000,000 = 15,497,369 X 5 = 77,486,843 51.3% U-6 239,471,887 - 63,787,431 = 175,684,456 15.6% X 50,000,000 = 7,822,195 X 1 = 7,822,195 5.2% U-7 450,000,000 - 145,350,060 = 304,649,940 27.1% X 50,000,000 = 13,564,269 X 1 = 13,564,269 9.0% S-1/S-2 37,500,000 - 0 = 37,500,000 3.3% X 50,000,000 = 1,669,654 X 1 = 1,669,654 1.1% S-6 37,500,000 - 0 = 37,500,000 3.3% X 50,000,000 = 1,669,654 X 1 = 1,669,654 1.1% -------------- ------------ -------------- ------ ----------- ----------- ---- ----------- ------ Total $1,622,986,977 $500,000,000 $1,122,986,977 100.0% 50,000,000 151,096,913 100.0% ============== ============ ============== ====== =========== =========== ==== =========== ====== If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms Total Value of % of Qualified Common Common Number Allocation Votes % of Allowed Securities Stock to be Stock of Shares of New Shares Per Voting Voting Class Amount Received Received Received to be Issued Issued Share Power Power - ------ -------------- ------------ -------------- -------- ----------- ----------- ---- ----------- ------ U-4 $ 479,260,923 - $256,282,055 = $ 222,978,868 19.9% X 50,000,000 = 9,927,937 X 5 = 49,639,683 32.5% U-5 379,254,167 - 25,808,799 = 353,445,368 31.5% X 50,000,000 = 15,736,842 X 5 = 78,684,209 51.5% U-6 239,471,887 - 64,170,892 = 175,300,995 15.6% X 50,000,000 = 7,805,121 X 1 = 7,805,121 5.1% U-7 525,000,000 - 153,738,254 = 371,261,746 33.1% X 50,000,000 = 16,530,100 X 1 = 16,530,100 10.8% E-1 0 - 0 = 0 0.0% X 50,000,000 = 0 X 1 = 0 0.0% -------------- ------------ -------------- ------ ---------- ----------- ------ Total $1,622,986,977 $500,000,000 $1,122,986,977 100.0% 50,000,000 152,659,113 100.0% ============== ============ ============== ====== ========== =========== ====== - ---------------- Assumes that no holders of Class E-1 interests become settling equityholders.
EXHIBIT IV Minimum Guarantee of Qualified Securities to Class U-6 Amount of Qualified Securities $700,000,000 $900,000,000 $500,000,000 If the If the If the Amended and Amended and Amended and Amended and Amended and Amended and Restated Restated Restated Restated Restated Restated Veil Piercing Veil Piercing Veil Piercing Veil Piercing Veil Piercing Veil Piercing Settlement Settlement Settlement Settlement Settlement Settlement Agreement Agreement Does Agreement Agreement Does Agreement Agreement Does Does Become Not Become Does Become Not Become Does Become Not Become Effective by Effective by Effective by Effective by Effective by Effective by Its Terms Its Terms Its Terms Its Terms Its Terms Its Terms ------------- ------------- ------------ ------------- ------------ ------------- Amount of Qualified Securities Available to Unsecured Bondholders $496,509,916 $484,766,444 $638,369,892 $623,271,142 $354,649,940 $346,261,746 Less: Qualified Securities at $700,000,000 Basis 496,509,916 484,766,444 496,509,916 484,766,444 496,509,916 484,766,444 ------------ ------------ ------------ ------------ ------------ ------------ Excess/(Shortfall) of Qualified Securities 0 0 141,859,976 138,504,698 (141,859,976) (138,504,698) Multiplied By: Proportion of Excess / (Shortfall) Attributable to Class U-6 11.43% 11.43% 11.43% 11.43% 11.43% 11.43% ------------ ------------ ------------ ------------ ------------ ------------ Proportional Amount of the Excess / (Shortfall) Attributable to Class U-6 0 0 16,212,569 15,829,108 (16,212,569) (15,829,108) Add: Qualified Securities Basis for Class U-6 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 ------------ ------------ ------------ ------------ ------------ ------------ Priority Allocation of Qualified Securities to Class U-6 $ 80,000,000 $ 80,000,000 $ 96,212,569 $ 95,829,108 $ 63,787,431 $ 64,170,892 ============ ============ ============ ============ ============ ============ - ---------------- See Exhibit I.A. Represents Priority Allocation to Class U-6 = 80,000,000 = 11.43% -------------------------------- ----------- Qualified Securities Basis 700,000,000 Assumes that no holders of Class E-1 interests become settling equityholders.
Under each scenario, each Class receiving Qualified Securities under the Creditors' Plan (and each Holder within such Class) will receive the same proportion of the various types of Qualified Securities (e.g., Cash, mortgage-backed debt securities, and non-mortgage-backed debt securities) as each other Class (and Holder) receiving Qualified Securities under the Creditors' Plan. The foregoing examples are illustrations only, and may not reflect the actual amount and type of Qualified Securities that will be available for distribution under the Creditors' Plan. e. New Common Stock The Creditors' Plan provides for the extinguishment of all outstanding common stock of Old Walter Industries (the "Old Common Stock") as of the Effective Date, and for the issuance on the Effective Date (i) to Holders of Class U-4, U-5, U-6 and U-7, and (ii) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, to Holders of Class S-1, S-2 and S-6 Claims of Class B Common Stock. The Creditors' Plan also grants the Holders of Allowed Old Common Stock Interests an Equity Call Option for the purchase, in Cash on the Effective Date, of all, but not part, of such Holder's Pro Rata share of all New Common Stock to be issued to Holders of Claims in Classes S-1, S-2, S-6 and U-4 through U-7 on the Effective Date (all in the form of Class B Common Stock), at an exercise price per share equal to the New Common Stock Value Per Share (provided, that, in calculating the New Common Stock Value Per Share for this purpose, the New Common Stock Value shall be calculated using a going concern enterprise value equal to the greater of (i) the Negotiated Enterprise Value and (ii) if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount). These Cash proceeds will be paid, pro rata, to Creditors that would otherwise have been issued such shares under the Creditors' Plan. In addition, in the event that there are shares of New Common Stock remaining after giving effect to all distributions to be made to Creditors under the Creditors' Plan (it being understood that no Creditor shall receive on account of an Allowed Claim consideration having a value in excess of that permitted to be paid on account of such Allowed Claim under the Code), each Holder of an Allowed Old Common Stock Interest shall receive such Holder's Pro Rata share of such shares, each of which shall be shares of Class B Common Stock. Under the Creditors' Plan, each share of New Common Stock is valued at the "New Common Stock Value Per Share," which is 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. The "New Common Stock Value" means the Negotiated Enterprise Value (or if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount), less the sum of (a) the lesser of (i) $902,000,000 and (ii) the excess of (A) the Allowed Amount of the Senior Claims (see Section II.B.2.(b)) (excluding any interest to be paid in Class B Common Stock to Classes S-1, S-2 and S-6), over (B) the interest paid or accrued under the provisions of the Creditors' Plan in respect of the Senior Claims for the period from January 1, 1994 to the Effective Date (excluding any interest to be paid in Class B Common Stock to Classes S-1, S-2 and S-6), and (b) the aggregate principal amount of Qualified Securities to be distributed under the Creditors' Plan. For a description of the significance and determination of the amount of $902,000,000 in this definition, see "OVERVIEW OF THE CREDITORS' PLAN--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants--Creation and Anticipated Range of Amount of Qualified Securities." The "Negotiated Enterprise Value" is an amount equal to $2,525,000,000. This amount reflects a good faith negotiated estimate of the going concern enterprise value of the Debtors on a consolidated basis, which was arrived at after extensive analysis and negotiations among certain of the Proponents and Holders of Claims in other Classes. The Negotiated Enterprise Value also takes into account the possibility of delay between the Confirmation Date and the Effective Date, and the likely increase in the value of the Debtors over time. As described above, the Creditors' Plan also incorporates the fixed value of $902,000,000 as the high end of the estimated Senior Claims, for purposes of allocating New Common Stock. Article VII of the Creditors' Plan provides that, except as set forth in the definition of New Common Stock Value, the Negotiated Enterprise Value will be used for all purposes of the Creditors' Plan relating to the allocation or value of New Common Stock, and will 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. Assuming that (i) the Court does not determine that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, (ii) the Senior Claim Differential is zero, and (ii) $700,000,000 of Qualified Securities are available for distribution under the Creditors' Plan, the New Common Stock Value Per Share would be $18.46 per share. For greater amounts of Qualified Securities, the New Common Stock Value Per Share would be as follows (in each case, assuming there is no Senior Claim Differential): Amount of Qualified Securities New Common Stock (in millions) Value Per Share $800 $16.46 900 14.46 The New Common Stock Value Per Share will increase in value as the amount of the Senior Claim Differential, if any, increases. Conversely, assuming that the value of the Debtors is equal to $2,525,000,000 on the Effective Date, then for every $10 million increase in Senior Claims in excess of $902,000,000, recoveries of New Common Stock to Holders of Subordinated Note Claims will decrease by approximately 0.6%. THERE CAN BE NO 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. The Creditors' Plan provides for the creation and issuance of a high-vote class of New Common Stock (the Class A Common Stock, which is entitled to five votes per share) to Holders of Class U-4 and U-5 Claims, for the purpose described below. A part of such Claims will be satisfied by Qualified Securities, while the remainder will be satisfied by Class A Common Stock. The Proponents believe that it should be easier for the Debtors to obtain the financing necessary to consummate the Creditors' Plan if the institutional Creditors, including Apollo and Lehman Brothers Inc., with most at stake in fact possess predominant voting power. The Proponents believe that the Creditors' Plan's allocation of voting power among the unsecured pre-LBO and post-LBO bondholders is also entirely appropriate because it appropriately recognizes the structural and contractual subordination rights between all Class U-4 and U-5 unsecured bondholders, on the one hand (who have greater seniority now and, therefore, greater voting power under the Creditors' Plan), and Class U-6 unsecured bondholders, on the other hand (who have less seniority now and, therefore, less voting power under the Creditors' Plan). This Class A and Class B New Common Stock allocation was the subject of protracted, arms-length negotiation between the Ad Hoc Committee of Pre-LBO Bondholders (including the largest holders of Class U-6 bonds and the indenture trustees for such bonds) and holders of unsecured Class U-4 and U-5 bonds, including Lehman Brothers Inc. and Apollo, that resulted in the Pre-LBO Bondholders Settlement Agreement. The Ad Hoc Committee ensured under the Pre-LBO Bondholders Settlement Agreement, moreover, that among other things, the holders of unsecured post-LBO bond Claims, including Lehman Brothers Inc. and Apollo, could not take economic advantage of their weighted, Class A voting rights. The Debtors have raised a number of objections to the equity structure provided for in the Creditors' Plan, each of which is discussed below. The Debtors assert that: (i) the different voting and conversion features of the Class A and Class B Common Stock may be violative of the Code; (ii) there is insufficient justification for the allocation of voting power among recipients of Class A and Class B Common Stock; (iii) the sale and conversion features of Class A Common Stock will grant Apollo and Lehman Brothers Inc. an inappropriate level of control of the reorganized Debtors; (iv) "preferential treatment" is granted as a result of the different voting and conversion features of the Class A Common Stock; (v) the Proponents should describe the rationale for and the effect of the two stock issuances, and the facts and circumstances that support the conclusion that the structure is necessary to obtain post-effective date financing, including the identity of any financial institution and the relationship of any such financial institution with any of the Proponents; and (vi) Apollo and Lehman Brothers Inc. will receive a disproportionate benefit of the preference of the Class A Common Stock issuance and that the value of the Class A Common Stock to holders other than Apollo and Lehman Brothers Inc., and the value of the Class B Common Stock, may be reduced as a result of the sale and/or conversion features of the Class A Common Stock and of Apollo's and/or Lehman's control of the Debtors. The Proponents disagree with each of these assertions. In the first place, notwithstanding the Proponents' strong belief that the voting provisions of the New Common Stock are appropriate, the Creditors' Plan expressly provides that these provisions may be modified by the Court to the extent it finds them to be inappropriate under the Section 1123(a)(6). Accordingly, to the extent the Court finds the voting and conversion rights of the Class A Common Stock violates the provisions of the Code, any legal deficiencies can be remedied by the Court. As discussed above, the Proponents believe that it should be easier for the Debtors to obtain the financing necessary to consummate the Creditors' Plan if the institutional creditors, including Apollo and Lehman Brothers Inc., with most at stake in fact possess predominant voting power. The Proponents believe that the Creditors' Plan's allocation of voting power among the unsecured pre-LBO and post-LBO bondholders is also entirely appropriate, for all of the reasons discussed above. With respect to the sale and conversion features of the Class A Common Stock, the Creditors' Plan has been amended so that each share of Class A Common Stock automatically converts into one share of Class B Common Stock upon the sale, transfer or other disposition (but not including a pledge) of such share, other than by an original recipient of such shares under the Creditors' Plan to an Affiliate of the original recipient of such shares. This conversion is automatic, and applies to all Holders of Class A Common Stock, including Apollo and Lehman Brothers Inc. There are no sale or conversion features that would have the effect of giving any holder of Class A Common Stock an inappropriate level of control of the Debtors. Moreover, Article 7 of the proposed Restated Certificate of Incorporation of Walter Industries prohibits the holders of Class A New Common Stock from taking economic advantage of their weighted Class A voting rights. The rationale for and the effect of the two stock issuances are described in detail elsewhere herein. The Proponents believe that the disparate voting rights will not adversely affect the value of Class B Common Stock because the Class A Common Stock automatically converts to Class B Common Stock if and when it is sold to an unaffiliated third party. As a result, the Proponents believe that the Class A Common Stock will not carry a control premium, and should not have any adverse effect on the value of the Class B Common Stock. Lehman Brothers Inc. and Apollo have represented that there are no understandings or agreements between them with respect to the exercise of their rights to elect Qualified Securities or with respect to their voting of New Common Stock that they may receive on the Effective Date. Also, at the present time, there are no understandings or agreements between them with respect to the nomination or appointment of directors to sit on the boards of directors of the reorganized Debtors, other than the appointments, described herein, of Messrs. Walter, Durham and Matlock. To the extent that Apollo and/or Lehman Brothers Inc. control or share in the control of the reorganized Debtors because of their ownership of Class A or Class B Common Stock, it is the present intention of each of Apollo and Lehman Brothers Inc. to provide for a continuation of senior officers of all the Debtors. Regarding the New Common Stock that may be issued to Apollo and Lehman Brothers Inc. on account of their Subordinated Note Claims, Section II.B. of this Disclosure Statement contains charts describing the allocation of New Common Stock and Qualified Securities to Holders of Subordinated Note Claims under various scenarios. These charts can be used to calculate the percentage of ownership of New Common Stock of Apollo and Lehman Brothers Inc. under a number of factual scenarios. (Apollo holds $120,445,719 in principal amount of Class U-4 Claims, representing approximately 27% of the principal amount in Claims in that Class, and $25,000,000 in principal amount of Class U-5 Claims, representing approximately 7% of the principal amount of Claims in that Class. Lehman Brothers Inc. holds $158,790,000 in principal amount of Class U-4 Claims, representing approximately 36% of the principal amount of Claims in that Class, and $111,950,000 in principal amount of Class U-5 Claims, representing approximately 32% of the principal amount of Claims in that Class). 3. Post-Filing Date Interest Claims The Revolving Credit Banks and the Working Capital Banks (as defined in Section II.D.3.) (collectively, the "Banks") have each asserted the right to be paid post-petition interest (the "Post-Filing Date Interest Claims") at the default rates set forth in the Revolving Credit Agreement (as defined in Section II.C.3.) and the Working Capital Agreement (as defined in Section II.C.3.), together with interest on the accrued Post-Filing Date Interest Claims. Assuming the Veil Piercing Settlement is consummated, the Proponents do not dispute that the respective Allowed Claims of the Banks include post-Filing Date interest. However, the Proponents do dispute the entitlement to post-Filing Date interest at the default rate and to interest on certain of the accrued Post-Filing Date Interest Claims, believing that the Debtors have valid legal and equitable defenses to these assertions. Nonetheless, as there could be no assurance that the Proponents would prevail in this regard and in the interest of achieving a consensual reorganization, the Proponents have provided in the Creditors' Plan that the Allowed Claims of the Banks will include (i) the pre-Filing Date amount, plus (ii) Stub Period Interest (as defined in Section II.C.3.) on the pre-Filing Date amount from the Filing Date to and including October 31, 1992 at the Chemical Bank Prime Rate (as defined in the Creditors' Plan) in effect from time to time plus 1.5% per annum (the sum of (i) and (ii) being the "Revolving Credit Bank Claim Stub Period Amount" and the "Working Capital Bank Claim Stub Period Amount," as applicable), plus (iii) interest on the Revolving Credit Bank Claim Stub Period Amount or the Working Capital Bank Claim Stub Period Amount, as applicable, from November 1, 1992 to the Effective Date at the Chemical Bank Prime Rate in effect from time to time plus 1.5% per annum, compounded each January 1, April 1, July 1, and October 1, provided, that this rate will increase to 13% during any period after June 30, 1994 to the payment of the Initial Revolving Credit Bank Claim Payment or the Initial Working Capital Bank Claim Payment, as the case may be, plus (iv) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $37,500,000 (of which $28,220,625 is allocated to Revolving Credit Bank Claims and $9,279,375 is allocated to Working Capital Bank Claims). The Banks will not receive interest on interest (i.e., compounded interest) for the period from the Filing Date through October 31, 1992 (the "Stub Period"), but the simple interest accrued during the Stub Period will bear interest (i.e., be compounded a single time) beginning November 1, 1992. One major Holder of the Series B & C Senior Notes and LaSalle National Bank ("LaSalle"), as successor indenture trustee for the Series B & C Senior Notes, had previously asserted the right to post-Filing Date interest at interest rates of at least 14.625% and 14.50% (the stated rates of interest applicable prior to the reset advisors' inability to reset the interest rates) with respect to the Series B Senior Notes and the Series C Senior Notes, respectively, together with interest on the post-Filing Date Claims for interest which has accrued. LaSalle and certain holders of Series B & C Senior Note Claims have agreed to settle and compromise their claim for post-petition interest for the treatment of the Series B & C Senior Note Claims now provided for in the Creditors' Plan. The Bondholders Committee and the Creditors Committee have also asserted on behalf of the Holders of the Subordinated Note Claims (as defined in the Creditors' Plan), and Holders of Other Unsecured Claims and Holders of Convenience Class Claims (as defined in the Creditors' Plan), respectively, the right to post-Filing Date interest on their Allowed Claims. The Debtors have disputed those assertions, stating their belief that there are legal and equitable defenses to Claims for post-Filing Date interest by such Creditors. The Proponents have provided in the Creditors' Plan for post-Filing Date interest to Holders of Other Unsecured Claims and Holders of Convenience Class Claims, but not for Holders of Subordinated Note Claims (except as provided below). For the Holders of Other Unsecured Claims in Class U-3, as well as Convenience Class Claims in Class U-2, the Creditors' Plan provides for simple interest on the Pre-Filing Date Unsecured Allowed Amount of such Claims at the General Unsecured Interest Rate of (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) will be selected by the Holders of Class U-3 Allowed Claims (voting for this purpose as a single class for all Debtors), by vote of a majority in number of such Holders who vote on the Creditors' Plan. The Proponents believe that bankruptcy courts have traditionally and consistently provided that unsecured creditors should recover post-petition interest when the debtor proves to be solvent, on the basis that it is inequitable for stockholders to have a recovery before creditors are paid the full amount owed to them. In addition to the foregoing reason, the Proponents believe that their claim to recover post-petition interest in these Chapter 11 Cases is particularly appropriate because they have actively sought a settlement of the Veil Piercing-Related Issues that would drastically shorten these cases but have been opposed by the Debtors' stockholders. The Proponents believe that the stockholders should not receive a windfall as a result of the delay. For Holders of Subordinated Note Claims, the Creditors' Plan provides that only to the extent permitted by law and to the extent that the same may be satisfied after all distributions are made in full to all other Holders of Allowed Claims, including Veil Piercing Claimants, interest is payable, Pro Rata, on the aggregate pre-Filing Date principal amount of their Claims (together with interest thereon accrued and unpaid as of the Filing Date) from the Filing Date to the Effective Date calculated, as the case may be, at the applicable non-default contract rate, or in the absence of a contract rate, 9.0% or such other interest rate as the Court shall determine. Based upon the settlements contained in the Creditors' Plan and the Negotiated Enterprise Value, it is anticipated that the amount of post-Filing Date interest payable in respect of Subordinated Note Claims will be zero. Pursuant to the Pre-LBO Bondholders Settlement Agreement, that portion of the amount of the 10 7/8% Subordinated Notes attributable to original issue discount (calculated by the Debtors at $10,372,071) as of the Filing Date is treated as post-petition interest. The Bondholder Proponents believe that this is consistent with applicable law. The Debtors have asserted that Holders of Unsecured Claims are not, as a matter of law (given the alleged values of the Debtors' estates), entitled to post-petition interest on account of their Claims, and that as a result, the Creditors' Plan is not confirmable as a matter of law. The Proponents dispute both of these assertions, believing them to be legally and factually erroneous. Moreover, as discussed herein at "OVERVIEW OF THE CREDITORS' PLAN," confirmation of the Creditors' Plan is not conditioned on whether Holders of Subordinated Note Claims are entitled to or will receive post-petition interest under the Creditors' Plan, although the Proponents believe that this is the correct legal conclusion under the circumstances. See "INTRODUCTION--Objections to Confirmability of Creditors' Plan Asserted by Debtors." The Proponents believe that any issues relating to post-petition interest on Unsecured Claims will, if relevant and if properly asserted, be considered at the confirmation hearing of the Creditors' Plan. The chart set forth in the section entitled "OVERVIEW OF THE CREDITORS' PLAN-- Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Funding of the Settlement Payment by Creditors" illustrates the post-petition interest that would accrue on the Subordinated Note Claims under the Creditors' Plan and at other interest rates. The Proponents believe that even if it were assumed that Veil Piercing Claimants received no property under the Creditors' Plan, all or substantially all of the consideration that would otherwise have been used to satisfy the Allowed Veil Piercing Claims Amount of $450,000,000 would be applied to the post-Filing Date interest claims accruing on the Subordinated Note Claims, under any of the interest rates that could reasonably be used to calculate post-Filing Date interest on the Subordinated Note Claims. --------------------------- The 10% Subordinated Note Trustee has disputed this amount. For more information on post-Filing Date interest and other amounts payable to Holders of Allowed Claims in Classes S1, S-2, S-6, U-2, U-3, U-4, U-5, U-6 and I-1, see "OVERVIEW OF THE CREDITORS' PLAN--Classification and Treatment of Claims and Interests." C. Classification and Treatment of Claims and Interests In accordance with Section 1123(a)(1) of the Code, the Creditors' Plan does not classify Administrative and Priority Claims. Other Claims and Interests are divided into Classes, depending on their nature and the treatment to be afforded them under the Creditors' Plan. The Classes and their intended treatment are set forth below. 1. Administrative Claims Administrative Claims Administrative Claims are, in large part, Claims which arise against all of the Debtors for fees and expenses incurred by Court appointed professionals. Also included in Administrative Claims are Claims which arise from (i) the assumption of an Executory Contract; (ii) Indenture Trustees Claims (of which the Claims of the Series B & C Senior Note Trustee are Allowed Claims under Section 506(b) of the Code); (iii) Proponents Expenses; and (iv) expenses incurred in the negotiation, execution and implementation of the Veil Piercing Settlement, the Pre-LBO Bondholders Settlement Agreement and the other settlements reached in connection with the Creditors' Plan. For purposes of the Disclosure Statement, the Proponents estimate the aggregate amount of Administrative Claims that will exist as of December 31, 1994 will be $32,000,000. Treatment of Administrative Claims is as follows: 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 Bondholders Committee 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. The "Allowed Amount" of an Administrative Claim (as defined in the Creditors' Plan) is an amount agreed to by the Bondholders Committee and the Holder of such Claim and approved by a Final Order of the Court or, failing agreement, the amount fixed by a Final Order of the Court. With respect to an Executory Contract Claim (as defined in the Creditors' Plan), the amount determined in accordance with the procedures of Article VIII of the Creditors' Plan will apply. 2. Priority Claims Federal Income Tax Claims Federal Income Tax Claims are Claims by the IRS against all of the Debtors arising out of the consolidated tax returns filed by the Debtors or their predecessors for fiscal years ended August 31, 1980, 1983, 1984, 1985, 1986, 1987 and May 31, 1988 (nine months), 1989, 1990 and 1991. The IRS conducted an examination of the Debtors' returns for fiscal years ended August 31, 1983 and 1984 and, as a result, the IRS proposed in two formal 30-Day Letters approximately sixty adjustments, totaling $19,631,992 of deficiencies and $2,700,868 of penalties. The Debtors formally protested many of these items with the Appeals Division of the IRS (the "Appeals Division"). After failing to reach resolution of these issues with the Appeals Division, the Debtors filed the Tax Complaint in the Court. Two issues were decided in two separate decisions in favor of the Debtors by the Court: (a) whether Mid-State Homes could report interest income received from the sale of repossessed homes on its historically consistent straight-line method of reporting interest income (September 3, 1993 order); and (b) whether certain adjustments called discounts on sales of repossessed homes were permissible as reflecting both economic and accounting realities (April 6, 1993 order). The IRS has indicated its intention to appeal these decisions. Subsequent to entry of the April 6, 1993 order, the Debtors and the IRS attempted to negotiate a settlement of the remaining issues as to the fiscal years ended August 31, 1980 and 1983-1987. Although the Debtors and the IRS advised the Court that an agreement in principle had been reached with respect to the remaining issues and that a stipulation incorporating such agreement in principle was in the process of being prepared, final approval of the agreement in principle could not be obtained from the IRS. The Debtors state in the Debtors' Disclosure Statement that, as a result of the IRS's inability to obtain final approval of the agreement, the Debtors have moved forward in the Court for determination of the remaining issues as to years 1980 and 1983-1987, which issues include coal royalties, DISC treatment and EURO-dollar hedging. The Court has announced its intention to try a portion of the remaining issues, and held a pre-trial conference on October 12, 1993. Discovery has proceeded as to these issues. No trial date has as yet been scheduled. On September 28, 29 and 30, 1993, and October 4, 1993, the IRS filed four additional proofs of claim. The first proof of claim, filed in the amount of $110,470,973, sought to amend the previous amendment filed October 27, 1992 to the IRS Amended Proof of Claim with respect to fiscal years ended August 31, 1980 and August 31, 1983 through August 31, 1987. It sought among other things to add coal royalties as an issue for fiscal years ended August 31, 1983 and August 31, 1984. The second proof of claim, filed in the amount of $31,468,189, sought to amend the prior proof of claim filed by the IRS on October 27, 1992 with respect to fiscal years ended May 31, 1988 (nine months) and May 31, 1989 which prior proof of claim was previously disallowed by the Court. The third proof of claim, filed in the amount of $110,560,883, sought to amend the previous IRS amended proof of claim filed on September 29, 1993 with respect to fiscal years ended August 31, 1980 and August 31, 1983 through August 31, 1987. The only change in this amended proof of claim from the prior amended proof of claim for these years is to add a foreign withholding tax issue for the year ended December 31, 1985. The fourth proof of claim, filed in the amount of $44,837,693, sought to amend the prior proof of claim filed with respect to fiscal year ending May 31, 1990 only to include both fiscal years ended May 31, 1990 and May 31, 1991. Objections to each of the four amended claims referred to above have been filed by the Debtors. On September 7, 1993, Judge Paskay entered an order setting forth certain issues encompassed by the above claims to be tried and authorizing discovery to commence. One of those issues involved coal royalties with respect to fiscal years ending August 31, 1985 and thereafter. The IRS has sought by motions to amend the Court's order and its amended claims to make coal royalties an issue in fiscal years ended August 31, 1983 and August 31, 1984. The Court has denied the IRS motion and sustained the Debtors' objections to the amended claims in this regard by Court order dated February 3, 1994. The government has filed a notice of appeal from the February 3, 1994 Order with the District Court. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Litigation--Federal Income Tax." Also included in Federal Income Tax Claims is a Claim against the Debtors in the amount of $233,864 representing the unpaid tax balance for the consolidated federal income tax return for fiscal year ended May 31, 1990. This Claim results from an allocation by the Debtors of the portion of the federal income tax liability incurred prior to the Filing Date, after offset for all payments made toward such liability. On June 11, 1993, the Court denied the IRS application for allowance of this Claim as an Administrative Expense Claim. The IRS filed a notice of appeal of this decision on June 21, 1993. The Debtors estimate that Allowed Federal Income Tax Claims, including pre-Filing Date interest thereon, will not exceed $14,000,000 as of December 31, 1994. In the event that the amount of these Claims is not resolved prior to the Effective Date, a reserve in excess of $14,000,000 may be required. Treatment of Federal Income Tax Claims is as follows: 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 Claims. The Allowed Amount shall be payable in equal quarterly installments over a six-year period from the date of the assessment by the IRS of such Claim, with interest on unpaid amounts from the later of the Effective Date or the date of assessment 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)(9)(C) of the Code and, if applicable, by 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a Federal Income Tax Claim is an amount agreed to by the Bondholders Committee and the Holder of such Claim and approved by a Final Order of the Court or, failing agreement, the amount fixed by a Final Order of the Court. Federal Excise Tax and Reclamation Claims. Federal Excise Tax and Reclamation Claims consist of two Claims against Jim Walter Resources: one by the Federal Government for Black Lung Excise Tax (the "Excise Tax"), and the other by the United States Department of Interior, Office of Surface Mining (the "OSM") for reclamation fees ("Reclamation Fees") (collectively, the "Federal Excise Tax and Reclamation Claims"). The Claim by the Federal Government is for the Excise Tax payment, which was due January 9, 1990 in the amount of $427,826 for the period of December 16 through December 25, 1989. The Excise Tax arose out of the enactment of the Black Lung Benefits Act of 1977, effective as of April 1977, which imposed a tax on coal mined or sold in the United States by coal mine operators after March 31, 1978. The Excise Tax is used to fund the Black Lung Disability Trust Fund to finance the cost of black lung claims (a) where the coal miner's last employment was before January 1, 1970, or (b) where no responsible coal mine operator has been identified and (c) for administrative expenses. On July 2, 1990, the Federal Government filed a proof of claim totaling $449,218, for Excise Taxes and penalties. Jim Walter Resources filed an objection to this Claim which was heard by the Court on May 19, 1993. At this hearing, the Court allowed the Claim for Excise Taxes totaling $427,826 and disallowed the Claim for penalties totaling $21,392, without prejudice, giving the Federal Government thirty (30) days in which to request a hearing on the disallowance of the penalty portion of the Claim. The Federal Government filed such a request for hearing on June 16, 1993. However, such request by the Federal Government was withdrawn on July 21, 1993. The Claim by the OSM is for Reclamation Fees for the fourth quarter of fiscal year 1989, due January 30, 1990, totaling $328,655. The Reclamation Fees arose out of enactment of Title IV of the Surface Mining Control and Reclamation Act of 1977 (the "Reclamation Act") and provided for the collection of a fee from coal mine operators subject to the Reclamation Act on each ton of coal produced. The funds collected are used for the reclamation of lands mined and abandoned or left in an inadequate reclamation status before the enactment date of the Reclamation Act, August 3, 1977. According to the Debtors' Disclosure Statement, Jim Walter Resources, based on its books and records, estimates that Claims in Class P-2 total $756,481, as of May 31, 1993. Treatment of Federal Excise Tax and Reclamation Claims is as follows: 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 the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a Federal Excise Tax and Reclamation Claim is an amount agreed to by the Bondholders Committee and the Holder of such Claim and approved by a Final Order of the Court or, failing agreement, the amount fixed by a Final Order of the Court. State and Local Tax Claims. State and Local Tax Claims are Secured Claims and Unsecured Claims of Governmental Units (as defined in Section 101(27) of the Code), other than the IRS and the Federal Government, with authority to tax the Debtors (the "State and Local Tax Claims") which are given special priority under the Code against Hillsborough, Best (Miss.), Computer Holdings, Dixie, Hamer Holdings, Hamer Properties, Homes Holdings, Computer Services, Jim Walter Homes, Jim Walter Resources, Window Components (Wisc.), JW Aluminum, 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, Old Walter Industries and Walter Land. The State and Local Tax Claims include real property, personal property, sales and use, excise, income and franchise taxes that were incurred prior to the Filing Date. The following is a summary of the estimated amount of such Claims in this Class by Debtor that are outstanding as of May 31, 1993, based on their books and records, according to the Debtors' Disclosure Statement:
Estimated Case Amount of Class Debtor Number Claims P-3A Hillsborough 89-9715-8P1 $ 31,178 P-3C Best (Miss.) 89-9737-8P1 1,232 P-3E Computer Holdings 89-9724-8P1 40 P-3F Dixie 89-9741-8P1 123,482 P-3G Hamer Holdings 89-9735-8P1 40 P-3H Hamer Properties 89-9739-8P1 1,098 P-3I Homes Holdings 89-9742-8P1 40 P-3J Computer Services 89-9723-8P1 40 P-3K Jim Walter Homes 89-9746-8P1 214,159 P-3M Jim Walter Resources 89-9738-8P1 4,099,469 P-3N Window Components (Wisc.) 89-9716-8P1 2,092 P-3O JW Aluminum 89-9718-8P1 191,849 P-3P Resources Holdings 89-9719-8P1 40 P-3Q JWI Holdings 89-9721-8P1 40 P-3R JW Walter 89-9717-8P1 11,430 P-3S Window Components 89-9732-8P1 17,646 P-3T Land Holdings 89-9720-8P1 40 P-3U Mid-State Homes 89-9725-8P1 6,686 P-3V Mid-State Holdings 89-9726-8P1 40 P-3W Railroad Holdings 89-9733-8P1 40 P-3X Sloss 89-9743-8P1 610,965 P-3Y Southern Precision 89-9729-8P1 42,036 P-3Z United Land 89-9730-8P1 846,010 P-3AA U.S. Pipe 89-9744-8P1 2,112,689 P-3BB Pipe Realty 89-9734-8P1 40 P-3CC Vestal 89-9728-8P1 64,037 P-3EE Old Walter industries 89-9745-8P1 7,019 P-3FF Walter Land 89-9736-8P1 65 Total $8,383,542
Treatment of State and Local Tax Claims is as follows: 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a State and Local Tax Claim is an amount agreed to by the Bondholders Committee and the Holder of such Claim and approved by a Final Order of the Court or, failing agreement, the amount fixed by a Final Order of the Court. 3. Secured Claims Class S-1 Claims: Revolving Credit Bank Claims. The Class S-1 Claims are Claims by various banks (the "Revolving Credit Banks") with respect to 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 (the "Revolving Credit Agreement") against Hillsborough (Class S-1A), Best (Class S-1B), Best (Miss.) (Class S-1C), Coast to Coast (Class S-1D), Dixie (Class S-1F), Hamer Properties (Class S-1H), Computer Services (Class S-1J), Jim Walter Homes (Class S-1K), JW Insurance (Class S-1L), Jim Walter Resources (Class S-1M), Window Components (Wisc.) (Class S-1N), JW Aluminum (Class S-10), JWI Holdings (Class S-1Q), JW Walter (Class S-1R), Window Components (Class S-1S), Sloss (Class S-1X), Southern Precision (Class S-1Y), United Land (Class S-1Z), U.S. Pipe (Class S-1AA), Pipe Realty (Class S-1BB), Vestal (Class S-1CC), Old Walter Industries (Class S-1EE) and Walter Land (Class S-1FF) (collectively, the "Revolving Loan Borrowers") which were guaranteed by Computer Holdings (Class S1E), Hamer Holdings (Class S-1G), Homes Holdings (Class S-1I), Resources Holdings (Class S-1P), Land Holdings (Class S-1T), Mid-State Holdings (Class S-1V), Railroad Holdings (Class S-1W) and JW Resources (Class S-1GG) (collectively, the "Revolving Loan Guarantors"). The Revolving Loan Borrowers and the Revolving Loan Guarantors are collectively referred to herein as the "Revolving Loan Debtors." Under the Revolving Credit Agreement, (i) Hillsborough was permitted to borrow up to $2.3 billion for Tender Offer Loans (as defined in Section VII.A.3.) to finance the Tender Offer; and (ii) effective January 7, 1988, the Revolving Loan Borrowers, on a joint and several basis, were permitted to borrow up to an aggregate of $800 million as revolving loans (the "Revolving Loan" or "Revolving Loan Commitment"), $700 million of which was a term loan and $100 million of which was a revolving loan, and (iii) Mid-State Homes was permitted to borrow up to $1.2 billion as a term loan (the "Mid-State Term Loan" or the "Mid-State Term Loan Commitment"). The Revolving Loan and the Mid-State Term Loan were borrowed immediately following the Merger and were used, together with other funds, to repay the Tender Offer Loans in full. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Organization of Hillsborough and Acquisition of Original Jim Walter--Financing of the Tender Offer and Merger." On April 19, 1988, a portion of the net proceeds from the issuance of Mortgage-Backed Notes (as defined in Section VII.B.2.(a)) was applied to a mandatory prepayment of the entire outstanding principal amount of the Mid-State Term Loan, with the result that the Mid-State Term Loan Commitment was reduced to zero and terminated as of April 19, 1988. The remainder of the net proceeds from the issuance of Mortgage-Backed Notes was applied to mandatory prepayment of a portion of the outstanding balances of the Revolving Loans. The obligations of the Revolving Loan Borrowers under the Revolving Credit Agreement are secured in the following manner: (1) the mortgage by Old Walter Industries of its headquarters building and the land associated therewith to secure the payment when due of all obligations of Old Walter Industries under the Old Walter Industries Guarantee with respect to the Revolving Loans (the "Old Walter Industries Revolving Credit Guarantee") and the Revolving Credit Agreement; (2) the pledge by JW Aluminum, Window Components, Sloss, Vestal and Southern Precision (each an "Additional Subsidiary Pledgor"), of all intercompany notes owned on the Filing Date by each Additional Subsidiary Pledgor, pursuant to a pledge agreement between each Additional Subsidiary Pledgor (or its predecessor) and MHTCo. (as predecessor to Chemical), as collateral agent, dated as of December 29, 1987 (collectively, the "Additional Subsidiaries Pledge Agreements"), to secure the payment when due of the obligations of Hillsborough and/or its consolidated subsidiaries to the Revolving Credit Banks; (3) the pledge by all First Tier Subsidiaries, excluding Homes Holdings, Former U.S. Pipe and Resources Holdings (each a "First Tier Subsidiary Pledgor"), of (a) all the issued and outstanding shares of capital stock owned on the Filing Date by each First Tier Subsidiary Pledgor of any corporation and (b) all intercompany notes owned on the Filing Date by each First Tier Subsidiary Pledgor, pursuant to a pledge agreement between each First Tier Subsidiary Pledgor and MHTCo. (as predecessor to Chemical), as collateral agent, dated as of December 29, 1987 (collectively, the "First Tier Subsidiary Pledge Agreements"), to secure the obligations of the First Tier Subsidiary Guarantors in respect of the Revolving Loans; (4) the pledge by U.S. Pipe, Jim Walter Resources and Walter Land (each a "Revolving Loan Borrower Pledgor") of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by each Revolving Loan Borrower Pledgor of any corporation and (b) all of the intercompany notes owned on the Filing Date by the Revolving Loan Borrower Pledgor pursuant to a pledge agreement between each Revolving Loan Borrower Pledgor and MHTCo. (as predecessor to Chemical), as collateral agent, dated as of December 29, 1987 (collectively, the "Revolving Loan Borrower Pledge Agreements"), to secure the obligations of the Revolving Loan Borrower Pledgors in respect of the Revolving Loans; (5) the pledge by Hillsborough of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by Hillsborough of any corporation, excluding the capital stock of Homes Holdings, Resources Holdings and U.S. Pipe (which stock is pledged by Hillsborough as "Shared Collateral") (as defined in the Revolving Credit Agreement) and (b) all intercompany notes owned on the Filing Date by Hillsborough, pursuant to a pledge agreement dated as of December 29, 1987 between Hillsborough and MHTCo. (as predecessor to Chemical), as collateral agent (the "Hillsborough Pledge Agreement"), to secure the payment when due of the obligations of Hillsborough pursuant to the Hillsborough guarantee in respect of the Revolving Loans; (6) the pledge by each of Homes Holdings, Resources Holdings and U.S. Pipe of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by each pledgor of any corporation, excluding capital stock of Jim Walter Homes and Jim Walter Resources and (b) all intercompany notes owned on the Filing Date by each pledgor, pursuant to a pledge agreement dated as of December 29, 1987 between each of Homes Holdings, Resources Holdings and U.S. Pipe and MHTCo. (as predecessor to Chemical), as collateral agent, to secure the obligations of each pledgor in respect of the Revolving Loans; and (7) the pledge by Old Walter Industries of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by Old Walter Industries of any corporation, excluding the capital stock of Jim Walter Homes and Jim Walter Resources (which stock is pledged by Old Walter Industries as Shared Collateral) and (b) all intercompany notes owned on the Filing Date by Old Walter Industries, pursuant to a pledge agreement dated as of December 29, 1987 between Old Walter Industries and MHTCo. (as predecessor to Chemical), as collateral agent (the "Old Walter Industries Pledge Agreement"), to secure the obligations of Old Walter Industries pursuant to the Old Walter Industries Revolving Credit Guarantee. (The pledge agreements referred to in clauses (5), (6) and (7) are collectively referred to herein as the "Issuer and Guarantor Pledge Agreements.") In addition, the obligations of the Revolving Loan Borrowers under the Revolving Credit Agreement are secured by a pledge by Computer Services, Jim Walter Homes, Best, Best (Miss.), JW Insurance, Coast to Coast, Dixie, Window Components, Hamer Properties, JW Walter and J.W. Railroad, a non-debtor (each an "Additional Revolving Loan Borrower Pledgor"), of (a) all of the issued and outstanding shares of stock owned as of the Filing Date by the Additional Revolving Loan Borrower Pledgors of any corporation and (b) all of the intercompany notes owned on the Filing Date by the Additional Revolving Loan Borrower Pledgors, pursuant to a pledge agreement between each Additional Revolving Loan Borrower Pledgor and MHTCo. (as predecessor to Chemical), as collateral agent, dated as of December 29, 1987 (the "Additional Revolving Loan Borrower Pledge Agreements"), to secure the payment when due of all obligations of the Additional Revolving Loan Borrower Pledgors pursuant to the Revolving Credit Agreement. As of the Filing Date, $242,291,945 principal amount of Revolving Loans were outstanding, plus accrued interest of $1,374,096. In October 1990, pursuant to an order of the Court, $5,794,016 of the $7,355,767 proceeds from the sale by Old Walter Industries of its investment in the stock of Beijer Industries AB ("Beijer Proceeds") together with certain bank accounts set off ("Bank Setoff Proceeds") against Revolving Loans, held as security under the Revolving Credit Agreement and the Working Capital Agreement, including interest thereon, were turned over to the Revolving Credit Banks with reservation of rights as to application of such payment. The Revolving Loan Borrowers have applied such payment as a reduction of principal. Also, in June 1991, pursuant to an order of the Court, $8,248,821 of the $11,054,126 proceeds ("Apache Note Proceeds") from the prepayment of a note (the "Apache Note") received by Jim Walter Resources from Jasper Corp. in connection with the sale of Apache Building Products Company ("Apache") which had been held as security under the Revolving Credit Agreement and the Working Capital Agreement, including interest thereon, were turned over to the Revolving Credit Banks and applied as a reduction of principal. The order of the Court stating that such payment should be applied to principal has been reversed by the District Court and remanded to the Court for further consideration as to its application. The balance of the proceeds from these security arrangements was turned over to the Working Capital Banks and applied as a reduction of the principal outstanding under the Working Capital Agreement. See "OVERVIEW OF THE CREDITORS' PLAN--Classification and Treatment of Claims and Interests--Secured Claims." On October 16, 1992, the Debtors submitted to the Court a motion to approve a Compromise and Settlement Agreement which had been negotiated between the Debtors and representatives of the Banks. The Compromise and Settlement Agreement, among other matters would have: (1) fixed (i) the amount of principal as of the Filing Date (ii) interest on the principal amount of the Revolving Loan accrued and unpaid as of the Filing Date calculated at the non-default contract rate in effect from time to time prior to the Filing Date and (iii) the application of the various disputed payments referred to in the preceding paragraph as a principal reduction from time to time (collectively (i), (ii) and (iii), the "Adjusted Revolving Loan Claim"), (2) provided that interest (the "Stub Period Interest") computed on the Adjusted Revolving Loan Claim at the Chemical Bank Prime Rate in effect from time to time plus 1 1/2% per annum (one of the contractual interest rate options under the Revolving Credit Agreement) for the period from the Filing Date through October 31, 1992 (the Stub Period) would be added to the amount of the Adjusted Revolving Loan Claim (together, the Revolving Credit Bank Claim Stub Period Amount), (3) provided that on November 1, 1992, a Claim would be allowed for additional post-Filing Date interest on the Revolving Credit Bank Claim Stub Period Amount from and after November 1, 1992, calculated at the Chemical Bank Prime Rate plus 1 1/2% per annum, and this interest would be paid quarterly during the pendency of the Chapter 11 Cases, (4) assumed continued payment of quarterly interest for 16 consecutive quarters (or to the Effective Date if sooner), in which case all Claims by the Revolving Credit Banks to post-Filing Date interest at a rate in excess of the Chemical Bank Prime Rate plus 1 1/2% per annum, and to interest on unpaid post-Filing Date interest other than Stub Period Interest, would have been waived and (5) provided for allowance of reasonable post-Filing Date expenses of the Revolving Credit Banks, subject to approval of the Court and the standards established by the Court in the Chapter 11 Cases. After opposition by other Creditors to the Compromise and Settlement Agreement and a hearing before the Court, the motion to approve the Compromise and Settlement Agreement was denied pursuant to an order of the Court dated April 27, 1993. A motion for rehearing the application to approve the Compromise and Settlement Agreement was denied pursuant to an order of the Court dated May 24, 1993. An appeal by the Debtors from such order is pending in the District Court. The Creditors' Plan largely embodies the terms of the earlier Compromise and Settlement Agreement. Treatment of Class S-1 Claims is as follows: Class S-1 Claims are impaired. Each Holder of a Class S-1 Allowed Claim shall receive, in full satisfaction thereof, Cash and, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, Class B 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) of the Creditors' Plan (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) of the Creditors' Plan; 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) of the Creditors' Plan which accrued during such calendar quarter and was not paid pursuant to Section 3.6(a) of the Creditors' Plan; and c. On the Effective Date, Cash and, to the extent set forth in Section 1.20(b)(vi) of the Creditors' Plan, Class B 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) of the Creditors' Plan, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a Revolving Credit Bank Claim (as defined in the Creditors' Plan) of any Holder is 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, 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) of the Creditors' Plan and (vi) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest consisting of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $28,220,625; provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Revolving Credit Bank Claim shall receive Cash in an amount equal to such Holder's Pro Rata share of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Revolving Credit Bank Claims under this paragraph, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder shall receive under this paragraph shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share (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). WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED OTHERWISE, HOLDERS OF REVOLVING CREDIT BANK CLAIMS, WORKING CAPITAL BANK CLAIMS AND SERIES B & C SENIOR NOTE CLAIMS SHOULD ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION INTEREST IN THE FORM OF CLASS B COMMON STOCK THAT IS CONTINGENT ON THE EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL 1-800-489-7444 AT ANY TIME FOR A RECORDING PROVIDING CURRENT INFORMATION AS TO WHETHER SUCH AGREEMENT HAS BECOME EFFECTIVE, INCLUDING THE RESULT OF THE SEPTEMBER 1, 1994 HEARING TO BE HELD BY THE CELOTEX BANKRUPTCY COURT TO CONSIDER APPROVAL THEREOF. FOR MORE INFORMATION ON THE CONDITIONS TO EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT, SEE "OVERVIEW OF THE CREDITORS' PLAN--SPECIAL FEATURES OF THE CREDITORS' PLAN--SETTLEMENT OF VEIL PIERCING/FRAUDULENT CONVEYANCE ISSUES AND OTHER ISSUES--TERMS OF THE VEIL PIERCING SETTLEMENT AGREEMENT." For a discussion of post-Filing Date Interest Claims generally, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Post-Filing Date Interest Claims." Based on information contained in the Debtors' Disclosure Statement, the aggregate Allowed Amount of the Revolving Credit Bank Claims as of May 31, 1993 was $310,010,797, consisting of the following: Pre-Filing Date principal amount $242,291,945 less Beijer Proceeds/Bank Setoff Proceeds (5,794,016) less Apache Note Proceeds (8,248,821) plus pre-Filing Date accrued interest 1,374,096 Adjusted Revolving Loan Claim 229,623,204 Stub Period Interest 67,274,606 Revolving Credit Bank Claim Stub Period Amount 296,897,810 Interest from 11/1/92 to 5/31/93 13,112,987 Total Allowed Amount as of May 31, 1993 $310,010,797 Based upon the foregoing information, the Proponents estimate that the aggregate Allowed Amount of the Revolving Credit Bank Claims as of December 31, 1994 will be approximately $354,027,530 plus, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest to be paid in the form of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $28,220,625 (if the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value). Upon receipt of the distribution specified above, 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 Creditors' 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 Creditors' 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. Class S-2 Claims: Working Capital Bank Claims. The Class S-2 Claims are the claims by various banks (the "Working Capital Banks") with respect to a Working Capital Credit Agreement, dated as of December 29, 1987, as amended (the "Working Capital Agreement") provided to Jim Walter Resources (Class S-2M), United Land (Class S-2Z), U.S. Pipe (Class S-2AA) and Walter Land (Class S-2FF) (collectively, the "Working Capital Borrowers") which are guaranteed by Hillsborough (Class S-2A), Computer Holdings (Class S-2E), Hamer Holdings (Class S-2G), Homes Holdings (Class S-2I), JW Aluminum (Class S-2O), Resources Holdings (Class S-2P), JWI Holdings (Class S-2Q), Window Components (Class S-2S), Land Holdings (Class S-2T), Mid-State Holdings (Class S-2V), Railroad Holdings (Class S-2W), Sloss (Class S-2X), Southern Precision (Class S-2Y), Pipe Realty (Class S-2BB), Vestal (Class S-2CC) and Old Walter Industries (Class S-2EE) (collectively, the "Working Capital Guarantors"). The Working Capital Borrowers and the Working Capital Guarantors are collectively referred to herein as the "Working Capital Debtors." Under the Working Capital Agreement, the Working Capital Borrowers were permitted to borrow, provided the sum of such loans (the "Working Capital Loans"), swingline loans (which, in general, were short-term borrowings that were designed to fund day-to-day Cash requirements and were repayable at least monthly with proceeds of subsequent Working Capital Loans) and letters of credit issued under the Working Capital Agreement did not exceed $150,000,000 (the "Working Capital Commitment") at any time outstanding (with such amount being divided into various sub-limits for each of the Working Capital Borrowers). Working Capital Loans could be repaid and reborrowed in accordance with the provisions of the Working Capital Agreement. The Working Capital Commitment was to terminate on December 31, 1989, and all letters of credit outstanding under the Working Capital Agreement were to expire no later than June 30, 1990. As a result of the Reorganization Proceedings, the Working Capital Agreement terminated and the maturity of all outstanding obligations under the Working Capital Agreement, other than the obligations with respect to outstanding letters of credit, were accelerated. The obligations of the Working Capital Borrowers under the Working Capital Agreement are secured in the following manner: (1) the mortgage by Old Walter Industries of its headquarters building and the land associated therewith to secure the payment when due of all obligations of Old Walter Industries under the Old Walter Industries Guarantee with respect to the Working Capital Loans (the "Old Walter Industries Working Capital Guarantee"), and the Working Capital Agreement; (2) the pledge by all Additional Subsidiary Pledgors of all intercompany notes owned on the Filing Date by each Additional Subsidiary Pledgor, pursuant to the Additional Subsidiaries Pledge Agreements, to secure the payment when due of the obligations of Hillsborough and/or its consolidated subsidiaries to each Additional Subsidiary Pledgor's or its direct parent corporation's obligations to the Working Capital Banks; (3) the pledge by all First Tier Subsidiary Pledgors of (a) all the issued and outstanding shares of capital stock owned on the Filing Date by each First Tier Subsidiary Pledgor of any corporation and (b) all intercompany notes owned on the Filing Date by each First Tier Subsidiary Pledgor, pursuant to the First Tier Subsidiary Pledge Agreements, to secure the obligations of the First Tier Subsidiary Guarantors in respect of the Working Capital Loans; (4) the pledge by U.S. Pipe, Jim Walter Resources and Walter Land (each a "Working Capital Borrower Pledgor") of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by each Working Capital Borrower Pledgor of any corporation and (b) all of the intercompany notes owned on the Filing Date by the Working Capital Borrower Pledgor, pursuant to a pledge agreement between each Working Capital Borrower Pledgor and MHTCo. (as predecessor to Chemical), as collateral agent, dated as of December 29, 1987 (collectively, the "Working Capital Borrower Pledge Agreements"), to secure the obligations of the Working Capital Borrower Pledgers in respect of the Working Capital Loans; (5) the pledge by Hillsborough of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by Hillsborough of any corporation, excluding the capital stock of Homes Holdings, Resources Holdings and U.S. Pipe (which stock is pledged by Hillsborough as Shared Collateral) and (b) all intercompany notes owned on the Filing Date by Hillsborough, pursuant to the Hillsborough Pledge agreement, to secure the payment when due of the obligations of Hillsborough pursuant to the Hillsborough guarantee in respect of the Working Capital Loans; (6) the pledge by each of Homes Holdings, Resources Holdings and U.S. Pipe of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by each pledgor of any corporation, excluding capital stock of Jim Walter Homes and Jim Walter Resources and (b) all intercompany notes owned on the Filing Date by each pledgor, pursuant to a pledge agreement dated as of December 29, 1987 between each of Homes Holdings, Resources Holdings and U.S. Pipe and MHTCo. (as predecessor to Chemical), as collateral agent, to secure the obligations of each pledgor in respect of the Working Capital Loans; and (7) the pledge by Old Walter Industries of (a) all of the issued and outstanding shares of capital stock owned on the Filing Date by Old Walter Industries of any corporation, excluding the capital stock of Jim Walter Homes and Jim Walter Resources (which stock is pledged by Old Walter Industries as Shared Collateral) and (b) all intercompany notes owned on the Filing Date by Old Walter Industries, pursuant to the Old Walter Industries Pledge Agreement, to secure the obligations of Old Walter Industries pursuant to the Old Walter Industries Working Capital Guarantee. As of the Filing Date, $79,500,000 principal amount of Working Capital Loans were outstanding, plus accrued interest and commitment fees of $620,608 and $125,261, respectively, and outstanding letters of credit totaling $20,449,197. Subsequent to the Filing Date, there were two draw-downs totaling $2,900,000 on the letters of credit outstanding. In October 1990, pursuant to an order of the Court, $1,561,751 of the $7,355,767 Beijer Proceeds and Bank Setoff Proceeds, held as security under the Working Capital Agreement and the Revolving Credit Agreement, including interest thereon, were turned over to the Working Capital Banks with reservation of rights as to application of such payment. The Working Capital Borrowers have applied such payment as a reduction of principal. Also, in June 1991, pursuant to an order of the Court $2,805,305 of the $11,054,126 Apache Proceeds, including interest thereon, were turned over to the Working Capital Banks and applied as a reduction of principal. The order of the Court stating that such payment should be applied to principal has been reversed by the District Court and remanded to the Court for further consideration. The balance of the proceeds from these security arrangements was turned over to the Revolving Credit Banks and applied as a reduction of the principal outstanding under the Revolving Credit Agreement. See "OVERVIEW OF THE CREDITORS' PLAN--Classification and Treatment of Claims and Interests--Secured Claims." On October 16, 1992, the Debtors submitted to the Court a motion to approve a Compromise and Settlement Agreement which had been negotiated between the Debtors and representatives of the Banks. The Compromise and Settlement Agreement, among other matters would have: (1) fixed (i) the amount of principal as of the Filing Date, (ii) interest on the principal amount of the Working Capital Loans accrued and unpaid as of the Filing Date calculated at the non-default contract rate in effect from time to time prior to the Filing Date, (iii) fees accrued and unpaid as of the Filing Date, (iv) the letter of credit draw-downs that occurred subsequent to the Filing Date and (v) the application of the various disputed payments referred to in the preceding paragraph as a principal reduction from time to time (collectively the sum of (i), (ii), (iii) and (iv) minus (v) the "Adjusted Working Capital Claim"); (2) provided that Stub Period Interest computed on the Adjusted Working Capital Claim at the Chemical Bank Prime Rate in effect from time to time plus 1 1/2% per annum (one of the contractual interest rate options under the Working Capital Agreement) for the Stub Period would be added to the amount of the Adjusted Working Capital Claim (together, the Working Capital Bank Claim Stub Period Amount), (3) provided that on November 1, 1992, a Claim would be allowed for additional post-Filing Date interest on the Working Capital Bank Claim Stub Period Amount, from and after November 1, 1992, calculated at the Chemical Bank Prime Rate plus 1 1/2% per annum, and this interest would be paid quarterly during the pendency of the Chapter 11 Cases, (4) assumed continued payment of quarterly interest for 16 consecutive quarters (or to the Effective Date if sooner) in which case, all Claims by the Working Capital Banks to post-Filing Date interest at a rate in excess of the Chemical Bank Prime Rate plus 1 1/2% per annum, and to interest on unpaid post-Filing Date interest other than Stub Period Interest, would have been waived and (5) provided for allowance of reasonable post-Filing Date expenses of the Working Capital Banks, subject to approval of the Court and the standards established by the Court in the Chapter 11 Cases. After opposition by other Creditors to the Compromise and Settlement Agreement and a hearing before the Court, the motion to approve the Compromise and Settlement Agreement was denied pursuant to an order of the Court dated April 27, 1993. A motion for rehearing the application to approve the Compromise and Settlement Agreement was denied pursuant to an order of the Court dated May 24, 1993. An appeal by the Debtors from such order is pending in the District Court. The Creditors' Plan largely embodies the terms of the earlier Compromise and Settlement Agreement. Treatment of Class S-2 Claims is as follows: Class S-2 Claims are impaired. Each Holder of a Class S-2 Allowed Claim shall receive, in full satisfaction thereof, Cash and, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, Class B 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) of the Creditors' Plan (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) of the Creditors' Plan; (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) of the Creditors' Plan which accrued during such calendar quarter and was not paid pursuant to Section 3.7(a) of the Creditors' Plan; and (c) On the Effective Date, Cash and, to the extent set forth in Section 1.20(c)(vi) of the Creditors' Plan, Class B 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) of the Creditors' Plan, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a Working Capital Bank Claim (as defined in the Creditors' Plan) of any Holder is 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 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 3.7(b) of the Creditors' Plan and (vi) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest consisting of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $9,279,375; provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Working Capital Bank Claim shall receive Cash in an amount equal to such Holder's Pro Rata share of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Working Capital Bank Claims under this paragraph, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder shall receive under this paragraph shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share (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). WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED OTHERWISE, HOLDERS OF REVOLVING CREDIT BANK CLAIMS, WORKING CAPITAL BANK CLAIMS AND SERIES B & C SENIOR NOTE CLAIMS SHOULD ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION INTEREST IN THE FORM OF CLASS B COMMON STOCK THAT IS CONTINGENT ON THE EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL 1-800-489-7444 AT ANY TIME FOR A RECORDING PROVIDING CURRENT INFORMATION AS TO WHETHER SUCH AGREEMENT HAS BECOME EFFECTIVE, INCLUDING THE RESULT OF THE SEPTEMBER 1, 1994 HEARING TO BE HELD BY THE CELOTEX BANKRUPTCY COURT TO CONSIDER APPROVAL THEREOF. FOR MORE INFORMATION ON THE CONDITIONS TO EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT, SEE "OVERVIEW OF THE CREDITORS' PLAN--SPECIAL FEATURES OF THE CREDITORS' PLAN--SETTLEMENT OF VEIL PIERCING/FRAUDULENT CONVEYANCE ISSUES AND OTHER ISSUES--TERMS OF THE VEIL PIERCING SETTLEMENT AGREEMENT." For a discussion of post-Filing Date Interest Claims generally, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Post-Filing Date Interest Claims." Based on information contained in the Debtors' Disclosure Statement, the aggregate Allowed Amount of the Working Capital Bank Claims as of May 31, 1993 was $106,257,782, consisting of the following: Pre-Filing Date principal amount $ 79,500,000 plus letter of credit draw-down 1/3/90 2,000,000 plus letter of credit draw-down 6/11/90 900,000 less Beijer Proceeds/Bank Setoff Proceeds (1,561,751) less Apache Note Proceeds (2,805,305) plus pre-Filing Date interest 620,608 plus pre-Filing Date fees 125,261 Adjusted Working Capital Claim 78,778,813 Stub Period Interest 22,984,426 Working Capital Bank Claim Stub Period Amount 101,763,239 Interest from 11/1/92 to 5/31/93 4,494,543 Total Allowed Amount as of 5/31/93 $106,257,782 Based upon the foregoing information, the Proponents estimate that the aggregate Allowed Amount of the Working Capital Bank Claims as of December 31, 1994 will be approximately $121,343,120 plus, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest in the form of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $9,279,375 (if the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value). Upon receipt of the distribution specified above, 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 Creditors' 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 Creditors' 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. Class S-3 Claims: Grace Street Note Claims. The Class S-3 Claims are Claims under two promissory notes, each dated March 19, 1971 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 (the "Grace Street Notes") as assigned to and assumed by Old Walter Industries (Class S-3EE). According to the Debtors' Disclosure Statement, Old Walter Industries, based on its books and records, estimates that the Claims in Class S-3 (the "Grace Street Note Claims") are $5,000 principal amount, plus accrued interest of $379 as of May 31, 1993, or a total of $5,379. Accrued interest between May 31, 1993 and December 31, 1994 is estimated by the Proponents to be immaterial. Treatment of Class S-3 Claims is as follows: 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of any Grace Street Note Claim is an amount equal to (i) as to a Claim for principal and interest, the sum of (A) the principal amount thereof due and owing as of the Filing Date, together with interest thereon accrued and unpaid as of the Filing Date, calculated at the non-default contract rate and (B) interest on the 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 Walter Industries to repay any such Claim subsequent to the Filing Date and prior to the Effective Date. Class S-4 Claims: Sloss IRB Claim. NOTE: All information below relating to Class S-4 Claims is taken from the Debtors' Disclosure Statement. The Class S-4 Claims are Claims against Sloss (Class S-4X) by the Industrial Development Board of the City of Birmingham (the "IDB of Birmingham"), asserted by NationsBank ("NationsBank") (as successor to NCNB National Bank of Florida), as trustee (the "Sloss IRB Trustee"), in accordance with the mortgage indenture, dated as of May 1, 1983 (the "Sloss IRB Indenture"). Under the terms of the Sloss IRB Indenture, the IDB of Birmingham issued $1,000,000 principal amount of Series 1983 Industrial Revenue Bonds (the "Sloss IRB"). The proceeds from the issuance of the Sloss IRB were used by Sloss to finance the cost of acquiring certain industrial equipment and installing such equipment at the plant facility of Sloss. In connection with the issuance of the Sloss IRB the IDB of Birmingham leased such equipment to Sloss under a lease agreement dated May 1, 1983, which obligated Sloss to pay rent directly to NationsBank for the account of the IDB of Birmingham. Sloss' obligations under the Sloss IRB Indenture (the "Sloss IRB Claim") are secured by such industrial equipment installed at its plant facilities. Under the terms of the Sloss IRB Indenture, the Sloss IRB was bearing an interest rate equal to 70% of the prime rate from time to time in effect per annum, payable quarterly, in Cash, on January 1, April 1, July 1 and October 1 on the unpaid principal balance. Principal payments of $25,000 were also made quarterly on the above dates. Sloss, based on its books and records, estimates that $525,000 principal amount, plus pre-and post-Filing Date accrued interest of $46,223 and $100,343, respectively, is outstanding as of May 31, 1993, or a total of $671,556. Based upon the foregoing information, the Proponents estimate that the aggregate Allowed Amount of the Class S-4 Claims as of December 31, 1994 will be approximately $715,207. Treatment of Class S-4 Claims is as follows: The 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of the Sloss IRB Claim is an amount equal to (i) as to a Claim for principal and interest, the sum of (x) the principal amount under the Sloss IRB due and owing as of the Filing Date, (y) interest thereon 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 nondefault 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. Accordingly, all accrued pre- and post-Filing Date interest plus the entire $525,000 of principal will be payable assuming a May 31, 1994 Effective Date. Class S-5 Claims: Secured Equipment Purchase Claims. NOTE: All information below relating to Class S-5 Claims is taken from the Debtors' Disclosure Statement. The Class S-5 Claims consist of Claims arising out of purchases by Computer Services (Class S-5J), JW Aluminum (Class S-5O), Window Components (Class S-5S), Sloss (Class S-5X), Southern Precision (Class S-5Y) and U.S. Pipe (Class S-5AA) of equipment which are secured by such equipment (collectively, the "Secured Equipment Purchase Claims"). The following is a summary of the estimated amount of Claims in Class S-5 by Debtor outstanding as of May 31, 1993, based on their books and records:
Case Estimated Class Debtor Number Amount of Claims S-5J Computer Services 89-9723-8P1 $28,588 S-5O JW Aluminum 89-9718-8P1 10,558 S-5S Window Components 89-9732-8P1 205 S-5X Sloss 89-9743-8P1 509 S-5Y Southern Precision 89-9729-8P1 3,312 S-5AA U.S. Pipe 89-9744-8P1 4,505 Total $47,677
Treatment of Class S-5 Claims is as follows: The 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a Secured Equipment Purchase Claim is 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. Class S-6 Claims: Series B & C Senior Note Claims. The Class S-6 Claims are Claims (the "Series B & C Senior Note Claims") against Jim Walter Homes (Class S-6K), Jim Walter Resources (Class S-6M), United Land (Class S-6Z) and U.S. Pipe (Class S-6AA) (collectively, the "Series B & C Senior Note Issuers") arising out of the issuance of the Series B Senior Notes and the Series C Senior Notes (collectively, the "Series B & C Senior Notes") issued pursuant to the Indenture (the "Series B & C Senior Note Indenture") dated as of January 1, 1988, as amended, among the Series B & C Senior Note Issuers, and Hillsborough (Class S-6A), Old Walter Industries (Class S-6EE), Homes Holdings (Class S-6I) and Resources Holdings (Class S-6P), as guarantors (the "Series B & C Senior Note Guarantors"), and LaSalle, as successor trustee to Continental Illinois National Bank and Trust Company of Chicago (the "Series B & C Senior Note Trustee") under the terms of the Series B & C Senior Note Indenture. The Series B & C Senior Note Issuers and Series B & C Senior Note Guarantors are referred to herein as the "Series B & C Senior Note Debtors." Under the terms of the Series B & C Senior Note Indenture, Class S-6 Claims rank senior in the right of payment to the Senior Subordinated Notes (Class U-4 Claims) and the 17% Subordinated Notes (as defined in Section II.C.4) (Class U-5 Claims) and certain other indebtedness of the Debtors and are pari passu with each other and certain other indebtedness of the Series B & C Senior Note Issuers (including indebtedness under the Revolving Credit Agreement (Class S-1 Claims) and the Working Capital Agreement (Class S-2 Claims)). Class S-6 Claims are secured ratably with the obligations of (i) the Revolving Loan Borrowers under the Revolving Credit Agreement and (ii) the Working Capital Borrowers under the Working Capital Agreement by the Shared Collateral, comprised of (a) the pledge by Hillsborough of all of the capital stock of the Series B & C Senior Note Guarantors, United Land and U.S. Pipe and (b) the pledge by Old Walter Industries of the capital stock of Jim Walter Homes and Jim Walter Resources. According to the Debtors' Disclosure Statement, the Series B & C Senior Note Debtors, based on their books and records, estimate that $181,300,000 principal amount, plus pre-Filing Date accrued interest of $13,033,530. The Proponents estimate that, based upon such information, post-Filing Date accrued interest of approximately $127,896,000 (assuming an all-Cash payment) or $136,641,000 (assuming payment in New Senior Notes), will be accrued and unpaid as of December 31, 1994, plus, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest in the form of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $37,500,000 (if the Court determines that the Debtors' enterprise value is $2.525 billion in accordance with the Creditors' Plan, then to the extent that the market agrees with the Debtors' higher estimated enterprise value of $2.805 billion, the value of this stock would be higher than this stated value). See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Post-Filing Date Interest Claims." Treatment of Class S-6 Claims is as follows: The 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 (being 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) of the Class S-6 Fund (as defined below), (b) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, such Holder's Pro Rata share of the Class B Common Stock set forth in Section 1.20(e)(iv) of the Creditors' Plan, and (c) with respect to the difference between the Allowed Amount of such Holder's Class S-6 Claim and the amount of Cash received pursuant to clauses (a) and (b), (i) if such Holder elects 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, and (ii) if such Holder does not make such election, an aggregate amount of Cash (if any) and principal amount of New Senior Notes (if any) equal to such difference, with the proportion of Cash and New Senior Notes to be equal with respect to each Holder that does not make such election, and with the relative amount of Cash and New Senior Notes distributed to all Class S-6 Claims under this clause (b) (ii) to be determined not less than fifteen (15) days prior to the Effective Date by the New Board (or, if the New Board has not been appointed by such date, by the Bondholders Committee), in its sole discretion, on or promptly after the Effective Date, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. THERE CAN BE NO ASSURANCE THAT ANY PART OF A CLASS S-6 CLAIM WILL BE PAID IN CASH, OTHER THAN CASH FROM THE CLASS S-6 FUND. The "Allowed Amount" of any Series B & C Senior Note Claim is 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(b) of the Creditors' Plan, interest on such principal amount and interest, accrued and unpaid 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, if any, paid in New Senior Notes under Section 3.11 (b) of the Creditors' Plan, 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) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest consisting of such Holder's Pro Rata portion of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $37,500,000; provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Series B & C Senior Note Claim shall receive Cash in an amount equal to such Holder's Pro Rata share of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Series B & C Senior Note Claims under this paragraph, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder shall receive under this paragraph shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share. WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED OTHERWISE, HOLDERS OF REVOLVING CREDIT BANK CLAIMS, WORKING CAPITAL BANK CLAIMS AND SERIES B & C SENIOR NOTE CLAIMS SHOULD ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION INTEREST IN THE FORM OF CLASS B COMMON STOCK THAT IS CONTINGENT ON THE EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL 1-800-489-7444 AT ANY TIME FOR A RECORDING PROVIDING CURRENT INFORMATION AS TO WHETHER SUCH AGREEMENT HAS BECOME EFFECTIVE, INCLUDING THE RESULT OF THE SEPTEMBER 1, 1994 HEARING TO BE HELD BY THE CELOTEX BANKRUPTCY COURT TO CONSIDER APPROVAL THEREOF. FOR MORE INFORMATION ON THE CONDITIONS TO EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT, SEE "OVERVIEW OF THE CREDITORS' PLAN--SPECIAL FEATURES OF THE CREDITORS' PLAN--SETTLEMENT OF VEIL PIERCING/FRAUDULENT CONVEYANCE ISSUES AND OTHER ISSUES--TERMS OF THE VEIL PIERCING SETTLEMENT AGREEMENT." The "New Senior Notes" are notes of Walter Industries and/or one or more other Debtors. If required by applicable securities law, the New Senior Notes will be issued under one or more indentures between the issuer and the trustee thereunder (the "New Senior Note Indenture") in an estimated maximum aggregate principal amount of approximately $325,000,000. If any such indenture(s) are subject to the Trust Indenture Act of 1939, the Proponents will seek to qualify such new indenture(s) thereunder and will notify the staff of the Securities and Exchange Commission thereof. If an indenture is not required, separate New Senior Notes will be issued to each recipient. See "OVERVIEW OF THE CREDITORS' PLAN--Description of Securities to Be Issued Under the Creditors' Plan--New Senior Notes." As used herein, the "Class S-6 Fund" means the funds held by Chemical (as successor to MHTCo.) for the benefit of Holders of the Series B & C Senior Notes, which funds represent a portion of 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 proceeds from the sale of Oil Holdings by Hillsborough, deposited with MHTCo. (as predecessor to Chemical) prior to the Filing Date, together with all earnings thereon to the date of distribution. The Proponents believe that the amount of such funds is approximately $6,300,000 as of the date of this Disclosure Statement. Upon receipt of the distribution specified above, 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 Creditors' 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 Creditors' 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. Class S-7 Claims: Provident Life & Accident Insurance Company Claims. NOTE: All information below relating to Class S-7 Claims is taken from the Debtors' Disclosure Statement. The Class S-7 Claims are against Old Walter Industries (Class S-7EE) for loans against insurance policies on the lives of certain key officers of the Debtors and companies previously owned by the Debtors (the "Provident Life & Accident Insurance Company Claims"). The Debtors state in the Debtors' Disclosure Statement that Old Walter Industries, based on its books and records, estimates that Class S-7 Claims total $7,493,856 as of May 31, 1993. Treatment of Class S-7 Claims is as follows: The Class S-7 Claims are not impaired. The Holder of the Class S-9 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 and the Bondholders Committee shall have agreed to a less favorable treatment of any such Claim. The "Allowed Amount" of any Provident Life & Accident Insurance Company Claim is the amount necessary to cure all defaults and pay all damages in respect of the agreement underlying any Provident Life & Accident Insurance Company Claim (without giving effect to the acceleration, if any, of the obligations underlying any 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. Upon payment in Cash of the Allowed Amounts 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 payments and such assumptions, 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. Class S-8 Claims: Revolving Credit Agents Claims. The Class S-8 Claims are Claims by the Revolving Credit Agents (as defined in the Creditors' Plan) against Hillsborough (Class S-8A), Best (Class S-8B), Best (Miss.) (Class S-8C), Coast to Coast (Class S-8D), Computer Holdings (Class S-8E), Dixie (Class S-8F), Hamer Holdings (Class S-8G), Hamer Properties (Class S-8H), Homes Holdings (Class S-8I), Computer Services (Class S-8J) Jim Walter Homes (Class S-8K), JW Insurance (Class S-8L), Jim Walter Resources (Class S-8K), Window Components (Wisc.) (Class S-8N), JW Aluminum (Class S-8O), Resources Holdings (Class S-8P), JWI Holdings (Class S-8Q), JW Walter (Class S-8R), Window Components (Class S-8S) Land Holdings (Class S-8T), Mid-State Holdings (Class S-8V), Railroad Holdings (Class S-8W), Sloss (Class S-8X), Southern Precision (Class S-8Y), United Land (Class S-8Z), U.S. Pipe (Class S-8AA), Pipe Realty (Class S-8BB), Vestal (Class S-8CC), Old Walter Industries (Class S-8EE), Walter Land (Class S-8FF) and JW Resources (Class S-8GG) for fees and Revolving Credit Agents under the expenses incurred by the Revolving Credit Agreement after the Filing Date. These Claims are entitled to all of the benefits of indebtedness arising under the Revolving Credit Agreement, including the benefit of all security thereunder and priority over Subordinated Note Claims. The Holders of Class S-8 Claims had not, as of the date of the Debtors' Disclosure Statement, provided to the applicable Debtors the amount of fees and expenses which had been incurred since the Filing Date. As a result thereof, the Proponents are unable to provide an estimate of the aggregate amount of Class S-8 Claims. Treatment of Class S-8 Claims is as follows: The Class S-8 Claims are not impaired. Each Holder of a Class S-8 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. The "Allowed Amount" of a Revolving Credit Agents Claim (as defined in the Creditors' Plan) is the amount thereof determined in accordance with the Revolving Credit Agreement. Upon receipt of the distribution specified above, 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 Creditors' 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 Creditors' 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. Class S-9 Claims: Working Capital Agents Claims. The Class S-9 Claims are Claims by the Working Capital Agents (as defined in the Creditors' Plan) against Hillsborough (Class S-9A), Computer Holdings (Class S-9E), Hamer Holdings (Class S-9o), Homes Holdings (Class S-9I), Jim Walter Resources (Class S-9M), JW Aluminum (Class (S-9o), Resources Holdings (Class S-9P), JWI Holdings (Class S-9Q), Window Components (Class S-9S), Land Holdings (Class S-9T), Mid-State Holdings (Class S-9V), Railroad Holdings (Class S-9W), Sloss (Class S-9X), Southern Precision (Class S-9Y), U.S. Pipe (Class S-9AA), Pipe Realty (Class S-9BB), Vestal (Class S-9CC), Old Walter Industries (Class S-9EE) and Walter Land (Class S-9FF) for fees and expenses incurred by the Working Capital Agents under the Working Capital Agreement after the Filing Date. These Claims are entitled to all of the benefits of indebtedness arising under the Working Capital Agreement, including the benefit of all security thereunder and priority over Subordinated Note Claims. The Holders of Class S-9 Claims had not, as of the date of the Debtors' Disclosure Statement, provided to the applicable Debtors the amount of fees and expenses which had been incurred since the Filing Date. As a result thereof, the Proponents are unable to provide an estimate of the aggregate amount of Class S-9 Claims. Treatment of Class S-9 Claims is as follows: The Class S-9 Claims are not impaired. Each Holder of a Class S-9 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 applicable Debtors shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a Working Capital Agents Claim (as defined in the Creditors' Plan) is the amount thereof determined in accordance with the Working Capital Agreement. Upon receipt of the distribution specified above, 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 Creditors' 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 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. Class S-10 Claims: Other Secured Claims. The Class S-10 Claims consist of all Secured Claims, if any, against any of the Debtors not otherwise classified in the Creditors' Plan. The Proponents are not aware of the existence of any Other Secured Claims. Treatment of Class S-10 Claims is as follows: Class S-10 Claims are not impaired. Each Holder, if any, of a Class S-10 Allowed Claim shall, at the sole discretion of the Bondholders Committee, and 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of an Other Secured Claim is (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 the Bondholders Committee 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. 4. Unsecured Claims Class U-1 Claims: Old Walter Industries IRB Claims. NOTE: All information below relating to Class I-1 Claims is taken from the Debtors' Disclosure Statement. The Class U-1 Claims are Unsecured Claims against Old Walter Industries (Class U-1EE) which arose from responsibilities of Original Jim Walter that were assumed by Old Walter Industries as of January 7, 1988, for obligations under various indenture agreements (collectively the "Old Walter Industries IRB Indentures") to the holders of 6.4% Industrial Revenue and 6.5% Pollution Control Revenue Bonds--The Industrial Development Board of the City of Chattanooga, Tennessee, 6.4% and 6.95% Industrial Revenue Bonds--Adams County, Colorado, 6.4% Industrial Revenue Bonds--New Jersey Economic Development Authority and 6.4% Industrial Development Bonds--City of Texarkana, Arkansas (collectively, the "Old Walter Industries IRBs"). The following is a summary of the major terms of the Old Walter Industries IRBs:
Principal Amount Rate Sinking Fund Date of IRB Issued and Per Interest Pay Payments Pay IRB Indenture Outstanding Annum Dates Beg. End Amount 6.4% IRB--Chattanooga March 1, 1977 $1,000,000 6.4% 3/1 and 9/1 3/1/92 3/1/93 $100,000 3/1/94 3/1/97 200,000 6.5% IRB--Chattanooga March 1, 1977 1,050,000 6.5% 3/1 and 9/1 3/1/93 3/1/01 100,000 9/1/01 3/1/02 150,000 6.4% IRB--Adams County Dec. 1, 1977 1,000,000 6.4% 6/1 and12/1 12/1/93 12/1/02 100,000 6.95% IRB--Adams County Aug. 1, 1979 1,500,000 6.95% 2/1 and 8/1 8/1/90 8/1/99 150,000 6.4% IRB--NJEDA June 1, 1977 1,000,000 6.4% 6/1 and 12/1 6/1/93 6/1/94 150,000 6/1/95 200,000 6/1/97 250,000 6.4% IRB--Texarkana Dec. 1, 1977 1,000,000 6.4% 6/1 and12/1 12/1/93 12/1/02 100,000 Total $6,550,000
Old Walter Industries, based on its books and records, estimates that $6,550,000 principal amount, plus pre- and post-Filing Date accrued interest of $99,950 and $1,467,612, respectively, or a total of $8,117,562, exclusive of the Claims of the indenture trustees under the Old Walter Industries IRB Indentures for reasonable fees and expenses, is outstanding as of May 31, 1993. Based upon such information, the Proponents estimate that the aggregate Allowed Amount of all Class U-1 Claims will be approximately $8,792,450 as of December 31, 1994. Treatment of Class U-1 Claims is as follows: The 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 such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. Such consideration shall be subject to any prior rights of such trustees under the Old Walter Industries IRBs for compensation and reimbursement of their reasonable fees and expenses asserted by such trustees, to the extent that such trustees do not receive payment of such reasonable fees and expenses from Walter Industries. The "Allowed Amount" of any Old Walter Industries IRB Claim (as defined in the Plan) is an amount equal to the sum of the principal payments under the Old Walter Industries IRBs 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 and interest payments became due either prior to or subsequent to the Filing Date and prior to the Effective Date in accordance with the Old Walter Industries IRB Indentures (without giving effect to the acceleration, if any, of the obligations underlying the Old Walter Industries IRBs). Of such amounts, all of the interest plus $2,350,000 of the principal will be payable assuming a May 31, 1995 Effective Date to cure existing defaults together with reasonable fees and expenses of the trustees under the Old Walter Industries IRB Indentures. Upon payment in Cash of the Allowed Amounts of the Old Walter Industries IRB Claims, Walter Industries shall assume all unsatisfied obligations with respect to the Old Walter Industries IRBs in accordance with their original contractual terms. Upon the making of such payments and such assumptions, 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. Class U-2 Claims: Convenience Class Claims. The Class U-2 is a convenience Class (the "Convenience Class") which consists of all Unsecured Claims (other than Old Walter Industries IRB Claims and all Subordinated Note Claims) which are either (a) in an Allowed Amount of $1,000 (exclusive of post-Filing Date interest) or less or (b) reduced by the Holderthereof to $1,000 (exclusive of post-Filing Date interest). Such Convenience Class Claims include: all contingent, unliquidated and disputed litigation, product Claims, contract disputes, etc., against any Debtor and Claims of trade Creditors for goods and services provided to any Debtor. The following table, which is taken from the Debtors' Disclosure Statement, is a summary, by Debtor, of the estimated amount of such Claims in Class U-2, plus post-Filing Date interest at a rate of 6 1/2%, outstanding as of May 31, 1993, based on the Debtors' books and records, assuming that no other Creditor voluntarily reduces its Claim or Claims to $1,000:
Estimated Case Amount of Class Debtor Number Claims U-2B Best 89-9740-8P1 $ 5,748 U-2D Coast to Coast 89-9727-8P1 146,545 U-2F Dixie 89-9741-8P1 6,903 U-2J Computer Services 89-9723-8P1 3,817 U-2K Jim Walter Homes 89-9746-8P1 257,742 U-2L JW Insurance 89-9731-8P1 4,695 U-2M Jim Walter Resources 89-9738-8P1 80,187 U-2N Window Components (Wisc.)89-9716-8P1 7,301 U-2O JW Aluminum 89-9718-8P1 66,671 U-2S Window Components 89-9732-8P1 58,807 U-2U Mid-State Homes 89-9725-8P1 18,940 U-2X Sloss 89-9743-8P1 95,290 U-2Y Southern Precision 89-9729-8P1 25,197 U-2Z United Land 89-9730-8P1 4,138 U-2AA U.S. Pipe 89-9744-8P1 341,581 U-2CC Vestal 89-9728-8P1 31,898 U-2DD Home Improvement 89-9722-8P1 8,705 U-2EE Old Walter Industries 89-9745-8P1 404,937 U-2FF Walter Land 89-9736-8P1 2,177 Total $1,571,279
Based upon such information, the Proponents estimate that the aggregate Allowed Amount of all Class U-2 Claims will be approximately $1,703,603 as of December 31, 1994. As to any of the Debtors not listed in the table above, the estimated amount of Claims in Class U-2 is zero. Treatment of Class U-2 Claims is as follows: The 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, as defined below, shall not be in excess of $1,000) within (a) sixty (60) days following the Effective Date, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of a Convenience Class Claim is equal to the sum of: (1) the "Pre-Filing Date Unsecured Allowed Amount," which is (A) if the 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 (B) 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 the Bondholders Committee 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, plus (2) interest on the Pre-Filing Date Unsecured Allowed Amount from the Filing Date to the Effective Date, calculated at the rate (the "General Unsecured Interest Rate") of (A) 6 1/2% per annum from the Filing Date until the Confirmation Date and (B) 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 (B) will be selected by the Holders of Class U-3 Allowed Claims (voting for this purpose as a single class for all Debtors), by vote of a majority in number of such Holders who vote on the Plan, and that selection will be binding on all Holders of Convenience Class Allowed Claims. Class U-3 Claims: Other Unsecured Claims. The Class U-3 Claims consist of all Unsecured Claims against each of the Debtors not otherwise classified in the Creditors' Plan (to the extent not included in Class U-2 Convenience Class Claims), including: all contingent, unliquidated and disputed litigation, product Claims, contract disputes, etc. against any Debtor; claims of trade Creditors for goods and services provided to any Debtor; Claims by the 17% Indenture Trustee and the Senior Subordinated Indenture Trustee against the Post-LBO Subordinated Note Issuers (Classes U-3K, U-3Z and U-3AA) and Post-LBO Subordinated Note Guarantors (Classes U-3A, U-3I and U-3EE) for fees and expenses under the 17% Subordinated Note Indenture and the Senior Subordinated Indenture, respectively, arising prior to the Filing Date; Claims by the 10 7/8% Indenture Trustee, the 13 1/8% Indenture Trustee and the 13 3/4% Indenture Trustee against Old Walter Industries (Class U-3EE) for fees and expenses under the 10 7/8% Subordinated Debenture Indenture, the 13 1/8% Subordinated Note Indenture and the 13 3/4% Subordinated Debenture Indenture, respectively, arising prior to the Filing Date; and Claims arising as a result of any Debtor's rejection of an Executory Contract pursuant to Section 365(a) or 1123(b)(2) of the Code. The following table, which is taken from the Debtors' Disclosure Statement, is a summary, by Debtor, of the estimated amount of such Claims in Class U-3 plus post-Filing Date interest at a rate of 6 1/2%, outstanding as of May 31, 1993, based on the Debtors' books and records, assuming that no Class U-3 Creditor voluntarily reduces its Claim or Claims to $1,000:
Estimated Case Amount of Class Debtor Number Claims U-3A Hillsborough 89-9715-8P1 $ 2,425,438 U-3B Best 89-9740-8P1 14,634 U-3C Best (Miss.) 89-9737-8P1 0 U-3D Coast to Coast 89-9727-8P1 267,349 U-3E Computer Holdings 89-9724-8P1 0 U-3F Dixie 89-9741-8P1 867,859 U-3G Hamer Holdings 89-9735-8P1 0 U-3H Hamer Properties 89-9739-8P1 0 U-3I Homes Holdings 89-9742-8P1 0 U-3J Computer Services 89-9723-8P1 32,805 U-3K Jim Walter Homes 89-9746-8P1 6,869,296 U-3L JW Insurance 89-9731-8P1 5,474 U-3M Jim Walter Resources 89-9738-8P1 18,127,484 U-3N Window Components (Wisc.) 89-9716-8P1 117,028 U-3O JW Aluminum 89-9718-8P1 6,099,140 U-3P Resources Holdings 89-9719-8P1 0 U-3Q JWI Holdings 89-9721-8P1 0 U-3R JW Walter 89-9717-8P1 0 U-3S Window Components 89-9732-8P1 2,112,444 U-3T Land Holdings 89-9720-8P1 0 U-3U Mid-State Homes 89-9725-8P1 115,024 U-3V Mid-State Holdings 89-9726-8P1 0 U-3W Railroad Holdings 89-9733-8P1 0 U-3X Sloss 89-9743-8P1 5,339,023 U-3Y Southern Precision 89-9729-8P1 362,673 U-3Z United Land 89-9730-8P1 1,282 U-3AA U.S. Pipe 89-9744-8P1 29,275,546 U-3BB Pipe Realty 89-9734-8P1 0 U-3CC Vestal 89-9728-8P1 716,930 U-3DD Home Improvement 89-9722-8P1 30,394 U-3EE Old Walter Industries 89-9745-8P1 13,680,779 U-3FF Walter Land 89-9736-8P1 30,891 U-3GG JW Resources 90-11997-8P1 0 ------------ Total $86,491,493 ============
Based upon such information, the Proponents estimate that the aggregate Allowed Amount of all Class U-3 Claims will be approximately $93,775,323 as of December 31, 1994. Treatment of Class U-3 Claims is as follows: The 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: a. 75% of the Allowed Amount on or promptly after the Effective Date, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim; and b. the balance of the Allowed Amount of such Class U-3 Claim together with interest accrued at the General Unsecured Interest Rate from the Effective Date to the date of actual payment on the portion of such balance constituting the remaining 25% of the Pre-Filing Date Unsecured Allowed Amount paid pursuant to clause (a) above within six (6) months following the payment pursuant to clause (a) above, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The "Allowed Amount" of an Other Unsecured Claim is the sum of: (1) the Pre-Filing Date Unsecured Allowed Amount, which is (A) if the 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 (B) 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 the applicable Debtor 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, plus (2) interest on the Pre-Filing Date Unsecured Allowed Amount from the Filing Date to the Effective Date, calculated at the rate (the General Unsecured Interest Rate) of (A) 6 1/2% per annum from the Filing Date until the Confirmation Date and (B) 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 to designate the General Unsecured Interest Rate for the period following the Confirmation Date as either a fixed or a variable rate, as specified in clause (B) of the preceding paragraph, will be made by the Holders of Allowed Class U-3 Claims (voting for this purpose as a single class for all Debtors) by a vote of a majority in number of such Holders who vote on the Plan. The vote will be made on the Other Unsecured Claim Ballot, in accordance with the instructions provided thereon. Class U-4 Claims: Senior Subordinated Note Claims. The Class U-4 Claims are Claims against Jim Walter Homes (Class U-4K), United Land (Class U-4Z) and U.S. Pipe (Class U-4AA), as issuers (the "Senior Subordinated Note Issuers") and Hillsborough (Class U-4A), Homes Holdings (Class U-4I) and Old Walter Industries (Class U-4EE), as guarantors (the "Senior Subordinated Note Guarantors") (collectively, the "Senior Subordinated Note Debtors") for the issuance and guarantee of the Senior Subordinated Extendible Reset Notes of Jim Walter Homes, U.S. Pipe and United Land (the "Senior Subordinated Notes") in accordance with the terms of the Senior Subordinated Note Indenture, other than Claims for fees and expenses of the Senior Subordinated Indenture Trustee. Under the terms of the Senior Subordinated Note Indenture, the Senior Subordinated Notes rank senior in right of payment to the 17% Subordinated Notes (Class U-5 Claims) and certain other indebtedness of the Debtors and are subordinated in right of payment to all "senior indebtedness" (as defined therein), including the Series B & C Senior Notes (Class S-8 Claims) and indebtedness under the Revolving Credit Agreement (Class S-1 Claims) and the Working Capital Agreement (Class S-2 Claims). The Senior Subordinated Notes are general unsecured obligations of the Senior Subordinated Note Issuers, and are jointly and severally guaranteed, on an unconditional but subordinated basis, by the Senior Subordinated Note Guarantors. The Senior Subordinated Note Debtors, based on their books and records, estimate that $443,046,488 principal amount, plus pre-Filing Date accrued interest of $36,214,435, or total Class U-4 Claims of $479,260,923, were outstanding as of the Filing Date on the Senior Subordinated Notes. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Post-Filing Date Interest Claims." Treatment of Class U-4 Claims is as follows: The 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. "Applicable Consideration" means the consideration, limited exclusively to Qualified Securities and New Common Stock, available for distribution to Holders of Class U-4 Claims, Class U-5 Claims and Class U-6 Claims, as described at "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants." Holders of Class U-4, U-5 and U-6 Allowed Claims are entitled to elect, pursuant to the Subordinated Note Claim Election, the portion of their claim desired to be received in the form of Qualified Securities. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants-- Method of Allocation of Qualified Securities and New Common Stock." The "Allowed Amount" of any Senior Subordinated Note Claim (as defined in the Creditors' Plan) is an amount equal to (i) the unpaid principal amount of such Senior Subordinated Note owing 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, and (ii) only to the fullest extent that the payment thereof is permitted by law and to the extent that the same may be satisfied after all distributions are made in full to all other Holders of Allowed Claims, including the Allowed Claims described in clause (i) above but excluding Claims in Classes I-1 through I-3, the Pro Rata share of the aggregate interest on the aggregate Allowed Claims described in clause (i) above, from the Filing Date to the Effective Date calculated at the applicable non-default contract rate(s), or in the absence of a contract rate, at 9% per annum, or such other interest rate as the Court shall determine; it being recognized that under the Creditors' Plan, based upon the settlements contained in the Creditors' Plan and the Negotiated Enterprise Value, it is anticipated that the amount of interest under clause (ii) will be zero. Upon receipt of the distribution specified above, 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 pursuant to the Creditors' Plan to Holders of other 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 Creditors' Plan on account of any other Subordinated Note 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. Class U-5 Claims: 17% Subordinated Note Claims. The Class U-5 Claims are Claims against Jim Walter Homes (Class U-5K), United Land (Class U-5Z) and U.S. Pipe (Class U-5AA) (the "17% Subordinated Note Issuers") and Hillsborough (Class U-5A), Homes Holdings (Class U-5I) and Old Walter Industries (Class U-5EE) (the "17% Subordinated Note Guarantors") (collectively, the "17% Subordinated Note Debtors") for the issuance and guarantee of the Subordinated Notes due 1996 of Jim Walter Homes, U.S. Pipe and United Land (the "17% Subordinated Notes") in accordance with the terms of the 17% Subordinated Note Indenture, other than Claims for fees and expenses of the 17% Indenture Trustee. Under the terms of the 17% Subordinated Note Indenture, the 17% Subordinated Notes are subordinated in right of payment to all "senior indebtedness" (as defined therein), including the Series B & C Senior Notes (Class S-6 Claims), the Senior Subordinated Notes (Class U-4 Claims) and indebtedness under the Revolving Credit Agreement (Class S-1 Claims) and the Working Capital Agreement (Class S-2 Claims). The 17% Subordinated Notes are general unsecured obligations of the 17% Subordinated Note Issuers, and are jointly and severally guaranteed, on an unconditional but subordinated basis, by the 17% Subordinated Note Guarantors. The 17% Subordinated Note Debtors, based on their books and records, estimate that $350,000,000 principal amount, plus pre-Filing Date accrued interest of $29,254,167, or total Class U-5 Claims of $379,254,167, were outstanding as of the Filing Date on the 17% Subordinated Notes. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Post-Filing Date Interest Claims." Treatment of Class U-5 Claims is as follows: The 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. "Applicable Consideration" means the consideration, limited exclusively to Qualified Securities and New Common Stock, available for distribution to Holders of Class U-4 Claims, Class U-5 Claims and Class U-6 Claims, as described at "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants." Holders of Class U-4, U-5 and U-6 Allowed Claims are entitled to elect, pursuant to the Subordinated Note Claim Election, the portion of their claim desired to be received in the form of Qualified Securities. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants-- Method of Allocation of Qualified Securities and New Common Stock." The "Allowed Amount" of any 17% Subordinated Note Claim (as defined in the Creditors' Plan) is an amount equal to (i) the unpaid principal amount of such 17% Subordinated Note owing 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, and (ii) only to the fullest extent that the payment thereof is permitted by law and to the extent that the same may be satisfied after all distributions are made in full to all other Holders of Allowed Claims, including the Allowed Claims described in clause (i) above but excluding Claims in Classes I-1 through I-3, the Pro Rata share of the aggregate interest on the aggregate Allowed Claims described in clause (i) above, from the Filing Date to the Effective Date calculated at the applicable non-default contract rate(s), or in the absence of a contract rate, at 9% per annum, or such other interest rate as the Court shall determine; it being recognized that under the Creditors' Plan, based upon the settlements contained in the Creditors' Plan and the Negotiated Enterprise Value, it is anticipated that the amount of interest under clause (ii) will be zero. Upon the receipt of the distribution specified above, 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 Creditors' Plan to Holders of other 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 Creditors' Plan on account of any other Subordinated Note 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. Class U-6 Claims: Pre-LBO Debenture Claims. The Class U-6 Claims are Claims against Old Walter Industries (Class U-6EE) arising from (i) the assumption, as of January 7, 1988, of the obligations under securities issued by Original Jim Walter in accordance with the 10 7/8% Subordinated Debenture Indenture, other than Claims for fees and expenses of the 10 7/8% Indenture Trustee; (ii) the assumption, as of January 7, 1988, of the obligations under securities issued by Original Jim Walter in accordance with the 13 1/8% Subordinated Note Indenture other than Claims for fees and expenses of the 13 1/8% Indenture Trustee; and (iii) the assumption, as of January 7, 1988, of the obligations under securities issued by Original Jim Walter in accordance with the 13 3/4% Subordinated Debenture Indenture, other than Claims for fees and expenses of the 13 3/4% Indenture Trustee. A. 10 7/8% Subordinated Debentures Under the terms of the 10 7/8% Subordinated Debenture Indenture, Original Jim Walter was authorized to issue $90,000,000 principal amount of 10 7/8% Subordinated Debentures due May 1, 2008 (the "10 7/8% Subordinated Debentures"). Under the terms of the 10 7/8% Subordinated Debenture Indenture, the 10 7/8% Subordinated Debentures are subordinated in right of payment to all "senior indebtedness" (as defined therein), including indebtedness under the Revolving Credit Agreement (Class S-1 Claims) and the Working Capital Agreement (Class S-2 Claims), the Series B & C Senior Notes (Class S-6 Claims), the Senior Subordinated Notes (Class U-4 Claims) and the 17% Subordinated Notes (Class U-5 Claims), but are pari passu in right of payment to the 13 1/8% Subordinated Notes (as defined below) and the 13% Subordinated Debentures (as defined below). The Ad Hoc Committee of Pre-LBO Bondholders believes, as a result of certain LBO-Related Issues, that the 10 7/8% Subordinated Debentures are not subordinated to said "senior indebtedness." Other creditor constituencies disagree with this view. The Creditors' Plan incorporates a full and final settlement of these LBO- Related Issues. According to the Debtors' Disclosure Statement, Old Walter Industries, based on its books and records, estimates that $90,000,000 principal amount, less unamortized original issue discount of $10,372,071 as of the Filing Date, plus pre-Filing Date accrued interest of $1,549,688 were outstanding as of the Filing Date on the 10 7/8% Subordinated Debentures. B. 13 1/8% Subordinated Notes Under the terms of the 13 1/8% Subordinated Note Indenture, Original Jim Walter was authorized to issue $50,000,000 principal amount of 13 1/8% Subordinated Notes due 1993 (the "13 1/8% Subordinated Notes"). Under the terms of the 13 1/8% Subordinated Note Indenture, the 13 1/8% Subordinated Notes are subordinated in right of payment to all "senior indebtedness" (as defined therein), including indebtedness under the Revolving Credit Agreement (Class S-1 Claims) and the Working Capital Agreement (Class S-2 Claims), the Series B & C Senior Notes (Class S-6 Claims), the Senior Subordinated Notes (Class U-4 Claims) and the 17% Subordinated Notes (Class U-5 Claims), but are pari passu in right of payment to the 10 7/8% Subordinated Debentures and to the 13 3/4% Subordinated Debentures. The Ad Hoc Committee of Pre-LBO Bondholders believes, as a result of certain LBO-Related Issues, that the 13 1/8% Subordinated Notes are not subordinated to said "senior indebtedness." Other creditor constituencies disagree with this view. The Creditors' Plan incorporates a full and final settlement of these LBO-Related Issues. According to the Debtors' Disclosure Statement, Old Walter Industries, based on its books and records, estimates that $50,000,000 principal amount as of the Filing Date plus pre-Filing Date accrued interest of $2,679,687 were outstanding as of the Filing Date on the 13 1/8% Subordinated Notes. C. 13 3/4% Subordinated Debentures Under the terms of the 13 3/4% Subordinated Debenture Indenture, Original Jim Walter was authorized to issue $100,000,000 principal amount of 13 3/4% Subordinated Debentures due 2003 (the "13 3/4% Subordinated Debentures"). Under the terms of the 13 3/4% Subordinated Debenture Indenture, the 13 3/4% Subordinated Debentures are subordinated in right of payment to all "senior indebtedness" (as defined therein), including indebtedness under the Revolving Credit Agreement (Class S-1 Claims) and the Working Capital Agreement (Class S-2 Claims), the Series B & C Senior Notes (Class S-6 Claims), the Senior Subordinated Notes (Class U-4 Claims) and the 17% Subordinated Notes (Class U-5 Claims), but are pari passu in right of payment to the 10 7/8% Subordinated Debentures and the 13 1/8% Subordinated Notes. The Ad Hoc Committee of Pre-LBO Bondholders believes, as a result of certain LBO-Related Issues, that the 13 3/4% Subordinated Debentures are not subordinated to said "senior indebtedness." Other creditor constituencies disagree with this view. The Creditors' Plan incorporates a full and final settlement of these LBO-Related Issues. According to the Debtors' Disclosure Statement, Old Walter Industries, based on its books and records, estimates that $100,000,000 principal amount plus pre-Filing Date accrued interest of $5,614,583 were outstanding as of the Filing Date on the 13 3/4% Subordinated Debentures. D. Aggregate Amount of Class U-6 Claims Based upon the foregoing information, the Proponents estimate that the aggregate Allowed Amount of all Class U-6 Claims was $239,471,887 as of the Filing Date. Treatment of Class U-6 Claims is as follows: The Class U-6 Claims are impaired. Each Holder of a Class U-6 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claim. The terms "Applicable Consideration" and "Qualified Securities" are defined above in the description of Class U-4 Claims. The "Allowed Amount" of any Pre-LBO Debenture Claim (as defined in the Creditors' Plan) is an amount equal to (i) the unpaid principal amount of such Pre-LBO Debenture owing as of the Filing Date (less, in the case of any 10 7/8% Subordinated Debenture Claims, the pre-filing Date unamortized discount associated with such 10 7/8% Subordinated Debenture) and (ii) only to the fullest extent that the payment thereof is permitted by law and to the extent that the same may be satisfied after all distributions are made in full to all other Holders of Allowed Claims, including the Allowed Claims described in clause (i) above but excluding Claims in Classes I-1 through I-3, the Pro Rata share of the aggregate interest on the aggregate Allowed Claims described in clause (i) above, from the Filing Date to the Effective Date calculated at the applicable non-default contract rate(s), or in the absence of a contract rate, at 9% per annum or such other interest rate as the Court shall determine; it being recognized that under the Creditors' Plan, based upon the settlements contained in the Creditors' Plan and the Negotiated Enterprise Value, the amount of interest under clause (ii) will be zero. "Applicable Consideration" means the consideration, limited exclusively to Qualified Securities and New Common Stock, available for distribution to Holders of Class U-4 Claims, Class U-5 Claims and Class U-6 Claims, as described at "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants." Holders of Class U-4, U-5 and U-6 Allowed Claims are entitled to elect, pursuant to the Subordinated Note Claim Election, the portion of their claim desired to be received in the form of Qualified Securities. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants-- Method of Allocation of Qualified Securities and New Common Stock." Class U-7 Claims: Veil Piercing Claims. Class U-7 Claims consist of the rights of all Persons who have asserted, or could or may assert any claim based upon or relating to any of the Veil Piercing-Related Issues (defined below). The sole Holder of the U-7 Claims may be Celotex. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues." Treatment of Class U-7 Claims is as follows: Class U-7 Claims are not impaired. 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 below equal to the aggregate Allowed Amount of the Class U-7 Claims, of which (a) the Veil Piercing Claims Amount shall be satisfied by a combination of Qualified Securities and Class B Common Stock, in the proportion described in the following sentence, together having an aggregate principal amount (in the case of Qualified Securities) and New Common Stock Value Per Share (in the case of Class B Common Stock) equal to the Veil Piercing Claims Amount; and (b) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, 100% of the Senior Claim Differential, or if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, the sum of (i) $75,000,000 and (ii) 100% of the Senior Claim Differential, in each case shall be satisfied by shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such amount (and, if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, all of which shares in this clause (b), except for an amount of shares having an aggregate New Common Stock Value Per Share equal to 50% of the Senior Claim Differential, are subject to assignment to Settling Equityholders as required under the Veil Piercing Settlement Agreement), on or promptly after the Effective Date, unless the Bondholders Committee and the Celotex Settlement Fund Recipient, consistent with the terms of the Veil Piercing Settlement Agreement, shall have agreed to a less favorable treatment of such Claims. The aggregate principal amount of Qualified Securities used to satisfy a portion of the Veil Piercing Claims Amount shall bear the same ratio to the aggregate principal amount of Qualified Securities used to satisfy a portion of the Subordinated Note Claims as $487.5 million (or, if the amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, $450 million) bears to $1,098 million; provided, that if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, the $487.5 million component of such ratio shall be reduced (but to no lower than $450 million) one dollar for every two dollars in value of Class B Common Stock assigned by the Celotex Settlement Fund Recipient to Settling Equityholders from the $75,000,000 of Class B Common Stock identified in Section 1.20(o)(B)(i) of the Creditors' Plan (for example, if all Holders of Old Common Stock Interests become Settling Equityholders, the ratio will be $450 million to $1,098 million); and the excess of the Veil Piercing Claims Amount over the portion thereof satisfied by Qualified Securities shall be satisfied by that number of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess, provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) the Celotex Settlement Fund Recipient shall receive Cash in an amount equal to the aggregate Cash proceeds received from the exercise of Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to the Celotex Settlement Fund Recipient under Section 3.22 of the Creditors' Plan, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that the Celotex Settlement Fund Recipient shall receive under the Creditors' Plan shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share. The Veil Piercing Settlement Agreement and the Charter provide that all shares of Class B Common Stock issued to the Celotex Settlement Fund Recipient under the Creditors' Plan (and not assigned to Settling Equityholders under the Veil Piercing Settlement Agreement) 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. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan-- Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants." For a discussion of the conditions precedent to effectiveness of the Amended and Restated Veil Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan-- Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." The "Allowed Amount" of all of the Allowed Veil Piercing Claims in the aggregate, is the sum of (a) the Veil Piercing Claims Amount (as defined in the Veil Piercing Settlement Agreement) and described herein in Section II.B.2(b), and (b) the sum of (i) $75,000,000 (but only if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms) and (ii) the Senior Claim Differential, in each case in the form of consideration set forth in this section "Class U-7 Claims: Veil Piercing Claims." "Veil Piercing-Related Issues" means 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, Celotex or any Holder of a Claim in Class U-7 or any creditor or interest holder in 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. Class U-7 Claims are unimpaired because they are allowed and paid as specifically compromised, settled and treated under the Veil Piercing Settlement Agreement and the Plan. In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 290 (2d Cir. 1992). 5. Intercompany Claims Class I-1 Claims: Intercompany IRB Claims. NOTE: All information below relating to Class I-1 Claims is taken from the Debtors' Disclosure Statement. The Class I-1 Claims are Secured Claims by the IDB of Birmingham and AmSouth Bank N.A., as trustee (the "Intercompany IRB Trustee") against Sloss (Class I-1X) in accordance with an indenture dated as of May 1, 1983 among the IDB of Birmingham, Sloss and the Intercompany IRB Trustee (the "Intercompany IRB Indenture")--Under the terms of the Intercompany IRB Indenture, the IDB of Birmingham issued $5,000,000 principal amount of Series A Industrial Revenue Bonds (the "Intercompany IRB") to provide funds to Sloss for the purpose of financing the cost of renovating and improving existing plant facilities. The Intercompany IRB was purchased by Original Jim Walter Corporation and transferred to Old Walter Industries on January 7, 1988. In connection with the issuance of the Intercompany IRB, the IDB of Birmingham leased such renovations and improvements of the existing facilities to Sloss under a lease agreement, dated as of May 1, 1983. Sloss' obligations under the Intercompany IRB Indenture are secured by such renovations and improvements of the existing facilities. Under the terms of the Intercompany IRB Indenture, the Intercompany IRB was bearing interest at 12% per annum, payable semi-annually, on January 1 and July 1. Redemption and payment of the Intercompany IRB was to begin on January 1, 1994, and on each January 1 thereafter, until and including January 1, 2002, in a principal amount of $500,000 annually. Sloss, based on its books and records, estimates that a total of $7,350,000, consisting of $5,000,000 principal amount, plus pre- and post-Filing Date accrued interest of $300,000 and $2,050,000, respectively, is outstanding as of May 31, 1993 together with reasonable fees and expenses of the Intercompany IRB Trustee. Treatment of Class I-1 Claims is as follows: The Class I-1 Claims are not impaired. The Holder of the Class I-1 Allowed Claim shall receive Cash in an amount equal to the Allowed Amount of the Class I-1 Claim, on or promptly after the Effective Date, unless the Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. - ---------------- The Proponents believe that if the Class U-7 Claims nevertheless were found to be impaired, acceptance could be obtained solely from The Celotex Corporation, Kalb, Voorhis & Co. v. American Financial Corp., 8 F.3d 130 (2d Cir. 1993), and/or any other appropriate representative of the Holder(s) of such Claims. In re Charter Co., 876 F.2d 866, 876 (11th Cir. 1989). The "Allowed Amount" of the Intercompany IRB Claim (as defined in the Creditors' Plan) is an amount equal to the sum of the principal payments under the Intercompany IRB 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 interest payments and principal payments became due either prior to or subsequent to the Filing Date and prior to the Effective Date in accordance with the Intercompany IRB Indenture (without giving effect to the acceleration, if any, of the obligations underlying the Intercompany IRB). Of such amounts, all of the interest plus $1,000,000 of the principal will be payable upon an assumed May 31, 1995 Effective Date to cure existing defaults together with reasonable fees and expenses of the Intercompany IRB Trustee under the Intercompany IRB Indenture. Upon payment in Cash of the Allowed Amount of the Class I-1 Claim, Sloss shall assume all unsatisfied obligations with respect to such Class I-1 Claim 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 Class I-1 Claim 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. Class I-2 Claims: Pre-Filing Date Intercompany Notes Payable Claims. NOTE: All information below relating to Class I-2 Claims is taken from the Debtors' Disclosure Statement. The Class I-2 Claims are Unsecured Claims against Hillsborough (Class I-2A), Best (Class I-2B), Best (Miss.) (Class I-2C), Coast to Coast (Class I-2D), Computer Holdings (Class I-2E), Dixie (Class I-2F), Hamer Holdings (Class I-2G), Hamer Properties (Class I-2H), Home Holdings (Class I-2I), Computer Services (Class I-2J), Jim Walter Homes (Class I-2K), Jim Walter Resources (Class I-2M), Window Components (Wisc.) (Class I-2N), JW Aluminum (Class I-2O), Resources Holdings (Class I-2P), JWI Holdings (Class I-2Q), JW Walter (Class I-2R), Window Components (Class I-2S), Land Holdings (Class I-2T), Mid-State Homes (Class I-2U), Mid-State Holdings (Class I-2V), Railroad Holdings (Class I-2W), Sloss (Class I-2X), Southern Precision (Class I-2Y), United Land (Class I-2Z), U.S. Pipe (Class I-2AA), Pipe Realty (Class I-2BB), Vestal (Class I-2CC), Home Improvement (Class I-2DD), Old Walter Industries (Class I-2EE) and Walter Land (Class I-2FF) arising out of allocation of the Tender Offer Loans, intercompany payables generated by the Debtors' Cash management system and from purchases of goods and services from, or for the benefit of, other Debtors prior to the Filing Date. The following is a summary, by Debtor, of the estimated amount of such Claims in Class I-2 that will be outstanding as of December 31, 1994, based on their respective books and records:
Estimated Case Amount of Class Debtor Number Claims - ------ ---------------- ------------ -------------- I-2A Hillsborough 89-9715-8P1 $ 100,653,408 I-2B Best 89-9740-8P1 1,017,635 I-2C Best (Miss.) 89-9737-8P1 63,527 I-2D Coast to Coast 89-9727-8P1 135,072 I-2E Computer Holdings 89-9724-8P1 5,516 I-2F Dixie 89-9741-8P1 232,281 I-2G Hamer Holdings 89-9735-8P1 5,516 I-2H Hamer Properties 89-9739-8P1 204,027 I-2I Homes Holdings 89-9742-8P1 6,217 I-2J Computer Services 89-9723-8P1 1,163,904 I-2K Jim Walter Homes 89-9746-8P1 194,400,852 I-2M Jim Walter Resources 89-9738-8P1 127,198,927 I-2N Window Components (Wisc.) 89-9716-8P1 1,165,372 I-2O JW Aluminum 89-9718-8P1 24,464,109 I-2P Resources Holdings 89-9719-8P1 22,706 I-2Q JWI Holdings 89-9721-8P1 677,064 I-2R JW Walter 89-9717-8P1 197,917 I-2S Window Components 89-9732-8P1 49,711,982 I-2T Land Holdings 89-9720-8P1 5,516 I-2U Mid-State Homes 89-9725-8P1 106,060,671 I-2V Mid-State Holdings 89-9726-8P1 6,217 I-2W Railroad Holdings 89-9733-8P1 5,516 I-2X Sloss 89-9743-8P1 27,768,432 I-2Y Southern Precision 89-9729-8P1 21,894,856 I-2Z United Land 89-9730-8P1 63,636,214 I-2AA U.S. Pipe 89-9744-8P1 35,357,321 I-2BB Pipe Realty 89-9734-8P1 125,678 I-2CC Vestal 89-9728-8P1 12,053,280 I-2DD Home Improvement 89-9722-8P1 1,923,013 I-2EE Old Walter Industries 89-9745-8P1 466,913,340 I-2FF Walter Land 89-9736-8P1 11,555,133 -------------- Total $1,248,631,219 ==============
Treatment of Class I-2 Claims is as follows: The Class I-2 Claims are not impaired. Pre-Filing Date Intercompany Notes Payable Claims (as defined in the Creditors' Plan) will be reinstated on the books and records of the respective Debtors. There will be no distributions made under the Creditors' Plan with respect to any Pre-Filing Date Intercompany Notes Payable Claims. However, Pre-Filing Date Intercompany Notes Payable Claims may be paid after the Effective Date in the ordinary course of business. Class I-3 Claims: Post-Filing Date Intercompany Notes Payable Claims. NOTE: All information below relating to Class I-3 Claims is taken from the Debtors' Disclosure Statement. The Class I-3 Claims are Unsecured Claims against any Debtor arising out of intercompany payables generated by the Debtors' Cash management system, from purchases of goods and services from, or for the benefit of, other Debtors subsequent to the Filing Date and from completion of the Mirror Liquidation Plan. The following is a summary, by Debtor, of the estimated amount of such Claims in Class I-3 by Debtor outstanding as of May 31, 1993, based on their books and records, which amounts will change in the ordinary course of business from June 1, 1993 to December 31, 1994:
Estimated Case Amount of Class Debtor Number Claims - ------ ---------------- ------------ -------------- I-3A Hillsborough 89-9715-8P1 $ 130,988,476 I-3B Best 89-9740-8P1 2,388,916 I-3C Best (Miss.) 89-9737-8P1 24,495 I-3D Coast to Coast 89-9727-8P1 72,210 I-3E Computer Holdings 89-9724-8P1 1,638 I-3F Dixie 89-9741-8P1 219,756 I-3G Hamer Holdings 89-9735-8P1 1,638 I-3H Hamer Properties 89-9739-8P1 4,586 I-3K Jim Walter Homes 89-9746-8P1 391,970,597 I-3M Jim Walter Resources 89-9738-8P1 7,838,346 I-3N Window Components (Wisc.) 89-9716-8P1 1,734,460 I-3O JW Aluminum 89-9718-8P1 7,066,237 I-3P Resources Holdings 89-9719-8P1 822 I-3S Window Components 89-9732-8P1 14,399,590 I-3T Land Holdings 89-9720-8P1 1,908 I-3U Mid-State Homes 89-9725-8P1 744,943,798 I-3W Railroad Holdings 89-9733-8P1 998 I-3X Sloss 89-9743-8P1 8,398,743 I-3Y Southern Precision 89-9729-8P1 12,759,841 I-3Z United Land 89-9730-8P1 17,424,095 I-3AA U.S. Pipe 89-9744-891 175,967,608 I-3BB Pipe Realty 89-9734-8P1 24,027 I-3CC Vestal 89-9728-8P1 3,385,098 I-3DD Home Improvement 89-9722-8P1 2,852,227 I-3EE Old Walter Industries 89-9745-8P1 481,734,307 I-3FF Walter Land 89-9736-8P1 1,798,997 -------------- Total $2,006,003,414 ==============
As to any of the Debtors not listed in the table above, the estimated amount of Claims in Class I-3 as of May 31, 1993 is zero. Treatment of Class I-3 Claims is as follows: Post-Filing Date Intercompany Notes Payable Claims (as defined in the Creditors' Plan) will be reinstated on the books and records of the respective Debtors. There will be no distributions made under the Creditors' Plan with respect to any Post-Filing Date Intercompany Notes Payable Claims. However, Post-Filing Date Intercompany Notes Payable Claims may be paid after the Effective Date in the ordinary course of business. 6. Equity Interests Class E-1 Interests: Old Common Stock Interests in Hillsborough. The Class E-1 Interests consist of the rights of Holders of common stock, par value $.01 per share, of Hillsborough (now known as Walter Industries) (the "Old Common Stock"). Hillsborough was authorized to issue 50,000,000 shares of Common Stock. Under the terms of the amended Charter, as of the Effective Date, the number of authorized shares of New Common Stock will be increased to 200,000,000 shares. According to the Debtors' Disclosure Statement: (i) as of May 31, 1993, there were issued and outstanding 31,120,773 shares of Old Common Stock; (ii) KKR Associates, a New York limited partnership ("KKR Associates"), is the sole general partner of three partnerships which own a total of 28,500,000 shares of outstanding Old Common Stock; and (iii) of the remaining shares of Old Common Stock, 487,500 shares are owned by directors and officers of the Debtors who are not general or limited partners of KKR or KKR Associates. See "POST-CONSUMMATION- -Security Ownership of Directors, Officers and Certain Beneficial Owners--Ownership of Common Stock." Treatment of Class E-1 Interests is as follows: The Class E-1 Interests are impaired. All shares of Old Common Stock shall be cancelled, annulled and extinguished as of the Effective Date. Each Holder of a Class E-1 Allowed Interest shall receive, in full satisfaction thereof, (i) with respect to each Person that was a Holder of a Class E-1 Allowed Interest on the date on which the order approving the Disclosure Statement is entered and that did not transfer such Interest on or prior to the Effective Date (other than to an Affiliate of such Person, which Affiliate shall have the right to exercise the Equity Call Option), a nontransferable Equity Call Option, entitling such Person to purchase all, but not part, of such Holder's Pro Rata share of all of the shares of New Common Stock (each of which shall be shares of Class B Common Stock) that would otherwise be issued on the Effective Date to Classes S-1, S-2, S-6 and U-4 through U-7, at a Cash exercise price per share equal to the New Common Stock Value Per Share (provided, that, in calculating the New Common Stock Value Per Share for this purpose, the New Common Stock Value shall be calculated using a going concern enterprise value equal to the greater of the Negotiated Enterprise Value and if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount), such right to be exercisable by properly completing and returning the Equity Call Option Election Form in accordance with the Election Procedure, and by paying the Cash exercise price in full on the Effective Date; and (ii) in the event that there are shares of New Common Stock remaining after giving effect to all distributions to be made to Creditors under the Creditors' Plan (it being understood that no Creditor shall receive on account of an Allowed Claim consideration having a value in excess of that permitted to be paid on account of such Allowed Claim under the Code), such Holder's Pro Rata share of such shares, each of which shall be shares of Class B Common Stock, on or promptly after the Effective Date, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Interest. See "OVERVIEW OF THE CREDITORS' PLAN -- Special Features of the Creditors' Plan -- Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues -- Terms of the Veil Piercing Settlement Agreement" for a description of consideration and releases that are afforded to Settling Equityholders. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan-- Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants." Under certain circumstances, Persons exercising an Equity Call Option may, as a condition to such exercise, be required to make certain customary investment representations. Class E-2 Interests: Stock Acquisition Rights in Hillsborough. The Class E-2 Interests consist of the rights of Holders of "Stock Acquisition Rights" to purchase Old Common Stock or other equity or similar interest in Hillsborough. Class E-2 Interests include options to purchase Old Common Stock under the Stock Option Plan for Key Employees of Walter Industries and its Subsidiaries, approved in October 1987 and all management Common Stock Subscription Rights (as defined in Section III.B.4(b)). Treatment of Class E-2 Interests is as follows: 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 Creditors' Plan on account of their Class E-2 Interests. Class SE-1 Interests: Subsidiary Common Stock Interests in Debtors other than Hillsborough. NOTE: All information below relating to Class SE-1 Interests is taken from the Debtors' Disclosure Statement. The Class SE-1 Interests consists of the rights of Holders of common stock of each of the Debtors other than Hillsborough (now known as Walter Industries) issued and outstanding as of the Filing Date (the "Subsidiary Common Stock"). As of the Filing Date, Hillsborough owned the capital stock of seventeen of the Debtors (Computer Holdings, Hamer Holdings, JW Aluminum, JW Resources, Resources Holdings, U.S. Pipe, Sloss, Homes Holdings, Southern Precision, Mid-State Holdings, Old Walter Industries, Vestal, Pipe Realty, Window Components, JWI Holdings, Land Holdings and Railroad Holdings); Old Walter Industries owned the capital stock of seven of the Debtors (Jim Walter Resources, United Land, Jim Walter Homes, Mid-State Homes, Best, Coast to Coast and Dixie); Hamer Holdings owned the capital stock of Hamer Properties; Computer Holdings owned the capital stock of Computer Services; Window Components owned the capital stock of Window Components (Wisc.); JWI Holdings owned the capital stock of JW Walter; Land Holdings owned the capital stock of Walter Land; Jim Walter Homes owned the capital stock of Home Improvement; and Best owned the capital stock of Best (Miss.) and JW Insurance. Although the corporate structure of the Debtors changed as a result of completion of the Mirror Liquidation Plan, see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Completion of Mirror Liquidation Plan" and Exhibit IX "Chart of Corporate Structure after Completion of Mirror Liquidation Plan," solely for purposes of the Creditors' Plan and pursuant to the Mirror Liquidation Order, Class SE-1 Interests are based upon the Debtors' corporate structure as it existed on the Filing Date. Treatment of Class SE-1 Interests is as follows: The Class SE-1 Interests are not impaired. Solely for purposes of the Creditors' Plan each Holder of a Class SE-1 Interest shall retain its Subsidiary Common Stock and shall not receive any distribution under the Creditors' Plan on account of such Interest. Class SE-2 Interests: Stock Acquisition Rights in Debtors other than Hillsborough. Class SE-2 Interests consist of Stock Acquisition Rights in Debtors other than Hillsborough. Treatment of Class SE-2 Interests is as follows: 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 Creditors' Plan on account of their Class SE-2 Interests. D. Distributions at Consummation 1. 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 of the Creditors' Plan subject to compliance with the provisions of Section 4.4 of the Creditors' Plan with respect to surrender of instruments: 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, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, S-18 and 3.23 respectively, of the Creditors' Plan; b. to the trustee under the New Senior Note Indenture on behalf of the Holders of Allowed Claims in Class S-6 a global certificate representing the New Senior Notes to be delivered in accordance with Section 3.11 of the Creditors' Plan; c. to the disbursing agent selected by the Bondholder Proponents, instruments representing Qualified Securities (which may include Cash) and certificates representing New Common Stock, to be delivered in accordance with Sections 3.19, 3.20 and 3.21 of the Creditors' Plan; d. to the Series B & C Senior Note Trustee on behalf of the Holders of Allowed Claims in Class S-6, Cash and, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, certificates representing Class B Common Stock in accordance with Section 3.11 of the Creditors' Plan (it being understood that nothing in the Creditors' 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 Class B Common Stock in accordance with Section 3.22 of the Creditors' Plan; f. to the Holders of Class E-1 Interests, certificates representing Class B Common Stock, if any, in accordance with Section 3.26 of the Creditors' Plan; and. g. to the Holders of Revolving Credit Bank Claims and Working Capital Bank Claims if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, certificates representing Class B Common Stock in accordance with Sections 3.6 and 3.7 of the Creditors' Plan. Walter Industries shall make all payments required to be made by any Debtor under the Creditors' Plan on behalf of such Debtor. All Allowed Claims paid by Walter Industries hereunder shall be allocated by the Debtor and paid by Walter Industries to the Debtor for whose benefit such Claims were satisfied in the same manner in which Allowed Claims incurred 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. 2. Surrender and Cancellation of Instruments 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 and the Subordinated Notes shall be deemed to be closed, and for purposes of the Creditors' Plan, there shall be deemed to 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 or Subordinated Notes 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 Loans, Working Capital Loans, Series B & C Senior Notes, Grace Street Notes, Sloss IRB, or Subordinated Notes occurring thereafter, but shall be entitled instead to recognize and deal with, for all purposes under the Creditors' Plan, except as otherwise provided in the Creditors' Plan, only those Persons who were the record holders of such loans or notes 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 which may have been employed in connection therewith), as the case may be. No Holder of any Revolving Loans, Working Capital Loans, Series B & C Senior Notes, Grace Street Notes, Sloss IRB or Subordinated Notes shall be entitled to any rights or distribution under the Creditors' 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) the applicable Indenture Trustee, (iii) in the case of the Grace Street Notes, Walter Industries or (iv) 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 instruments, 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. Promptly upon surrender of the relevant instruments referred to above, the applicable Bank Agent, the applicable Indenture Trustee, Sloss or Walter Industries shall cancel such instruments and the applicable Bank Agent or the applicable Indenture Trustee shall deliver such cancelled instruments to Walter Industries or Sloss, or otherwise dispose of such instruments in such manner as Walter Industries or Sloss may request. At the times specified in Article III of the Creditors' Plan, (i) the applicable Bank Agent, (ii) the applicable Indenture Trustee (or, in the case of the Subordinated Note Claims, the disbursing agent selected by the Bondholder Proponents), (iii) Walter Industries or (iv) Sloss, as the case may be, shall make the distributions provided for in Sections 4.5 and 4.6 of the Creditors' Plan in accordance with Article III of the Creditors' Plan. 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 or Subordinated Notes, as the case may be, pursuant to Section 4.4(b) of the Creditors' Plan, 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 or the Indenture Trustee (or, in the case of the Subordinated Note Claims, the disbursing agent selected by the Bondholder Proponents) for the account of such Holder shall have no rights under the debt and/or equity securities to be received by such Holder under the Creditors' Plan. Notwithstanding any other provision of the Creditors' Plan, no Holder of a Secured Claim who is to receive a distribution under the Creditors' 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, the applicable Indenture Trustee, Walter Industries, Sloss or any other Debtor necessary to release any Lien(s) and retransfer all collateral held by it in connection with such Secured Claim. As of the Effective Date, the Revolving Credit Agreement, the Working Capital Agreement, the Series B & C Senior Note Indenture, the Sloss IRB 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 Indenture, except that the applicable Bank Agent or Indenture Trustee shall be entitled to assert any charging liens to which it may be entitled under such Agreement or Indenture. 3. 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) that property 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., Cash, other Qualified Securities, New Common Stock and/or New Senior Notes), or such other property as the Holder of such Disputed Claim and the Bondholders Committee (prior to the Effective Date) or Walter Industries (on and after the Effective Date) may agree upon, 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 4.15 of the Creditors' Plan. E. Description of Securities to be Issued Under the Creditors' Plan The following description of the securities to be issued under the Creditors' Plan is qualified in its entirety by references to the Charter of Walter Industries, the Summary of Terms for the New Senior Notes, the Summary of Terms for the Mid-State Trust IV Secured Notes, the Summary of Terms for the Mid-State Trust II Residual Bonds and the Summary of Terms for the New Unsecured Notes, annexed as Exhibits 1, 2, 4, 5 and 6 to the Creditors' Plan. 1. New Senior Notes "New Senior Notes" are defined under the Creditors' Plan to mean, with respect to any Debtor, senior secured notes issued by such Debtor in an aggregate principal amount (for all Debtors) not to exceed approximately $315 million (assuming an Effective Date of 12/31/94) that meet the following requirements: (1) Independent Rating. Such securities must be rated BB or higher by a Rating Service as of the Effective Date (provided, that the obtaining of such Rating Service rating shall not be required in the event that, after proper application is made therefor, neither Rating Service provides a rating of the security proposed to be rated); and (2) Valuation at Par. Such debt securities must be 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. In the event that 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 New Board of Walter Industries (or, if the New Board has not yet been appointed, the Bondholders Committee and the Series B & C Senior Note Trustee) shall select a third qualified valuation expert of national reputation, whose determination under the Creditors' Plan will be binding. Attached to the Creditors' Plan as Exhibit 2 is a summary of the anticipated (although not required) terms, and anticipated (although not required) maximum aggregate principal amount, of the New Senior Notes. THERE CAN BE NO ASSURANCE THAT ANY NEW SENIOR NOTE WILL TRADE AT OR ABOVE PAR AT ANY TIME. TRADING PRICES WILL DEPEND ON NUMEROUS FACTORS INCLUDING MARKET CONDITIONS, PREVAILING INTEREST RATES AND THE FINANCIAL CONDITIONS AND PERFORMANCE OF THE OBLIGORS THEREOF. The "New Senior Notes" are notes of Walter Industries and/or one or more other Debtors. If required by applicable securities law, the New Senior Notes will be issued under one or more New Senior Note Indentures between the issuer and the trustee thereunder in an estimated maximum aggregate principal amount of approximately $325,000,000. If any such indenture(s) are subject to the Trust Indenture Act of 1939, the Proponents will seek to qualify such new indenture(s) thereunder and will notify the staff of the Securities and Exchange Commission thereof. If an indenture is not required, separate New Senior Notes will be issued to each recipient. The New Senior Notes will mature five (5) years after the Effective Date and will bear interest, payable semi-annually in arrears in Cash, at such percentage per annum that the conditions to qualification as New Senior Notes, as that term is defined above, are met. Payments of principal and interest on the New Senior Notes will be secured by a pledge of all of the issued and outstanding capital stock of Jim Walter Resources, U.S. Pipe, United Land and Jim Walter Homes, or 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). The New Senior Notes will be subject to optional redemption by the Issuers at any time, on or after the fourth anniversary of original issuance thereof, in whole or in part, 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 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. It is expected that all of the outstanding principal amount of the New Senior Notes and accrued but unpaid interest thereon shall be due and payable at maturity. The New Senior Notes will be senior indebtedness of the Issuer and will rank senior in right of payment to certain indebtedness of the Issuer and rank pari passu with certain other indebtedness of the Issuer. The New Senior Notes will contain restrictions customary for instruments of this kind, including but not limited to restrictions on incurrence of additional indebtedness; restrictions on the creation of liens or encumbrances upon the Assets or properties of the Issuers (other than under the Reorganization Documents); restrictions on the payment of dividends or other distributions; limitations on transactions with affiliates; and restrictions upon consolidations, mergers and certain Asset sales; 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 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. The New Senior Notes will also contain other covenants and events of default as more particularly described in the Summary of Terms for the New Senior Notes annexed as Exhibit 2 to the Creditors' Plan. Consistent with the foregoing, the Series B & C Senior Note Trustee shall have the right to reasonably approve all documents under the Creditors' Plan regarding the treatment of Series B & C Senior Note Claims. 2. Qualified Securities a. Mid-State Trust IV Secured Notes On or prior to the Effective Date, it is currently anticipated that a newly-created owner trust ("Mid-State Trust IV" or "Trust IV") will enter into the Mid-State Trust IV Secured Note Indenture which will provide for the issuance of certain notes (the "Mid-State Trust IV Secured Notes") in an estimated aggregate principal amount of $700,000,000. The Mid-State Trust IV Secured Notes will mature 12 years (assuming no prepayments) after the Effective Date and will bear interest, payable monthly in arrears, in Cash at a fixed rate. The interest rate will be set on a Pricing Date at a rate which reflects an increment ("Spread") to the yield ("Benchmark Yield") of the Treasury bond of average life similar to that projected for the Mid-State Trust IV Secured Notes. For purposes of illustration, a Spread of 1.45% and a Benchmark Yield of 6.40%, both on the Pricing Date, would produce an interest rate of 7.85%. The Mid-State Trust IV Secured Notes will be secured by an undivided interest in $850 million of fixed-rate installment sale contracts ("Trust IV Contracts") which are in turn secured by first mortgages on single-family residential properties. The Contracts will be serviced in the same manner as those in Trusts II and III. The Mid-State Trust IV Secured Notes will be further secured by a "AAA" quality surety bond on the assumption that the combination of the above credit support totaling $145 million, or roughly 17% of the Trust IV Contracts, will give a shadow rating of "A" for the insurer's risk. The Mid-State Trust IV Secured Notes will be subject to redemption at the option of the equity holder in Mid-State Trust IV, on or after the date on which the principal balance of the Trust IV Secured Notes is less than 10% of their original balance, in whole but not in part, at 100% of the principal amount, plus accrued and unpaid interest thereon. The principal amount of the Mid-State Trust IV Secured Notes will be amortized by all collections on the Trust IV Contracts remaining after payment of servicing fees, trust expenses and interest payments on the Mid-State Trust IV Secured Notes. It is possible for two reasons that proceeds greater than $700 million could be raised in a cost-effective manner via secured note offerings collateralized by $850 million of Trust IV Contracts. First, the overcollateralization requirements of Financial Security Assurance Inc. ("FSA") (or other surety provider), Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P") may be lower than 17%, in view of the credit performance data available for existing issues of Trusts II and III. Second, a proprietary two-trust structure has been proposed by Lehman Brothers Inc. which would facilitate the issuance of a class of bonds secured by Trust IV Contracts, guaranteed by Mid-State Homes and subordinate to the Trust IV Notes without creating a taxable mortgage pool ("TMP"). Such additional proceeds are contingent upon the negotiation of terms with all parties, the credit evaluation of Moody's and S&P and appropriate opinions of counsel. b. Mid-State Trust II Residual Bonds On or prior to the Effective Date, it is currently anticipated that Mid-State Trust II ("Mid-State Trust II") will enter into a new Indenture which will provide for the issuance by Mid-State Trust II of certain bonds (the "Mid-State Trust II Residual Bonds") in an estimated aggregate principal amount of $75 million. This issuance is permitted by Section 2.03(b) of the Trust Agreement for Mid-State Trust II. This section of the Trust Agreement allows the Trust to issue notes subordinated to the Mid-State Trust II Secured Notes as long as: (i) FSA consents thereto, (ii) such new notes are nonrecourse to Trust II or its assets (other than Cash flow which would otherwise be released from the original indenture) and (iii) the holders of such notes (or the trustee on their behalf) executes a "non-petition agreement" with FSA and the Note Trustee. Section 3.08 of the original Indenture prohibits Trust II from creating a second lien on the Trust II Contracts (as defined below) in favor of the Residual Bondholders. Alternatively, Mid-State Homes will deposit the certificate of beneficial interest in Mid-State Trust II, which it now holds, into a new Delaware business trust. In this alternative, which does not require the above consents, the new trust will issue the Residual Bonds plus a certificate of beneficial interest, which will be held by Mid-State Homes. The Mid-State Trust II Residual Bonds will mature 7.5 years after the Effective Date and will bear interest, payable quarterly in arrears in Cash, at a fixed interest rate. Principal will be retired at the rate of $2,500,000 each quarterly payment date. The interest rate will be set on a Pricing Date at a rate which reflects a Spread to the Benchmark Yield. For purposes of illustration, a Spread of 1.35% and a Benchmark Yield of 6.00% both on the Pricing Date, would produce an interest rate of 7.35%. The Mid-State Trust II Residual Bonds represent an additional issuance of debt from Mid-State Trust II, a trust whose only material assets are expected to be $1,060 million of fixed-rate installment sale contracts ("Trust II Contracts") secured by mortgages on single-family residential properties and whose only material liabilities are expected to be $740 million of outstanding bonds, leaving an "overcollateralization amount" of $320 million. The Mid-State Trust II Residual Bonds will be an additional class of debt which will have an aggregate face amount of $75 million, or $245 million less than the overcollateralization amount. The Mid-State Trust II Residual Bonds will be further secured by a "AAA" quality surety bond, on the assumption that the remaining overcollateralization amount will be sufficient to achieve a "shadow rating" of no less than "A" for the insurer's risk. The Mid-State Trust II Residual Bonds will be subordinate to the existing series of bonds issued by the Mid-State Trust II, senior to the beneficial interests of the Trust and will not have a lien on the Trust II Contracts. The amount of Residual Bonds could be significantly greater than $75 million if FSA will consent to the release of additional excess funds as provided in the original indenture. Such consent might be obtained in connection with the purchase of a surety bond from FSA to insure the Residual Bonds. If the overcollateralization requirements of FSA, Moody's and S&P were at 17% of initial trust assets, as they were in connection with the issuance of the Asset-Backed Notes by Mid-State Trust III in June of 1992, the amount of Residual Bonds might be up to $140 million. It is possible that the overcollateralization requirements would be lower than 17%, due to the availability of credit performance histories on both Mid-State Trusts II and III, allowing issuance in still larger amounts. Bonds issued in such amounts would not have a fixed sinking fund schedule, would use all Remaining Available Funds to retire bond principal, and would have longer maturities and commensurately higher coupons than the bonds issued in the $75 million amount. The issuance of the Mid-State Trust II Residual Bonds is not expected to cause Mid-State Trust II to be classified as a TMP because the pool pre-dates the TMP legislation. It is possible, however, that the IRS might issue new TMP regulations prior to the Effective Date which would adversely affect this conclusion. No financing is proposed which uses the equity in Mid-State Trust III as collateral. This is because the original issuance of Notes from Mid-State Trust III occurred subsequent to the TMP legislation and it is believed that the issuance of a second class of bonds which are secured by the Contracts, whose principal would be retired by payments on the Trust II Contracts and whose maturity is different from the original Notes, is likely to cause Trust III to be characterized as a TMP. c. New Unsecured Notes On or after the Effective Date, based upon Walter Industries' then current financial condition and to the extent consistent with prudent business practices, Walter Industries may enter into the New Unsecured Note Indenture which will provide for the issuance by Walter Industries of New Unsecured Notes in an estimated aggregate principal amount of up to $100,000,000. The New Unsecured Notes are expected to mature ten (10) years after the date of original issuance and will bear interest, payable semi-annually in arrears in Cash, at a fixed rate per annum such that the conditions to qualification as a Qualified Security, as that term is defined in the Creditors' Plan, are met. It is expected that the New Unsecured Notes will be subject to optional redemption by Walter Industries at any time, on or after the fifth anniversary of original issuance thereof, in whole or in part, at redemption prices similar to those prevailing in the market for similar debt instruments at the time of issuance, plus accrued and unpaid interest to the redemption date. It is expected that all of the outstanding principal amount of the New Unsecured Notes and accrued but unpaid interest thereon shall be due and payable at maturity. The New Unsecured Notes will be unsecured indebtedness of Walter Industries and will be subordinate and junior in right of payment to certain other indebtedness of Walter Industries in the manner and to the extent that the instrument creating such other indebtedness so provides. The New Unsecured Note Indenture will contain restrictions customary for instruments of this kind, including but not limited to restrictions on incurrence of additional indebtedness (including senior indebtedness); restrictions on the creation of liens or encumbrances upon the Assets or properties of Walter Industries (other than under the Reorganization Documents); restrictions on the payment of dividends or other distributions; limitations on transactions with affiliates; and restrictions upon consolidations, mergers and certain Asset sales; see Exhibit 6 to the Creditors' Plan for a detailed description of these covenants. In addition, Walter Industries will be required to offer to purchase the New Senior Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the redemption date as follows: (i) upon a change in control (to be defined to include a transfer of control to a person or entity, or "group" of persons or entities as that term is used in SEC Rule 13-d, (i) that did not hold or control, immediately after giving effect to the consummation of the Creditors' Plan, 5% or more of the New Common Stock, and (ii) that acquired control of the Company other than as a result of the conversion of any Class A Common Stock into Class B Common Stock); or (ii) upon a sale of substantially all of the assets of the Company. The New Unsecured Note Indenture will also contain other covenants and events of default as more particularly described in the Summary of Terms for the New Unsecured Notes annexed as Exhibit 6 to the Creditors' Plan. Holders of Qualified Securities issued under the Creditors' Plan shall be entitled to certain registration rights with respect to such Qualified Securities, pursuant to the "Qualified Securities Registration Rights Agreement" relating to the Qualified Securities distributed pursuant to the Creditors' Plan, to be entered into as of the Effective Date by Walter Industries and the Persons to which Qualified Securities are distributed on the Effective Date. The Qualified Securities Registration Rights Agreement will provide for registration rights to the Holders of Qualified Securities no less favorable to such Holders than those contained in the form of registration rights agreement attached as Exhibit 8 to the Creditors' Plan. The form of registration rights agreement attached as Exhibit 8 to the Creditors' Plan provides that, within thirty (30) days after the Effective Date, any Holder of a Qualified Security as to which registration pursuant to the Securities Act is required for a public sale (a "Registrable Qualified Security") then outstanding will have the right to request that Walter Industries make one offer pursuant to a registration statement under the Securities Act (the "Exchange Offer") to exchange any Qualified Registrable Securities for a like aggregate principal amount of publicly registered Qualified Securities having otherwise identical terms to the Registrable Qualified Security being exchanged, and shall use its best efforts to complete the Exchange Offer on or after the 90th day after the receipt of such request. If no such request is timely made, Walter Industries shall use its best efforts to cause a "shelf" registration statement with respect to all Registrable Qualified Securities (the "Qualified Securities Initial Shelf Registration") to become effective on or prior to the 90th day after the Effective Date and to keep such registration statement continuously effective until the first anniversary of the date such shelf registration statement is declared effective (or such shorter period terminating when all Registrable Qualified Securities have been sold pursuant to the shelf registration statement). At any time after the completion of the Exchange Offer or the Qualified Securities Initial Shelf Registration, Holders of at least 20% or more in aggregate principal amount of the then-outstanding Registrable Qualified Securities will also have the right to request up to two additional shelf registration statements which shall not be required to remain effective for in excess of nine (9) months each. Holders of all other Registrable Securities will be notified of such request and will be entitled to participate in the registration. Holders of Registrable Qualified Securities are also entitled to unlimited "piggyback" registration rights after completion of the Exchange Offer or the Qualified Securities Initial Shelf Registration, as the case may be. The expenses of the registration relating to the Exchange Offer and the shelf registrations will be borne by the Company, other than underwriting discounts and commissions relating to the sale of Registrable Qualified Securities, which will be borne by the Holder thereof. 3. New Common Stock The Creditors' Plan provides for the extinguishment of Old Common Stock and the issuance of "New Common Stock" to Holders of Allowed Claims in Classes U-4, U-5, U-6 and U-7, and if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, Classes S1, S-2 and S-6, in each case subject to exercise of Equity Call Options, and possibly to Class E-1 Interests. "New Common Stock" consists of the Class A Common Stock and Class B Common Stock of Walter Industries, to be issued by Walter Industries as of the Effective Date. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan-- Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants." For a discussion of the conditions precedent to effectiveness of the Amended and Restated Veil Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan-- Settlement of Veil Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of the Veil Piercing Settlement Agreement." Except as expressly provided below, and as qualified by the Charter, attached as Exhibit 1 to the Creditors' Plan, the rights, privileges and powers of the Class A Common Stock and the Class B Common Stock will be identical, and the two classes will vote together as a single class on all matters as to which both classes are entitled to vote. The voting rights of the Class A Common Stock and the Class B Common Stock (in addition to the voting rights required by law) and the mandatory conversion of the Class A Common Stock into Class B Common Stock will be as follows: (i) each share of Class A Common Stock is entitled to five votes and each share of Class B Common Stock is entitled to one vote; (ii) each share of Class A Common Stock automatically converts into one share of Class B Common Stock upon the sale, transfer or other disposition (but not including a pledge) of such share other than by an original recipient of such share under the Creditors' Plan to an Affiliate of the original recipient of such share and (iii) all shares of Class A Common Stock automatically convert into an equal number of shares of Class B Common Stock (A) as soon as the aggregate number of shares of Class A Common Stock held by Apollo, Lehman Brothers Inc. and their respective Affiliates is less than 8% of the then outstanding number of shares of New Common Stock, and (B) on the seventh anniversary of the date of original issue thereof. The Proponents believe that, as structured, the Class A Common Stock and Class B Common Stock is appropriate under Section 1123(a)(6) of the Code. See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants--New Common Stock." However, notwithstanding the foregoing, the Creditors' Plan provides that the special voting and conversion features of the Class A Common Stock will be modified, if, and only to the extent that, the Court determines that such modification is necessary to comply with Section 1123(a)(6) of the Code. An "Affiliate" of a person or entity means any person or entity that controls, is under common control with, or is controlled by, such other person or entity. For purposes of this definition, "control" means the ability of one person or entity to direct the management and policies of another person or entity. Holders of New Common Stock issued under the Creditors' Plan shall be entitled to certain registration rights with respect to such New Common Stock, pursuant to the "New Common Stock Registration Rights Agreement" relating to the New Common Stock issued pursuant to the Creditors' Plan, to be entered into as of the Effective Date by Walter Industries and the Persons to which New Common Stock are issued on the Effective Date. The New Common Stock Registration Rights Agreement will provide for registration rights to Holders of New Common Stock no less favorable to such Holders than those contained in the form of registration rights agreement attached as Exhibit 7 to the Creditors' Plan. The form of registration rights agreement attached as Exhibit 7 to the Creditors' Plan provides that, within thirty (30) days after the Effective Date, Walter Industries shall use its best efforts to cause a "shelf" registration statement with respect to all Registrable Securities (the "Registrable Securities Initial Shelf Registration") to become effective on or prior to the 90th day after the Effective Date and to keep such registration statement continuously effective until the first anniversary of the date such shelf registration statement is declared effective (or such shorter period terminating when all Registrable Securities have been sold pursuant to the shelf registration statement). At any time after the completion of the Registrable Securities Initial Shelf Registration, holders of at least 20% or more of the then-outstanding Registrable Securities will also have the right to request up to two additional shelf registration statements which shall not be required to remain effective for in excess of nine (9) months each. Holders of all other Registrable Securities will be notified of such request and will be entitled to participate in the registration. Holders of Registrable Securities are also entitled to unlimited "piggyback" registration rights after completion of the Registrable Securities Initial Shelf Registration, as the case may be. The expenses of the registration relating to the shelf registrations will be borne by the Company, other than underwriting discounts and commissions relating to the sale of Registrable Securities, which will be borne by the holder thereof. F. Impaired Classes of Claims and Interests As a condition to confirmation, the Code requires that each impaired class of claims or interests accept the plan. A class is "impaired" if the legal, equitable or contractual right attaching to the claims or interests of that class are modified, other than by curing defaults and reinstating maturity or by payment in full in Cash. The Code defines acceptance of a plan by an impaired class of claims as acceptance by holders of two-thirds in dollar amount and a majority in number of claims of that class who actually vote to accept or to reject such plan. The Code defines acceptance of a plan by an impaired class of interests (equity securities) as acceptance by holders of two-thirds of the number of shares in such class who actually vote. Holders of claims or interests who fail to vote are not counted as either accepting or rejecting the plan. Each holder of a security issued under an indenture is entitled to vote with respect to such security; indenture trustees cannot vote on any plan on behalf of such holders. Holders of Claims in Classes S-1, S-2, S-6, U-3, U-4, U-5, and U-6 and Holders of Interests in Classes E-1, E-2 and SE-2 are impaired under the Creditors' Plan. Because the Holders of Class E-2 and Class SE-2 Interests will receive or retain no property under the Creditors' Plan, pursuant to the Code, Classes E-2 and SE-2 are deemed to have rejected the Creditors' Plan and, accordingly, the Proponents will not solicit votes from Classes E-2 and SE-2. G. Unimpaired Classes of Claims and Interests Classes of Claims that are not "impaired" under the Creditors' Plan are deemed to have accepted the Creditors' Plan. Claims in Classes S-3, S-4, S-5, S-7, S-8, S-9, S-10, U-1, U-2, U-7 and I-1 through I-3 and Holders of Interests in Class SE-1 are not impaired under the Creditors' Plan and, accordingly, are deemed to have accepted the Creditors' Plan. H. Assumption or Rejection of Executory Contracts All Executory Contracts that have not been rejected before ninety (90) days after the Effective Date or are not the subject of a motion to reject pending as of such date will be deemed assumed as of the Confirmation Date. Attached as Exhibit 9 to the Creditors' Plan is a nonexhaustive list of Executory Contracts that are rejected under the Creditors' Plan, without admitting that any item on such Exhibit is an Executory Contract and without admitting any liability as a result of such rejection or otherwise. As to any Executory Contract assumed pursuant to the Creditors' Plan, Walter Industries and/or the applicable Debtor, as the case may be, will, 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 will 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 will determine the amount actually due and owing in respect of the defaults or will approve the settlement of any such Executory Contract Claim. The dollar amount of any monetary default of the Debtors existing as of the Confirmation Date under any Executory Contract, as may be agreed to by the parties thereto or as may be determined by the Court, will constitute a Class A-1 Allowed Administrative Claim upon the assumption of such Executory Contract. Each Person which is a party to an Executory Contract rejected pursuant to the Creditors' Plan will 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 party, or be forever barred. Objections to any proof of claim will be filed not later than sixty (60) days after such proof of claim is filed, and the Court will determine any such objections. Unsecured Claims arising out of the rejection of Executory Contracts will be included in Class U-3 Other Unsecured Claims. The Debtors state in the Debtors' Disclosure Statement that the Debtors do not expect that any material Claim will result from the rejection of Executory Contracts because substantially all of the Debtors' material Executory Contracts have either already been assumed pursuant to order of the Court or have expired during the pendency of the Chapter 11 Cases. EXHIBIT I: CREDITORS' JOINT PLAN OF REORGANIZATION 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. CREDITORS' JOINT PLAN OF REORGANIZATION DATED AS OF AUGUST 1, 1994 (THE "CREDITORS' PLAN") AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. Counsel to Apollo 65 East 55th Street 33rd Floor New York, NY 10022 (212) 872-1000 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 10019-6064 (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 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 3 ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS 25 2.1 Administrative Claims 25 2.2 Federal Income Tax Claims 25 2.3 Federal Excise Tax and Reclamation Claims 25 2.4 State and Local Tax Claims 25 2.5 Class S-1 Claims: Revolving Credit Bank Claims 26 2.6 Class S-2 Claims: Working Capital Bank Claims 27 2.7 Class S-3 Claims: Grace Street Note Claims 28 2.8 Class S-4 Claims: Sloss IRB Claim 28 2.9 Class S-5 Claims: Secured Equipment Purchase Claims 28 2.10 Class S-6 Claims: Series B & C Senior Note Claims 29 2.11 Class S-7 Claims: Provident Life & Accident Insurance Company Claims 29 2.12 Class S-8 Claims: Revolving Credit Agents Claims 29 2.13 Class S-9 Claims: Working Capital Agents Claims 31 2.14 Class S-10 Claims: Other Secured Claims 32 2.15 Class U-1 Claims: Old Walter Industries IRB Claims 33 2.16 Class U-2 Claims: Convenience Class Claims 33 2.17 Class U-3 Claims: Other Unsecured Claims 35 2.18 Class U-4 Claims: Senior Subordinated Note Claims 37 2.19 Class U-5 Claims: 17% Subordinated Note Claims 37 2.20 Class U-6 Claims: Pre-LBO Debenture Claims 37 2.21 Class U-7 Claims: Veil Piercing Claims 37 2.22 Class I-1 Claims: Intercompany IRB Claims 39 2.23 Class I-2 Claims: Pre-Filing Date Intercompany Notes Payable Claims 39 2.24 Class I-3 Claims: Post-Filing Date Intercompany Notes Payable Claims 41 2.25 Class E-1 Interests: Old Common Stock Interests in Hillsborough 42 2.26 Class E-2 Interests: Stock Acquisition Rights in Hillsborough 42 2.27 Class SE-1 Interests: Subsidiary Common Stock Interests in Debtors other than Hillsborough 42 2.28 Class SE-2 Interests: Stock Acquisition Rights in Debtors other than Hillsborough 45 ARTICLE III TREATMENT OF ALLOWED CLAIMS AND INTERESTS UNDER THE CREDITORS' PLAN 46 3.1 Satisfaction of Allowed Claims and Interests 46 3.2 Administrative Claims 47 3.3 Federal Income Tax Claims 47 3.4 Federal Excise Tax and Reclamation Claims 47 3.5 State and Local Tax Claims 47 3.6 Class S-1 Claims: Revolving Credit Bank Claims 47 3.7 Class S-2 Claims: Working Capital Bank Claims 48 3.8 Class S-3 Claims: Grace Street Note Claims 48 3.9 Class S-4 Claims: Sloss IRB Claim 48 3.10 Class S-5 Claims: Secured Equipment Purchase Claims 48 3.11 Class S-6 Claims: Series B & C Senior Note Claims 49 3.12 Class S-7 Claims: Provident Life & Accident Insurance Company Claims 49 3.13 Class S-8 Claims: Revolving Credit Agents Claims 49 3.14 Class S-9 Claims: Working Capital Agents Claims 50 3.15 Class S-10 Claims: Other Secured Claims 50 3.16 Class U-1 Claims: Old Walter Industries IRB Claims 50 3.17 Class U-2 Claims: Convenience Class Claims 50 3.18 Class U-3 Claims: Other Unsecured Claims 51 3.19 Class U-4 Claims: Senior Subordinated Note Claims 51 3.20 Class U-5 Claims: 17% Subordinated Note Claims 51 3.21 Class U-6 Claims: Pre-LBO Debenture Claims 51 3.22 Class U-7 Claims: Veil Piercing Claims 51 3.23 Class I-1 Claims: Intercompany IRB Claims 52 3.24 Class I-2 Claims: Pre-Filing Date Intercompany Notes Payable Claims 52 3.25 Class I-3 Claims: Post-Filing Date Intercompany Notes Payable Claims 53 3.26 Class E-1 Interests: Old Common Stock Interests in Hillsborough 53 3.27 Class E-2 Interests: Stock Acquisition Rights in Hillsborough 53 3.28 Class SE-1 Interests: Subsidiary Common Stock Interests in Debtors other than Hillsborough 53 3.29 Class SE-2 Interests: Stock Acquisition Rights in Debtors other than Hillsborough 53 ARTICLE IV MEANS FOR IMPLEMENTATION OF THE CREDITORS' PLAN 53 4.1 Charter; Common Stock 53 4.2 Amendments to Charter 54 4.3 Nonvoting Equity Securities 54 4.4 Surrender and Cancellation of Instruments 54 4.5 Distributions to Holders of Allowed Claims and Interests 55 4.6 All Distributions to be Made by Walter Industries 56 4.7 Fractional Shares 56 4.8 Execution and Delivery of Reorganization Documents 56 4.9 Cooperation by Debtors 56 4.10 New Capital Stock of Debtors 56 4.11 Estimated Claims Order(s) 56 4.12 Resolution of Disputed Claims 56 4.13 Reserves for Disputed Claims 57 4.14 Investment of Reserves 57 4.15 Excess Reserves 57 4.16 Bar Date for Fee Claims 57 4.17 Unclaimed Property 57 4.18 Non-Negotiated Checks 57 4.19 Returned Distributions 57 4.20 Claims Against Two or More Debtors 58 4.21 Direction to Parties 58 4.22 "Promptly After the Effective Date" 58 ARTICLE V MANAGEMENT OF WALTER INDUSTRIES 58 5.1 Corporate Governance; Directors and Officers 58 5.2 Reconstitution of Boards of Directors of Debtors 58 5.3 Certain Duties of New Boards 59 5.4 Management Stock; New Incentive Plans 59 5.5 Funding of Retiree Health Benefits 59 5.6 Confirmation Bonus Awards 59 ARTICLE VI RELEASES AND INDEMNIFICATION 59 6.1 Release by Holders of Claims or Interests 59 6.2 Release By Debtors 60 6.3 Dismissal of Lawsuits 60 6.4 Indemnification 60 ARTICLE VII ENTERPRISE VALUE 61 7.1 Enterprise Value 61 ARTICLE VIII EXECUTORY CONTRACTS 61 8.1 Assumption of Executory Contracts 61 8.2 Cure of Defaults 61 8.3 Claims for Damages 61 8.4 Classification of Claims 61 ARTICLE IX RETENTION OF JURISDICTION 61 9.1 Jurisdiction of Court 61 ARTICLE X CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS 62 10.1 Conditions to Confirmation 62 10.2 Conditions to Effectiveness 63 ARTICLE XI CRAM DOWN 64 11.1 Cram Down 64 ARTICLE XII EFFECTS OF PLAN CONFIRMATION; TITLE TO PROPERTY AND DISCHARGE 64 12.1 Vesting of Property 64 12.2 Discharge 64 12.3 Injunction 64 12.4 Effectiveness and Enforcement of Settlement Agreements 65 ARTICLE XIII MISCELLANEOUS PROVISIONS 65 13.1 Revocation 65 13.2 Amendments 65 13.3 No Consolidation 65 13.4 Provisions as to Interest 65 13.5 No Attorneys' Fees 66 13.6 Post Confirmation Effect of Evidences of Claims or Interests 66 13.7 Official Committees 66 13.8 Construction 66 13.9 Time 66 13.10 Tax Allocation of Consideration Paid to Holders 66 13.11 Governing Law 66 13.12 Headings 66 13.13 Notice of Effectiveness 66 13.14 Notices 67 13.15 Not Admissible 67 13.16 Successors and Assigns 68 EXHIBITS 1. Restated Certificate of Incorporation of Walter Industries 2. Summary of Terms for the New Senior Notes 3A. Veil Piercing Settlement Agreement 3B. Pre-LBO Bondholders Settlement Agreement 3C. Amended and Restated Veil Piercing Settlement Agreement 4. Summary of Terms for the Mid-State Trust IV Secured Notes 5. Summary of Terms for the Mid-State Trust II Residual Bonds 6. Summary of Terms for the New Unsecured Notes 7. Form of New Common Stock Registration Rights Agreement 8. Form of Qualified Securities Registration Rights Agreement 9. Rejected Executory Contracts CREDITORS' JOINT PLAN OF REORGANIZATION DATED AS OF AUGUST 1, 1994 The Bondholders Committee (as defined), Lehman Brothers Inc., Apollo (as defined), the Creditors Committee (as defined) and the Ad Hoc Committee of Pre-LBO Bondholders (as defined) (collectively, the "Proponents") hereby propose the following joint plan of reorganization (as defined herein, the "Creditors' 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 Creditors' Plan is being presented as a joint plan of reorganization of the Debtors for administrative purposes only. The Creditors' Plan is not predicated upon a substantive consolidation of the Chapter 11 Cases and nothing herein shall be otherwise construed. Pursuant to the Creditors' 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 Creditors' Plan, with respect to the distribution of Qualified Securities to Holders of Allowed Claims in Classes 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 Creditors' 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 Creditors' 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 Creditors' 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 Creditors' 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, U4A, 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, SE-1C and SE-2C; D. Coast to Coast--Classes S-1D, S-8D, S-10D, U-2D, U-3D, U-7D, I-2D, SE-1D and SE-2D; E. Computer Holdings--Classes S-1E, S-2E, S-8E, S-9E, S-10E, U-2E, U-3E, U7E, 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, 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, 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, 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, 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, SE-1M and SE-2M; N. Window Components (Wisc.)--Classes S-1N, S-8N, S-10N, U-2N, U-3N, U-7N, I-2N, 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, 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, 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, SE-1Q and SE-2Q; R. JW Walter--Classes S-1R, S-8R, S-10R, U-2R, U-3R, U-7R, I-2R, 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, 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, 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, 1-2Y, SE-1Y and SE-2Y; Z. United Land--Classes S-1Z, S-6Z, S-8Z, S-10Z, U-2Z, U-3Z, U-4Z, U-5Z, U-7Z, I-2Z, 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, 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, SE-1CC and SE-2CC; DD. Home Improvement--Classes S-10DD, U-2DD, U-3DD, U-7DD, I-2DD, 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, 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, SE-1GG and SE-1GG. ARTICLE I DEFINITIONS Unless otherwise provided in the Creditors' Plan, all terms used herein shall have the meanings assigned to such terms in the Code. For purposes of the Creditors' Plan, the following terms (which appear in the Creditors' 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 7/8% Subordinated Debenture Indenture. 1.2 "10 7/8% Subordinated Debenture Claims" shall mean all Claims arising under the 10 7/8% Subordinated Debentures and the 10 7/8% Subordinated Debenture Indenture, other than Claims for fees and expenses of the 10 7/8% 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 7/8% Subordinated Debentures due 2008 of Old Walter Industries, as successor to Original Jim Walter, issued pursuant to the 10 7/8% Subordinated Debenture Indenture. 1.5 "13 1/8% Indenture Trustee" shall mean the trustee under the 13 1/8% 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 l, 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); (d) all of the costs and expenses incurred in connection with the negotiation, execution and implementation of the Veil Piercing Settlement, the Pre-LBO Bondholders Settlement Agreement and the other settlements reached in connection with the Creditors' Plan; and (e) all of the Proponents Expenses. 1.19 "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. 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 the Bondholders Committee and the Holder of such Claim and approved by a Final Order of the Court 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 Creditors' 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) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest consisting of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $28,220,625; provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Revolving Credit Bank Claim shall receive Cash in an amount equal to such Holder's Pro Rata share of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Revolving Credit Bank Claims under this paragraph, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder shall receive under this paragraph shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share (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 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 3.7(b) and (vi) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest consisting of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $9,279,375; provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Working Capital Bank Claim shall receive Cash in an amount equal to such Holder's Pro Rata share of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Working Capital Bank Claims under this paragraph, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder shall receive under this paragraph shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share (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(b) of the Creditors' 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, if any, paid in New Senior Notes under Section 3.11(b) of the Creditors' Plan, 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) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, additional interest consisting of such Holder's Pro Rata portion of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to $37,500,000; provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Series B & C Senior Note Claim shall receive Cash in an amount equal to such Holder's Pro Rata share of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Series B & C Senior Note Claims under this paragraph, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder shall receive under this paragraph shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share; (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 the Bondholders Committee 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 (i) 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, and (ii) only to the fullest extent that the payment thereof is permitted by law and to the extent that the same may be satisfied after all distributions are made in full in respect of all other Allowed Claims, including the Allowed Claim described in clause (i) above but excluding Claims in Classes I-1 through I-3, the Pro Rata share of the aggregate interest on the aggregate Allowed Claims described in clause (i) above, from the Filing Date to the Effective Date calculated at the applicable non-default contract rate(s), or in the absence of a contract rate, at 9.0% per annum or such other interest rate as the Court may determine; (l) with respect to any Deficiency Claim, the amount thereof as agreed to by the Bondholders Committee 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 the Bondholders Committee 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 the Bondholders Committee 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 Allowed Veil Piercing Claims in the aggregate, the sum of (A) the Veil Piercing Claims Amount and (B) the sum of (i) $75,000,000 (but only if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms) and (ii) the Senior Claim Differential, 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 the Bondholders Committee 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 Indemnity Claim" shall mean an Allowed Claim for indemnification, reimbursement or contribution against any Debtor[sp10d]; provided, however, that any such Claim shall not be an Allowed Indemnity Claim if the agreement or other document giving rise to the Claim is void or voidable. 1.23 "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 and as to which no objection has been made or which has been made and which has been allowed by a Final Order. 1.24 "Amended and Restated Veil Piercing Settlement Agreement" shall mean an agreement in substantially the form attached as Exhibit 3C hereto, the conditions precedent to the effectiveness of which are set forth in Section 7(a) therein. 1.25 "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. 1.26 "Apollo" shall mean AIF II, L.P., certain Affiliates of AIF II, L.P. and certain accounts managed or controlled by such Affiliates. 1.27 "Applicable Consideration" shall mean the 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 Allowed Class U-4 Claims, Allowed Class U-5 Claims and Allowed Class U-6 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; and (d) The New Common Stock available for distribution on account of Subordinated Note Claims shall be allocated as follows: each Holder shall receive shares of New Common Stock (which shall be Class A Common Stock in the case of Class U-4 and Class U-5 Claims, and Class B Common Stock in the case of Class U-6 Claims) having an aggregate New Common Stock Value equal to (i) such Holder's Pro Rata share of the aggregate principal amount of Qualified Securities and the aggregate New Common Stock Value, in each case available for distribution in respect of Subordinated Note Claims after all distributions are made in respect of Veil Piercing Claims in accordance with Section 3.22 of the Creditors' Plan, and after all distributions of New Common Stock are made in respect of Revolving Credit Bank Claims, Working Capital Bank Claims and Series B & C Senior Note Claims; less (ii) the aggregate principal amount of Qualified Securities to be distributed in respect of such Subordinated Note Claim; provided, however, that in the event that the distributions to be made to Holders of Subordinated Note Claims under the Creditors' Plan would result in the receipt by such Holders of securities having a value in excess of their Allowed Claims, any such excess shall be distributed to Holders of Class E-1 Interests pursuant to Section 3.26 of the Creditors' Plan in shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess; provided, further, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) each Holder of a Subordinated Note Claim shall receive Cash in an amount equal to such Subordinated Noteholder's pro rata share (based on the number of shares of New Common Stock that would otherwise have been issued to such Holder under this paragraph (d), divided by all shares of New Common Stock that would otherwise have been issued to all Holders of Subordinated Note Claims under this paragraph (d)) of the aggregate Cash proceeds received from the exercise of all such Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to Holders of Subordinated Note Claims under this paragraph (d), and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that each Holder shall receive under this paragraph (d) shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share. Qualified Securities and New Common Stock available for distribution in respect of Subordinated Note Claims shall not include Qualified Securities and New Common Stock to be distributed to satisfy Allowed Veil Piercing Claims in accordance with Section 3.22 of the Creditors' Plan, and shall not include New Common Stock to be distributed to satisfy Allowed Revolving Credit Bank Claims, Allowed Working Capital Bank Claims or Allowed Series B & C Senior Note Claims in accordance with Sections 3.6, 3.7 and 3.11 of the Creditors' Plan, respectively. 1.28 "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. 1.29 "Ballot Date" shall mean the date set by the Court as the last date for timely submission by a Holder of a Claim or Interest of a ballot accepting or rejecting the Creditors' Plan. 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 "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. 1.39 "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. 1.40 "Cash" shall mean lawful currency of the United States of America, or any equivalent thereof. 1.41 "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. 1.42 "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. 1.43 "Celotex/JWC Released Party" shall mean any present or former director, officer, partner, shareholder, employee, agent, advisor or representative of Jim Walter Corporation or The Celotex Corporation or any of their respective subsidiaries (in each case only in such Person's aforementioned capacity and not otherwise) that, subject to the last two sentences hereof, (A) shall have become a signatory to the Veil Piercing Settlement Agreement, following a written request of the Bondholder Proponents, on or prior to the later of (i) thirty (30) days after a copy of the Veil Piercing Settlement Agreement is sent to such person or entity or a representative thereof, and (ii) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Creditors' Plan and the plan filed by the Debtors, and (B) shall have taken no action(s) subsequent to becoming a signatory to the Veil Piercing Settlement Agreement which, in the determination of the Bondholder Proponents, would be reasonably likely to (i) impede the prompt distribution or approval of the disclosure statement relating to the Creditors' Plan; (ii) impede the prompt confirmation and effectiveness of the Creditors' Plan; (iii) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Creditors' Plan and the Chapter 11 Cases; (iv) impede the prompt realization of Finality (as defined in the Veil Piercing Settlement Agreement); or (v) result in a breach of the Veil Piercing Settlement Agreement; provided, that a director, officer, partner, shareholder, employee, agent, advisor or representative of Jim Walter Corporation or The Celotex Corporation or any of their respective subsidiaries shall be a Celotex/JWC Released Party only if Jim Walter Corporation or The Celotex Corporation, respectively, has become a signatory to the Veil Piercing Settlement Agreement within the time permitted as set forth in the Veil Piercing Settlement Agreement. If the Court finds that the settlement set forth in the Veil Piercing Settlement Agreement is not reasonable or the Creditors' Plan is not confirmable unless each or any of such person(s) or entity(ies) is given a further opportunity to become a signatory to the Veil Piercing Settlement Agreement and receiving the benefits specified herein for a Celotex/JWC Released Party by a specific date(s) set by the Court, then the date specified in (A) hereof shall be the date(s) set by the Court; provided, further; that the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any such person(s) or entity(ies). If the Court or the Celotex Bankruptcy Court determines that a particular Celotex/JWC Released Party(ies) is not entitled to or should not be granted the release specified in Section 4(b) of the Veil Piercing Settlement Agreement, then such person(s) or entity(ies) shall not be entitled to and shall not receive such release. 1.44 "Celotex Settlement Fund Recipient" shall mean The Celotex Corporation for the exclusive benefit of the Veil Piercing Claimants and the Settling Equityholders, if any, 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 Veil Piercing Claims under the Veil Piercing Settlement Agreement and/or the Creditors' 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 Creditors' 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, subject to modification if, and only to the extent, the Court finds that the voting and/or conversion rights of the Class A Common Stock are required to be modified in order to comply with Section 1123(a)(6) of the Code. 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 Creditors' Plan. 1.50 "Class A Common Stock" shall mean the Class A Common Stock, par value $.01 per share, of Walter Industries, to be issued on the Effective Date. The Class A Common Stock shall have the special voting and conversion rights set forth in the Charter, subject to modification if, and only 1.51 "Class B Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of Walter Industries, to be issued on the Effective Date. 1.52 "Class S-6 Fund" shall have the meaning set forth in Section 3.11 of the Creditors' Plan. 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. Section 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 Creditors' Plan and approving the transactions and settlements contemplated therein. 1.60 "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. 1.61 "Creditor" shall mean a creditor of one or more of the Debtors within the meaning of Section 101(10) of the Code. 1.62 "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. 1.63 "Creditors' Plan" shall mean the Creditors' Joint Plan of Reorganization dated as of August 1, 1994, proposed by the Proponents and filed with the Court on August 2, 1994, as it may be amended or modified from time to time, together with all exhibits thereto. 1.64 "Debtor in Possession" shall mean any of the Debtors, as debtor in possession in the applicable Chapter 11 Case. 1.65 "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, South Precision, United Land, U.S. Pipe, Pipe Realty, Vestal, Home Improvement, Old Walter Industries and Walter Land, as Debtors in Possession under the Chapter 11 Cases. 1.66 "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. 1.67 "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 Creditor's Plan, arising out of the same or similar conduct or events that gave rise to the Veil Piercing Claims. 1.68 "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. 1.69 "Disclosure Statement" shall mean the disclosure statement (and all exhibits and schedules annexed thereto or referenced therein) that relate to the Creditors' 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. 1.70 "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 Creditors' Plan unless the Bondholders Committee and the holder thereof otherwise agree or the Court otherwise orders. 1.71 "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. 1.72 "Effective Date" shall mean that Business Day selected by the Bondholder Proponents which shall be not more than ninety (90) days after the date on which all conditions set forth in Section 10.2 of the Creditors' Plan have been satisfied or waived. 1.73 "Election Procedure" shall mean, for each of the Equity Call Option, the Series B & C Senior Note Election and the Subordinated Note Claim Election, the following procedure: (i) applicable election forms shall be mailed together with, and at the same time as, the mailing of ballots for the purpose of accepting or rejecting the Creditors' Plan; (ii) the applicable election form shall be returned so as to be received on or before the Ballot Date; (iii) in the event that the Effective Date does not, or is not anticipated to, occur on or before December 31, 1994, the previously sent election forms shall be disregarded, the elections shall be reconducted and the applicable election forms shall be sent to Holders as of a recent date selected by the Bondholder Committee, which forms shall be returned so as to be received during the 30 day period after such forms are resent; provided, that such 30 day period shall expire not more than 45 days prior to the Effective Date (if such 30 day period does expire more than 45 days prior to the Effective Date, the procedure in this clause (iii) shall be repeated until this condition is fulfilled). 1.74 "Equity Call Option" shall have the meaning set forth in Section 3.26 of the Creditors' Plan. 1.75 "Equity Call Option Election Form" shall mean the election form, sent in accordance with the Election Procedure, to each Person that held an Old Common Stock Interest as of the date on which the order approving the Disclosure Statement is entered (or as of a later date if a new election is required, as provided in the Election Procedure), upon which such Person may exercise its Equity Call Option (if it is eligible to do so under Section 3.26 of the Creditors' Plan), the form of which election form shall have been approved by the Court. 1.76 "Estimated Claims Order" shall mean any Order of the Court that estimates Claims that are Disputed Claims to aid in voting on the Creditors' Plan and/or in establishing the effectiveness of the Creditors' Plan. 1.77 "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. 1.78 "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. 1.79 "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. 1.80 "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. 1.81 "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. 1.82 "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. 1.83 "Filed" shall mean delivered to, received by and entered upon the legal docket of any of the Debtors by the Clerk of the Court. 1.84 "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. 1.85 "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 in a manner satisfactory to the Bondholder Proponents 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. 1.86 "First Hearing Day" shall have the meaning set forth in Section 4.16 of the Creditors' Plan. 1.87 "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. 1.88 "Governmental Unit" shall mean a governmental unit as such term is defined in Section 101(27) of the Code. 1.89 "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. 1.90 "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. 1.91 "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. 1.92 "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. 1.93 "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. 1.94 "Holder" shall mean the owner of any Claim or Interest. 1.95 "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. 1.96 "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. 1.97 "IDB of Birmingham" shall mean the Industrial Development Board of the City of Birmingham, Alabama. 1.98 "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. 1.99 "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. 1.100 "Initial Revolving Credit Bank Claim Payment" shall have the meaning set forth in Section 3.6(a) of the Creditors' Plan. 1.101 "Initial Working Capital Bank Claim Payment" shall have the meaning set forth in Section 3.7(a) of the Creditors' Plan. 1.102 "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. 1.103 "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. 1.104 "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. 1.105 "Intercompany IRB Trustee" shall mean the trustee under the Intercompany IRB Indenture. 1.106 "Interest" shall mean the rights arising out of any equity securities of any of the Debtors, including Old Common Stock and Subsidiary Common Stock. 1.107 "IRB Claims" shall mean, collectively, the Sloss IRB Claim, the Old Walter Industries IRB Claims and the Intercompany IRB Claims. 1.108 "IRBs" shall mean, collectively, the Sloss IRB, the Old Walter Industries IRBs and the Intercompany IRB. 1.109 "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. 1.110 "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. 1.111 "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. 1.112 "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. 1.113 "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. 1.114 "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. 1.115 "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. 1.116 "KKR Affiliates" shall mean and be the collective reference to Kohlberg Kravis Roberts & Co., KKR Associates and any Person that is or has ever been a director, officer, partner, employee, agent or representative of either of them. 1.117 "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. 1.118 "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 any Class other than Class U-7, 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 Kohlberg Kravis Roberts & Co. 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, 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. 1.119 "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. 1.120 "Management Incentive Compensation Plan" shall mean the management incentive compensation plan to be established by the New Board of Walter Industries (or, if the New Board has not been appointed as of the Confirmation Date, by the Bondholders Committee), to be effective as of the Effective Date. 1.121 "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. 1.122 "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. 1.123 "Mid-State Homes Warehouse Credit Facility" shall mean a warehouse credit facility, or the equivalent thereof, in an aggregate amount and on such terms as are satisfactory to the Bondholders Committee, to be entered into as of the Effective Date by Mid-State Homes and one or more financial institutions. 1.124 "Mirror Liquidation Order" shall have the meaning specified in the forepart of the Creditors' Plan. 1.125 "Mirror Liquidation Plan" shall have the meaning specified in the forepart to the Creditors' Plan. 1.126 "Negotiated Enterprise Value" shall mean $2,525,000,000, 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, and taking into account the possibility of delay between the Confirmation Date and the Effective Date, and the likely increase in the value of the Debtors over time. 1.127 "New Common Stock" shall mean the collective reference to the Class A Common Stock and the Class B Common Stock. Except with respect to the special voting rights and the mandatory conversion features of the Class A Common Stock set forth in the Charter, the rights, privileges and powers of the Class A Common Stock and the Class B Common Stock shall be identical, and the Class A Common Stock and the Class B Common Stock shall vote together as a single class on all matters as to which both classes are entitled to vote. 1.128 "New Common Stock Registration Rights Agreement" shall mean the registration rights agreement relating to the New Common Stock issued pursuant to the Creditors' 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 7 hereto. 1.129 "New Common Stock Value" shall mean the Negotiated Enterprise Value (or, if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount), less the sum of (a) the lesser of (i) $902 million and (ii) (A) the Allowed Amount of Claims for all Administrative and Priority Claims and Claims for all Classes other than Classes U-4 through U-7 and I-1 through I-3 (excluding any interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6) accrued or owed on the Effective Date (including without limitation any part thereof paid or to be paid after the Effective Date), minus (B) the interest paid or accrued under the provisions of the Creditors' Plan in respect of the Claims referred to in the preceding clause (A) for the period from January 1, 1994 to the Effective Date (excluding any interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6), and (b) the aggregate principal amount of Qualified Securities to be distributed under the terms of the Creditors' Plan on the Effective Date. 1.130 "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. 1.131 "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. 1.132 "New Senior Notes" shall mean, with respect to any Debtor, secured senior debt securities that (i) are rated BB or higher by a Rating Service, as of the Effective Date; provided, that the obtaining of such Rating Service ratings shall not be required in the event that, after proper application is made therefor, neither Rating Service provides a rating of the security proposed to be rated; and (ii) are 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 New Board of Walter Industries (or, if the New Board has not yet been appointed, the Bondholders Committee) and the Senior Note Trustee shall select a third qualified valuation expert of national reputation, whose determination under the Creditors' Plan will be binding. Attached hereto as Exhibit 2 is a summary of the anticipated (although not required) terms, and anticipated (although not required) maximum aggregate principal amount, of the New Senior Notes. 1.133 "Non-Settling Equityholder" shall mean a Holder of Old Common Stock that is not a Settling Equityholder. 1.134 "Official Committees" shall mean, collectively, the Bondholders Committee and the Creditors Committee. 1.135 "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. 1.136 "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. 1.137 "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. 1.138 "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. 1.139 "Old Walter Industries IRB Trustees" shall mean, collectively, the trustees under the Old Walter Industries IRB Indentures. 1.140 "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. 1.141 "Original Jim Walter" shall mean Jim Walter Corporation, a Florida corporation, prior to its acquisition by Hillsborough. 1.142 "Other Secured Claims" shall mean, collectively, only Secured Claims not otherwise separately classified in the Creditors' Plan. 1.143 "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 and upon which a Holder of an Other Unsecured Claim shall exercise its Other Unsecured Claim Election. 1.144 "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 on the Pre-Filing Date Unsecured Allowed Amount of Other Unsecured Claims and Convenience Class Claims from and after the Confirmation Date, which shall be 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% per annum. The interest rate option selected shall be 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 have actually made the Other Unsecured Claim Election. 1.145 "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 Creditors' 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. 1.146 "Person" shall mean a natural person, corporation, partnership, joint stock company, trust, association, unincorporated association, governmental agency, instrumentality or subdivision, or any other entity. 1.147 "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. 1.148 "Post-Filing Date Intercompany Notes Payable Claims" shall mean all Claims arising after the Filing Date held by any Debtor against any other Debtor. 1.149 "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. 1.150 "Pre-Filing Date Unsecured Allowed Amount" shall have the meaning set forth in Section 1.22(m)(i) hereof. 1.151 "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. 1.152 "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. 1.153 "Priority Claims" shall mean, collectively, Federal Income Tax Claims, Federal Excise Tax and Reclamation Claims and State and Local Tax Claims. 1.154 "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. 1.155 "Professional Person" shall mean any Person retained by the Debtors or 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. 1.156 "Proponents" shall have the meaning set forth in the first paragraph hereof. 1.157 "Proponents Expenses" shall mean all of the costs and expenses incurred by the Proponents arising after the Filing Date, not previously reimbursed by any Debtor, in connection with (a) the formulation, drafting and negotiation of the Creditors' 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 Creditors' Plan, the Disclosure Statement and the Reorganization Documents, (c) the effectuation of the Creditors' Plan and the Disclosure Statement, and (d) any and all other actions taken in connection with the Creditors' 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 Creditors' Plan and the Disclosure Statement shall include all prior and any future versions, amendments and/or supplements thereto). 1.158 "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. 1.159 "Qualified Securities" means with respect to any Debtor, (a) Cash (other than Cash proceeds from any exercise of an Equity Call Option), or (b) debt securities issued by such Debtor that (i)(A) if secured by real property mortgages and the promissory notes secured thereby, are rated BB or higher by either Rating Service; or (B) if not so secured, are rated B or higher by either Rating Service, in each case as of the Effective Date; provided, that the obtaining of such Rating Service ratings shall not be required in the event that, after proper application is made therefor, neither Rating Service provides a rating of the debt security proposed to be rated; and (ii) are 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 do not agree as to whether such securities are valued at par as of the Effective Date, the New Board of Walter Industries (or, if the New Board has not yet been appointed, the Bondholders Committee) shall select a third qualified valuation expert of national reputation, whose determination under the Creditors' Plan will be binding. Each Class receiving Qualified Securities under the Creditors' Plan shall receive the same proportion of the various types of debt securities qualifying as Qualified Securities and of Cash, as each other Class receiving Qualified Securities under the Creditors' Plan. Attached hereto as Exhibits 4, 5 and 6 are summaries of the anticipated terms, and anticipated (although not required) aggregate principal amounts, of certain Qualified Securities referred to as the Mid-State Trust IV Secured Notes, the Mid-State Trust II Residual Bonds and the New Unsecured Notes. 1.160 "Qualified Securities Registration Rights Agreement" shall mean the registration rights agreement relating to the Qualified Securities distributed pursuant to the Creditors' 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 than those contained in the form of agreement attached as Exhibit 8 hereto. 1.161 "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. 1.162 "Rating Service" shall mean Standard & Poor's Corporation or Moody's Investors Service, Inc. 1.163 "Record Date" shall mean July 13, 1994 or such other date as the Court may fix as the voting record date. 1.164 "Released Parties" shall have the meaning set forth in Section 6.1 of the Creditors' Plan. 1.165 "Reorganization Documents" shall mean, collectively, the New Senior Note Indenture, the Mid-State Homes Warehouse Credit Facility, 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. 1.166 "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. 1.167 "Revolving Credit Agents" shall mean the co-agents for the Revolving Credit Banks under the Revolving Credit Agreement. 1.168 "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 for legal services rendered prior to the Filing Date, in the amount previously disclosed by the Working Capital Agents to the Bondholder Proponents. 1.169 "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. 1.170 "Revolving Credit Bank Claims" shall mean the Claims arising under the Revolving Credit Agreement, other than Revolving Credit Agents Claims. 1.171 "Revolving Credit Bank Claim Stub Period Amount" shall have the meaning set forth in Section 1.22(b) of the Creditors' Plan. 1.172 "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. 1.173 "Revolving Loan" shall mean the amount of loans outstanding under the Revolving Credit Agreement from time to time. 1.174 "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. 1.175 "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. 1.176 "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. 1.177 "Securities Act" shall mean the Securities Act of 1933, as amended. 1.178 "Senior Claim Differential" shall mean the excess, if any, of $902 million over the difference between (a) the Allowed Amount of Claims for all Administrative and Priority Claims and Claims for all Classes other than Classes U-4 through U-7 and I-1 through I-3 (excluding any interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6) accrued or owed on the Effective Date (including without limitation any part thereof distributed or to be distributed after the Effective Date), and (b) the interest Allowed under the provisions of the Creditors' Plan in respect of the Claims referred to in the preceding clause (a) for the period from January 1, 1994 to the Effective Date (excluding any interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6). 1.179 "Senior Subordinated Indenture Trustee" shall mean the trustee under the Senior Subordinated Note Indenture. 1.180 "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. 1.181 "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. 1.182 "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. 1.183 "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. 1.184 "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 be made in accordance with the Election Procedure. 1.185 "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 may exercise its Series B & C Senior Note Claim Election, the form of which election form shall have been approved by the Court. 1.186 "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. 1.187 "Series B & C Senior Note Trustee" shall mean the trustee under the Series B & C Senior Note Indenture. 1.188 "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. 1.189 "Settling Equityholder" shall mean a Holder of an Allowed Old Common Stock Interest (a) that, subject to the last two sentences hereof, shall have become a signatory to the Veil Piercing Settlement Agreement on or prior to the later of (i) twenty (20) days after a copy of the Veil Piercing Settlement Agreement is sent to such Holder of an Allowed Old Common Stock Interest or a representative thereof, and (ii) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Creditors' Plan and the plan filed by the Debtors, and (b) that shall have taken no action(s) subsequent to becoming a signatory to the Veil Piercing Settlement Agreement which, in the determination of the Bondholder Proponents, would be reasonably likely to (i) impede the prompt distribution or approval of the disclosure statement relating to the Creditors' Plan; (ii) impede the prompt confirmation and effectiveness of the Creditors' Plan; (iii) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Creditors' Plan and the Chapter 11 Cases; (iv) impede the prompt realization of Finality (as defined in the Veil Piercing Settlement Agreement); or (v) result in a breach of the Veil Piercing Settlement Agreement. If the Court finds that the settlement set forth in the Veil Piercing Settlement Agreement is not reasonable or the Creditors' Plan is not confirmable unless each or any of the Holders of an Allowed Old Common Stock Interest is given a further opportunity to become a Settling Equityholder by becoming a signatory to the Veil Piercing Settlement Agreement and receiving the benefits specified therein for a Setting Equityholder by a specified date(s) set by the Court, then the date specified in (a) hereof shall be the date(s) set by the Court. Notwithstanding any other provision of this definition, the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any Person who is a Holder of less than 5% of the issued and outstanding Old Common Stock, exclusive of any shares of such stock held in treasury. 1.190 "Settling Party" shall mean a signatory to the Veil Piercing Settlement Agreement, including without limitation, all Settling Equityholders and any other persons or entities identified in the Veil Piercing Settlement Agreement as being "Settling Parties" for purposes of the Creditors' Plan, including all Debtors, but excluding all Non-Settling Equityholders. 1.191 "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. 1.192 "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. 1.193 "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. 1.194 "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. 1.195 "Sloss IRB Trustee" shall mean the trustee under the Sloss IRB Indenture. 1.196 "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. 1.197 "State and Local Tax Claims" shall mean Secured Claims and Unsecured Claims of Governmental Units, other than the Federal Government and the Internal Revenue Service, with authority to tax the Debtors. 1.198 "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 Equity Call Option or any right to receive New Common Stock under the Creditors' Plan. 1.199 "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. 1.200 "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 exercise its Subordinated Note Claim Election, the form of which election form shall have been approved by the Court. 1.201 "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. 1.202 "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. 1.203 "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. 1.204 "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. 1.205 "The Celotex Corporation" shall mean The Celotex Corporation, as debtor and debtor-in-possession. 1.206 "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. 1.207 "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. 1.208 "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. 1.209 "Veil Piercing Claimant" shall mean Celotex and any other Person that may have or may assert in the future a Veil Piercing Claim. 1.210 "Veil Piercing Claims" shall mean and be the collective reference to all Claims and all claims that may be asserted in the future based upon, arising out of or in connection with any of the Veil Piercing-Related Issues, but shall not include Allowed Indemnity Claims. 1.211 "Veil Piercing Claims Amount" shall have the meaning set forth in the Veil Piercing Settlement Agreement. 1.212 "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 Released Party based upon, arising out of or in connection with any of the Veil Piercing-Related Issues. 1.213 "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. 1.214 "Veil Piercing Settlement" shall mean the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims, Veil Piercing Proceedings and all claims based upon LBO-Related Issues held by the Veil Piercing Claimants; provided, however, that the Final Order or Final 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 and all Persons with Allowed Indemnity Claims arising from Veil Piercing-Related Issues to the extent of each such Allowed Indemnity Claim, and in full satisfaction thereof with respect to the Veil Piercing-Related Issues. 1.215 "Veil Piercing Settlement Agreement" shall mean and be the collective reference to the agreement, dated April 18, 1994, attached as Exhibit 3A hereto, as the same may be amended from time to time; provided, that the Veil Piercing Settlement Agreement shall mean the Amended and Restated Veil Piercing Settlement Agreement from and after the date, if any, on which the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms. 1.216 "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. 1.217 "Walter Industries" shall mean Walter Industries, Inc., the surviving corporation of the merger between Hillsborough and Old Walter Industries. 1.218 "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. 1.219 "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. 1.220 "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. 1.221 "Working Capital Agents" shall mean the co-agents for the Working Capital Banks under the Working Capital Agreement. 1.222 "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 for legal services rendered prior to the Filing Date, in the amount previously disclosed by the Working Capital Agents to the Bondholder Proponents. 1.223 "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. 1.224 "Working Capital Bank Claim Stub Period Amount" shall have the meaning set forth in Section 1.22(c). 1.225 "Working Capital Bank Claims" shall mean all Claims arising under the Working Capital Agreement, other than Working Capital Agents Claims. 1.226 "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. 1.227 "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 S1D 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 S1G 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 S1I 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 S1T 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-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. Claims 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-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-9BB 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 Veil Piercing Claims. 2.15 Class U-1: Old Walter Industries IRB Claims. Class U-1 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 Jim Walter 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-5X 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: Veil Piercing Claims. Class U-7 Claims shall consist of Veil Piercing Claims. Class U-7A Claims: Hillsborough Veil Piercing Claims. Class U-7A Claims shall consist of all Veil Piercing Claims against Hillsborough. Class U-7B Claims: Best Veil Piercing Claims. Class U-7B Claims shall consist of all Veil Piercing Claims against Best. Class U-7C Claims: Best (Miss.) Veil Piercing Claims. Class U-7C Claims shall consist of all Veil Piercing Claims against Best (Miss.). Class U-7D Claims: Coast to Coast Veil Piercing Claims. Class U-7D Claims shall consist of all Veil Piercing Claims against Coast to Coast. Class U-7E Claims: Computer Holdings Veil Piercing Claims. Class U-7E Claims shall consist of all Veil Piercing Claims against Computer Holdings. Class U-7F Claims: Dixie Veil Piercing Claims. Class U-7F Claims shall consist of all Veil Piercing Claims against Dixie. Class U-7G Claims: Hamer Holdings Veil Piercing Claims. Class U-7G Claims shall consist of all Veil Piercing Claims against Hamer Holdings. Class U-7H Claims: Hamer Properties Veil Piercing Claims. Class U-7H Claims shall consist of all Veil Piercing Claims against Hamer Properties. Class U-7I Claims: Homes Holdings Veil Piercing Claims. Class U-7I Claims shall consist of all Veil Piercing Claims against Homes Holdings. Class U-7J Claims: Computer Services Veil Piercing Claims. Class U-7J Claims shall consist of all Veil Piercing Claims against Computer Services. Class U-7K Claims: Jim Walter Homes Veil Piercing Claims. Class U-7K Claims shall consist of all Veil Piercing Claims against Jim Walter Homes. Class U-7L Claims: JW Insurance Veil Piercing Claims. Class U-7L Claims shall consist of all Veil Piercing Claims against JW Insurance. Class U-7M Claims: Jim Walter Resources Veil Piercing Claims. Class U-7M Claims shall consist of all Veil Piercing Claims against Jim Walter Resources. Class U-7N Claims: Window Components (Wisc.) Veil Piercing Claims. Class U-7N Claims shall consist of all Veil Piercing Claims against Window Components (Wisc.). Class U-7O Claims: JW Aluminum Veil Piercing Claims. Class U-7O Claims shall consist of all Veil Piercing Claims against JW Aluminum. Class U-7P Claims: Resources Holdings Veil Piercing Claims. Class U-7P Claims shall consist of all Veil Piercing Claims against Resources Holdings. Class U-7Q Claims: JWI Holdings Veil Piercing Claims. Class U-7Q Claims shall consist of all Veil Piercing Claims against JWI Holdings. Class U-7R Claims: JW Walter Veil Piercing Claims. Class U-7R Claims shall consist of all Veil Piercing Claims against JW Walter. Class U-7S Claims: Window Components Veil Piercing Claims. Class U-7S Claims shall consist of all Veil Piercing Claims against Window Components. Class U-7T Claims: Land Holdings Veil Piercing Claims. Class U-7T Claims shall consist of all Veil Piercing Claims against Land Holdings. Class U-7U Claims: Mid-State Homes Veil Piercing Claims. Class U-7U Claims shall consist of all Veil Piercing Claims against Mid-State Homes. Class U-7V Claims: Mid-State Holdings Veil Piercing Claims. Class U-7V Claims shall consist of all Veil Piercing Claims against Mid-State Holdings. Class U-7W Claims: Railroad Holdings Veil Piercing Claims. Class U-7W Claims shall consist of all Veil Piercing Claims against Railroad Holdings. Class U-7X Claims: Sloss Veil Piercing Claims. Class U-7X Claims shall consist of all Veil Piercing Claims against Sloss. Class U-7Y Claims: Southern Precision Veil Piercing Claims. Class U-7Y Claims shall consist of all Veil Piercing Claims against Southern Precision. Class U-7Z Claims: United Land Veil Piercing Claims. Class U-7Z Claims shall consist of all Veil Piercing Claims against United Land. Class U-7AA Claims: U.S. Pipe Veil Piercing Claims. Class U-7AA Claims shall consist of all Veil Piercing Claims against U.S. Pipe. Class U-7BB Claims: Pipe Realty Veil Piercing Claims. Class U-7BB Claims shall consist of all Veil Piercing Claims against Pipe Realty. Class U-7CC Claims: Vestal Veil Piercing Claims. Class U-7CC Claims shall consist of all Veil Piercing Claims against Vestal. Class U-7DD Claims: Home Improvement Veil Piercing Claims. Class U-7DD Claims shall consist of all Veil Piercing Claims against Home Improvement. Class U-7EE Claims: Old Walter Industries Veil Piercing Claims. Class U-7EE Claims shall consist of all Veil Piercing Claims against Old Walter Industries. Class U-7FF Claims: Walter Land Veil Piercing Claims. Class U-7FF Claims shall consist of all Veil Piercing Claims against Walter Land. Class U-7GG Claims: JW Resources Veil Piercing Claims. Class U-7GG Claims shall consist of all Veil Piercing 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-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-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-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-3K Claims: Jim Walter Homes Post-Filing Date Intercompany Notes Payable Claims. Class I-3J Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Jim Walter Homes. 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-3BB Claims: Pipe Realty Post-Filing Date Intercompany Notes Payable Claims. Class 1-3BB Claims shall consist of all Post-Filing Date Intercompany Notes Payable Claims against Pipe Realty. 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. 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: 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: 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: 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: 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: 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: 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: 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: Stock Acquisition Rights in Hamer Properties. Class SE-2H Interests shall consist of all Other Secured Claims against Hamer Properties. Class SE-2I Interests: Stock Acquisition Rights in Homes Holding. Class SE-2I Interests shall consist of all Interests of Holders of Stock Acquisition Rights in Homes Holdings. Class SE-2J Interests: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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 CREDITORS' 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, 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 Creditors' 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 Bondholders Committee 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 date of the assessment by the Internal Revenue Service of such Claim, with interest on unpaid amounts from the later of the Effective Date or the date of assessment 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 Bondholders Committee 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 the Bondholders Committee 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 Bondholders Committee 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, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, Class B 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), Class B 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 Bondholders Committee 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 Creditors' 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 Creditors' 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, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, Class B 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), Class B 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 Bondholders Committee 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 Creditors' 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 Creditors' 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 Bondholders Committee 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 Bondholders Committee 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 Bondholders Committee 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) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, such Holder's Pro Rata share of the Class B 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 Class B Common Stock received pursuant to clauses (a) and (b), (i) if such Holder elects 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 (ii) if such Holder does not make such election, an aggregate amount of Cash (if any) and principal amount of New Senior Notes (if any) equal to such difference, with the proportion of Cash and New Senior Notes to be equal with respect to each such Holder that does not make such election, and with the relative amount of Cash and New Senior Notes distributed to all Class S-6 Claims under this clause (b) (ii) to be determined not less than 15 days prior to the Effective Date by the New Board (or, if the New Board has not been appointed by such date, by the Bondholders Committee), in its sole discretion, on or promptly after the Effective Date, unless such Holder and the Bondholders Committee 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 Creditors' 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 Creditors' 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 Bondholders Committee shall have agreed to a less favorable treatment of such Claims. 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 Creditors' 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 Creditors' 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 Creditors' 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 Creditors' 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 Creditors' 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 Creditors' 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, at the sole discretion of the Bondholders Committee, and 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 Bondholders Committee 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 the Bondholders Committee 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 Bondholders Committee 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: (a) 75% of the Allowed Amount of such Claim, on or promptly after the Effective Date, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim; and (b) 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 (a) above, within six (6) months following the payment pursuant to clause (a) above unless such Holder and the Bondholders Committee 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 Bondholders Committee 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 Creditors' Plan and shall be permanently enjoined from enforcing, or attempting to enforce, any such subordination rights. Accordingly, distributions to be made pursuant to the Creditors' 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. 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 Bondholders Committee 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 Creditors' 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 Creditors' 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. 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, the Applicable Consideration allocated on account of such Claim, on or promptly after the Effective Date, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claim. 3.22 Class U-7 Claims: Veil Piercing Claims. Class U-7 Claims are not impaired. 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 (a) the Veil Piercing Claims Amount shall be satisfied by a combination of Qualified Securities and Class B Common Stock, in the proportion described in the following sentence, together having an aggregate principal amount (in the case of Qualified Securities) and New Common Stock Value Per Share (in the case of Class B Common Stock) equal to the Veil Piercing Claims Amount; and (b) if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, 100% of the Senior Claim Differential, or if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, the sum of (i) $75,000,000 and (ii) 100% of the Senior Claim Differential, in each case shall be satisfied by shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such sum (and, if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, all of which shares in this clause (b), except for an amount of shares having an aggregate New Common Stock Value Per Share equal to 50% of the Senior Claim Differential, are subject to assignment to Settling Equityholders as required under the Veil Piercing Settlement Agreement), on or promptly after the Effective Date, unless the Bondholders Committee and the Celotex Settlement Fund Recipient, consistent with the terms of the Veil Piercing Settlement Agreement, shall have agreed to a less favorable treatment of such Claims. The aggregate principal amount of Qualified Securities used to satisfy a portion of the Veil Piercing Claims Amount shall bear the same ratio to the aggregate principal amount of Qualified Securities used to satisfy a portion of the Subordinated Note Claims as $487.5 million (or, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, $450 million) bears to $1,098 million; provided, that if the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, the $487.5 million component of such ratio shall be reduced (but to no lower than $450 million) one dollar for every two dollars in value of Class B Common Stock assigned by the Celotex Settlement Fund Recipient to Settling Equityholders from the $75,000,000 of Class B Common Stock identified in Section 1.20(o)(B)(i) of the Creditors' Plan (for example, if all Holders of Old Common Stock Interests become Settling Equityholders, the ratio will be $450 million to $1,098 million); and the excess of the Veil Piercing Claims Amount over the portion thereof satisfied by Qualified Securities shall be satisfied by that number of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess; provided, however, that in the event that any Holder of an Allowed Old Common Stock Interest exercises an Equity Call Option, (i) the Celotex Settlement Fund Recipient shall receive Cash in an amount equal to the aggregate Cash proceeds received from the exercise of Equity Call Options, multiplied by a fraction, the numerator of which is the number of shares of New Common Stock that would otherwise be issued to the Celotex Settlement Fund Recipient under this Section 3.22, and the denominator of which is the number of shares of New Common Stock to be issued under the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares of New Common Stock that the Celotex Settlement Fund Recipient shall receive under this Section 3.22 shall be reduced by the amount of Cash received under clause (i) of this proviso divided by the New Common Stock Value Per Share. The Veil Piercing Settlement Agreement and the Charter provide that all shares of Class B Common Stock issued to the Celotex Settlement Fund Recipient under the Creditors' Plan (and not assigned to Settling Equityholders under the Veil Piercing Settlement Agreement) 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 Claims, on or promptly after the Effective Date, unless the Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Claims. Upon payment in Cash of the Allowed Amount of the Intercompany IRB Claims, 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 Creditors' 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 Creditors' 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. Each Holder of a Class E-1 Allowed Interest shall receive, in full satisfaction thereof, (i) with respect to each Person that was a Holder of a Class E-1 Allowed Interest on the date on which the order approving the Disclosure Statement is entered and that did not transfer such Interest on or prior to the Effective Date (other than to an Affiliate of Such Person, which Affiliate shall have the right to exercise the Equity Call Option), the nontransferable right (an "Equity Call Option") to purchase all, but not part, of such Holder's Pro Rata share of all of the shares of New Common Stock (each of which shall be shares of Class B Common Stock) that would otherwise be issued on the Effective Date to Classes S-1, S-2, S-6 and U-4 through U-7, at a Cash exercise price per share equal to the New Common Stock Value Per Share (provided that, in calculating the New Common Stock Value Per Share for this purpose, the New Common Stock Value shall be calculated using a going concern enterprise value equal to the greater of (A) the Negotiated Enterprise Value and (B) if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount), such right to be exercisable by properly completing and returning the Equity Call Option Election Form in accordance with the Election Procedure, and by paying the Cash exercise price in full on the Effective Date; and (ii) in the event that there are shares of New Common Stock remaining after giving effect to all distributions to be made to Creditors under the Creditors' Plan (it being understood that no Creditor shall receive on account of an Allowed Claim consideration having a value in excess of that permitted to be paid on account of such Allowed Claim under the Code), such Holder's Pro Rata share of such shares, each of which shall be shares of Class B Common Stock, on or promptly after the Effective Date, unless such Holder and the Bondholders Committee shall have agreed to a less favorable treatment of such Interest. 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 Creditors' 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 Creditors' 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 Creditors' Plan on account of their Class SE-2 Interests. ARTICLE IV MEANS FOR IMPLEMENTATION OF THE CREDITORS' PLAN 4.1 Charter; Common Stock. (a) On or as soon as practicable after 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 Creditors' Plan will be New Common Stock. Except as otherwise expressly provided in the Charter and the Creditors' 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 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 Creditors' 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 Creditors' 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, Grace Street Notes, Subordinated Notes or Interests shall be entitled to any rights or distribution under the Creditors' 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) the applicable Indenture Trustee, (iii) in the case of the Grace Street Notes or Interests in the Old Common Stock, Walter Industries, or (iv) 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 Creditors' Plan, (i) the applicable Bank Agent, (ii) the applicable Indenture Trustee (or, in the case of the Subordinated Note Claims, the disbursing agent selected by the Bondholder Proponents), (iii) Walter Industries or (iv) Sloss, as the case may be, shall make the distributions provided for in Sections 4.5 and 4.6 of the Creditors' Plan in accordance with Article III of the Creditors' 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 or the Indenture Trustee (or, in the case of the Subordinated Note Claims, the disbursing agent selected by the Bondholder Proponents) for the account of such Holder as required by Section 4.5 of the Creditors' Plan, such Holder shall have no rights under the debt and/or equity securities to be received by such Holder under the Creditors' Plan. (e) Notwithstanding any other provision of the Creditors' Plan, no Holder of a Secured Claim who is to receive a distribution under the Creditors' 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 Indenture, except that the applicable Bank Agent or Indenture Trustee shall be entitled to assert any charging liens to which it may be entitled under such Agreement or Indenture. 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 a global certificate representing the New Senior Notes to be delivered in accordance with Section 3.11 hereof; (c) to the disbursing a gent selected by the Bondholder Proponents, 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; (d) to the Series B & C Senior Note Trustee on behalf of the Holders of Allowed Claims in Class S-6, Cash and, if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, certificates representing Class B Common Stock in accordance with Section 3.11 hereof (it being understood that nothing in the Creditors' 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 Class B Common Stock in accordance with Section 3.22 hereof; (f) to the Holders of Class E-1 Interests, certificates representing Class B Common Stock, if any, in accordance with Section 3.26 hereof; and (g) to the Holders of Revolving Credit Bank Claims and Working Capital Bank Claims if the Amended and Restated Veil Piercing Settlement Agreement becomes effective by its terms, certificates representing Class B 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 Creditors' 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 Creditors' Plan or by any applicable agreement, any Cash payment to be made by or on behalf of any Debtor pursuant to the Creditors' 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 Creditors' 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. Fractional shares of New Common Stock will not be issued or distributed. Instead, fractional amounts (calculated to six decimal places) will be rounded up or down to the nearest whole share, with fractional amounts equal to .500000 being rounded up. 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 Cooperation by Debtors. Each of the Debtors shall grant its full and prompt cooperation to the Proponents, at the direction of the Bondholders Committee, in any matter directly or indirectly relating to the prompt and complete effectuation of any provision of the Creditors' Plan, and shall take such actions in connection therewith as shall be reasonably requested by the Bondholders Committee. 4.10 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 Creditors' 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 Creditors' Plan. 4.11 Estimated Claims Order(s). On or before the Confirmation Date, the Proponents shall make an application to the Court for an Estimated Claims Order, which shall estimate the aggregate amount of Disputed Claims that are Federal Income Tax Claims for purposes of determining whether the condition in Section 10.1(d) has been satisfied. 4.12 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. 4.13 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) that property 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., Cash, other Qualified Securities, New Common Stock and/or New Senior Notes), or such other property as the Holder of such Disputed Claim and the Bondholders Committee (prior to the Effective Date) or Walter Industries (on and after the Effective Date) may agree upon, 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 4.15 of the Creditors' Plan. 4.14 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. 4.15 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. 4.16 Bar Date for Fee Claims. Unless an earlier or later time is set by Final Order of the Court, all Fee Applications for final allowance of compensation and reimbursement of expenses shall be filed within thirty (30) days after the Confirmation Date. At least thirty (30) days prior to the first day of the hearing on confirmation of the Creditors' Plan (the "First Hearing Day"), or such later time as the Court may by order approve, each Professional Person referred to in, or requesting compensation pursuant to, a Fee Claim shall have Filed with the Court a non-binding estimate of the maximum amount of allowance of compensation and reimbursement of expenses to be requested in the Chapter 11 Cases (including any compensation to be sought under Sections 503(b) or 1129(a)(4) of the Code), for the period from the Filing Date through the First Hearing Day. 4.17 Unclaimed Property. Subject to Section 4.19 hereof, in accordance with Section 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 Creditors' 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 the disbursing agent selected by the Bondholder Proponents for absence of a mailing address shall be returned to and revested in Walter Industries. 4.18 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 Creditors' 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. 4.19 Returned Distributions. If a distribution to any Holder of an Allowed Claim or Interest made pursuant to the Creditors' Plan is returned to the applicable Bank Agent or Indenture Trustee or the disbursing agent selected by the Bondholder Proponents 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 or the disbursing agent selected by the Bondholder Proponents 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 Creditors' Plan. 4.20 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. 4.21 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 Creditors' Plan, and to perform any other act, including the satisfaction of any Lien, that is necessary for the Confirmation of the Creditors' Plan, pursuant to Section 1142(b) of the Code. 4.22 "Promptly After the Effective Date. "The term "promptly after the Effective Date" as used in the Creditors' 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, if applicable. ARTICLE V MANAGEMENT OF WALTER INDUSTRIES 5.1 Corporate Governance; Directors and Officers. Except where otherwise expressly provided in the Creditors' 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 Boards of Directors of Debtors. On the Confirmation Date, the Board of Directors of each Debtor shall be replaced by a New Board of Directors (each a "New Board" and together the "New Boards"), each consisting of eleven (11) Directors. Each New Board shall consist of the persons identified by the Proponents at least thirty (30) days prior to the date of the confirmation hearing on the Creditors' Plan, which persons shall include 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; and (iii) Kenneth J. Matlock, the present Executive Vice President, Chief Financial Officer and Director of Walter Industries. In the event that the Confirmation Order does not provide for or allow the replacement of the Board of Directors of each Debtor with a New Board on or about the Confirmation Date, then the Confirmation Order shall direct the Board of Directors of each Debtor to take the actions that the New Boards would be required to take under Section 5.3 of the Creditors' Plan and under the other provisions of the Creditors' Plan, except where another Person is expressly authorized under the Creditors' Plan to act in the stead of a New Board if it has not yet been constituted and except that the Confirmation Order shall also appoint the Bondholders Committee as the representative of Walter Industries under Section 303 of the Delaware General Corporation Law with the full power and authority to establish the amount and the terms, conditions, rights and benefits of the Qualified Securities and the New Senior Notes to be issued under the Creditors' Plan and to take such other actions as may be required to or as may facilitate the consummation of the Creditors' Plan. 5.3 Certain Duties of New Boards. In addition to the other duties of each New Board not inconsistent with this Section 5.3 under applicable law and the applicable articles of incorporation and bylaws of each Debtor, each New Board shall cause its Debtor to be managed and operated in a manner calculated to (i) maximize the value of the Debtor, and (ii) raise Cash from operations or other commercially reasonable sources, create Qualified Securities in accordance with customary industry practice, and take such other actions to facilitate consummation of the Creditors' Plan. 5.4 Management Stock; New Incentive Plans. As of the Effective Date, a number of shares of Class B 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 Creditors' Plan shall be reserved for issuance and delivery, from time to time, in the discretion of the New Board of Directors of Walter Industries 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 of Walter Industries (or if the New Board is not yet appointed, by the Bondholders Committee). Such incentive agreements and/or plans may also provide for the granting of restricted stock rights, stock appreciation rights or other incentive awards. 5.5 Funding of Retiree Health Benefits. On the Effective Date, Walter Industries shall set aside, in a trust, pre-funded insurance program or other appropriate vehicle, funds sufficient to provide reasonable assurance (on an actuarial basis in the judgment of the New Board of Directors of Walter Industries) of the continued funding of medical benefits, under the post-retirement medical benefit plan of Walter Industries 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 following the dissolution of Walter Industries, divestiture of its operating subsidiaries or other event which would render Walter Industries unable to continue the current funding of such benefits. 5.6 Confirmation Bonus Awards. Prior to the Effective Date, the New Boards (or if the New Boards have not been appointed as of the Confirmation Date, the Bondholders Committee) may, in their (or its) sole discretion, prepare a schedule of Cash bonuses 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. To the extent that Court approval is necessary under Section 1129(a) of the Code, such approval will be obtained. 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: (i) that accept any property or New Common Stock to be distributed to or for the benefit of a Holder of any Claims, or with respect to a Holder of Interests, that exercises its Equity Call Option, pursuant to Article III of the Creditors' Plan and in consideration therefor; (ii) in a Class that accepts the Creditors' Plan; or (iii) that mark 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 such release (the text of which release shall be set forth in full on such ballot) (and all trustees and/or agents on behalf of such Holder) shall be deemed to have released, to the extent permitted by the Court, (A) the Settling Parties (other than Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), the Proponents, 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 Holders of Allowed Indemnity Claims (to the extent of such Claims), 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, shareholders, employees, agents, advisors, predecessors in interest and representatives of all of the foregoing (other than any (x) Holders or former Holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex's or Jim Walter Corporation's or any of the Debtors' respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives, and Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), in each case in such Person's capacity as a Holder of a Claim or Interest, as a plan proponent, if applicable, as a shareholder of any Debtor, or any other capacity (including, with respect to the Bondholder Proponents, any action or inaction related to or set forth in the definition of Qualified Securities herein) (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a Holder or former Holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex/JWC Released Party) and (B) the holders of Allowed Indemnity Claims that are not parties to the Veil Piercing Settlement Agreement, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively, the Persons described in (A) and (B) are referred to herein, in such capacities, as the "Released Parties"), of and from any and all Claims, obligations, rights, causes of action and liabilities (other than the right to enforce the Debtors' obligations under the Creditors' 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 on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Creditors' 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 Creditors' Plan), whether known or unknown, foreseen or unforeseen, then existing or thereafter arising, which are based in whole or in part upon 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, that such causes of action shall be preserved to the extent not based upon Veil Piercing-Related Issues or LBO-Related Issues, for purposes of setoff in respect of any Disputed Claim. 6.3 Dismissal of Lawsuits. 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, 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. 6.4 Indemnification. The articles of incorporation and/or the bylaws of Walter Industries and each of the Debtors shall provide that Walter Industries and each of the Debtors shall indemnify, hold harmless and reimburse its present and former officers and directors from and against any and all losses, claims, damages, fees, expenses, liabilities and actions to the extent that such Persons were the beneficiary of an indemnity giving rise to an Allowed Indemnity Claim and pursuant to the terms of such indemnity. All rights of the Persons indemnified pursuant hereto shall survive Confirmation of the Creditors' Plan and shall not be discharged pursuant to Section 1141 of the Code. The Debtors may confirm any such contractual indemnification by contract, resolution or otherwise as they may deem appropriate. ARTICLE VII ENTERPRISE VALUE 7.1 Enterprise Value. Except as expressly provided in the definition of New Common Stock Value herein, the Negotiated Enterprise Value shall be used for all purposes of the Creditors' 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 9 attached hereto are expressly rejected under the Creditors' Plan, without admitting that any of the items listed on Exhibit 9 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 Creditors' 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 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. 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 Creditors' Plan; (e) To enter and implement such orders as may be appropriate in the event implementation of the Confirmation Order or Creditors' 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 Creditors' 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 Creditors' Plan, Disclosure Statement or Confirmation Order, in such manner as may be necessary to carry out the purposes and effects of the Creditors' Plan); (h) To enforce and to hear and determine disputes arising in connection with the Creditors' Plan or its implementation, including disputes among Holders and disputes arising under the Reorganization Documents, the Veil Piercing Settlement Agreement, the Pre-LBO Bondholders Settlement Agreement, or any other agreements, documents or instruments executed in connection with the Creditors' Plan; (i) To construe and to take any action to enforce the Creditors' Plan, Reorganization Documents and Confirmation Order, and issue such orders as may be necessary for the implementation, execution and consummation of the Creditors' Plan and the execution, delivery and performance of the Reorganization Documents; (j) To construe and to take any action to enforce the 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 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) 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 Creditors' 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 December 31, 1994 (this condition may be waived solely by the Bondholders Committee); (b) Either (i) the Court shall have entered an order finding (A) Jim Walter Resources not in default under any covenant contained in the amended agreement, effective January 1, 1979, between Jim Walter Resources and Alabama Power Company and (B) Jim Walter Resources, after giving effect to the Creditors' Plan, is in compliance with applicable covenants and required financial conditions in the amended agreement, effective January 1, 1979, between Jim Walter Resources and Alabama Power Company, or (ii) the disputed issues between Jim Walter Resources and Alabama Power Company shall have been settled on terms acceptable to the Bondholders Committee and the Court shall have entered an order approving such settlement (this condition may be waived solely by the Bondholders Committee); (c) The Court shall have entered an order approving the Veil Piercing Settlement and the Veil Piercing Settlement Agreement, and 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 (this condition may be waived solely by the Bondholders Committee); (d) 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 (this condition may be waived solely by the Bondholders Committee); and (e) 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 this Creditors' Plan to the Confirmation Date (this condition may be waived solely by the Bondholders Committee). 10.2 Conditions to Effectiveness. Notwithstanding any other provision of the Creditors' Plan or the Confirmation Order, the Effective Date of the Creditors' 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 Bondholders Committee); (b) All conditions precedent set forth in the Veil Piercing Settlement Agreement shall have been satisfied or waived (as provided therein); (c) The orders described in Sections 10.1(b) and 10.1(c) of the Creditors' Plan shall each have become a Final Order (this condition may be waived solely by the Bondholders Committee); (d) The Debtors shall have consideration sufficient to make all distributions required by the Creditors' Plan; (e) Qualified Securities having an aggregate principal amount of not less than $700 million shall be available for distribution to Classes U-4, U-5, U-6 and U-7 under the Creditors' Plan (this condition may be waived solely by the Bondholder Proponents); (f) The Reorganization Documents shall have been executed and delivered by all of the parties thereto and the Court shall have entered a Final Order approving the Reorganization Documents (this condition may be waived solely by the Bondholders Committee); (g) Mid-State Homes shall have obtained the Mid-State Homes Warehouse Credit Facility (this condition may be waived solely by the Bondholders Committee); (h) 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 this Creditors' Plan to the Effective Date (this condition may be waived solely by the Bondholders Committee); provided, that any such determination by the Bondholders Committee shall not be effective unless written notice thereof is given to the Court, the Debtors, the other Proponents, the Bank Agents and the Series B & C Senior Note Trustee with an opportunity for any of such persons to request, within 10 days after receipt of such notice, that a hearing be held to consider whether such determination constitutes an abuse of discretion; (i) All conditions to effectiveness of each of the Reorganization Documents (other than conditions relating to payment of money or the issuance of debt securities or New Common Stock on the Effective Date or conditions that the Effective Date shall have occurred or whose fulfillment would require the Effective Date to have occurred) shall have been satisfied (or waived by the applicable Persons); and (j) The Charter shall have been filed with the Secretary of State of the State of Delaware. ARTICLE XI CRAM DOWN 11.1 Cram Down. If all of the applicable requirements for Confirmation of the Creditors' 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 Creditors' Plan pursuant to Section 1129(b) of the Code, notwithstanding the requirements of subsection (8) thereof, on the basis that, among other things, the Creditors' 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 Creditors' 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 Creditors' Plan and 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 Creditors' Plan, the Confirmation Order, the Reorganization Documents and the Liens and security interests granted pursuant to the Creditors' Plan or any of the Reorganization Documents. Except as otherwise provided in the Creditors' 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(11) 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 Creditors' Plan shall be deemed to waive, limit or restrict in any way the discharge granted upon Confirmation of the Creditors' 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 Creditors' 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 of the Released Parties with respect to such Claims, Demands or Interests (other than actions brought to enforce any rights or obligations under the Creditors' 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 of the Released Parties or any direct or indirect successor in interest to any of the Released Parties, or any Assets 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 of the Released Parties or any direct or indirect successor in interest to any of the Released Parties or any Assets 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 of the Released Parties or any direct or indirect successor in interest to any of the Released Parties, or any Assets of any such transferee or successor other than as contemplated by the Creditors' 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 of the Released Parties, or any direct or indirect transferee of any Assets 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 Creditors' Plan or any of the Reorganization Documents. 12.4 Effectiveness and Enforcement of Settlement Agreements. On and after the Effective Date, the terms of the Veil Piercing Settlement Agreement and the Pre-LBO Bondholders Settlement Agreement and the settlements contained in the Creditors' Plan with respect to 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 the Creditors' 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 Veil Piercing Claims. ARTICLE XIII MISCELLANEOUS PROVISIONS 13.1 Revocation. The Proponents reserve the right to revoke and withdraw the Creditors' Plan prior to the Confirmation Date. If the Proponents revoke or withdraw the Creditors' Plan, then the Creditors' 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 Creditors' Plan may be amended, modified or supplemented by (a) all of the Proponents or (b) the Bondholder Proponents or (c) any one or more of the Proponents other than as provided in the proceeding 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 all of the Proponents or the Bondholder Proponents or any Debtor 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 Creditors' 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 setoff 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 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 Creditors' 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 Creditors' Plan (including, without limitation, Section 3.26 hereof), or otherwise permitted to be paid by the Court, 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 Creditors' Plan, post-Filing Date interest allowed on any Claim shall be simple interest and not compounded for any period. 13.5 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. 13.6 Post Confirmation Effect of Evidences of Claims or Interests. Except as otherwise provided in the Creditors' 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 Creditors' Plan. 13.7 Official Committees. The Official Committees shall continue in existence until the Effective Date for the principal purpose of overseeing the implementation of the Creditors' 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. 13.8 Construction. The rules of construction set forth in Section 102 of the Code shall apply to the construction of the Creditors' Plan. 13.9 Time. In computing any period of time prescribed or allowed by this Creditors' 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. 13.10 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. 13.11 Governing Law. Except to the extent the Code or Bankruptcy Rules are applicable, the rights and obligations arising under this Creditors' 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. 13.12 Headings. The headings of the Articles, paragraphs, and sections of this Creditors' Plan are inserted for convenience only and shall not affect the interpretation hereof. 13.13 Notice of Effectiveness. Upon the satisfaction of all of the conditions to the Effectiveness of the Creditors' 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). 13.14 Notices. All notices, requests or demands in connection with this Creditors' 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 Robert H. Falk, Esq. 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. 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. 13.15 Not Admissible. This Creditors' Plan shall not be admissible in any proceedings involving the Proponents or any of them for any purpose, nor shall it be deemed as an admission or waiver of any Proponent for any purpose. 13.16 Successors and Assigns. The rights, benefits and obligations of any Person named or referred to in the Creditors' Plan will be binding upon, and will inure to the benefit of, the heir, executor, administrator, representative, successor or assign of such Person. Dated: August 1, 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 D. Drain Robert D. Drain, Esq. 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/ Ellen R. Werther Ellen R. Werther, Esq. 65 East 55th Street, 33rd Floor New York, New York 10022 (212) 872-1010 For Apollo MARCUS MONTGOMERY WOLFSON P.C. By: /s/ Sara L. Chenetz Peter D. Wolfson, Esq. Sara L. Chenetz, Esq. 53 Wall Street New York, New York 10005 (212) 858-5200 For Ad Hoc Committee of Pre-LBO Bondholders 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, consisting of million shares of Class A Common Stock and million shares of Class B Common Stock. The Corporation shall not issue any non-voting capital stock. Except as expressly provided in Section 5 below, the rights, privileges and powers of the Class A Common Stock and the Class B Common Stock shall be identical, and shall vote together as a single class on all matters as to which both classes are entitled to vote. 5. Voting. Except as otherwise required by law or this Restated Certificate of Incorporation, the voting power attributable to the holders of the Class A Common Stock and the Class B Common Stock shall be as follows: (a) each record holder of Class A Common Stock shall be entitled to five votes for each share of Class A Common Stock standing in his name on the books of the Corporation and entitled to vote; (b) each record holder of Class B Common Stock shall be entitled to one vote for each share of Class B Common Stock standing in his name on the books of the Corporation and entitled to vote; (c) holders of Class B Common Stock that are Veil Piercing Claimants or representatives of Veil Piercing Claimants shall be entitled to vote their shares of Class B Common Stock in the Veil Piercing Trust only in the same percentages of votes as the shares of the Class A Common Stock and the other shares of Class B Common Stock are voted; and (d) holders of Class A Common Stock and holders of Class B Common Stock shall in all matters vote together as a single class, except as provided herein. 6. Conversion of Class A Common Stock. (a) Immediately prior to the transfer of one or more shares of Class A Common Stock by the holder thereof, whether by sale, exchange, gift or operation of law, other than any such transfer by an original recipient of Class A Common Stock under the Plan to an affiliate of such original recipient, each share of Class A Common Stock so transferred shall automatically, without further action by any such holder of the Class A Common Stock or by the Corporation, be converted into one share of Class B Common Stock. Immediately upon the earlier to occur of (a) the date on which the aggregate number of shares of Class A Common Stock held by AIF II, L.P., accounts managed or controlled by any affiliate of AIF II, L.P., Lehman Brothers Inc. or any affiliate of any of the foregoing is less than 8% of the then outstanding number of shares of Class A Common Stock and Class B Common Stock, and (b) the seventh anniversary of the date of consummation of the Plan (as defined below), all outstanding shares of Class A Common Stock shall automatically convert into shares of Class B Common Stock on a one-for-one basis. Upon and after the date of such conversion (the "Conversion Date"), each holder of record of any outstanding certificate or certificates theretofore representing shares of Class A Common Stock so transferred may surrender the same to the Secretary of the Corporation and such holder shall be entitled to receive in exchange therefor a certificate or certificates representing the number of shares of Class B Common Stock into which the shares theretofore represented by the certificate or certificates so surrendered shall have been converted as aforesaid. Until so surrendered, each outstanding certificate which, prior to the Conversion Date, represented shares of Class A Common Stock shall be deemed for all corporate purposes to represent the ownership of the number of shares of Class B Common Stock into which such shares of Class A Common Stock have been so converted. The Corporation shall pay any documentary, stamp or similar issue or transfer tax due in connection with such conversion or on the issue of certificates for Class B Common Stock in connection with such conversion. The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Class B Common Stock and issued Class B Common Stock held in its treasury, solely for the purpose of effecting the conversion of the shares of Class A Common Stock, the full number of shares of Class B Common Stock then issuable upon the conversion of all outstanding shares of Class A Common Stock. As used in this section, an "affiliate" of a person or entity means any person or entity that controls, is under common control with, or is controlled by, such other person or entity. As used in this section the term "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the controlled person or entity, and the term "person" means legal entities, including any partnership, corporation or trust. In the event the Corporation shall in any manner subdivide (by stock split, stock dividend or otherwise) or combine (by reverse stock split or otherwise) the number of outstanding shares of Class A Common Stock or Class B Common Stock prior to a conversion of Class A Common Stock into Class B Common Stock, then the holders of the Class A Common Stock to be so converted shall be entitled to receive in exchange therefore as herein provided a certificate or certificates representing the number of shares of Class B Common Stock to which such holders would have been entitled to receive had the conversion occurred prior to such subdivision or combination. 7. Prohibited Action by Corporation Relating to Common Stock. (a) So long as any shares of Class B Common Stock remain outstanding, the Corporation shall not without the affirmative vote at a meeting or the written consent without a meeting of the holders of at least 66 2/3% in number of shares of Class B Common Stock then outstanding, excluding any holder of Class B Common Stock that also is a holder of Class A Common Stock, adopt any amendment to its Certificate of Incorporation, enact any bylaw or amend, modify or alter the Plan in any material respect which would (i) alter or change the powers or rights of the Class B Common Stock in each case so as to affect them adversely, or (ii) alter or change the powers or rights of the Class A Common Stock so as to benefit the holders of Class A Common Stock in such capacity. (b) So long as any shares of Class A Common Stock remain outstanding, the Corporation shall not, without the affirmative vote at a meeting or the written consent without a meeting of the holders of at least 66 2/3% in number of shares of Class B Common Stock then outstanding, excluding any holder of Class B Common Stock that also is a holder of Class A Common Stock, take any action that enables any holder of shares of Class A Common Stock to enter into a transaction with any other holder of Class A Common Stock (or any affiliate thereof) which would (i) alter or change the powers or rights of the Class B Common Stock so as to affect them adversely, or (ii) alter or change the powers or rights of the Class A Common Stock so as to benefit the holders of Class A Common Stock in such capacity. (c) So long as no holder of shares of Class A Common Stock has entered into a transaction of the type described in subsection (b) above, nothing in this Restated Certificate of Incorporation or in any bylaw enacted by the Corporation shall (x) prohibit such holder of shares of Class A Common Stock from entering into any transaction affecting the conversion of such shares to shares of Class B Common Stock as provided herein for the sale or transfer of such shares of Class B Common Stock to any person or (y) limit in any respect the value of the consideration any Class A Common Stock holder is permitted to receive for the sale or transfer of such Class B Common Stock. 8. 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. 9. 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. 10. The Corporation shall indemnify the Corporation's present and former directors and officers and their heirs, executors and administrators to the fullest extent permitted by applicable law, regardless of whether the event occurred or occurs, the alleged liability arose or arises, or the claim is asserted before or after consummation of the Plan of Reorganization (the "Plan") in the Proceeding of the Corporation (Case No. 89-9715-8P1 in the United States Bankruptcy Court, Middle District of Florida, Tampa Division) under Chapter 11 of the United States Bankruptcy Code; provided, however, that the Corporation shall only indemnify its present and former directors and officers and their heirs, executors and administrators for alleged liabilities which arose on or prior to the consummation of the Plan in accordance and to the extent of any Allowed Indemnity Claim (as defined in the Plan) of any such present and former director or officer. 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. Principal Amount Up to an aggregate of approximately $325 million (Assuming 12/31/94 Effective Date). Maturity 5 years. Rate An interest rate per annum such that the conditions to qualification as New Senior Notes, as that term is defined in the Creditors' Plan, are met. Security Secured 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 and to the Proponents). Interest Payment Dates Semi-annually, interest paid in cash in arrears, on and . Optional Redemption The 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 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. 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 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 Issuer 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 (i) default in the payment of principal on any New Senior Notes when the same becomes due and payable; (ii) 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; (iii) the Company defaults in the performance of or breaches any other covenant or 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) there occurs with respect to 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, an event of default that has caused the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity and such indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration; (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, 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 Creditors' Plan regarding the treatment of Series B & C Senior Note Claims. EXHIBIT 3A: VEIL PIERCING SETTLEMENT AGREEMENT EXHIBIT 3A VEIL PIERCING SETTLEMENT AGREEMENT THIS AGREEMENT (as the same may be amended, modified or supplemented from time to time, the "Agreement") is made and entered into as of the 18th day of April, 1994, by and among (a) Certain asbestos victim defendants ("AVDs") named as defendants in Adversary Proceeding No. 90-0003 and Adversary Proceeding No. 90-0004 (the "Adversary Proceedings"), and represented in the Adversary Proceedings by Caplin & Drysdale, Chartered ("Caplin & Drysdale"), pending the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Court"), in the Chapter 11 cases of Hillsborough Holdings Corporation, Walter Industries, Inc. and other debtors (collectively, the "Debtors") in their administratively consolidated Case No. 89-9715-8P1; (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 Bodily Injury Claimants Committee and the Celotex Asbestos Property Damage Claimants Committee are collectively referred to herein as the "Official Celotex Committees"); (d) Jim Walter Corporation (including its subsidiaries other than The Celotex Corporation and its subsidiaries, collectively referred to as "JWC"), a defendant in the Adversary Proceedings; (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"; the HHC Official Committees and the Bondholder Proponents are collectively referred to herein as the "Plan Proponents"); and (f) the Settling Equityholders (as defined herein), if any (all of the foregoing are referred to herein collectively as the "Parties" and singularly 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 Celotex 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 that 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 Celotex; (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 Celotex; 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 Veil Piercing Claims (as defined herein) against the Debtors and JWC in various forums; and WHEREAS, The Celotex Corporation, as a debtor-in-possession, has asserted that (a) it has the exclusive right and standing to assert Veil Piercing Claims (as defined herein) against the Debtors and JWC for the benefit of its estate and 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 Claimants' Attorneys are authorized to act as the negotiating group for the law firms listed on Exhibit A attached hereto, and the law firms which have assented and will in the future assent to this Agreement by executing Exhibit D attached hereto, all of which represent persons and entities that have asserted or may assert Veil Piercing 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 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, this Agreement constitutes such definitive agreement; and WHEREAS, on December 16, 1993, the Plan Proponents 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 this Agreement; and WHEREAS, the Term Sheet contemplates, and the Original Creditor Plan embodies, 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 Veil Piercing Claims on the basis of (a) the "Negotiated Enterprise Value" of $2,525,000,000 and (b) the fractions set forth in Section 2(a) herein; it being understood that the Negotiated Enterprise Value represents a good faith estimate of the going concern enterprise value of the Debtors (as defined herein) on a consolidated basis, arrived at after extensive analysis by the Plan Proponents, and taking into account the possibility of delay between the Confirmation Date (as defined herein) and the 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 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 Claims (as defined herein); and WHEREAS, the Parties are mutually desirous of settling with finality, compromising, extinguishing, releasing and discharging any and all View Piercing Claims, specifically including those Veil Piercing Claims which are the subject of the Adversary Proceedings; 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 (as defined herein) and the Settling Equityholders (as defined herein), if any, and that, inter alia, 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 WHEREAS, the Parties desire to set forth their respective agreements, rights, duties and obligations in the form of this Agreement, all on the terms and subject to the conditions set forth herein. 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 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 View Piercing Claims and all claims held by the View 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 and Class B Common Stock under the Plan (the "Settlement Fund") to the Celotex Settlement Fund Recipient, as follows: (i) Allowed Amount of the Veil Piercing Claims. The allowed amount of the Veil Piercing Claims shall be equal to the sum of (A) the Veil Piercing Claims Amount (which is $450 million, as the same may be increased or decreased pursuant to this Section 2(a)) plus $75 million and (B) the Senior Claim Differential, if any, subject to the following: (x) the assignment to the Settling Equityholders, if any, on a pro rata basis of the right to receive their pro rata share of $75 million plus 50% of the Senior Claim Differential, if any, pursuant to Section 6 herein; and (y) in the event that the actual amount of distributions under the Plan in respect of the Subordinated Note Claims is different than $1098 million, then the Veil Piercing Claims Amount shall be calculated as follows: Actual amount of distributions in respect of Subordinated Note Claims X 450 million ----------------------------------- $1098 million For purposes of the fraction used in this clause (i) , 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 New Common Stock. (ii) Consideration Used to Satisfy the Veil Piercing Claims. The Veil Piercing Claims shall be paid and satisfied by the distribution of a combination of Qualified Securities and Class B Common Stock to the Celotex Settlement Fund Recipient. The amount of Qualified Securities to be so distributed under the Plan in respect of View Piercing Claims shall be calculated as follows: $450 million + $37.5 million ----------------------------- $1098 million + $450 million + $37.5 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; provided, that if any holder of an Allowed Old Common Stock Interest becomes a Settling Equityholder hereunder, then the numerator and denominator in the foregoing fraction shall each be reduced by $1 for each $2 of Class B Common Stock assigned to Settling Equityholders under clause (i) of Section 6(a) herein (it being further provided that in no event shall the numerator in the foregoing fraction be less than $450 million or the denominator less than $1548 million). The amount of Veil Piercing 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 Veil Piercing Claims. The excess of the allowed amount of Veil Piercing Claims over the part thereof paid, and settled, released and discharged, by Qualified Securities shall be paid, and settled, satisfied, released and discharged, by shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess. (iii) Examples. The following examples are 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, and assuming that 100% of the holders of the Allowed Old Common Stock Interests become Settling Equityholders, then (a) the aggregate allowed amount of the Veil Piercing Claims would consist of (i) the Veil Piercing Claims Amount (that is, $450 million), (ii) $75 million (all of which $75 million would be required to be assigned pursuant to Section 6 herein), plus (iii) the Senior Claim Differential, if any (50% of which would be required to be assigned pursuant to Section 6 herein), and (b) such allowed amount would be settled, satisfied, released and discharged, by the distribution of 450/1548 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, 450/1548 of such total, or $203,488,372, would be paid in Qualified Securities in respect of Veil Piercing Claims), and the distribution, in respect of the remainder of the allowed amount of the Veil Piercing Claims, of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such remainder. If, in the foregoing example, none of the holders of Allowed Old Common Stock Interests become Settling Equityholders, then (a) the aggregate allowed amount of the Veil Piercing Claims would consist of (i) the Veil Piercing Claims Amount (that is, $450 million), plus (ii) $75 million, plus (iii) the Senior Claim Differential, if any, and (b) such allowed amount would be settled, satisfied, released and discharged, by the distribution of 487.5/1585.5 of the aggregate 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, 487.5/1585.5 of such total, or $215,231,788, would be paid in Qualified Securities in respect of Veil Piercing Claims), and the distribution, in respect of the remainder of the allowed amount of the Veil Piercing Claims, of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such remainder. (b) "Plan" Defined. The term "Plan", as used in this Agreement, shall mean any plan(s) of reorganization filed in the Chapter 11 Cases as to which the Bondholder Proponents are proponents and that does not contravene the terms and conditions of this Agreement (subject to Section 2(c) herein); and the definition of the term "Plan" shall include, without limitation, the Original Creditor Plan, as amended to incorporate this Agreement; provided, that the term "Plan" shall not include a plan of reorganization (other than the Original Creditor Plan) or an amendment to or modification of a plan of reorganization unless (i) 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 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 ten (10) days prior to filing thereof with the Court, and (ii) in the event that such plan of reorganization, amendment or modification contravenes the terms and conditions of this Agreement, such plan of reorganization, amendment or modification is consented to by the Veil Piercing Claimants' Representatives, The Celotex Corporation, the Celotex Asbestos Property Damage Claimants Committee and the Celotex Asbestos Bodily Injury Claimants Committee, provided that the rights of such Party or the Veil Piercing Claimants represented by such Party under this Agreement are contravened by such plan of reorganization, amendment or modification; 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. Neither the confirmation nor the effectiveness of the Plan shall be conditioned upon the confirmation or effectiveness of a plan of reorganization in any proceedings pursuant to the Code other than the Chapter 11 Cases. (c) Nothing in this Agreement shall impair in any way the ability of the Plan Proponents 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) herein. (d) The Plan shall provide for a registration rights agreement substantially in the form of Exhibit B attached hereto, which shall provide, among other things, for the registration of all of the Qualified Securities and New Common Stock for sale promptly after the 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 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 Effective Date, substantially in the form of Exhibit C 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 sell shares of Class B Common Stock to a non-Affiliate other than on a national securities exchange or 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 C to participate in such sale 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 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 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 Veil Piercing Claims and all claims and causes of action based on the LBO-Related Issues, this settlement shall be conditioned on the satisfaction (or waiver or modification by the Bondholder Proponents and by such other Parties, if any, as specified below) 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 any Party whose rights under this Agreement would be contravened by such waiver or modification) specifically contain (i) all releases and injunctions necessary and appropriate to realize the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims against any and all of the Released Parties, the form and substance of which to be acceptable to the Bondholder Proponents, whether or not all the Veil Piercing Claims are known to or knowable by the Veil Piercing Claimants. The settlement, satisfaction, release and discharge of the Veil Piercing Claims against the Released Parties will become effective as to each Veil Piercing Claim, whether or not the Veil Piercing Claim constituted an allowed claim in the Chapter 11 Cases or the Celotex Chapter 11 Case and whether or not the holder of the Veil Piercing Claim received actual notice of the Plan and the proceedings for approval of the Plan and entry of the Confirmation Order. In addition, the entry of the Confirmation Order will operate as (i) a general resolution with prejudice of all pending legal proceedings that may be asserted against any or all of the Released Parties based upon, arising out of or in connection with the Veil Piercing-Related Issues as well as any such proceeding not yet instituted that may be asserted against any or all of the Released Parties; (ii) a determination that all Veil Piercing Claims shall channel, transfer and attach to the Settlement Fund; (iii) a provision retaining continuing jurisdiction by the Court to enforce the provisions of the Confirmation Order; (iv) a provision that the Settlement Fund shall be administered by, and subject to the jurisdiction of, the Celotex Bankruptcy Court; and (v) a provision enjoining 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 any appellate court of competent jurisdiction for the sole purpose of such court's review of the settlement embodied in this Agreement and the Confirmation Order). (b) The Confirmation Order shall have become a Final Order; (c) Entry by the Court of a Final Order allowing the Celotex Proof of Claims and/or any Veil Piercing Proof of Claims; and (d) "Finality" shall have been realized with respect to the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims. For purposes of this Agreement, "Finality" shall be deemed to have realized when all of the following conditions shall have been satisfied (subject to the provisos set forth below): (i) The Confirmation Order and the Plan shall provide for the release of (A) the Parties (other than JWC and The Celotex Corporation and its subsidiaries) and the Debtors, and each of their respective present and former parents, subsidiaries, Affiliates, directors, officers, partners, shareholders, employees, agents, advisors and representatives (other than any (x) holders or former holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex' or JWC's respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives and (z) JWC and The Celotex Corporation and its subsidiaries); 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 a shareholder of any Debtor, or any other capacity (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a holder or former holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex Released Party or a JWC Released Party); and (B) the holders of Allowed Indemnity Claims that are not parties hereto, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively (A) and (B) are referred to herein, in such capacities, as the "Released Parties") of and from any and all claims, obligations, rights, causes of action 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, based in whole or in part upon any act, omission or other occurrence taking place on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO-Related Issues); (ii) The Confirmation Order and the Plan shall provide for the full and complete settlement, satisfaction, discharge and, in respect of the Released Parties, release of all the LBO-Related Issues, 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.; (iii) The Confirmation Order shall provide that the Veil Piercing Settlement as embodied in the Plan is fair, equitable and reasonable and is a good faith settlement, satisfaction, release and discharge of all claims and causes of action of all Veil Piercing Claimants, and of Celotex, and of any and all person(s) and entity(ies) that may assert, derivatively or otherwise through Celotex, Veil Piercing Claims against any or all of the Released Parties; (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, which order shall have become a Final Order; and (v) At the request of the Bondholder Proponents, the Court shall have entered an order (i) allowing the Celotex Proof of Claims and/or, if applicable, (ii) allowing the Veil Piercing Proof of Claims, such order(s) to be in form and substance reasonably acceptable to the Bondholder Proponents; provided, however, that any one or more of the conditions set forth in (i) - (v) above may be waived or modified by the express written consent given (i) by the Bondholder Proponents; and (ii) if the Settling Equityholders hold a majority in amount of the Allowed Old Common Stock Interests in the aggregate, by Settling Equityholders that hold a majority of the Old Common Stock Interests held by all Settling Equityholders; provided, further, that no waiver or modification of Section 3(d)(i) herein that adversely affects the release granted to Settling Equityholders shall be effective against any Settling Equityholder that does not consent in writing to such waiver or modification; provided, further, that in the event that any of the conditions set forth in (i) - (v) is not fully satisfied, consistent with Section 4(d) herein, the Bondholder Proponents may request 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) Amendment of Original Creditor Plan. Subject to the provisions of Section 2(b) herein, the Plan Proponents shall promptly prepare and file with the Court an amendment to the Original Creditor Plan and related disclosure statement that (i) incorporates, to the extent appropriate, the terms of this Agreement and attaches this Agreement as an exhibit to the amended Original Creditor Plan; (ii) at the option of the Bondholder Proponents, adds, as proponents of the amended Original Creditor Plan (subject to receipt of any necessary approval from the Celotex Bankruptcy Court, and subject to the condition that such additional proponents shall not be eligible to participate in any actions to be taken under the Plan by the Plan Proponents, or to amend or otherwise modify the Plan), (A) The Celotex Corporation, (B) JWC and (C) in their capacity as representatives of certain of the Veil Piercing Claimants, the Veil Piercing Claimants' Representatives. The Parties shall continue to seek the prompt confirmation and consummation of the Plan, including the prompt approval by the Court of this Agreement in connection with the confirmation of the Plan. (b) Mutual Releases. The Plan shall provide that upon the Effective Date, the present and future signatories to this Agreement mutually release (except as waived or modified by the Bondholder Proponents and any person(s) or entity(ies) whose rights under such release would be contravened by such waiver or modification) each other and each of their respective present and former subsidiaries, Affiliates, directors, officers, partners, shareholders, employees, agents, advisors and representatives of and from any and all claims based upon any and all theories or bases of liability or recovery recognizable at law, in equity or in admiralty, under the laws of any jurisdiction, based upon, arising out of or in connection with 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 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), in each case only in connection with the LBO, action taken in contemplation of the LBO, or any contemporaneous or subsequent transaction(s) entered into as part of or arising out of or relating to any or all of the LBO transaction(s) or transfer(s) and the conduct of the Adversary Proceedings, 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.; provided that as to any such signatory who (x) is or was a holder of an Allowed Old Common Stock Interest or (y) is a present or former director, officer, partner, shareholder, employee, agent, advisor or representative of JWC or The Celotex Corporation or any of its subsidiaries, such person or entity shall become a Settling Equityholder, a Celotex Released Party, or a JWC Released Party, respectively, and provided further that there shall not be released any claims by creditors of Celotex or JWC, including without limitation the Veil Piercing Claimants against Celotex, JWC, any of the Celotex Released Parties or any of the JWC Released Parties, arising out of personal injury or property damage caused by or attributable to asbestos-containing products manufactured, sold or distributed by Celotex or JWC. (c) Dismissal of Lawsuits. The Plan Proponents (as may be necessary respecting the Adversary Proceedings only), the Veil Piercing Claimants' Representatives, The Celotex Corporation, JWC and the Official Celotex Committees shall use reasonable efforts to bring about the prompt dismissal, with prejudice, as soon as practicable after the Effective Date, of all known pending suit, appeals, proceedings and other actions, including the Adversary Proceedings, against (i) any or all of the Released Parties, (ii) any or all the Celotex Released Parties and/or (iii) any or all of the JWC Released Parties (solely in the capacity(ies) specified in the definitions of Released Parties, the Celotex Released Parties and the JWC Released Parties), to the extent such suits, appeals, proceedings or other actions are based upon, arising out of or in connection with the Veil Piercing-Related Issues as to the Released Parties and the issues covered by the mutual release specified in Section 4(b) herein as to the Celotex Released Parties and the JWC Released Parties, respectively. Upon request therefor, any Party shall provide the Bondholder Proponents with a certificate of a responsible person of such Party, in form and substance reasonably acceptable to the Bondholder Proponents, to the effect that such Party has fully complied with this Section 4(c). (d) Process Toward Realization of Finality. 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 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 Veil Piercing Settlement 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 best efforts to assist and cooperate with the Bondholder Proponents 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. (e) 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. (f) 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 in determining that the settlement of the Veil Piercing Claims set forth in this Agreement and in the Plan (i) is fair, equitable and reasonable and constitutes the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims and (ii) to the extent applicable, should be approved as part of confirmation of the Plan. (g) 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 Veil Piercing Claims. (h) Attorneys' Fees. (i) The Parties, except for the HHC Bondholders Committee, The Celotex Corporation and the HHC Creditors Committee, 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; (ii) the HHC Bondholders Committee, The Celotex Corporation and the HHC Creditors Committee 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 pursuant to Code sections 503(b) and/or 1129(a)(4), or otherwise, based on factors including those specified in clause (i) hereof; and (iii) the Parties shall support applications in the Chapter 11 Cases by counsel for Apollo and Lehman Brothers Inc. for reasonable attorneys' fees and costs pursuant to Code sections 503(b) and/or 1129(a)(4), or otherwise. (i) Confidentiality. From and after the Effective Date, the Veil Piercing Claimants' Representatives shall keep confidential, and 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 Veil Piercing-Related Issues. (j) At the request of the Bondholder Proponents, each of the Veil Piercing Claimants' Representatives shall use its best efforts to cause each of the law firms listed on Exhibit A attached hereto to indicate its assent to and/or support of this Agreement and/or the Plan, and/or to become a signatory to this Agreement, as directed by the Bondholder Proponents and in each case substantially in the form of Exhibit D attached hereto and as soon as practicable after such request is made. (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) promptly file the Celotex Proof of Claims against the Debtors for the benefit of its estate, (iii) at the request of the Bondholder Proponents, promptly file the Veil Piercing Proof of Claims against the Debtors for the benefit of its estate, (iv) accept treatment under the Plan of its claims against the Debtors pursuant to this Agreement, and (v) if it is the Celotex Settlement Fund Recipient, receive and hold the Settlement Fund for the exclusive benefit of the Veil Piercing Claimants and the Settling Equityholders, if any, 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 Official Celotex Committees that are Parties and the Veil Piercing Claimants' Representatives 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 approximately 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 approximately 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. 6. Settling Equityholders. (a) Each Settling Equityholder shall receive from the Celotex Settlement Fund Recipient, effective on the Effective Date, an assignment from the Celotex Settlement Fund Recipient of the right of the Celotex Settlement Fund Recipient to receive under the Plan and under this Agreement that number of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share that bears the same relation to the sum of (i) $75 million and (ii) 50% of the Senior Claim Differential, if any, as the Allowed Old Common Stock Interests of such Settling Equityholder bears to the aggregate Allowed Old Common Stock Interests. (b) Each Settling Equityholder shall, as a Party, be entitled to the releases provided for under the Plan (as provided in Sections 3(a) and 4(b) herein, as the same may be modified or waived pursuant to Sections 3(a) and 4(b) herein). 7. Effectiveness of this Agreement. (a) Subject to the provisions of Section 7(b) herein, this Agreement shall become effective upon the execution hereof by all of the Parties other than the Settling Equityholders, if any, and the Celotex Committee of Unsecured Creditors. (b) Notwithstanding any of the provisions of Section 7(a) herein to the contrary, in the event that Jim Walter Corporation does not cause its authorized representative to execute this Agreement and deliver it to the Bondholder Proponents on or before Tuesday, April 19, 1994 at 5 p.m. EDST then (i) Jim Walter Corporation shall not be, and shall not be deemed to be, a Party to this Agreement, (ii) none of the provisions of this Agreement applicable to JWC shall be, or shall become, effective and (iii) without limiting the foregoing, none of the provisions of this Agreement applicable to the release of any or all of the JWC Released Parties or the settlement, satisfaction or discharge of any claims against any or all of them shall be, or shall become, effective. (c) the Bondholder Proponents, in their sole and exclusive discretion, may waive any or all of the provisions contained in Section 7(b) herein. 8. Termination. This Agreement shall terminate upon the earlier to occur of the following: (a) Upon the giving of a notice by the Bondholder Proponents or the Veil Piercing Claimants' Representatives and The Celotex Corporation to the other at any time after an order shall have been entered which shall have become a Final Order that (i) 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(c) of the amendment of the Original Creditor Plan to be filed under Section 4(a) herein, (ii) confirms a plan of reorganization in any or all of the Chapter 11 Cases other than the Plan or (iii) 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; and (b) The Bondholder Proponents, The Celotex Corporation, and the Veil Piercing Claimants' Representatives shall mutually agree in writing to terminate this Agreement. 9. Miscellaneous. (a) Fiduciary Duty. Notwithstanding any other provision contained herein, in the event the Original Creditor Plan, as amended to incorporate this Agreement, 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 further amendment to or modification of the Original Creditor Plan would violate such Party's fiduciary duty arising out of such Party's status as an official committee in the Chapter 11 Cases or in The Celotex Chapter 11 Case, or with respect to The Celotex Corporation, as a debtor-in-possession in The Celotex Chapter 11 Case. (b) Further Assurances. 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 Claims and the Veil Piercing Proof of Claims, and to promptly take such actions or cause to be taken such actions, as may be reasonably requested by the Bondholder Proponents to fully and promptly effect 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 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 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 or refrain from voting with respect to, any 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 suits within and without the jurisdiction of the United States. (k) Successors and Assigns. This Agreement is intended to bind and inure to the benefit of the Parties and 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 other signatories, if any, 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 and other signatories, if any, whether written or oral, which may have related to the subject matter hereof in any way whatsoever, including without limitation the Term Sheet. (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, P.C. Ellen R. Werther 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 By: Michael B. Colgan 2900 Barnett Plaza 101 E. Kennedy Blvd. Tampa, FL 33602 (813) 229-6688 (813) 229-3331 (telecopier) For Jim Walter Corporation 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 & HUMPHREYS, P.A. By: /s/ Janet L. Humphreys John W. Kozyak Janet L. Humphreys 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) SETTLING EQUITYHOLDERS: CELOTEX RELEASED PARTIES: JWC RELEASED PARTIES APPENDIX A A. "Affiliate" shall have the meaning set forth in Rule 501, promulgated under the Securities Act of 1933, as amended. B. "Allowed Indemnity Claim" shall mean an Allowed Claim for indemnification, reimbursement or contribution against any Debtor; provided, however, that any such Claim shall not be an Allowed Indemnity Claim if the agreement or other basis giving rise to the Claim is void or voidable. C. "Allowed Old Common Stock Interest" shall mean all interests in the outstanding common stock, $0.01 par value, of Walter Industries, Inc., as the surviving corporation of the merger between Hillsborough Holdings Corporation and Walter Industries, Inc., 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, Inc. and as to which no objection has been made or which has been allowed by a Final Order. D. "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. E. "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. F. "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. G. "Celotex Proof of Claims" shall mean 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 (a) 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 based on any of the Veil Piercing-Related Issues and/or (b) 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 Claims 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. H. "Celotex Released Party" shall mean any present or former director, officer, partner, shareholder, employee, agent, advisor or representative of The Celotex Corporation or any of its subsidiaries (in each case only in such person's or entity's aforementioned capacity and not otherwise) that, subject to the last two sentences hereof, (1) shall have failed to become a signatory to this Agreement, following a written request of the Bondholder Proponents, on or prior to the later of (a) thirty (30) days after a copy of this Agreement is received by such person or entity or a representative thereof, and (b) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Plan and the plan filed by the Debtors, and (2) shall have taken no action(s) subsequent to the execution of this Agreement by the Parties which, in the reasonable determination of the Bondholder Proponents, would be reasonably likely to (a) impede the prompt distribution or approval of the disclosure statement relating to the Plan; (b) impede the prompt confirmation and effectiveness of the Plan; (c) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Plan and in the Chapter 11 Cases; (d) impede the prompt realization of Finality; or (e) result in a breach of this Agreement. If the Court or the Celotex Bankruptcy Court finds that the settlement set forth in this Agreement is not reasonable or the Plan is not confirmable unless each or any of such person(s) or entity(ies) is given a further opportunity to become a signatory to this Agreement and receiving the benefits specified herein for a Celotex Released Party by a specific date(s) set by the Court, then the date specified in (1) hereof shall be the date(s) set by the Court; provided further that the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any such person(s) or entity(ies). If the Court or the Celotex Bankruptcy Court at any time determines that any Celotex Released Party is not entitled to or should not be granted the release specified in Section 4(b) herein, then such person(s) or entity(ies) shall not be entitled to, and shall not receive such release. I. "Celotex Settlement Fund Recipient" shall mean The Celotex Corporation for the exclusive benefit of the Veil Piercing Claimants and the Settling Equityholders, if any, or such other person(s) or entity(ies) 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 and the liabilities of the Settlement Fund. J. "Chapter 11 Cases" shall mean each of the reorganization cases of the Debtors listed in the caption on the cover page of the Original Creditor Plan, all of which are being jointly administered under Case No. 89-9715-8P1. K. "Class A Common Stock" shall have the meaning assigned to that term (or another term serving the same or a similar function) under the Plan; provided, that the Class A Common Stock shall have economic rights, powers and privileges no more favorable than the economic rights, powers and privileges of the Class B Common Stock, unless less favorable treatment shall be agreed to in writing by the Veil Piercing Claimants' Representatives and the Celotex Settlement Fund Recipient. L. "Class B Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of Walter Industries, Inc. to be issued on the Effective Date. The Class B 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 percentages as the shares of the Class A Common Stock and other Class B Common Stock, taken together, are voted (based upon the number of votes cast). M. "Code" shall mean title 11 of the United States Code, U.S.C. Section 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. N. "Confirmation Date" shall mean the date on which the Court enters the Confirmation Order. O. "Confirmation Order" shall mean the order of the Court confirming the Plan and approving the transactions and settlements contemplated therein. P. "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. Q. "Debtors" shall mean the debtors and debtors in possession in the Chapter 11 Cases. R. "Effective Date" shall mean that business day selected by the Bondholder Proponents which shall be not more than ninety (90) days after the date on which all conditions to effectiveness set forth in the Plan have been satisfied or waived. S. "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, reargue, petition for certiorari or seek rehearing has been waived 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. T. "JWC Released Party" shall mean any present or former director, officer, partner, shareholder, employee, agent, advisor or representative of JWC (in each case only in such person's or entity's aforementioned capacity and not otherwise) that, subject to the last two sentences hereof, (1) shall have failed to become a signatory to this Agreement, following a written request of the Bondholder Proponents, on or prior to the later of (a) thirty (30) days after a copy of this Agreement is received by such person or entity or a representative thereof and (b) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Plan and the plan filed by the Debtors, and (2) shall have taken no action(s) subsequent to the execution of this Agreement by the Parties which, in the reasonable determination of the Bondholder Proponents, would be reasonably likely to (a) impede the prompt distribution or approval of the disclosure statement relating to the Plan (b) impede the prompt confirmation and effectiveness of the Plan; (c) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Plan and in the Chapter 11 Cases; (d) impede the prompt realization of Finality; or (e) result in a breach of this Agreement. If the Court or the Celotex Bankruptcy Court finds that the settlement set forth in this Agreement is not reasonable or the Plan is not confirmable unless each or any of such person(s) or entity(ies) is given a further opportunity to become a signatory to this Agreement and receiving the benefits specified herein for a JWC Released Party by a specified date(s) set by the Court, then the date specified in (1) hereof shall be the date(s) set by the Court; provided further that the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any such person(s) or entity(ies). If the Court or the Celotex Bankruptcy Court at any time determines that any JWC Released Party is not entitled to or should not be granted the release specified in Section 4(b) herein, then such person(s) or entity(ies) shall not receive, such release. U. "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 or in equity under the laws of any jurisdiction that are held or asserted by any holder of a claim or interest in the Chapter 11 Cases other than Veil Piercing Claimants (in such capacity), in respect of such claim or interest, directly or indirectly based upon, arising out of or in contemplation of or 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, 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. V. "New Common Stock" shall mean the collective reference to the Class A Common Stock and the Class B Common Stock. W. "New Common Stock Value" shall mean the Negotiated Enterprise Value (or, if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount) less the sum of (a) the lesser of (i) $902 million and (ii) (A) the allowed amount of claims for all classes other than classes consisting of Subordinated Note Claims, Veil Piercing Claims or intercompany claims (i.e., Classes U-4 through U-7 and I-1 through I-3 in the Original Creditors Plan) accrued or owed on the Effective Date (including without limitation any part thereof paid or to be paid after the Effective Date) minus (B) the interest paid or accrued under the provisions of the Plan in respect of the claims referred to in the preceding clause (A) for the period from January 1, 1994 to the Effective Date, and (b) the aggregate principal amount of Qualified Securities to be distributed to holders of Subordinated Note Claims and the Celotex Settlement Fund Recipient under the terms of the Plan on the Effective Date. X. "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. Y. "Qualified Securities" shall have the meaning assigned to that term (or another term serving the same or a similar function) under the Plan. Z. "Senior Claim Differential" shall mean the excess, if any, of $902 million over the difference between (a) the allowed amount of claims for all classes, other than classes consisting of Subordinated Note Claims, Veil Piercing Claims or intercompany claims, accrued or owed on the Effective Date (including without limitation any part thereof paid or to be paid after the Effective Date) (the "Senior Claims"), and (b) the interest paid or accrued under the provisions of the Plan in respect of the Senior Claims for the period from January 1, 1994 to the Effective Date. AA. "Settling Equityholder" shall mean a holder of an Allowed Old Common Stock Interest (a) that, subject to the last two sentences hereof, shall have become a signatory to this Agreement on or prior to the later of (i) twenty (20) days after a copy of this Agreement is sent to such holder of an Allowed Old Common Stock Interest or a representative thereof, and (ii) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Plan and the plan filed by the Debtors, and (b) that shall have taken no action(s) subsequent to becoming a signatory to this Agreement which, in the determination of the Bondholder Proponents, would be reasonably likely to (i) impede the prompt distribution or approval of the disclosure statement relating to the Plan; (ii) impede the prompt confirmation and effectiveness of the Plan; (iii) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Plan and the Chapter 11 Cases; (iv) impede the prompt realization of Finality; or (v) result in a breach of this Agreement. If the Court finds that the settlement set forth in this Agreement is not reasonable or the Plan is not confirmable unless each or any of the holders of an Allowed Old Common Stock Interest is given a further opportunity to become a Settling Equityholder by becoming a signatory to this Agreement and receiving the benefits specified herein for a Settling Equityholder by a specific date(s) set by the Court, then the date specified in (a) hereof shall be the date(s) set by the Court. Notwithstanding the other provisions of "AA" hereof, the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any person who is a holder of less than 5% of the issued and outstanding common stock, $0.01 per value, of Walter Industries, Inc., exclusive of any shares of such stock held in treasury. BB. "Settling Party" shall mean a Party to this Agreement, and each of the Debtors. CC. "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 (as each of such terms is defined in the Original Creditor Plan). DD. "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. EE. "Veil Piercing Claims" shall mean and be the collective reference to all existing claims and all claims that may be asserted in the future 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 Allowed Indemnity Claims. FF. "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, including, without limitation, each Settling Party based upon, arising out of or in connection with any of the Veil Piercing-Related Issues. GG. "Veil Piercing Proof of Claims" shall mean a proof(s) of claim(s) filed in the Chapter 11 Cases by (i) The Celotex Corporation and/or (ii) the Claimants' Attorneys and/or an appropriate representative(s) of Veil Piercing Claimants on behalf of one or more classes representing all Veil Piercing Claimants, solely 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 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. HH. "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 of any assets of 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 equity interests, 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. II. "Veil Piercing Settlement" shall mean the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims, Veil Piercing Proceedings and all claims based upon LBO-Related Issues held by the Veil Piercing Claimants. EXHIBIT A Gillenwater, Nichol & Ames Bearden Commercial Bank 6401 Baum Drive Knoxville, Tennessee 37919 Kazan, McClain, Edises & Simon 171 Twelfth Street, Third Floor Oakland, California 94607 The Jaques Admiralty 1370 Penobscot Building Detroit, Michigan 48226 Rose, Klein & Marias 801 South Grand Avenue Los Angeles, California 90017 Robert E. Sweeney, Co., L.P.A. 55 Public Square, Suite 1500 Cleveland, Ohio 44113 Umphrey, Swearington, Eddins & Carter 490 Park Street Beaumont, Texas 77004 Goldberg, Persky, Jennings & White 1030 Fifth Avenue Pittsburgh, Pennsylvania 15219 Ashcraft & Gerel 2000 L. Street, N.W. Washington, D.C. 20036 Jacobs & Crumplar 2 East 7th Street Remington, Delaware 19899 Peter G. Angelos, Esq. 5905 Harford Road Baltimore, Maryland 21214 Cartwright, Slobodin, Bokelman, Borowsky, Wartnick, Moore & Harris, Inc. 101 California Street San Francisco, California 94111 Levy, Phillips & Konigsberg 90 Park Avenue New York, New York 10016 Wilentz, Goldman & Spitzer 90 Woodbridge Center Drive P.O. Box 10 Woodbridge, New Jersey 07095 EXHIBIT B ATTACHED AS EXHIBITS 7 AND 8 TO THE CREDITORS' JOINT PLAN OF REORGANIZATION EXHIBIT C TAG-ALONG AND VOTING AGREEMENT by and among THE STOCKHOLDERS NAMED HEREIN Dated as of , 1994 TABLE OF CONTENTS Page 1. Definitions 1 2. Tag-along Rights 2 3. Voting of Class B Stock Owned by the Celotex Entities 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 1A--Class A Common Stock Schedule 1B--Class B Common Stock Schedule 2--Notices TAG-ALONG AND VOTING AGREEMENT TAG-ALONG AND VOTING AGREEMENT dated as of , 1994 by and among the stockholders listed on the signature pages hereof (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 Veil Piercing Settlement Agreement, dated, 1994, by and among the Bondholders Committee (as defined therein), the 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 Veil Piercing Claims (as defined therein), the Celotex Trade Creditors Committee, the Celotex Asbestos Property Damage Claimants Committee, the Celotex Bodily Injury Claimants Committee and the Settling Equityholders (each as defined therein) (the "Settlement Agreement"), and is attached as an exhibit thereto. Each Stockholder will acquire that number of shares of Class A Common Stock, par value $.01 per share, of Walter Industries, Inc., a corporation (the "Company") ("Class A Stock"), and Class B Common Stock, par value $.01 per share, of the Company ("Class B Stock") specified with respect to such Stockholder in Schedule 1-A and Schedule 1-B hereto, respectively, pursuant to the Creditors Plan of Reorganization of the Company and of the other debtors named therein (the "Plan"). The Class A Stock is convertible into Class B Stock on a share-for-share basis and will automatically so convert upon any Transfer of Class B Stock other than to an Affiliate of the holder. 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 Plan) (or such other court as may be administering the Chapter 11 Cases), (ii) 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 (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. "The Celotex Entities" means the entity or entities that, under supervision of the Bankruptcy Court, acquire and hold, on behalf of the holders of Veil Piercing Claims, shares of Class B Stock issued by the Company pursuant to the Plan. "Commission" means the U.S. Securities and Exchange Commission. "Common Stock" means, collectively, Class A Stock and Class B Stock. "Effective Date" means the Effective Date of the 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 a Celotex Entity only, made to any other Celotex Entity or made from a Celotex Entity to holders of Veil Piercing 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 Class A Stock and Class B Stock issued to the Stockholders on the Effective Date, and any shares of Class B Stock issued upon conversion, in connection with a Transfer or otherwise, of any such shares of Class A Stock; provided, that any share of 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). "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 Class B Stock Owned by the Celotex Entities. In any vote or action by written consent by the holders of Class A Stock and Class B Stock voting or taking action by written consent as a single class, the Celotex Entities will and will cause each of their Affiliates to vote or execute written consents with respect to their shares of Class B Stock, in proportion to the votes cast or consents executed and delivered by the holders of Class A Stock and Class B Stock (other than the Celotex Entities and their Affiliates). In any vote or action by written consent by the holders of Class B Stock voting or taking action by written consent as a separate class, the Celotex Entities will and will cause each of their Affiliates to vote or execute written consents with respect to their shares of Class B Stock in proportion to the votes cast or consents executed and delivered by the holders of Class B Stock (other than the Celotex Entities and their Affiliates). 4. Representations and Warranties of the Parties. Each Stockholder represents and warrants 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 Class A Stock and Class B 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 Class A Stock or Class B 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 "Class A Stock," "Class B Stock," "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 Veil Piercing Claims other than the Celotex Entities, and any notice given to the Celotex Entities 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 Entities, including all holders of Veil Piercing 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 Entities shall have Transferred or otherwise distributed to the individual holders of Veil Piercing Claims % or more of the Class B Stock held by the Celotex Entities, in the aggregate, on the Effective Date and (ii) the tenth anniversary of this Agreement. 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 By Name: Title: [other Celotex Entities* SCHEDULE 1-A Class A Common Stock Number of Shares Stockholder Owned AIF II, L.P. (and/or other of its Affiliates) Lehman Brothers Inc. SCHEDULE 1-B Class B Common Stock Number of Shares Stockholder Owned AIF II, L.P. (and/or other of its Affiliates) The Celotex Corporation (and/or other Celotex Entities) SCHEDULE 2 NOTICES If to AIF II, L.P., to: AIF II, L.P. Attention: Tel: Fax: with a copy to: Attention: Tel: Fax: EXHIBIT D , 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 Veil Piercing Settlement Agreement dated April , 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 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 Aggregate amount of all in respect of all Allowed Allowed Class U-4 Claims Subordinated Note Claims X (or Class U-5) Claims or - ------------------------------- Class U-6 Claims, as the Aggregate amount of all Allowed case may be) Subordinated Note Claims 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 + (80/700 X 140) = 96 80 - (80/700 X 70) = 72 U-5: 105 182 67 U-4: 65 + 240 = 305 112 + 240 = 352 41 + 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 to occur 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 3C: AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT EXHIBIT 3C AMENDED AND RESTATED VEIL PIERCING SETTLEMENT AGREEMENT THIS AMENDED VEIL PIERCING SETTLEMENT AGREEMENT (as the same may be amended, modified or supplemented from time to time, the "Agreement") is made and entered into as of the 1st day of August, 1994, and amends and restates that certain Veil Piercing Settlement Agreement (the "Original Agreement") made and entered into as of the 18th day of April, 1994, by and among (a) Certain asbestos victim defendants ("AVDs") named as defendants in Adversary Proceeding No. 90-0003 and Adversary Proceeding No. 90-0004 (the "Adversary Proceedings"), and represented in the Adversary Proceedings by Caplin & Drysdale, Chartered ("Caplin & Drysdale"), pending 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, Walter Industries, Inc. and other debtors (collectively, the "Debtors") in their administratively consolidated Case No. 89-9715-8P1; (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 Bodily Injury Claimants Committee and the Celotex Asbestos Property Damage Claimants Committee are collectively referred to herein as the "Official Celotex Committees"); (d) Jim Walter Corporation (including its subsidiaries other than The Celotex Corporation and its subsidiaries, collectively referred to as "JWC"), a defendant in the Adversary Proceedings; (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"; the HHC Official Committees and the Bondholder Proponents are collectively referred to herein as the "Plan Proponents"); and (f) the Settling Equityholders (as defined herein), if any (all of the foregoing are referred to herein collectively as the "Parties" and singularly as a "Party"). WITNESSETH: WHEREAS, the Debtors initiated the Adversary Proceedings seeking (a) a final declaration and adjudication that the corporate veil between JWC and Celotex 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 that 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 Celotex; (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 Celotex; 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 Veil Piercing Claims (as defined herein) against the Debtors and JWC in various forums; and WHEREAS, The Celotex Corporation, as a debtor-in-possession, has asserted that (a) it has the exclusive right and standing to assert Veil Piercing Claims (as defined herein) against the Debtors and JWC for the benefit of its estate and 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 Claimants' Attorneys are authorized to act as the negotiating group for the law firms listed on Exhibit A attached hereto, and the law firms which have assented and will in the future assent to this Agreement by executing Exhibit D attached hereto, all of which represent persons and entities that have asserted or may assert Veil Piercing 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 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 Plan Proponents 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 this Agreement; and WHEREAS, the Term Sheet contemplates, and the Original Creditor Plan embodies, 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 Veil Piercing Claims on the basis of (a) the "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 the Negotiated Enterprise Value represents a good faith estimate of the going concern enterprise value of the Debtors (as defined herein) on a consolidated basis, arrived at after extensive analysis by the Plan Proponents, and taking into account the possibility of delay between the Confirmation Date (as defined herein) and the 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 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 Claims (as defined herein); and WHEREAS, the Parties are mutually desirous of settling with finality, compromising, extinguishing, releasing and discharging any and all Veil Piercing Claims, specifically including those Veil Piercing Claims which are the subject of the Adversary Proceedings; 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 (as defined herein), and that, inter alia, 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 WHEREAS, a trial on the issues raised in the Adversary Proceedings took place 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 Adversary Proceedings, ruling in favor of the Debtors; and WHEREAS, the Original Agreement, embodying the Term Sheet, was executed and delivered by the Parties 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 have filed a timely notice of appeal of the Court's decision in the Adversary Proceedings; and WHEREAS, amendments to the Original Creditor Plan were filed with the Court on April 20, 1994, May 11, 1994, May 17, 1994 and June 9, 1994 (the amendment filed on June 9, 1994 is referred to herein as the "Current Creditors' Plan"); and WHEREAS, on July 28, 1994, the Court granted the Debtors' emergency motion to file an amended plan of reorganization (the "Debtors' Fifth Amended Plan") and an amended disclosure statement, which amended plan increased the allowed amount thereunder of each of (i) the Class S-1 and S-2 Claims, and (ii) the Class S-6 Claims, in each case by, inter alia, issuing shares of common stock of reorganized Walter Industries, Inc. equal to 5% of the shares to be issued and outstanding on the Effective Date, and decreased the recovery of Class E-1 by the aggregate of such shares; and WHEREAS, the Plan Proponents and the Veil Piercing Claimants' Representatives deem it advisable to amend the Current Creditors' Plan to increase thereunder 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 that was to have been distributed to the Celotex Settlement Fund Recipient under Section 2(a)(i)(A) of the Original Agreement (and that was to have been subject to assignment to Settling Equityholders, if any, under the Original Agreement), instead be distributed in the manner specified in any future amendment to the Current Creditors' Plan, and to provide that 100% of the Senior Claim Differential, if any, be distributed to the Celotex Settlement Fund Recipient, in each case, provided that this Agreement becomes effective as set forth in Section 7 herein; and WHEREAS, it is necessary to amend and restate the Original Agreement to incorporate the aforementioned redistribution of such $75 million of Class B Common Stock; and WHEREAS, the Parties to the Original Agreement desire to amend and restate the Original Agreement to reflect their respective agreements, rights, duties and obligations, all on the terms and subject to the conditions set forth herein. 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 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 Veil Piercing Claims and all claims held 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 and Class B Common Stock under the Plan (the "Settlement Fund") to the Celotex Settlement Fund Recipient, as follows: (i) Allowed Amount of the Veil Piercing Claims. The allowed amount of the Veil Piercing Claims shall be equal to the sum of (A) the Veil Piercing Claims Amount (which shall be $450 million, as the same may be increased or decreased pursuant to this Section 2(a)) plus (B) the Senior Claim Differential, if any; provided, that in the event that the actual amount of distributions under the Plan in respect of the Subordinated Note Claims is different than $1098 million, then the Veil Piercing Claims Amount shall be calculated as follows: Actual amount of distributions in respect of Subordinated Note Claims X $450 million ----------------------------------- $1098 million For purposes of the fraction used in this clause (i), 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 New Common Stock. (ii) Consideration Used to Satisfy the Veil Piercing Claims. The Veil Piercing Claims shall be paid and satisfied by the distribution of a combination of Qualified Securities and Class B Common Stock to the Celotex Settlement Fund Recipient. The amount of Qualified Securities to be so distributed under the Plan in respect of Veil Piercing Claims shall be calculated as follows: $450 million --------------------- $1098 million + $450 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 Veil Piercing 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 Veil Piercing Claims. The excess of the allowed amount of Veil Piercing Claims over the part thereof paid, and settled, satisfied, released and discharged, by Qualified Securities shall be paid, and settled, satisfied, released and discharged, by shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such excess. (iii) Examples. The following examples are 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 Veil Piercing Claims would consist of (i) the Veil Piercing Claims Amount (that is, $450 million), plus (ii) the Senior Claim Differential, if any, and (b) such allowed amount would be settled, satisfied, released and discharged, by the distribution of 450/1548 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, 450/1548 of such total, or $203,488,372, would be paid in Qualified Securities in respect of Veil Piercing Claims), and the distribution, in respect of the remainder of the allowed amount of the Veil Piercing Claims, of shares of Class B Common Stock having an aggregate New Common Stock Value Per Share equal to such remainder. (b) "Plan" Defined. The term "Plan", as used in this Agreement, shall mean any plan(s) of reorganization filed in the Chapter 11 Cases as to which the Bondholder Proponents are proponents and that does not contravene the terms and conditions of this Agreement (subject to Section 2(c) herein); and the definition of the term "Plan" shall include, without limitation, the amendment to the Current Creditors' Plan filed on or about August 2, 1994, which reflects the terms of this Agreement (the "Amended Creditors' Plan"), provided, that the term "Plan" shall not include a plan of reorganization (other than the Amended Creditors' Plan) or an amendment to or modification of a plan of reorganization unless (i) 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 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 (ii) in the event that such plan of reorganization, amendment or modification contravenes the terms and conditions of this Agreement, such plan of reorganization, amendment or modification is consented to by the Veil Piercing Claimants' Representatives, The Celotex Corporation, the Celotex Asbestos Property Damage Claimants Committee and the Celotex Asbestos Bodily Injury Claimants Committee, provided that the rights of such Party or the Veil Piercing Claimants represented by such Party under this Agreement are contravened by such plan of reorganization, amendment or modification; 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. Neither the confirmation nor the effectiveness of the Plan shall be conditioned upon the confirmation or effectiveness of a plan of reorganization in any proceedings pursuant to the Code other than the Chapter 11 Cases. (c) Nothing in this Agreement shall impair in any way the ability of the Plan Proponents 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) herein. (d) The Plan shall provide for a registration rights agreement substantially in the form of Exhibit B attached hereto, which shall provide, among other things, for the registration of all of the Qualified Securities and New Common Stock for sale promptly after the 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 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 Effective Date, substantially in the form of Exhibit C 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 sell shares of Class B Common Stock to a non-Affiliate other than on a national securities exchange or 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 C to participate in such sale 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 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 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 Veil Piercing Claims and all claims and causes of action based on the LBO-Related Issues, this settlement shall be conditioned on the satisfaction (or waiver or modification by the Bondholder Proponents and by such other Parties, if any, as specified below) 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 any Party whose rights under this Agreement would be contravened by such waiver or modification) specifically contain (i) all releases and injunctions necessary and appropriate to realize the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims against any and all of the Released Parties, the form and substance of which to be acceptable to the Bondholder Proponents, whether or not all the Veil Piercing Claims are known to or knowable by the Veil Piercing Claimants. The settlement, satisfaction, release and discharge of the Veil Piercing Claims against the Released Parties will become effective as to each Veil Piercing Claim, whether or not the Veil Piercing Claim constituted an allowed claim in the Chapter 11 Cases or the Celotex Chapter 11 Case and whether or not the holder of the Veil Piercing Claim received actual notice of the Plan and the proceedings for approval of the Plan and entry of the Confirmation Order. In addition, the entry of the Confirmation Order will operate as (i) a general resolution with prejudice of all pending legal proceedings that may be asserted against any or all of the Released Parties based upon, arising out of or in connection with the Veil Piercing-Related Issues as well as any such proceeding not yet instituted that may be asserted against any or all of the Released Parties; (ii) a determination that all Veil Piercing Claims shall channel, transfer and attach to the Settlement Fund; (iii) a provision retaining continuing jurisdiction by the Court to enforce the provisions of the Confirmation Order; (iv) a provision that the Settlement Fund shall be administered by, and subject to the jurisdiction of, the Celotex Bankruptcy Court; and (v) a provision enjoining 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 any appellate court of competent jurisdiction for the sole purpose of such court's review of the settlement embodied in this Agreement and the Confirmation Order). (b) The Confirmation Order shall have become a Final Order; (c) Entry by the Court of a Final Order allowing the Celotex Proof of Claims and/or any Veil Piercing Proof of Claims; and (d) "Finality" shall have been realized with respect to the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims. For purposes of this Agreement, "Finality" shall be deemed to have been realized when all of the following conditions shall have been satisfied (subject to the provisos set forth below): (i) The Confirmation Order and the Plan shall provide for the release of or injunction respecting, in each case to the fullest extent permitted by law: (A) the Parties (other than JWC and The Celotex Corporation and its subsidiaries) and the Debtors, and each of their respective present and former parents, subsidiaries, Affiliates, directors, officers, partners, shareholders, employees, agents, advisors and representatives (other than any (x) holders or former holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex' or JWC's respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives and (z) JWC and The Celotex Corporation and its subsidiaries); 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 a shareholder of any Debtor, or any other capacity (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a holder or former holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex Released Party or a JWC Released Party); and (B) the holders of Allowed Indemnity Claims that are not parties hereto, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively (A) and (B) are referred to herein, in such capacities, as the "Released Parties") of and from any and all claims, obligations, rights, causes of action 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, based in whole or in part upon any act, omission or other occurrence taking place on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO-Related Issues); (ii) The Confirmation Order and the Plan shall provide for the full and complete settlement, satisfaction, discharge and, in respect of the Released Parties, release of all of the LBO-Related Issues, 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.; (iii) The Confirmation Order shall provide that the Veil Piercing Settlement as embodied in the Plan is fair, equitable and reasonable and is a good faith settlement, satisfaction, release and discharge of all claims and causes of action of all Veil Piercing Claimants, and of Celotex, and of any and all person(s) and entity(ies) that may assert, derivatively or otherwise through Celotex, Veil Piercing Claims against any or all of the Released Parties; (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, which order shall have become a Final Order; and (v) At the request of the Bondholder Proponents, the Court shall have entered an order (i) allowing the Celotex Proof of Claims and/or, if applicable, (ii) allowing the Veil Piercing Proof of Claims, such order(s) to be in form and substance reasonably acceptable to the Bondholder Proponents; (e) Notwithstanding any other provision of this Agreement, any one or more of the conditions set forth in paragraphs (b), (c) and/or (d) of this Section 3 above may be waived or modified by the express written consent given by the Bondholder Proponents; provided, that no waiver or modification of Section 3(d)(i) herein that adversely affects the release granted to Settling Equityholders shall be effective against any Settling Equityholder that does not consent in writing to such waiver or modification; provided, further, that in the event that any of the conditions set forth in paragraphs (b), (c) and/or (d) of this Section 3 is not fully satisfied, consistent with Section 4(d) herein, the Bondholder Proponents may request 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) At the option of the Bondholder Proponents, the Plan may be amended to add, as proponents of the Plan (subject to receipt of any necessary approval from the Celotex Bankruptcy Court, and subject to the condition that such additional proponents shall not be eligible to participate in any actions to be taken under the Plan by the Plan Proponents, or to amend or otherwise modify the Plan), (A) The Celotex Corporation, (B) JWC and (C) in their capacity as representatives of certain of the Veil Piercing Claimants, the Veil Piercing Claimants' Representatives. The Parties shall continue to seek the prompt confirmation and consummation of the Plan, including the prompt approval by the Court of this Agreement in connection with the confirmation of the Plan. (b) Mutual Releases. The Plan shall provide that upon the Effective Date, the present and future signatories to this Agreement mutually release (except as waived or modified by the Bondholder Proponents and any person(s) or entity(ies) whose rights under such release would be contravened by such waiver or modification) each other and each of their respective present and former subsidiaries, Affiliates, directors, officers, partners, shareholders, employees, agents, advisors and representatives of and from any and all claims based upon any and all theories or bases of liability or recovery recognizable at law, in equity or in admiralty, under the laws of any jurisdiction, based upon, arising out of or in connection with 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 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), in each case only in connection with the LBO, action taken in contemplation of the LBO, or any contemporaneous or subsequent transaction(s) entered into as part of or arising out of or relating to any or all of the LBO transaction(s) or transfer(s) and the conduct of the Adversary Proceedings, 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.; provided that as to any such signatory who (x) is or was a holder of an Allowed Old Common Stock Interest or (y) is a present or former director, officer, partner, shareholder, employee, agent, advisor or representative of JWC or The Celotex Corporation or any of its subsidiaries, such person or entity shall become a Settling Equityholder, a Celotex Released Party, or a JWC Released Party, respectively, and provided further that there shall not be released any claims by creditors of Celotex or JWC, including without limitation the Veil Piercing Claimants against Celotex, JWC, any of the Celotex Released Parties or any of the JWC Released Parties, arising out of personal injury or property damage caused by or attributable to asbestos-containing products manufactured, sold or distributed by Celotex or JWC. (c) Dismissal of Lawsuits. The Plan Proponents (as may be necessary respecting the Adversary Proceedings only), the Veil Piercing Claimants' Representatives, The Celotex Corporation, JWC and the Official Celotex Committees shall use reasonable efforts to bring about the prompt dismissal, with prejudice, as soon as practicable after the Effective Date, of all known pending suits, appeals, proceedings and other actions, including the Adversary Proceedings, against (i) any or all of the Released Parties, (ii) any or all the Celotex Released Parties and\or (iii) any or all of the JWC Released Parties (solely in the capacity(ies) specified in the definitions of Released Parties, the Celotex Released Parties and the JWC Released Parties), to the extent such suits, appeals, proceedings or other actions are based upon, arising out of or in connection with the Veil Piercing-Related Issues as to the Released Parties and the issues covered by the mutual release specified in Section 4(b) herein as to the Celotex Released Parties and the JWC Released Parties, respectively. Upon request therefor, any Party shall provide the Bondholder Proponents with a certificate of a responsible person of such Party, in form and substance reasonably acceptable to the Bondholder Proponents, to the effect that such Party has fully complied with this Section 4(c). (d) Process Toward Realization of Finality. 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 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 Veil Piercing Settlement 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 best efforts to assist and cooperate with the Bondholder Proponents 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. (e) 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. (f) 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 in determining that the settlement of the Veil Piercing Claims set forth in this Agreement and in the Plan (i) is fair, equitable and reasonable and constitutes the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims and (ii) to the extent applicable, should be approved as part of confirmation of the Plan. (g) 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 Veil Piercing Claims. (h) Attorneys' Fees. (i) The Parties, except for the HHC Bondholders Committee, The Celotex Corporation and the HHC Creditors Committee, 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; (ii) the HHC Bondholders Committee, The Celotex Corporation and the HHC Creditors Committee 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 pursuant to Code sections 503(b) and/or 1129(a)(4), or otherwise, based on factors including those specified in clause (i) hereof; and (iii) the Parties shall support applications in the Chapter 11 Cases by counsel for Apollo and Lehman Brothers Inc. for reasonable attorneys' fees and costs pursuant to Code sections 503(b) and/or 1129(a)(4), or otherwise. (i) Confidentiality. From and after the Effective Date, the Veil Piercing Claimants' Representatives shall keep confidential, and 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 Veil Piercing-Related Issues. (j) At the request of the Bondholder Proponents, each of the Veil Piercing Claimants' Representatives shall use its best efforts to cause each of the law firms listed on Exhibit A attached hereto to indicate its assent to and/or support of this Agreement and/or the Plan, and/or to become a signatory to this Agreement, as directed by the Bondholder Proponents and in each case substantially in the form of Exhibit D attached hereto and as soon as practicable after such request is made. (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) promptly file the Celotex Proof of Claims against the Debtors for the benefit of its estate, (iii) at the request of the Bondholder Proponents, promptly file the Veil Piercing Proof of Claims against the Debtors for the benefit of its estate, (iv) accept treatment under the Plan of its claims against the Debtors pursuant to this Agreement, and (v) if it is the Celotex Settlement Fund Recipient, receive and hold the Settlement Fund for the exclusive benefit of the Veil Piercing Claimants, 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 Official Celotex Committees that are Parties and the Veil Piercing Claimants' Representatives 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. 6. Settling Equityholders. Each Settling Equityholder shall, as a Party, be entitled to the releases provided for under the Plan (as provided in Sections 3(a) and 4(b) herein, as the same may be modified or waived pursuant to Sections 3(a) and 4(b) herein). 7. Effectiveness of this Agreement. (a) The Original Agreement became effective by its terms (without the execution thereof by any Settling Equityholder or by the Jim Walter Corporation). The Original Agreement shall be amended and restated as set forth in this Agreement only upon the satisfaction of the following conditions on or prior to the Effective Date: (1) This Agreement shall have been executed by all of the Parties (other than any Settling Equityholder and other than the Jim Walter Corporation) to the Original Agreement; and (2) The Celotex Bankruptcy Court shall have entered an order (i) approving this Agreement, and (ii) authorizing and directing The Celotex Corporation to render performance in accordance with the terms and conditions of this Agreement. Prior to the satisfaction of all of the foregoing conditions, the Original Agreement shall remain in full force and effect in accordance with its terms. (b) In the event that Jim Walter Corporation does not cause its authorized representative to execute this Agreement and deliver it to the Bondholder Proponents on or before the date on which the Celotex Bankruptcy Court enters the order described in (a)(2) of this Section 7, then (i) Jim Walter Corporation shall not be, and shall not be deemed to be, a Party to this Agreement, (ii) none of the provisions of this Agreement applicable to JWC shall be, or shall become, effective and (iii) without limiting the foregoing, none of the provisions of this Agreement applicable to the release of any or all of the JWC Released Parties or the settlement, satisfaction or discharge of any claims against any or all of them shall be, or shall become, effective. (c) The Bondholder Proponents, in their sole and exclusive discretion, may waive any or all of the provisions contained in Section 7(b) herein. 8. Termination. This Agreement shall terminate upon the earlier to occur of the following: (a) Upon the giving of a notice by the Bondholder Proponents or the Veil Piercing Claimants' Representatives and The Celotex Corporation to the other at any time after an order shall have been entered which shall have become a Final Order that (i) 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(c) of the Amended Creditors' Plan, (ii) confirms a plan of reorganization in any or all of the Chapter 11 Cases other than the Plan or (iii) 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; and (b) The Bondholder Proponents, The Celotex Corporation, and the Veil Piercing Claimants' Representatives shall mutually agree in writing to terminate this Agreement. 9. Miscellaneous. (a) Fiduciary Duty. Notwithstanding any other provision contained herein, in the event the Original Creditor Plan, as amended to incorporate this Agreement, 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 further amendment to or modification of the Original Creditor Plan would violate such Party's fiduciary duty arising out of such Party's status as an official committee in the Chapter 11 Cases or in The Celotex Chapter 11 Case, or with respect to The Celotex Corporation, as a debtor-in-possession in The Celotex Chapter 11 Case. (b) Further Assurances. 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 Claims and the Veil Piercing Proof of Claims, and to promptly take such actions or cause to be taken such actions, as may be reasonably requested by the Bondholder Proponents to fully and promptly effect 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 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 or refrain from voting with respect to, any 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 suits within and without the jurisdiction of the United States. (k) Successors and Assigns. This Agreement is intended to bind and inure to the benefit of the Parties and 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 other signatories, if any, with respect to the subject matter hereof and, subject to Section 7(a) hereof, supersedes and preempts any prior agreement, understanding or representation made by and between any or all of such Parties and other signatories, if any, whether written or oral, which may have related to the subject matter hereof in any way whatsoever, including without limitation the Term Sheet. (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: Elihu Inselbuch 399 Park Avenue New York, NY 10022 (212) 319-7125 (212) 644-6755 (telecopier) For Itself and the AVDs BARON & BUDD By: 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: Joseph Rice P.O. Box 365 Barnwell, SC 29812 (803) 259-9900 (803) 577-7513 (telecopier) GREITZER AND LOCKS By: Gene Locks 1500 Walnut Street Philadelphia, PA 19102 (215) 893-0100 (215) 985-2960 (telecopier) AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. By: Ellen R. Werther 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: 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: Jeffrey W. Warren 220 South Franklin Street Tampa, FL 33602 (813) 224-9255 (813) 223-9620 (telecopier) For The Celotex Corporation HOYT, COLGAN & ANDREU By: Michael B. Colgan 2900 Barnett Plaza 101 E. Kennedy Blvd. Tampa, FL 33602 (813) 229-6688 (813) 229-3331 (telecopier) For Jim Walter Corporation STROOCK & STROOCK & LAVAN By: 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: 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: 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 & HUMPHREYS, P.A. By: John W. Kozyak Janet L. Humphreys 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: Sheldon S. Toll 2290 First National Building Detroit, MI 48226 For Celotex Asbestos Bodily Injury Claimants Committee (313) 256-7800 (313) 962-0176 (telecopier) SETTLING EQUITYHOLDERS: PAGE> CELOTEX RELEASED PARTIES: JWC RELEASED PARTIES: APPENDIX A A. "Affiliate" shall have the meaning set forth in Rule 501, promulgated under the Securities Act of 1933, as amended. B. "Allowed Indemnity Claim" shall mean an Allowed Claim for indemnification, reimbursement or contribution against any Debtor; provided, however, that any such Claim shall not be an Allowed Indemnity Claim if the agreement or other basis giving rise to the Claim is void or voidable. C. "Allowed Old Common Stock Interest" shall mean all interests in the outstanding common stock, $0.01 par value, of Walter Industries, Inc., as the surviving corporation of the merger between Hillsborough Holdings Corporation and Walter Industries, Inc., 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, Inc. and as to which no objection has been made or which has been allowed by a Final Order. D. "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. E. "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. F. "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. G. "Celotex Proof of Claims" shall mean 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 (a) 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 based on any of the Veil Piercing-Related Issues and/or (b) 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 Claims 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. H. "Celotex Released Party" shall mean any present or former director, officer, partner, shareholder, employee, agent, advisor or representative of The Celotex Corporation or any of its subsidiaries (in each case only in such person's or entity's aforementioned capacity and not otherwise) that, subject to the last two sentences hereof, (1) shall have become a signatory to this Agreement, following a written request of the Bondholder Proponents, on or prior to the later of (a) thirty (30) days after a copy of this Agreement is received by such person or entity or a representative thereof, and (b) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Plan and the plan filed by the Debtors, and (2) shall have taken no action(s) subsequent to the execution of this Agreement by the Parties which, in the reasonable determination of the Bondholder Proponents, would be reasonably likely to (a) impede the prompt distribution or approval of the disclosure statement relating to the Plan; (b) impede the prompt confirmation and effectiveness of the Plan; (c) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Plan and in the Chapter 11 Cases; (d) impede the prompt realization of Finality; or (e) result in a breach of this Agreement. If the Court or the Celotex Bankruptcy Court finds that the settlement set forth in this Agreement is not reasonable or the Plan is not confirmable unless each or any of such person(s) or entity(ies) is given a further opportunity to become a signatory to this Agreement and receiving the benefits specified herein for a Celotex Released Party by a specific date(s) set by the Court, then the date specified in (1) hereof shall be the date(s) set by the Court; provided further that the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any such person(s) or entity(ies). If the Court or the Celotex Bankruptcy Court at any time determines that any Celotex Released Party is not entitled to or should not be granted the release specified in Section 4(b) herein, then such person(s) or entity(ies) shall not be entitled to, and shall not receive such release. I. "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 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 and the liabilities of the Settlement Fund. J. "Chapter 11 Cases" shall mean each of the reorganization cases of the Debtors listed in the caption on the cover page of the Original Creditor Plan, all of which are being jointly administered under Case No. 89-9715-8P1. K. "Class A Common Stock" shall have the meaning assigned to that term (or another term serving the same or a similar function) under the Plan; provided, that the Class A Common Stock shall have economic rights, powers and privileges no more favorable than the economic rights, powers and privileges of the Class B Common Stock, unless less favorable treatment shall be agreed to in writing by the Veil Piercing Claimants' Representatives and the Celotex Settlement Fund Recipient. L. "Class B Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of Walter Industries, Inc. to be issued on the Effective Date. The Class B 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 percentages as the shares of the Class A Common Stock and other Class B Common Stock, taken together, are voted (based upon the number of votes cast). M. "Code" shall mean title 11 of the United States Code, 11 U.S.C. Section 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. N. "Confirmation Date" shall mean the date on which the Court enters the Confirmation Order. O. "Confirmation Order" shall mean the order(s) of the Court confirming the Plan and approving the transactions and settlements contemplated therein. P. "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. Q. "Debtors" shall mean the debtors and debtors in possession in the Chapter 11 Cases. R. "Effective Date" shall mean that business day selected by the Bondholder Proponents which shall be not more than ninety (90) days after the date on which all conditions to effectiveness set forth in the Plan have been satisfied or waived. S. "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 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. T. "JWC Released Party" shall mean any present or former director, officer, partner, shareholder, employee, agent, advisor or representative of JWC (in each case only in such person's or entity's aforementioned capacity and not otherwise) that, subject to the last two sentences hereof, (1) shall have become a signatory to this Agreement, following a written request of the Bondholder Proponents, on or prior to thirty (30) days after a copy of this Agreement is received by such person or entity or a representative thereof, and (2) shall have taken no action(s) subsequent to the execution of this Agreement by the Parties which, in the reasonable determination of the Bondholder Proponents, would be reasonably likely to (a) impede the prompt distribution or approval of the disclosure statement relating to the Plan (b) impede the prompt confirmation and effectiveness of the Plan; (c) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Plan and in the Chapter 11 Cases; (d) impede the prompt realization of Finality; or (e) result in a breach of this Agreement. If the Court or the Celotex Bankruptcy Court finds that the settlement set forth in this Agreement is not reasonable or the Plan is not confirmable unless each or any of such person(s) or entity(ies) is given a further opportunity to become a signatory to this Agreement and receiving the benefits specified herein for a JWC Released Party by a specified date(s) set by the Court, then the date specified in (1) hereof shall be the date(s) set by the Court; provided further that the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any such person(s) or entity(ies). If the Court or the Celotex Bankruptcy Court at any time determines that any JWC Released Party is not entitled to or should not be granted the release specified in Section 4(b) herein, then such person(s) or entity(ies) shall not be entitled to, and shall not receive, such release. U. "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 or in equity under the laws of any jurisdiction that are held or asserted by or that may be held or asserted by any holder of a claim or interest in the Chapter 11 Cases other than Veil Piercing Claimants (in such capacity), 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 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, 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. V. "New Common Stock" shall mean the collective reference to the Class A Common Stock and the Class B Common Stock. W. "New Common Stock Value" shall mean the Negotiated Enterprise Value (or, if the Court finds that the going concern enterprise value of the Debtors is equal to an amount other than $2,525,000,000, such other amount) less the sum of (a) the lesser of (i) $902 million and (ii) (A) the allowed amount of claims for all classes (excluding interest to be paid in the form of Class B Common Stock to be distributed to Classes S-1, S-2 and S-6) other than classes consisting of Subordinated Note Claims, Veil Piercing Claims or intercompany claims (i.e., Classes U-4 through U-7 and I-1 through I-3 in the Current Creditors Plan) accrued or owed on the Effective Date (including without limitation any part thereof paid or to be paid after the Effective Date), minus (B) the interest paid or accrued under the provisions of the Plan in respect of the claims referred to in the preceding clause (A) for the period from January 1, 1994 to the Effective Date (excluding interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6), and (b) the aggregate principal amount of Qualified Securities to be distributed to holders of Subordinated Note Claims and the Celotex Settlement Fund Recipient under the terms of the Plan on the Effective Date. X. "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. Y. "Qualified Securities" shall have the meaning assigned to that term (or another term serving the same or a similar function) under the Plan. Z. "Senior Claim Differential" shall mean the excess, if any, of $902 million over the difference between (a) the allowed amount of claims for all classes (excluding interest paid in the form of Class B Common Stock to be distributed to Classes S-1, S-2 and S-6), other than classes consisting of Subordinated Note Claims, Veil Piercing Claims or intercompany claims, accrued or owed on the Effective Date (including without limitation any part thereof paid or to be paid after the Effective Date) (the "Senior Claims"), and (b) the interest paid or accrued under the provisions of the Plan in respect of the Senior Claims for the period from January 1, 1994 to the Effective Date (excluding interest to be paid in the form of Class B Common Stock to Classes S-1, S-2 and S-6). AA. "Settling Equityholder" shall mean a holder of an Allowed Old Common Stock Interest (a) that, subject to the last two sentences hereof, shall have become a signatory to this Agreement on or prior to the later of (i) twenty (20) days after a copy of this Agreement is sent to such holder of an Allowed Old Common Stock Interest or a representative thereof, and (ii) the day prior to the date on which the Court holds the hearing on the adequacy of the disclosure statements respecting the Plan and the plan filed by the Debtors, and (b) that shall have taken no action(s) subsequent to becoming a signatory to this Agreement which, in the determination of the Bondholder Proponents, would be reasonably likely to (i) impede the prompt distribution or approval of the disclosure statement relating to the Plan; (ii) impede the prompt confirmation and effectiveness of the Plan; (iii) impede the use of the Negotiated Enterprise Value as the enterprise valuation of the Debtors for all purposes under the Plan and the Chapter 11 Cases; (iv) impede the prompt realization of Finality; or (v) result in a breach of this Agreement. If the Court finds that the settlement set forth in this Agreement is not reasonable or the Plan is not confirmable unless each or any of the holders of an Allowed Old Common Stock Interest is given a further opportunity to become a Settling Equityholder by becoming a signatory to this Agreement and receiving the benefits specified herein for a Settling Equityholder by a specific date(s) set by the Court, then the date specified in (a) hereof shall be the date(s) set by the Court. Notwithstanding the other provisions of "AA" hereof, the Bondholder Proponents shall have the right, exercisable on or before the Effective Date, to waive the date(s) specified herein for any person who is a holder of less than 5% of the issued and outstanding common stock, $0.01 per value, of Walter Industries, Inc., exclusive of any shares of such stock held in treasury. BB. "Settling Party" shall mean a Party to this Agreement, and each of the Debtors. CC. "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 (as each of such terms is defined in the Original Creditor Plan). DD. "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. EE. "Veil Piercing Claims" shall mean and be the collective reference to all existing claims and all claims that may be asserted in the future 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 Allowed Indemnity Claims. FF. "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, including, without limitation, each Settling Party based upon, arising out of or in connection with any of the Veil Piercing-Related Issues. GG. "Veil Piercing Proof of Claims" shall mean a proof(s) of claim(s) filed in the Chapter 11 Cases by (i) The Celotex Corporation and/or (ii) the Claimants' Attorneys and/or an appropriate representative(s) of Veil Piercing Claimants on behalf of one or more classes representing all Veil Piercing Claimants, solely 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 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. HH. "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 of any assets of 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 equity interests, 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. II. "Veil Piercing Settlement" shall mean the full and complete settlement, satisfaction, release and discharge of all Veil Piercing Claims, Veil Piercing Proceedings and all claims based upon LBO-Related Issues held by the Veil Piercing Claimants. EXHIBIT A ATTACHED AS EXHIBIT A TO THE VEIL PIERCING SETTLEMENT AGREEMENT (EXHIBIT 3A TO THE CREDITORS' JOINT PLAN OF REORGANIZATION) EXHIBIT B ATTACHED AS EXHIBITS 7 AND 8 TO THE CREDITORS' JOINT PLAN OF REORGANIZATION EXHIBIT C ATTACHED AS EXHIBIT C TO THE VEIL PIERCING SETTLEMENT AGREEMENT (EXHIBIT 3A TO THE CREDITORS' JOINT PLAN OF REORGANIZATION) EXHIBIT D , 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 Veil Piercing Settlement Agreement dated April , 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 4: SUMMARY OF TERMS FOR THE MID-STATE TRUST IV SECURED NOTES EXHIBIT 4 Summary of Terms for the Mid-State Trust IV Secured Notes Issuer Mid-State IV ("Trust IV" or the "Issuer") Issue Mid-State Trust IV Secured Notes (the "Secured Notes") Tax Status Debt of an owner trust Target Rating AAA/Aaa based on a surety which wraps an underlying A-/A3 quality bond Principal Amount $700,000,000 Rate [7.85%] (to be established according to market conditions on the Pricing Date) Average Life 5.9 years (at 2.5% CPR) Maturity 12 years (assuming no prepayments) Credit Support The Secured Notes will be secured by an undivided interest in $850 million of fixed-rate installment sale contracts ("Contracts") which are in turn secured by first mortgages on single-family residential properties. The Contracts in Mid-State Trust IV will be serviced in the same manner as those in Trusts II and III. The Secured Notes will be further secured by a surety bond on the assumption that the combination of the above credit support totaling $145 million, or approximately 17% of the total collateral for the Secured Notes, will give a shadow rating of "A" for the insurer's risk. Interest Payment Dates Monthly, interest paid in arrears on the day of each month. Optional Redemption The Secured Notes are redeemable on or after the date on which the principal balance is reduced to less than 10% of their original balance, at the option of the holder of the equity in Trust IV, in whole but not in part, at 100% of principal amount, plus accrued and unpaid interest thereon. Mandatory Redemption Principal of the Secured Notes will be amortized with all Remaining Available Funds, consisting of all collections on the Contracts remaining after payment of servicing fees, trust expenses and interest payments on the Trust IV Secured Notes. EXHIBIT 5: SUMMARY OF TERMS FOR MID-STATE TRUST II RESIDUAL BONDS Summary of Terms for the Mid-State Trust II Residual Bonds Issuer Mid-State Trust II (the "Issuer") Issue Mid-State Trust II Residual Bonds (the "Residual Bonds") Tax Status Debt of an owner trust Target Rating AAA/Aaa rating based on a surety bond, on the assumption that 23% subordination will give a shadow rating of no less than A-/A3 behind the surety and that Financial Security Assurance will approve the total arrangement. Principal Amount $75,000,000 Coupon [7.35%] (to be established according to market conditions on the Pricing Date) Average Life 3.5 years Interest Payment Dates Quarterly, interest paid in arrears Description The Residual Bonds represent an additional issuance of debt from a trust whose only material assets are expected to be $1,060 million economic balance of fixed-rate installment sale contracts ("Contracts") secured by mortgages on single-family residential properties and whose only material liabilities are expected to be $740 million of currently outstanding bonds, leaving an "overcollateralization amount" of $320 million. The Residual Bonds will be an additional class of debt which will have an aggregate face amount of $75 million, or $245 million less than the overcollateralization amount. Distributions Cash which would otherwise be released quarterly from the lien of the Mid-State Trust II bond indenture, net of trust expenses, will be distributed: -- first, to provide for payments of interest on the Residual Bonds; -- second, to retire $2,500,000 of the Residual Bonds; -- third, to retire additional Residual Bonds in the event that Contract liquidations are higher than a pre-determined threshold; and -- fourth, to the holders of the equity in Mid-State Trust II. EXHIBIT 6: SUMMARY OF TERMS FOR THE NEW UNSECURED NOTES EXHIBIT 6 WALTER INDUSTRIES, INC. Summary of Terms for New Unsecured Notes Issuer Walter Industries, Inc. (the "Company" or the "Issuer"). Issue New Unsecured Notes. Principal Amount Up to approximately $100 million (assuming 12/31/94 Effective Date). Maturity 10 years. Rate An interest rate per annum such that the conditions to qualification as a Qualified Security, as that term is defined in the Creditors' Plan, are met. Interest Payment Dates Semi-annually, interest paid in cash in arrears, on and . Optional Redemption The New Unsecured Notes are not redeemable prior to five (5) years after original issuance thereof. Thereafter, the New Unsecured Notes may be redeemed in whole or in part at the option of the Company upon prior notice at redemption prices similar to those prevailing in the market for similar debt securities at the time of issuance, 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 (including senior indebtedness), (ii) limitations on the creation of liens, (iii) limitations on restricted payments, (iv) limitations on dividends, (v) limitations on transactions with affiliates and (vi) limitations on asset sales, mergers and consolidations. Ranking The New Unsecured Notes will be unsecured Indebtedness of the Company and will be subordinate and junior in right of payment to other Indebtedness of the Company in the manner and to the extent that the instrument creating such other Indebtedness so provides. Required Offers to Purchase The Company will be required to offer to purchase the New Unsecured Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the redemption date as follows: (i) upon a change in control (to be defined to include a transfer of control to a person or entity, or "group" of persons or entities as that term is used in SEC Rule 13-d, (i) that did not hold or control, immediately after giving effect to the consummation of the Creditors' Plan, 5% or more of the New Common Stock, and (ii) that acquired control of the Company other than as a result of the conversion of any Class A Common Stock into Class B Common Stock); or (ii) upon a sale of substantially all of the assets of the Company. 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 Unsecured Notes when the same becomes due and payable; (b) default in the payment of interest on any New Unsecured 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 covenant or agreement of the Company under the New Unsecured 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 Unsecured Notes then outstanding; (d) there occurs with respect to 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, an event of default that has caused the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity and such indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration; (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, 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 Unsecured 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 Unsecured Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of and accrued interest on the New Unsecured Notes shall be immediately due and payable. In the event of 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 Unsecured 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 Unsecured 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 Unsecured 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. EXHIBIT 7: 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 7-1 2. Initial Registration Under the Securities Act 7-2 (a) Shelf Registration 7-2 (b) Effective Registration Statement 7-3 3. Securities Act Registration on Request 7-3 (a) Request 7-3 (b) Registration of Other Securities 7-4 (c) Registration Statement Form 7-4 (d) Effective Registration Statement 7-4 (e) Selection of Underwriters 7-5 (f) Priority in Requested Registration 7-5 (g) Shelf Registrations 7-5 4. Piggyback Registration 7-5 5. Expenses 7-6 6. Registration Procedures 7-6 7. Underwritten Offerings 7-9 (a) Requested Underwritten Offering 7-9 (b) Piggyback Underwritten Offerings; Priority 7-9 (c) Holders of Registrable Common Stock to be Parties to Underwriting Agreement 7-9 (d) Selection of Underwriters for Piggyback Underwritten Offering 7-10 (e) Holdback Agreements 7-10 8. Preparation; Reasonable Investigation 7-10 (a) Registration Statements 7-10 (b) Confidentiality 7-10 9. Postponements 7-11 10. Indemnification 7-11 (a) Indemnification by the Company 7-11 (b) Indemnification by the Offerors and Sellers 7-12 (c) Notices of Losses, etc. 7-12 (d) Contribution 7-12 (e) Other Indemnification 7-13 (f) Indemnification Payments 7-13 11. Registration Rights to Others 7-13 12. Adjustments Affecting Registrable Common Stock 7-13 13. Rule 144 and Rule 144A 7-13 14. Amendments and Waivers 7-14 15. Nominees for Beneficial Owners 7-14 16. Assignment 7-14 17. Calculation of Percentage or Number of Shares of Registrable Common Stock 7-14 18. Miscellaneous 7-14 (a) Further Assurances 7-14 (b) Headings 7-14 (c) No Inconsistent Agreements 7-14 (d) Remedies 7-14 (e) Entire Agreement 7-15 (f) Notices 7-15 (g) Governing Law 7-15 (h) Severability 7-15 (i) Counterparts 7-15 SCHEDULES: SCHEDULE A--HOLDERS OF REGISTRABLE COMMON STOCK SCHEDULE B--NOTICES REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of , 1994, by and among Walter Industries, Inc., a corporation (the "Company"), and the holders of Registrable Common Stock (as hereinafter defined) who are signatories or are deemed to be signatories to this Agreement pursuant to the Plan (as hereinafter defined) and any subsequent transferee thereof (the "Holders"). This Agreement is being entered into in connection with the acquisition, on the date hereof, by certain holders (the "Original Holders"), pursuant to the Plan, of the Class A Stock and Class B Stock (each as hereinafter defined). Upon the issuance of the Class A Stock and Class B Stock, each Original Holder will own the number of shares of Class A Stock and Class B Stock specified with respect to such Original Holder in Schedule A hereto. To induce the Holders of Registrable Stock 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 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. "Class A Stock" means the shares of common stock, $.01 par value per share, of the Company issued on the date hereof, 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 Class A Stock. "Class B Stock" means the shares of common stock, $.01 par value per share, of the Company issued on the date hereof, 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 Class B Stock. "Commission" means the U.S. Securities and Exchange Commission. "Common Stock" means, collectively, the Class B Stock and the Conversion Stock. "Conversion Stock" means the shares of Class B Stock issued or issuable upon conversion of the Class A Stock. For purposes of this Agreement, a Holder shall be deemed to hold unissued shares of Conversion Stock to the extent that such shares are issuable upon conversion of the shares of Class A Stock, if any, held by such Holder. "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. "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 and NASD fees, all fees and expenses of complying with state securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, 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 costs incurred by Requesting Holders in connection with such registration 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 , 1994, 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 []1 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 Creditors' 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 Class B Stock" means any of the Class B Stock held by the Holders from time to time as to which registration pursuant to the Securities Act is required for public sale. "Registrable Common Stock" means the (i) Registrable Class B Stock and (ii) the Registrable Conversion Stock. "Registrable Conversion Stock" means any of the Conversion Stock (including Conversion Stock issuable upon conversion of Class A Stock) 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. _______________________ 1 Insert principal amount and title of Notes issued by the Company. "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. 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 best efforts to have such Shelf Registration declared effective by the Commission not later than 90 days after the Effective Date. The Company agrees to use its 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 the Holders of at least 20% of the outstanding shares of Registrable Common Stock. 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, 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, the Holders 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 effective date of such registration, (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 20% of the shares of 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) Registrable Notes to be included in such registration pursuant to Section 4 of the Note Registration Rights Agreement 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 nine months, 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 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 acceptable to the Selling Holders owning at least a majority of the shares of Registrable Common Stock requested to be included in such registration, 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 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 (ii) all Registrable Notes (if any) requested to be registered pursuant to Section 4 of the Note Registration Rights Agreement by the holders thereof, pro rata among such holders on the basis of the aggregate principal amount of Registrable Notes requested to be registered by all such holders. (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 its Initial Shelf, proposes to register any of its securities (including, without limitation, 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(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 Business 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 Business Days after the receipt of any such notice (10 Business 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, 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, immediately upon notification to 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 price which any Requesting Holder shall have indicated to be acceptable to such Requesting Holder, such Requesting Holder shall then have the right to withdraw its request to have its Registrable Common Stock included in such registration statement 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; and (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. 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 Sections 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 all Expenses in connection with such registration. 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) or 4, 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 best efforts to obtain as promptly as practicable) the requisite registration statement to effect such registration and thereafter use its 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 Section 4 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 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 nine months 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), 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; (d) use its 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 request, (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 or to consent to general service of process in any such jurisdiction; (e) use it 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) 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; and (j) 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 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, the Requesting Holders holding a majority of the shares of Registrable Common Stock requested to be included in such registration (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 and the Registrable Notes requested to be registered pursuant to Section 4 of the Note Registration Rights Agreement, (A) 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 and (B) pro rata among the holders of the Registrable Notes on the basis of the aggregate principal amount of Registrable Notes requested to be registered by such 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 equity securities of the Company or securities convertible into or exchangeable or exercisable for equity securities of the Company issued after the date hereof 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 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 access to its books and records and such 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 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. 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 accounts 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. 10. Indemnification. (a) Indemnification by the Company. In the 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), 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, 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 and officers and each other Person, if any, who controls the Company (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 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 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. 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 provisions 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 (but shall include unissued shares of Conversion Stock that are issuable upon conversion of Class A Stock) 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 Holder of 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: 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 8: 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 8-1 2. Initial Registration Under the Securities Act 8-3 (a) Shelf Registration 8-3 (b) Exchange Registration 8-3 (d) Effective Registration Statement 8-4 3. Securities Act Registration on Request 8-4 (a) Request 8-4 (b) Registration of Other Securities 8-5 (c) Registration Statement Form 8-5 (d) Effective Registration Statement 8-6 (e) Selection of Underwriters 8-6 (f) Priority in Requested Registration 8-6 (g) Shelf Registrations 8-6 4. Piggyback Registration 8-6 5. Expenses 8-7 6. Registration Procedures 8-8 7. Underwritten Offerings 8-10 (a) Requested Underwritten Offerings 8-10 (b) Piggyback Underwritten Offerings; Priority 8-11 (c) Holders of Registrable Notes to be Parties to Underwriting Agreement 8-11 (d) Selection of Underwriters for Piggyback Underwritten Offering 8-11 (e) Holdback Agreements 8-11 8. Preparation; Reasonable Investigation 8-12 (a) Confidentiality 8-12 9. Postponements 8-12 10. Indemnification 8-13 (a) Indemnification by the Company 8-13 (b) Indemnification by the Offerors and Sellers 8-13 (c) Notices of Losses, etc. 8-14 (d) Contribution 8-14 (e) Other Indemnification 8-14 (f) Indemnification Payments 8-15 11. Registration Rights to Others 8-15 12. Adjustments Affecting Registrable Notes 8-15 13. Rule 144 and Rule 144A 8-15 14. Amendments and Waivers 8-15 15. Nominees for Beneficial Owners 8-15 16. Assignment 8-15 17. Calculation of Percentage Interest in Registrable Notes 8-16 18. Miscellaneous 8-16 (a) Further Assurances 8-16 (b) Headings 8-16 (c) No Inconsistent Agreements 8-16 (d) Remedies 8-16 (e) Entire Agreement 8-16 (f) Notices 8-16 (g) Governing Law 8-16 (h) Severability 8-16 (i) Counterparts 8-16 SCHEDULES: SCHEDULE A--HOLDERS OF REGISTRABLE NOTES SCHEDULE B--NOTICES REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of, 1994, by and among Walter Industries, Inc., a corporation (the "Company"), and the holders of Registrable Notes (as hereinafter defined) who are signatories or are deemed to be signatories to this Agreement pursuant to the Plan (as hereinafter defined) and any subsequent transferee thereof (the "Holders"). This Agreement is being entered into in connection with the acquisition, on the date hereof, by certain holders (the "Original Holders"), pursuant to the Plan, of the Notes (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 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 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. "Class A Stock" means the shares of common stock, $.01 par value per share, of the Company issued on the date hereof, 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 Class A Stock. "Class B Stock" means the shares of common stock, $.01 par value per share, of the Company issued on the date hereof, 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 Class B Stock. "Commission" means the U.S. Securities and Exchange Commission. "Common Stock" means, collectively, the Class B Stock and the Conversion Stock. "Common Stock Registration Rights Agreement" means the Registration Rights Agreement, dated as of , 1994, among the Company and the holders of Registrable Common Stock (as defined therein) who are signatories or are deemed to be signatories thereto. "Conversion Stock" means the shares of Class B Stock issued or issuable upon conversion of the Class A 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. "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 and NASD fees, all fees and expenses of complying with state securities or blue sky laws, all rating agency fees, all word processing, duplicating and printing expenses, messenger and delivery expenses, 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 Securities making a request pursuant to Section 3(a) hereof (selected by the Holders holding a majority of the aggregate principal amount of the 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 costs incurred by Requesting Holders in connection with such registration shall be deemed to be Expenses. "Initiating Holders" has the meaning set forth in Section 3(a) hereof. "Indenture" means the Indenture between the Company and , as trustee (the "Trustee"), dated , 1994, as amended from time to time, relating to the Notes. "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. [FN] Insert principal amount and title of Notes issued by Company. "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 Creditors' 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 Notes 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 5 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 best efforts to have such Shelf Registration declared effective by the Commission not later than 90 days after the Effective Date. The Company agrees to use its 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. (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 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) (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 available 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) hereof, 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"), as the case may be, 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 the Holders of at least 20% of the outstanding aggregate principal amount of the Registrable Notes. 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, 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 for disposition in accordance with the intended method stated in such request, and (ii) all other Registrable Notes which the Company has been requested to register (for disposition in accordance with Section 3(c) hereof) 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 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, the Holders 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 effective date of such registration, (D) subject to the last sentence of Section 5(a) hereof, any Holder whose Registrable Notes were 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 Notes, such that the Holders that have not elected to withdraw do not hold, in the aggregate, the requisite percentage of the 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 pursuant to this Section 3(a) unless 20% of the aggregate principal amount of the 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 (i) Registrable Notes and (ii) Registrable Common Stock to be included in such registration pursuant to Section 4 of the Common Stock Registration Rights Agreement shall be included among the securities covered by such registration unless the Selling Holders holding not less than a majority of the 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 or 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 nine months, 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 holding at least a majority of the outstanding principal amount of the 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 acceptable to the Selling Holders holding at least a majority of the aggregate principal amount of Registrable Notes requested to be included in such registration, 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 (ii) all shares of Registrable Common Stock (if any) requested to be registered pursuant to Section 4 of the Common Stock Registration Rights Agreement by the holders thereof, pro rata among such holders on the basis of the number of shares requested to be registered by all such holders. (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 expiration of the Initial Shalf Registration, as the case may be, proposes to register any of its securities (including, without limitation, 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 Business 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 Business Days after the receipt of any such notice (10 Business 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, the Company shall, subject to Section 8(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, immediately upon notification to 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 price which any Requesting Holder shall have indicated to be acceptable to such Requesting Holder, such Requesting Holder shall then have the right to withdraw its request to have its Registrable Notes included in such registration statement 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; and (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. 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 Section 4 hereof shall be deemed to have been effected pursuant to Section 3(a) hereof. 5. Expenses. (a) Registration Expenses. The Company shall pay all Expenses in connection with any registration initiated pursuant to Sections 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 on the basis of the 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 all Expenses in connection with such registration. 6. Registration Procedures. If and whenever the Company is required to effect any registration under the Securities Act as provided in Section 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) or 4, 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 best efforts to obtain as promptly as practicable) the requisite registration statement to effect such registration and thereafter use its 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 Section 4 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 with respect to the disposition of all Registrable Notes or Exchange Securities covered by such registration statement until such time as all of such Registrable Notes or Exchange Securities, as the case may be, have 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 nine months after the effective date of the registration statement; and provided, further, that with respect to the Initial Shelf Registration, 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 Registration, 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), 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 each such seller or Holder may reasonably request; (d) use its 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 request, (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 (iv) be obligated to be so qualified 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) furnish to each seller of Registrable Notes, each such seller's underwriters, if any, each, 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, 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 such 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 majority of the Selling Holders 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 types 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, the Requesting Holders holding a majority of the aggregate principal amount of the Registrable Notes requested to be included in such registration (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 and the Registrable Common Stock requested to be registered pursuant to Section 4 of the Common Stock Registration Rights Agreement, (A) 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 and (B) pro rata among the holders of the Registrable Common Stock on the basis of the number of shares of Registrable Common Stock requested to be registered by such 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 5 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, or securities convertible into or exchangeable or exercisable for debt 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. 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 registered under such registration statement, the underwriters, if any, and its respective counsel and accountants the 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 access to its books and records and such 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 opinion of any such Holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. (a) 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. If the Company shall fail (i) 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. 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), 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, 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 and officers and each other Person, if any, who Controls the Company (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 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. 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, 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) or 2(b) 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 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 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 Notes are 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 Notes for purposes of any request or other action by any Holder or Holders of Registrable Notes pursuant to this Agreement or any determination of the number or percentage of Registrable Notes held by any holder or holders of Registrable Notes 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 Holders 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 Interest in Registrable Notes. For purposes of this Agreement, all references to an aggregate principal amount of the Registrable Notes shall be calculated based upon the aggregate principal amount of the Registrable Notes outstanding at the time such calculation is made and shall exclude any Registrable Notes 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: HOLDERS OF REGISTRABLE NOTES Holder Principal Amount NOTICES If to the Company, to: [ ] Attention: Tel: Fax: with a copy to: Attention: Tel: Fax: If to the Stockholders, to: with a copy to: EXHIBIT 9: 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 and any other agreement(s) to which KKR or a KKR Affiliate and any Debtor or Affiliate thereof is a party (other than an agreement for an Allowed Indemnity Claim). 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 XII EXHIBIT IV Summary of Treatment and Classes ($000's)
Administrative & Priority CLASS A-1 CLASS P-1 CLASS P-2 CLASS P-3 Claims Summary Federal Excise Tax and State and Administrative Claims Federal Income Tax Claims Reclamation Claims Local Tax Claims TREATMENT OF ALLOWED Payment of cash in an amount Payment of Allowed Amounts in Payment of cash in an amount Payment ofcash in an CLAIMS UNDER PLAN equal to the Allowed Amount equal quarterly installments over a equal to the Allowed Amount amount equal to the of the claim without interest. 6 year period from date of the of the claim without interest. Allowed Amount of the Assessment by the IRS of such Claim, claim without interest. with interest on unpaid amounts from the later of the Effective Date or the date of Assessment equal to the Prime Lending Rate. ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $32,000 $14,000-$40,000 $756 $8,384 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 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 Claim ----------------------- -------------------- ---------------- ------------------ TREATMENT OF ALLOWED Payment of Allowed Payment of Allowed Payment of Allowed Payment of Allowed Amounts in full in Amounts in full in Amounts in full Amounts in full in cash. cash except for cash less any amounts in cash. $28,221 to be paid applied by the Debtors in Class B Common Stock. to repay any such claim subsequent to the Stub Period and prior to the Effective Date except for $9,279 to be paid in Class B Common Stock. CLAIMS UNDER PLAN ESTIMATE OF ALLOWED AMOUNT $382,248 $130,622 $5 $715 AS OF DECEMBER 31, 1994 ENTITY: Class Status Class Status Class Class - ------- ----- ------ ----- ------ ----- ----- Best Class S-1B Borrower Best (Miss.) 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-3EE 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 Note: Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $152.6 million. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would total $354,027. Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $51.9 million. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would total $121,343.
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 Life & Revolving Credit Working Capital Equipment Purchases Senior Note Claims Accident Insurance Agents Claim Agents Claim TREATMENT OF ALLOWED Company Claims CLAIMS UNDER THE PLAN - --------------------- ----------------------- -------------------- ------------------ ----------------- --------------- Payment of Allowed Payment of Allowed Payment of Allowed Payment of Payment of Amounts in full in cash. Amounts in cash in Amounts in cash Allowed Amounts Allowed in an amount equal and balance of in full in cash. Amounts in to such Holder's Pro Allowed Claims full in Rata Share of Class reinstated. in cash. S-6 Fund and a principal amount of New Senior Notes equal to the difference between the Allowed Amount of such Holder's Series B & C Note Claim and the amount of the cash received except for $37,500 to be paid in Class B Common Stock. ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $48 $359,729-$368,474 $7,494 Exact ENTITY: Class Amounts Class Status Class Class Class - ---------------- --------- ------- ---------- ---------- ------------ ----------- ----------- Best Class S-8B Class S-9B 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-8K 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-8GG JW Walter Class S-8R JW Window Components, Inc. Class S-5S 0 Class S-8S Class S-9S 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 Walker Industries Class S-6EE Guarantor Class S-7EE Class S-8EE Class S-9EE Pipe Realty Class S-8BB 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 - ---------------- Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $165.4 million-$174.1 million. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would total $322,229 x $330,974. 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 Convenience Other Industries Class Claims Unsecured Claims IRB Claims ----------- ------------ ---------------- TREATMENT OF ALLOWED Payment of Payment of Pre-Filing Payment of 75% of Pre-Filing Date Unsecured Allowed CLAIMS UNDER PLAN Allowed Date Unsecured Allowed Amounts on or promptly after the Effective Date, payment Amounts in Amounts plus Post-Filing within six months thereafter of the balance of the cash and Date interest from the Pre-Filing Date Unsecured Allowed Amounts plus balance of Filing Date to the Post-Filing Date interest on the Pre-Filing Date Allowed Claims Effective Date at the Unsecured Allowed Amounts from the Filing Date to the reinstated. General Unsecured Interest 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 $8,792 $1,704 $93,775 AMOUNT AS OF DECEMBER 31, 1994 Exact Exact ENTITY: Class Class Amounts Class Amounts - ------- ----- ----- ------- ----- ------- 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 Properties Class U-3H 0 Hillsborough Class U-3A 2,550 Home Improvement Class U-2DD 9 Class U-3DD 32 Homes Holdings Class U-3I 0 Jefferson Warrior Railroad 0 Jim Walter Homes Class U-2K 280 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 U-3W 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 - ---------------- 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 Summary CLASS U-4 CLASS U-5 CLASS U-6 CLASS U-7 Senior Pre-LBO Debenture Veil Piercing Subordinated Reset Notes 17% Subordinated Notes Claims Proceedings Claims ------------------------ ---------------------- ------------------- ------------------ TREATMENT OF ALLOWED Payments of Allowed Amount Payments of Allowed Amounts Payments of Allowed Amount Payment of Allowed CLAIMS UNDER PLAN in Full in combination of in Full in combination of in Full in combination of Amounts in full in a Qualified Securities and Qualified Securities and Qualified Securities and combination of Class A Common Stock. Class A Common Stock. Class B Common Stock. Qualified Securities and Class B Common Stock to the Veil Piercing Claims Trust on behalf of Holders of Class U-7 Claims. ESTIMATE OF ALLOWED $479,261 $379,254 $239,472 $450,000 plus AMOUNT AS OF the Senior Claim DECEMBER 31, 1994 Differential, if any ENTITY: Class Status Class Status Class Status - ------- ------ ------ ----- ------ ----- ------ 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-5EE 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-5Z Issuer Vestal Manufacturing Co. Walter Industries/Other Walter Land - ---------------- This represents the aggregate of Allowed Amounts against all Debtors. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would equal $525,000.
Summary of Treatment and Classes ($000's) Intercompany Claims Summary CLASS I-1 CLASS I-2 CLASS I-3 Pre-Filing Intercompany Post Filing Date Intercompany Intercompany IRB Claims Notes Payable Claims Notes Payable Claims ----------------------- ----------------------- ---------------------------- TREATMENT OF ALLOWED Payment in cash in an amount Class I-2 Claims will be Class I-3 Claims will be CLAIMS UNDER PLAN equal to the Allowed Amount reinstated on the books and reinstated on the books and of the claim without interest. records of the respective records of the respective Debtors. Debtors. Pre-Filing Date Pre-Filing Date Intercompany Intercompany Notes Payable Notes Payable may be paid after may be paid after the the Effective Date in the ordinary Effective Date in the ordinary course of business. course of business. ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $7,350 $1,248,631 $2,006,003 Exact Exact ENTITY: Class Amounts Class Amounts - ------- ----- ------- ----- ------- 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 Properties 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 391,971 Jim Walter Resources Class I-2M 127,199 Class I-3M 7,838 JW Aluminum 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 V DIRECTORS AND OFFICERS OF EACH OF THE DEBTORS Set forth herein are lists of the Directors and Officers of each of the Debtors and Non-Debtor Affiliates, other than Old Walter Industries, Resources Holdings, Jim Walter Resources and United Land as of January 1, 1994 (ages are as of August 1, 1993). For more detailed biographical information concerning certain of the Directors and Officers included herein and biographical information concerning the Directors and officers of Walter Industries, see "POST-CONSUMMATION -- Management -- Directors and Officers of the Debtors." (a) Directors (i) Walter Industries -- see "POST-CONSUMMATION -- Management -- Directors and Officers of the Debtors -- Directors of Walter Industries" (ii) Best G. Robert Durham Kenneth J. Matlock James W. Walter (iii) Best (Miss.) G. Robert Durham Kenneth J. Matlock Dana A. Snyder James W. Walter William H. Weldon (iv) JW Insurance G. Robert Durham Kenneth J. Matlock James W. Walter (v) Coast to Coast; Dixie and Home Improvement G. Robert Durham Robert W. Michael James W. Walter (vi) Computer Services G. Robert Durham Kenneth J. Matlock William H. Weldon (vii) Hamer Properties; JW Walter G. Robert Durham Kenneth J. Matlock William N. Temple (viii) Jim Walter Homes G. Robert Durham Robert W. Michael Kenneth J. Matlock James W. Walter (ix) JW Aluminum Richard E. Almy G. Robert Durham Kenneth J. Matlock James W. Walter (x) Jim Walter Resources (formerly named JW Resources) William Carr G. Robert Durham James W. Walter (xi) United Land (formerly named Pipe Realty) G. Robert Durham Kenneth J. Matlock William N. Temple James W. Walter (xii) Window Components G. Robert Durham Robert E. Rudolph James W. Walter (xiii) Window Components (Wisc.) G. Robert Durham Kenneth J. Matlock Robert E. Rudolph (xiv) Walter Land G. Robert Durham Kenneth J. Matlock William N. Temple James W. Walter (xv) Mid-State Homes G. Robert Durham Kenneth J. Matlock Sam J. Salario James W. Walter William H. Weldon (xvi) Sloss G. Robert Durham Lee C. Houlditch Kenneth J. Matlock James W. Walter (xvii) Southern Precision Earl E. Case G. Robert Durham Kenneth J. Matlock William N. Temple James W. Walter (xviii) U.S. Pipe G. Robert Durham James W. Walter William N. Temple (xix) Vestal G. Robert Durham Kenneth J. Matlock David M. Vestal James W. Walter (xx) Computer Holdings; Hamer Holdings; Homes Holdings; JWI Holdings; Land Holdings; Mid-State Holdings and Railroad Holdings Michael T. Tokarz Perry Golkin (xxi) Non-Debtor Affiliates a. Cardem G. Robert Durham Kenneth J. Matlock Richard D. Spurling William N. Temple William H. Weldon Peter J. Willitts b. J. W. Railroad G. Robert Durham Lee C. Houlditch Kenneth J. Matlock William H. Weldon c. Black Warrior Methane William Carr Ralph H. Daily G. Robert Durham David Faulkinberry Donald G. Russell William N. Temple d. Black Warrior Transmission William Carr Ralph H. Daily G. Robert Durham David Faulkinberry Donald G. Russell William N. Temple - ---------------- [FN] Member of law firm of Appleby, Spurling & Kempe, Bermuda counsel to CARDEM. Employee of Johnson & Higgins (Bermuda) Limited, third party manager of Cardem. Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its parent. (See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Businesses and Properties of the Debtors -- Non-Debtor Affiliates -- Black Warrior Methane; Black Warrior Transmission.")
(b) Officers Name Age Position - ---- --- -------- (i) Best Dana A. Snyder President Leola M. Voss 61 Vice President -- Finance Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary William Kendall Baker Treasurer John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (ii) Best (Miss.) Dana A. Snyder President Leola M. Voss Treasurer Kenneth J. Matlock Vice President William T. Robinson, Jr. 66 Vice President and Assistant Secretary William H. Weldon Vice President and Secretary Thomas G. Ketcham Assistant Treasurer (iii) JW Insurance Dana A. Snyder President Kenneth J. Matlock Vice President Leola M. Voss Vice President William H. Weldon Vice President William Kendall Baker Treasurer and Assistant Secretary Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (iv) Coast To Coast Roger A. Crabb President Kenneth J. Matlock Vice President William W. Weldon Vice President Mary C. Snow Secretary William Kendall Baker Treasurer and Assistant Secretary Thomas G. Ketcham Assistant Treasurer John F. Turbiville Assistant Secretary (v) Dixie Robert W. Michael President Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary William Kendall Baker Treasurer Thomas G. Ketcham Assistant Treasurer Stephen H. Foxworth Assistant Treasurer John F. Turbiville Assistant Secretary (vi) Home Improvement Robert W. Michael President D. Wayne Hornsby Vice President Kenneth J. Matlock Vice President William H. Weldon Vice President William Kendall Baker Treasurer Mary C. Snow Secretary S. Louise Russell Assistant Secretary John F. Turbiville Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer (vii) Computer Services William H. Weldon President Kenneth J. Matlock Vice President and Treasurer William M. Lammons 55 Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (viii) Hamer Properties William N. Temple President Kenneth J. Matlock Vice President William H. Weldon Vice President and Treasurer Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (ix) JW Walter William N. Temple President Kenneth J. Matlock Vice President William H. Weldon Vice President and Treasurer Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (x) Jim Walter Homes Robert W. Michael President and Chief Operating Officer Sam P. Bullara, Jr. Executive Vice President D. Wayne Hornsby Executive Vice President William Kendall Baker Vice President, Treasurer, Chief Financial Officer and Chief Accounting Officer Michael M. Roberts 46 Senior Vice President Sam J. Salario Vice President Leo Almerico 59 Vice President and Controller B. Craig Calhoun 42 Vice President Herbert R. Clarkson 60 Vice President Daisy B. Collins 56 Vice President Thomas L. Hires, Jr. 36 Vice President Alexander M. Pollock 61 Vice President Joseph P. Richardson, Jr. 40 Vice President Richard A. Ward 45 Vice President S. Louise Russell Secretary Kenneth J. Matlock Vice President William H. Weldon Vice President Frank A. Hult Assistant Secretary John F. Turbiville Assistant Secretary Mary C. Snow Assistant Secretary Norma J. Padron 54 Assistant Controller Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer and Assistant Secretary (xi) JW Aluminum Richard E. Almy President and Chief Operating Officer Russell F. Penley 49 Vice President -- Operations Bobby J. Proctor 61 Vice President -- Finance and Treasurer Roger W. Wilson 59 Vice President -- Marketing and Sales Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xii) Jim Walter Resources (formerly named JW Resources) William Carr President and Chief Operating Officer James M. Sims Vice President, Chief Financial Officer and Chief Accounting Officer Kenneth J. Matlock Vice President William H. Weldon Vice President and Treasurer Mary C. Snow Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xiii) United Land (formerly named Pipe Realty) William N. Temple President Kenneth J. Matlock Vice President E. Jack Mize, Jr. Vice President and Treasurer William H. Weldon Vice President and Assistant Secretary Larry O. Bailey Controller Mary C. Snow Secretary Lewis R. Knowles Assistant Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xiv) Window Components Robert E. Rudolph President Edmund W. Lanctot, Jr. 47 Vice President -- Sales and Marketing J. Randy Beard 43 Vice President and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xv) Window Components (Wisc.) Robert E. Rudolph President and Chief Operating Officer Edmund W. Lanctot, Jr. Vice President -- Sales and Marketing Kenneth J. Matlock Vice President J. Randy Beard Vice President and Treasurer William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xvi) Walter Land William N. Temple President Kenneth J. Matlock Vice President and Treasurer William H. Weldon Vice President, Controller and Assistant Secretary Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xvii) Mid-State Homes Sam J. Salario President Herbert R. Clarkson Vice President Kenneth J. Matlock Vice President Becky L. Mook 51 Vice President -- Administration and Secretary Alexander M. Pollock Vice President William H. Weldon Vice President and Chief Financial Officer William Kendall Baker Treasurer Sam P. Bullara, Jr. Assistant Secretary Bonnie K. Doyne 46 Assistant Secretary Mary C. Snow Assistant Secretary John F. Turbiville Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer and Assistant Secretary (xviii) Sloss Lee C. Houlditch President Frank E. Haver 61 Vice President R. Lee Vinzant 41 Vice President and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xix) Southern Precision Earl E. Case President Harold F. Bailey 63 Vice President Kenneth J. Matlock Vice President William N. Temple Vice President William H. Weldon Vice President Mary C. Snow Secretary Donald M. Kurucz Treasurer John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xx) U.S. Pipe William N. Temple President and Chief Operating Officer Harry L. Ransom Vice President -- Marketing William E. Fleck Vice President -- Manufacturing E. Jack Mize, Jr. Vice President -- Finance, Treasurer, Chief Financial Officer and Chief Accounting Officer Michael Roper 62 Vice President -- International Sales Larry O. Bailey 46 Controller and Assistant Secretary Lewis R. Knowles 56 Assistant Secretary Joseph W. Spransy Assistant Secretary Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary Frank A. Hult Assistant Secretary John F. Turbiville Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xxi) Vestal David M. Vestal President Keith E. Shope 41 Vice President Clyde L. Wells 49 Controller and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xxii) Computer Holdings; Hamer Holdings; JWI Holdings; Land Holdings; Mid-State Holdings and Railroad Holdings Michael T. Tokarz President and Chief Executive Officer Perry Golkin Vice President Donald M. Kurucz Vice President, Treasurer and Assistant Secretary Kenneth J. Matlock Vice President William H. Weldon Vice President, Controller and Assistant Secretary Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xxiii) Homes Holdings Michael T. Tokarz President and Chief Executive Officer Perry Golkin Vice President Donald M. Kurucz Vice President, Treasurer and Assistant Secretary Kenneth J. Matlock Vice President and Chief Financial Officer William H. Weldon Vice President, Controller, Assistant Secretary and Chief Accounting Officer Mary C. Snow Secretary Frank A. Hult Assistant Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xxiv) Non-Debtor Affiliates a. Cardem Kenneth J. Matlock President Peter J. Willitts Vice President Richard D. Spurling Secretary Deborah Hubbard-Taylor Assistant Secretary William N. Temple Vice President William H. Weldon Vice President Thomas G. Ketcham Assistant Vice President Donald M. Kurucz Treasurer Stephen H. Foxworth Assistant Treasurer b. J.W. Railroad Lee C. Houlditch President and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Thomas G. Ketcham Assistant Treasurer c. Black Warrior Methane Robert G. Sanders President and General Manager John A. Bearden 47 Controller David Faulkinberry Vice President Joseph W. Spransy Secretary James M. Sims Treasurer William Carr Assistant Treasurer Richard Bates Assistant Secretary John F. Turbiville Assistant Secretary d. Black Warrior Transmission Robert G. Sanders President and General Manager David Faulkinberry Vice President Joseph W. Spransy Secretary James M. Sims Treasurer William Carr Assistant Treasurer Richard Bates Assistant Secretary John F. Turbiville Assistant Secretary John A. Bearden Controller - ---------------- Employee of Johnson & Higgins (Bermuda) Limited, third party manager of Cardem. Member of law firm of Appelby, Spurling & Kempe, Bermuda counsel to Cardem. Employee of law firm of Appelby, Spurling & Kempe, Bermuda counsel to Cardem. Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its parent. (See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Businesses and Properties of the Debtors -- Non-Debtor Affiliates -- Black Warrior Methane; Black Warrior Transmission.")
EXHIBIT VI WALTER INDUSTRIES, INC. NOTES TO LIQUIDATION ANALYSIS The following Liquidation Analysis has been prepared to indicate values which might be obtained by impaired Classes of Claims and impaired Classes of Interests if the assets of Walter Industries (i.e., stock of the Operating Businesses) were sold pursuant to a Chapter 7 liquidation, as an alternative to the continued independent operation of the Debtors and structured payments under the Creditors' Plan. Underlying the Liquidation Analysis are a number of estimates and assumptions that are inherently subject to significant legal, business, economic and competitive uncertainties and contingencies beyond the control of the Debtors as well as assumptions with respect to the liquidation decisions which could be subject to change. Accordingly, there can be no assurance that the values reflected in the Liquidation Analysis would be realized if Walter Industries were, in fact, to undergo such a liquidation, and actual results could vary materially from those shown here. This Liquidation Analysis has been prepared assuming that the Chapter 11 Cases are converted to cases under Chapter 7 on December 31, 1994 (the assumed Effective Date under the Creditors' Plan) and that the sale of the stock of the Operating Businesses occurs on or before December 31, 1995, at which time it is assumed that the Chapter 7 trustee would make a distribution of the proceeds to creditors. It is assumed that a Chapter 7 trustee would attempt to maximize the value of the estates, consistent with the trustee's fiduciary duties, and, therefore, that the trustee would attempt to sell the stock of the Operating Businesses to minimize substantial liabilities that would otherwise arise. This liquidation strategy materially varies from that set forth in the Liquidation Analysis included in the Debtors' Disclosure Statement, (the "Debtors' Liquidation Analysis"), which, among other things, is based on the sale of assets. The Debtors' approach, which does not take advantage of the tax savings arising from the Debtors' Court-approved Mirror Liquidation Plan, results in a substantially higher tax liability than that used in the Proponents' Liquidation Analysis and, as such, would leave less value available for distribution to creditors. The Proponents believe that a Court order providing for potential buyers to purchase the stock of the Operating Businesses free and clear of all liens and encumbrances (pursuant to Sections 105 and 363(f) of the Bankruptcy Code) would enable the stock of the Operating Businesses to be sold. As noted below, the Proponents also have revised certain other assumptions in the Debtors' Liquidation Analysis, such as the appropriate discounts, if any, for the sale of stock of the Operating Business. Additionally, unlike the Debtors' Liquidation Analysis, which has a $215 million to $322 million discount, the Liquidation Analysis does not discount the Mid-State Homes Mortgage business. A discount for the Mid-State Homes mortgage business is contradicted by the Debtors' prior experience selling mortgages and the underlying notes secured thereby owned by Mid-State Homes during the Chapter 11 Cases. - ---------------- [FN] Given the Court's December 31, 1993 deadline for filing Chapter 11 plans and disclosure statements, the Proponents (and the other creditor proponents of plans filed by that deadline) adopted their Liquidation Analysis from the Debtors' previous Disclosure Statement that was on file with the Court. The Proponents had assumed that the Debtors' analysis would have been prepared consistent with what the Proponents believe is the proper approach, and that the Proponents would have the further opportunity to verify, update and amend the analysis in the final version of this Disclosure Statement. The Proponents have come to the belief that the Debtors' analysis was, in fact, fundamentally flawed, and accordingly have revised it as set forth herein. As noted in the Disclosure Statement, the Proponents believe the Debtors' choice of liquidation on an asset sale basis rather than a stock sale basis and other assumptions in the Debtors Liquidation Analysis were made to support a legal argument that the Proponents of the Creditors' Plan expect the Debtors to make with respect to the treatment of post-petition interest on unsecured Claims under the Debtors' Plan of Reorganization. Consistent with the Debtors' treatment in their Liquidation Analysis, this Liquidation Analysis has been prepared on a consolidated basis rather than on an individual Debtor basis. This approach was taken because the Debtors' complex liability structure makes an accurate allocation of claims by and against individual Debtors (including the joint and several Claims of the Revolving Credit and Working Capital Bank, Series B&C Senior Noteholders and unsecured bondholders), as well as Claims under intercompany guarantees and contingent assets under intercompany Contribution Agreements, impractical for these purposes. The Liquidation Analysis does, however, recognize the unique nature of the general unsecured trade claims against the Debtors' Operating Businesses. The Proponents believe that a Chapter 7 trustee would seek to allow unsecured trade Creditor Claims based on the facts that these post-LBO claims are asserted solely and directly against the Debtors' Operating Businesses, including Debtors against which no Subordinated Note Claims are asserted, and the potential fraudulent transfer claims that such Creditors would assert. Such allowance, constituting the payment in full of such Claims including post-petition interest at a compromised rate that is below applicable legal rates, is contained in the Liquidation Analysis. Except as described above, in the next succeeding paragraph, and for certain adjustments described in the accompanying Notes, estimates of expenses and claims have generally been adopted from the Debtors' Liquidation Analysis. Most significantly, this Liquidation Analysis differs from the Debtors' Liquidation Analysis with respect to the resolution of the asbestos-related, veil piercing claims, because the Creditors' Plan's Effective Date, unlike the Effective Date under the Debtor's Plan, is not conditioned upon the final, successfully-litigated resolution of those claims. Given the enormous magnitude of the asbestos-related, veil piercing claims, the complexity of the issues which will be raised on appeal of the Court's April 18, 1994 declaratory judgment decision and the protracted nature of the appellate process, the Proponents believe that a Chapter 7 trustee would attempt to negotiate a settlement of these claims in order to expedite distributions to creditors and to avoid a potential adverse appellate decision that could seriously dilute the distribution to creditors. Therefore, the Proponents' Liquidation Analysis assumes a settlement amount for asbestos-related, veil piercing claims of $450 million. This is based, in part, on the fact that the Veil Piercing Claimants have negotiated a settlement of approximately $450 million with the Proponents. If, however, the Chapter 7 trustee chose to litigate the asbestos-related, veil piercing claims and ultimately lost, the liability would be far higher than the settlement amount; the asbestos litigants have asserted that the underlying personal injury asbestos Claims exceed $10 billion. If the Chapter 7 trustee chose to litigate the asbestos-related, veil piercing claims and ultimately prevailed, the Proponents believe that the Debtors' estate would have sufficient value to pay in full the pre-Filing Date amount of all Claims and post-petition interest on Secured Claims, and leave a significant surplus available for post-petition interest on unsecured Claims. The Proponents' review of the Debtors' Liquidation Analysis, which assumes an ultimate litigation victory by a Chapter 7 trustee, is set forth in Article X of the Proponents' Disclosure Statement. The Proponents' review concludes that, based on reasonable assumptions that have been omitted from the Debtors' Liquidation Analysis and after correcting errors in that Analysis, there would be a significant surplus on a potential litigation victory basis after payment in full of all pre-Filing Date Claims and post-petition interest on all Secured Claims. Considering all of the risks of the asbestos-related, veil piercing litigation, the associated costs and delays, and the potentially devastating consequences to creditors of a litigation loss, the Proponents believe that their Liquidation Analysis demonstrates that the Creditors' Plan is in the best interests of creditors. Various other specific assumptions relevant to this Liquidation Analysis are set forth in the accompanying Notes. LIQUIDATION ANALYSIS ($ millions)
Liquidation Range ----------------- Note From To ---- ---- -- Going-Concern Value of Operating Businesses 1 $ 1,286 $ 1,286 Less Liquidation Discount 2 (322) (193) ------- ------- Liquidation Value of Operating Businesses 964 1,093 Value of Mid-State Homes Whole Loan Portfolio and Mid-State Trust II & III Residuals 1, 2 1,230 1,230 Value of Other Assets Cash and escrows 3 140 140 Other 4 10 17 ------- ------- 150 157 Interest on Proceeds from Liquidation 5 58 61 ------- ------- Gross Proceeds Available for Distribution 2,402 2,541 Liabilities Ranking Senior to Asbestos Claimants and Other Unsecured Creditors Obligations Arising From Chapter 7 Liquidation Operating Expenses During Liquidation 6 (20) (20) Chapter 7 Administrative Expenses 7 (66) (70) Liquidation Tax Liabilities 8 0 0 Secured Debt (including post-petition interest) 9 Revolving Credit Bank Claims (352) (352) Working Capital Bank Claims (121) (121) Grace Street Note Claims (1) (1) Sloss IRB Claims (1) (1) Secured Equipment Purchase Claims (1) (1) Series B & C Senior Note Claims (365) (365) Provident Life and Accident Insurance Company Claims (7) (7) Chapter 11 Priority and Administrative Claims Severance Pay 10 (1) (1) Pension Plan Termination 11 (18) (18) Other Liabilities 12 (53) (53) ------- ------- Proceeds Available to Asbestos Claimants and Other Unsecured Creditors 1,396 1,531 Convenience Class Claims (including post-petition interest) 13 (2) (2) General Unsecured, Trade Claims (including post-petition interest) 13 (98) (98) Proceeds Available to Asbestos and Subordinated Note Claimants 1,296 1,431 Funding of Payments for Asbestos-Related Claims (450) (450) Tax Benefit Associated with Payments for Asbestos-Related Claims 14 88 88 ------- ------- Proceeds Available to Subordinated Note Claimants 934 1,069 Subordinated Note Claims 15 (1,106) (1,106) ------- ------- Deficiency $ (172) $ (37) ======= =======
Note 1: Operating Businesses include all assets of the Debtors except Cash, Mid-State Homes' whole loan mortgage portfolio and Trust II and III Residuals and Other Assets which have been excluded as no discount has been applied to these assets. The value of the Operating Businesses includes the net working capital associated with the businesses, which consists primarily of receivables, inventories and payables. This value represents the approximate mid-point of the value range as of 12/31/94. This value as of 12/31/94 is assumed to grow by 10% by 12/31/95, or 5% on total value based on the assumption that during the liquidation process, one half of the sales of the Operating Businesses occurs by 6/30/95. The value of the Mid-State whole loan mortgage portfolio and Trust II & III Residuals is assumed to grow by 7% by 12/31/95 at which point it is assumed that the mortgages and Residuals are securitized. Liquidation 12/31/94 Period Cash $ 140 $ 140 Operating Businesses 1,225 1,286 Mid-State whole loan mortgage portfolio and Trust II & III Residuals available for securitization 1,150 1,230 Other Assets (Headquarters/Other) 10 17 ------ ------ Total Liquidation Value $2,525 $2,673 ====== ====== In connection with the analysis of the estimated going-concern value of the Company as of 12/31/94 and the subsequent assumptions regarding the estimated liquidation valuation of the Company, J.P. Morgan in conjunction with Ernst & Young, the Bondholders' Committee's financial advisors (the "Financial Advisors"), among other things: (a) reviewed certain publicly available financial statements for recent years and interim periods; (b) analyzed certain internal financial and operating data concerning the Operating Businesses, including the Company's financial projections through 1998 and estimated through 2002 by the Financial Advisors. (c) made discounted cash flow analyses to 12/31/94 for the various Operating Businesses based upon the financial projections referred to in (b) above; (d) considered the market values of publicly-traded companies which the Financial Advisors believed were comparable to the various Operating Businesses; (e) considered the financial terms, to the extent publicly available, of certain acquisitions of companies which the Financial Advisors believed were comparable to the various Operating Businesses; (f) considered certain economic and industry information relevant to the various Operating Businesses; (g) discussed the current operations and prospects of the various Operating Businesses with the senior management of Walter Industries and its subsidiaries; and, (h) made such other analyses and examinations as the Financial Advisors deemed necessary or appropriate. The valuation of each Operating Business was based on a review of the three methodologies described in clauses (c), (d), (e) above, except for Mid-State Homes and United Land. Mid- State Homes' value was derived through the valuation of the going concern operating entity, the servicing of existing mortgages and of the securitization of the whole loan mortgage portfolio and the Trust II and III Residuals. United Land's value was based on the cash flow from third party royalties and the book value or estimated market value from non-income producing land holdings. The Financial Advisors did not independently verify the information considered that was provided by the Debtors and other sources in its valuations and for purposes of its valuations relied upon the accuracy and completeness of all such information. In addition, the Financial Advisors did not undertake or obtain appraisals of the tangible or intangible assets of the various Operating Businesses. The value of an Operating Business is subject to uncertainties and contingencies which are difficult to predict and will fluctuate with changes in interest rates, market conditions and other factors affecting the financial conditions and prospects of such business. Note 2: The Liquidation Discount represents an estimate of the aggregate of the discounts to the value of the Operating Businesses that would likely be incurred in the sale of stock in the Operating Businesses under a Chapter 7 liquidation. Actual discounts which may be required to sell stock in the Operating Businesses could be significantly different. No discount has been applied to the value of the Mid-State whole loan mortgage portfolio and Mid-State Trust II and III Residuals as a Chapter 7 liquidation would not affect the ability of a buyer to securitize these assets at full value. The Debtors have successfully securitized these assets despite the proceedings of their Chapter 11 cases. The discounts applied to the Operating Businesses relate to two principal adverse circumstances that would affect all Walter Industries' Operating Businesses in a Chapter 7 liquidation: a. There would be pressure to convert stock in the Operating Businesses into cash quickly. (This analysis assumes a one year period between conversion to a Chapter 7 proceeding and distribution to creditors.) These sales may have an adverse impact on employee morale, customer willingness to order new goods and vendor willingness to ship new goods and extend trade credit and the forced nature of the sales may result in a discount to the going concern values of the enterprises. b. The Debtors have stated in their Disclosure Statement that studies of potential Chapter 7 environmental exposures have not been made. The Operating Businesses may have potential liabilities under environmental laws which could be addressed in the ordinary course of business after consummation of a plan of reorganization under Chapter 11. However, in a Chapter 7 liquidation, uncertainty would surround the transfer of responsibility for these exposures, and potential purchasers would raise concerns about possible environmental liabilities. The precise discount factor attributable to the uncertainties described above cannot be computed on the basis of any known empirical data. Given the adverse factors previously discussed, it is estimated that the actual liquidation values of most of the Operating Businesses would reflect a discount of 15-25% from the values which would otherwise exist. No discount has been applied to reflect uncertainties regarding future transferee liability for asbestos-related claims as it is assumed that such uncertainty would not exist for the reasons previously discussed. While the Proponents acknowledge that the foregoing circumstances set forth in sub-paragraphs (a) and (b) above warrant a discount from the going concern value of the Debtors' Operating Businesses, the Proponents believe that the range of discount employed by the Debtors in their Liquidation Analysis is artificially high and unwarranted given the conditions and requirements of their Plan. See Article X of the Disclosure Statement. Note 3: It is expected that there will be cash of approximately $140 million available, which includes the present cash escrow for the Series B and C Senior Notes. Amounts reserved for environmental liabilities or collateralizing letters of credit would not be available to creditors. Note 4: This amount includes headquarters, service and record storage buildings and other assets. Per the Debtors' Liquidation Analysis, the headquarters, service and record storage buildings are valued on a going-concern basis at $5-$16 million. A 50% discount was applied to the going-concern value to reflect the difficulty of selling a vacant office building in the current Tampa real estate market. Note 5: Interest income is calculated at 4.7% of the average cash balance during the liquidation period. This rate approximates the current 6 month Treasury rate. Note 6: There is no independent way for the Proponents to determine operating expenses during the liquidation. As such, expenses for personnel and other headquarters' operating expenses during the liquidation period and retention bonuses to ensure that employees remain with the Debtors during liquidation are the same as those of the Debtors' Liquidation Analysis. Note 7: Includes the expenses of professionals employed to sell the Operating Businesses, the fees of the Chapter 7 trustee and other professionals employed by the trustee. Although actual fees might be capped based on other factors, estimated amount represents approximately 3% of the Total Liquidation Value of the Operating Businesses and Mid-State Homes whole loan portfolio and Trust II & III Residual. Note 8: The Debtors have informed us that as a result of the Debtors' Mirror Liquidation Plan, the stock basis for tax purposes in these companies is approximately $3 billion. Therefore, it is assumed that a sale of stock grossing less than $3 billion would not result in additional tax liability. For these purposes, it is also assumed that losses generated by the sale of the stock of certain Operating Businesses can be used without limitation to offset gains, if any, from the sale of the stock of other Operating Businesses. To the extent that the Debtors generate any income through 12/31/95, it is assumed that any tax liability attributable to that income would be offset by losses generated from the asbestos settlement payment. See Note 14. Note 9: Secured claims include the accrual of post-petition interest from the Filing Date through December 31, 1995 at the respective non-default contract rates (i.e., Prime plus 1-1/2% on Bank Claims and 14 5/8% and 14 1/2% for Series B and C Notes, respectively). Note 10: Per the Debtors' Liquidation Analysis, it has been assumed that the sale of the Operating Businesses would result in severance payments to some employees. The Debtors have estimated that this would result in a severance liability of approximately $1 million. There is no independent way for the Proponents to verify this number and it has, as such, been adopted from the Debtors' Disclosure Statement. Note 11: Per the Debtors' Liquidation Analysis, it has been assumed that an involuntary termination of the Operating Businesses' pension plans would occur in Chapter 7. The Debtors have estimated that this would result in a termination liability of $18 million. There is no independent way for the Proponents to verify this number and it has, as such, been adopted from the Debtors' First Amended Disclosure Statement. Note 12: Includes Chapter 11 Administrative ($17 million), Federal Income Tax ($27 million), Federal Excise Tax and Reclamation ($0.8 million) and State and Local Tax ($8.4 million) claims. Liabilities related to Postretirement Health Benefits have been included in the valuation of the Operating Businesses. Note 13: Post-petition interest accrued at the General Unsecured Interest Rate (6.5%) on General Unsecured, Trade Claims through 12/31/95. This Rate reflects a compromise which is less than the Florida state legal rate of 12%. Note 14: It is believed that there would be a tax benefit carryback for the amount of the asbestos settlement payment. As approximately $88 million in taxes has been paid subject to the carryback period of the Internal Revenue Code, it is estimated that this amount represents the benefit available. There may also be additional tax benefits related to the asbestos settlement payment based on any further tax liabilities incurred. Note 15: Includes all Unsecured Bondholders and Old Walter Industries IRB claims. EXHIBIT VII WALTER INDUSTRIES, INC. PROJECTED FINANCIAL INFORMATION: As a condition to confirmation of the Creditors' Plan, the Bankruptcy Code requires, among other things, the Bankruptcy Court to determine that confirmation is not likely to be followed by liquidation or result in the need for further financial reorganization of the Debtors. To assess the feasibility of the Creditors' Plan, the Creditors' Plan has been overlaid on the Debtors' 1994 Five Year Business Plan (extrapolated for the years 1999 through 2001). Included herein are summary statements of consolidated cash flows of Reorganized Walter Industries, excluding Mid-State Trusts II and III, and the trusts contemplated by the Creditors' Plan, for each of the fiscal years ending 1995 through 2001. A separate statement of cash flows has been included to reflect the consolidated cash flows of the trusts contemplated by the Creditors' Plan. The cash flows of the Mid-State Trusts have been excluded to show the debt capacity of the corporate entity as assets of the Trusts are not available to satisfy claims of general creditors of the Company and its subsidiaries. The consolidated cash flows assume the implementation of the Creditors' Plan and are dependent upon the successful implementation of the Debtors' Business Plan and the reliability of the assumptions contained therein. Both the Debtors' Business Plan and the projections reflect numerous assumptions regarding both anticipated financial performance as well as industry performance, and overall economic conditions, some of which are beyond the control of the Debtors. In addition, unanticipated events and circumstances may affect the actual financial results of the Debtors. Therefore, the actual results achieved throughout the projection period may vary from the projected results. These variations may be material. Accordingly, no representation can be, or is being, made with respect to the accuracy of the projections or the ability of the Debtors to achieve the projected results. The Proponents urge that the underlying assumptions be carefully considered by Holders of Claims in deciding whether to accept or reject the Creditors' Plan. Principal Assumptions: Net Sales and Revenues: Net sales and revenues are assumed to increase between approximately 3% to 6% per year during the projection period. The Debtors have assumed that the general recessionary conditions that have prevailed in the United States during the past few years will gradually abate. Sales of all divisions are assumed to increase as a result of both increased volume and pricing as well as, in a limited number of instances, the introduction of new products. Interest income is assumed to increase as a result of the continued creation of new mortgages by Mid-State Homes. EBIT: EBIT is expected to increase over the projection period primarily as a result of the assumed sales growth which results in an increasing gross profit margin given the high degree of fixed costs associated with the subsidiaries engaged in manufacturing activities. Gross margins are also assumed to be enhanced as a result of continued efforts to control costs and implement productivity improvements. Capital Expenditures: Annual capital expenditures are assumed to average approximately $86 million per year during the projection period. The primary uses of capital, and their approximate percentage of total capital expenditures, relate to expenditures necessary to maintain profit centers (75%), environmental controls (9%), expansion (9%) and cost reduction programs (7%). United States Pipe and Foundry Co. and Jim Walter Resources have historically been, and are planned to be, the greatest users of capital, given the capital intensive nature of these businesses. Together, they account for approximately 75% of total planned capital expenditures. Income Taxes: The projections assume that the Plan will not result in the incurrence of any taxes upon the estate of the Debtors. A 41% total income tax rate on projected taxable income has been assumed in the projections. The projections also assume that income taxes are paid in the year in which they arise. The provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" have not been implemented in the projections. Interest Expense: Interest expense for all of the securities issued under the proposed Creditors' Plan have been calculated at the respective stated interest rates. Interest on the working capital line of credit has been calculated on the assumed average balance at an interest rate of 7 1/2%, which is equal to the current Prime rate of interest plus 1/4% during the projection period. Liquidity and Capital Resources: The Debtor's primary source of cash is from operations. However, significant amounts of cash are consumed by the home building segment of Jim Walter Homes which through its Mid-State Homes subsidiary finances approximately 97% of the homes sold by Jim Walter Homes. It is assumed that upon consummation of the Creditors' Plan, a working capital/warehouse line of credit will be established to fund the creation of these mortgages. Over time, it is anticipated that the mortgages created will be securitized consistent with the Debtors' past practices. However, no securitization of these mortgages is contemplated in the projection period. It is also assumed that the Debtors will borrow an amount necessary to provide a break-even cash flow for Mid-State Homes.
CONSOLIDATED STATEMENT OF CASH FLOWS (excluding Mid-State Trusts II & III and mortgages to be securitized under Plan) Projected for the Years Ended May 31, 1995 ($ Millions) (5 Months) 1996 1997 1998 1999 2000 2001 INDUSTRIAL COMPANIES: EBIT $ 76.4 $209.5 $230.0 $244.7 $254.5 $ 264.7 $ 275.3 plus: Depreciation 30.5 76.7 80.7 82.7 85.2 87.9 95.0 less: Change in Working Capital (5.5) (5.3) (7.4) (8.1) (8.9) (9.8) (10.8) less: Capital Expenditures (36.5) (88.3) (95.5) (83.3) (83.9) (83.9) (83.9) Free Cash Flow -- Industrial Companies 64.9 192.6 207.8 236.0 246.9 258.9 275.6 MID-STATE HOMES: EBIT 4.5 22.7 41.0 57.7 76.1 97.8 116.5 less: Net Change in Working Capital (4.5) (22.7) (41.0) (57.7) (76.1) (97.8) (116.5) Cash Flow -- Mid-State Homes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NET OPERATING CASH FLOW 64.9 192.6 207.8 236.0 246.8 258.9 275.5 less: Cash Interest Expense (17.6) (47.7) (60.2) (71.3) (81.0) (78.1) (69.0) less: Cash Taxes (15.0) (51.5) (61.8) (71.5) (77.4) (91.3) (106.3) less: Principal Repayment 0.0 (40.7) 0.0 0.0 0.0 (325.0) 0.0 Cash Flow before Financing 32.3 52.6 85.8 93.2 88.5 (235.6) 100.2 Cash Distributions under POR (140.4) 0.0 0.0 0.0 0.0 0.0 0.0 Decrease/(Increase) in Cash (108.1) 52.6 85.8 93.2 88.5 (235.6) 100.2 Beginning Cash 185.4 77.3 130.0 215.8 309.0 397.5 161.9 Ending Cash $ 77.3 $130.0 $215.8 $309.0 $397.5 $ 161.9 $ 262.2 Represents cash flows of all operating companies less corporate overhead. The cash flows of Mid-State Homes, the mortgage finance subsidiary, are separately reflected below. Represents cash flows from mortgages created after December 31, 1994. All previously existing mortgages and residuals are to be securitized as contemplated under the Creditors' Plan and are therefore excluded. Includes borrowings under a working capital/warehouse facility required to fund new mortgages. Amounts borrowed represent that necessary to provide a break-even cash flow for Mid-State Homes. Cash may be used to amortize indebtedness of Walter Industries and/or to create further mortgages.
Cash Interest Paid ($000's) Projected for the Years Ended May 31, 1995 (5 Months) 1996 1997 1998 1999 2000 2001 CASH INTEREST: 8.0% New Senior Notes $10,833 $26,000 $26,000 $26,000 $26,000 $15,167 $0 6.5% Bank Debt 6,771 16,250 16,250 16,250 16,250 16,250 16,250 7.5% Working Capital Facility/Warehouse Line 0 5,453 17,925 29,063 38,730 46,710 52,725 CASH INTEREST PAID $17,604 $47,703 $60,175 $71,313 $80,980 $78,127 $68,975 NOTE: If interest rates on this debt were to increase by 1%, annual interest expense would increase by the following amounts: 1995 1996 1997 1998 1999 2000 2001 $2,396 $6,477 $8,140 $9,625 $10,914 $10,624 $9,530
Summary of Long-Term and Short-Term Debt ($000's) 12/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 New Senior Notes $325,000 $325,000 $325,000 $325,000 $325,000 $325,000 $ 0 $ 0 Bank Debt 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 Working Capital Facility/Warehouse Line 0 72,700 239,000 387,500 516,400 622,800 703,000 760,100 TOTAL DEBT $575,000 $647,700 $814,000 $962,500 $1,091,400 $1,197,800 $953,000 $1,010,100 Projections assume an evergreen bank term loan. However, additional cash provided by the working capital facility and/or securitization of mortgages could be used to amortize this amount.
CASH FLOWS RELATED TO MORTGAGE SECURITIES ($ 000's) Projected for the Years Ended May 31, 1995 (5 Months) 1996 1997 1998 1999 2000 2001 Sources of Cash from Mortgage Assets to be Securitized: EBIT $37,156 $ 84,914 $ 81,918 $78,902 $ 75,861 $ 72,786 $ 69,671 Principal Repayment 14,635 34,959 34,448 34,016 33,664 33,397 33,220 Total Cash Sources 51,791 119,873 116,366 112,918 109,525 106,183 102,891 Uses of Cash: Interest (29,075) (66,786) (62,520) (58,189) (53,782) (49,287) (44,692) Debt Repayment (22,715) (53,087) (53,846) (54,729) (55,743) (56,896) (58,199) Total Cash Uses (51,791) (119,873) (116,366) (112,918) (109,525) (106,183) (102,891) Net Sources/Uses $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 12/31/94 New mortgage collateralized securities $875,000 $852,285 $799,198 $745,352 $690,623 $634,880 $577,984 $519,785 Represents cash flows from all unencumbered mortgages created prior to December 31, 1994 as well as the cash flows from residual interests in the Mid-State Trusts II & III. The Creditors' Plan contemplates that these mortgage assets will be securitized and they have therefore been segregated from the other cash flows of Walter Industries. Represents interest income net of miscellaneous expenses.
BALANCE SHEET ($ millions) Projected Recording of "Fresh Pro-Forma 12/31/94 Plan Consummation Start" 12/31/94 Cash $ 185.4 (140.4)(a)(b) $ 45.0 Short-term Investments 111.4 111.4 Installments Notes Receivable 1,462.7 1,462.7 Trade Receivables 143.8 143.8 Other Notes and Accounts Receivable 8.0 8.0 Inventories 161.4 161.4 Prepaid Expenses 8.4 8.4 Total Current Assets 2,081.1 (140.4) 0.0 1,940.7 Property, Plant and Equipment 1,161.9 1,161.9 Accum. Depreciation, Depletion and Amortization (473.4) (473.4) Property, Plant and Equipment, Net 688.4 688.4 Other Investments 5.7 5.7 Unamortized Debt Expense 27.2 (9.4) 17.8 Other Assets 38.2 38.2 Excess of Purchase Price over Net Assets Acquired 401.0 (401.0) 0.0 Reorganization Value in Excess of Amounts Allocable to Unidentifiable Assets 0.0 1,155.7(c) 1,155.7 Total Assets 3,241.6 (140.4) 745.3 3,846.5 Bank Overdrafts 13.5 13.5 Accounts Payable 57.4 57.4 Trade Notes (25% of Claim) 0.0 40.7(d) 40.7 Accrued Expenses 110.0 110.0 Income Taxes Payable (Current and Deferred) 48.8 48.8 Working Capital Facility 0.0 0.0 Total Current Liabilities 229.8 40.7 0.0 270.5 Income Taxes Payable-Deferred 33.2 33.2 Long-Term Senior Debt (incl. Current Maturities) Mid-State Trust II & III 835.4 835.4 Securities Issued Under the Plan 0.0 1,450.0(e) 1,450.0 Accrued Retiree Health Liability 229.8 0.0 229.8 Other Long-Term Liabilities 48.2 0.0 48.2 Accrued Post-Petition Interest on Ch. 11 Liabilities 404.3 (404.3)(f) 0.0 Liabilities Subject to Chapter 11 Proceedings 1,755.7 (1,755.7)(f) 0.0 Total Liabilities 3,536.4 (669.3) 0.0 2,867.1 Total Stockholders' Equity (294.8) 528.9(g)(h) 745.3(i) 979.4 Total Liabilities and Stockholders' Equity $3,241.6 (140.4) 745.3 $3,846.5
WALTER INDUSTRIES, INC. NOTES TO ADJUSTMENTS TO BALANCE SHEET UPON CONFIRMATION ($ 000's) (a) To record the following cash sources and uses at Consummation: Amount CASH SOURCES AT CONSUMMATION: Borrowing Pursuant to New Revolving Credit Agreement $ 250,000 Proceeds from Mortgage Collateralizations 875,000 Available Cash 125,000 Release of Restricted Cash 15,400 Total Cash Sources 1,265,400 CASH USES AT CONSUMMATION: Administrative 32,000 Priority 36,140 Secured Bank Claims: Bank Credit Agreement 354,028 Working Capital Facility 121,343 Series B and C Senior Notes 6,400 Trade/Accounts Payable 53,081 Old Walter Industries IRB 8,792 Provident Insurance 7,494 Convenience Class 1,704 Sloss IRB Claim 715 Secured Equipment Purchases 48 Grace Street Notes 5 Total Cash Uses 621,750 Cash Available for Distribution $ 643,650 (b) Includes the release of funds held in escrow during Chapter 11 proceedings: Series B and C Escrow $ 6,400 Cash Collateral for Letters of Credit 9,000 Total 15,400 (c) To record the reorganization value in excess of amounts allocable to identifiable assets in accordance with fresh start reporting. No attempt has been made to allocate this amount to specific assets due to the absence of specific asset valuations. This amount is not amortized in the projection period. Upon confirmation, values would be assigned to specific assets and this amount would be allocated appropriately among them. The unallocated portion would then be amortized going forward. (d) To record the Plan provision regarding payment of trade claims. (e) To reflect the issuance of debt obligations as contemplated in the Plan: Mortgage Collateralization Indebtedness $ 875,000 Walter Industries, Inc. -- Senior Notes 325,000 Walter Industries, Inc. -- Revolving Bank Loan 250,000 Total New Securities $1,450,000 Approximates total claim of $330,974 less funds in escrow of $6,400.
(f) To record the discharge of liabilities subject to Chapter 11 proceedings: Principal and Accrued Pre-Petition Interest Accrued Interest 12/29/89- as of Filing 12/31/94* ($ 000's) Administrative $ 32,000 Priority 36,140 Secured Bank Claims: Bank Credit Agreement 229,623 $152,625 Working Capital Facility 79,779 51,843 Total 308,402 204,468 Senior Reset Notes: Series B 188,977 169,340 Series C 5,356 4,801 Total 194,333 174,141 Trade/Other 70,774 23,001 Old Walter Industries IRB 6,650 2,143 Provident Insurance 7,494 Convenience Class 1,286 418 Sloss IRB Claim 571 144 Secured Equipment Purchases 48 Grace Street Notes 5 SUBTOTAL 657,703 404,315 Unsecured Bondholders: Senior Subordinated Notes 479,261 0 17% Subordinated Notes 1996 379,254 0 Pre-LBO Notes: 13 1/8 Sub Notes 1993 52,680 0 13 3/4 Sub Notes 2003 105,615 0 10 7/8 Sub Notes 2008 81,177 0 239,472 0 SUBTOTAL 1,097,987 0 TOTAL -- ALL CLAIMS $1,755,690 $404,315 * If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, total accrued interest would decrease by $75 million.
(g) To record the cancellation of common equity. (h) To record the net adjustment to retained earnings as a result of the discharge of indebtedness and other effects of Plan consummation. (i) To record the equity value of Reorganized Walter Industries. This amount represents: Negotiated Enterprise Value $2,525 Less: Senior Claims 902 Cash Available for Distribution 644 Reorganized Net Equity $ 979 EXHIBIT VIII HILLSBOROUGH HOLDINGS CORPORATION Corporate Structure on Filing Date EXHIBIT IX HILLSBOROUGH HOLDINGS CORPORATION (Now Named Walter Industries, Inc.) Corporate Structure after Completion of Mirror Liquidation Plan EXHIBIT XI AGREEMENT This Agreement (as the same may be amended, modified or supplemented from time to time, the "Agreement") is entered into by and among AIF II, L.P., certain affiliates of AIF II, L.P. and certain accounts managed or controlled by such affiliates ("Apollo"); Lehman Brothers Inc. ("Lehman"); the Official Bondholders Committee of the Debtors (as defined) (the "Bondholders Committee"); the Official Committee of General Unsecured Creditors of the Debtors (the "Creditors' Committee"); the Unofficial Ad Hoc Committee of Pre-LBO Bondholders (the "Ad Hoc Committee") (Apollo, Lehman, the Bondholders Committee, the Creditors Committee and the Ad Hoc Committee, the "Proponents") and Chemical Bank and Bankers Trust Company (the "Bank Agents") as co-agents under the Bank Credit Agreement dated as of September 10, 1987, as amended among Hillsborough Holdings Corporation ("Hillsborough"), Walter Industries, Inc. ("Old Walter Industries") and certain of their subsidiaries and the bank parties thereto (the "Revolving Credit Banks"), and the Working Capital Agreement dated as of December 29, 1987, as amended, among Hillsborough, Old Walter Industries and certain of their subsidiaries and the bank parties thereto (the "Working Capital Banks") (each of the Proponents and the Bank Agents, a "Party"), by their authorized undersigned counsel. WITNESSETH: WHEREAS, Hillsborough, Old Walter Industries and certain of their subsidiaries and affiliates (collectively, the "Debtors") are the subject of cases under Chapter 11 of 11 U.S.C. Section 101, et seq. (the "Bankruptcy Code") in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Court"), all of which are being jointly administered under Case No. 89-9715-8P1 (the "Chapter 11 Cases"); WHEREAS, certain of the Proponents filed a Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents Dated as of December 16, 1993 in the Chapter 11 Cases (the "Original Settlement Plan") and a Disclosure Statement therefor; WHEREAS, the Bank Agents filed a Bank Agents' Joint Plan of Reorganization Dated as of December 28, 1993 in the Chapter 11 Cases (as such plan may be modified or amended from time to time, the "Bank Agents' Plan") and a Disclosure Statement therefor; WHEREAS, the Bank Agents have filed documents stating that they intend to recommend to the holders of Bank Claims acceptance of the treatment of the claims of the Revolving Credit Banks, Working Capital Banks and Bank Agents ("Bank Claims") which have been incorporated in the Original Settlement Plan; WHEREAS, the Proponents intend to file an amendment to the Original Settlement Plan, and the Bank Agents have received a copy in substantially the form of such amendment, on or before April 20, 1994, or such other date set by the Court (as such amendment of the Original Settlement Plan may be further amended, revised or modified from time to time, the "Settlement Plan"); and WHEREAS, the Parties desire to defer the Court's consideration of the Bank Agents' Plan and the Disclosure Statement therefor on the terms and conditions set forth herein. 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. The Proponents shall not adversely modify or amend the treatment of any or all of the Bank Claims under the Settlement Plan until after (a) December 31, 1994 and either (b) both of the following conditions occur, if ever: (i) there shall have occurred a material adverse change in the business, results of operations, financial condition, properties or assets of the Debtors, taken together, from the date of this Agreement, and (ii) the treatment of the claims of the Proponents under the Settlement Plan is materially adversely modified or amended, or (c) the Court disapproves such Bank treatment on motion of a party other than a Proponent. 2. The Bank Agents hereby affirm that they will recommend and will not withdraw (except under a circumstance in which they could file a motion under Section 3) their recommendation to the holders of Bank Claims that they accept the treatment provided for such Claims under the Settlement Plan. 3. The Bank Agents shall file a motion with the Court to defer the Court's consideration of the Bank Agents' Plan and the Disclosure Statement therefor and shall not request the Court to renew consideration of the Bank Agents' Plan and the Disclosure Statement therefor until after the earlier of (a) December 31, 1994 and (b) such date, if any, that the Court denies approval of the Disclosure Statement for the Settlement Plan. 4. The Parties agree that any damages arising from the breach of a Party's obligations under Section 1, 2 or 3 hereof are not susceptible to a money satisfaction and that specific performance shall be the remedy for any such breach. The Court shall have jurisdiction to hear and determine any claim arising out of any breach hereof. 5. This Agreement may not be amended except in a writing signed by the Parties. 6. 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. Nor shall this Agreement impair the right or the ability of the Bank Agents also to recommend to the holders of the Bank Claims that they accept the treatment of the Bank Claims under any other plan of reorganization in the Chapter 11 Cases. 7. No part of this Agreement shall be deemed as an admission of any Party for any purpose. 8. Except to the extent the Bankruptcy 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. 9. This Agreement is intended to bind and inure to the benefit of the Parties and their respective successors, assigns, heirs, executors, administrators and representatives. 10. This document 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. 11. This Agreement is intended solely for the benefit of the Parties, and there shall be no third-party beneficiaries of this Agreement. 12. 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 April 18, 1994 AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. By: /s/ Steven M. Pesner, P.C. Ellen R. Werther 65 East 55th Street New York, New York 10022 (212) 872-1070 For APOLLO PAUL, WEISS, RIFKIND, WHARTON & GARRISON By: /s/ Robert Drain 1285 Avenue of the Americas New York, NY 10019-6064 (212) 373-3236 For LEHMAN BROTHERS INC. STROOCK & STROOCK & LAVAN By: /s/ Daniel H. Golden 7 Hanover Square New York, NY 10004 (212) 806-5400 For the BONDHOLDERS COMMITTEE JONES, DAY, REAVIS & POGUE By: /s/ Marc S. Kirschner 599 Lexington Avenue New York, NY 10022 (212) 326-3939 For The CREDITORS COMMITTEE MARCUS MONTGOMERY WOLFSON P.C. By: /s/ Peter D. Wolfson 53 Wall Street New York, NY 10005 For The AD HOC COMMITTEE WACHTELL, LIPTON, ROSEN & KATZ By: /s/ Harold S. Novikoff 51 West 52nd Street New York, NY 10019 (212) 403-1000 For the BANK AGENTS I. Assumption or Termination of Loan Agreements and Indentures As of the Effective Date, the Revolving Credit Agreement, the Working Capital Agreement, the Series B & C Senior Note Indenture, the Sloss IRB Indenture and each indenture with respect to the Subordinated Notes will be terminated, deemed null and void and of no further force and effect as to the Debtors, except to the extent that the Bank Agents' or Indenture Trustees' charging liens, if any, may otherwise be asserted under the terms of the governing agreement. Each Bank Agent or Indenture Trustee, on the one hand, and the Debtors, on the other hand, will have no further obligations to each other. Nothing in the Creditors' Plan will preclude any Holder of any Revolving Credit Bank Claim, Working Capital Bank Claim, Series B & C Senior Note Claim, Sloss IRB Claim or Subordinated Note Claim from objecting to the amounts or reasonableness of any Claims for compensation or reimbursement of expenses of the applicable Agent or applicable Indenture Trustee. Upon the payment of the Allowed Amounts pursuant to the Creditors' Plan, with respect to the Old Walter Industries IRB Claims in Class U-1, the Provident Life & Accident Insurance Company Claims in Class S-7 and the Intercompany IRB Claims in Class I-1, Sloss will assume all unsatisfied obligations under the Intercompany IRB and Walter Industries will assume all unsatisfied obligations under the Old Walter Industries IRBs and under the instruments upon which the Provident Life & Accident Insurance Company Claims are based, and any acceleration of any obligation and/or instrument or default in connection with such Claims will be rescinded, waived or cured and of no force or effect and the terms of such instruments will be reinstated as if no such acceleration or default had occurred. J. Indemnification The articles of incorporation and/or the bylaws of Walter Industries and each of the Debtors shall provide that Walter Industries and each of the Debtors shall indemnify, hold harmless and reimburse its present and former officers and directors from and against any and all losses, claims, damages, fees, expenses, liabilities and actions to the extent that such persons were the beneficiary of an indemnity giving rise to an Allowed Indemnity Claim and pursuant to the terms of such indemnity. All rights of the Persons indemnified pursuant hereto shall survive Confirmation of the Creditors' Plan and shall not be discharged pursuant to Section 1141 of the Code. The Debtors may confirm any such contractual indemnification by contract, resolution or otherwise as they may deem appropriate. K. Releases 1. Release by Holders of Claims As of the Effective Date, Holders of any Claims: (i) that accept any property or New Common Stock to be distributed to or for the benefit of a Holder of any Claims pursuant to Article III of the Creditors' Plan and in consideration therefor; (ii) in a Class that accepts the Creditors' Plan; or (iii) that mark 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 such release (the text of which release shall be set forth in full on such ballot) (and all trustees and/or agents on behalf of such Holder) shall be deemed to have released, to the extent permitted by the Court, (A) the Settling Parties (other than Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), the Proponents, 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 Holders of Allowed Indemnity Claims (to the extent of such Claims), 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, shareholders, employees, agents, advisors, predecessors in interest and representatives of all of the foregoing (other than any (x) Holders or former Holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex's or Jim Walter Corporation's or any of the Debtors' respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives, and (z) Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), in each case in such Person's capacity as a Holder of a Claim or Interest, as a plan proponent, if applicable, as a shareholder of any Debtor, or any other capacity (including, with respect to the Bondholder Proponents, any action or inaction related to or set forth in the definition of Qualified Securities in the Creditors' Plan) (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a Holder or former Holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex/JWC Released Party); and (B) the holders of Allowed Indemnity Claims that are not parties to the Veil Piercing Settlement Agreement, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively the Persons described in (A) and (B) are referred to herein, in such capacities, as the "Released Parties"), of and from any and all Claims, obligations, rights, causes of action and liabilities (other than the right to enforce the Debtors' obligations under the Creditors' 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 on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Creditors' Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO-Related Issues). The Debtors assert that this Disclosure Statement provides inadequate disclosure with respect to the limitations of the release provision, in that no basis is provided for "lack of mutuality." The releases contained in the Creditors' Plan do not cover the officers, directors or shareholders of the Debtors, except to the extent that they hold Allowed Indemnity Claims against the Debtors or timely become a signatory to the Veil Piercing Settlement Agreement and thereby become a Settling Equityholder. Releases are also being provided to members and representatives of Classes that have agreed to compromise and settle their Claims, as partial consideration for such compromise and settlement, and to the Proponents in consideration of their agreement to compromise and settle their Claims, and their negotiation and preparation of the Creditors' Plan and the settlements reached in connection therewith. The Proponents do not believe that there is a lack of mutuality in releases or, indeed, that mutuality is a legal requirement. The Securities and Exchange Commission and certain other parties in interest have questioned the validity under Section 524(e) of the Code of the releases of non-debtor parties contemplated by the Creditors' Plan. The Proponents believe that the releases do not contravene Section 524(e) or any other provision of the Code. 2. Release by Debtors 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 Creditors' Plan), whether known or unknown, foreseen or unforeseen, then existing or thereafter arising, which are based in whole or in part upon 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, that such causes of action shall be preserved to the extent not based upon Veil Piercing-Related Issues or LBO-Related Issues, for purposes of setoff and counterclaim in respect of any Disputed Claim. 3. Dismissal of Lawsuits Without limiting the scope or the generality of the foregoing Paragraphs 1. and 2., and without limiting any rights against Persons that are not Released Parties, 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. L. Unclaimed Property 1. Unclaimed Instruments In accordance with Sections 347 and 1143 of the Code, any Holder of any Revolving Credit Bank Claim, Working Capital Bank Claim, Sloss IRB Claim, Series B & C Senior Note Claim, Grace Street Note Claim, Subordinated Note Claim or Interest who fails to surrender the instrument, if any, evidencing its Claim or Interest, as provided in the Creditors' Plan, within two (2) years from and after the Effective Date will be deemed to have forfeited all rights and Claims and Interests and will not participate in any distribution on account of the Creditors' Plan. Upon the expiration of such two (2) year period, all shares of New Common Stock, all New Senior Notes and all Qualified Securities held for distribution by the applicable Bank Agent or the applicable Indenture Trustee will be returned to Walter Industries. Such New Common Stock will be taken into the treasury of Walter Industries and such New Senior Notes and Qualified Securities (other than Cash) will be deemed to be cancelled and of no further force and effect. 2. Unclaimed Cash In accordance with Sections 347 and 1143 of the Code, any Cash, including interest earned thereon, that is unclaimed for two (2) years after being held by the applicable Bank Agent or the applicable Indenture Trustee or after distribution thereof by mail to the latest mailing address filed by or for the party entitled thereto (or to the last mailing address maintained of record by the applicable Bank Agent or the applicable Indenture Trustee) will be returned to and revested in Walter Industries. 3. Non-Negotiated Checks In accordance with Sections 347 and 1143 of the Code, 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 Creditors' Plan within one (1) year of the date such check was issued, then the amount of Cash attributable to such check will be deemed to be unclaimed property in respect of such Holder's Allowed Claim and will be revested in Walter Industries. 4. Returned Distributions If a distribution to any Holder of an Allowed Claim made pursuant to the Creditors' Plan is returned to the applicable Bank Agent or Indenture Trustee or the disbursing agent selected by the Bondholder Proponents 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, Indenture Trustee, or the disbursing agent selected by the Bondholder Proponents shall notify Walter Industries and Walter Industries, on behalf of the Debtors, will 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 within sixty (60) days following the date such notice appears in such newspapers and provides Walter Industries with an accurate address, such distribution shall be deemed to be unclaimed property in respect of such Holder's Allowed Claim and in accordance with Sections 347 and 1143 of the Code, such Holder shall be deemed to have no further entitlement in respect of such distribution and will not participate in any further distributions under the Creditors' Plan. M. Vesting of Property Except as otherwise provided in the Creditors' 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 Creditors' Plan and 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 Creditors' Plan, the Confirmation Order, the Reorganization Documents and the Liens and security interests granted pursuant to the Creditors' Plan or any of the Reorganization Documents. Except as otherwise provided in the Creditors' 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. N. No Substantive Consolidation 1. Joint Administration of Chapter 11 Cases The Debtors' Chapter 11 Cases are being jointly administered pursuant to an order of the Court and the Creditors' Plan is being presented as a joint plan of reorganization of the Debtors for administrative purposes only. The Creditors' Plan is not predicated upon a substantive consolidation of the Chapter 11 Cases and nothing therein will be otherwise construed. Pursuant to the Creditors' Plan, Allowed Claims with respect to any Debtor will be satisfied by such Debtor or its successor. Accordingly, Claims and Interests have been classified in Article II of the Creditors' Plan with respect to each Debtor, and Article III of the Creditors' Plan provides for the treatment of Allowed Claims and Interests by the Debtor to which such Allowed Claims and/or Interests relate. 2. No Consolidation The Chapter 11 Cases will not be substantively consolidated and (i) the legal, equitable, and contractual rights relating to intercompany Claims between the Debtors will 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 Allowed 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 Allowed Claim has been filed; (v) for purposes of determining the availability of the right of set off under Section 553 of the Code, the Debtors will 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 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 Creditors' 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 will be discharged and released. O. Retention of Jurisdiction 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 the entry by the Court of the Confirmation Order ("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 Creditors' Plan; e. To enter and implement such orders as may be appropriate in the event implementation of the Confirmation Order or Creditors' 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 Creditors' 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 Creditors' Plan, Disclosure Statement or Confirmation Order, in such manner as may be necessary to carry out the purposes and effects of the Creditors' Plan); h. To enforce and to hear and determine disputes arising in connection with the Creditors' Plan or its implementation, including disputes among Holders and disputes arising under the Reorganization Documents, the Veil Piercing Settlement Agreement, the Pre-LBO Bondholders Settlement Agreement, or any other agreements, documents or instruments executed in connection with the Creditors' Plan; i. To construe and to take any action to enforce the Creditors' Plan, Reorganization Documents and Confirmation Order, and issue such orders as may be necessary for the implementation, execution and Confirmation of the Creditors' Plan and the execution, delivery and performance of the Reorganization Documents; j. To construe and to take any action to enforce the 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 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. 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. P. Fractional Shares of New Common Stock Fractional shares of New Common Stock will not be issued or distributed. Instead, fractional amounts (calculated to six decimal places) will be rounded up or down to the nearest whole share, with fractional amounts equal to .500000 being rounded up. Q. Amendments to the Creditors' Plan The Creditors' Plan may be amended, modified or supplemented by (a) all of the Proponents or (b) the Bondholder Proponents or (c) 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 all of the Proponents or the Bondholder Proponents or any Debtor after the Effective Date, in each case in the manner provided for by Section 1127 of the Code or as otherwise permitted by law. The Proponents' or the Bondholder Proponents' ability to adversely affect the treatment or amount of the Revolving Credit Bank Claims, the Working Capital Bank Claims, the Pre-LBO Debenture Claims, the Veil Piercing Claims, the Series B & C Senior Note Claims and the Series B & C Senior Note Trustee Claim is limited by the terms of the Bank Agents Agreement, the Pre-LBO Bondholders Settlement Agreement, the Veil Piercing Settlement Agreement and the Term Sheet for Treatment of Series B & C Senior Note Claims Under Creditor Proponents' Creditors' Plan. The Creditors' Plan specifies that nothing in the Creditors' Plan shall in any way prohibit or restrict any Proponent from filing a plan of reorganization on its own behalf. R. Amendments to the Charter On or as soon as practicable after the Effective Date, Walter Industries will adopt and file the Charter with the Secretary of State of the State of Delaware. The Charter will, among other things, increase the authorized Common Stock from 50 million shares to 200 million shares, and provide that Walter Industries may not issue non-voting capital stock. The Charter will also provide that: (i) each share of Class A Common Stock is entitled to five votes and each share of Class B Common Stock is entitled to one vote on all matters as to which the Class A Common Stock and the Class B Common Stock are both entitled to vote (and on such matters the Class A and Class B Common Stock shall vote together as a single class); (ii) each share of Class A Common Stock automatically converts into one share of Class B Common Stock upon the sale, transfer or other disposition (but not including a pledge) of such share other than by an original recipient of such shares under the Creditors' Plan to an Affiliate of the original recipient of such shares; and (iii) all shares of Class A Common Stock automatically convert into an equal number of shares of Class B Common Stock (A) as soon as the aggregate number of shares of Class A Common Stock held by Bondholder Proponents and their Affiliates is less than 8% of the then outstanding number of shares of New Common Stock, and (B) upon the seventh anniversary of the original issuance thereof. Notwithstanding the foregoing, the Creditors' Plan provides that the special voting and conversion features of the Class A Common Stock will be modified, if, and only to the extent that, the Court determines that such modification is necessary to comply with Section 1123(a)(6) of the Code. The Charter will also provide that Walter Industries shall indemnify, hold harmless and reimburse its present and former officers and directors from and against any and all losses, claims, damages, fees, expenses, liabilities and actions in accordance with the Allowed Indemnity Claims against the Debtors existing as of the Filing Date. An "Allowed Indemnity Claim" is an Allowed Claim for indemnification, reimbursement or contribution by any Debtor; provided, however, that any such Claim shall not be an Allowed Indemnity Claim if the agreement or other document giving rise to the Claim is void or voidable. All rights of the Persons indemnified pursuant to the Creditors' Plan will survive Confirmation of the Creditors' Plan and will not be discharged pursuant to Section 1141 of the Code. From and after the Effective Date, amendments to the Charter will be carried out in accordance with Delaware law, the terms of the Charter and the Reorganization Documents. S. Confirmation Bonus Award The general uncertainty of employment attributable to the bankruptcy filing has led to voluntary resignations at all levels of the Debtors' workforce. To the extent it is necessary to prevent the future loss of valuable and experienced talent which might jeopardize the Debtors' ability to reorganize, and to maximize the value of the Assets of their estates, prior to the Confirmation Date, the Board (as defined herein in Section III.B.) of Walter Industries, and subsequent to the Confirmation Date, the New Board (as defined herein in Section III.B) of Walter Industries (or, if such New Board has not been appointed as of the Confirmation Date, the Bondholders Committee), may in its sole discretion, prepare a schedule of Cash bonuses 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 or after the Effective Date. The Proponents believe that if such a schedule is established, it will represent a fair and reasonable solution and an appropriate response to deteriorating employee morale, which, in turn, will be beneficial to the estates by curtailing employee attrition. In addition, this incentive, particularly as to key executives, will help to ensure that a diligent effort will be made as to the successful completion of the Creditors' Plan and the successful operation of the Debtors, both of which are vitally important to all concerned. To the extent that Court approval is necessary under Section 1129(a) of the Code, such approval will be obtained. T. Conditions Precedent 1. To Confirmation of the Creditors' Plan Confirmation of the Creditors' 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 December 31, 1994 (this condition may be waived solely by the Bondholders Committee); b. Either (i) the Court shall have entered an order finding (A) Jim Walter Resources not in default under any covenant contained in the amended agreement, effective January 1, 1979, between Jim Walter Resources and Alabama Power Company and (B) Jim Walter Resources, after giving effect to the Creditors' Plan, is in compliance with applicable covenants and required financial conditions in the amended agreement, effective January 1, 1979, between Jim Walter Resources and Alabama Power Company or (ii) the disputed issues between Jim Walter Resources and Alabama Power Company shall have been settled on terms acceptable to the Bondholders Committee and the Court shall have entered an order approving such settlement (this condition may be waived solely by the Bondholders Committee) (see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Jim Walter Resources--Mining Division" as to a settlement between Jim Walter Resources and Alabama Power under which a new coal purchase agreement was signed, one part of which eliminates the required financial condition covenants contained in the 1979 contract, and which agreement was approved by order of the Court; because this settlement is acceptable to the Bondholders Committee, this condition has been satisfied); c. The Court shall have entered an order approving the Veil Piercing Settlement and the Veil Piercing Settlement Agreement, and 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 (this condition may be waived solely by the Bondholders Committee); d. 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 (this condition may be waived solely by the Bondholders Committee); and e. 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 (this condition may be waived solely by the Bondholders Committee). The Proponents will request that the Confirmation Order provide that either (i) the treatment of the Allowed Claims of each Class has been consented to by the requisite number of voting members of such Class or (ii) the Allowed Claims of each Class have been satisfied in full upon receipt of the distribution provided for upon consummation of the Creditors' Plan, and that, as a result, in each case, no subordination provisions relating to any Allowed Claims will be enforceable against any other Allowed Claim. The Proponents will request that the Confirmation Order contain a channelling injunction providing that the prosecution of any existing or future asbestos-related claims that arise out of Veil Piercing-Related Issues be enjoined against the Debtors and be channelled against the Celotex estate. 2. To Effectiveness of the Creditors' Plan The Effective Date (as defined below) of the Creditors' 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 Bondholders Committee); b. All conditions precedent set forth in the Veil Piercing Settlement Agreement shall have been satisfied or waived (as provided therein); c. Each of the orders described in Sections II.S.1.b. and II.S.1.c. above shall each have become a Final Order (this condition may be waived solely by the Bondholders Committee); d. The Debtors shall have consideration sufficient to make all distributions required by the Creditors' Plan; e. Qualified Securities having an aggregate principal amount of not less than $700 million shall be available for distribution to Classes U-4, U-5, U-6 and U-7 under the Creditors' Plan (this condition may be waived solely by the Bondholder Proponents); f. The Reorganization Documents shall have been executed and delivered by all of the parties thereto and the Court shall have entered a Final Order approving the Reorganization Documents (this condition may be waived solely by the Bondholders Committee); g. Mid-State Homes shall have obtained the Mid-State Homes Warehouse Credit Facility (this condition may be waived solely by the Bondholders Committee); h. 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 Effective Date (this condition may be waived solely by the Bondholders Committee); provided, that any such determination by the Bondholders Committee shall not be effective unless written notice thereof is given to the Court, the Debtors, the other Proponents, the Bank Agents and the Series B & C Senior Note Trustee with an opportunity for any of such persons to request, within 10 days after receipt of such notice, that a hearing be held to consider whether such determination constitutes an abuse of discretion; i. All conditions to effectiveness of each of the Reorganization Documents (other than conditions relating to payment of money or the issuance of debt securities or New Common Stock on the Effective Date or conditions that the Effective Date shall have occurred or whose fulfillment would require the Effective Date to have occurred) shall have been satisfied (or waived by the applicable Persons); and j. The Charter shall have been filed with the Secretary of State of the State of Delaware. The Proponents presently intend to waive any conditions to effectiveness that require a Final Order and consummate the Creditors' Plan, if the only appeal outstanding of the relevant order is raised by any Debtor(s) or any of their stockholders, because the issues raised by any such appeal are not expected to adversely affect the reorganized Debtors. Because the Debtors and their shareholders are the only parties likely to raise such appeals, the effectiveness of the Creditors' Plan will not be delayed during the pendency of any appeals taken by the Debtors and/or their shareholders with respect to any of the orders required for the Effective Date to occur, unless they obtain a stay pending appeal after posting any required bond, which would prevent the Effective Date from occurring. Because the Proponents believe that the amount of any such bond would be enormous, the Proponents do not believe that the Debtors and/or their shareholders are likely to obtain such a stay pending appeal. The ability of the Proponents to obtain the financing necessary to consummate the Creditors' Plan despite the existence of such an appeal is discussed above at "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the Creditors' Plan--Distribution of Combination of Qualified Securities and New Common Stock to Holders of Subordinated Note Claims and to Veil Piercing Claimants--Creation and Anticipated Range of Amount of Qualified Securities." Recently, the Bondholder Proponents have contacted prospective financing sources, but have not sought or received a commitment for any financing for any of the Debtors. The Debtors contend that the Creditors' Plan cannot be confirmed and cannot become effective without the litigation and appellate delays relating to the approval of the Veil Piercing Settlement Agreement, the Pre-LBO Bondholders Settlement Agreement, the resolution of the issue of the Unsecured Creditors' entitlement to post-petition interest and the satisfaction of the conditions of "Finality" (as that term is used in the Veil Piercing Settlement Agreement). The Proponents disagree. The Proponents believe that, other than the Debtors and KKR Associates, the Debtors' controlling stockholder, the parties that may realistically object to the Veil Piercing Settlement Agreement and the Pre-LBO Bondholders Settlement Agreement are the Veil Piercing Claimants and the Holders of Pre-LBO Debenture Claims, respectively. Virtually all parties that would have standing and/or cause to appeal the Veil Piercing Settlement Agreement--that is, The Celotex Corporation, the Celotex Asbestos Property Damage Claimants Committee, the Celotex Asbestos Bodily Injury Claimants Committee and counsel representing the great majority of the individual Veil Piercing Claimants--are already parties to the Veil Piercing Settlement Agreement and can be expected to support its implementation. The same is true of the Pre-LBO Bondholders Settlement Agreement, since both the Ad Hoc Committee of Pre-LBO Bondholders and Holders of over 2/3 of the principal amount of Pre-LBO Debenture Claims are parties to the Pre-LBO Bondholders Settlement Agreement. Moreover, as discussed above, the Bondholder Proponents presently intend to waive any conditions to effectiveness that require a Final Order, if the only appeal outstanding on the relevant order is raised by any Debtor(s) or any of their shareholders. Because the Debtors and their shareholders are the only parties likely to raise such appeals, the effectiveness of the Creditors' Plan should not be delayed during the pendency of any appeals taken by the Debtors and/or their shareholders with respect to any of the orders required for Confirmation or effectiveness (unless, as discussed above, the Debtors and/or their stockholders obtain a stay pending appeal). In addition, notwithstanding the Debtors' assertions to the contrary, neither approval of the Veil Piercing Settlement Agreement nor confirmation of the Creditors' Plan is conditioned upon a determination by the Court that Subordinated Noteholders are legally entitled to post-petition interest on account of their Claims. The Proponents believe that the Veil Piercing Settlement Agreement satisfies the fair and equitable test independent of the ability of the Subordinated Noteholders to receive post-petition interest on account of their Claims. The Creditors' Plan expressly provides that the Allowed Amount of Subordinated Note Claims includes all pre-petition amounts as well as post-petition interest, but only to the extent that the payment of post-petition interest is permitted by law and to the extent available after payment of all other Claims under the Creditors' Plan. Based upon the Negotiated Enterprise Value and the estimated amount of Allowed Claims, including the Veil Piercing Claims, pursuant to the Veil Piercing Settlement Agreement, the Proponents do not expect that any value will remain for allocation to post-petition interest on account of Subordinated Note Claims. Therefore, not only does the Creditors' Plan envision that no post-petition interest will be recovered on account of Subordinated Note Claims, in the event that there is any residual value in the Debtors' estates after payment of all other Allowed Claims, post-petition interest is recoverable on account of Subordinated Note Claims only to the extent permitted by law. Thus, although the Creditors' Plan is flexible enough to accommodate any finding by the Court with respect to Holders of Subordinated Note Claims' right to post-petition interest, because the Proponents do not believe that there will be any residual value in the Debtors' estates after payment of all other Allowed Claims, it will not be necessary for the Court to rule on the merits of the right of Holders of Subordinated Note Claims to recover value on account of post-petition interest in order to confirm the Creditors' Plan. The Debtors assert that this Disclosure Statement provides inadequate disclosure regarding the "material adverse change" condition to confirmation and consummation, i.e., that, as a result of this condition, Apollo and Lehman Brothers Inc. are allegedly able to prevent confirmation and/or consummation of the Plan in their sole discretion. The determination as to whether a material adverse change has occurred, for purposes of the condition to effectiveness, was changed so that the determination would be made by the Bondholders Committee and would not be effective until written notice thereof was given to the Debtors and all significant creditor representatives, with an opportunity for any of them to request a hearing to consider whether the determination constituted an abuse of discretion. The "Effective Date" of the Creditors' Plan shall be such Business Day (as defined in the Creditors' Plan) selected by the Bondholder Proponents which shall not be later than ninety (90) days after the entry of a Final Order by the Court finding that all of the foregoing conditions have been satisfied or waived. 3. Waiver of Conditions Precedent Satisfaction of the conditions precedent to confirmation and consummation of the Creditors' Plan may be waived by all of the Proponents (or, in certain cases, solely by certain of the Proponents, as set forth above). U. Certain Information Regarding Apollo and Lehman Brothers Inc. The Debtors have alleged that this Disclosure Statement provides inadequate disclosure with respect to the following: (a) the identity of the "Affiliates of AIF II, L.P. and certain accounts managed or controlled by such Affiliates," who are Creditor Proponents; (b) Apollo's cost basis in the Debtors' debt securities purchased after the Filing Date; (c) the pre-Filing Date relationship of certain principals of Apollo to the Debtors in connection with the financing of the LBO and the issuance of the LBO Bonds; (d) whether and to what extent principals of Apollo at the time Apollo purchased the Debtors' debt securities possessed material and non-public information; (e) any other pre-Filing Date relationships with the Debtors; (f) whether and to what extent Apollo had discussions with third-party post-Filing Date purchasers of the Debtors' debt securities, including, but not limited to "Libra;" (g) the facts and circumstances surrounding any lawsuit commenced against Apollo or any principals of Apollo which would be required to be disclosed under applicable federal and/or state securities laws; (h) the officers, directors and owners of Apollo and how much such individuals stand to earn if the Creditors' Plan goes effective; (i) who Apollo really is; (j) the holdings of Apollo in Classes U-4 and U-5; (k) the details of the post-Filing Date acquisitions of the Debtors' debt securities by Apollo, including the fact that Apollo purchased their bonds at a significant discount and as a result stand to make a substantial profit from confirmation of the Creditors' Plan; (l) the specifics of all of the Claims and Interests that Apollo presently holds or previously held and all prior fiduciary or other relationships with the Debtors; (m) the details of the expenses (including legal and professional fees) (i) incurred by Apollo in connection with the formulation and implementation of the Creditors' Plan and (ii) incurred in connection with the Apollo Veil Piercing Settlement Agreement, that would be entitled to administrative priority treatment under the Creditors' Plan; (n) why Apollo is interested in obtaining a controlling position in the reorganized Debtors and what their intentions are with respect to asserting that position; and (o) how much Apollo and their respective principals and affiliates stand to earn if the Creditors' Plan goes effective, including the value earned on account of their Claims and any fees and expenses which would be recovered from the Debtors, or anticipated future fees on financings or asset sales." Although Apollo does not believe that any of the information requested by this objection is required or relevant, nevertheless, in an effort to obviate certain of the objections and expedite the disclosure statement approval process, the following information is provided: (i) Within the defined term "Apollo," the only Proponent is currently AIF II, L.P., which is an investment partnership that holds all of the Claims held by any Apollo-related entity with respect to the Chapter 11 Cases. The term "Apollo" is defined broadly to permit the transfer, in the ordinary course of business, of any or all of such Claims to affiliates of AIF II, L.P. (ii) Prior to the Filing Date, Drexel Burnham Lambert Incorporated ("Drexel") acted as placement agent with respect to the 1987 private placement of the LBO bonds of Hillsborough, and as financial advisor to Hillsborough in the 1989 unsuccessful attempt to effect an exchange offer of the LBO bonds and a restructuring of Hillsborough. Certain principals of Apollo, as employees of Drexel, acted in connection with these engagements. Except for those engagements, neither Apollo nor any of its principals or employees had any other pre-Filing Date relationships with the Debtors. Drexel's last engagement by Hillsborough terminated in 1989, more than two years prior to March 1992, when Apollo acquired its debt securities of the Debtors as part of a bulk purchase of a portfolio of securities of over 300 different issuers. The purchase price for the portfolio was not required to be allocated among each security in the portfolio. Nevertheless, Apollo believes that it paid less than the face amount for the Debtors' debt securities. Apollo has not purchased any securities of any Debtor since that time. (iii) Neither Apollo nor any of its principals, employees or representatives possessed any material and non-public information with respect to any of the Debtors at the time of the purchase by Apollo of the Debtors' debt securities. (iv) On June 8, 1993, Apollo signed a confidentiality agreement with the Debtors and has fully complied therewith. (v) There are no lawsuits against Apollo or any principals of Apollo which would be required to be disclosed under applicable federal and/or state securities laws. (vi) AIF II, L.P. is an investment partnership in the form of a limited partnership, the general partner of which is Apollo Advisors, L.P., a limited partnership whose general partner is Apollo Capital Management, Inc., a Delaware corporation. The shareholders of Apollo Capital Management, Inc. are Leon Black, Craig Cogut, John Hannan and Arthur Bilger. (vii) AIF II, L.P. holds $120,445,719 principal amount of Class U-4 Claims, $25,000,000 principal amount of Class U-5 Claims, $12,375,000 principal amount of Class U-6 Claims and $2,250,000 principal amount of Series B & C Senior Note Claims. (viii) Apollo has incurred legal, professional and other expenses in connection with its attempt to formulate an alternative to the Debtors' plan and its ongoing efforts to effect a prompt and fair resolution of these Chapter 11 Cases; Apollo cannot estimate at this time what the amount of such expenses may be when the Creditors' Plan is finally consummated. (ix) Apollo is not interested in obtaining control over the reorganized Debtors. It is interested in enforcing its rights as a Creditor, and it did not acquire its interest in the Debtors with the intention of obtaining control over the reorganized Debtors. Apollo supports the issuance of a high-vote class of common stock because it believes that the issuance of such stock to Holders of Claims in Claims U-4 and U-5 will facilitate the Debtors obtaining necessary effective date financing and will facilitate the continuation of current operational management. Further, Lehman Brothers Inc. and Apollo have represented that there are no understandings or agreements between them with respect to the exercise of their rights to elect Qualified Securities or with respect to their voting of New Common Stock that they may receive on the Effective Date. Also, at the present time, there are no understandings or agreements between them with respect to the nomination or appointment of directors to sit on the boards of directors of the reorganized Debtors, other than the appointment, described herein, of Messrs. Walter, Durham and Matlock. The Debtors have alleged that this Disclosure Statement provides inadequate disclosure with respect to the following: (a) the pre-Filing Date fiduciary relationship between Lehman Brothers Inc. and the Debtors in connection with the LBO and as financial advisor to the Debtors in connection with sales and potential sales of certain of the Debtors' businesses; (b) whether and to what extent Lehman Brothers Inc., at the time it acquired the Debtors' debt securities, possessed material and non-public information obtained as a result of Lehman's Brothers Inc. pre-Filing Date relationship with the Debtors; (c) whether and to what extent Lehman Brothers Inc., at the time it sold certain of the Debtors' debt securities immediately prior to becoming a member of the Bondholders Committee, possessed material and non-public information obtained during the course of negotiations with the Debtors in 1992 and 1993; (d) the cost basis of Lehman Brothers Inc. in the Debtors' debt securities purchased after the Filing Date and any financing Lehman Brothers Inc. has offered to third parties in connection with such third parties' purchase of the Debtors' debt securities; (e) the research and analysts' reports issued by Lehman Brothers Inc. after the Filing Date relating to the Debtors and in particular the views expressed by Lehman Brothers Inc. in such reports as to the merits of the Veil Piercing Litigation; (f) whether and to what extent other corporate purposes of Lehman Brothers Inc. and/or its affiliates influenced Lehman's pursuit of the Creditors' Plan; (g) the holdings Lehman Brothers Inc. in Classes U-4 and U-5; (h) the details of the post-Filing Date acquisitions of the Debtors' debt securities by Lehman Brothers Inc., including the fact that Lehman Brothers Inc. purchased their bonds at a significant discount and as a result stands to make a substantial profit from confirmation of the Creditors' Plan; (i) the specifics of all of the Claims and Interests that Lehman Brothers Inc. presently holds or previously held and all prior fiduciary or other relationships with the Debtors; (j) the details of the expenses (including legal and professional fees) (i) incurred by Lehman Brothers Inc. in connection with the formulation and implementation of the Creditors' Plan and (ii) incurred in connection with the Veil Piercing Settlement Agreement, that would be entitled to administrative priority treatment under the Creditors' Plan; (k) why Lehman Brothers Inc. is interested in obtaining a controlling position in the reorganized Debtors and what their intentions are with respect to asserting that position; and (l) how much Lehman Brothers Inc. and its respective principals and affiliates stand to earn if the Creditors' Plan goes effective, including the value earned on account of their Claims and any fees and expenses which would be recovered from the Debtors, or anticipated future fees on financings or asset sales. Although Lehman Brothers Inc. does not believe that any of the information requested by this objection is required or relevant, nevertheless, in an effort to obviate certain of the objections and expedite the disclosure statement approval process, the following information is provided: (i) A special committee of the Board of Directors of Old Jim Walter engaged Lehman Brothers Inc. in 1986-87 to analyze and evaluate competing offers to acquire the Debtors' predecessors, including the 1987 LBO led by KKR. Following the LBO, Old Jim Walter engaged Lehman Brothers Inc. to assist in evaluating the potential sale of certain assets of the Debtors, including United States Pipe, and Lehman Brothers Inc. assisted in the sale of Celotex, Ltd., a foreign subsidiary. These engagements terminated before the Filing Date. (ii) Lehman Brothers Inc. did not possess material and non-public information as a result of the foregoing pre-Filing Date engagements when it obtained the Debtors' debt securities. As Lehman Brothers Inc. has previously informed the Debtors, Lehman Brothers Inc. did not disclose any non-public information in connection with its sale of certain of the Debtors' secured bond debt and bank debt that occurred before Lehman Brothers Inc. became a member of the Bondholders Committee, and Lehman Brothers Inc. has fully complied with its confidentiality agreement with the Debtors. (iii) In February 1993 Lehman Brothers Inc., with the full cooperation of the Debtors, and consistent with the nature of the public research report process, issued a Research Report regarding the Debtors based on information in the public record, which at that time did not include the results of extensive discovery, the record of the trial of the Declaratory Judgment Proceeding and the Court's April 18, 1994 opinion in the Declaratory Judgment Proceeding. The Research Report concluded, among other things, that Hillsborough should not be held liable for the asbestos claims of Celotex. The Research Report also concluded that the Chapter 11 process often leads to the settlement of such disputes and that certain factors, such as the likelihood of the Debtors' prevailing on the merits of the Declaratory Judgment Proceeding, the timing of distributions and the goals of the parties in interest, often have a bearing on any settlement. The Report also stated that because the Declaratory Judgment Proceeding named only specific defendants, achieving a prompt result that binds all present and future veil piercing claimants "appears to require the agreement of the major parties." (iv) Lehman Brothers Inc. holds Class U-4 and Class U-5 bonds in the approximate aggregate principal amount of $271 million. Some of these bonds were purchased after the Filing Date at a price below the par value of such bonds. (v) Lehman Brothers Inc. has incurred legal, professional and other expenses in connection with its attempt to formulate an alternative to the Debtors' plan and its ongoing efforts to effect a prompt and fair resolution of these Chapter 11 Cases; Lehman Brothers Inc. cannot estimate at this time what the amount of such expenses may be when the Creditors' Plan is consummated. (vi) Lehman Brothers Inc. is not interested in obtaining control over the reorganized Debtors. It is interested in enforcing its rights as a Creditor, and it did not become a Creditor with the intention of obtaining control over the reorganized Debtors. Lehman Brothers Inc. supports the allocation of Class A and Class B New Common Stock for the reasons set forth elsewhere in this Disclosure Statement, including to help to ensure that the Debtors obtain the financing necessary to consummate the Creditors' Plan and to provide for the continuation of the Debtors' long-term operational and senior management. There are no agreements or understandings between Lehman Brothers Inc. and Apollo with regard to the control of the Reorganized Debtors, including with respect to the allocation or voting of New Common Stock, other than the appointment of Messrs. Walter, Durham and Matlock to the New Boards. (vii) Apparently without any factual basis for doing so, the Debtors have questioned whether the voting and governance procedures of the Bondholders Committee were changed, and whether Apollo or Lehman made any agreements with Committee members, when Apollo and Lehman Brothers Inc. became members of the Bondholders Committee. No voting and governance procedures of the Bondholders Committee were changed when Apollo and Lehman Brothers Inc. became members of the Bondholders Committee, and neither Apollo nor Lehman Brothers Inc. made any agreements with Committee members at that time. III. POST-CONSUMMATION A. Business The Creditors' Plan does not contemplate the sale of any of the Debtors, Non-Debtor Affiliates (as defined in Section III.B.1.) or any substantial amount of their Assets in the foreseeable future. Therefore, in the foreseeable future, the businesses will continue as described herein in the section "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS." B. Management 1. Directors and Officers of the Debtors Set forth below are lists showing the names, ages and positions of all of the present directors and officers of Walter Industries, and the key operating officers of each of the other Debtors (together with brief biographical summaries). See Exhibit V for lists of all of the directors and officers of each of the other Debtors. It is currently expected that all current officers, other than officers that are employees of, or affiliated with, KKR Associates or its affiliates, will continue to serve in such capacities subsequent to consummation of the Creditors' Plan, except for any changes that might occur in the ordinary course of business. On the Confirmation Date, the Board of Directors of each Debtor shall be replaced by a New Board of Directors, (each a "New Board" and together the "New Boards"), each consisting of eleven (11) Directors. In the event that the Confirmation Order does not provide for or allow the replacement of the Board of Directors of each Debtor with a New Board on or about the Confirmation Date, then the Confirmation Order shall direct the Board of Directors of each Debtor to take the actions that the New Boards would be required to take under Section 5.3 of the Creditors' Plan and under the other provisions of the Creditors' Plan, except where another Person is expressly authorized under the Creditors' Plan to act in the stead of a New Board if it has not yet been constituted and except that the Confirmation Order shall appoint the Bondholders Committee as the representative of Walter Industries under Section 303 of the Delaware General Corporation Law with the full power and authority to establish the amount and the terms, conditions, rights and benefits of the Qualified Securities and the New Senior Notes to be issued under the Creditors' Plan and to take such other actions as may be required to or as may facilitate the consummation of the Creditors' Plan. Each New Board shall consist of the persons identified by the Proponents at least thirty (30) days prior to the Confirmation Hearing Date, which persons shall include 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; and (iii) Kenneth J. Matlock, the present Executive Vice President, Chief Financial Officer and Director of Walter Industries. In addition to the other duties of each New Board not inconsistent with Section 5.3 of the Creditors' Plan under applicable law and the applicable articles of incorporation and bylaws of each Debtor, each New Board shall cause its Debtor to be managed and operated in a manner calculated to (i) maximize the value of the Debtor, and (ii) raise Cash from operations or other commercially reasonable sources, create Qualified Securities in accordance with customary industry practice, and take such other actions to facilitate consummation of the Creditors' Plan. Note that, as a result of completion of the Mirror Liquidation Plan, the corporate existence of certain Debtors ceased. Accordingly, there are no current directors or officers of Old Walter Industries, Resources Holdings, Jim Walter Resources or United Land, since those corporate entities no longer exist. Directors of each of the Debtors are elected annually by the stockholders of such Debtor. Each director holds office until his successor is elected and qualified. Current Directors of Walter Industries are as follows: James W. Walter -- Chairman; G. Robert Durham; Perry Golkin; Henry R. Kravis; Kenneth J. Matlock; Paul E. Raether; George R. Roberts; and Michael T. Tokarz. With the exception of Mr. Walter, Mr. Durham and Mr. Matlock, it is expected that none of the current directors of Walter Industries will be elected to any of the New Boards. The biographical summaries for each of the current directors named above who are also officers of the Debtors are shown in the following section regarding officers. The biographical summaries (age and service as of August 1, 1993) for each of the current directors who are not also officers of the Debtors are as follows: James W. Walter has been Chairman of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. In 1948 Mr. Walter founded Walter Construction Co., a predecessor of Original Jim Walter (incorporated in 1955). He was President and Chief Executive Officer of Original Jim Walter from 1955 to 1963, Chairman and Chief Executive Officer from 1963 to 1983 and Chairman thereafter. He is also a Director of GTE Corporation, Contel Cellular, Inc. and Anchor Glass Container Corporation. Age 70. 45 years of service. Henry R. Kravis has been a director of Hillsborough, Old Walter Industries and/or Walter Industries since 1988 and he has been a general partner of KKR since its organization in 1976. Paul E. Raether has been a director of Hillsborough, Old Walter Industries and/or Walter Industries since 1988 and he has been a general partner of KKR since April 1986; prior to that time he was an associate at KKR. George R. Roberts has been a director of Hillsborough, Old Walter Industries and/or Walter Industries since 1988 and he has been a general partner of KKR since its organization in 1976. Officers of the Debtors and Cardem, J.W. Railroad, Black Warrior Methane and Black Warrior Transmission (collectively, the "Non-Debtor Affiliates") serve at the pleasure of the applicable Board of Directors. The Debtors state in the Debtors' Disclosure Statement that the Debtors are not aware of any family relationship among any of the officers of the Debtors and/or the Non-Debtor Affiliates. Set forth below are the names, ages, positions and business backgrounds (as of August 1, 1993) of all of the officers of Walter Industries and the key operating officers of each of the other Debtors. See Exhibit V for a list of all of the officers of the Debtors and the Non-Debtor Affiliates. Name Age Position and Background (1) Walter Industries (formerly named Hillsborough) G. Robert Durham 64 President and Chief Executive Officer G. Robert Durham had been President and Chief Executive Officer of Walter Industries since June 1991. He was Chairman, President and Chief Executive Officer of Phelps Dodge Corporation from 1987 to 1989, when he took early retirement. Prior to 1987 he was President and Chief Operating Officer (1985-1987) and held other executive positions (1967-1985) with Phelps Dodge Corporation and/or its affiliated companies. He is also a Director of Homestake Mining Company, GFC Financial Corporation and Atlantic Gulf Communities Corporation and a Trustee of Mutual Life Insurance Company of New York. He also was a Director of Manufacturers Hanover Corporation (resigned June 1991), MHTCo. (resigned June 1991) and Public Service Company of New Mexico (resigned July 1991). Two years of service. Kenneth J. Matlock 65 Executive Vice President and Chief Financial Officer Kenneth J. Matlock has been Executive Vice President and Chief Financial Officer of Walter Industries since 1991; he was Senior Vice President and Chief Financial Officer of Hillsborough, Old Walter Industries and/or Walter Industries from 1988 to 1991. Mr. Matlock joined Original Jim Walter in 1964, became Controller in 1970, Chief Financial Officer in 1974 and Senior Vice President in 1984. 29 years of service. William H. Weldon 61 Senior Vice President--Finance and Chief Accounting Officer William H. Weldon has been Senior Vice President-- Finance and Chief Accounting Officer of Walter Industries since 1991; he was Vice President, Controller and Chief Accounting Officer of Hillsborough, Old Walter Industries and/or Walter Industries from 1988 to 1991. Previously he served as Vice President and Controller (1977-1988); Controller (1972-1977); and Assistant Controller (1971-1972) of Original Jim Walter. 22 years of service. William N. Temple 60 Senior Vice President and Group Executive William N. Temple has been Senior Vice President and Group Executive of Walter Industries since 1991; he was also appointed President and Chief Operating Officer of U.S. Pipe effective November 4, 1993; he was a Vice President of Hillsborough, Old Walter Industries and/or Walter Industries from 1988 to 1991. Previously he served from 1974-1988 as a Vice President of Original Jim Walter. Prior thereto he served as President of the Fasteners and Special Products Division of Former U.S. Pipe (as defined in Section VII.B.2.(e)) and Vice President of Former U.S. Pipe (1972-1974); President of The Southeastern Bolt and Screw Division of Former U.S. Pipe (1971-1974); and Controller of Former U.S. Pipe (1965-1971). 28 years of service. Robert W. Michael 51 Senior Vice President and Group Executive See Jim Walter Homes Perry Golkin 39 Vice President Perry Golkin has been a Vice President of Hillsborough, Old Walter Industries and/or Walter Industries since 1987; he has been an associate at KKR since May 1986; prior to that time he was an associate at Simpson Thacher & Bartlett (law firm). He is a Director of American Re Corporation and K-III Communications Corp. Five years of service. Michael T. Tokarz 43 Vice President Michael T. Tokarz has been a Vice President of Hillsborough, Old Walter Industries and/or Walter Industries since 1987; he has been a general partner of KKR since January 1993; prior to that time he was an associate at KKR since September 1985; prior to that time he was a Vice President and Manager in the New York office of Continental Illinois National Bank and Trust Company of Chicago (commercial bank). He is a Director of Safeway, Inc., RJR Nabisco Holdings Corp., RJR Nabisco, Inc., TW Holdings, Inc., TW Services Inc., K-III Communications Corp. and IDEX Corporation. Five years of service. Gerald W. Hermann 58 Vice President--Employee Relations Gerald W. Hermann has been a Vice President of Hillsborough, Old Walter Industries and/or Walter Industries since 1990. Previously he served as Staff Vice President-Employee Relations (1987-1990) and Vice President-Employee Relations, Seal Group (1980-1987) of Parker Hannifin Corporation. Three years of service. David L. Townsend 39 Vice President--Public Relations David L. Townsend has been a Vice President of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. Previously he served as a Vice President (1983-1988); Director of Public Relations (1982-1983); Manager of Public Relations (1980-1982) and in various staff positions (1978-1980) with Original Jim Walter. 15 years of service. John F. Turbiville 64 Vice President--Legal and Secretary John F. Turbiville has been Vice President--Legal and Secretary of Hillsborough, Old Walter Industries and/or Walter Industries since 1989. Previously he served as Assistant Secretary of Walter Industries (1988-1989). Prior thereto he was Assistant Secretary (1981-1988) and a staff attorney (1979-1981) with Original Jim Walter. 14 years of service. Donald M. Kurucz 54 Vice President and Treasurer Donald M. Kurucz has been Vice President and Treasurer of Walter Industries since 1991; he was Treasurer of Hillsborough, Old Walter Industries and/or Walter Industries from 1988-1991. Previously he served as Treasurer (1977-1988) and Assistant Treasurer (1975-1977) of Original Jim Walter. 17 years of service. Frank A. Hult 42 Controller Frank A. Hult has been Controller of Walter Industries since 1991; he was Assistant Controller and Chief Accountant (1989-1991) and Manager of Budgets (1988-1989) of Hillsborough, Old Walter Industries and/or Walter Industries. Previously he was Manager of Budgets (1984-1988) and Financial Analyst (1978-1981) of Original Jim Walter; and Manager-Operations Administration (1981-1984); Plant Controller (1975-1978) and Cost Accountant (1974-1975) for Celotex. 19 years of service. William Kendall Baker 70 Assistant Treasurer See Jim Walter Homes S. Louise Russell 60 Assistant Secretary S. Louise Russell has been Assistant Secretary of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. Prior thereto she was Assistant Secretary (1963-1988) of Original Jim Walter. She has been employed by and has been Secretary of Jim Walter Homes since 1976. Prior thereto she held various accounting and clerical positions (1955-1976) with Jim Walter Homes. 38 years of service. Joseph W. Spransy 47 Assistant Secretary Joseph W. Spransy has been an Assistant Secretary of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. He has been employed by and has been Assistant Secretary of U.S. Pipe since 1988. Prior thereto he was an Assistant Secretary (1984-1988) and a Corporate Attorney (1979-1984) with Former U.S. Pipe. 14 years of service. Stephen H. Foxworth 49 Assistant Treasurer Stephen H. Foxworth has been an Assistant Treasurer of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. Prior thereto he was an Assistant Treasurer (1980- 1988); Manager-Cash and Banking (1976-1980); Senior Auditor (1975-1976) and Staff Auditor (1974-1975) of Original Jim Walter. 18 years of service. Mary C. Snow 47 Assistant Secretary Mary C. Snow has been Assistant Secretary of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. Prior thereto she was Assistant Secretary (1986-1988) and Staff Attorney (1982-1986) of Original Jim Walter. 11 years of service. Thomas G. Ketcham 62 Assistant Controller Thomas G. Ketcham has been Assistant Controller and Tax Director of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. Prior thereto he was Assistant Controller and Tax Director (1982-1988) of Original Jim Walter. 11 years of service. (2) Best Dana A. Snyder 41 President Dana A. Snyder has been President of Best since 1990. Prior thereto he was Vice President (1989-1990) and Senior Account Executive (1987-1989) of Best. Five years of service. (3) Best (Miss.) Dana A. Snyder 41 President See Best (4) JW Insurance Dana A. Snyder 41 President See Best (5) Coast to Coast Roger A. Crabb 37 President Roger A. Crabb has been President of Coast to Coast since January 1993. Prior thereto he was Vice President (1988-1993) and Account Manager (1984-1988) with Coast to Coast. Nine years of service. (6) Dixie Robert W. Michael 51 President See Jim Walter Homes (7) Home Improvement Robert W. Michael 51 President See Jim Walter Homes (8) Computer Services William H. Weldon 61 President See Walter Industries (9) Hamer Properties William N. Temple 60 President See Walter Industries (10) JW Walter William N. Temple 60 President See Walter Industries (11) Jim Walter Homes Robert W. Michael 51 President and Chief Operating Officer Robert W. Michael has been President and Chief Operating Officer of Jim Walter Homes since 1984. Prior thereto, he was Vice President-Sales (1975-1984); a Regional Manager (1973-1975); an Assistant Regional Manager (1970-1973); a Main Branch Manager (1967-1970) and a Sub-Branch Manager (1966-1967) with Jim Walter Homes and held various managerial positions with Mid-State Homes (1964-1966). He also was a Vice President of Original Jim Walter (1984-1988). 28 years of service. Sam P. Bullara, Jr. 45 Executive Vice President Sam P. Bullara, Jr. has been an Executive Vice President of Jim Walter Homes since October 1987. Previously he served as a Vice President (1979-1987); Collection Manager (1970-1979); an Assistant Regional Supervisor (1969-1970); and a Field Representative (1967-1969) with Mid-State Homes. 25 years of service. D. Wayne Hornsby 52 Executive Vice President D. Wayne Hornsby has been an Executive Vice President of Jim Walter Homes since 1987. Previously he served as Vice President-Administration (1984-1987); Vice President-Central Division (1980-1984); a Regional Manager (1975-1980); an Assistant Regional Manager (1974-1975); a Main Branch Manager (1970-1974) and in various managerial positions (1966-1970) with Jim Walter Homes. 26 years of service. William Kendall Baker 70 Vice President, Treasurer, Chief Financial Officer and Chief Accounting Officer William Kendall Baker has been Vice President, Treasurer and Chief Financial Officer and Chief Accounting Officer of Jim Walter Homes since 1976. Prior thereto he held various accounting positions with Jim Walter Homes (1956-1976). Mr. Baker has also been Assistant Treasurer of Hillsborough, Old Walter Industries and/or Walter Industries since 1988. Prior thereto he was Assistant Treasurer (1970-1988) of Original Jim Walter. 36 years of service. (12) JW Aluminum Richard E. Almy 51 President and Chief Operating Officer Richard E. Almy has been President and Chief Operating Officer of JW Aluminum since December 1991. Prior thereto he was President and Chief Executive Officer of Tubelite Architectural Products (1989-1991) and held various managerial positions with Consolidated Aluminum (1977-1989) and Kaiser Aluminum (1965-1977). One year of service. (13) Jim Walter Resources (formerly named JW Resources) William Carr 62 President and Chief Operating Officer William Carr has been President and Chief Operating Officer of Jim Walter Resources since August 1991; prior thereto he was Senior Executive Vice President and Chief Operating Officer of Jim Walter Resources and President of its Mining Division since 1976. He also was a Vice President of Original Jim Walter from 1976 to 1988. 16 years of service. James M. Sims 59 Vice President, Chief Financial Officer and Chief Accounting Officer James M. Sims has been the Vice President and Chief Financial and Accounting Officer of Jim Walter Resources since December 1980 and Senior Vice President-Finance, Marketing and Administration of its Mining Division since May 1983. Previously he was Vice President-Administration and Finance of Jim Walter Resources' Mining Division (1978-1983) and Vice President Finance and Administration of Former Georgia Marble (1975-1978). 17 years of service. (14) United Land (formerly named Pipe Realty) William N. Temple 60 President See Walter Industries (15) Window Components Robert E. Rudolph 57 President Robert E. Rudolph has been President of Window Components since 1985. Prior thereto he was Vice President, Treasurer and Controller (1973-1985) and Assistant Controller (1971-1973) with Celotex; and Budget Coordinator (1970-1971) with Original Jim Walter. 23 years of service. (16) Window Components (Wisc.) Robert E. Rudolph President and Chief Operating Officer See Window Components (17) Walter Land William N. Temple 60 President See Walter Industries (18) Mid-State Homes Sam J. Salario 64 President Sam J. Salario has been President of Mid-State Homes since 1984 and a Vice President of Jim Walter Homes since 1972. Previously he served as an Assistant Vice President (1963-1984); a Regional Supervisor (1961-1963) and a Representative (1960-1961) with Mid-State Homes. 33 years of service. (19) Sloss Lee C. Houlditch 42 President Lee C. Houlditch has been President of Sloss since 1989. Prior thereto he was Vice President--Finance (1981-1989) of Sloss; Controller of Wedlo (1978-1979) and Operations Analyst (1976-1978) with Former U.S. Pipe. 15 years of service. (20) Southern Precision Earl E. Case 67 President Earl E. Case has been President of Southern Precision since 1987. Prior thereto he was assistant to the President (1987); Plant Superintendent (1969-1987); Assistant Plant Superintendent (1963-1969) and held various manufacturing positions (1949-1963) with Southern Precision. 44 years of service. (21) U.S. Pipe William N. Temple President and Chief Operating Officer (effective November 4, 1993). See Walter Industries. Dorrance R. Wedell 61 Former President and Chief Operating Officer (effective November 4, 1993) Dorrance R. Wedell was President and Chief Operating Officer of U.S. Pipe from 1989 until his retirement on November 4, 1993. Prior thereto he was President of Sloss (1980-1989); and Vice President Manufacturing, Pressure Pipe Division (1977-1980); Plant Manager-North Birmingham (1975-1977), and in various managerial and engineering positions (1956-1975) with Former U.S. Pipe. 36 years of service. Harry L. Ransom 58 Vice President--Marketing Harry L. Ransom has been Vice President--Marketing of U.S. Pipe since 1992. Prior thereto he was Sales Manager of U.S. Pipe (1988-1992). Previously he was Sales Manager (1980-1988); Pacific Coast Regional Manager (1975-1980); Assistant Pacific Coast Regional Manager (1970- 1975); District Manager (1965-1970); and Sales Representative (1960-1965) of Former U.S. Pipe. 32 years of service. William E. Fleck 63 Vice President--Manufacturing William E. Fleck has been Vice President--Manufacturing of U.S. Pipe since 1988; and is Vice President-Manufacturing of its Pressure Pipe Division. Prior thereto he was a Vice President (1980-1988); Vice President-Manufacturing-Pressure Pipe Division (1980-1988); Plant Manager Bessemer (1976-1980); Plant General Superintendent-North Birmingham (1974-1976) and in various engineering positions (1955-1975) with Former U.S. Pipe. 38 years of service. E. Jack Mize, Jr. 47 Vice President--Finance, Treasurer, Chief Financial Officer and Chief Accounting Officer E. Jack Mize, Jr. has been Vice President--Finance, Treasurer and Chief Financial Officer and Chief Accounting Officer of U.S. Pipe since 1988. Prior thereto he was Vice President, Treasurer and Chief Financial and Accounting Officer (1985-1988); Vice President and Controller (1978-1985); Controller (1976-1978); Accounting Manager (1975-1976) and in various accounting positions (1968-1975) with Former U.S. Pipe. 24 years of service. (22) Vestal David M. Vestal 56 President David M. Vestal has been President of Vestal since 1982. Prior thereto he was Vice President-Operations (1979-1982); Vice President-Sales (1972-1979) and Assistant Sales Manager (1961-1972) with Vestal. 32 years of service. (23) Computer Holding; Hamer Holdings; JWI Holdings; Land Holdings; Mid-State Holdings and Railroad Holdings Michael T. Tokarz 43 President and Chief Executive Officer See Walter Industries (24) Non-Debtor Affiliates a. Cardem Kenneth J. Matlock 65 President See Walter Industries b. J.W. Railroad Lee C. Houlditch 42 President and Treasurer See Sloss c. Black Warrior Nethane Robert G. Sanders 50 President and General Manager Robert G. Sanders has been President and General Manager of Black Warrior Methane since 1983. 10 years of service. d. Black Warrior Transmission Robert G. Sanders President and General Manager See Black Warrior Methane 2. Executive Compensation a. Directors Non-employee directors of Walter Industries (Messrs. Golkin, Kravis, Raether, Roberts and Tokarz, each of whom is either a general partner or an associate of KKR; see "POST-CONSUMMATION -- Management -- Certain Related Transactions") were paid fees of $25,000 per year until the Filing Date. Effective with the commencement of the Reorganization Proceedings, current payment of such directors' fees was suspended. No fees are paid to directors of any other Debtor or Non-Debtor Affiliate of Walter Industries. Walter Industries and its subsidiaries do not pay fees to directors who are employees of Walter Industries or its subsidiaries. After consummation of the Creditors' Plan, it is presently proposed that payment of Walter Industries' directors' fees to nonemployee directors of Walter Industries at $25,000 per year will be made. b. Officers (1) Cash Compensation Relating to Year Ended May 31, 1993 The following tables show the cash compensation paid by each of the Debtors during the fiscal year ended May 31, 1993, for services rendered in all capacities, to each of the key operating officers of each of the Debtors and to all officers of each of the Debtors as a group, in each case only during that portion of the period during which such persons held such positions or relationships. Such compensation is shown under the Debtor with which such officer was an employee, except as where noted. Compensation of Walter Industries' officers are included in total Walter Industries' expenses, the majority of the net amount (other than interest expense) of which is allocated to its subsidiaries by a monthly charge. Footnotes (1), (2) and (3) appear at the end of this subsection.
Cash Compensation Salary Name of Individual Capacities in Which and Incentive or Number in Group Compensation was Earned Other(3) Compensation(1) Total (a) Walter Industries (formerly named Hillsborough) James W. Walter Chairman of the Board of Walter Industries(2) $ 378,612 $ 450,000 $ 828,612 G. Robert Durham President and Chief Executive Officer of Walter Industries(2) 413,375 450,000 863,375 Kenneth J. Matlock Executive Vice President and Chief Financial Officer of Walter Industries(2) 231,187 255,000 486,187 William H. Weldon Senior Vice President--Finance and Chief Accounting Officer of Walter Industries 165,915 150,000 315,915 William N. Temple Senior Vice President and Group Executive of Walter Industries(2) 154,557 100,000 254,557 John F. Turbiville Vice President--Legal and Secretary of Walter Industries 92,364 40,000 132,364 Donald M. Kurucz Vice President and Treasurer of Walter Industries 112,139 52,000 164,139 All officers as a group (13 persons) $2,064,335 $1,626,500 $3,690,835 See "POST-CONSUMMATION--Management--Executive Compensation--Officers--Certain Employment Agreements." Effective November 4, 1993, Mr. Temple was also appointed President and Chief Operating Officer of U.S. Pipe.
Cash Compensation Salary Name of Individual Capacities in Which and Incentive or Number in Group Compensation was Earned Other(3) Compensation(1) Total (b) Best Dana Snyder President of Best $ 79,115 $10,000 $ 89,115 All officers as a group (2 persons) $ 140,038 $17,500 $ 157,038 (c) Best (Miss.) All officers as a group (1 person)* $ 27,330 $ -- $ 27,330 * employee of Jim Walter Homes (d) JW Insurance No employee officers (e) Coast to Coast Roger A. Crabb* President of Coast to Coast $ 45,565 $ 4,700 $ 50,265 All officers as a group (2 persons)* $ 102,595 $ 4,700 $ 107,295 * employees of Jim Walter Homes (f) Dixie No employee officers (g) Home Improvement No employee officers (h) Computer Services All officers as a group (1 person) $ 69,627 $ 6,000 $ 75,627 (i) Hamer Properties No employee officers (j) JW Walter No employee officers (k) Jim Walter Homes Robert W. Michael President and Chief Operating Officer of Jim Walter Homes $ 135,712 $100,000 $ 235,712 Sam P. Bullara, Jr. Executive Vice President of Jim Walter Homes $ 72,112 $ 29,400 $ 101,512 D. Wayne Hornsby Executive Vice President of Jim Walter Homes $ 80,059 $ 41,000 $ 121,059 William Kendall Baker Vice President, Treasurer, Chief Financial Officer and Chief Accounting Officer of Jim Walter Homes $ 114,785 $ 68,000 $ 182,785 All officers as a group (16 persons) $1,072,594 $461,800 $1,584,394
Cash Compensation Salary Name of Individual Capacities in Which and Incentive or Number in Group Compensation was Earned Other(3) Compensation(1) Total (l) JW Aluminum Richard E. Almy President and Chief Operating Officer of JW Aluminum $ 141,836 $ 27,000 $ 168,836 All officers as a group (5 persons) $ 370,007 $ 49,000 $ 419,007 (m) Jim Walter Resources (formerly named JW Resources) William Carr President and Chief Operating Officer of Jim Walter Resources(2) $ 227,505 $100,000 $ 327,505 James M. Sims Vice President, Chief Financial Officer and Chief Accounting Officer of Jim Walter Resources 109,560 16,000 125,560 All officers as a group (3 persons) $ 383,146 $116,000 $ 499,146 (n) United Land (formerly named Pipe Realty) All officers as a group (1 person) $ 58,471 $ -- $ 58,471 (o) Window Components Robert E. Rudolph President of Window Components $ 99,297 $ 18,000 $ 117,297 All officers as a group (4 persons) $ 300,631 $ 35,000 $ 335,631 (p) Window Components (Wisc.) No employee officers (q) Walter Land No employee officers (r) Mid-State Homes Sam J. Salario* President of Mid-State Homes; Vice President of Jim Walter Homes $ 106,804 $ 85,000 $ 191,804 All officers as a group (3 persons) $ 164,529 $107,000 $ 271,529 * Employee of Jim Walter Homes (s) Sloss Lee C. Houlditch President of Sloss $ 91,806 $ 27,000 $ 118,806 All officers as a group (3 persons) $ 234,598 $ 44,000 $ 278,598 (t) Southern Precision Earl E. Case President of Southern Precision $ 90,774 $ 12,000 $ 102,774 All officers as a group (2 persons) $ 163,178 $ 16,000 $ 179,178
Cash Compensation Salary Name of Individual Capacities in Which and Incentive or Number in Group Compensation was Earned Other(3) Compensation(1) Total (u) U.S. Pipe Dorrance R. Wedell President and Chief Operating Officer of U.S. Pipe $ 141,852 $ 20,000 $ 161,852 Harry L. Ransom Vice President-- Marketing of U.S. Pipe (effective October 1, 1992) 114,202 16,000 130,202 William E. Fleck Vice President-- Manufacturing of U.S. Pipe 117,940 15,000 132,940 E. Jack Mize, Jr. Vice President-- Finance, Treasurer, Chief Financial Officer and Chief Accounting Officer of U.S. Pipe 110,601 17,000 127,601 All officers as a group (9 persons) $ 887,991 $103,000 $ 990,991 (v) Vestal David M. Vestal President of Vestal $ 78,623 $ 14,000 $ 92,623 All officers as a group (3 persons) $ 175,971 $ 24,000 $ 199,971 (w) Computer Holdings; Hamer Holdings; JWI Holdings; Land Holdings; Homes Holdings; Mid-State Holdings and Railroad Holdings No employee officers Retired November 4, 1993.
(FOOTNOTES TO SCHEDULE OF OFFICERS COMPENSATION) (1) Incentive Compensation As of August 31, 1988, the Debtors adopted an incentive compensation plan comparable to a plan previously in effect for Original Jim Walter. Non-employee directors are not eligible to receive incentive compensation. Both officer employees and non-officer employees are eligible to receive incentive compensation. Amounts for incentive compensation included in the cash compensation table shown above were paid in August 1993 applicable to employment for the year ended May 31, 1993. Pursuant to an order of the Court dated May 17, 1990, incentive compensation for all officers of all the Debtors, but excluding James W. Walter and Joe B. Cordell of Walter Industries (and G. Robert Durham pursuant to a Court order dated June 27, 1991), paid during September 1990 was limited to $1,695,000 (the same amount as was paid in 1989), of which $1,694,161 was paid. Such amount was based on the fact that "Operating Income" (earnings before interest, taxes, depreciation, amortization and professional fees and expenses incurred in the Reorganization Proceedings but before interest income related to the Reorganization Proceedings) for the year ended May 31, 1990 approximated the Operating Income for the year ended May 31, 1989. The actual amount of such incentive compensation paid in 1990 to each of such officers, excluding Messrs. Walter and Cordell, was subject to the discretion of the Debtors; provided, however, that the maximum amount of incentive compensation to be paid to any officer was limited to 125% of such officer's base salary. For the year ended May 31, 1992, incentive compensation paid in August 1992 to officers of the Debtors (exclusive of Messrs. Walter and Durham) totalled $1,569,997, as compared to a maximum of $1,570,000 payable as determined by the formula (as adjusted) in the third succeeding paragraph. For the year ended May 31, 1993, incentive compensation paid in August 1993 to officers of the Debtors (exclusive of Messrs. Walter and Durham) totaled $1,719,000, the maximum payable as determined by the formula in the third succeeding paragraph. With respect to incentive compensation paid to Messrs. Walter and Cordell, in September 1990, the Debtors proposed to the Official Committees amounts to be paid to Messrs. Walter and Cordell; however, if one or both of such Official Committees had not agreed to the proposed amounts to be paid, then the amount of incentive compensation to be paid to Messrs. Walter and Cordell would have had to be determined by the Court. The amounts proposed for Messrs. Walter and Cordell for 1990 were agreed to by the Official Committees. With respect to incentive compensation proposed to be paid to Messrs. Walter and Cordell for the year ended May 31, 1991, and as to the incentive compensation for Mr. Walter for years commencing with the year ending May 31, 1992 and for Mr. Durham, Mr. Cordell's successor as President and Chief Executive Officer, for years commencing with the year ending May 31, 1993 (see "POST-CONSUMMATION--Management--Executive Compensation--Officers--Certain Employment Agreements" as to Mr. Durham's incentive compensation for the year ending May 31, 1992), the same procedure as in the preceding paragraph shall apply. By order dated December 2, 1993, the Court clarified its order dated May 17, 1990 by providing that, in considering the appropriate amount of incentive compensation for Messrs. Walter and Durham, the Official Committees could not utilize progress with respect to plans of reorganization as a factor. The Official Committees agreed to the amounts paid to Messrs. Walter and Cordell in September 1991 applicable to the year ended May 31, 1991 and the amounts paid to Messrs. Walter and Durham applicable to the years ended May 31, 1992 and 1993. For all other officers of the Debtors, incentive compensation shall be based upon the operational performance of the officer himself, the Debtor with which the officer is employed and the Debtors as a whole. The standard against which performance will be measured shall be Operating Income for such fiscal year as set forth in the Debtors' annual business plan for such fiscal year (the "Target"). At the beginning of each such fiscal year, the Debtors will submit for review by the Official Committees the maximum aggregate amount of incentive compensation to be paid to such officers, which amount will be based upon Operating Income as shown by the annual business plan for such year. If one or both of the Official Committees do not agree on such maximum aggregate incentive compensation planned to be paid in each such fiscal year, then the Court, upon motion by the Debtors, shall determine such amount. The Debtors have the authority to increase or decrease the maximum aggregate incentive compensation by 10% at their discretion; provided, however, that such maximum may not be adjusted above this 10% factor assuming that actual Operating Income is not materially different from the Target. If the actual Operating Income exceeds the Target, the maximum aggregate amount of incentive compensation to be paid to all of the Debtor Corporations' officers, excluding Messrs. Walter and Durham, shall be increased by 5% for each 1% that the actual performance exceeds the Target; provided, however, that the maximum amount that may be paid as a result thereof shall not exceed 200% of the planned amount determined as described above. The maximum amount to be paid to any officer, excluding Messrs. Walter and Durham, shall be limited to 125% of such officer's base salary. (2) Supplemental Plans Prior to 1984, contributions to qualified profit sharing plans were limited to $45,475 per individual by ERISA. In 1982, an amendment to the IRC was passed limiting allowable contributions to qualified profit sharing plans to $30,000 per individual (to be reduced to $22,500 effective for plan years commencing September 1, 1994 as a result of an amendment to the IRC), including forfeitures credited to such individual's profit sharing account. As a result of the change in the law, in 1983, Original Jim Walter adopted an unfunded, non-qualified, Supplemental Profit Sharing Plan (the "Supplemental Profit Sharing Plan"), which plan has also been adopted by Walter Industries. The Supplemental Profit Sharing Plan provides that an amount equal to the additional amount of contributions and forfeitures which would have been credited to a participant's account under the Walter Industries' Profit Sharing Plan (see "POST-CONSUMMATION--Management-- Executive Compensation--Officers--Profit Sharing Plan") but for the restrictions on such amount imposed by the IRC, shall be accrued for the benefit of such participant, payable, as provided in the Supplemental Profit Sharing Plan, upon termination of employment, at the discretion of Walter Industries in either a lump sum or sixty (60) equal monthly installments. For the Supplemental Profit Sharing Plan year ended August 31, 1993, only three employees, Messrs. Walter, Durham and Matlock, qualified for such participation, and were credited with $22,667, $31,705 and $3,481, respectively; cumulatively, at August 31, 1993, amounts accrued were $362,887, $61,705 and $8,074, respectively. In 1989, Walter Industries and certain of its subsidiaries adopted an unfunded, non-qualified, Supplemental Pension Plan (the "Supplemental Pension Plan"). The Supplemental Pension Plan provides that an amount equal to the value of the amount of pension benefit the employee would have been entitled to without regard to the limitations on compensation for determining pension benefits imposed by the IRC, less the actual amount of pension benefit he will receive pursuant to the Pension Plan (see "POST-CONSUMMATION--Management--Executive Compensation--Officers--Pension Plan") shall be accrued for the benefit of such Supplemental Pension Plan participant. Such accrued benefit payment is subject to the same elections and options applicable to the benefits payable from the Pension Plan. However, the applicable Debtor may, in its sole discretion, elect to furnish any and all benefits due under the Supplemental Pension Plan by purchasing annuities, or by other means at its disposal, including payment of the present value of such benefits. As of the December 31, 1992 Supplemental Pension Plan year end the present values of benefits under such Supplemental Pension Plan, as determined by the Debtors' outside actuary, were $130,369 with respect to Kenneth J. Matlock of Walter Industries (for prior service with a subsidiary company), $85,466 with respect to William Carr of Jim Walter Resources and $1,568 with respect to William N. Temple (effective January 1, 1994, Mr. Temple became an employee of U.S. Pipe where he will again be eligible to participate in the Pension Plan (as defined in Section III.B.2.(b)(3)) of Walter Industries (for prior service with a subsidiary company), including $30,536, $10,514 and $1,568, respectively, for the Supplemental Pension Plan year ended December 31, 1992. (3) Increases in Salaries Pursuant to an order of the Court dated May 17, 1990, base salaries of all officers of all the Debtors, including all officers in the tables shown above except James W. Walter of Walter Industries (and G. Robert Durham pursuant to an order of the Court dated June 27, 1991), could not be increased during the 12 months following such order more than 5.5%, on average, of base salaries in effect at May 17, 1990. The same 5.5% rule applies in each succeeding twelve month period. Base salaries for Mr. Walter of Walter Industries (and G. Robert Durham pursuant to orders of the Court dated June 27, 1991 and August 23, 1993 can be increased only after review of any such proposed increases by the Official Committees; however, if one or both of such Official Committees do not approve any such proposed increases, then such increases shall not be implemented except upon approval of the Court. Mr. Walter did not receive an increase in his base salary during the year ended May 31, 1991. Effective January 1, 1992, Mr. Walter voluntarily reduced his base salary from $425,000 per year to $350,000 per year. See "POST-CONSUMMATION--Management--Executive Compensation--Officers--Certain Employment Agreements" as to Mr. Durham's base salary. (2) Profit Sharing Plan Since 1958, Original Jim Walter had a Profit Sharing Plan (the "Original Jim Walter Plan"), providing retirement benefits for salaried employees of Original Jim Walter and certain of its subsidiaries. Under the Original Jim Walter Plan, the lesser of (a) 15% of the aggregate compensation, as defined in such plan (but excluding the incentive compensation payments described in Footnote 1 to the cash compensation tables above), paid to all participants during the particular fiscal year (subject to the maximum amount permitted under the IRC) or (b) 25% of Original Jim Walter's net profits, as defined in such plan, for the year, before federal income taxes, were set aside each year to be held in trust for participants in proportion to their compensation, as defined in such plan, for that year. Subsequent to the Merger, Old Walter Industries and certain of its subsidiaries (Jim Walter Homes, Mid-State Homes, Best, Best (Miss.), JW Insurance, Coast to Coast, Dixie and Home Improvement), adopted and continued such plan (now, the "Walter Industries Plan"). Contributions to the Walter Industries Plan are computed at a rate of 15% of the aggregate compensation (excluding incentive compensation), as defined in the Walter Industries Plan, paid to all participants during the plan fiscal year ending August 31, without any limitation as to required net profits. For the plan year ended August 31, 1993, the following tables show the amounts set aside for such year, with plan balances as of August 31, 1993, under the Walter Industries Plan, all of which amounts were fully vested except as noted, for each of the officers of each of the applicable Debtors in the cash compensation tables above, and to all officers of each of the applicable Debtors as a group.
Creditors' Plan Set Aside Balances for Year Ended as of August 31, August 31, 1993 1993 A. Walter Industries James W. Walter(1) $ 29,833 $2,136,746 G. Robert Durham(1) 29,805 63,980 Kenneth J. Matlock(1)(2) 29,894 1,165,638 William H. Weldon 23,940 858,312 William N. Temple(1)(2) 22,379 770,138 John F. Turbiville 13,050 244,811 Donald M. Kurucz 16,088 468,217 All officers as a group (14 persons)(1)(2) $236,634 $6,807,286 (99.4% vested) B. Best Dana Snyder $ 11,835 $69,914 (60% vested) All officers as a group (2 persons) $ 21,021 $168,608 (83.4% vested) C. Best (Miss.) All officers as a group (1 person) $ 2,167 $906,983 D. Coast to Coast Roger A. Crabb $ 6,960 $96,109 All officers as a group (2 persons) $ 15,354 $849,947 E. Jim Walter Homes Robert W. Michael $ 20,190 $885,516 Sam P. Bullara, Jr. 10,681 497,160 D. Wayne Hornsby 11,950 606,464 William Kendall Baker 15,597 996,536 All officers as a group (16 persons) $159,003 $8,154,164 F. Mid-State Homes Sam J. Salario $ 15,610 $ 944,439 All Officers as a group (3 persons) $ 24,524 $1,324,309 (1) See Note (2) to the officers cash compensation tables above. (2) See "Pension Plan" in the next subsection.
(3) Pension Plan The Pension Plan for Salaried Employees of Subsidiaries, Divisions and/or Affiliates of Walter Industries (the "Pension Plan"), previously maintained by Original Jim Walter, is a defined benefit pension plan funded by a method which produces annual contribution requirements in the aggregate and, therefore, contributions for individual participants are not determinable. Aggregate accrued contributions to the Pension Plan in the fiscal year ended May 31, 1993 (for the plan year ended December 31, 1992) amounted to $4,012,001, which was approximately 5.64% of total covered remuneration. Benefit payments under the Pension Plan are based on final average annual compensation (including overtime pay, incentive compensation and certain other forms of compensation reportable as wages taxable for federal income tax purposes) for the five (5) consecutive years within the final ten (10) years of employment prior to normal retirement date which produce the highest average. However, effective for the calendar year 1989, compensation for any employee in excess of $200,000 per year (as escalated in subsequent years for inflation -- currently $235,840) (to be reduced to $150,000 for plan years commencing January 1, 1994 as a result of an amendment to the IRC) cannot be counted in the calculation of the pension benefit for such employee. The annual pension generally amounts to 0.975% of final average annual compensation up to social security covered compensation plus 1.475% of final average compensation in excess of social security covered compensation, all times the number of years of service up to 35 years, plus 1.475% of total final average compensation times the number of years of service in excess of 35 years. The following table shows the estimated annual retirement benefits for employees in specified remuneration and years of service classifications:
Years of service at retirement Final average annual compensation 20 30 40 $ 50,000 $12,470 $18,705 $ 25,510 75,000 19,845 29,768 40,260 100,000 27,220 40,830 55,010 125,000 34,595 51,893 69,760 150,000 41,970 62,955 84,510 175,000 49,345 74,018 99,260 200,000 56,720 85,080 114,010(a) (a) The retirement income amount is subject to limitations upon maximum payments from the Pension Plan imposed by the IRC. The current IRC limitation on benefits is $115,641 annually.
The table above assumes that employees retired at age 65 on June 1, 1993 and is based on social security covered compensation in effect on June 1, 1993. Officers of all Debtors except Hillsborough, Old Walter Industries, Jim Walter Homes, Mid-State Homes, Best, Best (Miss.), JW Insurance, Dixie, Coast to Coast and Home Improvement participate in the Pension Plan. In addition, Kenneth J. Matlock (with 6 years of credited service), and one other Old Walter Industries officer (with 7 years of credited service) are currently employees of Walter Industries and are participants in the Walter Industries Profit Sharing Plan described above since their intercorporate transfers, but they will also receive, upon normal retirement, annual pensions under the Pension Plan based on their prior years of service with certain subsidiaries of Original Jim Walter. William N. Temple (with 8 years of credited service) was an employee of Walter Industries and participated in the Walter Industries Profit Sharing Plan described above from the time of his intercompany transfer until January 1, 1994, at which time Mr. Temple became an employee of U.S. Pipe and again became a participant in the Pension Plan. (4) Common Stock Incentive Plans--Present and Proposed The Stock Option Plan for Key Employees of Walter Industries and Its Subsidiaries (the "Old Option Plan"), approved by Hillsborough's stockholders in October 1987, provides for the grant of incentive and non-qualified stock options ("Old Options") covering an aggregate of 3,318,182 shares of Common Stock (subject to customary anti-dilution provisions). The Old Option Plan is administered by a committee of the Board of Directors of Walter Industries, no member of which is eligible to receive an Old Option. Such committee has authority to determine which employees of Walter Industries and its subsidiaries will be eligible to receive Old Options as well as certain of the terms thereof, including the exercise price (which may not be less than 100% of the fair market value of the shares of Common Stock subject to an Old Option on the date it is granted) and the period (not in excess of 10 years) during which any Old Option will be exercisable. Upon consummation of the Creditors' Plan, such Old Option Plan and the Old Options shall be cancelled, and are expressly rejected under the Creditors' Plan to the extent they are Executory Contracts, without admitting that the same are Executory Contracts and without admitting any liability as a result of such rejection or otherwise. Old Options for 1,678,295 shares were outstanding as of May 31, 1993 under incentive and non-qualified stock option agreements entered into in 1988 and 1989 (collectively, the "Old Option Agreements"). The exercise price of each Old Option granted under the Old Option Agreements is $5.00 per share. Each outstanding Old Option becomes exercisable in equal installments over periods of time ranging from two to five years following the date of grant. Old Options will not become exercisable as to any additional shares following the termination of an optionee's employment by Walter Industries and its subsidiaries for any reason other than the death or permanent disability of the optionee or the retirement of the optionee at age 65 or over after having been employed by Walter Industries or a subsidiary of Walter Industries for at least three years after the date on which such Old Options were granted. In the event of such death, permanent disability or retirement, such Old Options will become exercisable as to all shares covered thereby. All Old Options will expire upon the earliest to occur of the following events: (i) the tenth anniversary of the date on which the Old Options were granted; (ii) not later than 95 days after the termination of the optionee's employment by Walter Industries and its subsidiaries unless such termination results from death, permanent disability or retirement at age 65 or over after having been employed by Walter Industries or one of its subsidiaries for at least three years after the date on which the Old Options were granted; (iii) 12 months after the termination of the optionee's employment by Walter Industries and its subsidiaries because of death, permanent disability or retirement at age 65 or over after having been employed by Walter Industries or one of its subsidiaries for at least three years after the date on which the Old Options were granted; (iv) the willful misconduct of the optionee which injures Walter Industries or any of its subsidiaries; (v) the repurchase of the optionee's shares of Common Stock under the circumstances set forth in the Management Common Stock Subscription Agreements discussed under "POST-CONSUMMATION--Management--Security Ownership of Directors, Officers and Certain Beneficial Owners--Agreements Regarding Common Stock;" and (vi) unless otherwise waived by Walter Industries, upon the merger or consolidation of Walter Industries into another corporation, the acquisition by another corporation of all or substantially all of Walter Industries' assets or 80% or more of Walter Industries' then outstanding voting stock, or the liquidation or dissolution of Walter Industries. All shares purchased upon exercise of such Old Options become subject to the Management Common Stock Subscription Agreements discussed below under "POST-CONSUMMATION-- Management--Security Ownership of Directors, Officers and Certain Beneficial Owners--Agreements Regarding Common Stock." During the fiscal year ended May 31, 1993, no Old Options were granted or exercised under the Old Option Plan. As of May 31, 1993, officers of each of the Debtors who hold Old Options (all of which are fully exercisable) are as follows: Shares (a) Walter Industries James W. Walter 630,455 Kenneth J. Matlock 82,955 William H. Weldon 66,364 William N. Temple 33,182 John F. Turbiville 17,500 Donald M. Kurucz 39,818 All officers as a group (8 persons) 906,819 (b) Jim Walter Homes Robert W. Michael 116,136 Sam P. Bullara, Jr. 19,909 D. Wayne Hornsby 33,182 William Kendall Baker 66,364 All officers as a group (8 persons) 338,454 (c) Jim Walter Resources William Carr 116,136 James M. Sims 33,182 (d) Window Components Robert E. Rudolph 6,636 (e) Mid-State Homes Sam J. Salario 82,955 (f) Sloss Lee C. Houlditch 8,295 (g) Southern Precision Earl E. Case 6,636 (h) U.S. Pipe Dorrance R. Wedell 26,545 William E. Fleck 66,364 E. Jack Mize, Jr. 19,909 (i) Vestal David M. Vestal 33,182 All officers of the Debtors as a group (26 Persons) 1,645,113 [FN] Retired November 4, 1993. As of the Effective Date, a number of shares of Common Stock up to 6% of the 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 Creditors' Plan shall be reserved for issuance and delivery, from time to time, in the discretion of the Board of Directors of Walter Industries 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 stock incentive agreements and/or plans (including a new stock option plan for key employees of Walter Industries and its subsidiaries (the "New Option Plan")) to be entered into and/or adopted, as the case may be, prior to the Effective Date by Walter Industries. Such incentive agreements and/or plans may also provide for the granting of restricted stock rights, stock appreciation rights or other incentive awards. Both the Old Option Plan and all Old Options are cancelled under the Creditors' Plan and are also expressly rejected under the Creditors' Plan, to the extent that they are Executory Contracts, without admitting that the same are Executory Contracts and without admitting any liability as a result of such rejection or otherwise. (5) Certain Employment Agreements Pursuant to two year employment agreements entered into in January 1988, and one year extensions thereof to January 11, 1991, entered into in December 1989, between Hillsborough or its applicable subsidiary and each of their executive officers (except that James W. Walter who had a 1988 employment agreement did not enter into a 1989 employment agreement), if any of those executive officers had been terminated without cause (as defined in the applicable employment agreement), he would have been entitled to receive the cash compensation specified in such employment agreement for the balance of the employment term (defined as the earlier of the first anniversary of the date of execution of the employee's employment agreement or the death, retirement or permanent disability of the employee). All such employment agreements terminated on January 11, 1991. Such employment agreements were executory contracts for purposes of the Code, but were not assumed by the Debtors. In connection with his employment as President and Chief Executive Officer of Walter Industries in June 1991, G. Robert Durham entered into a two-year employment agreement with Walter Industries dated June 19, 1991 (the "Original Durham Employment Agreement"). The Original Durham Employment Agreement was approved by the Court by an order dated June 27, 1991, retroactive to June 19, 1991. In July 1993, Mr. Durham entered into a new employment agreement with Walter Industries dated June 19, 1993 (the "New Durham Employment Agreement"). The New Durham Employment Agreement was approved by order of the Court dated August 23, 1993, retroactive to June 19, 1993. The major terms of the Original Durham Employment Agreement were and the terms of the New Durham Employment Agreement are: (1) Position (both agreements) -- President and Chief Executive Officer and a member of the Board of Directors of Walter Industries. (2) Term -- Original Durham Employment Agreement -- Earlier of the second anniversary of such agreement or the date of death or permanent disability of Mr. Durham. New Durham Employment Agreement -- Earlier of May 31, 1995 or the date of death or permanent disability of Mr. Durham. Such agreement shall automatically be renewed on June 1, 1995 and shall continue from year to year thereafter until the death or permanent disability of Mr. Durham or until terminated by either Mr. Durham or Walter Industries on 60 days' written notice to the other party. However, the June 1, 1995 renewal and each subsequent renewal shall be submitted to the Official Committees for their approval. If one or both of such Official Committees does not agree to such renewal, then the Court will determine whether to approve such renewal. (3) Compensation (a) Original Durham Employment Agreement -- first year of term (year ended May 31, 1992) -- (i) Base salary $400,000 (ii) Guaranteed incentive compensation $350,000 (See footnote 1 to the cash compensation table included under "POST-CONSUMMATION -- Management -- Executive Compensation -- Officers -- Cash Compensation Relating to Year Ended May 31, 1993.") By agreement with the Official Committees, such incentive compensation was increased to $400,000. (b) Original Durham Employment Agreement--second year of term (year ended May 31, 1993) -- (i) Base salary $400,000 (ii) Incentive compensation--determined by the Walter Industries Board of Directors in accordance with past practices, subject, however, to the restrictions on incentive compensation contained in the order of the Court dated May 17, 1990, as clarified by an order of the Court dated December 2, 1993 (see subsection (c) (ii) below), as described in footnote 1 to the cash compensation table included under "POST-CONSUMMATION--Management-- Executive Compensation--Officers--Cash Compensation Relating to Year Ended May 31, 1993," after substitution of Mr. Durham's name for that of Mr. Cordell contained in such May 17, 1990 Court order. By agreement with the Official Committees such compensation was increased to $450,000. (c) New Durham Employment Agreement (i) Base salary $450,000 (see Footnote 3 to the cash compensation table included under "POST-CONSUMMATION--Management-- Executive Compensation--Officers--Cash Compensation Relating to Year Ended May 31, 1993") as to requirements for approval of increases in such base salary. (ii) Incentive Compensation--determined by the Walter Industries Board of Directors in accordance with past practices, subject, however, to the restrictions on incentive compensation contained in the order of the Court dated May 17, 1990, as clarified by the Court's subsequent order dated December 2, 1993 as described in Footnote 1 to the cash compensation table included under "POST-CONSUMMATION--Management--Executive Compensation--Officers-- Cash Compensation Relating to Year Ended May 31, 1993." (4) Indemnification for his acts as an officer of Walter Industries. (Both agreements). (5) Relocation costs and expenses in line with Walter Industries normal policies. (Original Durham Employment Agreement). (6) Participation in other employee benefit plans, which would include the Profit Sharing Plan described above under "POST-CONSUMMATION--Management--Executive Compensation--Officers--Profit Sharing Plan" and the Supplemental Profit Sharing Plan described in Footnote 2 to the cash compensation table in "POST-CONSUMMATION-- Management--Executive Compensation--Officers--Cash Compensation Relating to Year Ended May 31, 1993." (Both agreements). (7) If Mr. Durham is terminated without cause during the term of the agreement (to May 31, 1995), he shall become entitled to receive his base salary for the balance of the term plus a pro rata amount of incentive compensation for the year in which the employment is terminated (subject to the restrictions of the May 17, 1990 order of the Court described in subsections 3(b)(ii) and 3(c)(ii) above) (both agreements). If such termination, other than for cause, occurs during any period of renewal of such agreement, Mr. Durham shall be entitled to receive his then current base salary for the balance of Walter Industries' fiscal year ended May 31 in which the employment is terminated plus a pro rata amount of incentive compensation for that year (subject to the restrictions of the May 17, 1990 order of the Court described in subsections 3(b)(ii) and 3(c)(ii) above) (New Durham Employment Agreement). (8) If Mr. Durham is terminated for cause during either the original term of the New Durham Employment Agreement or any renewal term thereof, he shall be entitled to receive his then current base salary through the date of termination and no incentive compensation payment for the year in which the employment was terminated (New Durham Employment Agreement). (9) In the case of Mr. Durham's death during the term of the agreement, his executors, beneficiaries, etc., as the case may be, shall be entitled to receive his then current base salary stated in subsections 3(a)(i), 3(b)(i) and 3(c)(i) above during the nine-month period following the date of death (Both Agreements), plus, if not yet paid, the guaranteed incentive compensation for the first year of the agreement stated in subsection 3(a)(ii) above (Original Durham Employment Agreement). (10) During the term of the agreement Mr. Durham will not invest in (other than less than .5% of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), or accept employment by a business that directly competes with any business of Walter Industries and its subsidiary companies. (Both agreements). (6) Other Benefit Plans All of the officers of the Debtors are eligible to participate in other benefit plans of the Debtors such as group medical plans, group life insurance programs, post-retirement medical benefits, paid vacations, paid holidays, leaves of absence, severance pay, etc., but only to the same extent that all other salaried employees of the Debtors are eligible to participate. Such other benefit plans are described in "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Other Employee Benefit Plans." Certain officers, as well as many other employees, of the Debtors have the use of company owned or leased automobiles. On the Effective Date, Walter Industries and Computer Services shall set aside, in trust(s), pre-funded insurance program or other appropriate vehicle, funds sufficient to provide reasonable assurance (on an actuarial basis in the judgment of the Board 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. It is presently anticipated that such program will consist of grantor trusts (sometimes referred to as "rabbi trusts") containing sufficient continuance of such benefits. It is currently estimated that approximately $2.7 million for Walter Industries and $2.0 million for Computer Services would be required to fund such trusts. If Walter Industries and/or Computer Services continue to pay such benefits for seven (7) years following the Effective Date, all funds in such trusts will revert to Walter Industries and/or Computer Services. 3. Certain Related Transactions Following its incorporation, Hillsborough retained KKR to provide financial, financial advisory and consulting services to Hillsborough in connection with the Tender Offer and the Merger, for which KKR was paid approximately $35 million. KKR has agreed to provide management consulting and financial services to Hillsborough (and now Walter Industries) and its subsidiaries on an annually renewable basis. For these services KKR received a fee of $500,000 for the year ended December 31, 1988 and was receiving a fee at the rate of $550,000 for the year ending December 31, 1989. Effective with the commencement of the Reorganization Proceedings, current payment of these consulting fees was suspended. The Creditors' Plan expressly rejects the agreement under which KKR provides financial, financial advisory and consulting services to Hillsborough and all other agreements between KKR or a KKR Affiliate and any Debtor or Affiliate thereof is a party (other than an agreement for an Allowed Indemnity Claim), in each case to the extent that the same is an Executory Contract, without admitting that the same is an Executory Contract and without admitting any liability as a result of such rejection or otherwise. See "OVERVIEW OF THE CREDITORS' PLAN--Assumption or Rejection of Executory Contracts." KKR Associates is the general partner of partnerships which, together, are the beneficial owners of approximately 91.58% of the currently outstanding shares of Common Stock. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Organization of Hillsborough and Acquisition of Original Jim Walter--Financing of the Tender Offer and Merger" and "POST-CONSUMMATION--Management -- Security Ownership of Directors, Officers and Certain Beneficial Owners" for information regarding the acquisition of these shares of Common Stock. Henry R. Kravis, George R. Roberts, Paul E. Raether and Michael T. Tokarz are directors of Walter Industries and are general partners of both KKR Associates and KKR. Mr. Tokarz is an officer of Walter Industries and certain of its subsidiaries. Perry Golkin is a Director and officer of Walter Industries and certain of its subsidiaries and is an associate of KKR. Original Jim Walter purchased insurance on the lives of certain officers of Original Jim Walter and its subsidiaries. These insurance policies are now owned by Walter Industries. Such insurance was placed through Thomas J. Brown and Associates or Paramount Financial Group, Inc., both in Tampa, Florida, of which Joe B. Cordell, Jr., son of Joe B. Cordell, President and Chief Executive officer of Walter Industries until June 1991, was an associate and stockholder, respectively, until 1990. While Walter Industries does not pay any fees to these firms for their services, such firms do receive a commission from the insurance carrier issuing or renewing such life insurance contracts. In July 1986, Waltsons, Inc., a family owned corporation, of which James W. Walter, Chairman of Walter Industries, has a twenty percent (20%) interest, acquired a fifty percent (50%) interest in the Operations of Booker & Company, Inc. ("Booker"), a wholesale distributor or building supplies and materials, headquartered in Tampa, Florida. For over 30 years, Booker has been a supplier of various building supplies and materials to Dixie. During the fiscal year ended May 31, 1993, Booker's sales of building supplies and materials to Dixie totaled approximately $6,193,739. Included in Other Unsecured Claims of Dixie (Class U-3F) is $503,278 previously owing to Booker, which Claim was sold by Booker in February 1994 and which will be satisfied upon consummation of the Creditors' Plan in the same manner as that of Other Unsecured Claims in Class U-3. 4. Security Ownership of Directors, Officers and Certain Beneficial Owners a. Ownership of Common Stock The following tables furnish information, as Of May 31, 1993, as to: (i) shares of Common Stock beneficially owned by any person owning beneficially more than five percent (5%) of the 31,120,773 outstanding shares of Common Stock (except as indicated below, all such shares are beneficially owned directly by the person indicated in the table); and (ii) shares of Common Stock beneficially owned by each director and key executive officers of each of the Debtors, as well as shares of Common Stock beneficially owned by all directors and officers of the Debtors as a group.
Number of Percent Name and Address of Beneficial Owner Shares of Class JWC Associates, L.P 27,646,600 88.84% c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 JWC Associates II, L.P. 183,200 .59 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 KKR Partners II, L.P. 670,200 2.15 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Henry R. Kravis 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 George R. Roberts 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 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 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 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 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Michael T. Tokarz 28,500,000(1)(3) 91.58 c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 James H. Greene, Jr. 28,500,000(1) 91.58 c/o Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road Suite 200 Menlo Park, CA 94025
Names of Directors and Key Operating Officers of the Debtors Who Are Beneficial Owners of Number Percent of Director Outstanding Shares of Common Stock of Shares Class and/or Officer Walter Industries G. Robert Durham -- -- Director and Officer** Perry Golkin --(2) -- Director and Officer** Henry R. Kravis 28,500,000(1) 91.58 Director Kenneth J. Matlock 25,000 * Director and Officer** Paul E. Raether 28,500,000(1) 91.58 Director George R. Roberts 28,500,000(1) 91.58 Director Michael T. Tokarz 28,500,000(1)(3) 91.58 Director and Officer** James W. Walter 190,000 .61 Director and Officer** William H. Weldon 20,000 * Officer** William N. Temple 10,000 * Officer** Donald M. Kurucz 12,000 * Officer Jim Walter Homes Robert W. Michael 35,000 .11 Director and Officer** Sam P. Bullara, Jr. 6,000 * Officer D. Wayne Hornsby 10,000 * Officer William Kendall Baker 20,000 * Officer Jim Walter Resources William Carr 35,000 .11 Director and Officer James M. Sims 10,000 * Officer Window Components Robert E. Rudolph 2,000 * Director and Officer** Mid-State Homes Sam J. Salario 25,000 * Director and Officer Sloss Lee C. Houlditch 2,500 * Director and Officer Southern Precision Earl E. Case 2,000 * Director and Officer U.S. Pipe Dorrance R. Wedell 8,000 * Director and Officer William E. Fleck 20,000 * Officer E. Jack Mize, Jr. 6,000 * Officer Vestal David M. Vestal 10,000 * Director and Officer All Directors of Debtors as a Group (18 persons) 28,864,500(1)(2)(3) 92.75 All non-Director Officers of Debtors as a Group (12 persons) 123,000 .40 All Directors and Officers of Debtors as a Group (30 persons) 28,987,500(1)(2)(3) 93.15 * Represents less than .1% of the shares of Common Stock currently outstanding. ** Director of one or more of Debtors, exclusive of Debtor under which listed. (1) Messrs. Kravis, Roberts, MacDonnell, Michelson, Fox, Raether, Tokarz and Greene 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 ownershipof such shares. (2) Mr. Golkin is a limited partner of KKR Associates and is an officer and director of Walter Industries and certain of its subsidiaries. (3) Mr. Tokarz is an officer and director of Walter Industries and certain of its subsidiaries. Retired effective November 4, 1993.
b. Agreements Regarding Common Stock Hillsborough and the Drexel Burnham Lambert Group, Inc. (the "Drexel Burnham Group") entered into an agreement dated as of September 18, 1987 (the "Drexel Burnham Group Stock Purchase Agreement") pursuant to which the Drexel Burnham Group purchased an aggregate of 1,727,273 shares of Common Stock at a purchase price of $5 per share. The Drexel Burnham Group Stock Purchase Agreement provided that Hillsborough, if so requested by the Drexel Burnham Group, would repurchase Common Stock held by the Drexel Burnham Group (at $5 per share) and would sell such Common Stock to purchasers (or their nominees) of the Securities (as defined in Section VII.A.3.) (at $5 per share), in connection with the private placement of the Securities. Pursuant to this provision, which became inoperative upon completion of the private placement of the Securities, Hillsborough repurchased an aggregate of 1,146,680 shares of Common Stock from the Drexel Burnham Group in connection with the sale of Common Stock to such purchasers of Securities (or their nominees). Those purchasers of Securities (or their nominees) who purchased Common Stock as described above entered into an agreement with Hillsborough which, among other things, sets forth the conditions subject to which each such purchaser of securities purchased the Common Stock. The KKR Investors and the Drexel Burnham Group entered into an agreement dated September 18, 1987 (the "Letter Agreement") pursuant to which the KKR Investors agreed to notify the Drexel Burnham Group in the event that at any time prior to a public offering of Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act") (a "Public Offering") any of the KKR Investors proposes to sell any of the Common Stock owned by it; and upon a written request from the Drexel Burnham Group, to include in the proposed sale of Common Stock by a KKR Investor, Common Stock held by the Drexel Burnham Group, subject to certain limitations. The sale of Common stock by the Drexel Burnham Group pursuant to the Letter Agreement is required to be made on the same terms and conditions as those applicable to the sale of Common Stock by the KKR Investor. In addition, if at any time after September 18, 1987 any of the KKR Investors (or any affiliate of a KKR Investor) proposes to purchase any shares of Common Stock, such KKR Investor is required to notify the Drexel Burnham Group of the proposed purchase; and, upon a written request from the Drexel Burnham Group to purchase shares of Common Stock, the KKR Investors have agreed that the proposed purchase will not be effected unless Hillsborough (and now Walter Industries) agrees to permit the Drexel Burnham Group to purchase, on the same terms and conditions, a number of shares equal to five (5) percent of the aggregate number of shares of Common Stock purchased by the KKR Investor and any affiliate. The obligations of the KKR Investors under the Letter Agreement as to inclusion of Common Stock in a Public Offering also extend, under the terms thereof, to the purchasers of Securities. The Letter Agreement and the agreement with the purchasers of Securities (discussed in the preceding paragraph) are expressly rejected under the Creditors' Plan pursuant to Section 365 of the Code, to the extent the same are Executory Contracts, without admitting that the same are Executory Contracts and without admitting any liability as a result of such rejection or otherwise. See "OVERVIEW OF THE CREDITORS' PLAN -- Assumption or Rejection of Executory Contracts." Hillsborough (and now Walter Industries) entered into common stock subscription agreements, each dated as of December 1, 1987 (collectively, the "Management Common Stock Subscription Agreements"), with 51 individuals who are former or current members of management of Walter Industries and its subsidiaries (the "Management Investors"), pursuant to which the Management Investors purchased, in the aggregate, 986,500 shares of Common Stock (at $5 per share), constituting approximately 3.2% of the then outstanding shares of Common Stock, and received options to purchase, in the aggregate, an additional 3,273,388 shares of Common Stock (at $5 per share), constituting approximately 9.5% of the shares of Common Stock that would then have been outstanding if all such options were exercised. The Management Common Stock Subscription Agreements provide that, except for transfers in the event of death or to certain trusts or custodianship, and except for the permitted transfers described herein, the shares of Common Stock acquired by a Management Investor would be nontransferable until January 7, 1993. The agreements also grant Walter Industries a right of first refusal if a Management Investor receives a bona fide offer from a third party to purchase any or all of such Management Investor's shares of Common Stock commencing January 7, 1993. Pursuant to this right of first refusal, Walter Industries would have the right to purchase not less than all of the shares of Common Stock subject to such third party's offer at the same price and on the same terms as such offer. Notwithstanding the foregoing, both the transfer restrictions and the right of first refusal will terminate in the event of a Public Offering. Under the terms of the Management Common Stock Subscription Agreements, the Management Investor, his estate or trust may, for a period of six months, require Walter Industries (a) if a Management Investor's employment by Walter Industries and its subsidiaries terminates because of death or permanent disability, to purchase, on one occasion, all or some of the shares of Common Stock then held by such Management Investor, his estate or trust (during the year ended May 31, 1989, 93,000 shares of Common Stock owned by three former executive officers of Walter Industries were purchased at a price of $5.00 per share) and to redeem such Management Investor's options (options granted to such three former executive officers of Walter Industries were canceled without any payment) at a price calculated in accordance with the terms of the Management Common Stock Subscription Agreement; or (b) if after January 7, 1993 the Management Investor's employment terminates because of death and no Public Offering has occurred, to purchase, on one occasion, all or any portion of the shares of Common Stock held by the Management Investor's estate or trust and to redeem the options held by such Management Investor's estate, at a price calculated pursuant to the Management Common Stock Subscription Agreements. The Management Common Stock Subscription Agreements also grant Walter Industries an option for 45 days (a) if a Management Investor's employment by Walter Industries and its subsidiaries terminates other than because of death, permanent disability or retirement on or after age 65, or such Management Investor shall effect a prohibited transfer of his shares of Common Stock, to purchase all but not less than all of the shares of Common Stock held by such Management Investor at a price per share calculated pursuant to the terms of the Management Common Stock Subscription Agreements and to redeem the options held by such Management Investor; or (b) in the event that a Management Investor's termination of employment occurs because of death, permanent disability or retirement on or after age 65, to purchase all but not less than all of his shares of Common Stock at a price calculated pursuant to the terms of the Management Common Stock Subscription Agreements. In any event, Walter Industries is not obligated to repurchase shares of Common Stock or options pursuant to any of the provisions described above to the extent that such purchases would exceed an aggregate of 430,000 shares of Common Stock and options in any one calendar year or the repurchase price thereof would exceed an aggregate of $2,000,000 in any one calendar year. The Reorganization Proceedings have had the effect of staying the terms of the Management Common Stock Subscription Agreements. Pursuant to a registration rights agreement entered into as of September 18, 1987 among the KKR Investors, the Drexel Burnham Group and Hillsborough (and now Walter Industries) (the "Registration Rights Agreement"), which has been incorporated by reference into the stock purchase agreement with purchasers of the Securities, and has been adopted, with certain modifications as described below, as part of the Management Common Stock Subscription Agreements, the parties thereto and any holder of registrable securities have "piggyback" registration rights whenever Walter Industries proposes to register under the Securities Act any such registrable securities. Under the Registration Rights Agreement, Walter Industries agreed to give prompt written notice to all such holders of its intention to effect such a registration and to use its best efforts to effect the registration under the Securities Act of all registrable securities which Walter Industries has been requested to register. Walter Industries is required to pay substantially all of the expenses in connection with any such registration. The Management Common Stock Subscription Agreements, however, limit the number of shares of Common Stock held by Management Investors that may be registered pursuant to their "piggyback" registration rights to a pro rata amount of those shares of Common Stock to be registered by the KKR Investors and the Drexel Burnham Group. The Registration Rights Agreement also provides for "demand" registration rights whereby, after any shares of Common Stock have been registered under the Securities Act, upon the written request of any holder that Walter Industries effect the registration under the Securities Act of all or a part of such holder's Common Stock (constituting in the aggregate with all other shares so registered at least 5,000,000 shares, or such lesser number of shares of Common Stock then outstanding), Walter Industries is required to notify all other holders of the requested registration and to use its best efforts to effect the registration under the Securities Act of the registrable securities which Walter Industries has been requested to register by such holder and all other registrable securities which Walter Industries has been requested to register by other Holders responding to the notice provided by Walter Industries (and described therein) of the requested registration. However, under certain specified circumstances, Walter Industries may defer filing a registration statement relating to such a request. Walter Industries is required to pay substantially all of the expenses in connection with the first six "demand" registrations; thereafter, all such expenses are required to be paid pro rata by Walter Industries and all other persons (including the holders) participating in the registration on the basis of the relative number of shares of Common Stock of each such person included in the registration. The Creditors' Plan expressly rejects all of the Management Common Stock Subscription Agreements and the Registration Rights Agreement, to the extent the same are Executory Contracts, without admitting that the same are Executory Contracts and without admitting any liability as a result of such rejection or otherwise. See "OVERVIEW OF THE CREDITORS' PLAN--Assumption or Rejection of Executory Contracts. IV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES THE FOLLOWING DISCUSSION IS A SUMMARY OF CERTAIN OF THE MORE SIGNIFICANT FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO WALTER INDUSTRIES, ITS SUBSIDIARIES AND HOLDERS OF CLAIMS AND INTERESTS, BASED ON THE TAX LAWS IN EFFECT AS OF THE DATE OF THE DISCLOSURE STATEMENT. THIS DISCUSSION DOES NOT ADDRESS THE PARTICULAR FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT TO CERTAIN TYPES OF TAXPAYERS SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS (SUCH AS LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND TAXPAYERS WHO ARE NOT U.S. DOMESTIC CORPORATIONS OR CITIZENS OR RESIDENTS OF THE UNITED STATES), NOR DOES IT DISCUSS ANY ASPECT OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS THAT MAY BE APPLICABLE TO PARTICULAR TAXPAYERS. THE TAX CONSEQUENCES TO HOLDERS MAY VARY BASED ON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER. THERE CAN BE NO ASSURANCE THAT THE IRS WILL NOT CHALLENGE ANY OR ALL OF THE TAX CONSEQUENCES OF THE PLAN, OR THAT SUCH A CHALLENGE, IF ASSERTED, WOULD NOT BE SUSTAINED. IF SUCH A CHALLENGE IS ASSERTED AND IS SUCCESSFUL, THE RECOVERY OF HOLDERS OF CLAIMS AND INTERESTS MAY BE LOWER THAN EXPECTED. MOREOVER, THE TAX CONSEQUENCES OF CERTAIN ASPECTS OF THE PLAN ARE UNCERTAIN DUE TO THE LACK OF APPLICABLE LEGAL PRECEDENT AND THE POSSIBILITY OF CHANGES IN LAW. AS OF THE DATE OF THE DISCLOSURE STATEMENT, NO RULING HAS BEEN OBTAINED FROM THE IRS WITH RESPECT TO ANY OF THE TAX CONSEQUENCES OF THE PLAN AND NO OPINION OF COUNSEL HAS BEEN OBTAINED BY THE PROPONENTS WITH RESPECT THERETO AND NO SUCH RULING OR OPINION (OTHER THAN AS REGARDS THE CLASSIFICATION OF CERTAIN TRUSTS TO BE ESTABLISHED UNDER THE PLAN)IS BEING SOUGHT. THE DISCUSSION AND CONCLUSIONS PRESENTED BELOW MAY BE BASED IN PART ON ANALYSES AND EVALUATIONS OF FACTORS NOT DISCUSSED HEREIN. EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO CONSULT WITH HIS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE PLAN. A. Tax Consequences to Walter Industries and its Subsidiaries The Proponents believe that the affiliated group of corporations filing a United States federal consolidated income tax return of which Walter Industries is the common parent (the "Walter Industries Group") will not incur a material federal income tax liability as a result of the consummation of the Creditors' Plan. As discussed below, however, it is possible that the Walter Industries Group's ability to utilize deductions and losses incurred during, or attributable to a period prior to, the consummation of the Creditors' Plan or as a consequence of the Creditors' Plan to offset income earned by the Walter Industries Group after the consummation of the Creditors' Plan and to minimize its potential liability for alternative minimum tax, if applicable, may be limited. *** 1. Cancellation of Indebtedness Income The Creditors' Plan contemplates that each Holder of a Claim will receive consideration in an amount for tax purposes equal to the full amount of its Claim. In such case, the Walter Industries Group will not realize any cancellation or other discharge of indebtedness income as a result of the Creditors' Plan. If, however, it is determined that any Holders of Claims do not receive consideration in an amount for tax purposes equal to the full amount of such Claims, then the Debtor against which such Claims are asserted will realize a discharge or cancellation of indebtedness for an amount equal to a portion of such Claims. Under the IRC, a taxpayer generally must include in gross income the amount of any discharged or cancelled indebtedness realized during the taxable year, except to the extent that payment of such indebtedness would have given rise to a deduction for income tax purposes. However, Section 108 of the IRC provides that, in a case under Title 11 of the Code, where the discharge or cancellation of indebtedness is granted by the court or is pursuant to a plan approved by the court, the amount of discharged or canceled indebtedness that otherwise would have been required to be included in gross income will instead be applied to reduce the tax attributes of the taxpayer in the following order: net operating loss carryforwards ("NOLs"), tax credit carryforwards, capital loss carryforwards, the basis of the taxpayer's assets and foreign tax credit carryforwards. For discharges after December 31, 1993, a taxpayer will be required to reduce minimum tax credit and passive activity losses and credit carryforwards along with its other tax attributes. A taxpayer may elect, however, to first reduce its tax bases for its depreciable assets before reducing the tax attributes listed above. The IRS has issued several private letter rulings indicating that, under certain circumstances, the attribute reduction rules of Section 108 apply on a separate company basis, even if the taxpayer is a member of an affiliated group filing a consolidated tax return, without affecting the attributes of any other member of the group. However, the IRS has informally announced that it is reconsidering this position. Notwithstanding the above, if a corporate taxpayer satisfies its indebtedness through the issuance of its own stock (with or without other property), which issuance meets certain requirements outlined in the next paragraph, then no income is realized and no tax attribute reduction is required (referred to as the "Stock-for- Debt Exception"). (While the Stock-for-Debt Exception was repealed by the Omnibus Revenue Reconciliation Act of 1993, as a result of certain transitional rules, it nonetheless remains available for stock transfers by the Walter Industries Group pursuant to its Title 11 case.) In determining how much indebtedness is satisfied by the issuance of stock, the outstanding debt is reduced by the amount of any cash paid to the creditor, the fair market value of any property other than new debt instruments or stock conveyed to the creditor, and the "issue price," determined for original issue discount ("OID") purposes as described below, of any new debt issued to the creditor. The remaining outstanding balance of the debt is treated as satisfied by the issuance of stock, and such issuance is assessed to determine whether the Stock-for-Debt Exception applies. In order for the Stock-for-Debt Exception to apply to a cancellation of indebtedness, two tests must be satisfied. First, the shares of stock issued in exchange for the debt must be more than "nominal or token." Second, in the case of unsecured debt, the ratio of the value of the stock received by the unsecured creditor to the amount of his indebtedness (including accrued but unpaid interest) canceled or exchanged for stock in the workout must be at least 50% of a similar ratio computed for all unsecured creditors who participate in the workout (the "proportionality test"). Under Treasury Regulations issued on March 17, 1994, whether an issuance of shares is "nominal or token" is determined by considering all relevant facts and circumstances. Rev. Proc. 94-26, also issued on March 17, 1994, establishes a safe harbor: it provides that the IRS will not consider such common stock issuance to be nominal or token if the stock-to-total stock ratio is at least 15 percent. It cannot be determined whether the Creditors' Plan provides for the issuance of New Common Stock with a value high enough, or in proportions necessary, to meet the "nominal or token" and proportionality tests of the Stock-for-Debt Exception until the fair market values of the New Senior Notes and the Qualified Securities (collectively, the "New Debt") and New Common Stock are known and until it is determined (based in part on the elections made by each Holder of Subordinated Note Claims specifying the amount of Qualified Securities it wishes to receive in respect of its Claim and whether and to the extent that the Class E-1 Interest Holders exercise the Equity Call Options or otherwise receive shares of New Common Stock pursuant to the Creditors' Plan) how the New Common Stock and Qualified Securities are to be distributed among the Holder Classes. Further, even if such tests could be met, the Creditors' Plan includes the issuance of New Common Stock to satisfy Claims by third parties against Debtors other than Walter Industries. While the issuance of New Common Stock by Walter Industries on behalf of a Debtor will result in an amount owed by such Debtor to Walter Industries (equal to the fair market value of such New Common Stock) as reflected by intercompany accounts, it is unclear whether such stock issuance could qualify under the Stock-for-Debt Exception. If the issuance of New Debt and New Common Stock does not provide each Holder of a Claim with aggregate consideration equal to the full amount of such Claim and if, and to the extent that, the Stock-for-Debt Exception does not apply, the cancellation of the Claims could result in the reduction or elimination of a portion of the Walter Industries Group's tax attributes, as described above. Furthermore, if the exchange of certain Claims for New Common Stock is treated as the transfer of property to Walter Industries and if the issuance of New Common Stock for those and other Claims pursuant to the Creditors' Plan results in the Holders of such Claims acquiring "control" of Walter Industries, each Debtor in the Walter Industries Group whose indebtedness is extinguished as a result of such stock issuance might realize cancellation of indebtedness and, thus, might be required to reduce its tax attributes, in the manner described above, in an amount by which the indebtedness extinguished as a result of the stock issuance exceeds the Holder's tax basis in the Claim extinguished. "Control" for this purpose means 80% or more of the voting power of all classes of stock entitled to vote and 80% of the number of all other classes of stock, but excluding New Common Stock issued in respect of accrued interest on indebtedness of Walter Industries. It is unclear whether the IRS would prevail if it sought to characterize the exchanges as transfers to a controlled corporation, and the Proponents intend to take the position that such characterization does not apply. 2. Net Operating Loss ("NOL") Carryforwards The Creditors' Plan is expected to result in the occurrence of an "ownership change" under Section 382 of the IRC on the Effective Date of the Creditors' Plan (unless a substantial number of Holders of Class E-1 Interests exercise their Equity Call Options). As a result, the Walter Industries Group will be subject to annual limitations on the tax benefits of its NOLs and certain other tax attributes (including certain built-in losses) imposed by Sections 382 and 383 of the IRC. In general, following the ownership change, the amount of income that the Walter Industries Group can offset with pre-change NOLs (and certain other tax benefit carryforwards) is restricted annually to the "Section 382 Limitation Amount." This is calculated by multiplying the equity value of the Walter Industries Group immediately before the ownership change by the "long-term tax-exempt rate" (an interest rate that is recomputed monthly and which equalled 5.83% for May 1994). Adjustments are then made to reflect, among other things, certain tax losses and gains recognized after the date upon which the ownership change occurs but which accrued as an economic matter prior to the change. The Proponents do not have sufficient tax accounting information to determine whether the Walter Industries Group has NOLs (or other tax benefit carryforwards) that would be subject to the Section 382 Limitation Amount if the Creditors' Plan were consummated. The Proponents believe however that, except as noted in the next paragraph, the Walter Industries Group may not have any such tax benefit carryforwards and thus, in such case, do not expect Section 382 or 383 to have any affect on the Walter Industries Group following consummation of the Creditors' Plan. It is possible, however, that the Section 382 Limitation Amount could apply (i) to losses incurred by the Walter Industries Group after any ownership change occurs that are attributable to the excess, on the ownership change date, of the tax basis for its assets over their fair market values and (ii) to deductions allowable after the change date that are attributable to periods before the ownership change date. Specifically, if, on the date of the ownership change, the Walter Industries Group's aggregate bases in its assets exceeds the fair market value of such assets by more than a de minimis amount, it has a "net unrealized built-in loss" ("NUBIL"). Losses recognized upon dispositions of such assets (and certain deductions allowed with respect to such assets), as well as any amount allowable as a deduction but attributable to periods prior to the ownership change, during the 5-year period following the ownership change may be treated as pre-change NOLs and subject to the Section 382 Limitation. Generally, a NUBIL is treated as more than de minimis only if it exceeds the lesser of (i) $10 million or (ii) 15 percent of the loss corporation's gross asset value, computed after excluding the value of cash and certain marketable securities. The Proponents do not have sufficient tax accounting information to determine whether and to what extent the Walter Industries Group has a NUBIL. However, payments made to the Celotex Settlement Fund Recipient pursuant to the Creditors' Plan, if deductible or amortizable, may be treated as a NUBIL and thus, when deducted or amortized by the Walter Industries Group, may be subject to the Section 382 Limitation Amount. Even if the Creditors' Plan results in an ownership change of the Walter Industries Group, the Section 382 Limitation Amount will not apply to its NOLs (and other tax benefit carryforwards) if the provisions of Section 382(l)(5) of the IRC are satisfied. Under such provisions, if in a Title 11 or similar case, a loss corporation issues to certain stockholders or "historic" creditors an amount of stock representing in the aggregate at least 50 percent of the voting power and value of the outstanding shares of all classes of stock of Walter Industries, then the Section 382 limitations will not be applicable to such corporation. Instead, the NOLs of such corporation will be reduced by (i) the amount of the prior three years interest paid or accrued by the loss corporation on indebtedness satisfied through the issuance of its stock and (ii) one-half of the amount which would have been applied to reduce tax attributes of the loss corporation under Section 108 of the IRC but for the Stock-for-Debt Exception. The Proponents are unable, prior to the determination of (i) the allocation of New Common Stock under the terms of the Creditors' Plan and (ii) the number of Class E-1 Interest Holders that will exercise their Equity Call Option, to determine whether Holders who would qualify as stockholders and "historic" creditors for purposes of Section 382(l)(5) will, after the Effective Date, hold a sufficient amount of New Common Stock to satisfy the requirements of such Section. Moreover, it is unclear at present whether and how such provisions are to be applied to a consolidated group such as the Walter Industries Group. While Treasury Regulations implementing Section 382 generally apply the rules of Section 382 to consolidated groups on an aggregate basis, such Regulations specifically reserve on the issue of the applicability of Section 382(l)(5) to consolidated groups. If the provisions of Section 382(l)(5) were satisfied, any NOLs and other tax benefit carryforwards (including any NUBILs) of Walter Industries (and perhaps its consolidated subsidiaries) would not be materially affected by the Creditors' Plan. However, if the provisions of Section 382(l)(5) were satisfied and a second ownership change of the Walter Industries Group occurs within two years of the Effective Date of the Creditors' Plan, the Section 382 Limitation Amount following such second ownership change would be zero. Hence, the Proponents may elect to have the provisions of Section 382(l)(6) of the IRC (permitting increases in value from cancellation of Claims under the Creditors' Plan to be taken into account in calculating the Section 382 Limitation Amount), rather than those of Section 382(l)(5), apply with respect to the ownership change occurring on the Effective Date of the Creditors' Plan. The Debtors have accrued and deducted post-petition interest in respect of Secured Claims only. The Proponents anticipate that accruals and deductions will be made in respect of Unsecured Claims only if, and to the extent, that any post-petition interest is likely to be paid on account of such Claims. 3. Alternative Minimum Tax Although for purposes of computing a corporation's tax liability all of its income recognized in a taxable year may be offset by its NOLs, for purposes of the alternative minimum tax ("AMT"), only 90 percent of a corporation's alternative minimum taxable income ("AMTI") may be offset by NOLs. Therefore, a portion of any income recognized by the Walter Industries Group in each taxable year will, after reduction by any allowable AMT NOLs, result in AMTI subject to a 20 percent AMT. Moreover, AMTI in excess of $2 million (without taking into account any deduction for NOLs) may be subject to a 0.12 percent environmental tax pursuant to Section 59A of the IRC. 4. High-Yield Debt Obligation ("HYDO") Rules The IRC disallows the deduction for a portion of interest paid or accrued, and defers a portion of the allowed deduction for accrued but unpaid interest, with respect to HYDOs. Whether a debt instrument is a HYDO depends in large part on the application of the OID rules (which are discussed in "CERTAIN FEDERAL INCOME TAX CONSEQUENCES--Federal Income Tax Consequences to Holders--Certain Other Considerations to Holders"). Based on the terms of the New Debt, the Proponents do not expect the New Debt to be issued pursuant to the Creditors' Plan to constitute a HYDO. 5. Deductibility of Payments to Celotex Settlement Fund Recipient The Proponents intend to take the position that payments made under the Creditors' Plan to the Celotex Settlement Fund Recipient will be deductible by Walter Industries in the year(s) in which such payment(s) is made. However, there can be no assurance that the IRS will not challenge the amount or timing of such deduction. B. Federal Income Tax Consequences To Holders The tax consequences of the Creditors' Plan to a Holder of a Claim will depend, in part, on whether the Claim constitutes a "tax security," the type of consideration received in exchange for the Claim, whether the Holder is a resident of the United States for tax purposes, whether the Holder reports income on the accrual or cash basis method, and whether the Holder receives distributions under the Creditors' Plan in more than one taxable year. In some cases the modification of a Claim or the substitution of a new debt instrument or instruments for the Claim pursuant to the Creditors' Plan may represent for tax purposes an exchange of the Claim for such modified Claim or for such net debt instrument, as the case may be, even though no actual transfer of the Claim takes place. HOLDERS ARE STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX TREATMENT UNDER THE PLAN OF THEIR PARTICULAR CLAIMS. 1. In General The federal income tax consequences of the Creditors' Plan to Holders of Claims will depend in large part on whether the exchange of a Claim for Plan consideration will be treated, in whole or in part, as a "recapitalization" of the Debtors within the meaning of IRC Section 368(a)(1)(E). If the exchanges contemplated by the Creditors' Plan are made pursuant to such a recapitalization, then an exchanging Holder generally will not recognize gain or loss for income tax purposes (except to the extent of any "boot" and consideration received in the exchange attributable to unpaid interest, as further described below). If an exchange is not made pursuant to a recapitalization, then an exchanging Holder will recognize gain or loss on such exchange. In order for an exchange contemplated by the Creditors' Plan to constitute a tax-free recapitalization, all of the following requirements must be met. First, the Claims exchanged by a Holder must be considered to be a "tax security;" second, the Holder must receive in the exchange (i) shares of New Common Stock and/or (ii) New Debt which is also considered to be a "tax security;" and, third, any stock or "tax security" issued in exchange for a Claim must be issued (or deemed to be issued) by the Debtor whose indebtedness is extinguished in the exchange. There is no precise definition under the tax law of what constitutes a "tax security," and all facts and circumstances pertaining to the origin and character of a Claim are relevant in determining its status as such. Nevertheless, courts have generally held that corporate debt obligations evidenced by written instruments with original maturities of more than five years constitute tax securities. Thus, the Series B & C Senior Notes, the Senior Subordinated Notes, the 17% Subordinated Notes, the 13 1/8% Subordinated Notes, the 10 7/8% Subordinated Debentures and the 13 3/4% Subordinated Debentures are likely to constitute tax securities. However, the Creditors' Plan contemplates that, in certain cases, such Claims may be exchanged for stock and indebtedness of a Debtor other than the Debtor whose indebtedness is extinguished in the exchange, thus failing to meet the requirements for recapitalization treatment. In addition, the general unsecured Claims (including Claims arising from the purchase of goods or services) and the Veil-Piercing Proceeding Claims will not be considered tax securities and thus will not qualify for recapitalization treatment. 2. Tax Treatment of Exchanging Holders by Class Based upon the foregoing and in light of the exchanges contemplated by the Creditors' Plan, the Proponents believe, subject to the exceptions noted in the next paragraph, that the Creditors' Plan is likely to have the following tax consequences for exchanging Holders (i.e. other than Holders who receive only cash under the Creditors' Plan): a. Holders of Claims in Class U-4, U-5 and U-7 will recognize gain or loss, as described below, on the exchange of their Claims for cash, Qualified Securities or New Common Stock (or any combination thereof), as will Holders of Claims in Class S-6 on the exchange of their Claims for New Senior Notes. Holders of Claims in Class U-3 will also recognize gain or loss on receipt of consideration under the Creditors' Plan in extinguishment of their Claims. b. Holders of Class E-1 Interests should not recognize gain or loss on the exchange of their Interests for New Common Stock (if any, and regardless of the number of shares) and the Equity Call Option unless the Equity Call Option is considered to be "boot" received in the exchange and is determined to have a fair market value greater than zero (in which case the exchange would be subject to tax as a recapitalization in the manner described below). Because the exercise price of the Equity Call Option will be equal to the New Common Stock Value Per Share, it is expected that, even if the Equity Call Option is "boot," Class E-1 Interest Holders should not recognize taxable gain on the exchange of their Interests for New Common Stock and the Equity Call Option. Accordingly, New Common Stock acquired by any Class E-1 Interest Holder pursuant to the exercise of the Equity Call Option should have a cost basis in such Holder's hands equal to the amount paid for such Stock pursuant to the Option, and its holding period should begin on the date of acquisition. c. Holders of Claims in Class U-6 will not recognize gain or loss if such Holders receive only New Common Stock and/or New Unsecured Notes with a principal amount that does not exceed the principal amount of the securities that such Holders are deemed to surrender in exchange therefor (such excess principal amount referred to as an "Excess Principal Amount"). Holders receiving a combination of (i) cash, Qualified Securities (other than New Unsecured Notes) or an Excess Principal Amount of New Unsecured Notes and (ii) New Common Stock and/or New Unsecured Notes, in exchange for their Class U-6 Claims, will recognize gain (but not loss) on the exchange but not in excess of the fair market value of the "boot" (i.e., cash, the Qualified Securities other than New Unsecured Notes and any Excess Principal Amount of New Unsecured Notes) received by the Holder in the exchange. Class U-6 Claim Holders that do not receive any New Common Stock or New Unsecured Notes will recognize gain or loss on the exchange in the manner described in paragraph a., above. Notwithstanding the above, based on certain prior IRS rulings, a Holder who exchanges a Claim that is a tax security (whether or not such Claim is against Walter Industries) for shares of New Common Stock may be able to treat the exchange as a tax-free exchange (except to the extent of any boot or consideration received in respect of accrued interest). The IRS, however, has indicated that it may no longer follow the analysis set forth in such rulings. Furthermore, even if a Claim does not constitute a tax security and whether or not such Claim is a claim against Walter Industries, it is possible (although uncertain) that an exchange of a Claim by a Holder for New Common Stock may be tax free (except to the extent of any boot or consideration received in respect of accrued interest) if the exchange of certain Claims are treated as transfers of property to Walter Industries and if, as a result of those and the other contemplated exchanges, the exchanging Holders (without regard to stock issued in payment of interest on Walter Industries indebtedness) acquire 80% or more of the voting power of all classes of stock entitled to vote and 80% of the total number of shares of all other classes of stock of Walter Industries. However, the Proponents intend to take the position that such transfers should not be treated as transfers of property to a controlled corporation. A Holder should consult his tax advisor regarding the appropriateness of this alternative tax treatment of such Claim-for-New Common Stock exchanges. Any gain recognized by the Holder of a Claim on an exchange of its Claim for Plan consideration under the above rules will be measured generally by the excess of the amount realized by the Holder over the Holder's tax basis in the Claim. The "amount realized" by a Holder generally will be measured as the amount of cash and the fair market value of all other property (including, as to Holders described in paragraph (i) above, New Common Stock) received in the exchange. Such gain generally will be treated as capital gain (except to the extent of any accrued market discount or consideration received in respect of accrued interest, as further described below) provided that the Claim represented a capital asset of such Claim Holder. A capital gain will be considered long-term with respect to Claims held for one year or more. Under current law, corporations are taxed at the same rates on capital gain as on ordinary income. The maximum tax rate for individuals on net capital gains is currently 28% and on ordinary income is generally 39.6%. A Holder's aggregate tax basis in any New Common Stock or tax securities received under the Creditors' Plan in respect of a Claim in an exchange that qualifies as a recapitalization, aside from any amounts allocable to interest, will generally equal the Holder's basis in the Claim, increased by any gain recognized on the exchange, and decreased by the amount of cash and the fair market value of any boot received. This aggregate basis should be apportioned among the items received according to their respective fair market values. The boot, if any, received will have a fair market value basis. The holding period for any New Common Stock or tax securities received in such recapitalization exchange will generally include the holding period of the Claim surrendered, whereas the holding period for any boot received will begin on the day after the date of receipt. A Holder's tax basis in any New Common Stock and Qualified Securities not received in a recapitalization, or allocable to accrued interest, will equal the fair market value of the New Common Stock and Qualified Securities, and the holding period for such New Common Stock and Qualified Securities will not include the holding period of the Claims but will begin the day after the Effective Date. Holders who recognize gain as a result of the exchange of their Claims for Creditors' Plan consideration should be aware that they may incur a tax liability even if they do not receive cash in such exchange and even if they do not or are unable to dispose of any New Common Stock or New Debt following such exchange. 3. Certain Other Tax Considerations for Holders a. Receipt of Interest Holders of Claims not previously required to include in their taxable income any accrued but unpaid interest on a Claim may be treated as receiving taxable interest to the extent that any consideration they receive under the Creditors' Plan is allocable to such interest. Holders who previously included in their taxable income any accrued but unpaid interest on a Claim may be entitled to recognize a deductible loss to the extent that such interest is not satisfied under the Creditors' Plan. For purposes of determining the tax consequences to Holders of Claims in Classes with respect to accrued interest, the value of the consideration such Holders receive under the Creditors' Plan has been allocated first to principal and second to unpaid interest accrued thereon through the Effective Date. The applicable Debtors will file information returns reflecting the fact that the consideration received by such Holders under the Creditors' Plan equals such principal plus all such accrued interest. b. Accrued Market Discount A debt instrument that is purchased or acquired for less than its stated redemption price at maturity will have "market discount" for federal income tax purposes unless such discount is less than a specified de minimis amount. The same rule applies to the purchase or acquisition of a debt instrument with original issue discount for less than its "adjusted issue price," defined as the issue price of the debt instrument increased by the original issue discount includible in income by all of the instrument's previous holders. A Holder of a Claim with market discount must treat any gain recognized with respect to the principal amount of such Claim as ordinary income to the extent of the Claim's accrued market discount. Also, if the accrued market discount on a tax security surrendered in the exchange exceeds the gain recognized on such security under the Creditors' Plan, such excess accrued market discount will be allocated between the New Debt and New Common Stock received for such security according to their fair market values. The accrued market discount allocated to the New Debt will be treated as accrued market discount subject to the rules discussed below. The accrued market discount allocated to the New Common Stock will be treated as ordinary income when the Holder disposes of such stock. Holders of debt having market discount may elect to include such market discount in income as it accrues. If this election is not made, gain on the retirement or disposition of market discount debt issued after July 18, 1984 will be ordinary income to the extent of the market discount that has accrued during such Holder's holding period ("accrued market discount"), calculated either by using a constant interest method or by reference to the ratio of the length of time the holder has held the instrument to the length of time between acquisition and maturity. A Holder who does not make the election may also be required to defer the deduction for all or a portion of the interest expense on any indebtedness incurred or maintained to carry the debt until its maturity or disposition in a taxable transaction. c. Installment Method Holders of Claims constituting installment obligations for tax purposes may be required to recognize currently any gain remaining with respect to the obligation if pursuant to the Creditors' Plan the obligation is considered to be satisfied at other than its face value, distributed, transmitted, sold, or otherwise disposed of within the meaning of IRC Section 453B. d. Reinstatement of Claims Holders should not generally recognize gain, loss, or other taxable income upon the reinstatement of their Claims under the Creditors' Plan. Taxable income may, however, be recognized by such Holders if they are considered to receive interest, damages, or other income in connection with the reinstatement, or if the reinstatement is considered for tax purposes to involve a modification of the Claim. e. Original Issue Discount ("OID") Under the IRC, a holder of a debt instrument which has OID must include a portion of the OID in gross income in each taxable year or portion thereof in which the holder holds the debt instrument even if the holder has not received a cash payment in respect of such OID. The IRC defines OID as the difference between the issue price and the stated redemption price at maturity of a debt instrument (assuming the difference exceeds a de minimis amount). The stated redemption price at maturity is generally the total of all payments due the holder of the instrument, other than certain interest payments based on a fixed rate and payable unconditionally at fixed period intervals of one year or less during the entire term of the instrument. The issue price of a debt instrument depends on the circumstances surrounding its issuance. The issue price of a debt instrument that is publicly traded or is issued in exchange for publicly traded property is generally the fair market value of the debt instrument when issued. The fair market value generally is the price at which the debt instrument trades on the first day on which it trades after issuance. Debt instruments issued for property not subject to the foregoing rule generally are considered to have an issue price equal to their stated principal amount if they bear "adequate stated interest" (within the meaning of the OID rules). Under the IRC as interpreted by recently finalized Treasury Regulations, a holder acquiring a debt instrument in a reorganization exchange may exclude all of the OID on such debt instrument from such holder's taxable income if it is acquired at a "premium" (that is, if the adjusted tax basis in the acquired debt instrument exceeds all payments due on the instrument after the acquisition date less certain stated interest) and may exclude a part of the OID on such debt instrument from such holder's taxable income if it is acquired at an "acquisition premium" (that is, if the adjusted tax basis in the acquired debt instrument exceeds its adjusted issue price). These Treasury Regulations are effective for debt instruments issued on or after March 28, 1994 (i.e. sixty days after January 27, the date these Treasury Regulations were adopted in final form). The Proponents believe that none of the New Debt to be issued under the Creditors' Plan should bear OID because (i) all New Debt issued under the Creditors' Plan will bear adequate stated interest and (ii) the New Senior Notes and the Qualified Securities are expected to trade at their respective par values. If, however, any New Debt is received by a Holder under the Creditors' Plan in an exchange not qualifying as a recapitalization and such New Debt instrument is considered to be publicly traded for OID purposes or is exchanged for a Claim that is publicly traded, OID may arise to the extent of any difference between the fair market value of the New Debt and the New Debt's principal amount. The rules and regulations governing the calculation of OID are complex; Holders of New Debt are therefore urged to consult their tax advisors with regard to the tax consequences to them of owning New Debt. IRC Section 1275(c) and the Treasury Regulation Section 1.1275-3 require information to be set forth on the face of certain debt instruments issued with OID, including the amount of OID and the issue date of the instrument. If the instrument is publicly offered, the issuer must also furnish certain information to the Secretary of the Treasury. The Debtors or their agents will appropriately legend the New Debt if it is issued with OID in accordance with the IRC and Treasury Regulation Section 1.1275-3. If the New Debt is issued with OID, a portion of the Debtor's interest deduction with respect to the OID on the New Debt may be deferred until paid and the remainder disallowed if the New Debt is considered to be a HYDO (as defined above). The disallowed portion of the OID may qualify for the dividends received deduction if received by a corporate holder of New Debt. In order to be considered to be a HYDO, the New Debt must have three features: (1) a maturity of greater than five years; (2) a yield to maturity greater than or equal to a specified rate (five percentage points plus the applicable federal rate for the calendar month in which the obligation is issued); and (3) significant OID. While it is not possible at present to determine the OID, if any, on the New Debt or the yield to maturity when the New Debt is issued, it is not expected that the HYDO rules will apply. f. Bad Debt and/or Worthless Securities Deduction A Holder who under the Creditors' Plan receives cash and/or other consideration in respect of his Claim in an amount less than the Holder's tax basis in such Claim (other than pursuant to any tax-free exchange described above) may be entitled in the year of receipt or in an earlier year to a bad debt deduction in some amount under IRC Section 166(a) or a worthless securities deduction under IRC Section 165(g). g. Future Stock Gains Any gain recognized by a Holder on this later sale or exchange of New Common Stock received under the Creditors' Plan in satisfaction of a Claim will be treated as ordinary income to the extent of (i) accrued market discount carried over in the exchange, as described above or (ii) any bad debt or ordinary loss deduction taken by such Holder with respect to such Claim less any amount included in such Holder's gross income on the satisfaction of such Claim pursuant to the Creditors' Plan. h. Future Sales of New Debt Generally, a Holder of New Debt will recognize gain or loss upon the sale, retirement or other disposition of New Debt in an amount equal to the difference between the amount realized from such sale, retirement or other disposition and such Holder's adjusted tax basis for such New Debt. A Holder's basis for his New Debt will initially be determined as provided above (see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES--Federal Income Tax Consequences to Holders"). Thereafter, a Holder's basis will be increased by the amount of any OID that the Holder includes in his income while he holds the New Debt and decreased by the amount of payments, other than qualified stated interest payments, received by him with respect to the New Debt. Under existing laws, gain or loss on a disposition of the New Debt generally will (except to the extent of any accrued OID or market discount) constitute capital gain or loss if the New Debt constitutes a capital asset of the Holder, and will be long-term if the New Debt has been held for one year or more. i. Backup Withholding Interest paid to a Holder of New Debt and dividends paid to a Holder of New Common Stock will ordinarily not be subject to withholding of federal income taxes. Withholding of such tax at a rate of 31 percent may be required, however, by reason of certain events (such as the failure of a Holder to supply the issuer or its agent with such Holder's taxpayer identification number). Such "backup" withholding may also apply to a Holder who is otherwise exempt from backup withholding if such Holder fails properly to document his exempt status. If dividends and interest are subject to backup withholding, the amount of tax withheld in each year is reflected as a credit in the Holder's tax return for such year (and may be refunded if such Holder's Federal income tax liability has been otherwise satisfied). Each Holder of a Claim who receives New Debt or New Common Stock will be asked to provide and certify his correct taxpayer identification number. C. The Mid-State Trusts The Proponents expect to obtain an opinion of special tax counsel that Mid-State Trust IV, to be established in connection with the issuance of Qualified Securities, will be classified either as a grantor trust or partnership, and not as an association taxable as a corporation for federal income tax purposes, and that neither the Mid-State Trust IV nor the Mid-State Trust II will constitute a "taxable mortgage pool" within the meaning of Section 7701(i) of the IRC. Accordingly, it is not expected that such Trusts will themselves be subject to federal income tax consequences. D. Celotex Settlement Fund Recipient The tax treatment of the Celotex Settlement Fund Recipient and of the beneficiaries of such entity will depend upon the form of the entity that serves as the Celotex Settlement Fund Recipient, as ordered by the Court administering the Celotex Chapter 11 Proceeding. AS INDICATED ABOVE, THE FOREGOING IS INTENDED TO BE A SUMMARY ONLY AND NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE PLAN ARE COMPLEX AND, IN SOME CASES, UNCERTAIN. ACCORDINGLY, EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO CONSULT WITH HIS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE PLAN. V. THE CHARTER On or as soon as practicable after the Effective Date, Walter Industries will adopt and file the Charter with the Secretary of State of the State of Delaware. The Charter will increase the authorized common stock from 50 million to 200 million shares. The Charter will provide that: (i) each share of Class A Common Stock is entitled to five votes and each shares of Class B Common Stock is entitled to one vote on all matters as to which the Class A Common Stock and the Class B Common Stock are both entitled to vote (and on such matters the Class A and Class B Common Stock shall vote together as a single class); (ii) each share of Class A Common Stock automatically converts into one share of Class B Common Stock upon the sale, transfer or other disposition (but not including a pledge) of such share, other than by an original recipient of such shares under the Creditors' Plan to an Affiliate of the original recipient of such shares; and (iii) all shares of Class A Common Stock automatically convert into an equal number of shares of Class B Common Stock (A) as soon as the aggregate number of shares of Class A Common Stock held by Bondholder Proponents and their Affiliates is less than 8% of the then outstanding number of shares of New Common Stock, and (B) upon the seventh anniversary of original issuance thereof. Notwithstanding the foregoing, the Creditors' Plan provides that the special voting and conversion features of the Class A Common Stock will be modified, if, and only to the extent that, the Court determines that such modification is necessary to comply with Section 1123(a)(6) of the Code. The Charter will also provide, among other things, that Walter Industries may not issue non-voting capital stock and that Walter Industries will indemnify, hold harmless and reimburse its present and former officers and directors from and against any and all losses, claims, damages, fees, expenses, liabilities and actions in accordance with Allowed Indemnity Claims against the Debtors existing as of the Filing Date. All rights of the Persons indemnified pursuant to the Creditors' Plan will survive Confirmation of the Creditors' Plan and will not be discharged pursuant to Section 1141 of the Code. From and after the Effective Date, amendments to the Charter will be carried out in accordance with Delaware law, the terms of the Charter and the Reorganization Documents. VI. APPLICABILITY OF FEDERAL AND STATE SECURITIES LAWS A. Issuance of Reorganization Securities Section 1145 of the Code exempts the original issuance of securities under a plan of reorganization from registration under the Securities Act and state law. Under Section 1145, the issuance of New Common Stock, New Senior Notes and Qualified Securities, to be issued under the Creditors' Plan (collectively referred to as the "Reorganization Securities") are exempt from registration if three principal requirements are satisfied: (1) the securities must be issued by a debtor, its successor, or an affiliate participating in a joint plan with a debtor, under a plan of reorganization; (2) the recipients of the securities must hold a claim against a debtor or such affiliate, an interest in a debtor or such affiliate, or a claim for an administrative expense against a debtor or such affiliate; and (3) the securities must be issued entirely in exchange for the recipient's claim against or interest in a debtor or such affiliate, or "principally" in such exchange and "partly" for cash or property. The Proponents believe that the issuance of the Reorganization Securities under the Creditors' Plan will satisfy all three conditions because: (a) the issuances are expressly contemplated under the Creditors' Plan; (b) the recipients are Holders of Claims or Interests; and (c) the recipients would obtain the Reorganization Securities in exchange for their Claims and Interests. B. Post-Consummation Transfers of Reorganization Securities Section 1145(c) of the Code provides that the offer or sale of securities pursuant to Section 1145 of the Code is deemed to be a public offering. The New Note Indenture will be qualified under the Trust Indenture Act. Therefore, none of the Reorganization Securities to be issued under the Creditors' Plan will, if offered and sold in accordance with Section 1145 of the Code, be deemed to be "restricted securities" and the resales and subsequent transactions in the Reorganized Securities will be exempt from registration under federal and state securities laws, unless the holder is an "underwriter" with respect to such securities. Section 1145(b) of the Code defines four types of "underwriters": (1) persons who purchase a claim against, an interest in, or a claim for an administrative expense against the debtor with a view to distributing any security received in exchange for such a claim or interest; (2) persons who offer to sell securities offered under a plan for the holders of such securities ("Accumulators"); (3) persons who offer to buy such securities for the holders of such securities, if the offer to buy is: (A) with a view to distributing such securities ("Distributors"); or (B) made under a distribution agreement ("Syndicators"); and (4) a person who is an "issuer" with respect to the securities, as the term "issuer" is defined in Section 2(11) of the Securities Act. Under Section 2(11) of the Securities Act, an "issuer" includes any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control of the issuer. Whether a Person is an "issuer," and therefore an "underwriter," for purposes of Section 1145(b) of the Code, depends on a number of factors. These include: (i) the person's equity interest in the debtor: (ii) the distribution and concentration of other equity interests in the debtor; (iii) whether the person is an officer or director of the debtor; (iv) whether the person, either alone or acting in concert with others, has a contractual or other relationship giving that person power over management policies and decisions of the debtor; and (v) whether the person actually has such power notwithstanding the absence of formal indicia of control. An officer or director of the debtor may be deemed a controlling person, particularly if his position is coupled with ownership of a significant percentage of voting stock. In addition, the legislative history of Section 1145 of the Code suggests that a creditor with at least 10% of the securities of a debtor could be deemed a controlling person. Directors and officers who will hold Reorganization Securities pursuant to the Creditors' Plan or the Stock Option Plan will receive certificates representing such securities bearing restrictive legends. Any person who, to the knowledge of the Debtors, will pursuant to the distributions under Article III of the Creditors' Plan become entitled to own 10 percent or more of the capital stock of Walter Industries will be subject to certain restrictions on the transfer of such securities, and certificates representing such securities received by them will bear a restrictive legend, although any such stock will be entitled to the benefits of the New Common Stock Registration Rights Agreement. To the extent that persons who receive Reorganization Securities pursuant to the Creditors' Plan are deemed to be "underwriters," resales by such persons would not be exempted by Section 1145 of the Code from registration under the Securities Act or other applicable law. Persons deemed to be underwriters may, however, be permitted to sell such Reorganization Securities without registration pursuant to the provisions of Rule 144 or Rule 148 under the Securities Act, subject to compliance with these rules. Those rules permit the public sale of securities received by "underwriters" if current information regarding the issuer is publicly available and if volume limitations and certain other conditions are met. Because determining whether any particular person would be deemed to be an "underwriter" with respect to any Reorganization Security to be issued pursuant to the Creditors' Plan would depend upon various facts and circumstances peculiar to that person, the Proponents express no view as to whether any particular person receiving Reorganization Securities under the Creditors' Plan would be an "underwriter" with respect to any Reorganization Security to be issued pursuant to the Creditors' Plan. Given the complex and subjective nature of the question of whether a particular holder may be an underwriter, the Proponents make no representation concerning the right of any person to trade in the Reorganization Securities. The Proponents recommend that potential recipients of Reorganization Securities consult their own counsel concerning whether they may freely trade such Reorganization Securities without compliance with the Securities Act or the Exchange Act. 1. Control Persons As of the date of the Disclosure Statement, the Proponents believe that, depending on the allocation of Qualified Securities and New Common Stock among Classes U-4, U-5, U-6 and U-7, and whether any or all of the Equity Call Options are exercised, certain recipients of Reorganization Securities may, by virtue of receiving such Reorganization Securities, be entitled to own 10% or more of the capital stock of Walter Industries or otherwise deemed to be control persons. 2. Syndicators The Proponents know of no arrangements for resale of securities issued in the Creditors' Plan that would make any person a Syndicator. 3. Accumulators and Distributors The Proponents believe that all resales of securities issued pursuant to the Creditors' Plan in these proceedings by Accumulators and Distributors should be regarded as exempt from registration under the Securities Act so long as the sales are made in "ordinary trading transactions," and that a transaction should be considered an "ordinary trading transaction" if it is made on an exchange or in the over-the-counter market at a time when the Debtor is a reporting company under the Exchange Act (see, "APPLICABILITY OF FEDERAL AND STATE SECURITIES LAWS -- Current Information") and does not involve any of the following factors: a. (i) concerted action by recipients of securities issued under the Creditors' Plan in connection with the sale of such securities, or (ii) concerted action by Distributors on behalf of one or more such recipients in connection with such sales, or (iii) both; b. informational documents concerning the offering of the securities prepared or used to assist in the resale of such securities other than a disclosure statement such as this one and any supplements thereto and documents filed with the Securities and Exchange Commission by any of the Debtors pursuant to the Exchange Act; or c. special compensation to brokers and dealers in connection with the sale of such securities designed as a special incentive to resell such securities, other than the compensation that would be paid pursuant to arms-length negotiations between a seller and a broker or dealer, each acting unilaterally, not greater than the compensation that would be paid for a routine similar-size sale of similar securities or a similar issuer. It is possible that resale transactions which included one or more of the above factors could constitute "ordinary trading transactions," but that determination would have to be carefully made on a case-by-case basis. EACH RECIPIENT OF REORGANIZATION SECURITIES SHOULD SATISFY ITSELF THROUGH CONSULTATION WITH ITS OWN LEGAL ADVISORS AS TO WHETHER OR NOT ITS RESALES OR OTHER TRANSACTIONS IN REORGANIZATION SECURITIES ARE LAWFUL UNDER FEDERAL AND STATE SECURITIES LAWS. In addition, certain registration rights will be granted pursuant to the Qualified Securities Registration Rights Agreement and the New Common Stock Registration Rights Agreement. See "OVERVIEW OF THE CREDITORS' PLAN -- Description of Securities to be Issued Under the Creditors' Plan." C. Current Information Following the Effective Date, according to the Debtors' Disclosure Statement, Walter Industries and Mid-State Homes each expects that it will be required to comply with the informational reporting requirements of the Exchange Act. Under the Exchange Act, Walter Industries and Mid-State Homes will be required to file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other information with the Securities and Exchange Commission. VII. BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS NOTE: THE INFORMATION (AND THIS CHARACTERIZATION THEREOF) IN THIS ARTICLE VII IS TAKEN FROM THE DEBTORS' DISCLOSURE STATEMENT. A. Organization of Hillsborough and Acquisition of Original Jim Walter 1. Organization of Hillsborough Hillsborough was organized in August 1987 by a group of investors led by KKR for the purpose of acquiring Original Jim Walter. Prior to the commencement of discussions relating to such acquisition, no relationship existed between KKR and Original Jim Walter. Original Jim Walter offered a diversified line of products and services for residential and non-residential construction, renovation/remodeling, water and waste water transmission, industrial and consumer markets, and was involved in the development of natural resources, including coal, marble, granite, limestone, oil, gas and gypsum. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Corporate Reorganizations and Asset Dispositions" for information regarding the disposition of certain of these businesses. Following its organization, Hillsborough organized and acquired all of the outstanding shares of capital stock of a group of direct wholly owned subsidiaries, the First Tier Subsidiaries, including JWC Holdings Corporation, a Florida corporation, JWC. Each of the First Tier Subsidiaries was intended to reflect a separate business operation of Original Jim Walter. The First Tier Subsidiaries (other than JWC) and Hillsborough organized and acquired all of the outstanding shares of capital stock of Old Walter Industries. JWC organized and acquired all of the outstanding shares of capital stock 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 shares of capital stock of Hillsborough Acquisition, HAC. 2. Acquisition of Original Jim Walter On August 18, 1987, pursuant to an Agreement and Creditors' Plan of Merger dated as of August 12, 1987, as amended, the Agreement and Creditors' Plan of Merger, HAC commenced an offer, the Tender Offer, to purchase all of the outstanding shares of common stock of Original Jim Walter at $60 per share in cash. On September 18, 1987, HAC acquired approximately 95% of the outstanding shares of common stock of Original Jim Walter pursuant to the Tender Offer. On January 7, 1988, Hillsborough caused Original Jim Walter to be merged, the Merger, into HAC (which changed its name to "Jim Walter Corporation"). On that same date: (1) 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 for all of the shares of capital stock of HAC owned by Old Walter Industries; (2) HAC merged into J-II; and (3) J-II changed its name to Jim Walter Corporation (J-II or Jim Walter Corporation). See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Corporate Reorganizations and Asset Dispositions -- Completed Transactions - -- JWC Holdings Corporation" for information regarding the subsequent sale of JWC. 3. Financing of the Tender Offer and Merger Funds required for the Tender Offer were obtained from the following sources: (i) the issuance and sale by Hillsborough of 28,500,000 shares of Common Stock for $142,500,000 to certain limited partnerships organized expressly for this purpose; (ii) the issuance and sale by Hillsborough of 1,500,000 shares of Common Stock for $7,500,000 to the Drexel Burnham Group; (iii) the issuance by Hillsborough to certain of the same limited partnerships referred in (i) above of subordinated promissory notes in the aggregate principal amount of $250,000,000 (the "Affiliate Subordinated Bridge Notes"); and (iv) commercial bank loans pursuant to the Revolving Credit Agreement among Hillsborough, Old Walter Industries and the First Tier Subsidiaries, the Revolving Loan Borrowers as of such time and the Revolving Credit Banks to Hillsborough in the aggregate principal amount of approximately $2,000,000,000 (the "Tender Offer Loans"). Hillsborough thereupon provided the funds to HAC through a series of capital contributions. At the time of the Merger, an aggregate of approximately $2,900,000,000 was required (i) to acquire (at $60 per share in cash) the shares of common stock of Original Jim Walter not acquired in the Tender Offer, (ii) to repay certain indebtedness of Original Jim Walter, (iii) to repay a portion of the Affiliate Subordinated Bridge Notes, (iv) to repay the Tender Offer Loans and (v) to pay related costs and expenses. These funds were obtained from the following sources: (a) the issuance of and sale by Hillsborough of 830,533 shares of Common Stock in a private placement to certain purchasers (or their nominees) of the Series B & C Senior Notes, the Senior Subordinated Notes and the 17% Subordinated Notes (the Series B & C Senior Notes, the Senior Subordinated Notes and the 17% Subordinated Notes are collectively referred to herein as the "Securities"), for a purchase price of $5 per share (in connection with which Hillsborough repurchased at the same purchase price an identical number of shares of Common Stock previously sold to the Drexel Burnham Group); (b) the issuance of and sale by Hillsborough of 227,273 shares of Common Stock for $5 per share to the Drexel Burnham Group; (c) the issuance by Jim Walter Resources, Jim Walter Homes and United States Pipe and Foundry Company, a Delaware corporation originally incorporated under the name "U.S. Pipe Holdings Corporation" ("U.S. Pipe Holdings") (collectively, the "Senior Note Issuers") and The Georgia Marble Company, a wholly owned subsidiary of Old Walter Industries, a Georgia corporation ("Former Georgia Marble") of $83,500,000 of an aggregate of $190,000,000 in principal amount of Series A Variable Rate Senior Notes due 1993 (the "Series A Senior Notes") and all of the Series B & C Senior Notes; (d) the issuance by the Senior Note Issuers, Hillsborough, Old Walter Industries, Resources Holdings, Homes Holdings, United Land, The Georgia Marble Company, a Delaware corporation originally incorporated under the name "Georgia Marble Holdings Corporation" ("Georgia Marble"), Former Georgia Marble and the Drexel Burnham Group of a senior note (the "Senior Bridge Note") in the amount of $106,500,000 pursuant to an agreement (the "Note Purchase Agreement"), dated as of January 1, 1988. Jim Walter Homes, United Land and U.S. Pipe Holdings are, collectively, the "Subordinated Note Issuers." The Senior Note Issuers and the Subordinated Note Issuers are, collectively, the "Issuers." Hillsborough, Old Walter Industries, Resources Holdings and Homes Holdings are, collectively, the "Senior Note Guarantors." Hillsborough, Old Walter Industries and Homes Holdings are, collectively, the "Subordinated Note Guarantors." The Senior Note Guarantors and the Subordinated Note Guarantors are, collectively, the "Guarantors;" (e) a loan in the principal amount of $10,000,000 evidenced by a note (the "Loan Note") issued pursuant to a loan agreement; (f) the issuance by the Subordinated Note Issuers and Former Georgia Marble of a portion of the Senior Subordinated Notes and 17% Subordinated Notes; (g) a term loan, the Mid-State Term Loan, to Mid-State Homes, pursuant to the Revolving Credit Agreement, in the aggregate principal amount of $1,200,000,000; (h) Revolving Loans to Revolving Loan Borrowers in the aggregate principal amount of $800,000,000; and (i) cash and cash equivalents of Original Jim Walter. Such issuers and borrowers provided the funds to Hillsborough through intercompany loans and intercompany payments of dividends. Following the Merger: (i) the balance of the Affiliate Subordinated Bridge Notes was repaid in full, through a series of transactions involving the issuance and sale of additional Senior Subordinated Notes and 17% Subordinated Notes; (ii) the Senior Bridge Note was repaid in full through a series of transactions involving the issuance and sale of the remaining $106,500,000 in principal amount of Series A Senior Notes; (iii) the Mid-State Term Loan and a portion of the Revolving Loans were repaid with net proceeds from the issuance and sale of $1,450,000,000 in aggregate principal amount of Mortgage Backed Notes; (iv) 316,147 shares of Common Stock were sold by Hillsborough to certain purchasers of Securities (or their nominees) for a purchase price of $5 per share (in connection with which Hillsborough repurchased from the Drexel Burnham Group at the same purchase price an identical number of shares of Common Stock previously sold to the Drexel Burnham Group); and (v) certain members of the management of Hillsborough and its subsidiaries purchased an aggregate of 986,500 shares of Common Stock, constituting approximately 3.2% of the shares of Common Stock currently outstanding, at a purchase price of $5 per share. In addition, such members of management of Hillsborough and its subsidiaries were given options to purchase at $5 per share an aggregate of 3,273,388 authorized and unissued shares of Common Stock, constituting approximately 9.5% of the shares of Common Stock that would be outstanding assuming exercise of all such options. See "POST-CONSUMMATION--Management--Security Ownership of Directors, Officers and Certain Beneficial Owners." The purchase price of the Securities paid by all of the original purchasers thereof was 100% of the principal amount of such Securities (plus, where applicable, accrued interest). The following table indicates the source of funds required to complete the Tender Offer, the Merger and the subsequent refinancing described above and the use of such funds: 4. Source and Use of Funds
Tender Subsequent Offer Merger Refinancing (in thousands) SOURCE OF FUNDS: Tender Offer Loans $2,000,000 $ 300,000 $ Issuance of Affiliate Subordinated Bridge Note 250,000 Issuance of Common Stock (Net) 150,000 1,136 4,933 Mid-State Term Loan 1,200,000 Revolving Loans 800,000 Issuance of Series A Senior Notes 83,500 106,500 Issuance of Loan Note 10,000 Issuance of Series B Senior Notes 180,000 Issuance of Series C Senior Notes 20,000 Issuance of Senior Bridge Note 106,500 Issuance of Senior Subordinated Notes 184,050 165,950 Issuance of 17% Subordinated Notes 308,500 41,500 Issuance of Mortgage-Backed Notes 1,450,000 Cash of Original Jim Walter 104,183 $2,400,000 $3,297,869 $1,768,883 USE OF FUNDS: Acquisition of Original Jim Walter Common Stock $2,315,483 $ 109,178 $ Retirement of Original Jim Walter Debt 587,824 Retirement of Tender Offer Loans 35,970 2,264,030 Retirement of Affiliate Subordinated Bridge Note 41,198 208,802 Retirement of Mid-State Term Loan 1,200,000 Retirement of Revolving Loans 49,264 119,700 Retirement of Senior Bridge Note 106,500 Restricted Investments -- Mortgaged-Backed Notes 43,963 Fees and Expenses 48,547 63,956 89,918 Interest Expense 182,419 $2,400,000 $3,297,869 $1,768,883
The Series A Senior Notes and the Loan Note were repaid on July 3, 1989. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Corporate Reorganizations and Asset Dispositions -- Completed Transactions - -- Georgia Marble." For operational purposes, Hillsborough, Old Walter Industries, Former U.S. Pipe (and later U.S. Pipe), Jim Walter Resources and Walter Land, the Working Capital Borrowers entered into the $150,000,000 Working Capital Agreement with the Working Capital Banks. 5. Certain Events Preceding the Reorganization Proceedings On November 7, 1989, the Issuers and Guarantors commenced the Exchange Offers for all outstanding Series B & C Senior Notes and Senior Subordinated Notes, which Exchange Offers were subsequently amended and extended. Under the Exchange Offers, holders of the Series B & C Senior Notes would have received (for each $1,000 principal amount thereof) $3.75 in cash plus $1,000 in principal amount of 15 5/8% Senior Extendible Reset Notes and holders of the Senior Subordinated Notes would have received (for each $1,000 principal amount thereof) $5.00 in cash, warrants to purchase shares of the Common Stock of Hillsborough and $1,000 in principal amount of 17 5/8% Senior Subordinated Reset Notes. As conditions of the Exchange Offers, specified minimum percentages of the outstanding principal amount of the Series B & C Senior Notes and the Senior Subordinated Notes would have had to have been validly tendered and not withdrawn and holders of the Series B & C Senior Notes and Senior Subordinated Notes would have had to have given their consent to the elimination of certain financial and other covenants from the Series B & C Senior Note Indenture and the Senior Subordinated Note Indenture. The Series B & C Senior Note Indenture, the Senior Subordinated Note Indenture and the 17% Subordinated Note Indenture are collectively referred to herein as the "Indentures." The primary purpose of the Exchange Offers was to mitigate the possible impact of resetting the interest rates on the Series B & C Senior Notes and the Senior Subordinated Notes at rates significantly higher than the then current interest rates of such debt. The terms of the Series B & C Senior Notes and the Senior Subordinated Notes required that the interest rates thereon be reset to the rates per annum such debt should bear in order to have a bid value of 101% of the principal amount thereof as of December 2, 1989. The Exchange Offers constituted one of a number of recapitalization alternatives that were considered by Hillsborough, but not successfully consummated, during the second half of calendar 1989. In early December 1989, during the pendency of the Exchange Offers, the reset advisors for the Series B & C Senior Notes and the Senior Subordinated Notes, Drexel Burnham and Merrill Lynch, advised Hillsborough that, in their opinion, there were no interest rates at which such notes could be reset to have bid values of 101% as called for by their terms. The Debtors state in the Debtors' Disclosure Statement that Hillsborough believes that the reset advisors' inability to reset the interest rates was primarily attributable to two factors: pending asbestos-related litigation, which materially hindered the ability of the Debtors to pursue a refinancing or sell assets to reduce debt, and general turmoil in the high yield bond markets. The Exchange Offers expired at 7:00 P.M., New York City Time, on December 27, 1989, without satisfaction of the conditions precedent to their consummation and without the acceptance for exchange of any Series B & C Senior Notes or Senior Subordinated Notes tendered thereunder. In light of possible defaults under indebtedness of the Debtors arising as a result of the inability to reset interest rates, consummate the Exchange Offers or effect alternate recapitalization, the Reorganization Proceedings were commenced later that evening. B. Corporate Reorganizations and Asset Dispositions 1. General Following the Merger and prior to the Filing Date, Hillsborough undertook a program of corporate reorganizations and asset dispositions, which were permitted and contemplated by the indentures, the Revolving Credit Agreement, the Working Capital Agreement and the related agreements with the Revolving Credit Banks and the Working Capital Banks. Pursuant to this program, Hillsborough has restructured and/or disposed of certain of the businesses of Original Jim Walter. The transactions completed and pending are described in the following two sections. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Completion of Mirror Liquidation Plan." 2. Completed Transactions a. Mid-State Homes On April 19, 1988, Mid-State Trust II, a non-Debtor business trust established under the laws of Delaware, issued and sold Mortgage-Backed Notes (the "Mortgage-Backed Notes") in an aggregate principal amount of $1,450,000,000. The $1,326,665,600 of net proceeds from the sale of the Mortgage-Backed Notes paid by Mid-State Trust II to Mid-State Homes were applied, pursuant to the terms of the indentures and the Revolving Credit Agreement, as follows: (i) to repay in full the principal of the Mid-State Term Loan and accrued interest to the date thereof; and (ii) to make a mandatory partial prepayment of principal (together with accrued interest) of the Revolving Loans. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Businesses and Properties of the Debtors -- Mid-State Homes." Mid-State Homes is the settlor of Mid-State Trust II and its sole beneficiary. Mid-State Homes is an indirect wholly owned subsidiary of Hillsborough that was established in 1958 to purchase and service installment notes receivable and mortgages from Jim Walter Homes in connection with homes constructed and sold by Jim Walter Homes in its normal business. Prior to the issuance of the Mortgaged-Backed Notes, the mortgage installment notes originated by Jim Walter Homes in connection with its sale of homes were sold by Jim Walter Homes to Mid-State Homes in the ordinary course of business. The net proceeds of the issuance of the Mortgage-Backed Notes were paid to Mid-State Homes by Mid-State Trust II in exchange for all of the mortgage installment notes and all of the mortgages, deeds of trust or other security instruments securing such mortgage installment notes that Mid-State Homes owned on February 29, 1988 (the "Mortgage-Backed Notes Collateral"). The Mortgage-Backed Notes Collateral, together with the collections thereon, secure the Mortgage-Backed Notes. Payments on the Mortgage-Backed Notes Collateral, together with earnings on reinvestment of such payments, are expected to be sufficient to make timely payments of interest on and principal of the Mortgage-Backed Notes as and when due. The Mortgage-Backed Notes are obligations solely of Mid-State Trust II, which did not file a petition for reorganization under, and is not operating in accordance with, the provisions of Chapter 11 of the Code. The Mortgage-Backed Notes are non-recourse to Mid-State Homes, Hillsborough or any other of the Debtors. Payment of principal of and interest on the Mortgage-Backed Notes have been unconditionally guaranteed by FSA, a monoline property and casualty insurance company that, directly and through subsidiaries, is engaged exclusively in the business of writing financial guarantee insurance, principally on corporate and other taxable securities offered in domestic and foreign markets. None of the collections on the Mortgage-Backed Notes Collateral will be available to the Debtors to make payments to Creditors until all of the Mortgage-Backed Notes have been paid in full, except for certain distributions by Mid-State Trust II to Mid-State Homes. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Businesses and Properties of the Debtors -- Mid-State Homes." Mortgage installment notes generated by Jim Walter Homes after February 29, 1988 were being sold to Mid-State Homes by Jim Walter Homes in the ordinary course of business in exchange for cash and/or an intercompany note payable. In early calendar 1989, Mid-State Homes entered into a $300 million credit agreement with several commercial banks (subsequently increased by amendment to $360 million). The agreement contained a revolving credit facility and provided for letters of credit that supported the issuance of commercial paper, the proceeds of which were used until the Filing Date to make the foregoing purchases of installment notes from Jim Walter Homes. The agreement was secured by certain installment notes and related security instruments. The filing of the Reorganization Proceedings was an event of default under this agreement and Mid-State Homes was no longer able to utilize the agreement. On July 1, 1992, pursuant to approval by the Court, mortgage installment notes having a gross amount of $638,078,000 and an Economic Balance of $296,160,000 were sold by Mid-State Homes to Mid-State Trust III in exchange for the net proceeds from the public issuance of $249,864,000 of asset backed notes (the "Asset Backed Notes"), by Mid-State Trust III. Such Asset Backed Notes have a 7 5/8% interest rate and are secured by the mortgage installment notes and all of the mortgages, deeds of trust or other security instruments securing such mortgage installment notes (the "Asset Backed Notes Collateral") sold by Mid-State Homes to Mid-State Trust III. The Asset Backed Notes are repayable quarterly in an amount equal to collections on such mortgage installment notes, net of payment of expenses and interest on the Asset Backed Notes. Net proceeds were utilized to repay in full all outstanding indebtedness due under the Mid-State Homes revolving credit facility with the excess cash to be used to fund the ongoing operations of the Debtors. Mid-State is the settlor and sole beneficiary of Mid-State Trust III. The Asset Backed Notes are non-recourse to Mid-State Homes, Hillsborough or any other of the Debtors. Payment of principal and interest on the Asset Backed Notes have been unconditionally guaranteed by FSA. None of the collections on the Asset Backed Notes Collateral will be available to the Debtors to make payments to Creditors until all of the Asset Backed Notes have been paid in full. b. Jim Walter Papers On April 19, 1988, the capital stock of Jim Walter Papers, Inc., a Florida corporation ("Jim Walter Papers"), was distributed by Old Walter Industries to Papers Holdings Corporation, a Delaware corporation and a First Tier Subsidiary ("Papers Holdings"). On August 9, 1988, Butler Paper Company, a wholly owned subsidiary of Great Northern Nekoosa Corporation, purchased from Hillsborough all of the outstanding shares of capital stock of Papers Holdings for approximately $116.1 million in cash, after giving effect to a post-closing adjustment. Butler Paper Company also paid an additional $10 million for certain non-competition agreements by Hillsborough. Net cash proceeds received at the closing of the sale were utilized to reduce indebtedness under the Revolving Credit Agreement. In the nine months ended May 31, 1988 (the "1988 Fiscal Period") and the twelve months ended August 31, 1987 (the "1987 Fiscal Year"), Jim Walter Papers' net sales and revenues amounted to $237.6 million and $294.1 million, respectively. Jim Walter Papers was a merchant engaged in the wholesale distribution of a variety of fine papers, industrial papers, converted products, packaging products and maintenance supplies. c. JWC Holdings Corporation On April 21, 1988, Jasper Corp., a Delaware corporation ("Jasper"), purchased from Hillsborough all of the outstanding shares of capital stock of JWC, which owned directly all of the outstanding shares of capital stock of J-II, the successor by merger to Original Jim Walter. The wholly owned subsidiaries of J-II, which became indirect, wholly owned subsidiaries of Jasper as a result of the purchase, include Celotex, Jim Walter Research Corporation, a Delaware corporation, and Jim Walter International Sales Corporation, a Florida corporation. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Organization of Hillsborough and Acquisition of Original Jim Walter--Organization of Hillsborough." The purchase price paid by Jasper for the capital stock of JWC consisted of $5,000,000 in cash and a non-interest bearing contingent obligation in the maximum amount of $95,000,000 payable only out of excess cash flow of Celotex and its subsidiaries following the substantial resolution of all asbestos-related litigation against Celotex and its subsidiaries. Such resolution was viewed by Hillsborough's management as remote and, accordingly, the contingent obligation was not reflected in Hillsborough's financial statements. See "INTRODUCTION--Litigation of Veil Piercing Actions." In connection with the purchase by Jasper of the capital stock of JWC, each of JWC, Celotex and the other subsidiaries of JWC agreed to indemnify Hillsborough and its affiliates against all liabilities incurred by any of them in respect to JWC and its subsidiaries, which indemnity covers any liability or expense incurred in respect of the asbestos-related litigation against Celotex and its subsidiaries. In the 1987 Fiscal Year, the net sales and revenues of JWC and its subsidiaries amounted to $619.6 million. JWC and its subsidiaries manufactured and distributed building materials. d. JWC Holding Corporation On May 26, 1988, Jasper purchased from Jim Walter Resources all of the outstanding shares of capital stock of Apache. The purchase price paid by Jasper for the capital stock of Apache consisted of $5,000,000 in cash and an interest bearing, non-recourse promissory note in the principal amount of $25,000,000 (the Apache Note). Principal of and, until August 31, 1990, interest on, the note were payable only out of excess cash flow of Apache. The principal amount of the note would be reduced by $5,000,000 if it was paid in full prior to August 31, 1991. Net cash proceeds received at closing of the sale were used to reduce indebtedness under the Revolving Credit Agreement. Prior to the Filing Date, Jasper had paid interest on the Apache Note, together with a $9,296,000 payment on principal. Proceeds of $7,417,250 were applied to the prepayment of borrowings under the Revolving Credit Agreement and the remaining proceeds of $1,878,750 were set aside to offer to purchase Series B & C Senior Notes. This amount together with interest thereon is currently held by Chemical (as successor to MHTCo.) in the Class S-6 Fund. Jasper made prepayments on the Apache Note in November and December 1990 in the aggregate amount of $10,704,000 which constituted repayment in full (after giving effect to the aforementioned $5,000,000 reduction) of the Apache Note. In June 1991, pursuant to a Court order dated June 3, 1991, such proceeds from the Apache Note, together with interest earned on such proceeds, were applied as payments of principal under the Revolving Credit Agreement ($8,248,821) and Working Capital Agreement ($2,805,305). However, see "BUSINESS, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Post-Filing Date Financing Efforts--Application of Certain Proceeds" as to an April 29, 1992 order of the District Court that reversed and remanded such Court order of June 3, 1991. In the 1987 Fiscal Year, Apache's net sales and revenues amounted to $31.0 million, including sales of $23.5 million to Celotex. Apache manufactured building materials. e. U.S. Pipe On May 17, 1988 United States Pipe and Foundry Company, incorporated in Delaware in 1969 ("Former U.S. Pipe"), a wholly owned subsidiary of Old Walter Industries, adopted a Plan of Complete Liquidation (the "Pipe Liquidation Plan") pursuant to which Former U.S. Pipe conveyed its Pressure Pipe, Soil Pipe, Industrial Products and Southeastern Assembly Divisions (the "Transferred Assets") and all of the outstanding shares of capital stock of its wholly owned subsidiaries, U.S. Castings Corporation, a Delaware corporation ("Castings"), and United Concrete Pipe Corporation, a Delaware corporation ("U.S. Concrete Pipe"), to Old Walter Industries in redemption and cancellation of a portion of the capital stock of Former U.S. Pipe owned by Old Walter Industries. Upon receipt of the Transferred Assets and the capital stock of Castings and U.S. Concrete Pipe, Old Walter Industries conveyed the Transferred Assets and the capital stock of Castings (but not U.S. Concrete Pipe) to U.S. Pipe Holdings, in redemption and cancellation of all of the capital stock of Old Walter Industries owned by U.S. Pipe Holdings, which subsequently changed its name to "United States Pipe and Foundry Company" (U.S. Pipe). On May 31, 1989, Castings was merged into U.S. Pipe. U.S. Pipe, which now owns substantially all of the assets of Former U.S. Pipe, has succeeded to Former U.S. Pipe's obligations as an Issuer under the Securities, a Revolving Loan Borrower under the Revolving Credit Agreement and a Working Capital Borrower under the Working Capital Agreement. f. United Land The balance of the assets of Former U.S. Pipe, the name of which was changed to "United Land Corporation" (United Land) was not transferred to U.S. Pipe. Those assets primarily consisted of certain land and mineral rights, some of which are utilized in the mining and degasification businesses of Jim Walter Resources (see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Jim Walter Resources" and--"Completion of Mirror Liquidation Plan"), and the capital stock of two subsidiaries: Wedlo, Inc., a Delaware corporation ("Wedlo"); and U.S. Concrete Pipe. On May 17, 1988, the capital stock of U.S. Concrete Pipe was distributed by Old Walter Industries to U.S. Concrete Pipe, Inc., Concrete, a Delaware corporation and a First Tier Subsidiary, in redemption and cancellation of all of the capital stock of Old Walter Industries owned by Concrete. On July 25, 1988, U.S. Concrete Pipe was merged into Concrete, which subsequently changed its name to "United Concrete Pipe Corporation." On July 25, 1988, the capital stock of Wedlo was distributed by Former U.S. Pipe to Old Walter Industries, in redemption and cancellation of a portion of the capital stock of Former U.S. Pipe owned by Old Walter Industries, and then was distributed by Old Walter Industries to Wedlo Holdings Corporation ("Wedlo Holdings"), a Delaware corporation and a First Tier Subsidiary, in redemption and cancellation of all of the capital stock of Old Walter Industries owned by Wedlo Holdings. g. Wedlo Holdings On May 18, 1989, a wholly owned subsidiary of WI Holdings Corp., a Delaware corporation ("WI Holdings") and an unaffiliated company, acquired Wedlo Holdings in a merger transaction for (i) approximately $46.1 million in cash, after giving effect to certain post-closing adjustments, (ii) shares of preferred stock of WI Holdings having an aggregate liquidation preference of $2 million and (iii) warrants to purchase common stock of WI Holdings. Net cash proceeds received at the closing of the sale were utilized to repay indebtedness under the Revolving Credit Agreement. In the 1988 Fiscal Period and the 1987 Fiscal Year, Wedlo's net sales and revenues were $35.1 million and $43.5 million, respectively. Wedlo operated retail jewelry outlets and a ring polishing operation and was a wholesale ring distributor. h. Concrete On April 11, 1989, UCP Holdings, Inc., a Delaware corporation and an unaffiliated company ("UCP Holdings"), purchased from Hillsborough all of the outstanding shares of capital stock of Concrete for (i) approximately $41.5 million in cash, subject to certain post-closing adjustments, (ii) shares of UCP Holdings' preferred stock having an aggregate liquidation preference of $4 million and (iii) warrants to purchase common stock of UCP Holdings. Net cash proceeds received at the closing of the sale were utilized to repay indebtedness under the Revolving Credit Agreement. UCP Holdings ceased operations in 1991, and Hillsborough's $4 million carrying value of UCP Holdings preferred stock was written off as a loss on disposal of discontinued operations in the year ended May 31, 1991. Concrete's net sales and revenues in the 1988 Fiscal Period and the 1987 Fiscal Year were $36.9 million and $54.1 million, respectively. Concrete was a domestic producer of concrete and welded steel pipe and a manufacturer of specialty concrete and welded steel pipe sections, fittings and joints, as well as steel products for pipelines and pumping and treatment plants. i. Georgia Marble On June 25, 1988, Former Georgia Marble, adopted a Plan of Complete Liquidation (the "Marble Liquidation Plan") pursuant to which Former Georgia Marble distributed all of the outstanding shares of capital stock of its wholly owned subsidiary, JW Aluminum Company, to Old Walter Industries in redemption and cancellation of a portion of the stock of Former Georgia Marble owned by Old Walter Industries. Old Walter Industries then immediately transferred such capital stock to Georgia Metals Holding Corporation, a Delaware corporation and a First Tier Subsidiary ("Georgia Metals Holdings"), in redemption and cancellation of all of the capital stock of Old Walter Industries held by Georgia Metals Holdings. On July 25, 1988, JW Aluminum Company was merged into Georgia Metals Holdings, which subsequently changed its name to "JW Aluminum Company" (JW Aluminum). On August 25, 1988, Former Georgia Marble was merged into Old Walter Industries to complete the Marble Liquidation Plan. Immediately thereafter, Old Walter Industries transferred to Georgia Marble all of the assets owned by Former Georgia Marble immediately prior to the merger in redemption and cancellation of all of the capital stock of Old Walter Industries held by Georgia Marble. When these transactions were completed, Georgia Marble changed its name to "The Georgia Marble Company," (Georgia Marble), and succeeded to Former Georgia Marble's obligations as an issuer under the Securities, a Revolving Loan Borrower under the Revolving Credit Agreement and a Working Capital Borrower under the Working Capital Agreement. On May 31, 1989, two corporations beneficially owned by a group of investors led by First Chicago Venture Capital purchased from Hillsborough all of the assets, subject to all related liabilities, of the Aggregate Products Group of Georgia Marble and all of the outstanding shares of capital stock of Georgia Marble, for an aggregate purchase price of $327 million in cash. Upon consummation of the foregoing transactions, Georgia Marble ceased to be an obligor under the Securities and its obligations thereunder were assumed by the remaining Issuers. In accordance with the provisions of a consent and waiver executed and delivered by the Revolving Credit Banks and the provisions of the Indentures and the loan agreement relating to the Loan Note, the net cash proceeds of $323,460,000 received in respect of such transactions were utilized to repay $104,760,000 in principal amount of indebtedness under the Revolving Credit Agreement, redeem the entire $190 million in principal amount of Series A Senior Notes outstanding and prepay the $10 million Loan Note in accordance with their respective provisions and, by tender offer, repurchase $3.7 million in principal amount of Series B Senior Notes and $15 million in principal amount of Series C Senior Notes. In the 1988 Fiscal Period and the 1987 Fiscal Year, net sales and revenues of Georgia Marble were $95.4 million and $120.8 million, respectively. Georgia Marble was a producer of crushed and ground aggregates, ground calcium carbonate and dimensional stone products and a producer and retailer of various consumer products. j. Jim Walter Resources On October 21, 1988, Jim Walter Resources adopted a Plan of Complete Liquidation (the "Resources Liquidation Plan") pursuant to which Jim Walter Resources distributed all of the outstanding shares of capital stock of Sloss Industries Corporation, Southern Precision Corporation, Vestal Manufacturing Company and JW Window Components, Inc., each a Delaware corporation and a wholly owned subsidiary of Jim Walter Resources (collectively, the "Transferred Jim Walter Resources Subsidiaries"), to Old Walter Industries in redemption and cancellation of a portion of the capital stock of Jim Walter Resources owned by Old Walter Industries. Old Walter Industries then immediately transferred the capital stock of the Transferred Jim Walter Resources Subsidiaries to their corresponding First Tier Subsidiaries, in each case in redemption and cancellation of all of the capital stock of Old Walter Industries owned by such First Tier Subsidiaries. Following the distribution of the capital stock of each Transferred Jim Walter Resources Subsidiary to its corresponding First Tier Subsidiary, such Transferred Jim Walter Resources Subsidiary was merged into such First Tier Subsidiary, which subsequently changed its name to that of the Transferred Jim Walter Resources Subsidiary. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Completion of Mirror Liquidation Plan." k. Cherokee and Sanford Brick Companies On November 2, 1988, Jim Walter Resources sold all of the outstanding shares of capital stock of Cherokee Brick Company of North Carolina, a North Carolina corporation, and Sanford Brick Corporation, a Delaware corporation (collectively referred to herein as "Cherokee/Sanford Brick"), to Cherokee Sanford Group, Inc., a North Carolina corporation and an unaffiliated company, for approximately $37.5 million in cash (after giving effect to certain offsets and post-closing adjustments and interest on the purchase price for the period from September 20 to November 2, 1988) and a subordinated promissory note in the principal amount of $1.0 million maturing in 1997. Net cash proceeds received at the closing of the sale were utilized to repay indebtedness under the Revolving Credit Agreement. In the 1988 Fiscal Period and the 1987 Fiscal Year, Cherokee/Sanford Brick's net sales and revenues amounted to $22.8 million and $33.6 million, respectively. Cherokee/Sanford Brick produced residential, architectural and specialty bricks, primarily for the new residential construction industry. l. Shore Oil On September 25, 1988 the capital stock of Shore Oil Corporation, a Delaware corporation ("Shore Oil"), was distributed by Old Walter Industries to Oil Holdings Corporation, a Delaware corporation and a First Tier Subsidiary ("Oil Holdings"), in redemption and cancellation of all of the capital stock of Old Walter Industries held by Oil Holdings. On November 30, 1989, Hillsborough sold all of its shares of common stock of Oil Holdings to Monticello Energy, Inc. for $13,050,000 in cash. Net cash proceeds received at the closing of the sale in the amount of $9,690,000 were utilized to repay indebtedness under the Revolving Credit Agreement and net cash proceeds in the amount of $3,230,000 were set aside to redeem Series B & C Senior Notes; the latter amount, together with interest thereon, is in the Class S-6 Fund, where it was deposited following the commencement of the Reorganization Proceedings. In the year ended May 31, 1989 and the 1988 Fiscal Period, Shore Oil's net sales and revenues amounted to $3.9 million and $6.3 million, respectively. Shore Oil's income was derived principally from its mineral rights underlying approximately 48,000 acres in southern Louisiana and its working interests in various oil and gas fields. C. Post-Filing Date Sales of Assets The Debtors have maintained substantially all of their operating businesses since the Filing Date. No sales of major business operations have been attempted during the Reorganization Proceedings or are contemplated as part of the confirmation of the Creditors' Plan. Isolated sales of assets and/or small business operations not in the ordinary course of business have been accomplished, with Court approval, during the Reorganization Proceedings for specific business reasons. Certain assets, not essential to the ongoing operations of the Debtors or to the consummation of the Creditors' Plan, have been sold pursuant to Court order, as follows: 1. Beijer Industries AB Stock Investment By order dated January 25, 1990, Old Walter Industries sold, pursuant to a tender offer, all of the shares of stock of Beijer Industries AB owned by Old Walter Industries and received net cash proceeds of $5,605,000. 2. Lease of Certain Rights to Coal Bed Methane Gas By order dated April 12, 1990, Jim Walter Resources and United Land were authorized to lease to Taurus Exploration, Inc. ("Taurus") the rights to develop coal bed methane gas from up to 8,800 acres of land located in Tuscaloosa County, Alabama. Net cash proceeds of approximately $1,260,000 and $3,480,000, respectively, were received by such Debtors. By order dated August 5, 1992, Jim Walter Resources and United Land were authorized to lease to Taurus the rights to develop coal bed methane gas from approximately 1,100 acres of land (together with an option for an additional 1,750 acres) in Tuscaloosa County, Alabama for an aggregate consideration of $165 bonus per acre payable upon execution of the lease, $25 of which was distributed to Jim Walter Resources and $140 to Sonat (as defined in Section VII.E.7.(b)). In addition, Jim Walter Resources (but not Sonat) will receive from Taurus 13.75% of the methane gas produced during the first two years of the lease and 15.625% of the methane gas thereafter as in-kind royalty. Jim Walter Resources will then sell such methane gas to Southern Natural Gas Company. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Businesses and Properties of the Debtors -- Jim Walter Resources -- De-Gas Division." 3. Certain Assets of Industrial Products Division of U.S. Pipe By order dated December 17, 1990, U.S. Pipe was authorized to sell certain assets of its former Industrial Products Division, located at Burlington, New Jersey, for $600,000. The closing of the sale occurred on December 27, 1990. 4. Certain Assets of Soil Pipe and Southeastern Assembly Divisions of U.S. Pipe By order dated July 9, 1990, U.S. Pipe was authorized to sell certain assets of its former Soil Pipe Division and its former Southeastern Assembly Division, which sale was consummated in July 1990. Net cash proceeds from such sale of approximately $5,850,000 were received by U.S. Pipe. D. Post-Filing Date Financing Efforts Certain of the Debtors have entered into various agreements, with Court approval, to obtain post-Filing Date financing, as follows: 1. Post-Petition Replacement Letter of Credit Agreement On April 24, 1990, the Court entered an order authorizing certain of the Debtors to enter into a Post-Petition Replacement Letter of Credit Agreement with Bankers Trust Company ("Bankers Trust") and Manufacturers Hanover Trust Company ("MHTCo.") (as predecessor to Chemical Bank ("Chemical")) to permit continuation of letters of credit existing at the Filing Date which aggregate approximately $17.5 million as of May 31, 1993 and November 30, 1993. 2. Post-Petition New Letter of Credit Agreement On April 24, 1990, the Court entered an order authorizing certain of the Debtors to enter into a cash collateralized Post-Petition New Letter of Credit Agreement (as subsequently amended) with Bankers Trust and MHTCo. (as predecessor to Chemical) in the amount of $25 million of which approximately $4.9 million and $2.8 million was outstanding as of May 31, 1993 and November 30, 1993, respectively. This agreement expired on May 27, 1994. On May 18, 1994, the Court granted the Debtors' motion to extend the May 27, 1994 expiration date to June 30, 1995. It is the Proponent's intention either to extend existing letters of credit, with the consent of the issuers thereof, beyond the Confirmation Date and thereafter the Effective Date or, if any letters of credit are cancelled, cause any amounts owed by the Debtors thereunder to be paid as Administrative Claims under the Creditors' Plan. 3. Periodic Payments of Mid-State Homes Pre-Filing Date Debt Pursuant to the Reimbursement Agreement among Mid-State Homes, the Bank of Nova Scotia, Credit Agricole--CNCA, New York Branch, Canadian Imperial Bank of Commerce ("CIBC"), the Sanwa Bank Limited (the "Initial Lenders") and MHTCo., as agent for the Initial Lenders, dated as of January 26, 1989, as amended by an amendment dated as of July 21, 1989, among Mid-State Homes, the Initial Lenders and National Australia Bank Limited, New York Branch (the lenders under such agreement are hereinafter referred to as the "Pre-Petition Lenders" and such Reimbursement Agreement, as amended, shall hereinafter be referred to as the "Pre-Petition Reimbursement Agreement"), the Pre-Petition Lenders established a credit facility up to a maximum aggregate principal amount of $360 million. On January 9, 1990, MHTCo. resigned as agent and CIBC was appointed agent for the Pre-Petition Lenders. As of the Filing Date, $202,400,000 of commercial paper and $10,000,000 of revolving credit loans were outstanding plus accrued interest of $5,573 and commitment fees of $402,858 under the Pre-Petition Reimbursement Agreement. On January 9, 1990, there were two draw-downs totaling $202,400,000 on the letters of credit. The proceeds of such drawings were invested for the benefit of Mid-State Homes until used to satisfy the issued and outstanding commercial paper on its scheduled maturity dates. After the Filing Date, Mid-State Homes continued to receive payments on account of principal and time charges owing under the notes and mortgages included in the collateral, all of which payments constituted cash collateral. Mid-State Homes segregated all such cash collateral into a separate account (the "Proceeds Account") containing only cash collateral, and reinvested such funds, as cash collateral, for the benefit of the Pre-Petition Lenders by order of the Court January 2, 1990 nunc pro tunc to the Filing Date. CIBC filed a motion on January 23, 1991 requesting the Court to issue an order authorizing Mid-State Homes' use of cash collateral and for modification of the Automatic Stay to permit a turnover of cash collateral pursuant to Sections 363(a) and 362(d) of the Code. The Court, by entry of an order dated February 20, 1991, approved the stipulation regarding the motion of the Pre-Petition Lenders and authorized Mid-State Homes to use cash collateral and to modify the Automatic Stay. This order essentially provided that all funds in the Proceeds Account would be paid to CIBC, as agent, for the account of the Pre-Petition Lenders and that the Pre-Petition Lenders would credit the amount of $55,568,828 paid under the order to the principal balance. All remaining distributions contemplated under the stipulation were applied as follows: ( a) First, to the interest accrued after January 31, 1991 on the then outstanding principal balance under the Pre-Petition Reimbursement Agreement, at the "reference rate" (as defined therein) plus of 1%, the non-default interest rate provided for in the Pre-Petition Reimbursement Agreement; and (b) Second, on a pro-rata basis to amortize the principal amounts of (i) the then-current principal balance due under the Pre-Petition Reimbursement Agreement and (ii) the then-current balance of the "accrued interest loan" (as defined therein). Pursuant to this Court's order, $55,568,828, comprised of collections on the collateral through January 31, 1991 and certain reserve funds, were released to CIBC, as agent, as a reduction of principal. Subsequent collections on the collateral were released to the Pre-Petition Lenders on the first and sixteenth of each month with payments first applied to current accrued interest and the balance applied to principal (87%) and accrued interest and fees that existed at January 31, 1991 (13%). On April 21, 1992, certain Debtors filed a motion for entry of an order authorizing Mid-State Homes to organize a business trust named Mid-State Trust III (as defined in Section VII.D.6.), to sell notes and mortgages to Mid-State Trust III, to cause Mid-State Trust III to sell debt instruments to the public and to enter into required related agreements. The notes and mortgages to be sold to Mid-State III were pledged to CIBC for the benefit of the Pre-Petition Lenders. The Court entered an order on June 18, 1992 granting the motion and directing Mid-State Homes to pay to the Pre-Petition Lenders the full amount of unpaid principal, unpaid interest through January 31, 1991 and unpaid pre-Filing Date fees owed and all subsequently accrued interest up to the date of the sale. Mid-State Homes was also directed to set aside $1,735,000 out of the proceeds of such sale in an escrow account (the "CIBC Escrow Fund") whereupon the lien interest of the Pre-Petition Lenders in and to all such accounts and payments would be extinguished and satisfied. The Court also instructed the Pre-Petition Lenders to file an application with the Court in support of their Claim for fees and out-of-pocket costs and expenses and after notice and hearing, the Court would allow such Claims to the extent deemed appropriate and direct Mid-State Homes to pay such Claims out of the CIBC Escrow Fund. CIBC filed such application on June 30, 1992 which was heard in the Court on September 8, 1992. Pursuant to an order of the Court dated August 2, 1993, CIBC was awarded an administrative expense for fees and expenses in the aggregate amount of $1,361,290. In addition, the August 2, 1993 order denied without prejudice a request for fees and expenses incurred by certain counsel retained by CIBC in the aggregate amount of $31,356. No such additional fees or expenses have been sought or are anticipated. 4. Application of Certain Proceeds By order dated June 3, 1991, the Court permitted the application of $10.7 million of proceeds from collections on the Apache Note (as defined in Section II.C.3) by Jim Walter Resources, plus interest earned thereon, to be applied against the principal portion only of the Claims of the Revolving Credit Banks (as defined in Section II.C.3.). Bankers Trust and MHTCo. (as predecessor to Chemical), as agents for the Revolving Credit Banks, filed an appeal with the District Court. On April 29, 1992, the District Court reversed the Court's order and remanded the case to the Court for further proceedings and determinations on the issues of whether the Revolving Credit Banks are oversecured Creditors, the reasonable, relevant and applicable interest rate and whether the Debtors' estates will ultimately prove to be solvent. As of the date of the Disclosure Statement, further proceedings have not been scheduled for hearing by the Court. This issue is resolved under the Creditors' Plan. See "OVERVIEW OF THE CREDITORS' PLAN--Classification and Treatment of Claims and Interests--Secured Claims." 5. Release of Certain Funds By order dated December 11, 1991, Mid-State Homes released funds in a certain bank account related to letters of credit which were paid to the Pre-Petition Lenders, including CIBC. 6. Sale of Installment Notes--Mid-State Homes By order dated June 18, 1992, Mid-State Homes was authorized to organize Mid-State Trust III, a Delaware business trust ("Mid-State Trust III"), sell installment notes and mortgages to Mid-State Trust III and cause Mid-State Trust III to sell debt instruments to the public through a registration statement filed with the Securities and Exchange Commission. Net proceeds were utilized to repay in full all outstanding indebtedness due under the Pre-Petition Reimbursement Agreement between Mid-State Homes and the Pre- Petition Lenders thereunder with the excess proceeds to be used to fund the ongoing operations of the Debtors. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Corporate Reorganizations and Asset Dispositions--Completed Transactions-- Mid-State Homes" and "--Businesses and Properties of the Debtors--Mid-State Homes." 7. Installment Purchase of Mining Equipment On February 23, 1993, the Court entered an order granting Jim Walter Resources' Motion for Authority to Obtain Credit and to Grant Security Interest and Administrative Expense Priority pursuant to which Jim Walter Resources was authorized to purchase certain mining equipment from Gullick Dobson for a purchase price of $10,263,518 in accordance with an installment sales agreement. E. Businesses and Properties of the Debtors 1. General The Debtors currently offer a diversified line of products and services for homebuilding, water and waste water transmission, residential and non-residential construction and industrial markets. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Completion of Mirror Liquidation Plan" for information regarding the Court's Mirror Liquidation Order authorizing the completion of such Mirror Liquidation Plan as to the status of Creditors of certain Debtors after completion of such Mirror Liquidation Plan; and also Exhibit VIII -- "Chart of Corporate Structure on Filing Date;" and Exhibit IX -- "Chart of Corporate Structure After Completion of Mirror Liquidation Plan" for information regarding changes in corporate structure since the Filing Date. For financial information relating to the industry segments of the Debtors, see Exhibits X.A.1. and X.A.2 (year ended May 31, 1993) and Exhibits X.B.1. and X.B.2. (nine months ended February 28, 1994). 2. Hillsborough Hillsborough, organized in August 1987, was a holding company and did not have any substantial properties or engage in any substantial business other than through its direct and indirect subsidiaries. On April 1, 1991, Old Walter Industries merged into Hillsborough, thereby completing the Mirror Liquidation Plan of Old Walter Industries and certain of its subsidiaries. Hillsborough then changed its name to "Walter Industries" in connection with such merger. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Completion of Mirror Liquidation Plan" for information regarding the Court's Mirror Liquidation Order authorizing the completion of such Mirror Liquidation Plan as to the status of Creditors of the Hillsborough Division of the new Walter Industries and the Walter Industries Division of the new Walter Industries after completion of such Mirror Liquidation Plan. 3. Walter Industries Walter Industries is a holding company providing certain corporate staff functions such as legal, tax, audit, cash management and employee relations services, and provides cash as required to its subsidiaries, for which Walter Industries charges its subsidiaries at amounts, which in the aggregate, are intended to reimburse Walter Industries for a major portion of its costs, other than interest expenses. The headquarters building, owned by Walter Industries, is a modern, twin tower, eight-story building of masonry and steel construction, containing approximately 200,000 square feet of office space located on a plot of land in excess of 13 acres in Tampa, Florida. 4. Jim Walter Homes Jim Walter Homes, headquartered in the Walter Industries building in Tampa, Florida, is in the business of marketing and supervising the construction of standardized, partially-finished and shell, detached, single family residential homes primarily in the southern region of the United States where the weather permits year- round construction. Jim Walter Homes has concentrated on the low to moderately priced segment of the housing market. Approximately 300,000 homes have been completed by Jim Walter Homes and its predecessor since 1955. Jim Walter Homes' standard product line consists of 28 models of conventionally built homes, built of wood on concrete foundations or wood pilings, and ranging in size from approximately 640 to 1,800 square feet. During 1990, Jim Walter Homes supplemented its standard product line with a new line of "Regency Series" models designed for the higher income buyer. The Regency Series consists of seven models ranging in size from 1,136 to 2,214 square feet. Each home is completely finished on the outside and is unfinished on the inside except for rough floors, ceiling joists, partition studding and closet framing. The buyer may elect to purchase optional interior components, including installation thereof, such as plumbing and electrical materials, heating and air conditioning, wallboard, interior doors, interior trim and floor finishing. A buyer selecting all options receives a home considered to be "90 percent complete," excluding only floor covering, inside paint, and water and sewer hookups. Shell homes are those which are completely finished on the outside with the inside containing only rough floors, partition studding and closet framing, but not interior walls, floor finishing, plumbing, electrical wiring and fixtures, doors and cabinetry. The remaining units are sold at varying "in-between" stages of interior finishing. Jim Walter Homes builds all of its homes "on site," and only against firm orders. The following chart shows the sales volume of Jim Walter Homes and the percent of homes sold in the three stages of completion for fiscal years 1991 to 1993:
Percent of Unit Sales Fiscal Year Ended May 31,Units Sold Shell Various Stages 90% Complete 1993 4,784 26% 12% 62% 1992 5,305 29 13 58 1991 5,229 30 13 57
During the fiscal years 1993, 1992 and 1991 the average net sales price of a home was $37,000; $34,600; and $33,400, respectively. In the nine month periods ended February 28, 1994 and 1993, units sold were 3,338 and 3,572 at average net sale prices of $38,100 and $37,300, respectively. Jim Walter Homes' backlog as of May 31, 1993 was 1,831 units, compared to 1,637 units at May 31, 1992. Such backlog as of February 28, 1994 was 1,764 units, compared to 1,609 units at February 28, 1993. The average time to construct a home ranges from four to twelve weeks. Jim Walter Homes currently operates 103 branch offices located in 17 states, primarily in the southern region of the United States. Of such branch offices approximately 78% are owned with the balance on leased land. These branch offices serve as "display parks," which are designed to allow customers to view actual models completed to the various stages of interior finishing available. Jim Walter Homes does not own or acquire land for purposes of its operations and is not a real estate developer. Accordingly, these operations are not subject to significant concentrations of credit risks. The actual construction of all homes sold by Jim Walter Homes is done by local building contractors with their own crews, pursuant to subcontracts executed in connection with each home, and inspected by Jim Walter Homes' supervisory personnel. Jim Walter Homes maintains warehouses near each of its district offices from which a portion of the necessary building materials may be obtained; the balance of the building materials is purchased locally. Approximately 97% of the sales made by Jim Walter Homes are for credit. In order to qualify for a credit sale the purchaser of a home must own his property free and clear of all encumbrances. In addition to owning the land, the purchaser must perform certain steps to complete the home and obtain a certificate of occupancy. Depending upon the degree of completion of the home purchased, these steps can cost a significant amount of money. The home, the land and the aforementioned buyer improvements are all subject to the mortgage, deed of trust or other security instrument received from the buyer to secured the indebtedness on the credit sale. The credit terms offered by Jim Walter Homes have a maximum 30-year term, are usually for 100% of the purchase price of the home, and carry a 10% "annual percentage rate," without points or closing costs. The favorable financing offered by Jim Walter Homes normally has tended to increase unit volume in times of high interest rates and limited availability of mortgage financing funds. As a result, Jim Walter Homes' business has tended to be counter-cyclical to national home construction activity. However, in times of low interest rates and high availability of mortgage funds, Jim Walter Homes' volume of home sales has tended to decrease. Since 1982 mortgage rates have declined substantially, creating greater competition for Jim Walter Homes. Once the home is complete and has been accepted by the purchaser, Jim Walter Homes sells the building and installment sales contract, the note, and the related mortgage, deed of trust or other security instrument to Mid-State Homes, an affiliated company, pursuant to an Agreement of Purchase and Sale of Installment Obligations and Servicing of Delinquent Accounts. Pursuant to this agreement, Jim Walter Homes provides field servicing on all delinquent accounts, including collection of delinquent accounts, recommendations of foreclosure, foreclosure and resale of foreclosed properties. For the calendar year 1993, Jim Walter Homes was the sixth largest builder of detached single-family homes in the United States after having been the fourth largest builder in 1992 and 1991, the third largest builder in 1990, the fourth largest builder in 1988 and 1989, the second largest builder in 1986 and 1987 and the largest builder in 1984 and 1985. In the three years ended May 31, 1993, 1992 and 1991, Jim Walter Homes' net sales and revenues amounted to $177.2 million, $183.5 million and $174.6 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $127.3 million and $133.2 million, respectively. 5. Home Improvement Home Improvement was established in 1988 to provide homeowners with room additions, remodeling, garages, carports, porch and pool enclosures and kitchen and bathroom replacements. On January 28, 1994, Home Improvement discontinued its business operations. In the three years ended May 31, 1993, 1992 and 1991, Home Improvement's net sales and revenues amounted to $3.1 million, $2.7 million and $2.1 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $2.7 million and $2.2 million, respectively. 6. Mid-State Homes Mid-State Homes was established in 1958 to purchase mortgage installment notes from Jim Walter Homes on homes constructed and sold by Jim Walter Homes and to service such mortgage installment notes. Jim Walter Homes offers buyers low-cost mortgage financing through Mid-State Homes. The property on which the home is constructed must be owned free and clear by the purchaser if the home is to be financed through Mid-State Homes. In addition to owning the land, the buyer must perform certain steps to complete the home and obtain a certificate of occupancy. Depending on the degree of completion of the home purchased, these steps can cost a significant amount of money. The home, the lot and the aforementioned buyer improvements are all subject to the mortgage, deed of trust or other security instrument received from the buyer to secure his indebtedness. The mortgages offered by Mid-State Homes have a maximum 30-year term, are usually for 100% of the purchase price of the home, and carry a 10% "Annual Percentage Rate," without points or closing costs. Mid-State Homes finances over 97% of the homes built by Jim Walter Homes. The favorable financing offered by Mid-State Homes has normally tended to increase Jim Walter Homes' unit volume of home sales in times of high interest rates and limited availability of mortgage financing funds. As a result, Jim Walter Homes' business has tended to be countercyclical to national home construction activity. However, in times of low interest rates and high availability of mortgage funds, Jim Walter Homes volume of home sales has tended to decrease. In the three years ended May 31, 1993, 1992 and 1991, Mid-State Homes' revenues amounted to $235.7 million, $219.9 million and $209.9 million, respectively, including revenues of Mid-State Trust II of $161.8 million, $160.3 million and $160.1 million, respectively, and Mid-State Trust III revenues of $23.2 million in the year ended May 31, 1993. In the nine month periods ended February 28, 1994 and 1993, such revenues amounted to $189.1 million and $174.1 million, respectively, including revenues of Mid-State Trust II of $122.8 million and $120.3 million, respectively, and revenues of Mid-State Trust III of $20.4 million and $16.6 million, respectively. In April 1988, Mid-State Homes sold to Mid-State Trust II installment notes and mortgages which it had acquired from Jim Walter Homes through February 29, 1988 with a gross amount of approximately $3,376,000,000 and an aggregate outstanding Economic Balance of approximately $1,750,000,000, pursuant to a purchase and sale agreement, in exchange for a purchase price of $1,326,665,600, representing the net cash proceeds from the public offering of Mid-State Trust II Mortgage-Backed Notes after paying the expenses associated with the sale of such Mortgage-Backed Notes; and entered into a servicing agreement with Mid-State Trust II for the continuing servicing of the installment notes and mortgages sold to Mid-State Trust II and a sub-servicing agreement with Jim Walter Homes with respect to the servicing of the same installment notes and mortgages. None of the Debtors are obligated to pay the notes which were issued by Mid-State Trust II or any other obligations of Mid-State Trust II, which did not file a petition for reorganization under Chapter 11 of the Code. The outstanding balance at February 28, 1994 of such Mortgage-Backed Notes was $696,228,000, net of $444,000 unamortized discount. Mid-State Trust II executed an indenture with Southeast Bank, N.A., as trustee (First Union National Bank of Florida now serves as successor trustee), which pledged the Mortgage-Backed Notes Collateral, the installment notes and the related mortgages that Mid-State Homes sold to Mid-State Trust II as security for the payment of the Mortgage-Backed Notes. At February 28, 1994 such Mid-State Trust II installment notes and mortgages had a gross book value of approximately $1,707,394,000 and an Economic Balance of approximately $1,012,668,000. Under the Mid-State Trust II indenture for the Mortgage-Backed Notes, if certain criteria as to performance of the pledged installment notes are met, Mid-State 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 installment notes exceed Mid-State 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 distributions, 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 has approved an additional distribution of approximately $14.1 million for the April 1, 1994 distribution. During the period from formation of Mid-State Trust II through April 1, 1994 such distributions amounted to $56,938,256. For installment notes originated from March l, 1988 through early calendar 1989, Mid-State Homes obtained the funds necessary to purchase the installment notes and mortgages from Jim Walter Homes primarily through the cash management system maintained by the Debtors. In effect, Mid-State Homes was using cash flow generated from its own operations and from the operations of the other Debtors as well as from the proceeds of financings completed by their ultimate parent company from time to time to purchase the installment notes and mortgages from Jim Walter Homes. Jim Walter Homes, in turn, used the cash which it received from Mid-State Homes to operate its construction business. An intercompany payable from Mid-State Homes to its ultimate parent company was created to record the indebtedness with respect to the transfer of funds to Mid-State Homes which it used to purchase the installment notes and mortgages from Jim Walter Homes. During early 1989, Mid-State Homes entered into a credit agreement with several commercial banks which was secured by certain installment notes and related security instruments. Borrowings under this agreement were used to purchase the installment notes and mortgages from Jim Walter Homes. The filing of the Reorganization Proceedings was an event of default under this agreement and Mid-State Homes was no longer able to utilize this agreement. On July 1, 1992, pursuant to approval by the Court, mortgage installment notes having a gross amount of $638,078,000 and an Economic Balance of $296,160,000 were sold by Mid-State Homes to Mid-State Trust III in exchange for the net proceeds from the public issuance by Mid-State Trust III of $249,864,000 of Asset Backed Notes, which bear an interest rate of 7 5/8%. Mid-State Homes entered into a servicing agreement with Mid-State Trust III for the continuing servicing of such mortgage installment notes sold to Mid-State Trust III. The Asset Backed Notes are repayable quarterly in an amount equal to collections on such installment notes, net of payments of expenses and interest on the Asset Backed Notes. Net proceeds were utilized to repay in full all outstanding indebtedness due under the Mid-State Homes revolving credit facility, with the excess cash to be used to fund the ongoing operations of the Debtors. None of the Debtors are obligated to pay the notes which were issued by Mid-State Trust III, which has not filed a petition for reorganization under Chapter 11 of the Code. The outstanding balance at February 28, 1994 of such Asset Backed Notes was $209,058,000. Mid-State Trust III executed an indenture with First Union National Bank of Florida, as trustee, which pledged the Asset Backed Notes Collateral, the installment notes and the related mortgages that Mid-State Homes sold to Mid-State Trust III as security for the payment of the Asset Backed Notes. At February 28, 1994, such Mid-State Trust III installment notes and mortgages had a gross book value of approximately $541,472,000 and an Economic Balance of approximately $263,962,000. Currently, Jim Walter Homes' business operations are being funded, as they were prior to the execution of the Mid-State Home Credit Agreement in 1989, by the sale of installment notes and mortgages from Jim Walter Homes to Mid-State Homes, with an intercompany note payable of Mid-State Homes to Jim Walter Homes created to record Mid-State Homes' purchase of installment notes and mortgages from Jim Walter Homes. Such unencumbered installment notes and mortgages have a gross book value of approximately $1,947,489,000 and an Economic Balance of approximately $791,491,000 at February 28, 1994. The cash required for Jim Walter Homes' business operations is being provided from the available cash of the Debtors at the Filing Date plus cash generated from the operations of the other Debtors pursuant to the Debtors' cash management system and excess cash proceeds from the public issuance of Asset Backed Notes by Mid-State Trust III, with a post-Filing Date intercompany note payable of Jim Walter Homes to its ultimate parent company created to record the funds obtained by Jim Walter Homes pursuant to the cash management system. 7. Jim Walter Resources Jim Walter Resources' operations are conducted through its Mining Division, which mines and sells coal from four (4) deep shaft mines in Alabama, and its De-Gas Division, which extracts and sells methane gas from the coal seams owned or leased by the Mining Division. In March 1991, Jim Walter Resources was merged into Old Walter Industries. Immediately after such merger, Old Walter Industries conveyed all of the assets owned by Jim Walter Resources immediately prior to such merger, together with all of the liabilities of Jim Walter Resources, to the Resources Division of Resources Holdings and immediately after the merger of United Land into Old Walter Industries, Old Walter Industries transferred to the United Land Division of Resources Holdings certain land and all mineral rights interests and the liabilities associated therewith, previously owned by United Land and used in the mining degasification businesses operated by Jim Walter Resources. Upon completion of the Pipe Liquidation Plan and the Resources Liquidation Plan, Resources Holdings immediately merged into JW Resources which changed its name to "Jim Walter Resources, Inc." See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Completion of Mirror Liquidation Plan" for information regarding the Court's Mirror Liquidation Order authorizing the completion of the Mirror Liquidation Plan as to the status of the Creditors of certain Debtors, including Jim Walter Resources, after completion of such Mirror Liquidation Plan. a. Mining Division The Mining Division, headquartered in Brookwood, Alabama, has approximately 8.6 million tons of rated annual coal production capacity from four deep shaft mines. These mines extract coal from Alabama's Blue Creek seam, from which a high quality metallurgical coal is obtained. This coal can be used as cooking coal as well as steam coal since it meets current environmental specifications. The Blue Creek coal has a low/medium volatility and high BTU and low sulfur content. The mines are located in west central Alabama between the cities of Birmingham and Tuscaloosa. The majority of the coal is mined using longwall technology, complemented by the more standard continuous mining method. Since the late 1970's, by replacing the traditional methods of underground mining with the longwall technique, the Mining Division has achieved greater production efficiency, improved safety, generated superior coal recovery results and lowered production costs. There are approximately 90 longwall mining systems in use in the United States, of which the Mining Division operates seven. The Mining Division's normal operating plan is a long wall/continuous ratio of about 75%/25%, which is the long-term sustainable ratio. The Mining Division's coal reserves are currently leased from United Land, a division of Jim Walter Resources; however, see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Completion of Mirror Liquidation Plan" for information regarding the Court's order authorizing the completion of the Mirror Liquidation Plan as to the status of Creditors of the Debtors after completion of such Mirror Liquidation Plan. Recoverable reserves as of May 31, 1993 were estimated to be approximately 263 million tons, of which 238 million tons relate to the four (4) Blue Creek mines. A summary of the reserves is as follows:
ESTIMATED RECOVERABLE(1) COAL RESERVES AS OF MAY 31, 1993 (In Thousands of Tons) Type(4) Steam(S) or United Lands' Mining Reserves(2) Classifications(3) Metallurgical Interest Quality(6) Production(7) Property Total Assigned Unassigned Measured Indicated (M) Owned Leased(5) Ash Sulf. BTU/lb. 1991 1992 1993 No. 3 Mine 65,245 65,245 -- 49,120 16,125 S/M 1,115 64,130 8.2 .56 14,469 2,500 2,403 1,564 No. 4 Mine 78,651 78,651 -- 22,047 56,604 S/M 8,174 70,477 9.4 .69 14,240 2,788 2,342 2,417 No. 5 Mine 31,574 31,574 -- 21,146 10,428 S/M 28,550 3,024 8.8 .66 14,334 1,496 1,819 1,326 No. 7 Mine 62,672 62,672 -- 25,944 36,728 S/M 18,357 44,315 8.0 .65 14,499 2,553 2,314 2,012 238,142 238,142 -- 118,257 119,885 56,196 181,946 9,337 8,878 7,319 Bessie(8) 24,919 -- 24,919 14,880 10,039 S/M 658 24,261 11.0 1.30 13,655 -- -- -- TOTAL 263,061 238,142 24,919 133,137 129,924 56,854 206,207 9,337 8,878 7,319 (1)"Recoverable" reserves are defined as tons of mineable coal in the Blue Creek and Mary Lee seams which can be extracted and marketed after deduction for coal to be left in pillars, etc. and adjusted for reasonable preparation and handling losses. (2)"Assigned" reserves represent coal which has been committed by Jim Walter Resources to its operating mines and plant facilities. "Unassigned" reserves represent coal which is not committed to an operating mine and would require additional expenditure to recover. The division of reserves into these two categories is based upon current mining plans, projections, and techniques. (3)The recoverable reserves (demonstrated resources) are the sum of "Measured" and "Indicated" resources. Measured coal extends 1/4 mile from any point of observation or measurement. Indicated coal is projected to extend from 1/4 mile to 3/4 mile from any point of observation or measurement. Inferred coal extends from 3/4 mile to 3 miles from any point of observation or measurement. Inferred reserves are not included in recoverable reserves. (4)All of the coal in the Blue Creek and Mary Lee seams is suitable for metallurgical purposes although, for marketing reasons, some is sold as compliance steam coal. (5)The leases are either renewable until the reserves are mined to exhaustion or are of sufficient duration to permit mining of all of the reserves before the expiration of the term. (6)Values shown are weighted averages of all reserves and are calculated on a dry basis. Bessie Mine reserves are equivalent to preparation at a 1.60 specific gravity whereas the others are at a 1.40 specific gravity. (7)Production for 1993, 1992 and 1991 is for the fiscal years ended May 31. (8)The Bessie Mine was closed in August 1988.
Environmental expenditures imposed by laws relating to deep shaft mining have been insignificant to date and no substantial expenditures are expected in the future. The Mining Division does not engage in any surface (strip) mining. The facilities of the Mining Division can be summarized as follows:
Facility Location Sq. Footage Administration headquarters Brookwood, AL 41,500 Central shop, supply center and training center Brookwood, AL 128,400
Current Operating Mines Location Rated Capacity Blue Creek No. 3 Adger, AL 2,100,000 tons Blue Creek No. 4 Brookwood, AL 2,500,000 tons Blue Creek No. 5 Brookwood, AL 1,500,000 tons Blue Creek No. 7 Brookwood, AL 2,500,000 tons
As discussed below, the Alabama Power contract has been revised to 4.0 million tons per year effective July 1, 1994 and some of the contracts with the Japanese steel mills, which expired on March 31, 1994, are being replaced by one-year agreements. Thus, going forward, 4.88 to 5.10 million tons will be sold under long-term contracts leaving 3.50 to 3.72 million tons to be sold under short-term contacts or on the spot market. The contract with Alabama Power that had been in effect since January 1, 1979 was amended effective July 1, 1988 and has been superseded by the New Contract (as defined below). The original 1979 contract was for 2.75 million tons per year through 1999. The 1988 amended contract was divided into two parts. The first part related to sales of 2.0 million tons per year through 1999. The base sales price for such coal through June 30, 1993 was fixed, with escalations based on an inflation index, as well as changes in haulage and government imposition costs. From July 1, 1993 to the end of the contract term in 1999, pricing (and other contract provisions) for such 2.0 million tons were to revert to the original contract, which included price adjustments largely based on changes (increases/decreases) in rates for labor, supplies and certain other costs. Such pricing increases and/or decreases were to reflect the rate of change applied to the base price. Productivity increases would benefit the Mining Division's performance because these cost improvements are not passed on to the customer. The second part of the 1988 amendment provided for shipping 1.0 million tons through June 30, 1993 at a market price that was to be periodically adjusted and was to be based on an index comprising all compliance coal delivered to utilities east of the Mississippi River. Again, productivity improvements accrued to the Mining Division. From July 1, 1993 to June 30, 1999, 500,000 tons of the 1.0 million ton second part of the 1988 amended contract would continue to be supplied at a sales price based on long-term contract bids of certain quantities to Alabama Power for comparable coal from new sources from other coal suppliers. Alabama Power has the option to purchase the balance of the 1.0 million tons, the sales price of which would have been based on the same long-term contract bid approach as in the preceding sentence. The Mining Division thus would have retained the right to sell the 500,000 tons in the open market after July 1, 1993, if the pricing obtainable in the open market warranted such a decision. The 1988 amendment to the Alabama Power contract provided for a review of billing price and price components prior to July 1, 1993. Officials of Jim Walter Resources and Alabama Power had met since 1992 in an attempt to satisfy the contract provisions, however numerous disputes have arisen. On June 28, 1993, Jim Walter Resources filed in the Court a Complaint for Declaratory Judgment asking the Court to interpret certain of the provisions of the contract relating to the billing prices to be in effect July 1, 1993. The Court has not ruled on such complaint. Alabama Power filed a Motion to Dismiss, or in the Alternative to Transfer Venue as to which a hearing was held on January 12, 1994. Such motion was denied. An interim agreement was reached with Alabama Power in August 1993 to ship only the Reduced Base Tonnage Coal (2 million tons of coal per year) and the Period 2 Tonnage Coal (500,000 tons) for the contract year ending June 30, 1994. Shipments of Period 2 Additional Tonnage Coal (500,000 tons) were to resume in the contract year beginning July 1, 1994. Until the pricing dispute was resolved, the parties agreed that currentpayments would be based on $61.00 per ton delivered (subject to adjustment upon resolution of the pricing disputes), the approximate blended price in effect on June 30, 1993 for the 3 million tons delivered in the contract year ended June 30, 1993. The New Contract adjusted this price to $63.00 per ton. Under the contract, the billing price to Alabama Power for the 2 million tons of Reduced Base Tonnage Coal was to revert to the provisions of the 1979 contract as adjusted for escalations, subject to the aforementioned review of billing price and price components. The billing price for the Period 2 Tonnage Coal and Period 2 Additional Tonnage Coal was to be based on domestic market prices meeting certain criteria. 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"). On May 23, 1994 the 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 has 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 now pending in the District Court. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Litigation -- Lawsuits Relating to Jim Walter Resources." 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 has been filed by Jim Walter Resources and Alabama Power with the Court seeking the entry of an order dismissing Jim Walter Resources' declaratory judgment action. By order dated June 24, 1994, the 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 reflect changes in the prices of four (4) specific coal indices. The composite change in market prices of these coal indices from the base point is 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. The long-term contract with Carcoke, S.A. extends through December 31, 1995. The contract provides for the sale of approximately 880,000 tons annually, with an option on approximately 220,000 additional tons annually. The pricing mechanism is market driven and reflects changes in prices of three specific coals or coal indices. Blue Creek 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 the 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 Mine Safety and Health Administration ("MSHA") regarding a new ventilating arrangement, designed to reduce the contact between oxygen and sulfur, for the longwall faces at Mine No. 5. Idle plant expenses associated with the shutdown were $6.5 million. Although MSHA approved the resumption of operations at the mine on September 14, 1990, providing for a modified conventional ventilation system, productivity was poor and costs were therefore high. In February 1991, the mine'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 operation were not successful. Mine No. 5 was also 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. The heatings were also the result of pyritic sulfur concentrations occurring in the coal seam being exposed to air. Representatives of Jim Walter Resources, 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 at Mine No. 5 and such mine is currently shut down. Jim Walter Resources, MSHA, Alabama State Mine Inspectors and the UMWA have agreed that the longwall coal panel being mined at the time the spontaneous heatings recurred will be abandoned and sealed off. Development mining for the two remaining longwall coal panels in this section of the mine will resume in the near future and the first panel will be ready for mining approximately January 1, 1995. Production will be adversely impacted during the period June 1, 1994 to January 1, 1995; however, a portion of the costs will be recovered from business interruption insurance. On April 10, 1992, Jim Walter Resources announced that it was reducing its workforce by approximately 720 hourly and salaried employees 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 (4) mines as well as above ground support functions. Such cutback resulted in a charge to income of $6.2 million in the year ended May 31, 1992 for severance, vacation pay and ongoing medical benefits. On June 17, 1992, a major production hoist accident occurred at Blue Creek 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 in shipments of 400,000 tons to Alabama Power from the period July through December 1992 to the period January through June 1993. In the three years ended May 31, 1993, 1992 and 1991, the Mining Division's net sales and revenues were $324.4 million, $393.7 million and $391.6 million, respectively, including $7.1 million, $9.6 million and $6.6 million, respectively, to Sloss. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $224.3 million and $230.2 million, respectively, including $4.5 million and $5.6 million, respectively to Sloss. b. De-Gas Division The De-Gas Division, through a joint venture, extracts and sells methane gas from the coal seams owned or leased by Jim Walter Resources' Mining Division. The original motivation for the joint venture was to increase safety in Jim Walter Resources' Blue Creek mines by reducing the level of methane gas through wells drilled in conjunction with the mining operations. As of May 1993, there were 316 wells producing approximately 33 million cubic feet of gas per day. As many as 150 additional wells are planned for development over the next several years. The degasification operation, as had originally been expected, has had the effect of improving mining operations and safety by reducing methane gas levels in the mines, as well as becoming a profitable operation. The gas is transported through a pipeline (owned by a corporation of which the De-Gas Division and Sonat (defined below) each owns 50% of the stock) directly to SNG's (defined below) pipeline. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Non-Debtor Affiliates--Black Warrior Transmission. The De-Gas Division began operations in 1981 with the formation of an equal joint venture with Kaneb Services, Inc. ("Kaneb") to capture and market methane gas from the Blue Creek seam. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Non-Debtor Affiliates--Black Warrior Methane." Southern Natural Gas Company ("SNG") is the joint venture's exclusive customer for all output of methane gas, all of which was originally at a price tied to the price of fuel oil in New York. In 1985, SNG arbitrarily reduced the purchase price of gas delivered to it by the De-Gas Division and Kaneb. Jim Walter Resources and Kaneb sued to collect the full contract price. In addition, SNG withheld all payments for gas deliveries from November 1986 through January 1987 as a result of a counterclaim in this litigation. In April 1987, a jury in an Alabama state court decided in favor of Jim Walter Resources and Kaneb and awarded them the full contract price for all gas delivered through January 1987, plus interest. SNG was ordered to pay approximately $22.1 million (50% of which would be due to the De-Gas Division). SNG appealed the judgment of the court. However, retroactive to February 1987, SNG resumed making payments, under a reservation of its legal rights. On September 8, 1988, Jim Walter Resources and SNG reached a settlement whereby the litigation was agreed to be withdrawn, and SNG paid to Jim Walter Resources its 50% interest in such $22.1 million, plus interest. Net proceeds to Jim Walter Resources, after severance tax and outside royalty payments, were $11.1 million. Kaneb subsequently sold its 50% interest in the degasification operation to a subsidiary of Sonat, Inc. ("Sonat"), SNG's parent corporation. In connection with such sale, additional areas were added to the gas sales contract. This gas was priced at a market price nominated by SNG which is not to be lower than the published price for spot purchases for SNG--South Louisiana for the applicable month. Effective January 1, 1994, the gas sales contract was amended. The price to be paid for gas delivered to SNG is now equal to the average of two published spot prices; provided, however, that the price will not be less than $2.00 per MMBTU (approximately $1.96 per MCF) on a weighted annual average basis, calculated cumulatively each month. Beginning in January 1994 and ending in December 2001, SNG will pay Jim Walter Resources a reservation fee of $675,000 per month if certain minimum quantities of gas are delivered. In the three years ended May 31, 1993, 1992 and 1991, the De-Gas Division's net sales and revenues amounted to $22.5 million, $21.7 million and $23.3 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $16.7 million and $16.9 million, respectively. 8. U.S. Pipe U.S. Pipe conducts its business through its Pressure Pipe Division and Castings Division. The Pressure Pipe Division manufactures and sells a broad line of ductile iron pressure pipe, pipe fittings and valves and hydrants. It is one of the nation's largest producers of ductile iron pressure pipe. The Castings Division produces and sells a wide variety of gray and ductile iron castings. In the three years ended May 31, 1993, 1992 and 1991, U.S. Pipe's net sales and revenues amounted to $331.2 million, $332.2 million and $312.7 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $254.3 million and $250.8 million, respectively. a. Pressure Pipe Division The Pressure Pipe Division manufactures and sells a complete line of ductile iron pipe ranging from 4* to 64* in diameter as well as most equivalent metric sizes. In addition, this division produces and sells a full line of fittings, valves and hydrants of various configurations to meet various municipal specifications. Approximately 70%-75% of the ductile iron pressure pipe produced by this division is used in the transmission and distribution of potable water and the remaining 25%-30% is used in the transmission of waste water and industrial applications. The majority of ductile iron pressure pipe and related fittings, valves and hydrants are for new residential construction. However, the market for rehabilitation, upgrading and replacement of pipe systems has grown significantly in recent years as major municipalities have initiated programs to rehabilitate aging water and waste water transmission systems, and is currently estimated to represent approximately 30% of ductile iron pressure pipe sales. Fittings, valves and hydrants produced by this division account for approximately 20% of sales. Ductile iron pressure pipe is manufactured by the delavaud centrifugal casting process and is typically classified into three size categories. Small pipe, ranging from 4E to 12E in diameter (approximately 57% of the division's pipe production), is used primarily for potable water distribution in subdivisions and small water system grids. Medium pipe ranging from 14E to 24E in diameter (approximately 30% of the Pressure Pipe Division's pipe production) is used primarily in reinforcing distribution systems, including looping grids and supply lines. Large pipe, 30* to 64* in diameter, which accounts for the remaining 13% of pipe production, is used for major water and waste water transmission and collection systems. The ductile iron pressure pipe industry is highly competitive, with a small number of manufacturers of ductile iron pressure pipe, fittings, valves and hydrants as well as a larger number of manufacturers which produce substitute materials, such as PVC, concrete, fiberglass, reinforced plastic and asbestos/cement pipe. U.S. Pipe is one of the nation's largest producers of ductile iron pressure pipe. Other major competitors include McWane, Inc., Griffin Ductile Iron Pipe Company and American Cast Iron Pipe Company. The division competes with other manufacturers of ductile iron pressure pipe on the basis of price, customer service and product quality. U.S. Pipe is also a manufacturer of ductile iron fittings. The Debtors state in the Debtors' Disclosure Statement that management believes that Tyler Corporation and McWane Inc. have larger market shares than U.S. Pipe in this market segment. U.S. Pipe is not a major manufacturer of valves and hydrants. Additional competition for ductile iron pressure pipe comes from pipe composed of other materials. Although ductile iron pressure pipe is typically more expensive than competing forms of pipe, customers choose ductile iron for its quality, longevity, strength, ease of installation and lack of maintenance problems. Products of the Pressure Pipe Division are sold primarily to contractors, water works supply houses, municipalities and private utilities. Most ductile iron pressure pipe orders result from contracts which are bid by contractors or directly issued by municipalities or private utilities. A smaller portion of ductile iron pressure pipe sales are made through independent water works supply houses. The division maintains numerous supply depots in leased space throughout the country which are used as a source of pipe for start-up projects, to supply ongoing projects and to aid in completing projects. The Pressure Pipe Division's sales are primarily domestic, although foreign sales are becoming more significant, with 8% of dollar sales in 1993. U.S. Pipe has 36 sales offices in leased space in the United States. It employs a salaried sales force of approximately 70 persons. The order backlog of pressure pipe at May 31, 1993 was 121,173 tons compared to 121,956 tons at May 31, 1992. Such backlog at February 28, 1994 was 131,413 tons, which represents three months' shipments, compared to 118,915 tons at February 28, 1993. The Pressure Pipe Division manufactures ductile iron pressure pipe at four owned plants located in (i) Bessemer, Alabama (563,000 square feet on 169 acres of land); (ii) North Birmingham, Alabama (336,000 square feet on 61 acres of land); (iii) Union City, California (116,000 square feet on 70 acres of land); and (iv) Burlington, New Jersey (329,000 square feet on 109 acres of land). Such plants have annual rated capacities, on a one shift per day basis, of 180,000 tons, 160,000 tons, 85,000 tons and 132,000 tons, respectively, of ductile iron pressure pipe. In addition, the division manufactures fittings, valves and hydrants at its owned plant in Chattanooga, Tennessee (623,000 square feet on 80 acres of land). The general offices contain 122,000 square feet of office space on 6 acres of owned land and are located in Birmingham, Alabama. While the pipe business is generally sensitive to recessions because of its partial dependence on the level of new construction activity, certain aspects of Pressure Pipe's operations have in the past helped to reduce the impact on such division of the effects of a downturn in new construction. First, Pressure Pipe's products have experienced a strong level of demand in the replacement market. The Debtors state in the Debtors' Disclosure Statement that management believes that the growth of the replacement market will continue as a result of major expenditures by governmental entities in an effort to rebuild the nation's infrastructure, such as the replacement and upgrading of water and waste water transmission systems. In addition, legislation such as the Clean Water Act and the Safe Drinking Water Act may force utilities and cities to upgrade and/or replace their pipe systems. Second, Pressure Pipe's facilities are located in regions of the country which have exhibited consistent economic strength. The Burlington, New Jersey plant is adjacent to the northeastern market with its significant replacement potential and the division's operations in California and the South are located in areas of relative economic growth. Because freight costs for pipe are high, locations close to important markets lower transportation costs, thereby making the Pressure Pipe Division's products more competitive. b. Castings Division The Castings Division produces a wide variety of gray and ductile iron castings as well as special hardness castings for the pollution control industry. In the year ended May 31, 1993, approximately 44% of the Castings Division's sales were sales of castings to the Pressure Pipe Division, with the balance of the sales to various capital goods industries. Manufacturing operations are located in Anniston, Alabama (228,000 square feet on 21 acres of owned land). 9. Sloss Sloss is a diversified manufacturing operation which has four major product lines: (1) foundry coke; (2) furnace coke; (3) mineral wool; and (4) specialty chemicals. Foundry coke is marketed to cast iron pipe plants and those foundries producing castings, such as for the automotive and agricultural equipment industries. It is shipped primarily into four geographic markets: the East Coast; the Southeast; Mexico; and the West Coast. Competition comes primarily from three merchant suppliers: ABC Coke, Koppers Company, Inc., and Empire Coke Company. In the year ended May 31, 1993, approximately 65% of the foundry coke produced by Sloss was sold to U.S. Pipe. Furnace coke is sold primarily to basic steel producers. Furnace coke sales were depressed in recent years. During 1993, 1992 and 1991, however, Sloss' furnace coke production was at near capacity as a result of a contract with National Steel Corporation. Sloss has only an estimated 1% of the market for furnace coke. Competition comes primarily from Koppers Company, Inc. in the southern United States, Citizens Gas & Coke Utility and steel producers with excess cooking capacity in the Midwest. Mineral wool is utilized principally by acoustical ceiling manufacturers, and is also used in fireproofing cements. A related product, Processed Mineral Wool, is used in friction materials and phenolic molding compounds. The continued success of the mineral wool business depends upon Sloss' ability to produce ceiling tile fiber of consistent high quality and react to customer demands for specific "customized" fiber composition. Of the total mineral wool sales in the year ended May 31, 1993, approximately 89% was sold to Armstrong World Industries and 11% to Apache Building Products Company. Chemical products are manufactured in plants located in Birmingham, Alabama and Ariton, Alabama. The Birmingham product line is composed primarily of aromatic sulfonic acids and sulfonyl chlorides used in the pharmaceutical, plasticizer, foundry and coatings industries, but also includes a custom manufactured specialty monomer for the plastic industry. The Ariton facility produces custom manufactured specialty products for the rubber and plastics industries. Sloss' manufacturing facilities located in Birmingham, Alabama include 120 coke ovens with an annual rated capacity of 450,000 tons and related buildings of 148,400 square feet, a mineral wool plant with an annual rated capacity of 121,000 tons in a building of 63,000 square feet and a synthetic chemicals plant in a building of 63,300 square feet, all on 521 acres of owned land. Sloss also operates a specialty chemical facility in Ariton, Alabama in a building of 6,900 square feet, on 53 acres of owned land. In the three years ended May 31, 1993, 1992 and 1991, Sloss' net sales and revenues amounted to $77.5 million, $76.2 million and $72.0 million, respectively, including $8.7 million, $8.9 million and $8.8 million, respectively, to U.S. Pipe. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $59.5 million and $57.2 million, respectively, including $6.6 million in both periods to U. S. Pipe. 10. JW Aluminum JW Aluminum produces: (i) aluminum sheet for general building uses, such as siding, gutters, roofing and window components; (ii) aluminum foil for household and institutional uses; (iii) converter foil for laminating; (iv) specialty coated foil used as a facer on foam insulation products; (v) fin stock used in the manufacture of heat transfer equipment, including coils in commercial air conditioners as well as other residential, automotive and marine applications; (vi) aluminum foil used in litho plates for newspaper printing; and (vii) cable wrap for use in the manufacture of communication cable. JW Aluminum is one of a large number of suppliers nationwide of aluminum sheet and foil. In fiscal 1993, JW Aluminum sold 92.4 million pounds of aluminum products, 35% of which were sheet products and 65% foil products. JW Aluminum has focused on directing its product mix away from building products which are price sensitive, low value added products, toward higher value added products such as fin stock, where product quality and service are relied upon more than price. JW Aluminum operates a single manufacturing facility with an annual rated capacity of approximately 110 million pounds, based on present product mix, of rolled aluminum sheet and foil in Mt. Holly, South Carolina. Such facility is in a building of 201,000 square feet on 22 acres of owned land. In the spring of 1991, JW Aluminum completed an approximately $9.6 million capital program to expand its annual capacity from 80 million pounds to 110 million pounds. A $5.6 million capital expenditure program is currently underway with respect to the second phase of a planned three phase expansion program which will increase the annual rated capacity to 140 million pounds in late fiscal year 1995. The third phase of the expansion plan is scheduled for fiscal 1999. In the three years ended May 31, 1993, 1992 and 1991, JW Aluminum's net sales and revenues amounted to $82.3 million, $78.8 million and $71.9 million, respectively, including $1.6 million, $1.0 million and $1.0 million, respectively, to Window Components. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $60.4 million and $56.4 million, respectively, including $1.3 million and $800,000, respectively, to Window Components. 11. Window Components and Window Components (Wisc.) Window Components and its wholly owned subsidiary, Window Components (Wisc.) (collectively, "JW Window Components"), produce a variety of screens and screen components and a full line of window components, such as extruded aluminum components, weatherstripping and sash balances. JW Window Components is recognized as an industry leader in the production of block and tackle sash balances and in 1991 introduced a new line of spiral balances. It also has the broadest product line of any supplier to the window and patio door industry. The Debtors state in the Debtors' Disclosure Statement that management estimates that approximately 60% of total sales are directed to the new construction market, approximately 30% to the renovation market and approximately 10% to the commercial sector. The recessionary levels of activity in the new construction market has adversely affected sales. The introduction of the new line of spiral balances in 1991 improved market share and sales penetration. JW Window Components' products are sold through a network of independent sales agents, who cover the continental United States, the Caribbean and Central American countries. JW Window Components operates four plants located in Hialeah, Florida (291,000 square feet on 10 acres of owned land); Columbus, Ohio (17,000 square feet of leased space); Sioux Falls, South Dakota (50,000 square feet on 3 acres of owned land); and Merrill, Wisconsin (Window Components (Wisc.) with 30,000 square feet of leased space). The administrative offices are located in the Walter Industries headquarters building in Tampa, Florida. On June 14, 1994, Window Components announced it had purchased a 147,000 square foot plant in Elizabethton, Tennessee which will serve as the new hub for its manufacturing operations. Two existing plants in Hialeah, Florida and Columbus, Ohio will be consolidated into the Elizabethton, Tennessee plant, which will be expanded to 200,000 square feet. The expansion and relocation are expected to be completed by the end of calendar 1994. In the three years ended May 31, 1993, 1992 and 1991, net sales and revenues for JW Window Components, including $6.2 million, $5.3 million and $4.5 million, respectively, for Window Components (Wisc.), amounted to $36.4 million, $33.1 million and $30.8 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $28.6 million and $26.7 million, respectively, including $5.4 million and $4.5 million, respectively, for such subsidiary. 12. Southern Precision Southern Precision's products and services include metal and wood pattern tooling, plastic and rubber mold tooling, computerized numerically controlled machining of products and resin coated sand for the foundry industry. Southern Precision's Irondale, Alabama manufacturing facility, which incorporates the plant, warehouse and administrative functions, is the largest of its type in the Southeast (85,000 square feet of building located on 6 acres of owned land). The facility and equipment enable the company to service larger and more sophisticated tooling programs. Competition for resin coated sand, which has been strong in recent years, is concentrated primarily in the Southeast. In order to expand production capacity for resin coated sand, Southern Precision entered into an agreement with Borden, Inc. in February 1994 to lease Borden, Inc.'s resin coated sand plant (together with the machinery and equipment) containing approximately 14,000 square feet of space and located in Birmingham, Alabama. The lease contains an option to purchase the plant at the end of the third year. The transaction also included the execution by Southern Precision and Borden, Inc. of a sales agreement, license agreement and other ancillary agreements. In the three years ended May 31, 1993, 1992 and 1991, Southern Precision's net sales and revenues amounted to $10.7 million, $11.8 million and $10.8 million, respectively, including $1.6 million, $1.8 million and $1.2 million, respectively, to U.S. Pipe. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $7.5 million and $8.2 million, respectively, including $1.3 million and $1.1 million, respectively, to U. S. Pipe. 13. Vestal Vestal produces a diversified line of metal and foundry products for residential, commercial and industrial use. Vestal manufactures a line of energy saving fireplaces, fireplace inserts, accessories and woodburning stoves, as well as lightweight castings for municipal markets and metal building products. Vestal's products are sold through a network of independent sales agents to hardware and building materials distributors, home centers and mass merchandisers. Vestal's performance to a large extent is tied to residential construction and as a result has been adversely affected by the recessionary level of construction activity. Foreign competition has also been a factor in recent years. Vestal operates a foundry with 100,000 square feet of building and has a presently unused plant building of 109,000 square feet, both on 32 acres of owned land, and a steel fabrication plant with 124,000 square feet of building on 7 acres of owned land, all in Sweetwater, Tennessee. In May 1994, Vestal relocated its steel fabrication operations to the unused plant building adjacent to the foundry. The relocation will result in improved operating efficiencies and eliminate the need for major repairs at the existing facility. In the three years ended May 31, 1993, 1992 and 1991, Vestal's net sales and revenues amounted to $15.2 million, $13.8 million and $13.2 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $12.7 million and $11.3 million, respectively. 14. United Land United Land owns approximately 75,000 acres of land (including approximately 7,100 acres transferred to Jim Walter Resources in connection with the Mirror Liquidation Plan) and also owns approximately 150,000 acres of mineral rights, principally in Alabama. Of this mineral rights acreage approximately 36,000 acres were transferred to Jim Walter Resources in connection with the Mirror Liquidation Plan. In addition, United Land leases approximately 74,000 acres of mineral interests (all of which were transferred to Jim Walter Resources in connection with the Mirror Liquidation Plan). See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS-- Completion of Mirror Liquidation Plan" for information regarding the Court's Mirror Liquidation Order authorizing the completion of such Mirror Liquidation Plan as to the status of the Creditors of certain Debtors after completion of such Mirror Liquidation Plan. This description of United Land is for such company as of the Filing Date, prior to such transactions relating to completion of the Mirror Liquidation Plan. Also see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Pipe Realty." Jim Walter Resources, through its Mining and De-Gas Divisions, currently operates four deep shaft coal mines and, through a joint venture, produces methane gas. United Land receives royalties related to these operations, and also receives royalties resulting from leases to strip coal miners, other gas producers and timber companies. When market conditions are favorable, management expects from time to time to sell excess real estate from the holdings of United Land not utilized by any of the other subsidiaries of Walter Industries. In the three years ended May 31, 1993, 1992 and 1991, United Land's net sales and revenues amounted to $31.5 million, $36.2 million and $38.9 million, respectively. Of such amounts, $19.1 million, $22.1 million and $23.3 million, respectively, were coal royalties from the Mining Division of Jim Walter Resources, and $1.5 million, $1.7 million and $1.7 million, respectively, were gas royalties from the De-Gas Division of Jim Walter Resources. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $26.4 million and $22.7 million, respectively, including coal royalties of $16.3 million and $13.3 million, respectively, and gas royalties of $1.1 million in both periods from Jim Walter Resources. 15. Walter Land Walter Land is a land sales operation with an inventory at May 31, 1993 of approximately 7,500 acres, primarily on the south side of Houma, Louisiana. The bulk of the commercial development in Houma is tied directly to service and support for offshore oil and gas drilling, which has been in a longer term recession. Land sales have been few and small in recent years. Presently, the majority of Walter Land's income is derived from rental income. Management and sale of the Louisiana properties are handled by local personnel on a contract basis. In the three years ended May 31, 1993, 1992 and 1991, Walter Land's net sales and revenues amounted to $241,000, $702,000 and $549,000, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $208,000 and $217,000 respectively. 16. Best; Best (Miss.) and JW Insurance Best is an insurance agency consisting of three areas of operation: (1) sells fire and extended coverage insurance to Jim Walter Homes' homebuyers; (2) sells personal and commercial insurance coverage to the general public through agency offices located in Tampa, Florida and Sun City, Florida and (3) provides risk management for all of Walter Industries and its subsidiaries needs through its corporate insurance department. Best's corporate offices are located in the headquarters building of Walter Industries in Tampa, Florida. Best (Miss.) is presently a local insurance agency that signs insurance policies sold in Mississippi. JW Insurance, presently basically inactive, was originally set up to sell insurance through agency offices in Birmingham, Alabama and Sun City, Florida. In the three years ended May 31, 1993, 1992 and 1991, net sales and revenues for Best and its wholly owned subsidiaries Best (Miss) and JW Insurance amounted to $3.4 million, $3.6 million and $3.4 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $2.4 million and $2.5 million, respectively. 17. Coast to Coast Coast to Coast is a captive advertising agency that originates and places all advertising for Jim Walter Homes branches throughout the United States. Coast to Coast's operations are located in the headquarters building of Walter Industries in Tampa, Florida. In the three years ended May 31, 1993, 1992 and 1991, Coast to Coast's net sales and revenues amounted to $5.4 million, $4.3 million and $4.1 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $4.4 million and $3.9 million, respectively. All of such net sales and revenues were to Jim Walter Homes. 18. Dixie Dixie is the centralized purchasing agent of building materials, except lumber and other locally purchased materials, for homes constructed by Jim Walter Homes. Dixie's administrative offices are located in the headquarters building of Walter Industries in Tampa, Florida. In the three years ended May 31, 1993, 1992 and 1991, Dixie's net sales and revenues amounted to $12.0 million, $14.3 million and $14.2 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $8.4 million and $8.9 million, respectively. All of such net sales and revenues were to Jim Walter Homes. 19. Computer Services Computer Services is a data processing service company rendering certain centralized electronic data processing services, largely to Walter Industries and its subsidiaries. Computer Services' operations are located in the U.S. Pipe headquarters building in Birmingham, Alabama and the Walter Industries headquarters building in Tampa, Florida. In the three years ended May 31, 1993, 1992 and 1991, Computer Services' net sales and revenues amounted to $4.1 million, $3.7 million and $3.1 million, respectively. Of such net sales and revenues, $3.8 million, $3.4 million and $2.8 million, respectively, were for data processing services rendered to Walter Industries and most of its subsidiaries on a recovery of cost basis based on centralized data processing service usage by each Debtor. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $3.1 million in both periods. Of such net sales and revenues, approximately $2.8 million in both periods were for services rendered to Walter Industries and most of its subsidiaries on the same recovery of cost basis. 20. Hamer Properties Hamer Properties owns approximately 700 acres of land in West Virginia. Hamer Properties derives its revenues from the sale of land, but in the three years ended May 31, 1993, 1992 and 1991 and in the nine months ended February 28, 1994 there were no sales. The company's operations are managed from the Walter Industries headquarters building in Tampa, Florida. 21. Pipe Realty Pipe Realty, a real estate investment company, owns approximately 1,600 acres of land located primarily in Georgia but also in Alabama, Iowa and Washington. Pipe Realty had no sales in the years ended May 31, 1993, 1992 and 1991 and in the nine months ended February 28, 1994. This land is not utilized by any of the operating subsidiaries of Walter Industries. When market conditions are favorable, management expects from time to time to sell portions or all of such land. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS-- Completion of Mirror Liquidation Plan" for information regarding the Court's Mirror Liquidation Order authorizing completion of the Mirror Liquidation Plan and the status of certain Creditors after completion of such Mirror Liquidation Plan. This description of Pipe Realty is for such company as of the Filing Date, prior to such transactions relating to completion of the Mirror Liquidation Plan. Also see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--United Land." 22. JW Walter JW Walter owns approximately 3,800 acres of land and holds mineral rights to approximately 7,600 acres, primarily in West Virginia, but also in Virginia. JW Walter derives its revenues from coal, oil and gas and timber royalty income. Land sales have also contributed to revenues, but in the three years ended May 31, 1993, 1992 and 1991 and in the nine months ended February 28, 1994 there were no sales. The company's operations are managed from the Walter Industries headquarters building in Tampa, Florida. JW Walter had net sales and revenues in the years ended May 31, 1993, 1992 and 1991 of $25,000, $158,000 and $79,000, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $20,000 and $19,000, respectively. 23. Holding Companies a. Computer Holdings b. Hamer Holdings c. Homes Holdings d. Mid-State Holdings e. Resources Holdings f. JW Resources g. JWI Holdings h. Land Holdings i. Railroad Holdings All of the above are holding companies and none were engaged in any business other than through subsidiaries as of the Filing Date. Based on their status as of the Filing Date, none of such holding companies had any net sales and revenues since their inception. As to Homes Holdings, Mid-State Holdings, Resources Holdings and JW Resources, see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Completion of Mirror Liquidation Plan" for information regarding the Court's Mirror Liquidation Order authorizing the completion of such Mirror Liquidation Plan as to the status of Creditors of such Debtors after completion of such Mirror Liquidation Plan. 24. Non-Debtor Affiliates a. Cardem Cardem is a Hamilton, Bermuda based offshore reinsurance company. The predominant part of its business is reinsuring 75% of the risk on fire and extended coverage insurance policies issued by Westchester Fire Insurance Company, an unrelated insurance company. Such insurance policies are with individual owners of homes constructed by Jim Walter Homes. Such policies were placed by Best and, at May 31, 1993, represented approximately 52% of the number of homes for which the mortgage notes thereon were owned and/or serviced by Mid-State Homes. In the years ended May 31, 1993, 1992, and 1991, Cardem's net sales and revenues amounted to $14.1 million, $13.4 million and $12.7 million, respectively. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $9.6 million and $10.4 million, respectively. b. J.W. Railroad J.W. Railroad is an Interstate Commerce Commission approved shortline railroad headquartered at the Sloss operations in Birmingham, Alabama. Its revenues are from car switching fees, transloading services and trackage fees on its some 15 miles of railroad track near Birmingham, Alabama. In the years ended May 31, 1993, 1992 and 1991, J.W. Railroad's net sales and revenues amounted to $3.2 million, $3.0 million and $2.6 million, respectively, of which $800,000, $800,000 and $700,000, respectively in each of the three years were to Sloss and U.S. Pipe. In the nine month periods ended February 28, 1994 and 1993, such net sales and revenues amounted to $2.2 million and $2.4 million, respectively, including $500,000 and $600,000, respectively, to Sloss and U.S. Pipe. c. Mid-State Trust II and Mid-State Trust III Mid-State Trust II and Mid-State Trust III are business trusts organized by Mid-State Homes, which owns all of the beneficial interests in Mid-State Trust II and Mid-State Trust III. In April 1988, Mid-State Trust II issued $1,450,000,000 face amount of debt to the public backed by installment notes and mortgages having an aggregate Economic Balance of approximately $1,750,000,000 sold to such Mid-State Trust II by Mid-State Homes for a purchase price of $1,326,665,600, the net cash proceeds of such public debt offering. Mid-State Homes is servicer, and Jim Walter Homes is subservicer, for such notes and mortgages. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS- - -Financing Efforts--Sale of Installment Notes--Mid-State Homes" and "--Corporate Reorganizations and Asset Dispositions--Completed Transactions--Mid-State Homes." On July 1, 1992, pursuant to approval by the Court, installment notes and mortgages having a gross amount of $638,078,000 and an Economic Balance of $296,160,000 were sold by Mid-State Homes to Mid-State Trust III in exchange for the net proceeds from the public issuance of $249,864,000 of Asset Backed Notes. Mid-State Homes is the servicer for such notes and mortgages. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Financing Efforts--Sale of Installment Notes--Mid-State Homes" and "-- Completed Transactions--Corporate Reorganizations and Asset Dispositions--Completed Transactions--Mid-State Homes." Mid-State Trust II's and Mid-State Trust III's revenues are required by generally accepted accounting principles to be consolidated as part of Mid-State Homes' revenues for financial statement purposes. In the years ended May 31, 1993, 1992 and 1991, Mid-State Trust II's revenues amounted to $161.8 million, $160.3 million and $160.1 million, respectively. In the year ended May 31, 1993, Mid-State Trust III's revenues were $23.2 million. In the nine month periods ended February 28, 1994 and 1993, Mid-State Trust II's revenues amounted to $122.8 million and $120.3 million, respectively, and Mid-State Trust III's revenues amounted to $20.4 million and $16.6 million, respectively. d. Black Warrior Methane Black Warrior Methane is a corporation 50% owned by the De-Gas Division of Jim Walter Resources and 50% owned by Sonat. Black Warrior Methane manages the operational activities of the De-Gas Division and those of such division's 50% joint venturer, Sonat. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Jim Walter Resources--De-Gas Division." e. Black Warrior Transmission Black Warrior Transmission is a corporation 50% owned by the De-Gas Division of Jim Walter Resources and 50% owned by Sonat. Black Warrior Transmission operates a 20 mile pipeline transporting the gas produced from the production area to the pipeline of SNG, the sole customer for such gas. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Jim Walter Resources--De-Gas Division." F. Employees As of May 31, 1993, the Debtors employed 7,522 people, of whom 4,518 were hourly workers and 3,004 were salaried employees. A total of 4,107 employees were represented by unions under collective bargaining agreements, of which 1,575 were covered by one contract with the UMWA which currently expires on August 1, 1998. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Labor Agreements." The Debtors state in the Debtors' Disclosure Statement that each of the Debtors considers its relations with its employees to be satisfactory. A breakdown of the hourly and salaried employees employed by each of the Debtors is as follows: Hourly Salaried Total Hillsborough Walter Industries -- 108 108 Jim Walter Homes -- 1,059 1,059 Home Improvement -- 23 23 Mid-State Homes -- 63 63 Jim Walter Resources 1,575 533 2,108 U.S. Pipe 1,864 758 2,622 Sloss 260 169 429 JW Aluminum 231 78 309 Window Components 322 63 385 Window Components (Wisc.) 55 1 56 Southern Precision 61 17 78 Vestal 150 42 192 United Land -- 7 7 Walter Land -- -- -- Best -- 33 33 Best (Miss.) -- -- -- JW Insurance -- -- -- Coast to Coast -- 11 11 Dixie -- 8 8 Computer Services -- 31 31 Hamer Properties -- -- -- Pipe Realty -- -- -- JW Walter -- -- -- Computer Holdings -- -- -- Hamer Holdings -- -- -- Homes Holdings -- -- -- Mid-State Holdings -- -- -- Resources Holdings -- -- -- JW Resources -- -- -- JWI Holdings -- -- -- Land Holdings -- -- -- Railroad Holdings -- -- -- Totals 4,518 3,004 7,522 G. Seasonality Certain of the businesses of the Debtors (largely U.S. Pipe, Jim Walter Homes, Window Components and Vestal) are subject to seasonal variations to varying degrees. The businesses are more significantly influenced by the general economy. H. Trade Names, Trademarks and Patents The names of each of the Debtors are well established in the respective markets served by them, and the Debtors state in the Debtors' Disclosure Statement that management believes that the reputation of such trade names is of some importance. The Debtors have numerous patents and trademarks. Management does not believe, however, that any one such patent or trademark is of material importance. I. Research and Development Research activities are conducted separately by each Debtor and are directed toward new products, processes, improvement of existing products, development of new uses for existing products and cost reduction efforts. Total research and development expenditures in each of the last three fiscal years were less than 1% of net sales and revenues. J. Raw Materials Substantially all of the raw materials needed for the operations of the Debtors are either produced by or are purchased from domestic sources. All materials used by the various businesses of the Debtors are readily available in the quantities necessary to support their respective operations. K. Labor Agreements Subsidiaries of Walter Industries have the following labor agreements in force. 1. Jim Walter Resources
Number of Employees as Company/Location/Union Effective Exploration of 5/31/93 UMWA Mine No. 3 12/16/93 8/1/98 411 Mine No. 4 12/16/93 8/1/98 430 Mine No. 5 12/16/93 8/1/98 271 Mine No. 7 12/16/93 8/1/98 380 Central Shop/Supply 12/16/93 8/1/98 83
An interim agreement has been reached between the Independent Bituminous Coal Bargaining Alliance ("IBCBA"), formed in 1992, of which Jim Walter Resources is a member, and the UMWA. The agreement contains all terms and conditions of the National Bituminous Coal Wage Agreement of 1993, except for certain modifications in the employment security and health care provisions to union members and an added emphasis on labor/management cooperation. The agreement is for the period from December 16, 1993 to August 1, 1998. The agreement can be reopened by the UMWA in September 1996 and 1997 for wages and pensions and may also be reopened by either Jim Walter Resources or the UMWA for negotiating changes in the health care bonus and annual deductible provisions of the health plan. 2. U.S. Pipe
Number of Employees as Company/Location/Union Effective Exploration of 5/31/93 International Union of Operating Engineers Union City, CA--Local 39 6/29/92 12/31/95 154 United Steel Workers of America Burlington, NJ--Local 2026 12/21/92 3/16/96 235 Chattanooga, TN--Local 3508 2/8/93 4/27/96 401 Bessemer, AL--Local 2140 3/16/92 10/31/95 241 Office and Professional Employees International Union Chattanooga, TN--Local 179 2/8/93 4/27/96 20 International Association of Machinist and Aerospace Workers Chattanooga, TN--Lodge 56 2/8/93 4/27/96 157 Anniston, AL--Lodge 291 11/24/91 12/3/94 42 Bessemer, AL--Lodge 359 3/2/92 10/31/95 110 International Brotherhood of Electrical Workers Chattanooga, TN--Local 175 2/8/93 4/27/96 24 Bessemer, AL--Local 136 3/16/92 10/31/95 12 Patternmakers League of North America Chattanooga, TN-- 2/8/93 4/27/96 12 International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers Bessemer, AL--Lodge 583 3/16/92 10/31/95 6 The Glass Molders, Pottery, Plastics and Allied Workers, International No. Birmingham, AL--Local 256 1/30/93 1/28/96 290 Anniston, AL--Local 324B 12/8/91 12/3/94 180 3. Sloss United Steelworkers of America Birmingham, AL--Local 12014 3/17/91 12/5/94 260 4. Window Component Laborers International Union of North America Sioux Falls, SD--No. 427 11/1/93 10/31/96 127 5. Vestal United Steelworkers of America Sweetwater, TN--Local 6638 1/22/94 1/17/97 150 6. Southern Precision United Automobile Aerospace & Agricultural Implement Workers Irondale, AL--Local 2281 11/22/93 11/21/96 61
L. Pension Plans The Debtors have various pension plans covering substantially all employees not separately covered by the profit sharing plan discussed in the following subsection. In addition to the Debtors' own pension plans, contributions are made to certain multi-employer plans. 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. As to the funding status of such pension plans, see Note 12 contained in Walter Industries' Consolidated Financial Statements for the year ended May 31, 1993 annexed hereto as Exhibit X.A.1. 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 liabilities. The Debtors state in the Debtors' Disclosure Statement that Jim Walter Resources estimates that its allocated portion of the unfunded vested liabilities of these plans amounted to approximately $24.0 million at May 31, 1993. 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 Jim Walter Resources. The pension plan for Salaried Employees of Walter Industries, Subsidiaries, and Affiliates, the Pension Plan previously maintained by Original Jim Walter, is a defined benefit pension plan covering all salaried employees of all the Debtors not covered by the Profit Sharing Plan discussed in the following subsection. The Pension Plan is funded by a method which produces annual contribution requirements in the aggregate, and, therefore, contributions for individual participants are not determinable. Aggregate accrued contributions to the Pension Plan in the fiscal year ended May 31, 1993 (for the plan year ended December 31, 1992) amounted to $4,012,001, which was approximately 5.64% of total covered remuneration. The Debtors have established and maintained at least 23 single-employer pension plans (collectively, the "Pension Plans") to provide retirement benefits for certain of their employees. The Pension Plans are covered by Title IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. Secs. 1301-1461. Walter Industries, Inc. is the plan administrator of the Pension Plans. The Pension Benefit Guaranty Corporation ("PBGC") has stated that the Pension Plans are not executory contracts that the Debtors may assume or reject and that the Pension Plans can be terminated only if the requirements of either 29 U.S.C. sec. 1341 or 29 U.S.C. sec. 1342 are met. Under the Creditors' Plan, the Proponents intend that the reorganized Debtors will continue the Pension Plans, but the Debtors reserve the right to terminate any Pension Plan after the Effective Date in accordance with the applicable plan documents and applicable law. The Proponents understand that the Debtors are (and so long as they remain in the control group will be, after the Effective Date, for all Pension Plans that have not been terminated prior to the Effective Date) jointly and severally liable to contribute to the Pension Plans at least the amounts necessary to satisfy ERISA's minimum funding standards, 29 U.S.C. sec. 1082; 26 U.S.C. sec. 412, and, in addition, that the Debtors may be contractually liable to contribute to the Pension Plans. The contributing sponsor of a pension plan and all members of the contributing sponsor's controlled group, as such term is defined under ERISA, are jointly and severally liable for the unfunded benefit liabilities of a pension plan under 29 U.S.C. sec. 1362(a). Certain trades or businesses that at present may be under common control with the Debtors under ERISA may not remain under such common control after the Effective Date of the Creditors' Plan. As a result, such trades or businesses, if any, may not be jointly and severally liable with the Debtors after the Effective Date for payment of minimum funding obligations and premiums due PBGC with respect to the Pension Plans, and, with respect to Pension Plans terminated, if any, after the Creditors' Plan's Effective Date, unfunded benefit liabilities. The Proponents understand that the Debtors' liability under 29 U.S.C. sec. 1362, if any, in the event of a Pension Plan termination, shall not be affected in any way by these reorganization proceedings, including by discharge, except with respect to Pension Plans, if any, that are terminated prior to the confirmation of a plan of reorganization for the Debtors. The Proponents further understand that such termination of the Pension Plans is not anticipated to occur. It is the Proponents' intention that PBGC shall not be precluded by Confirmation of the Creditors' Plan from commencing any action, or from taking any other action permitted under ERISA, to collect or recover any claims under 29 U.S.C. sec. 1362 from the reorganized Debtors, their successors or assigns, or their assets or properties with respect to any Pension Plans not terminated before Confirmation of the Creditors' Plan. The Proponents also intend to use their best efforts to have included in the Confirmation Order language to the effect that (1) as of the Effective Date the Debtors will have no debt to PBGC under 29 U.S.C. sec. 1362 with respect to any Pension Plan that is not terminated by the Confirmation Date; and (2) accordingly, any liability of the Debtors under 29 U.S.C. sec. 1362 shall not be discharged or otherwise affected by Confirmation of the Creditors' Plan with respect to any Pension Plan that has not been terminated prior to Confirmation of the Creditors' Plan. For a detailed explanation of the Pension Plan, see "POST-CONSUMMATION --Management -- Executive Compensation -- Officers -- Pension Plan." M. Profit Sharing Plan Since 1958, Original Jim Walter had a Profit Sharing Plan providing retirement benefits for salaried employees of Original Jim Walter and certain of its subsidiaries, including Jim Walter Homes, Mid-State Homes, Best, Dixie and Coast to Coast, the Original Jim Walter Plan. Under the Original Jim Walter Plan, the lesser of (a) 15% of the aggregate compensation, as defined in such plan (but excluding incentive compensation payments) paid to all participants during the particular fiscal year (subject to the maximum amount permitted under the IRC) or (b) 25% of Original Jim Walter's net profits, as defined in such plan, for the year, before Federal income taxes, were set aside each year to be held in trust for participants in proportion to their compensation, as defined in such plan, for that year. After the Merger, Walter Industries and the same subsidiaries mentioned above plus a new subsidiary, Home Improvement, adopted and have continued such plan (now known as the Walter Industries Plan), except that contributions to the Walter Industries Plan are computed at a rate of 15% of the aggregate compensation (excluding incentive compensation), as defined, paid to all participants during the plan fiscal year ending August 31, without any limitation as to required net profits. For the years ended May 31, 1993, 1992 and 1991, aggregate contributions by the applicable Debtors to such Walter Industries Plan were $3.0 million, $2.7 million and $2.5 million, respectively. See "POST-CONSUMMATION -- Management -- Executive Compensation -- Officers -- Profit Sharing Plan." N. Other Employee Benefit Plans Union employees have varying benefits based on their negotiated contracts. Salaried employees of all of the Debtors, with some variations for certain of the Debtors, are covered by the following plans or policies. 1. Group Medical Plans All salaried employees of all of the Debtors are under a single plan. Hourly unit plans vary in plan design. Certain of the Debtors offer participation in "Health Maintenance Organizations" where they are available. 2. Life Insurance The Debtors give salaried employees life insurance coverage for approximately one times annual salary on a company-paid basis, and optional contributory coverage totaling up to three times annual salary. Union hourly employees' coverage varies by location and union contract on a set amount basis. 3. Long-Term Disability All salaried employees are covered for long-term disability for up to 60% of salary, with a maximum payout of $4,000 per month. 4. Temporary Disability Hourly employees are covered by this benefit under various formulas. Benefits paid vary by location and are paid for periods of as little as thirteen (13) weeks to as much as twenty-six (26) weeks. 5. Retiree Medical Insurance Certain salaried and hourly retirees who meet the eligibility criteria are eligible for retiree medical insurance coverage. The Debtors and Non-Debtor Affiliates adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in the fourth quarter of the fiscal year ended May 31, 1993. Upon adoption, the Debtors and Non-Debtor Affiliates 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 amounts to $23.5 million before taxes in the year ended May 31, 1993. If fiscal year 1993 expense had been determined under the cash method used previously, the amount recognized would have been $2.7 million before taxes. Adoption of this new standard has no impact on cash flow. 6. Paid Vacations Salaried employees receive one to four weeks vacation, depending on service. Union hourly employees' vacations vary by location and contract. 7. Paid Holidays The number of paid holidays for salaried employees varies by location. The average is ten (10) days per year. Union hourly employees' paid holidays vary by location and contract. 8. Severance Pay Severance pay for salaried employees who are released is paid depending on certain eligibility criteria. The amount depends on length of service. The minimum is one week and the maximum is six months. Certain of the union contracts have payments, or continuing benefits such as medical coverage, for severed employees. 9. Employee Educational Assistance Program Salaried personnel can obtain reimbursement of the cost of books and tuition for certain eligible employees for job-related continuing education. O. Completion of Mirror Liquidation Plan 1. General Subsequent to its acquisition of Original Jim Walter by the Merger on January 7, 1988, Hillsborough undertook a program of corporate reorganizations and asset dispositions pursuant to which Hillsborough, prior to the Filing Date, restructured and/or disposed of certain of the businesses of Original Jim Walter. Included as part of this program were the complete liquidations of Old Walter Industries and certain of its subsidiaries pursuant to Section 332 of the IRC, as set forth in plans of complete liquidation adopted by their respective stockholders. Charts of the Debtors' corporate structure on the Filing Date and after completion of the Mirror Liquidation Plan are annexed hereto as Exhibits VIII and IX, respectively. Although significant strides were taken prior to the Filing Date to complete the Mirror Liquidation Plan, the commencement of the Reorganization Proceedings required the Debtors to temporarily delay the completion of such Creditors' Plan. The Mirror Liquidation Plan had to be completed by May 31, 1991 or Hillsborough, Old Walter Industries and the other Debtors would have incurred substantial tax liabilities and interest for prior periods and would have been subject to substantial tax liabilities on future sales of subsidiaries. Therefore, on July 5, 1990, the Debtors filed a motion with the Court for an order authorizing the Debtors to complete the Mirror Liquidation Plan. After Court hearings on such motion on September 5, 1990 and October 9, 1990, the Court issued the Mirror Liquidation Order authorizing completion of the Mirror Liquidation Plan, subject to certain restrictions described below. The Mirror Liquidation Order is attached hereto as Exhibit III to which reference should be made as to the status of Creditors of certain Debtors. In order to complete the Mirror Liquidation Plan, the following actions, as more fully discussed below, were taken on or prior to April 1, 1991: (1) completion of the Pipe Liquidation Plan; (2) completion of the Resources Liquidation Plan; (3) distribution by Old Walter Industries of the capital stock of Jim Walter Homes to Homes Holdings; (4) distribution by Old Walter Industries of the capital stock of Mid-State Homes to Mid-State Holdings; and (5) merger of Old Walter Industries into Hillsborough. 2. Completion of the Pipe Liquidation Plan To complete the Pipe Liquidation Plan, United Land Corporation (which prior to May 1988 was named United States Pipe and Foundry Company) was merged into Old Walter Industries in March 1991. Immediately after the foregoing merger, Old Walter Industries: (1) transferred to the United Land Division of Resources Holdings certain land and all mineral rights interests, and the liabilities associated therewith, previously owned by United Land and used in the mining and degasification businesses operated by Jim Walter Resources, in redemption and cancellation of a portion of the capital stock of Old Walter Industries held by Resources Holdings; (2) transferred to the United Land Division of Pipe Realty all land and mineral rights interests, and the liabilities associated therewith, previously owned by United Land and not used in the mining and degasification businesses operated by Jim Walter Resources, in redemption and cancellation of all the capital stock of Old Walter Industries held by Pipe Realty. Pipe Realty then changed its name to "United Land Corporation;" and (3) in connection with the transfer of the land and mineral rights interests leased by United Land from third parties, as well as certain other executory contracts, United Land, as authorized by Court orders, pursuant to Section 365 of the Code, assumed and assigned such leases and other executory contracts to Old Walter Industries which immediately assigned such leases and executory contracts to either the United Land Division of Pipe Realty (United Land Corporation) or the United Land Division of Jim Walter Resources, as applicable, which divisions assumed such leases and executory contracts. 3. Completion of the Resources Liquidation Plan To complete the Resources Liquidation Plan, Jim Walter Resources was merged into Old Walter Industries in March 1991. Immediately after the foregoing merger, Old Walter Industries: (1) conveyed all of the assets owned by Jim Walter Resources immediately prior to the merger, together with all liabilities of Jim Walter Resources to the Resources Division of Resources Holdings in redemption and cancellation of all of the capital stock of Old Walter Industries held by Resources Holdings; (2) to the extent that the assets received by Old Walter Industries in the merger and then transferred to the Resources Division of Resources Holdings constituted leases and executory contracts, Jim Walter Resources, as authorized by Court order, assumed and assigned such leases and executory contracts to Old Walter Industries which immediately assigned them to the Resources Division of Resources Holdings; and (3) upon completion of the Pipe Liquidation Plan and the Resources Liquidation Plan, Resources Holdings immediately merged into JW Resources which changed its name to "Jim Walter Resources, Inc." 4. Distribution of the Capital Stock of Jim Walter Homes On April 1, 1991, as a further required step in the Mirror Liquidation Plan, Old Walter Industries distributed the capital stock of Jim Walter Homes to Homes Holdings in redemption and cancellation of all of the outstanding capital stock of Old Walter Industries held by Homes Holdings Corporation. 5. Distribution of the Capital Stock of Mid-State Homes On April 1, 1991, as a further required step in the Mirror Liquidation Plan, Old Walter Industries distributed all of the outstanding shares of the capital stock of Mid-State Homes to Mid-State Holdings in redemption and cancellation of all of the outstanding shares of capital stock of Old Walter Industries held by Mid-State Holdings. 6. Merger of Old Walter Industries into Hillsborough After all of the steps noted above were taken, in order to complete the Mirror Liquidation Plan, Old Walter Industries merged into Hillsborough on April 1, 1991, as a result of which Hillsborough acquired the remaining assets of Old Walter Industries, as its Walter Industries Division. Such assets consisted primarily of the stock of certain operating subsidiaries (consisting of Coast to Coast, Dixie, Best and Cardem (a non-Debtor)), certain real and personal property, intercompany receivables and all other assets of Old Walter Industries together with all of its liabilities. Hillsborough then immediately changed its name to "Walter Industries, Inc." 7. Status of Creditors of Certain Debtors The Mirror Liquidation Order authorizing completion of the Mirror Liquidation Plan contained certain restrictions so as to protect the rights of creditors of certain Debtors by treating such creditors and Debtors as if the Mirror Liquidation Plan steps discussed above had not taken place. Reference should be made to Exhibit III hereto as to such restrictions. 8. Summary of Mirror Liquidation Order a. The rights, Liens, if any, Claims and priority of all interested parties of the Debtors, including, but not limited to, Hillsborough, Old Walter Industries, Jim Walter Resources, Resources Holdings, JW Resources, United Land, Pipe Realty, Jim Walter Homes, and Mid-State Homes, are, with respect to the determination of distributions under a liquidation or a plan or plans of reorganization (or any other distributions or matters in these Chapter 11 Cases), to be determined without regard to actions taken to complete the Mirror Liquidation Plan. Without limitation of the foregoing, in the case of a Debtor which ceased to be a separate corporation as a result of a merger effected pursuant to the Mirror Liquidation Order, the value of a Claim against such Debtor or of a Lien against the stock of such Debtor or an intercompany note between the Debtor and an entity with which it merged (and the rights of the Holder of such Claim or Lien) is to be determined (a) in the case of a Claim, as if that Claim had survived in the form of a Claim (in addition to any other Claim which may be held by such Holder) against the division or divisions into which the assets and liabilities of such Debtor were ultimately transferred, (b) in the case of a Lien against an intercompany note, as if such Lien had survived against a Claim of like kind and amount against the obligor under such note and (c) in the case of a Lien against stock, as if such Lien had survived against the equity value of such division or divisions. b. The Clerk of the Court has continued to maintain a separate case file and a separate Claims register for each of the Debtors without regard to actions taken to complete the Mirror Liquidation Plan. c. The actions taken to complete the Mirror Liquidation Plan are not to be deemed to substantively consolidate the Chapter 11 Cases. P. Risk Factors Relating to Businesses of the Debtors 1. General The Debtors' businesses are affected by general economic or other factors outside their control. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors" and Exhibits X.A.1. and X.A.2. 2. Major Debtors a. U.S. Pipe The sales of U.S. Pipe are dependent to some extent upon the rate of residential and non-residential building construction and other forms of construction activity, and are thus subject to certain economic factors such as general economic conditions, the underlying need for construction projects, interest rates and governmental incentives provided to construction projects. The cyclical nature of U.S. Pipe's business is offset to some extent by U.S. Pipe's sales to the replacement market. The replacement market generally fluctuates less than the rate of new construction and therefore tends to have a stabilizing influence during a period of depressed construction activity. b. Jim Walter Homes Jim Walter Homes is also sensitive to certain general economic and other factors. Its business has tended to be counter-cyclical to national home construction activity. In times of high interest rates or lack of availability of mortgage funds, and thus limited new home construction, Jim Walter Homes' volume of home sales tends to increase due to the terms of the financing it offers. However, in times of low interest rates and increased availability of mortgage funds, Jim Walter Homes' volume of home sales tends to decrease. c. Jim Walter Resources A majority of Jim Walter Resources' sales are made pursuant to long-term contracts, which tend to stabilize the results of its operations. The coal market currently has excess capacity and coal prices in foreign markets have declined. Metallurgical coal prices have fallen as world economic activity and steel production have weakened. Expanded use of pulverized coal injection in the steel-making process will negatively impact the demand for coking coals. However, the Clean Air Act of 1990 is expected to have a favorable impact on prices of low sulfur steam coal such as Jim Walter Resources produces. On May 10, 1994, Jim Walter Resources and Alabama Power signed a new agreement for the purchase and sale of coal replacing the 1979 coal purchase contract as amended, and reached tentative new one-year agreements with some of the Japanese steel mills. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Litigation--Lawsuits Relating to Jim Walter Resources." The Mining Division's financial results for the nine months ended February 28, 1994 were considerably below 1994 projections and the prior year period due to adverse geological conditions which lowered productivity rates and increased the cost per ton of coal produced and spontaneous combustion heatings in a section of Mine No. 5 which shut down the mine from November 17, 1993 through December 16, 1993. In early April 1994, the spontaneous heatings recurred at Mine No. 5 and such mine is currently shut down. Jim Walter Resources, MSHA, Alabama State Mine Inspectors and the UMWA have agreed that the longwall coal panel being mined at the time the spontaneous heatings recurred will be abandoned and sealed off. Development mining for the two remaining longwall coal panels in this section of the mine will resume in the near future and the first panel will be ready for mining approximately January 1, 1995. Production will be adversely impacted during the period June 1, 1994 to January 1, 1995; however, a portion of the costs will be recovered from business interruption insurance. The Mining Division will not achieve its 1994 earnings or cash flow projections. d. Vestal Vestal's sales are sensitive to the single family housing market. e. Window Components The sales of Window Components are also sensitive to certain general economic and other factors. Its business also tends to be cyclical with the national home construction market. However, Window Components' management recognized the overall reduction of demand for new home construction several years ago and began introducing new products to make Window Components more competitive. f. JW Aluminum JW Aluminum's sales tend to fluctuate with the general aluminum market, with its building products oriented sheet sales generally following construction activity. To offset the effects of the fluctuations of the aluminum market and construction activity, JW Aluminum's management began introducing new products aimed at industrial markets, which should reduce the swing in profit margins caused by the changing aluminum market. g. Southern Precision The sales of Southern Precision are dependent on the foundry industry. Historically, most major pattern tooling programs are initiated during downturns in foundry production as major foundries attempt to alter existing pattern equipment or introduce new pattern equipment. h. Sloss Coke products are sold to the steel and foundry industries. Furnace coke, sold primarily to one steel producer under contract until 1996, is subject to pricing fluctuations affected by the domestic steel industry and the availability of furnace coke from domestic and foreign providers. Foundry coke is sold primarily to U.S. Pipe (see 2. (a) above). Sloss's specialty chemicals are sold to a variety of customers in the foundry, plasticizer, pharmaceutical and other industries, which provides a degree of stability to this segment of Sloss's business. Demand and pricing for the mineral wool segment are affected by the levels of commercial and residential construction. Mineral wool is sold primarily to one customer for use in producing acoustical ceiling tile products. Q. Workers' Compensation For a number of years prior to the Filing Date, several of the Debtors were self-insured with respect to workers' compensation claims in several states. As a condition to self-insured status, each such Debtor was required to post cash bonds with various state agencies. In a number of those states, the applicable Debtor ceased its self insurance status and obtained insurance prior to the Filing Date. Certain of the Debtors (primarily U.S. Pipe) remain self-insured in the states of Alabama, California, Tennessee and New Jersey, and, pursuant to Court order, have continued to pay all Claims, including pre-Filing Date Claims with respect thereto. In certain states, Creditors have filed Claims against bonds posted as a condition of being self-insured. The Court has entered orders staying any actions to proceed against such bonds until confirmation of the Creditors' Plan. R. Tort Claims Resolution Procedure All pre-Filing Date personal injury and wrongful death Claims were stayed in all forums when the Chapter 11 Cases were commenced. The Code precludes the Court from determining the Allowed Amount (as defined in the Creditors' Plan) of such unliquidated Claims. On August 12, 1992, the Court entered an order authorizing the establishment of a procedure for resolving tort Claims exclusive of asbestos-related claims (the "Claims Resolution Procedure"). The essential elements of the Claims Resolution Procedure are as follows: a. Unless already filed, all Holders of personal injury and wrongful death Claims were required to file proofs of claim on or before October 30, 1992. b. The insurer and the Holders of such tort Claims had ninety (90) days subsequent to October 30, 1992, to negotiate a settlement, subject to approval of the Court. c. If the Claim is settled, the insurer shall pay the agreed amount to the extent covered by insurance. d. If the Claim is not settled, the Claim shall be referred to a Court-appointed mediator. e. If the mediation fails to produce a settlement, the Automatic Stay will be modified to permit the liquidation of the Claim in the designated forum. f. The Claims Resolution Procedure shall not apply to the current and future plaintiffs in the Lone Star Steel toxic litigation pending in the United States District Court in Norris County, Texas (the "Lone Star Steel Toxic Case"). (The Lone Star Steel Toxic Case involves approximately 2,750 plaintiffs and 370 defendants. Jim Walter Resources is a defendant in said litigation for which the Travelers Companies issued policies that may or may not indemnify Jim Walter Resources in such case.) g. By order of the Court dated March 3, 1993, the Court extended the time period for the insurer and the Holder of a tort Claim to negotiate a settlement for an additional ninety (90) days from January 31, 1993 to April 30, 1993. h. A mediator was appointed by the Court on May 6, 1993. S. Litigation Pursuant to the Automatic Stay, all pending litigation against the Debtor defendants was automatically stayed. Described below is the status of certain material litigation involving the Debtors. 1. U.S. Pipe Antitrust Lawsuits A civil antitrust-related lawsuit was commenced on February 1, 1989 in the United States District Court in Atlanta, Georgia, against U.S. Pipe, together with another company in the ductile iron pipe industry. The suit related to alleged bid-rigging in connection with the process by which contracts were awarded for the sale of ductile iron pipe to the City of Atlanta. The plaintiff in that action, the City of Atlanta, sought treble damages for alleged antitrust violations and violations under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), as well as disgorgement of monies paid to defendants as to the alleged violations of Georgia common law. U.S. Pipe vigorously defended the suit. The lawsuit was settled with Court approval by order dated April 17, 1992. A private civil antitrust-related lawsuit was commenced in June 1987 in the United States District Court in Lincoln, Nebraska against U.S. Pipe, together with another company in the ductile iron pipe industry. The suit alleges a variety of antitrust claims, including tie-ins, market allocation, and monopolization of the ductile iron pipe market. The plaintiff in that action, Midwest Pipe Fabricators, Inc. ("Midwest"), sought treble damages for alleged antitrust violations and violations under RICo. This suit was settled pursuant to a Court order entered on November 18, 1993. 2. Texas Lawsuits Relating to Property of Jim Walter Homes and Mid-State Homes On May 6, 1991, a civil action was filed on behalf of numerous plaintiffs in the Texas District Court of Jim Wells County against certain non-Debtor defendants (the "Delgado Lawsuit"). The plaintiffs in the Delgado Lawsuit (the "Delgado Plaintiffs"), 115 people who contracted to have homes built for them by Jim Walter Homes, sought damages for alleged violations of the Texas Consumer Credit Code ("Credit Code") and the Texas Deceptive Trade Practices Act ("DTPA"), as well as injunctive relief to prevent the defendants from foreclosing on the homes, invalidation of liens, forfeiture of the principal amount of indebtedness, and the recovery of actual and punitive damages. Jim Walter Homes and Mid-State Homes opposed the relief requested in the Delgado Lawsuit on the basis that the relief sought adversely impacts property interests of Mid-State Homes and Jim Walter Homes. The Delgado Plaintiffs sought to invalidate accounts which were formerly owned by Mid-State Homes. Many of the notes were subsequently transferred to Mid-State Trust II, a Delaware business trust, of which Mid- State Homes owns the entire beneficial interest. Also, Mid-State Homes held direct title to several of the mortgage notes and, therefore, held a direct interest in such mortgage notes. On January 3, 1991, defendants removed the Delgado Lawsuit to the United States District Court for the Southern District of Texas. The suit was subsequently referred to the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, and, on September 13, 1991, that court, upon defendants' motion, transferred the Delgado Lawsuit to the Court. In June of 1991, Jim Walter Homes and Mid-State Homes filed a complaint in the Court against Hector Gonzalez, a Texas attorney ("Gonzalez") who represents the Delgado Plaintiffs, contending that the Delgado Lawsuit was essentially a case against property belonging to Jim Walter Homes and Mid-State Homes and, therefore, the lawsuit was a violation of the Automatic Stay in the Chapter 11 Cases relating to Jim Walter Homes and Mid-State Homes. This complaint was dismissed on March 3, 1992 and an amended complaint was filed on May 15, 1992. Jim Walter Homes and Mid-State Homes filed a motion for summary judgment in that case, but the Court has not yet ruled on said motion. On June 11, 1991, Jim Walter Homes and Mid-State Homes filed a declaratory judgment action against Gonzalez' known and anticipated clients, approximately 443 homeowners (the "Adams Lawsuit") in the Court, seeking, inter alia, a declaration that the vapor barriers installed by Jim Walter Homes and the foundations used in the homes precluded a finding that the homes were "substantially incomplete." On October 24, 1991, the Adams Lawsuit and the Delgado Lawsuit were consolidated for procedural purposes upon Jim Walter Homes' and Mid-State Homes' motion. Discovery is currently under way in these cases. On April 10, 1992, Jim Walter Homes and Mid-State Homes filed a motion for partial summary judgment in the Adams Lawsuit, with respect to the applicability of the statute of limitations to the Credit Code Claims, the effect of prior releases executed by some of the homeowners in connection with earlier litigation, the application of the Credit Code to purchasers of repossessed homes, the applicability of the Federal Trade Commission ("FTC") "holder in due course" doctrine to the Claims, and the effect of the Code on the Claims for forfeiture, penalties and punitive damages. The Court ruled on October 13, 1992 that (1) certain of the homeowners were precluded from bringing suit under the Credit Code because of the expiration of the statute of limitations; (2) the Credit Code does not have application for those homeowners who purchased repossessed homes from Jim Walter Homes or Mid-State Homes because such transactions involve the purchase of real property; (3) the FTC holder in due course limitation required to be and contained in the contracts with the homeowners precludes recovery by the homeowners of an amount greater than the amount paid by the homeowners under the contracts; (4) the Claims of all homeowners who previously signed settlement or release agreements (for the construction quality and financing aspect of their homes) are barred; and (5) in this matter, the homeowners are not entitled to recover penalties or punitive damages by virtue of applicable provisions of the Code. Twenty-four (24) of Gonzalez' clients have filed a total of five (5) additional lawsuits against Mid-State Trust II and Larry Hyden in the Texas District Court of Jim Wells County between November 4, 1991 and February 1, 1993 (Ortiz, et al. v. Mid-State Trust II, et al.; Garcia, et al. v. Mid-State Trust II, et al.; Lugo, et al. v. Mid-State Trust II, et al.; Limon. et al. v. Mid-State Trust II, et al.; and Torres v. Mid-State Trust II, et al.). These suits allege similar Claims including that Jim Walter Homes failed to comply substantially with its contractual obligations; that Mid-State Trust II therefore violated the DTPA and the Credit Code provisions; and that Mid-State Trust II was negligent in collecting payments on the homeowners' accounts. All five (5) cases were removed to the United States Bankruptcy Court for the Southern District of Texas and then transferred to the Court where they were procedurally consolidated with the Adams Lawsuit and the Delgado Lawsuit. On July 3, 1992, in Jim Walters Homes v. Trigo, et al., Gonzalez' clients filed a counterclaim against Jim Walter Homes on behalf of two homeowners in a foreclosure action pending in a Texas state district court. The counterclaim alleges misrepresentation regarding the purchase of the home and illegal collection practices. This case was removed and transferred to the Court, and is now procedurally consolidated with the Adams Lawsuit and the Delgado Lawsuit. In response to a notification of a Bar Date, the owners of 291 homes filed proofs of claim with the Court on or before October 30, 1992. The basis for all such Claims was the quality of the construction and the collection of payments. By order dated March 9, 1993, the Court procedurally consolidated these proofs of claim with the Adams Lawsuit and the Delgado Lawsuit. On April 22, 1993, Jim Walter Homes and Mid-State Homes filed a lawsuit in the Court against approximately 660 homeowners (including all of the homeowners in the Adams Lawsuit and the Delgado Lawsuit) seeking a determination that (1) no defenses exist to the homeowners' obligations to pay their indebtedness for the purchase of their homes; (2) the liens on such homes were valid and enforceable; and (3) no defense exists to the acceleration and foreclosure of those liens which went into default (the "Adams II Lawsuit"). On May 13, 1993, Jim Walter Homes and Mid-State Homes amended their complaint in the Adams II Lawsuit to include as defendants all individuals who are plaintiffs in the Acuna Lawsuit defined below. On May 16, 1994, approximately 388 amended proofs of claim were filed by homeowners asserting secured status by virtue of alleged setoff rights. A Motion to Extend Time for 1111(b) Election by Raul Delgado, et al., and a Motion to Estimate Claim of Raul Delgado, et al., as Major Claim holders in Jim Walter Homes and Mid-State Homes for Accepting or Rejecting a Plan were filed May 24, 1994 and heard by the Court on June 15, 1994. As to the first motion, the Court ruled that the time for Raul Delgado, et al. to make the election provided for in Section 1111(b) of the Code would be extended to ten days from the entry of an order approving disclosure statements. As to the second motion, the Court continued the hearing on such motion until a date, to be scheduled, after the election provided for in Section 1111(b) of the Code has been made. On April 26, 1993, Gonzalez filed a lawsuit in the United States District Court in Brownsville, Texas, on behalf of 750 homeowners (including almost all of the defendants in the Adams Lawsuit) alleging violation by Jim Walter Homes, Mid-State Homes and eight (8) other defendants of the Credit Code, the Texas Debt Collection Act, the Federal Fair Debt Collection Practices Act, the DTPA, and RICO (the "Acuna Lawsuit"). On June 22, 1993, the defendants filed a motion to dismiss, or alternatively a motion to stay or transfer. On the same date, the defendants filed a motion for protective order asking that discovery be stayed pending the resolution of the motion to dismiss. On August 26, 1993, the United States District Court in Brownsville, Texas granted defendants' motion and entered an order transferring the Acuna Lawsuit to the District Court. On April 1, 1993, Jim Walter Homes and Mid-State Homes filed a second motion for partial summary judgment seeking relief similar to that awarded by the Court on October 13, 1992. This second motion was filed in an effort to extend the Court's earlier relief to encompass also the homeowners who were parties in the individual lawsuits or who filed proofs of claim but were not parties to the Adams Lawsuit. On February 23, 1993, Mid-State Trust II filed a similar motion for partial summary judgment seeking relief similar to that already granted by the Court's order of October 13, 1992, as to Jim Walter Homes and Mid-State Homes. Both of these motions for partial summary judgment are pending. On January 4, 1994 Jim Walter Homes and Mid-State Homes filed a third motion for partial summary judgment seeking to extend the Court's order of October 13, 1992 to claimants brought into these cases by Adams II. Hearings on pending motions for partial summary judgment have been scheduled for July 20, 1994, together with other pending motions. On May 11, 1993, Judge Paskay recused himself from hearing and determining the issues raised in these lawsuits and all of the lawsuits have been transferred to Judge Baynes for trial. Pretrial status and discovery conferences in these lawsuits were held before Judge Baynes on September 29, 1993. On December 1, 1993, Judge Baynes scheduled hearings for February 1, 1994 on all motions for summary judgment filed prior to January 4, 1994. At a disclosure statement hearing held on May 19, 1994, counsel to the Delgado Plaintiffs requested information regarding the assets held by Jim Walter Homes and Mid-State Homes. Based upon information provided by the Debtors, the Proponents believe that these two entities have, and will have as of the Effective Date and the foreseeable future thereafter, adequate assets to satisfy the Claims against them as provided in the Creditors' Plan, including Disputed Claims arising out of the Delgado Lawsuit, the Adams Lawsuit and related litigation described herein. These assets totalled approximately $1 billion as of April 30, 1994. The following disclosure has been provided by, and is included herein at the request of, counsel to the Delgado Plaintiffs: "The [Creditors'] disclosure statement fails to indicate the ruling on April 10, 1992 for the partial summary judgment is not final and is disputed by the homeowners as contrary to other court decisions, including Texas decisions, with regard that the FTC holder in due course limitation is only applicable where relief is sought thereunder which is not the basis of the homeowners actions. The disclosure statement fails to indicate in the ruling on April 10, 1992 for the partial summary judgment is not final and homeowners dispute the proper ruling on punitive damages. The discussion regarding the Brownsville litigation (Acuna lawsuit) and other Texas homeowner litigation erroneously implies a motion to dismiss was granted, when no such motion was granted. The lawsuit is presently pending asserting claims which may be classified as administrative and/or unsecured claims against the estate in excess of $20,000,000." 3. Federal Income Tax A substantial controversy exists with regard to federal income taxes allegedly owed by the Debtors. Accordingly, the Debtors filed a complaint for determination of tax liability and for determination of the validity, extent or priority of liens against the United States (the "Tax Complaint") in the Court on May 14, 1991 (adversary proceeding no. 91-313). The Tax Complaint not only encompassed the Debtors' federal tax returns for fiscal years ended August 31, 1980, 1983, and 1984, but also fiscal years ended August 31, 1985, 1986, 1987 and May 31, 1988 (nine months), 1989, 1990 and 1991, since the Debtors believe that the same issues raised by the IRS in fiscal years ended August 31, 1983 and 1984 will continue to be raised by the IRS for subsequent years. On July 10, 1991 the IRS amended its Proof of Claim to include fiscal years ended August 31, 1985, 1986 and 1987 and a FICA tax liability for the period ended December 31, 1987 (the "IRS Amended Proof of Claim"). The aggregate amount of the IRS Amended Proof of Claim was $70,749,780 for taxes and penalties and interest as of the Filing Date. The Debtors filed their objections to the original IRS proofs of claim. By order of the Court, these objections have been consolidated for procedural purposes with the Tax Complaint. The Debtors filed a motion for partial summary judgment on September 24, 1991 as to two major issues (an "interest" issue and a "discount" issue) common to all years in question, on the grounds that no genuine issue of any material fact existed and that Debtors are entitled to judgment as a matter of law. On November 18, 1991, the IRS filed a cross motion for summary judgment. Oral arguments related to these motions were heard in the Court on February 13, 1992. On September 3, 1992, the Court granted the Debtors' motion for summary judgment as to the "interest" issue. Further argument was held on December 15, 1992 as to the "discount" issue of the summary judgment motion. Summary judgment was entered in favor of the Debtors as to the "discount" issue by order of April 6, 1993. Subsequent to entry of the April 6, 1993 order, the Debtors and the IRS attempted to negotiate a settlement of the remaining issues as to the fiscal years ended August 31, 1980 and 1983-1987. Although the Debtors and the IRS advised the Court that an agreement in principle had been reached with respect to the remaining issues and that a stipulation incorporating such agreement in principle was in the process of being prepared, final approval of the agreement in principle could not be obtained from the IRS. The Debtors state in the Debtors' Disclosure Statement that based on the IRS's inability to obtain final approval in the agreement, the Debtors intend to move forward in the Court for determination of the remaining issues as to the fiscal years ended August 31, 1980 and 1983-1987, which issues include coal royalties, DISC treatment and EURO-dollar hedging. The Court has announced its intention to try a portion of the remaining issues, and held a pre-trial conference on October 12, 1993. Discovery has proceeded as to these issues. No trial date has as yet been scheduled. On October 27, 1992, the IRS filed two (2) additional proofs of claim. The first Proof of Claim, filed in the amount of $109,786,065, sought to amend the IRS Amended Proof of Claim. The second Proof of Claim, filed in the amount of $322,659,672, was with respect to estimated tax liabilities for the fiscal years ended May 31, 1988 (nine months) and May 31, 1989. The Court disallowed the second Proof of Claim without prejudice to the right of the IRS to file an amended Proof of Claim on or before August 1, 1993. That date was subsequently extended to September 30, 1993. On September 28, 1993, the IRS filed an amended Proof of Claim in the amount of $31,468,188.58. On September 29, 1993, the IRS filed an additional amended Proof of Claim in the amount of $179,683,202.92. The Debtor filed an objection to both of these amended proofs of claim on November 3, 1993. The issues raised by both proofs of claim are similar to the issues which have been raised in the Tax Complaint and, as a result thereof, objections to both proofs of claim have been consolidated with the Tax Complaint. On September 28, 29 and 30, 1993, and October 4, 1993, the IRS filed four additional proofs of claim. The first proof of claim, filed in the amount of $110,470,973, sought to amend the previous amendment filed October 27, 1992 to the IRS Amended Proof of Claim with respect to fiscal years ended August 31, 1980 and August 31, 1983 through August 31, 1987. It sought among other things to add coal royalties as an issue for fiscal years ended August 31, 1983 and August 31, 1984. The second proof of claim, filed in the amount of $31,468,189, sought to amend the prior proof of claim filed by the IRS on October 27, 1992 with respect to fiscal years ended May 31, 1988 (nine months) and May 31, 1989 which prior proof of claim was previously disallowed by the Court. The third proof of claim, filed in the amount of $110,560,883, sought to amend the previous IRS amended proof of claim filed on September 29, 1993 with respect to fiscal years ended August 31, 1980 and August 31, 1983 through August 31, 1987. The only change in this amended proof of claim from the prior amended proof of claim for these years is to add a foreign withholding tax issue for the year ended December 31, 1985. The fourth proof of claim, filed in the amount of $44,837,693, sought to amend the prior proof of claim filed with respect to fiscal year ending May 31, 1990 only to include both fiscal years ended May 31, 1990 and May 31, 1991. Objections to each of the four amended claims referred to above have been filed by the Debtors. On September 7, 1993, the Court entered an order setting forth certain issues encompassed by the above claims to be tried and authorizing discovery to commence. One of those issues involved coal royalties with respect to fiscal years ending August 31, 1985 and thereafter. The IRS has sought by motions to amend the Court's order and its amended claims to make coal royalties an issue in fiscal years ended August 31, 1983 and August 31, 1984. The Court has denied the IRS motion and sustained the Debtors' objections to the amended claims in this regard by order dated February 3, 1994. The government has filed a notice of appeal from the February 3, 1994 order with the District Court. Pretrial conferences with regard to the Tax Complaint were held on May 18, 1994 and June 15, 1994. The parties were authorized to proceed with discovery on four (4) issues, including allowance of LBO expense, LBO debt expense amortization and a hedge loss. Trial dates of August 22 and 23, 1994 were set for trial of those issues as to which discovery has been completed, namely, issues of DTSC treatment and coal royalties. The parties were directed to exchange names and addresses of witnesses and admission of documents by July 1, 1994 and to file their stipulation as to agreed facts no later than August 12, 1994. 4. Lawsuits Relating to Jim Walter Resources In December 1990, Hillsborough filed a motion on behalf of Jim Walter Resources and the other Debtors, to assume and assign certain Executory Contracts in connection with completion of the Mirror Liquidation Plan. One such Executory Contract was a coal sales agreement entered into in 1979 (for a term of 20 years) between Alabama Power and Jim Walter Resources and Amendment No. 6 thereto, which was signed in 1988 and which provides for delivery of up to 3,000,000 tons of coal annually. Alabama Power filed an objection to the assumption and assignment of such contract alleging that Jim Walter Resources was in default by virtue of its failure to maintain a $250 million stockholder equity and a current asset to current liability ratio of at least 1:1, as required by Amendment No. 6. Alabama Power also asserted that certification requirements under Section 11 of such agreement, which, inter alia, require a report from Jim Walter Resources' auditors, had not been met because the report received was "not without qualification because it was subject to significant uncertainties especially in connection with the Reorganization Proceedings and massive amounts of debt which are in default and on which Jim Walter Resources is jointly and severally liable." Alabama Power asserted that these liabilities, as well as other significant uncertainties, created a default under such agreement. Alabama Power also asserted that the price paid by Alabama Power under such agreement is in excess of the short-term price for coal and is directly connected to the long-term commitment of capital, the reliability of a supply of coal under such agreement, and the creditworthiness of Jim Walter Resources and, thus, constitutes a financial accommodation under Section 365(c)(2) of the Code. This section prohibits the assumption or assignment of an executory contract "if such contract is a contract to make a loan or extend other debt financing or financial accommodations to or for the benefit of the debtor." A final hearing on Alabama Power's objection was held on February 13, 1991 at which time testimony was taken and argument of counsel was presented to the Court. At the conclusion of the proceedings, the Court orally ruled that the financial condition of Jim Walter Resources did not constitute a default under the applicable provisions of Section 365 of the Code and that the assignee had demonstrated adequate assurances of its current and future ability to perform the Executory Contract, and that such Executory Contract did not constitute an agreement to make a loan or to extend debt financing. The Court further indicated that it was not prepared to make a final determination at that time that the contract did not constitute a financial accommodation under Section 365(c)(2) of the Code. Subsequently, on March 4, 1991, the Court entered its order allowing the assumption and assignment of such agreement, following which an amended order was entered on March 13, 1991 ex parte on the Court's own motion for purposes of reconsidering the March 4, 1991 order, which left open the question as to whether or not such agreement was in fact a contract for financial accommodation and thus within the exceptive provisions of Section 365(c)(2) of the Code which renders such contracts non-assumable. Upon such reconsideration, the Court found it unnecessary to hold any additional hearings on the remaining issues and concluded that the contract was not within the exceptive provisions for assumability, and thus none of the exceptions set forth in Section 365(c)(2) applied. The Court further stated that it was also satisfied that based upon the record established at the final evidentiary hearing, the prospective assignee, JW Resources, was financially able to perform the contract and thus met the requirement of Section 365 (b)(1)(c). On March 14, 1991, Alabama Power filed its notice of appeal to the District Court from the Order Allowing Assumption and Assignment of Executory Contract with Alabama Power entered on March 4, 1991, and the Amended Order on Motion to Assume and Assign Executory Contract with Alabama Power entered on March 13, 1991 with the District Court. Such appeal is presently pending in the District Court. The Debtors state in the Debtors' Disclosure Statement that the Debtors believe that loss of the Alabama Power contract (should that occur) could have a material adverse effect on the operations of Jim Walter Resources. See "OVERVIEW OF THE CREDITORS' PLAN -- Conditions Precedent -- To Confirmation of the Creditors' Plan." On June 28, 1993, Jim Walter Resources filed a complaint against Alabama Power in the Court seeking a declaratory judgment to determine rights of the parties as to certain provisions of a coal sales agreement between the parties entered into on January 1, 1979, and Amendment No. 6 thereto, relating to pricing, tonnage and quality of coal to be supplied under said agreement. Alabama Power filed a motion to stay the adversary proceeding and a motion for determination that the Automatic Stay is not applicable or, in the alternative, relief from the Automatic Stay. On August 11, 1993, both motions were denied without prejudice by the Court. Subsequent thereto, Alabama Power filed a motion to dismiss the complaint on account of improper venue or, in the alternative, to transfer venue of the action to the United States District Court for the Northern District of Alabama, Southern Division. The Motion was heard on January 12, 1994, and has been denied. On May 10, 1994, Jim Walter Resources and Alabama Power signed a new agreement for the sale and purchase of coal, which agreement replaced the 1979 coal purchase contract, as amended, which new agreement was approved by the Court on May 23, 1994. The May 23, 1994 approval order became final on June 3, 1994. The new agreement provides for the dismissal of Jim Walter Resources' declaratory judgment action and Alabama Power's dismissal of its appeal from the March 4, 1991 order regarding Jim Walter Resources' assumption of the 1979 coal purchase contract. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and Properties of the Debtors--Jim Walters Resources--Mining Division." 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 has been filed by Jim Walter Resources and Alabama Power with the court seeking the entry of an order dismissing Jim Walter Resources' declaratory judgment action. By order dated June 24, 1994, the Court granted the joint motion of Jim Walter Resources and Alabama Power to dismiss Jim Walter Resources' declaratory judgment action. On May 13, 1994, Jim Walter Resources, as plaintiff, filed a civil action in the Tuscaloosa Circuit Court, State of Alabama, sounding in tort and contract, alleging wrongful acts including, but not limited to, breach of contract, conversion, negligence and fraud against defendants, Cotton Energy Corporation; Jefferson Fuel Sales, Inc,; Jefferson Resource Sales, Inc,; David H. Cotton; Strachan Shipping Company; Thyssen, Inc., d/b/a Thyssen Carbometal Company, a division of Thyssen, Inc.; Rheinbraun Thyssen Energy, Inc.; and Fictitious Defendants, A, B, C, D, E, F, G, H, I and J, whose names are otherwise unknown, but which will be supplied by amendment when discovered, demanding actual, compensatory and punitive damages in excess of $10,000,000. 5. United Concrete Pipe Corporation On October 4, 1990, Walter Industries was notified by C. Frederich Wehba, Chairman, on behalf of The Westgate Group, Inc., the purchaser of United Concrete Pipe Corporation ("Concrete"), a former subsidiary of U.S. Pipe, that a Grand Jury Subpoena for Documents dated September 10, 1990, had been served upon Concrete ordering Concrete to produce certain documents before a grand jury sitting in Los Angeles, California investigating possible criminal violations of the Sherman Act, 15 United States Code Section 1, and that in the event any indictments or civil suits resulted from this investigation, he expected Walter Industries to indemnify the purchasers for any fines, judgments, fees and other expenditures incurred. The Debtors state in the Debtors' Disclosure Statement that Walter Industries believes, based on the information available, that Concrete did not violate the antitrust laws at any time prior to its sale on April 11, 1989. Walter Industries has been informed that several former employees of Concrete have appeared before the grand jury in response to subpoenas. The Debtors state in the Debtors' Disclosure Statement that Walter Industries believes that these employees have denied any wrongdoing. Walter Industries has recently been informed by its counsel in California that no indictments have been returned and none will be issued. T. Environmental NOTE: THE INFORMATION (AND THE CHARACTERIZATION THEREOF) IN THIS SECTION VII.T. IS TAKEN FROM THE DEBTORS' DISCLOSURE STATEMENT. 1. General The Federal Comprehensive Environmental Response Compensation and Liability Act, as amended ("CERCLA"), imposes liability on certain classes of Persons, including the owner or operator of the site and Persons that disposed or arranged for the disposal of hazardous substances found at sites at which hazardous substances are released into the environment or pose a substantial threat of such release. CERCLA authorized the United States Environmental Protection Agency (the "EPA"), the states and, in some circumstances, private entities to take actions in response to public health or environmental threats and to seek to recover the costs they incur from the same classes of Persons. Certain governmental authorities can also seek recovery of damages to natural resources. Various Debtors have been identified as a potentially responsible party by the EPA under CERCLA with respect to cleanup of hazardous waste at several superfund sites. These Debtors are in the process of preliminary investigation of the sites to determine the nature of their potential liability and amount of remedial costs to clean up such sites. At the current time, U.S. Pipe is a "potentially responsible party" ("PRP") at two superfund sites in New Jersey. The sites are the SCP Carlstadt superfund site and the Lone Pine superfund site. Both sites have identified numerous PRPs, many of which are large companies. U.S. Pipe's volumetric allocation is less than one-tenth of one percent. In addition to the other PRPs, insurance proceeds are available through third parties to fund the required cleanup. U.S. Pipe is a de minimis PRP at these sites. One other Debtor, Sloss Industries, is a PRP in a superfund site. Sloss Industries is a PRP in the Fuels and Chemicals superfund site, located near Tuscaloosa, Alabama. Other large companies and governmental agencies (including the U.S. Defense Department) are also PRPs. Sloss' volumetric allocation is one-tenth of one percent. Sloss is a de minimis PRP at this site. The Debtors state in the Debtors' Disclosure Statement that U.S. Pipe and Sloss Industries believe the extent of their involvement to be minor in relation to that of other named PRPs, a significant number of which are substantial companies. The Debtors also state in the Debtors' Disclosure Statement that management does not believe at this time that any such cleanup costs will have a material effect on their financial condition or results of operations although no assurances can be given that such Debtors will not be required in the future to make material expenditures relating to these sites. The constantly evolving environmental standards at the federal, state and local levels make it difficult to forecast the amount of environmental expenditures or the effect of changing standards on business operations; however, the Debtors state in the Debtors' Disclosure Statement that the Debtors believe that they are in substantial compliance with federal, state and local laws and regulations relating to the discharge of materials hazardous to the environment. In constructing and operating its plants, mines and other facilities, the Debtors state in the Debtors' Disclosure Statement that the Debtors make every effort to comply with environmental laws and regulations. Capital expenditures for environmental matters during the period June 1, 1991 through May 31, 1992 were approximately $6.3 million. From June 1, 1992 through May 31, 1993 they were approximately $3.5 million. Expenditures are projected to be $7.6 million during the period June 1, 1993 through May 31, 1994. The Debtors state in the Debtors' Disclosure Statement that the Debtors anticipate that in the following four (4) years these expenditures will average $7.4 million per year. Included in the planned capital expenditures are $1.4 million to install the equipment necessary to meet the new federal air pollution regulations at the Sloss coke and chemical facilities, Birmingham, Alabama, and $1.6 million for waste water and solid rock disposal at the Mining Division of Jim Walter Resources, Brookwood, Alabama. 2. Sloss Sloss received an administrative order issued under Section 3008 of the Resource Conservation Recovery Act from the United States EPA Region IV, Atlanta, to conduct an investigation at 39 "solid waste management units" ("SMUs") identified after an inspection at Sloss' Birmingham, Alabama complex by an EPA contractor to determine whether there has been soil and/or groundwater contamination. Sloss retained environmental engineers and consultants who reviewed the 39 SMUs identified by the EPA and prepared a proposed investigation which was submitted to the EPA. The EPA responded and sent its draft comments back to Sloss in November 1991. Sloss reviewed the EPA proposals and submitted a revised plan. The final order from the EPA has not been received. The remaining cost of the remedial investigation is estimated to be $1.0 million. Cleanup costs cannot be estimated until the investigation has been completed. 3. U.S. Pipe a. Burlington, New Jersey U.S. Pipe prepared and submitted a soil and ground water cleanup plan to the New Jersey Department of Environmental Protection and Energy (the "NJDEPE") for its Burlington, New Jersey plant pursuant to an Administrative Consent Order required under the New Jersey Environmental Cleanup Responsibility Act (now the Industrial Site Recovery Act "ISRA") in connection with HAC's acquisition of Original Jim Walter. A significant aspect of that proposed plan was a determination by NJDEPE concerning which ground water standard would apply at the Burlington Facility and at which physical locations those standards will be applied. The NJDEPE approved certain portions of the ground water section of the cleanup plan in February, 1994, and deferred its decision on the balance of the ground water section pending further investigation. In its approval, NJDEPE determined which ground water standard will apply, but it did not specify, in all instances, the location at which those standards would be applied. The NJDEPE has not yet approved the soil section of the cleanup plan, although it did approve limited remedial action and continued investigation in several areas of soil at the facility. Management is unable to determine at this time whether the cleanup cost will have a material effect on its financial condition or results of operations. The cleanup cost may be substantial but cannot be accurately quantified until the extent and nature of the required action under ISRA is determined. b. Union City, California As a result of the California Air Toxic Hot Spots Information Act of 1986, U.S. Pipe was required to perform a health risk assessment to determine the potential impact of toxic air emissions to the area. The initial health risk assessment report was submitted to the Bay Area Air Quality Management District ("BAAQMD") on or about January 29, 1991. It was not accepted by the BAAQMD because of alleged failure to conform with reporting guidelines, and this could result in potential monetary sanctions as high as $450,000. Thereafter, on or about April 21, 1991, a revised health risk assessment report was filed with, and accepted by, said agency, thereby stopping the accumulation of any further potential monetary sanctions. The Debtors state in the Debtors' Disclosure Statement that U.S. Pipe believes there are mitigating facts, as well as valid legal defenses that could reduce or eliminate such monetary sanctions. Debtor's environmental engineers and consultants subsequently prepared a further revised health risk assessment which was filed in early 1992. On April 2, 1992, a public hearing was held in Union City advising nearby neighbors of the results of the health risk assessment and U.S. Pipe's future plans. A plan of action was submitted to the BAAQMD in June 1992 outlining additional corrective action to the air pollution control system. After agency approval, the changes were made. Testing was conducted and a new health risk assessment was filed with BAAQMD in July 1993. Test and risk assessment results show compliance. Quarterly letters to nearby neighbors continue to be sent. In April 1992 the State of California Attorney General's Office filed a Proof of Claim and supplemental statement on behalf of the California Department of Toxic Substances Control ("DTSC") against U.S. Pipe and Hillsborough asserting, inter alia, the sum of $17,591,000 which the DTSC indicates was the "current best estimate of the amount of response costs it will take to complete investigation and remediation" of U.S. Pipe's Union City landfill site, which DTSC alleges is contaminated with hazardous substances. The Debtors state in the Debtors' Disclosure Statement that upon inquiry, U.S. Pipe and Hillsborough determined that such estimate and calculations are based upon the DTSC's assumptions that such cleanup would entail removal, treatment and disposal of all of the material in the landfill, as well as groundwater sampling and extended groundwater monitoring. Of the total claims asserted, less than $95,000 represents past costs; the remainder of the Claim represents contingent, estimated costs. In October 1992, the CRWQCB filed a proof of claim by the Attorney General, including a Supplemental Statement seeking $350,000 against U.S. Pipe and Hillsborough for oversight and eventual cleanup of alleged contaminated groundwater. U.S. Pipe and Hillsborough believe the assumption of groundwater contamination and the claim are without substantial merit. In May 1994, U.S. Pipe and Hillsborough requested a meeting with the California Attorney General representing the CRWQCB and DTSC to attempt to seek a resolution with respect to the claims. A meeting has been agreed to and should occur within the near future. In May 1994, the United States Environmental Protection Agency, Region IX, San Francisco, issued a Site Assessment for the Union City landfill under CERCLA. The assessment concluded that: "It appears that the site does not meet with EPA criteria for further action because: a release of hazardous substances from the site to groundwater has not been established; the closest active municipal groundwater well to the site is approximately 3.5 miles; there are no drinking water intakes from surface water bodies within 15 miles downstream of the site, and there are no schools, residences, or day care centers within approximately 0.25 miles of the site." In its objection to the Proponents' April 20, 1994 Disclosure Statement and the Debtors' April 19, 1994 Disclosure Statement, the DTSC alleged: (i) U.S. Pipe and Hillsborough are the only parties responsible for the clean-up of the Union City landfill site; (ii) the Debtors have an on-going obligation to remediate the Union City landfill site; (iii) there is no basis to assume that removal of contaminated soil from the boghouse waste site(s) and landfill(s) at the Union City site will not be necessary; (iv) the Debtors have post-confirmation liability to remediate the Union City landfill site; (v) the Debtors' statement that their involvement is minor in regard to other hazardous waste sites does not take into account CERCLA provisions regarding joint and several liability; (vi) the assertion by the Debtors that "management does not believe at this time that any clean-up costs will have a material effect on their financial condition" is not supported by any facts; and (vii) the discharge provisions contained in the Debtors' Plan do not relieve the reorganized Debtors of on-going remediation obligations. As stated above, the Debtors dispute the assertions of the DTSC and the classification and treatment of the DTSC Claim will be determined by the Court in connection with the hearing on the Debtors' objection to the DTSC Claim. VIII. PROJECTED FINANCIAL INFORMATION In conjunction with developing the Creditors' Plan, the Proponents, assisted by Ernst & Young, have prepared, based upon the Debtors' projections included in their Second Amended Disclosure Statement, unaudited financial projections which may be helpful to Holders of Claims in reaching their determination of whether or not to accept or reject the Creditors' Plan. These projections, together with the assumptions used in the preparation thereof, are attached as Exhibit VII to the Disclosure Statement. The projections for each of the years ending May 31, 1995 through 2001 are based upon assumptions concerning future events and circumstances. NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THE PROJECTED FINANCIAL INFORMATION OR THE ABILITY OF THE REORGANIZED DEBTORS TO ACHIEVE THE PROJECTED RESULTS. PROJECTIONS SET FORTH IN THE DISCLOSURE STATEMENT REPRESENT A PREDICTION OF FUTURE EVENTS BASED UPON ASSUMPTIONS, INCLUDING THOSE SET FORTH WITH SUCH PROJECTIONS AND OTHERS WHICH MAY OR MAY NOT BE SET FORTH. 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 WILL AFFECT THE OPERATIONS OF THE REORGANIZED DEBTORS, THE ACTUAL RESULTS OF OPERATIONS UNDOUBTEDLY WILL BE DIFFERENT FROM THOSE PROJECTED, AND SUCH DIFFERENCES MAY BE MATERIAL AND MAY BE ADVERSE. Unaudited financial projections for each of the years ending May 31, 1995 through 2001 were prepared by the Proponents based upon the Debtor's projections included in their Second Amended Disclosure Statement. This financial forecast reflects assumptions of management of the Debtors concerning existing and likely business and economic conditions relative to each of the Debtors' specific products or markets and has been adjusted by the Proponents to reflect the terms of the Creditors' Plan. IX. VOTING ON AND CONFIRMATION OF THE CREDITORS' PLAN A. Confirmation of the Creditors' Plan The Court will confirm the Creditors' Plan only if it finds that all of the requirements of the Code are met. In order for the Creditors' Plan to be confirmed, the Code requires that the Court determine that the Creditors' Plan complies with the technical requirements of the Code, and that the Proponents' disclosures concerning the Creditors' Plan have been adequate and have included information concerning all payments made or promised to be made by the Debtors in connection with the Creditors' Plan. The Code also requires that (i) the Creditors' Plan is feasible, (ii) Confirmation of the Creditors' Plan is in the best interests of Holders of all Claims and Interests (that is, dissenting Holders of Claims and Interests will receive at least as much under the Creditors' Plan as they would receive in a liquidation under Chapter 7 of the Code), (iii) the Creditors' Plan has classified Claims and Interests in a permissible manner, and (iv) the Creditors' Plan has been accepted by the requisite votes of Classes of Holders of Claims and Interests impaired under the Creditors' Plan except to the extent that Confirmation of the Creditors' Plan is sought under Section 1129(b) of the Code. To confirm the Creditors' Plan, the Court must find that all of these conditions have been met, unless the applicable provisions of Section 1129(b) of the Code are employed. Thus, even if the Holders of Claims and Interests of the Debtors accept the Creditors' Plan by the requisite votes, the Court must make independent findings respecting the Creditors' Plan's conformity with the requirements of the Code, the Creditors' Plan's feasibility, and whether the Creditors' Plan is in the best interests of the Debtors and Holders of Claims and Interests before it may confirm the Creditors' Plan. These statutory conditions to Confirmation are discussed below in the context of this case. B. Feasibility The Proponents believe that the Creditors' Plan meets the feasibility standard which requires that there is a reasonable prospect that the Debtors will be able to perform their obligations under the Creditors' Plan and continue to operate their businesses and are not likely to require further financial reorganization. In determining whether the Creditors' Plan, utilizing cash generated from operations and secured financing (see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS - - - Risk Factors Relating to Businesses of the Debtors"), meets the feasibility standard, the Proponents have analyzed the ability of Walter Industries to meet its obligations under the Creditors' Plan while retaining sufficient amounts of cash to carry on its operations. As part of this analysis, the Proponents have caused to be prepared a forecast of certain financial data for the Debtors for the seven (7) yearly periods ending 2001 based upon certain assumptions of management of the Debtors as discussed in Section VIII above. The financial forecasts are set forth in Exhibit VII hereto. Such forecast supports the conclusion that the Creditors' Plan is feasible. Although the Proponents believe that the financial results projected to be achieved are reasonably attainable, some or all of the estimates or assumptions may prove to be inaccurate. C. Best Interests of Holders of Claims and Holders of Interests Notwithstanding acceptance of the Creditors' Plan by Holders of Claims and Holders of Interests, in order to confirm the Creditors' Plan, the Court must independently determine that the Creditors' Plan is in the best interests of all Classes of Claims and Interests. The "best interests" test requires that the Court find that the Creditors' Plan provides to each member of each impaired Class of Claims and Interests a recovery which has a value as of the Effective Date at least equal to the value on such date of the distribution which each such member would receive from the Debtors if the Debtors were liquidated under Chapter 7 of the Code. To calculate what Holders of Claims and Interests would receive if the Debtors were liquidated, the Court must first determine the dollar amount that would be generated from liquidation (the "Liquidation Fund"). The Liquidation Fund would consist of the proceeds from the disposition of the Assets of the Debtors, augmented by the cash held by the Debtors. The Liquidation Fund would then be reduced by the costs of the liquidation. Costs of liquidation under Chapter 7 would likely include the fees of a trustee, as well as those of counsel and other professionals that might be retained by the Debtors' trustee, selling expenses, any unpaid expenses incurred by the Debtors during the pendency of the Chapter 11 Cases (such as fees for attorneys, financial advisors and accountants) which are Allowed in the Chapter 7 proceedings and Claims arising from the operation of the Debtors' businesses during the pendency of the Chapter 11 Cases and Chapter 7 proceedings. These Claims, in addition to validly perfected security interests and such other Claims as might arise in the liquidation or result from the current Chapter 11 Cases, would be paid in full out of the Liquidation Fund before the balance of a Liquidation Fund would be made available to any and all pre-Filing Date Unsecured Claims, including intercompany and affiliate Unsecured Claims. The value of the distributions out of the Liquidation Fund (after subtracting the amounts described above) are then compared with the value of the property offered to each of the Classes of Unsecured Claims and Interests under the Creditors' Plan to determine if the Creditors' Plan is in the best interests of all Classes. The Proponents believe, based upon the liquidation analysis annexed hereto as Exhibit VI, that under the most likely assumptions with respect to the way in which a Chapter 7 trustee would seek to resolve the asbestos-related veil piercing litigation, the value of any distributions from a Liquidation Fund to each Holder of Allowed Claims and Interests of the Debtors would be less than the value of distributions under the Creditors' Plan. Therefore, the Proponents believe that liquidation of the Debtors would not be in the best interests of the Debtors. D. Classification of Claims and Interests The Proponents believe that the Creditors' Plan meets the classification requirements of the Code which requires that a plan of reorganization place each claim or interest into a class with other claims or interests which are "substantially similar." The Creditors' Plan establishes 22 Classes of Claims and 4 Classes of Interests. Administrative Claims and Priority Claims (consisting of Federal Income Tax Claims, Federal Excise Tax and Reclamation Claims and State and Local Tax Claims) are not classified. Classes S-1 through S-10 encompass Secured Claims, consisting of Revolving Credit Bank Claims, Working Capital Bank Claims, Grace Street Note Claims, Sloss IRB Claim, Secured Equipment Purchase Claims, Series B & C Senior Note Claims, and the Provident Life & Accident Insurance Company Claims, the Revolving Credit Agents Claims, the Working Capital Agents Claims and Other Secured Claims. Classes U-1 through U-7 encompass Unsecured Claims, consisting 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 Veil Piercing Claims. Classes I-1 through I-3 encompass Intercompany Claims, including Intercompany IRB Claims, Pre-Filing Date Intercompany Notes Payable Claims and Post-Filing Date Intercompany Notes Payable Claims. Classes E-1 and E-2 encompass Interests in Hillsborough. Classes SE-1 and SE-2 encompass Interests in the Debtors other than Hillsborough. E. Voting; Acceptance As a condition to confirmation, the Code requires that with certain exceptions (as described below) each impaired Class of Claims and Interests accepts the Creditors' Plan. The Code defines acceptance of a plan by a class of claims as acceptance by holders of two-thirds in dollar amount and a majority in number of allowed claims of that class, but for that purpose counts only those who actually vote to accept or to reject a plan. The Code defines acceptance of a plan by a class of interests as acceptance by at least two-thirds in amount of the allowed interests, but for such purpose counts only those who actually vote to accept or reject a plan. Acceptances of the Creditors' Plan are being solicited only from those Persons who hold Claims or Interests in impaired Classes and who are entitled to receive distributions under the Creditors' Plan. A Class is "impaired" if its legal, equitable, or contractual rights attaching to the Claims or Interests of that Class are modified, other than by curing defaults in stated maturities or by payment in full in cash. The Classes of Claims that are not "impaired" under the Creditors' Plan are deemed to have accepted the Creditors' Plan. Classes S-3, S-4, S-5, S-7, S-8, S-9 and S-10, U-1 and U-2, U-7, I-1 through I-3 and SE-1 are unimpaired. Classes S-1, S-2, S-6, U-3 through U-6 and E-1 are impaired under the Creditors' Plan and, accordingly, their votes are being solicited. The Holders of Class E-2 and Class SE-2 Claims, however, neither receive nor retain any property under the Creditors' Plan. Pursuant to the Code, Classes E-2 and SE-2 are deemed to have rejected the Creditors' Plan and, accordingly, their votes are not being solicited. F. Confirmation Without Acceptance by all Impaired Classes The Code contains provisions for confirmation of a plan even if the plan is not accepted by all impaired classes, as long as at least one impaired class of claims has accepted it. The "cram-down" provisions of the Code are set forth in Section 1129(b) of the Code. A plan may be confirmed under the cram-down provisions if, in addition to satisfying the usual requirements of Section 1129 of the Code, it (i) "does not discriminate unfairly" and (ii) is "fair and equitable," with respect to each class of claims or interests that is impaired under, and has not accepted, the plan. As used by the Code, the phrases "discriminate unfairly" and "fair and equitable" have narrow and specific meanings unique to bankruptcy law. The requirement that a plan not "discriminate unfairly" means that a dissenting class must be treated equally with respect to other classes of the same rank. In the event of a cramdown, classes which are afforded treatment of unequal value compared to the treatment afforded other classes of equal rank could not be maintained without the consent of other classes. The "fair and equitable" standard, also known as the "absolute priority rule," requires that a dissenting class receive full compensation for its allowed claims or interests before any junior class receives or retains any property. If the holders of any impaired class vote to reject a plan, such plan may be confirmed under Section 1129(b) of the Code if holders of all claims and interests junior to those of the impaired class do not receive or retain any property under such plan. The Proponents believe, and have requested, that the Creditors' Plan as structured be confirmed under Section 1129(b) even if an impaired Class of Claims votes to reject the Creditors' Plan since the Creditors' Plan either (i) provides all Holders of Claims in an impaired Class with property having a value as at the Effective Date equal to the Allowed Amount of such Claims, or (ii) allows no Holder of any Claim or Interest that is junior to the Claims of such Class to receive or retain any property under the Creditors' Plan. X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE CREDITORS' PLAN If the Creditors' Plan is not confirmed and consummated, the alternatives include (i) preparation and presentation of an amended Creditors' Plan, (ii) confirmation and consummation of the Debtors' Plan or one of the other two creditor-proposed plans, and (iii) liquidation of the Debtors under Chapter 7 or Chapter 11. A. Alternatives to the Creditors' Plan There are currently four filed plans of reorganization in the Chapter 11 Cases: (i) the Debtors' Plan; (ii) the Creditors' Plan; (iii) the Bank Agents Plan (consideration of which the Bank Agents have requested the Court, and the Court has agreed, to defer); and (iv) the Senior Note Plan (consideration of which the Series B & C Senior Note Trustee has requested the Court, and the Court has agreed, to defer). See "INTRODUCTION -- Comparison of the Creditors' Plan With the Debtors' Plan" for a comparison of the Creditors' Plan with the Debtors' Plan. B. Liquidation Under Chapter 7 If no plan can be confirmed, the Chapter 11 Cases may be converted to a case under Chapter 7, in which one or more trustees would be elected or appointed to liquidate the assets of each Debtor for distribution to its creditors in accordance with the priorities established by the Code. For a discussion of the effect that a Chapter 7 liquidation would have on the recovery by Creditors, see Exhibit VI. The Proponents believe that the distributions to each impaired Class under the Creditors' Plan will be greater and earlier than the distributions that might be received after a Chapter 7 liquidation of each Debtor. The Proponents believe that Confirmation of the Creditors' Plan is preferable to a Chapter 7 liquidation because the Creditors' Plan maximizes the distributions to all Classes of Holders of Claims and Interests and any alternative to confirmation of the Creditors' Plan would result in substantial delays and lesser (and in some cases, no) recoveries. The Proponents believe that the liquidation analysis filed with the Debtors' Disclosure Statement (the "Debtors' Liquidation Analysis") does not follow the clear test set forth in Section 1129(a)(7) of the Bankruptcy Code. If the Debtors followed the plain requirements of Section 1129(a)(7), the Debtors would be solvent even on a hypothetical liquidation basis and, even under the Debtors' interpretation of the "solvent debtor" rule (which the Debtors contend is inapplicable if a hypothetical Chapter 7 liquidation of a debtor shows a hypothetical insolvency), unsecured Creditors would be entitled to post-petition interest. Section 1129(a)(7) states that a Chapter 11 plan can be confirmed only if With respect to each impaired class of claims or interests (a) each holder of a claim or interest of such class (i) has accepted the plan; or [FN] The Proponents believe that the solvent debtor rule, according to a long line of judicial authority, provides that post-petition interest on unsecured claims is allowed against a solvent debtor because it is inequitable for creditors not to receive post-petition interest before any recovery by the shareholders of the debtor. (ii) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under Chapter 7 of this title on such date. (emphasis added). The Section 1129(a)(7) test must be conducted as of the relevant plan's effective date, which under the Debtors' Plan will not occur until there is a Final Order resolving favorably to the Debtors all of the asbestos-related, veil piercing claims and litigation or all of the claims and litigation are settled on terms satisfactory to the Debtors. Debtors' Plan Section 9.2(b). Nevertheless, the Debtors' Liquidation Analysis is premised on liquidation commencing on May 31, 1995 and distribution occurring as of May 31, 1996. As discussed below, the Proponents believe that it is far more likely that satisfaction of Section 9.2(b) of the Debtors' Plan, and the occurrence of the Effective Date under that Plan, will occur sometime later. By using an unrealistically near-term date for the Section 1129(a)(7) hypothetical liquidation, the Proponents believe that the Debtors' Liquidation Analysis deprives the Debtors and their Creditors of all of the incremental value of the Debtors' growth and cash flow between May 31, 1995 and the likely Effective Date of the Debtors' Plan, when the hypothetical liquidation under Section 1129(a)(7) is supposed to occur. The Proponents believe that this incremental value would be substantial. Moreover, the Debtors' Liquidation Analysis provides for a discount to the Debtors' liquidation sale value because of several factors, including "a high degree of uncertainty about the potential exposure of purchasers to future transferee liability for future asbestos-related claims which might not be addressed in the Chapter 7 proceeding" (Debtors' Liquidation Analysis 4, n.i.), when, by the definition of Section 1129(a)(7) and under Section 9.2(b) of the Debtors' Plan, the hypothetical liquidation must occur on the date that the Debtors have no asbestos liabilities, the Debtors' Plan's Effective Date. This asbestos-related discount therefore also deprives the Debtors and their Creditors of substantial value under Section 1129(a)(7). The Debtors' response, that asbestos liabilities would not be disposed of in a Chapter 7 liquidation because corporations are not entitled to a discharge under Chapter 7, overlooks the fact that the hypothetical Chapter 7 liquidation used to apply Section 1129(a)(7) is presumed to commence on the Effective Date of the Debtors' Plan, which is defined as a date when the asbestos claims are eliminated by litigation or settlement, and that the Chapter 7 discharge would be irrelevant to the distribution of the Debtors' then-existing assets in a Chapter 7 liquidation. The Proponents also believe that the range of discounts taken in the Debtors' Liquidation Analysis for the adverse effect of rapid sale and for potential environmental exposures is high and unwarranted given the fact that the Chapter 7 trustee would have more than ample time to prepare the Debtors' businesses for sale prior to the occurrence of any realistic Effective Date under the Debtors' Plan. Additionally, the Proponents believe that the Debtors' Liquidation Analysis significantly undervalues the Debtors' assets in other respects, and significantly overvalues liquidation liabilities. One example: the liquidation analysis heavily discounts the Mid-State Homes mortgage business (by $414 million to $276 million) even though the Debtors have successfully sold large amounts of Mid-State Home's mortgages during the Chapter 11 Cases, when the asbestos-related issues were far from resolved, while they would be resolved in a hypothetical Chapter 7 liquidation that begins on the Debtors' Plan's Effective Date. Another example: the Debtors state that a Chapter 7 trustee would incur $453 million to $330 million of "liquidation tax liabilities" by selling assets, although the Debtors' own Court-approved Mirror Liquidation Plan would enable the Chapter 7 trustee to sell the Debtors' stock without incurring any tax liabilities (subject to the resolution of certain purchase price allocation determinations among the subsidiaries sold). A stock sale would also result in the elimination of the $105 million liability for post-retirement health benefits, that is reflected in the Debtors' Liquidation Analysis. Each of these errors pushes the Debtors conveniently to the liquidation insolvency of $512 million to $716 million required by their crabbed post-petition interest theory. If the Debtors' liquidation analysis had been prepared correctly, in accordance with the plain meaning of Section 1129(a)(7), the Proponents believe that the Debtors would be solvent under the provision that the Debtors contend is the sole basis for the solvent debtor rule. The Debtors have raised a number of objections to the Proponents' liquidation analysis, each of which is discussed below. The Debtors assert that the Proponents' liquidation analyses have been inconsistent in that the liquidation analysis contained in the Disclosure Statement of Certain Creditor Proponents Pursuant to Section 1125 of the Bankruptcy Code, dated as of December 16, 1993, concluded that the Debtors were insolvent on a liquidation basis and the liquidation analysis contained in the First Amended Disclosure Statement for Creditor Proponents' Creditors' Plan (and subsequent amendments thereto) concluded that the Debtors were solvent on a liquidation basis. Given the Court's December 31, 1993 deadline for filing Chapter 11 plans and disclosure statements, the Proponents (and the other creditor proponents of plans filed by that deadline) based their liquidation analysis on the liquidation analysis set forth in the Debtors' previous Disclosure Statement that was on file with the Court. The Proponents had assumed that the Debtors' Liquidation Analysis would have been correctly prepared, without being influenced by the Debtors' litigation strategy, and that the Proponents would have the further opportunity to verify, update and amend the analysis in the final version of this Disclosure Statement. For the reasons described above, the Proponents later came to believe that the Debtors' Liquidation Analysis was, in fact, fundamentally flawed, and accordingly revised it as set forth in the First Amended Disclosure Statement dated as of April 20, 1994, and the subsequent amendments thereto. The Debtors also disagree with the Proponents that the appropriate manner for conducting the liquidation analysis of the Debtors is through a sale of the stock of the Debtors' subsidiaries. The Proponents' liquidation analysis assumes that a Chapter 7 trustee would attempt to maximize the value of the estates, consistent with the trustee's fiduciary duties, and, therefore, that the trustee would attempt to sell the stock of the Operating Businesses to minimize substantial liabilities that would otherwise arise. This liquidation strategy materially varies from the Debtors' Liquidation Analysis, which, among other things, is based on the sale of assets. The Debtors' approach, which does not take advantage of the tax savings arising from the Debtors' Court-approved Mirror Liquidation Plan, results in a substantially higher tax liability than that used in the Proponents' liquidation analysis and, as such, would leave less value available for distribution to Creditors. The Proponents believe the Debtors' choice of liquidation on an asset sale basis rather than a stock sale basis and other assumptions in the Debtors' Liquidation Analysis were made to reduce assets available for distribution in order to bolster a legal argument that the Proponents expect the Debtors to make with respect to the fact that post-petition interest will not be paid in respect of Unsecured Claims under the Debtors' Plan. The Proponents believe that a Court order providing for potential buyers to purchase the stock of the Operating Businesses free and clear of all liens and encumbrances (pursuant to Sections 105(a) and 363(f) of the Code) would enable the stock of the Operating Businesses to be sold. The Debtors have raised the issue as to the effect if, hypothetically, a stock sale could not be effected and an asset sale must be conducted in a Chapter 7 liquidation. First, the Proponents believe that a sale of stock is appropriate and can be done. If, however, the Court finds that the liquidation analysis of the Debtors must be conducted on the basis of asset sales, the result would be increased tax liability, estimated in the Debtors' Liquidation Analysis to be in the range from $276 million to $414 million. The Debtors have questioned why the Negotiated Enterprise Value is only "marginally" higher than "Gross Proceeds Available for Distribution" on a Chapter 7 liquidation basis. The Negotiated Enterprise Value is $2,525,000,000, 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, and taking into account the possibility of delay between the Confirmation Date and the Effective Date, and the likely increase in the value of the Debtors over time. The Gross Proceeds Available for Distribution on a Chapter 7 liquidation basis is estimated by the Proponents to be in a range from $2,399,000,000 to $2,539,000,000. These figures assume that, during the estimated one-year liquidation period (from 12/31/94 to 12/31/95), the value of the Debtors will increase at the rate set forth in the Proponents' liquidation analysis. The Creditors' Plan, in contrast to the Debtors' Plan, can be consummated by 12/31/94. The fact that the Negotiated Enterprise Value is not dramatically greater than the Gross Proceeds Available for Distribution on a Chapter 7 liquidation basis also demonstrates that the method for liquidating the Debtors selected by the Proponents is proper in that it maximizes the value of the estate by minimizing any and all discounts accompanying a Chapter 7 liquidation. The Debtors' Liquidation Analysis, on the other hand, improperly maximizes discounts in the liquidation. The Debtors have questioned why the Negotiated Enterprise Value is less than the "Total Gross Asset Value" in the Proponents' April 1994 liquidation analysis. Total Gross Asset Value on a Chapter 7 liquidation basis assumes an increase in the value of the Debtors during the liquidation period as described above. The Creditors' Plan provides existing stockholders with an Equity Call Option to purchase their pro rata share of all of the New Common Stock that would otherwise be issued to Holders of Subordinated Note Claims and to the Celotex Settlement Fund Recipient, for Cash on the Effective Date, at an exercise price per share equal to the New Common Stock Value Per Share, which is derived from a valuation of $2,525,000,000, the Negotiated Enterprise Value or, if higher, the going concern enterprise value found by the Court. If existing stockholders really believe that the Negotiated Enterprise Value is too low, they can purchase the New Common Stock at a price directly based on the Negotiated Enterprise Value (or, if higher, the going concern enterprise value of the Debtors found by the Court). While the Proponents continue to believe that the Negotiated Enterprise Value is a reasonable estimate of the going concern enterprise value of the Debtors, and that the Equity Call Option therefore has minimal value, they have provided this call option to existing stockholders to demonstrate clearly their belief in the reasonableness of the Negotiated Enterprise Value, and to offer current stockholders the opportunity to put their words into action by purchasing New Common Stock for Cash at a price based on the Negotiated Enterprise Value. The Proponents believe that the Equity Call Option provides a reasonable safeguard for the existing stockholders against any possible undervaluing of the New Common Stock to be issued to unsecured bondholders under the Creditors' Plan. Exercise of the Equity Call Option will also have the beneficial effect of paying Creditors, in Cash, the value that they would otherwise have received in New Common Stock, thereby giving them immediate liquidity at a previously agreed upon price. The Proponents believe that the Debtors' Liquidation Analysis, if prepared consistent with what the Proponents believe is the proper approach, shows that, if one accepts the Debtors' assumption that no distribution would be made on account of the Veil Piercing Claims in a Chapter 7 liquidation, the Debtors would be solvent after paying the principal and pre-petition interest on Unsecured Claims, and that Holders of Subordinated Note Claims would be entitled by law to post-petition interest. Even if that is not factually the case, however, the Proponents believe that the Creditors' Plan is confirmable. The Debtors' contention to the contrary is based on the premise that the payment of post-petition interest to the Holders of Subordinated Note Claims under the Creditors' Plan is not permissible and that the propriety of the Veil Piercing Settlement Agreement depends on the permissibility of such a payment. The approval of the Veil Piercing Settlement Agreement does not, however, require that the Court determine that Holders of Subordinated Note Claims are legally entitled to post-petition interest on account of their Claims. The Veil Piercing Settlement Agreement can be approved by the Court independently of any such determination, based on the reasonableness of the settlement. Under the Creditors' Plan, post-petition interest on Subordinated Note Claims would be paid (i) only if the enterprise value of the Debtors exceeds $2.525 billion, and (ii) only to the extent that the payment of post-petition interest under the Creditors' Plan would be permitted by law. Thus, the Court's determination of the post-petition interest issue would not affect the validity of the plan provisions relating to the treatment of Subordinated Note Claims. As to trade creditors and other Holders of Unsecured Claims, the Creditors' Plan does provide that they will receive post-petition interest at the rate of 6.5% per annum - - - which is less than the legal rate of interest under Florida law (12%) or New York law (9%). The Proponents believe that this represents a reasonable settlement of the potential claims of trade and other general, unsecured creditors for post-petition interest in light of (i) the possibility that some of the Debtors are solvent on a stand-alone basis even on a Chapter 7 liquidation basis; and (ii) potential LBO-related fraudulent conveyance claims that might be asserted on behalf of trade creditors (including in a hypothetical Chapter 7 liquidation). XI. DEFINITIONS Set forth below is a cross-reference table denoting where in this Disclosure Statement capitalized terms used therein are defined. Annexed to this Disclosure Statement as Exhibit I is the Creditors' Plan. Included in Article I of the Creditors' Plan are definitions of certain terms used therein and herein. In case of any inconsistency in definitions between the Creditors' Plan and the Disclosure Statement, definitions in the Creditors' Plan shall control. Section in Defined Term Disclosure Statement 10 7/8% Indenture Trustee See Creditors' Plan 10 7/8% Subordinated Debenture Claims See Creditors' Plan 10 7/8% Subordinated Debenture Indenture See Creditors' Plan 10 7/8% Subordinated Debentures II.C.4. 13 1/8% Indenture Trustee See Creditors' Plan 13 1/8% Subordinated Note Claims See Creditors' Plan 13 1/8% Subordinated Note Indenture See Creditors' Plan 13 1/8% Subordinated Notes II.C.4. 13 3/4% Indenture Trustee See Creditors' Plan 13 3/4% Subordinated Debenture Claims See Creditors' Plan 13 3/4% Subordinated Debenture Indenture See Creditors' Plan 13 3/4% Subordinated Debentures II.C.4. 17% Indenture Trustee See Creditors' Plan 17% Subordinated Note Claims See Creditors' Plan 17% Subordinated Note Debtors II.C.4. 17% Subordinated Note Guarantors II.C.4. 17% Subordinated Note Indenture See Creditors' Plan 17% Subordinated Note Issuers II.C.4. 17% Subordinated Notes II.C.4. 1987 Fiscal Year VII.B.2.(b) 1988 Fiscal Period VII.B.2.(b) Acceptance Period I.E.9. Accrued Market Discount IV.B.3.(b) Accumulators VI.B. Acuna Lawsuit VII.S.2. Ad Hoc Committee of Pre-LBO Bondholders See Creditors' Plan Adams Lawsuit VII.S.2. Adams II Lawsuit VII.S.2. Additional Revolving Loan Borrower Pledge Agreements II.C.3. Additional Revolving Loan Borrower Pledgor II.C.3. Additional Subsidiaries Pledge Agreements II.C.3. Additional Subsidiary Pledgor II.C.3. Adjusted Revolving Loan Claim II.C.3. Adjusted Working Capital Claim II.C.3. Administrative Claims See Creditors' Plan Affiliate I.E.3. Affiliate Subordinated Bridge Notes VII.A.3. Agreement and Plan of Merger I.D. Alabama Power I.E.8. Allowed Amount See Creditors' Plan Allowed Claim See Creditors' Plan Allowed Indemnity Claims II.B.1.(e) AMT IV.A.3. AMTI IV.A.3. Apache II.C.3. Apache Note II.C.3. Apache Note Proceeds II.C.3 Apollo See Creditors' Plan Appeals Division II.C.2. Applicable Consideration II.C.4. Asset Backed Notes VII.B.2.(a) Asset Backed Notes Collateral VII.B.2.(a) Assets See Creditors' Plan Automatic Stay I.E.7. BAAQMD VII.T.3.(b) Ballot I.A.5. Bank Agents I.A.1. Bank Agents Agreement I.A.4. Bank Agents Plan I.E.11. Bank Setoff Proceeds II.C.3. Bankers Trust VII.D.1. Banks II.B.3. Bar Date See Creditors' Plan BCOA VII.K.1. Beijer Proceeds II.C.3. Benchmark Yield II.E.2.(a) Best Chart of Debtors Best (Miss.) Chart of Debtors Black Warrior Methane Chart of Debtors Black Warrior Transmission Chart of Debtors Bondholder Proponents I.A.1. Bondholders Committee I.A.1. Booker III.B.3. Business Day See Creditors' Plan Cardem Chart of Debtors Castings VII.B.2.(e) Celotex See Creditors' Plan Celotex Chapter 11 Proceeding I.A.2. -- Note 1 Celotex/JWC Released Party See Creditors' Plan Celotex Settlement Fund Recipient See Creditors' Plan CERCLA VII.T.1. Chapter 11 I.D. Chapter 11 Cases I.D. Charter See Creditors' Plan Chemical VII.D.1. Chemical Bank Prime Rate See Creditors' Plan Cherokee/Sanford Brick VII.B.2.(k) CIBC VII.D.3. CIBC Escrow Fund VII.D.3 Claim See Creditors' Plan Claims Resolution Procedure VII.R. Class See Creditors' Plan Class A Common Stock II.B.2. Class B Common Stock II.B.2. Class S-6 Fund II.C.3. Coast to Coast Chart of Debtors Code I.A.1. Common Stock II.C.6. Computer Holdings Chart of Debtors Computer Services Chart of Debtors Concrete VII.S.5. Confirmation II.N.(d) Confirmation Date See Creditors' Plan Confirmation Hearing I.A.5. Confirmation Hearing Notice I.A.5. Confirmation Order See Creditors' Plan Control II.E.3. Convenience Class II.C.4. Convenience Class Claims See Creditors' Plan Court I.A.1. Court of Appeals I.F. Credit Code VII.S.2. Creditor I.A.1. Creditors' Committee I.A.I Creditors' Plan I.A.1. DBL I.D. Debtors See Creditors' Plan Debtors' Disclosure Statement I.E.11. Debtors in Possession I.E.2. Debtors' Plan I.A.1. Declaratory Judgment Proceeding I.A.3. Delgado Lawsuit VII.S.2. Delgado Plaintiffs VII.S.2. Disclosure Statement I.A.1. Disputed Claim See Creditors' Plan Distributors VI.B. District Court I.E.8. Dixie Chart of Debtors Drexel Burnham I.D. Drexel Burnham Group III.B.4.(b) Drexel Burnham Group Stock Purchase Agreement III.B.4.(b) DTPA VII.S.2. DTSC VII.T.3.(b) Effective Date II.S.2. Election Procedure See Creditors' Plan Equity Call Option II. Equity Call Option Election Form I.A.5. EPA VII.T.1. ERISA VII.L. Excess Principal Amount IV.B.2. Exchange Act III.B.2.(b)(5) Exchange Offer II.E.2.(c) Exchange Offers I.D. Excise Tax II.C.2. Exclusivity Period I.E.9. Executory Contract I.E.8. Executory Contract Claim See Creditors' Plan Federal Excise Tax and Reclamation Claims II.C.2. Federal Income Tax Claims See Creditors' Plan Filing Date I.D. Final Order See Creditors' Plan First Tier Subsidiaries I.D. First Tier Subsidiary Pledge Agreements II.C.3. First Tier Subsidiary Pledgor II.C.3. Former Georgia Marble VII.A.3. Former U.S. Pipe VII.B.2.(e) Fraudulent Conveyance Lawsuit I.E.12. FSA II.E.2.(a) FTC VII.S.2. General Unsecured Interest Rate II.C.4. Georgia Marble VII.A.3. Georgia Metals Holdings VII.B.2.(i) Gonzalez VII.S.2. Governmental Unit See Creditors' Plan Grace Street Note Claims II.C.3. Grace Street Notes II.C.3. Guarantors VII.A.3. HAC I.D. Hamer Holdings Chart of Debtors Hamer Properties Chart of Debtors Hillsborough Chart of Debtors Hillsborough Pledge Agreement II.C.3. Holder See Creditors' Plan Home Improvement Chart of Debtors Homes Holdings Chart of Debtors HYDO IV.A.4. IBCBA VII.K.1. IDB of Birmingham II.C.3. Indenture Trustees See Creditors' Plan Indenture Trustees Claims See Creditors' Plan Indentures VII.A.5. Initial Lenders VII.D.3. Initial Revolving Credit Bank Claim Payment II.C.3. Initial Working Capital Bank Claim Payment II.C.3. Injunction Proceeding I.F. Intercompany IRB II.C.5. Intercompany IRB Claims See Creditors' Plan Intercompany IRB Indenture II.C.5. Intercompany IRB Trustee II.C.5. Interest See Creditors' Plan IRC I.E.8. IRS I.E.5. IRS Amended Proof of Claim VII.S.3. ISRA VII.T.3.(a) Issuer and Guarantor Pledge Agreements II.C.3. Issuers VII.A.3. J-II I.D. Jasper VII.B.2.(c) Jim Walter Corporation I.D. Jim Walter Homes Chart of Debtors Jim Walter Papers VII.B.2.(b) Jim Walter Resources Chart of Debtors JW Aluminum Chart of Debtors JW Insurance Chart of Debtors J.W. Railroad Chart of Debtors JW Resources Chart of Debtors JW Walter Chart of Debtors JW Window Components VII.E.11. JWC I.D. JWI Holdings Chart of Debtors Kaneb VII.E.7.(b) KKR I.D. KKR Associates II.C.6. KKR Investors III.B.4.(a) -- Note 1 Land Holdings Chart of Debtors LaSalle II.B.3. LBO-Related Issues See Creditors' Plan Letter Agreement III.B.4.(b) Lien See Creditors' Plan Liquidation Fund IX.C. Loan Note VII.A.3. Lone Star Steel Toxic Case VII.R.(f) Management Common Stock Subscription Agreements III.B.4.(b) Management Investors III.B.4.(b) Marble Liquidation Plan VII.B.2.(i) Merger I.D. Merrill Lynch I.D. MHTCo. VII.D.1. Mid-State Holdings Chart of Debtors Mid-State Homes Chart of Debtors Mid-State Term Loan II.C.3. Mid-State Term Loan Commitment II.C.3. Mid-State Trust II II.E.2.(b) Mid-State Trust II Residual Bonds II.E.2.(b) Mid-State Trust III VII.D.6. Mid-State Trust IV II.E.2.(a) Mid-State Trust IV Secured Notes II.E.2.(a) Midwest VII.S.1. Mine No. 5 VII.E.7.(a) Mirror Liquidation Order I.E.8. Mirror Liquidation Plan I.E.8. Moody's II.E.2.(a) Mortgage-Backed Notes VII.B.2.(a) Mortgage-Backed Notes Collateral VII.B.2.(a) MSHA VII.E.7.(a) NationsBank II.C.3. Negotiated Enterprise Value II.B.2.(e) New Board/New Boards III.B.1. New Common Stock II.E.3. New Common Stock Registration Rights Agreement II.E.3. New Common Stock Value II.B.2.(e) New Common Stock Value Per Share II.B.2.(e) New Debt IV.A.1. New Durham Employment Agreement III.B.2.(b)(5) New Option Plan III.B.2.(b)(4) New Note Indenture II.C.3. New Senior Notes See Creditors' Plan NJDEPE VII.T.3(a) NOLs IV.A.1. Non-Debtor Affiliates III.B.1. Note Purchase Agreement VII.A.3. NUBIL IV.A.2. Official Committees I.E.4. OID IV.A.1. Oil Holdings VII.B.2.(1) Old Common Stock II.B.2.(e) Old Option Agreements III.B.2.(b)(4) Old Option Plan III.B.2.(b)(4) Old Options III.B.2.(b)(4) Old Walter Industries I.D. Old Walter Industries IRB Claims See Creditors' Plan Old Walter Industries IRB Indentures II.C.4. Old Walter Industries IRBs II.C.4. Old Walter Industries Pledge Agreement II.C.3. Old Walter Industries Revolving Credit Guarantee II.C.3. Old Walter Industries Working Capital Guarantee II.C.3. Operating Income III.B.2.(b)(1)--Note 1 Original Durham Employment Agreement III.B.2.(b)(5) Original Jim Walter I.D. Original Jim Walter Plan III.B.2.(b)(2) Original Creditors' Plan I.A.4. OSM II.C.2. Other Unsecured Claim Election See Creditors' Plan Other Unsecured Claims See Creditors' Plan PRP VII.T.1 Papers Holdings VII.B.2.(b) Pension Plan III.B.2.(b)(3) Permitted Class A Holders II.E.3. Person See Creditors' Plan Pipe Liquidation Plan VII.B.2.(e) Pipe Realty Chart of Debtors Post-Filing Date Intercompany Notes Payable Claims See Creditors' Plan Post-Filing Date Interest Claims II.B.3. Post-LBO Subordinated Note Guarantors II.C.4. Post-LBO Subordinated Note Issuers II.C.4. Post-Stub Period Interest II.C.3. Pre-Filing Date Intercompany Notes Payable Claims See Creditors' Plan Pre-Filing Date Unsecured Allowed Amount See Creditors' Plan Pre-LBO Bondholders Settlement Agreement I.A.4. Pre-LBO Subcommittee I.E.4. Pre-Petition Lenders VII.D.3. Pre-Petition Reimbursement Agreement VII.D.3. Proceeds Account VII.D.3. Pro Rata See Creditors' Plan Proponents I.A.1. proportionality test IV.A.1. Provident Life & Accident Insurance Company Claims II.C.3. Public Offering III.B.4.(b) Qualified Securities II.B.2.(a) Qualified Securities Registration Rights Agreement II.E.2. Qualified Securities Initial Shelf Registration II.E.2.(c) Railroad Holdings Chart of Debtors Rating Service II.B.2.(a)(1) Reclamation Act II.C.2. Reclamation Fees II.C.2. Registrable Qualified Security II.E.2.(c) Registrable Securities Initial Shelf Registration II.E.3. Registration Rights Agreement III.B.4.(b) Rejecting Class I.A.7. Released Parties II.K.1. Reorganization Documents See Creditors' Plan Reorganization Proceedings I.D. Reorganization Securities VI.A. Resources Holdings Chart of Debtors Resources Liquidation Plan VII.B.2.(j) Restated Alabama Contract VII.E.7.(a) Revolving Credit Agents See Creditors' Plan Revolving Credit Agents Claims See Creditors' Plan Revolving Credit Agreement II.C.3. Revolving Credit Bank Claim Stub Period Amount II.C.3. Revolving Credit Bank Claims See Creditors' Plan Revolving Credit Banks II.C.3. Revolving Loan II.C.3. Revolving Loan Borrower Pledge Agreements II.C.3. Revolving Loan Borrower Pledgor II.C.3. Revolving Loan Borrowers II.C.3. Revolving Loan Commitment II.C.3. Revolving Loan Debtors II.C.3. Revolving Loan Guarantors II.C.3. RICO VII.S.1. S&P II.E.2.(a) SEC Second page after cover page Schedules See Creditors' Plan Secured Claim See Creditors' Plan Secured Equipment Purchase Claims II.C.3. Securities VII.A.3. Securities Act III.B.4.(b) Senior Bridge Note VII.A.3. Senior Claim Differential II.B.2.(b) Senior Claims II.B.2.(b) Senior Note Guarantors VII.A.3. Senior Note Issuers VII.A.3. Senior Note Plan I.E.11. Senior Subordinated Indenture Trustee See Creditors' Plan Senior Subordinated Note Claims See Creditors' Plan Senior Subordinated Note Debtors II.C.4. Senior Subordinated Note Guarantors II.C.4. Senior Subordinated Note Indenture See Creditors' Plan Senior Subordinated Note Issuers II.C.4. Senior Subordinated Notes II.C.4. Series A Senior Notes VII.A.3. Series B & C Senior Note Claims II.C.3. Series B & C Senior Note Claim Election I.A.6. Series B & C Senior Note Claim Election Form I.A.6. Series B & C Senior Note Debtors II.C.3. Series B & C Senior Note Guarantors II.C.3. Series B & C Senior Note Indenture II.C.3. Series B & C Senior Note Issuers II.C.3. Senior B & C Senior Note Trustee II.C.3. Series B & C Senior Notes II.C.3. Settling Equityholder II.B.1.A. Shared Collateral II.C.3. Shore Oil VII.B.2.(1) Sloss Chart of Debtors Sloss IRB II.C.3. Sloss IRB Claim II.C.3. Sloss IRB Indenture II.C.3. Sloss IRB Trustee II.C.3. SMUs VII.T.2. SNG VII.E.7.(b) Sonat VII.E.7.(b) Southern Precision Chart of Debtors Spread II.E.2.(a) State and Local Tax Claims II.C.2. Stock-for-Debt Exception IV.A.1. Stub Period II.B.3 Stub Period Interest II.C.3. Subordinated Note Claim Election I.A.5. Subordinated Note Claim Election Form I.A.5. Subordinated Note Claims See Creditors' Plan Subordinated Note Guarantors VII.A.3. Subordinated Note Issuers VII.A.3. Subordinated Notes See Creditors' Plan Subsidiary Common Stock II.C.6. Supplemental Pension Plan III.B.2.(b)(1)--Note 2 Supplemental Profit Sharing Plan III.B.2.(b)(1)--Note 2 Syndicators VI.B. Target III.B.2.(b)(1)--Note 1 Taurus VII.C.2. Tax Complaint VII.S.3. Tender Offer I.D. Tender Offer Loans VII.A.3. The Celotex Corporation See Creditors' Plan TMP II.E.2.(a) Transferred Assets VII.B.2.(e) Transferred Jim Walter Resources Subsidiaries VII.B.2.(j) Trust II Contracts II.E.2.(b) Trust IV Contracts II.E.2.(a) UCP Holdings VII.B.2.(h) UMWA VII.E.7.(a) United Land Chart of Debtors Unsecured Claim See Creditors' Plan U.S. Concrete Pipe VII.B.2.(e) U.S. Pipe Chart of Debtors U.S. Pipe Holdings VII.A.3. U.S. Trustee I.E.4. Veil Piercing Claims Amount II.B.2.(b) Veil Piercing-Related Issues II.C.4. Veil Piercing Proceedings See Creditors' Plan Veil Piercing Settlement See Creditors' Plan Veil Piercing Settlement Agreement I.A.1. Vestal Chart of Debtors Voting Classes I.A.5. Voting Deadline I.A.6. Voting Record Date I.A.6. Walter Industries Chart of Debtors Walter Industries Group IV.A. Walter Industries Plan III.B.2.(b)(2) Walter Land Chart of Debtors Wedlo VII.B.2.(f) Wedlo Holdings VII.B.2.(f) WI Holdings VII.B.2.(g) Window Components Chart of Debtors Window Components (Wisc.) Chart of Debtors Working Capital Agents See Creditors' Plan Working Capital Agents Claims See Creditors' Plan Working Capital Agreement II.C.3. Working Capital Bank Claim Stub Period Amount II.C.3. Working Capital Bank Claims See Creditors' Plan Working Capital Banks II.C.3. Working Capital Borrower Pledge Agreements II.C.3. Working Capital Borrower Pledgor II.C.3. Working Capital Borrowers II.C.3. Working Capital Commitment II.C.3. Working Capital Debtors II.C.3. Working Capital Guarantors II.C.3. Working Capital Loans II.C.3. XII. CHART OF DEBTORS
Definition Used in Debtors Creditors' Plan and Case No. Case Name Current Corporate Structure Disclosure Statement (N.A.) Walter Industries, Inc. Surviving corporation of merger between Hillsborough and Old Walter Industries Walter Industries 89-9715-8P1 Hillsborough Holdings Corporation Hillsborough Division of Walter Industries, Inc. (formerly named Hillsborough Holdings Corporation) Hillsborough 89-9745-8P1 Walter Industries, Inc. Walter Industries Division of Walter Industries, Inc. (formerly named Hillsborough Holdings Corporation) Old Walter Industries 89-9740-8P1 Best Insurors, Inc. Best Insurors, Inc. Best 89-9737-8P1 Best Insurors of Mississippi, Inc. Best Insurors of Mississippi, Inc. Best (Miss.) 89-9731-8P1 Jim Walter Insurance Services, Inc. Jim Walter Insurance Services, Inc. JW Insurance 89-9727-8P1 Coast to Coast Advertising, Inc. Coast to Coast Advertising, Inc. Coast to Coast 89-9724-8P1 Computer Holdings Corporation Computer Holdings Corporation Computer Holdings 89-9723-8P1 Jim Walter Computer Services, Inc. Jim Walter Computer Services, Inc. Computer Services 89-9741-8P1 Dixie Building Supplies, Inc. Dixie Building Supplies, Inc. Dixie 89-9735-8P1 Hamer Holdings Corporation Hamer Holdings Corporation Hamer Holdings 89-9739-8P1 Hamer Properties, Inc. Hamer Properties, Inc. Hamer Properties 89-9742-8P1 Homes Holdings Corporation Homes Holdings Corporation Homes Holdings 89-9746-8P1 Jim Walter Homes, Inc. Jim Walter Homes, Inc. Jim Walter Homes 89-9722-8P1 Walter Home Improvement, Inc. Walter Home Improvement, Inc. Home Improvement 89-9718-8P1 JW Aluminum Company JW Aluminum Company JW Aluminum 90-11997-8P1 JW Resources, Inc. JW Resources Division of Jim Walter Resources, Inc. (formerly named JW Resources, Inc.) JW Resources 89-9719-8P1 JW Resources Holdings Corporation Resources Holdings Division of Jim Walter Resources, Inc. (formerly named JW Resources, Inc.) Resources Holdings 89-9738-8P1 Jim Walter Resources, Inc. Resources Division of Jim Walter Resources, Inc. (formerly named JW Resources, Inc.) Jim Walter Resources 89-9734-8P1 U.S. Pipe Realty, Inc. Pipe Realty Division of United Land Corporation (formerly named U.S. Pipe Realty, Inc.) Pipe Realty 89-9730-8P1 United Land Corporation United Land Division of United Land United Land Corporation (formerly named U.S. Pipe Realty, Inc.) AND United Land Division of Jim Walter Resources, Inc. (formerly named JW Resources, Inc.) 89-9732-8P1 JW Window Components, Inc. JW Window Components, Inc. Window Components 89-9716-8P1 Jim Walter Window Components, Inc. Jim Walter Window Components, Inc. Window Components (Wisc.) 89-9721-8P1 J.W.I. Holdings Corporation J.W.I. Holdings Corporation JWI Holdings 89-9717-8P1 J.W. Walter, Inc. J.W. Walter, Inc. JW Walter 89-9720-8P1 Land Holdings Corporation Land Holdings Corporation Land Holdings 89-9736-8P1 Walter Land Company Walter Land Company Walter Land 89-9726-8P1 Mid-State Holdings Corporation Mid-State Holdings Corporation Mid-State Holdings 89-9725-8P1 Mid-State Homes, Inc. Mid-State Homes, Inc. Mid-State Homes 89-9733-8P1 Railroad Holdings Corporation Railroad Holdings Corporation Railroad Holdings 89-9743-8P1 Sloss Industries Corporation Sloss Industries Corporation Sloss 89-9729-8P1 Southern Precision Corporation Southern Precision Corporation Southern Precision 89-9744-8P1 United States Pipe and Foundry Company United States Pipe and Foundry Company U.S. Pipe 89-9728-8P1 Vestal Manufacturing Company Vestal Manufacturing Company Vestal Non-Debtor Affiliates Not applicable Cardem Insurance, Ltd. Cardem Not applicable Jefferson Warrior Railroad Company, Inc. J.W. Railroad Not applicable Mid-State Trust II Mid-State Trust II Not applicable Mid-State Trust III Mid-State Trust III Not applicable Black Warrior Methane Corp. (50%owned) Black Warrior Methane Not applicable Black Warrior Transmission Corp. (50% owned) Black Warrior Transmission
XIII. CONCLUSION The Proponents recommend that all Holders of impaired Claims and Interests vote to accept the Creditors' Plan. Dated: August 1, 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 D. Drain Robert D. Drain, Esq. 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/ Ellen R. Werther Ellen R. Werther, Esq. 65 East 55th Street, 33rd Floor New York, New York 10022 (212) 872-1010 For Apollo MARCUS MONTGOMERY WOLFSON P.C. By: /s/ Sara L. Chenetz Peter D. Wolfson, Esq. Sara L. Chenetz, Esq. 453 Wall Street New York, New York 10005 (212) 858-5200 For Ad Hoc Committee of Pre-LBO Bondholders (Signed as to form only) EX-99 2 Exhibit II OFFICIAL COMMITTEES Bondholders Committee Members The Acacia Mutual Life Insurance Company 51 Louisiana Avenue, N.W. Washington, D.C. 20001 Apollo Investment Fund, L.P. Credit Lyonnais Securities 1301 Avenue of the Americas, 38th Floor New York, NY 10019 General Electric Investment Corporation P.O. Box 7900 3003 Summer Street Stamford, CT 06904-7900 Lehman Brothers, Inc. American Express Tower World Financial Center 9th Floor New York, NY 10285 Ex-Officio Members The Bank of New York 101 Barclay, 21st Floor New York, NY 10286 Barnett Banks Trust Company, N.A. 9000 Southside Boulevard Building 100 P.O. Box 40200 Jacksonville, FL 32203-0200 Mellon Bank Corporate Trust Division One Mellon Bank Center Pittsburgh, PA 15258-0001 IBJ Schroder Bank & Trust Company One State Street Plaza New York, NY 10004 Official Committee of Unsecured Creditors Philipp Brothers, Inc. Specification Rubber 7 World Trade Center Products, Inc. 33rd Floor c/o Burr & Foreman New York, NY 10048 3000 South Trust Tower Birmingham, AL 35202 Drummond Coal Sales, Inc. United Steelworkers of 530 Beacon Parkway West America Birmingham, AL 35202 5 Gateway Center Pittsburgh, PA 15222 Lowe's Home Centers, Inc. CSX Corporation Highway 268 East 6735 South Point Drive, South North Wilkesboro, NC 28656 Jacksonville, FL 32216 Gullick Dobson, Inc. Norandal USA, Inc. Route 609 Hillman Highway Two Brentwood Commons Abingdon, VA 24210 750 Old Hickory Blvd. Suite 102 Brentwood, TN 37027 Anderson Ma Vor, Inc. Columbia National Group, Inc. 795 Old Route 119 North 6600 Grant Avenue Indiana, PA 15701 Cleveland, OH 44105 EXHIBIT III UNITED STATES BANKRUPTCY COURT MITDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re In Proceedings For a Reorganization Under Chapter 11 Case Nos. 89-9715-8P1 HILLSBOROUGH HOLDINGS Through 89-9746-8P1 CORPORATION, et al., Inclusive. per attached Exhibit A Debtors ORDER AUTHORIZING DEBTORS TO COMPLETE THEIR MIRROR LIQUIDATION PLAN Upon the motion dated July 5, 1990 (the "Motion") of Hillsborough Holdings Corporation, debtor and debtor in possission, for and on behalf of itself and the other debtors and debtors in possession herein (collectively, the "Debtors"), for an order authorizing certain of the Debtors to complete their previously adopted plans of complete liquidation pursuant to section 332 of the Internal Revenue Code of 1986, as amended; and hearings on the motion having been held on September 5, 1990 and October 9, 1990; and upon the record made at such hearings; and as it being the intent of the Court in entering this Order to preserve the rights and interest of the Interested parties, as said term is defined below, which may be affected by the completion of the Mirror Liquidation Plan and that the provisions of this Order be construed in a manner consistent with such intent; and as it being the further intent of the Court that nothing contained in this Order and no action taken pursuant hereto shall be deemed to eliminate or reduce any otherwise valid guaranty, intercompany obligation, equity interest, lien, joint and several claim or several claim; and after due deliberation and sufficient casue appearing therefor; IT IS HEREBY ORDERED THAT: 1. The Motion be, and it hereby is, granted. 2. The objection to the Motion filed by Manufacturers Hanover Trust Company and Bankers Trust Company, as agents for the bansk which are parties to the Credit Agreement dated as of September 10, 1987, as amended, the Working Capital Credit Agreement dated as of December 29, 1987, as amended, and/or the Post-Petition Replacement Letter of Credit Agreement dated as of May 18, 1990, as amended, is deemed settled by virtue of the provisions of this Order. 3. Capitalized terms used but not defined in this Order which are defined in the Motion shall have the meaning given to them in the Motion, and reference should be made thereto. For purposes of this Order, an "Interested Party" of any Debtor shall mean any entity which, as of the date of this Order, is a creditor or has an interest in the stock, property or obligations (including, without limitation, intercompany notes) of such Debtor. 4. Subject to the provisions of this Order, the Debtors be, and they hereby are, authorized an empowered to execute such documents and agreements and to do such things as may be necessary to effectuate, implement and consummate the Mirror Liquidation Plan. 5. Resources Holdings shall place and hold in a separate division (the "Resources Holdings Land Division") the assets, including, but not limited to, the estate and mineral interests and operations used by JWR in its mining and de- gasification businesses, of United Land to be transferred to Resources Holdings (collectively, the "Resources Holdings Land Division Assets") and the contingent and non-contingent liabilities (and only such liabilities) associated with such assets to be assumed by Resources Holdings (collectively, the "Resources Holdings Land Division Liabilities"). 6. Resources Holdings shall maintain separate books and records on a basis consistent with those accounting and tax procedures in existence as of the date hereof ("Books and Records") for the Resources Holdings Land Division and shall account for such division's assets, liabilites, business operations and financial condition in an manner sufficient to enable the Court and each Interested Party of United Land to determine the respective rights and interests of each such Interested Party with respect to distributions under one or more liquidation proceedings in accordance with chapter 7 of the Code (a "Liquidation") or under a plan or plans of reorgainization (or any other distributions or matters in these chapter 11 cases) without regard to any actions that may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 7. Resources HOldings shall maintain separate Books and Records for the present three (3) divisions of JWR (mining, de- gasification and administration) (collectively, the "JWR Division"), which divisions represent all of the assets, contingent and non-contingent liabilities and operations of JWR to be transferred to Resources Holdings by WII, and shall account for such divisions' assets, liabilities, business operations and financial condition in a manner sufficient to enable the Court and each Interested Party of JWR to determine the respective rights and interests of each such Interested Party with respect to distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these chapter 11 cases) without regard to any actions that may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 8. U.S. Pipe Realty, Inc. ("Pipe Realty") shall place and hold in a separate division (the "Pipe Realty Land Division") the assets, including, but not limited to, the real estate and mineral interests and operations not used by JWR in its mining and de-gasification businesses, of United Land to be transferred to Pipe Realty (collectively, the "Pipe Realty Land Division Assets") and the contingent and non-contingent liabilities (and only such liabilites) assiciated with such assets to be assumed by Pipe Realty (collectively, the "Pipe Realty Land Division Liabilities"). 9. Pipe Realty shall maintain separate Books and Records for the Pipe Realty Land Division and shall account for such division's assets, liabilities, business operations and financial condition in a manner sufficient to enable the Court and each Interested Party of United Land to determine the respective rights and interests of each such Interested Party with respect to distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these chapter 11 cases) without regard to any actions that may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 10. HHC shall place and hold in a separate division (the "WII Division") the assets of WII to be transferred to HHC, including but not limited to, the capital stock of Coast to Coast Advertising, Inc., Dixie Building Supplies, inc., Best Insurers, Inc. and Cardem Insurance Co. (collectively, the "WII Division Assets") and the contingent and non-contingent liabilities (and only such liabilities) of WII to be assumed by HHC (collectively, the "WII Division Liabilities"). 11. HHC shall maintain separate Books and Records for the WII Division and shall account for such division's assets, liabilities, business operations and financial condition in a manner sufficient to permit the Court and each Interested party of WII to determine the respective rights and interests of each such Interested party with respect to distributions undera Liquidation or a plan or plans of reorganization (or any other distrubutions or matters in these chapter 11 cases) without regard to any actions that may be taken pursuant to this Order to complete the Mirror Liquidation Plan. Following the transfer of the WII Division Assets and the WII Division Liabilites to HHC, HHC shall maintain the grid accoutns and general accounts currently extant between WII and each of the Debtors without regard to any actions that may be taken pursuant to Order to complete the Mirror Liquidation Plan. 12. For purposes of determining the rights and interests of the Interested Parties of JWR with respect to distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these chapter 11 cases), none of (a) the Resources Holdings Land Division Assets, (b) the Resources Holdings Land Division Liabilites, (c) the assets and liabilites of WII (other than the assets and liabilities of JWR which are acquired by WII by virtur of the merger of JWR into WII) or (d) any assets and liabilities of Resources Holdings existing prior to the transfer of the JWR Division assets and the JWR Division liabilities to Resources Holdings, shall be included in the JWR Division. 13. For purposes of determining the rights and interests of the Interested Parties of United Land with respect to distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these chapter 11 cases), none of (a) the JWR Division assets, (b) the JWR Division liabilities, (c) the assets and liabilities of WII (other than the land, mineral rights and associated liabilities of United Land used by JWR in its mining and de-gasification businesses which are acquired by WII by virtue of the merger of United Land into WII) or (d) any assets and liabilities of Resources Holdings existing prior to the transfer of the Resources Holdings Land Division Assets and the Resources Holdings Land Division Liabilities to Resources Holdings shall be included in the Resources Holdings Land Division. 14. For purposes of determining the rights and interests of the Interested Parties of WII with respect to distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these cpater 11 cases), none of (a) the assets and liabilities of HHC (other than the assets and liabilities of WII which are acquired by HHC by virtue of the merger of WWI into HHC), (b) the assets and liabilities of United Land or (c) the assets and liabilities of JWR shall be included in the WII Division. 15. For purposes of determining the rights and interests of the Interested Parties of Pipe Realty with respect to distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these chapter 11 cases), none of (a) the Pipe Realty Land Division Assets, (b) the Pipe Realty Land Division Liabilities or (c) the assets and liabilities of WII shall be included in the assets and liabilities of Pipe Realty. 16. For purposes of determining the rights and interests of the Interested Parties of United Land with respect to distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these chapter 11 cases), none of (a) the assets and liabilities of WII (other than the land, mineral rights and associated liabilities of United Land not used by JWR in its mining and de-gasification businesses which are acquired by WII by virture of the merger of United Land into WII) or (b) any assets and liabilities of Pipe Realty existing prior to the transfer of the Pipe Realty Land Division Assets and the Pipe Realty Land Division Liabilities Pipe Realty shall be included in the Pipe Realty Land Division. 17. For purposes of determining the rights and interests of the Interested Parties of HHC with respect to distribution under a Liquidation or aplan or plans of reorganization (or any other distributions or matters in these chapter 11 cases), none of the assets and liabilities of WII (including those acquired by WII by virtue of the mergers of United Land and JWR into WII) shall be included in the assets and liabilities of HHC. 18. All Interested Parties of United Land shall continue to hold claims and liens, if any, against the Resources Holdings Land Division and the Pipe Realty Land Division in the same manner and having the same rights, validity and priority as said claims and liens, if any, had against United Land (or the stock, property or obligations thereof) without regard to any actions which may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 19. All Interested Parties of JWR shall continue to hold claims and liens, if any, against the JWR Division in the same manner and having the same rights, validity and priority as said claims and liens, if any, against the JWR Division (or the stock, property or obligations thereof) without regard to any actions which may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 20. All Interested Parties of Pipe Realty shall continue to hold claims and liens, if any, against Pipe Realty in the same manner and having the same rights, validity and priority as said claims and liens, if any, had against Pipe Realty (or the stock, property or obligations thereof) without regard to any actions which may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 21. All Interested Parties of WII shall continue to hold claims and liens, if any, against the WII Division in the same manner and having the same rights, validity and priority as said claims and liens, if any, had against WII (or the stock, property or obligations thereof) without regard to any actions which may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 22. All Interested parties of HHC shall continue to hold claims and liens, if any, against HHC in the same manner and having the same rights, validity and priority as said claims and liens, if any, had against HHC (or the stock, property or obligatiosn thereof) without regard to any actions which may be taken pursuant to this Order to complete the Mirror Liquidation Plan. 23. Any entity which holds, as of the date of this Order, a lien against the stock of Jim Walter Homes, Inc. shall be deemed to continue to hold such lien (with no change in the validity or priority thereof or the rights related thereto) notwithstanding any transfer of the ownership of such stock from WII to Homes Holdings Corporation pursuant to the Mirror Liquidation Plan. 24. Any entity which holds, as of the date of this Order, a lien against the stock of Mid-State Homes, Inc. shall be deemed to continue to hold such lien (with no change in the validity or priority thereof or the rights related thereto) notwithstanding any transfer of the ownership of such stock from WII to Mid-State Holdings Corporation pursuant to the Mirror Liquidation Plan. 25. The rights, liens, if any, claims and priority of all Interested Parties of the Debtors, including, but not limited to, HHC WII, JWR, United Land, Jim Walter Homes, Inc., Mid-State Homes, Inc. and Pipe Realty shall with respect to the determination of distributions under a Liquidation or a plan or plans of reorganization (or any other distributions or matters in these chapter 11 cases), be determined without regard to any actions which may be taken pursuant to this Order to complete the Mirror Liquidation Plan. Without limitation of the foregoing, in the case of a Debtor which ceases to be a separate corporation as a result of a merger effected pursuant to this Order, the value of a claim against such Debtor or of a Lien against the stock of such Debtor or an intercompany note between the Debotr and an entity with which it merged (and the rights of the holder of such claim or lien) shall be determined (a) in the case of such a claim, as if such claim had survived in the form of a cliam (in addition to any other claim which may be held by such holder) against the division or divisions into which the assets and liabilities of such Debtor were ultimately transferred, (b) in the case of such a lien against such an intercompany note, as if such lien had survived against a claim of like kind and amount against the obligor under such note and (c) in the case of such a lien against such stock, as if such lien had survived against the equity value of such division of divisions. 26. The rights and claims, if any, of those persons who are either members of the class of asbestos victims asserted in the case of Larned v. Kohlberg Kravis Roberts & Co., No. B-133554 (District Court for Jefferson County, Texas, 60th Judicial District), and/or are defendants in the declaratory judgment action brought by the Debtors in these chapter 11 cases (Bankruptcy Adversary Proceeding No. 90-0003) shall not be adversely affected by actions which may be taken pursuant to this order to compelte the mirror Liquidation Plan. 27. The Clerk of this Court shall continue to maintain a separate case file and a seaprate claims register for each of the Debtors without regard to any actions which may be taken pursuant to this Order to Complete the Mirror Liquidation Plan. 28. The actions which may be taken pursuant to this Order to compelte the Mirror Liquidation Plan shall not be deemed to substantively consolicate the pending chapter 11 cases of the Debtors. Dated: Tampa, Florida November 5, 1990 ALEXANDER L. PASKAY Chief United States Bankruptcy Judge COPIES TO: STICHTER, RIEDEL, BLAIN & PROSSER, P.A. 100 East Madison Suite 300 Tampa, Florida 33602 Attn: Don M. Stichter, Esq. Counsel for the Debtors KAYE, SCHOLER, FIERMAN, HAYS & HANDLER 425 Park Avenue New York, New York 10022 Attn: Andrew A. Kress, Esq. Counsel for the Debtors HILLSBOROUGH HOLDINGS CORPORATION 1500 North Dale Mabry Highway Tampa, Florida 33607 Attn: John F. Turbiville, Esq. Stroock & Stroock & Lavan 7 Hanover Square New York, New York 10004 Attn: Daniel Golden, Esq. Counsel for Bondholders Committee JONES DAY REAVIS & POGUE 599 Lexington Avenue New York, New York 10022 Attn: Laurence Solarsh, Esq. Counsel for Unsecured Creditors Committee United States Trustee EXHIBIT "A" UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re: Chapter 11 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 COMAPNY, Case No. 89-9718-8P1 JW RESOURCES HOLDINGS CORPORATION, Case No. 89-9718-8P1 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., Case No. 89-9745-8P1 WALTER LAND COMPANY, Case No. 89-9736-8P1 Debtors.
EXHIBIT IV Summary of Treatment and Classes ($000's) Administrative and Priority CLASS A-1 CLASS P-1 CLASS P-2 CLASS P-3 Claims Summary Administrative Federal Income Federal Excise State and Local TREATMENT OF ALLOWED CLAIMS Claims Tax Claims Tax and Reclamation Tax Claims UNDER PLAN Payment of cash in Payment of Allowed Payment of cash in Payment of cash in an amount equal to the Amounts in equal an amount equal to the an amount equal to the Allowed Amount of the quarterly install- Allowed Amount of the Allowed Amount of the claim without interest. ments over a 6 year claim without interest. claim without interest. period from the date of the Assessment by the IRS of such Claim, with interest on unpaid amounts from the later of the Effective Date or the date of Assessment equal to the Prime Lending Rate. ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $32,000 $14,000-$40,000 $756 $8,384 Exact ENTITY: Class Amounts 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-31 0 Jim Warrior Railroad Jim Walter Homes Class P-3K 214 Jim Walter Resources 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 Sloss IRB Claim Bank Claims Bank Claims Note Claims TREATMENT OF ALLOWED CLAIMS Payment of Allowed Payment of Allowed Payments of Allowed Payment of Allowed UNDER PLAN Amounts in full in cash Amounts in full in Amounts in full Amounts in full except for $28,221 to cash less any amounts be paid in Class B applied to the Debtors Common Stock. to repay any such claim subsequent to the Stub Period and prior to the Effective Date except for $9,279 to be paid in Class B Common Stock. ESTIMATE OF ALLOWED AMOUNT $382,248 $130,622 $5 $715 AS OF DECEMBER 31, 1994 (a) (b) ENTITY: Class Status Class Status Class Class Best Class S-1B Borrower Best (Miss.) 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 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-3EE 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 Note: (a) Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $152.6 million. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would total $354,027. (b) Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $51.9 million. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would total $121,343.
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 Equipment Series B & C Provident Life and Revolving Credit Working Capital Purchases Senior Note Claims Accident Insurance Agents Claim Agents Claim TREATMENT OF ALLOWED Payment of Allowed Payment of Allowed Payment of Allowed Payment of Allowed Payment of CLAIMS UNDER THE PLAN Amounts in full in Amounts in cash in an Amounts in cash and Amounts in full in Allowed Amounts cash. amount equal to such balance of Allowed cash. in full in cash. Holder's Pro Rata Share Claims reinstated. 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 Series B & C Note Claim and the amount of the cash received except for $37,500 to be paid in Class B Common Stock. ESTIMATE OF ALLOWED AMOUNT AS OF DECEMBER 31, 1994 $48 $359,729-$368,474 $7,494 (b) (b) (a) Exact ENTITY: Class Amounts Class Status Class Class Class Best Class S-8B Class S-9B 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-61 Guarantor Class S-8I Class S-9I Jefferson Warrior Railroad Jim Walter Homes Class S-6K Issuer Class S-8K 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-8GG JW Walter Class S-8R JW Window Components Inc. Class S-5S 0 Class S-8S 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-8BB 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-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 Note: (a) Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $165.4-$174.1 million. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would total $322,229-$330,974. (b) 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 Payment of Allowed Payment of Pre-Filing Payment of 75% of Pre-Filing Date CLAIMS UNDER PLAN Amounts in cash and balance Date Unsecured Allowed Unsecured Allowed Amounts on or of Allowed Claims reinstated. Amounts plus Post-Filing Date promptly after the Effective Date, interest from the Filing Date payment within six months there- to the Effective Date at the after of the balance of the Pre- General Unsecured Interest Filing Date Unsecured Allowed Rate in full in cash. 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 $8,792 $1,704 $93,775 AMOUNT AS OF DECEMBER (a) 31, 1994 Exact Exact ENTITY: Class Class Amounts Class Amounts 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-3F 913 Hamer Holdings Class U-3G 0 Hamer Properties Class U-3H 0 Hillsborough Class U-3A 2,550 Home Improvement Class U-2DD 9 Class U-3DD 32 Homes Holdings Class U-31 0 Jefferson Warrior Railroad 0 Jim Walter Homes Class U-2K 280 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-3T 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 U-3W 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 Note: (a) 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) Secured Claims Summary Class U-4 Class U-5 Class U-6 Class U-7 Senior Submordinated 17% Subordinated Pre-LBO Debenture Veil Piercing Reset Notes Notes Claims Proceedings Claims TREATMENT OF ALLOWED CLAIMS Payment of Allowed Payments of Allowed Payments of Allowed Payment of Allowed UNDER PLAN Amount in full in Amount in full in Amount in full in Amounts in full combination of combination of combination of in a combination of Qualified Securities Qualified Securities Qualified Securities Qualified Secur- and Class A Common and Class A Common and Class B Common ities and Class B Stock. Stock. Stock. Common Stock to the Veil Piercing Claims Trust on behalf of Holders of Class U-7 Claims. ESTIMATE OF ALLOWED AMOUNT $479,261 $379,254 $239,472 $450,000 plus the AS OF DECEMBER 31, 1994 Senior Claim Differ- ential, if any (a) ENTITY: Class Status Class Status Class Status 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-4l Guarantor Class U-5l 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-5EE 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-5Z Issuer Vestal Manufacturing Co. Walter Industries/Other Walter Land Note: This represents the aggregate of Allowed Amounts against all Debtors. If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would equal $525,000.
Summary of Treatment and Classes ($000's) Intercompany Claims Summary CLASS I-1 CLASS I-2 CLASS I-3 Intercompany Pre-Filing Intercompany Post Filing Date Inter- IRB Claims Notes Payable Claims company Notes Payable Claims TREATMENT OF ALLOWED Payment of Cash in an Class I-2 Claims will be Class I-3 Claims will be CLAIMS UNDER PLAN amount equal to the Allowed reinstated on the books reinstated on the books and Amount of the claim without and records of the respective records of the respective Debtors. Pre-Filing Date Inter- Debtors. Pre-Filing Date Inter- company Notes Payable may be company Notes Payable may be paid after the Effective Date paid after the Effective Date in the ordinary course of in the ordinary course of business. business. ESTIMATE OF ALLOWED $7,350 $1,248,631 $2,006,003 AMOUNT AS OF DECEMBER 31, 1994 Exact Exact ENTITY: Class Amounts Class Amounts 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 Properties 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-21 6 Jefferson Warrior Railroad Jim Walter Homes Class I-2K 194,401 Class I-3K 391,971 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 JW Insurance JW Resources JW Walter Class I-2R 198 JW Window Components Inc. Class I-2S 49,712 Class I-3S 14,400 JW 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 Mid-State Holdings Class I-2V 6 Mid-State Homes, Inc. 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 Industries Corp. Class I-2X 27,768 Class I-3X 8,399 Southern Precision Corp. Class I-2Y 21,895 Class I-3Y 12,760 U.S. Pipe and Foundry Co. Class I-2AA 35,357 Class I-3AA 175,968 United Land Corp. 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 V DIRECTORS AND OFFICERS OF EACH OF THE DEBTORS Set forth herein are lists of the Directors and Officers of each of the Debtors and Non-Debtor Affiliates, other than Old Walter Industries, Resources Holdings, Jim Walter Resources and United Land as of January 1, 1994 (ages are as of August 1, 1993). For more detailed biographical information concerning certain of the Directors and Officers included herein and biographical information concerning the Directors and officers of Walter Industries, see "POST-CONSUMMATION -- Management -- Directors and Officers of the Debtors." (a) Directors (i) Walter Industries -- see "POST-CONSUMMATION -- Management -- Directors and Officers of the Debtors -- Directors of Walter Industries" (ii) Best G. Robert Durham Kenneth J. Matlock James W. Walter (iii) Best (Miss.) G. Robert Durham Kenneth J. Matlock Dana A. Snyder James W. Walter William H. Weldon (iv) JW Insurance G. Robert Durham Kenneth J. Matlock James W. Walter (v) Coast to Coast; Dixie and Home Improvement G. Robert Durham Robert W. Michael James W. Walter (vi) Computer Services G. Robert Durham Kenneth J. Matlock William H. Weldon (vii) Hamer Properties; JW Walter G. Robert Durham Kenneth J. Matlock William N. Temple (viii) Jim Walter Homes G. Robert Durham Robert W. Michael Kenneth J. Matlock James W. Walter (ix) JW Aluminum Richard E. Almy G. Robert Durham Kenneth J. Matlock James W. Walter (x) Jim Walter Resources (formerly named JW Resources) William Carr G. Robert Durham James W. Walter (xi) United Land (formerly named Pipe Realty) G. Robert Durham Kenneth J. Matlock William N. Temple James W. Walter (xii) Window Components G. Robert Durham Robert E. Rudolph James W. Walter (xiii) Window Components (Wisc.) G. Robert Durham Kenneth J. Matlock Robert E. Rudolph (xiv) Walter Land G. Robert Durham Kenneth J. Matlock William N. Temple James W. Walter (xv) Mid-State Homes G. Robert Durham Kenneth J. Matlock Sam J. Salario James W. Walter William H. Weldon (xvi) Sloss G. Robert Durham Lee C. Houlditch Kenneth J. Matlock James W. Walter (xvii) Southern Precision Earl E. Case G. Robert Durham Kenneth J. Matlock William N. Temple James W. Walter (xviii) US Pipe G. Robert Durham James W. Walter William N. Temple (xix) Vestal G. Robert Durham Kenneth J. Matlock David M. Vestal James W. Walter (xx) Computer Holdings; Hamer Holdings; Homes Holdings; JWI Holdings; Land Holdings; Mid-State Holdings and Railroad Holdings Michael T. Tokarz Perry Golkin (xxi) Non-Debtor Affiliates a. Carden G. Robert Durham Kenneth J. Matlock Richard D. Spurling* William N. Temple William H. Weldon Peter J. Willitts** b. J.W. Railroad G. Robert Durham Lee C. Houlditch Kenneth J. Matlock William H. Weldon c. Black Warrior Methane William Carr Ralph H. Daily*** G. Robert Durham David Faulkinberry*** Donald G. Russell*** William N. Temple d. Black Warrior Transmission William Carr Ralph H. Daily*** G. Robert Durham David Faulkinberry*** Donald G. Russell*** William N. Temple * Member of law firm of Appleby, Spurling & Kempe, Bermuda counsel to CARDEM. ** Employee of Johnson & Higgins (Bermuda) Limited, third party manager of Cardem. *** Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its parent. (See "BUSINESS, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS -- Business and Properties of the Debtors -- Non-Debtor Affiliates -- Black Warrior Methank; Black Warrior Transmission.") (b) Officers Name Age Position (i) Best Dana A. Snyder President Leola M. Voss 61 Vice President-Finance Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary William Kendal Baker Treasurer John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (ii) Best (Miss.) Dana A. Snyder President Leola M. Voss Vice President-Finance Kenneth J. Matlock Vice President William T. Robinson, Jr. 66 Vice President and Assistant Secretary William H. Weldon Vice President and Secretary Thomas G. Ketcham Assistant Treasurer (iii) JW Insurance Dana A. Snyder President Kenneth J. Matlock Vice President Leola M. Voss Vice President William H. Weldon Vice President William Kendal Baker Treasure and Assistant Secretary Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (iv) Coast to Coast Roger A. Crabb President Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary William Kendal Baker Treasurer and Assistant Secretary Thomas G. Ketcham Assistant Treasurer John F. Turbiville Assistant Secretary (v) Dixie Robert W. Michael President Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary William Kendal Baker Treasurer Thomas G. Ketcham Assistant Treasurer Stephen H. Foxworth Assistant Treasurer John F. Turbiville Assistant Secretary (vi) Home Improvement Robert W. Michael President D. Wayne Hornsby Vice President Kenneth J. Matlock Vice President William H. Weldon Vice President William Kendal Baker Treasurer Mary C. Snow Secretary S. Louise Russell Assistant Secretary John F. Turbiville Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer (vii) Computer Services William H. Weldon President Kenneth J. Matlock Vice President and Treasurer William M. Lammons 55 Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (viii) Hamer Properties William N. Temple President Kenneth J. Matlock Vice President William H. Weldon Vice President and Treasurer Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (ix) JW Walter William N. Temple President Kenneth J. Matlock Vice President William H. Weldon Vice President and Treasurer Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (x) Jim Walter Homes Robert W. Michael President and Chief Operating Officer Sam P. Bullara, Jr. Executive Vice President D. Wayne Hornsby Executive Vice President William Kendal Baker Vice President, Treasurer, Chief Financial Officer and Chief Accounting Officer Michael M. Roberts 46 Senior Vice President Sam J. Salario Vice President Leo Almerico 59 Vice President and Controller B. Craig Calhoun 42 Vice President Herbert R. Clarkson 60 Vice President Daisy B. Collins 56 Vice President Thomas L. Hires, Jr. 36 Vice President Alexander M. Pollock 61 Vice President Joseph P. Richardson, Jr. 40 Vice President Richard A. Ward 45 Vice President S. Louise Russell Secretary Kenneth J. Matlock Vice President William H. Weldon Vice President Frank A. Hult Assistant Secretary John F. Turbiville Assistant Secretary Mary C. Snow Assistant Secretary Norma J. Padron 54 Assistant Controller Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer and Assistant Secretary (xi) JW Aluminum Richard E. Almy President and Chief Operating Officer Russell F. Penley 49 Vice President Operations Bobby J. Proctor 61 Vice President Finance and Treasurer Roger W. Wilson 59 Vice President Marketing and Sales Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xii) Jim Walter Resources (formerly named JW Resources William Carr President and Chief Operating Officer James M. Sims Vice President, Chief Financial Officer and Chief Accounting Officer Kenneth J. Matlock Vice President William H. Weldon Vice President and Treasurer Mary C. Snow Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xiii) William N. Temple President Kenneth J. Matlock Vice President E. Jack Mize, Jr. Vice President and Treasurer William H. Weldon Vice President and Assistant Secretary Larry O. Bailey Controller Mary C. Snow Secretary Lewis R. Knowles Assistant Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xiv) Window Components Robert E. Rudolph President Edmund W. Lanctot, Jr. 47 Vice President - Sales and Marketing J. Randy Beard Vice President and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xv) Window Components (Wisc.) Robert E. Rudolph President and Chief Operating Officer Edmund W. Lanctot, Jr. Vice President - Sales and Marketing Kenneth J. Matlock Vice President J. Randy Beard Vice President and Treasurer William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xvi) Walter Land William N. Temple President Kenneth J. Matlock Vice President and Treasurer William H. Weldon Vice President, Controller and Assistant Secretary Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xvii) Mid-State Home Sam J. Salario President Herbert R. Clarkson Vice President Kenneth J. Matlock Vice President Becky L. Mook 51 Vice President - Administration and Secretary Alexander M. Pollock Vice President William H. Weldon Vice President and Chief Financial Officer William Kendal Baker Treasurer Sam P. Bullara, Jr. Assistant Secretary Bonnie K. Doyne 46 Assistant Secretary Mary C. Snow Assistant Secretary John F. Turbiville Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer and Assistant Secretary (xviii) Sloss Lee C. Houlditch President Frank E. Haver 61 Vice President R. Lee Vinzant 41 Vice President and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xix) Southern Precision Earl E. Case President Harold F. Bailey 63 Vice President Kenneth J. Matlock Vice President William N. Temple Vice President William H. Weldon Vice President Mary C. Snow Secretary Donald M. Kurucz Assistant Treasurer John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xx) U.S. Pipe President and Chief Operating Officer Harry L. Ransom Vice President - Marketing William E. Fleck Vice President - Manufacturing E. Jack Mize, Jr. Vice President - Finance, Treasurer, Chief Financial Officer and Chief Accounting Officer Michael Roper 62 Vice President - International Sales Larry O. Bailey 46 Controller and Assistant Secretary Lewis R. Knowles 56 Assistant Secretary Joseph W. Spransy Assistant Secretary Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary Frank A. Hult Assistant Secretary John F. Turbiville Assistant Secretary Stephen H. Foxworth Assistant Treasurer Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xxi) Vestal David M. Vestal President Keith E. Shope 41 Vice President Claude L. Wells 49 Controller and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer Donald M. Kurucz Assistant Treasurer (xxii) Computer Holdings; Hamer Holdings; JWI Holdings; Land Holdings; Mid-State Holdings and Railroad Holdings Michael T. Tokarz President and Chief Executive Officer Perry Golkin Vice President Donald M. Kurucz Vice President, Treasurer and Assistant Secretary Kenneth J. Matlock Vice President William H. Weldon Vice President Controller and Assistant Secretary Mary C. Snow Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xxii) Homes Holdings Michael T. Tokarz President and Chief Executive Officer Perry Golkin Vice President Donald M. Kurucz Vice President Treasurer and Assistant Secretary Kenneth J. Matlock Vice President and Chief Financial Officer William H. Weldon Vice President, Controller, Assistant Secretary and Chief Accounting Officer Mary C. Snow Secretary Frank A. Hult Assistant Secretary John F. Turbiville Assistant Secretary Thomas G. Ketcham Assistant Treasurer (xxiv) Non-Debtor Affiliates a. Cardem Kenneth J. Matlock President Peter J. Willitts* Vice President Richard D. Spurling ** Secretary Deborah Hubbard-Taylor*** Assistant Secretary William N. Temple Vice President William H. Weldon Vice President Thomas G. Ketcham Assistant Vice President Donald M. Kurucz Treasurer Stephen H. Foxworth Assistant Treasurer b. J.W. Railroad Lee C. Houlditch President and Treasurer Kenneth J. Matlock Vice President William H. Weldon Vice President Mary C. Snow Secretary John F. Turbiville Assistant Secretary Joseph W. Spransy Assistant Secretary Thomas G. Ketcham Assistant Treasurer c. Black Warrior Methane Robert G. Sanders President and General Manager John A. Bearden 47 Controller David Faulkinberry**** Vice President Joseph W. Spransy Secretary James M. Sims Treasurer William Carr Assistant Treasurer Richard Bates**** Assistant Secretary John F. Turbiville Assistant Secretary d. Black Warrior Transmission Robert G. Sanders President and General Manager David Faulkinberry**** Vice President Joseph W. Spransy Secretary James M. Sims Treasurer William Carr Assistant Treasurer Richard Bates**** Assistant Secretary John F. Turbiville Assistant Secretary John A. Bearden Controller * Employee of Johnson & Higgins (Bermuda) Limited, third party manager of Cardem. ** Member of law firm of Appleby, Spurling & Kempe, Bermuda counsel to Cardem. *** Employee of law firm of Appleby, Spurling & Kempe, Bermuda counsel to Cardem. **** Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its parent. (See "BUSINESS, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS - Businesses and Properties of the Debtors - Non- Debtor Affiliates - Black Warrior Methane; Black Warrior Transmission.") EXHIBIT VI WALTER INDUSTRIES, INC. NOTES TO LIQUIDATION ANALYSIS The following Liquidation Analysis has been prepared to indicate values which might be obtained by impaired Classes of Claims and impaired Classes of Interests if the assets of Walter Industries (i.e., stock of the Operating Businesses) were sold pursuant to a Chapter 7 liquidation, as an alternative to the continued independent operation of the Debtors and structured payments under the Creditors' Plan. Underlying the Liquidation Analysis are a number of estimates and assumptions that are inherently subject to significant legal, business, economic and competitive uncertainties and contingencies beyond the control of the Debtors as well as assumptions with respect to the liquidation decisions which could be subject to change. Accordingly, there can be no assurance that the values reflected in the Liquidation Analysis would be realized if Walter Industries were, in fact, to undergo such a liquidation, and actual results could vary materially from those shown here. [FN] Given the Court's December 31, 1993 deadline for filing Chapter 11 plans and disclosure statements, the Proponents (and the other creditor proponents of plans filed by that deadline) adopted their Liquidation Analysis from the Debtors' previous Disclosure Statement that was on file with the Court. The Proponents had assumed that the Debtors' analysis would have been prepared consistent with what the Proponents believe is the proper approach, and that the Proponents would have the further opportunity to verify, update and amend the analysis in the final version of this Disclosure Statement. The Proponents have come to the belief that the Debtors' analysis was, in fact, fundamentally flawed, and accordingly have revised it as set forth herein. This Liquidation Analysis has been prepared assuming that the Chapter 11 Cases are converted to cases under Chapter 7 on December 31, 1994 (the assumed Effective Date under the Creditors' Plan) and that the sale of the stock of the Operating Businesses occurs on or before December 31, 1995, at which time it is assumed that the Chapter 7 trustee would make a distribution of the proceeds to creditors. It is assumed that a Chapter 7 trustee would attempt to maximize the value of the estates, consistent with the trustee's fiduciary duties, and, therefore, that the trustee would attempt to sell the stock of the Operating Businesses to minimize substantial liabilities that would otherwise arise. This liquidation strategy materially varies from that set forth in the Liquidation Analysis included in the Debtors' Disclosure Statement, (the "Debtors' Liquidation Analysis"), which, among other things, is based on the sale of assets. The Debtors' approach, which does not take advantage of the tax savings arising from the Debtors' Court-approved Mirror Liquidation Plan, results in a substantially higher tax liability than that used in the Proponents' Liquidation Analysis and, as such, would leave less value available for distribution to creditors. The Proponents believe that a Court order providing for potential buyers to purchase the stock of the Operating Businesses free and clear of all liens and encumbrances (pursuant to Sections 105 and 363(f) of the Bankruptcy Code) would enable the stock of the Operating Businesses to be sold. As noted below, the Proponents also have revised certain other assumptions in the Debtors' Liquidation Analysis, such as the appropriate discounts, if any, for the sale Of stock of the Operating Business. Additionally, unlike the Debtors' Liquidation Analysis, which has a $215 million to $322 million discount, the Liquidation Analysis does not discount the Mid-State Homes Mortgage business. A discount for the Mid-State Homes mortgage business is contradicted by the Debtors' prior experience selling mortgages and the underlying notes secured thereby owned by Mid-State Homes during the Chapter 11 Cases. As noted in the Disclosure Statement, the Proponents believe the Debtors' choice of liquidation on an asset sale basis rather than a stock sale basis and other assumptions in the Debtors Liquidation Analysis were made to support a legal argument that the Proponents of the Creditors' Plan expect the Debtors to make with respect to the treatment of post-petition interest on unsecured Claims under the Debtors' Plan of Reorganization. Consistent with the Debtors' treatment in their Liquidation Analysis, this Liquidation Analysis has been prepared on a consolidated basis rather than on an individual Debtor basis. This approach was taken because the Debtors' complex liability structure makes an accurate allocation of claims by and against individual Debtors (including the joint and several Claims of the Revolving Credit and Working Capital Bank, Series B&C Senior Noteholders and unsecured bondholders), as well as Claims under intercompany guarantees and contingent assets under intercompany Contribution Agreements, impractical for these purposes. The Liquidation Analysis does, however, recognize the unique nature of the general unsecured trade claims against the Debtors Operating Businesses. The Proponents believe that a Chapter 7 trustee would seek to allow unsecured trade Creditor Claims based on the facts that these post-LBO claims are asserted solely and directly against the Debtors' Operating Businesses, including Debtors against which no Subordinated Note Claims are asserted, and the potential fraudulent transfer claims that such Creditors would assert. Such allowance, constituting the payment in full of such Claims including post-petition interest at a compromised rate that is below applicable legal rates, is contained in the Liquidation Analysis. Except as described above, in the next succeeding paragraph, and for certain adjustments described in the accompanying Notes, estimates of expenses and claims have generally been adopted from the Debtors' Liquidation Analysis. Most significantly, this Liquidation Analysis differs from the Debtors' Liquidation Analysis with respect to the resolution of the asbestos-related, veil piercing claims, because the Creditors' Plan's Effective Date, unlike the Effective Date under the Debtor's Plan, is not conditioned upon the final, successfully-litigated resolution of those claims. Given the enormous magnitude of the asbestos-related, veil piercing claims, the complexity of the issues which will be raised on appeal of the Court's April 18, 1994 declaratory judgment decision and the protracted nature of the appellate process, the Proponents believe that a Chapter 7 trustee would attempt to negotiate a settlement of these claims in order to expedite distributions to creditors and to avoid a potential adverse appellate decision that could seriously dilute the distribution to creditors. Therefore, the Proponents' Liquidation Analysis assumes a settlement amount for asbestos-related, veil piercing claims of $450 million. This is based, in part, on the fact that the Veil Piercing Claimants have negotiated a settlement of approximately $450 million with the Proponents. If, however, the Chapter 7 trustee chose to litigate the asbestos-related, veil piercing claims and ultimately lost, the liability would be far higher than the settlement amount; the asbestos litigants have asserted that the underlying personal injury asbestos Claims exceed $10 billion. If the Chapter 7 trustee chose to litigate the asbestos-related, veil piercing claims and ultimately prevailed, the Proponents believe that the Debtors' estate would have sufficient value to pay in full the pre-Filing Date amount of all Claims and postpetition interest on Secured Claims, and leave a significant surplus available for post-petition interest on unsecured Claims. The Proponents' review of the Debtors' Liquidation Analysis, which assumes an ultimate litigation victory by a Chapter 7 trustee, is set forth in Article X of the Proponents' Disclosure Statement. The Proponents' review concludes that, based on reasonable assumptions that have been omitted from the Debtors' Liquidation Analysis and after correcting errors in that Analysis, there would be a significant surplus on a potential litigation victory basis after payment in full of all pre-Filing Date Claims and post-petition interest o all Secured Claims. Considering all of the risks of the asbestos-related, veil piercing litigation, the associated costs and delays, and the potentially devastating consequences to creditors of a litigation loss, the Proponents believe that their Liquidation Analysis demonstrates that the Creditors' Plan is in the best interests of creditors. Various other specific assumptions relevant to this Liquidation Analysis are set forth in the accompanying Notes.
LIQUIDATION ANALYSIS ($ Millions) Liquidation Range Note From To Going-Concern Value of Operating Business 1 $1,286 $1,286 Less Liquidation Discount 2 (322) (193) Liquidation Value of Operating Business 964 1,093 Value of Mid-State Homes Whole Loan Portfolio and Mid-State Trust II & III Residuals 1,2 1,230 1,230 Value of Other Assets Cash and escrows 3 140 140 Other 4 10 17 150 157 Interest on Proceeds from Liquidation 5 58 61 Gross Proceeds Available for Distribution 2,402 2,541 Liabilities Ranking Senior to Asbestos Claimants and Other Unsecured Creditors Obligations Arising from Chapter 7 Liquidation Operating Expenses During Liquidation 6 (20) (20) Chapter 7 Administrative Expenses 7 (66) (70) Liquidation Tax Liabilities 8 0 0 Secured Debt (including post-petition interest) 9 Revolving Credit Bank Claims (352) (352) Working Capital Bank Claims (121) (121) Grace Street Note Claims (1) (1) Sloss IRB Claims (1) (1) Secured Equipment Purchase Claims (1) (1) Series B & C Senior Note Claims (365) (365) Provident Life and Accident Insurance Company Claims (7) (7) Chapter 11 Priority and Administrative Claims Severance Pay 10 (1) (1) Pension Plan Termination 11 (18) (18) Other Liabilities 12 (53) (53) Proceeds Available to Asbestos Claimants and Other Unsecured Creditors 1,396 1,531 Convenience Class Claims (including post-petition interest) 13 (2) (2) General Unsecured, Trade Claims (including post-petition interest) 13 (98) (98) Proceeds Available to Asbestos and Subordinated Note Claimants 1,296 1,431 Funding to Payments for Asbestos-Related Claims (450) (450) Tax Benefit Associated with Payments for Asbestos-Related Claims 14 88 88 Proceeds Available to Subordinated Note Claimants 934 1,069 Subordinated Note Claims 15 (1,106) (1,106) Deficiency $(172) $ (37)
Note 1: Operating Businesses include all assets of the Debtors except Cash, Mid-State Homes' whole loan mortgage portfolio and Trust II and III Residuals and Other Assets which have been excluded as no discount has been applied to these assets. The value of the Operating Businesses includes the net working capital associated with the businesses, which consists primarily of receivables, inventories and payables. This value represents the approximate mid-point of the value rate as of 12/31/94. This value as of 12/31/94 is assumed to grow by 10% by 12/31/95, or 5% on total value based on the assumption that during the liquidation process, one half of the sales of the Operating Businesses occurs by 6/30/95. The value of the Mid-State whole loan mortgage portfolio and Trust II and III Residuals is assumed by grow by 7% by 12/31/95 at which point it is assumed that the mortgages and Residuals are securitized.
Liquidation 12/31/94 Period Cash $ 140 $ 140 Operating Businesses 1,225 1,286 Mid-State whole loan mortgage portfolio and Trust II & III Residuals available for securitization 1,150 1,230 Other Assets (Headquarters/Other 10 17 Total Liquidation Value $2,525 $2,673
In connection with the analysis of the estimated going-concern value of the Company as of 12/31/94 and the subsequent assumptions regarding the estimated liquidation valuation of the Company, J.P. Morgan in conjunction with Ernst & Young, the Bondholders' Committee's financial advisors (the "Financial Advisors"), among other things: (a) reviewed certain publicly available financial statements for recent years and interim periods; (b) analyzed certain internal financial and operating data concerning the Operating Businesses, including the Company s financial projections through 1998 and estimated through 2002 by the Financial Advisors. (c) made discounted cash flow analyses to 12/31/94 for the various Operating Businesses based upon the financial projections referred to in (b) above; (d) considered the market values of publicly-traded companies which the Financial Advisors believed v.ere comparable to the various Operating Businesses; (e) considered the financial terms, to the extent publicly available, of certain acquisitions of companies which the Financial Advisors believed were comparable to the various Operating Businesses: (f) considered certain economic and industry information relevant to the various Operating Businesses; (g) discussed the current operations and prospects of the various Operating Businesses with the senior management of Walter Industries and its subsidiaries; and, (h) made such other analyses and examinations as the Financial Advisors deemed necessary or appropriate. The valuation of each Operating Business was based on a review of the three methodologies described in clauses (c), (d), (e) above, except for Mid-State Homes and United Land. Mid State Homes' value was derived through the valuation of the going concern operating entity, the servicing of existing mortgages and of the securitization of the whole loan mortgage portfolio and the Trust 11 and 111 Residuals. United Land's value was based on the cash flow producing land holdings. The Financial Advisors did not independently verify the information considered that was provided by the Debtors and other sources in its valuations and for purposes of its valuations relied upon the accuracy and completeness of all such information. In addition, the Financial Advisors did not undertake or obtain appraisals of the tangible or intangible assets of the various Operating Businesses. The value of an Operating Business is subject to uncertainties and contingencies which are difficult to predict and will fluctuate with changes in interest rates, market conditions and other factors affecting the financial conditions and prospects of such business. Note 2: The Liquidation Discount represents an estimate of the aggregate of the discounts to the value of the Operating Businesses that would likely be incurred in the sale of stock in the Operating Businesses under a Chapter 7 liquidation. Actual discounts which may be required to sell stock in the Operating Businesses could be significantly different. No discount has been applied to the value of the Mid-State whole loan mortgage portfolio and Mid-State Trust II and III Residuals as a Chapter 7 liquidation would not affect the ability of a buyer to securitize these assets at full value. The Debtors have successfully securitized these assets despite the proceedings of their Chapter 11 cases. The discounts applied to the Operating Businesses relate to two principal adverse circumstances that would affect all Walter Industries' Operating Businesses in a Chapter 7 liquidation: a. There would be pressure to convert stock in the Operating Businesses into cash quickly. (This analysis assumes a one year period between conversion to a Chapter 7 proceeding and distribution to creditors.) These sales may have an adverse impact on employee morale, customer willingness to order new goods and vendor willingness to ship new goods and extend trade credit and the forced nature of the sales may result in a discount to the going concern values of the enterprises. b. The Debtors have stated in their Disclosure Statement that studies of potential Chapter 7 environmental exposures have not been made. The Operating Businesses may have potential liabilities under environmental laws which could be addressed in the ordinary course of business after consummation of a plan of reorganization under Chapter 11. However, in a Chapter 7 liquidation, uncertainty would surround the transfer of responsibility for these exposures, and potential purchasers would raise concerns about possible environmental liabilities. The precise discount factor attributable to the uncertainties described above cannot be computed on the basis of any known empirical data. Given the adverse factors previously discussed, it is estimated that the actual liquidation values of most of the Operating Businesses would reflect a discount of 15-25% to from the values which would otherwise exist. No discount has been applied to reflect uncertainties regarding future transferee liability for asbestos-related claims as it is assumed that such uncertainty would not exist for the reasons previously discussed. While the Proponents acknowledge that the foregoing circumstances set forth in sub-paragraphs (a) and (b) above warrant a discount from the going concern value of the Debtors' Operating Businesses, the Proponents believe that the range of discount employed by the Debtors in their Liquidation Analysis is artificially high and unwarranted given the conditions and requirements of their Plan. See Article X of the Disclosure Statement. Note 3: It is expected that there will be cash of approximately $140 million available, which includes the present cash escrow for the Series B and C Senior Notes. Amounts reserved for environmental liabilities or collateralizing letters of credit would not be available to creditors benefit available. There may also be additional tax benefits related to the asbestos settlement payment based on any further tax liabilities incurred Note 15: Includes all Unsecured Bondholders and Old Walter Industries IRB claims. EXHIBIT VII WALTER INDUSTRIES, INC. PROJECTED FINANCIAL INFORMATION: As a condition to confirmation of the Creditors' Plan, the Bankruptcy Code requires, among other things, the Bankruptcy Court to determine that confirmation is not likely to be followed by liquidation or result in the need for further financial reorganization of the Debtors. To assess the feasibility of the Creditors' Plan, the Creditors' Plan has been overlaid on the Debtors' 1994 Five Year Business Plan (extrapolated for the years 1999 through 2001). Included herein are summary statements of consolidated cash flows of Reorganized Walter Industries excluding Mid-State Trusts II and III, and the trusts contemplated by the Creditors' Plan, for each of the fiscal years ending 1995 through 2001. A separate statement of cash flows has been included to reflect the consolidated cash flows of the trusts contemplated by the Creditors' Plan. The cash flows of the Mid-State Trusts have been excluded to show the debt capacity of the corporate entity as assets of the Trusts are not available to satisfy claims of general creditors of the Company and its subsidiaries. The consolidated cash flows assume the implementation of the Creditors' Plan and are dependent upon the successful implementation of the Debtors' Business Plan and the reliability of the assumptions contained therein. Both the Debtors' Business Plan and the projections reflect numerous assumptions regarding both anticipated financial performance as well as industry performance, and overall economic conditions, some of which are beyond the control of the Debtors. In addition, unanticipated events and circumstances may affect the actual financial results of the Debtors. Therefore, the actual results achieved throughout the projection period may vary from the projected results. These variations may be material. Accordingly, no representation can be, or is being, made with respect to the accuracy of the projections or the ability of the Debtors to achieve the projected results. The Proponents urge that the underlying assumptions be carefully considered by Holders of Claims in deciding whether to accept or reject the Creditors' Plan. Principal Assumptions: Net Sales and Revenues: Net sales and revenues are assumed to increase between approximately 3% to 6% per year during the projection period. The Debtors have assumed that the general recessionary conditions that have prevailed in the United States during the past few years will gradually abate. Sales of all divisions are assumed to increase as a result of both increased volume and pricing as well as, in a limited number of instances, the introduction of new products. Interest income is assumed to increase as a result of the continued creation of new mortgages by Mid- State Homes. EBIT: EBIT is expected to increase over the projection period primarily as a result of the assumed sales growth which results in an increasing gross profit margin given the high degree of fixed costs associated with the subsidiaries engaged in manufacturing activities. Gross margins are also assumed to be enhanced as a result of continued efforts to control costs and implement productivity improvements. Capital Expenditures: Annual capital expenditures are assumed to average approximately $86 million per year during the projection period. The primary uses of capital, and their approximate percentage of total capital expenditures, relate to expenditures necessary to maintain profit centers (75%), environmental controls (9%), expansion (9%) and cost reduction programs (7%). United States Pipe and Foundry Co. and Jim Walter Resources have historically been, and are planned to be, the greatest users of capital, given the capital intensive nature of these businesses. Together, they account for approximately 75% of total planned capital expenditures. Income Taxes: The projections assume that the Plan will not result in the incurrence of any taxes upon the estate of the Debtors. A 41% total income tax rate on projected taxable income has been assumed in the projections. The projections also assume that income taxes are paid in the year in which they arise. The provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" have not been implemented in the projections. Interest Expense: Interest expense for all of the securities issued under the proposed Creditors' Plan have been calculated at the respective stated interest rates. Interest on the working capital line of credit has been calculated on the assumed balance at an interest rate of 71/2%, which is equal to the current Prime rate of interest plus 1/4% during the projection period. Liquidity and Capital Resources: The Debtor's primary source of cash is from operations. However, significant amounts of cash are consumed by the home building segment of Jim Walter Homes which through its Mid-State Homes subsidiary finances approximately 97% of the homes sold by Jim Walter Homes. It is assumed that upon consummation of the Creditors' Plan, a working capital/warehouse line of credit will be established to fund the creation of these mortgages. Over time, it is anticipated that the mortgages created will be securitized consistent with the Debtors' past practices. However, no securitization of these mortgages is contemplated in the projection period. It is also assumed that the Debtors will borrow an amount necessary to provide a break-even cash flow for Mid-State Homes. CONSOLIDATED STATEMENT OF CASH FLOWS (excluding Mid-State Trusts II & III and mortgages to be securitized under Plan)
Projected for the Years Ended May 31, 1995 ($ Millions) (5 Months) 1996 1997 1998 1999 2000 2001 INDUSTRIAL COMPANIES: (a) EBIT........................... $ 76.4 $209.5 $230.0 $244.7 $254.5 $ 264.7 $ 275.3 plus: Depreciation............. 30.5 76.7 80.7 82.7 85.2 87.9 95.0 less: Change in Working Capital (5.5) (5.3) (7.4) (8.1) (8.9) (9.8) (10.8) less: Capital Expenditures..... (36.5) (88.3) (95.5) (83.3) (83.9) (83.9) (83.9) Free Cash Flow - Industrial Companies................... 64.9 192.6 207.8 236.0 246.9 258.9 275.6 MID-STATE HOMES: (b) EBIT........................... 4.5 22.7 41.0 57.7 76.1 97.8 116.5 less: Net Change in Working Capital (c)................. (4.5) (22.7) (41.0) (57.7) (76.1) (97.8) (116.5) Cash Flow - Mid-State Homes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NET OPERATING CASH FLOW 64.9 192.6 207.8 236.0 246.8 258.9 275.5 less: Cash Interest Expense.. (17.6) (47.7) (60.2) (71.3) (81.0) (78.1) (69.0) less: Cash Taxes............. (15.0) (51.5) (61.8) (71.5) (77.4) (91.3) (106.3) less: Principal Repayment.... 0.0 (40.7) 0.0 0.0 0.0 (325.0) 0.0 Cash Flow before Financing.... 32.3 52.6 85.8 93.2 88.5 (235.6) 100.2 Cash Distributions under POR. (140.4) 0.0 0.0 0.0 0.0 0.0 0.0 Decrease/(Increase) in Cash..... (108.1) 52.6 85.8 93.2 88.5 (235.6) 100.2 Beginning Cash.................. 185.4 77.3 130.0 215.8 209.0 397.5 161.9 Ending Cash (d)................. $ 77.3 $130.0 $215.8 $309.0 $397.5 $161.9 $262.2
(a) Represents cash flows of all operating companies less corporate overhead. The cash flows of Mid-State Homes, the mortgage finance subsidiary, are separately reflected below. (b) Represents cash flows from mortgages created after December 31, 1994. All previously existing mortgages and residuals are to be securitized as contemplated under the Creditors' Plan and are therefore excluded. (c) Includes borrowings under a working capital/warehouse facility required to fund new mortgages. Amounts borrowed represent that necessary to provide a break-even cash flow for Mid-State Homes. (d) Cash may be used to amortize indebtedness of Walter Industries and/or to create further mortgages.
Cash Interest Paid ($000's) Projected for the Years ended May 31, 1995 (5 Months) 1996 1997 1998 1999 2000 2001 CASH INTEREST: 8.0% New Senior Notes......... $10,833 $26,000 $26,000 $ 26,000 $26,000 $15,167 $ 0 6.5% Bank Debt................ 6,771 16,250 16,250 16,250 16,250 16,250 16,250 7.5% Working Capital facility/Warehouse Line...... 0 5,453 17,925 29,063 38,730 46,710 52,725 CASH INTEREST PAID.............. $17,604 $47,703 $60,175 $71,313 $80,980 $78,127 $68,975 NOTE: If interest rates on this debt were to increase by 1%, annual interest expense would increase by the following amounts: 1995 1996 1997 1998 1999 2000 2001 $2,396 $6,477 $8,140 $9,625 $10,914 $10,624 $9,530
Summary of Long-Term and Short-Term Debt ($000's) 12/31/94 5/31/95 5/21/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 New Senior Notes............ $325,000 $325,000 $325,000 $325,000 $325,000 $325,000 $ 0 $ 0 Bank Debt(a)................ 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 Working Capital Facility/Warehouse Line... 0 72,700 239,000 387,400 516,400 622,800 703,000 760,100 TOTAL DEBT.................. $575,000 $647,700 $814,000 $962,500 $1,091,400 $1,197,800 $ 953,000 $1,010,100
(a) Projections assume an evergreen bank term loan. However, additional cash provided by the working capital facility and/or securitization of mortgage could be used to amortize this amount.
CASH FLOWS RELATED TO MORTGAGE SECURITIES ($ 000's) Projected for the Years Ended May 31, 1995 (5 Months) 1996 1997 1998 1999 2000 2001 Sources of Cash from Mortgage Assets to be Securitized: (a) EBIT(b)................................. $37,156 $ 84,914 $ 81,918 $ 78,902 $ 75,861 $ 72,786 $ 69,671 Principal Repayment..................... 14,635 34,959 34,448 34,016 33,664 33,397 33,220 Total Cash Sources..................... 51,791 119,873 116,366 112,918 109,525 106,183 102,891 Uses of Cash: Interest............................... (29,075) (66,786) (62,250) (58,189) (53,782) (49,287) (44,692) Debt Repayment......................... (22,715) (53,087) (53,846) (54,729) (55,743) (56,896) (58,199) Total Cash Uses........................ (51,791) (119,873) (116,366) (112,918) (109,525) (106,183) (102,891) Net Sources/Uses....................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 New mortgage collateralizes securities $875,000 $852,285 $799,198 $745,352 $690,623 $634,880 $577,984 $519,785
(a) Represents cash flows from all unencumbered mortgages created prior to December 31, 1994 as well as the cash flows from residual interests in Mid-State Trusts II & III. The Creditors' Plan contemplates that these mortgage assets will be securitized and they have therefore been segregated from the other cash flows of Walter Industries. (b) Represents interest income net of miscellaneous expenses.
BALANCE SHEET ($ millions) Projected Recording of "Fresh Pro-Forma 12/31/94 Plan Consummation Start" 12/31/94 Cash...................................................................... $ 185.4 (140.4)(a)(b) $ 45.0 Short-term Investments.................................................... 111.4 111.4 Installments Notes Receivable............................................. 1,462.7 1,462.7 Trade Receivables......................................................... 143.8 143.8 Other Notes and Accounts Receivable....................................... 8.0 8.0 Inventories............................................................... 161.4 161.4 Prepaid Expenses.......................................................... 8.4 8.4 Total Current Assets.................................................... 2,081.1 (140.4) 0.0 1,940.7 Property, Plant and Equipment............................................. 1,161.9 1,161.9 Accum. Depreciation, Depletion and Amortization........................... (473.4) (473.4) Property, Plant and Equipment, Net........................................ 688.4 688.4 Other Investments......................................................... 5.7 5.7 Unamortized Debt Expense.................................................. 27.2 (9.4) 17.8 Other Assets.............................................................. 38.2 38.2 Excess of Purchase Price over Net Assets Acquired......................... 401.0 (401.0) 0.0 Reorganization Value in Excess of Amounts Allocable to Unidentifiable Assets 0.0 1,155.7(c) 1,155.7 Total Assets............................................................ 3,241.6 (140.4) 745.3 3,846.5 Bank Overdrafts........................................................... 13.5 13.5 Accounts Payable.......................................................... 57.4 57.4 Trade Notes (25% of Claim)................................................ 0.0 40.7(d) 40.7 Accrued Expenses.......................................................... 110.0 110.0 Income Taxes Payable (Current and Deferred)............................... 48.8 48.8 Working Capital Facility.................................................. 0.0 40.7 0.0 0.0 Total Current Liabilities............................................... 229.8 270.5 Income Taxes Payable-Deferred............................................. 33.2 33.2 Long-Term Senior Debt (incl. Current Maturities) Mid-State Trust II & III................................................ 835.4 835.4 Securities Issued Under the Plan........................................ 0.0 1,450.0(e) 1,450.0 Accrued Retiree Health Liability.......................................... 229.8 0.0 229.8 Other Long-Term Liabilities............................................... 48.2 0.0 48.2 Accrued Post-Petition Interest on Ch. 11 Liabilities...................... 404.3 (404.3)(f) 0.0 Liabilities Subject to Chapter 11 Proceedings............................. 1,755.7 (1,755.7)(f) 0.0 Total Liabilities....................................................... 3,536.4 (669.3) 0.0 2,867.1 Total Stockholders' Equity................................................ (294.8) 528.9(g)(h) 745.3(i) 979.4 Total Liabilities and Stockholders' Equity.............................. $3,241.6 (140.4) 745.3 $3,846.5
WALTER INDUSTRIES, INC. NOTES TO ADJUSTMENTS TO BALANCE SHEET UPON CONFIRMATION ($ 000's) (a) To record the following cash sources and uses at Consummation:
Amount CASH SOURCES AT CONSUMMATION: Borrowing Pursuant to New Revolving Credit Agreement............. $ 250,000 Proceeds from Mortgage Collateralizations........................ 875,000 Available Cash................................................... 125,000 Release of Restricted Cash....................................... 15,400 Total Cash Sources......................................... 1,265,400 CASH USES AT CONSUMMATION: Administrative.................................................... 32,000 Priority.......................................................... 36,140 Secured Bank Claims: Bank Credit Agreement........................................... 354,028 working Capital Facility........................................ 121,343 Series B and C Senior Notes....................................... 6,400 Trade/Accounts Payable............................................ 8,792 Old Walter Industries IRB......................................... 7,494 Provident Insurance............................................... 1,704 Sloss IRB Claim................................................... 715 Secured Equipment Purchases....................................... 48 Grace Street Notes................................................ 5 Total Cash Uses................................................ 621,750 Cash Available for Distribution................................... $ 643,650 (b) Includes the release of funds held in escrow during Chapter 11 proceedings: Series B and C Escrow............................................. $ 6,400 Cash Collateral for Letters of Credit............................. 9,000 Total...................................................... $ 15,400
(c) To record the reorganization in excess of amounts allocable to identifiable assets in accordance with fresh start reporting. No attempt has been made to allocate this amount to specific assets due to the absence of specific asset valuations. This amount is not amortized in the projection period. Upon confirmation, values would be assigned to specific assets and this amount would be allocated appropriately among them. The unallocated portion would then be amortized going forward. (d) To record the Plan provision regarding payment of trade claims. (e) To reflect the issuance of debt obligations as contemplated in the Plan: Mortgage Collateralization Indebtedness...... $ 875,000 Walter Industries, Inc. - Senior Notes......... 325,000(1) Walter Industries, Inc. - Revolving Bank Loan.. 250,000 Total New Securities..................... $1,450,000 (1) Approximates total claim of $330,974 less funds in escrow of $6,400. (f) To record the discharge of liabilities subject to Chapter 11 proceedings:
Principal and Pre-Petition Accrued Interest Accrued Interest as of Filing 12/29/89-12/31/94* ($ 000's) Administrative.................... $ 32,000 Priority.......................... 26,140 Secured Bank Claims: Bank Credit Agreement........... 229,623 $152,625 Working Capital Facility........ 78,779 51,843 Total......................... 308,402 204,468 Senior Reset Notes: Series B....................... 188,977 169,340 Series C....................... 5,356 4,801 Total........................ 194,333 174,141 Trade/Other...................... 70,774 23,001 Old Walter Industries IRB........ 6,650 2,143 Provident Insurance.............. 7,494 Convenience Class................ 1,286 418 Sloss IRB Claim.................. 571 144 Secured Equipment Purchases...... 48 Grace Street Notes............... 5 SUBTOTAL....................... 657,703 404,315 Unsecured Bondholders: Senior Subordinated Notes...... 479,261 0 17% Subordinated Notes 1996.... 379,254 0 Pre-LBO Notes: 131/8 Sub Notes 1993........... 52,680 0 133/4 Sub Notes 2003........... 105,615 0 107/8 Sub Notes 2008........... 81,177 0 239,472 0 SUBTOTAL..................... 1,097,987 0 TOTAL-ALL CLAIMS............ $1,755,690 $404,315
* If the Amended and Restated Veil Piercing Settlement Agreement does not become effective by its terms, total accrued interest would decrease by $75 million. (g) To record the cancellation of common equity. (h) To record the net adjustment to retained earnings as a result of the discharge of indebtedness and other effects of Plan consummation. (i) To record the equity value of Reorganized Walter Industries. This amount represents: Negotiated Enterprise Value........... $2,525 Less: Senior Claims.................. 902 Cash Available for Distribution.. 644 Reorganized Net Equity................. $ 979 EXHIBIT X.A.1 WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS MAY 31, 1993 INDEX TO FINANCIAL STATEMENTS Page Walter Industries, Inc. and Subsidiaries Report of Independent Certified Public Accounts F-2 Consolidated Balance Sheet-May 31, 1993 F-3 Consolidated Statement of Operations and Retained earnings (Deficit) for the Three Years Ended May 31, 1993 F-4 Consolidated Statement of Cash Flows for the Three Years Ended May 31, 1993 F-5 Notes To Financial Statements F-6 to F-36 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, 1993 and 1992, and the results of their operations and their cash flows for the years then ended 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 included 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 11 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 joint plan of reorganization and related disclosure statement with the Bankruptcy Court on June 15, 1992. 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 12 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 9, 1993
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET May 31 1993 1992 (in thousands) ASSETS Cash (including short-term investments of $172,553,000 and $84,271,000) (Note 6) $ 190,370 $ 105,874 Short-term investments, restricted (Note 4) 105,620 106,954 Instalment notes receivable (Notes 4,6 and 7) 4,187,316 4,052,629 Less Provision for possible losses ( 26,579) ( 25,965) Unearned time charges (2,773,878) (2,663,412) Net 1,386,859 1,363,252 Trade receivables 143,259 145,013 Less Provision for possible losses ( 7,324) ( 6,080) Net 135,935 138,933 Other notes and accounts receivable 15,625 14,056 Inventories, at lower of cost (first in, first out or average) or market: Finished goods 94,360 91,180 Goods in process 23,421 24,160 Raw materials and supplies 47,153 49,447 Houses held for resale 1,705 2,479 Total inventories 166,639 167,266 Prepaid expenses 7,902 8,138 Property, plant and equipment, at cost (note 5) 1,075,068 1,015,483 Less Accumulated depreciation, depletion and amortization (412,028) ( 350,861) Net 663,040 664,622 Investments 5,568 5,440 Amortized debt expense 46,622 59,251 Other assets 37,616 36,581 Excess of purchase price over net assets acquired (Note 1) 461,438 500,899 $3,223,234 $3,171,266 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Bank overdrafts (Note 6) $ 17,921 $ 27,679 Accounts payable (Note 2) 52,696 54,388 Accrued expenses (Note 2) 116,238 117,920 Income taxes payable (Notes 2 and 7) 19,135 10,024 Deferred income taxes (Note 7) 85,833 171,469 Long-term senior debt (Notes 2 and 6) 1,046,971 948,782 Accrued postpetition interest on secured obligations (Notes 2 and 6) 210,199 177,594 Accumulated postretirement health benefits obligations (Note 12) 189,905 - Other long-term liabilities 46,442 48,201 Liabilities subject to Chapter 11 proceedings (Note 2, 4 and 6) 1,725,631 1,845,328 Stockholders' equity (deficit) (Notes 1, 6, 8 and 9): 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 ( 441,695) ( 383,681) Excess of additional pension liability over unrecognized prior years service cost ( 1,646) ( 2,042) Total stockholders' equity (deficit) ( 287,737) (230,119) $ 3,113,234 $3,171,266
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) For the years ended May 31, 1993 1992 1991 Sales and revenues: Net sales $1,072.615 $1,139.048 $1,098,062 Time charges (Note 4) 218,696 195,001 180,292 Miscellaneous 23,160 28,172 34,743 Interest income from Chapter 11 proceedings (Note 2) 4,515 4,360 13,300 1,318,986 1,366,581 1,326,397 Cost and expenses: Cost of sales 804,411 891,882 826,455 Depreciation, depletion and amortization (Note 5) 70,483 82,801 75,099 Selling, general and administrative 124,616 129,372 122,921 Postretirement health benefits (Note 12) 23,474 - - Provision for possible losses 4,236 5,787 7,386 Chapter 11 costs (Note 2) 9,802 5,172 5,179 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, 5 and 6) 171,581 177,060 209,511 Amortization of excess of purchase price over net assets acquired (Note 1) 39,461 39,702 39,760 1,248,064 1,331,776 1,286,311 70,922 34,805 40,086 Provision for income taxes (Note 7): Current (48,141) (35,957) ( 24,931) Deferred 23,813 23,494 5,477 Income from continuing operations before cumulative effect of accounting change 46,594 22,342 20,632 Discontinued operations (Note 3): Loss form operations - - ( 395) Loss on disposal - - ( 5,775) Cumulative effect of change in accounting principle - postretirement benefits other than pensions (net of income tax benefit of $61, 823,000) (Note 12) ( 104,608) - - Net income (loss) ( 58,014) 22,342 14,462 Retained earnings (deficit) at beginning of year ( 383,681) ( 406,023) ( 420,485) Retained earnings (deficit) at end of year $( 441,695) $( 383,681) $( 406,023)
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the years ended May 31, 1993 1992 1991 (in thousands) OPERATIONS CONTINUING OPERATIONS: Net income (loss) $( 58, 014) $ 22,342 $ 20,632 Charges to income not affecting cash: Depreciation, depletion and amortization 70,483 82,801 75,099 Provision for deferred income taxes (23,813) ( 23,494) ( 5,477) Accumulated postretirement health benefits obligation (Note 12) 189,905 - - Adjustment to deferred taxes for accounting change (Note 12) ( 61,823) - - Provision for other long-term liabilities ( 781) 6,782 ( 4,236) Amortization of excess of purchase price over net assets acquired (Note 1) 39,461 39,702 39,760 Amortization of debt discount and expense 22,148 19,715 23,775 177,566 147,848 149,553 Decrease (increase) in: Short-term investments, restricted 1,334 4,374 9,188 Installment notes receivable, net (23,607) (47,835) (44,205) Trade and other receivables, net 1,429 ( 457) 32,181 Trade and other receivables, net 627 12,118 (21,349) Inventories 236 1,404 ( 959) Prepaid expenses Increase (decrease) in: Bank overdrafts (Note 6) ( 9,758) 7,906 ( 661) Accounts payable ( 1,682) 15,663 8,331 Accrued expenses 32,605 47,868 75,694 Income taxes payable 9,111 (18,036) 16,457 Accrued postpetition interest on secured obligations 32,605 47,868 75,694 Liabilities subject to Chapter 11 proceedings (Note 2): Accounts payable 811 714 ( 7,340) Accrued expense 4 ( 136) ( 2,049) Income taxes payable - 1,429) - Other long-term liabilities - ( 244) 482 Cash flows from continuing operations 186,984 173,041 215,816 DISCONTINUED OPERATIONS (Note 3): Loss from operations - - ( 395) Loss on disposal - - ( 5,775) Cash flows from discontinued operations - - ( 6,170) Cash flows from operations 186,984 173,041 209,646 FINANCING ACTIVITIES Issuance of long-term senior debt 256,128 - - Addition to unamortized debt expense ( 4,794) - - Retirement of long-term senior debt (Note 6) (161,959) (127,258) (120,715) Decrease in liabilities subject to Chapter 11 proceedings (Notes 2, 4 and 6): Short-term notes payable - ( 2,805) ( 662) Long-term senior debt (121,217) ( 37,958) (67,278) Cash flows from financing activities ( 31,842) (168,021) (188,655) INVESTING ACTIVITIES Proceeds from sale of discontinued operations (Note 3) - - 5,837 Additions to property, plant and equipment, net of normal retirements (68,901) ( 63,646) ( 64,719) Decrease (increase in investments ( 128) ( 1,137) 4,222 Decrease (increase) in other assets ( 1,617) ( 5,485) 3,469) (Increase) in net investment in discontinued operations (Note 3) - - ( 202) Cash flows from investing activities (70, 646) ( 67,994) ( 51,393) Net increase (decrease) in cash and cash equivalents 84,496 ( 62,974) ( 30,402) Cash and cash equivalents at beginning of year 105,874 168,848 199,250 Cash and cash equivalents at end of year (Note 6) $ 190,370 $ 105,874 $168,848 Consists of sales and resales, net of repossessions and provision for possible losses, of $207,340,000 $207,000 and $188,319,000 and cash collections on account and payouts in advance of maturity of $183,733,000 $159,813,000 and $145,114,000 for the years ended May 31, 1993, 1992 and 1991, respectively.
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) 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 reclassification that have been made to reflect the liabilities which have been deferred under the Reorganization Proceedings. Interest in the amount of $560,621,000 ($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. 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 or reorganization of the Debtors 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. 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 November 23, 1992. No provision has been included in the accompanying financial statements for any prepetition potential claims and additional liabilities that may arise from resolution of any claims filed. The amount includes as liabilities subject to Chapter 11 proceedings reflected on the Company's consolidated balance sheet consists of the following:
May 31, 1993 1992 (in thousands) Short-term notes payable $ 78,033 $ 78,033 Accounts payable 62,900 62,089 Accrued expenses 95,999 95,995 Income taxes payable 47,066 47,066 Long-term senior debt (Notes 4 and 6) 416,629 537,846 Long-term subordinated debt (Note 6) 1,024,766 1,024,061 Other long-term liabilities 238 238 $1,725,631 $1,845,328
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" mens 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 at a hearing on February 17, 19993, the time within which the Debtors must assume or reject their non-residential real property leases was extended through and including August 11, 1993. On February 25, 1991, the Debtors received Bankruptcy Court approval to assume substantially all of their mineral leases and interests. Because of material uncertainties surrounding the Reorganization Proceedings, the Debtors may seek further extensions of time to assume or reject their other non- residential real property leases. There can be no assurance that such extensions will be granted. 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 Code (the "Exclusive 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. Pursuant to an order of the Bankruptcy Court, unless the Debtors filed a plan or plans of reorganization by June 15, 1992, the Exclusivity Period would expire. 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. The Debtors' joint plan of reorganization provides for payment in full of all allowed claims using cash, issuance of new indebtedness issuance of common stock equal to approximately a 20% ownership interest, or a combination thereof. Under the plan certain claims are impaired; therefore the plan is subject to acceptance by vote of the holders of each such impaired claims. Confirmation of the plan is 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. The Debtors are continuing to meet and negotiate possible changes to the terms of the joint plan of reorganization with the various creditor constituencies. At a hearing held on June 16, 1993, the Bankruptcy Court extended the Acceptance Period through and including August 2, 1993. The Bankruptcy Court further ruled that unless each of the major creditor constituencies, i.e. the Official Committee of Bondholders, the indenture trustee for the senior notes, the Bank Credit Agreement and Working Capital Agreement creditor (as defined in Note 6) and two significant holders of subordinated debt, consented to a further extension of the Acceptance Period, there would be no further extension beyond August 2, 1993. If the Acceptance Period is not extended beyond august 2, 1993, then unless otherwise directed by the Bankruptcy Court at the hearing to be held on July 14, 1993, any party in interest including the official committees, an individual creditor, an individual equity security holder or any indenture trustee may file a plan of reorganization. The process pursuant to which a plan or plans of reorganization of the Debtors may be confirmed necessarily will be complex and may be delayed pending further developments in the asbestos-related litigation involving the Company (see Note 11). Accordingly, the timing of such confirmation necessarily cannot be predicted. A plan or plans of reorganization will be sent, along with a disclosure statement approved by the Bankruptcy Court following a hearing, 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 interest 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. 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, a joint plan or plans of reorganization involving the Debtors may be confirmed or the ultimate terms thereof. NOTE 3 - Discontinued Operations Loss on disposal of discontinued operations consists of adjustments to securities received on disposition of businesses in prior years of $5,775,000 net of an income tax benefit of $3,225,000. Loss from operations relates to a business classified as discontinued in fiscal 1990 and sold in July 1991. NOTE 4 - Instalment Notes Receivable The installment 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 $4,187,316,000 an amount of $3,873,426 is due after one year. Instalment payments estimated to be receivable within each of the five years from May 31, 1993 are $313,890,000, $304,962,000, $293,528,000, $284,911,000 and $277,705,000, respectively, and $2,712,320,000 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 installment notes receivable having at least one payment ninety or more days delinquent was 3.12% and 3.31% of total installment notes receivable at may 31, 1993 and 1992, respectively. On April 19, 1988, all of the installment notes receivable outstanding at February 29, 1988 were transferred from Mid-State Homes, Inc. ("Mid-State"), an indirect wholly-owned subsidiary of the Company, to Mid-State Trust II ("Trust II"), a business trust established under the laws of Delaware, in exchange for the net proceeds from the issuance by Trust II of the Mortgage-Backed Notes described in Note 6. Mid-State is the settlor and sole beneficiary of Trust II. Assets of Trust II, including the installment notes receivable, are not available to satisfy claims of general creditors of the Company and its subsidiaries. Of the gross amount of installments notes receivable at May 31, 1993 of $4,187,316,000 an amount of $1,925,821,000 of such receivables were owned by Trust II. During 1989, Mid-State entered into a credit agreement with several commercial banks which was secured by certain installment notes and related security instruments. The filing of the Reorganization Proceedings was an event of default under this agreement and Mid-State was no longer able to utilize this agreement. 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. Such Asset Backed Notes have a 7-5/8% interest rate and are secured by the installment notes receivable sold by Mid-State to Trust III. The Asset Backed Notes are repayable quarterly in an amount equal to collections on such installment notes receivable net of payment of expenses and interest on the Asset Backed Notes. Net proceeds were utilized to repay in full all outstanding indebtedness due under the Mid-State credit facility (see Note 6) with the excess cash to be used to fund the ongoing operations of the Debtors. Mid-State is the settlor and sole beneficiary of Trust III. Assets of Trust III, including the installment notes receivable, are not available to satisfy claims of general creditors of the Company and its subsidiaries. Of the gross amount of installment notes receivable at May 31, 1993 of $4,187,316,000 an amount of $591,607,000 of such receivables were owned by Trust III. Restricted short-term investments include (i) temporary investment of reserve funds and collections on installment 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 ($72,117,000), (ii) temporary investment of reserve funds and collections on installment notes receivable owned by Mid-State Trust III which are available only to pay expenses of Trust III and principal and interest on the Asset Backed Notes ($10,406,000), (iii) cash securing letters of credit ($4,904,000) and (iv) miscellaneous other segregated accounts restricted to specific uses ($18,193,000), including $6,096,000 from proceeds of sale of assets set aside to offer to purchase Series B and Series C Senior Extendible Reset Notes. NOTE 5 - Property, Plant and Equipment Property, plant and equipment are summarized as follows (see Note 1 regarding purchase accounting):
May 31, 1993 1992 (in thousands) Land and minerals $ 200,000 $ 198,927 Land improvements 17,349 16,556 Buildings and leasehold improvements 99,597 98,947 Mine development costs 116,576 116,576 Machinery and equipment 617,987 567,218 Construction in progress 23,559 567,218 Total $1,075,068 $1,015,483
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 year ended May 31, 1993, 1992 and 1991 was immaterial. Interest paid in cash for the years ended May 31, 1993, 1992, and 1991 was $117,853,000, $109,477,000 and $110,119,000, respectively. NOTE 6 - 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, 1993. 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, 1993, $4,904,000 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 May 27, 1994. During 1989, Mid-State entered into the credit facility described in Note 4. Due to the filing of the Reorganization Proceedings, Mid-State was no longer able to utilize this agreement. On July 1, 1992, all outstanding indebtedness under the facility was repaid in full (see Note 4). Long-term debt, in accordance with its contractual terms, consisted of the following at each year-end:
May 31, 1993 1992 (in thousands) Senior debt: Mortgage-Backed Notes (less unamortized discount of $1,864,000 and $5,884,000) $ 811,112 $ 948,782 Asset Back Notes 229,585 - Mid-State credit facility (Note 4) - 121,217 Bank 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 13,344 7,080 Total Senior Debt 1,463,600 1,486,628 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 $8,280,000 and $8,985,000) 81,720 81,015 Total subordinated debt 1,024,766 1,024,061 Less: Amount included as liabilities subject to Chapter 11 proceedings (Note 2) (1,441,395)(1,561,907) Total consolidated long-term debt $1,046,971 $ 948,782
The Mortgaged-Backed Notes (see Note 4) were issued by Trust II (which did not file a petition for reorganization) in five classes in varying principal amounts with interest rates ranging from 6.95% to 9.625%. Interest on each class notes in 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. The Class A1 and Class A2 Notes have been fully repaid. Payments on Class AV Notes are made on each Payment Date based upon certain specified criteria. Maturities of the balance of these Mortgage-Backed Notes range from April 1, 1998 for the Class A3 Notes to April 1, 2007 for the Class AV Notes. The Class A3 and Class A4 Notes are subject to special principal payments and the Class A4 and Class AV Notes may be subject to optional redemption under specified circumstances. Depending on the rate of prepayments on the underlying installments notes receivable, the Class AV Notes could be fully paid earlier than the scheduled maturity date of April 1, 2007. The scheduled principal amount of notes maturing in each of the five years from May 31, 1993 is $87,000,000. The Asset Backed Notes (see Note 4) 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, July 1, and October 1, based on collection on 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 "Bank Credit Agreement"), of which $700,000,000 was a term loan and $100,000,000 was a revolving loan. The commitment under the Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 11). 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, 1993, $228,249,000 principal amount of loans were outstanding. Under the terms of the Bank Credit Agreement, overdue principal and, to the extent permitted by law, overdue interest bear interest at a to 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 14-1/2% 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 15 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 (values 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 on 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 has 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, inn 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 15 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) 13-1/8% Subordinated Notes, (ii) 13-3/4% Subordinated Debentures and (iii) 10-7/8% Subordinated Debentures (which were sold at a discount to yield 12-3/4% to maturity). The Company's various debt agreements had covenants which, among other things, restricted incurrence of additional indebtedness, dividend payments, mergers, consolidations and sale 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 filling 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 covenant contained ln the various debt agreements. NOTE 7 - Income Taxes Income tax expense (benefit) is made up of the following components:
Current Deferred Current Deferred Current Deferred (in thousands) United States $44,093 $(22,682) $34,349 $(23,494) $21,729 $(5,477) State and Local 4,048 ( 1,131) 1,608 - 3,202 - Total $48,141 $(23,813) $35,957 $(23,494) $24,931 $(5,477)
Federal income tax paid for fiscal 1993, 1992 and 1991 was approximately $35.9 million, $34.1 million and $18.0 million (after reduction for the benefit included in discontinued operations). 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". 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 to mature 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, 1993 1992 1991 (in thousands) Effect of tax loss and tax credit carryforwards $ - $ 4,779 $21,362 Revenues recognized on the installment sales method for tax purposes and on the accrual basis for financial reporting (11,271) (13,123) (13,085) Excess of book over tax depreciation ( 6,149) (10,850) (11,502) Postretirement benefit obligation ( 7,594) - - Amortization of investment tax credit ( 219) ( 384) ( 977) Mine development expense 913 573 270 Timing differences relating to accrued expenses 2,364 ( 3,542) ( 1,117) Other net ( 726) ( 947) ( 428) Total $(22,682) $(23,494) $( 5,477) Statutory tax (benefit) rate 34.0% 34.0% 34.0% Effect of: State and local income tax 2.7 3.0 5.2 Percentage depletion ( 8.3) ( 13.8) (17.7) Amortization of net investment tax credit ( .3) ( 1.1) ( 2.4) Non-conventional fuel credit ( 7.7) ( 15.2) - Amortization of excess of purchase price over net assets acquired 19.0 38.9 28.6 Capital loss carryforward ( 4.7) ( 10.2) - Other, net .4 .2 .8 Effective tax (benefit) rate 34.3% 35.8% 48.5%
Of the total deferred income tax of $85,833,000 at May 31, 1993, $62,608,000 relates to use of the instalment sales method for instalment notes receivable of prior years, $93,701,000 relates to depreciation, $28,119,000 relates to the difference in basis of assets under purchase accounting, ($28,044,000) relates to accrued expenses and $70,551,000) relates to the current year and cumulative effect in change of accounting principle for postretirement benefits other than pensions. The Revenue Act of 1987 eliminated the instalment sales method of tax reporting for instalment sales after December 31, 1987. In fiscal 1991, the Company utilized its net operating loss carryforward for federal income tax purposes of approximately $80.0 million. 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 $9.9 million and $10.4 million in fiscal 1993 and 1992. 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 four years. The Company has established a valuation allowance of $15.8 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 four 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). NOTE 8 - Stockholders Equity KKR Associates, a New York 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 - 9 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 of non-qualified stock options (the "Options"). Options for 1,678,295 shares, all of which are exercisable, were outstanding at May 31, 1993. The exercise price of each Option granted is $5.00 per share, the fair market value at date of grant. During 1993, 1992 and 1991 options for 384,909, 16,591 and 66,364 shares were canceled. NOTE 10 - 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 11 - 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-11) 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 injuring to the health of persons exposed to asbestos-containing products. Original Jim Walter has 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 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 costs to Celotex to date of settling or otherwise disposing of asbestos-related lawsuits has been very substantial and that a substantial portion of such costs 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 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 exclusion, (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 Rapid-American 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 co-defendant 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 (ii) 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, 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 officer 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 alleged, 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 substantial 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' motion 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 requests 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 liabilities 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 asset 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, 990, 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 finding 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 Declaration Judgement 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 or 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 Judgement 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 Judgement 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 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 has been lifted, the Declaratory Judgment Proceeding has gone forward in the Bankruptcy Court under schedules that were set by the Bankruptcy Court. Discovery in the Declaratory Judgement 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 judgement in the Declaratory Judgement 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 Judgement and supporting affidavits. On April 9, 1992, the asbestos claimants filed their Response to Debtors' Motion for Summary Judgement, and on May 7, 1992, filed a Supplemental Response to the Debtors' Motion for Summary Judgement. On April 16, 1992, oral arguments were heard by the Bankruptcy Court on the Debtors' Motion for Summary Judgement. On May 29, 1992, the Debtors filed their Statement of Undisputed Facts and Memorandum f Law in Support of their Motion for Summary Judgement. on May 29, 1992, asbestos claimants filed their Brief in Opposition to Debtors' Motion for Summary Judgement. On August 25, 1992, the Bankruptcy Court entered an order denying the Debtors' Motion for Summary Judgement. 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 Judgement 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 which remain 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. Discussions between the parties are continuing. 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 tentatively agreed to stipulate to certain dates contained within the Debtor's proposal; said stipulation is currently being negotiated. 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. While the Debtors believe they will prevail in the Declaratory Judgment Proceeding, there can be no assurance that the Bankruptcy Court will grant the Debtors the relief sought, or that if the Bankruptcy Court rules in favor of the Debtors on these complaints, its ruling will be affirmed on appeal. Moreover, the Debtors necessarily cannot predict the timing of any Bankruptcy Court or 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 Holding 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. During the latter part of February, 1991, the Union City, California plant of U.S. Pipe received a notice from the Bay Area Air Quality Management District ("BAAQMD"), San Francisco, California, informing U.S. Pipe that an initial health risk assessment report submitted to said agency by U.S. Pipe on or about January 29, 1991 was unacceptable because of alleged failure to conform with reporting guidelines pursuant to the California Air Toxic "Hot Spots" Information and Assessments Act of 1987 (A.B. 2588). The potential monetary sanctions that could be imposed as a result thereof might be as high as $450,000. On or about April 1, 1991, U.S. Pipe submitted a revised health risk assessment report which was accepted by the agency, thereby stopping the accumulation of any further potential monetary sanctions. U.S. Pipe believes that there are mitigating facts, as well as valid legal defenses, that could reduce or eliminate the imposition of any monetary sanctions. U.S. Pipe is cooperating fully with the BAAQMD. It is unknown at the present time whether any change in operating procedures or any capital expenditures might be required as a result of this matter. On May 8, 1991, U.S. Pipe submitted to the BAAQMO a revised health risk assessment report supplementing the April 1991 submission. In December 1991, U. S. Pipe receive notification from the BAAQMO that it must send individual letters to affected residents and conduct a public hearing on the health risk assessment. The letter to such residents was sent on March 19, 1992, and the public hearing was held April 2, 1992. A plan of action detailing the current status was sent to BAAQMD in June 1992 and implemented thereafter. A required quarterly letter was sent to residents on July 7, 1992. Thereafter, U.S. Pipe submitted a plan for additional corrective action to the air pollution control system. After agency approval, the changes were made and additional testing was conducted. A new health risk assessment is being prepared for submission to BAAQMO. Quarterly letters continue to be sent to residents as required by AB 2588. On April 4, 1991, Secretary of Labor, Lynn Martin, announced that the United States Department of Labor has cited more than 500 coal mining firms for alleged tampering with coal-dust samples used to monitor compliance with regulations designed to protect miners from black lung disease lung disease. The public announcement, indicated to be following a 20-month investigation, a also indicated that the Mine Safety and Health Administration ("MSHA") has issued a total of 4,710 citations to operators of approximately 847 coal mines that allegedly submitted questionable samples, including approximately 89 such alleged samples from Jim Walter Resources' four active mines located in Tuscaloosa and Jefferson Counties, Alabama. MSHa has proposed penalties against Jim Walter Resources totaling $151,600 for these alleged violations. The public announcement indicated MSHA may also pursue criminal investigations related to the alleged tampering with coal-dust samples. Neither the Company's management nor Jim Walter Resources' management had any prior knowledge of any such investigations or citations until the public announcement and, therefore, cannot comment at this time on how such conclusions were reached, whether such conclusions are valid or whether any further citations may be issued against the Company and/or Jim Walter Resources. The Company has conducted a thorough internal investigation and found absolutely no factual basis to support such allegations. The Company believes that, given the hugh number of companies cited, the thousands of samples involved, and the public statement of the President of the National Coal Association that even some samples taken by MSHA inspectors themselves were "abnormal", suggests at least the possibility of flaws in the testing procedures and that an independent investigation of the entire sample measuring process is not only called for but should be mandated. The current schedule required joint discovery to be concluded by May 1992, with individual discovery commenced thereafter. Joint discovery was completed in June 1992. A trial held before the Federal Mine Safety and Health Commission in Washington, D.C. as to all common issues commenced on December 1, 1992 and concluded on February 22, 1993. The parties have filed their briefs and reply briefs. A decision is now pending. NOTE 12 - 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, 1993, 1992 and 1991, was $16.5 million, $20.1 million and $20.7 million, respectively. 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 follows:
For the years ended May 31, 1993 1992 1991 (in thousands) Service cost-benefits earned during the period $ 5,233 $ 4,849 $ 4,105 Interest cost on projected benefit obligation 15,634 14,695 13,846 Actual return on assets (18,131) (25,212) (16,254) Net amortization and deferral 3,174 11,954 3,927 Net pension costs $ 5,910 $ 6,286 $ 5,624
The following table sets forth the funded status of Company administered plans:
May 31, 1993 May 31, 1992 Plans in which Plans in which Assets exceed Accumulated Assets exceed Accumulated accumulated benefits accumulated benefits benefits exceed assets benefits exceed assets Actuarial present value of accumulated benefit obligations: Vested benefits $115,915 $ 37,492 $104,037 $ 41,662 Non-vested benefits 4,639 1,626 4,225 2,018 $120,554 $ 39,118 $108,262 $ 43,680 Plan assets at fair value, primarily stocks and bonds $176,551 $ 24,926 $155,585 $ 27,688 Projected benefit obligations 149,258 39,118 135,763 44,482 Plan assets in excess of (less than) projected benefit obligations 27,293 (14,192) 19,822 (16,794) Unamortized portion of transition (assets) obligation at June 1, 1986 (12,546) 5,709 (14,471) 7,077 Unrecognized net loss (gain) from actual experience different from that assumed ( 5,318) 79 ( 1,759) 454 Prior service cost not recognized 985 2,540 894 2,328 Contribution to plans after measurement date 1,369 771 1,327 917 Prepaid (accrued) pension cost 11,783 ( 5,093) 5,813 ( 6,018) Additional liability - ( 8,224) - ( 9,203) Prepaid pension cost (pension liability) recognized in the balance sheet $ 11,783 $(13,317) $ 5,813 $(15,221)
The projected benefit obligations were determined using an assumed discount rate of 9.0% in fiscal 1993 and fiscal 1992 and, where applicable, an assumed 6% rate of increase in future compensation levels. 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 of 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 $24.0 million at May 31, 1993. 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 the fourth quarter of 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. The annual accrual under the new accounting method amounts to $23.5 million before taxes. If 1993 expense had been determined under the cash method used previously, the amount recognized would have been $2.7 million before taxes. Adoption of this standard has no impact on cash flow. Summary information is set forth below:
May 31, 1993 (in thousands) Accumulated postretirement benefit obligation: Retirees $ 70,220 Fully eligible, active participants 23,493 Other active participants 96,192 $189,905 May 31, 1993 (in thousands) Net periodic postretirement benefit cost: Immediate recognition of transition obligation $166,431 Service cost, benefits attributed to service during the year 8,495 Interest cost on accumulated post-retirement benefit obligation 14,979 $189,905
The principal assumptions used to measure the accumulated postretirement benefit obligation include a discount rate of 9% and a health care cost trend rate of 14% declining to 6.5% over a twelve year period and remaining level thereafter. A one percent increase in the health care cost component would increase the accumulated postretirement benefit obligation by approximately $28.5 million and increase net periodic cost for 1993 by approximately $4.4 million. Certain subsidiaries of the Company maintain profit sharing plans. The total cost of these plans for the years ended May 31, 1993, 1992 and 1991 was $3.0 million, $2.7 million and $2.5 million, respectively. NOTE 13 - 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 11) 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 sort-term investments) and short-term investments-restricted - The carrying amount reported in the balance sheet approximates fair value. Installment notes receivable - In connection with the Reorganization Proceedings, three different investment ranking firms have made estimates of the fair value of the Company's portfolio of instalment notes receivable. These estimates ranged from $756 million to $944 million as compared to the net carrying amount reported in the balance sheet of $346 million (net of indebtedness of $1.041 billion secured by certain of the installment notes receivable). All three firms used discounted cash flow methodologies but their assumptions as to interest rates and credit losses varied. Values of mortgaged-backed instruments such as the installment 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 14 - Segment Information Information relating to the Company's business segments is set forth on pages F-35 and F-36. NOTE 15 - 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 6). Summarized financial information for the Senior Note Issuers and the Subordinated Note Issuers is set forth below:
Senior Note Issuers Subordinated Note Issuers For the years ended May 31, For the years ended May 31, 1993 1992 1991 1993 1992 1991 (in thousands) (in thousands) INCOME DATA Net sales and revenues $ 858,560 $ 932,056 $ 903,883 $ 510,944 $ 516,368 $ 488,032 Cost of sales (exclusive of depreciation, depletion and amortization) 630,917 730,655 691,459 390,550 384,346 362,037 Other operating expenses 103,257 119,224 112,956 74,221 77,013 73,900 Postretirement health benefits 19,307 - - 5,870 - - Chapter 11 costs 4,845 3,000 3,008 2,933 1,664 1,650 Interest and amortization of debt expense 43,092 45,990 48,663 28,625 30,226 34,620 Amortization of excess purchase price 21,498 21,431 21,394 23,244 23,181 23,137 35,644 11,756 26,403 (14,499) ( 62) ( 7,312) Provision for income taxes (14,785) 392 (10,437) ( 3,469) ( 8,000) ( 4,367) Income (loss) from continuing operations before cumulative effect of accounting change 20,859 12,148 15,966 (17,968) ( 8,062) (11,679) Discontinued operations: Loss from operations - - ( 433) - - ( 433) Cumulative effect of change in accounting principle - postretirement benefits other than pensions (net of income tax benefit) (82,513) - - (26,725) - - Net income (loss) $(61,654) $12,148 $15,533 $(44,693) $(8,062) $(12,112)
Senior Note Issuers Subordinated Note Issuers May 31, May 31, 1993 1992 1991 1993 1992 1991 (in thousands) (in thousands) ASSETS Cash (includes short-term investments) $ 23,753 $ 21,531 $ 21,705 $ 23,714 $ 21,479 $ 21,570 Short-term investments, restricted 8,652 10,986 20,599 5,699 8,195 9,416 Trade and other receivables, net 114,169 112,877 107,416 72,582 70,436 73,793 Inventories 128,647 129,848 144,594 93,384 90,534 87,794 Prepaid expenses 4,921 5,531 6,501 3,300 3,938 4,697 Intercompany receivables 1,723,343 1,545,659 1,276,807 1,264,689 1,153,071 910,131 Property, plant and equipment, net 525,779 523,763 537,747 172,962 173,930 171,715 Unamortized debt expense and other assets 33,563 39,520 46,415 25,671 32,433 38,796 Excess of purchase price over net assets acquired 305,673 327,171 348,602 330,568 353,812 376,993 $2,868,500 $2,716,886 $2,510,386 $1,992,569 $1,907,828 $1,694,905 LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) Bank Overdrafts $ 13,590 $ 21,347 $ 15,183 $ 9,758 $ 14,108 $ 11,298 Accounts payable and accrued expenses 115,162 123,105 120,366 57,594 61,878 61,690 Income taxes payable 7,209 6,557 6,639 5,036 4,853 4,914 Deferred income taxes 63,514 128,401 153,185 40,812 66,433 78,386 Intercompany payables 578,132 483,491 296,542 570,337 483,369 293,733 Long-term senior debt 6,264 - - - - - Accrued postpetition interest on secured obligations 152,633 110,821 58,439 104,665 76,741 39,576 Accumulated postretirement health benefits obligation 150,904 - - 48,492 - - Other long-term liabilities 36,178 37,404 32,445 6,949 7,598 3,451 Liabilities subject to Chapter 11 proceedings 1,731,865 1,731,406 1,764,381 1,444,575 1,444,253 1,444,200 Stockholder's equity (deficit) 13,049 74,354 63,206 ( 295,749) ( 251,405) ( 242,343) $2,868,500 $2,716,886 $2,510,386 $1,992,569 $1,097,828 $1,694,905
WALTER INDUSTRIES, INC. AND SUBSIDIARIES SEGMENT INFORMATION
For the years ended May 31, 1993 1992 1993 (in thousands) Sales and Revenues: Homebuilding and related financing $ 419,378 $ 409,071 $ 389,137 Building materials 51,539 46,887 43,991 Industrial products 171,541 165,007 153,012 Water and waste water transmission products 320,740 324,400 305,458 Natural resources(e) 351,017 419,274 423,867 Corporate 4,771 1,942 10,932 Consolidated sales and revenues(a)(f) $1,318,986 $1,366,581 $1,326,397 Contributions to Operating Income: Homebuilding and related financing $ 88,902 $ 82,718 $ 66,954 Building materials 2,354 2,343 1,088 Industrial products 9,997 11,226 8,869 Water and waste water transmission products 14,990 24,492 24,541 Natural resources 50,807 16,020 61,144 167,050 136,799 162,596 Less-Unallocated corporate interest and other expense(b) (96,128) (101,994) (122,510) Income taxes (24,328) (12,463) (19,454) Income from continuing operations(c) $ 46,594 $ 22,342 $ 20,632 Depreciation, Depletion and Amortization: Homebuilding and related financing $ 3,113 $ 3,059 $ 3,445 Building materials 1,421 1,103 1,147 Industrial products 8,654 9,118 8,277 Water and waste water transmission products 15,079 14,492 14,132 Natural resources 40,714 53,556 46,817 Corporate 1,502 1,473 1,281 Total $ 70,483 $ 82,801 $ 75,099 Gross Capital Expenditures: Homebuilding and related financing $ 6,284 $ 6,357 $ 3,893 Building materials 998 709 1,151 Industrial products 8,344 7,284 10,049 Water and waste water transmission products 12,084 16,379 9,990 Natural resources 42,941 36,993 42,434 Corporate 1,057 627 1,529 Total $ 71,708 $ 68,349 $ 69,046 Identification Assets: Homebuilding and related financing $1,907,199 $1,899,737 $1,891,112 Building materials 57,343 57,564 60,508 Industrial products 129,392 129,723 130,589 Water and waste water transmission products 478,234 496,890 513,124 Natural resources 475,533 477,150 512,096 Corporate (d) 175,533 110,202 168,782 Total $3,223,234 $3,171,266 $3,276,211
_______________ (a) Inter-segment sales (made primarily at prevailing market prices) are deducted from sale of the selling segment and are insignificant in amount with the exception of the sale of the Industrial Products Group o the Water and Waste Water Transmission Product Group of $18,667,000, $16,661,000 and $15,255,000 and sales of the Natural Resources Group to the Industrial Products Group of $7,121,000, $9,551,000 and $6,619,000 in 1993, 1992 and 1991, respectively. (b) Excludes interest expense incurred by the Homebuilding and Related Financing Group of $137,945,000, $136,955,000 and $140,624,000 in 1993, 1992 and 1991, respectively. The balance of unallocated expenses is attributable to all groups and cannot be reasonable allocated to specific groups. (c) Includes postretirement health benefits of $23,474,000 in 1993. A breakdown by segment is as follows: (in thousands) Homebuilding and related financing $ 1,991 Building materials 463 Industrial products 2,821 Water and waste water transmission products 4,136 Natural resources 13,437 Corporate 626 $23,474 (d) Primarily cash and corporate headquarters buildings and equipment. (e) Includes sales of coal of $321,834,000, $392,674,000 and $391,130,000 in 1993, 1992 and 1991, respectively. (f) Export sales, primarily coal, were $183,188,000, $206,546,000 and $215,453,000 in 1993, 1992 and 1991, respectively. Export sales to any single geographic area do not exceed 10% of consolidated net sales and revenues. EXHIBIT X.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 of Page F-1), particularly the "Segment Information" on pages F-35 and F-36 which presents sales and operating income by operating group. The Company adopted Statement of Financial Accounting Standards No. 106 "Employers Accounting for Postretirement Benefits Other Than Pensions" (FAS 106) in the fourth quarter of fiscal 1993 (see Note 12 of Notes to Financial Statements). 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"). 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 15 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, 1993 and 1992 Net ales 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 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 the prior year 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 Company ("alabama Power") from the period July through September 1992 to the period January through June 1993. Prior year 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 period due to the hoist accident and an April 1992 workforce reduction which has 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 the current year is 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 the current year. 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 United Mine Workers of America ("UMWA") ($2.4 million) in August 1991. An interim agreement has been reached between the Independent Bituminous Coal Bargaining Alliance ("IBCBA"), formed in 1992, of which Jim Walter Resources, Inc. is a member, and the UMWA. The agreement extends all terms and conditions of the National Bituminous Coal Wage Agreement of 1988, except for certain modifications including employment security to union members and an emphasis on labor/management cooperation. The agreement is for a period of one year, from June 30, 1993 to June 30, 1994, or until 30 days after the ratification of a successor national agreement. The agreement is separate from the negotiations between the UMWA and the Bituminous Coal Operators Association ("BCOA") and has no effect on the UMWA's selective strike that began May 10, 1993 against the member companies of the BCOA. 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 to 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 is 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 reflects strong competition in virtually every Jim Walter Homes sales region and the current year having a one week shorter sales period than 1992. Jim Walter Homes' backlog at May 31, 1993 was 1,831 units (all of which are expected to be completed prior to the end of fiscal 1994) compared to 1,637 units at May 31, 1992. Time charge income (revenues received from Mid-State's installment note portfolio) increased from $195.0 million in 1992 to $218.7 million in 1993. The increase in time charge income is attributable to the continued 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, industrial castings and aluminum foil were partially offset by lower sales volumes of aluminum coil, resin coated sand, patterns and tooling, furnace coke and mineral wool and lower selling prices for aluminum foil and coil, furnace coke, resin coated sand and patterns and tooling. The Group's 1993 adjusted operating income of $12.8 million exceeded he prior year by $1.6 million. The improved performance was the result of the increased sales volumes and improved gross profit margins for industrial 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. Prior year results 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 the prior year 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 the fourth quarter of 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 amounts to $23.5 million. See Note 12 of the Notes to Financial Statements. Interest and amortization of debt discount and expense decreased $5.5 million. The decrease is the result of lower outstanding debt balances on secured obligations (see Notes 2, 4 and 6 of Notes o 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 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, 4 and 6 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 income for 1993 and 1992 reflects all of the previously mentioned factors as well as the impact of a slightly lower effective income tax rate (see Note 7 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 they ear 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 rom 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 continued 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 grater 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 coil products, furnace and foundry coke, mineral wool, chemicals, resin-coated sand and tooling, partially offset by lower selling prices for aluminum foil and coil 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 coil, 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. 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 Company in fiscal 1992 under a separate sort-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 Blue Creek Mine No. 5 ("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 Mine Safety and Health Administration ("MSHA") regarding a new ventilating arrangement, designed to reduce the contact between oxygen and sulfur, for the long wall 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 reflects 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 is 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 coil, 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 and the Mortgage-Backed Notes (see Notes 4 and 6 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, 4 and 6 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 7 of Notes to Financial Statements) and the effect of discontinued operations (in 1991) explained in Note 3 of Notes to Financial Statements, partially offset by decreased interest income from Chapter 11 proceedings ($8.9 million) due to lower funds available for investment and lower interest rates. Years ended May 31, 1991 and 1990 Net sales and revenues for the year ended May 31, 1991 decreased #$49.9 million, or 3.6%, from the prior year. A 5.6% decrease in volume was partially offset by a 2.0% increase in price and/or product mix. The decrease in volume of the many different product lines of the Company's subsidiaries principally resulted from adverse economic and market conditions. The decrease in net sales and revenues was the result of lower sales in the Building Materials, Industrial Products, Water and Waste Water Transmission Products and Natural Resources Group, partially offset by an increase in sales and revenues in the Homebuilding and Related Financing Group. Building Materials Group sales and revenues were $1.6 million, or 3.4%, below the prior year. This decrease principally resulted from lower sales volumes of window components and metal building products due to reduced levels of residential construction. Operating income decreased $800,000 to $1.1 million, reflecting the lower sales volumes and reduced operating efficiencies in the metal and foundry products business due to the lower sales volume, partially offset by reduced aluminum costs, a major raw material in the window components business. Industrial Products Group sales and revenues were $3.4 million, or 2.2%, below the prior year. The decrease resulted from lower sales volumes of furnace and foundry coke, mineral wool and aluminum coil (the latter two as a result of reduced construction) coupled with reduced selling prices for furnace coke and aluminum foil and coil, partially offset by improved aluminum foil sales volume. The reduced sales volumes and prices resulted from highly competitive market conditions caused by the adverse economic environment. Operating income of $8.9 million was $12.5 million below the prior year. Margin deterioration, including the effect of the lower selling prices, occurred in almost all product lines but was particularly acute in furnace coke and aluminum foil and coil. Reduced operating efficiencies at the Charleston, South Carolina aluminum rolling mill due to roof failures over the melting furnaces also contributed to the lower profitability. The roof failures were a delayed effect of the rapid cool down of the furnaces during Hurricane Hugo in September 1989. Repairs to the furnaces were completed in November 1990. In December 1990, the hourly workers at the Sloss Industries manufacturing facilities in Birmingham, Alabama went on strike. Settlement was reached in March 1991. During the 102 day strike period, salaried personnel operated the facilities. In addition, there was an abnormal $1.6 million bad debt in the aluminum operation in fiscal 1991. Fiscal 1990 results were adversely affected by a 37 day strike at the resin-coated sand and tooling operation and the effects of Hurricane Hugo on production costs and shipments of aluminum coil and foil. In November 1989, the Burlington, New Jersey industrial castings plant was closed due to continuing poor demand and highly competitive markets for its centrifugally cast metal products; its operating results in 1991 and 1990 and costs of close down in 1990 are included in discontinued operations. Water and Waste Water Transmission Products Group sales and revenues were $29.4 million, or 8.8%, below the prior year. This decrease was the result of lower sales volume due to reduced construction activity and rehabilitation work, principally in the Northeast marketing region, partially offset by slightly higher pricing. Operating income of $24.5 million was $2.4 million below fiscal 1990. The effect of lower sales volumes on this highly capital intensive product group was the primary reason for the lower profits, but was partially offset by lower raw material prices, especially scrap, a major raw material component, and improved selling prices. Fiscal 1990 was adversely impacted by strikes of over 50 days each at two of the Group's four pipe plants. The soil pipe and rubber gaskets operations of the Group were closed down at the end of fiscal 1990 and certain of their assets were sold in July 1990; their operating losses in 1991 and 1990 and the loss on sale and costs of close down in 1990 are included in discontinued operations. Natural Resources Group sales and revenues were $31.7 million, or 7.0%, below the prior year. The decrease was the result of lower coal shipments, reduced methane gas sales volume and a $4.5 million gain from the lease of certain rights to develop coalbed methane gas in 1990, partially offset by the higher average selling prices for coal and methane gas and increased outside coal royalty income. A total of 8.89 million tons of coal was sold in 1991 versus 9.96 million tons in 1990, a 10.7% decrease. The average price per ton of coal sold increased 4.1%, from $42.26 in 1990 to $43.99 in 1991. The lower shipments of coal resulted from a reduction in sales of purchased coal, reduced availability from Mine No. 5 resulting from the aforementioned shutdown due to adverse geological conditions and to a temporary rescheduling of shipments under certain export contracts. The Group's operating income of $61.1 million was $20.0 million, or 24.7%, below the prior year reflecting the lower sales volumes, geological and recovery problems which resulted in lower productivity and higher costs per ton of coal produced, especially at Mine No. 5, idle plant costs of $6.5 million due to the previously mentioned shut down of Mine No. 5 and the prior year $4.5 million gain from the lease of certain rights to develop coalbed methane gas. Fiscal 1990 was adversely affected by idle plant costs of $8.7 million resulting from wildcat strikes by the UMWA in June and July 1989. Homebuilding and Related Financing Group sales and revenues exceeded the prior year by $14.0 million, or 3.7%. The improved performance includes a 6.0% increase in the average selling price per home sold from $31,500 in 1990 to $33,400 in 1991 and a slight increase in the number of homes sold, from 5,213 units in 1990 to 5,229 units in 1991. The increase in average selling price in 1991 is primarily attributable to an improved sales mix resulting from the sale of larger sized homes. Jim Walter Homes' backlog at May 31, 1991 was 1,588 units compared to 1,704 units at May 31, 1990. Time charge income (revenues received from Mid- State's instalment note portfolio) increased from $170.7 million in 1990 to $180.3 million in 1991. The increase in time charge income is attributable to the continued 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 $67.0 million exceeded the prior year by $16.2 million, or 31.9%. This improvement reflects the increases in selling prices and number of homes sold, the higher time charge income, improved homebuilding gross profits margins (due mainly to a reduction in lumber prices) and lower interest expense in 1991 ($140.6 million) compared to that incurred in 1990 ($147.7 million). Cost of sales, exclusive of depreciation, of $826.5 million was 75.3% of net sales in 1991 versus $858.3 million and 74.3% in 1990. The cost of sales percentage increase was primarily the result of lower margins on coal (where productivity decreases and resulting cost increases more than offset selling price increases), furnace and foundry coke, mineral wool, metal building and foundry products and aluminum foil and coil and the effect of the strike at Sloss Industries, partially offset by higher margins on homes in 1991, lower idle plant costs associated with the Mine No. 5 problem in 1991 versus the UMWA wildcat strikes in 1990, the effect of the strikes at two of the pressure pipe plants and the resin-coated sand and tooling operation in 1990 and the effect of Hurricane Hugo on aluminum operations in 1990. Selling, general and administrative expenses of $122.9 million were 9.3% of net sales and revenues in 1991 versus $130.2 million and 9.5% in 1990. Expenses in the prior year were adversely impacted by legal costs of $7.5 million associated with asbestos-related litigation described in Note 11 of Notes to Financial Statements and costs related to a proposed refinancing program. Interest and amortization of debt discount and expense decreased $111.5 million from the prior year. Interest on unsecured obligations has not been accrued since the date of the filings of petition for reorganization. Approximately $163.7 million of additional interest expense would have been accrued in 1991 versus approximately $69.6 million for the prior year if the Debtors had not been subject to the Reorganization Proceedings. These amounts are based on balances of the unsecured debt obligations and their interest rates as of December 27, 1989 and do 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. Interest expense also decreased due to a reduction in amounts outstanding under the Mid-State credit facility and the Mortgage-Backed Notes. See Notes 2, 4 and 6 of Notes to Financial Statements. The net income for 1991 and the net loss for 1990 reflects all of the previously mentioned factors as well as the impact of income tax rate differences, decreased Chapter 11 costs and substantially decreased losses from discontinued operations. Financial Condition On December 27, 1989, the Debtors each filed a voluntary petition for reorganization under the Bankruptcy Code in the United States Bankruptcy Court (the "Bankruptcy Court") for the Middle District of Florida, Tampa Division. On December 3, 1990, one additional small subsidiary filed a voluntary petition for reorganization under the Bankruptcy Code. Tow 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 (collectively, the "New 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 t hat 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 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 percentage 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, 1993, interest in the amount of $560.6 million ($163.7 million in the current fiscal year) had not been accrued on unsecured obligations (including $252.3 million in respect of Senior Subordinated Extendible Reset Notes which, prior to the petition date, was payable in additional Senior Subordinated Extendible Reset Notes). These amounts are abased 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, 1993, $4,904,000 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, 1993) 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 May 27, 1994. See Note 6 of Notes to Financial Statements. 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. The Debtors' joint plan of reorganization provides for payment in full of all allowed claims using cash, issuance of new indebtedness, issuance of common stock equal to approximately a 20% ownership interest, or a combination thereof. Under the plan certain claims are impaired; therefore the plan is subject to acceptance by vote of the holders of each such impaired claims. Confirmation of the plan is 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 11 of Notes to Financial Statements). The Debtors are continuing to meet and negotiate possible changes to the terms of the joint plan of reorganization with the various creditor constituencies. The Company's objectives in developing the joint plan of reorganization were based upon the maximization of value for all creditors and shareholders which will result in a viable enterprise with a capital structure that allows for cash flows after reorganization sufficient to meet creditors' obligations (as confirmed by such joint plan or plans of reorganization) and to fund future capital expenditures and growth of operations. There can be no assurance, however, that the liabilities of the Debtors as of the date of confirmation of a plan or plans of reorganization will not be found in the Reorganization Proceedings to exceed the fair value of their assets at such date. This could result in claims being paid at less than 100% of their face value and the equity of the Company's common stockholders being diluted or canceled. See Note 2 of Notes to Financial Statements. Subsequent to the acquisition of Original Jim Walter, the Company undertook a program of corporate reorganizations and asset dispositions pursuant to which the Company, prior to the petition date, restructed and/or disposed of certain of the businesses of Original Jim Walter. Included as part of this program were the complete liquidations of Old Walter Industries, Jim Walter Resources and United Land Corporation ("United Land") as set forth in the Plan of Complete Liquidation (the "Liquidation Plans") adopted by their respective shareholders in 1988. As a result of the Reorganization Proceedings, the implementation of each of the Liquidation Plans required approval of the Bankruptcy Court. The Company, for and on behalf of itself and the others Debtors filed a motion in the Bankruptcy Court for an order authorizing the completion of the previously adopted Liquidation Plans. Such motion included a request that the rights of the creditors of the Debtors for purposes of determining the distributions to which they may be entitled under a plan or plans of reorganization (or in any liquidation proceeding) be determined without regard to subsequent actions that might be taken to complete such Liquidation Plans. At hearings held on September 5, 1990 and October 9, 1990, the Bankruptcy Court authorized the Debtors to complete the Liquidation Plans and a definitive order granting such relief was issued by the Bankruptcy Court on November 5, 1990. In December 1990, Old Walter Industries, Jim Walter Resources and United Land filed a motion with the Bankruptcy Court to assign and assume certain executory contracts in connection with t he completion of the Liquidation Plans. One such executory contract was a material coal sales agreement entered into in 1979 (for a term of 20 years) between Alabama Power Company ("APCO") and Jim Walter Resources and Amendment No. 6 thereto, which was signed in 1988 and which provides for delivery of up to 3,000,000 tons of coal annually. APCO filed an objection the assignment and assumption of such contract alleging that Jim Walter Resources was in default by virtue of its failure to maintain a $250 million shareholders equity and a current asset to current liability ratio of at least 1:1, as required by Amendment No. 6. APCO also asserted that certification requirements under such Amendment No. 6 requires a report from Jim Walter Resources' auditors, and that the report received was "not without qualification because it was subject to significant uncertainties especially in connection with the Reorganization Proceedings and massive amounts of debt which are in default and on which Jim Walter Resources is jointly and severally liable." APCO asserted that these liabilities, as well as other significant uncertainties, created a default under such agreement. APCO also asserted that the price paid by APCO under such agreement is in excess of the short-term price for coal and is directly connected to the long-term commitment of capital, the reliability of a supply of coal under such agreement, and the creditworthiness of Jim Walter Resources and, thus, constitutes a financial accommodation under Section 365(c)(2) of the Bankruptcy Code. This section prohibits the assumption or assignment of an executory contract "if such contract is a contract to make a loan or extend other debt financing or financial accommodations to or for the benefit of the debtor. . . ." A final hearing was held on February 13, 1991 at which time testimony was taken and argument of counsel was presented to the Bankruptcy Court. At the conclusion of the proceedings, the Bankruptcy Code orally ruled that the financial condition of Jim Walter Resources did not constitute a default under the applicable provisions of Section 365 of the Bankruptcy Code and that the assignee had demonstrated adequate assurances of its current and future ability to perform the executory contract, and that such executory contract did not constitute an agreement to make a loan or to extend debt financing. The Bankruptcy Court further indicated that it was not prepared to make a final determination at that time that the contract did not constitute a financial accommodation under Section 365(c)(2) of the Bankruptcy Code. Subsequently, on March 4, 1991, the Bankruptcy Court entered its order allowing the assumption and assignment of such agreement, following which an amended order was entered on March 13, 1991 ex parte on the Court's own motion for purposes of reconsidering the March 4, 1991 order, which left open the question as to whether or not such agreement was in fact a contract for financial accommodation and thus within the exceptive provisions of Section 365(c)(2) of the Bankruptcy Code which renders such contracts nonassumable. Upon such reconsideration, the Bankruptcy Court found it unnecessary to hold any additional hearings on the remaining issues and concluded that the contract was not within the exceptive provisions for assumability, and thus none of the exceptions set forth in Section 365(c)(2) applied. The Bankruptcy Court further stated that it was also satisfied that based upon the record established at the final evidentiary hearing, the prospective assignee, JW Resources, Inc. was financially able to perform the contract and thus met the requirements of Section 365(b)(1)(c). On March 14, 1991, APCO filed its Notice of Appeal to the United States District Court for the Middle District of Florida, Tampa Division (the "District Court") from the Order Allowing Assumption and Assignment of Executory Contract with APCO of the Bankruptcy Court entered on March 4, 1991, and the Amended Order on Motion to Assume and Assign Executory Contract with APCO entered on March 13, 1991. Such appeal is presently pending in the District Court. The APCO contract provides for a review of billing price and price components prior to July 1, 1993. Officials of Jim Walter Resources and APCO have been meeting since 1992 in an attempt to satisfy the contract provisions, however numerous disputes have arisen. On June 28, 1993, Jim Walter Resources filed in the Bankruptcy Court a Complaint for Declaratory Judgment asking the Bankruptcy Court to interpret certain of the provisions of the contract relating to the billing price to be in effect July 1, 1993. Although management believes the pricing disputes will ultimately be resolved favorably, the outcome cannot presently be determined. The Jim Walter Resources and United Land Liquidation Plans were completed on March 26, 1991. On April 1, 1991, Old Walter Industries distributed the capital stock of Jim Walter Homes and Mid-State Homes to Homes Holdings Corporation and Mid-State Holdings Corporation, respectively. Old Walter Industries then merged into Hillsborough Holdings Corporation. Hillsborough Holdings Corporation changed its name to Walter Industries, Inc. in connection with such merger. 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 these principal purposes: (1) for working capital requirements (including the financing of homes 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, 1993, the Company had free cash balances and short-term investments of approximately $129 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 (see Note 4 of the Notes to Financial Statements). At the present time, 97% of all home sales are financed by Mid-State 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 1994 include capital expenditures of approximately $94 million. The Reorganization Proceedings have had no adverse impact on capital expenditures. Greater cash flow from operations in future years in 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 X.B.1 WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FEBRRUARY 28, 1994 [CAPTION] WALTER INDUSTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) For the nine months ended February 28, ----------------------------- 1994 1993 ---------- ---------- (Note 7) (in thousands) Sales and revenues: Net sales $788,800 $786,935 Time charges 176,402 161,165 Miscellaneous 16,443 19,614 Interest income from Chapter 11 proceedings (Note 2) 3,385 3,395 ------------ ----------- 985,030 972,109 ------------ ----------- Costs and expenses: Cost of sales 623,357 596,717 Depreciation, depletion and amortization 51,471 51,775 Selling, general and administrative 94,682 95,258 Postretirement health benefits (Note 7) 19,189 17,605 Provision for possible losses 3,593 3,639 Chapter 11 costs (Note 2) 10,870 6,461 Interest and amortization of debt discount and expense (Interest on unsecured obligations not accrued - $122,764,000 in 1994 and 1993) (Note 2) 118,129 127,239 Amortization of excess of purchase price over net assets acquired (Note 1) 29,301 29,530 ------------ ----------- 950,592 928,224 ------------ ----------- Provision for income taxes (Note 8): Current (39,382) (43,272) Deferred 14,010 21,005 ------------ ----------- Income before cumulative effect of accounting change 9,066 20,618 Cumulative effect of change in accounting principle - postretirement benefits other than pensions (net of income tax benefit of $61,823,000) (Note 7) - (104,608) ------------ ----------- Net income (loss) 9,066 (83,990) Retained earnings (deficit) at beginning of period (441,695) (383,681) ------------ ----------- Retained earnings (deficit) at end of period ($432,629) ($467,671) ============ ===========
[CAPTION] WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET February 28, ----------------------------- 1994 1993 ---------- ---------- (Note 7) (in thousands) ASSETS Cash (includes short-term investments of $157,065,000 and $171,187,000 (Note 3) $196,367 $200,062 Short-term investments, restricted (Note 4) 104,036 102,050 Installment notes receivables (Note 4) 4,196,355 4,161,273 Less - Provision for possible losses (26,477) (26,464) Unearned time charges (2,798,419) (2,750,195) Trade receivables, less $8,258,000 and $7,174,000 provision for possible losses 123,391 118,942 Other notes and accounts receivable 14,823 15,452 Inventories, at lower of cost (first in, first out or average) or market: Finished goods 92,259 95,492 Goods in process 26,341 23,834 Raw materials and supplies 49,825 47,686 Houses held for resale 2,186 1,882 Prepaid expenses 14,366 9,066 Property, plant and equipment, at cost 1,099,350 1,048,335 Less - Accumulated depreciation, depletion and amortization (443,375) (393,753) Investments 5,690 5,525 Unamortized debt expense 35,100 51,823 Other assets 38,705 37,544 Excess of purchase price over net assets acquired (Note 1) 432,137 471,369 ------------- ------------ $3,162,660 $3,219,923 ============= ============
WALTER INDUSTRIES, INC. AND SUBSIDIARIES ---------------------------------------- CONSOLIDATED BALANCE SHEET -------------------------- February 28, -------------------- 1994 1993 ________ ________ (Note 7) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (in thousands) - ---------------------------------------------- Bank overdrafts (Note 3) $34,029 $21,435 Accounts payable (Note 2) 51,385 52,006 Accrued expenses (Note 2) 121,000 114,565 Income taxes payable (Notes 2 and 8) 29,163 24,693 Deferred income taxes (Note 8) 71,823 88,641 Long-term senior debt (Notes 2, 4 and 5) 907,504 1,077,694 Accrued postpetition interest on secured obligations (Note 2) 245,462 198,072 Accumulated postretirement health benefits obligation (Note 7) 206,380 184,036 Other long-term liabilities (Note 2) 46,240 47,876 Liabilities subject to Chapter 11 proceedings (Notes 2, 4 and 5) 1,727,345 1,725,014 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 (432,629) (467,671) Excess of additional pension liability over unrecognized prior years service cost (1,646) (2,042) ----------- ----------- Total stockholders' equity (deficit) (278,671) (314,109) ----------- ----------- $3,162,660 $3,219,923 ----------- ----------- ----------- -----------
WALTER INDUSTRIES, INC. AND SUBSIDIARIES ---------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ For the nine months ended February 28, ------------------------- 1994 1993 ________ ________ (Note 7) OPERATIONS (in thousands) - ---------- Net income loss) $9,066 ($83,990) Chares to income not affecting cash: Depreciation, depletion and amortization 51,471 51,775 Provision for deferred income taxes (Note 8) (14,010) (21,005) Accumulated postretirement health benefits obligation (Note 7) 16,475 184,036 Adjustment to deferred taxes for accounting change (Note 7) - (61,823) Provision for other long-term liabilities (202) (325) Amortization of excess of purchase price over net assets acquired (Note 1) 29,301 29,530 Amortization of debt discount and expense 13,514 14,444 105,615 112,642 Decrease (increase) in: Short-term investments, restricted (note 4) 1,584 4,904 Installment notes receivable, net 15,400 (21,362) Trade and other receivable, net 13,346 18,595 Inventories (3,972) (1,628) Prepaid expenses (6,464) (928) Increase (decrease) in: Bank overdrafts (Note 3) 17,108 (6,244) Accounts payable (1,311) (2,382) Accrued expenses 4,762 (3,355) Income taxes payable (Note 8) 10,028 14,669 Accrued postpetition interest on secured obligations 35,263 20,478 Liabilities subject to Chapter 11 proceedings (Note 2): Accounts payable 1,294 477 Accrued expenses (152) (98) Cash flows from operations 192,501 135,768 FINANCING ACTIVITIES - -------------------- Issuance of long-term senior debt (Note 4) 2,000 249,864 Retirement of long-term senior debt (142,887) (122,285) Addition to unamortized debt expense (Note 4) - (5,159) Decrease in liabilities subjec to Chapter 11 proceedings (Notes 2 and 4): Long-term senior debt - (121,217) Cash flows from financing activities (140,887) 1,203 INVESTING ACTIVITIES - -------------------- Additions to property, plant and equipment, net of normal retirements (44,406) (41,735) (Increase) in investments (122) (85) (Increase) in other assets (1,089) (963) Cash flows from investing activities (45,617) (42,783) Net increase in cash and cash equivalents 5,997 94,188 Cash and cash equivalent at beginning of period 190,370 105,874 Cash and cash equivalent at end of period (Note 3) $196,367 $200,062
WALTER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 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 - Chapter 11 Proceedings On December 27, 1989, the Company and 31 of its subsidiaries (together with 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 have not filed petitions of reorganization. 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. The financial statements include adjustments and reclassifications that have been made to reflect the liabilities which have been deferred under the Chapter 11 filings. Interest on unsecured obligations in the amount of $683,385,000 at February 28, 1994 and $519,700,000 at February 28, 1993 ($122,764,000 for the nine months ended February 28, 1994 and 1993) has not been accrued in the financial statements since the date of the filing of petitions for reorganization. These amounts are based oh the balances of 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. 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 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. 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 flied 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 (in thousands of dollars): February 28, ___________________________ 1994 1993 ____________ __________ Short-term notes payable $ 78,033 $ 78,033 Accounts payable 64,194 62,566 Accrued expenses 95,847 95,897 Income taxes payable 47,066 47,066 Long-term senior debt (Notes 4 and 5) 416,629 416,629 Long-term subordinated debt 1,025,338 1,024,585 Other long-term liabilities 238 238 __________ __________ $1,727,345 $1,725,014 ========== ==========
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. 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 may 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 "Plan") and first amended related disclosure statement. The Plan provides 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 presently proposed to be issued under the Plan), or a combination thereof. In addition, the Plan provides that holders of subordinated debt claims will 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. Such sharing in value is designed to provide compensation to holders of subordinated debt claims during the delay in consummation of the Plan required in order to resolve the asbestos-related litigation. Under the Plan certain claims and the equity interest in the Company are impaired; therefore the Plan is 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 Plan are 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 6). 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 is predicated upon a settlement of the Veil Piercing Litigation which contemplates 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 support the Bondholders Plan and execute the Veil Piercing Settlement Agreement (as said term is defined in the Bondholders Plan) by a date certain, to the Veil Piercing Claims Trust (as said term is defined in the Bondholders Plan). The Bondholders Plan is 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 provides 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 provides for no recovery by the shareholders of the Company unless the shareholders support the Bondholders Plan and execute the Veil Piercing Settlement Agreement by a date certain. Confirmation and effectiveness of the Bondholders Plan are 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 is defined in the Bondholders Plan). On December 28, 1993, 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, 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, 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 is not predicated upon a settlement of the asbestos-related litigation, the plan provides for the issuance of "New Notes" (as said term is defined in the Senior Note Trustee Plan) to fund any settlement which may be approved by the Debtors and the Series B & C Senior Note Trustee. The Senior Note Trustee Plan is premised upon an "Equity Value" (as said term is defined in the Senior Note Trustee Plan) of $783.8 million. The Senior Note Trustee Plan provides 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 is achieved), or a combination thereof. In addition, the Senior Note Trustee Plan provides that the shareholders of the Company shall retain their common stock interests, subject to dilution in the event a settlement of the asbestos-related litigation is reached. Effectiveness of the Senior Note Trustee Plan is subject to various conditions which are similar to the conditions set forth in the Company's 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 an additional party to file, by April 20, 1994, a plan of reorganization and related disclosure statement, (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. The process pursuant to which the Plan or any further amended plan of reorganization filed by the Debtors, the Bondholders Plan, the Bank Agents Plan and the Senior Note Trustee Plan as they may be further amended, or plans filed by other parties in interest, may be confirmed necessarily will be complex and may be delayed pending further developments in the asbestos-related litigation involving the Company (see Note 6). Accordingly, the timing of such confirmation necessarily cannot be predicted. The Plan, the Bondholders Plan, the Bank Agents Plan, the Senior Note Trustee Plan and/or other plans of reorganization will be sent, along with a disclosure statement approved by the Bankruptcy Court following a hearing, 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. 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 Plan, the Bondholders Plan, the Bank Agents Plan, the Senior Note Trustee Plan or any other plans of reorganization that may be filed involving the Debtors 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 increase in instalment notes receivable consists of sales and resales, net of repossessions and provision for possible losses, of $149,105,000 and $156,648,000 and cash collections on account and payouts in advance of maturity of $164,505,000 and $135,286,000 for the nine months ended February 28, 1994 and 1993, respectively. On April 19, 1988, all of the instalment notes receivable outstanding at February 29, 1988 were transferred from Mid-State Homes, Inc. ("Mid-State") to Mid-State Trust II ("Trust II"), a business trust established under the laws of Delaware, in exchange for the net proceeds from the issuance by Trust II of Mortgage-Backed Notes ($696,228,000 outstanding at February 28, 1994, net of $444,000 unamortized discount). Mid-State is the settlor and sole beneficiary of Trust II. Assets of Trust II, 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 February 28, 1994 of $4,196,355,000 with an economic balance of $2,068,121,000, such Mid-State Trust II instalment notes receivable had a gross book value of $1,707,394,000 and an economic balance of $1,012,668,000. During 1989, Mid-State entered into a credit agreement with several commercial which was secured by certain instalment notes and related security instruments. The filing of the Reorganization Proceedings was an event of default under this agreement and Mid-State was no longer able to utilize this agreement. 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 ($209,058,000 outstanding at February 28, 1994) by Trust III which bear an interest rate of 7-5/8%. Such Asset Backed Notes are secured by the instalment notes receivable sold by Mid-State to Trust III. The Asset Backed Notes are repayable quarterly in an amount equal to collections on such instalment notes receivable net of payment of expenses and interest on the Asset Backed Notes. 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. Mid-State is the settlor and sole beneficiary of Trust III. Assets of 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 February 28, 1994 of $4,196,355,000 such Mid-State Trust III instalment notes receivable had a gross book value of $541,472,000 and an economic balance of $263,962,000. 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 ($71,343.000), (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 ($12,281,000), (iii) cash securing letters of credit ($3,570,000) and (iv) miscellaneous other segregated accounts restricted to specific uses $16,842,000, including $6,221,000 from proceeds of sale of assets set aside to offer 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). Bankers Trust Company and Chemical Bank, as agents for the various bank lenders under the Revolving Credit Agreement and the Working Capital Agreement (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 11 of Notes to Financial Statements for the year ended May 31, 1993, 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, The Celotex Corporation ("Celotex") a 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 14, 1993, the Company, 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 Company 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 Company, 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 have 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 are 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 pre-trial 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. The Company has previously discussed, in Note 11 of Notes to Financial Statements for the year ended May 31, 1993, the background and status of the citation by the United States Department of Labor of more than 500 coal mining firms, including Jim Walter Resources, Inc., for alleged tampering with coal-dust samples used to monitor compliance with regulations designed to protect miners from black lung disease. On July 20, 1993, the administrative law judge entered an order ruling in favor of the coal mining firms, including Jim Walter Resources, Inc., finding that the evidence presented was not sufficient to prove the allegation of tampering. However, the ruling did not vacate the citations outright, instead staying all but one of the cases pending a single hearing involving one mine of a different company than Jim Walter Resources, Inc. Note 7 - Postretirement Health Benefits The Company adopted Statement of Financial Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions" in the fourth quarter of 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. As required, the consolidated financial statements presented herein for the month, three months and nine months ended February 28, 1993 have been restated to reflect the retroactive application of the change in accounting principle. Note B - Income Taxes On August 10, 1993, the Revenue 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 includes federal income taxes at the 35% statutory rate for the month, three months and nine months ended February 28, 1994. 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 estimates that such one-time charge is approximately $2.5 million and such amount is included in the provision for deferred income taxes for the nine months ended February 28, 1994. Note 9 - 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: Note 10 - Segment Information _____________________________ Information relating to the Company's business segments is set forth as follows: Three months ended Nine months ended February 28, February 28, _________________________________ ________________________________ 1994 1993 1994 1993 ______________ _____________ ______________ _____________ (in thousands) Sales and Revenues: Homebuilding and related financing $99,809 $99,356 $319,898 $311,958 Building materials 10,928 9,987 41,323 37,944 Industrial products 42,934 40,930 128,577 122,533 Water and waste water transmission products 64,625 60,147 245,534 243,302 Natural resources (e) 90,012 94,209 245,717 250,038 Corporate 1,184 1,373 3,981 5,334 ______________ ______________ ______________ ______________ Consolidated sales and revenues (a) $309,492 $306,002 $985,030 $971,109 ============== ============== =============== ============== Contributions to Operating Income: Homebuilding and related financing $24,165 $99,356 $319,898 $311,958 Building materials (330) 9,987 41,323 37,944 Industrial products 3,033 40,930 128,577 122,533 Water and waste water transmission products 1,717 60,147 245,534 243,302 Natural resources 554 12,861 6,928 28,097 ______________ ______________ ______________ ______________ 29,139 34,278 105,030 112,681 Less - Unallocated corporate interest and other expense (b) (22,959) (24,025) (70,592) (69,796) Income taxes (5,323) (4,223) (25,372) (22,267) ______________ ______________ ______________ ______________ Income before cumulative effect of accounting change (c) $857 $6,030 $9,066 $20,618 ============== ============== =============== ============== Depreciation, Depletion and Amortization: Homebuilding and related financing $828 $99,356 $319,898 $311,958 Building materials 409 9,987 41,323 37,944 Industrial products 2,260 40,930 128,577 122,533 Water and waste water transmission products 3,835 60,147 245,534 243,302 Natural resources 9,938 12,861 6,928 28,097 Corporate 481 378 1,225 1,124 ______________ ______________ ______________ ______________ Total $17,751 $17,587 $51,471 $51,775 ============== ============== =============== ============== Gross Capital Expenditures: Homebuilding and related financing $895 $1,193 $2,541 $4,386 Building materials 318 122 672 774 Industrial products 2,843 2,569 5,822 5,833 Water and waste water transmission products 3,060 2,428 8,309 8,648 Natural resources 8,829 14,045 27,656 23,406 Corporate 197 202 1,525 792 ______________ ______________ ______________ ______________ Total $16,142 $20,559 $46,525 $43,839 ============== ============== =============== ==============
Operations Data Senior Note Issuers Subordinated Note Issuers _______________ _________________________________ ________________________________ ($ in thousands) Nine months ended February 28, Nine months ended February 28, _________________________________ ________________________________ 1994 1993 (Note 7) 1994 1993 (Note 7) ______________ _____________ ______________ _____________ Net sales and revenues $627,161 $634,506 $384,278 $386,170 Cost of sales (exclusive of depreciation, depletion and amortization) 490,223 471,401 295,788 292,827 Other operating expenses 75,756 (a) 78,862 (a) 58,491 (b) 58,081 (b) Postretirement health benefits (Note 7) 15,705 14,486 4,721 4,406 Chapter 11 costs 24 59 7 42 Interest and amortization of debt expense 32,107 32,210 21,245 21,445 Amortization of excess purchase price 16,033 16,095 17,339 17,401 ______________ ______________ ______________ ______________ (2,687) 21,393 (13,313) (8,032) Provision for income taxes (Note 8) (6,861) (10,013) (3,066) (3,465) ______________ ______________ _______________ ______________ Income (loss) from operations before cumulative effect of accounting change (9,548) 11,380 (16,379) (11,497) Cumulative effect of change in accounting principle - postretirement health benefits other than pensions (net of income tax benefit) (Note 7) - (82,513) - (26,725) ______________ ______________ _______________ ______________ Net loss ($9,584) ($71,133) ($16,379) ($38,222) ============== ============== =============== ==============
(a) - Net of $24,194 and $21,788 intercompany income, respectively. (b) - Net of $6,990 and $6,834 intercompany income, respectively. Balance Sheet Data Senior Note Issuers Subordinated Note Issuers __________________ _________________________________ ________________________________ ($ in thousands) February 28, May 31, February 28, May 31, 1994 1993 1994 1993 ______________ _____________ ______________ _____________ Assets Cash $2,500 $23,753 $2,462 $23,714 Short-term investments, restricted 7,363 8,652 3,922 5,699 Trade and other receivables, net 104,440 114,169 55,178 72,582 Inventories 128,384 128,647 102,373 93,384 Prepaid expenses 10,813 4,921 4,162 3,300 Intercompany receivables 1,892,261 1,723,343 1,417,976 1,264,689 Property, plant and equipment, net 521,502 525,779 167,899 172,962 Unamortized debt expense and other assets 28,365 33,563 19,626 25,671 Excess of purchase price over net assets acquired 289,640 305,673 313,299 330,568 ______________ ______________ ______________ ______________ $2,985,268 $2,868,500 $2,086,827 $1,992,569 ============== ============== =============== ============== Liabilities and Stockholder's Equity (Deficit) Bank overdrafts $29,325 $13,590 $17,620 $9,758 Accounts payable and accrued expenses 108,468 115,162 54,587 57,694 Income taxes payable (Note 8) 10,667 7,209 6,717 5,036 Deferred income taxes (Note 8) 55,729 63,514 34,500 40,812 Intercompany payables 657,519 578,132 656,279 570,337 Long-term senior debt 2,218 6,264 - - Accrued postpetition interest on secured obligations 183,899 152,633 125,557 104,665 Accumulated postretirement health benefits obligation (Note 7) 164,530 150,904 51,145 48,492 Other long-term liabilities 35,809 36,178 6,632 6,949 Liabilities subject to Chapter 11 proceedings 1,733,048 1,731,865 1,445,363 1,444,575 Stockholder's equity (deficit) 4,056 13,049 (311,573) (295,749) ______________ ______________ _______________ ______________ $2,985,268 $2,868,500 $2,086,827 $1,992,569 ============== ============== =============== ==============
WALTER INDUSTRIES, INC. AND SUBSIDIARIES SEGMENT INFORMATION February 28, ---------------------- 1994 1993 -------- -------- (in thousands) Identifiable Assets: Homebuilding and related financing $1,842,590 $1,886,704 Building materials 53,776 55,299 Industrial products 130,210 134,558 Water and waste water transmission products 451,194 479,379 Natural resources 480,739 459,246 Corporate (d) 204,151 204,737 ---------- ---------- Total $3,162,660 $3,219,923 ---------- ---------- ---------- ----------
(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: - Sales of the Industrial Products Group to the Water and Waste Water Transmission Products Group of $4,241,000 and $4,234,000 in the three months ended February 28, 1994 and 1993, respectively, and $13,330,000 and $14,399,000 in the nine months ended February 28, 1994 and 1993, respectively. - Sales of the Natural Resources Group to the Water and Industrial Products Group of $1,753,000 and $1,538,000 in the three months ended February 28, 1994 and 1993, respectively, and $4,518,000 and $5,612,000 in the nine months ended February 28, 1994 and 1993, respectively. (b) Excludes interest expense incurred by the Homebuilding and Related Financing Group of $31,585,000 and $33,642,000 in the three months ended February 28, 1994 and 1993, respectively, and $97,519,000 and $101,761,000 in the nine months ended February 28, 1994 and 1993, respectively. (c) Includes postretirement health benefits of $6,397,000 and $5,868,000 in the three months ended February 30, 1993 and 1992, respectively, and $19,189,000 and $17,605,000 in the nine months ended February 28, 1994 and 1993, respectively. A breakdown by segment is as follows: Three months ended Nine months ended February 28, February 29, ---------------------- ----------------------- 1994 1993 1994 1993 --------- --------- --------- --------- (in thousands) Homebuilding and related financing $542 $498 $1,628 $1,494 Building materials 127 114 378 342 Industrial products 790 705 2,369 2,115 Water and waste water transmission products 1,098 1,035 3,293 3,105 Natural resources 3,670 3,360 11,010 10,080 Corporate 170 156 511 469 --------- --------- --------- --------- Total $6,397 $5,868 $19,189 $17,605 --------- --------- --------- --------- --------- --------- --------- ---------
(d) Primarily cash and corporate headquarters buildings and equipment. (e) Includes sales of coal of $82,88,000 and $86,593,000 in the three months ended February 28, 1994 and 1993, respectively, and $223,054,000 and $228,054,000 and $228,108,000 in the nine months ended February 28, 1994 and 1993, respectively. Note 11 - Subsequent Event In early April 1994, Jim Walter Resources' Mine No. 5 experienced spontaneous heating problems similar to those experienced in the past. The mine is currently shut down while Jim Walter Resources, the Mine Safety and Health Administration, Alabama State Mine Inspectors and the United Mine Workers of America study various alternatives for resolving this problem. It is possible that the mine will remain shut down or operations substantially curtailed for several months. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS This discussion should be read in conjunction with the February 1994 consolidated financial statements and notes thereto of Walter Industries, Inc. and subsidiaries, particularly Note 10 - - Segment Information which presents sales and operating income by operating group. The Company adopted Statement of Financial Accounting Standards No. 106 "Employers" Accounting for Postretirement Benefits Other Than Pension" in the fourth quarter of fiscal 1993. As required, financial results for the three months and nine months ended February 28, 1993, including operating income referred to in the following discussion, have been restated to reflect retroactive application of such change in accounting principle. Results of Operations Three months ended February 28, 1994 and 1993 Net sales and revenues for the three months ended February 28, 1994 of $309.5 million increased $3.5 million, or 1.1%, over the prior year period. The improvement resulted from a 1.0% increase in volume and a .1% increase in pricing and/or 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 and revenues in the Natural Resources Group. Homebuilding and Related Financing Group sales and revenues of $99.8 million were $453,000, or less than 1%, greater than the 1993 period. This performance reflects a 2.1% increase in the average selling price per home sold, from $37,500 in 1993 to $38,300 in 1994, which was more than offset by a 15.3% decrease in the number of homes sold, from 1,087 units in 1993 to 921 units in 1994. The higher average selling price in 1994 reflects a price increase instituted April 1, 1993 to compensate for increased lumber costs. The decrease in unit sales reflects continuing strong competition in virtually every Jim Walter Homes sales region. Jim Walter Homes' backlog at February 28, 1994 was 1,764 units compared to 1,609 units at February 28, 1993. Time charge income (revenues received from Mid-State Home's installment note portfolio) increased from $53.4 million in 1993 to $59.4 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 $24.2 million exceeded the prior year period by $3.9 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 ($31.6 million) as compared to that incurred in 1993 ($33.6 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 primarily the result of higher lumber prices. Lumber prices in the current fiscal period ranged from $449 - $510 per thousand board feet as compared to $311 - $474 per thousand board feet in the 1993 period. Building Materials Group sales and revenues of $10.9 million were $941,000, or 9.4% greater than the prior year period. The increase resulted from improved sales prices and volumes for window components and greater metal building and foundry products sales volumes. The Group had an operating loss of $330,000 compared to a loss of $237,000 in the prior year period. This performance as the result of 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 of $42.9 million exceeded the prior year period by $2.0 million, or 4.9%. Increased sales volumes of aluminum foil and sheet, chemicals, industrial castings and resin coated sand and higher selling prices for furnace coke were partially offset by lower sales volumes of furnace and foundry coke, mineral wool and patterns and tooling and lower selling prices for aluminum foil and sheet and industrial castings. The Group's operating income of $3.0 million was $1.0 million greater than the prior year period. The improved performance resulted from higher gross profit margins for furnace coke, mineral wool, resin coated sand and patterns and tooling, partially offset by reduced margins for castings. Water and Waste Water Transmission Products Group sales and revenues of $64.6 million were $4.5 million, or 7.4%, ahead of the prior year period. The increase was the result of improved ductile iron pressure pipe selling prices and volume and fittings and valves and hydrants sales prices, partially offset by lower valves and hydrants and fittings volumes. The Group had an operating income of $1.7 million compared to a loss in the prior year period of $634,000. The improved performance resulted from the higher selling prices, partially offset by lower overall sales volumes and higher raw material costs, especially scrap, a major raw material component. Natural Resources Group sales and revenues of $90.0 million were $4.2 million, or 4.5%, below the prior year period. The decrease resulted from lower average coal and methane gas selling prices, partially offset by slightly higher coal shipments, increased methane gas sales volume and an increase in outside coal and gas royalty income. A total of 1.935 million tons of coal was sold in the 1994 period versus 1.904 million tons in 1993, a 1.6% increase. The increase in tonnage sold was the result of greater shipments to Japanese steel mills and other export customers, partially offset by lower shipments to Alabama Power Company ("Alabama Power"). 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). Shipments in the prior year period were favorably impacted due to the June 17, 1992 hoist accident at Blue Creek Mine NO. 3 ("Mine No. 3") which resulted in the postponement of shipments of approximately 400,000 tons from the period July through September 1992 to the period January through June 1993. The average price per ton of coal decreased 5.8%, from $45.49 in 1993 to $42.84 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 mine. 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 reoccurred and the mine is currently shut down while Jim Walter Resources, MSHA, Alabama State Mine Inspectors and the UMWA study the various alternatives for resolving this problem. It is possible that the mine will remain shut down or operations substantially curtailed for several months. 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 Group's operating income of $554,000 was $12.3 million below the prior year period. The lower performance reflects the decrease in average selling prices for coal and methane gas, reduced coal mining productivity which resulted in higher costs per ton of coal produced and idle plant costs of $2.3 million associated with the Mine No. 5 shut down which more than offset the effect of increased coal and methane gas sales volumes and the greater outside coal and gas royalty income. Cost of sales, exclusive of depreciation, of $197.6 million was 80.9% of net sales in the 1994 period versus $186.5 million and 75.7% in 1993. The cost of sales percentage increase was primarily the result of lower gross profit margins on home sales, coal, industrial castings, window components and metal building and foundry products and the Mine No. 5 idle plant costs, partially offset by improved margins on furnace coke, mineral wool, resin coated sand and patterns and tooling. Selling, general and administrative expenses (exclusive of postretirement health benefits) of $29.9 million were 9.7% of net sales and revenues in the 1994 period versus $30.9 million and 10.1% in 1993. Interest and amortization of debt discount and expense decreased $4.3 million. The decrease is the result of lower outstanding debt balances on secured obligations (see Notes 2 and 4 of Notes to Consolidated Financial Statements) and reduced amortization of debt discount and expense. Interest in the amount of $40.9 million in the three months ended February 28, 1994 and 1993 on unsecured obligations has not been accrued in the consolidated financial statements as a result 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, 4 and 5 of 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 Revenue Reconciliation At of 1993 was signed into law raising the federal corporate income tax to 35% from 34%, retroactive to January 1, 1993. The provision for income taxes for the three months ended February 28, 1994 includes federal income taxes at the 35% statutory rate. Net income for the three months ended February 28, 1994 was $857,000 as compared to $6.0 million in the 1993 period reflecting all of the previously mentioned factors as well as the impact of lower miscellaneous income and Interest Income from Chapter 11 proceedings combined with higher Chapter 11 costs and postretirement health benefits. Nine Months Ended February 28. 1994 and 1993 Net sales and revenues for the nine months ended February 28, 1994 of $985.0 million increased $13.9 million, or 1.4%, over the prior year period. The improved performance resulted from a 1.3% increase in pricing and/or product mix and a .1% increase in volume. 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 Sales and revenues of $319.9 million were 57.9 million, or 2.5%, greater than the 1993 period. This performance reflects a 2.1% increase in the average selling price per home sold from $37.300 in 1993 to $38,100 in 1994, which was are than offset by a 6.6% decrease in the number of homes sold, from 3,572 units in 1993 to 3,338 units in 1994. The higher average selling price in 1994 reflects a price increase instituted April 1, 1993 to compensate for higher lumber costs. The decrease in unit sales reflects continuing strong competition in virtually every Jim Walter Homes sales region. Time charge Income (revenues received from Mid-State Home's Instalment note portfolio) increased from $161.2 million In 1993 to $176.4 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 $73.9 million exceeded the prior year period by $9.7 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 ($97.5 million) compared to that Incurred in 1993 ($101.8 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 lumber prices and the decision in October 1992 to reduce gross profit margins on five smaller basic shelter homes in an effort to generate sales. Lumber prices in the current fiscal period ranged from $295 - $510 per thousand board feet as compared to $248 - $474 in the 1993 period. Building Materials Group sales and revenues of $41.3 million were $3.4 million, or 8.9%, greater than the prior year period. The Increase principally resulted from improved sales volumes of window components and metal building and foundry products. The Group's operating income of $700,000 was $352,000 below the 1993 period. This 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 volume. Industrial Products Group sales and revenues of $128.6 million were $6.0 million, or 4.9%, ahead of the 1993 period. Increased sales volumes of aluminum foil, furnace coke, castings, resin coated sand and chemicals and higher selling prices for furnace coke were partially offset by lower sales volumes of aluminum sheet, mineral wool and patterns and tooling and lower selling prices for aluminum foil and sheet. The Group's operating income of $7.5 million was $334,000 greater than the prior year period. The Improved performance resulted from higher gross profit margins for furnace coke and mineral wool, partially offset by reduced margins for chemicals, foundry coke, aluminum foil and sheet (including the effect of lower selling prices) and industrial castings. Water and Waste Water Transmission Products Group sales and revenues of $245.5 million were 52.2 million, or .9%, ahead of the prior year period. The increase was the result of higher overall selling prices, partially offset by lower overall sales volumes. Operating income of $16.0 million exceeded the prior year period by $3.9 million. The improved performance resulted from the increased sales prices, partially offset by the lower sales volumes and higher raw material costs, especially scrap, a major raw material component. Natural Resources Group sales and revenues of $245.7 million were $4.3 million; or 1.7%, below the prior year period. The decrease resulted from reduced coal shipments and lower methane gas selling prices, partially offset by higher average coal selling prices, increased methane gas sales volume and greater outside gas and timber royalty income. A total of 4.890 million tons of coal was sold in the 1994 period versus 5.127 million tons in 1993, a 4.6% decrease. The decrease In tonnage sold was the result of lower shipments to Alabama Power (including the effect of the previously discussed reduction in tonnage for the contract year ending June 30, 1994) and Japanese steel mills, partially offset by greater sales to other export customers. Shipments in the prior year period were adversely impacted by the previously mentioned hoist accident at Mine No. 3. The average price per ton of coal sold increased 2.5% from $44.49 In the 1993 period to $45.60 in 1994 due to higher prices realized on shipments to Alabama Power, partially offset by lower prices to Japanese steel mills and other export customers. As previously discussed, Nine 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, which problem reoccurred in April 1994. The Group's operating income of $6.9 million was $21.2 million below the 1993 period. The lower performance reflects the decrease in coal shipments, the lower methane gas selling prices. reduced coal mining productivity which resulted in higher costs per ton of coal produced and Mine No. 5 idle plant costs which are than offset the effect of the higher average price per ton of coal sold, increased methane gas sales volume and greater outside gas and timber royalty income. Cost of sales, exclusive of depreciation, of $623.4 million was 79.0% of net sales versus $596.7 million and 75.8% in 1993. The cost of sales percentage increase was primarily the result of lower gross profit margins on home sales, coal, chemicals, foundry coke, aluminum foil and sheet, industrial castings, window components and metal building and foundry products, partially offset by improved margins on furnace coke, mineral wool and ductile iron pressure pipe. Selling, general and administrative expenses (exclusive of postretirement health benefits) of $94.7 million were 9.6% of net sales and revenues in the 1994 period versus $95.3 million and 9.8% in 1993. Interest and amortization of debt discount and expense decreased $9.1 million. The decrease is the result of lower outstanding debt balances on secured obligations (see Notes 2 and 4 of Notes to Consolidated Financial Statements) and reduced amortization of debt discount and expense. Interest in the amount of $683.4 million ($122.8 million in the nine months ended February 28, 1994 and 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, 4 and 5 of 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 Revenue Reconciliation Act of 1993 was signed into law raising the federal corporate income tax to 35% from 34%, retroactive to January 1, 1993. The provision for income taxes for the 1994 period includes 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 estimates that such one-time charge is approximately $2.5 million and such amount is included in the provision for deferred income taxes in the nine months ended February 28, 1994. The income before cumulative effect of accounting change for the nine months ended February 28, 1994 was $9.1 million as compared to $20.6 million in the 1993 period reflecting all of the previously mentioned factors as well as the impact of higher Chapter 11 costs and postretirement health benefits combined with lower miscellaneous income and slightly lower interest income from Chapter 11 proceedings. Financial Condition ___________________ On December 27, 1989, the Debtors each filed a voluntary petition for reorganization under the Bankruptcy Code in the United States Bankruptcy Court (the "Bankruptcy Court") for the Middle District of Florida, Tampa Division. 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 February 28, 1994, interest in the amount of $683.4 million ($122.8 million in the current nine month fiscal period) had not been accrued on unsecured obligations (including $307.5 million In respect of Senior Subordinated Extendible Reset Notes which, prior to the petition date, was payable in additional Senior Subordinated Extendible Reset Notes). 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 deposit with the issuing bank an amount of cash equal to the stated amount of the letter of credit. At February 28, 1994. $3,570,000 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 Credit Agreement ($17.549,000 outstanding at February 28, 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 Revolving 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 May 27, 1994. A motion has been filed with the Bankruptcy Court to extend such agreement to June 30, 1995. 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 "Plan") and related first amended disclosure statement. The Plan provides 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 the Debtors's option to substitute additional debt securities in lieu of common stock presently proposed to be issued under the Plan), or a combination thereof. In addition, the Plan provides that holders of subordinated debt claims will additionally share in a portion of any increase in Debtor's unencumbered instalment notes receivable portfolio after May 31, 1993 through issuance of additional debt securities. Such sharing in value is designed to provide compensation to holders of subordinated debt claims during the delay in consummation of the Plan required in order to resolve the asbestos-related litigation. Under the Plan certain claims and the equity interest in the Company are impaired; therefore the Plan is subject to the 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 Plan are subject to the satisfaction of various conditions including dismissal with prejudice of any and all claims and actions against the Debtors relating to or in connection with the asbestos-related litigation (see Notes 2 and 6 of Notes to Consolidated Financial Statements). 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 is predicated upon a settlement of the Veil Piercing Litigation which contemplates 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 support the Bondholders Plan and execute the Veil Piercing Settlement Agreement (as said term is defined in the Bondholders Plan) by a date certain, to the veil Piercing Claims Trust (as said term is defined in the Bondholders Plan). The Bondholders Plan is 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 provides 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 provides for no recovery by the shareholders of the Company unless the shareholders support the Bondholders Plan and execute the Veil Piercing Settlement Agreement by a date certain. Confirmation and effectiveness of the Bondholders Plan are subject to the satisfaction of various condition 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 is defined in the Bondholders Plan). On December 28, 1993, 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, 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, as the successor trustee under the indenture date 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 is not predicated upon a settlement of the asbestos-related litigation, the plan provides for the issuance of "New Notes" (as said term is defined in the Senior Note Trustee Plan) to fund any settlement which may be approved by the Debtors and the Series B & C Senior Note Trustee. The Senior Note Trustee Plan is premises upon an "Equity Value" (as said terms is defined in the Senior Note Trustee Plan) of $783.8 million. The Senior Note Trustee Plan provides 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 is achieved), or a combination thereof. In addition, the Senior Note Trustee Plan provides that the shareholders of the Company shall retain their common stock interests, subject to dilution in the event a settlement of the asbestos-related litigation is reached. Effectiveness of the Senior Note Trustee Plan is subject to various conditions which are similar to the conditions set forth in the Company's 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 an additional party to file, by April 20, 1994, a plan of reorganization and related disclosure statement, (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) schedule a hearing for May 19, 1994 and continuing, if necessary through May 20, 1994 to consider approval of disclosure statements. The Company's objectives in developing the Plan were based upon the maximization of value for all creditors and shareholders which will result in a viable enterprise with a capital structure that allows for cash flows after reorganization sufficient to meet creditors' obligations (as confirmed by such Plan or any further amended plan of reorganization filed by the Debtors, the Bondholders Plan, the Bank Agents Plan and the Senior Note Trustee Plan or plans filed by other parties in interest) and to fund future capital expenditures and growth of operations. There can be no assurance, however, that the liabilities of the Debtors as of the date of confirmation of the Plan or any further amended plan of reorganization filed by the Debtors, the Bondholders Plan, the Bank Agents Plan and the Senior Note Trustee Plan or plans filed by any other parties in interest, will not be found in the Reorganization Proceedings to exceed the fair value of the Debtors assets at such date. This could result in claims being paid at less than 100% of their face value and the equity of the Company's common stockholders being diluted or canceled. See Note 2 of Notes to Consolidated Financial Statements. Subsequent to the acquisition of Original Jim Walter, the Company undertook a program of corporate reorganizations and asset dispositions pursuant to which the Company, prior to the petition date, restructured and/or disposed of certain of the businesses of Original Jim Walter. Included as part of this program were the complete liquidations of Old Walter Industries, Jim Walter Resources and United Land Corporation ("United Land") as set forth in the Plans of Complete Liquidation (the "Liquidation Plans") adopted by their respective shareholders in 1988. As a result of the Reorganization Proceedings, the implementation of each of the Liquidation Plans required approval of the Bankruptcy Court. The Company, for and on behalf of itself and the other Debtors filed a motion in the Bankruptcy Court for an order authorizing the completion of the previously adopted Liquidation Plans. Such motion included a request that the rights of the creditors of the Debtors for purposes of determining the distributions to which they may be entitled under a plan or plans of reorganization (or in any liquidation proceeding) be determined without regard to subsequent actions that might be taken to complete such Liquidation Plans. As hearings held on September 5, 1990 and October 9, 1990, the Bankruptcy Court authorized the Debtors to complete the Liquidation Plans and a definitive order granting such relief was issued by the Bankruptcy Court on November 5, 1990, on March 26, 1991. On April 1, 1991, Old Walter Industries distributed the capital stock of Jim Walter Homes and Mid-State Homes to Homes Holdings Corporation and Mid-State Holdings Corporation, respectively. Old Walter Industries then merged into Hillsborough Holdings Corporation. Hillsborough Holdings Corporation changed its name to Walter Industries, Inc. in connection with such merger. In December 1990, Old Walter Industries, Jim Walter Resources and United Land filed a motion with the Bankruptcy Court to assign and assume certain executory contracts in connection with the completion of the Liquidation Plans. One such executory contract was a material coal sales agreement entered into in 1979 (for a term of 20 years) between Alabama Power and Jim Walter Resources and Amendment No. 6 thereto, which was singed in 1988 and which provides for delivery of up to 3,000,000 tons of coal annually. Alabama Power filed an objection to the assignment and assumption of such contract alleging that Jim Walter Resources was in default by virtue of its failure to maintain a $250 million shareholders equity and a current asset to current liability ratio of at least 1:1, as required by Amendment No. 6. Alabama Power also asserted that certification requirements under such Amendment No. 6 requires a report from Jim Walter Resources' auditors, and that the report received was "not without qualification because it was subject to significant uncertainties especially in connection with the Reorganization Proceedings and massive amounts of debt which are in default and on which Jim Walter Resources is jointly and severally liable." Alabama Power asserted that these liabilities, as well as other significant uncertainties, created a default under such agreement. Alabama Power also asserted that the price paid by them under such agreement is in excess of the short-term price for coal and is directly connected to the long-term commitment of capital, the reliability of a supply of coal under such agreement, and the creditworthiness of Jim Walter Resources and, thus, constitute a financial accommodation under section 365(c)(2) of the Bankruptcy Code. This section prohibits the assumption or assignment of an executory contract "if such contract is a contract to make a loan or extend other debt financing or financial accommodations to or for the benefit of the debtor...." A final hearing was held on February 13, 1991 at which time testimony was taken and argument of counsel was presented to the Bankruptcy Court. At the conclusion of the proceedings, the Bankruptcy Court orally ruled that the financial condition of Jim Walter Resources did not constitute a default under the applicable provisions of section 365 of the Bankruptcy Code and that the assignee had demonstrated adequate assurances of its current and future ability to perform the executory contract, and that such executory contract did not constitute an agreement to make a loan or to extend debt financing. The Bankruptcy Court further indicated that it was not prepared to make a final determination at that time that the contract did not constitute a financial accommodation under section 365(c)(2) of the Bankruptcy Code. Subsequently, on March 4, 1991, the Bankruptcy Court entered its order allowing the assumption and assignment of such agreement, following which an amended order was entered on March 13, 1991 ex parte on the Court's own motion for purposes of reconsidering the March 4, 1991 order, which left open the question as to whether or not such agreement was in fact a contract for financial accommodation and thus within the exceptive provisions of section 365(c)(2) of the Bankruptcy Code which renders such contracts non-assumable. Upon such reconsideration, the Bankruptcy Court found it unnecessary to hold any additional hearings on the remaining issues and concluded that the contract was to within the exceptive provisions for assumability, and thus none of the exceptions set forth in section 365(c)(2) applied. The Bankruptcy Court further stated that it was also satisfied that based upon the record established at the final evidentiary hearing, the prospective assignee, JW Resources, Inc. was financially able to perform the contract and thus met the requirements of SECTION 365(b)(1)(c). On March 14, 1991, Alabama Power filed its Notice of Appeal to the United States District Court for the Middle District of Florida, Tampa Division (the "District Court") from the Order Allowing Assumption and Assignment of Executory Contract with Alabama Power of the Bankruptcy Court entered on March 4, 1991, and the Amended Order on Motion to Assume and Assign Executory Contract with Alabama Power entered on March 13, 1991. Such appeal is presently pending in the District Court. The Alabama Power contract provides for a review of billing price and price components prior to July 1, 1993. Officials of Jim Walter Resources and Alabama Power met since 1992 in an attempt to satisfy the contract provisions; however, during that time numerous disputes arose. On June 28, 1993, Jim Walter Resources filed in the Bankruptcy Court a Complaint for Declaratory Judgment asking the Bankruptcy Court to interpret certain provisions of the contract relating to the billing rice effective July 1, 1993. The Court has not ruled on such complaint. Alabama Power filed a Motion to Dismiss, or in the Alternative to Transfer Venue as to which a hearing was held on January 12, 1994. A decision on such motion is now pending. An interim agreement was reached with Alabama Power in August 1993 to the ship only the Reduced Base Tonnage Coal (2 million tons of coal per year) and the Period 2 Tonnage Coal (500,000 tons) for the contract year ending June 30, 1994. Shipments of Period 2 Additional Tonnage Coal (500,000 tons) were to resume in the contract year beginning July 1, 1994. Until the pricing dispute was resolved the parties agreed that current payments would be based on $61.00 per ton delivered (subject to adjustment upon resolution of the pricing disputes), the approximate blended price in effect on June 30, 1993 for the 3 million tons delivered in the contract year ended June 30, 1993. Under the contract the billing price to Alabama Power Company for the 2 million tons of Reduced Base Tonnage Coal was to revert to the provisions of the 1979 contract as adjusted for escalations, subject to the aforementioned review of billing price and price components. The billing price for the Period 2 Tonnage Coal and Period 2 Additional Tonnage Coal were to be based on domestic market prices meeting certain criteria. On March 14, 1994, Jim Walter Resources and Alabama Power signed a Settlement Agreement as to the disputes discussed above. Such agreement in principal will be embodied in a restated coal purchase contract which will completely replace the 1979 contract and the 1988 amendment thereto. Under the new proposed contract, Alabama Power will purchase 4.0 million tons of coal per year from Jim Walter Resources during the period July 1, 1994 thorough 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 price, terms and conditions of such extension. The new contract will have a fixed price subject to an escalation based on the Consumer Price Index or other appropriate published index and adjustment for governmental impositions and quality. Other matters currently being resolved for inclusion in such new agreement include modification of specifications, shipping deviations and transportation arrangements. Upon execution of the new agreement, Jim Walter Resources will seek approval thereof by the Court as a compromise and settlement of Jim Walter Resources' Complaint for Declaratory Judgment discussed above. Upon receipt of a non-appealable order of the Court, Alabama Power will also dismiss its appeal regarding Jim Walter Resources' assumption of the 1979 contract now pending in the District Court. The long-term contracts with the six Japanese steel mills for 2.75 to 3.0 million tons annually, depending on the level of steel production in Japan, expired March 31, 1994. The pricing mechanism of such contracts were market driven and reflected changes in the prices of four specific coal indices. The composite change in market prices of these coal indices from the base point was the reflected in the billing price to the steel mills. Tentative agreement has been reached with 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 1995 at the long-term contract price, which is substantially higher than current market price. 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 February 28, 1994, the Company had free cash balances and short-term investments of approximately $114 million available for operations. On July 1, 1992, pursuant to approval by the Bankruptcy Court, installment 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 (see Note 4 of the Notes to Financial Statements). Under the Mid-State Trust II indenture for the Mortgage-Backed Notes, if certain criteria as to performance of the pledged instalment notes are met, Mid-State 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 Mid-State 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 has approved an additional distribution of approximately $14.1 million for the April 1, 1994 distribution. During the period from formation of Mid-State Trust II through April 1, 1994 such distributions amounted to $56.9 million. At the present time, approximately 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 sue 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 1994 include capital expend duties of approximately $19 million for the balance of the year ending May 31, 1994. 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 XI AGREEMENT This Agreement (as the same may be amended, modified or supplemented from time to time, the "Agreement") is entered into by and among AIF II, L.P., certain affiliates of AIF II, L.P. and certain accounts managed or controlled by such affiliates ("Apollo"); Lehman Brothers Inc. ("Lehman"); the Official Bondholders Committee of the Debtors (as defined ) (the "Bondholders Committee"); the Official Committee of General Unsecured Creditors of the Debtors (the "Creditors' Committee"); the Unofficial Ad Hoc Committee of Pre-LBO Bondholders (the "Ad Hoc Committee") (Apollo, Lehman, the Bondholders Committee, the Creditors Committee and the Ad Hoc Committee, the "Proponents") and Chemical Bank and Bankers Trust Company (the "Bank Agents") as co-agents under the Bank Credit Agreement dated as of September 10, 1987, as amended among Hillsborough Holdings Corporation ("Hillsborough"), Walter Industries, Inc. ("Old Walter Industries") and certain of their subsidiaries and the bank parties thereto (the "Revolving Credit Banks"), and the Working capital Agreement dated as of December 29, 1987, as amended, among Hillsborough, Old Walter Industries and certain of their subsidiaries and the bank parties thereto (the "Working Capital Banks") (each of the Proponents and the Bank Agents, a "Party"), by their authorized undersigned counsel. WITNESSETH: WHEREAS, Hillsborough, Old Walter Industries and certain of their subsidiaries and affiliates (collectively, the "Debtors") are the subject of cases under Chapter 11 of 11 U.S.C. section 101 et seq. (the "Bankruptcy Code"), in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Court"), all of which are being jointly administered under Case No. 89-9715-8P1 (the "Chapter 11 Cases"); WHEREAS, certain of the Proponents filed a Joint Plan of Reorganization of Debtors Proposed by Certain Creditor Proponents Dated as of December 16, 1993 in the Chapter 11 Cases (the "Original Settlement Plan") and a Disclosure Statement therefor; WHEREAS, the Bank Agents filed a Bank Agents' Joint Plan of Reorganization Dated as of December 28, 1993 in the Chapter 11 Cases (as such plan may be modified or amended from time to time, the "Bank Agents' Plan") and a Disclosure Statement therefor; WHEREAS, the Bank Agents have filed documents stating that they intend to recommend to the holders of Bank Claims acceptance of the treatment of the claims of the Revolving Credit Banks, Working Capital Banks and Bank Agents ("Bank Claims") which have been incorporated in the Original Settlement Plan; WHEREAS, the Proponents intend to file an amendment to the Original Settlement Plan, and the Bank Agents have received a copy in substantially the form of such amendment, on or before April 20, 1994, or such other date set by the Court (as such amendment of the Original Settlement Plan may be further amended, revised or modified from time to time, the "Settlement Plan"); and WHEREAS, the Parties desire to defer the Court's consideration of the Bank Agents' Plan and the Disclosure Statement therefor on the terms and conditions set forth herein. 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. The Proponents shall not adversely modify or amend the treatment of any or all of the Bank Claims under the Settlement Plan until after (a) December 31, 1994 and either (b) both of the following conditions occur, if ever: (i) there shall have occurred a material adverse change in the business, results of operations, financial condition, properties or assets of the Debtors, taken together, from the date of this Agreement, and (ii) the treatment of the claims of the Proponents under the Settlement Plan is materially adversely modified or amended, or (c) the Court disapproves such Bank treatment on motion of a party other than a Proponent. 2. The Bank Agents hereby affirm that they will recommend and will not withdraw (except under a circumstance in which they could file a motion under Section 3) their recommendation to the holders of Bank Claims that they accept the treatment provided for such Claims under the Settlement Plan. 3. The Bank Agents shall file a motion with the Court to defer the Court's consideration of the Bank Agents' Plan and the Disclosure Statement therefor and shall not request the Court to renew consideration of the Bank Agents' Plan and the Disclosure Statement therefor until after the earlier of (a) December 31, 1994 and (b) such date, if any, that the Court denies approval of the Disclosure Statement for the Settlement Plan. 4. The Parties agree that any damages arising from the breach of a Party's obligations under Section 1, 2 or 3 hereof are not susceptible to a money satisfaction and that specific performance shall be the remedy for any such breach. The court shall have jurisdiction to hear and determine any claim arising out of any breach hereof. 5. This Agreement may not be amended except in a writing signed by the Parties. 6. 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 form voting with respect to, any plan of reorganization. Nor shall this Agreement impair the right or the ability of the Bank Agents also to recommend to the holders of the Bank Claims that they accept the treatment of the Bank Claims under any other plan or reorganization in the Chapter 11 Cases. 7. No part of this Agreement shall be deemed as an admission of any Party for any purpose. 8. Except to the extent the Bankruptcy 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. 9. This Agreement is intended to bind and inure to the benefit of the Parties and their respective successors, assigns, heirs, executors, administrators and representatives. 10. This document 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. 11. This Agreement is intended solely for the benefit of the Parties, and there shall be no third-party beneficiaries of this Agreement. 12. 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 April 18, 1994 AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. By:/s/ Steven M. Pesner, P.C. Ellen R. Werther 65 East 55th Street New York, New York 10022 (212)872-1070 For APOLLO PAUL, WEISS, RIFKIND, WHARTON & GARRISON By:/s/ Robert Drain 1285 Avenue of the Americas New York, NY 10019-6064 (212) 373-3236 For LEHMAN BROTHERS INC. STROOCK & STROOCK & LAVAN By:/s/ Daniel H. Golden 7 Hanover Square New York, NY 10004 (212) 806-5400 For the BONDHOLDERS COMMITTEE JONES, DAY, REAVIS & POGUE By:/s/ Marc S. Kirschner 599 Lexington Avenue New York, NY 10022 (212) 326-3939 For The CREDITORS COMMITTEE MARCUS MONTGOMERY WOLFSON P.C. By:/s/ Peter D. Wolfson 53 Wall Street New York, NY 10005 For The AD HOC COMMITTEE WACHTELL, LIPTON, ROSEN & KATZ By: /s/ Harold S. Novikoff 51 West 52nd Street New York, NY 10019 (212) 403-1000 For the BANK AGENTS Exhibit XII UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION IN RE: CASE NOS. 89-9715-8P1 through 89-9746-8P1 HILLSBOROUGH HOLDINGS and 90-11977-8P1 CORPORATION, et. al. Debtor HILLSBOROUGH HOLDINGS CORPORATION, et. al. Plaintiff vs. ADV. NO. 90-03 & 90-04 THE CELOTEX CORPORATION, et. al., Defendant THIS IS an adversary proceeding commenced in these yet-to-be-confirmed Chapter 11 cases of Hillsborough Holdings Corporation (HHC), now known as Walter Industries, Inc., and its 31 wholly-owned subsidiaries (collectively referred to as the Debtors). In this connection, it should be noted that none of the Chapter 11 cases have been substantially consolidated, although procedurally the Debtors have been treated as a group as the matter involved impacts the interests of all Debtors. In order to fully understand the role of the parties involved in this litigation, it is important to note that prior to 1987, the Debtors, together with other non-debtor entities, operated within the corporate structure of Jim Walter Corporation (JWC) acting as the holding company, owning all the stock in each of the subsidiaries, including Celotex Corporation (Celotex). In 1987, JWC was the subject of a leveraged buy-out, out of which HHC emerged as the new holding company and it is now the parent of all the subsidiaries of JWC except Celotex which was not part of the group of subsidiaries which emerged after the leveraged buy-out. The matter under consideration was presented by a Complaint filed by the Debtors on January 2, 1990 seeking declaratory relief. In their Complaint, the Debtors named as defendants Celotex, JWC, and hundreds of individuals (collectively referred to as Asbestos Claimants) who claim to have suffered personal injuries as the result of exposure to asbestos products manufactured and distributed by Celotex. In Count I of the Complaint, the Debtors sought a declaration that the corporate veil between Celotex and JWC cannot be pierced. In Count II of the Complaint, the Debtors sought a declaration that the leveraged buy-out of the JWC subsidiaries, which did not include Celotex, was not a fraudulent transfer. In Count III, the Debtors sought a declaration that under applicable law, they are not the successors in interest (sic) to the asbestos-related personal injury claims asserted against JWC or Celotex. In Count IV, the Debtors sought a declaration that under applicable law, they are not liable for the asbestos-related claims against either JWC or Celotex. Extensive discovery was undertaken by both sides, and on February 28, 1992, the Debtors filed a Motion for Summary Judgment, contending that there were no genuine issues of material facts and based on the undisputed facts they presented, that they were entitled to the relief sought as a matter of law. In due course, this Court heard argument of counsel for the respective parties, considered the extensive record relevant to the motion, and on August 25, 1992 entered an Order denying the Debtors' Motion for Summary Judgment, based upon the Court's conclusion that there were in fact genuine issues of material fact which, of course, prevented the disposition of the controversy as a matter of law. Shortly thereafter, this Court scheduled a pre-trial conference in order to prepare the remaining issues for final evidentiary hearing. On February 3, 1993, this Court entered an Order at the conclusion of the pre-trial conference, which set forth five specific issues to be tried at the final evidentiary hearing. They are as follows: (1) whether or not during the period relevant, JWC exercised such pervasive dominant control over the affairs of Celotex which, in fact, made Celotex nothing more than a sham or an alter ego of JWC; (2) whether or not the inter-company transactions between Celotex and JWC disregarded all hallmarks of the separateness of the legal and equitable existence of a subsidiary from its parent, that is, the operation of the cash management system, and the record-keeping activities of both entities concerning inter-company transactions; (3) to what extent JWC was involved in the decision- making process concerning the sale of assets of Celotex; (4) whether or not the disposition of assets of Celotex was based on a valid economic basis and was fully justified by the prevailing market conditions; and (5) whether or not the utilization of the proceeds in fact was not repayment of valid obligations and resulted in rendering Celotex insolvent and without sufficient assets to respond to the claims of the Asbestos Claimants. Additional discovery was allowed, but limited solely to the five (5) issues specified, and on December 13, 1993, the trial commenced on schedule. During the five days of trial, the Court received live testimony of witnesses, and received in evidence close to three thousand exhibits, including numerous charts and summaries of the testimony of the witnesses. Having received the trial transcript, and the post-trial briefs, submitted by the parties, the resolution of the five specific issues is now ripe for consideration. Before discussing in detail the facts as established at the trial, it should be noted at the outset that, notwithstanding the formal and technical line-up of the litigants in this adversary proceeding, in which the Debtors are nominally the Plaintiffs, the party who carries the burden of proof is in reality the Asbestos Claimants, the named Defendants. In order to place these several claims and the relief sought in proper context, it should be helpful to understand the core of the controversy. The claims asserted by the Asbestos Claimants are two-fold. First, the Asbestos Claimants seek to pierce the corporate veil between Celotex and JWC, the predecessor-in-interest of HHC. Second, if the Asbestos Claimants are successful in piercing the corporate veil and then hold JWC liable to their claims already asserted against Celotex this, in turn, would, according to the Asbestos Claimants, would have rendered JWC insolvent thus the transfer accomplished through the LBO could be attached and set aside as a fraudulent transfer. In preparing these issues for trial, this Court concluded that the veil-piercing issue was a threshold issue, and therefore, should be tried first and, only in the event the Asbestos Claimants succeed on the veil-piercing issue, will this Court consider and try the fraudulent transfer issue. It should also be noted that the central issue in this adversary proceeding is not the liability vel non of any of these Debtors to the Claimants, since it is beyond dispute that HHC and the other debtor subsidiaries never manufactured, distributed or sold any products containing asbestos. Thus, one must focus solely on the veil piercing issue, and nothing relevant to the fraudulent transfer claim will be considered and treated by this memorandum opinion. The facts relevant to the issues outlined in the February 3, 1993 Order, as established at the evidentiary hearing, through testimony and documentary evidence are as follows: HISTORICAL BACKGROUND JWC was formed in 1995 as a successor to Walter Construction Company, the home building business founded by James Walter in 1946. In 1964, JWC acquired a 100% interest in Celotex Corporation, a large manufacturer of home and building materials. In 1970, JWC became the holding company of its several operating entities, in order to manage their diverse and large business activities, which included coal and marble mining, and the manufacture of gypsum board, building materials and cast iron and ductile pipe. In April of 1972, Celotex acquired a controlling interest in The Panacon Corporation (Panacon) with a $62 million loan obtained from its parent JWC. Shortly thereafter, Celotex and Panacon merged with the unanimous written consent of the Board of Directors of Celotex and Panacon. At the time of the acquisition of Celotex, Panacon had revenues of $181.1 million, net income of $10.6 million and assets of $106 million in 1971, and employed 5500 people. Beginning in the mid-1970's, numerous lawsuits were initiated against Panacon by parties who claim to have been injured as the result of alleged exposure to products distributed and sold by Panacon which contained asbestos. After the merger, Celotex was named as a defendant in these lawsuits. A great majority of these lawsuits alleged liability based on pre-1972 activities of Philip Carey Corporation, a predecessor-in-interest of Panacon. Due to JWC's role as a parent of its wholly-owned subsidiaries, the members of its Board of Directors also sat on the Boards of the subsidiaries, including the Board of Celotex. In addition, JWC established a central cash management system through which JWC and its wholly-owned subsidiaries managed both payables and receivables. It is the propriety vel non of the cash management system and the alleged pervasive control by JWC over the affairs of Celotex, especially the disposition of certain assets of Celotex, which are central in the determination of the rights of the Asbestos Claimants to pierce the corporate veil of JWC. CASH MANAGEMENT SYSTEM AND FINANCING The cash management system for all of its wholly-owned subsidiaries, was established by JWC in the 1970's. Under this system all cash generated by the subsidiaries was transferred to the central cash management account maintained by JWC in Tampa. Payments to the subsidiaries were made directly to a depository bank account maintained by the subsidiary ("lock box"). These funds were then wire transferred to the JWC concentration account. JWC maintained a record of the funds deposited into the concentration account by each subsidiary, and entered a credit on the books of the subsidiary in an amount equal to the amount of the cash deposited into the concentration account. The funds in the cash management account were used in the overall operation of JWC, both for day-to-day operations and also to provide intercompany loans to the subsidiaries at rates more favorable than those available at outside institutional lenders. Each subsidiary maintained its own checking account and had the discretion to pay its own expense. However, the checking account was a "zero-balance" account. The subsidiary wrote checks against the zero balance and, at the end of the day, JWC transferred enough money into the subsidiary's account to cover the checks negotiated against the account, thereby always maintaining a zero balance in the account. The funds transferred into the zero balance account were recorded as an intercompany payable on the subsidiaries' books. JWC also provided services to its subsidiaries, and assessed a charge upon the subsidiaries for these services. These services included professional services, such as legal advice, accounting and tax services, as well as human resources and investment advisory services. The corporate assessment also included the cost incurred by the parent of obtaining money and making it available to the subsidiaries. Finally, the costs of insurance premiums and taxes were also paid by the subsidiaries as a part of the corporate assessment. The corporate assessment was calculated based on a proportion of the projections of net assets employed, by the respective subsidiary. JWC used the preliminary budgets prepared by the subsidiaries, summarized their net assets employed in any given business years. JWC then would divide the total expenses of JWC by the net assets employed, arriving at a break-even rate, provided that each subsidiary met its projected budget for the coming year. That rate was then used by the subsidiaries in their budgets to calculate the corporate assessment to be paid to JWC. Because of fluctuations in interest rates on the money borrowed by JWC, the actual costs of the services provided by JWC changed, and therefore, there were times when the corporate assessment collected was more than was necessary to cover costs of JWC, and other times the assessment collected was less than was required to meet the operating expenses of JWC. Be that as it may, there always was an adjustment made on the records, either by a debit or a credit entry to reflect the deviation for the projected budget. The cash management system was operated by JWC through their separate bank accounts, the "501 account" and the "502 account." The 501 account contained all funds which were deposited into the cash management system, i.e. deposits from the subsidiary lock boxes. The 502 account maintained all other transactions. Into this account would be payments made directly to JWC on behalf of the subsidiary, corporate assessments and intercompany adjustments. The 502 account generated a statement to the subsidiary any time any transaction was made which affected that subsidiary. It was for that reason that payments made directly to JWC on behalf of the subsidiary were deposited in the 502 account, which would generate an "advice" to the subsidiary notifying the subsidiary that a payment on an accounts receivable had been made. The 501 account and the 502 account were reconciled against each other on a monthly basis. One of the items was recorded on the 502 account was loans made by JWC to Celotex and to other subsidiaries. As a general practice, JWC would obtain outside financing and funnel the proceeds of the loan down to its subsidiaries as it was needed, generally, but not always, for capital expenditures. This practice made economic sense and was beneficial to both JWC and to all subsidiaries, and to Celotex as a subsidiary because JWC was able to obtain financing at more favorable rates than any individual subsidiary would have been able to obtain on their own. In addition, to acquire outside financing by a subsidiary alone would have resulted in significant limitations on the financing imposed by the lender, even if obtained, and rigid reporting requirements, and certainly would have required substantial and significantly higher interest rates for the loan. Advances by JWC to the subsidiaries, including Celotex, was never fully formalized by the execution of loan documents or promissory notes. However, it is equally without dispute that no additional stock in Celotex, or in any other subsidiaries, were ever issued to JWC as consideration for these advances. These advances were recorded on the 502 account ledger as an intercompany payables, acknowledged by the officers of Celotex as an obligation due to JWC, and were payable upon demand. CORPORATE GOVERNANCE A substantial part of the evidence presented extensively focused on the corporate structure both of JWC and of Celotex. As noted earlier, Celotex and several others were a wholly-owned subsidiaries of JWC, and as such, members of JWC's Board of Directors also sat on the Board of Celotex and the other subsidiaries. JWC had, in addition to the traditional officers of corporations such as President, Chief Executive Officer, Chief Financial Officer, etc., also had five Group Vice Presidents who were responsible for specific business areas of the Company. Subsidiaries reported both to Group Vice Presidents as well as to the traditional management of JWC. There is no question that the Board of JWC as intimately involved in long-term decision making which affected specific subsidiaries as well as the health of the parent and all of its subsidiaries. These decisions included acquisition and construction of plants, the sale or closing of plants, and the acquisition or transfer of assets. The JWC Board also monitored key events of subsidiaries and provided oversight functions, but there is no evidence in this record which warrants the finding that JWC was involved in the day-to-day operation of the business of the subsidiaries. It is also true that the Board of Directors of Celotex seldom met face-to-face, but as a general rule they acted by written consent to any proposed action to be undertaken by the Board. Celotex hired and fired, independent of JWC its own employees; was a full charge of its own payroll and the promotion of its employees, with the exception of management if the proposed promotion did deviate from the procedural guidelines established by JWC for all subsidiaries. Celotex maintained its own corporate minute books and its individual accounting records in which all transactions involving inter-company transactions were properly recorded. Celotex itself had its own subsidiaries and divisions. Certain of Celotex's businesses, Celotex's "core" businesses, were included in one of three divisions: Building Products, Roofing Products and Industrial Products. These divisions reported directly to the president of Celotex. However, the subsidiaries of Celotex, which were not part of the three divisions just described, reported directly to the Group Vice Presidents of JWC. Although standing alone, this reporting structure appears odd, within the complete structure of JWC, it is apparent that the subsidiaries and divisions of the Company reported through profit centers designated along business lines established in order to enable JWC to monitor the performance of its subsidiaries. This method of reporting allowed JWC to report the financial health of the subsidiaries when JWC filed its Report with the Securities and Exchange Commission, and of course in its annual report to its shareholders. ASSET DISPOSITIONS During the 1980's, the United States faces a recession which was marked by high interest rates and inflation. These high rates affected JWC's business as it chilled the real estate market, making it unattractive to purchase homes. As a result the demand for construction of homes and construction components fell. In addition, JWC was carrying approximately $1 billion in long and short term debts. All of these debts were on adjustable interest or on floating interest rates so, as the interest rates climbed, which eventually passed 20%, the amount owed by JWC also increased and reached the point when the outstanding loans could no longer be managed. As a result of the drastic downturn of the market, JWC embarked upon a cost-cutting plan. The initial plan included an evaluation and re-evaluation of the operating expenses of the Company as a whole, and of each subsidiary, as-well-as an evaluation of the economic viability of each of the subsidiaries and its representative divisions. The evaluations of the viability of particular businesses were done at the subsidiary level initially by the officers of each subsidiary. As a result of this evaluation process, particular subsidiaries were targeted for sale. Some, but not all, of the subsidiaries targeted for sale were owned by Celotex and were targeted by the Celotex officers for sale. Between 1981-1987, twenty-one subsidiaries or divisions were sold, and an additional eight operations were simply closed, because they could not be sold. Of the twenty-one companies sold, seventeen companies were owned by Celotex, and fifteen of those were sold to third parties. The sales of Celotex subsidiaries or divisions generated $151.6 million. Overall, these companies were businesses which had historically performed poorly, and this poor performance reached an economically unacceptable stage during the recession of the 1980's. There is no dispute that the Board of Directors of Celotex and also the Board of JWC was involved in each of these sales. By way of example, in August, 1982, Hamer Lumber was sold. Hamer was originally acquired by JWC as an in-house supplier of raw materials. In 1977, Celotex purchased Hamer from JWC. During the years Hamer was held by Celotex, Hamer saw only two profitable years. In late 1981, JWC received an unsolicited inquiry from Plum Creek Lumber Co. for purchase of Hamer. JWC and Celotex decided to pursue the sale, and on August 27, 1982, the Celotex and JWC Boards of Directors approved the sale of Hamer to Plum Creek for a price of approximately $12 million. For instance, Jim Walter Doors was formed by Celotex in 1972 with the combining of four divisions. By the late 1970's, Doors was in financial trouble, and between 1975 and 1978, Doors lost $10 million in pre-tax dollars. Attempts were made to sell Doors during the 1975 and 1978 time period, but all attempts failed. In 1981, Doors lost almost $9 million. In 1982, Celotex recommended either sale or closure of Doors. JWC approved the recommendation, and Doors' Portland, Charlotte and Century plants were closed. The balance of Doors operations were sold in pieces over the next few years, ultimately realizing proceeds of $12.1 million. The proceeds generated by the sale of the Celotex subsidiaries were then used to reduce and ultimately satisfy the outstanding amounts of intercompany advances made by JWC to Celotex. This payable was made up of the corporate assessments, as well as the advances made by JWC, which JWC and Celotex both characterized as inter-company "loans." ASBESTOS LITIGATION There is no question that during the time period between 1972 and 1987 asbestos litigation increased, and the number of plaintiffs with cases pending against Celotex had doubled each year. Further, between 1982 and 1983, lawsuits against Celotex increased from 15,100 to 20,1000; between 1983 and 1984, it increased to 25,600; and between 1984 and 1985, it increased to 34,900. Litigation costs also increased, from $18 million in 1982, to an ultimate $79 million in 1987. The management of Celotex, and of JWC were fully aware of the impact of the asbestos litigation on the economic health of Celotex and of course also indirectly upon JWC. In fact, the JWC legal department regularly distributed reports on the number of claims and the cost of settlements and the prospect of litigation to the officers and to the Board of Directors of JWC. In addition, JWC's annual reports and Forms 10-K filed with the SEC regularly disclosed the key facts concerning asbestos litigation. Basically, these are the salient facts established at the trial, upon which this Court is called upon to resolve the claim under consideration; that is, the right of the Asbestos Claimants to pierce the corporate veil of JWC. BURDEN OF PROOF/CHOICE OF LAW It should be noted at the outset that the party seeking to pierce the corporate veil bears the burden of proof. Matter of Multiponics, Inc., 622 F.2d 709 (5th Cir. 1980); Kingston Square Tenants Ass'n v. Tuskegee Gardens, Ltd., 792 F.Supp. 1566 (S.D. Fla. 1992); Publicker Indus., Inc. v. Roman Ceramics, Corp., 603 F.2d 1065 (3rd Cir. 1979). This burden does not change because the Debtors are the plaintiffs in this declaratory action. Moreover, the Asbestos Claimants concede that the burden of proof is placed on them. This controversy is controlled by the applicable state law, either by the laws of the State of Florida or the State of incorporation of the Debtors, which is the State of Delaware. In re Blanton, 105 B.R. 811 (Bankr. W.D. Tex. 1989). JWC is a Florida corporation and Celotex is a Delaware corporation, which raises the question of choice of law. In determining which state's law applies, the bankruptcy court must apply choice-of-law rules of the state in which it sits. In re Master Mortgages Inv. Fund, Inc., 151 B.R. 513 (Bankr. W.D. Mo. 1993); In re O.P.M. Leasing Svs., Inc., 40 B.R. 380 (Bankr. S.D.N.Y.) aff'd 44 B.R. 1023 (S.D.N.Y. 1984); In re Shepard, 29 B.R. 928 (Bankr. M.D. Fla. 1983). Since this Court sits in Florida, Florida choice-of-law rules apply. Florida's courts look to the Restatement (Second) of Conflicts (1971) for choice- of-law questions. See Bishop v. Florida Specialty Paint Co., 389 So.2d 999 (Fla. 1980). Section 145 of the Restatement sets forth the "most significant contracts test" to determine the choice-of-law. Under this test, Florida law would apply. Celotex and JWC were headquartered in Florida, this action is pending in Florida and JWC is incorporated in Florida. However, under Section 307 of the Restatement, Delaware law would apply because the Asbestos Claimants seek to ultimately impose liability on the shareholder of a Delaware corporation. See Jefferson Pilot Broadcasting v. Hilary & Hogan, 617 F.2d 133 (5th Cir. 1980). However, the resolution of this conflict in the application of law is largely insignificant, since the laws of Delaware and Florida are functionally the same. In re Rodriguez, 895 F.2d 725 (11th Cir. 1990). GENERAL PRINCIPLES RELEVANT TO THE ISSUES Florida and Delaware courts disregard the corporate entity in only the most extraordinary cases. Those who seek to pierce the corporate veil, in either jurisdiction, carry a very heavy burden. Eagle v. Benefield-Chappell, Inc., 476 So.2d 716 (Fla. 4th DCA 1985); Harco Nat'l Ins. Co. v. Green Field Farms, Inc., 1989 WL 110537 (Del. Ch.). In order to pierce the corporate veil under Florida and Delaware law, it is the claimant's burden to establish by a preponderance of the evidence that: (1) the shareholder dominated and controlled the corporation to such an extent that the corporation independent existence, was in fact non-existent and the shareholder shareholders were in fact alter egos of the corporation; (2) the corporate form must have been used fraudulently or for an improper purpose; and (3) the fraudulent or improper use of the corporate form caused injury to the claimant. Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114 (Fla. 1984); Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp. 260 (D. Del. 1989). In order to overcome the presumption of the separate existence of the corporation from its shareholder, it must be established with the requisite degree of proof that the parent and the subsidiary operated as a single economic entity. Mabon, Nugent & Co. v. Texas American Energy Corp., 1990 WL 44267 (Del. Ch.); cf. Solomon v. Betras Plastics, Inc., 550 So.2d 1182 (Fla. 5th DCA) (individual liability imposed where "the personal affairs of the shareholder become confused with the business affairs of the corporation") rev. dismissed, 554 So.2d 1168 (Fla. 1989). Under both the laws of Florida and Delaware, there must be persuasive proof of shareholder misconduct before a Court will pierce the corporate veil. The courts of both Florida and Delaware require proof of deliberate misuse of the corporate form--tantamount to fraud-- before they will pierce the corporate veil. Thus, absent proof of fraud or ulterior motive by the shareholder, the corporate veil shall not be pierced. Conant v. Blount, 192 So. 481 (Fla. 1939); Advertects, Inc. v. Sawyer Industries, Inc., 84 So.2d 21 (Fla. 1955); Corvell v. Pilkington 39 F.Supp 142 (S.D. Fla. 1941), aff'd 128 F.2d 702 (5th Cir. 1942), aff'd 317 U.S. 406, 63 S.Ct. 291, 87 L. Ed. 363 (1943). The Florida Supreme Court has unequivocally stated that "the corporate veil may not be pierced absent a showing of improper conduct." Dania Jai-Alai Palace, Inc., supra. It is true that the courts of this state do not hesitate to find such conduct where "the corporation was organized or employed for the purpose to mislead creditors or to work a fraud upon them." Id., at 1120 (quoting Advertects, Inc., supra; see also Gershuny v. Martin McFall Messenger Anesthesia, P.A., 539 So.2d 1131 (Fla. 1989) ("courts will not look behind [the corporate] entity to hold liable the individuals who compose it absent fraud or some illegal purpose"). Florida cases after Dania looked to shareholders' subjective motivation, and not to the effect of their actions. In Steinhardt v. Banks, 511 So.2d 336 (Fla. 4th DCA 1987) (per curiam), rev. denied 518 So.2d 1273 (Fla. 1987), the Florida District Court of Appeal offered a "workable formula for applying the [Dania] reference to 'improper conduct'." The court stated: Florida decisions uniformly hold that courts will look through the screen of corporate entity to the individuals who compose it in cases in which the corporation was a mere device or sham to accomplish some ulterior purpose, . . . or where the purpose is to evade some statute or to accomplish some fraud or illegal purpose, or where the corporation was employed by the stockholders for fraudulent or misleading purposes, was organized or used to mislead creditors or to perpetrate a fraud upon them, or to evade existing personal liability. (emphasis added). Id. (citing Tiernan v. Sheldon, 191 So.2d 87 (Fla. 4th DCA 1966), cert. discharged, 200 So.2d 183 (Fla. 1967). Thus it is that the improper conduct must be deliberate misconduct. See also Barkett v. Hardy, 571 So.2d 13 (Fla. 2d DCA 1990) (absence of corporate formalities, lack of equity capital, proof of domination and control, and that corporation was used as a vehicle for personal interest were insufficient to establish improper conduct); Futch v. Head, 511 So.2d 314 (Fla. 1st DCA) (veil pierced where shareholder employed corporation to cheat co-broker out of a sales commission), rev. denied, 518 So.2d 1275 (Fla. 1987); U-Haul Int'l v. Jartran, Inc., 793 F.2d 1034 (9th Cir. 1986) (interpreting Dania to require actual fraud as a prerequisite to alter ego liability for trademark infringement). One would have to be less than candid not to ignore the decisions which have considered also the "instrumentality/alter ego" theory in connection with the veil piercing actions. See, e.g. Mabon, Nugent, supra. Under this theory, once the plaintiff proved that the shareholder completely disregarded the corporate form, and in fact acted not as a corporation, the courts did not require additional misconduct to pierce the corporate veil. For example, if the shareholders entered into business relationships as an individual and not as a corporation, especially if the shareholder ignored the formalities required by law, or held himself out to the market place as an individual, no doubt the shareholder will not be permitted to hide behind the corporate shield. Then the veil may be pierced for no other reason than that the shareholders are bound by their conduct and are estoppel to hide behind the corporate veil. However, no Delaware court actually held that the corporate veil may be pierced solely on the instrumentality theory. See Mabon, Nugent, supra. ("The Delaware courts have also stated, although not held, that the corporate veil may be pierced where a subsidiary is in fact a mere instrumentality or alter ego of its parent"). Nor is this Court aware of a Florida decision to the contrary. Moreover they do not stand for the proposition that misconduct is not required. In this connection it should also be noted that this Court has already found in its Memorandum Opinion on the Motion for Summary Judgment that before one can resort to the instrumentality theory, there must have been a complete disregard for corporate formalities--where shareholders "have ignored the 'corporateness' of the corporation," Irwin & Leighton, Inc., v. W.M. Anderson Co., 532 A.2d 983 (Del. Ch. 1987), and where the parent and subsidiary corporations are "operated as a single economic entity such that it would be inequitable for [a] Court to uphold a legal distinction between them." Mabon, Nugent, supra. It is clear that negligence or even reckless conduct, of which by the way there is not evidence in this case in spite of some insinuation and innuendo, are not sufficient to establish improper conduct under either Florida or Delaware law. In Ally v. Naim, 581 So.2d 961 (Fla. 3d DCA 1991), the plaintiff was an employee of a corporation that owned and operated food vending machines. In 1985, the corporation sold all of its machines to a third party. It continued to sell soda through 1988. From 1985 through 1989, the president and sold stockholder took all corporate income, net after expenses, as personal compensation. Plaintiff was injured in the course of his employment in 1986. He filed a worker's compensation claim. In 1990, unable to collect his judgment from the corporation, the plaintiff sued the individual stockholder. The trial court pierced the corporate veil and entered judgment against the individual stockholder. On appeal, the Florida court reversed the judgment. Although the defendant had not set aside any corporate funds to cover the worker's compensation claim, the court refused to pierce the corporate veil "unless it is shown that the corporation was organized or employed to mislead creditors or to work a fraud upon them." Id. at 963 (quoting Advertects, supra.) The court further stated that "it is not enough to show that the corporation's 'business affairs had been rather poorly handled.'" Id. In Harco Nat'l Ins. Co. v. Green Farms, Inc., supra, a former employee sought to collect a worker's compensation judgment from he individual stockholders of Green Farms, Inc., his past employer. The corporation had failed to carry worker's compensation insurance, as required by statute, and was otherwise undercapitalized. In denying summary judgment on the plaintiff's veil-piercing claim, the court stated: [The stockholders] apparently made loans to Green Farms, Inc., and then obtained repayment by transferring assets from the corporation to themselves. Such a transfer of assets, however, is not necessarily a basis for piercing the corporate veil. The Plaintiffs must also show that such transfers were done to defraud creditors or were done merely to siphon off corporate assets, rather than repay outstanding loans. (emphasis added). The conduct of a shareholder in both Ally and Harco was clearly negligent and reckless. Notwithstanding, in both cases the fact that the persons in charge breached their legal duty to provide insurance for their employees did not warrant piercing the corporate veil. The controlling case law requires more, intentional misconduct, or, put a different way, before the conduct may form the basis to disregard the corporate structure, it must be established that the corporation was operated as a shell game and the corporate shield between the parent and subsidiary was nothing more than a sham. Mobil Oil Corp., supra. In the present instance JWC had no legal obligation to assure that Celotex had adequate insurance to meet the projected and, in a large measure, the claims of the asbestos victims, some of whom are yet to be identified, related to the exposure of asbestos is certainly insufficient to conclude that they intentionally failed to provide for the Asbestos Claimants and would warrant piercing the corporate veil. There is hardly any question that even if the conduct of a parent is reckless or negligent, as a matter of law it is insufficient to carry the burden of proof placed on the parties who seek to pierce the corporate veil. Even assuming without conceding that JWC was negligent or even reckless by failing to assure that Celotex had enough insurance, this is not sufficient to warrant to pierce the corporate veil. PERVASIVE DOMINION AND CONTROL INTERCOMPANY TRANSACTIONS A. Cash Management System One element of the attack on the corporate separateness of Celotex and JWC centered around the cash management system. It has been widely recognized in the corporate world that there is nothing inherently wrong in a parent managing all the cash generated by the subsidiaries through a cash management system. Tyco Lab., Inc. v. DASI Indus., Inc. 1993 WL 356929 (N.D. Ill. 1993) (evidence that parent served a 'centralized cash management function' for itself and its subsidiaries did not justify piercing veil); United States v. Bliss, 108 F.R.D. 127 (E.D. Mo. 1985) (claim that parent "manipulated cash flows through a cash management system" did not indicate anything more "than a usual parent- subsidiary relationship"); Japan Petroleum (Nigeria) Ltd. v. Ashland Oil, Inc., 456 F.Supp. 831 (D. Del. 1978) (fact that parent paid invoices of subsidiary "pursuant to a cash management system for its subsidiaries" was not grounds to pierce veil). Based on this record there is no doubt, and this Court is satisfied, that the cash management system was totally consistent with sound business practices widely recognized in the corporate business world. B. Corporate Assessment The next thrust of the attack by the Asbestos Claimants focused on the corporate assessment by the parent to its subsidiaries and contended it was somehow improper. In the case of Pulte Home Corp., Inc., v. Ply Gem Industries, Inc., 804 F.Supp. 1471 (M.D.Fla. 1992), the District Court for the Middle District of Florida held that: The only payments made by Hoover to Ply Gem are reasonable amounts that it, like the other operating subsidiaries, pays to compensate Ply Gem for financing and other services that Ply Gem provides to it, and provide Ply Gem with a reasonable return on its investment. Ply Gem charges Hoover a working capital fee that is calculated at a fixed percentage of Hoover's net working capital. The percentage rate changes annually and reflects the interest rate paid by Ply Gem to its own lenders. This rate is lower than any fixed rate that would be available to Hoover from outside lenders if Hoover were to finance its working capital. See also Johnson v. Warnaco, Inc., 426 F.Supp. 44 (S.D. Miss. 1976) "corporate charge" of 1.3% of sales was levied for services rendered by parent). Again, it is clear that there is nothing inherently improper in the assessment by a parent of charges incurred on behalf of the subsidiary. Without anything more, it is difficult to accept that the existence of a corporate assessment warrants the piercing of the corporate veil between Celotex and JWC. This is evident inasmuch as had the parent not furnished the services for which it charged a reasonable cost, the subsidiary would have to obtain these services from outside sources at no doubt equal or greater cost. Such an arrangement would not have been conducive to an efficient or economic manner to conduct the business of the various enterprises. C. Line-of-Business Reporting In the same vein, the line-of-business reporting and general oversight of the operations of a subsidiary by a parent is equally common and proper. This Court that the line-of- business reporting is a proper manner for a parent to oversee the operation of its subsidiaries and does not support the conclusion to pierce the corporate veil. See In re Fairfield Plantation, Inc., 147 B.R. 946 (Bankr. E.D. Ark. 1992) ("centralized records for all FCI subsidiaries were kept by FCI."); In re School Asbestos Litigation, 1993 WL 209719 (E.D. Pa. 1993) (fact that subsidiary president and division manager reported to group vice president did not exhibit control necessary to pierce veil); Fidenas AG v. Honeywell, Inc., 501 F. Supp. 1029 (S.D.N.Y. 1980) (no piercing although parent reported subsidiaries' profits as part of parent financial, had a unified marketing plan, approved long range plans and annual plans, and held themselves out as a "single integrated world-wide operation"). These holdings are sound and all emphasize one basic point, that a 100% stockholder has the right to know what is going on with his investment. In re School Asbestos Litigation, supra. DECISION-MAKING PROCESS Also, the Asbestos Claimants contend that the requirement of approval by the parent of capital expenditures, acquisitions and sales of capital assets was improper. There is substantial authority to support the proposition that such involvement by a parent is not only proper but common and has been approved by the courts. See Phoenix Canada Oil Co., Ltd. v. Texaco, Inc., 842 F.2d 1466 (3d Cir.) cert. denied 488 U.S. 908, 109 S.Ct. 259, 102 L. Ed. 2d 247 (1988) (subsidiaries were "required to secure approval from their parent corporations for large investments and acquisitions or disposal of major assets"); Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145 (3d Cir. 1988) ("widespread involvement" in financial and management decisions, including "close scrutiny of new capital expenditure projects," did not rise to high standard of domination required to pierce the veil); Quarles v. Fuqua Industries, Inc., 504 F.2d 1358 (10th Cir. 1974) (it is appropriate for a corporate parent to approve budgets and generally to supervise and coordinate subsidiaries' financial matters); Mobil Oil Corp., supra. (approval of major subsidiary expenditures merely demonstrated that parent and subsidiary were "closely connected" and did not warrant piercing the veil); Akzona Inc. v. E.I. DuPont de Nemours & Co., 607 F.Supp. 227 (D.Del. 1984) (no piercing where parent had to approve capital expenditures of subsidiary); D.L. Auld Co. v. Park Electrochemical Corp., 553 F.Supp. 804 (E.D.N.Y. 1982) (no piercing where subsidiary "must follow the orders of [parent company] regarding significant business decisions"); Fidenas, supra (fact that parent approved subsidiary expenditures over a certain level did not support piercing). The one and only asset of JWC was its stock holdings in Celotex. It would have been sheer, utter folly, and would defy common business sense to require the parent to stand aloof with its eyes closed to the subsidiary's activities concerning the acquisition and sale of capital assets. JWC owed, as a fiduciary, the duty to its stockholders to assure that nothing done by its wholly owned subsidiaries impaired or put in jeopardy the investment of its shareholders. Based upon the foregoing, this Court is satisfied that the involvement by JWC in the area of capital expenditure and capital liquidation was within the accepted standards of the corporate business world and was proper. MOTIVATION TO SELL ASSETS OF CELOTEX In the last analysis the underlying basis of the Asbestos Claimants' position is based on the assertion that the assets of Celotex were sold in order to denude Celotex of its assets and render it unable to respond to the ever-growing claims of individuals and entities who claimed to have suffered damage as a result of exposure to products containing asbestos manufactured and/or distributed by Celotex. It is clear that all asbestos manufacturers were aware of the media coverage of the asbestos litigation, especially when Johns-Manville filed for protection under the Bankruptcy Code, the first major asbestos related Chapter 11 case. Everybody who had a connection with asbestos or asbestos related products was fully aware of the progress of the Johns-Manville Chapter 11 case. One would be less than candid not to admit that this threat to enterprises who were connected and involved with asbestos would raise concern in the minds of the management of JWC and the legal department of JWC. Juxtaposed to this disturbing and ever mounting development in the asbestos related litigation was the real and radical downturn of the economy due to the unprecedented inflation and an unheard of rise in the interest rates which, as noted earlier, approached and ultimately passed the 20% annual rate. It is unnecessary to indulge in any unwarranted speculation of the tremendous impact and the effect of this development on the real estate market, particularly on sales of new homes. One of the strongest and healthiest member of the JWC family was Jim Walter Homes, which builds prefabricated homes all over the country. The almost devastating impact of this development brought home to the management of JWC that it was presented with the inevitable choice between further attempts to strengthen business and struggle to survive through cost cutting and in the event that failed to produce the necessary results, possibly targeting certain parts of the JWC family for liquidation in order to raise the necessary cash to survive. The line of credit which was clearly the life blood of the economic health and the operation of the JWC family was in serious danger and thus it was absolutely imperative to secure the necessary cash to keep the ship afloat. The divisions or subsidiaries of Celotex which were targeted and were actually sold were historically poor performers, some never having generated any profit, and some only marginally. There is no hard evidence in this record which would warrant the conclusion based on this record that JWC embarked upon conduct using its dominating position as a parent to liquidate the assets of Celotex specifically for the purpose of evading any possible liability resulting from the asbestos litigation. The most that could be said is that the theory advanced by the Asbestos Claimants is supported somewhat, albeit slightly, by this record. It is equally true that this record also supports, but with a greater force, the position taken by JWC that the liquidation proceeds was a result of a sound proper business judgment and was not motivated by any desire to injure the Asbestos Claimants or denude Celotex of its assets in order to assure that in the event they prevail they will not be able to obtain satisfaction of their judgments, if and when they obtain the judgments. This being the case it is clear that the record supports more strongly the claim of the Debtors and for this reason the Asbestos Claimants have failed to carry the burden placed on them which is persuasive and definitely the preponderance of the evidence. UTILIZATION OF PROCEEDS OF LIQUIDATION REPAYMENT OF LOANS VS RECOVERY OF EQUITY The propriety of the repayment of the intercompany payable with the proceeds of the asset disposition was hotly contested by the parties. The question centers around whether the intercompany payable was in fact a payable, i.e. debt, or really an equity investment, i.e. capital. It should be pointed out at the outset that the financing of a subsidiary by a parent is not improper per se. This notion was has been repeatedly rejected by courts, finding that it is proper for the parent to provide all financing to the subsidiary. In re Fairfield Plantation, Inc., supra. See Pulte Home Corp., supra, (no piercing where parent financed subsidiary's working capital); In re Blanton, supra, (intercompany loans, documented only on accounting books, do "not reveal a disregard of the legal separateness of the various corporations, but only reflects the factual relatedness of the various corporations"); Bliss, supra (parent's guarantee of bank loans for subsidiary did not indicate a relationship "other than a usual parent-subsidiary relationship"); Akzona Inc., supra (parent "arranging financing" for subsidiary was not grounds for piercing veil); Fidenas, supra (fact that defendants procured loans for subsidiary was "common" and not grounds for piercing the veil); Japan Petroleum Co., supra (treasury department of parent advanced funds to subsidiary as part of cash management system, but that was not grounds to pierce veil); Johnson v. Warnaco, supra, (parent obtained financing as needed, charging subsidiaries on inter-corporate books). Thus, in the last analysis the issue involves the proper classification of the advances--described by JWC as a bona fide loan and by the Asbestos Claimants as an equity investment. In determining whether the advance of funds is equity or debt, courts have looked to a variety of factors, including the initial capitalization of the corporation, the amount of shareholder control, the label placed on the transaction by the parties involved, the intent of the parties involved in the transaction, and the documentation of the transaction. Turning first to the issue of whether the funds advanced were in fact bona fide loans or capital investment, Courts frequently consider the question of whether or not the corporation was initially properly capitalized or whether the capitalization was either nominal or "thin." The longer the corporation operated before the advance was made by the insiders, stockholders or affiliates, the less likely that the Courts will finds the corporation was undercapitalized, and the more likely the advance was a bona fide loan. In re Regency, Inc., 96 F.Supp. 535 (D.N.J. 1951); Costello v. Fazio, 256 F.2d 903 (9th Cir. 1958); Bijour-Pensacola Corp. v. United States, 172 F.Supp. 309 (N.D. Fla. 1959). There is no question that Celotex was established long before it was acquired by JWC, and there is not a scintilla of evidence in this record that at its creation, Celotex was undercapitalized. In addition to capitalization, the courts also look to the amount of control exercised by the shareholders of the parent over the affairs of the subsidiary. The absence of control has been a factor in cases where advances were determined to be loans, In the Matter of Lumber, Inc., 124 F.Supp. 302 (D.Ore. 1954). However, the rule is best stated in the negative, that is, absence of control makes a strong case for the plaintiff, but the presence of control alone will not make out the case for finding that an advance of funds was an actual infusion of capital rather than bona fide loans. Although there is no question that there was a certain amount of control exercised by JWC over the affairs of Celotex and the other subsidiaries, it was exercised within the context of the holding company's relationship with its wholly owned subsidiary. This Court is satisfied that this control was within normal and accepted ranges. After all, the control by the parent was part and parcel of the parent's responsibility to its shareholders, to ensure that their investments would be monitored and would not be jeopardized, which might have occurred had JWC given an unbridled control and carte blanche authority to its subsidiaries, including Celotex. Next, the courts frequently look at the label placed upon the advance in the corporate books. In re Otis & Edwards, P.C., 55 B.R. 185 (Bankr. E.D. Mich. 1985), ("A corporation's general ledger will usually reveal how payments on the receivables have been treated by the corporation."); The label placed upon the advance often reveals the parties' intent as to the treatment of the transaction, and as held in In re Lane, 742 F.2d 1311 (11th Cir. 1984), a deciding factor is the intent of the parties. Id. at 1315. (quoting Bayerlite Corp. v. Williams 286 F.2d 285 (6th Cir. 1960) ("the decisive factor is not what the payments are called but what, in fact, they are, and that depends upon the real intention of the parties")); Estate of Mixon v. United States, 464 F.2d 394 (5th Cir. 1972) ("we agree that the parties' intent to create either a debt or equity relationship is, in a sense, the ultimate issue to be determined here.") In re Otis & Edwards, P.C., supra ("The character of the debt depends on the intent of the parties at the time the transfer was made"). In the case of Celotex, both Celotex and JWC labeled the intercompany payable as a payable and treated the advance as such. This treatment of the intercompany payable was recognized to be debt not only by the parties involved, but also by third party lenders and financial analysts, and this payable was also reported as a liability in the report filed with the Securities and Exchange Commission. In sum, the funds advanced by JWC were no different than a line of credit transaction between an institutional lender and a creditor, in which the outstanding balance owed constantly fluctuates, yet there is no question that the outstanding balance is expected to be repaid. As a matter of fact, in this particular instance the funds advanced by JWC to Celotex were in fact, repaid in full. Along with the label placed on the transaction, the formality of the transaction was placed into issue. It is without dispute that these advances were not evidenced by executed promissory notes, nor did the corporation issue additional stock for the advance. The answer to this question was furnished by Fidelity Capital Corp., 920 F.2d 827 (11th Cir. 1991) where the court determined that an entry of an advance on the corporate books is sufficient formality for an intercompany loan. See also Stewart Bros. v. Allen, 189 Ga. App. 816, 377 S.E.2d 724 (Ga. App. 1989) (checks demarcated as "loans" provided sufficient formality to establish debt). Based upon the foregoing, this Court is satisfied that the documentation of the advance, or the lack thereof, is not a fatal element in this situation. It is clear from the record that the parties involved intended that these advances be treated as debt, and Celotex understood it had an obligation to repay the funds advanced. It is intimated in this instance, however, that the repayment by Celotex to JWC of the loans were somewhat tainted suggesting that the repayment of the loans by Celotex to JWC was improper because the funds used to make this repayment should have been kept by Celotex especially because these funds were realized from the liquidation of Celotex assets and should have been used to purchase adequate insurance to cover the claims of the Asbestos Claimants. Or put in a different way, the Asbestos Claimants contend that JWC was preferred over the bona fide claims asserted by the asbestos victims against Celotex and, therefore, this conduct was somewhat improper and by itself would warrant to pierce the corporate veil. To the extent that it is intimated or suggested that these repayments were voidable preferences obviously misses the mark inasmuch as these transactions were way outside of any time frame provided by Section 547 to avoid preferences, i.e., the one year time frame for insiders, Section 547 (b)(1)(B). The contention that, because of the repayment of the advances by Celotex, JWC deprived Celotex from funds and assets which would otherwise be available to respond to the massive- tort claims, in this Court's opinion, also misses the mark. This same argument was examined--and rejected--by the court in In re Silicone Gel Breast Implants Products Liability Litigation, 837 F.Supp. 1128 (N.D. Ala. 1993), where personal injury plaintiffs sought to pierce the veil between Dow Corning and one of its parents, Dow Chemical. Judge Pointer granted summary judgment rejecting the claim. He had this to say on the question of capitalization: One could argue that whenever the potential tort liabilities facing a corporation exceed its assets, the corporation is undercapitalized. Plaintiffs make this argument, but fail to cite any decision so holding, nor is this court aware of any such case. As the movants point out, such a definition of under-capitalization would result in limited liability for a corporation in the tort context only when it does not need it, i.e. when the corporation's assets are sufficient to satisfy its liabilities. . . . [T]he plaintiff's argument is tantamount to a call for disregarding the limited liability of corporate organizations whenever a closely-held corporation becomes confronted with potential tort liabilities that could exceed its assets. No court has taken such an expansive view of the veil-piercing doctrine, and this court refuses to do so now. 837 F.Supp. at 1137-38 (emphasis added). CONCLUSION Having considered the entire record together with the exhibits and being fully advised by post-trial submissions by the parties, there is no doubt that in the matter under consideration there is a lot of smoke, but not sufficient fire and the proof presented in support of the veil piercing claim is a slender reed, indeed, upon which to hang a sword with sufficient strength required under the law to pierce the corporate veil. With some exception, the proof presented did not even reach the level of equilibrium which by itself would be insufficient to carry the burden of proof. Even on points viewed in the most favorable light which would support the Debtors' claims, such as JWC's motivation and its involvement in the asset disposition of Celotex, the record equally supports the theory urged by the Asbestos Claimants. It is equally consistent with the position taken by JWC and the Debtors that it was a sold and sound business decision and never reached the level of intention wrongdoing which is required under the law to pierce the corporate veil. A separate Final Judgment shall be entered in accordance with the foregoing. DATED at Tampa, Florida, on April 18, 1994. __________________________ ALEXANDER L. PASKAY Chief Bankruptcy Judge c: Debtor Debtor/Plaintiff Atty-D Stichter, Esq. & M Crames, Esq. Defendant Atty-Marsha Rydberg, Esq. & E Inselbuch, Esq. All Interested Parties U.S. Trustee All Interested parties on Attached List EXHIBIT T3E5 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN BALLOT FOR CLASS S-6 (SERIES B & C SENIOR NOTE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED. The statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders are soliciting your votes with respect to the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan is further described in the "Disclosure Statement For Creditors' Plan Dated As Of August 1, 1994" (the "Creditors' Disclosure Statement"). On August 2, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Creditors' Disclosure Statement as containing adequate information. PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR ACCEPTANCE OR REJECTION OF THE CREDITORS' PLAN, YOUR PREFERENCE FOR THE CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING NEW SENIOR NOTES AND YOUR ELECTION REGARDING THE SPECIFIC RELEASE CONTAINED IN THE CREDITORS' PLAN: Item 1. Principal Amount of Series B & C Senior Notes As To Which Votes Are Cast. This Ballot 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. 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) Vote. The Beneficial Owner of the aggregate principal amount of Series B & C Senior Notes set forth in Item 1 votes to (please check one box below): Accept the Creditors' Plan Reject the Creditors' Plan Item 3. Preference. The Beneficial Owner of the aggregate principal amount of Series B & C Senior Notes set forth in Item 1 wishes to indicate a preference for one Plan over the other in the following manner (please check one box below): Prefer the Creditors' Plan over the Debtors' Plan. Prefer the Debtors' Plan over the Creditors' Plan. Item 4. Series B & C Senior Note Claim Election. Pursuant to Section 3.11 of the Creditors' Plan, each holder of a Claim in Class S-6 may elect to receive all, but not part, of its Series B & C Senior Note Claim in the form of New Senior Notes. I wish to have all of my Allowed Series B & C Senior Note Claim satisfied by New Senior Notes Item 5. Section 6.1 of the Creditors' Plan, which is set forth in its entirety below, provides for a general release to be granted creditors of and equity holders in the Debtors in one of several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS ENTIRETY AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU SPECIFICALLY AGREE TO GRANT SUCH RELEASE. 6.1 Release by Holders of Claims or Interests. As of the Effective Date, Holders of any Claims or Interests: (i) that accept any property or New Common Stock to be distributed to or for the benefit of a Holder of any Claims, or with respect to a Holder of Interests, that exercises its Equity Call Option, pursuant to Article III of the Creditors' Plan and in consideration therefor; (ii) in a Class that accepts the Creditors' Plan; or (iii) that mark 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 such release (the text of which release shall be set forth in full on such ballot) (and all trustees and/or agents on behalf of such Holder) shall be deemed to have released, to the extent permitted by the Court, (A) the Settling Parties (other than Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), the Proponents, 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 Holders of Allowed Indemnity Claims (to the extent of such Claims), 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, shareholders, employees, agents, advisors, predecessors in interest and representatives of the all of the foregoing (other than any (x) Holders or former Holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex's or Jim Walter Corporation's or any of the Debtors' respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives, and (z) Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), in each case in such Person's capacity as a Holder of a Claim or Interest, as a plan proponent, if applicable, as a shareholder of any Debtor, or any other capacity (including, with respect to the Bondholder Proponents, any action or inaction related to or set forth in the definition of Qualified Securities herein) (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a Holder or former Holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex/JWC Released Party) and (B) the holders of Allowed Indemnity Claims that are not parties to the Veil Piercing Settlement Agreement, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively, the Persons described in (A) and (B) are referred to herein, in such capacities, as the "Released Parties"), of and from any and all Claims, obligations, rights, causes of action and liabilities (other than the right to enforce the Debtors' obligations under the Creditors' 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 on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Creditors' Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO-Related Issues). The undersigned specifically AGREES TO grant the release provided in Section 6.1. of the Creditors' Plan. YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF YOUR ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE. YOU MAY VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT NOT TO SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT CHECKING THE BOX ABOVE. Item 6. By signing this Ballot, the undersigned certifies that the Beneficial Owner has been provided with a copy of the Creditors' Disclosure Statement, including all Exhibits thereto. IMPORTANT TAX INFORMATION Under federal income tax laws, you (as payee) are required by law to provide the Debtors with your correct taxpayer identification number ("TIN"). If you are an individual, your TIN is your social security number. If the Debtors are not provided with your correct TIN, you may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments and distributions to be made to you pursuant to the Creditors' Plan may be subject to "backup withholding" for federal income tax purposes. Completing Substitute Form W-9 To prevent backup federal income tax withholding in connection with distributions to be received pursuant to the Creditors' Plan, you must provide the Debtors with your correct TIN by completing the Substitute Form W9 below, certifying that the TIN provided on Substitute Form W-9 is correct and that either (1) you have not been notified by the Internal Revenue Service that you are subject to backup withholding or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. If you are an exempt holder, you must also provide the Debtors with your correct TIN by completing the Substitute Form W-9, and should indicate your exempt status by writing "EXEMPT" in Part III of the Substitute Form W-9. If you are subject to backup withholding, please cross out Item Number 2 in Part IV of the Substitute Form W-9. If you have not been issued a TIN and have applied for one, or if you intend to apply for one in the near future, please check the box in Part II of the Substitute Form W-9, and sign and date both the Substitute Form W-9 and the "Certificate of Taxpayer Awaiting Identification Number". If you fail to do so, the Debtors will withhold 31% from any payments and distributions made to you thereafter until a TIN and new Substitute Form W-9 are provided to the Debtors. What Taxpayer Identification Number to Provide You are required to provide the Debtors the social security number or employer identification number of the record holder of the Claim held by you. If the Claim is in more than one name or is not in the name of the actual owner, consult the enclosed "Guidelines for certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. EXHIBIT T3E6 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. MASTER BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN FOR USE BY RECORD HOLDERS OF CLASS S-6 (SERIES B & C SENIOR NOTE) CLAIMS PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, IT WILL NOT BE COUNTED. Name of Bank, Broker or Nominee: Address: 1. The undersigned, a record holder as of July 13, 1994 of the aggregate principal amount of $ of Series B & C Senior Notes certifies the following (please fill out): beneficial owners of an aggregate principal amount of $ of Series B & C Senior Notes accepted the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of Series B & C Senior Notes rejected the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of Series B & C Senior Notes agreed to grant the specific release provided in Section 6.1 of the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of Series B & C Senior Notes prefer the Creditors' Plan to the Debtors' Plan. beneficial owners of an aggregate principal amount of $ of Series B & C Senior Notes prefer the Debtors' Plan to the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of Series B & C Senior Notes elected to receive New Senior Notes. 2. The undersigned certifies that each beneficial owner of the Series B & C Senior Notes described above whose votes are being transmitted along with this summary ballot has been provided with a copy of the Creditors' Disclosure Statement. 3. The undersigned certifies that it is the registered record holder in its own name or through a position held at a securities depository of the Series B & C Senior Notes set forth above. 4. Beneficial Owner Information Please complete the following schedule below. The undersigned certifies that it is a true and accurate schedule of the votes of the beneficial owners of the Series B & C Senior Notes described above.
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT OF OF OF OF OF OF $ $ $ $ $ $ ELECTS TO RECEIVE ACCEPTS REJECTS PREFERS PREFERS QUALIFIED ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Total =N/A
(ATTACH ADDITIONAL PAGES IF NECESSARY) 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 BALLOT The Master Ballot on the reverse side is not a letter of transmittal and may not be used for any purpose other than for the record holders of the Series B & C Senior Notes holding on behalf of another to record acceptances or rejections of the Creditors' Plan, the preferences for the Creditors' Plan or the Debtors' Plan, elections of New Senior Notes and the grant of the specific release contained in the Creditors' Plan by the Beneficial Owners of Series B & C Senior Notes. Accordingly, holders should not surrender any certificates representing their securities in connection with voting on the Creditors' Plan, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Master Ballot. The Creditors' 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 such 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 Creditors' Plan is confirmed by the Bankruptcy Court, all holders of the Series B & C Senior Notes Claims and any and all other holders of Claims against and equity interests in the Debtors (including those who abstain or reject such plan) will be bound by the confirmed plan and the transactions contemplated thereby. The record date (the "Voting Record Date") for purposes of determining which holders of Series B & C Senior Notes are eligible to vote on the Creditors' Plan is July 13, 1994. Only holders of Series B & C Senior Notes in whose name such Series B & C Senior Notes are held on the books of the Series B & C Senior Note Trustee on the Voting Record Date or any person who has obtained a properly completed proxy from such person are eligible to vote on the Creditors' Plan. This Master Ballot is to be used by brokerage firms, banks, or nominees for summarizing votes cast by beneficial owners of Series B & C Senior Notes and received by 5:00 P.M., Eastern Time, on September 19, 1994. Individual Ballots received after such time must not be counted. Please retain all executed Individual Ballots for one year. Please forward this Master Ballot in the enclosed return envelope to: If By Mail Donlin, Recano & Company, Inc. P.O. Box 2022 Murray Hill Station New York, New York 10156-0701 If By Courier or Hand Donlin, Recano & Company, Inc. 419 Park Avenue South Suite 1206 New York, New York 10016 To have your vote count, you must complete, sign and return this Master Ballot so that it is received by the Balloting Agent not later than 5:00 pm., Eastern Time, on September 23, 1994. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT, CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868. EXHIBIT T3E7 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN BALLOT FOR CLASS U-4 (SENIOR SUBORDINATED NOTE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED. The statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders are soliciting your votes with respect to the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan is further described in the "Disclosure Statement For Creditors' Plan Dated As Of August 1, 1994" (the "Creditors' Disclosure Statement"). On August 2, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Creditors' Disclosure Statement as containing adequate information. PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR ACCEPTANCE OR REJECTION OF THE CREDITORS' PLAN, YOUR PREFERENCE FOR THE CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING QUALIFIED SECURITIES, AND YOUR ELECTION REGARDING THE SPECIFIC RELEASE CONTAINED IN THE CREDITORS' PLAN: Item 1. Principal Amount of Senior Subordinated Notes As To Which Votes Are Cast. This Ballot is cast by or on behalf of the Beneficial Owner of the aggregate principal amount of the Senior Subordinated Notes indicated immediately below. 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) Vote. The Beneficial Owner of the aggregate principal amount of Senior Subordinated Notes set forth in Item 1 votes to (please check one box below): Accept the Creditors' Plan Reject the Creditors' Plan Item 3. Preference. The Beneficial Owner of the aggregate principal amount of Senior Subordinated Notes set forth in Item 1 wishes to indicate a preference for one Plan over the other in the following manner (please check one box below): Prefer the Creditors' Plan over the Debtors' Plan. Prefer the Debtors' Plan over the Creditors' Plan. Item 4. Subordinated Note Claim Election. Pursuant to Section 1.26 of the Creditors' Plan, each holder of a Claim in Classes U-4, U-5 and/or U-6 may elect to receive all or any part of its Allowed Claim in Qualified Securities. Any part of such Claim that is not satisfied by Qualified Securities will be satisfied by New Common Stock. Please select one of the following: I wish to have all of my Allowed Subordinated Note Claim satisfied by Qualified Securities. I wish to have $ aggregate principal amount (fill in any amount up to the full amount of your Allowed Subordinated Note Claim for the Class to which this Election Form relates) of my Allowed Subordinated Note Claim satisfied by Qualified Securities. Item 5. Section 6.1 of the Creditors' Plan, which is set forth in its entirety below, provides for a general release to be granted creditors of and equity holders in the Debtors in one of several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS ENTIRETY AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU SPECIFICALLY AGREE TO GRANT SUCH RELEASE. 6.1 Release by Holders of Claims or Interests. As of the Effective Date, Holders of any Claims or Interests: (i) that accept any property or New Common Stock to be distributed to or for the benefit of a Holder of any Claims, or with respect to a Holder of Interests, that exercises its Equity Call Option, pursuant to Article III of the Creditors' Plan and in consideration therefor; (ii) in a Class that accepts the Creditors' Plan; or (iii) that mark 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 such release (the text of which release shall be set forth in full on such ballot) (and all trustees and/or agents on behalf of such Holder) shall be deemed to have released, to the extent permitted by the Court, (A) the Settling Parties (other than Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), the Proponents, 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 Holders of Allowed Indemnity Claims (to the extent of such Claims), 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, shareholders, employees, agents, advisors, predecessors in interest and representatives of the all of the foregoing (other than any (x) Holders or former Holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex's or Jim Walter Corporation's or any of the Debtors' respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives, and (z) Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), in each case in such Person's capacity as a Holder of a Claim or Interest, as a plan proponent, if applicable, as a shareholder of any Debtor, or any other capacity (including, with respect to the Bondholder Proponents, any action or inaction related to or set forth in the definition of Qualified Securities herein) (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a Holder or former Holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex/JWC Released Party) and (B) the holders of Allowed Indemnity Claims that are not parties to the Veil Piercing Settlement Agreement, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively, the Persons described in (A) and (B) are referred to herein, in such capacities, as the "Released Parties"), of and from any and all Claims, obligations, rights, causes of action and liabilities (other than the right to enforce the Debtors' obligations under the Creditors' 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 on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Creditors' Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO-Related Issues). The undersigned specifically AGREES TO grant the release provided in Section 6.1. of the Creditors' Plan. YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF YOUR ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE. YOU MAY VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT NOT TO SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT CHECKING THE BOX ABOVE. Item 6. By signing this Ballot, the undersigned certifies that the Beneficial Owner has been provided with a copy of the Creditors' Disclosure Statement, including all Exhibits thereto. IMPORTANT TAX INFORMATION Under federal income tax laws, you (as payee) are required by law to provide the Debtors with your correct taxpayer identification number ("TIN"). If you are an individual, your TIN is your social security number. If the Debtors are not provided with your correct TIN, you may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments and distributions to be made to you pursuant to the Creditors' Plan may be subject to "backup withholding" for federal income tax purposes. Completing Substitute Form W-9 To prevent backup federal income tax withholding in connection with distributions to be received pursuant to the Creditors' Plan, you must provide the Debtors with your correct TIN by completing the Substitute Form W9 below, certifying that the TIN provided on Substitute Form W-9 is correct and that either (1) you have not been notified by the Internal Revenue Service that you are subject to backup withholding or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. If you are an exempt holder, you must also provide the Debtors with your correct TIN by completing the Substitute Form W-9, and should indicate your exempt status by writing "EXEMPT" in Part III of the Substitute Form W-9. If you are subject to backup withholding, please cross out Item Number 2 in Part IV of the Substitute Form W-9. If you have not been issued a TIN and have applied for one, or if you intend to apply for one in the near future, please check the box in Part II of the Substitute Form W-9, and sign and date both the Substitute Form W-9 and the "Certificate of Taxpayer Awaiting Identification Number". If you fail to do so, the Debtors will withhold 31% from any payments and distributions made to you thereafter until a TIN and new Substitute Form W-9 are provided to the Debtors. What Taxpayer Identification Number to Provide You are required to provide the Debtors the social security number or employer identification number of the record holder of the Claim held by you. If the Claim is in more than one name or is not in the name of the actual owner, consult the enclosed "Guidelines for certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. EXHIBIT T3E8 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. MASTER BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN FOR USE BY RECORD HOLDERS OF CLASS U-4 (SENIOR SUBORDINATED NOTE) CLAIMS PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, IT WILL NOT BE COUNTED. Name of Bank, Broker or Nominee: Address: 1. The undersigned, a record holder as of July 13, 1994 of the aggregate principal amount of $ of Senior Subordinated Notes certifies the following (please fill out): beneficial owners of an aggregate principal amount of $ of Senior Subordinated Notes accepted the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of Senior Subordinated Notes rejected the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of Senior Subordinated Notes agreed to grant the specific release provided in Section 6.1 of the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of Senior Subordinated Notes prefer the Creditors' Plan to the Debtors' Plan. beneficial owners of an aggregate principal amount of $ of Senior Subordinated Notes prefer the Debtors' Plan to the Creditors' Plan. 2. The undersigned certifies that each beneficial owner of the Senior Subordinated Notes described above whose votes are being transmitted along with this summary ballot has been provided with a copy of the Creditors' Disclosure Statement. 3. The undersigned certifies that it is the registered record holder in its own name or through a position held at a securities depository of the Senior Subordinated Notes set forth above. 4. Beneficial Owner Information Please complete the following schedule below. The undersigned certifies that it is a true and accurate schedule of the votes of the beneficial owners of the Senior Subordinated Notes described above.
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT OF OF OF OF OF OF $ $ $ $ $ $ ELECTS TO RECEIVE ACCEPTS REJECTS PREFERS PREFERS QUALIFIED ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Total =N/A
(ATTACH ADDITIONAL PAGES IF NECESSARY) 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 BALLOT The Master Ballot on the reverse side is not a letter of transmittal and may not be used for any purpose other than for record holders of the Senior Subordinated Notes holding on behalf of another to record acceptances or rejections of the Creditors' Plan, the preferences for the Creditors' Plan or the Debtors' Plan, elections of Qualified Securities, and the grant of the specific release contained in the Creditors' Plan by the Beneficial Owners of Senior Subordinated Notes. Accordingly, holders should not surrender any certificates representing their securities in connection with voting on the Creditors' Plan, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Master Ballot. The Creditors' 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 such 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 Creditors' 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) will be bound by the confirmed plan and the transactions contemplated thereby. The record date (the "Voting Record Date") for purposes of determining which holders of Senior Subordinated Notes are eligible to vote on the Creditors' Plan is July 13, 1994. Only holders of Senior Subordinated Notes in whose name such Senior Subordinated Notes are held on the books of the Senior Subordinated Indenture Trustee on the Voting Record Date or any person who has obtained a properly completed proxy from such person are eligible to vote on the Creditors' Plan. This Master Ballot is to be used by brokerage firms, banks, or nominees for summarizing votes cast by Beneficial Owners of Senior Subordinated Notes and received by 5:00 p.m., Eastern Time, on September 19, 1994. Individual Ballots received after such time must not be counted. Please retain all executed Individual Ballots for one year. Please forward this Master Ballot in the enclosed return envelope to: If By Mail Donlin, Recano & Company, Inc. P.O. Box 2022 Murray Hill Station New York, New York 10156-0701 If By Courier or Hand Donlin, Recano & Company, Inc. 419 Park Avenue South Suite 1206 New York, New York 10016 To have your vote count, you must complete, sign and return this Master Ballot so that it is received by the Balloting Agent not later than 5:00 p.m., Eastern Time, on September 23, 1994. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT, CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868. EXHIBIT T3E9 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN BALLOT FOR CLASS U-5 (17% SUBORDINATED NOTE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, Inc. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED. The statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders are soliciting your votes with respect to the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan is further described in the "Disclosure Statement For Creditors' Plan Dated As Of August 1, 1994" (the "Creditors' Disclosure Statement"). On August 2, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Creditors' Disclosure Statement as containing adequate information. PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR ACCEPTANCE OR REJECTION OF THE CREDITORS' PLAN , YOUR PREFERENCE FOR THE CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING QUALIFIED SECURITIES, AND YOUR ELECTION REGARDING THE SPECIFIC RELEASE CONTAINED IN THE CREDITORS' PLAN: Item 1. Principal Amount of 17% Subordinated Notes As To Which Votes Are Cast. This Ballot is cast by or on behalf of the Beneficial Owner of the aggregate principal amount of the 17% Subordinated Notes indicated immediately below. 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) Vote. The Beneficial Owner of the aggregate principal amount of 17% Subordinated Notes set forth in Item 1 votes to (please check one box below): Accept the Creditors' Plan Reject the Creditors' Plan Item 3. Preference. The Beneficial Owner of the aggregate principal amount of 17% Subordinated Notes set forth in Item 1 wishes to indicate a preference for one Plan over the other in the following manner (please check one box below): Prefer the Creditors' Plan over the Debtors' Plan. Prefer the Debtors' Plan over the Creditors' Plan. Item 4. Subordinated Note Claim Election. Pursuant to Section 1.26 of the Creditors' Plan, each holder of a Claim in Classes U-4, U-5 and/or U-6 may elect to receive all or any part of their Allowed Claim in Qualified Securities. Any part of such Claim that is not satisfied by Qualified Securities will be satisfied by New Common Stock. Please select one of the following: I wish to have all of my Allowed Subordinated Note Claim satisfied by Qualified Securities. I wish to have $ aggregate principal amount (fill in any amount up to the full amount of your Allowed Subordinated Note Claim for the Class to which this Election Form relates) of my Allowed Subordinated Note Claim satisfied by Qualified Securities. Item 5. Section 6.1 of the Creditors' Plan, which is set forth in its entirety below, provides for a general release to be granted creditors of and equity holders in the Debtors in one of several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS ENTIRETY AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU SPECIFICALLY AGREE TO GRANT SUCH RELEASE. 6.1 Release by Holders of Claims or Interests. As of the Effective Date, Holders of any Claims or Interests: (i) that accept any property or New Common Stock to be distributed to or for the benefit of a Holder of any Claims, or with respect to a Holder of Interests, that exercises its Equity Call Option, pursuant to Article III of the Creditors' Plan and in consideration therefor; (ii) in a Class that accepts the Creditors' Plan; or (iii) that mark 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 such release (the text of which release shall be set forth in full on such ballot) (and all trustees and/or agents on behalf of such Holder) shall be deemed to have released, to the extent permitted by the Court, (A) the Settling Parties (other than Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), the Proponents, 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 Holders of Allowed Indemnity Claims (to the extent of such Claims), 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, shareholders, employees, agents, advisors, predecessors in interest and representatives of the all of the foregoing (other than any (x) Holders or former Holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex's or Jim Walter Corporation's or any of the Debtors' respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives, and (z) Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), in each case in such Person's capacity as a Holder of a Claim or Interest, as a plan proponent, if applicable, as a shareholder of any Debtor, or any other capacity (including, with respect to the Bondholder Proponents, any action or inaction related to or set forth in the definition of Qualified Securities herein) (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a Holder or former Holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex/JWC Released Party) and (B) the holders of Allowed Indemnity Claims that are not parties to the Veil Piercing Settlement Agreement, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively, the Persons described in (A) and (B) are referred to herein, in such capacities, as the "Released Parties"), of and from any and all Claims, obligations, rights, causes of action and liabilities (other than the right to enforce the Debtors' obligations under the Creditors' 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 on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Creditors' Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO-Related Issues). The undersigned specifically AGREES TO grant the release provided in Section 6.1. of the Creditors' Plan. YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF YOUR ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE. YOU MAY VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT NOT TO SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT CHECKING THE BOX ABOVE. Item 6. By signing this Ballot, the undersigned certifies that the Beneficial Owner has been provided with a copy of the Creditors' Disclosure Statement, including all Exhibits thereto. IMPORTANT TAX INFORMATION Under federal income tax laws, you (as payee) are required by law to provide the Debtors with your correct taxpayer identification number ("TIN"). If you are an individual, your TIN is your social security number. If the Debtors are not provided with your correct TIN, you may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments and distributions to be made to you pursuant to the Creditors' Plan may be subject to "backup withholding" for federal income tax purposes. Completing Substitute Form W-9 To prevent backup federal income tax withholding in connection with distributions to be received pursuant to the Creditors' Plan, you must provide the Debtors with your correct TIN by completing the Substitute Form W9 below, certifying that the TIN provided on Substitute Form W-9 is correct and that either (1) you have not been notified by the Internal Revenue Service that you are subject to backup withholding or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. If you are an exempt holder, you must also provide the Debtors with your correct TIN by completing the Substitute Form W-9, and should indicate your exempt status by writing "EXEMPT" in Part III of the Substitute Form W-9. If you are subject to backup withholding, please cross out Item Number 2 in Part IV of the Substitute Form W-9. If you have not been issued a TIN and have applied for one, or if you intend to apply for one in the near future, please check the box in Part II of the Substitute Form W-9, and sign and date both the Substitute Form W-9 and the "Certificate of Taxpayer Awaiting Identification Number". If you fail to do so, the Debtors will withhold 31% from any payments and distributions made to you thereafter until a TIN and new Substitute Form W-9 are provided to the Debtors. What Taxpayer Identification Number to Provide You are required to provide the Debtors the social security number or employer identification number of the record holder of the Claim held by you. If the Claim is in more than one name or is not in the name of the actual owner, consult the enclosed "Guidelines for certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. EXHIBIT T3E10 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. MASTER BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN FOR USE BY RECORD HOLDERS OF CLASS U-5 (17% SUBORDINATED NOTE) CLAIMS PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, IT WILL NOT BE COUNTED. Name of Bank, Broker or Nominee: Address: 1. The undersigned, a record holder as of July 13, 1994 of the aggregate principal amount of $ of 17% Subordinated Notes certifies the following (please fill out): beneficial owners of an aggregate principal amount of $ of 17% Subordinated Notes accepted the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 17% Subordinated Notes rejected the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 17% Subordinated Notes agreed to grant the specific release provided in Section 6.1 of the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 17% Subordinated Notes prefer the Creditors' Plan to the Debtors' Plan. beneficial owners of an aggregate principal amount of $ of 17% Subordinated Notes prefer the Debtors' Plan to the Creditors' Plan. 2. The undersigned certifies that each beneficial owner of the 17% Subordinated Notes described above whose votes are being transmitted along with this summary ballot has been provided with a copy of the Creditors' Disclosure Statement. 3. The undersigned certifies that it is the registered record holder in its own name or through a position held at a securities depository of the 17% Subordinated Notes set forth above. 4. Beneficial Owner Information Please complete the following schedule below. The undersigned certifies that it is a true and accurate schedule of the votes of the beneficial owners of the 17% Subordinated Notes described above.
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT OF OF OF OF OF OF $ $ $ $ $ $ ELECTS TO RECEIVE ACCEPTS REJECTS PREFERS PREFERS QUALIFIED ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Total =N/A
(ATTACH ADDITIONAL PAGES IF NECESSARY) 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 BALLOT The Master Ballot on the reverse side is not a letter of transmittal and may not be used for any purpose other than for record holders of the 17% Subordinated Notes holding on behalf of another to record acceptances or rejections of the Creditors' Plan, the preferences for the Creditors' Plan or the Debtors' Plan, elections of Qualified Securities, and the grant of the specific release contained in the Creditors' Plan by the Beneficial Owners of 17% Subordinated Notes. Accordingly, holders should not surrender any certificates representing their securities in connection with voting on the Creditors' Plan, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Master Ballot. The Creditors' 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 such 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 Creditors' 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) will be bound by the confirmed plan and the transactions contemplated thereby. The record date (the "Voting Record Date") for purposes of determining which holders of 17% Subordinated Notes are eligible to vote on the Creditors' Plan is July 13, 1994. Only holders of 17% Subordinated Notes in whose name such 17% Subordinated Notes are held on the books of the 17% Subordinated Indenture Trustee on the Voting Record Date or any person who has obtained a properly completed proxy from such person are eligible to vote on the Creditors' Plan. This Master Ballot is to be used by brokerage firms, banks, or nominees for summarizing votes cast by Beneficial Owners of 17% Subordinated Notes and received by 5:00 p.m., Eastern Time, on September 19, 1994. Individual Ballots received after such time must not be counted. Please retain all executed Individual Ballots for one year. Please forward this Master Ballot in the enclosed return envelope to: If By Mail Donlin, Recano & Company, Inc. P.O. Box 2022 Murray Hill Station New York, New York 10156-0701 If By Courier or Hand Donlin, Recano & Company, Inc. 419 Park Avenue South Suite 1206 New York, New York 10016 To have your vote count, you must complete, sign and return this Master Ballot so that it is received by the Balloting Agent not later than 5:00 pm, Eastern Time, on September 23, 1994. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT, CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868. EXHIBIT T3E11 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN BALLOT FOR CLASS U-6 (PRE-LBO DEBENTURE) CLAIMS (BENEFICIAL OWNERS) PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, Inc. (THE "BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED. The statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc Committee of Pre-LBO Bondholders are soliciting your votes with respect to the "Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan is further described in the "Disclosure Statement For Creditors' Plan Dated As Of August 1, 1994" (the "Creditors' Disclosure Statement"). On August 2, 1994, the United States Bankruptcy Court for the Middle District of Florida (Tampa Division) entered an order approving the Creditors' Disclosure Statement as containing adequate information. PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR ACCEPTANCE OR REJECTION OF THE CREDITORS' PLAN, YOUR PREFERENCE FOR THE CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING QUALIFIED SECURITIES, AND YOUR ELECTION REGARDING THE SPECIFIC RELEASE CONTAINED IN THE CREDITORS' PLAN: 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 Are Cast. This Ballot 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/or 13 3/4% Subordinated Debentures indicated immediately below. 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) Vote. 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 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 votes to (please check one box below): Accept the Creditors' Plan Reject the Creditors' 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 Creditors' Plan Reject the Creditors' Plan Item 3. Preference. The Beneficial Owner of the aggregate principal amount of 10 7/8% Subordinated Debentures set forth in Item 1 wishes to indicate a preference for one Plan over the other in the following manner (please check one box below): Prefer the Creditors' Plan over the Debtors' Plan. Prefer the Debtors' Plan over the Creditors' Plan. The Beneficial Owner of the aggregate principal amount of 13 1/8% Subordinated Notes set forth in Item 1 wishes to indicate a preference for one Plan over the other in the following manner (please check one box below): Prefer the Creditors' Plan over the Debtors' Plan. Prefer the Debtors' Plan over the Creditors' Plan. The Beneficial Owner of the aggregate principal amount of 13 3/4% Subordinated Debentures set forth in Item 1 wishes to indicate a preference for one Plan over the other in the following manner (please check one box below): Prefer the Creditors' Plan over the Debtors' Plan. Prefer the Debtors' Plan over the Creditors' Plan. Item 4. Subordinated Note Claim Election. Pursuant to Section 1.26 of the Creditors' Plan, each holder of a Claim in Classes U-4, U-5 and/or U-6 may elect to receive all or any part of its Allowed Claim in Qualified Securities. Any part of such Claim that is not satisfied by Qualified Securities will be satisfied by New Common Stock. Please select one of the following: I wish to have all of my Allowed Subordinated Note Claim satisfied by Qualified Securities. I wish to have $ aggregate principal amount (fill in any amount up to the full amount of your Allowed Subordinated Note Claim for the Class to which this Election Form relates) of my Allowed Subordinated Note Claim satisfied by Qualified Securities. Item 5. Section 6.1 of the Creditors' Plan, which is set forth in its entirety below, provides for a general release to be granted creditors of and equity holders in the Debtors in one of several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS ENTIRETY AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU SPECIFICALLY AGREE TO GRANT SUCH RELEASE. 6.1 Release by Holders of Claims or Interests. As of the Effective Date, Holders of any Claims or Interests: (i) that accept any property or New Common Stock to be distributed to or for the benefit of a Holder of any Claims, or with respect to a Holder of Interests, that exercises its Equity Call Option, pursuant to Article III of the Creditors' Plan and in consideration therefor; (ii) in a Class that accepts the Creditors' Plan; or (iii) that mark 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 such release (the text of which release shall be set forth in full on such ballot) (and all trustees and/or agents on behalf of such Holder) shall be deemed to have released, to the extent permitted by the Court, (A) the Settling Parties (other than Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), the Proponents, 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 Holders of Allowed Indemnity Claims (to the extent of such Claims), 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, shareholders, employees, agents, advisors, predecessors in interest and representatives of the all of the foregoing (other than any (x) Holders or former Holders of Allowed Old Common Stock Interests that are not Settling Equityholders, (y) any of Celotex's or Jim Walter Corporation's or any of the Debtors' respective present and former shareholders, directors, officers, partners, employees, agents, advisors and representatives, and (z) Jim Walter Corporation and The Celotex Corporation and their respective subsidiaries), in each case in such Person's capacity as a Holder of a Claim or Interest, as a plan proponent, if applicable, as a shareholder of any Debtor, or any other capacity (including, with respect to the Bondholder Proponents, any action or inaction related to or set forth in the definition of Qualified Securities herein) (it being understood that this clause (A) does not include any shareholder, director, officer, partner, employee, agent, advisor or representative of any Debtor, in each case that is a Holder or former Holder of an Allowed Old Common Stock Interest that is not a Settling Equityholder or that is not a Celotex/JWC Released Party) and (B) the holders of Allowed Indemnity Claims that are not parties to the Veil Piercing Settlement Agreement, but only to the extent of such Allowed Indemnity Claims and only in the capacity in which such Allowed Indemnity Claims provide indemnification, reimbursement or contribution (collectively, the Persons described in (A) and (B) are referred to herein, in such capacities, as the "Released Parties"), of and from any and all Claims, obligations, rights, causes of action and liabilities (other than the right to enforce the Debtors' obligations under the Creditors' 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 on or prior to the Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the Creditors' Plan (including, without limitation, any of the Veil Piercing-Related Issues or LBO-Related Issues). The undersigned specifically AGREES TO grant the release provided in Section 6.1. of the Creditors' Plan. YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF YOUR ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE. YOU MAY VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT NOT TO SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT CHECKING THE BOX ABOVE. Item 6. By signing this Ballot, the undersigned certifies that the Beneficial Owner has been provided with a copy of the Creditors' Disclosure Statement, including all Exhibits thereto. IMPORTANT TAX INFORMATION Under federal income tax laws, you (as payee) are required by law to provide the Debtors with your correct taxpayer identification number ("TIN"). If you are an individual, your TIN is your social security number. If the Debtors are not provided with your correct TIN, you may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments and distributions to be made to you pursuant to the Creditors' Plan may be subject to "backup withholding" for federal income tax purposes. Completing Substitute Form W-9 To prevent backup federal income tax withholding in connection with distributions to be received pursuant to the Creditors' Plan, you must provide the Debtors with your correct TIN by completing the Substitute Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is correct and that either (1) you have not been notified by the Internal Revenue Service that you are subject to backup withholding or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. If you are an exempt holder, you must also provide the Debtors with your correct TIN by completing the Substitute Form W-9, and should indicate your exempt status by writing "EXEMPT" in Part III of the Substitute Form W-9. If you are subject to backup withholding, please cross out Item Number 2 in Part IV of the Substitute Form W-9. If you have not been issued a TIN and have applied for one, or if you intend to apply for one in the near future, please check the box in Part II of the Substitute Form W-9, and sign and date both the Substitute Form W-9 and the "Certificate of Taxpayer Awaiting Identification Number". If you fail to do so, the Debtors will withhold 31% from any payments and distributions made to you thereafter until a TIN and new Substitute Form W-9 are provided to the Debtors. What Taxpayer Identification Number to Provide You are required to provide the Debtors the social security number or employer identification number of the record holder of the Claim held by you. If the Claim is in more than one name or is not in the name of the actual owner, consult the enclosed "Guidelines for certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. EXHIBIT T3E12 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1 CORPORATION, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. MASTER BALLOT FOR ACCEPTING OR REJECTING THE CREDITORS' PLAN FOR USE BY RECORD HOLDERS OF CLASS U-6 (PRE-LBO DEBENTURE) CLAIMS PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE SEPTEMBER 23, 1994, IT WILL NOT BE COUNTED. Name of Bank, Broker or Nominee: Address: 1. a. The undersigned, a record holder as of July 13, 1994 of the aggregate principal amount of $ of 10 7/8% Subordinated Debentures certifies the following (please fill out): beneficial owners of an aggregate principal amount of $ of 10 7/8% Subordinated Debentures accepted the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 10 7/8% Subordinated Debentures rejected the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 10 7/8% Subordinated Debentures agreed to grant the specific release provided in Section 6.1 of the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 10 7/8% Subordinated Debentures prefer the Creditors' Plan to the Debtors' Plan. beneficial owners of an aggregate principal amount of $ of 10 7/8% Subordinated Debentures prefer the Debtors' Plan to the Creditors' Plan. b. The undersigned, a record holder as of July 13 1/8, 1994 of the aggregate principal amount of $ of 13 1/8% Subordinated Notes certifies the following (please fill out): beneficial owners of an aggregate principal amount of $ of 13 1/8% Subordinated Notes accepted the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 13 1/8% Subordinated Notes rejected the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 13 1/8% Subordinated Notes agreed to grant the specific release provided in Section 6.1 of the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 13 1/8% Subordinated Notes prefer the Creditors' Plan to the Debtors' Plan. beneficial owners of an aggregate principal amount of $ of 13 1/8% Subordinated Notes prefer the Debtors' Plan to the Creditors' Plan. c. The undersigned, a record holder as of July 13, 1994 of the aggregate principal amount of $ of 13 3/4% Subordinated Debentures certifies the following (please fill out): beneficial owners of an aggregate principal amount of $ of 13 3/4% Subordinated Debentures accepted the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 13 3/4% Subordinated Debentures rejected the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 13 3/4% Subordinated Debentures agreed to grant the specific release provided in Section 6.1 of the Creditors' Plan. beneficial owners of an aggregate principal amount of $ of 13 3/4% Subordinated Debentures prefer the Creditors' Plan to the Debtors' Plan. beneficial owners of an aggregate principal amount of $ of 13 3/4% Subordinated Debentures prefer the Debtors' Plan to the Creditors' Plan. 2. The undersigned certifies that each beneficial owner of the Pre-LBO Debenture Claims described above whose votes are being transmitted along with this summary ballot has been provided with a copy of the Creditors' Disclosure Statement. 3. The undersigned certifies that it is the registered record holder in its own name or through a position held at a securities depository of the Pre-LBO Debenture Claims set forth above. 4. Beneficial Owner Information Please complete the following schedule below. The undersigned certifies that it is a true and accurate schedule of the votes of the beneficial owners of the Pre-LBO Debenture Claims described above.
a. 10 7/8% Subordinated Debentures PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT OF OF OF OF OF OF $ $ $ $ $ $ ELECTS TO RECEIVE ACCEPTS REJECTS PREFERS PREFERS QUALIFIED ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Total =N/A
b. 13 1/8% Subordinated Notes PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT OF OF OF OF OF OF $ $ $ $ $ $ ELECTS TO RECEIVE ACCEPTS REJECTS PREFERS PREFERS QUALIFIED ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Total =N/A
c. 13 3/4% Subordinated Debentures PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT OF OF OF OF OF OF $ $ $ $ $ $ ELECTS TO RECEIVE ACCEPTS REJECTS PREFERS PREFERS QUALIFIED ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Total = N/A
(ATTACH ADDITIONAL PAGES IF NECESSARY) 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 BALLOT The Master Ballot on the reverse side is not a letter of transmittal and may not be used for any purpose other than for the record holders of the Pre-LBO Debenture Claims holding on behalf of another to record acceptances or rejections of the Creditors' Plan, the preferences for the Creditors' Plan or the Debtors' Plan, elections of Qualified Securities and the grant of the specific release contained in the Creditors' Plan by the Beneficial Owners of Pre-LBO Debenture Claims. Accordingly, holders should not surrender any certificates representing their securities in connection with voting on the Creditors' Plan, and the Balloting Agent will not accept delivery of any such certificates tendered together with this Master Ballot. The Creditors' 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 such 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 Creditors' 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) will be bound by the confirmed plan and the transactions contemplated thereby. The record date (the "Voting Record Date") for purposes of determining which holders of Pre-LBO Debenture Claims are eligible to vote on the Creditors' Plan is July 13, 1994. Only holders of Pre-LBO Debenture Claims in whose name such Pre-LBO Debenture Claims 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 the Voting Record Date or any person who has obtained a properly completed proxy from such person are eligible to vote on the Creditors' Plan. This Master Ballot is to be used by brokerage firms, banks, or nominees for summarizing votes cast by Beneficial Owners of Pre-LBO Debenture Claims and received by 5:00 p.m., Eastern Time, on September 19, 1994. Individual Ballots received after such time must not be counted. Please retain all executed Individual Ballots for one year. Please forward this Master Ballot in the enclosed return envelope to: If By Mail Donlin, Recano & Company, Inc. P.O. Box 2022 Murray Hill Station New York, New York 10156-0701 If By Courier or Hand Donlin, Recano & Company, Inc. 419 Park Avenue South Suite 1206 New York, New York 10016 To have your vote count, you must complete, sign and return this Master Ballot so that it is received by the Balloting Agent not later than 5:00 pm, Eastern Time, on September 23, 1994. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT, CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868. IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868. EXHIBIT T3E19 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION In re Chapter 11 Jointly Administered Hillsborough Holdings Case Nos. 89-9715-8P1 Corporation, et al., to 89-9746-8P1 and 90-11997-8P1 Inclusive Debtors. BALLOT FOR ACCEPTING OR REJECTING THE CONSENSUAL PLAN OF REORGANIZATION BALLOT FOR CLASS U-7 CLAIMS (VEIL PIERCING CLAIMANTS) The statutorily appointed Bondholders' Committee and Creditors' Committee, Lehman Brothers Inc., Apollo, the Ad Hoc Committee of Pre-LBO Bondholders, the above-captioned Hillsborough Debtors and the KKR Proponents are soliciting your vote with respect to the Amended Joint Plan of Reorganization Dated As Of December 9, 1994 (the "Consensual Plan") for the Hillsborough Debtors which represents a modification of the Creditors' Joint Plan of Reorganization Dated As Of August 1, 1994 (the "Creditors' Plan"). The Consensual Plan is further described in the Supplement To Disclosure Statement For Amended Joint Plan of Reorganization Dated As Of December 9, 1994 (the "Disclosure Statement Supplement") and the Creditors' Plan is described in the Disclosure Statement For Creditors' Plan Dated As Of August 1, 1994 (the "Creditors' Disclosure Statement"). PLEASE READ THE INFORMATION BELOW AND ON THE REVERSE SIDE CAREFULLY. IN ORDER TO HAVE YOUR VOTE COUNT, YOU OR YOUR AUTHORIZED ATTORNEY MUST COMPLETE, SIGN, AND DATE THE BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO DONLIN, RECANO & COMPANY, Inc. (THE "BALLOTING AGENT") BUT IN NO EVENT LATER THAN BY 5:00 P.M., EASTERN TIME, ON OR BEFORE FEBRUARY 22, 1995. THE CONSENSUAL PLAN INCLUDES PROVISIONS FOR SETTLING VEIL PIERCING AND RELATED CLAIMS BY ALLOWING A CLAIM OF BETWEEN $375,000,000 AND $390,000,000 AGAINST THE DEBTORS. YOUR VOTE MAY BE IMPORTANT TO ACHIEVING THIS SETTLEMENT. PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR ACCEPTANCE OR REJECTION OF THE CONSENSUAL PLAN: Item 1. CLASS U-7 (Veil Piercing Claimants) Vote. The undersigned holder of a Class U-7 Claim or the undersigned authorized attorney of the holder of the Class U-7 Claim identified below votes to (Please check one box below): Accept the Consensual Plan _________ Reject the Consensual Plan _________ PURSUANT TO AN ORDER OF THE BANKRUPTCY COURT DATED DECEMBER 15, 1994, EACH CLASS U-7 CLAIM HAS BEEN TEMPORARILY ALLOWED AGAINST EACH DEBTOR FOR VOTING PURPOSES ONLY ON THE CONSENSUAL PLAN IN THE AMOUNT OF ONE DOLLAR ($1.00). Accordingly, Your Vote Will Be Counted in the Amount of One Dollar ($1.00), As Will All Other Class U-7 Claims (Veil Piercing Claimants). YOUR FAILURE TO COMPLETE AND RETURN THIS BALLOT WILL NOT AFFECT (1) THE VALIDITY AND AMOUNT OF YOUR CLAIM AGAINST THE CELOTEX CORPORATION IN THE CELOTEX CORPORATION CHAPTER 11 CASE, OR (2) YOUR RIGHTS IN RESPECT OF YOUR CLAIM UNDER AN EFFECTIVE PLAN OF REORGANIZATION FOR THE CELOTEX CORPORATION CHAPTER 11 CASE. THIS IS NOT A PROOF OF CLAIM FORM. Item 2. By signing this Ballot, the undersigned certifies that (a)(i) he/she/it holds a Class U-7 Claim, (ii) he/she/it has authority to vote to accept or reject the Consensual Plan, and (iii) the holder has been provided with a copy of the Consensual Plan and the Disclosure Statement Supplement or (b) he/she is an attorney for a holder of a Class U-7 Claim set forth in (a) above, and is authorized by such holder to execute this Ballot on the holder's behalf. Name: (Print or Type) Class U-7 Holder OR: Signature Of Attorney In Fact AND: Print or Type Name of Claimant By: (If Appropriate) Title: (If Appropriate) Address: Street City, State and Zip Code Telephone Number:() Date Completed: IF THIS BALLOT IS CAST BY THE CLASS U-7 CLAIMHOLDER'S ATTORNEY, THE ATTORNEY MUST COMPLETE THE FOLLOWING: Item 3. AFFIRMATION OF ATTORNEY IN FACT I , an attorney at law and member of the bar of the State of , with offices at declare under penalty of perjury that (a) I am the Attorney In Fact for the Claimant named herein, and (b) I am authorized to vote this Claim in connection with the Consensual Plan. Signature of Attorney In Fact Dated: INSTRUCTIONS FOR COMPLETING THE CLASS U-7 BALLOT The effectiveness of the Second Amended and Restated Veil Piercing Settlement Agreement is conditioned upon, among other things, confirmation by the Court and consummation of the Consensual Plan. If the conditions to the effectiveness of the Second Amended and Restated Veil Piercing Settlement Agreement occur and the Consensual Plan is consummated, in consideration of the full and complete settlement, satisfaction, release and discharge of all Settlement Claims against all Released Parties (as defined in the Second Amended and Restated Veil Piercing Settlement Agreement and the Consensual Plan), there shall be an aggregate allowed claim for the exclusive benefit of the holders of all Settlement Claims as treated under the Consensual Plan equal to approximately (A) $375,000,000, plus, under certain conditions, an amount not to exceed $15,000,000 all as provided in the Second Amended and Restated Veil Piercing Settlement Agreement. 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 Class U-7 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. To have your vote count, you must complete, sign and return this Ballot 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 Station Suite 1206 New York, New York 10156-0701 New York, New York 10016 To have your vote count, you must complete, sign and return this Ballot so that it is received by the Balloting Agent not later than 5:00 p.m., Eastern Time, on February 22, 1995. Any Ballot which is executed but which does not indicate either an acceptance or rejection of the Consensual Plan or which indicates both an acceptance and a rejection of the Consensual Plan will not be counted. Your original signature is required on the Ballot in order for your vote to count. All capitalized terms used herein shall have the meanings ascribed to them in the Consensual Plan. To properly complete the Ballot, you must follow the procedures described below: (a) cast one vote to accept or reject the Consensual Plan by checking the proper box in Item 1; (b) make sure the information required in Item 2 has been inserted, and that you sign the Ballot; (c) if you are completing this Ballot on behalf of another entity, indicate your relationship with such entity and the capacity in which you are signing; (d) if you are the authorized attorney of a Class U-7 Claimholder you must complete the Affirmation at Item 3; (e) return your Ballot using the enclosed return envelope. Please mail your Ballot so that it will be received by February 22, 1995. IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR BALLOT, OR YOU BELIEVE THAT YOU ARE MISSING ANY MATERIALS FROM THE SOLICITATION PACKAGE OR IF YOU BELIEVE THAT YOU HAVE RECEIVED THE WRONG BALLOT, CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 489-7444. IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE VOTING PROCEDURES, PLEASE CALL 1 (800) 489-7444. -----END PRIVACY-ENHANCED MESSAGE-----