8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  April 17, 2009

Walter Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-13711	13-3429953
(State or other jurisdiction of incorporation	Commission File No.	(I.R.S. Employer Identification No.)
or organization)

4211 W. Boy Scout Boulevard

Tampa, Florida 33607

(813) 871-4811

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive
offices)

N/A

(Former Name or Former Address, if Changed from Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01Entry into a Material Definitive Agreement

On April 17, 2009, Walter Industries, Inc. (the “Company”) completed the spin-off of Walter Investment Management LLC (“Spinco”), the legal entity that held the Company’s Financing segment.   In connection with the spin-off, the Company and Spinco entered into several agreements regarding their ongoing relationship following the spin-off, as described in more detail below.  On April 17, 2009, following the spin-off and a subsequent taxable dividend paid by Spinco to holders of units of its limited liability company interests distributed by the Company in the spin-off, Spinco merged (the “Merger”) into Hanover Capital Mortgage Holdings, Inc. (“Hanover”), a Maryland corporation, pursuant to the Second Amended and Restated Agreement and Plan of Merger, dated February 6, 2009, among the Company, Hanover, Spinco and JWH Holding Company LLC (“JWHHC”), a wholly-owned subsidiary of the Company, as amended on February 17, 2009 (the “Merger Agreement”).  In connection with the Merger, Hanover changed its name to Walter Investment Management Corp. (“Walter Investment”).

Trademark License Agreement.  On April 17, 2009, the Company and Spinco entered into a Trademark License Agreement (the “Trademark License”), pursuant to which the Company granted Spinco, and Walter Investment acquired by operation of law as successor to the rights and obligations of Spinco, a paid-up, perpetual, non-exclusive, non-transferable (except to affiliates) license to use certain variations and/or acronyms of the “Walter”, “Best Insurors” and “Mid-State” names in connection with mortgage finance, lending, insurance and reinsurance services, and financial services related thereto, in the United States.  In addition, the Company caused to be granted to Spinco and its subsidiaries a paid-up, non-transferable right to maintain certain domain name registrations for the purpose of operating websites directed to customers in the United States in connection with the above services.  Spinco and its subsidiaries may sublicense to third parties only in connection with the operation of their own businesses.  The Company agreed not to use or license others to use the ‘‘Walter’’ name immediately adjacent to words that would convey services like those to be offered by Spinco, including ‘‘Mortgage,’’ ‘‘Reinsurance,’’ ‘‘Investment,’’ ‘‘Finance,’’ or ‘‘Bank,’’ for use in connection with such services.  The foregoing description of the Trademark License does not purport to be complete and is qualified in its entirety by the terms and conditions of the Trademark License, which is filed as Exhibit 10.1 hereto, and incorporated into this report by reference.

Transition Services Agreement.  On April 17, 2009, the Company entered into a Transition Services Agreement with Spinco (the “Transition Services Agreement”)  pursuant to which the Company and certain of its subsidiaries will provide to Walter Investment (as successor to Spinco), and  Walter Investment will provide to the Company and its subsidiaries, certain transitional services. Prior to the Merger, the Company and its subsidiaries provided to, or shared with, the financing business of Spinco, a range of management, operational and technical services related to the conduct of the Spinco financing business.  Following the spin-off and Merger, the Company will provide to Walter Investment certain tax, legal, treasury and accounting services, human resources services, information technology and communications systems and support, and Walter Investment will provide certain accounting services and tax-related services to the Company.  Each of the Company and Walter Investment will provide these services for a limited duration, in all cases not expected to exceed 24 months, with the precise term of each service set forth in the Transition Services Agreement.  However, the Company and Walter Investment, in their respective capacities as recipients of services provided under the agreement, have the right to terminate any or all services they are receiving upon 30 days written notice.  The foregoing description of the Transition Services Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Transition Services Agreement, which is filed as Exhibit 10.2 hereto, and incorporated into this report by reference.

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Tax Separation Agreement.  On April 17, 2009, the Company entered into a Tax Separation Agreement with Spinco ( the “Tax Separation Agreement”), pursuant to which Walter Investment, as successor to Spinco, will make payments to the Company with respect to the 2008 tax year and the portion of the 2009 tax year ending on the date of the spin-off, during which Spinco and its subsidiaries, Walter Mortgage Company (“WMC”), Walter Investment Reinsurance Co. Ltd (“WIRC”) and Best Insurors, Inc. (“Best”) were included in, or were members of, the consolidated federal income tax group or any combined state or local income tax group with the Company or any subsidiary of the Company, equal to the amount of taxes such entities would have paid if they had filed separate tax returns in such jurisdictions rather than having been a consolidated or combined subsidiary of the Company with respect to such taxes.  With respect to any other taxable years in which WMC, WIRC and Best were included in, or were members of,  the consolidated federal income tax group or any combined state or local income tax group with the Company or any subsidiary of the Company, the Company retains any liability for adjustments to the U.S. federal income or state combined income taxes of the applicable group for such years (including any interest or penalties applicable thereto) resulting from an audit or other settlement or compromise with any taxing authority, even if such taxes relate to Spinco, WMC, WIRC or Best.  Walter Investment, as successor to Spinco, is responsible for Spinco’s share of any such income tax liabilities (including any interest or penalties applicable thereto) attributable to adjustments other than as a result of an audit or other settlement or compromise with any tax authority but only where such liabilities are attributable to misleading or inaccurate information provided by Spinco or any of its subsidiaries to the Company (or the failure by any such entity to provide material information to the Company).

Additionally, Walter Investment, as successor to Spinco, will remain liable for any taxes imposed on Spinco or its subsidiaries in jurisdictions in which Spinco did not join with the Company in a combined or consolidated group for income tax purposes (and with respect to any taxes other than income taxes).  The Tax Separation Agreement also provides that if, as a result of certain adjustments, Spinco (or Walter Investment, as successor to Spinco) is required to pay an additional dividend (other than the taxable dividend declared in connection with the spin-off and merger) in order to maintain its REIT status for U.S. federal income tax purposes, the Company will be required to reimburse Walter Investment, as successor to Spinco, for a portion of such additional dividend.  The Company continues to have all the rights of a parent of a consolidated group (and similar rights provided for by applicable state and local law with respect to a parent of a combined, consolidated or unitary group), is the sole and exclusive agent for Spinco and its subsidiaries in any and all matters relating to the combined, consolidated or unitary federal, state and local income tax liabilities of Spinco and its affiliates, has sole and exclusive responsibility for the preparation and filing of consolidated federal income and consolidated or combined state and local tax returns (or amended returns), and has the power, in its sole discretion, to contest or compromise any asserted tax adjustment or deficiency and to file, litigate or compromise any claim for refund on behalf of Spinco and its subsidiaries related to any such combined, consolidated or unitary (as applicable) federal, state or local tax return.  Walter Investment, as successor to Spinco, is responsible for the preparation and filing of all other tax returns that relate to Spinco and its subsidiaries. Both parties have agreed in the Tax Separation Agreement to assist each other in the preparation of such returns that relate to periods prior to the spin-off.

The foregoing description of the Tax Separation Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Tax Separation Agreement, which is filed as Exhibit 10.3 hereto, and incorporated into this report by reference.

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Joint Litigation Agreement. On April 17, 2009, the Company and Spinco entered into a Joint Litigation Agreement (the “Joint Litigation Agreement”)  allocating responsibilities with respect to, and liabilities arising from, any existing or future claims against the Company, Spinco and their subsidiaries.  In addition, the Joint Litigation Agreement provides, where available, for sharing of insurance coverage and third party indemnification.  In general, the Joint Litigation Agreement allocates liability for claims to Spinco or the Company based on the post-spin-off ownership of the businesses or operations from which the liabilities arise. Thus, Walter Investment (as successor to Spinco) will generally assume responsibility for such liabilities arising primarily out of the financing business, and the Company will generally retain responsibility for liabilities unrelated to Spinco as of the date of the spin-off, including liabilities related to the Company’ homebuilding business. To the extent that the Company and Spinco are jointly named in a claim, the agreement will provide that the parties will cooperate to defend or settle such claim and allocate the liability arising from such claim between Spinco and Walter Industries in good faith.  The foregoing description of the Joint Litigation Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Joint Litigation Agreement, which is filed as Exhibit 10.4 hereto, and incorporated into this report by reference.

Item 2.01Completion of Acquisition or Disposition of Assets

The spin-off  distribution took place in the form of a pro rata dividend to holders of record as of February 27, 2009 (the “Record Date”) of the Company’s common stock.  The stockholders of the Company received a single unit of limited liability company interest of Spinco (“Spinco Interests”) for each share of the Company’s common stock held as of the Record Date.  In total, the Company distributed approximately 52.8 million Spinco Interests to its stockholders, representing all of the limited liability company interests of Spinco that the Company owned as of April 17, 2009.  The spin-off was structured to be tax-free to the Company’s stockholders for U.S. tax purpose, but was followed by a taxable dividend paid by Spinco in cash and additional Spinco Interests to holders of Spinco Interests immediately following the spin-off.  The unaudited pro forma financial statements of the Company reflecting the spin-off of Walter Investment Management LLC are attached as Exhibit 99(a).

Item 8.01Other Events

On April 17, 2009, the Company issued a press release announcing that it had completed the spin-off of Spinco. A copy of the press release is attached hereto as Exhibit 99.1. The information contained in Item 8.01 shall not be deemed to be “filed” with the Securities and Exchange Commission or incorporated by reference in any filing under the Securities Exchange Act of 1934, as amended or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filings.

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Item 9.01Financial Statements and Exhibits

(b)	Pro Forma Financial Information of Walter Industries, Inc. reflecting the spin-off Walter Investment Management LLC, attached as Exhibit 99(a).
(d)	Exhibits
10.1	Trademark License Agreement, dated as of April 17, 2009, between Walter Industries, Inc. and Walter Investment Management LLC
10.2	Transition Services Agreement, dated as of April 17, 2009, between Walter Industries, Inc. and Walter Investment Management LLC
10.3	Tax Separation Agreement, dated as of April 17, 2009, between Walter Industries, Inc. and Walter Investment Management LLC
10.4	Joint Litigation Agreement, dated as of April 17, 2009, between Walter Industries, Inc. and Walter Investment Management LLC
99.1	Press Release dated April 17, 2009, Walter Industries, Inc. Completes Separation of Financing Business

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		WALTER INDUSTRIES, INC.
Date: April 23, 2009	By:	/s/ Catherine C. Bona
		Catherine C. Bona, Vice President
		Assistant General Counsel and Secretary

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EX-99.A

Exhibit 99(a)

(b)           Pro Forma Financial Information

Due to the spin-off of Walter Investment Management LLC on April 17, 2009, the historical results of operations of Walter Investment Management LLC through the date of the spin-off will be reflected in the historical financial statements of the Company as discontinued operations.

The following Unaudited Pro Forma Condensed Consolidated Financial Statements reflecting the spin-off are based on and should be read in conjunction with the Company’s historical Consolidated Financial Statements and related notes appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006 are prepared as though the Walter Investment Management LLC spin-off occurred as of the beginning of the earliest period presented.  The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2008 is prepared as if the Walter Investment Management LLC spin-off occurred as of December 31, 2008. Pro forma adjustments are described in the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

The following Unaudited Pro Forma Condensed Consolidated Financial Statements are presented for illustrative and informational purposes only and are not intended to represent or be indicative of the financial condition or results of operations which would actually have been recorded if the Walter Investment Management LLC spin-off had occurred during the periods presented.  In addition, the Unaudited Pro Forma Condensed Consolidated Financial Statements are not intended to represent the Company’s financial position or results of operations for any future date or period.

WALTER INDUSTRIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2008

(in thousands, except share amounts)

	Historical			Discontinued  Operations  Adjustments (a)			Pro Forma  Adjustments			Pro Forma
ASSETS
Cash and cash equivalents	$	117,672		$	(1,319	)	$	(35,000	)(b)(c)	$	81,353
Short-term investments, restricted	56,275			(48,985		)				7,290
Instalment notes receivable, net	1,769,688			(1,769,077		)				611
Receivables, net	176,601			(4,208		)				172,393
Inventories	133,129			(48,198		)				84,931
Prepaid expenses	26,418			(3,063		)				23,355
Property, plant and equipment, net	515,418			(414		)				515,004
Deferred income taxes	206,733			61,312						268,045
Other assets	59,392			(23,792		)				35,600
Assets of discontinued operations	6,667			—						6,667
Total assets	$	3,067,993		$	(1,837,744	)	$	(35,000	)	$	1,195,249
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	72,801		$	(714	)				$	72,087
Accrued expenses	91,213			(15,963		)				75,250
Accrued interest	11,362			(9,717		)				1,645
Debt:
Mortgage-backed / asset-backed notes	1,372,821			(1,372,821		)				—
Other debt	225,385			—						225,385
Accumulated postretirement benefits obligation	369,055			(748		)				368,307
Other liabilities	293,759			(19,495		)				274,264
Liabilities of discontinued operations	1,328			—						1,328
Total liabilities	2,437,724			(1,419,458		)	—			1,018,266
Stockholders’ equity
Common stock, $.01 par value per share:
Authorized - 200,000,000 shares Issued - 54,143,958	541			—						541
Capital in excess of par value	714,174			(365,549		)	(35,000		)(b)(c)	313,625
Retained earnings (deficit)	50,990			(50,990		)				—
Accumulated other comprehensive income (loss):
Pension and other post-retirement benefit plans, net of tax	(137,364		)	(1,158		)				(138,522		)
Unrealized gain on hedges, net of tax	1,928			(589		)				1,339
Total stockholders’ equity	630,269			(418,286		)	(35,000		)	176,983
Total liabilities and stockholders’ equity	$	3,067,993		$	(1,837,744	)	$	(35,000	)	$	1,195,249

See accompanying notes

WALTER INDUSTRIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2008

(in thousands, except per share and share amounts)

	Historical			Discontinued  Operations (a)			Pro Forma (d)
Net sales and revenues:
Net sales	$	1,263,834		$	(11,777	)	$	1,252,057
Interest income on instalment notes	187,094			(187,094		)	—
Miscellaneous income	36,142			(2,170		)	33,972
	1,487,070			(201,041		)	1,286,029
Costs and expenses:
Cost of sales (exclusive of depreciation)	729,833			(4,777		)	725,056
Depreciation	59,772			(416		)	59,356
Selling, general and administrative	142,912			(36,668		)	106,244
Provision for losses on instalment notes	21,315			(21,315		)	—
Postretirement benefits	26,494			456			26,950
Interest expense - mortgage-backed/asset-backed notes	102,115			(102,115		)	—
Interest rate hedge ineffectiveness	16,981			(16,981		)	—
Interest expense - other debt	26,223			—			26,223
Amortization of intangibles	1,278			(1,005		)	273
Restructuring and impairment charges	63,958			(10,895		)	53,063
Provision for estimated hurricane insurance losses	3,853			(3,853		)	—
	1,194,734			(197,569		)	997,165
Income from continuing operations before income tax expense (benefit)	292,336			(3,472		)	288,864
Income tax expense (benefit)	(75,798		)	5,075			(80,873		)
Income from continuing operations	$	368,134		$	1,603		$	369,737
Basic income from continuing operations per share	$	6.84					$	6.87
Weighted average number of basic shares outstanding	53,791,058						53,791,058
Diluted income from continuing operations per share (e)	$	6.74					$	6.77
Weighted average number of diluted shares outstanding	54,584,672						54,584,672

See accompanying notes

WALTER INDUSTRIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2007

(in thousands, except per share and share amounts)

	Historical		Discontinued Operations (a)			Pro Forma (d)
Net sales and revenues:
Net sales	$	1,000,411	$	(9,766	)	$	990,645
Interest income on instalment notes	202,654		(202,654		)	—
Miscellaneous income	36,756		(4,113		)	32,643
	1,239,821		(216,533		)	1,023,288
Costs and expenses:
Cost of sales (exclusive of depreciation)	686,326		(4,468		)	681,858
Depreciation	45,559		(1,174		)	44,385
Selling, general and administrative	144,186		(27,924		)	116,262
Provision for losses on instalment notes	13,889		(13,889		)	—
Postretirement benefits	26,734		424			27,158
Interest expense - mortgage-backed/asset-backed notes	119,102		(119,102		)	—
Interest expense - other debt	18,830		—			18,830
Amortization of intangibles	1,932		(1,581		)	351
	1,056,558		(167,714		)	888,844
Income from continuing operations before income tax expense	183,263		(48,819		)	134,444
Income tax expense	58,261		(18,594		)	39,667
Income from continuing operations	$	125,002	$	(30,225	)	$	94,777
Basic income from continuing operations per share	$	2.40				$	1.82
Weighted average number of basic shares outstanding	52,015,569					52,015,569
Diluted income from continuing operations per share(e)	$	2.38				$	1.81
Weighted average number of diluted shares outstanding	52,489,977					52,489,977

See accompanying notes

WALTER INDUSTRIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2006

(in thousands, except per share and share amounts)

	Historical			Discontinued Operations (a)			Pro Forma (d)
Net sales and revenues:
Net sales	$	1,009,781		$	(10,015	)	$	999,766
Interest income on instalment notes	199,659			(199,659		)	—
Miscellaneous income	63,468			(5,286		)	58,182
	1,272,908			(214,960		)	1,057,948
Costs and expenses:
Cost of sales (exclusive of depreciation)	662,877			(5,154		)	657,723
Depreciation	36,764			(1,387		)	35,377
Selling, general and administrative	141,265			(29,643		)	111,622
Provision for losses on instalment notes	9,062			(9,062		)	—
Postretirement benefits	13,540			1,544			15,084
Interest expense - mortgage-backed/asset-backed notes	118,743			(118,743		)	—
Interest expense - other debt	38,009			—			38,009
Amortization of intangibles	2,405			(2,405		)	—
Restructuring and impairment charges	1,639			—			1,639
Provision for estimated hurricane insurance losses	(1,046		)	1,046			—
Debt conversion expense	19,370			—			19,370
	1,042,628			(163,804		)	878,824
Income from continuing operations before income tax expense	230,280			(51,156		)	179,124
Income tax expense	73,983			(18,244		)	55,739
Income from continuing operations	$	156,297		$	(32,912	)	$	123,385
Basic income from continuing operations per share	$	3.55					$	2.80
Weighted average number of basic shares outstanding	44,029,837						44,029,837
Diluted income from continuing operations per share (e)	$	3.07					$	2.43
Weighted average number of diluted shares outstanding	52,077,356						52,077,356

See accompanying notes

WALTER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(a)	Reflects the elimination of the financial results, assets, liabilities and accumulated other comprehensive income amounts associated with Walter Investment Management LLC and the distribution of Walter Investment Management LLC to the shareholders of Walter Industries, Inc.
(b)	Includes $31.3 million of cash contributed by Walter Industries, Inc. to Walter Investment Management LLC immediately prior to the spin-off. Walter Investment Management LLC will use these proceeds for general corporate purposes and for the payment of transaction and other related costs.
(c)	Estimated non-recurring costs, primarily legal, accounting and consulting fees, associated with the distribution of Walter Investment Management LLC in the amount of approximately $3.7 million are expected to be incurred subsequent to December 31, 2008. These costs have been shown separately as a charge directly to pro forma equity.
(d)	There were no pro forma adjustments required for the presentation of Pro Forma Continuing Operations in the Unaudited Pro Forma Condensed Consolidated Statements of Operations.
(e)	The interest expense, net of tax, and shares issuable upon conversion related to Walter Industries, Inc. contingent convertible senior subordinated notes were included in the calculation of historical and pro forma consolidated diluted income from continuing operations per share for the years ended December 31, 2006 and 2007.  In January 2008, the last of these notes were converted to shares of Walter Industries, Inc.’s common stock.

EX-10.1

Exhibit 10.1

TRADEMARK LICENSE AGREEMENT

This TRADEMARK LICENSE AGREEMENT (the “Agreement”) made and entered into April 17, 2009 (“Effective Date”) by and between Walter Industries, Inc., a corporation duly organized and existing under the laws of the State of Delaware (“Walter”), and Walter Investment Management LLC, a limited liability company duly organized and existing under the laws of the State of Delaware, and a wholly-owned subsidiary of Walter (“Spinco,” and together with Walter, the “Parties” and each a “Party”).

WHEREAS, Walter owns all the limited liability company units of Spinco;

WHEREAS, Walter intends to distribute all of its interest in Spinco to Walter’s stockholders prior to the merger referred to below (the “Spin-Off”);

WHEREAS, pursuant to the Second Amended and Restated Agreement and Plan of Merger dated February 6, 2009 (as may be further amended, supplemented, restated or otherwise modified, the “Merger Agreement”) by and among Walter, Spinco, JWH Holding Company, LLC (“JWHHC”), and Hanover Capital Mortgage Holdings, Inc. (“Hanover”), following the Spin-Off, Spinco will merge into Hanover;

WHEREAS, Walter or its subsidiaries (collectively, the “Walter Parties”) own certain trademarks, domain names, corporate and/or trade names that JWHHC and/or its subsidiaries have used in connection with its mortgage finance, insurance, and reinsurance businesses;

WHEREAS, prior to the Spin-Off, JWHHC will transfer its mortgage finance, insurance and reinsurance businesses to Walter, and Walter will transfer such businesses to Spinco; and

WHEREAS, Spinco and its subsidiaries (collectively, the “Spinco Parties”) wish to use certain trademarks, domain names, corporate and/or trade names following the consummation of the Spin-Off and merger into Hanover, and Walter is willing to permit such use;

NOW THEREFORE, in consideration of the premises and the mutual promises and covenants contained herein and for other good and valuable consideration (including that recited in the Merger Agreement), the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

SECTION 1 - GRANT OF LICENSE

1.1.         Licenses.

(a)           Walter, on behalf of itself and the other Walter Parties, grants to the Spinco Parties a perpetual, non-exclusive, paid-up, non-transferable (except as permitted in Section 7.4) license to use the trademarks, corporate and/or trade names on Exhibit A solely in the United States, its territories and possessions, and solely in connection with mortgage finance, lending, insurance and reinsurance services and financial services relating to the foregoing (the “Licensed Business”).

(b)           Walter hereby causes its subsidiary Jim Walter Homes, Inc. to grant to the Spinco Parties the paid-up, non-transferable right to maintain the registrations for the domain names on Exhibit A (the “Licensed Domains,” and together with the other items on Exhibit A, the “Licensed Marks”) solely for operating websites directed to customers in the United States, its territories and possessions, and solely in connection with the Licensed Business.

1.2.         Sublicensing.  Each Spinco Party may sublicense the Licensed Marks to agents, distributors and other persons in connection with such Spinco Party’s operation of its own business, but not for the separate or unrelated use of any other person.  Spinco is liable hereunder for any act or omission by any sublicensee that would breach this Agreement if made by Spinco.

1.3.         Reservations.

(a)           Spinco acknowledges, on behalf of itself and the other Spinco Parties, that each of them has no right under this Agreement to use any (i) trademarks, service marks, domain names, logos, corporate or trade names, trade dress or other source indicators (“Trademarks”) of the Walter Parties other than the Licensed Marks; (ii) Trademark containing the term “JWH”; (iii) Trademark containing the term “Walter,” other than the Licensed Marks; (iv) Trademark containing the term “Jim Walter” and/or any version or variation of the “flying W” logo depicted on Exhibit B; or (v) Trademark containing the term “Cardem.”

(b)           All rights not expressly licensed to the Spinco Parties in Section 1.1 are reserved to the Walter Parties, provided that Walter agrees that each of the Walter Parties will not use or grant any person a license to use in the Licensed Business the name “Walter” immediately adjacent to the word “Mortgage,” “Reinsurance,” “Investment,” “Finance,” “Bank,” or any other word that reasonably conveys to consumers any services included in the Licensed Business.

1.4.         Future Transfer.  If at any time after the Effective Date Walter determines it no longer wishes to own any of the Licensed Marks, it shall notify Spinco, and upon Spinco’s request, the Parties shall execute a transfer of any such Licensed Marks to Spinco on mutually agreeable terms.

SECTION 2 -OWNERSHIP

Each Spinco Party agrees that, as between the Walter Parties and Spinco Parties, the Walter Parties are the sole and exclusive owners of the Licensed Marks and all intellectual property rights therein.  Each Spinco Party shall, upon the reasonable request and expense of Walter, take further actions and execute additional documents to establish and perfect the above rights.  Each Spinco Party agrees not to question or contest the validity of, or the Walter Parties’ rights in the Licensed Marks and the associated goodwill.  For clarity, the foregoing shall not limit Spinco from bringing any claim that Walter has breached this Agreement.

SECTION 3 -USE

3.1.         New Marks.  Each Spinco Party may adopt and use as Trademarks any variations of the Licensed Marks on Part I of Exhibit A, if such Trademarks use “Walter” immediately adjacent to the word “Mortgage,” “Reinsurance,” “Investment,” “Finance,” or any other word that reasonably conveys to consumers any services included in the Licensed Business.  Each

Spinco Party may adopt and use reasonable variations of the Licensed Marks on Part II of Exhibit A in its discretion, subject to Section 1.3.  Spinco will give Walter prompt notice of any such new Trademark, which will be included in the definition of “Licensed Marks” for all purposes hereunder.

3.2          Domain Names/Internet.  Each Spinco Party will not be deemed to have breached the territorial restriction in Section 1.1(b) if persons outside the United States access any Internet websites operated under the Licensed Domains, provided that such websites are controlled by such Spinco Party and are directed at U.S. customers.  Walter will cause the transfer of the registrations for the Licensed Domains to a designated Spinco Party within 30 days of the Effective Date, at Spinco’s expense for Walter’s out-of-pocket costs.

3.3          Quality Assurance.  Each Spinco Party will use the Licensed Marks solely (i) in accordance with good trademark practice; and (ii) in connection with products, services, content and materials maintaining quality levels at least as high as those of Walter’s past practice and that reflect favorably on Walter.  Each Spinco Party will not take any action that could reasonably be expected to harm the Licensed Marks or their associated goodwill.  Each Spinco Party shall, at its sole expense, comply at all times with all applicable laws, regulations, rules and reputable industry practice pertaining to the Licensed Business and its use of the Licensed Marks.

3.4          Samples.  To ensure the Spinco Parties’ compliance with Section 3.3, upon Walter’s request, Spinco will provide Walter with representative samples of all materials bearing the Licensed Marks in any media, no more than once a year (unless reasonably justified under the circumstances).  If, in the exercise of its commercially reasonable judgment, Walter finds that any samples violate Section 3.3, Walter will inform Spinco in writing.  Spinco will correct such non-compliance within a reasonable time thereafter, not to exceed 30 days.

SECTION 4 -INFRINGEMENT

Spinco will notify Walter promptly after any Spinco Party becomes aware of any actual or threatened infringement, imitation, dilution, misappropriation, or other unauthorized use or conduct in derogation of the Licensed Marks.  Walter will have the sole right to bring any claim, action, suit or proceeding (“Action”) to remedy the foregoing, and the Spinco Parties will cooperate with Walter in same at Walter’s expense.

SECTION 5 - WARRANTY AND INDEMNITY

5.1.         By Each Party.  Each Party represents and warrants to the other Party that (i) the warranting Party has the requisite corporate or company power and authority to enter into this Agreement; (ii)  the warranting Party’s execution, delivery and performance of this Agreement has been duly authorized by all requisite corporate or company action on its part; (iii) this Agreement has been duly executed and delivered by the warranting Party and, assuming due authorization, execution and delivery, constitutes a legal, valid and binding agreement, enforceable against the warranting Party in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting creditors’ rights and to general equity principles; and (iv) neither the execution and

delivery by the warranting Party of this Agreement or compliance and performance with any of the provisions hereof results in a default (or an event that, with notice or lapse of time or both, would become a default) or gives rise to any right of termination by any third Party, cancellation, amendment or acceleration of any obligation or the loss of any benefit under, any contract binding the warranting Party.

5.2.         DISCLAIMER.  EXCEPT AS EXPRESSLY SET FORTH IN SECTION 5.1, THE WALTER  PARTIES MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THIS AGREEMENT OR THE LICENSED MARKS, AND EXPRESSLY DISCLAIM SAME, INCLUDING ANY WITH RESPECT TO TITLE, NON-INFRINGEMENT, MERCHANTABILITY, VALUE, RELIABILITY OR FITNESS FOR USE.  EACH SPINCO PARTY’S USE OF THE LICENSED MARKS IS ON AN “AS IS” BASIS AND IS AT ITS OWN RISK.

5.3.         Indemnity. Each Party will defend at its expense, hold harmless and indemnify the other Party and its affiliates and their respective directors, officers, shareholders, agents and employees against any third-party Actions and all related losses, awards, judgments, settlements, costs, fees, expenses, liabilities and damages (including reasonable attorneys’ fees and costs of suit) to the extent arising out of or relating to the indemnifying Party’s breach of this Agreement or any representations, warranties, covenants or agreements herein.

SECTION 6 - TERM

6.1.         Term.  The term of this Agreement commences as of the Effective Date and lasts in perpetuity, unless termination occurs pursuant to Section 6.2 or 6.3.

6.2.         Breach.  If either Party materially breaches any provision hereof, the non-breaching Party may terminate this Agreement if the breaching Party does not cure such breach within 30 days following written notice thereof (or any mutually-agreed extension).  Any such termination shall be effective upon written notice by Walter to Spinco made after such 30-day period (or any mutually-agreed extension).

6.3.         Bankruptcy.  To the fullest extent permitted by applicable law, if Spinco (i) is unable to pay its debts when due, (ii) makes any assignment for the benefit of creditors,  (iii) files any petition under the bankruptcy or insolvency laws, (iv) has a receiver or trustee to be appointed for its business or property, or (v) is adjudicated bankrupt or insolvent, Walter may at its discretion terminate this Agreement, upon 30 days’ prior written notice.

6.4.         Survival.  Sections 2, 5, 6.4, 7.5 & 7.7 shall survive any termination of this Agreement.

SECTION 7 -MISCELLANEOUS

7.1.         Notice.  All notices hereunder will be in writing and will be deemed given upon (a) confirmed receipt of a facsimile transmission, (b) confirmed delivery of a standard overnight courier or when delivered by hand or (c) five business days after the date mailed by certified or registered mail (return receipt requested), postage prepaid, to the Parties at the following addresses (or at such other addresses for a Party as will be specified by like notice):

If to Walter:	If to Spinco:
Walter Industries, Inc.	Walter Investment Management, LLC
4211 W. Boy Scout Blvd., 10th Floor	4211 W. Boy Scout Blvd., 4th Floor
Tampa, Florida 33607-5724	Tampa, Florida 33607-5724
Attention: General Counsel	Attention: General Counsel
Facsimile: (813) 871-4399	Facsimile: (813) 871- 4430
with a copy to:	with a copy to:
Simpson Thacher & Bartlett LLP	Simpson Thacher & Bartlett LLP
425 Lexington Avenue	425 Lexington Avenue
New York, New York 10017	New York, New York 10017
Attention: Peter J. Gordon, Esq. and	Attention: Peter J. Gordon, Esq. and
Lori E. Lesser, Esq.	Lori E. Lesser, Esq.
Facsimile: (212) 455-2502	Facsimile: (212) 455-2502

7.2.         Construction.  The article and section headings in this Agreement are for reference purposes only and will not affect the interpretation of this Agreement.

7.3.         Severability.  If any provision of this Agreement or the application of any such provision to any person or entity or circumstance, shall be declared judicially to be invalid, unenforceable or void, such decision shall not have the effect of invalidating or voiding the remainder of this Agreement, it being the Parties’ intent and agreement that this Agreement shall be deemed amended by modifying such provision to the extent necessary to render it valid, legal and enforceable while preserving its intent or by substituting another provision that is legal and enforceable and that achieves the same objective.

7.4.         Assignment; Binding Effect.  Neither this Agreement nor any of the rights, benefits or obligations hereunder may be assigned or assumed by a Party (whether by operation of law or otherwise) without the prior written consent of the other Party, which consent will not be unreasonably withheld, except to an affiliate as a result of an internal reorganization for tax or administrative purposes.  For clarity, a merger, reorganization (including in bankruptcy), change of control or sale of all or substantially all of the assets or business to which this Agreement relates constitutes an “assignment” hereunder.  In the event of a permitted assignment hereunder, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns.  Any attempted assignment in violation of the foregoing will be null and void at the outset.

7.5.         Third Parties.  No person or entity (other than as specified in this Agreement) will be deemed a third party beneficiary under or by reason of this Agreement.  Spinco is liable

hereunder for any act or omission by any Spinco Party that would breach this Agreement if made by Spinco.

7.6.         Entire Agreement.  This Agreement constitutes the entire agreement of the Parties and supersedes all prior and contemporaneous agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof.  Exhibits A and B are expressly made a part of, and incorporated by reference into this Agreement.

7.7.         Governing Law/Jurisdiction.  This Agreement will be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed therein.  Each Party irrevocably submits to the jurisdiction of the state or federal courts in New York, New York for the purposes of any Action arising out of this Agreement.  Each party unconditionally waives any right to a trial by jury in respect of any such action.  The Parties agree that irreparable damage would occur to Walter in the event that Spinco materially breaches any provision of Sections 1-3 of this Agreement.  Therefore, Walter may seek an injunction to prevent or enjoin such breach in the above courts without posting bond or other security.

7.8.         Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one agreement.  Facsimile signatures will serve as originals for purposes of binding the Parties hereto.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date written above.

WALTER INDUSTRIES, INC.
By:	/s/
Name:	Victor P. Patrick
Title:	Vice Chairman, Chief Financial Officer and General Counsel
WALTER INVESTMENT MANAGEMENT LLC
By:	/s/
Name:	Mark J. O’Brien
Title:	Chairman and Chief Executive Officer

EXHIBIT A — LICENSED MARKS

Part I

Walter Investment Management Corp.

Walter Investment Management LLC

Walter Mortgage Company

WMC

Walter Investment Reinsurance Co. Ltd.

walterinvestment.com

walterinvestmentcorp.com

walter-investment.com

walter-investment.net

walter-investment.org

walter-investments.com

walter-investments.net

walter-investments.org

walterinv.com

walterinv.net

walterinv.org

waltermortgage.com

waltermortgage.net

waltermortgage.org

waltermortgageservicing.com

gowimc.com

A-1

Part II

Best Insurors

Best Insurors, Inc.

Mid-State Capital Corporation

Mid-State Homes, Inc.

Mid-State Capital, LLC

bestinsurors.com

bestinsurorsinc.com

A-2

EXHIBIT B

The “flying W” logo –

A-3

EX-10.2

Exhibit 10.2

TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (this “Services Agreement”) is made as of April 17 2009, by and among (i) Walter Industries, Inc., a Delaware corporation (“Walter”), on behalf of itself and each of the other Walter Entities (defined below), and (ii) Walter Investment Management LLC, a Delaware limited liability company (“Spinco”), on behalf of itself, its successors and each of the other Spinco Entities (defined below).

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

WHEREAS, the Spinco Entities currently receive certain services from and provide certain services to the Walter Entities;

WHEREAS, each of the Walter Entities and the Spinco Entities desires that these services continue to be provided after the Distribution Date, upon the terms and conditions set forth in this Services Agreement.

In consideration of the mutual covenants and agreements contained in this Services Agreement, the parties hereto hereby agree as follows:

ARTICLE 1.

DEFINITIONS

1.1           Unless the context otherwise requires, the following terms (and their singular or plural) used in this Services Agreement shall have the meanings set forth below:

(a)“Affiliate” shall have the meaning ascribed to such term in the Merger Agreement after giving effect to the Distribution.

(b)“Business Day” shall mean any day other than Saturday, Sunday or any other day on which commercial banks are authorized to close or are closed in the states of Florida and Maryland.

(c)“Disclosing Party” shall have the meaning set forth in Section 1.1(g) of this Services Agreement.

(d)“Distribution Date” shall have the meaning set forth in the recitals to this Services Agreement,

(e)“Force Majeure” shall have the meaning set forth in Section 7.1 of this Services Agreement.

(f)“Hanover” shall have the meaning set forth in the recitals to this Services Agreement.

(g)“Information” means any information obtained by a party to this Services Agreement, its Affiliates and its and their respective officers, directors, employees, agents, contractors and representatives (the “Receiving Party”) from any other party to this Services Agreement, its Affiliates and its and their respective officers, directors, employees, agents, contractors and representatives (the “Disclosing Party”) concerning the past, present or future business activities of these entities or persons, including any information relating to customers and related personal data, pricing, methods, processes, financial data, lists, technical data, apparatus, statistics, programs, specifications, documentation, research, development or related information.

(h)“JWHHC” shall have the meaning set forth in the recitals to this Services Agreement.

(i)“Merger Agreement” shall have the meaning set forth in the recitals to this Services Agreement

(j)“Person” means an individual, partnership, corporation, trust, unincorporated association, or other entity or association.

(k)“Provider” shall mean the particular Walter Entity or Spinco Entity, in any given location, that is providing services or leasing or subleasing property (as lessor) pursuant to this Services Agreement.

(l)“Receiving Party” shall have the meaning set forth in Section 1.1(g) of this Services Agreement.

(m)“Recipient” shall mean the particular Walter Entity or Spinco Entity, in any given location, that is receiving services or leasing or subleasing property (as tenant) pursuant to this Services Agreement.

(n)“Spinco” shall have the meaning set forth in the preamble to this Services Agreement.

(o)“Spinco Entities” means, collectively, Spinco and any of its subsidiaries that are listed as Recipients on Schedule A or as Providers on Schedule B.

(p)“Spinco Provided Services” shall have the meaning set forth in Section 2.2 of this Services Agreement.

(q)“Term” shall have the meaning set forth in Section 5.1 of this Services Agreement.

(r)“Walter” shall have the meaning set forth in the preamble to this Services Agreement.

(s)“Walter Entities” means, collectively, Walter and any of its subsidiaries that are listed as Providers on Schedule A or as Recipients on Schedule B.

(t)“Walter Provided Services” shall have the meaning set forth in Section 2.1 of this Services Agreement.

Other terms are used as defined elsewhere herein.

ARTICLE 2.

SERVICES

2.1           Walter Provided Services. Pursuant to the terms of this Services Agreement, the Walter Entities agree to provide, or cause to be provided, to the respective Spinco Entities the services described in Schedule A to this Services Agreement (the “Walter Provided Services”).

2.2           Spinco Provided Services. Pursuant to the terms of this Services Agreement, the Spinco Entities agree to provide, or cause to be provided, the services described in Schedule B to this Services Agreement (the “Spinco Provided Services”).

2.3           Other Services. If, after the execution of this Services Agreement, the parties determine that a service provided by the Walter Entities to the Spinco Entities or by the Spinco Entities to the Walter Entities prior to the date hereof was omitted from the Schedules to this Services Agreement, then the parties shall negotiate in good faith to agree to the terms and conditions upon which such services would be added to this Services Agreement, it being agreed that the charges for such services should be determined on a basis consistent with the methodology for determining the initial prices provided for in Section 3.3.

ARTICLE 3.

COMPENSATION

3.1           Compensation for Walter Provided Services. Subject to Section 3.4, the compensation for the Walter Provided Services for the duration of the Term shall be as described for each individual service provided as set forth on Schedule A, plus applicable sales or value-added taxes, if any.

3.2           Compensation for Spinco Provided Services. Subject to Section 3.4, the compensation for the Spinco Provided Services for the duration of the Term shall be as described for each individual service as set forth on Schedule B, plus applicable sales or value-added taxes, if any.

3.3           Methodology for Determining Prices. The parties agree that the prices charged by a

Provider for any service provided hereunder shall be sufficient to cover such Provider’s reasonable estimate of its actual costs and, if applicable, consistent with the prices such Provider would charge to an affiliate, in each case without taking into account any profit margin or projected savings from increased efficiency.

3.4           Price Adjustments. It is the intent of the parties that the prices set forth on the Schedules hereto are consistent with the methodology for determining prices as described in Section 3.3. If the parties determine in good faith that the initial prices set forth on the Schedules hereto are not consistent with such methodology, then the parties shall negotiate in good faith to adjust such prices in a manner that is consistent with such methodology.

3.5           Allocation of Certain Expenses.

(a)           (i)  In respect of software applications which are resident in the Spinco Entities while they are affiliates of the Walter Entities, Spinco shall bear the costs and expenses of obtaining any and all licenses for such software applications for Spinco.

(ii)  Walter and Spinco shall cooperate in good faith to minimize the costs and expenses to be incurred pursuant to this Section 3.5(a).

(b)         Walter and Spinco shall each bear the costs and expenses of obtaining any and all consents from third parties which may be necessary in connection with the other party’s provision of services to the Recipient hereunder.

3.6           Terms of Payment; Dispute Resolution.

(a)          Except as otherwise expressly provided herein, Providers shall invoice Recipients monthly (or, if mutually agreeable to Provider and Recipient, quarterly or semi-annually) in arrears for the services provided by them under this Services Agreement. Payment in U.S. dollars shall be made by Recipients within 30 days after receipt of any invoice. No Recipient shall withhold any payments to its Provider under this Services Agreement, and no Provider shall withhold the provision of any services to its Recipient, notwithstanding any dispute that may be pending between them, whether under this Services Agreement or otherwise (any required adjustment being made on subsequent invoices), unless such withholding is provided for in an arbitration award in accordance with Section 9.7 of this Services Agreement.

(b)           If there is a dispute between any Recipient and any Provider regarding the amounts shown as billed to such Recipient on any invoice, such Provider shall furnish to such Recipient reasonable documentation to substantiate the amounts billed including, but not limited to listings of the dates, times and amounts of the services in question where applicable and practicable. Upon delivery of such documentation, such Recipient and such Provider shall cooperate and use their best efforts to resolve such dispute among themselves. If such disputing parties are unable to resolve their dispute within thirty (30) calendar days of the initiation of such procedure, and such Recipient believes in good faith and with a reasonable basis that the amounts shown as billed to such Recipient are inaccurate or are otherwise not in accordance with the terms of this Services Agreement, then such Recipient shall have the right, at its own expense

(subject to any award or allocation of expenses included in any judgment rendered by the arbitrator as set forth in Section 9.7 hereof), to commence arbitration in accordance with Section 9.1 of this Services Agreement.

ARTICLE 4.

OCCUPANCY RIGHTS

4.1           Any employee of a Walter Entity or Spinco Entity who is located at a facility of the other party may remain at such location for a period not to exceed 180 days after the date of the spin-off; provided, however, that such employee shall be required to adhere to all applicable security restrictions and guidelines at such facility. Thereafter, the owner of such facility may require such employee(s) to vacate the premises unless, prior to such time, the parties have executed a formal lease or other occupancy arrangement upon commercially reasonable terms that are mutually acceptable to the parties.

ARTICLE 5.

TERM

5.1           Term. Except as expressly provided otherwise in this Services Agreement, or with respect to specific services as indicated on the Schedules hereto, the term of this Services Agreement shall commence on the Distribution Date and shall expire automatically at the time the term of every service described on the Schedules hereto terminates (the “Term”). The obligation of any Recipient to make a payment for services previously rendered shall not be affected by the expiration of the term and shall continue until full payment is made.

5.2           Termination of Individual Services. Each of the individual services described on the Schedules hereto has a separate term which, in respect of some services, includes a right of extension. Unless earlier terminated pursuant to the following sentence, the obligation of a Provider to provide a service will terminate upon the expiration of the term of such service. Effective between the respective Provider and Recipient, a Recipient may terminate at any time during the Term any individual service provided under this Services Agreement on a service-by-service basis (and/or location-by-location basis where an individual service is provided to multiple locations of a Recipient) upon written notice to the Provider identifying the particular service (or location) to be terminated and the effective date of termination, which date shall not be less than 30 days after receipt of such notice unless the Provider otherwise agrees. Effective upon the termination of any service, an appropriate reduction will be made in the fees charged to such Recipient.

ARTICLE 6.

CERTAIN COVENANTS

6.1           Points of Contact. Each Provider and Recipient shall name a point of contact which shall be added to the Schedules hereto. Such points of contact shall be responsible for the

implementation of this Services Agreement between the respective Provider and its Recipient, including resolutions of any issues that may arise during the performance hereunder on a day-to-day basis.

6.2           Cooperation; Reasonable Care.

(a)          The parties will cooperate (using reasonable commercial efforts) to effect a smooth and orderly transition of the services provided hereunder from the Providers to the respective Recipients including, without limitation, the separation of the Spinco Entities from the Walter Entities; provided, however, that this Section 6.2 shall not require any party hereto to incur any out-of-pocket expenses unless and except as expressly provided otherwise herein.

(b)         Each Provider shall perform the services that it is required to provide to its respective Recipient(s) under this Services Agreement with reasonable skill and care and shall use at least that degree of skill and care that it would exercise in similar circumstances in carrying out its own business. Each Provider shall take necessary measures to protect the respective Recipient’s data that is processed by such Provider from destruction, deletion or unauthorized change and allow its recovery in events of Force Majeure; provided, however, that a Provider shall be deemed to have satisfied this obligation if the measures taken to protect and recover a Recipient’s data are equivalent to what it uses in carrying out its own business.

6.3           Migration Projects. Each Provider will provide the respective Recipient with reasonable support necessary to transition the services, which may include consulting and training and providing reasonable access to data and other information and to Provider’s employees; provided, however, that such activities shall not unduly burden or interfere with Provider’s business and operations. Where required for transitioning the services, the Recipient’s employees will be granted reasonable access to the respective Provider’s facilities during normal business hours.

6.4           Further Assurances. From time to time after the date hereof, without further consideration, each party shall execute and deliver such formal lease or license agreements as another party may reasonably request to evidence any lease or license provided for herein or contemplated hereby.

6.5           Certain Disbursements/Receipts. The parties hereto contemplate that, from time to time, including following the Merger, Walter Entities and/or Spinco Entities (any such party, the “Paying Party”), as a convenience to another Spinco Entity or Walter Entity, as the case may be (the “Responsible Party”), in connection with the transactions contemplated by this Services Agreement, may make certain payments that are properly the responsibility of the Responsible Party (any such payment made, a “Disbursement”). Similarly, from time to time, Walter Entities and/or Spinco Entities (any such party, the “Payee”) may receive from third parties certain payments to which another Spinco Entity or Walter Entity, as the case may be, is entitled (any such party, the “Other Party”, and any such payment received, a “Receipt”).

(a)          Disbursements.

(i)           For Disbursements made by check, the Responsible Party will reimburse the Paying Party within three (3) Business Days after written notice of such Disbursement has been given to the Responsible Party.

(ii)          In case of a Disbursement by electronic funds, if written notice has been given by 2:00 p.m. on the Business Day prior to the payment of such Disbursement, the Responsible Party shall reimburse the Paying Party for the amount of such payment on the date the Disbursement is made by the Paying Party. If notice as provided above has not been given prior to the payment of such Disbursement, the Responsible Party shall reimburse the Paying Party for the amount of such payment within one Business Day after receipt by the Responsible Party of such notice from the Paying Party.

(iii)         A Paying Party shall provide such supporting documentation regarding Disbursements for which it is seeking reimbursement as the Responsible Party may reasonably request.

(b)         Receipts. A Payee shall remit Receipts to the Other Party within one Business Day of receipt thereof.

(c)          Certain Exceptions. Notwithstanding anything to the contrary set forth above, if with respect to any particular transaction(s), it is impossible or impracticable under the circumstances to comply with the procedures set forth in Sections 6.5(a) or 6.5(b) hereof (including the time periods specified therein), the parties will cooperate to find a mutually agreeable alternative that will achieve substantially similar economic results from the point of view of the Paying Party or the Other Party, as the case may be (i.e., an alternative pursuant to which the Paying Party will not incur any material interest expense or the Other Party will not be deprived of any material interest income); provided, however, that if a Payee cannot comply with the procedures set forth in Section 6.5(b) hereof because it does not become aware of a Receipt on behalf of the Other Party, then the Payee shall remit such Receipt (without interest thereon) to the Other Party within one Business Day after the Payee becomes aware of such Receipt.

(d)         Funding of Payroll. Notwithstanding anything which may be to the contrary set forth in Sections 6.5(a) or 6.5(c) hereof, payroll disbursed by or at the direction of a Walter Entity as part of the Walter Provided Services shall be funded in immediately available funds to an account as directed by such Walter Entity on the day the direct deposits are issued to Spinco employees; provided, that such Walter Entity notifies the respective Spinco Entity by 3:00 p.m. on the Business Day prior to the date of disbursement of the funding requirement amount (which amount shall be grossed up to include any social security and medicare taxes and any other related disbursements made in connection with the payroll payment to the respective employee).

(e)          Interest Rate. Any payments required by sections 6.5(a) or 6.5(b) that are not paid by the Responsible Party or the Payee, as the case may be, within the applicable periods of time set forth in such sections, and that are not otherwise subject to the exceptions set forth in Section 6.5(c), shall accrue interest thereon calculated daily at the “Prime Rate” as published by the Wall Street Journal.

ARTICLE 7.

FORCE MAJEURE

7.1           Force Majeure. No Provider shall bear any responsibility or liability for any losses, damages, liabilities, claims, costs or expenses, including attorneys’, accountants’ or experts’ fees (“Damages”) arising out of any delay, inability to perform or interruption of its performance of obligations under this Services Agreement due to any acts or omissions of Recipient or for events beyond its reasonable control (hereinafter referred to as “Force Majeure”) including, without limitation, acts of God, act of governmental authority, act of the public enemy or due to war, riot, flood, civil commotion, insurrection, labor difficulty, severe or adverse weather conditions, lack of or shortage of electrical power, malfunctions of equipment or software programs or any other cause beyond the reasonable control of the Provider whose performance is affected by the Force Majeure event.

ARTICLE 8.

INDEMNITY

8.1           Indemnity.

(a)          The Walter Entities and Spinco Entities, in both instances jointly and severally among such Entities, will each indemnify and hold harmless the other, their agents, employees and invitees, against all liabilities, claims, losses, damages, death or personal injury of whatever nature or kind, arising out of their respective performance of this Services Agreement or the entry of their respective agents, employees or invitees in the premises of the other, to the extent occasioned by their own willful misconduct or negligent actions or omissions or the willful misconduct or negligent actions or omissions of their respective agents, employees or invitees.

(b)           Notwithstanding the foregoing, no party shall be entitled to any damages with respect to lost profits or other consequential damages or punitive damages with respect to the performance by any other party under this Services Agreement.

ARTICLE 9.

MISCELLANEOUS

9.1           Resolution of Disputes; Continuation of Services Pending Outcome of Dispute. In the event of any dispute between the parties or between Providers and Recipients, the parties agree to be bound by the arbitration procedures set forth in Section 9.7 of this Services Agreement. Notwithstanding the existence of any dispute between the parties, no Provider shall discontinue any service provided for herein, unless so provided in an arbitral determination that the respective Recipient is in default of an obligation under this Services Agreement.

9.2           Confidentiality.

(a)           Disclosure.

(i)            The Receiving Party shall hold all the Disclosing Party’s Information in confidence for the Disclosing Party and, except as set forth in this Services Agreement (including in the Schedules hereto) or as otherwise may be documented by the Disclosing Party in writing, the Receiving Party shall not disclose to any person, firm or enterprise, or use for its own benefit, any such Information. The Receiving Party may disclose Information of the Disclosing Party to its Affiliates and its and their officers, directors, employees, agents, contractors and representatives on a need-to-know basis and solely as required in order for the parties and their Affiliates to perform their respective obligations under this Services Agreement.  Without limiting the foregoing, Walter, Spinco and their respective Affiliates shall (A) advise each of their respective officers, directors, employees, agents, contractors and representatives having access to or using such Information of the confidentiality requirements in this Services Agreement, (B) cause each such officer, director, employee, agent, contractor and representative to comply with the confidentiality requirements set forth in this Services Agreement (including, without limitation, taking all reasonable measures, at its sole expense, to restrain such officer, director, employee, agents, contractor and representative from any prohibited or authorized disclosure or use of the Information) and (C) be responsible for any breach of such confidentiality requirements set forth in this Agreement by any of their respective Affiliates, officers, directors, employees, agents, contractors and representatives.

(ii)           The obligation of confidentiality contained in this Services Agreement shall not apply to the extent that: (A) the Receiving Party is required to disclose information by Law to which the Receiving Party is subject, provided, that the Receiving Party shall not make any such disclosure without first notifying the Disclosing Party and allowing the Disclosing Party a reasonable opportunity to seek injunctive relief from (or a protective order with respect to) the obligation to make such disclosure; or (B) (I) the disclosed information was or becomes publicly available other than as a result of the action of the Receiving Party in violation hereof, or (II) the disclosed information was received by the Receiving Party after the date hereof on an unrestricted basis from a source unrelated to the Disclosing Party and not known by the Receiving Party to be under a duty of confidentiality to the Disclosing Party.

(b)           Document Retention.  Promptly after the termination or expiration of this Services Agreement, each Receiving Party shall furnish, upon reasonable request and at the expense of the Disclosing Party, to the Disclosing Party all copies (in whatever form or medium) of all such Information in the possession of Receiving Party.  Notwithstanding the termination or expiration of this Services Agreement or any of the services provided hereunder, each Receiving Party shall maintain indefinitely the confidentiality of any such retained record to the same extent required under this Services Agreement.

9.3           Notices. All notices, consents, waiver, claims and other communications hereunder (each a “Notice”) shall be in writing and shall be (a) personally delivered, (b) deposited, prepaid in a nationally established overnight delivery firm such as Federal Express, (c) mailed by certified mail, return receipt requested, or (d) transmitted by facsimile as follows:

As to Walter or any other Walter Entity:
	Walter Industries, Inc.
	4211 W. Boy Scout Blvd., 10th Floor
	Tampa, FL 33607
	Attention: General Counsel
	Fax No.: (813) 871-4420
As to Spinco or any other Spinco Entity:
	Walter Investment Management LLC
	4211 W. Boy Scout Blvd., 4th Floor
	Tampa, FL 33607
	Attention: General Counsel
	Fax No.: (813) 871-[ ]

or to any other address which such party may have subsequently communicated to the other party by a Notice given in accordance with the provisions of this Section. Each Notice shall be deemed given and effective upon receipt (or refusal of receipt).

9.4           Entire Agreement. This Services Agreement and the Schedules attached hereto contain every obligation and understanding between the parties relating to the subject matter hereof and merge all prior discussion, negotiations and agreements, if any, between them, and none of the parties shall be bound by any representations, warranties, covenants or other understandings, other than as expressly provided herein or therein.

9.5           Waiver and Amendment. Any representation, warranty, covenant, term or condition of this Services Agreement which may legally be waived, may be waived, or the time of performance thereof extended, at any time by the party hereto entitled to the benefit thereof, and any term, condition or covenant hereto may be amended by the parties hereto at any time. Any such waiver, extension or amendment shall be evidenced by an instrument in writing executed on behalf of the appropriate party by a Person who has been authorized by such party to execute waivers, extensions or amendments on its behalf. No waiver by any party hereto, whether express or implied, of its rights under any provisions at any other time or a waiver of such party’s rights under any other provision of this Services Agreement. No failure by any party hereto to take any action against any breach of this Services Agreement or default by another party shall constitute a waiver of the former party’s right to enforce any provision of this Services Agreement or to take action against such breach or default or any subsequent breach or default by such other party.

9.6           Severability. In the event that any one or more of the provisions contained in this Services Agreement shall be declared invalid, void or unenforceable, the remainder of the provisions of this Services Agreement shall remain in full force and effect, and such invalid, void or unenforceable provision shall be interpreted as closely as possible to the manner in which it was written.

9.7           Governing Law; Jurisdiction. This Services Agreement shall be interpreted and construed in accordance with the laws of New York applicable to contracts made and to be performed therein.  Neither party shall commence any proceeding against the other party under this Services

Agreement unless and until the parties shall have attempted in good faith to settle the underlying dispute through negotiation or mediation for a period of not less than 30 days. If the parties have not resolved the dispute within 30 days, then either party may initiate arbitration by notifying the other party in writing that arbitration is demanded. The arbitration shall be conducted in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration (the “Rules”) by one arbitrator. Unless the parties agree on an individual arbitrator by name, each party shall appoint one arbitrator, obtain its appointee’s acceptance of such appointment, and deliver written notification of such appointment and acceptance to the other party within 10 days after delivery of the written notice demanding arbitration. The two party appointed arbitrators shall then jointly appoint a third arbitrator, obtain the appointee’s acceptance of such appointment and notify the parties in writing of such appointment and acceptance within 10 days after their appointment and acceptance. The arbitrator appointed by the two party-appointed arbitrators shall serve as the sole arbitrator. If the party appointed arbitrators fail to appoint an arbitrator within the time limits specified herein, the CPR Institute for Dispute Resolution shall appoint the arbitrator in accordance with Article 6 of the Rules. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. Unless otherwise agreed, the place of the arbitration shall be Tampa, Florida.

9.8           Counterpart Execution. This Services Agreement may be executed in counterparts with the same effect as if all of the parties had signed the same document. Such counterparts shall be construed together and shall constitute one and the same instrument, notwithstanding that all of the parties are not signatories to the original or the same instrument, or that signature pages from different counterparts are combined. The signature of any party to one counterpart shall be deemed to be a signature to and may be appended to any other counterpart.

9.9           Assignment. This Services Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that this Agreement may not be assigned by either party to any Person without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, (i) either party may assign any of its rights and obligations under this Services Agreement, in whole or in part, to one or more wholly owned subsidiaries of such party; (ii) any party so assigning this Services Agreement shall remain fully liable to the other party for the performance by any assignee of any obligation of such party so assigned, and (iii) each party hereto acknowledges and consents to the assignment, by operation of law or otherwise, of this Services Agreement to the successor in interest of Spinco pursuant to the Merger, and this Services Agreement shall remain binding and in full force and effect following the Merger.  Any purported assignment in violation of this Section 9.8 shall be void.

9.10         No Third Party Beneficiary. Nothing expressed or implied in this Services Agreement is intended, or shall be construed, to confer upon or give any Person other than the parties hereto, their respective successors and permitted assigns and the indemnities, any rights or remedies under or by reason of this Services Agreement.

9.11         Headings and Interpretation. Titles and headings to articles and sections herein and titles to the Schedules are inserted for convenience of reference only and are not intended to be a

part of or to affect the meaning or interpretation of this Services Agreement. The Schedules referred to herein shall be construed with and as an integral part of this Services Agreement to the same extent as if they were set forth verbatim herein.

9.12         Survival. Notwithstanding anything to the contrary herein, the rights and obligations of the parties under this Services Agreement which by their nature would continue beyond the termination of this Services Agreement, including but not limited to those set forth in Sections 3.6, 6.5, 8.1, 9.1, 9.2 and 9.7, shall survive termination of this Services Agreement.

[Signature pages to follow]

IN WITNESS WHEREOF, the duly authorized officers or representatives of the parties hereto have duly executed this Services Agreement as of the date first written above.

Spinco Entities:		Walter Entities:
Walter Investment Management LLC		Walter Industries, Inc.
	/s/		/s/
Name:	Mark J. O’Brien	Name:	Victor P. Patrick
Title:	President and Chief Executive Officer	Title:	Vice Chairman, Chief Financial Officer and General Counsel

EX-10.3

Exhibit 10.3

TAX SEPARATION AGREEMENT

THIS TAX SEPARATION AGREEMENT (this “Agreement”) dated as of April 17, 2009 is made and entered into by Walter Industries, Inc., a Delaware corporation (“Walter”) and the Walter Affiliates (as defined below), and Walter Investment Management LLC, a Delaware limited liability company (“Spinco”) and the Spinco Affiliates (as defined below).

RECITALS

WHEREAS, Walter is the common parent corporation of an “affiliated group” of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and of certain combined groups as defined under similar laws of other jurisdictions and Spinco and the Spinco Affiliates and WMC and the WMC Affiliates are, as of the date hereof, and have been members of such groups;

WHEREAS, the groups of which Walter is the common parent and Spinco and the Spinco Affiliates and WMC and the WMC Affiliates are members file or intend to file Consolidated Returns and Combined Returns (each as defined below);

WHEREAS, on April 17, 2009, JWHHC’s interests in WMC, Walter Investment Reinsurance Co. Ltd. and Best Insurors, Inc. were sold by JWHHC to Walter in exchange for cash or a note executed by Walter;

WHEREAS, on April 17, 2009, Walter contributed its interests in WMC, Walter Investment Reinsurance Co. Ltd. and Best Insurors, Inc. to Spinco in exchange for all the limited liability company interests in Spinco;

WHEREAS, as of the date of this Agreement, Walter intends to make a distribution (the “Distribution”) of the issued and outstanding limited liability company interests of Spinco pro rata to the holders of Walter capital stock in a transaction that is intended to qualify as a tax-free distribution under Section 355 of the Code;

WHEREAS, following the Distribution, Spinco intends to merge (the “Merger”) into Hanover Capital Mortgage Holdings, Inc. (“HCM”), with HCM being the surviving corporation in the Merger and a successor to Spinco;

WHEREAS, at the effective time of the Merger, the surviving corporation will be renamed Walter Investment Management Corporation; and

WHEREAS, Walter and Spinco desire to set forth their agreement regarding the allocation of taxes, the filing of tax returns, the administration of tax contests and other related matters;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1.DEFINITIONS

1.1“ADDITIONAL TAXABLE DIVIDEND” means a dividend required to be paid by Spinco (under Section 860 of the Code or otherwise) in order to meet the requirement of Section 857(a)(2)(B) of the Code and maintain its status as a “real estate investment trust” for United States federal income tax purposes, and resulting solely from an E+P Adjustment.

1.2“ADJUSTMENT AMOUNT” means with respect to any taxable year, and with respect to any Non-Audit Adjustment, the amount determined under Section 3.9 of this Agreement.

1.3“AUDIT” includes any audit, assessment of Taxes, other examination by any Tax Authority, proceeding, or appeal of such proceeding, relating to Taxes, whether administrative or judicial.

1.4“COMBINED GROUP” means a group of corporations or other entities that files a Combined Return.

1.5“COMBINED RETURN” means any Tax Return with respect to Non-Federal Taxes filed on a consolidated, combined (including nexus combination, worldwide combination, domestic combination, line of business combination or any other form of combination) or unitary basis wherein one or more members of the WMC Group or Spinco Group join in the filing of a Tax Return with Walter or a Walter Affiliate that is not also a member of either such group.

1.6“CONSOLIDATED GROUP” means the affiliated group of corporations within the meaning of Section 1504(a) of the Code of which Walter is the common parent and which includes the Spinco Group and WMC Group.

1.7“CONSOLIDATED RETURN” means any Tax Return with respect to Federal Income Taxes filed by the Consolidated Group pursuant to Section 1501 of the Code.

1.8“CURRENT TAXABLE PERIODS” means, as applicable, the taxable period commencing on January 1, 2009 and ending on the Distribution Date, and the taxable year commencing on January 1, 2008 and ending on December 31, 2008.

1.9“DISTRIBUTION DATE” means the day on which the Distribution is effective.

1.10“DISTRIBUTION TAXES” means any (i) Taxes imposed on, or increase in Taxes incurred by, Walter or any Walter Affiliate and (ii) any Taxes of a Walter shareholder (or former Walter shareholder) that are required to be paid or reimbursed by Walter or any Walter Affiliate pursuant to a legal determination, resulting from, or arising in connection with, the failure of the Distribution to qualify as a tax-free transaction under Section 355 of the Code (including, without limitation, any Tax resulting from the application of Section 355(d) or Section 355(e) of the Code to the Distribution) or corresponding provisions of the laws of any other jurisdictions.  Any Tax referred to in the immediately preceding sentence shall be determined using the highest applicable statutory rate with respect to such Taxes for the relevant taxable period (or portion thereof).

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1.11“E+P ADJUSTMENT” means, as a result of a Final Determination, any positive adjustment to the earnings and profits (as determined for United States federal income tax purposes) of the Consolidated Group or any member of the Consolidated Group arising from any redetermination of any item of income, gain, loss, deduction or credit of any member of the Consolidated Group.

1.12“ESTIMATED TAX INSTALLMENT DATE” means the installment due dates prescribed in Section 6655(c) of the Code (presently April 15, June 15, September 15 and December 15).

1.13“FEDERAL INCOME TAX” or “FEDERAL INCOME TAXES” means any tax imposed under Subtitle A of the Code (including the taxes imposed by Sections 11, 55, 59A, and 1201(a) of the Code), including any interest, additions to Tax, or penalties applicable thereto, and any other income based Federal Tax which is hereinafter imposed upon corporations.

1.14“FEDERAL TAX” means any Tax imposed under the Code or otherwise under United States federal Tax law.

1.15“FINAL DETERMINATION” means (a) the final resolution of any Tax (or other matter) for a taxable period, including any related interest or penalties, that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise, including (1) by the expiration of a statute of limitations (giving effect to any extension, waiver or mitigation thereof) or a period for the filing of claims for refunds, amended returns, appeals from adverse determinations, or recovering any refund (including by offset), (2) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable, (3) by a closing agreement or an accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreements under laws of other jurisdictions, (4) by execution of an IRS Form 870-AD, or by a comparable form under the laws of other jurisdictions (excluding, however, any such form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Tax Authority to assert a further deficiency), or (5) by any allowance of a refund or credit, but only after the expiration of all periods during which such refund or credit may be recovered (including by way of offset) or (b) the payment of Tax by any member of the Consolidated Group or Combined Group with respect to any item disallowed or adjusted by a Tax Authority provided that Walter determines that no action should be taken to recoup such payment.

1.16“HOMES” means Jim Walter Homes, LLC, a subsidiary of Walter, and any of its subsidiaries.

1.17“IRS” means the Internal Revenue Service.

1.18“JWHHC” means JWH Holding Company, LLC, a Delaware limited liability company.

1.19“MARKET VALUATION” means as of the first business day immediately following the date on which the Distribution is effected (i) with respect to Spinco, the fair market value of all of its issued and outstanding limited liability company interests as of such date, or (ii) with respect to Walter, the fair market value of all of its issued and outstanding

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stock (measured using the mean of the high and low of the public trading price as published in The Wall Street Journal) as of such date.

1.20“NON-AUDIT ADJUSTMENT” means the redetermination of any item of income, gain, loss, deduction or credit of any member of the Consolidated Group or any Combined Group other than as a result of an Audit or any settlement or compromise with any Tax Authority, provided that such redetermination is attributable to misleading or inaccurate information provided by Spinco, any Spinco Affiliate, WMC or any WMC Affiliate to Walter, or the failure by Spinco, any Spinco Affiliate, WMC or any WMC Affiliate to provide material information to Walter.

1.21“NON-FEDERAL COMBINED TAXES” means any Non-Federal Taxes with respect to which a Combined Return is filed.

1.22“NON-FEDERAL INCOME TAX” means any income-based Non-Federal Tax imposed by any Tax Authority, including any interest, additions to Tax, or penalties applicable thereto.

1.23“NON-FEDERAL SEPARATE TAXES” means any Non-Federal Taxes that are not Non-Federal Combined Taxes.

1.24“NON-FEDERAL TAXES” means any Tax other than a Federal Tax.

1.25“OFFICER’S CERTIFICATE” means a letter executed by an officer of Walter or Spinco and provided to Tax Counsel as a condition for the completion of a Tax Opinion or Supplemental Tax Opinion.

1.26“POST-DISTRIBUTION PERIOD” means a taxable period beginning after the Distribution Date.

1.27“PRE-DISTRIBUTION PERIOD” means any taxable period beginning on or prior to the Distribution Date.

1.28“PRO FORMA SPINCO GROUP COMBINED RETURN” means a pro forma non-federal combined tax return or other schedule prepared pursuant to Section 3.6 of this Agreement.

1.29“PRO FORMA SPINCO GROUP CONSOLIDATED RETURN” means a pro forma consolidated federal income tax return prepared pursuant to Section 3.5 of this Agreement.

1.30“PRO FORMA WMC GROUP COMBINED RETURN” means a pro forma non-federal combined tax return or other schedule prepared pursuant to Section 3.6 of this Agreement.

1.31“PRO FORMA WMC GROUP CONSOLIDATED RETURN” means a pro forma consolidated federal income tax return prepared pursuant to Section 3.5 of this Agreement.

1.32“RULING” means (i) any private letter ruling issued by the IRS in connection with the Distribution in response to a request for such a private letter ruling filed by Walter (or any Walter Affiliate) prior to the date of the Distribution, and (ii) any similar ruling issued

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by any other Tax Authority addressing the application of a provision of the laws of another jurisdiction to the Distribution.

1.33“RULING DOCUMENTS” means (i) the request for a Ruling filed with the IRS, together with any supplemental filings or other materials subsequently submitted on behalf of Walter, its Affiliates and shareholders to the IRS, or on behalf of Spinco, its Affiliates and shareholders to the IRS the appendices and exhibits thereto, and any Ruling issued by the IRS to Walter (or any Walter Affiliate) or Spinco (or any Spinco Affiliate) in connection with the Distribution and (ii) any similar filings submitted to, or rulings issued by, any other Tax Authority in connection with the Distribution.

1.34“SPINCO” means Walter Investment Management LLC, a Delaware limited liability company.

1.35“SPINCO AFFILIATE” means any corporation or other entity, including any entity that is a disregarded entity for federal income tax purposes, directly or indirectly “controlled” by Spinco where “control” means the ownership of fifty percent (50%) or more of the ownership interests of such corporation or other entity (by vote or value) or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such corporation or other entity.

1.36“SPINCO BUSINESS” means the business and operations conducted by Spinco and its Affiliates as such business and operations will continue after the date of the Distribution.

1.37“SPINCO GROUP” means the affiliated group of corporations, including any entity that is a disregarded entity for federal income tax purposes, as defined in Section 1504(a) of the Code, or similar group of entities as defined under similar laws of other jurisdictions, of which Spinco would be the common parent if it were not a subsidiary of Walter, and any corporation or other entity, including any entity that is a disregarded entity for federal income tax purposes, which may be or become a member of such group from time to time.

1.38“SPINCO GROUP COMBINED TAX LIABILITY” means, with respect to any taxable year, the Spinco Group’s liability for Non-Federal Combined Taxes as determined under Section 3.6 of this Agreement.

1.39“SPINCO GROUP FEDERAL INCOME TAX LIABILITY” means, with respect to any taxable year, the Spinco Group’s liability for Federal Income Taxes as determined under Section 3.5 of this Agreement.

1.40“SUPPLEMENTAL RULING” means (i) any ruling (other than the Ruling) issued by the IRS in connection with the Distribution, and (ii) any similar ruling issued by any other Tax Authority addressing the application of a provision of the laws of another jurisdiction to the Distribution.

1.41“SUPPLEMENTAL RULING DOCUMENTS” means (i) the request for a Supplemental Ruling, together with any supplemental filings or other materials subsequently submitted, the appendices and exhibits thereto, and any Supplemental Rulings issued by the IRS in connection with the Distribution and (ii) any similar filings submitted to, or rulings issued by, any other Tax Authority in connection with the Distribution.

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1.42“SUPPLEMENTAL TAX OPINION” has the meaning set forth in Section 4.2(c) of this Agreement.

1.43“TAX” or “TAXES” means any charges, fees, levies, imposts, duties, or other assessments of a similar nature, including without limitation, income, alternative or add-on minimum, gross receipts, excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, withholding, Social Security, unemployment, disability, ad valorem, estimated, highway use, commercial rent, capital stock, paid up capital, recording, registration, property, real property gains, value added, business license, custom duties, or other tax or governmental fee of any kind whatsoever, imposed or required to be withheld by any Tax Authority including any interest, additions to Tax, or penalties applicable thereto.

1.44“TAX ASSET” means any net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction or any other deduction, credit or tax attribute which could reduce Taxes (including without limitation deductions and credits related to alternative minimum taxes).

1.45“TAX AUTHORITY” includes the IRS and any state, local, or other governmental authority responsible for the administration of any Taxes.

1.46“TAX COUNSEL” means a nationally recognized law firm or accounting firm selected by Walter to provide a Tax Opinion or a Supplemental Tax Opinion.

1.47“TAX OPINION” means an opinion issued by PricewaterhouseCoopers LLP addressing certain United States federal income tax consequences of the Distribution under Section 355 of the Code as one of the conditions to completing the Distribution.

1.48“TAX RETURN” OR “TAX RETURNS” means any return, declaration, statement, report, schedule, certificate, form, information return or any other document (and any related or supporting information) including an amended tax return required to be supplied to, or filed with, a Tax Authority with respect to Taxes.

1.49“TAXABLE DIVIDEND” means the dividend paid by Spinco in the form of cash and Spinco interests immediately subsequent to the Distribution and immediately preceding the Merger.

1.50“WALTER AFFILIATE” means any corporation or other entity, including any entity that is disregarded for federal income tax purposes, directly or indirectly “controlled” by Walter where “control” means the ownership of fifty percent (50%) or more of the ownership interests of such corporation or other entity (by vote or value) or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such corporation or other entity, but at all times excluding Spinco and any Spinco Affiliate, and WMC and any WMC affiliate, as applicable.

1.51“WALTER BUSINESS” means all of the businesses and operations conducted by Walter and any Walter Affiliates, excluding the Spinco Business or the WMC Business, at any time, whether prior to, or after the Distribution Date.

1.52“WALTER GROUP” means the affiliated group of corporations, including any entity that is a disregarded entity for federal income tax purposes, as defined in Section 

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1504(a) of the Code, or similar group of entities as defined under similar laws of other jurisdictions, of which Walter is the common parent, and any corporation or other entity, including any entity that is a disregarded entity for federal income tax purposes, which may be or become a member of such group from time to time.

1.53“WMC” means Walter Mortgage Company LLC, a Delaware limited liability company.

1.54“WMC AFFILIATE” means (i) any corporation or other entity, including any entity that is disregarded for federal income tax purposes, directly or indirectly “controlled” by WMC where “control” means the ownership of fifty percent (50%) or more of the ownership interests of such corporation or other entity (by vote or value) or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such corporation or other entity, (ii) Best Insurors, Inc. and (iii) Walter Investment Reinsurance Co., Ltd.

1.55“WMC BUSINESS” means all of the businesses and operations conducted by WMC and any WMC Affiliates, as such business and operations will continue after the date of the Distribution.

1.56“WMC GROUP COMBINED TAX LIABILITY” means, with respect to any taxable year, the WMC Group’s liability for Non-Federal Combined Taxes as determined under Section 3.6 of this Agreement.

1.57“WMC GROUP FEDERAL INCOME TAX LIABILITY” means, with respect to any taxable year, the WMC Group’s liability for Federal Income Taxes as determined under Section 3.5 of this Agreement.

1.58“WMC GROUP” means the affiliated group of corporations, including any entity that is a disregarded entity for federal income tax purposes, as defined in Section 1504(a) of the Code, or similar group of entities as defined under similar laws of other jurisdictions, of which WMC would be the common parent if it were not a subsidiary of Spinco, and any corporation or other entity, including any entity that is a disregarded entity for federal income tax purposes, which may be or become a member of such group from time to time. Such group shall also include Best Insurors, Inc. and Walter Investment Reinsurance Co., Ltd.

SECTION 2.PREPARATION AND FILING OF TAX RETURNS

2.1IN GENERAL.  (a)  Walter shall have the sole and exclusive responsibility for the preparation and filing of any Consolidated Return or Combined Return.

(b) Spinco shall, subject to Section 2.2 of this Agreement, be responsible for preparing and filing all Tax Returns of Spinco and the Spinco Affiliates, and of WMC and the WMC Affiliates, other than those described in Section 2.1(a) of this Agreement.

2.2PREPARATION AND FILING OF RETURNS.  (a) All Tax Returns described in Section 2.1 of this Agreement shall be (1) prepared in a manner that is consistent with Section 4 of this Agreement and the Code, and (2) filed on a timely basis (taking into account applicable extensions) by the party responsible for such filing under Section 2.1 of this Agreement.

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(b)Subject to Section 2.2(a) of this Agreement, Walter, in its sole discretion, shall have the exclusive right with respect to any Consolidated Return or Combined Return (a) to determine (1) the manner in which such Tax Return shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported, (2) whether any extensions may be requested, (3) the elections that will be made by any member of the Consolidated Group or applicable Combined Group, and (4) whether any amended Tax Returns should be filed, (b) to control, contest, and represent the interests of the Consolidated Group and  any Combined Group in any Audit and to resolve, settle, or agree to any adjustment or deficiency proposed, asserted or assessed as a result of any Audit, (c) to file, prosecute, compromise or settle any claim for refund, and (d) to determine whether any refunds, to which the Consolidated Group or applicable Combined Group may be entitled, shall be paid by way of refund or credited against the Tax liability of the Consolidated Group or applicable Combined Group. Spinco, for itself and its subsidiaries, hereby irrevocably appoints Walter as its agent and attorney-in-fact to take such action (including the execution of documents) as Walter may deem appropriate to effect the foregoing.

2.3FURNISHING INFORMATION. (a) Spinco (or the applicable Spinco  Affiliate) shall, to the extent commercially reasonable,(i) furnish to Walter in a timely manner such information, documents and assistance as Walter may reasonably request for purposes of (1) preparing any original or amended Consolidated Return or Combined Return, (2) contesting or defending any Audit relating to a Consolidated Return or a Combined Return, and (3) making any determination or computation necessary or appropriate under this Agreement; (ii) cooperate and provide assistance in any Audit of any Consolidated Return or Combined Return; (iii) retain and provide on demand books, records, documentation or other information relating to any Tax Return and maintain and provide support to Walter (including the provision of the appropriate personnel as further described in Section 2.3(b) of this Agreement) with respect to any electronic financial systems that provide information relating to historical data, including data required to be sourced from the “mainframe” (the data that is maintained by Walter that was sourced from the McCormick and Dodge system and its predecessor (the “Mainframe”) or the related data that may at any time be transferred from the mainframe to an alternate database, until the later of (1) the expiration of the applicable statute of limitations (giving effect to any extension, waiver, or mitigation thereof) and (2) in the event any claim is made under this Agreement for which such information is relevant, until a Final Determination with respect to such claim; and (iv) take such action as Walter may deem appropriate in connection therewith. For purposes of this Section 2.3(a), such assistance shall include, but not be limited to, the making available of individuals with expertise relating to matters that are the subject of any Audit or proceeding, or relating to any information or documents requested under this Section 2.3(a), at the times and in the manner requested by Walter.

(b)For purposes of Section 2.3(a) of this Agreement, the provision of appropriate personnel shall include, without limitation, the following persons: (i) Joe Kelly, Executive VP of WMC, shall be made available, to the extent commercially reasonable, upon request to provide data required to be sourced from the Mainframe, (ii) Kim Perez, CFO, and Ann Carballa, Director of Systems Integration, of WMC, shall be made available, to the extent commercially reasonable, to provide data requests specifically for the periods post 2002, upon which time the Company converted from the Mainframe to alternate systems, and to assist Joe Kelly in providing data requests for data prior to 2002.  In addition, WMC shall use its commercially reasonable best efforts to assure that the knowledge of the individuals

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described in clause (i) and (ii), as it pertains to the data requests, shall be transferred to others within the WMC organization should these individuals leave the employ of WMC, unless prevented by the circumstances of such departure.

(c)Walter shall, to the extent commercially reasonable, furnish to Spinco (or the applicable Spinco Affiliate) in a timely manner such assistance as Spinco may reasonably require for purposes of preparing any Tax Return relating to the Taxes of the Spinco Group for any Pre-Distribution Period, and Walter shall, to the extent commercially reasonable, provide Spinco (or the applicable Spinco Affiliate) any assistance reasonably required in providing any information requested pursuant to this Section 2.3. For purposes of this Section 2.3(e), such assistance shall include, but not be limited to, the making available of individuals with expertise relating to the matters described in this Section 2.3, at the times and in the manner reasonably requested by Spinco. For the avoidance of doubt, the obligations of Walter under this Section 2.3(e) shall in no way limit its obligations under any other agreements entered into in connection with the Distribution.

SECTION 3.PAYMENT OF TAXES AND TAX SHARING AMOUNTS

3.1FEDERAL INCOME TAXES. Walter shall pay (or cause to be paid) to the IRS all Federal Income Taxes, if any, of the Consolidated Group.

3.2NON-FEDERAL COMBINED TAXES. Walter shall pay (or cause to be paid) to the appropriate Tax Authorities all Non-Federal Combined Taxes, if any, of any Combined Group.

3.3NON-FEDERAL SEPARATE TAXES AND OTHER TAXES. Spinco shall pay to the appropriate Tax Authorities all Non-Federal Separate Taxes and any other Taxes (other than those described in Section 3.1 and Section 3.2 of this Agreement), if any, of Spinco and the Spinco Affiliates, and of WMC and the WMC Affiliates, including, without limitation, those for any Pre-Distribution Period (or portion thereof ending on the Distribution Date) arising as a result of a Final Determination with respect to Federal Income Taxes that requires an adjustment to any Taxes described in this Section 3.3. With respect to any Current Taxable Period, the Non-Federal Separate Taxes and any other Taxes described in this Section 3.3 shall include any Non-Federal Separate Taxes and any other Taxes owed by JWHHC (as the former parent of the WMC Group for such periods) to the extent attributable to the income of WMC or the WMC Affiliates, and, accordingly, shall be payable by Spinco to JWHHC or Walter not later than 15 business days after it is notified by Walter of the amount due. Notwithstanding the foregoing, any 1098 reporting penalties imposed by the IRS relating to a Pre-Distribution Period shall be paid by Walter. For purposes of this Section, “1098 reporting penalties” shall mean any penalties that result solely from a determination that the amount of interest reported with respect to the financing contracts associated with the sale of homes by Homes was incorrectly reported on IRS Form 1098.

3.4SPINCO LIABILITY FOR FEDERAL INCOME TAXES AND NON-FEDERAL COMBINED TAXES FOR CURRENT TAXABLE YEARS.  For each Current Taxable Period, Spinco shall pay to Walter an amount equal to, without duplication, the sum of (1) the WMC Group Federal Income Tax Liability, (2) the WMC Group Combined Tax Liability, (3) the Spinco Group Federal Income Tax Liability and (4) the Spinco Group Combined Tax Liability, for such period, as determined pursuant to Sections 3.5 and 3.6 of this Agreement, and in the manner described in Section 3.8 of this Agreement.

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3.5           wmc GROUP and Spinco group FEDERAL INCOME TAX LIABILITY.  (a)  WMC GROUP FEDERAL INCOME TAX LIABILITY. The WMC Group Federal Income Tax Liability for a Current Taxable Period shall be the WMC Group’s liability for Federal Income Taxes for such taxable period, as determined on a Pro Forma WMC Group Consolidated Return prepared in accordance with Section 3.5(b) of this Agreement.

(b)           PRO FORMA WMC GROUP CONSOLIDATED RETURN. With respect to a Current Taxable Period, Walter shall prepare or cause to be prepared (and, as requested by Walter, Spinco shall cooperate in preparing) a Pro Forma WMC Group Consolidated Return as if the WMC Group were not and never were part of the Consolidated Group, but rather were a separate affiliated group of corporations of which WMC were the common parent filing a consolidated federal income tax return for such period pursuant to Section 1501 of the Code.  For the avoidance of doubt, the Pro Forma WMC Group Consolidated Return shall be prepared without regard to the conversion of WMC to a disregarded entity, treating WMC as a corporation for these purposes.

(c)           SPINCO GROUP FEDERAL INCOME TAX LIABILITY. The Spinco Group Federal Income Tax Liability for a Current Taxable Period shall be the Spinco Group’s liability for Federal Income Taxes for such taxable period, as determined on a Pro Forma Spinco Group Consolidated Return prepared in accordance with Section 3.5(d) of this Agreement.

(d)           PRO FORMA SPINCO GROUP CONSOLIDATED RETURN. With respect to a Current Taxable Period, Walter shall prepare or cause to be prepared (and, as requested by Walter, Spinco shall cooperate in preparing) a Pro Forma Spinco Group Consolidated Return as if the Spinco Group were not and never were part of the Consolidated Group, but rather were a separate affiliated group of corporations of which Spinco were the common parent filing a consolidated federal income tax return for such period pursuant to Section 1501 of the Code.

3.6           WMC GROUP AND SPINCO GROUP COMBINED TAX LIABILITY.  (a) WMC GROUP COMBINED TAX LIABILITY. The WMC Group Combined Tax Liability for a Current Taxable Period shall be the sum for such taxable period of the WMC Group’s liability for each Non-Federal Combined Tax, as determined on Pro Forma WMC Group Combined Returns prepared in a manner consistent with the principles and procedures set forth in Section 3.5(b) hereof.  For the avoidance of doubt, the Pro Forma WMC Group Combined Return shall be prepared without regard to the conversion of WMC to a disregarded entity for U.S. federal income tax purposes, treating WMC as a corporation for these purposes, and Spinco and the WMC Group shall be liable for such taxes pursuant to Section 3.4 of this Agreement, regardless of whether JWHHC is ultimately responsible for filing the Tax Returns relating to such Non-Federal Combined Taxes.

(b)           SPINCO GROUP COMBINED TAX LIABILITY. The Spinco Group Combined Tax Liability for a Current Taxable Period shall be the sum for such taxable period of the Spinco Group’s liability for each Non-Federal Combined Tax, as determined on Pro Forma Spinco Group Combined Returns prepared in a manner consistent with the principles and procedures set forth in Section 3.5(d) hereof.

3.7           TAX SHARING INSTALLMENT PAYMENTS.  (a)  WMC GROUP FEDERAL INCOME TAXES. For each Estimated Tax Installment Date with respect to any

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Current Taxable Period, Walter shall determine under Section 6655 of the Code the estimated amount of the related installment of the WMC Group Federal Income Tax Liability and shall notify Spinco of such amount. Spinco shall then pay to Walter, not later than 15 business days after it is notified by Walter of such amount, the amount thus determined.

(b)           WMC GROUP NON-FEDERAL COMBINED TAXES. For each estimated tax installment date with respect to Non-Federal Combined Taxes for any Current Taxable Period, Walter shall determine the estimated amount of the related installment of the WMC Group Combined Tax Liability and shall notify Spinco of such amount.  Spinco shall pay to Walter, not later than 15 business days after it is notified by Walter of such amount, the amount thus determined.

(c)           SPINCO GROUP FEDERAL INCOME TAXES. For each Estimated Tax Installment Date with respect to any Current Taxable Period, Walter shall determine under Section 6655 of the Code the estimated amount of the related installment of the Spinco Group Federal Income Tax Liability and shall notify Spinco of such amount. Spinco shall then pay to Walter, not later than 15 business days after it is notified by Walter of such amount, the amount thus determined.

(d)           SPINCO GROUP NON-FEDERAL COMBINED TAXES. For each estimated tax installment date with respect to Non-Federal Combined Taxes for any Current Taxable Period, Walter shall determine the estimated amount of the related installment of the Spinco Group Combined Tax Liability and shall notify Spinco of such amount.  Spinco shall pay to Walter, not later than 15 business days after it is notified by Walter of such amount, the amount thus determined.

3.8           TAX SHARING TRUE-UP PAYMENTS.  (a)  FEDERAL INCOME TAXES.  Not later than 60 business days after the Consolidated Return is filed with respect to any Current Taxable Period, Walter shall deliver to Spinco a Pro Forma WMC Group Consolidated Return and a Pro Forma Spinco Group Consolidated Return or other comparable schedules reflecting the WMC Group Federal Income Tax Liability and Spinco Group Federal Income Tax Liability for such period. Not later than 10 business days after the date such Pro Forma WMC Group Consolidated Return and Pro Forma Spinco Group Consolidated Return or other schedules are delivered, Spinco shall pay to Walter, or Walter shall pay to Spinco, as appropriate, an amount equal to (i) the difference, if any, between the WMC Group Federal Income Tax Liability for such taxable period and the aggregate amount paid by Spinco with respect to such taxable period under Section 3.7(a) of this Agreement, and (ii) the difference, if any, between the Spinco Group Federal Income Tax Liability for such taxable period and the aggregate amount paid by Spinco with respect to such taxable period under Section 3.7(c) of this Agreement. Notwithstanding anything to the contrary herein, Walter shall only be required to make a payment to Spinco pursuant to this Section 3.8(a) to the extent it has received a refund of Federal Income Taxes attributable to such amounts; and in no event shall such payment be required prior to 15 days after the receipt of such refund.

(b)           NON-FEDERAL COMBINED TAXES.  Not later than 60 business days after the Combined Return is filed with respect to any taxable period described in Section 3.4, Walter shall deliver to Spinco a Pro Forma WMC Group Combined Return and a Pro Forma Spinco Group Combined Return or other comparable schedules reflecting the WMC Group Combined Tax Liability and Spinco Group Combined Tax Liability for such taxable year (or portion thereof ending on the Distribution Date). Not later than 10 business days following

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delivery of such Pro Forma WMC Group Combined Return and Pro Forma Spinco Group Combined Return or other schedules, Spinco shall pay to Walter, or Walter shall pay to Spinco, as appropriate, an amount equal to (i) the difference, if any, between the WMC Group Combined Tax Liability for such taxable year (or portion thereof ending on the Distribution Date) and the amount paid by Spinco with respect to such taxable year (or portion thereof ending on the Distribution Date) under Section 3.7(b) of this Agreement, and (ii) the difference, if any, between the Spinco Group Combined Tax Liability for such taxable period and the aggregate amount paid by Spinco with respect to such taxable period under Section 3.7(d) of this Agreement. Notwithstanding anything to the contrary herein, Walter shall only be required to make a payment to Spinco pursuant to this Section 3.8(b) to the extent it has received a refund of Non-Federal Combined Taxes attributable to such amounts; and in no event shall such payment be required prior to 15 days after the receipt of such refund.

3.9           ADJUSTMENT AMOUNT.  (a)  IN GENERAL.  In the event of any Non-Audit Adjustment, Spinco shall pay Walter the Adjustment Amount.

(b)           COMPUTATION.  The Adjustment Amount shall be equal to the sum of (A) the difference between (1) the sum of the WMC Group Federal Income Tax Liability and the WMC Group Combined Tax Liability that would have been computed under Sections 3.5 and 3.6 for the taxable year to which the Non-Audit Adjustment relates had such year been a Current Taxable Period, taking such Non-Audit Adjustment into account, and (2) the sum of the WMC Group Federal Income Tax Liability and the WMC Group Combined Tax Liability that would have been computed under Sections 3.5 and 3.6 for the taxable year to which the Non-Audit Adjustment relates had such year been a Current Taxable Period, without regard to such Non-Audit Adjustment; and (B) the difference between (1) the sum of the Spinco Group Federal Income Tax Liability and the Spinco Group Combined Tax Liability that would have been computed under Sections 3.5 and 3.6 for the taxable year to which the Non-Audit Adjustment relates had such year been a Current Taxable Period, taking such Non-Audit Adjustment into account, and (2) the sum of the Spinco Group Federal Income Tax Liability and the Spinco Group Combined Tax Liability that would have been computed under Sections 3.5 and 3.6 for the taxable year to which the Non-Audit Adjustment relates had such year been a Current Taxable Period, without regard to such Non-Audit Adjustment.

(c)           PAYMENT.  Walter shall deliver to Spinco a schedule reflecting the computation of any Adjustment Amount with respect to any applicable taxable year. Not later than 5 business days after the date such schedule is delivered, Spinco shall pay Walter such Adjustment Amount.

3.10         INTEREST ON LATE PAYMENTS.  Payments made between Walter and Spinco under this Section 3 that are not made within the prescribed period shall thereafter bear interest at the short term applicable federal rate, (as defined in Section 1274 of the Code and as determined by the IRS from time to time) plus 350 basis points.

SECTION 4.           DISTRIBUTION TAXES

4.1           CONTINUING COVENANTS.  Spinco, for itself, the Spinco Affiliates, WMC and the WMC Affiliates, covenants that on or after the Distribution Date it will not (nor will it cause or permit any member of the Spinco Group to), (i) make or change any tax election, (ii) change any accounting method, (iii) amend any Tax Return or take any Tax position on any Tax Return that is inconsistent with any Tax position on any Tax Return of

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the Walter Group, or (iv) take any action, omit to take any action or enter into any transaction that results in any increased Tax liability or reduction of any Tax Asset of the Walter Group; unless any such action is required by a Final Determination.

4.2           ADDITIONAL CONTINUING COVENANTS.  (a)  Spinco RESTRICTIONS.   Spinco agrees that it will not take or fail to take, or permit any Spinco Affiliate, WMC or any WMC Affiliate to take or fail to take, any action where such action or failure to act would be inconsistent with any material, information, covenant or representation that relates to facts or matters related to Spinco or WMC, any Spinco Affiliate or WMC Affiliate, or the Spinco Business or WMC Business or that is within the control of Spinco, any Spinco Affiliate, WMC or any WMC Affiliate, and is contained in an Officer’s Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents, Ruling, or Supplemental Ruling.  For this purpose an action is considered inconsistent with a representation if the representation states that there is no plan or intention to take such action.  Spinco agrees that it will not take (and it will cause the Spinco Affiliates, WMC and the WMC Affiliates to refrain from taking) any position on a Tax Return that is inconsistent with the treatment of the Distribution as a tax-free transaction under Section 355 of the Code.

(b)           WALTER RESTRICTIONS.  Walter agrees that it will not take or fail to take, or permit any Walter Affiliate to take or fail to take, any action where such action or failure to act would be inconsistent with any material, information, covenant or representation that relates to facts or matters related to Walter (or any Walter Affiliate) or within the control of Walter and is contained in an Officer’s Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents, Ruling, or Supplemental Ruling.  For this purpose an action is considered inconsistent with a representation if the representation states that there is no plan or intention to take such action.  Walter agrees that it will not take (and it will cause the Walter Affiliates to refrain from taking) any position on a Tax Return that is inconsistent with the treatment of the Distribution as a tax-free transaction under Section 355 of the Code.

(c)           CERTAIN SPINCO ACTIONS FOLLOWING THE DISTRIBUTION.  Spinco agrees that, during the 2-year period following the Distribution, without first obtaining, at Spinco’s own expense, either a supplemental opinion from Tax Counsel that such action will not result in Distribution Taxes (a “Supplemental Tax Opinion”) or a Supplemental Ruling that such action will not result in Distribution Taxes, unless in any such case Walter and Spinco agree in writing otherwise, Spinco shall not (1) sell all or substantially all of the assets of Spinco or any Spinco Affiliate, (2) merge Spinco or any Spinco Affiliate with another entity, without regard to which party is the surviving entity, (3) transfer any assets of Spinco in a transaction described in Section 351 (other than a transfer to a corporation which files a consolidated return with Spinco and which is wholly-owned, directly or indirectly, by Spinco) or subparagraph (C) or (D) of Section 368(a)(1) of the Code, (4) issue stock of Spinco or any Spinco Affiliate (or any instrument that is convertible or exchangeable into any such stock) in an acquisition or public or private offering, or (5) facilitate or otherwise participate in any acquisition of stock in Spinco  that would result in any shareholder owning five percent (5%) or more of the outstanding stock of Spinco.  Spinco or any Spinco Affiliate shall only undertake any of such actions after Walter’s receipt of such Supplemental Tax Opinion or Supplemental Ruling and pursuant to the terms and conditions of any such Supplemental Tax Opinion or Supplemental Ruling or as otherwise consented to in writing in advance by Walter.  The parties hereby agree that they will act in

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good faith to take all reasonable steps necessary to amend this Section 4.2(c), from time to time, by mutual agreement, to (i) add certain actions to the list contained herein, or (ii) remove certain actions from the list contained herein, in either case, in order to reflect any relevant change in law, regulation or administrative interpretation occurring after the date of this Agreement. For the avoidance of doubt, nothing in this Agreement shall in any way prevent or prohibit Spinco from consummating the Merger.

(d)           NOTICE OF SPECIFIED TRANSACTIONS.  Not later than 30 days prior to entering into any oral or written contract or agreement, and not later than 5 days after it first becomes aware of any negotiations, plan or intention (regardless of whether it is a party to such negotiations, plan or intention), regarding any of the transactions described in Section 4.2(c) of this Agreement, Spinco shall provide written notice of its intent to consummate such transaction or the negotiations, plan or intention of which it becomes aware, as the case may be, to Walter.

4.3           DISTRIBUTION TAXES.  The parties have set forth how certain Tax matters with respect to a Distribution would be handled. Notwithstanding Section 3 of this Agreement, this Section 4.3 shall govern with respect to any and all Distribution Taxes whenever imposed.

(a)           WALTER’S LIABILITY FOR DISTRIBUTION TAXES. Walter and each Walter Affiliate shall be jointly and severally liable for any Distribution Taxes, to the extent that such Distribution Taxes are attributable to, caused by, or result from, one or more of the following:

(1)           any action or omission by Walter (or any Walter Affiliate) inconsistent with any material, information, covenant or representation related to Walter, any Walter Affiliate, or the Walter Business in an Officer’s Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents, Ruling, or Supplemental Ruling (for the avoidance of doubt, disclosure of any action or fact that is inconsistent with any material, information, covenant or representation submitted to Tax Counsel, the IRS, or other Tax Authority, as applicable, in connection with an Officer’s Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents, Ruling, or Supplemental Ruling shall not relieve Walter (or any Walter Affiliate) of liability under this Agreement);

(2)           any action or omission by Walter (or any Walter Affiliate), including a cessation, transfer to affiliates, or disposition of its active trades or businesses, or an issuance of stock, stock buyback or payment of an extraordinary dividend by Walter (or any Walter Affiliate) following the Distribution;

(3)           any acquisition of any stock or assets of Walter (or any Walter Affiliate) by one or more other persons (other than Spinco or a Spinco Affiliate) prior to or following the Distribution; or

(4)           any issuance of stock by Walter (or any Walter Affiliate).

(b)           SPINCO’S LIABILITY FOR DISTRIBUTION TAXES.  Spinco and each Spinco Affiliate shall be jointly and severally liable for any Distribution Taxes, to the extent that such Distribution Taxes are attributable to, caused by, or result from, one or more of the following:

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(1)           any action or omission by Spinco (or any Spinco Affiliate) after the Distribution at any time, that is inconsistent with any material, information, covenant or representation related to Spinco or WMC, or any Spinco Affiliate or WMC Affiliate, or the Spinco Business or the WMC Business, in an Officer’s Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents, Ruling, or Supplemental Ruling (for the avoidance of doubt, disclosure by Spinco (or any Spinco Affiliate) to Walter (or any Walter Affiliate) of any action or fact that is inconsistent with any material, information, covenant or representation submitted to Tax Counsel, the IRS, or other Tax Authority, as applicable, in connection with an Officer’s Certificate, Tax Opinion, Supplemental Tax Opinion, Ruling Documents, Supplemental Ruling Documents, Ruling, or Supplemental Ruling shall not relieve Spinco (or any Spinco Affiliate) of liability under this Agreement);

(2)           any action or omission by Spinco (or any Spinco Affiliate) after the date of the Distribution (including any act or omission that is in furtherance of, connected to, or part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) occurring on or prior to the date of the Distribution) including a cessation, transfer to affiliates or disposition of the active trades or businesses of Spinco (or any Spinco Affiliate), stock buyback or payment of an extraordinary dividend (other than the payment of the Taxable Dividend);

(3)           any acquisition (other than the Merger, and for the avoidance of doubt, other than in connection with the Taxable Dividend) of any stock (or limited liability company interests) or assets of Spinco (or any Spinco Affiliate) by one or more other persons (other than Walter or any Walter Affiliate) prior to or following the Distribution; or

(4)           any issuance of stock (or limited liability company interests) by Spinco (or any Spinco Affiliate) after the Distribution, including any issuance pursuant to the exercise of employee stock options or other employment related arrangements or the exercise of warrants, other than in connection with the Taxable Dividend.

(c)           JOINT LIABILITY FOR REMAINING DISTRIBUTION TAXES.  Walter and each Walter Affiliate shall be liable for a percentage of any Distribution Taxes (not otherwise allocated by Sections 4.3(a) or (b) of this Agreement) equal to the quotient of (i) Walter’s Market Valuation, divided by (ii) the sum of (x) Walter’s Market Valuation, and (y) Spinco’s Market Valuation.  Spinco and each Spinco Affiliate shall be jointly and severally liable for a percentage of any Distribution Taxes (not otherwise allocated by Sections 4.3(a) or (b) of this Agreement) equal to the quotient of (i) Spinco’s Market Valuation, divided by (ii) the sum of (x) Walter’s Market Valuation, and (y) Spinco’s Market Valuation.

SECTION 5.           EARNINGS AND PROFITS ADJUSTMENTS

5.1           NOTICE. Walter shall notify Spinco within 75 days of an E+P Adjustment.

5.2           REIMBURSEMENT.

(a)           IN GENERAL. To the extent that Spinco is required to pay an Additional Taxable Dividend, Walter shall pay Spinco an amount in cash equal to the lesser of (i) the Additional Taxable Dividend actually paid by Spinco multiplied by the percentage of the Taxable Dividend that was paid in cash and (ii) the amount of such Additional Taxable Dividend actually paid in cash.

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(b)           TIMING. Such payment shall be made no later than 2 business days after the date on which such Additional Taxable Dividend is made.

SECTION 6.           MISCELLANEOUS

6.1           TERM.  All rights and obligations arising hereunder shall survive until they are fully effectuated or performed provided that, notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof).

6.2           ALLOCATIONS.  (a)  IN GENERAL.  All computations with respect to any Pre-Distribution Period shall be made pursuant to the principles of Treasury Regulations Section 1.1502-76(b), taking into account such elections thereunder as Walter, in its sole discretion, shall make.

(b)           TAX ASSETS.  Walter shall advise Spinco in writing within 90 days after the filing of the Consolidated Return for the taxable year that includes the Distribution Date of the allocation of any Tax Assets among Walter, each Walter Affiliate, Spinco, and each Spinco Affiliate.  The parties hereby agree that, for purposes of determining such allocation, Walter shall be free to use any legally permissible method of allocation in its sole discretion.

6.3           FINAL DETERMINATIONS. Spinco and the Spinco Affiliates agree to be bound by (and to report its Taxes consistently with) any Final Determination relating to Spinco, any Spinco Affiliate, WMC and any WMC Affiliate for any Pre-Distribution Period (or portion thereof ending on the Distribution Date), even if such Final Determination affects a Post-Distribution Period (or portion of a Pre-Distribution Period beginning after the Distribution Date).

6.4           CHANGES IN LAW.  Any reference to a provision of the Code or a similar law of another jurisdiction shall include a reference to any successor provision to such provision.

6.5           CONFIDENTIALITY. Each party shall hold and cause its advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other parties hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (a) previously known by the party to which it was furnished, (b) in the public domain through no fault of such party, or (c) later lawfully acquired from other sources not under a duty of confidentiality by the party to which it was furnished), and each party shall not release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants who shall be advised of and agree to be bound by the provisions of this Section 6.5. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentiality for its own similar information.

6.6           SUCCESSORS. This Agreement shall be binding on and inure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any of the parties hereto

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(including any successor of Walter and Spinco succeeding to the tax attributes of such party under Section 381 of the Code), to the same extent as if such successor had been an original party, and shall apply after the Merger to Walter Investment Management Corporation as successor to Spinco.

6.7           AUTHORIZATION, ETC.  Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of each such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding on such party.

6.8           ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements.

6.9           SECTION CAPTIONS.  Section captions used in this Agreement are for convenience and reference only and shall not affect the construction of this Agreement.

6.10         GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to laws and principles relating to conflicts of law.

6.11         COUNTERPARTS.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

6.12         WAIVERS AND AMENDMENTS.  This Agreement shall not be waived, amended or otherwise modified except in writing, duly executed by all of the parties hereto.

6.13         SEVERABILITY.  In case any one or more of the provisions in this Agreement should be invalid, illegal or unenforceable, the enforceability of the remaining provisions hereof will not in any way be effected or impaired thereby.

6.14         NO THIRD PARTY BENEFICIARIES.  This Agreement is solely for the benefit of the parties to this Agreement and each Walter Affiliate and Spinco Affiliate and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other rights in excess of those existing without this Agreement.

6.15         OTHER REMEDIES.  Spinco recognizes that any failure by it or any Spinco Affiliate (and WMC or any WMC Affiliates) to comply with its obligations under Section 4 of this Agreement would result in Distribution Taxes that would cause irreparable harm to Walter, Walter Affiliates, and their stockholders.  Accordingly, Walter shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which Walter is entitled at law or in equity.

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by a duly authorized officer as of the date first above written.

WALTER INDUSTRIES, INC.
on behalf of itself and the Walter Affiliates
By:	/s/
Name:	Victor P. Patrick
Title:	Vice Chairman, Chief Financial Officer and General Counsel
WALTER INVESTMENT MANAGEMENT LLC,
on behalf of itself and the Spinco Affiliates
By:	/s/
Name:	Mark J. O’Brien
Title:	Chairman and Chief Executive Officer

EX-10.4

Exhibit 10.4

Walter Industries, Inc.

Walter Investment Management LLC

FORM OF JOINT LITIGATION AGREEMENT

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

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

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

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

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

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

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

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

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

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

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

2. Allocation of Responsibility for Litigation and Claims.

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

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

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

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

3. Future Litigation.

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

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

4. Fees and Expenses.

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

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

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

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

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

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

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

5.Protection of Information.

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

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

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

6.Prior Coverages and Indemnification.

(a)Prior Coverage

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

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

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

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

(c)WIMLLC Policies

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

(d)First Come/First Served

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

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faith about such impacts.

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

8.Further Assurances.

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

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

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

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

9.Arbitration.

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

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paragraph (b) of this Section 9.

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

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

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

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

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

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

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

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

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

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

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

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

[Signature pages to follow]

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

WALTER INDUSTRIES, INC.		WALTER INVESTMENT MANAGEMENT LLC
Signature:	/s/	Signature:	/s/
Name:	Victor P. Patrick	Name:	Mark J. O’Brien
Title:	Vice Chairman and Chief Financial Officer	Title:	President and Chief Executive Officer
Address:	4211 W. Boy Scout Boulevard	Address:	4211 W. Boy Scout Blvd., 4th Floor
	Tampa, FL 33607		Tampa, FL 33607
Facsimile:	813-871-4420	Facsimile:	813-871-4420

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EX-99.1

Exhibit 99.1

	PRESS RELEASE

FOR IMMEDIATE RELEASE	Investor Contact: Mark Tubb
April 17, 2009	Vice President - Investor Relations
	813.871.4027
	mtubb@walterenergy.com
	Media Contact: Michael A. Monahan
	Director - Corporate Communications
	813.871.4132
	mmonahan@walterenergy.com

WALTER INDUSTRIES, INC. COMPLETES SEPARATION OF FINANCING BUSINESS; EXPECTS TO
ANNOUNCE NEW CORPORATE IDENTITY AT ANNUAL SHAREHOLDER MEETING

(TAMPA, Fla.) - Walter Industries, Inc. (NYSE: WLT) announced today that it has completed the separation of its Financing business and the merger of that business with Hanover Capital Mortgage Holdings to create Walter Investment Management Corp. (NYSE Amex: WAC) - a fully independent, publicly traded Real Estate Investment Trust.

In conjunction with the completion of this separation, Walter Industries said that, contingent on shareholder approval of a proposed name change, it would unveil a new corporate identity at the Company’s annual shareholder meeting on April 23 at the Tampa Airport Marriott Hotel, repositioning the company with a new brand identity reflecting its focus on its core natural resources and energy businesses.

“The separation of Walter Investment Management Corp. marks the completion of a six-year transformation strategy,” said Walter Industries Chairman Michael T. Tokarz. “We are excited to embark on this next chapter in our Company’s history as the leading producer and exporter of premium U.S. metallurgical coal to the world’s steel producers.”

About Walter Industries

Walter Industries, Inc., based in Tampa, Fla., is the leading producer and exporter of premium metallurgical coal for the global steel industry and also produces steam coal, coal bed methane gas, furnace and foundry coke and other related products. The Company has annual revenues of approximately $1.5 billion and employs approximately 2,250 people. For more information about Walter Industries, please visit the Company website at www.walterind.com.

4211 W. Boy Scout Blvd.   |   Tampa, Florida 33607   |   Tel: 813.871.4811   |   Web site: www.walterind.com