SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
- -----------
AMENDMENT NO. 1
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
- ----------
Walter Industries, Inc.
(Name of applicant)
1500 North Dale Mabry Highway
Tampa, Florida 33607
(Address of Principal Executive Offices)
- ------------
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
- -----------------------------------------------------------
TITLE OF CLASS AMOUNT
Senior Notes Due 2000 $490,000,000
(Series B, Series B-1)
Approximate date of proposed public offering: On or as soon as
practicable after the Effective Date (as defined in the
Amended Joint Plan of Reorganization, dated as of December 9,
1994, of Walter Industries, Inc. and the other debtors named
therein).
Name and address of agent for service:
Kenneth J. Matlock
Executive Vice President and Chief
Financial Officer
Walter Industries, Inc.
1500 North Dale Mabry Highway
Tampa, Florida 33607
The applicant hereby amends this application for qualification on
such date or dates as may be necessary to delay its effectiveness
until (i) the 20th day after the filing of a further amendment
which specifically states that it shall supersede this amendment,
or (ii) such date as the Commission, acting pursuant to Section
307(c) of the Act, may determine upon the written request of the
applicant.
GENERAL
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS
TO THE APPLICANT:
a. Form of organization: A corporation.
b. State or other sovereign power under the laws of which
organized: Delaware
2. SECURITIES ACT EXEMPTION APPLICABLE. STATE BRIEFLY THE
FACTS
RELIED UPON BY THE APPLICANT AS A BASIS FOR THE CLAIM THAT
REGISTRATION OF THE INDENTURE SECURITIES UNDER THE SECURITIES ACT
OF 1933 IS NOT REQUIRED.
The applicant, Walter Industries, Inc. (the "Company"),
formerly known as Hillsborough Holdings Corporation
("Hillsborough"), proposes to issue, as part of its Amended Joint
Plan of Reorganization dated as of December 9, 1994 (the
"Consensual Plan"), pursuant to Section 1121(a) of the United
States Bankruptcy Code, up to $490,000,000 of its Series B Senior
Notes due 2000 (the "Series B Notes"). The Series B Notes will
be
issued to discharge in part claims of existing creditors in the
Bankruptcy Proceedings described below. The Series B Notes may
be
exchanged pursuant to an offer which may be made by the Company
following effectiveness of the Consensual Plan, under a
Registration Rights Agreement to be executed as part of the
Consensual Plan, for Series B-1 Senior Notes due 2000 (the
"Series
B-1 Notes" and, together with the Series B Notes, the "Notes").
As further described below, the Series B Notes are
proposed to be issued in reliance upon the exemption from
registration under the Securities Act of 1933, as amended (the
"Securities Act"), set forth in Section 1145(a)(1) of the United
States Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the
"Bankruptcy Code"), applicable to the offer or sale under a
Chapter
11 reorganization plan by an entity that is not an underwriter of
a security of a debtor in exchange for a claim against such
debtor.
On December 27, 1989 (the "Petition Date"), Hillsborough
and thirty-one of its affiliates (together with the corporation
referred to in the next sentence, the "Debtors") filed voluntary
petitions under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the Middle District of Florida, Tampa
Division (the "Court"). On December 3, 1990, one additional
subsidiary filed a voluntary petition for reorganization under
Chapter 11 with the Court. Under provisions of the Bankruptcy
Code
and an order of the Court dated December 28, 1989, the Debtors
continue to own and manage their respective properties and assets
as debtors in possession.
Pursuant to an order of the Court dated November 5, 1990,
certain asset transfers were made among the Debtors and certain
of
the Debtors were merged with one another, including the merger of
a subsidiary of Hillsborough into Hillsborough, which thereafter
changed its name to Walter Industries, Inc. and was the surviving
entity.
On December 9, 1994, the Consensual Plan was filed as a
modification of the Creditors' Joint Plan of Reorganization dated
as of August 1, 1994 (the "Creditors' Plan"). The Debtors, which
had filed a competing Fifth Amended Plan of Reorganization dated
as
of July 25, 1994 (the "Debtors' Plan"), and Kohlberg Kravis
Roberts
& Co. and certain of its affiliates ("KKR"), which had joined as
proponents of the Debtors' Plan, agreed not to pursue
confirmation
of the Debtor's Plan and became proponents of the Consensual
Plan.
At a hearing before the Court on December 15, 1994, the Court,
pursuant to Section 1125 of the Bankruptcy Code, approved the
Supplement to Disclosure Statement for the Amended Joint Plan
dated
as of December 9, 1994 (the "Supplemental Disclosure Statement")
as
containing adequate information. On January 24, 1995, the
proponents of the Consensual Plan completed soliciting vote
changes
in light of the modifications to the Creditors' Plan contained in
the Consensual Plan. The voting for a class of claims relating
to the "Veil Piercing Settlement Agreement" described in the Plan
and Supplemental Disclosure Statement related thereto is expected
to be completed on February 22, 1995. A copy of the Supplemental
Disclosure Statement is attached as Exhibit T3E2 to this Form
T-3; the Consensual Plan is attached as Exhibit 1 to the
Disclosure Statement.
Section 1145 of the Bankruptcy Code exempts the offer or
sale of securities under a plan of reorganization from
registration
under the Securities Act and state law. Under Section 1145, the
issuance of securities is exempt from registration if three
principal requirements are satisfied: (1) the securities are
issued
by a debtor, its successor, or an affiliate participating in a
joint plan with the debtor (provided that such entity is not an
underwriter as defined in Section 1145(b) of the Bankruptcy Code)
under a plan of reorganization; (2) the recipients of the
securities hold a claim against the debtor or such affiliate, an
interest in the debtor or such affiliate, or a claim for an
administrative expense against the debtor or such affiliate; and
(3) the securities are issued entirely in exchange for the
recipients' claim against or interest in the debtor or such
affiliate, or "principally" in such exchange and "partly" for
cash or property.
The applicant believes that the issuance of the Series B
Notes under the Indenture to holders of various creditor classes
under the Consensual Plan will satisfy all three conditions of
Section 1145 of the Bankruptcy Code because (a) the issuances are
expressly contemplated under the Consensual Plan as part of the
reorganization; (b) the recipients are holders of "Claims"
against
the Debtors; and (c) the recipients would obtain such Notes in
exchange for their prepetition claims. Under the terms of the
Registration Rights Agreement, the Series B-1 Notes are to be
issued, if at all, pursuant to an exchange offer by the Company
which would be registered in conformity with the Securities Act
and
any relevant state law. The applicant does not hereby claim any
exemption from the Securities Act or any state law for the
issuance of the Series B-1 Notes.
AFFILIATIONS
3. AFFILIATES. FURNISH A LIST OR DIAGRAM OF ALL AFFILIATES OF
THE APPLICANT AND INDICATE THE RESPECTIVE PERCENTAGES OF VOTING
SECURITIES OR OTHER BASES OF CONTROL.
AS OF FEBRUARY 2, 1995
WALTER INDUSTRIES, INC. (DE) (formerly named Hillsborough
Holdings
Corporation (DE)) - owns all of the stock of the subsidiary
companies numbered 1 through 19.
1. BEST INSURERS, INC. (FL)
Wholly owned subsidiaries of Best Insurers, Inc.:
Best Insurers of Mississippi, Inc. (MS)
Jim Walter Insurance Services, Inc. (FL)
2. CARDEM INSURANCE CO., LTD. (Bermuda)
3. COAST TO COAST ADVERTISING, INC. (FL)
4. COMPUTER HOLDINGS CORPORATION (DE)
Wholly owned subsidiary of Computer Holdings
Corporation:
Jim Walter Computer Services, Inc. (DE)
5. DIXIE BUILDING SUPPLIES, INC. (FL)
6. HAMER HOLDINGS CORPORATION (DE)
Wholly owned subsidiary of Hamer Holdings
Corporation:
Hamer Properties, Inc. (WV)
7. HOMES HOLDINGS CORPORATION (DE)
Wholly owned subsidiary of Homes Holdings
Corporation:
Jim Walter Homes, Inc. (FL)
Wholly owned subsidiaries of Jim Walter Homes,
Inc.:
Jim Walter Homes of Louisiana, Inc. (LA)
Walter Home Improvement, Inc. (FL)
8. JW ALUMINUM COMPANY (DE)
9. JIM WALTER RESOURCES, INC. (AL) (formerly named JW
Resources Inc. (AL))
Jim Walter Resources, Inc. has a 50% stock
ownership interest in Black Warrior Transmission
Corp. and Black Warrior Methane Corp.
10. JW WINDOW COMPONENTS, INC. (DE)
Wholly owned subsidiaries of JW Window Components,
Inc.:
D. J. Dinsmore Co. (SD) (inactive)
Jim Walter Window Components, Inc. (WI)
Warren Industries, Inc. (FL) (inactive)
11. J.W.I. HOLDINGS CORPORATION (DE)
Wholly owned subsidiary of J.W.I. Holdings
Corporation:
J. W. Walter, Inc. (DE)
12. LAND HOLDINGS CORPORATION (DE)
Wholly owned subsidiary of Land Holdings
Corporation:
Walter Land Company (DE)
13. MID-STATE HOLDINGS CORPORATION (DE)
Wholly owned subsidiary of Mid-State Holdings
Corporation:
Mid-State Homes, Inc. (FL)
Wholly owned subsidiary of Mid-State Homes,
Inc.:
Mid-State Trust IV
Mid-State Trust V
14. RAILROAD HOLDINGS CORPORATION
Wholly owned subsidiary of Railroad Holdings
Corporation:
Jefferson Warrior Railroad Company, Inc. (AL)
15. SLOSS INDUSTRIES CORPORATION (DE)
16. SOUTHERN PRECISION CORPORATION (DE)
17. UNITED LAND CORPORATION (DE) (formerly named U.S. Pipe
Realty, Inc. (DE))
18. UNITED STATES PIPE AND FOUNDRY COMPANY (DE) (formerly
named Pipe Holdings Corporation (DE))
19. VESTAL MANUFACTURING COMPANY (DE)
AS OF EFFECTIVE DATE
Same As That Of February 2, 1995
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS. LIST THE NAMES AND
COMPLETE
MAILING ADDRESSES OF ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE
APPLICANT AND ALL PERSONS CHOSEN TO BECOME DIRECTORS OR EXECUTIVE
OFFICERS. INDICATE ALL OFFICES WITH THE APPLICANT HELD OR TO BE
HELD BY EACH PERSON NAMED.
AS OF FEBRUARY 2, 1995
Name Address Office
James W. Walter (a) Chairman
Henry R. Kravis (b) Director
Paul E. Raether (b) Director
George R. Roberts (c) Director
G. Robert Durham (a) Director, President and
Chief Executive Officer
Kenneth J. Matlock (a) Director, Executive Vice
President and Chief
Financial Officer
Perry Golkin (b) Director and Vice President
Michael T. Tokarz (b) Director and Vice President
William H. Weldon (a) Senior Vice President -
Finance and Chief
Accounting Officer
William N. Temple (d) Senior Vice President and
Group Executive
Robert W. Michael (f) Senior Vice President and
Group Executive
David L. Townsend (a) Vice President -
Human Resources/Public
Relations
John F. Turbiville (a) Vice President -
Legal and Secretary
Donald M. Kurucz (a) Vice President and
Treasurer
AS OF EFFECTIVE DATE1
Name Address Office
James W. Walter (a) Chairman
G. Robert Durham (a) Director, Chief Executive
Officer and President
Michael T. Tokarz (b) Director
Elliot M. Fried (e) Director
Howard L. Clark (e) Director
Kenneth A. Buckfire (e) Director
Kenneth J. Matlock (a) Director, Executive Vice
President and Chief Financial
Officer
William H. Weldon (a) Senior Vice President -
Finance and Chief
Accounting Officer
William N. Temple (d) Senior Vice President and
Group Executive
Robert W. Michael (f) Senior Vice President and
Group Executive
David L. Townsend (a) Vice President -
Human Resources Public
Relations
John F. Turbiville (a) Vice President -
Legal and Secretary
Donald M. Kurucz (a) Vice President and
Treasurer
1 In addition to the directors listed below, pursuant to
the Consensual Plan, the current management of Company will
designate two independent directors at a later date.
(a) Walter Industries
1500 North Dale Mabry Highway
Tampa, FL 33607
(b) Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
(c) Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road (Suite 200)
Menlo Park, CA 94025
(d) United States Pipe and Foundry Company
3300 First Avenue North
Birmingham, AL 35202
(e) Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
(f) Jim Walter Homes, Inc.
1500 North Dale Highway
Tampa, Florida 33607
5. PRINCIPAL OWNERS OF VOTING SECURITIES. FURNISH THE
FOLLOWING INFORMATION AS TO EACH
PERSON OWNING 10% OR MORE OF THE VOTING SECURITIES OF THE
APPLICANT.
<TABLE>
<CAPTION>
AS OF FEBRUARY 2, 1995
Name and Complete Title of Class Amount Percentage of
Mailing Address Owned Owned Voting Securities
Owned
<S> <C> <C> <C>
JWC Associates, L.P. Common Shares 27,646,600 88.84%
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
JWC Associates II, L.P. Common Shares 183,200 .59
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
KKR Partners II, L.P. Common Shares 670,200 2.15
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Henry R. Kravis Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
George R. Roberts Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Robert I. MacDonnell Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Michael W. Michelson Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Paul E. Raether Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Michael T. Tokarz Common Shares 28,500,000(1)(2) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
James H. Greene, Jr. Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Perry Golkin Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Scott M. Stewart Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Clifton S. Robbins Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Edward A. Gilhuly Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Saul A. Fox Common Shares 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
(1) Messrs. Kravis, Roberts, MacDonnell, Michelson, Fox, Raether, Tokarz, Greene, Golkin,
Stewart, Robbins and Gilhuly are general partners of KKR Associates, the sole general partner
of each of JWC Associates, L.P., JWC Associates II, L.P. and KKR Partners II, L.P. (the "KKR
Investors"). Such persons may be deemed to be "beneficial owners" of the shares owned by the
KKR Investors within the meaning of Rule 13d-3 under the Exchange act, although each such
person disclaims beneficial ownership of such shares.
(2) Messrs. Tokarz and Golkin are currently directors and officers of the Company and
certain of its subsidiaries. It is anticipated that as of the
effective date, (i) Messrs. Tokarz and Golkin will no longer be officers or
directors of any subsidiary, (ii) Mr. Golkin will neither be an officer
nor a director of the Company and (iii) Mr. Tokarz will remain a director, but not an
officer of the Company.
AS OF EFFECTIVE DATE
Name and Complete Title of Class Amount Percentage of
Mailing Address Owned Owned Voting Securities
Owned
<S> <C> <C> <C>
The Celotex Settlement Fund
Recipient Common Shares 10,941,000(3) 21.7%(3)
1 Metro Center
4010 Boy Scout Boulevard
Tampa, Florida 33607
Lehman Brothers Inc. Common Shares 7,772,000(1) 15.4%(1)
3 World Financial Center
New York, NY 10285
The KKR Investors (JWC Associates, Common Shares 5,901,000(2) 11.7%(2)
L.P., JWC Associates II L.P. and
KKR Partners II, L.P.)
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10009
</TABLE>
(1) Approximate amounts based on a March 15, 1995 effective date
for the reorganization and $555 million of "Qualified Securities"
(as defined in the Consensual Plan, consisting of cash
and Notes) being issued under the Consensual Plan. To the extent
that less than $555 million of Qualified Securities are issued
(minimum amount is $530 million), the number of shares and
percentage would increase. If all the shares of common stock
that may be issued to the KKR Investors (see note (2) below) are
issued, the percentage would be reduced to approximately 14.2%.
(2) Approximate amounts based on a March 15, 1995 effective date
for the reorganization and
$555 million of Qualified Securities being issued under the
Consensual Plan. To the extent
that less than $555 million of Qualified Securities are issued
(minimum amount is $530
million), the number of shares and percentages would decrease.
Approximately 453,000
additional shares of common stock will be issued to the KKR
Investors six months after the
Effective Date. In addition, approximately 3,553,000 shares of
common stock will be issued
after six months into an escrow account. The KKR Investors will
have the right to vote the
escrowed shares. To the extent that certain contingencies
regarding Federal income tax
claims of the Company are resolved satisfactorily, the escrowed
shares will be distributed
to the KKR Investors. To the extent such matters are not settled
satisfactorily, the
escrowed shares will be returned to the Company and canceled. If
all such shares are
distributed to the KKR Investors, the KKR Investors would hold
approximately 9,907,000 shares
of common stock, or 18.1% of the then outstanding shares of
common stock.
(3) Approximate amounts based on a March 15, 1995 effective date
for the reorganization and
$555 million of Qualified Securities being issued under the
Consensual Plan. To the extent
that less than $555 million of Qualified Securities are issued
(minimum amount is $530
million) the number of shares and percentage would increase. If
all the shares of common
stock that may be issued to the KKR Investors (see note 2 above)
are issued, the percentage
would be reduced to approximately 19.9%.
UNDERWRITERS
6. UNDERWRITERS. GIVE THE NAME AND COMPLETE MAILING ADDRESS OF
(A) EACH PERSON WHO, WITHIN THREE YEARS PRIOR TO THE DATE OF
FILING THE APPLICATION, ACTED AS AN UNDERWRITER OF
ANY SECURITIES OF THE OBLIGOR WHICH WERE OUTSTANDING ON THE DATE
OF FILING THE APPLICATION, AND (B) EACH PROPOSED PRINCIPAL
UNDERWRITER OF THE SECURITIES PROPOSED TO BE OFFERED. AS TO
EACH PERSON SPECIFIED IN (A) GIVE THE TITLE OF EACH CLASS OF
SECURITIES UNDERWRITTEN.
a. Merrill Lynch & Co.; World Financial Center, North
Tower, New York, NY 10281
b. The Series B Notes proposed to be offered will be
exchanged with certain holders of claims against the applicant
and the applicant's affiliates, as set forth in the Consensual
Plan, without the assistance of any underwriter.
CAPITAL SECURITIES
7. CAPITALIZATION. (A) FURNISH THE FOLLOWING INFORMATION AS TO
EACH AUTHORIZED CLASS OF SECURITIES OF THE APPLICANT.
<TABLE>
<CAPTION>
AS OF FEBRUARY 2, 1995
AMOUNT AMOUNT
TITLE OF CLASS AUTHORIZED OUTSTANDING
<S> <C> <C>
Mortgage-Backed Notes $1,450,000,000 $605,750,000
Asset-Backed Notes $ 249,864,000 $179,065,213
Series B Senior
Extendible Reset Notes $ 180,000,000 $176,300,000
Series C Senior
Extendible Reset Notes $ 20,000,000 $5,000,000
Senior Subordinated
Extendible Reset Notes $ 350,000,000(1) $443,046,488
Subordinated Notes $ 350,000,000 $350,000,000
13-1/8% Subordinated
Notes $ 50,000,000 $50,000,000
13-3/4% Subordinated
Notes $ 100,000,000 $100,000,000
10-7/8% Subordinated
Notes $ 90,000,000 $ 90,000,000
Common Stock,
$.01 par value 50,000,000 shares 31,120,773 shares
(1) Plus the amount of such Notes issued in payment of interest thereon
AS OF EFFECTIVE DATE
AMOUNT AMOUNT
TITLE OF CLASS AUTHORIZED OUTSTANDING
<S> <C> <C>
Series B Senior Notes $ 490,000,000 $490,000,000(1)
Due 2000
Mortgage-Backed Notes $1,450,000,000 $605,750,000
Asset-Backed Notes $ 249,864,000 $179,065,213
Asset and Residual
Backed Notes $ 945,000,000(2) $945,000,000(2)
Common Stock,
$.01 par value 200,000,000 shares 50,494,000
shares(3)
</TABLE>
(1) This is the maximum amount to be issued under the Indenture.
This amount will be reduced by cash available in
excess of $45 million after paying all other claims that have to
be paid in cash.
(2) This is an estimate of the amount to be issued to the public
on or prior to the effective date in a public offering being
registered under the Securities Act by Mid-State Trust IV and
Mid-State Trust V, business trusts owned by Mid-State Homes,
Inc., a subsidiary of the Company. Such offering is being
underwritten by Lehman Brothers, Inc., Merrill Lynch Pierce
Fenner & Smith Incorporated, NatWest Capital Markets Group
and Nomura Securities, Inc.
(3) If all of the shares of common stock that may be issued to
the KKR Investors, described in note (2) to Item 5 above, were
issued as of the effective date, a total of approximately
54,869,000 shares of common stock will be outstanding.
Approximate amounts based on a March 15, 1995 closing date
and $555 million of Qualified Securities.
(B) GIVE A BRIEF OUTLINE OF THE VOTING RIGHTS OF EACH CLASS OF
VOTING SECURITIES REFERRED TO IN PARAGRAPH (A) ABOVE.
AS OF FEBRUARY 2, 1995
With respect to the voting rights of the common stock of the
Company, each holder of a share of such common stock is entitled
to one vote on all matters on which such shareholders are
entitled to vote.
AS OF EFFECTIVE DATE
With respect to the voting rights of the common stock of the
Company, including the shares to be issued into escrow (as
described in Note 2 to Item 5 above as of the effective date),
each holder of a share of such common stock will be entitled to
one vote on all matters on which such shareholders
are entitled to vote, except that pursuant to a Shareholders'
Agreement all shares of such common stock issued to the Celotex
Settlement Fund Recipient under the Consensual Plan will be voted
by the Celotex Settlement Fund Recipient (or by the beneficiaries
of the Celotex Settlement Fund Recipient or the creditors of The
Celotex Corporation, in their capacities as such), except
with respect to matters that only affect such shares held by the
Celotex Settlement Fund Recipient, in the same proportion as the
votes cast by all other holders of shares of common stock on all
matters and for all purposes. Upon transfer of such shares to a
person not affiliated with a beneficiary of
the Celotex Settlement Fund Recipient or a creditor of The
Celotex Corporation, in thier capacities as such, such shares
shall receive normal voting rights.
INDENTURE SECURITIES<F1>
[FN]
<F1> Capitalized terms used in this Section 8, "Analysis of
Indenture Provisions," and not otherwise defined herein shall
have the meaning ascribed to them in the Indenture.
8. ANALYSIS OF INDENTURE PROVISIONS. INSERT AT THIS POINT THE
ANALYSIS OF INDENTURE PROVISIONS REQUIRED UNDER SECTION 305(A)(2)
OF THE ACT.
(a) Definition of Default: Withholding of Notice.
The following events are defined in the Indenture as "Events
of Default":
(i) failure by the Company to pay interest on the
Notes for 5 Business Days after becoming due;
(ii) failure by the Company to pay the principal of or
premium, if any, on the Notes, whether at maturity or upon
acceleration, redemption or otherwise (including the failure to
repurchase the Notes tendered pursuant to a Change of Control
Offer or Asset Sale Offer);
(iii) failure by the Company to perform any of its
obligations under the second paragraph of Section 5 or Section 7
of the Pledge Agreement or failure by any Subsidiary to perform
any of its obligations under the second paragraph of Section 5 or
Section 7 of any Subsidiary Pledge Agreement
or the Trustee is entitled to exercise any remedies pursuant to
Section 11 of the Pledge Agreement or any Subsidiary Pledge
Agreement;
(iv) failure by the Company or any of its Subsidiaries
to comply with the provisions of Section 4.08, 4.09, or 5.01 of
the Indenture;
(v) failure by the Company or any of its Subsidiaries
to comply with the provisions of Section 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.17 or 4.18 of the Indenture for 30 days after
written
notice specifying the failure and that the same is a Default
shall have been given to the Company by the Trustee or Holders
of 25% in principal amount of the Notes outstanding;
(vi) failure by the Company or any of its Subsidiaries
to comply with any covenants or the breach by the Company or any
of its Subsidiaries of any representation or warranty hereunder
or under the Pledge Agreement or any Subsidiary Pledge Agreement
(other than a covenant, representation or warranty, a Defalut in
the compliance with which is specifically dealt with elsewhere in
this Section 6.01) for 60 days after written notice specifying
the failure and that the same is a Default shall have been given
to the Company by the Trustee or Holders of 25% in principal
amount of the Notes outstanding;
(vii) default or defaults (including a payment default)
under one or more agreements, instruments, mortgages, bonds,
debentures or other evidence of Indebtedness under which the
Company or any of its Significant Subsidiaries has an outstanding
principal amount of Indebtedness in excess of
$25 million individually or $50 million in the aggregate for all
such issues of all such Persons and either (x) such Indebtedness
is already due and payable in full or (y) such default or
defaults have resulted in the acceleration of the maturity of
such Indebtedness;
(viii) any final judgment or order (not covered by
insurance) is entered against the Company or any Significant
Subsidiary in excess of $25 million individually or $50 million
in the aggregate for all such final judgments or orders against
all such Persons and remains undischarged or unstayed for 60
days;
(ix) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding,
(b) consents to the entry of a judgment, decree
or order for relief against it in an involuntary case or
proceeding,
(c) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(d) consents to the institution of a bankruptcy
or an insolvency proceeding against it,
(e) makes a general assignment for the benefit of
its creditors, or
(f) takes any corporate action to authorize or
effect any of the foregoing;
(x) a court of competent jurisdiction enters a
judgment, decree or order under any Bankruptcy Law that is for
relief against the Company or any Significant Subsidiary of the
Company, in an involuntary case or proceeding which shall:
(a) approve a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company
or any Significant Subsidiary of the Company,
(b) appoint a Custodian for the Company or any
Significant Subsidiary of the Company or for all or substantially
all of the property of any of them, or
(c) order the merger, winding-up or liquidation
of the Company or any Significant Subsidiary of the Company,
and in each case the judgment, order or decree remains unstayed
and in effect for 60 days; and
(xi) any Lien granted or purported to be granted
pursuant to the Pledge Agreement or any Subsidiary Pledge
Agreement shall be or become unenforceable or invalid, or the
priority thereof shall become diminished, or the Company or any
Subsidiary or any Person acting by or on behalf of the
Company or any Subsidiary shall contest or disaffirm any such
Lien. (Section 6.01)
If an Event of Default occurs and is continuing, the
Trustee by written notice to the Company, or the Holders of at
least 25% of the aggregate principal amount of the then
outstanding Notes, by written notice to the Company and the
Trustee, may declare all of the Notes to be due and
payable immediately. Upon such declaration, the unpaid principal
of, premium, if any, and accrued interest on the Notes shall be
due and payable. Notwithstanding the foregoing, in the case of
an Event of Default specified
in clause (ix) or (x) above with respect to the Company or any
Significant Subsidiary, such an amount shall ipso facto become
immediately due and payable without any declaration, notice or
other act on the part of the Trustee or any Holder. (Section
6.02)
If a Default or an Event of Default occurs and is
continuing and if it is known to a Responsible Officer of the
Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 90 days after
it occurs. Except in the case of a Default or Event of Default
in payment of principal, premium, if any, or interest on any
Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests
of the Holders. (Section 7.05)
(b) Authentication and Delivery: Application of Proceeds.
Securities may be authenticated and delivered from time
to time pursuant to the Indenture and upon confirmation of the
Consensual Plan to (i) Holders of Subordinated Note Claims that
claim entitlement thereto based upon the making of or the failure
to make the Subordinated Note Claim Election
(and the Class U-4 Exchange Election, if applicable) with respect
to a portion of such Holders' Subordinated Note Claim and (ii)
the Celotex Settlement Fund Recipient for the benefit of the
holders of Veil Piercing Claims (Class U-7). The Trustee shall,
upon a written order of the Company
signed by two Officers, authenticate Series B Notes for original
issue up to the aggregate principal amount stated above. The
aggregate principal amount
of Notes outstanding at any time may not exceed such amount.
The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate the Notes. An
authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in the Indenture to
authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent
to deal with the Company or an Affiliate of the Company.
(Section 2.02)
The Notes will be issued in exchange for claims against
the Company or its affiliates as provided in the Consensual Plan,
and accordingly, the issuance of the Notes will not result in
proceeds to the applicant.
(c) Release and Substitution of Property Subject to the
Lien of the Indenture.
The Company will not, and will not permit any of its
Subsidiaries to, sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of the Company's Subsidiaries (other
than pursuant to the Pledge Agreement or Subsidiary Pledge
Agreement governing the Pledged Shares) except for the sale by
the Company or a Subsidiary of all or part of the Capital
Stock of a Non-Core Subsidiary and except for the sale of 100% of
the Capital Stock of any other Subsidiary owned collectively by
the Company and/or its Subsidiaries; provided that in either case
such sale complies with the requirements of Section 4.09 of the
Indenture. (Section 4.17)
Section 7 of the Pledge Agreement and Section 7 of each
Subsidiary Pledge Agreement provides that the Company and each
Subsidiary, respectively, agrees that it will not (i) sell,
pledge, hypothecate or otherwise convey or
dispose of any or all of the Pledged Collateral, (ii) create or
permit to exist any Lien upon or with respect to any of the
Pledged Collateral, except for the Lien and security interest
under such Pledge Agreement, or (iii) permit any of the
Subsidiaries to merge or consolidate, unless all the
outstanding capital stock of the surviving or resulting
corporation is, upon such merger or consolidation, pledged under
such Pledge Agreement and no cash, securities or other property
is distributed in respect of the outstanding shares of any other
constituent corporation; provided, however,
that the Company and its Subsidiaries may conduct Asset Sales in
accordance with Section 4.09 of the Indenture, and upon the
consummation of any such Asset Sale, any Pledged Collateral
subject to such Asset Sale shall be released from the Lien of the
Pledge Agreement or Subsidiary Pledge Agreement, as the case may
be.
(d) Satisfaction and Discharge. The Indenture shall cease
to be of further effect other than with respect to:
(A)(i) the Company's compensation and indemnity
obligations and the Lien granted by the Company to the Trustee to
secure such obligations (Section 7.07), and (ii) the Company's,
the Trustee's and any Paying Agent's obligations with respect to
money remaining unclaimed for two years (Section 8.06);
when all outstanding Notes theretofore authenticated and issued
have been delivered (other than destroyed, lost or stolen Notes
that have been replaced or paid) to the Trustee for cancellation
and the Company has paid all sums payable under the Indenture
(Section 8.01).
(B)(i) the Company's compensation and indemnity
obligations and the Lien granted by the Company to the Trustee to
secure such obligations (Section 7.07), (ii) the rights of
Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 of the
Indenture, and as more fully set forth in such Section, payments
in respect of the principal, of, premium, if any, and interest on
such Notes when such payments are due,
(Section 8.02(a)), (iii) the Company's, the Trustee's and the
Paying Agent's obligations with respect to such Notes under
Sections 2.03 through 2.07, 4.02 and 7.07 of the Indenture
(Section 8.02(b)) and (iv) Article Eight of the
Indenture (Section 8.03(c));
upon the Company's exercise of its option to legally defease the
Notes pursuant to Section 8.02 of the Indenture and when the
Company has complied with all the conditions to such exercise set
forth in Section 8.04 of the Indenture (Section 8.02), including
the condition that the Company irrevocably deposit such amounts
as will be sufficient to pay the principal of, premium, if any,
and interest on the outstanding Notes on the stated date
for payment thereof or on the applicable redemption date, as the
case may be, of such principal, premium, if any, or interest on
the outstanding Notes.
(e) Evidence of Compliance.
(i) The Company shall deliver to the Trustee, within 120
days after the end of each fiscal year, a certificate of the
principal executive officer, the principal financial officer or
the principal accounting officer of the Company stating that to
the best of each such officer's knowledge no Default
or Event of Default has occurred (or, if a Default or Event of
Default shall have occurred and is pending, describing all such
Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to
take with respect thereto) and that to the best of his
or her knowledge no event has occurred and remains in existence
by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or, if such event
has occurred, a description of the
event and what action the Company is taking or proposes to take
with respect thereto.
(ii) The Company shall deliver to the Trustee within 3
Business Days of any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the
Company is taking or proposes to take with respect thereto.
(Section 4.04)
9. OTHER OBLIGORS. GIVE THE NAME AND COMPLETE MAILING ADDRESS
OF ANY PERSON, OTHER THAN THE APPLICANT, WHO IS AN OBLIGOR UPON
THE INDENTURE SECURITIES.
There are no other obligors with respect to the Notes.<F1>
[FN]
<F1> Certain Subsidiaries will pledge shares of common stock of
Subsidiaries of the Company owned by them as sceurity for the
obligations of the Company under the Indenture and the Notes
issued thereunder.
CONTENTS OF APPLICATION FOR QUALIFICATION. This application
for qualification comprises:
a. Pages numbered 1 to 22, consecutively.
b. The statement of eligibility and qualification of the
trustee under the Indenture to be qualified.
c. The following exhibits in addition to those filed as a
part of the statement of eligibility and qualification of each
trustee.
Exhibit T3A1.* Certificate of Incorporation of the Company
filed with Delaware Secretary of State on ______ __,
Exhibit T3A2.* Restated Certificate of Incorporation of the
Company filed with Delaware Secretary of State
on ___________ __,
Exhibit T3B.* Amended and Restated By Laws of the Company
Exhibit T3C.** Form of indenture including exhibits thereto
Exhibit T3E1. Disclosure Statement for Creditors Plan
dated as of August 1, 1994, including
Creditors Plan of Reorganization as an
exhibit thereto, as filed with the
United States Bankruptcy Court, Middle
District of Florida, Tampa Division
Exhibit T3E2.** Supplement to Disclosure Statement for
Amended Joint Plan of Reorganization, dated
as of December 9, 1994,
including the Amended Joint Plan of
Reorganization (the
"Consensual Plan") as an exhibit thereto, as
filed with
the United States Bankruptcy Court, Middle
District of
Florida, Tampa Division
Exhibit T3E3.** Notice of Order (A) approving Debtors'
disclosure statement and Creditors'
disclosure statement, (B)
establishing procedures and deadlines for
voting on and
objecting to the debtors' joint plan of
reorganization,
(C) fixing the date of the initial
confirmation hearing
and of the scheduling of related hearings,
and (D) approving related relief
Exhibit T3E4.** Notice of Order (A) approving disclosure
statement supplement respecting consensual
plan, (B) establishing
procedures and deadlines regarding
acceptances and
rejections of, and objections to, the
consensual plan and
objections to the veil piercing settlement,
(C) fixing
the date of the hearing on confirmation of
the consensual
plan and on the veil piercing settlement and
(D) approving related relief
Exhibit T3E5. Individual Ballot for Class S-6 (for
accepting or rejecting the Creditors' Plan)
Exhibit T3E6. Master Ballot for Class S-6 (for accepting or
rejecting the Creditors' Plan)
Exhibit T3E7. Individual Ballot for Class U-4 (for
accepting or rejecting the Creditors' Plan)
Exhibit T3E8. Master Ballot for Class U-4 (for accepting or
rejecting the Creditors' Plan)
Exhibit T3E9. Individual Ballot for Class U-5 (for
accepting or rejecting the Creditors' Plan)
Exhibit T3E10. Master Ballot for Class U-5 (for accepting or
rejecting the Creditors' Plan)
Exhibit T3E11. Individual Ballot for Class U-6 (for
accepting or rejecting the Creditors' Plan)
Exhibit T3E12. Master Ballot for Class U-6 (for accepting or
rejecting the Creditors' Plan)
Exhibit T3E13.** Individual Class U-4 Vote Change
Certification for the Consensual Plan
Exhibit T3E14.** Master Class U-4 Vote Change Certification
for the Consensual Plan
Exhibit T3E15.** Individual Class U-5 Vote Change
Certification for the Consensual Plan
Exhibit T3E16.** Master Class U-5 Vote Change Certification
for the Consensual Plan
Exhibit T3E17.** Individual Class U-6 Vote Change
Certification for the Consensual Plan
Exhibit T3E18.** Master Class U-6 Vote Change Certification
for the Consensual Plan
Exhibit T3E19. Class U-7 Ballot (for accepting or rejecting
the Consensual Plan)
Exhibit T3E20.** Individual Class S-6 Vote Change
Certification for the Consensual Plan
Exhibit T3E21.** Master Class S-6 Vote Change Certification
for the Consensual Plan
Exhibit T3E22.** Class U-4 Exchange Election Form for the
Consensual Plan
Exhibit T3E23.** Master Class U-4 Exchange Election Form for
the Consensual Plan
Exhibit T3F.** See Cross Reference Sheet showing the
location in the Indenture of the provisions
inserted therein pursuant to
Section 310 through 318(a), inclusive, of the
Trust Indenture Act of 1939 (included in
Exhibit T3C hereof)
* To be filed by Amendment.
** Previously filed
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust indenture Act of
1939, the applicant, Walter Industries, Inc., a corporation
organized and existing under the laws of the State of Delaware,
has duly caused this application to be signed on its behalf by
the undersigned, thereunto duly authorized, and
its seal to be hereunto affixed and attested, all in the City of
Tampa and State of Florida, on the twenty-fourth day of February,
1995.
WALTER INDUSTRIES, INC.
By:_______________________
G. Robert Durham
Chief Executive Officer
and President
By:_______________________
Kenneth J. Matlock
Executive Vice President
and Chief Financial
Officer
Attest:
___________________
Name:
Title:
<PAGE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS CORPORATION, Case No. 89-9715-8P1
BEST INSURORS, INC., Case No. 89-9740-8P1
BEST INSURORS OF MISSISSIPPI, INC., Case No. 89-9737-8P1
COAST TO COAST ADVERTISING, INC., Case No. 89-9727-8P1
COMPUTER HOLDINGS CORPORATION, Case No. 89-9724-8P1
DIXIE BUILDING SUPPLIES, INC., Case No. 89-9741-8P1
HAMER HOLDINGS CORPORATION, Case No. 89-9735-8P1
HAMER PROPERTIES, INC., Case No. 89-9739-8P1
HOMES HOLDINGS CORPORATION, Case No. 89-9742-8P1
JIM WALTER COMPUTER SERVICES, INC., Case No. 89-9723-8P1
JIM WALTER HOMES, INC., Case No. 89-9746-8P1
JIM WALTER INSURANCE SERVICES, INC., Case No. 89-9731-8P1
JIM WALTER RESOURCES, INC., Case No. 89-9738-8P1
JIM WALTER WINDOW COMPONENTS, INC., Case No. 89-9716-8P1
JW ALUMINUM COMPANY, Case No. 89-9718-8P1
JW RESOURCES, INC., Case No. 90-11997-8P1
JW RESOURCES HOLDINGS CORPORATION, Case No. 89-9719-8P1
J.W.I. HOLDINGS CORPORATION, Case No. 89-9721-8P1
J.W. WALTER, INC., Case No. 89-9717-8P1
JW WINDOW COMPONENTS, INC., Case No. 89-9732-8P1
LAND HOLDINGS CORPORATION, Case No. 89-9720-8P1
MID-STATE HOMES, INC., Case No. 89-9725-8P1
MID-STATE HOLDINGS CORPORATION, Case No. 89-9726-8P1
RAILROAD HOLDINGS CORPORATION, Case No. 89-9733-8P1
SLOSS INDUSTRIES CORPORATION, Case No. 89-9743-8P1
SOUTHERN PRECISION CORPORATION, Case No. 89-9729-8P1
UNITED LAND CORPORATION, Case No. 89-9730-8P1
UNITED STATES PIPE AND FOUNDRY COMPANY, Case No. 89-9744-8P1
U.S. PIPE REALTY, INC., Case No. 89-9734-8P1
VESTAL MANUFACTURING COMPANY, Case No. 89-9728-8P1
WALTER HOME IMPROVEMENT, INC., Case No. 89-9722-8P1
WALTER INDUSTRIES, Inc. and Case No. 89-9745-8P1
WALTER LAND COMPANY, Case No. 89-9736-8P1
Debtors.
<PAGE>
DISCLOSURE STATEMENT FOR CREDITORS' PLAN
DATED AS OF AUGUST 1, 1994
AKIN, GUMP, STRAUSS,
HAUER & FELD, L.L.P.
Counsel to Apollo
65 East 55th Street
33rd Floor
New York, NY 10022
(212) 872-1000
JONES, DAY, REAVIS & POGUE
Counsel to Official
Committee of General
Unsecured Creditors
599 Lexington Avenue
New York, NY 10022
(212) 326-3939
PAUL, WEISS, RIFKIND,
WHARTON & GARRISON
Counsel to Lehman
Brothers Inc.
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3000
STROOCK & STROOCK & LAVAN
Counsel to Official
Bondholders Committee
Seven Hanover Square
New York, NY 10004-2594
(212) 806-5400
MARCUS MONTGOMERY
WOLFSON P.C.
Counsel to Ad Hoc Committee
of Pre-LBO Bondholders
53 Wall Street
New York, NY 10005
(212) 858-5200
<PAGE>
NO PERSON MAY GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS, OTHER THAN THE INFORMATION AND REPRESENTATIONS
CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN
OR THE SOLICITATION OF ACCEPTANCES OF THE CREDITORS' PLAN.
PURSUANT TO AN ORDER DATED AUGUST 2, 1994, THE BANKRUPTCY
COURT DETERMINED THAT THIS DISCLOSURE STATEMENT COMPLIES WITH THE
REQUIREMENTS OF THE BANKRUPTCY CODE. ALL
CLAIMANTS ARE HEREBY ADVISED AND ENCOURAGED TO READ THIS
DISCLOSURE STATEMENT AND THE CREDITORS' PLAN IN THEIR ENTIRETY
BEFORE VOTING TO ACCEPT OR REJECT THE CREDITORS' PLAN.
CREDITORS' PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE
STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE
CREDITORS' PLAN, OTHER EXHIBITS ANNEXED HERETO AND
OTHER DOCUMENTS REFERENCED AS FILED WITH THE COURT PRIOR TO OR
CONCURRENT WITH THE FILING OF THIS DISCLOSURE STATEMENT. EXCEPT
AS OTHERWISE INDICATED HEREIN, THE FACTUAL AND
FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT
(INCLUDING THE EXHIBITS HERETO) REGARDING THE DEBTORS, THEIR
BUSINESSES AND CLAIMS AGAINST SUCH DEBTORS IN THIS
BANKRUPTCY PROCEEDING HAS BEEN PROVIDED BY MANAGEMENT OF THE
DEBTORS TO THE PROPONENTS
AND THEIR REPRESENTATIVES, AND HAS ALSO BEEN COMPILED FROM THE
PLEADINGS AND DOCUMENTS
ON FILE WITH THE BANKRUPTCY COURT. EXCEPT AS OTHERWISE
INDICATED, SUCH INFORMATION HAS
NOT BEEN SUBJECT TO AUDIT OR INDEPENDENT REVIEW. WHILE THE
PROPONENTS HAVE TAKEN
REASONABLE STEPS UNDER THE CIRCUMSTANCES TO ENSURE THAT SUCH
INFORMATION IS ACCURATE, THE
PROPONENTS AND THEIR PROFESSIONAL ADVISORS, INCLUDING THEIR
COUNSEL, ACCOUNTANTS, AND
FINANCIAL ADVISORS, DO NOT WARRANT THE ACCURACY OF SUCH
INFORMATION. STATEMENTS MADE
HEREIN IDENTIFYING SPECIFIC INFORMATION AS HAVING BEEN TAKEN FROM
THE DEBTORS' DISCLOSURE
STATEMENT OR OTHERWISE OBTAINED FROM THE DEBTORS OR BASED UPON
INFORMATION FURNISHED BY
THE DEBTORS SHALL NOT LIMIT THE GENERALITY OF THE FOREGOING.
DELIVERY OF THIS DISCLOSURE
STATEMENT SHALL NOT CREATE THE IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN RESPECT OF THE INFORMATION SET FORTH HEREIN SINCE THE
DATE OF THIS DISCLOSURE STATEMENT AND THE DATE
OF THE MATERIALS RELIED UPON IN PREPARATION OF THIS DISCLOSURE
STATEMENT.
ALL HOLDERS OF CLAIMS SHOULD READ CAREFULLY AND CONSIDER
FULLY THE "RISK FACTORS"
SECTION HEREOF BEFORE VOTING FOR OR AGAINST THE CREDITORS' PLAN.
NO REPRESENTATION IS MADE HEREIN REGARDING THE TRADING OR
OTHER MARKET VALUE OF ANY
SECURITY TO BE ISSUED PURSUANT TO OR IN CONNECTION WITH THE
CREDITORS' PLAN.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE
WITH SECTION 1125 OF THE BANKRUPTCY CODE AND RULE 3016(c) OF THE
FEDERAL RULES OF BANKRUPTCY PROCEDURE AND NOT IN
ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER
APPLICABLE NONBANKRUPTCY LAW.
PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING
OR TRANSFERRING SECURITIES
OF THE DEBTORS SHOULD EVALUATE THIS DISCLOSURE STATEMENT AND THE
CREDITORS' PLAN IN LIGHT OF THE PURPOSE FOR WHICH IT WAS
PREPARED.
THIS DISCLOSURE STATEMENT HAS NEITHER BEEN APPROVED NOR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
NOR HAS THE SEC PASSED UPON THE ACCURACY
OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER
ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL
NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION
OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER BUT RATHER AS A
STATEMENT MADE IN SETTLEMENT NEGOTIATIONS.
THIS DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN ANY
PROCEEDING INVOLVING THE PROPONENTS OR ANY OTHER PARTY NOR SHALL
IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE
TAX, SECURITIES OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS
TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN THE DEBTORS.
<PAGE>
TABLE OF CONTENTS
Page
I. INTRODUCTION 1
A. General 1
1. Introduction and Recommendations 1
2. Comparison of the Creditors' Plan With the Debtors'
Plan 3
3. Asbestos/Veil Piercing Settlement 7
4. Background to Filing of Creditors' Plan 9
5. Summary 11
6. Voting Instructions 12
7. Confirmation Hearing 14
B. Acceptance or Rejection of the Creditors' Plan 14
C. Recommendations With Respect to the Creditors' Plan 15
D. Summary of Businesses, Properties and Other Information
With Respect to the Debtors 15
E. The Chapter 11 Cases 17
1. General 17
2. Debtors-in-Possession Order 17
3. Retention of Professionals for Debtors 17
4. Committees 17
5. Claims 18
6. Bar Date for Filing of Claims 19
7. Automatic Stay 19
8. Executory Contracts 19
9. Exclusivity Period and Acceptance Period 20
10. Negotiations With KKR Associates and Debtors'
Representatives With Respect to Plan of
Reorganization, and
Negotiations and Agreement With Representatives of
Veil Piercing Claimants With Respect to Settlement
of Those Claims 21
11. Filing of Currently Pending Plans; Disclosure
Statement Hearing 22
12. Negotiations and Agreement with Ad Hoc Committee of
Pre-LBO Bond-holders 25
13. Negotiations and Agreement With Holders of
Series B & C Senior Note Claims and Series B & C
Senior Note Trustee 25
F. Litigation of Veil Piercing Proceedings 25
G. Objections To Confirmability of Creditors' Plan
Asserted by Debtors 29
II. OVERVIEW OF THE CREDITORS' PLAN 31
A. Summary of Claims and Class Treatment Under the
Creditors' Plan 34
B. Special Features of the Creditors' Plan 38
1. Settlement of Veil Piercing/Fraudulent Conveyance
Issues and Other Issues 38
a. Terms of the Veil Piercing Settlement Agreement 39
b. Reasonableness of the Settlement: Certainty and
Prompt Payment vs. Uncertainty and Additional
Years of Delay 42
c. Funding of the Settlement Payment by Creditors 45
d. Pre-LBO Bondholders Settlement Agreement 46
e. Negotiated Enterprise Value and Equity Call
Option 47
f. Other Features of the Creditors' Plan 48
2. Distribution of Combination of Qualified Securities
and New Common Stock to Holders of Subordinated
Note Claims and to Veil Piercing Claimants 50
a. Qualified Securities 51
b. Method of Allocation of Qualified Securities
and New Common Stock 51
c. Creation and Anticipated Range of Amount of
Qualified Securities 54
d. Examples of Possible Allocations of Qualified
Securities and New Common Stock 55
e. New Common Stock 70
3. Post-Filing Date Interest Claims 73
C. Classification and Treatment of Claims and Interests 75
1. Administrative Claims 75
2. Priority Claims 75
3. Secured Claims 79
4. Unsecured Claims 94
5. Intercompany Claims 105
6. Equity Interests 108
D. Distributions at Consummation 110
1. Distributions to Holders of Allowed Claims and
Interests 110
2. Surrender and Cancellation of Instruments 111
3. Reserves for Disputed Claims 112
E. Description of Securities to be Issued Under the
Creditors' Plan 113
1. New Senior Notes 113
2. Qualified Securities 114
a. Mid-State Trust IV Secured Notes 114
b. Mid-State Trust II Residual Bonds 115
c. New Unsecured Notes 116
3. New Common Stock 117
F. Impaired Classes of Claims and Interests 118
G. Unimpaired Classes of Claims and Interests 119
H. Assumption or Rejection of Executory Contracts 119
I. Assumption or Termination of Loan Agreements and
Indentures 119
J. Indemnification 120
K. Releases 120
1. Release by Holders of Claims 120
2. Release by Debtors 121
3. Dismissal of Lawsuits 121
L. Unclaimed Property 121
1. Unclaimed Instruments 121
2. Unclaimed Cash 122
3. Non-Negotiated Checks 122
4. Returned Distributions 122
M. Vesting of Property 122
N. No Substantive Consolidation 123
1. Joint Administration of Chapter 11 Cases 123
2. No Consolidation 123
O. Retention of Jurisdiction 123
P. Fractional Shares of New Common Stock 124
Q. Amendments to the Creditors' Plan 124
R. Amendments to the Charter 124
S. Confirmation Bonus Award 125
T. Conditions Precedent 125
1. To Confirmation of the Creditors' Plan 125
2. To Effectiveness of the Creditors' Plan 126
3. Waiver of Conditions Precedent 129
U. Certain Information Regarding Apollo and
Lehman Brothers Inc. 129
III. POST-CONSUMMATION 133
A. Business 133
B. Management 133
1. Directors and Officers of the Debtors 133
2. Executive Compensation 140
a. Directors 140
b. Officers 141
(1) Cash Compensation Relating to Year
Ended May 31, 1993 141
(2) Profit Sharing Plan 148
(3) Pension Plan 149
(4) Common Stock Incentive Plans--Present
and Proposed 150
(5) Certain Employment Agreements 152
(6) Other Benefit Plans 154
3. Certain Related Transactions 154
4. Security Ownership of Directors, Officers and
Certain Beneficial Owners 155
a. Ownership of Common Stock 155
b. Agreements Regarding Common Stock 158
IV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES 161
A. Tax Consequences to Walter Industries and its
Subsidiaries 161
1. Cancellation of Indebtedness Income 161
2. Net Operating Loss ("NOL") Carryforwards 163
3. Alternative Minimum Tax 164
4. High-Yield Debt Obligation ("HYDO") Rules 164
5. Deductibility of Payments to Celotex Settlement
Fund Recipient 165
B. Federal Income Tax Consequences To Holders 165
1. In General 165
2. Tax Treatment of Exchanging Holders by Class 165
3. Certain Other Tax Considerations for Holders 167
a. Receipt of Interest 167
b. Accrued Market Discount 167
c. Installment Method 168
d. Reinstatement of Claims 168
e. Original Issue Discount ("OID") 168
f. Bad Debt and/or Worthless Securities
Deduction 169
g. Future Stock Gains 169
h. Future Sales of New Debt 169
i. Backup Withholding 169
C. The Mid-State Trusts 170
D. Celotex Settlement Fund Recipient 170
V. THE CHARTER 171
VI. APPLICABILITY OF FEDERAL AND STATE SECURITIES LAWS 172
A. Issuance of Reorganization Securities 172
B. Post-Consummation Transfers of Reorganization
Securities 172
1. Control Persons 173
2. Syndicators 173
3. Accumulators and Distributors 173
C. Current Information 174
VII. BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT
TO THE DEBTORS 175
A. Organization of Hillsborough and Acquisition
of Original Jim Walter 175
1. Organization of Hillsborough 175
2. Acquisition of Original Jim Walter 175
3. Financing of the Tender Offer and Merger 175
4. Source and Use of Funds 177
5. Certain Events Preceding the Reorganization
Proceedings 178
B. Corporate Reorganizations and Asset Dispositions 178
1. General 178
2. Completed Transactions 178
a. Mid-State Homes 178
b. Jim Walter Papers 180
c. JWC Holdings Corporation 180
d. JWC Holding Corporation 180
e. U.S. Pipe 181
f. United Land 181
g. Wedlo Holdings 181
h. Concrete 182
i. Georgia Marble 182
j. Jim Walter Resources 183
k. Cherokee and Sanford Brick Companies 183
l. Shore Oil 183
C. Post-Filing Date Sales of Assets 183
1. Beijer Industries AB Stock Investment 184
2. Lease of Certain Rights to Coal Bed Methane Gas 184
3. Certain Assets of Industrial Products Division
of U.S. Pipe 184
4. Certain Assets of Soil Pipe and Southeastern
Assembly Divisions of U.S. Pipe 184
D. Post-Filing Date Financing Efforts 184
1. Post-Petition Replacement Letter of Credit
Agreement 184
2. Post-Petition New Letter of Credit Agreement 185
3. Periodic Payments of Mid-State Homes Pre-Filing
Date Debt 185
4. Application of Certain Proceeds 186
5. Release of Certain Funds 186
6. Sale of Installment Notes--Mid-State Homes 186
7. Installment Purchase of Mining Equipment 187
E. Businesses and Properties of the Debtors 187
1. General 187
2. Hillsborough 187
3. Walter Industries 187
4. Jim Walter Homes 187
5. Home Improvement 189
6. Mid-State Homes 189
7. Jim Walter Resources 191
a. Mining Division 191
b. De-Gas Division 195
8. U.S. Pipe 196
a. Pressure Pipe Division 196
b. Castings Division 198
9. Sloss 198
10. JW Aluminum 199
11. Window Components and Window Components (Wisc.) 199
12. Southern Precision 200
13. Vestal 200
14. United Land 200
15. Walter Land 201
16. Best; Best (Miss.) and JW Insurance 201
17. Coast to Coast 202
18. Dixie 202
19. Computer Services 202
20. Hamer Properties 202
21. Pipe Realty 202
22. JW Walter 203
23. Holding Companies 203
a. Computer Holdings 203
b. Hamer Holdings 203
c. Homes Holdings 203
d. Mid-State Holdings 203
e. Resources Holdings 203
f. JW Resources 203
g. JWI Holdings 203
h. Land Holdings 203
i. Railroad Holdings 203
24. Non-Debtor Affiliates 203
a. Cardem 203
b. J.W. Railroad 204
c. Mid-State Trust II and Mid-State Trust III 204
d. Black Warrior Methane 204
e. Black Warrior Transmission 205
F. Employees 205
G. Seasonality 206
H. Trade Names, Trademarks and Patents 206
I. Research and Development 206
J. Raw Materials 206
K. Labor Agreements 206
1. Jim Walter Resources 206
2. U.S. Pipe 207
3. Sloss 207
4. Window Component 207
5. Vestal 207
6. Southern Precision 207
L. Pension Plans 207
M. Profit Sharing Plan 209
N. Other Employee Benefit Plans 209
1. Group Medical Plans 209
2. Life Insurance 209
3. Long-Term Disability 209
4. Temporary Disability 210
5. Retiree Medical Insurance 210
6. Paid Vacations 210
7. Paid Holidays 210
8. Severance Pay 210
9. Employee Educational Assistance Program 210
O. Completion Of Mirror Liquidation Plan 210
1. General 210
2. Completion of the Pipe Liquidation Plan 211
3. Completion of the Resources Liquidation Plan 211
4. Distribution of the Capital Stock of Jim
Walter Homes 212
5. Distribution of the Capital Stock of
Mid-State Homes 212
6. Merger of Old Walter Industries into Hillsborough 212
7. Status of Creditors of Certain Debtors 212
8. Summary of Mirror Liquidation Order 212
P. Risk Factors Relating to Businesses of the Debtors 213
1. General 213
2. Major Debtors 213
a. U.S. Pipe 213
b. Jim Walter Homes 213
c. Jim Walter Resources 213
d. Vestal 214
e. Window Components 214
f. JW Aluminum 214
g. Southern Precision 214
h. Sloss 214
Q. Workers' Compensation 214
R. Tort Claims Resolution Procedure 214
S. Litigation 215
1. U.S. Pipe Antitrust Lawsuits 215
2. Texas Lawsuits Relating to Property of Jim Walter
Homes and Mid-State Homes 215
3. Federal Income Tax 218
4. Lawsuits Relating to Jim Walter Resources 219
5. United Concrete Pipe Corporation 221
T. Environmental 221
1. General 221
2. Sloss 222
3. U.S. Pipe 223
a. Burlington, New Jersey 223
b. Union City, California 223
VIII. PROJECTED FINANCIAL INFORMATION 225
IX. VOTING ON AND CONFIRMATION OF THE CREDITORS' PLAN 226
A. Confirmation of the Creditors' Plan 226
B. Feasibility 226
C. Best Interests of Holders of Claims and Holders of
Interests 226
D. Classification of Claims and Interests 227
E. Voting; Acceptance 227
F. Confirmation Without Acceptance by All Impaired
Classes 228
X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE
CREDITORS' PLAN 229
A. Alternatives to the Creditors' Plan 229
B. Liquidation Under Chapter 7 229
XI. DEFINITIONS 233
XII. CHART OF DEBTORS 242
XIII. CONCLUSION 244
<PAGE>
INDEX OF EXHIBITS
I. Creditors' Joint Plan of Reorganization
Exhibits:
1. Restated Certificate of Incorporation of Walter
Industries
2. Summary of Terms for the New Senior Notes
3A. Veil Piercing Settlement Agreement
3B. Pre-LBO Bondholders Settlement Agreement
3C. Amended and Restated Veil Piercing Settlement Agreement
4. Summary of Terms for the Mid-State Trust IV Secured
Notes
5. Summary of Terms for the Mid-State Trust II Residual
Bonds
6. Summary of New Unsecured Notes
7. Form of New Common Stock Registration Rights Agreement
8. Form of Qualified Securities Registration Rights
Agreement
9. Rejected Executory Contracts
II. Official Committees
III. Order Authorizing Debtors to Complete Their Mirror
Liquidation Plan
IV. Summary of Classes and Treatment of Claims Under the
Creditors' Plan for Each Debtor
V. Directors and Officers of Each of the Debtors
VI. Liquidation Analysis
VII. Projected Statements of Operations of Debtors for 1993
through 2001
VIII. Chart of Corporate Structure on Filing Date
IX. Chart of Corporate Structure after Completion of Mirror
Liquidation Plan
X. Consolidated Financial Statements of Walter Industries:
A.1. Year ended May 31, 1993 (audited)
A.2. Management's Discussion and Analysis of Financial
Condition and Results of Operations For Year Ended May 31, 1993
B.1. Nine Months Ended February 28, 1994 (unaudited)
B.2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Nine Months ended
February 28, 1994.
XI. Bank Agents Agreement, dated as of April 18, 1994
XII. Findings of Fact, Conclusions of Law and Memorandum
Opinion of Alexander L. Paskay, Chief Bankruptcy Judge, in In re
Hillsborough Holdings Corporation, et al. v. The
Celotex Corporation, et al., Adv. No. 90-03 & 90-04,
United States Bankruptcy Court for the Middle District of
Florida, dated April 18, 1994
<PAGE>
I.
INTRODUCTION
A. General
THE DEBTORS HAVE INFORMED THE PROPONENTS THAT THEY DISAGREE WITH
THE CHARACTERIZATION AND/OR ACCURACY OF MANY OF THE FACTUAL AND
LEGAL STATEMENTS CONTAINED HEREIN. FOR A
DESCRIPTION OF THE DEBTORS' VIEWS ON SUCH MATTERS, SEE THE
DEBTORS' FIFTH AMENDED
DISCLOSURE STATEMENT DATED AS OF JULY 25, 1994, A COPY OF WHICH
IS INCLUDED IN THE SAME MAILING AS THIS DISCLOSURE STATEMENT.
UNLESS OTHERWISE INDICATED HEREIN, CAPITALIZED TERMS NOT DEFINED
HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN THE CREDITORS'
PLAN. A TABLE OF CONTENTS OF DEFINED TERMS IS CONTAINED HEREIN
AT ARTICLE XI.
1. Introduction and Recommendations
The Official Committee of General Unsecured Creditors of
the Debtors (the "Creditors Committee"), the Official Bondholders
Committee of Hillsborough Holdings Corporation, et al. (the
"Bondholders Committee"), Apollo (as defined), Lehman Brothers
Inc., and the unofficial Ad Hoc Committee of Pre-LBO Bondholders
(collectively, the "Proponents") have filed the Creditors' Joint
Plan of Reorganization dated as of August
1, 1994 (the "Creditors' Plan") in connection with the Debtors'
pending Chapter 11 Cases
in the U.S. Bankruptcy Court for the Middle District of Florida,
Tampa Division (the
"Court"). The Proponents jointly submit this Disclosure
Statement for Creditors' Plan
dated as of August 1, 1994 (together with all attachments and
exhibits hereto, the "Disclosure Statement") pursuant to Section
1125 of Title 11 of the United States Code,
11 U.S.C. Section 101, et seq. (the "Code") in connection with
the solicitation of acceptances of the Creditors' Plan from the
Holders of impaired Classes of Claims and
Interests and the hearing related to confirmation of the
Creditors' Plan scheduled to
commence on October 17, 1994 and to continue day to day until
concluded, and the initial
confirmation hearing status conference scheduled for November 16,
1994 and any adjournment
thereof. By order of the Court dated August 2, 1994, the
Disclosure Statement has been
approved as containing "adequate information" for a creditor of
one or more of the Debtors
within the meaning of Section 101(10) of the Code (a "Creditor")
and a Holder of Interests
in any of the Debtors in accordance with Section 1125(b) of the
Code.
The treatment provided in the Creditors' Plan is supported
by the following creditor constituencies in the Chapter 11 Cases:
(i) Chemical Bank and Bankers Trust Company, the
co-agents for the Revolving Credit Banks and the Working Capital
Banks (together, the "Bank Agents") (the Bank Agents have also
recommended the treatment provided in the Debtors' Plan);
(ii) the Creditors Committee;
(iii) the Bondholders Committee, which consists of
The Acacia Mutual Life Insurance Company, General Electric
Investment Corporation, Apollo and Lehman Brothers Inc., each as
voting members, and The Bank of New York, Barnett Banks
Trust Company, N.A., Mellon Bank, N.A. and IBJ Schroeder
Bank & Trust Company, each as non-voting, ex officio members in
their capacity as indenture trustees;
(iv) the unofficial Ad Hoc Committee of Pre-LBO
Bondholders, which consists of Gabriel Capital, L.P. and The
Acacia Mutual Life Insurance Company, each as
voting members, and Mellon Bank, N.A., as indenture
trustee and The Bank of New York, as indenture trustee, each as
non-voting, ex officio members in their capacity as indenture
trustees;
(v) Apollo and Lehman Brothers Inc. (collectively,
the "Bondholder Proponents"), the two largest holders of
Subordinated Note Claims, which collectively hold approximately
$428 million principal amount of the approximately
$1,023 million in principal amount of Subordinated Note
Claims;
(vi) the holders of more than 2/3 outstanding
principal amount of Pre-LBO Debenture Claims (who are signatories
to the Pre-LBO Bondholders Settlement Agreement);
(vii) the holders of over 75% outstanding principal
amount of Series B & C Senior Note Claims (as evidenced by
letters of direction furnished to the Series B & C Senior Note
Trustee); and
(viii) the Series B & C Senior Note Trustee.
The Proponents believe that these Holders and
representatives represent the vast majority of creditors and
Claims in the Chapter 11 Cases. In addition to the support of
the Proponents and the vast majority of the creditor
constituencies, the Bank Agents have
agreed that they will recommend to the Holders of Revolving
Credit Bank Claims and Working
Capital Bank Claims that they accept the treatment provided for
such Claims under the Creditors' Plan.
The Proponents believe that the Creditors' Plan would
promptly and finally resolve
all asbestos-related claims against the Debtors pursuant to the
settlement agreed to in principle on December 9, 1993 and
embodied in the definitive Veil Piercing Settlement
Agreement entered into on April 18, 1994 (the "Veil Piercing
Settlement Agreement").<F1> For a description of the Veil
Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS'
PLAN--Special Features of the Creditors' Plan--Settlement of Veil
Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of
the Veil Piercing Settlement Agreement"; for a description of the
Court's decision in the asbestos-related, veil piercing
litigation, see "INTRODUCTION--Litigation of Veil Piercing
Proceedings." As discussed below, the asbestos-related claims are
the primary reason that the Debtors sought Chapter 11 relief.
Unlike the other plans filed in the Chapter 11 Cases, the
Creditors' Plan is the only plan that is capable of confirmation
and consummation in the near term--as early as the end
of calendar year 1994. All other plans depend on either (i) a
final litigated resolution of these cases, which, because of the
appellate process, will prolong these cases for
years to come, or (ii) an unspecified settlement to be reached on
unspecified terms at an unspecified date.
<F1> The Creditors' Plan is conditioned on the Court's
approval of the Veil Piercing Settlement Agreement. If such
approval is not obtained the Creditors' Plan cannot be confirmed
in its present form.
<PAGE>
THE PROPONENTS STRONGLY URGE YOU TO VOTE IN FAVOR OF THE
CREDITORS' PLAN AND AGAINST THE DEBTORS' JOINT PLAN OF
REORGANIZATION (THE "DEBTORS' PLAN"), FOR THE FOLLOWING
PRINCIPAL REASONS:
The Creditors' Plan pays in full (including
post-petition interest) all Secured Claims.
The Creditors' Plan pays in full (including the rate
of post-petition interest agreed to by the Creditors Committee)
all general unsecured Claims, including trade creditor claims.
The Creditors' Plan envisions the payment in full of
all pre-Filing Date principal and interest on Subordinated Note
Claims.
The Proponents believe that the Creditors' Plan
provides favorable and the earliest possible recoveries to
Holders of Claims.
The Creditors' Plan is the only filed plan that
resolves, through an existing settlement, the asbestos-related
veil piercing litigation (as defined in the Creditors' Plan, the
"Veil Piercing Proceedings") that forced the Debtors into
bankruptcy over four years ago, and is therefore the only
filed plan that, by its terms, can be confirmed and
consummated in calendar 1994. <F2>
<F2> Approval of the Veil Piercing Settlement Agreement is a
condition to confirmation of the Creditors' Plan. See "OVERVIEW
OF THE CREDITORS' PLAN--Conditions Precedent."
The Veil Piercing Settlement Agreement entered into
in connection with the Creditors' Plan <F3> provides the
stockholders and management of Walter Industries with the
opportunity to receive certain releases, provided that
certain conditions are met. For a discussion regarding the
conditions imposed on such releases, see "OVERVIEW OF THE
CREDITORS' PLAN--Releases--Releases by Holders of Claims."
<F3> See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of
the Creditors' Plan--Settlement of Veil Piercing/Fraudulent
Conveyance Issues and Other Issues--Terms of the Veil Piercing
Settlement Agreement."
The Creditors' Plan is the only filed plan that
consensually resolves the intercreditor issues relating to the
1987 leveraged buyout.
The Proponents believe that the Creditors' Plan is
more desirable than the Debtors' Plan because, among other
things:
(i) Consummation of the Debtors' Plan depends on
either (a) the final litigated resolution, in favor of the
Debtors, of the Veil Piercing Proceedings, including all appeals,
which the Proponents believe are not expected to be completed for
years, or (b) a settlement of the asbestos-related claims that is
satisfactory to the Debtors and that is consistent with the other
terms of the Debtors' Plan;
(ii) The Debtors' Plan subjects creditors to the
risk of enormous loss--potentially in the billions of dollars--if
the Debtors do not ultimately prevail in the Veil Piercing
Proceedings, including prosecution of all appeals; and
(iii) The Debtors' Plan offers creditors no return
for the years of additional delay in receiving payment of
their Claims while the Debtors litigate the appeal of the
Declaratory Judgment Proceeding, and confers the benefits of
litigation success on current shareholders.
The Creditors' Plan will de-leverage Walter
Industries' balance sheet and allow it to emerge from bankruptcy
as a viable company with a strong future.
The Creditors' Plan is the only filed plan that has
the support of the Bondholders Committee, the Creditors Committee
and the Ad Hoc Committee of Pre-LBO Bondholders. The Bank Agents
and the Series B & C Senior Note Trustee support the treatment
provided to their respective constituencies in the Creditors'
Plan. The Debtors, senior management of the Debtors and
the Debtors' largest shareholder support the Debtors' Plan.
2. Comparison of the Creditors' Plan With the Debtors'
Plan
The Creditors' Plan and the Debtors' Plan have certain
significant points in common; for example, under each Plan the
reorganized Debtors will continue to be managed
by existing senior and operational management. However, in
general, Creditors in Voting Classes have a choice between
substantially different results and treatment under each
Plan. The Proponents believe that the primary differences
between the Creditors' Plan and the Debtors' Plan are set forth
below. The Debtors and their controlling stockholder,
KKR Associates, the record holder of 91.6% of the Hillsborough
common stock (and which has sole voting power with respect to
such stock) dispute the characterization, accuracy
and significance of most of these differences. The Debtors have
stated that KKR
Associates holds such stock on behalf of beneficial owners
comprised primarily of state
pension plans, corporate pension plans, college endowments,
insurance companies and commercial banks.
Creditors' Plan
Resolves by compromise and settlement all Veil Piercing
Claims and potential asbestos claims against the Debtors.
Avoids delay of appeals by asbestos litigants.
Avoids risk of remand or reversal on appeal of April
18, 1994 decision in the Declaratory Judgment Proceeding.
Debtors' Plan
Unless settled on currently unspecified terms satisfactory
to the Debtors, consummation of the Plan requires (a) continued
litigation of appeals of April 18, 1994 decision in the
Declaratory Judgment Proceeding until there is a final order
favorable to the Debtors, and (b) further litigation to
determine whether that decision in the Declaratory Judgment
Proceeding binds all Veil Piercing Claimants and asbestos
claimants against the Debtors, including persons who were not
parties to the Declaratory Judgment Proceeding.
Creditors' Plan
Resolves by compromise and settlement intercreditor issues
raised by 1987 LBO and subsequent Chapter 11 filings, including
Fraudulent Conveyance Lawsuit against Banks, Series B & C Senior
Noteholders and Senior Subordinated Noteholders, and
provides a release of the foregoing Creditors.
Debtors' Plan
Does not resolve intercreditor issues raised by 1987 LBO,
the Chapter 11 filings and the Fraudulent Conveyance Lawsuit,
which does not depend on a veil piercing theory.
Creditors' Plan
Resolves by compromise and settlement the treatment of
Series B & C Senior Note Claims.
Debtors' Plan
Plan supported only by Shareholders (KKR Associates),
Debtors, Debtors' senior management and Bank Agents (who also
support Creditors' Plan).
Creditors' Plan
Creditors' Plan supported by the Bondholders Committee,
Creditors Committee and Ad Hoc Committee of Pre-LBO Bondholders;
Bank Agents and Series B & C Senior Note Trustee support
treatment provided to their respective
constituencies under the Creditors' Plan.
Debtors' Plan
Plan cannot become effective until either (a) all appeals
of veil piercing/asbestos litigation are finally resolved in the
Debtors' favor, or (b) the veil piercing/asbestos litigation is
resolved on terms satisfactory to the Debtors that are consistent
with the other terms of the Debtors' Plan.
Creditors' Plan
Treatment of Series B & C Senior Note Claims (S-6)<F4>
<F4> All summaries are qualified by the descriptions in Section
II below and by the terms of the respective Plans.
Allowed Claims include (i) post-petition interest at
13% simple (if paid in Cash) or 14% simple (if paid in New Senior
Notes) from Filing Date to 6/30/94 and 14.625% simple thereafter
and (ii) if the Amended and Restated Veil Piercing Settlement
Agreement becomes effective by its terms<F5>, shares of Class B
Common Stock having an aggregate New
Common Stock Value Per Share of $37.5 million (if the Court
determines that the Debtors' enterprise value is $2.525 billion
in accordance with the Creditors' Plan, then to the extent
that the market agrees with the Debtors' higher
estimated enterprise value of $2.805 billion, the value of this
stock would be higher than this stated value). Payment is not
subject to litigation delay and other risks inherent
in the Debtors' Plan (the Proponents believe that a
shareholder appeal of the Confirmation Order can be mooted).
Debtors' Plan
Treatment of Series B & C Senior Note Claims (S-6)
Although allowed Claims include (i) post-petition interest
at 13.0% simple if paid in cash, and 14.625% simple
(14.5% simple for Series C) if paid in New Senior Notes from
Filing Date to 6/30/94 and 14.625% simple thereafter, and (ii) an
aggregate of 5% of the post-Effective Date common stock, the
Proponents believe that there is no material difference in value
between this facially higher recovery and the recovery under the
Creditors' Plan, principally because the Debtors' Plan uses a
higher enterprise value than the Creditors' Plan for purposes of
allocating post-effective date common stock. In addition, the
Proponents believe that the recovery under the Debtors' Plan is
subject to the significant litigation delay and
other risks in the Debtors' Plan (which requires either (a) final
litigated resolution, favorable to the Debtors, of all
asbestos-related, veil piercing claims or (b)
settlement of such claims on terms acceptable to the Debtors
that are consistent with the other terms of the Debtors' Plan).
<F5> The Proponents amended their Plan on August 1, 1994 to
provide the additional recovery described in the foregoing clause
(ii) in response to a similar increase made by the Debtors after
an emergency hearing held by the Court on July 28, 1994.
Due to the last-minute timing of the Debtors' amendment,
the Proponents were unable to complete all of the actions
necessary for the Amended and Restated Veil Piercing
Settlement Agreement to become effective by its terms
within the time frame established by the Court for the mailing of
plans and disclosure statements.
Nevertheless, the Proponents expect that the Amended and
Restated Veil Piercing Settlement Agreement will become effective
by its terms in the near future. For a discussion of the
conditions precedent to effectiveness of the Amended and
Restated Veil Piercing Settlement Agreement, see "OVERVIEW
OF THE CREDITORS' PLAN--Special Features of the Creditors'
Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues
and Other Issues--Terms of the Veil Piercing Settlement
Agreement."
Creditors' Plan
Treatment of Bank Claims (S-1 and S-2)
Allowed Claims include (i) post-petition interest
from Filing Date to 6/30/94 at prime + 1 1/2% (non-default
contract rate), compounding quarterly on and after 11/1/92, plus
13% on accrued but unpaid post-Filing Date interest to extent not
paid after 6/30/94, compounding quarterly until paid,
and (ii) if the Amended and Restated Vail Piercing
Settlement Agreement becomes effective by its terms <F6>, shares
of Class B Common Stock having an aggregate New Common Stock
Value Per Share of $37.5 million (if the Court determines that
the Debtors' enterprise value is $2.525 billion in
accordance with the Creditors' Plan, then to the
extent that the market agrees with the Debtors' higher estimated
enterprise value of $2.805 billion, the value of this stock would
be higher than this stated value). Payment is not subject to
litigation delay and other risks inherent in the
Debtors' Plan (the Proponents believe that a
shareholder appeal of the Confirmation Order can be mooted).
<F6> See footnote 5 above.
Debtors' Plan
Treatment of Bank Claims (S-1 and S-2)
Although Debtors' Plan includes (i) post-petition interest at
prime + 2 1/2%, compounding quarterly after Filing
Date, and (ii) an aggregate of 5% of the post-Effective Date
common stock, the Proponents believe that this higher recovery
is subject to the significant litigation delay and other risks
in the Debtors' Plan (which requires either (a) final litigated
resolution, favorable to the Debtors, of all asbestos-related,
veil piercing claims or (b) settlement of such claims on terms
acceptable to the Debtors that are consistent with the other
terms of the Debtors' Plan).
Creditors' Plan
Treatment of Other Unsecured Claims (U-3)
Allowed Claims include post-petition interest at General
Unsecured Interest Rate (generally 6 1/2% simple).
Paid in Cash (a) 75% on Effective Date and (b) 25%,
plus interest on that amount, 6 months after Effective Date.
Debtors' Plan
Treatment of Other Unsecured Claims (U-2).
Allowed Claims do not include any post-petition interest.
Paid in Cash as soon as practicable following Effective Date
but no earlier than 10 Business Days following closing of
Syndication Agreement.
Creditors' Plan
Treatment of Subordinated Note Claims (U-4 through U-6)
Allowed Claims include post-petition interest (payable after
all other Allowed Claims, including Veil Piercing Claims, are
paid), if there is sufficient value to pay such post-petition
interest and permitted by the Court. Based on the Negotiated
Enterprise Value of $2.525 billion, however, the Proponents do
not believe that post-petition interest will be paid under
the Creditors' Plan.
Debtors' Plan
Treatment of Subordinated Note Claims (U-4 through U-6)
Allowed Claims do not include any post-petition
interest, irrespective of the going concern value of the Debtors.
Paid in (a) hybrid mortgage-backed securities
(Mid-State Homes New PIK Debentures and Mid-State Homes New
Notes) (requiring no minimum ratings and valued at par as of the
Effective Date by a qualified valuation expert
selected by the Debtors) and (b) approximately 22%
of all Common Stock.
Creditors' Plan
Paid in (a) Qualified Securities (requiring minimum
ratings by a Rating Service and valued at par as of Effective
Date by Lehman Brothers Inc. and a qualified valuation expert
selected by Apollo), and (b) New Common Stock.
Debtors' Plan
Debtors retain option on Effective Date to substitute
Mid-State Homes New Notes for Common Stock otherwise to be
received by Subordinated Noteholders. Current
shareholders (including KKR Associates and senior
management) are not required to accept substitution of same debt
securities for Common Stock to be retained by current
shareholders. The Proponents believe that the
option therefore creates uncertainty for holders of Subordinated
Note Claims and may increase the value of the Common Stock to be
retained by the current shareholders.
Creditors' Plan
Treatment of Old Common Stock Interests
Will receive New Common Stock after all Creditors
are paid in full to the extent permitted by law, if there is
sufficient value to support such payment. Based upon the
Negotiated Enterprise Value, the Proponents do not
anticipate that there will be any such distributions
of New Common Stock to Holders of Old Common Stock Interests.
Will receive Equity Call Option to purchase New
Common Stock at New Common Stock Value Per Share.
Will receive a release if not a Settling
Equityholder only if holds an Allowed Indemnity Claim.
Proponents believe that Debtors' pre-Filing Date
indemnity of current shareholders is invalid as a
matter of law and/or as against public policy.
If the Amended and Restated Veil Piercing Settlement
Agreement does not become effective by its terms, Holders of Old
Common Stock Interests still eligible to become Settling
Equityholders will receive pro rata portion of $75 million of New
Common Stock under Veil Piercing
Settlement Agreement from Veil Piercing Claimants if such Holders
become Settling Equityholders.
Debtors' Plan
Treatment of Old Common Stock Interests
Will retain approximately 68% of all Common Stock (68% is
valued by Debtors to be worth approximately $623 million as of
5/31/95). Proponents believe that value will grow over time
until Effective Date, particularly given absence of post-petition
interest to unsecured Creditors.
KKR will seek $550,000 annual "consulting fee" for
each year beginning with the Filing Date until Effective Date and
will continue fee arrangement post-Effective Date.
Will receive a release whether or not they provide
any consideration therefor.
The Proponents believe that the Debtors' Plan imposes the
cost and risk of resolving the veil piercing, asbestos-related
litigation and issues on the unsecured trade
creditors and bondholders while it confers the benefits of
litigation success over the
asbestos victims primarily on the current shareholders (including
KKR Associates and senior management). The Proponents believe
that the successful fully litigated resolution
of the veil piercing, asbestos-related issues--required before
there can be any distributions to Creditors under the Debtors'
Plan--will not occur for years, if ever.
On the other hand, the Proponents believe that distributions to
Creditors will be made
significantly earlier under the Creditors' Plan because the only
opponent of the
Creditors' Plan appears to be KKR Associates, and the Proponents
believe that they will
be able to consummate the Creditors' Plan despite an appeal of
the Confirmation order by
KKR Associates.<F7> For those reasons, the Proponents believe
that the Creditors' Plan
provides significantly better treatment for unsecured creditors
and bondholders than the
Debtors' Plan; under the terms of the Debtors' Plan, unsecured
creditors and bondholders
will not receive any compensation in the form of post-petition
interest or otherwise for
the delayed conclusion of all veil piercing appeals and related
litigation. Moreover,
under the Debtors' litigation strategy, if the Debtors ultimately
lose on the merits of
the veil piercing, asbestos-related issues, the Proponents
believe that in excess of
$10 billion of additional claims could be added to the Debtors'
liabilities and, as a
result, Creditors' recoveries would be reduced to a small
fraction of their pre-Filing
Date claims. The Proponents believe that the avoidance of these
risks means that the
Creditors' Plan also is superior to the Debtors' Plan from the
perspective of Secured Creditors.
<F7> The Proponents believe that any stay of the
Confirmation Order would require a substantial bond.
<PAGE>
The Debtors' Plan substantially enhances the value only of
the Old Common Stock, most of which is held by KKR Associates, in
the event that the Debtors finally prevail
on the veil piercing, asbestos-related issues, by depriving
unsecured creditors and bondholders of post-petition interest
during the period required to fully litigate those
issues.<F8> The Debtors' Plan also confers on the current
shareholders (including KKR Associates and senior management)
approximately 68% of the Old Common Stock that would be
outstanding after the Effective Date. The Debtors estimate that
at 5/31/95, without assuming any growth thereafter in the
Debtors' businesses, the Old Common Stock to be
retained by the current shareholders under the Debtors' Plan is
worth approximately $623 million.
The Debtors and KKR Associates, their controlling
shareholder, caused the
incurrence of over a billion dollars of unsecured debt when they
were aware of the
pendency of asbestos-related lawsuits against Celotex, which was,
immediately prior to
the LBO, a subsidiary of Jim Walter Corporation. The Debtors
will be able to pay both that debt and post-petition interest
accrued on it if they ultimately prevail in the veil
piercing litigation, but they have chosen to file a Plan that
does not make such payments.
The Proponents believe that by failing to compensate unsecured
creditors for the delay
in achieving a successful fully litigated resolution of the
asbestos issues, the Debtors'
Plan is proposed in bad faith to confer a windfall on the current
shareholders (including
KKR Associates and senior management). Faced with, in effect,
the alternative of a forced
$1 billion non-interest-bearing loan without a fixed term,
payable only if and when all
the asbestos-related issues are finally litigated in the Debtors'
favor, the Proponents
believe that the prompt settlement of the veil piercing,
asbestos-related issues under
the Creditors' Plan is fair, without even considering the risks
to Creditors raised by
continued litigation of the asbestos-related issues.
In the final analysis, therefore, the Creditors' Plan is
based on the proposition
that the Creditors should not be compelled to wait years for only
an uncertain distribution that they can readily obtain or exceed
now with certainty, and that it is
inequitable for the Debtors and the current shareholders to
retain value when they can
pay, but refuse to pay, validly incurred obligations.
3. Asbestos/Veil Piercing Settlement
On April 18, 1994, the Court rendered its decision in the
Debtors' adversary
proceedings to obtain a declaratory judgment that the corporate
veil between Old Walter
Industries (a predecessor of Walter Industries) and The Celotex
Corporation<F9> could not be
pierced (the "Declaratory Judgment Proceeding"). As expected,
the Court ruled in favor
of the Debtors. See "INTRODUCTION--Litigation of Veil Piercing
Proceedings." The Proponents believe that, regardless of the
Court's decision in the Declaratory Judgment
Proceeding, the Veil Piercing Settlement Agreement is critical to
allowing the Debtors to successfully emerge from Chapter 11.
<F8> Assuming the non-default contract rate and the
applicable judgment rate in the absence of a contract rate, lost
opportunity cost in respect of unsecured claims grows by
approximately $120 million a year, or by more than $10 million a
month.
<F9> On October 12, 1990, The Celotex Corporation and one of
its affiliates filed petitions for reorganization under Chapter
11 of the Code with the Court (the "Celotex Chapter 11
Proceeding"). The Celotex Corporation is a former subsidiary
of Original Jim Walter.
<PAGE>
The Proponents have always anticipated that, absent a
settlement, given the enormous amounts involved, the Court's
decision (whether in favor of the Debtors or the
Veil Piercing Claimants) would be appealed by one or more parties
to the Declaratory Judgment Proceeding until all avenues of
appeal have been exhausted. This is expected
to include appeals to the U.S. District Court for the Middle
District of Florida, the
11th Circuit Court of Appeals and the United States Supreme
Court, as well as possible
remands and/or retrials, which could result in additional
discovery, another trial and
another round of appeals to the same higher courts. Counsel to
the Veil Piercing Claimants have filed a timely notice of appeal
of the Court's decision, and have raised,
among other issues on appeal, issues relating to (a) choice of
law, (b) the right to a
jury trial, (c) accountant-client privilege and waiver, (d)
attorney-client privilege and
waiver, (e) the applicable standards for veil piercing, and (f)
corollary issues such as
a shareholder's obligations to creditors of an insolvent debtor.
Given the complexity
of these issues and the delays inherent in the judicial system,
the Proponents expect that the appellate process will not be
completed for many years, even if the Veil Piercing
Claimants are not successful in any of their appeals.<F10>
Even the Court has noted the significant delay of the
appellate process:
THE COURT: Ladies and gentlemen, Mr. Crames, I
believe I have stated it several times and--I cannot for the life
of me see how anyone could possibly file a meaningful Disclosure
Statement and a meaningful Plan until the asbestos
litigation is resolved by stipulation; and if not by
stipulation, litigation. And this Court is the lowest on the
totem pole, and I can assure you whatever I decide
after December, if that is going to be tried in December,
that's going to be appealed and going to go to District Court.
And knowing the speed over there, that whatever and whenever that
is going to be decided affirming me or reversing me,
that is going to go to the Court of Appeals. And whenever
they go the Court of Appeals and there's going to be a decision
by the Court of Appeals, there's going to be a request for
hearing en banc--or at least first step, Motion for Rehearing.
And then a hearing en banc for the entire panel. And then
whatever the outcome is, there will be a Petition for Cert and
that would be the term of the Supreme Court
in 1996, or thereabouts, and so going to be granted or
denied. And that will end the litigation.
(July 14, 1993 Trans. 23:6-24:2.)
Although the Proponents of the Creditors' Plan have always
believed that the Debtors will ultimately prevail in the Veil
Piercing Proceedings, the settlement
represents their collective judgment that the uncertainty and
cost of protracted
litigation far outweigh the very substantial cost of the
settlement. The settlement was
negotiated by the Bondholder Proponents, which, as the two
largest holders of Subordinated
Note Claims (approximately $428 million principal amount), will
bear the largest burden
of a litigation loss or extended delay in finally resolving the
Veil Piercing Claims.
The settlement represents a reasonable assessment of (i) the
uncertainty inherent in the
litigation, i.e., the possibility of an ultimately adverse
judgment against the Debtors,
and (ii) the probability that distributions to creditors will be
delayed for additional
years pending completion of the appellate process. In
negotiating the settlement, the
Bondholder Proponents took into consideration the risk to
creditors of losing billions
of dollars if the asbestos claimants were to prevail, as well as
the time and expense (in
terms of the time value of money and otherwise) of the completion
of the lengthy appellate
process. In this connection, counsel to the Proponents read and
analyzed thousands of
pages of transcripts and documents and have analyzed certain
legal issues expected to be raised on appeal.
<F10> The Debtors assert that this Disclosure Statement
allegedly misleadingly contends that, under the Debtors' Plan,
the alleged asbestos-related claims will "never be
promptly resolved." The Debtors further assert that the
Debtors have already taken steps to achieve "finality" with
respect to alleged asbestos related liabilities,
not only as to parties to the Veil Piercing Proceedings
but also with respect to all creditors of Celotex.
The Proponents believe that the foregoing factors, in and
of themselves, demonstrate that the settlement is fair and
equitable. In addition to these factors,
however, it is important to note that, notwithstanding the
Debtors' assertions to the
contrary, all or substantially all of the value being used to
settle the Veil Piercing
Claims is, in effect, coming from distributions to which
Subordinated Noteholders would
otherwise be legally entitled on account of post-petition
interest accrued during the
Debtors' more than four-year old bankruptcy proceedings. Such an
award of post-petition interest is proper under the Code and
existing case law where, as here, the Debtors'
estates would have remaining value, after satisfaction of all
Claims (other than post-petition interest on Subordinated Note
Claims), if it is assumed that the Veil
Piercing Claims have a value of zero. The Proponents believe
that it would not be in good
faith or fair and equitable to delay distributions until a final
litigated result is obtained with respect to the Veil
Piercing-Related Issues, and then not pay creditors
post-petition interest on their Claims.
Moreover, notwithstanding Debtors' assertions to the
contrary, neither approval of
the settlement nor confirmation of the Creditors' Plan is
conditioned upon a determination
by the Court that Subordinated Noteholders are legally entitled
to post-petition interest
on account of their Claims. The Proponents believe that the
settlement satisfies the fair
and equitable test independent of the Subordinated Noteholders'
legal right to receive post-petition interest on account of their
Claims. The Creditors' Plan expressly provides
that the Allowed Amount of Subordinated Note Claims includes all
pre-petition amounts as
well as post-petition interest, but only to the extent that the
payment of post-petition
interest is permitted by law and to the extent available after
payment of all other Claims
under the Creditors' Plan. Based upon the Negotiated Enterprise
Value and the estimated
amount of Allowed Claims, including Veil Piercing Claims pursuant
to the Veil Piercing
Settlement Agreement, the Proponents do not expect that any value
will remain for payment
of post-petition interest on account of Subordinated Note Claims.
Therefore, not only does the Creditors' Plan envision that no
post-petition interest will be paid on account
of Subordinated Note Claims, in the event that there is any
residual value in the Debtors'
estates after payment of all other Allowed Claims, post-petition
interest is payable on
account of Subordinated Note Claims only to the extent permitted
by law. Thus, although
the Creditors' Plan is flexible enough to accommodate any finding
by the Court with
respect to Subordinated Noteholders' right to post-petition
interest, because the
Proponents do not believe that there will be any residual value
in the Debtors' estates after payment of all other Allowed
Claims, it will not be necessary for the Court to rule
on the merits of Subordinated Noteholders' right to post-petition
interest in order to confirm the Creditors' Plan.
The Proponents believe that the Veil Piercing Settlement
is reasonable and is in the best interests of all creditors and
the Debtors. Nothing in the Court's decision in
the Declaratory Judgment Proceeding in any way prevents or
precludes the settlement of
the Veil Piercing Claims under the Veil Piercing Settlement
Agreement.
4. Background to Filing of Creditors' Plan
The commencement of the Debtors' Chapter 11 Cases resulted
from a sequence of
events stemming primarily from an inability of Hillsborough's
interest reset advisors to
reset interest rates on approximately $624 million of outstanding
debt on which interest
rates were scheduled to be reset effective January 2, 1990, based
in part on uncertainties
arising from the pending Veil Piercing Proceedings. In that
litigation, thousands of
persons claiming asbestos-related damages sought to pierce the
corporate veil between The Celotex Corporation, against which
their claims could be asserted, and Original Jim
Walter, which relied on its corporate separateness as a defense
to such claims.
The Debtors have been unable to resolve the claims
underlying these litigations
during the more than four years since the Debtors commenced the
Chapter 11 Cases. A trial
on the merits of the Declaratory Judgment Proceeding was held
during the week of
December 13, 1993. On April 18, 1994, the Court rendered a
decision in this proceeding
in favor of the Debtors. See "INTRODUCTION--Litigation of Veil
Piercing Proceedings."
Following the decision, counsel to the Veil Piercing Claimants
have stated that they will
appeal the decision and, unless a settlement is reached, the
Debtors' ability to emerge from Chapter 11 will be delayed for a
further number of years, whether or not the Debtors
win all issues on appeal. The trial record presents a number of
complex legal and factual
issues, and there can be no assurance that the Debtors will
prevail on some or all of
these issues. Even if the Debtors were to prevail on all
appealable legal and factual
issues, additional uncertainties will remain, such as whether the
trial, involving only
a few thousand specified asbestos claimants, binds all asbestos
claimants, and whether
the economic premises underlying the Debtors' Plan will still
apply when the appellate process is finally completed.
From February through October 1993, the Bondholder
Proponents engaged in frequent
and protracted negotiations with representatives of KKR
Associates and representatives
of Walter Industries in an effort to reach an agreement, inter
alia, on the terms of a
plan of reorganization and the financial parameters for settling
the asbestos litigation
that could be supported by the Bondholder Proponents, and that
would provide the basis
for support by other Holders of Claims. Despite these
negotiations, an agreement was not reached with KKR Associates.
Thereafter, commencing in October 1993, the Bondholder
Proponents actively began
to develop the Creditors' Plan, as an alternative to the Debtors'
Plan, and entered into
the negotiation of a settlement of the Veil Piercing Proceedings
and the Veil Piercing-Related Issues with representatives of the
Holders of a significant number of
the Holders of asserted Veil Piercing Claims. These negotiations
resulted in the execution of an agreement in principle dated
December 9, 1993, setting forth the terms
of the settlement, and the execution of the definitive Veil
Piercing Settlement Agreement
in April 1994 (a copy of which is attached as Exhibit 3A to the
Creditors' Plan). Over thirty-five law firms, representing the
vast majority of Veil Piercing Claimants, have
agreed to be bound by the Veil Piercing Settlement Agreement.
On December 16, 1993, the Bondholder Proponents, together
with the other Proponents
(which at that time did not include the Ad Hoc Committee of
Pre-LBO Bondholders), filed
a plan of reorganization (the "Original Creditors' Plan") with
the Court. On April 20,
1994 the Proponents filed the First Amendment to the Original
Creditors' Plan, on May 11,
1994, the Proponents filed the Second Amendment to the Original
Creditors' Plan, on May 17, 1994, the Proponents filed the Third
Amendment to the Original Creditors' Plan
and on June 9, 1994 the Proponents filed the Creditors' Plan.
Support for the Creditors' Plan is expressly provided for
in four critical agreements, described below.
Under the terms of the Veil Piercing Settlement Agreement,
the Creditors' Plan is supported by the attorneys representing
the vast majority of the persons asserting
asbestos-related claims, the Official Committees appointed in the
Celotex Chapter 11 Proceeding to represent the interests of
asbestos-related claimants and The Celotex Corporation.
The support of the Ad Hoc Committee of Pre-LBO Bondholders
is provided for in the settlement agreement reached between the
Committee and the Bondholder Proponents as of
March 23, 1994 (the "Pre-LBO Bondholders Settlement Agreement"),
which settles certain
litigation and intercreditor issues relating to the alleged
fraudulent conveyances by the
Debtors in connection with the 1987 leveraged buyout of
Hillsborough. A copy of the Pre-LBO Bondholders Settlement
Agreement is attached as Exhibit 3B to the Creditors' Plan.
On April 18, 1994, an agreement was reached between the
Proponents and the Bank Agents, providing for, among other
things, the recommendation by the Bank Agents to the
Holders of Bank Claims of the treatment of Bank Claims in the
Creditors' Plan, and the filing of a motion by the Bank Agents to
defer the Court's consideration of the plan of
reorganization filed by the Bank Agents in December 1993 (the
"Bank Agents Agreement").
This motion has been filed and granted by the Court. A copy of
the Bank Agents Agreement
is attached as Exhibit XI to the Disclosure Statement.
Finally, on May 19, 1994, the Series B & C Senior Note
Trustee reached an agreement with the Proponents regarding the
rate of post-petition interest to be paid on account
of the Series B & C Senior Notes Claims and the form of
consideration (Cash and/or New Senior Notes) to be used to
satisfy such Claims under the Creditors' Plan. This agreement
is supported by the Holders of a substantial amount of Series B &
C Senior Note Claims.
The terms of this agreement have been incorporated into the
Creditors' Plan. At the
request of the Series B & C Senior Note Trustee, the Court has
agreed to defer consideration of the plan of reorganization filed
by the Series B & C Senior Note Trustee in December 1993 and
amended in April 1994.
The Proponents believe that implementation of the
settlements contained in the Creditors' Plan and confirmation of
the Creditors' Plan would resolve protracted
litigation and enable the Debtors to emerge from Chapter 11 in
the near future. The Proponents further believe that
implementation of the settlements contained in the
Creditors' Plan and confirmation of the Creditors' Plan do not
require confirmation of a Chapter 11 plan for Celotex.
5. Summary
Accompanying the Disclosure Statement are copies of:
a. the Creditors' Plan which is included as Exhibit I
hereto;
b. the notice fixing (i) the time for filing of
acceptances or rejections of the Creditors' Plan, (ii) the date
and time of the hearing to consider confirmation of the
Creditors' Plan and related matters and (iii) the time
for filing objections to Confirmation (as defined in
Section II.N.(d).) of the Creditors' Plan (the "Confirmation
Hearing Notice"); and
c. in the case of Holders of Class S-1 Claims, Class
S-2 Claims, Class S-6 Claims, Class U-3 Claims, Class U-4 Claims,
Class U-5 Claims, Class U-6 Claims and Class E-1 Interests (the
"Voting Classes"), one or more ballots for acceptance or
rejection of the Creditors' Plan (a "Ballot"). All
Ballots provide for the Holders to elect to grant
certain releases, and on certain Ballots, Holders are also given
the opportunity to make certain elections, described in more
detail below.
Pursuant to the provisions of the Code, only Classes (as
defined in the Creditors' Plan) of Claims and Interests which are
"impaired" under the Code by the terms and
provisions of the Creditors' Plan are entitled to vote to accept
or reject the Creditors' Plan. Classes E-2 and SE-2 do not
receive or retain any property under the Creditors'
Plan, and are deemed to have rejected the Creditors' Plan. For
purposes of the Creditors' Plan, only the Voting Classes and
Classes E-2 and SE-2 are deemed to be impaired.
ACCORDINGLY, A BALLOT FOR ACCEPTANCE OR REJECTION OF THE
CREDITORS' PLAN IS BEING PROVIDED ONLY TO MEMBERS OF THE VOTING
CLASSES.
The Holder of any Claim or Interest in a Voting Class
should read the Disclosure Statement, together with the exhibits
hereto, including the Creditors' Plan, in their
entirety. After carefully reviewing the Disclosure Statement,
please indicate your vote with respect to the Creditors' Plan on
the enclosed Ballot and return it in the envelope
provided. If you have an impaired Claim or Interest in more than
one Class, you will receive a separate Ballot for each such Claim
or Interest. See "INTRODUCTION--General--
Voting Instructions." PLEASE VOTE EACH BALLOT YOU RECEIVE.
Ballot Elections--Acceptance or Rejection of Plan of
Reorganization
The Ballot will permit members of Voting Classes to accept
or reject the Creditors' Plan, and to indicate their preference
between the Creditors' Plan and the Debtors' Plan.
Creditors may vote in favor of both plans, and still indicate a
preference between the Creditors' Plan and the Debtors' Plan.
Other Ballot Elections
Other Unsecured Claim Election. Holders of Class U-3
Allowed Claims are requested to designate on the Ballots sent to
them the General Unsecured Interest Rate to apply to
Class U-2 Allowed Claims and Class U-3 Allowed Claims subsequent
to the Confirmation Date.
Subordinated Note Claim Election. The voting Ballots for
the Holders of Class U-4, U-5 and U-6 Allowed Claims contain an
election form (the "Subordinated Note Claim Election
Form"), as approved by the Court, that will allow such Holders to
elect to receive all or any part of their Claim in Qualified
Securities (the "Subordinated Note Claim
Election"). Any part of such Claim that is not satisfied by
Qualified Securities will
be satisfied by Class A Common Stock, in the case of Classes U-4
and U-5, and Class B Common Stock, in the case of Class U-6.
Series B & C Senior Note Claim Election. The voting
Ballot for the Holders of Allowed Series B & C Senior Note Claims
contains an election form (the "Series B & C
Senior Note Claim Election Form"), as approved by the Court, that
will allow such Holders to elect to receive all, but not part, of
their Series B & C Senior Note Claim in the form
of New Senior Notes. If the election to receive all of such
Claim in New Senior Notes is not made, then the Holder will
receive Cash, New Senior Notes or a combination thereof
in respect of such Holder's Series B & C Senior Note Claim, with
the relative amount of Cash and/or New Senior Notes to be decided
in the sole discretion of the New Board of
Walter Industries (or, if such New Board has not yet been
appointed, by the Bondholders Committee).
Equity Call Option Election. The voting Ballot for
Holders of Allowed Old Common Stock Interests as of the date on
which the order approving the Disclosure Statement is
entered contains an election form (the "Equity Call Option
Election Form"), as approved by the Court, that will allow
eligible Holders of Class E-1 Allowed Interests (i.e., Holders
that do not transfer their Class E-1 Allowed Interests) to
exercise their Equity Call Options.
In the event that the Effective Date does not, or is not
anticipated to, occur until after December 31, 1994, the
previously completed election
forms for the Subordinated Note Claim Election, the Series B & C
Senior Note Claim Election and the
Equity Call Option Election shall be disregarded, such elections
shall be reconducted and
the applicable election forms shall be sent to Holders as of a
recent date selected by the Bondholders Committee. Such Holders
will be given thirty (30) days to complete and
return the election forms, with such 30-day period expiring not
more than forty-five (45) days prior to the Effective Date.
Release. The general release set forth in Section 6.1 of
the Creditors' Plan is deemed by the Creditors' Plan to be
granted by a Holder upon receipt of a distribution
under the Creditors' Plan by that Holder or the acceptance of the
Creditors' Plan by the Holder's Class of Claims. This release
will be valid and enforceable to the extent
permitted by law, including res judicata. In addition, each
Ballot contains the full text
of the release and a space for the Holder to specifically agree
to grant the release.
None of the elections need be made for you to vote to
accept or reject the Creditors' Plan, and a Holder need not vote
to accept the Creditors' Plan in order to make
any of the elections. The importance and effect of these
elections are more fully described below.
For a summary description of the treatment of each Class
of Claims and Interests
and the estimated value of distributions to each Class of Claims
and Interests provided for in the Creditors' Plan, see "OVERVIEW
OF THE CREDITORS' PLAN--Summary of Claims and Class Treatment
Under the Creditors' Plan."
The Court has scheduled a hearing to commence on October
17, 1994 and continuing day to day until concluded, to consider
(i) the issues raised by the Debtors in Adversary
Proceeding No. 94-278 (as defined herein, the "New DJ Action"),
which action the Court has ruled should be deemed to be a
contested matter governed by Bankruptcy Rule 9014, and
the issues raised in any response and/or motion filed by any of
the defendants thereto; (ii) the application by the Proponents
seeking approval of the Veil Piercing Settlement
Agreement, which, among other things, provides for a settlement
of all Veil Piercing Claims including, among others, all claims
asserted in the Declaratory Judgment
Proceeding, and any related application or response filed by any
party-in-interest thereto; and (iii) any properly asserted
challenges or objections to the vote of any party
with respect to the Creditors' Plan.
The Court has further scheduled an initial hearing to
consider Confirmation of the
Creditors' Plan and the Debtors' Plan for November 16, 1994, at
1:30 P.M., at the United States Bankruptcy Court, Middle District
of Florida, Tampa Division, 4921 Memorial
Highway, Tampa, Florida 33634 (the "Confirmation Hearing"), at
which time the Court will conduct only a status conference to
schedule the date on which the Confirmation Hearing
will continue, and to consider other issues appropriate for
consideration at such status conference. The Court has directed
that objections, if any, to Confirmation of the
Creditors' Plan be served and filed on or before November 10,
1994 in the manner described
in the Confirmation Hearing Notice accompanying the Disclosure
Statement. The date of the Confirmation Hearing may be adjourned
from time to time in open Court without further notice.
6. Voting Instructions
The Ballot(s) have been specifically designed for the
purpose of soliciting votes on the Creditors' Plan from the
Voting Classes. Accordingly, in voting for or against
the Creditors' Plan, please use only the Ballot(s) sent to you
with the Disclosure Statement. Please complete and sign your
original Ballot(s) (copies will not be accepted)
and return it in the enclosed envelope so that it is received on
or before the Voting Deadline.
Banks, brokers and other nominees will be requested to
transmit a Ballot with a copy of the Disclosure Statement to each
beneficial owner of the Debtors' securities and
other indebtedness held in the names of such nominees.
Instructions for returning Ballots
will also be requested to be sent to beneficial owners by
nominees. If you have a question concerning the voting procedure
for beneficial owners, contact your bank or
broker or the balloting agent, Donlin, Recano & Company, Inc., at
1-800-433-3868. Do not return your securities with your
Ballot(s).
The Proponents and the Debtors have been authorized by the
Court to retain Donlin, Recano & Company, Inc. as balloting agent
to mail, receive and tabulate Ballots and
materials relating thereto. Instructions for the return of
Ballots to the balloting agent accompany the Ballots.
The record date for determining which Holders of Claims
and Interests are entitled to vote on the Creditors' Plan is July
13, 1994 (the "Voting Record Date").
THE INDENTURE TRUSTEES FOR THE DEBTORS' DEBT SECURITIES
WILL NOT VOTE ON BEHALF OF THE HOLDERS OF THESE SECURITIES AND
CONSEQUENTLY EACH HOLDER MUST SUBMIT ITS OWN
BALLOT(S). DO NOT RETURN YOUR SECURITIES WITH YOUR BALLOT(S).
Ballots are being sent to the known Holders of all Claims
and Interests which are impaired (including fully or partially
Disputed Claims (as defined in the Creditors' Plan)
to which objections have been or will be filed). Under the Code
only Holders of Allowed
Claims and Interests whose Claims or Interests are "impaired"
will be entitled to vote on the Creditors' Plan. The Code also
provides that the Court may temporarily allow a
Disputed Claim for purposes of voting on the Creditors' Plan.
If a Holder of a Claim to which an objection has been
filed wishes to vote on the
Plan, such Holder must file a motion with the Court pursuant to
Rule 3018(a) of the Federal Rules of Bankruptcy Procedure
requesting the Court to temporarily allow such Claim
for the purpose of accepting or rejecting the Plan. If the Court
temporarily allows such
Claim, the Court will fix the Allowed Amount of such Claim only
for purposes of accepting
or rejecting the Plan. Such motion must be filed with the Court
on or before (i) September 14, 1994 if such Claim is a Disputed
Claim on or prior to the Voting Record
Date, or (ii) thirty (30) days after service of the Debtors'
objection to such Claim, if
the Claim is objected to after the Voting Record Date but prior
to the Voting Deadline.
If a Creditor has an Allowed Claim against more than one
of the Debtors, or in more
than one Class, such Creditor may receive multiple Ballots. IF
YOU RECEIVE MORE THAN ONE BALLOT YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A SEPARATE CLAIM OR INTEREST AND SHOULD
COMPLETE AND RETURN EACH OF THE BALLOTS YOU RECEIVE. IF A BALLOT
IS DAMAGED OR LOST OR IF YOU HAVE ANY QUESTIONS CONCERNING VOTING
PROCEDURES, YOU MAY CONTACT DONLIN, RECANO
& COMPANY, INC. AT 1-800-433-3868.
IN ORDER FOR YOUR BALLOT TO BE COUNTED, IT MUST BE
COMPLETED AS SET FORTH ABOVE, MAILED, AND RECEIVED AT THE
FOLLOWING ADDRESS NO LATER THAN SEPTEMBER 23, 1994 BY 5:00 P.M.
EASTERN TIME (THE "VOTING DEADLINE"):
If By Mail
Donlin, Recano & Company, Inc.
P.O. Box 2022
Murray Hill Station
New York, NY 10156-0701
If By Courier or Hand
Donlin, Recano & Company, Inc.
419 Park Avenue South
Suite 1206
New York, NY 10016
PLEASE NOTE THAT BENEFICIAL OWNERS WHOSE SECURITIES OR
OTHER INDEBTEDNESS ARE HELD BY A NOMINEE OR OTHER AGENT MUST
ENSURE THAT THEIR COMPLETED BALLOTS ARE RECEIVED BY SUCH
NOMINEE OR OTHER AGENT NO LATER THAN SEPTEMBER 19, 1994 AT 5:00
P.M. EASTERN TIME.
Pursuant to Section 3.05 of the Rules of the United States
Bankruptcy Court for the Middle District of Florida, any Ballots
received which do not indicate either an
acceptance or rejection of the Creditors' Plan or which indicate
both an acceptance and
rejection of the Creditors' Plan will not be counted as either an
acceptance or a rejection of the Creditors' Plan.
The Court has directed that objections or challenges, if
any, to the vote of any party with respect to the Creditor's
Plan, must be in writing and must be filed with the
Court and personally served upon the parties identified in the
order approving the Disclosure Statement dated August 2, 1994 so
that they are received by such parties on or before October 7,
1994.
7. Confirmation Hearing
The Code requires the Court to hold a hearing on
Confirmation of the Creditors'
Plan after Ballots have been cast. The initial Confirmation
Hearing has been scheduled
for November 16, 1994 at 1:30 P.M., Eastern Time, at the United
States Bankruptcy Court for the Middle District of Florida, Tampa
Division, 4921 Memorial Highway, Tampa, Florida
33634. At the Initial Confirmation Hearing, the Court will
conduct only a status conference to schedule the date on which
the Confirmation Hearing will continue, and to
consider other issues appropriate for consideration at such
status conference. The Confirmation Hearing may be adjourned
from time to time by the Court without further
notice except for an announcement of the adjournment made at the
Confirmation Hearing. At the Confirmation Hearing, the Court will
(i) determine whether the Creditors' Plan has
been accepted by the requisite majorities of each Voting Class,
(ii) hear and determine any objections to Confirmation of the
Creditors' Plan, (iii) determine whether the
Creditors' Plan meets the requirements of the Code and has been
proposed in good faith, (iv) determine that conditions to
Confirmation have occurred, have been satisfied or have
been waived, (v) confirm or deny Confirmation of the Creditors'
Plan, (vi) determine the results of the Other Unsecured Claim
Election, the Subordinated Note Claim Election, the
Series B & C Senior Note Claim Election and the Equity Call
Option Election.
Objections to Confirmation of the Creditors' Plan, if any,
must be in writing and must be filed with the Court, and
personally served upon the parties identified in the
order approving the Disclosure Statement dated August 2, 1994 so
that they are received by such parties on or before November 10,
1994.
Objections to Confirmation of the Creditors' Plan are
governed by Bankruptcy Rule 9014 and Local Bankruptcy Rule 3.05.
B. Acceptance or Rejection of the Creditors' Plan
As a Holder of a Claim or Interest, your vote on the
Creditors' Plan is important.
In order for the Creditors' Plan to be accepted and thereafter
confirmed by the Court without resort to the "cram-down"
provisions of the Code, votes representing at least
two-thirds in amount and more than one-half in number of Allowed
Claims under the Creditors' Plan of each Voting Class that are
voted must be cast for the acceptance of the Creditors' Plan.
The Proponents are soliciting acceptances from Holders of
Claims in Class S-1, Class S-2, Class S-6, Class U-3, Class U-4,
Class U-5 and Class U-6, and Holders of Interests in Class E-1.
If an impaired Class of Claims or Interests votes to
reject the Creditors' Plan (a "Rejecting Class"), the Proponents
have the right to seek confirmation of the Creditors'
Plan under the "cram-down" provisions of Section 1129(b) of the
Code. Because Classes E-2 and SE-2 are deemed to have rejected
the Creditors' Plan, since the Holders of such
Interests will receive or retain no property under the Creditors'
Plan, the Proponents will be required to exercise this right as
against those Classes to effect Confirmation
of the Creditors' Plan. Under Section 11.1 of the Creditors'
Plan, the Proponents have elected to exercise this right with
respect to Classes E-2 and SE-2 and each Rejecting
Class, if any. To meet the requirements for Confirmation of the
Creditors' Plan under the "cram-down" provisions of Section
1129(b) of the Code, the Creditors' Plan would, at
a minimum, have to be shown to provide either that all Classes
junior to the Rejecting Class will not receive or retain any
property under the Creditors' Plan or that all
Holders of Claims or Interests in the Rejecting Class will
receive under the Creditors'
Plan property having a value equal to the full amount of their
Allowed Claims or Interests. The Proponents expect to be able to
confirm the Creditors' Plan under the
"cram-down" provisions of the Code. As a result, the Proponents
anticipate that the
distributions described herein in respect of Allowed Claims will
not be modified for any
Class of Claims or Interests in the event the Proponents seek
Confirmation of the
Creditors' Plan under the "cram-down" provisions of Section
1129(b) of the Code. The
Proponents, however, reserve their rights to modify the
distributions described herein
in the event the Proponents seek confirmation of the Creditors'
Plan under the "cram-down" provisions of Section 1129(b) of the
Code.
C. Recommendations With Respect to the Creditors' Plan
THE PROPONENTS BELIEVE THAT THE CREDITORS' PLAN PROVIDES
FAVORABLE TREATMENT AND THE EARLIEST POSSIBLE RECOVERIES TO
HOLDERS OF CLAIMS AND INTERESTS AND THAT ACCEPTANCE
OF THE CREDITORS' PLAN IS IN THE BEST INTERESTS OF ALL HOLDERS OF
CLAIMS AND HOLDERS OF INTERESTS. THE PROPONENTS STRONGLY URGE
YOU TO ACCEPT THE CREDITORS' PLAN AND VOTE
AGAINST THE DEBTORS' PLAN. THE DEBTORS, THEIR SENIOR MANAGEMENT
AND A MAJORITY OF THE
HOLDERS OF THE DEBTORS' COMMON STOCK RECOMMEND REJECTION OF THE
CREDITORS' PLAN.
For a description of certain events leading to the filing
of the Creditors' Plan and Disclosure Statement, see
"INTRODUCTION--The Chapter 11 Cases--Negotiations With KKR
Associates and Debtors' Representatives With Respect to Plan of
Reorganization, and Negotiations and Agreement With
Representatives of Veil Piercing Claimants With Respect
to Settlement of Those Claims."
D. Summary of Businesses, Properties and Other Information With
Respect to the Debtors
NOTE: SUBSTANTIALLY ALL OF THE INFORMATION (AND THE
CHARACTERIZATION THEREOF) IN THIS SECTION I.D. IS TAKEN FROM THE
DEBTORS' DISCLOSURE STATEMENT.
Hillsborough was organized in August 1987 by a group of
investors led by Kohlberg
Kravis Roberts & Co. ("KKR") for the purpose of acquiring Jim
Walter Corporation, a
Florida corporation ("Original Jim Walter") pursuant to a
leveraged buyout. Following
its organization, Hillsborough organized and acquired all of the
outstanding shares of capital stock of a group of direct wholly
owned subsidiaries (the "First Tier
Subsidiaries") including JWC Holdings Corporation, a Florida
corporation ("JWC"). Each
of the First Tier Subsidiaries was intended to reflect a separate
business operation of
Original Jim Walter. The First Tier Subsidiaries (other than
JWC) and Hillsborough
organized and acquired all of the outstanding shares of capital
stock of Walter Industries, Inc., a Delaware corporation and an
indirect wholly owned subsidiary of
Hillsborough ("Old Walter Industries"). JWC organized and
acquired all of the outstanding
shares of capital stock of J-II Acquisition Corporation, a
Florida corporation ("J-II").
Old Walter Industries and J-II, in turn, organized and acquired
all of the outstanding
shares of capital stock of Hillsborough Acquisition Corporation
("HAC").
On August 18, 1987, pursuant to an Agreement and Plan of
Merger dated as of August 12, 1987, as amended (the "Agreement
and Plan of Merger"), HAC commenced an offer
(the "Tender Offer") to purchase all of the outstanding shares of
common stock of Original Jim Walter at $60 per share in Cash. On
September 18, 1987, HAC acquired approximately
95% of the outstanding shares of common stock of Original Jim
Walter pursuant to the Tender Offer. On January 7, 1988,
Hillsborough caused Original Jim Walter to be merged
(the "Merger") into HAC (which changed its name to "Jim Walter
Corporation"). On that same date: (1) HAC distributed
substantially all of its assets (principally excluding the
stock of certain subsidiaries of Original Jim Walter engaged in
building materials businesses) to Old Walter Industries in
redemption for all of the shares of capital stock
of HAC owned by Old Walter Industries; (2) HAC merged into J-II;
and (3) J-II changed its name to "Jim Walter Corporation" (and is
hereinafter referred to as "J-II" or "Jim Walter
Corporation"). See "BUSINESSES, PROPERTIES AND OTHER INFORMATION
WITH RESPECT TO THE DEBTORS--Organization of Hillsborough and
Acquisition of Original Jim Walter;" and "--
Corporate Reorganizations and Asset Dispositions--Completed
Transactions--JWC Holdings Corporation."
Following the Merger and prior to the commencement of the
Chapter 11 Cases, Hillsborough undertook a program of corporate
reorganizations and asset dispositions,
which were contemplated by all of the debt agreements entered
into in connection with the
Tender Offer and the Merger. Pursuant to this program
Hillsborough restructured and/or
disposed of certain of the businesses of Original Jim Walter.
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO
THE DEBTORS--Corporate Reorganizations and Asset
Dispositions;" and "--Completion of Mirror Liquidation Plan."
On December 27, 1989, 32 of the Debtors each filed a
voluntary petition for reorganization under Chapter 11 of the
Code ("Chapter 11") (collectively, together with
the voluntary petition for reorganization filed by JW Resources,
the "Chapter 11 Cases"). On December 3, 1990, JW Resources filed
a voluntary petition for reorganization under
Chapter 11 (such dates, with respect to such Debtors, the "Filing
Date") (collectively, the "Reorganization Proceedings"). Two
active subsidiaries, Cardem and J.W. Railroad,
have not filed petitions for reorganization.
The commencement of the Debtors' Chapter 11 Cases resulted
from a sequence of events stemming primarily from an inability of
Hillsborough's interest reset advisors to
reset interest rates on approximately $624 million of outstanding
debt on which interest rates were scheduled to be reset effective
January 2, 1990, based largely on uncertainties
arising from pending veil piercing and asbestos-related
litigation, and the possibility
either that such litigation would lead to the prohibition of
further asset sales and debt
repayment or that substantial new asbestos-related claims might
become assertible against Hillsborough.
On November 7, 1989, certain of the Debtors commenced
exchange offers for all such
outstanding debt that contained interest reset provisions which
exchange offers were
subsequently amended and extended (the "Exchange Offers"). The
primary purpose of the
Exchange Offers was to mitigate the possible impact of resetting
the interest rates on
such debt at rates significantly higher than the then current
interest rates on such debt.
The terms of such debt required that the interest rates thereon
be reset to the rate per
annum such debt should bear in order to have a bid value of 101%
of the principal amount thereof as of December 2, 1989.
The Exchange Offers constituted one of a number of
recapitalization alternatives
that were considered by Hillsborough, but not successfully
consummated, during the second
half of calendar 1989. In early December 1989, during the
pendency of the Exchange
Offers, the reset advisors for such debt with interest reset
provisions, Drexel Burnham Lambert Incorporated ("Drexel Burnham"
or "DBL") and Merrill Lynch, Pierce, Fenner &
Smith, Incorporated ("Merrill Lynch"), the Debtors' current
investment banker, advised
Hillsborough that, in their opinion, there were no interest rates
at which such debt could
be reset to have bid values of 101% as called for by their terms.
The Debtors state in
the Debtors' Disclosure Statement that Hillsborough believes that
the reset advisors'
inability to reset the interest rates was primarily attributable
to two factors: pending
veil piercing-related litigation, which materially hindered the
ability of the Debtors
to pursue a refinancing or sell assets to reduce debt, and
general turmoil in the high yield bond markets.
The Exchange Offers expired at 7:00 p.m., New York City
time, on December 27, 1989,
without satisfaction of the conditions precedent to their
consummation and without the
acceptance for exchange of any of such debt tendered thereunder.
In light of possible
defaults under indebtedness of the Debtors arising as a result of
the inability to reset
interest rates, consummate the Exchange Offers or effect
alternate recapitalizations, the
Reorganization Proceedings were commenced later that evening.
The Debtors currently offer a diversified line of products
and services for home
building, water and waste water transmission, residential and
non-residential construction
and industrial markets. As of May 31, 1993, the Debtors employed
7,522 people at 18 manufacturing facilities, 4 underground coal
mines and its network of sales and
administrative offices nationwide. See "BUSINESSES, PROPERTIES
AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS."
E. The Chapter 11 Cases
1. General
On December 27, 1989, Hillsborough and 31 of its
subsidiaries each filed a voluntary petition for reorganization
under Chapter 11 with the Court. On December 3,
1990, one additional subsidiary, JW Resources, also filed a
voluntary petition for reorganization under Chapter 11 with the
Court. Two other small subsidiaries did not file
petitions for reorganization under Chapter 11.
2. Debtors-in-Possession Order
Pursuant to provisions of the Code and an order of the
Court dated December 28, 1989, the Debtors were authorized to
operate their businesses and to continue to own and
manage their properties and assets as debtors in possession (the
"Debtors in Possession").
The Code authorized the Debtors to enter into transactions,
including the sale or lease of property of their estates and to
use property of their estates, in the ordinary course
of their businesses, without prior approval of the Court. The
sale or lease of property
of the estates other than in the ordinary course of business and
certain other transactions (for example, secured financing),
whether or not in the ordinary course of
business, are subject to prior approval of the Court.
In late December 1989, the Court entered, among other
orders, (i) an order
permitting the Debtors to operate their cash management system
during the Reorganization
Proceedings; (ii) orders (which have since been amended)
permitting payments for certain
pre-Filing Date employee related expenses; (iii) an order
authorizing Jim Walter Homes
to continue the practice of sale of notes and mortgages to
Mid-State Homes; (iv) an order
authorizing payment by Jim Walter Homes to subcontractors of
pre-Filing Date Claims
carrying lien rights; (v) an order procedurally consolidating the
Chapter 11 Cases; and
(vi) orders authorizing use of pre-Filing Date bank accounts and
continuation of investment practices.
3. Retention of Professionals for Debtors
The Court authorized the Debtors to retain Levin,
Weintraub & Crames (now part of
Kaye, Scholer, Fierman, Hays & Handler) and Stichter, Riedel,
Blain & Prosser, P.A. as
bankruptcy counsel. Simpson Thacher & Bartlett was retained as
special counsel to
represent the Debtors in the declaratory judgment veil
piercing-related litigation
described below and as to selected corporate matters, and
Shackleford, Farrior,
Stallings & Evans was retained as special counsel for corporate
matters. The Debtors have
retained a number of other law firms to represent them in
ordinary course transactions
and/or special litigation. From time to time, the Debtors have
sought to retain
additional counsel to deal with new legal matters as they arise
and that are not within
the expertise or geographical areas covered by the present slate
of retained
professionals. The Debtors, with Court approval, have retained
Price Waterhouse as
accountants, and Merrill Lynch as financial advisors, for the
Debtors. The expenses of
these professionals are being paid by the Debtors, to the extent
allowed by the Court
after submission of fee applications. From time to time, the
Debtors have sought to
retain professionals, usually accountants, business brokers or
real estate brokers with
respect to specific sales, litigation or administrative matters.
Utilization of these
professionals has occurred after their retention has been
approved by the Court. The fees
and expenses of these professionals are being paid by the
Debtors, to the extent allowed
by the Court after submission of fee applications.
4. Committees
The United States Trustee (the "U.S. Trustee") has
appointed two unsecured creditor
committees, consisting of the Creditors Committee and the
Bondholders Committee
(collectively, the "Official Committees"). The Official
Committees have played an
extensive role in reviewing the business activities of the
Debtors and assessing and
serving the interests of the Creditors. An unofficial committee
was formed to represent
a group of banks holding Secured Claims (as defined in the
Creditors' Plan) against the
Debtors and another unofficial committee was formed to represent
Holders of the Series B &
C Senior Notes (as defined in Section II.C.3.). In addition, the
Ad Hoc Committee of
Pre-LBO Bondholders constitutes an unofficial committee of
Holders of Pre-LBO Debentures.
The U.S. Trustee's office has been active throughout the
Reorganization Proceedings.
The Official Committees have been represented by counsel
and accountants, and the
Bondholders Committee, in addition, has retained a financial
advisor. The Debtors are
required to pay such expenses of the Official Committees, as well
as expenses of members
of the Official Committees, including all professional fees, to
the extent allowed by the
Court. The Debtors have paid all required statutory fees to the
U.S. Trustee. Lists of
the present members of the Official Committees are annexed hereto
as Exhibit II.
At the request of certain members of the Bondholders
Committee holding Original Jim
Walter debt, the Bondholders Committee established a subcommittee
(the "Pre-LBO
Subcommittee") to represent the interests of the holders of
Original Jim Walter debt.
On September 10, 1991, the Pre-LBO Subcommittee filed an
application seeking authorization
from the Court to retain separate counsel. On September 24,
1991, the Court denied that
application. The Pre-LBO Subcommittee subsequently filed a
motion for reconsideration
of the Court's denial of the application, which was denied by the
Court.
The Ad Hoc Committee of Pre-LBO Bondholders has retained
its own counsel, as have the Bondholder Proponents.
5. Claims
NOTE: UNLESS SPECIFICALLY INDICATED OTHERWISE HEREIN, ALL
CLAIMS INFORMATION
CONTAINED HEREIN IS BASED UPON THE DEBTORS' DISCLOSURE STATEMENT.
As of June 28, 1994, in addition to the Claims listed in
the Schedules (as defined
in the Creditors' Plan), the Debtors' Disclosure Statement states
that approximately
8,200 proofs of claim have been filed in the Chapter 11 Cases.
Because the bar date fixed
by the Court for filing proofs of claim excluded asbestos claims
or other claims based
on veil piercing theories, such claims are not included in the
Debtors' Claim
calculations, although they would be resolved under the
Creditors' Plan. Although the
Debtors are in the process of reconciling and resolving Claims
that differ in amounts from
the Debtors' records, a large number of these Claims remain
unresolved. Many of the
Claims against various Debtors are believed to be duplicative of
other Claims, erroneously
filed against the wrong Debtor or otherwise not properly
allowable by the Court. The
Debtors have begun the process of reviewing and objecting to
Claims erroneous in amounts
or as to the Debtor involved. The Debtors filed a motion to
approve Claim objection
procedures, to deal expeditiously with Claims to be challenged as
paid, duplicates,
transfers and other similar objections involving eleven Debtors.
Debtors have further
filed a motion to approve a compromise of Claim procedure,
seeking an expedited procedure
for adjusting controversies as to amounts of Claims. Both
motions were approved at a
hearing held on August 11, 1993. Further motions to approve
Claim objection procedures
involving other Debtors were approved by the Court on February 14
and on June 15, 1994.
The Debtors filed their motion to approve a Claims
resolution procedure relating
to the liquidation of bodily injury and wrongful death Claims
(excluding asbestos Claims
or any other Claims based on veil piercing theories). The Court
order dated August 12,
1992 approved such procedure which included the requirement of a
special Claim form, a
period for negotiating settlements, a period for mediation, and a
lifting of the Automatic
Stay (as defined in Section I.E.7.) in the event Claims have not
been resolved after
application of the procedure. Numerous Claims have been settled
and are the subject of
past and future motions to approve compromises. Mediation
proceedings have been scheduled before the Court-appointed
mediator.
The Debtors' best evaluation of outstanding Claims
(excluding asbestos Claims or
any other Claims based on veil piercing theories) are as listed
in their respective
Schedules filed by the Debtors with the Court and are as
described herein under "OVERVIEW
OF THE CREDITORS' PLAN--Summary of Claims and Class Treatment
Under the Creditors' Plan."
Some Claims have been filed, or will be filed, seeking
substantial recoveries on
Claims that are unliquidated or which are in dispute. A number
of the Disputed Claims
involve significant dollar amounts and thus the total amount of
all Claims, including
Disputed Claims, is substantially in excess of the total amount
of Claims that the
Creditors' Plan assumes will be Allowed Claims. Resolution of
certain Disputed Claims
will be a prerequisite to confirmation of the Creditors' Plan,
unless waived by the
Proponents. See "BUSINESSES PROPERTIES AND OTHER INFORMATION
WITH RESPECT TO THE DEBTORS-
- -Litigation--Federal Income Tax" and "--Lawsuits Relating to Jim
Walter Resources." It
is anticipated that the Debtors or the Official Committees will
seek to resolve or
estimate Disputed Claims in advance of Confirmation of the
Creditors' Plan to avoid delay
in such Confirmation, where non-resolution might affect a
Debtor's ability to perform under the Creditors' Plan.
Numerous Claims exist with regard to property taxes, sales
taxes and intangible
taxes for the year 1989. Many of these taxes were not due and
owing as of the Filing Date
and payment post-Filing Date has been precluded by the filing of
the Chapter 11 Cases.
Proofs of claim have been filed by the Internal Revenue
Service (the "IRS") in the
amounts of $110,560,883 with respect to fiscal years ended August
31, 1980 and August 31,
1983 through August 31, 1987, $31,468,189 with respect to fiscal
years ended May 31, 1988
(nine months) and May 31, 1989 and $44,837,693 with respect to
fiscal years ended May 31,
1990 and May 31, 1991. These Claims and the objections thereto
have been consolidated
with adversary proceeding no. 91-313, Hillsborough Holdings
Corporation v. United States.
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO
THE DEBTORS--Litigation--Federal Income Tax."
6. Bar Date for Filing of Claims
The Debtors filed their motion requesting a Bar Date (as
defined in the Creditors'
Plan) be set for October 30, 1992, for all Claims other than
Claims relating to the veil
piercing-related litigation or any other asbestos-related Claims
(no bar date has been
fixed for these other Claims). The motion was approved by order
of August 14, 1992,
establishing October 30, 1992 as a Bar Date. The Debtors filed a
motion to set a Bar Date
for the filing of bodily injury and wrongful death Claims, which
Bar Date was also set for October 30, 1992. The Debtors have
filed subsequent amendments to the Schedules, with
subsequent Bar Dates for the Creditors listed in such amendments.
7. Automatic Stay
Pursuant to the provisions of Section 362 of the Code,
upon commencement of the Chapter 11 Cases all actions other than
actions set forth in Section 362(b) of the Code
which existed against the Debtors at the Filing Date and all
actions taken against the Debtors' property were automatically
stayed (the "Automatic Stay").
The Court has granted relief from the Automatic Stay in
three areas. First, Holders of certain Claims have been allowed
by the Court to liquidate Claims in respect
of personal injury or wrongful death in other forums. The
Debtors state in the Debtors'
Disclosure Statement that the Debtors believe that a majority of
these Claims will be satisfied from insurance proceeds.
The second exception relates to Jim Walter Homes, a Debtor
engaged in the business
of constructing and financing new homes, and Mid-State Homes, a
Debtor engaged in the
purchasing and servicing of mortgage installment notes generated
by Jim Walter Homes in
the ordinary course of its business. The Court has granted
relief from the Automatic Stay
to allow the claimants to resolve, in appropriate non-bankruptcy
courts, disputes
involving priority of lien or other real property issues where
either Jim Walter Homes
or Mid-State Homes held a mortgage on property.
The third exception relates to the claims resolution
procedure approved by order
of the Court dated August 12, 1992 whereby tort claimants may be
authorized to proceed
to liquidate their Claims in appropriate state or federal courts
when negotiation and mediation efforts have failed to resolve the
dispute.
8. Executory Contracts
As Debtors in Possession, the Debtors have the right,
subject to Court approval,
to assume or reject any executory contract or unexpired lease,
including, but not limited
to, any employment or severance contract or agreement, as
contemplated by Section 365 of
the Code, in effect on the Filing Date between any of the Debtors
and any other Person
(as defined in the Creditors' Plan) (an "Executory Contract").
In this context,
assumption means that the Debtors agree to perform their
obligations and cure existing
defaults under an Executory Contract. Rejection of an Executory
Contract relieves the
Debtors from their obligation to perform further under such
Executory Contract. Damages
resulting to the other party from the rejection of an Executory
Contract are treated as
an Other Unsecured Claim (as defined in the Creditors' Plan)
arising prior to the Filing
Date and are included in the appropriate Class to the extent such
Claim is allowed by the Court.
Certain Debtors have already assumed substantially all of
their real property and
mineral leases as part of the complete liquidation of Old Walter
Industries and certain
of its subsidiaries pursuant to Section 332 of the Internal
Revenue Code of 1986, as
amended (the "IRC"), as set forth in plans of complete
liquidation adopted by their
respective stockholders (the "Mirror Liquidation Plan"), approved
by Court order of
November 5, 1990, a copy of which is annexed hereto as Exhibit
III (the "Mirror
Liquidation Order"). In connection with the Mirror Liquidation
Plan, Jim Walter Resources
sought approval to assume and assign certain leases and Executory
Contracts, including
a lease with S.E. Belcher and a sales contract with Alabama
Power Company ("Alabama Power"). Alabama Power asserted that Jim
Walter Resources could not assume a coal supply
contract as a matter of law and, alternatively, that Jim Walter
Resources had not cured
defaults in the contract prior to assumption. The Court granted
Jim Walter Resources'
motion for summary judgment and authorized the assumption and
assignment of the coal
supply contract. Alabama Power's appeal of that order is pending
in the United States
District Court for the Middle District of Florida ("District
Court"). See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH
RESPECT TO THE DEBTORS--Litigation--Lawsuits
Relating to Jim Walter Resources" and "OVERVIEW OF THE CREDITORS'
PLAN--Conditions
Precedent--To Confirmation of the Creditors' Plan." As discussed
herein, on May 10, 1994,
Jim Walter Resources and Alabama Power signed a new agreement for
the sale and purchase
of coal which was approved by order of the Court dated May 23,
1994, which order became
final on June 3, 1994. The new agreement provides that Alabama
Power will dismiss its
appeal. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH
RESPECT TO THE DEBTORS--
Businesses and Properties of the Debtors--Jim Walter
Resources--Mining Division." With
respect to the lease with S.E. Belcher, an objection of S.E.
Belcher was resolved by
agreement of the parties and Court approval of that settlement.
The remaining unassumed real property leases of the
Debtors consist mainly of land
under model home display parks operated by Jim Walter Homes and
sales office leases of
U.S. Pipe. The Debtors have made monthly payments in accordance
with the existing leases
throughout the Reorganization Proceedings. The last day to
assume or reject the remaining
unassumed real property leases was extended by the Court to the
Confirmation Date.
Certain other Executory Contracts, apart from those
assumed in connection with the
Mirror Liquidation Plan, have been assumed by the Debtors with
Court approval, where
necessary to assure continuity of service and supply requirements
and construction contracts. Under the Creditors' Plan, all other
Executory Contracts will be assumed
unless specifically rejected on or before the 90th day after the
Effective Date or such
other date specified in the Confirmation Order, or unless a
motion to reject is pending
as of such date. Attached as Exhibit 9 to the Creditors' Plan is
a nonexhaustive list
of Executory Contracts that are rejected under the Creditors'
Plan. The Debtors state
in the Debtors' Disclosure Statement that the Debtors do not
expect to reject any
Executory Contracts which would give rise to any material
rejection damages.
9. Exclusivity Period and Acceptance Period
Pursuant to Section 1121(b) of the Code, a debtor is given
the exclusive right to file a plan of reorganization until the
expiration of the 120 day period following the
date of the order for relief (the "Exclusivity Period"), unless
such Exclusivity Period is extended by the Court. In addition,
pursuant to Section 1121(c)(3) of the Code, a
debtor is given the exclusive right to solicit acceptances to its
plan for 180 days following the date of the order for relief (the
"Acceptance Period"). The initial
Exclusivity Period for each of the Debtors would have expired on
April 26, 1990, and the
initial Acceptance Period would have expired on June 26, 1990.
The Debtors filed various
motions to extend the Exclusivity Period and the Acceptance
Period which were granted.
By order dated April 15, 1992, the Exclusivity Period expired
June 15, 1992 and the
Acceptance Period was to expire on August 14, 1992. A joint plan
of reorganization and
disclosure statement each dated as of June 15, 1992, were filed
by the Debtors with the
Court on June 15, 1992 prior to the expiration of the Exclusivity
Period.
Subsequent to August 1992, the Debtors were granted
various extensions of the Acceptance Period and adjournments of
the hearing for approval of the disclosure statement
dated June 15, 1992.
By order of July 7, 1993, the Court extended the
Acceptance Period until August 2,
1993, but ruled that no further extensions would be granted
beyond August 2, 1993. On
August 23, 1993, the Court entered an order fixing January 1,
1994 as the last date when
a plan of reorganization and disclosure statement may be filed by
any party in interest
and that all disclosure statements filed by such date will be
heard on a date and time
to be fixed by future order of the Court. The Court subsequently
permitted one additional
creditor plan to be filed by April 20, 1994. The August 2, 1993
order further provided
that no hearings for approval of disclosure statements filed on
or before January 1, 1994
would be scheduled until after conclusion of the trial in the
Declaratory Judgment Proceeding (as defined in Section I.A.2.).
On February 16, 1994, the Court denied the Debtors' motion
to delay approval of
disclosure statements and confirmation of a plan of
reorganization. The motion, which
was opposed in separate objections filed by the Bondholders
Committee, the Creditors
Committee, Apollo, Lehman Brothers Inc., the Bank Agents and the
Series B & C Senior Note
Trustee, had sought to delay consideration of the adequacy of the
pending disclosure
statements until the Court rendered a decision in the Declaratory
Judgment Proceeding,
and sought to have the Debtors' Disclosure Statement considered
prior to consideration of any other disclosure statement.
On February 25, 1994, the Court entered an order
scheduling a disclosure statement
hearing on May 19, 1994, establishing April 20, 1994 as the last
day prior to the
disclosure statement hearing date for filing amendments to the
disclosure statements and
their related plans of reorganization filed prior to January 1,
1994, permitting the
filing of a creditor plan of reorganization and related
disclosure statement by Allan
L. Potter, Esq. (which was not timely filed), and establishing
May 6, 1994 as the last
day for filing objections to disclosure statements to be
considered at the hearing. The
order also established procedures for obtaining copies of
previously filed plans and disclosure statements.
10. Negotiations With KKR Associates and Debtors'
Representatives With Respect to Plan of Reorganization, and
Negotiations and Agreement With Representatives of Veil Piercing
Claimants With Respect to Settlement of Those Claims
From February through October 1993, the Bondholder
Proponents engaged in frequent
and protracted negotiations with representatives of KKR
Associates, which is the sole
general partner of three partnerships that hold over 91% of the
Old Common Stock Interests
in Walter Industries, and representatives of Walter Industries in
an effort to reach an
agreement on, inter alia, the terms of a plan of reorganization
and the financial
parameters for settling the asbestos-related veil piercing
litigation that could be
supported by the Bondholder Proponents, and that would provide
the basis for support by
other Holders of Claims. Despite these negotiations, an
agreement was not reached with KKR Associates.
Thereafter, commencing in October 1993, the Bondholder
Proponents actively began
to develop the Creditors' Plan, as an alternative to the Debtors'
Plan, and entered into
the negotiation of a settlement of the Veil Piercing Proceedings
and the Veil Piercing-Related Issues with representatives of the
Holders of a significant number of
asserted Veil Piercing Claims. These negotiations resulted in
the execution of an
agreement in principle dated December 9, 1993, setting forth the
terms of the settlement,
and the execution of the definitive Veil Piercing Settlement
Agreement on April 18, 1994
with such persons and the official committees in the Celotex
Chapter 11 Proceeding. Over
thirty-five law firms, which have represented to the Proponents
that they collectively
represent the vast majority of Veil Piercing Claimants, have
agreed to be bound by the
Veil Piercing Settlement Agreement. The settlement is subject
to, among other things,
the confirmation and consummation of a plan of reorganization of
the Debtors reflecting
the terms of the settlement. The settlement is not, however,
conditioned on confirmation
of a Chapter 11 plan for The Celotex Corporation.
The terms of the Veil Piercing Settlement Agreement are
described at "OVERVIEW OF THE CREDITORS' PLAN--Special Features
of the Creditors' Plan--Settlement of Veil
Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of
the Veil Piercing Settlement Agreement."
11. Filing of Currently Pending Plans; Disclosure
Statement Hearing
On or about August 3, 1994, the Debtors filed with the
Court the Debtors' Plan and
the Debtors' Fifth Amended Disclosure Statement dated as of July
25, 1994 pursuant to
Section 1125 of the Bankruptcy Code (the "Debtors' Disclosure
Statement"). The Debtors'
original and first, second and third amended joint plans of
reorganization and disclosure
statements were filed on June 15, 1992, September 21, 1993, April
20, 1994 and June 9,
1994, respectively. The Debtors' Fourth Amended Plan was filed
on June 22, 1994 and the
Debtors' Fourth Amended Disclosure Statement was filed on June
29, 1994.
On August 2, 1994, the Proponents filed the Creditors'
Plan and the Disclosure
Statement, which amends a plan filed on June 9, 1994 and a
disclosure statement filed on
June 29, 1994, respectively. On December 16, 1993, the
Proponents (which at that time
did not include the Ad Hoc Committee of Pre-LBO Bondholders)
filed the Original Creditors'
Plan and accompanying disclosure statement, and on April 20,
1994, May 11, 1994 and
May 17, 1994, the Proponents filed the first, second and third
amended Original Creditors'
Plan and accompanying disclosure statements, respectively. On
June 9, 1994, the
Proponents filed a disclosure statement that amended their third
amended disclosure statement.
On or about December 31, 1993, the Ad Hoc Committee of
Pre-LBO Bondholders filed
a joinder to the Original Creditors' Plan. To the extent that
the Ad Hoc Committee of
Pre-LBO Bondholders has preserved its right to file a separate
plan of reorganization in
the Chapter 11 Cases, it does not intend to exercise such right
so long as it is a Proponent of the Creditors' Plan.
On December 28, 1993, the Bank Agents filed a plan of
reorganization (the "Bank
Agents Plan") and accompanying disclosure statement. The Bank
Agents' disclosure
statement stated that the purpose of the Bank Agents Plan is to
preserve the rights of
the Working Capital Banks and the Revolving Credit Banks in view
of the January 1, 1994
deadline for filing plans of reorganization with the Court. The
Bank Agents stated in the same filing that they support the
treatment provided for the banks in the Creditors' Plan.
On April 17, 1994, the Bank Agents and the Proponents
entered into the Bank Agents
Agreement. In the Bank Agents Agreement, the Bank Agents state
that they will recommend
to the Holders of Revolving Credit Bank Claims and Working
Capital Bank Claims that they
accept the treatment provided for such Claims under the
Settlement Agreement, and agreed
that they would file a motion with the Court to defer the Court's
consideration of the
Bank Agents Plan and the related disclosure statement and would
not request the Court to
renew consideration thereof until the earlier of December 31,
1994 and the date, if any,
on which the Court denies approval of the Disclosure Statement
for the Creditors' Plan.
The Court granted such deferral at a hearing held on May 18,
1994. The Bank Agents
Agreement further provides that the Proponents will not adversely
modify or amend the
treatment of any or all of the Claims of the Revolving Credit
Banks, the Working Capital
Banks or the Bank Agents under the Creditors' Plan until after
December 31, 1994 and until
either (a) both of the following conditions occur, if ever: (i)
there shall have occurred
a material adverse change in the business, results of operations,
condition (financial
or otherwise), properties, assets, or prospects of the Debtors,
taken together, from the
date of the Bank Agents Agreement, and (ii) the treatment of the
Subordinated Note Claims
under the Creditors' Plan is materially adversely modified or
amended, or (b) the Court
disapproves such treatment on motion of a party to the Bank
Agents Agreement other than a Proponent.
On April 20, 1994, the Series B & C Senior Note Trustee
filed a plan of
reorganization (the "Senior Note Plan") and accompanying
disclosure statement, amending
the plan and disclosure statement filed on December 30, 1993.
Like the Bank Agents Plan,
which focuses on the treatment of the Bank Claims, the Senior
Note Plan focuses on the
treatment of the Holders of Series B & C Senior Note Claims. On
May 19, 1994, in
connection with an agreement reached with the Proponents on the
rate of post-petition
interest to be paid on account of Series B & C Senior Note Claims
and the form of
consideration to be used to satisfy such Claims under the
Creditors' Plan, the Series B &
C Senior Note Trustee agreed to seek to defer the Court's
consideration of the Senior Note
Plan, and the Court granted such deferral at a hearing held on
May 19, 1994.
As set forth above, see "INTRODUCTION--Exclusivity Period
and Acceptance Period,"
the February 25, 1994 order of the Court fixed May 6, 1994 as the
last day to file objections to the disclosure statements filed on
April 20, 1994 and scheduled a hearing for May 19, 1994 to
approve such disclosure statements.
On or prior to May 6, 1994, objections to the Debtors'
April 19, 1994 disclosure
statement were filed by the Proponents, the California Department
of Toxic Substances
Control ("DTSC") and the California Regional Water Quality
Control Board ("CRWQCB"), the
Mississippi State Tax Commission, Raul Delgado, et al. and other
Texas homeowners (the
"Texas Homeowners"), the Series B & C Senior Note Trustee, the
Securities and Exchange
Commission (the "SEC") and Purnie Melcher, Mary Melcher, Richard
Melcher and Curtis Melcher.
Objections to the Proponents' April 20, 1994 disclosure
statement were filed by the
Debtors, DTSC and CRWQCB, the Texas Homeowners, the Series B & C
Senior Note Trustee and the SEC.
Objections to the Series B & C Senior Note Trustee's April
20, 1994 disclosure
statement were filed by the Debtors, the Proponents, the DTSC and
CRWQCB, the Texas Homeowners and the SEC.
On May 19, 1994, a hearing was held to consider approval
of the Proponents'
April 20, 1994 disclosure statement and the Debtors' April 19,
1994 disclosure statement.
At the conclusion of the hearing, the Court sustained in part and
overruled in part the
objections filed, permitted the Debtors and the Proponents to
file amended plans of
reorganization and disclosure statements not later than June 9,
1994, fixed June 17, 1994
as the date by when objections to the amended disclosure
statements must be filed and
scheduled a status conference for June 15, 1994 to further
consider the confirmation process.
An objection to the Proponents' April 20, 1994 disclosure
statement was filed on June 8, 1994 by the Aetna Casualty and
Surety Company.
On May 23, 1994, the Court entered an order (i) sustaining
in part and overruling
in part the objections filed to the Proponents' April 20, 1994
disclosure statement and
the Debtors' April 19, 1994 disclosure statement; (ii) fixing
June 9, 1994 as the last
day to file supplements to the amended disclosure statements
filed by the Proponents and
the Debtors; (iii) fixing June 17, 1994 as the last day to file
objections to the
disclosure statements filed by the Proponents and the Debtors on
June 9, 1994;
(iv) providing that in the event additional objections are filed
on or before June 17,
1994, the Court may schedule a hearing to consider such
objections; and (v) providing that
once the Proponents' and the Debtors' disclosure statements are
approved, the Court will
enter an order scheduling a Confirmation Hearing.
On June 15, 1994, the Court held a status conference with
respect to the disclosure
statements filed by the Debtors and the Proponents on June 9,
1994. At the status
conference, the Debtors and the Proponents suggested the
following procedures and the
fixing of the following dates in connection with the disclosure
statement approval
process: (i) June 21, 1994 was fixed as the last date by which
the Debtors and the
Proponents could serve amended and restated plans of
reorganization, which amended and
restated plans of reorganization were to be filed with the Court
on June 22, 1994;
(ii) June 28, 1994 was fixed as the last date by which the
Debtors and the Proponents
could serve amended and restated disclosure statements, which
amended and restated
disclosure statements were to be filed with the Court on June 29,
1994; (iii) July 6, 1994
was fixed as the last date by which parties in interest, other
than the clients of Allan
Potter, Esq., were to serve written objections to the amended and
restated disclosure
statements filed on June 29, 1994, which objections were to be
filed with the Court no
later than July 7, 1994; (iv) July 8, 1994 was fixed as the last
date by which the clients
of Allan Potter, Esq. could serve and file written objections to
amended and restated
disclosure statements filed by the Debtors and the Proponents;
(v) during the period
July 7 through July 11, 1994, the Debtors and the Proponents were
to confer and attempt
in good faith to resolve any objections to the amended and
restated disclosure statements;
(vi) prior to July 7, 1994, the Debtors and the Proponents were
to attempt to resolve
technical balloting and solicitation issues and serve and file,
either jointly or
separately, a motion regarding such issues and procedures which
motion was scheduled to
be heard on July 13, 1994; (vii) on July 12, 1994, the Debtors
and the Proponents were
each to file with the Court a pleading setting forth, without
legal argument, unresolved
objections to the amended and restated disclosure statements
filed by the Debtors and the
Proponents; and (viii) a hearing was scheduled for July 13, 1994
at which the Court heard
argument concerning any unresolved objections to the amended and
restated disclosure statements filed by the Debtors and the
Proponents. On June 28, 1994, the Court entered
an order confirming the aforementioned procedures and dates.
Objections to the Debtors' and the Proponents' June 9,
1994 disclosure statements
were filed by the Pension Benefit Guaranty Corporation on June
16, 1994 and by the Texas Homeowners on June 20, 1994.
Objections to the Debtors' June 29, 1994 disclosure
statement were filed on or
prior to July 7, 1994 by the Proponents and the Texas Homeowners,
and objections to the
Proponents' June 29, 1994 disclosure statement were filed on or
prior to July 7, 1994 by the Debtors and the Texas Homeowners.
In early July 1994, the Debtors and the Proponents
separately negotiated and
reached agreement with the PBGC on changes to the Debtors' and
the Proponents' respective
June 29, 1994 disclosure statements, which changes satisfied all
of the PBGC's filed objections.
On July 8, 1994, counsel for the Proponents and counsel
for the Debtors conferred
and attempted to resolve their respective objections to the
other's disclosure statement.
Such counsel resolved all but two of the 11 objections raised by
the Proponents, and some
of the numerous objections raised by the Debtors. On July 12,
1994, the Proponents and
the Debtors each filed separate statements with the Court
indicating the remaining
outstanding objections of each of them to the other's June 29,
1994 disclosure statement.
On July 13, 1994, the Court held a hearing at which the
Court (i) ruled on all
outstanding objections to the Creditors' and the Debtors'
respective June 29, 1994
disclosure statements; (ii) fixed July 13, 1994 as the Voting
Record Date; fixed August 5,
1994 as the last date for mailing of disclosure statements to
Creditors and Interest
holders; fixed August 15, 1994 as the deadline for publication of
notice of the
Confirmation Hearing; fixed September 23, 1994 as the Voting
Deadline; fixed October 7,
1994 as the last day to file challenges or objections to the vote
of any party with
respect to the Creditors' Plan; fixed October 17, 1994 as the
date on which the Court will
commence hearings, continuing day to day until concluded to
consider the following
confirmation-related matters (it being understood that when and
whether the Court will
issue one or more orders in respect of these matters is not
determined by the Court's
order scheduling such hearing): (a) the issues raised by the
Debtors in Adversary
Proceeding No. 94-278 (as defined herein, the "New DJ Action"),
which action the Court
has ruled should be deemed to be a contested matter governed by
Bankruptcy Rule 9014, and
the issues raised in any response and/or motion filed by any of
the defendants thereto;
(b) the application by the Proponents seeking approval of the
Veil Piercing Settlement
Agreement, which, among other things, provides for a settlement
of all Veil Piercing
claims including, among others, all claims asserted in the
Declaratory Judgment
Proceeding, and any related application or response filed by any
party-in-interest
thereto; and (c) any properly asserted challenges or objections
to the vote of any party
with respect to the Creditors' Plan; fixed November 10, 1994 as
the last day to file
objections to confirmation of the Creditors' Plan or the Debtors'
Plan; and fixed
November 16, 1994 as the date on which the initial Confirmation
Hearing will take place,
at which hearing the Court will conduct only a status conference
to schedule the date on which the Confirmation Hearing will
continue, and to consider other issues appropriate
for consideration at such status conference.
On July 28, 1994, the Court, inter alia, (i) granted the
Debtors' emergency motion
for leave to file a further amended plan of reorganization and
disclosure statement, which
motion was opposed by the Proponents, (ii) granted the Proponents
permission to serve an
amended plan and an amended disclosure statement on or prior to
August 1, 1994, and file
the same with the Court on August 2, 1994, and (iii) extended, by
as few days as
necessary, but to no later than August 12, 1994, the August 5,
1994 deadline for mailing solicitation packages to Creditors.
The Proponents and the Debtors have agreed on the text of
a proposed order, which
the Proponents expect the Court to sign on or about August 1,
1994, that, inter alia,
authorizes the Debtors to serve on or before August 2, 1994 and
file on or before
August 3, 1994 (i) an amended plan of reorganization that
contains only those changes set
forth in Exhibit B to the Debtors' Emergency Motion dated July
25, 1994, and (ii) an
amended disclosure statement that contains only those changes set
forth in Exhibit C to
the Debtors' Emergency Motion dated July 25, 1994 and those
changes that must necessarily
be made as a result of the changes made to the Creditors' Plan
served on August 1 and filed on August 2, 1994.
12. Negotiations and Agreement with Ad Hoc Committee of
Pre-LBO Bondholders
From January through March 1994, the Bondholder Proponents
engaged in negotiations
with members of the Ad Hoc Committee of Pre-LBO Bondholders,
which includes the Indenture
Trustees for the Pre-LBO Debentures and holders of a significant
amount of Pre-LBO
Subordinated Note Claims, regarding the treatment of Class U-6
Claims under the Creditors'
Plan and the continued prosecution of the fraudulent conveyance
lawsuit, Mellon Bank, N.A.
and The Bank of New York v. Kohlberg Kravis Roberts & Co., et
al., Adv. Pro. No. 94-17
(the "Fraudulent Conveyance Lawsuit"), filed by the Indenture
Trustees for the Pre-LBO Debentures in January 1994. The
Fraudulent Conveyance Lawsuit, brought by the
plaintiffs for the benefit of the Hillsborough estate and its
creditors, alleges, among
other things, that the issuance of debt in connection with the
1988 leveraged buy-out of
Hillsborough constituted a fraudulent conveyance under New York
and Florida law. The
plaintiffs sought to avoid the obligations incurred by the
Debtors in the leveraged
buy-out, which, among other results, the plaintiffs allege would
effectively make the
Pre-LBO Debenture Claims senior to the other Subordinated Note
Claims, the Bank Claims
and the Series B & C Note Claims, would entitle the Holders of
Pre-LBO Debenture Claims
to certain funds paid after the Filing Date in repayment of debt
owed to the Working
Capital Banks and the Revolving Credit Banks, and would
invalidate the liens of such Banks
with respect to the Pre-LBO Debenture Claims. The order of the
Court granting leave for
the filing of the Fraudulent Conveyance Lawsuit provided that the
litigation could not
be further pursued without leave of the Court, and specifically
reserved the right of all
parties in interest to object to the plaintiffs' right to file
the lawsuit and prosecute
the litigation. According to the plaintiffs' motion filed with
the Court, the lawsuit
was filed at the time it was in order to avoid the passage of a
possible statute of
limitations expiration date of January 7, 1994, the sixth
anniversary of the merger that
consummated the leveraged buy-out of Hillsborough.
The negotiations resulted in the execution of the Pre-LBO
Bondholders Settlement Agreement.
The terms of the Pre-LBO Bondholders Settlement Agreement
are described at
"OVERVIEW OF THE CREDITORS' PLAN--Special Features of the
Creditors' Plan--Settlement of
Veil Piercing/Fraudulent Conveyance Issues and Other
Issues--Pre-LBO Bondholders Settlement Agreement."
13. Negotiations and Agreement With Holders of Series B
& C Senior Note Claims and Series B & C Senior Note Trustee
After negotiations that had been conducted from time to
time since February, 1994,
on May 19, 1994, the Series B & C Senior Note Trustee reached an
agreement with the
Proponents regarding the rate of post-petition interest to be
paid on account of the
Series B & C Senior Note Claims and the form of consideration
(Cash and/or New Senior
Notes) to be used to satisfy such Claims under the Creditors'
Plan. This agreement is
supported by the Holders of a substantial amount of Series B & C
Senior Note Claims. The
terms of this agreement have been incorporated into the
Creditors' Plan. The Series B &
C Senior Note Trustee sought to defer the Court's consideration
of the plan of
reorganization filed by the Series B & C Senior Note Trustee in
December 1993 and amended
in April 1994, and the Court granted such deferral at a hearing
held on May 19, 1994.
F. Litigation of Veil Piercing Proceedings
Prior to the Filing Date, certain of the Debtors were
named as co-defendants in
lawsuits brought against Celotex alleging, inter alia, that (i)
Original Jim Walter and
its successors, including certain of the Debtors, are liable for
all damages caused by
products manufactured, sold and distributed by Celotex, by reason
of Claims sounding in
piercing the corporate veil, alter ego and related theories, and
(ii) the distribution
by HAC of substantially all of its assets to Old Walter
Industries constituted a fraudulent conveyance.
On January 2, 1990, the Debtors commenced the Declaratory
Judgment Proceeding
against Original Jim Walter, Celotex and all known individuals
who have filed suit against
the Debtors seeking to hold the Debtors liable for
asbestos-related liabilities of
Celotex. The Declaratory Judgment Proceeding requested that the
Court declare and
adjudicate that (i) the corporate veil between Original Jim
Walter and Celotex may not
be pierced; (ii) the leveraged buyout of Original Jim Walter was
not a fraudulent
conveyance, nor were any subsequent transactions entered into as
part of the leveraged
buyout fraudulent transfers; (iii) neither the Debtors nor any of
their non-Debtor
subsidiaries or affiliates is the successor in interest to either
Original Jim Walter or
Celotex; and (iv) neither the Debtors nor any of their non-Debtor
subsidiaries or
affiliates is liable for the asbestos-related liabilities of
either Original Jim Walter or Celotex.
On the same date, the Debtors also filed a Complaint to
Extend Automatic Stay (the
"Injunction Proceeding") wherein the Debtors sought to enjoin all
actions against Original
Jim Walter and all other non-Debtors on corporate veil piercing
or related theories, and
further seeking a permanent injunction staying all actions. On
January 9, 1990, the
Debtors filed a motion for preliminary injunction in the
Injunction Proceeding. Such
motion sought a preliminary injunction extending the Automatic
Stay to enjoin the
prosecution of any action in which a plaintiff seeks to hold the
Debtors, any of their
non-Debtor subsidiaries or affiliates or other non-Debtors
responsible for
asbestos-related liabilities of Celotex, on piercing the
corporate veil or similar legal theory.
The veil piercing claimants filed a motion with the Court
requesting that the Court
dismiss or abstain, or, in the alternative, stay the Declaratory
Judgment Proceeding.
The veil piercing claimants opposed the Debtors' motion for
preliminary injunction.
On April 13, 1990, the Court issued proposed findings of
fact, conclusions of law
and recommendations pursuant to Bankruptcy Rule 9011 which
recommended, among other
things, that the District Court deny the veil piercing claimants'
motion to abstain from
deciding, or to stay, the Declaratory Judgment Proceeding as to
the Debtors. On April 20,
1990, the Court entered orders (i) deferring the ruling on the
veil piercing claimants'
motion to dismiss the Injunction Proceeding until the District
Court decided whether or
not to adopt the Court's recommendation, and (ii) preliminarily
enjoining all asbestos
related personal injury and property damage claimants and their
attorneys and agents and
all others acting on their behalf from commencing or continuing
any civil action in any
United States federal or state court in which persons are
attempting to assert Claims
against non-Debtors that are based on the right to pierce the
corporate veil between
Celotex and Original Jim Walter or that relate to or are
connected with claims that
attempt to impose liability on the Debtors for asbestos-related
liabilities.
The veil piercing claimants sought relief from the
District Court as to both the
April 13, 1990 and April 20, 1990 orders. On July 11, 1990, the
District Court adopted
the Court's findings of fact, conclusions of law and
recommendations pursuant to
Bankruptcy Rule 9011 and denied the veil piercing claimants'
motion to abstain from
deciding, or to stay, the Declaratory Judgment Proceeding. On
February 5, 1991 the
District Court entered its Order Denying Motion to Appeal the
preliminary injunction as being interlocutory in nature.
The Debtors filed a motion for summary judgment on
February 28, 1992. The Court heard oral argument in connection
with the summary judgment motion on April 16, 1992.
On August 25, 1992, the Court entered an order denying the
Debtors' motion for
summary judgment but in its decision made certain findings of
fact supportive of the
Debtors' position in the Declaratory Judgment Proceeding.
Following the Court's denial of the Debtors' motion for
summary judgment, on
September 2, 1992, the veil piercing claimants filed a renewed
request with the District
Court to withdraw the Declaratory Judgment Proceeding from the
Court. On September 14,
1992, the Debtors filed a motion in the Court to strike the veil
piercing claimants' jury
demand, which was granted on October 7, 1992. On September 15,
1992, the District Court
entered an order denying the veil piercing claimants' motion to
withdraw the proceeding.
On September 22, 1992, the veil piercing claimants filed a motion
in the District Court
for reconsideration of its September 15th order, or, in the
alternative, for certification
of the order for interlocutory review in the United States
Circuit Court of Appeals for
the Eleventh Circuit (the "Court of Appeals"), which was denied
on February 23, 1993.
On March 3, 1993, the veil piercing claimants petitioned
the Court of Appeals for
a writ of mandamus ordering the District Court to withdraw the
Declaratory Judgment
Proceeding from the Court, and to conduct a jury trial on the
veil piercing and fraudulent
conveyance claims. On April 18, 1993, the Court of Appeals
denied the veil piercing claimants' request for mandamus.
On October 30, 1992, Celotex filed proofs of claim in each
of the Debtor's Chapter
11 Cases claiming that each Debtor is liable for all Claims which
Celotex may hold. On
November 6, 1992, the Debtors filed their objections to the
Claims of Celotex. On
December 9, 1992, the Court signed an order sustaining the
Debtor's objections to the
proofs of claim filed by Celotex, without prejudice to the right
of Celotex, or any other
person alleging a veil piercing claim, to file proofs of claim,
if the Court deems
appropriate, at the conclusion of the Declaratory Judgment
Proceeding.
On November 13, 1992, the Debtors filed a motion in the
Celotex Chapter 11
Proceeding for limited relief from the Automatic Stay for the
sole purpose of permitting
a trial on the veil-piercing Claims in the Declaratory Judgment
Proceeding and the
prosecution or defense of any appeals arising from or relating to
the decision in such
trial. On December 9, 1992, United States Bankruptcy Judge
Thomas E. Baynes granted
relief from the Automatic Stay, permitting Celotex to participate
in all aspects of the
Declaratory Judgment Proceeding up through and including any
appeals.
On February 18, 1993, the veil piercing claimants filed
new discovery requests on
the Debtors, Celotex, Jim Walter Corporation and certain parties
not defendants in the
Declaratory Judgment Proceeding. Further discovery ensued, as
well as litigation over
whether the Debtors had waived the attorney--client and
accountant--client privileges in
connection with certain material sought to be reviewed by the
asbestos claimants. The
Court denied the asbestos claimants' requests to obtain such
discovery.
On June 14, 1993, the Debtors filed a pre-conference
statement requesting the Court
to set a definite trial date of December 13, 1993 (which the
Court had earlier indicated
was its goal) and to set dates for all remaining discovery and
other pretrial matters.
On July 14, 1993, all parties entered into a stipulation
that modified the
previously agreed upon discovery dates and set a firm pre-trial
schedule leading to a
December 13, 1993 trial date in the Declaratory Judgment
Proceeding.
On July 16, 1993, the veil piercing claimants filed a
Petition for Writ of
Certiorari with the United States Supreme Court, seeking review
of the decision of the
Court of Appeals denying the veil piercing claimants' Petition
for Writ of Mandamus on
the issue of their right to a jury trial on the veil piercing
issues, which Debtors
received on July 19, 1993. On August 18, 1993, Debtors filed
their opposition to the
Petition for Writ of Certiorari. On August 25, 1993, the veil
piercing claimants filed
their reply brief. On October 4, 1993, the United States Supreme
Court denied the veil piercing claimants' Petition for Writ of
Certiorari.
On November 24, 1993, the Court entered an order denying
the asbestos claimants'
motion to reschedule the pre-trial conference scheduled for
November 29, 1993 and the
trial scheduled to commence December 13, 1993. On December 6,
1993, the asbestos
claimants filed a renewed motion for continuance which sought to
continue the trial until
January 1994. On December 8, 1993, the Court entered an order
denying the renewed motion
to reschedule the trial. On December 8, 1993, the asbestos
claimants filed an Emergency
Petition for Writ of Mandamus in the District Court which sought
to have the District
Court enter an order continuing the trial. At a hearing held on
December 9, 1993, the
District Court denied the asbestos claimants' Emergency Petition
for Writ of Mandamus.
The Court held a trial in the Declaratory Judgment
Proceeding during the week of December 13, 1993. A transcript of
the trial may be obtained from Pacific Photo at a cost
of $1,000. Post-trial briefs were filed by the parties on March
16, 1994.
On April 18, 1994, the Court issued its decision on the
veil piercing issues raised
in the Declaratory Judgment Proceeding. As expected, the Court
ruled in favor of the
Debtors. A copy of Bankruptcy Judge Paskay's 38 page Findings of
Fact, Conclusions of
Law and Memorandum Opinion is annexed hereto as Exhibit XII.
The Court found and determined that the burden of proof on
the veil piercing issue
was on the asbestos claimants (see p. 4) and that the proof
presented on the five specific
issues which were the subject of the December 1993 trial (see pp.
3-4) was insufficient
to carry the asbestos claimants' burden of proof (see p. 37).
The Court determined that
the veil piercing issue was a threshold issue and that since it
decided this issue against
the asbestos claimants, it did not have to consider the
fraudulent transfer claim (see p. 5).
Among other things, the Court also found that:
(a) it would apply the laws of the States of
Delaware and Florida (which it stated were "functionally the
same") (see pp. 16-17);
(b) "The management of Celotex, and of JWC were
fully aware of the impact of the asbestos litigation on the
economic health of Celotex and of course also
indirectly upon JWC. In fact, the JWC legal department
regularly distributed reports on the number of claims and the
cost of settlements and the prospect of litigation to the
officers and to the Board of Directors of JWC. In addition,
JWC's annual reports and Forms 10-K filed with the SEC
regularly disclosed the key facts concerning asbestos
litigation." (see p. 15);
(c) "It is clear that all asbestos manufacturers
were aware of the media coverage of the asbestos litigation,
especially when Johns-Manville filed for protection under the
Bankruptcy Code, the first major asbestos related Chapter 11
case. Everybody who had a connection with asbestos or
asbestos related products was fully aware of the progress of the
Johns-Manville Chapter 11 case. One would be less than candid
not to admit that this threat to enterprises who were connected
and involved with asbestos would raise concern in the
minds of the management of JWC and the legal department of JWC."
(see pp. 28-39); and
(d) "... there is a lot of smoke, but not
sufficient fire and the proof presented in support of the veil
piercing claim is a slender reed, indeed, upon which to hang a
sword with sufficient strength required under law to pierce the
corporation veil.... Even on points viewed in the most
favorable light which would support the Debtors' claims, such as
JWC's motivation and its involvement in the asset disposition of
Celotex, the record equally supports the theory urged by the
Asbestos Claimants." (p. 37).
Nothing in the Court's decision in the Declaratory
Judgment Proceeding in any way
prevents or precludes the settlement of the Veil Piercing Claims
under the Veil Piercing Settlement Agreement.
On April 26, 1994, counsel to the Veil Piercing Claimants
filed a timely notice of
appeal of the Court's decision. On May 7, 1994, counsel to the
Veil Piercing Claimants
filed their statement of issues and designated those items which
were to be included in
the record on appeal. Such counsel have raised, among other
issues on appeal, issues
relating to (a) choice of law, (b) the right to a jury trial, (c)
accountant--client privilege and waiver, (d) attorney--client
privilege and waiver, (e) the applicable
standards for veil piercing, and (f) corollary issues such as a
shareholder's obligations
to creditors of an insolvent debtor. On May 19, 1994, the
Debtors filed their counter
designation of items to be included in the record on appeal. By
notice dated June 2,
1994, the asbestos claimants filed a motion with the District
Court seeking the entry of
an order modifying the page limits applicable to briefs on the
merits of their appeal from
the Court's decision in the Declaratory Judgment Proceeding so as
to permit the asbestos
claimants to file a principal brief not exceeding seventy-five
(75) pages and a reply
brief not exceeding thirty (30) pages. The Debtors have filed a
memorandum of law in
opposition to the asbestos claimants' motion and have filed an
emergency motion to
expedite ruling on the asbestos claimants' motion. By order
dated June 24, 1994, the
District Court denied the asbestos claimants' motion to modify
the page limits applicable
to briefs, denied the Debtors' emergency motion as moot, modified
the District Court's
June 6, 1994 order described below to the extent that the
asbestos claimants shall serve
and file their principal brief on or before July 18, 1994 and
that Bankruptcy Rule 8009
shall govern the dates by which the remaining appellate briefs
shall be filed.
By motion dated June 2, 1994, the asbestos claimants filed
a motion with the
District Court seeking the entry of an order extending their time
to file their principal
brief until thirty (30) days following the District Court's
ruling on their motion to
modify the page limits applicable to briefs on the merits of
their appeal from the Court's
decision in the Declaratory Judgment Proceeding. The Debtors
filed a memorandum of law
in opposition to the motion. By order dated June 6, 1994, the
District Court granted the asbestos claimants' motion.
Notwithstanding the Court's ruling in the Declaratory
Judgment Proceeding, the
Proponents believe that the Veil Piercing Settlement Agreement is
in the best interest
of all creditors and the Debtors. See "OVERVIEW OF THE
CREDITORS' PLAN--Special Features
of the Creditors' Plan--Settlement of Veil Piercing/Fraudulent
Conveyance Issues and Other
Issues--Reasonableness of the Settlement: Certainty and Prompt
Payment vs. Uncertainty
and Additional Years of Delay."
On April 28, 1994, the Debtors filed with the Celotex
Bankruptcy Court a complaint
for declaratory relief and a motion for summary judgment in the
Celotex Chapter 11
Proceeding on the issues of whether (i) Celotex alone has
standing to assert a veil
piercing claim against any of the Debtors, and (ii) all creditors
of Celotex are bound
by the outcome of the Court's decision in the Declaratory
Judgment Proceeding. The
Proponents believe that, among other issues, it is unclear
whether the complaint describes
a judicially reviewable "case or controversy" since it names, as
defendants, only parties
that may be predisposed to agree with the judgment sought by the
Debtors, and whether the
relief, if granted, would bind all persons that may challenge any
such declaratory
judgment at a later date. On May 18, 1994, Celotex filed a
motion to strike the Debtors'
motion for summary judgment as being prematurely filed. Celotex
has also filed a motion
to dismiss the complaint based on several grounds, including that
it did not state a case
or controversy. The motion is scheduled to be heard by the
Celotex Bankruptcy Court on October 13, 1994.
On June 16, 1994 Judge Thomas M. Baynes entered an order
in the Celotex Chapter 11 Proceeding authorizing and directing
Celotex's entry into and performance of the Veil
Piercing Settlement Agreement.
G. Objections To Confirmability of Creditors' Plan Asserted by
Debtors
In the Debtors' Objection to Approval of First Amended
Disclosure Statement For Creditor Proponents' Settlement Plan
filed with the Court on May 5, 1994, the Debtors
allege that the First Amendment to the Original Creditors' Plan
is not confirmable because certain terms of the Creditors' Plan
are invalid, as follows:
(i) The Veil Piercing Settlement Agreement is
allegedly not reasonable in light of the Court's ruling in the
Declaratory Judgment Proceeding in favor of the Debtors;
(ii) Unsecured Creditors are allegedly not entitled
to post-petition interest as a matter of law given the alleged
values of the Debtors' estates;
(iii) The Veil Piercing Settlement allegedly
improperly dictates the terms of a future plan of reorganization
and the Proponents allegedly improperly solicited Holders of
equity interests in Walter Industries to execute the Veil
Piercing Settlement Agreement, support the Creditors' Plan
and reject all other plans of reorganization;
(iv) The structure of the New Common Stock
allegedly does not provide an appropriate distribution under
Section 1123(a)(6) of the Code of voting power between the two
classes of common stock to be distributed to the three classes of
unsecured bondholders under the Creditors' Plan;
(v) The Pre-LBO Bondholders Settlement Agreement
allegedly improperly dictates the terms of a future plan of
reorganization and the Proponents improperly solicited Holders of
Pre-LBO Debenture Claims to support the Creditors' Plan and
reject the Debtors' Plan and the Senior Note Plan;
(vi) The Creditors' Plan was allegedly proposed in
bad faith; and
(vii) Apollo and Lehman Brothers Inc. have
allegedly breached their duties to all bondholders.
The Proponents believe that none of these grounds, if and
when they are properly
raised and briefed at a hearing on the confirmation of the
Creditors' Plan, provides a
basis upon which the confirmation of the Creditors' Plan can be
successfully challenged.
The Proponents expect that the factual and legal issues relating
to the confirmability
of the Creditors' Plan will be decided by the Court at the
confirmation hearing.
The Proponents believe that, purportedly in furtherance of
pursuing one of these
grounds for objection, on May 5, 1994, the Debtors filed a
complaint with the Court (Adv.
Proc. No. 94-278) (the "New DJ Action") requesting a declaratory
judgment that (i) on a
Chapter 7 liquidation basis, the Debtors are insolvent, and (ii)
under the provisions of
the Code and applicable law, unsecured creditors in the Chapter
11 Cases are therefore
not legally entitled to receive post-petition interest on their
Claims. The complaint
in the New DJ Action names as defendants each of the Proponents
and each of the Indenture
Trustees, including the Series B & C Senior Note Trustee. The
complaint alleges that,
if the Court grants the relief requested by the Debtors, the
Creditors' Plan and the
Senior Note Plan would be unconfirmable as a matter of law. The
Proponents believe that
the issues raised in the complaint are irrelevant to the
confirmability of the Creditors'
Plan; that certain factual and legal conclusions contained in the
complaint are erroneous;
and that the issues raised in the New DJ Action are properly the
subject of a confirmation
hearing rather than a declaratory judgment proceeding. As
discussed herein at "OVERVIEW OF THE CREDITORS' PLAN,"
confirmation of the Creditors' Plan is not conditioned on whether
Holders of Subordinated Note Claims are permitted to be paid or
will receive post-petition interest, although the Proponents
believe that this is the correct legal conclusion under
the circumstances. On June 6, 1994, the Series B & C Senior Note
Trustee filed a motion
to dismiss the New DJ Action, and the Proponents filed a motion
seeking to dismiss the
complaint in the New DJ Action or, alternatively, to consolidate
the New DJ Action with
the Confirmation Hearing. The Debtors filed a response to these
motions on July 7, 1994.
At a hearing held on July 13, 1994, the Court ruled that the New
DJ Action should be
deemed to be a contested matter governed by Bankruptcy Rule 9014
and that as part of the
confirmation process the issues raised by the New DJ Action be
considered at a hearing scheduled to begin on October 17, 1994.
<PAGE>
II.
OVERVIEW OF THE CREDITORS' PLAN
The Proponents believe that the Creditors' Plan is the
only plan filed in these
Chapter 11 Cases that is capable of confirmation and consummation
in the near term--as
early as the end of calendar year 1994. Unlike the other plans
filed to date, including
the Debtors' Plan, the Creditors' Plan would promptly and finally
resolve all
asbestos-related claims against the Debtors pursuant to the
settlement agreed to in
principle on December 9, 1993 and embodied in the definitive Veil
Piercing Settlement
Agreement entered into on April 18, 1994. The asbestos-related
claims are the primary
reason that the Debtors sought Chapter 11 relief. All other
plans depend on either (i) a
final litigated resolution of these cases, which, because of the
appellate process, will
prolong these cases for years to come, or (ii) an unspecified
settlement to be reached
on unspecified terms at an unspecified date. The rationale and
basis for the veil
piercing settlement are discussed below in greater detail.
On April 18, 1994, the Court rendered its decision in the
Declaratory Judgment
Proceeding. As expected, the Court ruled in favor of the
Debtors. On April 27, 1994,
counsel for the Veil Piercing Claimants filed a timely appeal of
the Court's decision.
Far from resolving the litigation, this decision marks only the
beginning of what the
Proponents expect to be a lengthy and costly appeals process.
Nothing in the Court's
decision in the Declaratory Judgment Proceeding in any way
prevents or precludes the
settlement of the Veil Piercing Claims under the Veil Piercing
Settlement Agreement. See
"INTRODUCTION--Litigation of Veil Piercing Proceedings."
Although the Proponents of the Creditors' Plan have always
believed that the
Debtors will ultimately prevail in the Veil Piercing Proceedings,
the settlement
represents their collective judgment that the uncertainty and
cost of protracted
litigation far outweigh the very substantial cost of the
settlement. The settlement was
negotiated by the Bondholder Proponents, who, as the two largest
holders of Subordinated
Note Claims (approximately $428 million principal amount), will
see their recoveries most
adversely impacted by a litigation loss or extended delay in
finally resolving the Veil
Piercing Claims. The settlement represents a reasonable
assessment of (i) the uncertainty
inherent in the litigation, i.e., the possibility of an
ultimately adverse judgment
against the Debtors, and (ii) the probability that distributions
to Creditors will be
delayed for additional years pending completion of the appellate
process. In negotiating
the settlement, the Bondholder Proponents took into consideration
the risk to Creditors
of losing billions of dollars if the asbestos claimants were to
prevail, as well as the
time and expense (in terms of the time value of money and
otherwise) of the completion
of the lengthy appellate process. In this connection, counsel to
the Proponents read and
analyzed thousands of pages of transcripts and documents and have
analyzed certain legal issues raised on appeal.
The Proponents believe that the foregoing factors, in and
of themselves,
demonstrate that the settlement is fair and equitable. In
addition to these factors,
however, it is important to note that, notwithstanding the
Debtors' assertions to the
contrary, all or substantially all of the value being used to
settle the Veil Piercing
Claims is, in effect, coming from distributions to which
Subordinated Noteholders would
otherwise be legally entitled on account of post-petition
interest accrued during the
Debtors' more than four-year old bankruptcy proceedings. Such an
award of post-petition
interest is proper under the Code and existing case law where, as
here, the Debtors'
estates would have remaining value, after satisfaction of all
Claims (other than
post-petition interest on Subordinated Note Claims), if it is
assumed that the Veil
Piercing Claims have a value of zero. The Proponents believe
that it would not be in good
faith or fair and equitable to delay distributions until a final
litigated result or
settlement negotiated on terms satisfactory to the Debtors and
approved by the Court is
obtained with respect to the Veil Piercing-Related Issues, and
then not pay creditors
post-petition interest on their Claims.
Moreover, notwithstanding Debtors' assertions to the
contrary, neither approval of
the settlement nor confirmation of the Creditors' Plan is
conditioned upon a determination
by the Court that Subordinated Noteholders are legally permitted
to receive post-petition
interest on account of their Claims. The Proponents believe that
the settlement satisfies
the fair and equitable test independent of the Subordinated
Noteholders' legal right to
receive post-petition interest on account of their Claims. The
Creditors' Plan expressly
provides that the Allowed Amount of Subordinated Note Claims
includes all pre-petition
amounts as well as post-petition interest, but only to the extent
that the payment of
post-petition interest is permitted by law and to the extent
available after payment of
all other Claims under the Creditors' Plan. Based upon the
Negotiated Enterprise Value
and the estimated amount of Allowed Claims, including Veil
Piercing Claims pursuant to
the Veil Piercing Settlement Agreement, the Proponents do not
expect that any value will
remain for payment of post-petition interest on account of
Subordinated Note Claims.
Therefore, not only does the Creditors' Plan envision that no
post-petition interest will
be paid on account of Subordinated Note Claims, in the event that
there is any residual
value in the Debtors' estates after payments of all other Allowed
Claims, post-petition
interest is payable on account of Subordinated Note Claims only
to the extent permitted
by law. Thus, although the Creditors' Plan is flexible enough to
accommodate any finding
by the Court with respect to Subordinated Noteholders' right to
post-petition interest,
because the Proponents do not believe that there will be any
residual value in the
Debtors' estates after payment of all other Allowed Claims, it
will not be necessary for
the Court to rule on the merits of Subordinated Noteholders'
right to post-petition
interest in order to confirm the Creditors' Plan.
The veil piercing settlement does not require confirmation
of a plan of reorganization in the Celotex Chapter 11 Proceeding
before it becomes effective, nor will
the Debtors' estates be burdened with any issues regarding the
allocation of the settlement proceeds.
The Creditors' Plan also settles fraudulent conveyance
claims asserted by the Ad
Hoc Committee of Pre-LBO Bondholders, now a Proponent of the
Creditors' Plan, against the
Released Parties. The claims asserted in the Fraudulent
Conveyance Lawsuit raise issues
of priority that are not consensually resolved by the Debtors'
Plan or any other creditor
plan. Like the veil piercing litigation, the fraudulent
conveyance litigation would
otherwise result in further delay and uncertainty to creditors.
The Creditors' Plan, and the terms of the settlements it
embodies, are premised on
a Negotiated Enterprise Value of $2,525,000,000, which represents
a good faith negotiated
estimate of the going concern enterprise value of the Debtors on
a consolidated basis.
This value is critical to the allocation of New Common Stock and
Qualified Securities
among holders of Subordinated Note Claims (i.e., those who are
effectively funding the
veil piercing settlement) and the holders of Veil Piercing
Claims. All other creditor
classes are paid in full, including post-petition interest,
either in Cash or debt securities.
The Proponents believe that, given the amount of Claims,
including post-petition
interest, and the value of the Debtors, the current stockholders
no longer have an
economic stake in the Debtors or in the Chapter 11 Cases. Even
if no consideration were
paid in settlement of the Veil Piercing Claims, the Debtors'
estate would still have
insufficient remaining value to satisfy post-petition interest to
which the Subordinated
Noteholders are legally entitled, leaving no residual value for
stockholders on account of their equity interests.
Accordingly, the Creditors' Plan provides a recovery for
Holders of Old Common
Stock Interests only if and to the extent that there are shares
of New Common Stock
remaining after giving effect to all distributions to be made to
Creditors under the
Creditors' Plan (a result that would occur only if the Court
finds that the going concern
enterprise value of the Debtors is significantly greater than the
Negotiated Enterprise
Value of $2,525,000,000 and that Holders of Subordinated Note
Claims are not permitted
by law to be paid post-petition interest on account of their
Claims). In an effort to
promote a fully consensual resolution of these Chapter 11 Cases,
the Veil Piercing
Settlement Agreement requires the Celotex Settlement Fund
Recipient to assign to Settling
Equityholders, pro rata among such Settling Equityholders, the
Celotex Settlement Fund
Recipient's right to receive shares of Class B Common Stock
having an aggregate New Common
Stock Value Per Share equal to the sum of (a) $75,000,000 and (b)
50% of the Senior Claim
Differential, multiplied by a fraction, the numerator of which is
the aggregate Allowed
Old Common Stock Interests of Settling Equityholders, and the
denominator of which is the
aggregate Allowed Old Common Stock Interests.
KKR Associates, the beneficial holder (with sole power to
vote) of over 91% of the
Old Common Stock, did not agree to become a Settling Equityholder
within the time period
specified in the Veil Piercing Settlement Agreement. In view of
this fact, and in view
of the Debtors' last-minute increase in the recoveries of Classes
S-1 and S-2 and
Class S-6 pursuant to an amendment to the Debtors' Plan after an
emergency hearing held
by the Court on July 28, 1994, the Proponents decided to amend
the Creditors' Plan and
to seek the agreement of the other parties to the Veil Piercing
Settlement Agreement to
amend the Veil Piercing Settlement Agreement, in each case to
decrease by $75 million the
amount of Class B Common Stock that was to have been issued to
the Celotex Settlement Fund
Recipient (and that was to have been subject to pro rata
assignment to Settling
Equityholders, if any), and increase by a total of $75 million
the post-petition interest
recovery (in the form of Class B Common Stock) of Class S-6 and
of Classes S-1 and S-2,
taken together. This amendment to the Veil Piercing Settlement
Agreement has already been
agreed to in principle by all but one of the parties thereto, and
must be executed and
then approved by the Celotex Bankruptcy Court in order to become
effective. The
Proponents expect that the amended agreement will become
effective in the near future.
See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of the
Creditors' Plan--Settlement
of Veil Piercing/Fraudulent Conveyance Issues and Other
Issues--Terms of the Veil Piercing Settlement Agreement."
In addition, each Person that was a Holder of a Class E-1
Interest on the date on
which the order approving this Disclosure Statement is entered
and that did not transfer
such Interest on or prior to the Effective Date (other than to an
Affiliate of such
Person, which Affiliate shall have the right to exercise the
Equity Call Option) shall
have a nontransferable Equity Call Option, entitling such person
to purchase all, but not
part, of such Holder's Pro Rata share of all of the 50 million
shares of New Common Stock
(each of which shall be shares of Class B Common Stock) that are
to be issued on the
Effective Date, at a Cash exercise price per share equal to the
New Common Stock Value
Per Share (provided, that in calculating the New Common Stock
Value Per Share for this
purpose, the New Common Stock Value shall be calculated using a
going concern enterprise
value equal to the greater of (i) the Negotiated Enterprise Value
and (ii) if the Court
finds that the going concern enterprise value of the Debtors is
equal to an amount other
than $2,525,000,000, such other amount), such right to be
exercisable by properly
completing and returning the Equity Call Option Election Form in
accordance with the
Election Procedure and by paying the Cash exercise price in full
on the Effective Date.
Under certain circumstances, Persons exercising the Equity
Call Option may, as a
condition to such exercise, be required to make certain customary
investment representations.
<PAGE>
A. Summary of Claims and Class Treatment Under the Creditors'
Plan
Set forth below is a summary of Claims and Class treatment
under the Creditors' Plan. Summaries of
Claims and Class treatment under the Creditors' Plan for each
Debtor are annexed hereto as Exhibit IV.
Unless otherwise indicated, all amounts are estimated from the
Debtors' records.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Estimated
Allowed Amount Treatment of Allowed
of Claims as of Claims Under the
Class of Creditors (Debtors)(<F1> Dec. 31, 1994<F1> Creditors' Plan<F2> Impairment
Administrative Claims:
Administrative Claims (all Debtors) $32,000,000<F3> Payment of Allowed Amounts in full, in Cash Not Applicable
Priority Claims:
Federal Income Tax Claims (all Debtors) $14,000,000-
$40,000,000<F4> Payment of Allowed Amounts in full,
pursuant to Section 1129(a)(9)(C) of the Code Not Applicable
Federal Excise Tax and Reclamation
Claims (Jim Walter Resources) $ 756,481 Payment of Allowed Amounts in full, in Cash Not Applicable
State and Local Tax Claims (all
Debtors except JW Resources, Home
Improvement, Coast to Coast, Best
and JW Insurance) $ 8,383,542 Payment of Allowed Amounts in full, in Cash Not Applicable
Secured Claims:
Class S-1 Revolving Credit Bank
Claims (all Debtors except Home
Improvement and Mid-State Homes) $354,027,530 plus
$28,220,625 of Class B
Common Stock if Amended
and Restated Veil
Piercing Settlement
Agreement becomes
effective by its
terms<F5><F6> Payment of Allowed Amounts in full,
in Cash and, if Amended and Restated Veil
Piercing Settlement Agreement becomes
effective by its terms, also in Class B
Common Stock Impaired
<FN>
<F1> Substantially all Claim amounts are derived from
information contained in the Debtors' Disclosure Statement.
<F2> Allowed Amounts and Classes are defined in the Creditors'
Plan for each Class of Creditors.
<F3> The Proponents do not believe that the $12,000,000 amount
for Administrative Claims set forth in the Debtors' Disclosure
Statement is adequate. The primary reason for this difference is
the inclusion in the Creditors' Plan of certain types of expenses
as Administrative Claims that are not so included in the
Debtors' Plan. See "OVERVIEW OF THE CREDITORS'
PLAN--Classification of Claims and Interests--Administrative
Claims."
<F4> Proofs of claim have been filed for a total of
approximately $185,000,000 in asserted Federal Income Tax Claims.
These amounts have been and continue to be contested by the
Debtors. The Debtors' Disclosure Statement estimates that the
Federal Income Tax Claims, including pre-Filing Date interest
thereon, will not exceed $14,000,000. The Proponents believe
that, based upon their preliminary analysis of the disputed
issues, $40,000,000 (or approximately 22% of the aggregate proof
of claim amount) represents a reasonable estimate of the upper
range for the Federal Income Tax Claims given the number of
issues involved and the uncertainty of their resolution. The
Debtors strongly disagree with this estimate.
<F5> The Proponents amended their Plan on August 1, 1994 to
provide the additional Class B Common Stock recovery in response
to a similar increase made by the Debtors after an emergency
hearing held by the Court on July 28, 1994. Due to the
last-minute timing of the Debtors' amendment, the Proponents were
unable to complete all of the actions necessary for the Amended
and Restated Veil Piercing Settlement Agreement to become
effective by its terms within the time frame established by the
Court for the mailing of plans and disclosure statements.
Nevertheless, the Proponents expect that the Amended and Restated
Veil Piercing Settlement Agreement will become effective by its
terms in the near future. For a discussion of the conditions
precedent to effectiveness of the Amended and Restated Veil
Piercing Settlement Agreement, see "OVERVIEW OF THE CREDITORS'
PLAN--Special Features of the Creditors' Plan--Settlement of Veil
Piercing/Fraudulent Conveyance Issues and Other Issues--Terms of
the Veil Piercing Settlement Agreement."
<F6> If the Court determines that the Debtors' enterprise value
is $2.525 billion in accordance with the Creditors' Plan, then to
the extent that the market agrees with the Debtors' higher
estimated enterprise value of $2.805 billion, the value of this
stock would be higher than this stated value.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Estimated
Allowed Amount Treatment of Allowed
of Claims as of Claims Under the
Class of Creditors (Debtors)<F1> Dec. 31, 1994<F1> Creditors' Plan<F2> Impairment
Class S-2 Working Capital Bank Claims
(Hillsborough, Old Walter Industries,
Resources Holdings, Jim Walter
Resources, U.S. Pipe, Homes Holdings,
JW Aluminum, Sloss, Mid-State Holdings,
Window Components, Southern Precision,
Vestal, Pipe Realty, Hamer Holdings,
JWI Holdings, Land Holdings, Computer
Holdings, Railroad Holdings and
Walter Land) $121,343,120 plus
$9,279,375 of Class B
Common Stock if Amended
and Restated Veil Piercing
Settlement Agreement
becomes effective by its
terms<F5><F7> Payment of Allowed Amounts in full, in Cash and,
if Amended and Restated Veil Piercing
Settlement Agreement becomes effective by its
terms, also in Class B Common Stock Impaired
Class S-3 Grace Street Note Claims (Old
Walter Industries) $5,379 Payment of Allowed Amounts in full, in Cash Unimpaired
Class S-4 Sloss IRB Claim (Sloss) $715,207 Payment of Allowed Amounts in full, in Cash Unimpaired
Class S-5 Secured Equipment Purchase
Claims (U.S. Pipe, JW Aluminum, Sloss,
Window Components, Southern Precision
and Computer Services) $47,677 Payment of Allowed Amounts in full, in Cash Unimpaired
Class S-6 Series B & C Senior Note Claims
(Hillsborough, Old Walter Industries,
Resources Holdings, Jim Walter Resources,
U.S. Pipe, Homes Holdings, Jim Walter
Homes and United Land) $330,974,293 plus
$37,500,000 of Class B
Common Stock if Amended
and Restated Veil
Piercing Settlement
Agreement becomes
effective by its
terms<F5><F8><F9> Payment of Allowed Amounts in full, partially
in Cash from the S-6 Fund, and the remainder
in Cash, New Senior Notes or a combination
thereof, and, if Amended and Restated Veil
Piercing Settlement Agreement becomes
effective by its terms, also in Class B
Common Stock Impaired
Class S-7 Provident Life & Accident
Insurance Company Claims (Old Walter
Industries) $7,493,856 Payment of Allowed Amounts in Cash and balance
of Allowed Claims reinstated Unimpaired
Class S-8 Revolving Credit Agents
Claims (All Debtors except Home
Improvement and Mid-State Homes) <F10>
Payment of Allowed Amounts in full, in Cash Unimpaired
Class S-9 Working Capital Agents
Claims (Hillsborough, Old Walter
Industries, Resources Holdings, Jim
Walter Resources, U.S. Pipe, Home
Holdings, JW Aluminum, Mid-State
Holdings, Sloss, Window Components,
Southern Precision, Vestal, Pipe
Realty, Hamer Holdings, JWI
Holdings, Land Holdings, Computer
Holdings, Railroad Holdings and
Walter Land) <F10> Payment of Allowed Amounts in full, in CashUnimpaired
Class S-10 Other Secured Claims
(all Debtors) $0<F11> Either: (i) legal, equitable and contractual
rights left unaltered; or (ii) defaults cured
and contractual rights reinstated; or (iii)
payment of Allowed Amounts in full, in Cash Unimpaired
Estimated
Allowed Amount Treatment of Allowed
of Claims as of Claims Under the
Class of Creditors (Debtors)<F1> Dec. 31, 1994<F1> Creditors' Plan<F2> Impairment
Unsecured Claims:
Class U-1 Old Walter Industries IRB
Claims (Old Walter Industries) $8,792,450 Payment of delinquent amounts in Cash with
balance of Allowed Claims reinstated Unimpaired
Class U-2 Convenience Class Claims
(all Debtors) $1,703,603 Payment of Pre-Filing Date Unsecured Allowed
Amounts plus post-Filing Date interest from the
Filing Date to the Effective Date at the
General Unsecured Interest Rate in full, in Cash Unimpaired
Class U-3 Other Unsecured Claims (all
Debtors) $93,775,323 Payment of 75% of Pre-Filing Date Unsecured
Allowed Amounts on the Effective Date, payment
six (6) months later of the balance of the
Pre-Filing Date Unsecured Allowed Amounts plus
post-Filing Date interest on the Pre-Filing
Date Unsecured Allowed Amounts from the Filing
Date to the Effective Date at the General
Unsecured Interest Rate together with post-Filing
Date interest on the remaining 25% of
Pre-Filing Date Unsecured Allowed Amounts from
the Effective Date to the payment date at the
General Unsecured Interest Rate in full, in Cash Impaired
Class U-4 Senior Subordinated Note
Claims (Hillsborough, Old Walter
Industries, U.S. Pipe, Homes Holdings,
Jim Walter Homes and United Land) $479,260,923<F12> Satisfaction of Allowed Amounts in combination
of Qualified Securities and Class A
Common Stock<F13> Impaired
Class U-5 17% Subordinated Note Claims
(Hillsborough, Old Walter Industries,
U.S. Pipe, Homes Holdings, Jim Walter
Homes and United Land) $379,254,167<F12> Satisfaction of Allowed Amounts in combination
of Qualified Securities and Class A Common
Stock<F13> Impaired
Class U-6 Pre-LBO Debenture Claims (Old
Walter Industries) $239,471,887<F12> Satisfaction of Allowed Amounts in combination
of Qualified Securities and Class B
Common Stock<F13> Impaired
Class U-7 Veil Piercing Claims
(all Debtors) As provided in the Veil
Piercing Settlement
Agreement, $450,000,000
($525,000,000 if the
Amended and Restated
Veil Piercing Settlement
Agreement does not become
effective by its terms)
plus the Senior Claim
Differential, if any. Payment of Allowed Amount in full in combination
of Qualified Securities and Class B Common
Stock to the Celotex Settlement Fund Recipient
on behalf of Holders of Class U-7 Claims Unimpaired
Intercompany Claims:
Class I-1 Intercompany IRB Claims (Sloss) $7,350,000 Payment of Allowed Amounts in Cash and balance
of Allowed Claim reinstated Unimpaired
Class I-2 Pre-Filing Date Intercompany
Notes Payable Claims (all Debtors except
for JW Resources and JW Insurance) $1,248,631,219 Payment in the ordinary course of business Unimpaired
Class I-3 Post-Filing Date Intercompany
Notes Payable Claims (all Debtors) $2,006,003,414 Payment in the ordinary course of business Unimpaired
Equity Claims:
Class E-1 Interests (Hillsborough) $0 Grant of Equity Call Option for Cash purchase
of Class B Common Stock; in addition,
distribution of Class B Common Stock, if any,
remaining after giving effect to all
distributions to Creditors under Creditors' Plan Impaired
Class E-2 Interests (Hillsborough) Not Applicable Holder will receive and retain no propertyImpaired
Class SE-1 Interests in Debtors other
than Hillsborough (all Debtors other
than Hillsborough) Not Applicable Retention of existing Subsidiary Common Stock Unimpaired
<PAGE>
Estimated
Allowed Amount Treatment of Allowed
of Claims as of Claims Under the
Class of Creditors (Debtors)<F1> Dec. 31, 1994<F1> Creditors' Plan<F2>
Impairment
Class SE-2 Interests in Debtors other
than Hillsborough (all Debtors other
than Hillsborough) Not Applicable Holders will receive and retain no property Impaired
<FN>
<F7> If the Court determines that the Debtors' enterprise value
is $2.525 billion in accordance with the Creditors' Plan, then to
the extent that the market agrees with the Debtors' higher
estimated enterprise value of $2.805 billion, the value of this
stock would be higher than this stated value.
<F8> Reflects payment in full in New Senior Notes, in which case
post-petition interest to 6/30/94 accrues at 14.0%, simple.
Post-petition interest to 6/30/94 accrues at 13.0%, simple,
for any part of the Class S-6 Claim that is paid in Cash (other
than from the Class S-6 Fund). In either case, post-petition
interest from 6/30/94 to the Effective Date accrues at 14 5/8%,
simple.
<F9> If the Court determines that the Debtors' enterprise value
is $2.525 billion in accordance with the Creditors' Plan, then to
the extent that the market agrees with the Debtors' higher
estimated enterprise value of $2.805 billion, the value of this
stock would be higher than this stated value.
<F10> The Proponents are unable to estimate the amount of this
Claim.
<F11> The Proponents are not aware of any Other Secured Claims.
<F12> Does not reflect post-petition interest, which the
Proponents believe that the Class is permitted to receive under
applicable law, but which will not be paid under the Creditors'
Plan assuming the utilization of the Negotiated Enterprise Value
for purposes of allocation of New Common Stock and Qualified
Securities. See "OVERVIEW OF THE CREDITORS' PLAN--Special
Features of the Creditors' Plan--Distribution of Combination of
Qualified Securities and New Common Stock to Holders of
Subordinated Note Claims and to Veil Piercing Claimants--New
Common Stock."
<F13> See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of
the Creditors' Plan--Distribution of Combination of Qualified
Securities and New Common Stock to Holders of Subordinated Note
Claims and to Veil Piercing Claimants."
</TABLE>
<PAGE>
B. Special Features of the Creditors' Plan
The Creditors' Plan reflects, among other things, the
Proponents' desire to resolve
contentious and difficult issues that could potentially delay the
Debtors' emergence from
the Chapter 11 Cases for a substantial period of time, and to
enable the reorganized
Debtors to conduct their businesses free from the adverse
influences of such issues.
1. Settlement of Veil Piercing/Fraudulent Conveyance
Issues and Other Issues
The Creditors' Plan incorporates, and implements the terms
of, two settlements of
existing and potential claims based upon Veil Piercing-Related
Issues and LBO-Related
Issues, a settlement of a dispute regarding the rate of
post-petition interest to be paid
in respect of Series B & C Senior Note Claims (and the form of
consideration to be used
to satisfy those Claims), and the allowance of the Claims of the
Working Capital Banks
and the Revolving Credit Banks, described in more detail below.
An agreement in principle was reached on December 9, 1993,
and the Veil Piercing
Settlement Agreement was entered into on April 18, 1994, with
counsel to a majority of
the plaintiffs in the pending Veil Piercing Proceedings and the
Official Committees in
the Celotex Chapter 11 Proceeding. Over thirty-five law firms,
representing the vast
majority of the Veil Piercing Claimants, have agreed to be bound
by the Veil Piercing Settlement Agreement.
An agreement regarding LBO-Related Issues was executed as
of March 23, 1994 with
the members of the Ad Hoc Committee of Pre-LBO Bondholders and
Holders of over aggregate
principal amount of Pre-LBO Debenture Claims. In addition, an
agreement regarding the
rate of post-petition interest to be paid in respect of Series B
& C Senior Note Claims
(and the form of consideration to be used to satisfy those
Claims) was entered into on
May 19, 1994 with the Series B & C Senior Note Trustee, which
agreement is supported by
Holders of a substantial amount of Series B & C Senior Note
Claims. The terms of each
of these agreements are reflected in the Creditors' Plan (a copy
of the Veil Piercing
Settlement Agreement is attached as Exhibit 3A to the Creditors'
Plan and a copy of the
Pre-LBO Bondholders Settlement Agreement is attached as Exhibit
3B to the Creditors'
Plan). Implementation of these settlements would resolve
protracted litigation and enable
the Debtors to emerge from Chapter 11 in the near future.
These settlements are to be made effective and operative
under
Section 1123(b)(3)(A) of the Code, which expressly permits a plan
of reorganization to
provide for the settlement or adjustment of any claim or interest
belonging to the debtor or to the estate.
a. Terms of the Veil Piercing Settlement Agreement
The Veil Piercing Settlement Agreement provides that all
Veil Piercing Claims and
all claims held by the Veil Piercing Claimants based upon
LBO-Related Issues shall be
fully and completely settled, satisfied, released and discharged
in exchange for an
aggregate amount of consideration (as calculated below), to be
paid and satisfied through
the distribution of Qualified Securities and Class B Common Stock
under the Creditors' Plan to the Celotex Settlement Fund
Recipient.
The Veil Piercing Settlement Agreement provides that the
Allowed Amount of the Veil
Piercing Claims shall be equal to the sum of (A) $450
million,<F11> as the same may be
increased or decreased as described below (defined as the "Veil
Piercing Claims Amount"),
(B) $75 million in New Common Stock and (C) the Senior Claim
Differential, if any, subject to the following: (x) the
assignment to the Settling Equityholders, if any, on a pro rata
<F11> On an after-tax basis, assuming full deductibility for
federal and state income tax purposes of the $450 million
settlement amount in the year in which payment by the
Debtors is made, the effective cost of the settlement
would be approximately $270 million (assuming an effective
combined tax rate of 40%). However, see "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES--Tax Consequences to
Walter Industries and its Subsidiaries--Deductibility of Payments
to Celotex Settlement Fund Recipient" and "--Net Operating Loss
("NOL") Carryforwards," for a discussion of possible
limitations on deductibility and other issues regarding
the availability and timing of this deduction.
basis of the right to receive their pro rata share of $75 million
plus 50% of the Senior
Claim Differential, if any (as described below); and (y) in the
event that the actual
amount of distributions under the Plan in respect of the
Subordinated Note Claims is
different than $1098 million, then the Veil Piercing Claims
Amount shall be calculated as follows:
Actual amount of distributions in
respect of Subordinated Note Claims
$1098 million X $450 million
For purposes of the foregoing fraction, the actual amount of
distributions is valued at
the aggregate principal amount in the case of Qualified
Securities, and at the aggregate
New Common Stock Value Per Share in the case of New Common Stock.
The Veil Piercing Settlement Agreement provides that the
Veil Piercing Claims shall
be paid and satisfied by the distribution of a combination of
Qualified Securities and
Class B Common Stock to the Celotex Settlement Fund Recipient.
The amount of Qualified
Securities to be so distributed under the Plan in respect of Veil
Piercing Claims is calculated as follows:
$450 million + $37.5 million
$1098 million + $450 million + $37.5 million
multiplied by the aggregate principal amount of Qualified
Securities available for
distribution to holders of Subordinated Note Claims and the
Celotex Settlement Fund
Recipient under the Creditors' Plan; provided, that if the
Amended and Restated Veil
Piercing Settlement Agreement becomes effective by its terms (as
discussed below), $37.5 million shall be subtracted from the
numerator and from the denominator of the
foregoing fraction, and provided, further, that if the Amended
and Restated Veil Piercing
Settlement Agreement does not become effective by its terms, if
any holder of an Allowed
Old Common Stock Interest becomes a Settling Equityholder under
the Veil Piercing
Settlement Agreement, then the numerator and denominator in the
foregoing fraction shall
each be reduced by $1 for each $2 of Class B Common Stock
assigned to Settling
Equityholders under clause (i) of Section 6(a) of the Veil
Piercing Settlement Agreement
(it being further provided that in no event shall the numerator
in the foregoing fraction
be less than $450 million or the denominator less than $1548
million). The amount of Veil
Piercing Claims that is deemed to be paid, and settled,
satisfied, released and
discharged, by Qualified Securities shall be equal to the
aggregate principal amount of
Qualified Securities issued in respect of Veil Piercing Claims.
The excess of the Allowed
Amount of Veil Piercing Claims over the part thereof paid, and
settled, satisfied,
released and discharged, by Qualified Securities shall be paid,
and settled, satisfied,
released and discharged, by shares of Class B Common Stock having
an aggregate New Common
Stock Value Per Share equal to such excess. See "OVERVIEW OF THE
CREDITORS' PLAN--Special
Features of the Creditors' Plan--Distribution of Combination of
Qualified Securities and
New Common Stock to Holders of Subordinated Note Claims and to
Veil Piercing Claimants."
Although the Celotex Settlement Fund Recipient will be
organized and administered
in conjunction with the Celotex Chapter 11 Proceeding, the
Creditors' Plan is not
conditioned upon the confirmation of a plan of reorganization in
the Celotex Chapter 11 Proceeding.
It is believed that a consensual resolution of the Chapter
11 Cases is in the best
interests of all constituencies, and, accordingly, the Veil
Piercing Settlement Agreement
offers existing stockholders an opportunity to receive
substantial value and releases if
they support the settlement and the Creditors' Plan. While the
Creditors' Plan does not
provide a certain recovery for Holders of Old Common Stock
Interests, as discussed above,
the Veil Piercing Settlement Agreement requires the Celotex
Settlement Fund Recipient to
assign to any Settling Equityholders, pro rata among such
Settling Equityholders, the
Celotex Settlement Fund Recipients' right to receive shares of
Class B Common Stock having
an aggregate New Common Stock Value Per Share equal to the sum of
(a) $75,000,000 and
(b) 50% of the Senior Claim Differential, multiplied by a
fraction, the numerator of which
is the aggregate Allowed Old Common Stock Interests of Setting
Equityholders, and the
denominator of which is the aggregate Allowed Old Common Stock
Interests.
Under the terms of the Veil Piercing Settlement Agreement,
KKR Associates, the
beneficial holder (with sole power to vote) of over 91% of the
Old Common Stock, was given
the opportunity to become a Settling Equityholder during the 28
day period from April 20,
1994 to May 18, 1994. KKR Associates failed to timely become a
signatory to the Veil
Piercing Settlement Agreement and is, therefore, precluded from
becoming a Settling
Equityholder, unless the Court finds that the settlement set
forth in the Veil Piercing
Settlement Agreement is not reasonable or the Creditors' Plan is
not confirmable unless
each or any of the Holder(s) of an Allowed Old Common Stock
Interest is given a further
opportunity to become a Settling Equityholder by becoming a
signatory to the Veil Piercing
Settlement Agreement by a specific date or dates set by the
Court.
In view of this fact, and in response to the Debtors'
last-minute amendment of
their plan and disclosure statement to increase the recoveries
(i) to Class S-6 and
(ii) to Classes S-1 and S-2, collectively, in each case by 5% of
the common stock of the
reorganized Debtors, the Proponents decided to amend their plan
and disclosure statement
to increase the recoveries to Class S-6, and to Classes S-1 and
S-2, collectively, by
increasing the interest to be paid on account of such Claims in
each case by an amount
of Class B Common Stock having an aggregate New Common Stock
Value Per Share equal to
$37.5 million. These increases, however, require the amendment
of the Veil Piercing
Settlement Agreement to authorize a total of $75 million of Class
B Common Stock to be
redistributed from the Celotex Settlement Fund Recipient (where
such shares were subject
to pro rata assignment to Settling Equityholders) to Classes S-6,
S-1 and S-2. The
rationale for this redistribution was in part due to the failure
of KKR Associates to
timely become a signatory to the Veil Piercing Settlement
Agreement and thereby become
a Settling Equityholder. Due to the last-minute timing of the
Debtors' plan amendment,
the Proponents were unable to complete all of the actions
necessary for the Amended and
Restated Veil Piercing Settlement Agreement to become effective
by its terms within the
time frame established by the Court for the mailing of plans and
disclosure statements.
Nevertheless, the Proponents believe that the Amended and
Restated Veil Piercing
Settlement Agreement will become effective by its terms in the
near future. Accordingly,
the Creditors' Plan is drafted so that, if the Amended and
Restated Veil Piercing
Settlement Agreement becomes effective, the amended treatment,
described above and
elsewhere herein, will apply and become effective. Otherwise,
the existing treatment will apply.
The Amended and Restated Veil Piercing Settlement
Agreement becomes effective, by
its terms, only upon the satisfaction of both of the following
conditions on or prior to the Effective Date:
(i) the execution of the Amended and Restated Veil
Piercing Settlement Agreement substantially in the form of
Exhibit 3C to the Creditors' Plan by all of the parties to the
Veil Piercing Settlement Agreement other than any Settling
Equityholders and other than the Jim Walter Corporation,
which amended and restated agreement permits the $75 million of
Class B Common Stock otherwise to have been distributed to the
Celotex Settlement Fund Recipient (subject to Assignment to
Settling Equityholders) to be distributed under the
Creditors' Plan; and
(ii) the entry of an order by the Celotex
Bankruptcy Court that (a) approves such Amended and Restated Veil
Piercing Settlement Agreement, and (b) authorizes and directs The
Celotex Corporation to render performance under such
Amended and Restated Veil Piercing Settlement Agreement.
The parties that must execute the Amended and Restated
Veil Piercing Settlement
Agreement in order for it to become effective are as follows:
(i) each of the "Veil Piercing Claimants'
Representatives," which consist of the law firms of Caplin &
Drysdale, Baron & Budd, Greitzer and Locks and Ness
Motley Loadholt Richardson & Poole;
(ii) The Celotex Corporation;
(iii) the Celotex Committee of Unsecured Creditors;
(iv) the Celotex Asbestos Property Damage Claimants
Committee;
(v) the Celotex Asbestos Bodily Injury Claimants
Committee; and
(vi) the Bondholders Committee, the Creditors
Committee, Lehman Brothers Inc. and Apollo.
Each of the foregoing parties, other than The Celotex
Corporation, has already
agreed in principle to execute the Amended and Restated Veil
Piercing Settlement
Agreement. The Celotex Corporation has not been able to act on
this matter in the limited
time available to do so, but the Proponents expect The Celotex
Corporation to act shortly
and to agree in principle to execute the Amended and Restated
Veil Piercing Settlement
Agreement, especially in light of the agreement in principle of
Celotex's three official
creditors committees to do so. The Celotex Bankruptcy Court has
scheduled a hearing for
September 1, 1994 at 1:30 P.M., Eastern Time, before Judge Thomas
M. Baynes at the United
States Bankruptcy Court for the Middle District of Florida, Tampa
Division, 4921 Memorial
Highway, Tampa, Florida 33634, to consider granting the order
described above approving
the Amended and Restated Veil Piercing Settlement Agreement.
WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED
OTHERWISE, HOLDERS OF REVOLVING CREDIT BANK CLAIMS, WORKING
CAPITAL BANK CLAIMS AND SERIES B & C SENIOR NOTE CLAIMS SHOULD
ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION
INTEREST IN THE FORM OF CLASS B COMMON STOCK THAT IS CONTINGENT
ON THE EFFECTIVENESS OF THE AMENDED AND RESTATED
VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL
1-800-489-7444 AT ANY TIME FOR
A RECORDING PROVIDING CURRENT INFORMATION AS TO WHETHER SUCH
AGREEMENT HAS BECOME EFFECTIVE, INCLUDING THE RESULT OF THE
SEPTEMBER 1, 1994 HEARING TO BE HELD BY THE CELOTEX
BANKRUPTCY COURT TO CONSIDER APPROVAL THEREOF. IN ADDITION, WHEN
VOTING ON THE CREDITORS'
PLAN, HOLDERS OF OLD COMMON STOCK INTERESTS SHOULD ASSUME THAT
THEY WILL NOT BE ENTITLED
TO RECEIVE ANY CONSIDERATION (OTHER THAN SPECIFIED RELEASES)
UNDER THE VEIL PIERCING
SETTLEMENT AGREEMENT EVEN IF THEY BECOME SETTLING EQUITYHOLDERS
THEREUNDER.
The Creditors' Plan defines "Settling Equityholder" to
mean a Holder of an Allowed
Old Common Stock Interest (a) that, subject to certain
contingencies described below,
shall have become a signatory to the Veil Piercing Settlement
Agreement on or prior to
the later of (i) twenty (20) days after a copy of the Veil
Piercing Settlement Agreement
is sent to such Holder of an Allowed Old Common Stock Interest or
a representative
thereof, and (ii) the day prior to the date on which the Court
holds the hearing on the
adequacy of the disclosure statements respecting the Creditors'
Plan and the plan filed
by the Debtors), and (b) that shall have taken no action(s)
subsequent to becoming a
signatory to the Veil Piercing Settlement Agreement which, in the
determination of the
Bondholder Proponents, would be reasonably likely to (i) impede
the prompt distribution
or approval of the Disclosure Statement; (ii) impede the prompt
confirmation and
effectiveness of the Creditors' Plan; (iii) impede the use of the
Negotiated Enterprise
Value as the enterprise valuation of the Debtors for all purposes
under the Creditors'
Plan and the Chapter 11 Cases; (iv) impede the prompt realization
of Finality (as defined
in the Veil Piercing Settlement Agreement); or (v) result in a
breach of the Veil Piercing
Settlement Agreement. If the Court finds that the settlement set
forth in the Veil
Piercing Settlement Agreement is not reasonable or the Creditors'
Plan is not confirmable
unless each or any of the Holders of an Allowed Old Common Stock
Interest is given a
further opportunity to become a Settling Equityholder by becoming
a signatory to the Veil
Piercing Settlement Agreement and receiving the benefits
specified therein for a Setting
Equityholder by a specified date(s) set by the Court, then the
date specified in (a) above
shall be the date(s) set by the Court. Notwithstanding the
foregoing, the Bondholder
Proponents will have the right, exercisable on or before the
Effective Date, to waive the
date(s) specified above for any Person who is a Holder of less
than 5% of the issued and
outstanding Old Common Stock, exclusive of any shares of such
stock held in treasury.
A copy of the Veil Piercing Settlement Agreement was sent to KKR
Associates on April 20,
1994 but was not executed prior to the May 18, 1994 deadline or
thereafter, and as of the
date of this Disclosure Statement the Court has not acted to
extend such deadline. A copy
of the Veil Piercing Settlement has not, as of the date of this
Disclosure Statement, been
sent to other Holders of Allowed Old Common Stock Interests. The
Proponents anticipate
that such other Holders will be permitted to execute the Veil
Piercing Settlement
Agreement at any time up to the Effective Date.
The Veil Piercing Settlement Agreement also provides for
releases of The Celotex
Corporation, Old Jim Walter and, with certain exceptions, their
respective present or
former directors, officers, partners, shareholders, employees,
agents, advisers and
representatives and their respective subsidiaries.
b. Reasonableness of the Settlement: Certainty and
Prompt Payment vs. Uncertainty and Additional Years of Delay
On April 18, 1994, the Court rendered its decision in the
Declaratory Judgment
Proceeding. As expected, the Court ruled in favor of the
Debtors. On April 27, 1994,
counsel for the Veil Piercing Claimants filed a timely notice of
appeal of the Court's
decision. Nothing in the Court's decision in the Declaratory
Judgment Proceeding in any
way prevents or precludes the settlement of the Veil Piercing
Claims under the Veil
Piercing Settlement Agreement. Far from resolving the
litigation, this decision marks
only the beginning of what the Proponents expect to be a lengthy
and costly appeals process. See "INTRODUCTION--Litigation of
Veil Piercing Proceedings."
Although the Proponents of the Creditors' Plan have always
believed that the
Debtors will ultimately prevail in the Veil Piercing Proceedings,
the settlement
represents their collective judgment that the uncertainty and
cost of protracted
litigation far outweigh the very substantial cost of the
settlement. The settlement was
negotiated by the Bondholder Proponents, who, as the two largest
holders of Subordinated
Note Claims (approximately $428 million principal amount), will
see their recoveries most
adversely impacted by a litigation loss or extended delay in
finally resolving the Veil
Piercing Claims. The settlement represents a reasonable
assessment of (i) the uncertainty
inherent in the litigation, i.e., the possibility of an
ultimately adverse judgment
against the Debtors, and (ii) the probability that distributions
to Creditors will be
delayed for additional years pending completion of the appellate
process. In negotiating
the settlement, the Bondholder Proponents took into consideration
the risk to Creditors
of losing billions of dollars if the asbestos claimants were to
prevail, as well as the
time and expense (in terms of the time value of money and
otherwise) of the completion
of the lengthy appellate process. In this connection, counsel to
the Proponents read and
analyzed thousands of pages of transcripts and documents and have
analyzed certain legal issues raised on appeal.
Based on the foregoing, the Proponents believe that they
will be able to
demonstrate, at the hearing on confirmation of the Creditors'
Plan, that the settlement
is fair, equitable and reasonable and should be approved by the
Court. Under applicable
law, a court considers four main factors in determining whether
to approve a compromise
and settlement, such as the settlement of the Veil
Piercing-Related Issues under the
Creditors' Plan. They are: the probability of ultimate success
on the merits if the
settled issues were instead fully litigated; the likely cost of
continued litigation; the
likely delay caused by continued litigation; and the wishes of
creditors.
As noted above, the Proponents believe that the vast
majority of creditors or their
representatives support the Creditors' Plan or the treatments
provided for in the
Creditors' Plan. The Creditors' Plan is the only filed plan that
has the support of the
Bondholders Committee, the Creditors Committee and the Ad Hoc
Committee of Pre-LBO
Bondholders. The Bank Agents and the Series B & C Senior Note
Trustee support the
treatment provided to their respective constituencies in the
Creditors' Plan. The
Debtors, senior management of the Debtors and the Debtors'
largest shareholder support
the Debtors' Plan. Given the sophistication of the Creditors and
their representatives,
this fact, and the fact that the settlement was negotiated by the
Bondholder Proponents,
who, as the holders of approximately $428 million principal
amount of Subordinated Note
Claims will see their recoveries most adversely affected by a
litigation loss or extended
delay in finally resolving the Veil Piercing Claims, probably
provide the strongest proof
of the reasonableness of the settlement. In pursuing the
Debtors' litigation strategy,
the Proponents believe that the Debtors are betting with the
Creditors' money. Moreover,
even if the Debtors ultimately prevail in the Declaratory
Judgment Proceeding, under the
Debtors' Plan, Creditors will bear the full cost of the
protracted appeals process but
substantially all of the benefits of a victory by the Debtors
will be transferred to the old shareholders.
The Proponents have always anticipated that, given the
potentially enormous amounts
involved, the Court's decision in the Declaratory Judgment
Proceeding (whether in favor
of the Debtors or the Veil Piercing Claimants) would be appealed
and that further appeals
will be taken from appellate court decisions until all avenues of
appeal have been
exhausted. On April 27, 1994, counsel for the Veil Piercing
Claimants timely filed notice
of appeal in the Declaratory Judgment Proceeding. Counsel for
the Veil Piercing Claimants
have raised a number of legal issues on appeal, including (a) the
choice of law, (b) the
right to a jury trial, (c) accountant--client privilege and
waiver, (d) attorney--client
privilege and waiver, (e) the applicable standards for veil
piercing and (f) corollary
issues, such as a shareholder's obligation to creditors of an
insolvent debtor.
In the past, the Debtors have been unwilling to agree to a
settlement that would
grant significant monetary or other relief to the veil piercing
claimants, and it is the
Proponents' belief, based upon prior negotiations by the
Bondholder Proponents with both
of the parties, that the Veil Piercing Claimants would not agree
to forego their claims
against the Debtors except in consideration of a significant
damages award or settlement.
As a result, the Proponents believe that under current
circumstances there are no real
prospects for a settlement of this litigation by the Debtors with
the veil piercing claimants.
Moreover, even though the Proponents believe that the
Debtors have the better legal
argument in this litigation, the possibility of an ultimately
adverse judgment, which
could be in the billions of dollars, cannot be ignored.
The Proponents believe that the foregoing factors, in and
of themselves,
demonstrate that the settlement is fair and equitable. In
addition to these factors,
however, it is important to note that, notwithstanding the
Debtors' assertions to the
contrary, all or substantially all of the value being used to
settle the Veil Piercing
Claims is, in effect, coming from distributions which
Subordinated Noteholders would
otherwise be legally permitted to be paid on account of
post-petition interest accrued
during the Debtors' more than four-year old bankruptcy
proceedings. Such an award of
post-petition interest is proper under the Code and existing case
law where, as here, the
Debtors' estates would have remaining value, after satisfaction
of all Claims (other than
post-petition interest on Subordinated Note Claims), if it is
assumed that the Veil
Piercing Claims have a value of zero. The Proponents believe
that it would not be in good
faith or fair and equitable to delay distributions until a final
litigated result is
obtained with respect to the Veil Piercing-Related Issues, and
then not pay Creditors post-petition interest on their Claims.
Moreover, notwithstanding Debtors' assertions to the
contrary, neither approval of
the settlement nor confirmation of the Creditors' Plan is
conditioned upon a determination
by the Court that Subordinated Noteholders are legally entitled
to post-petition interest
on account of their Claims. The Proponents believe that the
settlement satisfies the fair
and equitable test independent of the Subordinated Noteholders'
legal right to receive
post-petition interest on account of their Claims. The
Creditors' Plan expressly provides
that the Allowed Amount of Subordinated Note Claims includes all
pre-petition amounts as
well as post-petition interest, but only to the extent that the
payment of post-petition
interest is permitted by law and to the extent available after
payment of all other Claims
under the Creditors' Plan. Based upon the Negotiated Enterprise
Value and the estimated
amount of Allowed Claims, including Veil Piercing Claims pursuant
to the Veil Piercing
Settlement Agreement, the Proponents do not expect that any value
will remain for payment
of post-petition interest on account of Subordinated Note Claims.
Therefore, not only does the Creditors' Plan envision that no
post-petition interest will be paid on account
of Subordinated Note Claims, in the event that there is any
residual value in the Debtors'
estates after payments of all other Allowed Claims, post-petition
interest is payable on
account of Subordinated Note Claims only to the extent permitted
by law. Thus, although
the Creditors' Plan is flexible enough to accommodate any finding
by the Court with
respect to Subordinated Noteholders' right to be paid
post-petition interest, because the
Proponents do not believe that there will be any residual value
in the Debtors' estates
after payment of all other Allowed Claims, it will not be
necessary for the Court to rule
on the merits of Subordinated Noteholders' right to post-petition
interest in order to
confirm the Creditors' Plan.
The Proponents believe that, in addition to the merits of
the Declaratory Judgment
Proceedings, there are ancillary legal issues that will engender
further delay if
litigated to conclusion. Notably, the Debtor's lawsuit names as
defendants only a handful
of the estimated 250,000 present and future asbestos claimants
that could assert liability
against the Debtors. Thus, even if the litigation in the
Declaratory Judgment Proceedings
ultimately results in a final order favorable to the Debtors, it
is unclear whether this
order would be binding on more than perhaps 1% of the veil
piercing claimants. If not,
further litigation with the remaining 99% would be inevitable.
Added to this is the
lengthy delay that will occur in litigating other issues of law,
such as the right to a
jury trial, which may go to the Supreme Court, and issues
regarding whether the Debtors
waived the attorney--client and accountant--client privileges,
which, if a waiver is found
on appeal, could lead to a retrial of the merits. A settlement
with the asbestos
claimants' representatives, including the official committees in
the Celotex Case, is
believed to greatly enhance the likelihood that such issues will
not further delay the Debtors' emergence from Chapter 11.
The Debtors assert that this Disclosure Statement does not
demonstrate that the
Veil Piercing Settlement Agreement or the Pre-LBO Bondholder
Settlement Agreement
satisfies the "fair and equitable" and "best interests of the
estate" standards. The
Proponents disagree and believe that the settlement agreements
meet the applicable legal
standards for all of the reasons set forth in this Section
II.B.1.(b). This issue,
however, should be decided by the Court at the hearing on
confirmation of the Creditors' Plan.
The Debtors further assert that (i) the settlements
contained in the Veil Piercing
Settlement Agreement and the Pre-LBO Bondholders Settlement
Agreement cannot be approved
because they constitute an improper solicitation of support for
the Creditors' Plan and
rejection of all other plans, and (ii) the Creditors' Plan cannot
be consummated should
the Court determine that the Holders of Unsecured Claims are not
entitled to post-petition interest.
The Proponents disagree.
First, both the Veil Piercing Settlement Agreement and the
Pre-LBO Bondholders
Settlement Agreement expressly provide that the parties to the
agreement are not bound
to vote for or against any plan of reorganization. Far from
constituting a
"solicitation," the agreements expressly allow any signatory to
vote for or against (or even abstain from voting on) any plan of
reorganization. See section 9(i) of the Veil Piercing
Settlement Agreement and section 9 of the Pre-LBO Bondholders
Settlement Agreement (attached as
Exhibits 3A. and 3B. to the Creditors' Plan).
Moreover, the Proponents believe that the Debtors are
mistaken in their belief that
a determination that the Holders of Subordinated Note Claims and
unsecured trade Claims
(Other Unsecured Claims) are legally permitted to be paid
post-petition interest is a
condition to confirmation of the Creditors' Plan.
The Creditors' Plan does, however, recognize the unique
nature of the unsecured
trade Claims against the Debtors' Operating Businesses. The
Proponents believe that it
is appropriate to settle these unsecured trade Claims, without
litigation, based on the
facts that these post-LBO Claims are asserted solely and directly
against the Debtors'
Operating Businesses, including Debtors against which no
Subordinated Note Claims are
asserted, and the potential fraudulent transfer claims that such
Creditors would assert.
Such allowance, constituting the payment in full of such Claims
including post-petition
interest at a compromised rate that is below applicable legal
rates, is contained in the Proponents' liquidation analysis.
These issues, if properly raised, should be decided by the
Court at the hearing on confirmation of the Creditors' Plan.
c. Funding of the Settlement Payment by Creditors
As described above, the Proponents believe that, under the
circumstances, the
settlement of the Veil Piercing-Related Issues is reasonable.
Moreover, all or
substantially all of the consideration provided for in the Veil
Piercing Settlement
Agreement, and embodied in the Creditors' Plan, will effectively
be funded by post-petition interest foregone by certain
Creditors, primarily by Holders of Subordinated Note
Claims, and not by value that might otherwise be received by the
Holders of Old Common Stock Interests.
The Proponents believe that the Debtors' controlling
stockholder has a strong
financial interest in causing the Debtors to pursue a
time-consuming litigation-only
strategy. The Debtors' Plan is designed to extract from
bondholders, for the controlling
stockholder's benefit, interest-free financing. The treatment of
the bondholders' claims
under the Debtors' Plan is the equivalent of a forced,
non-interest bearing loan without
a fixed maturity, that will be paid only if and when the veil
piercing litigation is
finally resolved in favor of the Debtors. The Debtors' Plan also
confers on the current
stockholders, including the controlling stockholder,
substantially all of the benefits
of this interest-free financing, together with the growth in the
Debtors' enterprise value
which the controlling stockholder anticipates will occur over the
next several years while
appeals of the veil piercing litigation are litigated. Thus, the
controlling stockholder
stands to profit from delay. The Proponents believe that this
reason has played a
significant part in the Debtors' decision to pursue a litigation
strategy which the
controlling stockholder knows will postpone resolution of these
cases indefinitely. The
Proponents believe that the Debtors have deliberately chosen to
gamble with the
bondholders' money, even though creditors will be deprived of
their lawful recoveries and
these cases may become one of the longest running Chapter 11
cases in history.
The Proponents believe that the following table
demonstrates that the amount of
post-petition interest to which the Holders of Subordinated Note
Claims are legally
entitled, under any of three rates of interest that may
reasonably be used, exceeds the
payment to be made to the Celotex Settlement Trust Recipient
under the Veil Piercing
Settlement Agreement, and that a settlement amount of zero would
still result in a
negative equity value for the Holders of Old Common Stock
Interests if post-petition
interest were paid at any of these rates on the Subordinated Note
Claims. This is true
whether post-petition interest on Subordinated Note Claims is
calculated at the New York
legal rate (9%), the Florida legal rate (12%), or the non-default
contract rate (ranging
from 10% to 17%). The table makes certain assumptions with
respect to the resolution of
a dispute involving the proper amount of Federal Income Tax
Claims. There can be no
assurance that this dispute will be resolved in the manner
assumed.
Estimated Aggregate Claims as of 12/31/94 (in thousands)
<TABLE>
<CAPTION>
POST-PETITION INTEREST RATE ON SUBORDINATED NOTE CLAIMS
<S> <C> <C> <C>
Non-Default
NY Legal FL Legal Contract
9% 12% Rate
Administrative & Priority <F1> $ 68,140 $ 68,140 $ 68,140
Trade Claims<F2> 93,775 93,775 93,775
Other Claims <F3> 18,758 18,758 18,758
Secured Bank Claims: <F4>
Bank Credit Agreement 354,027 354,027 354,027
Working Capital Facility 121,343 121,343 121,343
Total Secured Bank Claims 475,370 475,370 475,370
Senior Reset Notes: <F5>
14 5/8% Series B 317,600 317,600 317,600
14 1/2% Series C 9,002 9,002 9,002
Total Senior Reset Notes 326,602 326,602 326,602
Total of Foregoing Claims 982,645 982,645 982,645
Unsecured Bondholders 1,592,081 1,756,779 1,970,060
TOTAL CLAIMS 2,574,726 2,739,424 2,952,705
Negotiated Enterprise Value $2,525,000 $2,525,000 $2,525,000
Value to Existing Equity Assuming $0 for
the Asbestos Settlement <F6> $ (49,726) $ (214,424) $ (427,705)
</TABLE>
[FN]
<F1> The amount of Federal Income Tax Claims is in dispute.
Although proofs of claim of approximately $185,000,000 have been
filed, for purposes of this chart the average of the Debtors'
estimate ($14,000,000) and approximately 22% of the proof
of claim (or approximately $40,000,000) is used. The
Debtors strongly disagree with this estimate.
<F2> Assumed to accrue from filing at 6.5% simple interest.
<F3> Includes IRB Claims ($9.5), Convenience Class Claims
($1.7), and Provident Insurance Claims ($7.5), among others.
<F4> Accrual assumed to be prime +1.5% compounded quarterly,
with interest on previously accrued but unpaid post-petition
interest accruing at 13% after 6/30/94.
<F5> For purposes of this chart, post-petition interest is
calculated at the midpoint of the interest rates that will apply
to an all Cash and an all New Senior Notes payment.
<F6> Although old equity is technically entitled to $0 value
assuming the payment of post-petition interest at the above
described accrual rates, nevertheless, the Veil Piercing
Settlement Agreement provides for Holders of Old Common Stock
Interests to receive at least $75 million of value from the
Celotex Settlement Fund Recipient, assuming a prompt consensual
resolution of these Chapter 11 Cases, and the Creditors' Plan
provides for Holders of Old Common Stock Interests to receive
the Equity Call Option and New Common Stock representing
any "excess" value not already distributed to Creditors.
The foregoing chart should be read in conjunction with the
discussion in "New Common Stock" regarding the sensitivity of
common stock recoveries to increases in the
amount of claims in all Classes other than U-4 through U-7.
d. Pre-LBO Bondholders Settlement Agreement
From January through March 1994, the Bondholder Proponents
engaged in negotiations
with members of the Ad Hoc Committee of Pre-LBO Bondholders
regarding the treatment of
Class U-6 Claims under the Creditors' Plan and the continued
prosecution of the Fraudulent
Conveyance Lawsuit filed by the Indenture Trustees for the
Pre-LBO Debentures in
January 1994. The negotiations resulted in the execution of an
agreement, dated as of
March 23, 1994, by and among Lehman Brothers Inc., Apollo and the
members of the Ad Hoc
Committee of Pre-LBO Bondholders. A copy of the Pre-LBO
Bondholders Settlement Agreement
is attached to the Creditors' Plan as Exhibit 3B.
The Pre-LBO Bondholders Settlement Agreement provides that
the parties thereto will
support the Creditors' Plan, and any other plan of reorganization
that provides for the
relative treatment of Holders of Class U-6 Claims set forth in
the agreement and as to
which the Bondholders Proponents are proponents, and that the Ad
Hoc Committee of Pre-LBO
Bondholders will become a co-proponent of the Creditors' Plan.
The Pre-LBO Bondholders
Settlement Agreement does not obligate Holders of Pre-LBO
Debenture Claims to vote for
the Creditors' Plan. The agreement sets forth certain features
of the treatment of
Pre-LBO Debenture Claims that are incorporated in the Creditors'
Plan, which primarily
consist of a reallocation of Qualified Securities among Classes
U-4, U-5 and U-6 that is
not strictly governed by contractual priority. Depending on the
amount of Qualified
Securities, such allocation is not necessarily pro rata by Class.
These allocations are
set forth in Section 1.28 of the Creditors' Plan and are
described herein at
Section II.B.2. The Proponents believe that such allocation is
reasonable given the
circumstances, including the assumed New Common Stock Value.
The Pre-LBO Bondholders Settlement Agreement further
provides that, so long as the
agreement remains in effect, the indenture trustees for the
Pre-LBO Debenture indentures
will not actively pursue any litigation, including the Fraudulent
Conveyance Lawsuit, of
the LBO-Related Issues against Released Parties, and that such
LBO-Related Issues shall
be settled to the extent and as provided in the Pre-LBO
Bondholders Settlement Agreement
and in the Creditors' Plan on the Effective Date.
The Pre-LBO Bondholders Settlement Agreement resolves
certain pending litigation
and intercreditor issues that no other filed plan addresses. The
Bondholder Proponents
have argued that the merits of the Fraudulent Conveyance Lawsuit
are tied to the merits
of the Declaratory Judgment Proceeding, settled by the Veil
Piercing Settlement Agreement.
However, the Ad Hoc Committee of Pre-LBO Bondholders took a
different position, and the
Pre-LBO Bondholders Settlement Agreement therefore resolves
issues that might otherwise
have been raised regarding the value of the Debtors and potential
disputes about
consideration provided to various creditor groups under a Chapter
11 plan for the Debtors.
Under the Pre-LBO Bondholders Settlement Agreement, on the
Effective Date the Fraudulent
Transfer Lawsuit will be dismissed with respect to all creditors,
including the Holders
of Bank Claims, Series B & C Senior Note Claims, Holders of
Subordinated Note Claims, and
stockholders, to the extent that stockholders agree to become
Settling Equityholders under
the Veil Piercing Settlement Agreement.
e. Negotiated Enterprise Value and Equity Call Option
The Creditors' Plan, and the terms of the Veil-Piercing
Settlement Agreement, are
premised upon a Negotiated Enterprise Value of $2,525,000,000,
which represents a good
faith negotiated estimate of the going concern enterprise value
of the Debtors on a
consolidated basis. Because this value takes into account the
possibility of delay
between the Confirmation Date and the Effective Date, and the
likely increase in the value
of the Debtors over time, and because the Negotiated Enterprise
Value is fundamental to
the distributions provided for under the negotiated veil piercing
settlement that is
incorporated in the Creditors' Plan, the Creditors' Plan provides
that, except if the
Court finds that the going concern enterprise value of the
Debtors is equal to a different
amount, the Negotiated Enterprise Value shall not be increased or
decreased at any time
or for any reason with respect to the Creditors' Plan.
The Debtors and their controlling stockholder have stated
their belief that the
going concern enterprise value of the Debtors is greater than the
Negotiated Enterprise
Value. Notwithstanding this assertion, the Creditors' Plan
nevertheless provides the
existing equityholders with an Equity Call Option to purchase
their pro rata share of all
of the New Common Stock that would otherwise be issued to Holders
of Subordinated Note
Claims and to the Celotex Settlement Fund Recipient, in Cash on
the Effective Date, at
an exercise price per share equal to the New Common Stock Value
Per Share, which is
derived from a valuation of $2,525,000,000, the Negotiated
Enterprise Value. If existing
stockholders really believe that the Negotiated Enterprise Value
is too low, they can
purchase the New Common Stock at a price directly based on the
Negotiated Enterprise Value
(or, if higher, the going concern enterprise value of the Debtors
found by the Court).
While the Proponents continue to believe that the Negotiated
Enterprise Value is a
reasonable estimate of the going concern enterprise value of the
Debtors, and that the
Equity Call Option therefore has minimal value, they have
provided this call option to
existing equityholders to clearly demonstrate their belief in the
reasonableness of the
Negotiated Enterprise Value, and to offer current equityholders
the opportunity to put
their words into action by purchasing New Common Stock for Cash
at a price based on the
Negotiated Enterprise Value. The Proponents believe that the
Equity Call Option provides
a reasonable safeguard for the existing equityholders against any
possible undervaluing
of the New Common Stock to be issued to unsecured bondholders
under the Creditors' Plan.
Exercise of the Equity Call Option will also have the beneficial
effect of paying
Creditors, in Cash, the value that they would otherwise have
received in New Common Stock,
thereby giving them immediate liquidity at a previously
agreed-upon price.
The Debtors assert that this Disclosure Statement provides
inadequate disclosure
with respect to the use of a Total Gross Asset Value of $2.645 to
$2.652 billion in the Proponents' liquidation analysis.
As discussed above, the Negotiated Enterprise Value is
$2,525,000,000, representing
a good faith negotiated estimate of the going concern enterprise
value of the Debtors on
a consolidated basis, arrived at after extensive analysis and
negotiations among the
Proponents and Holders of Claims in other Classes, and taking
into account the possibility
of delay between the Confirmation Date and the Effective Date,
and the likely increase in the value of the Debtors over time.
The Proponents' liquidation analysis assumes that the
Chapter 11 Cases are
converted to cases under Chapter 7 on December 31, 1994 (the
assumed Effective Date under
the Creditors' Plan) and that the sale of the stock of the
Operating Businesses occurs
on or before December 31, 1995, at which time the Chapter 7
trustee would make
distributions to Creditors. Accordingly, the Proponents'
liquidation analysis assumes
an additional year of growth of the Debtors' Operating
Businesses. However, the Claims
of Creditors that are entitled to post-petition interest will be
accruing post-petition
interest during the liquidation period and therefore will
increase at a significant rate,
which would partially offset the increase in asset value.
The Debtors further assert that this Disclosure Statement
provides inadequate
disclosure in that, according to the Debtors, if the Negotiated
Enterprise Value is less
than the actual value of the Debtors' businesses, (A) Apollo and
Lehman Brothers Inc. will
allegedly receive values to which they are not legally entitled,
and (B) if the Court
determines that Holders of Subordinated Note Claims and Other
Unsecured Claims are not
entitled to post-petition interest, the Creditors' Plan cannot be
confirmed because
Holders of such Claims would be receiving more than they are
legally entitled to receive under Section 1129(b) of the Code.
If the Holders of Old Common Stock believe that the
Negotiated Enterprise Value is
less than the actual value of the Debtors, they can either
exercise the Equity Call Option
or seek to have the Court determine the actual value of the
Debtors.
As set forth elsewhere herein, post-petition interest is
only payable to the
Holders of Subordinated Note Claims to the extent permitted by
law, and is clearly not
a condition to confirmation or effectiveness of the Creditors'
Plan.
As to trade creditors and other Holders of Other Unsecured
Claims, the Creditors'
Plan does provide that they will receive post-petition interest
at the rate of 6.5% per
annum--which is less than the legal rate of interest under
Florida law (12%) or New York
law (9%). The Proponents believe that this represents a fair,
equitable and reasonable
settlement of the potential claims of trade and other general,
unsecured creditors for
post-petition interest in light of (i) the possibility that some
of the Debtors are
solvent on a stand-alone basis even on a Chapter 7 liquidation
basis; and (ii) potential
LBO-related fraudulent conveyance claims that might be asserted
on behalf of trade
creditors (including in a hypothetical Chapter 7 liquidation).
Moreover, in the event excess equity value (New Common
Stock Value Per Share)
exists after all amounts permitted by law are distributed to
Creditors under the
Creditors' Plan, shares of New Common Stock will be distributed
to Holders of Allowed Old
Common Stock Interests, so that no Creditor receives in excess of
the amount permitted
to be distributed to such Creditor by law.
These provisions are specifically designed to provide
safeguards against overpayment to Creditors in respect of their
Claims.
f. Other Features of the Creditors' Plan
The Creditors' Plan embodies and provides for the final
settlement and resolution
of (a) all veil piercing/fraudulent conveyance issues raised in
the pending Declaratory
Judgment Proceeding (Hillsborough Holdings Corp., et al. v.
Celotex Corp., et al.,
No. 90-0003, now pending in the Court), all pre-petition
litigations (including, without
limitation, Larned, et al. v. Kohlberg Kravis Roberts & Co., et
al., and Cimino, et al.
v. Raymark Industries, Inc. et al., both now pending in the
Eastern District of Texas),
and all possible future such litigations (as defined in Section
II.C.4, the "Veil
Piercing-Related Issues"), as the Veil Piercing-Related Issues
relate to any or all of
the Settling Parties, which include the Debtors, their
predecessors and their respective
present or former subsidiaries and affiliates, persons and
entities who have valid and
enforceable indemnities from any or all of the Debtors arising
out of or relating to the
Veil Piercing-Related Issues (as defined herein, holders of
"Allowed Indemnity Claims"),
and other parties to the Veil Piercing Settlement Agreement, (b)
the Fraudulent Conveyance
Lawsuit and (c) certain issues relating to bank debt claims, to
Series B & C Senior Note
Claims and to general unsecured claims.
The confirmation and effectiveness of the Creditors' Plan
is conditioned upon,
among other things, the entry of an order by the Court approving
the Veil Piercing
Settlement and the Veil Piercing Settlement Agreement. On June
10, 1994, acting upon a
motion filed by Celotex, the Celotex Bankruptcy Court approved
the Veil Piercing
Settlement Agreement and authorized and directed Celotex to
perform its obligations
thereunder. The Veil Piercing Settlement Agreement is not,
however, conditioned on
confirmation of a Chapter 11 plan for Celotex.
The confirmation and effectiveness of the Creditors' Plan
is also conditioned upon
the final resolution and settlement, approved by an order of the
Court, of all LBO-Related
Issues as to the Released Parties, as provided in the Pre-LBO
Bondholders Settlement
Agreement and the Creditors' Plan.
It should also be noted that the Veil Piercing Settlement
Agreement binds not only
present claimants, but also binds any and all future claimants
asserting any claim based
on a Veil Piercing-Related Issue against any Debtor or other
Released Party.
On June 8, 1994, the Aetna Casualty and Surety Company
("Aetna"), an insurer of Old
Jim Walter and an alleged creditor and party in interest in the
Chapter 11 Cases, filed
an untimely written objection to the Disclosure Statement
requesting that certain language
be added to the Disclosure Statement. Aetna had previously filed
a motion with the
Celotex Bankruptcy Court in which, among other things, Aetna
stated that it had no
objection to the economic terms of the Veil Piercing Settlement
Agreement. The language
requested by Aetna to be included herein is reproduced in its
entirety below:
"The Veil Piercing Settlement Agreement (the
"Settlement Agreement") contemplates, among other things, for the
compromise of the claims of the "Veil Piercing Claimants" who are
is [sic] defined on page 29 of the Settlement Agreement as
follows:
"Veil Piercing Claimants" shall mean The Celotex
Corporation and any other person or entity who may have or may
assert in the future a Veil Piercing Claim. (emphasis added)
The term "Veil Piercing Claims" is defined on page
29 of the Settlement Agreement as follows:
"Veil Piercing Claims" shall mean and be the
collective reference to all existing claims and all claims that
may be asserted in the future against any or all of the Debtors
or any other Released Party based upon, arising out of or in
connection with any of the Veil Piercing-Related
Issues, but shall not include Allowed Indemnity
Claims. (emphasis added)
Page 8 of the Settlement Agreement at paragraph 3(a)
provides, in relevant part, the following condition:
Entry by the [Hillsborough] Court of the Confirmation Order,
which order shall (unless this requirement, or any part
thereof, is waived or modified by the Bondholder Proponents and
any Party whose rights under this Agreement would be contravened
by such waiver or modification) specifically contain (i) all
releases and injunctions necessary and appropriate to
realize the full and complete settlement, satisfaction, release
and discharge of all Veil Piercing Claims against any
and all of the Released Parties, the form and substance of which
to be acceptable to the Bondholder Proponents, whether or not all
the Veil Piercing Claims are known to or knowable by the Veil
Piercing Claimants. The settlement, satisfaction,
release and discharge of the Veil Piercing Claims
against the Released Parties will become effective as to each
Veil Piercing Claim, whether or not the Veil Piercing Claim
constituted an allowed claim in the [Hillsborough]
Chapter 11 Cases or the Celotex Chapter 11 Case and
whether or not the holder of the Veil Piercing Claim received
actual notice of the Plan and the proceedings for approval of the
Plan and entry of the Confirmation Order. (emphasis added)
It should be noted, that certain of the holders of
Veil Piercing Claims may hold "future claims" against Celotex.
"Future claimants" may be defined as those parties who may in the
future manifest an injury or harm based upon alleged acts
or omissions (either pre-petition or post-petition) by
Celotex or the Debtor arising out of the manufacture and/or
distribution of asbestos and asbestos products. Although such
"future claimants" are not represented in either the
bankruptcy proceedings for the Debtor or Celotex, their
rights are being significantly affected by the Settlement
Agreement. Notwithstanding the attempted
compromise of such claims, it is possible that some or all
of such claimants may be represented at some point in the future.
It is also possible that such claimants may argue that they did
not receive notice and an opportunity for hearing
in connection with the compromise of their rights and that
their fundamental constitutional right of due process has been
violated. It is further possible that such "future claimants"
may commence an action against the Debtor seeking to
"pierce the corporate veil" and allege that the Debtor is
liable to such claimants for their alleged injuries. There can
be no certainty as to what the outcome might be of such a
litigation."
The Proponents disagree with Aetna.The Proponents believe
that the procedures to
be followed under the Veil Piercing Settlement Agreement in
achieving Finality (as defined
therein), and the procedures that the Proponents believe will be
followed by the Celotex
Settlement Fund Recipient in connection with the distribution,
under the auspices of the
Celotex Bankruptcy Court, of the payment to be made to the
Celotex Settlement Fund
Recipient under the Creditors' Plan, will fully satisfy all
constitutional due process
rights of, and will prevent any future litigation against the
Debtors or Released Parties
by, any and all possible future asbestos claimants.
2. Distribution of Combination of Qualified Securities
and New Common Stock to Holders of Subordinated Note Claims and
to Veil Piercing Claimants
Holders of Allowed Subordinated Note Claims (Classes U-4,
U-5 and U-6) and Veil
Piercing Claimants (Class U-7) will receive consideration under
the Creditors' Plan
consisting of a combination of (i) "Qualified Securities" and
(ii) shares of one of two
newly-created classes of common stock of Walter Industries--Class
A Common Stock, par
value $.01 per share (the "Class A Common Stock"), which will be
distributed to Holders
of Class U-4 and Class U-5 Claims and which is entitled to five
(5) votes per share--or
Class B Common Stock, par value $.01 per share (the "Class B
Common Stock"), which will
be distributed to Holders of Class U-6 and Class U-7 Claims and
which is entitled to one
(1) vote per share. Other than voting rights, and certain
optional and mandatory
conversion rights of the Class A Common Stock into Class B Common
Stock, the terms of the
Class A Common Stock and Class B Common Stock are identical. See
"OVERVIEW OF THE CREDITORS' PLAN--Description of Securities to be
Issued Under the Creditors' Plan--New
Common Stock." Each share of Class A Common Stock automatically
converts into one share
of Class B Common Stock upon transfer by the original recipient
(except to an Affiliate),
and the Charter is designed to protect against any amendment to
this Charter provision
by the holders of Class A Common Stock. As described in more
detail below, to the extent
that Holders of Allowed Old Common Stock Interests exercise the
Equity Call Options
granted to them under the Creditors' Plan, Creditors will
receive, in lieu of some of the
shares of New Common Stock that they otherwise would have
received under the Creditors'
Plan, Cash in an amount equal to the New Common Stock Value Per
Share, for each share that
is not received as a result of the exercise of the Equity Call
Options.
a. Qualified Securities
"Qualified Securities" are defined under the Creditors'
Plan to mean, with respect
to any Debtor, either Cash (other than Cash proceeds from the
exercise of Equity Call
Options) or debt securities issued by such Debtor that meet the
following requirements:
(1) Independent Rating. If the debt securities are
secured by real property mortgages and the promissory notes
secured thereby, such securities must be rated BB or higher by
either Standard & Poor's Corporation or Moody's Investors
Service, Inc. (a "Rating Service"); and if the debt
securities are not so secured, such securities must be rated B or
higher by a Rating Service, in each case as of the Effective Date
(provided, that the obtaining of such Rating Service ratings
shall not be required in the event that, after proper
application is made therefor, neither Rating Service provides a
rating of the debt securities proposed to be rated); and
(2) Valuation at Par. Such debt securities must be
valued by Lehman Brothers Inc. and a qualified valuation expert
selected by Apollo at par as of the Effective Date, on a fully
distributed basis. In the event that Lehman Brothers
Inc. and such qualified valuation expert selected by
Apollo do not agree as to whether such securities are valued at
par as of the Effective Date, the New Board of such Debtor (or,
if the New Board has not yet been appointed, the Bondholders
Committee) shall select a third qualified valuation expert
of national reputation, whose determination will be binding.
THERE CAN BE NO ASSURANCE THAT ANY QUALIFIED SECURITY WILL TRADE
AT OR ABOVE PAR AT ANY TIME. TRADING PRICES WILL DEPEND ON
NUMEROUS FACTORS, INCLUDING MARKET CONDITIONS, PREVAILING
INTEREST RATES AND THE FINANCIAL CONDITION AND PERFORMANCE OF THE
OBLIGORS THEREOF.
If more than one type of Qualified Security is
distributed, each Class receiving Qualified Securities under the
Creditors' Plan will receive the same proportion of the various
types of debt securities qualifying as Qualified Securities, and
of Cash, as each other Class receiving Qualified Securities under
the Creditors' Plan. See "OVERVIEW OF THE CREDITORS'
PLAN--Description of Securities to be Issued Under the Creditors'
Plan--Qualified Securities."
b. Method of Allocation of Qualified Securities and New
Common Stock
The Creditors' Plan provides for Qualified Securities and
New Common Stock (part of which will be replaced by Cash if
Equity Call Options are exercised) to be distributed to Holders
of Allowed Subordinated Note Claims according to: (i) the
election made by each such Holder on the place indicated on such
Holder's Subordinated Note Claim Election Form under which the
Holder may specify the dollar amount of its Allowed Claim that is
desired to be satisfied by Qualified Securities, with the
remainder to be satisfied by shares of the applicable class of
New Common Stock; and (ii) the preferences given by the
Creditors' Plan under the Pre-LBO Bondholders Settlement
Agreement to Classes U-4, U-5 and U-6.
The Creditors' Plan provides that Qualified Securities and
New Common Stock available for distribution in respect of Allowed
Subordinated Note Claims do not include Qualified Securities and
New Common Stock to be distributed to satisfy Allowed Veil
Piercing Claims as described below.
Specifically, the Creditors' Plan provides for the
allocation of Qualified Securities and New Common Stock available
for distribution to Holders of Subordinated Note Claims and
Holders of Veil Piercing Claims as follows:
(a) To the extent elected by Holders of Class U-4
Claims pursuant to the Subordinated Note Claim Election, the
first $240,000,000 principal amount of such Qualified Securities
(to the extent available) shall be used to satisfy the Allowed
Claims of Class U-4;
(b) To the extent elected by Holders of Class U-4
Claims (other than as to Class U-4 Claims satisfied with
Qualified Securities pursuant to paragraph (a) above), Class U-5
Claims and Class U-6 Claims pursuant to the Subordinated Note
Claim Election, the remaining principal amount of such
Qualified Securities (to the extent available), plus the
principal amount, if any, of Qualified Securities
provided for in clause (a) above but not elected by
Holders of Class U-4 Claims, shall be used to satisfy the Allowed
Claims of Class U-4, U-5 and U-6, as follows:
(i) The next $80,000,000 (plus, whether
positive or negative, 80/700 of the difference between the amount
of Qualified Securities actually available for distribution under
this paragraph (b), and the amount of Qualified Securities that
would be available under this paragraph (b) if there were
$700,000,000 principal amount of Qualified Securities available,
in the aggregate, for distribution to Classes U-4
through U-7) principal amount of such Qualified Securities (to
the extent available) shall be used to satisfy the Allowed Claims
of Class U-6;
(ii) the remaining principal amount of such
Qualified Securities (to the extent available) shall be used to
satisfy the remaining Class U-4 and Class U-5 Allowed Claims, pro
rata (after deducting from Class U-4 the amount of Claims
satisfied by paragraph (a) of this Section) among Classes
U-4 and U-5; and
(iii) the remaining principal amount of such
Qualified Securities (to the extent available) shall be used to
satisfy the remaining Class U-6 Claims; and
(c) any of such Qualified Securities remaining
after giving effect to (a) and (b) above shall be applied to
satisfy the Allowed Claims of Classes U-4, U-5 and U-6 to the
extent not already satisfied by Qualified Securities after
giving effect to (a) and (b) above, pro rata, based on the
amount of Allowed Claims not satisfied by Qualified Securities
pursuant to (a) and (b) above, among all such remaining
Subordinated Note Claims.
(d) The New Common Stock available for distribution
on account of Subordinated Note Claims shall be allocated as
follows: each Holder shall receive shares of New Common Stock
(which shall be Class A Common Stock in the case of
Class U-4 and Class U-5 Claims, and Class B Common Stock
in the case of Class U-6 Claims) having an aggregate New Common
Stock Value equal to (i) such Holder's Pro Rata share of the
aggregate principal amount of Qualified Securities and the
aggregate New Common Stock Value Per Share of the New
Common Stock, in each case available for distribution in respect
of Subordinated Note Claims after all distributions are made in
respect of Veil Piercing Claims and, with respect to New
Common Stock, Revolving Credit Bank Claims, Working
Capital Bank Claims and Series B & C Senior Note Claims; less
(ii) the aggregate principal amount of Qualified Securities to be
distributed in respect of such Subordinated Note Claim,
provided, however, that in the event that the distributions to be
made to Holders of Subordinated Note Claims under the Creditors'
Plan would result in the receipt by such Holders of securities
having a value in excess of their Allowed Claims, any
such excess shall be distributed to Holders of Class E-1
Interests pursuant to Section 3.26 of the Creditors' Plan in
shares of Class B Common Stock having an aggregate New Common
Stock Value Per Share equal to such excess; provided, further,
that in the event that any Holder of an Allowed Old Common
Stock Interest exercises an Equity Call Option, (i) each Holder
of a Subordinated Note Claim shall receive Cash in an amount
equal to such Subordinated Noteholder's pro rata share (based on
the number of shares of New Common Stock that would
otherwise have been issued to such Holder under this paragraph
(d), divided by all shares of New Common Stock that would
otherwise have been issued to all Holders of Subordinated Note
Claims under this paragraph (d)) of the aggregate Cash proceeds
received from the exercise of all such Equity Call Options,
multiplied by a fraction, the numerator of which is the number of
shares of New Common Stock that would otherwise be issued to
Holders of Subordinated Note Claims under this paragraph
(d), and the denominator of which is the number of shares of New
Common Stock to be issued under the Creditors' Plan to Classes
S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares
of New Common Stock that each Holder of Subordinated Note Claims
shall receive under this paragraph (d) shall be reduced by the
amount of Cash received under clause (i) of this proviso divided
by the New Common Stock Value Per Share. The sum of the
aggregate principal amount of Qualified Securities, the aggregate
New Common Stock Value Per Share of New Common Stock and
Cash paid in lieu of New Common Stock cannot, however, be greater
than the Allowed Amount of any Subordinated Note Claim.
The Creditors' Plan provides for Qualified Securities and
Class B Common Stock to
be distributed to the Celotex Settlement Fund Recipient in
respect of all Allowed Veil Piercing Claims (Class U-7) as
follows:
(1) With respect to the "Veil Piercing Claims
Amount," which is an amount equal to $450,000,000 (assuming that
the Negotiated Enterprise Value is used for allocation purposes,
and subject to adjustment under the Veil Piercing Settlement
Agreement if it is not--see "OVERVIEW OF THE CREDITORS'
PLAN--Special Features of the Creditors' Plan--Settlement of Veil
Piercing/Fraudulent Conveynce Issuer and Other Issues--Terms of
the Veil Piercing Settlement Agreement"), such amount shall
be satisfied by a combination of Qualified Securities and
shares of Class B Common Stock, such that the aggregate principal
amount of Qualified Securities used to satisfy a portion of the
Veil Piercing Proceedings Claim amount shall bear the same
ratio to the aggregate principal amount of Qualified
Securities used to satisfy a portion of the Subordinated Note
Claims as $487.5 million (or, if the Amended and Restated Veil
Piercing Settlement Agreement becomes effective by its terms,
$450 million) bears to $1,098 million; provided that if
the Amended and Restated Veil Piercing Settlement Agreement does
not become effective by its terms, the $487.5 million component
of such ratio shall be reduced (but to no lower than $450
million) one dollar for every two dollars in value of
Class B Common Stock assigned by the Celotex Settlement Fund
Recipient to Settling Equityholders from the $75,000,000 of Class
B Common Stock identified in Section 1.22(o) (B) (i) of the
Creditors' Plan (for example, if all Holders of Old Common
Stock Interests become Settling Equityholders, the ratio will be
$450 million to $1,098 million); and the excess of the Veil
Piercing Claims Amount over the portion thereof satisfied by
Qualified Securities shall be satisfied by that number of
shares of Class B Common Stock having an aggregate New Common
Stock Value Per Share equal to such excess, provided, however,
that in the event that any Holder of an Allowed Old Common Stock
Interest exercises an Equity Call Option, (i) the Celotex
Settlement Fund Recipient shall receive Cash in an amount equal
to the aggregate Cash proceeds received from the exercise of all
such Equity Call Options, multiplied by a fraction, the
numerator of which is the number of shares of New Common
Stock that would otherwise be issued to the Celotex Settlement
Fund Recipient under Section 3.22 of the Creditors' Plan, and the
denominator of which is the number of shares of New Common
Stock to be issued under the Creditors' Plan to Classes
S-1, S-2, S-6 and U-4 through U-7; and (ii) the number of shares
of New Common Stock that the Celotex Settlement Fund Recipient
shall receive under this paragraph 1 shall be reduced by
an amount equal to the amount of Cash received under
clause (i) of this proviso divided by the New Common Stock Value
Per Share; and
(2) with respect to (i) if the Amended and Restated
Veil Piercing Settlement Agreement becomes effective by its
terms, 100% of the Senior Claim Differential (defined below), or
(ii) if the Amended and Restated Veil Piercing Agreement does not
become effective by its terms, the sum of (a) $75,000,000 and
(b) the Senior Claim Differential, shares of Class B
Common Stock having an aggregate New Common Stock Value Per Share
equal to such sum. If the Amended and Restated Veil Piercing
Settlement Agreement does not become effective by its terms,
the shares described in this clause (ii), other than
shares having an aggregate New Common Stock Value Per Share equal
to 50% of the Senior Claim Differential are subject to assignment
to Settling Equityholders, pro rata as though all Holders of
Class E-1 Interests were Settling Equityholders.
For a discussion of the conditions precedent to
effectiveness of the Amended and
Restated Veil Piercing Settlement Agreement, see "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues
and Other Issues--Terms of the Veil Piercing Settlement
Agreement."
The "Senior Claim Differential" means the excess, if any,
of $902,000,000 over the difference between (a) the Allowed
Amount of Claims for all Classes other than Classes
U-4 through U-7 and Classes I-1 through I-3 (excluding any
interest to be paid in the form
of Class B Common Stock to Classes S-1, S-2 and S-6), accrued or
owed on the Effective Date (including without limitation any part
thereof paid or to be paid after the Effective
Date) (the "Senior Claims"), and (b) the interest paid or accrued
under the Creditors' Plan in respect of the Senior Claims for the
period from January 1, 1994 to the Effective
Date (excluding any interest to be paid in the form of Class B
Common Stock to Classes S-1, S-2 and S-6).
The amount of $902,000,000 represents a negotiated
reasonable estimate of the
aggregate Allowed Amount of all Claims in Classes other than
Classes U-4 through U-7 and I-1 through I-3 (excluding any
interest to be paid in the form of Class B Common Stock
to Classes S-1, S-2 and S-6), as of December 31, 1993. This
estimate was arrived at by the Bondholder Proponents in their
negotiations with certain representatives of Veil
Piercing Claimants, and was believed to be a realistic estimate
at that time. While there can be no assurance as to the actual
amount of such Claims that will ultimately be allowed
by the Court, the Proponents estimate that the Allowed Amount of
Senior Claims assuming a 12/31/94 Effective Date will be in
excess of $902 million. However, this will have no
effect on the allocation of New Common Stock and Qualified
Securities under the Creditors'
Plan. But see "OVERVIEW OF THE CREDITORS' PLAN--Special Features
of the Creditors' Plan--Distribution of Combination of Qualified
Securities and New Common Stock to Holders of
Subordinated Note Claims and to Veil Piercing Claimants--New
Common Stock," for a discussion of the sensitivity of common
stock recoveries to increases in Senior Claims.
The Debtors assert that this Disclosure Statement provides
inadequate disclosure in that, if the Court determines that the
Qualified Securities are worth more than face
value, the recipients of Qualified Securities would receive more
than the Allowed Amount
of their Claims and the Creditors' Plan would violate Section
1129(b) of the Code. The Debtors further assert that under
certain circumstances, Apollo and Lehman Brothers Inc.
will be the entities setting the terms and conditions of the
Qualified Securities, and may have sole discretion in
establishing the value of the Qualified Securities.
The Proponents disagree. The Creditors' Plan expressly
prohibits Creditors from receiving distributions in excess of the
maximum amount permitted by law. In the event
that excess equity value (New Common Stock Value Per Share)
exists after all amounts permitted by law are distributed to
Creditors under the Creditors' Plan, that excess
equity value is distributed to existing equityholders in the form
of New Common Stock.
c. Creation and Anticipated Range of Amount of
Qualified Securities
The Creditors' Plan provides that each of the New Boards,
in addition to the other
duties of each New Board not inconsistent with the following
under applicable law and the
applicable articles of incorporation and bylaws of each Debtor,
shall cause its Debtor
to be managed and operated in a manner calculated to (i) maximize
the value of the Debtor,
and (ii) raise Cash from operations or other commercially
reasonable sources, create
Qualified Securities in accordance with customary industry
practice, and take such other
actions to facilitate consummation of the Creditors' Plan. The
Proponents do not
anticipate that the Creditors' Plan will require the Debtors to
significantly alter their
current business plan, and they currently do not intend that such
business plan will be
significantly altered after the Effective Date.
The Proponents believe that the form and amount of Cash
and other Qualified Securities available for distribution under
the Creditors' Plan will be within the ranges
set forth below, based upon the financial information publicly
disclosed by the Debtors, and assuming (i) an Effective Date of
December 31, 1994, (ii) average loan production by
Mid-State Homes through the Effective Date, and (iii) utilization
of the Debtors' unrestricted Cash balances and borrowing capacity
as of the Effective Date in accordance
with prudent business judgment and the customary practices of the
Debtors. THERE CAN BE NO ASSURANCE, HOWEVER, AS TO THE AMOUNT,
IF ANY, OF QUALIFIED SECURITIES THAT WILL BE
AVAILABLE FOR DISTRIBUTION UNDER THE CREDITORS' PLAN.
<TABLE>
<CAPTION>
Estimated Range of
Amounts as of
12/31/94
(in millions)<F1>
<S> <C> <C>
SOURCES OF FUNDS
Cash and Cash equivalents on hand <F2> $ 125 $ 150
Walter Industries indebtedness distributed to Creditors <F3> 525 600
Securitization of unencumbered mortgages and
mortgage residuals <F4><F5> 850 900
Total 1,500 1,650
USES OF FUNDS
Estimated Cash and indebtedness necessary to satisfy
Claims of Classes other than U-4 through U-7<F6> (975) (975)
Amount of Qualified Securities available for distribution
to Classes U-4 through U-7 $ 525 $ 675
</TABLE>
[FN]
<F1> This chart is provided for illustrative purposes only, and
there can be no assurance that Qualified Securities will be
available in the foregoing forms and amounts.
<F2> Projected cash available for distribution is based on the
actual cash balance as of March 30, 1994 adjusted for planned
cash flows through December 31, 1994 and the release of currently
restricted Cash that would become available upon the Debtors'
emergence from Chapter 11. To the extent that the
Mid-State Homes' subsidiary finances more mortgage loans than
planned, the actual Cash balance at December 31, 1994 may be
lower than anticipated. This decrease, however, would be offset
by a greater amount of mortgages available for securitization.
<F3> This indebtedness is expected to include New Senior Notes
and Qualified Securities. The actual amount of indebtedness will
be determined prior to the Effective Date based on input from the
Rating Services and management of Walter Industries and is
subject to approval by the New Board of Walter Industries
(or if the New Board is not appointed, the Bondholders
Committee). As an alternative, the New Board of
Walter Industries (or if the New Board is not yet
appointed, the Bondholders Committee) may seek to have debt
obligations of Walter Industries sold in an underwritten public
offering or private placement and distribute the cash proceeds
from such offering to creditors in lieu of New Senior
Notes and indebtedness constituting Qualified Securities.
<F41> These obligations are intended to be created through the
securitization of currently unencumbered mortgages of Mid-State
Homes and through the securitization of the residuals of
Mid-State Homes Trust II and III and the residuals created by
the securitization of the aforementioned unencumbered
mortgages. The actual amount of securities created will be
determined prior to the Effective Date based on input
from the Rating Services and management of Walter
Industries and is subject to approval by the New Board of Walter
Industries (or if the New Board is not appointed, the Bondholders
Committee). As an alternative, the New Board of Walter
Industries (or if the New Board is not yet appointed, the
Bondholders Committee) may seek to have all or part of these
securities sold in an underwritten offering
or private placement and distribute the cash proceeds from
such offering to creditors in lieu of indebtedness constituting
Qualified Securities.
<F5> The Bondholders Committee has initiated discussions with
prospective financing sources regarding the underwriting or
private placement of the Walter Industries debt obligations and
the mortgage-backed securities discussed above. It is
anticipated that Lehman Brothers will be a participant in
any such underwriting or private placement. It is expected that
any underwriter retained in connection with these financings,
including Lehman Brothers, would be required to seek the approval
of the Court, under Rule 1129(a)(4) of the Code, for their
fees and reimbursement of expenses.
<F6> See chart of Claims set forth in "Reasonableness of the
Settlement: Certainty and Prompt Payment vs. Uncertainty and
Additional Years of Delay--Funding of the Settlement Payment by
Creditors."
The Proponents and their financial advisors believe that
the Cash and securities
required to fund the consummation of the Creditors' Plan can be
obtained even in the event
of a pending appeal of the Confirmation Order by the Debtors or
their controlling
stockholder, KKR Associates. In order to consummate the
Creditors' Plan, Holders of
Senior Claims must be paid in Cash or, in the case of Class S-6,
Cash and/or New Senior
Notes. If Class S-6 Claims are satisfied in full by New Senior
Notes, then approximately
$660 million in Cash will be required to satisfy remaining Senior
Claims. Cash on hand
reduces this amount to approximately $500 million; assuming that
no Qualified Securities
are issued to Classes U-4 through U-7, the Cash required to pay
$500 million in Senior
Claims and provide post-consummation working capital for the
Debtors could either be
provided by bank financing (which the Proponents believe could be
obtained even in the
face of such an appeal) or, if bank financing was not available
due to the pending appeal,
then Cash well in excess of the required amount could be raised
from the financing or sale
of Mid-State Homes' unencumbered mortgage portfolio.
Additionally, if the Proponents sell
unencumbered mortgages to fund Senior Claims, there may be less
Qualified Securities
available for distribution to Holders of Subordinated Note Claims
and Veil Piercing Claims.
If, however, as the result of appeals from the
Confirmation Order and (if not
contained in the Confirmation Order) the order approving the Veil
Piercing Settlement,
the Proponents are unable to obtain financing and are unable to
finance or sell Mid-State
Homes' unencumbered mortgage portfolio, there would be
substantial delay in consummating
the Creditors' Plan, if it can be consummated at all, due to the
time involved in resolving such appeals.
d. Examples of Possible Allocations of Qualified
Securities and New Common
Stock
The method of allocating Qualified Securities and New
Common Stock among Classes
U-4, U-5, U-6 and U-7 is illustrated in the following charts
through the use of three
examples. The first example assumes that $700,000,000 aggregate
principal amount of
Qualified Securities (representing the minimum amount necessary
to satisfy a condition
to the Effective Date, which condition may be waived solely by
the Bondholder Proponents)
are available for distribution under the Creditors' Plan, while
the second example assumes
that $900,000,000 aggregate principal amount of Qualified
Securities are available for
distribution under the Creditors' Plan. For the sake of
illustration, the third example
assumes that $500,000,000 aggregate principal amount of Qualified
Securities are available
for distribution under the Creditors' Plan.
In each example, the allocation of Qualified Securities
between the Holders of
Allowed Subordinated Note Claims, on the one hand, and the
Celotex Settlement Fund
Recipient, on the other hand, must first be determined. The
allocation of Qualified
Securities to the Celotex Settlement Fund Recipient is described
above in "OVERVIEW OF
THE CREDITORS' PLAN--Distribution of Combination of Qualified
Securities and New Common
Stock to Holders of Subordinated Note Claims and to Veil Piercing
Claimants--Qualified
Securities." As illustrated by the examples set forth in the
following Exhibits I.A.,
II.A. and III.A., in the event that the Amended and Restated Veil
Piercing Settlement
Agreement does not become effective by its terms, more Qualified
Securities will be
allocated to Holders of Subordinated Note Claims and fewer
Qualified Securities will be
allocated to the Celotex Settlement Fund Recipient, to the extent
that more Holders of
Old Common Stock become Settling Equityholders (that is, as the
aggregate amount of Old
Common Stock held by Settling Equityholders increases).
Qualified Securities and New Common Stock distributed to
the Celotex Settlement
Fund Recipient will be allocated to the veil piercing claimants
in accordance with the
Veil Piercing Settlement Agreement and any Chapter 11 plan for
Celotex, under the
supervision of the court administering the Celotex Chapter 11
Proceeding.
The specific amount of Qualified Securities and New Common
Stock allocated among
Classes U-4, U-5 and U-6 will depend on (a) the amount of
Qualified Securities available
for distribution to Holders of Allowed Subordinated Note Claims
(i.e., after distribution
is made of Qualified Securities to the Celotex Settlement Fund
Recipient), and (b) the
result of the Subordinated Note Claim Election.
Exhibits I., II. and III. B., C. and D. further illustrate
the allocation of
Qualified Securities and New Common Stock among Classes U-4
through U-7. In each case,
it is assumed (i) that all Holders of Subordinated Note Claims
elect to receive all of
their distribution in Qualified Securities; (ii) that the Court
does not find that the
going concern enterprise value of the Debtors is equal to an
amount other than the
Negotiated Enterprise Value; and (iii) that the Senior Claims
Differential is equal to
zero; and (iv) that there is no exercise of the Equity Call
Options.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT I.A.
Allocation of Qualified Securities Between
Unsecured Bondholders and Veil Piercing Claimants
Amount of Qualified Securities $700,000,000
Percentage of
Allowed Claim
Proportional Proportional Available Allocation Received in
Sharing Sharing Qualified of Qualified Qualified
Allowed Claim Amounts Percentages Securities Securities Securities
<S> <C> <C> <C> <C> <C> <C>
Subordinated Notes
(Classes U-4, U-5, U-6) $1,097,986,977(a) $1,097,986,977 70.9% X $700,000,000 = $496,509,916 45.2%
Veil Piercing Claimants
(Class U-7) $ 450,000,000 $ 450,000,000 29.1% X $700,000,000 = $203,490,084 45.2%
Total $1,547,986,977 $1,547,986,977 100.0% $700,000,000
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Percentage of
Allowed Claim
Proportional Proportional Available Allocation Received in
Sharing Sharing Qualified of Qualified Qualified
Allowed Claim Amounts Percentages Securities Securities Securities
Subordinated Notes
(Classes U-4, U-5, U-6) $1,097,986,977<F1> $1,097,986,977 69.3% X $700,000,000 = $484,766,444 44.2%
Veil Piercing Claimants
(Class U-7) $ 525,000,000<F2> $ 487,500,000 30.7% X $700,000,000 = $215,233,556 41.0%
Total $1,622,986,977 $1,585,486,977 100.0% $700,000,000
<FN>
<F1> Allowed Claim represents Filing Date amount only.
<F2> Assumes that no holders of Class E-1 interests become settling equityholders.
NOTE: Assumes that Senior Claim Differential equals zero and that all claimants elect to receive full amount of Qualified
Securities available to them.
</TABLE>
<TABLE>
EXHIBIT I.B.
Consideration Received By Unsecured Bondholders
Amount of Qualified Securities $700,000,000
Percentage
of Claim Percentage
Priority Allocation Received Value of of Claim
Allocation of Remaining Total in Common Received
of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage
Class Claim Securities Securities<F3> Securities Securities Received<F4> Stock Consideration of Claim
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $ 68,279,539 $308,279,539 64.3% $170,981,384 35.7% $ 479,260,923 100.0%
U-5 379,254,167 0 108,230,377 108,230,377 28.5% 271,023,790 71.5% 379,254,167 100.0%
U-6 239,471,887 80,000,000<F1> 0 80,000,000 33.4% 159,471,887 66.6% 239,471,887 100.0%
$1,097,986,977 $320,000,000 $176,509,916 $496,509,916 $601,477,061 $1,097,986,977 100.0%
Remaining Qualified Securities 176,509,916
Total Qualified Securities $496,509,916<F2>
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Percentage
of Claim Percentage
Priority Allocation Received Value of of Claim
Allocation of Remaining Total in Common Received
of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage
Class Claim Securities Securities<F3> Securities Securities Received<F4> Stock Consideration of Claim
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $ 63,736,798 $303,736,798 63.4% $175,524,125 36.6% $ 479,260,923 100.0%
U-5 379,254,167 0 101,029,646 101,029,646 26.6% 278,224,521 73.4% 379,254,167 100.0%
U-6 239,471,887 80,000,000<F1> 0 80,000,000 33.4% 159,471,887 66.6% 239,471,887 100.0%
$1,097,986,977 $320,000,000 $164,766,444 $484,766,444 $613,220,533 $1,097,986,977 100.0%
Remaining Qualified Securities 164,766,444
Total Qualified Securities $484,766,444<F2>
NOTE: Calculations assume that each class elects to receive full amount of Qualified Securities available to it.
<FN>
<F1> See Exhibit IV for calculation of minimum guaranteed amount of Qualified Securities for Class U-6.
<F2> See Exhibit I.A. for calculation of Qualified Securities available for distribution to Classes U-4, U-5 and U-6 after
allocation of Qualified Securities to Class U-7.
<F3> See Exhibit I.C. for allocation of remaining Qualified Securities.
<F4> See Exhibit I.D. for allocation of New Common Stock. These calculations assume an aggregate of $902 million of senior
claims.
</TABLE>
<PAGE>
<TABLE>
EXHIBIT I.C.
<CAPTION>
Allocation of Remaining Qualified Securities
Amount of Qualified Securities $700,000,000
Remaining Claims after
Priority Allocation for
which Qualified Securities
Are Available
Priority Amount of Allocation of
Allocation Remaining Remaining
of Qualified Remaining % Qualified Qualified
Class Claim<F1> Securities Claim $ Total Securities Securities
<S> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $176,509,916 = $ 68,279,539
U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 176,509,916 = 108,230,377
U-6 239,471,887 80,000,000 159,471,887
$1,097,986,977 $320,000,000 $777,986,977 $618,515,090 100.0% $176,509,916
Remaining Qualified Securities 176,509,916
Total Qualified Securities $496,509,916
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Remaining Claims after
Priority Allocation for
which Qualified Securities
Are Available
Priority Amount of Allocation of
Allocation Remaining Remaining
of Qualified Remaining % Qualified Qualified
Class Claim<F1> Securities Claim $ Total Securities Securities
UU-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $164,766,444 = $ 63,736,798
U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 164,766,444 = 101,029,646
U-6 239,471,887 80,000,000 159,471,887
$1,097,986,977 $320,000,000 $777,986,977 $618,515,090 100.0%
$164,766,444
Remaining Qualified Securities 164,766,444
Total Qualified Securities $484,766,444
<FN>
<F1> Claim based on Filing Date amount; does not include post-petition interest.
</TABLE>
<TABLE>
EXHIBIT I.D.
<CAPTION>
Allocation of New Common Stock
Negotiated Enterprise Value $2,525,000,000
Amount of Senior Claims 902,000,000
Amount of Qualified Securities 700,000,000
New Common Stock Value $ 923,000,000
Total Value of % of
Qualified Common Common Number Allocation of Votes % of
Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting
Class Amount Received Received Received to be Issued Issued Share Power Power
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 - $308,279,539 = $170,981,384 18.5% X 50,000,000 = 9,262,394 X 5 = 46,311,971 31.8%
U-5 379,254,167 - 108,230,377 = 271,023,790 29.4% X 50,000,000 = 14,681,886 X 5 = 73,409,430 50.4%
U-6 239,471,887 - 80,000,000 = 159,471,887 17.3% X 50,000,000 = 8,638,902 X 1 = 8,638,902 5.9%
U-7 450,000,000 - 203,490,084 = 246,509,916 26.7% X 50,000,000 = 13,353,922 X 1 = 13,353,922 9.2%
S-1/S-2 37,500,000 - 0 = 37,500,000 4.1% X 50,000,000 = 2,031,448 X 1 = 2,031,448 1.4%
S-6 37,500,000 - 0 = 37,500,000 4.1% X 50,000,000 = 2,031,448 X 1 = 2,031,448 1.4%
Total $1,622,986,977 $700,000,000 $922,986,977 100.0% 50,000,000 145,777,120 100.0%
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Total Value of % of
Qualified Common Common Number Allocation of Votes % of
Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting
Class Amount Received Received Received to be Issued Issued Share Power Power
U-4 $ 479,260,923 - $303,736,798 = $175,524,125 19.0% X 50,000,000 = 9,508,483 X 5 = 47,542,416 32.1%
U-5 379,254,167 - 101,029,646 = 278,224,521 30.1% X 50,000,000 = 15,071,964 X 5 = 75,359,818 50.8%
U-6 239,471,887 - 80,000,000 = 159,471,887 17.3% X 50,000,000 = 8,638,902 X 1 = 8,638,902 5.8%
U-7 525,000,000 - 215,233,556 = 309,766,444 33.6% X 50,000,000 = 16,780,651 X 1 = 16,780,651 11.3%
E-1 0 - 0 = 0<F1> 0.0% X 50,000,000 = 0 X 1 = 0 0.0%
Total $1,622,986,977 $700,000,000 $922,986,977 100.0% 50,000,000 148,321,787 100.0%
<FN>
<F1> Assumes that no holders of Class E-1 interests become settling equityholders.
</TABLE>
<TABLE>
EXHIBIT II.A.
<CAPTION>
Allocation of Qualified Securities Between
Unsecured Bondholders and Veil Piercing Claimants
Amount of Qualified Securities $900,000,000
Percentage of
Allowed Claim
Proportional Proportional Available Allocation Received in
Sharing Sharing Qualified of Qualified Qualified
Allowed Claim Amounts Percentages Securities Securities Securities
<S> <C> <C> <C> <C> <C> <C>
Subordinated Notes
(Classes U-4, U-5, U-6) $1,097,986,977<F1> $1,097,986,977 70.9% X $900,000,000 = $638,369,892 58.1%
Veil Piercing Claimants
(Class U-7) $ 450,000,000 $ 450,000,000 29.1% X $900,000,000 = $261,630,108 58.1%
Total $1,547,986,977 $1,547,986,977 100.0% $900,000,000
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Percentage of
Allowed Claim
Proportional Proportional Available Allocation Received in
Sharing Sharing Qualified of Qualified Qualified
Allowed Claim Amounts Percentages Securities Securities Securities
Subordinated Notes
(Classes U-4, U-5, U-6) $1,097,986,977<F1> $1,097,986,977 69.3% X $900,000,000 = $623,271,142 56.8%
Veil Piercing Claimants
(Class U-7) $ 525,000,000<F2> $ 487,500,000 30.7% X $900,000,000 = $276,728,858 52.7%
Total $1,622,986,977 $1,585,486,977 100.0% $900,000,000
<FN>
<F1> Allowed Claim represents Filing Date amount only.
<F2> Assumes that no holders of Class E-1 interests become settling equityholders.
NOTE: Assumes that Senior Claim Differential equals zero and that all claimants elect to receive full amount of Qualified
Securities available to them.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT II.B.
Consideration Received By Unsecured Bondholders
Amount of Qualified Securities $900,000,000
Percentage
of Claim Percentage
Priority Allocation Received Value of of Claim
Allocation of Remaining Total in Common Received
of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage
Class Claim Securities Securities<F3> Securities Securities Received<F4> Stock Consideration of Claim
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $116,883,874 $356,883,874 74.5% $122,377,049 25.5% $ 479,260,923 100.0%
U-5 379,254,167 0 185,273,449 185,273,449 48.9% 193,980,718 51.1% 379,254,167 100.0%
U-6 239,471,887 96,212,569<F1> 0 96,212,569 40.2% 143,259,318 59.8% 239,471,887 100.0%
$1,097,986,977 $336,212,569 $302,157,323 $638,369,892 $459,617,085 $1,097,986,977 100.0%
Remaining Qualified Securities 302,157,323
Total Qualified Securities $638,369,892<F2>
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Percentage
of Claim Percentage
Priority Allocation Received Value of of Claim
Allocation of Remaining Total in Common Received
of Qualified Qualified Qualified Qualified Stock to be in Common Total Percentage
Class Claim Securities Securities(c) Securities Securities Received<F4> Stock Consideration of Claim
U-4 $ 479,260,923 $240,000,000 $111,191,542 $351,191,542 73.3% $128,069,381 26.7% $ 479,260,923 100.0%
U-5 379,254,167 0 176,250,492 176,250,492 46.5% 203,003,675 53.5% 379,254,167 100.0%
U-6 239,471,887 95,829,108<F1> 0 95,829,108 40.0% 143,642,779 60.0% 239,471,887 100.0%
$1,097,986,977 $335,829,108 $287,442,034 $623,271,142 $474,715,835 $1,097,986,977 100.0%
Remaining
Qualified Securities 287,442,034
Total Qualified
Securities $623,271,142<F2>
NOTE: Calculations assume that each class elects to receive full amount of Qualified Securities available to it.
<FN>
<F1> See Exhibit IV for calculation of minimum guaranteed amount of Qualified Securities for Class U-6.
<F2> See Exhibit I.A. for calculation of Qualified Securities available for distribution to Classes U-4, U-5 and U-6 after
allocation of Qualified Securities to Class U-7.
<F3> See Exhibit II.C. for allocation of remaining Qualified Securities.
<F4> See Exhibit II.D. for allocation of New Common Stock. These calculations assume an aggregate of $902 million of senior
claims.
</TABLE>
<TABLE>
EXHIBIT II.C.
Allocation of Remaining Qualified Securities
Amount of Qualified Securities $900,000,000
Remaining Claims after
Priority Allocation for
which Qualified Securities
Are Available
Priority Amount of Allocation of
Allocation Remaining Remaining
of Qualified Remaining % Qualified Qualified
Class Claim(a) Securities Claim $ Total Securities Securities
<S> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $302,157,323 = $116,883,874
U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 302,157,323 = 185,273,449
U-6 239,471,887 96,212,569 143,259,318
$1,097,986,977 $336,212,569 $761,774,408 $618,515,090 100.0% $302,157,323
Remaining Qualified
Securities 302,157,323
Total Qualified Securities $638,369,892
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Remaining Claims after
Priority Allocation for
which Qualified Securities
Are Available
Priority Amount of Allocation of
Allocation Remaining Remaining
of Qualified Remaining % Qualified Qualified
Class Claim<F1> Securities Claim $ Total Securities Securities
U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $287,442,034 = $111,191,542
U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 287,442,034 = 176,250,492
U-6 239,471,887 95,829,108 143,642,779
$1,097,986,977 $335,829,108 $762,157,869 $618,515,090 100.0%
$287,442,034
Remaining Qualified
Securities 287,442,034
Total Qualified Securities $623,271,142
<FN>
<F1> Claim based on Filing Date amount; does not include post-petition interest.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT II.D.
Allocation of New Common Stock
Negotiated Enterprise Value $2,525,000,000
Amount of Senior Claims 902,000,000
Amount of Qualified Securities 900,000,000
New Common Stock Value $ 723,000,000
Total Value of % of
Qualified Common Common Number Allocation of Votes % of
Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting
Class Amount Received Received Received to be Issued Issued Share Power Power
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 - $356,883,874 = $122,377,049 16.9% X 50,000,000 = 8,463,296 X 5 = 42,316,478 30.8%
U-5 379,254,167 - 185,273,449 = 193,980,718 26.8% X 50,000,000 = 13,415,229 X 5 = 67,076,145 48.8%
U-6 239,471,887 - 96,212,569 = 143,259,318 19.8% X 50,000,000 = 9,907,462 X 1 = 9,907,462 7.2%
U-7 450,000,000 - 261,630,108 = 188,369,892 26.1% X 50,000,000 = 13,027,198 X 1 = 13,027,198 9.5%
S-1/S-2 37,500,000 - 0 = 37,500,000 5.2% X 50,000,000 = 2,593,408 X 1 = 2,593,408 1.9%
S-6 37,500,000 - 0 = 37,500,000 5.2% X 50,000,000 = 2,593,408 X 1 = 2,593,408 1.9%
Total $1,622,986,977 $900,000,000 $722,986,977 100.0% 50,000,000 137,514,098 100.0%
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Total Value of % of
Qualified Common Common Number Allocation of Votes % of
Allowed Securities Stock to be Stock of Shares New Shares Per Voting Voting
Class Amount Received Received Received to be Issued Issued Share Power Power
U-4 $ 479,260,923 - $351,191,542 = $128,069,381 17.7% X 50,000,000 = 8,856,963 X 5 = 44,284,816 31.3%
U-5 379,254,167 - 176,250,492 = 203,003,675 28.1% X 50,000,000 = 14,039,235 X 5 = 70,196,173 49.6%
U-6 239,471,887 - 95,829,108 = 143,642,779 19.9% X 50,000,000 = 9,933,981 X 1 = 9,933,981 7.0%
U-7 525,000,000 - 276,728,858 = 248,271,142 34.3% X 50,000,000 = 17,169,821 X 1 = 17,169,821 12.1%
E-1 0 - 0 = 0<F1> 0.0% X 50,000,000 = 0 X 1 = 0 0.0%
Total $1,622,986,977 $900,000,000 $722,986,977 100.0% 50,000,000 141,584,791 100.0%
<FN>
<F1> Assumes that no holders of Class E-1 interests become settling equityholders.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT III.A.
Allocation of Qualified Securities Between
Unsecured Bondholders and Veil Piercing Claimants
Amount of Qualified Securities $500,000,000
============
Percentage of
Allowed Claim
Proportional Proportional Available Allocation Received in
Sharing Sharing Qualified of Qualified Qualified
Allowed Claim Amounts Percentages Securities Securities Securities
<S> <C> <C> <C> <C> <C> <C>
Subordinated Notes
(Classes U-4, U-5, U-6) $1,097,986,977<F1> $1,097,986,977 70.9% X $500,000,000 = $354,649,940 32.3%
Veil Piercing Claimants
(Class U-7) $ 450,000,000 $ 450,000,000 29.1% X $500,000,000 = $145,350,060 32.3%
Total $1,547,986,977 $1,547,986,977 100.0% $500,000,000
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Percentage of
Allowed Claim
Proportional Proportional Available Allocation Received in
Sharing Sharing Qualified of Qualified Qualified
Allowed Claim Amounts Percentages Securities Securities Securities
Subordinated Notes
(Classes U-4, U-5, U-6) $1,097,986,977<F1> $1,097,986,977 69.3% X $500,000,000 = $346,261,746 31.5%
Veil Piercing Claimants
(Class U-7) $ 525,000,000<F2> $ 487,500,000 30.7% X $500,000,000 = $153,738,254 29.3%
Total $1,622,986,977 $1,585,486,977 100.0% $500,000,000
<FN>
<F1> Allowed Claim represents Filing Date amount only.
<F2> Assumes that no holders of Class E-1 interests become settling equityholders.
NOTE: Assumes that Senior Claim Differential equals zero and that all claimants elect to receive full amount of Qualified
Securities available to them.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT III.B.
Consideration Received By Unsecured Bondholders
Amount of Qualified Securities $500,000,000
============
Percentage Percentage
of Claim of Claim
Priority Allocation Received Value of Received
Allocation of Remaining Total in Common in
of Qualified Qualified Qualified Qualified Stock to be Common Total Percentage
Class Claim Securities Securities<F3> Securities Securities Received<F4> Stock Consideration of Claim
- ----- ----- ------------ -------------- ---------- ---------- ------------ ----- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $19,675,204 $259,675,204 54.2% $219,585,719 45.8% $ 479,260,923 100.0%
U-5 379,254,167 0 31,187,304 31,187,304 8.2% 348,066,863 91.8% 379,254,167 100.0%
U-6 239,471,887 63,787,431<F1> 0 63,787,431 26.6% 175,684,456 73.4% 239,471,887 100.0%
-------------- ------------ ----------- ------------ ------------ -------------- ------
$1,097,986,977 $303,787,431 $50,862,509 $354,649,940 $743,337,037 $1,097,986,977 100.0%
============== ============ =========== ============ ============ ============== ======
Remaining
Qualified
Securities 50,862,509
------------
Total Qualified Securities $354,649,940<F2>
============
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Percentage Percentage
of Claim of Claim
Priority Allocation Received Value of Received
Allocation of Remaining Total in Common in
of Qualified Qualified Qualified Qualified Stock to be Common Total Percentage
Class Claim Securities Securities<F3> Securities Securities Received<F4> Stock Consideration of Claim
- ----- ----- ------------ -------------- ---------- ---------- ------------ ----- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $16,282,055 $256,282,055 53.5% $222,978,868 46.5% $ 479,260,923 100.0%
U-5 379,254,167 0 25,808,799 25,808,799 6.8% 353,445,368 93.2% 379,254,167 100.0%
U-6 239,471,887 64,170,892<F1> 0 64,170,892 26.8% 175,300,995 73.2% 239,471,887 100.0%
-------------- ------------ ----------- ------------ ------------ -------------- ------
$1,097,986,977 $304,170,892 $42,090,854 $346,261,746 $751,725,231 $1,097,986,977 100.0%
============== ============ =========== ============ ============ ============== ======
Remaining
Qualified
Securities 42,090,854
------------
Total Qualified Securities $346,261,746<F2>
NOTE: Calculations assume that each class elects to receive full amount of Qualified Securities available to it.
- ----------------
<FN> See Exhibit IV for calculation of minimum guaranteed amount of Qualified Securities for Class U-6.
<FN> See Exhibit III.A. for calculation of Qualified Securities available for distribution to Classes U-4, U-5 and U-6 after
allocation of Qualified Securities to Class U-7.
<FN> See Exhibit III.C. for allocation of remaining Qualified Securities
<FN> Exhibit III.D. for allocation of New Common Stock. These calculations assume an aggregate of $902 million of senior claims.
</TABLE>
<TABLE>
EXHIBIT III.C.
Allocation of Remaining Qualified Securities
Amount of Qualified Securities $500,000,000
============
Remaining Claims after
Priority Allocation for
which Qualified Securities
Are Available
--------------------------
Priority Amount of Allocation of
Allocation Remaining Remaining
of Qualified Remaining % Qualified Qualified
Class Claim<F1> Securities Claim $ Total Securities Securities
- ----- ---------- ----------- --------- --------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $50,862,509 = $19,675,204
U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 50,862,509 = 31,187,304
U-6 239,471,887 63,787,431 175,684,456
-------------- ------------ ------------ ------------ ------ -----------
$1,097,986,977 $303,787,431 $794,199,546 $618,515,090 100.0% $50,862,509
============== ============ ============ ============ ===== ===========
Remaining
Qualified Securities 50,862,509
------------
Total Qualified
Securities $354,649,940
============
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Remaining Claims after
Priority Allocation for
which Qualified Securities
Are Available
--------------------------
Priority Amount of Allocation of
Allocation Remaining Remaining
of Qualified Remaining % Qualified Qualified
Class Claim<F1> Securities Claim $ Total Securities Securities
- ----- ---------- ----------- --------- --------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 $240,000,000 $239,260,923 $239,260,923 38.7% X $42,090,854 = $16,282,055
U-5 379,254,167 0 379,254,167 379,254,167 61.3% X 42,090,854 = 25,808,799
U-6 239,471,887 64,170,892 175,300,995
-------------- ------------ ------------ ------------ ------ -----------
$1,097,986,977 $304,170,892 $793,816,085 $618,515,090 100.0% $42,090,854
============== ============ ============ ============ ===== ===========
Remaining Qualified
Securities 42,090,854
--------------
Total Qualified
Securities $346,261,746
==============
- ----------------
<FN> Claim based on Filing Date amount; does not include post-petition interest.
</TABLE>
<TABLE>
EXHIBIT III.D.
Allocation of New Common Stock
Negotiated Enterprise Value $2,525,000,000
Amount of Senior Claims 902,000,000
Amount of Qualified Securities 500,000,000
--------------
New Common Stock Value $1,123,000,000
==============
Total Value of % of
Qualified Common Common Number Allocation Votes % of
Allowed Securities Stock to be Stock of Shares of New Shares Per Voting Voting
Class Amount Received Received Received to be Issued Issued Share Power Power
- ------ -------------- ------------ -------------- -------- ----------- ----------- ---- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 - $259,675,204 = $ 219,585,719 19.6% X 50,000,000 = 9,776,860 X 5 = 48,884,298 32.4%
U-5 379,254,167 - 31,187,304 = 348,066,863 31.0% X 50,000,000 = 15,497,369 X 5 = 77,486,843 51.3%
U-6 239,471,887 - 63,787,431 = 175,684,456 15.6% X 50,000,000 = 7,822,195 X 1 = 7,822,195 5.2%
U-7 450,000,000 - 145,350,060 = 304,649,940 27.1% X 50,000,000 = 13,564,269 X 1 = 13,564,269 9.0%
S-1/S-2 37,500,000 - 0 = 37,500,000 3.3% X 50,000,000 = 1,669,654 X 1 = 1,669,654 1.1%
S-6 37,500,000 - 0 = 37,500,000 3.3% X 50,000,000 = 1,669,654 X 1 = 1,669,654 1.1%
-------------- ------------ -------------- ------ ----------- ----------- ---- ----------- ------
Total $1,622,986,977 $500,000,000 $1,122,986,977 100.0% 50,000,000 151,096,913 100.0%
============== ============ ============== ====== =========== =========== ==== =========== ======
If the Amended and Restated Veil Piercing Settlement Agreement Does Not Become Effective by its Terms
Total Value of % of
Qualified Common Common Number Allocation Votes % of
Allowed Securities Stock to be Stock of Shares of New Shares Per Voting Voting
Class Amount Received Received Received to be Issued Issued Share Power Power
- ------ -------------- ------------ -------------- -------- ----------- ----------- ---- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U-4 $ 479,260,923 - $256,282,055 = $ 222,978,868 19.9% X 50,000,000 = 9,927,937 X 5 = 49,639,683 32.5%
U-5 379,254,167 - 25,808,799 = 353,445,368 31.5% X 50,000,000 = 15,736,842 X 5 = 78,684,209 51.5%
U-6 239,471,887 - 64,170,892 = 175,300,995 15.6% X 50,000,000 = 7,805,121 X 1 = 7,805,121 5.1%
U-7 525,000,000 - 153,738,254 = 371,261,746 33.1% X 50,000,000 = 16,530,100 X 1 = 16,530,100 10.8%
E-1 0 - 0 = 0<F1> 0.0% X 50,000,000 = 0 X 1 = 0 0.0%
-------------- ------------ -------------- ------ ---------- ----------- ------
Total $1,622,986,977 $500,000,000 $1,122,986,977 100.0% 50,000,000 152,659,113 100.0%
============== ============ ============== ====== ========== =========== ======
- ----------------
<FN> Assumes that no holders of Class E-1 interests become settling equityholders.
</TABLE>
<TABLE>
EXHIBIT IV
Minimum Guarantee of Qualified Securities to Class U-6
Amount of Qualified Securities $700,000,000
$900,000,000 $500,000,000
If the If the If the
Amended and Amended and Amended and Amended and Amended and Amended and
Restated Restated Restated Restated Restated Restated
Veil Piercing Veil Piercing Veil Piercing Veil Piercing Veil Piercing Veil Piercing
Settlement Settlement Settlement Settlement Settlement Settlement
Agreement Agreement Does Agreement Agreement Does Agreement Agreement Does
Does Become Not Become Does Become Not Become Does Become Not Become
Effective by Effective by Effective by Effective by Effective by Effective by
Its Terms Its Terms<F3> Its Terms Its Terms<F3> Its Terms Its Terms<F3>
------------- ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Amount of Qualified Securities
Available to Unsecured Bondholders $496,509,916 $484,766,444 $638,369,892 $623,271,142 $354,649,940 $346,261,746
Less: Qualified Securities at
$700,000,000 Basis<F1> 496,509,916 484,766,444 496,509,916 484,766,444 496,509,916 484,766,444
------------ ------------ ------------ ------------ ------------ ------------
Excess/(Shortfall) of Qualified
Securities 0 0 141,859,976 138,504,698 (141,859,976) (138,504,698)
Multiplied By: Proportion of Excess /
(Shortfall) Attributable to Class U-6<F2> 11.43% 11.43% 11.43% 11.43% 11.43% 11.43%
------------ ------------ ------------ ------------ ------------ ------------
Proportional Amount of the Excess /
(Shortfall) Attributable to Class U-6 0 0 16,212,569 15,829,108 (16,212,569) (15,829,108)
Add: Qualified Securities Basis
for Class U-6 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000
------------ ------------ ------------ ------------ ------------ ------------
Priority Allocation of Qualified
Securities to Class U-6 $ 80,000,000 $ 80,000,000 $ 96,212,569 $ 95,829,108 $ 63,787,431 $ 64,170,892
============ ============ ============ ============ ============ ============
- ----------------
<FN> See Exhibit I.A.
<FN> Represents Priority Allocation to Class U-6 = 80,000,000 = 11.43%
-------------------------------- -----------
Qualified Securities Basis 700,000,000
<FN> Assumes that no holders of Class E-1 interests become settling equityholders.
</TABLE>
<PAGE>
Under each scenario, each Class receiving Qualified
Securities under the Creditors' Plan (and each Holder within such
Class) will receive the same proportion of the various types of
Qualified Securities (e.g., Cash, mortgage-backed debt
securities, and non-mortgage-backed debt securities) as each
other Class (and Holder) receiving Qualified Securities under the
Creditors' Plan.
The foregoing examples are illustrations only, and may not
reflect the actual amount and type of Qualified Securities that
will be available for distribution under the Creditors' Plan.
e. New Common Stock
The Creditors' Plan provides for the extinguishment of all
outstanding common stock of Old Walter Industries (the "Old
Common Stock") as of the Effective Date, and for the issuance on
the Effective Date (i) to Holders of Class U-4, U-5, U-6 and U-7,
and (ii) if the Amended and Restated Veil Piercing Settlement
Agreement becomes effective by its terms, to Holders of Class
S-1, S-2 and S-6 Claims of Class B Common Stock. The Creditors'
Plan also grants the Holders of Allowed Old Common Stock
Interests an Equity Call Option for the purchase, in Cash on the
Effective Date, of all, but not part, of such Holder's Pro Rata
share of all New Common Stock to be issued to Holders of Claims
in Classes S-1, S-2, S-6 and U-4 through U-7 on the Effective
Date (all in the form of Class B Common Stock), at an exercise
price per share equal to the New Common Stock Value Per Share
(provided, that, in calculating the New Common Stock Value Per
Share for this purpose, the New Common Stock Value shall be
calculated using a going concern enterprise value equal to the
greater of (i) the Negotiated Enterprise Value and (ii) if the
Court finds that the going concern enterprise value of the
Debtors is equal to an amount other than $2,525,000,000, such
other amount). These Cash proceeds will be paid, pro rata, to
Creditors that would otherwise have been issued such shares under
the Creditors' Plan. In addition, in the event that there are
shares of New Common Stock remaining after giving effect to all
distributions to be made to Creditors under the Creditors' Plan
(it being understood that no Creditor shall receive on account of
an Allowed Claim consideration having a value in excess of that
permitted to be paid on account of such Allowed Claim under the
Code), each Holder of an Allowed Old Common Stock Interest shall
receive such Holder's Pro Rata share of such shares, each of
which shall be shares of Class B Common Stock.
Under the Creditors' Plan, each share of New Common Stock
is valued at the "New Common Stock Value Per Share," which is the
New Common Stock Value divided by 50 million, representing the
number of shares of New Common Stock to be issued and outstanding
on the Effective Date.
The "New Common Stock Value" means the Negotiated
Enterprise Value (or if the Court finds that the going concern
enterprise value of the Debtors is equal to an amount other than
$2,525,000,000, such other amount), less the sum of (a) the
lesser of (i) $902,000,000 and (ii) the excess of (A) the Allowed
Amount of the Senior Claims (see Section II.B.2.(b)) (excluding
any interest to be paid in Class B Common Stock to Classes S-1,
S-2 and S-6), over (B) the interest paid or accrued under the
provisions of the Creditors' Plan in respect of the Senior Claims
for the period from January 1, 1994 to the Effective Date
(excluding any interest to be paid in Class B Common Stock to
Classes S-1, S-2 and S-6), and (b) the aggregate principal amount
of Qualified Securities to be distributed under the Creditors'
Plan. For a description of the significance and determination of
the amount of $902,000,000 in this definition, see "OVERVIEW OF
THE CREDITORS' PLAN--Distribution of Combination of Qualified
Securities and New Common Stock to Holders of Subordinated Note
Claims and to Veil Piercing Claimants--Creation and Anticipated
Range of Amount of Qualified Securities."
The "Negotiated Enterprise Value" is an amount equal to
$2,525,000,000. This amount reflects a good faith negotiated
estimate of the going concern enterprise value of the Debtors on
a consolidated basis, which was arrived at after extensive
analysis and negotiations among certain of the Proponents and
Holders of Claims in other Classes. The Negotiated Enterprise
Value also takes into account the possibility of delay between
the Confirmation Date and the Effective Date, and the likely
increase in the value of the Debtors over time. As described
above, the Creditors' Plan also incorporates the fixed value of
$902,000,000 as the high end of the estimated Senior Claims, for
purposes of allocating New Common Stock. Article VII of the
Creditors' Plan provides that, except as set forth in the
definition of New Common Stock Value, the Negotiated Enterprise
Value will be used for all purposes of the Creditors' Plan
relating to the allocation or value of New Common Stock, and will
not be increased or decreased at any time or for any reason,
including, without limitation, any change in the business,
results of operations, condition (financial or otherwise),
properties, Assets or prospects of any Debtor.
Assuming that (i) the Court does not determine that the
going concern enterprise value of the Debtors is equal to an
amount other than $2,525,000,000, (ii) the Senior Claim
Differential is zero, and (ii) $700,000,000 of Qualified
Securities are available for distribution under the Creditors'
Plan, the New Common Stock Value Per Share would be $18.46 per
share. For greater amounts of Qualified Securities, the New
Common Stock Value Per Share would be as follows (in each case,
assuming there is no Senior Claim Differential):
Amount of Qualified
Securities New Common
Stock
(in millions) Value Per
Share
$800 $16.46
900 14.46
The New Common Stock Value Per Share will increase in
value as the amount of the Senior Claim Differential, if any,
increases.
Conversely, assuming that the value of the Debtors is
equal to $2,525,000,000 on the Effective Date, then for every $10
million increase in Senior Claims in excess of $902,000,000,
recoveries of New Common Stock to Holders of Subordinated Note
Claims will decrease by approximately 0.6%.
THERE CAN BE NO ASSURANCE THAT THE SHARES OF NEW COMMON
STOCK ISSUED ON THE EFFECTIVE DATE WILL TRADE AT OR ABOVE THE
VALUES INDICATED HEREIN AT ANY TIME. TRADING PRICES WILL DEPEND
ON NUMEROUS FACTORS, INCLUDING MARKET CONDITIONS, PREVAILING
INTEREST RATES AND THE FINANCIAL CONDITION AND PERFORMANCE OF
WALTER INDUSTRIES AND ITS SUBSIDIARIES.
The Creditors' Plan provides for the creation and issuance
of a high-vote class of New Common Stock (the Class A Common
Stock, which is entitled to five votes per share) to Holders of
Class U-4 and U-5 Claims, for the purpose described below. A
part of such Claims will be satisfied by Qualified Securities,
while the remainder will be satisfied by Class A Common Stock.
The Proponents believe that it should be easier for the Debtors
to obtain the financing necessary to consummate the Creditors'
Plan if the institutional Creditors, including Apollo and Lehman
Brothers Inc., with most at stake in fact possess predominant
voting power.
The Proponents believe that the Creditors' Plan's
allocation of voting power among the unsecured pre-LBO and
post-LBO bondholders is also entirely appropriate because it
appropriately recognizes the structural and contractual
subordination rights between all Class U-4 and U-5 unsecured
bondholders, on the one hand (who have greater seniority now and,
therefore, greater voting power under the Creditors' Plan), and
Class U-6 unsecured bondholders, on the other hand (who have less
seniority now and, therefore, less voting power under the
Creditors' Plan). This Class A and Class B New Common Stock
allocation was the subject of protracted, arms-length negotiation
between the Ad Hoc Committee of Pre-LBO Bondholders (including
the largest holders of Class U-6 bonds and the indenture trustees
for such bonds) and holders of unsecured Class U-4 and U-5 bonds,
including Lehman Brothers Inc. and Apollo, that resulted in the
Pre-LBO Bondholders Settlement Agreement. The Ad Hoc Committee
ensured under the Pre-LBO Bondholders Settlement Agreement,
moreover, that among other things, the holders of unsecured
post-LBO bond Claims, including Lehman Brothers Inc. and Apollo,
could not take economic advantage of their weighted, Class A
voting rights.
The Debtors have raised a number of objections to the
equity structure provided for in the Creditors' Plan, each of
which is discussed below.
The Debtors assert that: (i) the different voting and
conversion features of the Class A and Class B Common Stock may
be violative of the Code; (ii) there is insufficient
justification for the allocation of voting power among recipients
of Class A and Class B Common Stock; (iii) the sale and
conversion features of Class A Common Stock will grant Apollo and
Lehman Brothers Inc. an inappropriate level of control of the
reorganized Debtors; (iv) "preferential treatment" is granted as
a result of the different voting and conversion features of the
Class A Common Stock; (v) the Proponents should describe the
rationale for and the effect of the two stock issuances, and the
facts and circumstances that support the conclusion that the
structure is necessary to obtain post-effective date financing,
including the identity of any financial institution and the
relationship of any such financial institution with any of the
Proponents; and (vi) Apollo and Lehman Brothers Inc. will receive
a disproportionate benefit of the preference of the Class A
Common Stock issuance and that the value of the Class A Common
Stock to holders other than Apollo and Lehman Brothers Inc., and
the value of the Class B Common Stock, may be reduced as a result
of the sale and/or conversion features of the Class A Common
Stock and of Apollo's and/or Lehman's control of the Debtors.
The Proponents disagree with each of these assertions.
In the first place, notwithstanding the Proponents' strong
belief that the voting provisions of the New Common Stock are
appropriate, the Creditors' Plan expressly provides that these
provisions may be modified by the Court to the extent it finds
them to be inappropriate under the Section 1123(a)(6).
Accordingly, to the extent the Court finds the voting and
conversion rights of the Class A Common Stock violates the
provisions of the Code, any legal deficiencies can be remedied by
the Court.
As discussed above, the Proponents believe that it should
be easier for the Debtors to obtain the financing necessary to
consummate the Creditors' Plan if the institutional creditors,
including Apollo and Lehman Brothers Inc., with most at stake in
fact possess predominant voting power.
The Proponents believe that the Creditors' Plan's
allocation of voting power among the unsecured pre-LBO and
post-LBO bondholders is also entirely appropriate, for all of the
reasons discussed above.
With respect to the sale and conversion features of the
Class A Common Stock, the Creditors' Plan has been amended so
that each share of Class A Common Stock automatically converts
into one share of Class B Common Stock upon the sale, transfer or
other disposition (but not including a pledge) of such share,
other than by an original recipient of such shares under the
Creditors' Plan to an Affiliate of the original recipient of such
shares. This conversion is automatic, and applies to all Holders
of Class A Common Stock, including Apollo and Lehman Brothers
Inc. There are no sale or conversion features that would have the
effect of giving any holder of Class A Common Stock an
inappropriate level of control of the Debtors.
Moreover, Article 7 of the proposed Restated Certificate
of Incorporation of Walter Industries prohibits the holders of
Class A New Common Stock from taking economic advantage of their
weighted Class A voting rights.
The rationale for and the effect of the two stock
issuances are described in detail elsewhere herein. The
Proponents believe that the disparate voting rights will not
adversely affect the value of Class B Common Stock because the
Class A Common Stock automatically converts to Class B Common
Stock if and when it is sold to an unaffiliated third party. As
a result, the Proponents believe that the Class A Common Stock
will not carry a control premium, and should not have any adverse
effect on the value of the Class B Common Stock.
Lehman Brothers Inc. and Apollo have represented that
there are no understandings or agreements between them with
respect to the exercise of their rights to elect Qualified
Securities or with respect to their voting of New Common Stock
that they may receive on the Effective Date. Also, at the
present time, there are no understandings or agreements between
them with respect to the nomination or appointment of directors
to sit on the boards of directors of the reorganized Debtors,
other than the appointments, described herein, of Messrs. Walter,
Durham and Matlock.
To the extent that Apollo and/or Lehman Brothers Inc.
control or share in the control of the reorganized Debtors
because of their ownership of Class A or Class B Common Stock, it
is the present intention of each of Apollo and Lehman Brothers
Inc. to provide for a continuation of senior officers of all the
Debtors.
Regarding the New Common Stock that may be issued to
Apollo and Lehman Brothers Inc. on account of their Subordinated
Note Claims, Section II.B. of this Disclosure Statement contains
charts describing the allocation of New Common Stock and
Qualified Securities to Holders of Subordinated Note Claims under
various scenarios. These charts can be used to calculate the
percentage of ownership of New Common Stock of Apollo and Lehman
Brothers Inc. under a number of factual scenarios. (Apollo holds
$120,445,719 in principal amount of Class U-4 Claims,
representing approximately 27% of the principal amount in Claims
in that Class, and $25,000,000 in principal amount of Class U-5
Claims, representing approximately 7% of the principal amount of
Claims in that Class. Lehman Brothers Inc. holds $158,790,000 in
principal amount of Class U-4 Claims, representing approximately
36% of the principal amount of Claims in that Class, and
$111,950,000 in principal amount of Class U-5 Claims,
representing approximately 32% of the principal amount of Claims
in that Class).
3. Post-Filing Date Interest Claims
The Revolving Credit Banks and the Working Capital Banks
(as defined in Section II.D.3.) (collectively, the "Banks") have
each asserted the right to be paid post-petition interest (the
"Post-Filing Date Interest Claims") at the default rates set
forth in the Revolving Credit Agreement (as defined in Section
II.C.3.) and the Working Capital Agreement (as defined in Section
II.C.3.), together with interest on the accrued Post-Filing Date
Interest Claims.
Assuming the Veil Piercing Settlement is consummated, the
Proponents do not dispute that the respective Allowed Claims of
the Banks include post-Filing Date interest. However, the
Proponents do dispute the entitlement to post-Filing Date
interest at the default rate and to interest on certain of the
accrued Post-Filing Date Interest Claims, believing that the
Debtors have valid legal and equitable defenses to these
assertions. Nonetheless, as there could be no assurance that the
Proponents would prevail in this regard and in the interest of
achieving a consensual reorganization, the Proponents have
provided in the Creditors' Plan that the Allowed Claims of the
Banks will include (i) the pre-Filing Date amount, plus (ii) Stub
Period Interest (as defined in Section II.C.3.) on the pre-Filing
Date amount from the Filing Date to and including October 31,
1992 at the Chemical Bank Prime Rate (as defined in the
Creditors' Plan) in effect from time to time plus 1.5% per annum
(the sum of (i) and (ii) being the "Revolving Credit Bank Claim
Stub Period Amount" and the "Working Capital Bank Claim Stub
Period Amount," as applicable), plus (iii) interest on the
Revolving Credit Bank Claim Stub Period Amount or the Working
Capital Bank Claim Stub Period Amount, as applicable, from
November 1, 1992 to the Effective Date at the Chemical Bank Prime
Rate in effect from time to time plus 1.5% per annum, compounded
each January 1, April 1, July 1, and October 1, provided, that
this rate will increase to 13% during any period after June 30,
1994 to the payment of the Initial Revolving Credit Bank Claim
Payment or the Initial Working Capital Bank Claim Payment, as the
case may be, plus (iv) if the Amended and Restated Veil Piercing
Settlement Agreement becomes effective by its terms, shares of
Class B Common Stock having an aggregate New Common Stock Value
Per Share equal to $37,500,000 (of which $28,220,625 is allocated
to Revolving Credit Bank Claims and $9,279,375 is allocated to
Working Capital Bank Claims). The Banks will not receive
interest on interest (i.e., compounded interest) for the period
from the Filing Date through October 31, 1992 (the "Stub
Period"), but the simple interest accrued during the Stub Period
will bear interest (i.e., be compounded a single time) beginning
November 1, 1992.
One major Holder of the Series B & C Senior Notes and
LaSalle National Bank ("LaSalle"), as successor indenture trustee
for the Series B & C Senior Notes, had previously asserted the
right to post-Filing Date interest at interest rates of at least
14.625% and 14.50% (the stated rates of interest applicable prior
to the reset advisors' inability to reset the interest rates)
with respect to the Series B Senior Notes and the Series C Senior
Notes, respectively, together with interest on the post-Filing
Date Claims for interest which has accrued. LaSalle and certain
holders of Series B & C Senior Note Claims have agreed to settle
and compromise their claim for post-petition interest for the
treatment of the Series B & C Senior Note Claims now provided for
in the Creditors' Plan.
The Bondholders Committee and the Creditors Committee have
also asserted on behalf of the Holders of the Subordinated Note
Claims (as defined in the Creditors' Plan), and Holders of Other
Unsecured Claims and Holders of Convenience Class Claims (as
defined in the Creditors' Plan), respectively, the right to
post-Filing Date interest on their Allowed Claims. The Debtors
have disputed those assertions, stating their belief that there
are legal and equitable defenses to Claims for post-Filing Date
interest by such Creditors. The Proponents have provided in the
Creditors' Plan for post-Filing Date interest to Holders of Other
Unsecured Claims and Holders of Convenience Class Claims, but not
for Holders of Subordinated Note Claims (except as provided
below). For the Holders of Other Unsecured Claims in Class U-3,
as well as Convenience Class Claims in Class U-2, the Creditors'
Plan provides for simple interest on the Pre-Filing Date
Unsecured Allowed Amount of such Claims at the General Unsecured
Interest Rate of (i) 6 1/2% per annum from the Filing Date until
the Confirmation Date, and (ii) thereafter, either (x) a variable
rate equal to the Chemical Bank Prime Rate as from time to time
in effect, not to exceed 10% per annum, or (y) a fixed rate equal
to 6 1/2% per annum. The option specified in clause (ii) will be
selected by the Holders of Class U-3 Allowed Claims (voting for
this purpose as a single class for all Debtors), by vote of a
majority in number of such Holders who vote on the Creditors'
Plan.
The Proponents believe that bankruptcy courts have
traditionally and consistently provided that unsecured creditors
should recover post-petition interest when the debtor proves to
be solvent, on the basis that it is inequitable for stockholders
to have a recovery before creditors are paid the full amount owed
to them. In addition to the foregoing reason, the Proponents
believe that their claim to recover post-petition interest in
these Chapter 11 Cases is particularly appropriate because they
have actively sought a settlement of the Veil Piercing-Related
Issues that would drastically shorten these cases but have been
opposed by the Debtors' stockholders. The Proponents believe
that the stockholders should not receive a windfall as a result
of the delay.
For Holders of Subordinated Note Claims, the Creditors'
Plan provides that only to the extent permitted by law and to the
extent that the same may be satisfied after all distributions are
made in full to all other Holders of Allowed Claims, including
Veil Piercing Claimants, interest is payable, Pro Rata, on the
aggregate pre-Filing Date principal amount of their Claims
(together with interest thereon accrued and unpaid as of the
Filing Date) from the Filing Date to the Effective Date
calculated, as the case may be, at the applicable non-default
contract rate, or in the absence of a contract rate, 9.0% or such
other interest rate as the Court shall determine.
Based upon the settlements contained in the Creditors'
Plan and the Negotiated Enterprise Value, it is anticipated that
the amount of post-Filing Date interest payable in respect of
Subordinated Note Claims will be zero. Pursuant to the Pre-LBO
Bondholders Settlement Agreement, that portion of the amount of
the 10 7/8% Subordinated Notes attributable to original issue
discount (calculated by the Debtors at $10,372,071)<F12> as of
the Filing Date is treated as post-petition interest. The
Bondholder Proponents believe that this is consistent with
applicable law.
The Debtors have asserted that Holders of Unsecured Claims
are not, as a matter of law (given the alleged values of the
Debtors' estates), entitled to post-petition interest on account
of their Claims, and that as a result, the Creditors' Plan is not
confirmable as a matter of law. The Proponents dispute both of
these assertions, believing them to be legally and factually
erroneous. Moreover, as discussed herein at "OVERVIEW OF THE
CREDITORS' PLAN," confirmation of the Creditors' Plan is not
conditioned on whether Holders of Subordinated Note Claims are
entitled to or will receive post-petition interest under the
Creditors' Plan, although the Proponents believe that this is the
correct legal conclusion under the circumstances. See
"INTRODUCTION--Objections to Confirmability of Creditors' Plan
Asserted by Debtors." The Proponents believe that any issues
relating to post-petition interest on Unsecured Claims will, if
relevant and if properly asserted, be considered at the
confirmation hearing of the Creditors' Plan.
The chart set forth in the section entitled "OVERVIEW OF
THE CREDITORS' PLAN-- Special Features of the Creditors'
Plan--Settlement of Veil Piercing/Fraudulent Conveyance Issues
and Other Issues--Funding of the Settlement Payment by Creditors"
illustrates the post-petition interest that would accrue on the
Subordinated Note Claims under the Creditors' Plan and at other
interest rates. The Proponents believe that even if it were
assumed that Veil Piercing Claimants received no property under
the Creditors' Plan, all or substantially all of the
consideration that would otherwise have been used to satisfy the
Allowed Veil Piercing Claims Amount of $450,000,000 would be
applied to the post-Filing Date interest claims accruing on the
Subordinated Note Claims, under any of the interest rates that
could reasonably be used to calculate post-Filing Date interest
on the Subordinated Note Claims.
---------------------------
<F12> The 10% Subordinated Note Trustee has disputed this
amount.
<PAGE>
For more information on post-Filing Date interest and
other amounts payable to Holders of Allowed Claims in Classes S1,
S-2, S-6, U-2, U-3, U-4, U-5, U-6 and I-1, see "OVERVIEW OF THE
CREDITORS' PLAN--Classification and Treatment of Claims and
Interests."
C. Classification and Treatment of Claims and Interests
In accordance with Section 1123(a)(1) of the Code, the
Creditors' Plan does not classify Administrative and Priority
Claims. Other Claims and Interests are divided into Classes,
depending on their nature and the treatment to be afforded them
under the Creditors' Plan. The Classes and their intended
treatment are set forth below.
1. Administrative Claims
Administrative Claims
Administrative Claims are, in large part, Claims which
arise against all of the Debtors for fees and expenses incurred
by Court appointed professionals. Also included in
Administrative Claims are Claims which arise from (i) the
assumption of an Executory Contract; (ii) Indenture Trustees
Claims (of which the Claims of the Series B & C Senior Note
Trustee are Allowed Claims under Section 506(b) of the Code);
(iii) Proponents Expenses; and (iv) expenses incurred in the
negotiation, execution and implementation of the Veil Piercing
Settlement, the Pre-LBO Bondholders Settlement Agreement and the
other settlements reached in connection with the Creditors' Plan.
For purposes of the Disclosure Statement, the Proponents estimate
the aggregate amount of Administrative Claims that will exist as
of December 31, 1994 will be $32,000,000.
Treatment of Administrative Claims is as follows:
Each Holder of an Allowed Administrative Claim shall
receive, in full satisfaction thereof, (1) Cash in an
amount equal to the Allowed Amount of such Claim, without
interest, on or promptly after the Effective Date, or (2)
such amount, at such other date and upon such other terms
as shall have been agreed upon between the Holder of such
Allowed Claim and the Bondholders Committee and approved
by a Final Order of the Court; provided, however, that
Allowed Administrative Claims representing obligations
incurred in the ordinary course of business of a
Debtor or assumed by any Debtor subsequent to the Filing
Date shall be paid or performed by such Debtor in
accordance with the terms and conditions of each
agreement relating thereto in the ordinary course of such
Debtor's business.
The "Allowed Amount" of an Administrative Claim (as
defined in the Creditors' Plan) is an amount agreed to by the
Bondholders Committee and the Holder of such Claim and approved
by a Final Order of the Court or, failing agreement, the amount
fixed by a Final Order of the Court. With respect to an
Executory Contract Claim (as defined in the Creditors' Plan), the
amount determined in accordance with the procedures of Article
VIII of the Creditors' Plan will apply.
2. Priority Claims
Federal Income Tax Claims
Federal Income Tax Claims are Claims by the IRS against
all of the Debtors arising out of the consolidated tax returns
filed by the Debtors or their predecessors for fiscal years ended
August 31, 1980, 1983, 1984, 1985, 1986, 1987 and May 31, 1988
(nine months), 1989, 1990 and 1991.
The IRS conducted an examination of the Debtors' returns
for fiscal years ended August 31, 1983 and 1984 and, as a result,
the IRS proposed in two formal 30-Day Letters approximately sixty
adjustments, totaling $19,631,992 of deficiencies and $2,700,868
of penalties. The Debtors formally protested many of these items
with the Appeals Division of the IRS (the "Appeals Division").
After failing to reach resolution of these issues with the
Appeals Division, the Debtors filed the Tax Complaint in the
Court. Two issues were decided in two separate decisions in
favor of the Debtors by the Court: (a) whether Mid-State Homes
could report interest income received from the sale of
repossessed homes on its historically consistent straight-line
method of reporting interest income (September 3, 1993 order);
and (b) whether certain adjustments called discounts on sales of
repossessed homes were permissible as reflecting both economic
and accounting realities (April 6, 1993 order). The IRS has
indicated its intention to appeal these decisions.
Subsequent to entry of the April 6, 1993 order, the
Debtors and the IRS attempted to negotiate a settlement of the
remaining issues as to the fiscal years ended August 31, 1980 and
1983-1987. Although the Debtors and the IRS advised the Court
that an agreement in principle had been reached with respect to
the remaining issues and that a stipulation incorporating such
agreement in principle was in the process of being prepared,
final approval of the agreement in principle could not be
obtained from the IRS. The Debtors state in the Debtors'
Disclosure Statement that, as a result of the IRS's inability to
obtain final approval of the agreement, the Debtors have moved
forward in the Court for determination of the remaining issues as
to years 1980 and 1983-1987, which issues include coal royalties,
DISC treatment and EURO-dollar hedging. The Court has announced
its intention to try a portion of the remaining issues, and held
a pre-trial conference on October 12, 1993. Discovery has
proceeded as to these issues. No trial date has as yet been
scheduled.
On September 28, 29 and 30, 1993, and October 4, 1993, the
IRS filed four additional proofs of claim. The first proof of
claim, filed in the amount of $110,470,973, sought to amend the
previous amendment filed October 27, 1992 to the IRS Amended
Proof of Claim with respect to fiscal years ended August 31, 1980
and August 31, 1983 through August 31, 1987. It sought among
other things to add coal royalties as an issue for fiscal years
ended August 31, 1983 and August 31, 1984. The second proof of
claim, filed in the amount of $31,468,189, sought to amend the
prior proof of claim filed by the IRS on October 27, 1992 with
respect to fiscal years ended May 31, 1988 (nine months) and May
31, 1989 which prior proof of claim was previously disallowed by
the Court. The third proof of claim, filed in the amount of
$110,560,883, sought to amend the previous IRS amended proof of
claim filed on September 29, 1993 with respect to fiscal years
ended August 31, 1980 and August 31, 1983 through August 31,
1987. The only change in this amended proof of claim from the
prior amended proof of claim for these years is to add a foreign
withholding tax issue for the year ended December 31, 1985. The
fourth proof of claim, filed in the amount of $44,837,693, sought
to amend the prior proof of claim filed with respect to fiscal
year ending May 31, 1990 only to include both fiscal years ended
May 31, 1990 and May 31, 1991. Objections to each of the four
amended claims referred to above have been filed by the Debtors.
On September 7, 1993, Judge Paskay entered an order setting forth
certain issues encompassed by the above claims to be tried and
authorizing discovery to commence. One of those issues involved
coal royalties with respect to fiscal years ending August 31,
1985 and thereafter. The IRS has sought by motions to amend the
Court's order and its amended claims to make coal royalties an
issue in fiscal years ended August 31, 1983 and August 31, 1984.
The Court has denied the IRS motion and sustained the Debtors'
objections to the amended claims in this regard by Court order
dated February 3, 1994. The government has filed a notice of
appeal from the February 3, 1994 Order with the District Court.
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO
THE DEBTORS--Litigation--Federal Income Tax."
Also included in Federal Income Tax Claims is a Claim
against the Debtors in the amount of $233,864 representing the
unpaid tax balance for the consolidated federal income tax return
for fiscal year ended May 31, 1990. This Claim results from an
allocation by the Debtors of the portion of the federal income
tax liability incurred prior to the Filing Date, after offset for
all payments made toward such liability. On June 11, 1993, the
Court denied the IRS application for allowance of this Claim as
an Administrative Expense Claim. The IRS filed a notice of
appeal of this decision on June 21, 1993.
The Debtors estimate that Allowed Federal Income Tax
Claims, including pre-Filing Date interest thereon, will not
exceed $14,000,000 as of December 31, 1994. In the event that
the amount of these Claims is not resolved prior to the Effective
Date, a reserve in excess of $14,000,000 may be required.
Treatment of Federal Income Tax Claims is as follows:
The Holder of the Allowed Federal Income Tax Claims
shall receive, in full satisfaction thereof, Cash payments
in an aggregate amount equal to the Allowed Amount of such
Allowed Federal Income Tax Claims. The Allowed Amount
shall be payable in equal quarterly installments over a
six-year period from the date of the assessment by the IRS
of such Claim, with interest on unpaid amounts from the
later of the Effective Date or the date of assessment at
an annual rate equal to the Chemical Bank Prime Rate in
effect on such date, in accordance with the provisions
of Section 1129(a)(9)(C) of the Code and, if applicable,
by a Final Order of the Court; provided, that, if the date
of any assessment shall have occurred prior to the
Effective Date, then the Holder of the Federal Income Tax
Claims shall receive Cash in an amount equal to the
aggregate amount of all deferred Cash payments which
were due and payable in accordance with the foregoing on
or prior to the Effective Date, on or promptly after the
Effective Date, unless such Holder and the Bondholders
Committee shall have agreed to a less favorable treatment
of such Claim.
The "Allowed Amount" of a Federal Income Tax Claim is an
amount agreed to by the Bondholders Committee and the Holder of
such Claim and approved by a Final Order of the Court or, failing
agreement, the amount fixed by a Final Order of the Court.
Federal Excise Tax and Reclamation Claims.
Federal Excise Tax and Reclamation Claims consist of two
Claims against Jim Walter Resources: one by the Federal
Government for Black Lung Excise Tax (the "Excise Tax"), and the
other by the United States Department of Interior, Office of
Surface Mining (the "OSM") for reclamation fees ("Reclamation
Fees") (collectively, the "Federal Excise Tax and Reclamation
Claims"). The Claim by the Federal Government is for the Excise
Tax payment, which was due January 9, 1990 in the amount of
$427,826 for the period of December 16 through December 25, 1989.
The Excise Tax arose out of the enactment of the Black Lung
Benefits Act of 1977, effective as of April 1977, which imposed a
tax on coal mined or sold in the United States by coal mine
operators after March 31, 1978. The Excise Tax is used to fund
the Black Lung Disability Trust Fund to finance the cost of black
lung claims (a) where the coal miner's last employment was before
January 1, 1970, or (b) where no responsible coal mine operator
has been identified and (c) for administrative expenses.
On July 2, 1990, the Federal Government filed a proof of
claim totaling $449,218, for Excise Taxes and penalties. Jim
Walter Resources filed an objection to this Claim which was heard
by the Court on May 19, 1993. At this hearing, the Court allowed
the Claim for Excise Taxes totaling $427,826 and disallowed the
Claim for penalties totaling $21,392, without prejudice, giving
the Federal Government thirty (30) days in which to request a
hearing on the disallowance of the penalty portion of the Claim.
The Federal Government filed such a request for hearing on June
16, 1993. However, such request by the Federal Government was
withdrawn on July 21, 1993.
The Claim by the OSM is for Reclamation Fees for the
fourth quarter of fiscal year 1989, due January 30, 1990,
totaling $328,655. The Reclamation Fees arose out of enactment
of Title IV of the Surface Mining Control and Reclamation Act of
1977 (the "Reclamation Act") and provided for the collection of a
fee from coal mine operators subject to the Reclamation Act on
each ton of coal produced. The funds collected are used for the
reclamation of lands mined and abandoned or left in an inadequate
reclamation status before the enactment date of the Reclamation
Act, August 3, 1977.
According to the Debtors' Disclosure Statement, Jim Walter
Resources, based on its books and records, estimates that Claims
in Class P-2 total $756,481, as of May 31, 1993.
Treatment of Federal Excise Tax and Reclamation Claims is
as follows:
Each Holder of an Allowed Federal Excise Tax and
Reclamation Claim shall receive, in full satisfaction thereof,
Cash in an amount equal to the Allowed Amount of such Claim,
without interest, on or promptly after the Effective Date,
unless such Holder and the Bondholders Committee shall
have agreed to a less favorable treatment of such Claim.
The "Allowed Amount" of a Federal Excise Tax and
Reclamation Claim is an amount
agreed to by the Bondholders Committee and the Holder of such
Claim and approved by a
Final Order of the Court or, failing agreement, the amount fixed
by a Final Order of the Court.
State and Local Tax Claims.
State and Local Tax Claims are Secured Claims and
Unsecured Claims of Governmental
Units (as defined in Section 101(27) of the Code), other than the
IRS and the Federal
Government, with authority to tax the Debtors (the "State and
Local Tax Claims") which
are given special priority under the Code against Hillsborough,
Best (Miss.), Computer
Holdings, Dixie, Hamer Holdings, Hamer Properties, Homes
Holdings, Computer Services, Jim
Walter Homes, Jim Walter Resources, Window Components (Wisc.), JW
Aluminum, Resources
Holdings, JWI Holdings, JW Walter, Window Components, Land
Holdings, Mid-State Homes, Mid-State Holdings, Railroad Holdings,
Sloss, Southern Precision, United
Land, U.S. Pipe, Pipe Realty, Vestal, Old Walter Industries and
Walter Land. The State
and Local Tax Claims include real property, personal property,
sales and use, excise,
income and franchise taxes that were incurred prior to the Filing
Date.
The following is a summary of the estimated amount of such
Claims in this Class by
Debtor that are outstanding as of May 31, 1993, based on their
books and records, according to the Debtors' Disclosure
Statement:
<TABLE>
<CAPTION> Estimated
Case Amount of
Class Debtor Number Claims
<S> <C> <C> <C>
P-3A Hillsborough 89-9715-8P1 $ 31,178
P-3C Best (Miss.) 89-9737-8P1 1,232
P-3E Computer Holdings 89-9724-8P1 40
P-3F Dixie 89-9741-8P1 123,482
P-3G Hamer Holdings 89-9735-8P1 40
P-3H Hamer Properties 89-9739-8P1 1,098
P-3I Homes Holdings 89-9742-8P1 40
P-3J Computer Services 89-9723-8P1 40
P-3K Jim Walter Homes 89-9746-8P1 214,159
P-3M Jim Walter Resources 89-9738-8P1 4,099,469
P-3N Window Components (Wisc.) 89-9716-8P1 2,092
P-3O JW Aluminum 89-9718-8P1 191,849
P-3P Resources Holdings 89-9719-8P1 40
P-3Q JWI Holdings 89-9721-8P1 40
P-3R JW Walter 89-9717-8P1 11,430
P-3S Window Components 89-9732-8P1 17,646
P-3T Land Holdings 89-9720-8P1 40
P-3U Mid-State Homes 89-9725-8P1 6,686
P-3V Mid-State Holdings 89-9726-8P1 40
P-3W Railroad Holdings 89-9733-8P1 40
P-3X Sloss 89-9743-8P1 610,965
P-3Y Southern Precision 89-9729-8P1 42,036
P-3Z United Land 89-9730-8P1 846,010
P-3AA U.S. Pipe 89-9744-8P1 2,112,689
P-3BB Pipe Realty 89-9734-8P1 40
P-3CC Vestal 89-9728-8P1 64,037
P-3EE Old Walter industries 89-9745-8P1 7,019
P-3FF Walter Land 89-9736-8P1 65
Total $8,383,542
</TABLE>
Treatment of State and Local Tax Claims is as follows:
Each Holder of an Allowed State and Local Tax Claim
shall receive, in full satisfaction thereof, Cash in an amount
equal to the Allowed Amount of such Claim, without interest, on
or promptly after the Effective Date, unless such Holder and
the Bondholders Committee shall have agreed to a less
favorable treatment of such Claim.
The "Allowed Amount" of a State and Local Tax Claim is an
amount agreed to by the
Bondholders Committee and the Holder of such Claim and approved
by a Final Order of the
Court or, failing agreement, the amount fixed by a Final Order of
the Court.
3. Secured Claims
Class S-1 Claims: Revolving Credit Bank Claims.
The Class S-1 Claims are Claims by various banks (the
"Revolving Credit Banks")
with respect to the Bank Credit Agreement, dated as of September
10, 1987, as amended,
among Hillsborough, Old Walter Industries, the Debtors which are
signatory parties thereto
and the Revolving Credit Banks, as amended from time to time (the
"Revolving Credit
Agreement") against Hillsborough (Class S-1A), Best (Class S-1B),
Best (Miss.)
(Class S-1C), Coast to Coast (Class S-1D), Dixie (Class S-1F),
Hamer Properties
(Class S-1H), Computer Services (Class S-1J), Jim Walter Homes
(Class S-1K), JW Insurance
(Class S-1L), Jim Walter Resources (Class S-1M), Window
Components (Wisc.) (Class S-1N),
JW Aluminum (Class S-10), JWI Holdings (Class S-1Q), JW Walter
(Class S-1R), Window
Components (Class S-1S), Sloss (Class S-1X), Southern Precision
(Class S-1Y), United Land
(Class S-1Z), U.S. Pipe (Class S-1AA), Pipe Realty (Class S-1BB),
Vestal (Class S-1CC),
Old Walter Industries (Class S-1EE) and Walter Land (Class S-1FF)
(collectively, the
"Revolving Loan Borrowers") which were guaranteed by Computer
Holdings (Class S1E), Hamer
Holdings (Class S-1G), Homes Holdings (Class S-1I), Resources
Holdings (Class S-1P), Land
Holdings (Class S-1T), Mid-State Holdings (Class S-1V), Railroad
Holdings (Class S-1W)
and JW Resources (Class S-1GG) (collectively, the "Revolving Loan
Guarantors"). The
Revolving Loan Borrowers and the Revolving Loan Guarantors are
collectively referred to herein as the "Revolving Loan Debtors."
Under the Revolving Credit Agreement, (i) Hillsborough was
permitted to borrow up
to $2.3 billion for Tender Offer Loans (as defined in Section
VII.A.3.) to finance the
Tender Offer; and (ii) effective January 7, 1988, the Revolving
Loan Borrowers, on a joint
and several basis, were permitted to borrow up to an aggregate of
$800 million as
revolving loans (the "Revolving Loan" or "Revolving Loan
Commitment"), $700 million of
which was a term loan and $100 million of which was a revolving
loan, and (iii) Mid-State
Homes was permitted to borrow up to $1.2 billion as a term loan
(the "Mid-State Term Loan"
or the "Mid-State Term Loan Commitment"). The Revolving Loan and
the Mid-State Term Loan
were borrowed immediately following the Merger and were used,
together with other funds,
to repay the Tender Offer Loans in full. See "BUSINESSES,
PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS--Organization of Hillsborough and Acquisition of
Original Jim Walter--Financing of the Tender Offer and Merger."
On April 19, 1988, a portion of the net proceeds from the
issuance of
Mortgage-Backed Notes (as defined in Section VII.B.2.(a)) was
applied to a mandatory
prepayment of the entire outstanding principal amount of the
Mid-State Term Loan, with
the result that the Mid-State Term Loan Commitment was reduced to
zero and terminated as
of April 19, 1988. The remainder of the net proceeds from the
issuance of Mortgage-Backed
Notes was applied to mandatory prepayment of a portion of the
outstanding balances of the Revolving Loans.
The obligations of the Revolving Loan Borrowers under the
Revolving Credit Agreement are secured in the following manner:
(1) the mortgage by Old Walter Industries of its
headquarters building and the land associated therewith to secure
the payment when due of all obligations of Old Walter Industries
under the Old Walter Industries Guarantee with respect to the
Revolving Loans (the "Old Walter Industries Revolving
Credit Guarantee") and the Revolving Credit Agreement;
(2) the pledge by JW Aluminum, Window Components,
Sloss, Vestal and Southern Precision (each an "Additional
Subsidiary Pledgor"), of all intercompany notes owned on the
Filing Date by each Additional Subsidiary Pledgor, pursuant to
a pledge agreement between each Additional Subsidiary
Pledgor (or its predecessor) and MHTCo. (as predecessor to
Chemical), as collateral agent, dated as of December 29, 1987
(collectively, the "Additional Subsidiaries Pledge Agreements"),
to secure the payment when due of the obligations of
Hillsborough and/or its consolidated subsidiaries to the
Revolving Credit Banks;
(3) the pledge by all First Tier Subsidiaries,
excluding Homes Holdings, Former U.S. Pipe and Resources Holdings
(each a "First Tier Subsidiary Pledgor"), of (a) all the issued
and outstanding shares of capital stock owned on the Filing
Date by each First Tier Subsidiary Pledgor of any
corporation and (b) all intercompany notes owned on the Filing
Date by each First Tier Subsidiary Pledgor, pursuant to a pledge
agreement between each First Tier Subsidiary Pledgor and
MHTCo. (as predecessor to Chemical), as collateral agent,
dated as of December 29, 1987 (collectively, the "First Tier
Subsidiary Pledge Agreements"), to secure the obligations of the
First Tier Subsidiary Guarantors in respect of the Revolving
Loans;
(4) the pledge by U.S. Pipe, Jim Walter Resources
and Walter Land (each a "Revolving Loan Borrower Pledgor") of (a)
all of the issued and outstanding shares of capital stock owned
on the Filing Date by each Revolving Loan Borrower Pledgor
of any corporation and (b) all of the intercompany notes
owned on the Filing Date by the Revolving Loan Borrower Pledgor
pursuant to a pledge agreement between each
Revolving Loan Borrower Pledgor and MHTCo. (as predecessor
to Chemical), as collateral agent, dated as of December 29, 1987
(collectively, the "Revolving Loan Borrower Pledge Agreements"),
to secure the obligations of the Revolving Loan
Borrower Pledgors in respect of the Revolving Loans;
(5) the pledge by Hillsborough of (a) all of the
issued and outstanding shares of capital stock owned on the
Filing Date by Hillsborough of any corporation, excluding the
capital stock of Homes Holdings, Resources Holdings and
U.S. Pipe (which stock is pledged by Hillsborough as
"Shared Collateral") (as defined in the Revolving Credit
Agreement) and (b) all intercompany notes owned on
the Filing Date by Hillsborough, pursuant to a pledge
agreement dated as of December 29, 1987 between Hillsborough and
MHTCo. (as predecessor to Chemical), as collateral agent (the
"Hillsborough Pledge Agreement"), to secure the payment when
due of the obligations of Hillsborough pursuant to the
Hillsborough guarantee in respect of the Revolving Loans;
(6) the pledge by each of Homes Holdings, Resources
Holdings and U.S. Pipe of (a) all of the issued and outstanding
shares of capital stock owned on the Filing Date by each pledgor
of any corporation, excluding capital stock of Jim
Walter Homes and Jim Walter Resources and (b) all
intercompany notes owned on the Filing Date by each pledgor,
pursuant to a pledge agreement dated as of December 29, 1987
between each of Homes Holdings, Resources Holdings and U.S. Pipe
and MHTCo. (as predecessor to Chemical), as collateral
agent, to secure the obligations of each pledgor in respect of
the Revolving Loans; and
(7) the pledge by Old Walter Industries of (a) all
of the issued and outstanding shares of capital stock owned on
the Filing Date by Old Walter Industries of any corporation,
excluding the capital stock of Jim Walter Homes and
Jim Walter Resources (which stock is pledged by Old Walter
Industries as Shared Collateral) and (b) all intercompany notes
owned on the Filing Date by Old Walter Industries, pursuant to a
pledge agreement dated as of December 29, 1987 between
Old Walter Industries and MHTCo. (as predecessor to
Chemical), as collateral agent (the "Old Walter Industries Pledge
Agreement"), to secure the obligations of Old Walter Industries
pursuant to the Old Walter Industries Revolving Credit Guarantee.
(The pledge agreements referred to in clauses (5), (6) and
(7) are collectively referred to herein as the "Issuer and
Guarantor Pledge Agreements.")
In addition, the obligations of the Revolving Loan
Borrowers under the Revolving
Credit Agreement are secured by a pledge by Computer Services,
Jim Walter Homes, Best,
Best (Miss.), JW Insurance, Coast to Coast, Dixie, Window
Components, Hamer Properties,
JW Walter and J.W. Railroad, a non-debtor (each an "Additional
Revolving Loan Borrower
Pledgor"), of (a) all of the issued and outstanding shares of
stock owned as of the Filing
Date by the Additional Revolving Loan Borrower Pledgors of any
corporation and (b) all
of the intercompany notes owned on the Filing Date by the
Additional Revolving Loan
Borrower Pledgors, pursuant to a pledge agreement between each
Additional Revolving Loan
Borrower Pledgor and MHTCo. (as predecessor to Chemical), as
collateral agent, dated as
of December 29, 1987 (the "Additional Revolving Loan Borrower
Pledge Agreements"), to
secure the payment when due of all obligations of the Additional
Revolving Loan Borrower
Pledgors pursuant to the Revolving Credit Agreement.
As of the Filing Date, $242,291,945 principal amount of
Revolving Loans were
outstanding, plus accrued interest of $1,374,096. In October
1990, pursuant to an order
of the Court, $5,794,016 of the $7,355,767 proceeds from the sale
by Old Walter Industries
of its investment in the stock of Beijer Industries AB ("Beijer
Proceeds") together with
certain bank accounts set off ("Bank Setoff Proceeds") against
Revolving Loans, held as
security under the Revolving Credit Agreement and the Working
Capital Agreement, including
interest thereon, were turned over to the Revolving Credit Banks
with reservation of
rights as to application of such payment. The Revolving Loan
Borrowers have applied such
payment as a reduction of principal. Also, in June 1991,
pursuant to an order of the
Court, $8,248,821 of the $11,054,126 proceeds ("Apache Note
Proceeds") from the prepayment
of a note (the "Apache Note") received by Jim Walter Resources
from Jasper Corp. in
connection with the sale of Apache Building Products Company
("Apache") which had been
held as security under the Revolving Credit Agreement and the
Working Capital Agreement,
including interest thereon, were turned over to the Revolving
Credit Banks and applied
as a reduction of principal. The order of the Court stating that
such payment should be
applied to principal has been reversed by the District Court and
remanded to the Court
for further consideration as to its application. The balance of
the proceeds from these
security arrangements was turned over to the Working Capital
Banks and applied as a
reduction of the principal outstanding under the Working Capital
Agreement. See "OVERVIEW OF THE CREDITORS' PLAN--Classification
and Treatment of Claims and Interests--Secured Claims."
On October 16, 1992, the Debtors submitted to the Court a
motion to approve a
Compromise and Settlement Agreement which had been negotiated
between the Debtors and
representatives of the Banks. The Compromise and Settlement
Agreement, among other
matters would have: (1) fixed (i) the amount of principal as of
the Filing Date
(ii) interest on the principal amount of the Revolving Loan
accrued and unpaid as of the
Filing Date calculated at the non-default contract rate in effect
from time to time prior
to the Filing Date and (iii) the application of the various
disputed payments referred
to in the preceding paragraph as a principal reduction from time
to time (collectively
(i), (ii) and (iii), the "Adjusted Revolving Loan Claim"), (2)
provided that interest (the
"Stub Period Interest") computed on the Adjusted Revolving Loan
Claim at the Chemical Bank
Prime Rate in effect from time to time plus 1 1/2% per annum (one
of the contractual
interest rate options under the Revolving Credit Agreement) for
the period from the Filing
Date through October 31, 1992 (the Stub Period) would be added to
the amount of the
Adjusted Revolving Loan Claim (together, the Revolving Credit
Bank Claim Stub Period
Amount), (3) provided that on November 1, 1992, a Claim would be
allowed for additional
post-Filing Date interest on the Revolving Credit Bank Claim Stub
Period Amount from and
after November 1, 1992, calculated at the Chemical Bank Prime
Rate plus 1 1/2% per annum,
and this interest would be paid quarterly during the pendency of
the Chapter 11 Cases,
(4) assumed continued payment of quarterly interest for 16
consecutive quarters (or to
the Effective Date if sooner), in which case all Claims by the
Revolving Credit Banks to
post-Filing Date interest at a rate in excess of the Chemical
Bank Prime Rate plus 1 1/2%
per annum, and to interest on unpaid post-Filing Date interest
other than Stub Period
Interest, would have been waived and (5) provided for allowance
of reasonable post-Filing
Date expenses of the Revolving Credit Banks, subject to approval
of the Court and the
standards established by the Court in the Chapter 11 Cases.
After opposition by other
Creditors to the Compromise and Settlement Agreement and a
hearing before the Court, the
motion to approve the Compromise and Settlement Agreement was
denied pursuant to an order
of the Court dated April 27, 1993. A motion for rehearing the
application to approve the
Compromise and Settlement Agreement was denied pursuant to an
order of the Court dated
May 24, 1993. An appeal by the Debtors from such order is
pending in the District Court.
The Creditors' Plan largely embodies the terms of the
earlier Compromise and Settlement Agreement.
Treatment of Class S-1 Claims is as follows:
Class S-1 Claims are impaired. Each Holder of a
Class S-1 Allowed Claim shall receive, in full satisfaction
thereof, Cash and, if the Amended and Restated
Veil Piercing Settlement Agreement becomes effective by
its terms, Class B Common Stock as follows:
a. Within 5 days following the Confirmation
Date, or such other date as the Court may order (but in any event
not later than the Effective Date), Cash in the amount of the
portion of such Holder's Allowed Claim described
in clauses (ii) and (iii) of Section 1.20(b) of the
Creditors' Plan (the "Initial Revolving Credit Bank Claim
Payment"); provided, however, that if the Initial Revolving
Credit Bank Claim Payment is not made on or prior to
June 30, 1994, then the Initial Revolving Credit
Bank Claim Payment shall also include the portion of such
holder's Allowed Claim described in clause
(iv) of Section 1.20(b) of the Creditors' Plan;
b. On the last Business Day of each calendar
quarter occurring between the date of the Initial Revolving
Credit Bank Claim Payment and the
Effective Date, Cash in the amount of the unpaid
portion of such Holder's Allowed Claim described in clause (v) of
Section 1.20(b) of the Creditors' Plan which accrued during such
calendar quarter and was not paid pursuant to Section 3.6(a) of
the Creditors' Plan; and
c. On the Effective Date, Cash and, to the
extent set forth in Section 1.20(b)(vi) of the Creditors' Plan,
Class B Common Stock in the amount of the Allowed Amount of such
Holder's Allowed Claim to the extent not theretofore paid
pursuant to Section 3.6(a) and (b) of the Creditors'
Plan, unless such Holder and the Bondholders
Committee shall have agreed to a less favorable treatment of such
Claim.
The "Allowed Amount" of a Revolving Credit Bank Claim (as
defined in the Creditors' Plan) of any Holder is an amount equal
to a Pro Rata portion of the sum of (i) the
Adjusted Revolving Loan Claim (as defined below) as of the
Effective Date, (ii) interest
on the Adjusted Revolving Loan Claim for the period from December
27, 1989 through
October 31, 1992 at the Chemical Bank Prime Rate plus 1.5% per
annum (the Stub Period
Interest, together with the Adjusted Revolving Loan Claim, the
"Revolving Credit Bank
Claim Stub Period Amount"), (iii) interest on the Revolving
Credit Bank Claim Stub Period
Amount for the period November 1, 1992 through the earlier to
occur of (A) the date of
the Initial Revolving Credit Bank Claim Payment and (B) June 30,
1994 at the Chemical Bank
Prime Rate plus 1.5% per annum, compounded on each January 1,
April 1, July 1 and
October 1 (the "Post-Stub Period Interest"), (iv) in the event
that all or any portion
of the Initial Revolving Bank Claim Payment is not made on or
prior to June 30, 1994, the
sum of (A) interest on the sum of the Stub Period Interest and
the Post-Stub Period
Interest (or the unpaid portion of either thereof) for the period
from July 1, 1994
through the date on which the Initial Revolving Credit Claim
Payment is made (or such
portion is paid), at 13% per annum, and (B) interest on the
Adjusted Revolving Loan Claim
for the period from July 1, 1994 through the date on which the
Initial Revolving Credit
Claim Payment is made, at the Chemical Bank Prime Rate plus 1.5%
per annum, in the case
of each of (A) and (B), compounded on each January 1, April 1,
July 1 and October 1,
(v) interest on the Adjusted Revolving Loan Claim from the date
of the Initial Revolving
Credit Bank Claim Payment through the Effective Date at the
Chemical Bank Prime Rate plus
1.5% per annum, compounded on each January 1, April 1, July 1 and
October 1 if not paid
currently in accordance with Section 3.6(b) of the Creditors'
Plan and (vi) if the Amended
and Restated Veil Piercing Settlement Agreement becomes effective
by its terms, additional
interest consisting of shares of Class B Common Stock having an
aggregate New Common Stock
Value Per Share equal to $28,220,625; provided, however, that in
the event that any Holder
of an Allowed Old Common Stock Interest exercises an Equity Call
Option, (i) each Holder
of a Revolving Credit Bank Claim shall receive Cash in an amount
equal to such Holder's
Pro Rata share of the aggregate Cash proceeds received from the
exercise of all such
Equity Call Options, multiplied by a fraction, the numerator of
which is the number of
shares of New Common Stock that would otherwise be issued to
Holders of Revolving Credit
Bank Claims under this paragraph, and the denominator of which is
the number of shares
of New Common Stock to be issued under the Creditors' Plan to
Classes S-1, S-2, S-6 and
U-4 through U-7; and (ii) the number of shares of New Common
Stock that each Holder shall
receive under this paragraph shall be reduced by the amount of
Cash received under
clause (i) of this proviso divided by the New Common Stock Value
Per Share (the term
"Adjusted Revolving Loan Claim" shall mean, as of any date
commencing on December 27,
1989, $243,666,041 as reduced from time to time by repayments of
principal thereof and
interest thereon, including payments of $5,794,016 of Beijer
Proceeds and Bank Setoff
Proceeds as of October 19, 1990 and $8,248,821 of Apache Note
Proceeds as of June 18, 1991).
WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED
OTHERWISE, HOLDERS OF REVOLVING CREDIT BANK CLAIMS, WORKING
CAPITAL BANK CLAIMS AND SERIES B & C SENIOR NOTE CLAIMS SHOULD
ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION
INTEREST IN THE FORM OF CLASS B COMMON STOCK THAT IS CONTINGENT
ON THE EFFECTIVENESS OF THE AMENDED AND RESTATED
VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL
1-800-489-7444 AT ANY TIME FOR A RECORDING PROVIDING CURRENT
INFORMATION AS TO WHETHER SUCH AGREEMENT HAS BECOME
EFFECTIVE, INCLUDING THE RESULT OF THE SEPTEMBER 1, 1994 HEARING
TO BE HELD BY THE CELOTEX BANKRUPTCY COURT TO CONSIDER APPROVAL
THEREOF. FOR MORE INFORMATION ON THE CONDITIONS
TO EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING
SETTLEMENT AGREEMENT, SEE "OVERVIEW OF THE CREDITORS'
PLAN--SPECIAL FEATURES OF THE CREDITORS' PLAN--SETTLEMENT OF
VEIL PIERCING/FRAUDULENT CONVEYANCE ISSUES AND OTHER
ISSUES--TERMS OF THE VEIL PIERCING SETTLEMENT AGREEMENT."
For a discussion of post-Filing Date Interest Claims
generally, see "OVERVIEW OF THE CREDITORS' PLAN--Special Features
of the Creditors' Plan--Post-Filing Date Interest
Claims."
Based on information contained in the Debtors' Disclosure
Statement, the aggregate
Allowed Amount of the Revolving Credit Bank Claims as of May 31,
1993 was $310,010,797,
consisting of the following:
Pre-Filing Date principal amount $242,291,945
less Beijer Proceeds/Bank Setoff Proceeds (5,794,016)
less Apache Note Proceeds (8,248,821)
plus pre-Filing Date accrued interest 1,374,096
Adjusted Revolving Loan Claim 229,623,204
Stub Period Interest 67,274,606
Revolving Credit Bank Claim Stub Period Amount 296,897,810
Interest from 11/1/92 to 5/31/93 13,112,987
Total Allowed Amount as of May 31, 1993 $310,010,797
Based upon the foregoing information, the Proponents
estimate that the aggregate Allowed Amount of the Revolving
Credit Bank Claims as of December 31, 1994 will be
approximately $354,027,530 plus, if the Amended and Restated Veil
Piercing Settlement
Agreement becomes effective by its terms, additional interest to
be paid in the form of
Class B Common Stock having an aggregate New Common Stock Value
Per Share equal to
$28,220,625 (if the Court determines that the Debtors' enterprise
value is $2.525 billion
in accordance with the Creditors' Plan, then to the extent that
the market agrees with
the Debtors' higher estimated enterprise value of $2.805 billion,
the value of this stock would be higher than this stated value).
Upon receipt of the distribution specified above, all
Holders of Class S-1 Claims
shall be deemed to have waived any and all subordination rights
which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to
Holders of Subordinated Note Claims and shall be permanently
enjoined from enforcing, or
attempting to enforce, any such subordination rights.
Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be
subject to levy, garnishment, attachment or other legal process
by any Holder of a Class S-1 Claim by reason of any subordination
rights.
Class S-2 Claims: Working Capital Bank Claims.
The Class S-2 Claims are the claims by various banks (the
"Working Capital Banks")
with respect to a Working Capital Credit Agreement, dated as of
December 29, 1987, as
amended (the "Working Capital Agreement") provided to Jim Walter
Resources (Class S-2M),
United Land (Class S-2Z), U.S. Pipe (Class S-2AA) and Walter Land
(Class S-2FF)
(collectively, the "Working Capital Borrowers") which are
guaranteed by Hillsborough
(Class S-2A), Computer Holdings (Class S-2E), Hamer Holdings
(Class S-2G), Homes Holdings
(Class S-2I), JW Aluminum (Class S-2O), Resources Holdings (Class
S-2P), JWI Holdings
(Class S-2Q), Window Components (Class S-2S), Land Holdings
(Class S-2T), Mid-State
Holdings (Class S-2V), Railroad Holdings (Class S-2W), Sloss
(Class S-2X), Southern
Precision (Class S-2Y), Pipe Realty (Class S-2BB), Vestal (Class
S-2CC) and Old Walter
Industries (Class S-2EE) (collectively, the "Working Capital
Guarantors"). The Working
Capital Borrowers and the Working Capital Guarantors are
collectively referred to herein
as the "Working Capital Debtors."
Under the Working Capital Agreement, the Working Capital
Borrowers were permitted
to borrow, provided the sum of such loans (the "Working Capital
Loans"), swingline loans
(which, in general, were short-term borrowings that were designed
to fund day-to-day Cash
requirements and were repayable at least monthly with proceeds of
subsequent Working
Capital Loans) and letters of credit issued under the Working
Capital Agreement did not
exceed $150,000,000 (the "Working Capital Commitment") at any
time outstanding (with such
amount being divided into various sub-limits for each of the
Working Capital Borrowers).
Working Capital Loans could be repaid and reborrowed in
accordance with the provisions
of the Working Capital Agreement. The Working Capital Commitment
was to terminate on
December 31, 1989, and all letters of credit outstanding under
the Working Capital
Agreement were to expire no later than June 30, 1990.
As a result of the Reorganization Proceedings, the Working
Capital Agreement
terminated and the maturity of all outstanding obligations under
the Working Capital
Agreement, other than the obligations with respect to outstanding
letters of credit, were
accelerated.
The obligations of the Working Capital Borrowers under the
Working Capital Agreement are secured in the following manner:
(1) the mortgage by Old Walter Industries of its
headquarters building and the land associated therewith to secure
the payment when due of all obligations of Old Walter Industries
under the Old Walter Industries Guarantee with respect to the
Working Capital Loans (the "Old Walter Industries Working
Capital Guarantee"), and the Working Capital Agreement;
(2) the pledge by all Additional Subsidiary
Pledgors of all intercompany notes owned on the Filing Date by
each Additional Subsidiary Pledgor, pursuant to the Additional
Subsidiaries Pledge Agreements, to secure the payment when due of
the obligations of Hillsborough and/or its consolidated
subsidiaries to each Additional Subsidiary Pledgor's or its
direct parent corporation's obligations to the Working Capital
Banks;
(3) the pledge by all First Tier Subsidiary
Pledgors of (a) all the issued and outstanding shares of capital
stock owned on the Filing Date by each First Tier
Subsidiary Pledgor of any corporation and (b) all
intercompany notes owned on the Filing Date by each First Tier
Subsidiary Pledgor, pursuant to the First Tier
Subsidiary Pledge Agreements, to secure the obligations of
the First Tier Subsidiary Guarantors in respect of the Working
Capital Loans;
(4) the pledge by U.S. Pipe, Jim Walter Resources
and Walter Land (each a "Working Capital Borrower Pledgor") of
(a) all of the issued and outstanding shares
of capital stock owned on the Filing Date by each Working
Capital Borrower Pledgor of any corporation and (b) all of the
intercompany notes owned on the Filing Date by the Working
Capital Borrower Pledgor, pursuant to a pledge agreement between
each Working Capital Borrower Pledgor and MHTCo. (as
predecessor to Chemical), as collateral agent, dated as of
December 29, 1987 (collectively, the "Working Capital
Borrower Pledge Agreements"), to secure the obligations of
the Working Capital Borrower Pledgers in respect of the Working
Capital Loans;
(5) the pledge by Hillsborough of (a) all of the
issued and outstanding shares of capital stock owned on the
Filing Date by Hillsborough of any corporation, excluding the
capital stock of Homes Holdings, Resources Holdings and
U.S. Pipe (which stock is pledged by Hillsborough as
Shared Collateral) and (b) all intercompany notes owned on the
Filing Date by Hillsborough, pursuant to the Hillsborough Pledge
agreement, to secure the payment when due of the obligations
of Hillsborough pursuant to the Hillsborough guarantee in
respect of the Working Capital Loans;
(6) the pledge by each of Homes Holdings, Resources
Holdings and U.S. Pipe of (a) all of the issued and outstanding
shares of capital stock owned on the
Filing Date by each pledgor of any corporation, excluding
capital stock of Jim Walter Homes and Jim Walter Resources and
(b) all intercompany notes owned on the Filing Date by each
pledgor, pursuant to a pledge agreement dated as of
December 29, 1987 between each of Homes Holdings,
Resources Holdings and U.S. Pipe and MHTCo. (as predecessor to
Chemical), as collateral agent, to secure the
obligations of each pledgor in respect of the Working
Capital Loans; and
(7) the pledge by Old Walter Industries of (a) all
of the issued and outstanding shares of capital stock owned on
the Filing Date by Old Walter Industries of any corporation,
excluding the capital stock of Jim Walter Homes and
Jim Walter Resources (which stock is pledged by Old Walter
Industries as Shared Collateral) and (b) all intercompany notes
owned on the Filing Date by Old Walter
Industries, pursuant to the Old Walter Industries Pledge
Agreement, to secure the obligations of Old Walter Industries
pursuant to the Old Walter Industries Working Capital Guarantee.
As of the Filing Date, $79,500,000 principal amount of
Working Capital Loans were outstanding, plus accrued interest and
commitment fees of $620,608 and $125,261,
respectively, and outstanding letters of credit totaling
$20,449,197. Subsequent to the
Filing Date, there were two draw-downs totaling $2,900,000 on the
letters of credit
outstanding. In October 1990, pursuant to an order of the Court,
$1,561,751 of the
$7,355,767 Beijer Proceeds and Bank Setoff Proceeds, held as
security under the Working
Capital Agreement and the Revolving Credit Agreement, including
interest thereon, were
turned over to the Working Capital Banks with reservation of
rights as to application of
such payment. The Working Capital Borrowers have applied such
payment as a reduction of
principal. Also, in June 1991, pursuant to an order of the Court
$2,805,305 of the
$11,054,126 Apache Proceeds, including interest thereon, were
turned over to the Working
Capital Banks and applied as a reduction of principal. The order
of the Court stating
that such payment should be applied to principal has been
reversed by the District Court
and remanded to the Court for further consideration. The balance
of the proceeds from
these security arrangements was turned over to the Revolving
Credit Banks and applied as
a reduction of the principal outstanding under the Revolving
Credit Agreement. See
"OVERVIEW OF THE CREDITORS' PLAN--Classification and Treatment of
Claims and Interests--Secured Claims."
On October 16, 1992, the Debtors submitted to the Court a
motion to approve a
Compromise and Settlement Agreement which had been negotiated
between the Debtors and
representatives of the Banks. The Compromise and Settlement
Agreement, among other
matters would have: (1) fixed (i) the amount of principal as of
the Filing Date,
(ii) interest on the principal amount of the Working Capital
Loans accrued and unpaid as
of the Filing Date calculated at the non-default contract rate in
effect from time to time
prior to the Filing Date, (iii) fees accrued and unpaid as of the
Filing Date, (iv) the
letter of credit draw-downs that occurred subsequent to the
Filing Date and (v) the
application of the various disputed payments referred to in the
preceding paragraph as
a principal reduction from time to time (collectively the sum of
(i), (ii), (iii) and
(iv) minus (v) the "Adjusted Working Capital Claim"); (2)
provided that Stub Period
Interest computed on the Adjusted Working Capital Claim at the
Chemical Bank Prime Rate
in effect from time to time plus 1 1/2% per annum (one of the
contractual interest rate
options under the Working Capital Agreement) for the Stub Period
would be added to the
amount of the Adjusted Working Capital Claim (together, the
Working Capital Bank Claim
Stub Period Amount), (3) provided that on November 1, 1992, a
Claim would be allowed for
additional post-Filing Date interest on the Working Capital Bank
Claim Stub Period Amount,
from and after November 1, 1992, calculated at the Chemical Bank
Prime Rate plus 1 1/2%
per annum, and this interest would be paid quarterly during the
pendency of the Chapter
11 Cases, (4) assumed continued payment of quarterly interest for
16 consecutive quarters
(or to the Effective Date if sooner) in which case, all Claims by
the Working Capital
Banks to post-Filing Date interest at a rate in excess of the
Chemical Bank Prime Rate
plus 1 1/2% per annum, and to interest on unpaid post-Filing Date
interest other than Stub
Period Interest, would have been waived and (5) provided for
allowance of reasonable
post-Filing Date expenses of the Working Capital Banks, subject
to approval of the Court
and the standards established by the Court in the Chapter 11
Cases. After opposition by
other Creditors to the Compromise and Settlement Agreement and a
hearing before the Court,
the motion to approve the Compromise and Settlement Agreement was
denied pursuant to an
order of the Court dated April 27, 1993. A motion for rehearing
the application to
approve the Compromise and Settlement Agreement was denied
pursuant to an order of the
Court dated May 24, 1993. An appeal by the Debtors from such
order is pending in the
District Court.
The Creditors' Plan largely embodies the terms of the
earlier Compromise and Settlement Agreement.
Treatment of Class S-2 Claims is as follows:
Class S-2 Claims are impaired. Each Holder of a
Class S-2 Allowed Claim shall receive, in full satisfaction
thereof, Cash and, if the Amended and Restated
Veil Piercing Settlement Agreement becomes effective by
its terms, Class B Common Stock, as follows:
(a) Within 5 days following the Confirmation
Date, or such other date as the Court may order (but in any event
not later than the Effective Date), Cash in the amount of the
portion of such Holder's Allowed Claim described in clauses (ii)
and (iii) of Section 1.20(c) of the Creditors' Plan (the "Initial
Working Capital Bank Claim Payment"); provided, however,
that if the Initial Working Capital Bank Claim
Payment is not made on or prior to June 30, 1994, then the
Initial Working Capital Bank Claim Payment
shall also include the portion of such Holder's
Allowed Claim described in clause (iv) of Section 1.20(c) of the
Creditors' Plan;
(b) On the last Business Day of each
calendar quarter occurring between the date of the Initial
Working Capital Bank Claim Payment and the
Effective Date, Cash in the amount of the unpaid
portion of such Holder's Allowed Claim described in clause (v) of
Section 1.20(c) of the Creditors'
Plan which accrued during such calendar quarter and
was not paid pursuant to Section 3.7(a) of the Creditors' Plan;
and
(c) On the Effective Date, Cash and, to the
extent set forth in Section 1.20(c)(vi) of the Creditors' Plan,
Class B Common Stock, in the amount of the Allowed Amount of such
Holder's Allowed Claim to the extent
not theretofore paid pursuant to Section 3.7(a) and
(b) of the Creditors' Plan, unless such Holder and the
Bondholders Committee shall have agreed to a less favorable
treatment of such Claim.
The "Allowed Amount" of a Working Capital Bank Claim (as
defined in the Creditors'
Plan) of any Holder is an amount equal to a Pro Rata portion of
the sum of (i) the
Adjusted Working Capital Claim (as defined below) as of the
Effective Date, (ii) interest
on the Adjusted Working Capital Claim for the period from
December 27, 1989 through
October 31, 1992 at the Chemical Bank Prime Rate plus 1.5% per
annum (the "Stub Period
Interest," and together with the Adjusted Working Capital Claim,
the "Working Capital Bank
Claim Stub Period Amount"), (iii) interest on the Working Capital
Bank Claim Stub Period
Amount for the period November 1, 1992 through the earlier to
occur of (A) the date of
the Initial Working Capital Bank Claim Payment and (B) June 30,
1994 at the Chemical Bank
Prime Rate plus 1.5% per annum, compounded on each January 1,
April 1, July 1 and October
1 (the "Post-Stub Period Interest"), (iv) in the event that all
or any portion of the
Initial Working Capital Bank Claim Payment is not made on or
prior to June 30, 1994, the
sum of (A) interest on the sum of the Stub Period Interest and
the Post-Stub Period
Interest (or the unpaid portion of either thereof) for the period
from July 1, 1994
through the date on which the Initial Working Capital Bank Claim
Payment is made (or such
portion is paid), at 13% per annum, and (B) interest on the
Adjusted Working Capital Claim
for the period from July 1, 1994 through the date on which the
Initial Working Capital
Bank Claim Payment is made, at the Chemical Bank Prime Rate plus
1.5% per annum, in the
case of each of (A) and (B), compounded on each January 1, April
1, July 1 and October 1,
(v) interest on the Adjusted Working Capital Claim from the date
of the Initial Revolving
Credit Bank Claim Payment through the Effective Date at the
Chemical Bank Prime Rate plus
1.5% per annum, compounded on each January 1, April 1, July 1 and
October 1 if not paid
currently in accordance with Section 3.7(b) of the Creditors'
Plan and (vi) if the Amended
and Restated Veil Piercing Settlement Agreement becomes effective
by its terms, additional
interest consisting of shares of Class B Common Stock having an
aggregate New Common Stock
Value Per Share equal to $9,279,375; provided, however, that in
the event that any Holder
of an Allowed Old Common Stock Interest exercises an Equity Call
Option, (i) each Holder
of a Working Capital Bank Claim shall receive Cash in an amount
equal to such Holder's
Pro Rata share of the aggregate Cash proceeds received from the
exercise of all such
Equity Call Options, multiplied by a fraction, the numerator of
which is the number of
shares of New Common Stock that would otherwise be issued to
Holders of Working Capital
Bank Claims under this paragraph, and the denominator of which is
the number of shares
of New Common Stock to be issued under the Creditors' Plan to
Classes S-1, S-2, S-6 and
U-4 through U-7; and (ii) the number of shares of New Common
Stock that each Holder shall
receive under this paragraph shall be reduced by the amount of
Cash received under clause
(i) of this proviso divided by the New Common Stock Value Per
Share (the term "Adjusted
Working Capital Claim" shall mean, as of any date commencing on
December 27, 1989,
$80,245,869 as (x) increased from time to time by letter of
credit draws, including draws
of $2,000,000 as of January 3, 1990 and $900,000 as of June 11,
1990 and (y) reduced from
time to time by repayments of principal thereof and interest
thereon, including payments
of $1,561,751 of Beijer Proceeds and Bank Setoff Proceeds as of
October 19, 1990 and
$2,805,305 of Apache Note Proceeds as of June 18, 1991).
WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED
OTHERWISE, HOLDERS OF REVOLVING CREDIT BANK CLAIMS, WORKING
CAPITAL BANK CLAIMS AND SERIES B & C SENIOR NOTE CLAIMS SHOULD
ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION
INTEREST IN THE FORM OF CLASS B COMMON STOCK THAT IS CONTINGENT
ON THE EFFECTIVENESS OF THE AMENDED AND RESTATED
VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL
1-800-489-7444 AT ANY TIME FOR
A RECORDING PROVIDING CURRENT INFORMATION AS TO WHETHER SUCH
AGREEMENT HAS BECOME EFFECTIVE, INCLUDING THE RESULT OF THE
SEPTEMBER 1, 1994 HEARING TO BE HELD BY THE CELOTEX
BANKRUPTCY COURT TO CONSIDER APPROVAL THEREOF. FOR MORE
INFORMATION ON THE CONDITIONS
TO EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING
SETTLEMENT AGREEMENT, SEE
"OVERVIEW OF THE CREDITORS' PLAN--SPECIAL FEATURES OF THE
CREDITORS' PLAN--SETTLEMENT OF
VEIL PIERCING/FRAUDULENT CONVEYANCE ISSUES AND OTHER
ISSUES--TERMS OF THE VEIL PIERCING SETTLEMENT AGREEMENT."
For a discussion of post-Filing Date Interest Claims
generally, see "OVERVIEW OF
THE CREDITORS' PLAN--Special Features of the Creditors'
Plan--Post-Filing Date Interest
Claims."
Based on information contained in the Debtors' Disclosure
Statement, the aggregate
Allowed Amount of the Working Capital Bank Claims as of May 31,
1993 was $106,257,782,
consisting of the following:
Pre-Filing Date principal amount $ 79,500,000
plus letter of credit draw-down 1/3/90 2,000,000
plus letter of credit draw-down 6/11/90 900,000
less Beijer Proceeds/Bank Setoff Proceeds (1,561,751)
less Apache Note Proceeds (2,805,305)
plus pre-Filing Date interest 620,608
plus pre-Filing Date fees 125,261
Adjusted Working Capital Claim 78,778,813
Stub Period Interest 22,984,426
Working Capital Bank Claim Stub Period Amount 101,763,239
Interest from 11/1/92 to 5/31/93 4,494,543
Total Allowed Amount as of 5/31/93 $106,257,782
Based upon the foregoing information, the Proponents
estimate that the aggregate
Allowed Amount of the Working Capital Bank Claims as of December
31, 1994 will be
approximately $121,343,120 plus, if the Amended and Restated Veil
Piercing Settlement
Agreement becomes effective by its terms, additional interest in
the form of Class B
Common Stock having an aggregate New Common Stock Value Per Share
equal to $9,279,375 (if
the Court determines that the Debtors' enterprise value is $2.525
billion in accordance
with the Creditors' Plan, then to the extent that the market
agrees with the Debtors'
higher estimated enterprise value of $2.805 billion, the value of
this stock would be
higher than this stated value).
Upon receipt of the distribution specified above, all
Holders of Class S-2 Claims
shall be deemed to have waived any and all subordination rights
which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to
Holders of Subordinated Note Claims and shall be permanently
enjoined from enforcing, or
attempting to enforce, any such subordination rights.
Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be
subject to levy, garnishment, attachment or other legal process
by any Holder of a
Class S-2 Claim by reason of any subordination rights.
Class S-3 Claims: Grace Street Note Claims.
The Class S-3 Claims are Claims under two promissory
notes, each dated March 19,
1971 made by Paul G. Goodman in the original principal amount of
$50,000, one in favor
of D. Crawford Freeman and the other in favor of Fred Halling
(the "Grace Street Notes")
as assigned to and assumed by Old Walter Industries (Class
S-3EE). According to the
Debtors' Disclosure Statement, Old Walter Industries, based on
its books and records,
estimates that the Claims in Class S-3 (the "Grace Street Note
Claims") are $5,000
principal amount, plus accrued interest of $379 as of May 31,
1993, or a total of $5,379.
Accrued interest between May 31, 1993 and December 31, 1994 is
estimated by the Proponents to be immaterial.
Treatment of Class S-3 Claims is as follows:
The Class S-3 Claims are not impaired. Each Holder
of a Class S-3 Allowed Claim shall receive, in full satisfaction
thereof, Cash in an amount equal to the
Allowed Amount of such Claim on or promptly after the
Effective Date, unless the Holder thereof and the Bondholders
Committee shall have agreed to a less favorable
treatment of such Claim.
The "Allowed Amount" of any Grace Street Note Claim is an
amount equal to (i) as
to a Claim for principal and interest, the sum of (A) the
principal amount thereof due
and owing as of the Filing Date, together with interest thereon
accrued and unpaid as of
the Filing Date, calculated at the non-default contract rate and
(B) interest on the
principal amount accrued and unpaid from the Filing Date to the
Effective Date calculated
at the non-default contract rate, minus (ii) any amounts applied
by Walter Industries to
repay any such Claim subsequent to the Filing Date and prior to
the Effective Date.
Class S-4 Claims: Sloss IRB Claim.
NOTE: All information below relating to Class S-4 Claims
is taken from the Debtors' Disclosure Statement.
The Class S-4 Claims are Claims against Sloss (Class S-4X)
by the Industrial
Development Board of the City of Birmingham (the "IDB of
Birmingham"), asserted by
NationsBank ("NationsBank") (as successor to NCNB National Bank
of Florida), as trustee
(the "Sloss IRB Trustee"), in accordance with the mortgage
indenture, dated as of May 1,
1983 (the "Sloss IRB Indenture"). Under the terms of the Sloss
IRB Indenture, the IDB
of Birmingham issued $1,000,000 principal amount of Series 1983
Industrial Revenue Bonds
(the "Sloss IRB"). The proceeds from the issuance of the Sloss
IRB were used by Sloss
to finance the cost of acquiring certain industrial equipment and
installing such
equipment at the plant facility of Sloss. In connection with the
issuance of the Sloss
IRB the IDB of Birmingham leased such equipment to Sloss under a
lease agreement dated
May 1, 1983, which obligated Sloss to pay rent directly to
NationsBank for the account
of the IDB of Birmingham. Sloss' obligations under the Sloss IRB
Indenture (the "Sloss
IRB Claim") are secured by such industrial equipment installed at
its plant facilities.
Under the terms of the Sloss IRB Indenture, the Sloss IRB
was bearing an interest
rate equal to 70% of the prime rate from time to time in effect
per annum, payable
quarterly, in Cash, on January 1, April 1, July 1 and October 1
on the unpaid principal
balance. Principal payments of $25,000 were also made quarterly
on the above dates.
Sloss, based on its books and records, estimates that $525,000
principal amount, plus pre-and post-Filing Date accrued interest
of $46,223 and $100,343, respectively, is
outstanding as of May 31, 1993, or a total of $671,556. Based
upon the foregoing
information, the Proponents estimate that the aggregate Allowed
Amount of the Class S-4
Claims as of December 31, 1994 will be approximately $715,207.
Treatment of Class S-4 Claims is as follows:
The Class S-4 Claims are not impaired. The Holder
of a Class S-4 Allowed
Claim shall receive, in full satisfaction thereof, Cash in
an amount equal to the
Allowed Amount of such Claim, on or promptly after the
Effective Date, unless the
Holder thereof and the Bondholders Committee shall have
agreed to a less favorable
treatment of such Claim.
The "Allowed Amount" of the Sloss IRB Claim is an amount
equal to (i) as to a Claim
for principal and interest, the sum of (x) the principal amount
under the Sloss IRB due
and owing as of the Filing Date, (y) interest thereon accrued and
unpaid as of the Filing
Date, calculated at the non-default contract rate and (z)
interest on such principal
amount accrued and unpaid from the Filing Date to the Effective
Date calculated at the
nondefault contract rate, minus (ii) any amounts applied by Sloss
to repay any such Claim
subsequent to the Filing Date and prior to the Effective Date.
Accordingly, all accrued
pre- and post-Filing Date interest plus the entire $525,000 of
principal will be payable assuming a May 31, 1994 Effective Date.
Class S-5 Claims: Secured Equipment Purchase Claims.
NOTE: All information below relating to Class S-5 Claims
is taken from the Debtors' Disclosure Statement.
The Class S-5 Claims consist of Claims arising out of
purchases by Computer
Services (Class S-5J), JW Aluminum (Class S-5O), Window
Components (Class S-5S), Sloss
(Class S-5X), Southern Precision (Class S-5Y) and U.S. Pipe
(Class S-5AA) of equipment
which are secured by such equipment (collectively, the "Secured
Equipment Purchase Claims").
The following is a summary of the estimated amount of
Claims in Class S-5 by Debtor
outstanding as of May 31, 1993, based on their books and records:
<TABLE>
<CAPTION>
Case Estimated
Class Debtor Number Amount of Claims
<S> <C> <C> <C>
S-5J Computer Services 89-9723-8P1 $28,588
S-5O JW Aluminum 89-9718-8P1 10,558
S-5S Window Components 89-9732-8P1 205
S-5X Sloss 89-9743-8P1 509
S-5Y Southern Precision 89-9729-8P1 3,312
S-5AA U.S. Pipe 89-9744-8P1 4,505
Total $47,677
</TABLE>
Treatment of Class S-5 Claims is as follows:
The Class S-5 Claims are not impaired. Each Holder
of a Class S-5 Allowed Claim shall receive, in full satisfaction
thereof, Cash in an amount equal to the
Allowed Amount of such Claim on or promptly after the
Effective Date, unless such Holder and the Bondholders Committee
shall have agreed to a less favorable treatment of such Claim.
The "Allowed Amount" of a Secured Equipment Purchase Claim
is equal to (i) as to
a Claim for principal and interest, the sum of (x) the principal
amount thereof due and
owing as of the Filing Date, (y) interest on such principal
amount accrued and unpaid as
of the Filing Date calculated at the non-default contract rate
and (z) interest on such
principal amount accrued and unpaid from the Filing Date to the
Effective Date calculated
at the non-default contract rate, minus (ii) any amounts applied
by the applicable Debtor
to repay any such Claim subsequent to the Filing Date and prior
to the Effective Date.
Class S-6 Claims: Series B & C Senior Note Claims.
The Class S-6 Claims are Claims (the "Series B & C Senior
Note Claims") against Jim
Walter Homes (Class S-6K), Jim Walter Resources (Class S-6M),
United Land (Class S-6Z)
and U.S. Pipe (Class S-6AA) (collectively, the "Series B & C
Senior Note Issuers") arising
out of the issuance of the Series B Senior Notes and the Series C
Senior Notes
(collectively, the "Series B & C Senior Notes") issued pursuant
to the Indenture (the
"Series B & C Senior Note Indenture") dated as of January 1,
1988, as amended, among the
Series B & C Senior Note Issuers, and Hillsborough (Class S-6A),
Old Walter Industries
(Class S-6EE), Homes Holdings (Class S-6I) and Resources Holdings
(Class S-6P), as
guarantors (the "Series B & C Senior Note Guarantors"), and
LaSalle, as successor trustee
to Continental Illinois National Bank and Trust Company of
Chicago (the "Series B & C
Senior Note Trustee") under the terms of the Series B & C Senior
Note Indenture. The
Series B & C Senior Note Issuers and Series B & C Senior Note
Guarantors are referred to
herein as the "Series B & C Senior Note Debtors."
Under the terms of the Series B & C Senior Note Indenture,
Class S-6 Claims rank
senior in the right of payment to the Senior Subordinated Notes
(Class U-4 Claims) and
the 17% Subordinated Notes (as defined in Section II.C.4) (Class
U-5 Claims) and certain
other indebtedness of the Debtors and are pari passu with each
other and certain other
indebtedness of the Series B & C Senior Note Issuers (including
indebtedness under the
Revolving Credit Agreement (Class S-1 Claims) and the Working
Capital Agreement (Class S-2
Claims)).
Class S-6 Claims are secured ratably with the obligations
of (i) the Revolving Loan
Borrowers under the Revolving Credit Agreement and (ii) the
Working Capital Borrowers
under the Working Capital Agreement by the Shared Collateral,
comprised of (a) the pledge
by Hillsborough of all of the capital stock of the Series B & C
Senior Note Guarantors,
United Land and U.S. Pipe and (b) the pledge by Old Walter
Industries of the capital stock
of Jim Walter Homes and Jim Walter Resources. According to the
Debtors' Disclosure
Statement, the Series B & C Senior Note Debtors, based on their
books and records,
estimate that $181,300,000 principal amount, plus pre-Filing Date
accrued interest of
$13,033,530. The Proponents estimate that, based upon such
information, post-Filing Date
accrued interest of approximately $127,896,000 (assuming an
all-Cash payment) or
$136,641,000 (assuming payment in New Senior Notes), will be
accrued and unpaid as of
December 31, 1994, plus, if the Amended and Restated Veil
Piercing Settlement Agreement
becomes effective by its terms, additional interest in the form
of Class B Common Stock
having an aggregate New Common Stock Value Per Share equal to
$37,500,000 (if the Court
determines that the Debtors' enterprise value is $2.525 billion
in accordance with the
Creditors' Plan, then to the extent that the market agrees with
the Debtors' higher
estimated enterprise value of $2.805 billion, the value of this
stock would be higher than
this stated value). See "OVERVIEW OF THE CREDITORS'
PLAN--Special Features of the
Creditors' Plan--Post-Filing Date Interest Claims."
Treatment of Class S-6 Claims is as follows:
The Class S-6 Claims are impaired. Each Holder of a
Class S-6 Allowed Claim shall receive, in full satisfaction
thereof, (a) Cash in an amount equal to such Holder's Pro Rata
share (being a fraction, the numerator of which is the Allowed
Amount of such Series B & C Senior Note Claim and the
denominator of which is the aggregate Allowed Amount of all
Series B & C Senior Note Claims) of the Class S-6 Fund (as
defined below), (b) if the Amended and Restated Veil Piercing
Settlement Agreement becomes effective by its terms, such
Holder's Pro Rata share of the Class B Common Stock set forth in
Section 1.20(e)(iv) of the Creditors' Plan, and (c) with respect
to the difference between the Allowed Amount of such Holder's
Class S-6 Claim and the amount of Cash received pursuant
to clauses (a) and (b), (i) if such Holder elects to receive all
of the remainder of its Series B & C Senior Note Claim in New
Senior Notes pursuant to the Series B & C Senior Note
Claim Election, an aggregate principal amount of New
Senior Notes equal to such difference, and (ii) if such Holder
does not make such election, an aggregate amount of Cash (if any)
and principal amount of New Senior Notes (if any) equal to
such difference, with the proportion of Cash and New
Senior Notes to be equal with respect to each Holder that does
not make such election, and with the relative
amount of Cash and New Senior Notes distributed to all
Class S-6 Claims under this clause (b) (ii) to be determined not
less than fifteen (15) days prior to the Effective Date by the
New Board (or, if the New Board has not been appointed by
such date, by the Bondholders Committee), in its sole
discretion, on or promptly after the Effective Date, unless such
Holder and the Bondholders Committee shall have agreed to a less
favorable treatment of such Claim.
THERE CAN BE NO ASSURANCE THAT ANY PART OF A CLASS S-6
CLAIM WILL BE PAID IN CASH, OTHER THAN CASH FROM THE CLASS S-6
FUND.
The "Allowed Amount" of any Series B & C Senior Note Claim
is an amount equal to
the sum of (i) the principal amount thereof due and owing as of
the Filing Date,
(ii) interest on such principal amount accrued and unpaid as of
the Filing Date calculated
at the non-default contract rate, (iii) (a) with respect to
amounts paid in Cash under
Section 3.11(b) of the Creditors' Plan, interest on such
principal amount and interest,
accrued and unpaid from the Filing Date to June 30, 1994
calculated at a rate of 13.0%
per annum and accrued from July 1, 1994 to the Effective Date
calculated at a rate of
14 5/8% per annum; and (b) with respect to amounts, if any, paid
in New Senior Notes under
Section 3.11 (b) of the Creditors' Plan, interest on such
principal amount and interest,
accrued from the Filing Date to June 30, 1994 calculated at a
rate of 14.0% per annum and
accrued from July 1, 1994 to the Effective Date at a rate of 14
5/8% per annum and (iv) if
the Amended and Restated Veil Piercing Settlement Agreement
becomes effective by its
terms, additional interest consisting of such Holder's Pro Rata
portion of shares of
Class B Common Stock having an aggregate New Common Stock Value
Per Share equal to
$37,500,000; provided, however, that in the event that any Holder
of an Allowed Old Common
Stock Interest exercises an Equity Call Option, (i) each Holder
of a Series B & C Senior
Note Claim shall receive Cash in an amount equal to such Holder's
Pro Rata share of the
aggregate Cash proceeds received from the exercise of all such
Equity Call Options,
multiplied by a fraction, the numerator of which is the number of
shares of New Common
Stock that would otherwise be issued to Holders of Series B & C
Senior Note Claims under
this paragraph, and the denominator of which is the number of
shares of New Common Stock
to be issued under the Creditors' Plan to Classes S-1, S-2, S-6
and U-4 through U-7; and
(ii) the number of shares of New Common Stock that each Holder
shall receive under this
paragraph shall be reduced by the amount of Cash received under
clause (i) of this proviso divided by the New Common Stock Value
Per Share.
WHEN VOTING ON THE CREDITORS' PLAN, UNLESS ADVISED
OTHERWISE, HOLDERS OF REVOLVING
CREDIT BANK CLAIMS, WORKING CAPITAL BANK CLAIMS AND SERIES B & C
SENIOR NOTE CLAIMS SHOULD
ASSUME THAT THEY WILL NOT RECEIVE THE ADDITIONAL POST-PETITION
INTEREST IN THE FORM OF
CLASS B COMMON STOCK THAT IS CONTINGENT ON THE EFFECTIVENESS OF
THE AMENDED AND RESTATED
VEIL PIERCING SETTLEMENT AGREEMENT. SUCH HOLDERS MAY CALL
1-800-489-7444 AT ANY TIME FOR
A RECORDING PROVIDING CURRENT INFORMATION AS TO WHETHER SUCH
AGREEMENT HAS BECOME
EFFECTIVE, INCLUDING THE RESULT OF THE SEPTEMBER 1, 1994 HEARING
TO BE HELD BY THE CELOTEX
BANKRUPTCY COURT TO CONSIDER APPROVAL THEREOF. FOR MORE
INFORMATION ON THE CONDITIONS
TO EFFECTIVENESS OF THE AMENDED AND RESTATED VEIL PIERCING
SETTLEMENT AGREEMENT, SEE
"OVERVIEW OF THE CREDITORS' PLAN--SPECIAL FEATURES OF THE
CREDITORS' PLAN--SETTLEMENT OF
VEIL PIERCING/FRAUDULENT CONVEYANCE ISSUES AND OTHER
ISSUES--TERMS OF THE VEIL PIERCING
SETTLEMENT AGREEMENT."
The "New Senior Notes" are notes of Walter Industries
and/or one or more other
Debtors. If required by applicable securities law, the New
Senior Notes will be issued
under one or more indentures between the issuer and the trustee
thereunder (the "New
Senior Note Indenture") in an estimated maximum aggregate
principal amount of
approximately $325,000,000. If any such indenture(s) are subject
to the Trust Indenture
Act of 1939, the Proponents will seek to qualify such new
indenture(s) thereunder and will
notify the staff of the Securities and Exchange Commission
thereof. If an indenture is
not required, separate New Senior Notes will be issued to each
recipient. See "OVERVIEW
OF THE CREDITORS' PLAN--Description of Securities to Be Issued
Under the Creditors' Plan--New Senior Notes."
As used herein, the "Class S-6 Fund" means the funds held
by Chemical (as successor
to MHTCo.) for the benefit of Holders of the Series B & C Senior
Notes, which funds
represent a portion of the cash collections received by Jim
Walter Resources prior to the
Filing Date from Jasper Corp. in connection with the non-recourse
promissory note dated
May 26, 1988 payable to Jim Walter Resources, and proceeds from
the sale of Oil Holdings
by Hillsborough, deposited with MHTCo. (as predecessor to
Chemical) prior to the Filing
Date, together with all earnings thereon to the date of
distribution. The Proponents
believe that the amount of such funds is approximately $6,300,000
as of the date of this
Disclosure Statement.
Upon receipt of the distribution specified above, all
Holders of Class S-6 Claims
shall be deemed to have waived any and all subordination rights
which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to
Holders of Subordinated Note Claims and shall be permanently
enjoined from enforcing, or
attempting to enforce, any such subordination rights.
Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be
subject to levy, garnishment, attachment or other legal process
by any Holder of a
Class S-6 Claim by reason of any subordination rights.
Class S-7 Claims: Provident Life & Accident Insurance
Company Claims.
NOTE: All information below relating to Class S-7 Claims
is taken from the Debtors' Disclosure Statement.
The Class S-7 Claims are against Old Walter Industries
(Class S-7EE) for loans
against insurance policies on the lives of certain key officers
of the Debtors and
companies previously owned by the Debtors (the "Provident Life &
Accident Insurance
Company Claims"). The Debtors state in the Debtors' Disclosure
Statement that Old Walter
Industries, based on its books and records, estimates that Class
S-7 Claims total $7,493,856 as of May 31, 1993.
Treatment of Class S-7 Claims is as follows:
The Class S-7 Claims are not impaired. The Holder
of the Class S-9 Allowed Claims shall receive Cash in an amount
equal to the Allowed Amount of such Claim, on or promptly after
the Effective Date, unless the Holder and the Bondholders
Committee shall have agreed to a less favorable treatment
of any such Claim.
The "Allowed Amount" of any Provident Life & Accident
Insurance Company Claim is
the amount necessary to cure all defaults and pay all damages in
respect of the agreement
underlying any Provident Life & Accident Insurance Company Claim
(without giving effect
to the acceleration, if any, of the obligations underlying any
agreement) such that any
remaining amount of such Provident Life & Accident Insurance
Company Claim may be
reinstated in accordance with Section 1124(2) of the Code.
Upon payment in Cash of the Allowed Amounts of the
Provident Life & Accident
Insurance Company Claims, Walter Industries shall assume all
unsatisfied obligations with
respect to the loans underlying such Provident Life & Accident
Insurance Company Claims
in accordance with their original contractual terms. Upon the
making of such payments
and such assumptions, any acceleration of any obligation and/or
instrument or default in
connection with the loans underlying such Provident Life &
Accident Insurance Company
Claims shall be deemed to be rescinded, waived or cured and of no
force or effect, and
the terms of such obligation and/or instrument shall be
reinstated as if no such
acceleration or default had occurred.
Class S-8 Claims: Revolving Credit Agents Claims.
The Class S-8 Claims are Claims by the Revolving Credit
Agents (as defined in the
Creditors' Plan) against Hillsborough (Class S-8A), Best (Class
S-8B), Best (Miss.)
(Class S-8C), Coast to Coast (Class S-8D), Computer Holdings
(Class S-8E), Dixie
(Class S-8F), Hamer Holdings (Class S-8G), Hamer Properties
(Class S-8H), Homes Holdings
(Class S-8I), Computer Services (Class S-8J) Jim Walter Homes
(Class S-8K), JW Insurance
(Class S-8L), Jim Walter Resources (Class S-8K), Window
Components (Wisc.) (Class S-8N),
JW Aluminum (Class S-8O), Resources Holdings (Class S-8P), JWI
Holdings (Class S-8Q), JW
Walter (Class S-8R), Window Components (Class S-8S) Land Holdings
(Class S-8T), Mid-State
Holdings (Class S-8V), Railroad Holdings (Class S-8W), Sloss
(Class S-8X), Southern
Precision (Class S-8Y), United Land (Class S-8Z), U.S. Pipe
(Class S-8AA), Pipe Realty
(Class S-8BB), Vestal (Class S-8CC), Old Walter Industries (Class
S-8EE), Walter Land
(Class S-8FF) and JW Resources (Class S-8GG) for fees and
Revolving Credit Agents under
the expenses incurred by the Revolving Credit Agreement after the
Filing Date. These
Claims are entitled to all of the benefits of indebtedness
arising under the Revolving
Credit Agreement, including the benefit of all security
thereunder and priority over Subordinated Note Claims.
The Holders of Class S-8 Claims had not, as of the date of
the Debtors' Disclosure
Statement, provided to the applicable Debtors the amount of fees
and expenses which had
been incurred since the Filing Date. As a result thereof, the
Proponents are unable to
provide an estimate of the aggregate amount of Class S-8 Claims.
Treatment of Class S-8 Claims is as follows:
The Class S-8 Claims are not impaired. Each Holder
of a Class S-8 Allowed Claim shall receive, in full satisfaction
thereof, Cash in an amount equal to the Allowed Amount of such
Claim on or promptly after the Effective Date.
The "Allowed Amount" of a Revolving Credit Agents Claim
(as defined in the Creditors' Plan) is the amount thereof
determined in accordance with the Revolving Credit
Agreement.
Upon receipt of the distribution specified above, all
Holders of Class S-8 Claims
shall be deemed to have waived any and all subordination rights
which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to
Holders of Subordinated Note Claims and shall be permanently
enjoined from enforcing, or
attempting to enforce, any such subordination rights.
Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be
subject to levy, garnishment, attachment or other legal process
by any Holder of a
Class S-8 Claim by reason of any subordination rights.
Class S-9 Claims: Working Capital Agents Claims.
The Class S-9 Claims are Claims by the Working Capital
Agents (as defined in the
Creditors' Plan) against Hillsborough (Class S-9A), Computer
Holdings (Class S-9E), Hamer
Holdings (Class S-9o), Homes Holdings (Class S-9I), Jim Walter
Resources (Class S-9M),
JW Aluminum (Class (S-9o), Resources Holdings (Class S-9P), JWI
Holdings (Class S-9Q),
Window Components (Class S-9S), Land Holdings (Class S-9T),
Mid-State Holdings
(Class S-9V), Railroad Holdings (Class S-9W), Sloss (Class S-9X),
Southern Precision
(Class S-9Y), U.S. Pipe (Class S-9AA), Pipe Realty (Class S-9BB),
Vestal (Class S-9CC),
Old Walter Industries (Class S-9EE) and Walter Land (Class S-9FF)
for fees and expenses
incurred by the Working Capital Agents under the Working Capital
Agreement after the
Filing Date. These Claims are entitled to all of the benefits of
indebtedness arising
under the Working Capital Agreement, including the benefit of all
security thereunder and priority over Subordinated Note Claims.
The Holders of Class S-9 Claims had not, as of the date of
the Debtors' Disclosure
Statement, provided to the applicable Debtors the amount of fees
and expenses which had
been incurred since the Filing Date. As a result thereof, the
Proponents are unable to
provide an estimate of the aggregate amount of Class S-9 Claims.
Treatment of Class S-9 Claims is as follows:
The Class S-9 Claims are not impaired. Each Holder
of a Class S-9 Allowed Claim shall receive, in full satisfaction
thereof, Cash in an amount equal to the Allowed Amount of such
Claim on or promptly after the Effective Date, unless such
Holder and the applicable Debtors shall have agreed to a
less favorable treatment of such Claim.
The "Allowed Amount" of a Working Capital Agents Claim (as
defined in the
Creditors' Plan) is the amount thereof determined in accordance
with the Working Capital Agreement.
Upon receipt of the distribution specified above, all
Holders of Class S-9 Claims
shall be deemed to have waived any and all subordination rights
which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to
Holders of Subordinated Note Claims and shall be permanently
enjoined from enforcing, or
attempting to enforce, any such subordination rights.
Accordingly, distributions to be
made pursuant to the Plan on account of Subordinated Note Claims
shall not be subject to
levy, garnishment, attachment or other legal process by any
Holder of a Class S-9 Claim by reason of any subordination
rights.
Class S-10 Claims: Other Secured Claims.
The Class S-10 Claims consist of all Secured Claims, if
any, against any of the Debtors not otherwise classified in the
Creditors' Plan.
The Proponents are not aware of the existence of any Other
Secured Claims.
Treatment of Class S-10 Claims is as follows:
Class S-10 Claims are not impaired. Each Holder, if
any, of a Class S-10 Allowed Claim shall, at the sole discretion
of the Bondholders Committee, and in full satisfaction thereof,
receive one of the following treatments: (i) the legal,
equitable and contractual rights to which such Claim
entitles the Holder shall be left unaltered; (ii) notwithstanding
any contractual provision or applicable law that entitles the
Holder of such Claim to demand or receive accelerated payment of
such Claim after the occurrence of a default: (A) any such
default that occurred before or after the Filing Date (other than
a default of the kind specified in Section 365(b)(2) of the Code)
shall be cured; (B) the maturity of such Claim shall be
reinstated (as such maturity existed before such default); (C)
the Holder of such Claim shall be compensated for any damages
incurred as a result of any reasonable reliance by such Holder on
such contractual provision or such applicable
law; and (D) the legal, equitable or contractual rights to
which such Claim entitles the Holder of such Claim shall not
otherwise be altered; or (iii) on the Effective Date, the Holder
of such Claim shall receive, on account of such Claim,
Cash equal to the Allowed Amount of such Claim; in each
case unless such Holder and the Bondholders Committee shall have
agreed to a less favorable treatment of such Claim.
The "Allowed Amount" of an Other Secured Claim is (i) if a
Holder of such Claim did not file a proof of claim with respect
thereto with the Court on or before the Bar Date,
the amount of such Claim as listed in the Debtors' Schedules as
not disputed, contingent or unliquidated; or (ii) if the Holder
of such Claim did file a proof of claim with
respect thereto with the Court on or before the Bar Date, the
amount of such Claim as agreed to by the Bondholders Committee
and the Holder of such Claim and approved by a
Final Order, or, in the absence of such agreement, (A) the amount
stated in such proof of claim if no objection to such proof of
claim was interposed within the applicable
period of time fixed by the Code, the Bankruptcy Rules or the
Court or (B) the amount thereof as fixed by a Final Order, if an
objection to such proof of claim was interposed
within the applicable period of time fixed by the Code, the
Bankruptcy Rules or the Court.
4. Unsecured Claims
Class U-1 Claims: Old Walter Industries IRB Claims.
NOTE: All information below relating to Class I-1 Claims
is taken from the Debtors' Disclosure Statement.
The Class U-1 Claims are Unsecured Claims against Old
Walter Industries (Class U-1EE) which arose from responsibilities
of Original Jim Walter that were assumed by Old Walter Industries
as of January 7, 1988, for obligations under various indenture
agreements (collectively the "Old Walter Industries IRB
Indentures") to the holders of 6.4% Industrial Revenue and 6.5%
Pollution Control Revenue Bonds--The Industrial
Development Board of the City of Chattanooga, Tennessee, 6.4% and
6.95% Industrial Revenue Bonds--Adams County, Colorado, 6.4%
Industrial Revenue Bonds--New Jersey Economic
Development Authority and 6.4% Industrial Development Bonds--City
of Texarkana, Arkansas (collectively, the "Old Walter Industries
IRBs").
The following is a summary of the major terms of the Old
Walter Industries IRBs:
<TABLE>
<CAPTION>
Principal
Amount Rate Sinking Fund
Date of IRB Issued and Per Interest Pay Payments Pay
IRB Indenture Outstanding Annum Dates Beg. End Amount
<S> <C> <C> <C> <C> <C> <C> <C>
6.4% IRB--Chattanooga March 1, 1977 $1,000,000 6.4% 3/1 and 9/1 3/1/92 3/1/93 $100,000
3/1/94 3/1/97 200,000
6.5% IRB--Chattanooga March 1, 1977 1,050,000 6.5% 3/1 and 9/1 3/1/93 3/1/01 100,000
9/1/01 3/1/02 150,000
6.4% IRB--Adams County Dec. 1, 1977 1,000,000 6.4% 6/1 and12/1 12/1/93 12/1/02 100,000
6.95% IRB--Adams County Aug. 1, 1979 1,500,000 6.95% 2/1 and 8/1 8/1/90 8/1/99 150,000
6.4% IRB--NJEDA June 1, 1977 1,000,000 6.4% 6/1 and 12/1 6/1/93 6/1/94 150,000
6/1/95 200,000
6/1/97 250,000
6.4% IRB--Texarkana Dec. 1, 1977 1,000,000 6.4% 6/1 and12/1 12/1/93 12/1/02 100,000
Total $6,550,000
</TABLE>
Old Walter Industries, based on its books and records,
estimates that $6,550,000 principal amount, plus pre- and
post-Filing Date accrued interest of $99,950 and
$1,467,612, respectively, or a total of $8,117,562, exclusive of
the Claims of the indenture trustees under the Old Walter
Industries IRB Indentures for reasonable fees and
expenses, is outstanding as of May 31, 1993. Based upon such
information, the Proponents estimate that the aggregate Allowed
Amount of all Class U-1 Claims will be approximately $8,792,450
as of December 31, 1994.
Treatment of Class U-1 Claims is as follows:
The Class U-1 Claims are not impaired. Each Holder
of a Class U-1 Allowed Claim shall receive Cash in an amount
equal to the Allowed Amount of such Claim, on or promptly after
the Effective Date, unless such Holder and the Bondholders
Committee shall have agreed to a less favorable treatment
of such Claim. Such consideration shall be subject to any prior
rights of such trustees under the Old Walter Industries IRBs for
compensation and reimbursement of their reasonable fees
and expenses asserted by such trustees, to the extent that
such trustees do not receive payment of such reasonable fees and
expenses from Walter Industries.
The "Allowed Amount" of any Old Walter Industries IRB
Claim (as defined in the Plan) is an amount equal to the sum of
the principal payments under the Old Walter
Industries IRBs due and owing as of the Effective Date together
with interest payments thereunder accrued and unpaid as of the
Effective Date, calculated at the non-default
contract rate, which principal payments and interest payments
became due either prior to or subsequent to the Filing Date and
prior to the Effective Date in accordance with the
Old Walter Industries IRB Indentures (without giving effect to
the acceleration, if any, of the obligations underlying the Old
Walter Industries IRBs). Of such amounts, all of
the interest plus $2,350,000 of the principal will be payable
assuming a May 31, 1995 Effective Date to cure existing defaults
together with reasonable fees and expenses of
the trustees under the Old Walter Industries IRB Indentures.
Upon payment in Cash of the Allowed Amounts of the Old
Walter Industries IRB Claims, Walter Industries shall assume all
unsatisfied obligations with respect to the Old Walter Industries
IRBs in accordance with their original contractual terms. Upon
the making of such payments and such assumptions, any
acceleration of any obligation and/or
instrument or default in connection with the Old Walter
Industries IRBs shall be deemed to be rescinded, waived or cured
and of no force or effect and the terms of the Old Walter
Industries IRBs shall be reinstated as if no such acceleration or
default had occurred.
Class U-2 Claims: Convenience Class Claims.
The Class U-2 is a convenience Class (the "Convenience
Class") which consists of all Unsecured Claims (other than Old
Walter Industries IRB Claims and all Subordinated
Note Claims) which are either (a) in an Allowed Amount of $1,000
(exclusive of post-Filing Date interest) or less or (b) reduced
by the Holderthereof to $1,000 (exclusive of post-Filing Date
interest). Such Convenience Class Claims include: all
contingent, unliquidated and disputed litigation, product Claims,
contract disputes, etc., against any Debtor and Claims of trade
Creditors for goods and services provided to any Debtor.
The following table, which is taken from the Debtors'
Disclosure Statement, is a summary, by Debtor, of the estimated
amount of such Claims in Class U-2, plus post-Filing Date
interest at a rate of 6 1/2%, outstanding as of May 31,
1993, based on the Debtors' books and records, assuming that no
other Creditor voluntarily reduces its Claim or Claims to $1,000:
<TABLE>
<CAPTION>
Estimated
Case Amount of
Class Debtor Number Claims
<S> <C> <C> <C>
U-2B Best 89-9740-8P1 $ 5,748
U-2D Coast to Coast 89-9727-8P1 146,545
U-2F Dixie 89-9741-8P1 6,903
U-2J Computer Services 89-9723-8P1 3,817
U-2K Jim Walter Homes 89-9746-8P1 257,742
U-2L JW Insurance 89-9731-8P1 4,695
U-2M Jim Walter Resources 89-9738-8P1 80,187
U-2N Window Components (Wisc.)89-9716-8P1 7,301
U-2O JW Aluminum 89-9718-8P1 66,671
U-2S Window Components 89-9732-8P1 58,807
U-2U Mid-State Homes 89-9725-8P1 18,940
U-2X Sloss 89-9743-8P1 95,290
U-2Y Southern Precision 89-9729-8P1 25,197
U-2Z United Land 89-9730-8P1 4,138
U-2AA U.S. Pipe 89-9744-8P1 341,581
U-2CC Vestal 89-9728-8P1 31,898
U-2DD Home Improvement 89-9722-8P1 8,705
U-2EE Old Walter Industries 89-9745-8P1 404,937
U-2FF Walter Land 89-9736-8P1 2,177
Total $1,571,279
</TABLE>
Based upon such information, the Proponents estimate that
the aggregate Allowed Amount of all Class U-2 Claims will be
approximately $1,703,603 as of December 31, 1994.
As to any of the Debtors not listed in the table above,
the estimated amount of Claims in Class U-2 is zero.
Treatment of Class U-2 Claims is as follows:
The Class U-2 Claims are not impaired. Each Holder
of a Class U-2 Allowed Claim shall receive, in full satisfaction
thereof, Cash in an amount equal to the Allowed Amount of such
Claim (of which the Pre-Filing Date Unsecured Allowed
Amount, as defined below, shall not be in excess of
$1,000) within (a) sixty (60) days following the Effective Date,
unless such Holder and the Bondholders Committee shall have
agreed to a less favorable treatment of such Claim.
The "Allowed Amount" of a Convenience Class Claim is equal
to the sum of:
(1) the "Pre-Filing Date Unsecured Allowed Amount,"
which is (A) if the Holder of such Claim did not file a proof of
claim with respect thereto with the Court on or before the Bar
Date the amount of such Claim as listed in the Debtors'
Schedules as not disputed, contingent or unliquidated; or
(B) if the Holder of such Claim did file a proof of claim with
respect thereto with the Court on or before the Bar Date, the
amount of such Claim as agreed to by the Bondholders Committee
and the Holder of such Claim and approved by a Final Order
of the Court, or, in the absence of such an agreement, (x) the
amount stated in such proof of claim if no objection to such
proof of claim was interposed within the applicable period of
time fixed by the Code, the Bankruptcy Rules or the Court
or (y) the amount thereof as fixed by a Final Order of the Court,
if an objection to such proof of claim was interposed within the
applicable period of time fixed by the Code, the Bankruptcy
Rules or the Court, plus
(2) interest on the Pre-Filing Date Unsecured
Allowed Amount from the Filing Date to the Effective Date,
calculated at the rate (the "General Unsecured Interest Rate") of
(A) 6 1/2% per annum from the Filing Date until the Confirmation
Date and (B) thereafter, either (x) a variable rate equal
to the Chemical Bank Prime Rate as from time to time in effect,
not to exceed 10% per annum, or (y) a fixed rate equal to 6 1/2%
per annum. The option specified in clause (B) will be
selected by the Holders of Class U-3 Allowed Claims
(voting for this purpose as a single class for all Debtors), by
vote of a majority in number of such Holders who vote on the
Plan, and that selection will be binding on all Holders of
Convenience Class Allowed Claims.
Class U-3 Claims: Other Unsecured Claims.
The Class U-3 Claims consist of all Unsecured Claims
against each of the Debtors not otherwise classified in the
Creditors' Plan (to the extent not included in Class U-2
Convenience Class Claims), including: all contingent,
unliquidated and disputed litigation, product Claims, contract
disputes, etc. against any Debtor; claims of trade
Creditors for goods and services provided to any Debtor; Claims
by the 17% Indenture Trustee and the Senior Subordinated
Indenture Trustee against the Post-LBO Subordinated
Note Issuers (Classes U-3K, U-3Z and U-3AA) and Post-LBO
Subordinated Note Guarantors (Classes U-3A, U-3I and U-3EE) for
fees and expenses under the 17% Subordinated Note
Indenture and the Senior Subordinated Indenture, respectively,
arising prior to the Filing Date; Claims by the 10 7/8% Indenture
Trustee, the 13 1/8% Indenture Trustee and the 13 3/4% Indenture
Trustee against Old Walter Industries (Class U-3EE) for fees and
expenses under the 10 7/8% Subordinated Debenture Indenture, the
13 1/8% Subordinated Note Indenture and the 13 3/4% Subordinated
Debenture Indenture, respectively, arising prior to the Filing
Date; and Claims arising as a result of any Debtor's rejection of
an Executory Contract pursuant to Section 365(a) or 1123(b)(2) of
the Code.
The following table, which is taken from the Debtors'
Disclosure Statement, is a summary, by Debtor, of the estimated
amount of such Claims in Class U-3 plus post-Filing
Date interest at a rate of 6 1/2%, outstanding as of May 31,
1993, based on the Debtors' books and records, assuming that no
Class U-3 Creditor voluntarily reduces its Claim or Claims to
$1,000:
<TABLE>
<CAPTION>
Estimated
Case Amount of
Class Debtor Number Claims
<S> <C> <C> <C>
U-3A Hillsborough 89-9715-8P1 $ 2,425,438
U-3B Best 89-9740-8P1 14,634
U-3C Best (Miss.) 89-9737-8P1 0
U-3D Coast to Coast 89-9727-8P1 267,349
U-3E Computer Holdings 89-9724-8P1 0
U-3F Dixie 89-9741-8P1 867,859
U-3G Hamer Holdings 89-9735-8P1 0
U-3H Hamer Properties 89-9739-8P1 0
U-3I Homes Holdings 89-9742-8P1 0
U-3J Computer Services 89-9723-8P1 32,805
U-3K Jim Walter Homes 89-9746-8P1 6,869,296
U-3L JW Insurance 89-9731-8P1 5,474
U-3M Jim Walter Resources 89-9738-8P1 18,127,484
U-3N Window Components (Wisc.) 89-9716-8P1 117,028
U-3O JW Aluminum 89-9718-8P1 6,099,140
U-3P Resources Holdings 89-9719-8P1 0
U-3Q JWI Holdings 89-9721-8P1 0
U-3R JW Walter 89-9717-8P1 0
U-3S Window Components 89-9732-8P1 2,112,444
U-3T Land Holdings 89-9720-8P1 0
U-3U Mid-State Homes 89-9725-8P1 115,024
U-3V Mid-State Holdings 89-9726-8P1 0
U-3W Railroad Holdings 89-9733-8P1 0
U-3X Sloss 89-9743-8P1 5,339,023
U-3Y Southern Precision 89-9729-8P1 362,673
U-3Z United Land 89-9730-8P1 1,282
U-3AA U.S. Pipe 89-9744-8P1 29,275,546
U-3BB Pipe Realty 89-9734-8P1 0
U-3CC Vestal 89-9728-8P1 716,930
U-3DD Home Improvement 89-9722-8P1 30,394
U-3EE Old Walter Industries 89-9745-8P1 13,680,779
U-3FF Walter Land 89-9736-8P1 30,891
U-3GG JW Resources 90-11997-8P1 0
------------
Total $86,491,493
============
</TABLE>
Based upon such information, the Proponents estimate that
the aggregate Allowed Amount of all Class U-3 Claims will be
approximately $93,775,323 as of December 31, 1994.
Treatment of Class U-3 Claims is as follows:
The Class U-3 Claims are impaired. Each Holder of a
Class U-3 Allowed Claim shall receive, in full satisfaction
thereof, Cash in an amount equal to the Allowed
Amount of such Claim payable as follows:
a. 75% of the Allowed Amount on or promptly
after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less
favorable treatment of such Claim; and
b. the balance of the Allowed Amount of such
Class U-3 Claim together with interest accrued at the
General Unsecured Interest Rate from the Effective Date
to the date of actual payment on the portion of such
balance constituting the remaining 25% of the Pre-Filing
Date Unsecured Allowed Amount paid pursuant to clause (a)
above within six (6) months following the payment pursuant
to clause (a) above, unless such Holder and the
Bondholders Committee shall have agreed to a less
favorable treatment of such Claim.
The "Allowed Amount" of an Other Unsecured Claim is the
sum of:
(1) the Pre-Filing Date Unsecured Allowed Amount,
which is (A) if the Holder of such Claim did not file a proof
of claim with respect thereto with the Court on or before the
Bar Date the amount of such Claim as listed in the Debtors'
Schedules as not disputed, contingent or unliquidated; or
(B) if the Holder of such Claim did file a proof of claim
with respect thereto with the Court on or before the Bar
Date, the amount of such Claim as agreed to by the applicable
Debtor and the Holder of such Claim and approved by a Final
Order of the Court, or, in the absence of such an agreement,
(x) the amount stated in such proof of claim if no
objection to such proof of claim was interposed within the
applicable period of time fixed by the Code, the Bankruptcy
Rules or the Court or (y) the amount thereof as fixed by a
Final Order of the Court, if an objection to such proof of
claim was interposed within the applicable period of time
fixed by the Code, the Bankruptcy Rules or the Court, plus
(2) interest on the Pre-Filing Date Unsecured
Allowed Amount from the Filing Date to the Effective Date,
calculated at the rate (the General Unsecured Interest Rate)
of (A) 6 1/2% per annum from the Filing Date until the
Confirmation Date and (B) thereafter, either (x) a variable
rate equal to the Chemical Bank Prime Rate as from time to
time in effect, not to exceed 10% per annum, or (y) a
fixed rate equal to 6 1/2% per annum.
The option to designate the General Unsecured Interest
Rate for the period following the Confirmation Date as either a
fixed or a variable rate, as specified in clause (B) of the
preceding paragraph, will be made by the Holders of Allowed Class
U-3 Claims (voting for this purpose as a single class for all
Debtors) by a vote of a majority in number of such Holders who
vote on the Plan. The vote will be made on the Other Unsecured
Claim Ballot, in accordance with the instructions
provided thereon.
Class U-4 Claims: Senior Subordinated Note Claims.
The Class U-4 Claims are Claims against Jim Walter Homes
(Class U-4K), United Land (Class U-4Z) and U.S. Pipe (Class
U-4AA), as issuers (the "Senior Subordinated Note Issuers") and
Hillsborough (Class U-4A), Homes Holdings (Class U-4I) and Old
Walter Industries (Class U-4EE), as guarantors (the "Senior
Subordinated Note Guarantors") (collectively, the "Senior
Subordinated Note Debtors") for the issuance and guarantee of the
Senior Subordinated Extendible Reset Notes of Jim Walter Homes,
U.S. Pipe and United Land (the "Senior Subordinated Notes") in
accordance with the terms of the Senior Subordinated Note
Indenture, other than Claims for fees and expenses of the Senior
Subordinated Indenture Trustee.
Under the terms of the Senior Subordinated Note Indenture,
the Senior Subordinated Notes rank senior in right of payment to
the 17% Subordinated Notes (Class U-5 Claims) and certain other
indebtedness of the Debtors and are subordinated in right of
payment to all "senior indebtedness" (as defined therein),
including the Series B & C Senior Notes (Class S-8 Claims) and
indebtedness under the Revolving Credit Agreement (Class S-1
Claims) and the Working Capital Agreement (Class S-2 Claims).
The Senior Subordinated Notes are general unsecured obligations
of the Senior Subordinated Note Issuers, and are jointly and
severally guaranteed, on an unconditional but subordinated basis,
by the Senior Subordinated Note Guarantors.
The Senior Subordinated Note Debtors, based on their books
and records, estimate that $443,046,488 principal amount, plus
pre-Filing Date accrued interest of $36,214,435, or total Class
U-4 Claims of $479,260,923, were outstanding as of the Filing
Date on the Senior Subordinated Notes. See "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Post-Filing Date Interest Claims."
Treatment of Class U-4 Claims is as follows:
The Class U-4 Claims are impaired. Each Holder
of a Class U-4 Allowed Claim shall receive, in full
satisfaction thereof, the Applicable Consideration
allocated on account of such Claim, on or promptly
after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less
favorable treatment of such Claim.
"Applicable Consideration" means the consideration,
limited exclusively to Qualified Securities and New Common Stock,
available for distribution to Holders of Class U-4 Claims, Class
U-5 Claims and Class U-6 Claims, as described at "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of Combination of Qualified Securities and New
Common Stock to Holders of Subordinated Note Claims and to Veil
Piercing Claimants."
Holders of Class U-4, U-5 and U-6 Allowed Claims are
entitled to elect, pursuant to the Subordinated Note Claim
Election, the portion of their claim desired to be received in
the form of Qualified Securities. See "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of Combination of Qualified Securities and New
Common Stock to Holders of Subordinated Note Claims and to Veil
Piercing Claimants-- Method of Allocation of Qualified Securities
and New Common Stock."
The "Allowed Amount" of any Senior Subordinated Note Claim
(as defined in the Creditors' Plan) is an amount equal to (i) the
unpaid principal amount of such Senior Subordinated Note owing as
of the Filing Date together with interest thereon accrued and
unpaid as of the Filing Date, calculated at the contract rate
then in effect, and (ii) only to the fullest extent that the
payment thereof is permitted by law and to the extent that the
same may be satisfied after all distributions are made in full to
all other Holders of Allowed Claims, including the Allowed Claims
described in clause (i) above but excluding Claims in Classes I-1
through I-3, the Pro Rata share of the aggregate interest on the
aggregate Allowed Claims described in clause (i) above, from the
Filing Date to the Effective Date calculated at the applicable
non-default contract rate(s), or in the absence of a contract
rate, at 9% per annum, or such other interest rate as the Court
shall determine; it being recognized that under the Creditors'
Plan, based upon the settlements contained in the Creditors' Plan
and the Negotiated Enterprise Value, it is anticipated that the
amount of interest under clause (ii) will be zero.
Upon receipt of the distribution specified above, all
Holders of Class U-4 Claims shall be deemed to have waived any
and all subordination rights which they may otherwise have with
respect to the distributions to be made pursuant to the
Creditors' Plan to Holders of other Subordinated Note Claims and
shall be permanently enjoined from enforcing, or attempting to
enforce, any such subordination rights. Accordingly,
distributions to be made pursuant to the Creditors' Plan on
account of any other Subordinated Note Claims, shall not be
subject to levy, garnishment, attachment or other legal process
by any Holder of a Class U-4 Claim by reason of any subordination
rights.
Class U-5 Claims: 17% Subordinated Note Claims.
The Class U-5 Claims are Claims against Jim Walter Homes
(Class U-5K), United Land (Class U-5Z) and U.S. Pipe (Class
U-5AA) (the "17% Subordinated Note Issuers") and Hillsborough
(Class U-5A), Homes Holdings (Class U-5I) and Old Walter
Industries (Class U-5EE) (the "17% Subordinated Note Guarantors")
(collectively, the "17% Subordinated Note Debtors") for the
issuance and guarantee of the Subordinated Notes due 1996 of Jim
Walter Homes, U.S. Pipe and United Land (the "17% Subordinated
Notes") in accordance with the terms of the 17% Subordinated Note
Indenture, other than Claims for fees and expenses of the 17%
Indenture Trustee.
Under the terms of the 17% Subordinated Note Indenture,
the 17% Subordinated Notes are subordinated in right of payment
to all "senior indebtedness" (as defined therein), including the
Series B & C Senior Notes (Class S-6 Claims), the Senior
Subordinated Notes (Class U-4 Claims) and indebtedness under the
Revolving Credit Agreement (Class S-1 Claims) and the Working
Capital Agreement (Class S-2 Claims). The 17% Subordinated Notes
are general unsecured obligations of the 17% Subordinated Note
Issuers, and are jointly and severally guaranteed, on an
unconditional but subordinated basis, by the 17% Subordinated
Note Guarantors.
The 17% Subordinated Note Debtors, based on their books
and records, estimate that $350,000,000 principal amount, plus
pre-Filing Date accrued interest of $29,254,167, or total Class
U-5 Claims of $379,254,167, were outstanding as of the Filing
Date on the 17% Subordinated Notes. See "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Post-Filing Date Interest Claims."
Treatment of Class U-5 Claims is as follows:
The Class U-5 Claims are impaired. Each Holder of
a Class U-5 Allowed Claim shall receive, in full
satisfaction thereof, the Applicable Consideration
allocated on account of such Claim, on or promptly
after the Effective Date, unless such Holder and
the Bondholders Committee shall have agreed to a less
favorable treatment of such Claim.
"Applicable Consideration" means the consideration,
limited exclusively to Qualified Securities and New Common Stock,
available for distribution to Holders of Class U-4 Claims, Class
U-5 Claims and Class U-6 Claims, as described at "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of Combination of Qualified Securities and New
Common Stock to Holders of Subordinated Note Claims and to Veil
Piercing Claimants."
Holders of Class U-4, U-5 and U-6 Allowed Claims are
entitled to elect, pursuant to the Subordinated Note Claim
Election, the portion of their claim desired to be received in
the form of Qualified Securities. See "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of Combination of Qualified Securities and New
Common Stock to Holders of Subordinated Note Claims and to Veil
Piercing Claimants-- Method of Allocation of Qualified Securities
and New Common Stock."
The "Allowed Amount" of any 17% Subordinated Note Claim
(as defined in the Creditors' Plan) is an amount equal to (i) the
unpaid principal amount of such 17% Subordinated Note owing as of
the Filing Date together with interest thereon accrued and unpaid
as of the Filing Date, calculated at the contract rate then in
effect, and (ii) only to the fullest extent that the payment
thereof is permitted by law and to the extent that the same may
be satisfied after all distributions are made in full to all
other Holders of Allowed Claims, including the Allowed Claims
described in clause (i) above but excluding Claims in Classes I-1
through I-3, the Pro Rata share of the aggregate interest on the
aggregate Allowed Claims described in clause (i) above, from the
Filing Date to the Effective Date calculated at the applicable
non-default contract rate(s), or in the absence of a contract
rate, at 9% per annum, or such other interest rate as the Court
shall determine; it being recognized that under the Creditors'
Plan, based upon the settlements contained in the Creditors' Plan
and the Negotiated Enterprise Value, it is anticipated that the
amount of interest under clause (ii) will be zero.
Upon the receipt of the distribution specified above, all
Holders of Class U-5 Claims shall be deemed to have waived any
and all subordination rights which they may otherwise have with
respect to the distributions to be made pursuant to the
Creditors' Plan to Holders of other Subordinated Note Claims and
shall be permanently enjoined from enforcing, or attempting to
enforce, any such subordination rights. Accordingly,
distributions to be made pursuant to the Creditors' Plan on
account of any other Subordinated Note Claims shall not be
subject to levy, garnishment, attachment or other legal process
by any Holder of a Class U-5 Claim by reason of any subordination
rights.
Class U-6 Claims: Pre-LBO Debenture Claims.
The Class U-6 Claims are Claims against Old Walter
Industries (Class U-6EE) arising from (i) the assumption, as of
January 7, 1988, of the obligations under securities issued by
Original Jim Walter in accordance with the 10 7/8% Subordinated
Debenture Indenture, other than Claims for fees and expenses of
the 10 7/8% Indenture Trustee; (ii) the assumption, as of January
7, 1988, of the obligations under securities issued by Original
Jim Walter in accordance with the 13 1/8% Subordinated Note
Indenture other than Claims for fees and expenses of the 13 1/8%
Indenture Trustee; and (iii) the assumption, as of January 7,
1988, of the obligations under securities issued by Original Jim
Walter in accordance with the 13 3/4% Subordinated Debenture
Indenture, other than Claims for fees and expenses of the 13 3/4%
Indenture Trustee.
A. 10 7/8% Subordinated Debentures
Under the terms of the 10 7/8% Subordinated Debenture
Indenture, Original Jim Walter was authorized to issue
$90,000,000 principal amount of 10 7/8% Subordinated Debentures
due May 1, 2008 (the "10 7/8% Subordinated Debentures").
Under the terms of the 10 7/8% Subordinated Debenture
Indenture, the 10 7/8% Subordinated Debentures are subordinated
in right of payment to all "senior indebtedness" (as defined
therein), including indebtedness under the Revolving Credit
Agreement (Class S-1 Claims) and the Working Capital Agreement
(Class S-2 Claims), the Series B & C Senior Notes (Class S-6
Claims), the Senior Subordinated Notes (Class U-4 Claims) and the
17% Subordinated Notes (Class U-5 Claims), but are pari passu in
right of payment to the 13 1/8% Subordinated Notes (as defined
below) and the 13% Subordinated Debentures (as defined below).
The Ad Hoc Committee of Pre-LBO Bondholders believes, as a result
of certain LBO-Related Issues, that the 10 7/8% Subordinated
Debentures are not subordinated to said "senior indebtedness."
Other creditor constituencies disagree with this view. The
Creditors' Plan incorporates a full and final settlement of these
LBO- Related Issues.
According to the Debtors' Disclosure Statement, Old Walter
Industries, based on its books and records, estimates that
$90,000,000 principal amount, less unamortized original issue
discount of $10,372,071 as of the Filing Date, plus pre-Filing
Date accrued interest of $1,549,688 were outstanding as of the
Filing Date on the 10 7/8% Subordinated Debentures.
B. 13 1/8% Subordinated Notes
Under the terms of the 13 1/8% Subordinated Note
Indenture, Original Jim Walter was authorized to issue
$50,000,000 principal amount of 13 1/8% Subordinated Notes due
1993 (the "13 1/8% Subordinated Notes").
Under the terms of the 13 1/8% Subordinated Note
Indenture, the 13 1/8% Subordinated Notes are subordinated in
right of payment to all "senior indebtedness" (as defined
therein), including indebtedness under the Revolving Credit
Agreement (Class S-1 Claims) and the Working Capital Agreement
(Class S-2 Claims), the Series B & C Senior Notes (Class S-6
Claims), the Senior Subordinated Notes (Class U-4 Claims) and the
17% Subordinated Notes (Class U-5 Claims), but are pari passu in
right of payment to the 10 7/8% Subordinated Debentures and to
the 13 3/4% Subordinated Debentures. The Ad Hoc Committee of
Pre-LBO Bondholders believes, as a result of certain LBO-Related
Issues, that the 13 1/8% Subordinated Notes are not subordinated
to said "senior indebtedness." Other creditor constituencies
disagree with this view. The Creditors' Plan incorporates a full
and final settlement of these LBO-Related Issues.
According to the Debtors' Disclosure Statement, Old Walter
Industries, based on its books and records, estimates that
$50,000,000 principal amount as of the Filing Date plus
pre-Filing Date accrued interest of $2,679,687 were outstanding
as of the Filing Date on the 13 1/8% Subordinated Notes.
C. 13 3/4% Subordinated Debentures
Under the terms of the 13 3/4% Subordinated Debenture
Indenture, Original Jim Walter was authorized to issue
$100,000,000 principal amount of 13 3/4% Subordinated Debentures
due 2003 (the "13 3/4% Subordinated Debentures").
Under the terms of the 13 3/4% Subordinated Debenture
Indenture, the 13 3/4% Subordinated Debentures are subordinated
in right of payment to all "senior indebtedness" (as defined
therein), including indebtedness under the Revolving Credit
Agreement (Class S-1 Claims) and the Working Capital Agreement
(Class S-2 Claims), the Series B & C Senior Notes (Class S-6
Claims), the Senior Subordinated Notes (Class U-4 Claims) and the
17% Subordinated Notes (Class U-5 Claims), but are pari passu in
right of payment to the 10 7/8% Subordinated Debentures and the
13 1/8% Subordinated Notes. The Ad Hoc Committee of Pre-LBO
Bondholders believes, as a result of certain LBO-Related Issues,
that the 13 3/4% Subordinated Debentures are not subordinated to
said "senior indebtedness." Other creditor constituencies
disagree with this view. The Creditors' Plan incorporates a full
and final settlement of these LBO-Related Issues.
According to the Debtors' Disclosure Statement, Old Walter
Industries, based on its books and records, estimates that
$100,000,000 principal amount plus pre-Filing Date accrued
interest of $5,614,583 were outstanding as of the Filing Date on
the 13 3/4% Subordinated Debentures.
D. Aggregate Amount of Class U-6 Claims
Based upon the foregoing information, the Proponents
estimate that the aggregate Allowed Amount of all Class U-6
Claims was $239,471,887 as of the Filing Date.
Treatment of Class U-6 Claims is as follows:
The Class U-6 Claims are impaired. Each Holder of
a Class U-6 Allowed Claim shall receive, in full
satisfaction thereof, the Applicable Consideration
allocated on account of such Claim, on or promptly
after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less
favorable treatment of such Claim. The terms "Applicable
Consideration" and "Qualified Securities" are defined
above in the description of Class U-4 Claims.
The "Allowed Amount" of any Pre-LBO Debenture Claim (as
defined in the Creditors' Plan) is an amount equal to (i) the
unpaid principal amount of such Pre-LBO Debenture owing as of the
Filing Date (less, in the case of any 10 7/8% Subordinated
Debenture Claims, the pre-filing Date unamortized discount
associated with such 10 7/8% Subordinated Debenture) and (ii)
only to the fullest extent that the payment thereof is permitted
by law and to the extent that the same may be satisfied after all
distributions are made in full to all other Holders of Allowed
Claims, including the Allowed Claims described in clause (i)
above but excluding Claims in Classes I-1 through I-3, the Pro
Rata share of the aggregate interest on the aggregate Allowed
Claims described in clause (i) above, from the Filing Date to the
Effective Date calculated at the applicable non-default contract
rate(s), or in the absence of a contract rate, at 9% per annum or
such other interest rate as the Court shall determine; it being
recognized that under the Creditors' Plan, based upon the
settlements contained in the Creditors' Plan and the Negotiated
Enterprise Value, the amount of interest under clause (ii) will
be zero.
"Applicable Consideration" means the consideration,
limited exclusively to Qualified Securities and New Common Stock,
available for distribution to Holders of Class U-4 Claims, Class
U-5 Claims and Class U-6 Claims, as described at "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of Combination of Qualified Securities and New
Common Stock to Holders of Subordinated Note Claims and to Veil
Piercing Claimants."
Holders of Class U-4, U-5 and U-6 Allowed Claims are
entitled to elect, pursuant to the Subordinated Note Claim
Election, the portion of their claim desired to be received in
the form of Qualified Securities. See "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of Combination of Qualified Securities and New
Common Stock to Holders of Subordinated Note Claims and to Veil
Piercing Claimants-- Method of Allocation of Qualified Securities
and New Common Stock."
Class U-7 Claims: Veil Piercing Claims.
Class U-7 Claims consist of the rights of all Persons who
have asserted, or could or may assert any claim based upon or
relating to any of the Veil Piercing-Related Issues (defined
below). The sole Holder of the U-7 Claims may be Celotex. See
"OVERVIEW OF THE CREDITORS' PLAN--Special Features of the
Creditors' Plan--Settlement of Veil Piercing/Fraudulent
Conveyance Issues and Other Issues."
Treatment of Class U-7 Claims is as follows:
Class U-7 Claims are not impaired. On or promptly
after the Effective Date, the Celotex Settlement Fund
Recipient shall receive, in full satisfaction of all
Class U-7 Claims, consideration described below equal to
the aggregate Allowed Amount of the Class U-7 Claims, of
which (a) the Veil Piercing Claims Amount shall
be satisfied by a combination of Qualified Securities and
Class B Common Stock, in the proportion described in the
following sentence, together having an aggregate
principal amount (in the case of Qualified Securities) and
New Common Stock Value Per Share (in the case of Class B
Common Stock) equal to the Veil Piercing Claims Amount;
and (b) if the Amended and Restated Veil Piercing
Settlement Agreement becomes effective by its terms, 100%
of the Senior Claim Differential, or if the Amended and
Restated Veil Piercing Settlement Agreement does not
become effective by its terms, the sum of (i) $75,000,000
and (ii) 100% of the Senior Claim Differential, in each
case shall be satisfied by shares of Class B Common Stock
having an aggregate New Common Stock Value Per Share equal
to such amount (and, if the Amended and Restated Veil
Piercing Settlement Agreement does not become effective by
its terms, all of which shares in this clause (b), except
for an amount of shares having an aggregate New Common
Stock Value Per Share equal to 50% of the Senior Claim
Differential, are subject to assignment to Settling
Equityholders as required under the Veil Piercing
Settlement Agreement), on or promptly after the Effective
Date, unless the Bondholders Committee and the Celotex
Settlement Fund Recipient, consistent with the terms of
the Veil Piercing Settlement Agreement, shall have agreed
to a less favorable treatment of such Claims. The
aggregate principal amount of Qualified Securities used to
satisfy a portion of the Veil Piercing Claims Amount shall
bear the same ratio to the aggregate principal amount of
Qualified Securities used to satisfy a portion of the
Subordinated Note Claims as $487.5 million (or, if the
amended and Restated Veil Piercing Settlement Agreement
becomes effective by its terms, $450 million) bears
to $1,098 million; provided, that if the Amended and
Restated Veil Piercing Settlement Agreement does not
become effective by its terms, the $487.5 million
component of such ratio shall be reduced (but to no lower
than $450 million) one dollar for every two dollars in
value of Class B Common Stock assigned by the Celotex
Settlement Fund Recipient to Settling Equityholders from
the $75,000,000 of Class B Common Stock identified in
Section 1.20(o)(B)(i) of the Creditors' Plan (for example,
if all Holders of Old Common Stock Interests become
Settling Equityholders, the ratio will be $450 million to
$1,098 million); and the excess of the Veil Piercing
Claims Amount over the portion thereof satisfied by
Qualified Securities shall be satisfied by that number of
shares of Class B Common Stock having an aggregate New
Common Stock Value Per Share equal to such excess,
provided, however, that in the event that any Holder of an
Allowed Old Common Stock Interest exercises an Equity Call
Option, (i) the Celotex Settlement Fund Recipient
shall receive Cash in an amount equal to the aggregate
Cash proceeds received from the exercise of Equity Call
Options, multiplied by a fraction, the numerator of
which is the number of shares of New Common Stock that
would otherwise be issued to the Celotex Settlement Fund
Recipient under Section 3.22 of the Creditors' Plan,
and the denominator of which is the number of shares of
New Common Stock to be issued under the Creditors' Plan to
Classes S-1, S-2, S-6 and U-4 through U-7; and
(ii) the number of shares of New Common Stock that the
Celotex Settlement Fund Recipient shall receive under the
Creditors' Plan shall be reduced by the amount of Cash
received under clause (i) of this proviso divided
by the New Common Stock Value Per Share.
The Veil Piercing Settlement Agreement and the Charter
provide that all shares of Class B Common Stock issued to the
Celotex Settlement Fund Recipient under the Creditors' Plan (and
not assigned to Settling Equityholders under the Veil Piercing
Settlement Agreement) will be required to be voted by the Celotex
Settlement Fund Recipient (or by the beneficiaries of the Celotex
Settlement Fund Recipient) in the same proportion as the votes
are cast by all other shares of New Common Stock on all matters
and for all purposes.
See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of
the Creditors' Plan-- Distribution of Combination of Qualified
Securities and New Common Stock to Holders of Subordinated Note
Claims and to Veil Piercing Claimants." For a discussion of the
conditions precedent to effectiveness of the Amended and Restated
Veil Piercing Settlement Agreement, see "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors' Plan--
Settlement of Veil Piercing/Fraudulent Conveyance Issues and
Other Issues--Terms of the Veil Piercing Settlement Agreement."
The "Allowed Amount" of all of the Allowed Veil Piercing
Claims in the aggregate, is the sum of (a) the Veil Piercing
Claims Amount (as defined in the Veil Piercing Settlement
Agreement) and described herein in Section II.B.2(b), and (b) the
sum of (i) $75,000,000 (but only if the Amended and Restated Veil
Piercing Settlement Agreement does not become effective by its
terms) and (ii) the Senior Claim Differential, in each case in
the form of consideration set forth in this section "Class U-7
Claims: Veil Piercing Claims."
"Veil Piercing-Related Issues" means the collective
reference to all theories or bases of recovery recognizable at
law, in equity or in admiralty under the laws of any jurisdiction
that are held or asserted by, or that may be held or asserted by,
Celotex or any Holder of a Claim in Class U-7 or any creditor or
interest holder in Celotex directly or indirectly based upon,
arising out of or in connection with asbestos, any product
manufactured, sold or distributed by Celotex, any other liability
or obligation of any nature of Celotex, or any act or failure to
act by Celotex or any officer, director, employee, agent or other
representative of Celotex, whether based upon alter ego, agency,
alternate entity, instrumentality, successor liability,
conspiracy, indemnification, contribution, any theories of
piercing the corporate veil of any Debtor or its predecessor
and/or any of its respective present or former parents,
subsidiaries, or Affiliates, or the transfer (fraudulent or
otherwise) of any assets or property to or by any Debtor (or
other non-Debtor that had at any time been a parent, subsidiary
or Affiliate of any Debtor or its predecessor), whether in
connection with any of the transactions constituting or relating
to the financing or the acquisition of any of the Debtors or any
of their respective predecessors, parents, subsidiaries or
Affiliates by the current holders of Old Common Stock, the
divestiture by Celotex of any of its assets or property at any
time, or in connection with any other transactions, events or
circumstances, or otherwise; provided, however, that the Veil
Piercing-Related Issues shall not include any of the LBO-Related
Issues.
Class U-7 Claims are unimpaired because they are allowed
and paid as specifically compromised, settled and treated under
the Veil Piercing Settlement Agreement and the Plan. In re
Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 290 (2d Cir.
1992).<F13>
5. Intercompany Claims
Class I-1 Claims: Intercompany IRB Claims.
NOTE: All information below relating to Class I-1 Claims
is taken from the Debtors' Disclosure Statement.
The Class I-1 Claims are Secured Claims by the IDB of
Birmingham and AmSouth Bank N.A., as trustee (the "Intercompany
IRB Trustee") against Sloss (Class I-1X) in accordance with an
indenture dated as of May 1, 1983 among the IDB of Birmingham,
Sloss and the Intercompany IRB Trustee (the "Intercompany IRB
Indenture")--Under the terms of the Intercompany IRB Indenture,
the IDB of Birmingham issued $5,000,000 principal amount of
Series A Industrial Revenue Bonds (the "Intercompany IRB") to
provide funds to Sloss for the purpose of financing the cost of
renovating and improving existing plant facilities. The
Intercompany IRB was purchased by Original Jim Walter Corporation
and transferred to Old Walter Industries on January 7, 1988. In
connection with the issuance of the Intercompany IRB, the IDB of
Birmingham leased such renovations and improvements of the
existing facilities to Sloss under a lease agreement, dated as of
May 1, 1983. Sloss' obligations under the Intercompany IRB
Indenture are secured by such renovations and improvements of the
existing facilities.
Under the terms of the Intercompany IRB Indenture, the
Intercompany IRB was bearing interest at 12% per annum, payable
semi-annually, on January 1 and July 1. Redemption and payment
of the Intercompany IRB was to begin on January 1, 1994, and on
each January 1 thereafter, until and including January 1, 2002,
in a principal amount of $500,000 annually. Sloss, based on its
books and records, estimates that a total of $7,350,000,
consisting of $5,000,000 principal amount, plus pre- and
post-Filing Date accrued interest of $300,000 and $2,050,000,
respectively, is outstanding as of May 31, 1993 together with
reasonable fees and expenses of the Intercompany IRB Trustee.
Treatment of Class I-1 Claims is as follows:
The Class I-1 Claims are not impaired. The Holder
of the Class I-1 Allowed Claim shall receive Cash in an
amount equal to the Allowed Amount of the Class I-1
Claim, on or promptly after the Effective Date, unless
the Holder and the Bondholders Committee shall have
agreed to a less favorable treatment of such Claim.
- ----------------
<F13> The Proponents believe that if the Class U-7 Claims
nevertheless were found to be impaired, acceptance could
be obtained solely from The Celotex Corporation, Kalb,
Voorhis & Co. v. American Financial Corp., 8 F.3d 130
(2d Cir. 1993), and/or any other appropriate
representative of the Holder(s) of such Claims. In re
Charter Co., 876 F.2d 866, 876 (11th Cir. 1989).
<PAGE>
The "Allowed Amount" of the Intercompany IRB Claim (as
defined in the Creditors' Plan) is an amount equal to the sum of
the principal payments under the Intercompany IRB due and owing
as of the Effective Date together with interest payments
thereunder accrued and unpaid as of the Effective Date,
calculated at the non-default contract rate, which interest
payments and principal payments became due either prior to or
subsequent to the Filing Date and prior to the Effective Date in
accordance with the Intercompany IRB Indenture (without giving
effect to the acceleration, if any, of the obligations underlying
the Intercompany IRB). Of such amounts, all of the interest plus
$1,000,000 of the principal will be payable upon an assumed May
31, 1995 Effective Date to cure existing defaults together with
reasonable fees and expenses of the Intercompany IRB Trustee
under the Intercompany IRB Indenture.
Upon payment in Cash of the Allowed Amount of the Class
I-1 Claim, Sloss shall assume all unsatisfied obligations with
respect to such Class I-1 Claim in accordance with its original
contractual terms. Upon the making of such payment, and such
assumption, any acceleration of any obligation and/or instrument
or default in connection with such Class I-1 Claim shall be
rescinded, waived or cured and of no force or effect and the
terms of such obligations and/or instrument shall be reinstated
as if no such acceleration or default had occurred.
Class I-2 Claims: Pre-Filing Date Intercompany Notes
Payable Claims.
NOTE: All information below relating to Class I-2 Claims
is taken from the Debtors' Disclosure Statement.
The Class I-2 Claims are Unsecured Claims against
Hillsborough (Class I-2A), Best (Class I-2B), Best (Miss.) (Class
I-2C), Coast to Coast (Class I-2D), Computer Holdings (Class
I-2E), Dixie (Class I-2F), Hamer Holdings (Class I-2G), Hamer
Properties (Class I-2H), Home Holdings (Class I-2I), Computer
Services (Class I-2J), Jim Walter Homes (Class I-2K), Jim Walter
Resources (Class I-2M), Window Components (Wisc.) (Class I-2N),
JW Aluminum (Class I-2O), Resources Holdings (Class I-2P), JWI
Holdings (Class I-2Q), JW Walter (Class I-2R), Window Components
(Class I-2S), Land Holdings (Class I-2T), Mid-State Homes (Class
I-2U), Mid-State Holdings (Class I-2V), Railroad Holdings (Class
I-2W), Sloss (Class I-2X), Southern Precision (Class I-2Y),
United Land (Class I-2Z), U.S. Pipe (Class I-2AA), Pipe Realty
(Class I-2BB), Vestal (Class I-2CC), Home Improvement (Class
I-2DD), Old Walter Industries (Class I-2EE) and Walter Land
(Class I-2FF) arising out of allocation of the Tender Offer
Loans, intercompany payables generated by the Debtors' Cash
management system and from purchases of goods and services from,
or for the benefit of, other Debtors prior to the Filing Date.
The following is a summary, by Debtor, of the estimated
amount of such Claims in Class I-2 that will be outstanding as of
December 31, 1994, based on their respective books and records:
<TABLE>
<CAPTION>
Estimated
Case Amount of
Class Debtor Number Claims
- ------ ---------------- ------------ --------------
<S> <C> <C> <C>
I-2A Hillsborough 89-9715-8P1 $ 100,653,408
I-2B Best 89-9740-8P1 1,017,635
I-2C Best (Miss.) 89-9737-8P1 63,527
I-2D Coast to Coast 89-9727-8P1 135,072
I-2E Computer Holdings 89-9724-8P1 5,516
I-2F Dixie 89-9741-8P1 232,281
I-2G Hamer Holdings 89-9735-8P1 5,516
I-2H Hamer Properties 89-9739-8P1 204,027
I-2I Homes Holdings 89-9742-8P1 6,217
I-2J Computer Services 89-9723-8P1 1,163,904
I-2K Jim Walter Homes 89-9746-8P1 194,400,852
I-2M Jim Walter Resources 89-9738-8P1 127,198,927
I-2N Window Components (Wisc.) 89-9716-8P1 1,165,372
I-2O JW Aluminum 89-9718-8P1 24,464,109
I-2P Resources Holdings 89-9719-8P1 22,706
I-2Q JWI Holdings 89-9721-8P1 677,064
I-2R JW Walter 89-9717-8P1 197,917
I-2S Window Components 89-9732-8P1 49,711,982
I-2T Land Holdings 89-9720-8P1 5,516
I-2U Mid-State Homes 89-9725-8P1 106,060,671
I-2V Mid-State Holdings 89-9726-8P1 6,217
I-2W Railroad Holdings 89-9733-8P1 5,516
I-2X Sloss 89-9743-8P1 27,768,432
I-2Y Southern Precision 89-9729-8P1 21,894,856
I-2Z United Land 89-9730-8P1 63,636,214
I-2AA U.S. Pipe 89-9744-8P1 35,357,321
I-2BB Pipe Realty 89-9734-8P1 125,678
I-2CC Vestal 89-9728-8P1 12,053,280
I-2DD Home Improvement 89-9722-8P1 1,923,013
I-2EE Old Walter Industries 89-9745-8P1 466,913,340
I-2FF Walter Land 89-9736-8P1 11,555,133
--------------
Total $1,248,631,219
==============
</TABLE>
Treatment of Class I-2 Claims is as follows:
The Class I-2 Claims are not impaired. Pre-Filing
Date Intercompany Notes Payable Claims (as defined in the
Creditors' Plan) will be reinstated on the books and
records of the respective Debtors.
There will be no distributions made under the Creditors'
Plan with respect to any Pre-Filing Date Intercompany Notes
Payable Claims. However, Pre-Filing Date Intercompany Notes
Payable Claims may be paid after the Effective Date in the
ordinary course of business.
Class I-3 Claims: Post-Filing Date Intercompany Notes
Payable Claims.
NOTE: All information below relating to Class I-3 Claims
is taken from the Debtors' Disclosure Statement.
The Class I-3 Claims are Unsecured Claims against any
Debtor arising out of intercompany payables generated by the
Debtors' Cash management system, from purchases of goods and
services from, or for the benefit of, other Debtors subsequent to
the Filing Date and from completion of the Mirror Liquidation
Plan.
The following is a summary, by Debtor, of the estimated
amount of such Claims in Class I-3 by Debtor outstanding as of
May 31, 1993, based on their books and records, which amounts
will change in the ordinary course of business from June 1, 1993
to December 31, 1994:
<TABLE>
<CAPTION>
Estimated
Case Amount of
Class Debtor Number Claims
- ------ ---------------- ------------ --------------
<S> <C> <C> <C>
I-3A Hillsborough 89-9715-8P1 $ 130,988,476
I-3B Best 89-9740-8P1 2,388,916
I-3C Best (Miss.) 89-9737-8P1 24,495
I-3D Coast to Coast 89-9727-8P1 72,210
I-3E Computer Holdings 89-9724-8P1 1,638
I-3F Dixie 89-9741-8P1 219,756
I-3G Hamer Holdings 89-9735-8P1 1,638
I-3H Hamer Properties 89-9739-8P1 4,586
I-3K Jim Walter Homes 89-9746-8P1 391,970,597
I-3M Jim Walter Resources 89-9738-8P1 7,838,346
I-3N Window Components (Wisc.) 89-9716-8P1 1,734,460
I-3O JW Aluminum 89-9718-8P1 7,066,237
I-3P Resources Holdings 89-9719-8P1 822
I-3S Window Components 89-9732-8P1 14,399,590
I-3T Land Holdings 89-9720-8P1 1,908
I-3U Mid-State Homes 89-9725-8P1 744,943,798
I-3W Railroad Holdings 89-9733-8P1 998
I-3X Sloss 89-9743-8P1 8,398,743
I-3Y Southern Precision 89-9729-8P1 12,759,841
I-3Z United Land 89-9730-8P1 17,424,095
I-3AA U.S. Pipe 89-9744-891 175,967,608
I-3BB Pipe Realty 89-9734-8P1 24,027
I-3CC Vestal 89-9728-8P1 3,385,098
I-3DD Home Improvement 89-9722-8P1 2,852,227
I-3EE Old Walter Industries 89-9745-8P1 481,734,307
I-3FF Walter Land 89-9736-8P1 1,798,997
--------------
Total $2,006,003,414
==============
</TABLE>
As to any of the Debtors not listed in the table above,
the estimated amount of Claims in Class I-3 as of May 31, 1993 is
zero.
Treatment of Class I-3 Claims is as follows:
Post-Filing Date Intercompany Notes Payable Claims
(as defined in the Creditors' Plan) will be reinstated on
the books and records of the respective Debtors. There
will be no distributions made under the Creditors' Plan
with respect to any Post-Filing Date Intercompany Notes
Payable Claims. However, Post-Filing Date Intercompany
Notes Payable Claims may be paid after the Effective
Date in the ordinary course of business.
6. Equity Interests
Class E-1 Interests: Old Common Stock Interests in
Hillsborough.
The Class E-1 Interests consist of the rights of Holders
of common stock, par value $.01 per share, of Hillsborough (now
known as Walter Industries) (the "Old Common Stock").
Hillsborough was authorized to issue 50,000,000 shares of Common
Stock. Under the terms of the amended Charter, as of the
Effective Date, the number of authorized shares of New Common
Stock will be increased to 200,000,000 shares. According to the
Debtors' Disclosure Statement: (i) as of May 31, 1993, there were
issued and outstanding 31,120,773 shares of Old Common Stock;
(ii) KKR Associates, a New York limited partnership ("KKR
Associates"), is the sole general partner of three partnerships
which own a total of 28,500,000 shares of outstanding Old Common
Stock; and (iii) of the remaining shares of Old Common Stock,
487,500 shares are owned by directors and officers of the Debtors
who are not general or limited partners of KKR or KKR Associates.
See "POST-CONSUMMATION- -Security Ownership of Directors,
Officers and Certain Beneficial Owners--Ownership of Common
Stock."
Treatment of Class E-1 Interests is as follows:
The Class E-1 Interests are impaired. All shares of
Old Common Stock shall be cancelled, annulled and
extinguished as of the Effective Date. Each Holder of
a Class E-1 Allowed Interest shall receive, in full
satisfaction thereof, (i) with respect to each Person that
was a Holder of a Class E-1 Allowed Interest on the
date on which the order approving the Disclosure Statement
is entered and that did not transfer such Interest on or
prior to the Effective Date (other than to an
Affiliate of such Person, which Affiliate shall have the
right to exercise the Equity Call Option), a
nontransferable Equity Call Option, entitling such Person
to purchase all, but not part, of such Holder's Pro Rata
share of all of the shares of New Common Stock (each of
which shall be shares of Class B Common Stock) that
would otherwise be issued on the Effective Date to Classes
S-1, S-2, S-6 and U-4 through U-7, at a Cash exercise
price per share equal to the New Common Stock Value
Per Share (provided, that, in calculating the New Common
Stock Value Per Share for this purpose, the New Common
Stock Value shall be calculated using a going concern
enterprise value equal to the greater of the Negotiated
Enterprise Value and if the Court finds that the going
concern enterprise value of the Debtors is equal to an
amount other than $2,525,000,000, such other amount), such
right to be exercisable by properly completing and
returning the Equity Call Option Election Form in
accordance with the Election Procedure, and by paying the
Cash exercise price in full on the Effective Date; and
(ii) in the event that there are shares of New Common Stock
remaining after giving effect to all distributions to be
made to Creditors under the Creditors' Plan (it being
understood that no Creditor shall receive on account of an
Allowed Claim consideration having a value in excess of
that permitted to be paid on account of such Allowed Claim
under the Code), such Holder's Pro Rata share of such
shares, each of which shall be shares of Class B
Common Stock, on or promptly after the Effective Date,
unless such Holder and the Bondholders Committee shall
have agreed to a less favorable treatment of such
Interest.
See "OVERVIEW OF THE CREDITORS' PLAN -- Special Features
of the Creditors' Plan -- Settlement of Veil Piercing/Fraudulent
Conveyance Issues and Other Issues -- Terms of the Veil Piercing
Settlement Agreement" for a description of consideration and
releases that are afforded to Settling Equityholders.
See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of
the Creditors' Plan-- Distribution of Combination of Qualified
Securities and New Common Stock to Holders of Subordinated Note
Claims and to Veil Piercing Claimants."
Under certain circumstances, Persons exercising an Equity
Call Option may, as a condition to such exercise, be required to
make certain customary investment representations.
Class E-2 Interests: Stock Acquisition Rights in
Hillsborough.
The Class E-2 Interests consist of the rights of Holders
of "Stock Acquisition Rights" to purchase Old Common Stock or
other equity or similar interest in Hillsborough. Class E-2
Interests include options to purchase Old Common Stock under the
Stock Option Plan for Key Employees of Walter Industries and its
Subsidiaries, approved in October 1987 and all management Common
Stock Subscription Rights (as defined in Section III.B.4(b)).
Treatment of Class E-2 Interests is as follows:
Class E-2 Interests are impaired. All Stock
Acquisition Rights in Hillsborough shall be cancelled,
annulled and extinguished as of the Effective
Date. Holders of Class E-2 Interests shall receive or
retain no property under the Creditors' Plan on account of
their Class E-2 Interests.
Class SE-1 Interests: Subsidiary Common Stock Interests in
Debtors other than Hillsborough.
NOTE: All information below relating to Class SE-1
Interests is taken from the Debtors' Disclosure Statement.
The Class SE-1 Interests consists of the rights of Holders
of common stock of each of the Debtors other than Hillsborough
(now known as Walter Industries) issued and outstanding as of the
Filing Date (the "Subsidiary Common Stock").
As of the Filing Date, Hillsborough owned the capital
stock of seventeen of the Debtors (Computer Holdings, Hamer
Holdings, JW Aluminum, JW Resources, Resources Holdings, U.S.
Pipe, Sloss, Homes Holdings, Southern Precision, Mid-State
Holdings, Old Walter Industries, Vestal, Pipe Realty, Window
Components, JWI Holdings, Land Holdings and Railroad Holdings);
Old Walter Industries owned the capital stock of seven of the
Debtors (Jim Walter Resources, United Land, Jim Walter Homes,
Mid-State Homes, Best, Coast to Coast and Dixie); Hamer Holdings
owned the capital stock of Hamer Properties; Computer Holdings
owned the capital stock of Computer Services; Window Components
owned the capital stock of Window Components (Wisc.); JWI
Holdings owned the capital stock of JW Walter; Land Holdings
owned the capital stock of Walter Land; Jim Walter Homes owned
the capital stock of Home Improvement; and Best owned the capital
stock of Best (Miss.) and JW Insurance.
Although the corporate structure of the Debtors changed as
a result of completion of the Mirror Liquidation Plan, see
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS--Completion of Mirror Liquidation Plan" and Exhibit IX
"Chart of Corporate Structure after Completion of Mirror
Liquidation Plan," solely for purposes of the Creditors' Plan and
pursuant to the Mirror Liquidation Order, Class SE-1 Interests
are based upon the Debtors' corporate structure as it existed on
the Filing Date.
Treatment of Class SE-1 Interests is as follows:
The Class SE-1 Interests are not impaired. Solely
for purposes of the
Creditors' Plan each Holder of a Class SE-1 Interest shall
retain its Subsidiary
Common Stock and shall not receive any distribution under
the Creditors' Plan on
account of such Interest.
Class SE-2 Interests: Stock Acquisition Rights in Debtors
other than Hillsborough.
Class SE-2 Interests consist of Stock Acquisition Rights
in Debtors other than Hillsborough.
Treatment of Class SE-2 Interests is as follows:
Class SE-2 Interests are impaired. All Stock
Acquisition Rights in Debtors other than Hillsborough
shall be cancelled, annulled and extinguished as of the
Effective Date. Holders of Class SE-2 Interests shall
receive or retain no property under the Creditors' Plan on
account of their Class SE-2 Interests.
D. Distributions at Consummation
1. Distributions to Holders of Allowed Claims and
Interests
Walter Industries shall deliver or cause to be delivered,
on behalf of the applicable Debtors, at the applicable times
specified in Article III of the Creditors' Plan subject to
compliance with the provisions of Section 4.4 of the Creditors'
Plan with respect to surrender of instruments:
a. to each Holder of an Administrative Claim, a
Priority Claim and an Allowed Claim in Classes S-1, S-2,
S-3, S-4, S-5, S-7, S-8, S-9, S-10, U-1, U-2, U-3, and I-1, Cash
in accordance with Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8,
3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, S-18
and 3.23 respectively, of the Creditors' Plan;
b. to the trustee under the New Senior Note
Indenture on behalf of the Holders of Allowed Claims in
Class S-6 a global certificate representing the New
Senior Notes to be delivered in accordance with Section
3.11 of the Creditors' Plan;
c. to the disbursing agent selected by the
Bondholder Proponents, instruments representing Qualified
Securities (which may include Cash) and certificates representing
New Common Stock, to be delivered in accordance with
Sections 3.19, 3.20 and 3.21 of the Creditors' Plan;
d. to the Series B & C Senior Note Trustee on
behalf of the Holders of Allowed Claims in Class S-6, Cash
and, if the Amended and Restated Veil Piercing
Settlement Agreement becomes effective by its terms,
certificates representing Class B Common Stock in
accordance with Section 3.11 of the Creditors' Plan (it
being understood that nothing in the Creditors' Plan shall
in any way modify or prejudice the right of the Series B &
C Senior Note Trustee to assert its rights
under the Series B & C Senior Note Indenture, including
but not limited to Section 6.07 thereof, against the
Holders of Class S-6 Claims);
e. to the Celotex Settlement Fund Recipient,
instruments representing Qualified Securities and
certificates representing Class B Common Stock in
accordance with Section 3.22 of the Creditors' Plan;
f. to the Holders of Class E-1 Interests,
certificates representing Class B
Common Stock, if any, in accordance with Section 3.26 of
the Creditors' Plan; and.
g. to the Holders of Revolving Credit Bank Claims
and Working Capital Bank Claims if the Amended and
Restated Veil Piercing Settlement Agreement becomes
effective by its terms, certificates representing Class B
Common Stock in accordance with Sections 3.6 and 3.7 of
the Creditors' Plan.
Walter Industries shall make all payments required to be
made by any Debtor under the Creditors' Plan on behalf of such
Debtor. All Allowed Claims paid by Walter Industries hereunder
shall be allocated by the Debtor and paid by Walter Industries to
the Debtor for whose benefit such Claims were satisfied in the
same manner in which Allowed Claims incurred by Walter Industries
in the ordinary course of business are allocated to the Debtors.
Intercompany accounts shall be established for any amounts paid
by a Debtor on behalf of any other Debtor hereunder on the books
and records of such Debtors.
2. Surrender and Cancellation of Instruments
As of the close of business on the Effective Date, the
transfer ledgers or registers and any other records determining
record ownership maintained by the Bank Agents, the Indenture
Trustees, Walter Industries or any Debtor (or any other trustees,
transfer agents or registrars which may have been employed in
connection therewith) for the Revolving Loans, the Working
Capital Loans, the Series B & C Senior Notes, the Grace Street
Notes, the Sloss IRB and the Subordinated Notes shall be deemed
to be closed, and for purposes of the Creditors' Plan, there
shall be deemed to be no further changes in the record holders of
any Revolving Loans, Working Capital Loans, Series B & C Senior
Notes, Grace Street Notes, Sloss IRB or Subordinated Notes on the
books of the Bank Agents, the Indenture Trustees, Walter
Industries or any Debtor (or any other trustees, transfer agents
or registrars which may have been employed in connection
therewith). Neither Walter Industries nor any other Debtor shall
have any obligation to recognize any transfer of Revolving Loans,
Working Capital Loans, Series B & C Senior Notes, Grace Street
Notes, Sloss IRB, or Subordinated Notes occurring thereafter, but
shall be entitled instead to recognize and deal with, for all
purposes under the Creditors' Plan, except as otherwise provided
in the Creditors' Plan, only those Persons who were the record
holders of such loans or notes as of the close of business on the
Effective Date, as reflected on the books of the Bank Agents, the
Indenture Trustees, Walter Industries or any Debtor (or such
other trustees, transfer agents or registrars which may have been
employed in connection therewith), as the case may be.
No Holder of any Revolving Loans, Working Capital Loans,
Series B & C Senior Notes, Grace Street Notes, Sloss IRB or
Subordinated Notes shall be entitled to any rights or
distribution under the Creditors' Plan unless and until such
Holder shall have first surrendered or caused to be surrendered
the relevant instrument, if any, held by such Holder to (i) the
applicable Bank Agent, (ii) the applicable Indenture Trustee,
(iii) in the case of the Grace Street Notes, Walter Industries or
(iv) in the case of the Sloss IRB, Sloss. To the extent any such
Holder is not the holder of record of such relevant instrument,
such Holder must deliver to the Person specified in the preceding
sentence, together with the relevant instruments, documents
reasonably satisfactory to Walter Industries evidencing
succession of title from the record holder thereof. In the event
that any such instrument has been lost, destroyed, stolen or
mutilated, the Holder thereof may instead execute and deliver an
affidavit of loss and indemnity with respect thereto in a form
customarily utilized for such purposes that is reasonably
satisfactory to Walter Industries together with, if Walter
Industries so requests, a bond in form and substance (including,
without limitation, amount) reasonably satisfactory to Walter
Industries.
Promptly upon surrender of the relevant instruments
referred to above, the applicable Bank Agent, the applicable
Indenture Trustee, Sloss or Walter Industries shall cancel such
instruments and the applicable Bank Agent or the applicable
Indenture Trustee shall deliver such cancelled instruments to
Walter Industries or Sloss, or otherwise dispose of such
instruments in such manner as Walter Industries or Sloss may
request.
At the times specified in Article III of the Creditors'
Plan, (i) the applicable Bank Agent, (ii) the applicable
Indenture Trustee (or, in the case of the Subordinated Note
Claims, the disbursing agent selected by the Bondholder
Proponents), (iii) Walter Industries or (iv) Sloss, as the case
may be, shall make the distributions provided for in Sections 4.5
and 4.6 of the Creditors' Plan in accordance with Article III of
the Creditors' Plan.
Until a holder of record on the Effective Date or its
successor by operation of law surrenders the relevant
instruments, if any, evidencing its Revolving Loans, Working
Capital Loans, Series B & C Senior Notes, Grace Street Notes,
Sloss IRB or Subordinated Notes, as the case may be, pursuant to
Section 4.4(b) of the Creditors' Plan, and the debt and/or equity
securities to be issued in satisfaction thereof are issued and
delivered by or on behalf of the applicable Debtors to such
Holder, the Bank Agent or the Indenture Trustee (or, in the case
of the Subordinated Note Claims, the disbursing agent selected by
the Bondholder Proponents) for the account of such Holder shall
have no rights under the debt and/or equity securities to be
received by such Holder under the Creditors' Plan.
Notwithstanding any other provision of the Creditors'
Plan, no Holder of a Secured Claim who is to receive a
distribution under the Creditors' Plan in respect of such Secured
Claim shall receive such distribution until such Holder executes
and delivers or causes to be executed and delivered any documents
(in recordable form if appropriate) and/or surrenders or causes
to be surrendered any personal property or other collateral
(including shares of capital stock) in its possession or the
possession of its agent or trustee or the applicable Bank Agent,
the applicable Indenture Trustee, Walter Industries, Sloss or any
other Debtor necessary to release any Lien(s) and retransfer all
collateral held by it in connection with such Secured Claim.
As of the Effective Date, the Revolving Credit Agreement,
the Working Capital Agreement, the Series B & C Senior Note
Indenture, the Sloss IRB Indenture and each indenture with
respect to the Subordinated Notes, shall be terminated, deemed
null and void and of no further force and effect as to the
Debtors. Each Bank Agent or Indenture Trustee, on the one hand,
and the Debtors, on the other hand, shall have no further
obligations to each other under such Agreements and Indenture,
except that the applicable Bank Agent or Indenture Trustee shall
be entitled to assert any charging liens to which it may be
entitled under such Agreement or Indenture.
3. Reserves for Disputed Claims
On or promptly after the Effective Date, the applicable
Debtor shall reserve or cause to be reserved, in an account,
segregated in trust, for the account of each Holder of a Disputed
Claim (a) that property which would otherwise be distributable to
such Holder on the Effective Date were such Disputed Claim an
Allowed Claim on the Effective Date (i.e., Cash, other Qualified
Securities, New Common Stock and/or New Senior Notes), or such
other property as the Holder of such Disputed Claim and the
Bondholders Committee (prior to the Effective Date) or Walter
Industries (on and after the Effective Date) may agree upon, or
(b) that property specified by a Final Order. The property so
reserved for the Holder of such Disputed Claim shall be
distributed to such Holder, to the extent such Disputed Claim is
allowed, only after such Disputed Claim becomes an Allowed Claim.
To the extent interest is earned on reserved Cash, such interest
shall be held by or on behalf of the applicable Debtor as
additional reserved Cash for the account of the Holder for whom
such reserved Cash is held; reserved Cash, net of federal and
state income taxes and costs and expenses incurred with respect
thereto, shall be distributed to the Holder of a Disputed Claim
which becomes an Allowed Claim in accordance with Sections 4.5
and 4.15 of the Creditors' Plan.
E. Description of Securities to be Issued Under the Creditors'
Plan
The following description of the securities to be issued
under the Creditors' Plan is qualified in its entirety by
references to the Charter of Walter Industries, the Summary of
Terms for the New Senior Notes, the Summary of Terms for the
Mid-State Trust IV Secured Notes, the Summary of Terms for the
Mid-State Trust II Residual Bonds and the Summary of Terms for
the New Unsecured Notes, annexed as Exhibits 1, 2, 4, 5 and 6 to
the Creditors' Plan.
1. New Senior Notes
"New Senior Notes" are defined under the Creditors' Plan
to mean, with respect to any Debtor, senior secured notes issued
by such Debtor in an aggregate principal amount (for all Debtors)
not to exceed approximately $315 million (assuming an Effective
Date of 12/31/94) that meet the following requirements:
(1) Independent Rating. Such securities must be
rated BB or higher by a Rating Service as of the Effective
Date (provided, that the obtaining of such Rating Service rating
shall not be required in the event that, after proper
application is made therefor, neither Rating Service
provides a rating of the security proposed to be rated); and
(2) Valuation at Par. Such debt securities must be
valued at par as of the Effective Date (on a fully
distributed basis) by Lehman Brothers Inc. and a qualified
valuation expert selected by the Series B & C Senior Note
Trustee. In the event that Lehman Brothers Inc. and the
qualified valuation expert selected by the Series B & C Senior
Note Trustee do not agree as to whether such securities are
valued at par as of the Effective Date, the New Board of
Walter Industries (or, if the New Board has not yet been
appointed, the Bondholders Committee and the Series B & C Senior
Note Trustee) shall select a third qualified valuation expert of
national reputation, whose determination under the Creditors'
Plan will be binding.
Attached to the Creditors' Plan as Exhibit 2 is a summary
of the anticipated (although not required) terms, and anticipated
(although not required) maximum aggregate principal amount, of
the New Senior Notes.
THERE CAN BE NO ASSURANCE THAT ANY NEW SENIOR NOTE WILL
TRADE AT OR ABOVE PAR AT ANY TIME. TRADING PRICES
WILL DEPEND ON NUMEROUS FACTORS INCLUDING MARKET CONDITIONS,
PREVAILING INTEREST RATES AND THE FINANCIAL CONDITIONS AND
PERFORMANCE OF THE OBLIGORS THEREOF.
The "New Senior Notes" are notes of Walter Industries
and/or one or more other Debtors. If required by applicable
securities law, the New Senior Notes will be issued under one or
more New Senior Note Indentures between the issuer and the
trustee thereunder in an estimated maximum aggregate principal
amount of approximately $325,000,000. If any such indenture(s)
are subject to the Trust Indenture Act of 1939, the Proponents
will seek to qualify such new indenture(s) thereunder and will
notify the staff of the Securities and Exchange Commission
thereof. If an indenture is not required, separate New Senior
Notes will be issued to each recipient.
The New Senior Notes will mature five (5) years after the
Effective Date and will bear interest, payable semi-annually in
arrears in Cash, at such percentage per annum that the conditions
to qualification as New Senior Notes, as that term is defined
above, are met. Payments of principal and interest on the New
Senior Notes will be secured by a pledge of all of the issued and
outstanding capital stock of Jim Walter Resources, U.S. Pipe,
United Land and Jim Walter Homes, or other collateral of equal or
greater value, (provided, that any such method of valuation shall
be reasonably acceptable to the Series B & C Senior Note
Trustee). The New Senior Notes will be subject to optional
redemption by the Issuers at any time, on or after the fourth
anniversary of original issuance thereof, in whole or in part, at
101% of the outstanding principal amount plus accrued and unpaid
interest to the redemption date, provided, that, if at the time
of issuance of the New Senior Notes, market conditions and the
equivalent terms of similar debt instruments commonly issued and
carrying a BB rating contain a shorter no-call period, then the
no-call period may be shortened, but in any event not to less
than 18 months after issuance, and/or the redemption premium
shall be increased, but in any event the redemption premium shall
not be less than 103% of the outstanding principal amount in the
case of an 18 month no-call period. It is expected that all of
the outstanding principal amount of the New Senior Notes and
accrued but unpaid interest thereon shall be due and payable at
maturity.
The New Senior Notes will be senior indebtedness of the
Issuer and will rank senior in right of payment to certain
indebtedness of the Issuer and rank pari passu with certain other
indebtedness of the Issuer.
The New Senior Notes will contain restrictions customary
for instruments of this kind, including but not limited to
restrictions on incurrence of additional indebtedness;
restrictions on the creation of liens or encumbrances upon the
Assets or properties of the Issuers (other than under the
Reorganization Documents); restrictions on the payment of
dividends or other distributions; limitations on transactions
with affiliates; and restrictions upon consolidations, mergers
and certain Asset sales; provided, that such covenants shall
expressly permit the Issuer and its subsidiaries to make asset
sales out of the ordinary course of business and to enter into
other non-ordinary course transactions (including the sale of
collateral securing the New Senior Notes free and clear of any
liens, claims and encumbrances, provided that the net proceeds
thereof are used to redeem New Senior Notes at par plus accrued
interest); provided, further, that such covenants, consistent
with the foregoing, shall be reasonably acceptable to the Series
B & C Senior Note Trustee.
The New Senior Notes will also contain other covenants and
events of default as more particularly described in the Summary
of Terms for the New Senior Notes annexed as Exhibit 2 to the
Creditors' Plan.
Consistent with the foregoing, the Series B & C Senior
Note Trustee shall have the right to reasonably approve all
documents under the Creditors' Plan regarding the treatment of
Series B & C Senior Note Claims.
2. Qualified Securities
a. Mid-State Trust IV Secured Notes
On or prior to the Effective Date, it is currently
anticipated that a newly-created owner trust ("Mid-State Trust
IV" or "Trust IV") will enter into the Mid-State Trust IV Secured
Note Indenture which will provide for the issuance of certain
notes (the "Mid-State Trust IV Secured Notes") in an estimated
aggregate principal amount of $700,000,000.
The Mid-State Trust IV Secured Notes will mature 12 years
(assuming no prepayments) after the Effective Date and will bear
interest, payable monthly in arrears, in Cash at a fixed rate.
The interest rate will be set on a Pricing Date at a rate which
reflects an increment ("Spread") to the yield ("Benchmark Yield")
of the Treasury bond of average life similar to that projected
for the Mid-State Trust IV Secured Notes. For purposes of
illustration, a Spread of 1.45% and a Benchmark Yield of 6.40%,
both on the Pricing Date, would produce an interest rate of
7.85%. The Mid-State Trust IV Secured Notes will be secured by
an undivided interest in $850 million of fixed-rate installment
sale contracts ("Trust IV Contracts") which are in turn secured
by first mortgages on single-family residential properties. The
Contracts will be serviced in the same manner as those in Trusts
II and III. The Mid-State Trust IV Secured Notes will be further
secured by a "AAA" quality surety bond on the assumption that the
combination of the above credit support totaling $145 million, or
roughly 17% of the Trust IV Contracts, will give a shadow rating
of "A" for the insurer's risk.
The Mid-State Trust IV Secured Notes will be subject to
redemption at the option of the equity holder in Mid-State Trust
IV, on or after the date on which the principal balance of the
Trust IV Secured Notes is less than 10% of their original
balance, in whole but not in part, at 100% of the principal
amount, plus accrued and unpaid interest thereon. The principal
amount of the Mid-State Trust IV Secured Notes will be amortized
by all collections on the Trust IV Contracts remaining after
payment of servicing fees, trust expenses and interest payments
on the Mid-State Trust IV Secured Notes.
It is possible for two reasons that proceeds greater than
$700 million could be raised in a cost-effective manner via
secured note offerings collateralized by $850 million of Trust IV
Contracts. First, the overcollateralization requirements of
Financial Security Assurance Inc. ("FSA") (or other surety
provider), Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") may be lower than 17%, in
view of the credit performance data available for existing issues
of Trusts II and III. Second, a proprietary two-trust structure
has been proposed by Lehman Brothers Inc. which would facilitate
the issuance of a class of bonds secured by Trust IV Contracts,
guaranteed by Mid-State Homes and subordinate to the Trust IV
Notes without creating a taxable mortgage pool ("TMP"). Such
additional proceeds are contingent upon the negotiation of terms
with all parties, the credit evaluation of Moody's and S&P and
appropriate opinions of counsel.
b. Mid-State Trust II Residual Bonds
On or prior to the Effective Date, it is currently
anticipated that Mid-State Trust II ("Mid-State Trust II") will
enter into a new Indenture which will provide for the issuance by
Mid-State Trust II of certain bonds (the "Mid-State Trust II
Residual Bonds") in an estimated aggregate principal amount of
$75 million. This issuance is permitted by Section 2.03(b) of
the Trust Agreement for Mid-State Trust II. This section of the
Trust Agreement allows the Trust to issue notes subordinated to
the Mid-State Trust II Secured Notes as long as: (i) FSA consents
thereto, (ii) such new notes are nonrecourse to Trust II or its
assets (other than Cash flow which would otherwise be released
from the original indenture) and (iii) the holders of such notes
(or the trustee on their behalf) executes a "non-petition
agreement" with FSA and the Note Trustee. Section 3.08 of the
original Indenture prohibits Trust II from creating a second lien
on the Trust II Contracts (as defined below) in favor of the
Residual Bondholders. Alternatively, Mid-State Homes will
deposit the certificate of beneficial interest in Mid-State Trust
II, which it now holds, into a new Delaware business trust. In
this alternative, which does not require the above consents, the
new trust will issue the Residual Bonds plus a certificate of
beneficial interest, which will be held by Mid-State Homes.
The Mid-State Trust II Residual Bonds will mature 7.5
years after the Effective Date and will bear interest, payable
quarterly in arrears in Cash, at a fixed interest rate.
Principal will be retired at the rate of $2,500,000 each
quarterly payment date. The interest rate will be set on a
Pricing Date at a rate which reflects a Spread to the Benchmark
Yield. For purposes of illustration, a Spread of 1.35% and a
Benchmark Yield of 6.00% both on the Pricing Date, would produce
an interest rate of 7.35%. The Mid-State Trust II Residual Bonds
represent an additional issuance of debt from Mid-State Trust II,
a trust whose only material assets are expected to be $1,060
million of fixed-rate installment sale contracts ("Trust II
Contracts") secured by mortgages on single-family residential
properties and whose only material liabilities are expected to be
$740 million of outstanding bonds, leaving an
"overcollateralization amount" of $320 million. The Mid-State
Trust II Residual Bonds will be an additional class of debt which
will have an aggregate face amount of $75 million, or $245
million less than the overcollateralization amount. The
Mid-State Trust II Residual Bonds will be further secured by a
"AAA" quality surety bond, on the assumption that the remaining
overcollateralization amount will be sufficient to achieve a
"shadow rating" of no less than "A" for the insurer's risk. The
Mid-State Trust II Residual Bonds will be subordinate to the
existing series of bonds issued by the Mid-State Trust II, senior
to the beneficial interests of the Trust and will not have a lien
on the Trust II Contracts.
The amount of Residual Bonds could be significantly
greater than $75 million if FSA will consent to the release of
additional excess funds as provided in the original indenture.
Such consent might be obtained in connection with the purchase of
a surety bond from FSA to insure the Residual Bonds. If the
overcollateralization requirements of FSA, Moody's and S&P were
at 17% of initial trust assets, as they were in connection with
the issuance of the Asset-Backed Notes by Mid-State Trust III in
June of 1992, the amount of Residual Bonds might be up to $140
million. It is possible that the overcollateralization
requirements would be lower than 17%, due to the availability of
credit performance histories on both Mid-State Trusts II and III,
allowing issuance in still larger amounts. Bonds issued in such
amounts would not have a fixed sinking fund schedule, would use
all Remaining Available Funds to retire bond principal, and would
have longer maturities and commensurately higher coupons than the
bonds issued in the $75 million amount.
The issuance of the Mid-State Trust II Residual Bonds is
not expected to cause Mid-State Trust II to be classified as a
TMP because the pool pre-dates the TMP legislation. It is
possible, however, that the IRS might issue new TMP regulations
prior to the Effective Date which would adversely affect this
conclusion.
No financing is proposed which uses the equity in
Mid-State Trust III as collateral. This is because the original
issuance of Notes from Mid-State Trust III occurred subsequent to
the TMP legislation and it is believed that the issuance of a
second class of bonds which are secured by the Contracts, whose
principal would be retired by payments on the Trust II Contracts
and whose maturity is different from the original Notes, is
likely to cause Trust III to be characterized as a TMP.
c. New Unsecured Notes
On or after the Effective Date, based upon Walter
Industries' then current financial condition and to the extent
consistent with prudent business practices, Walter Industries may
enter into the New Unsecured Note Indenture which will provide
for the issuance by Walter Industries of New Unsecured Notes in
an estimated aggregate principal amount of up to $100,000,000.
The New Unsecured Notes are expected to mature ten (10)
years after the date of original issuance and will bear interest,
payable semi-annually in arrears in Cash, at a fixed rate per
annum such that the conditions to qualification as a Qualified
Security, as that term is defined in the Creditors' Plan, are
met. It is expected that the New Unsecured Notes will be subject
to optional redemption by Walter Industries at any time, on or
after the fifth anniversary of original issuance thereof, in
whole or in part, at redemption prices similar to those
prevailing in the market for similar debt instruments at the time
of issuance, plus accrued and unpaid interest to the redemption
date.
It is expected that all of the outstanding principal
amount of the New Unsecured Notes and accrued but unpaid interest
thereon shall be due and payable at maturity.
The New Unsecured Notes will be unsecured indebtedness of
Walter Industries and will be subordinate and junior in right of
payment to certain other indebtedness of Walter Industries in the
manner and to the extent that the instrument creating such other
indebtedness so provides.
The New Unsecured Note Indenture will contain restrictions
customary for instruments of this kind, including but not limited
to restrictions on incurrence of additional indebtedness
(including senior indebtedness); restrictions on the creation of
liens or encumbrances upon the Assets or properties of Walter
Industries (other than under the Reorganization Documents);
restrictions on the payment of dividends or other distributions;
limitations on transactions with affiliates; and restrictions
upon consolidations, mergers and certain Asset sales; see Exhibit
6 to the Creditors' Plan for a detailed description of these
covenants.
In addition, Walter Industries will be required to offer
to purchase the New Senior Notes at 101% of the principal amount
thereof plus accrued and unpaid interest to the redemption date
as follows:
(i) upon a change in control (to be defined to include a
transfer of control to a person or entity, or
"group" of persons or entities as that term is used
in SEC Rule 13-d, (i) that did not hold or control,
immediately after giving effect to the consummation
of the Creditors' Plan, 5% or more of the New
Common Stock, and (ii) that acquired control of the
Company other than as a result of the conversion of
any Class A Common Stock into Class B Common
Stock); or
(ii) upon a sale of substantially all of the assets of
the Company.
The New Unsecured Note Indenture will also contain other
covenants and events of default as more particularly described in
the Summary of Terms for the New Unsecured Notes annexed as
Exhibit 6 to the Creditors' Plan.
Holders of Qualified Securities issued under the
Creditors' Plan shall be entitled to certain registration rights
with respect to such Qualified Securities, pursuant to the
"Qualified Securities Registration Rights Agreement" relating to
the Qualified Securities distributed pursuant to the Creditors'
Plan, to be entered into as of the Effective Date by Walter
Industries and the Persons to which Qualified Securities are
distributed on the Effective Date. The Qualified Securities
Registration Rights Agreement will provide for registration
rights to the Holders of Qualified Securities no less favorable
to such Holders than those contained in the form of registration
rights agreement attached as Exhibit 8 to the Creditors' Plan.
The form of registration rights agreement attached as
Exhibit 8 to the Creditors' Plan provides that, within thirty
(30) days after the Effective Date, any Holder of a Qualified
Security as to which registration pursuant to the Securities Act
is required for a public sale (a "Registrable Qualified
Security") then outstanding will have the right to request that
Walter Industries make one offer pursuant to a registration
statement under the Securities Act (the "Exchange Offer") to
exchange any Qualified Registrable Securities for a like
aggregate principal amount of publicly registered Qualified
Securities having otherwise identical terms to the Registrable
Qualified Security being exchanged, and shall use its best
efforts to complete the Exchange Offer on or after the 90th day
after the receipt of such request. If no such request is timely
made, Walter Industries shall use its best efforts to cause a
"shelf" registration statement with respect to all Registrable
Qualified Securities (the "Qualified Securities Initial Shelf
Registration") to become effective on or prior to the 90th day
after the Effective Date and to keep such registration statement
continuously effective until the first anniversary of the date
such shelf registration statement is declared effective (or such
shorter period terminating when all Registrable Qualified
Securities have been sold pursuant to the shelf registration
statement). At any time after the completion of the Exchange
Offer or the Qualified Securities Initial Shelf Registration,
Holders of at least 20% or more in aggregate principal amount of
the then-outstanding Registrable Qualified Securities will also
have the right to request up to two additional shelf registration
statements which shall not be required to remain effective for in
excess of nine (9) months each. Holders of all other Registrable
Securities will be notified of such request and will be entitled
to participate in the registration. Holders of Registrable
Qualified Securities are also entitled to unlimited "piggyback"
registration rights after completion of the Exchange Offer or the
Qualified Securities Initial Shelf Registration, as the case may
be. The expenses of the registration relating to the Exchange
Offer and the shelf registrations will be borne by the Company,
other than underwriting discounts and commissions relating to the
sale of Registrable Qualified Securities, which will be borne by
the Holder thereof.
3. New Common Stock
The Creditors' Plan provides for the extinguishment of Old
Common Stock and the issuance of "New Common Stock" to Holders of
Allowed Claims in Classes U-4, U-5, U-6 and U-7, and if the
Amended and Restated Veil Piercing Settlement Agreement becomes
effective by its terms, Classes S1, S-2 and S-6, in each case
subject to exercise of Equity Call Options, and possibly to Class
E-1 Interests. "New Common Stock" consists of the Class A Common
Stock and Class B Common Stock of Walter Industries, to be issued
by Walter Industries as of the Effective Date.
See "OVERVIEW OF THE CREDITORS' PLAN--Special Features of
the Creditors' Plan-- Distribution of Combination of Qualified
Securities and New Common Stock to Holders of Subordinated Note
Claims and to Veil Piercing Claimants." For a discussion of the
conditions precedent to effectiveness of the Amended and Restated
Veil Piercing Settlement Agreement, see "OVERVIEW OF THE
CREDITORS' PLAN--Special Features of the Creditors' Plan--
Settlement of Veil Piercing/Fraudulent Conveyance Issues and
Other Issues--Terms of the Veil Piercing Settlement Agreement."
Except as expressly provided below, and as qualified by
the Charter, attached as Exhibit 1 to the Creditors' Plan, the
rights, privileges and powers of the Class A Common Stock and the
Class B Common Stock will be identical, and the two classes will
vote together as a single class on all matters as to which both
classes are entitled to vote.
The voting rights of the Class A Common Stock and the
Class B Common Stock (in addition to the voting rights required
by law) and the mandatory conversion of the Class A Common Stock
into Class B Common Stock will be as follows: (i) each share of
Class A Common Stock is entitled to five votes and each share of
Class B Common Stock is entitled to one vote; (ii) each share of
Class A Common Stock automatically converts into one share of
Class B Common Stock upon the sale, transfer or other disposition
(but not including a pledge) of such share other than by an
original recipient of such share under the Creditors' Plan to an
Affiliate of the original recipient of such share and (iii) all
shares of Class A Common Stock automatically convert into an
equal number of shares of Class B Common Stock (A) as soon as the
aggregate number of shares of Class A Common Stock held by
Apollo, Lehman Brothers Inc. and their respective Affiliates is
less than 8% of the then outstanding number of shares of New
Common Stock, and (B) on the seventh anniversary of the date of
original issue thereof. The Proponents believe that, as
structured, the Class A Common Stock and Class B Common Stock is
appropriate under Section 1123(a)(6) of the Code. See "OVERVIEW
OF THE CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of Combination of Qualified Securities and New
Common Stock to Holders of Subordinated Note Claims and to Veil
Piercing Claimants--New Common Stock." However, notwithstanding
the foregoing, the Creditors' Plan provides that the special
voting and conversion features of the Class A Common Stock will
be modified, if, and only to the extent that, the Court
determines that such modification is necessary to comply with
Section 1123(a)(6) of the Code.
An "Affiliate" of a person or entity means any person or
entity that controls, is under common control with, or is
controlled by, such other person or entity. For purposes of this
definition, "control" means the ability of one person or entity
to direct the management and policies of another person or
entity.
Holders of New Common Stock issued under the Creditors'
Plan shall be entitled to certain registration rights with
respect to such New Common Stock, pursuant to the "New Common
Stock Registration Rights Agreement" relating to the New Common
Stock issued pursuant to the Creditors' Plan, to be entered into
as of the Effective Date by Walter Industries and the Persons to
which New Common Stock are issued on the Effective Date. The New
Common Stock Registration Rights Agreement will provide for
registration rights to Holders of New Common Stock no less
favorable to such Holders than those contained in the form of
registration rights agreement attached as Exhibit 7 to the
Creditors' Plan.
The form of registration rights agreement attached as
Exhibit 7 to the Creditors' Plan provides that, within thirty
(30) days after the Effective Date, Walter Industries shall use
its best efforts to cause a "shelf" registration statement with
respect to all Registrable Securities (the "Registrable
Securities Initial Shelf Registration") to become effective on or
prior to the 90th day after the Effective Date and to keep such
registration statement continuously effective until the first
anniversary of the date such shelf registration statement is
declared effective (or such shorter period terminating when all
Registrable Securities have been sold pursuant to the shelf
registration statement). At any time after the completion of the
Registrable Securities Initial Shelf Registration, holders of at
least 20% or more of the then-outstanding Registrable Securities
will also have the right to request up to two additional shelf
registration statements which shall not be required to remain
effective for in excess of nine (9) months each. Holders of all
other Registrable Securities will be notified of such request and
will be entitled to participate in the registration. Holders of
Registrable Securities are also entitled to unlimited "piggyback"
registration rights after completion of the Registrable
Securities Initial Shelf Registration, as the case may be. The
expenses of the registration relating to the shelf registrations
will be borne by the Company, other than underwriting discounts
and commissions relating to the sale of Registrable Securities,
which will be borne by the holder thereof.
F. Impaired Classes of Claims and Interests
As a condition to confirmation, the Code requires that
each impaired class of claims or interests accept the plan. A
class is "impaired" if the legal, equitable or contractual right
attaching to the claims or interests of that class are modified,
other than by curing defaults and reinstating maturity or by
payment in full in Cash. The Code defines acceptance of a plan
by an impaired class of claims as acceptance by holders of
two-thirds in dollar amount and a majority in number of claims of
that class who actually vote to accept or to reject such plan.
The Code defines acceptance of a plan by an impaired class of
interests (equity securities) as acceptance by holders of
two-thirds of the number of shares in such class who actually
vote. Holders of claims or interests who fail to vote are not
counted as either accepting or rejecting the plan. Each holder
of a security issued under an indenture is entitled to vote with
respect to such security; indenture trustees cannot vote on any
plan on behalf of such holders.
Holders of Claims in Classes S-1, S-2, S-6, U-3, U-4, U-5,
and U-6 and Holders of Interests in Classes E-1, E-2 and SE-2 are
impaired under the Creditors' Plan. Because the Holders of Class
E-2 and Class SE-2 Interests will receive or retain no property
under the Creditors' Plan, pursuant to the Code, Classes E-2 and
SE-2 are deemed to have rejected the Creditors' Plan and,
accordingly, the Proponents will not solicit votes from Classes
E-2 and SE-2.
G. Unimpaired Classes of Claims and Interests
Classes of Claims that are not "impaired" under the
Creditors' Plan are deemed to have accepted the Creditors' Plan.
Claims in Classes S-3, S-4, S-5, S-7, S-8, S-9, S-10, U-1, U-2,
U-7 and I-1 through I-3 and Holders of Interests in Class SE-1
are not impaired under the Creditors' Plan and, accordingly, are
deemed to have accepted the Creditors' Plan.
H. Assumption or Rejection of Executory Contracts
All Executory Contracts that have not been rejected before
ninety (90) days after the Effective Date or are not the subject
of a motion to reject pending as of such date will be deemed
assumed as of the Confirmation Date. Attached as Exhibit 9 to
the Creditors' Plan is a nonexhaustive list of Executory
Contracts that are rejected under the Creditors' Plan, without
admitting that any item on such Exhibit is an Executory Contract
and without admitting any liability as a result of such rejection
or otherwise.
As to any Executory Contract assumed pursuant to the
Creditors' Plan, Walter Industries and/or the applicable Debtor,
as the case may be, will, pursuant to the provisions of Section
1123(a)(5)(G) of the Code, cure or demonstrate the ability to
cure all defaults (except those specified in Section 365(b)(2) of
the Code) existing under and pursuant to such Executory Contract
by paying or demonstrating the ability to pay the amount, if any,
of such Executory Contract Claim. Payment of any such Executory
Contract Claim will be in full satisfaction, release, discharge
and cure of all such defaults (including any other Claims filed
by any such party as a result of such existing defaults);
provided, however, that if any Person files, within thirty (30)
days of the filing of a proof of claim with respect to any
Executory Contract Claim, an objection in writing to the amount
set forth, the Court will determine the amount actually due and
owing in respect of the defaults or will approve the settlement
of any such Executory Contract Claim. The dollar amount of any
monetary default of the Debtors existing as of the Confirmation
Date under any Executory Contract, as may be agreed to by the
parties thereto or as may be determined by the Court, will
constitute a Class A-1 Allowed Administrative Claim upon the
assumption of such Executory Contract.
Each Person which is a party to an Executory Contract
rejected pursuant to the Creditors' Plan will be entitled to
file, not later than thirty (30) days after the issuance of a
Final Order of the Court authorizing such rejection, a proof of
claim for damages alleged to have arisen from the rejection of
the Executory Contract to which such Person is party, or be
forever barred. Objections to any proof of claim will be filed
not later than sixty (60) days after such proof of claim is
filed, and the Court will determine any such objections.
Unsecured Claims arising out of the rejection of Executory
Contracts will be included in Class U-3 Other Unsecured Claims.
The Debtors state in the Debtors' Disclosure Statement that the
Debtors do not expect that any material Claim will result from
the rejection of Executory Contracts because substantially all of
the Debtors' material Executory Contracts have either already
been assumed pursuant to order of the Court or have expired
during the pendency of the Chapter 11 Cases.
<PAGE>
EXHIBIT I:
CREDITORS' JOINT PLAN OF REORGANIZATION
<PAGE>
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS CORPORATION, Case No. 89-9715-8P1
BEST INSURORS, INC., Case No. 89-9740-8P1
BEST INSURORS OF MISSISSIPPI, INC., Case No. 89-9737-8P1
COAST TO COAST ADVERTISING, INC., Case No. 89-9727-8P1
COMPUTER HOLDINGS CORPORATION, Case No. 89-9724-8P1
DIXIE BUILDING SUPPLIES, INC., Case No. 89-9741-8P1
HAMER HOLDINGS CORPORATION, Case No. 89-9735-8P1
HAMER PROPERTIES, INC., Case No. 89-9739-8P1
HOMES HOLDINGS CORPORATION, Case No. 89-9742-8P1
JIM WALTER COMPUTER SERVICES, INC., Case No. 89-9723-8P1
JIM WALTER HOMES, INC., Case No. 89-9746-8P1
JIM WALTER INSURANCE SERVICES, INC., Case No. 89-9731-8P1
JIM WALTER RESOURCES, INC., Case No. 89-9738-8P1
JIM WALTER WINDOW COMPONENTS, INC., Case No. 89-9716-8P1
JW ALUMINUM COMPANY, Case No. 89-9718-8P1
JW RESOURCES, INC., Case No. 90-11997-8P1
JW RESOURCES HOLDINGS CORPORATION, Case No. 89-9719-8P1
J.W.I. HOLDINGS CORPORATION, Case No. 89-9721-8P1
J.W. WALTER, INC., Case No. 89-9717-8P1
JW WINDOW COMPONENTS, INC., Case No. 89-9732-8P1
LAND HOLDINGS CORPORATION, Case No. 89-9720-8P1
MID-STATE HOMES, INC., Case No. 89-9725-8P1
MID-STATE HOLDINGS CORPORATION, Case No. 89-9726-8P1
RAILROAD HOLDINGS CORPORATION, Case No. 89-9733-8P1
SLOSS INDUSTRIES CORPORATION, Case No. 89-9743-8P1
SOUTHERN PRECISION CORPORATION, Case No. 89-9729-8P1
UNITED LAND CORPORATION, Case No. 89-9730-8P1
UNITED STATES PIPE AND FOUNDRY COMPANY, Case No. 89-9744-8P1
U.S. PIPE REALTY, INC., Case No. 89-9734-8P1
VESTAL MANUFACTURING COMPANY, Case No. 89-9728-8P1
WALTER HOME IMPROVEMENT, INC., Case No. 89-9722-8P1
WALTER INDUSTRIES, Inc. and Case No. 89-9745-8P1
WALTER LAND COMPANY, Case No. 89-9736-8P1
Debtors.
<PAGE>
CREDITORS' JOINT PLAN OF REORGANIZATION
DATED AS OF AUGUST 1, 1994 (THE "CREDITORS' PLAN")
AKIN, GUMP, STRAUSS,
HAUER & FELD, L.L.P.
Counsel to Apollo
65 East 55th Street
33rd Floor
New York, NY 10022
(212) 872-1000
JONES, DAY, REAVIS & POGUE
Counsel to Official
Committee of General
Unsecured Creditors
599 Lexington Avenue
New York, NY 10022
(212) 326-3939
PAUL, WEISS, RIFKIND,
WHARTON & GARRISON
Counsel to
Lehman Brothers Inc.
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3000
STROOCK & STROOCK
& LAVAN
Counsel to Official
Bondholders Committee
Seven Hanover Square
New York, NY 10004-2594
(212) 806-5400
MARCUS MONTGOMERY
WOLFSON P.C.
Counsel to Ad Hoc Committee
of Pre-LBO Bondholders
53 Wall Street
New York, NY 10005
(212) 858-5200
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 3
ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS 25
2.1 Administrative Claims 25
2.2 Federal Income Tax Claims 25
2.3 Federal Excise Tax and Reclamation Claims 25
2.4 State and Local Tax Claims 25
2.5 Class S-1 Claims: Revolving Credit Bank Claims 26
2.6 Class S-2 Claims: Working Capital Bank Claims 27
2.7 Class S-3 Claims: Grace Street Note Claims 28
2.8 Class S-4 Claims: Sloss IRB Claim 28
2.9 Class S-5 Claims: Secured Equipment
Purchase Claims 28
2.10 Class S-6 Claims: Series B & C Senior
Note Claims 29
2.11 Class S-7 Claims: Provident Life & Accident
Insurance Company Claims 29
2.12 Class S-8 Claims: Revolving Credit Agents
Claims 29
2.13 Class S-9 Claims: Working Capital
Agents Claims 31
2.14 Class S-10 Claims: Other Secured Claims 32
2.15 Class U-1 Claims: Old Walter Industries IRB
Claims 33
2.16 Class U-2 Claims: Convenience Class Claims 33
2.17 Class U-3 Claims: Other Unsecured Claims 35
2.18 Class U-4 Claims: Senior Subordinated Note
Claims 37
2.19 Class U-5 Claims: 17% Subordinated Note Claims 37
2.20 Class U-6 Claims: Pre-LBO Debenture Claims 37
2.21 Class U-7 Claims: Veil Piercing Claims 37
2.22 Class I-1 Claims: Intercompany IRB Claims 39
2.23 Class I-2 Claims: Pre-Filing Date Intercompany
Notes Payable Claims 39
2.24 Class I-3 Claims: Post-Filing Date
Intercompany Notes Payable Claims 41
2.25 Class E-1 Interests: Old Common Stock
Interests in Hillsborough 42
2.26 Class E-2 Interests: Stock Acquisition
Rights in Hillsborough 42
2.27 Class SE-1 Interests: Subsidiary Common Stock
Interests in Debtors other than Hillsborough 42
2.28 Class SE-2 Interests: Stock Acquisition Rights
in Debtors other than Hillsborough 45
ARTICLE III TREATMENT OF ALLOWED CLAIMS AND INTERESTS
UNDER THE CREDITORS' PLAN 46
3.1 Satisfaction of Allowed Claims and Interests 46
3.2 Administrative Claims 47
3.3 Federal Income Tax Claims 47
3.4 Federal Excise Tax and Reclamation Claims 47
3.5 State and Local Tax Claims 47
3.6 Class S-1 Claims: Revolving Credit Bank Claims 47
3.7 Class S-2 Claims: Working Capital Bank Claims 48
3.8 Class S-3 Claims: Grace Street Note Claims 48
3.9 Class S-4 Claims: Sloss IRB Claim 48
3.10 Class S-5 Claims: Secured Equipment Purchase
Claims 48
3.11 Class S-6 Claims: Series B & C Senior Note
Claims 49
3.12 Class S-7 Claims: Provident Life & Accident
Insurance Company Claims 49
3.13 Class S-8 Claims: Revolving Credit Agents
Claims 49
3.14 Class S-9 Claims: Working Capital
Agents Claims 50
3.15 Class S-10 Claims: Other Secured Claims 50
3.16 Class U-1 Claims: Old Walter Industries
IRB Claims 50
3.17 Class U-2 Claims: Convenience Class Claims 50
3.18 Class U-3 Claims: Other Unsecured Claims 51
3.19 Class U-4 Claims: Senior Subordinated Note
Claims 51
3.20 Class U-5 Claims: 17% Subordinated Note Claims 51
3.21 Class U-6 Claims: Pre-LBO Debenture Claims 51
3.22 Class U-7 Claims: Veil Piercing Claims 51
3.23 Class I-1 Claims: Intercompany IRB Claims 52
3.24 Class I-2 Claims: Pre-Filing Date Intercompany
Notes Payable Claims 52
3.25 Class I-3 Claims: Post-Filing Date
Intercompany Notes Payable Claims 53
3.26 Class E-1 Interests: Old Common Stock
Interests in Hillsborough 53
3.27 Class E-2 Interests: Stock Acquisition
Rights in Hillsborough 53
3.28 Class SE-1 Interests: Subsidiary Common Stock
Interests in Debtors other than Hillsborough 53
3.29 Class SE-2 Interests: Stock Acquisition
Rights in Debtors other than Hillsborough 53
ARTICLE IV MEANS FOR IMPLEMENTATION OF THE CREDITORS'
PLAN 53
4.1 Charter; Common Stock 53
4.2 Amendments to Charter 54
4.3 Nonvoting Equity Securities 54
4.4 Surrender and Cancellation of Instruments 54
4.5 Distributions to Holders of Allowed Claims
and Interests 55
4.6 All Distributions to be Made by Walter
Industries 56
4.7 Fractional Shares 56
4.8 Execution and Delivery of Reorganization
Documents 56
4.9 Cooperation by Debtors 56
4.10 New Capital Stock of Debtors 56
4.11 Estimated Claims Order(s) 56
4.12 Resolution of Disputed Claims 56
4.13 Reserves for Disputed Claims 57
4.14 Investment of Reserves 57
4.15 Excess Reserves 57
4.16 Bar Date for Fee Claims 57
4.17 Unclaimed Property 57
4.18 Non-Negotiated Checks 57
4.19 Returned Distributions 57
4.20 Claims Against Two or More Debtors 58
4.21 Direction to Parties 58
4.22 "Promptly After the Effective Date" 58
ARTICLE V MANAGEMENT OF WALTER INDUSTRIES 58
5.1 Corporate Governance; Directors and Officers 58
5.2 Reconstitution of Boards of Directors of
Debtors 58
5.3 Certain Duties of New Boards 59
5.4 Management Stock; New Incentive Plans 59
5.5 Funding of Retiree Health Benefits 59
5.6 Confirmation Bonus Awards 59
ARTICLE VI RELEASES AND INDEMNIFICATION 59
6.1 Release by Holders of Claims or Interests 59
6.2 Release By Debtors 60
6.3 Dismissal of Lawsuits 60
6.4 Indemnification 60
ARTICLE VII ENTERPRISE VALUE 61
7.1 Enterprise Value 61
ARTICLE VIII EXECUTORY CONTRACTS 61
8.1 Assumption of Executory Contracts 61
8.2 Cure of Defaults 61
8.3 Claims for Damages 61
8.4 Classification of Claims 61
ARTICLE IX RETENTION OF JURISDICTION 61
9.1 Jurisdiction of Court 61
ARTICLE X CONDITIONS PRECEDENT TO CONFIRMATION AND
EFFECTIVENESS 62
10.1 Conditions to Confirmation 62
10.2 Conditions to Effectiveness 63
ARTICLE XI CRAM DOWN 64
11.1 Cram Down 64
ARTICLE XII EFFECTS OF PLAN CONFIRMATION; TITLE TO
PROPERTY AND DISCHARGE 64
12.1 Vesting of Property 64
12.2 Discharge 64
12.3 Injunction 64
12.4 Effectiveness and Enforcement of Settlement
Agreements 65
ARTICLE XIII MISCELLANEOUS PROVISIONS 65
13.1 Revocation 65
13.2 Amendments 65
13.3 No Consolidation 65
13.4 Provisions as to Interest 65
13.5 No Attorneys' Fees 66
13.6 Post Confirmation Effect of Evidences of
Claims or Interests 66
13.7 Official Committees 66
13.8 Construction 66
13.9 Time 66
13.10 Tax Allocation of Consideration Paid to
Holders 66
13.11 Governing Law 66
13.12 Headings 66
13.13 Notice of Effectiveness 66
13.14 Notices 67
13.15 Not Admissible 67
13.16 Successors and Assigns 68
<PAGE>
EXHIBITS
1. Restated Certificate of Incorporation of Walter Industries
2. Summary of Terms for the New Senior Notes
3A. Veil Piercing Settlement Agreement
3B. Pre-LBO Bondholders Settlement Agreement
3C. Amended and Restated Veil Piercing Settlement Agreement
4. Summary of Terms for the Mid-State Trust IV Secured Notes
5. Summary of Terms for the Mid-State Trust II Residual Bonds
6. Summary of Terms for the New Unsecured Notes
7. Form of New Common Stock Registration Rights Agreement
8. Form of Qualified Securities Registration Rights Agreement
9. Rejected Executory Contracts
<PAGE>
CREDITORS' JOINT PLAN OF REORGANIZATION
DATED AS OF AUGUST 1, 1994
The Bondholders Committee (as defined), Lehman Brothers
Inc., Apollo (as defined), the Creditors Committee (as defined)
and the Ad Hoc Committee of Pre-LBO Bondholders (as defined)
(collectively, the "Proponents") hereby propose the following
joint plan of reorganization (as defined herein, the "Creditors'
Plan") pursuant to the provisions of chapter 11 of title 11 of
the United States Code, 11 U.S.C. Section 101, et seq.
Capitalized terms shall have the meanings set forth in
Article I hereof.
Unconsolidated Plan
The Debtors' Chapter 11 Cases are being jointly
administered pursuant to an order of the Court and the Creditors'
Plan is being presented as a joint plan of reorganization of the
Debtors for administrative purposes only. The Creditors' Plan is
not predicated upon a substantive consolidation of the Chapter 11
Cases and nothing herein shall be otherwise construed. Pursuant
to the Creditors' Plan, Claims and/or Interests with respect to
any Debtor shall be satisfied by such Debtor or its successor,
except that, as an element of the settlements provided for in the
Creditors' Plan, with respect to the distribution of Qualified
Securities to Holders of Allowed Claims in Classes U-4, U-5, U-6
and U-7, the issuer of such securities may be a Debtor other than
the Debtor against which the Claim is asserted. Accordingly,
except as noted in the previous sentence, Claims and Interests
have been classified in Article II hereof with respect to each
Debtor, and Article III hereof provides for the treatment of such
Allowed Claims and/or Interests by the Debtor to which such
Claims and/or Interests relate.
Mirror Liquidation Plan
Pursuant to an order of the Court dated November 5, 1990
(the "Mirror Liquidation Order"), certain of the Debtors,
including Hillsborough, Old Walter Industries, Jim Walter
Resources, JW Resources, Resources Holdings, United Land, and
Pipe Realty, completed plans of liquidation or merger, or
effected or received other distributions which had been approved
and adopted by them prior to the Filing Date as part of the
Debtors' mirror liquidation plans (the "Mirror Liquidation
Plan"). As a result of the completion of the Mirror Liquidation
Plan, certain Debtors have been completely liquidated or merged
with other Debtors and no longer exist as separate legal
entities. Pursuant to the Mirror Liquidation Order, all rights
of Creditors of Hillsborough, Old Walter Industries, Jim Walter
Resources, Resources Holdings, JW Resources, United Land, Pipe
Realty and any other Debtor affected by the Mirror Liquidation
Plan have been classified, and, except as otherwise set forth in
this paragraph, are addressed in the Creditors' Plan without
giving effect to corporate changes resulting from the completion
of the Mirror Liquidation Plan. Obligations, financial and
nonfinancial, of a Debtor under the Creditors' Plan shall
automatically be assumed and performed by its successor, if any,
under the Mirror Liquidation Plan. Where the Assets and
liabilities of a Debtor have been transferred to more than one
other Debtor pursuant to the Mirror Liquidation Plan, the
obligations under the Creditors' Plan of the transferring Debtor
shall be assumed and performed by the successor Debtors, each
successor Debtor being responsible for satisfying Allowed Claims
of a predecessor Debtor to the extent that the liabilities of the
predecessor Debtor were expressly assumed by such successor
Debtor pursuant to the Mirror Liquidation Plan.
Cross References
For ease of reference in the Creditors' Plan, any Allowed
Claim against any Debtor in any Class is lettered consistently
throughout all Classes, as indicated below. For example, Allowed
Claims with respect to U.S. Pipe in Class S-1 are included in
Class S-1AA, those in Class U-3 are included in Class U-3AA, and
so on. Allowed Claims and/or Interests with respect to each
Debtor are set forth in the following Classes:
A. Hillsborough--Classes S-1A, S-2A, S-6A, S-8A,
S-9A, S-10A, U-2A, U-3A, U4A, U-5A, U-7A, I-2A, I-3A, E-1A
and E-2A;
B. Best--Classes S-1B, S-8B, S-10B, U-2B, U-3B,
I-2B, U-7B, I-3B, SE-1B and SE-2B;
C. Best (Miss.)--Classes S-1C, S-8C, S-10C, U-2C,
U-3C, U-7C, I-2C, SE-1C and SE-2C;
D. Coast to Coast--Classes S-1D, S-8D, S-10D, U-2D,
U-3D, U-7D, I-2D, SE-1D and SE-2D;
E. Computer Holdings--Classes S-1E, S-2E, S-8E,
S-9E, S-10E, U-2E, U-3E, U7E, I-2E, I-3E, SE-1E and SE-2E;
F. Dixie--Classes S-1F, S-8F, S-10F, U-2F, U-3F,
U-7F, I-2F, SE-1F and SE-2F;
G. Hamer Holdings-- Classes S-1G, S-2G, S-8G, S-9G,
S-10G, U-2G, U-3G, U-7G, I-2G, I-3G, SE-1G and SE-2G;
H. Hamer Properties--Classes S-1H, S-8H, S-10H,
U-2H, U-3H, U-7H, I-2H, SE-1H and SE-2H;
I. Homes Holdings--Classes S-1I, S-2I, S-6I, S-8I,
S-9I, S-10I, U-2I, U-3I, U-4I, U-5I, U-7I, I-2I, I-3I,
SE-1I and SE-2I;
J. Computer Services-- Classes S-1J, S-5J, S-8J,
S-10J, U-2J, U-3J, U-7J, I-2J, SE-1J and SE-2J;
K. Jim Walter Homes--Classes S-1K, S-6K, S-8K,
S-10K, U-2K, U-3K, U-4K, U-5K, U-7K, I-2K, I-3K, SE-1K and
SE-2K;
L. JW Insurance--Classes S-1L, S-8L, S-10L, U-2L,
U-7L, U-3L, SE-1L and SE-2L;
M. Jim Walter Resources--Classes S-1M, S-2M, S-6M,
S-8M, S-9M, S-10M, U-2M, U-3M, U-7M, I-2M, SE-1M and
SE-2M;
N. Window Components (Wisc.)--Classes S-1N, S-8N,
S-10N, U-2N, U-3N, U-7N, I-2N, SE-1N and SE-2N;
O. JW Aluminum--Classes S-1O, S-2O, S-5O, S-8O,
S-9O, S-10O, U-2O, U-3O, U-7O, I-2O, SE-1O and SE-2O;
P. Resources Holdings--Classes S-1P, S-2P, S-6P,
S-8P, S-9P, S-10P, U-2P, U-3P, U-7P, I-2P, SE-1P and
SE-2P;
Q. JWI Holdings--Classes S-1Q, S-2Q, S-8Q, S-9Q,
S-10Q, U-2Q, U-3Q, U-7Q, I-2Q, SE-1Q and SE-2Q;
R. JW Walter--Classes S-1R, S-8R, S-10R, U-2R,
U-3R, U-7R, I-2R, SE-1R and SE-2R;
S. Window Components--Classes S-1S, S-2S, S-5S,
S-8S, S-9S, S-10S, U-2S, U-3S, U-7S, I-2S, SE-1S and
SE-2S;
T. Land Holdings--Classes S-1T, S-2T, S-8T, S-9T,
S-10T, U-2T, U-3T, U-7T, I-2T, I-3T, SE-1T and SE-2T;
U. Mid-State Homes--Classes S-10U, U-2U, U-3U,
U-7U, I-2U, I-3U, SE-1U and SE-2U;
V. Mid-State Holdings--Classes S-1V, S-2V, S-8V,
S-9V, S-10V, U-2V, U-3V, U-7V, I-2V, I-3V, SE-1V and
SE-2V;
W. Railroad Holdings--Classes S-1W, S-2W, S-8W,
S-9W, S-10W, U-2W, U-3W, U-7W, I-2W, I-3W, SE-1W and
SE-2W;
X. Sloss--Classes S-1X, S-2X, S-4X, S-5X, S-8X,
S-9X, S-10X, U-2X, U-3X, U-7X, I-1X, I-2X, SE-1X and
SE-2X;
Y. Southern Precision--Classes S-1Y, S-2Y, S-5Y,
S-8Y, S-9Y, S-10Y, U-2Y, U-3Y, U-7Y, 1-2Y, SE-1Y and
SE-2Y;
Z. United Land--Classes S-1Z, S-6Z, S-8Z, S-10Z,
U-2Z, U-3Z, U-4Z, U-5Z, U-7Z, I-2Z, SE-1Z and SE-2Z;
AA. U.S. Pipe--Classes S-1AA, S-2AA, S-5AA, S-6AA,
S-8AA, S-9AA, S-10AA, U-2AA, U-3AA, U-4AA, U-5AA, U-7AA,
I-2AA, SE-1AA and SE-2AA;
BB. Pipe Realty--Classes S-1BB, S-2BB, S-8BB,
S-9BB, S-10BB, U-2BB, U-3BB, U-7BB, I-2BB, I-3BB, SE-1BB
and SE-2BB;
CC. Vestal--Classes S-1CC, S-2CC, S-8CC, S-9CC,
S-10CC, U-2CC, U-3CC, U-7CC, I-2CC, SE-1CC and SE-2CC;
DD. Home Improvement--Classes S-10DD, U-2DD, U-3DD,
U-7DD, I-2DD, SE-1DD and SE-2DD;
EE. Old Walter Industries--Classes S-1EE, S-2EE,
S-3EE, S-6EE, S-7EE, S-8EE, S-9EE, S-10EE, U-1EE, U-2EE,
U-3EE, U-4EE, U-5EE, U-6EE, U-7EE, I-2EE, SE-1EE and
SE-2EE;
FF. Walter Land--Classes S-1FF, S-2FF, S-8FF,
S-9FF, S-10FF, U-2FF, U-3FF, U-7FF, I-2FF, I-3FF, SE-1FF
and SE-2FF;
GG. JW Resources--Classes S-1GG, S-8GG, S-10GG,
U-2GG, U-3GG, U-7GG, SE-1GG and SE-1GG.
ARTICLE I
DEFINITIONS
Unless otherwise provided in the Creditors' Plan, all
terms used herein shall have the meanings assigned to such terms
in the Code. For purposes of the Creditors' Plan, the following
terms (which appear in the Creditors' Plan as capitalized terms)
shall have the meanings set forth below, and such meanings shall
be equally applicable to the singular and plural forms of the
terms defined, unless the context otherwise requires.
1.1 "10 7/8% Indenture Trustee" shall mean the trustee
under the 10 7/8% Subordinated Debenture Indenture.
1.2 "10 7/8% Subordinated Debenture Claims" shall mean
all Claims arising under the 10 7/8% Subordinated Debentures and
the 10 7/8% Subordinated Debenture Indenture, other than Claims
for fees and expenses of the 10 7/8% Indenture Trustee.
1.3 "10 7/8% Subordinated Debenture Indenture" shall mean
the Indenture dated as of May 1, 1983, as amended, between
Original Jim Walter and Mellon Bank, N.A., as trustee, as assumed
as of January 7, 1988 by Old Walter Industries.
1.4 "10 7/8% Subordinated Debentures" shall mean the 10
7/8% Subordinated Debentures due 2008 of Old Walter Industries,
as successor to Original Jim Walter, issued pursuant to the 10
7/8% Subordinated Debenture Indenture.
1.5 "13 1/8% Indenture Trustee" shall mean the trustee
under the 13 1/8% Subordinated Note Indenture.
1.6 "13 1/8% Subordinated Note Claims" shall mean all
Claims arising under the 13 1/8% Subordinated Notes and the 13
1/8% Subordinated Note Indenture, other than Claims for fees and
expenses of the 13 1/8% Indenture Trustee.
1.7 "13 1/8% Subordinated Note Indenture" shall mean the
Indenture dated as of February l, 1983, as amended, between
Original Jim Walter and The Bank of New York, as successor
trustee to Irving Trust Company, as assumed as of January 7, 1988
by Old Walter Industries.
1.8 "13 1/8% Subordinated Notes" shall mean the 13 1/8%
Subordinated Notes due 1993 of Old Walter Industries, as
successor to Original Jim Walter, issued pursuant to the 13 1/8%
Subordinated Note Indenture.
1.9 "13 3/4% Indenture Trustee" shall mean the trustee
under the 13 3/4% Subordinated Debenture Indenture.
1.10 "13 3/4% Subordinated Debenture Claims" shall mean
all Claims arising under the 13 3/4% Subordinated Debentures and
the 13 3/4% Subordinated Debenture Indenture, other than Claims
for fees and expenses of the 13 3/4% Indenture Trustee.
1.11 "13 3/4% Subordinated Debenture Indenture" shall
mean the Indenture dated as of February 1, 1983, as amended,
between Original Jim Walter and The Bank of New York, as
successor trustee to Irving Trust Company, as assumed as of
January 7, 1988 by Old Walter Industries.
1.12 "13 3/4% Subordinated Debentures" shall mean the 13
3/4% Subordinated Debentures due 2003 of Old Walter Industries,
as successor to Original Jim Walter, issued pursuant to the 13
3/4% Subordinated Debenture Indenture.
1.13 "17% Indenture Trustee" shall mean the trustee under
the 17% Subordinated Note Indenture.
1.14 "17% Subordinated Note Claims" shall mean all Claims
arising under the 17% Subordinated Notes and the 17% Subordinated
Note Indenture, other than Claims for fees and expenses of the
17% Indenture Trustee.
1.15 "17% Subordinated Note Indenture" shall mean the
Indenture dated as of January 1, 1988, as amended, among Jim
Walter Homes, United Land and U.S. Pipe, as issuers,
Hillsborough, Old Walter Industries and Homes Holdings, as
guarantors, and IBJ Schroder Bank & Trust Company, as successor
trustee to Southeast Bank, N.A.
1.16 "17% Subordinated Notes" shall mean the Subordinated
Notes due 1996 of Jim Walter Homes, United Land and U.S. Pipe,
issued pursuant to the 17% Subordinated Note Indenture.
1.17 "Ad Hoc Committee of Pre-LBO Bondholders" shall mean
the unofficial committee of certain holders of 10 7/8%
Subordinated Debentures, 13 1/8% Subordinated Notes and 13 3/4%
Subordinated Debentures, the members of which consist of, as of
the date hereof, Gabriel Capital, L.P. and The Acacia Mutual Life
Insurance Company, each as voting members, and Mellon Bank, N.A.,
as indenture trustee, and The Bank of New York, as indenture
trustee, each as non-voting ex officio members.
1.18 "Administrative Claims" shall mean and be the
collective reference to, to the extent entitled to and allowed
priority in payment under Section 507(a)(1) of the Code or as may
be allowed by a Final Order: (a) all of the costs and expenses of
administration of the Chapter 11 Cases, including, without
limitation, the costs and expenses allowed under Section 503(b)
of the Code, the actual and necessary costs and expenses of
preserving the estate of each of the Debtors and operating the
business of each of the Debtors, all Fee Claims, any indebtedness
or obligations incurred or assumed by any of the Debtors, and any
fees or charges assessed against the estate of any of the Debtors
under 28 U.S.C. Section 1930; (b) Executory Contract Claims; (c)
Indenture Trustees Claims (of which the Claims of the Series B &
C Senior Note Trustee shall be Allowed Claims under Section
506(b) of the Code); (d) all of the costs and expenses incurred
in connection with the negotiation, execution and implementation
of the Veil Piercing Settlement, the Pre-LBO Bondholders
Settlement Agreement and the other settlements reached in
connection with the Creditors' Plan; and (e) all of the
Proponents Expenses.
1.19 "Affiliate" of a Person means any Person that
controls, is under common control with, or is controlled by, such
other Person. For purposes of this definition, "control" means
the ability of one Person to direct the management and policies
of another Person.
1.20 "Allowed Amount" shall mean:
(a) with respect to any Administrative Claim or
Priority Claim, the amount of such Claim as agreed to by the
Bondholders Committee and the Holder of such Claim and approved
by a Final Order of the Court or, failing agreement, the amount
thereof as fixed by a Final Order of the Court, including
with respect to an Executory Contract Claim, the amount of such
Claim as determined in accordance with the procedures set forth
in Section 8.2 of the Creditors' Plan;
(b) with respect to any Revolving Credit Bank
Claim, an amount equal to a Pro Rata portion of the sum of (i)
the Adjusted Revolving Loan Claim (as defined below) as of the
Effective Date, (ii) interest on the Adjusted Revolving Loan
Claim for the period from December 27, 1989 through October 31,
1992 at the Chemical Bank Prime Rate plus 1.5% per annum (the
"Stub Period Interest," and together with the Adjusted Revolving
Loan Claim, the "Revolving Credit Bank Claim Stub Period
Amount"), (iii) interest on the Revolving Credit Bank Claim Stub
Period Amount for the period November 1, 1992 through the earlier
to occur of (A) the date of the Initial Revolving Credit Bank
Claim Payment and (B) June 30, 1994 at the Chemical Bank Prime
Rate plus 1.5% per annum, compounded on each January 1,
April 1, July 1 and October 1 (the "Post-Stub Period Interest"),
(iv) in the event that all or any portion of the Initial
Revolving Bank Claim Payment is not made on or prior to June 30,
1994, the sum of (A) interest on the sum of the Stub Period
Interest and the Post-Stub Period Interest (or the unpaid
portion of either thereof) for the period from July 1, 1994
through the date on which the Initial Revolving Credit Claim
Payment is made (or such portion is paid), at 13% per annum,
and (B) interest on the Adjusted Revolving Loan Claim for
the period from July 1, 1994 through the date on which the
Initial Revolving Credit Claim Payment is made, at the Chemical
Bank Prime Rate plus 1.5% per annum, in the case of each of (A)
and
(B), compounded on each January 1, April 1, July 1 and
October 1, (v) interest on the Adjusted Revolving Loan Claim from
the date of the Initial Revolving Credit Bank Claim Payment
through the Effective Date at the Chemical Bank Prime Rate plus
1.5% per annum, compounded on each January 1, April 1,
July 1 and October 1 if not paid currently in accordance with
Section 3.6(b) and (vi) if the Amended and Restated Veil Piercing
Settlement Agreement becomes effective by its terms, additional
interest consisting of shares of Class B Common Stock having an
aggregate New Common Stock Value Per Share equal to
$28,220,625; provided, however, that in the event that any Holder
of an Allowed Old Common Stock Interest exercises an Equity Call
Option, (i) each Holder of a Revolving Credit Bank Claim shall
receive Cash in an amount equal to such Holder's Pro Rata
share of the aggregate Cash proceeds received from the exercise
of all such Equity Call Options, multiplied by a fraction, the
numerator of which is the number of shares of New Common Stock
that would otherwise be issued to Holders of Revolving Credit
Bank Claims under this paragraph, and the denominator of which
is the number of shares of New Common Stock to be issued under
the Creditors' Plan to Classes S-1, S-2, S-6 and U-4 through U-7;
and (ii) the number of shares of New Common Stock that each
Holder shall receive under this paragraph shall be reduced
by the amount of Cash received under clause (i) of this proviso
divided by the New Common Stock Value Per Share (the term
"Adjusted Revolving Loan Claim" shall mean, as of any date
commencing on December 27, 1989, $243,666,041 as reduced
from time to time by repayments of principal thereof and interest
thereon, including payments of $5,794,016 of Beijer Proceeds and
Bank Setoff Proceeds as of October 19, 1990 and $8,248,821 of
Apache Note Proceeds as of June 18, 1991);
(c) with respect to any Working Capital Bank Claim,
an amount equal to a Pro Rata portion of the sum of (i) the
Adjusted Working Capital Claim (as defined below) as of the
Effective Date, (ii) interest on the Adjusted Working Capital
Claim for the period from December 27, 1989 through
October 31, 1992 at the Chemical Bank Prime Rate plus 1.5% per
annum (the "Stub Period Interest," and together with the Adjusted
Working Capital Claim, the "Working Capital Bank Claim Stub
Period Amount"), (iii) interest on the Working Capital Bank Claim
Stub Period Amount for the period November 1, 1992 through the
earlier to occur of (A) the date of the Initial Working Capital
Bank Claim Payment and (B) June 30, 1994 at the Chemical Bank
Prime Rate plus 1.5% per annum, compounded on each January 1,
April 1, July 1 and October 1 (the "Post-Stub Period Interest"),
(iv) in the event that all or any portion of the Initial Working
Capital Bank Claim Payment is not made on or prior to June 30,
1994, the sum of (A) interest on the sum of the Stub Period
Interest and the Post-Stub Period Interest (or the unpaid portion
of either thereof) for the period from July 1, 1994 through the
date on which the Initial Working Capital Bank Claim Payment is
made (or such portion is paid), at 13% per annum, and (B)
interest on the Adjusted Working Capital Claim for the period
from July 1, 1994 through the date on which the Initial
Working Capital Bank Claim Payment is made, at the Chemical Bank
Prime Rate plus 1.5% per annum, in the case of each of (A) and
(B), compounded on each January 1, April 1, July 1 and
October 1, (v) interest on the Adjusted Working Capital Claim
from the date of the Initial Revolving Credit Bank Claim Payment
through the Effective Date at the Chemical Bank Prime Rate plus
1.5% per annum, compounded on each January 1, April 1, July 1
and October 1 if not paid currently in accordance with Section
3.7(b) and (vi) if the Amended and Restated Veil Piercing
Settlement Agreement becomes effective by its terms, additional
interest consisting of shares of Class B Common Stock having an
aggregate New Common Stock Value Per Share equal to $9,279,375;
provided, however, that in the event that any Holder of an
Allowed Old Common Stock Interest exercises an Equity Call
Option, (i) each Holder of a Working Capital Bank Claim shall
receive Cash in an amount equal to such Holder's Pro Rata share
of the aggregate Cash proceeds received from the exercise of all
such Equity Call Options, multiplied by a fraction, the numerator
of which is the number of shares of New Common Stock that would
otherwise be issued to Holders of Working Capital Bank Claims
under this paragraph, and the denominator of which is the number
of shares of New Common Stock to be issued under the Creditors'
Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the
number of shares of New Common Stock that each Holder shall
receive under this paragraph shall be reduced by the amount of
Cash received under clause (i) of this proviso divided by the
New Common Stock Value Per Share (the term "Adjusted Working
Capital Claim" shall mean, as of any date commencing on December
27, 1989, $80,245,869 as (x) increased from time to time by
letter of credit draws, including draws of $2,000,000 as
of January 3, 1990 and $900,000 as of June 11, 1990 and (y)
reduced from time to time by repayments of principal thereof and
interest thereon, including payments of $1,561,751 of Beijer
Proceeds and Bank Setoff Proceeds as of October 19, 1990
and $2,805,305 of Apache Note Proceeds as of June 18, 1991);
(d) with respect to any Revolving Credit Agents
Claim and Working Capital Agents Claim, the amount thereof
determined in accordance with the Revolving Credit Agreement and
Working Capital Agreement, respectively;
(e) with respect to any Series B & C Senior Note
Claim, an amount equal to the sum of (i) the principal amount
thereof due and owing as of the Filing Date, (ii) interest on
such principal amount accrued and unpaid as of the Filing Date
calculated at the non-default contract rate, (iii) (a) with
respect to amounts paid in Cash under Section 3.11(b) of the
Creditors' Plan, interest on such principal amount and interest,
accrued from the Filing Date to June 30, 1994 calculated at a
rate of 13.0% per annum, and accrued from July 1, 1994 to the
Effective Date calculated at a rate of 14 5/8% per annum;
and (b) with respect to amounts, if any, paid in New Senior Notes
under Section 3.11(b) of the Creditors' Plan, interest on such
principal amount and interest, accrued from the Filing Date
to June 30, 1994 calculated at a rate of 14.0% per annum,
and accrued from July 1, 1994 to the Effective Date at a rate of
14 5/8% per annum; and (iv) if the Amended and Restated Veil
Piercing Settlement Agreement becomes
effective by its terms, additional interest consisting of such
Holder's Pro Rata portion of shares of Class B Common Stock
having an aggregate New Common Stock Value Per Share equal to
$37,500,000; provided, however, that in the event that any
Holder of an Allowed Old Common Stock Interest exercises an
Equity Call Option, (i) each Holder of a Series B & C Senior Note
Claim shall receive Cash in an amount equal to such
Holder's Pro Rata share of the aggregate Cash proceeds
received from the exercise of all such Equity Call Options,
multiplied by a fraction, the numerator of which
is the number of shares of New Common Stock that would
otherwise be issued to Holders of Series B & C Senior Note Claims
under this paragraph, and the denominator of which is the number
of shares of New Common Stock to be issued under the Creditors'
Plan to Classes S-1, S-2, S-6 and U-4 through U-7; and (ii) the
number of shares of New Common Stock that each Holder
shall receive under this paragraph shall be reduced by the amount
of Cash received under clause (i) of this proviso divided by the
New Common Stock Value Per Share;
(f) with respect to any Grace Street Note Claim, an
amount equal to (i) as to a Claim for principal and interest, the
sum of (x) the principal amount thereof due and owing as of the
Filing Date, (y) interest on such principal amount accrued
and unpaid as of the Filing Date, calculated at the
non-default contract rate and (z) interest on such principal
amount accrued and unpaid from the Filing Date to
the Effective Date calculated at the non-default contract
rate, plus (ii) as to a Claim for reasonable fees and expenses of
payees under the Grace Street Notes, (x) the amount agreed to by
the Bondholders Committee and such payees and approved by
a Final Order of the Court or (y) the amount fixed by a
Final Order of the Court, minus in either case (iii) any amounts
applied by Walter Industries to repay any such Claim subsequent
to the Filing Date and prior to the Effective Date;
(g) with respect to any Secured Equipment Purchase
Claim, an amount equal to (i) as to a Claim for principal and
interest, the sum of (x) the principal amount thereof due and
owing as of the Filing Date, (y) interest on such principal
amount accrued and unpaid as of the Filing Date, calculated at
the non-default contract rate and (z) interest on such principal
amount accrued and unpaid from the Filing Date to the Effective
Date calculated at the non-default contract rate, minus (ii) any
amounts applied by the applicable Debtor to repay any such Claim
subsequent to the Filing Date and prior to the Effective
Date;
(h) with respect to any IRB Claim other than the
Sloss IRB Claim, an amount equal to the sum of the principal
payments thereunder due and owing as of the Effective Date
together with interest payments thereunder accrued and unpaid as
of the Effective Date, calculated at the non-default contract
rate, which principal payments or interest payments became due
either prior to or subsequent to the Filing Date and prior to the
Effective Date in accordance with the applicable indenture
(without giving effect to the acceleration, if any, of the
obligations underlying the applicable IRBs);
(i) with respect to the Sloss IRB Claim, an amount
equal to (i) as to a Claim for principal and interest, the sum of
(x) the principal amount thereof due and owing as of the Filing
Date, (y) interest on such principal amount accrued and
unpaid as of the Filing Date, calculated at the non-default
contract rate and (z) interest on such principal amount accrued
and unpaid from the Filing Date to the Effective Date calculated
at the non-default contract rate, minus (ii) any amounts applied
by Sloss to repay any such Claim subsequent to the Filing Date
and prior to the Effective Date;
(j) with respect to any Provident Life & Accident
Insurance Company Claim, an amount necessary to cure all defaults
and pay all damages in respect of the agreement underlying such
Provident Life & Accident Insurance Company Claim
(without giving effect to the acceleration, if any, of the
obligations underlying such agreement) such that any remaining
amount of such Provident Life & Accident Insurance Company Claim
may be reinstated in accordance with Section 1124(2) of the
Code;
(k) with respect to any Subordinated Note Claim, an
amount equal to (i) the unpaid principal amount of such
Subordinated Note due and owing as of the Filing
Date (less, in the case of any 10 7/8% Subordinated
Debenture Claims, the unamortized discount associated with such
10 7/8% Subordinated Debenture as of the Filing Date) together
with interest thereon accrued and unpaid as of the Filing
Date, calculated at the contract rate then in effect, and
(ii) only to the fullest extent that the payment thereof is
permitted by law and to the extent that the same
may be satisfied after all distributions are made in full
in respect of all other Allowed Claims, including the Allowed
Claim described in clause (i) above but excluding Claims in
Classes I-1 through I-3, the Pro Rata share of the aggregate
interest on the aggregate Allowed Claims described in
clause (i) above, from the Filing Date to the Effective Date
calculated at the applicable non-default contract rate(s), or in
the absence of a contract rate, at 9.0% per annum or such other
interest rate as the Court may determine;
(l) with respect to any Deficiency Claim, the
amount thereof as agreed to by the Bondholders Committee and the
Holder of such Claim and approved by a Final Order of the Court
or the amount thereof as fixed by a Final Order of the Court;
(m) with respect to any Convenience Class Claim or
Other Unsecured Claim, the sum of
(i) (A) if the Holder of such Claim did not
File a proof of claim with respect thereto on or before the Bar
Date the amount of such Claim as listed in the Debtors' Schedules
as not disputed, contingent or unliquidated; or (B) if the Holder
of such Claim Filed a proof of claim with respect thereto on or
before the Bar Date, the amount of such Claim as agreed to by the
Bondholders Committee and the Holder of such Claim and approved
by a Final Order of the Court, or, in the absence of such an
agreement, (x) the amount stated in such proof of claim if no
objection to such proof of claim was interposed within the
applicable period of time fixed by the Code, the Bankruptcy Rules
or the Court, or (y) the amount thereof as fixed by a Final Order
of the Court if an objection to such proof of claim was
interposed within the applicable period of time fixed by the
Code, the Bankruptcy Rules or the Court ("Pre-Filing Date
Unsecured Allowed Amount"), plus
(ii) interest on the Pre-Filing Date
Unsecured Allowed Amount from the Filing Date to the Effective
Date, calculated at the General Unsecured Interest Rate as from
time to time in effect;
(n) with respect to any Other Secured Claim, (i) if
a Holder of such Claim did not file a proof of claim with respect
thereto with the Court on or before the Bar Date, the amount of
such Claim as listed in the Debtors' Schedules as not disputed,
contingent or unliquidated; or (ii) if the Holder of such Claim
did file a proof of claim with respect thereto with the Court on
or before the Bar Date, the amount of such Claim as agreed to by
the Bondholders Committee and the Holder of such Claim and
approved by a Final Order, or, in the absence of such agreement,
(A) the amount stated in such proof of claim if no objection
to such proof of claim was interposed within the applicable
period of time fixed by the Code, the Bankruptcy Rules or the
Court or (B) the amount thereof as fixed by a Final Order, if an
objection to such proof of claim was interposed within the
applicable period of time fixed by the Code, the Bankruptcy Rules
or the Court;
(o) with respect to all of the Allowed Veil
Piercing Claims in the aggregate, the sum of (A) the Veil
Piercing Claims Amount and (B) the sum of (i) $75,000,000 (but
only if the Amended and Restated Veil Piercing Settlement
Agreement does not become effective by its terms) and (ii)
the Senior Claim Differential, in each case in the form of
consideration set forth in Section 3.22 hereof; and
(p) with respect to any Allowed Claim not otherwise
specified in (a) through (o) above, the amount of such Claim as
agreed to by the Bondholders Committee and the Holder of such
Claim and approved by a Final Order, or, in the absence of such
an agreement, the amount thereof as fixed by a Final Order of the
Court.
1.21 "Allowed Claim" shall mean any Claim for which an
Allowed Amount has been determined.
1.22 "Allowed Indemnity Claim" shall mean an Allowed
Claim for indemnification, reimbursement or contribution against
any Debtor[sp10d]; provided, however, that any such Claim shall
not be an Allowed Indemnity Claim if the agreement or other
document giving rise to the Claim is void or voidable.
1.23 "Allowed Old Common Stock Interest" shall mean any
interest in the Old Common Stock, exclusive of any shares of such
stock held in treasury, which is registered as of the Effective
Date in such stock register as may be maintained by or on behalf
of Walter Industries and as to which no objection has been made
or which has been made and which has been allowed by a Final
Order.
1.24 "Amended and Restated Veil Piercing Settlement
Agreement" shall mean an agreement in substantially the form
attached as Exhibit 3C hereto, the conditions precedent to the
effectiveness of which are set forth in Section 7(a) therein.
1.25 "Apache Note Proceeds" shall mean Cash collections
received by Jim Walter Resources subsequent to the Filing Date
from Jasper Corp. in the amount of $10,704,000 from payments on
the non-recourse promissory note dated May 26, 1988 payable to
Jim Walter Resources in the original principal amount of
$25,000,000, together with $350,126 of interest earned thereon
prior to application thereof to amounts owed to the Revolving
Credit Banks and the Working Capital Banks, or a total of
$11,054,126.
1.26 "Apollo" shall mean AIF II, L.P., certain Affiliates
of AIF II, L.P. and certain accounts managed or controlled by
such Affiliates.
1.27 "Applicable Consideration" shall mean the
consideration, limited exclusively to Qualified Securities and
New Common Stock, available for distribution on account of
Subordinated Note Claims, which shall be allocated to Holders of
Allowed Class U-4 Claims, Allowed Class U-5 Claims and Allowed
Class U-6 Claims, as follows:
(a) To the extent elected by Holders of Class U-4
Claims pursuant to the Subordinated Note Claim Election, the
first $240,000,000 principal amount of such Qualified Securities
(to the extent available) shall be used to satisfy the Allowed
Claims of Class U-4;
(b) To the extent elected by Holders of Class U-4
Claims (other than as to Class U-4 Claims satisfied with
Qualified Securities pursuant to paragraph (a) of this Section),
Class U-5 Claims and Class U-6 Claims pursuant to the
Subordinated Note Claim Election, the remaining principal amount
of such Qualified Securities (to the extent available), plus the
principal amount, if any, of Qualified Securities provided for in
clause (a) above but not elected by Holders of Class U-4
Claims, shall be used to satisfy the Allowed Claims of Class U-4,
U-5 and U-6, as follows:
(i) The next $80,000,000 (plus, whether
positive or negative, 80/700 of the difference between the amount
of Qualified Securities actually available for distribution under
this paragraph (b), and the amount of Qualified Securities that
would be available under this paragraph (b) if there were
$700,000,000 principal amount of Qualified Securities available,
in the aggregate, for distribution to Classes U-4
through U-7) principal amount of such Qualified Securities (to
the extent available) shall be used to satisfy the Allowed Claims
of Class U-6;
(ii) the remaining principal amount of such
Qualified Securities (to the extent available) shall be used to
satisfy the remaining Class U-4 and Class U-5 Allowed Claims, pro
rata (after deducting from Class U-4 the amount of Claims
satisfied by paragraph (a) of this Section) among Classes U-4 and
U-5; and
(iii) the remaining principal amount of such
Qualified Securities (to the extent available) shall be used to
satisfy the remaining Class U-6 Claims;
(c) any of such Qualified Securities remaining
after giving effect to (a) and (b) above shall be applied to
satisfy the Allowed Claims of Classes U-4, U-5 and U-6 to the
extent not already satisfied by Qualified Securities after giving
effect to (a) and (b) above, pro rata, based on the amount
of Allowed Claims not satisfied by Qualified Securities pursuant
to (a) and (b) above, among all such remaining Subordinated Note
Claims; and
(d) The New Common Stock available for distribution
on account of Subordinated Note Claims shall be allocated as
follows: each Holder shall receive shares of New Common Stock
(which shall be Class A Common Stock in the case of Class U-4 and
Class U-5 Claims, and Class B Common Stock in the case of Class
U-6 Claims) having an aggregate New Common Stock Value equal
to (i) such Holder's Pro Rata share of the aggregate principal
amount of Qualified Securities and the aggregate New Common Stock
Value, in each case available for distribution in respect of
Subordinated Note Claims after all distributions are made in
respect of Veil Piercing Claims in accordance with Section 3.22
of the Creditors' Plan, and after all distributions of New Common
Stock are made in respect of Revolving Credit Bank Claims,
Working Capital Bank Claims and Series B & C Senior Note Claims;
less (ii) the aggregate principal amount of Qualified
Securities to be distributed in respect of such Subordinated Note
Claim; provided, however, that in the event that the
distributions to be made to Holders of Subordinated Note Claims
under the Creditors' Plan would result in the receipt by such
Holders of securities having a value in excess of their Allowed
Claims, any such excess shall be distributed to Holders of Class
E-1 Interests pursuant to Section 3.26 of the Creditors' Plan in
shares of Class B Common Stock having an aggregate New Common
Stock Value Per Share equal to such excess; provided, further,
that in the event that any Holder of an Allowed Old Common Stock
Interest exercises an Equity Call Option, (i) each Holder
of a Subordinated Note Claim shall receive Cash in an amount
equal to such Subordinated Noteholder's pro rata share (based on
the number of shares of New Common Stock that would otherwise
have been issued to such Holder under this paragraph (d), divided
by all shares of New Common Stock that would otherwise have
been issued to all Holders of Subordinated Note Claims
under this paragraph (d)) of the aggregate Cash proceeds received
from the exercise of all such Equity Call Options, multiplied by
a fraction, the numerator of which is the number of shares
of New Common Stock that would otherwise be issued to Holders of
Subordinated Note Claims under this paragraph (d), and the
denominator of which is the number of shares of New Common Stock
to be issued under the Creditors' Plan to Classes S-1,
S-2, S-6 and U-4 through U-7; and (ii) the number of shares of
New Common Stock that each Holder shall receive under this
paragraph (d) shall be reduced by the amount of Cash received
under clause (i) of this proviso divided by the New Common
Stock Value Per Share.
Qualified Securities and New Common Stock available for
distribution in respect of Subordinated Note Claims shall not
include Qualified Securities and New Common Stock to be
distributed to satisfy Allowed Veil Piercing Claims in accordance
with Section 3.22 of the Creditors' Plan, and shall not include
New Common Stock to be distributed to satisfy Allowed Revolving
Credit Bank Claims, Allowed Working Capital Bank Claims or
Allowed Series B & C Senior Note Claims in accordance with
Sections 3.6, 3.7 and 3.11 of the Creditors' Plan, respectively.
1.28 "Assets" shall mean, collectively, all of the
property of a Debtor's estate under Section 541 of the Code,
including the assets, property, interests (including equity
interests) and effects, real and personal, tangible and
intangible, wherever situated of the applicable Debtor as of the
Confirmation Date, including, but not limited to, all rights,
claims and causes of action arising under the Code or other
applicable law, if any, including, but not limited to, claims and
causes of action under Sections 510, 544, 545, 547, 548, 549, 550
and 553 of the Code; which rights, claims and causes of action
may be pursued by the reorganized Debtors, as appropriate, in
accordance with what is in the best interests, and for the
benefit, of the reorganized Debtors.
1.29 "Ballot Date" shall mean the date set by the Court
as the last date for timely submission by a Holder of a Claim or
Interest of a ballot accepting or rejecting the Creditors' Plan.
1.30 "Bank Agents" shall mean, collectively, the Working
Capital Agents and the Revolving Credit Agents.
1.31 "Bank Setoff Proceeds" shall mean the Cash balances
as at the Filing Date in the aggregate amount of $1,481,772 in
accounts maintained by certain of the Debtors with the Revolving
Credit Banks and the Working Capital Banks, as the case may be,
against which Cash balances the Revolving Credit Banks and the
Working Capital Banks, as the case may be, were authorized to
exercise their respective rights of setoff pursuant to an order
of the Court.
1.32 "Bankruptcy Rules" shall mean the Federal Rules of
Bankruptcy Procedure, as amended from time to time, and the local
rules of the Court, as applicable to the Chapter 11 Cases.
1.33 "Bar Date" shall mean the last day to file a proof
of claim with the Court as fixed with respect to such claim by a
Final Order of the Court issued pursuant to Bankruptcy Rule
3003(c)(3).
1.34 "Beijer Proceeds" shall mean the net Cash proceeds
received by Old Walter Industries from the sale, pursuant to a
tender offer, of all shares of stock of Beijer Industries AB
owned by Old Walter Industries in the amount of $5,605,000,
together with $268,995 of interest earned thereon prior to
application thereof to amounts owed to the Revolving Credit Banks
and the Working Capital Banks, or a total of $5,873,995.
1.35 "Best" shall mean Best Insurors, Inc., a Debtor in
Possession in the jointly administered Chapter 11 Cases pending
in the Court under Case No. 89-9740-8P1.
1.36 "Best (Miss.)" shall mean Best Insurors of
Mississippi, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9737-8P1.
1.37 "Bondholder Proponents" shall mean and be the
collective reference to Lehman Brothers Inc. and Apollo, solely
in their individual capacity.
1.38 "Bondholders Committee" shall mean the Official
Bondholders Committee of the Debtors appointed by the United
States Trustee in the Chapter 11 Cases pursuant to Section 1102
of the Code, as such committee may be constituted from time to
time.
1.39 "Business Day" shall mean a day other than a
Saturday, Sunday or other day on which commercial banks in the
State of Florida are authorized or required by law to close.
1.40 "Cash" shall mean lawful currency of the United
States of America, or any equivalent thereof.
1.41 "Celotex" shall mean The Celotex Corporation, and/or
any predecessor thereof or successor thereto and all of their
respective present and former parents, Affiliates and
subsidiaries.
1.42 "Celotex Bankruptcy Court" shall mean (a) the United
States Bankruptcy Court for the Middle District of Florida, Tampa
Division with jurisdiction over the reorganization case of The
Celotex Corporation (or such other court as may be administering
such cases), (b) to the extent of any withdrawal of reference
made pursuant to 28 U.S.C. Section 157, the United States
District Court for the Middle District of Florida, and (c) with
respect to any particular proceeding within any such case, any
other court which may be exercising jurisdiction over such
proceeding.
1.43 "Celotex/JWC Released Party" shall mean any present
or former director, officer, partner, shareholder, employee,
agent, advisor or representative of Jim Walter Corporation or The
Celotex Corporation or any of their respective subsidiaries (in
each case only in such Person's aforementioned capacity and not
otherwise) that, subject to the last two sentences hereof, (A)
shall have become a signatory to the Veil Piercing Settlement
Agreement, following a written request of the Bondholder
Proponents, on or prior to the later of (i) thirty (30) days
after a copy of the Veil Piercing Settlement Agreement is sent to
such person or entity or a representative thereof, and (ii) the
day prior to the date on which the Court holds the hearing on the
adequacy of the disclosure statements respecting the Creditors'
Plan and the plan filed by the Debtors, and (B) shall have taken
no action(s) subsequent to becoming a signatory to the Veil
Piercing Settlement Agreement which, in the determination of the
Bondholder Proponents, would be reasonably likely to (i) impede
the prompt distribution or approval of the disclosure statement
relating to the Creditors' Plan; (ii) impede the prompt
confirmation and effectiveness of the Creditors' Plan; (iii)
impede the use of the Negotiated Enterprise Value as the
enterprise valuation of the Debtors for all purposes under the
Creditors' Plan and the Chapter 11 Cases; (iv) impede the prompt
realization of Finality (as defined in the Veil Piercing
Settlement Agreement); or (v) result in a breach of the Veil
Piercing Settlement Agreement; provided, that a director,
officer, partner, shareholder, employee, agent, advisor or
representative of Jim Walter Corporation or The Celotex
Corporation or any of their respective subsidiaries shall be a
Celotex/JWC Released Party only if Jim Walter Corporation or The
Celotex Corporation, respectively, has become a signatory to the
Veil Piercing Settlement Agreement within the time permitted as
set forth in the Veil Piercing Settlement Agreement. If the
Court finds that the settlement set forth in the Veil Piercing
Settlement Agreement is not reasonable or the Creditors' Plan is
not confirmable unless each or any of such person(s) or
entity(ies) is given a further opportunity to become a signatory
to the Veil Piercing Settlement Agreement and receiving the
benefits specified herein for a Celotex/JWC Released Party by a
specific date(s) set by the Court, then the date specified in (A)
hereof shall be the date(s) set by the Court; provided, further;
that the Bondholder Proponents shall have the right, exercisable
on or before the Effective Date, to waive the date(s) specified
herein for any such person(s) or entity(ies). If the Court or
the Celotex Bankruptcy Court determines that a particular
Celotex/JWC Released Party(ies) is not entitled to or should not
be granted the release specified in Section 4(b) of the Veil
Piercing Settlement Agreement, then such person(s) or entity(ies)
shall not be entitled to and shall not receive such release.
1.44 "Celotex Settlement Fund Recipient" shall mean The
Celotex Corporation for the exclusive benefit of the Veil
Piercing Claimants and the Settling Equityholders, if any, or
such other Person(s) designated by a Final Order entered by the
Celotex Bankruptcy Court to act in the place and stead and on
behalf of The Celotex Corporation, including without limitation,
any entity established pursuant to a confirmed plan of
reorganization for The Celotex Corporation to hold, manage,
liquidate, distribute or otherwise assume responsibility for the
consideration to be distributed in respect of Veil Piercing
Claims under the Veil Piercing Settlement Agreement and/or the
Creditors' Plan and any liabilities arising therefrom or in
connection therewith.
1.45 "Chapter 11 Cases" shall mean each of the
reorganization cases of the Debtors listed in the caption on the
cover page of the Creditors' Plan, all of which are being jointly
administered under Case No. 89-9715-8P1.
1.46 "Charter" shall mean the Restated Certificate of
Incorporation of Walter Industries, which shall be substantially
in the form of Exhibit 1 attached hereto, subject to modification
if, and only to the extent, the Court finds that the voting
and/or conversion rights of the Class A Common Stock are required
to be modified in order to comply with Section 1123(a)(6) of the
Code.
1.47 "Chemical Bank Prime Rate" shall mean the rate of
interest publicly announced by Chemical Bank in New York, New
York from time to time as its reference rate. The reference rate
is not intended to be the lowest rate of interest charged by
Chemical Bank in connection with extensions of credit.
1.48 "Claim" shall mean a claim against one or more of
the Debtors within the meaning of Section 101(5) of the Code
excluding current commercial payables incurred in the ordinary
course of business after the Filing Date.
1.49 "Class" shall mean any group of Claims or Interests,
as classified pursuant to Article II of the Creditors' Plan.
1.50 "Class A Common Stock" shall mean the Class A Common
Stock, par value $.01 per share, of Walter Industries, to be
issued on the Effective Date. The Class A Common Stock shall
have the special voting and conversion rights set forth in the
Charter, subject to modification if, and only
1.51 "Class B Common Stock" shall mean the Class B Common
Stock, par value $.01 per share, of Walter Industries, to be
issued on the Effective Date.
1.52 "Class S-6 Fund" shall have the meaning set forth in
Section 3.11 of the Creditors' Plan.
1.53 "Coast to Coast" shall mean Coast to Coast
Advertising, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9727-8P1.
1.54 "Code" shall mean title 11 of the United States
Code, 11 U.S.C. Section 101 et seq., as in effect on the Filing
Date, together with all amendments, modifications and
replacements as the same exist on any relevant date to the extent
applicable to the Chapter 11 Cases.
1.55 "Computer Holdings" shall mean Computer Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9724-8P1.
1.56 "Computer Services" shall mean Jim Walter Computer
Services, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9723-8P1.
1.57 "Confirmation" shall mean the entry by the Court of
the Confirmation Order.
1.58 "Confirmation Date" shall mean the date on which the
Court enters the Confirmation Order.
1.59 "Confirmation Order" shall mean the order of the
Court confirming the Creditors' Plan and approving the
transactions and settlements contemplated therein.
1.60 "Convenience Class Claims" shall mean (a) any
Unsecured Claim (other than an Old Walter Industries IRB Claim)
having a Pre-Filing Date Unsecured Amount equal to or less than
$1,000 and (b) any Other Unsecured Claim as to which the Holder
thereof agrees to reduce the Pre-Filing Date Unsecured Allowed
Amount to $1,000.
1.61 "Creditor" shall mean a creditor of one or more of
the Debtors within the meaning of Section 101(10) of the Code.
1.62 "Creditors Committee" shall mean the Official
Committee of General Unsecured Creditors of the Debtors appointed
by the United States Trustee in the Chapter 11 Cases pursuant to
Section 1102 of the Code, as such committee may be constituted
from time to time.
1.63 "Creditors' Plan" shall mean the Creditors' Joint
Plan of Reorganization dated as of August 1, 1994, proposed by
the Proponents and filed with the Court on August 2, 1994, as it
may be amended or modified from time to time, together with all
exhibits thereto.
1.64 "Debtor in Possession" shall mean any of the
Debtors, as debtor in possession in the applicable Chapter 11
Case.
1.65 "Debtors" shall mean Hillsborough, Best, Best
(Miss.), Coast to Coast, Computer Holdings, Dixie, Hamer
Holdings, Hamer Properties, Homes Holdings, Computer Services,
Jim Walter Homes, JW Insurance, Jim Walter Resources, Window
Components (Wisc.), JW Aluminum, JW Resources, Resources
Holdings, JWI Holdings, JW Walter, Window Components, Land
Holdings, Mid-State Homes, Mid-State Holdings, Railroad Holdings,
Sloss, South Precision, United Land, U.S. Pipe, Pipe Realty,
Vestal, Home Improvement, Old Walter Industries and Walter Land,
as Debtors in Possession under the Chapter 11 Cases.
1.66 "Deficiency Claim" shall mean the unsecured portion
of any Claim determined in accordance with Section 506(a) of the
Code which is unsecured, in whole or in part, as of the
Confirmation Date.
1.67 "Demand" shall mean a demand for or right to
payment, present or future, that was not a Claim during the
proceedings leading to the Confirmation of the Creditor's Plan,
arising out of the same or similar conduct or events that gave
rise to the Veil Piercing Claims.
1.68 "Director and Officer Indemnification Agreement"
shall mean the indemnification agreement to be entered into as of
the Effective Date by Walter Industries and its direct and
indirect subsidiaries and the directors and certain officers
thereof.
1.69 "Disclosure Statement" shall mean the disclosure
statement (and all exhibits and schedules annexed thereto or
referenced therein) that relate to the Creditors' Plan and that
was approved pursuant to Section 1125 of the Code and an Order
entered by the Court on August 2, 1994, as such disclosure
statement may be amended, modified or supplemented.
1.70 "Disputed Claim" shall mean any Claim or any portion
thereof which is not an Allowed Claim. In the event that any
part of a Claim is disputed, such Claim in its entirety shall be
deemed a Disputed Claim for purposes of distribution under the
Creditors' Plan unless the Bondholders Committee and the holder
thereof otherwise agree or the Court otherwise orders.
1.71 "Dixie" shall mean Dixie Building Supplies, Inc., a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9741-8P1.
1.72 "Effective Date" shall mean that Business Day
selected by the Bondholder Proponents which shall be not more
than ninety (90) days after the date on which all conditions set
forth in Section 10.2 of the Creditors' Plan have been satisfied
or waived.
1.73 "Election Procedure" shall mean, for each of the
Equity Call Option, the Series B & C Senior Note Election and the
Subordinated Note Claim Election, the following procedure: (i)
applicable election forms shall be mailed together with, and at
the same time as, the mailing of ballots for the purpose of
accepting or rejecting the Creditors' Plan; (ii) the applicable
election form shall be returned so as to be received on or before
the Ballot Date; (iii) in the event that the Effective Date does
not, or is not anticipated to, occur on or before December 31,
1994, the previously sent election forms shall be disregarded,
the elections shall be reconducted and the applicable election
forms shall be sent to Holders as of a recent date selected by
the Bondholder Committee, which forms shall be returned so as to
be received during the 30 day period after such forms are resent;
provided, that such 30 day period shall expire not more than 45
days prior to the Effective Date (if such 30 day period does
expire more than 45 days prior to the Effective Date, the
procedure in this clause (iii) shall be repeated until this
condition is fulfilled).
1.74 "Equity Call Option" shall have the meaning set
forth in Section 3.26 of the Creditors' Plan.
1.75 "Equity Call Option Election Form" shall mean the
election form, sent in accordance with the Election Procedure, to
each Person that held an Old Common Stock Interest as of the date
on which the order approving the Disclosure Statement is entered
(or as of a later date if a new election is required, as provided
in the Election Procedure), upon which such Person may exercise
its Equity Call Option (if it is eligible to do so under Section
3.26 of the Creditors' Plan), the form of which election form
shall have been approved by the Court.
1.76 "Estimated Claims Order" shall mean any Order of the
Court that estimates Claims that are Disputed Claims to aid in
voting on the Creditors' Plan and/or in establishing the
effectiveness of the Creditors' Plan.
1.77 "Executory Contract" shall mean any unexpired
contract or lease entered into prior to the Filing Date,
including, but not limited to, any employment or severance
contract or agreement, as contemplated by Section 365 of the
Code, in effect on the Confirmation Date, between any of the
Debtors and any other Person or Persons.
1.78 "Executory Contract Claim" shall mean any Claim
arising under Section 365(b)(1)(A) and (B) of the Code with
respect to an Executory Contract heretofore or hereafter assumed
by the Debtors pursuant to Section 365(a) or Section 1123(b)(2)
of the Code. An Executory Contract Claim shall not mean or
include any Claim arising as a result of any Debtor's rejection
of an Executory Contract pursuant to Section 365(a) or Section
1123(b)(2) of the Code.
1.79 "Federal Excise Tax and Reclamation Claims" shall
mean, collectively, Claims of the Federal Government for the
Black Lung Excise Tax under the Black Lung Benefits Act of 1977
and of the United States Department of the Interior, Office of
Surface Mining, for reclamation fees under Title IV of the
Surface Mining Control and Reclamation Act of 1977, that are
entitled to priority in payment under Section 507(a)(7) of the
Code.
1.80 "Federal Income Tax Claims" shall mean all Claims of
the Internal Revenue Service that are entitled to priority in
payment under Section 507(a)(7) of the Code.
1.81 "Fee Applications" shall mean applications of
Professional Persons under Section 330, 331, 503(b) or 1129(a)(4)
of the Code for allowance of compensation and reimbursement of
expenses in the Chapter 11 Cases.
1.82 "Fee Claim" shall mean a Claim under Section 330,
503(b) or 1129(a)(4) of the Code for allowance of final
compensation and reimbursement of expenses in the Chapter 11
Cases.
1.83 "Filed" shall mean delivered to, received by and
entered upon the legal docket of any of the Debtors by the Clerk
of the Court.
1.84 "Filing Date" shall mean with respect to each of the
Debtors, other than JW Resources, December 27, 1989, and with
respect to JW Resources, December 3, 1990.
1.85 "Final Order" shall mean an order, judgment, ruling
or decree issued and entered by the Court or by any state or
other federal court or other tribunal located in one of the
states, territories or possessions of the United States or the
District of Columbia that has not been reversed, stayed, modified
or amended and as to which the time to appeal or petition for
reargument, rehearing or certiorari has expired, and as to which
no appeal, reargument, petition for certiorari, or rehearing is
pending or as to which any right to appeal, reargue, petition for
certiorari or seek rehearing has been waived in writing in a
manner satisfactory to the Bondholder Proponents or, if an
appeal, reargument, petition for certiorari, or rehearing thereof
has been denied, the time to take any further appeal or to seek
certiorari or further reargument or rehearing has expired.
1.86 "First Hearing Day" shall have the meaning set forth
in Section 4.16 of the Creditors' Plan.
1.87 "General Unsecured Interest Rate" shall mean (i) 6
1/2% per annum from the Filing Date until the Confirmation Date,
and (ii) thereafter, either (x) a variable rate equal to the
Chemical Bank Prime Rate as from time to time in effect, not to
exceed 10% per annum, or (y) a fixed rate equal to 6 1/2% per
annum. The option specified in clause (ii) shall be selected in
accordance with the Other Unsecured Claim Election.
1.88 "Governmental Unit" shall mean a governmental unit
as such term is defined in Section 101(27) of the Code.
1.89 "Grace Street Note Claims" shall mean all Claims
arising under the Grace Street Notes, including Claims thereunder
for fees and expenses of the payees thereof.
1.90 "Grace Street Notes" shall mean, collectively, the
two promissory notes, each dated March 19, 1971 and made by Paul
G. Goodman in the original principal amount of $50,000, one in
favor of D. Crawford Freeman and the other in favor of Fred
Halling, as assumed by Old Walter Industries.
1.91 "Hamer Holdings" shall mean Hamer Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9735-8P1.
1.92 "Hamer Properties" shall mean Hamer Properties,
Inc., a Debtor in Possession in the jointly administered Chapter
11 Cases pending in the Court under Case No. 89-9739-8P1.
1.93 "Hillsborough" shall mean Hillsborough Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9715-8P1,
prior to its merger with Old Walter Industries pursuant to the
Mirror Liquidation Plan.
1.94 "Holder" shall mean the owner of any Claim or
Interest.
1.95 "Home Improvement" shall mean Walter Home
Improvement, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9722-8P1.
1.96 "Homes Holdings" shall mean Homes Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9742-8P1.
1.97 "IDB of Birmingham" shall mean the Industrial
Development Board of the City of Birmingham, Alabama.
1.98 "Indenture Trustees" shall mean, collectively, the
10 7/8% Indenture Trustee, the 13 1/8% Indenture Trustee, the 13
3/4% Indenture Trustee, the 17% Indenture Trustee, the Senior
Subordinated Indenture Trustee, the Series B & C Senior Note
Trustee, the Intercompany IRB Trustee, the Sloss IRB Trustee and
the Old Walter Industries IRB Trustees.
1.99 "Indenture Trustees Claims" shall mean all Claims
for reasonable fees and expenses of the Indenture Trustees under
the relevant indenture(s) as to which they are the trustee.
1.100 "Initial Revolving Credit Bank Claim Payment" shall
have the meaning set forth in Section 3.6(a) of the Creditors'
Plan.
1.101 "Initial Working Capital Bank Claim Payment" shall
have the meaning set forth in Section 3.7(a) of the Creditors'
Plan.
1.102 "Intercompany IRB" shall mean the Series A
Industrial Revenue Bonds issued under the Intercompany IRB
Indenture in the original aggregate principal amount of
$5,000,000.
1.103 "Intercompany IRB Claims" shall mean all Claims
arising under the Intercompany IRB and the Intercompany IRB
Indenture, other than Claims thereunder for fees and expenses of
the Intercompany IRB Trustee.
1.104 "Intercompany IRB Indenture" shall mean the
indenture dated as of May 1, 1983 among Sloss, the IDB of
Birmingham and AmSouth Bank N.A., as trustee.
1.105 "Intercompany IRB Trustee" shall mean the trustee
under the Intercompany IRB Indenture.
1.106 "Interest" shall mean the rights arising out of any
equity securities of any of the Debtors, including Old Common
Stock and Subsidiary Common Stock.
1.107 "IRB Claims" shall mean, collectively, the Sloss
IRB Claim, the Old Walter Industries IRB Claims and the
Intercompany IRB Claims.
1.108 "IRBs" shall mean, collectively, the Sloss IRB, the
Old Walter Industries IRBs and the Intercompany IRB.
1.109 "JW Aluminum" shall mean JW Aluminum Company, a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9718-8P1.
1.110 "JW Insurance" shall mean Jim Walter Insurance
Services, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9731-8P1.
1.111 "JW Resources" shall mean JW Resources, Inc., a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 90-11997- 8P1.
1.112 "JW Walter" shall mean J.W. Walter, Inc., a Debtor
in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9717-8P1.
1.113 "JWI Holdings" shall mean J.W.I. Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9721-8P1.
1.114 "Jim Walter Homes" shall mean Jim Walter Homes,
Inc., a Debtor in Possession in the jointly administered Chapter
11 Cases pending in the Court under Case No. 89-9746-8P1.
1.115 "Jim Walter Resources" shall mean Jim Walter
Resources, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9738-8P1.
1.116 "KKR Affiliates" shall mean and be the collective
reference to Kohlberg Kravis Roberts & Co., KKR Associates and
any Person that is or has ever been a director, officer, partner,
employee, agent or representative of either of them.
1.117 "Land Holdings" shall mean Land Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under the Case No.
89-9720-8P1.
1.118 "LBO-Related Issues" shall mean and be the
collective reference to all theories or bases of recovery
recognizable at law, in admiralty or in equity under the laws of
any jurisdiction that are held or asserted by or that may be held
or asserted by any Debtor or any Holder of a Claim or Interest in
any Class other than Class U-7, in respect of such Claim or
Interest, directly or indirectly based upon, arising out of or in
connection with the leveraged acquisition in 1987 of Original Jim
Walter by a group of investors led by Kohlberg Kravis Roberts &
Co. and all transactions consummated as a part thereof or in
connection therewith, including without limitation the
acquisition of the capital stock of the Debtors, the consummation
of the transactions contemplated by the Agreement and Plan of
Merger dated as of August 12, 1987, and the financing,
reorganization, asset disposition and other transactions
consummated as a part thereof or in connection therewith, whether
based upon theories of piercing the corporate veil of any Debtor,
alter ego, alternate entity, agency, instrumentality, the
transfer (fraudulent or otherwise) of any assets or property by
any Debtor (or other non-Debtor that had at any time been an
Affiliate of any Debtor), preference, fraud, conspiracy,
substantive consolidation, successor liability, or any other
legal or equitable theory whatsoever, or any theory or basis of
recovery asserted in Mellon Bank, N.A. and Bank of New York v.
Kohlberg Kravis Roberts & Co., et. al., Adv. Pro. No. 94-17.
1.119 "Lien" shall mean, with respect to the Assets of
the Debtors, a "lien" or "judicial lien" as said terms are
defined in Sections 101(36) and 101(37) of the Code.
1.120 "Management Incentive Compensation Plan" shall mean
the management incentive compensation plan to be established by
the New Board of Walter Industries (or, if the New Board has not
been appointed as of the Confirmation Date, by the Bondholders
Committee), to be effective as of the Effective Date.
1.121 "Mid-State Holdings" shall mean Mid-State Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9726-8P1.
1.122 "Mid-State Homes" shall mean Mid-State Homes, Inc.,
a Debtor in Possession in the jointly administered Chapter 11
Cases pending in the Court under Case No. 89-9725-8P1.
1.123 "Mid-State Homes Warehouse Credit Facility" shall
mean a warehouse credit facility, or the equivalent thereof, in
an aggregate amount and on such terms as are satisfactory to the
Bondholders Committee, to be entered into as of the Effective
Date by Mid-State Homes and one or more financial institutions.
1.124 "Mirror Liquidation Order" shall have the meaning
specified in the forepart of the Creditors' Plan.
1.125 "Mirror Liquidation Plan" shall have the meaning
specified in the forepart to the Creditors' Plan.
1.126 "Negotiated Enterprise Value" shall mean
$2,525,000,000, representing a good faith negotiated estimate of
the going concern enterprise value of the Debtors on a
consolidated basis, arrived at after extensive analysis and
negotiations among the Proponents and Holders of Claims in other
Classes, and taking into account the possibility of delay between
the Confirmation Date and the Effective Date, and the likely
increase in the value of the Debtors over time.
1.127 "New Common Stock" shall mean the collective
reference to the Class A Common Stock and the Class B Common
Stock. Except with respect to the special voting rights and the
mandatory conversion features of the Class A Common Stock set
forth in the Charter, the rights, privileges and powers of the
Class A Common Stock and the Class B Common Stock shall be
identical, and the Class A Common Stock and the Class B Common
Stock shall vote together as a single class on all matters as to
which both classes are entitled to vote.
1.128 "New Common Stock Registration Rights Agreement"
shall mean the registration rights agreement relating to the New
Common Stock issued pursuant to the Creditors' Plan, to be
entered into as of the Effective Date by Walter Industries, for
the benefit of all Persons to which New Common Stock is issued on
the Effective Date, containing provisions not less favorable to
the Holders of New Common Stock as those contained in the form of
agreement attached as Exhibit 7 hereto.
1.129 "New Common Stock Value" shall mean the Negotiated
Enterprise Value (or, if the Court finds that the going concern
enterprise value of the Debtors is equal to an amount other than
$2,525,000,000, such other amount), less the sum of (a) the
lesser of (i) $902 million and (ii) (A) the Allowed Amount of
Claims for all Administrative and Priority Claims and Claims for
all Classes other than Classes U-4 through U-7 and I-1 through
I-3 (excluding any interest to be paid in the form of Class B
Common Stock to Classes S-1, S-2 and S-6) accrued or owed on the
Effective Date (including without limitation any part thereof
paid or to be paid after the Effective Date), minus (B) the
interest paid or accrued under the provisions of the Creditors'
Plan in respect of the Claims referred to in the preceding clause
(A) for the period from January 1, 1994 to the Effective Date
(excluding any interest to be paid in the form of Class B Common
Stock to Classes S-1, S-2 and S-6), and (b) the aggregate
principal amount of Qualified Securities to be distributed under
the terms of the Creditors' Plan on the Effective Date.
1.130 "New Common Stock Value Per Share" shall mean the
New Common Stock Value divided by 50 million, representing the
number of shares of New Common Stock to be issued and outstanding
on the Effective Date.
1.131 "New Senior Note Indenture" shall mean the
Indenture to be dated as of the Effective Date between Walter
Industries and the trustee thereunder, governing the New Senior
Notes.
1.132 "New Senior Notes" shall mean, with respect to any
Debtor, secured senior debt securities that (i) are rated BB or
higher by a Rating Service, as of the Effective Date; provided,
that the obtaining of such Rating Service ratings shall not be
required in the event that, after proper application is made
therefor, neither Rating Service provides a rating of the
security proposed to be rated; and (ii) are valued at par as of
the Effective Date (on a fully distributed basis) by Lehman
Brothers Inc. and a qualified valuation expert selected by the
Series B & C Senior Note Trustee; provided, that if Lehman
Brothers Inc. and the qualified valuation expert selected by the
Series B & C Senior Note Trustee do not agree as to whether such
securities are valued at par as of the Effective Date, the New
Board of Walter Industries (or, if the New Board has not yet been
appointed, the Bondholders Committee) and the Senior Note Trustee
shall select a third qualified valuation expert of national
reputation, whose determination under the Creditors' Plan will be
binding. Attached hereto as Exhibit 2 is a summary of the
anticipated (although not required) terms, and anticipated
(although not required) maximum aggregate principal amount, of
the New Senior Notes.
1.133 "Non-Settling Equityholder" shall mean a Holder of
Old Common Stock that is not a Settling Equityholder.
1.134 "Official Committees" shall mean, collectively, the
Bondholders Committee and the Creditors Committee.
1.135 "Old Common Stock" shall mean the common stock,
$.01 par value per share, of Walter Industries, as the surviving
corporation of the merger between Hillsborough and Old Walter
Industries.
1.136 "Old Walter Industries" shall mean Walter
Industries, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9745-8P1, prior to its merger with and into Hillsborough
pursuant to the Mirror Liquidation Plan.
1.137 "Old Walter Industries IRB Claims" shall mean the
Claims arising under the Old Walter Industries IRBs and the Old
Walter Industries IRB Indentures, other than Claims thereunder
for fees and expenses of the Old Walter Industries IRB Trustees.
1.138 "Old Walter Industries IRB Indentures" shall mean,
collectively, (a) the two indentures dated as of March 1, 1977
between the Industrial Development Board of the City of
Chattanooga, Tennessee and Sun Bank, as successor trustee to
American National Bank and Trust Company of Chattanooga; (b) the
indenture dated as of December 1, 1977 between Adams County,
Colorado and Norwest Bank Denver f/k/a United Bank of Denver
National Association, as trustee; (c) the indenture dated as of
August l, 1979 between Adams County, Colorado and Norwest Bank
Denver, f/k/a United Bank of Denver National Association, as
trustee; (d) the Indenture dated as of June 1, 1977 between the
New Jersey Economic Development Authority and Fidelity Union
Trust Company, as trustee; and (e) the indenture dated as of
December l, 1977 between the City of Texarkana, Arkansas and
Commercial National Bank of Little Rock, as trustee, each as
amended and all as assumed by Old Walter Industries.
1.139 "Old Walter Industries IRB Trustees" shall mean,
collectively, the trustees under the Old Walter Industries IRB
Indentures.
1.140 "Old Walter Industries IRBs" shall mean,
collectively, (a) the 6.4% Industrial Revenue Bonds and the 6.5%
Pollution Control Revenue Bonds issued by the Industrial
Development Board of the City of Chattanooga, Tennessee, (b) the
6.4% and 6.95% Industrial Revenue Bonds issued by Adams County,
Colorado, (c) the 6.4% Industrial Revenue Bonds issued by the New
Jersey Economic Development Authority and (d) the 6.4% Industrial
Development Bonds issued by the City of Texarkana, Arkansas.
1.141 "Original Jim Walter" shall mean Jim Walter
Corporation, a Florida corporation, prior to its acquisition by
Hillsborough.
1.142 "Other Secured Claims" shall mean, collectively,
only Secured Claims not otherwise separately classified in the
Creditors' Plan.
1.143 "Other Unsecured Claim Ballot" shall mean the
ballot sent to all Holders of Other Unsecured Claims for purposes
of voting to accept or reject the Creditors' Plan and upon which
a Holder of an Other Unsecured Claim shall exercise its Other
Unsecured Claim Election.
1.144 "Other Unsecured Claim Election" shall mean the
election by a Holder of an Other Unsecured Claim made on the
Other Unsecured Claim Ballot in accordance with the instructions
provided thereon, to select the rate of interest to accrue under
the Creditors' Plan on the Pre-Filing Date Unsecured Allowed
Amount of Other Unsecured Claims and Convenience Class Claims
from and after the Confirmation Date, which shall be either (i) a
variable rate of interest equal to the Chemical Bank Prime Rate
as from time to time in effect, not to exceed 10% per annum, or
(ii) a fixed rate of interest equal to 6% per annum. The
interest rate option selected shall be based upon the option
selected by a majority in number of the Holders of Other
Unsecured Claims (voting for this purpose as a single Class for
all of the Debtors) who have actually made the Other Unsecured
Claim Election.
1.145 "Other Unsecured Claims" shall mean, collectively,
the Unsecured Claims of trade and service Creditors due and owing
by the Debtors for goods provided and services rendered to the
Debtors in the ordinary course of business prior to the Filing
Date and all other Unsecured Claims not otherwise separately
classified in the Creditors' Plan, including Claims arising as a
result of any rejection of an Executory Contract pursuant to
Section 365(a) or 1123(b)(2) of the Code.
1.146 "Person" shall mean a natural person, corporation,
partnership, joint stock company, trust, association,
unincorporated association, governmental agency, instrumentality
or subdivision, or any other entity.
1.147 "Pipe Realty" shall mean U.S. Pipe Realty, Inc., a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9734-8P1.
1.148 "Post-Filing Date Intercompany Notes Payable
Claims" shall mean all Claims arising after the Filing Date held
by any Debtor against any other Debtor.
1.149 "Pre-Filing Date Intercompany Notes Payable Claims"
shall mean all Claims arising on or before the Filing Date held
by any Debtor against any other Debtor, other than the
Intercompany IRB Claims.
1.150 "Pre-Filing Date Unsecured Allowed Amount" shall
have the meaning set forth in Section 1.22(m)(i) hereof.
1.151 "Pre-LBO Bondholders Settlement Agreement" shall
mean and be the collective reference to the agreement, dated as
of March 23, 1994, attached as Exhibit 3B hereto, as the same may
be amended from time to time.
1.152 "Pre-LBO Debenture Claims" shall mean the 10 7/8%
Subordinated Debenture Claims, the 13 1/8% Subordinated Note
Claims and the 13 3/4% Subordinated Debenture Claims.
1.153 "Priority Claims" shall mean, collectively, Federal
Income Tax Claims, Federal Excise Tax and Reclamation Claims and
State and Local Tax Claims.
1.154 "Pro Rata" shall mean:
(a) with respect to any Series B & C Senior Note
Claim, a fraction, the numerator of which is the Allowed Amount
of such Series B & C Senior Note Claim and the denominator of
which is the aggregate Allowed Amount of all Series B & C Senior
Note Claims;
(b) with respect to any Revolving Credit Bank
Claim, a fraction, the numerator of which is the pre-Filing Date
principal and interest component of such Revolving Credit Bank
Claim and the denominator of which is the aggregate amount
of pre-Filing Date principal and interest due under the
Revolving Credit Agreement, in each case without giving effect to
the receipt and application of the Beijer Proceeds, the Apache
Note Proceeds and the Bank Setoff Proceeds by the Revolving
Credit Banks;
(c) with respect to any Working Capital Bank Claim,
a fraction, the numerator of which is the pre-Filing Date
principal and interest component of such Working Capital Bank
Claim and the denominator of which is the aggregate amount of
pre-Filing Date principal and interest due under the
Working Capital Agreement, in each case without giving effect to
(i) receipt and application of the Beijer Proceeds, the Apache
Note Proceeds and the Bank Setoff Proceeds by the Working
Capital Banks, (ii) the Claim of the Working Capital
Agents for fees and expenses under the Working Capital Agreement
arising prior to the Filing Date and (iii) that portion of the
Working Capital Bank Claims resulting from the post-Filing Date
draw-downs on letters of credit issued under the Working
Capital Agreement prior to the Filing Date;
(d) with respect to any Subordinated Note Claim, a
fraction, the numerator of which is the Allowed Amount of such
Subordinated Note Claim and the denominator of which is the
aggregate Allowed Amount of all Subordinated Note Claims; and
(e) with respect to any other Allowed Claim or
Interest, the proportion that such Allowed Claim or Interest in a
particular Class bears to the aggregate amount of Allowed Claims
or Interests in such Class.
1.155 "Professional Person" shall mean any Person
retained by the Debtors or the Official Committees pursuant to an
order of the Court or any Person seeking compensation from the
Debtors pursuant to Section 503(b) or 1129(a)(4) of the Code, for
professional services.
1.156 "Proponents" shall have the meaning set forth in
the first paragraph hereof.
1.157 "Proponents Expenses" shall mean all of the costs
and expenses incurred by the Proponents arising after the Filing
Date, not previously reimbursed by any Debtor, in connection with
(a) the formulation, drafting and negotiation of the Creditors'
Plan (including settlement agreements contemplated thereby or
provided for therein), the Disclosure Statement and the
Reorganization Documents, (b) the consideration by the Court of
the Creditors' Plan, the Disclosure Statement and the
Reorganization Documents, (c) the effectuation of the Creditors'
Plan and the Disclosure Statement, and (d) any and all other
actions taken in connection with the Creditors' Plan, the
Disclosure Statement and the Reorganization Documents, including
without limitation, litigation, contested matters, declaratory
judgment actions, appellate litigation and the like; in each case
including without limitation, attorneys' and other professionals'
fees and expenses (references in this definition to the
Creditors' Plan and the Disclosure Statement shall include all
prior and any future versions, amendments and/or supplements
thereto).
1.158 "Provident Life & Accident Insurance Company
Claims" shall mean Claims of Provident Life & Accident Insurance
Company arising under loans secured by the Cash surrender value
of various life insurance policies on certain present and prior
key officers of the Debtors or corporations formerly owned by the
Debtors.
1.159 "Qualified Securities" means with respect to any
Debtor, (a) Cash (other than Cash proceeds from any exercise of
an Equity Call Option), or (b) debt securities issued by such
Debtor that (i)(A) if secured by real property mortgages and the
promissory notes secured thereby, are rated BB or higher by
either Rating Service; or (B) if not so secured, are rated B or
higher by either Rating Service, in each case as of the Effective
Date; provided, that the obtaining of such Rating Service ratings
shall not be required in the event that, after proper application
is made therefor, neither Rating Service provides a rating of the
debt security proposed to be rated; and (ii) are valued at par as
of the Effective Date (on a fully distributed basis) by Lehman
Brothers Inc. and a qualified valuation expert selected by
Apollo; provided, that if Lehman Brothers Inc. and the qualified
valuation expert selected by Apollo do not agree as to whether
such securities are valued at par as of the Effective Date, the
New Board of Walter Industries (or, if the New Board has not yet
been appointed, the Bondholders Committee) shall select a third
qualified valuation expert of national reputation, whose
determination under the Creditors' Plan will be binding. Each
Class receiving Qualified Securities under the Creditors' Plan
shall receive the same proportion of the various types of debt
securities qualifying as Qualified Securities and of Cash, as
each other Class receiving Qualified Securities under the
Creditors' Plan. Attached hereto as Exhibits 4, 5 and 6 are
summaries of the anticipated terms, and anticipated (although not
required) aggregate principal amounts, of certain Qualified
Securities referred to as the Mid-State Trust IV Secured Notes,
the Mid-State Trust II Residual Bonds and the New Unsecured
Notes.
1.160 "Qualified Securities Registration Rights
Agreement" shall mean the registration rights agreement relating
to the Qualified Securities distributed pursuant to the
Creditors' Plan, to be entered into as of the Effective Date by
Walter Industries, for the benefit of all Persons to which
Qualified Securities are distributed on the Effective Date,
containing provisions not less favorable to the Holders of
Qualified Securities than those contained in the form of
agreement attached as Exhibit 8 hereto.
1.161 "Railroad Holdings" shall mean Railroad Holdings
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9733-8P1.
1.162 "Rating Service" shall mean Standard & Poor's
Corporation or Moody's Investors Service, Inc.
1.163 "Record Date" shall mean July 13, 1994 or such
other date as the Court may fix as the voting record date.
1.164 "Released Parties" shall have the meaning set forth
in Section 6.1 of the Creditors' Plan.
1.165 "Reorganization Documents" shall mean,
collectively, the New Senior Note Indenture, the Mid-State Homes
Warehouse Credit Facility, the Qualified Securities Registration
Rights Agreement, the New Common Stock Registration Rights
Agreement, the instrument(s) evidencing the Qualified Securities,
the Management Incentive Compensation Plan, the Director and
Officer Indemnification Agreement and the Charter.
1.166 "Resources Holdings" shall mean JW Resources
Holdings Corporation, a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9719-8P1.
1.167 "Revolving Credit Agents" shall mean the co-agents
for the Revolving Credit Banks under the Revolving Credit
Agreement.
1.168 "Revolving Credit Agents Claims" shall mean all
Claims for fees and expenses of the Revolving Credit Agents under
the Revolving Credit Agreement including without limitation the
fees and expenses of attorneys, accountants and financial
advisors retained by or on behalf of the Revolving Credit Agents
in connection with the Chapter 11 Cases, and including amounts
payable to White & Case for legal services rendered prior to the
Filing Date, in the amount previously disclosed by the Working
Capital Agents to the Bondholder Proponents.
1.169 "Revolving Credit Agreement" shall mean the Bank
Credit Agreement dated as of September 10, 1987, as amended,
among Hillsborough, Old Walter Industries, the Debtors which are
signatory parties thereto and the Revolving Credit Banks, as
amended from time to time.
1.170 "Revolving Credit Bank Claims" shall mean the
Claims arising under the Revolving Credit Agreement, other than
Revolving Credit Agents Claims.
1.171 "Revolving Credit Bank Claim Stub Period Amount"
shall have the meaning set forth in Section 1.22(b) of the
Creditors' Plan.
1.172 "Revolving Credit Banks" shall mean, as of any
date, the parties to the Revolving Credit Agreement, other than
the Debtors, excluding such parties which were not parties to
such agreement as of such date.
1.173 "Revolving Loan" shall mean the amount of loans
outstanding under the Revolving Credit Agreement from time to
time.
1.174 "Schedules" shall mean the schedules heretofore
filed by the Debtors with the Court pursuant to Bankruptcy Rule
1007 as they have been and may be amended or supplemented from
time to time in accordance with Bankruptcy Rule 1009.
1.175 "Secured Claim" shall mean the portion of any
Claim, determined in accordance with Section 506(a) of the Code,
as of the Confirmation Date, secured by a valid and perfected
Lien, express or implied, arising by contract, operation of law,
or otherwise, including but not limited to the secured portion of
any Revolving Credit Bank Claim, Working Capital Bank Claim and
Series B & C Senior Note Claim.
1.176 "Secured Equipment Purchase Claims" shall mean any
Secured Claim held by a vendor of equipment sold to any Debtor
with respect to the purchase of such equipment, which Secured
Claim is secured by such equipment.
1.177 "Securities Act" shall mean the Securities Act of
1933, as amended.
1.178 "Senior Claim Differential" shall mean the excess,
if any, of $902 million over the difference between (a) the
Allowed Amount of Claims for all Administrative and Priority
Claims and Claims for all Classes other than Classes U-4 through
U-7 and I-1 through I-3 (excluding any interest to be paid in the
form of Class B Common Stock to Classes S-1, S-2 and S-6) accrued
or owed on the Effective Date (including without limitation any
part thereof distributed or to be distributed after the Effective
Date), and (b) the interest Allowed under the provisions of the
Creditors' Plan in respect of the Claims referred to in the
preceding clause (a) for the period from January 1, 1994 to the
Effective Date (excluding any interest to be paid in the form of
Class B Common Stock to Classes S-1, S-2 and S-6).
1.179 "Senior Subordinated Indenture Trustee" shall mean
the trustee under the Senior Subordinated Note Indenture.
1.180 "Senior Subordinated Note Claims" shall mean all
Claims arising under the Senior Subordinated Notes and the Senior
Subordinated Note Indenture, other than Claims for fees and
expenses of the Senior Subordinated Indenture Trustee.
1.181 "Senior Subordinated Note Indenture" shall mean the
indenture dated as of January 1, 1988 among Jim Walter Homes,
U.S. Pipe and United Land, as issuers, and Hillsborough, Old
Walter Industries and Homes Holdings, as guarantors, and Barnett
Banks Trust Company, N.A., as trustee.
1.182 "Senior Subordinated Notes" shall mean the Senior
Subordinated Extended Reset Notes of Jim Walter Homes, U.S. Pipe
and United Land issued pursuant to the Senior Subordinated Note
Indenture.
1.183 "Series B & C Senior Note Claims" shall mean all
Claims arising under the Series B & C Senior Notes and the Series
B & C Senior Note Indenture, other than Claims thereunder for
fees and expenses of the Series B & C Senior Note Trustee.
1.184 "Series B & C Senior Note Claim Election" shall
mean the election by a Holder of a Series B & C Senior Note Claim
made on the Series B & C Senior Note Claim Election Form by a
Holder of a Series B & C Senior Note Claim in accordance with the
instructions thereon to elect to receive all of such Holder's
Series B & C Senior Note Claim in the form of New Senior Notes,
such election to be made in accordance with the Election
Procedure.
1.185 "Series B & C Senior Note Claim Election Form"
shall mean the election form, sent in accordance with the
Election Procedure, to all Holders of Series B & C Senior Note
Claims, upon which a Holder of a Series B & C Senior Note Claim
may exercise its Series B & C Senior Note Claim Election, the
form of which election form shall have been approved by the
Court.
1.186 "Series B & C Senior Note Indenture" shall mean the
Indenture dated as of January l, 1988, as amended, among Jim
Walter Resources, Jim Walter Homes, U.S. Pipe and United Land, as
issuers, and Hillsborough, Old Walter Industries, Homes Holdings
and Resources Holdings, as guarantors, and LaSalle National Bank,
as successor trustee to Continental Illinois National Bank and
Trust Company of Chicago.
1.187 "Series B & C Senior Note Trustee" shall mean the
trustee under the Series B & C Senior Note Indenture.
1.188 "Series B & C Senior Notes" shall mean,
collectively, the Series B Senior Notes and the Series C Senior
Notes which were issued pursuant to the Series B & C Senior Note
Indenture.
1.189 "Settling Equityholder" shall mean a Holder of an
Allowed Old Common Stock Interest (a) that, subject to the last
two sentences hereof, shall have become a signatory to the Veil
Piercing Settlement Agreement on or prior to the later of (i)
twenty (20) days after a copy of the Veil Piercing Settlement
Agreement is sent to such Holder of an Allowed Old Common Stock
Interest or a representative thereof, and (ii) the day prior to
the date on which the Court holds the hearing on the adequacy of
the disclosure statements respecting the Creditors' Plan and the
plan filed by the Debtors, and (b) that shall have taken no
action(s) subsequent to becoming a signatory to the Veil Piercing
Settlement Agreement which, in the determination of the
Bondholder Proponents, would be reasonably likely to (i) impede
the prompt distribution or approval of the disclosure statement
relating to the Creditors' Plan; (ii) impede the prompt
confirmation and effectiveness of the Creditors' Plan; (iii)
impede the use of the Negotiated Enterprise Value as the
enterprise valuation of the Debtors for all purposes under the
Creditors' Plan and the Chapter 11 Cases; (iv) impede the prompt
realization of Finality (as defined in the Veil Piercing
Settlement Agreement); or (v) result in a breach of the Veil
Piercing Settlement Agreement. If the Court finds that the
settlement set forth in the Veil Piercing Settlement Agreement is
not reasonable or the Creditors' Plan is not confirmable unless
each or any of the Holders of an Allowed Old Common Stock
Interest is given a further opportunity to become a Settling
Equityholder by becoming a signatory to the Veil Piercing
Settlement Agreement and receiving the benefits specified therein
for a Setting Equityholder by a specified date(s) set by the
Court, then the date specified in (a) hereof shall be the date(s)
set by the Court. Notwithstanding any other provision of this
definition, the Bondholder Proponents shall have the right,
exercisable on or before the Effective Date, to waive the date(s)
specified herein for any Person who is a Holder of less than 5%
of the issued and outstanding Old Common Stock, exclusive of any
shares of such stock held in treasury.
1.190 "Settling Party" shall mean a signatory to the Veil
Piercing Settlement Agreement, including without limitation, all
Settling Equityholders and any other persons or entities
identified in the Veil Piercing Settlement Agreement as being
"Settling Parties" for purposes of the Creditors' Plan, including
all Debtors, but excluding all Non-Settling Equityholders.
1.191 "Sloss" shall mean Sloss Industries Corporation, a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9743-8P1.
1.192 "Sloss IRB" shall mean the Series 1983 Industrial
Revenue Bonds issued under the Sloss IRB Indenture in the
original aggregate principal amount of $1,000,000.
1.193 "Sloss IRB Claim" shall mean the Claim arising
under the Sloss IRBs and the Sloss IRB Indenture, other than
Claims thereunder for fees and expenses of the Sloss IRB Trustee.
1.194 "Sloss IRB Indenture" shall mean the Mortgage
Indenture dated as of May 1, 1983 among Sloss, the IDB of
Birmingham and NationsBank, as successor trustee to NCNB National
Bank of Florida.
1.195 "Sloss IRB Trustee" shall mean the trustee under
the Sloss IRB Indenture.
1.196 "Southern Precision" shall mean Southern Precision
Corporation, a Debtor in Possession in the jointly administered
Chapter 11 Cases pending in the Court under Case No. 89-9729-8P1.
1.197 "State and Local Tax Claims" shall mean Secured
Claims and Unsecured Claims of Governmental Units, other than the
Federal Government and the Internal Revenue Service, with
authority to tax the Debtors.
1.198 "Stock Acquisition Rights" shall mean any and all
rights to acquire Old Common Stock or Subsidiary Common Stock or
any other equity or similar ownership interest in any Debtor,
whether in the form of an option, warrant, purchase right,
subscription agreement or otherwise, but shall not include any
Equity Call Option or any right to receive New Common Stock under
the Creditors' Plan.
1.199 "Subordinated Note Claim Election" shall mean the
election by a Holder of a Subordinated Note Claim made on the
Subordinated Note Claim Election Form by a Holder of a
Subordinated Note Claim in accordance with the instructions
thereon to affirmatively select that part of such Holder's Claim
that such Holder desires to be satisfied by Qualified Securities
pursuant to the Creditors' Plan.
1.200 "Subordinated Note Claim Election Form" shall mean
the election form, sent in accordance with the Election
Procedure, to all Holders of Subordinated Note Claims, upon which
a Holder of a Subordinated Note Claim may exercise its
Subordinated Note Claim Election, the form of which election form
shall have been approved by the Court.
1.201 "Subordinated Note Claims" shall mean,
collectively, the Senior Subordinated Note Claims, the 17%
Subordinated Note Claims, the 10 7/8% Subordinated Debenture
Claims, the 13 1/8% Subordinated Note Claims and the 13 3/4%
Subordinated Debenture Claims.
1.202 "Subordinated Note Trustees" shall mean,
collectively, the Senior Subordinated Indenture Trustee, the 17%
Indenture Trustee, the 10 7/8% Indenture Trustee, the 13 1/8%
Indenture Trustee and the 13 3/4% Indenture Trustee.
1.203 "Subordinated Notes" shall mean, collectively, the
Senior Subordinated Notes, the 17% Subordinated Notes, the 10
7/8% Subordinated Debentures, the 13 1/8% Subordinated Notes and
the 13 3/4% Subordinated Debentures.
1.204 "Subsidiary Common Stock" shall mean the common
stock of each of the Debtors, other than Walter Industries as the
surviving corporation of the merger between Hillsborough and Old
Walter Industries, issued and outstanding as of the Filing Date.
1.205 "The Celotex Corporation" shall mean The Celotex
Corporation, as debtor and debtor-in-possession.
1.206 "United Land" shall mean United Land Corporation, a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9730-8P1.
1.207 "Unsecured Claim" shall mean a Claim other than (a)
a Secured Claim, (b) a Subordinated Note Claim, (c) a Post-Filing
Date Intercompany Notes Payable Claim, Pre-Filing Date
Intercompany Notes Payable Claim or Intercompany IRB Claim, (d) a
Priority Claim, or (e) an Administrative Claim.
1.208 "U.S. Pipe" shall mean United States Pipe and
Foundry Company, a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9744-8P1.
1.209 "Veil Piercing Claimant" shall mean Celotex and any
other Person that may have or may assert in the future a Veil
Piercing Claim.
1.210 "Veil Piercing Claims" shall mean and be the
collective reference to all Claims and all claims that may be
asserted in the future based upon, arising out of or in
connection with any of the Veil Piercing-Related Issues, but
shall not include Allowed Indemnity Claims.
1.211 "Veil Piercing Claims Amount" shall have the
meaning set forth in the Veil Piercing Settlement Agreement.
1.212 "Veil Piercing Proceedings" shall mean and be the
collective reference to all lawsuits, actions and other judicial
and administrative proceedings that have been, or may in the
future be, instituted against any Person that directly or
indirectly seek or could seek any remedy from any Released Party
based upon, arising out of or in connection with any of the Veil
Piercing-Related Issues.
1.213 "Veil Piercing-Related Issues" shall mean and be
the collective reference to all theories or bases of recovery
recognizable at law, in equity or in admiralty under the laws of
any jurisdiction that are held or asserted by, or may be held or
asserted by, Celotex or any Holder of a Claim in Class U-7 or any
creditor or interest holder of Celotex, directly or indirectly
based upon, arising out of or in connection with asbestos, any
product manufactured, sold or distributed by Celotex, any other
liability or obligation of any nature of Celotex, or any act or
failure to act by Celotex or any officer, director, employee,
agent or other representative of Celotex, whether based upon
alter ego, agency, alternate entity, instrumentality, successor
liability, conspiracy, indemnification, contribution, any
theories of piercing the corporate veil of any Debtor or its
predecessor and/or any of its respective present or former
parents, subsidiaries, or Affiliates, or the transfer (fraudulent
or otherwise) of any assets or property to or by any Debtor (or
other non-Debtor that had at any time been a parent, subsidiary
or Affiliate of any Debtor or its predecessor), whether in
connection with any of the transactions constituting or relating
to the financing or the acquisition of any of the Debtors or any
of their respective predecessors, parents, subsidiaries or
Affiliates by the current Holders of Old Common Stock, the
divestiture by Celotex of any of its assets or property at any
time, or in connection with any other transactions, events or
circumstances, or otherwise; provided, however, that the Veil
Piercing-Related Issues shall not include any of the LBO-Related
Issues.
1.214 "Veil Piercing Settlement" shall mean the full and
complete settlement, satisfaction, release and discharge of all
Veil Piercing Claims, Veil Piercing Proceedings and all claims
based upon LBO-Related Issues held by the Veil Piercing
Claimants; provided, however, that the Final Order or Final
Orders approving the settlement must, either singularly or taken
together, contain findings that (i) the terms of the settlement
are final and binding on all Veil Piercing Claimants, (ii)
provide for the dismissal, with prejudice, of all pending Veil
Piercing Proceedings, and (iii) provide for the full release of
all Released Parties and all Persons with Allowed Indemnity
Claims arising from Veil Piercing-Related Issues to the extent of
each such Allowed Indemnity Claim, and in full satisfaction
thereof with respect to the Veil Piercing-Related Issues.
1.215 "Veil Piercing Settlement Agreement" shall mean and
be the collective reference to the agreement, dated April 18,
1994, attached as Exhibit 3A hereto, as the same may be amended
from time to time; provided, that the Veil Piercing Settlement
Agreement shall mean the Amended and Restated Veil Piercing
Settlement Agreement from and after the date, if any, on which
the Amended and Restated Veil Piercing Settlement Agreement
becomes effective by its terms.
1.216 "Vestal" shall mean Vestal Manufacturing Company, a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9728- 8P1.
1.217 "Walter Industries" shall mean Walter Industries,
Inc., the surviving corporation of the merger between
Hillsborough and Old Walter Industries.
1.218 "Walter Land" shall mean Walter Land Company, a
Debtor in Possession in the jointly administered Chapter 11 Cases
pending in the Court under Case No. 89-9736-8P1.
1.219 "Window Components" shall mean JW Window
Components, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9732-8P1.
1.220 "Window Components (Wisc.)" shall mean Jim Walter
Window Components, Inc., a Debtor in Possession in the jointly
administered Chapter 11 Cases pending in the Court under Case No.
89-9716-8P1.
1.221 "Working Capital Agents" shall mean the co-agents
for the Working Capital Banks under the Working Capital
Agreement.
1.222 "Working Capital Agents Claims" shall mean all
Claims for fees and expenses of the Working Capital Agents under
the Working Capital Agreement, including without limitation the
fees and expenses of attorneys, accountants and financial
advisors retained by or on behalf of the Working Capital Agents
in connection with the Chapter 11 Cases, and including amounts
payable to White & Case for legal services rendered prior to the
Filing Date, in the amount previously disclosed by the Working
Capital Agents to the Bondholder Proponents.
1.223 "Working Capital Agreement" shall mean the Working
Capital Credit Agreement dated as of December 29, 1987, as
amended, among Hillsborough, Old Walter Industries, the other
Debtors which are signatories thereto and the Working Capital
Banks, as amended from time to time.
1.224 "Working Capital Bank Claim Stub Period Amount"
shall have the meaning set forth in Section 1.22(c).
1.225 "Working Capital Bank Claims" shall mean all Claims
arising under the Working Capital Agreement, other than Working
Capital Agents Claims.
1.226 "Working Capital Banks" shall mean, as of any date,
the parties to the Working Capital Agreement, other than the
Debtors, excluding such parties which were not parties to such
agreement as of such date.
1.227 "Working Capital Loans" shall mean the amount of
loans outstanding under the Working Capital Agreement from time
to time.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
UNCLASSIFIED CLAIMS
In accordance with Section 1123(a)(1) of the Code,
Administrative Claims, Federal Income Tax Claims, Federal Excise
Tax and Reclamation Claims and State and Local Tax Claims are not
classified.
ADMINISTRATIVE CLAIMS
2.1 Administrative Claims. Administrative Claims apply
separately to each Debtor.
PRIORITY CLAIMS
Priority Claims include Federal Income Tax Claims, Federal
Excise Tax and Reclamation Claims and State and Local Tax Claims.
2.2 Federal Income Tax Claims. Federal Income Tax Claims
apply separately to each Debtor.
2.3 Federal Excise Tax and Reclamation Claims. Federal
Excise Tax and Reclamation Claims apply only to Jim Walter
Resources.
2.4 State and Local Tax Claims. State and Local Tax
Claims apply separately to each Debtor, except Best, Coast to
Coast, JW Insurance, Home Improvement and JW Resources.
CLASSIFIED CLAIMS
Claims against, and Interests in, the Debtors are
classified in the Classes listed below.
SECURED CLAIMS
Secured Claims consist of Revolving Credit Bank Claims,
Working Capital Bank Claims, the Grace Street Note Claims, the
Sloss IRB Claim, Secured Equipment Purchase Claims, Series B & C
Senior Note Claims, Provident Life & Accident Insurance Company
Claims, Revolving Credit Agents Claims, Working Capital Agents
Claims and Other Secured Claims.
2.5 Class S-1 Claims: Revolving Credit Bank Claims.
Class S-1 Claims shall consist of all Revolving Credit Bank
Claims.
Class S-1A Claims: Hillsborough Revolving Credit
Bank Claims. Class S-1A Claims shall consist of all Revolving
Credit Bank Claims against Hillsborough.
Class S-1B Claims: Best Revolving Credit Bank
Claims. Class S-1B Claims shall consist of all Revolving Credit
Bank Claims against Best.
Class S-1C Claims: Best (Miss.) Revolving Credit
Bank Claims. Class S-1C Claims shall consist of all Revolving
Credit Bank Claims against Best (Miss.).
Class S-1D Claims: Coast to Coast Revolving Credit
Bank Claims. Class S1D Claims shall consist of all Revolving
Credit Bank Claims against Coast to Coast.
Class S-1E Claims: Computer Holdings Revolving
Credit Bank Claims. Class S-1E Claims shall consist of all
Revolving Credit Bank Claims against Computer Holdings.
Class S-1F Claims: Dixie Revolving Credit Bank
Claims. Class S-1F Claims shall consist of all Revolving Credit
Bank Claims against Dixie.
Class S-1G Claims: Hamer Holdings Revolving Credit
Bank Claims. Class S1G Claims shall consist of all Revolving
Credit Bank Claims against Hamer Holdings.
Class S-1H Claims: Hamer Properties Revolving Credit
Bank Claims. Class S-1H Claims shall consist of all Revolving
Credit Bank Claims against Hamer Properties.
Class S-1I Claims: Homes Holdings Revolving Credit
Bank Claims. Class S1I Claims shall consist of all Revolving
Credit Bank Claims against Homes Holdings.
Class S-1J Claims: Computer Services Revolving
Credit Bank Claims. Class S-1J Claims shall consist of all
Revolving Credit Bank Claims against Computer Services.
Class S-1K Claims: Jim Walter Homes Revolving Credit
Bank Claims. Class S-1K Claims shall consist of all Revolving
Credit Bank Claims against Jim Walter Homes.
Class S-1L Claims: JW Insurance Revolving Credit
Bank Claims. Class S-1L Claims shall consist of all Revolving
Credit Bank Claims against JW Insurance.
Class S-1M Claims: Jim Walter Resources Revolving
Credit Bank Claims. Class S-1M Claims shall consist of all
Revolving Credit Bank Claims against Jim Walter Resources.
Class S-1N Claims: Window Components (Wisc.)
Revolving Credit Bank Claims. Class S-1N Claims shall consist of
all Revolving Credit Bank Claims against Window Components
(Wisc.).
Class S-1O Claims: JW Aluminum Revolving Credit Bank
Claims. Class S-1O Claims shall consist of all Revolving Credit
Bank Claims against JW Aluminum.
Class S-1P Claims: Resources Holdings Revolving
Credit Bank Claims. Class S-1P Claims shall consist of all
Revolving Credit Bank Claims against Resources Holdings.
Class S-1Q Claims: JWI Holdings Revolving Credit
Bank Claims. Class S-1Q Claims shall consist of all Revolving
Credit Bank Claims against JWI Holdings.
Class S-1R Claims: JW Walter Revolving Credit Bank
Claims. Class S-1R Claims shall consist of all Revolving Credit
Bank Claims against JW Walter.
Class S-1S Claims: Window Components Revolving
Credit Bank Claims. Class S-1S Claims shall consist of all
Revolving Credit Bank Claims against Window Components.
Class S-1T Claims: Land Holdings Revolving Credit
Bank Claims. Class S1T Claims shall consist of all Revolving
Credit Bank Claims against Land Holdings.
Class S-1V Claims: Mid-State Holdings Revolving
Credit Bank Claims. Class S-1V Claims shall consist of all
Revolving Credit Bank Claims against Mid-State Holdings.
Class S-1W Claims: Railroad Holdings Revolving
Credit Bank Claims. Class S-1W Claims shall consist of all
Revolving Credit Bank Claims against Railroad Holdings.
Class S-1X Claims: Sloss Revolving Credit Bank
Claims. Class S-1X Claims shall consist of all Revolving Credit
Bank Claims against Sloss.
Class S-1Y Claims: Southern Precision Revolving
Credit Bank Claims. Class S-1Y Claims shall consist of all
Revolving Credit Bank Claims against Southern Precision.
Class S-1Z Claims: United Land Revolving Credit Bank
Claims. Class S-1Z Claims shall consist of all Revolving Credit
Bank Claims against United Land.
Class S-1AA Claims: U.S. Pipe Revolving Credit Bank
Claims. Class S-1AA Claims shall consist of all Revolving Credit
Bank Claims against U.S. Pipe.
Class S-1BB Claims: Pipe Realty Revolving Credit
Bank Claims. Class S 1BB Claims shall consist of all Revolving
Credit Bank Claims against Pipe Realty.
Class S-1CC Claims: Vestal Revolving Credit Bank
Claims. Class S-1CC Claims shall consist of all Revolving Credit
Bank Claims against Vestal.
Class S-1EE Claims: Old Walter Industries Revolving
Credit Bank Claims. Class S-1EE Claims shall consist of all
Revolving Credit Bank Claims against Old Walter Industries.
Class S-1FF Claims: Walter Land Revolving Credit
Bank Claims. Class S-1FF Claims shall consist of all Revolving
Credit Bank Claims against Walter Land.
Class S-1GG Claims: JW Resources Revolving Credit
Bank Claims. Class S-1GG Claims shall consist of all Revolving
Credit Bank Claims against JW Resources.
2.6 Class S-2 Claims: Working Capital Bank Claims. Class
S-2 Claims shall consist of all Working Capital Bank Claims.
Class S-2A Claims: Hillsborough Working Capital Bank
Claims. Class S-2A Claims shall consist of all Working Capital
Bank Claims against Hillsborough.
Class S-2E Claims: Computer Holdings Working Capital
Bank Claims. Class S-2E Claims shall consist of all Working
Capital Bank Claims against Computer Holdings.
Class S-2G Claims: Hamer Holdings Working Capital
Bank Claims. Class S-2G Claims shall consist of all Working
Capital Bank Claims against Hamer Holdings.
Class S-2I Claims: Homes Holdings Working Capital
Bank Claims. Class S-2I Claims shall consist of all Working
Capital Bank Claims against Homes Holdings.
Class S-2M Claims: Jim Walter Resources Working
Capital Bank Claims. Class S-2M Claims shall consist of all
Working Capital Bank Claims against Jim Walter Resources.
Class S-2O Claims: JW Aluminum Working Capital Bank
Claims. Class S-2O Claims shall consist of all Working Capital
Bank Claims against JW Aluminum.
Class S-2P Claims: Resources Holdings Working
Capital Bank Claims. Class S-2P Claims shall consist of all
Working Capital Bank Claims against Resources Holdings.
Class S-2Q Claims: JWI Holdings Working Capital Bank
Claims. Class S-2Q Claims shall consist of all Working Capital
Bank Claims against JWI Holdings.
Class S-2S Claims: Window Components Working Capital
Bank Claims. Class S-2S Claims shall consist of all Working
Capital Bank Claims against Window Components.
Class S-2T Claims: Land Holdings Working Capital
Bank Claims. Class S-2T Claims shall consist of all Working
Capital Bank Claims against Land Holdings.
Class S-2V Claims: Mid-State Holdings Working
Capital Bank Claims. Class S-2V Claims shall consist of all
Working Capital Bank Claims against Mid-State Holdings.
Class S-2W Claims: Railroad Holdings Working Capital
Bank Claims. Class S-2W Claims shall consist of all Working
Capital Bank Claims against Railroad Holdings.
Class S-2X Claims: Sloss Working Capital Bank
Claims. Class S-2X Claims shall consist of all Working Capital
Bank Claims against Sloss.
Class S-2Y Claims: Southern Precision Working
Capital Bank Claims. Class S-2Y Claims shall consist of all
Working Capital Bank Claims against Southern Precision.
Class S-2AA Claims: U.S. Pipe Working Capital Bank
Claims. Class S-2AA Claims shall consist of all Working Capital
Bank Claims against U.S. Pipe.
Class S-2BB Claims: Pipe Realty Working Capital Bank
Claims. Class S-2BB Claims shall consist of all Working Capital
Bank Claims against Pipe Realty.
Class S-2CC Claims: Vestal Working Capital Bank
Claims. Class S-2CC Claims shall consist of all Working Capital
Bank Claims against Vestal.
Class S-2EE Claims: Old Walter Industries Working
Capital Bank Claims. Class S-2EE Claims shall consist of all
Working Capital Bank Claims against Old Walter Industries.
Class S-2FF Claims: Walter Land Working Capital Bank
Claims. Class S-2FF Claims shall consist of all Working Capital
Bank Claims against Walter Land.
2.7 Class S-3 Claims: Grace Street Note Claims. Class
S-3 Claims shall consist of the Grace Street Note Claims.
Class S-3EE Claims: Old Walter Industries Grace
Street Note Claims. Class S-3EE Claims shall consist of the Grace
Street Note Claims against Old Walter Industries.
2.8 Class S-4 Claims: Sloss IRB Claim. Class S-4 Claims
shall consist of the Sloss IRB Claim.
Class S-4X Claims: Sloss IRB Claim. Class S-4X
Claims shall consist of the Sloss IRB Claim against Sloss.
2.9 Class S-5 Claims: Secured Equipment Purchase Claims.
Class S-5 Claims shall consist of all Secured Equipment Purchase
Claims.
Class S-5J Claims: Computer Services Secured
Equipment Purchase Claims.Class S-5J Claims shall consist of all
Secured Equipment Purchase Claims against Computer Services.
Class S-5O Claims: JW Aluminum Secured Equipment
Purchase Claims. Class S-5O Claims shall consist of all Secured
Equipment Purchase Claims against JW Aluminum.
Class S-5S Claims: Window Components Secured
Equipment Purchase Claims. Class S-5S Claims shall consist of all
Secured Equipment Purchase Claims against Window Components.
Class S-5X Claims: Sloss Secured Equipment Purchase
Claims. Class S-5X Claims shall consist of all Secured Equipment
Purchase Claims against Sloss.
Class S-5Y Claims: Southern Precision Secured
Equipment Purchase Claims. Class S-5Y Claims shall consist of
all Secured Equipment Purchase Claims against Southern Precision.
Class S-5AA Claims: U.S. Pipe Secured Equipment
Purchase Claims. Class S-5AA Claims shall consist of all Secured
Equipment Purchase Claims against U.S. Pipe.
2.10 Class S-6 Claims: Series B & C Senior Note Claims.
Class S-6 Claims shall consist of all Series B & C Senior Note
Claims.
Class S-6A Claims: Hillsborough Series B & C Senior
Note Claims. Class S-6A Claims shall consist of all Series B & C
Senior Note Claims against Hillsborough.
Class S-6I Claims: Homes Holdings Series B & C
Senior Note Claims. Class S-6I Claims shall consist of all Series
B & C Senior Note Claims against Homes Holdings.
Class S-6K Claims: Jim Walter Homes Series B & C
Senior Note Claims. Class S-6K Claims shall consist of all Series
B & C Senior Note Claims against Jim Walter Homes.
Class S-6M Claims: Jim Walter Resources Series B & C
Senior Note Claims. Class S-6M Claims shall consist of all
Series B & C Senior Note Claims against Jim Walter Resources.
Class S-6P Claims: Resources Holdings Series B & C
Senior Note Claims. Class S-6P Claims shall consist of all
Series B & C Senior Note Claims against Resources Holdings.
Class S-6Z Claims: United Land Series B & C Senior
Note Claims. Class S-6Z Claims shall consist of all Series B & C
Senior Note Claims against United Land.
Class S-6AA Claims: U.S. Pipe Series B & C Senior
Note Claims. Class S-6AA Claims shall consist of all Series B &
C Senior Note Claims against U.S. Pipe.
Class S-6EE Claims: Old Walter Industries Series B &
C Senior Note Claims. Class S-6EE Claims shall consist of all
Series B & C Senior Note Claims against Old Walter Industries.
2.11 Class S-7 Claims: Provident Life & Accident
Insurance Company Claims. Class S-7 Claims shall consist of all
Provident Life & Accident Insurance Company Claims.
Class S-7EE Claims: Old Walter Industries Provident
Life & Accident Insurance Company Claims. Class S-7EE Claims
shall consist of all Provident Life & Accident Insurance Company
Claims against Old Walter Industries.
2.12 Class S-8 Claims: Revolving Credit Agents Claims.
Class S-8 Claims shall consist of all Revolving Credit Agents
Claims.
Class S-8A Claims: Hillsborough Revolving Credit
Agents Claims. Class S-8A Claims shall consist of all Revolving
Credit Agents Claims against Hillsborough.
Class S-8B Claims: Best Revolving Credit Agents
Claims. Class S-8B Claims shall consist of all Revolving Credit
Agents Claims against Best.
Class S-8C Claims: Best (Miss.) Revolving Credit
Agents Claims. Class S-8C Claims shall consist of all Revolving
Credit Agents Claims against Best (Miss.).
Class S-8D Claims: Coast to Coast Revolving Credit
Agents Claims. Class S-8D Claims shall consist of all Revolving
Credit Agents Claims against Coast to Coast.
Class S-8E Claims: Computer Holdings Revolving
Credit Agents Claims. Class S-8E Claims shall consist of all
Revolving Credit Agents Claims against Computer Holdings.
Class S-8F Claims: Dixie Revolving Credit Agents
Claims. Class S-8F Claims shall consist of all Revolving Credit
Agents Claims against Dixie.
Class S-8G Claims: Hamer Holdings Revolving Credit
Agents Claims. Class S-8G Claims shall consist of all Revolving
Credit Agents Claims against Hamer Holdings.
Class S-8H Claims: Hamer Properties Revolving Credit
Agents Claims. Class S-8H Claims shall consist of all Revolving
Credit Agents Claims against Hamer Properties.
Class S-8I Claims: Homes Holdings Revolving Credit
Agents Claims. Class S-8I Claims shall consist of all Revolving
Credit Agents Claims against Homes Holdings.
Class S-8J Claims: Computer Services Revolving
Credit Agents Claims. Class S-8J Claims shall consist of all
Revolving Credit Agents Claims against Computer Services.
Claims S-8K Claims: Jim Walter Homes Revolving
Credit Agents Claims. Class S-8K Claims shall consist of all
Revolving Credit Agents Claims against Jim Walter Homes.
Class S-8L Claims: JW Insurance Revolving Credit
Agents Claims. Class S-8L Claims shall consist of all Revolving
Credit Agents Claims against JW Insurance.
Class S-8M Claims: Jim Walter Resources Revolving
Credit Agents Claims. Class S-8M Claims shall consist of all
Revolving Credit Agents Claims against Jim Walter Resources.
Class S-8N Claims: Window Components (Wisc.)
Revolving Credit Agents Claims. Class S-8N Claims shall consist
of all Revolving Credit Agents Claims against Window Components
(Wisc.).
Class S-8O Claims: JW Aluminum Revolving Credit
Agents Claims. Class S-8O Claims shall consist of all Revolving
Credit Agents Claims against JW Aluminum.
Class S-8P Claims: Resources Holdings Revolving
Credit Agents Claims. Class S-8P Claims shall consist of all
Revolving Credit Agents Claims against Resources Holdings.
Class S-8Q Claims: JWI Holdings Revolving Credit
Agents Claims. Class S-8Q Claims shall consist of all Revolving
Credit Agents Claims against JWI Holdings.
Class S-8R Claims: JW Walter Revolving Credit Agents
Claims. Class S-8R Claims shall consist of all Revolving Credit
Agents Claims against JW Walter.
Class S-8S Claims: Window Components Revolving
Credit Agents Claims. Class S-8S Claims shall consist of all
Revolving Credit Agents Claims against Window Components.
Class S-8T Claims: Land Holdings Revolving Credit
Agents Claims. Class S-8T Claims shall consist of all Revolving
Credit Agents Claims against Land Holdings.
Class S-8V Claims: Mid-State Holdings Revolving
Credit Agents Claims. Class S-8V Claims shall consist of all
Revolving Credit Agents Claims against Mid-State Holdings.
Class S-8W Claims: Railroad Holdings Revolving
Credit Agents Claims. Class S-8W Claims shall consist of all
Revolving Credit Agents Claims against Railroad Holdings.
Class S-8X Claims: Sloss Revolving Credit Agents
Claims. Class S-8X Claims shall consist of all Revolving Credit
Agents Claims against Sloss.
Class S-8Y Claims: Southern Precision Revolving
Credit Agents Claims. Class S-8Y Claims shall consist of all
Revolving Credit Agents Claims against Southern Precision.
Class S-8Z Claims: United Land Revolving Credit
Agent Claims. Class S-8Z Claims shall consist of all Revolving
Credit Agents Claims Against United Land.
Class S-8AA Claims: U.S. Pipe Revolving Credit
Agents Claims. Class S-8AA Claims shall consist of all Revolving
Credit Agents Claims against U.S. Pipe.
Class S-8BB Claims: Pipe Realty Revolving Credit
Agents Claims. Class S-8BB Claims shall consist of all Revolving
Credit Agents Claims against Pipe Realty.
Class S-8CC Claims: Vestal Revolving Credit Agents
Claims. Class S-8CC Claims shall consist of all Revolving Credit
Agents Claims against Vestal.
Class S-8EE Claims: Old Walter Industries Revolving
Credit Agents Claims. Class S-8EE Claims shall consist of all
Revolving Credit Agents Claims against Old Walter Industries.
Class S-8FF Claims: Walter Land Revolving Credit
Agents Claims. Class S-8FF Claims shall consist of all Revolving
Credit Agents Claims against Walter Land.
Class S-8GG Claims: JW Resources Revolving Credit
Agents Claims. Class S-8GG Claims shall consist of all Revolving
Credit Agents Claims against JW Resources.
2.13 Class S-9 Claims: Working Capital Agents Claims.
Class S-9 Claims shall consist of all Working Capital Agents
Claims.
Class S-9A Claims: Hillsborough Working Capital
Agents Claims. Class S-9A Claims shall consist of all Working
Capital Agents Claims against Hillsborough.
Class S-9E Claims: Computer Holdings Working Capital
Agents Claims. Class S-9E Claims shall consist of all Working
Capital Agents Claims against Computer Holdings.
Class S-9G Claims: Hamer Holdings Working Capital
Agents Claims. Class S-9G Claims shall consist of all Working
Capital Agents Claims against Hamer Holdings.
Class S-9I Claims: Homes Holdings Working Capital
Agents Claims. Class S-9I Claims shall consist of all Working
Capital Agents Claims against Homes Holdings.
Class S-9M Claims: Jim Walter Resources Working
Capital Agents Claims. Class S-9M Claims shall consist of all
Working Capital Agents Claims against Jim Walter Resources.
Class S-9O Claims: JW Aluminum Working Capital
Agents Claims. Class S-9O Claims shall consist of all Working
Capital Agents Claims against JW Aluminum.
Class S-9P Claims: Resources Holdings Working
Capital Agents Claims. Class S-9P Claims shall consist of all
Working Capital Agents Claims against Resources Holdings.
Class S-9Q Claims: JWI Holdings Working Capital
Agents Claims. Class S-9Q Claims shall consist of all Working
Capital Agents Claims against JWI Holdings.
Class S-9S Claims: Window Components Working Capital
Agents Claims. Class S-9S Claims shall consist of all Working
Capital Agents Claims against Window Components.
Class S-9T Claims: Land Holdings Working Capital
Agents Claims. Class S-9T Claims shall consist of all Working
Capital Agents Claims against Land Holdings.
Class S-9V Claims: Mid-State Holdings Working
Capital Agents Claims. Class S-9V Claims shall consist of all
Working Capital Agents Claims against Mid-State Holdings.
Class S-9W Claims: Railroad Holdings Working Capital
Agents Claims. Class S-9W Claims shall consist of all Working
Capital Agents Claims against Railroad Holdings.
Class S-9X Claims: Sloss Working Capital Agents
Claims. Class S-9X Claims shall consist of all Working Capital
Agents Claims against Sloss.
Class S-9Y Claims: Southern Precision Working
Capital Agents Claims. Class S-9Y Claims shall consist of all
Working Capital Agents Claims against Southern Precision.
Class S-9AA Claims: U.S. Pipe Working Capital Agents
Claims. Class S-9AA Claims shall consist of all Working Capital
Agents Claims against U.S. Pipe.
Class S-9BB Claims: Pipe Realty Working Capital
Agents Claims. Class S-9BB Claims shall consist of all Working
Capital Agents Claims against Pipe Realty.
Class S-9CC Claims: Vestal Working Capital Agents
Claims. Class S-9BB Claims shall consist of all Working Capital
Agents Claims against Vestal.
Class S-9EE Claims: Old Walter Industries Working
Capital Agents Claims. Class S-9EE Claims shall consist of all
Working Capital Agents Claims against Old Walter Industries.
Class S-9FF Claims: Walter Land Working Capital
Agents Claims. Class S-9FF Claims shall consist of all Working
Capital Agents Claims against Walter Land.
2.14 Class S-10 Claims: Other Secured Claims. Class S-10
Claims shall consist of all Other Secured Claims.
Class S-10A Claims: Hillsborough Other Secured
Claims. Class S-10A Claims shall consist of all Other Secured
Claims against Hillsborough.
Class S-10B Claims: Best Other Secured Claims.
Class S-10B Claims shall consist of all Other Secured Claims
against Best.
Class S-10C Claims: Best (Miss. ) Other Secured
Claims.Class S-10C Claims shall consist of all Other Secured
Claims against Best (Miss.).
Class S-10D Claims: Coast to Coast Other Secured
Claims. Class S-10D Claims shall consist of all Other Secured
Claims against Coast to Coast.
Class S-10E Claims: Computer Holdings Other Secured
Claims. Class S-10E Claims shall consist of all Other Secured
Claims against Computer Holdings.
Class S-10F Claims: Dixie Other Secured Claims.
Class S-10F Claims shall consist of all Other Secured Claims
against Dixie.
Class S-10G Claims: Hamer Holdings Other Secured
Claims. Class S-10G Claims shall consist of all Other Secured
Claims against Hamer Holdings.
Class S-10H Claims: Hamer Properties Other Secured
Claims. Class S-10H Claims shall consist of all Other Secured
Claims against Hamer Properties.
Class S-10I Claims: Homes Holdings Other Secured
Claims. Class S-10I Claims shall consist of all Other Secured
Claims against Homes Holdings.
Class S-10J Claims: Computer Services Other Secured
Claims. Class S-10J Claims shall consist of all Other Secured
Claims against Computer Services.
Class S-10K Claims: Jim Walter Homes Other Secured
Claims. Class S-10K Claims shall consist of all Other Secured
Claims against Jim Walter Homes.
Class S-10L Claims: JW Insurance Other Secured
Claims. Class S-10L Claims shall consist of all Other Secured
Claims against JW Insurance.
Class S-10M Claims: Jim Walter Resources Other
Secured Claims. Class S-10M Claims shall consist of all Other
Secured Claims against Jim Walter Resources.
Class S-10N Claims: Window Components (Wisc.) Other
Secured Claims. Class S-10N Claims shall consist of all Other
Secured Claims against Window Components (Wisc.).
Class S-10O Claims: JW Aluminum Other Secured
Claims. Class S-10O Claims shall consist of all Other Secured
Claims against JW Aluminum.
Class S-10P Claims: Resources Holdings Other Secured
Claims. Class S-10P Claims shall consist of all Other Secured
Claims against Resources Holdings.
Class S-10Q Claims: JWI Holdings Other Secured
Claims. Class S-10Q Claims shall consist of all Other Secured
Claims against JWI Holdings.
Class S-10R Claims: JW Walter Other Secured Claims.
Class S-10R Claims shall consist of all Other Secured Claims
against JW Walter.
Class S-10S Claims: Window Components Other Secured
Claims. Class S-10S Claims shall consist of all Other Secured
Claims against Window Components.
Class S-10T Claims: Land Holdings Other Secured
Claims. Class S-10T Claims shall consist of all Other Secured
Claims against Land Holdings.
Class S-10U Claims: Mid-State Homes Other Secured
Claims. Class S-10U Claims shall consist of all Other Secured
Claims against Mid-State Homes.
Class S-10V Claims: Mid-State Holdings Other Secured
Claims. Class S-10V Claims shall consist of all Other Secured
Claims against Mid-State Holdings.
Class S-10W Claims: Railroad Holdings Other Secured
Claims. Class S-10W Claims shall consist of all Other Secured
Claims against Railroad Holdings.
Class S-10X Claims: Sloss Other Secured Claims.
Class S-10X Claims shall consist of all Other Secured Claims
against Sloss.
Class S-10Y Claims: Southern Precision Other Secured
Claims. Class S-10Y Claims shall consist of all Other Secured
Claims against Southern Precision.
Class S-10Z Claims: United Land Other Secured
Claims. Class S-10Z Claims shall consist of all Other Secured
Claims against United Land.
Class S-10AA Claims: U.S. Pipe Other Secured Claims.
Class S-10AA Claims shall consist of all Other Secured Claims
against U.S. Pipe.
Class S-10BB Claims: Pipe Realty Other Secured
Claims. Class S-10BB Claims shall consist of all Other Secured
Claims against Pipe Realty.
Class S-10CC Claims: Vestal Other Secured Claims.
Class S-10CC Claims shall consist of all Other Secured Claims
against Vestal.
Class S-10DD Claims: Home Improvement Other Secured
Claims. Class S-10DD Claims shall consist of all Other Secured
Claims against Home Improvement.
Class S-10EE Claims: Old Walter Industries Other
Secured Claims. Class S-10EE Claims shall consist of all Other
Secured Claims against Old Walter Industries.
Class S-10FF Claims: Walter Land Other Secured
Claims. Class S-10FF Claims shall consist of all Other Secured
Claims against Walter Land.
Class S-10GG Claims: JW Resources Other Secured
Claims. Class S-10GG Claims shall consist of all Other Secured
Claims against JW Resources.
UNSECURED CLAIMS
Unsecured Claims consist of Old Walter Industries IRB
Claims, Convenience Class Claims, Other Unsecured Claims, Senior
Subordinated Note Claims, 17% Subordinated Note Claims, Pre-LBO
Debenture Claims and Veil Piercing Claims.
2.15 Class U-1: Old Walter Industries IRB Claims. Class
U-1 shall consist of the Old Walter Industries IRB Claims.
Class U-1EE: Old Walter Industries IRB Claims.
Class U-1EE Claims shall consist of the Old Walter Industries IRB
Claims against Old Walter Industries.
2.16 Class U-2 Claims: Convenience Class Claims. Class
U-2 Claims shall consist of all Convenience Class Claims.
Class U-2A Claims: Hillsborough Convenience Class
Claims. Class U-2A Claims shall consist of all Convenience Class
Claims against Hillsborough.
Class U-2B Claims: Best Convenience Class Claims.
Class U-2B Claims shall consist of all Convenience Class Claims
against Best.
Class U-2C Claims: Best (Miss.) Convenience Class
Claims. Class U-2C Claims shall consist of all Convenience Class
Claims against Best (Miss.).
Class U-2D Claims: Coast to Coast Convenience Class
Claims. Class U-2D Claims shall consist of all Convenience Class
Claims against Coast to Coast.
Class U-2E Claims: Computer Holdings Convenience
Class Claims. Class U-2E Claims shall consist of all Convenience
Class Claims against Computer Holdings.
Class U-2F Claims: Dixie Convenience Class Claims.
Class U-2F Claims shall consist of all Convenience Class Claims
against Dixie.
Class U-2G Claims: Hamer Holdings Convenience Class
Claims. Class U-2G Claims shall consist of all Convenience Class
Claims against Hamer Holdings.
Class U-2H Claims: Hamer Properties Convenience
Class Claims. Class U-2H Claims shall consist of all Convenience
Class Claims against Hamer Properties.
Class U-2I Claims: Homes Holdings Convenience Class
Claims. Class U-2I Claims shall consist of all Convenience Class
Claims against Homes Holdings.
Class U-2J Claims: Computer Services Convenience
Class Claims. Class U-2J Claims shall consist of all Convenience
Class Claims against Computer Services.
Class U-2K Claims: Jim Walter Homes Convenience
Class Claims. Class U-2K Claims shall consist of all Convenience
Class Claims against Jim Walter Homes.
Class U-2L Claims: JW Insurance Corporation
Convenience Class Claims. Class U-2L Claims shall consist of all
Convenience Class Claims against JW Insurance.
Class U-2M Claims: Jim Walter Resources Convenience
Class Claims. Class U-2M Claims shall consist of all Convenience
Class Claims against Jim Walter Resources.
Class U-2N Claims: Window Components (Wisc.)
Convenience Class Claims. Class U-2N Claims shall consist of
all Convenience Class Claims against Jim Walter Window Components
(Wisc.).
Class U-2O Claims: JW Aluminum Convenience Class
Claims. Class U-2O Claims shall consist of all Convenience Class
Claims against JW Aluminum.
Class U-2P Claims: Resources Holdings Convenience
Class Claims. Class U-2P Claims shall consist of all Convenience
Class Claims against Resources Holdings.
Class U-2Q Claims: JWI Holdings Convenience Class
Claims. Class U-2Q Claims shall consist of all Convenience Class
Claims against JWI Holdings.
Class U-2R Claims: JW Walter Convenience Class
Claims. Class U-2R Claims shall consist of all Convenience Class
Claims against JW Walter.
Class U-2S Claims: Window Components Convenience
Class Claims. Class U-2S Claims shall consist of all Convenience
Class Claims against Window Components.
Class U-2T Claims: Land Holdings Convenience Class
Claims. Class U-2T Claims shall consist of all Convenience Class
Claims against Land Holdings.
Class U-2U Claims: Mid-State Homes Convenience Class
Claims. Class U-2U Claims shall consist of all Convenience Class
Claims against Mid-State Homes.
Class U-2V Claims: Mid-State Holdings Convenience
Class Claims. Class U-2V Claims shall consist of all Convenience
Class Claims against Mid-State Holdings.
Class U-2W Claims: Railroad Holdings Convenience
Class Claims. Class U-2W Claims shall consist of all Convenience
Class Claims against Railroad Holdings.
Class U-2X Claims: Sloss Convenience Class Claims.
Class U-2X Claims shall consist of all Convenience Class Claims
against Sloss.
Class U-2Y Claims: Southern Precision Convenience
Class Claims. Class U-2Y Claims shall consist of all Convenience
Class Claims against Southern Precision.
Class U-2Z Claims: United Land Convenience Class
Claims. Class U-2Z Claims shall consist of all Convenience Class
Claims against United Land.
Class U-2AA Claims: U.S. Pipe Convenience Class
Claims. Class U-2AA Claims shall consist of all Convenience
Class Claims against U.S. Pipe.
Class U-2BB Claims: Pipe Realty Convenience Class
Claims. Class U-2BB Claims shall consist of all Convenience
Class Claims against Pipe Realty.
Class U-2CC Claims: Vestal Convenience Class Claims.
Class U-2CC Claims shall consist of all Convenience Class Claims
against Vestal.
Class U-2DD Claims: Home Improvement Convenience
Class Claims. Class U-2DD Claims shall consist of all
Convenience Class Claims against Home Improvement.
Class U-2EE Claims: Old Walter Industries
Convenience Class Claims. Class U-2EE Claims shall consist of
all Convenience Class Claims against Old Walter Industries.
Class U-2FF Claims: Walter Land Convenience Class
Claims. Class U-2FF Claims shall consist of all Convenience
Class Claims against Walter Land.
Class U-2GG Claims: JW Resources Convenience Class
Claims. Class U-2GG Claims shall consist of all Convenience
Class Claims against JW Resources.
2.17 Class U-3 Claims: Other Unsecured Claims. Class U-3
Claims shall consist of all Other Unsecured Claims.
Class U-3A Claims: Hillsborough Other Unsecured
Claims. Class U-3A Claims shall consist of all Other Unsecured
Claims against Hillsborough.
Class U-3B Claims: Best Other Unsecured Claims.
Class U-3B Claims shall consist of all Other Unsecured Claims
against Best.
Class U-3C Claims: Best (Miss.) Other Unsecured
Claims. Class U-3C Claims shall consist of all Other Unsecured
Claims against Best (Miss.).
Class U-3D Claims: Coast to Coast Other Unsecured
Claims. Class U-3D Claims shall consist of all Other Unsecured
Claims against Coast to Coast.
Class U-3E Claims: Computer Holdings Other Unsecured
Claims. Class U-3E Claims shall consist of all Other Unsecured
Claims against Computer Holdings.
Class U-3F Claims: Dixie Other Unsecured Claims.
Class U-3F Claims shall consist of all Other Unsecured Claims
against Dixie.
Class U-3G Claims: Hamer Holdings Other Unsecured
Claims. Class U-3G Claims shall consist of all Other Unsecured
Claims against Hamer Holdings.
Class U-3H Claims: Hamer Properties Other Unsecured
Claims. Class U-3H Claims shall consist of all Other Unsecured
Claims against Hamer Properties.
Class U-3I Claims: Homes Holdings Other Unsecured
Claims. Class U-3I Claims shall consist of all Other Unsecured
Claims against Homes Holdings.
Class U-3J Claims: Computer Services Other Unsecured
Claims. Class U-3J Claims shall consist of all Other Unsecured
Claims against Computer Services.
Class U-3K Claims: Jim Walter Homes Other Unsecured
Claims. Class U-3K Claims shall consist of all Other Unsecured
Claims against Jim Walter Homes.
Class U-3L Claims: JW Insurance Other Unsecured
Claims. Class U-3L Claims shall consist of all Other Unsecured
Claims against JW Insurance.
Class U-3M Claims: Jim Walter Resources Other
Unsecured Claims. Class U-3M Claims shall consist of all Other
Unsecured Claims against Jim Walter Resources.
Class U-3N Claims: Window Components (Wisc.) Other
Unsecured Claims. Class U-3N Claims shall consist of all Other
Unsecured Claims against Window Components (Wisc.).
Class U-3O Claims: JW Aluminum Other Unsecured
Claims. Class U-3O Claims shall consist of all Other Unsecured
Claims against JW Aluminum.
Class U-3P Claims: Resources Holdings Other
Unsecured Claims. Class U-3P Claims shall consist of all Other
Unsecured Claims against Resources Holdings.
Class U-3Q Claims: JWI Holdings Other Unsecured
Claims. Class U-3Q Claims shall consist of all Other Unsecured
Claims against JWI Holdings.
Class U-3R Claims: JW Walter Other Unsecured Claims.
Class U-3R Claims shall consist of all Other Unsecured Claims
against JW Walter.
Class U-3S Claims: Window Components Other Unsecured
Claims. Class U-3S Claims shall consist of all Other Unsecured
Claims against Window Components.
Class U-3T Claims: Land Holdings Other Unsecured
Claims. Class U-3T Claims shall consist of all Other Unsecured
Claims against Land Holdings.
Class U-3U Claims: Mid-State Homes Other Unsecured
Claims. Class U-3U Claims shall consist of all Other Unsecured
Claims against Mid-State Homes.
Class U-3V Claims: Mid-State Holdings Other
Unsecured Claims. Class U-3V Claims shall consist of all Other
Unsecured Claims against Mid-State Holdings.
Class U-3W Claims: Railroad Holdings Other Unsecured
Claims. Class U-3W Claims shall consist of all Other Unsecured
Claims against Railroad Holdings.
Class U-3X Claims: Sloss Other Unsecured Claims.
Class U-3X Claims shall consist of all Other Unsecured Claims
against Sloss.
Class U-3Y Claims: Southern Precision Other
Unsecured Claims. Class U-3Y Claims shall consist of all Other
Unsecured Claims against Southern Precision.
Class U-3Z Claims: United Land Other Unsecured
Claims. Class U-3Z Claims shall consist of all Other Unsecured
Claims against United Land.
Class U-3AA Claims: U.S. Pipe Other Unsecured
Claims.Class U-3AA Claims shall consist of all Other Unsecured
Claims against U.S. Pipe.
Class U-3BB Claims: Pipe Realty Other Unsecured
Claims. Class U-3BB Claims shall consist of all Other Unsecured
Claims against Pipe Realty.
Class U-3CC Claims: Vestal Other Unsecured Claims.
Class U-3CC Claims shall consist of all Other Unsecured Claims
against Vestal.
Class U-3DD Claims: Home Improvement Other Unsecured
Claims. Class U-3DD Claims shall consist of all Other Unsecured
Claims against Home Improvement.
Class U-3EE Claims: Old Walter Industries Other
Unsecured Claims. Class U-3EE Claims shall consist of all Other
Unsecured Claims against Old Walter Industries.
Class U-3FF Claims: Walter Land Other Unsecured
Claims. Class U-3FF Claims shall consist of all Other Unsecured
Claims against Walter Land.
Class U-3GG Claims: JW Resources Other Unsecured
Claims. Class U-3GG Claims shall consist of all Other Unsecured
Claims against JW Resources.
2.18 Class U-4 Claims: Senior Subordinated Note Claims.
Class U-4 Claims shall consist of all Senior Subordinated Note
Claims.
Class U-4A Claims: Hillsborough Senior Subordinated
Note Claims. Class U-4A Claims shall consist of all Senior
Subordinated Note Claims against Hillsborough.
Class U-4I Claims: Homes Holdings Senior
Subordinated Note Claims. Class U-4I Claims shall consist of all
Senior Subordinated Note Claims against Homes Holdings.
Class U-4K Claims: Jim Walter Homes Senior
Subordinated Note Claims. Class U-4K Claims shall consist of all
Senior Subordinated Note Claims against Jim Walter Homes.
Class U-4Z Claims: United Land Senior Subordinated
Note Claims. Class U-4Z Claims shall consist of all Senior
Subordinated Note Claims against United Land.
Class U-4AA Claims: U.S. Pipe Senior Subordinated
Note Claims. Class U-4AA Claims shall consist of all Senior
Subordinated Note Claims against U.S. Pipe.
Class U-4EE Claims: Old Walter Industries Senior
Subordinated Note Claims. Class U-4EE Claims shall consist of
all Senior Subordinated Note Claims against Old Walter
Industries.
2.19 Class U-5 Claims: 17% Subordinated Note Claims.
Class U-5 Claims shall consist of all 17% Subordinated Note
Claims.
Class U-5A Claims: Hillsborough 17% Subordinated
Note Claims. Class U-5A Claims shall consist of all 17%
Subordinated Note Claims against Hillsborough.
Class U-5I Claims: Homes Holdings 17% Subordinated
Note Claims. Class U-5I Claims shall consist of all 17%
Subordinated Note Claims against Homes Holdings.
Class U-5K Claims: Jim Walter Homes 17% Subordinated
Note Claims. Class U-5X Claims shall consist of all 17%
Subordinated Note Claims against Jim Walter Homes.
Class U-5Z Claims: United Land 17% Subordinated Note
Claims. Class U-5Z Claims shall consist of all 17% Subordinated
Note Claims against United Land.
Class U-5AA Claims: U.S. Pipe 17% Subordinated Note
Claims. Class U-5AA Claims shall consist of all 17% Subordinated
Note Claims against U.S. Pipe.
Class U-5EE Claims: Old Walter Industries 17%
Subordinated Note Claims. Class U-5EE Claims shall consist of
all 17% Subordinated Note Claims against Old Walter Industries.
2.20 Class U-6 Claims: Pre-LBO Debenture Claims. Class
U-6 Claims shall consist of all Pre-LBO Debenture Claims.
Class U-6EE Claims: Old Walter Industries Pre-LBO
Debenture Claims. Class U-6EE Claims shall consist of all
Pre-LBO Debenture Claims against Old Walter Industries.
2.21 Class U-7 Claims: Veil Piercing Claims. Class U-7
Claims shall consist of Veil Piercing Claims.
Class U-7A Claims: Hillsborough Veil Piercing
Claims. Class U-7A Claims shall consist of all Veil Piercing
Claims against Hillsborough.
Class U-7B Claims: Best Veil Piercing Claims. Class
U-7B Claims shall consist of all Veil Piercing Claims against
Best.
Class U-7C Claims: Best (Miss.) Veil Piercing
Claims. Class U-7C Claims shall consist of all Veil Piercing
Claims against Best (Miss.).
Class U-7D Claims: Coast to Coast Veil Piercing
Claims. Class U-7D Claims shall consist of all Veil Piercing
Claims against Coast to Coast.
Class U-7E Claims: Computer Holdings Veil Piercing
Claims. Class U-7E Claims shall consist of all Veil Piercing
Claims against Computer Holdings.
Class U-7F Claims: Dixie Veil Piercing Claims.
Class U-7F Claims shall consist of all Veil Piercing Claims
against Dixie.
Class U-7G Claims: Hamer Holdings Veil Piercing
Claims. Class U-7G Claims shall consist of all Veil Piercing
Claims against Hamer Holdings.
Class U-7H Claims: Hamer Properties Veil Piercing
Claims. Class U-7H Claims shall consist of all Veil Piercing
Claims against Hamer Properties.
Class U-7I Claims: Homes Holdings Veil Piercing
Claims. Class U-7I Claims shall consist of all Veil Piercing
Claims against Homes Holdings.
Class U-7J Claims: Computer Services Veil Piercing
Claims. Class U-7J Claims shall consist of all Veil Piercing
Claims against Computer Services.
Class U-7K Claims: Jim Walter Homes Veil Piercing
Claims. Class U-7K Claims shall consist of all Veil Piercing
Claims against Jim Walter Homes.
Class U-7L Claims: JW Insurance Veil Piercing
Claims. Class U-7L Claims shall consist of all Veil Piercing
Claims against JW Insurance.
Class U-7M Claims: Jim Walter Resources Veil
Piercing Claims. Class U-7M Claims shall consist of all Veil
Piercing Claims against Jim Walter Resources.
Class U-7N Claims: Window Components (Wisc.) Veil
Piercing Claims. Class U-7N Claims shall consist of all Veil
Piercing Claims against Window Components (Wisc.).
Class U-7O Claims: JW Aluminum Veil Piercing Claims.
Class U-7O Claims shall consist of all Veil Piercing Claims
against JW Aluminum.
Class U-7P Claims: Resources Holdings Veil Piercing
Claims. Class U-7P Claims shall consist of all Veil Piercing
Claims against Resources Holdings.
Class U-7Q Claims: JWI Holdings Veil Piercing
Claims. Class U-7Q Claims shall consist of all Veil Piercing
Claims against JWI Holdings.
Class U-7R Claims: JW Walter Veil Piercing Claims.
Class U-7R Claims shall consist of all Veil Piercing Claims
against JW Walter.
Class U-7S Claims: Window Components Veil Piercing
Claims. Class U-7S Claims shall consist of all Veil Piercing
Claims against Window Components.
Class U-7T Claims: Land Holdings Veil Piercing
Claims. Class U-7T Claims shall consist of all Veil Piercing
Claims against Land Holdings.
Class U-7U Claims: Mid-State Homes Veil Piercing
Claims. Class U-7U Claims shall consist of all Veil Piercing
Claims against Mid-State Homes.
Class U-7V Claims: Mid-State Holdings Veil Piercing
Claims. Class U-7V Claims shall consist of all Veil Piercing
Claims against Mid-State Holdings.
Class U-7W Claims: Railroad Holdings Veil Piercing
Claims. Class U-7W Claims shall consist of all Veil Piercing
Claims against Railroad Holdings.
Class U-7X Claims: Sloss Veil Piercing Claims.
Class U-7X Claims shall consist of all Veil Piercing Claims
against Sloss.
Class U-7Y Claims: Southern Precision Veil Piercing
Claims. Class U-7Y Claims shall consist of all Veil Piercing
Claims against Southern Precision.
Class U-7Z Claims: United Land Veil Piercing Claims.
Class U-7Z Claims shall consist of all Veil Piercing Claims
against United Land.
Class U-7AA Claims: U.S. Pipe Veil Piercing Claims.
Class U-7AA Claims shall consist of all Veil Piercing Claims
against U.S. Pipe.
Class U-7BB Claims: Pipe Realty Veil Piercing
Claims. Class U-7BB Claims shall consist of all Veil Piercing
Claims against Pipe Realty.
Class U-7CC Claims: Vestal Veil Piercing Claims.
Class U-7CC Claims shall consist of all Veil Piercing Claims
against Vestal.
Class U-7DD Claims: Home Improvement Veil Piercing
Claims. Class U-7DD Claims shall consist of all Veil Piercing
Claims against Home Improvement.
Class U-7EE Claims: Old Walter Industries Veil
Piercing Claims. Class U-7EE Claims shall consist of all Veil
Piercing Claims against Old Walter Industries.
Class U-7FF Claims: Walter Land Veil Piercing
Claims. Class U-7FF Claims shall consist of all Veil Piercing
Claims against Walter Land.
Class U-7GG Claims: JW Resources Veil Piercing
Claims. Class U-7GG Claims shall consist of all Veil Piercing
Claims against JW Resources.
INTERCOMPANY CLAIMS
Intercompany Claims consist of Intercompany IRB Claims,
Pre-Filing Date Intercompany Notes Payable Claims and Post-Filing
Date Intercompany Notes Payable Claims.
2.22 Class I-1 Claims: Intercompany IRB Claims. Class
I-1 Claims shall consist of all Intercompany IRB Claims.
Class I-1X Claims: Sloss Intercompany IRB Claims.
Class I-1X Claims shall consist of all Intercompany IRB Claims
against Sloss.
2.23 Class I-2 Claims: Pre-Filing Date Intercompany Notes
Payable Claims. Class I-2 Claims shall consist of all Pre-Filing
Date Intercompany Notes Payable Claims.
Class I-2A Claims: Hillsborough Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2A Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Hillsborough.
Class I-2B Claims: Best Pre-Filing Date Intercompany
Notes Payable Claims. Class I-2B Claims shall consist of all
Pre-Filing Date Intercompany Notes Payable Claims against Best.
Class I-2C Claims: Best (Miss.) Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2C Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Best (Miss.).
Class I-2D Claims: Coast to Coast Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2D Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Coast to Coast.
Class I-2E Claims: Computer Holdings Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2E Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Computer Holdings.
Class I-2F Claims: Dixie Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2F Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable
Claims against Dixie.
Class I-2G Claims: Hamer Holdings Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2G Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Hamer Holdings.
Class I-2H Claims: Hamer Properties Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2H Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Hamer Properties.
Class I-2I Claims: Homes Holdings Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2I Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Homes Holdings.
Class I-2J Claims: Computer Services Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2J Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Computer Services.
Class I-2K Claims: Jim Walter Homes Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2K Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Jim Walter Homes.
Class I-2M Claims: Jim Walter Resources Pre-Filing
Date Intercompany Notes Payable Claims. Class I-2M Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Jim Walter Resources.
Class I-2N Claims: Window Components (Wisc.)
Pre-Filing Date Intercompany Notes Payable Claims. Class I-2N
Claims shall consist of all Pre-Filing Date Intercompany Notes
Payable Claims against Window Components (Wisc.).
Class I-2O Claims: JW Aluminum Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2O Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against JW Aluminum.
Class I-2P Claims: Resources Holdings Pre-Filing
Date Intercompany Notes Payable Claims. Class I-2P Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Resources Holdings.
Class I-2Q Claims: JWI Holdings Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2Q Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against JWI Holdings.
Class I-2R Claims: JW Walter Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2R Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against JW Walter.
Class I-2S Claims: Window Components Pre-Filing Date
Intercompany Notes Payable Claims. Class 1-2S Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Window Components.
Class I-2T Claims: Land Holdings Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2T Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Land Holdings.
Class I-2U Claims: Mid-State Homes Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2U Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Mid-State Homes.
Class I-2V Claims: Mid-State Holdings Pre-Filing
Date Intercompany Notes Payable Claims. Class I-2V Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Mid-State Holdings.
Class I-2W Claims: Railroad Holdings Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2W Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Railroad Holdings.
Class I-2X Claims: Sloss Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2X Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable
Claims against Sloss.
Class I-2Y Claims: Southern Precision Pre-Filing
Date Intercompany Notes Payable Claims. Class I-2Y Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Southern Precision.
Class I-2Z Claims: United Land Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2Z Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against United Land.
Class I-2AA Claims: U.S. Pipe Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2AA Claims shall
consist of all Pre-Filing Date Intercompany Notes
Payable Claims against U.S. Pipe.
Class I-2BB Claims: Pipe Realty Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2BB Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Pipe Realty.
Class I-2CC Claims: Vestal Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2CC Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Vestal.
Class I-2DD Claims: Home Improvement Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2DD Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Home Improvement.
Class I-2EE Claims: Old Walter Industries Pre-Filing
Date Intercompany Notes Payable Claims. Class I-2EE Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Old Walter Industries.
Class I-2FF Claims: Walter Land Pre-Filing Date
Intercompany Notes Payable Claims. Class I-2FF Claims shall
consist of all Pre-Filing Date Intercompany Notes Payable Claims
against Walter Land.
2.24 Class I-3 Claims: Post-Filing Date Intercompany
Notes Payable Claims. Class I-3 Claims shall consist of all
Post-Filing Date Intercompany Notes Payable Claims.
Class I-3A Claims: Hillsborough Post-Filing Date
Intercompany Notes Payable Claims. Class 1-3A Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Hillsborough.
Class I-3B Claims: Best Post-Filing Date
Intercompany Notes Payable Claims. Class I-3B Claims shall
consist of all Post-Filing Date Intercompany Notes Payable
Claims against Best.
Class I-3E Claims: Computer Holdings Post-Filing
Date Intercompany Notes Payable Claims. Class I-3E Claims shall
consist of all Post-Filing Date Intercompany Notes Payable
Claims against Computer Holdings.
Class I-3G Claims: Hamer Holdings Post-Filing Date
Intercompany Notes Payable Claims. Class I-3G Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Hamer Holdings.
Class I-3I Claims: Homes Holdings Post-Filing Date
Intercompany Notes Payable Claims. Class I-3I Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Homes Holdings.
Class I-3K Claims: Jim Walter Homes Post-Filing Date
Intercompany Notes Payable Claims. Class I-3J Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Jim Walter Homes.
Class I-3T Claims: Land Holdings Post-Filing Date
Intercompany Notes Payable Claims. Class I-3T Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Land Holdings.
Class I-3U Claims: Mid-State Homes Post-Filing Date
Intercompany Notes Payable Claims. Class I-3U Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Mid-State Homes.
Class I-3V Claims: Mid-State Holdings Post-Filing
Date Intercompany Notes Payable Claims. Class I-3V Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Mid-State Holdings.
Class I-3W Claims: Railroad Holdings Post-Filing
Date Intercompany Notes Payable Claims. Class I-3W Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Railroad Holdings.
Class I-3BB Claims: Pipe Realty Post-Filing Date
Intercompany Notes Payable Claims. Class 1-3BB Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Pipe Realty.
Class I-3FF Claims: Walter Land Post-Filing Date
Intercompany Notes Payable Claims. Class I-3FF Claims shall
consist of all Post-Filing Date Intercompany Notes Payable Claims
against Walter Land.
INTERESTS IN HILLSBOROUGH
Interests in Hillsborough consist of all Interests of
Holders of Old Common Stock and Holders of Stock Acquisition
Rights in Hillsborough.
2.25 Class E-1 Interests: Old Common Stock Interests in
Hillsborough. Class E-l Interests shall consist of all Interests
of Holders of Old Common Stock.
Class E-1A Interests: Old Common Stock Interests in
Hillsborough. Class E-1A Interests shall consist of all
Interests of Holders of Old Common Stock.
2.26 Class E-2 Interests: Stock Acquisition Rights in
Hillsborough. Class E-2 Interests shall consist of all Interests
of Holders of Stock Acquisition Rights in Hillsborough.
Class E-2A Interests: Stock Acquisition Rights in
Hillsborough. Class E-2A Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in
Hillsborough.
INTERESTS IN DEBTORS OTHER THAN HILLSBOROUGH
Interests in the Debtors other than Hillsborough consist
of all Interests of Holders of Subsidiary Common Stock and
Holders of Stock Acquisition Rights in each Debtor other than
Hillsborough.
2.27 Class SE-1 Interests: Subsidiary Common Stock
Interests in Debtors other than Hillsborough. Class SE-1
Interests shall consist of all Interests of Holders of Subsidiary
Common Stock.
Class SE-1B Interests: Subsidiary Common Stock
Interests in Best. Class SE-1B Interests shall consist of all
Interests of Holders of Subsidiary Common Stock of Best issued
and outstanding as of the Filing Date.
Class SE-1C Interests: Subsidiary Common Stock
Interests in Best (Miss.). Class SE-1C Interests shall consist of
all Interests of Holders of Subsidiary Common Stock of Best
(Miss.) issued and outstanding as of the Filing Date.
Class SE-1D Interests: Subsidiary Common Stock
Interests in Coast to Coast. Class SE-1D Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of Coast
to Coast issued and outstanding as of the Filing Date.
Class SE-1E Interests: Subsidiary Common Stock
Interests in Computer Holdings. Class SE-1E Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Computer Holdings issued and outstanding as of the Filing Date.
Class SE-1F Interests: Subsidiary Common Stock
Interests in Dixie. Class SE-1F Interests shall consist of all
Interests of Holders of Subsidiary Common Stock of Dixie issued
and outstanding as of the Filing Date.
Class SE-1G Interests: Subsidiary Common Stock
Interests in Hamer Holdings. Class SE-1G Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of Hamer
Holdings issued and outstanding as of the Filing Date.
Class SE-1H Interests: Subsidiary Common Stock
Interests in Hamer Properties. Class SE-1H Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Hamer Properties issued and outstanding as of the Filing Date.
Class SE-1I Interests: Subsidiary Common Stock
Interests in Homes Holdings. Class SE-1I Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of Homes
Holdings issued and outstanding as of the Filing Date.
Class SE-1J Interests: Subsidiary Common Stock
Interests in Computer Services. Class SE-1J Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Computer Services issued and outstanding as of the Filing Date.
Class SE-1K Interests: Subsidiary Common Stock
Interests in Jim Walter Homes. Class SE-1K Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Jim Walter Homes issued and outstanding as of the Filing Date.
Class SE-1L Interests: Subsidiary Common Stock
Interests in JW Insurance. Class SE-1L Interests shall consist of
all Interests of Holders of Subsidiary Common Stock of JW
Insurance issued and outstanding as of the Filing Date.
Class SE-1M Interests: Subsidiary Common Stock
Interests in Jim Walter Resources. Class SE-1M Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Jim Walter Resources issued and outstanding as of the Filing
Date.
Class SE-1N Interests: Subsidiary Common Stock
Interests in Window Components (Wisc.). Class SE-1N Interests
shall consist of all Interests of Holders of Subsidiary Common
Stock of Window Components (Wisc.) issued and outstanding as of
the Filing Date.
Class SE-1O Interests: Subsidiary Common Stock
Interests in JW Aluminum. Class SE-1O Interests shall consist of
all Interests of Holders of Subsidiary Common Stock of JW
Aluminum issued and outstanding as of the Filing Date.
Class SE-1P Interests: Subsidiary Common Stock
Interests in Resources Holdings. Class SE-1P Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Resources Holdings issued and outstanding as of the Filing Date.
Class SE-1Q Interests: Subsidiary Common Stock
Interests in JWI Holdings. Class SE-1Q Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of JWI
Holdings issued and outstanding as of the Filing Date.
Class SE-1R Interests: Subsidiary Common Stock
Interests in JW Walter. Class SE-1R Interests shall consist of
all Interests of Holders of Subsidiary Common Stock of JW Walter
issued and outstanding as of the Filing Date.
Class SE-1S Interests: Subsidiary Common Stock
Interests in Window Components. Class SE-1S Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Window Components issued and outstanding as of the Filing Date.
Class SE-1T Interests: Subsidiary Common Stock
Interests in Land Holdings. Class SE-1T Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of Land
Holdings issued and outstanding as of the Filing Date.
Class SE-1U Interests: Subsidiary Common Stock
Interests in Mid-State Homes. Class SE-1U Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of
Mid-State Homes issued and outstanding as of the Filing Date.
Class SE-1V Interests: Subsidiary Common Stock
Interests in Mid-State Holdings. Class SE-1V Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Mid-State Holdings issued and outstanding as of the Filing Date.
Class SE-1W Interests: Subsidiary Common Stock
Interests in Railroad Holdings. Class SE-1W Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Railroad Holdings issued and outstanding as of the Filing Date.
Class SE-1X Interests: Subsidiary Common Stock
Interests in Sloss. Class SE-1X Interests shall consist of all
Interests of Holders of Subsidiary Common Stock of Sloss issued
and outstanding as of the Filing Date.
Class SE-1Y Interests: Subsidiary Common Stock
Interests in Southern Precision. Class SE-1Y Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Southern Precision issued and outstanding as of the Filing Date.
Class SE-1Z Interests: Subsidiary Common Stock
Interests in United Land. Class SE-1Z Interests shall consist of
all Interests of Holders of Subsidiary Common Stock of United
Land issued and outstanding as of the Filing Date.
Class SE-1AA Interests: Subsidiary Common Stock
Interests in U.S. Pipe.Class SE-1AA Interests shall consist of
all Interests of Holders of Subsidiary Common Stock of U.S. Pipe
issued and outstanding as of the Filing Date.
Class SE-1BB Interests: Subsidiary Common Stock
Interests in Pipe Realty. Class SE-1BB Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of Pipe
Realty issued and outstanding as of the Filing Date.
Class SE-1CC Interests: Subsidiary Common Stock
Interests in Vestal. Class SE-1CC Interests shall consist of all
Interests of Holders of Subsidiary Common Stock of Vestal issued
and outstanding as of the Filing Date.
Class SE-1DD Interests: Subsidiary Common Stock
Interests in Home Improvement. Class SE-1DD Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Home Improvement issued and outstanding as of the Filing Date.
Class SE-1EE Interests: Subsidiary Common Stock
Interests in Old Walter Industries. Class SE-1EE Interests shall
consist of all Interests of Holders of Subsidiary Common Stock of
Old Walter Industries issued and outstanding as of the Filing
Date.
Class SE-1FF Interests: Subsidiary Common Stock
Interests in Walter Land. Class SE-1FF Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of Walter
Land issued and outstanding as of the Filing Date.
Class SE-1GG Interests: Subsidiary Common Stock
Interests in JW Resources. Class SE-1GG Interests shall consist
of all Interests of Holders of Subsidiary Common Stock of JW
Resources issued and outstanding as of the Filing Date.
2.28 Class SE-2 Interests: Stock Acquisition Rights in
Debtors other than Hillsborough. Class SE-2 Interests shall
consist of all Interests of Holders of Stock Acquisition Rights
in each Debtor other than Hillsborough.
Class SE-2B Interests: Stock Acquisition Rights in
Best. Class SE-2B Interests shall consist of all Interests of
Holders of Stock Acquisition Rights in Best.
Class SE-2C Interests: Stock Acquisition Rights in
Best (Miss.). Class SE-2C Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Best (Miss.).
Class SE-2D Interests: Stock Acquisition Rights in
Coast to Coast. Class SE-2D Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Coast to
Coast.
Class SE-2E Interests: Stock Acquisition Rights in
Computer Holdings. Class SE-2E Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Computer
Holdings.
Class SE-2F Interests: Stock Acquisition Rights in
Dixie. Class SE-2F Interests shall consist of all Interests of
Holders of Stock Acquisition Rights in Dixie.
Class SE-2G Interests: Stock Acquisition Rights in
Hamer Holdings. Class SE-2G Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Hamer
Holdings.
Class SE-2H Interests: Stock Acquisition Rights in
Hamer Properties. Class SE-2H Interests shall consist of all
Other Secured Claims against Hamer Properties.
Class SE-2I Interests: Stock Acquisition Rights in
Homes Holding. Class SE-2I Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Homes
Holdings.
Class SE-2J Interests: Stock Acquisition Rights in
Computer Services. Class SE-2J Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Computer
Services.
Class SE-2K Interests: Stock Acquisition Rights in
Jim Walter Homes. Class SE-2K Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Jim Walter
Homes.
Class SE-2L Interests: Stock Acquisition Rights in
JW Insurance. Class SE-2L Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in JW Insurance.
Class SE-2M Interests: Stock Acquisition Rights in
Jim Walter Resources. Class SE-2M Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Jim Walter
Resources.
Class SE-2N Interests: Stock Acquisition Rights in
Window Components (Wisc.). Class SE-2N Interests shall consist
of all Interests of Holders of Stock Acquisition Rights in Window
Components (Wisc.).
Class SE-2O Interests: Stock Acquisition Rights in
JW Aluminum. Class SE-2O Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in JW Aluminum.
Class SE-2P Interests: Stock Acquisition Rights in
Resources Holdings. Class SE-2P Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Resources
Holdings.
Class SE-2Q Interests: Stock Acquisition Rights in
JWI Holdings. Class SE-2Q Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in JWI Holdings.
Class SE-2R Interests: Stock Acquisition Rights in
JW Walter. Class SE-2R Interests shall consist of all Interests
of Holders of Stock Acquisition Rights in JW Walter.
Class SE-2S Interests: Stock Acquisition Rights in
Window Components. Class SE-2S Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Window
Components.
Class SE-2T Interests: Stock Acquisition Rights in
Land Holdings. Class SE-2T Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Land
Holdings.
Class SE-2U Interests: Stock Acquisition Rights in
Mid-State Homes. Class SE-2U Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Mid-State
Homes.
Class SE-2V Interests: Stock Acquisition Rights in
Mid-State Holdings. Class SE-2V Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Mid-State
Holdings.
Class SE-2W Interests: Stock Acquisition Rights in
Railroad Holdings. Class SE-2W Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Railroad
Holdings.
Class SE-2X Interests: Stock Acquisition Rights in
Sloss. Class SE-2X Interests shall consist of all Interests of
Holders of Stock Acquisition Rights in Sloss.
Class SE-2Y Interests: Stock Acquisition Rights in
Southern Precision. Class SE-2Y Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Southern
Precision.
Class SE-2Z Interests: Stock Acquisition Rights in
United Land. Class SE-2Z Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in United Land.
Class SE-2AA Interests: Stock Acquisition Rights in
U.S. Pipe. Class SE-2AA Interests shall consist of all Interests
of Holders of Stock Acquisition Rights in U.S. Pipe.
Class SE-2BB Interests: Stock Acquisition Rights in
Pipe Realty. Class SE-2BB Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Pipe Realty.
Class SE-2CC Interests: Stock Acquisition Rights in
Vestal. Class SE-2CC Interests shall consist of all Interests of
Holders of Stock Acquisition Rights in Vestal.
Class SE-2DD Interests: Stock Acquisition Rights in
Home Improvement. Class SE-2DD Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Home
Improvement.
Class SE-2EE Interests: Stock Acquisition Rights in
Old Walter Industries. Class SE-2EE Interests shall consist of
all Interests of Holders of Stock Acquisition Rights in Old
Walter Industries.
Class SE-2FF Interests: Stock Acquisition Rights in
Walter Land. Class SE-2FF Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in Walter Land.
Class SE-2GG Interests: Stock Acquisition Rights in
JW Resources. Class SE-2GG Interests shall consist of all
Interests of Holders of Stock Acquisition Rights in JW Resources.
ARTICLE III
TREATMENT OF ALLOWED CLAIMS AND INTERESTS UNDER THE
CREDITORS' PLAN
3.1 Satisfaction of Allowed Claims and Interests. The
treatment of and the consideration received by Holders of Allowed
Claims or Interests pursuant to this Article III shall be in full
satisfaction, release and discharge of (i) such Holder's
respective Allowed Claims against or Interests in each and all of
the Debtors, and (ii) any other claims, obligations, rights,
causes of action and liabilities which such Holder may be
entitled to assert against any Debtor, whether known or unknown,
foreseen or unforeseen, then existing or thereafter arising,
based in whole or in part upon any act, omission or other
occurrence taking place on or prior to the Effective Date
(including without limitation, any such claims, obligations,
rights, causes of action and liabilities based upon any of the
Veil Piercing-Related Issues or the LBO-Related Issues), except
as provided in the Creditors' Plan and the Confirmation Order.
UNCLASSIFIED CLAIMS
ADMINISTRATIVE CLAIMS
3.2 Administrative Claims. Each Holder of an Allowed
Administrative Claim shall receive, in full satisfaction thereof,
(1) Cash in an amount equal to the Allowed Amount of such Claim,
without interest, on or promptly after the Effective Date, or (2)
such amount, at such other date and upon such other terms as
shall have been agreed upon between the Holder of such Allowed
Claim and the Bondholders Committee and approved by a Final Order
of the Court; provided, however, that Allowed Administrative
Claims representing obligations incurred in the ordinary course
of business of a Debtor or assumed by any Debtor subsequent to
the Filing Date shall be paid or performed by such Debtor in
accordance with the terms and conditions of each agreement
relating thereto in the ordinary course of such Debtor's
business.
PRIORITY CLAIMS
3.3 Federal Income Tax Claims. The Holder of the Allowed
Federal Income Tax Claims shall receive, in full satisfaction
thereof, Cash payments in an aggregate amount equal to the
Allowed Amount of such Allowed Federal Income Tax Claim. The
Allowed Amount shall be payable in equal quarterly installments
over a six-year period from the date of the assessment by the
Internal Revenue Service of such Claim, with interest on unpaid
amounts from the later of the Effective Date or the date of
assessment at an annual rate equal to the Chemical Bank Prime
Rate in effect on such date, in accordance with the provisions of
Section 1129(a) of the Code and, if applicable, a Final Order of
the Court; provided that if the date of any assessment shall have
occurred prior to the Effective Date, then the Holder of the
Federal Income Tax Claims shall receive Cash in an amount equal
to the aggregate amount of all deferred Cash payments which were
due and payable in accordance with the foregoing on or prior to
the Effective Date, on or promptly after the Effective Date,
unless such Holder and the Bondholders Committee shall have
agreed to a less favorable treatment of such Claim.
3.4 Federal Excise Tax and Reclamation Claims. Each
Holder of an Allowed Federal Excise Tax and Reclamation Claim
shall receive, in full satisfaction thereof, Cash in an amount
equal to the Allowed Amount of such Claim, without interest, on
or promptly after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less favorable
treatment of such Claim.
3.5 State and Local Tax Claims. Each Holder of an
Allowed State and Local Tax Claim shall receive, in full
satisfaction thereof, Cash in an amount equal to the Allowed
Amount of such Claim, without interest, on or promptly after the
Effective Date, unless such Holder and the Bondholders Committee
shall have agreed to a less favorable treatment of such Claim.
CLASSIFIED CLAIMS
SECURED CLAIMS
3.6 Class S-1 Claims: Revolving Credit Bank Claims.
Class S-1 Claims are impaired. Each Holder of a Class S-1
Allowed Claim shall receive, in full satisfaction thereof, Cash
and, if the Amended and Restated Veil Piercing Settlement
Agreement becomes effective by its terms, Class B Common Stock as
follows:
(a) Within 5 days following the Confirmation Date,
or such other date as the Court may order (but in any event not
later than the Effective Date), Cash in the amount of the portion
of such Holder's Allowed Claim described in clauses (ii) and
(iii) of Section 1.20(b) (the "Initial Revolving Credit Bank
Claim Payment"); provided, however, that if the Initial
Revolving Credit Bank Claim Payment is not made on or prior to
June 30, 1994, then the Initial Revolving Credit Bank Claim
Payment shall also include the portion of such Holder's Allowed
Claim described in clause (iv) of Section 1.20(b);
(b) On the last Business Day of each calendar
quarter occurring between the date of the Initial Revolving
Credit Bank Claim Payment and the Effective Date,
Cash in the amount of the unpaid portion of such Holder's
Allowed Claim described in clause (v) of Section 1.20(b) which
accrued during such calendar quarter and was not paid pursuant to
Section 3.6(a); and
(c) On the Effective Date, Cash and, to the extent
set forth in Section 1.20(b)(vi), Class B Common Stock in the
amount of the Allowed Amount of such Holder's Allowed Claim to
the extent not theretofore paid pursuant to Section 3.6(a) and
(b), unless such Holder and the Bondholders Committee shall have
agreed to a less favorable treatment of such Claim.
Upon receipt of the distribution specified in this Section
3.6, all Holders of Class S-1 Claims shall be deemed to have
waived any and all subordination rights which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to Holders of Subordinated Note Claims and shall
be permanently enjoined from enforcing, or attempting to enforce,
any such subordination rights. Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be subject to levy, garnishment, attachment
or other legal process by any Holder of a Class S-1 Claim by
reason of any subordination rights.
3.7 Class S-2 Claims: Working Capital Bank Claims. Class
S-2 Claims are impaired. Each Holder of a Class S-2 Allowed
Claim shall receive, in full satisfaction thereof, Cash and, if
the Amended and Restated Veil Piercing Settlement Agreement
becomes effective by its terms, Class B Common Stock as follows:
(a) Within 5 days following the Confirmation Date,
or such other date as the Court may order (but in any event not
later than the Effective Date), Cash in the amount of the portion
of such Holder's Allowed Claim described in clauses (ii) and
(iii) of Section 1.20(c) (the "Initial Working Capital Bank Claim
Payment"); provided, however, that if the Initial Working
Capital Bank Claim Payment is not made on or prior to June 30,
1994, then the Initial Working Capital Bank Claim Payment shall
also include the portion of such Holder's Allowed Claim
described in clause (iv) of Section 1.20(c);
(b) On the last Business Day of each calendar
quarter occurring between the date of the Initial Working Capital
Bank Claim Payment and the Effective Date, Cash in the amount of
the unpaid portion of such Holder's Allowed Claim described in
clause (v) of Section 1.20(c) which accrued during such
calendar quarter and was not paid pursuant to Section 3.7(a); and
(c) On the Effective Date, Cash and, to the extent
set forth in Section 1.20(c)(vi), Class B Common Stock in the
amount of the Allowed Amount of such Holder's Allowed Claim to
the extent not theretofore paid pursuant to Section
3.7(a) and (b), unless such Holder and the Bondholders
Committee shall have agreed to a less favorable treatment of such
Claim.
Upon receipt of the distribution specified in this Section
3.7, all Holders of Class S-2 Claims shall be deemed to have
waived any and all subordination rights which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to Holders of Subordinated Note Claims and shall
be permanently enjoined from enforcing, or attempting to enforce,
any such subordination rights. Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be subject to levy, garnishment, attachment
or other legal process by any Holder of a Class S-2 Claim by
reason of any subordination rights.
3.8 Class S-3 Claims: Grace Street Note Claims. The
Class S-3 Claims are not impaired. Each Holder of a Class S-3
Allowed Claim shall receive, in full satisfaction thereof, Cash
in an amount equal to the Allowed Amount of such Claim on or
promptly after the Effective Date, unless the Holder thereof and
the Bondholders Committee shall have agreed to a less favorable
treatment of such Claim.
3.9 Class S-4 Claims: Sloss IRB Claim. Class S-4 Claims
are not impaired. The Holder of a Class S-4 Allowed Claim shall
receive, in full satisfaction thereof, Cash in an amount equal to
the Allowed Amount of such Claim, on or promptly after the
Effective Date, unless the Holder thereof and the Bondholders
Committee shall have agreed to a less favorable treatment of such
Claim.
3.10 Class S-5 Claims: Secured Equipment Purchase Claims.
Class S-5 Claims are not impaired. Each Holder of a Class S-5
Allowed Claim shall receive, in full satisfaction thereof, Cash
in an amount equal to the Allowed Amount of such Claim, on or
promptly after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less favorable
treatment of such Claim.
3.11 Class S-6 Claims: Series B & C Senior Note Claims.
Class S-6 Claims are impaired.Each Holder of a Class S-6 Allowed
Claim shall receive, in full satisfaction thereof, (a) Cash in an
amount equal to such Holder's Pro Rata share of the Class S-6
Fund, (b) if the Amended and Restated Veil Piercing Settlement
Agreement becomes effective by its terms, such Holder's Pro Rata
share of the Class B Common Stock set forth in Section
1.20(e)(iv), and (c) with respect to the difference between the
Allowed Amount of such Holder's Class S-6 Claim and the amount of
Cash and Class B Common Stock received pursuant to clauses (a)
and (b), (i) if such Holder elects to receive all of the
remainder of its Series B & C Senior Note Claim in New Senior
Notes pursuant to the Series B & C Senior Note Claim Election, an
aggregate principal amount of New Senior Notes equal to such
difference, or (ii) if such Holder does not make such election,
an aggregate amount of Cash (if any) and principal amount of New
Senior Notes (if any) equal to such difference, with the
proportion of Cash and New Senior Notes to be equal with respect
to each such Holder that does not make such election, and with
the relative amount of Cash and New Senior Notes distributed to
all Class S-6 Claims under this clause (b) (ii) to be determined
not less than 15 days prior to the Effective Date by the New
Board (or, if the New Board has not been appointed by such date,
by the Bondholders Committee), in its sole discretion, on or
promptly after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less favorable
treatment of such Claim.
As used herein, the "Class S-6 Fund" means the funds held
by Chemical Bank, as successor to Manufacturers Hanover Trust
Company, in a restricted Cash account, for the benefit of the
holders of Series B & C Senior Notes, which funds represent a
portion of (a) the cash collections received by Jim Walter
Resources prior to the Filing Date from Jasper Corp. in
connection with the non-recourse promissory note dated May 26,
1988 payable to Jim Walter Resources and (b) the proceeds from
the sale of Oil Holdings Corporation by Hillsborough and other
proceeds deposited with Manufacturers Hanover Trust Company, as
predecessor to Chemical Bank, prior to the Filing Date, together
with all earnings thereon to the date of distribution.
Upon receipt of the distribution specified in this Section
3.11, all Holders of Class S-6 Claims shall be deemed to have
waived any and all subordination rights which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to Holders of Subordinated Note Claims and shall
be permanently enjoined from enforcing, or attempting to enforce,
any such subordination rights. Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be subject to levy, garnishment, attachment
or other legal process by any Holder of a Class S-6 Claim by
reason of any subordination rights.
3.12 Class S-7 Claims: Provident Life & Accident
Insurance Company Claims. Class S-7 Claims are not impaired.The
Holder of the Class S-7 Allowed Claims shall receive, in full
satisfaction thereof, Cash in an amount equal to the Allowed
Amount of such Claims on or promptly after the Effective Date,
unless such Holder and the Bondholders Committee shall have
agreed to a less favorable treatment of such Claims.
Upon payment in Cash of the Allowed Amount of the
Provident Life & Accident Insurance Company Claims, Walter
Industries shall assume all unsatisfied obligations with respect
to the loans underlying such Provident Life & Accident Insurance
Company Claims in accordance with their original contractual
terms. Upon the making of such payment and such assumption, any
acceleration of any obligation and/or instrument or default in
connection with the loans underlying such Provident Life &
Accident Insurance Company Claims shall be deemed to be
rescinded, waived or cured and of no force or effect, and the
terms of such obligation and/or instrument shall be reinstated as
if no such acceleration or default had occurred.
3.13 Class S-8 Claims: Revolving Credit Agents Claims.
Class S-8 Allowed Claims are not impaired. Each Holder of a
Class S-8 Allowed Claim shall receive on the Effective Date, in
full satisfaction of such Claim, Cash in an amount equal to the
Allowed Amount of such Claim. This Creditors' Plan shall not
affect the obligation of any such Holder to remit any such Cash
so received to other Persons who have previously paid, or
reimbursed such Holder in respect of, fees and expenses
comprising a portion of such Claim.
Upon receipt of the distribution specified in this Section
3.13, all Holders of Class S-8 Claims shall be deemed to have
waived any and all subordination rights which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to Holders of Subordinated Note Claims and shall
be permanently enjoined from enforcing, or attempting to enforce,
any such subordination rights. Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be subject to levy, garnishment, attachment
or other legal process by any Holder of a Class S-8 Claim by
reason of any subordination rights.
3.14 Class S-9 Claims: Working Capital Agents Claims.
Class S-9 Claims are not impaired. Each Holder of a Class S-9
Claim shall receive on the Effective Date, in full satisfaction
of such Claim, Cash in an amount equal to the Allowed Amount of
such Claim. This Creditors' Plan shall not affect the obligation
of any such Holder to remit any such Cash so received to other
Persons who have previously paid, or reimbursed such Holder in
respect of, fees and expenses comprising a portion of such Claim.
Upon receipt of the distribution specified in this Section
3.14, all Holders of Class S-9 Claims shall be deemed to have
waived any and all subordination rights which they may otherwise
have with respect to the distributions to be made pursuant to the
Creditors' Plan to Holders of Subordinated Note Claims and shall
be permanently enjoined from enforcing, or attempting to enforce,
any such subordination rights. Accordingly, distributions to be
made pursuant to the Creditors' Plan on account of Subordinated
Note Claims shall not be subject to levy, garnishment, attachment
or other legal process by any Holder of a Class S-9 Claim by
reason of any subordination rights.
3.15 Class S-10 Claims: Other Secured Claims. Class S-10
Claims are not impaired. Each Holder, if any, of a Class S-10
Allowed Claim shall, at the sole discretion of the Bondholders
Committee, and in full satisfaction thereof, receive one of the
following treatments: (i) the legal, equitable and contractual
rights to which such Claim entitles the Holder shall be left
unaltered; (ii) notwithstanding any contractual provision or
applicable law that entitles the Holder of such Claim to demand
or receive accelerated payment of such Claim after the occurrence
of a default: (A) any such default that occurred before or after
the Filing Date (other than a default of the kind specified in
Section 365(b)(2) of the Code) shall be cured; (B) the maturity
of such Claim shall be reinstated (as such maturity existed
before such default); (C) the Holder of such Claim shall be
compensated for any damages incurred as a result of any
reasonable reliance by such Holder on such contractual provision
or such applicable law; and (D) the legal, equitable or
contractual rights to which such Claim entitles the Holder of
such Claim shall not otherwise be altered; or (iii) on the
Effective Date, the Holder of such Claim shall receive, on
account of such Claim, Cash equal to the Allowed Amount of such
Claim; in each case unless such Holder and the Bondholders
Committee shall have agreed to a less favorable treatment of such
Claim.
UNSECURED CLAIMS
3.16 Class U-1 Claims: Old Walter Industries IRB Claims.
Class U-1 Claims are not impaired. Each Holder of a Class U-1
Allowed Claim shall receive Cash in an amount equal to the
Allowed Amount of such Claim, on or promptly after the Effective
Date, unless the Holder thereof and the Bondholders Committee
shall have agreed to a less favorable treatment of such Claim.
Upon payment in Cash of the Allowed Amount of the Old
Walter Industries IRB Claims, Walter Industries shall assume all
unsatisfied obligations under the Old Walter Industries IRBs in
accordance with their original contractual terms. Upon the
making of such payment and such assumption, any acceleration of
any obligation and/or instrument or default in connection with
the Old Walter Industries IRBs shall be deemed to be rescinded,
waived or cured and of no force or effect and the terms of the
Old Walter Industries IRBs shall be reinstated as if no such
acceleration or default had occurred.
3.17 Class U-2 Claims: Convenience Class Claims. Class
U-2 Claims are not impaired. Each Holder of a Class U-2 Allowed
Claim shall receive, in full satisfaction thereof, Cash in an
amount equal to the Allowed Amount of such Claim (of which the
Pre-Filing Date Unsecured Allowed Amount shall not be in excess
of $1,000), on or promptly after the Effective Date, unless such
Holder and the Bondholders Committee shall have agreed to a less
favorable treatment of such Claim.
3.18 Class U-3 Claims: Other Unsecured Claims. Class U-3
Claims are impaired. Each Holder of a Class U-3 Allowed Claim
shall receive, in full satisfaction thereof, Cash in an amount
equal to the Allowed Amount of such Claim payable as follows:
(a) 75% of the Allowed Amount of such Claim, on or
promptly after the
Effective Date, unless such Holder and the Bondholders
Committee shall have agreed
to a less favorable treatment of such Claim; and
(b) the balance of such Allowed Amount, together
with interest accrued at
the General Unsecured Interest Rate from the Effective
Date to the date of actual
payment of the 25% portion of the Pre-Filing Date
Unsecured Allowed Amount not paid
pursuant to clause (a) above, within six (6) months
following the payment pursuant
to clause (a) above unless such Holder and the Bondholders
Committee shall have
agreed to a less favorable treatment of such Claim.
3.19 Class U-4 Claims: Senior Subordinated Note Claims.
Class U-4 Claims are impaired. Each Holder of a Class U-4
Allowed Claim shall receive, in full satisfaction thereof, the
Applicable Consideration allocated on account of such Claim, on
or promptly after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less favorable
treatment of such Claim.
Upon receipt of the distribution specified in this Section
3.19, all Holders of Class U-4 Claims shall be deemed to have
waived any and all subordination rights which they may otherwise
have with respect to the distributions to be made to Holders of
17% Subordinated Note Claims and Pre-LBO Debenture Claims,
pursuant to the Creditors' Plan and shall be permanently enjoined
from enforcing, or attempting to enforce, any such subordination
rights. Accordingly, distributions to be made pursuant to the
Creditors' Plan on account of 17% Subordinated Note Claims and
Pre-LBO Debenture Claims, shall not be subject to levy,
garnishment, attachment or other legal process by any Holder of a
Class U-4 Claim by reason of any subordination rights.
3.20 Class U-5 Claims: 17% Subordinated Note Claims.
Class U-5 Claims are impaired. Each Holder of a Class U-5
Allowed Claim shall receive, in full satisfaction thereof, the
Applicable Consideration allocated on account of such Claim, on
or promptly after the Effective Date, unless such Holder and the
Bondholders Committee shall have agreed to a less favorable
treatment of such Claim.
Upon the receipt of the distribution specified in this
Section 3.20, all Holders of Class U-5 Claims shall be deemed to
have waived any and all subordination rights which they may
otherwise have with respect to the distributions to be made
pursuant to the Creditors' Plan to Holders of Pre-LBO Debenture
Claims and shall be permanently enjoined from enforcing, or
attempting to enforce, any such subordination rights.
Accordingly, distributions to be made pursuant to the Creditors'
Plan on account of Pre-LBO Debenture Claims shall not be subject
to levy, garnishment, attachment or other legal process by any
Holder of a Class U-5 Claim by reason of any subordination
rights.
3.21 Class U-6 Claims: Pre-LBO Debenture Claims. Class
U-6 Claims are impaired. Each Holder of a Class U-6 Allowed
Claim shall receive, in full satisfaction thereof, the Applicable
Consideration allocated on account of such Claim, on or promptly
after the Effective Date, unless such Holder and the Bondholders
Committee shall have agreed to a less favorable treatment of such
Claim.
3.22 Class U-7 Claims: Veil Piercing Claims. Class U-7
Claims are not impaired. On or promptly after the Effective
Date, the Celotex Settlement Fund Recipient shall receive, in
full satisfaction of all Class U-7 Claims, consideration
described herein equal to the aggregate Allowed Amount of the
Class U-7 Claims, of which (a) the Veil Piercing Claims Amount
shall be satisfied by a combination of Qualified Securities and
Class B Common Stock, in the proportion described in the
following sentence, together having an aggregate principal amount
(in the case of Qualified Securities) and New Common Stock Value
Per Share (in the case of Class B Common Stock) equal to the Veil
Piercing Claims Amount; and (b) if the Amended and Restated Veil
Piercing Settlement Agreement becomes effective by its terms,
100% of the Senior Claim Differential, or if the Amended and
Restated Veil Piercing Settlement Agreement does not become
effective by its terms, the sum of (i) $75,000,000 and (ii) 100%
of the Senior Claim Differential, in each case shall be satisfied
by shares of Class B Common Stock having an aggregate New Common
Stock Value Per Share equal to such sum (and, if the Amended and
Restated Veil Piercing Settlement Agreement does not become
effective by its terms, all of which shares in this clause (b),
except for an amount of shares having an aggregate New Common
Stock Value Per Share equal to 50% of the Senior Claim
Differential, are subject to assignment to Settling Equityholders
as required under the Veil Piercing Settlement Agreement), on or
promptly after the Effective Date, unless the Bondholders
Committee and the Celotex Settlement Fund Recipient, consistent
with the terms of the Veil Piercing Settlement Agreement, shall
have agreed to a less favorable treatment of such Claims. The
aggregate principal amount of Qualified Securities used to
satisfy a portion of the Veil Piercing Claims Amount shall bear
the same ratio to the aggregate principal amount of Qualified
Securities used to satisfy a portion of the Subordinated Note
Claims as $487.5 million (or, if the Amended and Restated Veil
Piercing Settlement Agreement becomes effective by its terms,
$450 million) bears to $1,098 million; provided, that if the
Amended and Restated Veil Piercing Settlement Agreement does not
become effective by its terms, the $487.5 million component of
such ratio shall be reduced (but to no lower than $450 million)
one dollar for every two dollars in value of Class B Common Stock
assigned by the Celotex Settlement Fund Recipient to Settling
Equityholders from the $75,000,000 of Class B Common Stock
identified in Section 1.20(o)(B)(i) of the Creditors' Plan (for
example, if all Holders of Old Common Stock Interests become
Settling Equityholders, the ratio will be $450 million to $1,098
million); and the excess of the Veil Piercing Claims Amount over
the portion thereof satisfied by Qualified Securities shall be
satisfied by that number of shares of Class B Common Stock having
an aggregate New Common Stock Value Per Share equal to such
excess; provided, however, that in the event that any Holder of
an Allowed Old Common Stock Interest exercises an Equity Call
Option, (i) the Celotex Settlement Fund Recipient shall receive
Cash in an amount equal to the aggregate Cash proceeds received
from the exercise of Equity Call Options, multiplied by a
fraction, the numerator of which is the number of shares of New
Common Stock that would otherwise be issued to the Celotex
Settlement Fund Recipient under this Section 3.22, and the
denominator of which is the number of shares of New Common Stock
to be issued under the Creditors' Plan to Classes S-1, S-2, S-6
and U-4 through U-7; and (ii) the number of shares of New Common
Stock that the Celotex Settlement Fund Recipient shall receive
under this Section 3.22 shall be reduced by the amount of Cash
received under clause (i) of this proviso divided by the New
Common Stock Value Per Share.
The Veil Piercing Settlement Agreement and the Charter
provide that all shares of Class B Common Stock issued to the
Celotex Settlement Fund Recipient under the Creditors' Plan (and
not assigned to Settling Equityholders under the Veil Piercing
Settlement Agreement) will be required to be voted by the Celotex
Settlement Fund Recipient (or by the beneficiaries of the Celotex
Settlement Fund Recipient) in the same proportion as the votes
are cast by all other shares of New Common Stock on all matters
and for all purposes.
INTERCOMPANY CLAIMS
3.23 Class I-1 Claims: Intercompany IRB Claims. Class
I-1 Allowed Claims are not impaired. The Holder of the Class I-1
Allowed Claims shall receive Cash in an amount equal to the
Allowed Amount of such Claims, on or promptly after the Effective
Date, unless the Holder and the Bondholders Committee shall have
agreed to a less favorable treatment of such Claims.
Upon payment in Cash of the Allowed Amount of the
Intercompany IRB Claims, Sloss shall assume all unsatisfied
obligations with respect to such Intercompany IRB in accordance
with its original contractual terms. Upon the making of such
payment and such assumption, any acceleration of any obligation
and/or instrument or default in connection with such Intercompany
IRB shall be rescinded, waived or cured and of no force or effect
and the terms of such obligations and/or instrument shall be
reinstated as if no such acceleration or default had occurred.
3.24 Class I-2 Claims: Pre-Filing Date Intercompany Notes
Payable Claims. Class I-2 Claims are not impaired. Pre-Filing
Date Intercompany Notes Payable Claims will be reinstated on the
books and records of the respective Debtors. There will be no
distributions under the Creditors' Plan made in respect of any
Pre-Filing Date Intercompany Notes Payable Claims, but such
Claims may be paid after the Effective Date in the ordinary
course of business.
3.25 Class I-3 Claims: Post-Filing Date Intercompany
Notes Payable Claims. Class I-3 Claims are not impaired.
Post-Filing Date Intercompany Notes Payable Claims will be
reinstated on the books and records of the respective Debtors.
There will be no distributions under the Creditors' Plan made in
respect of any Post-Filing Date Intercompany Notes Payable
Claims, but such Claims may be paid after the Effective Date in
the ordinary course of business.
INTERESTS
3.26 Class E-1 Interests: Old Common Stock Interests in
Hillsborough. Class E-1 Interests are impaired. All shares of
Old Common Stock held by Holders of Class E-1 Interests shall be
cancelled, annulled and extinguished as of the Effective Date.
Each Holder of a Class E-1 Allowed Interest shall receive, in
full satisfaction thereof, (i) with respect to each Person that
was a Holder of a Class E-1 Allowed Interest on the date on which
the order approving the Disclosure Statement is entered and that
did not transfer such Interest on or prior to the Effective Date
(other than to an Affiliate of Such Person, which Affiliate shall
have the right to exercise the Equity Call Option), the
nontransferable right (an "Equity Call Option") to purchase all,
but not part, of such Holder's Pro Rata share of all of the
shares of New Common Stock (each of which shall be shares of
Class B Common Stock) that would otherwise be issued on the
Effective Date to Classes S-1, S-2, S-6 and U-4 through U-7, at
a Cash exercise price per share equal to the New Common Stock
Value Per Share (provided that, in calculating the New Common
Stock Value Per Share for this purpose, the New Common Stock
Value shall be calculated using a going concern enterprise value
equal to the greater of (A) the Negotiated Enterprise Value and
(B) if the Court finds that the going concern enterprise value of
the Debtors is equal to an amount other than $2,525,000,000, such
other amount), such right to be exercisable by properly
completing and returning the Equity Call Option Election Form in
accordance with the Election Procedure, and by paying the Cash
exercise price in full on the Effective Date; and (ii) in the
event that there are shares of New Common Stock remaining after
giving effect to all distributions to be made to Creditors under
the Creditors' Plan (it being understood that no Creditor shall
receive on account of an Allowed Claim consideration having a
value in excess of that permitted to be paid on account of such
Allowed Claim under the Code), such Holder's Pro Rata share of
such shares, each of which shall be shares of Class B Common
Stock, on or promptly after the Effective Date, unless such
Holder and the Bondholders Committee shall have agreed to a less
favorable treatment of such Interest.
3.27 Class E-2 Interests: Stock Acquisition Rights in
Hillsborough. Class E-2 Interests are impaired. All Stock
Acquisition Rights in Hillsborough shall be cancelled, annulled
and extinguished as of the Effective Date. Holders of Class E-2
Interests shall receive or retain no property under the
Creditors' Plan on account of their Class E-2 Interests.
3.28 Class SE-1 Interests: Subsidiary Common Stock
Interests in Debtors other than Hillsborough. Class SE-1
Interests are not impaired. Each Holder of a Class SE-1 Interest
shall retain its Subsidiary Common Stock and shall not receive
any distribution under the Creditors' Plan in respect of its
Class SE-1 interest.
3.29 Class SE-2 Interests: Stock Acquisition Rights in
Debtors other than Hillsborough. Class SE-2 Interests are
impaired. All Stock Acquisition Rights in Debtors other than
Hillsborough shall be cancelled, annulled and extinguished as of
the Effective Date. Holders of Class SE-2 Interests shall
receive or retain no property under the Creditors' Plan on
account of their Class SE-2 Interests.
ARTICLE IV
MEANS FOR IMPLEMENTATION OF THE CREDITORS' PLAN
4.1 Charter; Common Stock.
(a) On or as soon as practicable after the
Effective Date, Walter Industries shall adopt and file the
Charter with the Secretary of State of the State of Delaware.
(b) All stock distributed pursuant to the
Creditors' Plan will be New Common Stock. Except as otherwise
expressly provided in the Charter and the Creditors' Plan, all
shares of New Common Stock shall enjoy the same rights,
benefits and privileges and shall not bear any restrictive
legends on the stock certificates (except for legends prohibiting
transfer other than in accordance with the Securities Act).
4.2 Amendments to Charter. From and after the Effective
Date, amendments to the Charter shall be made in accordance with
Delaware law, the terms of the Charter and the Reorganization
Documents.
4.3 Nonvoting Equity Securities. The certificates of
incorporation of Walter Industries and each of the Debtors shall
be amended, on or prior to the Effective Date, to prohibit the
issuance by each Debtor of nonvoting capital stock to the extent
required by the provisions of Section 1123(a)(6) of the Code.
4.4 Surrender and Cancellation of Instruments.
(a) As of the close of business on the Effective
Date, the transfer ledgers or registers and any other records
determining record ownership maintained by the Bank Agents, the
Indenture Trustees, Walter Industries or any Debtor (or any other
trustees, transfer agents or registrars which may have
been employed in connection therewith) for the Revolving Loans,
the Working Capital Loans, the Series B & C Senior Notes, the
Grace Street Notes, the Sloss IRB, the Subordinated Notes and all
Interests shall be deemed to be closed, and for purposes
of the Creditors' Plan, there shall be no further changes in the
record Holders of any Revolving Loans, Working Capital Loans,
Series B & C Senior Notes, Grace Street Notes, Sloss IRB,
Subordinated Notes or Interests on the books of the Bank
Agents, the Indenture Trustees, Walter Industries or any Debtor
(or any other trustees, transfer agents or registrars which may
have been employed in connection therewith). Neither
Walter Industries nor any other Debtor shall have any
obligation to recognize any transfer of Revolving Credit Loans,
Working Capital Loans, Series B & C Senior Notes, Grace Street
Notes, Sloss IRB, Subordinated Notes or Interests occurring
thereafter, but shall be entitled instead to recognize and
deal with, for all purposes under the Creditors' Plan, except as
otherwise provided herein, only those Persons who were Holders of
such loans, notes or Interests as of the close of business on the
Effective Date, as reflected on the books of the Bank Agents, the
Indenture Trustees, Walter Industries or any Debtor (or
such other trustees, transfer agents or registrars), as the case
may be.
(b) No Holder of any Revolving Loans, Working
Capital Loans, Series B & C Senior Notes, Grace Street Notes,
Subordinated Notes or Interests shall be entitled to any rights
or distribution under the Creditors' Plan unless and until such
Holder shall have first surrendered or caused to be
surrendered the relevant instrument, if any, held by such Holder
to (i) the applicable Bank Agent, (ii) the applicable Indenture
Trustee, (iii) in the case of the Grace Street Notes or
Interests in the Old Common Stock, Walter Industries, or
(iv) in the case of the Sloss IRB, Sloss. To the extent any such
Holder is not the holder of record of such relevant instrument,
such Holder must deliver to the Person specified in the
preceding sentence, together with the relevant instrument,
documents reasonably satisfactory to Walter Industries evidencing
succession of title from the record holder thereof. In the event
that any such instrument has been lost, destroyed, stolen or
mutilated, the Holder thereof may instead execute and deliver an
affidavit of loss and indemnity with respect thereto in a
form customarily utilized for such purposes that is reasonably
satisfactory to Walter Industries together with, if Walter
Industries so requests, a bond in form and substance (including,
without limitation, amount) reasonably satisfactory to
Walter Industries.
(c) Promptly upon surrender of the relevant
instruments referred to in Section 4.4(b), the applicable Bank
Agent, Indenture Trustee or Walter Industries shall cancel such
instruments, and the applicable Bank Agent or Indenture Trustee
shall deliver such cancelled instruments to Walter
Industries or otherwise dispose of such instruments in such
manner as Walter Industries may request. At the times
specified in Article III of the Creditors' Plan, (i) the
applicable Bank Agent, (ii) the applicable Indenture Trustee (or,
in the case of the Subordinated Note Claims, the disbursing agent
selected by the Bondholder Proponents), (iii) Walter
Industries or (iv) Sloss, as the case may be, shall make
the distributions provided for in Sections 4.5 and 4.6 of the
Creditors' Plan in accordance with Article III of the Creditors'
Plan.
(d) Until a Holder of record on the Effective Date
or its successor by operation of law surrenders the relevant
instruments, if any, evidencing its Revolving Loans, Working
Capital Loans, Series B & C Senior Notes, Grace Street
Notes, Sloss IRB, Subordinated Notes or Interests, as the
case may be, pursuant to Section 4.4(b) hereof, and the debt
and/or equity securities to be issued in satisfaction thereof are
issued and delivered by or on behalf of the applicable
Debtors to such Holder, the Bank Agent or the Indenture
Trustee (or, in the case of the Subordinated Note Claims, the
disbursing agent selected by the Bondholder Proponents) for the
account of such Holder as required by Section 4.5 of the
Creditors' Plan, such Holder shall have no rights under
the debt and/or equity securities to be received by such Holder
under the Creditors' Plan.
(e) Notwithstanding any other provision of the
Creditors' Plan, no Holder of a Secured Claim who is to receive a
distribution under the Creditors' Plan in respect of such Secured
Claim shall receive such distribution until such Holder
executes and delivers or causes to be executed and
delivered any documents (in recordable form if appropriate)
and/or surrenders or causes to be surrendered any
personal property or other collateral (including shares of
capital stock) in its possession or the possession of its agent
or trustee or the applicable Bank Agent or Indenture Trustee,
necessary to release any Lien(s) and retransfer all
collateral held by it in connection with such Secured
Claim.
(f) As of the Effective Date, the Revolving Credit
Agreement, the Working Capital Agreement, the Sloss IRB
Indenture, the Series B & C Senior Note Indenture
and each Indenture with respect to the Subordinated Notes,
shall be terminated, deemed null and void and of no further force
and effect as to the Debtors. Each Bank Agent or Indenture
Trustee, on the one hand, and the Debtors, on the other
hand, shall have no further obligations to each other
under such Agreements and Indenture, except that the applicable
Bank Agent or Indenture Trustee shall be entitled to assert any
charging liens to which it may be entitled under such
Agreement or Indenture.
4.5 Distributions to Holders of Allowed Claims and
Interests. Walter Industries shall deliver or cause to be
delivered, on behalf of the applicable Debtors, at the
applicable times specified in Article III subject to compliance
with the provisions of Section 4.4 hereof:
(a) to each Holder of an Administrative Claim, a
Priority Claim and an Allowed Claim in Classes S-1, S-2, S-3,
S-4, S-5, S-7, S-8, S-9, S-10, U-1, U-2, U-3, and I-1, Cash in
accordance with Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8,
3.9, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, and
3.23 respectively, hereof;
(b) to the trustee under the New Senior Note
Indenture on behalf of the Holders of Allowed Claims in Class S-6
a global certificate representing the New Senior Notes to be
delivered in accordance with Section 3.11 hereof;
(c) to the disbursing a gent selected by the
Bondholder Proponents, instruments (which may include Cash)
representing Qualified Securities and certificates representing
New Common Stock, to be delivered in accordance with
Sections 3.19, 3.20 and 3.21 hereof;
(d) to the Series B & C Senior Note Trustee on
behalf of the Holders of Allowed Claims in Class S-6, Cash and,
if the Amended and Restated Veil Piercing Settlement Agreement
becomes effective by its terms, certificates representing
Class B Common Stock in accordance with Section 3.11
hereof (it being understood that nothing in the Creditors' Plan
shall in any way modify or prejudice the right
of the Series B & C Senior Note Trustee to assert its
rights under the Series B & C Senior Note Indenture, including
but not limited to Section 6.07 thereof, against
the Holders of Class S-6 Claims);
(e) to the Celotex Settlement Fund Recipient,
instruments representing Qualified Securities and certificates
representing Class B Common Stock in accordance with Section 3.22
hereof;
(f) to the Holders of Class E-1 Interests,
certificates representing Class B Common Stock, if any, in
accordance with Section 3.26 hereof; and
(g) to the Holders of Revolving Credit Bank Claims
and Working Capital Bank Claims if the Amended and Restated Veil
Piercing Settlement Agreement becomes effective by its terms,
certificates representing Class B Common Stock in
accordance with Sections 3.6 and 3.7 hereof.
4.6 All Distributions to be Made by Walter Industries.
(a) Walter Industries shall make all payments
required to be made by any Debtor under the Creditors' Plan on
behalf of such Debtor.
All Allowed Claims paid by Walter Industries hereunder shall be
allocated by Walter Industries to the Debtor for whose benefit
such Claims were satisfied in the same manner in which
Allowed Claims incurred by the Debtors and paid by Walter
Industries in the ordinary course of business are allocated to
the Debtors. Intercompany accounts shall be established for any
amounts paid by a Debtor on behalf of any other Debtor
hereunder on the books and records of such Debtors.
(b) At the option of Walter Industries, except as
otherwise required or provided in the Creditors' Plan or by any
applicable agreement, any Cash payment to be made by or on behalf
of any Debtor pursuant to the Creditors' Plan may be
made by a check drawn on a United States bank mailed by
first class mail or by wire transfer.
(c) Payments in respect of all Revolving Credit
Bank Claims and Revolving Credit Agents Claims (other than to
White & Case) shall be made by wire transfer
of immediately available funds to the Revolving Credit
Agents, and payments in respect of all Working Capital Bank
Claims and Working Capital Agents Claims (other than to White &
Case) shall be made by wire transfer of immediately available
funds to the Working Capital Agents, in each case for
distribution to Holders of Allowed Revolving Credit Bank Claims
and Allowed Working Capital Bank Claims, respectively,
in accordance with the Creditors' Plan. All consideration
paid or distributed by Walter Industries on behalf of the Debtors
to the Bank Agents on account of Allowed Claims shall be for the
account of each Holder of such Allowed Claims, and any
Claims filed by individual Holders shall be disallowed as
duplicative. Such consideration shall be subject to any rights
of the applicable Bank Agent for compensation and reimbursement
of its fees and expenses (including the reasonable
fees and expenses of its counsel) asserted by such Bank
Agent to the extent that such Bank Agent does not receive payment
of such fees and expenses from the Debtors.
4.7 Fractional Shares. Fractional shares of New Common
Stock will not be issued
or distributed. Instead, fractional amounts (calculated to six
decimal places) will be
rounded up or down to the nearest whole share, with fractional
amounts equal to .500000
being rounded up.
4.8 Execution and Delivery of Reorganization Documents.
On or before the
Effective Date, each of the Reorganization Documents shall be
executed and delivered by
each of the parties thereto.
4.9 Cooperation by Debtors. Each of the Debtors shall
grant its full and prompt
cooperation to the Proponents, at the direction of the
Bondholders Committee, in any
matter directly or indirectly relating to the prompt and complete
effectuation of any
provision of the Creditors' Plan, and shall take such actions in
connection therewith as
shall be reasonably requested by the Bondholders Committee.
4.10 New Capital Stock of Debtors. Except with respect
to the issuance of New
Common Stock and the cancellation, annulment and extinguishment
of the Old Common Stock,
in accordance with the terms of the Creditors' Plan, no change in
the ownership of the
capital stock of any of the Debtors shall be required in
connection with the
implementation of the Creditors' Plan.
4.11 Estimated Claims Order(s). On or before the
Confirmation Date, the
Proponents shall make an application to the Court for an
Estimated Claims Order, which
shall estimate the aggregate amount of Disputed Claims that are
Federal Income Tax Claims
for purposes of determining whether the condition in Section
10.1(d) has been satisfied.
4.12 Resolution of Disputed Claims. All objections to
Disputed Claims shall be
filed by the Debtors and/or the Bondholders Committee on or
before the date established
in the Confirmation Order as the last date for filing objections
to Disputed Claims. The
objecting party shall serve a copy of each such objection upon
the Holder of the Disputed
Claim to which it pertains.
4.13 Reserves for Disputed Claims.On or promptly after
the Effective Date, the
applicable Debtor shall reserve or cause to be reserved, in an
account, segregated in
trust, for the account of each Holder of a Disputed Claim (a)
that property which would
otherwise be distributable to such Holder on the Effective Date
were such Disputed Claim
an Allowed Claim on the Effective Date (i.e., Cash, other
Qualified Securities, New Common
Stock and/or New Senior Notes), or such other property as the
Holder of such Disputed
Claim and the Bondholders Committee (prior to the Effective Date)
or Walter Industries
(on and after the Effective Date) may agree upon, or (b) that
property specified by a
Final Order. The property so reserved for the Holder of such
Disputed Claim shall be
distributed to such Holder, to the extent such Disputed Claim is
allowed, only after such
Disputed Claim becomes an Allowed Claim. To the extent interest
is earned on reserved
Cash, such interest shall be held by or on behalf of the
applicable Debtor as additional
reserved Cash for the account of the Holder for whom such
reserved Cash is held; reserved
Cash, net of federal and state income taxes and costs and
expenses incurred with respect
thereto, shall be distributed to the Holder of a Disputed Claim
which becomes an Allowed
Claim in accordance with Sections 4.5 and 4.15 of the Creditors'
Plan.
4.14 Investment of Reserves. The Debtors shall deposit
or invest all Cash held
from time to time in reserve consistent with their customary
investment policies giving
due regard to the Debtors' likely need for such monies to satisfy
Disputed Claims.
4.15 Excess Reserves. As each Disputed Claim becomes an
Allowed Claim, the Debtor
from which the reserved property derived shall become vested with
all right, title and
interest in that property, if any, reserved for, but not
distributed to, the Holder of
such Disputed Claim (including interest, if any, earned thereon)
as a consequence of the
Allowed Amount of such Disputed Claim having been fixed at less
than the amount stated
in such Disputed Claim.
4.16 Bar Date for Fee Claims. Unless an earlier or later
time is set by Final
Order of the Court, all Fee Applications for final allowance of
compensation and
reimbursement of expenses shall be filed within thirty (30) days
after the Confirmation
Date. At least thirty (30) days prior to the first day of the
hearing on confirmation
of the Creditors' Plan (the "First Hearing Day"), or such later
time as the Court may by
order approve, each Professional Person referred to in, or
requesting compensation
pursuant to, a Fee Claim shall have Filed with the Court a
non-binding estimate of the
maximum amount of allowance of compensation and reimbursement of
expenses to be requested
in the Chapter 11 Cases (including any compensation to be sought
under Sections 503(b)
or 1129(a)(4) of the Code), for the period from the Filing Date
through the First Hearing
Day.
4.17 Unclaimed Property. Subject to Section 4.19 hereof,
in accordance with
Section 1143 of the Code, any Holder that fails to surrender the
instrument, if any,
evidencing its Claim or Interest, as provided herein, within two
(2) years from and after
the Effective Date shall be deemed to have forfeited all rights
and Claims and Interests
and shall not participate in any distribution on account of the
Creditors' Plan. Any
Cash, including interest earned thereon, that is unclaimed for
two (2) years after being
held by the applicable Bank Agent or Indenture Trustee or the
disbursing agent selected
by the Bondholder Proponents for absence of a mailing address
shall be returned to and
revested in Walter Industries.
4.18 Non-Negotiated Checks. If a Holder of an Allowed
Claim fails to negotiate
a check issued to such Holder pursuant to the provisions of
Article III of the Creditors'
Plan within one (1) year of the date such check was issued, then
the amount of Cash
attributable to such check shall be deemed to be unclaimed
property in respect of such
Holder's Claims and shall be revested in Walter Industries.
4.19 Returned Distributions. If a distribution to any
Holder of an Allowed Claim
or Interest made pursuant to the Creditors' Plan is returned to
the applicable Bank Agent
or Indenture Trustee or the disbursing agent selected by the
Bondholder Proponents or to
Walter Industries or the Debtors, due to an incorrect or
incomplete address for the Holder
of such Allowed Claim, then such Bank Agent or Indenture Trustee
or the disbursing agent
selected by the Bondholder Proponents shall promptly so notify
Walter Industries and
Walter Industries, on behalf of the Debtors, shall publish a
notice once in The Wall
Street Journal (National Edition) and The New York Times
(National Edition) not later than
two (2) years after the date on which such distribution was made
listing the name of such
Holder and the distribution due such Holder and stating that
unless such Holder contacts
Walter Industries or the applicable Debtor within sixty (60) days
following the date such
notice appears in such newspapers and provides Walter Industries
or the applicable Debtor
with an accurate address, such distribution shall be deemed to be
unclaimed property in
respect of such Holder's Allowed Claim or Interest and such
Holder shall be deemed to have
no further entitlement in respect of such distribution and shall
not participate in any
further distributions under the Creditors' Plan.
4.20 Claims Against Two or More Debtors. Solely for the
purpose of determining
the allowed status of such Claims, to the extent any Creditor
holds Claims against two
or more Debtors arising out of a single debt or liability,
whether by virtue of joint-and
several liability, or status as co-obligors or cross-guarantors,
such Claims may be
Allowed Claims against each such Debtor, subject to all defenses
and rights of each such
Debtor, but such Creditor shall not be entitled to recover, in
the aggregate, more than
the amount of such single debt or liability. This section shall
not affect any rights
of contribution or reimbursement among Debtors or affect any
determination of the solvency
of any Debtors under the Code.
4.21 Direction to Parties. From and after the Effective
Date, any Holder and any
of the Debtors may apply to the Court for an order directing any
of the Debtors or any
necessary party, as the case may be, to execute or deliver or to
join in the execution
or delivery of any instrument required to effect a transfer of
property in accordance with
the Creditors' Plan, and to perform any other act, including the
satisfaction of any Lien,
that is necessary for the Confirmation of the Creditors' Plan,
pursuant to Section 1142(b)
of the Code.
4.22 "Promptly After the Effective Date. "The term
"promptly after the Effective
Date" as used in the Creditors' Plan shall mean as soon as
practicable after the Effective
Date, but in no event later than thirty (30) days after the
Effective Date or, if later,
thirty (30) days after a Claim shall have become an Allowed Claim
or thirty (30) days
after compliance with Section 4.4, if applicable.
ARTICLE V
MANAGEMENT OF WALTER INDUSTRIES
5.1 Corporate Governance; Directors and Officers. Except
where otherwise
expressly provided in the Creditors' Plan, the corporate
governance of the Debtors and
the election and appointment of the directors and officers of the
Debtors shall be carried
out in accordance with the respective articles of incorporation
and bylaws of the Debtors
and the laws of the respective states in which the Debtors are
incorporated.
5.2 Reconstitution of Boards of Directors of Debtors. On
the Confirmation Date,
the Board of Directors of each Debtor shall be replaced by a New
Board of Directors (each
a "New Board" and together the "New Boards"), each consisting of
eleven (11) Directors.
Each New Board shall consist of the persons identified by the
Proponents at least thirty
(30) days prior to the date of the confirmation hearing on the
Creditors' Plan, which
persons shall include the following: (i) G. Robert Durham, the
present President, Chief
Executive Officer and Director of Walter Industries; (ii) James
W. Walter, the present
Chairman of Walter Industries; and (iii) Kenneth J. Matlock, the
present Executive Vice
President, Chief Financial Officer and Director of Walter
Industries. In the event that
the Confirmation Order does not provide for or allow the
replacement of the Board of
Directors of each Debtor with a New Board on or about the
Confirmation Date, then the
Confirmation Order shall direct the Board of Directors of each
Debtor to take the actions
that the New Boards would be required to take under Section 5.3
of the Creditors' Plan
and under the other provisions of the Creditors' Plan, except
where another Person is
expressly authorized under the Creditors' Plan to act in the
stead of a New Board if it
has not yet been constituted and except that the Confirmation
Order shall also appoint
the Bondholders Committee as the representative of Walter
Industries under Section 303
of the Delaware General Corporation Law with the full power and
authority to establish
the amount and the terms, conditions, rights and benefits of the
Qualified Securities and
the New Senior Notes to be issued under the Creditors' Plan and
to take such other actions
as may be required to or as may facilitate the consummation of
the Creditors' Plan.
5.3 Certain Duties of New Boards. In addition to the
other duties of each New
Board not inconsistent with this Section 5.3 under applicable law
and the applicable
articles of incorporation and bylaws of each Debtor, each New
Board shall cause its Debtor
to be managed and operated in a manner calculated to (i) maximize
the value of the Debtor,
and (ii) raise Cash from operations or other commercially
reasonable sources, create
Qualified Securities in accordance with customary industry
practice, and take such other
actions to facilitate consummation of the Creditors' Plan.
5.4 Management Stock; New Incentive Plans. As of the
Effective Date, a number of
shares of Class B Common Stock equal to 6% of the New Common
Stock which would be
outstanding on the Effective Date after giving effect to the
issuance of shares of New
Common Stock pursuant to the Creditors' Plan shall be reserved
for issuance and delivery,
from time to time, in the discretion of the New Board of
Directors of Walter Industries
to the management of Walter Industries and its subsidiaries and
certain other employees
of Walter Industries and its subsidiaries upon the terms and
subject to the conditions
of certain incentive agreements and/or plans to be entered into
and/or adopted, as the
case may be, on or about the Effective Date by Walter Industries
in the form agreed to
by the New Board of Walter Industries (or if the New Board is not
yet appointed, by the
Bondholders Committee). Such incentive agreements and/or plans
may also provide for the
granting of restricted stock rights, stock appreciation rights or
other incentive awards.
5.5 Funding of Retiree Health Benefits. On the Effective
Date, Walter Industries
shall set aside, in a trust, pre-funded insurance program or
other appropriate vehicle,
funds sufficient to provide reasonable assurance (on an actuarial
basis in the judgment
of the New Board of Directors of Walter Industries) of the
continued funding of medical
benefits, under the post-retirement medical benefit plan of
Walter Industries from time
to time in effect, upon the retirement of current employees whose
benefits in such plan
have vested and to retired employees of Walter Industries
following the dissolution of
Walter Industries, divestiture of its operating subsidiaries or
other event which would
render Walter Industries unable to continue the current funding
of such benefits.
5.6 Confirmation Bonus Awards. Prior to the Effective
Date, the New Boards (or
if the New Boards have not been appointed as of the Confirmation
Date, the Bondholders
Committee) may, in their (or its) sole discretion, prepare a
schedule of Cash bonuses to
be paid on or after the Effective Date to the management of
Walter Industries and its
subsidiaries who are employed by Walter Industries or such
subsidiaries on the Effective
Date. To the extent that Court approval is necessary under
Section 1129(a) of the Code,
such approval will be obtained.
ARTICLE VI
RELEASES AND INDEMNIFICATION
6.1 Release by Holders of Claims or Interests. As of the
Effective Date, Holders
of any Claims or Interests: (i) that accept any property or New
Common Stock to be
distributed to or for the benefit of a Holder of any Claims, or
with respect to a Holder
of Interests, that exercises its Equity Call Option, pursuant to
Article III of the
Creditors' Plan and in consideration therefor; (ii) in a Class
that accepts the Creditors'
Plan; or (iii) that mark a box on the ballot sent to such Holder
for purposes of voting
whether to accept or reject the Creditors' Plan, indicating such
Holder's agreement to
such release (the text of which release shall be set forth in
full on such ballot) (and
all trustees and/or agents on behalf of such Holder) shall be
deemed to have released,
to the extent permitted by the Court, (A) the Settling Parties
(other than Jim Walter
Corporation and The Celotex Corporation and their respective
subsidiaries), the
Proponents, the Holders of Revolving Credit Bank Claims, the
Holders of Working Capital
Bank Claims, the Revolving Credit Agents, the Working Capital
Agents, the Holders of
Series B & C Senior Note Claims, the Holders of Subordinated Note
Claims, the Series B
& C Senior Note Trustee, the Subordinated Note Trustees, the
Holders of Allowed Indemnity
Claims (to the extent of such Claims), the members of the
Official Committees, the members
of the Ad Hoc Committee of Pre-LBO Bondholders and the respective
present and former
parents, subsidiaries, Affiliates, directors, officers, partners,
shareholders, employees,
agents, advisors, predecessors in interest and representatives of
all of the foregoing
(other than any (x) Holders or former Holders of Allowed Old
Common Stock Interests that
are not Settling Equityholders, (y) any of Celotex's or Jim
Walter Corporation's or any
of the Debtors' respective present and former shareholders,
directors, officers, partners,
employees, agents, advisors and representatives, and Jim Walter
Corporation and The
Celotex Corporation and their respective subsidiaries), in each
case in such Person's
capacity as a Holder of a Claim or Interest, as a plan proponent,
if applicable, as a
shareholder of any Debtor, or any other capacity (including, with
respect to the
Bondholder Proponents, any action or inaction related to or set
forth in the definition
of Qualified Securities herein) (it being understood that this
clause (A) does not include
any shareholder, director, officer, partner, employee, agent,
advisor or representative
of any Debtor, in each case that is a Holder or former Holder of
an Allowed Old Common
Stock Interest that is not a Settling Equityholder or that is not
a Celotex/JWC Released
Party) and (B) the holders of Allowed Indemnity Claims that are
not parties to the Veil
Piercing Settlement Agreement, but only to the extent of such
Allowed Indemnity Claims
and only in the capacity in which such Allowed Indemnity Claims
provide indemnification,
reimbursement or contribution (collectively, the Persons
described in (A) and (B) are
referred to herein, in such capacities, as the "Released
Parties"), of and from any and
all Claims, obligations, rights, causes of action and liabilities
(other than the right
to enforce the Debtors' obligations under the Creditors' Plan)
which such Holder may be
entitled to assert, whether known or unknown, foreseen or
unforeseen, then existing or
thereafter arising, based in whole or in part upon any act,
omission or other occurrence
taking place on or prior to the Effective Date in any way
relating to the Debtors, the
Chapter 11 Cases or the Creditors' Plan (including, without
limitation, any of the Veil
Piercing-Related Issues or LBO-Related Issues).
6.2 Release By Debtors. (a) As of the Effective Date,
the Debtors shall be deemed
to have waived and released any and all claims, obligations,
rights, causes of action and
liabilities, whether known or unknown, foreseen or unforeseen,
then existing or thereafter
arising, which are based in whole or in part upon any act,
omission or other occurrence
taking place on or prior to the Effective Date and which may be
asserted by or on behalf
of any of the Debtors, against any of the Released Parties, in
any of their respective
capacities, and (b) on the Effective Date, the Debtors, for good
and valuable
consideration, the adequacy of which is hereby confirmed, shall
be deemed to have waived
and released any and all claims, obligations, rights, causes of
action and liabilities
(including, without limitation, causes of action arising under
Sections 544, 547 and 548
of the Code, but excluding any rights of the Debtors to enforce
the Creditors' Plan),
whether known or unknown, foreseen or unforeseen, then existing
or thereafter arising,
which are based in whole or in part upon act, omission or other
occurrence taking place
on or prior to the Effective Date and which may be asserted by or
on behalf of any of the
Debtors against any Released Party; provided, that such causes of
action shall be
preserved to the extent not based upon Veil Piercing-Related
Issues or LBO-Related Issues,
for purposes of setoff in respect of any Disputed Claim.
6.3 Dismissal of Lawsuits. Without limiting the scope or
the generality of the
foregoing Sections 6.1 and 6.2, and without limiting any rights
against Persons that are
not Released Parties, the Debtors and the other named parties in
such lawsuits shall cause
to be dismissed with prejudice, as to all Released Parties on the
Effective Date, Mellon
Bank, N.A. and Bank of New York v. Kohlberg Kravis Roberts & Co.,
et al, Adversary
Proceeding No. 94-17 pending before the Court.
6.4 Indemnification. The articles of incorporation
and/or the bylaws of Walter
Industries and each of the Debtors shall provide that Walter
Industries and each of the
Debtors shall indemnify, hold harmless and reimburse its present
and former officers and
directors from and against any and all losses, claims, damages,
fees, expenses,
liabilities and actions to the extent that such Persons were the
beneficiary of an
indemnity giving rise to an Allowed Indemnity Claim and pursuant
to the terms of such
indemnity. All rights of the Persons indemnified pursuant hereto
shall survive
Confirmation of the Creditors' Plan and shall not be discharged
pursuant to Section 1141
of the Code. The Debtors may confirm any such contractual
indemnification by contract,
resolution or otherwise as they may deem appropriate.
ARTICLE VII
ENTERPRISE VALUE
7.1 Enterprise Value. Except as expressly provided in
the definition of New
Common Stock Value herein, the Negotiated Enterprise Value shall
be used for all purposes
of the Creditors' Plan relating to the allocation or value of New
Common Stock, and shall
not be increased or decreased at any time or for any reason,
including, without
limitation, any change in the business, results of operations,
condition (financial or
otherwise), properties, Assets or prospects of any Debtor.
ARTICLE VIII
EXECUTORY CONTRACTS
8.1 Assumption of Executory Contracts. All Executory
Contracts that have not been
rejected before ninety (90) days after the Effective Date shall
be deemed assumed as of
the Confirmation Date; provided, however, that the Proponents
reserve the right to assume
or reject after the 90th day after the Effective Date any
Executory Contract which is
subject to a motion pending as of such 90th day to assume or
reject such Executory
Contract. The Executory Contracts listed on Exhibit 9 attached
hereto are expressly
rejected under the Creditors' Plan, without admitting that any of
the items listed on
Exhibit 9 is an Executory Contract, and without admitting any
liability as a result of
such rejection or otherwise.
8.2 Cure of Defaults. As to any Executory Contract
assumed pursuant to this
Creditors' Plan, Walter Industries and/or the applicable Debtor,
as the case may be,
shall, pursuant to the provisions of Section 1123(a)(5)(G) of the
Code, cure or
demonstrate the ability to cure all defaults (except those
specified in Section 365(b)(2)
of the Code) existing under and pursuant to such Executory
Contract by paying or
demonstrating the ability to pay the amount, if any, of such
Executory Contract Claim.
Payment of any such Executory Contract Claim shall be in full
satisfaction, release,
discharge and cure of all such defaults (including any other
Claims Filed by any such
party as a result of such existing defaults); provided, however,
that if any Person Files,
within thirty (30) days of the Filing of a proof of claim with
respect to any Executory
Contract Claim, an objection in writing to the amount set forth,
the Court shall determine
the amount actually due and owing in respect of the defaults or
shall approve the
settlement of any such Executory Contract Claim.
8.3 Claims for Damages. Each Person that is a party to
an Executory Contract
rejected pursuant to this Article VIII shall be entitled to File,
not later than thirty
(30) days after the issuance of a Final Order of the Court
authorizing such rejection,
a proof of claim for damages alleged to have arisen from the
rejection of the Executory
Contract to which such Person is a party, or be forever barred.
Objections to any proof
of claim shall be Filed not later than sixty (60) days after such
proof of claim is Filed,
and the Court shall determine any such objections.
8.4 Classification of Claims. Unsecured Claims arising
out of the rejection of
Executory Contracts shall be Class U-3 Claims (Other Unsecured
Claims).
ARTICLE IX
RETENTION OF JURISDICTION
9.1 Jurisdiction of Court. Notwithstanding the entry of
the Confirmation Order
or the Effective Date having occurred, the Court will retain
jurisdiction of the
Chapter 11 Cases for the following purposes:
(a) To hear and determine any and all pending
applications for the rejection and disaffirmance, assumption or
assignment of Executory Contracts, any objections to Claims
resulting therefrom, and the allowance of any Claims resulting
therefrom;
(b) To hear and determine any and all applications,
adversary proceedings, contested matters and other litigated
matters pending on the Confirmation Date;
(c) To ensure that the distributions to Holders of
Allowed Claims and Interests are accomplished as provided herein
and in the Reorganization Documents;
(d) To hear and determine any objections to Claims
Filed, before or after Confirmation; to allow or disallow, in
whole or in part, any Disputed Claim, and to hear and determine
other issues presented by or arising under the Creditors'
Plan;
(e) To enter and implement such orders as may be
appropriate in the event implementation of the Confirmation Order
or Creditors' Plan is for any reason stayed, or the Confirmation
Order is reversed, revoked, modified or vacated;
(f) To hear and determine all applications for
compensation of professionals and reimbursement of expenses under
Sections 330, 331, 503(b) or 1129(a)(4) of the Code;
(g) To hear the Proponents' application, if any, to
modify the Creditors' Plan in accordance with Section 1127 of the
Code (after Confirmation, any Proponent may also, so long as it
does not adversely affect the interest of Holders,
institute proceedings in the Court to remedy any defect or
omission or reconcile any inconsistencies in the Creditors' Plan,
Disclosure Statement or Confirmation Order, in such manner as may
be necessary to carry out the purposes and effects of
the Creditors' Plan);
(h) To enforce and to hear and determine disputes
arising in connection with the Creditors' Plan or its
implementation, including disputes among Holders
and disputes arising under the Reorganization Documents,
the Veil Piercing Settlement Agreement, the Pre-LBO Bondholders
Settlement Agreement, or any other agreements, documents or
instruments executed in connection with the Creditors'
Plan;
(i) To construe and to take any action to enforce
the Creditors' Plan, Reorganization Documents and Confirmation
Order, and issue such orders as may be necessary for the
implementation, execution and consummation of the Creditors' Plan
and the execution, delivery and performance of the
Reorganization Documents;
(j) To construe and to take any action to enforce
the Veil Piercing Settlement Agreement and the Pre-LBO
Bondholders Settlement Agreement, including without limitation,
the enforcement of the settlement injunction and the releases
contained or provided for therein, and issue such orders
as may be necessary for the implementation of the Veil Piercing
Settlement Agreement and the Pre-LBO Bondholders Settlement
Agreement;
(k) To determine such other matters and for such
other purposes as may be provided in the Confirmation Order;
(l) To hear and determine any motions, contested
matters or adversary proceedings involving taxes, tax refunds,
tax attributes and tax benefits and similar or related matters,
with respect to the Debtors or their estates arising
prior to the Effective Date or relating to the period of
administration of the Chapter 11 Cases;
(m) To hear and determine any other matters related
hereto and not inconsistent with Chapter 11 of the Code; and
(n) To enter a final decree closing the Chapter 11
Cases.
ARTICLE X
CONDITIONS PRECEDENT TO CONFIRMATION AND
EFFECTIVENESS
10.1 Conditions to Confirmation. Confirmation of this
Creditors' Plan shall not
occur unless and until each of the following conditions shall
have been satisfied or have
been waived by all of the Proponents (or, if specified, solely by
certain of the
Proponents):
(a) The Court shall have entered the Confirmation
Order on or prior to December 31, 1994 (this condition may be
waived solely by the Bondholders Committee);
(b) Either (i) the Court shall have entered an
order finding (A) Jim Walter Resources not in default under any
covenant contained in the amended agreement, effective January 1,
1979, between Jim Walter Resources and Alabama Power Company
and (B) Jim Walter Resources, after giving effect to the
Creditors' Plan, is in compliance with applicable covenants and
required financial conditions in the amended agreement, effective
January 1, 1979, between Jim Walter Resources and
Alabama Power Company, or (ii) the disputed issues between
Jim Walter Resources and Alabama Power Company shall have been
settled on terms acceptable to the Bondholders Committee and the
Court shall have entered an order approving such
settlement (this condition may be waived solely by the
Bondholders Committee);
(c) The Court shall have entered an order approving
the Veil Piercing Settlement and the Veil Piercing Settlement
Agreement, and the Court shall have entered an order settling and
resolving all of the LBO-Related Issues as to the Released
Parties, as provided in the Creditors' Plan (this condition may
be waived solely by the Bondholders Committee);
(d) The Allowed Amount of Federal Income Tax Claims
shall have been estimated by the Court or settled in an amount
not in excess of $40,000,000 (this condition may be waived solely
by the Bondholders Committee); and
(e) There shall not have occurred, in the sole
determination of the Bondholders Committee, a material adverse
change in the business, results of operations, condition
(financial or otherwise), properties, Assets or prospects of
the Debtors, taken together, from the date of this
Creditors' Plan to the Confirmation Date (this condition may be
waived solely by the Bondholders Committee).
10.2 Conditions to Effectiveness. Notwithstanding any
other provision of the Creditors' Plan or the Confirmation Order,
the Effective Date of the Creditors' Plan shall
not occur unless and until each of the following conditions shall
have been satisfied or
have been waived by all of the Proponents (or, if specified,
solely by certain of the
Proponents):
(a) The Confirmation Order shall have become a
Final Order (this condition
may be waived solely by the Bondholders Committee);
(b) All conditions precedent set forth in the Veil
Piercing Settlement
Agreement shall have been satisfied or waived (as provided
therein);
(c) The orders described in Sections 10.1(b) and
10.1(c) of the Creditors'
Plan shall each have become a Final Order (this condition
may be waived solely by
the Bondholders Committee);
(d) The Debtors shall have consideration sufficient
to make all
distributions required by the Creditors' Plan;
(e) Qualified Securities having an aggregate
principal amount of not less than $700 million shall be available
for distribution to Classes U-4, U-5, U-6 and U-7 under the
Creditors' Plan (this condition may be waived solely by the
Bondholder Proponents);
(f) The Reorganization Documents shall have been
executed and delivered by all of the parties thereto and the
Court shall have entered a Final Order approving the
Reorganization Documents (this condition may be waived
solely by the Bondholders Committee);
(g) Mid-State Homes shall have obtained the
Mid-State Homes Warehouse Credit Facility (this condition may be
waived solely by the Bondholders Committee);
(h) There shall not have occurred, in the sole
determination of the Bondholders Committee, a material adverse
change in the business, results of operations, condition
(financial or otherwise), properties, Assets or prospects of
the Debtors, taken together, from the date of this
Creditors' Plan to the Effective Date (this condition may be
waived solely by the Bondholders Committee); provided,
that any such determination by the Bondholders Committee
shall not be effective unless written notice thereof is given to
the Court, the Debtors, the other Proponents, the Bank Agents and
the Series B & C Senior Note Trustee with an opportunity for any
of such persons to request, within 10 days after receipt of
such notice, that a hearing be held to consider whether
such determination constitutes an abuse of discretion;
(i) All conditions to effectiveness of each of the
Reorganization Documents (other than conditions relating to
payment of money or the issuance of debt securities or New Common
Stock on the Effective Date or conditions that the
Effective Date shall have occurred or whose fulfillment
would require the Effective Date to have occurred) shall have
been satisfied (or waived by the applicable Persons); and
(j) The Charter shall have been filed with the
Secretary of State of the State of Delaware.
ARTICLE XI
CRAM DOWN
11.1 Cram Down. If all of the applicable requirements
for Confirmation of the
Creditors' Plan are met as set forth in Sections 1129(a)(l)
through (13) of the Code
except subsection (8) thereof, the Proponents hereby request that
the Court confirm the
Creditors' Plan pursuant to Section 1129(b) of the Code,
notwithstanding the requirements
of subsection (8) thereof, on the basis that, among other things,
the Creditors' Plan is
fair and equitable, and does not discriminate unfairly, with
respect to each nonaccepting
impaired Class.
ARTICLE XII
EFFECTS OF PLAN CONFIRMATION; TITLE TO PROPERTY AND
DISCHARGE
12.1 Vesting of Property. Except as otherwise provided
in the Creditors' Plan or
the Confirmation Order, on the Effective Date, all Assets of the
estates of each of the
Debtors (including, without limitation, any and all claims and
causes of action against
Persons that are not Released Parties) shall vest in such
Debtors, and subsequently will
be retained by such entities subject to the provisions of the
Creditors' Plan and the
Confirmation Order and the Reorganization Documents and shall be
free and clear of all
Claims and Interests of all Holders, except the obligations to
perform according to the
Creditors' Plan, the Confirmation Order, the Reorganization
Documents and the Liens and
security interests granted pursuant to the Creditors' Plan or any
of the Reorganization
Documents. Except as otherwise provided in the Creditors' Plan
or the Confirmation Order,
on the Effective Date and thereafter, each of the Debtors may
operate its business free
of any restrictions imposed by the Code.
12.2 Discharge. The issuance of the Confirmation Order
shall (a) operate as a
discharge, pursuant to Section 1141(d)(1) of the Code, effective
as of the Effective Date,
of any and all debts (as such term is defined in Section 101(11)
of the Code) of or Claims
against one or more of the Debtors that arose at any time before
the Effective Date,
including, but not limited to, all principal and all interest,
whether accrued before,
on or after the Filing Date. Without limiting the generality of
the foregoing, on the
Effective Date, the Debtors shall be discharged from any debt
that arose before the
Effective Date, and any debt of a kind specified in Section
502(g), 502(h) or 502(i) of
the Code, to the full extent permitted by Section 1141(d)(1)(A)
of the Code. Nothing in
the Creditors' Plan shall be deemed to waive, limit or restrict
in any way the discharge
granted upon Confirmation of the Creditors' Plan pursuant to
Section 1141 of the Code and
effective as of the Effective Date.
12.3 Injunction. In order to preserve and promote the
settlements contemplated
by and provided for in the Creditors' Plan, effective on the
Effective Date, all Persons
who have held, hold or may hold a Demand, debt or Claim, or who
have held, hold or may
hold Interests, shall be permanently enjoined, to the fullest
extent permitted by law,
from taking any of the following actions against or affecting the
Released Parties or the
Assets of the Released Parties with respect to such Claims,
Demands or Interests (other
than actions brought to enforce any rights or obligations under
the Creditors' Plan or
any of the Reorganization Documents or appeals, if any, from the
Confirmation Order):
(i) commencing, conducting or continuing in any manner, directly
or indirectly, any suit,
action or other proceeding of any kind against the Released
Parties or the Assets of the
Released Parties or any direct or indirect successor in interest
to any of the Released
Parties, or any Assets of any such successor; (ii) enforcing,
levying, attaching,
collecting or otherwise recovering by any manner or means whether
directly or indirectly
any judgment, award, decree or order against the Released Parties
or the Assets of the
Released Parties or any direct or indirect successor in interest
to any of the Released
Parties or any Assets of any such transferee or successor; (iii)
creating, perfecting or
otherwise enforcing in any manner, directly or indirectly, any
encumbrance of any kind
against the Released Parties or the Assets of the Released
Parties or any direct or
indirect successor in interest to any of the Released Parties, or
any Assets of any such
transferee or successor other than as contemplated by the
Creditors' Plan or any of the
Reorganization Documents; (iv) asserting any set-off, right of
subrogation or recoupment
of any kind, directly or indirectly against any obligation due
the Released Parties or
the Assets of the Released Parties, or any direct or indirect
transferee of any Assets
of, or successor in interest to, any of the Released Parties; and
(v) proceeding in any
manner in any place whatsoever that does not conform to or comply
with the provisions of
the Creditors' Plan or any of the Reorganization Documents.
12.4 Effectiveness and Enforcement of Settlement
Agreements. On and after the
Effective Date, the terms of the Veil Piercing Settlement
Agreement and the Pre-LBO
Bondholders Settlement Agreement and the settlements contained in
the Creditors' Plan with
respect to the Other Unsecured Claims, the Series B & C Senior
Note Claims, the Working
Capital Bank Claims and the Revolving Credit Bank Claims shall be
incorporated by
reference in the Creditors' Plan in their entirety, and shall be
binding and enforceable
by the Court against the Debtors, all of the respective parties
thereto and all Holders
of Veil Piercing Claims.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Revocation. The Proponents reserve the right to
revoke and withdraw the Creditors' Plan prior to the Confirmation
Date. If the Proponents revoke or withdraw the
Creditors' Plan, then the Creditors' Plan shall be null and void
and, in such event, nothing contained herein shall be deemed to
constitute a waiver or release of any Claims
by or against the Proponents or any other Person or to prejudice
in any manner the rights
of any of the Proponents or any Person in any further proceedings
involving the Proponents.
13.2 Amendments. This Creditors' Plan may be amended,
modified or supplemented
by (a) all of the Proponents or (b) the Bondholder Proponents or
(c) any one or more of
the Proponents other than as provided in the proceeding clauses
(a) and (b) (provided
that, in the case of this clause (c), such amendment shall bind
only the Proponent(s)
filing such amendment, modification or supplement), in each case
before or after the
Confirmation Date, and by all of the Proponents or the Bondholder
Proponents or any Debtor
after the Effective Date, in each case in the manner provided for
by Section 1127 of the
Code or as otherwise permitted by law. Notwithstanding the
foregoing or any other
provision hereof, nothing in this Creditors' Plan shall in any
way prohibit or restrict
any Proponent from filing a plan of reorganization on its own
behalf.
13.3 No Consolidation. The Chapter 11 Cases shall not be
substantively
consolidated and (i) the legal, equitable, and contractual rights
relating to intercompany
Claims between the Debtors shall be unaltered; (ii) the Assets
and liabilities of the
Debtors will not be merged or treated as though they were merged;
(iii) any obligation
of any Debtor will be deemed to be an obligation of such Debtor
only and any Claim which
is Filed in connection with any such obligation will be an
Allowed Claim only against the
Debtor against which such Claim has been Filed; (iv) each and
every Claim which is Filed
in the Chapter 11 Case of any Debtor will be deemed Filed only
against the Debtor with
respect to which such Claim has been Filed; and (v) for purposes
of determining the
availability of the right of setoff under Section 553 of the
Code, the Debtors shall not
be treated as one entity so that, subject to the other provisions
of Section 553 of the
Code, debts due to any of the Debtors may not be set off against
the debts of any of the
other Debtors. Notwithstanding the foregoing, on the Effective
Date, and in accordance
with the terms of the Creditors' Plan, all Allowed Claims based
upon guarantees of
collection, payment or performance made by any of the Debtors
with respect to the
obligations of another Debtor shall be discharged and released.
13.4 Provisions as to Interest. Except as expressly
stated in this Creditors'
Plan (including, without limitation, Section 3.26 hereof), or
otherwise permitted to be
paid by the Court, no interest, penalty or late charge is to be
allowed on any Claim
subsequent to the Filing Date; and except as expressly stated in
this Creditors' Plan,
post-Filing Date interest allowed on any Claim shall be simple
interest and not compounded
for any period.
13.5 No Attorneys' Fees. No attorneys' fees will be paid
by any Debtor with
respect to any Claim except as specified herein, in any of the
Reorganization Documents
or as allowed by a Final Order of the Court.
13.6 Post Confirmation Effect of Evidences of Claims or
Interests. Except as
otherwise provided in the Creditors' Plan, effective upon the
Effective Date, all
evidences of Claims or Interests shall represent only the right
to participate in the
distributions, if any, contemplated by the Creditors' Plan.
13.7 Official Committees. The Official Committees shall
continue in existence
until the Effective Date for the principal purpose of overseeing
the implementation of
the Creditors' Plan. The members of the Official Committees
shall serve without
compensation, but shall be reimbursed for all expenses incurred
in their capacity as
members of the Official Committees.
13.8 Construction. The rules of construction set forth
in Section 102 of the Code
shall apply to the construction of the Creditors' Plan.
13.9 Time. In computing any period of time prescribed or
allowed by this
Creditors' Plan, the day of the act, event, or default from which
the designated period
of time begins to run shall not be included. The last day of the
period so computed shall
be included, unless it is not a Business Day or, when the act to
be done is the Filing
of a paper in court, a day on which weather or other conditions
have made the clerk's
office inaccessible, in which event the period runs until the end
of the next day which
is not one of the aforementioned days.
13.10 Tax Allocation of Consideration Paid to Holders.
In the case of Holders of
Allowed Claims who receive consideration in respect of the
Allowed Amount of such Claims,
other than, or in addition to, Cash, the consideration received
shall be allocated and
applied to such Claims in the following order: any New Common
Stock, any New Senior Notes
or Qualified Securities (other than Cash), and any Cash shall, in
that order, be applied
to reduce, satisfy and discharge first the principal amount of
the Allowed Claim, then
any pre-Filing Date interest included in such Allowed Claim and
last any post-Filing Date
interest included in such Claim.
13.11 Governing Law. Except to the extent the Code or
Bankruptcy Rules are
applicable, the rights and obligations arising under this
Creditors' Plan shall be
governed by, and construed and enforced in accordance with, the
laws of the State of New
York, without giving effect to the principles of conflicts of law
thereof.
13.12 Headings. The headings of the Articles,
paragraphs, and sections of this
Creditors' Plan are inserted for convenience only and shall not
affect the interpretation
hereof.
13.13 Notice of Effectiveness. Upon the satisfaction of
all of the conditions to
the Effectiveness of the Creditors' Plan, Walter Industries shall
give notice thereof to
(a) the Holders of Revolving Credit Bank Claims, c/o Chemical
Bank, 270 Park Avenue, New
York, New York 10017, Attention: Elizabeth Kelley, (b) the
Holders of Working Capital Bank
Claims, c/o Bankers Trust Company, 280 Park Avenue, 19 West, New
York, New York 10017,
Attention: Susan Forst, (c) the Holders of Series B & C Senior
Note Claims, c/o LaSalle
National Bank, 135 South LaSalle Street, Chicago, Illinois 60603,
Attention: Lars
Anderson, (d) the Creditors' Committee, c/o Jones, Day Reavis &
Pogue, 599 Lexington
Avenue, New York, New York 10016, Attention: Marc Kirschner, Esq.
and (e) the Bondholders
Committee c/o Stroock & Stroock & Lavan, 7 Hanover Square, New
York, New York 10004,
Attention: Daniel Golden, Esq., and shall publish notice thereof
once in The Wall Street
Journal (National Edition) and The New York Times (National
Edition).
13.14 Notices. All notices, requests or demands in
connection with this Creditors' Plan shall be in writing and
shall be mailed by registered or certified mail, return receipt
requested to:
Bondholders Committee
c/o Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attention: Daniel H. Golden, Esq.
and
Official Committee of
General Unsecured Creditors
c/o Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Marc S. Kirschner, Esq.
and
Lehman Brothers Inc.
American Express Tower
World Financial Center
18th Floor
New York, New York 10285-0018
Attention: Mr. Kenneth A. Buckfire
and
Lion Advisors, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: Mr. Marc J. Rowan
Robert H. Falk, Esq.
and
Ad Hoc Committee of Pre-LBO Bondholders
c/o Marcus Montgomery Wolfson P.C.
53 Wall Street
New York, New York 10005
Attention: Peter D. Wolfson, Esq.
Sara L. Chenetz, Esq.
With copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert D. Drain, Esq.
and
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
65 East 55th Street, 33rd Floor
New York, New York 10022
Attention: Ellen R. Werther, Esq.
Steven M. Pesner, P.C.
13.15 Not Admissible. This Creditors' Plan shall not be
admissible in any proceedings involving the Proponents or any of
them for any purpose, nor shall it be deemed as an admission or
waiver of any Proponent for any purpose.
13.16 Successors and Assigns. The rights, benefits and
obligations of any Person named or referred to in the Creditors'
Plan will be binding upon, and will inure to the
benefit of, the heir, executor, administrator, representative,
successor or assign of such Person.
Dated: August 1, 1994
New York, New York
OFFICIAL BONDHOLDERS COMMITTEE OF
HILLSBOROUGH HOLDINGS CORPORATION, ET
AL.
By: /s/ Daniel H. Golden
Daniel H. Golden, Esq.
OFFICIAL COMMITTEE OF GENERAL UNSECURED
CREDITORS OF HILLSBOROUGH HOLDINGS
CORPORATION, ET AL.
By: /s/ Marc S. Kirschner
Marc S. Kirschner, Esq.
PAUL, WEISS, RIFKIND, WHARTON &
GARRISON
By: /s/ Robert D. Drain
Robert D. Drain, Esq.
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3236
For Lehman Brothers Inc.
AKIN, GUMP, STRAUSS, HAUER &
FELD, L.L.P.
By: /s/ Ellen R. Werther
Ellen R. Werther, Esq.
65 East 55th Street, 33rd Floor
New York, New York 10022
(212) 872-1010
For Apollo
MARCUS MONTGOMERY WOLFSON P.C.
By: /s/ Sara L. Chenetz
Peter D. Wolfson, Esq.
Sara L. Chenetz, Esq.
53 Wall Street
New York, New York 10005
(212) 858-5200
For Ad Hoc Committee of Pre-LBO
Bondholders
<PAGE>
EXHIBIT 1:
RESTATED CERTIFICATE OF INCORPORATION OF WALTER INDUSTRIES
<PAGE>
EXHIBIT 1
RESTATED
CERTIFICATE OF INCORPORATION
OF
WALTER INDUSTRIES, INC.
WALTER INDUSTRIES, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of
the State of Delaware (hereinafter called the "Corporation"),
DOES HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is WALTER INDUSTRIES,
Inc. The Corporation was originally incorporated under the name
"HILLSBOROUGH HOLDINGS CORPORATION" and the date of filing of the
Corporation's original Certificate of Incorporation with the
Secretary of State of Delaware was September 8, 1987.
SECOND: Pursuant to Section 245 of the General
Corporation Law of the State of Delaware, this Restated
Certificate of Incorporation restates and integrates and further
amends the provisions of the Certificate of Incorporation of the
Corporation.
THIRD: The text of the Restated Certificate of
Incorporation as heretofore amended or supplemented is hereby
restated and further amended to read in its entirety as follows:
1. The name of the Corporation is WALTER
INDUSTRIES, INC.
2. The registered office and registered agent of
the Corporation is The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801.
3. The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock that the
Corporation is authorized to issue is Two Hundred Million
(200,000,000) shares of Common Stock, par value
$.01 each, consisting of million shares of Class A Common
Stock and million shares of Class B Common Stock. The
Corporation shall not issue any non-voting capital stock. Except
as expressly provided in Section 5 below, the rights,
privileges and powers of the Class A Common Stock and the
Class B Common Stock shall be identical, and shall vote together
as a single class on all matters as to which both classes are
entitled to vote.
5. Voting. Except as otherwise required by law or
this Restated Certificate of Incorporation, the voting power
attributable to the holders of the Class A Common Stock and the
Class B Common Stock shall be as follows:
(a) each record holder of Class A Common
Stock shall be entitled to five votes for each share of Class A
Common Stock standing in his name on the books of the Corporation
and entitled to vote;
(b) each record holder of Class B Common
Stock shall be entitled to one vote for each share of Class B
Common Stock standing in his name on the books of the Corporation
and entitled to vote;
(c) holders of Class B Common Stock that are
Veil Piercing Claimants or representatives of Veil Piercing
Claimants shall be entitled to vote their shares of Class B
Common Stock in the Veil Piercing Trust only in the
same percentages of votes as the shares of the Class
A Common Stock and the other shares of Class B Common Stock are
voted; and
(d) holders of Class A Common Stock and
holders of Class B Common Stock shall in all matters vote
together as a single class, except as provided herein.
6. Conversion of Class A Common Stock.
(a) Immediately prior to the transfer of one
or more shares of Class A Common Stock by the holder thereof,
whether by sale, exchange, gift or operation of law, other than
any such transfer by an original recipient of Class A Common
Stock under the Plan to an affiliate of such original
recipient, each share of Class A Common Stock so
transferred shall automatically, without further action by any
such holder of the Class A Common Stock or by the Corporation, be
converted into one share of Class B Common Stock. Immediately
upon the earlier to occur of (a) the date on which the aggregate
number of shares of Class A Common Stock held by AIF II,
L.P., accounts managed or controlled by any affiliate of AIF II,
L.P., Lehman Brothers Inc. or any affiliate of any of the
foregoing is less than 8% of the then outstanding number of
shares of Class A Common Stock and Class B Common Stock, and (b)
the seventh anniversary of the date of consummation of the Plan
(as defined below), all outstanding shares of Class A Common
Stock shall automatically convert into shares of Class B
Common Stock on a one-for-one basis. Upon and after
the date of such conversion (the "Conversion Date"), each holder
of record of any outstanding certificate or certificates
theretofore representing shares of Class A Common Stock so
transferred may surrender the same to the Secretary of the
Corporation and such holder shall be entitled to receive in
exchange therefor a certificate or certificates representing
the number of shares of Class B Common Stock into which the
shares theretofore represented by the certificate or certificates
so surrendered shall have been converted as aforesaid. Until so
surrendered, each outstanding certificate which, prior
to the Conversion Date, represented shares of Class
A Common Stock shall be deemed for all corporate purposes to
represent the ownership of the number of shares of Class B Common
Stock into which such shares of Class A Common Stock have been so
converted. The Corporation shall pay any documentary,
stamp or similar issue or transfer tax due in connection with
such conversion or on the issue of certificates for Class
B Common Stock in connection with such conversion.
The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Class B Common Stock and
issued Class B Common Stock held in its treasury,
solely for the purpose of effecting the conversion
of the shares of Class A Common Stock, the full number of shares
of Class B Common Stock then issuable upon the conversion of all
outstanding shares of Class A Common Stock.
As used in this section, an "affiliate" of a
person or entity means any person or entity that controls, is
under common control with, or is controlled by, such other person
or entity. As used in this section the term "control" means the
possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of the
controlled person or entity, and the term "person" means legal
entities, including any partnership, corporation or trust.
In the event the Corporation shall in any
manner subdivide (by stock split, stock dividend or otherwise) or
combine (by reverse stock split or otherwise) the number of
outstanding shares of Class A Common Stock or Class B Common
Stock prior to a conversion of Class A Common Stock into
Class B Common Stock, then the holders of the Class
A Common Stock to be so converted shall be entitled to receive in
exchange therefore as herein provided a certificate or
certificates representing the number of shares of
Class B Common Stock to which such holders would have been
entitled to receive had the conversion occurred prior to such
subdivision or combination.
7. Prohibited Action by Corporation Relating to
Common Stock.
(a) So long as any shares of Class B Common
Stock remain outstanding, the Corporation shall not without the
affirmative vote at a meeting or the written consent without a
meeting of the holders of at least 66 2/3% in number of shares of
Class B Common Stock then outstanding, excluding any holder of
Class B Common Stock that also is a holder of Class A Common
Stock, adopt any amendment to its Certificate of Incorporation,
enact any bylaw or amend, modify or alter the Plan
in any material respect which would (i) alter or change the
powers or rights of the Class B Common Stock in each case so as
to affect them adversely, or (ii) alter or change
the powers or rights of the Class A Common Stock so as to benefit
the holders of Class A Common Stock in such capacity.
(b) So long as any shares of Class A Common
Stock remain outstanding, the Corporation shall not, without the
affirmative vote at a meeting or the written consent without a
meeting of the holders of at least 66 2/3% in number of shares of
Class B Common Stock then outstanding, excluding any holder of
Class B Common Stock that also is a holder of Class A Common
Stock, take any action that enables any holder of shares of Class
A Common Stock to enter into a transaction with any
other holder of Class A Common Stock (or any affiliate thereof)
which would (i) alter or change the powers or rights of the Class
B Common Stock so as to affect them adversely, or (ii) alter or
change the powers or rights of the Class A Common Stock so as to
benefit the holders of Class A Common Stock in such capacity.
(c) So long as no holder of shares of Class
A Common Stock has entered into a transaction of the type
described in subsection (b) above, nothing in this Restated
Certificate of Incorporation or in any bylaw enacted by the
Corporation shall (x) prohibit such holder of shares of Class
A Common Stock from entering into any transaction
affecting the conversion of such shares to shares of Class B
Common Stock as provided herein for the sale or transfer of such
shares of Class B Common Stock to any person or (y) limit in any
respect the value of the consideration any Class A Common
Stock holder is permitted to receive for the sale or transfer of
such Class B Common Stock.
8. The following provisions are inserted for the
management of the business and for the conduct of the affairs of
the Corporation and for the purpose of creating, defining,
limiting and regulating powers of the Corporation and its
directors and stockholders:
(a) The Board of directors of the
Corporation, acting by majority vote, may alter, amend or repeal
the bylaws of the Corporation.
(b) Elections of directors need not be by
written ballot unless the bylaws of the Corporation shall so
provide.
9. Except as otherwise provided by the Delaware
General Corporation Law as the same exists or may hereafter be
amended, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal
or modification of this Article 6 by the stockholders of the
Corporation shall not adversely affect any right or protection of
a director of the Corporation existing at the time of such
repeal or modification.
10. The Corporation shall indemnify the
Corporation's present and former directors and officers and their
heirs, executors and administrators to the fullest extent
permitted by applicable law, regardless of whether
the event occurred or occurs, the alleged liability arose or
arises, or the claim is asserted before or after consummation of
the Plan of Reorganization (the "Plan") in the Proceeding of
the Corporation (Case No. 89-9715-8P1 in the United States
Bankruptcy Court, Middle District of Florida, Tampa Division)
under Chapter 11 of the United States Bankruptcy Code; provided,
however, that the Corporation shall only indemnify its
present and former directors and officers and their heirs,
executors and administrators for alleged liabilities which arose
on or prior to the consummation of the Plan in accordance and to
the extent of any Allowed Indemnity Claim (as defined in the
Plan) of any such present and former director or officer.
IN WITNESS WHEREOF, WALTER INDUSTRIES, Inc. has caused
this Restated Certificate of Incorporation to be signed by , its
President, and attested by , its secretary, this day of , 19.
ATTEST: WALTER INDUSTRIES, INC.
By:
Name: Name:
Title: Secretary Title: President
<PAGE>
EXHIBIT 2:
SUMMARY OF TERMS FOR THE NEW SENIOR NOTES
<PAGE>
EXHIBIT 2
Summary of Terms for New Senior Notes
Issuer Walter Industries, Inc. and/or one or
more other Debtors (each
the "Company" or the "Issuer").
Issue New Senior Notes.
Principal Amount Up to an aggregate of approximately
$325 million (Assuming
12/31/94 Effective Date).
Maturity 5 years.
Rate An interest rate per annum such that
the conditions to
qualification as New Senior Notes, as
that term is defined in
the Creditors' Plan, are met.
Security Secured by all collateral presently
securing the Series B & C
Senior Notes, consisting of all of the
stock of Jim Walter
Resources, U.S. Pipe, Jim Walter Homes
and United Land, or by
other collateral of equal or greater
value (provided, that any
such method of valuation shall be
reasonably acceptable to the
Series B & C Senior Note Trustee and
to the Proponents).
Interest Payment Dates Semi-annually, interest paid in cash
in arrears, on and .
Optional Redemption The New Senior Notes are not
redeemable prior to four years
after original issuance thereof, and
may be redeemed thereafter in whole or
in part at the option of the Company
upon prior notice at 101% of the
outstanding principal amount
plus accrued and unpaid interest to
the redemption date; provided that, if
at the time of issuance of the New
Senior Notes, market conditions and
the equivalent terms of similar
debt instruments commonly issued and
carrying a BB rating contain a shorter
no-call period, then the no-call
period may be shortened, but in any
event not to less than 18 months
after issuance, and/or the redemption
premium shall be increased, but in any
event the redemption premium shall not
be less than 103% of the outstanding
principal amount in the case of an 18
month no-call period.
Amortization All of the outstanding principal
amount and accrued but unpaid
interest thereon shall be due and
payable at maturity.
Covenants Covenants shall include but not be
limited to: (i) limitations
on indebtedness, (ii) limitations on
the creation of liens,
(iii) limitations on restricted
payments, (iv) limitation on
dividends, (v) limitations on
transactions with affiliates and
(vi) limitations on asset sales,
mergers and consolidations;
provided, that such covenants shall
expressly permit the
Issuer and its subsidiaries to make
asset sales out of the
ordinary course of business and to
enter into other
non-ordinary course transactions
(including the sale of
collateral securing the New Senior
Notes, free and clear of
any liens, claims and encumbrances,
provided that the net
proceeds thereof are used to redeem
New Senior Notes at par
plus accrued interest); provided,
further, that such
covenants, consistent with the
foregoing, shall be reasonably
acceptable to the Series B & C Senior
Note Trustee.
Ranking The New Senior Notes will be senior
Indebtedness of the Issuer
and will rank senior in right of
payment to certain other
Indebtedness of the Issuer and rank
pari passu with certain
other Indebtedness of the Issuer.
Events of Default and
Remedies Events of Default shall include but
not be limited to
(i) default in the payment of
principal on any New Senior
Notes when the same becomes due and
payable; (ii) default in
the payment of interest on any New
Senior Notes when the same
becomes due and payable, and such
default continues for a
period of five (5) days; (iii) the
Company defaults in the
performance of or breaches any other
covenant or agreement of
the Company under the New Senior Notes
and such default or
breach continues for a period of 30
consecutive days after
written notice by the Trustee or the
Holders of 25% or more in
aggregate principal amount of the New
Senior Notes then
outstanding; (d) there occurs with
respect to any issue or
issues of indebtedness of the Company
and or one or more of
its Significant Subsidiaries having an
outstanding principal
amount of $25 million or more
individually or $50 million or
more in the aggregate for all such
issues of all such persons,
an event of default that has caused
the holder thereof to
declare such indebtedness to be due
and payable prior to its
stated maturity and such indebtedness
has not been discharged
in full or such acceleration has not
been rescinded or
annulled within 30 days of such
acceleration; (e) any final
judgment or order (not covered by
insurance) for the payment
of money in excess of $25 million
individually or $50 million
in the aggregate for all such final
judgments or orders
against all such persons shall be
rendered against the Company
or any of its Significant Subsidiaries
and shall not be paid
or discharged; and (f) with respect to
the Company, the
occurrence of certain acts of
bankruptcy or insolvency or
failure to pay debts generally as they
come due.
If an Event of Default (other than an
Event of Default
specified in clause (f) above) occurs
and is continuing under
the Indenture, the Trustee or the
Holders of at least 25% in
aggregate principal amount of the New
Senior Notes then
outstanding, by written notice to the
Company (and to the
Trustee if such notice is given by the
Holders), may, and the
Trustee at the request of the Holders
shall, declare the
entire unpaid principal of and accrued
interest on the New
Senior Notes shall be immediately due
and payable. Upon a
declaration of acceleration, such
principal of and accrued
interest on the New Senior Notes to be
immediately due and
payable. In the event a declaration
of acceleration because
an Event of Default set forth in
clause (d) above has occurred
and is continuing, such declaration of
acceleration shall be
automatically rescinded and annulled
if the event of default
triggering such Event of Default
pursuant to clause (d) shall
be remedied, cured by the Company or
waived by the holders of
the relevant indebtedness within 60
days after the declaration
of acceleration with respect thereto.
If an Event of Default
specified in clause (f) above occurs,
all unpaid principal of
and accrued interest on the New Senior
Notes then outstanding
shall ipso facto become and be
immediately due and payable
without any declaration or other act
on the part of the
Trustee or any Holder. The Holders of
at least a majority in
principal amount of the outstanding
New Senior Notes, by
written notice to the Company and the
Trustee, may waive all
past defaults and rescind and annul a
declaration of
acceleration and its consequences if
(i) all existing Events
of Default, other than the nonpayment
of the principal of and
interest on the New Senior Notes that
have become due solely
by such declaration of acceleration,
have been cured or waived
and (ii) the rescission would not
conflict with any judgment
or decree of a court of competent
jurisdiction.
Documentation The Series B & C Senior Note Trustee
shall have the right to
reasonably approve all documents under
the Creditors' Plan
regarding the treatment of Series B &
C Senior Note Claims.
<PAGE>
EXHIBIT 3A:
VEIL PIERCING SETTLEMENT AGREEMENT
<PAGE>
EXHIBIT 3A
VEIL PIERCING SETTLEMENT AGREEMENT
THIS AGREEMENT (as the same may be amended, modified or
supplemented from time to time, the "Agreement") is made and
entered into as of the 18th day of April, 1994, by and among
(a) Certain asbestos victim defendants ("AVDs")
named as defendants in Adversary Proceeding No. 90-0003 and
Adversary Proceeding No. 90-0004 (the "Adversary Proceedings"),
and represented in the Adversary Proceedings by Caplin &
Drysdale, Chartered ("Caplin & Drysdale"), pending the
United States Bankruptcy Court for the Middle District of
Florida, Tampa Division (the "Court"), in the Chapter 11 cases of
Hillsborough Holdings Corporation, Walter Industries, Inc. and
other debtors (collectively, the "Debtors") in their
administratively consolidated Case No. 89-9715-8P1;
(b) Caplin & Drysdale, Baron & Budd, Greitzer and
Locks, Ness Motley Loadholt Richardson & Poole ("Ness Motley"),
each on behalf of itself, its individual lawyers, and its clients
that may be Veil Piercing Claimants (as defined herein) (Baron &
Budd, Greitzer and Locks, and Ness Motley are collectively
referred to herein as the "Claimants' Attorneys" and
Caplin & Drysdale and the Claimants' Attorneys are collectively
referred to herein as the "Veil Piercing Claimants'
Representatives");
(c) The Celotex Corporation, a defendant in the
Adversary Proceedings and a debtor and debtor-in-possession in a
Chapter 11 case ("The Celotex Corporation") pending in the United
States Bankruptcy Court for the Middle District of Florida,
Tampa Division (the "Celotex Bankruptcy Court"), Case No.
90-10016-8B1 (the "Celotex Chapter 11 Case"), the Celotex
Committee of Unsecured Creditors, the Celotex Asbestos Property
Damage Claimants Committee and the Celotex Asbestos
Bodily Injury Claimants Committee (the Celotex Committee
of Unsecured Creditors, the Celotex Asbestos Bodily Injury
Claimants Committee and the Celotex Asbestos
Property Damage Claimants Committee are collectively
referred to herein as the "Official Celotex Committees");
(d) Jim Walter Corporation (including its
subsidiaries other than The Celotex Corporation and its
subsidiaries, collectively referred to as "JWC"), a
defendant in the Adversary Proceedings;
(e) the HHC Bondholders Committee (as defined
herein), the HHC Creditors Committee (as defined herein) (the HHC
Bondholders Committee and the HHC Creditors Committee are
collectively referred to herein as the "HHC Official
Committees"), Lehman Brothers Inc., Apollo (as defined herein)
(together, Lehman Brothers Inc. and Apollo are referred to
herein, solely in their capacity as creditors in the
Chapter 11 Cases (as defined herein) and in no other
capacity, as the "Bondholder Proponents"; the HHC Official
Committees and the Bondholder Proponents are
collectively referred to herein as the "Plan Proponents");
and
(f) the Settling Equityholders (as defined herein),
if any (all of the foregoing are referred to herein collectively
as the "Parties" and singularly as a "Party").
W I T N E S S E T H:
WHEREAS, the Debtors initiated the Adversary Proceedings
seeking (a) a final declaration and adjudication that the
corporate veil between JWC and Celotex may not be pierced; (b) a
final declaration and adjudication that the leveraged buy-out of
JWC (the "LBO") was not a fraudulent conveyance, nor were any
subsequent transactions entered into as a part of that LBO
fraudulent transfers; (c) a final declaration and adjudication
that neither the Debtors nor any of their subsidiaries or
affiliates is the successor-in-interest to the asbestos-related
liabilities of either JWC or Celotex; (d) a final declaration and
adjudication that neither the Debtors nor any of their
subsidiaries or affiliates is liable for the asbestos-related
liabilities of either JWC or Celotex; and (e) such injunctive
relief as may be necessary and appropriate to effectuate the
declaratory relief sought by the Debtors; and
WHEREAS, the AVDs have defended and opposed the relief
sought by the Debtors in the Adversary Proceedings and have
asserted Veil Piercing Claims (as defined herein) against the
Debtors and JWC in various forums; and
WHEREAS, The Celotex Corporation, as a
debtor-in-possession, has asserted that (a) it has the exclusive
right and standing to assert Veil Piercing Claims (as defined
herein) against the Debtors and JWC for the benefit of its estate
and creditors because such claims are asserted by it to be the
property of its bankruptcy estate and (b) bankruptcy policy is
furthered by ensuring that all similarly situated creditors are
treated fairly; and
WHEREAS, the Claimants' Attorneys are authorized to act as
the negotiating group for the law firms listed on Exhibit A
attached hereto, and the law firms which have assented and will
in the future assent to this Agreement by executing Exhibit D
attached hereto, all of which represent persons and entities that
have asserted or may assert Veil Piercing Claims; and
WHEREAS, the Celotex Committee of Unsecured Creditors, the
Celotex Asbestos Property Damage Claimants Committee and the
Celotex Asbestos Bodily Injury Claimants Committee are officially
authorized by the Code to represent the interests of persons or
entities having general unsecured and trade claims, asbestos
property damage claims and present asbestos bodily injury claims,
respectively, against The Celotex Corporation in the Celotex
Chapter 11 Case; and
WHEREAS, on December 9, 1993, the Veil Piercing Claimants'
Representatives and the Bondholder Proponents entered into a Term
Sheet for Settlement of Veil Piercing Claims Pursuant to Chapter
11 Plan (the "Term Sheet"), which Term Sheet embodied certain
agreements in principle and contemplated the prompt preparation
and execution of a definitive agreement that would embody the
terms of and supersede the Term Sheet; and
WHEREAS, this Agreement constitutes such definitive
agreement; and
WHEREAS, on December 16, 1993, the Plan Proponents filed
with the Court a Joint Plan of Reorganization of Debtors Proposed
by Certain Creditor Proponents (the "Original Creditor Plan"),
which incorporated, inter alia, the terms of the Term Sheet and
which contemplated the prompt preparation and execution of this
Agreement; and
WHEREAS, the Term Sheet contemplates, and the Original
Creditor Plan embodies, a settlement under which distributions of
New Common Stock (as defined herein) and Qualified Securities (as
defined herein) would be made in full and complete settlement,
satisfaction, release and discharge of all Veil Piercing Claims
on the basis of (a) the "Negotiated Enterprise Value" of
$2,525,000,000 and (b) the fractions set forth in Section 2(a)
herein; it being understood that the Negotiated Enterprise Value
represents a good faith estimate of the going concern enterprise
value of the Debtors (as defined herein) on a consolidated basis,
arrived at after extensive analysis by the Plan Proponents, and
taking into account the possibility of delay between the
Confirmation Date (as defined herein) and the Effective Date (as
defined herein), and the potential increase in the value of the
Debtors over time; and
WHEREAS, the time for The Celotex Corporation to file a
proof of claim on behalf of itself and/or its creditors who are
Veil Piercing Claimants has not yet expired, and The Celotex
Corporation has demonstrated its intention to timely file such
proof of claim, including, without limitation, the Celotex Proof
of Claims (as defined herein); and
WHEREAS, the Parties are mutually desirous of settling
with finality, compromising, extinguishing, releasing and
discharging any and all View Piercing Claims, specifically
including those Veil Piercing Claims which are the subject of the
Adversary Proceedings;
WHEREAS, it is the specific intention and desire of the
Parties that the Settlement Fund (as defined herein) be paid to
the Celotex Settlement Fund Recipient (as defined herein) for the
exclusive benefit of the Veil Piercing Claimants (as defined
herein) and the Settling Equityholders (as defined herein), if
any, and that, inter alia, all Veil Piercing Claims shall
channel, transfer and attach to the Settlement Fund which shall
be administered by, and together with the Celotex Settlement Fund
Recipient shall be subject to the jurisdiction of, the Celotex
Bankruptcy Court; and
WHEREAS, the Parties desire to set forth their respective
agreements, rights, duties and obligations in the form of this
Agreement, all on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
1. Defined Terms. Capitalized terms not defined in
the body of this
Agreement shall have the meanings ascribed to them in
Appendix A attached hereto.
2. Settlement of Veil Piercing Claims Pursuant to
Plan of Reorganization.
(a) All View Piercing Claims and all claims
held by the View
Piercing Claimants based upon LBO-Related Issues
shall be fully and
completely settled, satisfied, released and
discharged in exchange for an
aggregate amount of consideration (as calculated
below), to be paid and
satisfied through the distribution of Qualified
Securities and Class B
Common Stock under the Plan (the "Settlement Fund")
to the Celotex
Settlement Fund Recipient, as follows:
(i) Allowed Amount of the Veil
Piercing Claims. The allowed
amount of the Veil Piercing Claims shall be
equal to the sum of
(A) the Veil Piercing Claims Amount (which is
$450 million, as the
same may be increased or decreased pursuant
to this Section 2(a))
plus $75 million and (B) the Senior Claim
Differential, if any,
subject to the following: (x) the assignment
to the Settling
Equityholders, if any, on a pro rata basis of
the right to receive
their pro rata share of $75 million plus 50%
of the Senior Claim
Differential, if any, pursuant to Section 6
herein; and (y) in the
event that the actual amount of distributions
under the Plan in
respect of the Subordinated Note Claims is
different than $1098
million, then the Veil Piercing Claims Amount
shall be calculated as
follows:
Actual amount of distributions in
respect of Subordinated Note Claims X 450 million
-----------------------------------
$1098 million
For purposes of the fraction used in this
clause (i) , the actual
amount of distributions shall be valued at the
aggregate principal amount
in the case of Qualified Securities, and at the
aggregate New Common Stock
Value Per Share in the case of New Common Stock.
(ii) Consideration Used to Satisfy
the Veil Piercing Claims.
The Veil Piercing Claims shall be paid and
satisfied by the
distribution of a combination of Qualified
Securities and Class B
Common Stock to the Celotex Settlement Fund
Recipient. The amount
of Qualified Securities to be so distributed
under the Plan in
respect of View Piercing Claims shall be
calculated as follows:
$450 million + $37.5 million
-----------------------------
$1098 million + $450 million + $37.5 million
multiplied by the aggregate principal amount of Qualified
Securities available for distribution to holders of Subordinated
Note Claims and the Celotex Settlement Fund Recipient under the
Plan; provided, that if any holder of an Allowed Old Common Stock
Interest becomes a Settling Equityholder hereunder, then the
numerator and denominator in the foregoing fraction shall each be
reduced by $1 for each $2 of Class B Common Stock assigned to
Settling Equityholders under clause (i) of Section 6(a) herein
(it being further provided that in no event shall the numerator
in the foregoing fraction be less than $450 million or the
denominator less than $1548 million). The amount of Veil
Piercing Claims that is deemed to be paid, and settled,
satisfied, released and discharged, by Qualified Securities shall
be equal to the aggregate principal amount of Qualified
Securities issued in respect of Veil Piercing Claims. The excess
of the allowed amount of Veil Piercing Claims over the part
thereof paid, and settled, released and discharged, by Qualified
Securities shall be paid, and settled, satisfied, released and
discharged, by shares of Class B Common Stock having an aggregate
New Common Stock Value Per Share equal to such excess.
(iii) Examples. The following
examples are provided solely for the purpose of illustrating the
operation of clauses (i) and (ii) above. Assuming that the
actual amount of distributions made under the Plan in respect of
Subordinated Note Claims is equal to $1098 million, and assuming
that 100% of the holders of the Allowed Old Common Stock
Interests become Settling Equityholders, then
(a) the aggregate allowed amount of the Veil Piercing Claims
would consist of (i) the Veil Piercing Claims
Amount (that is, $450 million), (ii) $75 million (all of which
$75 million would be required to be assigned pursuant to Section
6 herein), plus (iii) the Senior Claim Differential, if any (50%
of which would be required to be assigned pursuant to Section 6
herein), and (b) such allowed amount would be settled, satisfied,
released and discharged, by the distribution of 450/1548 of the
aggregate principal amount of Qualified Securities available for
distribution to holders of Subordinated Note Claims and the
Celotex Settlement Fund Recipient (for example, if $700 million
of Qualified Securities were so available, 450/1548 of such
total, or $203,488,372, would be paid in
Qualified Securities in respect of Veil Piercing Claims), and the
distribution, in respect of the remainder of the allowed amount
of the Veil Piercing Claims, of shares of Class B Common Stock
having an aggregate New Common Stock Value Per Share equal to
such remainder. If, in the foregoing example, none of the
holders of Allowed Old Common Stock Interests become
Settling Equityholders, then (a) the aggregate allowed amount of
the Veil Piercing Claims would consist of (i) the Veil Piercing
Claims Amount (that is, $450 million), plus (ii) $75 million,
plus (iii) the Senior Claim Differential, if any, and (b) such
allowed amount would be settled, satisfied, released and
discharged, by the distribution of 487.5/1585.5 of the aggregate
amount of Qualified Securities available for distribution to
holders of Subordinated Note Claims and the Celotex Settlement
Fund Recipient (for example, if $700 million of Qualified
Securities were so available, 487.5/1585.5 of such total, or
$215,231,788, would be paid in Qualified Securities in
respect of Veil Piercing Claims), and the distribution, in
respect of the remainder of the allowed amount of the
Veil Piercing Claims, of shares of Class B Common Stock having an
aggregate New Common Stock Value Per Share equal to such
remainder.
(b) "Plan" Defined. The term "Plan", as
used in this Agreement, shall mean any plan(s) of reorganization
filed in the Chapter 11 Cases as to which the Bondholder
Proponents are proponents and that does not contravene the terms
and conditions of this Agreement (subject to Section
2(c) herein); and the definition of the term "Plan"
shall include, without limitation, the Original Creditor Plan, as
amended to incorporate this Agreement; provided, that the term
"Plan" shall not include a plan of reorganization (other than the
Original Creditor Plan) or an amendment to or modification of a
plan of reorganization unless (i) a notice specifying
the intended date of filing of the plan of reorganization,
amendment or modification, together with a copy of such plan of
reorganization, amendment or modification, in substantially final
form, are sent to the Veil Piercing Claimants' Representatives,
The Celotex Corporation, the Celotex Asbestos Property Damage
Claimants Committee and the Celotex Asbestos Bodily Injury
Claimants Committee not less than ten (10) days prior to filing
thereof with the Court, and (ii) in the event that such plan of
reorganization, amendment or modification contravenes the terms
and conditions of this Agreement, such plan of reorganization,
amendment or modification is consented to by the Veil Piercing
Claimants' Representatives, The Celotex Corporation, the
Celotex Asbestos Property Damage Claimants Committee
and the Celotex Asbestos Bodily Injury Claimants Committee,
provided that the rights of such Party or the Veil Piercing
Claimants represented by such Party under this
Agreement are contravened by such plan of reorganization,
amendment or modification; it being further understood that such
plan of reorganization, amendment or modification shall not
constitute a Plan unless the Bondholder Proponents shall be a
proponent of the plan of reorganization so filed,
amended or modified, after giving effect to such
amendment or modification. Neither the confirmation nor the
effectiveness of the Plan shall be conditioned upon the
confirmation or effectiveness of a plan of
reorganization in any proceedings pursuant to the
Code other than the Chapter 11 Cases.
(c) Nothing in this Agreement shall impair
in any way the ability of the Plan Proponents or any of them to
file, modify or amend a plan of reorganization in any respect;
provided, that no such modification or amendment contravenes the
terms and conditions of this Agreement, unless
consented to pursuant to Section 2(b) herein.
(d) The Plan shall provide for a
registration rights agreement substantially in the form of
Exhibit B attached hereto, which shall provide, among other
things, for the registration of all of the Qualified Securities
and New Common Stock for sale promptly after the
Effective Date pursuant to a registration statement or statements
under the Securities Act of 1933, as amended. Nothing in this
Agreement shall impair in any way the ability of the Bondholder
Proponents to modify or amend the registration rights
agreement; provided that such modification or amendment shall not
delay the timing of the initial shelf registrations or
adversely affect the number and timing of demand or piggy-back
registrations available to the Celotex Settlement Fund Recipient
or the right of the Celotex Settlement Fund
Recipient to participate in any such registrations.
(e) Lehman Brothers Inc., Apollo and the
Celotex Settlement Fund Recipient shall enter into an agreement
as of the Effective Date, substantially in the form of Exhibit C
attached hereto, which shall provide, among other things, that if
any of Lehman Brothers Inc., Apollo or the Celotex Settlement
Fund Recipient (in the case of the Celotex Settlement
Fund Recipient, only with the consent of the Veil
Piercing Claimants' Representatives) determines to sell shares of
Class B Common Stock to a non-Affiliate other than on a national
securities exchange or through a registered broker-dealer, then
the other parties to such agreement shall have the "tag-along"
rights specified in the agreement attached hereto as
Exhibit C to participate in such sale on a pro-rata
basis.
(f) (i) In the event that the Plan provides
for a call option or other right of purchase to be granted
pursuant to the Plan with respect to all shares of New Common
Stock otherwise to be issued to holders of Subordinated Note
Claims pursuant to the Plan, and such call option or other
right of purchase provides for the purchase of such
New Common Stock at any time not later than five (5) business
days after the Effective Date, for a cash purchase price per
share not less than the New Common Stock Value Per
Share, then the Celotex Settlement Fund Recipient
shall grant an identical call option or other right of purchase
with respect to all shares of New Common Stock otherwise to be
issued to the Celotex Settlement Fund Recipient pursuant to the
Plan; and (ii) in the event that the Bondholder Proponents
grant, other than pursuant to the Plan with respect
to all shares of New Common Stock otherwise issued to holders of
Subordinated Note Claims, a call option or other right of
purchase with respect to any shares of New Common
Stock otherwise to be issued to the Bondholder Proponents under
the Plan, and such call option or other right of purchase
provides for the purchase of such New Common Stock at any time
not later than five (5) business days after the Effective Date,
for a cash purchase price per share not less than
the New Common Stock Value Per Share, then the
Celotex Settlement Fund Recipient shall have the option to grant
an identical call option or other right of purchase with respect
to a proportional amount of shares of New Common Stock otherwise
to be issued to the Celotex Settlement Fund Recipient
pursuant to the Plan, such option to be exercisable
in writing not later than the earlier to occur of (A) thirty (30)
days after written notice of the grant, or proposed grant, of a
call option or other purchase right by the Bondholder Proponents
pursuant to this Section 2(f)(ii) herein is given to the Veil
Piercing Claimants' Representatives and the Celotex Settlement
Fund Recipient, which notice shall specify the
principal terms of such call option or other purchase right,
including the identity of the grantee(s), the timing and method
of exercise, and the form, amount and timing of payment of the
exercise price, and (B) such other period of time required
by the terms of the call option or other right of purchase, which
shall in no event be less than ten (10) days after notice
thereof is given to the Veil Piercing Claimants' Representatives
and the Celotex Settlement Fund Recipient.
3. Conditions to Effectiveness of the Settlement.
In order to provide for the full and complete settlement,
satisfaction, release and discharge of all Veil Piercing Claims
and all claims and causes of action based on the
LBO-Related Issues, this settlement shall be conditioned on the
satisfaction (or waiver
or modification by the Bondholder Proponents and by such other
Parties, if any, as
specified below) of all of the following conditions:
(a) Entry by the Court of the Confirmation Order,
which order shall (unless
this requirement, or any part thereof, is waived or
modified by the Bondholder
Proponents and any Party whose rights under this Agreement
would be contravened by
such waiver or modification) specifically contain (i) all
releases and injunctions
necessary and appropriate to realize the full and complete
settlement,
satisfaction, release and discharge of all Veil Piercing
Claims against any and all
of the Released Parties, the form and substance of which
to be acceptable to the
Bondholder Proponents, whether or not all the Veil
Piercing Claims are known to or
knowable by the Veil Piercing Claimants. The settlement,
satisfaction, release and
discharge of the Veil Piercing Claims against the Released
Parties will become
effective as to each Veil Piercing Claim, whether or not
the Veil Piercing Claim
constituted an allowed claim in the Chapter 11 Cases or
the Celotex Chapter 11 Case
and whether or not the holder of the Veil Piercing Claim
received actual notice of
the Plan and the proceedings for approval of the Plan and
entry of the Confirmation
Order. In addition, the entry of the Confirmation Order
will operate as (i) a
general resolution with prejudice of all pending legal
proceedings that may be
asserted against any or all of the Released Parties based
upon, arising out of or
in connection with the Veil Piercing-Related Issues as
well as any such proceeding
not yet instituted that may be asserted against any or all
of the Released Parties;
(ii) a determination that all Veil Piercing Claims shall
channel, transfer and
attach to the Settlement Fund; (iii) a provision retaining
continuing jurisdiction
by the Court to enforce the provisions of the Confirmation
Order; (iv) a provision
that the Settlement Fund shall be administered by, and
subject to the jurisdiction
of, the Celotex Bankruptcy Court; and (v) a provision
enjoining any use of the
record of the Adversary Proceedings, including the
transcript of the trial and all
depositions taken in such proceedings, against any or all
of the Released Parties
(but specifically permitting the use of such record by any
appellate court of
competent jurisdiction for the sole purpose of such
court's review of the
settlement embodied in this Agreement and the Confirmation
Order).
(b) The Confirmation Order shall have become a
Final Order;
(c) Entry by the Court of a Final Order allowing
the Celotex Proof of
Claims and/or any Veil Piercing Proof of Claims; and
(d) "Finality" shall have been realized with
respect to the full and
complete settlement, satisfaction, release and discharge
of all Veil Piercing
Claims. For purposes of this Agreement, "Finality" shall
be deemed to have
realized when all of the following conditions shall have
been satisfied (subject
to the provisos set forth below):
(i) The Confirmation Order and the Plan
shall provide for the
release of (A) the Parties (other than JWC and The
Celotex Corporation and
its subsidiaries) and the Debtors, and each of their
respective present and
former parents, subsidiaries, Affiliates, directors,
officers, partners,
shareholders, employees, agents, advisors and
representatives (other than
any (x) holders or former holders of Allowed Old
Common Stock Interests that
are not Settling Equityholders, (y) any of Celotex'
or JWC's respective
present and former shareholders, directors,
officers, partners, employees,
agents, advisors and representatives and (z) JWC and
The Celotex Corporation
and its subsidiaries); in each case in such person's
or entity's capacity
as a holder of a claim or interest in the Chapter 11
Cases, as a plan
proponent, if applicable, as a shareholder of any
Debtor, or any other
capacity (it being understood that this clause (A)
does not include any
shareholder, director, officer, partner, employee,
agent, advisor or
representative of any Debtor, in each case that is a
holder or former holder
of an Allowed Old Common Stock Interest that is not
a Settling Equityholder
or that is not a Celotex Released Party or a JWC
Released Party); and (B)
the holders of Allowed Indemnity Claims that are not
parties hereto, but
only to the extent of such Allowed Indemnity Claims
and only in the capacity
in which such Allowed Indemnity Claims provide
indemnification,
reimbursement or contribution (collectively (A) and
(B) are referred to
herein, in such capacities, as the "Released
Parties") of and from any and
all claims, obligations, rights, causes of action
and liabilities (other
than the right to enforce obligations under this
Agreement and the Plan)
which any person or entity may be entitled to
assert, whether known or
unknown, foreseen or unforeseen, then existing or
thereafter arising, based
in whole or in part upon any act, omission or other
occurrence taking place
on or prior to the Effective Date in any way
relating to the Debtors, the
Chapter 11 Cases or the Plan (including, without
limitation, any of the Veil
Piercing-Related Issues or LBO-Related Issues);
(ii) The Confirmation Order and the Plan
shall provide for the full
and complete settlement, satisfaction, discharge
and, in respect of the
Released Parties, release of all the LBO-Related
Issues, including without
limitation all claims, indemnities and causes of
action that any or all of
the Debtors, or any person(s) or entity(ies)
claiming through any or all of
them, have in connection with the LBO, action taken
in contemplation of the
LBO, or any contemporaneous or subsequent
transaction(s) entered into as
part of, arising out of, or relating to the LBO or
any or all of the LBO
transaction(s) or transfer(s), including without
limitation, any and all
obligations of any nature contemplated by, arising
out of, or related to the
Stock Purchase Agreement between Hillsborough
Holdings Corporation and
Jasper Corp. dated as of April 21, 1988, as amended
pursuant to amendments
dated May 26, 1988 and January 25, 1989, and the
related Undertaking of
Jasper Corp.;
(iii) The Confirmation Order shall provide
that the Veil Piercing
Settlement as embodied in the Plan is fair,
equitable and reasonable and is
a good faith settlement, satisfaction, release and
discharge of all claims
and causes of action of all Veil Piercing Claimants,
and of Celotex, and of
any and all person(s) and entity(ies) that may
assert, derivatively or
otherwise through Celotex, Veil Piercing Claims
against any or all of the
Released Parties;
(iv) The Celotex Bankruptcy Court shall have
entered an order
approving this Agreement and authorizing and
directing The Celotex
Corporation to render performance in accordance with
the terms and
conditions hereof, which order shall have become a
Final Order; and
(v) At the request of the Bondholder
Proponents, the Court shall
have entered an order (i) allowing the Celotex Proof
of Claims and/or, if
applicable, (ii) allowing the Veil Piercing Proof of
Claims, such order(s)
to be in form and substance reasonably acceptable to
the Bondholder
Proponents;
provided, however, that any one or more of the conditions set
forth in (i) - (v) above
may be waived or modified by the express written consent given
(i) by the Bondholder
Proponents; and (ii) if the Settling Equityholders hold a
majority in amount of the
Allowed Old Common Stock Interests in the aggregate, by Settling
Equityholders that hold
a majority of the Old Common Stock Interests held by all Settling
Equityholders; provided,
further, that no waiver or modification of Section 3(d)(i) herein
that adversely affects
the release granted to Settling Equityholders shall be effective
against any Settling
Equityholder that does not consent in writing to such waiver or
modification; provided,
further, that in the event that any of the conditions set forth
in (i) - (v) is not fully
satisfied, consistent with Section 4(d) herein, the Bondholder
Proponents may request that
the Celotex Settlement Fund Recipient and any and all Parties to
this Agreement take such
actions as the Bondholder Proponents may reasonably request,
which actions are reasonably
believed by the Bondholder Proponents to be necessary to the
realization of Finality.
4. Agreements.
(a) Amendment of Original Creditor Plan. Subject
to the provisions of
Section 2(b) herein, the Plan Proponents shall promptly
prepare and file with the
Court an amendment to the Original Creditor Plan and
related disclosure statement
that (i) incorporates, to the extent appropriate, the
terms of this Agreement and
attaches this Agreement as an exhibit to the amended
Original Creditor Plan;
(ii) at the option of the Bondholder Proponents, adds, as
proponents of the amended
Original Creditor Plan (subject to receipt of any
necessary approval from the
Celotex Bankruptcy Court, and subject to the condition
that such additional
proponents shall not be eligible to participate in any
actions to be taken under
the Plan by the Plan Proponents, or to amend or otherwise
modify the Plan), (A) The
Celotex Corporation, (B) JWC and (C) in their capacity as
representatives of
certain of the Veil Piercing Claimants, the Veil Piercing
Claimants'
Representatives. The Parties shall continue to seek the
prompt confirmation and
consummation of the Plan, including the prompt approval by
the Court of this
Agreement in connection with the confirmation of the Plan.
(b) Mutual Releases. The Plan shall provide that
upon the Effective Date,
the present and future signatories to this Agreement
mutually release (except as
waived or modified by the Bondholder Proponents and any
person(s) or entity(ies)
whose rights under such release would be contravened by
such waiver or
modification) each other and each of their respective
present and former
subsidiaries, Affiliates, directors, officers, partners,
shareholders, employees,
agents, advisors and representatives of and from any and
all claims based upon any
and all theories or bases of liability or recovery
recognizable at law, in equity
or in admiralty, under the laws of any jurisdiction, based
upon, arising out of or
in connection with alter ego, agency, alternate entity,
instrumentality, successor
liability, conspiracy, indemnification, contribution, any
theories of piercing the
corporate veil of any Debtor or its predecessor and/or any
and all of its
respective present or former parents, subsidiaries or
Affiliates, or the transfer
of any assets or property to or by any Debtor (or other
non-Debtor that had at any
time been a parent, subsidiary or Affiliate of any Debtor
or its predecessor), in
each case only in connection with the LBO, action taken in
contemplation of the
LBO, or any contemporaneous or subsequent transaction(s)
entered into as part of
or arising out of or relating to any or all of the LBO
transaction(s) or
transfer(s) and the conduct of the Adversary Proceedings,
including, without
limitation, any and all obligations of any nature
contemplated by, arising out of,
or related to the Stock Purchase Agreement between
Hillsborough Holdings
Corporation and Jasper Corp. dated as of April 21, 1988,
as amended pursuant to
amendments dated May 26, 1988 and January 25, 1989, and
the related Undertaking of
Jasper Corp.; provided that as to any such signatory who
(x) is or was a holder of
an Allowed Old Common Stock Interest or (y) is a present
or former director,
officer, partner, shareholder, employee, agent, advisor or
representative of JWC
or The Celotex Corporation or any of its subsidiaries,
such person or entity shall
become a Settling Equityholder, a Celotex Released Party,
or a JWC Released Party,
respectively, and provided further that there shall not be
released any claims by
creditors of Celotex or JWC, including without limitation
the Veil Piercing
Claimants against Celotex, JWC, any of the Celotex
Released Parties or any of the
JWC Released Parties, arising out of personal injury or
property damage caused by
or attributable to asbestos-containing products
manufactured, sold or distributed
by Celotex or JWC.
(c) Dismissal of Lawsuits. The Plan Proponents (as
may be necessary
respecting the Adversary Proceedings only), the Veil
Piercing Claimants'
Representatives, The Celotex Corporation, JWC and the
Official Celotex Committees
shall use reasonable efforts to bring about the prompt
dismissal, with prejudice,
as soon as practicable after the Effective Date, of all
known pending suit,
appeals, proceedings and other actions, including the
Adversary Proceedings,
against (i) any or all of the Released Parties, (ii) any
or all the Celotex
Released Parties and/or (iii) any or all of the JWC
Released Parties (solely in the
capacity(ies) specified in the definitions of Released
Parties, the Celotex
Released Parties and the JWC Released Parties), to the
extent such suits, appeals,
proceedings or other actions are based upon, arising out
of or in connection with
the Veil Piercing-Related Issues as to the Released
Parties and the issues covered
by the mutual release specified in Section 4(b) herein as
to the Celotex Released
Parties and the JWC Released Parties, respectively. Upon
request therefor, any
Party shall provide the Bondholder Proponents with a
certificate of a responsible
person of such Party, in form and substance reasonably
acceptable to the Bondholder
Proponents, to the effect that such Party has fully
complied with this
Section 4(c).
(d) Process Toward Realization of Finality. The
Parties acknowledge that
the prompt realization of Finality will require
considerable strategic planning and
the cooperation of all of the Parties. In view of these
considerations, the
Parties intend that the Bondholder Proponents shall make
and implement all
strategic decisions (including without limitation
decisions as to the content and
timing of any and all applications, filings, or other
documents filed with or
otherwise submitted to (or statements made before) the
Court, or releases or
statements to the press (or that are reasonably calculated
to be made publicly
available through the press), that relate directly or
indirectly to the Veil
Piercing Settlement or to Finality), in each case in
consultation with the other
Parties to the extent appropriate and/or practicable under
the circumstances; and
the other Parties agree to use their best efforts to
assist and cooperate with the
Bondholder Proponents in implementing such decisions and
in promptly realizing
Finality, (including, without limitation to consult with
the Bondholder Proponents
respecting the content and timing of any and all
applications, filings, or other
documents to be filed with or otherwise submitted to (or
statements to be made
before) the Celotex Bankruptcy Court prior to making any
such submission or
statement) in all cases consistent with this Agreement.
(e) Announcement. The Parties shall jointly
announce the existence and the
terms of this Agreement as soon as possible after this
Agreement shall have become
effective.
(f) Use of Evidence From Trial. The Parties shall
support the use by the
Court and by the Celotex Bankruptcy Court of the evidence
presented during the
trial held in the Adversary Proceedings that commenced on
December 13, 1993 in
determining that the settlement of the Veil Piercing
Claims set forth in this
Agreement and in the Plan (i) is fair, equitable and
reasonable and constitutes the
full and complete settlement, satisfaction, release and
discharge of all Veil
Piercing Claims and (ii) to the extent applicable, should
be approved as part of
confirmation of the Plan.
(g) Support of Plan. The Parties shall support the
Plan and shall not
support, directly or indirectly or through one or more
intermediaries, any other
proposed plan in respect of any or all of the Debtors or
any other settlement of
any of the Veil Piercing Claims.
(h) Attorneys' Fees. (i) The Parties, except for
the HHC Bondholders
Committee, The Celotex Corporation and the HHC Creditors
Committee, shall support
an application in the Chapter 11 Cases by Caplin &
Drysdale, on behalf of itself
and the Claimants' Attorneys, for an award of reasonable
attorneys' fees and costs
in an amount equal to $15 million pursuant to Code
sections 503(b) and/or
1129(a)(4), or otherwise, based on factors including the
contingent nature of the
representation, the favorable results achieved, the
difficulty of the issues
presented and the fact that counsel were representing
clients brought involuntarily
into the Chapter 11 Cases through the Adversary
Proceedings; (ii) the HHC
Bondholders Committee, The Celotex Corporation and the HHC
Creditors Committee
shall support an application in the Chapter 11 Cases by
Caplin & Drysdale, on
behalf of itself and the Claimants' Attorneys, for an
award of reasonable
attorneys' fees and costs pursuant to Code sections 503(b)
and/or 1129(a)(4), or
otherwise, based on factors including those specified in
clause (i) hereof; and
(iii) the Parties shall support applications in the
Chapter 11 Cases by counsel for
Apollo and Lehman Brothers Inc. for reasonable attorneys'
fees and costs pursuant
to Code sections 503(b) and/or 1129(a)(4), or otherwise.
(i) Confidentiality. From and after the Effective
Date, the Veil Piercing
Claimants' Representatives shall keep confidential, and
not use in any manner
inconsistent with this Agreement, all files and memoranda
relating to cases against
any or all of the Released Parties based upon, arising out
of or relating to the
Veil Piercing-Related Issues.
(j) At the request of the Bondholder Proponents,
each of the Veil Piercing
Claimants' Representatives shall use its best efforts to
cause each of the law
firms listed on Exhibit A attached hereto to indicate its
assent to and/or support
of this Agreement and/or the Plan, and/or to become a
signatory to this Agreement,
as directed by the Bondholder Proponents and in each case
substantially in the form
of Exhibit D attached hereto and as soon as practicable
after such request is made.
(k) The Celotex Corporation shall (i) promptly seek
appropriate approval
from the Celotex Bankruptcy Court for authority to be
bound by this Agreement, for
the support of the Plan by The Celotex Corporation, and
for the authorization and
direction by the Celotex Bankruptcy Court for The Celotex
Corporation to render
performance in accordance with the terms and conditions of
this Agreement,
(ii) promptly file the Celotex Proof of Claims against the
Debtors for the benefit
of its estate, (iii) at the request of the Bondholder
Proponents, promptly file the
Veil Piercing Proof of Claims against the Debtors for the
benefit of its estate,
(iv) accept treatment under the Plan of its claims against
the Debtors pursuant to
this Agreement, and (v) if it is the Celotex Settlement
Fund Recipient, receive and
hold the Settlement Fund for the exclusive benefit of the
Veil Piercing Claimants
and the Settling Equityholders, if any, and manage the
Settlement Fund in
accordance with this Agreement and all applicable orders
of the Celotex Bankruptcy
Court, and distribute the Settlement Fund pursuant to its
confirmed plan of
reorganization or an order(s) of the Celotex Bankruptcy
Court.
(l) The Official Celotex Committees that are
Parties and the Veil Piercing
Claimants' Representatives shall support The Celotex
Corporation in its efforts to
obtain the approvals from the Celotex Bankruptcy Court
that are specified in
Section 4(k) of this Agreement.
5. Representations.
(a) Apollo represents and warrants that it owns or
controls debt
obligations of the Debtors in the approximately aggregate
principal amount of
$160 million.
(b) Lehman Brothers Inc. represents and warrants
that it owns or controls
debt obligations of the Debtors in the approximately
aggregate principal amount of
$271 million.
(c) Each of the Veil Piercing Claimants'
Representatives represents and
warrants that it is authorized to enter into this
Agreement on behalf of all of its
clients or principals that are or may be Veil Piercing
Claimants.
6. Settling Equityholders.
(a) Each Settling Equityholder shall receive from
the Celotex Settlement
Fund Recipient, effective on the Effective Date, an
assignment from the Celotex
Settlement Fund Recipient of the right of the Celotex
Settlement Fund Recipient to
receive under the Plan and under this Agreement that
number of shares of Class B
Common Stock having an aggregate New Common Stock Value
Per Share that bears the
same relation to the sum of (i) $75 million and (ii) 50%
of the Senior Claim
Differential, if any, as the Allowed Old Common Stock
Interests of such Settling
Equityholder bears to the aggregate Allowed Old Common
Stock Interests.
(b) Each Settling Equityholder shall, as a Party,
be entitled to the
releases provided for under the Plan (as provided in
Sections 3(a) and 4(b) herein,
as the same may be modified or waived pursuant to Sections
3(a) and 4(b) herein).
7. Effectiveness of this Agreement.
(a) Subject to the provisions of Section 7(b)
herein, this Agreement shall
become effective upon the execution hereof by all of the
Parties other than the
Settling Equityholders, if any, and the Celotex Committee
of Unsecured Creditors.
(b) Notwithstanding any of the provisions of
Section 7(a) herein to the
contrary, in the event that Jim Walter Corporation does
not cause its authorized
representative to execute this Agreement and deliver it to
the Bondholder
Proponents on or before Tuesday, April 19, 1994 at 5 p.m.
EDST then (i) Jim Walter
Corporation shall not be, and shall not be deemed to be, a
Party to this Agreement,
(ii) none of the provisions of this Agreement applicable
to JWC shall be, or shall
become, effective and (iii) without limiting the
foregoing, none of the provisions
of this Agreement applicable to the release of any or all
of the JWC Released
Parties or the settlement, satisfaction or discharge of
any claims against any or
all of them shall be, or shall become, effective.
(c) the Bondholder Proponents, in their sole and
exclusive discretion, may
waive any or all of the provisions contained in Section
7(b) herein.
8. Termination.
This Agreement shall terminate upon the earlier to occur
of the following:
(a) Upon the giving of a notice by the Bondholder
Proponents or the Veil
Piercing Claimants' Representatives and The Celotex
Corporation to the other at any
time after an order shall have been entered which shall
have become a Final Order
that (i) disapproves this Agreement or the Plan
substantially in its entirety
provided that such disapproval shall not be based on the
failure of any or all of
the conditions contained in Section 10.1(a) or 10.1(c) of
the amendment of the
Original Creditor Plan to be filed under Section 4(a)
herein, (ii) confirms a plan
of reorganization in any or all of the Chapter 11 Cases
other than the Plan or
(iii) finds or declares that the Veil Piercing Claims are
without merit or grants
substantially the relief requested in Adversary Proceeding
No. 90-0003 and/or
90-0004; and
(b) The Bondholder Proponents, The Celotex
Corporation, and the Veil
Piercing Claimants' Representatives shall mutually agree
in writing to terminate
this Agreement.
9. Miscellaneous.
(a) Fiduciary Duty. Notwithstanding any other
provision contained herein,
in the event the Original Creditor Plan, as amended to
incorporate this Agreement,
is amended or modified without the consent required by
this Agreement, no such
Party shall be required to fulfill any of its agreements,
rights, duties or
obligations hereunder to the extent that such Party has
reasonably determined, on
advice of counsel, that the fulfillment of such agreement
or duty in connection
with any further amendment to or modification of the
Original Creditor Plan would
violate such Party's fiduciary duty arising out of such
Party's status as an
official committee in the Chapter 11 Cases or in The
Celotex Chapter 11 Case, or
with respect to The Celotex Corporation, as a
debtor-in-possession in The Celotex
Chapter 11 Case.
(b) Further Assurances. Each Party, as applicable,
shall promptly execute
and deliver such agreements, certificates, receipts,
instruments, acknowledgements,
and other documents, including, without limitation, the
Celotex Proof of Claims and
the Veil Piercing Proof of Claims, and to promptly take
such actions or cause to
be taken such actions, as may be reasonably requested by
the Bondholder Proponents
to fully and promptly effect the agreements and other
provisions contained herein.
(c) Amendments. This Agreement may not be amended
except in a writing
signed by the Party against which such amendment is sought
to be enforced.
(d) Governing Law. Except to the extent the Code
or Bankruptcy Rules are
applicable, the rights and obligations arising under this
Agreement shall be
governed by, and construed and enforced in accordance
with, the laws of the State
of New York, without giving effect to the principles of
conflicts of law thereof.
(e) Headings. The headings of the Sections,
paragraphs, and subsections
of this Agreement are inserted for convenience only and
shall not affect the
interpretation hereof.
(f) Notices. All notices, requests or demands
under or in connection with
this Agreement shall be in writing and shall be delivered
by hand, sent by
recognized overnight courier or sent by telecopier, telex
or similar electronic
means to the address or telecopier number of the Party as
set forth under its
signature hereto, or to such other address or telecopier
number as such Party shall
provide to all Parties hereto in writing, and shall be
deemed sent or given
hereunder, in the case of delivery by recognized overnight
courier, on the date of
actual delivery, in the cases of transmission by
telecopier, telex or similar
electronic means on the date of actual transmission, and
in the case of personal
delivery, on the date of actual delivery.
(g) No Admissions. No part of this Agreement shall
be deemed as an
admission of any Party for any purpose, whether in any of
the Veil Piercing
Proceedings or otherwise.
(h) No Waiver. The Parties do not waive or release
any rights, claims,
defenses or remedies until all conditions of this
Agreement and the Plan have been
satisfied or waived. Without limiting the foregoing,
nothing herein shall
constitute an admission or waiver with respect to the
Chapter 11 Cases, any Veil
Piercing Proceedings, or the Celotex Chapter 11 Case.
(i) No Solicitation. Notwithstanding any other
provision in this
Agreement, nothing in this Agreement is intended to be or
constitute, and shall not
be deemed to be or constitute, a solicitation of any vote
or an agreement to vote
for or against any plan of reorganization, and nothing in
this Agreement shall
impair the right or the ability of any Party to vote for
or against, or abstain or
refrain from voting with respect to, any plan of
reorganization.
(j) Extraterritoriality. It is the intention of
the Parties that the
settlements and other agreements contained in this
Agreement be given application
both to suits within and without the jurisdiction of the
United States.
(k) Successors and Assigns. This Agreement is
intended to bind and inure
to the benefit of the Parties and other signatories, if
any, hereof and their
respective successors, assigns, heirs, executors,
administrators and
representatives.
(l) Complete Agreement. This document, including
the appendix and exhibits
hereto, embodies the complete agreement and understanding
between the Parties and
other signatories, if any, with respect to the subject
matter hereof and supersedes
and preempts any prior agreement, understanding or
representation made by and
between any or all of such Parties and other signatories,
if any, whether written
or oral, which may have related to the subject matter
hereof in any way whatsoever,
including without limitation the Term Sheet.
(m) Counterparts. This Agreement may be executed
in one or more
counterparts, each of which shall be deemed an original
and all of which shall
constitute one and the same Agreement.
CAPLIN & DRYSDALE, Chartered
By: /s/ Elihu Inselbuch
Elihu Inselbuch
399 Park Avenue
New York, Ny 10022
(212) 319-7125
(212) 644-6755 (telecopier)
For Itself and the AVDs
BARON & BUDD
By: /s/ Fred Baron
Fred Baron
3102 Oak Lawn Avenue
Suite 1100
Dallas, TX 75219-4281
(214) 521-3605
(214) 520-1181 (telecopier)
NESS MOTLEY LOADHOLT
RICHARDSON & POOLE
By:
/s/ Joseph Rice
Joseph Rice
P.O. Box 365
Barnwell, SC 29812
(803) 259-9900
(803) 577-7513 (telecopier)
GREITZER AND LOCKS
By:
/s/ Gene Locks
Gene Locks
1500 Walnut Street
Philadelphia, PA 19102
(215) 893-0100
(215) 985-2960 (telecopier)
AKIN, GUMP, STRAUSS,
HAUER & FELD, L.L.P.
By: /s/ Steven M. Pesner, P.C.
Ellen R. Werther
Steven M. Pesner, P.C.
65 East 55th Street, 33rd Flr.
New York, NY 10022
(212) 872-1070
(212) 872-1003 (telecopier)
For Apollo
PAUL, WEISS, RIFKIND,
WHARTON & GARRISON
By: /s/ Robert Drain
Robert Drain
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3236
(212) 373-2366 (telecopier)
For Lehman Brothers Inc.
BUSH ROSS GARDNER WARREN
& RUDY, P.A.
By: /s/ Jeffrey W. Warren
Jeffrey W. Warren
220 South Franklin Street
Tampa, FL 33602
(813) 224-9255
(813) 223-9620 (telecopier)
For The Celotex Corporation
HOYT, COLGAN & ANDREU
By:
Michael B. Colgan
2900 Barnett Plaza
101 E. Kennedy Blvd.
Tampa, FL 33602
(813) 229-6688
(813) 229-3331 (telecopier)
For Jim Walter Corporation
STROOCK & STROOCK & LAVAN
By:
/s/ Daniel H. Golden
Daniel H. Golden
Seven Hanover Square
New York, NY 10004-2594
(212) 806-5423
(212) 806-6606 (telecopier)
For HHC Bondholders Committee
JONES, DAY, REAVIS & POGUE
By:
/s/ Marc S. Kirschner
Marc S. Kirschner
599 Lexington Avenue
New York, NY 10025
(212) 326-3939
(212) 755-7306 (telecopier)
For HHC Creditors Committee
JOHNSON, BLAKELY, POPE, BOKOR
RUPPEL & BURNS, P.A.
By:
/s/ Charles M. Tatelbaum
Charles M. Tatelbaum
911 Chestnut Street
Clearwater, FL 33616
(813) 461-1818
(813) 441-8617 (telecopier)
For Celotex Unsecured Trade Creditors
Committee
KOZYAK TROPIN THROCKMORTON
& HUMPHREYS, P.A.
By: /s/ Janet L. Humphreys
John W. Kozyak
Janet L. Humphreys
200 S. Biscayne Boulevard
Suite 2850
Miami, FL 33131-2335
(305) 372-1800
(305) 372-3508 (telecopier)
For Celotex Asbestos Property Damage
Claimants Committee
HONIGMAN MILLER SCHWARTZ
& COHN
By: /s/ Sheldon S. Toll
Sheldon S. Toll
2290 First National Building
Detroit, MI 48226
For Celotex Asbestos Bodily Injury
Claimants Committee
(313) 256-7800
(313) 962-0176 (telecopier)
<PAGE>
SETTLING EQUITYHOLDERS:
<PAGE>
CELOTEX RELEASED PARTIES:
JWC RELEASED PARTIES
<PAGE>
APPENDIX A
A. "Affiliate" shall have the meaning set forth in Rule
501, promulgated under the Securities Act of 1933, as amended.
B. "Allowed Indemnity Claim" shall mean an Allowed Claim
for indemnification, reimbursement or contribution against any
Debtor; provided, however, that any such Claim shall not be an
Allowed Indemnity Claim if the agreement or other basis giving
rise to the Claim is void or voidable.
C. "Allowed Old Common Stock Interest" shall mean all
interests in the outstanding common stock, $0.01 par value, of
Walter Industries, Inc., as the surviving corporation of the
merger between Hillsborough Holdings Corporation and Walter
Industries, Inc., exclusive of any shares of such stock held in
treasury, which is registered as of the Effective Date in such
stock register as may be maintained by or on behalf of Walter
Industries, Inc. and as to which no objection has been made or
which has been allowed by a Final Order.
D. "Apollo" shall mean AIF II, L.P., certain affiliates
(as defined in the Plan) of AIF II, L.P. and certain accounts
managed or controlled by such affiliates.
E. "HHC Bondholders Committee" shall mean the Official
Bondholders Committee of the Debtors appointed by the United
States Trustee in the Chapter 11 Cases pursuant to Section 1102
of the Code, as such Committee may be constituted from time to
time.
F. "Celotex" shall mean The Celotex Corporation and/or
any predecessor thereof or successor thereto and all of their
respective present and former parents, Affiliates and
subsidiaries, other than JWC.
G. "Celotex Proof of Claims" shall mean a proof(s) of
claim(s) filed in the Chapter 11 Cases asserting that any or all
of the Debtors are or may be liable for any or all claims (a)
which Celotex holds or which may be asserted against Celotex in
the future, direct, indirect or derivative, caused by products
manufactured, sold or distributed by Celotex, or otherwise based
on any of the Veil Piercing-Related Issues and/or (b) based on
the LBO-Related Issues, such proof(s) of claim(s) to be in form
and substance reasonably acceptable to the Bondholder Proponents
and settled, satisfied, released and discharged by distribution
of the Settlement Fund to the Celotex Settlement Fund Recipient.
The liability of the Debtors described in the Celotex
Proof of Claims shall include: (i) claims in the nature of or
sounding in piercing the corporate veil, alter ego, alternate
entity, successor liability, conspiracy, instrumentality, agency
and any other theory of law, equity or admiralty that seeks to
hold the stockholder of a corporation liable for all or part of
any claims against that corporation; (ii) claims resulting from
or arising out of or relating to the LBO, actions taken in
contemplation of the LBO or any contemporaneous or subsequent
transaction(s) entered into as a part of, arising out of, or
relating to the LBO or any or all of the LBO transaction(s) or
transfer(s), and (iii) claims resulting or arising from the
transfer of assets of Celotex for less than reasonably equivalent
value to the extent available remedies exist in favor of Celotex
as to such transfers.
H. "Celotex Released Party" shall mean any present or
former director, officer, partner, shareholder, employee, agent,
advisor or representative of The Celotex Corporation or any of
its subsidiaries (in each case only in such person's or entity's
aforementioned capacity and not otherwise) that, subject to the
last two sentences hereof, (1) shall have failed to become a
signatory to this Agreement, following a written request of the
Bondholder Proponents, on or prior to the later of (a) thirty
(30) days after a copy of this Agreement is received by such
person or entity or a representative thereof, and (b) the day
prior to the date on which the Court holds the hearing on the
adequacy of the disclosure statements respecting the Plan and the
plan filed by the Debtors, and (2) shall have taken no action(s)
subsequent to the execution of this Agreement by the Parties
which, in the reasonable determination of the Bondholder
Proponents, would be reasonably likely to (a) impede the prompt
distribution or approval of the disclosure statement relating to
the Plan; (b) impede the prompt confirmation and effectiveness of
the Plan; (c) impede the use of the Negotiated Enterprise Value
as the enterprise valuation of the Debtors for all purposes under
the Plan and in the Chapter 11 Cases; (d) impede the prompt
realization of Finality; or (e) result in a breach of this
Agreement. If the Court or the Celotex Bankruptcy Court finds
that the settlement set forth in this Agreement is not reasonable
or the Plan is not confirmable unless each or any of such
person(s) or entity(ies) is given a further opportunity to become
a signatory to this Agreement and receiving the benefits
specified herein for a Celotex Released Party by a specific
date(s) set by the Court, then the date specified in (1) hereof
shall be the date(s) set by the Court; provided further that the
Bondholder Proponents shall have the right, exercisable on or
before the Effective Date, to waive the date(s) specified herein
for any such person(s) or entity(ies). If the Court or the
Celotex Bankruptcy Court at any time determines that any Celotex
Released Party is not entitled to or should not be granted the
release specified in Section 4(b) herein, then such person(s) or
entity(ies) shall not be entitled to, and shall not receive such
release.
I. "Celotex Settlement Fund Recipient" shall mean The
Celotex Corporation for the exclusive benefit of the Veil
Piercing Claimants and the Settling Equityholders, if any, or
such other person(s) or entity(ies) designated by a Final Order
entered by the Celotex Bankruptcy Court to act in the place and
stead and on behalf of The Celotex Corporation, including,
without limitation, any entity established pursuant to a
confirmed plan of reorganization for The Celotex Corporation to
hold, manage, liquidate, distribute or otherwise assume
responsibility for and the liabilities of the Settlement Fund.
J. "Chapter 11 Cases" shall mean each of the
reorganization cases of the Debtors listed in the caption on the
cover page of the Original Creditor Plan, all of which are being
jointly administered under Case No. 89-9715-8P1.
K. "Class A Common Stock" shall have the meaning assigned
to that term (or another term serving the same or a similar
function) under the Plan; provided, that the Class A Common Stock
shall have economic rights, powers and privileges no more
favorable than the economic rights, powers and privileges of the
Class B Common Stock, unless less favorable treatment shall be
agreed to in writing by the Veil Piercing Claimants'
Representatives and the Celotex Settlement Fund Recipient.
L. "Class B Common Stock" shall mean the Class B Common
Stock, par value $.01 per share, of Walter Industries, Inc. to be
issued on the Effective Date. The Class B Common Stock held by
the Celotex Settlement Fund Recipient or by any creditor of The
Celotex Corporation, in its capacity as such, shall be voted in
the same percentages as the shares of the Class A Common Stock
and other Class B Common Stock, taken together, are voted (based
upon the number of votes cast).
M. "Code" shall mean title 11 of the United States Code,
U.S.C. Section 101 et seq., together with all amendments,
modifications and replacements as the same exist on any relevant
date to the extent applicable to the Chapter 11 Cases.
N. "Confirmation Date" shall mean the date on which the
Court enters the Confirmation Order.
O. "Confirmation Order" shall mean the order of the Court
confirming the Plan and approving the transactions and
settlements contemplated therein.
P. "HHC Creditors Committee" shall mean the Official
Committee of General Unsecured Creditors of the Debtors appointed
by the United States Trustee in the Chapter 11 Cases pursuant to
Section 1102 of the Code, as such Committee may be constituted
from time to time.
Q. "Debtors" shall mean the debtors and debtors in
possession in the Chapter 11 Cases.
R. "Effective Date" shall mean that business day selected
by the Bondholder Proponents which shall be not more than ninety
(90) days after the date on which all conditions to effectiveness
set forth in the Plan have been satisfied or waived.
S. "Final Order" shall mean an order, judgment, ruling or
decree issued and entered by the Court or by any state or other
federal court or other tribunal located in one of the states,
territories or possessions of the United States or the District
of Columbia that has not been reversed, stayed, modified or
amended and as to which the time to appeal or petition for
reargument, rehearing or certiorari has expired, and as to which
no appeal, reargue, petition for certiorari or seek rehearing has
been waived or, if an appeal, reargument, petition for certiorari
or rehearing thereof has been denied, the time to take any
further appeal or to seek certiorari or further reargument or
rehearing has expired.
T. "JWC Released Party" shall mean any present or former
director, officer, partner, shareholder, employee, agent, advisor
or representative of JWC (in each case only in such person's or
entity's aforementioned capacity and not otherwise) that, subject
to the last two sentences hereof, (1) shall have failed to become
a signatory to this Agreement, following a written request of the
Bondholder Proponents, on or prior to the later of (a) thirty
(30) days after a copy of this Agreement is received by such
person or entity or a representative thereof and (b) the day
prior to the date on which the Court holds the hearing on the
adequacy of the disclosure statements respecting the Plan and the
plan filed by the Debtors, and (2) shall have taken no action(s)
subsequent to the execution of this Agreement by the Parties
which, in the reasonable determination of the Bondholder
Proponents, would be reasonably likely to (a) impede the prompt
distribution or approval of the disclosure statement relating to
the Plan (b) impede the prompt confirmation and effectiveness of
the Plan; (c) impede the use of the Negotiated Enterprise Value
as the enterprise valuation of the Debtors for all purposes under
the Plan and in the Chapter 11 Cases; (d) impede the prompt
realization of Finality; or (e) result in a breach of this
Agreement. If the Court or the Celotex Bankruptcy Court finds
that the settlement set forth in this Agreement is not reasonable
or the Plan is not confirmable unless each or any of such
person(s) or entity(ies) is given a further opportunity to become
a signatory to this Agreement and receiving the benefits
specified herein for a JWC Released Party by a specified date(s)
set by the Court, then the date specified in (1) hereof shall be
the date(s) set by the Court; provided further that the
Bondholder Proponents shall have the right, exercisable on or
before the Effective Date, to waive the date(s) specified herein
for any such person(s) or entity(ies). If the Court or the
Celotex Bankruptcy Court at any time determines that any JWC
Released Party is not entitled to or should not be granted the
release specified in Section 4(b) herein, then such person(s) or
entity(ies) shall not receive, such release.
U. "LBO-Related Issues" shall mean and be the collective
reference to all theories or bases of recovery recognizable at
law, in equity or in admiralty or in equity under the laws of any
jurisdiction that are held or asserted by any holder of a claim
or interest in the Chapter 11 Cases other than Veil Piercing
Claimants (in such capacity), in respect of such claim or
interest, directly or indirectly based upon, arising out of or in
contemplation of or as a part thereof or in connection therewith,
including without limitation the acquisition of the capital stock
of the Debtors, the consummation of the transactions contemplated
by the Agreement and Plan of Merger dated as of August 12, 1987,
and the financing, reorganization, asset disposition and other
transactions consummated as a part thereof or in connection
therewith, whether based upon theories of piercing the corporate
veil of any Debtor, alter ego, alternate entity, agency,
instrumentality, the transfer (fraudulent or otherwise) of any
assets or property by any Debtor (or other non-Debtor that had at
any time been an Affiliate of any Debtor), preference, fraud,
conspiracy, substantive consolidation, successor liability, or
any other legal or equitable theory whatsoever.
V. "New Common Stock" shall mean the collective reference
to the Class A Common Stock and the Class B Common Stock.
W. "New Common Stock Value" shall mean the Negotiated
Enterprise Value (or, if the Court finds that the going concern
enterprise value of the Debtors is equal to an amount other than
$2,525,000,000, such other amount) less the sum of (a) the lesser
of (i) $902 million and (ii) (A) the allowed amount of claims for
all classes other than classes consisting of Subordinated Note
Claims, Veil Piercing Claims or intercompany claims (i.e.,
Classes U-4 through U-7 and I-1 through I-3 in the Original
Creditors Plan) accrued or owed on the Effective Date (including
without limitation any part thereof paid or to be paid after the
Effective Date) minus (B) the interest paid or accrued under the
provisions of the Plan in respect of the claims referred to in
the preceding clause (A) for the period from January 1, 1994 to
the Effective Date, and (b) the aggregate principal amount of
Qualified Securities to be distributed to holders of Subordinated
Note Claims and the Celotex Settlement Fund Recipient under the
terms of the Plan on the Effective Date.
X. "New Common Stock Value Per Share" shall mean the New
Common Stock Value divided by 50 million, representing the number
of shares of New Common Stock to be issued and outstanding on the
Effective Date.
Y. "Qualified Securities" shall have the meaning assigned
to that term (or another term serving the same or a similar
function) under the Plan.
Z. "Senior Claim Differential" shall mean the excess, if
any, of $902 million over the difference between (a) the allowed
amount of claims for all classes, other than classes consisting
of Subordinated Note Claims, Veil Piercing Claims or intercompany
claims, accrued or owed on the Effective Date (including without
limitation any part thereof paid or to be paid after the
Effective Date) (the "Senior Claims"), and (b) the interest paid
or accrued under the provisions of the Plan in respect of the
Senior Claims for the period from January 1, 1994 to the
Effective Date.
AA. "Settling Equityholder" shall mean a holder of an
Allowed Old Common Stock Interest (a) that, subject to the last
two sentences hereof, shall have become a signatory to this
Agreement on or prior to the later of (i) twenty (20) days after
a copy of this Agreement is sent to such holder of an Allowed Old
Common Stock Interest or a representative thereof, and (ii) the
day prior to the date on which the Court holds the hearing on the
adequacy of the disclosure statements respecting the Plan and the
plan filed by the Debtors, and (b) that shall have taken no
action(s) subsequent to becoming a signatory to this Agreement
which, in the determination of the Bondholder Proponents, would
be reasonably likely to (i) impede the prompt distribution or
approval of the disclosure statement relating to the Plan; (ii)
impede the prompt confirmation and effectiveness of the Plan;
(iii) impede the use of the Negotiated Enterprise Value as the
enterprise valuation of the Debtors for all purposes under the
Plan and the Chapter 11 Cases; (iv) impede the prompt realization
of Finality; or (v) result in a breach of this Agreement. If the
Court finds that the settlement set forth in this Agreement is
not reasonable or the Plan is not confirmable unless each or any
of the holders of an Allowed Old Common Stock Interest is given a
further opportunity to become a Settling Equityholder by becoming
a signatory to this Agreement and receiving the benefits
specified herein for a Settling Equityholder by a specific
date(s) set by the Court, then the date specified in (a) hereof
shall be the date(s) set by the Court. Notwithstanding the other
provisions of "AA" hereof, the Bondholder Proponents shall have
the right, exercisable on or before the Effective Date, to waive
the date(s) specified herein for any person who is a holder of
less than 5% of the issued and outstanding common stock, $0.01
per value, of Walter Industries, Inc., exclusive of any shares of
such stock held in treasury.
BB. "Settling Party" shall mean a Party to this
Agreement, and each of the Debtors.
CC. "Subordinated Note Claims" shall mean, collectively,
the Senior Subordinated Note Claims, the 17% Subordinated Note
Claims, the 10 7/8% Subordinated Debenture Claims, the 13 1/8%
Subordinated Note Claims and the 13 3/4% Subordinated Debenture
Claims (as each of such terms is defined in the Original Creditor
Plan).
DD. "Veil Piercing Claimants" shall mean The Celotex
Corporation and any other person or entity who may have or may
assert in the future a Veil Piercing Claim.
EE. "Veil Piercing Claims" shall mean and be the
collective reference to all existing claims and all claims that
may be asserted in the future against any or all of the Debtors
or any other Released Party based upon, arising out of or in
connection with any of the Veil Piercing-Related Issues, but
shall not include Allowed Indemnity Claims.
FF. "Veil Piercing Proceedings" shall mean and be the
collective reference to all lawsuits, actions and other judicial
and administrative proceedings that have been, or may in the
future be, instituted against any person that directly or
indirectly seek or could seek any remedy from any or all of the
Released Parties, including, without limitation, each Settling
Party based upon, arising out of or in connection with any of the
Veil Piercing-Related Issues.
GG. "Veil Piercing Proof of Claims" shall mean a proof(s)
of claim(s) filed in the Chapter 11 Cases by (i) The Celotex
Corporation and/or (ii) the Claimants' Attorneys and/or an
appropriate representative(s) of Veil Piercing Claimants on
behalf of one or more classes representing all Veil Piercing
Claimants, solely upon the request of the Bondholder Proponents
and solely in connection with and for the purpose of the
confirmation of the Plan, the approval of this Agreement and the
realization of Finality, which proof(s) of claim(s) shall be in
form and substance reasonably acceptable to the Bondholder
Proponents and which proof(s) of claim(s) will be settled,
satisfied, released and discharged by distribution of the
Settlement Fund to the Celotex Settlement Fund Recipient.
HH. "Veil Piercing-Related Issues" shall mean and be the
collective reference to all theories or bases of liability or
recovery recognizable at law, in equity or in admiralty, under
the laws of any jurisdiction, directly or indirectly based upon,
arising out of or in connection with asbestos, any product
manufactured, sold or distributed by Celotex, any other liability
or obligation of any nature of Celotex, or any act or failure to
act by Celotex or any officer, director, employee, agent or other
representative of Celotex, whether based upon alter ego, agency,
alternate entity, instrumentality, successor liability,
conspiracy, indemnification, contribution, any theories of
piercing the corporate veil of any Debtor or its predecessor
and/or any and all of its respective present or former parents,
subsidiaries or Affiliates, or the transfer of any assets of
property to or by any Debtor (or other non-Debtor that had at any
time been a parent, subsidiary or Affiliate of any Debtor or its
predecessor), whether in connection with any of the transactions
constituting or relating to the financing or the acquisition of
any of the Debtors or any of their respective predecessors,
parents, subsidiaries or Affiliates by the current holders of
equity interests, the divestiture by Celotex of any of its assets
or property at any time, or in connection with any other
transactions, events or circumstances, or otherwise; provided,
however, that the Veil Piercing-Related Issues shall not include
any of the LBO-Related Issues.
II. "Veil Piercing Settlement" shall mean the full and
complete settlement, satisfaction, release and discharge of all
Veil Piercing Claims, Veil Piercing Proceedings and all claims
based upon LBO-Related Issues held by the Veil Piercing
Claimants.
<PAGE>
EXHIBIT A
Gillenwater, Nichol & Ames
Bearden Commercial Bank
6401 Baum Drive
Knoxville, Tennessee 37919
Kazan, McClain, Edises & Simon
171 Twelfth Street, Third Floor
Oakland, California 94607
The Jaques Admiralty
1370 Penobscot Building
Detroit, Michigan 48226
Rose, Klein & Marias
801 South Grand Avenue
Los Angeles, California 90017
Robert E. Sweeney, Co., L.P.A.
55 Public Square, Suite 1500
Cleveland, Ohio 44113
Umphrey, Swearington, Eddins & Carter
490 Park Street
Beaumont, Texas 77004
Goldberg, Persky, Jennings & White
1030 Fifth Avenue
Pittsburgh, Pennsylvania 15219
Ashcraft & Gerel
2000 L. Street, N.W.
Washington, D.C. 20036
Jacobs & Crumplar
2 East 7th Street
Remington, Delaware 19899
Peter G. Angelos, Esq.
5905 Harford Road
Baltimore, Maryland 21214
Cartwright, Slobodin, Bokelman, Borowsky,
Wartnick, Moore & Harris, Inc.
101 California Street
San Francisco, California 94111
Levy, Phillips & Konigsberg
90 Park Avenue
New York, New York 10016
Wilentz, Goldman & Spitzer
90 Woodbridge Center Drive
P.O. Box 10
Woodbridge, New Jersey 07095
<PAGE>
EXHIBIT B
ATTACHED AS EXHIBITS 7 AND 8
TO THE
CREDITORS' JOINT PLAN OF REORGANIZATION
<PAGE>
EXHIBIT C
<PAGE>
TAG-ALONG AND VOTING AGREEMENT
by and among
THE STOCKHOLDERS NAMED HEREIN
Dated as of , 1994
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 1
2. Tag-along Rights 2
3. Voting of Class B Stock Owned by the Celotex Entities 3
4. Representations and Warranties of the Parties 4
4.1 Authority 4
4.2 Binding Obligation 4
4.3 No Conflicts/Approvals 4
5. Legends 4
6. Other Securities 4
7. Further Assurances 4
8. Headings 4
9. Remedies 4
10. Entire Agreement 5
11. Notices 5
12. Governing Law 5
13. Severability 5
14. Assignment 5
15. Amendments; Waivers 5
16. Termination 5
17. Counterparts 5
Schedules:
Schedule 1A--Class A Common Stock
Schedule 1B--Class B Common Stock
Schedule 2--Notices
<PAGE>
TAG-ALONG AND VOTING AGREEMENT
TAG-ALONG AND VOTING AGREEMENT dated as of , 1994 by and
among the stockholders listed on the signature pages hereof
(together with their respective Restricted Transferees (as
defined in Section 2(h)), heirs and successors, the
"Stockholders").
This Agreement is being entered into in connection with
the Veil Piercing Settlement Agreement, dated, 1994, by and among
the Bondholders Committee (as defined therein), the Creditors
Committee (as defined therein), Lehman Brothers Inc., a
corporation ("Lehman Brothers"), AIF II, L.P. a limited
partnership ("AIF"), certain Affiliates of AIF and certain
accounts managed or controlled by such Affiliates ("AIF
Affiliates" and, together with AIF, "Apollo"), The Celotex
Corporation, a corporation ("Celotex"), Jim Walter Corporation,
certain attorneys and agents signatory thereto and/or listed on
Exhibit C attached thereto representing persons and entities that
hold Veil Piercing Claims (as defined therein), the Celotex Trade
Creditors Committee, the Celotex Asbestos Property Damage
Claimants Committee, the Celotex Bodily Injury Claimants
Committee and the Settling Equityholders (each as defined
therein) (the "Settlement Agreement"), and is attached as an
exhibit thereto.
Each Stockholder will acquire that number of shares of
Class A Common Stock, par value $.01 per share, of Walter
Industries, Inc., a corporation (the "Company") ("Class A
Stock"), and Class B Common Stock, par value $.01 per share, of
the Company ("Class B Stock") specified with respect to such
Stockholder in Schedule 1-A and Schedule 1-B hereto,
respectively, pursuant to the Creditors Plan of Reorganization of
the Company and of the other debtors named therein (the "Plan").
The Class A Stock is convertible into Class B Stock on a
share-for-share basis and will automatically so convert upon any
Transfer of Class B Stock other than to an Affiliate of the
holder.
In consideration of the premises and the mutual agreements
set forth herein, the parties hereto hereby agree as follows:
1. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following
respective meanings:
"Affiliate" of a Person means any Person that
controls, is under common control with, or is
controlled by, such other Person. For purposes
of this definition, "control" means the ability of
one Person to direct the management and policies of
another Person.
"Bankruptcy Court" means (i) the United
States Bankruptcy Court for
the Middle District of Florida, Tampa Division with
jurisdiction over the
Chapter 11 Cases (as defined in the Plan) (or such
other court as may be
administering the Chapter 11 Cases), (ii) to the
extent of any withdrawal
of reference made pursuant to 28 U.S.C. Section 157, the
United States District
Court for the Middle District of Florida, and (iii)
with respect to any
particular proceeding within a Chapter 11 Case, any
other court which may
be exercising jurisdiction over such proceeding.
"Business Day" means any day except a
Saturday, Sunday or other day
on which commercial banks in New York City are
required or authorized by law
to be closed.
"The Celotex Entities" means the entity or
entities that, under
supervision of the Bankruptcy Court, acquire and
hold, on behalf of the
holders of Veil Piercing Claims, shares of Class B
Stock issued by the
Company pursuant to the Plan.
"Commission" means the U.S. Securities and
Exchange Commission.
"Common Stock" means, collectively, Class A
Stock and Class B Stock.
"Effective Date" means the Effective Date of
the Plan, as defined therein.
"Exchange Act" means the Securities Exchange
Act of 1934, as amended, and the rules and
regulations thereunder, or any similar or successor
statute.
"Exempt Transaction" means a Transfer (i) of
Restricted Common Stock
effected on a national securities exchange or the
National Association of
Securities Dealers, Inc. Automated Quotation System
or through a registered
broker-dealer; (ii) made by a Stockholder to an
Affiliate of that
Stockholder; (iii) made pursuant to a Public
Offering; (iv) in the case of
a Celotex Entity only, made to any other Celotex
Entity or made from a
Celotex Entity to holders of Veil Piercing Claims;
or (v) made pursuant to
a call option or other purchase right described in
Section 2(f) of the Settlement Agreement.
"Person" means any individual, corporation,
partnership, firm, joint
venture, association, joint stock company, trust,
unincorporated
organization, governmental or regulatory body or
subdivision thereof or other entity.
"Public Offering" means a public offering and
sale of Common Stock
pursuant to an effective registration statement
under the Securities Act.
"Restricted Common Stock" means the shares of
Class A Stock and
Class B Stock issued to the Stockholders on the
Effective Date, and any
shares of Class B Stock issued upon conversion, in
connection with a
Transfer or otherwise, of any such shares of Class A
Stock; provided, that
any share of Common Stock shall cease to be
Restricted Common Stock upon a
Transfer of such Common Stock (i) in an Exempt
Transaction or (ii) in
compliance with the provisions of Sections 2(a)
through 2(g).
"Securities Act" means the Securities Act of
1933, as amended, and
the rules and regulations thereunder, or any similar
or successor statute.
"Transfer" means any transfer, sale,
assignment, or other disposition. "Transferor" and
"Transferee" have correlative meanings.
2. Tag-along Rights. (a) In the event that a
Stockholder (the "Selling Stockholder") proposes to enter
into a transaction to Transfer any of its
Restricted Common Stock to a third party (the "Third
Party Transferee"), other than pursuant to an Exempt
Transaction, the Selling Stockholder shall offer to
include in such transaction (the "Tag-along Transaction")
the number of shares of Restricted Common Stock owned by
each of the other Stockholders determined in accordance
with this Section 2. In connection with any proposed
Tag-along Transaction, the Selling Stockholder will send
written notice (the "Selling Stockholder Notice") to each
of the other Stockholders setting forth in reasonable
detail the terms of the Tag-along Transaction, including,
without limitation, (i) the identity of the Selling
Stockholder, (ii) the name and address of the Third
Party Transferee, (iii) the total number of shares that
the Third Party Transferee proposes to purchase, (iv) the
amount and form of consideration, (v) the date on
which the Tag-along Transaction is expected to close and
(vi) the conditions, if any, to which the Tag-along
Transaction is subject. At any time within 15 days
after the receipt of the Selling Stockholder Notice, each
of the other Stockholders may, subject to Section 2(g)
below, in its sole discretion, elect to participate
in the Tag-along Transaction by sending to the Selling
Stockholder written notice (the "Other Stockholder
Notice") stating that such other Stockholder has elected
to participate and setting forth (i) the number of shares
of Restricted Common Stock held by such other Stockholder
and (ii) the maximum number of shares that such other
Stockholder desires to include in the Tag-along
Transaction. Subject to the provisions of this Section
2, if the Selling Stockholder shall receive an
Other Stockholder Notice from one or more of the other
Stockholders within the time specified in the sentence
above, the Selling Stockholder shall cause the maximum
number of shares of Restricted Common Stock specified in
such Other Stockholder Notice or Notices to be included
in the Tag-along Transaction; provided that if the
total number of shares of Restricted Common Stock of all
Stockholders electing to participate in the Tag-along
Transaction, including the Selling Stockholder (each
a "Participating Stockholder"), shall exceed the number
of shares that the Third Party Transferee proposes to
purchase, then each Participating Stockholder shall
be entitled to include in the Tag-along Transaction up to
the number of shares determined pursuant to subsection
2(c) below. Notwithstanding the foregoing, nothing
herein shall obligate the Selling Stockholder to
consummate any proposed Tag-along Transaction, and, in
the event that the Selling Stockholder determines
not to consummate any Tag-along Transaction, the other
Stockholders will not have any rights to participate
therein, regardless of whether any of other Stockholders
has given an Other Stockholder Notice with respect thereto.
(b) If within 15 days after the receipt of the
Selling Stockholder Notice
any of the other Stockholders has not given the Other
Stockholder Notice, such
other Stockholder shall be deemed to have waived any and
all rights with respect
to the sale or other disposition of shares in the
Tag-along Transaction described
in the Selling Stockholder Notice. The failure by any
other Stockholder to give
an Other Stockholder Notice shall not constitute a waiver
of any rights hereunder
with respect to any Tag-along Transaction other than that
described in the Selling Stockholder Notice.
(c) Each Participating Stockholder shall have a
right to sell a number of
shares equal to the product of (i) the total number shares
that the Third Party
Transferee has offered to acquire, as set forth in the
Selling Stockholder Notice,
multiplied by (ii) a fraction, the numerator of which is
the Percentage Interest
of such Participating Stockholder and the denominator of
which is the aggregate
Percentage Interests of all Participating Stockholders.
As used herein, the term
"Percentage Interest" shall mean, with respect to any
Participating Stockholder,
the percentage (expressed as a decimal rounded to the
nearest one hundredth) then
held by such Participating Stockholder of all outstanding
Restricted Common Stock.
(d) The Transfer by each of the other Stockholders
pursuant to this
Section 2 shall be on the same terms and conditions,
including the per share price
and the date of Transfer, as the Transfer by the Selling
Stockholder and as stated
in the Selling Stockholder Notice provided to the other
Stockholders.
(e) The Selling Stockholder shall notify the other
Stockholders who have
exercised their tag-along rights pursuant to this Section
2 within five days of the
end of the 15-day period referred to in subsection 2(a),
of the number of shares
of Restricted Common Stock each Stockholder has been
allocated to sell. Each other
Stockholder, within five days of receipt of such notice,
shall deliver to the
Selling Stockholder the certificate or certificates
representing the shares to be
sold in the Tag-along Transaction by such other
Stockholder, together with a
limited power-of-attorney authorizing the Selling
Stockholder to sell or otherwise
dispose of the shares to be sold pursuant to the terms of
the Selling Stockholder
Notice. If any other Stockholder fails to deliver stock
certificates within the
time specified in the immediately preceding sentence, such
other Stockholder shall
be deemed to have waived any and all rights with respect
to the sale or other disposition of the shares in the
Tag-along Transaction described in the Selling Stockholder
Notice.
(f) Simultaneously with the consummation of
Transfer of the shares of the
Selling Stockholder and the shares of the other
Stockholders who have exercised
their tag-along rights pursuant to this Section 2, the
Selling Stockholder shall
notify the other Stockholders who have exercised their
tag-along rights pursuant
to Section 2 that the consummation of such Tag-along
Transaction has occurred and
shall promptly, but in any event not later than 3 Business
Days thereafter, remit
to such other Stockholders the total sales price of the
shares of such other
Stockholders sold pursuant thereto, net of such other
Stockholder's pro rata share
of all out-of-pocket fees, expenses and costs incidental
to such sale and shall
furnish such other evidence of the completion and time of
completion of such
Transfer and the terms thereof as may be reasonably
requested by such other Stockholders.
(g) Notwithstanding any other provision of this
Section 2, if the Selling Stockholder is Lehman Brothers
or Apollo, neither Lehman Brothers nor Apollo shall
have any tag-along rights pursuant to this Section 2 with
respect to such Transfer.
(h) In the case of any Exempt Transfer described in
clause (ii) or (iv) of
the definition of Exempt Transfer herein, the Transferee
of any shares of
Restricted Common Stock pursuant to such Exempt Transfer
(a "Restricted
Transferee") shall, prior to such Transfer, execute an
instrument agreeing to be
bound by all of the terms and provisions of this Agreement
as if such Restricted
Transferee had been an original signatory hereto,
whereupon such Restricted
Transferee thereafter shall have all of the rights and
obligations of the
transferring Stockholder under this Agreement.
3. Voting of Class B Stock Owned by the Celotex
Entities. In any vote or action by written consent by the
holders of Class A Stock and Class B Stock voting
or taking action by written consent as a single class, the
Celotex Entities will and will cause each of their
Affiliates to vote or execute written consents with
respect to their shares of Class B Stock, in proportion to
the votes cast or consents executed and delivered by the
holders of Class A Stock and Class B Stock (other than the
Celotex Entities and their Affiliates). In any vote or
action by written consent by the holders of Class B Stock
voting or taking action by written consent as a separate
class, the Celotex Entities will and will cause each of
their Affiliates to vote or execute written consents with
respect to their shares of Class B Stock in proportion to
the votes cast or consents executed and delivered
by the holders of Class B Stock (other than the Celotex
Entities and their Affiliates).
4. Representations and Warranties of the Parties.
Each Stockholder represents and warrants to each other
that:
4.1 Authority. The execution, delivery and
performance of this
Agreement has been duly authorized by all necessary
action of such Stockholder.
4.2 Binding Obligation. It has duly and
validly executed and
delivered this Agreement and this Agreement
constitutes its legal, valid and
binding obligation, enforceable against it in
accordance with its terms.
4.3 No Conflicts/Approvals. The execution,
delivery and performance
of this Agreement will not conflict with or result
in the breach or
violation of any of the terms or conditions of, or
constitute (or with
notice or lapse of time or both, would constitute) a
default under, (i) its
constituting documents; (ii) any instrument,
contract or other agreement by
or to which it is a party or its assets are bound or
subject; (iii) any
statute or regulation, order, judgment or decree of
any court or
governmental or regulatory body; or (iv) any
license, permit, order or
approval of any governmental or regulatory body
respecting its business.
No approval or consent of any foreign, Federal,
state, county, local or
other governmental or regulatory body or court and
no approval or consent
of any other Person is required in connection with
the execution, delivery or performance of this
Agreement by it.
5. Legends. Except as otherwise permitted by this
Section 5, the parties hereto shall cause the Company to
legend each certificate evidencing outstanding
shares of the Class A Stock and Class B Stock issued to
any Stockholder with the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF THE STOCKHOLDERS
AGREEMENT DATED AS OF , 1994 BY AND AMONG THE HOLDER
AND THE OTHER STOCKHOLDERS NAMED THEREIN, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE ISSUER.
If any shares of Class A Stock or Class B Stock
issued to any Stockholder cease to be Restricted Common
Stock, the parties hereto shall cause the Company,
upon the written request of the holder thereof, to issue
to such holder a new certificate evidencing such shares
without the legend above endorsed thereon.
6. Other Securities. The terms "Class A Stock,"
"Class B Stock," "Common Stock" and "Restricted Common Stock"
include any securities of the Company issued or issuable with
respect to any shares of the foregoing by way of a dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization
or otherwise.
7. Further Assurances. Each of the parties hereto
shall execute such documents and other papers and perform such
further acts as may be reasonably required or desirable to carry
out the provisions of this Agreement and the transactions
contemplated hereby.
8. Headings. The headings in this Agreement are
for convenience of reference only and shall not control or affect
the meaning or construction of any provisions hereof.
9. Remedies. Each Stockholder, in addition to
being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of
its rights under this Agreement.
10. Entire Agreement. This Agreement constitutes
the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and there are no
restrictions, promises, representations, warranties,
covenants, or undertakings with respect to the subject
matter hereof, other than those expressly set forth or referred
to herein. This Agreement supersedes all prior agreements and
understandings between the parties hereto with respect to the
subject matter hereof.
11. Notices. Any notices or other communications
to be given hereunder by any party to another party shall be in
writing, shall be delivered personally, by telecopy, by certified
or registered mail, postage prepaid, return receipt
requested, or by Federal Express or other comparable
delivery service, to the address of the party set forth on
Schedule 2 hereto or to such other address as the
party to whom notice is to be given may provide in a
written notice to the other parties hereto, a copy of which shall
be on file with the Secretary of the Company. Receipt of notice
shall be effective when delivered if given personally, when
receipt is acknowledged if telecopied, three days after
mailing if given by registered or certified mail as described
above and, one business day after deposit if given by Federal
Express or comparable delivery service. Notwithstanding the
foregoing, none of Lehman Brothers, Apollo or any of their
respective Restricted Transferees shall be obligated to give any
notice to the holders of Veil Piercing Claims other than the
Celotex Entities, and any notice given to the Celotex
Entities by Lehman Brothers, Apollo or any of their
respective Restricted Transferees shall, for all purposes hereof,
be deemed to constitute effective notice to all Restricted
Transferees of the Celotex Entities, including all holders
of Veil Piercing Claims.
12. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to agreements made to be performed
entirely in such State.
13. Severability. The invalidity or
unenforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity, legality or
enforceability of any other provision of this Agreement in
such jurisdiction or the validity, legality or enforceability of
this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable
to the fullest extent permitted by law.
14. Assignment. The provisions of this Agreement
shall be binding upon and accrue to the benefit of the parties
hereto and their respective heirs, successors and permitted
assigns. Except as provided in Section 2(d), neither this
Agreement nor any right, remedy, obligation or liability arising
hereunder or by reason hereof shall be assignable by any of the
parties hereto without the prior written consent of the other
parties hereto.
15. Amendments; Waivers. No amendment to this
Agreement or any waiver or discharge of any provision hereof
shall be made without the prior written consent of each party
hereto. No waiver of any provision of this Agreement shall be
deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver
constitute a continuing waiver.
16. Termination. This Agreement shall terminate
and be of no further force and effect on the earlier of (i) the
date that the Celotex Entities shall have Transferred or
otherwise distributed to the individual holders of Veil Piercing
Claims % or more of the Class B Stock held by the Celotex
Entities, in the aggregate, on the Effective Date and (ii) the
tenth anniversary of this Agreement.
17. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AIF II, L.P.
By
Name:
Title:
[other AIF Affiliates]
LEHMAN BROTHERS INC.
By
Name:
Title:
THE CELOTEX CORPORATION
By
Name:
Title:
[other Celotex Entities*
<PAGE>
SCHEDULE 1-A
Class A Common Stock
Number of Shares
Stockholder Owned
AIF II, L.P. (and/or other of its Affiliates)
Lehman Brothers Inc.
<PAGE>
SCHEDULE 1-B
Class B Common Stock
Number of Shares
Stockholder Owned
AIF II, L.P. (and/or other of its Affiliates)
The Celotex Corporation (and/or other Celotex Entities)
<PAGE> SCHEDULE 2
NOTICES
If to AIF II, L.P., to:
AIF II, L.P.
Attention:
Tel:
Fax:
with a copy to:
Attention:
Tel:
Fax:
<PAGE>
EXHIBIT D
, 1994
Re: Hillsborough Holdings Corporation, et al.
The undersigned law firm: (1) represents one or more
persons or entities with Veil Piercing Claims [as defined in the
Veil Piercing Settlement Agreement dated April , 1994 ("VPSA")*;
(2) hereby agrees on behalf of itself, each of its lawyers, and
each of its clients who have such claims, irrevocably to comply
with, assent to and support the VPSA and the Plan (as defined in
the VPSA) and (3) to promptly become a signatory to the VPSA upon
the request of the Bondholder Proponents (as defined in the
VPSA).
Very truly yours,
[LAW FIRM]
By:
A Member of the Firm
<PAGE>
EXHIBIT 3B:
PRE-LBO BONDHOLDERS SETTLEMENT AGREEMENT
<PAGE>
AGREEMENT FOR SETTLEMENT OF PRE-LBO ISSUES
AND TREATMENT OF SUBORDINATED NOTES
PURSUANT TO CHAPTER 11 PLAN
This Agreement (as the same may be amended, modified or
supplemented from time to time, the "Agreement") is entered into
by the parties set forth below (each a "party") to set forth the
terms of a settlement respecting alleged fraudulent transfer and
related claims, including all claims asserted against Released
Parties in Mellon Bank, N.A. and Bank of New York v. Kohlberg
Kravis Roberts & Co., et al., Adv. Pro. No. 94-17 (the "Adversary
Proceeding"), and the related treatment of holders of
Subordinated Note Claims, all pursuant to an amendment (the
"Amended Plan") to the Joint Plan of Reorganization of Debtors
Proposed by Certain Creditor Proponents, dated as of December 16,
1993 (the "Original Plan"), for Hillsborough Holdings Corporation
and its subsidiaries and affiliates (the "Debtors").
NOW THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
1. Defined Terms. Unless otherwise indicated, all
capitalized terms shall
have the meanings ascribed to them in the Original Plan.
2. Support of Amended Plan. The parties will
support, and, in the case of
The Acacia Group, Gabriel Capital L.P. (as members of the
ad hoc committee of the
pre-LBO bondholders), Apollo and Lehman Brothers, become
co-proponents of, the
Amended Plan (which, except as set forth in sections 3.B.,
6 and 7 below, will be
in substantially the form of the Original Plan). The
parties shall support any
plan as to which the Bondholder Proponents are proponents
so long as the relative
treatment set forth herein is maintained for them.
3. Treatment of Subordinated Note Claims.
A. Pro rata Treatment of Subordinated Note
Claims. If the actual
amount of distributions under the Amended Plan in
respect of all Allowed
Subordinated Note Claims is different than the
aggregate Allowed Amount of
all Subordinated Note Claims, then the aggregate
amount of distributions in
respect of Allowed Subordinated Note Claims in
Classes U-4, U-5 and U-6
shall be calculated as follows:
Actual amount of distributions Aggregate amount of all
in respect of all Allowed Allowed Class U-4 Claims
Subordinated Note Claims X (or Class U-5) Claims or
- ------------------------------- Class U-6 Claims, as the
Aggregate amount of all Allowed case may be)
Subordinated Note Claims
For the purposes of the fraction used in this
subparagraph A., the actual
amount of distributions shall be valued at the
aggregate principal amount
in the case of Qualified Securities, and at the
aggregate New Common Stock
Value Per Share in the case of the New Common Stock.
B. Allocation of Qualified Securities Available for
Distribution. Qualified Securities available for
distribution (i.e., after allocation to Class U-7) shall
be allocated to Classes U-4, U-5 and U-6 as follows:
i. Class U-4 shall have the right to elect
distribution of the first
$240 million in principal amount of Qualified
Securities available for
distribution in satisfaction of the same amount of
Allowed Class U-4 Claims;
thereafter
ii. Classes U-4, U-5 and U-6 shall have the
right to make the
election to receive the remaining Qualified
Securities available for
distribution on the pro rata basis described in
3.A., above, subject to the
following sentence (the Allowed Amount of Class U-4
Claims shall have been
reduced for purposes of this calculation by the
aggregate principal amount
of Qualified Securities previously elected under
subsection 3.B.i.). The
foregoing pro rata calculation shall be modified as
follows: (a) if there
are $700 million of Qualified Securities available
for distribution to
Classes U-4, U-5, U-6 and U-7, Class U-6 shall have
the right to elect
$80 million of Qualified Securities available for
distribution to Classes
U-4, U-5 and U-6 in the aggregate (after allocation
to Class U-7 and after
allocation pursuant to 3.B.i.), (b) if either less
or more than $700 million
of Qualified Securities are available for
distribution to Classes U-4, U-5,
U-6 and U-7, Class U-6 shall have the right to elect
$80 million of the
Qualified Securities available for distribution to
Classes U-4, U-5 and U-6
in the aggregate (after allocation to Class U-7 and
after allocation
pursuant to 3.B.i.), minus or plus, as the case may
be, 80/700 of the
difference between (x) the Qualified Securities
available for distribution
to Classes U-4, U-5 and U-6 in the aggregate (after
allocation to Class U-7
and after allocation pursuant to 3.B.i.) and (y) the
Qualified Securities
available for distribution to Classes U-4, U-5 and
U-6 in the aggregate
(after allocation to Class U-7 and after allocation
pursuant to 3.B.i.) if
there were $700 million of Qualified Securities
available for distribution
to Classes U-4, U-5, U-6 and U-7, and (c) the right
to elect Qualified
Securities by Classes U-4 and U-5 shall be
correspondingly adjusted to
reflect the disproportionate right of election of
Class U-6 pursuant to this
sentence.
Examples, assuming Allowed Claims as follows:
U-4: $ 480
U-5: 390
U-6: 240
------
$1.10 billion
$487.5 divided by (1,098 + 487.5) = 30% of Qualified
Securities to U-7; 70% of Qualified Securities to
U-4 through U-6
Qualified Securities *
<TABLE>
<S> <C> <C> <C>
$700 $900 $600
U-7: 210 270 180
---- ---- ----
490 630 420
U-4: 240 240 240
---- ---- ----
250 390 180
U-6: 80 80 + (80/700 X 140) = 96 80 - (80/700 X 70) = 72
U-5: 105 182 67
U-4: 65 + 240 = 305 112 + 240 = 352 41 + 240 = 281
* For purposes of the examples, calculations are rounded to
nearest $.5 million.
</TABLE>
C. Allocation of Qualified Securities Among Persons
Making Election. If Holders of Class U-4 Subordinated Notes
elect to receive Qualified Securities in respect of Class U-4
Subordinated Notes in an aggregate principal amount in excess
of $240 million or Holders of Class U-6 Subordinated Notes
elect to receive Qualified Securities in respect of Class U-6
Subordinated Notes in an aggregate principal amount in excess of
$80 million, pursuant to sections 3.B.i. and 3.B.ii.,
respectively, the Qualified Securities so elected shall be
allocated among such electing Holders pro rata, based upon the
aggregate principal amount of Subordinated Notes elected by each
such Holder to be applied to such Qualified Securities over the
aggregate principal amount of Subordinated Notes elected by all
such Holders to be applied to such Qualified Securities
times $240 million or $80 million, as the case may be.
4. Effectiveness of this Agreement. This Agreement
shall become effective when executed by the parties designated
"Original Parties" on the signature page hereof (the "Original
Parties") and additional holders of Subordinated Notes in
Class U-6 whose Subordinated Notes, together with the
Subordinated Notes owned or controlled by The Acacia Group and
Gabriel Capital L.P. or for which such parties
are authorized to execute this Agreement, represent not
less than two-thirds in principal amount of all Subordinated
Notes in Class U-6; provided that such Additional Parties shall
have executed this Agreement no later than April 15, 1994,
unless such date shall be extended by written notice given
by the Bondholder Proponents to The Acacia Group and Gabriel
Capital L.P. Each of The Acacia Group,
Gabriel Capital L.P. and each of the other holders of
Subordinated Notes in Class U-6 which becomes a party to this
Agreement represents that it owns, controls or
is authorized to execute this Agreement on behalf of such
party, the principal amount of Subordinated Notes in Class U-6
set forth under its name on the signature
page hereof (which amounts shall not be publicly disclosed
except as may be required by applicable law).
5. Effective Settlement.
A. Unless otherwise agreed by the Bondholder
Proponents, and except as
provided in section 9 hereof, the Class U-6 parties hereto
will not support any
proposed plan for any or all of the Debtors or settlement
of the LBO-Related Issues
(the definition of LBO-Related Issues in the Plan shall be
amended by adding the
words "except claims and causes of action against persons
who are not Released
Parties") other than the Amended Plan, or as contained in
the Amended Plan as
amended from time to time with the consent of the
Bondholder Proponents, so long
as such Amended Plan provides for relative treatment of
the Class U-6 Claims that
is at least as favorable as the relative treatment
provided herein.
B. Binding on Transferees. Each of the Class U-6
parties hereto agrees not
to sell or otherwise transfer the Subordinated Notes in
Class U-6 owned or
controlled by such party unless either (i) such
Subordinated Notes shall be
legended as follows or effective arrangements shall first
have been made pursuant
to an escrow or trust certificate agreement to cause the
certificate(s) evidencing
such Subordinated Notes in Class U-6 to be legended as
follows:
"The obligations evidenced hereby are subject to the
Agreement For
Settlement of Pre-LBO Issues and Treatment of
Subordinated Notes Pursuant
to Chapter 11 Plan dated as of March 23, 1994, and
may not be transferred
except in compliance therewith. A copy of such
Agreement is on file at the
offices of The Bank of New York, as escrow agent and
trustee,
or (ii) such holder's buyer or transferee confirms in
writing to such holder as
follows:
"[Buyer or Transferee] agrees to comply with the
Pre-LBO Agreement dated as
of March 23, 1994 to which [Seller or Transferor] is
a party. All parties
to such Agreement are third-party beneficiaries of
this Agreement."
Within five (5) business days of such holder's
receipt of such confirmation,
such holder shall furnish a copy of the confirmation to
The Bank of New York at 101
Barclay Street, 21st Floor, NY, NY 10286, Attn: David G.
Sampson. Upon the written
request of the Bondholder Proponents, acting in good faith
to monitor compliance
with the Agreement, The Bank of New York shall provide a
copy of such confirmation
to the Bondholder Proponents. The sole function of The
Bank of New York shall be
to hold copies of confirmations actually delivered to it
by the holders and to
provide copies of such confirmations as set forth herein.
If such sale is
conducted through a broker-dealer, such agreement may be
set forth on the
"confirmation" of the sale or transfer of such
Subordinated Note.
C. Fraudulent Transfer Litigation. The parties
acknowledge that the
indenture trustees for the Class U-6 parties have
commenced the Adversary
Proceeding for the stated purpose of preserving
LBO-Related Issues; however, such
parties agree that, so long as this Agreement shall remain
in effect, they will not
actively pursue any litigation of the LBO-Related Issues
against any or all of the
Released Parties, and that such LBO-Related Issues shall
be settled to the extent
and as provided herein and in the Amended Plan upon the
Effective Date of the
Amended Plan. The Amended Plan shall provide for a clear
reservation of rights
against any and all non-Released Parties.
6. Other Plan and Disclosure Statement Amendments. The
Original Plan shall, in
addition, be amended as follows:
A. The Certificate of Incorporation for reorganized
WII shall be amended
as provided in Exhibit 1 hereto.
B. "Proponents and Trustee Expenses" shall include
reasonable fees and
expenses of all Proponents and the trustees for the
Pre-LBO Debentures, not
previously reimbursed by the Debtors, which in the
Disclosure Statement for the
Amended Plan shall be set forth for each Proponent and
trustee in an estimated,
lump-sum amount and which the Proponents and trustees
shall support.
C. Any postponement of the date by which the
condition to confirmation set
forth in section 10.1(a) of the Original Plan after
December 31, 1994 must be
agreed to by all Plan Proponents.
D. The parties shall agree on technical amendments
to be reflected in the
Amended Plan and the disclosure statement therefor to
implement and describe the
terms of this Agreement.
7. Termination. This Agreement shall terminate upon the
earlier to occur of the
following:
A. Either (i) any of the Class U-6 parties hereto
shall breach any of its
obligations hereunder and such breach shall not be cured
within twenty (20)
calendar days after written notice of such breach shall
have been given by the
Bondholder Proponents to the indenture trustees for the
Pre-LBO Debentures and The
Acacia Group and Gabriel Capital L.P.; or (ii) any of the
Bondholder Proponents
shall breach any of its obligations hereunder and such
breach shall not be cured
within twenty (20) calendar days after written notice of
such breach shall have
been given by the indenture trustees for the Pre-LBO
Debentures and The Acacia
Group and Gabriel Capital L.P. to the Bondholder
Proponents.
B. Any holder of Class U-6 Claims is permitted by
the Court to pursue, and
actively pursues, litigation in respect of the LBO-Related
Issues against any of
the Debtors or any other Released Party and such holder
shall not cease to actively
pursue such litigation (and shall not cause any motions or
other legal process
filed in connection with such active pursuit to be
withdrawn) within ten (10)
calendar days after written notice shall have been given
by the Bondholder
Proponents to The Acacia Group and Gabriel Capital L.P.
C. On December 31, 1994, at the election of the
Bondholder Proponents or
The Acacia Group and Gabriel Capital L.P., provided that
the Court has not
previously entered the Confirmation Order.
D. All the parties hereto shall mutually agree in
writing to terminate this
Agreement.
8. Amendments. This Agreement may not be amended except
in a writing signed by
the parties hereto.
9. No Solicitation. Notwithstanding any other provision
of this Agreement,
nothing in this Agreement is intended to be or constitute, and
shall not be deemed to be
or constitute, a solicitation of any vote or any agreement to
vote for or against any plan
of reorganization, and nothing in this Agreement shall impair the
right or the ability
of any party to vote for or against, or abstain from voting with
respect to, any plan of
reorganization.
10. No Admissions or Waivers. No part of this Agreement
shall be deemed as an
admission of any party for any purpose. The parties hereto do
not waive or release any
rights, claims, defenses or remedies, including in respect of any
"cram down" under
section 1129(b) of the Bankruptcy Code, until all conditions to
the effectiveness of the
Amended Plan have been satisfied or waived.
11. Announcement. The Original Parties shall coordinate
the announcement of their
entry into this Agreement promptly after its execution by them.
12. Governing Law. Except to the extent the Code or
Bankruptcy Rules are
applicable, the rights and obligations arising under this
Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the
State of New York, without
giving effect to the principles of conflicts of law thereof.
13. Headings. The headings of the Sections, paragraphs,
and subsections of this
Agreement are inserted for convenience only and shall not affect
the interpretation
hereof.
14. Notices. All notices, requests or demands under or
in connection with this
Agreement shall be in writing and shall be delivered by hand,
sent by recognized overnight
courier or sent by telecopier, telex or similar electronic means
to the party as set forth
under its signature hereto, or to such other address or
telecopier number as such party
shall provide to all parties hereto in writing, and shall be
deemed sent or given
hereunder, in the case of delivery by recognized overnight
courier, on the date of actual
delivery, in the cases of transmission by telecopier, telex or
similar electronic means
on the date of actual transmission, and in the case of personal
delivery, on the date of
actual delivery.
15. Extraterritoriality. It is the intention of the
parties that the settlements
and other agreements contained in this Agreement be given
application both to suits within
and without the jurisdiction of the United States.
16. Successors and Assigns. This Agreement is intended
to bind and inure to the
benefit of the parties hereof and their respective successors,
assigns, heirs, executors,
administrators and representatives.
17. Complete Agreement. This document, including the
exhibit hereto, embodies the
complete agreement and understanding between the parties with
respect to the subject
matter hereof and supersedes and preempts any prior agreement,
understanding or
representation made by and between any or all of such parties,
whether written or oral,
which may have related to the subject matter hereof in any way
whatsoever, including
without limitation the Term Sheet.
18. Counterparts. This Agreement may be executed in one
or more counterparts,
each of which shall be deemed an original and all of which shall
constitute one and the
same Agreement.
Dated: As of March 23, 1994
Original Parties
Institution:
LEHMAN BROTHERS, INC.,
in its individual capacity
By: /s/
Institution:
APOLLO ADVISORS, L.P.,
in its individual capacity
By: /s/
Institution:
GABRIEL CAPITAL L.P.
Principal Amount of Subordinated
Notes in Class U-6:
By: /s/
Institution:
THE ACACIA GROUP,
in its individual capacity
Principal Amount of Subordinated
Notes in Class U-6:
By: /s/
Institution:
MELLON BANK, N.A., as
Indenture Trustee
By: /s/
Institution:
THE BANK OF NEW YORK, as
Indenture Trustee
By: /s/
Additional Parties
Institution:
Principal Amount of Subordinated
Notes in Class U-6:
By:
Institution:
Principal Amount of Subordinated
Notes in Class U-6:
By:
Institution:
Principal Amount of Subordinated
Notes in Class U-6:
By:
Institution:
Principal Amount of Subordinated
Notes in Class U-6:
By:
Institution:
Principal Amount of Subordinated
Notes in Class U-6:
By:
<PAGE>
EXHIBIT 3C:
AMENDED AND RESTATED VEIL PIERCING SETTLEMENT
AGREEMENT
<PAGE>
EXHIBIT 3C
AMENDED AND RESTATED
VEIL PIERCING SETTLEMENT AGREEMENT
THIS AMENDED VEIL PIERCING SETTLEMENT AGREEMENT (as the
same may be amended, modified or supplemented from time to time,
the "Agreement") is made and entered into as of the 1st day of
August, 1994, and amends and restates that certain Veil Piercing
Settlement Agreement (the "Original Agreement") made and entered
into as of the 18th day of April, 1994, by and among
(a) Certain asbestos victim defendants ("AVDs")
named as defendants in
Adversary Proceeding No. 90-0003 and Adversary Proceeding
No. 90-0004 (the
"Adversary Proceedings"), and represented in the Adversary
Proceedings by Caplin
& Drysdale, Chartered ("Caplin & Drysdale"), pending in
the United States
Bankruptcy Court for the Middle District of Florida, Tampa
Division (the "Court"),
in the Chapter 11 cases of Hillsborough Holdings
Corporation, Walter Industries,
Inc. and other debtors (collectively, the "Debtors") in
their administratively
consolidated Case No. 89-9715-8P1;
(b) Caplin & Drysdale, Baron & Budd, Greitzer and
Locks, Ness Motley
Loadholt Richardson & Poole ("Ness Motley"), each on
behalf of itself, its
individual lawyers, and its clients that may be Veil
Piercing Claimants (as defined
herein) (Baron & Budd, Greitzer and Locks, and Ness Motley
are collectively
referred to herein as the "Claimants' Attorneys" and
Caplin & Drysdale and the
Claimants' Attorneys are collectively referred to herein
as the "Veil Piercing
Claimants' Representatives");
(c) The Celotex Corporation, a defendant in the
Adversary Proceedings and
a debtor and debtor-in-possession in a Chapter 11 case
("The Celotex Corporation")
pending in the United States Bankruptcy Court for the
Middle District of Florida,
Tampa Division (the "Celotex Bankruptcy Court"), Case No.
90-10016-8B1 (the
"Celotex Chapter 11 Case"), the Celotex Committee of
Unsecured Creditors, the
Celotex Asbestos Property Damage Claimants Committee and
the Celotex Asbestos
Bodily Injury Claimants Committee (the Celotex Committee
of Unsecured Creditors,
the Celotex Asbestos Bodily Injury Claimants Committee and
the Celotex Asbestos
Property Damage Claimants Committee are collectively
referred to herein as the
"Official Celotex Committees");
(d) Jim Walter Corporation (including its
subsidiaries other than The
Celotex Corporation and its subsidiaries, collectively
referred to as "JWC"), a
defendant in the Adversary Proceedings;
(e) the HHC Bondholders Committee (as defined
herein), the HHC Creditors
Committee (as defined herein) (the HHC Bondholders
Committee and the HHC Creditors
Committee are collectively referred to herein as the "HHC
Official Committees"),
Lehman Brothers Inc., Apollo (as defined herein)
(together, Lehman Brothers Inc.
and Apollo are referred to herein, solely in their
capacity as creditors in the
Chapter 11 Cases (as defined herein) and in no other
capacity, as the "Bondholder
Proponents"; the HHC Official Committees and the
Bondholder Proponents are
collectively referred to herein as the "Plan Proponents");
and
(f) the Settling Equityholders (as defined herein),
if any (all of the
foregoing are referred to herein collectively as the
"Parties" and singularly as
a "Party").
WITNESSETH:
WHEREAS, the Debtors initiated the Adversary Proceedings
seeking (a) a final declaration and adjudication that the
corporate veil between JWC and Celotex may not be pierced; (b) a
final declaration and adjudication that the leveraged buy-out of
JWC (the "LBO") was not a fraudulent conveyance, nor were any
subsequent transactions entered into as a part of that LBO
fraudulent transfers; (c) a final declaration and adjudication
that neither the Debtors nor any of their subsidiaries or
affiliates is the successor-in-interest to the asbestos-related
liabilities of either JWC or Celotex; (d) a final declaration and
adjudication that neither the Debtors nor any of their
subsidiaries or affiliates is liable for the asbestos-related
liabilities of either JWC or Celotex; and (e) such injunctive
relief as may be necessary and appropriate to effectuate the
declaratory relief sought by the Debtors; and
WHEREAS, the AVDs have defended and opposed the relief
sought by the Debtors in the Adversary Proceedings and have
asserted Veil Piercing Claims (as defined herein) against the
Debtors and JWC in various forums; and
WHEREAS, The Celotex Corporation, as a
debtor-in-possession, has asserted that (a) it has the exclusive
right and standing to assert Veil Piercing Claims (as defined
herein) against the Debtors and JWC for the benefit of its estate
and creditors because such claims are asserted by it to be the
property of its bankruptcy estate and (b) bankruptcy policy is
furthered by ensuring that all similarly situated creditors are
treated fairly; and
WHEREAS, the Claimants' Attorneys are authorized to act as
the negotiating group for the law firms listed on Exhibit A
attached hereto, and the law firms which have assented and will
in the future assent to this Agreement by executing Exhibit D
attached hereto, all of which represent persons and entities that
have asserted or may assert Veil Piercing Claims; and
WHEREAS, the Celotex Committee of Unsecured Creditors, the
Celotex Asbestos Property Damage Claimants Committee and the
Celotex Asbestos Bodily Injury Claimants Committee are officially
authorized by the Code to represent the interests of persons or
entities having general unsecured and trade claims, asbestos
property damage claims and present asbestos bodily injury claims,
respectively, against The Celotex Corporation in the Celotex
Chapter 11 Case; and
WHEREAS, on December 9, 1993, the Veil Piercing Claimants'
Representatives and the Bondholder Proponents entered into a Term
Sheet for Settlement of Veil Piercing Claims Pursuant to Chapter
11 Plan (the "Term Sheet"), which Term Sheet embodied certain
agreements in principle and contemplated the prompt preparation
and execution of a definitive agreement that would embody the
terms of and supersede the Term Sheet; and
WHEREAS, on December 16, 1993, the Plan Proponents filed
with the Court a Joint Plan of Reorganization of Debtors Proposed
by Certain Creditor Proponents (the "Original Creditor Plan"),
which incorporated, inter alia, the terms of the Term Sheet and
which contemplated the prompt preparation and execution of this
Agreement; and
WHEREAS, the Term Sheet contemplates, and the Original
Creditor Plan embodies, a settlement under which distributions of
New Common Stock (as defined herein) and Qualified Securities (as
defined herein) would be made in full and complete settlement,
satisfaction, release and discharge of all Veil Piercing Claims
on the basis of (a) the "Negotiated Enterprise Value" of
$2,525,000,000, and (b) the fractions set forth in Section 2(a)
of the Original Agreement; it being understood that the
Negotiated Enterprise Value represents a good faith estimate of
the going concern enterprise value of the Debtors (as defined
herein) on a consolidated basis, arrived at after extensive
analysis by the Plan Proponents, and taking into account the
possibility of delay between the Confirmation Date (as defined
herein) and the Effective Date (as defined herein), and the
potential increase in the value of the Debtors over time; and
WHEREAS, the time for The Celotex Corporation to file a
proof of claim on behalf of itself and/or its creditors who are
Veil Piercing Claimants has not yet expired, and The Celotex
Corporation has demonstrated its intention to timely file such
proof of claim, including, without limitation, the Celotex Proof
of Claims (as defined herein); and
WHEREAS, the Parties are mutually desirous of settling
with finality, compromising, extinguishing, releasing and
discharging any and all Veil Piercing Claims, specifically
including those Veil Piercing Claims which are the subject of the
Adversary Proceedings;
WHEREAS, it is the specific intention and desire of the
Parties that the Settlement Fund (as defined herein) be paid to
the Celotex Settlement Fund Recipient (as defined herein) for the
exclusive benefit of the Veil Piercing Claimants (as defined
herein), and that, inter alia, all Veil Piercing Claims shall
channel, transfer and attach to the Settlement Fund which shall
be administered by, and together with the Celotex Settlement Fund
Recipient shall be subject to the jurisdiction of, the Celotex
Bankruptcy Court; and
WHEREAS, a trial on the issues raised in the Adversary
Proceedings took place from December 13, 1993 through December
17, 1993; and
WHEREAS, on April 18, 1994, the Court issued its opinion
on the issues raised in the Adversary Proceedings, ruling in
favor of the Debtors; and
WHEREAS, the Original Agreement, embodying the Term Sheet,
was executed and delivered by the Parties as of April 18, 1994;
and
WHEREAS, on June 16, 1994, the Celotex Bankruptcy Court
entered an order authorizing and directing The Celotex
Corporation to enter into and to perform its obligations under
the Original Agreement; and
WHEREAS, the Veil Piercing Claimants' Representatives have
filed a timely notice of appeal of the Court's decision in the
Adversary Proceedings; and
WHEREAS, amendments to the Original Creditor Plan were
filed with the Court on April 20, 1994, May 11, 1994, May 17,
1994 and June 9, 1994 (the amendment filed on June 9, 1994 is
referred to herein as the "Current Creditors' Plan"); and
WHEREAS, on July 28, 1994, the Court granted the Debtors'
emergency motion to file an amended plan of reorganization (the
"Debtors' Fifth Amended Plan") and an amended disclosure
statement, which amended plan increased the allowed amount
thereunder of each of (i) the Class S-1 and S-2 Claims, and (ii)
the Class S-6 Claims, in each case by, inter alia, issuing shares
of common stock of reorganized Walter Industries, Inc. equal to
5% of the shares to be issued and outstanding on the Effective
Date, and decreased the recovery of Class E-1 by the aggregate of
such shares; and
WHEREAS, the Plan Proponents and the Veil Piercing
Claimants' Representatives deem it advisable to amend the Current
Creditors' Plan to increase thereunder the allowed amount of
Class S-1, Class S-2 and Class S-6 Claims, by providing that the
$75 million of Class B Common Stock that was to have been
distributed to the Celotex Settlement Fund Recipient under
Section 2(a)(i)(A) of the Original Agreement (and that was to
have been subject to assignment to Settling Equityholders, if
any, under the Original Agreement), instead be distributed in the
manner specified in any future amendment to the Current
Creditors' Plan, and to provide that 100% of the Senior Claim
Differential, if any, be distributed to the Celotex Settlement
Fund Recipient, in each case, provided that this Agreement
becomes effective as set forth in Section 7 herein; and
WHEREAS, it is necessary to amend and restate the Original
Agreement to incorporate the aforementioned redistribution of
such $75 million of Class B Common Stock; and
WHEREAS, the Parties to the Original Agreement desire to
amend and restate the Original Agreement to reflect their
respective agreements, rights, duties and obligations, all on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
1. Defined Terms.
Capitalized terms not defined in the body of this
Agreement shall have the
meanings ascribed to them in Appendix A attached hereto.
2. Settlement of Veil Piercing Claims Pursuant to
Plan of Reorganization.
(a) All Veil Piercing Claims and all claims held by
the Veil Piercing
Claimants based upon LBO-Related Issues shall be fully and
completely settled,
satisfied, released and discharged in exchange for an
aggregate amount of
consideration (as calculated below), to be paid and
satisfied through the
distribution of Qualified Securities and Class B Common
Stock under the Plan (the
"Settlement Fund") to the Celotex Settlement Fund
Recipient, as follows:
(i) Allowed Amount of the Veil Piercing
Claims.
The allowed amount of the Veil Piercing
Claims shall be equal to the
sum of (A) the Veil Piercing Claims Amount (which
shall be $450 million, as the same may be increased
or decreased pursuant to this Section 2(a)) plus
(B) the Senior Claim Differential, if any; provided,
that in the event that the actual amount of
distributions under the Plan in respect of the
Subordinated Note Claims is different than $1098
million, then the Veil Piercing Claims Amount shall
be calculated as follows:
Actual amount of distributions in
respect of Subordinated Note Claims X $450 million
-----------------------------------
$1098 million
For purposes of the fraction used in this clause
(i), the actual amount of
distributions shall be valued at the aggregate
principal amount in the case
of Qualified Securities, and at the aggregate New
Common Stock Value Per
Share in the case of New Common Stock.
(ii) Consideration Used to Satisfy the Veil
Piercing Claims. The
Veil Piercing Claims shall be paid and satisfied by
the distribution of a
combination of Qualified Securities and Class B
Common Stock to the Celotex
Settlement Fund Recipient. The amount of Qualified
Securities to be so
distributed under the Plan in respect of Veil
Piercing Claims shall be
calculated as follows:
$450 million
---------------------
$1098 million + $450 million
multiplied by the aggregate principal amount of
Qualified Securities
available for distribution to holders of
Subordinated Note Claims and the
Celotex Settlement Fund Recipient under the Plan.
The amount of Veil Piercing Claims that is deemed to
be paid, and settled,
satisfied, released and discharged, by Qualified
Securities shall be equal
to the aggregate principal amount of Qualified
Securities issued in respect
of Veil Piercing Claims. The excess of the allowed
amount of Veil Piercing
Claims over the part thereof paid, and settled,
satisfied, released and
discharged, by Qualified Securities shall be paid,
and settled, satisfied,
released and discharged, by shares of Class B Common
Stock having an
aggregate New Common Stock Value Per Share equal to
such excess.
(iii) Examples. The following examples are
provided solely for the
purpose of illustrating the operation of clauses (i)
and (ii) above.
Assuming that the actual amount of distributions
made under the Plan in
respect of Subordinated Note Claims is equal to
$1098 million, then (a) the
aggregate allowed amount of the Veil Piercing Claims
would consist of
(i) the Veil Piercing Claims Amount (that is, $450
million), plus (ii) the
Senior Claim Differential, if any, and (b) such
allowed amount would be
settled, satisfied, released and discharged, by the
distribution of 450/1548
of the aggregate principal amount of Qualified
Securities available for
distribution to holders of Subordinated Note Claims
and the Celotex
Settlement Fund Recipient (for example, if $700
million of Qualified
Securities were so available, 450/1548 of such
total, or $203,488,372, would
be paid in Qualified Securities in respect of Veil
Piercing Claims), and the
distribution, in respect of the remainder of the
allowed amount of the Veil
Piercing Claims, of shares of Class B Common Stock
having an aggregate New
Common Stock Value Per Share equal to such
remainder.
(b) "Plan" Defined. The term "Plan", as used in
this Agreement, shall mean
any plan(s) of reorganization filed in the Chapter 11
Cases as to which the
Bondholder Proponents are proponents and that does not
contravene the terms and
conditions of this Agreement (subject to Section 2(c)
herein); and the definition
of the term "Plan" shall include, without limitation, the
amendment to the Current
Creditors' Plan filed on or about August 2, 1994, which
reflects the terms of this
Agreement (the "Amended Creditors' Plan"), provided, that
the term "Plan" shall not
include a plan of reorganization (other than the Amended
Creditors' Plan) or an
amendment to or modification of a plan of reorganization
unless (i) a notice
specifying the intended date of filing of the plan of
reorganization, amendment or
modification, together with a copy of such plan of
reorganization, amendment or
modification, in substantially final form, are sent to the
Veil Piercing Claimants'
Representatives, The Celotex Corporation, the Celotex
Asbestos Property Damage
Claimants Committee and the Celotex Asbestos Bodily Injury
Claimants Committee not
less than three (3) business days prior to filing thereof
with the Court, and
(ii) in the event that such plan of reorganization,
amendment or modification
contravenes the terms and conditions of this Agreement,
such plan of
reorganization, amendment or modification is consented to
by the Veil Piercing
Claimants' Representatives, The Celotex Corporation, the
Celotex Asbestos Property
Damage Claimants Committee and the Celotex Asbestos Bodily
Injury Claimants
Committee, provided that the rights of such Party or the
Veil Piercing Claimants
represented by such Party under this Agreement are
contravened by such plan of
reorganization, amendment or modification; it being
further understood that such
plan of reorganization, amendment or modification shall
not constitute a Plan
unless the Bondholder Proponents shall be a proponent of
the plan of reorganization
so filed, amended or modified, after giving effect to such
amendment or
modification. Neither the confirmation nor the
effectiveness of the Plan shall be
conditioned upon the confirmation or effectiveness of a
plan of reorganization in
any proceedings pursuant to the Code other than the
Chapter 11 Cases.
(c) Nothing in this Agreement shall impair in any
way the ability of the
Plan Proponents or any of them to file, modify or amend a
plan of reorganization
in any respect; provided, that no such modification or
amendment contravenes the
terms and conditions of this Agreement, unless consented
to pursuant to
Section 2(b) herein.
(d) The Plan shall provide for a registration
rights agreement
substantially in the form of Exhibit B attached hereto,
which shall provide, among
other things, for the registration of all of the Qualified
Securities and New
Common Stock for sale promptly after the Effective Date
pursuant to a registration
statement or statements under the Securities Act of 1933,
as amended. Nothing in
this Agreement shall impair in any way the ability of the
Bondholder Proponents to
modify or amend the registration rights agreement;
provided that such modification
or amendment shall not delay the timing of the initial
shelf registrations or
adversely affect the number and timing of demand or
piggy-back registrations
available to the Celotex Settlement Fund Recipient or the
right of the Celotex
Settlement Fund Recipient to participate in any such
registrations.
(e) Lehman Brothers Inc., Apollo and the Celotex
Settlement Fund Recipient
shall enter into an agreement as of the Effective Date,
substantially in the form
of Exhibit C attached hereto, which shall provide, among
other things, that if any
of Lehman Brothers Inc., Apollo or the Celotex Settlement
Fund Recipient (in the
case of the Celotex Settlement Fund Recipient, only with
the consent of the Veil
Piercing Claimants' Representatives) determines to sell
shares of Class B Common
Stock to a non-Affiliate other than on a national
securities exchange or through
a registered broker-dealer, then the other parties to such
agreement shall have the
"tag-along" rights specified in the agreement attached
hereto as Exhibit C to
participate in such sale on a pro-rata basis.
(f) (i) In the event that the Plan provides for a
call option or other
right of purchase to be granted pursuant to the Plan with
respect to all shares of
New Common Stock otherwise to be issued to holders of
Subordinated Note Claims
pursuant to the Plan, and such call option or other right
of purchase provides for
the purchase of such New Common Stock at any time not
later than five (5) business
days after the Effective Date, for a cash purchase price
per share not less than
the New Common Stock Value Per Share, then the Celotex
Settlement Fund Recipient
shall grant an identical call option or other right of
purchase with respect to all
shares of New Common Stock otherwise to be issued to the
Celotex Settlement Fund
Recipient pursuant to the Plan; and (ii) in the event that
the Bondholder
Proponents grant, other than pursuant to the Plan with
respect to all shares of New
Common Stock otherwise issued to holders of Subordinated
Note Claims, a call option
or other right of purchase with respect to any shares of
New Common Stock otherwise
to be issued to the Bondholder Proponents under the Plan,
and such call option or
other right of purchase provides for the purchase of such
New Common Stock at any
time not later than five (5) business days after the
Effective Date, for a cash
purchase price per share not less than the New Common
Stock Value Per Share, then
the Celotex Settlement Fund Recipient shall have the
option to grant an identical
call option or other right of purchase with respect to a
proportional amount of
shares of New Common Stock otherwise to be issued to the
Celotex Settlement Fund
Recipient pursuant to the Plan, such option to be
exercisable in writing not later
than the earlier to occur of (A) thirty (30) days after
written notice of the
grant, or proposed grant, of a call option or other
purchase right by the
Bondholder Proponents pursuant to this Section 2(f)(ii)
herein is given to the Veil
Piercing Claimants' Representatives and the Celotex
Settlement Fund Recipient,
which notice shall specify the principal terms of such
call option or other
purchase right, including the identity of the grantee(s),
the timing and method of
exercise, and the form, amount and timing of payment of
the exercise price, and
(B) such other period of time required by the terms of the
call option or other
right of purchase, which shall in no event be less than
ten (10) days after notice
thereof is given to the Veil Piercing Claimants'
Representatives and the Celotex Settlement Fund Recipient.
3. Conditions to Effectiveness of the Settlement.
In order to provide for the full and complete
settlement, satisfaction,
release and discharge of all Veil Piercing Claims and all
claims and causes of
action based on the LBO-Related Issues, this settlement
shall be conditioned on the
satisfaction (or waiver or modification by the Bondholder
Proponents and by such
other Parties, if any, as specified below) of all of the
following conditions:
(a) Entry by the Court of the Confirmation
Order, which order shall
(unless this requirement, or any part thereof, is
waived or modified by the
Bondholder Proponents and any Party whose rights
under this Agreement would
be contravened by such waiver or modification)
specifically contain (i) all
releases and injunctions necessary and appropriate
to realize the full and
complete settlement, satisfaction, release and
discharge of all Veil
Piercing Claims against any and all of the Released
Parties, the form and
substance of which to be acceptable to the
Bondholder Proponents, whether
or not all the Veil Piercing Claims are known to or
knowable by the Veil
Piercing Claimants. The settlement, satisfaction,
release and discharge of
the Veil Piercing Claims against the Released
Parties will become effective
as to each Veil Piercing Claim, whether or not the
Veil Piercing Claim
constituted an allowed claim in the Chapter 11 Cases
or the Celotex
Chapter 11 Case and whether or not the holder of the
Veil Piercing Claim
received actual notice of the Plan and the
proceedings for approval of the
Plan and entry of the Confirmation Order. In
addition, the entry of the
Confirmation Order will operate as (i) a general
resolution with prejudice
of all pending legal proceedings that may be
asserted against any or all of
the Released Parties based upon, arising out of or
in connection with the
Veil Piercing-Related Issues as well as any such
proceeding not yet
instituted that may be asserted against any or all
of the Released Parties;
(ii) a determination that all Veil Piercing Claims
shall channel, transfer
and attach to the Settlement Fund; (iii) a provision
retaining continuing
jurisdiction by the Court to enforce the provisions
of the Confirmation
Order; (iv) a provision that the Settlement Fund
shall be administered by,
and subject to the jurisdiction of, the Celotex
Bankruptcy Court; and (v) a
provision enjoining any use of the record of the
Adversary Proceedings,
including the transcript of the trial and all
depositions taken in such
proceedings, against any or all of the Released
Parties (but specifically
permitting the use of such record by any appellate
court of competent
jurisdiction for the sole purpose of such court's
review of the settlement
embodied in this Agreement and the Confirmation
Order).
(b) The Confirmation Order shall have become
a Final Order;
(c) Entry by the Court of a Final Order
allowing the Celotex Proof
of Claims and/or any Veil Piercing Proof of Claims;
and
(d) "Finality" shall have been realized with
respect to the full and
complete settlement, satisfaction, release and
discharge of all Veil
Piercing Claims. For purposes of this Agreement,
"Finality" shall be deemed
to have been realized when all of the following
conditions shall have been
satisfied (subject to the provisos set forth below):
(i) The Confirmation Order and the
Plan shall provide for the
release of or injunction respecting, in each
case to the fullest
extent permitted by law: (A) the Parties
(other than JWC and The
Celotex Corporation and its subsidiaries) and
the Debtors, and each
of their respective present and former
parents, subsidiaries,
Affiliates, directors, officers, partners,
shareholders, employees,
agents, advisors and representatives (other
than any (x) holders or
former holders of Allowed Old Common Stock
Interests that are not
Settling Equityholders, (y) any of Celotex'
or JWC's respective
present and former shareholders, directors,
officers, partners,
employees, agents, advisors and
representatives and (z) JWC and The
Celotex Corporation and its subsidiaries); in
each case in such
person's or entity's capacity as a holder of
a claim or interest in
the Chapter 11 Cases, as a plan proponent, if
applicable, as a
shareholder of any Debtor, or any other
capacity (it being understood
that this clause (A) does not include any
shareholder, director,
officer, partner, employee, agent, advisor or
representative of any
Debtor, in each case that is a holder or
former holder of an Allowed
Old Common Stock Interest that is not a
Settling Equityholder or that
is not a Celotex Released Party or a JWC
Released Party); and (B) the
holders of Allowed Indemnity Claims that are
not parties hereto, but
only to the extent of such Allowed Indemnity
Claims and only in the
capacity in which such Allowed Indemnity
Claims provide
indemnification, reimbursement or
contribution (collectively (A) and
(B) are referred to herein, in such
capacities, as the "Released
Parties") of and from any and all claims,
obligations, rights, causes
of action and liabilities (other than the
right to enforce
obligations under this Agreement and the
Plan) which any person or
entity may be entitled to assert, whether
known or unknown, foreseen
or unforeseen, then existing or thereafter
arising, based in whole
or in part upon any act, omission or other
occurrence taking place
on or prior to the Effective Date in any way
relating to the Debtors,
the Chapter 11 Cases or the Plan (including,
without limitation, any
of the Veil Piercing-Related Issues or
LBO-Related Issues);
(ii) The Confirmation Order and the
Plan shall provide for
the full and complete settlement,
satisfaction, discharge and, in
respect of the Released Parties, release of
all of the LBO-Related
Issues, including without limitation all
claims, indemnities and
causes of action that any or all of the
Debtors, or any person(s) or
entity(ies) claiming through any or all of
them, have in connection
with the LBO, action taken in contemplation
of the LBO, or any
contemporaneous or subsequent transaction(s)
entered into as part of,
arising out of, or relating to the LBO or any
or all of the LBO
transaction(s) or transfer(s), including
without limitation, any and
all obligations of any nature contemplated
by, arising out of, or
related to the Stock Purchase Agreement
between Hillsborough Holdings
Corporation and Jasper Corp. dated as of
April 21, 1988, as amended
pursuant to amendments dated May 26, 1988 and
January 25, 1989, and
the related Undertaking of Jasper Corp.;
(iii) The Confirmation Order shall
provide that the Veil
Piercing Settlement as embodied in the Plan
is fair, equitable and
reasonable and is a good faith settlement,
satisfaction, release and
discharge of all claims and causes of action
of all Veil Piercing
Claimants, and of Celotex, and of any and all
person(s) and
entity(ies) that may assert, derivatively or
otherwise through
Celotex, Veil Piercing Claims against any or
all of the Released Parties;
(iv) The Celotex Bankruptcy Court
shall have entered an order
approving this Agreement and authorizing and
directing The Celotex
Corporation to render performance in
accordance with the terms and
conditions hereof, which order shall have
become a Final Order; and
(v) At the request of the Bondholder
Proponents, the Court
shall have entered an order (i) allowing the
Celotex Proof of Claims
and/or, if applicable, (ii) allowing the Veil
Piercing Proof of
Claims, such order(s) to be in form and
substance reasonably
acceptable to the Bondholder Proponents;
(e) Notwithstanding any other provision of
this Agreement, any one or more of the conditions
set forth in paragraphs (b), (c) and/or (d) of
this Section 3 above may be waived or modified by
the express written
consent given by the Bondholder Proponents;
provided, that no waiver or
modification of Section 3(d)(i) herein that
adversely affects the release
granted to Settling Equityholders shall be effective
against any Settling
Equityholder that does not consent in writing to
such waiver or
modification; provided, further, that in the event
that any of the
conditions set forth in paragraphs (b), (c) and/or
(d) of this Section 3 is
not fully satisfied, consistent with Section 4(d)
herein, the Bondholder
Proponents may request that the Celotex Settlement
Fund Recipient and any
and all Parties to this Agreement take such actions
as the Bondholder
Proponents may reasonably request, which actions are
reasonably believed by
the Bondholder Proponents to be necessary to the
realization of Finality.
4. Agreements.
(a) At the option of the Bondholder Proponents, the
Plan may be amended to add, as proponents of the Plan
(subject to receipt of any necessary approval from
the Celotex Bankruptcy Court, and subject to the condition
that such additional proponents shall not be eligible to
participate in any actions to be taken under
the Plan by the Plan Proponents, or to amend or otherwise
modify the Plan), (A) The
Celotex Corporation, (B) JWC and (C) in their capacity as
representatives of
certain of the Veil Piercing Claimants, the Veil Piercing
Claimants'
Representatives. The Parties shall continue to seek the
prompt confirmation and
consummation of the Plan, including the prompt approval by
the Court of this Agreement in connection with the
confirmation of the Plan.
(b) Mutual Releases. The Plan shall provide that
upon the Effective Date, the present and future
signatories to this Agreement mutually release (except as
waived or modified by the Bondholder Proponents and any
person(s) or entity(ies) whose rights under such release
would be contravened by such waiver or
modification) each other and each of their respective
present and former
subsidiaries, Affiliates, directors, officers, partners,
shareholders, employees,
agents, advisors and representatives of and from any and
all claims based upon any
and all theories or bases of liability or recovery
recognizable at law, in equity
or in admiralty, under the laws of any jurisdiction, based
upon, arising out of or
in connection with alter ego, agency, alternate entity,
instrumentality, successor
liability, conspiracy, indemnification, contribution, any
theories of piercing the
corporate veil of any Debtor or its predecessor and/or any
and all of its
respective present or former parents, subsidiaries or
Affiliates, or the transfer
of any assets or property to or by any Debtor (or other
non-Debtor that had at any
time been a parent, subsidiary or Affiliate of any Debtor
or its predecessor), in
each case only in connection with the LBO, action taken in
contemplation of the
LBO, or any contemporaneous or subsequent transaction(s)
entered into as part of
or arising out of or relating to any or all of the LBO
transaction(s) or
transfer(s) and the conduct of the Adversary Proceedings,
including, without
limitation, any and all obligations of any nature
contemplated by, arising out of,
or related to the Stock Purchase Agreement between
Hillsborough Holdings
Corporation and Jasper Corp. dated as of April 21, 1988,
as amended pursuant to
amendments dated May 26, 1988 and January 25, 1989, and
the related Undertaking of
Jasper Corp.; provided that as to any such signatory who
(x) is or was a holder of
an Allowed Old Common Stock Interest or (y) is a present
or former director,
officer, partner, shareholder, employee, agent, advisor or
representative of JWC
or The Celotex Corporation or any of its subsidiaries,
such person or entity shall
become a Settling Equityholder, a Celotex Released Party,
or a JWC Released Party,
respectively, and provided further that there shall not be
released any claims by
creditors of Celotex or JWC, including without limitation
the Veil Piercing Claimants against Celotex, JWC, any of
the Celotex Released Parties or any of the
JWC Released Parties, arising out of personal injury or
property damage caused by or attributable to
asbestos-containing products manufactured, sold or distributed
by Celotex or JWC.
(c) Dismissal of Lawsuits. The Plan Proponents (as
may be necessary
respecting the Adversary Proceedings only), the Veil
Piercing Claimants'
Representatives, The Celotex Corporation, JWC and the
Official Celotex Committees
shall use reasonable efforts to bring about the prompt
dismissal, with prejudice,
as soon as practicable after the Effective Date, of all
known pending suits,
appeals, proceedings and other actions, including the
Adversary Proceedings,
against (i) any or all of the Released Parties, (ii) any
or all the Celotex
Released Parties and\or (iii) any or all of the JWC
Released Parties (solely in the
capacity(ies) specified in the definitions of Released
Parties, the Celotex
Released Parties and the JWC Released Parties), to the
extent such suits, appeals,
proceedings or other actions are based upon, arising out
of or in connection with
the Veil Piercing-Related Issues as to the Released
Parties and the issues covered
by the mutual release specified in Section 4(b) herein as
to the Celotex Released
Parties and the JWC Released Parties, respectively. Upon
request therefor, any
Party shall provide the Bondholder Proponents with a
certificate of a responsible
person of such Party, in form and substance reasonably
acceptable to the Bondholder
Proponents, to the effect that such Party has fully
complied with this Section 4(c).
(d) Process Toward Realization of Finality. The
Parties acknowledge that
the prompt realization of Finality will require
considerable strategic planning and
the cooperation of all of the Parties. In view of these
considerations, the
Parties intend that the Bondholder Proponents shall make
and implement all
strategic decisions (including without limitation
decisions as to the content and
timing of any and all applications, filings, or other
documents filed with or
otherwise submitted to (or statements made before) the
Court, or releases or
statements to the press (or that are reasonably calculated
to be made publicly
available through the press), that relate directly or
indirectly to the Veil
Piercing Settlement or to Finality), in each case in
consultation with the other
Parties to the extent appropriate and/or practicable under
the circumstances; and
the other Parties agree to use their best efforts to
assist and cooperate with the
Bondholder Proponents in implementing such decisions and
in promptly realizing
Finality, (including, without limitation to consult with
the Bondholder Proponents
respecting the content and timing of any and all
applications, filings, or other
documents to be filed with or otherwise submitted to (or
statements to be made
before) the Celotex Bankruptcy Court prior to making any
such submission or statement) in all cases consistent with
this Agreement.
(e) Announcement. The Parties shall jointly
announce the existence and the
terms of this Agreement as soon as possible after this
Agreement shall have become effective.
(f) Use of Evidence From Trial. The Parties shall
support the use by the Court and by the Celotex Bankruptcy
Court of the evidence presented during the
trial held in the Adversary Proceedings that commenced on
December 13, 1993 in determining that the settlement of
the Veil Piercing Claims set forth in this
Agreement and in the Plan (i) is fair, equitable and
reasonable and constitutes the
full and complete settlement, satisfaction, release and
discharge of all Veil
Piercing Claims and (ii) to the extent applicable, should
be approved as part of confirmation of the Plan.
(g) Support of Plan. The Parties shall support the
Plan and shall not support, directly or indirectly or
through one or more intermediaries, any other
proposed plan in respect of any or all of the Debtors or
any other settlement of any of the Veil Piercing Claims.
(h) Attorneys' Fees. (i) The Parties, except for
the HHC Bondholders Committee, The Celotex Corporation and
the HHC Creditors Committee, shall support
an application in the Chapter 11 Cases by Caplin &
Drysdale, on behalf of itself and the Claimants'
Attorneys, for an award of reasonable attorneys' fees and costs
in an amount equal to $15 million pursuant to Code
sections 503(b) and/or
1129(a)(4), or otherwise, based on factors including the
contingent nature of the
representation, the favorable results achieved, the
difficulty of the issues
presented and the fact that counsel were representing
clients brought involuntarily
into the Chapter 11 Cases through the Adversary
Proceedings; (ii) the HHC
Bondholders Committee, The Celotex Corporation and the HHC
Creditors Committee
shall support an application in the Chapter 11 Cases by
Caplin & Drysdale, on
behalf of itself and the Claimants' Attorneys, for an
award of reasonable
attorneys' fees and costs pursuant to Code sections 503(b)
and/or 1129(a)(4), or
otherwise, based on factors including those specified in
clause (i) hereof; and
(iii) the Parties shall support applications in the
Chapter 11 Cases by counsel for
Apollo and Lehman Brothers Inc. for reasonable attorneys'
fees and costs pursuant
to Code sections 503(b) and/or 1129(a)(4), or otherwise.
(i) Confidentiality. From and after the Effective
Date, the Veil Piercing
Claimants' Representatives shall keep confidential, and
not use in any manner
inconsistent with this Agreement, all files and memoranda
relating to cases against
any or all of the Released Parties based upon, arising out
of or relating to the Veil Piercing-Related Issues.
(j) At the request of the Bondholder Proponents,
each of the Veil Piercing
Claimants' Representatives shall use its best efforts to
cause each of the law
firms listed on Exhibit A attached hereto to indicate its
assent to and/or support
of this Agreement and/or the Plan, and/or to become a
signatory to this Agreement,
as directed by the Bondholder Proponents and in each case
substantially in the form of Exhibit D attached hereto and
as soon as practicable after such request is made.
(k) The Celotex Corporation shall (i) promptly seek
appropriate approval
from the Celotex Bankruptcy Court for authority to be
bound by this Agreement, for
the support of the Plan by The Celotex Corporation, and
for the authorization and
direction by the Celotex Bankruptcy Court for The Celotex
Corporation to render
performance in accordance with the terms and conditions of
this Agreement, (ii) promptly file the Celotex Proof of
Claims against the Debtors for the benefit
of its estate, (iii) at the request of the Bondholder
Proponents, promptly file the
Veil Piercing Proof of Claims against the Debtors for the
benefit of its estate,
(iv) accept treatment under the Plan of its claims against
the Debtors pursuant to
this Agreement, and (v) if it is the Celotex Settlement
Fund Recipient, receive and
hold the Settlement Fund for the exclusive benefit of the
Veil Piercing Claimants,
and manage the Settlement Fund in accordance with this
Agreement and all applicable
orders of the Celotex Bankruptcy Court, and distribute the
Settlement Fund pursuant
to its confirmed plan of reorganization or an order(s) of
the Celotex Bankruptcy Court.
(l) The Official Celotex Committees that are
Parties and the Veil Piercing Claimants' Representatives
shall support The Celotex Corporation in its efforts to
obtain the approvals from the Celotex Bankruptcy Court
that are specified in Section 4(k) of this Agreement.
5. Representations.
(a) Apollo represents and warrants that it owns or
controls debt obligations of the Debtors in the
approximate aggregate principal amount of $160 million.
(b) Lehman Brothers Inc. represents and warrants
that it owns or controls debt obligations of the Debtors
in the approximate aggregate principal amount of $271 million.
(c) Each of the Veil Piercing Claimants'
Representatives represents and warrants that it is
authorized to enter into this Agreement on behalf of all of its
clients or principals that are or may be Veil Piercing
Claimants.
6. Settling Equityholders.
Each Settling Equityholder shall, as a Party, be
entitled to the releases provided for under the Plan (as
provided in Sections 3(a) and 4(b) herein, as the
same may be modified or waived pursuant to Sections 3(a)
and 4(b) herein).
7. Effectiveness of this Agreement.
(a) The Original Agreement became effective by its
terms (without the execution thereof by any Settling
Equityholder or by the Jim Walter Corporation).
The Original Agreement shall be amended and restated as
set forth in this Agreement only upon the satisfaction of
the following conditions on or prior to the Effective Date:
(1) This Agreement shall have been executed
by all of the Parties (other than any Settling
Equityholder and other than the Jim Walter Corporation) to the
Original Agreement; and
(2) The Celotex Bankruptcy Court shall have
entered an order (i) approving this Agreement, and
(ii) authorizing and directing The Celotex Corporation to render
performance in accordance with the terms and conditions of this
Agreement.
Prior to the satisfaction of all of the foregoing
conditions, the Original Agreement shall remain in full
force and effect in accordance with its terms.
(b) In the event that Jim Walter Corporation does
not cause its authorized representative to execute this
Agreement and deliver it to the Bondholder
Proponents on or before the date on which the Celotex
Bankruptcy Court enters the order described in (a)(2) of
this Section 7, then (i) Jim Walter Corporation shall
not be, and shall not be deemed to be, a Party to this
Agreement, (ii) none of the provisions of this Agreement
applicable to JWC shall be, or shall become, effective
and (iii) without limiting the foregoing, none of the
provisions of this Agreement applicable to the release of
any or all of the JWC Released Parties or the
settlement, satisfaction or discharge of any claims
against any or all of them shall be, or shall become, effective.
(c) The Bondholder Proponents, in their sole and
exclusive discretion, may waive any or all of the
provisions contained in Section 7(b) herein.
8. Termination.
This Agreement shall terminate upon the earlier to
occur of the following:
(a) Upon the giving of a notice by the Bondholder
Proponents or the Veil Piercing Claimants' Representatives
and The Celotex Corporation to the other at any
time after an order shall have been entered which shall
have become a Final Order that (i) disapproves this
Agreement or the Plan substantially in its entirety
provided that such disapproval shall not be based on the
failure of any or all of the conditions contained in
Section 10.1(a) or 10.1(c) of the Amended Creditors'
Plan, (ii) confirms a plan of reorganization in any or all
of the Chapter 11 Cases other than the Plan or (iii) finds
or declares that the Veil Piercing Claims are
without merit or grants substantially the relief requested
in Adversary Proceeding No. 90-0003 and/or 90-0004; and
(b) The Bondholder Proponents, The Celotex
Corporation, and the Veil Piercing Claimants'
Representatives shall mutually agree in writing to terminate
this Agreement.
9. Miscellaneous.
(a) Fiduciary Duty. Notwithstanding any other
provision contained herein, in the event the Original
Creditor Plan, as amended to incorporate this Agreement,
is amended or modified without the consent required by
this Agreement, no such Party shall be required to fulfill
any of its agreements, rights, duties or obligations hereunder to
the extent that such Party has reasonably determined, on
advice of counsel, that the fulfillment of such agreement
or duty in connection with any further amendment to or
modification of the Original Creditor Plan would
violate such Party's fiduciary duty arising out of such
Party's status as an official committee in the Chapter 11
Cases or in The Celotex Chapter 11 Case, or with respect to The
Celotex Corporation, as a debtor-in-possession in The Celotex
Chapter 11 Case.
(b) Further Assurances. Each Party, as applicable,
shall promptly execute and deliver such agreements,
certificates, receipts, instruments, acknowledgements,
and other documents, including, without limitation, the
Celotex Proof of Claims and the Veil Piercing Proof of
Claims, and to promptly take such actions or cause to
be taken such actions, as may be reasonably requested by
the Bondholder Proponents to fully and promptly effect the
agreements and other provisions contained herein.
(c) Amendments. This Agreement may not be amended
except in a writing signed by the Party against which such
amendment is sought to be enforced.
(d) Governing Law. Except to the extent the Code
or Bankruptcy Rules are applicable, the rights and
obligations arising under this Agreement shall be
governed by, and construed and enforced in accordance
with, the laws of the State of New York, without giving
effect to the principles of conflicts of law thereof.
(e) Headings. The headings of the Sections,
paragraphs, and subsections of this Agreement are inserted
for convenience only and shall not affect the interpretation
hereof.
(f) Notices. All notices, requests or demands
under or in connection with this Agreement shall be in
writing and shall be delivered by hand, sent by
recognized overnight courier or sent by telecopier, telex
or similar electronic means to the address or telecopier
number of the Party as set forth under its
signature hereto, or to such other address or telecopier
number as such Party shall provide to all Parties hereto
in writing, and shall be deemed sent or given
hereunder, in the case of delivery by recognized overnight
courier, on the date of actual delivery, in the cases of
transmission by telecopier, telex or similar
electronic means on the date of actual transmission, and
in the case of personal delivery, on the date of actual delivery.
(g) No Admissions. No part of this Agreement shall
be deemed as an admission of any Party for any purpose, whether
in any of the Veil Piercing Proceedings or otherwise.
(h) No Waiver. The Parties hereto do not waive or
release any rights, claims, defenses or remedies until all
conditions of this Agreement and the Plan have been satisfied or
waived. Without limiting the foregoing, nothing herein
shall constitute an admission or waiver with respect to
the Chapter 11 Cases, any Veil Piercing Proceedings, or
the Celotex Chapter 11 Case.
(i) No Solicitation. Notwithstanding any other
provision in this Agreement, nothing in this Agreement is
intended to be or constitute, and shall not be deemed to be or
constitute, a solicitation of any vote or an agreement to vote
for or against any plan of reorganization, and nothing in
this Agreement shall impair the right or the ability of
any Party to vote for or against, or abstain or
refrain from voting with respect to, any plan of reorganization.
(j) Extraterritoriality. It is the intention of
the Parties that the settlements and other agreements
contained in this Agreement be given application
both to suits within and without the jurisdiction of the
United States.
(k) Successors and Assigns. This Agreement is
intended to bind and inure to the benefit of the Parties
and other signatories, if any, hereof and their
respective successors, assigns, heirs, executors,
administrators and representatives.
(l) Complete Agreement. This document, including
the appendix and exhibits hereto, embodies the complete
agreement and understanding between the Parties and
other signatories, if any, with respect to the subject
matter hereof and, subject to Section 7(a) hereof,
supersedes and preempts any prior agreement, understanding
or representation made by and between any or all of such
Parties and other signatories, if any, whether written or
oral, which may have related to the subject
matter hereof in any way whatsoever, including without
limitation the Term Sheet.
(m) Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed
an original and all of which shall constitute one and the same
Agreement.
CAPLIN & DRYSDALE, Chartered
By:
Elihu Inselbuch
399 Park Avenue
New York, NY 10022
(212) 319-7125
(212) 644-6755 (telecopier)
For Itself and the AVDs
BARON & BUDD
By:
Fred Baron
3102 Oak Lawn Avenue
Suite 1100
Dallas, TX 75219-4281
(214) 521-3605
(214) 520-1181 (telecopier)
NESS MOTLEY LOADHOLT
RICHARDSON & POOLE
By:
Joseph Rice
P.O. Box 365
Barnwell, SC 29812
(803) 259-9900
(803) 577-7513 (telecopier)
GREITZER AND LOCKS
By:
Gene Locks
1500 Walnut Street
Philadelphia, PA 19102
(215) 893-0100
(215) 985-2960 (telecopier)
AKIN, GUMP, STRAUSS,
HAUER & FELD, L.L.P.
By:
Ellen R. Werther
Steven M. Pesner, P.C.
65 East 55th Street, 33rd Flr.
New York, NY 10022
(212) 872-1070
(212) 872-1003 (telecopier)
For Apollo
PAUL, WEISS, RIFKIND,
WHARTON & GARRISON
By:
Robert Drain
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3236
(212) 373-2366 (telecopier)
For Lehman Brothers Inc.
BUSH ROSS GARDNER WARREN
& RUDY, P.A.
By:
Jeffrey W. Warren
220 South Franklin Street
Tampa, FL 33602
(813) 224-9255
(813) 223-9620 (telecopier)
For The Celotex Corporation
HOYT, COLGAN & ANDREU
By:
Michael B. Colgan
2900 Barnett Plaza
101 E. Kennedy Blvd.
Tampa, FL 33602
(813) 229-6688
(813) 229-3331 (telecopier)
For Jim Walter Corporation
STROOCK & STROOCK & LAVAN
By:
Daniel H. Golden
Seven Hanover Square
New York, NY 10004-2594
(212) 806-5423
(212) 806-6606 (telecopier)
For HHC Bondholders Committee
JONES, DAY, REAVIS & POGUE
By:
Marc S. Kirschner
599 Lexington Avenue
New York, NY 10025
(212) 326-3939
(212) 755-7306 (telecopier)
For HHC Creditors Committee
JOHNSON, BLAKELY, POPE, BOKOR
RUPPEL & BURNS, P.A.
By:
Charles M. Tatelbaum
911 Chestnut Street
Clearwater, FL 33616
(813) 461-1818
(813) 441-8617 (telecopier)
For Celotex Unsecured Trade
Creditors Committee
KOZYAK TROPIN THROCKMORTON
& HUMPHREYS, P.A.
By:
John W. Kozyak
Janet L. Humphreys
200 S. Biscayne Boulevard
Suite 2850
Miami, FL 33131-2335
(305) 372-1800
(305) 372-3508 (telecopier)
For Celotex Asbestos Property
Damage Claimants Committee
HONIGMAN MILLER SCHWARTZ
& COHN
By:
Sheldon S. Toll
2290 First National Building
Detroit, MI 48226
For Celotex Asbestos Bodily
Injury
Claimants Committee
(313) 256-7800
(313) 962-0176 (telecopier)
<PAGE>
SETTLING EQUITYHOLDERS:
PAGE>
CELOTEX RELEASED PARTIES:
JWC RELEASED PARTIES:
<PAGE>
APPENDIX A
A. "Affiliate" shall have the meaning set forth in Rule
501, promulgated under the Securities Act of 1933, as amended.
B. "Allowed Indemnity Claim" shall mean an Allowed Claim
for indemnification, reimbursement or contribution against any
Debtor; provided, however, that any such Claim shall not be an
Allowed Indemnity Claim if the agreement or other basis giving
rise to the Claim is void or voidable.
C. "Allowed Old Common Stock Interest" shall mean all
interests in the outstanding common stock, $0.01 par value, of
Walter Industries, Inc., as the surviving corporation of the
merger between Hillsborough Holdings Corporation and Walter
Industries, Inc., exclusive of any shares of such stock held in
treasury, which is registered as of the Effective Date in such
stock register as may be maintained by or on behalf of Walter
Industries, Inc. and as to which no objection has been made or
which has been allowed by a Final Order.
D. "Apollo" shall mean AIF II, L.P., certain affiliates
(as defined in the Plan) of AIF II, L.P. and certain accounts
managed or controlled by such affiliates.
E. "HHC Bondholders Committee" shall mean the Official
Bondholders Committee of the Debtors appointed by the United
States Trustee in the Chapter 11 Cases pursuant to Section 1102
of the Code, as such Committee may be constituted from time to
time.
F. "Celotex" shall mean The Celotex Corporation and/or
any predecessor thereof or successor thereto and all of their
respective present and former parents, Affiliates and
subsidiaries, other than JWC.
G. "Celotex Proof of Claims" shall mean a proof(s) of
claim(s) filed in the Chapter 11 Cases asserting that any or all
of the Debtors are or may be liable for any or all claims (a)
which Celotex holds or which may be asserted against Celotex in
the future, direct, indirect or derivative, caused by products
manufactured, sold or distributed by Celotex, or otherwise based
on any of the Veil Piercing-Related Issues and/or (b) based on
the LBO-Related Issues, such proof(s) of claim(s) to be in form
and substance reasonably acceptable to the Bondholder Proponents
and settled, satisfied, released and discharged by distribution
of the Settlement Fund to the Celotex Settlement Fund Recipient.
The liability of the Debtors described in the Celotex
Proof of Claims shall include: (i) claims in the nature of or
sounding in piercing the corporate veil, alter ego, alternate
entity, successor liability, conspiracy, instrumentality, agency
and any other theory of law, equity or admiralty that seeks to
hold the stockholder of a corporation liable for all or part of
any claims against that corporation; (ii) claims resulting from
or arising out of or relating to the LBO, actions taken in
contemplation of the LBO or any contemporaneous or subsequent
transaction(s) entered into as a part of, arising out of, or
relating to the LBO or any or all of the LBO transaction(s) or
transfer(s), and (iii) claims resulting or arising from the
transfer of assets of Celotex for less than reasonably equivalent
value to the extent available remedies exist in favor of Celotex
as to such transfers.
H. "Celotex Released Party" shall mean any present or
former director, officer, partner, shareholder, employee, agent,
advisor or representative of The Celotex Corporation or any of
its subsidiaries (in each case only in such person's or entity's
aforementioned capacity and not otherwise) that, subject to the
last two sentences hereof, (1) shall have become a signatory to
this Agreement, following a written request of the Bondholder
Proponents, on or prior to the later of (a) thirty (30) days
after a copy of this Agreement is received by such person or
entity or a representative thereof, and (b) the day prior to the
date on which the Court holds the hearing on the adequacy of the
disclosure statements respecting the Plan and the plan filed by
the Debtors, and (2) shall have taken no action(s) subsequent to
the execution of this Agreement by the Parties which, in the
reasonable determination of the Bondholder Proponents, would be
reasonably likely to (a) impede the prompt distribution or
approval of the disclosure statement relating to the Plan; (b)
impede the prompt confirmation and effectiveness of the Plan; (c)
impede the use of the Negotiated Enterprise Value as the
enterprise valuation of the Debtors for all purposes under the
Plan and in the Chapter 11 Cases; (d) impede the prompt
realization of Finality; or (e) result in a breach of this
Agreement. If the Court or the Celotex Bankruptcy Court finds
that the settlement set forth in this Agreement is not reasonable
or the Plan is not confirmable unless each or any of such
person(s) or entity(ies) is given a further opportunity to become
a signatory to this Agreement and receiving the benefits
specified herein for a Celotex Released Party by a specific
date(s) set by the Court, then the date specified in (1) hereof
shall be the date(s) set by the Court; provided further that the
Bondholder Proponents shall have the right, exercisable on or
before the Effective Date, to waive the date(s) specified herein
for any such person(s) or entity(ies). If the Court or the
Celotex Bankruptcy Court at any time determines that any Celotex
Released Party is not entitled to or should not be granted the
release specified in Section 4(b) herein, then such person(s) or
entity(ies) shall not be entitled to, and shall not receive such
release.
I. "Celotex Settlement Fund Recipient" shall mean The
Celotex Corporation for the exclusive benefit of the Veil
Piercing Claimants, or such other person(s) or entity(ies)
designated by a Final Order entered by the Celotex Bankruptcy
Court to act in the place and stead and on behalf of The Celotex
Corporation, including, without limitation, any entity
established pursuant to a confirmed plan of reorganization for
The Celotex Corporation to hold, manage, liquidate, distribute or
otherwise assume responsibility for and the liabilities of the
Settlement Fund.
J. "Chapter 11 Cases" shall mean each of the
reorganization cases of the Debtors listed in the caption on the
cover page of the Original Creditor Plan, all of which are being
jointly administered under Case No. 89-9715-8P1.
K. "Class A Common Stock" shall have the meaning assigned
to that term (or another term serving the same or a similar
function) under the Plan; provided, that the Class A Common Stock
shall have economic rights, powers and privileges no more
favorable than the economic rights, powers and privileges of the
Class B Common Stock, unless less favorable treatment shall be
agreed to in writing by the Veil Piercing Claimants'
Representatives and the Celotex Settlement Fund Recipient.
L. "Class B Common Stock" shall mean the Class B Common
Stock, par value $.01 per share, of Walter Industries, Inc. to be
issued on the Effective Date. The Class B Common Stock held by
the Celotex Settlement Fund Recipient or by any creditor of The
Celotex Corporation, in its capacity as such, shall be voted in
the same percentages as the shares of the Class A Common Stock
and other Class B Common Stock, taken together, are voted (based
upon the number of votes cast).
M. "Code" shall mean title 11 of the United States Code,
11 U.S.C. Section 101 et seq., together with all amendments,
modifications and replacements as the same exist on any relevant
date to the extent applicable to the Chapter 11 Cases.
N. "Confirmation Date" shall mean the date on which the
Court enters the Confirmation Order.
O. "Confirmation Order" shall mean the order(s) of the
Court confirming the Plan and approving the transactions and
settlements contemplated therein.
P. "HHC Creditors Committee" shall mean the Official
Committee of General Unsecured Creditors of the Debtors appointed
by the United States Trustee in the Chapter 11 Cases pursuant to
Section 1102 of the Code, as such Committee may be constituted
from time to time.
Q. "Debtors" shall mean the debtors and debtors in
possession in the Chapter 11 Cases.
R. "Effective Date" shall mean that business day selected
by the Bondholder Proponents which shall be not more than ninety
(90) days after the date on which all conditions to effectiveness
set forth in the Plan have been satisfied or waived.
S. "Final Order" shall mean an order, judgment, ruling or
decree issued and entered by the Court or by any state or other
federal court or other tribunal located in one of the states,
territories or possessions of the United States or the District
of Columbia that has not been reversed, stayed, modified or
amended and as to which the time to appeal or petition for
reargument, rehearing or certiorari has expired, and as to which
no appeal, reargument, petition for certiorari or rehearing is
pending or as to which any right to appeal, reargue, petition for
certiorari or seek rehearing has been waived or, if an appeal,
reargument, petition for certiorari or rehearing thereof has been
denied, the time to take any further appeal or to seek certiorari
or further reargument or rehearing has expired.
T. "JWC Released Party" shall mean any present or former
director, officer, partner, shareholder, employee, agent, advisor
or representative of JWC (in each case only in such person's or
entity's aforementioned capacity and not otherwise) that, subject
to the last two sentences hereof, (1) shall have become a
signatory to this Agreement, following a written request of the
Bondholder Proponents, on or prior to thirty (30) days after a
copy of this Agreement is received by such person or entity or a
representative thereof, and (2) shall have taken no action(s)
subsequent to the execution of this Agreement by the Parties
which, in the reasonable determination of the Bondholder
Proponents, would be reasonably likely to (a) impede the prompt
distribution or approval of the disclosure statement relating to
the Plan (b) impede the prompt confirmation and effectiveness of
the Plan; (c) impede the use of the Negotiated Enterprise Value
as the enterprise valuation of the Debtors for all purposes under
the Plan and in the Chapter 11 Cases; (d) impede the prompt
realization of Finality; or (e) result in a breach of this
Agreement. If the Court or the Celotex Bankruptcy Court finds
that the settlement set forth in this Agreement is not reasonable
or the Plan is not confirmable unless each or any of such
person(s) or entity(ies) is given a further opportunity to become
a signatory to this Agreement and receiving the benefits
specified herein for a JWC Released Party by a specified date(s)
set by the Court, then the date specified in (1) hereof shall be
the date(s) set by the Court; provided further that the
Bondholder Proponents shall have the right, exercisable on or
before the Effective Date, to waive the date(s) specified herein
for any such person(s) or entity(ies). If the Court or the
Celotex Bankruptcy Court at any time determines that any JWC
Released Party is not entitled to or should not be granted the
release specified in Section 4(b) herein, then such person(s) or
entity(ies) shall not be entitled to, and shall not receive, such
release.
U. "LBO-Related Issues" shall mean and be the collective
reference to all theories or bases of recovery recognizable at
law, in equity or in admiralty or in equity under the laws of any
jurisdiction that are held or asserted by or that may be held or
asserted by any holder of a claim or interest in the Chapter 11
Cases other than Veil Piercing Claimants (in such capacity), in
respect of such claim or interest, directly or indirectly based
upon, arising out of or in connection with the LBO or any of the
LBO transactions or transfers consummated in contemplation of or
as a part thereof or in connection therewith, including without
limitation the acquisition of the capital stock of the Debtors,
the consummation of the transactions contemplated by the
Agreement and Plan of Merger dated as of August 12, 1987, and the
financing, reorganization, asset disposition and other
transactions consummated as a part thereof or in connection
therewith, whether based upon theories of piercing the corporate
veil of any Debtor, alter ego, alternate entity, agency,
instrumentality, the transfer (fraudulent or otherwise) of any
assets or property by any Debtor (or other non-Debtor that had at
any time been an Affiliate of any Debtor), preference, fraud,
conspiracy, substantive consolidation, successor liability, or
any other legal or equitable theory whatsoever.
V. "New Common Stock" shall mean the collective reference
to the Class A Common Stock and the Class B Common Stock.
W. "New Common Stock Value" shall mean the Negotiated
Enterprise Value (or, if the Court finds that the going concern
enterprise value of the Debtors is equal to an amount other than
$2,525,000,000, such other amount) less the sum of (a) the lesser
of (i) $902 million and (ii) (A) the allowed amount of claims for
all classes (excluding interest to be paid in the form of Class B
Common Stock to be distributed to Classes S-1, S-2 and S-6) other
than classes consisting of Subordinated Note Claims, Veil
Piercing Claims or intercompany claims (i.e., Classes U-4 through
U-7 and I-1 through I-3 in the Current Creditors Plan) accrued or
owed on the Effective Date (including without limitation any part
thereof paid or to be paid after the Effective Date), minus (B)
the interest paid or accrued under the provisions of the Plan in
respect of the claims referred to in the preceding clause (A) for
the period from January 1, 1994 to the Effective Date (excluding
interest to be paid in the form of Class B Common Stock to
Classes S-1, S-2 and S-6), and (b) the aggregate principal amount
of Qualified Securities to be distributed to holders of
Subordinated Note Claims and the Celotex Settlement Fund
Recipient under the terms of the Plan on the Effective Date.
X. "New Common Stock Value Per Share" shall mean the New
Common Stock Value divided by 50 million, representing the number
of shares of New Common Stock to be issued and outstanding on the
Effective Date.
Y. "Qualified Securities" shall have the meaning assigned
to that term (or another term serving the same or a similar
function) under the Plan.
Z. "Senior Claim Differential" shall mean the excess, if
any, of $902 million over the difference between (a) the allowed
amount of claims for all classes (excluding interest paid in the
form of Class B Common Stock to be distributed to Classes S-1,
S-2 and S-6), other than classes consisting of Subordinated Note
Claims, Veil Piercing Claims or intercompany claims, accrued or
owed on the Effective Date (including without limitation any part
thereof paid or to be paid after the Effective Date) (the "Senior
Claims"), and (b) the interest paid or accrued under the
provisions of the Plan in respect of the Senior Claims for the
period from January 1, 1994 to the Effective Date (excluding
interest to be paid in the form of Class B Common Stock to
Classes S-1, S-2 and S-6).
AA. "Settling Equityholder" shall mean a holder of an
Allowed Old Common Stock Interest (a) that, subject to the last
two sentences hereof, shall have become a signatory to this
Agreement on or prior to the later of (i) twenty (20) days after
a copy of this Agreement is sent to such holder of an Allowed Old
Common Stock Interest or a representative thereof, and (ii) the
day prior to the date on which the Court holds the hearing on the
adequacy of the disclosure statements respecting the Plan and the
plan filed by the Debtors, and (b) that shall have taken no
action(s) subsequent to becoming a signatory to this Agreement
which, in the determination of the Bondholder Proponents, would
be reasonably likely to (i) impede the prompt distribution or
approval of the disclosure statement relating to the Plan; (ii)
impede the prompt confirmation and effectiveness of the Plan;
(iii) impede the use of the Negotiated Enterprise Value as the
enterprise valuation of the Debtors for all purposes under the
Plan and the Chapter 11 Cases; (iv) impede the prompt realization
of Finality; or (v) result in a breach of this Agreement. If the
Court finds that the settlement set forth in this Agreement is
not reasonable or the Plan is not confirmable unless each or any
of the holders of an Allowed Old Common Stock Interest is given a
further opportunity to become a Settling Equityholder by becoming
a signatory to this Agreement and receiving the benefits
specified herein for a Settling Equityholder by a specific
date(s) set by the Court, then the date specified in (a) hereof
shall be the date(s) set by the Court. Notwithstanding the other
provisions of "AA" hereof, the Bondholder Proponents shall have
the right, exercisable on or before the Effective Date, to waive
the date(s) specified herein for any person who is a holder of
less than 5% of the issued and outstanding common stock, $0.01
per value, of Walter Industries, Inc., exclusive of any shares of
such stock held in treasury.
BB. "Settling Party" shall mean a Party to this
Agreement, and each of the Debtors.
CC. "Subordinated Note Claims" shall mean, collectively,
the Senior Subordinated Note Claims, the 17% Subordinated Note
Claims, the 10 7/8% Subordinated Debenture Claims, the 13 1/8%
Subordinated Note Claims and the 13 3/4 Subordinated Debenture
Claims (as each of such terms is defined in the Original Creditor
Plan).
DD. "Veil Piercing Claimants" shall mean The Celotex
Corporation and any other person or entity who may have or may
assert in the future a Veil Piercing Claim.
EE. "Veil Piercing Claims" shall mean and be the
collective reference to all existing claims and all claims that
may be asserted in the future against any or all of the Debtors
or any other Released Party based upon, arising out of or in
connection with any of the Veil Piercing-Related Issues, but
shall not include Allowed Indemnity Claims.
FF. "Veil Piercing Proceedings" shall mean and be the
collective reference to all lawsuits, actions and other judicial
and administrative proceedings that have been, or may in the
future be, instituted against any person or entity that directly
or indirectly seek or could seek any remedy from any or all of
the Released Parties, including, without limitation, each
Settling Party based upon, arising out of or in connection with
any of the Veil Piercing-Related Issues.
GG. "Veil Piercing Proof of Claims" shall mean a proof(s)
of claim(s) filed in the Chapter 11 Cases by (i) The Celotex
Corporation and/or (ii) the Claimants' Attorneys and/or an
appropriate representative(s) of Veil Piercing Claimants on
behalf of one or more classes representing all Veil Piercing
Claimants, solely upon the request of the Bondholder Proponents
and solely in connection with and for the purpose of the
confirmation of the Plan, the approval of this Agreement and the
realization of Finality, which proof(s) of claim(s) shall be in
form and substance reasonably acceptable to the Bondholder
Proponents and which proof(s) of claim(s) will be settled,
satisfied, released and discharged by distribution of the
Settlement Fund to the Celotex Settlement Fund Recipient.
HH. "Veil Piercing-Related Issues" shall mean and be the
collective reference to all theories or bases of liability or
recovery recognizable at law, in equity or in admiralty, under
the laws of any jurisdiction, directly or indirectly based upon,
arising out of or in connection with asbestos, any product
manufactured, sold or distributed by Celotex, any other liability
or obligation of any nature of Celotex, or any act or failure to
act by Celotex or any officer, director, employee, agent or other
representative of Celotex, whether based upon alter ego, agency,
alternate entity, instrumentality, successor liability,
conspiracy, indemnification, contribution, any theories of
piercing the corporate veil of any Debtor or its predecessor
and/or any and all of its respective present or former parents,
subsidiaries or Affiliates, or the transfer of any assets of
property to or by any Debtor (or other non-Debtor that had at any
time been a parent, subsidiary or Affiliate of any Debtor or its
predecessor), whether in connection with any of the transactions
constituting or relating to the financing or the acquisition of
any of the Debtors or any of their respective predecessors,
parents, subsidiaries or Affiliates by the current holders of
equity interests, the divestiture by Celotex of any of its assets
or property at any time, or in connection with any other
transactions, events or circumstances, or otherwise; provided,
however, that the Veil Piercing-Related Issues shall not include
any of the LBO-Related Issues.
II. "Veil Piercing Settlement" shall mean the full and
complete settlement, satisfaction, release and discharge of all
Veil Piercing Claims, Veil Piercing Proceedings and all claims
based upon LBO-Related Issues held by the Veil Piercing
Claimants.
<PAGE>
EXHIBIT A
ATTACHED AS EXHIBIT A TO THE
VEIL PIERCING SETTLEMENT AGREEMENT
(EXHIBIT 3A TO THE CREDITORS'
JOINT PLAN OF REORGANIZATION)
<PAGE>
EXHIBIT B
ATTACHED AS EXHIBITS 7 AND 8
TO THE
CREDITORS' JOINT PLAN OF REORGANIZATION
<PAGE>
EXHIBIT C
ATTACHED AS EXHIBIT C TO THE
VEIL PIERCING SETTLEMENT AGREEMENT
(EXHIBIT 3A TO THE CREDITORS'
JOINT PLAN OF REORGANIZATION)
<PAGE>
EXHIBIT D
, 1994
Re: Hillsborough Holdings Corporation, et al.
The undersigned law firm: (1) represents one or more
persons or entities with Veil Piercing Claims [as defined in the
Veil Piercing Settlement Agreement dated April , 1994
("VPSA")]; (2) hereby agrees on behalf of itself, each of its
lawyers, and each of its clients who have such claims,
irrevocably to comply with, assent to and support the VPSA and
the Plan (as defined in the VPSA) and (3) to promptly become a
signatory to the VPSA upon the request of the Bondholder
Proponents (as defined in the VPSA).
Very truly yours,
[LAW FIRM]
By:
A Member of the Firm
<PAGE>
EXHIBIT 4:
SUMMARY OF TERMS FOR THE MID-STATE TRUST IV SECURED NOTES
<PAGE>
EXHIBIT 4
Summary of Terms for the Mid-State Trust IV Secured Notes
Issuer Mid-State IV ("Trust IV" or the "Issuer")
Issue Mid-State Trust IV Secured Notes (the
"Secured Notes")
Tax Status Debt of an owner trust
Target Rating AAA/Aaa based on a surety which wraps an
underlying A-/A3 quality bond
Principal Amount $700,000,000
Rate [7.85%] (to be established according to
market conditions on the
Pricing Date)
Average Life 5.9 years (at 2.5% CPR)
Maturity 12 years (assuming no prepayments)
Credit Support The Secured Notes will be secured by an
undivided interest in $850
million of fixed-rate installment sale
contracts ("Contracts") which
are in turn secured by first mortgages on
single-family residential
properties. The Contracts in Mid-State Trust
IV will be serviced in
the same manner as those in Trusts II and
III. The Secured Notes
will be further secured by a surety bond on
the assumption that the
combination of the above credit support
totaling $145 million, or
approximately 17% of the total collateral for
the Secured Notes, will
give a shadow rating of "A" for the insurer's
risk.
Interest Payment
Dates Monthly, interest paid in arrears on the
day of each month.
Optional Redemption The Secured Notes are redeemable on or after
the date on which the
principal balance is reduced to less than 10%
of their original
balance, at the option of the holder of the
equity in Trust IV, in
whole but not in part, at 100% of principal
amount, plus accrued and
unpaid interest thereon.
Mandatory
Redemption Principal of the Secured Notes will be
amortized with all Remaining
Available Funds, consisting of all
collections on the Contracts
remaining after payment of servicing fees,
trust expenses and
interest payments on the Trust IV Secured
Notes.
<PAGE>
EXHIBIT 5:
SUMMARY OF TERMS FOR MID-STATE TRUST II RESIDUAL BONDS
<PAGE>
Summary of Terms for the Mid-State Trust II Residual Bonds
Issuer Mid-State Trust II (the "Issuer")
Issue Mid-State Trust II Residual Bonds (the
"Residual Bonds")
Tax Status Debt of an owner trust
Target Rating AAA/Aaa rating based on a surety bond, on the
assumption that 23%
subordination will give a shadow rating of no
less than A-/A3 behind
the surety and that Financial Security
Assurance will approve the
total arrangement.
Principal Amount $75,000,000
Coupon [7.35%] (to be established according to
market conditions on the
Pricing Date)
Average Life 3.5 years
Interest Payment
Dates Quarterly, interest paid in arrears
Description The Residual Bonds represent an additional
issuance of debt from a
trust whose only material assets are expected
to be $1,060 million
economic balance of fixed-rate installment
sale contracts
("Contracts") secured by mortgages on
single-family residential
properties and whose only material
liabilities are expected to be
$740 million of currently outstanding bonds,
leaving an
"overcollateralization amount" of $320
million. The Residual Bonds
will be an additional class of debt which
will have an aggregate face
amount of $75 million, or $245 million less
than the
overcollateralization amount.
Distributions Cash which would otherwise be released
quarterly from the lien of the
Mid-State Trust II bond indenture, net of
trust expenses, will be
distributed:
-- first, to provide for payments of
interest on the Residual
Bonds;
-- second, to retire $2,500,000 of the
Residual Bonds;
-- third, to retire additional Residual
Bonds in the event that
Contract liquidations are higher than
a pre-determined
threshold; and
-- fourth, to the holders of the equity
in Mid-State Trust II.
<PAGE>
EXHIBIT 6:
SUMMARY OF TERMS FOR THE NEW UNSECURED NOTES
<PAGE>
EXHIBIT 6
WALTER INDUSTRIES, INC.
Summary of Terms for New Unsecured Notes
Issuer Walter Industries, Inc. (the "Company" or the
"Issuer").
Issue New Unsecured Notes.
Principal Amount Up to approximately $100 million (assuming
12/31/94 Effective Date).
Maturity 10 years.
Rate An interest rate per annum such that the
conditions to qualification
as a Qualified Security, as that term is
defined in the Creditors'
Plan, are met.
Interest Payment
Dates Semi-annually, interest paid in cash in
arrears, on and .
Optional
Redemption The New Unsecured Notes are not redeemable
prior to five (5) years
after original issuance thereof. Thereafter,
the New Unsecured Notes
may be redeemed in whole or in part at the
option of the Company upon
prior notice at redemption prices similar to
those prevailing in the
market for similar debt securities at the
time of issuance, plus
accrued and unpaid interest to the redemption
date.
Amortization All of the outstanding principal amount and
accrued but unpaid
interest thereon shall be due and payable at
maturity.
Covenants Covenants shall include but not be limited
to: (i) limitations on
indebtedness (including senior indebtedness),
(ii) limitations on the
creation of liens, (iii) limitations on
restricted payments,
(iv) limitations on dividends, (v)
limitations on transactions with
affiliates and (vi) limitations on asset
sales, mergers and
consolidations.
Ranking The New Unsecured Notes will be unsecured
Indebtedness of the Company
and will be subordinate and junior in right
of payment to other
Indebtedness of the Company in the manner and
to the extent that the
instrument creating such other Indebtedness
so provides.
Required Offers
to Purchase The Company will be required to offer to
purchase the New Unsecured
Notes at 101% of the principal amount thereof
plus accrued and unpaid
interest to the redemption date as follows:
(i) upon a change in control (to be
defined to include a transfer
of control to a person or entity, or
"group" of persons or
entities as that term is used in SEC
Rule 13-d, (i) that did
not hold or control, immediately after
giving effect to the
consummation of the Creditors' Plan,
5% or more of the New
Common Stock, and (ii) that acquired
control of the Company
other than as a result of the
conversion of any Class A Common
Stock into Class B Common Stock); or
(ii) upon a sale of substantially all of
the assets of the Company.
Events of Default
and Remedies Events of Default shall include but not be
limited to: (a) default
in the payment of principal on any New
Unsecured Notes when the same
becomes due and payable; (b) default in the
payment of interest on
any New Unsecured Notes when the same becomes
due and payable, and
such default continues for a period of five
(5) days; (c) the Company
defaults in the performance of or breaches
any other covenant or
agreement of the Company under the New
Unsecured Notes and such
default or breach continues for a period of
30 consecutive days after
written notice by the Trustee or the Holders
of 25% or more in
aggregate principal amount of the New
Unsecured Notes then
outstanding; (d) there occurs with respect to
any issue or issues of
indebtedness of the Company and or one or
more of its Significant
Subsidiaries having an outstanding principal
amount of $25 million
or more individually or $50 million or more
in the aggregate for all
such issues of all such persons, an event of
default that has caused
the holder thereof to declare such
indebtedness to be due and payable
prior to its stated maturity and such
indebtedness has not been
discharged in full or such acceleration has
not been rescinded or
annulled within 30 days of such acceleration;
(e) any final judgment
or order (not covered by insurance) for the
payment of money in
excess of $25 million individually or $50
million in the aggregate
for all such final judgments or orders
against all such persons shall
be rendered against the Company or any of its
Significant
Subsidiaries and shall not be paid or
discharged; and (f) with
respect to the Company, the occurrence of
certain acts of bankruptcy
or insolvency or failure to pay debts
generally as they come due.
If an Event of Default (other than an Event
of Default specified in
clause (f) above) occurs and is continuing
under the Indenture, the
Trustee or the Holders of at least 25% in
aggregate principal amount
of the New Unsecured Notes then outstanding,
by written notice to the
Company (and to the Trustee if such notice is
given by the Holders),
may, and the Trustee at the request of the
Holders shall, declare the
entire unpaid principal of and accrued
interest on the New Unsecured
Notes to be immediately due and payable.
Upon a declaration of
acceleration, such principal of and accrued
interest on the New
Unsecured Notes shall be immediately due and
payable. In the event
of a declaration of acceleration because an
Event of Default set
forth in clause (d) above has occurred and is
continuing, such
declaration of acceleration shall be
automatically rescinded and
annulled if the event of default triggering
such Event of Default
pursuant to clause (d ) shall be remedied,
cured by the Company or
waived by the holders of the relevant
indebtedness within 60 days
after the declaration of acceleration with
respect thereto. If an
Event of Default specified in clause (f)
above occurs, all unpaid
principal of and accrued interest on the New
Unsecured Notes then
outstanding shall ipso facto become and be
immediately due and
payable without any declaration or other act
on the part of the
Trustee or any Holder. The Holders of at
least a majority in
principal amount of the outstanding New
Unsecured Notes, by written
notice to the Company and the Trustee, may
waive all past defaults
and rescind and annul a declaration of
acceleration and its
consequences if (i) all existing Events of
Default, other than the
nonpayment of the principal of and interest
on the New Unsecured
Notes that have become due solely by such
declaration of
acceleration, have been cured or waived and
(ii) the rescission would
not conflict with any judgment or decree of a
court of competent
jurisdiction.
<PAGE>
EXHIBIT 7:
NEW COMMON STOCK REGISTRATION RIGHTS AGREEMENT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
by and among
WALTER INDUSTRIES, INC.
and
THE HOLDERS NAMED HEREIN
Dated as of , 1994
<PAGE>
Table of Contents
Page
1. Definitions 7-1
2. Initial Registration Under the Securities Act 7-2
(a) Shelf Registration 7-2
(b) Effective Registration Statement 7-3
3. Securities Act Registration on Request 7-3
(a) Request 7-3
(b) Registration of Other Securities 7-4
(c) Registration Statement Form 7-4
(d) Effective Registration Statement 7-4
(e) Selection of Underwriters 7-5
(f) Priority in Requested Registration 7-5
(g) Shelf Registrations 7-5
4. Piggyback Registration 7-5
5. Expenses 7-6
6. Registration Procedures 7-6
7. Underwritten Offerings 7-9
(a) Requested Underwritten Offering 7-9
(b) Piggyback Underwritten Offerings; Priority 7-9
(c) Holders of Registrable Common Stock to be
Parties to Underwriting Agreement 7-9
(d) Selection of Underwriters for Piggyback
Underwritten Offering 7-10
(e) Holdback Agreements 7-10
8. Preparation; Reasonable Investigation 7-10
(a) Registration Statements 7-10
(b) Confidentiality 7-10
9. Postponements 7-11
10. Indemnification 7-11
(a) Indemnification by the Company 7-11
(b) Indemnification by the Offerors and
Sellers 7-12
(c) Notices of Losses, etc. 7-12
(d) Contribution 7-12
(e) Other Indemnification 7-13
(f) Indemnification Payments 7-13
11. Registration Rights to Others 7-13
12. Adjustments Affecting Registrable Common Stock 7-13
13. Rule 144 and Rule 144A 7-13
14. Amendments and Waivers 7-14
15. Nominees for Beneficial Owners 7-14
16. Assignment 7-14
17. Calculation of Percentage or Number of Shares of
Registrable Common Stock 7-14
18. Miscellaneous 7-14
(a) Further Assurances 7-14
(b) Headings 7-14
(c) No Inconsistent Agreements 7-14
(d) Remedies 7-14
(e) Entire Agreement 7-15
(f) Notices 7-15
(g) Governing Law 7-15
(h) Severability 7-15
(i) Counterparts 7-15
SCHEDULES:
SCHEDULE A--HOLDERS OF REGISTRABLE COMMON STOCK
SCHEDULE B--NOTICES
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of , 1994, by and
among Walter Industries, Inc., a corporation (the "Company"),
and the holders of Registrable Common Stock (as
hereinafter defined) who are signatories or are deemed to be
signatories to this Agreement pursuant to the Plan (as
hereinafter defined) and any subsequent transferee thereof (the
"Holders").
This Agreement is being entered into in connection with
the acquisition, on the
date hereof, by certain holders (the "Original Holders"),
pursuant to the Plan, of the
Class A Stock and Class B Stock (each as hereinafter defined).
Upon the issuance of the
Class A Stock and Class B Stock, each Original Holder will own
the number of shares of
Class A Stock and Class B Stock specified with respect to such
Original Holder in Schedule A hereto.
To induce the Holders of Registrable Stock to vote in
favor of the Plan and to
accept the issuance of the Common Stock by the Company under the
Plan, the Company has
undertaken to register Registrable Common Stock under the
Securities Act and to take
certain other actions with respect to the Registrable Common
Stock. This Agreement sets forth the terms and conditions of
such undertaking.
In consideration of the premises and the mutual agreements
set forth herein, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein,
capitalized terms used herein and in the recitals above shall
have the following meanings:
"Affiliate" of a Person means any Person that
controls, is under common control with, or is controlled
by, such other Person. For purposes of this
definition, "control" means the ability of one Person to
direct the management and policies of another Person.
"Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York
City are authorized or required by law to be closed.
"Class A Stock" means the shares of common stock,
$.01 par value per share, of the Company issued on the
date hereof, as adjusted to reflect any merger,
consolidation, recapitalization, reclassification,
split-up, stock dividend, rights
offering or reverse stock split made, declared or effected
with respect to the Class A Stock.
"Class B Stock" means the shares of common stock,
$.01 par value per share,
of the Company issued on the date hereof, as adjusted to
reflect any merger, consolidation, recapitalization,
reclassification, split-up, stock dividend, rights
offering or reverse stock split made, declared or effected
with respect to the Class B Stock.
"Commission" means the U.S. Securities and Exchange
Commission.
"Common Stock" means, collectively, the Class B
Stock and the Conversion Stock.
"Conversion Stock" means the shares of Class B Stock
issued or issuable upon conversion of the Class A Stock.
For purposes of this Agreement, a Holder shall
be deemed to hold unissued shares of Conversion Stock to
the extent that such shares are issuable upon conversion
of the shares of Class A Stock, if any, held by such Holder.
"Effective Date" means the effective date of the
Plan pursuant to the terms thereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations
thereunder, or any similar or successor statute.
"Expenses" means, except as set forth in Section 5
hereof, all expenses incident to the Company's performance
of or compliance with its obligations under
this Agreement, including, without limitation, all
registration, filing, listing
and NASD fees, all fees and expenses of complying with
state securities or blue sky
laws, all word processing, duplicating and printing
expenses, messenger and
delivery expenses, the fees, disbursements and other
charges of counsel for the
Company and of its independent public accountants,
including the expenses incurred
in connection with "cold comfort" letters required by or
incident to such
performance and compliance, any fees and disbursements of
underwriters customarily
paid by issuers or sellers of securities and the
reasonable fees, disbursements and
other charges of one firm of counsel (per registration
prepared) to the holders of
Registrable Common Stock making a request pursuant to
Section 3(a) hereof (selected
by the Holders holding a majority of the shares of
Registrable Common Stock covered
by such registration), but excluding underwriting
discounts and commissions and
applicable transfer taxes, if any, which discounts,
commissions and transfer taxes
shall be borne by the seller or sellers of Registrable
Common Stock in all cases;
provided, that, in the event the Company shall, in
accordance with Section 4 or
Section 9 hereof, not register any securities with respect
to which it had given
written notice of its intention to register to holders of
Registrable Common Stock,
notwithstanding anything to the contrary in the foregoing,
all of the costs
incurred by Requesting Holders in connection with such
registration shall be deemed to be Expenses.
"Initiating Holders" has the meaning set forth in
Section 3(a) hereof.
"NASD" means the National Association of Securities
Dealers, Inc.
"NASDAQ" means the National Association of
Securities Dealers, Inc. Automated Quotation System.
"Note Registration Rights Agreement" means the
Registration Rights
Agreement, dated as of , 1994, among the Company and the
holders of Registrable
Notes (as defined therein) who are signatories or are
deemed to be signatories thereto.
"Notes" means $[] in aggregate principal amount of
[]1 issued on the date
hereof, and includes any securities of the Company issued
or issuable with respect
to such securities by way of a recapitalization, merger,
consolidation or other reorganization or otherwise.
"Person" means any individual, corporation,
partnership, firm, joint venture, association, joint stock
company, trust, unincorporated organization, governmental or
regulatory body or subdivision thereof or other entity.
"Plan" means the Creditors' Plan of Reorganization
under Chapter 11 of the United States Bankruptcy Code for
Walter Industries, Inc., as the same may be amended, modified or
supplemented from time to time in accordance with the terms
thereof.
"Public Offering" means a public offering and sale
of Common Stock pursuant to an effective registration
statement under the Securities Act.
"Registrable Class B Stock" means any of the Class B
Stock held by the Holders from time to time as to which
registration pursuant to the Securities Act is required for
public sale.
"Registrable Common Stock" means the (i) Registrable
Class B Stock and (ii) the Registrable Conversion Stock.
"Registrable Conversion Stock" means any of the
Conversion Stock (including Conversion Stock issuable upon
conversion of Class A Stock) held by the Holders from time to
time as to which registration pursuant to the Securities Act is
required for a public sale.
"Requesting Holders" has the meaning set forth in
Section 4 hereof.
"Securities Act" means the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or
any similar or successor statute.
_______________________
1 Insert principal amount and title of Notes issued by the
Company.
"Selling Holders" means the holders of Registrable
Common Stock requested
to be registered pursuant to Section 3(a) hereof.
"Transfer" means any transfer, sale, assignment,
pledge, hypothecation or
other disposition of any interest. "Transferor" and
"Transferee" have correlative meanings.
2. Initial Registration Under the Securities Act.
(a) Shelf Registration. The Company shall (i)
cause to be filed not later than 45 days after the
Effective Date a shelf registration statement pursuant to
Rule 415 promulgated under the Securities Act (a "Shelf
Registration") providing for the sale by the Holders of
all of the Registrable Common Stock and (ii) use its
best efforts to have such Shelf Registration declared
effective by the Commission not later than 90 days after
the Effective Date. The Company agrees to use its
best efforts to keep the Shelf Registration continuously
effective until the first
anniversary of the date such Shelf Registration is
declared effective by the
Commission or such shorter period which will terminate
when all of the Registrable
Common Stock covered by the Shelf Registration have been
sold pursuant to the Shelf
Registration. The Company further agrees, if necessary,
to supplement or amend the
Shelf Registration, if required by the rules, regulations
or instructions
applicable to the registration form used by the Company
for such Shelf Registration
or by the Securities Act or by any other rules and
regulations thereunder for shelf
registration, and the Company agrees to furnish to the
Holders copies of any such
supplement or amendment promptly after its being issued or
filed with the Commission.
(b) Effective Registration Statement. A Shelf
Registration pursuant to Section 2(a) hereof shall not be
deemed to have been effected
(i) unless a registration statement with
respect thereto has been
declared effective by the Commission and remains
effective in compliance
with the provisions of the Securities Act and the
laws of any state or other
jurisdiction applicable to the disposition of all
Registrable Common Stock
covered by such registration statement until such
time as all of such
Registrable Common Stock have been disposed of in
accordance with such
registration statement (provided that such period
need not exceed one year), or,
(ii) if, after it has become effective, such
registration is interfered with by any stop order,
injunction or other order or requirement
of the Commission or other governmental or
regulatory agency or court for
any reason other than a violation of applicable law
solely by the Holders
and has not thereafter become effective.
3. Securities Act Registration on Request.
(a) Request. At any time and from time to
time after the expiration
of the Shelf Registration filed by the Company
pursuant to Section 2(a)
hereof (the "Initial Shelf"), one or more Holders
(the "Initiating Holders")
may make a written request (the "Initiating
Request") to the Company for the
registration with the Commission under the
Securities Act of all or part of
such Initiating Holders' Registrable Common Stock;
provided, however, that
such request shall be made by the Holders of at
least 20% of the outstanding
shares of Registrable Common Stock. Upon the
receipt of any Initiating
Request for registration pursuant to this paragraph,
the Company promptly
shall notify in writing all other Holders of the
receipt of such request and
will use its best efforts to effect, at the earliest
possible date, such
registration under the Securities Act, including a
Shelf Registration, of
(i) the Registrable Common Stock
which the Company has been
so requested to register by such Initiating
Holder, and
(ii) all other Registrable Common
Stock which the Company has
been requested to register by any other
Holders by written request
given to the Company within 30 days after the
giving of written
notice by the Company to such other Holders
of the Initiating Request,
all to the extent necessary to permit the disposition (in
accordance with Section 3(c) hereof) of the Registrable
Common Stock so to be registered; provided, that,
(A) the Company shall not be
required to effect more
than a total of two registrations
pursuant to this Section 3(a),
(B) if the intended method of
distribution is an
underwritten public offering, the
Company shall not be
required to effect such registration
pursuant to this Section 3(a) unless
such underwriting shall be conducted on a "firm commitment"
basis,
(C) if the Company shall have
previously effected a
registration pursuant to this Section
3(a) or shall have
previously effected a registration of
which notice has been
given to the Holders pursuant to
Section 4 hereof, the Holders
shall not request and the Company
shall not be required to
effect any registration pursuant to
this Section 3(a) or
Section 4 hereof until a period of 180
days shall have elapsed
from the effective date of such
registration,
(D) subject to the last
sentence of Section 5(a)
hereof, any Holder whose Registrable
Common Stock was to be
included in any such registration, by
written notice to the
Company may withdraw such request and,
on receipt of such
notice of the withdrawal of such
request from Holders holding
a percentage of Common Stock, such
that the Holders that have
not elected to withdraw do not hold,
in the aggregate, the
requisite percentage of the Common
Stock to initiate a request
under this Section 3(a), the company
shall not effect such
registration, and
(E) the Company shall not be
required to effect any
registration to be effected pursuant
to this Section 3(a)
unless at least 20% of the shares of
Common Stock outstanding
at the time of such request is to be
included in such registration.
(b) Registration of other Securities.
Whenever the Company
shall effect a registration pursuant to
Section 3(a) hereof, no
securities other than (i) Registrable Common
Stock and
(ii) Registrable Notes to be included in such
registration pursuant
to Section 4 of the Note Registration Rights
Agreement shall be
included among the securities covered by such
registration unless the
Selling Holders holding not less than a
majority of the shares of
Registrable Common Stock to be covered by
such registration shall
have consented in writing to the inclusion of
such other securities.
(c) Registration Statement Form.
Registrations under Section
3(a) hereof shall be on such appropriate
registration form prescribed
by the Commission under the Securities Act as
shall be selected by
the Company and as shall permit the
disposition of the Registrable
Common Stock pursuant to an underwritten
offering unless the Selling
Holders holding at least a majority of the
shares of Registrable
Common Stock requested to be included in such
registration statement
determine otherwise, in which case pursuant
to the method of
disposition determined by such Selling
Holders. The Company agrees
to include in any such registration statement
filed pursuant to
Section 3(a) hereof all information which any
Selling Holder, upon
advice of counsel, shall reasonably request.
The Company may, if
permitted by law, effect any registration
requested under this
Section 3 by the filing of a registration
statement on Form S-3 (or
any successor or similar short form
registration statement).
(d) Effective Registration Statement.
A registration
requested pursuant to Section 3(a) hereof
shall not be deemed to have
been effected
(i) unless a registration
statement with respect
thereto has been declared effective by
the Commission and
remains effective in compliance with
the provisions of the
Securities Act and the laws of any
state or other jurisdiction
applicable to the disposition of all
Registrable Common Stock
covered by such registration statement
until such time as all
of such Registrable Common Stock have
been disposed of in
accordance with such registration
statement, provided, that,
except with respect to any Shelf
Registration, such period
need not exceed nine months, and,
provided, further, that with
respect to any Shelf Registration,
such period need not extend
beyond the period provided for in
section 3(g) hereof,
(ii) if, after it has become
effective, such
registration is interfered with by any
stop order, injunction
or other order or requirement of the
Commission or other
governmental or regulatory agency or
court for any reason
other than a violation of applicable
law solely by the Selling
Holders and has not thereafter become
effective or
(iii) if, in the case of an
underwritten offering, the
conditions to closing specified in an
underwriting agreement
to which the Company is a party are
not satisfied other than
by reason of any breach or failure by
Selling Holders, or are
not otherwise waived.
The holders of Registrable Common Stock to be
included in a registration
statement may at any time terminate a request for
registration made pursuant to
Section 3(a) in accordance with Section 3(a) (ii) (D).
Expenses incurred in
connection with a request for registration terminated
pursuant to this paragraph
shall be paid in accordance with the last sentence of
Section 5(a) hereof.
(e) Selection of Underwriters. The underwriter or
underwriters of each underwritten offering, if any, of the
Registrable Common Stock to be registered pursuant to Section
3(a) hereof (i) shall be a nationally recognized underwriter
(or underwriters), (ii) shall be selected by the Selling
Holders owning at least a majority of the shares of
Registrable Common Stock to be registered and (iii)
shall be reasonably acceptable to the Company.
(f) Priority in Requested Registration. If a
registration under Section 3 hereof involves an
underwritten public offering, and the managing underwriter of
such underwritten offering shall advise the Company in
writing (with a copy to each
Holder requesting that Registrable Common Stock be
included in such registration
statement) that, in its opinion, the number of shares of
Registrable Common Stock
requested to be included in such registration exceeds the
number of such securities
that can be sold in such offering within a price range
acceptable to the Selling
Holders owning at least a majority of the shares of
Registrable Common Stock
requested to be included in such registration, the Company
shall include in such
registration, to the extent of the number and type of
securities which the Company
is advised can be sold in such offering, (i) all
Registrable Common Stock requested
to be registered pursuant to Section 3(a) hereof, pro rata
among the Selling
Holders on the basis of the number of shares of
Registrable Common Stock requested
to be registered by all such holders and (ii) all
Registrable Notes (if any)
requested to be registered pursuant to Section 4 of the
Note Registration Rights
Agreement by the holders thereof, pro rata among such
holders on the basis of the
aggregate principal amount of Registrable Notes requested
to be registered by all such holders.
(g) Shelf Registrations. If the first demand made
pursuant to Section 3(a)
hereof is for a Shelf Registration, the period for which
such Shelf Registration
must remain effective need not extend beyond one year from
the date on which such
Shelf Registration is declared effective by the Commission
and the period for which
any subsequent Shelf Registration must remain effective
need not extend beyond nine
months from the date on which such Shelf Registration is
declared effective by the Commission.
4. Piggyback Registration. If the Company at any
time after the
termination of its Initial Shelf, proposes to register any
of its securities
(including, without limitation, any registration of
Registrable Notes pursuant to
the Note Registration Rights Agreement) under the
Securities Act by registration
on any forms other than Form S-4 or S-8 (or any successor
or similar forms(s)),
whether or not pursuant to registration rights granted to
other holders of its
securities and whether or not for sale for its own
account, it shall give prompt
written notice to all of the Holders of its intention to
do so and of such Holders'
rights (if any) under this Section 4, which notice, in any
event, shall be given
at least 30 Business Days prior to such proposed
registration. Upon the written
request of any Holder receiving notice of such proposed
registration that is a
holder of Registrable Common Stock (a "Requesting Holder")
made within 20 Business
Days after the receipt of any such notice (10 Business
Days if the Company states
in such written notice or gives telephonic notice to the
relevant securityholders,
with written confirmation to follow promptly thereafter,
stating that (i) such
registration will be on Form S-3 and (ii) such shorter
period of time is required
because of a planned filing date), which request shall
specify the Registrable
Common Stock intended to be disposed of by such Requesting
Holder, the Company
shall, subject to Section 7(b) hereof, effect the
registration under the Securities
Act of all Registrable Common Stock which the Company has
been so requested to register by the Requesting Holders
thereof; provided, that,
(A) prior to the effective date of
the registration statement
filed in connection with such registration,
immediately upon
notification to the Company from the managing
underwriter of the
price at which such securities are to be
sold, the Company shall so
advise each Requesting Holder of such price,
and if such price is
below the price which any Requesting Holder
shall have indicated to
be acceptable to such Requesting Holder, such
Requesting Holder shall
then have the right to withdraw its request
to have its Registrable
Common Stock included in such registration
statement without
prejudice to the rights of any holder or
holders of Registrable
Common Stock to include Registrable Common
Stock in any future
registration (or registrations) pursuant to
this Section 4 or to
cause such registration to be effected as a
registration under
Section 3(a) hereof, as the case may be; and
(B) if at any time after giving
written notice of its
intention to register any securities and
prior to the effective date
of the registration statement filed in
connection with such
registration, the Company shall determine for
any reason not to
register or to delay registration of such
securities, the Company
may, at its election, give written notice of
such determination to
each Requesting Holder and (i) in the case of
a determination not to
register, shall be relieved of its obligation
to register any
Registrable Common Stock in connection with
such registration (but
not from any obligation of the Company to pay
the Expenses in
connection therewith), without prejudice,
however, to the rights of
any Holder to include Registrable Common
Stock in any future
registration (or registrations) pursuant to
this Section 4 or to
cause such registration to be effected as a
registration under
Section 3(a) hereof, as the case may be, and
(ii) in the case of a
determination to delay registering, shall be
permitted to delay
registering any Registrable Common Stock, for
the same period as the
delay in registering such other securities.
No registration effected under this Section 4 shall
relieve the Company of its obligation to effect any
registration upon request under Section 3(a) hereof
and no registration effected pursuant to this Section 4 shall be
deemed to have been effected pursuant to Section 3(a) hereof.
5. Expenses. The Company shall pay all Expenses in
connection with any registration initiated pursuant to
Sections 2(a), 3(a) or 4 hereof, whether or not such registration
shall become effective and whether or not all or any portion of
the Registrable Common Stock originally requested to be
included in such registration are ultimately included in such
registration Notwithstanding the foregoing, if any request for
registration made pursuant to Section 3(a) hereof is
withdrawn or terminated by the Selling Holders prior to
the registration becoming effective, the Expenses incurred in
connection with such request shall be borne by the Selling
Holders pro rata on the basis of the number of shares of
Registrable Common Stock requested to be registered pursuant to
such demand by each Selling Holder; provided, however, that, in
the case of an underwritten Public Offering, if such request for
registration is withdrawn or terminated by the Selling Holders
prior to the registration becoming effective because the
offering price of the Registrable Common Stock requested to be
registered would, in the opinion of the managing underwriter of
such offering, be less than 90% of the estimated offering
price of the Common Stock as indicated in writing by the
managing underwriter prior to the initial filing of such
registration statement with the Commission, the Company shall pay
all Expenses in connection with such registration.
6. Registration Procedures. If and whenever the
Company is required to effect any registration under the
Securities Act as provided in Sections 2(a), 3(a) and 4 hereof,
the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission
(promptly and, in the case of any registration
pursuant to Section 3(a) or 4, in any event on or before
the date that is (i) 90 days after the end of the
period within which requests for registration may be
given to the Company or (ii) if, as of such
ninetieth day, the Company does not have the audited
financial statements required to be included in the
registration statement, 30 days after the
receipt by the Company from its independent public
accountants of such
audited financial statements, which the Company
shall use its best efforts
to obtain as promptly as practicable) the requisite
registration statement
to effect such registration and thereafter use its
best efforts to cause
such registration statement to become effective;
provided, however, that the
Company may discontinue any registration of its
securities that are not
shares of Registrable Common Stock (and, under the
circumstances specified
in Section 4 hereof, its securities that are shares
of Registrable Common
Stock) at any time prior to the effective date of
the registration statement
relating thereto;
(b) prepare and file with the Commission
such amendments and
supplements to such registration statement and the
prospectus used in
connection therewith as may be necessary to keep
such registration statement
effective and to comply with the provisions of the
Securities Act with
respect to the disposition of all Registrable Common
Stock covered by such
registration statement until such time as all of
such Registrable Common
Stock has been disposed of in accordance with the
method of disposition set
forth in such registration statement; provided,
that, except with respect
to any Shelf Registration, such period need not
extend beyond nine months
after the effective date of the registration
statement; and provided,
further, that with respect to the Initial Shelf,
such period need not extend
beyond one year after the effective date of such
registration statement and,
with respect to any Shelf Registration other than
the Initial Shelf, such
period need not exceed the applicable period
provided for in Section 3(g)
hereof;
(c) furnish to each seller of Registrable
Common Stock covered by
such registration statement such number of copies of
such drafts and final
conformed versions of such registration statement
and of each such amendment
and supplement thereto (in each case including all
exhibits), such number
of copies of such drafts and final versions of the
prospectus contained in
such registration statement (including each
preliminary prospectus and any
summary prospectus) and any other prospectus filed
under Rule 424 under the
Securities Act, in conformity with the requirements
of the Securities Act,
and such other documents, as such seller may
reasonably request;
(d) use its best efforts (i) to register or
qualify all Registrable
Common Stock and other securities covered by such
registration statement
under such other securities or blue sky laws of such
states or other
jurisdictions of the United States of America as the
sellers of Registrable
Common Stock covered by such registration statement
shall request, (ii) to
keep such registration or qualification in effect
for so long as such
registration statement remains in effect and (iii)
to take any other action
that may be reasonably necessary or advisable to
enable such sellers to
consummate the disposition in such jurisdictions of
the securities to be
sold by such sellers, except that the Company shall
not for any such purpose
be required to qualify generally to do business as a
foreign corporation in
any jurisdiction wherein it would not but for the
requirements of this
subsection (d) be obligated to be so qualified or to
consent to general
service of process in any such jurisdiction;
(e) use it best efforts to cause all
Registrable Common Stock and
other securities covered by such registration
statement to be registered
with or approved by such other federal or state
governmental agencies or
authorities as may be necessary in the opinion of
counsel to the Company and
counsel to the seller or sellers of Registrable
Common Stock to enable the
seller or sellers thereof to consummate the
disposition of such Registrable Common Stock;
(f) furnish to each seller of Registrable
Common Stock, and each
such seller's underwriters, if any, a signed
(i) opinion of counsel for the
Company, dated the effective
date of such registration statement (and, if
such registration
involves an underwritten offering, dated the
date of the closing
under the underwriting agreement), reasonably
satisfactory in form
and substance to such seller, and
(ii) "comfort" letter, dated the
effective date of such
registration statement (and, if such
registration involves an
underwritten offering, dated the date of the
closing under the
underwriting agreement) and signed by the
independent public
accountants who have certified the Company's
financial statements
included or incorporated by reference in such
registration statement,
reasonably satisfactory in form and substance
to such seller,
in each case, covering substantially the same
matters with respect to such
registration statement (and the prospectus included
therein) and, in the
case of the accountants' comfort letter, with
respect to events subsequent
to the date of such financial statements, as are
customarily covered in
opinions of issuer's counsel and in accountants'
comfort letters delivered
to underwriters in underwritten Public Offerings of
securities and, in the
case of the accountants' comfort letter, such other
financial matters, and,
in the case of the legal opinion, such other legal
matters, as the sellers
of the Registrable Common Stock covered by such
registration statement or
the underwriters, if any, may reasonably request;
(g) notify each seller of Registrable Common
Stock and other securities covered by such
registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of
any event as a result of which, the prospectus
included in such registration statement, as then in
effect, includes an untrue statement of a material
fact or omits to state any material fact required to
be stated therein or necessary to make the
statements therein not misleading in the light of
the circumstances under
which they were made, and, at the request of any
such seller of Registrable
Common Stock, promptly prepare and furnish to it a
reasonable number of
copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such
securities, such prospectus, as supplemented or
amended, shall not include an untrue statement of a
material fact or omit to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading in the light
of the circumstances under which they were made;
(h) otherwise comply with all applicable
rules and regulations of
the Commission and any other governmental agency or
authority having
jurisdiction over the offering, and make available
to its security holders,
as soon as reasonably practicable, an earnings
statement covering the period
of at least twelve months, but not more than
eighteen months, beginning with
the first full calendar month after the effective
date of such registration
statement, which earnings statement shall satisfy
the provisions of
Section 11(a) of the Securities Act and Rule 158
promulgated thereunder, and
furnish to each seller of Registrable Common Stock
at least ten days prior
to the filing thereof a copy of any amendment or
supplement to such registration statement or
prospectus;
(i) upon a request of the Holders of a
majority of the shares of
Registrable Common Stock requested to be included in
a registration pursuant
to Section 3(a) or 4 hereof, made at any time on and
after the first
anniversary of the date hereof, use its best efforts
to cause all such
Registrable Common Stock covered by such
registration statement (i) to be
listed on a national securities exchange on which
similar securities issued
by the Company are then listed, if the listing of
such Registrable Common
Stock is then permitted under the rules of such
exchange or (ii) if the
Company is not required pursuant to clause (i) above
to list such securities
covered by such registration statement on a national
securities exchange,
use its best efforts to secure designation of all
Registrable Common Stock
covered by such registration statement as a NASDAQ
"national market system
security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing
that, to secure NASDAQ authorization for such
Registrable Common Stock and,
without limiting the generality of the foregoing, to
arrange for at least
two market makers to register with the NASD as such
with respect to such Registrable Common Stock; and
(j) enter into such agreements and take such
other actions as any Holder or Holders of
Registrable Common Stock covered by such registration
statement shall reasonably request in order to
expedite or facilitate the disposition of such
Registrable Common Stock.
The Company may require each seller of Registrable
Common Stock as to which
any registration is being effected to furnish the Company
such information regarding such seller and the
distribution of the securities covered by such
registration statement as the Company may from time to
time reasonably request in
writing and as is required by applicable laws and
regulations.
Each Holder agrees that as of the date that a final
prospectus is made
available to it for distribution to prospective purchasers
of Registrable Common
Stock it shall cease to distribute copies of any
preliminary prospectus prepared
in connection with the offer and sale of such Registrable
Common Stock. Each
Holder further agrees that, upon receipt of any notice
from the Company of the
happening of any event of the kind described in subsection
(g) of this Section 6,
such Holder shall forthwith discontinue such Holder's
disposition of Registrable
Common Stock pursuant to the registration statement
relating to such Registrable
Common Stock until such Holder's receipt of the copies of
the supplemented or
amended prospectus contemplated by subsection (g) of this
Section 6 and, if so
directed by the Company, shall deliver to the Company (at
the Company's expense)
all copies, other than permanent file copies, then in such
Holder's possession of
the prospectus relating to such Registrable Common Stock
current at the time of
receipt of such notice. If any event of the kind
described in subsection (g) of
this Section 6 occurs and such event is the fault solely
of a Holder (or Holders),
such Holder (or Holders) shall pay all Expenses
attributable to the preparation,
filing and delivery of any supplemented or amended
prospectus contemplated by subsection (g) of this Section 6.
7. Underwritten Offerings.
(a) Requested Underwritten Offerings. If
requested by the
underwriters in connection with a request for a
registration under Section 3
hereof, the Company shall enter into a firm
commitment underwriting
agreement with such underwriters for such offering,
such agreement to be
reasonably satisfactory in substance and form to the
majority of the Selling
Holders whose Registered Common Stock is included in
such registration, and
the underwriters and to contain such representations
and warranties by the
Company and such other terms as are generally
prevailing in agreements of
that type, including, without limitation,
indemnification and contribution
to the effect and to the extent provided in Section
10 hereof.
(b) Piggyback Underwritten Offerings;
Priority. If the Company
proposes to register any of its securities under the
Securities Act as
contemplated by Section 4 hereof and such securities
are to be distributed
by or through one or more underwriters, the Company
shall, if requested by
any Requesting Holders, use its best efforts to
arrange for such
underwriters to include all of the Registrable
Common Stock to be offered
and sold by such Requesting Holders among the
securities of the Company to
be distributed by such underwriters; provided, that,
if the managing
underwriter of such underwritten offering shall
advise the Company in
writing (with a copy to the Requesting Holders) that
if all the Registrable
Common Stock requested to be included in such
registration were so included,
in its opinion, the number and type of securities
proposed to be included
in such registration would exceed the number and
type of securities which
could be sold in such offering within a price range
acceptable to the
Company, the Requesting Holders holding a majority
of the shares of
Registrable Common Stock requested to be included in
such registration (such
writing to state the basis of such opinion and the
approximate number and
type of securities which may be included in such
offering without such
effect), then the Company shall include in such
registration, to the extent
of the number and type of securities which the
Company is so advised can be
sold in such offering, (i) first, securities that
the Company proposes to
issue and sell for its own account and (ii) second,
Registrable Common Stock
requested to be registered by Requesting Holders
pursuant to Section 4
hereof and the Registrable Notes requested to be
registered pursuant to
Section 4 of the Note Registration Rights Agreement,
(A) pro rata among the
Requesting Holders on the basis of the number of
shares of Registrable
Common Stock requested to be registered by all such
Requesting Holders and
(B) pro rata among the holders of the Registrable
Notes on the basis of the
aggregate principal amount of Registrable Notes
requested to be registered by such holders.
Any Requesting Holder may withdraw its
request to have all or any
portion of its Registrable Common Stock included in
any such offering by
notice to the Company within 10 Business Days after
receipt of a copy of a
notice from the managing underwriter pursuant to
this Section 7(b).
(c) Holders of Registrable Common Stock to
be Parties to
Underwriting Agreement. The holders of Registrable
Common Stock to be
distributed by underwriters in an underwritten
offering contemplated by
subsections (a) or (b) of this Section 7 shall be
parties to the
underwriting agreement between the Company and such
underwriters and any
such Holder, at its option, may require that any or
all of the
representations and warranties by, and the other
agreements on the part of,
the Company to and for the benefit of such
underwriters shall also be made
to and for the benefit of such Holders and that any
or all of the conditions
precedent to the obligations of such underwriters
under such underwriting
agreement be conditions precedent to the obligations
of such Holders. No
such Holder shall be required to make any
representations or warranties to
or agreements with the Company or the underwriters
other than
representations, warranties or agreements regarding
such holder, such
Holder's Registrable Common Stock and such Holder's
intended method of distribution.
(d) Selection of Underwriters for Piggyback
Underwritten Offering.
The underwriter or underwriters of each piggyback
underwritten offering
pursuant to this Section 7 shall be a nationally
recognized underwriter (or
underwriters) selected by the Company.
(e) Holdback Agreements. Each Holder
agrees, if so required by the
managing underwriter for any underwritten offering
pursuant to this
Agreement, not to effect any sale or distribution of
equity securities of
the Company or securities convertible into or
exchangeable or exercisable
for equity securities of the Company issued after
the date hereof during the
10 days prior to the date on which an underwritten
registration of
Registrable Common Stock pursuant to Section 2(a), 3
or 4 hereof has become
effective and until 120 days after the effective
date of such underwritten
registration, except as part of such underwritten
registration or to the
extent that such Holder is prohibited by applicable
law from agreeing to
withhold securities from sale or is acting in its
capacity as a fiduciary
or an investment adviser. Without limiting the
scope of the term
"fiduciary," a holder shall be deemed to be acting
as a fiduciary or an
investment adviser if its actions or the securities
proposed to be sold are
subject to the Employee Retirement Income Security
Act of 1974, as amended,
the Investment Company Act of 1940, as amended, or
the Investment Advisers
Act of 1940, as amended, or if such securities are
held in a separate
account under applicable insurance law or
regulation.
The Company agrees (i) not to effect any
Public Offering or distribution of any equity
securities of the Company or securities convertible into or
exchangeable or exercisable for equity securities of the
Company, during the 10 days prior to the date on
which any underwritten registration pursuant to
Section 2(a), 3 or 4 hereof has become effective
and until 120 days after the effective date of such
underwritten registration, except as part of such
underwritten registration, and (ii) to
cause each holder of any equity securities, or
securities convertible into
or exchangeable or exercisable for equity
securities, in each case, acquired
from the Company at any time on or after the date of
this agreement (other than in a Public Offering), to
agree not to effect any Public Offering or
distribution of such securities, during such period.
8. Preparation; Reasonable Investigation.
(a) Registration Statements. In connection
with the preparation and
filing of each registration statement under the
Securities Act pursuant to
this Agreement, the Company shall give each holder
of Registrable Common
Stock registered under such registration statement,
the underwriters, if
any, and its respective counsel and accountants the
opportunity to
participate in the preparation of such registration
statement, each
prospectus included therein or filed with the
Commission, and each amendment
thereof or supplement thereto, and shall give each
of them such access to
its books and records and such opportunities to
discuss the business of the
Company with its officers and the independent public
accountants who have
certified its financial statements as shall be
necessary, in the opinion of
any such Holders' and such underwriters' respective
counsel, to conduct a
reasonable investigation within the meaning of the
Securities Act.
(b) Confidentiality. Each Holder of
Registrable Common Stock shall
maintain the confidentiality of any confidential
information received from
or otherwise made available by the Company to such
Holder of Registrable
Common Stock and identified in writing by the
Company as confidential.
Information that (i) is or becomes available to a
Holder of Registrable
Common Stock from a public source, (ii) is disclosed
to a Holder of
Registrable Common Stock by a third-party source who
the Holder of
Registrable Common Stock reasonably believes has the
right to disclose such
information or (iii) is or becomes required to be
disclosed by a holder of
Registrable Common Stock by law, including by court
order, shall not be
deemed to be confidential information for purposes
of this Agreement. The
Holders of Registrable Common Stock shall not grant
access, and the Company
shall not be required to grant access, to
information under this Section 8
to any Person who will not agree to maintain the
confidentiality (to the
same extent a Holder is required to maintain
confidentiality) of any
confidential information received from or otherwise
made available to it by
the Company or the holders of Registrable Common
Stock under this Agreement
and identified in writing by the Company as
confidential.
9. Postponements. If the Company shall fail to
file any registration statement to be filed pursuant to a
request for registration under Section 3(a)
hereof, the Holders requesting such registration shall
have the right to withdraw the request for registration if
such withdrawal shall be made by holders of Common
Stock holding an amount of Common Stock such that the
Holders that have not elected to withdraw do not hold the
requisite percentage of shares of Common Stock to
initiate a request under Section 3. Any such withdrawal
shall be made by giving written notice to the Company
within 20 days after, in the case of a request
pursuant to Section 3(a) hereof, the date on which a
registration statement would otherwise have been required
to have been filed with the Commission under clause
(i) of Section 6(a) hereof (i.e., 20 days after the date
that is 90 days after the conclusion of the period within
which requests for registration may be given to the
Company, or, if, as of such ninetieth day, the Company
does not have the audited
financial statements required to be included in the
registration statement, 30 days
after the receipt by the Company from its independent
public accounts of such audited financial statements). In
the event of such withdrawal, the request for
registration shall not be counted for purposes of
determining the number of registrations to which Holders
are entitled pursuant to Section 3 hereof. The
Company shall pay all Expenses incurred in connection with
a request for registration withdrawn pursuant to this paragraph.
10. Indemnification.
(a) Indemnification by the Company. In the
connection with any registration statement filed by the Company
pursuant to Section 2(a), 3(a) or 4 hereof, the Company shall,
and hereby agrees to, indemnify and hold harmless, each
Holder and seller of any Registrable Common Stock covered
by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such
Holder or seller or any such underwriter, and their respective
directors, officers, partners, agents and Affiliates (each, a
"Company Indemnitee" for purposes of this Section 10(a)), against
any losses, claims, damages, liabilities (or actions or
proceedings, whether commenced or threatened, in respect
thereof), joint or several, and expenses, including, without
limitation, the reasonable fees, disbursements and other charges
of legal counsel and reasonable costs of investigation, to which
such Company Indemnitee may become subject under the
Securities Act or otherwise (collectively, a "Loss" or
"Losses"), insofar as such Losses arise out of or are based upon
any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which
such securities were registered or otherwise offered or
sold under the Securities Act or otherwise, any preliminary
prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto (collectively,
"Offering Documents"), or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein in the light of the
circumstances in which they were made not misleading;
provided, that, the Company shall not be liable in any
such case to the extent that any such Loss arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Offering Documents in
reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by
or on behalf of such Company Indemnitee specifically stating that
it is expressly for use therein; and provided, further,
that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of
Registrable Common Stock or any other Person, if any, who
controls such underwriter, in any such case to the extent that
any such Loss arises out of such Person's failure to send
or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the
sale of Registrable Common Stock to such Person if such statement
or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Company
Indemnitee and shall survive the transfer of such securities by
such Company Indemnitee.
(b) Indemnification by the Offerors and
Sellers. In connection with
any registration statement filed by the Company
pursuant to Section 2(a),
3(a) or 4 hereof in which a Holder has registered
for sale Registrable
Common Stock, each such Holder or seller of
Registrable Common Stock shall,
and hereby agrees to, indemnify and hold harmless
the Company and each of
its directors and officers and each other Person, if
any, who controls the
Company (each, a "Holder Indemnitee" for purposes of
this Section 10(b)),
against all Losses insofar as such Losses arise out
of or are based upon any
untrue statement or alleged untrue statement of a
material fact contained
in any Offering Documents or any omission or alleged
omission to state
therein a material fact required to be stated
therein or necessary to make
the statements therein in the light of circumstances
in which they were made
not misleading, if such untrue statement or alleged
untrue statement or
omission or alleged omission was made in reliance
upon and in conformity
with written information furnished to the Company
through an instrument duly
executed by such Holder or seller of Registrable
Common Stock specifically
stating that it is expressly for use therein;
provided, however, that the
liability of such indemnifying party under this
Section 10(b) shall be
limited to the amount of the net proceeds received
by such indemnifying
party in the offering giving rise to such liability.
Such indemnity shall
remain in full force and effect, regardless of any
investigation made by or
on behalf of the Holder Indemnitee and shall survive
the transfer of such securities by such Holder.
(c) Notices of Losses, etc. Promptly after
receipt by an
indemnified party of notice of the commencement of
any action or proceeding
involving a Loss referred to in the preceding
subsections of this
Section 10, such indemnified party will, if a claim
in respect thereof is
to be made against an indemnifying party, give
written notice to the latter
of the commencement of such action; provided,
however, that the failure of
any indemnified party to give notice as provided
herein shall not relieve
the indemnifying party of its obligations under the
preceding subsections
of this Section 10, except to the extent that the
indemnifying party is
actually prejudiced by such failure to give notice.
In case any action is
brought against an indemnified party, the
indemnifying party shall be
entitled to participate in and, unless in such
indemnified party's
reasonable judgment a conflict of interest between
such indemnified and
indemnifying parties may exist in respect of such
Loss, to assume and
control the defense thereof, in each case at its own
expense, jointly with
any other indemnifying party similarly notified, to
the extent that it may
wish, with counsel reasonably satisfactory to such
indemnified party, and
after its assumption of the defense thereof, the
indemnifying party shall
not be liable to such indemnified party for any
legal or other expenses
subsequently incurred by the latter in connection
with the defense thereof
other than reasonable costs of investigation. No
indemnifying party shall
be liable for any settlement of any such action or
proceeding effected
without its written consent. No indemnifying party
shall, without the
consent of the indemnified party, consent to entry
of any judgment or enter
into any settlement which does not include as an
unconditional term thereof
the giving by the claimant or plaintiff to such
indemnified party of a
release from all liability in respect of such Loss
or which requires action
on the part of such indemnified party or otherwise
subjects the indemnified
party to any obligation or restriction to which it
would not otherwise be subject.
(d) Contribution. If the indemnification
provided for in this
Section 10 shall for any reason be unavailable to an
indemnified party under
subsection (a) or (b) of this Section 10 in respect
of any Loss, then, in
lieu of the amount paid or payable under subsection
(a) or (b) of this
Section 10, the indemnified party and the
indemnifying party under
subsection (a) or (b) of this Section 10 shall
contribute to the aggregate
Losses (including legal or other expenses reasonably
incurred in connection
with investigating the same) (i) in such proportion
as is appropriate to
reflect the relative fault of the Company and the
prospective sellers of
Registrable Common Stock covered by the registration
statement which
resulted in such Loss or action in respect thereof,
with respect to the
statements, omissions or action which resulted in
such Loss or action in
respect thereof, as well as any other relevant
equitable considerations, or
(ii) if the allocation provided by clause (i) above
is not permitted by
applicable law, in such proportion as shall be
appropriate to reflect the
relative benefits received by the Company, on the
one hand, and such
prospective sellers, on the other hand, from their
sale of Registrable
Common Stock; provided, that, for purposes of this
clause (ii), the relative
benefits received by the prospective sellers shall
be deemed not to exceed
the amount received by such sellers. No Person
guilty of fraudulent
misrepresentation (within the meaning of Section
11(f) of the Securities
Act) shall be entitled to contribution from any
Person who was not guilty
of such fraudulent misrepresentation. The
obligations, if any, of the
selling holders of Registrable Common Stock to
contribute as provided in
this subsection (d) are several in proportion to the
relative value of their
respective Registrable Common Stock covered by such
registration statement
and not joint. In addition, no Person shall be
obligated to contribute
hereunder any amounts in payment for any settlement
of any action or Loss effected without such Person's consent.
(e) Other Indemnification. The Company and,
in connection with any
registration statement filed by the Company pursuant
to Section 2(a) each
Holder shall, and, in connection with any
registration statement filed by
the Company pursuant to section 3(a) or 4, each
Holder who has registered
for sale Registrable Common Stock, shall, with
respect to any required
registration or other qualification of securities
under any Federal or state
law or regulation of any governmental authority
other than the Securities
Act, indemnify Holder Indemnitees and Company
Indemnitees, respectively,
against Losses, or, to the extent that
indemnification shall be unavailable
to a Holder Indemnitee or Company Indemnitee,
contribute to the aggregate
Losses of such Holder Indemnitee or Company
Indemnitee in a manner similar
to that specified in the preceding subsections of
this Section 10 (with appropriate modifications).
(f) Indemnification Payments. The
indemnification and contribution
required by this Section 10 shall be made by
periodic payments of the amount
thereof during the course of any investigation or
defense, as and when bills
are received or any Loss is incurred.
11. Registration Rights to Others.
If the Company shall at any time hereafter, other
than pursuant to the Note
Registration Rights Agreement, provide to any holder of
any securities of the
Company rights with respect to the registration of such
securities under the
Securities Act or the Exchange Act, such rights shall not
be in conflict with or
adversely affect any of the rights provided in this
Agreement to the holders of Registrable Common Stock.
12. Adjustments Affecting Registrable Common Stock.
The Company shall not effect or permit to occur any
combination, subdivision
or reclassification of Registrable Common Stock that would
materially adversely
affect the ability of the Holders to include such
Registrable Common Stock in any
registration of its securities under the Securities Act
contemplated by this
Agreement or the marketability of such Registrable Common
Stock under any such registration or other offering.
13. Rule 144 and Rule 144A.
The Company shall take all actions reasonably
necessary to enable Holders
to sell Registrable Common Stock without registration
under the Securities Act
within the limitation of the exemptions provided by (a)
Rule 144 under the
Securities Act, as such Rule may be amended from time to
time, (b) Rule 144A under
the Securities Act, as such Rule may be amended from time
to time, or (c) any
similar rules or regulations hereafter adopted by the
Commission, including,
without limiting the generality of the foregoing, filing
on a timely basis all
reports required to be filed under the Exchange Act. Upon
the request of any
Holder, the Company shall deliver to such Holder a written
statement as to whether it has complied with such
requirements.
14. Amendments and Waivers.
Any provision of this Agreement may be amended,
modified or waived if, but
only if, the written consent to such amendment,
modification or waiver has been
obtained from (i) except as provided in clause (ii) below,
the Holder or Holders of at least 66 2/3% of the shares of
Registrable Common Stock affected by such
amendment, modification or waiver and (ii) in the case of
any amendment, modification or waiver of any provisions of
Section 5 or 9 hereof or this Section 14 or any provisions as to
the number of requests for registration to which holders of
Registrable Common Stock are entitled under Section 3 or 4
hereof, or as to the percentages of Holders required for any
amendment, modification or waiver, or any amendment,
modification or waiver which adversely affects any right
and/or obligation under this Agreement of any Holder, the
written consent of each Holder so affected.
15. Nominees for Beneficial Owners.
In the event that any Registrable Common Stock is
held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing
delivered to the Company, be treated as the Holder of such
Registrable Common Stock for purposes of any request or other
action by any Holder or Holders pursuant to this Agreement or any
determination of the number or percentage of shares of
Registrable Common Stock held by any Holder or Holders
contemplated by this Agreement. If the beneficial owner of any
Registrable Common Stock so elects, the Company may
require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Common Stock.
16. Assignment.
The provisions of this Agreement shall be binding
upon and inure to the
benefit of the parties hereto and their respective heirs,
successors and permitted
assigns. Any Holder may assign to any permitted
Transferee (as permitted under
applicable law) of its Registrable Common Stock its rights
and obligations under
this Agreement, provided that such Transferee shall agree
in writing with the
parties hereto prior to the assignment to be bound by this
Agreement as if it were
an original party hereto, whereupon such assignee shall
for all purposes be deemed
to be a Holder under this Agreement. Except as provided
above or otherwise
permitted by this Agreement, neither this Agreement nor
any right, remedy,
obligation or liability arising hereunder or by reason
hereof shall be assignable
by any Holder without the prior written consent of the
other parties hereto. The Company may not assign this
Agreement or any right, remedy, obligation or liability
arising hereunder or by reason hereof.
17. Calculation of Percentage or Number of Shares
of Registrable Common Stock.
For purposes of this Agreement, all references to a
percentage or number of
shares of Registrable Common Stock or Common Stock shall
be calculated based upon
the number of shares of Registrable Common Stock or Common
Stock, as the case may
be, outstanding at the time such calculation is made (but
shall include unissued
shares of Conversion Stock that are issuable upon
conversion of Class A Stock) and
shall exclude any Registrable Common Stock or Common
Stock, as the case may be,
owned by the Company or any subsidiary of the Company.
18. Miscellaneous.
(a) Further Assurances. Each of the parties
hereto shall execute
such documents and other papers and perform such
further acts as may be
reasonably required or desirable to carry out the
provisions of this Agreement and the transactions
contemplated hereby.
(b) Headings. The headings in this
Agreement are for convenience
of reference only and shall not control or affect
the meaning or
construction of any provisions hereof.
(c) No Inconsistent Agreements. The Company
will not hereafter
enter into any agreement which is inconsistent with
the rights granted to the Holders in this Agreement.
(d) Remedies. Each Holder, in addition to
being entitled to
exercise all rights granted by law, including
recovery of damages, will be
entitled to specific performance of its rights under
this Agreement. The
Company agrees that monetary damages would not be
adequate compensation for
any loss incurred by reason of a breach by it of the
provisions of this
Agreement and the Company hereby agrees to waive the
defense in any action
for specific performance that a remedy at law would
be adequate.
(e) Entire Agreement. This Agreement
constitutes the entire
agreement and understanding of the parties hereto in
respect of the subject
matter contained herein, and there are no
restrictions, promises,
representations, warranties, covenants, or
undertakings with respect to the
subject matter hereof, other than those expressly
set forth or referred to
herein. This Agreement supersedes all prior
agreements and understandings
between the parties hereto with respect to the
subject matter hereof.
(f) Notices. Any notices or other
communications to be given
hereunder by any party to another party shall be in
writing, shall be
delivered personally, by telecopy, by certified or
registered mail, postage
prepaid, return receipt requested, or by Federal
Express or other comparable
delivery service, to the address of the party set
forth on Schedule B hereto
or to such other address as the party to whom notice
is to be given may
provide in a written notice to the other parties
hereto, a copy of which
shall be on file with the Secretary of the Company.
Notice shall be
effective when delivered if given personally, when
receipt is acknowledged
if telecopied, three days after mailing if given by
registered or certified
mail as described above, and one business day after
deposit if given by
Federal Express or comparable delivery service.
(g) Governing Law. This Agreement shall be
governed by and
construed in accordance with the laws of the State
of New York applicable
to agreements made to be performed entirely in such
State.
(h) Severability. Notwithstanding any
provision of this Agreement,
neither the Company nor any other party hereto shall
be required to take any
action which would be in violation of any applicable
Federal or state
securities law. The invalidity or unenforceability
of any provision of this
Agreement in any jurisdiction shall not affect the
validity, legality or
enforceability of any other provision of this
Agreement in such jurisdiction
or the validity, legality or enforceability of this
Agreement, including any
such provision, in any other jurisdiction, it being
intended that all rights
and obligations of the parties hereunder shall be
enforceable to the fullest
extent permitted by law.
(i) Counterparts. This Agreement may be
executed in two or more
counterparts, each of which shall be deemed an
original but all of which
shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date
first above written.
WALTER INDUSTRIES, INC.
By
Name:
Title:
<PAGE>
HOLDERS:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
<PAGE>
SCHEDULE A
HOLDERS OF REGISTRABLE COMMON STOCK
Number and Type
Holder of Shares Owned
<PAGE>
SCHEDULE B
NOTICES
If to the Company, to:
[ ]
Attention:
Tel:
Fax:
with a copy to:
Attention:
Tel:
Fax:
If to the Holders, to:
with a copy to:
<PAGE>
SCHEDULE B
NOTICES
If to the Company, to:
[ ]
Attention:
Tel:
Fax:
with a copy to:
Attention:
Tel:
Fax:
If to the Holders, to:
with a copy to:
<PAGE>
EXHIBIT 8:
QUALIFIED SECURITIES REGISTRATION RIGHTS AGREEMENT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
by and among
WALTER INDUSTRIES, INC.
and
THE HOLDERS NAMED HEREIN
Dated as of , 1994
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 8-1
2. Initial Registration Under the Securities Act 8-3
(a) Shelf Registration 8-3
(b) Exchange Registration 8-3
(d) Effective Registration Statement 8-4
3. Securities Act Registration on Request 8-4
(a) Request 8-4
(b) Registration of Other Securities 8-5
(c) Registration Statement Form 8-5
(d) Effective Registration Statement 8-6
(e) Selection of Underwriters 8-6
(f) Priority in Requested Registration 8-6
(g) Shelf Registrations 8-6
4. Piggyback Registration 8-6
5. Expenses 8-7
6. Registration Procedures 8-8
7. Underwritten Offerings 8-10
(a) Requested Underwritten Offerings 8-10
(b) Piggyback Underwritten Offerings; Priority 8-11
(c) Holders of Registrable Notes to be Parties to
Underwriting Agreement 8-11
(d) Selection of Underwriters for Piggyback
Underwritten Offering 8-11
(e) Holdback Agreements 8-11
8. Preparation; Reasonable Investigation 8-12
(a) Confidentiality 8-12
9. Postponements 8-12
10. Indemnification 8-13
(a) Indemnification by the Company 8-13
(b) Indemnification by the Offerors and Sellers 8-13
(c) Notices of Losses, etc. 8-14
(d) Contribution 8-14
(e) Other Indemnification 8-14
(f) Indemnification Payments 8-15
11. Registration Rights to Others 8-15
12. Adjustments Affecting Registrable Notes 8-15
13. Rule 144 and Rule 144A 8-15
14. Amendments and Waivers 8-15
15. Nominees for Beneficial Owners 8-15
16. Assignment 8-15
17. Calculation of Percentage Interest in Registrable
Notes 8-16
18. Miscellaneous 8-16
(a) Further Assurances 8-16
(b) Headings 8-16
(c) No Inconsistent Agreements 8-16
(d) Remedies 8-16
(e) Entire Agreement 8-16
(f) Notices 8-16
(g) Governing Law 8-16
(h) Severability 8-16
(i) Counterparts 8-16
SCHEDULES:
SCHEDULE A--HOLDERS OF REGISTRABLE NOTES
SCHEDULE B--NOTICES
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of, 1994, by and
among Walter Industries,
Inc., a corporation (the "Company"), and the holders of
Registrable Notes (as hereinafter
defined) who are signatories or are deemed to be signatories to
this Agreement pursuant
to the Plan (as hereinafter defined) and any subsequent
transferee thereof (the "Holders").
This Agreement is being entered into in connection with
the acquisition, on the
date hereof, by certain holders (the "Original Holders"),
pursuant to the Plan, of the
Notes (as hereinafter defined). Upon the issuance of the Notes,
each Original Holder will
own the aggregate principal amount of Notes specified with
respect to such Original Holder in Schedule A hereto.
To induce the Holders of Registrable Notes to vote in
favor of the Plan and to
accept the issuance of the Notes by the Company under the Plan,
the Company has undertaken
to register Registrable Notes under the Securities Act and to
take certain other actions
with respect to the Registrable Notes. This Agreement sets forth
the terms and conditions of such undertaking.
In consideration of the premises and the mutual agreements
set forth herein, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein,
capitalized terms used
herein and in the recitals above shall have the following
meanings:
"Affiliate" of a Person means any Person that
controls, is under
common control with, or is controlled by, such other
Person. For purposes
of this definition, "control" means the ability of
one Person to direct the
management and policies of another Person.
"Business Day" means any day except a
Saturday, Sunday or other day
on which commercial banks in New York City are
authorized or required by law
to be closed.
"Class A Stock" means the shares of common
stock, $.01 par value per
share, of the Company issued on the date hereof, as
adjusted to reflect any
merger, consolidation, recapitalization,
reclassification, split-up, stock
dividend, rights offering or reverse stock split
made, declared or effected
with respect to the Class A Stock.
"Class B Stock" means the shares of common
stock, $.01 par value per
share, of the Company issued on the date hereof, as
adjusted to reflect any
merger, consolidation, recapitalization,
reclassification, split-up, stock
dividend, rights offering or reverse stock split
made, declared or effected
with respect to the Class B Stock.
"Commission" means the U.S. Securities and
Exchange Commission.
"Common Stock" means, collectively, the Class
B Stock and the Conversion Stock.
"Common Stock Registration Rights Agreement"
means the Registration
Rights Agreement, dated as of , 1994, among the
Company and the holders of
Registrable Common Stock (as defined therein) who
are signatories or are
deemed to be signatories thereto.
"Conversion Stock" means the shares of Class
B Stock issued or
issuable upon conversion of the Class A Stock.
"Effective Date" means the effective date of
the Plan pursuant to the terms thereof.
"Exchange Act" means the Securities Exchange
Act of 1934, as amended,
and the rules and regulations thereunder, or any
similar or successor statute.
"Exchange Offer" shall mean the exchange
offer by the Company of
Exchange Securities for Registrable Notes pursuant
to Section 2(b) hereof.
"Exchange Securities" means securities issued
by the Company
containing terms substantially identical to the
Registrable Notes, to be
offered to holders of Registrable Notes in exchange
for Registrable Notes pursuant to the Exchange
Offer.
"Expenses" means, except as set forth in
Section 5 hereof, all
expenses incident to the Company's performance of or
compliance with its
obligations under this Agreement, including, without
limitation, all
registration, filing, listing and NASD fees, all
fees and expenses of
complying with state securities or blue sky laws,
all rating agency fees,
all word processing, duplicating and printing
expenses, messenger and
delivery expenses, the fees, disbursements and other
charges of counsel for
the Company and of its independent public
accountants, including the
expenses incurred in connection with "cold comfort"
letters required by or
incident to such performance and compliance, any
fees and disbursements of
underwriters customarily paid by issuers or sellers
of securities and the
reasonable fees, disbursements and other charges of
one firm of counsel (per
registration prepared) to the holders of Registrable
Securities making a
request pursuant to Section 3(a) hereof (selected by
the Holders holding a
majority of the aggregate principal amount of the
Registrable Notes covered
by such registration, but excluding underwriting
discounts and commissions
and applicable transfer taxes, if any, which
discounts, commissions and
transfer taxes shall be borne by the seller or
sellers of Registrable Notes
in all cases; provided, that, in the event the
Company shall, in accordance
with Section 4 or Section 9 hereof, not register any
securities with respect
to which it had given written notice of its
intention to register to holders
of Registrable Notes, notwithstanding anything to
the contrary in the
foregoing, all of the costs incurred by Requesting
Holders in connection
with such registration shall be deemed to be
Expenses.
"Initiating Holders" has the
meaning set forth in Section 3(a) hereof.
"Indenture" means the Indenture between the
Company and , as trustee
(the "Trustee"), dated , 1994, as amended from time
to time, relating to the Notes.
"NASD" means the National Association of
Securities Dealers, Inc.
"NASDAQ" means the National Association of
Securities Dealers, Inc.
Automated Quotation System.
"Notes" means $[] in aggregate principal
amount of []<F1> issued on the
date hereof, and includes any securities of the
Company issued or issuable
with respect to such securities by way of a
recapitalization, merger,
consolidation or other reorganization or otherwise.
[FN]
<F1> Insert principal amount and title of Notes issued by
Company.
"Person" means any individual, corporation,
partnership, firm, joint venture, association, joint stock
company, trust, unincorporated organization, governmental or
regulatory body or subdivision thereof or other entity.
"Plan" means the Creditors' Plan of
Reorganization under Chapter 11
of the United States Bankruptcy Code for Walter
Industries, Inc., as the
same may be amended, modified or supplemented from
time to time in accordance with the terms thereof.
"Public Offering" means a public offering and
sale of Notes pursuant to an effective registration statement
under the Securities Act.
"Registrable Notes" means any of the Notes
held by the Holders from
time to time as to which registration pursuant to
the Securities Act is required for a public sale.
"Requesting Holders" has the meaning set
forth in Section 5 hereof.
"Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations
thereunder, or any similar or successor statute.
"Selling Holders" means the holders of
Registrable Notes requested to be registered pursuant to Section
3(a) hereof.
"Transfer" means any transfer, sale,
assignment, pledge, hypothecation or other
disposition of any interest.
"Transferor" and "Transferee" have correlative
meanings.
2. Initial Registration Under the Securities Act.
(a) Shelf Registration. The Company shall
(i) cause to be filed not
later than 45 days after the Effective Date a shelf
registration statement
pursuant to Rule 415 promulgated under the
Securities Act (a "Shelf
Registration") providing for the sale by the Holders
of all of the
Registrable Notes and (ii) use its best efforts to
have such Shelf
Registration declared effective by the Commission
not later than 90 days
after the Effective Date. The Company agrees to use
its best efforts to
keep the Shelf Registration continuously effective
until the first
anniversary of the date such Shelf Registration is
declared effective by the
Commission or such shorter period which will
terminate when all of the
Registrable Notes covered by the Shelf Registration
have been sold pursuant
to the Shelf Registration. The Company further
agrees, if necessary, to
supplement or amend the Shelf Registration, if
required by the rules,
regulations or instructions applicable to the
registration form used by the
Company for such Shelf Registration or by the
Securities Act or by any other
rules and regulations thereunder for shelf
registration, and the Company
agrees to furnish to the Holders copies of any such
supplement or amendment
promptly after its being issued or filed with the
Commission.
(b) Exchange Registration. Notwithstanding
the provisions of
Section 2(a), if the Company receives within the
time period referred to in
Section 2(c) the notice described therein, the
Company shall, in lieu of
causing a Shelf Registration with respect to the
Registrable Notes to be
filed and declared effective, cause to be filed with
the Commission, and use
its best efforts to have declared effective, not
later than 45 days and 90
days, respectively, after receipt of such notice, a
registration statement
on an appropriate form (the "Exchange Registration")
for the registration
of the Exchange Securities to be offered in exchange
for the Registrable
Notes. The Company shall commence the Exchange
Offer promptly after the
Exchange Registration has been declared effective by
the Commission by
mailing the related exchange offer prospectus and
accompanying documents to
each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being
made pursuant to this
Agreement and that any and all Registrable
Notes validly tendered
will be accepted for exchange;
(ii) the date of acceptance for
exchange (which shall be not
less than 20 Business Days and not more than
30 Business Days from
the date such notice is mailed) (the
"Exchange Date");
(iii) that Holders electing to have a
Registrable Note
exchanged pursuant to the Exchange Offer will
be required to
surrender such Registrable Note, together
with the enclosed letters
of transmittal, to the institution and at the
address (located in the
Borough of Manhattan, The City of New York)
specified in the notice
prior to the close of business on the
Exchange Date; and
(iv) that Holders will be entitled to
withdraw their
election, not later than the close of
business on the Exchange Date,
by sending to the institution and at the
address (located in the
Borough of Manhattan, The City of New York)
specified in the notice
a telegram, telex, facsimile transmission or
letter setting forth the
name of such Holder, the principal amount of
Registrable Notes
delivered for exchange and a statement that
such Holder is
withdrawing its election to have such Notes
exchanged.
As soon as practicable after the Exchange
Date, the Company shall:
(i) accept for exchange Registrable
Notes or portions thereof tendered and not validly withdrawn
pursuant to the Exchange Offer; and
(ii) deliver, or cause to be
delivered, to the Trustee for cancellation all Registrable Notes
or portions thereof so accepted for exchange by the Company and
issue, and cause the Trustee under the Indenture to promptly
authenticate and mail to each Holder, a new
Exchange Security, equal in principal amount
to the principal amount of the Registrable Notes surrendered by
such Holder.
The Company shall complete the Exchange Offer as
provided above and shall comply with the applicable requirements
of the Securities Act, the Exchange Act and other applicable laws
in connection with the Exchange Offer.
(c) The Company shall effect an Exchange
Registration pursuant to Section 2(b) if, not later than the
close of business on the 30th calendar day next
succeeding the Effective Date of the Plan, the Company
receives a notice from any Holder requesting the Company to
effect the Exchange Registration and accompanied
by a letter from legal counsel to such Holder to the
effect that the operative facts surrounding such Exchange
Registration are not materially different than the
operative facts described in the interpretive letters of
the Commission referred to in clause (i) below. In connection
with the Exchange Registration, the Company
(i) will provide a letter to the staff of the Commission
that contains statements and representations substantially in the
form set forth in Mary Kay Cosmetics, Inc.
(no-action letter available June 5, 1991), Morgan Stanley
& Co. Incorporated (no-action letter available June 5, 1991),
Warnaco, Inc. (no-action letter available October 11, 1991), Epic
Properties, Inc. (no-action letter available
October 21, 1991) and no-action letters to similar effect
and (ii) will not seek a "no-action" or interpretive position
from the Commission with respect to the Exchange Registration
without the consent of the Holders of a majority of the
outstanding aggregate principal amount of Registrable
Notes.
(d) Effective Registration Statement. A Shelf
Registration pursuant to Section 2(a) or an Exchange Registration
pursuant to Section 2(b) hereof shall not be deemed to have been
effected
(i) unless a registration statement with
respect thereto has been declared effective by the Commission and
remains effective in compliance with the provisions of the
Securities Act and the laws of any state or other
jurisdiction applicable to the disposition of all
Registrable Notes covered by such registration statement, in the
case of a Shelf Registration pursuant to Section 2(a) hereof,
until such time as all of such Registrable Notes
have been disposed of in accordance with such
registration statement (provided that such period need not exceed
one year), and, in the case of an Exchange Offer Registration
pursuant to Section 2(b) hereof, until the closing of the
Exchange Offer, or,
(ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or
other order or requirement of the Commission or other
governmental or regulatory agency or court for
any reason other than a violation of applicable law
solely by the Holders and has not thereafter become effective.
3. Securities Act Registration on Request.
(a) Request. At any time and from time to
time after the completion of the Exchange Offer or the expiration
of the Shelf Registration filed by the Company pursuant to
Section 2(a) hereof (the "Initial Shelf"), as the
case may be, one or more Holders (the "Initiating
Holders") may make a written request (the "Initiating Request")
to the Company for the registration with the Commission under the
Securities Act of all or part of such Initiating Holders'
Registrable Notes; provided, however, that such
request shall be made by the Holders of at least 20%
of the outstanding aggregate principal amount of the Registrable
Notes.
Upon the receipt of any Initiating Request for registration
pursuant to this paragraph, the Company promptly shall notify in
writing all other Holders of the receipt of such request and will
use its best efforts to effect, at the earliest
possible date, such registration under the
Securities Act, including a Shelf Registration, of
(i) the Registrable Notes which the
Company has been so requested to register by such Initiating
Holder for disposition in accordance with the intended method
stated in such request, and
(ii) all other Registrable Notes
which the Company has been requested to register (for disposition
in accordance with Section 3(c) hereof) by any other Holders by
written request given to the Company within 30 days after the
giving of written notice by the Company to such other Holders of
the Initiating Request,
all to the extent necessary to permit the
disposition of the Registrable Notes so to be registered;
provided, that,
(A) the Company shall not be required
to effect more than a total of two registrations pursuant to this
Section 3(a),
(B) if the intended method of
distribution is an underwritten public offering, the Company
shall not be required to effect such
registration pursuant to this Section 3(a)
unless such underwriting shall be conducted on a "firm
commitment" basis,
(C) if the Company shall have
previously effected a registration pursuant to this Section 3(a)
or shall have previously effected a registration of which notice
has been given to the Holders pursuant to Section 4 hereof, the
Holders shall not request and the Company shall not be required
to effect any registration pursuant to this Section 3(a) or
Section 4 hereof until a period of 180 days
shall have elapsed from the effective date of such registration,
(D) subject to the last sentence of
Section 5(a) hereof, any Holder whose Registrable Notes were to
be included in any such registration, by written notice to the
Company may withdraw such request and, on receipt of such notice
of the withdrawal of such request from Holders holding a
percentage of Notes, such that the Holders that have not elected
to withdraw do not hold, in the aggregate, the requisite
percentage of the Notes to initiate a request under this Section
3(a), the Company shall not effect such registration, and
(E) the Company shall not be required
to effect any registration pursuant to this Section 3(a)
unless 20% of the aggregate principal amount of the Registrable
Notes outstanding at the time of such request is to be included
in such registration.
(b) Registration of Other Securities.
Whenever the Company shall effect a registration pursuant to
Section 3(a) hereof, no securities other than (i) Registrable
Notes and (ii) Registrable Common Stock to be included
in such registration pursuant to Section 4 of the
Common Stock Registration Rights Agreement shall be included
among the securities covered by such registration unless the
Selling Holders holding not less than a majority of
the Registrable Notes to be covered by such
registration shall have consented in writing to the inclusion of
such other securities.
(c) Registration Statement Form.
Registrations under Section 3(a) hereof shall be on such
appropriate registration form prescribed by the
Commission under the Securities Act as shall be
selected by the Company and as shall permit the disposition of
the Registrable Notes pursuant to an underwritten offering unless
the Selling Holders holding at least a majority or the aggregate
principal amount of Registrable Notes requested to be
included in such registration statement determine
otherwise, in which case, pursuant to the method of disposition
determined by such Selling Holders.
The Company agrees to include in any such
registration statement filed pursuant to Section 3(a) hereof all
information which any Selling Holder,
upon advice of counsel, shall reasonably request.
The Company may, if permitted by law, effect any registration
requested under this Section 3 by the filing of a registration
statement on Form S-3 (or any successor or
similar short form registration statement).
(d) Effective Registration Statement. A
registration requested pursuant to Section 3(a) hereof shall not
be deemed to have been effected.
(i) unless a registration statement
with respect thereto has been declared effective by the
Commission and remains effective in compliance with the
provisions of the Securities Act and the laws of
any state or other jurisdiction applicable to
the disposition of all Registrable Notes covered by such
registration statement until such time as all of such Registrable
Notes have been disposed of in accordance with such registration
statement, provided, that, except with respect to any Shelf
Registration, such period need not exceed nine months, and,
provided, further, that with respect to any Shelf
Registration, such period need not extend
beyond the period provided for in Section 3(g) hereof,
(ii) if, after it has become
effective, such registration is interfered with by any stop
order, injunction or other order or
requirement of the Commission or other
governmental or regulatory agency or court for any reason other
than a violation of applicable law solely by the Selling Holders
and has not thereafter become effective or
(iii) if, in the case of an
underwritten offering, the conditions to closing specified in an
underwriting agreement to which the Company is a party are not
satisfied other than by reason of any breach or failure by the
Selling Holders, or are not otherwise waived.
The holders of Registrable Notes to be
included in a registration statement may at any time terminate a
request for registration made pursuant to Section 3(a) in
accordance with Section 3(a)(ii)(D). Expenses incurred
in connection with a request for registration
terminated pursuant to this paragraph shall be paid in accordance
with the last sentence of Section 5(a) hereof.
(e) Selection of Underwriters. The
underwriter or underwriters of each underwritten offering, if
any, of the Registrable Notes to be registered pursuant to
Section 3(a) hereof (i) shall be a nationally
recognized underwriter (or underwriters), (ii) shall
be selected by the Selling Holders holding at least a majority of
the outstanding principal amount of the Registrable Notes to be
registered and (iii) shall be reasonably acceptable to the
Company.
(f) Priority in Requested Registration. If
a registration under Section 3 hereof involves an underwritten
public offering, and the managing underwriter of such
underwritten offering shall advise the Company in
writing (with a copy to each Holder requesting that
Registrable Notes be included in such registration statement)
that, in its opinion, the aggregate principal amount of
Registrable Notes requested to be included in such
registration exceeds the aggregate principal amount
of such securities that can be sold in such offering within a
price range acceptable to the Selling Holders holding at least a
majority of the aggregate principal amount of
Registrable Notes requested to be included in such
registration, the Company shall include in such registration, to
the extent of the number and type of securities which the Company
is advised can be sold in such offering, (i) all Registrable
Notes requested to be registered pursuant to Section
3(a) hereof, pro rata among the Selling Holders on
the basis of the aggregate principal amount of Registrable Notes
requested to be registered by all such holders and (ii) all
shares of Registrable Common Stock (if any) requested to be
registered pursuant to Section 4 of the Common Stock
Registration Rights Agreement by the holders
thereof, pro rata among such holders on the basis of the number
of shares requested to be registered by all such holders.
(g) Shelf Registrations. If the first
demand made pursuant to Section 3(a) hereof is for a Shelf
Registration, the period for which such Shelf Registration must
remain effective need not extend beyond one year
from the date on which such Shelf Registration is
declared effective by the Commission and the period for which any
subsequent Shelf Registration must remain effective need not
extend beyond nine months from the date on which such Shelf
Registration is declared effective by the Commission.
4. Piggyback Registration. If the Company at any
time after the completion of the Exchange Offer or the expiration
of the Initial Shalf Registration, as the case may be, proposes
to register any of its securities (including, without
limitation, any registration of Registrable Common Stock
pursuant to the Common Stock Registration Rights Agreement) under
the Securities Act by registration on any forms other than Form
S-4 or S-8 (or any successor or similar forms(s)),
whether or not pursuant to registration rights granted to
other holders of its securities and whether or not for sale for
its own account, it shall give prompt written notice to all of
the Holders of its intention to do so and of such Holders'
rights (if any) under this Section 4, which notice, in any
event, shall be given at least 30 Business Days prior to such
proposed registration. Upon the written request of any Holder
receiving notice of such proposed registration that is a
holder of Registrable Notes (a "Requesting Holder") made
within 20 Business Days after the receipt of any such notice (10
Business Days if the Company states in such written notice or
gives telephonic notice to the relevant Securityholders,
with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii)
such shorter period of time is required because of a planned
filing date), which request shall specify the Registrable
Notes intended to be disposed of by such Requesting
Holder, the Company shall, subject to Section 8(b) hereof, effect
the registration under the Securities Act of all Registrable
Notes which the Company has been so requested to register by the
Requesting Holders thereof; provided, that,
(A) prior to the effective date of
the registration statement filed in connection with such
registration, immediately upon notification to the Company from
the managing underwriter of the price at which such securities
are to be sold, the Company shall so advise each Requesting
Holder of such price, and if such price is
below the price which any Requesting Holder
shall have indicated to be acceptable to such Requesting Holder,
such Requesting Holder shall then have the right to withdraw its
request to have its Registrable Notes included in such
registration statement without prejudice to
the rights of any holder or holders of Registrable Notes to
include Registrable Notes in any future registration
(or registrations) pursuant to this Section 4 or to cause such
registration to be effected as a registration under Section 3(a)
hereof, as the case may be; and
(B) if at any time after giving
written notice of its intention to register any securities and
prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine
for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice
of such determination to each Requesting Holder and (i) in the
case of a determination not to register, shall be relieved of its
obligation to register any Registrable Notes in connection with
such registration (but not from any obligation of the Company to
pay the Expenses in connection therewith), without prejudice,
however, to the rights of any Holder to include Registrable Notes
in any future registration (or registrations) pursuant to this
Section 4 or to cause such registration to be effected as a
registration under Section 3(a) hereof, as the case may be, and
(ii) in the case of a determination to delay registering, shall
be permitted to delay registering any
Registrable Notes, for the same period as the
delay in registering such other securities.
No registration effected under this Section 4 shall
relieve the Company of its obligation to effect any registration
upon request under Section 3(a) hereof and no registration
effected pursuant to Section 4 hereof shall be deemed to have
been effected pursuant to Section 3(a) hereof.
5. Expenses.
(a) Registration Expenses. The Company
shall pay all Expenses in connection with any registration
initiated pursuant to Sections 2(a), 2(b), 3(a) or 4 hereof,
whether or not such registration shall become effective
and whether or not all or any portion of the
Registrable Notes originally requested to be included in such
registration are ultimately included in such registration.
Notwithstanding the foregoing, if any request for
registration made pursuant to Section 3(a) hereof is
withdrawn or terminated by the Selling Holders prior to the
registration becoming effective, the Expenses incurred in
connection with such request shall be borne by the
Selling Holders on the basis of the principal amount
of Registrable Notes requested to be registered pursuant to such
demand by each Selling Holder; provided, however, that, in the
case of an underwritten Public Offering, if
such request for registration is withdrawn or
terminated by the Selling Holders prior to the registration
becoming effective because the offering price of the Registrable
Notes requested to be registered would, in the
opinion of the managing underwriter of such
offering, be less than 90% of the estimated offering price of the
Notes as indicated in writing by the managing underwriter prior
to the initial filing of such registration
statement with the Commission, the Company shall pay
all Expenses in connection with such registration.
6. Registration Procedures. If and whenever the
Company is required to effect any registration under the
Securities Act as provided in Section 2(a), 2(b),
3(a) and 4 hereof, the Company shall, as expeditiously as
possible:
(a) prepare and file with the Commission
(promptly and, in the case of any registration pursuant to
Section 3(a) or 4, in any event on or before the date that is (i)
90 days after the end of the period within which
requests for registration may be given to the
Company or (ii) if, as of such ninetieth day, the Company does
not have the audited financial statements
required to be included in the registration
statement, 30 days after the receipt by the Company from its
independent public accountants of such audited financial
statements, which the Company shall use its best efforts
to obtain as promptly as practicable) the requisite
registration statement to effect such registration and thereafter
use its best efforts to cause such registration statement to
become effective; provided, however, that the
Company may discontinue any registration of its
securities that are not Registrable Notes (and, under the
circumstances specified in Section 4 hereof, its securities that
are Registrable Notes) at any time prior to the
effective date of the registration statement
relating thereto;
(b) prepare and file with the Commission
such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement
effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Notes or Exchange Securities covered by such registration
statement until such time as all of such Registrable Notes or
Exchange Securities, as the case may be, have been
disposed of in accordance with the method of
disposition set forth in such registration statement; provided,
that, except with respect to any Shelf Registration, such period
need not extend beyond nine months after the
effective date of the registration statement; and
provided, further, that with respect to the Initial Shelf
Registration, such period need not extend
beyond one year after the effective date of such
registration statement and, with respect to any Shelf
Registration other than the Initial Shelf
Registration, such period need not exceed the
applicable period provided for in Section 3(g) hereof;
(c) in the case of a registration pursuant
to Section 2(a), 3(a) or 4 hereof, furnish to each seller of
Registrable Notes covered by such registration statement such
number of copies of such drafts and final conformed versions of
such registration statement and of each such amendment
and supplement thereto (in each case including all
exhibits), such number of copies of such drafts and final
versions of the prospectus contained in such registration
statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as
each such seller or Holder may reasonably request;
(d) use its best efforts (i) to register or
qualify all Registrable Notes and other securities covered by
such registration statement under such other securities or blue
sky laws of such states or other jurisdictions of the United
States of America as the sellers of Registrable Notes covered by
such registration statement shall request, (ii) to
keep such registration or qualification in effect for so long as
such registration statement remains in effect and (iii) to take
any other action that may be reasonably necessary or advisable to
enable such sellers to consummate the disposition in such
jurisdictions of the securities to be sold by such sellers,
except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subsection (iv) be obligated to be so
qualified or to consent to general service of process in
any such jurisdiction;
(e) use its best efforts to cause all
Registrable Notes and other securities covered by such
registration statement to be registered with or
approved by such other federal or state governmental
agencies or authorities as may be necessary in the opinion of
counsel to the Company and counsel to the seller or sellers of
Registrable Notes to enable the seller or sellers
thereof to consummate the disposition of such
Registrable Notes;
(f) furnish to each seller of Registrable
Notes, each such seller's underwriters, if any, each, a signed
(i) opinion of counsel for the
Company, dated the effective date of such registration statement
(and, if such registration involves an underwritten offering,
dated the date of the closing under the underwriting agreement)
reasonably satisfactory in form and substance to such seller, and
(ii) "comfort" letter, dated the
effective date of such registration statement (and, if such
registration involves an underwritten offering, dated the date of
the closing under the underwriting agreement) and signed by the
independent public accountants who have certified the Company's
financial statements included or incorporated by reference in
such registration statement, reasonably satisfactory in form and
substance to such seller,
in each case, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the accountants'
comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants'
comfort letters delivered to underwriters in underwritten Public
Offerings of securities and, in the case of the accountants'
comfort letter, such other financial matters, and,
in the case of the legal opinion, such other legal
matters, as the sellers of the Registrable Notes covered by such
registration statement or the underwriters, if any, may
reasonably request;
(g) notify each seller of Registrable Notes
and other securities covered by such registration statement at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the
prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading in the light of the circumstances under
which they were made, and, at the request of any
such seller of Registrable Notes, promptly prepare and furnish to
it a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of
such securities, such prospectus, as supplemented or amended,
shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading
in the light of the circumstances under which they
were made;
(h) otherwise comply with all applicable
rules and regulations of the Commission and any other
governmental agency or authority having jurisdiction over the
offering, and make available to its security holders,
as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not
more than eighteen months, beginning with the first full calendar
month after the effective date of such registration
statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule
158 promulgated thereunder, and furnish to each seller of
Registrable Notes at least ten days prior to the filing
thereof a copy of any amendment or supplement to
such registration statement or prospectus;
(i) upon a request of the Holders of a
majority of the aggregate principal amount of Registrable Notes
requested to be included in a registration pursuant to Section
3(a) or 4 hereof, made at any time on and after the first
anniversary of the date hereof, use its best efforts to
cause all such Registrable Notes covered by such
registration statement (i) to be listed on a national securities
exchange on which similar securities issued by the Company are
then listed, if the listing of such Registrable Notes is then
permitted under the rules of such exchange or (ii) if the Company
is not required pursuant to clause (i) above to list
such securities covered by such registration
statement on a national securities exchange, use its best efforts
to secure designation of all Registrable Notes covered by such
registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for
such Registrable Notes and, without limiting the
generality of the foregoing, to arrange for at least two market
makers to register with the NASD as such with respect to such
Registrable Notes;
(j) obtain a CUSIP number for all Exchange
Securities or Registrable Notes, as the case may be, not later
than the effective date of the registration statement with
respect to such Exchange Securities or Registrable Notes, as the
case may be;
(k) use its best efforts to cause the
Indenture to be qualified under the Trust Indenture Act of 1939,
as amended (the "TIA"), in connection with the registration of
the Exchange Securities or Registrable Notes, as
the case may be, and cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with
the terms of the TIA and execute and use its
best efforts to cause the Trustee to execute all
documents as may be required to effect such changes and all other
forms and documents required to be filed with the Commission to
enable the Indenture to be so qualified in a timely manner; and
(l) enter into such agreements and take such
other actions as any Holder or Holders of Registrable Notes
covered by such registration statement shall reasonably request
in order to expedite or facilitate the disposition of such
Registrable Notes.
The Company may require each seller of Registrable
Notes as to which any registration is being effected to furnish
the Company such information regarding such seller and the
distribution of the securities covered by such registration
statement as the Company may from time to time reasonably
request in writing and as is required by applicable laws and
regulations.
In the case of a registration pursuant to Section
2(a), 3(a) or 4, each Holder agrees that as of the date that a
final prospectus is made available to it for distribution to
prospective purchasers of Registrable Notes it shall cease to
distribute copies of any preliminary prospectus prepared
in connection with the offer and sale of such Registrable Notes.
Each such Holder further agrees that, upon receipt of any notice
from the Company of the happening of any event of the
kind described in subsection (g) of this Section 6, such
Holder shall forthwith discontinue such Holder's disposition of
Registrable Notes pursuant to the registration statement relating
to such Registrable Notes until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by
subsection (g) of this Section 6 and, if so directed by
the Company, shall deliver to the Company (at the Company's
expense) all copies, other than permanent file
copies, then in such Holder's possession of the prospectus
relating to such Registrable Notes current at the time of receipt
of such notice. If any event of the kind described in subsection
(g) of this Section 6 occurs and such event is the
fault solely of a Holder (or Holders), such Holder (or
Holders) shall pay all Expenses attributable to the preparation,
filing and delivery of any supplemented or amended prospectus
contemplated by subsection (g) of this Section 6.
7. Underwritten Offerings.
(a) Requested Underwritten Offerings. If
requested by the underwriters in connection with a request for a
registration under Section 3 hereof, the Company shall enter into
a firm commitment underwriting agreement with such underwriters
for such offering, such agreement to be reasonably satisfactory
in substance and form to the majority of the Selling
Holders included in such registration, and the
underwriters and to contain such representations and warranties
by the Company and such other terms as are generally prevailing
in agreements of that type, including, without
limitation, indemnification and contribution to the
effect and to the extent provided in Section 10 hereof.
(b) Piggyback Underwritten Offerings;
Priority. If the Company proposes to register any of its
securities under the Securities Act as contemplated by Section 4
hereof and such securities are to be distributed
by or through one or more underwriters, the Company
shall, if requested by any Requesting Holders, use its best
efforts to arrange for such underwriters to include all of the
Registrable Notes to be offered and sold by such Requesting
Holders among the securities of the Company to be
distributed by such underwriters; provided, that, if
the managing underwriter of such underwritten offering shall
advise the Company in writing (with a copy to the Requesting
Holders) that if all the Registrable Notes requested to be
included in such registration were so included, in its
opinion, the number and types of securities proposed
to be included in such registration would exceed the number and
type of securities which could be sold in such offering within a
price range acceptable to the Company, the Requesting Holders
holding a majority of the aggregate principal amount of
the Registrable Notes requested to be included in
such registration (such writing to state the basis of such
opinion and the approximate number and type of securities which
may be included in such offering without such effect), then the
Company shall include in such registration, to the extent
of the number and type of securities which the
Company is so advised can be sold in such offering, (i) first,
securities that the Company proposes to issue and sell for its
own account and (ii) second, Registrable Notes
requested to be registered by Requesting Holders
pursuant to Section 4 hereof and the Registrable Common Stock
requested to be registered pursuant to Section 4 of the Common
Stock Registration Rights Agreement, (A) pro rata
among the Requesting Holders on the basis of the
aggregate principal amount of Registrable Notes requested to be
registered by all such Requesting Holders and (B) pro rata among
the holders of the Registrable Common Stock on the basis of the
number of shares of Registrable Common Stock requested
to be registered by such holders.
Any Requesting Holder may withdraw its
request to have all or any portion of its Registrable Notes
included in any such offering by notice to the Company within 10
Business Days after receipt of a copy of a notice from
the managing underwriter pursuant to this Section 7(b).
(c) Holders of Registrable Notes to be
Parties to Underwriting Agreement. The holders of Registrable
Notes to be distributed by underwriters in an underwritten
offering contemplated by subsections (a) or (b) of this Section 7
shall be parties to the underwriting agreement between
the Company and such underwriters and any such
Holder, at its option, may require that any or all of the
representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the
benefit of such Holders and that any or all of the conditions
precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to
the obligations of such Holders. No such Holder
shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than
representations, warranties or agreements regarding
such holder, such Holder's Registrable Notes and
such Holder's intended method of distribution.
(d) Selection of Underwriters for Piggyback
Underwritten Offering. The underwriter or underwriters of each
piggyback underwritten offering pursuant to this Section 7 shall
be a nationally recognized underwriter (or
underwriters) selected by the Company.
(e) Holdback Agreements. Each Holder
agrees, if so required by the managing underwriter for any
underwritten offering pursuant to this Agreement, not to effect
any sale or distribution of any debt securities of
the Company issued after the date hereof during the
10 days prior to the date on which an underwritten registration
of Registrable Notes pursuant to Section 2(a), 3 or 5 hereof has
become effective and until 120 days after the effective date of
such underwritten registration, except as part of such
underwritten registration or to the extent that such
Holder is prohibited by applicable law from agreeing to withhold
securities from sale or is acting in its capacity as a fiduciary
or an investment adviser. Without limiting the scope of the term
"fiduciary," a holder shall be deemed to be acting as a fiduciary
or an investment adviser if its actions or the
securities proposed to be sold are subject to the
Employee Retirement Income Security Act of 1974, as amended, the
Investment Company Act of 1940, as amended, or the Investment
Advisers Act of 1940, as amended, or if such
securities are held in a separate account under
applicable insurance law or regulation.
The Company agrees (i) not to effect any
Public Offering or distribution of any debt securities of the
Company during the 10 days prior to the date on which any
underwritten registration pursuant to Section 2(a),
3 or 4 hereof has become effective and until 120
days after the effective date of such underwritten registration,
except as part of such underwritten registration, and (ii) to
cause each holder of any debt securities, or
securities convertible into or exchangeable or
exercisable for debt securities, in each case, acquired from the
Company at any time on or after the date of this Agreement (other
than in a Public Offering), to agree not to effect any Public
Offering or distribution of such securities, during
such period.
8. Preparation; Reasonable Investigation. In
connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement,
the Company shall give each Holder registered under
such registration statement, the underwriters, if any, and
its respective counsel and accountants the opportunity to
participate in the preparation of such registration statement,
each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement
thereto, and shall give each of them such access to its books and
records and such opportunities to discuss the
business of the Company with its officers and the
independent public accountants who have certified its financial
statements as shall be necessary, in the opinion
of any such Holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning
of the Securities Act.
(a) Confidentiality. Each Holder of
Registrable Notes shall maintain the confidentiality of any
confidential information received from or otherwise made
available by the Company to such Holder of Registrable
Notes and identified in writing by the Company as
confidential. Information that (i) is or becomes available to a
Holder of Registrable Notes from a public source, (ii) is
disclosed to a Holder of Registrable Notes by a
third-party source who the Holder of Registrable Notes reasonably
believes has the right to disclose such information or (iii)
is or becomes required to be disclosed by a holder of Registrable
Notes by law, including by court order, shall not be deemed to be
confidential information for purposes of this Agreement. The
Holders of Registrable Notes shall not grant access,
and the Company shall not be required to grant
access, to information under this Section 8 to any Person who
will not agree to maintain the confidentiality (to the same
extent a Holder is required to maintain
confidentiality) of any confidential information
received from or otherwise made available to it by the Company or
the holders of Registrable Notes under this Agreement and
identified in writing by the Company as confidential.
9. Postponements. If the Company shall fail (i) to
file any registration statement to be filed pursuant to a request
for registration under Section 3(a) hereof, the Holders
requesting such registration shall have the right to withdraw
the request for registration if such withdrawal shall be
made by holders of Notes holding an aggregate principal amount of
Notes such that the Holders that have not elected to withdraw do
not hold the requisite percentage of Notes to initiate a
request under Section 3. Any such withdrawal shall be
made by giving written notice to the Company within 20 days
after, in the case of a request pursuant to
Section 3(a) hereof, the date on which a registration
statement would otherwise have been required to have been filed
with the Commission under clause (i) of Section 6(a) hereof
(i.e., 20 days after the date that is 90 days after the
conclusion of the period within which requests for
registration may be given to the Company, or, if, as of such
ninetieth day, the Company does not have the audited
financial statements required to be included in the
registration statement, 30 days after the receipt by the Company
from its independent public accountants of such audited financial
statements). In the event of such withdrawal, the request for
registration shall not be counted for purposes of
determining the number of registrations to which Holders are
entitled pursuant to Section 3 hereof. The Company shall pay all
Expenses incurred in connection with a request for
registration withdrawn pursuant to this paragraph.
10. Indemnification.
(a) Indemnification by the Company.In
connection with any registration statement filed by the Company
pursuant to Section 2(a), 3(a) or 4 hereof, the Company shall,
and hereby agrees to, indemnify and hold harmless, each Holder
and seller of any Registrable Notes covered by such
registration statement and each other Person who
participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such
Holder or seller or any such underwriter,
and their respective directors, officers, partners,
agents and Affiliates (each, a "Company Indemnitee" for purposes
of this Section 10(a)), against any losses, claims, damages,
liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof), joint
or several, and expenses, including, without limitation, the
reasonable fees, disbursements and other charges of legal counsel
and reasonable costs of investigation, to which such Company
Indemnitee may become subject under the Securities Act
or otherwise (collectively, a "Loss" or "Losses"),
insofar as such Losses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in any registration statement under which such
securities were registered or otherwise offered or sold under the
Securities Act or otherwise, any preliminary
prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto (collectively,
"Offering Documents"), or any omission or alleged
omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
in the light of the circumstances in which they were made not
misleading; provided, that, the Company shall not be liable in
any such case to the extent that any such Loss arises out
of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such
Offering Documents in reliance upon and in conformity with
written information furnished to the Company through an
instrument duly executed by or on behalf of such Company
Indemnitee specifically stating that it is expressly
for use therein; and provided, further, that the Company shall
not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Notes or any other Person, if
any, who controls such underwriter, in any such case
to the extent that any such Loss arises out of such
Person's failure to send or give a copy of the final prospectus,
as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Notes to
such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of
such Company Indemnitee and shall survive the transfer of such
securities by such Company Indemnitee.
(b) Indemnification by the Offerors and
Sellers. In connection with any registration statement filed by
the Company pursuant to Section 2(a), 3(a) or 4 hereof in which a
Holder has registered for sale Registrable Notes, each such
Holder or seller of Registrable Notes shall, and hereby
agrees to, indemnify and hold harmless the Company
and each of its directors and officers and each other Person, if
any, who Controls the Company (each , a "Holder Indemnitee" for
purposes of this Section 10(b)), against all Losses insofar as
such Losses arise out of or are based upon any untrue
statement or alleged untrue statement of a material
fact contained in any Offering Documents or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in the
light of circumstances in which they were made not
misleading, if such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company
through an instrument duly executed by such Holder or seller of
Registrable Notes specifically stating that it is
expressly for use therein; provided, however, that
the liability of such indemnifying party under this Section 10(b)
shall be limited to the amount of the net proceeds received by
such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force
and effect, regardless of any investigation made by
or on behalf of the Holder Indemnitee and shall survive the
transfer of such securities by such Holder.
(c) Notices of Losses, etc. Promptly after
receipt by an indemnified party of notice of the commencement of
any action or proceeding involving a Loss referred to in the
preceding subsections of this Section 10, such indemnified party
will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter
of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subsections of this Section
10, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and,
unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may
exist in respect of such Loss, to assume and control the defense
thereof, in each case at its own expense, jointly with
any other indemnifying party similarly notified, to
the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party, and after its assumption of the
defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall be liable for any
settlement of any such action or proceeding effected
without its written consent. No indemnifying party
shall, without the consent of the indemnified party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a
release from all liability in respect of such Loss
or which requires action on the part of such indemnified party or
otherwise subjects the indemnified party to any obligation or
restriction to which it would not otherwise be subject.
(d) Contribution. If the indemnification
provided for in this Section 10 shall for any reason be
unavailable to an indemnified party under subsection (a) or (b)
of this Section 10 in respect of any Loss, then, in
lieu of the amount paid or payable under subsection
(a) or (b) of this Section 10, the indemnified party and the
indemnifying party under subsection (a) or (b) of this Section 10
shall contribute to the aggregate Losses (including legal or
other expenses reasonably incurred in connection
with investigating the same) (i) in such proportion
as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Notes covered by the
registration statement which resulted in such Loss or action in
respect thereof, as well as any other relevant
equitable considerations, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law,
in such proportion as shall be appropriate to reflect the
relative benefits received by the Company, on the
one hand, and such prospective sellers, on the other
hand, from their sale of Registrable Notes; provided, that, for
purposes of this clause (ii), the relative benefits received by
the prospective sellers shall be deemed not to exceed the amount
received by such sellers. No Person guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation. The obligations, if any,
of the selling holders of Registrable Notes to
contribute as provided in this subsection (d) are several in
proportion to the relative value of their respective Registrable
Notes covered by such registration statement and not
joint. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of
any action or Loss effected without such Person's consent.
(e) Other Indemnification. The Company and,
in connection with any registration statement filed by the
Company pursuant to Section 2(a) or 2(b) each Holder shall, and,
in connection with any registration statement filed
by the Company pursuant to Section 3(a) or 4, each
Holder who has registered for sale Registrable Notes shall, with
respect to any required registration or other qualification of
securities under any Federal or state law or
regulation of any governmental authority other than
the Securities Act, indemnify Holder Indemnitees and Company
Indemnitees, respectively, against Losses, or, to the extent that
indemnification shall be unavailable to a
Holder Indemnitee or Company Indemnitee, contribute
to the aggregate Losses of such Holder Indemnitee or Company
Indemnitee in a manner similar to that specified in the preceding
subsections of this Section 10 (with appropriate modifications).
(f) Indemnification Payments. The
indemnification and contribution required by this Section 10
shall be made by periodic payments of the amount
thereof during the course of any investigation or
defense, as and when bills are received or any Loss is incurred.
11. Registration Rights to Others. If the Company
shall at any time hereafter, other than pursuant to the Note
Registration Rights Agreement, provide to any holder of any
securities of the Company rights with respect to the
registration of such securities under the Securities Act
or the Exchange Act, such rights shall not be in conflict with or
adversely affect any of the rights provided in this Agreement to
the holders of Registrable Notes.
12. Adjustments Affecting Registrable Notes. The
Company shall not effect or permit to occur any combination,
subdivision or reclassification of Registrable
Notes that would materially adversely affect the ability
of the Holders to include such Registrable Notes in any
registration of its securities under the Securities
Act contemplated by this Agreement or the marketability of
such Registrable Notes under any such registration or other
offering.
13. Rule 144 and Rule 144A. The Company shall take
all actions reasonably necessary to enable Holders to sell
Registrable Notes without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from
time to time, (b) Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or (c) any similar rules
or regulations hereafter adopted by the Commission,
including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be
filed under the Exchange Act. Upon the request
of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such
requirements.
14. Amendments and Waivers. Any provision of this
Agreement may be amended, modified or waived if, but only if, the
written consent to such amendment, modification or waiver has
been obtained from (i) except as provided in clause (ii)
below, the Holder or Holders of at least 66 2/3% of the
aggregate principal amount of Registrable Notes affected by such
amendment, modification or waiver and (ii) in the case of any
amendment, modification or waiver of any provision of Section 5
or 9 hereof or this Section 14 or any provisions as to the
number of requests for registration to which holders of
Registrable Notes are entitled under Section 3 or
4 hereof, or as to the percentages of Holders required for
any amendment, modification or waiver, or any amendment,
modification or waiver which adversely affects any right and/or
obligation under this Agreement of any Holder, the written
consent of each Holder so affected.
15. Nominees for Beneficial Owners. In the event
that any Registrable Notes are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at
its election in writing delivered to the Company, be treated as
the Holder of such Registrable Notes for purposes of any
request or other action by any Holder or Holders of Registrable
Notes pursuant to this Agreement or any determination of the
number or percentage of Registrable Notes held by any holder
or holders of Registrable Notes contemplated by this
Agreement. If the beneficial owner of any Registrable Notes so
elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such
Registrable Notes.
16. Assignment. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted
assigns. Any Holders may assign to any permitted Transferee (as
permitted under applicable law) of its Registrable Notes
its rights and obligations under this Agreement, provided that
such Transferee shall agree in writing with the parties hereto
prior to the assignment to be bound by this Agreement as if it
were an original party hereto, whereupon such assignee shall
for all purposes be deemed to be a Holder under this Agreement.
Except as provided above or otherwise permitted by this
Agreement, neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason
hereof shall be assignable by any Holder without the prior
written consent of the other parties hereto. The Company may not
assign this Agreement or any right, remedy, obligation or
liability arising hereunder or by reason hereof.
17. Calculation of Percentage Interest in
Registrable Notes. For purposes of this Agreement, all
references to an aggregate principal amount of the
Registrable Notes shall be calculated based upon the
aggregate principal amount of the Registrable Notes outstanding
at the time such calculation is made and shall exclude any
Registrable Notes owned by the Company or any
subsidiary of the Company.
18. Miscellaneous.
(a) Further Assurances. Each of the parties
hereto shall execute such documents and other papers and perform
such further acts as may be reasonably required or desirable to
carry out the provisions of this Agreement and the transactions
contemplated hereby.
(b) Headings. The headings in this
Agreement are for convenience of reference only and shall not
control or affect the meaning or construction of any provisions
hereof.
(c) No Inconsistent Agreements. The Company
will not hereafter enter into any agreement which is inconsistent
with the rights granted to the Holders in this Agreement.
(d) Remedies. Each Holder, in addition to
being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the
provisions of this Agreement and the Company hereby agrees to
waive the defense in any action for specific performance that a
remedy at law would be adequate.
(e) Entire Agreement. This Agreement
constitutes the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and
there are no restrictions, promises, representations, warranties,
covenants, or undertakings with respect to the
subject matter hereof, other than those expressly
set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties hereto
with respect to the subject matter hereof.
(f) Notices. Any notices or other
communications to be given hereunder by any party to another
party shall be in writing, shall be delivered personally, by
telecopy, by certified or registered mail, postage
prepaid, return receipt requested, or by Federal
Express or other comparable delivery service, to the address of
the party set forth on Schedule B hereto or to such other address
as the party to whom notice is to be given may
provide in a written notice to the other parties
hereto, a copy of which shall be on file with the Secretary of
the Company. Notice shall be effective when delivered if given
personally, when receipt is acknowledged if telecopied, three
days after mailing if given by registered or certified
mail as described above, and one business day after
deposit if given by Federal Express or comparable delivery
service.
(g) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to agreements made to be performed
entirely in such State.
(h) Severability. Notwithstanding any
provision of this Agreement, neither the Company nor any other
party hereto shall be required to take any action which would be
in violation of any applicable Federal or state
securities law. The invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not
affect the validity, legality or enforceability of any other
provision of this Agreement in such jurisdiction
or the validity, legality or enforceability of this
Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights
and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
(i) Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the
same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
WALTER INDUSTRIES, INC.
By:
Name:
Title:
HOLDERS:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
[ ]
By
Name:
Title:
<PAGE>
HOLDERS OF REGISTRABLE NOTES
Holder Principal Amount
<PAGE>
NOTICES
If to the Company, to:
[ ]
Attention:
Tel:
Fax:
with a copy to:
Attention:
Tel:
Fax:
If to the Stockholders, to:
with a copy to:
<PAGE>
EXHIBIT 9:
REJECTED EXECUTORY CONTRACTS
<PAGE>
Rejected Executory Contracts
1. The agreement (or agreements) under which KKR provides
financial, financial advisory, consulting and/or any other
services to Hillsborough and/or any other Debtor or Affiliate
thereof and any other agreement(s) to which KKR or a KKR
Affiliate and any Debtor or Affiliate thereof is a party
(other than an agreement for an Allowed Indemnity Claim).
2. Letter Agreement (as defined in the Disclosure Statement),
dated September 18, 1987, between the KKR Investors and the
Drexel Burnham Lambert Group and the related agreement with
purchasers of Securities.
3. All Management Common Stock Subscription Agreements (as
defined in the Disclosure Statement).
4. The Registration Rights Agreement (as defined in the
Disclosure Statement).
5. All agreements containing or evidencing Stock Acquisition
Rights, including without limitation all options granted under
the Stock Option Plan for Key Employees of Walter Industries and
its Subsidiaries approved in October 1987; such plan; and all
Old Option Agreements (as defined in the Disclosure
Statement).
<PAGE>
Exhibit XII
<PAGE>
EXHIBIT IV
Summary of Treatment and Classes
($000's)
<TABLE>
<CAPTION>
Administrative & Priority CLASS A-1 CLASS P-1 CLASS P-2 CLASS P-3
Claims Summary
Federal Excise Tax and State and
Administrative Claims Federal Income Tax Claims Reclamation Claims Local Tax Claims
TREATMENT OF ALLOWED Payment of cash in an amount Payment of Allowed Amounts in Payment of cash in an amount Payment ofcash in an
CLAIMS UNDER PLAN equal to the Allowed Amount equal quarterly installments over a equal to the Allowed Amount amount equal to
the of the claim without interest. 6 year period from date of the of the claim without interest. Allowed Amount
of the
Assessment by the IRS of such Claim,
claim without interest.
with interest on unpaid amounts from
the later of the Effective Date or the
date of Assessment equal to the
Prime Lending Rate.
<S> <C> <C> <C> <C>
ESTIMATE OF ALLOWED AMOUNT
AS OF DECEMBER 31, 1994 $32,000 $14,000-$40,000 $756 $8,384
ENTITY:
Best
Best (Miss.) Class P-3C 1
Coast to Coast
Computer Holdings Class P-3E 0
Computer Services Class P-3J 0
Dixie Class P-3F 123
Hamer Holdings Class P-3G 0
Hamer Properties Class P-3H 1
Hillsborough Class P-3A 31
Home Improvement
Homes Holdings Class P-3I 0
Jim Warrior Railroad
Jim Walter Homes Class P-3K 214
Jim Walter Resources Class P-3M 4,099
JW Aluminum Class P-3O 192
JW Insurance
JW Resources
JW Walter Class P-3R 11
Window Components Class P-3S 18
Window Components (Wisc.) Class P-3N 2
JWI Holdings Class P-3Q 0
Land Holdings Class P-3T 0
Mid-State Holdings Class P-3V 0
Mid-State Homes Class P-3U 7
Old Walter Industries Class P-3EE 7
Pipe Realty Class P-3BB 0
Railroad Holdings Class P-3W 0
Resources Holdings Class P-3P 0
Sloss Class P-3X 611
Southern Precision Class P-3Y 42
U.S. Pipe Class P-3AA 2,113
United Land Class P-3Z 846
Vestal Class P-3CC 64
Walter Industries/Other
Walter Land Class P-3FF 0
</TABLE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Secured Claims Summary CLASS S-1 CLASS S-2 CLASS S-3 CLASS S-4
Revolving Credit Working Capital Grace Street
Bank Claims Bank Claims Note Claims Sloss IRB Claim
----------------------- -------------------- ---------------- ------------------
TREATMENT OF ALLOWED Payment of Allowed Payment of Allowed Payment of Allowed Payment of Allowed
Amounts in full in Amounts in full in Amounts in full Amounts in full in cash.
cash except for cash less any amounts in cash.
$28,221 to be paid applied by the Debtors
in Class B Common Stock. to repay any such
claim subsequent to
the Stub Period and
prior to the Effective
Date except for $9,279
to be paid in Class B
Common Stock.
CLAIMS UNDER PLAN
ESTIMATE OF ALLOWED AMOUNT $382,248 $130,622 $5 $715
AS OF DECEMBER 31, 1994 <F1> <F2>
ENTITY: Class Status Class Status Class Class
- ------- ----- ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Best Class S-1B Borrower
Best (Miss.) Class S-1C Borrower
Coast to Coast Class S-1D Borrower
Computer Holdings Class S-1E Guarantor Class S-2E Guarantor
Computer Services Class S-1J Borrower
Dixie Class S-1F Borrower
Hamer Holdings Class S-1G Guarantor Class S-2G Guarantor
Hamer Properties Class S-1H Borrower
Hillsborough Class S-1A Borrower Class S-2A Guarantor
Home Improvement
Homes Holdings Class S-1I Guarantor Class S-2I Guarantor
Jefferson Warrior Railroad
Jim Walter Homes Class S-1K Borrower
Jim Walter Resources, Inc. Class S-1M Borrower Class S-2M Borrower
JW Aluminum Co. Class S-1O Borrower Class S-2O Guarantor
JW Insurance Class S-1L Borrower
JW Resources Class S-1GG Guarantor
JW Walter Class S-1R Borrower
JW Window Components, Inc. Class S-1S Borrower Class S-2S Guarantor
JW Window Components (Wisc.)Class S-1N Borrower
JWI Holdings Class S-1Q Borrower Class S-2Q Guarantor
Land Holdings Class S-1T Guarantor Class S-2T Guarantor
Mid-State Holdings Class S-1V Guarantor Class S-2V Guarantor
Mid-State Homes, Inc.
Old Walter Industries Class S-1EE Borrower Class S-2EE Guarantor Class S-3EE
Pipe Realty Class S-1BB Borrower Class S-2BB Guarantor
Railroad Holdings Class S-1W Guarantor Class S-2W Guarantor
Resources Holdings Class S-1P Guarantor Class S-2P Guarantor
Sloss Industries Corp. Class S-1X Borrower Class S-2X Guarantor Class S-4X
Southern Precision Corp. Class S-1Y Borrower Class S-2Y Guarantor
U.S. Pipe and Foundry Co. Class S-1AA Borrower Class S-2AA Borrower
United Land Corp. Class S-1Z Borrower
Vestal Manufacturing Co. Class S-1CC Borrower Class S-2CC Guarantor
Walter Industries/Other
Walter Land Class S-1FF Borrower Class S-2FF Borrower
Note:
<FN>
<F1> Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $152.6 million. If the Amended and Restated Veil
Piercing Settlement Agreement does not become effective by its terms, this
amount would total $354,027.
<F2> Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $51.9 million. If the Amended and Restated Veil
Piercing Settlement Agreement does not become effective by its terms, this
amount would total $121,343.
</TABLE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Secured Claims Summary CLASS S-5 CLASS S-6 CLASS S-7 CLASS S-8 CLASS S-9
Secured Series B & C Provident Life & Revolving Credit Working Capital
Equipment Purchases Senior Note Claims Accident Insurance Agents Claim Agents Claim
TREATMENT OF ALLOWED Company Claims
CLAIMS UNDER THE PLAN
- --------------------- ----------------------- -------------------- ------------------ ----------------- ---------------
Payment of Allowed Payment of Allowed Payment of Allowed Payment of Payment of
Amounts in full in cash. Amounts in cash in Amounts in cash Allowed Amounts Allowed
in an amount equal and balance of in full in cash. Amounts in
to such Holder's Pro Allowed Claims full in
Rata Share of Class reinstated. in cash.
S-6 Fund and a
principal amount of
New Senior Notes
equal to the difference
between the Allowed
Amount of such Holder's
Series B & C Note Claim
and the amount of the
cash received except for
$37,500 to be paid in
Class B Common Stock.
ESTIMATE OF ALLOWED
AMOUNT AS OF
DECEMBER 31, 1994 $48 $359,729-$368,474 $7,494 <F2> <F2>
<F1>
Exact
ENTITY: Class Amounts Class Status Class Class Class
- ---------------- --------- ------- ---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Best Class S-8B Class S-9B
Best (Miss.) Class S-8C
Coast to Coast Class S-8D
Computer Holdings Class S-8E Class S-9E
Computer Services Class S-5J 29 Class S-8J
Dixie Class S-8F
Hamer Holdings Class S-8G Class S-9G
Hamer Properties Class S-8H
Hillsborough Class S-6A Guarantor Class S-8A Class S-9A
Home Improvement
Homes Holdings Class S-6I Guarantor Class S-8I Class S-9I
Jefferson Warrior Railroad
Jim Walter Homes Class S-6K Issuer Class S-8K
Jim Walter Resources, Inc. Class S-6M Issuer Class S-8M Class S-9M
JW Aluminum Co. Class S-5O 11 Class S-8O Class S-9O
JW Insurance Class S-8L
JW Resources Class S-8GG
JW Walter Class S-8R
JW Window Components, Inc. Class S-5S 0 Class S-8S Class S-9S
JW Window Components (Wisc.) Class S-8N
JWI Holdings Class S-8Q Class S-9Q
Land Holdings Class S-8T Class S-9T
Mid-State Holdings Class S-8V Class S-9V
Mid-State Homes, Inc.
Old Walker Industries Class S-6EE Guarantor Class S-7EE Class S-8EE Class S-9EE
Pipe Realty Class S-8BB Class S-9BB
Railroad Holdings Class S-8W Class S-9W
Resources Holdings Class S-6P Guarantor Class S-8P Class S-9P
Sloss Industries Corp. Class S-5X 1 Class S-8X Class S-9X
Southern Precision Corp. Class S-5Y 3 Class S-8Y Class S-9Y
U.S. Pipe and Foundry Co. Class S-5AA 5 Class S-6AA Issuer Class S-8AA Class S-9AA
United Land Corp. Class S-6Z Issuer Class S-8Z Class S-9Z
Vestal Manufacturing Co. Class S-8CC Class S-9CC
Walter Industries/Other
Walter Land Class S-8FF Class S-9FF
- ----------------
<FN>
<F1> Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $165.4 million-$174.1 million. If the Amended and
Restated Veil Piercing Settlement Agreement does not become effective by its terms, this amount would total
$322,229 x $330,974.
<F2> The Holders of Class S-8 and S-9 Claims have not provided the amount of fees and expenses incurred since the Filing Date.
As a result, there is insufficient information upon which to estimate Class S-8 and S-9 Claims.
</TABLE>
<PAGE>
<TABLE>
Summary of Treatment and Classes
($000's)
<CAPTION>
Unsecured Claims Summary CLASS U-1 CLASS U-2 CLASS U-3
Old Walter Convenience Other
Industries Class Claims Unsecured Claims
IRB Claims
----------- ------------ ----------------
TREATMENT OF ALLOWED Payment of Payment of Pre-Filing Payment of 75% of Pre-Filing Date Unsecured Allowed
CLAIMS UNDER PLAN Allowed Date Unsecured Allowed Amounts on or promptly after the Effective Date, payment
Amounts in Amounts plus Post-Filing within six months thereafter of the balance of the
cash and Date interest from the Pre-Filing Date Unsecured Allowed Amounts plus
balance of Filing Date to the Post-Filing Date interest on the Pre-Filing Date
Allowed Claims Effective Date at the Unsecured Allowed Amounts from the Filing Date to the
reinstated. General Unsecured Interest Effective Date at the General Unsecured Interest Rate
together with Post-Filing Date interest on the remaining
25% of Pre-Filing Date Unsecured Allowed Amounts
from the Effective Date to the Payment Date at the
General Unsecured Interest rate in full in cash.
ESTIMATE OF ALLOWED $8,792 $1,704 $93,775
AMOUNT AS OF <F1>
DECEMBER 31, 1994
Exact Exact
ENTITY: Class Class Amounts Class Amounts
- ------- ----- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C>
Best Class U-2B 6 Class U-3B 15
Best (Miss.) Class U-3C 0
Coast to Coast Class U-2D 159 Class U-3D 281
Computer Holdings Class U-3E 0
Computer Services Class U-2J 4 Class U-3J 34
Dixie Class U-2F 7 Class U-3F 913
Hamer Holdings Class U-3G 0
Hamer Properties Class U-3H 0
Hillsborough Class U-3A 2,550
Home Improvement Class U-2DD 9 Class U-3DD 32
Homes Holdings Class U-3I 0
Jefferson Warrior Railroad 0
Jim Walter Homes Class U-2K 280 Class U-3K 7,223
Jim Walter Resources, Inc. Class U-2M 87 Class U-3M 19,061
JW Aluminum Co. Class U-2O 72 Class U-3O 6,413
JW Insurance Class U-2L 5 Class U-3L 6
JW Resources Class U-3GG 0
JW Walter Class U-3R 0
JW Window Components, Inc. Class U-2S 64 Class U-3S 2,221
JW Window Components (Wisc.) Class U-2N 8 Class U-3N 123
JWI Holdings Class U-3Q 0
Land Holdings Class U-3T 0
Mid-State Holdings Class U-3V 0
Mid-State Homes, Inc. Class U-2U 21 Class U-3U 121
Old Walter Industries Class U-1EE Class U-2EE 439 Class U-3EE 14,385
Pipe Realty Class U-3BB 0
Railroad Holdings Class U-3W 0
Resources Holdings Class U-3P 0
Sloss Industries Corp. Class U-2X 103 Class U-3X 5,614
Southern Precision Corp. Class U-2Y 27 Class U-3Y 381
U.S. Pipe and Foundry Co. Class U-2AA 370 Class U-3AA 30,783
United Land Corp. Class U-2Z 4 Class U-3Z 1
Vestal Manufacturing Co. Class U-2CC 35 Class U-3CC 754
Walter Industries/Other 0
Walter Land Class U-2FF 2 Class U-3FF 32
- ----------------
<FN>
<F1> Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $23.0 million which has been allocated pro rata across
each Entity in Class U-3.
</TABLE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Unsecured Claims Summary CLASS U-4 CLASS U-5 CLASS U-6 CLASS U-7
Senior Pre-LBO Debenture Veil Piercing
Subordinated Reset Notes 17% Subordinated Notes Claims Proceedings Claims
------------------------ ---------------------- ------------------- ------------------
TREATMENT OF ALLOWED Payments of Allowed Amount Payments of Allowed Amounts Payments of Allowed Amount Payment of Allowed
CLAIMS UNDER PLAN in Full in combination of in Full in combination of in Full in combination of Amounts in full in a
Qualified Securities and Qualified Securities and Qualified Securities and combination of
Class A Common Stock. Class A Common Stock. Class B Common Stock. Qualified Securities
and Class B Common
Stock to the Veil
Piercing Claims
Trust on behalf of
Holders of Class U-7
Claims.
ESTIMATE OF ALLOWED $479,261 $379,254 $239,472 $450,000 plus
AMOUNT AS OF the Senior Claim
DECEMBER 31, 1994 Differential, if any
<F1>
ENTITY: Class Status Class Status Class Status
- ------- ------ ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Best
Best (Miss.)
Coast to Coast
Computer Holdings
Computer Services
Dixie
Hamer Holdings
Hamer Properties
Hillsborough Class U-4A Guarantor Class U-5A Guarantor
Home Improvement
Homes Holdings Class U-4I Guarantor Class U-5I Guarantor
Jefferson Warrior Railroad
Jim Walter Homes Class U-4K Issuer Class U-5K Issuer
Jim Walter Resources, Inc.
JW Aluminum Co.
JW Insurance
JW Resources
JW Walter
JW Window Components, Inc.
JW Window Components (Wisc.)
JWI Holdings
Land Holdings
Mid-State Holdings
Mid-State Homes, Inc.
Old Walter Industries Class U-4EE Guarantor Class U-5EE Guarantor Class U-6EE Issuer
Pipe Realty
Railroad Holdings
Resources Holdings
Sloss Industries Corp.
Southern Precision Corp.
U.S. Pipe and Foundry Co. Class U-4AA Issuer Class U-5AA Issuer
United Land Corp. Class U-4Z Issuer Class U-5Z Issuer
Vestal Manufacturing Co.
Walter Industries/Other
Walter Land
- ----------------
<FN>
<F1> This represents the aggregate of Allowed Amounts against all Debtors. If the Amended and Restated Veil Piercing
Settlement Agreement does not become effective by its terms, this amount would equal $525,000.
</TABLE>
<TABLE>
Summary of Treatment and Classes
($000's)
Intercompany Claims Summary CLASS I-1 CLASS I-2 CLASS I-3
Pre-Filing Intercompany Post Filing Date Intercompany
Intercompany IRB Claims Notes Payable Claims Notes Payable Claims
----------------------- ----------------------- ----------------------------
TREATMENT OF ALLOWED Payment in cash in an amount Class I-2 Claims will be Class I-3 Claims will be
CLAIMS UNDER PLAN equal to the Allowed Amount reinstated on the books and reinstated on the books and
of the claim without interest. records of the respective records of the respective Debtors.
Debtors. Pre-Filing Date Pre-Filing Date Intercompany
Intercompany Notes Payable Notes Payable may be paid after
may be paid after the the Effective Date in the ordinary
Effective Date in the ordinary course of business.
course of business.
ESTIMATE OF ALLOWED
AMOUNT AS OF
DECEMBER 31, 1994 $7,350 $1,248,631 $2,006,003
Exact Exact
ENTITY: Class Amounts Class Amounts
- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C>
Best Class I-2B 1,018 Class I-3B 2,389
Best (Miss.) Class I-2C 64 Class I-3C 24
Coast to Coast Class I-2D 135 Class I-3D 72
Computer Holdings Class I-2E 6 Class I-3E 2
Computer Services Class I-2J 1,164
Dixie Class I-2F 232 Class I-3F 220
Hamer Holdings Class I-2G 6 Class I-3G 2
Hamer Properties Class I-2H 204 Class I-3H 5
Hillsborough Class I-2A 100,653 Class I-3A 130,988
Home Improvement Class I-2DD 1,923 Class I-3DD 2,852
Homes Holdings Class I-2I 6
Jefferson Warrior Railroad
Jim Walter Homes Class I-2K 194,401 Class I-3K 391,971
Jim Walter Resources Class I-2M 127,199 Class I-3M 7,838
JW Aluminum Class I-2O 24,464 Class I-3O 7,066
JW Insurance
JW Resources
JW Walter Class I-2R 198
Window Components Class I-2S 49,712 Class I-3S 14,400
Window Components (Wisc.) Class I-2N 1,165 Class I-3N 1,734
JWI Holdings Class I-2Q 677
Land Holdings Class I-2T 6 Class I-3T 2
Mid-State Holdings Class I-2V 6
Mid-State Homes Class I-2U 106,061 Class I-3U 744,944
Old Walter Industries Class I-2EE 466,913 Class I-3EE 481,734
Pipe Realty Class I-2BB 126 Class I-3BB 24
Railroad Holdings Class I-2W 6 Class I-3W 1
Resources Holdings Class I-2P 23 Class I-3P 1
Sloss Class I-2X 27,768 Class I-3X 8,399
Southern Precision Class I-2Y 21,895 Class I-3Y 12,760
U.S. Pipe Class I-2AA 35,357 Class I-3AA 175,968
United Land Class I-2Z 63,636 Class I-3Z 17,424
Vestal Class I-2CC 12,053 Class I-3CC 3,385
Walter Industries/Other
Walter Land Class I-2FF 11,555 Class I-3FF 1,799
</TABLE>
<PAGE>
EXHIBIT V
DIRECTORS AND OFFICERS OF EACH OF THE DEBTORS
Set forth herein are lists of the Directors and Officers
of each of the Debtors and Non-Debtor Affiliates, other than Old
Walter Industries, Resources Holdings, Jim Walter Resources and
United Land as of January 1, 1994 (ages are as of August 1,
1993). For more detailed biographical information concerning
certain of the Directors and Officers included herein and
biographical information concerning the Directors and officers of
Walter Industries, see "POST-CONSUMMATION -- Management --
Directors and Officers of the Debtors."
(a) Directors
(i) Walter Industries -- see "POST-CONSUMMATION
-- Management --
Directors and Officers of the Debtors --
Directors of Walter
Industries"
(ii) Best
G. Robert Durham
Kenneth J. Matlock
James W. Walter
(iii) Best (Miss.)
G. Robert Durham
Kenneth J. Matlock
Dana A. Snyder
James W. Walter
William H. Weldon
(iv) JW Insurance
G. Robert Durham
Kenneth J. Matlock
James W. Walter
(v) Coast to Coast; Dixie and Home Improvement
G. Robert Durham
Robert W. Michael
James W. Walter
(vi) Computer Services
G. Robert Durham
Kenneth J. Matlock
William H. Weldon
(vii) Hamer Properties; JW Walter
G. Robert Durham
Kenneth J. Matlock
William N. Temple
(viii) Jim Walter Homes
G. Robert Durham
Robert W. Michael
Kenneth J. Matlock
James W. Walter
(ix) JW Aluminum
Richard E. Almy
G. Robert Durham
Kenneth J. Matlock
James W. Walter
(x) Jim Walter Resources (formerly named JW
Resources)
William Carr
G. Robert Durham
James W. Walter
(xi) United Land (formerly named Pipe Realty)
G. Robert Durham
Kenneth J. Matlock
William N. Temple
James W. Walter
(xii) Window Components
G. Robert Durham
Robert E. Rudolph
James W. Walter
(xiii) Window Components (Wisc.)
G. Robert Durham
Kenneth J. Matlock
Robert E. Rudolph
(xiv) Walter Land
G. Robert Durham
Kenneth J. Matlock
William N. Temple
James W. Walter
(xv) Mid-State Homes
G. Robert Durham
Kenneth J. Matlock
Sam J. Salario
James W. Walter
William H. Weldon
(xvi) Sloss
G. Robert Durham
Lee C. Houlditch
Kenneth J. Matlock
James W. Walter
(xvii) Southern Precision
Earl E. Case
G. Robert Durham
Kenneth J. Matlock
William N. Temple
James W. Walter
(xviii) U.S. Pipe
G. Robert Durham
James W. Walter
William N. Temple
(xix) Vestal
G. Robert Durham
Kenneth J. Matlock
David M. Vestal
James W. Walter
(xx) Computer Holdings; Hamer Holdings; Homes
Holdings; JWI Holdings; Land
Holdings; Mid-State Holdings and Railroad
Holdings
Michael T. Tokarz
Perry Golkin
(xxi) Non-Debtor Affiliates
a. Cardem
G. Robert Durham
Kenneth J. Matlock
Richard D. Spurling<F1>
William N. Temple
William H. Weldon
Peter J. Willitts<F2>
b. J. W. Railroad
G. Robert Durham
Lee C. Houlditch
Kenneth J. Matlock
William H. Weldon
c. Black Warrior Methane
William Carr
Ralph H. Daily<F3>
G. Robert Durham
David Faulkinberry<F3>
Donald G. Russell<F3>
William N. Temple
d. Black Warrior Transmission
William Carr
Ralph H. Daily<F3>
G. Robert Durham
David Faulkinberry<F3>
Donald G. Russell<F3>
William N. Temple
- ----------------
[FN]
<F1> Member of law firm of Appleby, Spurling & Kempe, Bermuda
counsel to CARDEM.
<F2> Employee of Johnson & Higgins (Bermuda) Limited, third
party manager of Cardem.
<F3> Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its
parent. (See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE DEBTORS -- Businesses and
Properties of the Debtors -- Non-Debtor Affiliates --
Black Warrior Methane; Black Warrior Transmission.")
<PAGE>
<TABLE>
<CAPTION>
(b) Officers
Name Age Position
- ---- --- --------
<S> <C> <C>
(i) Best
Dana A. Snyder President
Leola M. Voss 61 Vice President -- Finance
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
William Kendall Baker Treasurer
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(ii) Best (Miss.)
Dana A. Snyder President
Leola M. Voss Treasurer
Kenneth J. Matlock Vice President
William T. Robinson, Jr. 66 Vice President and Assistant Secretary
William H. Weldon Vice President and Secretary
Thomas G. Ketcham Assistant Treasurer
(iii) JW Insurance
Dana A. Snyder President
Kenneth J. Matlock Vice President
Leola M. Voss Vice President
William H. Weldon Vice President
William Kendall Baker Treasurer and Assistant Secretary
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(iv) Coast To Coast
Roger A. Crabb President
Kenneth J. Matlock Vice President
William W. Weldon Vice President
Mary C. Snow Secretary
William Kendall Baker Treasurer and Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
John F. Turbiville Assistant Secretary
(v) Dixie
Robert W. Michael President
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
William Kendall Baker Treasurer
Thomas G. Ketcham Assistant Treasurer
Stephen H. Foxworth Assistant Treasurer
John F. Turbiville Assistant Secretary
(vi) Home Improvement
Robert W. Michael President
D. Wayne Hornsby Vice President
Kenneth J. Matlock Vice President
William H. Weldon Vice President
William Kendall Baker Treasurer
Mary C. Snow Secretary
S. Louise Russell Assistant Secretary
John F. Turbiville Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
(vii) Computer Services
William H. Weldon President
Kenneth J. Matlock Vice President and
Treasurer
William M. Lammons 55 Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(viii) Hamer Properties
William N. Temple President
Kenneth J. Matlock Vice President
William H. Weldon Vice President and Treasurer
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(ix) JW Walter
William N. Temple President
Kenneth J. Matlock Vice President
William H. Weldon Vice President and Treasurer
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(x) Jim Walter Homes
Robert W. Michael President and Chief Operating Officer
Sam P. Bullara, Jr. Executive Vice President
D. Wayne Hornsby Executive Vice President
William Kendall Baker Vice President, Treasurer, Chief Financial
Officer and Chief
Accounting Officer
Michael M. Roberts 46 Senior Vice President
Sam J. Salario Vice President
Leo Almerico 59 Vice President and Controller
B. Craig Calhoun 42 Vice President
Herbert R. Clarkson 60 Vice President
Daisy B. Collins 56 Vice President
Thomas L. Hires, Jr. 36 Vice President
Alexander M. Pollock 61 Vice President
Joseph P. Richardson, Jr. 40 Vice President
Richard A. Ward 45 Vice President
S. Louise Russell Secretary
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Frank A. Hult Assistant Secretary
John F. Turbiville Assistant Secretary
Mary C. Snow Assistant Secretary
Norma J. Padron 54 Assistant Controller
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer and Assistant Secretary
(xi) JW Aluminum
Richard E. Almy President and Chief
Operating Officer
Russell F. Penley 49 Vice President -- Operations
Bobby J. Proctor 61 Vice President -- Finance and Treasurer
Roger W. Wilson 59 Vice President -- Marketing and Sales
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xii) Jim Walter Resources (formerly named JW Resources)
William Carr President and Chief Operating Officer
James M. Sims Vice President, Chief Financial Officer and
Chief Accounting Officer
Kenneth J. Matlock Vice President
William H. Weldon Vice President and Treasurer
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xiii) United Land (formerly named Pipe Realty)
William N. Temple President
Kenneth J. Matlock Vice President
E. Jack Mize, Jr. Vice President and Treasurer
William H. Weldon Vice President and Assistant Secretary
Larry O. Bailey Controller
Mary C. Snow Secretary
Lewis R. Knowles Assistant Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xiv) Window Components
Robert E. Rudolph President
Edmund W. Lanctot, Jr. 47 Vice President -- Sales and Marketing
J. Randy Beard 43 Vice President and Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xv) Window Components (Wisc.)
Robert E. Rudolph President and Chief Operating Officer
Edmund W. Lanctot, Jr. Vice President -- Sales and Marketing
Kenneth J. Matlock Vice President
J. Randy Beard Vice President and Treasurer
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xvi) Walter Land
William N. Temple President
Kenneth J. Matlock Vice President and Treasurer
William H. Weldon Vice President, Controller and
Assistant Secretary
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xvii) Mid-State Homes
Sam J. Salario President
Herbert R. Clarkson Vice President
Kenneth J. Matlock Vice President
Becky L. Mook 51 Vice President -- Administration and Secretary
Alexander M. Pollock Vice President
William H. Weldon Vice President and Chief Financial Officer
William Kendall Baker Treasurer
Sam P. Bullara, Jr. Assistant Secretary
Bonnie K. Doyne 46 Assistant Secretary
Mary C. Snow Assistant Secretary
John F. Turbiville Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer and Assistant Secretary
(xviii) Sloss
Lee C. Houlditch President
Frank E. Haver 61 Vice President
R. Lee Vinzant 41 Vice President and Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xix) Southern Precision
Earl E. Case President
Harold F. Bailey 63 Vice President
Kenneth J. Matlock Vice President
William N. Temple Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
Donald M. Kurucz Treasurer
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xx) U.S. Pipe
William N. Temple President and Chief Operating Officer
Harry L. Ransom Vice President -- Marketing
William E. Fleck Vice President -- Manufacturing
E. Jack Mize, Jr. Vice President -- Finance, Treasurer, Chief
Financial Officer and Chief Accounting
Officer
Michael Roper 62 Vice President -- International Sales
Larry O. Bailey 46 Controller and Assistant Secretary
Lewis R. Knowles 56 Assistant Secretary
Joseph W. Spransy Assistant Secretary
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
Frank A. Hult Assistant Secretary
John F. Turbiville Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xxi) Vestal
David M. Vestal President
Keith E. Shope 41 Vice President
Clyde L. Wells 49 Controller and Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xxii) Computer Holdings; Hamer Holdings; JWI Holdings;
Land Holdings; Mid-State
Holdings and Railroad Holdings
Michael T. Tokarz President and Chief Executive Officer
Perry Golkin Vice President
Donald M. Kurucz Vice President, Treasurer and
Assistant Secretary
Kenneth J. Matlock Vice President
William H. Weldon Vice President, Controller and
Assistant Secretary
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xxiii) Homes Holdings
Michael T. Tokarz President and Chief Executive Officer
Perry Golkin Vice President
Donald M. Kurucz Vice President, Treasurer and
Assistant Secretary
Kenneth J. Matlock Vice President and Chief Financial Officer
William H. Weldon Vice President, Controller, Assistant Secretary
and Chief Accounting Officer
Mary C. Snow Secretary
Frank A. Hult Assistant Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xxiv) Non-Debtor Affiliates
a. Cardem
Kenneth J. Matlock President
Peter J. Willitts<F1> Vice President
Richard D. Spurling<F2> Secretary
Deborah Hubbard-Taylor<F3> Assistant Secretary
William N. Temple Vice President
William H. Weldon Vice President
Thomas G. Ketcham Assistant Vice President
Donald M. Kurucz Treasurer
Stephen H. Foxworth Assistant Treasurer
b. J.W. Railroad
Lee C. Houlditch President and Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
c. Black Warrior Methane
Robert G. Sanders President and General Manager
John A. Bearden 47 Controller
David Faulkinberry<F4> Vice President
Joseph W. Spransy Secretary
James M. Sims Treasurer
William Carr Assistant Treasurer
Richard Bates<F4> Assistant Secretary
John F. Turbiville Assistant Secretary
d. Black Warrior Transmission
Robert G. Sanders President and General Manager
David Faulkinberry<F4> Vice President
Joseph W. Spransy Secretary
James M. Sims Treasurer
William Carr Assistant Treasurer
Richard Bates<F4> Assistant Secretary
John F. Turbiville Assistant Secretary
John A. Bearden Controller
- ----------------
<FN>
<F1> Employee of Johnson & Higgins (Bermuda) Limited, third
party manager of Cardem.
<F2> Member of law firm of Appelby, Spurling & Kempe, Bermuda
counsel to Cardem.
<F3> Employee of law firm of Appelby, Spurling & Kempe, Bermuda
counsel to Cardem.
<F4> Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its
parent. (See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE DEBTORS -- Businesses and
Properties of the Debtors -- Non-Debtor Affiliates --
Black Warrior Methane; Black Warrior Transmission.")
</TABLE>
<PAGE>
EXHIBIT VI
WALTER INDUSTRIES, INC.
NOTES TO LIQUIDATION ANALYSIS
The following Liquidation Analysis<F1> has been prepared
to indicate values which might be obtained by impaired Classes of
Claims and impaired Classes of Interests if the assets of Walter
Industries (i.e., stock of the Operating Businesses) were sold
pursuant to a Chapter 7 liquidation, as an alternative to the
continued independent operation of the Debtors and structured
payments under the Creditors' Plan. Underlying the Liquidation
Analysis are a number of estimates and assumptions that are
inherently subject to significant legal, business, economic and
competitive uncertainties and contingencies beyond the control of
the Debtors as well as assumptions with respect to the
liquidation decisions which could be subject to change.
Accordingly, there can be no assurance that the values reflected
in the Liquidation Analysis would be realized if Walter
Industries were, in fact, to undergo such a liquidation, and
actual results could vary materially from those shown here.
This Liquidation Analysis has been prepared assuming that
the Chapter 11 Cases are converted to cases under Chapter 7 on
December 31, 1994 (the assumed Effective Date under the
Creditors' Plan) and that the sale of the stock of the Operating
Businesses occurs on or before December 31, 1995, at which time
it is assumed that the Chapter 7 trustee would make a
distribution of the proceeds to creditors.
It is assumed that a Chapter 7 trustee would attempt to
maximize the value of the estates, consistent with the trustee's
fiduciary duties, and, therefore, that the trustee would attempt
to sell the stock of the Operating Businesses to minimize
substantial liabilities that would otherwise arise. This
liquidation strategy materially varies from that set forth in the
Liquidation Analysis included in the Debtors' Disclosure
Statement, (the "Debtors' Liquidation Analysis"), which, among
other things, is based on the sale of assets. The Debtors'
approach, which does not take advantage of the tax savings
arising from the Debtors' Court-approved Mirror Liquidation Plan,
results in a substantially higher tax liability than that used in
the Proponents' Liquidation Analysis and, as such, would leave
less value available for distribution to creditors.<F2> The
Proponents believe that a Court order providing for potential
buyers to purchase the stock of the Operating Businesses free and
clear of all liens and encumbrances (pursuant to Sections 105 and
363(f) of the Bankruptcy Code) would enable the stock of the
Operating Businesses to be sold. As noted below, the Proponents
also have revised certain other assumptions in the Debtors'
Liquidation Analysis, such as the appropriate discounts, if any,
for the sale of stock of the Operating Business. Additionally,
unlike the Debtors' Liquidation Analysis, which has a $215
million to $322 million discount, the Liquidation Analysis does
not discount the Mid-State Homes Mortgage business. A discount
for the Mid-State Homes mortgage business is contradicted by the
Debtors' prior experience selling mortgages and the underlying
notes secured thereby owned by Mid-State Homes during the Chapter
11 Cases.
- ----------------
[FN]
<F1> Given the Court's December 31, 1993 deadline for filing
Chapter 11 plans and disclosure statements, the Proponents
(and the other creditor proponents of plans
filed by that deadline) adopted their Liquidation Analysis
from the Debtors' previous Disclosure Statement that was
on file with the Court. The Proponents had assumed that
the Debtors' analysis would have been prepared consistent
with what the Proponents believe is the proper approach,
and that the Proponents would have the further opportunity
to verify, update and amend the analysis in the final
version of this Disclosure Statement. The Proponents have
come to the belief that the Debtors' analysis was, in
fact, fundamentally flawed, and accordingly have
revised it as set forth herein.
<F2> As noted in the Disclosure Statement, the Proponents
believe the Debtors' choice of liquidation on an asset
sale basis rather than a stock sale basis and other
assumptions in the Debtors Liquidation Analysis were made
to support a legal argument that the Proponents of the
Creditors' Plan expect the Debtors to make with
respect to the treatment of post-petition interest on
unsecured Claims under the Debtors' Plan of
Reorganization.
<PAGE>
Consistent with the Debtors' treatment in their
Liquidation Analysis, this Liquidation Analysis has been prepared
on a consolidated basis rather than on an individual Debtor
basis. This approach was taken because the Debtors' complex
liability structure makes an accurate allocation of claims by and
against individual Debtors (including the joint and several
Claims of the Revolving Credit and Working Capital Bank, Series
B&C Senior Noteholders and unsecured bondholders), as well as
Claims under intercompany guarantees and contingent assets under
intercompany Contribution Agreements, impractical for these
purposes. The Liquidation Analysis does, however, recognize the
unique nature of the general unsecured trade claims against the
Debtors' Operating Businesses. The Proponents believe that a
Chapter 7 trustee would seek to allow unsecured trade Creditor
Claims based on the facts that these post-LBO claims are asserted
solely and directly against the Debtors' Operating Businesses,
including Debtors against which no Subordinated Note Claims are
asserted, and the potential fraudulent transfer claims that such
Creditors would assert. Such allowance, constituting the payment
in full of such Claims including post-petition interest at a
compromised rate that is below applicable legal rates, is
contained in the Liquidation Analysis.
Except as described above, in the next succeeding
paragraph, and for certain adjustments described in the
accompanying Notes, estimates of expenses and claims have
generally been adopted from the Debtors' Liquidation Analysis.
Most significantly, this Liquidation Analysis differs from
the Debtors' Liquidation Analysis with respect to the resolution
of the asbestos-related, veil piercing claims, because the
Creditors' Plan's Effective Date, unlike the Effective Date under
the Debtor's Plan, is not conditioned upon the final,
successfully-litigated resolution of those claims. Given the
enormous magnitude of the asbestos-related, veil piercing claims,
the complexity of the issues which will be raised on appeal of
the Court's April 18, 1994 declaratory judgment decision and the
protracted nature of the appellate process, the Proponents
believe that a Chapter 7 trustee would attempt to negotiate a
settlement of these claims in order to expedite distributions to
creditors and to avoid a potential adverse appellate decision
that could seriously dilute the distribution to creditors.
Therefore, the Proponents' Liquidation Analysis assumes a
settlement amount for asbestos-related, veil piercing claims of
$450 million. This is based, in part, on the fact that the Veil
Piercing Claimants have negotiated a settlement of approximately
$450 million with the Proponents.
If, however, the Chapter 7 trustee chose to litigate the
asbestos-related, veil piercing claims and ultimately lost, the
liability would be far higher than the settlement amount; the
asbestos litigants have asserted that the underlying personal
injury asbestos Claims exceed $10 billion. If the Chapter 7
trustee chose to litigate the asbestos-related, veil piercing
claims and ultimately prevailed, the Proponents believe that the
Debtors' estate would have sufficient value to pay in full the
pre-Filing Date amount of all Claims and post-petition interest
on Secured Claims, and leave a significant surplus available for
post-petition interest on unsecured Claims. The Proponents'
review of the Debtors' Liquidation Analysis, which assumes an
ultimate litigation victory by a Chapter 7 trustee, is set forth
in Article X of the Proponents' Disclosure Statement. The
Proponents' review concludes that, based on reasonable
assumptions that have been omitted from the Debtors' Liquidation
Analysis and after correcting errors in that Analysis, there
would be a significant surplus on a potential litigation victory
basis after payment in full of all pre-Filing Date Claims and
post-petition interest on all Secured Claims. Considering all of
the risks of the asbestos-related, veil piercing litigation, the
associated costs and delays, and the potentially devastating
consequences to creditors of a litigation loss, the Proponents
believe that their Liquidation Analysis demonstrates that the
Creditors' Plan is in the best interests of creditors.
Various other specific assumptions relevant to this
Liquidation Analysis are set forth in the accompanying Notes.
LIQUIDATION ANALYSIS
($ millions)
<TABLE>
<CAPTION>
Liquidation Range
-----------------
Note From To
---- ---- --
<S> <C> <C> <C>
Going-Concern Value of Operating Businesses 1 $ 1,286 $ 1,286
Less Liquidation Discount 2 (322) (193)
------- -------
Liquidation Value of Operating Businesses 964 1,093
Value of Mid-State Homes Whole Loan Portfolio and Mid-State
Trust II & III Residuals 1, 2 1,230 1,230
Value of Other Assets
Cash and escrows 3 140 140
Other 4 10 17
------- -------
150 157
Interest on Proceeds from Liquidation 5 58 61
------- -------
Gross Proceeds Available for Distribution 2,402 2,541
Liabilities Ranking Senior to Asbestos Claimants and Other
Unsecured Creditors
Obligations Arising From Chapter 7 Liquidation
Operating Expenses During Liquidation 6 (20) (20)
Chapter 7 Administrative Expenses 7 (66) (70)
Liquidation Tax Liabilities 8 0 0
Secured Debt (including post-petition interest) 9
Revolving Credit Bank Claims (352) (352)
Working Capital Bank Claims (121) (121)
Grace Street Note Claims (1) (1)
Sloss IRB Claims (1) (1)
Secured Equipment Purchase Claims (1) (1)
Series B & C Senior Note Claims (365) (365)
Provident Life and Accident Insurance Company Claims (7) (7)
Chapter 11 Priority and Administrative Claims
Severance Pay 10 (1) (1)
Pension Plan Termination 11 (18) (18)
Other Liabilities 12 (53) (53)
------- -------
Proceeds Available to Asbestos Claimants and Other
Unsecured Creditors 1,396 1,531
Convenience Class Claims (including post-petition interest) 13 (2) (2)
General Unsecured, Trade Claims (including post-petition
interest) 13 (98) (98)
Proceeds Available to Asbestos and Subordinated Note Claimants 1,296 1,431
Funding of Payments for Asbestos-Related Claims (450) (450)
Tax Benefit Associated with Payments for Asbestos-Related Claims 14 88 88
------- -------
Proceeds Available to Subordinated Note Claimants 934 1,069
Subordinated Note Claims 15 (1,106) (1,106)
------- -------
Deficiency $ (172) $ (37)
======= =======
</TABLE>
Note 1: Operating Businesses include all assets of the
Debtors except Cash, Mid-State Homes' whole
loan mortgage portfolio and Trust II and III
Residuals and Other Assets which have been
excluded as no discount has been applied to these
assets. The value of the Operating
Businesses includes the net working capital
associated with the businesses, which consists
primarily of receivables, inventories and payables.
This value represents the approximate
mid-point of the value range as of 12/31/94. This
value as of 12/31/94 is assumed to grow
by 10% by 12/31/95, or 5% on total value based on
the assumption that during the
liquidation process, one half of the sales of the
Operating Businesses occurs by 6/30/95.
The value of the Mid-State whole loan mortgage
portfolio and Trust II & III Residuals is
assumed to grow by 7% by 12/31/95 at which point it
is assumed that the mortgages and
Residuals are securitized.
Liquidation
12/31/94 Period
Cash $ 140 $ 140
Operating Businesses 1,225 1,286
Mid-State whole loan mortgage portfolio and
Trust II & III Residuals available for
securitization 1,150 1,230
Other Assets (Headquarters/Other) 10 17
------ ------
Total Liquidation Value $2,525 $2,673
====== ======
In connection with the analysis of the estimated
going-concern value of the Company as of
12/31/94 and the subsequent assumptions regarding the
estimated liquidation valuation of the
Company, J.P. Morgan in conjunction with Ernst & Young,
the Bondholders' Committee's financial
advisors (the "Financial Advisors"), among other things:
(a) reviewed certain publicly available financial
statements for recent years and
interim periods;
(b) analyzed certain internal financial and
operating data concerning the Operating
Businesses, including the Company's financial
projections through 1998 and
estimated through 2002 by the Financial
Advisors.
(c) made discounted cash flow analyses to
12/31/94 for the various Operating Businesses
based upon the financial projections referred to in (b) above;
(d) considered the market values of
publicly-traded companies which the Financial
Advisors believed were comparable to the
various Operating Businesses;
(e) considered the financial terms, to the extent
publicly available, of certain acquisitions of companies which
the Financial Advisors believed were comparable to
the various Operating Businesses;
(f) considered certain economic and industry
information relevant to the various Operating Businesses;
(g) discussed the current operations and
prospects of the various Operating Businesses
with the senior management of Walter
Industries and its subsidiaries; and,
(h) made such other analyses and examinations as
the Financial Advisors deemed necessary or appropriate.
The valuation of each Operating Business was based on a
review of the three methodologies described in clauses (c), (d),
(e) above, except for Mid-State Homes and United Land. Mid-
State Homes' value was derived through the valuation of
the going concern operating entity, the servicing of existing
mortgages and of the securitization of the whole loan mortgage
portfolio and the Trust II and III Residuals. United Land's
value was based on the cash flow from third
party royalties and the book value or estimated market
value from non-income producing land holdings.
The Financial Advisors did not independently verify the
information considered that was provided
by the Debtors and other sources in its valuations and for
purposes of its valuations relied upon the accuracy and
completeness of all such
information. In addition, the Financial Advisors
did not undertake or obtain appraisals of the tangible or
intangible assets of the various Operating Businesses. The value
of an Operating Business is subject to uncertainties and
contingencies which are difficult to predict and will
fluctuate with changes in interest rates,
market conditions and other factors affecting the
financial conditions and prospects of such business.
Note 2: The Liquidation Discount represents an estimate of
the aggregate of the discounts to the value of the Operating
Businesses that would likely be incurred in the sale of stock in
the Operating Businesses under a Chapter 7
liquidation. Actual discounts which may be
required to sell stock in the Operating Businesses
could be significantly different. No discount has been applied
to the value of the Mid-State whole loan mortgage portfolio and
Mid-State Trust II and III Residuals as a Chapter 7
liquidation would not affect the ability of a buyer to securitize
these assets at full value. The Debtors have
successfully securitized these assets despite the
proceedings of their Chapter 11 cases.
The discounts applied to the Operating Businesses relate
to two principal adverse circumstances that would affect all
Walter Industries' Operating Businesses in a Chapter 7
liquidation:
a. There would be pressure to convert stock in
the Operating Businesses into cash quickly. (This analysis
assumes a one year period between conversion to a Chapter
7 proceeding and distribution to creditors.)
These sales may have an adverse impact on employee morale,
customer willingness to order new goods and vendor willingness
to ship new goods and extend trade credit and
the forced nature of the sales may
result in a discount to the going concern
values of the enterprises.
b. The Debtors have stated in their Disclosure
Statement that studies of potential Chapter 7 environmental
exposures have not been made. The Operating Businesses may
have potential liabilities under
environmental laws which could be addressed in the
ordinary course of business after
consummation of a plan of reorganization under
Chapter 11. However, in a Chapter 7
liquidation, uncertainty would surround the
transfer of responsibility for these
exposures, and potential purchasers would
raise concerns about possible environmental liabilities.
The precise discount factor attributable to the
uncertainties described above cannot be computed
on the basis of any known empirical data. Given the
adverse factors previously discussed, it is estimated that the
actual liquidation values of most of the Operating Businesses
would reflect a discount of 15-25% from the values which would
otherwise exist. No discount has been applied to reflect
uncertainties regarding future transferee liability for
asbestos-related claims as it is assumed that such uncertainty
would not exist for the reasons previously discussed. While the
Proponents acknowledge that the foregoing circumstances set forth
in sub-paragraphs (a) and (b) above warrant a discount from
the going concern value of the Debtors' Operating Businesses, the
Proponents believe that the range of discount employed by the
Debtors in their Liquidation Analysis is artificially high and
unwarranted given the conditions and requirements of their Plan.
See Article X of the Disclosure Statement.
Note 3: It is expected that there will be cash of
approximately $140 million available, which includes the present
cash escrow for the Series B and C Senior Notes. Amounts
reserved for environmental liabilities or collateralizing
letters of credit would not be available to creditors.
Note 4: This amount includes headquarters, service and
record storage buildings and other assets.
Per the Debtors' Liquidation Analysis, the
headquarters, service and record storage buildings are valued on
a going-concern basis at $5-$16 million. A 50% discount was
applied to the going-concern value to reflect the
difficulty of selling a vacant office building in the current
Tampa real estate market.
Note 5: Interest income is calculated at 4.7% of the
average cash balance during the liquidation
period. This rate approximates the current 6 month
Treasury rate.
Note 6: There is no independent way for the Proponents to
determine operating expenses during the liquidation. As such,
expenses for personnel and other headquarters' operating expenses
during the liquidation period and retention bonuses
to ensure that employees remain with the Debtors during
liquidation are the same as those of the Debtors' Liquidation
Analysis.
Note 7: Includes the expenses of professionals employed to
sell the Operating Businesses, the fees of the Chapter 7 trustee
and other professionals employed by the trustee. Although actual
fees might be capped based on other factors,
estimated amount represents approximately 3% of the Total
Liquidation Value of the Operating Businesses and Mid-State Homes
whole loan portfolio and Trust II & III Residual.
Note 8: The Debtors have informed us that as a result of
the Debtors' Mirror Liquidation Plan, the stock basis for tax
purposes in these companies is approximately $3 billion.
Therefore, it is assumed that a sale of stock
grossing less than $3 billion would not result in additional tax
liability. For these purposes, it is also assumed that losses
generated by the sale of the stock of certain
Operating Businesses can be used without limitation to offset
gains, if any, from the sale of the stock of other Operating
Businesses. To the extent that the Debtors
generate any income through 12/31/95, it is
assumed that any tax liability attributable to that
income would be offset by losses generated from the asbestos
settlement payment.
See Note 14.
Note 9: Secured claims include the accrual of post-petition
interest from the Filing Date through December 31, 1995 at the
respective non-default contract rates (i.e., Prime plus 1-1/2%
on Bank Claims and 14 5/8% and 14 1/2% for Series B
and C Notes, respectively).
Note 10: Per the Debtors' Liquidation Analysis, it has been
assumed that the sale of the Operating Businesses would result in
severance payments to some employees. The Debtors have
estimated that this would result in a severance
liability of approximately $1 million. There is no independent
way for the Proponents to verify this number and it has, as such,
been adopted from the Debtors' Disclosure Statement.
Note 11: Per the Debtors' Liquidation Analysis, it has been
assumed that an involuntary termination of the Operating
Businesses' pension plans would occur in Chapter 7. The Debtors
have estimated that this would result in a termination
liability of $18 million. There is no independent way for the
Proponents to verify this number and it has, as such, been
adopted from the Debtors' First Amended Disclosure
Statement.
Note 12: Includes Chapter 11 Administrative ($17 million),
Federal Income Tax ($27 million), Federal Excise Tax and
Reclamation ($0.8 million) and State and Local Tax ($8.4 million)
claims. Liabilities related to Postretirement
Health Benefits have been included in the valuation of the
Operating Businesses.
Note 13: Post-petition interest accrued at the General
Unsecured Interest Rate (6.5%) on General Unsecured, Trade Claims
through 12/31/95. This Rate reflects a compromise which is less
than the Florida state legal rate of 12%.
Note 14: It is believed that there would be a tax benefit
carryback for the amount of the asbestos settlement payment. As
approximately $88 million in taxes has been paid subject to the
carryback period of the Internal Revenue Code, it
is estimated that this amount represents the benefit available.
There may also be additional tax benefits related to the asbestos
settlement payment based on any further tax liabilities incurred.
Note 15: Includes all Unsecured Bondholders and Old Walter
Industries IRB claims.
<PAGE>
EXHIBIT VII
WALTER INDUSTRIES, INC.
PROJECTED FINANCIAL INFORMATION:
As a condition to confirmation of the Creditors' Plan, the
Bankruptcy Code requires, among other
things, the Bankruptcy Court to determine that confirmation is
not likely to be followed by liquidation
or result in the need for further financial reorganization of the
Debtors. To assess the feasibility
of the Creditors' Plan, the Creditors' Plan has been overlaid on
the Debtors' 1994 Five Year Business
Plan (extrapolated for the years 1999 through 2001).
Included herein are summary statements of consolidated cash flows
of Reorganized Walter Industries,
excluding Mid-State Trusts II and III, and the trusts
contemplated by the Creditors' Plan, for each of
the fiscal years ending 1995 through 2001. A separate statement
of cash flows has been included to
reflect the consolidated cash flows of the trusts contemplated by
the Creditors' Plan. The cash flows
of the Mid-State Trusts have been excluded to show the debt
capacity of the corporate entity as assets
of the Trusts are not available to satisfy claims of general
creditors of the Company and its
subsidiaries. The consolidated cash flows assume the
implementation of the Creditors' Plan and are
dependent upon the successful implementation of the Debtors'
Business Plan and the reliability of the
assumptions contained therein. Both the Debtors' Business Plan
and the projections reflect numerous
assumptions regarding both anticipated financial performance as
well as industry performance, and
overall economic conditions, some of which are beyond the control
of the Debtors. In addition,
unanticipated events and circumstances may affect the actual
financial results of the Debtors.
Therefore, the actual results achieved throughout the projection
period may vary from the projected
results. These variations may be material. Accordingly, no
representation can be, or is being, made
with respect to the accuracy of the projections or the ability of
the Debtors to achieve the projected
results. The Proponents urge that the underlying assumptions be
carefully considered by Holders of
Claims in deciding whether to accept or reject the Creditors'
Plan.
Principal Assumptions:
Net Sales and Revenues: Net sales and revenues are
assumed to increase between approximately 3% to 6% per year
during the projection period. The Debtors have assumed that the
general recessionary conditions that have prevailed in the United
States during the past few years will gradually abate. Sales of
all divisions are assumed to increase as a result of both
increased volume and pricing as well as, in a limited number of
instances, the introduction of new products. Interest income is
assumed to increase as a result of the continued creation of new
mortgages by Mid-State Homes.
EBIT: EBIT is expected to increase over the projection
period primarily as a result of the assumed sales growth which
results in an increasing gross profit margin given the high
degree of fixed costs associated with the subsidiaries engaged in
manufacturing activities. Gross margins are also assumed to be
enhanced as a result of continued efforts to control costs and
implement productivity improvements.
Capital Expenditures: Annual capital expenditures are
assumed to average approximately $86 million per year during the
projection period. The primary uses of capital, and their
approximate percentage of total capital expenditures,
relate to expenditures necessary to maintain profit centers
(75%), environmental controls (9%), expansion (9%) and cost
reduction programs (7%). United States Pipe and Foundry Co. and
Jim Walter Resources have historically been, and are planned to
be, the greatest users of capital, given the capital intensive
nature of these businesses. Together, they account for
approximately 75% of total planned capital expenditures.
Income Taxes: The projections assume that the Plan will
not result in the incurrence of any taxes upon the estate of the
Debtors. A 41% total income tax rate on projected taxable income
has been assumed in the projections. The projections also
assume that income taxes are paid in the year in which they
arise. The provisions of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" have not been
implemented in the projections.
Interest Expense: Interest expense for all of the
securities issued under the proposed Creditors' Plan have been
calculated at the respective stated interest rates. Interest on
the working capital line of credit has been calculated on the
assumed average balance at an interest rate of 7 1/2%, which is
equal to the current Prime rate of interest plus 1/4% during the
projection period.
Liquidity and Capital Resources: The Debtor's primary
source of cash is from operations. However, significant amounts
of cash are consumed by the home building segment of Jim Walter
Homes which through its Mid-State Homes subsidiary
finances approximately 97% of the homes sold
by Jim Walter Homes. It is assumed that upon consummation
of the Creditors' Plan, a working capital/warehouse line of
credit will be established to fund the creation of these
mortgages. Over time, it is anticipated that the mortgages
created will be securitized consistent with the
Debtors' past practices. However, no securitization of
these mortgages is contemplated in the projection period. It is
also assumed that the Debtors will borrow an amount necessary to
provide a break-even cash flow for Mid-State Homes.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(excluding Mid-State Trusts II & III and mortgages to be securitized under Plan)
Projected for the Years Ended May 31,
1995
($ Millions) (5 Months) 1996 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C>
INDUSTRIAL COMPANIES: <F1>
EBIT $ 76.4 $209.5 $230.0 $244.7 $254.5 $ 264.7 $ 275.3
plus: Depreciation 30.5 76.7 80.7 82.7 85.2 87.9 95.0
less: Change in Working Capital (5.5) (5.3) (7.4) (8.1) (8.9) (9.8) (10.8)
less: Capital Expenditures (36.5) (88.3) (95.5) (83.3) (83.9) (83.9) (83.9)
Free Cash Flow --
Industrial Companies 64.9 192.6 207.8 236.0 246.9 258.9 275.6
MID-STATE HOMES: <F2>
EBIT 4.5 22.7 41.0 57.7 76.1 97.8 116.5
less: Net Change in Working
Capital <F3> (4.5) (22.7) (41.0) (57.7) (76.1) (97.8) (116.5)
Cash Flow -- Mid-State Homes 0.0 0.0 0.0 0.0 0.0 0.0 0.0
NET OPERATING CASH FLOW 64.9 192.6 207.8 236.0 246.8 258.9 275.5
less: Cash Interest Expense (17.6) (47.7) (60.2) (71.3) (81.0) (78.1) (69.0)
less: Cash Taxes (15.0) (51.5) (61.8) (71.5) (77.4) (91.3) (106.3)
less: Principal Repayment 0.0 (40.7) 0.0 0.0 0.0 (325.0) 0.0
Cash Flow before Financing 32.3 52.6 85.8 93.2 88.5 (235.6) 100.2
Cash Distributions under POR (140.4) 0.0 0.0 0.0 0.0 0.0 0.0
Decrease/(Increase) in Cash (108.1) 52.6 85.8 93.2 88.5 (235.6) 100.2
Beginning Cash 185.4 77.3 130.0 215.8 309.0 397.5 161.9
Ending Cash <F4> $ 77.3 $130.0 $215.8 $309.0 $397.5 $ 161.9 $ 262.2
<FN>
<F1> Represents cash flows of all operating companies less corporate overhead. The cash flows of Mid-State
Homes, the mortgage finance subsidiary, are separately reflected below.
<F2> Represents cash flows from mortgages created after December 31, 1994. All previously existing
mortgages and residuals are to be securitized as contemplated under the Creditors' Plan and are
therefore excluded.
<F3> Includes borrowings under a working capital/warehouse facility required to fund new mortgages.
Amounts borrowed represent that necessary to provide a break-even cash flow for Mid-State Homes.
<F4> Cash may be used to amortize indebtedness of Walter Industries and/or to create further mortgages.
</TABLE>
<PAGE>
<TABLE>
Cash Interest Paid
($000's)
Projected for the Years Ended May 31,
1995
(5 Months) 1996 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C>
CASH INTEREST:
8.0% New Senior Notes $10,833 $26,000 $26,000 $26,000 $26,000 $15,167 $0
6.5% Bank Debt 6,771 16,250 16,250 16,250 16,250 16,250 16,250
7.5% Working Capital
Facility/Warehouse Line 0 5,453 17,925 29,063 38,730 46,710 52,725
CASH INTEREST PAID $17,604 $47,703 $60,175 $71,313 $80,980 $78,127 $68,975
NOTE: If interest rates on this debt were to increase by 1%, annual interest expense would increase by the
following amounts:
1995 1996 1997 1998 1999 2000 2001
$2,396 $6,477 $8,140 $9,625 $10,914 $10,624 $9,530
</TABLE>
<TABLE>
<CAPTION>
Summary of Long-Term and Short-Term Debt
($000's)
12/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New Senior Notes $325,000 $325,000 $325,000 $325,000 $325,000 $325,000 $ 0 $ 0
Bank Debt<F1> 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000
Working Capital
Facility/Warehouse
Line 0 72,700 239,000 387,500 516,400 622,800 703,000 760,100
TOTAL DEBT $575,000 $647,700 $814,000 $962,500 $1,091,400 $1,197,800 $953,000 $1,010,100
<FN>
<F1> Projections assume an evergreen bank term loan. However, additional cash provided by the working
capital facility and/or securitization of mortgages could be used to amortize this amount.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CASH FLOWS RELATED TO MORTGAGE SECURITIES
($ 000's)
Projected for the Years Ended May 31,
1995
(5 Months) 1996 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C>
Sources of Cash from Mortgage
Assets to be Securitized:<F1>
EBIT<F2> $37,156 $ 84,914 $ 81,918 $78,902 $ 75,861 $ 72,786 $ 69,671
Principal Repayment 14,635 34,959 34,448 34,016 33,664 33,397 33,220
Total Cash Sources 51,791 119,873 116,366 112,918 109,525 106,183 102,891
Uses of Cash:
Interest (29,075) (66,786) (62,520) (58,189) (53,782) (49,287) (44,692)
Debt Repayment (22,715) (53,087) (53,846) (54,729) (55,743) (56,896) (58,199)
Total Cash Uses (51,791) (119,873) (116,366) (112,918) (109,525) (106,183) (102,891)
Net Sources/Uses $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
12/31/94
New mortgage
collateralized
securities $875,000 $852,285 $799,198 $745,352 $690,623 $634,880 $577,984 $519,785
<FN>
<F1> Represents cash flows from all unencumbered mortgages created prior to December 31, 1994 as well as
the cash flows from residual interests in the Mid-State Trusts II & III. The Creditors' Plan
contemplates that these mortgage assets will be securitized
and they have therefore been segregated from the other cash flows of Walter Industries.
<F2> Represents interest income net of miscellaneous expenses.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET
($ millions)
Projected Recording of "Fresh Pro-Forma
12/31/94 Plan Consummation Start" 12/31/94
<S> <C> <C> <C> <C>
Cash $ 185.4 (140.4)(a)(b) $ 45.0
Short-term Investments 111.4 111.4
Installments Notes Receivable 1,462.7 1,462.7
Trade Receivables 143.8 143.8
Other Notes and Accounts Receivable 8.0 8.0
Inventories 161.4 161.4
Prepaid Expenses 8.4 8.4
Total Current Assets 2,081.1 (140.4) 0.0 1,940.7
Property, Plant and Equipment 1,161.9 1,161.9
Accum. Depreciation, Depletion
and Amortization (473.4) (473.4)
Property, Plant and Equipment, Net 688.4 688.4
Other Investments 5.7 5.7
Unamortized Debt Expense 27.2 (9.4) 17.8
Other Assets 38.2 38.2
Excess of Purchase Price over
Net Assets Acquired 401.0 (401.0) 0.0
Reorganization Value in Excess
of Amounts Allocable to
Unidentifiable Assets 0.0 1,155.7(c) 1,155.7
Total Assets 3,241.6 (140.4) 745.3 3,846.5
Bank Overdrafts 13.5 13.5
Accounts Payable 57.4 57.4
Trade Notes (25% of Claim) 0.0 40.7(d) 40.7
Accrued Expenses 110.0 110.0
Income Taxes Payable (Current
and Deferred) 48.8 48.8
Working Capital Facility 0.0 0.0
Total Current Liabilities 229.8 40.7 0.0 270.5
Income Taxes Payable-Deferred 33.2 33.2
Long-Term Senior Debt (incl.
Current Maturities)
Mid-State Trust II & III 835.4 835.4
Securities Issued Under the Plan 0.0 1,450.0(e) 1,450.0
Accrued Retiree Health Liability 229.8 0.0 229.8
Other Long-Term Liabilities 48.2 0.0 48.2
Accrued Post-Petition Interest
on Ch. 11 Liabilities 404.3 (404.3)(f) 0.0
Liabilities Subject to Chapter
11 Proceedings 1,755.7 (1,755.7)(f) 0.0
Total Liabilities 3,536.4 (669.3) 0.0 2,867.1
Total Stockholders' Equity (294.8) 528.9(g)(h) 745.3(i) 979.4
Total Liabilities and
Stockholders' Equity $3,241.6 (140.4) 745.3 $3,846.5
</TABLE>
<PAGE>
WALTER INDUSTRIES, INC.
NOTES TO ADJUSTMENTS TO BALANCE SHEET UPON CONFIRMATION
($ 000's)
(a) To record the following cash sources and uses at
Consummation:
Amount
CASH SOURCES AT CONSUMMATION:
Borrowing Pursuant to New Revolving Credit Agreement $ 250,000
Proceeds from Mortgage Collateralizations 875,000
Available Cash 125,000
Release of Restricted Cash 15,400
Total Cash Sources 1,265,400
CASH USES AT CONSUMMATION:
Administrative 32,000
Priority 36,140
Secured Bank Claims:
Bank Credit Agreement 354,028
Working Capital Facility 121,343
Series B and C Senior Notes 6,400
Trade/Accounts Payable 53,081
Old Walter Industries IRB 8,792
Provident Insurance 7,494
Convenience Class 1,704
Sloss IRB Claim 715
Secured Equipment Purchases 48
Grace Street Notes 5
Total Cash Uses 621,750
Cash Available for Distribution $ 643,650
(b) Includes the release of funds held in escrow during
Chapter 11 proceedings:
Series B and C Escrow $ 6,400
Cash Collateral for Letters of Credit 9,000
Total 15,400
(c) To record the reorganization value in excess of
amounts allocable to identifiable assets in accordance with fresh
start reporting. No attempt has been made to allocate this
amount to specific assets due to the absence of
specific asset valuations. This amount is not amortized in the
projection
period. Upon confirmation, values would be assigned to specific
assets and this amount would
be allocated appropriately among them. The unallocated portion
would then be amortized going forward.
(d) To record the Plan provision regarding payment of
trade claims.
(e) To reflect the issuance of debt obligations as
contemplated in the Plan:
Mortgage Collateralization Indebtedness $ 875,000
Walter Industries, Inc. -- Senior Notes 325,000<F1>
Walter Industries, Inc. -- Revolving Bank Loan 250,000
Total New Securities $1,450,000
<F1> Approximates total claim of $330,974 less funds in escrow
of $6,400.
<TABLE>
<CAPTION>
(f) To record the discharge of liabilities subject to
Chapter 11 proceedings:
Principal and Accrued
Pre-Petition Interest
Accrued Interest 12/29/89-
as of Filing 12/31/94*
($ 000's)
<S> <C> <C>
Administrative $ 32,000
Priority 36,140
Secured Bank Claims:
Bank Credit Agreement 229,623 $152,625
Working Capital Facility 79,779 51,843
Total 308,402 204,468
Senior Reset Notes:
Series B 188,977 169,340
Series C 5,356 4,801
Total 194,333 174,141
Trade/Other 70,774 23,001
Old Walter Industries IRB 6,650 2,143
Provident Insurance 7,494
Convenience Class 1,286 418
Sloss IRB Claim 571 144
Secured Equipment Purchases 48
Grace Street Notes 5
SUBTOTAL 657,703 404,315
Unsecured Bondholders:
Senior Subordinated Notes 479,261 0
17% Subordinated Notes 1996 379,254 0
Pre-LBO Notes:
13 1/8 Sub Notes 1993 52,680 0
13 3/4 Sub Notes 2003 105,615 0
10 7/8 Sub Notes 2008 81,177 0
239,472 0
SUBTOTAL 1,097,987 0
TOTAL -- ALL CLAIMS $1,755,690 $404,315
* If the Amended and Restated Veil Piercing Settlement
Agreement does not become effective by its terms, total accrued interest would
decrease by $75 million.
</TABLE>
(g) To record the cancellation of common equity.
(h) To record the net adjustment to retained earnings as
a result of the discharge of indebtedness and other effects of
Plan consummation.
(i) To record the equity value of Reorganized Walter
Industries. This amount represents:
Negotiated Enterprise Value $2,525
Less: Senior Claims 902
Cash Available for Distribution 644
Reorganized Net Equity $ 979
<PAGE>
EXHIBIT VIII
HILLSBOROUGH HOLDINGS CORPORATION
Corporate Structure on Filing Date
<PAGE>
EXHIBIT IX
HILLSBOROUGH HOLDINGS CORPORATION
(Now Named Walter Industries, Inc.)
Corporate Structure after Completion of Mirror Liquidation Plan
<PAGE>
EXHIBIT XI
AGREEMENT
This Agreement (as the same may be amended, modified or
supplemented from time to
time, the "Agreement") is entered into by and among AIF II, L.P.,
certain affiliates of
AIF II, L.P. and certain accounts managed or controlled by such
affiliates ("Apollo");
Lehman Brothers Inc. ("Lehman"); the Official Bondholders
Committee of the Debtors (as
defined) (the "Bondholders Committee"); the Official Committee of
General Unsecured
Creditors of the Debtors (the "Creditors' Committee"); the
Unofficial Ad Hoc Committee
of Pre-LBO Bondholders (the "Ad Hoc Committee") (Apollo, Lehman,
the Bondholders
Committee, the Creditors Committee and the Ad Hoc Committee, the
"Proponents") and
Chemical Bank and Bankers Trust Company (the "Bank Agents") as
co-agents under the Bank
Credit Agreement dated as of September 10, 1987, as amended among
Hillsborough Holdings
Corporation ("Hillsborough"), Walter Industries, Inc. ("Old
Walter Industries") and
certain of their subsidiaries and the bank parties thereto (the
"Revolving Credit Banks"),
and the Working Capital Agreement dated as of December 29, 1987,
as amended, among
Hillsborough, Old Walter Industries and certain of their
subsidiaries and the bank parties
thereto (the "Working Capital Banks") (each of the Proponents and
the Bank Agents, a "Party"), by their authorized undersigned
counsel.
WITNESSETH:
WHEREAS, Hillsborough, Old Walter Industries and certain
of their subsidiaries and
affiliates (collectively, the "Debtors") are the subject of cases
under Chapter 11 of 11 U.S.C. Section 101, et seq. (the
"Bankruptcy Code") in the United States Bankruptcy Court for the
Middle District of Florida, Tampa Division (the "Court"), all of
which are being jointly
administered under Case No. 89-9715-8P1 (the "Chapter 11 Cases");
WHEREAS, certain of the Proponents filed a Joint Plan of
Reorganization of Debtors
Proposed by Certain Creditor Proponents Dated as of December 16,
1993 in the Chapter 11
Cases (the "Original Settlement Plan") and a Disclosure Statement
therefor;
WHEREAS, the Bank Agents filed a Bank Agents' Joint Plan
of Reorganization Dated
as of December 28, 1993 in the Chapter 11 Cases (as such plan may
be modified or amended
from time to time, the "Bank Agents' Plan") and a Disclosure
Statement therefor;
WHEREAS, the Bank Agents have filed documents stating that
they intend to recommend
to the holders of Bank Claims acceptance of the treatment of the
claims of the Revolving
Credit Banks, Working Capital Banks and Bank Agents ("Bank
Claims") which have been
incorporated in the Original Settlement Plan;
WHEREAS, the Proponents intend to file an amendment to the
Original Settlement
Plan, and the Bank Agents have received a copy in substantially
the form of such
amendment, on or before April 20, 1994, or such other date set by
the Court (as such
amendment of the Original Settlement Plan may be further amended,
revised or modified from
time to time, the "Settlement Plan"); and
WHEREAS, the Parties desire to defer the Court's
consideration of the Bank Agents'
Plan and the Disclosure Statement therefor on the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, agree as follows:
1. The Proponents shall not adversely modify or
amend the treatment of any or all of the Bank Claims under the
Settlement Plan until after (a) December 31, 1994 and either (b)
both of the following conditions occur, if ever: (i) there
shall have occurred a material adverse change in the
business, results of operations, financial condition, properties
or assets of the Debtors, taken together, from the date of this
Agreement, and (ii) the treatment of the claims of the Proponents
under the Settlement Plan is materially adversely modified or
amended, or (c) the Court disapproves such Bank treatment
on motion of a party other than a Proponent.
2. The Bank Agents hereby affirm that they will
recommend and will not withdraw (except under a circumstance in
which they could file a motion under Section 3) their
recommendation to the holders of Bank Claims that they accept the
treatment provided for such Claims under the Settlement Plan.
3. The Bank Agents shall file a motion with the
Court to defer the Court's consideration of the Bank Agents' Plan
and the Disclosure Statement therefor and shall not request the
Court to renew consideration of the Bank Agents' Plan and the
Disclosure Statement therefor until after the earlier of
(a) December 31, 1994 and (b) such date, if any, that the Court
denies approval of the Disclosure Statement for the Settlement
Plan.
4. The Parties agree that any damages arising from
the breach of a Party's obligations under Section 1, 2 or 3
hereof are not susceptible to a money satisfaction and that
specific performance shall be the remedy for any such breach.
The Court shall have jurisdiction to hear and determine
any claim arising out of any breach hereof.
5. This Agreement may not be amended except in a
writing signed by the Parties.
6. Notwithstanding any other provision of this
Agreement, nothing in this Agreement is intended to be or
constitute, and shall not be deemed to be or constitute, a
solicitation of any vote or any agreement to vote for or against
any plan of reorganization, and nothing in this Agreement
shall impair the right or the ability of any Party to vote for or
against, or abstain from voting with respect to, any plan of
reorganization. Nor shall this Agreement impair the right or the
ability of the Bank Agents also to recommend to the
holders of the Bank Claims that they accept the treatment of the
Bank Claims under any other plan of reorganization in the Chapter
11 Cases.
7. No part of this Agreement shall be deemed as an
admission of any Party for any purpose.
8. Except to the extent the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights and obligations
arising under this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State
of New York, without giving effect to the principles of
conflicts of law thereof.
9. This Agreement is intended to bind and inure to
the benefit of the Parties and their respective successors,
assigns, heirs, executors, administrators and representatives.
10. This document embodies the complete agreement
and understanding between the Parties with respect to the subject
matter hereof and supersedes and preempts any prior agreement,
understanding or representation made by and between any or all
of such Parties, whether written or oral, which may have
related to the subject matter hereof in any way whatsoever.
11. This Agreement is intended solely for the
benefit of the Parties, and there shall be no third-party
beneficiaries of this Agreement.
12. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all
of which shall constitute one and the same Agreement.
<PAGE>
Dated: As of April 18, 1994
AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.
By: /s/
Steven M. Pesner, P.C.
Ellen R. Werther
65 East 55th Street
New York, New York 10022
(212) 872-1070
For APOLLO
PAUL, WEISS, RIFKIND, WHARTON
& GARRISON
By: /s/
Robert Drain
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3236
For LEHMAN BROTHERS INC.
STROOCK & STROOCK & LAVAN
By: /s/
Daniel H. Golden
7 Hanover Square
New York, NY 10004
(212) 806-5400
For the BONDHOLDERS COMMITTEE
JONES, DAY, REAVIS & POGUE
By: /s/
Marc S. Kirschner
599 Lexington Avenue
New York, NY 10022
(212) 326-3939
For The CREDITORS COMMITTEE
MARCUS MONTGOMERY WOLFSON P.C.
By: /s/
Peter D. Wolfson
53 Wall Street
New York, NY 10005
For The AD HOC COMMITTEE
WACHTELL, LIPTON, ROSEN & KATZ
By: /s/
Harold S. Novikoff
51 West 52nd Street
New York, NY 10019
(212) 403-1000
For the BANK AGENTS
<PAGE>
I. Assumption or Termination of Loan Agreements and Indentures
As of the Effective Date, the Revolving Credit Agreement,
the Working Capital Agreement, the Series B & C Senior Note
Indenture, the Sloss IRB Indenture and each
indenture with respect to the Subordinated Notes will be
terminated, deemed null and void
and of no further force and effect as to the Debtors, except to
the extent that the Bank
Agents' or Indenture Trustees' charging liens, if any, may
otherwise be asserted under
the terms of the governing agreement. Each Bank Agent or
Indenture Trustee, on the one
hand, and the Debtors, on the other hand, will have no further
obligations to each other.
Nothing in the Creditors' Plan will preclude any Holder of any
Revolving Credit Bank
Claim, Working Capital Bank Claim, Series B & C Senior Note
Claim, Sloss IRB Claim or
Subordinated Note Claim from objecting to the amounts or
reasonableness of any Claims for
compensation or reimbursement of expenses of the applicable Agent
or applicable Indenture Trustee.
Upon the payment of the Allowed Amounts pursuant to the
Creditors' Plan, with
respect to the Old Walter Industries IRB Claims in Class U-1, the
Provident Life & Accident Insurance Company Claims in Class S-7
and the Intercompany IRB Claims in
Class I-1, Sloss will assume all unsatisfied obligations under
the Intercompany IRB and
Walter Industries will assume all unsatisfied obligations under
the Old Walter Industries
IRBs and under the instruments upon which the Provident Life &
Accident Insurance Company
Claims are based, and any acceleration of any obligation and/or
instrument or default in
connection with such Claims will be rescinded, waived or cured
and of no force or effect
and the terms of such instruments will be reinstated as if no
such acceleration or default had occurred.
J. Indemnification
The articles of incorporation and/or the bylaws of Walter
Industries and each of
the Debtors shall provide that Walter Industries and each of the
Debtors shall indemnify,
hold harmless and reimburse its present and former officers and
directors from and against
any and all losses, claims, damages, fees, expenses, liabilities
and actions to the extent
that such persons were the beneficiary of an indemnity giving
rise to an Allowed Indemnity
Claim and pursuant to the terms of such indemnity. All rights of
the Persons indemnified
pursuant hereto shall survive Confirmation of the Creditors' Plan
and shall not be
discharged pursuant to Section 1141 of the Code. The Debtors may
confirm any such
contractual indemnification by contract, resolution or otherwise
as they may deem appropriate.
K. Releases
1. Release by Holders of Claims
As of the Effective Date, Holders of any Claims: (i) that
accept any property or
New Common Stock to be distributed to or for the benefit of a
Holder of any Claims
pursuant to Article III of the Creditors' Plan and in
consideration therefor; (ii) in a
Class that accepts the Creditors' Plan; or (iii) that mark a box
on the ballot sent to
such Holder for purposes of voting whether to accept or reject
the Creditors' Plan,
indicating such Holder's agreement to such release (the text of
which release shall be
set forth in full on such ballot) (and all trustees and/or agents
on behalf of such
Holder) shall be deemed to have released, to the extent permitted
by the Court, (A) the
Settling Parties (other than Jim Walter Corporation and The
Celotex Corporation and their
respective subsidiaries), the Proponents, the Holders of
Revolving Credit Bank Claims,
the Holders of Working Capital Bank Claims, the Revolving Credit
Agents, the Working
Capital Agents, the Holders of Series B & C Senior Note Claims,
the Holders of
Subordinated Note Claims, the Series B & C Senior Note Trustee,
the Subordinated Note
Trustees, the Holders of Allowed Indemnity Claims (to the extent
of such Claims), the
members of the Official Committees, the members of the Ad Hoc
Committee of Pre-LBO
Bondholders and the respective present and former parents,
subsidiaries, Affiliates,
directors, officers, partners, shareholders, employees, agents,
advisors, predecessors
in interest and representatives of all of the foregoing (other
than any (x) Holders or
former Holders of Allowed Old Common Stock Interests that are not
Settling Equityholders,
(y) any of Celotex's or Jim Walter Corporation's or any of the
Debtors' respective present
and former shareholders, directors, officers, partners,
employees, agents, advisors and
representatives, and (z) Jim Walter Corporation and The Celotex
Corporation and their
respective subsidiaries), in each case in such Person's capacity
as a Holder of a Claim
or Interest, as a plan proponent, if applicable, as a shareholder
of any Debtor, or any
other capacity (including, with respect to the Bondholder
Proponents, any action or
inaction related to or set forth in the definition of Qualified
Securities in the
Creditors' Plan) (it being understood that this clause (A) does
not include any
shareholder, director, officer, partner, employee, agent, advisor
or representative of
any Debtor, in each case that is a Holder or former Holder of an
Allowed Old Common Stock
Interest that is not a Settling Equityholder or that is not a
Celotex/JWC Released Party);
and (B) the holders of Allowed Indemnity Claims that are not
parties to the Veil Piercing
Settlement Agreement, but only to the extent of such Allowed
Indemnity Claims and only
in the capacity in which such Allowed Indemnity Claims provide
indemnification,
reimbursement or contribution (collectively the Persons described
in (A) and (B) are
referred to herein, in such capacities, as the "Released
Parties"), of and from any and
all Claims, obligations, rights, causes of action and liabilities
(other than the right
to enforce the Debtors' obligations under the Creditors' Plan)
which such Holder may be
entitled to assert, whether known or unknown, foreseen or
unforeseen, then existing or
thereafter arising, based in whole or in part upon any act,
omission or other occurrence
taking place on or prior to the Effective Date in any way
relating to the Debtors, the
Chapter 11 Cases or the Creditors' Plan (including, without
limitation, any of the Veil
Piercing-Related Issues or LBO-Related Issues).
The Debtors assert that this Disclosure Statement provides
inadequate disclosure
with respect to the limitations of the release provision, in that
no basis is provided for "lack of mutuality."
The releases contained in the Creditors' Plan do not cover
the officers, directors
or shareholders of the Debtors, except to the extent that they
hold Allowed Indemnity
Claims against the Debtors or timely become a signatory to the
Veil Piercing Settlement Agreement and thereby become a Settling
Equityholder.
Releases are also being provided to members and
representatives of Classes that
have agreed to compromise and settle their Claims, as partial
consideration for such
compromise and settlement, and to the Proponents in consideration
of their agreement to
compromise and settle their Claims, and their negotiation and
preparation of the
Creditors' Plan and the settlements reached in connection
therewith.
The Proponents do not believe that there is a lack of
mutuality in releases or, indeed, that mutuality is a legal
requirement.
The Securities and Exchange Commission and certain other
parties in interest have questioned the validity under Section
524(e) of the Code of the releases of non-debtor
parties contemplated by the Creditors' Plan. The Proponents
believe that the releases do not contravene Section 524(e) or any
other provision of the Code.
2. Release by Debtors
As of the Effective Date, the Debtors shall be deemed to
have waived and released
any and all claims, obligations, rights, causes of action and
liabilities, whether known
or unknown, foreseen or unforeseen, then existing or thereafter
arising, which are based
in whole or in part upon any act, omission or other occurrence
taking place on or prior
to the Effective Date and which may be asserted by or on behalf
of any of the Debtors,
against any of the Released Parties, in any of their respective
capacities, and (b) on
the Effective Date, the Debtors, for good and valuable
consideration, the adequacy of
which is hereby confirmed, shall be deemed to have waived and
released any and all claims,
obligations, rights, causes of action and liabilities (including,
without limitation,
causes of action arising under Sections 544, 547 and 548 of the
Code, but excluding any
rights of the Debtors to enforce the Creditors' Plan), whether
known or unknown, foreseen
or unforeseen, then existing or thereafter arising, which are
based in whole or in part
upon act, omission or other occurrence taking place on or prior
to the Effective Date and
which may be asserted by or on behalf of any of the Debtors
against any Released Party;
provided, that such causes of action shall be preserved to the
extent not based upon Veil
Piercing-Related Issues or LBO-Related Issues, for purposes of
setoff and counterclaim in respect of any Disputed Claim.
3. Dismissal of Lawsuits
Without limiting the scope or the generality of the
foregoing Paragraphs 1. and 2., and without limiting any rights
against Persons that are not Released Parties, the
Debtors and the other named parties in such lawsuits shall cause
to be dismissed with prejudice, as to all Released Parties on the
Effective Date, Mellon Bank, N.A. and Bank
of New York v. Kohlberg Kravis Roberts & Co., et al., Adversary
Proceeding No. 94-17 pending before the Court.
L. Unclaimed Property
1. Unclaimed Instruments
In accordance with Sections 347 and 1143 of the Code, any
Holder of any Revolving
Credit Bank Claim, Working Capital Bank Claim, Sloss IRB Claim,
Series B & C Senior Note
Claim, Grace Street Note Claim, Subordinated Note Claim or
Interest who fails to surrender
the instrument, if any, evidencing its Claim or Interest, as
provided in the Creditors'
Plan, within two (2) years from and after the Effective Date will
be deemed to have forfeited all rights and Claims and Interests
and will not participate in any distribution on account of the
Creditors' Plan. Upon the expiration of such two (2) year
period, all shares of New Common Stock, all New Senior Notes and
all Qualified Securities held for
distribution by the applicable Bank Agent or the applicable
Indenture Trustee will be returned to Walter Industries. Such
New Common Stock will be taken into the treasury of
Walter Industries and such New Senior Notes and Qualified
Securities (other than Cash) will be deemed to be cancelled and
of no further force and effect.
2. Unclaimed Cash
In accordance with Sections 347 and 1143 of the Code, any
Cash, including interest earned thereon, that is unclaimed for
two (2) years after being held by the applicable
Bank Agent or the applicable Indenture Trustee or after
distribution thereof by mail to the latest mailing address filed
by or for the party entitled thereto (or to the last
mailing address maintained of record by the applicable Bank Agent
or the applicable Indenture Trustee) will be returned to and
revested in Walter Industries.
3. Non-Negotiated Checks
In accordance with Sections 347 and 1143 of the Code, if a
Holder of an Allowed Claim fails to negotiate a check issued to
such Holder pursuant to the provisions of Article III of the
Creditors' Plan within one (1) year of the date such check was
issued, then the amount of Cash attributable to such check will
be deemed to be unclaimed property
in respect of such Holder's Allowed Claim and will be revested in
Walter Industries.
4. Returned Distributions
If a distribution to any Holder of an Allowed Claim made
pursuant to the Creditors'
Plan is returned to the applicable Bank Agent or Indenture
Trustee or the disbursing agent
selected by the Bondholder Proponents or to Walter Industries or
the Debtors, due to an
incorrect or incomplete address for the Holder of such Allowed
Claim, then such Bank
Agent, Indenture Trustee, or the disbursing agent selected by the
Bondholder Proponents
shall notify Walter Industries and Walter Industries, on behalf
of the Debtors, will
publish a notice once in The Wall Street Journal (National
Edition) and The New York Times
(National Edition) not later than two (2) years after the date on
which such distribution
was made listing the name of such Holder and the distribution due
such Holder and stating
that unless such Holder contacts Walter Industries within sixty
(60) days following the
date such notice appears in such newspapers and provides Walter
Industries with an
accurate address, such distribution shall be deemed to be
unclaimed property in respect
of such Holder's Allowed Claim and in accordance with Sections
347 and 1143 of the Code,
such Holder shall be deemed to have no further entitlement in
respect of such distribution
and will not participate in any further distributions under the
Creditors' Plan.
M. Vesting of Property
Except as otherwise provided in the Creditors' Plan or the
Confirmation Order, on the Effective Date, all Assets of the
estates of each of the Debtors (including, without
limitation, any and all claims and causes of action against
Persons that are not Released
Parties) shall vest in such Debtors, and subsequently will be
retained by such entities
subject to the provisions of the Creditors' Plan and the
Confirmation Order and the
Reorganization Documents and shall be free and clear of all
Claims and Interests of all
Holders, except the obligations to perform according to the
Creditors' Plan, the
Confirmation Order, the Reorganization Documents and the Liens
and security interests
granted pursuant to the Creditors' Plan or any of the
Reorganization Documents. Except
as otherwise provided in the Creditors' Plan or the Confirmation
Order, on the Effective
Date and thereafter, each of the Debtors may operate its business
free of any restrictions imposed by the Code.
N. No Substantive Consolidation
1. Joint Administration of Chapter 11 Cases
The Debtors' Chapter 11 Cases are being jointly
administered pursuant to an order
of the Court and the Creditors' Plan is being presented as a
joint plan of reorganization
of the Debtors for administrative purposes only. The Creditors'
Plan is not predicated
upon a substantive consolidation of the Chapter 11 Cases and
nothing therein will be
otherwise construed. Pursuant to the Creditors' Plan, Allowed
Claims with respect to any
Debtor will be satisfied by such Debtor or its successor.
Accordingly, Claims and
Interests have been classified in Article II of the Creditors'
Plan with respect to each
Debtor, and Article III of the Creditors' Plan provides for the
treatment of Allowed
Claims and Interests by the Debtor to which such Allowed Claims
and/or Interests relate.
2. No Consolidation
The Chapter 11 Cases will not be substantively
consolidated and (i) the legal, equitable, and contractual rights
relating to intercompany Claims between the Debtors will
be unaltered; (ii) the Assets and liabilities of the Debtors will
not be merged or treated as though they were merged; (iii) any
obligation of any Debtor will be deemed to be an
obligation of such Debtor only and any Claim which is filed in
connection with any such obligation will be an Allowed Claim only
against the Debtor against which such Claim has
been filed; (iv) each and every Allowed Claim which is filed in
the Chapter 11 Case of
any Debtor will be deemed filed only against the Debtor with
respect to which such Allowed
Claim has been filed; (v) for purposes of determining the
availability of the right of
set off under Section 553 of the Code, the Debtors will not be
treated as one entity so
that, subject to the other provisions of Section 553 of the Code,
debts due to any of the
Debtors may not be set-off against the debts of any of the other
Debtors. Notwithstanding
the foregoing, on the Effective Date, and in accordance with the
terms of the Creditors'
Plan, all Allowed Claims based upon guarantees of collection,
payment or performance made
by any of the Debtors with respect to the obligations of another
Debtor will be discharged and released.
O. Retention of Jurisdiction
Notwithstanding the entry of the Confirmation Order or the
Effective Date having
occurred, the Court will retain jurisdiction of the Chapter 11
Cases for the following purposes:
a. To hear and determine any and all pending
applications for the rejection and disaffirmance, assumption or
assignment of Executory Contracts, any objections to Claims
resulting therefrom, and the allowance of any Claims resulting
therefrom;
b. To hear and determine any and all applications,
adversary proceedings, contested matters and other litigated
matters pending on the Confirmation Date;
c. To ensure that the distributions to Holders of
Allowed Claims and Interests are accomplished as provided herein
and in the Reorganization Documents;
d. To hear and determine any objections to Claims
filed, before or after the entry by the Court of the Confirmation
Order ("Confirmation"); to allow or disallow, in whole or in
part, any Disputed Claim, and to hear and determine other
issues presented by or arising under the Creditors' Plan;
e. To enter and implement such orders as may be
appropriate in the event implementation of the Confirmation Order
or Creditors' Plan is for any reason stayed, or the Confirmation
Order is reversed, revoked, modified or vacated;
f. To hear and determine all applications for
compensation of professionals and reimbursement of expenses under
Sections 330, 331, 503(b) or 1129(a)(4) of the Code;
g. To hear the Proponents' application, if any, to
modify the Creditors' Plan in accordance with Section 1127 of the
Code (after Confirmation, any Proponent may also, so long as it
does not adversely affect the interest of Holders,
institute proceedings in the Court to remedy any defect or
omission or reconcile any inconsistencies in the Creditors' Plan,
Disclosure Statement or Confirmation Order, in such manner as may
be necessary to carry out the purposes and effects of
the Creditors' Plan);
h. To enforce and to hear and determine disputes
arising in connection with the Creditors' Plan or its
implementation, including disputes among Holders and
disputes arising under the Reorganization Documents, the
Veil Piercing Settlement Agreement, the Pre-LBO Bondholders
Settlement Agreement, or any other agreements, documents or
instruments executed in connection with the Creditors' Plan;
i. To construe and to take any action to enforce
the Creditors' Plan, Reorganization Documents and Confirmation
Order, and issue such orders as may be necessary for the
implementation, execution and Confirmation of the Creditors' Plan
and the execution, delivery and performance of the
Reorganization Documents;
j. To construe and to take any action to enforce
the Veil Piercing Settlement Agreement and the Pre-LBO
Bondholders Settlement Agreement, including without limitation,
the enforcement of the settlement injunction and the releases
contained or provided for therein, and issue such orders
as may be necessary for the implementation of the Veil Piercing
Settlement Agreement and the Pre-LBO Bondholders Settlement
Agreement;
k. To determine such other matters and for such
other purposes as may be provided in the Confirmation Order;
l. To hear and determine any motions, contested
matters, or adversary proceedings involving taxes, tax refunds,
tax attributes and tax benefits and similar or related matters,
with respect to the Debtors or their estates arising prior to the
Effective Date or relating to the period of administration of the
Chapter 11 Cases;
m. To hear and determine any other matters related
hereto and not inconsistent with Chapter 11 of the Code; and
n. To enter a final decree closing the Chapter 11 Cases.
P. Fractional Shares of New Common Stock
Fractional shares of New Common Stock will not be issued
or distributed. Instead, fractional amounts (calculated to six
decimal places) will be rounded up or down to the
nearest whole share, with fractional amounts equal to .500000
being rounded up.
Q. Amendments to the Creditors' Plan
The Creditors' Plan may be amended, modified or
supplemented by (a) all of the
Proponents or (b) the Bondholder Proponents or (c) any one or
more of the Proponents other
than as provided in the preceding clauses (a) and (b) (provided
that, in the case of this
clause (c), such amendment shall bind only the Proponent(s)
filing such amendment,
modification or supplement), in each case before or after the
Confirmation Date, and by
all of the Proponents or the Bondholder Proponents or any Debtor
after the Effective Date,
in each case in the manner provided for by Section 1127 of the
Code or as otherwise
permitted by law. The Proponents' or the Bondholder Proponents'
ability to adversely
affect the treatment or amount of the Revolving Credit Bank
Claims, the Working Capital
Bank Claims, the Pre-LBO Debenture Claims, the Veil Piercing
Claims, the Series B & C
Senior Note Claims and the Series B & C Senior Note Trustee Claim
is limited by the terms
of the Bank Agents Agreement, the Pre-LBO Bondholders Settlement
Agreement, the Veil
Piercing Settlement Agreement and the Term Sheet for Treatment of
Series B & C Senior Note
Claims Under Creditor Proponents' Creditors' Plan. The
Creditors' Plan specifies that
nothing in the Creditors' Plan shall in any way prohibit or
restrict any Proponent from
filing a plan of reorganization on its own behalf.
R. Amendments to the Charter
On or as soon as practicable after the Effective Date,
Walter Industries will adopt
and file the Charter with the Secretary of State of the State of
Delaware. The Charter
will, among other things, increase the authorized Common Stock
from 50 million shares to
200 million shares, and provide that Walter Industries may not
issue non-voting capital
stock. The Charter will also provide that: (i) each share of
Class A Common Stock is
entitled to five votes and each share of Class B Common Stock is
entitled to one vote on
all matters as to which the Class A Common Stock and the Class B
Common Stock are both
entitled to vote (and on such matters the Class A and Class B
Common Stock shall vote
together as a single class); (ii) each share of Class A Common
Stock automatically
converts into one share of Class B Common Stock upon the sale,
transfer or other
disposition (but not including a pledge) of such share other than
by an original recipient
of such shares under the Creditors' Plan to an Affiliate of the
original recipient of such
shares; and (iii) all shares of Class A Common Stock
automatically convert into an equal
number of shares of Class B Common Stock (A) as soon as the
aggregate number of shares
of Class A Common Stock held by Bondholder Proponents and their
Affiliates is less than
8% of the then outstanding number of shares of New Common Stock,
and (B) upon the seventh
anniversary of the original issuance thereof. Notwithstanding
the foregoing, the
Creditors' Plan provides that the special voting and conversion
features of the Class A
Common Stock will be modified, if, and only to the extent that,
the Court determines that
such modification is necessary to comply with Section 1123(a)(6)
of the Code. The Charter
will also provide that Walter Industries shall indemnify, hold
harmless and reimburse its
present and former officers and directors from and against any
and all losses, claims,
damages, fees, expenses, liabilities and actions in accordance
with the Allowed Indemnity
Claims against the Debtors existing as of the Filing Date. An
"Allowed Indemnity Claim"
is an Allowed Claim for indemnification, reimbursement or
contribution by any Debtor;
provided, however, that any such Claim shall not be an Allowed
Indemnity Claim if the
agreement or other document giving rise to the Claim is void or
voidable. All rights of
the Persons indemnified pursuant to the Creditors' Plan will
survive Confirmation of the
Creditors' Plan and will not be discharged pursuant to Section
1141 of the Code. From
and after the Effective Date, amendments to the Charter will be
carried out in accordance
with Delaware law, the terms of the Charter and the
Reorganization Documents.
S. Confirmation Bonus Award
The general uncertainty of employment attributable to the
bankruptcy filing has led
to voluntary resignations at all levels of the Debtors'
workforce. To the extent it is
necessary to prevent the future loss of valuable and experienced
talent which might
jeopardize the Debtors' ability to reorganize, and to maximize
the value of the Assets
of their estates, prior to the Confirmation Date, the Board (as
defined herein in
Section III.B.) of Walter Industries, and subsequent to the
Confirmation Date, the New
Board (as defined herein in Section III.B) of Walter Industries
(or, if such New Board
has not been appointed as of the Confirmation Date, the
Bondholders Committee), may in
its sole discretion, prepare a schedule of Cash bonuses to be
paid on or after the
Effective Date to the management of Walter Industries and its
subsidiaries who are
employed by Walter Industries or such subsidiaries on or after
the Effective Date. The
Proponents believe that if such a schedule is established, it
will represent a fair and
reasonable solution and an appropriate response to deteriorating
employee morale, which,
in turn, will be beneficial to the estates by curtailing employee
attrition. In addition,
this incentive, particularly as to key executives, will help to
ensure that a diligent
effort will be made as to the successful completion of the
Creditors' Plan and the
successful operation of the Debtors, both of which are vitally
important to all concerned.
To the extent that Court approval is necessary under Section
1129(a) of the Code, such approval will be obtained.
T. Conditions Precedent
1. To Confirmation of the Creditors' Plan
Confirmation of the Creditors' Plan shall not occur unless
and until each of the following conditions shall have been
satisfied or have been waived by all of the
Proponents (or, if specified, solely by certain of the
Proponents):
a. The Court shall have entered the Confirmation
Order on or prior to December 31, 1994 (this condition may be
waived solely by the Bondholders Committee);
b. Either (i) the Court shall have entered an order
finding (A) Jim Walter Resources not in default under any
covenant contained in the amended agreement, effective January 1,
1979, between Jim Walter Resources and Alabama Power Company
and (B) Jim Walter Resources, after giving effect to the
Creditors' Plan, is in compliance with applicable covenants and
required financial conditions in the amended agreement, effective
January 1, 1979, between Jim Walter Resources and Alabama Power
Company or (ii) the disputed issues between Jim Walter Resources
and Alabama Power Company shall have been settled on terms
acceptable to the Bondholders Committee and the Court shall have
entered an order approving such settlement (this condition may be
waived solely by the Bondholders Committee) (see
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT
TO THE DEBTORS--Businesses and Properties of the Debtors--Jim
Walter Resources--Mining Division" as to a settlement between Jim
Walter Resources and Alabama Power under which a new
coal purchase agreement was signed, one part of which
eliminates the required financial condition covenants contained
in the 1979 contract, and which agreement was approved by order
of the Court; because this settlement is acceptable to the
Bondholders Committee, this condition has been satisfied);
c. The Court shall have entered an order approving
the Veil Piercing Settlement and the Veil Piercing Settlement
Agreement, and the Court shall have entered an order settling and
resolving all of the LBO-Related Issues as to the Released
Parties, as provided in the Creditors' Plan (this condition may
be waived solely by the Bondholders Committee);
d. The Allowed Amount of Federal Income Tax Claims
shall have been estimated by the Court or settled in an amount
not in excess of $40,000,000 (this condition may be waived solely
by the Bondholders Committee); and
e. There shall not have occurred, in the sole
determination of the Bondholders Committee, a material adverse
change in the business, results of operations, condition
(financial or otherwise), properties, Assets or prospects of
the Debtors, taken together, from the date of the
Creditors' Plan to the Confirmation Date (this condition may be
waived solely by the Bondholders Committee).
The Proponents will request that the Confirmation Order
provide that either (i) the treatment of the Allowed Claims of
each Class has been consented to by the requisite
number of voting members of such Class or (ii) the Allowed Claims
of each Class have been satisfied in full upon receipt of the
distribution provided for upon consummation of the
Creditors' Plan, and that, as a result, in each case, no
subordination provisions relating
to any Allowed Claims will be enforceable against any other
Allowed Claim.
The Proponents will request that the Confirmation Order
contain a channelling
injunction providing that the prosecution of any existing or
future asbestos-related
claims that arise out of Veil Piercing-Related Issues be enjoined
against the Debtors and be channelled against the Celotex estate.
2. To Effectiveness of the Creditors' Plan
The Effective Date (as defined below) of the Creditors'
Plan shall not occur unless and until each of the following
conditions shall have been satisfied or have been waived
by all of the Proponents (or, if specified, solely by certain of
the Proponents):
a. The Confirmation Order shall have become a Final
Order (this condition may be waived solely by the Bondholders
Committee);
b. All conditions precedent set forth in the Veil
Piercing Settlement Agreement shall have been satisfied or waived
(as provided therein);
c. Each of the orders described in Sections
II.S.1.b. and II.S.1.c. above shall each have become a Final
Order (this condition may be waived solely by the
Bondholders Committee);
d. The Debtors shall have consideration sufficient
to make all distributions required by the Creditors' Plan;
e. Qualified Securities having an aggregate
principal amount of not less than $700 million shall be available
for distribution to Classes U-4, U-5, U-6 and U-7 under the
Creditors' Plan (this condition may be waived solely by the
Bondholder Proponents);
f. The Reorganization Documents shall have been
executed and delivered by all of the parties thereto and the
Court shall have entered a Final Order approving the
Reorganization Documents (this condition may be waived
solely by the Bondholders Committee);
g. Mid-State Homes shall have obtained the
Mid-State Homes Warehouse Credit Facility (this condition may be
waived solely by the Bondholders Committee);
h. There shall not have occurred, in the sole
determination of the Bondholders Committee, a material adverse
change in the business, results of operations, condition
(financial or otherwise), properties, Assets or prospects of
the Debtors, taken together, from the date of the
Creditors' Plan to the Effective Date (this condition may be
waived solely by the Bondholders Committee); provided,
that any such determination by the Bondholders Committee
shall not be effective unless written notice thereof is given to
the Court, the Debtors, the other Proponents, the Bank Agents and
the Series B & C Senior Note Trustee with an opportunity for any
of such persons to request, within 10 days after receipt of
such notice, that a hearing be held to consider whether
such determination constitutes an abuse of discretion;
i. All conditions to effectiveness of each of the
Reorganization Documents (other than conditions relating to
payment of money or the issuance of debt securities or New Common
Stock on the Effective Date or conditions that the
Effective Date shall have occurred or whose fulfillment
would require the Effective Date to have occurred) shall have
been satisfied (or waived by the applicable Persons); and
j. The Charter shall have been filed with the
Secretary of State of the State of Delaware.
The Proponents presently intend to waive any conditions to
effectiveness that require a Final Order and consummate the
Creditors' Plan, if the only appeal outstanding
of the relevant order is raised by any Debtor(s) or any of their
stockholders, because
the issues raised by any such appeal are not expected to
adversely affect the reorganized
Debtors. Because the Debtors and their shareholders are the only
parties likely to raise
such appeals, the effectiveness of the Creditors' Plan will not
be delayed during the
pendency of any appeals taken by the Debtors and/or their
shareholders with respect to
any of the orders required for the Effective Date to occur,
unless they obtain a stay
pending appeal after posting any required bond, which would
prevent the Effective Date
from occurring. Because the Proponents believe that the amount
of any such bond would
be enormous, the Proponents do not believe that the Debtors
and/or their shareholders are likely to obtain such a stay
pending appeal.
The ability of the Proponents to obtain the financing
necessary to consummate the
Creditors' Plan despite the existence of such an appeal is
discussed above at "OVERVIEW
OF THE CREDITORS' PLAN--Special Features of the Creditors'
Plan--Distribution of
Combination of Qualified Securities and New Common Stock to
Holders of Subordinated Note
Claims and to Veil Piercing Claimants--Creation and Anticipated
Range of Amount of Qualified Securities."
Recently, the Bondholder Proponents have contacted
prospective financing sources,
but have not sought or received a commitment for any financing
for any of the Debtors.
The Debtors contend that the Creditors' Plan cannot be
confirmed and cannot become
effective without the litigation and appellate delays relating to
the approval of the Veil
Piercing Settlement Agreement, the Pre-LBO Bondholders Settlement
Agreement, the
resolution of the issue of the Unsecured Creditors' entitlement
to post-petition interest
and the satisfaction of the conditions of "Finality" (as that
term is used in the Veil Piercing Settlement Agreement).
The Proponents disagree.
The Proponents believe that, other than the Debtors and
KKR Associates, the Debtors' controlling stockholder, the parties
that may realistically object to the Veil
Piercing Settlement Agreement and the Pre-LBO Bondholders
Settlement Agreement are the
Veil Piercing Claimants and the Holders of Pre-LBO Debenture
Claims, respectively.
Virtually all parties that would have standing and/or cause to
appeal the Veil Piercing
Settlement Agreement--that is, The Celotex Corporation, the
Celotex Asbestos Property
Damage Claimants Committee, the Celotex Asbestos Bodily Injury
Claimants Committee and
counsel representing the great majority of the individual Veil
Piercing Claimants--are
already parties to the Veil Piercing Settlement Agreement and can
be expected to support
its implementation. The same is true of the Pre-LBO Bondholders
Settlement Agreement,
since both the Ad Hoc Committee of Pre-LBO Bondholders and
Holders of over 2/3 of the
principal amount of Pre-LBO Debenture Claims are parties to the
Pre-LBO Bondholders Settlement Agreement.
Moreover, as discussed above, the Bondholder Proponents
presently intend to waive
any conditions to effectiveness that require a Final Order, if
the only appeal outstanding
on the relevant order is raised by any Debtor(s) or any of their
shareholders. Because
the Debtors and their shareholders are the only parties likely to
raise such appeals, the
effectiveness of the Creditors' Plan should not be delayed during
the pendency of any
appeals taken by the Debtors and/or their shareholders with
respect to any of the orders
required for Confirmation or effectiveness (unless, as discussed
above, the Debtors and/or
their stockholders obtain a stay pending appeal).
In addition, notwithstanding the Debtors' assertions to
the contrary, neither
approval of the Veil Piercing Settlement Agreement nor
confirmation of the Creditors' Plan
is conditioned upon a determination by the Court that
Subordinated Noteholders are legally
entitled to post-petition interest on account of their Claims.
The Proponents believe
that the Veil Piercing Settlement Agreement satisfies the fair
and equitable test
independent of the ability of the Subordinated Noteholders to
receive post-petition
interest on account of their Claims. The Creditors' Plan
expressly provides that the
Allowed Amount of Subordinated Note Claims includes all
pre-petition amounts as well as
post-petition interest, but only to the extent that the payment
of post-petition interest
is permitted by law and to the extent available after payment of
all other Claims under
the Creditors' Plan. Based upon the Negotiated Enterprise Value
and the estimated amount
of Allowed Claims, including the Veil Piercing Claims, pursuant
to the Veil Piercing
Settlement Agreement, the Proponents do not expect that any value
will remain for
allocation to post-petition interest on account of Subordinated
Note Claims. Therefore,
not only does the Creditors' Plan envision that no post-petition
interest will be
recovered on account of Subordinated Note Claims, in the event
that there is any residual
value in the Debtors' estates after payment of all other Allowed
Claims, post-petition
interest is recoverable on account of Subordinated Note Claims
only to the extent
permitted by law. Thus, although the Creditors' Plan is flexible
enough to accommodate
any finding by the Court with respect to Holders of Subordinated
Note Claims' right to
post-petition interest, because the Proponents do not believe
that there will be any
residual value in the Debtors' estates after payment of all other
Allowed Claims, it will
not be necessary for the Court to rule on the merits of the right
of Holders of
Subordinated Note Claims to recover value on account of
post-petition interest in order to confirm the Creditors' Plan.
The Debtors assert that this Disclosure Statement provides
inadequate disclosure
regarding the "material adverse change" condition to confirmation
and consummation, i.e.,
that, as a result of this condition, Apollo and Lehman Brothers
Inc. are allegedly able
to prevent confirmation and/or consummation of the Plan in their
sole discretion.
The determination as to whether a material adverse change
has occurred, for
purposes of the condition to effectiveness, was changed so that
the determination would
be made by the Bondholders Committee and would not be effective
until written notice
thereof was given to the Debtors and all significant creditor
representatives, with an
opportunity for any of them to request a hearing to consider
whether the determination constituted an abuse of discretion.
The "Effective Date" of the Creditors' Plan shall be such
Business Day (as defined
in the Creditors' Plan) selected by the Bondholder Proponents
which shall not be later
than ninety (90) days after the entry of a Final Order by the
Court finding that all of
the foregoing conditions have been satisfied or waived.
3. Waiver of Conditions Precedent
Satisfaction of the conditions precedent to confirmation
and consummation of the
Creditors' Plan may be waived by all of the Proponents (or, in
certain cases, solely by certain of the Proponents, as set forth
above).
U. Certain Information Regarding Apollo and Lehman Brothers Inc.
The Debtors have alleged that this Disclosure Statement
provides inadequate disclosure with respect to the following:
(a) the identity of the "Affiliates of AIF II, L.P.
and certain accounts managed or controlled by such Affiliates,"
who are Creditor Proponents; (b) Apollo's cost basis in the
Debtors' debt securities purchased after the Filing
Date; (c) the pre-Filing Date relationship of certain
principals of Apollo to the Debtors in connection with the
financing of the LBO and the issuance of the LBO
Bonds; (d) whether and to what extent principals of Apollo
at the time Apollo purchased the Debtors' debt securities
possessed material and non-public information; (e) any other
pre-Filing Date relationships with the Debtors;
(f) whether and to what extent Apollo had discussions with
third-party post-Filing Date purchasers of the Debtors' debt
securities, including, but not limited to "Libra;" (g) the facts
and circumstances surrounding any lawsuit commenced against
Apollo or any principals of Apollo which would be required
to be disclosed under applicable federal and/or state securities
laws; (h) the officers, directors and owners of Apollo and how
much such individuals stand to earn if the Creditors' Plan
goes effective; (i) who Apollo really is; (j) the holdings
of Apollo in Classes U-4 and U-5; (k) the details of the
post-Filing Date acquisitions of the Debtors' debt
securities by Apollo, including the fact that Apollo
purchased their bonds at a significant discount and as a result
stand to make a substantial profit from confirmation of the
Creditors' Plan; (l) the specifics of all of the Claims and
Interests that Apollo presently holds or previously held
and all prior fiduciary or other relationships with the Debtors;
(m) the details of the expenses (including legal and professional
fees) (i) incurred by Apollo in connection with the
formulation and implementation of the Creditors' Plan and
(ii) incurred in connection with the Apollo Veil Piercing
Settlement Agreement, that would be entitled to administrative
priority treatment under the Creditors' Plan; (n) why
Apollo is interested in obtaining a controlling position
in the reorganized Debtors and what their intentions are with
respect to asserting that position; and (o) how much Apollo and
their respective principals and affiliates stand to earn if the
Creditors' Plan goes effective, including the value earned
on account of their Claims and any fees and expenses which would
be recovered from the Debtors, or anticipated future fees on
financings or asset sales."
Although Apollo does not believe that any of the
information requested by this objection is required or relevant,
nevertheless, in an effort to obviate certain of the
objections and expedite the disclosure statement approval
process, the following information is provided:
(i) Within the defined term "Apollo," the only
Proponent is currently AIF II, L.P., which is an investment
partnership that holds all of the Claims held by any
Apollo-related entity with respect to the Chapter 11
Cases. The term "Apollo" is defined broadly to permit the
transfer, in the ordinary course of business, of any or all of
such Claims to affiliates of AIF II, L.P.
(ii) Prior to the Filing Date, Drexel Burnham
Lambert Incorporated ("Drexel") acted as placement agent with
respect to the 1987 private placement of the LBO bonds of
Hillsborough, and as financial advisor to Hillsborough in the
1989 unsuccessful attempt to effect an exchange offer of the
LBO bonds and a restructuring of Hillsborough. Certain
principals of Apollo, as employees of Drexel, acted in connection
with these engagements. Except for those engagements,
neither Apollo nor any of its principals or employees had
any other pre-Filing Date relationships with the Debtors.
Drexel's last engagement by Hillsborough terminated in 1989, more
than two years prior to March 1992, when Apollo acquired
its debt securities of the Debtors as part of a bulk
purchase of a portfolio of securities of over 300 different
issuers. The purchase price for the portfolio was not required
to be allocated among each security in the portfolio.
Nevertheless, Apollo believes that it paid less than the
face amount for the Debtors' debt securities. Apollo has not
purchased any securities of any Debtor since that time.
(iii) Neither Apollo nor any of its principals,
employees or representatives possessed any material and
non-public information with respect to any of the Debtors at the
time of the purchase by Apollo of the Debtors' debt
securities.
(iv) On June 8, 1993, Apollo signed a
confidentiality agreement with the Debtors and has fully complied
therewith.
(v) There are no lawsuits against Apollo or any
principals of Apollo which would be required to be disclosed
under applicable federal and/or state securities laws.
(vi) AIF II, L.P. is an investment partnership in
the form of a limited partnership, the general partner of which
is Apollo Advisors, L.P., a limited partnership whose general
partner is Apollo Capital Management, Inc., a Delaware
corporation. The shareholders of Apollo Capital
Management, Inc. are Leon Black, Craig Cogut, John Hannan and
Arthur Bilger.
(vii) AIF II, L.P. holds $120,445,719 principal
amount of Class U-4 Claims, $25,000,000 principal amount of Class
U-5 Claims, $12,375,000 principal amount of Class U-6 Claims and
$2,250,000 principal amount of Series B & C Senior Note
Claims.
(viii) Apollo has incurred legal, professional and
other expenses in connection with its attempt to formulate an
alternative to the Debtors' plan and its ongoing efforts to
effect a prompt and fair resolution of these Chapter 11
Cases; Apollo cannot estimate at this time what the amount
of such expenses may be when the Creditors' Plan is finally
consummated.
(ix) Apollo is not interested in obtaining control
over the reorganized Debtors. It is interested in enforcing its
rights as a Creditor, and it did not acquire its interest in the
Debtors with the intention of obtaining control over
the reorganized Debtors. Apollo supports the issuance of
a high-vote class of common stock because it believes that the
issuance of such stock to Holders of Claims in Claims U-4 and U-5
will facilitate the Debtors obtaining necessary
effective date financing and will facilitate the
continuation of current operational management. Further, Lehman
Brothers Inc. and Apollo have represented that there are no
understandings or agreements between them with respect to the
exercise of their rights to elect Qualified Securities or
with respect to their voting of New Common Stock that they may
receive on the Effective Date. Also, at the present time, there
are no understandings or agreements between them with
respect to the nomination or appointment of directors to
sit on the boards of directors of the reorganized Debtors, other
than the appointment, described herein, of Messrs. Walter, Durham
and Matlock.
The Debtors have alleged that this Disclosure Statement
provides inadequate disclosure with respect to the following:
(a) the pre-Filing Date fiduciary relationship
between Lehman Brothers Inc. and the Debtors in connection with
the LBO and as financial advisor to the Debtors in connection
with sales and potential sales of certain of the Debtors'
businesses; (b) whether and to what extent Lehman Brothers Inc.,
at the time it acquired the Debtors' debt securities, possessed
material and non-public information obtained as a result of
Lehman's Brothers Inc. pre-Filing Date relationship with the
Debtors; (c) whether and to what extent Lehman Brothers
Inc., at the time it sold certain of the Debtors' debt securities
immediately prior to becoming a member of the Bondholders
Committee, possessed material and non-public information obtained
during the course of negotiations with the Debtors in 1992
and 1993; (d) the cost basis of Lehman Brothers Inc. in the
Debtors' debt securities purchased after the Filing Date and any
financing Lehman Brothers Inc. has offered to third parties in
connection with such third parties' purchase of the
Debtors' debt securities; (e) the research and analysts' reports
issued by Lehman Brothers Inc. after the Filing Date relating to
the Debtors and in particular the views expressed by Lehman
Brothers Inc. in such reports as to the merits of the Veil
Piercing Litigation; (f) whether and to what extent other
corporate purposes of Lehman Brothers Inc. and/or its affiliates
influenced Lehman's pursuit of the Creditors' Plan; (g) the
holdings Lehman Brothers Inc. in Classes U-4 and U-5; (h)
the details of the post-Filing Date acquisitions of the Debtors'
debt securities by Lehman Brothers Inc., including the fact that
Lehman Brothers Inc. purchased their bonds at a
significant discount and as a result stands to make a
substantial profit from confirmation of the Creditors' Plan; (i)
the specifics of all of the Claims and Interests that Lehman
Brothers Inc. presently holds or previously held and all
prior fiduciary or other relationships with the Debtors;
(j) the details of the expenses (including legal and professional
fees) (i) incurred by Lehman Brothers Inc. in connection with the
formulation and implementation of the Creditors' Plan and (ii)
incurred in connection with the Veil Piercing Settlement
Agreement, that would be entitled to administrative priority
treatment under the Creditors' Plan; (k) why Lehman Brothers Inc.
is interested in obtaining a controlling position in
the reorganized Debtors and what their intentions are with
respect to asserting that position; and (l) how much Lehman
Brothers Inc. and its respective principals and affiliates stand
to earn if the Creditors' Plan goes effective, including the
value earned on account of their Claims and any fees and
expenses which would be recovered from the Debtors, or
anticipated future fees on financings or asset sales.
Although Lehman Brothers Inc. does not believe that any of
the information requested by this objection is required or
relevant, nevertheless, in an effort to obviate certain of the
objections and expedite the disclosure statement
approval process, the following information is provided:
(i) A special committee of the Board of Directors
of Old Jim Walter engaged Lehman Brothers Inc. in 1986-87 to
analyze and evaluate competing offers to acquire the Debtors'
predecessors, including the 1987 LBO led by KKR. Following the
LBO, Old Jim Walter engaged Lehman Brothers Inc. to assist in
evaluating the potential sale of certain assets of the Debtors,
including United States Pipe, and Lehman Brothers Inc. assisted
in the sale of Celotex, Ltd., a foreign subsidiary. These
engagements terminated before the Filing Date.
(ii) Lehman Brothers Inc. did not possess material
and non-public information as a result of the foregoing
pre-Filing Date engagements when it obtained the Debtors' debt
securities. As Lehman Brothers Inc. has previously
informed the Debtors, Lehman Brothers Inc. did not
disclose any non-public information in connection with its sale
of certain of the Debtors' secured bond debt and bank debt that
occurred before Lehman Brothers Inc. became a member of the
Bondholders Committee, and Lehman Brothers Inc. has fully
complied with its confidentiality agreement with the Debtors.
(iii) In February 1993 Lehman Brothers Inc., with
the full cooperation of the Debtors, and consistent with the
nature of the public research report process, issued a Research
Report regarding the Debtors based on information in the public
record, which at that time did not include the results of
extensive discovery, the record of the trial of the Declaratory
Judgment Proceeding and the Court's April 18, 1994 opinion in the
Declaratory Judgment Proceeding. The Research Report
concluded, among other things, that Hillsborough should
not be held liable for the asbestos claims of Celotex. The
Research Report also concluded that the Chapter 11
process often leads to the settlement of such disputes and
that certain factors, such as the likelihood of the Debtors'
prevailing on the merits of the Declaratory Judgment Proceeding,
the timing of distributions and the goals of the parties in
interest, often have a bearing on any settlement. The
Report also stated that because the Declaratory Judgment
Proceeding named only specific defendants, achieving a prompt
result that binds all present and future veil piercing claimants
"appears to require the agreement of the major parties."
(iv) Lehman Brothers Inc. holds Class U-4 and Class
U-5 bonds in the approximate aggregate principal amount of $271
million. Some of these bonds were purchased after the Filing
Date at a price below the par value of such bonds.
(v) Lehman Brothers Inc. has incurred legal,
professional and other expenses in connection with its attempt to
formulate an alternative to the Debtors' plan and its ongoing
efforts to effect a prompt and fair resolution of these
Chapter 11 Cases; Lehman Brothers Inc. cannot estimate at
this time what the amount of such expenses may be when the
Creditors' Plan is consummated.
(vi) Lehman Brothers Inc. is not interested in
obtaining control over the reorganized Debtors. It is interested
in enforcing its rights as a Creditor, and it did not become a
Creditor with the intention of obtaining control over the
reorganized Debtors. Lehman Brothers Inc. supports the
allocation of Class A and Class B New Common Stock for the
reasons set forth elsewhere in this Disclosure Statement,
including to help to ensure that the Debtors obtain the financing
necessary to consummate the Creditors' Plan and to provide
for the continuation of the Debtors' long-term operational and
senior management. There are no agreements or understandings
between Lehman Brothers Inc. and Apollo with regard to the
control of the Reorganized Debtors, including with respect
to the allocation or voting of New Common Stock, other than the
appointment of Messrs. Walter, Durham and Matlock to the New
Boards.
(vii) Apparently without any factual basis for
doing so, the Debtors have questioned whether the voting and
governance procedures of the Bondholders Committee were changed,
and whether Apollo or Lehman made any agreements with
Committee members, when Apollo and Lehman Brothers Inc.
became members of the Bondholders Committee. No voting and
governance procedures of the Bondholders Committee were changed
when Apollo and Lehman Brothers Inc. became members of the
Bondholders Committee, and neither Apollo nor Lehman
Brothers Inc. made any agreements with Committee members at that
time.
<PAGE>
III.
POST-CONSUMMATION
A. Business
The Creditors' Plan does not contemplate the sale of any
of the Debtors, Non-Debtor Affiliates (as defined in Section
III.B.1.) or any substantial amount of their Assets in
the foreseeable future. Therefore, in the foreseeable future,
the businesses will continue as described herein in the section
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS."
B. Management
1. Directors and Officers of the Debtors
Set forth below are lists showing the names, ages and
positions of all of the
present directors and officers of Walter Industries, and the key
operating officers of
each of the other Debtors (together with brief biographical
summaries). See Exhibit V
for lists of all of the directors and officers of each of the
other Debtors. It is
currently expected that all current officers, other than officers
that are employees of,
or affiliated with, KKR Associates or its affiliates, will
continue to serve in such
capacities subsequent to consummation of the Creditors' Plan,
except for any changes that
might occur in the ordinary course of business. On the
Confirmation Date, the Board of
Directors of each Debtor shall be replaced by a New Board of
Directors, (each a "New
Board" and together the "New Boards"), each consisting of eleven
(11) Directors. In the
event that the Confirmation Order does not provide for or allow
the replacement of the
Board of Directors of each Debtor with a New Board on or about
the Confirmation Date, then
the Confirmation Order shall direct the Board of Directors of
each Debtor to take the
actions that the New Boards would be required to take under
Section 5.3 of the Creditors'
Plan and under the other provisions of the Creditors' Plan,
except where another Person
is expressly authorized under the Creditors' Plan to act in the
stead of a New Board if
it has not yet been constituted and except that the Confirmation
Order shall appoint the
Bondholders Committee as the representative of Walter Industries
under Section 303 of the
Delaware General Corporation Law with the full power and
authority to establish the amount
and the terms, conditions, rights and benefits of the Qualified
Securities and the New
Senior Notes to be issued under the Creditors' Plan and to take
such other actions as may
be required to or as may facilitate the consummation of the
Creditors' Plan.
Each New Board shall consist of the persons identified by
the Proponents at least
thirty (30) days prior to the Confirmation Hearing Date, which
persons shall include the
following: (i) G. Robert Durham, the present President, Chief
Executive Officer and
Director of Walter Industries; (ii) James W. Walter, the present
Chairman of Walter
Industries; and (iii) Kenneth J. Matlock, the present Executive
Vice President, Chief Financial Officer and Director of Walter
Industries.
In addition to the other duties of each New Board not
inconsistent with Section 5.3
of the Creditors' Plan under applicable law and the applicable
articles of incorporation
and bylaws of each Debtor, each New Board shall cause its Debtor
to be managed and
operated in a manner calculated to (i) maximize the value of the
Debtor, and (ii) raise
Cash from operations or other commercially reasonable sources,
create Qualified Securities
in accordance with customary industry practice, and take such
other actions to facilitate
consummation of the Creditors' Plan.
Note that, as a result of completion of the Mirror
Liquidation Plan, the corporate existence of certain Debtors
ceased. Accordingly, there are no current directors or
officers of Old Walter Industries, Resources Holdings, Jim Walter
Resources or United Land, since those corporate entities no
longer exist.
Directors of each of the Debtors are elected annually by
the stockholders of such Debtor. Each director holds office
until his successor is elected and qualified.
Current Directors of Walter Industries are as follows:
James W. Walter -- Chairman; G. Robert Durham; Perry Golkin;
Henry R. Kravis; Kenneth J. Matlock; Paul E. Raether;
George R. Roberts; and Michael T. Tokarz. With the exception of
Mr. Walter, Mr. Durham and Mr. Matlock, it is expected that none
of the current directors of Walter Industries
will be elected to any of the New Boards.
The biographical summaries for each of the current
directors named above who are
also officers of the Debtors are shown in the following section
regarding officers. The
biographical summaries (age and service as of August 1, 1993) for
each of the current
directors who are not also officers of the Debtors are as
follows:
James W. Walter has been Chairman of Hillsborough,
Old Walter Industries and/or Walter Industries since 1988. In
1948 Mr. Walter founded Walter Construction Co., a predecessor of
Original Jim Walter (incorporated in 1955). He was President and
Chief Executive Officer of Original Jim Walter from 1955 to 1963,
Chairman and Chief Executive Officer from 1963 to 1983 and
Chairman thereafter. He is also a Director of GTE Corporation,
Contel Cellular, Inc. and Anchor Glass Container Corporation.
Age 70. 45 years of service.
Henry R. Kravis has been a director of Hillsborough,
Old Walter Industries and/or Walter Industries since 1988 and he
has been a general partner of KKR since its organization in 1976.
Paul E. Raether has been a director of Hillsborough,
Old Walter Industries and/or Walter Industries since 1988 and he
has been a general partner of KKR since April 1986; prior to that
time he was an associate at KKR.
George R. Roberts has been a director of
Hillsborough, Old Walter Industries and/or Walter Industries
since 1988 and he has been a general partner of KKR since
its organization in 1976.
Officers of the Debtors and Cardem, J.W. Railroad,
Black Warrior Methane and Black Warrior Transmission
(collectively, the "Non-Debtor Affiliates") serve at the
pleasure of the applicable Board of Directors. The
Debtors state in the Debtors' Disclosure Statement that the
Debtors are not aware of any family relationship
among any of the officers of the Debtors and/or the
Non-Debtor Affiliates.
Set forth below are the names, ages, positions and
business backgrounds (as of August 1, 1993) of all of the
officers of Walter Industries and the key operating officers
of each of the other Debtors. See Exhibit V for a list of all of
the officers of the Debtors and the Non-Debtor Affiliates.
Name Age Position and Background
(1) Walter Industries (formerly named Hillsborough)
G. Robert Durham 64 President and Chief Executive
Officer
G. Robert Durham had been
President and Chief Executive
Officer of Walter Industries
since June 1991. He was
Chairman, President and Chief
Executive Officer of
Phelps Dodge Corporation from
1987 to 1989, when he
took early retirement. Prior
to 1987 he was President
and Chief Operating Officer
(1985-1987) and held other
executive positions (1967-1985)
with Phelps Dodge
Corporation and/or its
affiliated companies. He is
also a Director of Homestake
Mining Company, GFC
Financial Corporation and
Atlantic Gulf Communities
Corporation and a Trustee of
Mutual Life Insurance
Company of New York. He also
was a Director of
Manufacturers Hanover
Corporation (resigned June 1991),
MHTCo. (resigned June 1991) and
Public Service Company
of New Mexico (resigned July
1991). Two years of
service.
Kenneth J. Matlock 65 Executive Vice President and
Chief Financial Officer
Kenneth J. Matlock has been
Executive Vice President
and Chief Financial Officer of
Walter Industries since
1991; he was Senior Vice
President and Chief Financial
Officer of Hillsborough, Old
Walter Industries and/or
Walter Industries from 1988 to
1991. Mr. Matlock
joined Original Jim Walter in
1964, became Controller
in 1970, Chief Financial Officer
in 1974 and Senior
Vice President in 1984. 29
years of service.
William H. Weldon 61 Senior Vice President--Finance
and Chief Accounting
Officer
William H. Weldon has been
Senior Vice President--
Finance and Chief Accounting
Officer of Walter
Industries since 1991; he was
Vice President,
Controller and Chief Accounting
Officer of
Hillsborough, Old Walter
Industries and/or Walter
Industries from 1988 to 1991.
Previously he served as
Vice President and Controller
(1977-1988); Controller
(1972-1977); and Assistant
Controller (1971-1972) of
Original Jim Walter. 22 years
of service.
William N. Temple 60 Senior Vice President and Group
Executive
William N. Temple has been
Senior Vice President and
Group Executive of Walter
Industries since 1991; he was
also appointed President and
Chief Operating Officer of
U.S. Pipe effective November 4,
1993; he was a Vice
President of Hillsborough, Old
Walter Industries and/or
Walter Industries from 1988 to
1991. Previously he
served from 1974-1988 as a Vice
President of Original
Jim Walter. Prior thereto he
served as President of
the Fasteners and Special
Products Division of Former
U.S. Pipe (as defined in Section
VII.B.2.(e)) and Vice
President of Former U.S. Pipe
(1972-1974); President of
The Southeastern Bolt and Screw
Division of Former
U.S. Pipe (1971-1974); and
Controller of Former
U.S. Pipe (1965-1971). 28 years
of service.
Robert W. Michael 51 Senior Vice President and Group
Executive
See Jim Walter Homes
Perry Golkin 39 Vice President
Perry Golkin has been a Vice
President of Hillsborough,
Old Walter Industries and/or
Walter Industries since
1987; he has been an associate
at KKR since May 1986;
prior to that time he was an
associate at Simpson
Thacher & Bartlett (law firm).
He is a Director of
American Re Corporation and
K-III Communications Corp.
Five years of service.
Michael T. Tokarz 43 Vice President
Michael T. Tokarz has been a
Vice President of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1987; he has
been a general partner of
KKR since January 1993; prior to
that time he was an
associate at KKR since September
1985; prior to that
time he was a Vice President and
Manager in the New
York office of Continental
Illinois National Bank and
Trust Company of Chicago
(commercial bank). He is a
Director of Safeway, Inc., RJR
Nabisco Holdings Corp.,
RJR Nabisco, Inc., TW Holdings,
Inc., TW Services Inc.,
K-III Communications Corp. and
IDEX Corporation. Five
years of service.
Gerald W. Hermann 58 Vice President--Employee
Relations
Gerald W. Hermann has been a
Vice President of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1990.
Previously he served as Staff
Vice President-Employee
Relations (1987-1990) and Vice
President-Employee Relations,
Seal Group (1980-1987) of
Parker Hannifin Corporation.
Three years of service.
David L. Townsend 39 Vice President--Public Relations
David L. Townsend has been a
Vice President of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1988.
Previously he served as a Vice
President (1983-1988); Director
of Public Relations
(1982-1983); Manager of Public
Relations (1980-1982)
and in various staff positions
(1978-1980) with
Original Jim Walter. 15 years
of service.
John F. Turbiville 64 Vice President--Legal and
Secretary
John F. Turbiville has been Vice
President--Legal and
Secretary of Hillsborough, Old
Walter Industries and/or
Walter Industries since 1989.
Previously he served as
Assistant Secretary of Walter
Industries (1988-1989).
Prior thereto he was Assistant
Secretary (1981-1988)
and a staff attorney (1979-1981)
with Original Jim
Walter. 14 years of service.
Donald M. Kurucz 54 Vice President and Treasurer
Donald M. Kurucz has been Vice
President and Treasurer
of Walter Industries since 1991;
he was Treasurer of
Hillsborough, Old Walter
Industries and/or Walter
Industries from 1988-1991.
Previously he served as
Treasurer (1977-1988) and
Assistant Treasurer
(1975-1977) of Original Jim
Walter. 17 years of
service.
Frank A. Hult 42 Controller
Frank A. Hult has been
Controller of Walter Industries
since 1991; he was Assistant
Controller and Chief
Accountant (1989-1991) and
Manager of Budgets
(1988-1989) of Hillsborough, Old
Walter Industries
and/or Walter Industries.
Previously he was Manager of
Budgets (1984-1988) and
Financial Analyst (1978-1981)
of Original Jim Walter; and
Manager-Operations
Administration (1981-1984);
Plant Controller
(1975-1978) and Cost Accountant
(1974-1975) for
Celotex. 19 years of service.
William Kendall Baker 70 Assistant Treasurer
See Jim Walter Homes
S. Louise Russell 60 Assistant Secretary
S. Louise Russell has been
Assistant Secretary of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1988. Prior
thereto she was Assistant
Secretary (1963-1988) of
Original Jim Walter. She has
been employed by and has been
Secretary of Jim Walter
Homes since 1976. Prior thereto
she held various
accounting and clerical
positions (1955-1976) with Jim
Walter Homes. 38 years of
service.
Joseph W. Spransy 47 Assistant Secretary
Joseph W. Spransy has been an
Assistant Secretary of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1988. He has
been employed by and has
been Assistant Secretary of U.S.
Pipe since 1988.
Prior thereto he was an
Assistant Secretary (1984-1988)
and a Corporate Attorney
(1979-1984) with Former
U.S. Pipe. 14 years of service.
Stephen H. Foxworth 49 Assistant Treasurer
Stephen H. Foxworth has been an
Assistant Treasurer of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1988. Prior
thereto he was an
Assistant Treasurer (1980-
1988); Manager-Cash and
Banking (1976-1980); Senior
Auditor (1975-1976) and
Staff Auditor (1974-1975) of
Original Jim Walter.
18 years of service.
Mary C. Snow 47 Assistant Secretary
Mary C. Snow has been Assistant
Secretary of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1988. Prior
thereto she was Assistant
Secretary (1986-1988) and Staff
Attorney (1982-1986) of
Original Jim Walter. 11 years
of service.
Thomas G. Ketcham 62 Assistant Controller
Thomas G. Ketcham has been
Assistant Controller and Tax
Director of Hillsborough, Old
Walter Industries and/or
Walter Industries since 1988.
Prior thereto he was
Assistant Controller and Tax
Director (1982-1988) of
Original Jim Walter. 11 years
of service.
(2) Best
Dana A. Snyder 41 President
Dana A. Snyder has been
President of Best since 1990.
Prior thereto he was Vice
President (1989-1990) and
Senior Account Executive
(1987-1989) of Best. Five
years of service.
(3) Best (Miss.)
Dana A. Snyder 41 President
See Best
(4) JW Insurance
Dana A. Snyder 41 President
See Best
(5) Coast to Coast
Roger A. Crabb 37 President
Roger A. Crabb has been
President of Coast to Coast
since January 1993. Prior
thereto he was Vice
President (1988-1993) and
Account Manager (1984-1988)
with Coast to Coast. Nine years
of service.
(6) Dixie
Robert W. Michael 51 President
See Jim Walter Homes
(7) Home Improvement
Robert W. Michael 51 President
See Jim Walter Homes
(8) Computer Services
William H. Weldon 61 President
See Walter Industries
(9) Hamer Properties
William N. Temple 60 President
See Walter Industries
(10) JW Walter
William N. Temple 60 President
See Walter Industries
(11) Jim Walter Homes
Robert W. Michael 51 President and Chief Operating
Officer
Robert W. Michael has been
President and Chief
Operating Officer of Jim Walter
Homes since 1984.
Prior thereto, he was Vice
President-Sales (1975-1984);
a Regional Manager (1973-1975);
an Assistant Regional
Manager (1970-1973); a Main
Branch Manager (1967-1970)
and a Sub-Branch Manager
(1966-1967) with Jim Walter
Homes and held various
managerial positions with
Mid-State Homes (1964-1966). He
also was a Vice
President of Original Jim Walter
(1984-1988). 28 years
of service.
Sam P. Bullara, Jr. 45 Executive Vice President
Sam P. Bullara, Jr. has been an
Executive Vice
President of Jim Walter Homes
since October 1987.
Previously he served as a Vice
President (1979-1987);
Collection Manager (1970-1979);
an Assistant Regional
Supervisor (1969-1970); and a
Field Representative
(1967-1969) with Mid-State
Homes. 25 years of service.
D. Wayne Hornsby 52 Executive Vice President
D. Wayne Hornsby has been an
Executive Vice President
of Jim Walter Homes since 1987.
Previously he served
as Vice President-Administration
(1984-1987); Vice
President-Central Division
(1980-1984); a Regional
Manager (1975-1980); an
Assistant Regional Manager
(1974-1975); a Main Branch
Manager (1970-1974) and in
various managerial positions
(1966-1970) with Jim
Walter Homes. 26 years of
service.
William Kendall Baker 70 Vice President, Treasurer, Chief
Financial Officer and
Chief Accounting Officer
William Kendall Baker has been
Vice President,
Treasurer and Chief Financial
Officer and Chief
Accounting Officer of Jim Walter
Homes since 1976.
Prior thereto he held various
accounting positions with
Jim Walter Homes (1956-1976).
Mr. Baker has also been
Assistant Treasurer of
Hillsborough, Old Walter
Industries and/or Walter
Industries since 1988. Prior
thereto he was Assistant
Treasurer (1970-1988) of
Original Jim Walter. 36 years
of service.
(12) JW Aluminum
Richard E. Almy 51 President and Chief Operating
Officer
Richard E. Almy has been
President and Chief Operating
Officer of JW Aluminum since
December 1991. Prior
thereto he was President and
Chief Executive Officer of
Tubelite Architectural Products
(1989-1991) and held
various managerial positions
with Consolidated Aluminum
(1977-1989) and Kaiser Aluminum
(1965-1977). One year
of service.
(13) Jim Walter Resources (formerly named JW Resources)
William Carr 62 President and Chief Operating
Officer
William Carr has been President
and Chief Operating
Officer of Jim Walter Resources
since August 1991;
prior thereto he was Senior
Executive Vice President
and Chief Operating Officer of
Jim Walter Resources and
President of its Mining Division
since 1976. He also
was a Vice President of Original
Jim Walter from 1976
to 1988. 16 years of service.
James M. Sims 59 Vice President, Chief Financial
Officer and Chief
Accounting Officer
James M. Sims has been the Vice
President and Chief
Financial and Accounting Officer
of Jim Walter
Resources since December 1980
and Senior Vice
President-Finance, Marketing and
Administration of its
Mining Division since May 1983.
Previously he was Vice
President-Administration and
Finance of Jim Walter
Resources' Mining Division
(1978-1983) and Vice
President Finance and
Administration of Former Georgia
Marble (1975-1978). 17 years of
service.
(14) United Land (formerly named Pipe Realty)
William N. Temple 60 President
See Walter Industries
(15) Window Components
Robert E. Rudolph 57 President
Robert E. Rudolph has been
President of Window
Components since 1985. Prior
thereto he was Vice
President, Treasurer and
Controller (1973-1985) and
Assistant Controller (1971-1973)
with Celotex; and
Budget Coordinator (1970-1971)
with Original Jim
Walter. 23 years of service.
(16) Window Components (Wisc.)
Robert E. Rudolph President and Chief Operating
Officer
See Window Components
(17) Walter Land
William N. Temple 60 President
See Walter Industries
(18) Mid-State Homes
Sam J. Salario 64 President
Sam J. Salario has been
President of Mid-State Homes
since 1984 and a Vice President
of Jim Walter Homes
since 1972. Previously he
served as an Assistant Vice
President (1963-1984); a
Regional Supervisor
(1961-1963) and a Representative
(1960-1961) with
Mid-State Homes. 33 years of
service.
(19) Sloss
Lee C. Houlditch 42 President
Lee C. Houlditch has been
President of Sloss since
1989. Prior thereto he was Vice
President--Finance
(1981-1989) of Sloss; Controller
of Wedlo (1978-1979)
and Operations Analyst
(1976-1978) with Former
U.S. Pipe. 15 years of service.
(20) Southern Precision
Earl E. Case 67 President
Earl E. Case has been President
of Southern Precision
since 1987. Prior thereto he
was assistant to the
President (1987); Plant
Superintendent (1969-1987);
Assistant Plant Superintendent
(1963-1969) and held
various manufacturing positions
(1949-1963) with
Southern Precision. 44 years of
service.
(21) U.S. Pipe
William N. Temple President and Chief Operating
Officer (effective
November 4, 1993).
See Walter Industries.
Dorrance R. Wedell 61 Former President and Chief
Operating Officer
(effective November 4, 1993)
Dorrance R. Wedell was President
and Chief Operating
Officer of U.S. Pipe from 1989
until his retirement on
November 4, 1993. Prior thereto
he was President of
Sloss (1980-1989); and Vice
President Manufacturing,
Pressure Pipe Division
(1977-1980); Plant Manager-North
Birmingham (1975-1977), and in
various managerial and
engineering positions
(1956-1975) with Former
U.S. Pipe. 36 years of service.
Harry L. Ransom 58 Vice President--Marketing
Harry L. Ransom has been Vice
President--Marketing of
U.S. Pipe since 1992. Prior
thereto he was Sales
Manager of U.S. Pipe
(1988-1992). Previously he was
Sales Manager (1980-1988);
Pacific Coast Regional
Manager (1975-1980); Assistant
Pacific Coast Regional
Manager (1970- 1975); District
Manager (1965-1970); and
Sales Representative (1960-1965)
of Former U.S. Pipe.
32 years of service.
William E. Fleck 63 Vice President--Manufacturing
William E. Fleck has been Vice
President--Manufacturing
of U.S. Pipe since 1988; and is
Vice
President-Manufacturing of its
Pressure Pipe Division.
Prior thereto he was a Vice
President (1980-1988); Vice
President-Manufacturing-Pressure
Pipe Division
(1980-1988); Plant Manager
Bessemer (1976-1980); Plant
General Superintendent-North
Birmingham (1974-1976) and
in various engineering positions
(1955-1975) with
Former U.S. Pipe. 38 years of
service.
E. Jack Mize, Jr. 47 Vice President--Finance,
Treasurer, Chief Financial
Officer and Chief Accounting
Officer
E. Jack Mize, Jr. has been Vice
President--Finance,
Treasurer and Chief Financial
Officer and Chief
Accounting Officer of U.S. Pipe
since 1988. Prior
thereto he was Vice President,
Treasurer and Chief
Financial and Accounting Officer
(1985-1988); Vice
President and Controller
(1978-1985); Controller
(1976-1978); Accounting Manager
(1975-1976) and in
various accounting positions
(1968-1975) with Former
U.S. Pipe. 24 years of service.
(22) Vestal
David M. Vestal 56 President
David M. Vestal has been
President of Vestal since
1982. Prior thereto he was Vice
President-Operations
(1979-1982); Vice
President-Sales (1972-1979) and
Assistant Sales Manager
(1961-1972) with Vestal.
32 years of service.
(23) Computer Holding; Hamer Holdings; JWI Holdings; Land
Holdings; Mid-State Holdings and Railroad Holdings
Michael T. Tokarz 43 President and Chief Executive
Officer
See Walter Industries
(24) Non-Debtor Affiliates
a. Cardem
Kenneth J. Matlock 65 President
See Walter Industries
b. J.W. Railroad
Lee C. Houlditch 42 President and Treasurer
See Sloss
c. Black Warrior Nethane
Robert G. Sanders 50 President and General Manager
Robert G. Sanders has been
President and General
Manager of Black Warrior Methane
since 1983. 10 years
of service.
d. Black Warrior Transmission
Robert G. Sanders President and General Manager
See Black Warrior Methane
2. Executive Compensation
a. Directors
Non-employee directors of Walter Industries (Messrs.
Golkin, Kravis, Raether,
Roberts and Tokarz, each of whom is either a general partner or
an associate of KKR; see
"POST-CONSUMMATION -- Management -- Certain Related
Transactions") were paid fees of
$25,000 per year until the Filing Date. Effective with the
commencement of the
Reorganization Proceedings, current payment of such directors'
fees was suspended. No
fees are paid to directors of any other Debtor or Non-Debtor
Affiliate of Walter
Industries. Walter Industries and its subsidiaries do not pay
fees to directors who are
employees of Walter Industries or its subsidiaries.
After consummation of the Creditors' Plan, it is presently
proposed that payment
of Walter Industries' directors' fees to nonemployee directors of
Walter Industries at $25,000 per year will be made.
b. Officers
(1) Cash Compensation Relating to Year Ended May
31, 1993
The following tables show the cash compensation paid by
each of the Debtors during
the fiscal year ended May 31, 1993, for services rendered in all
capacities, to each of
the key operating officers of each of the Debtors and to all
officers of each of the
Debtors as a group, in each case only during that portion of the
period during which such
persons held such positions or relationships. Such compensation
is shown under the Debtor
with which such officer was an employee, except as where noted.
Compensation of Walter
Industries' officers are included in total Walter Industries'
expenses, the majority of
the net amount (other than interest expense) of which is
allocated to its subsidiaries
by a monthly charge. Footnotes (1), (2) and (3) appear at the
end of this subsection.
<PAGE>
<TABLE>
<CAPTION>
Cash Compensation
Salary
Name of Individual Capacities in Which and Incentive
or Number in Group Compensation was Earned Other(3) Compensation(1) Total
(a) Walter Industries (formerly named Hillsborough)
<S> <C> <C> <C> <C>
James W. Walter Chairman of the Board
of Walter Industries(2) $ 378,612 $ 450,000 $ 828,612
G. Robert Durham President and Chief Executive
Officer of Walter Industries(2)<F1> 413,375 450,000 863,375
Kenneth J. Matlock Executive Vice President and
Chief Financial Officer of
Walter Industries(2) 231,187 255,000 486,187
William H. Weldon Senior Vice President--Finance
and Chief Accounting Officer
of Walter Industries 165,915 150,000 315,915
William N. Temple<F2> Senior Vice President and Group
Executive of Walter Industries(2) 154,557 100,000 254,557
John F. Turbiville Vice President--Legal and
Secretary of Walter Industries 92,364 40,000 132,364
Donald M. Kurucz Vice President and Treasurer of
Walter Industries 112,139 52,000 164,139
All officers as a group
(13 persons) $2,064,335 $1,626,500 $3,690,835
<FN>
<F1> See "POST-CONSUMMATION--Management--Executive Compensation--Officers--Certain Employment Agreements."
<F2> Effective November 4, 1993, Mr. Temple was also appointed President and Chief Operating Officer of U.S. Pipe.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cash Compensation
Salary
Name of Individual Capacities in Which and Incentive
or Number in Group Compensation was Earned Other(3) Compensation(1) Total
(b) Best
<S> <C> <C> <C>
Dana Snyder President of Best $ 79,115 $10,000 $ 89,115
All officers as a group (2 persons) $ 140,038 $17,500 $ 157,038
(c) Best (Miss.)
All officers as a group (1 person)* $ 27,330 $ -- $ 27,330
* employee of Jim Walter Homes
(d) JW Insurance
No employee officers
(e) Coast to Coast
Roger A. Crabb* President of Coast to Coast $ 45,565 $ 4,700 $ 50,265
All officers as a group (2 persons)* $ 102,595 $ 4,700 $ 107,295
* employees of Jim Walter Homes
(f) Dixie
No employee officers
(g) Home Improvement
No employee officers
(h) Computer Services
All officers as a group (1 person) $ 69,627 $ 6,000 $ 75,627
(i) Hamer Properties
No employee officers
(j) JW Walter
No employee officers
(k) Jim Walter Homes
Robert W. Michael President and Chief Operating
Officer of Jim Walter Homes $ 135,712 $100,000 $ 235,712
Sam P. Bullara, Jr. Executive Vice President of
Jim Walter Homes $ 72,112 $ 29,400 $ 101,512
D. Wayne Hornsby Executive Vice President of
Jim Walter Homes $ 80,059 $ 41,000 $ 121,059
William Kendall Baker Vice President, Treasurer,
Chief Financial Officer and
Chief Accounting Officer of
Jim Walter Homes $ 114,785 $ 68,000 $ 182,785
All officers as a group (16 persons) $1,072,594 $461,800 $1,584,394
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cash Compensation
Salary
Name of Individual Capacities in Which and Incentive
or Number in Group Compensation was Earned Other(3) Compensation(1) Total
(l) JW Aluminum
<S> <C> <C> <C> <C>
Richard E. Almy President and Chief
Operating Officer of JW Aluminum $ 141,836 $ 27,000 $ 168,836
All officers as a group (5 persons) $ 370,007 $ 49,000 $ 419,007
(m) Jim Walter Resources (formerly named JW Resources)
William Carr President and Chief Operating
Officer of Jim Walter
Resources(2) $ 227,505 $100,000 $ 327,505
James M. Sims Vice President, Chief Financial
Officer and Chief Accounting
Officer of Jim Walter Resources 109,560 16,000 125,560
All officers as a group (3 persons) $ 383,146 $116,000 $ 499,146
(n) United Land (formerly named Pipe Realty)
All officers as a group (1 person) $ 58,471 $ -- $ 58,471
(o) Window Components
Robert E. Rudolph President of Window Components $ 99,297 $ 18,000 $ 117,297
All officers as a group (4 persons) $ 300,631 $ 35,000 $ 335,631
(p) Window Components (Wisc.)
No employee officers
(q) Walter Land
No employee officers
(r) Mid-State Homes
Sam J. Salario* President of Mid-State Homes;
Vice President of Jim
Walter Homes $ 106,804 $ 85,000 $ 191,804
All officers as a group (3 persons) $ 164,529 $107,000 $ 271,529
* Employee of Jim Walter Homes
(s) Sloss
Lee C. Houlditch President of Sloss $ 91,806 $ 27,000 $ 118,806
All officers as a group (3 persons) $ 234,598 $ 44,000 $ 278,598
(t) Southern Precision
Earl E. Case President of Southern Precision $ 90,774 $ 12,000 $ 102,774
All officers as a group (2 persons) $ 163,178 $ 16,000 $ 179,178
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cash Compensation
Salary
Name of Individual Capacities in Which and Incentive
or Number in Group Compensation was Earned Other(3) Compensation(1) Total
(u) U.S. Pipe
<S> <C> <C> <C> <C>
Dorrance R. Wedell<F1> President and Chief Operating
Officer of U.S. Pipe $ 141,852 $ 20,000 $ 161,852
Harry L. Ransom Vice President-- Marketing
of U.S. Pipe (effective
October 1, 1992) 114,202 16,000 130,202
William E. Fleck Vice President-- Manufacturing
of U.S. Pipe 117,940 15,000 132,940
E. Jack Mize, Jr. Vice President-- Finance,
Treasurer, Chief Financial
Officer and Chief Accounting
Officer of U.S. Pipe 110,601 17,000 127,601
All officers as a group (9 persons) $ 887,991 $103,000 $ 990,991
(v) Vestal
David M. Vestal President of Vestal $ 78,623 $ 14,000 $ 92,623
All officers as a group (3 persons) $ 175,971 $ 24,000 $ 199,971
(w) Computer Holdings; Hamer Holdings; JWI Holdings; Land Holdings; Homes Holdings; Mid-State Holdings
and Railroad Holdings
No employee officers
<FN>
<F1> Retired November 4, 1993.
</TABLE>
<PAGE>
(FOOTNOTES TO SCHEDULE OF OFFICERS COMPENSATION)
(1) Incentive Compensation
As of August 31, 1988, the Debtors adopted an incentive
compensation plan
comparable to a plan previously in effect for Original Jim
Walter. Non-employee directors
are not eligible to receive incentive compensation. Both officer
employees and
non-officer employees are eligible to receive incentive
compensation.
Amounts for incentive compensation included in the cash
compensation table shown
above were paid in August 1993 applicable to employment for the
year ended May 31, 1993.
Pursuant to an order of the Court dated May 17, 1990,
incentive compensation for
all officers of all the Debtors, but excluding James W. Walter
and Joe B. Cordell of
Walter Industries (and G. Robert Durham pursuant to a Court order
dated June 27, 1991),
paid during September 1990 was limited to $1,695,000 (the same
amount as was paid in
1989), of which $1,694,161 was paid. Such amount was based on
the fact that "Operating
Income" (earnings before interest, taxes, depreciation,
amortization and professional fees
and expenses incurred in the Reorganization Proceedings but
before interest income related
to the Reorganization Proceedings) for the year ended May 31,
1990 approximated the
Operating Income for the year ended May 31, 1989. The actual
amount of such incentive
compensation paid in 1990 to each of such officers, excluding
Messrs. Walter and Cordell,
was subject to the discretion of the Debtors; provided, however,
that the maximum amount
of incentive compensation to be paid to any officer was limited
to 125% of such officer's base salary.
For the year ended May 31, 1992, incentive compensation
paid in August 1992 to
officers of the Debtors (exclusive of Messrs. Walter and Durham)
totalled $1,569,997, as
compared to a maximum of $1,570,000 payable as determined by the
formula (as adjusted) in the third succeeding paragraph.
For the year ended May 31, 1993, incentive compensation
paid in August 1993 to
officers of the Debtors (exclusive of Messrs. Walter and Durham)
totaled $1,719,000, the
maximum payable as determined by the formula in the third
succeeding paragraph.
With respect to incentive compensation paid to Messrs.
Walter and Cordell, in
September 1990, the Debtors proposed to the Official Committees
amounts to be paid to
Messrs. Walter and Cordell; however, if one or both of such
Official Committees had not
agreed to the proposed amounts to be paid, then the amount of
incentive compensation to
be paid to Messrs. Walter and Cordell would have had to be
determined by the Court. The
amounts proposed for Messrs. Walter and Cordell for 1990 were
agreed to by the Official Committees.
With respect to incentive compensation proposed to be paid
to Messrs. Walter and
Cordell for the year ended May 31, 1991, and as to the incentive
compensation for
Mr. Walter for years commencing with the year ending May 31, 1992
and for Mr. Durham,
Mr. Cordell's successor as President and Chief Executive Officer,
for years commencing
with the year ending May 31, 1993 (see
"POST-CONSUMMATION--Management--Executive
Compensation--Officers--Certain Employment Agreements" as to Mr.
Durham's incentive
compensation for the year ending May 31, 1992), the same
procedure as in the preceding
paragraph shall apply. By order dated December 2, 1993, the
Court clarified its order
dated May 17, 1990 by providing that, in considering the
appropriate amount of incentive
compensation for Messrs. Walter and Durham, the Official
Committees could not utilize
progress with respect to plans of reorganization as a factor.
The Official Committees
agreed to the amounts paid to Messrs. Walter and Cordell in
September 1991 applicable to
the year ended May 31, 1991 and the amounts paid to Messrs.
Walter and Durham applicable
to the years ended May 31, 1992 and 1993.
For all other officers of the Debtors, incentive
compensation shall be based upon
the operational performance of the officer himself, the Debtor
with which the officer is
employed and the Debtors as a whole. The standard against which
performance will be
measured shall be Operating Income for such fiscal year as set
forth in the Debtors'
annual business plan for such fiscal year (the "Target"). At the
beginning of each such
fiscal year, the Debtors will submit for review by the Official
Committees the maximum
aggregate amount of incentive compensation to be paid to such
officers, which amount will
be based upon Operating Income as shown by the annual business
plan for such year. If
one or both of the Official Committees do not agree on such
maximum aggregate incentive
compensation planned to be paid in each such fiscal year, then
the Court, upon motion by
the Debtors, shall determine such amount. The Debtors have the
authority to increase or
decrease the maximum aggregate incentive compensation by 10% at
their discretion;
provided, however, that such maximum may not be adjusted above
this 10% factor assuming
that actual Operating Income is not materially different from the
Target. If the actual
Operating Income exceeds the Target, the maximum aggregate amount
of incentive
compensation to be paid to all of the Debtor Corporations'
officers, excluding
Messrs. Walter and Durham, shall be increased by 5% for each 1%
that the actual
performance exceeds the Target; provided, however, that the
maximum amount that may be
paid as a result thereof shall not exceed 200% of the planned
amount determined as
described above. The maximum amount to be paid to any officer,
excluding Messrs. Walter
and Durham, shall be limited to 125% of such officer's base
salary.
(2) Supplemental Plans
Prior to 1984, contributions to qualified profit sharing
plans were limited to
$45,475 per individual by ERISA. In 1982, an amendment to the
IRC was passed limiting
allowable contributions to qualified profit sharing plans to
$30,000 per individual (to
be reduced to $22,500 effective for plan years commencing
September 1, 1994 as a result
of an amendment to the IRC), including forfeitures credited to
such individual's profit
sharing account. As a result of the change in the law, in 1983,
Original Jim Walter
adopted an unfunded, non-qualified, Supplemental Profit Sharing
Plan (the "Supplemental
Profit Sharing Plan"), which plan has also been adopted by Walter
Industries. The
Supplemental Profit Sharing Plan provides that an amount equal to
the additional amount
of contributions and forfeitures which would have been credited
to a participant's account
under the Walter Industries' Profit Sharing Plan (see
"POST-CONSUMMATION--Management--
Executive Compensation--Officers--Profit Sharing Plan") but for
the restrictions on such
amount imposed by the IRC, shall be accrued for the benefit of
such participant, payable,
as provided in the Supplemental Profit Sharing Plan, upon
termination of employment, at
the discretion of Walter Industries in either a lump sum or sixty
(60) equal monthly
installments. For the Supplemental Profit Sharing Plan year
ended August 31, 1993, only
three employees, Messrs. Walter, Durham and Matlock, qualified
for such participation,
and were credited with $22,667, $31,705 and $3,481, respectively;
cumulatively, at
August 31, 1993, amounts accrued were $362,887, $61,705 and
$8,074, respectively.
In 1989, Walter Industries and certain of its subsidiaries
adopted an unfunded,
non-qualified, Supplemental Pension Plan (the "Supplemental
Pension Plan"). The
Supplemental Pension Plan provides that an amount equal to the
value of the amount of
pension benefit the employee would have been entitled to without
regard to the limitations
on compensation for determining pension benefits imposed by the
IRC, less the actual
amount of pension benefit he will receive pursuant to the Pension
Plan (see
"POST-CONSUMMATION--Management--Executive
Compensation--Officers--Pension Plan") shall
be accrued for the benefit of such Supplemental Pension Plan
participant. Such accrued
benefit payment is subject to the same elections and options
applicable to the benefits
payable from the Pension Plan. However, the applicable Debtor
may, in its sole
discretion, elect to furnish any and all benefits due under the
Supplemental Pension Plan
by purchasing annuities, or by other means at its disposal,
including payment of the present value of such benefits.
As of the December 31, 1992 Supplemental Pension Plan year
end the present values
of benefits under such Supplemental Pension Plan, as determined
by the Debtors' outside
actuary, were $130,369 with respect to Kenneth J. Matlock of
Walter Industries (for prior
service with a subsidiary company), $85,466 with respect to
William Carr of Jim Walter
Resources and $1,568 with respect to William N. Temple (effective
January 1, 1994,
Mr. Temple became an employee of U.S. Pipe where he will again be
eligible to participate
in the Pension Plan (as defined in Section III.B.2.(b)(3)) of
Walter Industries (for prior
service with a subsidiary company), including $30,536, $10,514
and $1,568, respectively,
for the Supplemental Pension Plan year ended December 31, 1992.
(3) Increases in Salaries
Pursuant to an order of the Court dated May 17, 1990, base
salaries of all officers
of all the Debtors, including all officers in the tables shown
above except James
W. Walter of Walter Industries (and G. Robert Durham pursuant to
an order of the Court
dated June 27, 1991), could not be increased during the 12 months
following such order
more than 5.5%, on average, of base salaries in effect at May 17,
1990. The same 5.5%
rule applies in each succeeding twelve month period. Base
salaries for Mr. Walter of
Walter Industries (and G. Robert Durham pursuant to orders of the
Court dated June 27,
1991 and August 23, 1993 can be increased only after review of
any such proposed increases
by the Official Committees; however, if one or both of such
Official Committees do not
approve any such proposed increases, then such increases shall
not be implemented except
upon approval of the Court. Mr. Walter did not receive an
increase in his base salary
during the year ended May 31, 1991. Effective January 1, 1992,
Mr. Walter voluntarily
reduced his base salary from $425,000 per year to $350,000 per
year. See
"POST-CONSUMMATION--Management--Executive
Compensation--Officers--Certain Employment
Agreements" as to Mr. Durham's base salary.
(2) Profit Sharing Plan
Since 1958, Original Jim Walter had a Profit Sharing Plan
(the "Original Jim Walter
Plan"), providing retirement benefits for salaried employees of
Original Jim Walter and
certain of its subsidiaries. Under the Original Jim Walter Plan,
the lesser of (a) 15%
of the aggregate compensation, as defined in such plan (but
excluding the incentive
compensation payments described in Footnote 1 to the cash
compensation tables above), paid
to all participants during the particular fiscal year (subject to
the maximum amount
permitted under the IRC) or (b) 25% of Original Jim Walter's net
profits, as defined in
such plan, for the year, before federal income taxes, were set
aside each year to be held
in trust for participants in proportion to their compensation, as
defined in such plan,
for that year. Subsequent to the Merger, Old Walter Industries
and certain of its
subsidiaries (Jim Walter Homes, Mid-State Homes, Best, Best
(Miss.), JW Insurance, Coast
to Coast, Dixie and Home Improvement), adopted and continued such
plan (now, the "Walter
Industries Plan"). Contributions to the Walter Industries Plan
are computed at a rate
of 15% of the aggregate compensation (excluding incentive
compensation), as defined in
the Walter Industries Plan, paid to all participants during the
plan fiscal year ending
August 31, without any limitation as to required net profits.
For the plan year ended August 31, 1993, the following
tables show the amounts set
aside for such year, with plan balances as of August 31, 1993,
under the Walter Industries
Plan, all of which amounts were fully vested except as noted, for
each of the officers
of each of the applicable Debtors in the cash compensation tables
above, and to all
officers of each of the applicable Debtors as a group.
<TABLE>
<CAPTION>
Creditors'
Plan
Set Aside Balances
for Year Ended as of
August 31, August 31,
1993 1993
A. Walter Industries
<S> <C> <C>
James W. Walter(1) $ 29,833 $2,136,746
G. Robert Durham(1) 29,805 63,980
Kenneth J. Matlock(1)(2) 29,894 1,165,638
William H. Weldon 23,940 858,312
William N. Temple(1)(2) 22,379 770,138
John F. Turbiville 13,050 244,811
Donald M. Kurucz 16,088 468,217
All officers as a group (14 persons)(1)(2) $236,634 $6,807,286
(99.4% vested)
B. Best
Dana Snyder $ 11,835 $69,914
(60% vested)
All officers as a group (2 persons) $ 21,021 $168,608
(83.4% vested)
C. Best (Miss.)
All officers as a group (1 person) $ 2,167 $906,983
D. Coast to Coast
Roger A. Crabb $ 6,960 $96,109
All officers as a group (2 persons) $ 15,354 $849,947
E. Jim Walter Homes
Robert W. Michael $ 20,190 $885,516
Sam P. Bullara, Jr. 10,681 497,160
D. Wayne Hornsby 11,950 606,464
William Kendall Baker 15,597 996,536
All officers as a group (16 persons) $159,003 $8,154,164
F. Mid-State Homes
Sam J. Salario $ 15,610 $ 944,439
All Officers as a group (3 persons) $ 24,524 $1,324,309
(1) See Note (2) to the officers cash compensation tables above.
(2) See "Pension Plan" in the next subsection.
</TABLE>
(3) Pension Plan
The Pension Plan for Salaried Employees of Subsidiaries,
Divisions and/or
Affiliates of Walter Industries (the "Pension Plan"), previously
maintained by Original
Jim Walter, is a defined benefit pension plan funded by a method
which produces annual
contribution requirements in the aggregate and, therefore,
contributions for individual
participants are not determinable. Aggregate accrued
contributions to the Pension Plan
in the fiscal year ended May 31, 1993 (for the plan year ended
December 31, 1992) amounted
to $4,012,001, which was approximately 5.64% of total covered
remuneration. Benefit
payments under the Pension Plan are based on final average annual
compensation (including
overtime pay, incentive compensation and certain other forms of
compensation reportable
as wages taxable for federal income tax purposes) for the five
(5) consecutive years
within the final ten (10) years of employment prior to normal
retirement date which
produce the highest average. However, effective for the calendar
year 1989, compensation
for any employee in excess of $200,000 per year (as escalated in
subsequent years for
inflation -- currently $235,840) (to be reduced to $150,000 for
plan years commencing
January 1, 1994 as a result of an amendment to the IRC) cannot be
counted in the
calculation of the pension benefit for such employee. The annual
pension generally
amounts to 0.975% of final average annual compensation up to
social security covered
compensation plus 1.475% of final average compensation in excess
of social security
covered compensation, all times the number of years of service up
to 35 years, plus 1.475%
of total final average compensation times the number of years of
service in excess of
35 years. The following table shows the estimated annual
retirement benefits for
employees in specified remuneration and years of service
classifications:
<TABLE>
<CAPTION>
Years of service at retirement
Final average
annual
compensation 20 30 40
<S> <C> <C> <C>
$ 50,000 $12,470 $18,705 $ 25,510
75,000 19,845 29,768 40,260
100,000 27,220 40,830 55,010
125,000 34,595 51,893 69,760
150,000 41,970 62,955 84,510
175,000 49,345 74,018 99,260
200,000 56,720 85,080 114,010(a)
(a) The retirement income amount is subject to limitations upon maximum payments from
the Pension Plan imposed by the IRC. The current IRC limitation on benefits is
$115,641 annually.
</TABLE>
The table above assumes that employees retired at age 65
on June 1, 1993 and is based on social security covered
compensation in effect on June 1, 1993.
Officers of all Debtors except Hillsborough, Old Walter
Industries, Jim Walter
Homes, Mid-State Homes, Best, Best (Miss.), JW Insurance, Dixie,
Coast to Coast and Home
Improvement participate in the Pension Plan. In addition,
Kenneth J. Matlock (with
6 years of credited service), and one other Old Walter Industries
officer (with 7 years
of credited service) are currently employees of Walter Industries
and are participants
in the Walter Industries Profit Sharing Plan described above
since their intercorporate
transfers, but they will also receive, upon normal retirement,
annual pensions under the
Pension Plan based on their prior years of service with certain
subsidiaries of Original
Jim Walter. William N. Temple (with 8 years of credited service)
was an employee of
Walter Industries and participated in the Walter Industries
Profit Sharing Plan described
above from the time of his intercompany transfer until January 1,
1994, at which time
Mr. Temple became an employee of U.S. Pipe and again became a
participant in the Pension
Plan.
(4) Common Stock Incentive Plans--Present and Proposed
The Stock Option Plan for Key Employees of Walter
Industries and Its Subsidiaries
(the "Old Option Plan"), approved by Hillsborough's stockholders
in October 1987, provides
for the grant of incentive and non-qualified stock options ("Old
Options") covering an
aggregate of 3,318,182 shares of Common Stock (subject to
customary anti-dilution
provisions). The Old Option Plan is administered by a committee
of the Board of Directors
of Walter Industries, no member of which is eligible to receive
an Old Option. Such
committee has authority to determine which employees of Walter
Industries and its
subsidiaries will be eligible to receive Old Options as well as
certain of the terms
thereof, including the exercise price (which may not be less than
100% of the fair market
value of the shares of Common Stock subject to an Old Option on
the date it is granted)
and the period (not in excess of 10 years) during which any Old
Option will be
exercisable. Upon consummation of the Creditors' Plan, such Old
Option Plan and the Old
Options shall be cancelled, and are expressly rejected under the
Creditors' Plan to the
extent they are Executory Contracts, without admitting that the
same are Executory
Contracts and without admitting any liability as a result of such
rejection or otherwise.
Old Options for 1,678,295 shares were outstanding as of
May 31, 1993 under
incentive and non-qualified stock option agreements entered into
in 1988 and 1989
(collectively, the "Old Option Agreements"). The exercise price
of each Old Option
granted under the Old Option Agreements is $5.00 per share. Each
outstanding Old Option
becomes exercisable in equal installments over periods of time
ranging from two to
five years following the date of grant. Old Options will not
become exercisable as to
any additional shares following the termination of an optionee's
employment by Walter
Industries and its subsidiaries for any reason other than the
death or permanent
disability of the optionee or the retirement of the optionee at
age 65 or over after
having been employed by Walter Industries or a subsidiary of
Walter Industries for at
least three years after the date on which such Old Options were
granted. In the event
of such death, permanent disability or retirement, such Old
Options will become
exercisable as to all shares covered thereby. All Old Options
will expire upon the
earliest to occur of the following events: (i) the tenth
anniversary of the date on which
the Old Options were granted; (ii) not later than 95 days after
the termination of the
optionee's employment by Walter Industries and its subsidiaries
unless such termination
results from death, permanent disability or retirement at age 65
or over after having been
employed by Walter Industries or one of its subsidiaries for at
least three years after
the date on which the Old Options were granted; (iii) 12 months
after the termination of
the optionee's employment by Walter Industries and its
subsidiaries because of death,
permanent disability or retirement at age 65 or over after having
been employed by Walter
Industries or one of its subsidiaries for at least three years
after the date on which
the Old Options were granted; (iv) the willful misconduct of the
optionee which injures
Walter Industries or any of its subsidiaries; (v) the repurchase
of the optionee's shares
of Common Stock under the circumstances set forth in the
Management Common Stock
Subscription Agreements discussed under
"POST-CONSUMMATION--Management--Security Ownership
of Directors, Officers and Certain Beneficial Owners--Agreements
Regarding Common Stock;"
and (vi) unless otherwise waived by Walter Industries, upon the
merger or consolidation
of Walter Industries into another corporation, the acquisition by
another corporation of
all or substantially all of Walter Industries' assets or 80% or
more of Walter Industries'
then outstanding voting stock, or the liquidation or dissolution
of Walter Industries.
All shares purchased upon exercise of such Old Options become
subject to the Management
Common Stock Subscription Agreements discussed below under
"POST-CONSUMMATION--
Management--Security Ownership of Directors, Officers and Certain
Beneficial Owners--Agreements Regarding Common Stock."
During the fiscal year ended May 31, 1993, no Old Options
were granted or exercised under the Old Option Plan.
As of May 31, 1993, officers of each of the Debtors who
hold Old Options (all of
which are fully exercisable) are as follows:
Shares
(a) Walter Industries
James W. Walter 630,455
Kenneth J. Matlock 82,955
William H. Weldon 66,364
William N. Temple 33,182
John F. Turbiville 17,500
Donald M. Kurucz 39,818
All officers as a group (8 persons) 906,819
(b) Jim Walter Homes
Robert W. Michael 116,136
Sam P. Bullara, Jr. 19,909
D. Wayne Hornsby 33,182
William Kendall Baker 66,364
All officers as a group (8 persons) 338,454
(c) Jim Walter Resources
William Carr 116,136
James M. Sims 33,182
(d) Window Components
Robert E. Rudolph 6,636
(e) Mid-State Homes
Sam J. Salario 82,955
(f) Sloss
Lee C. Houlditch 8,295
(g) Southern Precision
Earl E. Case 6,636
(h) U.S. Pipe
Dorrance R. Wedell<F1> 26,545
William E. Fleck 66,364
E. Jack Mize, Jr. 19,909
(i) Vestal
David M. Vestal 33,182
All officers of the Debtors as a group
(26 Persons) 1,645,113
[FN]
<F1> Retired November 4, 1993.
<PAGE>
As of the Effective Date, a number of shares of Common
Stock up to 6% of the Common
Stock which would be outstanding on the Effective Date after
giving effect to the issuance
of shares of New Common Stock pursuant to the Creditors' Plan
shall be reserved for
issuance and delivery, from time to time, in the discretion of
the Board of Directors of
Walter Industries to the management of Walter Industries and its
subsidiaries and certain
other employees of Walter Industries and its subsidiaries upon
the terms and subject to
the conditions of certain stock incentive agreements and/or plans
(including a new stock
option plan for key employees of Walter Industries and its
subsidiaries (the "New Option
Plan")) to be entered into and/or adopted, as the case may be,
prior to the Effective Date
by Walter Industries. Such incentive agreements and/or plans may
also provide for the
granting of restricted stock rights, stock appreciation rights or
other incentive awards.
Both the Old Option Plan and all Old Options are cancelled
under the Creditors'
Plan and are also expressly rejected under the Creditors' Plan,
to the extent that they
are Executory Contracts, without admitting that the same are
Executory Contracts and
without admitting any liability as a result of such rejection or
otherwise.
(5) Certain Employment Agreements
Pursuant to two year employment agreements entered into in
January 1988, and one
year extensions thereof to January 11, 1991, entered into in
December 1989, between
Hillsborough or its applicable subsidiary and each of their
executive officers (except
that James W. Walter who had a 1988 employment agreement did not
enter into a 1989
employment agreement), if any of those executive officers had
been terminated without
cause (as defined in the applicable employment agreement), he
would have been entitled
to receive the cash compensation specified in such employment
agreement for the balance
of the employment term (defined as the earlier of the first
anniversary of the date of
execution of the employee's employment agreement or the death,
retirement or permanent
disability of the employee). All such employment agreements
terminated on January 11,
1991. Such employment agreements were executory contracts for
purposes of the Code, but were not assumed by the Debtors.
In connection with his employment as President and Chief
Executive Officer of
Walter Industries in June 1991, G. Robert Durham entered into a
two-year employment
agreement with Walter Industries dated June 19, 1991 (the
"Original Durham Employment
Agreement"). The Original Durham Employment Agreement was
approved by the Court by an
order dated June 27, 1991, retroactive to June 19, 1991. In July
1993, Mr. Durham entered
into a new employment agreement with Walter Industries dated June
19, 1993 (the "New
Durham Employment Agreement"). The New Durham Employment
Agreement was approved by order
of the Court dated August 23, 1993, retroactive to June 19, 1993.
The major terms of the Original Durham Employment
Agreement were and the terms of the New Durham Employment
Agreement are:
(1) Position (both agreements) -- President and
Chief Executive Officer and
a member of the Board of Directors of Walter Industries.
(2) Term -- Original Durham Employment Agreement --
Earlier of the second
anniversary of such agreement or the date of death or
permanent disability of Mr. Durham.
New Durham Employment Agreement -- Earlier of
May 31, 1995 or the
date of death or permanent disability of Mr. Durham.
Such agreement shall
automatically be renewed on June 1, 1995 and shall
continue from year to
year thereafter until the death or permanent
disability of Mr. Durham or
until terminated by either Mr. Durham or Walter
Industries on 60 days'
written notice to the other party. However, the
June 1, 1995 renewal and
each subsequent renewal shall be submitted to the
Official Committees for
their approval. If one or both of such Official
Committees does not agree
to such renewal, then the Court will determine
whether to approve such
renewal.
(3) Compensation
(a) Original Durham Employment Agreement --
first year of term (year
ended May 31, 1992) --
(i) Base salary $400,000
(ii) Guaranteed incentive
compensation $350,000 (See
footnote 1 to the cash compensation table
included under
"POST-CONSUMMATION -- Management -- Executive
Compensation --
Officers -- Cash Compensation Relating to
Year Ended May 31, 1993.")
By agreement with the Official Committees,
such incentive
compensation was increased to $400,000.
(b) Original Durham Employment
Agreement--second year of term (year
ended May 31, 1993) --
(i) Base salary $400,000
(ii) Incentive
compensation--determined by the Walter
Industries Board of Directors in accordance
with past practices,
subject, however, to the restrictions on
incentive compensation
contained in the order of the Court dated May
17, 1990, as clarified
by an order of the Court dated December 2,
1993 (see
subsection (c) (ii) below), as described in
footnote 1 to the cash
compensation table included under
"POST-CONSUMMATION--Management--
Executive Compensation--Officers--Cash
Compensation Relating to Year
Ended May 31, 1993," after substitution of
Mr. Durham's name for that
of Mr. Cordell contained in such May 17, 1990
Court order. By
agreement with the Official Committees such
compensation was increased to $450,000.
(c) New Durham Employment Agreement
(i) Base salary $450,000 (see
Footnote 3 to the cash
compensation table included under
"POST-CONSUMMATION--Management--
Executive Compensation--Officers--Cash
Compensation Relating to Year
Ended May 31, 1993") as to requirements for
approval of increases in such base salary.
(ii) Incentive
Compensation--determined by the Walter
Industries Board of Directors in accordance
with past practices,
subject, however, to the restrictions on
incentive compensation
contained in the order of the Court dated May
17, 1990, as clarified
by the Court's subsequent order dated
December 2, 1993 as described
in Footnote 1 to the cash compensation table
included under
"POST-CONSUMMATION--Management--Executive
Compensation--Officers--
Cash Compensation Relating to Year Ended May
31, 1993."
(4) Indemnification for his acts as an officer of
Walter Industries. (Both agreements).
(5) Relocation costs and expenses in line with
Walter Industries normal
policies. (Original Durham Employment Agreement).
(6) Participation in other employee benefit plans,
which would include the
Profit Sharing Plan described above under
"POST-CONSUMMATION--Management--Executive
Compensation--Officers--Profit Sharing Plan" and the
Supplemental Profit Sharing
Plan described in Footnote 2 to the cash compensation
table in "POST-CONSUMMATION--
Management--Executive Compensation--Officers--Cash
Compensation Relating to Year
Ended May 31, 1993." (Both agreements).
(7) If Mr. Durham is terminated without cause
during the term of the
agreement (to May 31, 1995), he shall become entitled to
receive his base salary
for the balance of the term plus a pro rata amount of
incentive compensation for
the year in which the employment is terminated (subject to
the restrictions of the
May 17, 1990 order of the Court described in subsections
3(b)(ii) and
3(c)(ii) above) (both agreements). If such termination,
other than for cause,
occurs during any period of renewal of such agreement, Mr.
Durham shall be entitled
to receive his then current base salary for the balance of
Walter Industries'
fiscal year ended May 31 in which the employment is
terminated plus a pro rata
amount of incentive compensation for that year (subject to
the restrictions of the
May 17, 1990 order of the Court described in subsections
3(b)(ii) and
3(c)(ii) above) (New Durham Employment Agreement).
(8) If Mr. Durham is terminated for cause during
either the original term
of the New Durham Employment Agreement or any renewal term
thereof, he shall be
entitled to receive his then current base salary through
the date of termination
and no incentive compensation payment for the year in
which the employment was
terminated (New Durham Employment Agreement).
(9) In the case of Mr. Durham's death during the
term of the agreement, his
executors, beneficiaries, etc., as the case may be, shall
be entitled to receive
his then current base salary stated in subsections
3(a)(i), 3(b)(i) and
3(c)(i) above during the nine-month period following the
date of death (Both
Agreements), plus, if not yet paid, the guaranteed
incentive compensation for the
first year of the agreement stated in subsection 3(a)(ii)
above (Original Durham Employment Agreement).
(10) During the term of the agreement Mr. Durham
will not invest in (other
than less than .5% of securities registered under Section
12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), or
accept employment by a
business that directly competes with any business of
Walter Industries and its
subsidiary companies. (Both agreements).
(6) Other Benefit Plans
All of the officers of the Debtors are eligible to
participate in other benefit
plans of the Debtors such as group medical plans, group life
insurance programs,
post-retirement medical benefits, paid vacations, paid holidays,
leaves of absence,
severance pay, etc., but only to the same extent that all other
salaried employees of the
Debtors are eligible to participate. Such other benefit plans
are described in
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS--Other Employee
Benefit Plans." Certain officers, as well as many other
employees, of the Debtors have
the use of company owned or leased automobiles.
On the Effective Date, Walter Industries and Computer
Services shall set aside, in
trust(s), pre-funded insurance program or other appropriate
vehicle, funds sufficient to
provide reasonable assurance (on an actuarial basis in the
judgment of the Board of
Directors of Walter Industries and Computer Services) of the
continued funding of medical
benefits under the post-retirement medical benefit plans of
Walter Industries and Computer
Services from time to time in effect, upon the retirement of
current employees whose
benefits in such plan have vested and to retired employees of
Walter Industries and
Computer Services following the dissolution of Walter Industries
and/or Computer Services,
divestiture of Walter Industries' operating subsidiaries or other
event which would render
Walter Industries and/or Computer Services unable to continue the
current funding of such
benefits. It is presently anticipated that such program will
consist of grantor trusts
(sometimes referred to as "rabbi trusts") containing sufficient
continuance of such
benefits. It is currently estimated that approximately $2.7
million for Walter Industries
and $2.0 million for Computer Services would be required to fund
such trusts. If Walter
Industries and/or Computer Services continue to pay such benefits
for seven (7) years
following the Effective Date, all funds in such trusts will
revert to Walter Industries
and/or Computer Services.
3. Certain Related Transactions
Following its incorporation, Hillsborough retained KKR to
provide financial,
financial advisory and consulting services to Hillsborough in
connection with the Tender
Offer and the Merger, for which KKR was paid approximately $35
million. KKR has agreed
to provide management consulting and financial services to
Hillsborough (and now Walter
Industries) and its subsidiaries on an annually renewable basis.
For these services KKR
received a fee of $500,000 for the year ended December 31, 1988
and was receiving a fee
at the rate of $550,000 for the year ending December 31, 1989.
Effective with the
commencement of the Reorganization Proceedings, current payment
of these consulting fees
was suspended. The Creditors' Plan expressly rejects the
agreement under which KKR
provides financial, financial advisory and consulting services to
Hillsborough and all
other agreements between KKR or a KKR Affiliate and any Debtor or
Affiliate thereof is
a party (other than an agreement for an Allowed Indemnity Claim),
in each case to the
extent that the same is an Executory Contract, without admitting
that the same is an
Executory Contract and without admitting any liability as a
result of such rejection or
otherwise. See "OVERVIEW OF THE CREDITORS' PLAN--Assumption or
Rejection of Executory
Contracts." KKR Associates is the general partner of partnerships
which, together, are
the beneficial owners of approximately 91.58% of the currently
outstanding shares of
Common Stock. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION
WITH RESPECT TO THE
DEBTORS--Organization of Hillsborough and Acquisition of Original
Jim Walter--Financing
of the Tender Offer and Merger" and
"POST-CONSUMMATION--Management -- Security Ownership
of Directors, Officers and Certain Beneficial Owners" for
information regarding the
acquisition of these shares of Common Stock. Henry R. Kravis,
George R. Roberts, Paul
E. Raether and Michael T. Tokarz are directors of Walter
Industries and are general
partners of both KKR Associates and KKR. Mr. Tokarz is an
officer of Walter Industries
and certain of its subsidiaries. Perry Golkin is a Director and
officer of Walter
Industries and certain of its subsidiaries and is an associate of
KKR.
Original Jim Walter purchased insurance on the lives of
certain officers of
Original Jim Walter and its subsidiaries. These insurance
policies are now owned by
Walter Industries. Such insurance was placed through Thomas J.
Brown and Associates or
Paramount Financial Group, Inc., both in Tampa, Florida, of which
Joe B. Cordell, Jr.,
son of Joe B. Cordell, President and Chief Executive officer of
Walter Industries until
June 1991, was an associate and stockholder, respectively, until
1990. While Walter
Industries does not pay any fees to these firms for their
services, such firms do receive
a commission from the insurance carrier issuing or renewing such
life insurance contracts.
In July 1986, Waltsons, Inc., a family owned corporation,
of which James W. Walter,
Chairman of Walter Industries, has a twenty percent (20%)
interest, acquired a fifty
percent (50%) interest in the Operations of Booker & Company,
Inc. ("Booker"), a wholesale
distributor or building supplies and materials, headquartered in
Tampa, Florida. For over
30 years, Booker has been a supplier of various building supplies
and materials to Dixie.
During the fiscal year ended May 31, 1993, Booker's sales of
building supplies and
materials to Dixie totaled approximately $6,193,739. Included in
Other Unsecured Claims
of Dixie (Class U-3F) is $503,278 previously owing to Booker,
which Claim was sold by
Booker in February 1994 and which will be satisfied upon
consummation of the Creditors'
Plan in the same manner as that of Other Unsecured Claims in
Class U-3.
4. Security Ownership of Directors, Officers and
Certain Beneficial Owners
a. Ownership of Common Stock
The following tables furnish information, as Of May 31,
1993, as to: (i) shares of
Common Stock beneficially owned by any person owning beneficially
more than five percent
(5%) of the 31,120,773 outstanding shares of Common Stock (except
as indicated below, all
such shares are beneficially owned directly by the person
indicated in the table); and
(ii) shares of Common Stock beneficially owned by each director
and key executive officers
of each of the Debtors, as well as shares of Common Stock
beneficially owned by all
directors and officers of the Debtors as a group.
<PAGE>
<TABLE>
<CAPTION>
Number of Percent
Name and Address of Beneficial Owner Shares of Class
<S> <C> <C>
JWC Associates, L.P 27,646,600 88.84%
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
JWC Associates II, L.P. 183,200 .59
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
KKR Partners II, L.P. 670,200 2.15
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Henry R. Kravis 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
George R. Roberts 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Robert I. MacDonnell 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Michael W. Michelson 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Saul A. Fox 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Paul E. Raether 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Michael T. Tokarz 28,500,000(1)(3) 91.58
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
James H. Greene, Jr. 28,500,000(1) 91.58
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Names of Directors and
Key Operating Officers
of the Debtors Who
Are Beneficial Owners of Number Percent of Director
Outstanding Shares of Common Stock of Shares Class and/or Officer
<S> <C> <C> <C>
Walter Industries
G. Robert Durham -- -- Director and Officer**
Perry Golkin --(2) -- Director and Officer**
Henry R. Kravis 28,500,000(1) 91.58 Director
Kenneth J. Matlock 25,000 * Director and Officer**
Paul E. Raether 28,500,000(1) 91.58 Director
George R. Roberts 28,500,000(1) 91.58 Director
Michael T. Tokarz 28,500,000(1)(3) 91.58 Director and Officer**
James W. Walter 190,000 .61 Director and Officer**
William H. Weldon 20,000 * Officer**
William N. Temple 10,000 * Officer**
Donald M. Kurucz 12,000 * Officer
Jim Walter Homes
Robert W. Michael 35,000 .11 Director and Officer**
Sam P. Bullara, Jr. 6,000 * Officer
D. Wayne Hornsby 10,000 * Officer
William Kendall Baker 20,000 * Officer
Jim Walter Resources
William Carr 35,000 .11 Director and Officer
James M. Sims 10,000 * Officer
Window Components
Robert E. Rudolph 2,000 * Director and Officer**
Mid-State Homes
Sam J. Salario 25,000 * Director and Officer
Sloss
Lee C. Houlditch 2,500 * Director and Officer
Southern Precision
Earl E. Case 2,000 * Director and Officer
U.S. Pipe
Dorrance R. Wedell<F1> 8,000 * Director and Officer
William E. Fleck 20,000 * Officer
E. Jack Mize, Jr. 6,000 * Officer
Vestal
David M. Vestal 10,000 * Director and Officer
All Directors of Debtors as a
Group (18 persons) 28,864,500(1)(2)(3) 92.75
All non-Director Officers of
Debtors as a Group (12 persons) 123,000 .40
All Directors and Officers
of Debtors as a Group
(30 persons) 28,987,500(1)(2)(3) 93.15
* Represents less than .1% of the shares of Common Stock currently outstanding.
** Director of one or more of Debtors, exclusive of Debtor under which listed.
(1) Messrs. Kravis, Roberts, MacDonnell, Michelson, Fox, Raether, Tokarz and Greene are
general partners of KKR Associates, the sole general partner of each of JWC
Associates, L.P., JWC Associates II, L.P. and KKR Partners II, L.P. (the "KKR
Investors"). Such persons may be deemed to be "beneficial owners" of the shares
owned by the KKR Investors within the meaning of Rule 13d-3 under the Exchange Act,
although each such person disclaims beneficial ownershipof such shares.
(2) Mr. Golkin is a limited partner of KKR Associates and is an officer and director
of Walter Industries and certain of its subsidiaries.
(3) Mr. Tokarz is an officer and director of Walter Industries and certain of its
subsidiaries.
<FN>
<F1> Retired effective November 4, 1993.
</TABLE>
<PAGE>
b. Agreements Regarding Common Stock
Hillsborough and the Drexel Burnham Lambert Group, Inc.
(the "Drexel Burnham
Group") entered into an agreement dated as of September 18, 1987
(the "Drexel Burnham
Group Stock Purchase Agreement") pursuant to which the Drexel
Burnham Group purchased an
aggregate of 1,727,273 shares of Common Stock at a purchase price
of $5 per share. The
Drexel Burnham Group Stock Purchase Agreement provided that
Hillsborough, if so requested
by the Drexel Burnham Group, would repurchase Common Stock held
by the Drexel Burnham
Group (at $5 per share) and would sell such Common Stock to
purchasers (or their nominees)
of the Securities (as defined in Section VII.A.3.) (at $5 per
share), in connection with
the private placement of the Securities. Pursuant to this
provision, which became
inoperative upon completion of the private placement of the
Securities, Hillsborough
repurchased an aggregate of 1,146,680 shares of Common Stock from
the Drexel Burnham Group
in connection with the sale of Common Stock to such purchasers of
Securities (or their nominees).
Those purchasers of Securities (or their nominees) who
purchased Common Stock as
described above entered into an agreement with Hillsborough
which, among other things,
sets forth the conditions subject to which each such purchaser of
securities purchased the Common Stock.
The KKR Investors and the Drexel Burnham Group entered
into an agreement dated
September 18, 1987 (the "Letter Agreement") pursuant to which the
KKR Investors agreed
to notify the Drexel Burnham Group in the event that at any time
prior to a public
offering of Common Stock pursuant to an effective registration
statement under the
Securities Act of 1933, as amended (the "Securities Act") (a
"Public Offering") any of
the KKR Investors proposes to sell any of the Common Stock owned
by it; and upon a written
request from the Drexel Burnham Group, to include in the proposed
sale of Common Stock
by a KKR Investor, Common Stock held by the Drexel Burnham Group,
subject to certain
limitations. The sale of Common stock by the Drexel Burnham
Group pursuant to the Letter
Agreement is required to be made on the same terms and conditions
as those applicable to
the sale of Common Stock by the KKR Investor. In addition, if at
any time after
September 18, 1987 any of the KKR Investors (or any affiliate of
a KKR Investor) proposes
to purchase any shares of Common Stock, such KKR Investor is
required to notify the Drexel
Burnham Group of the proposed purchase; and, upon a written
request from the Drexel
Burnham Group to purchase shares of Common Stock, the KKR
Investors have agreed that the
proposed purchase will not be effected unless Hillsborough (and
now Walter Industries)
agrees to permit the Drexel Burnham Group to purchase, on the
same terms and conditions,
a number of shares equal to five (5) percent of the aggregate
number of shares of Common
Stock purchased by the KKR Investor and any affiliate. The
obligations of the KKR
Investors under the Letter Agreement as to inclusion of Common
Stock in a Public Offering
also extend, under the terms thereof, to the purchasers of
Securities. The Letter
Agreement and the agreement with the purchasers of Securities
(discussed in the preceding
paragraph) are expressly rejected under the Creditors' Plan
pursuant to Section 365 of
the Code, to the extent the same are Executory Contracts, without
admitting that the same
are Executory Contracts and without admitting any liability as a
result of such rejection
or otherwise. See "OVERVIEW OF THE CREDITORS' PLAN -- Assumption
or Rejection of Executory Contracts."
Hillsborough (and now Walter Industries) entered into
common stock subscription
agreements, each dated as of December 1, 1987 (collectively, the
"Management Common Stock
Subscription Agreements"), with 51 individuals who are former or
current members of
management of Walter Industries and its subsidiaries (the
"Management Investors"),
pursuant to which the Management Investors purchased, in the
aggregate, 986,500 shares
of Common Stock (at $5 per share), constituting approximately
3.2% of the then outstanding
shares of Common Stock, and received options to purchase, in the
aggregate, an additional
3,273,388 shares of Common Stock (at $5 per share), constituting
approximately 9.5% of
the shares of Common Stock that would then have been outstanding
if all such options were exercised.
The Management Common Stock Subscription Agreements
provide that, except for
transfers in the event of death or to certain trusts or
custodianship, and except for the
permitted transfers described herein, the shares of Common Stock
acquired by a Management
Investor would be nontransferable until January 7, 1993. The
agreements also grant Walter
Industries a right of first refusal if a Management Investor
receives a bona fide offer
from a third party to purchase any or all of such Management
Investor's shares of Common
Stock commencing January 7, 1993. Pursuant to this right of
first refusal, Walter
Industries would have the right to purchase not less than all of
the shares of Common
Stock subject to such third party's offer at the same price and
on the same terms as such
offer. Notwithstanding the foregoing, both the transfer
restrictions and the right of
first refusal will terminate in the event of a Public Offering.
Under the terms of the Management Common Stock
Subscription Agreements, the
Management Investor, his estate or trust may, for a period of six
months, require Walter
Industries (a) if a Management Investor's employment by Walter
Industries and its
subsidiaries terminates because of death or permanent disability,
to purchase, on one
occasion, all or some of the shares of Common Stock then held by
such Management Investor,
his estate or trust (during the year ended May 31, 1989, 93,000
shares of Common Stock
owned by three former executive officers of Walter Industries
were purchased at a price
of $5.00 per share) and to redeem such Management Investor's
options (options granted to
such three former executive officers of Walter Industries were
canceled without any
payment) at a price calculated in accordance with the terms of
the Management Common Stock
Subscription Agreement; or (b) if after January 7, 1993 the
Management Investor's
employment terminates because of death and no Public Offering has
occurred, to
purchase, on one occasion, all or any portion of the shares of
Common Stock held by the
Management Investor's estate or trust and to redeem the options
held by such Management
Investor's estate, at a price calculated pursuant to the
Management Common Stock Subscription Agreements.
The Management Common Stock Subscription Agreements also
grant Walter Industries
an option for 45 days (a) if a Management Investor's employment
by Walter Industries and
its subsidiaries terminates other than because of death,
permanent disability or
retirement on or after age 65, or such Management Investor shall
effect a prohibited
transfer of his shares of Common Stock, to purchase all but not
less than all of the
shares of Common Stock held by such Management Investor at a
price per share calculated
pursuant to the terms of the Management Common Stock Subscription
Agreements and to redeem
the options held by such Management Investor; or (b) in the event
that a Management
Investor's termination of employment occurs because of death,
permanent disability or
retirement on or after age 65, to purchase all but not less than
all of his shares of
Common Stock at a price calculated pursuant to the terms of the
Management Common Stock Subscription Agreements.
In any event, Walter Industries is not obligated to
repurchase shares of Common
Stock or options pursuant to any of the provisions described
above to the extent that such
purchases would exceed an aggregate of 430,000 shares of Common
Stock and options in any
one calendar year or the repurchase price thereof would exceed an
aggregate of $2,000,000 in any one calendar year.
The Reorganization Proceedings have had the effect of
staying the terms of the
Management Common Stock Subscription Agreements.
Pursuant to a registration rights agreement entered into
as of September 18, 1987
among the KKR Investors, the Drexel Burnham Group and
Hillsborough (and now Walter
Industries) (the "Registration Rights Agreement"), which has been
incorporated by
reference into the stock purchase agreement with purchasers of
the Securities, and has
been adopted, with certain modifications as described below, as
part of the Management
Common Stock Subscription Agreements, the parties thereto and any
holder of registrable
securities have "piggyback" registration rights whenever Walter
Industries proposes to
register under the Securities Act any such registrable
securities. Under the Registration
Rights Agreement, Walter Industries agreed to give prompt written
notice to all such
holders of its intention to effect such a registration and to use
its best efforts to
effect the registration under the Securities Act of all
registrable securities which
Walter Industries has been requested to register. Walter
Industries is required to pay
substantially all of the expenses in connection with any such
registration.
The Management Common Stock Subscription Agreements,
however, limit the number of
shares of Common Stock held by Management Investors that may be
registered pursuant to
their "piggyback" registration rights to a pro rata amount of
those shares of Common Stock
to be registered by the KKR Investors and the Drexel Burnham
Group.
The Registration Rights Agreement also provides for
"demand" registration rights
whereby, after any shares of Common Stock have been registered
under the Securities Act,
upon the written request of any holder that Walter Industries
effect the registration
under the Securities Act of all or a part of such holder's Common
Stock (constituting in
the aggregate with all other shares so registered at least
5,000,000 shares, or such
lesser number of shares of Common Stock then outstanding), Walter
Industries is required
to notify all other holders of the requested registration and to
use its best efforts to
effect the registration under the Securities Act of the
registrable securities which
Walter Industries has been requested to register by such holder
and all other registrable
securities which Walter Industries has been requested to register
by other Holders
responding to the notice provided by Walter Industries (and
described therein) of the
requested registration. However, under certain specified
circumstances, Walter Industries
may defer filing a registration statement relating to such a
request. Walter Industries
is required to pay substantially all of the expenses in
connection with the first six
"demand" registrations; thereafter, all such expenses are
required to be paid pro rata
by Walter Industries and all other persons (including the
holders) participating in the
registration on the basis of the relative number of shares of
Common Stock of each such
person included in the registration.
The Creditors' Plan expressly rejects all of the
Management Common Stock
Subscription Agreements and the Registration Rights Agreement, to
the extent the same are
Executory Contracts, without admitting that the same are
Executory Contracts and without
admitting any liability as a result of such rejection or
otherwise. See "OVERVIEW OF THE
CREDITORS' PLAN--Assumption or Rejection of Executory Contracts.
<PAGE>
IV.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS A SUMMARY OF CERTAIN OF THE
MORE SIGNIFICANT FEDERAL
INCOME TAX CONSEQUENCES OF THE PLAN TO WALTER INDUSTRIES, ITS
SUBSIDIARIES AND HOLDERS
OF CLAIMS AND INTERESTS, BASED ON THE TAX LAWS IN EFFECT AS OF
THE DATE OF THE DISCLOSURE
STATEMENT. THIS DISCUSSION DOES NOT ADDRESS THE PARTICULAR
FEDERAL INCOME TAX
CONSEQUENCES THAT MAY BE RELEVANT TO CERTAIN TYPES OF TAXPAYERS
SUBJECT TO SPECIAL
TREATMENT UNDER THE FEDERAL INCOME TAX LAWS (SUCH AS LIFE
INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS AND TAXPAYERS WHO ARE NOT U.S. DOMESTIC
CORPORATIONS OR CITIZENS OR
RESIDENTS OF THE UNITED STATES), NOR DOES IT DISCUSS ANY ASPECT
OF STATE, LOCAL, FOREIGN
OR OTHER TAX LAWS THAT MAY BE APPLICABLE TO PARTICULAR TAXPAYERS.
THE TAX CONSEQUENCES
TO HOLDERS MAY VARY BASED ON THE INDIVIDUAL CIRCUMSTANCES OF EACH
HOLDER. THERE CAN BE
NO ASSURANCE THAT THE IRS WILL NOT CHALLENGE ANY OR ALL OF THE
TAX CONSEQUENCES OF THE
PLAN, OR THAT SUCH A CHALLENGE, IF ASSERTED, WOULD NOT BE
SUSTAINED. IF SUCH A CHALLENGE
IS ASSERTED AND IS SUCCESSFUL, THE RECOVERY OF HOLDERS OF CLAIMS
AND INTERESTS MAY BE
LOWER THAN EXPECTED. MOREOVER, THE TAX CONSEQUENCES OF CERTAIN
ASPECTS OF THE PLAN ARE
UNCERTAIN DUE TO THE LACK OF APPLICABLE LEGAL PRECEDENT AND THE
POSSIBILITY OF CHANGES
IN LAW. AS OF THE DATE OF THE DISCLOSURE STATEMENT, NO RULING
HAS BEEN OBTAINED FROM THE
IRS WITH RESPECT TO ANY OF THE TAX CONSEQUENCES OF THE PLAN AND
NO OPINION OF COUNSEL HAS
BEEN OBTAINED BY THE PROPONENTS WITH RESPECT THERETO AND NO SUCH
RULING OR OPINION (OTHER
THAN AS REGARDS THE CLASSIFICATION OF CERTAIN TRUSTS TO BE
ESTABLISHED UNDER THE PLAN)IS
BEING SOUGHT. THE DISCUSSION AND CONCLUSIONS PRESENTED BELOW MAY
BE BASED IN PART ON
ANALYSES AND EVALUATIONS OF FACTORS NOT DISCUSSED HEREIN. EACH
HOLDER OF A CLAIM OR
INTEREST IS STRONGLY URGED TO CONSULT WITH HIS OWN TAX ADVISOR
REGARDING THE FEDERAL,
STATE AND LOCAL TAX CONSEQUENCES OF THE PLAN.
A. Tax Consequences to Walter Industries and its Subsidiaries
The Proponents believe that the affiliated group of
corporations filing a United
States federal consolidated income tax return of which Walter
Industries is the common
parent (the "Walter Industries Group") will not incur a material
federal income tax
liability as a result of the consummation of the Creditors' Plan.
As discussed below,
however, it is possible that the Walter Industries Group's
ability to utilize deductions
and losses incurred during, or attributable to a period prior to,
the consummation of the
Creditors' Plan or as a consequence of the Creditors' Plan to
offset income earned by the
Walter Industries Group after the consummation of the Creditors'
Plan and to minimize its
potential liability for alternative minimum tax, if applicable,
may be limited.
***
1. Cancellation of Indebtedness Income
The Creditors' Plan contemplates that each Holder of a
Claim will receive
consideration in an amount for tax purposes equal to the full
amount of its Claim. In
such case, the Walter Industries Group will not realize any
cancellation or other
discharge of indebtedness income as a result of the Creditors'
Plan.
If, however, it is determined that any Holders of Claims
do not receive
consideration in an amount for tax purposes equal to the full
amount of such Claims, then
the Debtor against which such Claims are asserted will realize a
discharge or cancellation
of indebtedness for an amount equal to a portion of such Claims.
Under the IRC, a
taxpayer generally must include in gross income the amount of any
discharged or cancelled
indebtedness realized during the taxable year, except to the
extent that payment of such
indebtedness would have given rise to a deduction for income tax
purposes. However,
Section 108 of the IRC provides that, in a case under Title 11 of
the Code, where the
discharge or cancellation of indebtedness is granted by the court
or is pursuant to a plan
approved by the court, the amount of discharged or canceled
indebtedness that otherwise
would have been required to be included in gross income will
instead be applied to reduce
the tax attributes of the taxpayer in the following order: net
operating loss
carryforwards ("NOLs"), tax credit carryforwards, capital loss
carryforwards, the basis
of the taxpayer's assets and foreign tax credit carryforwards.
For discharges after
December 31, 1993, a taxpayer will be required to reduce minimum
tax credit and passive
activity losses and credit carryforwards along with its other tax
attributes. A taxpayer
may elect, however, to first reduce its tax bases for its
depreciable assets before
reducing the tax attributes listed above. The IRS has issued
several private letter
rulings indicating that, under certain circumstances, the
attribute reduction rules of
Section 108 apply on a separate company basis, even if the
taxpayer is a member of an
affiliated group filing a consolidated tax return, without
affecting the attributes of
any other member of the group. However, the IRS has informally
announced that it is
reconsidering this position.
Notwithstanding the above, if a corporate taxpayer
satisfies its indebtedness
through the issuance of its own stock (with or without other
property), which issuance
meets certain requirements outlined in the next paragraph, then
no income is realized and
no tax attribute reduction is required (referred to as the
"Stock-for-
Debt Exception"). (While the Stock-for-Debt Exception was
repealed by the Omnibus Revenue
Reconciliation Act of 1993, as a result of certain transitional
rules, it nonetheless
remains available for stock transfers by the Walter Industries
Group pursuant to its
Title 11 case.) In determining how much indebtedness is satisfied
by the issuance of
stock, the outstanding debt is reduced by the amount of any cash
paid to the creditor,
the fair market value of any property other than new debt
instruments or stock conveyed
to the creditor, and the "issue price," determined for original
issue discount ("OID")
purposes as described below, of any new debt issued to the
creditor. The remaining
outstanding balance of the debt is treated as satisfied by the
issuance of stock, and such
issuance is assessed to determine whether the Stock-for-Debt
Exception applies.
In order for the Stock-for-Debt Exception to apply to a
cancellation of
indebtedness, two tests must be satisfied. First, the shares of
stock issued in exchange
for the debt must be more than "nominal or token." Second, in the
case of unsecured debt,
the ratio of the value of the stock received by the unsecured
creditor to the amount of
his indebtedness (including accrued but unpaid interest) canceled
or exchanged for stock
in the workout must be at least 50% of a similar ratio computed
for all unsecured
creditors who participate in the workout (the "proportionality
test"). Under Treasury
Regulations issued on March 17, 1994, whether an issuance of
shares is "nominal or token"
is determined by considering all relevant facts and
circumstances. Rev. Proc. 94-26,
also issued on March 17, 1994, establishes a safe harbor: it
provides that the IRS will
not consider such common stock issuance to be nominal or token if
the stock-to-total stock
ratio is at least 15 percent.
It cannot be determined whether the Creditors' Plan
provides for the issuance of
New Common Stock with a value high enough, or in proportions
necessary, to meet the
"nominal or token" and proportionality tests of the
Stock-for-Debt Exception until the
fair market values of the New Senior Notes and the Qualified
Securities (collectively,
the "New Debt") and New Common Stock are known and until it is
determined (based in part
on the elections made by each Holder of Subordinated Note Claims
specifying the amount
of Qualified Securities it wishes to receive in respect of its
Claim and whether and to
the extent that the Class E-1 Interest Holders exercise the
Equity Call Options or
otherwise receive shares of New Common Stock pursuant to the
Creditors' Plan) how the New
Common Stock and Qualified Securities are to be distributed among
the Holder Classes.
Further, even if such tests could be met, the Creditors' Plan
includes the issuance of
New Common Stock to satisfy Claims by third parties against
Debtors other than Walter
Industries. While the issuance of New Common Stock by Walter
Industries on behalf of a
Debtor will result in an amount owed by such Debtor to Walter
Industries (equal to the
fair market value of such New Common Stock) as reflected by
intercompany accounts, it is
unclear whether such stock issuance could qualify under the
Stock-for-Debt Exception.
If the issuance of New Debt and New Common Stock does not
provide each Holder of
a Claim with aggregate consideration equal to the full amount of
such Claim and if, and
to the extent that, the Stock-for-Debt Exception does not apply,
the cancellation of the
Claims could result in the reduction or elimination of a portion
of the Walter Industries
Group's tax attributes, as described above. Furthermore, if the
exchange of certain
Claims for New Common Stock is treated as the transfer of
property to Walter Industries
and if the issuance of New Common Stock for those and other
Claims pursuant to the
Creditors' Plan results in the Holders of such Claims acquiring
"control" of Walter
Industries, each Debtor in the Walter Industries Group whose
indebtedness is extinguished
as a result of such stock issuance might realize cancellation of
indebtedness and, thus,
might be required to reduce its tax attributes, in the manner
described above, in an
amount by which the indebtedness extinguished as a result of the
stock issuance exceeds
the Holder's tax basis in the Claim extinguished. "Control" for
this purpose means 80%
or more of the voting power of all classes of stock entitled to
vote and 80% of the number
of all other classes of stock, but excluding New Common Stock
issued in respect of accrued
interest on indebtedness of Walter Industries. It is unclear
whether the IRS would
prevail if it sought to characterize the exchanges as transfers
to a controlled
corporation, and the Proponents intend to take the position that
such characterization does not apply.
2. Net Operating Loss ("NOL") Carryforwards
The Creditors' Plan is expected to result in the
occurrence of an "ownership
change" under Section 382 of the IRC on the Effective Date of the
Creditors' Plan (unless
a substantial number of Holders of Class E-1 Interests exercise
their Equity Call
Options). As a result, the Walter Industries Group will be
subject to annual limitations
on the tax benefits of its NOLs and certain other tax attributes
(including certain
built-in losses) imposed by Sections 382 and 383 of the IRC. In
general, following the
ownership change, the amount of income that the Walter Industries
Group can offset with
pre-change NOLs (and certain other tax benefit carryforwards) is
restricted annually to
the "Section 382 Limitation Amount." This is calculated by
multiplying the equity value
of the Walter Industries Group immediately before the ownership
change by the "long-term
tax-exempt rate" (an interest rate that is recomputed monthly and
which equalled 5.83%
for May 1994). Adjustments are then made to reflect, among other
things, certain tax
losses and gains recognized after the date upon which the
ownership change occurs but
which accrued as an economic matter prior to the change.
The Proponents do not have sufficient tax accounting
information to determine
whether the Walter Industries Group has NOLs (or other tax
benefit carryforwards) that
would be subject to the Section 382 Limitation Amount if the
Creditors' Plan were
consummated. The Proponents believe however that, except as
noted in the next paragraph,
the Walter Industries Group may not have any such tax benefit
carryforwards and thus, in
such case, do not expect Section 382 or 383 to have any affect on
the Walter Industries
Group following consummation of the Creditors' Plan.
It is possible, however, that the Section 382 Limitation
Amount could apply (i) to
losses incurred by the Walter Industries Group after any
ownership change occurs that are
attributable to the excess, on the ownership change date, of the
tax basis for its assets
over their fair market values and (ii) to deductions allowable
after the change date that
are attributable to periods before the ownership change date.
Specifically, if, on the
date of the ownership change, the Walter Industries Group's
aggregate bases in its assets
exceeds the fair market value of such assets by more than a de
minimis amount, it has a
"net unrealized built-in loss" ("NUBIL"). Losses recognized upon
dispositions of such
assets (and certain deductions allowed with respect to such
assets), as well as any amount
allowable as a deduction but attributable to periods prior to the
ownership change, during
the 5-year period following the ownership change may be treated
as pre-change NOLs and
subject to the Section 382 Limitation. Generally, a NUBIL is
treated as more than de
minimis only if it exceeds the lesser of (i) $10 million or (ii)
15 percent of the loss
corporation's gross asset value, computed after excluding the
value of cash and certain
marketable securities.
The Proponents do not have sufficient tax accounting
information to determine
whether and to what extent the Walter Industries Group has a
NUBIL. However, payments
made to the Celotex Settlement Fund Recipient pursuant to the
Creditors' Plan, if
deductible or amortizable, may be treated as a NUBIL and thus,
when deducted or amortized
by the Walter Industries Group, may be subject to the Section 382
Limitation Amount.
Even if the Creditors' Plan results in an ownership change
of the Walter Industries
Group, the Section 382 Limitation Amount will not apply to its
NOLs (and other tax benefit
carryforwards) if the provisions of Section 382(l)(5) of the IRC
are satisfied. Under
such provisions, if in a Title 11 or similar case, a loss
corporation issues to certain
stockholders or "historic" creditors an amount of stock
representing in the aggregate at
least 50 percent of the voting power and value of the outstanding
shares of all classes
of stock of Walter Industries, then the Section 382 limitations
will not be applicable
to such corporation. Instead, the NOLs of such corporation will
be reduced by (i) the
amount of the prior three years interest paid or accrued by the
loss corporation on
indebtedness satisfied through the issuance of its stock and (ii)
one-half of the amount
which would have been applied to reduce tax attributes of the
loss corporation under
Section 108 of the IRC but for the Stock-for-Debt Exception.
The Proponents are unable, prior to the determination of
(i) the allocation of New
Common Stock under the terms of the Creditors' Plan and (ii) the
number of Class E-1
Interest Holders that will exercise their Equity Call Option, to
determine whether Holders
who would qualify as stockholders and "historic" creditors for
purposes of Section
382(l)(5) will, after the Effective Date, hold a sufficient
amount of New Common Stock
to satisfy the requirements of such Section. Moreover, it is
unclear at present whether
and how such provisions are to be applied to a consolidated group
such as the Walter
Industries Group. While Treasury Regulations implementing
Section 382 generally apply
the rules of Section 382 to consolidated groups on an aggregate
basis, such Regulations
specifically reserve on the issue of the applicability of Section
382(l)(5) to
consolidated groups. If the provisions of Section 382(l)(5) were
satisfied, any NOLs and
other tax benefit carryforwards (including any NUBILs) of Walter
Industries (and perhaps
its consolidated subsidiaries) would not be materially affected
by the Creditors' Plan.
However, if the provisions of Section 382(l)(5) were satisfied
and a second ownership
change of the Walter Industries Group occurs within two years of
the Effective Date of
the Creditors' Plan, the Section 382 Limitation Amount following
such second ownership
change would be zero. Hence, the Proponents may elect to have
the provisions of Section
382(l)(6) of the IRC (permitting increases in value from
cancellation of Claims under the
Creditors' Plan to be taken into account in calculating the
Section 382 Limitation
Amount), rather than those of Section 382(l)(5), apply with
respect to the ownership
change occurring on the Effective Date of the Creditors' Plan.
The Debtors have accrued and deducted post-petition
interest in respect of Secured
Claims only. The Proponents anticipate that accruals and
deductions will be made in
respect of Unsecured Claims only if, and to the extent, that any
post-petition interest
is likely to be paid on account of such Claims.
3. Alternative Minimum Tax
Although for purposes of computing a corporation's tax
liability all of its income
recognized in a taxable year may be offset by its NOLs, for
purposes of the alternative
minimum tax ("AMT"), only 90 percent of a corporation's
alternative minimum taxable income
("AMTI") may be offset by NOLs. Therefore, a portion of any
income recognized by the
Walter Industries Group in each taxable year will, after
reduction by any allowable AMT
NOLs, result in AMTI subject to a 20 percent AMT. Moreover, AMTI
in excess of $2 million
(without taking into account any deduction for NOLs) may be
subject to a 0.12 percent
environmental tax pursuant to Section 59A of the IRC.
4. High-Yield Debt Obligation ("HYDO") Rules
The IRC disallows the deduction for a portion of interest
paid or accrued, and
defers a portion of the allowed deduction for accrued but unpaid
interest, with respect
to HYDOs. Whether a debt instrument is a HYDO depends in large
part on the application
of the OID rules (which are discussed in "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES--Federal
Income Tax Consequences to Holders--Certain Other Considerations
to Holders"). Based on
the terms of the New Debt, the Proponents do not expect the New
Debt to be issued pursuant
to the Creditors' Plan to constitute a HYDO.
5. Deductibility of Payments to Celotex Settlement Fund
Recipient
The Proponents intend to take the position that payments
made under the Creditors'
Plan to the Celotex Settlement Fund Recipient will be deductible
by Walter Industries in
the year(s) in which such payment(s) is made. However, there can
be no assurance that
the IRS will not challenge the amount or timing of such
deduction.
B. Federal Income Tax Consequences To Holders
The tax consequences of the Creditors' Plan to a Holder of
a Claim will depend, in
part, on whether the Claim constitutes a "tax security," the type
of consideration
received in exchange for the Claim, whether the Holder is a
resident of the United States
for tax purposes, whether the Holder reports income on the
accrual or cash basis method,
and whether the Holder receives distributions under the
Creditors' Plan in more than one
taxable year. In some cases the modification of a Claim or the
substitution of a new debt
instrument or instruments for the Claim pursuant to the
Creditors' Plan may represent for
tax purposes an exchange of the Claim for such modified Claim or
for such net debt
instrument, as the case may be, even though no actual transfer of
the Claim takes place.
HOLDERS ARE STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX
TREATMENT UNDER THE PLAN OF THEIR PARTICULAR CLAIMS.
1. In General
The federal income tax consequences of the Creditors' Plan
to Holders of Claims
will depend in large part on whether the exchange of a Claim for
Plan consideration will
be treated, in whole or in part, as a "recapitalization" of the
Debtors within the meaning
of IRC Section 368(a)(1)(E). If the exchanges contemplated by
the Creditors' Plan are
made pursuant to such a recapitalization, then an exchanging
Holder generally will not
recognize gain or loss for income tax purposes (except to the
extent of any "boot" and
consideration received in the exchange attributable to unpaid
interest, as further
described below). If an exchange is not made pursuant to a
recapitalization, then an
exchanging Holder will recognize gain or loss on such exchange.
In order for an exchange contemplated by the Creditors'
Plan to constitute a
tax-free recapitalization, all of the following requirements must
be met. First, the
Claims exchanged by a Holder must be considered to be a "tax
security;" second, the Holder
must receive in the exchange (i) shares of New Common Stock
and/or (ii) New Debt which
is also considered to be a "tax security;" and, third, any stock
or "tax security" issued
in exchange for a Claim must be issued (or deemed to be issued)
by the Debtor whose
indebtedness is extinguished in the exchange.
There is no precise definition under the tax law of what
constitutes a "tax
security," and all facts and circumstances pertaining to the
origin and character of a
Claim are relevant in determining its status as such.
Nevertheless, courts have generally
held that corporate debt obligations evidenced by written
instruments with original
maturities of more than five years constitute tax securities.
Thus, the Series B & C
Senior Notes, the Senior Subordinated Notes, the 17% Subordinated
Notes, the 13 1/8%
Subordinated Notes, the 10 7/8% Subordinated Debentures and the
13 3/4% Subordinated
Debentures are likely to constitute tax securities. However, the
Creditors' Plan
contemplates that, in certain cases, such Claims may be exchanged
for stock and
indebtedness of a Debtor other than the Debtor whose indebtedness
is extinguished in the
exchange, thus failing to meet the requirements for
recapitalization treatment. In
addition, the general unsecured Claims (including Claims arising
from the purchase of
goods or services) and the Veil-Piercing Proceeding Claims will
not be considered tax
securities and thus will not qualify for recapitalization
treatment.
2. Tax Treatment of Exchanging Holders by Class
Based upon the foregoing and in light of the exchanges
contemplated by the
Creditors' Plan, the Proponents believe, subject to the
exceptions noted in the next
paragraph, that the Creditors' Plan is likely to have the
following tax consequences for
exchanging Holders (i.e. other than Holders who receive only cash
under the Creditors'
Plan):
a. Holders of Claims in Class U-4, U-5 and U-7 will
recognize gain or loss,
as described below, on the exchange of their Claims for
cash, Qualified Securities
or New Common Stock (or any combination thereof), as will
Holders of Claims in
Class S-6 on the exchange of their Claims for New Senior
Notes. Holders of Claims
in Class U-3 will also recognize gain or loss on receipt
of consideration under the
Creditors' Plan in extinguishment of their Claims.
b. Holders of Class E-1 Interests should not
recognize gain or loss on the
exchange of their Interests for New Common Stock (if any,
and regardless of the
number of shares) and the Equity Call Option unless the
Equity Call Option is
considered to be "boot" received in the exchange and is
determined to have a fair
market value greater than zero (in which case the exchange
would be subject to tax
as a recapitalization in the manner described below).
Because the exercise price
of the Equity Call Option will be equal to the New Common
Stock Value Per Share,
it is expected that, even if the Equity Call Option is
"boot," Class E-1 Interest
Holders should not recognize taxable gain on the exchange
of their Interests for
New Common Stock and the Equity Call Option. Accordingly,
New Common Stock
acquired by any Class E-1 Interest Holder pursuant to the
exercise of the Equity
Call Option should have a cost basis in such Holder's
hands equal to the amount
paid for such Stock pursuant to the Option, and its
holding period should begin on
the date of acquisition.
c. Holders of Claims in Class U-6 will not
recognize gain or loss if such
Holders receive only New Common Stock and/or New Unsecured
Notes with a principal
amount that does not exceed the principal amount of the
securities that such
Holders are deemed to surrender in exchange therefor (such
excess principal amount
referred to as an "Excess Principal Amount"). Holders
receiving a combination of
(i) cash, Qualified Securities (other than New Unsecured
Notes) or an Excess
Principal Amount of New Unsecured Notes and (ii) New
Common Stock and/or New
Unsecured Notes, in exchange for their Class U-6 Claims,
will recognize gain (but
not loss) on the exchange but not in excess of the fair
market value of the "boot"
(i.e., cash, the Qualified Securities other than New
Unsecured Notes and any Excess
Principal Amount of New Unsecured Notes) received by the
Holder in the exchange.
Class U-6 Claim Holders that do not receive any New Common
Stock or New Unsecured
Notes will recognize gain or loss on the exchange in the
manner described in
paragraph a., above.
Notwithstanding the above, based on certain prior IRS
rulings, a Holder who
exchanges a Claim that is a tax security (whether or not such
Claim is against Walter
Industries) for shares of New Common Stock may be able to treat
the exchange as a tax-free
exchange (except to the extent of any boot or consideration
received in respect of accrued
interest). The IRS, however, has indicated that it may no longer
follow the analysis set
forth in such rulings. Furthermore, even if a Claim does not
constitute a tax security
and whether or not such Claim is a claim against Walter
Industries, it is possible
(although uncertain) that an exchange of a Claim by a Holder for
New Common Stock may be
tax free (except to the extent of any boot or consideration
received in respect of accrued
interest) if the exchange of certain Claims are treated as
transfers of property to Walter
Industries and if, as a result of those and the other
contemplated exchanges, the
exchanging Holders (without regard to stock issued in payment of
interest on Walter
Industries indebtedness) acquire 80% or more of the voting power
of all classes of stock
entitled to vote and 80% of the total number of shares of all
other classes of stock of
Walter Industries. However, the Proponents intend to take the
position that such
transfers should not be treated as transfers of property to a
controlled corporation.
A Holder should consult his tax advisor regarding the
appropriateness of this alternative
tax treatment of such Claim-for-New Common Stock exchanges.
Any gain recognized by the Holder of a Claim on an
exchange of its Claim for Plan
consideration under the above rules will be measured generally by
the excess of the amount
realized by the Holder over the Holder's tax basis in the Claim.
The "amount realized"
by a Holder generally will be measured as the amount of cash and
the fair market value
of all other property (including, as to Holders described in
paragraph (i) above, New
Common Stock) received in the exchange. Such gain generally will
be treated as capital
gain (except to the extent of any accrued market discount or
consideration received in
respect of accrued interest, as further described below) provided
that the Claim
represented a capital asset of such Claim Holder. A capital gain
will be considered
long-term with respect to Claims held for one year or more.
Under current law,
corporations are taxed at the same rates on capital gain as on
ordinary income. The
maximum tax rate for individuals on net capital gains is
currently 28% and on ordinary
income is generally 39.6%.
A Holder's aggregate tax basis in any New Common Stock or
tax securities received
under the Creditors' Plan in respect of a Claim in an exchange
that qualifies as a
recapitalization, aside from any amounts allocable to interest,
will generally equal the
Holder's basis in the Claim, increased by any gain recognized on
the exchange, and
decreased by the amount of cash and the fair market value of any
boot received. This
aggregate basis should be apportioned among the items received
according to their
respective fair market values. The boot, if any, received will
have a fair market value
basis. The holding period for any New Common Stock or tax
securities received in such
recapitalization exchange will generally include the holding
period of the Claim
surrendered, whereas the holding period for any boot received
will begin on the day after
the date of receipt.
A Holder's tax basis in any New Common Stock and Qualified
Securities not received
in a recapitalization, or allocable to accrued interest, will
equal the fair market value
of the New Common Stock and Qualified Securities, and the holding
period for such New
Common Stock and Qualified Securities will not include the
holding period of the Claims
but will begin the day after the Effective Date.
Holders who recognize gain as a result of the exchange of
their Claims for
Creditors' Plan consideration should be aware that they may incur
a tax liability even
if they do not receive cash in such exchange and even if they do
not or are unable to
dispose of any New Common Stock or New Debt following such
exchange.
3. Certain Other Tax Considerations for Holders
a. Receipt of Interest
Holders of Claims not previously required to include in
their taxable income any
accrued but unpaid interest on a Claim may be treated as
receiving taxable interest to
the extent that any consideration they receive under the
Creditors' Plan is allocable to
such interest. Holders who previously included in their taxable
income any accrued but
unpaid interest on a Claim may be entitled to recognize a
deductible loss to the extent
that such interest is not satisfied under the Creditors' Plan.
For purposes of
determining the tax consequences to Holders of Claims in Classes
with respect to accrued
interest, the value of the consideration such Holders receive
under the Creditors' Plan
has been allocated first to principal and second to unpaid
interest accrued thereon
through the Effective Date. The applicable Debtors will file
information returns
reflecting the fact that the consideration received by such
Holders under the Creditors'
Plan equals such principal plus all such accrued interest.
b. Accrued Market Discount
A debt instrument that is purchased or acquired for less
than its stated redemption
price at maturity will have "market discount" for federal income
tax purposes unless such
discount is less than a specified de minimis amount. The same
rule applies to the
purchase or acquisition of a debt instrument with original issue
discount for less than
its "adjusted issue price," defined as the issue price of the
debt instrument increased
by the original issue discount includible in income by all of the
instrument's previous
holders. A Holder of a Claim with market discount must treat any
gain recognized with
respect to the principal amount of such Claim as ordinary income
to the extent of the
Claim's accrued market discount. Also, if the accrued market
discount on a tax security
surrendered in the exchange exceeds the gain recognized on such
security under the
Creditors' Plan, such excess accrued market discount will be
allocated between the New
Debt and New Common Stock received for such security according to
their fair market
values. The accrued market discount allocated to the New Debt
will be treated as accrued
market discount subject to the rules discussed below. The
accrued market discount
allocated to the New Common Stock will be treated as ordinary
income when the Holder
disposes of such stock.
Holders of debt having market discount may elect to
include such market discount
in income as it accrues. If this election is not made, gain on
the retirement or
disposition of market discount debt issued after July 18, 1984
will be ordinary income
to the extent of the market discount that has accrued during such
Holder's holding period
("accrued market discount"), calculated either by using a
constant interest method or by
reference to the ratio of the length of time the holder has held
the instrument to the
length of time between acquisition and maturity. A Holder who
does not make the election
may also be required to defer the deduction for all or a portion
of the interest expense
on any indebtedness incurred or maintained to carry the debt
until its maturity or
disposition in a taxable transaction.
c. Installment Method
Holders of Claims constituting installment obligations for
tax purposes may be
required to recognize currently any gain remaining with respect
to the obligation if
pursuant to the Creditors' Plan the obligation is considered to
be satisfied at other than
its face value, distributed, transmitted, sold, or otherwise
disposed of within the
meaning of IRC Section 453B.
d. Reinstatement of Claims
Holders should not generally recognize gain, loss, or
other taxable income upon the
reinstatement of their Claims under the Creditors' Plan. Taxable
income may, however,
be recognized by such Holders if they are considered to receive
interest, damages, or
other income in connection with the reinstatement, or if the
reinstatement is considered
for tax purposes to involve a modification of the Claim.
e. Original Issue Discount ("OID")
Under the IRC, a holder of a debt instrument which has OID
must include a portion
of the OID in gross income in each taxable year or portion
thereof in which the holder
holds the debt instrument even if the holder has not received a
cash payment in respect
of such OID. The IRC defines OID as the difference between the
issue price and the stated
redemption price at maturity of a debt instrument (assuming the
difference exceeds a de
minimis amount). The stated redemption price at maturity is
generally the total of all
payments due the holder of the instrument, other than certain
interest payments based on
a fixed rate and payable unconditionally at fixed period
intervals of one year or less
during the entire term of the instrument. The issue price of a
debt instrument depends
on the circumstances surrounding its issuance. The issue price
of a debt instrument that
is publicly traded or is issued in exchange for publicly traded
property is generally the
fair market value of the debt instrument when issued. The fair
market value generally
is the price at which the debt instrument trades on the first day
on which it trades after
issuance. Debt instruments issued for property not subject to
the foregoing rule
generally are considered to have an issue price equal to their
stated principal amount
if they bear "adequate stated interest" (within the meaning of
the OID rules).
Under the IRC as interpreted by recently finalized
Treasury Regulations, a holder
acquiring a debt instrument in a reorganization exchange may
exclude all of the OID on
such debt instrument from such holder's taxable income if it is
acquired at a "premium"
(that is, if the adjusted tax basis in the acquired debt
instrument exceeds all payments
due on the instrument after the acquisition date less certain
stated interest) and may
exclude a part of the OID on such debt instrument from such
holder's taxable income if
it is acquired at an "acquisition premium" (that is, if the
adjusted tax basis in the
acquired debt instrument exceeds its adjusted issue price).
These Treasury Regulations
are effective for debt instruments issued on or after March 28,
1994 (i.e. sixty days
after January 27, the date these Treasury Regulations were
adopted in final form).
The Proponents believe that none of the New Debt to be
issued under the Creditors'
Plan should bear OID because (i) all New Debt issued under the
Creditors' Plan will bear
adequate stated interest and (ii) the New Senior Notes and the
Qualified Securities are
expected to trade at their respective par values. If, however,
any New Debt is received
by a Holder under the Creditors' Plan in an exchange not
qualifying as a recapitalization
and such New Debt instrument is considered to be publicly traded
for OID purposes or is
exchanged for a Claim that is publicly traded, OID may arise to
the extent of any
difference between the fair market value of the New Debt and the
New Debt's principal
amount. The rules and regulations governing the calculation of
OID are complex; Holders
of New Debt are therefore urged to consult their tax advisors
with regard to the tax
consequences to them of owning New Debt.
IRC Section 1275(c) and the Treasury Regulation Section
1.1275-3 require
information to be set forth on the face of certain debt
instruments issued with OID,
including the amount of OID and the issue date of the instrument.
If the instrument is
publicly offered, the issuer must also furnish certain
information to the Secretary of
the Treasury. The Debtors or their agents will appropriately
legend the New Debt if it
is issued with OID in accordance with the IRC and Treasury
Regulation Section 1.1275-3.
If the New Debt is issued with OID, a portion of the
Debtor's interest deduction
with respect to the OID on the New Debt may be deferred until
paid and the remainder
disallowed if the New Debt is considered to be a HYDO (as defined
above). The disallowed
portion of the OID may qualify for the dividends received
deduction if received by a
corporate holder of New Debt. In order to be considered to be a
HYDO, the New Debt must
have three features: (1) a maturity of greater than five years;
(2) a yield to maturity
greater than or equal to a specified rate (five percentage points
plus the applicable
federal rate for the calendar month in which the obligation is
issued); and (3)
significant OID. While it is not possible at present to
determine the OID, if any, on
the New Debt or the yield to maturity when the New Debt is
issued, it is not expected that
the HYDO rules will apply.
f. Bad Debt and/or Worthless Securities Deduction
A Holder who under the Creditors' Plan receives cash
and/or other consideration in
respect of his Claim in an amount less than the Holder's tax
basis in such Claim (other
than pursuant to any tax-free exchange described above) may be
entitled in the year of
receipt or in an earlier year to a bad debt deduction in some
amount under IRC Section
166(a) or a worthless securities deduction under IRC Section
165(g).
g. Future Stock Gains
Any gain recognized by a Holder on this later sale or
exchange of New Common Stock
received under the Creditors' Plan in satisfaction of a Claim
will be treated as ordinary
income to the extent of (i) accrued market discount carried over
in the exchange, as
described above or (ii) any bad debt or ordinary loss deduction
taken by such Holder with
respect to such Claim less any amount included in such Holder's
gross income on the
satisfaction of such Claim pursuant to the Creditors' Plan.
h. Future Sales of New Debt
Generally, a Holder of New Debt will recognize gain or
loss upon the sale,
retirement or other disposition of New Debt in an amount equal to
the difference between
the amount realized from such sale, retirement or other
disposition and such Holder's
adjusted tax basis for such New Debt. A Holder's basis for his
New Debt will initially
be determined as provided above (see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES--Federal
Income Tax Consequences to Holders"). Thereafter, a Holder's
basis will be increased by
the amount of any OID that the Holder includes in his income
while he holds the New Debt
and decreased by the amount of payments, other than qualified
stated interest payments,
received by him with respect to the New Debt. Under existing
laws, gain or loss on a
disposition of the New Debt generally will (except to the extent
of any accrued OID or
market discount) constitute capital gain or loss if the New Debt
constitutes a capital
asset of the Holder, and will be long-term if the New Debt has
been held for one year or
more.
i. Backup Withholding
Interest paid to a Holder of New Debt and dividends paid
to a Holder of New Common
Stock will ordinarily not be subject to withholding of federal
income taxes. Withholding
of such tax at a rate of 31 percent may be required, however, by
reason of certain events
(such as the failure of a Holder to supply the issuer or its
agent with such Holder's
taxpayer identification number). Such "backup" withholding may
also apply to a Holder
who is otherwise exempt from backup withholding if such Holder
fails properly to document
his exempt status. If dividends and interest are subject to
backup withholding, the
amount of tax withheld in each year is reflected as a credit in
the Holder's tax return
for such year (and may be refunded if such Holder's Federal
income tax liability has been
otherwise satisfied). Each Holder of a Claim who receives New
Debt or New Common Stock
will be asked to provide and certify his correct taxpayer
identification number.
C. The Mid-State Trusts
The Proponents expect to obtain an opinion of special tax
counsel that Mid-State
Trust IV, to be established in connection with the issuance of
Qualified Securities, will
be classified either as a grantor trust or partnership, and not
as an association taxable
as a corporation for federal income tax purposes, and that
neither the Mid-State Trust
IV nor the Mid-State Trust II will constitute a "taxable mortgage
pool" within the meaning
of Section 7701(i) of the IRC. Accordingly, it is not expected
that such Trusts will
themselves be subject to federal income tax consequences.
D. Celotex Settlement Fund Recipient
The tax treatment of the Celotex Settlement Fund Recipient
and of the beneficiaries
of such entity will depend upon the form of the entity that
serves as the Celotex
Settlement Fund Recipient, as ordered by the Court administering
the Celotex Chapter 11
Proceeding.
AS INDICATED ABOVE, THE FOREGOING IS INTENDED TO BE A
SUMMARY ONLY AND NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE
FEDERAL, STATE AND LOCAL
TAX CONSEQUENCES OF THE PLAN ARE COMPLEX AND, IN SOME CASES,
UNCERTAIN. ACCORDINGLY, EACH
HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO CONSULT WITH
HIS OWN TAX ADVISOR
REGARDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE
PLAN.
<PAGE>
V.
THE CHARTER
On or as soon as practicable after the Effective Date,
Walter Industries will adopt
and file the Charter with the Secretary of State of the State of
Delaware. The Charter
will increase the authorized common stock from 50 million to 200
million shares. The
Charter will provide that: (i) each share of Class A Common Stock
is entitled to five
votes and each shares of Class B Common Stock is entitled to one
vote on all matters as
to which the Class A Common Stock and the Class B Common Stock
are both entitled to vote
(and on such matters the Class A and Class B Common Stock shall
vote together as a single
class); (ii) each share of Class A Common Stock automatically
converts into one share of
Class B Common Stock upon the sale, transfer or other disposition
(but not including a
pledge) of such share, other than by an original recipient of
such shares under the
Creditors' Plan to an Affiliate of the original recipient of such
shares; and (iii) all
shares of Class A Common Stock automatically convert into an
equal number of shares of
Class B Common Stock (A) as soon as the aggregate number of
shares of Class A Common Stock
held by Bondholder Proponents and their Affiliates is less than
8% of the then outstanding
number of shares of New Common Stock, and (B) upon the seventh
anniversary of original
issuance thereof. Notwithstanding the foregoing, the Creditors'
Plan provides that the
special voting and conversion features of the Class A Common
Stock will be modified, if,
and only to the extent that, the Court determines that such
modification is necessary to
comply with Section 1123(a)(6) of the Code. The Charter will
also provide, among other
things, that Walter Industries may not issue non-voting capital
stock and that Walter
Industries will indemnify, hold harmless and reimburse its
present and former officers
and directors from and against any and all losses, claims,
damages, fees, expenses,
liabilities and actions in accordance with Allowed Indemnity
Claims against the Debtors
existing as of the Filing Date. All rights of the Persons
indemnified pursuant to the
Creditors' Plan will survive Confirmation of the Creditors' Plan
and will not be
discharged pursuant to Section 1141 of the Code. From and after
the Effective Date,
amendments to the Charter will be carried out in accordance with
Delaware law, the terms
of the Charter and the Reorganization Documents.
<PAGE>
VI.
APPLICABILITY OF FEDERAL AND STATE SECURITIES LAWS
A. Issuance of Reorganization Securities
Section 1145 of the Code exempts the original issuance of
securities under a plan
of reorganization from registration under the Securities Act and
state law. Under Section
1145, the issuance of New Common Stock, New Senior Notes and
Qualified Securities, to be
issued under the Creditors' Plan (collectively referred to as the
"Reorganization
Securities") are exempt from registration if three principal
requirements are satisfied:
(1) the securities must be issued by a debtor, its successor, or
an affiliate
participating in a joint plan with a debtor, under a plan of
reorganization; (2) the
recipients of the securities must hold a claim against a debtor
or such affiliate, an
interest in a debtor or such affiliate, or a claim for an
administrative expense against
a debtor or such affiliate; and (3) the securities must be issued
entirely in exchange
for the recipient's claim against or interest in a debtor or such
affiliate, or
"principally" in such exchange and "partly" for cash or property.
The Proponents believe
that the issuance of the Reorganization Securities under the
Creditors' Plan will satisfy
all three conditions because: (a) the issuances are expressly
contemplated under the
Creditors' Plan; (b) the recipients are Holders of Claims or
Interests; and (c) the
recipients would obtain the Reorganization Securities in exchange
for their Claims and Interests.
B. Post-Consummation Transfers of Reorganization Securities
Section 1145(c) of the Code provides that the offer or
sale of securities pursuant
to Section 1145 of the Code is deemed to be a public offering.
The New Note Indenture
will be qualified under the Trust Indenture Act. Therefore, none
of the Reorganization
Securities to be issued under the Creditors' Plan will, if
offered and sold in accordance
with Section 1145 of the Code, be deemed to be "restricted
securities" and the resales
and subsequent transactions in the Reorganized Securities will be
exempt from registration
under federal and state securities laws, unless the holder is an
"underwriter" with
respect to such securities. Section 1145(b) of the Code defines
four types of "underwriters":
(1) persons who purchase a claim against, an interest
in, or a claim for an
administrative expense against the debtor with a
view to distributing any
security received in exchange for such a claim or
interest;
(2) persons who offer to sell securities offered under a
plan for the holders
of such securities ("Accumulators");
(3) persons who offer to buy such securities for the
holders of such securities,
if the offer to buy is: (A) with a view to
distributing such securities
("Distributors"); or (B) made under a distribution
agreement ("Syndicators"); and
(4) a person who is an "issuer" with respect to the
securities, as the term
"issuer" is defined in Section 2(11) of the
Securities Act.
Under Section 2(11) of the Securities Act, an "issuer"
includes any person directly
or indirectly controlling or controlled by the issuer, or any
person under direct or indirect common control of the issuer.
Whether a Person is an "issuer," and therefore an
"underwriter," for purposes of
Section 1145(b) of the Code, depends on a number of factors.
These include: (i) the
person's equity interest in the debtor: (ii) the distribution and
concentration of other
equity interests in the debtor; (iii) whether the person is an
officer or director of the
debtor; (iv) whether the person, either alone or acting in
concert with others, has a
contractual or other relationship giving that person power over
management policies and
decisions of the debtor; and (v) whether the person actually has
such power
notwithstanding the absence of formal indicia of control. An
officer or director of the
debtor may be deemed a controlling person, particularly if his
position is coupled with
ownership of a significant percentage of voting stock. In
addition, the legislative
history of Section 1145 of the Code suggests that a creditor with
at least 10% of the
securities of a debtor could be deemed a controlling person.
Directors and officers who will hold Reorganization
Securities pursuant to the
Creditors' Plan or the Stock Option Plan will receive
certificates representing such
securities bearing restrictive legends.
Any person who, to the knowledge of the Debtors, will
pursuant to the distributions
under Article III of the Creditors' Plan become entitled to own
10 percent or more of the
capital stock of Walter Industries will be subject to certain
restrictions on the transfer
of such securities, and certificates representing such securities
received by them will
bear a restrictive legend, although any such stock will be
entitled to the benefits of
the New Common Stock Registration Rights Agreement.
To the extent that persons who receive Reorganization
Securities pursuant to the
Creditors' Plan are deemed to be "underwriters," resales by such
persons would not be
exempted by Section 1145 of the Code from registration under the
Securities Act or other
applicable law. Persons deemed to be underwriters may, however,
be permitted to sell such
Reorganization Securities without registration pursuant to the
provisions of Rule 144 or
Rule 148 under the Securities Act, subject to compliance with
these rules. Those rules
permit the public sale of securities received by "underwriters"
if current information
regarding the issuer is publicly available and if volume
limitations and certain other
conditions are met.
Because determining whether any particular person would be
deemed to be an
"underwriter" with respect to any Reorganization Security to be
issued pursuant to the
Creditors' Plan would depend upon various facts and circumstances
peculiar to that person,
the Proponents express no view as to whether any particular
person receiving
Reorganization Securities under the Creditors' Plan would be an
"underwriter" with respect
to any Reorganization Security to be issued pursuant to the
Creditors' Plan. Given the
complex and subjective nature of the question of whether a
particular holder may be an
underwriter, the Proponents make no representation concerning the
right of any person to
trade in the Reorganization Securities. The Proponents recommend
that potential
recipients of Reorganization Securities consult their own counsel
concerning whether they
may freely trade such Reorganization Securities without
compliance with the Securities Act or the Exchange Act.
1. Control Persons
As of the date of the Disclosure Statement, the Proponents
believe that, depending
on the allocation of Qualified Securities and New Common Stock
among Classes U-4, U-5,
U-6 and U-7, and whether any or all of the Equity Call Options
are exercised, certain
recipients of Reorganization Securities may, by virtue of
receiving such Reorganization
Securities, be entitled to own 10% or more of the capital stock
of Walter Industries or otherwise deemed to be control persons.
2. Syndicators
The Proponents know of no arrangements for resale of
securities issued in the
Creditors' Plan that would make any person a Syndicator.
3. Accumulators and Distributors
The Proponents believe that all resales of securities
issued pursuant to the
Creditors' Plan in these proceedings by Accumulators and
Distributors should be regarded
as exempt from registration under the Securities Act so long as
the sales are made in
"ordinary trading transactions," and that a transaction should be
considered an "ordinary
trading transaction" if it is made on an exchange or in the
over-the-counter market at
a time when the Debtor is a reporting company under the Exchange
Act (see, "APPLICABILITY
OF FEDERAL AND STATE SECURITIES LAWS -- Current Information") and
does not involve any of the following factors:
a. (i) concerted action by recipients of securities
issued under the
Creditors' Plan in connection with the sale of such
securities, or (ii) concerted
action by Distributors on behalf of one or more such
recipients in connection with such sales, or (iii) both;
b. informational documents concerning the offering
of the securities
prepared or used to assist in the resale of such
securities other than a disclosure
statement such as this one and any supplements thereto and
documents filed with the
Securities and Exchange Commission by any of the Debtors
pursuant to the Exchange Act; or
c. special compensation to brokers and dealers in
connection with the sale
of such securities designed as a special incentive to
resell such securities, other
than the compensation that would be paid pursuant to
arms-length negotiations
between a seller and a broker or dealer, each acting
unilaterally, not greater than
the compensation that would be paid for a routine
similar-size sale of similar securities or a similar
issuer.
It is possible that resale transactions which included one or
more of the above factors
could constitute "ordinary trading transactions," but that
determination would have to
be carefully made on a case-by-case basis.
EACH RECIPIENT OF REORGANIZATION SECURITIES SHOULD SATISFY
ITSELF THROUGH
CONSULTATION WITH ITS OWN LEGAL ADVISORS AS TO WHETHER OR NOT ITS
RESALES OR OTHER
TRANSACTIONS IN REORGANIZATION SECURITIES ARE LAWFUL UNDER
FEDERAL AND STATE SECURITIES LAWS.
In addition, certain registration rights will be granted
pursuant to the Qualified
Securities Registration Rights Agreement and the New Common Stock
Registration Rights
Agreement. See "OVERVIEW OF THE CREDITORS' PLAN -- Description
of Securities to be Issued Under the Creditors' Plan."
C. Current Information
Following the Effective Date, according to the Debtors'
Disclosure Statement,
Walter Industries and Mid-State Homes each expects that it will
be required to comply with
the informational reporting requirements of the Exchange Act.
Under the Exchange Act,
Walter Industries and Mid-State Homes will be required to file
Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and other information with
the Securities and Exchange Commission.
<PAGE>
VII.
BUSINESSES, PROPERTIES AND OTHER INFORMATION
WITH RESPECT TO THE DEBTORS
NOTE: THE INFORMATION (AND THIS CHARACTERIZATION THEREOF)
IN THIS ARTICLE VII IS TAKEN FROM THE DEBTORS' DISCLOSURE
STATEMENT.
A. Organization of Hillsborough and Acquisition of Original Jim
Walter
1. Organization of Hillsborough
Hillsborough was organized in August 1987 by a group of
investors led by KKR for
the purpose of acquiring Original Jim Walter. Prior to the
commencement of discussions
relating to such acquisition, no relationship existed between KKR
and Original Jim Walter.
Original Jim Walter offered a diversified line of products and
services for residential
and non-residential construction, renovation/remodeling, water
and waste water
transmission, industrial and consumer markets, and was involved
in the development of
natural resources, including coal, marble, granite, limestone,
oil, gas and gypsum. See
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS -- Corporate
Reorganizations and Asset Dispositions" for information regarding
the disposition of certain of these businesses.
Following its organization, Hillsborough organized and
acquired all of the
outstanding shares of capital stock of a group of direct wholly
owned subsidiaries, the
First Tier Subsidiaries, including JWC Holdings Corporation, a
Florida corporation, JWC.
Each of the First Tier Subsidiaries was intended to reflect a
separate business operation
of Original Jim Walter. The First Tier Subsidiaries (other than
JWC) and Hillsborough
organized and acquired all of the outstanding shares of capital
stock of Old Walter
Industries. JWC organized and acquired all of the outstanding
shares of capital stock
of J-II Acquisition Corporation, a Florida corporation, J-II.
Old Walter Industries and
J-II, in turn, organized and acquired all of the outstanding
shares of capital stock of Hillsborough Acquisition, HAC.
2. Acquisition of Original Jim Walter
On August 18, 1987, pursuant to an Agreement and
Creditors' Plan of Merger dated
as of August 12, 1987, as amended, the Agreement and Creditors'
Plan of Merger, HAC
commenced an offer, the Tender Offer, to purchase all of the
outstanding shares of common
stock of Original Jim Walter at $60 per share in cash. On
September 18, 1987, HAC
acquired approximately 95% of the outstanding shares of common
stock of Original Jim
Walter pursuant to the Tender Offer. On January 7, 1988,
Hillsborough caused Original
Jim Walter to be merged, the Merger, into HAC (which changed its
name to "Jim Walter
Corporation"). On that same date: (1) HAC distributed
substantially all of its assets
(principally excluding the stock of certain subsidiaries of
Original Jim Walter engaged
in building materials businesses) to Old Walter Industries in
redemption for all of the
shares of capital stock of HAC owned by Old Walter Industries;
(2) HAC merged into J-II;
and (3) J-II changed its name to Jim Walter Corporation (J-II or
Jim Walter Corporation).
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO
THE DEBTORS -- Corporate
Reorganizations and Asset Dispositions -- Completed Transactions
- -- JWC Holdings
Corporation" for information regarding the subsequent sale of
JWC.
3. Financing of the Tender Offer and Merger
Funds required for the Tender Offer were obtained from the
following sources: (i)
the issuance and sale by Hillsborough of 28,500,000 shares of
Common Stock for
$142,500,000 to certain limited partnerships organized expressly
for this purpose; (ii)
the issuance and sale by Hillsborough of 1,500,000 shares of
Common Stock for $7,500,000
to the Drexel Burnham Group; (iii) the issuance by Hillsborough
to certain of the same
limited partnerships referred in (i) above of subordinated
promissory notes in the
aggregate principal amount of $250,000,000 (the "Affiliate
Subordinated Bridge Notes");
and (iv) commercial bank loans pursuant to the Revolving Credit
Agreement among
Hillsborough, Old Walter Industries and the First Tier
Subsidiaries, the Revolving Loan
Borrowers as of such time and the Revolving Credit Banks to
Hillsborough in the aggregate
principal amount of approximately $2,000,000,000 (the "Tender
Offer Loans"). Hillsborough
thereupon provided the funds to HAC through a series of capital
contributions.
At the time of the Merger, an aggregate of approximately
$2,900,000,000 was
required (i) to acquire (at $60 per share in cash) the shares of
common stock of Original
Jim Walter not acquired in the Tender Offer, (ii) to repay
certain indebtedness of
Original Jim Walter, (iii) to repay a portion of the Affiliate
Subordinated Bridge Notes,
(iv) to repay the Tender Offer Loans and (v) to pay related costs
and expenses. These
funds were obtained from the following sources: (a) the issuance
of and sale by
Hillsborough of 830,533 shares of Common Stock in a private
placement to certain
purchasers (or their nominees) of the Series B & C Senior Notes,
the Senior Subordinated
Notes and the 17% Subordinated Notes (the Series B & C Senior
Notes, the Senior
Subordinated Notes and the 17% Subordinated Notes are
collectively referred to herein as
the "Securities"), for a purchase price of $5 per share (in
connection with which
Hillsborough repurchased at the same purchase price an identical
number of shares of
Common Stock previously sold to the Drexel Burnham Group); (b)
the issuance of and sale
by Hillsborough of 227,273 shares of Common Stock for $5 per
share to the Drexel Burnham
Group; (c) the issuance by Jim Walter Resources, Jim Walter Homes
and United States Pipe
and Foundry Company, a Delaware corporation originally
incorporated under the name
"U.S. Pipe Holdings Corporation" ("U.S. Pipe Holdings")
(collectively, the "Senior Note
Issuers") and The Georgia Marble Company, a wholly owned
subsidiary of Old Walter
Industries, a Georgia corporation ("Former Georgia Marble") of
$83,500,000 of an aggregate
of $190,000,000 in principal amount of Series A Variable Rate
Senior Notes due 1993 (the
"Series A Senior Notes") and all of the Series B & C Senior
Notes; (d) the issuance by
the Senior Note Issuers, Hillsborough, Old Walter Industries,
Resources Holdings, Homes
Holdings, United Land, The Georgia Marble Company, a Delaware
corporation originally
incorporated under the name "Georgia Marble Holdings Corporation"
("Georgia Marble"),
Former Georgia Marble and the Drexel Burnham Group of a senior
note (the "Senior Bridge
Note") in the amount of $106,500,000 pursuant to an agreement
(the "Note Purchase
Agreement"), dated as of January 1, 1988. Jim Walter Homes,
United Land and U.S. Pipe
Holdings are, collectively, the "Subordinated Note Issuers." The
Senior Note Issuers and
the Subordinated Note Issuers are, collectively, the "Issuers."
Hillsborough, Old Walter
Industries, Resources Holdings and Homes Holdings are,
collectively, the "Senior Note
Guarantors." Hillsborough, Old Walter Industries and Homes
Holdings are, collectively,
the "Subordinated Note Guarantors." The Senior Note Guarantors
and the Subordinated Note
Guarantors are, collectively, the "Guarantors;" (e) a loan in the
principal amount of
$10,000,000 evidenced by a note (the "Loan Note") issued pursuant
to a loan agreement;
(f) the issuance by the Subordinated Note Issuers and Former
Georgia Marble of a portion
of the Senior Subordinated Notes and 17% Subordinated Notes; (g)
a term loan, the
Mid-State Term Loan, to Mid-State Homes, pursuant to the
Revolving Credit Agreement, in
the aggregate principal amount of $1,200,000,000; (h) Revolving
Loans to Revolving Loan
Borrowers in the aggregate principal amount of $800,000,000; and
(i) cash and cash
equivalents of Original Jim Walter. Such issuers and borrowers
provided the funds to
Hillsborough through intercompany loans and intercompany payments
of dividends.
Following the Merger: (i) the balance of the Affiliate
Subordinated Bridge Notes
was repaid in full, through a series of transactions involving
the issuance and sale of
additional Senior Subordinated Notes and 17% Subordinated Notes;
(ii) the Senior Bridge
Note was repaid in full through a series of transactions
involving the issuance and sale
of the remaining $106,500,000 in principal amount of Series A
Senior Notes; (iii) the
Mid-State Term Loan and a portion of the Revolving Loans were
repaid with net proceeds
from the issuance and sale of $1,450,000,000 in aggregate
principal amount of Mortgage
Backed Notes; (iv) 316,147 shares of Common Stock were sold by
Hillsborough to certain
purchasers of Securities (or their nominees) for a purchase price
of $5 per share (in
connection with which Hillsborough repurchased from the Drexel
Burnham Group at the same
purchase price an identical number of shares of Common Stock
previously sold to the Drexel
Burnham Group); and (v) certain members of the management of
Hillsborough and its
subsidiaries purchased an aggregate of 986,500 shares of Common
Stock, constituting
approximately 3.2% of the shares of Common Stock currently
outstanding, at a purchase
price of $5 per share. In addition, such members of management
of Hillsborough and its
subsidiaries were given options to purchase at $5 per share an
aggregate of 3,273,388
authorized and unissued shares of Common Stock, constituting
approximately 9.5% of the
shares of Common Stock that would be outstanding assuming
exercise of all such options.
See "POST-CONSUMMATION--Management--Security Ownership of
Directors, Officers and Certain Beneficial Owners."
The purchase price of the Securities paid by all of the
original purchasers thereof
was 100% of the principal amount of such Securities (plus, where
applicable, accrued interest).
The following table indicates the source of funds required
to complete the Tender
Offer, the Merger and the subsequent refinancing described above
and the use of such funds:
4. Source and Use of Funds
<TABLE>
<CAPTION>
Tender Subsequent
Offer Merger Refinancing
(in thousands)
SOURCE OF FUNDS:
<S> <C>
Tender Offer Loans $2,000,000 $ 300,000 $
Issuance of Affiliate Subordinated
Bridge Note 250,000
Issuance of Common Stock (Net) 150,000 1,136 4,933
Mid-State Term Loan 1,200,000
Revolving Loans 800,000
Issuance of Series A Senior Notes 83,500 106,500
Issuance of Loan Note 10,000
Issuance of Series B Senior Notes 180,000
Issuance of Series C Senior Notes 20,000
Issuance of Senior Bridge Note 106,500
Issuance of Senior Subordinated Notes 184,050 165,950
Issuance of 17% Subordinated Notes 308,500 41,500
Issuance of Mortgage-Backed Notes 1,450,000
Cash of Original Jim Walter 104,183
$2,400,000 $3,297,869 $1,768,883
USE OF FUNDS:
Acquisition of Original Jim Walter
Common Stock $2,315,483 $ 109,178 $
Retirement of Original Jim Walter Debt 587,824
Retirement of Tender Offer Loans 35,970 2,264,030
Retirement of Affiliate Subordinated
Bridge Note 41,198 208,802
Retirement of Mid-State Term Loan
1,200,000
Retirement of Revolving Loans 49,264 119,700
Retirement of Senior Bridge Note 106,500
Restricted Investments -- Mortgaged-Backed
Notes 43,963
Fees and Expenses 48,547 63,956 89,918
Interest Expense 182,419
$2,400,000 $3,297,869 $1,768,883
</TABLE>
The Series A Senior Notes and the Loan Note were repaid on
July 3, 1989. See
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS -- Corporate
Reorganizations and Asset Dispositions -- Completed Transactions
- -- Georgia Marble."
For operational purposes, Hillsborough, Old Walter
Industries, Former U.S. Pipe
(and later U.S. Pipe), Jim Walter Resources and Walter Land, the
Working Capital Borrowers
entered into the $150,000,000 Working Capital Agreement with the
Working Capital Banks.
5. Certain Events Preceding the Reorganization
Proceedings
On November 7, 1989, the Issuers and Guarantors commenced
the Exchange Offers for
all outstanding Series B & C Senior Notes and Senior Subordinated
Notes, which Exchange
Offers were subsequently amended and extended. Under the
Exchange Offers, holders of the
Series B & C Senior Notes would have received (for each $1,000
principal amount thereof)
$3.75 in cash plus $1,000 in principal amount of 15 5/8% Senior
Extendible Reset Notes
and holders of the Senior Subordinated Notes would have received
(for each $1,000
principal amount thereof) $5.00 in cash, warrants to purchase
shares of the Common Stock
of Hillsborough and $1,000 in principal amount of 17 5/8% Senior
Subordinated Reset Notes.
As conditions of the Exchange Offers, specified minimum
percentages of the outstanding
principal amount of the Series B & C Senior Notes and the Senior
Subordinated Notes would
have had to have been validly tendered and not withdrawn and
holders of the Series B &
C Senior Notes and Senior Subordinated Notes would have had to
have given their consent
to the elimination of certain financial and other covenants from
the Series B & C Senior
Note Indenture and the Senior Subordinated Note Indenture. The
Series B & C Senior Note
Indenture, the Senior Subordinated Note Indenture and the 17%
Subordinated Note Indenture
are collectively referred to herein as the "Indentures." The
primary purpose of the
Exchange Offers was to mitigate the possible impact of resetting
the interest rates on
the Series B & C Senior Notes and the Senior Subordinated Notes
at rates significantly
higher than the then current interest rates of such debt. The
terms of the Series B &
C Senior Notes and the Senior Subordinated Notes required that
the interest rates thereon
be reset to the rates per annum such debt should bear in order to
have a bid value of 101%
of the principal amount thereof as of December 2, 1989.
The Exchange Offers constituted one of a number of
recapitalization alternatives
that were considered by Hillsborough, but not successfully
consummated, during the second
half of calendar 1989. In early December 1989, during the
pendency of the Exchange
Offers, the reset advisors for the Series B & C Senior Notes and
the Senior Subordinated
Notes, Drexel Burnham and Merrill Lynch, advised Hillsborough
that, in their opinion,
there were no interest rates at which such notes could be reset
to have bid values of 101%
as called for by their terms. The Debtors state in the Debtors'
Disclosure Statement that
Hillsborough believes that the reset advisors' inability to reset
the interest rates was
primarily attributable to two factors: pending asbestos-related
litigation, which
materially hindered the ability of the Debtors to pursue a
refinancing or sell assets to
reduce debt, and general turmoil in the high yield bond markets.
The Exchange Offers expired at 7:00 P.M., New York City
Time, on December 27, 1989,
without satisfaction of the conditions precedent to their
consummation and without the
acceptance for exchange of any Series B & C Senior Notes or
Senior Subordinated Notes
tendered thereunder. In light of possible defaults under
indebtedness of the Debtors
arising as a result of the inability to reset interest rates,
consummate the Exchange
Offers or effect alternate recapitalization, the Reorganization
Proceedings were commenced
later that evening.
B. Corporate Reorganizations and Asset Dispositions
1. General
Following the Merger and prior to the Filing Date,
Hillsborough undertook a program
of corporate reorganizations and asset dispositions, which were
permitted and contemplated
by the indentures, the Revolving Credit Agreement, the Working
Capital Agreement and the
related agreements with the Revolving Credit Banks and the
Working Capital Banks.
Pursuant to this program, Hillsborough has restructured and/or
disposed of certain of the
businesses of Original Jim Walter. The transactions completed
and pending are described
in the following two sections. See "BUSINESSES, PROPERTIES AND
OTHER INFORMATION WITH
RESPECT TO THE DEBTORS--Completion of Mirror Liquidation Plan."
2. Completed Transactions
a. Mid-State Homes
On April 19, 1988, Mid-State Trust II, a non-Debtor
business trust established
under the laws of Delaware, issued and sold Mortgage-Backed Notes
(the "Mortgage-Backed
Notes") in an aggregate principal amount of $1,450,000,000. The
$1,326,665,600 of net
proceeds from the sale of the Mortgage-Backed Notes paid by
Mid-State Trust II to
Mid-State Homes were applied, pursuant to the terms of the
indentures and the Revolving
Credit Agreement, as follows: (i) to repay in full the principal
of the Mid-State Term
Loan and accrued interest to the date thereof; and (ii) to make a
mandatory partial
prepayment of principal (together with accrued interest) of the
Revolving Loans. See
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS -- Businesses
and Properties of the Debtors -- Mid-State Homes."
Mid-State Homes is the settlor of Mid-State Trust II and
its sole beneficiary.
Mid-State Homes is an indirect wholly owned subsidiary of
Hillsborough that was
established in 1958 to purchase and service installment notes
receivable and mortgages
from Jim Walter Homes in connection with homes constructed and
sold by Jim Walter Homes
in its normal business. Prior to the issuance of the
Mortgaged-Backed Notes, the mortgage
installment notes originated by Jim Walter Homes in connection
with its sale of homes were
sold by Jim Walter Homes to Mid-State Homes in the ordinary
course of business. The net
proceeds of the issuance of the Mortgage-Backed Notes were paid
to Mid-State Homes by
Mid-State Trust II in exchange for all of the mortgage
installment notes and all of the
mortgages, deeds of trust or other security instruments securing
such mortgage installment
notes that Mid-State Homes owned on February 29, 1988 (the
"Mortgage-Backed Notes
Collateral"). The Mortgage-Backed Notes Collateral, together
with the collections
thereon, secure the Mortgage-Backed Notes. Payments on the
Mortgage-Backed Notes
Collateral, together with earnings on reinvestment of such
payments, are expected to be
sufficient to make timely payments of interest on and principal
of the Mortgage-Backed
Notes as and when due. The Mortgage-Backed Notes are obligations
solely of Mid-State
Trust II, which did not file a petition for reorganization under,
and is not operating
in accordance with, the provisions of Chapter 11 of the Code.
The Mortgage-Backed Notes
are non-recourse to Mid-State Homes, Hillsborough or any other of
the Debtors. Payment
of principal of and interest on the Mortgage-Backed Notes have
been unconditionally
guaranteed by FSA, a monoline property and casualty insurance
company that, directly and
through subsidiaries, is engaged exclusively in the business of
writing financial
guarantee insurance, principally on corporate and other taxable
securities offered in
domestic and foreign markets. None of the collections on the
Mortgage-Backed Notes
Collateral will be available to the Debtors to make payments to
Creditors until all of
the Mortgage-Backed Notes have been paid in full, except for
certain distributions by
Mid-State Trust II to Mid-State Homes. See "BUSINESSES,
PROPERTIES AND OTHER INFORMATION
WITH RESPECT TO THE DEBTORS -- Businesses and Properties of the
Debtors -- Mid-State
Homes."
Mortgage installment notes generated by Jim Walter Homes
after February 29, 1988
were being sold to Mid-State Homes by Jim Walter Homes in the
ordinary course of business
in exchange for cash and/or an intercompany note payable. In
early calendar 1989,
Mid-State Homes entered into a $300 million credit agreement with
several commercial banks
(subsequently increased by amendment to $360 million). The
agreement contained a
revolving credit facility and provided for letters of credit that
supported the issuance
of commercial paper, the proceeds of which were used until the
Filing Date to make the
foregoing purchases of installment notes from Jim Walter Homes.
The agreement was secured
by certain installment notes and related security instruments.
The filing of the Reorganization Proceedings was an event
of default under this
agreement and Mid-State Homes was no longer able to utilize the
agreement. On July 1,
1992, pursuant to approval by the Court, mortgage installment
notes having a gross amount
of $638,078,000 and an Economic Balance of $296,160,000 were sold
by Mid-State Homes to
Mid-State Trust III in exchange for the net proceeds from the
public issuance of
$249,864,000 of asset backed notes (the "Asset Backed Notes"), by
Mid-State Trust III.
Such Asset Backed Notes have a 7 5/8% interest rate and are
secured by the mortgage
installment notes and all of the mortgages, deeds of trust or
other security instruments
securing such mortgage installment notes (the "Asset Backed Notes
Collateral") sold by
Mid-State Homes to Mid-State Trust III. The Asset Backed Notes
are repayable quarterly
in an amount equal to collections on such mortgage installment
notes, net of payment of
expenses and interest on the Asset Backed Notes. Net proceeds
were utilized to repay in
full all outstanding indebtedness due under the Mid-State Homes
revolving credit facility
with the excess cash to be used to fund the ongoing operations of
the Debtors. Mid-State
is the settlor and sole beneficiary of Mid-State Trust III. The
Asset Backed Notes are
non-recourse to Mid-State Homes, Hillsborough or any other of the
Debtors. Payment of
principal and interest on the Asset Backed Notes have been
unconditionally guaranteed by
FSA. None of the collections on the Asset Backed Notes
Collateral will be available to
the Debtors to make payments to Creditors until all of the Asset
Backed Notes have been
paid in full.
b. Jim Walter Papers
On April 19, 1988, the capital stock of Jim Walter Papers,
Inc., a Florida
corporation ("Jim Walter Papers"), was distributed by Old Walter
Industries to Papers
Holdings Corporation, a Delaware corporation and a First Tier
Subsidiary ("Papers
Holdings"). On August 9, 1988, Butler Paper Company, a wholly
owned subsidiary of Great
Northern Nekoosa Corporation, purchased from Hillsborough all of
the outstanding shares
of capital stock of Papers Holdings for approximately $116.1
million in cash, after giving
effect to a post-closing adjustment. Butler Paper Company also
paid an additional
$10 million for certain non-competition agreements by
Hillsborough. Net cash proceeds
received at the closing of the sale were utilized to reduce
indebtedness under the
Revolving Credit Agreement. In the nine months ended May 31,
1988 (the "1988 Fiscal
Period") and the twelve months ended August 31, 1987 (the "1987
Fiscal Year"), Jim Walter
Papers' net sales and revenues amounted to $237.6 million and
$294.1 million,
respectively. Jim Walter Papers was a merchant engaged in the
wholesale distribution of
a variety of fine papers, industrial papers, converted products,
packaging products and
maintenance supplies.
c. JWC Holdings Corporation
On April 21, 1988, Jasper Corp., a Delaware corporation
("Jasper"), purchased from
Hillsborough all of the outstanding shares of capital stock of
JWC, which owned directly
all of the outstanding shares of capital stock of J-II, the
successor by merger to
Original Jim Walter. The wholly owned subsidiaries of J-II,
which became indirect, wholly
owned subsidiaries of Jasper as a result of the purchase, include
Celotex, Jim Walter
Research Corporation, a Delaware corporation, and Jim Walter
International Sales
Corporation, a Florida corporation. See "BUSINESSES, PROPERTIES
AND OTHER INFORMATION
WITH RESPECT TO THE DEBTORS--Organization of Hillsborough and
Acquisition of Original Jim
Walter--Organization of Hillsborough." The purchase price paid by
Jasper for the capital
stock of JWC consisted of $5,000,000 in cash and a non-interest
bearing contingent
obligation in the maximum amount of $95,000,000 payable only out
of excess cash flow of
Celotex and its subsidiaries following the substantial resolution
of all asbestos-related
litigation against Celotex and its subsidiaries. Such resolution
was viewed by
Hillsborough's management as remote and, accordingly, the
contingent obligation was not
reflected in Hillsborough's financial statements. See
"INTRODUCTION--Litigation of Veil
Piercing Actions." In connection with the purchase by Jasper of
the capital stock of JWC,
each of JWC, Celotex and the other subsidiaries of JWC agreed to
indemnify Hillsborough
and its affiliates against all liabilities incurred by any of
them in respect to JWC and
its subsidiaries, which indemnity covers any liability or expense
incurred in respect of
the asbestos-related litigation against Celotex and its
subsidiaries. In the 1987 Fiscal
Year, the net sales and revenues of JWC and its subsidiaries
amounted to $619.6 million.
JWC and its subsidiaries manufactured and distributed building
materials.
d. JWC Holding Corporation
On May 26, 1988, Jasper purchased from Jim Walter
Resources all of the outstanding
shares of capital stock of Apache. The purchase price paid by
Jasper for the capital
stock of Apache consisted of $5,000,000 in cash and an interest
bearing, non-recourse
promissory note in the principal amount of $25,000,000 (the
Apache Note). Principal of
and, until August 31, 1990, interest on, the note were payable
only out of excess cash
flow of Apache. The principal amount of the note would be
reduced by $5,000,000 if it
was paid in full prior to August 31, 1991. Net cash proceeds
received at closing of the
sale were used to reduce indebtedness under the Revolving Credit
Agreement.
Prior to the Filing Date, Jasper had paid interest on the
Apache Note, together
with a $9,296,000 payment on principal. Proceeds of $7,417,250
were applied to the
prepayment of borrowings under the Revolving Credit Agreement and
the remaining proceeds
of $1,878,750 were set aside to offer to purchase Series B & C
Senior Notes. This amount
together with interest thereon is currently held by Chemical (as
successor to MHTCo.) in
the Class S-6 Fund. Jasper made prepayments on the Apache Note
in November and December
1990 in the aggregate amount of $10,704,000 which constituted
repayment in full (after
giving effect to the aforementioned $5,000,000 reduction) of the
Apache Note. In June
1991, pursuant to a Court order dated June 3, 1991, such proceeds
from the Apache Note,
together with interest earned on such proceeds, were applied as
payments of principal
under the Revolving Credit Agreement ($8,248,821) and Working
Capital Agreement
($2,805,305). However, see "BUSINESS, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO
THE DEBTORS--Post-Filing Date Financing Efforts--Application of
Certain Proceeds" as to
an April 29, 1992 order of the District Court that reversed and
remanded such Court order
of June 3, 1991.
In the 1987 Fiscal Year, Apache's net sales and revenues
amounted to $31.0 million,
including sales of $23.5 million to Celotex. Apache manufactured
building materials.
e. U.S. Pipe
On May 17, 1988 United States Pipe and Foundry Company,
incorporated in Delaware
in 1969 ("Former U.S. Pipe"), a wholly owned subsidiary of Old
Walter Industries, adopted
a Plan of Complete Liquidation (the "Pipe Liquidation Plan")
pursuant to which Former
U.S. Pipe conveyed its Pressure Pipe, Soil Pipe, Industrial
Products and Southeastern
Assembly Divisions (the "Transferred Assets") and all of the
outstanding shares of capital
stock of its wholly owned subsidiaries, U.S. Castings
Corporation, a Delaware corporation
("Castings"), and United Concrete Pipe Corporation, a Delaware
corporation ("U.S. Concrete
Pipe"), to Old Walter Industries in redemption and cancellation
of a portion of the
capital stock of Former U.S. Pipe owned by Old Walter Industries.
Upon receipt of the
Transferred Assets and the capital stock of Castings and U.S.
Concrete Pipe, Old Walter
Industries conveyed the Transferred Assets and the capital stock
of Castings (but not
U.S. Concrete Pipe) to U.S. Pipe Holdings, in redemption and
cancellation of all of the
capital stock of Old Walter Industries owned by U.S. Pipe
Holdings, which subsequently
changed its name to "United States Pipe and Foundry Company"
(U.S. Pipe). On May 31,
1989, Castings was merged into U.S. Pipe. U.S. Pipe, which now
owns substantially all
of the assets of Former U.S. Pipe, has succeeded to Former U.S.
Pipe's obligations as an
Issuer under the Securities, a Revolving Loan Borrower under the
Revolving Credit
Agreement and a Working Capital Borrower under the Working
Capital Agreement.
f. United Land
The balance of the assets of Former U.S. Pipe, the name of
which was changed to
"United Land Corporation" (United Land) was not transferred to
U.S. Pipe. Those assets
primarily consisted of certain land and mineral rights, some of
which are utilized in the
mining and degasification businesses of Jim Walter Resources (see
"BUSINESSES, PROPERTIES
AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and
Properties of the
Debtors--Jim Walter Resources" and--"Completion of Mirror
Liquidation Plan"), and the
capital stock of two subsidiaries: Wedlo, Inc., a Delaware
corporation ("Wedlo"); and
U.S. Concrete Pipe. On May 17, 1988, the capital stock of U.S.
Concrete Pipe was
distributed by Old Walter Industries to U.S. Concrete Pipe, Inc.,
Concrete, a Delaware
corporation and a First Tier Subsidiary, in redemption and
cancellation of all of the
capital stock of Old Walter Industries owned by Concrete. On
July 25, 1988, U.S. Concrete
Pipe was merged into Concrete, which subsequently changed its
name to "United Concrete
Pipe Corporation." On July 25, 1988, the capital stock of Wedlo
was distributed by Former
U.S. Pipe to Old Walter Industries, in redemption and
cancellation of a portion of the
capital stock of Former U.S. Pipe owned by Old Walter Industries,
and then was distributed
by Old Walter Industries to Wedlo Holdings Corporation ("Wedlo
Holdings"), a Delaware
corporation and a First Tier Subsidiary, in redemption and
cancellation of all of the
capital stock of Old Walter Industries owned by Wedlo Holdings.
g. Wedlo Holdings
On May 18, 1989, a wholly owned subsidiary of WI Holdings
Corp., a Delaware
corporation ("WI Holdings") and an unaffiliated company, acquired
Wedlo Holdings in a
merger transaction for (i) approximately $46.1 million in cash,
after giving effect to
certain post-closing adjustments, (ii) shares of preferred stock
of WI Holdings having
an aggregate liquidation preference of $2 million and (iii)
warrants to purchase common
stock of WI Holdings. Net cash proceeds received at the closing
of the sale were utilized
to repay indebtedness under the Revolving Credit Agreement. In
the 1988 Fiscal Period
and the 1987 Fiscal Year, Wedlo's net sales and revenues were
$35.1 million and $43.5
million, respectively. Wedlo operated retail jewelry outlets and
a ring polishing
operation and was a wholesale ring distributor.
h. Concrete
On April 11, 1989, UCP Holdings, Inc., a Delaware
corporation and an unaffiliated
company ("UCP Holdings"), purchased from Hillsborough all of the
outstanding shares of
capital stock of Concrete for (i) approximately $41.5 million in
cash, subject to certain
post-closing adjustments, (ii) shares of UCP Holdings' preferred
stock having an aggregate
liquidation preference of $4 million and (iii) warrants to
purchase common stock of UCP
Holdings. Net cash proceeds received at the closing of the sale
were utilized to repay
indebtedness under the Revolving Credit Agreement. UCP Holdings
ceased operations in
1991, and Hillsborough's $4 million carrying value of UCP
Holdings preferred stock was
written off as a loss on disposal of discontinued operations in
the year ended May 31,
1991. Concrete's net sales and revenues in the 1988 Fiscal
Period and the 1987 Fiscal
Year were $36.9 million and $54.1 million, respectively.
Concrete was a domestic producer
of concrete and welded steel pipe and a manufacturer of specialty
concrete and welded
steel pipe sections, fittings and joints, as well as steel
products for pipelines and
pumping and treatment plants.
i. Georgia Marble
On June 25, 1988, Former Georgia Marble, adopted a Plan of
Complete Liquidation
(the "Marble Liquidation Plan") pursuant to which Former Georgia
Marble distributed all
of the outstanding shares of capital stock of its wholly owned
subsidiary, JW Aluminum
Company, to Old Walter Industries in redemption and cancellation
of a portion of the stock
of Former Georgia Marble owned by Old Walter Industries. Old
Walter Industries then
immediately transferred such capital stock to Georgia Metals
Holding Corporation, a
Delaware corporation and a First Tier Subsidiary ("Georgia Metals
Holdings"), in
redemption and cancellation of all of the capital stock of Old
Walter Industries held by
Georgia Metals Holdings. On July 25, 1988, JW Aluminum Company
was merged into Georgia
Metals Holdings, which subsequently changed its name to "JW
Aluminum Company" (JW
Aluminum).
On August 25, 1988, Former Georgia Marble was merged into
Old Walter Industries to
complete the Marble Liquidation Plan. Immediately thereafter,
Old Walter Industries
transferred to Georgia Marble all of the assets owned by Former
Georgia Marble immediately
prior to the merger in redemption and cancellation of all of the
capital stock of Old
Walter Industries held by Georgia Marble. When these
transactions were completed, Georgia
Marble changed its name to "The Georgia Marble Company," (Georgia
Marble), and succeeded
to Former Georgia Marble's obligations as an issuer under the
Securities, a Revolving Loan
Borrower under the Revolving Credit Agreement and a Working
Capital Borrower under the
Working Capital Agreement.
On May 31, 1989, two corporations beneficially owned by a
group of investors led
by First Chicago Venture Capital purchased from Hillsborough all
of the assets, subject
to all related liabilities, of the Aggregate Products Group of
Georgia Marble and all of
the outstanding shares of capital stock of Georgia Marble, for an
aggregate purchase price
of $327 million in cash. Upon consummation of the foregoing
transactions, Georgia Marble
ceased to be an obligor under the Securities and its obligations
thereunder were assumed
by the remaining Issuers. In accordance with the provisions of a
consent and waiver
executed and delivered by the Revolving Credit Banks and the
provisions of the Indentures
and the loan agreement relating to the Loan Note, the net cash
proceeds of $323,460,000
received in respect of such transactions were utilized to repay
$104,760,000 in principal
amount of indebtedness under the Revolving Credit Agreement,
redeem the entire $190
million in principal amount of Series A Senior Notes outstanding
and prepay the $10
million Loan Note in accordance with their respective provisions
and, by tender offer,
repurchase $3.7 million in principal amount of Series B Senior
Notes and $15 million in
principal amount of Series C Senior Notes. In the 1988 Fiscal
Period and the 1987 Fiscal
Year, net sales and revenues of Georgia Marble were $95.4 million
and $120.8 million,
respectively. Georgia Marble was a producer of crushed and
ground aggregates, ground
calcium carbonate and dimensional stone products and a producer
and retailer of various
consumer products.
j. Jim Walter Resources
On October 21, 1988, Jim Walter Resources adopted a Plan
of Complete Liquidation
(the "Resources Liquidation Plan") pursuant to which Jim Walter
Resources distributed all
of the outstanding shares of capital stock of Sloss Industries
Corporation, Southern
Precision Corporation, Vestal Manufacturing Company and JW Window
Components, Inc., each
a Delaware corporation and a wholly owned subsidiary of Jim
Walter Resources
(collectively, the "Transferred Jim Walter Resources
Subsidiaries"), to Old Walter
Industries in redemption and cancellation of a portion of the
capital stock of Jim Walter
Resources owned by Old Walter Industries. Old Walter Industries
then immediately
transferred the capital stock of the Transferred Jim Walter
Resources Subsidiaries to
their corresponding First Tier Subsidiaries, in each case in
redemption and cancellation
of all of the capital stock of Old Walter Industries owned by
such First Tier
Subsidiaries. Following the distribution of the capital stock of
each Transferred Jim
Walter Resources Subsidiary to its corresponding First Tier
Subsidiary, such Transferred
Jim Walter Resources Subsidiary was merged into such First Tier
Subsidiary, which
subsequently changed its name to that of the Transferred Jim
Walter Resources Subsidiary.
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO
THE DEBTORS--Completion
of Mirror Liquidation Plan."
k. Cherokee and Sanford Brick Companies
On November 2, 1988, Jim Walter Resources sold all of the
outstanding shares of
capital stock of Cherokee Brick Company of North Carolina, a
North Carolina corporation,
and Sanford Brick Corporation, a Delaware corporation
(collectively referred to herein
as "Cherokee/Sanford Brick"), to Cherokee Sanford Group, Inc., a
North Carolina
corporation and an unaffiliated company, for approximately $37.5
million in cash (after
giving effect to certain offsets and post-closing adjustments and
interest on the purchase
price for the period from September 20 to November 2, 1988) and a
subordinated promissory
note in the principal amount of $1.0 million maturing in 1997.
Net cash proceeds received
at the closing of the sale were utilized to repay indebtedness
under the Revolving Credit
Agreement. In the 1988 Fiscal Period and the 1987 Fiscal Year,
Cherokee/Sanford Brick's
net sales and revenues amounted to $22.8 million and $33.6
million, respectively.
Cherokee/Sanford Brick produced residential, architectural and
specialty bricks, primarily
for the new residential construction industry.
l. Shore Oil
On September 25, 1988 the capital stock of Shore Oil
Corporation, a Delaware
corporation ("Shore Oil"), was distributed by Old Walter
Industries to Oil Holdings
Corporation, a Delaware corporation and a First Tier Subsidiary
("Oil Holdings"), in
redemption and cancellation of all of the capital stock of Old
Walter Industries held by
Oil Holdings. On November 30, 1989, Hillsborough sold all of its
shares of common stock
of Oil Holdings to Monticello Energy, Inc. for $13,050,000 in
cash. Net cash proceeds
received at the closing of the sale in the amount of $9,690,000
were utilized to repay
indebtedness under the Revolving Credit Agreement and net cash
proceeds in the amount of
$3,230,000 were set aside to redeem Series B & C Senior Notes;
the latter amount, together
with interest thereon, is in the Class S-6 Fund, where it was
deposited following the
commencement of the Reorganization Proceedings. In the year
ended May 31, 1989 and the
1988 Fiscal Period, Shore Oil's net sales and revenues amounted
to $3.9 million and $6.3
million, respectively. Shore Oil's income was derived
principally from its mineral rights
underlying approximately 48,000 acres in southern Louisiana and
its working interests in
various oil and gas fields.
C. Post-Filing Date Sales of Assets
The Debtors have maintained substantially all of their
operating businesses since
the Filing Date. No sales of major business operations have been
attempted during the
Reorganization Proceedings or are contemplated as part of the
confirmation of the
Creditors' Plan. Isolated sales of assets and/or small business
operations not in the
ordinary course of business have been accomplished, with Court
approval, during the
Reorganization Proceedings for specific business reasons.
Certain assets, not essential to the ongoing operations of
the Debtors or to the
consummation of the Creditors' Plan, have been sold pursuant to
Court order, as follows:
1. Beijer Industries AB Stock Investment
By order dated January 25, 1990, Old Walter Industries
sold, pursuant to a tender
offer, all of the shares of stock of Beijer Industries AB owned
by Old Walter Industries
and received net cash proceeds of $5,605,000.
2. Lease of Certain Rights to Coal Bed Methane Gas
By order dated April 12, 1990, Jim Walter Resources and
United Land were authorized
to lease to Taurus Exploration, Inc. ("Taurus") the rights to
develop coal bed methane
gas from up to 8,800 acres of land located in Tuscaloosa County,
Alabama. Net cash
proceeds of approximately $1,260,000 and $3,480,000,
respectively, were received by such
Debtors.
By order dated August 5, 1992, Jim Walter Resources and
United Land were authorized
to lease to Taurus the rights to develop coal bed methane gas
from approximately
1,100 acres of land (together with an option for an additional
1,750 acres) in Tuscaloosa
County, Alabama for an aggregate consideration of $165 bonus per
acre payable upon
execution of the lease, $25 of which was distributed to Jim
Walter Resources and $140 to
Sonat (as defined in Section VII.E.7.(b)). In addition, Jim
Walter Resources (but not
Sonat) will receive from Taurus 13.75% of the methane gas
produced during the first two
years of the lease and 15.625% of the methane gas thereafter as
in-kind royalty. Jim
Walter Resources will then sell such methane gas to Southern
Natural Gas Company. See
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS -- Businesses
and Properties of the Debtors -- Jim Walter Resources -- De-Gas
Division."
3. Certain Assets of Industrial Products Division of
U.S. Pipe
By order dated December 17, 1990, U.S. Pipe was authorized
to sell certain assets
of its former Industrial Products Division, located at
Burlington, New Jersey, for
$600,000. The closing of the sale occurred on December 27, 1990.
4. Certain Assets of Soil Pipe and Southeastern
Assembly Divisions of U.S. Pipe
By order dated July 9, 1990, U.S. Pipe was authorized to
sell certain assets of its
former Soil Pipe Division and its former Southeastern Assembly
Division, which sale was
consummated in July 1990. Net cash proceeds from such sale of
approximately $5,850,000
were received by U.S. Pipe.
D. Post-Filing Date Financing Efforts
Certain of the Debtors have entered into various
agreements, with Court approval,
to obtain post-Filing Date financing, as follows:
<PAGE>
1. Post-Petition Replacement Letter of Credit Agreement
On April 24, 1990, the Court entered an order authorizing
certain of the Debtors
to enter into a Post-Petition Replacement Letter of Credit
Agreement with Bankers Trust
Company ("Bankers Trust") and Manufacturers Hanover Trust Company
("MHTCo.") (as
predecessor to Chemical Bank ("Chemical")) to permit continuation
of letters of credit
existing at the Filing Date which aggregate approximately $17.5
million as of May 31, 1993
and November 30, 1993.
2. Post-Petition New Letter of Credit Agreement
On April 24, 1990, the Court entered an order authorizing
certain of the Debtors
to enter into a cash collateralized Post-Petition New Letter of
Credit Agreement (as
subsequently amended) with Bankers Trust and MHTCo. (as
predecessor to Chemical) in the
amount of $25 million of which approximately $4.9 million and
$2.8 million was outstanding
as of May 31, 1993 and November 30, 1993, respectively. This
agreement expired on May 27,
1994. On May 18, 1994, the Court granted the Debtors' motion to
extend the May 27, 1994
expiration date to June 30, 1995.
It is the Proponent's intention either to extend existing
letters of credit, with
the consent of the issuers thereof, beyond the Confirmation Date
and thereafter the
Effective Date or, if any letters of credit are cancelled, cause
any amounts owed by the
Debtors thereunder to be paid as Administrative Claims under the
Creditors' Plan.
3. Periodic Payments of Mid-State Homes Pre-Filing Date
Debt
Pursuant to the Reimbursement Agreement among Mid-State
Homes, the Bank of Nova
Scotia, Credit Agricole--CNCA, New York Branch, Canadian Imperial
Bank of Commerce
("CIBC"), the Sanwa Bank Limited (the "Initial Lenders") and
MHTCo., as agent for the
Initial Lenders, dated as of January 26, 1989, as amended by an
amendment dated as of
July 21, 1989, among Mid-State Homes, the Initial Lenders and
National Australia Bank
Limited, New York Branch (the lenders under such agreement are
hereinafter referred to
as the "Pre-Petition Lenders" and such Reimbursement Agreement,
as amended, shall
hereinafter be referred to as the "Pre-Petition Reimbursement
Agreement"), the
Pre-Petition Lenders established a credit facility up to a
maximum aggregate principal
amount of $360 million. On January 9, 1990, MHTCo. resigned as
agent and CIBC was
appointed agent for the Pre-Petition Lenders.
As of the Filing Date, $202,400,000 of commercial paper
and $10,000,000 of
revolving credit loans were outstanding plus accrued interest of
$5,573 and commitment
fees of $402,858 under the Pre-Petition Reimbursement Agreement.
On January 9, 1990,
there were two draw-downs totaling $202,400,000 on the letters of
credit. The proceeds
of such drawings were invested for the benefit of Mid-State Homes
until used to satisfy
the issued and outstanding commercial paper on its scheduled
maturity dates.
After the Filing Date, Mid-State Homes continued to
receive payments on account of
principal and time charges owing under the notes and mortgages
included in the collateral,
all of which payments constituted cash collateral. Mid-State
Homes segregated all such
cash collateral into a separate account (the "Proceeds Account")
containing only cash
collateral, and reinvested such funds, as cash collateral, for
the benefit of the
Pre-Petition Lenders by order of the Court January 2, 1990 nunc
pro tunc to the Filing
Date. CIBC filed a motion on January 23, 1991 requesting the
Court to issue an order
authorizing Mid-State Homes' use of cash collateral and for
modification of the Automatic
Stay to permit a turnover of cash collateral pursuant to Sections
363(a) and 362(d) of
the Code.
The Court, by entry of an order dated February 20, 1991,
approved the stipulation
regarding the motion of the Pre-Petition Lenders and authorized
Mid-State Homes to use
cash collateral and to modify the Automatic Stay. This order
essentially provided that
all funds in the Proceeds Account would be paid to CIBC, as
agent, for the account of the
Pre-Petition Lenders and that the Pre-Petition Lenders would
credit the amount of
$55,568,828 paid under the order to the principal balance.
All remaining distributions contemplated under the
stipulation were applied as
follows:
( a) First, to the interest accrued after January 31,
1991 on the then
outstanding principal balance under the Pre-Petition
Reimbursement Agreement, at
the "reference rate" (as defined therein) plus of 1%, the
non-default interest
rate provided for in the Pre-Petition Reimbursement
Agreement; and
(b) Second, on a pro-rata basis to amortize the
principal amounts of (i)
the then-current principal balance due under the
Pre-Petition Reimbursement
Agreement and (ii) the then-current balance of the
"accrued interest loan" (as
defined therein).
Pursuant to this Court's order, $55,568,828, comprised of
collections on the
collateral through January 31, 1991 and certain reserve funds,
were released to CIBC, as
agent, as a reduction of principal. Subsequent collections on
the collateral were
released to the Pre-Petition Lenders on the first and sixteenth
of each month with
payments first applied to current accrued interest and the
balance applied to principal
(87%) and accrued interest and fees that existed at January 31,
1991 (13%).
On April 21, 1992, certain Debtors filed a motion for
entry of an order authorizing
Mid-State Homes to organize a business trust named Mid-State
Trust III (as defined in
Section VII.D.6.), to sell notes and mortgages to Mid-State Trust
III, to cause Mid-State
Trust III to sell debt instruments to the public and to enter
into required related
agreements. The notes and mortgages to be sold to Mid-State III
were pledged to CIBC for
the benefit of the Pre-Petition Lenders. The Court entered an
order on June 18, 1992
granting the motion and directing Mid-State Homes to pay to the
Pre-Petition Lenders the
full amount of unpaid principal, unpaid interest through January
31, 1991 and unpaid
pre-Filing Date fees owed and all subsequently accrued interest
up to the date of the
sale. Mid-State Homes was also directed to set aside $1,735,000
out of the proceeds of
such sale in an escrow account (the "CIBC Escrow Fund") whereupon
the lien interest of
the Pre-Petition Lenders in and to all such accounts and payments
would be extinguished
and satisfied. The Court also instructed the Pre-Petition
Lenders to file an application
with the Court in support of their Claim for fees and
out-of-pocket costs and expenses
and after notice and hearing, the Court would allow such Claims
to the extent deemed
appropriate and direct Mid-State Homes to pay such Claims out of
the CIBC Escrow Fund.
CIBC filed such application on June 30, 1992 which was heard in
the Court on September 8,
1992. Pursuant to an order of the Court dated August 2, 1993,
CIBC was awarded an
administrative expense for fees and expenses in the aggregate
amount of $1,361,290. In
addition, the August 2, 1993 order denied without prejudice a
request for fees and
expenses incurred by certain counsel retained by CIBC in the
aggregate amount of $31,356.
No such additional fees or expenses have been sought or are
anticipated.
4. Application of Certain Proceeds
By order dated June 3, 1991, the Court permitted the
application of $10.7 million
of proceeds from collections on the Apache Note (as defined in
Section II.C.3) by Jim
Walter Resources, plus interest earned thereon, to be applied
against the principal
portion only of the Claims of the Revolving Credit Banks (as
defined in Section II.C.3.).
Bankers Trust and MHTCo. (as predecessor to Chemical), as agents
for the Revolving Credit
Banks, filed an appeal with the District Court. On April 29,
1992, the District Court
reversed the Court's order and remanded the case to the Court for
further proceedings and
determinations on the issues of whether the Revolving Credit
Banks are oversecured
Creditors, the reasonable, relevant and applicable interest rate
and whether the Debtors'
estates will ultimately prove to be solvent. As of the date of
the Disclosure Statement,
further proceedings have not been scheduled for hearing by the
Court. This issue is
resolved under the Creditors' Plan. See "OVERVIEW OF THE
CREDITORS' PLAN--Classification
and Treatment of Claims and Interests--Secured Claims."
5. Release of Certain Funds
By order dated December 11, 1991, Mid-State Homes released
funds in a certain bank
account related to letters of credit which were paid to the
Pre-Petition Lenders,
including CIBC.
6. Sale of Installment Notes--Mid-State Homes
By order dated June 18, 1992, Mid-State Homes was
authorized to organize Mid-State
Trust III, a Delaware business trust ("Mid-State Trust III"),
sell installment notes and
mortgages to Mid-State Trust III and cause Mid-State Trust III to
sell debt instruments
to the public through a registration statement filed with the
Securities and Exchange
Commission. Net proceeds were utilized to repay in full all
outstanding indebtedness due
under the Pre-Petition Reimbursement Agreement between Mid-State
Homes and the Pre-
Petition Lenders thereunder with the excess proceeds to be used
to fund the ongoing
operations of the Debtors. See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT
TO THE DEBTORS--Corporate Reorganizations and Asset
Dispositions--Completed Transactions--
Mid-State Homes" and "--Businesses and Properties of the
Debtors--Mid-State Homes."
7. Installment Purchase of Mining Equipment
On February 23, 1993, the Court entered an order granting
Jim Walter Resources'
Motion for Authority to Obtain Credit and to Grant Security
Interest and Administrative
Expense Priority pursuant to which Jim Walter Resources was
authorized to purchase certain
mining equipment from Gullick Dobson for a purchase price of
$10,263,518 in accordance
with an installment sales agreement.
E. Businesses and Properties of the Debtors
1. General
The Debtors currently offer a diversified line of products
and services for
homebuilding, water and waste water transmission, residential and
non-residential
construction and industrial markets. See "BUSINESSES, PROPERTIES
AND OTHER INFORMATION
WITH RESPECT TO THE DEBTORS -- Completion of Mirror Liquidation
Plan" for information
regarding the Court's Mirror Liquidation Order authorizing the
completion of such Mirror
Liquidation Plan as to the status of Creditors of certain Debtors
after completion of such
Mirror Liquidation Plan; and also Exhibit VIII -- "Chart of
Corporate Structure on Filing
Date;" and Exhibit IX -- "Chart of Corporate Structure After
Completion of Mirror
Liquidation Plan" for information regarding changes in corporate
structure since the
Filing Date.
For financial information relating to the industry
segments of the Debtors, see
Exhibits X.A.1. and X.A.2 (year ended May 31, 1993) and Exhibits
X.B.1. and X.B.2. (nine
months ended February 28, 1994).
2. Hillsborough
Hillsborough, organized in August 1987, was a holding
company and did not have any
substantial properties or engage in any substantial business
other than through its direct
and indirect subsidiaries.
On April 1, 1991, Old Walter Industries merged into
Hillsborough, thereby
completing the Mirror Liquidation Plan of Old Walter Industries
and certain of its
subsidiaries. Hillsborough then changed its name to "Walter
Industries" in connection
with such merger. See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE
DEBTORS -- Completion of Mirror Liquidation Plan" for information
regarding the Court's
Mirror Liquidation Order authorizing the completion of such
Mirror Liquidation Plan as
to the status of Creditors of the Hillsborough Division of the
new Walter Industries and
the Walter Industries Division of the new Walter Industries after
completion of such
Mirror Liquidation Plan.
3. Walter Industries
Walter Industries is a holding company providing certain
corporate staff functions
such as legal, tax, audit, cash management and employee relations
services, and provides
cash as required to its subsidiaries, for which Walter Industries
charges its subsidiaries
at amounts, which in the aggregate, are intended to reimburse
Walter Industries for a
major portion of its costs, other than interest expenses. The
headquarters building,
owned by Walter Industries, is a modern, twin tower, eight-story
building of masonry and
steel construction, containing approximately 200,000 square feet
of office space located
on a plot of land in excess of 13 acres in Tampa, Florida.
4. Jim Walter Homes
Jim Walter Homes, headquartered in the Walter Industries
building in Tampa,
Florida, is in the business of marketing and supervising the
construction of standardized,
partially-finished and shell, detached, single family residential
homes primarily in the
southern region of the United States where the weather permits
year-
round construction. Jim Walter Homes has concentrated on the low
to moderately priced
segment of the housing market. Approximately 300,000 homes have
been completed by Jim
Walter Homes and its predecessor since 1955.
Jim Walter Homes' standard product line consists of 28
models of conventionally
built homes, built of wood on concrete foundations or wood
pilings, and ranging in size
from approximately 640 to 1,800 square feet. During 1990, Jim
Walter Homes supplemented
its standard product line with a new line of "Regency Series"
models designed for the
higher income buyer. The Regency Series consists of seven models
ranging in size from
1,136 to 2,214 square feet. Each home is completely finished on
the outside and is
unfinished on the inside except for rough floors, ceiling joists,
partition studding and
closet framing. The buyer may elect to purchase optional
interior components, including
installation thereof, such as plumbing and electrical materials,
heating and air
conditioning, wallboard, interior doors, interior trim and floor
finishing. A buyer
selecting all options receives a home considered to be "90
percent complete," excluding
only floor covering, inside paint, and water and sewer hookups.
Shell homes are those
which are completely finished on the outside with the inside
containing only rough floors,
partition studding and closet framing, but not interior walls,
floor finishing, plumbing,
electrical wiring and fixtures, doors and cabinetry. The
remaining units are sold at
varying "in-between" stages of interior finishing. Jim Walter
Homes builds all of its
homes "on site," and only against firm orders. The following
chart shows the sales volume
of Jim Walter Homes and the percent of homes sold in the three
stages of completion for fiscal years 1991 to 1993:
<TABLE>
<CAPTION>
Percent of Unit Sales
Fiscal Year Ended May 31,Units Sold Shell Various Stages 90% Complete
<S> <C> <C> <C> <C>
1993 4,784 26% 12% 62%
1992 5,305 29 13 58
1991 5,229 30 13 57
</TABLE>
During the fiscal years 1993, 1992 and 1991 the average
net sales price of a home
was $37,000; $34,600; and $33,400, respectively. In the nine
month periods ended
February 28, 1994 and 1993, units sold were 3,338 and 3,572 at
average net sale prices of $38,100 and $37,300, respectively.
Jim Walter Homes' backlog as of May 31, 1993 was 1,831
units, compared to 1,637
units at May 31, 1992. Such backlog as of February 28, 1994 was
1,764 units, compared
to 1,609 units at February 28, 1993. The average time to
construct a home ranges from four to twelve weeks.
Jim Walter Homes currently operates 103 branch offices
located in 17 states,
primarily in the southern region of the United States. Of such
branch offices
approximately 78% are owned with the balance on leased land.
These branch offices serve
as "display parks," which are designed to allow customers to view
actual models completed
to the various stages of interior finishing available. Jim
Walter Homes does not own or
acquire land for purposes of its operations and is not a real
estate developer.
Accordingly, these operations are not subject to significant
concentrations of credit
risks. The actual construction of all homes sold by Jim Walter
Homes is done by local
building contractors with their own crews, pursuant to
subcontracts executed in connection
with each home, and inspected by Jim Walter Homes' supervisory
personnel. Jim Walter
Homes maintains warehouses near each of its district offices from
which a portion of the
necessary building materials may be obtained; the balance of the
building materials is
purchased locally.
Approximately 97% of the sales made by Jim Walter Homes
are for credit. In order
to qualify for a credit sale the purchaser of a home must own his
property free and clear
of all encumbrances. In addition to owning the land, the
purchaser must perform certain
steps to complete the home and obtain a certificate of occupancy.
Depending upon the
degree of completion of the home purchased, these steps can cost
a significant amount of
money. The home, the land and the aforementioned buyer
improvements are all subject to
the mortgage, deed of trust or other security instrument received
from the buyer to
secured the indebtedness on the credit sale.
The credit terms offered by Jim Walter Homes have a
maximum 30-year term, are
usually for 100% of the purchase price of the home, and carry a
10% "annual percentage
rate," without points or closing costs.
The favorable financing offered by Jim Walter Homes
normally has tended to increase
unit volume in times of high interest rates and limited
availability of mortgage financing
funds. As a result, Jim Walter Homes' business has tended to be
counter-cyclical to
national home construction activity. However, in times of low
interest rates and high
availability of mortgage funds, Jim Walter Homes' volume of home
sales has tended to
decrease. Since 1982 mortgage rates have declined substantially,
creating greater
competition for Jim Walter Homes.
Once the home is complete and has been accepted by the
purchaser, Jim Walter Homes
sells the building and installment sales contract, the note, and
the related mortgage,
deed of trust or other security instrument to Mid-State Homes, an
affiliated company,
pursuant to an Agreement of Purchase and Sale of Installment
Obligations and Servicing
of Delinquent Accounts. Pursuant to this agreement, Jim Walter
Homes provides field
servicing on all delinquent accounts, including collection of
delinquent accounts,
recommendations of foreclosure, foreclosure and resale of
foreclosed properties.
For the calendar year 1993, Jim Walter Homes was the sixth
largest builder of
detached single-family homes in the United States after having
been the fourth largest
builder in 1992 and 1991, the third largest builder in 1990, the
fourth largest builder
in 1988 and 1989, the second largest builder in 1986 and 1987 and
the largest builder in
1984 and 1985.
In the three years ended May 31, 1993, 1992 and 1991, Jim
Walter Homes' net sales
and revenues amounted to $177.2 million, $183.5 million and
$174.6 million, respectively.
In the nine month periods ended February 28, 1994 and 1993, such
net sales and revenues
amounted to $127.3 million and $133.2 million, respectively.
5. Home Improvement
Home Improvement was established in 1988 to provide
homeowners with room additions,
remodeling, garages, carports, porch and pool enclosures and
kitchen and bathroom
replacements.
On January 28, 1994, Home Improvement discontinued its
business operations.
In the three years ended May 31, 1993, 1992 and 1991, Home
Improvement's net sales
and revenues amounted to $3.1 million, $2.7 million and $2.1
million, respectively. In
the nine month periods ended February 28, 1994 and 1993, such net
sales and revenues
amounted to $2.7 million and $2.2 million, respectively.
6. Mid-State Homes
Mid-State Homes was established in 1958 to purchase
mortgage installment notes from
Jim Walter Homes on homes constructed and sold by Jim Walter
Homes and to service such
mortgage installment notes.
Jim Walter Homes offers buyers low-cost mortgage financing
through Mid-State Homes.
The property on which the home is constructed must be owned free
and clear by the
purchaser if the home is to be financed through Mid-State Homes.
In addition to owning
the land, the buyer must perform certain steps to complete the
home and obtain a
certificate of occupancy. Depending on the degree of completion
of the home purchased,
these steps can cost a significant amount of money. The home,
the lot and the
aforementioned buyer improvements are all subject to the
mortgage, deed of trust or other
security instrument received from the buyer to secure his
indebtedness.
The mortgages offered by Mid-State Homes have a maximum
30-year term, are usually
for 100% of the purchase price of the home, and carry a 10%
"Annual Percentage Rate,"
without points or closing costs. Mid-State Homes finances over
97% of the homes built
by Jim Walter Homes.
The favorable financing offered by Mid-State Homes has
normally tended to increase
Jim Walter Homes' unit volume of home sales in times of high
interest rates and limited
availability of mortgage financing funds. As a result, Jim
Walter Homes' business has
tended to be countercyclical to national home construction
activity. However, in times
of low interest rates and high availability of mortgage funds,
Jim Walter Homes volume
of home sales has tended to decrease.
In the three years ended May 31, 1993, 1992 and 1991,
Mid-State Homes' revenues
amounted to $235.7 million, $219.9 million and $209.9 million,
respectively, including
revenues of Mid-State Trust II of $161.8 million, $160.3 million
and $160.1 million,
respectively, and Mid-State Trust III revenues of $23.2 million
in the year ended May 31,
1993. In the nine month periods ended February 28, 1994 and
1993, such revenues amounted
to $189.1 million and $174.1 million, respectively, including
revenues of Mid-State
Trust II of $122.8 million and $120.3 million, respectively, and
revenues of Mid-State
Trust III of $20.4 million and $16.6 million, respectively.
In April 1988, Mid-State Homes sold to Mid-State Trust II
installment notes and
mortgages which it had acquired from Jim Walter Homes through
February 29, 1988 with a
gross amount of approximately $3,376,000,000 and an aggregate
outstanding Economic Balance
of approximately $1,750,000,000, pursuant to a purchase and sale
agreement, in exchange
for a purchase price of $1,326,665,600, representing the net cash
proceeds from the public
offering of Mid-State Trust II Mortgage-Backed Notes after paying
the expenses associated
with the sale of such Mortgage-Backed Notes; and entered into a
servicing agreement with
Mid-State Trust II for the continuing servicing of the
installment notes and mortgages
sold to Mid-State Trust II and a sub-servicing agreement with
Jim Walter Homes with
respect to the servicing of the same installment notes and
mortgages. None of the Debtors
are obligated to pay the notes which were issued by Mid-State
Trust II or any other
obligations of Mid-State Trust II, which did not file a petition
for reorganization under
Chapter 11 of the Code. The outstanding balance at February 28,
1994 of such
Mortgage-Backed Notes was $696,228,000, net of $444,000
unamortized discount. Mid-State
Trust II executed an indenture with Southeast Bank, N.A., as
trustee (First Union National
Bank of Florida now serves as successor trustee), which pledged
the Mortgage-Backed Notes
Collateral, the installment notes and the related mortgages that
Mid-State Homes sold to
Mid-State Trust II as security for the payment of the
Mortgage-Backed Notes. At
February 28, 1994 such Mid-State Trust II installment notes and
mortgages had a gross book
value of approximately $1,707,394,000 and an Economic Balance of
approximately
$1,012,668,000.
Under the Mid-State Trust II indenture for the
Mortgage-Backed Notes, if certain
criteria as to performance of the pledged installment notes are
met, Mid-State Trust II
is allowed to make distributions of cash to Mid-State Homes, its
sole beneficial owner,
to the extent that cash collections on such installment notes
exceed Mid-State Trust II's
cash expenditures for its operating expenses, interest expense
and mandatory debt payments
on the Mortgage-Backed Notes. In addition to the performance
based distributions, the
indenture permits distribution of additional excess funds, if
any, provided such
distributions are consented to by the guarantor of the
Mortgage-Backed Notes. The
guarantor has approved an additional distribution of
approximately $14.1 million for the
April 1, 1994 distribution. During the period from formation of
Mid-State Trust II
through April 1, 1994 such distributions amounted to $56,938,256.
For installment notes originated from March l, 1988
through early calendar 1989,
Mid-State Homes obtained the funds necessary to purchase the
installment notes and
mortgages from Jim Walter Homes primarily through the cash
management system maintained
by the Debtors. In effect, Mid-State Homes was using cash flow
generated from its own
operations and from the operations of the other Debtors as well
as from the proceeds of
financings completed by their ultimate parent company from time
to time to purchase the
installment notes and mortgages from Jim Walter Homes. Jim
Walter Homes, in turn, used
the cash which it received from Mid-State Homes to operate its
construction business.
An intercompany payable from Mid-State Homes to its ultimate
parent company was created
to record the indebtedness with respect to the transfer of funds
to Mid-State Homes which
it used to purchase the installment notes and mortgages from Jim
Walter Homes.
During early 1989, Mid-State Homes entered into a credit
agreement with several
commercial banks which was secured by certain installment notes
and related security
instruments. Borrowings under this agreement were used to
purchase the installment notes
and mortgages from Jim Walter Homes. The filing of the
Reorganization Proceedings was
an event of default under this agreement and Mid-State Homes was
no longer able to utilize
this agreement. On July 1, 1992, pursuant to approval by the
Court, mortgage installment
notes having a gross amount of $638,078,000 and an Economic
Balance of $296,160,000 were
sold by Mid-State Homes to Mid-State Trust III in exchange for
the net proceeds from the
public issuance by Mid-State Trust III of $249,864,000 of Asset
Backed Notes, which bear
an interest rate of 7 5/8%. Mid-State Homes entered into a
servicing agreement with
Mid-State Trust III for the continuing servicing of such mortgage
installment notes sold
to Mid-State Trust III. The Asset Backed Notes are repayable
quarterly in an amount equal
to collections on such installment notes, net of payments of
expenses and interest on the
Asset Backed Notes. Net proceeds were utilized to repay in full
all outstanding
indebtedness due under the Mid-State Homes revolving credit
facility, with the excess
cash to be used to fund the ongoing operations of the Debtors.
None of the Debtors are
obligated to pay the notes which were issued by Mid-State Trust
III, which has not filed
a petition for reorganization under Chapter 11 of the Code. The
outstanding balance at
February 28, 1994 of such Asset Backed Notes was $209,058,000.
Mid-State Trust III
executed an indenture with First Union National Bank of Florida,
as trustee, which pledged
the Asset Backed Notes Collateral, the installment notes and the
related mortgages that
Mid-State Homes sold to Mid-State Trust III as security for the
payment of the Asset
Backed Notes. At February 28, 1994, such Mid-State Trust III
installment notes and
mortgages had a gross book value of approximately $541,472,000
and an Economic Balance
of approximately $263,962,000.
Currently, Jim Walter Homes' business operations are being
funded, as they were
prior to the execution of the Mid-State Home Credit Agreement in
1989, by the sale of
installment notes and mortgages from Jim Walter Homes to
Mid-State Homes, with an
intercompany note payable of Mid-State Homes to Jim Walter Homes
created to record
Mid-State Homes' purchase of installment notes and mortgages from
Jim Walter Homes. Such
unencumbered installment notes and mortgages have a gross book
value of approximately
$1,947,489,000 and an Economic Balance of approximately
$791,491,000 at February 28, 1994.
The cash required for Jim Walter Homes' business operations is
being provided from the
available cash of the Debtors at the Filing Date plus cash
generated from the operations
of the other Debtors pursuant to the Debtors' cash management
system and excess cash
proceeds from the public issuance of Asset Backed Notes by
Mid-State Trust III, with a
post-Filing Date intercompany note payable of Jim Walter Homes to
its ultimate parent
company created to record the funds obtained by Jim Walter Homes
pursuant to the cash
management system.
7. Jim Walter Resources
Jim Walter Resources' operations are conducted through its
Mining Division, which
mines and sells coal from four (4) deep shaft mines in Alabama,
and its De-Gas Division,
which extracts and sells methane gas from the coal seams owned or
leased by the Mining
Division.
In March 1991, Jim Walter Resources was merged into Old
Walter Industries.
Immediately after such merger, Old Walter Industries conveyed all
of the assets owned by
Jim Walter Resources immediately prior to such merger, together
with all of the
liabilities of Jim Walter Resources, to the Resources Division of
Resources Holdings and
immediately after the merger of United Land into Old Walter
Industries, Old Walter
Industries transferred to the United Land Division of Resources
Holdings certain land and
all mineral rights interests and the liabilities associated
therewith, previously owned
by United Land and used in the mining degasification businesses
operated by Jim Walter
Resources. Upon completion of the Pipe Liquidation Plan and the
Resources Liquidation
Plan, Resources Holdings immediately merged into JW Resources
which changed its name to
"Jim Walter Resources, Inc." See "BUSINESSES, PROPERTIES AND
OTHER INFORMATION WITH
RESPECT TO THE DEBTORS -- Completion of Mirror Liquidation Plan"
for information regarding
the Court's Mirror Liquidation Order authorizing the completion
of the Mirror Liquidation
Plan as to the status of the Creditors of certain Debtors,
including Jim Walter Resources,
after completion of such Mirror Liquidation Plan.
a. Mining Division
The Mining Division, headquartered in Brookwood, Alabama,
has approximately 8.6
million tons of rated annual coal production capacity from four
deep shaft mines. These
mines extract coal from Alabama's Blue Creek seam, from which a
high quality metallurgical
coal is obtained. This coal can be used as cooking coal as well
as steam coal since it
meets current environmental specifications. The Blue Creek coal
has a low/medium
volatility and high BTU and low sulfur content. The mines are
located in west central
Alabama between the cities of Birmingham and Tuscaloosa.
The majority of the coal is mined using longwall
technology, complemented by the
more standard continuous mining method. Since the late 1970's,
by replacing the
traditional methods of underground mining with the longwall
technique, the Mining Division
has achieved greater production efficiency, improved safety,
generated superior coal
recovery results and lowered production costs. There are
approximately 90 longwall mining
systems in use in the United States, of which the Mining Division
operates seven. The
Mining Division's normal operating plan is a long wall/continuous
ratio of about 75%/25%,
which is the long-term sustainable ratio.
The Mining Division's coal reserves are currently leased
from United Land, a
division of Jim Walter Resources; however, see "BUSINESSES,
PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE DEBTORS--Completion of Mirror
Liquidation Plan" for
information regarding the Court's order authorizing the
completion of the Mirror
Liquidation Plan as to the status of Creditors of the Debtors
after completion of such
Mirror Liquidation Plan.
<PAGE>
Recoverable reserves as of May 31, 1993 were estimated to
be approximately 263 million tons, of which
238 million tons relate to the four (4) Blue Creek mines.
A summary of the reserves is as follows:
<TABLE>
<CAPTION>
ESTIMATED RECOVERABLE(1) COAL RESERVES AS OF MAY 31, 1993
(In Thousands of Tons)
Type(4)
Steam(S) or United Lands'
Mining Reserves(2) Classifications(3) Metallurgical Interest Quality(6) Production(7)
Property Total Assigned Unassigned Measured Indicated (M) Owned Leased(5) Ash Sulf. BTU/lb. 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No. 3 Mine 65,245 65,245 -- 49,120 16,125 S/M 1,115 64,130 8.2 .56 14,469 2,500 2,403 1,564
No. 4 Mine 78,651 78,651 -- 22,047 56,604 S/M 8,174 70,477 9.4 .69 14,240 2,788 2,342 2,417
No. 5 Mine 31,574 31,574 -- 21,146 10,428 S/M 28,550 3,024 8.8 .66 14,334 1,496 1,819 1,326
No. 7 Mine 62,672 62,672 -- 25,944 36,728 S/M 18,357 44,315 8.0 .65 14,499 2,553 2,314 2,012
238,142 238,142 -- 118,257 119,885 56,196 181,946 9,337 8,878 7,319
Bessie(8) 24,919 -- 24,919 14,880 10,039 S/M 658 24,261 11.0 1.30 13,655 -- -- --
TOTAL 263,061 238,142 24,919 133,137 129,924 56,854 206,207 9,337 8,878 7,319
(1)"Recoverable" reserves are defined as tons of mineable coal in the Blue Creek and Mary Lee seams which can be
extracted and marketed after deduction for coal to be left in pillars, etc. and adjusted for reasonable
preparation and handling losses.
(2)"Assigned" reserves represent coal which has been committed by Jim Walter Resources to its operating mines and
plant facilities. "Unassigned" reserves represent coal which is not committed to an operating mine and would
require additional expenditure to recover. The division of reserves into these two categories is based upon
current mining plans, projections, and techniques.
(3)The recoverable reserves (demonstrated resources) are the sum of "Measured" and "Indicated" resources.
Measured coal extends 1/4 mile from any point of observation or measurement. Indicated coal is projected to
extend from 1/4 mile to 3/4 mile from any point of observation or measurement. Inferred coal extends from 3/4
mile to 3 miles from any point of observation or measurement. Inferred reserves are not included in
recoverable reserves.
(4)All of the coal in the Blue Creek and Mary Lee seams is suitable for metallurgical purposes although, for
marketing reasons, some is sold as compliance steam coal.
(5)The leases are either renewable until the reserves are mined to exhaustion or are of sufficient duration to
permit mining of all of the reserves before the expiration of the term.
(6)Values shown are weighted averages of all reserves and are calculated on a dry basis. Bessie Mine reserves
are equivalent to preparation at a 1.60 specific gravity whereas the others are at a 1.40 specific gravity.
(7)Production for 1993, 1992 and 1991 is for the fiscal years ended May 31.
(8)The Bessie Mine was closed in August 1988.
</TABLE>
Environmental expenditures imposed by laws relating to
deep shaft mining have been
insignificant to date and no substantial expenditures are
expected in the future. The
Mining Division does not engage in any surface (strip) mining.
The facilities of the Mining Division can be summarized as
follows:
<TABLE>
<CAPTION>
Facility Location Sq. Footage
<S> <C> <C>
Administration headquarters Brookwood, AL 41,500
Central shop, supply center and training center Brookwood, AL 128,400
</TABLE>
<TABLE>
<CAPTION>
Current
Operating Mines Location Rated Capacity
<S> <C> <C>
Blue Creek No. 3 Adger, AL 2,100,000 tons
Blue Creek No. 4 Brookwood, AL 2,500,000 tons
Blue Creek No. 5 Brookwood, AL 1,500,000 tons
Blue Creek No. 7 Brookwood, AL 2,500,000 tons
</TABLE>
As discussed below, the Alabama Power contract has been
revised to 4.0 million tons
per year effective July 1, 1994 and some of the contracts with
the Japanese steel mills,
which expired on March 31, 1994, are being replaced by one-year
agreements. Thus, going
forward, 4.88 to 5.10 million tons will be sold under long-term
contracts leaving 3.50
to 3.72 million tons to be sold under short-term contacts or on
the spot market.
The contract with Alabama Power that had been in effect
since January 1, 1979 was
amended effective July 1, 1988 and has been superseded by the New
Contract (as defined
below). The original 1979 contract was for 2.75 million tons per
year through 1999. The
1988 amended contract was divided into two parts. The first part
related to sales of 2.0
million tons per year through 1999. The base sales price for
such coal through June 30,
1993 was fixed, with escalations based on an inflation index, as
well as changes in
haulage and government imposition costs. From July 1, 1993 to
the end of the contract
term in 1999, pricing (and other contract provisions) for such
2.0 million tons were to
revert to the original contract, which included price adjustments
largely based on changes
(increases/decreases) in rates for labor, supplies and certain
other costs. Such pricing
increases and/or decreases were to reflect the rate of change
applied to the base price.
Productivity increases would benefit the Mining Division's
performance because these cost
improvements are not passed on to the customer.
The second part of the 1988 amendment provided for
shipping 1.0 million tons through June 30, 1993 at a market price
that was to be periodically adjusted and was to
be based on an index comprising all compliance coal delivered to
utilities east of the
Mississippi River. Again, productivity improvements accrued to
the Mining Division.
From July 1, 1993 to June 30, 1999, 500,000 tons of the
1.0 million ton second part
of the 1988 amended contract would continue to be supplied at a
sales price based on
long-term contract bids of certain quantities to Alabama Power
for comparable coal from
new sources from other coal suppliers. Alabama Power has the
option to purchase the
balance of the 1.0 million tons, the sales price of which would
have been based on the
same long-term contract bid approach as in the preceding
sentence. The Mining Division
thus would have retained the right to sell the 500,000 tons in
the open market after
July 1, 1993, if the pricing obtainable in the open market
warranted such a decision.
The 1988 amendment to the Alabama Power contract provided
for a review of billing
price and price components prior to July 1, 1993. Officials of
Jim Walter Resources and
Alabama Power had met since 1992 in an attempt to satisfy the
contract provisions, however
numerous disputes have arisen. On June 28, 1993, Jim Walter
Resources filed in the Court
a Complaint for Declaratory Judgment asking the Court to
interpret certain of the
provisions of the contract relating to the billing prices to be
in effect July 1, 1993.
The Court has not ruled on such complaint. Alabama Power filed a
Motion to Dismiss, or
in the Alternative to Transfer Venue as to which a hearing was
held on January 12, 1994. Such motion was denied.
An interim agreement was reached with Alabama Power in
August 1993 to ship only the
Reduced Base Tonnage Coal (2 million tons of coal per year) and
the Period 2 Tonnage Coal
(500,000 tons) for the contract year ending June 30, 1994.
Shipments of Period 2
Additional Tonnage Coal (500,000 tons) were to resume in the
contract year beginning
July 1, 1994. Until the pricing dispute was resolved, the
parties agreed that
currentpayments would be based on $61.00 per ton delivered
(subject to adjustment upon
resolution of the pricing disputes), the approximate blended
price in effect on June 30,
1993 for the 3 million tons delivered in the contract year ended
June 30, 1993. The New
Contract adjusted this price to $63.00 per ton. Under the
contract, the billing price
to Alabama Power for the 2 million tons of Reduced Base Tonnage
Coal was to revert to the
provisions of the 1979 contract as adjusted for escalations,
subject to the aforementioned
review of billing price and price components. The billing price
for the Period 2 Tonnage
Coal and Period 2 Additional Tonnage Coal was to be based on
domestic market prices meeting certain criteria.
On May 10, 1994, Jim Walter Resources and Alabama Power
signed a new agreement for
the sale and purchase of coal replacing the 1979 contract and the
1988 amendment thereto
(the "New Contract"). On May 23, 1994 the Court issued an order
approving the New
Contract, and such order became final on June 3, 1994. Under the
New Contract, Alabama
Power will purchase 4.0 million tons of coal per year from Jim
Walter Resources during
the period July 1, 1994 through August 31, 1999. In addition,
Jim Walter Resources will
have the option to extend the New Contract through August 31,
2004, subject to mutual
agreement on the market pricing mechanism and other terms and
conditions of such
extension. The New Contract has a fixed price subject to an
escalation based on the
Consumer Price Index and adjustments for governmental impositions
and quality. The New
Contract includes modifications of specifications and shipping
deviations and changes in
transportation arrangements. The New Contract provides for the
dismissal of Jim Walter
Resources' declaratory judgment action and Alabama Power's
dismissal of its appeal
regarding Jim Walter Resources' assumption of the 1979 contract
now pending in the
District Court. See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE
DEBTORS -- Litigation -- Lawsuits Relating to Jim Walter
Resources." In accordance with
the New Contract, a joint motion has been filed by Jim Walter
Resources and Alabama Power
with the District Court seeking the entry of an order dismissing
Alabama Power's appeal
from the March 4, 1991 order; and a joint motion has been filed
by Jim Walter Resources
and Alabama Power with the Court seeking the entry of an order
dismissing Jim Walter
Resources' declaratory judgment action. By order dated June 24,
1994, the Court granted
the joint motion of Jim Walter Resources and Alabama Power to
dismiss Jim Walter Resources' declaratory judgment action.
The long-term contracts with the six (6) Japanese steel
mills for 2.75 to
3.0 million tons annually, depending on the level of steel
production in Japan, expired
on March 31, 1994. The pricing mechanisms in such contracts were
market driven and
reflect changes in the prices of four (4) specific coal indices.
The composite change
in market prices of these coal indices from the base point is
then reflected in the
billing price to the steel mills. Tentative agreements have been
reached with some of
the Japanese steel mills as to one-year contracts for shipment of
approximately
1.2 million tons of coal at a current market price. In addition,
approximately 800,000
tons of coal not previously shipped under terms of the long-term
contracts will be shipped
from April 1994 through March 1996 at the long-term contract
price, which is substantially higher than the current market
price.
The long-term contract with Carcoke, S.A. extends through
December 31, 1995. The contract provides for the sale of
approximately 880,000 tons annually, with an option on
approximately 220,000 additional tons annually. The pricing
mechanism is market driven and reflects changes in prices of
three specific coals or coal indices.
Blue Creek Mine No. 5 ("Mine No. 5") was shut down for a
substantial portion of the
period from July 9, 1990 through September 16, 1990 as a result
of safety concerns arising
from spontaneous combustion heatings which were a result of
pyritic sulfur concentrations
occurring in the coal seam in the southern part of the mine being
exposed to the air by
the mining process. The exposure of the sulfur deposits and its
reaction with oxygen
contained in the ventilation air currents caused the heatings to
occur. Throughout this
period, Jim Walter Resources was engaged in discussions with the
Mine Safety and Health
Administration ("MSHA") regarding a new ventilating arrangement,
designed to reduce the
contact between oxygen and sulfur, for the longwall faces at Mine
No. 5. Idle plant
expenses associated with the shutdown were $6.5 million.
Although MSHA approved the
resumption of operations at the mine on September 14, 1990,
providing for a modified
conventional ventilation system, productivity was poor and costs
were therefore high.
In February 1991, the mine's one longwall unit was moved from the
southern part of the
mine to a longwall coal panel in the northern area and
productivity improved. The
southwestern area of the mine was subsequently abandoned and
sealed off as efforts to
design a ventilation arrangement acceptable to MSHA which
properly controlled the
spontaneous combustion heatings and provided acceptable
productivity and costs of operation were not successful.
Mine No. 5 was also shut down from November 17, 1993
through December 16, 1993 as
a precautionary measure as a result of air monitoring tests
detecting evidence of
spontaneous combustion heatings in a section of the mine. The
heatings were also the
result of pyritic sulfur concentrations occurring in the coal
seam being exposed to air.
Representatives of Jim Walter Resources, MSHA, Alabama State Mine
Inspectors and the
United Mine Workers of America ("UMWA") investigated the problem.
Since the area of the
suspected heatings was inaccessible, a decision was made to drill
vertical holes from the
surface and flood the area with combinations of water, carbon
dioxide, foam and
cementitious mixtures to neutralize the spontaneous combustion
heatings. MSHA approved
the resumption of operations at the mine on December 17, 1993.
In early April 1994, the spontaneous heatings recurred at
Mine No. 5 and such mine
is currently shut down. Jim Walter Resources, MSHA, Alabama
State Mine Inspectors and
the UMWA have agreed that the longwall coal panel being mined at
the time the spontaneous
heatings recurred will be abandoned and sealed off. Development
mining for the two
remaining longwall coal panels in this section of the mine will
resume in the near future
and the first panel will be ready for mining approximately
January 1, 1995. Production
will be adversely impacted during the period June 1, 1994 to
January 1, 1995; however,
a portion of the costs will be recovered from business
interruption insurance.
On April 10, 1992, Jim Walter Resources announced that it
was reducing its
workforce by approximately 720 hourly and salaried employees in a
major cost reduction
move to increase mine productivity and strengthen its
competitiveness in worldwide coal
markets. The cutback, effective April 13, 1992, applied to all
four (4) mines as well
as above ground support functions. Such cutback resulted in a
charge to income of $6.2 million in the year ended May 31, 1992
for severance, vacation pay and ongoing medical benefits.
On June 17, 1992, a major production hoist accident
occurred at Blue Creek Mine
No. 3 causing extensive damage. The mine did not resume
production until August 31, 1992.
The hoist accident resulted in a mutually agreed postponement in
shipments of 400,000 tons
to Alabama Power from the period July through December 1992 to
the period January through June 1993.
In the three years ended May 31, 1993, 1992 and 1991, the
Mining Division's net
sales and revenues were $324.4 million, $393.7 million and $391.6
million, respectively,
including $7.1 million, $9.6 million and $6.6 million,
respectively, to Sloss. In the
nine month periods ended February 28, 1994 and 1993, such net
sales and revenues amounted
to $224.3 million and $230.2 million, respectively, including
$4.5 million and $5.6 million, respectively to Sloss.
b. De-Gas Division
The De-Gas Division, through a joint venture, extracts and
sells methane gas from
the coal seams owned or leased by Jim Walter Resources' Mining
Division.
The original motivation for the joint venture was to
increase safety in Jim Walter
Resources' Blue Creek mines by reducing the level of methane gas
through wells drilled
in conjunction with the mining operations. As of May 1993, there
were 316 wells producing approximately 33 million cubic feet of
gas per day.
As many as 150 additional wells are planned for
development over the next several
years. The degasification operation, as had originally been
expected, has had the effect
of improving mining operations and safety by reducing methane gas
levels in the mines, as well as becoming a profitable operation.
The gas is transported through a pipeline (owned by a
corporation of which the
De-Gas Division and Sonat (defined below) each owns 50% of the
stock) directly to SNG's
(defined below) pipeline. See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and
Properties of the Debtors--Non-Debtor Affiliates--Black
Warrior Transmission.
The De-Gas Division began operations in 1981 with the
formation of an equal joint
venture with Kaneb Services, Inc. ("Kaneb") to capture and market
methane gas from the
Blue Creek seam. See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE
DEBTORS--Businesses and Properties of the Debtors--Non-Debtor
Affiliates--Black Warrior
Methane." Southern Natural Gas Company ("SNG") is the joint
venture's exclusive customer
for all output of methane gas, all of which was originally at a
price tied to the price
of fuel oil in New York. In 1985, SNG arbitrarily reduced the
purchase price of gas
delivered to it by the De-Gas Division and Kaneb. Jim Walter
Resources and Kaneb sued
to collect the full contract price. In addition, SNG withheld
all payments for gas
deliveries from November 1986 through January 1987 as a result of
a counterclaim in this
litigation. In April 1987, a jury in an Alabama state court
decided in favor of Jim
Walter Resources and Kaneb and awarded them the full contract
price for all gas delivered
through January 1987, plus interest. SNG was ordered to pay
approximately $22.1 million
(50% of which would be due to the De-Gas Division). SNG appealed
the judgment of the
court. However, retroactive to February 1987, SNG resumed making
payments, under a
reservation of its legal rights. On September 8, 1988, Jim
Walter Resources and SNG
reached a settlement whereby the litigation was agreed to be
withdrawn, and SNG paid to
Jim Walter Resources its 50% interest in such $22.1 million, plus
interest. Net proceeds
to Jim Walter Resources, after severance tax and outside royalty
payments, were $11.1
million. Kaneb subsequently sold its 50% interest in the
degasification operation to a
subsidiary of Sonat, Inc. ("Sonat"), SNG's parent corporation.
In connection with such
sale, additional areas were added to the gas sales contract.
This gas was priced at a
market price nominated by SNG which is not to be lower than the
published price for spot
purchases for SNG--South Louisiana for the applicable month.
Effective January 1, 1994,
the gas sales contract was amended. The price to be paid for gas
delivered to SNG is now
equal to the average of two published spot prices; provided,
however, that the price will
not be less than $2.00 per MMBTU (approximately $1.96 per MCF) on
a weighted annual
average basis, calculated cumulatively each month. Beginning in
January 1994 and ending
in December 2001, SNG will pay Jim Walter Resources a reservation
fee of $675,000 per
month if certain minimum quantities of gas are delivered.
In the three years ended May 31, 1993, 1992 and 1991, the
De-Gas Division's net
sales and revenues amounted to $22.5 million, $21.7 million and
$23.3 million,
respectively. In the nine month periods ended February 28, 1994
and 1993, such net sales
and revenues amounted to $16.7 million and $16.9 million,
respectively.
8. U.S. Pipe
U.S. Pipe conducts its business through its Pressure Pipe
Division and Castings
Division. The Pressure Pipe Division manufactures and sells a
broad line of ductile iron
pressure pipe, pipe fittings and valves and hydrants. It is one
of the nation's largest
producers of ductile iron pressure pipe. The Castings Division
produces and sells a wide variety of gray and ductile iron
castings.
In the three years ended May 31, 1993, 1992 and 1991, U.S.
Pipe's net sales and
revenues amounted to $331.2 million, $332.2 million and $312.7
million, respectively.
In the nine month periods ended February 28, 1994 and 1993, such
net sales and revenues
amounted to $254.3 million and $250.8 million, respectively.
a. Pressure Pipe Division
The Pressure Pipe Division manufactures and sells a
complete line of ductile iron
pipe ranging from 4* to 64* in diameter as well as most
equivalent metric sizes. In
addition, this division produces and sells a full line of
fittings, valves and hydrants
of various configurations to meet various municipal
specifications. Approximately 70%-75%
of the ductile iron pressure pipe produced by this division is
used in the transmission
and distribution of potable water and the remaining 25%-30% is
used in the transmission
of waste water and industrial applications. The majority of
ductile iron pressure pipe
and related fittings, valves and hydrants are for new residential
construction. However,
the market for rehabilitation, upgrading and replacement of pipe
systems has grown
significantly in recent years as major municipalities have
initiated programs to
rehabilitate aging water and waste water transmission systems,
and is currently estimated
to represent approximately 30% of ductile iron pressure pipe
sales. Fittings, valves and
hydrants produced by this division account for approximately 20%
of sales.
Ductile iron pressure pipe is manufactured by the delavaud
centrifugal casting
process and is typically classified into three size categories.
Small pipe, ranging from
4E to 12E in diameter (approximately 57% of the division's pipe
production), is used
primarily for potable water distribution in subdivisions and
small water system grids.
Medium pipe ranging from 14E to 24E in diameter (approximately
30% of the Pressure Pipe
Division's pipe production) is used primarily in reinforcing
distribution systems,
including looping grids and supply lines. Large pipe, 30* to 64*
in diameter, which
accounts for the remaining 13% of pipe production, is used for
major water and waste water transmission and collection systems.
The ductile iron pressure pipe industry is highly
competitive, with a small number
of manufacturers of ductile iron pressure pipe, fittings, valves
and hydrants as well as
a larger number of manufacturers which produce substitute
materials, such as PVC,
concrete, fiberglass, reinforced plastic and asbestos/cement
pipe. U.S. Pipe is one of
the nation's largest producers of ductile iron pressure pipe.
Other major competitors
include McWane, Inc., Griffin Ductile Iron Pipe Company and
American Cast Iron Pipe
Company. The division competes with other manufacturers of
ductile iron pressure pipe
on the basis of price, customer service and product quality.
U.S. Pipe is also a manufacturer of ductile iron fittings.
The Debtors state in the Debtors' Disclosure Statement that
management believes that Tyler Corporation and
McWane Inc. have larger market shares than U.S. Pipe in this
market segment. U.S. Pipe is not a major manufacturer of valves
and hydrants.
Additional competition for ductile iron pressure pipe
comes from pipe composed of
other materials. Although ductile iron pressure pipe is
typically more expensive than
competing forms of pipe, customers choose ductile iron for its
quality, longevity,
strength, ease of installation and lack of maintenance problems.
Products of the Pressure Pipe Division are sold primarily
to contractors, water
works supply houses, municipalities and private utilities. Most
ductile iron pressure
pipe orders result from contracts which are bid by contractors or
directly issued by
municipalities or private utilities. A smaller portion of
ductile iron pressure pipe
sales are made through independent water works supply houses.
The division maintains
numerous supply depots in leased space throughout the country
which are used as a source
of pipe for start-up projects, to supply ongoing projects and to
aid in completing
projects. The Pressure Pipe Division's sales are primarily
domestic, although foreign
sales are becoming more significant, with 8% of dollar sales in
1993. U.S. Pipe has 36
sales offices in leased space in the United States. It employs a
salaried sales force of approximately 70 persons.
The order backlog of pressure pipe at May 31, 1993 was
121,173 tons compared to
121,956 tons at May 31, 1992. Such backlog at February 28, 1994
was 131,413 tons, which
represents three months' shipments, compared to 118,915 tons at
February 28, 1993.
The Pressure Pipe Division manufactures ductile iron
pressure pipe at four owned
plants located in (i) Bessemer, Alabama (563,000 square feet on
169 acres of land);
(ii) North Birmingham, Alabama (336,000 square feet on 61 acres
of land); (iii) Union
City, California (116,000 square feet on 70 acres of land); and
(iv) Burlington, New
Jersey (329,000 square feet on 109 acres of land). Such plants
have annual rated
capacities, on a one shift per day basis, of 180,000 tons,
160,000 tons, 85,000 tons and
132,000 tons, respectively, of ductile iron pressure pipe. In
addition, the division
manufactures fittings, valves and hydrants at its owned plant in
Chattanooga, Tennessee
(623,000 square feet on 80 acres of land). The general offices
contain 122,000 square
feet of office space on 6 acres of owned land and are located in
Birmingham, Alabama.
While the pipe business is generally sensitive to
recessions because of its partial
dependence on the level of new construction activity, certain
aspects of Pressure Pipe's
operations have in the past helped to reduce the impact on such
division of the effects of a downturn in new construction.
First, Pressure Pipe's products have experienced a strong
level of demand in the
replacement market. The Debtors state in the Debtors' Disclosure
Statement that
management believes that the growth of the replacement market
will continue as a result
of major expenditures by governmental entities in an effort to
rebuild the nation's
infrastructure, such as the replacement and upgrading of water
and waste water
transmission systems. In addition, legislation such as the Clean
Water Act and the Safe
Drinking Water Act may force utilities and cities to upgrade
and/or replace their pipe systems.
Second, Pressure Pipe's facilities are located in regions
of the country which have
exhibited consistent economic strength. The Burlington, New
Jersey plant is adjacent to
the northeastern market with its significant replacement
potential and the division's
operations in California and the South are located in areas of
relative economic growth.
Because freight costs for pipe are high, locations close to
important markets lower
transportation costs, thereby making the Pressure Pipe Division's
products more competitive.
b. Castings Division
The Castings Division produces a wide variety of gray and
ductile iron castings as
well as special hardness castings for the pollution control
industry. In the year ended
May 31, 1993, approximately 44% of the Castings Division's sales
were sales of castings
to the Pressure Pipe Division, with the balance of the sales to
various capital goods
industries. Manufacturing operations are located in Anniston,
Alabama (228,000 square feet on 21 acres of owned land).
9. Sloss
Sloss is a diversified manufacturing operation which has
four major product lines: (1) foundry coke; (2) furnace coke; (3)
mineral wool; and (4) specialty chemicals.
Foundry coke is marketed to cast iron pipe plants and
those foundries producing
castings, such as for the automotive and agricultural equipment
industries. It is shipped
primarily into four geographic markets: the East Coast; the
Southeast; Mexico; and the
West Coast. Competition comes primarily from three merchant
suppliers: ABC Coke, Koppers
Company, Inc., and Empire Coke Company. In the year ended May
31, 1993, approximately
65% of the foundry coke produced by Sloss was sold to U.S. Pipe.
Furnace coke is sold primarily to basic steel producers.
Furnace coke sales were
depressed in recent years. During 1993, 1992 and 1991, however,
Sloss' furnace coke
production was at near capacity as a result of a contract with
National Steel Corporation.
Sloss has only an estimated 1% of the market for furnace coke.
Competition comes
primarily from Koppers Company, Inc. in the southern United
States, Citizens Gas & Coke
Utility and steel producers with excess cooking capacity in the
Midwest.
Mineral wool is utilized principally by acoustical ceiling
manufacturers, and is
also used in fireproofing cements. A related product, Processed
Mineral Wool, is used
in friction materials and phenolic molding compounds. The
continued success of the
mineral wool business depends upon Sloss' ability to produce
ceiling tile fiber of
consistent high quality and react to customer demands for
specific "customized" fiber
composition. Of the total mineral wool sales in the year ended
May 31, 1993,
approximately 89% was sold to Armstrong World Industries and 11%
to Apache Building Products Company.
Chemical products are manufactured in plants located in
Birmingham, Alabama and
Ariton, Alabama. The Birmingham product line is composed
primarily of aromatic sulfonic
acids and sulfonyl chlorides used in the pharmaceutical,
plasticizer, foundry and coatings
industries, but also includes a custom manufactured specialty
monomer for the plastic
industry. The Ariton facility produces custom manufactured
specialty products for the rubber and plastics industries.
Sloss' manufacturing facilities located in Birmingham,
Alabama include 120 coke
ovens with an annual rated capacity of 450,000 tons and related
buildings of 148,400
square feet, a mineral wool plant with an annual rated capacity
of 121,000 tons in a
building of 63,000 square feet and a synthetic chemicals plant in
a building of 63,300
square feet, all on 521 acres of owned land. Sloss also operates
a specialty chemical
facility in Ariton, Alabama in a building of 6,900 square feet,
on 53 acres of owned land.
In the three years ended May 31, 1993, 1992 and 1991,
Sloss' net sales and revenues
amounted to $77.5 million, $76.2 million and $72.0 million,
respectively, including
$8.7 million, $8.9 million and $8.8 million, respectively, to
U.S. Pipe. In the nine
month periods ended February 28, 1994 and 1993, such net sales
and revenues amounted to
$59.5 million and $57.2 million, respectively, including $6.6
million in both periods to U. S. Pipe.
10. JW Aluminum
JW Aluminum produces: (i) aluminum sheet for general
building uses, such as siding,
gutters, roofing and window components; (ii) aluminum foil for
household and institutional
uses; (iii) converter foil for laminating; (iv) specialty coated
foil used as a facer on
foam insulation products; (v) fin stock used in the manufacture
of heat transfer
equipment, including coils in commercial air conditioners as well
as other residential,
automotive and marine applications; (vi) aluminum foil used in
litho plates for newspaper
printing; and (vii) cable wrap for use in the manufacture of
communication cable.
JW Aluminum is one of a large number of suppliers
nationwide of aluminum sheet and
foil. In fiscal 1993, JW Aluminum sold 92.4 million pounds of
aluminum products, 35% of
which were sheet products and 65% foil products. JW Aluminum has
focused on directing
its product mix away from building products which are price
sensitive, low value added
products, toward higher value added products such as fin stock,
where product quality and service are relied upon more than
price.
JW Aluminum operates a single manufacturing facility with
an annual rated capacity
of approximately 110 million pounds, based on present product
mix, of rolled aluminum
sheet and foil in Mt. Holly, South Carolina. Such facility is
in a building of 201,000
square feet on 22 acres of owned land. In the spring of 1991, JW
Aluminum completed an
approximately $9.6 million capital program to expand its annual
capacity from 80 million
pounds to 110 million pounds. A $5.6 million capital expenditure
program is currently
underway with respect to the second phase of a planned three
phase expansion program which
will increase the annual rated capacity to 140 million pounds in
late fiscal year 1995.
The third phase of the expansion plan is scheduled for fiscal
1999.
In the three years ended May 31, 1993, 1992 and 1991, JW
Aluminum's net sales and
revenues amounted to $82.3 million, $78.8 million and $71.9
million, respectively,
including $1.6 million, $1.0 million and $1.0 million,
respectively, to Window Components.
In the nine month periods ended February 28, 1994 and 1993, such
net sales and revenues
amounted to $60.4 million and $56.4 million, respectively,
including $1.3 million and $800,000, respectively, to Window
Components.
11. Window Components and Window Components (Wisc.)
Window Components and its wholly owned subsidiary, Window
Components (Wisc.)
(collectively, "JW Window Components"), produce a variety of
screens and screen components
and a full line of window components, such as extruded aluminum
components,
weatherstripping and sash balances. JW Window Components is
recognized as an industry
leader in the production of block and tackle sash balances and in
1991 introduced a new
line of spiral balances. It also has the broadest product line
of any supplier to the
window and patio door industry. The Debtors state in the
Debtors' Disclosure Statement
that management estimates that approximately 60% of total sales
are directed to the new
construction market, approximately 30% to the renovation market
and approximately 10% to
the commercial sector. The recessionary levels of activity in
the new construction market
has adversely affected sales. The introduction of the new line
of spiral balances in 1991
improved market share and sales penetration.
JW Window Components' products are sold through a network
of independent sales agents, who cover the continental United
States, the Caribbean and Central American countries.
JW Window Components operates four plants located in
Hialeah, Florida (291,000
square feet on 10 acres of owned land); Columbus, Ohio (17,000
square feet of leased
space); Sioux Falls, South Dakota (50,000 square feet on 3 acres
of owned land); and
Merrill, Wisconsin (Window Components (Wisc.) with 30,000 square
feet of leased space).
The administrative offices are located in the Walter Industries
headquarters building in Tampa, Florida.
On June 14, 1994, Window Components announced it had
purchased a 147,000 square
foot plant in Elizabethton, Tennessee which will serve as the new
hub for its
manufacturing operations. Two existing plants in Hialeah,
Florida and Columbus, Ohio will
be consolidated into the Elizabethton, Tennessee plant, which
will be expanded to 200,000
square feet. The expansion and relocation are expected to be
completed by the end of calendar 1994.
In the three years ended May 31, 1993, 1992 and 1991, net
sales and revenues for
JW Window Components, including $6.2 million, $5.3 million and
$4.5 million, respectively,
for Window Components (Wisc.), amounted to $36.4 million, $33.1
million and $30.8 million,
respectively. In the nine month periods ended February 28, 1994
and 1993, such net sales
and revenues amounted to $28.6 million and $26.7 million,
respectively, including $5.4
million and $4.5 million, respectively, for such subsidiary.
12. Southern Precision
Southern Precision's products and services include metal
and wood pattern tooling, plastic and rubber mold tooling,
computerized numerically controlled machining of products
and resin coated sand for the foundry industry.
Southern Precision's Irondale, Alabama manufacturing
facility, which incorporates
the plant, warehouse and administrative functions, is the largest
of its type in the
Southeast (85,000 square feet of building located on 6 acres of
owned land). The facility
and equipment enable the company to service larger and more
sophisticated tooling
programs. Competition for resin coated sand, which has been
strong in recent years, is concentrated primarily in the
Southeast.
In order to expand production capacity for resin coated
sand, Southern Precision
entered into an agreement with Borden, Inc. in February 1994 to
lease Borden, Inc.'s resin
coated sand plant (together with the machinery and equipment)
containing approximately
14,000 square feet of space and located in Birmingham, Alabama.
The lease contains an
option to purchase the plant at the end of the third year. The
transaction also included
the execution by Southern Precision and Borden, Inc. of a sales
agreement, license agreement and other ancillary agreements.
In the three years ended May 31, 1993, 1992 and 1991,
Southern Precision's net
sales and revenues amounted to $10.7 million, $11.8 million and
$10.8 million,
respectively, including $1.6 million, $1.8 million and $1.2
million, respectively, to
U.S. Pipe. In the nine month periods ended February 28, 1994 and
1993, such net sales
and revenues amounted to $7.5 million and $8.2 million,
respectively, including
$1.3 million and $1.1 million, respectively, to U. S. Pipe.
13. Vestal
Vestal produces a diversified line of metal and foundry
products for residential,
commercial and industrial use. Vestal manufactures a line of
energy saving fireplaces,
fireplace inserts, accessories and woodburning stoves, as well as
lightweight castings for municipal markets and metal building
products.
Vestal's products are sold through a network of
independent sales agents to
hardware and building materials distributors, home centers and
mass merchandisers.
Vestal's performance to a large extent is tied to
residential construction and as
a result has been adversely affected by the recessionary level of
construction activity.
Foreign competition has also been a factor in recent years.
Vestal operates a foundry with 100,000 square feet of
building and has a presently
unused plant building of 109,000 square feet, both on 32 acres of
owned land, and a steel
fabrication plant with 124,000 square feet of building on 7 acres
of owned land, all in
Sweetwater, Tennessee. In May 1994, Vestal relocated its steel
fabrication operations
to the unused plant building adjacent to the foundry. The
relocation will result in
improved operating efficiencies and eliminate the need for major
repairs at the existing facility.
In the three years ended May 31, 1993, 1992 and 1991,
Vestal's net sales and
revenues amounted to $15.2 million, $13.8 million and $13.2
million, respectively. In
the nine month periods ended February 28, 1994 and 1993, such net
sales and revenues
amounted to $12.7 million and $11.3 million, respectively.
14. United Land
United Land owns approximately 75,000 acres of land
(including approximately 7,100
acres transferred to Jim Walter Resources in connection with the
Mirror Liquidation Plan)
and also owns approximately 150,000 acres of mineral rights,
principally in Alabama. Of
this mineral rights acreage approximately 36,000 acres were
transferred to Jim Walter
Resources in connection with the Mirror Liquidation Plan. In
addition, United Land leases
approximately 74,000 acres of mineral interests (all of which
were transferred to Jim
Walter Resources in connection with the Mirror Liquidation Plan).
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH
RESPECT TO THE DEBTORS--
Completion of Mirror Liquidation Plan" for information regarding
the Court's Mirror
Liquidation Order authorizing the completion of such Mirror
Liquidation Plan as to the
status of the Creditors of certain Debtors after completion of
such Mirror Liquidation
Plan. This description of United Land is for such company as of
the Filing Date, prior
to such transactions relating to completion of the Mirror
Liquidation Plan. Also see
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS--Businesses and Properties of the Debtors--Pipe Realty."
Jim Walter Resources, through its Mining and De-Gas
Divisions, currently operates
four deep shaft coal mines and, through a joint venture, produces
methane gas. United
Land receives royalties related to these operations, and also
receives royalties resulting
from leases to strip coal miners, other gas producers and timber
companies.
When market conditions are favorable, management expects
from time to time to sell excess real estate from the holdings of
United Land not utilized by any of the other subsidiaries of
Walter Industries.
In the three years ended May 31, 1993, 1992 and 1991,
United Land's net sales and
revenues amounted to $31.5 million, $36.2 million and $38.9
million, respectively. Of
such amounts, $19.1 million, $22.1 million and $23.3 million,
respectively, were coal
royalties from the Mining Division of Jim Walter Resources, and
$1.5 million, $1.7 million
and $1.7 million, respectively, were gas royalties from the
De-Gas Division of Jim Walter
Resources. In the nine month periods ended February 28, 1994 and
1993, such net sales
and revenues amounted to $26.4 million and $22.7 million,
respectively, including coal
royalties of $16.3 million and $13.3 million, respectively, and
gas royalties of
$1.1 million in both periods from Jim Walter Resources.
15. Walter Land
Walter Land is a land sales operation with an inventory at
May 31, 1993 of approximately 7,500 acres, primarily on the south
side of Houma, Louisiana. The bulk of the commercial development
in Houma is tied directly to service and support for offshore
oil and gas drilling, which has been in a longer term recession.
Land sales have been few and small in recent years. Presently,
the majority of Walter Land's income is derived
from rental income. Management and sale of the Louisiana
properties are handled by local personnel on a contract basis.
In the three years ended May 31, 1993, 1992 and 1991,
Walter Land's net sales and
revenues amounted to $241,000, $702,000 and $549,000,
respectively. In the nine month
periods ended February 28, 1994 and 1993, such net sales and
revenues amounted to $208,000 and $217,000 respectively.
16. Best; Best (Miss.) and JW Insurance
Best is an insurance agency consisting of three areas of
operation: (1) sells fire
and extended coverage insurance to Jim Walter Homes' homebuyers;
(2) sells personal and
commercial insurance coverage to the general public through
agency offices located in
Tampa, Florida and Sun City, Florida and (3) provides risk
management for all of Walter
Industries and its subsidiaries needs through its corporate
insurance department. Best's
corporate offices are located in the headquarters building of
Walter Industries in Tampa, Florida.
Best (Miss.) is presently a local insurance agency that
signs insurance policies sold in Mississippi.
JW Insurance, presently basically inactive, was originally
set up to sell insurance through agency offices in Birmingham,
Alabama and Sun City, Florida.
In the three years ended May 31, 1993, 1992 and 1991, net
sales and revenues for
Best and its wholly owned subsidiaries Best (Miss) and JW
Insurance amounted to
$3.4 million, $3.6 million and $3.4 million,
respectively. In the nine month periods ended February 28, 1994
and 1993, such net sales
and revenues amounted to $2.4 million and $2.5 million,
respectively.
17. Coast to Coast
Coast to Coast is a captive advertising agency that
originates and places all
advertising for Jim Walter Homes branches throughout the United
States. Coast to Coast's
operations are located in the headquarters building of Walter
Industries in Tampa, Florida.
In the three years ended May 31, 1993, 1992 and 1991,
Coast to Coast's net sales
and revenues amounted to $5.4 million, $4.3 million and $4.1
million, respectively. In
the nine month periods ended February 28, 1994 and 1993, such net
sales and revenues
amounted to $4.4 million and $3.9 million, respectively. All of
such net sales and revenues were to Jim Walter Homes.
18. Dixie
Dixie is the centralized purchasing agent of building
materials, except lumber and
other locally purchased materials, for homes constructed by Jim
Walter Homes. Dixie's
administrative offices are located in the headquarters building
of Walter Industries in Tampa, Florida.
In the three years ended May 31, 1993, 1992 and 1991,
Dixie's net sales and
revenues amounted to $12.0 million, $14.3 million and $14.2
million, respectively. In
the nine month periods ended February 28, 1994 and 1993, such net
sales and revenues
amounted to $8.4 million and $8.9 million, respectively. All of
such net sales and revenues were to Jim Walter Homes.
19. Computer Services
Computer Services is a data processing service company
rendering certain
centralized electronic data processing services, largely to
Walter Industries and its
subsidiaries. Computer Services' operations are located in the
U.S. Pipe headquarters
building in Birmingham, Alabama and the Walter Industries
headquarters building in Tampa, Florida.
In the three years ended May 31, 1993, 1992 and 1991,
Computer Services' net sales
and revenues amounted to $4.1 million, $3.7 million and $3.1
million, respectively. Of
such net sales and revenues, $3.8 million, $3.4 million and $2.8
million, respectively,
were for data processing services rendered to Walter Industries
and most of its
subsidiaries on a recovery of cost basis based on centralized
data processing service
usage by each Debtor. In the nine month periods ended February
28, 1994 and 1993, such
net sales and revenues amounted to $3.1 million in both periods.
Of such net sales and
revenues, approximately $2.8 million in both periods were for
services rendered to Walter
Industries and most of its subsidiaries on the same recovery of
cost basis.
20. Hamer Properties
Hamer Properties owns approximately 700 acres of land in
West Virginia. Hamer
Properties derives its revenues from the sale of land, but in the
three years ended
May 31, 1993, 1992 and 1991 and in the nine months ended February
28, 1994 there were no
sales. The company's operations are managed from the Walter
Industries headquarters building in Tampa, Florida.
21. Pipe Realty
Pipe Realty, a real estate investment company, owns
approximately 1,600 acres of
land located primarily in Georgia but also in Alabama, Iowa and
Washington. Pipe Realty
had no sales in the years ended May 31, 1993, 1992 and 1991 and
in the nine months ended
February 28, 1994. This land is not utilized by any of the
operating subsidiaries of Walter Industries. When market
conditions are favorable, management expects from time
to time to sell portions or all of such land.
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH
RESPECT TO THE DEBTORS--
Completion of Mirror Liquidation Plan" for information regarding
the Court's Mirror
Liquidation Order authorizing completion of the Mirror
Liquidation Plan and the status
of certain Creditors after completion of such Mirror Liquidation
Plan. This description
of Pipe Realty is for such company as of the Filing Date, prior
to such transactions
relating to completion of the Mirror Liquidation Plan. Also see
"BUSINESSES, PROPERTIES
AND OTHER INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and
Properties of the Debtors--United Land."
22. JW Walter
JW Walter owns approximately 3,800 acres of land and holds
mineral rights to
approximately 7,600 acres, primarily in West Virginia, but also
in Virginia. JW Walter
derives its revenues from coal, oil and gas and timber royalty
income. Land sales have
also contributed to revenues, but in the three years ended May
31, 1993, 1992 and 1991
and in the nine months ended February 28, 1994 there were no
sales. The company's
operations are managed from the Walter Industries headquarters
building in Tampa, Florida.
JW Walter had net sales and revenues in the years ended
May 31, 1993, 1992 and 1991
of $25,000, $158,000 and $79,000, respectively. In the nine
month periods ended
February 28, 1994 and 1993, such net sales and revenues amounted
to $20,000 and $19,000, respectively.
23. Holding Companies
a. Computer Holdings
b. Hamer Holdings
c. Homes Holdings
d. Mid-State Holdings
e. Resources Holdings
f. JW Resources
g. JWI Holdings
h. Land Holdings
i. Railroad Holdings
All of the above are holding companies and none were
engaged in any business other
than through subsidiaries as of the Filing Date. Based on their
status as of the Filing
Date, none of such holding companies had any net sales and
revenues since their inception.
As to Homes Holdings, Mid-State Holdings, Resources
Holdings and JW Resources, see
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS--Completion of
Mirror Liquidation Plan" for information regarding the Court's
Mirror Liquidation Order
authorizing the completion of such Mirror Liquidation Plan as to
the status of Creditors
of such Debtors after completion of such Mirror Liquidation Plan.
24. Non-Debtor Affiliates
a. Cardem
Cardem is a Hamilton, Bermuda based offshore reinsurance
company. The predominant
part of its business is reinsuring 75% of the risk on fire and
extended coverage insurance
policies issued by Westchester Fire Insurance Company, an
unrelated insurance company.
Such insurance policies are with individual owners of homes
constructed by Jim Walter
Homes. Such policies were placed by Best and, at May 31, 1993,
represented approximately
52% of the number of homes for which the mortgage notes thereon
were owned and/or serviced by Mid-State Homes.
In the years ended May 31, 1993, 1992, and 1991, Cardem's
net sales and revenues
amounted to $14.1 million, $13.4 million and $12.7 million,
respectively. In the nine
month periods ended February 28, 1994 and 1993, such net sales
and revenues amounted to $9.6 million and $10.4 million,
respectively.
b. J.W. Railroad
J.W. Railroad is an Interstate Commerce Commission
approved shortline railroad
headquartered at the Sloss operations in Birmingham, Alabama.
Its revenues are from car
switching fees, transloading services and trackage fees on its
some 15 miles of railroad
track near Birmingham, Alabama.
In the years ended May 31, 1993, 1992 and 1991, J.W.
Railroad's net sales and
revenues amounted to $3.2 million, $3.0 million and $2.6 million,
respectively, of which
$800,000, $800,000 and $700,000, respectively in each of the
three years were to Sloss
and U.S. Pipe. In the nine month periods ended February 28, 1994
and 1993, such net sales
and revenues amounted to $2.2 million and $2.4 million,
respectively, including $500,000
and $600,000, respectively, to Sloss and U.S. Pipe.
c. Mid-State Trust II and Mid-State Trust III
Mid-State Trust II and Mid-State Trust III are business
trusts organized by
Mid-State Homes, which owns all of the beneficial interests in
Mid-State Trust II and Mid-State Trust III.
In April 1988, Mid-State Trust II issued $1,450,000,000
face amount of debt to the
public backed by installment notes and mortgages having an
aggregate Economic Balance of
approximately $1,750,000,000 sold to such Mid-State Trust II by
Mid-State Homes for a
purchase price of $1,326,665,600, the net cash proceeds of such
public debt offering.
Mid-State Homes is servicer, and Jim Walter Homes is subservicer,
for such notes and
mortgages. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION
WITH RESPECT TO THE DEBTORS-
- -Financing Efforts--Sale of Installment Notes--Mid-State Homes"
and "--Corporate Reorganizations and Asset
Dispositions--Completed Transactions--Mid-State Homes."
On July 1, 1992, pursuant to approval by the Court,
installment notes and mortgages
having a gross amount of $638,078,000 and an Economic Balance of
$296,160,000 were sold
by Mid-State Homes to Mid-State Trust III in exchange for the net
proceeds from the public
issuance of $249,864,000 of Asset Backed Notes. Mid-State Homes
is the servicer for such
notes and mortgages. See "BUSINESSES, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO
THE DEBTORS--Financing Efforts--Sale of Installment
Notes--Mid-State Homes" and "--
Completed Transactions--Corporate Reorganizations and Asset
Dispositions--Completed Transactions--Mid-State Homes."
Mid-State Trust II's and Mid-State Trust III's revenues
are required by generally
accepted accounting principles to be consolidated as part of
Mid-State Homes' revenues
for financial statement purposes. In the years ended May 31,
1993, 1992 and 1991,
Mid-State Trust II's revenues amounted to $161.8 million, $160.3
million and $160.1
million, respectively. In the year ended May 31, 1993, Mid-State
Trust III's revenues
were $23.2 million. In the nine month periods ended February 28,
1994 and 1993, Mid-State
Trust II's revenues amounted to $122.8 million and $120.3
million, respectively, and
Mid-State Trust III's revenues amounted to $20.4 million and
$16.6 million, respectively.
d. Black Warrior Methane
Black Warrior Methane is a corporation 50% owned by the
De-Gas Division of Jim
Walter Resources and 50% owned by Sonat. Black Warrior Methane
manages the operational
activities of the De-Gas Division and those of such division's
50% joint venturer, Sonat.
See "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO
THE DEBTORS--Businesses
and Properties of the Debtors--Jim Walter Resources--De-Gas
Division."
e. Black Warrior Transmission
Black Warrior Transmission is a corporation 50% owned by
the De-Gas Division of Jim
Walter Resources and 50% owned by Sonat. Black Warrior
Transmission operates a 20 mile
pipeline transporting the gas produced from the production area
to the pipeline of SNG,
the sole customer for such gas. See "BUSINESSES, PROPERTIES AND
OTHER INFORMATION WITH
RESPECT TO THE DEBTORS--Businesses and Properties of the
Debtors--Jim Walter Resources--De-Gas Division."
F. Employees
As of May 31, 1993, the Debtors employed 7,522 people, of
whom 4,518 were hourly
workers and 3,004 were salaried employees. A total of 4,107
employees were represented
by unions under collective bargaining agreements, of which 1,575
were covered by one
contract with the UMWA which currently expires on August 1, 1998.
See "BUSINESSES,
PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS--Labor Agreements." The
Debtors state in the Debtors' Disclosure Statement that each of
the Debtors considers its
relations with its employees to be satisfactory. A breakdown of
the hourly and salaried
employees employed by each of the Debtors is as follows:
Hourly Salaried Total
Hillsborough
Walter Industries -- 108 108
Jim Walter Homes -- 1,059 1,059
Home Improvement -- 23 23
Mid-State Homes -- 63 63
Jim Walter Resources 1,575 533 2,108
U.S. Pipe 1,864 758 2,622
Sloss 260 169 429
JW Aluminum 231 78 309
Window Components 322 63 385
Window Components (Wisc.) 55 1 56
Southern Precision 61 17 78
Vestal 150 42 192
United Land -- 7 7
Walter Land -- -- --
Best -- 33 33
Best (Miss.) -- -- --
JW Insurance -- -- --
Coast to Coast -- 11 11
Dixie -- 8 8
Computer Services -- 31 31
Hamer Properties -- -- --
Pipe Realty -- -- --
JW Walter -- -- --
Computer Holdings -- -- --
Hamer Holdings -- -- --
Homes Holdings -- -- --
Mid-State Holdings -- -- --
Resources Holdings -- -- --
JW Resources -- -- --
JWI Holdings -- -- --
Land Holdings -- -- --
Railroad Holdings -- -- --
Totals 4,518 3,004 7,522
G. Seasonality
Certain of the businesses of the Debtors (largely U.S.
Pipe, Jim Walter Homes,
Window Components and Vestal) are subject to seasonal variations
to varying degrees. The
businesses are more significantly influenced by the general
economy.
H. Trade Names, Trademarks and Patents
The names of each of the Debtors are well established in
the respective markets served by them, and the Debtors state in
the Debtors' Disclosure Statement that management
believes that the reputation of such trade names is of some
importance. The Debtors have numerous patents and trademarks.
Management does not believe, however, that any one such
patent or trademark is of material importance.
I. Research and Development
Research activities are conducted separately by each
Debtor and are directed toward
new products, processes, improvement of existing products,
development of new uses for
existing products and cost reduction efforts. Total research and
development expenditures
in each of the last three fiscal years were less than 1% of net
sales and revenues.
J. Raw Materials
Substantially all of the raw materials needed for the
operations of the Debtors are
either produced by or are purchased from domestic sources. All
materials used by the
various businesses of the Debtors are readily available in the
quantities necessary to support their respective operations.
K. Labor Agreements
Subsidiaries of Walter Industries have the following labor
agreements in force.
1. Jim Walter Resources
<TABLE>
<CAPTION>
Number of
Employees as
Company/Location/Union Effective Exploration of 5/31/93
<S> <C> <C> <C>
UMWA
Mine No. 3 12/16/93 8/1/98 411
Mine No. 4 12/16/93 8/1/98 430
Mine No. 5 12/16/93 8/1/98 271
Mine No. 7 12/16/93 8/1/98 380
Central Shop/Supply 12/16/93 8/1/98 83
</TABLE>
An interim agreement has been reached between the
Independent Bituminous Coal Bargaining Alliance ("IBCBA"), formed
in 1992, of which Jim Walter Resources is a member,
and the UMWA. The agreement contains all terms and conditions of
the National Bituminous Coal Wage Agreement of 1993, except for
certain modifications in the employment security
and health care provisions to union members and an added emphasis
on labor/management cooperation. The agreement is for the period
from December 16, 1993 to August 1, 1998.
The agreement can be reopened by the UMWA in September 1996 and
1997 for wages and
pensions and may also be reopened by either Jim Walter Resources
or the UMWA for
negotiating changes in the health care bonus and annual
deductible provisions of the health plan.
2. U.S. Pipe
<TABLE>
<CAPTION>
Number of
Employees as
Company/Location/Union Effective Exploration of 5/31/93
<S> <C> <C> <C>
International Union of Operating Engineers
Union City, CA--Local 39 6/29/92 12/31/95 154
United Steel Workers of America
Burlington, NJ--Local 2026 12/21/92 3/16/96 235
Chattanooga, TN--Local 3508 2/8/93 4/27/96 401
Bessemer, AL--Local 2140 3/16/92 10/31/95 241
Office and Professional Employees
International Union
Chattanooga, TN--Local 179 2/8/93 4/27/96 20
International Association of Machinist
and Aerospace Workers
Chattanooga, TN--Lodge 56 2/8/93 4/27/96 157
Anniston, AL--Lodge 291 11/24/91 12/3/94 42
Bessemer, AL--Lodge 359 3/2/92 10/31/95 110
International Brotherhood of Electrical
Workers
Chattanooga, TN--Local 175 2/8/93 4/27/96 24
Bessemer, AL--Local 136 3/16/92 10/31/95 12
Patternmakers League of North America
Chattanooga, TN-- 2/8/93 4/27/96 12
International Brotherhood of Boilermakers,
Iron Ship Builders, Blacksmiths,
Forgers and Helpers
Bessemer, AL--Lodge 583 3/16/92 10/31/95 6
The Glass Molders, Pottery, Plastics and
Allied Workers, International
No. Birmingham, AL--Local 256 1/30/93 1/28/96 290
Anniston, AL--Local 324B 12/8/91 12/3/94 180
3. Sloss
United Steelworkers of America
Birmingham, AL--Local 12014 3/17/91 12/5/94 260
4. Window Component
Laborers International Union of North America
Sioux Falls, SD--No. 427 11/1/93 10/31/96 127
5. Vestal
United Steelworkers of America
Sweetwater, TN--Local 6638 1/22/94 1/17/97 150
6. Southern Precision
United Automobile Aerospace & Agricultural
Implement Workers
Irondale, AL--Local 2281 11/22/93 11/21/96 61
</TABLE>
L. Pension Plans
The Debtors have various pension plans covering
substantially all employees not
separately covered by the profit sharing plan discussed in the
following subsection. In
addition to the Debtors' own pension plans, contributions are
made to certain
multi-employer plans. The funding of retirement and employee
benefit plans is in
accordance with the requirements of the plans and, where
applicable, in sufficient amounts
to satisfy the "Minimum Funding Standards" of the Employee
Retirement Income Security Act
of 1974 ("ERISA"). The plans provide benefits based on years of
service and compensation,
or at stated amounts for each year of service. As to the funding
status of such pension
plans, see Note 12 contained in Walter Industries' Consolidated
Financial Statements for
the year ended May 31, 1993 annexed hereto as Exhibit X.A.1.
Under the labor contract with the United Mine Workers of
America, Jim Walter
Resources makes payments into multi-employer pension plan trusts
established for union
employees. Under ERISA, as amended by the Multiemployer Pension
Plan Amendments Act of
1980, an employer is liable for a proportionate part of the
plans' unfunded vested
liabilities. The Debtors state in the Debtors' Disclosure
Statement that Jim Walter
Resources estimates that its allocated portion of the unfunded
vested liabilities of these
plans amounted to approximately $24.0 million at May 31, 1993.
However, although the net
liability can be estimated, its components, the relative position
of each employer with
respect to actuarial present value of accumulated benefits and
net assets available for
benefits, are not available to Jim Walter Resources.
The pension plan for Salaried Employees of Walter
Industries, Subsidiaries, and
Affiliates, the Pension Plan previously maintained by Original
Jim Walter, is a defined
benefit pension plan covering all salaried employees of all the
Debtors not covered by
the Profit Sharing Plan discussed in the following subsection.
The Pension Plan is funded
by a method which produces annual contribution requirements in
the aggregate, and,
therefore, contributions for individual participants are not
determinable. Aggregate
accrued contributions to the Pension Plan in the fiscal year
ended May 31, 1993 (for the
plan year ended December 31, 1992) amounted to $4,012,001, which
was approximately 5.64% of total covered remuneration.
The Debtors have established and maintained at least 23
single-employer pension
plans (collectively, the "Pension Plans") to provide retirement
benefits for certain of their employees.
The Pension Plans are covered by Title IV of the Employee
Retirement Income
Security Act of 1974, as amended ("ERISA"), 29 U.S.C. Secs.
1301-1461. Walter Industries,
Inc. is the plan administrator of the Pension Plans.
The Pension Benefit Guaranty Corporation ("PBGC") has
stated that the Pension Plans
are not executory contracts that the Debtors may assume or reject
and that the Pension
Plans can be terminated only if the requirements of either 29
U.S.C. sec. 1341 or 29 U.S.C. sec. 1342 are met.
Under the Creditors' Plan, the Proponents intend that the
reorganized Debtors will
continue the Pension Plans, but the Debtors reserve the right to
terminate any Pension
Plan after the Effective Date in accordance with the applicable
plan documents and applicable law.
The Proponents understand that the Debtors are (and so
long as they remain in the
control group will be, after the Effective Date, for all Pension
Plans that have not been
terminated prior to the Effective Date) jointly and severally
liable to contribute to the
Pension Plans at least the amounts necessary to satisfy ERISA's
minimum funding standards,
29 U.S.C. sec. 1082; 26 U.S.C. sec. 412, and, in addition, that
the Debtors may be
contractually liable to contribute to the Pension Plans. The
contributing sponsor of a
pension plan and all members of the contributing sponsor's
controlled group, as such term
is defined under ERISA, are jointly and severally liable for the
unfunded benefit
liabilities of a pension plan under 29 U.S.C. sec. 1362(a).
Certain trades or businesses that at present may be under
common control with the
Debtors under ERISA may not remain under such common control
after the Effective Date of
the Creditors' Plan. As a result, such trades or businesses, if
any, may not be jointly
and severally liable with the Debtors after the Effective Date
for payment of minimum
funding obligations and premiums due PBGC with respect to the
Pension Plans, and, with
respect to Pension Plans terminated, if any, after the Creditors'
Plan's Effective Date, unfunded benefit liabilities.
The Proponents understand that the Debtors' liability
under 29 U.S.C. sec. 1362,
if any, in the event of a Pension Plan termination, shall not be
affected in any way by
these reorganization proceedings, including by discharge, except
with respect to Pension
Plans, if any, that are terminated prior to the confirmation of a
plan of reorganization
for the Debtors. The Proponents further understand that such
termination of the Pension Plans is not anticipated to occur.
It is the Proponents' intention that PBGC shall not be
precluded by Confirmation
of the Creditors' Plan from commencing any action, or from taking
any other action
permitted under ERISA, to collect or recover any claims under 29
U.S.C. sec. 1362 from
the reorganized Debtors, their successors or assigns, or their
assets or properties with
respect to any Pension Plans not terminated before Confirmation
of the Creditors' Plan.
The Proponents also intend to use their best efforts to
have included in the
Confirmation Order language to the effect that (1) as of the
Effective Date the Debtors
will have no debt to PBGC under 29 U.S.C. sec. 1362 with respect
to any Pension Plan that
is not terminated by the Confirmation Date; and (2) accordingly,
any liability of the
Debtors under 29 U.S.C. sec. 1362 shall not be discharged or
otherwise affected by
Confirmation of the Creditors' Plan with respect to any Pension
Plan that has not been
terminated prior to Confirmation of the Creditors' Plan.
For a detailed explanation of the Pension Plan, see
"POST-CONSUMMATION --Management -- Executive Compensation --
Officers -- Pension Plan."
M. Profit Sharing Plan
Since 1958, Original Jim Walter had a Profit Sharing Plan
providing retirement
benefits for salaried employees of Original Jim Walter and
certain of its subsidiaries,
including Jim Walter Homes, Mid-State Homes, Best, Dixie and
Coast to Coast, the Original
Jim Walter Plan. Under the Original Jim Walter Plan, the lesser
of (a) 15% of the
aggregate compensation, as defined in such plan (but excluding
incentive compensation
payments) paid to all participants during the particular fiscal
year (subject to the
maximum amount permitted under the IRC) or (b) 25% of Original
Jim Walter's net profits,
as defined in such plan, for the year, before Federal income
taxes, were set aside each
year to be held in trust for participants in proportion to their
compensation, as defined
in such plan, for that year. After the Merger, Walter Industries
and the same
subsidiaries mentioned above plus a new subsidiary, Home
Improvement, adopted and have
continued such plan (now known as the Walter Industries Plan),
except that contributions
to the Walter Industries Plan are computed at a rate of 15% of
the aggregate compensation
(excluding incentive compensation), as defined, paid to all
participants during the plan
fiscal year ending August 31, without any limitation as to
required net profits. For the
years ended May 31, 1993, 1992 and 1991, aggregate contributions
by the applicable Debtors
to such Walter Industries Plan were $3.0 million, $2.7 million
and $2.5 million,
respectively. See "POST-CONSUMMATION -- Management -- Executive
Compensation -- Officers -- Profit Sharing Plan."
N. Other Employee Benefit Plans
Union employees have varying benefits based on their
negotiated contracts. Salaried employees of all of the Debtors,
with some variations for certain of the Debtors,
are covered by the following plans or policies.
1. Group Medical Plans
All salaried employees of all of the Debtors are under a
single plan. Hourly unit plans vary in plan design. Certain of
the Debtors offer participation in "Health
Maintenance Organizations" where they are available.
2. Life Insurance
The Debtors give salaried employees life insurance
coverage for approximately one
times annual salary on a company-paid basis, and optional
contributory coverage totaling
up to three times annual salary. Union hourly employees'
coverage varies by location and
union contract on a set amount basis.
3. Long-Term Disability
All salaried employees are covered for long-term
disability for up to 60% of
salary, with a maximum payout of $4,000 per month.
4. Temporary Disability
Hourly employees are covered by this benefit under various
formulas. Benefits paid vary by location and are paid for
periods of as little as thirteen (13) weeks to as much
as twenty-six (26) weeks.
5. Retiree Medical Insurance
Certain salaried and hourly retirees who meet the
eligibility criteria are eligible
for retiree medical insurance coverage. The Debtors and
Non-Debtor Affiliates adopted
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for
Postretirement Benefits Other Than Pensions" in the fourth
quarter of the fiscal year
ended May 31, 1993. Upon adoption, the Debtors and Non-Debtor
Affiliates elected to
record the transition obligation of $166.4 million pre-tax
($104.6 million after tax) as
a one-time charge against earnings rather than amortize it over a
longer period. The
annual accrual under the new accounting method amounts to $23.5
million before taxes in
the year ended May 31, 1993. If fiscal year 1993 expense had
been determined under the
cash method used previously, the amount recognized would have
been $2.7 million before
taxes. Adoption of this new standard has no impact on cash flow.
6. Paid Vacations
Salaried employees receive one to four weeks vacation,
depending on service. Union
hourly employees' vacations vary by location and contract.
7. Paid Holidays
The number of paid holidays for salaried employees varies
by location. The average
is ten (10) days per year. Union hourly employees' paid holidays
vary by location and contract.
8. Severance Pay
Severance pay for salaried employees who are released is
paid depending on certain
eligibility criteria. The amount depends on length of service.
The minimum is one week
and the maximum is six months. Certain of the union contracts
have payments, or
continuing benefits such as medical coverage, for severed
employees.
9. Employee Educational Assistance Program
Salaried personnel can obtain reimbursement of the cost of
books and tuition for
certain eligible employees for job-related continuing education.
O. Completion of Mirror Liquidation Plan
1. General
Subsequent to its acquisition of Original Jim Walter by
the Merger on January 7,
1988, Hillsborough undertook a program of corporate
reorganizations and asset dispositions
pursuant to which Hillsborough, prior to the Filing Date,
restructured and/or disposed
of certain of the businesses of Original Jim Walter. Included as
part of this program
were the complete liquidations of Old Walter Industries and
certain of its subsidiaries
pursuant to Section 332 of the IRC, as set forth in plans of
complete liquidation adopted
by their respective stockholders. Charts of the Debtors'
corporate structure on the
Filing Date and after completion of the Mirror Liquidation Plan
are annexed hereto as Exhibits VIII and IX, respectively.
Although significant strides were taken prior to the
Filing Date to complete the
Mirror Liquidation Plan, the commencement of the Reorganization
Proceedings required the
Debtors to temporarily delay the completion of such Creditors'
Plan. The Mirror
Liquidation Plan had to be completed by May 31, 1991 or
Hillsborough, Old Walter
Industries and the other Debtors would have incurred substantial
tax liabilities and
interest for prior periods and would have been subject to
substantial tax liabilities on future sales of subsidiaries.
Therefore, on July 5, 1990, the Debtors filed a motion
with the Court for an order
authorizing the Debtors to complete the Mirror Liquidation Plan.
After Court hearings
on such motion on September 5, 1990 and October 9, 1990, the
Court issued the Mirror
Liquidation Order authorizing completion of the Mirror
Liquidation Plan, subject to
certain restrictions described below. The Mirror Liquidation
Order is attached hereto
as Exhibit III to which reference should be made as to the status
of Creditors of certain Debtors.
In order to complete the Mirror Liquidation Plan, the
following actions, as more
fully discussed below, were taken on or prior to April 1, 1991:
(1) completion of the Pipe Liquidation Plan;
(2) completion of the Resources Liquidation Plan;
(3) distribution by Old Walter Industries of the
capital stock of Jim Walter Homes to Homes Holdings;
(4) distribution by Old Walter Industries of the
capital stock of Mid-State Homes to Mid-State Holdings; and
(5) merger of Old Walter Industries into
Hillsborough.
2. Completion of the Pipe Liquidation Plan
To complete the Pipe Liquidation Plan, United Land
Corporation (which prior to May
1988 was named United States Pipe and Foundry Company) was merged
into Old Walter Industries in March 1991.
Immediately after the foregoing merger, Old Walter
Industries:
(1) transferred to the United Land Division of
Resources Holdings certain land and all mineral rights interests,
and the liabilities associated therewith, previously owned by
United Land and used in the mining and degasification
businesses operated by Jim Walter Resources, in redemption
and cancellation of a portion of the capital stock of Old Walter
Industries held by Resources Holdings;
(2) transferred to the United Land Division of Pipe
Realty all land and mineral rights interests, and the liabilities
associated therewith, previously owned by United Land and not
used in the mining and degasification businesses
operated by Jim Walter Resources, in redemption and
cancellation of all the capital stock of Old Walter Industries
held by Pipe Realty. Pipe Realty then changed its
name to "United Land Corporation;" and
(3) in connection with the transfer of the land and
mineral rights interests leased by United Land from third
parties, as well as certain other executory contracts, United
Land, as authorized by Court orders, pursuant to Section 365
of the Code, assumed and assigned such leases and other
executory contracts to Old Walter Industries which immediately
assigned such leases and executory contracts
to either the United Land Division of Pipe Realty (United
Land Corporation) or the United Land Division of Jim Walter
Resources, as applicable, which divisions assumed such leases and
executory contracts.
3. Completion of the Resources Liquidation Plan
To complete the Resources Liquidation Plan, Jim Walter
Resources was merged into Old Walter Industries in March 1991.
Immediately after the foregoing merger, Old Walter
Industries:
(1) conveyed all of the assets owned by Jim Walter
Resources immediately prior to the merger, together with all
liabilities of Jim Walter Resources to the Resources Division of
Resources Holdings in redemption and cancellation of all of
the capital stock of Old Walter Industries held by
Resources Holdings;
(2) to the extent that the assets received by Old
Walter Industries in the merger and then transferred to the
Resources Division of Resources Holdings constituted leases and
executory contracts, Jim Walter Resources, as authorized by
Court order, assumed and assigned such leases and
executory contracts to Old Walter Industries which immediately
assigned them to the Resources Division of Resources
Holdings; and
(3) upon completion of the Pipe Liquidation Plan
and the Resources Liquidation Plan, Resources Holdings
immediately merged into JW Resources which
changed its name to "Jim Walter Resources, Inc."
4. Distribution of the Capital Stock of Jim Walter Homes
On April 1, 1991, as a further required step in the Mirror
Liquidation Plan, Old
Walter Industries distributed the capital stock of Jim Walter
Homes to Homes Holdings in
redemption and cancellation of all of the outstanding capital
stock of Old Walter Industries held by Homes Holdings
Corporation.
5. Distribution of the Capital Stock of Mid-State Homes
On April 1, 1991, as a further required step in the Mirror
Liquidation Plan, Old
Walter Industries distributed all of the outstanding shares of
the capital stock of
Mid-State Homes to Mid-State Holdings in redemption and
cancellation of all of the
outstanding shares of capital stock of Old Walter Industries held
by Mid-State Holdings.
6. Merger of Old Walter Industries into Hillsborough
After all of the steps noted above were taken, in order to
complete the Mirror
Liquidation Plan, Old Walter Industries merged into Hillsborough
on April 1, 1991, as a
result of which Hillsborough acquired the remaining assets of Old
Walter Industries, as
its Walter Industries Division. Such assets consisted primarily
of the stock of certain
operating subsidiaries (consisting of Coast to Coast, Dixie, Best
and Cardem (a non-Debtor)), certain real and personal property,
intercompany receivables and all other
assets of Old Walter Industries together with all of its
liabilities. Hillsborough then
immediately changed its name to "Walter Industries, Inc."
7. Status of Creditors of Certain Debtors
The Mirror Liquidation Order authorizing completion of the
Mirror Liquidation Plan
contained certain restrictions so as to protect the rights of
creditors of certain Debtors
by treating such creditors and Debtors as if the Mirror
Liquidation Plan steps discussed
above had not taken place. Reference should be made to Exhibit
III hereto as to such restrictions.
8. Summary of Mirror Liquidation Order
a. The rights, Liens, if any, Claims and priority of all
interested parties of the
Debtors, including, but not limited to, Hillsborough, Old Walter
Industries, Jim Walter
Resources, Resources Holdings, JW Resources, United Land, Pipe
Realty, Jim Walter Homes,
and Mid-State Homes, are, with respect to the determination of
distributions under a
liquidation or a plan or plans of reorganization (or any other
distributions or matters
in these Chapter 11 Cases), to be determined without regard to
actions taken to complete
the Mirror Liquidation Plan. Without limitation of the
foregoing, in the case of a Debtor
which ceased to be a separate corporation as a result of a merger
effected pursuant to
the Mirror Liquidation Order, the value of a Claim against such
Debtor or of a Lien
against the stock of such Debtor or an intercompany note between
the Debtor and an entity
with which it merged (and the rights of the Holder of such Claim
or Lien) is to be
determined (a) in the case of a Claim, as if that Claim had
survived in the form of a
Claim (in addition to any other Claim which may be held by such
Holder) against the
division or divisions into which the assets and liabilities of
such Debtor were ultimately
transferred, (b) in the case of a Lien against an intercompany
note, as if such Lien had
survived against a Claim of like kind and amount against the
obligor under such note and
(c) in the case of a Lien against stock, as if such Lien had
survived against the equity
value of such division or divisions.
b. The Clerk of the Court has continued to maintain a
separate case file and a
separate Claims register for each of the Debtors without regard
to actions taken to
complete the Mirror Liquidation Plan.
c. The actions taken to complete the Mirror Liquidation
Plan are not to be deemed
to substantively consolidate the Chapter 11 Cases.
P. Risk Factors Relating to Businesses of the Debtors
1. General
The Debtors' businesses are affected by general economic
or other factors outside
their control. See "BUSINESSES, PROPERTIES AND OTHER INFORMATION
WITH RESPECT TO THE
DEBTORS--Businesses and Properties of the Debtors" and Exhibits
X.A.1. and X.A.2.
2. Major Debtors
a. U.S. Pipe
The sales of U.S. Pipe are dependent to some extent upon
the rate of residential
and non-residential building construction and other forms of
construction activity, and
are thus subject to certain economic factors such as general
economic conditions, the
underlying need for construction projects, interest rates and
governmental incentives
provided to construction projects. The cyclical nature of U.S.
Pipe's business is offset
to some extent by U.S. Pipe's sales to the replacement market.
The replacement market
generally fluctuates less than the rate of new construction and
therefore tends to have
a stabilizing influence during a period of depressed construction
activity.
b. Jim Walter Homes
Jim Walter Homes is also sensitive to certain general
economic and other factors.
Its business has tended to be counter-cyclical to national home
construction activity.
In times of high interest rates or lack of availability of
mortgage funds, and thus
limited new home construction, Jim Walter Homes' volume of home
sales tends to increase
due to the terms of the financing it offers. However, in times
of low interest rates and
increased availability of mortgage funds, Jim Walter Homes'
volume of home sales tends
to decrease.
c. Jim Walter Resources
A majority of Jim Walter Resources' sales are made
pursuant to long-term contracts,
which tend to stabilize the results of its operations. The coal
market currently has
excess capacity and coal prices in foreign markets have declined.
Metallurgical coal
prices have fallen as world economic activity and steel
production have weakened.
Expanded use of pulverized coal injection in the steel-making
process will negatively
impact the demand for coking coals. However, the Clean Air Act
of 1990 is expected to
have a favorable impact on prices of low sulfur steam coal such
as Jim Walter Resources
produces. On May 10, 1994, Jim Walter Resources and Alabama
Power signed a new agreement
for the purchase and sale of coal replacing the 1979 coal
purchase contract as amended,
and reached tentative new one-year agreements with some of the
Japanese steel mills. See
"BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO THE
DEBTORS--Litigation--Lawsuits Relating to Jim Walter Resources."
The Mining Division's financial results for the nine
months ended February 28, 1994
were considerably below 1994 projections and the prior year
period due to adverse
geological conditions which lowered productivity rates and
increased the cost per ton of
coal produced and spontaneous combustion heatings in a section of
Mine No. 5 which shut
down the mine from November 17, 1993 through December 16, 1993.
In early April 1994, the
spontaneous heatings recurred at Mine No. 5 and such mine is
currently shut down. Jim
Walter Resources, MSHA, Alabama State Mine Inspectors and the
UMWA have agreed that the
longwall coal panel being mined at the time the spontaneous
heatings recurred will be
abandoned and sealed off. Development mining for the two
remaining longwall coal panels
in this section of the mine will resume in the near future and
the first panel will be
ready for mining approximately January 1, 1995. Production will
be adversely impacted
during the period June 1, 1994 to January 1, 1995; however, a
portion of the costs will
be recovered from business interruption insurance. The Mining
Division will not achieve its 1994 earnings or cash flow
projections.
d. Vestal
Vestal's sales are sensitive to the single family housing
market.
e. Window Components
The sales of Window Components are also sensitive to
certain general economic and
other factors. Its business also tends to be cyclical with the
national home construction
market. However, Window Components' management recognized the
overall reduction of demand
for new home construction several years ago and began introducing
new products to make Window Components more competitive.
f. JW Aluminum
JW Aluminum's sales tend to fluctuate with the general
aluminum market, with its
building products oriented sheet sales generally following
construction activity. To
offset the effects of the fluctuations of the aluminum market and
construction activity,
JW Aluminum's management began introducing new products aimed at
industrial markets, which
should reduce the swing in profit margins caused by the changing
aluminum market.
g. Southern Precision
The sales of Southern Precision are dependent on the
foundry industry.
Historically, most major pattern tooling programs are initiated
during downturns in
foundry production as major foundries attempt to alter existing
pattern equipment or introduce new pattern equipment.
h. Sloss
Coke products are sold to the steel and foundry
industries. Furnace coke, sold
primarily to one steel producer under contract until 1996, is
subject to pricing
fluctuations affected by the domestic steel industry and the
availability of furnace coke
from domestic and foreign providers. Foundry coke is sold
primarily to U.S. Pipe (see
2. (a) above). Sloss's specialty chemicals are sold to a
variety of customers in the
foundry, plasticizer, pharmaceutical and other industries, which
provides a degree of
stability to this segment of Sloss's business. Demand and
pricing for the mineral wool
segment are affected by the levels of commercial and residential
construction. Mineral
wool is sold primarily to one customer for use in producing
acoustical ceiling tile products.
Q. Workers' Compensation
For a number of years prior to the Filing Date, several of
the Debtors were
self-insured with respect to workers' compensation claims in
several states. As a
condition to self-insured status, each such Debtor was required
to post cash bonds with
various state agencies. In a number of those states, the
applicable Debtor ceased its
self insurance status and obtained insurance prior to the Filing
Date. Certain of the
Debtors (primarily U.S. Pipe) remain self-insured in the states
of Alabama, California,
Tennessee and New Jersey, and, pursuant to Court order, have
continued to pay all Claims,
including pre-Filing Date Claims with respect thereto. In
certain states, Creditors have
filed Claims against bonds posted as a condition of being
self-insured. The Court has
entered orders staying any actions to proceed against such bonds
until confirmation of the Creditors' Plan.
R. Tort Claims Resolution Procedure
All pre-Filing Date personal injury and wrongful death
Claims were stayed in all
forums when the Chapter 11 Cases were commenced. The Code
precludes the Court from
determining the Allowed Amount (as defined in the Creditors'
Plan) of such unliquidated
Claims. On August 12, 1992, the Court entered an order
authorizing the establishment of
a procedure for resolving tort Claims exclusive of
asbestos-related claims (the "Claims
Resolution Procedure"). The essential elements of the Claims
Resolution Procedure are as follows:
a. Unless already filed, all Holders of personal
injury and wrongful death Claims were required to file proofs of
claim on or before October 30, 1992.
b. The insurer and the Holders of such tort Claims
had ninety (90) days subsequent to October 30, 1992, to negotiate
a settlement, subject to approval of the Court.
c. If the Claim is settled, the insurer shall pay
the agreed amount to the extent covered by insurance.
d. If the Claim is not settled, the Claim shall be
referred to a Court-appointed mediator.
e. If the mediation fails to produce a settlement,
the Automatic Stay will be modified to permit the liquidation of
the Claim in the designated forum.
f. The Claims Resolution Procedure shall not apply
to the current and future plaintiffs in the Lone Star Steel toxic
litigation pending in the United States District Court in Norris
County, Texas (the "Lone Star Steel Toxic Case").
(The Lone Star Steel Toxic Case involves approximately
2,750 plaintiffs and 370 defendants. Jim Walter Resources is a
defendant in said litigation for which the Travelers Companies
issued policies that may or may not indemnify Jim Walter
Resources in such case.)
g. By order of the Court dated March 3, 1993, the
Court extended the time period for the insurer and the Holder of
a tort Claim to negotiate a settlement for an additional ninety
(90) days from January 31, 1993 to April 30, 1993.
h. A mediator was appointed by the Court on May 6,
1993.
S. Litigation
Pursuant to the Automatic Stay, all pending litigation
against the Debtor
defendants was automatically stayed. Described below is the
status of certain material litigation involving the Debtors.
1. U.S. Pipe Antitrust Lawsuits
A civil antitrust-related lawsuit was commenced on
February 1, 1989 in the United
States District Court in Atlanta, Georgia, against U.S. Pipe,
together with another
company in the ductile iron pipe industry. The suit related to
alleged bid-rigging in
connection with the process by which contracts were awarded for
the sale of ductile iron
pipe to the City of Atlanta. The plaintiff in that action, the
City of Atlanta, sought
treble damages for alleged antitrust violations and violations
under the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), as well as
disgorgement of monies paid
to defendants as to the alleged violations of Georgia common law.
U.S. Pipe vigorously
defended the suit. The lawsuit was settled with Court approval
by order dated April 17, 1992.
A private civil antitrust-related lawsuit was commenced in
June 1987 in the United
States District Court in Lincoln, Nebraska against U.S. Pipe,
together with another
company in the ductile iron pipe industry. The suit alleges a
variety of antitrust
claims, including tie-ins, market allocation, and monopolization
of the ductile iron pipe
market. The plaintiff in that action, Midwest Pipe Fabricators,
Inc. ("Midwest"), sought
treble damages for alleged antitrust violations and violations
under RICo. This suit was
settled pursuant to a Court order entered on November 18, 1993.
2. Texas Lawsuits Relating to Property of Jim Walter Homes and
Mid-State Homes
On May 6, 1991, a civil action was filed on behalf of
numerous plaintiffs in the
Texas District Court of Jim Wells County against certain
non-Debtor defendants (the
"Delgado Lawsuit"). The plaintiffs in the Delgado Lawsuit (the
"Delgado Plaintiffs"),
115 people who contracted to have homes built for them by Jim
Walter Homes, sought damages
for alleged violations of the Texas Consumer Credit Code ("Credit
Code") and the Texas
Deceptive Trade Practices Act ("DTPA"), as well as injunctive
relief to prevent the
defendants from foreclosing on the homes, invalidation of liens,
forfeiture of the
principal amount of indebtedness, and the recovery of actual and
punitive damages.
Jim Walter Homes and Mid-State Homes opposed the relief
requested in the Delgado
Lawsuit on the basis that the relief sought adversely impacts
property interests of
Mid-State Homes and Jim Walter Homes. The Delgado Plaintiffs
sought to invalidate
accounts which were formerly owned by Mid-State Homes. Many of
the notes were
subsequently transferred to Mid-State Trust II, a Delaware
business trust, of which Mid-
State Homes owns the entire beneficial interest. Also, Mid-State
Homes held direct title
to several of the mortgage notes and, therefore, held a direct
interest in such mortgage notes.
On January 3, 1991, defendants removed the Delgado Lawsuit
to the United States
District Court for the Southern District of Texas. The suit was
subsequently referred
to the United States Bankruptcy Court for the Southern District
of Texas, Corpus Christi
Division, and, on September 13, 1991, that court, upon
defendants' motion, transferred the Delgado Lawsuit to the Court.
In June of 1991, Jim Walter Homes and Mid-State Homes
filed a complaint in the
Court against Hector Gonzalez, a Texas attorney ("Gonzalez") who
represents the Delgado
Plaintiffs, contending that the Delgado Lawsuit was essentially a
case against property
belonging to Jim Walter Homes and Mid-State Homes and, therefore,
the lawsuit was a
violation of the Automatic Stay in the Chapter 11 Cases relating
to Jim Walter Homes and
Mid-State Homes. This complaint was dismissed on March 3, 1992
and an amended complaint
was filed on May 15, 1992. Jim Walter Homes and Mid-State Homes
filed a motion for
summary judgment in that case, but the Court has not yet ruled on
said motion.
On June 11, 1991, Jim Walter Homes and Mid-State Homes
filed a declaratory judgment
action against Gonzalez' known and anticipated clients,
approximately 443 homeowners (the
"Adams Lawsuit") in the Court, seeking, inter alia, a declaration
that the vapor barriers
installed by Jim Walter Homes and the foundations used in the
homes precluded a finding
that the homes were "substantially incomplete." On October 24,
1991, the Adams Lawsuit
and the Delgado Lawsuit were consolidated for procedural purposes
upon Jim Walter Homes'
and Mid-State Homes' motion. Discovery is currently under way in
these cases.
On April 10, 1992, Jim Walter Homes and Mid-State Homes
filed a motion for partial
summary judgment in the Adams Lawsuit, with respect to the
applicability of the statute
of limitations to the Credit Code Claims, the effect of prior
releases executed by some
of the homeowners in connection with earlier litigation, the
application of the Credit
Code to purchasers of repossessed homes, the applicability of the
Federal Trade Commission
("FTC") "holder in due course" doctrine to the Claims, and the
effect of the Code on the
Claims for forfeiture, penalties and punitive damages. The Court
ruled on October 13,
1992 that (1) certain of the homeowners were precluded from
bringing suit under the Credit
Code because of the expiration of the statute of limitations; (2)
the Credit Code does
not have application for those homeowners who purchased
repossessed homes from Jim Walter
Homes or Mid-State Homes because such transactions involve the
purchase of real property;
(3) the FTC holder in due course limitation required to be and
contained in the contracts
with the homeowners precludes recovery by the homeowners of an
amount greater than the
amount paid by the homeowners under the contracts; (4) the Claims
of all homeowners who
previously signed settlement or release agreements (for the
construction quality and
financing aspect of their homes) are barred; and (5) in this
matter, the homeowners are
not entitled to recover penalties or punitive damages by virtue
of applicable provisions of the Code.
Twenty-four (24) of Gonzalez' clients have filed a total
of five (5) additional
lawsuits against Mid-State Trust II and Larry Hyden in the Texas
District Court of Jim
Wells County between November 4, 1991 and February 1, 1993
(Ortiz, et al. v. Mid-State
Trust II, et al.; Garcia, et al. v. Mid-State Trust II, et al.;
Lugo, et al. v. Mid-State
Trust II, et al.; Limon. et al. v. Mid-State Trust II, et al.;
and Torres v. Mid-State
Trust II, et al.). These suits allege similar Claims including
that Jim Walter Homes
failed to comply substantially with its contractual obligations;
that Mid-State Trust II
therefore violated the DTPA and the Credit Code provisions; and
that Mid-State Trust II
was negligent in collecting payments on the homeowners' accounts.
All five (5) cases were
removed to the United States Bankruptcy Court for the Southern
District of Texas and then
transferred to the Court where they were procedurally
consolidated with the Adams Lawsuit
and the Delgado Lawsuit.
On July 3, 1992, in Jim Walters Homes v. Trigo, et al.,
Gonzalez' clients filed a
counterclaim against Jim Walter Homes on behalf of two homeowners
in a foreclosure action
pending in a Texas state district court. The counterclaim
alleges misrepresentation
regarding the purchase of the home and illegal collection
practices. This case was
removed and transferred to the Court, and is now procedurally
consolidated with the Adams
Lawsuit and the Delgado Lawsuit.
In response to a notification of a Bar Date, the owners of
291 homes filed proofs
of claim with the Court on or before October 30, 1992. The basis
for all such Claims was
the quality of the construction and the collection of payments.
By order dated March 9,
1993, the Court procedurally consolidated these proofs of claim
with the Adams Lawsuit
and the Delgado Lawsuit.
On April 22, 1993, Jim Walter Homes and Mid-State Homes
filed a lawsuit in the
Court against approximately 660 homeowners (including all of the
homeowners in the Adams
Lawsuit and the Delgado Lawsuit) seeking a determination that (1)
no defenses exist to
the homeowners' obligations to pay their indebtedness for the
purchase of their homes;
(2) the liens on such homes were valid and enforceable; and (3)
no defense exists to the
acceleration and foreclosure of those liens which went into
default (the "Adams II
Lawsuit"). On May 13, 1993, Jim Walter Homes and Mid-State Homes
amended their complaint
in the Adams II Lawsuit to include as defendants all individuals
who are plaintiffs in
the Acuna Lawsuit defined below.
On May 16, 1994, approximately 388 amended proofs of claim
were filed by homeowners
asserting secured status by virtue of alleged setoff rights.
A Motion to Extend Time for 1111(b) Election by Raul
Delgado, et al., and a Motion
to Estimate Claim of Raul Delgado, et al., as Major Claim holders
in Jim Walter Homes and
Mid-State Homes for Accepting or Rejecting a Plan were filed May
24, 1994 and heard by
the Court on June 15, 1994. As to the first motion, the Court
ruled that the time for
Raul Delgado, et al. to make the election provided for in
Section 1111(b) of the Code
would be extended to ten days from the entry of an order
approving disclosure statements.
As to the second motion, the Court continued the hearing on such
motion until a date, to
be scheduled, after the election provided for in Section 1111(b)
of the Code has been made.
On April 26, 1993, Gonzalez filed a lawsuit in the United
States District Court in
Brownsville, Texas, on behalf of 750 homeowners (including almost
all of the defendants
in the Adams Lawsuit) alleging violation by Jim Walter Homes,
Mid-State Homes and
eight (8) other defendants of the Credit Code, the Texas Debt
Collection Act, the Federal
Fair Debt Collection Practices Act, the DTPA, and RICO (the
"Acuna Lawsuit"). On June 22,
1993, the defendants filed a motion to dismiss, or alternatively
a motion to stay or
transfer. On the same date, the defendants filed a motion for
protective order asking
that discovery be stayed pending the resolution of the motion to
dismiss. On August 26,
1993, the United States District Court in Brownsville, Texas
granted defendants' motion
and entered an order transferring the Acuna Lawsuit to the
District Court.
On April 1, 1993, Jim Walter Homes and Mid-State Homes
filed a second motion for
partial summary judgment seeking relief similar to that awarded
by the Court on
October 13, 1992. This second motion was filed in an effort to
extend the Court's earlier
relief to encompass also the homeowners who were parties in the
individual lawsuits or
who filed proofs of claim but were not parties to the Adams
Lawsuit. On February 23,
1993, Mid-State Trust II filed a similar motion for partial
summary judgment seeking
relief similar to that already granted by the Court's order of
October 13, 1992, as to
Jim Walter Homes and Mid-State Homes. Both of these motions for
partial summary judgment
are pending. On January 4, 1994 Jim Walter Homes and Mid-State
Homes filed a third motion
for partial summary judgment seeking to extend the Court's order
of October 13, 1992 to
claimants brought into these cases by Adams II.
Hearings on pending motions for partial summary judgment
have been scheduled for July 20, 1994, together with other
pending motions.
On May 11, 1993, Judge Paskay recused himself from hearing
and determining the
issues raised in these lawsuits and all of the lawsuits have been
transferred to Judge
Baynes for trial. Pretrial status and discovery conferences in
these lawsuits were held
before Judge Baynes on September 29, 1993. On December 1, 1993,
Judge Baynes scheduled
hearings for February 1, 1994 on all motions for summary judgment
filed prior to January 4, 1994.
At a disclosure statement hearing held on May 19, 1994,
counsel to the Delgado
Plaintiffs requested information regarding the assets held by Jim
Walter Homes and
Mid-State Homes. Based upon information provided by the Debtors,
the Proponents believe
that these two entities have, and will have as of the Effective
Date and the foreseeable
future thereafter, adequate assets to satisfy the Claims against
them as provided in
the Creditors' Plan, including Disputed Claims arising out of the
Delgado Lawsuit, the
Adams Lawsuit and related litigation described herein. These
assets totalled
approximately $1 billion as of April 30, 1994.
The following disclosure has been provided by, and is
included herein at the request of, counsel to the Delgado
Plaintiffs:
"The [Creditors'] disclosure statement fails to
indicate the ruling on April 10, 1992 for the partial summary
judgment is not final and is disputed by the homeowners as
contrary to other court decisions, including Texas decisions,
with regard that the FTC holder in due course limitation is
only applicable where relief is sought thereunder which is not
the basis of the homeowners actions. The disclosure statement
fails to indicate in the ruling on April 10, 1992 for the
partial summary judgment is not final and homeowners
dispute the proper ruling on punitive damages. The discussion
regarding the Brownsville litigation (Acuna lawsuit) and other
Texas homeowner litigation erroneously implies a motion to
dismiss was granted, when no such motion was granted. The
lawsuit is presently pending asserting claims which may be
classified as administrative and/or unsecured
claims against the estate in excess of $20,000,000."
3. Federal Income Tax
A substantial controversy exists with regard to federal
income taxes allegedly owed
by the Debtors. Accordingly, the Debtors filed a complaint for
determination of tax
liability and for determination of the validity, extent or
priority of liens against the
United States (the "Tax Complaint") in the Court on May 14, 1991
(adversary proceeding
no. 91-313). The Tax Complaint not only encompassed the Debtors'
federal tax returns for
fiscal years ended August 31, 1980, 1983, and 1984, but also
fiscal years ended August 31,
1985, 1986, 1987 and May 31, 1988 (nine months), 1989, 1990 and
1991, since the Debtors
believe that the same issues raised by the IRS in fiscal years
ended August 31, 1983 and
1984 will continue to be raised by the IRS for subsequent years.
On July 10, 1991 the IRS amended its Proof of Claim to
include fiscal years ended
August 31, 1985, 1986 and 1987 and a FICA tax liability for the
period ended December 31,
1987 (the "IRS Amended Proof of Claim"). The aggregate amount of
the IRS Amended Proof
of Claim was $70,749,780 for taxes and penalties and interest as
of the Filing Date. The
Debtors filed their objections to the original IRS proofs of
claim. By order of the
Court, these objections have been consolidated for procedural
purposes with the Tax
Complaint.
The Debtors filed a motion for partial summary judgment on
September 24, 1991 as
to two major issues (an "interest" issue and a "discount" issue)
common to all years in
question, on the grounds that no genuine issue of any material
fact existed and that
Debtors are entitled to judgment as a matter of law. On November
18, 1991, the IRS filed
a cross motion for summary judgment. Oral arguments related to
these motions were heard
in the Court on February 13, 1992. On September 3, 1992, the
Court granted the Debtors'
motion for summary judgment as to the "interest" issue. Further
argument was held on
December 15, 1992 as to the "discount" issue of the summary
judgment motion. Summary
judgment was entered in favor of the Debtors as to the "discount"
issue by order of April 6, 1993.
Subsequent to entry of the April 6, 1993 order, the
Debtors and the IRS attempted
to negotiate a settlement of the remaining issues as to the
fiscal years ended August 31,
1980 and 1983-1987. Although the Debtors and the IRS advised the
Court that an agreement
in principle had been reached with respect to the remaining
issues and that a stipulation
incorporating such agreement in principle was in the process of
being prepared, final
approval of the agreement in principle could not be obtained from
the IRS. The Debtors
state in the Debtors' Disclosure Statement that based on the
IRS's inability to obtain
final approval in the agreement, the Debtors intend to move
forward in the Court for
determination of the remaining issues as to the fiscal years
ended August 31, 1980 and
1983-1987, which issues include coal royalties, DISC treatment
and EURO-dollar hedging.
The Court has announced its intention to try a portion of the
remaining issues, and held
a pre-trial conference on October 12, 1993. Discovery has
proceeded as to these issues.
No trial date has as yet been scheduled.
On October 27, 1992, the IRS filed two (2) additional
proofs of claim. The first
Proof of Claim, filed in the amount of $109,786,065, sought to
amend the IRS Amended Proof
of Claim. The second Proof of Claim, filed in the amount of
$322,659,672, was with
respect to estimated tax liabilities for the fiscal years ended
May 31, 1988 (nine months)
and May 31, 1989. The Court disallowed the second Proof of Claim
without prejudice to
the right of the IRS to file an amended Proof of Claim on or
before August 1, 1993. That
date was subsequently extended to September 30, 1993. On
September 28, 1993, the IRS
filed an amended Proof of Claim in the amount of $31,468,188.58.
On September 29, 1993,
the IRS filed an additional amended Proof of Claim in the amount
of $179,683,202.92. The
Debtor filed an objection to both of these amended proofs of
claim on November 3, 1993.
The issues raised by both proofs of claim are similar to the
issues which have been raised
in the Tax Complaint and, as a result thereof, objections to both
proofs of claim have been consolidated with the Tax Complaint.
On September 28, 29 and 30, 1993, and October 4, 1993, the
IRS filed four
additional proofs of claim. The first proof of claim, filed in
the amount of
$110,470,973, sought to amend the previous amendment filed
October 27, 1992 to the IRS
Amended Proof of Claim with respect to fiscal years ended August
31, 1980 and August 31,
1983 through August 31, 1987. It sought among other things to
add coal royalties as an
issue for fiscal years ended August 31, 1983 and August 31, 1984.
The second proof of
claim, filed in the amount of $31,468,189, sought to amend the
prior proof of claim filed
by the IRS on October 27, 1992 with respect to fiscal years ended
May 31, 1988 (nine
months) and May 31, 1989 which prior proof of claim was
previously disallowed by the
Court. The third proof of claim, filed in the amount of
$110,560,883, sought to amend
the previous IRS amended proof of claim filed on September 29,
1993 with respect to fiscal
years ended August 31, 1980 and August 31, 1983 through August
31, 1987. The only change
in this amended proof of claim from the prior amended proof of
claim for these years is
to add a foreign withholding tax issue for the year ended
December 31, 1985. The fourth
proof of claim, filed in the amount of $44,837,693, sought to
amend the prior proof of
claim filed with respect to fiscal year ending May 31, 1990 only
to include both fiscal
years ended May 31, 1990 and May 31, 1991. Objections to each of
the four amended claims
referred to above have been filed by the Debtors. On September
7, 1993, the Court entered
an order setting forth certain issues encompassed by the above
claims to be tried and
authorizing discovery to commence. One of those issues involved
coal royalties with
respect to fiscal years ending August 31, 1985 and thereafter.
The IRS has sought by
motions to amend the Court's order and its amended claims to make
coal royalties an issue
in fiscal years ended August 31, 1983 and August 31, 1984. The
Court has denied the IRS
motion and sustained the Debtors' objections to the amended
claims in this regard by order
dated February 3, 1994. The government has filed a notice of
appeal from the February 3, 1994 order with the District Court.
Pretrial conferences with regard to the Tax Complaint were
held on May 18, 1994 and
June 15, 1994. The parties were authorized to proceed with
discovery on four (4) issues,
including allowance of LBO expense, LBO debt expense amortization
and a hedge loss.
Trial dates of August 22 and 23, 1994 were set for trial
of those issues as to
which discovery has been completed, namely, issues of DTSC
treatment and coal royalties.
The parties were directed to exchange names and addresses of
witnesses and admission of
documents by July 1, 1994 and to file their stipulation as to
agreed facts no later than August 12, 1994.
4. Lawsuits Relating to Jim Walter Resources
In December 1990, Hillsborough filed a motion on behalf of
Jim Walter Resources and
the other Debtors, to assume and assign certain Executory
Contracts in connection with
completion of the Mirror Liquidation Plan. One such Executory
Contract was a coal sales
agreement entered into in 1979 (for a term of 20 years) between
Alabama Power and Jim
Walter Resources and Amendment No. 6 thereto, which was signed in
1988 and which provides
for delivery of up to 3,000,000 tons of coal annually. Alabama
Power filed an objection
to the assumption and assignment of such contract alleging that
Jim Walter Resources was
in default by virtue of its failure to maintain a $250 million
stockholder equity and a
current asset to current liability ratio of at least 1:1, as
required by Amendment No. 6.
Alabama Power also asserted that certification requirements under
Section 11 of such
agreement, which, inter alia, require a report from Jim Walter
Resources' auditors, had
not been met because the report received was "not without
qualification because it was
subject to significant uncertainties especially in connection
with the Reorganization
Proceedings and massive amounts of debt which are in default and
on which Jim Walter
Resources is jointly and severally liable." Alabama Power
asserted that these liabilities,
as well as other significant uncertainties, created a default
under such agreement.
Alabama Power also asserted that the price paid by Alabama
Power under such
agreement is in excess of the short-term price for coal and is
directly connected to the
long-term commitment of capital, the reliability of a supply of
coal under such agreement,
and the creditworthiness of Jim Walter Resources and, thus,
constitutes a financial
accommodation under Section 365(c)(2) of the Code. This section
prohibits the assumption
or assignment of an executory contract "if such contract is a
contract to make a loan or
extend other debt financing or financial accommodations to or for
the benefit of the debtor."
A final hearing on Alabama Power's objection was held on
February 13, 1991 at which
time testimony was taken and argument of counsel was presented to
the Court. At the
conclusion of the proceedings, the Court orally ruled that the
financial condition of Jim
Walter Resources did not constitute a default under the
applicable provisions of
Section 365 of the Code and that the assignee had demonstrated
adequate assurances of its
current and future ability to perform the Executory Contract, and
that such Executory
Contract did not constitute an agreement to make a loan or to
extend debt financing. The
Court further indicated that it was not prepared to make a final
determination at that
time that the contract did not constitute a financial
accommodation under
Section 365(c)(2) of the Code. Subsequently, on March 4, 1991,
the Court entered its
order allowing the assumption and assignment of such agreement,
following which an amended
order was entered on March 13, 1991 ex parte on the Court's own
motion for purposes of
reconsidering the March 4, 1991 order, which left open the
question as to whether or not
such agreement was in fact a contract for financial accommodation
and thus within the
exceptive provisions of Section 365(c)(2) of the Code which
renders such contracts
non-assumable. Upon such reconsideration, the Court found it
unnecessary to hold any
additional hearings on the remaining issues and concluded that
the contract was not within
the exceptive provisions for assumability, and thus none of the
exceptions set forth in
Section 365(c)(2) applied. The Court further stated that it was
also satisfied that based
upon the record established at the final evidentiary hearing, the
prospective assignee,
JW Resources, was financially able to perform the contract and
thus met the requirement of Section 365 (b)(1)(c).
On March 14, 1991, Alabama Power filed its notice of
appeal to the District Court
from the Order Allowing Assumption and Assignment of Executory
Contract with Alabama Power
entered on March 4, 1991, and the Amended Order on Motion to
Assume and Assign Executory
Contract with Alabama Power entered on March 13, 1991 with the
District Court. Such
appeal is presently pending in the District Court. The Debtors
state in the Debtors'
Disclosure Statement that the Debtors believe that loss of the
Alabama Power contract
(should that occur) could have a material adverse effect on the
operations of Jim Walter
Resources. See "OVERVIEW OF THE CREDITORS' PLAN -- Conditions
Precedent -- To Confirmation of the Creditors' Plan."
On June 28, 1993, Jim Walter Resources filed a complaint
against Alabama Power in
the Court seeking a declaratory judgment to determine rights of
the parties as to certain
provisions of a coal sales agreement between the parties entered
into on January 1, 1979,
and Amendment No. 6 thereto, relating to pricing, tonnage and
quality of coal to be
supplied under said agreement. Alabama Power filed a motion to
stay the adversary
proceeding and a motion for determination that the Automatic Stay
is not applicable or,
in the alternative, relief from the Automatic Stay. On August
11, 1993, both motions were
denied without prejudice by the Court. Subsequent thereto,
Alabama Power filed a motion
to dismiss the complaint on account of improper venue or, in the
alternative, to transfer
venue of the action to the United States District Court for the
Northern District of
Alabama, Southern Division. The Motion was heard on January 12,
1994, and has been denied.
On May 10, 1994, Jim Walter Resources and Alabama Power
signed a new agreement for
the sale and purchase of coal, which agreement replaced the 1979
coal purchase contract,
as amended, which new agreement was approved by the Court on May
23, 1994. The May 23,
1994 approval order became final on June 3, 1994. The new
agreement provides for the
dismissal of Jim Walter Resources' declaratory judgment action
and Alabama Power's
dismissal of its appeal from the March 4, 1991 order regarding
Jim Walter Resources'
assumption of the 1979 coal purchase contract. See "BUSINESSES,
PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE DEBTORS--Businesses and
Properties of the Debtors--Jim
Walters Resources--Mining Division." A joint motion has been
filed by Jim Walter Resources
and Alabama Power with the District Court seeking the entry of an
order dismissing Alabama
Power's appeal from the March 4, 1991 order and a joint motion
has been filed by Jim
Walter Resources and Alabama Power with the court seeking the
entry of an order dismissing
Jim Walter Resources' declaratory judgment action. By order
dated June 24, 1994, the
Court granted the joint motion of Jim Walter Resources and
Alabama Power to dismiss Jim Walter Resources' declaratory
judgment action.
On May 13, 1994, Jim Walter Resources, as plaintiff, filed
a civil action in the
Tuscaloosa Circuit Court, State of Alabama, sounding in tort and
contract, alleging
wrongful acts including, but not limited to, breach of contract,
conversion, negligence
and fraud against defendants, Cotton Energy Corporation;
Jefferson Fuel Sales, Inc,;
Jefferson Resource Sales, Inc,; David H. Cotton; Strachan
Shipping Company; Thyssen, Inc.,
d/b/a Thyssen Carbometal Company, a division of Thyssen, Inc.;
Rheinbraun Thyssen Energy,
Inc.; and Fictitious Defendants, A, B, C, D, E, F, G, H, I and J,
whose names are
otherwise unknown, but which will be supplied by amendment when
discovered, demanding
actual, compensatory and punitive damages in excess of
$10,000,000.
5. United Concrete Pipe Corporation
On October 4, 1990, Walter Industries was notified by C.
Frederich Wehba, Chairman,
on behalf of The Westgate Group, Inc., the purchaser of United
Concrete Pipe Corporation
("Concrete"), a former subsidiary of U.S. Pipe, that a Grand Jury
Subpoena for Documents
dated September 10, 1990, had been served upon Concrete ordering
Concrete to produce
certain documents before a grand jury sitting in Los Angeles,
California investigating
possible criminal violations of the Sherman Act, 15 United States
Code Section 1, and that in
the event any indictments or civil suits resulted from this
investigation, he expected
Walter Industries to indemnify the purchasers for any fines,
judgments, fees and other expenditures incurred.
The Debtors state in the Debtors' Disclosure Statement
that Walter Industries
believes, based on the information available, that Concrete did
not violate the antitrust
laws at any time prior to its sale on April 11, 1989. Walter
Industries has been informed
that several former employees of Concrete have appeared before
the grand jury in response
to subpoenas. The Debtors state in the Debtors' Disclosure
Statement that Walter
Industries believes that these employees have denied any
wrongdoing. Walter Industries
has recently been informed by its counsel in California that no
indictments have been returned and none will be issued.
T. Environmental
NOTE: THE INFORMATION (AND THE CHARACTERIZATION THEREOF)
IN THIS SECTION VII.T. IS TAKEN FROM THE DEBTORS' DISCLOSURE
STATEMENT.
1. General
The Federal Comprehensive Environmental Response
Compensation and Liability Act,
as amended ("CERCLA"), imposes liability on certain classes of
Persons, including the
owner or operator of the site and Persons that disposed or
arranged for the disposal of
hazardous substances found at sites at which hazardous substances
are released into the
environment or pose a substantial threat of such release. CERCLA
authorized the United
States Environmental Protection Agency (the "EPA"), the states
and, in some circumstances,
private entities to take actions in response to public health or
environmental threats
and to seek to recover the costs they incur from the same classes
of Persons. Certain
governmental authorities can also seek recovery of damages to
natural resources.
Various Debtors have been identified as a potentially
responsible party by the EPA
under CERCLA with respect to cleanup of hazardous waste at
several superfund sites. These
Debtors are in the process of preliminary investigation of the
sites to determine the
nature of their potential liability and amount of remedial costs
to clean up such sites.
At the current time, U.S. Pipe is a "potentially responsible
party" ("PRP") at two
superfund sites in New Jersey. The sites are the SCP Carlstadt
superfund site and the
Lone Pine superfund site. Both sites have identified numerous
PRPs, many of which are
large companies. U.S. Pipe's volumetric allocation is less than
one-tenth of one percent.
In addition to the other PRPs, insurance proceeds are available
through third parties to
fund the required cleanup. U.S. Pipe is a de minimis PRP at
these sites.
One other Debtor, Sloss Industries, is a PRP in a
superfund site. Sloss Industries
is a PRP in the Fuels and Chemicals superfund site, located near
Tuscaloosa, Alabama.
Other large companies and governmental agencies (including the
U.S. Defense Department)
are also PRPs. Sloss' volumetric allocation is one-tenth of one
percent. Sloss is a de minimis PRP at this site.
The Debtors state in the Debtors' Disclosure Statement
that U.S. Pipe and Sloss
Industries believe the extent of their involvement to be minor in
relation to that of
other named PRPs, a significant number of which are substantial
companies. The Debtors
also state in the Debtors' Disclosure Statement that management
does not believe at this
time that any such cleanup costs will have a material effect on
their financial condition
or results of operations although no assurances can be given that
such Debtors will not
be required in the future to make material expenditures relating
to these sites.
The constantly evolving environmental standards at the
federal, state and local
levels make it difficult to forecast the amount of environmental
expenditures or the
effect of changing standards on business operations; however, the
Debtors state in the
Debtors' Disclosure Statement that the Debtors believe that they
are in substantial
compliance with federal, state and local laws and regulations
relating to the discharge of materials hazardous to the
environment.
In constructing and operating its plants, mines and other
facilities, the Debtors
state in the Debtors' Disclosure Statement that the Debtors make
every effort to comply
with environmental laws and regulations. Capital expenditures
for environmental matters
during the period June 1, 1991 through May 31, 1992 were
approximately $6.3 million. From
June 1, 1992 through May 31, 1993 they were approximately $3.5
million. Expenditures are
projected to be $7.6 million during the period June 1, 1993
through May 31, 1994. The
Debtors state in the Debtors' Disclosure Statement that the
Debtors anticipate that in
the following four (4) years these expenditures will average $7.4
million per year.
Included in the planned capital expenditures are $1.4
million to install the
equipment necessary to meet the new federal air pollution
regulations at the Sloss coke
and chemical facilities, Birmingham, Alabama, and $1.6 million
for waste water and solid
rock disposal at the Mining Division of Jim Walter Resources,
Brookwood, Alabama.
2. Sloss
Sloss received an administrative order issued under
Section 3008 of the Resource
Conservation Recovery Act from the United States EPA Region IV,
Atlanta, to conduct an
investigation at 39 "solid waste management units" ("SMUs")
identified after an inspection
at Sloss' Birmingham, Alabama complex by an EPA contractor to
determine whether there has been soil and/or groundwater
contamination.
Sloss retained environmental engineers and consultants who
reviewed the 39 SMUs
identified by the EPA and prepared a proposed investigation which
was submitted to the
EPA. The EPA responded and sent its draft comments back to Sloss
in November 1991. Sloss
reviewed the EPA proposals and submitted a revised plan. The
final order from the EPA
has not been received. The remaining cost of the remedial
investigation is estimated to
be $1.0 million. Cleanup costs cannot be estimated until the
investigation has been completed.
3. U.S. Pipe
a. Burlington, New Jersey
U.S. Pipe prepared and submitted a soil and ground water
cleanup plan to the New
Jersey Department of Environmental Protection and Energy (the
"NJDEPE") for its
Burlington, New Jersey plant pursuant to an Administrative
Consent Order required under
the New Jersey Environmental Cleanup Responsibility Act (now the
Industrial Site Recovery
Act "ISRA") in connection with HAC's acquisition of Original Jim
Walter. A significant
aspect of that proposed plan was a determination by NJDEPE
concerning which ground water
standard would apply at the Burlington Facility and at which
physical locations those
standards will be applied. The NJDEPE approved certain portions
of the ground water
section of the cleanup plan in February, 1994, and deferred its
decision on the balance
of the ground water section pending further investigation. In
its approval, NJDEPE
determined which ground water standard will apply, but it did not
specify, in all
instances, the location at which those standards would be
applied. The NJDEPE has not
yet approved the soil section of the cleanup plan, although it
did approve limited
remedial action and continued investigation in several areas of
soil at the facility.
Management is unable to determine at this time whether the
cleanup cost will have a
material effect on its financial condition or results of
operations. The cleanup cost
may be substantial but cannot be accurately quantified until the
extent and nature of the required action under ISRA is
determined.
b. Union City, California
As a result of the California Air Toxic Hot Spots
Information Act of 1986,
U.S. Pipe was required to perform a health risk assessment to
determine the potential
impact of toxic air emissions to the area. The initial health
risk assessment report was
submitted to the Bay Area Air Quality Management District
("BAAQMD") on or about
January 29, 1991. It was not accepted by the BAAQMD because of
alleged failure to conform
with reporting guidelines, and this could result in potential
monetary sanctions as high
as $450,000. Thereafter, on or about April 21, 1991, a revised
health risk assessment
report was filed with, and accepted by, said agency, thereby
stopping the accumulation
of any further potential monetary sanctions. The Debtors state
in the Debtors' Disclosure
Statement that U.S. Pipe believes there are mitigating facts, as
well as valid legal
defenses that could reduce or eliminate such monetary sanctions.
Debtor's environmental engineers and consultants
subsequently prepared a further
revised health risk assessment which was filed in early 1992. On
April 2, 1992, a public
hearing was held in Union City advising nearby neighbors of the
results of the health risk assessment and U.S. Pipe's future
plans.
A plan of action was submitted to the BAAQMD in June 1992
outlining additional
corrective action to the air pollution control system. After
agency approval, the changes
were made. Testing was conducted and a new health risk
assessment was filed with BAAQMD
in July 1993. Test and risk assessment results show compliance.
Quarterly letters to nearby neighbors continue to be sent.
In April 1992 the State of California Attorney General's
Office filed a Proof of
Claim and supplemental statement on behalf of the California
Department of Toxic
Substances Control ("DTSC") against U.S. Pipe and Hillsborough
asserting, inter alia, the
sum of $17,591,000 which the DTSC indicates was the "current best
estimate of the amount
of response costs it will take to complete investigation and
remediation" of U.S. Pipe's
Union City landfill site, which DTSC alleges is contaminated with
hazardous substances.
The Debtors state in the Debtors' Disclosure Statement that upon
inquiry, U.S. Pipe and
Hillsborough determined that such estimate and calculations are
based upon the DTSC's
assumptions that such cleanup would entail removal, treatment and
disposal of all of the
material in the landfill, as well as groundwater sampling and
extended groundwater
monitoring. Of the total claims asserted, less than $95,000
represents past costs; the
remainder of the Claim represents contingent, estimated costs.
In October 1992, the CRWQCB filed a proof of claim by the
Attorney General,
including a Supplemental Statement seeking $350,000 against U.S.
Pipe and Hillsborough
for oversight and eventual cleanup of alleged contaminated
groundwater. U.S. Pipe and
Hillsborough believe the assumption of groundwater contamination
and the claim are without substantial merit.
In May 1994, U.S. Pipe and Hillsborough requested a
meeting with the California
Attorney General representing the CRWQCB and DTSC to attempt to
seek a resolution with
respect to the claims. A meeting has been agreed to and should
occur within the near future.
In May 1994, the United States Environmental Protection
Agency, Region IX, San
Francisco, issued a Site Assessment for the Union City landfill
under CERCLA. The assessment concluded that:
"It appears that the site does not meet with EPA
criteria for further action because: a release of hazardous
substances from the site to groundwater has not
been established; the closest active municipal groundwater
well to the site is approximately 3.5 miles; there are no
drinking water intakes from surface water bodies within 15 miles
downstream of the site, and there are no schools,
residences, or day care centers within approximately 0.25
miles of the site."
In its objection to the Proponents' April 20, 1994
Disclosure Statement and the Debtors' April 19, 1994 Disclosure
Statement, the DTSC alleged: (i) U.S. Pipe and
Hillsborough are the only parties responsible for the clean-up of
the Union City landfill site; (ii) the Debtors have an on-going
obligation to remediate the Union City landfill
site; (iii) there is no basis to assume that removal of
contaminated soil from the
boghouse waste site(s) and landfill(s) at the Union City site
will not be necessary;
(iv) the Debtors have post-confirmation liability to remediate
the Union City landfill
site; (v) the Debtors' statement that their involvement is minor
in regard to other
hazardous waste sites does not take into account CERCLA
provisions regarding joint and
several liability; (vi) the assertion by the Debtors that
"management does not believe
at this time that any clean-up costs will have a material effect
on their financial
condition" is not supported by any facts; and (vii) the discharge
provisions contained
in the Debtors' Plan do not relieve the reorganized Debtors of
on-going remediation obligations.
As stated above, the Debtors dispute the assertions of the
DTSC and the classification and treatment of the DTSC Claim will
be determined by the Court in connection with the hearing on the
Debtors' objection to the DTSC Claim.
VIII.
PROJECTED FINANCIAL INFORMATION
In conjunction with developing the Creditors' Plan, the
Proponents, assisted by
Ernst & Young, have prepared, based upon the Debtors' projections
included in their Second
Amended Disclosure Statement, unaudited financial projections
which may be helpful to
Holders of Claims in reaching their determination of whether or
not to accept or reject
the Creditors' Plan. These projections, together with the
assumptions used in the
preparation thereof, are attached as Exhibit VII to the
Disclosure Statement. The
projections for each of the years ending May 31, 1995 through
2001 are based upon
assumptions concerning future events and circumstances.
NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THE
PROJECTED FINANCIAL INFORMATION OR THE ABILITY OF THE REORGANIZED
DEBTORS TO ACHIEVE THE PROJECTED RESULTS.
PROJECTIONS SET FORTH IN THE DISCLOSURE STATEMENT REPRESENT A
PREDICTION OF FUTURE EVENTS BASED UPON ASSUMPTIONS, INCLUDING
THOSE SET FORTH WITH SUCH PROJECTIONS AND OTHERS WHICH
MAY OR MAY NOT BE SET FORTH. THESE FUTURE EVENTS MAY OR MAY NOT
OCCUR AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS A
GUARANTEE OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT
WILL OCCUR. BECAUSE OF THE NUMEROUS RISKS AND INHERENT
UNCERTAINTIES THAT WILL AFFECT THE OPERATIONS OF THE REORGANIZED
DEBTORS, THE ACTUAL RESULTS OF OPERATIONS UNDOUBTEDLY
WILL BE DIFFERENT FROM THOSE PROJECTED, AND SUCH DIFFERENCES MAY
BE MATERIAL AND MAY BE ADVERSE.
Unaudited financial projections for each of the years
ending May 31, 1995 through
2001 were prepared by the Proponents based upon the Debtor's
projections included in their
Second Amended Disclosure Statement. This financial forecast
reflects assumptions of
management of the Debtors concerning existing and likely business
and economic conditions
relative to each of the Debtors' specific products or markets and
has been adjusted by
the Proponents to reflect the terms of the Creditors' Plan.
IX.
VOTING ON AND CONFIRMATION OF THE CREDITORS' PLAN
A. Confirmation of the Creditors' Plan
The Court will confirm the Creditors' Plan only if it
finds that all of the requirements of the Code are met.
In order for the Creditors' Plan to be confirmed, the Code
requires that the Court determine that the Creditors' Plan
complies with the technical requirements of the Code,
and that the Proponents' disclosures concerning the Creditors'
Plan have been adequate and have included information concerning
all payments made or promised to be made by the
Debtors in connection with the Creditors' Plan.
The Code also requires that (i) the Creditors' Plan is
feasible, (ii) Confirmation
of the Creditors' Plan is in the best interests of Holders of all
Claims and Interests
(that is, dissenting Holders of Claims and Interests will receive
at least as much under
the Creditors' Plan as they would receive in a liquidation under
Chapter 7 of the Code),
(iii) the Creditors' Plan has classified Claims and Interests in
a permissible manner,
and (iv) the Creditors' Plan has been accepted by the requisite
votes of Classes of
Holders of Claims and Interests impaired under the Creditors'
Plan except to the extent
that Confirmation of the Creditors' Plan is sought under Section
1129(b) of the Code.
To confirm the Creditors' Plan, the Court must find that
all of these conditions
have been met, unless the applicable provisions of Section
1129(b) of the Code are
employed. Thus, even if the Holders of Claims and Interests of
the Debtors accept the
Creditors' Plan by the requisite votes, the Court must make
independent findings
respecting the Creditors' Plan's conformity with the requirements
of the Code, the
Creditors' Plan's feasibility, and whether the Creditors' Plan is
in the best interests
of the Debtors and Holders of Claims and Interests before it may
confirm the Creditors'
Plan. These statutory conditions to Confirmation are discussed
below in the context of this case.
B. Feasibility
The Proponents believe that the Creditors' Plan meets the
feasibility standard
which requires that there is a reasonable prospect that the
Debtors will be able to
perform their obligations under the Creditors' Plan and continue
to operate their
businesses and are not likely to require further financial
reorganization. In determining
whether the Creditors' Plan, utilizing cash generated from
operations and secured
financing (see "BUSINESSES, PROPERTIES AND OTHER INFORMATION WITH
RESPECT TO THE DEBTORS -
- - Risk Factors Relating to Businesses of the Debtors"), meets the
feasibility standard,
the Proponents have analyzed the ability of Walter Industries to
meet its obligations
under the Creditors' Plan while retaining sufficient amounts of
cash to carry on its
operations. As part of this analysis, the Proponents have caused
to be prepared a
forecast of certain financial data for the Debtors for the seven
(7) yearly periods ending
2001 based upon certain assumptions of management of the Debtors
as discussed in Section VIII above.
The financial forecasts are set forth in Exhibit VII
hereto. Such forecast
supports the conclusion that the Creditors' Plan is feasible.
Although the Proponents
believe that the financial results projected to be achieved are
reasonably attainable,
some or all of the estimates or assumptions may prove to be
inaccurate.
C. Best Interests of Holders of Claims and Holders of Interests
Notwithstanding acceptance of the Creditors' Plan by
Holders of Claims and Holders
of Interests, in order to confirm the Creditors' Plan, the Court
must independently
determine that the Creditors' Plan is in the best interests of
all Classes of Claims and
Interests. The "best interests" test requires that the Court
find that the Creditors'
Plan provides to each member of each impaired Class of Claims and
Interests a recovery
which has a value as of the Effective Date at least equal to the
value on such date of
the distribution which each such member would receive from the
Debtors if the Debtors were liquidated under Chapter 7 of the
Code.
To calculate what Holders of Claims and Interests would
receive if the Debtors were
liquidated, the Court must first determine the dollar amount that
would be generated from
liquidation (the "Liquidation Fund"). The Liquidation Fund would
consist of the proceeds
from the disposition of the Assets of the Debtors, augmented by
the cash held by the
Debtors. The Liquidation Fund would then be reduced by the costs
of the liquidation.
Costs of liquidation under Chapter 7 would likely include the
fees of a trustee, as well
as those of counsel and other professionals that might be
retained by the Debtors'
trustee, selling expenses, any unpaid expenses incurred by the
Debtors during the pendency
of the Chapter 11 Cases (such as fees for attorneys, financial
advisors and accountants)
which are Allowed in the Chapter 7 proceedings and Claims arising
from the operation of
the Debtors' businesses during the pendency of the Chapter 11
Cases and Chapter 7
proceedings. These Claims, in addition to validly perfected
security interests and such
other Claims as might arise in the liquidation or result from the
current Chapter 11
Cases, would be paid in full out of the Liquidation Fund before
the balance of a
Liquidation Fund would be made available to any and all
pre-Filing Date Unsecured Claims,
including intercompany and affiliate Unsecured Claims. The value
of the distributions
out of the Liquidation Fund (after subtracting the amounts
described above) are then
compared with the value of the property offered to each of the
Classes of Unsecured Claims
and Interests under the Creditors' Plan to determine if the
Creditors' Plan is in the best interests of all Classes.
The Proponents believe, based upon the liquidation
analysis annexed hereto as
Exhibit VI, that under the most likely assumptions with respect
to the way in which a
Chapter 7 trustee would seek to resolve the asbestos-related veil
piercing litigation,
the value of any distributions from a Liquidation Fund to each
Holder of Allowed Claims
and Interests of the Debtors would be less than the value of
distributions under the
Creditors' Plan. Therefore, the Proponents believe that
liquidation of the Debtors would not be in the best interests of
the Debtors.
D. Classification of Claims and Interests
The Proponents believe that the Creditors' Plan meets the
classification
requirements of the Code which requires that a plan of
reorganization place each claim
or interest into a class with other claims or interests which are
"substantially similar."
The Creditors' Plan establishes 22 Classes of Claims and 4
Classes of Interests.
Administrative Claims and Priority Claims (consisting of Federal
Income Tax Claims,
Federal Excise Tax and Reclamation Claims and State and Local Tax
Claims) are not
classified. Classes S-1 through S-10 encompass Secured Claims,
consisting of Revolving
Credit Bank Claims, Working Capital Bank Claims, Grace Street
Note Claims, Sloss IRB
Claim, Secured Equipment Purchase Claims, Series B & C Senior
Note Claims, and the
Provident Life & Accident Insurance Company Claims, the Revolving
Credit Agents Claims,
the Working Capital Agents Claims and Other Secured Claims.
Classes U-1 through U-7
encompass Unsecured Claims, consisting of Old Walter Industries
IRB Claims, Convenience
Class Claims, Other Unsecured Claims, Senior Subordinated Note
Claims, 17% Subordinated
Note Claims, Pre-LBO Debenture Claims and Veil Piercing Claims.
Classes I-1 through I-3
encompass Intercompany Claims, including Intercompany IRB Claims,
Pre-Filing Date
Intercompany Notes Payable Claims and Post-Filing Date
Intercompany Notes Payable Claims.
Classes E-1 and E-2 encompass Interests in Hillsborough. Classes
SE-1 and SE-2 encompass
Interests in the Debtors other than Hillsborough.
E. Voting; Acceptance
As a condition to confirmation, the Code requires that
with certain exceptions (as
described below) each impaired Class of Claims and Interests
accepts the Creditors' Plan.
The Code defines acceptance of a plan by a class of claims as
acceptance by holders of
two-thirds in dollar amount and a majority in number of allowed
claims of that class, but
for that purpose counts only those who actually vote to accept or
to reject a plan. The
Code defines acceptance of a plan by a class of interests as
acceptance by at least
two-thirds in amount of the allowed interests, but for such
purpose counts only those who
actually vote to accept or reject a plan. Acceptances of the
Creditors' Plan are being
solicited only from those Persons who hold Claims or Interests in
impaired Classes and
who are entitled to receive distributions under the Creditors'
Plan. A Class is
"impaired" if its legal, equitable, or contractual rights
attaching to the Claims or
Interests of that Class are modified, other than by curing
defaults in stated maturities
or by payment in full in cash. The Classes of Claims that are
not "impaired" under the
Creditors' Plan are deemed to have accepted the Creditors' Plan.
Classes S-3, S-4, S-5,
S-7, S-8, S-9 and S-10, U-1 and U-2, U-7, I-1 through I-3 and
SE-1 are unimpaired.
Classes S-1, S-2, S-6, U-3 through U-6 and E-1 are impaired under
the Creditors' Plan and,
accordingly, their votes are being solicited. The Holders of
Class E-2 and Class SE-2
Claims, however, neither receive nor retain any property under
the Creditors' Plan.
Pursuant to the Code, Classes E-2 and SE-2 are deemed to have
rejected the Creditors' Plan
and, accordingly, their votes are not being solicited.
F. Confirmation Without Acceptance by all Impaired Classes
The Code contains provisions for confirmation of a plan
even if the plan is not
accepted by all impaired classes, as long as at least one
impaired class of claims has
accepted it. The "cram-down" provisions of the Code are set
forth in Section 1129(b) of the Code.
A plan may be confirmed under the cram-down provisions if,
in addition to
satisfying the usual requirements of Section 1129 of the Code, it
(i) "does not
discriminate unfairly" and (ii) is "fair and equitable," with
respect to each class of
claims or interests that is impaired under, and has not accepted,
the plan. As used by
the Code, the phrases "discriminate unfairly" and "fair and
equitable" have narrow and
specific meanings unique to bankruptcy law.
The requirement that a plan not "discriminate unfairly"
means that a dissenting
class must be treated equally with respect to other classes of
the same rank. In the
event of a cramdown, classes which are afforded treatment of
unequal value compared to
the treatment afforded other classes of equal rank could not be
maintained without the
consent of other classes.
The "fair and equitable" standard, also known as the
"absolute priority rule,"
requires that a dissenting class receive full compensation for
its allowed claims or
interests before any junior class receives or retains any
property.
If the holders of any impaired class vote to reject a
plan, such plan may be
confirmed under Section 1129(b) of the Code if holders of all
claims and interests junior
to those of the impaired class do not receive or retain any
property under such plan.
The Proponents believe, and have requested, that the
Creditors' Plan as structured
be confirmed under Section 1129(b) even if an impaired Class of
Claims votes to reject
the Creditors' Plan since the Creditors' Plan either (i) provides
all Holders of Claims
in an impaired Class with property having a value as at the
Effective Date equal to the
Allowed Amount of such Claims, or (ii) allows no Holder of any
Claim or Interest that is
junior to the Claims of such Class to receive or retain any
property under the Creditors' Plan.
X.
ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE CREDITORS'
PLAN
If the Creditors' Plan is not confirmed and consummated,
the alternatives include
(i) preparation and presentation of an amended Creditors' Plan,
(ii) confirmation and
consummation of the Debtors' Plan or one of the other two
creditor-proposed plans, and
(iii) liquidation of the Debtors under Chapter 7 or Chapter 11.
A. Alternatives to the Creditors' Plan
There are currently four filed plans of reorganization in
the Chapter 11 Cases:
(i) the Debtors' Plan;
(ii) the Creditors' Plan;
(iii) the Bank Agents Plan (consideration of which
the Bank Agents have requested the Court, and the Court has
agreed, to defer); and
(iv) the Senior Note Plan (consideration of which
the Series B & C Senior Note Trustee has requested the Court, and
the Court has agreed, to defer).
See "INTRODUCTION -- Comparison of the Creditors' Plan
With the Debtors' Plan" for
a comparison of the Creditors' Plan with the Debtors' Plan.
B. Liquidation Under Chapter 7
If no plan can be confirmed, the Chapter 11 Cases may be
converted to a case under
Chapter 7, in which one or more trustees would be elected or
appointed to liquidate the
assets of each Debtor for distribution to its creditors in
accordance with the priorities
established by the Code. For a discussion of the effect that a
Chapter 7 liquidation
would have on the recovery by Creditors, see Exhibit VI. The
Proponents believe that the
distributions to each impaired Class under the Creditors' Plan
will be greater and earlier
than the distributions that might be received after a Chapter 7
liquidation of each
Debtor. The Proponents believe that Confirmation of the
Creditors' Plan is preferable
to a Chapter 7 liquidation because the Creditors' Plan maximizes
the distributions to all
Classes of Holders of Claims and Interests and any alternative to
confirmation of the
Creditors' Plan would result in substantial delays and lesser
(and in some cases, no)
recoveries.
The Proponents believe that the liquidation analysis filed
with the Debtors'
Disclosure Statement (the "Debtors' Liquidation Analysis") does
not follow the clear test
set forth in Section 1129(a)(7) of the Bankruptcy Code. If the
Debtors followed the plain
requirements of Section 1129(a)(7), the Debtors would be solvent
even on a hypothetical
liquidation basis and, even under the Debtors' interpretation of
the "solvent debtor" rule
(which the Debtors contend is inapplicable if a hypothetical
Chapter 7 liquidation of a
debtor shows a hypothetical insolvency)<F1>, unsecured Creditors
would be entitled to post-petition interest.
Section 1129(a)(7) states that a Chapter 11 plan can be
confirmed only if
With respect to each impaired class of claims or interests
(a) each holder of a claim or interest of such
class
(i) has accepted the plan; or
[FN]
<F1> The Proponents believe that the solvent debtor rule,
according to a long line of judicial authority, provides that
post-petition interest on unsecured claims is allowed against a
solvent debtor because it is inequitable for creditors not to
receive post-petition interest before any recovery by the
shareholders of the debtor.
(ii) will receive or retain under the plan
on account of such claim or interest property of a value, as of
the effective date of the plan, that is not less than the amount
that such holder would so receive or retain if the debtor were
liquidated under Chapter 7 of this title on such date.
(emphasis added). The Section 1129(a)(7) test must be conducted
as of the relevant plan's
effective date, which under the Debtors' Plan will not occur
until there is a Final Order
resolving favorably to the Debtors all of the asbestos-related,
veil piercing claims and
litigation or all of the claims and litigation are settled on
terms satisfactory to the
Debtors. Debtors' Plan Section 9.2(b). Nevertheless, the
Debtors' Liquidation Analysis
is premised on liquidation commencing on May 31, 1995 and
distribution occurring as of
May 31, 1996. As discussed below, the Proponents believe that it
is far more likely that
satisfaction of Section 9.2(b) of the Debtors' Plan, and the
occurrence of the Effective
Date under that Plan, will occur sometime later. By using an
unrealistically near-term
date for the Section 1129(a)(7) hypothetical liquidation, the
Proponents believe that the
Debtors' Liquidation Analysis deprives the Debtors and their
Creditors of all of the
incremental value of the Debtors' growth and cash flow between
May 31, 1995 and the likely
Effective Date of the Debtors' Plan, when the hypothetical
liquidation under
Section 1129(a)(7) is supposed to occur. The Proponents believe
that this incremental value would be substantial.
Moreover, the Debtors' Liquidation Analysis provides for a
discount to the Debtors'
liquidation sale value because of several factors, including "a
high degree of uncertainty
about the potential exposure of purchasers to future transferee
liability for future
asbestos-related claims which might not be addressed in the
Chapter 7 proceeding"
(Debtors' Liquidation Analysis 4, n.i.), when, by the definition
of Section 1129(a)(7)
and under Section 9.2(b) of the Debtors' Plan, the hypothetical
liquidation must occur
on the date that the Debtors have no asbestos liabilities, the
Debtors' Plan's Effective
Date. This asbestos-related discount therefore also deprives the
Debtors and their
Creditors of substantial value under Section 1129(a)(7). The
Debtors' response, that
asbestos liabilities would not be disposed of in a Chapter 7
liquidation because
corporations are not entitled to a discharge under Chapter 7,
overlooks the fact that the
hypothetical Chapter 7 liquidation used to apply Section
1129(a)(7) is presumed to
commence on the Effective Date of the Debtors' Plan, which is
defined as a date when the
asbestos claims are eliminated by litigation or settlement, and
that the Chapter 7
discharge would be irrelevant to the distribution of the Debtors'
then-existing assets
in a Chapter 7 liquidation. The Proponents also believe that the
range of discounts taken
in the Debtors' Liquidation Analysis for the adverse effect of
rapid sale and for
potential environmental exposures is high and unwarranted given
the fact that the Chapter
7 trustee would have more than ample time to prepare the Debtors'
businesses for sale
prior to the occurrence of any realistic Effective Date under the
Debtors' Plan.
Additionally, the Proponents believe that the Debtors'
Liquidation Analysis
significantly undervalues the Debtors' assets in other respects,
and significantly
overvalues liquidation liabilities. One example: the liquidation
analysis heavily
discounts the Mid-State Homes mortgage business (by $414 million
to $276 million) even
though the Debtors have successfully sold large amounts of
Mid-State Home's mortgages
during the Chapter 11 Cases, when the asbestos-related issues
were far from resolved,
while they would be resolved in a hypothetical Chapter 7
liquidation that begins on the
Debtors' Plan's Effective Date. Another example: the Debtors
state that a Chapter 7
trustee would incur $453 million to $330 million of "liquidation
tax liabilities" by
selling assets, although the Debtors' own Court-approved Mirror
Liquidation Plan would
enable the Chapter 7 trustee to sell the Debtors' stock without
incurring any tax
liabilities (subject to the resolution of certain purchase price
allocation determinations
among the subsidiaries sold). A stock sale would also result in
the elimination of the
$105 million liability for post-retirement health benefits, that
is reflected in the Debtors' Liquidation Analysis.
Each of these errors pushes the Debtors conveniently to
the liquidation insolvency
of $512 million to $716 million required by their crabbed
post-petition interest theory.
If the Debtors' liquidation analysis had been prepared correctly,
in accordance with the
plain meaning of Section 1129(a)(7), the Proponents believe that
the Debtors would be
solvent under the provision that the Debtors contend is the sole
basis for the solvent debtor rule.
The Debtors have raised a number of objections to the
Proponents' liquidation analysis, each of which is discussed
below.
The Debtors assert that the Proponents' liquidation
analyses have been inconsistent
in that the liquidation analysis contained in the Disclosure
Statement of Certain Creditor
Proponents Pursuant to Section 1125 of the Bankruptcy Code, dated
as of December 16, 1993,
concluded that the Debtors were insolvent on a liquidation basis
and the liquidation
analysis contained in the First Amended Disclosure Statement for
Creditor Proponents'
Creditors' Plan (and subsequent amendments thereto) concluded
that the Debtors were solvent on a liquidation basis.
Given the Court's December 31, 1993 deadline for filing
Chapter 11 plans and
disclosure statements, the Proponents (and the other creditor
proponents of plans filed
by that deadline) based their liquidation analysis on the
liquidation analysis set forth
in the Debtors' previous Disclosure Statement that was on file
with the Court. The
Proponents had assumed that the Debtors' Liquidation Analysis
would have been correctly
prepared, without being influenced by the Debtors' litigation
strategy, and that the
Proponents would have the further opportunity to verify, update
and amend the analysis
in the final version of this Disclosure Statement. For the
reasons described above, the
Proponents later came to believe that the Debtors' Liquidation
Analysis was, in fact,
fundamentally flawed, and accordingly revised it as set forth in
the First Amended
Disclosure Statement dated as of April 20, 1994, and the
subsequent amendments thereto.
The Debtors also disagree with the Proponents that the
appropriate manner for
conducting the liquidation analysis of the Debtors is through a
sale of the stock of the Debtors' subsidiaries.
The Proponents' liquidation analysis assumes that a
Chapter 7 trustee would attempt
to maximize the value of the estates, consistent with the
trustee's fiduciary duties, and,
therefore, that the trustee would attempt to sell the stock of
the Operating Businesses
to minimize substantial liabilities that would otherwise arise.
This liquidation strategy
materially varies from the Debtors' Liquidation Analysis, which,
among other things, is
based on the sale of assets. The Debtors' approach, which does
not take advantage of the
tax savings arising from the Debtors' Court-approved Mirror
Liquidation Plan, results in
a substantially higher tax liability than that used in the
Proponents' liquidation
analysis and, as such, would leave less value available for
distribution to Creditors.
The Proponents believe the Debtors' choice of liquidation on an
asset sale basis rather
than a stock sale basis and other assumptions in the Debtors'
Liquidation Analysis were
made to reduce assets available for distribution in order to
bolster a legal argument that
the Proponents expect the Debtors to make with respect to the
fact that post-petition
interest will not be paid in respect of Unsecured Claims under
the Debtors' Plan.
The Proponents believe that a Court order providing for
potential buyers to
purchase the stock of the Operating Businesses free and clear of
all liens and
encumbrances (pursuant to Sections 105(a) and 363(f) of the Code)
would enable the stock of the Operating Businesses to be sold.
The Debtors have raised the issue as to the effect if,
hypothetically, a stock sale
could not be effected and an asset sale must be conducted in a
Chapter 7 liquidation.
First, the Proponents believe that a sale of stock is appropriate
and can be done. If,
however, the Court finds that the liquidation analysis of the
Debtors must be conducted
on the basis of asset sales, the result would be increased tax
liability, estimated in
the Debtors' Liquidation Analysis to be in the range from $276
million to $414 million.
The Debtors have questioned why the Negotiated Enterprise
Value is only
"marginally" higher than "Gross Proceeds Available for
Distribution" on a Chapter 7
liquidation basis. The Negotiated Enterprise Value is
$2,525,000,000, representing a good
faith negotiated estimate of the going concern enterprise value
of the Debtors on a
consolidated basis, arrived at after extensive analysis and
negotiations among the
Proponents and Holders of Claims in other Classes, and taking
into account the possibility
of delay between the Confirmation Date and the Effective Date,
and the likely increase in the value of the Debtors over time.
The Gross Proceeds Available for Distribution on a Chapter
7 liquidation basis is
estimated by the Proponents to be in a range from $2,399,000,000
to $2,539,000,000. These
figures assume that, during the estimated one-year liquidation
period (from 12/31/94 to
12/31/95), the value of the Debtors will increase at the rate set
forth in the Proponents'
liquidation analysis. The Creditors' Plan, in contrast to the
Debtors' Plan, can be
consummated by 12/31/94. The fact that the Negotiated Enterprise
Value is not
dramatically greater than the Gross Proceeds Available for
Distribution on a Chapter 7
liquidation basis also demonstrates that the method for
liquidating the Debtors selected
by the Proponents is proper in that it maximizes the value of the
estate by minimizing
any and all discounts accompanying a Chapter 7 liquidation. The
Debtors' Liquidation
Analysis, on the other hand, improperly maximizes discounts in
the liquidation.
The Debtors have questioned why the Negotiated Enterprise
Value is less than the
"Total Gross Asset Value" in the Proponents' April 1994
liquidation analysis. Total Gross
Asset Value on a Chapter 7 liquidation basis assumes an increase
in the value of the
Debtors during the liquidation period as described above.
The Creditors' Plan provides existing stockholders with an
Equity Call Option to
purchase their pro rata share of all of the New Common Stock that
would otherwise be
issued to Holders of Subordinated Note Claims and to the Celotex
Settlement Fund
Recipient, for Cash on the Effective Date, at an exercise price
per share equal to the
New Common Stock Value Per Share, which is derived from a
valuation of $2,525,000,000,
the Negotiated Enterprise Value or, if higher, the going concern
enterprise value found
by the Court. If existing stockholders really believe that the
Negotiated Enterprise
Value is too low, they can purchase the New Common Stock at a
price directly based on the
Negotiated Enterprise Value (or, if higher, the going concern
enterprise value of the
Debtors found by the Court). While the Proponents continue to
believe that the Negotiated
Enterprise Value is a reasonable estimate of the going concern
enterprise value of the
Debtors, and that the Equity Call Option therefore has minimal
value, they have provided
this call option to existing stockholders to demonstrate clearly
their belief in the
reasonableness of the Negotiated Enterprise Value, and to offer
current stockholders the
opportunity to put their words into action by purchasing New
Common Stock for Cash at a
price based on the Negotiated Enterprise Value. The Proponents
believe that the Equity
Call Option provides a reasonable safeguard for the existing
stockholders against any
possible undervaluing of the New Common Stock to be issued to
unsecured bondholders under
the Creditors' Plan. Exercise of the Equity Call Option will
also have the beneficial
effect of paying Creditors, in Cash, the value that they would
otherwise have received
in New Common Stock, thereby giving them immediate liquidity at a
previously agreed upon price.
The Proponents believe that the Debtors' Liquidation
Analysis, if prepared consistent with what the Proponents believe
is the proper approach, shows that, if one
accepts the Debtors' assumption that no distribution would be
made on account of the Veil Piercing Claims in a Chapter 7
liquidation, the Debtors would be solvent after paying the
principal and pre-petition interest on Unsecured Claims, and that
Holders of Subordinated Note Claims would be entitled by law to
post-petition interest. Even if that is not
factually the case, however, the Proponents believe that the
Creditors' Plan is confirmable. The Debtors' contention to the
contrary is based on the premise that the
payment of post-petition interest to the Holders of Subordinated
Note Claims under the
Creditors' Plan is not permissible and that the propriety of the
Veil Piercing Settlement
Agreement depends on the permissibility of such a payment. The
approval of the Veil Piercing Settlement Agreement does not,
however, require that the Court determine that
Holders of Subordinated Note Claims are legally entitled to
post-petition interest on
account of their Claims. The Veil Piercing Settlement Agreement
can be approved by the
Court independently of any such determination, based on the
reasonableness of the settlement.
Under the Creditors' Plan, post-petition interest on
Subordinated Note Claims would
be paid (i) only if the enterprise value of the Debtors exceeds
$2.525 billion, and
(ii) only to the extent that the payment of post-petition
interest under the Creditors'
Plan would be permitted by law. Thus, the Court's determination
of the post-petition
interest issue would not affect the validity of the plan
provisions relating to the treatment of Subordinated Note Claims.
As to trade creditors and other Holders of Unsecured
Claims, the Creditors' Plan does provide that they will receive
post-petition interest at the rate of 6.5% per annum -
- - which is less than the legal rate of interest under Florida law
(12%) or New York law (9%). The Proponents believe that this
represents a reasonable settlement of the
potential claims of trade and other general, unsecured creditors
for post-petition
interest in light of (i) the possibility that some of the Debtors
are solvent on a
stand-alone basis even on a Chapter 7 liquidation basis; and (ii)
potential LBO-related
fraudulent conveyance claims that might be asserted on behalf of
trade creditors (including in a hypothetical Chapter 7
liquidation).
XI.
DEFINITIONS
Set forth below is a cross-reference table denoting where
in this Disclosure Statement capitalized terms used therein are
defined.
Annexed to this Disclosure Statement as Exhibit I is the
Creditors' Plan. Included in Article I of the Creditors' Plan
are definitions of certain terms used therein and
herein. In case of any inconsistency in definitions between the
Creditors' Plan and the Disclosure Statement, definitions in the
Creditors' Plan shall control.
Section in
Defined Term Disclosure Statement
10 7/8% Indenture Trustee See Creditors' Plan
10 7/8% Subordinated Debenture Claims See Creditors' Plan
10 7/8% Subordinated Debenture Indenture See Creditors' Plan
10 7/8% Subordinated Debentures II.C.4.
13 1/8% Indenture Trustee See Creditors' Plan
13 1/8% Subordinated Note Claims See Creditors' Plan
13 1/8% Subordinated Note Indenture See Creditors' Plan
13 1/8% Subordinated Notes II.C.4.
13 3/4% Indenture Trustee See Creditors' Plan
13 3/4% Subordinated Debenture Claims See Creditors' Plan
13 3/4% Subordinated Debenture Indenture See Creditors' Plan
13 3/4% Subordinated Debentures II.C.4.
17% Indenture Trustee See Creditors' Plan
17% Subordinated Note Claims See Creditors' Plan
17% Subordinated Note Debtors II.C.4.
17% Subordinated Note Guarantors II.C.4.
17% Subordinated Note Indenture See Creditors' Plan
17% Subordinated Note Issuers II.C.4.
17% Subordinated Notes II.C.4.
1987 Fiscal Year VII.B.2.(b)
1988 Fiscal Period VII.B.2.(b)
Acceptance Period I.E.9.
Accrued Market Discount IV.B.3.(b)
Accumulators VI.B.
Acuna Lawsuit VII.S.2.
Ad Hoc Committee of Pre-LBO Bondholders See Creditors' Plan
Adams Lawsuit VII.S.2.
Adams II Lawsuit VII.S.2.
Additional Revolving Loan
Borrower Pledge Agreements II.C.3.
Additional Revolving Loan Borrower Pledgor II.C.3.
Additional Subsidiaries Pledge Agreements II.C.3.
Additional Subsidiary Pledgor II.C.3.
Adjusted Revolving Loan Claim II.C.3.
Adjusted Working Capital Claim II.C.3.
Administrative Claims See Creditors' Plan
Affiliate I.E.3.
Affiliate Subordinated Bridge Notes VII.A.3.
Agreement and Plan of Merger I.D.
Alabama Power I.E.8.
Allowed Amount See Creditors' Plan
Allowed Claim See Creditors' Plan
Allowed Indemnity Claims II.B.1.(e)
AMT IV.A.3.
AMTI IV.A.3.
Apache II.C.3.
Apache Note II.C.3.
Apache Note Proceeds II.C.3
Apollo See Creditors' Plan
Appeals Division II.C.2.
Applicable Consideration II.C.4.
Asset Backed Notes VII.B.2.(a)
Asset Backed Notes Collateral VII.B.2.(a)
Assets See Creditors' Plan
Automatic Stay I.E.7.
BAAQMD VII.T.3.(b)
Ballot I.A.5.
Bank Agents I.A.1.
Bank Agents Agreement I.A.4.
Bank Agents Plan I.E.11.
Bank Setoff Proceeds II.C.3.
Bankers Trust VII.D.1.
Banks II.B.3.
Bar Date See Creditors' Plan
BCOA VII.K.1.
Beijer Proceeds II.C.3.
Benchmark Yield II.E.2.(a)
Best Chart of Debtors
Best (Miss.) Chart of Debtors
Black Warrior Methane Chart of Debtors
Black Warrior Transmission Chart of Debtors
Bondholder Proponents I.A.1.
Bondholders Committee I.A.1.
Booker III.B.3.
Business Day See Creditors' Plan
Cardem Chart of Debtors
Castings VII.B.2.(e)
Celotex See Creditors' Plan
Celotex Chapter 11 Proceeding I.A.2. -- Note 1
Celotex/JWC Released Party See Creditors' Plan
Celotex Settlement Fund Recipient See Creditors' Plan
CERCLA VII.T.1.
Chapter 11 I.D.
Chapter 11 Cases I.D.
Charter See Creditors' Plan
Chemical VII.D.1.
Chemical Bank Prime Rate See Creditors' Plan
Cherokee/Sanford Brick VII.B.2.(k)
CIBC VII.D.3.
CIBC Escrow Fund VII.D.3
Claim See Creditors' Plan
Claims Resolution Procedure VII.R.
Class See Creditors' Plan
Class A Common Stock II.B.2.
Class B Common Stock II.B.2.
Class S-6 Fund II.C.3.
Coast to Coast Chart of Debtors
Code I.A.1.
Common Stock II.C.6.
Computer Holdings Chart of Debtors
Computer Services Chart of Debtors
Concrete VII.S.5.
Confirmation II.N.(d)
Confirmation Date See Creditors' Plan
Confirmation Hearing I.A.5.
Confirmation Hearing Notice I.A.5.
Confirmation Order See Creditors' Plan
Control II.E.3.
Convenience Class II.C.4.
Convenience Class Claims See Creditors' Plan
Court I.A.1.
Court of Appeals I.F.
Credit Code VII.S.2.
Creditor I.A.1.
Creditors' Committee I.A.I
Creditors' Plan I.A.1.
DBL I.D.
Debtors See Creditors' Plan
Debtors' Disclosure Statement I.E.11.
Debtors in Possession I.E.2.
Debtors' Plan I.A.1.
Declaratory Judgment Proceeding I.A.3.
Delgado Lawsuit VII.S.2.
Delgado Plaintiffs VII.S.2.
Disclosure Statement I.A.1.
Disputed Claim See Creditors' Plan
Distributors VI.B.
District Court I.E.8.
Dixie Chart of Debtors
Drexel Burnham I.D.
Drexel Burnham Group III.B.4.(b)
Drexel Burnham Group Stock Purchase Agreement III.B.4.(b)
DTPA VII.S.2.
DTSC VII.T.3.(b)
Effective Date II.S.2.
Election Procedure See Creditors' Plan
Equity Call Option II.
Equity Call Option Election Form I.A.5.
EPA VII.T.1.
ERISA VII.L.
Excess Principal Amount IV.B.2.
Exchange Act III.B.2.(b)(5)
Exchange Offer II.E.2.(c)
Exchange Offers I.D.
Excise Tax II.C.2.
Exclusivity Period I.E.9.
Executory Contract I.E.8.
Executory Contract Claim See Creditors' Plan
Federal Excise Tax and Reclamation Claims II.C.2.
Federal Income Tax Claims See Creditors' Plan
Filing Date I.D.
Final Order See Creditors' Plan
First Tier Subsidiaries I.D.
First Tier Subsidiary Pledge Agreements II.C.3.
First Tier Subsidiary Pledgor II.C.3.
Former Georgia Marble VII.A.3.
Former U.S. Pipe VII.B.2.(e)
Fraudulent Conveyance Lawsuit I.E.12.
FSA II.E.2.(a)
FTC VII.S.2.
General Unsecured Interest Rate II.C.4.
Georgia Marble VII.A.3.
Georgia Metals Holdings VII.B.2.(i)
Gonzalez VII.S.2.
Governmental Unit See Creditors' Plan
Grace Street Note Claims II.C.3.
Grace Street Notes II.C.3.
Guarantors VII.A.3.
HAC I.D.
Hamer Holdings Chart of Debtors
Hamer Properties Chart of Debtors
Hillsborough Chart of Debtors
Hillsborough Pledge Agreement II.C.3.
Holder See Creditors' Plan
Home Improvement Chart of Debtors
Homes Holdings Chart of Debtors
HYDO IV.A.4.
IBCBA VII.K.1.
IDB of Birmingham II.C.3.
Indenture Trustees See Creditors' Plan
Indenture Trustees Claims See Creditors' Plan
Indentures VII.A.5.
Initial Lenders VII.D.3.
Initial Revolving Credit Bank Claim Payment II.C.3.
Initial Working Capital Bank Claim Payment II.C.3.
Injunction Proceeding I.F.
Intercompany IRB II.C.5.
Intercompany IRB Claims See Creditors' Plan
Intercompany IRB Indenture II.C.5.
Intercompany IRB Trustee II.C.5.
Interest See Creditors' Plan
IRC I.E.8.
IRS I.E.5.
IRS Amended Proof of Claim VII.S.3.
ISRA VII.T.3.(a)
Issuer and Guarantor Pledge Agreements II.C.3.
Issuers VII.A.3.
J-II I.D.
Jasper VII.B.2.(c)
Jim Walter Corporation I.D.
Jim Walter Homes Chart of Debtors
Jim Walter Papers VII.B.2.(b)
Jim Walter Resources Chart of Debtors
JW Aluminum Chart of Debtors
JW Insurance Chart of Debtors
J.W. Railroad Chart of Debtors
JW Resources Chart of Debtors
JW Walter Chart of Debtors
JW Window Components VII.E.11.
JWC I.D.
JWI Holdings Chart of Debtors
Kaneb VII.E.7.(b)
KKR I.D.
KKR Associates II.C.6.
KKR Investors III.B.4.(a) --
Note 1
Land Holdings Chart of Debtors
LaSalle II.B.3.
LBO-Related Issues See Creditors' Plan
Letter Agreement III.B.4.(b)
Lien See Creditors' Plan
Liquidation Fund IX.C.
Loan Note VII.A.3.
Lone Star Steel Toxic Case VII.R.(f)
Management Common Stock
Subscription Agreements III.B.4.(b)
Management Investors III.B.4.(b)
Marble Liquidation Plan VII.B.2.(i)
Merger I.D.
Merrill Lynch I.D.
MHTCo. VII.D.1.
Mid-State Holdings Chart of Debtors
Mid-State Homes Chart of Debtors
Mid-State Term Loan II.C.3.
Mid-State Term Loan Commitment II.C.3.
Mid-State Trust II II.E.2.(b)
Mid-State Trust II Residual Bonds II.E.2.(b)
Mid-State Trust III VII.D.6.
Mid-State Trust IV II.E.2.(a)
Mid-State Trust IV Secured Notes II.E.2.(a)
Midwest VII.S.1.
Mine No. 5 VII.E.7.(a)
Mirror Liquidation Order I.E.8.
Mirror Liquidation Plan I.E.8.
Moody's II.E.2.(a)
Mortgage-Backed Notes VII.B.2.(a)
Mortgage-Backed Notes Collateral VII.B.2.(a)
MSHA VII.E.7.(a)
NationsBank II.C.3.
Negotiated Enterprise Value II.B.2.(e)
New Board/New Boards III.B.1.
New Common Stock II.E.3.
New Common Stock Registration
Rights Agreement II.E.3.
New Common Stock Value II.B.2.(e)
New Common Stock Value Per Share II.B.2.(e)
New Debt IV.A.1.
New Durham Employment Agreement III.B.2.(b)(5)
New Option Plan III.B.2.(b)(4)
New Note Indenture II.C.3.
New Senior Notes See Creditors' Plan
NJDEPE VII.T.3(a)
NOLs IV.A.1.
Non-Debtor Affiliates III.B.1.
Note Purchase Agreement VII.A.3.
NUBIL IV.A.2.
Official Committees I.E.4.
OID IV.A.1.
Oil Holdings VII.B.2.(1)
Old Common Stock II.B.2.(e)
Old Option Agreements III.B.2.(b)(4)
Old Option Plan III.B.2.(b)(4)
Old Options III.B.2.(b)(4)
Old Walter Industries I.D.
Old Walter Industries IRB Claims See Creditors' Plan
Old Walter Industries IRB Indentures II.C.4.
Old Walter Industries IRBs II.C.4.
Old Walter Industries Pledge Agreement II.C.3.
Old Walter Industries Revolving Credit
Guarantee II.C.3.
Old Walter Industries Working Capital
Guarantee II.C.3.
Operating Income
III.B.2.(b)(1)--Note 1
Original Durham Employment Agreement III.B.2.(b)(5)
Original Jim Walter I.D.
Original Jim Walter Plan III.B.2.(b)(2)
Original Creditors' Plan I.A.4.
OSM II.C.2.
Other Unsecured Claim Election See Creditors' Plan
Other Unsecured Claims See Creditors' Plan
PRP VII.T.1
Papers Holdings VII.B.2.(b)
Pension Plan III.B.2.(b)(3)
Permitted Class A Holders II.E.3.
Person See Creditors' Plan
Pipe Liquidation Plan VII.B.2.(e)
Pipe Realty Chart of Debtors
Post-Filing Date Intercompany Notes
Payable Claims See Creditors' Plan
Post-Filing Date Interest Claims II.B.3.
Post-LBO Subordinated Note Guarantors II.C.4.
Post-LBO Subordinated Note Issuers II.C.4.
Post-Stub Period Interest II.C.3.
Pre-Filing Date Intercompany Notes
Payable Claims See Creditors' Plan
Pre-Filing Date Unsecured Allowed Amount See Creditors' Plan
Pre-LBO Bondholders Settlement Agreement I.A.4.
Pre-LBO Subcommittee I.E.4.
Pre-Petition Lenders VII.D.3.
Pre-Petition Reimbursement Agreement VII.D.3.
Proceeds Account VII.D.3.
Pro Rata See Creditors' Plan
Proponents I.A.1.
proportionality test IV.A.1.
Provident Life & Accident Insurance
Company Claims II.C.3.
Public Offering III.B.4.(b)
Qualified Securities II.B.2.(a)
Qualified Securities Registration
Rights Agreement II.E.2.
Qualified Securities Initial
Shelf Registration II.E.2.(c)
Railroad Holdings Chart of Debtors
Rating Service II.B.2.(a)(1)
Reclamation Act II.C.2.
Reclamation Fees II.C.2.
Registrable Qualified Security II.E.2.(c)
Registrable Securities Initial
Shelf Registration II.E.3.
Registration Rights Agreement III.B.4.(b)
Rejecting Class I.A.7.
Released Parties II.K.1.
Reorganization Documents See Creditors' Plan
Reorganization Proceedings I.D.
Reorganization Securities VI.A.
Resources Holdings Chart of Debtors
Resources Liquidation Plan VII.B.2.(j)
Restated Alabama Contract VII.E.7.(a)
Revolving Credit Agents See Creditors' Plan
Revolving Credit Agents Claims See Creditors' Plan
Revolving Credit Agreement II.C.3.
Revolving Credit Bank Claim Stub
Period Amount II.C.3.
Revolving Credit Bank Claims See Creditors' Plan
Revolving Credit Banks II.C.3.
Revolving Loan II.C.3.
Revolving Loan Borrower Pledge Agreements II.C.3.
Revolving Loan Borrower Pledgor II.C.3.
Revolving Loan Borrowers II.C.3.
Revolving Loan Commitment II.C.3.
Revolving Loan Debtors II.C.3.
Revolving Loan Guarantors II.C.3.
RICO VII.S.1.
S&P II.E.2.(a)
SEC Second page after cover page
Schedules See Creditors' Plan
Secured Claim See Creditors' Plan
Secured Equipment Purchase Claims II.C.3.
Securities VII.A.3.
Securities Act III.B.4.(b)
Senior Bridge Note VII.A.3.
Senior Claim Differential II.B.2.(b)
Senior Claims II.B.2.(b)
Senior Note Guarantors VII.A.3.
Senior Note Issuers VII.A.3.
Senior Note Plan I.E.11.
Senior Subordinated Indenture Trustee See Creditors' Plan
Senior Subordinated Note Claims See Creditors' Plan
Senior Subordinated Note Debtors II.C.4.
Senior Subordinated Note Guarantors II.C.4.
Senior Subordinated Note Indenture See Creditors' Plan
Senior Subordinated Note Issuers II.C.4.
Senior Subordinated Notes II.C.4.
Series A Senior Notes VII.A.3.
Series B & C Senior Note Claims II.C.3.
Series B & C Senior Note Claim Election I.A.6.
Series B & C Senior Note Claim Election Form I.A.6.
Series B & C Senior Note Debtors II.C.3.
Series B & C Senior Note Guarantors II.C.3.
Series B & C Senior Note Indenture II.C.3.
Series B & C Senior Note Issuers II.C.3.
Senior B & C Senior Note Trustee II.C.3.
Series B & C Senior Notes II.C.3.
Settling Equityholder II.B.1.A.
Shared Collateral II.C.3.
Shore Oil VII.B.2.(1)
Sloss Chart of Debtors
Sloss IRB II.C.3.
Sloss IRB Claim II.C.3.
Sloss IRB Indenture II.C.3.
Sloss IRB Trustee II.C.3.
SMUs VII.T.2.
SNG VII.E.7.(b)
Sonat VII.E.7.(b)
Southern Precision Chart of Debtors
Spread II.E.2.(a)
State and Local Tax Claims II.C.2.
Stock-for-Debt Exception IV.A.1.
Stub Period II.B.3
Stub Period Interest II.C.3.
Subordinated Note Claim Election I.A.5.
Subordinated Note Claim Election Form I.A.5.
Subordinated Note Claims See Creditors' Plan
Subordinated Note Guarantors VII.A.3.
Subordinated Note Issuers VII.A.3.
Subordinated Notes See Creditors' Plan
Subsidiary Common Stock II.C.6.
Supplemental Pension Plan III.B.2.(b)(1)--Note 2
Supplemental Profit Sharing Plan III.B.2.(b)(1)--Note 2
Syndicators VI.B.
Target III.B.2.(b)(1)--Note 1
Taurus VII.C.2.
Tax Complaint VII.S.3.
Tender Offer I.D.
Tender Offer Loans VII.A.3.
The Celotex Corporation See Creditors' Plan
TMP II.E.2.(a)
Transferred Assets VII.B.2.(e)
Transferred Jim Walter Resources Subsidiaries VII.B.2.(j)
Trust II Contracts II.E.2.(b)
Trust IV Contracts II.E.2.(a)
UCP Holdings VII.B.2.(h)
UMWA VII.E.7.(a)
United Land Chart of Debtors
Unsecured Claim See Creditors' Plan
U.S. Concrete Pipe VII.B.2.(e)
U.S. Pipe Chart of Debtors
U.S. Pipe Holdings VII.A.3.
U.S. Trustee I.E.4.
Veil Piercing Claims Amount II.B.2.(b)
Veil Piercing-Related Issues II.C.4.
Veil Piercing Proceedings See Creditors' Plan
Veil Piercing Settlement See Creditors' Plan
Veil Piercing Settlement Agreement I.A.1.
Vestal Chart of Debtors
Voting Classes I.A.5.
Voting Deadline I.A.6.
Voting Record Date I.A.6.
Walter Industries Chart of Debtors
Walter Industries Group IV.A.
Walter Industries Plan III.B.2.(b)(2)
Walter Land Chart of Debtors
Wedlo VII.B.2.(f)
Wedlo Holdings VII.B.2.(f)
WI Holdings VII.B.2.(g)
Window Components Chart of Debtors
Window Components (Wisc.) Chart of Debtors
Working Capital Agents See Creditors' Plan
Working Capital Agents Claims See Creditors' Plan
Working Capital Agreement II.C.3.
Working Capital Bank Claim Stub Period Amount II.C.3.
Working Capital Bank Claims See Creditors' Plan
Working Capital Banks II.C.3.
Working Capital Borrower Pledge Agreements II.C.3.
Working Capital Borrower Pledgor II.C.3.
Working Capital Borrowers II.C.3.
Working Capital Commitment II.C.3.
Working Capital Debtors II.C.3.
Working Capital Guarantors II.C.3.
Working Capital Loans II.C.3.
XII.
CHART OF DEBTORS
<TABLE>
<CAPTION>
Definition Used in
Debtors Creditors' Plan and
Case No. Case Name Current Corporate Structure Disclosure Statement
<S> <C> <C> <C>
(N.A.) Walter Industries, Inc. Surviving corporation of merger between
Hillsborough and Old Walter Industries Walter Industries
89-9715-8P1 Hillsborough Holdings
Corporation Hillsborough Division of Walter
Industries, Inc. (formerly named
Hillsborough Holdings Corporation) Hillsborough
89-9745-8P1 Walter Industries, Inc. Walter Industries Division of Walter
Industries, Inc. (formerly named
Hillsborough Holdings Corporation) Old Walter Industries
89-9740-8P1 Best Insurors, Inc. Best Insurors, Inc. Best
89-9737-8P1 Best Insurors of
Mississippi, Inc. Best Insurors of Mississippi, Inc. Best (Miss.)
89-9731-8P1 Jim Walter Insurance
Services, Inc. Jim Walter Insurance Services, Inc. JW Insurance
89-9727-8P1 Coast to Coast
Advertising, Inc. Coast to Coast Advertising, Inc. Coast to Coast
89-9724-8P1 Computer Holdings
Corporation Computer Holdings Corporation Computer Holdings
89-9723-8P1 Jim Walter Computer
Services, Inc. Jim Walter Computer Services, Inc. Computer Services
89-9741-8P1 Dixie Building
Supplies, Inc. Dixie Building Supplies, Inc. Dixie
89-9735-8P1 Hamer Holdings
Corporation Hamer Holdings Corporation Hamer Holdings
89-9739-8P1 Hamer Properties, Inc. Hamer Properties, Inc. Hamer Properties
89-9742-8P1 Homes Holdings
Corporation Homes Holdings Corporation Homes Holdings
89-9746-8P1 Jim Walter Homes, Inc. Jim Walter Homes, Inc. Jim Walter Homes
89-9722-8P1 Walter Home
Improvement, Inc. Walter Home Improvement, Inc. Home Improvement
89-9718-8P1 JW Aluminum Company JW Aluminum Company JW Aluminum
90-11997-8P1 JW Resources, Inc. JW Resources Division of Jim
Walter Resources, Inc. (formerly
named JW Resources, Inc.) JW Resources
89-9719-8P1 JW Resources Holdings
Corporation Resources Holdings Division of Jim
Walter Resources, Inc. (formerly
named JW Resources, Inc.) Resources Holdings
89-9738-8P1 Jim Walter Resources,
Inc. Resources Division of Jim Walter
Resources, Inc. (formerly named
JW Resources, Inc.) Jim Walter Resources
89-9734-8P1 U.S. Pipe Realty, Inc. Pipe Realty Division of United Land
Corporation (formerly named U.S. Pipe
Realty, Inc.) Pipe Realty
89-9730-8P1 United Land Corporation United Land Division of United Land United Land
Corporation (formerly named U.S.
Pipe Realty, Inc.)
AND
United Land Division of Jim Walter
Resources, Inc. (formerly named JW
Resources, Inc.)
89-9732-8P1 JW Window Components,
Inc. JW Window Components, Inc. Window Components
89-9716-8P1 Jim Walter Window
Components, Inc. Jim Walter Window Components, Inc. Window Components (Wisc.)
89-9721-8P1 J.W.I. Holdings
Corporation J.W.I. Holdings Corporation JWI Holdings
89-9717-8P1 J.W. Walter, Inc. J.W. Walter, Inc. JW Walter
89-9720-8P1 Land Holdings
Corporation Land Holdings Corporation Land Holdings
89-9736-8P1 Walter Land Company Walter Land Company Walter Land
89-9726-8P1 Mid-State Holdings
Corporation Mid-State Holdings Corporation Mid-State Holdings
89-9725-8P1 Mid-State Homes, Inc. Mid-State Homes, Inc. Mid-State Homes
89-9733-8P1 Railroad Holdings
Corporation Railroad Holdings Corporation Railroad Holdings
89-9743-8P1 Sloss Industries
Corporation Sloss Industries Corporation Sloss
89-9729-8P1 Southern Precision
Corporation Southern Precision Corporation Southern Precision
89-9744-8P1 United States Pipe and
Foundry Company United States Pipe and Foundry Company U.S. Pipe
89-9728-8P1 Vestal Manufacturing
Company Vestal Manufacturing Company Vestal
Non-Debtor Affiliates
Not applicable Cardem Insurance, Ltd. Cardem
Not applicable Jefferson Warrior Railroad Company, Inc. J.W. Railroad
Not applicable Mid-State Trust II Mid-State Trust II
Not applicable Mid-State Trust III Mid-State Trust III
Not applicable Black Warrior Methane Corp. (50%owned) Black Warrior Methane
Not applicable Black Warrior Transmission Corp.
(50% owned) Black Warrior Transmission
</TABLE>
XIII.
CONCLUSION
The Proponents recommend that all Holders of impaired
Claims and Interests vote to accept the Creditors' Plan.
Dated: August 1, 1994
New York, New York
OFFICIAL BONDHOLDERS COMMITTEE OF
HILLSBOROUGH HOLDINGS CORPORATION, ET AL.
By: /s/ Daniel H. Golden
Daniel H. Golden, Esq.
OFFICIAL COMMITTEE OF GENERAL UNSECURED CREDITORS OF
HILLSBOROUGH HOLDINGS CORPORATION, ET AL.
By: /s/ Marc S. Kirschner
Marc S. Kirschner, Esq.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
By: /s/ Robert D. Drain
Robert D. Drain, Esq.
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3236
For Lehman Brothers Inc.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
By: /s/ Ellen R. Werther
Ellen R. Werther, Esq.
65 East 55th Street, 33rd Floor
New York, New York 10022
(212) 872-1010
For Apollo
MARCUS MONTGOMERY WOLFSON P.C.
By: /s/ Sara L. Chenetz
Peter D. Wolfson, Esq.
Sara L. Chenetz, Esq.
453 Wall Street
New York, New York 10005
(212) 858-5200
For Ad Hoc Committee of Pre-LBO Bondholders
(Signed as to form only)
Exhibit II
OFFICIAL COMMITTEES
Bondholders Committee
Members
The Acacia Mutual Life Insurance Company
51 Louisiana Avenue, N.W.
Washington, D.C. 20001
Apollo Investment Fund, L.P.
Credit Lyonnais Securities
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
General Electric Investment Corporation
P.O. Box 7900
3003 Summer Street
Stamford, CT 06904-7900
Lehman Brothers, Inc.
American Express Tower
World Financial Center
9th Floor
New York, NY 10285
Ex-Officio Members
The Bank of New York
101 Barclay, 21st Floor
New York, NY 10286
Barnett Banks Trust Company, N.A.
9000 Southside Boulevard
Building 100
P.O. Box 40200
Jacksonville, FL 32203-0200
Mellon Bank
Corporate Trust Division
One Mellon Bank Center
Pittsburgh, PA 15258-0001
IBJ Schroder Bank & Trust Company
One State Street Plaza
New York, NY 10004
Official Committee of Unsecured Creditors
Philipp Brothers, Inc. Specification Rubber
7 World Trade Center Products, Inc.
33rd Floor c/o Burr & Foreman
New York, NY 10048 3000 South Trust Tower
Birmingham, AL 35202
Drummond Coal Sales, Inc. United Steelworkers of 530
Beacon Parkway West America
Birmingham, AL 35202 5 Gateway Center
Pittsburgh, PA 15222
Lowe's Home Centers, Inc. CSX Corporation
Highway 268 East 6735 South Point Drive, South
North Wilkesboro, NC 28656 Jacksonville, FL 32216
Gullick Dobson, Inc. Norandal USA, Inc.
Route 609 Hillman Highway Two Brentwood Commons
Abingdon, VA 24210 750 Old Hickory Blvd.
Suite 102
Brentwood, TN 37027
Anderson Ma Vor, Inc. Columbia National Group, Inc.
795 Old Route 119 North 6600 Grant Avenue
Indiana, PA 15701 Cleveland, OH 44105
<PAGE>
EXHIBIT III
UNITED STATES BANKRUPTCY COURT
MITDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re In Proceedings For a Reorganization
Under Chapter 11 Case Nos. 89-9715-8P1
HILLSBOROUGH HOLDINGS Through 89-9746-8P1
CORPORATION, et al., Inclusive.
per attached Exhibit A
Debtors
ORDER AUTHORIZING DEBTORS
TO COMPLETE THEIR MIRROR
LIQUIDATION PLAN
Upon the motion dated July 5, 1990 (the "Motion") of
Hillsborough Holdings Corporation, debtor and debtor in
possission, for and on behalf of itself and the other debtors
and debtors in possession herein (collectively, the "Debtors"),
for an order authorizing certain of the Debtors to complete their
previously adopted plans of complete liquidation pursuant to
section 332 of the Internal Revenue Code of 1986, as amended; and
hearings on the motion having been held on September 5, 1990 and
October 9, 1990; and upon the record made at such hearings; and
as it being the intent of the Court in entering this Order to
preserve the rights and interest of the Interested parties, as
said term is defined below, which may be affected by the
completion of the Mirror Liquidation Plan and that the provisions
of this Order be construed in a manner consistent with such
intent; and as it being the further intent of the Court that
nothing contained in this Order and no action taken pursuant
hereto shall be deemed to eliminate or reduce any otherwise valid
guaranty, intercompany obligation, equity interest, lien, joint
and several claim or several claim; and after due deliberation
and sufficient casue appearing therefor;
IT IS HEREBY ORDERED THAT:
1. The Motion be, and it hereby is, granted.
2. The objection to the Motion filed by Manufacturers
Hanover Trust Company and Bankers Trust Company, as agents for
the bansk which are parties to the Credit Agreement dated as of
September 10, 1987, as amended, the Working Capital Credit
Agreement dated as of December 29, 1987, as amended, and/or the
Post-Petition Replacement Letter of Credit Agreement dated as of
May 18, 1990, as amended, is deemed settled by virtue of the
provisions of this Order.
3. Capitalized terms used but not defined in this Order
which are defined in the Motion shall have the meaning given to
them in the Motion, and reference should be made thereto. For
purposes of this Order, an "Interested Party" of any Debtor shall
mean any entity which, as of the date of this Order, is a
creditor or has an interest in the stock, property or obligations
(including, without limitation, intercompany notes) of such
Debtor.
4. Subject to the provisions of this Order, the Debtors
be, and they hereby are, authorized an empowered to execute such
documents and agreements and to do such things as may be
necessary to effectuate, implement and consummate the Mirror
Liquidation Plan.
5. Resources Holdings shall place and hold in a
separate division (the "Resources Holdings Land Division") the
assets, including, but not limited to, the estate and mineral
interests and operations used by JWR in its mining and de-
gasification businesses, of United Land to be transferred to
Resources Holdings (collectively, the "Resources Holdings Land
Division Assets") and the contingent and non-contingent
liabilities (and only such liabilities) associated with such
assets to be assumed by Resources Holdings (collectively, the
"Resources Holdings Land Division Liabilities").
6. Resources Holdings shall maintain separate books and
records on a basis consistent with those accounting and tax
procedures in existence as of the date hereof ("Books and
Records") for the Resources Holdings Land Division and shall
account for such division's assets, liabilites, business
operations and financial condition in an manner sufficient to
enable the Court and each Interested Party of United Land to
determine the respective rights and interests of each such
Interested Party with respect to distributions under one or more
liquidation proceedings in accordance with chapter 7 of the Code
(a "Liquidation") or under a plan or plans of reorgainization (or
any other distributions or matters in these chapter 11 cases)
without regard to any actions that may be taken pursuant to this
Order to complete the Mirror Liquidation Plan.
7. Resources HOldings shall maintain separate Books and
Records for the present three (3) divisions of JWR (mining, de-
gasification and administration) (collectively, the "JWR
Division"), which divisions represent all of the assets,
contingent and non-contingent liabilities and operations of JWR
to be transferred to Resources Holdings by WII, and shall account
for such divisions' assets, liabilities, business operations and
financial condition in a manner sufficient to enable the Court
and each Interested Party of JWR to determine the respective
rights and interests of each such Interested Party with respect
to distributions under a Liquidation or a plan or plans of
reorganization (or any other distributions or matters in these
chapter 11 cases) without regard to any actions that may be taken
pursuant to this Order to complete the Mirror Liquidation Plan.
8. U.S. Pipe Realty, Inc. ("Pipe Realty") shall place
and hold in a separate division (the "Pipe Realty Land Division")
the assets, including, but not limited to, the real estate and
mineral interests and operations not used by JWR in its mining
and de-gasification businesses, of United Land to be transferred
to Pipe Realty (collectively, the "Pipe Realty Land Division
Assets") and the contingent and non-contingent liabilities (and
only such liabilites) assiciated with such assets to be assumed
by Pipe Realty (collectively, the "Pipe Realty Land Division
Liabilities").
9. Pipe Realty shall maintain separate Books and
Records for the Pipe Realty Land Division and shall account for
such division's assets, liabilities, business operations and
financial condition in a manner sufficient to enable the Court
and each Interested Party of United Land to determine the
respective rights and interests of each such Interested Party
with respect to distributions under a Liquidation or a plan or
plans of reorganization (or any other distributions or matters in
these chapter 11 cases) without regard to any actions that may be
taken pursuant to this Order to complete the Mirror Liquidation
Plan.
10. HHC shall place and hold in a separate division
(the "WII Division") the assets of WII to be transferred to HHC,
including but not limited to, the capital stock of Coast to Coast
Advertising, Inc., Dixie Building Supplies, inc., Best Insurers,
Inc. and Cardem Insurance Co. (collectively, the "WII Division
Assets") and the contingent and non-contingent liabilities (and
only such liabilities) of WII to be assumed by HHC (collectively,
the "WII Division Liabilities").
11. HHC shall maintain separate Books and Records for
the WII Division and shall account for such division's assets,
liabilities, business operations and financial condition in a
manner sufficient to permit the Court and each Interested party
of WII to determine the respective rights and interests of each
such Interested party with respect to distributions undera
Liquidation or a plan or plans of reorganization (or any other
distrubutions or matters in these chapter 11 cases) without
regard to any actions that may be taken pursuant to this Order to
complete the Mirror Liquidation Plan. Following the transfer of
the WII Division Assets and the WII Division Liabilites to HHC,
HHC shall maintain the grid accoutns and general accounts
currently extant between WII and each of the Debtors without
regard to any actions that may be taken pursuant to Order to
complete the Mirror Liquidation Plan.
12. For purposes of determining the rights and
interests of the Interested Parties of JWR with respect to
distributions under a Liquidation or a plan or plans of
reorganization (or any other distributions or matters in these
chapter 11 cases), none of (a) the Resources Holdings Land
Division Assets, (b) the Resources Holdings Land Division
Liabilites, (c) the assets and liabilites of WII (other than the
assets and liabilities of JWR which are acquired by WII by virtur
of the merger of JWR into WII) or (d) any assets and liabilities
of Resources Holdings existing prior to the transfer of the JWR
Division assets and the JWR Division liabilities to Resources
Holdings, shall be included in the JWR Division.
13. For purposes of determining the rights and
interests of the Interested Parties of United Land with respect
to distributions under a Liquidation or a plan or plans of
reorganization (or any other distributions or matters in these
chapter 11 cases), none of (a) the JWR Division assets, (b) the
JWR Division liabilities, (c) the assets and liabilities of WII
(other than the land, mineral rights and associated liabilities
of United Land used by JWR in its mining and de-gasification
businesses which are acquired by WII by virtue of the merger of
United Land into WII) or (d) any assets and liabilities of
Resources Holdings existing prior to the transfer of the
Resources Holdings Land Division Assets and the Resources
Holdings Land Division Liabilities to Resources Holdings shall be
included in the Resources Holdings Land Division.
14. For purposes of determining the rights and
interests of the Interested Parties of WII with respect to
distributions under a Liquidation or a plan or plans of
reorganization (or any other distributions or matters in these
cpater 11 cases), none of (a) the assets and liabilities of HHC
(other than the assets and liabilities of WII which are acquired
by HHC by virtue of the merger of WWI into HHC), (b) the assets
and liabilities of United Land or (c) the assets and liabilities
of JWR shall be included in the WII Division.
15. For purposes of determining the rights and
interests of the Interested Parties of Pipe Realty with respect
to distributions under a Liquidation or a plan or plans of
reorganization (or any other distributions or matters in these
chapter 11 cases), none of (a) the Pipe Realty Land Division
Assets, (b) the Pipe Realty Land Division Liabilities or (c) the
assets and liabilities of WII shall be included in the assets and
liabilities of Pipe Realty.
16. For purposes of determining the rights and
interests of the Interested Parties of United Land with respect
to distributions under a Liquidation or a plan or plans of
reorganization (or any other distributions or matters in these
chapter 11 cases), none of (a) the assets and liabilities of WII
(other than the land, mineral rights and associated liabilities
of United Land not used by JWR in its mining and de-gasification
businesses which are acquired by WII by virture of the merger of
United Land into WII) or (b) any assets and liabilities of Pipe
Realty existing prior to the transfer of the Pipe Realty Land
Division Assets and the Pipe Realty Land Division Liabilities
Pipe Realty shall be included in the Pipe Realty Land Division.
17. For purposes of determining the rights and
interests of the Interested Parties of HHC with respect to
distribution under a Liquidation or aplan or plans of
reorganization (or any other distributions or matters in these
chapter 11 cases), none of the assets and liabilities of WII
(including those acquired by WII by virtue of the mergers of
United Land and JWR into WII) shall be included in the assets and
liabilities of HHC.
18. All Interested Parties of United Land shall
continue to hold claims and liens, if any, against the Resources
Holdings Land Division and the Pipe Realty Land Division in the
same manner and having the same rights, validity and priority as
said claims and liens, if any, had against United Land (or the
stock, property or obligations thereof) without regard to any
actions which may be taken pursuant to this Order to complete the
Mirror Liquidation Plan.
19. All Interested Parties of JWR shall continue to
hold claims and liens, if any, against the JWR Division in the
same manner and having the same rights, validity and priority as
said claims and liens, if any, against the JWR Division (or the
stock, property or obligations thereof) without regard to any
actions which may be taken pursuant to this Order to complete the
Mirror Liquidation Plan.
20. All Interested Parties of Pipe Realty shall
continue to hold claims and liens, if any, against Pipe Realty in
the same manner and having the same rights, validity and priority
as said claims and liens, if any, had against Pipe Realty (or the
stock, property or obligations thereof) without regard to any
actions which may be taken pursuant to this Order to complete the
Mirror Liquidation Plan.
21. All Interested Parties of WII shall continue to
hold claims and liens, if any, against the WII Division in the
same manner and having the same rights, validity and priority as
said claims and liens, if any, had against WII (or the stock,
property or obligations thereof) without regard to any actions
which may be taken pursuant to this Order to complete the Mirror
Liquidation Plan.
22. All Interested parties of HHC shall continue to
hold claims and liens, if any, against HHC in the same manner and
having the same rights, validity and priority as said claims and
liens, if any, had against HHC (or the stock, property or
obligatiosn thereof) without regard to any actions which may be
taken pursuant to this Order to complete the Mirror Liquidation
Plan.
23. Any entity which holds, as of the date of this
Order, a lien against the stock of Jim Walter Homes, Inc. shall
be deemed to continue to hold such lien (with no change in the
validity or priority thereof or the rights related thereto)
notwithstanding any transfer of the ownership of such stock from
WII to Homes Holdings Corporation pursuant to the Mirror
Liquidation Plan.
24. Any entity which holds, as of the date of this
Order, a lien against the stock of Mid-State Homes, Inc. shall be
deemed to continue to hold such lien (with no change in the
validity or priority thereof or the rights related thereto)
notwithstanding any transfer of the ownership of such stock from
WII to Mid-State Holdings Corporation pursuant to the Mirror
Liquidation Plan.
25. The rights, liens, if any, claims and priority of
all Interested Parties of the Debtors, including, but not limited
to, HHC WII, JWR, United Land, Jim Walter Homes, Inc., Mid-State
Homes, Inc. and Pipe Realty shall with respect to the
determination of distributions under a Liquidation or a plan or
plans of reorganization (or any other distributions or matters in
these chapter 11 cases), be determined without regard to any
actions which may be taken pursuant to this Order to complete the
Mirror Liquidation Plan. Without limitation of the foregoing, in
the case of a Debtor which ceases to be a separate corporation as
a result of a merger effected pursuant to this Order, the value
of a claim against such Debtor or of a Lien against the stock of
such Debtor or an intercompany note between the Debotr and an
entity with which it merged (and the rights of the holder of such
claim or lien) shall be determined (a) in the case of such a
claim, as if such claim had survived in the form of a cliam (in
addition to any other claim which may be held by such holder)
against the division or divisions into which the assets and
liabilities of such Debtor were ultimately transferred, (b) in
the case of such a lien against such an intercompany note, as if
such lien had survived against a claim of like kind and amount
against the obligor under such note and (c) in the case of such a
lien against such stock, as if such lien had survived against the
equity value of such division of divisions.
26. The rights and claims, if any, of those persons who
are either members of the class of asbestos victims asserted in
the case of Larned v. Kohlberg Kravis Roberts & Co., No. B-133554
(District Court for Jefferson County, Texas, 60th Judicial
District), and/or are defendants in the declaratory judgment
action brought by the Debtors in these chapter 11 cases
(Bankruptcy Adversary Proceeding No. 90-0003) shall not be
adversely affected by actions which may be taken pursuant to this
order to compelte the mirror Liquidation Plan.
27. The Clerk of this Court shall continue to maintain
a separate case file and a seaprate claims register for each of
the Debtors without regard to any actions which may be taken
pursuant to this Order to Complete the Mirror Liquidation Plan.
28. The actions which may be taken pursuant to this
Order to compelte the Mirror Liquidation Plan shall not be deemed
to substantively consolicate the pending chapter 11 cases of the
Debtors.
Dated: Tampa, Florida
November 5, 1990
ALEXANDER L. PASKAY
Chief United States
Bankruptcy Judge
COPIES TO:
STICHTER, RIEDEL, BLAIN & PROSSER, P.A.
100 East Madison
Suite 300
Tampa, Florida 33602
Attn: Don M. Stichter, Esq.
Counsel for the Debtors
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER
425 Park Avenue
New York, New York 10022
Attn: Andrew A. Kress, Esq.
Counsel for the Debtors
HILLSBOROUGH HOLDINGS CORPORATION
1500 North Dale Mabry Highway
Tampa, Florida 33607
Attn: John F. Turbiville, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Daniel Golden, Esq.
Counsel for Bondholders Committee
JONES DAY REAVIS & POGUE
599 Lexington Avenue
New York, New York 10022
Attn: Laurence Solarsh, Esq.
Counsel for Unsecured Creditors Committee
United States Trustee
EXHIBIT "A"
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re: Chapter 11
HILLSBOROUGH HOLDINGS CORPORATION, Case No. 89-9715-8P1
BEST INSURORS, INC., Case No. 89-9740-8P1
BEST INSURORS OF MISSISSIPPI, INC., Case No. 89-9737-8P1
COAST TO COAST ADVERTISING, INC., Case No. 89-9727-8P1
COMPUTER HOLDINGS CORPORATION, Case No. 89-9724-8P1
DIXIE BUILDING SUPPLIES, INC., Case No. 89-9741-8P1
HAMER HOLDINGS CORPORATION, Case No. 89-9735-8P1
HAMER PROPERTIES, INC., Case No. 89-9739-8P1
HOMES HOLDINGS CORPORATION, Case No. 89-9742-8P1
JIM WALTER COMPUTER SERVICES, INC., Case No. 89-9723-8P1
JIM WALTER HOMES, INC., Case No. 89-9746-8P1
JIM WALTER INSURANCE SERVICES, INC. Case No. 89-9731-8P1
JIM WALTER RESOURCES, INC., Case No. 89-9738-8P1
JIM WALTER WINDOW COMPONENTS, INC., Case No. 89-9716-8P1
JW ALUMINUM COMAPNY, Case No. 89-9718-8P1
JW RESOURCES HOLDINGS CORPORATION, Case No. 89-9718-8P1
J.W.I. HOLDINGS CORPORATION, Case No. 89-9721-8P1
J.W. WALTER, INC. Case No. 89-9717-8P1
JW WINDOW COMPONENTS, INC., Case No. 89-9732-8P1
LAND HOLDINGS CORPORATION, Case No. 89-9720-8P1
MID-STATE HOMES, INC., Case No. 89-9725-8P1
MID-STATE HOLDINGS CORPORATION, Case No. 89-9726-8P1
RAILROAD HOLDINGS CORPORATION, Case No. 89-9733-8P1
SLOSS INDUSTRIES CORPORATION, Case No. 89-9743-8P1
SOUTHERN PRECISION CORPORATION, Case No. 89-9729-8P1
UNITED LAND CORPORATION, Case No. 89-9730-8P1
UNITED STATES PIPE AND FOUNDRY COMPANY, Case No. 89-9744-8P1
U.S. PIPE REALTY, INC., Case No. 89-9734-8P1
VESTAL MANUFACTURING COMPANY, Case No. 89-9728-8P1
WALTER HOME IMPROVEMENT, INC. Case No. 89-9722-8P1
WALTER INDUSTRIES, INC., Case No. 89-9745-8P1
WALTER LAND COMPANY, Case No. 89-9736-8P1
Debtors.
<PAGE>
<TABLE>
<CAPTION> EXHIBIT IV
Summary of Treatment and Classes
($000's)
Administrative and Priority CLASS A-1 CLASS P-1 CLASS P-2 CLASS P-3
Claims Summary
Administrative Federal Income Federal Excise State and Local
TREATMENT OF ALLOWED CLAIMS Claims Tax Claims Tax and Reclamation Tax Claims
UNDER PLAN
Payment of cash in Payment of Allowed Payment of cash in Payment of cash in
an amount equal to the Amounts in equal an amount equal to the an amount equal to the
Allowed Amount of the quarterly install- Allowed Amount of the Allowed Amount of the
claim without interest. ments over a 6 year claim without interest. claim without interest.
period from the date
of the Assessment by
the IRS of such Claim,
with interest on unpaid
amounts from the later of
the Effective Date or the
date of Assessment equal to
the Prime Lending Rate.
<S>
ESTIMATE OF ALLOWED AMOUNT <C> <C> <C> <C>
AS OF DECEMBER 31, 1994 $32,000 $14,000-$40,000 $756 $8,384
Exact
ENTITY: Class Amounts
Best
Best (Miss.) Class P-3C 1
Coast to Coast
Computer Holdings Class P-3E 0
Computer Services Class P-3J 0
Dixie Class P-3F 123
Hamer Holdings Class P-3G 0
Hamer Properties Class P-3H 1
Hillsborough Class P-3A 31
Home Improvement
Homes Holdings Class P-31 0
Jim Warrior Railroad
Jim Walter Homes Class P-3K 214
Jim Walter Resources Class P-3M 4,099
JW Aluminum Class P-3O 192
JW Insurance
JW Resources
JW Walter Class P-3R 11
Window Components Class P-3S 18
Window Components (Wisc.) Class P-3N 2
JWI Holdings Class P-3Q 0
Land Holdings Class P-3T 0
Mid-State Holdings Class P-3V 0
Mid-State Homes Class P-3U 7
Old Walter Industries Class P-3EE 7
Pipe Realty Class P-3BB 0
Railroad Holdings Class P-3W 0
Resources Holdings Class P-3P 0
Sloss Class P-3X 611
Southern Precision Class P-3Y 42
U.S. Pipe Class P-3AA 2,113
United Land Class P-3Z 846
Vestal Class P-3CC 64
Walter Industries/Other
Walter Land Class P-3FF 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Secured Claims Summary Class S-1 Class S-2 Class S-3 Class S-4
Revolving Credit Working Capital Grace Street Sloss IRB Claim
Bank Claims Bank Claims Note Claims
TREATMENT OF ALLOWED CLAIMS Payment of Allowed Payment of Allowed Payments of Allowed Payment of Allowed
UNDER PLAN Amounts in full in cash Amounts in full in Amounts in full Amounts in full
except for $28,221 to cash less any amounts
be paid in Class B applied to the Debtors
Common Stock. to repay any such claim
subsequent to the Stub
Period and prior to the
Effective Date except for
$9,279 to be paid in Class
B Common Stock.
<S> <C> <C> <C> <C>
ESTIMATE OF ALLOWED AMOUNT $382,248 $130,622 $5 $715
AS OF DECEMBER 31, 1994 (a) (b)
ENTITY: Class Status Class Status Class Class
Best Class S-1B Borrower
Best (Miss.) Class S-1C Borrower
Coast to Coast Class S-1D Borrower
Computer Holdings Class S-1E Guarantor Class S-2E Guarantor
Computer Services Class S-1J Borrower
Dixie Class S-1F Borrower
Hamer Holdings Class S-1G Guarantor Class S-2G Guarantor
Hamer Properties Class S-1H Borrower
Hillsborough Class S-1A Borrower Class S-2A Guarantor
Home Improvement
Homes Holdings Class S-1I Guarantor Class S-2I
Jefferson Warrior Railroad
Jim Walter Homes Class S-1K Borrower
Jim Walter Resources, Inc. Class S-1M Borrower Class S-2M Borrower
JW Aluminum Co. Class S-1O Borrower Class S-2O Guarantor
JW Insurance Class S-1L Borrower
JW Resources Class S-1GG Guarantor
JW Walter Class S-1R Borrower
JW Window Components Inc. Class S-1S Borrower Class S-2S Guarantor
JW Window Components (Wisc.) Class S-1N Borrower
JWI Holdings Class S-1Q Borrower Class S-2Q Guarantor
Land Holdings Class S-1T Guarantor Class S-2T Guarantor
Mid-State Holdings Class S-1V Guarantor Class S-2V Guarantor
Mid-State Homes, Inc.
Old Walter Industries Class S-1EE Borrower Class S-2EE Guarantor Class S-3EE
Pipe Realty Class S-1BB Borrower Class S-2BB Guarantor
Railroad Holdings Class S-1W Guarantor Class S-2W Guarantor
Resources Holdings Class S-1P Guarantor Class S-2P Guarantor
Sloss Industries Corp. Class S-1X Borrower Class S-2X Guarantor Class S-4X
Southern Precision Corp. Class S-1Y Borrower Class S-2Y Guarantor
U.S. Pipe and Foundry Co. Class S-1AA Borrower Class S-2AA Borrower
United Land Corp. Class S-1Z Borrower
Vestal Manufacturing Co. Class S-1CC Borrower Class S-2CC Guarantor
Walter Industries/Other
Walter Land Class S-1FF Borrower Class S-2FF Borrower
Note:
(a) Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $152.6 million. If the Amended and Restated Veil Piercing
Settlement Agreement does not become effective by its terms, this amount would total $354,027.
(b) Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $51.9 million. If the Amended and Restated Veil Piercing
Settlement Agreement does not become effective by its terms, this amount would total $121,343.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Secured Claims Summary Class S-5 Class S-6 Class S-7 Class S-8 Class S-9
Secured Equipment Series B & C Provident Life and Revolving Credit Working Capital
Purchases Senior Note Claims Accident Insurance Agents Claim Agents Claim
TREATMENT OF ALLOWED Payment of Allowed Payment of Allowed Payment of Allowed Payment of Allowed Payment of
CLAIMS UNDER THE PLAN Amounts in full in Amounts in cash in an Amounts in cash and Amounts in full in Allowed Amounts
cash. amount equal to such balance of Allowed cash. in full in cash.
Holder's Pro Rata Share Claims reinstated.
of Class S-6 Fund and a
principal amount of New
Senior Notes equal to the
difference between the
Allowed Amount of such
Holder's Series B & C Note
Claim and the amount of
the cash received except
for $37,500 to be paid in
Class B Common Stock.
<S>
ESTIMATE OF ALLOWED
AMOUNT AS OF DECEMBER <C> <C> <C> <C> <C>
31, 1994 $48 $359,729-$368,474 $7,494 (b) (b)
(a)
Exact
ENTITY: Class Amounts Class Status Class Class Class
Best Class S-8B Class S-9B
Best (Miss.) Class S-8C
Coast to Coast Class S-8D
Computer Holdings Class S-8E Class S-9E
Computer Services Class S-5J 29 Class S-8J
Dixie Class S-8F
Hamer Holdings Class S-8G Class S-9G
Hamer Properties Class S-8H
Hillsborough Class S-6A Guarantor Class S-8A Class S-9A
Home Improvement
Homes Holdings Class S-61 Guarantor Class S-8I Class S-9I
Jefferson Warrior Railroad
Jim Walter Homes Class S-6K Issuer Class S-8K
Jim Walter Resources, Inc. Class S-6M Issuer Class S-8M Class S-9M
JW Aluminum Co. Class S-5O 11 Class S-8O Class S-9O
JW Insurance Class S-8L
JW Resources Class S-8GG
JW Walter Class S-8R
JW Window Components Inc. Class S-5S 0 Class S-8S Class S-8S
JW Window Components (Wisc.) Class S-8N
JWI Holdings Class S-8Q Class S-9Q
Land Holdings Class S-8T Class S-9T
Mid-State Holdings Class S-8V Class S-9V
Mid-State Homes, Inc.
Old Walter Industries Class S-6EE Guarantor Class S-7EE Class S-8EE Class S-9EE
Pipe Realty Class S-8BB Class S-9BB
Railroad Holdings Class S-8W Class S-9W
Resources Holdings Class S-6P Guarantor Class S-8P Class S-9P
Sloss Industries Corp. Class S-5X 1 Class S-8X Class S-9X
Southern Precision Corp. Class S-5Y 3 Class S-8Y Class S-9Y
U.S. Pipe and Foundry Co. Class S-5AA 5 Class S-6AA Issuer Class S-S-8AA Class S-9AA
United Land Corp. Class S-6Z Issuer Class S-8Z Class S-9Z
Vestal Manufacturing Co. Class S-8CC Class S-9CC
Walter Industries/Other
Walter Land Class S-8FF Class S-9FF
Note:
(a) Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $165.4-$174.1 million. If the Amended and Restated Veil Piercing
Settlement Agreement does not become effective by its terms, this amount would total $322,229-$330,974.
(b) The Holders of Class S-8 and S-9 Claims have not provided the amount of fees and expenses incurred since the Filing Date. As a
result, there is insufficient information upon which to estimate Class S-8 and S-9 Claims.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Unsecured Claims Summary CLASS U-1 CLASS U-2 CLASS U-3
Old Walter Industries Convenience Other
IRB Claims Class Claims Unsecured Claims
TREATMENT OF ALLOWED Payment of Allowed Payment of Pre-Filing Payment of 75% of Pre-Filing Date
CLAIMS UNDER PLAN Amounts in cash and balance Date Unsecured Allowed Unsecured Allowed Amounts on or
of Allowed Claims reinstated. Amounts plus Post-Filing Date promptly after the Effective Date,
interest from the Filing Date payment within six months there-
to the Effective Date at the after of the balance of the Pre-
General Unsecured Interest Filing Date Unsecured Allowed
Rate in full in cash. Amounts plus Post-Filing Date
interest on the Pre-Filing Date
Unsecured Allowed Amounts from
the Filing Date to the Effective
Date at the General Unsecured
Interest Rate together with Post-
Filing Date interest on the
remaining 25% of Pre-Filing Date
Unsecured Allowed Amounts from
the Effective Date to the
Payment Date at the General
Unsecured Interest Rate in full
in cash.
<S> <C> <C> <C>
ESTIMATE OF ALLOWED $8,792 $1,704 $93,775
AMOUNT AS OF DECEMBER (a)
31, 1994
Exact Exact
ENTITY: Class Class Amounts Class Amounts
Best Class U-2B 6 Class U-3B 15
Best (Miss.) Class U-3C 0
Coast to Coast Class U-2D 159 Class U-3D 281
Computer Holdings Class U-3E 0
Computer Services Class U-2J 4 Class U-3J 34
Dixie Class U-3F 913
Hamer Holdings Class U-3G 0
Hamer Properties Class U-3H 0
Hillsborough Class U-3A 2,550
Home Improvement Class U-2DD 9 Class U-3DD 32
Homes Holdings Class U-31 0
Jefferson Warrior Railroad 0
Jim Walter Homes Class U-2K 280 Class U-3K 7,223
Jim Walter Resources, Inc. Class U-2M 87 Class U-3M 19,061
JW Aluminum Co. Class U-2O 72 Class U-3O 6,413
JW Insurance Class U-2L 5 Class U-3L 6
JW Resources Class U-3GG 0
JW Walter Class U-3R 0
JW Window Components Inc. Class U-2S 64 Class U-3S 2,221
JW Window Components (Wisc.) Class U-2N 8 Class U-3N 123
JWI Holdings Class U-3Q 0
Land Holdings Class U-3T 0
Mid-State Holdings Class U-3T 0
Mid-State Homes, Inc. Class U-2U 21 Class U-3U 121
Old Walter Industries Class U-1EE Class U-2EE 439 Class U-3EE 14,385
Pipe Realty Class U-3BB 0
Railroad Holdings Class U-3W 0
Resources Holdings Class U-3P 0
Sloss Industries Corp. Class U-2X 103 Class U-3X 5,614
Southern Precision Corp. Class U-2Y 27 Class U-3Y 381
U.S. Pipe and Foundry Co. Class U-2AA 370 Class U-3AA 30,783
United Land Corp. Class U-2Z 4 Class U-3Z 1
Vestal Manufacturing Co. Class U-2CC 35 Class U-3CC 754
Walter Industries/Other 0
Walter Land Class U-2FF 2 Class U-3FF 32
Note:
(a) Includes Accrued Interest from 12/28/89 to 12/31/94 totaling $23.0 million which has been allocated pro rata across each Entity
in Class U-3.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Secured Claims Summary Class U-4 Class U-5 Class U-6 Class U-7
Senior Submordinated 17% Subordinated Pre-LBO Debenture Veil Piercing
Reset Notes Notes Claims Proceedings Claims
TREATMENT OF ALLOWED CLAIMS Payment of Allowed Payments of Allowed Payments of Allowed Payment of Allowed
UNDER PLAN Amount in full in Amount in full in Amount in full in Amounts in full
combination of combination of combination of in a combination of
Qualified Securities Qualified Securities Qualified Securities Qualified Secur-
and Class A Common and Class A Common and Class B Common ities and Class B
Stock. Stock. Stock. Common Stock to the
Veil Piercing Claims
Trust on behalf of
Holders of Class U-7
Claims.
<S> <C> <C> <C> <C>
ESTIMATE OF ALLOWED AMOUNT $479,261 $379,254 $239,472 $450,000 plus the
AS OF DECEMBER 31, 1994 Senior Claim Differ-
ential, if any (a)
ENTITY: Class Status Class Status Class Status
Best
Best (Miss.)
Coast to Coast
Computer Holdings
Computer Services
Dixie
Hamer Holdings
Hamer Properties
Hillsborough Class U-4A Guarantor Class U-5A Guarantor
Home Improvement
Homes Holdings Class U-4l Guarantor Class U-5l Guarantor
Jefferson Warrior Railroad
Jim Walter Homes Class U-4K Issuer Class U-5K Issuer
Jim Walter Resources, Inc.
JW Aluminum Co.
JW Insurance
JW Resources
JW Walter
JW Window Components Inc.
JW Window Components (Wisc.)
JWI Holdings
Land Holdings
Mid-State Holdings
Mid-State Homes, Inc.
Old Walter Industries Class U-4EE Guarantor Class U-5EE Guarantor Class U-6EE Issuer
Pipe Realty
Railroad Holdings
Resources Holdings
Sloss Industries Corp.
Southern Precision Corp.
U.S. Pipe and Foundry Co. Class U-4AA Issuer Class U-5AA Issuer
United Land Corp. Class U-4Z Issuer Class U-5Z Issuer
Vestal Manufacturing Co.
Walter Industries/Other
Walter Land
Note: This represents the aggregate of Allowed Amounts against all Debtors. If the Amended and Restated Veil Piercing Settlement
Agreement does not become effective by its terms, this amount would equal $525,000.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summary of Treatment and Classes
($000's)
Intercompany Claims Summary CLASS I-1 CLASS I-2 CLASS I-3
Intercompany Pre-Filing Intercompany Post Filing Date Inter-
IRB Claims Notes Payable Claims company Notes Payable Claims
TREATMENT OF ALLOWED Payment of Cash in an Class I-2 Claims will be Class I-3 Claims will be
CLAIMS UNDER PLAN amount equal to the Allowed reinstated on the books reinstated on the books and
Amount of the claim without and records of the respective records of the respective
Debtors. Pre-Filing Date Inter- Debtors. Pre-Filing Date Inter-
company Notes Payable may be company Notes Payable may be
paid after the Effective Date paid after the Effective Date
in the ordinary course of in the ordinary course of
business. business.
<S> <C> <C> <C>
ESTIMATE OF ALLOWED $7,350 $1,248,631 $2,006,003
AMOUNT AS OF DECEMBER
31, 1994
Exact Exact
ENTITY: Class Amounts Class Amounts
Best Class I-2B 1,018 Class I-3B 2,389
Best (Miss.) Class I-2C 64 Class I-3C 24
Coast to Coast Class I-2D 135 Class I-3D 72
Computer Holdings Class I-2E 6 Class I-3E 2
Computer Services Class I-2J 1,164
Dixie Class I-2F 232 Class I-3F 220
Hamer Holdings Class I-2G 6 Class I-3G 2
Hamer Properties Class I-2H 204 Class I-3H 5
Hillsborough Class I-2A 100,653 Class I-3A 130,988
Home Improvement Class I-2DD 1,923 Class I-3DD 2,852
Homes Holdings Class I-21 6
Jefferson Warrior Railroad
Jim Walter Homes Class I-2K 194,401 Class I-3K 391,971
Jim Walter Resources, Inc. Class I-2M 127,199 Class I-3M 7,838
JW Aluminum Co. Class I-2O 24,464 Class I-3O
JW Insurance
JW Resources
JW Walter Class I-2R 198
JW Window Components Inc. Class I-2S 49,712 Class I-3S 14,400
JW Window Components (Wisc.) Class I-2N 1,165 Class I-3N 1,734
JWI Holdings Class I-2Q 677
Land Holdings Class I-2T 6 Class I-3T
Mid-State Holdings Class I-2V 6
Mid-State Homes, Inc. Class I-2U 106,061 Class I-3U 744,944
Old Walter Industries Class I-2EE 466,913 Class I-3EE 481,734
Pipe Realty Class I-2BB 126 Class I-3BB 24
Railroad Holdings Class I-2W 6 Class I-3W 1
Resources Holdings Class I-2P 23 Class I-3P 1
Sloss Industries Corp. Class I-2X 27,768 Class I-3X 8,399
Southern Precision Corp. Class I-2Y 21,895 Class I-3Y 12,760
U.S. Pipe and Foundry Co. Class I-2AA 35,357 Class I-3AA 175,968
United Land Corp. Class I-2Z 63,636 Class I-3Z 17,424
Vestal Class I-2CC 12,053 Class I-3CC 3,385
Walter Industries/Other
Walter Land Class I-2FF 11,555 Class I-3FF 1,799
</TABLE>
<PAGE>
<PAGE>
EXHIBIT V
DIRECTORS AND OFFICERS OF EACH OF THE DEBTORS
Set forth herein are lists of the Directors and Officers of
each of the Debtors and Non-Debtor Affiliates, other than Old
Walter Industries, Resources Holdings, Jim Walter Resources and
United Land as of January 1, 1994 (ages are as of August 1,
1993). For more detailed biographical information concerning
certain of the Directors and Officers included herein and
biographical information concerning the Directors and officers
of Walter Industries, see "POST-CONSUMMATION -- Management --
Directors and Officers of the Debtors."
(a) Directors
(i) Walter Industries -- see "POST-CONSUMMATION --
Management -- Directors and Officers of the Debtors -- Directors
of Walter Industries"
(ii) Best
G. Robert Durham
Kenneth J. Matlock
James W. Walter
(iii) Best (Miss.)
G. Robert Durham
Kenneth J. Matlock
Dana A. Snyder
James W. Walter
William H. Weldon
(iv) JW Insurance
G. Robert Durham
Kenneth J. Matlock
James W. Walter
(v) Coast to Coast; Dixie and Home Improvement
G. Robert Durham
Robert W. Michael
James W. Walter
(vi) Computer Services
G. Robert Durham
Kenneth J. Matlock
William H. Weldon
(vii) Hamer Properties; JW Walter
G. Robert Durham
Kenneth J. Matlock
William N. Temple
(viii) Jim Walter Homes
G. Robert Durham
Robert W. Michael
Kenneth J. Matlock
James W. Walter
(ix) JW Aluminum
Richard E. Almy
G. Robert Durham
Kenneth J. Matlock
James W. Walter
(x) Jim Walter Resources (formerly named JW
Resources)
William Carr
G. Robert Durham
James W. Walter
(xi) United Land (formerly named Pipe Realty)
G. Robert Durham
Kenneth J. Matlock
William N. Temple
James W. Walter
(xii) Window Components
G. Robert Durham
Robert E. Rudolph
James W. Walter
(xiii) Window Components (Wisc.)
G. Robert Durham
Kenneth J. Matlock
Robert E. Rudolph
(xiv) Walter Land
G. Robert Durham
Kenneth J. Matlock
William N. Temple
James W. Walter
(xv) Mid-State Homes
G. Robert Durham
Kenneth J. Matlock
Sam J. Salario
James W. Walter
William H. Weldon
(xvi) Sloss
G. Robert Durham
Lee C. Houlditch
Kenneth J. Matlock
James W. Walter
(xvii) Southern Precision
Earl E. Case
G. Robert Durham
Kenneth J. Matlock
William N. Temple
James W. Walter
(xviii) US Pipe
G. Robert Durham
James W. Walter
William N. Temple
(xix) Vestal
G. Robert Durham
Kenneth J. Matlock
David M. Vestal
James W. Walter
(xx) Computer Holdings; Hamer Holdings; Homes
Holdings; JWI Holdings; Land Holdings; Mid-State
Holdings and Railroad Holdings
Michael T. Tokarz
Perry Golkin
(xxi) Non-Debtor Affiliates
a. Carden
G. Robert Durham
Kenneth J. Matlock
Richard D. Spurling*
William N. Temple
William H. Weldon
Peter J. Willitts**
b. J.W. Railroad
G. Robert Durham
Lee C. Houlditch
Kenneth J. Matlock
William H. Weldon
c. Black Warrior Methane
William Carr
Ralph H. Daily***
G. Robert Durham
David Faulkinberry***
Donald G. Russell***
William N. Temple
d. Black Warrior Transmission
William Carr
Ralph H. Daily***
G. Robert Durham
David Faulkinberry***
Donald G. Russell***
William N. Temple
* Member of law firm of Appleby, Spurling & Kempe,
Bermuda counsel to CARDEM.
** Employee of Johnson & Higgins (Bermuda) Limited, third
party manager of Cardem.
*** Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its
parent. (See "BUSINESS, PROPERTIES AND OTHER
INFORMATION WITH RESPECT TO THE DEBTORS -- Business
and Properties of the Debtors -- Non-Debtor Affiliates
-- Black Warrior Methank; Black Warrior
Transmission.")
(b) Officers
Name Age Position
(i) Best
Dana A. Snyder President
Leola M. Voss 61 Vice President-Finance
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
William Kendal Baker Treasurer
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(ii) Best (Miss.)
Dana A. Snyder President
Leola M. Voss Vice President-Finance
Kenneth J. Matlock Vice President
William T. Robinson, Jr. 66 Vice President and
Assistant Secretary
William H. Weldon Vice President and
Secretary
Thomas G. Ketcham Assistant Treasurer
(iii) JW Insurance
Dana A. Snyder President
Kenneth J. Matlock Vice President
Leola M. Voss Vice President
William H. Weldon Vice President
William Kendal Baker Treasure and Assistant
Secretary
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(iv) Coast to Coast
Roger A. Crabb President
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
William Kendal Baker Treasurer and Assistant
Secretary
Thomas G. Ketcham Assistant Treasurer
John F. Turbiville Assistant Secretary
(v) Dixie
Robert W. Michael President
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
William Kendal Baker Treasurer
Thomas G. Ketcham Assistant Treasurer
Stephen H. Foxworth Assistant Treasurer
John F. Turbiville Assistant Secretary
(vi) Home Improvement
Robert W. Michael President
D. Wayne Hornsby Vice President
Kenneth J. Matlock Vice President
William H. Weldon Vice President
William Kendal Baker Treasurer
Mary C. Snow Secretary
S. Louise Russell Assistant Secretary
John F. Turbiville Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
(vii) Computer Services
William H. Weldon President
Kenneth J. Matlock Vice President and
Treasurer
William M. Lammons 55 Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(viii) Hamer Properties
William N. Temple President
Kenneth J. Matlock Vice President
William H. Weldon Vice President and
Treasurer
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(ix) JW Walter
William N. Temple President
Kenneth J. Matlock Vice President
William H. Weldon Vice President and
Treasurer
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(x) Jim Walter Homes
Robert W. Michael President and Chief
Operating Officer
Sam P. Bullara, Jr. Executive Vice President
D. Wayne Hornsby Executive Vice President
William Kendal Baker Vice President,
Treasurer, Chief
Financial Officer
and Chief Accounting
Officer
Michael M. Roberts 46 Senior Vice President
Sam J. Salario Vice President
Leo Almerico 59 Vice President and
Controller
B. Craig Calhoun 42 Vice President
Herbert R. Clarkson 60 Vice President
Daisy B. Collins 56 Vice President
Thomas L. Hires, Jr. 36 Vice President
Alexander M. Pollock 61 Vice President
Joseph P. Richardson, Jr. 40 Vice President
Richard A. Ward 45 Vice President
S. Louise Russell Secretary
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Frank A. Hult Assistant Secretary
John F. Turbiville Assistant Secretary
Mary C. Snow Assistant Secretary
Norma J. Padron 54 Assistant Controller
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
and Assistant Secretary
(xi) JW Aluminum
Richard E. Almy President and Chief
Operating Officer
Russell F. Penley 49 Vice President
Operations
Bobby J. Proctor 61 Vice President
Finance and Treasurer
Roger W. Wilson 59 Vice President
Marketing and Sales
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xii) Jim Walter Resources (formerly named JW Resources
William Carr President and Chief
Operating Officer
James M. Sims Vice President, Chief
Financial Officer and
Chief Accounting
Officer
Kenneth J. Matlock Vice President
William H. Weldon Vice President and
Treasurer
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xiii)
William N. Temple President
Kenneth J. Matlock Vice President
E. Jack Mize, Jr. Vice President and
Treasurer
William H. Weldon Vice President and
Assistant Secretary
Larry O. Bailey Controller
Mary C. Snow Secretary
Lewis R. Knowles Assistant Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xiv) Window Components
Robert E. Rudolph President
Edmund W. Lanctot, Jr. 47 Vice President - Sales
and Marketing
J. Randy Beard Vice President and
Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xv) Window Components (Wisc.)
Robert E. Rudolph President and Chief
Operating Officer
Edmund W. Lanctot, Jr. Vice President -
Sales and Marketing
Kenneth J. Matlock Vice President
J. Randy Beard Vice President and
Treasurer
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xvi) Walter Land
William N. Temple President
Kenneth J. Matlock Vice President and
Treasurer
William H. Weldon Vice President,
Controller and
Assistant Secretary
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xvii) Mid-State Home
Sam J. Salario President
Herbert R. Clarkson Vice President
Kenneth J. Matlock Vice President
Becky L. Mook 51 Vice President -
Administration
and Secretary
Alexander M. Pollock Vice President
William H. Weldon Vice President and
Chief Financial
Officer
William Kendal Baker Treasurer
Sam P. Bullara, Jr. Assistant Secretary
Bonnie K. Doyne 46 Assistant Secretary
Mary C. Snow Assistant Secretary
John F. Turbiville Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
and Assistant Secretary
(xviii) Sloss
Lee C. Houlditch President
Frank E. Haver 61 Vice President
R. Lee Vinzant 41 Vice President and
Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xix) Southern Precision
Earl E. Case President
Harold F. Bailey 63 Vice President
Kenneth J. Matlock Vice President
William N. Temple Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
Donald M. Kurucz Assistant Treasurer
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xx) U.S. Pipe President and Chief
Operating Officer
Harry L. Ransom Vice President -
Marketing
William E. Fleck Vice President -
Manufacturing
E. Jack Mize, Jr. Vice President -
Finance, Treasurer,
Chief Financial Officer
and Chief Accounting
Officer
Michael Roper 62 Vice President -
International Sales
Larry O. Bailey 46 Controller and
Assistant Secretary
Lewis R. Knowles 56 Assistant Secretary
Joseph W. Spransy Assistant Secretary
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
Frank A. Hult Assistant Secretary
John F. Turbiville Assistant Secretary
Stephen H. Foxworth Assistant Treasurer
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xxi) Vestal
David M. Vestal President
Keith E. Shope 41 Vice President
Claude L. Wells 49 Controller and Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
Donald M. Kurucz Assistant Treasurer
(xxii) Computer Holdings; Hamer Holdings; JWI Holdings; Land
Holdings; Mid-State Holdings and Railroad Holdings
Michael T. Tokarz President and Chief
Executive Officer
Perry Golkin Vice President
Donald M. Kurucz Vice President,
Treasurer and
Assistant Secretary
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Controller and
Assistant Secretary
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xxii) Homes Holdings
Michael T. Tokarz President and Chief
Executive Officer
Perry Golkin Vice President
Donald M. Kurucz Vice President
Treasurer and
Assistant Secretary
Kenneth J. Matlock Vice President and Chief
Financial Officer
William H. Weldon Vice President,
Controller, Assistant
Secretary and Chief
Accounting Officer
Mary C. Snow Secretary
Frank A. Hult Assistant Secretary
John F. Turbiville Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
(xxiv) Non-Debtor Affiliates
a. Cardem
Kenneth J. Matlock President
Peter J. Willitts* Vice President
Richard D. Spurling ** Secretary
Deborah Hubbard-Taylor*** Assistant Secretary
William N. Temple Vice President
William H. Weldon Vice President
Thomas G. Ketcham Assistant Vice President
Donald M. Kurucz Treasurer
Stephen H. Foxworth Assistant Treasurer
b. J.W. Railroad
Lee C. Houlditch President and Treasurer
Kenneth J. Matlock Vice President
William H. Weldon Vice President
Mary C. Snow Secretary
John F. Turbiville Assistant Secretary
Joseph W. Spransy Assistant Secretary
Thomas G. Ketcham Assistant Treasurer
c. Black Warrior Methane
Robert G. Sanders President and General
Manager
John A. Bearden 47 Controller
David Faulkinberry**** Vice President
Joseph W. Spransy Secretary
James M. Sims Treasurer
William Carr Assistant Treasurer
Richard Bates**** Assistant Secretary
John F. Turbiville Assistant Secretary
d. Black Warrior Transmission
Robert G. Sanders President and General
Manager
David Faulkinberry**** Vice President
Joseph W. Spransy Secretary
James M. Sims Treasurer
William Carr Assistant Treasurer
Richard Bates**** Assistant Secretary
John F. Turbiville Assistant Secretary
John A. Bearden Controller
* Employee of Johnson & Higgins (Bermuda) Limited, third party
manager of Cardem.
** Member of law firm of Appleby, Spurling & Kempe, Bermuda
counsel to Cardem.
*** Employee of law firm of Appleby, Spurling & Kempe, Bermuda
counsel to Cardem.
**** Employed by Sonat Coal Gas, Inc. or Sonat, Inc., its parent.
(See "BUSINESS, PROPERTIES AND OTHER INFORMATION WITH RESPECT TO
THE DEBTORS - Businesses and Properties of the Debtors - Non-
Debtor Affiliates - Black Warrior Methane; Black Warrior
Transmission.")
<PAGE>
EXHIBIT VI
WALTER INDUSTRIES, INC.
NOTES TO LIQUIDATION ANALYSIS
The following Liquidation Analysis <F1> has been prepared to
indicate values which might be obtained by
impaired Classes of Claims and impaired Classes of Interests if
the assets of Walter Industries (i.e., stock of
the Operating Businesses) were sold pursuant to a Chapter 7
liquidation, as an alternative to the continued
independent operation of the Debtors and structured payments
under
the Creditors' Plan. Underlying the
Liquidation Analysis are a number of estimates and assumptions
that are inherently subject to significant
legal, business, economic and competitive uncertainties and
contingencies beyond the control of the Debtors
as well as assumptions with respect to the liquidation decisions
which could be subject to change. Accordingly,
there can be no assurance that the values reflected in the
Liquidation Analysis would be realized if Walter
Industries were, in fact, to undergo such a liquidation, and
actual results could vary materially from those
shown here.
[FN]
<F1> Given the Court's December 31, 1993 deadline for filing
Chapter 11 plans and disclosure statements, the Proponents (and
the other creditor proponents of plans filed by that deadline)
adopted their Liquidation Analysis from the Debtors' previous
Disclosure Statement that was on file with the Court. The
Proponents had assumed that the Debtors' analysis would have
been prepared consistent with what the Proponents believe is the
proper approach, and that the Proponents would have the further
opportunity to verify, update and amend the analysis in the
final version of this
Disclosure Statement. The Proponents have come to the belief
that the Debtors' analysis was, in fact, fundamentally flawed,
and accordingly have revised it as set forth herein.
This Liquidation Analysis has been prepared assuming that the
Chapter 11 Cases are converted to cases
under Chapter 7 on December 31, 1994 (the assumed Effective Date
under the Creditors' Plan) and that the
sale of the stock of the Operating Businesses occurs on or
before
December 31, 1995, at which time it is
assumed that the Chapter 7 trustee would make a distribution of
the proceeds to creditors.
It is assumed that a Chapter 7 trustee would attempt to maximize
the value of the estates, consistent with
the trustee's fiduciary duties, and, therefore, that the trustee
would attempt to sell the stock of the Operating
Businesses to minimize substantial liabilities that would
otherwise arise. This liquidation strategy materially
varies from that set forth in the Liquidation Analysis included
in the Debtors' Disclosure Statement, (the
"Debtors' Liquidation Analysis"), which, among other things, is
based on the sale of assets. The Debtors'
approach, which does not take advantage of the tax savings
arising from the Debtors' Court-approved Mirror
Liquidation Plan, results in a substantially higher tax
liability than that used in the Proponents' Liquidation
Analysis and, as such, would leave less value available for
distribution to creditors. <F2> The Proponents believe
that a Court order providing for potential buyers to purchase
the stock of the Operating Businesses free and
clear of all liens and encumbrances (pursuant to Sections 105
and 363(f) of the Bankruptcy Code) would
enable the stock of the Operating Businesses to be sold. As
noted below, the Proponents also have revised
certain other assumptions in the Debtors' Liquidation Analysis,
such as the appropriate discounts, if any, for
the sale Of stock of the Operating Business. Additionally,
unlike
the Debtors' Liquidation Analysis, which has
a $215 million to $322 million discount, the Liquidation
Analysis does not discount the Mid-State Homes
Mortgage business. A discount for the Mid-State Homes mortgage
business is contradicted by the Debtors'
prior experience selling mortgages and the underlying notes
secured thereby owned by Mid-State Homes
during the Chapter 11 Cases.
<F2> As noted in the Disclosure Statement, the Proponents believe
the Debtors' choice of liquidation on an asset sale basis rather
than a stock sale basis and other assumptions in the Debtors
Liquidation Analysis were made to support a legal argument that
the Proponents of the Creditors' Plan expect the Debtors to make
with respect to the treatment of post-petition interest on
unsecured Claims under the Debtors' Plan of Reorganization.
Consistent with the Debtors' treatment in their Liquidation
Analysis, this Liquidation Analysis has been
prepared on a consolidated basis rather than on an individual
Debtor basis. This approach was taken because
the Debtors' complex liability structure makes an accurate
allocation of claims by and against individual Debtors
(including the joint and several Claims of the Revolving
Credit and Working Capital Bank, Series
B&C Senior Noteholders and unsecured bondholders), as well as
Claims under intercompany guarantees and
contingent assets under intercompany Contribution Agreements,
impractical for these purposes. The Liquidation Analysis does,
however, recognize the unique nature of the
general unsecured trade claims against the
Debtors Operating Businesses. The Proponents believe that a
Chapter 7 trustee would seek to allow
unsecured trade Creditor Claims based on the facts that these
post-LBO claims are asserted solely and
directly against the Debtors' Operating Businesses, including
Debtors against which no Subordinated Note
Claims are asserted, and the potential fraudulent transfer
claims
that such Creditors would assert. Such
allowance, constituting the payment in full of such Claims
including post-petition interest at a compromised
rate that is below applicable legal rates, is contained in the
Liquidation Analysis.
Except as described above, in the next succeeding paragraph,
and for certain adjustments described in the
accompanying Notes, estimates of expenses and claims have
generally been adopted from the Debtors'
Liquidation Analysis.
Most significantly, this Liquidation Analysis differs from the
Debtors' Liquidation Analysis with respect to the resolution of
the
asbestos-related, veil piercing claims, because the Creditors'
Plan's Effective Date, unlike the Effective Date under the
Debtor's
Plan, is not conditioned upon the final, successfully-litigated
resolution of those claims. Given the enormous magnitude of the
asbestos-related, veil piercing claims, the complexity of the
issues which will be raised on appeal of the Court's April 18,
1994
declaratory judgment decision and the protracted nature of the
appellate process, the Proponents believe that a Chapter 7
trustee would attempt to negotiate a settlement of these claims
in order to
expedite distributions to creditors and to avoid a potential
adverse appellate decision that could seriously dilute the
distribution to creditors. Therefore, the Proponents'
Liquidation
Analysis assumes a settlement amount for asbestos-related, veil
piercing claims of $450 million. This is based, in part, on the
fact that the Veil Piercing Claimants have negotiated a
settlement
of approximately $450 million with the Proponents.
If, however, the Chapter 7 trustee chose to litigate the
asbestos-related, veil piercing claims and ultimately lost, the
liability would be far higher than the settlement amount; the
asbestos litigants have asserted that the underlying personal
injury asbestos Claims exceed $10 billion. If the Chapter 7
trustee
chose to litigate the asbestos-related, veil piercing claims and
ultimately prevailed, the Proponents believe that the Debtors'
estate would have sufficient value to pay in full the pre-Filing
Date amount of all Claims and postpetition interest on Secured
Claims, and leave a significant surplus available for
post-petition
interest on unsecured Claims. The Proponents' review of the
Debtors' Liquidation Analysis, which assumes an ultimate
litigation victory by a Chapter 7 trustee, is set forth in
Article X of the Proponents' Disclosure Statement. The
Proponents' review concludes that, based on reasonable
assumptions
that have been omitted from the Debtors'
Liquidation Analysis and after correcting errors in that
Analysis,
there would be a significant surplus on a
potential litigation victory basis after payment in full of all
pre-Filing Date Claims and post-petition interest o
all Secured Claims. Considering all of the risks of the
asbestos-related, veil piercing litigation, the associated
costs and delays, and the potentially devastating consequences
to creditors of a litigation loss, the Proponents
believe that their Liquidation Analysis demonstrates that the
Creditors' Plan is in the best interests of creditors.
Various other specific assumptions relevant to this Liquidation
Analysis are set forth in the accompanying Notes.
<TABLE>
<CAPTION>
LIQUIDATION ANALYSIS
($ Millions)
Liquidation Range
Note From To
<S> <C> <C> <C>
Going-Concern Value of Operating Business 1 $1,286 $1,286
Less Liquidation Discount 2 (322) (193)
Liquidation Value of Operating Business 964 1,093
Value of Mid-State Homes Whole Loan Portfolio and Mid-State
Trust II & III Residuals 1,2 1,230 1,230
Value of Other Assets
Cash and escrows 3 140 140
Other 4 10 17
150 157
Interest on Proceeds from Liquidation 5 58 61
Gross Proceeds Available for Distribution 2,402 2,541
Liabilities Ranking Senior to Asbestos Claimants and Other
Unsecured Creditors
Obligations Arising from Chapter 7 Liquidation
Operating Expenses During Liquidation 6 (20) (20)
Chapter 7 Administrative Expenses 7 (66) (70)
Liquidation Tax Liabilities 8 0 0
Secured Debt (including post-petition interest) 9
Revolving Credit Bank Claims (352) (352)
Working Capital Bank Claims (121) (121)
Grace Street Note Claims (1) (1)
Sloss IRB Claims (1) (1)
Secured Equipment Purchase Claims (1) (1)
Series B & C Senior Note Claims (365) (365)
Provident Life and Accident Insurance Company Claims (7) (7)
Chapter 11 Priority and Administrative Claims
Severance Pay 10 (1) (1)
Pension Plan Termination 11 (18) (18)
Other Liabilities 12 (53) (53)
Proceeds Available to Asbestos Claimants and Other
Unsecured Creditors 1,396 1,531
Convenience Class Claims (including post-petition interest) 13 (2) (2)
General Unsecured, Trade Claims (including post-petition interest) 13 (98) (98)
Proceeds Available to Asbestos and Subordinated Note Claimants 1,296 1,431
Funding to Payments for Asbestos-Related Claims (450) (450)
Tax Benefit Associated with Payments for Asbestos-Related Claims 14 88 88
Proceeds Available to Subordinated Note Claimants 934 1,069
Subordinated Note Claims 15 (1,106) (1,106)
Deficiency $(172) $ (37)
</TABLE>
Note 1: Operating Businesses include all assets of the Debtors
except Cash, Mid-State Homes' whole loan mortgage portfolio and
Trust II and III Residuals and Other Assets which have been
excluded as no discount has been applied to these assets. The
value of the Operating Businesses includes the net working
capital associated with the businesses, which consists primarily
of receivables, inventories and payables. This value represents
the approximate mid-point of the value rate as of 12/31/94.
This value as of 12/31/94 is assumed to grow by 10% by 12/31/95,
or 5% on total value based on the assumption that during the
liquidation process, one half of the sales of the Operating
Businesses occurs by 6/30/95. The value of the Mid-State whole
loan mortgage portfolio and Trust II and III Residuals is
assumed by grow by 7% by 12/31/95 at which point it is assumed
that the mortgages and Residuals are securitized.
<TABLE>
<CAPTION>
Liquidation
12/31/94 Period
<S> <C> <C>
Cash $ 140 $ 140
Operating Businesses 1,225 1,286
Mid-State whole loan mortgage portfolio
and Trust II & III Residuals available
for securitization 1,150 1,230
Other Assets (Headquarters/Other 10 17
Total Liquidation Value $2,525 $2,673
</TABLE>
In connection with the analysis of the estimated going-concern
value of the Company as of 12/31/94 and the subsequent
assumptions regarding the estimated liquidation valuation of the
Company, J.P. Morgan in conjunction with Ernst & Young, the
Bondholders' Committee's
financial advisors (the "Financial Advisors"), among other
things:
(a) reviewed certain publicly available financial statements for
recent years and interim
periods;
(b) analyzed certain internal financial and operating data
concerning the Operating
Businesses, including the Company s financial projections
through 1998 and estimated
through 2002 by the Financial Advisors.
(c) made discounted cash flow analyses to 12/31/94 for the
various Operating Businesses based upon the financial projections
referred to in (b) above;
(d) considered the market values of publicly-traded companies
which the Financial
Advisors believed v.ere comparable to the various Operating
Businesses;
(e) considered the financial terms, to the extent publicly
available, of certain acquisitions
of companies which the Financial Advisors believed were
comparable to the various Operating Businesses:
(f) considered certain economic and industry information
relevant to the various Operating Businesses;
(g) discussed the current operations and prospects of the
various Operating Businesses
with the senior management of Walter Industries and its
subsidiaries; and,
(h) made such other analyses and examinations as the Financial
Advisors deemed necessary or appropriate.
The valuation of each Operating Business was based on a review
of the three methodologies
described in clauses (c), (d), (e) above, except for Mid-State
Homes and United Land. Mid State Homes' value was derived through
the valuation of the going concern operating entity,
the servicing of existing mortgages and of the securitization of
the whole loan mortgage
portfolio and the Trust 11 and 111 Residuals. United Land's
value was based on the cash flow producing land holdings.
The Financial Advisors did not independently verify the
information
considered that was provided by the Debtors and other sources in
its valuations and for purposes of its valuations relied upon the
accuracy and completeness of all such information.
In addition, the Financial Advisors did not undertake or obtain
appraisals of the tangible or intangible assets of the
various Operating Businesses. The value of an Operating Business
is subject to uncertainties
and contingencies which are difficult to predict and will
fluctuate with changes in interest rates,
market conditions and other factors affecting the financial
conditions and prospects of such business.
Note 2: The Liquidation Discount represents an estimate of the
aggregate of the discounts to the value
of the Operating Businesses that would likely be incurred in
the sale of stock in the Operating
Businesses under a Chapter 7 liquidation. Actual discounts
which may be required to sell stock
in the Operating Businesses could be significantly different. No
discount has been applied to the value of the Mid-State whole
loan mortgage portfolio and Mid-State Trust II and III
Residuals as a Chapter 7 liquidation would not affect the
ability of a buyer to securitize these
assets at full value. The Debtors have successfully securitized
these assets despite the proceedings of their Chapter 11 cases.
The discounts applied to the Operating Businesses relate to two
principal adverse circumstances that would affect all Walter
Industries' Operating Businesses in a Chapter 7 liquidation:
a. There would be pressure to convert stock in the Operating
Businesses into cash quickly.
(This analysis assumes a one year period between conversion to
a Chapter 7 proceeding and distribution to creditors.) These
sales may have an adverse impact on employee morale, customer
willingness to order new goods and vendor
willingness to ship new
goods and extend trade credit and the forced nature of the
sales may result in a discount
to the going concern values of the enterprises.
b. The Debtors have stated in their Disclosure Statement that
studies of potential
Chapter 7 environmental exposures have not been made. The
Operating Businesses may have potential liabilities under
environmental laws which
could be addressed in the ordinary course of business after
consummation of a plan of reorganization under
Chapter 11. However, in a Chapter 7 liquidation, uncertainty
would surround the transfer of responsibility for these
exposures, and potential purchasers would raise
concerns about possible environmental liabilities.
The precise discount factor attributable to the
uncertainties described above cannot be
computed on the basis of any known empirical data. Given the
adverse factors previously
discussed, it is estimated that the actual liquidation values of
most of the Operating Businesses
would reflect a discount of 15-25% to from the values which would
otherwise exist. No discount has been applied to reflect
uncertainties regarding future transferee liability for
asbestos-related claims as it is assumed that such uncertainty
would not exist
for the reasons previously discussed. While the Proponents
acknowledge that the foregoing
circumstances set forth in
sub-paragraphs (a) and (b) above warrant a discount from the
going concern value of the
Debtors' Operating Businesses, the Proponents believe that the
range of discount employed by
the Debtors in their Liquidation Analysis is artificially high
and unwarranted given the
conditions and requirements of their Plan. See Article X of the
Disclosure Statement.
Note 3: It is expected that there will be cash of approximately
$140 million available, which includes the present cash escrow
for the Series B and C Senior Notes. Amounts reserved for
environmental
liabilities or collateralizing letters of credit would not be
available to creditors benefit available. There may also be
additional tax benefits related to the asbestos settlement
payment based on any further tax liabilities incurred
Note 15: Includes all Unsecured Bondholders and Old Walter
Industries IRB claims.
<PAGE>
EXHIBIT VII
WALTER INDUSTRIES, INC.
PROJECTED FINANCIAL INFORMATION:
As a condition to confirmation of the Creditors' Plan, the
Bankruptcy Code requires, among other things, the Bankruptcy
Court to determine that confirmation is not likely to be
followed by liquidation or result in the need for further
financial reorganization of the Debtors. To assess the
feasibility of the Creditors' Plan, the Creditors' Plan has been
overlaid on the Debtors' 1994 Five Year Business Plan
(extrapolated for the years 1999 through 2001).
Included herein are summary statements of consolidated cash
flows of Reorganized Walter Industries excluding Mid-State
Trusts II and III, and the trusts contemplated by the Creditors'
Plan, for each of the fiscal years ending 1995 through 2001. A
separate statement of cash flows has been included to reflect
the consolidated cash flows of the trusts contemplated by the
Creditors' Plan. The cash flows of the Mid-State Trusts have
been excluded to show the debt capacity of the corporate entity
as assets of the Trusts are not available to satisfy claims of
general creditors of the Company and its subsidiaries. The
consolidated cash flows assume the implementation of the
Creditors' Plan and are dependent upon the successful
implementation of the Debtors' Business Plan and the reliability
of the assumptions contained therein. Both the Debtors'
Business Plan and the projections reflect numerous assumptions
regarding both anticipated financial performance as well as
industry performance, and overall economic conditions, some of
which are beyond the control of the Debtors. In addition,
unanticipated events and circumstances may affect the actual
financial results of the Debtors. Therefore, the actual results
achieved throughout the projection period may vary from the
projected results. These variations may be material.
Accordingly, no representation can be, or is being, made with
respect to the accuracy of the projections or the ability of the
Debtors to achieve the projected results. The Proponents urge
that the underlying assumptions be carefully considered by
Holders of Claims in deciding whether to accept or reject the
Creditors' Plan.
Principal Assumptions:
Net Sales and Revenues: Net sales and revenues are assumed
to increase between approximately 3% to 6% per year during
the projection period. The Debtors have assumed that the
general recessionary conditions that have prevailed in the
United States during the past few years will gradually
abate. Sales of all divisions are assumed to increase as a
result of both increased volume and pricing as well as, in
a limited number of instances, the introduction of new
products. Interest income is assumed to increase as a
result of the continued creation of new mortgages by Mid-
State Homes.
EBIT: EBIT is expected to increase over the projection
period primarily as a result of the assumed sales growth
which results in an increasing gross profit margin given
the high degree of fixed costs associated with the
subsidiaries engaged in manufacturing activities. Gross
margins are also assumed to be enhanced as a result of
continued efforts to control costs and implement
productivity improvements.
Capital Expenditures: Annual capital expenditures are
assumed to average approximately $86 million per year
during the projection period. The primary uses of capital,
and their approximate percentage of total capital
expenditures, relate to expenditures necessary to maintain
profit centers (75%), environmental controls (9%),
expansion (9%) and cost reduction programs (7%). United
States Pipe and Foundry Co. and Jim Walter Resources have
historically been, and are planned to be, the greatest
users of capital, given the capital intensive nature of
these businesses. Together, they account for approximately
75% of total planned capital expenditures.
Income Taxes: The projections assume that the Plan will
not result in the incurrence of any taxes upon the estate
of the Debtors. A 41% total income tax rate on projected
taxable income has been assumed in the projections. The
projections also assume that income taxes are paid in the
year in which they arise. The provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for
Income Taxes" have not been implemented in the projections.
Interest Expense: Interest expense for all of the
securities issued under the proposed Creditors' Plan have
been calculated at the respective stated interest rates.
Interest on the working capital line of credit has been
calculated on the assumed balance at an interest rate of
71/2%, which is equal to the current Prime rate of interest
plus 1/4% during the projection period.
Liquidity and Capital Resources: The Debtor's primary
source of cash is from operations. However, significant
amounts of cash are consumed by the home building segment
of Jim Walter Homes which through its Mid-State Homes
subsidiary finances approximately 97% of the homes sold by
Jim Walter Homes. It is assumed that upon consummation of
the Creditors' Plan, a working capital/warehouse line of
credit will be established to fund the creation of these
mortgages. Over time, it is anticipated that the mortgages
created will be securitized consistent with the Debtors'
past practices. However, no securitization of these
mortgages is contemplated in the projection period. It is
also assumed that the Debtors will borrow an amount
necessary to provide a break-even cash flow for Mid-State
Homes.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(excluding Mid-State Trusts II & III and mortgages to be securitized under Plan)
<CAPTION>
Projected for the Years Ended May 31,
<S> <C> <C> <C> <C> <C> <C>
1995
($ Millions) (5 Months) 1996 1997 1998 1999 2000 2001
INDUSTRIAL COMPANIES: (a)
EBIT........................... $ 76.4 $209.5 $230.0 $244.7 $254.5 $ 264.7 $ 275.3
plus: Depreciation............. 30.5 76.7 80.7 82.7 85.2 87.9 95.0
less: Change in Working Capital (5.5) (5.3) (7.4) (8.1) (8.9) (9.8) (10.8)
less: Capital Expenditures..... (36.5) (88.3) (95.5) (83.3) (83.9) (83.9) (83.9)
Free Cash Flow - Industrial
Companies................... 64.9 192.6 207.8 236.0 246.9 258.9 275.6
MID-STATE HOMES: (b)
EBIT........................... 4.5 22.7 41.0 57.7 76.1 97.8 116.5
less: Net Change in Working
Capital (c)................. (4.5) (22.7) (41.0) (57.7) (76.1) (97.8) (116.5)
Cash Flow - Mid-State Homes 0.0 0.0 0.0 0.0 0.0 0.0 0.0
NET OPERATING CASH FLOW 64.9 192.6 207.8 236.0 246.8 258.9 275.5
less: Cash Interest Expense.. (17.6) (47.7) (60.2) (71.3) (81.0) (78.1) (69.0)
less: Cash Taxes............. (15.0) (51.5) (61.8) (71.5) (77.4) (91.3) (106.3)
less: Principal Repayment.... 0.0 (40.7) 0.0 0.0 0.0 (325.0) 0.0
Cash Flow before Financing.... 32.3 52.6 85.8 93.2 88.5 (235.6) 100.2
Cash Distributions under POR. (140.4) 0.0 0.0 0.0 0.0 0.0 0.0
Decrease/(Increase) in Cash..... (108.1) 52.6 85.8 93.2 88.5 (235.6) 100.2
Beginning Cash.................. 185.4 77.3 130.0 215.8 209.0 397.5 161.9
Ending Cash (d)................. $ 77.3 $130.0 $215.8 $309.0 $397.5 $161.9 $262.2
</TABLE>
(a) Represents cash flows of all operating companies less
corporate overhead. The cash flows of Mid-State Homes, the
mortgage finance subsidiary, are separately reflected below.
(b) Represents cash flows from mortgages created after December
31, 1994. All previously existing mortgages and residuals are to
be securitized as contemplated under the Creditors' Plan and are
therefore excluded.
(c) Includes borrowings under a working capital/warehouse
facility required to fund new mortgages. Amounts borrowed
represent that necessary to provide a break-even cash flow for
Mid-State Homes.
(d) Cash may be used to amortize indebtedness of Walter
Industries and/or to create further mortgages.
<PAGE>
<TABLE>
<CAPTION>
Cash Interest Paid
($000's)
Projected for the Years ended May 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995
(5 Months) 1996 1997 1998 1999 2000 2001
CASH INTEREST:
8.0% New Senior Notes......... $10,833 $26,000 $26,000 $ 26,000 $26,000 $15,167 $ 0
6.5% Bank Debt................ 6,771 16,250 16,250 16,250 16,250 16,250 16,250
7.5% Working Capital
facility/Warehouse Line...... 0 5,453 17,925 29,063 38,730 46,710 52,725
CASH INTEREST PAID.............. $17,604 $47,703 $60,175 $71,313 $80,980 $78,127 $68,975
NOTE: If interest rates on this debt were to increase by 1%, annual interest expense would increase by the following amounts:
1995 1996 1997 1998 1999 2000 2001
$2,396 $6,477 $8,140 $9,625 $10,914 $10,624 $9,530
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summary of Long-Term and Short-Term Debt
($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 5/31/95 5/21/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01
New Senior Notes............ $325,000 $325,000 $325,000 $325,000 $325,000 $325,000 $ 0 $ 0
Bank Debt(a)................ 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000
Working Capital
Facility/Warehouse Line... 0 72,700 239,000 387,400 516,400 622,800 703,000 760,100
TOTAL DEBT.................. $575,000 $647,700 $814,000 $962,500 $1,091,400 $1,197,800 $ 953,000 $1,010,100
</TABLE>
(a) Projections assume an evergreen bank term loan. However,
additional cash provided by the working capital facility and/or
securitization of mortgage could be used to amortize this amount.
<PAGE>
<TABLE>
<CAPTION>
CASH FLOWS RELATED TO MORTGAGE SECURITIES
($ 000's)
Projected for the Years Ended May 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995
(5 Months) 1996 1997 1998 1999 2000 2001
Sources of Cash from Mortgage Assets
to be Securitized: (a)
EBIT(b)................................. $37,156 $ 84,914 $ 81,918 $ 78,902 $ 75,861 $ 72,786 $ 69,671
Principal Repayment..................... 14,635 34,959 34,448 34,016 33,664 33,397 33,220
Total Cash Sources..................... 51,791 119,873 116,366 112,918 109,525 106,183 102,891
Uses of Cash:
Interest............................... (29,075) (66,786) (62,250) (58,189) (53,782) (49,287) (44,692)
Debt Repayment......................... (22,715) (53,087) (53,846) (54,729) (55,743) (56,896) (58,199)
Total Cash Uses........................ (51,791) (119,873) (116,366) (112,918) (109,525) (106,183) (102,891)
Net Sources/Uses....................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
New mortgage collateralizes securities $875,000 $852,285 $799,198 $745,352 $690,623 $634,880 $577,984 $519,785
</TABLE>
(a) Represents cash flows from all unencumbered mortgages
created prior to December 31, 1994 as well as the cash flows from
residual interests in Mid-State Trusts II & III. The Creditors'
Plan contemplates that these mortgage assets will be securitized
and they have therefore been segregated from the other cash flows
of Walter Industries.
(b) Represents interest income net of miscellaneous expenses.
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET
($ millions)
<S> <C> <C> <C> <C>
Projected Recording of "Fresh Pro-Forma
12/31/94 Plan Consummation Start" 12/31/94
Cash...................................................................... $ 185.4 (140.4)(a)(b) $ 45.0
Short-term Investments.................................................... 111.4 111.4
Installments Notes Receivable............................................. 1,462.7 1,462.7
Trade Receivables......................................................... 143.8 143.8
Other Notes and Accounts Receivable....................................... 8.0 8.0
Inventories............................................................... 161.4 161.4
Prepaid Expenses.......................................................... 8.4 8.4
Total Current Assets.................................................... 2,081.1 (140.4) 0.0 1,940.7
Property, Plant and Equipment............................................. 1,161.9 1,161.9
Accum. Depreciation, Depletion and Amortization........................... (473.4) (473.4)
Property, Plant and Equipment, Net........................................ 688.4 688.4
Other Investments......................................................... 5.7 5.7
Unamortized Debt Expense.................................................. 27.2 (9.4) 17.8
Other Assets.............................................................. 38.2 38.2
Excess of Purchase Price over Net Assets Acquired......................... 401.0 (401.0) 0.0
Reorganization Value in Excess of Amounts Allocable to Unidentifiable Assets 0.0 1,155.7(c) 1,155.7
Total Assets............................................................ 3,241.6 (140.4) 745.3 3,846.5
Bank Overdrafts........................................................... 13.5 13.5
Accounts Payable.......................................................... 57.4 57.4
Trade Notes (25% of Claim)................................................ 0.0 40.7(d) 40.7
Accrued Expenses.......................................................... 110.0 110.0
Income Taxes Payable (Current and Deferred)............................... 48.8 48.8
Working Capital Facility.................................................. 0.0 40.7 0.0 0.0
Total Current Liabilities............................................... 229.8 270.5
Income Taxes Payable-Deferred............................................. 33.2 33.2
Long-Term Senior Debt (incl. Current Maturities)
Mid-State Trust II & III................................................ 835.4 835.4
Securities Issued Under the Plan........................................ 0.0 1,450.0(e) 1,450.0
Accrued Retiree Health Liability.......................................... 229.8 0.0 229.8
Other Long-Term Liabilities............................................... 48.2 0.0 48.2
Accrued Post-Petition Interest on Ch. 11 Liabilities...................... 404.3 (404.3)(f) 0.0
Liabilities Subject to Chapter 11 Proceedings............................. 1,755.7 (1,755.7)(f) 0.0
Total Liabilities....................................................... 3,536.4 (669.3) 0.0 2,867.1
Total Stockholders' Equity................................................ (294.8) 528.9(g)(h) 745.3(i) 979.4
Total Liabilities and Stockholders' Equity.............................. $3,241.6 (140.4) 745.3 $3,846.5
</TABLE>
<PAGE>
WALTER INDUSTRIES, INC.
NOTES TO ADJUSTMENTS TO BALANCE SHEET UPON CONFIRMATION
($ 000's)
(a) To record the following cash sources and uses at
Consummation:
<TABLE>
<CAPTION>
Amount
<S> <C>
CASH SOURCES AT CONSUMMATION:
Borrowing Pursuant to New Revolving Credit Agreement............. $ 250,000
Proceeds from Mortgage Collateralizations........................ 875,000
Available Cash................................................... 125,000
Release of Restricted Cash....................................... 15,400
Total Cash Sources......................................... 1,265,400
CASH USES AT CONSUMMATION:
Administrative.................................................... 32,000
Priority.......................................................... 36,140
Secured Bank Claims:
Bank Credit Agreement........................................... 354,028
working Capital Facility........................................ 121,343
Series B and C Senior Notes....................................... 6,400
Trade/Accounts Payable............................................ 8,792
Old Walter Industries IRB......................................... 7,494
Provident Insurance............................................... 1,704
Sloss IRB Claim................................................... 715
Secured Equipment Purchases....................................... 48
Grace Street Notes................................................ 5
Total Cash Uses................................................ 621,750
Cash Available for Distribution................................... $ 643,650
(b) Includes the release of funds held in escrow during Chapter 11 proceedings:
Series B and C Escrow............................................. $ 6,400
Cash Collateral for Letters of Credit............................. 9,000
Total...................................................... $ 15,400
</TABLE>
(c) To record the reorganization in excess of amounts allocable
to identifiable assets in accordance with fresh start reporting.
No attempt has been made to allocate this amount to specific
assets due to the absence of specific asset valuations. This
amount is not amortized in the projection period. Upon
confirmation, values would be assigned to specific assets and
this amount would be allocated appropriately among them. The
unallocated portion would then be amortized going forward.
(d) To record the Plan provision regarding payment of trade
claims.
(e) To reflect the issuance of debt obligations as contemplated
in the Plan:
Mortgage Collateralization Indebtedness...... $ 875,000
Walter Industries, Inc. - Senior Notes......... 325,000(1)
Walter Industries, Inc. - Revolving Bank Loan.. 250,000
Total New Securities..................... $1,450,000
(1) Approximates total claim of $330,974 less funds in escrow of
$6,400.
(f) To record the discharge of liabilities subject to Chapter 11
proceedings:
<TABLE>
<CAPTION>
<S> <C> <C>
Principal and Pre-Petition Accrued Interest
Accrued Interest as of Filing 12/29/89-12/31/94*
($ 000's)
Administrative.................... $ 32,000
Priority.......................... 26,140
Secured Bank Claims:
Bank Credit Agreement........... 229,623 $152,625
Working Capital Facility........ 78,779 51,843
Total......................... 308,402 204,468
Senior Reset Notes:
Series B....................... 188,977 169,340
Series C....................... 5,356 4,801
Total........................ 194,333 174,141
Trade/Other...................... 70,774 23,001
Old Walter Industries IRB........ 6,650 2,143
Provident Insurance.............. 7,494
Convenience Class................ 1,286 418
Sloss IRB Claim.................. 571 144
Secured Equipment Purchases...... 48
Grace Street Notes............... 5
SUBTOTAL....................... 657,703 404,315
Unsecured Bondholders:
Senior Subordinated Notes...... 479,261 0
17% Subordinated Notes 1996.... 379,254 0
Pre-LBO Notes:
131/8 Sub Notes 1993........... 52,680 0
133/4 Sub Notes 2003........... 105,615 0
107/8 Sub Notes 2008........... 81,177 0
239,472 0
SUBTOTAL..................... 1,097,987 0
TOTAL-ALL CLAIMS............ $1,755,690 $404,315
</TABLE>
* If the Amended and Restated Veil Piercing Settlement Agreement
does not become effective by its terms, total accrued interest
would decrease by $75 million.
(g) To record the cancellation of common equity.
(h) To record the net adjustment to retained earnings as a
result of the discharge of indebtedness and other effects of Plan
consummation.
(i) To record the equity value of Reorganized Walter
Industries. This amount represents:
Negotiated Enterprise Value........... $2,525
Less: Senior Claims.................. 902
Cash Available for Distribution.. 644
Reorganized Net Equity................. $ 979
<PAGE>
EXHIBIT X.A.1
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1993
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Walter Industries, Inc. and Subsidiaries
Report of Independent Certified Public Accounts F-2
Consolidated Balance Sheet-May 31, 1993 F-3
Consolidated Statement of Operations and Retained
earnings (Deficit) for the Three Years Ended
May 31, 1993 F-4
Consolidated Statement of Cash Flows for the
Three Years Ended May 31, 1993 F-5
Notes To Financial Statements F-6 to F-36
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Walter Industries, Inc.
In our opinion, the accompanying consolidated balance sheet
and the related consolidated statements of operations and
retained earnings (deficit) and of cash flows present fairly, in
all material respects, the financial position of Walter
Industries, Inc. and its subsidiaries at May 31, 1993 and 1992,
and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Notes 2 and 11 to the financial
statements, on December 27, 1989, Walter Industries, Inc. and
substantially all of its subsidiaries each filed a voluntary
petition for reorganization under Chapter 11 of Title 11 of the
United States Code, thereby raising substantial doubt about their
ability to continue as a going concern. The Company filed a
joint plan of reorganization and related disclosure statement
with the Bankruptcy Court on June 15, 1992. The accompanying
consolidated financial statements do not include any adjustments
that might result from the outcome of the petitions for
reorganization.
As discussed in Note 12 to the Consolidated Financial
Statements, the Company changed its method of accounting for
postretirement benefits other than pensions in fiscal year 1993.
PRICE WATERHOUSE
Tampa, Florida
July 9, 1993
<PAGE>
<TABLE>
<CAPTION>
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
May 31
1993 1992
(in thousands)
<S> <C> <C>
ASSETS
Cash (including short-term investments of
$172,553,000 and $84,271,000) (Note 6) $ 190,370 $ 105,874
Short-term investments, restricted (Note 4) 105,620 106,954
Instalment notes receivable (Notes 4,6 and 7) 4,187,316 4,052,629
Less Provision for possible losses ( 26,579) ( 25,965)
Unearned time charges (2,773,878) (2,663,412)
Net 1,386,859 1,363,252
Trade receivables 143,259 145,013
Less Provision for possible losses ( 7,324) ( 6,080)
Net 135,935 138,933
Other notes and accounts receivable 15,625 14,056
Inventories, at lower of cost (first in,
first out or average)
or market:
Finished goods 94,360 91,180
Goods in process 23,421 24,160
Raw materials and supplies 47,153 49,447
Houses held for resale 1,705 2,479
Total inventories 166,639 167,266
Prepaid expenses 7,902 8,138
Property, plant and equipment, at cost (note 5) 1,075,068 1,015,483
Less Accumulated depreciation, depletion and
amortization (412,028) ( 350,861)
Net 663,040 664,622
Investments 5,568 5,440
Amortized debt expense 46,622 59,251
Other assets 37,616 36,581
Excess of purchase price over net assets
acquired (Note 1) 461,438 500,899
$3,223,234 $3,171,266
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Bank overdrafts (Note 6) $ 17,921 $ 27,679
Accounts payable (Note 2) 52,696 54,388
Accrued expenses (Note 2) 116,238 117,920
Income taxes payable (Notes 2 and 7) 19,135 10,024
Deferred income taxes (Note 7) 85,833 171,469
Long-term senior debt (Notes 2 and 6) 1,046,971 948,782
Accrued postpetition interest on
secured obligations (Notes 2 and 6) 210,199 177,594
Accumulated postretirement health benefits
obligations (Note 12) 189,905 -
Other long-term liabilities 46,442 48,201
Liabilities subject to Chapter 11 proceedings
(Note 2, 4 and 6) 1,725,631 1,845,328
Stockholders' equity (deficit) (Notes 1, 6,
8 and 9):
Common stock, $.01 par value per share:
Authorized - 50,000,000 shares
Issued - 31,120,773 shares 311 311
Capital in excess of par value 155,293 155,293
Retained earnings (deficit), per accompanying
statement ( 441,695) ( 383,681)
Excess of additional pension liability over
unrecognized prior years service cost ( 1,646) ( 2,042)
Total stockholders' equity (deficit) ( 287,737) (230,119)
$ 3,113,234 $3,171,266
</TABLE>
<TABLE>
<CAPTION>
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
For the years ended May 31,
1993 1992 1991
<S> <C> <C> <C>
Sales and revenues:
Net sales $1,072.615 $1,139.048 $1,098,062
Time charges (Note 4) 218,696 195,001 180,292
Miscellaneous 23,160 28,172 34,743
Interest income from Chapter 11
proceedings (Note 2) 4,515 4,360 13,300
1,318,986 1,366,581 1,326,397
Cost and expenses:
Cost of sales 804,411 891,882 826,455
Depreciation, depletion and
amortization (Note 5) 70,483 82,801 75,099
Selling, general and administrative 124,616 129,372 122,921
Postretirement health benefits (Note 12) 23,474 - -
Provision for possible losses 4,236 5,787 7,386
Chapter 11 costs (Note 2) 9,802 5,172 5,179
Interest and amortization of debt
discount and expense (Interest on
unsecured debt obligations not accrued
since December 27, 1989 $163,685,000
in each year ) (Notes 2, 5 and 6) 171,581 177,060 209,511
Amortization of excess of purchase price
over net assets acquired (Note 1) 39,461 39,702 39,760
1,248,064 1,331,776 1,286,311
70,922 34,805 40,086
Provision for income taxes (Note 7):
Current (48,141) (35,957) ( 24,931)
Deferred 23,813 23,494 5,477
Income from continuing operations before
cumulative effect of accounting change 46,594 22,342 20,632
Discontinued operations (Note 3):
Loss form operations - - ( 395)
Loss on disposal - - ( 5,775)
Cumulative effect of change in accounting
principle - postretirement benefits other
than pensions (net of income tax benefit
of $61, 823,000) (Note 12) ( 104,608) - -
Net income (loss) ( 58,014) 22,342 14,462
Retained earnings (deficit) at
beginning of year ( 383,681) ( 406,023) ( 420,485)
Retained earnings (deficit) at end
of year $( 441,695) $( 383,681) $( 406,023)
</TABLE>
<TABLE>
<CAPTION>
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended May 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
OPERATIONS
CONTINUING OPERATIONS:
Net income (loss) $( 58, 014) $ 22,342 $ 20,632
Charges to income not affecting cash:
Depreciation, depletion and amortization 70,483 82,801 75,099
Provision for deferred income taxes (23,813) ( 23,494) ( 5,477)
Accumulated postretirement health benefits
obligation (Note 12) 189,905 - -
Adjustment to deferred taxes for accounting
change (Note 12) ( 61,823) - -
Provision for other long-term liabilities ( 781) 6,782 ( 4,236)
Amortization of excess of purchase price
over net assets acquired (Note 1) 39,461 39,702 39,760
Amortization of debt discount and expense 22,148 19,715 23,775
177,566 147,848 149,553
Decrease (increase) in:
Short-term investments, restricted 1,334 4,374 9,188
Installment notes receivable, net <F1> (23,607) (47,835) (44,205)
Trade and other receivables, net 1,429 ( 457) 32,181
Trade and other receivables, net 627 12,118 (21,349)
Inventories 236 1,404 ( 959)
Prepaid expenses
Increase (decrease) in:
Bank overdrafts (Note 6) ( 9,758) 7,906 ( 661)
Accounts payable ( 1,682) 15,663 8,331
Accrued expenses 32,605 47,868 75,694
Income taxes payable 9,111 (18,036) 16,457
Accrued postpetition interest on secured obligations 32,605 47,868 75,694
Liabilities subject to Chapter 11 proceedings
(Note 2):
Accounts payable 811 714 ( 7,340)
Accrued expense 4 ( 136) ( 2,049)
Income taxes payable - 1,429) -
Other long-term liabilities - ( 244) 482
Cash flows from continuing operations 186,984 173,041 215,816
DISCONTINUED OPERATIONS (Note 3):
Loss from operations - - ( 395)
Loss on disposal - - ( 5,775)
Cash flows from discontinued operations - - ( 6,170)
Cash flows from operations 186,984 173,041 209,646
FINANCING ACTIVITIES
Issuance of long-term senior debt 256,128 - -
Addition to unamortized debt expense ( 4,794) - -
Retirement of long-term senior debt (Note 6) (161,959) (127,258) (120,715)
Decrease in liabilities subject
to Chapter 11 proceedings (Notes 2, 4 and 6):
Short-term notes payable - ( 2,805) ( 662)
Long-term senior debt (121,217) ( 37,958) (67,278)
Cash flows from financing activities ( 31,842) (168,021) (188,655)
INVESTING ACTIVITIES
Proceeds from sale of discontinued operations (Note 3) - - 5,837
Additions to property, plant and equipment,
net of normal retirements (68,901) ( 63,646) ( 64,719)
Decrease (increase in investments ( 128) ( 1,137) 4,222
Decrease (increase) in other assets ( 1,617) ( 5,485) 3,469)
(Increase) in net investment in
discontinued operations (Note 3) - - ( 202)
Cash flows from investing activities (70, 646) ( 67,994) ( 51,393)
Net increase (decrease) in cash and
cash equivalents 84,496 ( 62,974) ( 30,402)
Cash and cash equivalents at beginning of year 105,874 168,848 199,250
Cash and cash equivalents at end of year (Note 6) $ 190,370 $ 105,874 $168,848
<FN>
<F1> Consists of sales and resales, net of repossessions and provision for possible losses, of
$207,340,000 $207,000 and $188,319,000 and cash collections on account and payouts in advance
of maturity of $183,733,000 $159,813,000 and $145,114,000 for the years ended
May 31, 1993, 1992 and 1991, respectively.
</TABLE>
NOTE 1 - Organization and Acquisition
Walter Industries, Inc. (formerly Hillsborough Holdings
Corporation) (the "Company") was organized in August 1987 by a
group of investors led by Kohlberg Kravis Roberts & Co. ("KKR")
for the purpose of acquiring Jim Walter Corporation, a Florida
corporation ("Original Jim Walter"). Following its organization,
the Company organized and acquired all of the outstanding capital
stock of a group of direct wholly-owned subsidiaries (the "First
Tier Subsidiaries"). The First Tier Subsidiaries (except JWC
Holdings Corporation) and the Company organized and acquired all
of the outstanding capital stock of Walter Industries, Inc. ("Old
Walter Industries"). JWC Holdings Corporation, a Florida
corporation and a First Tier Subsidiary ("JWC Holdings"),
organized and acquired all of the outstanding shares of J_II
Acquisition Corporation, a Florida corporation ("J-II"). Old
Walter Industries and J-II, in turn, organized and acquired all
of the outstanding capital stock of Hillsborough Acquisition
Corporation ("HAC").
On September 18, 1987, HAC acquired approximately 95% of the
outstanding common stock of Original Jim Walter at a price of $60
per share in cash, pursuant to an Agreement and Plan of Merger
dated as of August 12,1987 (the "Acquisition"). On January 7,
1988, the Company caused Original Jim Walter to be merged (the
"Merger") into HAC (which changed its name to "Jim Walter
Corporation") and the remaining 5% of its common stock was
converted into the right to receive $60 in cash for each share.
On that same date: (i) HAC distributed substantially all of its
assets (principally excluding the stock of certain subsidiaries
of Original Jim Walter engaged in building materials businesses)
Old Walter Industries in redemption of all of its shares of
capital stock owned by Old Walter Industries: (ii) HAC merged
into J-II; and (iii) J-II changed its name to "Jim Walter
Corporation". On April 1, 1991, Old Walter Industries merged
into Hillsborough Holdings Corporation thereby completing its
previously adopted plan of liquidation. The Company changed its
name to Walter Industries, Inc. in connection with such merger.
Prior to September 18, 1987, the Company had no significant
assets or liabilities and did not engage in any activities other
than those related to the Acquisition. The purchase price of the
shares of Original Jim Walter was approximately $2,425,000,000,
plus expenses of the Acquisition and assumption of certain
outstanding indebtedness. For financial statement purposes, the
Acquisition has been accounted for as a purchase as of September
1, 1987 and, accordingly, the purchase price has been allocated
based upon the fair value of assets acquired and liabilities
assumed. The excess of purchase price over net assets acquired
in connection with the Acquisition is being amortized over
periods ranging up to twenty years.
The consolidated financial statements include the accounts
of the Company and all of its subsidiaries. All significant
intercompany balances have been eliminated.
NOTE 2 - Reorganization Proceedings
On December 27, 1989, the Company and 31 of its subsidiaries
(including the subsidiary in the next sentence, the "Debtors")
each filed a voluntary petition for reorganization under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court (the "Bankruptcy Court")
for the Middle District of Florida, Tampa Division (the
"Reorganization proceedings"). On December 3, 1990, one
additional small subsidiary filed a voluntary petition for
reorganization under the Bankruptcy Code. Two other small
subsidiaries did not file petitions for reorganization.
The Debtors' Chapter 11 cases resulted from a sequence of
events stemming primarily from an inability of the Company's
interest reset advisors to reset interest rates on approximately
$624 million of outstanding Senior Extendible Reset Notes and
Senior Subordinated Extendible Reset Notes on which interest
rates were scheduled to be reset effective January 2, 1990. The
inability to reset the interest rates was primarily attributable
to pending asbestos-related litigation which prevented the
Debtors from completing a refinancing or from selling assets to
reduce their debt which, together with turmoil in the high yield
bond markets, depressed the bid value of such notes.
The consolidated financial statements of the Company have
been prepared on a "going-concern" basis which contemplates the
realization of assets and the liquidation of liabilities in the
ordinary course of business; however, as a result of the Chapter
11 filings, such realization of assets and liquidation of
liabilities are subject to a significant number of
uncertainties.
These financial statements include adjustments and
reclassification that have been made to reflect the liabilities
which have been deferred under the Reorganization Proceedings.
Interest in the amount of $560,621,000 ($163,685,000 in the
current fiscal year) on unsecured debt obligations has not been
accrued in the consolidated financial statements since the date
of the filing of petitions for reorganization. This estimate is
based on the balances of the unsecured debt obligations and
their interest rates as of the petition date. Such interest
rates do not necessarily presently govern the respective rights
of the Company, its subsidiaries and the various lenders.
Instead, the rights of the parties will be determined in
connection with the Reorganization Proceedings.
The discussion below sets forth various aspects of the
Reorganization Proceedings, but is not intended to be an
exhaustive summary. For additional information regarding the
effect on the Debtors of the Reorganization Proceedings,
reference should be made to the Bankruptcy Code, the rules and
regulations promulgated pursuant to the Bankruptcy Code and the
case law thereunder. Each creditor should consult with its own
counsel regarding the impact of the Reorganization Proceedings
on such creditor's claims.
Pursuant to provisions of the Bankruptcy Code and an order
of the Bankruptcy Court dated December 28, 1989, the Debtors
were authorized to continue to operate their businesses and own
and manage their properties and assets as debtors in possession.
The Bankruptcy Code authorizes the Debtors to enter into
transactions, including the sale or lease of property of their
estates and to use property of their estates, in the ordinary
course of their businesses without prior approval of the
Bankruptcy Court. The sale or lease of property of the estates
other than in the ordinary course of business and certain other
transactions (for example, secured financing), whether or not in
the ordinary course of business, are subject to prior approval
by the Bankruptcy Court.
As a result of the filing of petitions for reorganization,
the maturity of all unpaid principal of, and interest on, the
senior and subordinated indebtedness of the Debtors became
immediately due and payable in accordance with the terms of the
instruments governing such indebtedness. The Debtors will not
be able to borrow additional funds under any of their prepetition
credit arrangements.
Under the Chapter 11 filings, a significant portion of
claims in existence at the filing date ("prepetition") are
stayed ("deferred") while the Company continues to manage the
business.
The Bankruptcy Code defines "claim" to include a right to
payment whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured.
Claims which were contingent or unliquidated at the commencement
of the Reorganization Proceedings constitute claims under the
Bankruptcy Code. Such claims, including, without limitation,
those that may arise in connection with rejection of executory
contracts, including leases, as well as those that might arise in
connection with environmental and pension-related matters, could
be significant. It is not possible to quantify the amount of
such claims at this time. Under the Bankruptcy Code, a
creditor's claim is treated as secured only to the extent of the
value of such creditor's collateral, and the balance of such
creditor's claim is treated as unsecured. Depending upon the
outcome of the Reorganization Proceedings and the value of a
secured creditor's collateral, if any, secured creditors may not
be entitled to claim interest on their claims for the period
after December 27, 1989. Generally, unsecured debt does not
accrue interest after the filing.
Only holders of "allowed claims" may vote on and
participate in distributions under any plan or plans or
reorganization of the Debtors that may be proposed. A claim is
allowed to the extent (i) the claim is not listed as contingent,
disputed or unliquidated on the Debtors bankruptcy schedules
filed in January 1990, as amended, or (ii) a proof of claim is
filed and not successfully objected to by a party in interest.
To the extent a creditor must file a proof of claim, such
proof must be filed by a date fixed by the Bankruptcy Court as
the last day to file proofs of claim (the "Bar Date"). At a
hearing on July 23, 1992, the Bankruptcy Court set a Bar Date of
October 30, 1992 in the Reorganization Proceedings for all
claims other than any potential claims related to asbestos
personal injury or property damage. At a hearing on December 16,
1992, the Bankruptcy Court set a Second Bar Date of March 1, 1993
in the Reorganization Proceedings for new creditors added by
amended schedules filed by certain of the Debtors November 23,
1992.
No provision has been included in the accompanying
financial statements for any prepetition potential claims and
additional liabilities that may arise from resolution of any
claims filed.
The amount includes as liabilities subject to Chapter 11
proceedings reflected on the Company's consolidated balance
sheet consists of the following:
<TABLE>
<CAPTION>
May 31,
1993 1992
(in thousands)
<S> <C> <C>
Short-term notes payable $ 78,033 $ 78,033
Accounts payable 62,900 62,089
Accrued expenses 95,999 95,995
Income taxes payable 47,066 47,066
Long-term senior debt (Notes 4 and 6) 416,629 537,846
Long-term subordinated debt (Note 6) 1,024,766 1,024,061
Other long-term liabilities 238 238
$1,725,631 $1,845,328
</TABLE>
As debtors in possession, the Debtors have the right, subject to
Bankruptcy Court approval and certain other limitations, to
assume or reject certain executory contracts including unexpired
leases. In this context, "assumption" means that the Debtors
agree to perform their obligations and cure certain existing
defaults under the contract or lease, and "rejection" mens that
the Debtors are relieved from their obligations to perform
further under the contract or lease and are subject only to a
claim for damages for the breach thereof. Any claim for damages
resulting from the rejection of an executory contract or an
unexpired lease is treated as a general unsecured claim in the
Reorganization Proceedings.
Unless the Bankruptcy Court, upon request of a non-Debtor
party and after notice and a hearing, fixes a date by when the
Debtors must elect to assume or reject an executory contract,
the Debtors may assume or reject such contracts in a plan or
plans of reorganization. With respect to unexpired
non-residential real property leases, including mineral leases
and interests, the Bankruptcy Code provides that a Debtor has 60
days after the commencement of a Chapter 11 case in which to
assume or reject such leases unless the Bankruptcy Court, for
cause shown, extends such 60 day period. Pursuant to an order of
the Bankruptcy Court at a hearing on February 17, 19993, the time
within which the Debtors must assume or reject their
non-residential real property
leases was extended through and including August 11, 1993. On
February 25, 1991, the Debtors received Bankruptcy Court
approval to assume substantially all of their mineral leases and
interests. Because of material uncertainties surrounding the
Reorganization Proceedings, the Debtors may seek further
extensions of time to assume or reject their other non-
residential real property leases. There can be no assurance
that such extensions will be granted.
The Bankruptcy Code permits the Bankruptcy Court to appoint
a trustee on request of a party in interest (including a
creditor, equity security holder, committee or indenture
trustee) or the United States Trustee. In order for a trustee to
be appointed, a requesting party, after notice and a hearing,
must show cause, such as gross mismanagement by current
management, or
demonstrate that such appointment is in the best interest of
creditors, equity security holders and other interests of the
estates.
In addition, the Bankruptcy Code permits the Bankruptcy
Court to appoint an examiner on request of a party in interest
(including a creditor, equity security holder, committee or
indenture trustee) or the United States Trustee, if the
Bankruptcy Court does not order the appointment of a trustee, to
conduct such investigation of a debtor as is appropriate.
For 120 days after the date of the filing of a voluntary
Chapter 11 petition, a debtor has the exclusive right to file a
plan of reorganization with the Bankruptcy Code (the "Exclusive
Period"). If a debtor files a plan of reorganization during the
120-day Exclusivity Period, no other party may file a plan of
reorganization until 180 days after the date of filing of the
Chapter 11 petition. Until the end of this 180-day period (the
"Acceptance Period") the debtor has the exclusive right to
solicit acceptances of the plan. The Bankruptcy Court may
shorten or extend the 120- and 180-day periods for cause shown.
If a debtor fails to file a plan during the Exclusivity Period
or, if such plan has been filed, fails to obtain acceptance of
such plan from impaired classes of its creditors and equity
security holders during the Acceptance Period, any party in
interest, including a creditor, an equity security holder, a
committee of creditors or equity security holders or an
indenture trustee may file a plan. Additionally, if the
Bankruptcy Court were to appoint a trustee, the Exclusivity
Period, if not previously terminated, would terminate.
Pursuant to an order of the Bankruptcy Court, unless the
Debtors filed a plan or plans of reorganization by June 15,
1992, the Exclusivity Period would expire.
On June 15, 1992, the Debtors filed with the Bankruptcy
Court and presented to the creditor constituencies a joint plan
of reorganization and related disclosure statement. The
Debtors' joint plan of reorganization provides for payment in
full of all allowed claims using cash, issuance of new
indebtedness issuance of common stock equal to approximately a
20% ownership interest, or a combination thereof. Under the plan
certain claims are impaired; therefore the plan is subject to
acceptance by vote of the holders of each such impaired claims.
Confirmation of the plan is subject to the satisfaction of
various conditions including dismissal with prejudice of any and
all claims and actions against the Debtors or any assets of the
Debtors relating to or in connection with the asbestos-related
litigation. The Debtors are continuing to meet and negotiate
possible changes to the terms of the joint plan of reorganization
with the various creditor constituencies. At a hearing held on
June 16, 1993, the
Bankruptcy Court extended the Acceptance Period through and
including August 2, 1993. The Bankruptcy Court further ruled
that unless each of the major creditor constituencies, i.e. the
Official Committee of Bondholders, the indenture trustee for the
senior notes, the Bank Credit Agreement and Working Capital
Agreement creditor (as defined in Note 6) and two significant
holders of subordinated debt, consented to a further extension
of the Acceptance Period, there would be no further extension
beyond August 2, 1993.
If the Acceptance Period is not extended beyond august 2,
1993, then unless otherwise directed by the Bankruptcy Court at
the hearing to be held on July 14, 1993, any party in interest
including the official committees, an individual creditor, an
individual equity security holder or any indenture trustee may
file a plan of reorganization.
The process pursuant to which a plan or plans of
reorganization of the Debtors may be confirmed necessarily will
be complex and may be delayed pending further developments in
the asbestos-related litigation involving the Company (see Note
11).
Accordingly, the timing of such confirmation necessarily cannot
be predicted.
A plan or plans of reorganization will be sent, along with
a disclosure statement approved by the Bankruptcy Court following
a hearing, to all members of classes of impaired creditors and
equity security holders for acceptance or rejection. In
general, the Bankruptcy Code provides that a claim or interest is
impaired under a plan unless such plan proposes to pay such claim
or interest in full or leave it unaltered. In order to be
accepted, at least two-thirds in amount and a majority in number
of holders of allowed claims or interests in each class that is
impaired who actually vote, must accept the plan. Following
acceptance or rejection of any plan by impaired classes of
creditors and equity security holders, the Bankruptcy Court at a
noticed hearing would consider whether to confirm the plan.
Among other things, for confirmation the Bankruptcy Court at a
noticed hearing is required to find that (i) each holder of a
claim or interest in each impaired class of creditors and equity
security holders will, pursuant to the plan, receive at least as
much as the class
would have received in a liquidation under Chapter 7 of the
Bankruptcy Code, (ii) each impaired class of creditors and
equity security holders has accepted the plan by the requisite
vote and (iii) confirmation of the plan is not likely to be
followed by the liquidation or need for further financial
reorganization of the debtor or any successor unless the plan
proposes such liquidation or reorganization.
If any impaired class of creditors or equity security
holders does not accept a plan, and assuming that all of the
other requirements of the Bankruptcy Code are met, the proponent
of the plan may invoke the so-called "cram down" provisions of
the Bankruptcy Code. Under these provisions, the Bankruptcy
Court may confirm a plan notwithstanding the nonacceptance of
the plan by an impaired class of creditors or equity security
holders if certain requirements of the Bankruptcy Code are met.
These requirements may necessitate provision in full for senior
classes of creditors and/or equity security holders before
provision for a junior class could be made.
The Company cannot now predict whether, or at what time, a
joint plan or plans of reorganization involving the Debtors may
be confirmed or the ultimate terms thereof.
NOTE 3 - Discontinued Operations
Loss on disposal of discontinued operations consists of
adjustments to securities received on disposition of businesses
in prior years of $5,775,000 net of an income tax benefit of
$3,225,000. Loss from operations relates to a business
classified as discontinued in fiscal 1990 and sold in July 1991.
NOTE 4 - Instalment Notes Receivable
The installment notes receivable arise from sales of
partially-finished homes to customers for time payments
primarily over periods of twelve to thirty years and are secured
by first mortgages or similar security instruments. Revenue and
income from the sale of homes is included in income upon
completion of construction and legal transfer to the customer.
The buyer's ownership of the land and the improvements necessary
to complete the home constitute a significant equity investment
which the Company has access to should the buyer default on
payment of the instalment note obligation. Of the gross amount
of $4,187,316,000 an amount of $3,873,426 is due after one year.
Instalment payments estimated to be receivable within each of
the five years from May 31, 1993 are $313,890,000, $304,962,000,
$293,528,000, $284,911,000 and $277,705,000, respectively, and
$2,712,320,000 after five years. Time charges are included in
equal parts in each monthly payment and are taken into income as
collected. This method approximates the interest method since a
much larger provision for loan losses and other expenses would
be required if time charge income were accelerated. The
aggregate amount of installment notes receivable having at least
one payment ninety or more days delinquent was 3.12% and 3.31% of
total installment notes receivable at may 31, 1993 and 1992,
respectively.
On April 19, 1988, all of the installment notes receivable
outstanding at February 29, 1988 were transferred from Mid-State
Homes, Inc. ("Mid-State"), an indirect wholly-owned subsidiary
of the Company, to Mid-State Trust II ("Trust II"), a business
trust established under the laws of Delaware, in exchange for the
net proceeds from the issuance by Trust II of the Mortgage-Backed
Notes described in Note 6. Mid-State is the settlor and sole
beneficiary of Trust II. Assets of Trust II, including the
installment notes receivable, are not available to satisfy
claims of general creditors of the Company and its subsidiaries.
Of the
gross amount of installments notes receivable at May 31, 1993 of
$4,187,316,000 an amount of $1,925,821,000 of such receivables
were owned by Trust II.
During 1989, Mid-State entered into a credit agreement with
several commercial banks which was secured by certain
installment notes and related security instruments. The filing
of the Reorganization Proceedings was an event of default under
this agreement and Mid-State was no longer able to utilize this
agreement. On July 1, 1992, pursuant to approval by the
Bankruptcy Court, instalment notes receivable having a gross
amount of $638,078,000 were sold by Mid-State to Mid-State Trust
III ("Trust III"), a business trust established under the laws
of Delaware, in exchange for the net proceeds from the public
issuance of $249,864,000 of Asset Backed Notes by Trust III.
Such Asset Backed Notes have a 7-5/8% interest rate and are
secured by the installment notes receivable sold by Mid-State to
Trust III. The Asset Backed Notes are repayable quarterly in an
amount equal to collections on such installment notes receivable
net of payment of expenses and interest on the Asset Backed
Notes. Net proceeds were utilized to repay in full all
outstanding indebtedness due under the Mid-State credit facility
(see Note 6) with the excess cash to be used to fund the ongoing
operations of the Debtors. Mid-State is the settlor and sole
beneficiary of Trust III. Assets of Trust III, including the
installment notes receivable, are not available to satisfy
claims of general creditors of the Company and its subsidiaries.
Of the
gross amount of installment notes receivable at May 31, 1993 of
$4,187,316,000 an amount of $591,607,000 of such receivables
were owned by Trust III.
Restricted short-term investments include (i) temporary
investment of reserve funds and collections on installment notes
receivable owned by Trust II which are available only to pay
expenses of Trust II and principal and interest on the Mortgage-
Backed Notes ($72,117,000), (ii) temporary investment of reserve
funds and collections on installment notes receivable owned by
Mid-State Trust III which are available only to pay expenses of
Trust III and principal and interest on the Asset Backed Notes
($10,406,000), (iii) cash securing letters of credit
($4,904,000) and (iv) miscellaneous other segregated accounts
restricted to specific uses ($18,193,000), including $6,096,000
from proceeds of sale of assets set aside to offer to purchase
Series B and Series C Senior Extendible Reset Notes.
NOTE 5 - Property, Plant and Equipment
Property, plant and equipment are summarized as follows
(see Note 1 regarding purchase accounting):
<TABLE>
<CAPTION>
May 31,
1993 1992
(in thousands)
<S> <C> <C>
Land and minerals $ 200,000 $ 198,927
Land improvements 17,349 16,556
Buildings and leasehold improvements 99,597 98,947
Mine development costs 116,576 116,576
Machinery and equipment 617,987 567,218
Construction in progress 23,559 567,218
Total $1,075,068 $1,015,483
</TABLE>
The Company provides depreciation for financial reporting
purposes principally on the straight line method over the useful
lives of the assets. Assets (primarily mine development costs)
extending for the full life of a coal mine are depreciated on
the unit of production basis. For federal income tax purposes
accelerated methods are used for substantially all eligible
properties. Depletion of minerals is provided based on
estimated recoverable quantities.
The Company has capitalized interest on qualifying
properties in accordance with Financial Accounting Standards
Board Statement No. 34. Interest capitalized for the year ended
May 31, 1993, 1992 and 1991 was immaterial. Interest paid in
cash for the years ended May 31, 1993, 1992, and 1991 was
$117,853,000, $109,477,000 and $110,119,000, respectively.
NOTE 6 - Debt
The Company's cash management system provides for the
reimbursement of all major bank disbursement accounts on a daily
basis. Checks issued but not yet presented to the banks for
payment are classified as bank overdrafts.
As a result of the Reorganization Proceedings, the maturity
of all unpaid principal of, and interest on, substantially all
of the indebtedness of the Debtors became immediately due and
payable in accordance with the terms of the instruments
governing such indebtedness.
While the Reorganization Proceedings are pending, the
Debtors are prohibited from making any payments of obligations
owing as of the petition date, except as permitted by the
Bankruptcy Court. Furthermore, the Debtors will not be able to
borrow additional funds under any of their prepetition credit
arrangements.
At the date of the filing of the Reorganization Proceedings
the Company and various of its subsidiaries were borrowing under
a Working Capital Agreement which also provided for the
issuance of letters of credit. An aggregate of $78,033,000 of
borrowings and $17,549,000 of letters of credit are outstanding
under this agreement at May 31, 1993. Under the terms of the
Working Capital Agreement, overdue principal and, to the extent
permitted by law, overdue interest bear interest at a rate equal
to 3-1/2% per annum in excess of the reference rate of Chemical
Bank (the "Reference Rate") in effect from time to time, provided
that no loan will bear interest after maturity at a rate per
annum less than 1% in excess of the rate of interest applicable
thereto at maturity.
Since the beginning of the Reorganization Proceedings
certain of the Debtors have consummated an agreement, as
amended, with two commercial banks with respect to a $25 million
letter of
credit facility. Pursuant to the terms of such "New Letter of
Credit Agreement", upon issuance of a letter of credit, the
applicable Debtors will deposit with the issuing bank an amount
of cash equal to the stated amount of the letter of credit. At
May 31, 1993, $4,904,000 of letters of credit were outstanding
under this agreement. Since the beginning of the Reorganization
Proceedings certain of the Debtors have also consummated an
agreement with the lenders pursuant to which the lenders agree
to renew letters of credit issued under the Working Capital
Agreement that were outstanding at the time of filing of the
petitions for reorganization (the "Replacement Letter of Credit
Agreement"). To the extent that the letters of credit under the
Replacement Letter of Agreement are renewed during the
Reorganization Proceedings, these Debtors have agreed to
reimburse the issuing bank for any draws under such letters of
credit, which obligation shall be entitled to an administrative
expense claim under the Bankruptcy Code. In addition, the
obligations of the Debtors under such Replacement Letter of
Credit Agreement shall continue to be secured by the collateral
which secures the Debtors' obligations under the Bank Credit
Agreement and the Working Capital Agreement. The Bankruptcy
Court approved the Debtors' entering into the New Letter of
Credit Agreement in May 1990. The New Letter of Credit
Agreement currently terminates on May 27, 1994.
During 1989, Mid-State entered into the credit facility
described in Note 4. Due to the filing of the Reorganization
Proceedings, Mid-State was no longer able to utilize this
agreement. On July 1, 1992, all outstanding indebtedness under
the facility was repaid in full (see Note 4).
Long-term debt, in accordance with its contractual terms,
consisted of the following at each year-end:
<TABLE>
<CAPTION>
May 31,
1993 1992
(in thousands)
<S> <C> <C>
Senior debt:
Mortgage-Backed Notes (less unamortized
discount of $1,864,000 and $5,884,000) $ 811,112 $ 948,782
Asset Back Notes 229,585 -
Mid-State credit facility (Note 4) - 121,217
Bank Credit Agreement 228,249 228,249
Series B Senior Extendible Reset Notes 176,300 176,300
Series C Senior Extendible Reset Notes 5,000 5,000
Other 13,344 7,080
Total Senior Debt 1,463,600 1,486,628
Subordinated debt:
Senior Subordinated Extendible
Reset Notes 443,046 443,046
Subordinated Notes 350,000 350,000
13-1/8% Subordinated Notes 50,000 50,000
13-3/4% Subordinated Debentures 100,000 100,000
10-7/8% Subordinated Debentures
(less unamortized discount of $8,280,000
and $8,985,000) 81,720 81,015
Total subordinated debt 1,024,766 1,024,061
Less: Amount included as liabilities
subject to Chapter 11 proceedings
(Note 2) (1,441,395)(1,561,907)
Total consolidated long-term debt $1,046,971 $ 948,782
</TABLE>
The Mortgaged-Backed Notes (see Note 4) were issued by
Trust II (which did not file a petition for reorganization) in
five classes in varying principal amounts with interest rates
ranging from 6.95% to 9.625%. Interest on each class notes in
payable quarterly on each January 1, april 1, July 1 and October
1, (each a "Payment Date"). On each Payment Date, regular
scheduled principal payments will be made on the Class A3 and
Class A4 Notes in order of maturity. The Class A1 and Class A2
Notes have been fully repaid. Payments on Class AV Notes are
made on each Payment Date based upon certain specified criteria.
Maturities of the balance of these Mortgage-Backed Notes range
from April 1, 1998 for the Class A3 Notes to April 1, 2007 for
the Class AV Notes. The Class A3 and Class A4 Notes are subject
to special principal payments and the Class A4 and Class AV
Notes may be subject to optional redemption under specified
circumstances. Depending on the rate of prepayments on the
underlying installments notes receivable, the Class AV Notes
could be fully paid earlier than the scheduled maturity date of
April 1, 2007. The scheduled principal amount of notes maturing
in each of the five years from May 31, 1993 is $87,000,000.
The Asset Backed Notes (see Note 4) issued by Trust III,
bear interest at 7-5/8% constitute a single class and have a
final maturity date of April 1, 2022. Payments are made
quarterly on January 1, April, July 1, and October 1, based on
collection on underlying collateral less amounts paid for
interest on the notes and Trust III expenses.
Set forth in the following paragraphs is a description of the
terms of the Company's various senior, senior subordinated and
subordinated debt agreements as in effect on the petition
date. Such provisions do not necessarily presently govern the
respective rights of the Company, its subsidiaries and the
various lenders. Instead, the rights of the parties will be
determined in connection with the Reorganization Proceedings.
The Company, Old Walter Industries and certain operating
subsidiaries of the Company (the "Revolving Loan Borrowers"), on
a joint and several basis, were initially permitted to borrow
up to an aggregate of $800,000,000 under the terms of a credit
agreement dated as of September 10, 1987, as amended, with
various banks (the "Bank Credit Agreement"), of which
$700,000,000 was a term loan and $100,000,000 was a revolving
loan. The commitment under the Bank Credit Agreement had been
reduced to $242,292,000 at the petition date and was scheduled
to be fully repaid by quarterly payments through June 30, 1991.
Additionally, the commitment
would have been reduced by the proceeds of certain asset sales.
Interest, at the option of the Revolving Loan Borrowers, was at
(i) the Reference Rate plus 1-1/2%, (ii) a LIBOR rate plus
2-1/4% or (iii) a certificate of deposit rate plus 2-1/2%. A
commitment fee of 1/2 of 1% per annum was required based on the
daily average unutilized commitment. In fiscal 1991, pursuant
to an order of the Bankruptcy Court, $7,356,000 of proceeds from
the sale of an asset held as security for the Bank Credit
Agreement and setoff of bank accounts were turned over to the
lenders with reservation of rights as to application of such
payment. The Company has applied such payment to a reduction of
principal ($5,794,000 to the Bank Credit
Agreement and $1,562,000 to the Working Capital Agreement). In
June 1991, pursuant to an order of the Bankruptcy Court,
$10,704,000 of proceeds from the prepayment of the promissory
note received in connection with the sale of Apache Building
Products Company in 1988, plus $350,000 of interest earned
thereon, held in a segregated escrow account were applied as a
reduction of principal ($8,249,000 to the Bank Credit Agreement
and $2,805,000 to the Working Capital Agreement). Bankers Trust
Company and Chemical Bank, as agents for the various bank
lenders under the Bank Credit Agreement (the "Revolving Credit
Banks"), appealed the Bankruptcy Court's order, permitting the
application of proceeds to the principal of the indebtedness
only, to the District Court (as defined in Note 11). On April
29, 1992, the District Court reversed the Bankruptcy Court's
order and remanded the case to the Bankruptcy Court for further
proceedings and determinations on the issues of whether the
Revolving Credit Banks are oversecured creditors, the reasonable,
relevant, applicable interest rate and whether the Debtors will
ultimately prove to be solvent. At May 31, 1993, $228,249,000
principal amount of loans were outstanding. Under the terms of
the Bank Credit Agreement, overdue principal and, to the extent
permitted by law, overdue interest bear interest at a to rate
equal to 3-1/2% per annum in excess of the Reference Rate in
effect from time to time, provided that no loan will bear
interest after maturity at a rate per annum less than 1% in
excess of the rate of interest applicable thereto at maturity.
The Series B Senior Extendible Reset Notes and Series C Senior
Extendible Notes were bearing interest at rates of 14-1/2% and
14-1/2%, respectively, on the petition date, payable
semi-annually, in cash, on January 1 and July 1 and were to
mature on January 1, 1990 unless the Senior Note Issuers (three
subsidiaries of the Company) elected to extend the notes for
one or more additional one-year periods. In the event the
maturity was extended, the interest rate would be reset to the
interest rate per annum these notes should bear in order to have
a bid value of 101% of the principal amount as of the reset
date. In no event,
however, would the interest rate be reset below the interest
rate then in effect.
The Senior Note Issuers are the following principal operating
subsidiaries: Jim Walter Homes, Inc., Jim Walter Resources, Inc.
("Jim Walter Resources") and United States Pipe and Foundry
Company ("U.S. Pipe"). See Note 15 for Summarized Financial
Information of the Senior Note Issuers.
The Senior Subordinated Extendible Reset Notes were bearing
interest at a rate of 16-5/8 per annum on the petition date
until reset as described herein, payable semi-annually on
January 1 and July 1, in cash or, at the option of the
Subordinated Note Issuers (two subsidiaries of the Company who
are also the issuers of the Subordinated Notes) on or before
January 1, 1993, by delivering additional Senior Subordinated
Extendible Reset Notes (values at their principal amount). The
Senior Subordinated Extendible Reset Notes were to mature on
January 1, 1990, unless the Subordinated Note Issuers elected to
extend the notes for on or more additional one-year periods. In
the event the maturity was extended, the interest rate would be
reset to the interest rate per annum these notes should bear in
order to has a bid value of 101% of the principal amount as of
the reset date. In no event, however, would the interest rate
be reset below the interest rate then in effect.
The Subordinated Notes were bearing interest at a rate of 17%
per annum on the petition date payable semi-annually, inn cash,
on January 1 and July 1.
The Subordinated Note Issuers are the following principal
operating subsidiaries: Jim Walter Homes, Inc. and U.S. Pipe.
See Note 15 for Summarized Financial Information of the
Subordinated Note Issuers.
Subordinated debt assumed by Old Walter Industries from Original
Jim Walter in connection with the Acquisition includes the (i)
13-1/8% Subordinated Notes, (ii) 13-3/4% Subordinated Debentures
and (iii) 10-7/8% Subordinated Debentures (which were sold at a
discount to yield 12-3/4% to maturity).
The Company's various debt agreements had covenants which, among
other things, restricted incurrence of additional indebtedness,
dividend payments, mergers, consolidations and sale of assets by
the Company and its subsidiaries and required the Company to
maintain certain financial ratios. However, as a result of the
automatic stay resulting from the filling of the Reorganization
Proceedings, neither the indenture trustees nor the holders of
the Company's debt may enforce any rights, exercise any remedies
or realize on any claims in the event the Company or any of its
subsidiaries fails to comply with any of the covenant contained
ln the various debt agreements.
NOTE 7 - Income Taxes
Income tax expense (benefit) is made up of the following
components:
<TABLE>
<CAPTION>
Current Deferred Current Deferred Current Deferred
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
United States $44,093 $(22,682) $34,349 $(23,494) $21,729 $(5,477)
State and Local 4,048 ( 1,131) 1,608 - 3,202 -
Total $48,141 $(23,813) $35,957 $(23,494) $24,931 $(5,477)
</TABLE>
Federal income tax paid for fiscal 1993, 1992 and 1991 was
approximately $35.9 million, $34.1 million and $18.0 million
(after reduction for the benefit included in discontinued
operations). State income tax payments approximated the amounts
provided above.
The Company adopted Statement of Financial Accounting Standards
No. 109 ("FAS 109"). "Accounting for Income Taxes". FAS 109 is
an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events which have been
recognized in the Company's financial statements or tax returns.
FAS 109 generally considers all expected future events other
than changes in tax law or to mature rates. Previously, the
Company used the FAS 96 asset and liability method that gave no
recognition to future events other than the recovery of assets
against liabilities which
reversed in the same time period. The change to FAS 109 did not
require any change to the
financial statements. Deferred income taxes result from timing
differences in the recognition of revenue and expense for tax
and financial reporting purposes.
The tax effect of such timing differences is summarized as
follows:
<TABLE>
<CAPTION>
May 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Effect of tax loss and tax credit carryforwards $ - $ 4,779 $21,362
Revenues recognized on the installment
sales method for tax purposes and on
the accrual basis for financial reporting (11,271) (13,123) (13,085)
Excess of book over tax depreciation ( 6,149) (10,850) (11,502)
Postretirement benefit obligation ( 7,594) - -
Amortization of investment tax credit ( 219) ( 384) ( 977)
Mine development expense 913 573 270
Timing differences relating to accrued expenses 2,364 ( 3,542) ( 1,117)
Other net ( 726) ( 947) ( 428)
Total $(22,682) $(23,494) $( 5,477)
Statutory tax (benefit) rate 34.0% 34.0% 34.0%
Effect of:
State and local income tax 2.7 3.0 5.2
Percentage depletion ( 8.3) ( 13.8) (17.7)
Amortization of net investment tax credit ( .3) ( 1.1) ( 2.4)
Non-conventional fuel credit ( 7.7) ( 15.2) -
Amortization of excess of purchase price over
net assets acquired 19.0 38.9 28.6
Capital loss carryforward ( 4.7) ( 10.2) -
Other, net .4 .2 .8
Effective tax (benefit) rate 34.3% 35.8% 48.5%
</TABLE>
Of the total deferred income tax of $85,833,000 at May 31, 1993,
$62,608,000 relates to use of the instalment sales method for
instalment notes
receivable of prior years, $93,701,000 relates to depreciation,
$28,119,000 relates to the difference in basis of assets under
purchase accounting, ($28,044,000) relates to accrued expenses
and $70,551,000) relates to the current year and cumulative
effect in change of accounting principle for postretirement
benefits other than pensions. The Revenue Act of 1987
eliminated the instalment sales method of tax reporting for
instalment sales after December 31, 1987.
In fiscal 1991, the Company utilized its net operating loss
carryforward for federal income tax purposes of approximately
$80.0 million.
For book purposes the Company recognized a long-term
capital loss of approximately $75.0 million in fiscal 1989.
This loss was recognized for tax purposes in fiscal 1992 and is
deductible to the extent of capital gains of approximately $9.9
million and $10.4 million in fiscal 1993 and 1992. The
remaining capital loss is available as a carryback to fiscal
1991 to be offset against capital gains of approximately $8.3
million and as a carryforward to the succeeding four years. The
Company has established a valuation allowance of $15.8 million
to offset the deferred tax asset related to the carryforward
since the Company cannot predict whether capital gains
sufficient to offset the carryforward will be realized in the
four year carryforward period. If certain substantial changes
in the Company's ownership should occur, there would be an
annual limitation on the amount of such loss carryforward which
could be utilized. The Company allocates federal income tax
expense (benefit) to its subsidiaries based on their separate
taxable income (loss).
NOTE 8 - Stockholders Equity
KKR Associates, a New York partnership, is the sole general
partner of three partnerships which own a total of 28,500,000
shares of the outstanding common stock of the Company.
The Company entered into common stock subscription
agreements, dated as of December 1, 1987 (the "Management Common
Stock Subscription Agreements"), with certain individuals who
are former or current members of management (the "Management
Investors") under which an aggregate of 893,500 shares of common
stock remain outstanding. The Management Common Stock
Subscription Agreements generally provide the Company with a
right of first refusal with respect to any bona fide offer from
a third party to purchase any or all of such Management
Investor's shares of common stock commencing after January 7,
1993; provided that such transfer restrictions and right of
first refusal will terminate in the event of a public offering
of the Company's common stock.
NOTE - 9 Stock Options
Under stock option plans approved by stockholders in
October 1987, an aggregate of 3,318,182 shares of the Company's
common stock have been reserved for the grant and issuance of
incentive of non-qualified stock options (the "Options").
Options for 1,678,295 shares, all of which are exercisable, were
outstanding at May 31, 1993. The exercise price of each Option
granted is $5.00 per share, the fair market value at date of
grant. During 1993, 1992 and 1991 options for 384,909, 16,591
and 66,364 shares were canceled.
NOTE 10 - Related Party Transactions
Following its incorporation, the Company retained KKR to
provide financial, financial advisory and consulting services to
the Company in connection with the Acquisition and the Merger,
for which the Company paid to KKR a fee of $35 million, KKR has
agreed to provide management consulting and financial services
to the Company and its subsidiaries on an annually renewable
basis. Effective with the commencement of the Reorganization
Proceedings, current payment of these consulting fees was
suspended. The annual rate at such time was $550,000.
NOTE 11 - Litigation and Other Matters
Note 1 contains a description of the organization of the
Company and the acquisition of Original Jim Walter. On April
21, 1988, the Company sold all of the outstanding capital stock
of JWC Holdings, the parent corporation of Jim Walter
Corporation (formerly J-11) and its subsidiaries, including The
Celotex Corporation ("Celotex") and its subsidiaries. Celotex
is a co-defendant with other miners, manufacturers and
distributors of asbestos-containing products in a very large
number of lawsuits filed throughout the United States alleging
injuring to the health of persons exposed to asbestos-containing
products. Original Jim Walter has been named as a defendant in
certain asbestos-related lawsuits from time to time and the
Company understands that Original Jim Walter's corporate
successor, Jim Walter Corporation, currently is a co-defendant
in a number of the asbestos-related lawsuits filed against
Celotex. As discussed below, the Company and certain of its
subsidiaries and other affiliates have been served with process
as a co-defendant in a number of these lawsuits. The Company
understands that prior to the Tender Offer Celotex ceased to be
engaged in the mining, manufacturing and distribution of the
asbestos-containing products that have given rise to the
aforementioned asbestos-related lawsuits against Celotex.
Because Jim Walter Corporation, Celotex and their respective
affiliates are not affiliates of the Company, neither the
Company, Old Walter Industries nor any of their respective
affiliates can make any representation as to the status of the
asbestos-related litigation pending against Jim Walter
Corporation, Celotex and their respective affiliates, the amount
of the alleged damages sought from Jim Walter Corporation,
Celotex and their respective affiliates in those lawsuits, the
insurance coverage available to them to satisfy asbestos-related
claims, or any other matter related to such litigation.
The Company understands that the extent of the alleged
injuries in the asbestos-related lawsuits filed against Celotex
varies from case to case, many of the complaints against Celotex
request punitive damages in addition to the compensatory damages
and the aggregate damages sought in these cases is very
substantial. In addition to these personal injury cases, a
substantial number of actions, some which are styled as class
actions, have been filed against Celotex and numerous co-
defendants seeking very substantial aggregate damages for the
cost of detecting, analyzing, repairing and/or removing
asbestos-containing materials in buildings owned or operated by
the plaintiffs. The Company understands that the number of
asbestos-related lawsuits filed against Celotex has continued to
grow in recent years and the magnitude of the additional claims
that are expected to be asserted against Celotex in the future
cannot be accurately predicted at this time. The Company
understands that the costs to Celotex to date of settling or
otherwise disposing of asbestos-related lawsuits has been very
substantial and that a substantial portion of such costs has
been borne by insurance carriers pursuant to their insurance
policies or settlement agreements with Celotex. The Company
believes, however, that (i) most of Celotex' available insurance
coverage prior to late 1977 has been exhausted, (ii) since late
1977, most Celotex' insurance policies have excluded coverage
for asbestosis, which is the basis for most of the personal
injury claims pending against Celotex, (iii) beginning in late
1977, an increasing number of Celotex' policies have excluded
coverage for other asbestos-related diseases and Celotex and its
insurers dispute the scope of most of those exclusion, (iv)
since late 1984, coverage for asbestos-related personal injury
and property damage claims generally have been excluded from
Celotex policies, (v) Celotex' insurers dispute whether any of
Celotex' policies cover any asbestos-related property damage
claims and (vi) no insurance is available for punitive damages
in many jurisdictions. The insurance coverage disputes referred
to above are the subject of litigation. The uncertain outcome
and possible adverse consequences of the insurance coverage
disputes referred to above, the continued growth in the number
of asbestos-related lawsuits filed against Celotex and the very
substantial aggregate damages alleged therein and the
possibility that future disposition costs could exceed those
experienced to date by Celotex, could impair the ability of
Celotex to continue to satisfy asbestos-related claims. On
October 12, 1990, Celotex and its wholly-owned subsidiary, Carey
Canada, Inc. each filed a petition for reorganization under
Chapter 11 of the Bankruptcy code with the United States
Bankruptcy Court for the Middle District of Florida, Tampa
Division. The Chapter 11 cases were assigned to the Honorable
Thomas E. Baynes, Jr. As a result thereof and pursuant to the
automatic stay provisions contained in Section 362 of the
Bankruptcy Code, all actions (other than those actions set forth
in Section 362(b) and, as discussed below, other than, for
certain limited purposes, the Declaratory Judgment Proceeding
commenced
by the Debtors) commenced against Celotex prior to October 12,
1990 were stayed pending any future modification of the
automatic stay under the Bankruptcy Code. On May 8, 1991, the
Debtors filed a motion in the Celotex Chapter 11 case seeking to
have the automatic stay lifted so as to allow the Debtors to
continue to prosecute the Declaratory Judgment Proceeding
against Celotex and others. On June 4, 1991, Judge Baynes
granted the Debtors motion for the limited purpose of permitting
them to file and proceed with a motion for summary judgment and
to prosecute or defend any appeals arising from or related to
such motion.
A substantial number of the asbestos-related lawsuits filed
against Celotex relate to the asbestos-related operations of a
predecessor corporation of Rapid-American Corporation, a
Delaware corporation ("Rapid-American"), which subsequently were
transferred by Rapid-American to a corporation which was merged
into Celotex in 1972. According to Rapid-American's Annual
Report on Form 10-K for the fiscal year ended January 31, 1989,
Rapid-American is a co-defendant in a number of personal injury
and property damage cases. Each of Celotex and its predecessor
corporation had indemnified Rapid-American and its predecessor
corporation against all liabilities relating to those operations
for a limited time period. The extent of the indemnification is
currently a matter of dispute.
As stated above, the Company and certain of its
subsidiaries and other affiliates have been served with process
as a co-defendant in a number of the asbestos-related lawsuits
described above. One of these lawsuits is a class action filed
in federal court in Beaumont, Texas that involves approximately
3,000 plaintiffs alleging asbestos-related personal injuries.
Plaintiffs in the class action added Old Walter Industries as a
defendant alleging, among other things, that (i) Original Jim
Walter and its successors, including Jim Walter Corporation and
HAC, are liable for all damages caused by the products
manufactured, sold and distributed by Celotex by reason, among
other things, of operating Celotex as a division, and conspiring
with Celotex and other co-defendants to market harmful products;
(ii) the distribution by HAC of substantially all of its assets
to Old Walter Industries constituted a fraudulent conveyance;
and (ii) Old Walter Industries is a successor to the liabilities
of HAC and is thus liable to the plaintiffs for injuries caused
by Celotex and certain named subsidiaries and/or predecessor
companies of Celotex, and Original Jim Walter and its
successors, including HAC and Jim Walter Corporation.
Another asbestos-related lawsuit is a purported class
action filed on July 13, 1989, KKR, KKR Associates, Jim Walter
Corporation, HAC, Celotex, Drexel Burnham Lambert Incorporated
("Drexel Burnham"), Drexel Burnham Lambert Group, Inc. ("Drexel
Burnham Group"), and certain directors and executive officer of
the Company, Old Walter Industries and Original Jim Walter
(i.e., John B. Carter, Jr., Perry Golkin, Henry R. Kravis, Paul
E. Raether, George R. Roberts, Michael T. Tokarz and Gene M.
Woodfin) that purports to involve all persons pursuing
unsatisfied personal injury or wrongful death claims against
Celotex or Jim Walter Corporation based upon exposure to
asbestos. The action originally named as defendants, in
addition to those individuals and entities named above, James O.
Alston, Joe B. Cordell and James W. Walter, directors and
executive officers of the Company, Old Walter Industries and
Original Jim Walter. Subsequently, plaintiffs voluntarily
dismissed their claims against Messrs. Alston, Cordell and
Walter. On December 26, 1989, plaintiffs filed their Second
Amended Original Petition and Application for Temporary
Injunction. Plaintiffs alleged, among other things, that (i)
Original Jim Walter and its successors, including Jim Walter
Corporation and HAC, are liable for all damages caused by the
products manufactured, sold and distributed by Celotex by
reason, among other things, of operating Celotex as a division;
(ii) the distribution by HAC of substantial all of its assets to
Old Walter Industries constituted a fraudulent conveyance; (iii)
Old Walter Industries is a successor to the liabilities of HAC
and the corporate separateness of Old Walter Industries and HAC
should be disregarded, and thus Old Walter Industries is liable
to the plaintiffs for injuries caused by Celotex and its
predecessors and Original Jim Walter and its successors,
including HAC and Jim Walter Corporation; (iv) the corporate
separateness of the Company and Old Walter Industries should be
disregarded; (v) the sales and transfers of assets by Old Walter
Industries are fraudulent ; and (vi) the individual defendants,
KKR, KKR Associates, Drexel Burnham, Drexel Burnham Group and
the Company conspired to effect the allegedly fraudulent
transfers of assets from and to Old Walter Industries. The
relief requested by the plaintiffs includes, among other things,
(i) enjoining each defendant from transferring any assets
formerly owned by Original Jim Walter (and any proceeds from the
disposition thereof); (ii) requiring each defendant to account
for all transfers of such assets or proceeds; (iii) requiring
each defendant to transfer such assets and proceeds to Celotex
to be held in trust for the benefit of the plaintiffs; (iv)
appointing a receiver to take charge of such assets and proceeds
or of any other property of any defendant; (v) holding the
defendants jointly and severally liable for damages equal to the
fair market value of any assets formerly owned by Original Jim
Walter which have been sold and cannot be recovered; and (vi)
punitive damages, interest and costs. Plaintiffs also requested
the Beaumont state court to issue a temporary injunction
enjoining the Company from selling or otherwise transferring or
encumbering its stock in any corporation that owns assets
formerly owned by Original Jim Walter or Old Walter Industries.
The Company agreed to give the plaintiffs 15 days prior notice
of any closing of any disposition of stock of a corporation
which owns assets formerly owned by Original Jim Walter or its
subsidiaries. On September 12 through 15, 1989 the Beaumont
state court held a hearing on the defendants' motion to dismiss
the action for lack of personal jurisdiction. These motions
were denied. On October 11, 1989, plaintiffs filed a motion for
class certification. On October 16, 1989, defendants KKR, KKR
Associates, and Messrs. Kravis, Roberts, Raether, Tokarz and
Golkin filed a motion for a change of venue. Discovery was
conducted with respect to the class certification and venue
motions. The Beaumont state court did not hold a hearing on
either the motion for Class Certification or the motion to
change venue.
Some of the other asbestos-related lawsuits pending against
the Company and its subsidiaries involve claims against the
Company and its subsidiaries and request relief from the Company
and its subsidiaries similar to one or more of the claims
involved and remedies requested in the lawsuits pending against
the Company and its subsidiaries in Beaumont, Texas. On
December 27, 1989, the Debtors commenced the Reorganization
Proceedings. As a result of the automatic stay provisions of
the Bankruptcy Code, all pending litigation against the Debtors
was automatically stayed. On December 29, 1989, plaintiffs
moved before the Beaumont state court to sever the claims
against the Company and Old Walter Industries from their claims
against the remaining defendants. On January 2, 1990, the
Beaumont state court action was removed to the United States
Bankruptcy Court for the Eastern District of Texas, Beaumont
Division. On January 5, 1990, certain defendants in that action
moved to transfer the lawsuit to the United States District
Court for the Middle District of Florida, Tampa Division (the
"District Court"). The plaintiffs in that action moved to
remand that action to state court. All proceedings in that
action have been stayed by agreement of the parties and order of
the District Court pending resolution of the abstention issues
in the Reorganization Proceedings in the Bankruptcy Court.
Other asbestos-related lawsuits pending against the Company and
its subsidiaries allege personal injuries arising out of
exposure to asbestos and further allege, among other things,
that (i) each named defendant has been or is now engaged,
directly or indirectly, in the manufacture, supply, sale or
otherwise placing into the stream of commerce, asbestos or
asbestos-containing products and (ii) defendants should be held
liable on the theories of strict products liability and
negligence for plaintiffs' injuries. None of the complaints
filed in such latter actions contain, at this time, corporate
veil-piercing or fraudulent conveyance claims. The relief
requested by the plaintiffs in these actions includes, among
other things, general damages, punitive damages and special
damages in amounts to be proven at the time of trial. There can
be no assurance that the Company, its subsidiaries or other
affiliates will not, in the future, be named as co-defendants in
other asbestos-related lawsuits, whether currently pending or
subsequently commenced, or that temporary or preliminary
injunctive relief against the sale by the Company of any of its
assets will not be granted in any such pending or future lawsuit
prior to judgment. Based on the advice of outside counsel, the
Company believes that it and its affiliates have and would have
a variety of meritorious procedural and substantive defenses to
the claims made or any claims which may be made against them in
pending or future asbestos-related lawsuits. Accordingly, the
Company believes that such claims are and would be without
foundation or merit and intends to defend such cases vigorously.
Plaintiffs have not specified the amount of compensatory and
punitive damages they seek from the Company and its affiliates
in the lawsuits pending in Beaumont, Texas and most of the other
asbestos-related lawsuits against the Company and its affiliates
referred to above. Such alleged damages are expected to be very
substantial and, accordingly, if judgments against the Company
and its subsidiaries are rendered in such lawsuits, the Company
and its subsidiaries could be materially adversely affected.
On January 2, 1990, the Debtors commenced the Declaratory
Judgment Proceeding against Jim Walter Corporation, Celotex and
all known individuals who had filed suit against the Debtors
seeking to hold them liable for asbestos-related liabilities of
Celotex. The Declaratory Judgment Proceeding requests the
Bankruptcy Court to declare and adjudicate that (i) the
corporate veil between Jim Walter Corporation and Celotex may
not be pierced, (ii) the leveraged buyout of Original Jim Walter
was not a fraudulent conveyance, nor were any subsequent
transactions entered into as a part of that leveraged buyout
fraudulent transfers, (iii) neither the Company, Old Walter
Industries nor any of their subsidiaries or affiliates is the
successor in interest to the asbestos-related liabilities of
either Jim Walter Corporation or Celotex and (iv) neither the
Company, Old Walter Industries nor any of their subsidiaries or
affiliates is liable for the asbestos-related liabilities of
either Jim Walter Corporation or Celotex.
On January 2, 1990, the Debtors also commenced another
proceeding by filing in the Bankruptcy Court a Complaint to
Extend the Automatic Stay (the "Injunction Proceeding") wherein
the Debtors sought to enjoin all actions against Jim Walter
Corporation and all other non-debtors on corporate veil piercing
or related theories, and further seeking a permanent injunction
staying all such actions, including the previously disclosed
proposed class-action lawsuit filed in state court in Beaumont,
Texas. That action was removed to the United States Bankruptcy
Court for the Eastern District of Texas, Beaumont Division by
certain of the defendants after the Debtors commenced the
Reorganization Proceedings. A motion to transfer said action to
the Bankruptcy Court is now pending, as well as a motion filed
by the plaintiffs to remand said action to the state court in
Beaumont.
On January 9, 1990, the Debtors filed their Motion for
Preliminary Injunction in the Injunction Proceeding seeking a
preliminary injunction extending the automatic stay under
Section 362 of the Bankruptcy Code to enjoin the prosecution of
any action in which plaintiffs seek to hold Jim Walter
Corporation and other non-Debtors responsible for the asbestos-
related liabilities of Jim Walter Corporation's subsidiary,
Celotex, on a piercing the corporate veil or similar legal
theory.
On January 19, 1990, an asbestos claimant filed a motion in
the Bankruptcy Court requesting the Bankruptcy Court to dismiss
and abstain from deciding or, in the alternative, to stay the
Declaratory Judgment Proceeding. The asbestos claimant also
opposed the Debtors' motion for a preliminary injunction. A
hearing on the pending motions was held on January 22, 1990.
Subsequently, the asbestos claimant, joined by four additional
claimants, also moved to dismiss the Injunction Proceeding.
On April 13, 1990, and as amended, the Bankruptcy Court
issued its proposed findings of fact, conclusions of law and
recommendation pursuant to Bankruptcy Rule 9011 which
recommended, among other things, that the District Court deny
the asbestos claimants' motion to abstain from deciding, or to
stay, the Declaratory Judgment Proceeding as to the Debtors.
The asbestos claimants subsequently filed objections to the
proposed findings of fact, conclusions of law and
recommendations with the District Court. On April 20, 1990, the
Bankruptcy Court entered orders (i) deferring a ruling on the
asbestos claimants' motion to dismiss the Injunction Proceeding
until the District Court decided whether or not to adopt the
Bankruptcy Court's recommendation and (ii) preliminarily
enjoining all asbestos-related personal injury and property
damage claimants and their attorneys and agents and all other
persons acting on their behalf from commencing or continuing any
civil action in any United States federal or state court in
which such persons are attempting to assert claims against non-
Debtors that are based on the right to pierce the corporate veil
between Celotex and Jim Walter Corporation or that relate to or
are connected with claims that attempt to impose liabilities on
the Debtors for asbestos-related claims. The asbestos claimants
filed an appeal of the preliminary injunction with the District
Court. On February 5, 1991, the District
Court entered an order denying the asbestos claimants' action
for leave to appeal an interlocutory order, thus letting stand
the preliminary injunction of the Bankruptcy Court entered on
April 20, 1990 enjoining all asbestos-related personal injury
and property damage claimants and their attorneys and agents and
all other persons acting on their behalf from commencing or
continuing any civil action in any United States federal or
state court in which such persons are attempting to asset claims
against non-Debtors that are based on the right to pierce the
corporate veil between Celotex and Jim Walter Corporation or
that relate to or are connected with claims that attempt to
impose liability on the Debtors for asbestos-related claims.
On May 17, and May 22, 1990, the asbestos claimants filed
motions in the Bankruptcy Court and in the District Court,
respectively, each seeking stay of the Declaratory Judgment
Proceeding, each of which was denied by those courts on May 17
and June 5, 1990, respectively. Also on May 17, 1990, certain
asbestos defendants filed a motion in District Court for
withdrawal of reference as to the Declaratory Judgment
Proceeding from the Bankruptcy Court. On July 11, 990, the
District Court issued an order dated June 29, 1990 which
declined to rule on the asbestos claimants' motion for
withdrawal of reference until after the Bankruptcy Court ruled
on any motion for summary judgment.
On September 2, 1992, the asbestos claimants filed a
renewed request to withdraw the reference in the District Court.
On September 14, 1992, the Debtors filed a memorandum of law
responsive to the asbestos claimants renewal request. On
September 15, 1992, the District Court entered an order denying
the asbestos claimants' motion to withdraw the reference. The
District Court held that while the asbestos claimants could have
their claims heard by a jury, they were not entitled to a jury
trial on the claims of piercing the corporate veil and
fraudulent conveyance because those claims are equitable in
nature. On September 22, 1992, the asbestos claimants filed a
motion for reconsideration and, pleading in the alternative,
requested the District Court to certify the order for
interlocutory review in the United States Circuit Court of
Appeals for the Eleventh Circuit ("Court of Appeals"). On
October 5, 1992, the Debtors filed their Memorandum of Law in
opposition to the asbestos claimants' motion for
reconsideration. On February 23, 1993, the District Court
entered an order denying the motion for reconsideration and
request for certification of interlocutory appeal. On March 3,
1993, the asbestos claimants filed a petition for a writ of
mandamus with the Court of Appeals. On April 13, 1993, the
Debtors filed their response to the writ of mandamus. On April
19, 1993, the Court of Appeals denied the asbestos claimants
petition for such writ of mandamus.
On July 11, 1990, the District Court adopted the Bankruptcy
Court's proposed finding of fact, conclusions of law and
recommendation pursuant to Bankruptcy Rule 9011, and denied the
asbestos claimants' motion to abstain from deciding, or to stay,
the Declaratory Judgment Proceeding. As a result of the
District Court's decisions, absent any reversal on
reconsideration or appeal, the Bankruptcy Court was empowered to
rule on a motion for summary judgment in the Declaration
Judgement Proceeding.
On July 17, 1990, the asbestos claimants filed a motion in
the District Court seeking reconsideration of the July 11, 1990
order denying the motion for abstention, and, in the
alternative, seeking certification of that order for
interlocutory appeal to the Court of Appeals pursuant to 28
U.S.C. Section 1292. The asbestos claimants also sought a stay
pending determination of their motion. On July 30, 1990, the
Debtors opposed the July 17, 1990 motion.
On December 6, 1990, the District Court entered an order
(a) denying the asbestos claimants' motion to reconsider the
District Court's decision or July 11, 1990 which adopted the
Bankruptcy Court's recommendation to deny the asbestos
defendants' motion to require the Bankruptcy Court to abstain
from considering the Declaratory Judgement Proceeding commenced
by the Debtors against the asbestos defendants; (b) giving the
asbestos claimants ten (10) days from the date of the order to
seek interlocutory appeal to the Court of Appeals and (c)
granting the asbestos claimants' motion to stay further
prosecution of the Declaratory Judgement Proceeding pending the
outcome of the interlocutory appeal. On December 17, 1990, the
asbestos claimants filed their Petition for Permission to Appeal
with the Court of Appeals. On February 5, 1991, the Court of
Appeals denied the asbestos claimants' Petition to Appeal. By
so ruling, the Court of Appeals let stand the District Court's
ruling of December 6, 1990 denying the asbestos claimants'
motion to reconsider the District Court's decision of July 11,
1990, which adopted the Bankruptcy Court's recommendation to
deny the asbestos claimants' motion to abstain in such
proceeding. On March 19, 1991, the asbestos claimants filed
with the District Court a Renewed Motion for Reconsideration of
their Motion to Abstain, which also sought to continue the stay
in the Bankruptcy Court. On April 16, 1991, the District Court
entered an order confirming that its stay of proceedings in the
Bankruptcy Court had expired. In addition, the District Court
denied the asbestos claimants Renewed Motion for Reconsideration
of their Motion to Abstain. Because the District Court's stay
has been lifted, the Declaratory Judgment Proceeding has gone
forward in the Bankruptcy Court under schedules that were set by
the Bankruptcy Court.
Discovery in the Declaratory Judgement Proceeding was to
have been concluded on July 6, 1990 pursuant to a Bankruptcy
Court order. Subsequent to issuance of that order, certain
discovery disputes arose between Jim Walter Corporation and the
asbestos claimants centered upon issues relating to whether or
not certain documentation was subject to various privileges and
thus protected. After protracted litigation wherein various
issues were appealed to the District Court and the Court of
Appeals, on June 15, 1992 Jim Walter Corporation and the
asbestos claimants entered into a stipulation regarding the
resolution of all their then pending discovery disputes, without
either party waiving their right for further review, if
necessary.
Following a hearing on January 8, 1992, the Bankruptcy
Court ordered that any motions for summary judgement in the
Declaratory Judgement Proceeding be filed by March 1, 1992 and
set oral arguments for April 16, 1992. On February 28, 1992,
the Debtors filed their Motion for Summary Judgement and
supporting affidavits. On April 9, 1992, the asbestos claimants
filed their Response to Debtors' Motion for Summary Judgement,
and on May 7, 1992, filed a Supplemental Response to the
Debtors' Motion for Summary Judgement. On April 16, 1992, oral
arguments were heard by the Bankruptcy Court on the Debtors'
Motion for Summary Judgement. On May 29, 1992, the Debtors
filed their Statement of Undisputed Facts and Memorandum f Law
in Support of their Motion for Summary Judgement. on May 29,
1992, asbestos claimants filed their Brief in Opposition to
Debtors' Motion for Summary Judgement.
On August 25, 1992, the Bankruptcy Court entered an order
denying the Debtors' Motion for Summary Judgement. On September
3, 1992, the Debtors filed a motion to reopen the record to make
additional findings of fact pursuant to Rule 43(e) of the
Federal Rules of Civil Procedure. On September 18, 1992, the
asbestos claimants filed their opposition to the Debtors'
motion. On October 8, 1992, the Bankruptcy Court denied the
Debtors' motion to reopen the record to make additional findings
of fact.
On September 14, 1992, the Debtors filed a motion to strike
the asbestos claimants' demand for a jury trial and on September
21, 1992, the Debtors filed a motion for a pre-hearing
conference to resolve all motions pending before the Bankruptcy
Court. On October 7, 1992, the Bankruptcy Court entered an
order granting the Debtors' motion to strike the asbestos
claimants demand for jury trial.
On July 29, 1992, the asbestos claimants served discovery
requests upon the Debtors, Celotex, Jim Walter Corporation and
other parties not defendants to the Declaratory Judgement
Proceeding. Upon a motion for protective order by one of the
non-party witnesses, which was granted by order dated October 7,
1992, the Bankruptcy Court suspended all discovery in the
adversary proceeding, and indicated that it would enter, without
a hearing, an order on the issue of additional permitted
discovery. If any, on the veil piercing question and, if
appropriate, describe the scope of any production of documents.
On October 5, 1992, the asbestos claimants filed a motion
for pre-trial conference to address a number of issues,
including but not limited to the nature and scope of discovery.
On October 30, 1992, the Bankruptcy Court entered orders denying
all pending motions for pre-trial conference stating that the
parties had not obtained further relief from the automatic stay
in the Celotex bankruptcy case.
On October 30, 1992, Celotex filed Proofs of Claim in each
of the Debtor's bankruptcy cases claiming that each Debtor is
liable for all claims which Celotex may hold (1) predicated upon
a piercing the corporate veil, alter ego instrumentality,
agency, conspiracy and any related theory of law, equity or
admiralty; (2) arising out of the leveraged buyout of Original
Jim Walter which resulted in the January 7, 1988 transfer by
Hillsborough Acquisition corporation of substantially all of its
assets to the Company; (3) arising out of the transfer of
Celotex assets for less than reasonably equivalent value; and
(4) arising out of that certain Stock Purchase Agreement dated
April 21, 1988 and amendments thereto. The total amount of the
Proofs of Claim included all scheduled and filed claims against
Celotex in their bankruptcy proceedings, all unfiled present
asbestos-related personal injury and property damage claims and
all future asbestos-related personal injury claims against
Celotex. On November 6, 1992, the Debtors filed their
objections to the claims of Celotex. On November 25, 1992 the
Bankruptcy Court sustained the Debtors objections to the Proofs
of Claim filed by Celotex without prejudice to the right to file
Proofs of Claim, if appropriate, at the conclusion of the veil
piercing litigation.
On November 13, 1992, the Debtors filed a motion in the
Celotex bankruptcy case for limited relief from the automatic
stay for the sole purpose of permitting a trial on the veil
piercing claims in the Declaratory Judgment Proceeding and the
prosecution or defense of any appeals arising from or relating
to the decision in such trial. On December 4, 1992, the
asbestos claimants filed a cross-motion for relief from the
automatic stay requesting that the automatic stay be lifted to
permit Celotex to participate in all aspects of the Declaratory
Judgment Proceeding. On December 9, 1992, Judge Baynes granted
relief from the automatic stay, permitting Celotex to
participate in all aspects of the Declaratory Judgment
Proceeding up through final judgment.
On December 15, 1992, the Debtors, asbestos claimants,
Celotex and Jim Walter Corporation filed a Joint Motion for Pre-
Trial Conference which the Bankruptcy Court granted.
On January 13, 1993, a pre-trial conference was held. As a
result of the pre-trial conference, the Bankruptcy Court entered
two orders on February 3, 1993. One order identified
five discrete issues which remain to be tried. The other order
set forth a detailed schedule for any discovery which remained.
On February 16, 1993, the Debtors filed a Motion for
Reconsideration in the Bankruptcy Court seeking a reconsideration
of the discovery schedule which the Debtors believe to be
unnecessarily long. In the motion for reconsideration, the
Debtors proposed a more condensed discovery schedule which would
lead to a trial of the remaining issues by July 1993. The
Bankruptcy Court granted the
motion for reconsideration and held a hearing on March 17, 1993,
wherein the Bankruptcy Court agreed to review the issue
and enter an order accordingly. At a hearing held on April 22,
1993, the Bankruptcy Court stated that the trial on the remaining
issues would commence December 13, 1993.
On February 18, 1993, the Debtors served upon the asbestos
claimants discovery requests in the form of interrogatories and
requests for production of documents. On February 18,
1993, the asbestos claimants served upon the Debtors (i)
discovery requests in the form of interrogatories and requests
for production of documents and (ii) deposition notices which
included document production requests on certain parties not
defendants to the Declaratory Judgment Proceeding. The Debtors,
Jim Walter Corporation, the asbestos claimants, and other
non-party defendants filed responses and motions for protective
orders regarding certain discovery requests which motions were
heard on March 17, 1993. The Bankruptcy Court entered an order
from the bench both granting and denying particular subject
matters contained in the motions for protective orders. The
Bankruptcy Court gave all parties until April 10, 1993
to comply with the discovery requests in accordance with the
Bankruptcy Court's guidance.
The Debtors produced additional documents in accordance with the
Bankruptcy Court's order and answered additional interrogatories.
On April 15, 1993, the asbestos claimants filed motions to
compel the Debtors, Jim Walter Corporation and Celotex to respond
to their discovery requests with more detailed financial
documents. At a hearing on April 22, 1993, the Bankruptcy Court
denied in almost its entirety the asbestos claimants motion to
compel filed against the Debtors. The motions to compel filed
against Jim Walter Corporation and Celotex were continued to
allow the parties to comply by April 30, 1993. Discussions
between the parties are continuing. On April 21,
1993, the asbestos claimants served Request for Admissions on
the Debtors, Jim Walter Corporation and Celotex. On May 21,
1993, all parties served
their responses to said Request for Admissions.
On June 14, 1993, the Debtors filed a pre-conference statement
requesting the Bankruptcy Court to set definite dates for
discovery and all other pretrial matters. Prior to the June
16, 1993 status conference, the Debtors, asbestos claimants and
other interested parties tentatively agreed to stipulate to
certain dates contained within the Debtor's proposal; said
stipulation is currently being negotiated.
On June 21, 1993, the asbestos claimants served additional
discovery on the Debtors, Celotex and Jim Walter corporation. The
Debtors served responses thereto on July 1, 1993. On July 7,
1993, the Debtors filed a motion for protective
order striking certain of the asbestos claimants' discovery
requests.
While the Debtors believe they will prevail in the Declaratory
Judgment Proceeding, there can be no assurance that the
Bankruptcy Court will grant the Debtors the relief sought, or
that if the Bankruptcy Court rules in favor of the Debtors on
these complaints, its ruling will be affirmed on appeal.
Moreover, the Debtors necessarily cannot predict the timing of
any Bankruptcy Court or appellate proceedings. If the asbestos
health and/or asbestos property damage claimants ultimately
prevail on their allegations that the Debtors may be liable for
claims asserted against Celotex, it is not possible at
this time: (i) to quantify the amount of these claims, although
the Debtors believe these claims will be substantial
(ii) to predict how these claims will be treated in any plan
or plans of reorganization (iii) to determine the impact of these
claims on the operations of the Debtors; or (iv) to
predict their ability to confirm a plan or plans of
reorganization.
JWC Holdings, Jim Walter Corporation, Celotex and the other
subsidiaries of JWC Holding have indemnified the Company and its
affiliates against any liability or expense incurred as
a result of any asbestos-related lawsuit. However, there can
be no assurance that the Company and its affiliates will be
reimbursed by Jim Walter Corporation and its subsidiaries
pursuant to the aforementioned indemnity for any liability or
expense resulting therefrom.
During the latter part of February, 1991, the Union City,
California plant of U.S. Pipe received a notice from the Bay Area
Air Quality Management District ("BAAQMD"), San
Francisco, California, informing U.S. Pipe that an initial
health risk assessment report submitted to said agency by U.S.
Pipe on or about January 29, 1991 was unacceptable because of
alleged failure to conform with reporting guidelines pursuant
to the California Air Toxic "Hot Spots" Information and
Assessments Act of 1987 (A.B. 2588).
The potential monetary sanctions that could be imposed as a
result thereof might be as high as $450,000. On or about April 1,
1991, U.S. Pipe submitted a revised health risk assessment report
which was accepted by the agency, thereby stopping the
accumulation of any further potential monetary sanctions. U.S.
Pipe believes that there are mitigating facts,
as well as valid legal defenses, that could reduce or eliminate
the imposition of any monetary sanctions. U.S. Pipe is
cooperating fully with the BAAQMD. It is unknown at the
present time whether any change in operating procedures or any
capital expenditures might be required as a result of this
matter. On May 8, 1991, U.S. Pipe submitted to the BAAQMO a
revised health risk assessment report supplementing the April
1991 submission. In December 1991, U. S. Pipe receive
notification from the BAAQMO that it must send individual
letters to affected residents and conduct a public hearing on the
health risk assessment. The letter to such residents was sent on
March 19, 1992, and the public hearing was held April 2,
1992. A plan of action detailing the current status was sent to
BAAQMD in June 1992 and implemented thereafter. A required
quarterly letter was sent to residents on July 7, 1992.
Thereafter, U.S. Pipe submitted a plan for additional corrective
action to the air pollution control system. After agency
approval, the changes were made and additional testing
was conducted. A new health risk assessment is being prepared
for submission to BAAQMO.
Quarterly letters continue to be sent to residents as required by
AB 2588.
On April 4, 1991, Secretary of Labor, Lynn Martin, announced
that the United States Department of Labor has cited more than
500 coal mining firms for alleged tampering with coal-dust
samples used to monitor compliance with regulations designed to
protect miners from black lung disease lung disease. The public
announcement, indicated to be following a 20-month investigation,
a also indicated that the Mine Safety and Health Administration
("MSHA") has issued a total of 4,710 citations to operators of
approximately 847 coal mines that allegedly submitted
questionable samples, including approximately 89 such alleged
samples from Jim Walter Resources' four active mines located in
Tuscaloosa and Jefferson Counties, Alabama. MSHa has proposed
penalties against Jim Walter Resources totaling $151,600 for
these alleged violations. The public announcement indicated MSHA
may also pursue criminal investigations related to the alleged
tampering with coal-dust samples. Neither the Company's
management nor Jim Walter Resources' management had any prior
knowledge of any such investigations or citations until the
public announcement and, therefore, cannot comment at this time
on how such conclusions were reached, whether such conclusions
are valid or whether any further citations may be issued against
the Company and/or Jim Walter Resources. The Company has
conducted a thorough internal investigation and found absolutely
no factual basis to support such allegations. The Company
believes that, given the hugh number of companies cited, the
thousands of samples involved, and the public statement of the
President of the National Coal Association that even some samples
taken by MSHA inspectors themselves were "abnormal", suggests at
least the possibility of flaws in the testing procedures and that
an independent investigation of the entire sample measuring
process is not only called for but should be mandated. The
current schedule required joint discovery to be concluded by May
1992, with individual discovery commenced thereafter. Joint
discovery was completed in June 1992. A trial held before the
Federal Mine Safety and Health Commission in Washington, D.C. as
to all common issues commenced on December 1, 1992 and concluded
on February 22, 1993. The parties have filed their briefs and
reply briefs. A decision is now pending.
NOTE 12 - Pension and Other Employee Benefits
The Company has various pension and profit sharing plans
covering substantially all employees. In addition to its own
pension plans, the Company contributes to certain multi-employer
plans. Total pension expense for the years ended May 31, 1993,
1992 and 1991, was $16.5 million, $20.1 million and $20.7
million, respectively. The funding of retirement and employee
benefit plans is in accordance with the requirements of the plans
and, where applicable, in sufficient amounts to satisfy the
"Minimum Funding Standards" of the Employee Retirement Income
Security Act of 1974 ("ERISA"). The plans provide benefits based
on years of service and compensation or at stated amounts for
each year of service.
The net pension costs for Company administered plans are
follows:
<TABLE>
<CAPTION>
For the years ended May 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 5,233 $ 4,849 $ 4,105
Interest cost on projected benefit obligation 15,634 14,695 13,846
Actual return on assets (18,131) (25,212) (16,254)
Net amortization and deferral 3,174 11,954 3,927
Net pension costs $ 5,910 $ 6,286 $ 5,624
</TABLE>
The following table sets forth the funded status of Company
administered plans:
<TABLE>
<CAPTION>
May 31, 1993 May 31, 1992
Plans in which Plans in which
Assets exceed Accumulated Assets exceed Accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
<S> <C> <C> <C> <C>
Actuarial present value of
accumulated benefit obligations:
Vested benefits $115,915 $ 37,492 $104,037 $ 41,662
Non-vested benefits 4,639 1,626 4,225 2,018
$120,554 $ 39,118 $108,262 $ 43,680
Plan assets at fair value, primarily stocks and bonds $176,551 $ 24,926 $155,585 $ 27,688
Projected benefit obligations 149,258 39,118 135,763 44,482
Plan assets in excess of (less than) projected benefit
obligations 27,293 (14,192) 19,822 (16,794)
Unamortized portion of transition (assets) obligation
at June 1, 1986 (12,546) 5,709 (14,471) 7,077
Unrecognized net loss (gain) from actual experience
different from that assumed ( 5,318) 79 ( 1,759) 454
Prior service cost not recognized 985 2,540 894 2,328
Contribution to plans after measurement date 1,369 771 1,327 917
Prepaid (accrued) pension cost 11,783 ( 5,093) 5,813 ( 6,018)
Additional liability - ( 8,224) - ( 9,203)
Prepaid pension cost (pension liability) recognized in
the balance sheet $ 11,783 $(13,317) $ 5,813 $(15,221)
</TABLE>
The projected benefit obligations were determined using an
assumed discount rate of 9.0% in fiscal 1993 and fiscal 1992 and,
where applicable, an assumed 6% rate of increase in future
compensation levels. The assumed long-term rate of return on
plan assets is 8%.
Under the labor contract with the United Mine Workers of
America, Jim Walter Resources makes payments into multi-employer
pension plan trusts established for union employees. Under
ERISA, as amended by the Multiemployer Pension Plan Amendments of
Act of 1980, an employer is liable for a proportionate part of
the plans' unfunded vested benefits liabilities. The Company
estimates that its allocated portion of the unfunded vested
benefits liabilities of these plans amounted to approximately
$24.0 million at May 31, 1993. However, although the net
liability can be estimated, its components, the relative position
of each employer with respect to actuarial present value of
accumulated benefits and net assets available for benefits, are
not available to the Company.
The Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" in the fourth quarter of fiscal
1993. Upon adoption, the Company elected to record the
transition obligation of $166.4 million pre-tax ($104.6 million
after tax) as a one-time charge against earnings, rather than
amortize it over a longer period. This obligation is primarily
related to the health benefits for eligible retirees. The annual
accrual under the new accounting method amounts to $23.5 million
before taxes. If 1993 expense had been determined under the cash
method used previously, the amount recognized would have been
$2.7 million before taxes. Adoption of this standard has no
impact on cash flow.
Summary information is set forth below:
<TABLE>
<CAPTION>
May 31, 1993
(in thousands)
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 70,220
Fully eligible, active participants 23,493
Other active participants 96,192
$189,905
May 31, 1993
(in thousands)
Net periodic postretirement benefit cost:
Immediate recognition of transition obligation $166,431
Service cost, benefits attributed to service
during the year 8,495
Interest cost on accumulated post-retirement
benefit obligation 14,979
$189,905
</TABLE>
The principal assumptions used to measure the accumulated
postretirement benefit obligation include a discount rate of 9%
and a health care cost trend rate of 14% declining to 6.5% over a
twelve year period and remaining level thereafter. A one percent
increase in the health care cost component would increase the
accumulated postretirement benefit obligation by approximately
$28.5 million and increase net periodic cost for 1993 by
approximately $4.4 million.
Certain subsidiaries of the Company maintain profit sharing
plans. The total cost of these plans for the years ended May 31,
1993, 1992 and 1991 was $3.0 million, $2.7 million and $2.5
million, respectively.
NOTE 13 - Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments" ("FAS
107") requires disclosure of estimated fair values for all
financial instruments for which it is practicable to estimate
fair value. Considerable judgment is necessary in developing
estimates of fair value and a variety of valuation techniques are
allowed under FAS 107. The derived fair value estimates
resulting from the judgments and valuation techniques applied
cannot be substantiated by comparison to independent materials or
to disclosures by other companies with similar financial
instruments. Furthermore, FAS 107 fair value disclosures do not
purport to be the amount which could be attained in immediate
settlement of the financial instrument. Fair value estimates are
not necessarily more relevant than historical cost values and
have limited usefulness in evaluating long-term assets and
liabilities held in the ordinary course of business.
Accordingly, management believes that the disclosures required by
FAS 107 have limited relevance to the Company and its operations.
In addition, because of the Company's petition for reorganization
(see Note 2) and the asbestos-related litigation (see Note 11)
estimates are either not practicable or are subject to a much
wider degree of uncertainty than would normally be the case.
The following methods and assumptions were used to estimate
fair value disclosures:
Cash (including sort-term investments) and short-term
investments-restricted - The carrying amount reported in the
balance sheet approximates fair value.
Installment notes receivable - In connection with the
Reorganization Proceedings, three different investment
ranking firms have made estimates of the fair value of the
Company's portfolio of instalment notes receivable. These
estimates ranged from $756 million to $944 million as
compared to the net carrying amount reported in the balance
sheet of $346 million (net of indebtedness of $1.041 billion
secured by certain of the installment notes receivable).
All three firms used discounted cash flow methodologies but
their assumptions as to interest rates and credit losses
varied. Values of mortgaged-backed instruments such as the
installment notes receivable are very sensitive to changes
in interest rates.
Debt - Due to the uncertainties arising from the Debtors'
petitions for reorganization, the asbestos-related
litigation and the preliminary status of plan of
reorganization negotiations there are no reliable market
quotations or other valid market comparisons and
accordingly, it is impracticable to estimate a fair value of
the Company's various outstanding debt instruments.
NOTE 14 - Segment Information
Information relating to the Company's business segments is
set forth on pages F-35 and F-36.
NOTE 15 - Summarized Financial Information
The consolidated financial statements presented herein are
of the Company, which is a guarantor of the obligations of the
Senior Note Issuers and the Subordinated Note Issuers (see Note
6). Summarized financial information for the Senior Note Issuers
and the Subordinated Note Issuers is set forth below:
<TABLE>
<CAPTION>
Senior Note Issuers Subordinated Note Issuers
For the years ended May 31, For the years ended May 31,
1993 1992 1991 1993 1992 1991
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCOME DATA
Net sales and revenues $ 858,560 $ 932,056 $ 903,883 $ 510,944 $ 516,368 $ 488,032
Cost of sales (exclusive of
depreciation, depletion and
amortization) 630,917 730,655 691,459 390,550 384,346 362,037
Other operating expenses 103,257 119,224 112,956 74,221 77,013 73,900
Postretirement health benefits 19,307 - - 5,870 - -
Chapter 11 costs 4,845 3,000 3,008 2,933 1,664 1,650
Interest and amortization of
debt expense 43,092 45,990 48,663 28,625 30,226 34,620
Amortization of excess purchase
price 21,498 21,431 21,394 23,244 23,181 23,137
35,644 11,756 26,403 (14,499) ( 62) ( 7,312)
Provision for income taxes (14,785) 392 (10,437) ( 3,469) ( 8,000) ( 4,367)
Income (loss) from continuing
operations before cumulative
effect of accounting change 20,859 12,148 15,966 (17,968) ( 8,062) (11,679)
Discontinued operations:
Loss from operations - - ( 433) - - ( 433)
Cumulative effect of change in
accounting principle -
postretirement benefits
other than pensions (net of
income tax benefit) (82,513) - - (26,725) - -
Net income (loss) $(61,654) $12,148 $15,533 $(44,693) $(8,062) $(12,112)
</TABLE>
<TABLE>
<CAPTION>
Senior Note Issuers Subordinated Note Issuers
May 31, May 31,
1993 1992 1991 1993 1992 1991
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash (includes short-term
investments) $ 23,753 $ 21,531 $ 21,705 $ 23,714 $ 21,479 $ 21,570
Short-term investments,
restricted 8,652 10,986 20,599 5,699 8,195 9,416
Trade and other receivables, net 114,169 112,877 107,416 72,582 70,436 73,793
Inventories 128,647 129,848 144,594 93,384 90,534 87,794
Prepaid expenses 4,921 5,531 6,501 3,300 3,938 4,697
Intercompany receivables 1,723,343 1,545,659 1,276,807 1,264,689 1,153,071 910,131
Property, plant and equipment,
net 525,779 523,763 537,747 172,962 173,930 171,715
Unamortized debt expense and
other assets 33,563 39,520 46,415 25,671 32,433 38,796
Excess of purchase price over
net assets acquired 305,673 327,171 348,602 330,568 353,812 376,993
$2,868,500 $2,716,886 $2,510,386 $1,992,569 $1,907,828 $1,694,905
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Bank Overdrafts $ 13,590 $ 21,347 $ 15,183 $ 9,758 $ 14,108 $ 11,298
Accounts payable and accrued
expenses 115,162 123,105 120,366 57,594 61,878 61,690
Income taxes payable 7,209 6,557 6,639 5,036 4,853 4,914
Deferred income taxes 63,514 128,401 153,185 40,812 66,433 78,386
Intercompany payables 578,132 483,491 296,542 570,337 483,369 293,733
Long-term senior debt 6,264 - - - - -
Accrued postpetition interest
on secured obligations 152,633 110,821 58,439 104,665 76,741 39,576
Accumulated postretirement
health benefits obligation 150,904 - - 48,492 - -
Other long-term liabilities 36,178 37,404 32,445 6,949 7,598 3,451
Liabilities subject to Chapter
11 proceedings 1,731,865 1,731,406 1,764,381 1,444,575 1,444,253 1,444,200
Stockholder's equity (deficit) 13,049 74,354 63,206 ( 295,749) ( 251,405) ( 242,343)
$2,868,500 $2,716,886 $2,510,386 $1,992,569 $1,097,828 $1,694,905
</TABLE>
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
<TABLE>
<CAPTION>
For the years ended May 31,
1993 1992 1993
(in thousands)
<S> <C> <C> <C>
Sales and Revenues:
Homebuilding and related financing $ 419,378 $ 409,071 $ 389,137
Building materials 51,539 46,887 43,991
Industrial products 171,541 165,007 153,012
Water and waste water transmission
products 320,740 324,400 305,458
Natural resources(e) 351,017 419,274 423,867
Corporate 4,771 1,942 10,932
Consolidated sales and revenues(a)(f) $1,318,986 $1,366,581 $1,326,397
Contributions to Operating Income:
Homebuilding and related financing $ 88,902 $ 82,718 $ 66,954
Building materials 2,354 2,343 1,088
Industrial products 9,997 11,226 8,869
Water and waste water transmission
products 14,990 24,492 24,541
Natural resources 50,807 16,020 61,144
167,050 136,799 162,596
Less-Unallocated corporate interest
and other expense(b) (96,128) (101,994) (122,510)
Income taxes (24,328) (12,463) (19,454)
Income from continuing operations(c) $ 46,594 $ 22,342 $ 20,632
Depreciation, Depletion and Amortization:
Homebuilding and related financing $ 3,113 $ 3,059 $ 3,445
Building materials 1,421 1,103 1,147
Industrial products 8,654 9,118 8,277
Water and waste water transmission
products 15,079 14,492 14,132
Natural resources 40,714 53,556 46,817
Corporate 1,502 1,473 1,281
Total $ 70,483 $ 82,801 $ 75,099
Gross Capital Expenditures:
Homebuilding and related financing $ 6,284 $ 6,357 $ 3,893
Building materials 998 709 1,151
Industrial products 8,344 7,284 10,049
Water and waste water transmission
products 12,084 16,379 9,990
Natural resources 42,941 36,993 42,434
Corporate 1,057 627 1,529
Total $ 71,708 $ 68,349 $ 69,046
Identification Assets:
Homebuilding and related financing $1,907,199 $1,899,737 $1,891,112
Building materials 57,343 57,564 60,508
Industrial products 129,392 129,723 130,589
Water and waste water transmission
products 478,234 496,890 513,124
Natural resources 475,533 477,150 512,096
Corporate (d) 175,533 110,202 168,782
Total $3,223,234 $3,171,266 $3,276,211
</TABLE>
_______________
(a) Inter-segment sales (made primarily at prevailing market
prices) are deducted from sale of the selling segment and
are insignificant in amount with the exception of the sale
of the Industrial Products Group o the Water and Waste Water
Transmission Product Group of $18,667,000, $16,661,000 and
$15,255,000 and sales of the Natural Resources Group to the
Industrial Products Group of $7,121,000, $9,551,000 and
$6,619,000 in 1993, 1992 and 1991, respectively.
(b) Excludes interest expense incurred by the Homebuilding and
Related Financing Group of $137,945,000, $136,955,000 and
$140,624,000 in 1993, 1992 and 1991, respectively. The
balance of unallocated expenses is attributable to all
groups and cannot be reasonable allocated to specific
groups.
(c) Includes postretirement health benefits of $23,474,000 in
1993. A breakdown by segment is as follows:
(in thousands)
Homebuilding and related financing $ 1,991
Building materials 463
Industrial products 2,821
Water and waste water transmission
products 4,136
Natural resources 13,437
Corporate 626
$23,474
(d) Primarily cash and corporate headquarters buildings and
equipment.
(e) Includes sales of coal of $321,834,000, $392,674,000 and
$391,130,000 in 1993, 1992 and 1991, respectively.
(f) Export sales, primarily coal, were $183,188,000,
$206,546,000 and $215,453,000 in 1993, 1992 and 1991,
respectively. Export sales to any single geographic area do
not exceed 10% of consolidated net sales and revenues.
<PAGE>
EXHIBIT X.A.2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the
consolidated financial statements and notes thereto of Walter
Industries, Inc. and subsidiaries (see Index to Financial
Statements of Page F-1), particularly the "Segment Information"
on pages F-35 and F-36 which presents sales and operating income
by operating group.
The Company adopted Statement of Financial Accounting
Standards No. 106 "Employers Accounting for Postretirement
Benefits Other Than Pensions" (FAS 106) in the fourth quarter of
fiscal 1993 (see Note 12 of Notes to Financial Statements).
Accordingly, operating income presented in the "Segment
Information" includes postretirement health benefits of $23.5
million in 1993. However, for purposes of the following
discussion of results of operations for the years ended May 31,
1993 and 1992, the fiscal 1993 operating income referred to in
each business segment excludes such postretirement health
benefits expense (hereinafter referred to as "1993 adjusted
operating income").
The "Segment Information" is prepared on the basis of
product markets rather than legal corporate structures and thus
does not reflect separate data for the issuers and guarantors of
certain of the Company's outstanding indebtedness. However, see
Note 15 of Notes to Financial Statements as to combined financial
data for such issuers. The guarantors are holding companies and
neither one currently, with the exception of Walter Industries,
Inc., which provides certain corporate staff functions and owns a
twin-tower, eight story office building located on a plot of land
in excess of 13 acres in Tampa, Florida, has any substantial
properties or engages in any substantial business other than
through subsidiaries.
RESULTS OF OPERATIONS:
Years ended May 31, 1993 and 1992
Net ales and revenues for the year ended May 31, 1993
decreased $47.6 million, or 3.5%. A 5.9% decrease in volume was
partially offset by a 2.4% increase in price and/or product mix.
The decrease in net sales and revenues resulted from lower sales
and revenues in the Water and Waste Water Transmission Products
and Natural Resources Groups, partially offset by improved sales
in the Homebuilding and Related Financing, Building Materials and
Industrial Products Groups.
Water and Waste Water Transmission Products Group sales and
revenues were $3.7 million, or 1.1%, below the prior year. The
decrease was basically the result of lower ductile iron pressure
pipe sales volume due to continued weak construction activity and
rehabilitation work, partially offset by improved selling prices.
The 1993 adjusted operating income of $19.1 million was $5.4
million below the prior year. The effect of lower ductile iron
pressure pipe sales volume on this highly capital intensive
product group was the primary reason for the decline in operating
profit which was partially offset by lower scrap costs, a major
raw material component, improved selling prices and reduced
selling, general and administrative expenses (due principally to
legal and settlement costs in the prior year associated with a
lawsuit filed by the City of Atlanta.
Natural Resources Group sales and revenues were $68.3
million, or 16.3%, below the prior year. The decrease was the
result of lower coal shipments and a decrease in outside coal
royalties, partially offset by higher average selling prices for
coal and methane gas and greater methane gas sales volume. A
total of 7.18 million tons of coal was sold in 1993 versus 9.18
million tons in 1992, a 22% decrease. On June 17, 1992 a major
production hoist accident occurred at Blue Creek Mine No. 3
("Mine No. 3") causing extensive damage. The mine did not resume
production until August 31, 1992. The hoist accident resulted in
a mutually agreed postponement of shipments of 400,000 tons to
Alabama Power Company ("alabama Power") from the period July
through September 1992 to the period January through June 1993.
Prior year tonnage shipments to Alabama Power were favorably
impacted by a separate lower selling price short-term contract
for 964,000 tons. Shipments to the Japanese steel mills and
other export customers were also below the prior year period due
to the hoist accident and an April 1992 workforce reduction which
has reduced production tonnage available for sale. The average
price per ton of coal sold increased 4.9%, from $42,76 in 1992 to
$44.84 in 1993. The higher price realization in the current year
is the result of coal shipped to Alabama Power in 1992 under the
previously mentioned separate lower selling price short-term
contract, partially offset by lower selling prices to the
Japanese and other export customers in the current year. The
Group's 1993 adjusted operating income of $64.2 million exceeded
the prior year by $48.2 million. The improved performance
resulted from the increased coal and methane gas average selling
prices, higher methane gas sales volume, lower selling, general
and administrative expenses and improved mining productivity,
including the effect of the April 1992 workforce reduction, which
resulted in lower costs per ton of coal produced, partially
offset by the reduced coal sales volume and the decrease in
outside coal royalties. Prior year results were also adversely
impacted by severance, vacation pay and ongoing medical benefits
associated with the April 1992 workforce reduction ($6.2
million), accelerated depreciation on the remaining assets at a
previously closed small coal mine ($5.6 million) and idle plant
costs associated with a three week shutdown of Blue Creek Mine
No. 4 ("Mine No. 4") due to an accident which damaged the
production hoist ($4.4 million) and wildcat strikes by the United
Mine Workers of America ("UMWA") ($2.4 million) in August 1991.
An interim agreement has been reached between the
Independent Bituminous Coal Bargaining Alliance ("IBCBA"), formed
in 1992, of which Jim Walter Resources, Inc. is a member, and the
UMWA. The agreement extends all terms and conditions of the
National Bituminous Coal Wage Agreement of 1988, except for
certain modifications including employment security to union
members and an emphasis on labor/management cooperation. The
agreement is for a period of one year, from June 30, 1993 to June
30, 1994, or until 30 days after the ratification of a successor
national agreement. The agreement is separate from the
negotiations between the UMWA and the Bituminous Coal Operators
Association ("BCOA") and has no effect on the UMWA's selective
strike that began May 10, 1993 against the member companies of
the BCOA.
Homebuilding and Related Financing Group sales and revenues
were $10.3 million, or 2.5%, greater than 1992. This performance
reflects a 6.9% increase in the average selling price per home
sold, from $34,600 to 1992 to $37,000 in 1993, which was more
than offset by a 9.8% decrease in the number of homes sold, from
5,305 units in 1992 to 4,784 units in 1993. The increase in
average selling price in 1993 is attributable to higher average
prices realized on both the standard line and the larger sized
Regency homes combined with a greater percentage of Regency homes
sold. The decrease in unit sales reflects strong competition in
virtually every Jim Walter Homes sales region and the current
year having a one week shorter sales period than 1992. Jim
Walter Homes' backlog at May 31, 1993 was 1,831 units (all of
which are expected to be completed prior to the end of fiscal
1994) compared to 1,637 units at May 31, 1992. Time charge
income (revenues received from Mid-State's installment note
portfolio) increased from $195.0 million in 1992 to $218.7
million in 1993. The increase in time charge income is
attributable to the continued growth of the mortgage portfolio,
increased payoffs received in advance of maturity and new
mortgages having a higher yield than the older mortgages paying
out. The Group's 1993 adjusted operating income of $90.9 million
exceeded the prior year by $8.2 million. This improvement
resulted from the increase in average selling price per home
sold, the higher time charge income and lower selling, general
and administrative expenses, partially offset by the lower number
of homes sold, reduced homebuilding gross profit margins (due
principally to the sales of the larger sized, lower margin
Regency homes and increased lumber prices) and slightly higher
interest expense in 1993 ($137.9 million) as compared to that
incurred in 1992 ($137.0 million). Lumber prices rose from $259
per thousand board feet in June 1992 to a high of $506 in March
1993 and ended the year at $325. A price increase was instituted
effective April 1, 1993 to compensate for these increased costs.
Building Materials Group sales and revenues were $4.7
million, or 9.9%, ahead of the prior year. The increase resulted
from improved window components and metal building and foundry
products sales volumes, partially offset by lower overall sales
prices and/or mix. The Group's 1993 adjusted operating income of
$2.8 million was $500,000 greater than the prior year as the
increased sales volumes and improved operating efficiencies in
the metal building and foundry business more than offset the
lower selling prices and increased manufacturing costs in the
window components business.
Industrial Products Group sales and revenues were $6.5
million, or 4.0% greater than the prior year. Increased sales
volumes of foundry coke, chemicals, industrial castings and
aluminum foil were partially offset by lower sales volumes of
aluminum coil, resin coated sand, patterns and tooling, furnace
coke and mineral wool and lower selling prices for aluminum foil
and coil, furnace coke, resin coated sand and patterns and
tooling. The Group's 1993 adjusted operating income of $12.8
million exceeded he prior year by $1.6 million. The improved
performance was the result of the increased sales volumes and
improved gross profit margins for industrial castings, partially
offset by lower margins for chemicals, resin coated sand and
patterns and tooling.
Cost of sales, exclusive of depreciation, of $804.4 million
was 75.0% of net sales versus $891.9 million and 78.3% in 1992.
The cost of sales percentage decrease was primarily the result of
improved gross profit margins on coal, metal building and foundry
products and industrial castings, partially offset by lower
margins on home sales, ductile iron pressure pipe, chemicals,
resin coated sand and patterns and tooling. Prior year results
were adversely affected by the impact of charges resulting from
the previously mentioned Jim Walter Resources mining operations
workforce reduction and idle plant costs associated with the
wildcat strikes by the UMWA.
Selling, general and administrative expenses of $124.6
million were 9.4% of net sales and revenues in 1993 as compared
to $129.4 million and 9.5% in 1992. Expenses in the prior year
were adversely impacted by legal and settlement costs associated
with a lawsuit filed by the City of Atlanta.
As previously mentioned, the Company adopted FAS 106 in the
fourth quarter of 1993. Upon adoption, the Company elected to
record the transition obligation of $166.4 million pre-tax
($104.6 million after tax) as a one time charge against earnings
rather than amortize it over a longer period. The annual accrual
under the new accounting method amounts to $23.5 million. See
Note 12 of the Notes to Financial Statements.
Interest and amortization of debt discount and expense
decreased $5.5 million. The decrease is the result of lower
outstanding debt balances on secured obligations (see Notes 2, 4
and 6 of Notes o Financial Statements) and lower interest rates,
partially offset by greater amortization of debt discount and
expense. Interest in the amount of $560.6 million ($163.7
million in the current year) on unsecured obligations has not
been accrued in the consolidated financial statements since the
date of the filing of petitions for reorganization. This amount
is based on the balances of the unsecured debt obligations and
their interest rates as of December 27, 1989 and does not
consider fluctuations in the level of short term debt and
interest rates and the issuance of commercial paper that would
have occurred to meet the working capital requirements of the
Homebuilding and Related Financing Group (see Notes 2, 4 and 6 of
Notes to Financial Statements). Such interest rates do not
presently govern the respective rights of the Company, its
subsidiaries and the various lenders. Instead the rights of the
parties will be determined in connection with the Reorganization
Proceedings.
The net income for 1993 and 1992 reflects all of the
previously mentioned factors as well as the impact of a slightly
lower effective income tax rate (see Note 7 of Notes to Financial
Statements) and slightly higher interest income from Chapter 11
proceedings, partially offset by a $4.6 million increase in
Chapter 11 costs.
YEARS ENDED MAY 31, 1992 AND 1991
Net sales and revenues for they ear ended May 31, 1992
increased $40.2 million, or 3.0%. A 4.8% increase in volume was
partially offset by a 1.8% decrease in price and/or product mix.
The increase in net sales and revenues resulted from improved
sales and revenues in the Homebuilding and Related Financing,
Building Materials, Industrial Products and Water and Waste Water
Transmission Products Groups, partially offset by lower sales in
the Natural Resources Group and lower Corporate revenues
(basically lower interest income from Chapter 11 proceedings).
There is no identifiable reason for the increase in volume of the
many different product lines of the Company's subsidiaries other
than improved activity in the markets for these products.
Homebuilding and Related Financing Group net sales and
revenues were $19.9 million, or 5.1%, greater than 1991. The
improved performance includes a 3.6% increase in the average
price per home sold, from $33,400 in 1991 to $34,600 in 1992 and
a 1.5% increase in the number of homes sold, from 5,229 units in
1991 to 5,305 units in 1992. The increase in average selling
price in 1992 is primarily attributable to an improved sales mix
resulting rom the sale of larger sized homes. Jim Walter Homes'
backlog at May 31, 1992 was 1,637 units compared to 1,588 units
at May 31, 1991. Time charge income (revenues received from Mid-
State's mortgage portfolio) increased from $180.3 million in 1991
to $195.0 million in 1992. The increase in time charge income is
attributable to the continued growth of the mortgage portfolio
and to new mortgages having a higher yield than the older
mortgages paying out. The Group's operating income of $82.7
million exceeded the prior year by $15.7 million. This
improvement reflects the increases in average selling price and
number of homes sold, the higher time charge income and lower
interest expense in 1992 ($137.0 million) compared to that
incurred in 1991 ($140.6 million), partially offset by reduced
gross profit margins (due principally to the sale of larger
sized, but lower margin Regency homes and increased lumber
prices).
Building Materials Group sales and revenues were $2.9
million, or 6.6%, ahead of the prior year. The increase resulted
from improved window components sales (increased volume,
partially offset by lower selling prices) and greater foundry
products sales volume. Operating income of $2.3 million was $1.2
million grater than the prior year reflecting the increased
sales, improved efficiencies in the metal building and foundry
business due to the increased sales volume and reduced aluminum
costs, a major raw material used in the window components
business.
Industrial Products Group sales and revenues were $12.0
million, or 7.8%, greater than the prior year. The increase was
the result of higher sales volumes of aluminum foil and coil
products, furnace and foundry coke, mineral wool, chemicals,
resin-coated sand and tooling, partially offset by lower selling
prices for aluminum foil and coil and furnace coke. Operating
income of $11.2 million exceeded the prior year by $2.3 million.
The improved performance resulted from the increased volume and
increased operating margins for mineral wool and chemicals,
partially offset by lower margins for aluminum foil and coil,
furnace coke, resin-coated sand and tooling. Fiscal 1991 results
were adversely impacted by reduced operating efficiencies at the
charleston, South Carolina aluminum rolling mill due to roof
failures over the melting furnaces which were a delayed effect of
Hurricane Hugo in September 1989; a 102 day strike at the Sloss
Industries manufacturing facilities in Birmingham, Alabama,
during which period salaried personnel operated the facilities;
and an abnormal $1.6 million bad debt expense in the aluminum
operation.
Water and Waste Water Transmission Products Group sales and
revenues were $18.9 million, or 6.2%, ahead of the prior year,
due to improved sales volumes, partially offset by slightly lower
pricing. Operating income of $24.5 million was level with the
prior year. Increased sales volumes and lower scrap costs, a
major raw material component, were offset by the lower selling
prices and higher selling, general and administrative expenses
due principally to legal and settlement costs associated with a
lawsuit filed by the City of Atlanta.
Natural Resources Group sales and revenues were $4.6
million, or 1.1% below the prior year. The decrease was the
result of lower selling prices for coal and methane gas and a
decrease in outside coal royalty income, partially offset by
greater coal shipments and increased methane gas sales volume. A
total of 9.18 million tons of coal was sold in 1992 versus 8.89
million tons in 1991, a 3.3% increase. The average price per ton
of coal sold decreased 2.8%, from $43.99 in 1991 to $42.76 in
1992, due to coal shipped to Alabama Power Company in fiscal 1992
under a separate sort-term contract and to lower prices to the
Japanese and other export customers. Shipments in the prior year
were adversely affected by reduced availability from Blue Creek
Mine No. 5 ("Mine No. 5"). Mine No. 5 was shut down for a
substantial portion of the period from July 9, 1990 through
September 16, 1990 as a result of safety concerns arising from
spontaneous combustion heatings which were a result of pyritic
sulfur concentrations occurring in the coal seam in the southern
part of the mine being exposed to air by the mining process. The
exposure of the sulfur deposits and its reaction with oxygen
contained in the ventilation air currents caused the heatings to
occur. Throughout this period, Jim Walter Resources was engaged
in discussions with the Mine Safety and Health Administration
("MSHA") regarding a new ventilating arrangement, designed to
reduce the contact between oxygen and sulfur, for the long wall
faces at Mine No. 5. Although MSHA approved the resumption of
operations at the mine on September 15, 1990, providing for a
modified conventional ventilation system, productivity was poor
and costs were therefore high. In February 1991, Mine No. 5's
one longwall unit was moved from the southern part of the mine to
a longwall coal panel in the northern area and productivity
improved. The southwestern area of the mine was subsequently
abandoned and sealed off as efforts to design a ventilation
arrangement acceptable to MSHA which properly controlled the
spontaneous combustion heatings and provided acceptable
productivity and costs of operations were not successful. The
Group's operating income of $16.0 million was $45.1 million below
the prior year. The lower performance reflects the decrease in
coal and methane gas selling prices, reduced outside coal royalty
income, lower productivity which resulted in higher costs per ton
of coal produced, severance, vacation pay and ongoing medical
benefits associated with the workforce reduction described in the
following paragraph ($6.2 million), accelerated depreciation on
the remaining assets at a previously closed small coal mine ($5.6
million) and slightly higher idle plant costs associated with the
three week shutdown of Mine No. 4 due to an accident which
damaged the production hoist ($4.4 million) and wildcat strikes
by the UMWA ($2.4 million) in 1992 versus the previously
mentioned Mine No. 5 problem in 1991 ($6.5 million), partially
offset by the improved coal and methane gas sales volumes.
On April 10, 1992, Jim Walter Resources announced that it
was reducing its workforce by approximately 720 hourly and
salaried employees (approximately 25%) in a major cost reduction
move to increase mine productivity and strengthen is
competitiveness in worldwide coal markets. The cutback,
effective April 13, 1992, applied to all four mines as well as
above ground support functions.
Cost of sales, exclusive of depreciation, of $891.9 million
was 78.3% of net sales in 1992 versus $826.5 million and 75.3% in
1991. The cost of sales percentage increase was primarily the
result of lower margins on coal, homes, aluminum foil and coil,
furnace coke, resin coated sand and tooling, combined with the
impact of charges resulting from the previously mentioned Jim
Walter Resources mining operations workforce cutback, and higher
idle plant costs associated with the Mine No. 4 Production hoist
problem and the UMWA wildcat strikes in 1992 versus the Mine No.
5 spontaneous combustion heatings problem in 1991. These
increases were partially offset by improved margins for window
components, metal building and foundry products, mineral wool and
chemicals.
Selling, general and administrative expenses of $129.4
million were 9.5% of net sales and revenues in 1992 versus $122.9
million and 9.3% in 1991. Expenses in 1992 were adversely
impacted by legal and settlement costs associated with a lawsuit
filed by the City of Atlanta.
Interest and amortization of debt discount and expense
decreased $32.5 million. The decrease is the result of a
reduction in the amounts outstanding under the Mid-State credit
facility and the Mortgage-Backed Notes (see Notes 4 and 6 of
Notes to Financial Statements) and lower amortization of debt
discount and expense. Interest in the amount of $396.9 million
($163.7 million in 1992) on unsecured debt obligations has not
been accrued in the consolidated financial statement since the
date of the filing of petitions for reorganization. This amount
is based on the balances of the unsecured debt obligations and
their interest rates as of December 27, 1989 and does not
consider fluctuations in the level of short-term debt and
interest rates and the issuance of commercial paper that would
have occurred to meet the working capital requirements of the
Homebuilding and Related Financing Group (see Notes 2, 4 and 6 of
Notes to Financial Statements). Such interest rates do not
necessarily presently govern the respective rights of the
Company, its subsidiaries and the various lenders. Instead, the
rights of the parties will be determined in connection with the
Reorganization Proceedings.
The net income for 1992 and 1991 reflects all of the
previously mentioned factors as well as the impact of a lower
effective income tax rate (see Note 7 of Notes to Financial
Statements) and the effect of discontinued operations (in 1991)
explained in Note 3 of Notes to Financial Statements, partially
offset by decreased interest income from Chapter 11 proceedings
($8.9 million) due to lower funds available for investment and
lower interest rates.
Years ended May 31, 1991 and 1990
Net sales and revenues for the year ended May 31, 1991
decreased #$49.9 million, or 3.6%, from the prior year. A 5.6%
decrease in volume was partially offset by a 2.0% increase in
price and/or product mix. The decrease in volume of the many
different product lines of the Company's subsidiaries principally
resulted from adverse economic and market conditions. The
decrease in net sales and revenues was the result of lower sales
in the Building Materials, Industrial Products, Water and Waste
Water Transmission Products and Natural Resources Group,
partially offset by an increase in sales and revenues in the
Homebuilding and Related Financing Group.
Building Materials Group sales and revenues were $1.6
million, or 3.4%, below the prior year. This decrease
principally resulted from lower sales volumes of window
components and metal building products due to reduced levels of
residential construction. Operating income decreased $800,000 to
$1.1 million, reflecting the lower sales volumes and reduced
operating efficiencies in the metal and foundry products business
due to the lower sales volume, partially offset by reduced
aluminum costs, a major raw material in the window components
business.
Industrial Products Group sales and revenues were $3.4
million, or 2.2%, below the prior year. The decrease resulted
from lower sales volumes of furnace and foundry coke, mineral
wool and aluminum coil (the latter two as a result of reduced
construction) coupled with reduced selling prices for furnace
coke and aluminum foil and coil, partially offset by improved
aluminum foil sales volume. The reduced sales volumes and prices
resulted from highly competitive market conditions caused by the
adverse economic environment. Operating income of $8.9 million
was $12.5 million below the prior year. Margin deterioration,
including the effect of the lower selling prices, occurred in
almost all product lines but was particularly acute in furnace
coke and aluminum foil and coil. Reduced operating efficiencies
at the Charleston, South Carolina aluminum rolling mill due to
roof failures over the melting furnaces also contributed to the
lower profitability. The roof failures were a delayed effect of
the rapid cool down of the furnaces during Hurricane Hugo in
September 1989. Repairs to the furnaces were completed in
November 1990. In December 1990, the hourly workers at the Sloss
Industries manufacturing facilities in Birmingham, Alabama went
on strike. Settlement was reached in March 1991. During the 102
day strike period, salaried personnel operated the facilities.
In addition, there was an abnormal $1.6 million bad debt in the
aluminum operation in fiscal 1991. Fiscal 1990 results were
adversely affected by a 37 day strike at the resin-coated sand
and tooling operation and the effects of Hurricane Hugo on
production costs and shipments of aluminum coil and foil. In
November 1989, the Burlington, New Jersey industrial castings
plant was closed due to continuing poor demand and highly
competitive markets for its centrifugally cast metal products;
its operating results in 1991 and 1990 and costs of close down in
1990 are included in discontinued operations.
Water and Waste Water Transmission Products Group sales and
revenues were $29.4 million, or 8.8%, below the prior year. This
decrease was the result of lower sales volume due to reduced
construction activity and rehabilitation work, principally in the
Northeast marketing region, partially offset by slightly higher
pricing. Operating income of $24.5 million was $2.4 million
below fiscal 1990. The effect of lower sales volumes on this
highly capital intensive product group was the primary reason for
the lower profits, but was partially offset by lower raw material
prices, especially scrap, a major raw material component, and
improved selling prices. Fiscal 1990 was adversely impacted by
strikes of over 50 days each at two of the Group's four pipe
plants. The soil pipe and rubber gaskets operations of the Group
were closed down at the end of fiscal 1990 and certain of their
assets were sold in July 1990; their operating losses in 1991 and
1990 and the loss on sale and costs of close down in 1990 are
included in discontinued operations.
Natural Resources Group sales and revenues were $31.7
million, or 7.0%, below the prior year. The decrease was the
result of lower coal shipments, reduced methane gas sales volume
and a $4.5 million gain from the lease of certain rights to
develop coalbed methane gas in 1990, partially offset by the
higher average selling prices for coal and methane gas and
increased outside coal royalty income. A total of 8.89 million
tons of coal was sold in 1991 versus 9.96 million tons in 1990, a
10.7% decrease. The average price per ton of coal sold increased
4.1%, from $42.26 in 1990 to $43.99 in 1991. The lower shipments
of coal resulted from a reduction in sales of purchased coal,
reduced availability from Mine No. 5 resulting from the
aforementioned shutdown due to adverse geological conditions and
to a temporary rescheduling of shipments under certain export
contracts. The Group's operating income of $61.1 million was
$20.0 million, or 24.7%, below the prior year reflecting the
lower sales volumes, geological and recovery problems which
resulted in lower productivity and higher costs per ton of coal
produced, especially at Mine No. 5, idle plant costs of $6.5
million due to the previously mentioned shut down of Mine No. 5
and the prior year $4.5 million gain from the lease of certain
rights to develop coalbed methane gas. Fiscal 1990 was adversely
affected by idle plant costs of $8.7 million resulting from
wildcat strikes by the UMWA in June and July 1989.
Homebuilding and Related Financing Group sales and revenues
exceeded the prior year by $14.0 million, or 3.7%. The improved
performance includes a 6.0% increase in the average selling price
per home sold from $31,500 in 1990 to $33,400 in 1991 and a
slight increase in the number of homes sold, from 5,213 units in
1990 to 5,229 units in 1991. The increase in average selling
price in 1991 is primarily attributable to an improved sales mix
resulting from the sale of larger sized homes. Jim Walter Homes'
backlog at May 31, 1991 was 1,588 units compared to 1,704 units
at May 31, 1990. Time charge income (revenues received from Mid-
State's instalment note portfolio) increased from $170.7 million
in 1990 to $180.3 million in 1991. The increase in time charge
income is attributable to the continued growth of the mortgage
portfolio and to new mortgages having a higher yield than the
older mortgages paying out. The Group's operating income, of
$67.0 million exceeded the prior year by $16.2 million, or 31.9%.
This improvement reflects the increases in selling prices and
number of homes sold, the higher time charge income, improved
homebuilding gross profits margins (due mainly to a reduction in
lumber prices) and lower interest expense in 1991 ($140.6
million) compared to that incurred in 1990 ($147.7 million).
Cost of sales, exclusive of depreciation, of $826.5 million
was 75.3% of net sales in 1991 versus $858.3 million and 74.3% in
1990. The cost of sales percentage increase was primarily the
result of lower margins on coal (where productivity decreases and
resulting cost increases more than offset selling price
increases), furnace and foundry coke, mineral wool, metal
building and foundry products and aluminum foil and coil and the
effect of the strike at Sloss Industries, partially offset by
higher margins on homes in 1991, lower idle plant costs
associated with the Mine No. 5 problem in 1991 versus the UMWA
wildcat strikes in 1990, the effect of the strikes at two of the
pressure pipe plants and the resin-coated sand and tooling
operation in 1990 and the effect of Hurricane Hugo on aluminum
operations in 1990.
Selling, general and administrative expenses of $122.9
million were 9.3% of net sales and revenues in 1991 versus $130.2
million and 9.5% in 1990. Expenses in the prior year were
adversely impacted by legal costs of $7.5 million associated with
asbestos-related litigation described in Note 11 of Notes to
Financial Statements and costs related to a proposed refinancing
program.
Interest and amortization of debt discount and expense
decreased $111.5 million from the prior year. Interest on
unsecured obligations has not been accrued since the date of the
filings of petition for reorganization. Approximately $163.7
million of additional interest expense would have been accrued in
1991 versus approximately $69.6 million for the prior year if the
Debtors had not been subject to the Reorganization Proceedings.
These amounts are based on balances of the unsecured debt
obligations and their interest rates as of December 27, 1989 and
do not consider fluctuations in the level of short-term debt and
interest rates and the issuance of commercial paper that would
have occurred to meet the working capital requirements of the
Homebuilding and Related Financing Group. Interest expense also
decreased due to a reduction in amounts outstanding under the
Mid-State credit facility and the Mortgage-Backed Notes. See
Notes 2, 4 and 6 of Notes to Financial Statements.
The net income for 1991 and the net loss for 1990 reflects
all of the previously mentioned factors as well as the impact of
income tax rate differences, decreased Chapter 11 costs and
substantially decreased losses from discontinued operations.
Financial Condition
On December 27, 1989, the Debtors each filed a voluntary
petition for reorganization under the Bankruptcy Code in the
United States Bankruptcy Court (the "Bankruptcy Court") for the
Middle District of Florida, Tampa Division. On December 3, 1990,
one additional small subsidiary filed a voluntary petition for
reorganization under the Bankruptcy Code. Tow other small
subsidiaries have not filed petitions for reorganization.
Pursuant to the applicable provisions of the Bankruptcy Code, all
pending legal proceedings and collection of outstanding claims
against the Debtors were automatically stayed upon filing of the
Chapter 11 petitions while the Debtors continue business
operations as debtors in possession (see Note 2 of Notes to
Financial Statements).
The Debtors' Chapter 11 petitions resulted from a sequence
of events stemming primarily from an inability of the Company's
interest reset advisors to reset interest rates on approximately
$624 million of outstanding Senior Extendible Reset Notes and
Senior Subordinated Extendible Reset Notes (collectively, the
"Old Notes") on which interest rates were scheduled to be reset
effective January 2, 1990. The Company believes that the reset
advisors' inability to reset the interest rates was primarily
attributable to pending asbestos-related litigation which
prevented the Debtors from completing a refinancing or from
selling assets to reduce their debt which, together with turmoil
in the high yield bond markets, depressed the bid value of such
notes. This created the potential for a sharply higher reset
rate that, in turn, would have caused interest expense to rise
above the Debtors' ability to pay. To mitigate these factors,
the Company, on November 7, 1989, offered to exchange the Old
Notes for a combination of cash and new Senior Extendible Reset
Notes and new Senior Subordinated Reset Notes (collectively, the
"New Notes").
The interest reset advisors, Drexel Burnham and Merrill
Lynch, advised the Company in early December 1989 that, in their
opinion, there was no interest rate at which the Old Notes could
be reset to have a bid value of 101% as called for in the terms
of the Old Notes. Trustees for the Old Notes, citing the
inability of the interest reset advisors to establish a new rate,
subsequently advised the Company t hat the failure to reset the
Old Notes not tendered in the exchange offers would likely
constitute non-compliance under the indentures for the Old Notes.
Later, the exchange offer was supplemented to strengthen certain
covenants of the New Notes and, in addition, an offer of 10%
equity in the Company was made to the holders of old Senior
Subordinated Extendible Reset Notes.
The Company received less than the percentage of each of the
outstanding classes of Old Notes required under terms of the
exchange offers, which expired at 7:00 p.m. New York City time on
December 27, 1989. As a result, the exchange offers were
terminated and all tendered Old Notes were returned.
As a result of the Reorganization Proceedings, the maturity
of all unpaid principal of, and interest on, the senior and
subordinated indebtedness of the Debtors became immediately due
and payable in accordance with the terms of the instruments
governing such indebtedness. The amount of indebtedness that was
accelerated on the petition date aggregated approximately $1.7
billion. The Debtors are currently accruing, but not paying,
interest on senior secured indebtedness and not accruing interest
on unsecured indebtedness. At May 31, 1993, interest in the
amount of $560.6 million ($163.7 million in the current fiscal
year) had not been accrued on unsecured obligations (including
$252.3 million in respect of Senior Subordinated Extendible Reset
Notes which, prior to the petition date, was payable in
additional Senior Subordinated Extendible Reset Notes). These
amounts are abased on the balances of the unsecured debt
obligations and their interest rates as of the petition date.
Such interest rates do not necessarily govern the respective
rights of the Company, its subsidiaries and the various lenders.
Instead, the rights of the parties will be determined in
connection with the Reorganization Proceedings.
While the Reorganization Proceedings are pending, the
Debtors are prohibited from making any payments of prepetition
obligations owing as of the petition date, except as permitted by
the Bankruptcy Court. Furthermore, the Debtors will not be able
to borrow additional funds under any of their prepetition credit
arrangements.
Since the beginning of the Reorganization Proceedings
certain of the Debtors have consummated an agreement, as amended,
with two commercial banks with respect to a $25 million letter of
credit facility. Pursuant to the terms of such "New Letter of
Credit Agreement", upon issuance of a letter of credit, the
applicable Debtors will deposit with the issuing bank an amount
of cash equal to the stated amount of the letter of credit. At
May 31, 1993, $4,904,000 of letters of credit were outstanding
under this agreement. Since the beginning of the Reorganization
Proceedings certain of the Debtors have also consummated an
agreement with the lenders pursuant to which the lenders agree to
renew letters of credit issued under the Working Capital
Agreement that were outstanding at the time of filing of the
petitions for reorganization (the "Replacement Letter of
Agreement"). To the extent that the letters of credit under the
Replacement Letter of Agreement ($17,549,000 outstanding at May
31, 1993) are renewed during the Reorganization Proceedings,
these Debtors have agreed to reimburse the issuing bank for any
draws under such letters of credit, which obligation shall be
entitled to an administrative expense claim under the Bankruptcy
Code. In addition, the obligations of the Debtors under such
Replacement Letter of Credit Agreement shall continue to be
secured by the collateral which secures the Debtors' obligations
under the Bank Credit Agreement and the Working Capital
Agreement. The Bankruptcy Court approved the Debtors' entering
into the New Letter of Credit Agreement in May 1990. The New
Letter of Credit Agreement currently terminates on May 27, 1994.
See Note 6 of Notes to Financial Statements.
On June 15, 1992, the Debtors filed with the Bankruptcy
Court and presented to the creditor constituencies a joint plan
of reorganization and related disclosure statement. The Debtors'
joint plan of reorganization provides for payment in full of all
allowed claims using cash, issuance of new indebtedness, issuance
of common stock equal to approximately a 20% ownership interest,
or a combination thereof. Under the plan certain claims are
impaired; therefore the plan is subject to acceptance by vote of
the holders of each such impaired claims. Confirmation of the
plan is subject to the satisfaction of various conditions
including dismissal with prejudice of any and all claims and
actions against the Debtors or any assets of the Debtors relating
to or in connection with the asbestos-related litigation (see
Note 11 of Notes to Financial Statements). The Debtors are
continuing to meet and negotiate possible changes to the terms of
the joint plan of reorganization with the various creditor
constituencies. The Company's objectives in developing the joint
plan of reorganization were based upon the maximization of value
for all creditors and shareholders which will result in a viable
enterprise with a capital structure that allows for cash flows
after reorganization sufficient to meet creditors' obligations
(as confirmed by such joint plan or plans of reorganization) and
to fund future capital expenditures and growth of operations.
There can be no assurance, however, that the liabilities of the
Debtors as of the date of confirmation of a plan or plans of
reorganization will not be found in the Reorganization
Proceedings to exceed the fair value of their assets at such
date. This could result in claims being paid at less than 100%
of their face value and the equity of the Company's common
stockholders being diluted or canceled. See Note 2 of Notes to
Financial Statements.
Subsequent to the acquisition of Original Jim Walter, the
Company undertook a program of corporate reorganizations and
asset dispositions pursuant to which the Company, prior to the
petition date, restructed and/or disposed of certain of the
businesses of Original Jim Walter. Included as part of this
program were the complete liquidations of Old Walter Industries,
Jim Walter Resources and United Land Corporation ("United Land")
as set forth in the Plan of Complete Liquidation (the
"Liquidation Plans") adopted by their respective shareholders in
1988.
As a result of the Reorganization Proceedings, the
implementation of each of the Liquidation Plans required approval
of the Bankruptcy Court. The Company, for and on behalf of
itself and the others Debtors filed a motion in the Bankruptcy
Court for an order authorizing the completion of the previously
adopted Liquidation Plans. Such motion included a request that
the rights of the creditors of the Debtors for purposes of
determining the distributions to which they may be entitled under
a plan or plans of reorganization (or in any liquidation
proceeding) be determined without regard to subsequent actions
that might be taken to complete such Liquidation Plans. At
hearings held on September 5, 1990 and October 9, 1990, the
Bankruptcy Court authorized the Debtors to complete the
Liquidation Plans and a definitive order granting such relief was
issued by the Bankruptcy Court on November 5, 1990.
In December 1990, Old Walter Industries, Jim Walter
Resources and United Land filed a motion with the Bankruptcy
Court to assign and assume certain executory contracts in
connection with t he completion of the Liquidation Plans. One
such executory contract was a material coal sales agreement
entered into in 1979 (for a term of 20 years) between Alabama
Power Company ("APCO") and Jim Walter Resources and Amendment No.
6 thereto, which was signed in 1988 and which provides for
delivery of up to 3,000,000 tons of coal annually. APCO filed an
objection the assignment and assumption of such contract alleging
that Jim Walter Resources was in default by virtue of its failure
to maintain a $250 million shareholders equity and a current
asset to current liability ratio of at least 1:1, as required by
Amendment No. 6. APCO also asserted that certification
requirements under such Amendment No. 6 requires a report from
Jim Walter Resources' auditors, and that the report received was
"not without qualification because it was subject to significant
uncertainties especially in connection with the Reorganization
Proceedings and massive amounts of debt which are in default and
on which Jim Walter Resources is jointly and severally liable."
APCO asserted that these liabilities, as well as other
significant uncertainties, created a default under such
agreement.
APCO also asserted that the price paid by APCO under such
agreement is in excess of the short-term price for coal and is
directly connected to the long-term commitment of capital, the
reliability of a supply of coal under such agreement, and the
creditworthiness of Jim Walter Resources and, thus, constitutes a
financial accommodation under Section 365(c)(2) of the Bankruptcy
Code. This section prohibits the assumption or assignment of an
executory contract "if such contract is a contract to make a loan
or extend other debt financing or financial accommodations to or
for the benefit of the debtor. . . ."
A final hearing was held on February 13, 1991 at which time
testimony was taken and argument of counsel was presented to the
Bankruptcy Court. At the conclusion of the proceedings, the
Bankruptcy Code orally ruled that the financial condition of Jim
Walter Resources did not constitute a default under the
applicable provisions of Section 365 of the Bankruptcy Code and
that the assignee had demonstrated adequate assurances of its
current and future ability to perform the executory contract, and
that such executory contract did not constitute an agreement to
make a loan or to extend debt financing. The Bankruptcy Court
further indicated that it was not prepared to make a final
determination at that time that the contract did not constitute a
financial accommodation under Section 365(c)(2) of the Bankruptcy
Code. Subsequently, on March 4, 1991, the Bankruptcy Court
entered its order allowing the assumption and assignment of such
agreement, following which an amended order was entered on March
13, 1991 ex parte on the Court's own motion for purposes of
reconsidering the March 4, 1991 order, which left open the
question as to whether or not such agreement was in fact a
contract for financial accommodation and thus within the
exceptive provisions of Section 365(c)(2) of the Bankruptcy Code
which renders such contracts nonassumable. Upon such
reconsideration, the Bankruptcy Court found it unnecessary to
hold any additional hearings on the remaining issues and
concluded that the contract was not within the exceptive
provisions for assumability, and thus none of the exceptions set
forth in Section 365(c)(2) applied. The Bankruptcy Court further
stated that it was also satisfied that based upon the record
established at the final evidentiary hearing, the prospective
assignee, JW Resources, Inc. was financially able to perform the
contract and thus met the requirements of Section 365(b)(1)(c).
On March 14, 1991, APCO filed its Notice of Appeal to the
United States District Court for the Middle District of Florida,
Tampa Division (the "District Court") from the Order Allowing
Assumption and Assignment of Executory Contract with APCO of the
Bankruptcy Court entered on March 4, 1991, and the Amended Order
on Motion to Assume and Assign Executory Contract with APCO
entered on March 13, 1991. Such appeal is presently pending in
the District Court.
The APCO contract provides for a review of billing price and
price components prior to July 1, 1993. Officials of Jim Walter
Resources and APCO have been meeting since 1992 in an attempt to
satisfy the contract provisions, however numerous disputes have
arisen. On June 28, 1993, Jim Walter Resources filed in the
Bankruptcy Court a Complaint for Declaratory Judgment asking the
Bankruptcy Court to interpret certain of the provisions of the
contract relating to the billing price to be in effect July 1,
1993. Although management believes the pricing disputes will
ultimately be resolved favorably, the outcome cannot presently be
determined.
The Jim Walter Resources and United Land Liquidation Plans
were completed on March 26, 1991. On April 1, 1991, Old Walter
Industries distributed the capital stock of Jim Walter Homes and
Mid-State Homes to Homes Holdings Corporation and Mid-State
Holdings Corporation, respectively. Old Walter Industries then
merged into Hillsborough Holdings Corporation. Hillsborough
Holdings Corporation changed its name to Walter Industries, Inc.
in connection with such merger.
Liquidity
The Debtors did not commence the Reorganization Proceedings
as a result of their inability to fund normal operating
liabilities either on a short-term or long-term basis; therefore,
the following discussion of liquidity presents a somewhat unusual
position compared to that normally associated with many
bankruptcy filings.
The Company normally uses its cash flows for these principal
purposes: (1) for working capital requirements (including the
financing of homes sales); (2) for capital expenditures for
business expansion, productivity improvement, cost reduction and
replacements necessary to maintain the business; and (3) to
provide a return to lenders and shareholders.
Working capital is required to fund adequate levels of
inventories and accounts receivable, including instalment notes
receivable arising from the homebuilding business. At May 31,
1993, the Company had free cash balances and short-term
investments of approximately $129 million available for
operations. On July 1, 1992, pursuant to approval by the
Bankruptcy court, instalment notes receivable having a gross
amount of $638,078,000 were sold by Mid-State to Mid-State Trust
III ("Trust III"), a business trust established under the laws of
Delaware, in exchange for the net proceeds from the public
issuance of $249,864,000 of Asset Backed Notes by Trust III which
bear an interest rate of 7-5/8%. Net proceeds were utilized to
repay in full all outstanding indebtedness due under the Mid-
State credit facility with the excess cash to be used to fund the
ongoing operations of the Debtors (see Note 4 of the Notes to
Financial Statements).
At the present time, 97% of all home sales are financed by
Mid-State using cash flow from operations of the Company. The
Company believes that, under present operating conditions,
sufficient cash flow will be generated, together with some use of
free cash balances, to finance home sales, to make planned
capital expenditures and to meet all operating needs, including
any cash deposits to collateralize letters of credit. There are
no material commitments for capital expenditures; however, the
Debtors' business plans for 1994 include capital expenditures of
approximately $94 million. The Reorganization Proceedings have
had no adverse impact on capital expenditures.
Greater cash flow from operations in future years in
dependent upon the Company's ability to grow and to improve its
profitability. The effects that the Reorganization Proceedings
will have on the levels of cash flow generated by future
operations are unknown at this time.
<PAGE>
Exhibit X.B.1
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FEBRRUARY 28, 1994
<PAGE>
[CAPTION]
WALTER INDUSTIES, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
<TABLE>
For the nine months ended
February 28,
-----------------------------
1994 1993
---------- ----------
(Note 7)
(in thousands)
Sales and revenues:
<S> <C> <C>
Net sales $788,800 $786,935
Time charges 176,402 161,165
Miscellaneous 16,443 19,614
Interest income from Chapter 11 proceedings (Note 2) 3,385 3,395
------------ -----------
985,030 972,109
------------ -----------
Costs and expenses:
Cost of sales 623,357 596,717
Depreciation, depletion and amortization 51,471 51,775
Selling, general and administrative 94,682 95,258
Postretirement health benefits (Note 7) 19,189 17,605
Provision for possible losses 3,593 3,639
Chapter 11 costs (Note 2) 10,870 6,461
Interest and amortization of debt discount and expense
(Interest on unsecured obligations not accrued -
$122,764,000 in 1994 and 1993) (Note 2) 118,129 127,239
Amortization of excess of purchase price
over net assets acquired (Note 1) 29,301 29,530
------------ -----------
950,592 928,224
------------ -----------
Provision for income taxes (Note 8):
Current (39,382) (43,272)
Deferred 14,010 21,005
------------ -----------
Income before cumulative effect of accounting change 9,066 20,618
Cumulative effect of change in accounting principle -
postretirement benefits other than pensions
(net of income tax benefit of $61,823,000) (Note 7) - (104,608)
------------ -----------
Net income (loss) 9,066 (83,990)
Retained earnings (deficit) at beginning of period (441,695) (383,681)
------------ -----------
Retained earnings (deficit) at end of period ($432,629) ($467,671)
============ ===========
</TABLE>
<PAGE>
[CAPTION]
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
February 28,
-----------------------------
1994 1993
---------- ----------
(Note 7)
(in thousands)
ASSETS
<S>
Cash (includes short-term investments <C> <C>
of $157,065,000 and $171,187,000 (Note 3) $196,367 $200,062
Short-term investments, restricted (Note 4) 104,036 102,050
Installment notes receivables (Note 4) 4,196,355 4,161,273
Less - Provision for possible losses (26,477) (26,464)
Unearned time charges (2,798,419) (2,750,195)
Trade receivables, less $8,258,000 and
$7,174,000 provision for possible losses 123,391 118,942
Other notes and accounts receivable 14,823 15,452
Inventories, at lower of cost (first in,
first out or average) or market:
Finished goods 92,259 95,492
Goods in process 26,341 23,834
Raw materials and supplies 49,825 47,686
Houses held for resale 2,186 1,882
Prepaid expenses 14,366 9,066
Property, plant and equipment, at cost 1,099,350 1,048,335
Less - Accumulated depreciation,
depletion and amortization (443,375) (393,753)
Investments 5,690 5,525
Unamortized debt expense 35,100 51,823
Other assets 38,705 37,544
Excess of purchase price over net assets acquired (Note 1) 432,137 471,369
------------- ------------
$3,162,660 $3,219,923
============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION> WALTER INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
February 28,
--------------------
1994 1993
________ ________
(Note 7)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (in thousands)
- ----------------------------------------------
<S> <C> <C>
Bank overdrafts (Note 3) $34,029 $21,435
Accounts payable (Note 2) 51,385 52,006
Accrued expenses (Note 2) 121,000 114,565
Income taxes payable (Notes 2 and 8) 29,163 24,693
Deferred income taxes (Note 8) 71,823 88,641
Long-term senior debt (Notes 2, 4 and 5) 907,504 1,077,694
Accrued postpetition interest on secured obligations (Note 2) 245,462 198,072
Accumulated postretirement health benefits obligation (Note 7) 206,380 184,036
Other long-term liabilities (Note 2) 46,240 47,876
Liabilities subject to Chapter 11 proceedings (Notes 2, 4 and 5) 1,727,345 1,725,014
Stockholders' equity (deficit) (Note 1):
Common stock, $.01 par value per share:
Authorized - 50,000,000 shares
Issued - 31,120,773 shares 311 311
Capital in excess of par value 155,293 155,293
Retained earnings (deficit), per accompanying statement (432,629) (467,671)
Excess of additional pension liability over unrecognized
prior years service cost (1,646) (2,042)
----------- -----------
Total stockholders' equity (deficit) (278,671) (314,109)
----------- -----------
$3,162,660 $3,219,923
----------- -----------
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION> WALTER INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
For the nine months ended
February 28,
-------------------------
1994 1993
________ ________
(Note 7)
OPERATIONS (in thousands)
- ----------
<S> <C> <C>
Net income loss) $9,066 ($83,990)
Chares to income not affecting cash:
Depreciation, depletion and amortization 51,471 51,775
Provision for deferred income taxes (Note 8) (14,010) (21,005)
Accumulated postretirement health benefits obligation (Note 7) 16,475 184,036
Adjustment to deferred taxes for accounting change (Note 7) - (61,823)
Provision for other long-term liabilities (202) (325)
Amortization of excess of purchase price
over net assets acquired (Note 1) 29,301 29,530
Amortization of debt discount and expense 13,514 14,444
105,615 112,642
Decrease (increase) in:
Short-term investments, restricted (note 4) 1,584 4,904
Installment notes receivable, net 15,400 (21,362)
Trade and other receivable, net 13,346 18,595
Inventories (3,972) (1,628)
Prepaid expenses (6,464) (928)
Increase (decrease) in:
Bank overdrafts (Note 3) 17,108 (6,244)
Accounts payable (1,311) (2,382)
Accrued expenses 4,762 (3,355)
Income taxes payable (Note 8) 10,028 14,669
Accrued postpetition interest on secured obligations 35,263 20,478
Liabilities subject to Chapter 11 proceedings (Note 2):
Accounts payable 1,294 477
Accrued expenses (152) (98)
Cash flows from operations 192,501 135,768
FINANCING ACTIVITIES
- --------------------
Issuance of long-term senior debt (Note 4) 2,000 249,864
Retirement of long-term senior debt (142,887) (122,285)
Addition to unamortized debt expense (Note 4) - (5,159)
Decrease in liabilities subjec to
Chapter 11 proceedings (Notes 2 and 4):
Long-term senior debt - (121,217)
Cash flows from financing activities (140,887) 1,203
INVESTING ACTIVITIES
- --------------------
Additions to property, plant and equipment, net
of normal retirements (44,406) (41,735)
(Increase) in investments (122) (85)
(Increase) in other assets (1,089) (963)
Cash flows from investing activities (45,617) (42,783)
Net increase in cash and cash equivalents 5,997 94,188
Cash and cash equivalent at beginning of period 190,370 105,874
Cash and cash equivalent at end of period (Note 3) $196,367 $200,062
</TABLE>
<PAGE>
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1994
Note 1 - Organization
Walter Industries, Inc. (formerly Hillsborough Holdings
Corporation) (the "Company") was organized in August 1987 by a
group of Investors led by Kohlberg Kravis Roberts & Co. ("KKR")
for the purpose of acquiring Jim Walter Corporation, a Florida
corporation ("Original Jim Walter") through a tender offer and a
subsequent merger, consummated on January 7, 1988 (the "Merger").
On April 1, 1991, Walter Industries, Inc., a subsidiary of the
Company, merged into the Company thereby completing its
previously adopted plan of reorganization. The Company changed
its name to Walter Industries, Inc. in connection with such
merger. The consolidated financial statements include the
accounts of the Company and all of its subsidiaries. All
significant intercompany balances have been eliminated. The
Company's financial statements reflect the allocation of the
purchase price of Original Jim Walter based upon fair market
value of the assets acquired and liabilities assumed.
Note 2 - Chapter 11 Proceedings
On December 27, 1989, the Company and 31 of its subsidiaries
(together with the subsidiary in the next sentence, the
"Debtors") each filed a voluntary petition for reorganization
under Chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court (the
"Bankruptcy Court") for the Middle District of Florida, Tampa
Division (the "Reorganization Proceedings"). On December 3,
1990, one additional small subsidiary filed a voluntary petition
for reorganization under the Bankruptcy Code. Two other small
subsidiaries have not filed petitions of reorganization.
The consolidated financial statements of the Company have been
prepared on a "going-concern" basis which contemplates the
realization of assets and the liquidation of liabilities in the
ordinary course of business: however, as a result of the Chapter
11 filings, such realization of assets and liquidation of
liabilities are subject to a significant number of uncertainties.
The financial statements include adjustments and
reclassifications that have been made to reflect the liabilities
which have been deferred under the Chapter 11 filings. Interest
on unsecured obligations in the amount of $683,385,000 at
February 28, 1994 and $519,700,000 at February 28, 1993
($122,764,000 for the nine months ended February 28, 1994 and
1993) has not been accrued in the financial statements since the
date of the filing of petitions for reorganization. These
amounts are based oh the balances of unsecured debt obligations
and their interest rates as of the petition date. Such interest
rates do not necessarily presently govern the respective rights
of the Company, its subsidiaries and the various lenders.
Instead, the rights of the parties will be determined in
connection with the Reorganization Proceedings.
As a result of the filing of petitions for reorganization the
maturity of all unpaid principal of, and interest on, the senior
and subordinated indebtedness of the Debtors became immediately
due and payable in accordance with the terms of the instruments
governing such indebtedness. The Debtors will not be able to
borrow additional funds under any of their credit arrangements.
Pursuant to the applicable provisions of the Bankruptcy Code, all
pending legal proceedings against the Debtors were automatically
stayed upon the filing of such petitions.
Under the Chapter 11 filings, a significant portion of claims in
existence at the filing date ("prepetition") are stayed
("deferred") while the Company continues to manage the business.
Additional prepetition claims and liabilities may arise, some of
which may be significant, subsequent to the filing date for
various reasons. To the extent a creditor must file a proof of
claim, such proof must be filed by a date fixed by the Bankruptcy
Court as the last day to file proofs of claim (the "Bar Date").
At a hearing on July 23, 1992, the Bankruptcy Court set a Bar
Date of October 30, 1992 in the Reorganization proceedings for
all claims other than any potential claims related to asbestos
personal injury or property damage. At a hearing on December 16,
1992, the Bankruptcy Court set a second Bar Date of March 1, 1993
in the Reorganization proceedings for new creditors added by
amended schedules filed by certain of the Debtors on November 23,
1992. On August 31, 1993, the Bankruptcy Court set a third Bar
Date of November 30, 1993 for creditors added by amended
schedules flied by the Debtors on July 12, 1993. No provision
has been included in the accompanying financial statements for
any prepetition claims and additional liabilities that may arise
from resolution of any claims filed.
The amount included as liabilities subject to Chapter 11
proceedings reflected on the Company's consolidated balance sheet
consists of the following (in thousands of dollars):
<TABLE>
February 28,
___________________________
1994 1993
____________ __________
<S> <C> <C>
Short-term notes payable $ 78,033 $ 78,033
Accounts payable 64,194 62,566
Accrued expenses 95,847 95,897
Income taxes payable 47,066 47,066
Long-term senior debt (Notes 4 and 5) 416,629 416,629
Long-term subordinated debt 1,025,338 1,024,585
Other long-term liabilities 238 238
__________ __________
$1,727,345 $1,725,014
========== ==========
</TABLE>
As debtors in possession, the Debtors have the right, subject to
Bankruptcy Court approval and certain other limitations, to
assume or reject certain executory contracts, including unexpired
leases. In this context, "assumption" means that the Debtors
agree to perform their obligations and cure certain existing
defaults under the contract or lease, and "rejection" means that
the Debtors are relieved from their obligations to perform
further under the contract or lease and are subject only to a
claim for damages for the breach thereof. Any claim for damages
resulting from the rejection of an executory contract or an
unexpired lease is treated as a general unsecured claim in the
Reorganization proceedings.
Unless the Bankruptcy Court. Upon request of a non-Debtor party
and after notice and a hearing, fixes a date by when the Debtors
must elect to assume or reject an executory contract, the Debtors
may assume or reject such contracts in a plan or plans of
reorganization. With respect to unexpired non-residential real
property leases, including mineral leases and interests. The
Bankruptcy Code provides that a debtor has 60 days after the
commencement of a Chapter 11 case in which to assume or reject
such leases unless the Bankruptcy Court, for cause shown, extends
such 60 day period. Pursuant to an order of the Bankruptcy Court
dated August 31, 1993, the time within which the Debtors must
assume or reject their non-residential real property leases was
extended through and including October 31, 1993. The Debtors
filed a motion to extend, until confirmation of a plan of
reorganization, the time for assumption or rejection of their
non-residential real property leases. On March 4, 1994, the
Bankruptcy Court entered an order approving the Debtors motion.
On February 25, 1991, the Debtors received Bankruptcy Court
approval to assume substantially all of their mineral leases and
interests.
For 120 days after the date of the filing of a voluntary Chapter
11 petition, a debtor has the exclusive right to file a plan of
reorganization with the Bankruptcy Court (the "Exclusivity
Period"). If a debtor files a plan of reorganization during the
120-day Exclusivity Period, no other party may file a plan of
reorganization until 180 days after the date of filing of the
Chapter 11 petition. Until the end of this 180-day period (the
"Acceptance Period") the debtor has the exclusive right to
solicit acceptances of the plan. The Bankruptcy Court may
shorten or extend the 120- and 180-day periods for cause shown.
If a debtor fails to file a plan during the Exclusivity Period
or, if such plan has been filed, fails to obtain acceptance of
such plan from impaired classes of its creditors and equity
security holders during the Acceptance Period, any party in
interest, including a creditor, an equity security holder, a
committee of creditors or equity security holders or an indenture
trustee may file a plan. Additionally, if the Bankruptcy Court
were to appoint a trustee, the Exclusivity Period, if not
previously terminated, would terminate.
The initial Exclusivity Period for each of the Debtors would have
expired on April 26, 1990 and the initial Acceptance Period would
have expired on June 26, 1990. The Debtors filed various motions
to extend the Exclusivity Period which were granted. Pursuant to
an order of the Bankruptcy Court dated April 15, 1992, the
Exclusivity Period expired June 15, 1992 and the Acceptance
Period was to expire on August 14, 1992.
On June 15, 1992, the Debtors filed with the Bankruptcy Court and
presented to the creditor constituencies a joint plan of
reorganization and related disclosure statement prior to the
expiration of the Exclusivity Period. Subsequent to August 1992,
the Debtors were granted various extensions of the Acceptance
Period and adjournments of the hearing for approval of the
disclosure statement dated June 15, 1992, while negotiations
continued with the various creditor constituencies toward a
consensual plan of reorganization. Pursuant to an order of the
Bankruptcy Court dated July 7, 1993, the Bankruptcy Court
extended the Acceptance Period until August 2, 1993, ruling that
no further extensions would be granted beyond August 2, 1993. On
July 14, 1993, the Bankruptcy Court entered an order fixing
January 1, 1994 as the last date when a plan of reorganization
and disclosure statement may be filed by a party in interest and
that all plans of reorganization and disclosure statements filed
by such date would be heard on a date and time to be fixed by
future order of the Bankruptcy Court.
On September 22, 1993, the Debtors filed with the Bankruptcy
Court and presented to the creditor constituencies their first
amended joint plan of reorganization (the "Plan") and first
amended related disclosure statement. The Plan provides for
payment in full of all allowed claims (plus post-petition
interest at varying rates) using cash, issuance of new
indebtedness, issuance of common stock equal to approximately a
46% ownership interest (subject to Debtors' option to substitute
additional debt securities in lieu of common stock presently
proposed to be issued under the Plan), or a combination thereof.
In addition, the Plan provides that holders of subordinated debt
claims will additionally share in a portion of any increase in
the Debtors' unencumbered instalment notes receivable portfolio
after May 31, 1993 through issuance of additional debt
securities.
Such sharing in value is designed to provide compensation to
holders of subordinated debt claims during the delay in
consummation of the Plan required in order to resolve the
asbestos-related litigation. Under the Plan certain claims and
the equity interest in the Company are impaired; therefore the
Plan is subject to acceptance by vote of the holders of each such
class of impaired claims and the holders of the Company's common
stock. Confirmation and consummation of the Plan are subject to
the satisfaction of various conditions including dismissal with
prejudice of any and all claims and actions against the Debtors
or any assets of the Debtors relating to or in connection with
the asbestos-related litigation (see Note 6).
On December 16, 1993, AIF II, L.P., certain affiliates of AIF II,
L.P. and certain accounts managed or controlled by such
affiliates; Lehman Brothers Inc.; the Official Bondholders
Committee and the Official Committee of General Unsecured
Creditors (collectively, the "Bondholders Plan Proponents") filed
a Joint Plan of Reorganization of Debtors Proposed by Certain
Creditor Proponents Dated as of December 16, 1993 (the
"Bondholders Plan"). The Bondholders Plan is predicated upon a
settlement of the Veil Piercing Litigation which contemplates a
distribution of debt and equity securities having a value equal
to $525 million, subject to reduction in the event the
shareholders of the Company support the Bondholders Plan and
execute the Veil Piercing Settlement Agreement (as said term is
defined in the Bondholders Plan) by a date certain, to the Veil
Piercing Claims Trust (as said term is defined in the Bondholders
Plan). The Bondholders Plan is premised upon a negotiated
estimate of the going concern enterprise value of the Debtors on
a consolidated basis in an amount equal to $2.525 billion. The
Bondholders Plan provides for payment in full of all allowed
claims (plus post-petition interest at varying rates with respect
to certain secured and unsecured claims) using cash, issuance of
new indebtedness, issuance of common stock, or a combination
thereof. The Bondholders Plan provides for no recovery by the
shareholders of the Company unless the shareholders support the
Bondholders Plan and execute the Veil Piercing Settlement
Agreement by a date certain. Confirmation and effectiveness of
the Bondholders Plan are subject to the satisfaction of various
conditions including the final resolution and settlement,
approved by final orders, of all asserted and unasserted claims
arising out of or relating to the asbestos-related litigation and
all LBO-Related Issues (as said term is defined in the
Bondholders Plan).
On December 28, 1993, Chemical Bank and Bankers Trust Company, as
agents under the Bank Credit Agreement dated as of September 10,
1987, as amended, and the Working Capital Credit Agreement dated
as of December 29, 1987, as amended, filed the Bank Agents' Joint
Plan of Reorganization Dated as of December 28, 1993 (the "Bank
Agents Plan"). The Bank Agents Plan is predicated upon a
settlement of the asbestos-related litigation which contemplates
a distribution of common stock having a value equal to the
allowed amount of the "Celotex Disputed Claims" (as said term is
defined in the Bank Agents Plan). The Bank Agents Plan
contemplates that the allowed amount of the Celotex Disputed
Claims shall be determined by: (a) agreement between the holders
of such claims and the Bank Agents, (b) a final order of the
Bankruptcy Court or (c) an order of the Bankruptcy Court
estimating the allowed amount of such claims. The Bank Agents
Plan provides for payment in full in cash of all secured allowed
claims (including post-filing date interest at varying rates of
interest) and the distribution of common stock to holders of
unsecured allowed claims (including trade creditors and
subordinated bondholders) in full satisfaction of unsecured
allowed claims (including post-filing date interest at rates to
be agreed to by the Bank Agents or, if no agreement, rates to be
determined by the Bankruptcy Court). The Bank Agents Plan
provides for a recovery by the shareholders of the Company only
to the extent shares of common stock are available after payment
in full of unsecured allowed claims. Effectiveness of the Bank
Agents Plan is subject to various conditions including the
Company's ability to obtain third party financing in an amount
sufficient to enable the Debtors to make the cash payments
required under the Bank Agents Plan and to meet the Debtors'
contemplated working capital and letter of credit needs.
On December 30, 1993, LaSalle National Bank, as the successor
trustee under the indenture dated as of January 1, 1988, as
amended, filed the Series B & C Senior Note Trustee's Joint Plan
of Reorganization of Debtors Dated as of December 30, 1993 (the
"Senior Note Trustee Plan"). While the Senior Note Trustee Plan
is not predicated upon a settlement of the asbestos-related
litigation, the plan provides for the issuance of "New Notes" (as
said term is defined in the Senior Note Trustee Plan) to fund any
settlement which may be approved by the Debtors and the Series B
& C Senior Note Trustee. The Senior Note Trustee Plan is
premised upon an "Equity Value" (as said term is defined in the
Senior Note Trustee Plan) of $783.8 million. The Senior Note
Trustee Plan provides for payment in full in cash of all secured
allowed claims (including post-filing date interest at varying
rates) and payment in full of unsecured allowed claims (including
post-filing date interest at varying rates) by using cash,
issuance of new indebtedness, issuance of common stock (subject
to dilution in the event a settlement of the asbestos-related
litigation is achieved), or a combination thereof. In addition,
the Senior Note Trustee Plan provides that the shareholders of
the Company shall retain their common stock interests, subject to
dilution in the event a settlement of the asbestos-related
litigation is reached. Effectiveness of the Senior Note Trustee
Plan is subject to various conditions which are similar to the
conditions set forth in the Company's Plan.
By order dated February 25, 1994, the Bankruptcy Court (i) fixed
April 20, 1994 as the last date to file any further amendments or
supplements to the Plan, the Bondholders Plan, the Bank Agents
Plan or the Senior Note Trustee Plan, (ii) allowed an additional
party to file, by April 20, 1994, a plan of reorganization and
related disclosure statement, (iii) fixed April 20, 1994 as the
last date for requesting a copy of a plan and disclosure
statement filed by the above noted parties, (iv) fixed May 6,
1994 as the last date for any party in interest to file
objections to the disclosure statements and (v) scheduled a
hearing for May 19, 1994 and continuing, if necessary, through
May 20, 1994 to consider approval of disclosure statements.
The process pursuant to which the Plan or any further amended
plan of reorganization filed by the Debtors, the Bondholders
Plan, the Bank Agents Plan and the Senior Note Trustee Plan as
they may be further amended, or plans filed by other parties in
interest, may be confirmed necessarily will be complex and may be
delayed pending further developments in the asbestos-related
litigation involving the Company (see Note 6). Accordingly, the
timing of such confirmation necessarily cannot be predicted.
The Plan, the Bondholders Plan, the Bank Agents Plan, the Senior
Note Trustee Plan and/or other plans of reorganization will be
sent, along with a disclosure statement approved by the
Bankruptcy Court following a hearing, to all members of classes
of impaired creditors and equity security holders for acceptance
or rejection. In general, the Bankruptcy Code provides that a
claim or interest is impaired under a plan unless such plan
proposes to pay such claim or interest in full or leave it
unaltered. In order to be accepted, at least two-thirds in
amount and a majority in number of holders of allowed claims or
interests in each class that is impaired who actually vote, must
accept the plan. Following acceptance or rejection of any plan
by impaired classes of creditors and equity security holders, the
Bankruptcy Court at a noticed hearing would consider whether to
confirm the plan. Among other things, for confirmation the
Bankruptcy Court at a noticed hearing is required to find that
(i) each holder of a claim or interests in each impaired class of
creditors and equity security holders will, pursuant to the plan,
receive at least as much as the class would have received in a
liquidation under Chapter 7 of the Bankruptcy Code, (ii) each
impaired class of creditors and equity security holders has
accepted the plan by the requisite vote and (iii) confirmation of
the plan is not likely to be followed by the liquidation or need
for further financial reorganization of the debtor or any
successor unless the plan proposes such liquidation or
reorganization.
If any impaired class of creditors or equity security holders
does not accept a plan, and assuming that all of the other
requirements of the Bankruptcy Code are met, the proponent of the
plan may invoke the so-called "cram down" provisions of the
Bankruptcy Code. Under these provisions, the Bankruptcy Court
may confirm a plan notwithstanding the nonacceptance of the plan
by an impaired class of creditors or equity security holders if
certain requirements of the Bankruptcy Code are met. These
requirements may necessitate provision in full for senior classes
of creditors and/or equity security holders before provision for
a junior class could be made.
The Company cannot now predict whether, or at what time, the
Plan, the Bondholders Plan, the Bank Agents Plan, the Senior Note
Trustee Plan or any other plans of reorganization that may be
filed involving the Debtors may be confirmed or the ultimate
terms thereof.
Note 3 - Classification of Cash
The Company's cash management system provides for the
reimbursement of all major bank disbursement accounts on a daily
basis. Checks issued but not yet presented to the banks for
payment are classified as bank overdrafts.
Note 4 - Instalment Notes Receivable and Restricted Investments
The net increase in instalment notes receivable consists of sales
and resales, net of repossessions and provision for possible
losses, of $149,105,000 and $156,648,000 and cash collections on
account and payouts in advance of maturity of $164,505,000 and
$135,286,000 for the nine months ended February 28, 1994 and
1993, respectively.
On April 19, 1988, all of the instalment notes receivable
outstanding at February 29, 1988 were transferred from Mid-State
Homes, Inc. ("Mid-State") to Mid-State Trust II ("Trust II"), a
business trust established under the laws of Delaware, in
exchange for the net proceeds from the issuance by Trust II of
Mortgage-Backed Notes ($696,228,000 outstanding at February 28,
1994, net of $444,000 unamortized discount). Mid-State is the
settlor and sole beneficiary of Trust II. Assets of Trust II,
including the instalment notes receivable, are not available to
satisfy claims of general creditors of the Company and its
subsidiaries. Of the gross amount of instalment notes
receivable at February 28, 1994 of $4,196,355,000 with an
economic balance of $2,068,121,000, such Mid-State Trust II
instalment notes receivable had a gross book value of
$1,707,394,000 and an economic balance of $1,012,668,000.
During 1989, Mid-State entered into a credit agreement with
several commercial which was secured by certain instalment notes
and related security instruments. The filing of the
Reorganization Proceedings was an event of default under this
agreement and Mid-State was no longer able to utilize this
agreement. On July 1, 1992, pursuant to approval by the
Bankruptcy Court, instalment notes receivable having a gross
amount of $638,078,000 were sold by Mid-State to Mid-State Trust
III ("Trust III"), a business trust established under the laws of
Delaware, in exchange for the net proceeds from the public
issuance of $249,864,000 of Asset Backed Notes ($209,058,000
outstanding at February 28, 1994) by Trust III which bear an
interest rate of 7-5/8%. Such Asset Backed Notes are secured by
the instalment notes receivable sold by Mid-State to Trust III.
The Asset Backed Notes are repayable quarterly in an amount equal
to collections on such instalment notes receivable net of payment
of expenses and interest on the Asset Backed Notes. Net proceeds
were utilized to repay in full all outstanding indebtedness due
under the Mid-State credit facility, with the excess cash to be
used to fund the ongoing operations of the Debtors. Mid-State is
the settlor and sole beneficiary of Trust III. Assets of Trust
III, including the instalment notes receivable, are not available
to satisfy claims of general creditors of the Company and its
subsidiaries. Of the gross amount of instalment notes receivable
at February 28, 1994 of $4,196,355,000 such Mid-State Trust III
instalment notes receivable had a gross book value of
$541,472,000 and an economic balance of $263,962,000.
Restricted short-term investments include (i) temporary
investment of reserve funds and collections on instalment notes
receivable owned by Trust II which are available only to pay
expenses of Trust II and principal and interest on the
Mortgage-Backed Notes ($71,343.000), (ii) temporary investment of
reserve funds and collections on instalment notes receivable
owned by Trust III which are only available to pay expenses of
Trust III and principal and interest on the Asset Backed Notes
($12,281,000), (iii) cash securing letters of credit ($3,570,000)
and (iv) miscellaneous other segregated accounts restricted to
specific uses $16,842,000, including $6,221,000 from proceeds of
sale of assets set aside to offer purchase Series B and Series C
Senior Extendible Reset Notes).
Note 5 - Debt
In June 1991, pursuant to an order of the Bankruptcy Court,
$10,704,000 of proceeds from the prepayment of the promissory
note received in connection with the sale of Apache Building
Products Company ("Apache") in 1988, plus $350,000 of interest
earned thereon, held in a segregated escrow account, were applied
as a reduction of principal ($8,249,000 to the Revolving Credit
Agreement and $2,805,000 to the Working Capital Agreement).
Bankers Trust Company and Chemical Bank, as agents for the
various bank lenders under the Revolving Credit Agreement and the
Working Capital Agreement (the "Revolving Credit and Working
Capital Banks"), appealed the Bankruptcy Court's order,
permitting the application of proceeds to the principal of the
indebtedness only, to the United States District Court for the
Middle District of Florida, Tampa Division (the "District
Court"). On April 29, 1992, the District Court reversed the
Bankruptcy Court's order and remanded the case to the Bankruptcy
Court for further proceedings and determinations on the issues
of whether the Revolving Credit and Working Capital Banks are
oversecured creditors, the reasonable, relevant, applicable
interest rate and whether the Debtors will ultimately prove to be
solvent.
During fiscal 1991, pursuant to an order of the Bankruptcy Court,
$7,356,000 of proceeds from the sale of an asset, held as
security for the Revolving Credit Agreement and the Working
Capital Agreement, and setoff of bank accounts were turned over
to the Revolving Credit and Working Capital Banks with
reservation of rights as to application of such payment. The
Company has applied such payment to a reduction of principal
($5,794,000 to the Revolving Credit Agreement and $1,562,000 to
the Working Capital Agreement).
Note 6 - Litigation and Other Matters
The Company has previously discussed, in Note 11 of Notes to
Financial Statements for the year ended May 31, 1993, the
background and status of the Declaratory Judgment Proceeding
which the Company filed on January 2, 1990 in the Bankruptcy
Court against Jim Walter Corporation, The Celotex Corporation
("Celotex") a certain known individuals who had filed suit
against the Company and/or certain of its subsidiaries seeking to
hold them liable for asbestos-related liabilities of Celotex.
On July 14, 1993, the Company, Jim Walter Corporation, Celotex
and the asbestos claimants entered into a stipulation that
modified the previously agreed upon discovery dates in the
Declaratory Judgment Proceeding and set a firm pre-trial schedule
leading to a December 13, 1993 trial date, which the Bankruptcy
Court approved by order dated August 17, 1993.
On July 16, 1993, the asbestos claimants filed a Petition for
Writ of Certiorari with the United States Supreme Court, seeking
review of the decision of the Court of Appeals for the Eleventh
Circuit denying the asbestos claimants' Writ of Mandamus on the
issue of their right to a jury trial on veil piercing issues. On
August 18, 1993, the Company filed its brief in opposition to the
asbestos claimants Petition for Writ of Certiorari. On August
25, 1993, the asbestos claimants filed a reply brief. On October
4, 1993, the United States Supreme Court denied the petition for
certiorari.
On August 12, 1993, the Bankruptcy Court entered an order which
denied the asbestos claimants motions to compel discovery against
one non-party which, in effect, upheld the accountant-client
privilege.
On October 5, 1993, the Company filed a motion in the Bankruptcy
Court which sought to limit the trial on the veil piercing claims
in the Declaratory Judgment Proceeding to six days which was
denied by the Bankruptcy Court at a hearing held November 3,
1993.
On October 18, 1993, the Company, Jim Walter Corporation and the
asbestos claimants filed their designation of testifying experts.
On October 22, 1993, the Company filed a motion seeking to
preclude the testimony of certain of the asbestos claimants
designated experts. On November 16, 1993, the Bankruptcy Court
entered an order that precluded the testimony of three of the
asbestos claimants designated experts and limited the testimony
of two of the other asbestos claimants designated experts.
On October 21, 1993, the Bankruptcy Court entered an order which
directed that, in order to assure the trial in the veil piercing
adversary proceeding not be unduly prolonged, all parties must
file all mutually agreed upon exhibits, premarked and accompanied
by a log identifying each, no later than November 15, 1993. The
parties thereafter entered into a stipulation which extended the
time to file exhibits to December 7, 1993. A hearing to decide
the admissibility of those exhibits in dispute was held November
29, 1993. The Bankruptcy Court ruled on the appropriate
submission of certain grouped documents and limited by date the
admissibility of other exhibits. The Bankruptcy Court scheduled
a hearing for December 6, 1993 to consider any other motions
which have been filed and to consider the admissibility of any
other exhibits not decided at the November 29, 1993 hearing. On
December 13, 1993, the Bankruptcy Court entered an order
disposing of all outstanding motions relating to testimony by
experts.
On October 25, 1993, the asbestos claimants filed certain motions
to compel production of documents and compliance with subpoena
from third parties which are not parties to the adversary
proceeding. At a hearing held November 3, 1993, the Bankruptcy
Court allowed production of certain documents which were withheld
under attorney-client privilege. By order dated November 5,
1993, the Bankruptcy Court denied the asbestos claimants motion
to compel production of certain accountant's workpapers, holding
that the accountant-client privilege was applicable.
On November 24, 1993, the Bankruptcy Court entered an order
denying the asbestos claimants motion to reschedule the pre-trial
conference scheduled for November 29, 1993 and the final
evidentiary hearing scheduled to commence December 13, 1993. On
December 6, 1993, the asbestos claimants filed a renewed motion
for continuance which sought to continue the final evidentiary
hearing until January 1994. On December 8, 1993, the Bankruptcy
Court entered an order denying the renewed motion to reschedule
the final evidentiary hearing. On December 8, 1993, the asbestos
claimants filed an Emergency Petition for Writ of Mandamus in the
District Court which sought to have the District Court enter an
order continuing the final evidentiary hearing. At a hearing
held on December 9, 1993, the District Court denied the asbestos
claimants' Emergency Petition for Writ of Mandamus.
On December 13, 1993, the final evidentiary hearing commenced in
the Bankruptcy Court and concluded on December 17, 1993. Post-
trial briefs were submitted by the Company, Jim Walter
Corporation and the asbestos claimants on March 16, 1994.
The Company has previously discussed, in Note 11 of Notes to
Financial Statements for the year ended May 31, 1993, the
background and status of the citation by the United States
Department of Labor of more than 500 coal mining firms, including
Jim Walter Resources, Inc., for alleged tampering with coal-dust
samples used to monitor compliance with regulations designed to
protect miners from black lung disease. On July 20, 1993, the
administrative law judge entered an order ruling in favor of the
coal mining firms, including Jim Walter Resources, Inc., finding
that the evidence presented was not sufficient to prove the
allegation of tampering. However, the ruling did not vacate the
citations outright, instead staying all but one of the cases
pending a single hearing involving one mine of a different
company than Jim Walter Resources, Inc.
Note 7 - Postretirement Health Benefits
The Company adopted Statement of Financial Accounting Standards
No. 106, "Employers Accounting for Postretirement Benefits Other
Than Pensions" in the fourth quarter of fiscal 1993. Upon
adoption, the Company elected to record the transition obligation
of $166.4 million pre-tax ($104.6 million after tax) as a
one-time charge against earnings, rather than amortize it over a
longer period. This obligation is primarily related to the
health benefits for eligible retirees. As required, the
consolidated financial statements presented herein for the month,
three months and nine months ended February 28, 1993 have been
restated to reflect the retroactive application of the change in
accounting principle.
Note B - Income Taxes
On August 10, 1993, the Revenue Reconciliation Act of 1993 was
signed into law raising the federal corporate income tax rate to
35% from 34%, retroactive to January 1, 1993. The provision for
income taxes includes federal income taxes at the 35% statutory
rate for the month, three months and nine months ended February
28, 1994. In addition, Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" requires that
deferred tax liabilities and assets be adjusted in the period of
enactment for the effect of an enacted change in tax laws or
rates. The Company estimates that such one-time charge is
approximately $2.5 million and such amount is included in the
provision for deferred income taxes for the nine months ended
February 28, 1994.
Note 9 - Summarized Financial Information
The consolidated financial statements presented herein are of the
Company, which is a guarantor of the obligations of the Senior
Note Issuers (the principal operating subsidiaries consisting of
Jim Walter Homes. Inc, ["Jim Walter Homes"], Jim Walter
Resources, Inc. and United States Pipe and Foundry Company ["U.S.
Pipe"]) and the Subordinated Note Issuers (Jim Walter Homes and
U.S. Pipe). Summarized unaudited financial information of the
Senior Note Issuers and the Subordinated Note Issuers is set
forth as follows:
<PAGE>
Note 10 - Segment Information
_____________________________
Information relating to the Company's business segments is set
forth as follows:
<TABLE>
Three months ended Nine months ended
February 28, February 28,
_________________________________ ________________________________
1994 1993 1994 1993
______________ _____________ ______________ _____________
(in thousands)
<S> <C> <C> <C> <C>
Sales and Revenues:
Homebuilding and related financing $99,809 $99,356 $319,898 $311,958
Building materials 10,928 9,987 41,323 37,944
Industrial products 42,934 40,930 128,577 122,533
Water and waste water transmission products 64,625 60,147 245,534 243,302
Natural resources (e) 90,012 94,209 245,717 250,038
Corporate 1,184 1,373 3,981 5,334
______________ ______________ ______________ ______________
Consolidated sales and revenues (a) $309,492 $306,002 $985,030 $971,109
============== ============== =============== ==============
Contributions to Operating Income:
Homebuilding and related financing $24,165 $99,356 $319,898 $311,958
Building materials (330) 9,987 41,323 37,944
Industrial products 3,033 40,930 128,577 122,533
Water and waste water transmission products 1,717 60,147 245,534 243,302
Natural resources 554 12,861 6,928 28,097
______________ ______________ ______________ ______________
29,139 34,278 105,030 112,681
Less - Unallocated corporate interest
and other expense (b) (22,959) (24,025) (70,592) (69,796)
Income taxes (5,323) (4,223) (25,372) (22,267)
______________ ______________ ______________ ______________
Income before cumulative effect of
accounting change (c) $857 $6,030 $9,066 $20,618
============== ============== =============== ==============
Depreciation, Depletion and Amortization:
Homebuilding and related financing $828 $99,356 $319,898 $311,958
Building materials 409 9,987 41,323 37,944
Industrial products 2,260 40,930 128,577 122,533
Water and waste water transmission products 3,835 60,147 245,534 243,302
Natural resources 9,938 12,861 6,928 28,097
Corporate 481 378 1,225 1,124
______________ ______________ ______________ ______________
Total $17,751 $17,587 $51,471 $51,775
============== ============== =============== ==============
Gross Capital Expenditures:
Homebuilding and related financing $895 $1,193 $2,541 $4,386
Building materials 318 122 672 774
Industrial products 2,843 2,569 5,822 5,833
Water and waste water transmission products 3,060 2,428 8,309 8,648
Natural resources 8,829 14,045 27,656 23,406
Corporate 197 202 1,525 792
______________ ______________ ______________ ______________
Total $16,142 $20,559 $46,525 $43,839
============== ============== =============== ==============
</TABLE>
<PAGE>
<TABLE>
Operations Data Senior Note Issuers Subordinated Note Issuers
_______________ _________________________________ ________________________________
($ in thousands) Nine months ended February 28, Nine months ended February 28,
_________________________________ ________________________________
1994 1993 (Note 7) 1994 1993 (Note 7)
______________ _____________ ______________ _____________
<S> <C> <C> <C> <C>
Net sales and revenues $627,161 $634,506 $384,278 $386,170
Cost of sales (exclusive of depreciation,
depletion and amortization) 490,223 471,401 295,788 292,827
Other operating expenses 75,756 (a) 78,862 (a) 58,491 (b) 58,081 (b)
Postretirement health benefits (Note 7) 15,705 14,486 4,721 4,406
Chapter 11 costs 24 59 7 42
Interest and amortization of debt expense 32,107 32,210 21,245 21,445
Amortization of excess purchase price 16,033 16,095 17,339 17,401
______________ ______________ ______________ ______________
(2,687) 21,393 (13,313) (8,032)
Provision for income taxes (Note 8) (6,861) (10,013) (3,066) (3,465)
______________ ______________ _______________ ______________
Income (loss) from operations before
cumulative effect of accounting change (9,548) 11,380 (16,379) (11,497)
Cumulative effect of change in accounting
principle - postretirement health benefits
other than pensions (net of income tax
benefit) (Note 7) - (82,513) - (26,725)
______________ ______________ _______________ ______________
Net loss ($9,584) ($71,133) ($16,379) ($38,222)
============== ============== =============== ==============
</TABLE>
(a) - Net of $24,194 and $21,788 intercompany income,
respectively.
(b) - Net of $6,990 and $6,834 intercompany income, respectively.
<TABLE>
Balance Sheet Data Senior Note Issuers Subordinated Note Issuers
__________________ _________________________________ ________________________________
($ in thousands) February 28, May 31, February 28, May 31,
1994 1993 1994 1993
______________ _____________ ______________ _____________
<S> <C> <C> <C> <C>
Assets
Cash $2,500 $23,753 $2,462 $23,714
Short-term investments, restricted 7,363 8,652 3,922 5,699
Trade and other receivables, net 104,440 114,169 55,178 72,582
Inventories 128,384 128,647 102,373 93,384
Prepaid expenses 10,813 4,921 4,162 3,300
Intercompany receivables 1,892,261 1,723,343 1,417,976 1,264,689
Property, plant and equipment, net 521,502 525,779 167,899 172,962
Unamortized debt expense and other assets 28,365 33,563 19,626 25,671
Excess of purchase price over net
assets acquired 289,640 305,673 313,299 330,568
______________ ______________ ______________ ______________
$2,985,268 $2,868,500 $2,086,827 $1,992,569
============== ============== =============== ==============
Liabilities and Stockholder's Equity (Deficit)
Bank overdrafts $29,325 $13,590 $17,620 $9,758
Accounts payable and accrued expenses 108,468 115,162 54,587 57,694
Income taxes payable (Note 8) 10,667 7,209 6,717 5,036
Deferred income taxes (Note 8) 55,729 63,514 34,500 40,812
Intercompany payables 657,519 578,132 656,279 570,337
Long-term senior debt 2,218 6,264 - -
Accrued postpetition interest on secured obligations 183,899 152,633 125,557 104,665
Accumulated postretirement health benefits
obligation (Note 7) 164,530 150,904 51,145 48,492
Other long-term liabilities 35,809 36,178 6,632 6,949
Liabilities subject to Chapter 11 proceedings 1,733,048 1,731,865 1,445,363 1,444,575
Stockholder's equity (deficit) 4,056 13,049 (311,573) (295,749)
______________ ______________ _______________ ______________
$2,985,268 $2,868,500 $2,086,827 $1,992,569
============== ============== =============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
February 28,
----------------------
1994 1993
-------- --------
(in thousands)
Identifiable Assets:
<S> <C> <C>
Homebuilding and related financing $1,842,590 $1,886,704
Building materials 53,776 55,299
Industrial products 130,210 134,558
Water and waste water transmission products 451,194 479,379
Natural resources 480,739 459,246
Corporate (d) 204,151 204,737
---------- ----------
Total $3,162,660 $3,219,923
---------- ----------
---------- ----------
</TABLE>
<PAGE>
(a) Inter-segment sales (made primarily at prevailing market
prices) are deducted from sales of the selling segment and
are insignificant in amount with the exception of:
- Sales of the Industrial Products Group to the Water and
Waste Water Transmission Products Group of $4,241,000
and $4,234,000 in the three months ended February 28,
1994 and 1993, respectively, and $13,330,000 and
$14,399,000 in the nine months ended February 28, 1994
and 1993, respectively.
- Sales of the Natural Resources Group to the Water and
Industrial Products Group of $1,753,000 and $1,538,000
in the three months ended February 28, 1994 and 1993,
respectively, and $4,518,000 and $5,612,000 in the nine
months ended February 28, 1994 and 1993, respectively.
(b) Excludes interest expense incurred by the Homebuilding and
Related Financing Group of $31,585,000 and $33,642,000 in
the three months ended February 28, 1994 and 1993,
respectively, and $97,519,000 and $101,761,000 in the nine
months ended February 28, 1994 and 1993, respectively.
(c) Includes postretirement health benefits of $6,397,000 and
$5,868,000 in the three months ended February 30, 1993 and
1992, respectively, and $19,189,000 and $17,605,000 in the
nine months ended February 28, 1994 and 1993, respectively.
A breakdown by segment is as follows:
<TABLE>
Three months ended Nine months ended
February 28, February 29,
---------------------- -----------------------
1994 1993 1994 1993
--------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Homebuilding and related financing $542 $498 $1,628 $1,494
Building materials 127 114 378 342
Industrial products 790 705 2,369 2,115
Water and waste water transmission products 1,098 1,035 3,293 3,105
Natural resources 3,670 3,360 11,010 10,080
Corporate 170 156 511 469
--------- --------- --------- ---------
Total $6,397 $5,868 $19,189 $17,605
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<PAGE>
(d) Primarily cash and corporate headquarters buildings and
equipment.
(e) Includes sales of coal of $82,88,000 and $86,593,000 in the
three months ended February 28, 1994 and 1993, respectively,
and $223,054,000 and $228,054,000 and $228,108,000 in the
nine months ended February 28, 1994 and 1993, respectively.
<PAGE>
Note 11 - Subsequent Event
In early April 1994, Jim Walter Resources' Mine No. 5 experienced
spontaneous heating problems similar to those experienced in the
past. The mine is currently shut down while Jim Walter
Resources, the Mine Safety and Health Administration, Alabama
State Mine Inspectors and the United Mine Workers of America
study various alternatives for resolving this problem. It is
possible that the mine will remain shut down or operations
substantially curtailed for several months.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
This discussion should be read in conjunction with the
February 1994 consolidated financial statements and notes thereto
of Walter Industries, Inc. and subsidiaries, particularly Note 10
- - Segment Information which presents sales and operating income
by operating group.
The Company adopted Statement of Financial Accounting
Standards No. 106 "Employers" Accounting for Postretirement
Benefits Other Than Pension" in the fourth quarter of fiscal
1993. As required, financial results for the three months and
nine months ended February 28, 1993, including operating income
referred to in the following discussion, have been restated to
reflect retroactive application of such change in accounting
principle.
Results of Operations
Three months ended February 28, 1994 and 1993
Net sales and revenues for the three months ended February
28, 1994 of $309.5 million increased $3.5 million, or 1.1%, over
the prior year period. The improvement resulted from a 1.0%
increase in volume and a .1% increase in pricing and/or mix. The
increase in net sales and revenues resulted from improved sales
and revenues in the Homebuilding and Related Financing, Building
Materials, Industrial Products and Water and Waste Water
Transmission Products Groups, partially offset by lower sales and
revenues in the Natural Resources Group.
Homebuilding and Related Financing Group sales and revenues
of $99.8 million were $453,000, or less than 1%, greater than the
1993 period. This performance reflects a 2.1% increase in the
average selling price per home sold, from $37,500 in 1993 to
$38,300 in 1994, which was more than offset by a 15.3% decrease
in the number of homes sold, from 1,087 units in 1993 to 921
units in 1994. The higher average selling price in 1994 reflects
a price increase instituted April 1, 1993 to compensate for
increased lumber costs. The decrease in unit sales reflects
continuing strong competition in virtually every Jim Walter Homes
sales region. Jim Walter Homes' backlog at February 28, 1994 was
1,764 units compared to 1,609 units at February 28, 1993. Time
charge income (revenues received from Mid-State Home's
installment note portfolio) increased from $53.4 million in 1993
to $59.4 million in 1994. The increase in time charge income is
attributable to increased payoffs received in advance of maturity
and to an increase in the average balance per account in the
portfolio. The Group's operating income of $24.2 million
exceeded the prior year period by $3.9 million. This improvement
resulted from the increase in the average selling price per home
sold, the higher time charge income and lower interest expense in
1994 ($31.6 million) as compared to that incurred in 1993 ($33.6
million), partially offset by the lower number of homes sold,
reduced homebuilding gross profit margins and higher selling,
general and administrative expenses. The lower gross profit
margins were primarily the result of higher lumber prices.
Lumber prices in the current fiscal period ranged from $449 -
$510 per thousand board feet as compared to $311 - $474 per
thousand board feet in the 1993 period.
Building Materials Group sales and revenues of $10.9 million
were $941,000, or 9.4% greater than the prior year period. The
increase resulted from improved sales prices and volumes for
window components and greater metal building and foundry products
sales volumes. The Group had an operating loss of $330,000
compared to a loss of $237,000 in the prior year period. This
performance as the result of increased manufacturing costs in the
window components and metal building and foundry businesses,
partially offset by the increased sales.
Industrial Products Group sales and revenues of $42.9
million exceeded the prior year period by $2.0 million, or 4.9%.
Increased sales volumes of aluminum foil and sheet, chemicals,
industrial castings and resin coated sand and higher selling
prices for furnace coke were partially offset by lower sales
volumes of furnace and foundry coke, mineral wool and patterns
and tooling and lower selling prices for aluminum foil and sheet
and industrial castings. The Group's operating income of $3.0
million was $1.0 million greater than the prior year period. The
improved performance resulted from higher gross profit margins
for furnace coke, mineral wool, resin coated sand and patterns
and tooling, partially offset by reduced margins for castings.
Water and Waste Water Transmission Products Group sales and
revenues of $64.6 million were $4.5 million, or 7.4%, ahead of
the prior year period. The increase was the result of improved
ductile iron pressure pipe selling prices and volume and fittings
and valves and hydrants sales prices, partially offset by lower
valves and hydrants and fittings volumes. The Group had an
operating income of $1.7 million compared to a loss in the prior
year period of $634,000. The improved performance resulted from
the higher selling prices, partially offset by lower overall
sales volumes and higher raw material costs, especially scrap, a
major raw material component.
Natural Resources Group sales and revenues of $90.0 million
were $4.2 million, or 4.5%, below the prior year period. The
decrease resulted from lower average coal and methane gas selling
prices, partially offset by slightly higher coal shipments,
increased methane gas sales volume and an increase in outside
coal and gas royalty income. A total of 1.935 million tons of
coal was sold in the 1994 period versus 1.904 million tons in
1993, a 1.6% increase. The increase in tonnage sold was the
result of greater shipments to Japanese steel mills and other
export customers, partially offset by lower shipments to Alabama
Power Company ("Alabama Power"). Reduced shipments to Alabama
Power were the result of an agreement reached with Alabama Power
to ship only the Reduced Base Tonnage Coal (2 million tons per
year) and Period 2 Tonnage Coal (500,000 tons) for the contract
year ending June 30, 1994 (see Financial Condition for further
discussion). Shipments in the prior year period were favorably
impacted due to the June 17, 1992 hoist accident at Blue Creek
Mine NO. 3 ("Mine No. 3") which resulted in the postponement of
shipments of approximately 400,000 tons from the period July
through September 1992 to the period January through June 1993.
The average price per ton of coal decreased 5.8%, from $45.49 in
1993 to $42.84 in 1994 due to lower prices realized on shipments
to Japanese steel mills and other export customers. Blue Creek
Mine No. 5 ("Mine No. 5) was shut down from November 17, 1993
through December 16, 1993 as a precautionary measure as a result
of air monitoring tests detecting evidence of spontaneous
combustion heatings in a section of mine. The heatings were a
result of pyritic sulfur concentrations occurring in the coal
seam being exposed to air. Representatives of Jim Walter
Resources, the Mine Safety and Health Administration ("MSHA"),
Alabama State Mine Inspectors and the United Mine Workers of
America ("UMWA") investigated the problem. Since the area of the
suspected heatings was inaccessible, a decision was made to drill
vertical holes from the surface and flood the area with
combinations of water, carbon dioxide, foam and cementitious
mixtures to neutralize the spontaneous combustion heatings. MSHA
approved the resumption of operations at the mine on December 17,
1993. In early April 1994 the spontaneous heatings reoccurred
and the mine is currently shut down while Jim Walter Resources,
MSHA, Alabama State Mine Inspectors and the UMWA study the
various alternatives for resolving this problem. It is possible
that the mine will remain shut down or operations substantially
curtailed for several months. Mine No. 5 was shut down for a
substantial portion of the period from July 9, 1990 through
September 16, 1990 when a similar problem occurred. The Group's
operating income of $554,000 was $12.3 million below the prior
year period. The lower performance reflects the decrease in
average selling prices for coal and methane gas, reduced coal
mining productivity which resulted in higher costs per ton of
coal produced and idle plant costs of $2.3 million associated
with the Mine No. 5 shut down which more than offset the effect
of increased coal and methane gas sales volumes and the greater
outside coal and gas royalty income.
Cost of sales, exclusive of depreciation, of $197.6 million
was 80.9% of net sales in the 1994 period versus $186.5 million
and 75.7% in 1993. The cost of sales percentage increase was
primarily the result of lower gross profit margins on home sales,
coal, industrial castings, window components and metal building
and foundry products and the Mine No. 5 idle plant costs,
partially offset by improved margins on furnace coke, mineral
wool, resin coated sand and patterns and tooling.
Selling, general and administrative expenses (exclusive of
postretirement health benefits) of $29.9 million were 9.7% of net
sales and revenues in the 1994 period versus $30.9 million and
10.1% in 1993.
Interest and amortization of debt discount and expense
decreased $4.3 million. The decrease is the result of lower
outstanding debt balances on secured obligations (see Notes 2 and
4 of Notes to Consolidated Financial Statements) and reduced
amortization of debt discount and expense. Interest in the
amount of $40.9 million in the three months ended February 28,
1994 and 1993 on unsecured obligations has not been accrued in
the consolidated financial statements as a result of the filing
of petitions for reorganization. This amount is based on the
balances of the unsecured debt obligations and their interest
rates as of December 27, 1989 and does not consider fluctuations
in the level of short-term debt and interest rates and the
issuance of commercial paper that would have occurred to meet the
working capital requirements of the Homebuilding and Related
Financing Group (see Notes 2, 4 and 5 of Notes to Consolidated
Financial Statements). Such interest rates do not presently
govern the respective rights of the Company, its subsidiaries and
the various lenders. Instead the rights of the parties will be
determined in connection with the Reorganization Proceedings.
On August 10, 1993, the Revenue Reconciliation At of 1993
was signed into law raising the federal corporate income tax to
35% from 34%, retroactive to January 1, 1993. The provision for
income taxes for the three months ended February 28, 1994
includes federal income taxes at the 35% statutory rate.
Net income for the three months ended February 28, 1994 was
$857,000 as compared to $6.0 million in the 1993 period
reflecting all of the previously mentioned factors as well as the
impact of lower miscellaneous income and Interest Income from
Chapter 11 proceedings combined with higher Chapter 11 costs and
postretirement health benefits.
Nine Months Ended February 28. 1994 and 1993
Net sales and revenues for the nine months ended February
28, 1994 of $985.0 million increased $13.9 million, or 1.4%, over
the prior year period. The improved performance resulted from a
1.3% increase in pricing and/or product mix and a .1% increase in
volume. The increase in net sales and revenues resulted from
improved sales and revenues in the Homebuilding and Related
Financing, Building Materials, Industrial Products and Water and
Waste Water Transmission Products Groups, partially offset by
lower sales and revenues in the Natural Resources Group.
Homebuilding and Related Financing Sales and revenues of
$319.9 million were 57.9 million, or 2.5%, greater than the 1993
period. This performance reflects a 2.1% increase in the average
selling price per home sold from $37.300 in 1993 to $38,100 in
1994, which was are than offset by a 6.6% decrease in the number
of homes sold, from 3,572 units in 1993 to 3,338 units in 1994.
The higher average selling price in 1994 reflects a price
increase instituted April 1, 1993 to compensate for higher lumber
costs. The decrease in unit sales reflects continuing strong
competition in virtually every Jim Walter Homes sales region.
Time charge Income (revenues received from Mid-State Home's
Instalment note portfolio) increased from $161.2 million In 1993
to $176.4 million in 1994. The increase in time charge income is
attributable to increased payoffs received in advance of maturity
and to an Increase in the average balance per account in the
portfolio. The Group's operating income of $73.9 million
exceeded the prior year period by $9.7 million. This improvement
resulted from the Increase in the average selling price per home
sold, the higher time charge income and lower interest expense In
1994 ($97.5 million) compared to that Incurred in 1993 ($101.8
million), partially offset by the lower number of homes sold,
reduced homebuilding gross profit margins and higher selling,
general and administrative expenses. The lower gross profit
margins were the result of higher lumber prices and the decision
in October 1992 to reduce gross profit margins on five smaller
basic shelter homes in an effort to generate sales. Lumber
prices in the current fiscal period ranged from $295 - $510 per
thousand board feet as compared to $248 - $474 in the 1993
period.
Building Materials Group sales and revenues of $41.3 million
were $3.4 million, or 8.9%, greater than the prior year period.
The Increase principally resulted from improved sales volumes of
window components and metal building and foundry products. The
Group's operating income of $700,000 was $352,000 below the 1993
period. This performance was the result of the increased
manufacturing costs in the window components and metal building
and foundry businesses, partially offset by the increased sales
volume.
Industrial Products Group sales and revenues of $128.6
million were $6.0 million, or 4.9%, ahead of the 1993 period.
Increased sales volumes of aluminum foil, furnace coke, castings,
resin coated sand and chemicals and higher selling prices for
furnace coke were partially offset by lower sales volumes of
aluminum sheet, mineral wool and patterns and tooling and lower
selling prices for aluminum foil and sheet. The Group's
operating income of $7.5 million was $334,000 greater than the
prior year period. The Improved performance resulted from higher
gross profit margins for furnace coke and mineral wool, partially
offset by reduced margins for chemicals, foundry coke, aluminum
foil and sheet (including the effect of lower selling prices) and
industrial castings.
Water and Waste Water Transmission Products Group sales and
revenues of $245.5 million were 52.2 million, or .9%, ahead of
the prior year period. The increase was the result of higher
overall selling prices, partially offset by lower overall sales
volumes. Operating income of $16.0 million exceeded the prior
year period by $3.9 million. The improved performance resulted
from the increased sales prices, partially offset by the lower
sales volumes and higher raw material costs, especially scrap, a
major raw material component.
Natural Resources Group sales and revenues of $245.7 million
were $4.3 million; or 1.7%, below the prior year period. The
decrease resulted from reduced coal shipments and lower methane
gas selling prices, partially offset by higher average coal
selling prices, increased methane gas sales volume and greater
outside gas and timber royalty income. A total of 4.890 million
tons of coal was sold in the 1994 period versus 5.127 million
tons in 1993, a 4.6% decrease. The decrease In tonnage sold was
the result of lower shipments to Alabama Power (including the
effect of the previously discussed reduction in
tonnage for the contract year ending June 30, 1994) and Japanese
steel mills, partially offset by greater sales to other export
customers. Shipments in the prior year period were adversely
impacted by the previously mentioned hoist accident at Mine
No. 3. The average price per ton of coal sold increased 2.5%
from $44.49 In the 1993 period to $45.60 in 1994 due to higher
prices realized on shipments to Alabama Power, partially offset
by lower prices to Japanese steel mills and other export
customers. As previously discussed, Nine No. 5 was shut down
from November 17, 1993 through December 16, 1993 as a
precautionary measure as a result of air monitoring tests
detecting evidence of spontaneous combustion heatings in a
section of the mine, which problem reoccurred in April 1994. The
Group's operating income of $6.9 million was $21.2 million below
the 1993 period. The lower performance reflects the decrease in
coal shipments, the lower methane gas selling prices. reduced
coal mining productivity which resulted in higher costs per ton
of coal produced and Mine No. 5 idle plant costs which are than
offset the effect of the higher average price per ton of coal
sold, increased methane gas sales volume and greater outside gas
and timber royalty income.
Cost of sales, exclusive of depreciation, of $623.4 million
was 79.0% of net sales versus $596.7 million and 75.8% in 1993.
The cost of sales percentage increase was primarily the result of
lower gross profit margins on home sales, coal, chemicals,
foundry coke, aluminum foil and sheet, industrial castings,
window components and metal building and foundry products,
partially offset by improved margins on furnace coke, mineral
wool and ductile iron pressure pipe.
Selling, general and administrative expenses (exclusive of
postretirement health benefits) of $94.7 million were 9.6% of net
sales and revenues in the 1994 period versus $95.3 million and
9.8% in 1993.
Interest and amortization of debt discount and expense
decreased $9.1 million. The decrease is the result of lower
outstanding debt balances on secured obligations (see Notes 2 and
4 of Notes to Consolidated Financial Statements) and reduced
amortization of debt discount and expense. Interest in the
amount of $683.4 million ($122.8 million in the nine months ended
February 28, 1994 and 1993) on unsecured obligations has not been
accrued in the consolidated financial statements since the date
of the filing of petitions for reorganization. This amount is
based on the balances of the unsecured debt obligations and their
interest rates as of December 27, 1989 and does not consider
fluctuations In the level of short-term debt and Interest rates
and the issuance of commercial paper that would have occurred to
meet the working capital requirements of the Homebuilding and
Related Financing Group (see Notes 2, 4 and 5 of Notes to
Consolidated Financial Statements). Such interest rates do not
presently govern the respective rights of the Company, its
subsidiaries and the various lenders. Instead the rights of the
parties will be determined in connection with the Reorganization
Proceedings.
On August 10, 1993, the Revenue Reconciliation Act of 1993
was signed into law raising the federal corporate income tax to
35% from 34%, retroactive to January 1, 1993. The provision for
income taxes for the 1994 period includes federal income taxes at
the 35% statutory rate. In addition, Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes"
requires that deferred tax liabilities and assets be adjusted in
the period of enactment for the effect of an enacted change in
tax laws or rates. The Company estimates that such one-time
charge is approximately $2.5 million and such amount is included
in the provision for deferred income taxes in the nine months
ended February 28, 1994.
The income before cumulative effect of accounting change for
the nine months ended February 28, 1994 was $9.1 million as
compared to $20.6 million in the 1993 period reflecting all of
the previously mentioned factors as well as the impact of higher
Chapter 11 costs and postretirement health benefits combined with
lower miscellaneous income and slightly lower interest income
from Chapter 11 proceedings.
Financial Condition
___________________
On December 27, 1989, the Debtors each filed a voluntary
petition for reorganization under the Bankruptcy Code in the
United States Bankruptcy Court (the "Bankruptcy Court") for the
Middle District of Florida, Tampa Division. On December 3, 1990,
one additional small subsidiary filed a voluntary petition for
reorganization under the Bankruptcy Code. Two other small
subsidiaries have not filed petitions for reorganization.
Pursuant to the applicable provisions of the Bankruptcy Code, all
pending legal proceedings and collection of outstanding claims
against the Debtors were automatically stayed upon filing of the
Chapter 11 petitions while the Debtors continue business
operations as debtors in possession (see Note 2 of Notes to
Consolidated Financial Statements).
The Debtors' Chapter 11 petitions resulted from a sequence
of events stemming primarily from an inability of the Company's
interest reset advisors to reset interest rates on approximately
$624 million of outstanding Senior Extendible Reset Notes and
Senior Subordinated Extendible Reset Notes (collectively, the
"Old Notes") on which interest rates were scheduled to be reset
effective January 2, 1990. The Company believes that the reset
advisors' inability to reset the interest rates was primarily
attributable to pending asbestos-related litigation which
prevented the Debtors from completing a refinancing or from
selling assets to reduce their debt which, together with turmoil
in the high yield bond markets, depressed the bid value of such
notes. This created the potential for a sharply higher reset
rate that, in turn, would have caused interest expense to rise
above the Debtors' ability to pay. To mitigate these factors.
the Company, on November 7, 1989, offered to exchange the Old
Notes for a combination of cash and new Senior Extendible Reset
Notes and new Senior Subordinated Reset Notes.
The interest reset advisors, Drexel Burnham and Merrill
Lynch, advised the Company In early December 1989 that, in their
opinion, there was no Interest rate at which the Old Notes could
be reset to have a bid value of 101% as called for In the terms
of the Old Notes. Trustees for the Old Notes, citing the
inability of the interest reset advisors to establish a new rate,
subsequently advised the Company that the failure to reset the
Old Notes not tendered in the exchange offers would likely
constitute non-compliance under the indentures for the Old Notes.
Later, the exchange offer was supplemented to strengthen certain
covenants of the new Senior Extendible Reset Notes and new Senior
Subordinated Reset Notes and, in addition, an offer of 10% equity
in the Company was made to the holders of old Senior Subordinated
Extendible Reset Notes.
The Company received less than the percentages of each of
the outstanding classes of Old Notes required under terms of the
exchange offers, which expired at 7:00 p.m. New York City time on
December 27, 1989. As a result, the exchange offers were
terminated and all tendered Old Notes were returned.
As a result of the Reorganization Proceedings, the maturity
of all unpaid principal of, and interest on, the senior and
subordinated indebtedness of the Debtors became immediately due
and payable in accordance with the terms of the instruments
governing such Indebtedness. The amount of indebtedness that was
accelerated on the petition date aggregated approximately $1.7
billion. The Debtors are currently accruing, but not paying,
interest on senior secured indebtedness and not accruing interest
on unsecured indebtedness. At February 28, 1994, interest in the
amount of $683.4 million ($122.8 million in the current nine
month fiscal period) had not been accrued on unsecured
obligations (including $307.5 million In respect of Senior
Subordinated Extendible Reset Notes which, prior to the petition
date, was payable in additional Senior Subordinated Extendible
Reset Notes). These amounts are based on the balances of the
unsecured debt obligations and their interest rates as of the
petition date. Such interest rates do not necessarily govern the
respective rights of the Company, its subsidiaries and the
various lenders. Instead, the rights of the parties will be
determined in connection with the Reorganization Proceedings.
While the Reorganization Proceedings are pending, the
Debtors are prohibited from making any payments of prepetition
obligations owing as of the petition date, except as permitted by
the Bankruptcy Court. Furthermore, the Debtors will not be able
to borrow additional funds under any of their prepetition credit
arrangements.
Since the beginning of the Reorganization Proceedings
certain of the Debtors have consummated an agreement, as amended,
with two commercial banks with respect to a $25 million letter of
credit facility. Pursuant to the terms of such "New Letter of
Credit Agreement", upon issuance of a letter of credit, the
applicable Debtors deposit with the issuing bank an amount of
cash equal to the stated amount of the letter of credit. At
February 28, 1994. $3,570,000 of letters of credit were
outstanding under this agreement. Since the beginning of the
Reorganization Proceedings certain of the Debtors have also
consummated an agreement with the lenders pursuant to which the
lenders agree to renew letters of credit issued under the Working
CapItal Agreement that were outstanding at the time of filing of
the petitions for reorganization (the "Replacement Letter of
Credit Agreement"). To the extent that the letters of credit
under the Replacement Letter of Credit Agreement ($17.549,000
outstanding at February 28, 1994) are renewed during the
Reorganization Proceedings, these Debtors have agreed to
reimburse the issuing bank for any draws under such letters of
credit, which obligation shall be entitled to an administrative
expense claim under the Bankruptcy Code. In addition, the
obligations of the Debtors under such Replacement Letter of
Credit Agreement shall continue to be secured by the collateral
which secures the Debtors' obligations under the Revolving Credit
Agreement and the Working Capital Agreement. The Bankruptcy
Court approved the Debtors' entering into the New Letter of
Credit Agreement in May 1990. The New Letter of Credit Agreement
currently terminates on May 27, 1994. A motion has been filed
with the Bankruptcy Court to extend such agreement to June 30,
1995.
On September 22, 1993, the Debtors filed with the Bankruptcy
Court and presented to the creditor constituencies their first
amended joint plan of reorganization (the "Plan") and related
first amended disclosure statement. The Plan provides for
payment in full of all allowed claims (plus post-petition
interest at varying rates) using cash, issuance of new
indebtedness. issuance of common stock equal to approximately a
46% ownership interest (subject to the Debtors's option to
substitute additional debt securities in lieu of common stock
presently proposed to be issued under the Plan), or a combination
thereof. In addition, the Plan provides that holders of
subordinated debt claims will additionally share in a portion of
any increase in Debtor's unencumbered instalment notes receivable
portfolio after May 31, 1993 through issuance of additional debt
securities. Such sharing in value is designed to provide
compensation to holders of subordinated debt claims during the
delay in consummation of the Plan required in order to resolve
the asbestos-related litigation. Under the Plan certain claims
and the equity interest in the Company are impaired; therefore
the Plan is subject to the acceptance by vote of the holders of
each such class of impaired claims and the holders of the
Company's common stock. Confirmation and consummation of the
Plan are subject to the satisfaction of various conditions
including dismissal with prejudice of any and all claims and
actions against the Debtors relating to or in connection with the
asbestos-related litigation (see Notes 2 and 6 of Notes to
Consolidated Financial Statements).
On December 16, 1993, AIF II, L.P. certain affiliates of AIF
II, L.P. and certain accounts managed or controlled by such
affiliates: Lehman Brothers Inc. the Official Bondholders
Committee and the Official Committee of General Unsecured
Creditors (collectively, the "Bondholders Plan Proponents") filed
a Joint Plan of Reorganization of Debtors Proposed by Certain
Creditor Proponents Dated as of December 16, 1993 (the
"Bondholders Plan"). The Bondholders Plan is predicated upon a
settlement of the Veil Piercing Litigation which contemplates a
distribution of debt and equity securities having a value equal
to $525 million, subject to reduction in the event the
shareholders of the Company support the Bondholders Plan and
execute the Veil Piercing Settlement Agreement (as said term is
defined in the Bondholders Plan) by a date certain, to the veil
Piercing Claims Trust (as said term is defined in the Bondholders
Plan). The Bondholders Plan is premised upon a negotiated
estimate of the going concern enterprise value of the Debtors on
a consolidated basis in an amount equal to $2.525 billion. The
Bondholders Plan provides for payment in full of all allowed
claims (plus post-petition interest at varying rates with respect
to certain secured and unsecured claims) using cash, issuance of
new indebtedness, issuance of common stock, or a combination
thereof. The Bondholders Plan provides for no recovery by the
shareholders of the Company unless the shareholders support the
Bondholders Plan and execute the Veil Piercing Settlement
Agreement by a date certain. Confirmation and effectiveness of
the Bondholders Plan are subject to the satisfaction of various
condition including the final resolution and settlement, approved
by final orders, of all asserted and unasserted claims arising
out of or relating to the asbestos-related litigation and all
LBO-Related Issues (as said term is defined in the Bondholders
Plan).
On December 28, 1993, Chemical Bank and Bankers Trust
Company, as agents under the Bank Credit Agreement dated as of
September 10, 1987, as amended, and the Working Capital Credit
Agreement dated as of December 29, 1987, as amended, filed the
Bank Agents' Joint Plan of Reorganization Dated as of December
28, 1993 (the "Bank Agents Plan"). The Bank Agents Plan is
predicated upon a settlement of the asbestos-related litigation
which contemplates a distribution of common stock having a value
equal to the allowed amount of the "Celotex Disputed Claims" (as
said term is defined in the Bank Agents Plan). The Bank Agents
Plan contemplates that the allowed amount of the Celotex Disputed
Claims shall be determined by: (a) agreement between the holders
of such claims and the Bank Agents, (b) a final order of the
Bankruptcy Court or (c) an order of the Bankruptcy Court
estimating the allowed amount of such claims. The Bank Agents
Plan provides for payment in full in cash of all secured allowed
claims (including post-filing date interest at varying rates of
interest) and the distribution of common stock to holders of
unsecured allowed claims (including trade creditors and
subordinated bondholders) in full satisfaction of unsecured
allowed claims (including post-filing date interest at rates to
be agreed to by the Bank Agents or, if no agreement, rates to be
determined by the Bankruptcy Court). The Bank Agents Plan
provides for a recovery by the shareholders of the Company only
to the extent shares of common stock are available after payment
in full of unsecured allowed claims. Effectiveness of the Bank
Agents Plan is subject to various conditions including the
Company's ability to obtain third party financing in an amount
sufficient to enable the Debtors to make the cash payments
required under the Bank Agents Plan and to meet the Debtors'
contemplated working capital and letter of credit needs.
On December 30, 1993, LaSalle National Bank, as the
successor trustee under the indenture date as of January 1, 1988,
as amended, filed the Series B & C Senior Note Trustee's Joint
Plan of Reorganization of Debtors Dated as of December 30, 1993
(the "Senior Note Trustee Plan"). While the Senior Note Trustee
Plan is not predicated upon a settlement of the asbestos-related
litigation, the plan provides for the issuance of "New Notes" (as
said term is defined in the Senior Note Trustee Plan) to fund any
settlement which may be approved by the Debtors and the Series B
& C Senior Note Trustee. The Senior Note Trustee Plan is
premises upon an "Equity Value" (as said terms is defined in the
Senior Note Trustee Plan) of $783.8 million. The Senior Note
Trustee Plan provides for payment in full in cash of all secured
allowed claims (including post-filing date interest at varying
rates) and payment in full of unsecured allowed claims (including
post-filing date interest at varying rates) by using cash,
issuance of new indebtedness, issuance of common stock (subject
to dilution in the event a settlement of the asbestos-related
litigation is achieved), or a combination thereof. In addition,
the Senior Note Trustee Plan provides that the shareholders of
the Company shall retain their common stock interests, subject to
dilution in the event a settlement of the asbestos-related
litigation is reached. Effectiveness of the Senior Note Trustee
Plan is subject to various conditions which are similar to the
conditions set forth in the Company's Plan.
By order dated February 25, 1994, the Bankruptcy Court (i)
fixed April 20, 1994 as the last date to file any further
amendments or supplements to the Plan, the Bondholders Plan, the
Bank Agents Plan or the Senior Note Trustee Plan, (ii) allowed an
additional party to file, by April 20, 1994, a plan of
reorganization and related disclosure statement, (iii) fixed
April 20, 1994 as the last date for requesting a copy of a plan
and disclosure statement filed by the above noted parties, (iv)
fixed May 6, 1994 as the last date for any party in interest to
file objections to the disclosure statements and (v) schedule a
hearing for May 19, 1994 and continuing, if necessary through May
20, 1994 to consider approval of disclosure statements.
The Company's objectives in developing the Plan were based
upon the maximization of value for all creditors and shareholders
which will result in a viable enterprise with a capital structure
that allows for cash flows after reorganization sufficient to
meet creditors' obligations (as confirmed by such Plan or any
further amended plan of reorganization filed by the Debtors, the
Bondholders Plan, the Bank Agents Plan and the Senior Note
Trustee Plan or plans filed by other parties in interest) and to
fund future capital expenditures and growth of operations. There
can be no assurance, however, that the liabilities of the Debtors
as of the date of confirmation of the Plan or any further amended
plan of reorganization filed by the Debtors, the Bondholders
Plan, the Bank Agents Plan and the Senior Note Trustee Plan or
plans filed by any other parties in interest, will not be found
in the Reorganization Proceedings to exceed the fair value of the
Debtors assets at such date. This could result in claims being
paid at less than 100% of their face value and the equity of the
Company's common stockholders being diluted or canceled. See
Note 2 of Notes to Consolidated Financial Statements.
Subsequent to the acquisition of Original Jim Walter, the
Company undertook a program of corporate reorganizations and
asset dispositions pursuant to which the Company, prior to the
petition date, restructured and/or disposed of certain of the
businesses of Original Jim Walter. Included as part of this
program were the complete liquidations of Old Walter Industries,
Jim Walter Resources and United Land Corporation ("United Land")
as set forth in the Plans of Complete Liquidation (the
"Liquidation Plans") adopted by their respective shareholders in
1988.
As a result of the Reorganization Proceedings, the
implementation of each of the Liquidation Plans required approval
of the Bankruptcy Court. The Company, for and on behalf of
itself and the other Debtors filed a motion in the Bankruptcy
Court for an order authorizing the completion of the previously
adopted Liquidation Plans. Such motion included a request that
the rights of the creditors of the Debtors for purposes of
determining the distributions to which they may be entitled under
a plan or plans of reorganization (or in any liquidation
proceeding) be determined without regard to subsequent actions
that might be taken to complete such Liquidation Plans. As
hearings held on September 5, 1990 and October 9, 1990, the
Bankruptcy Court authorized the Debtors to complete the
Liquidation Plans and a definitive order granting such relief was
issued by the Bankruptcy Court on November 5, 1990, on March 26,
1991. On April 1, 1991, Old Walter Industries distributed the
capital stock of Jim Walter Homes and Mid-State Homes to Homes
Holdings Corporation and Mid-State Holdings Corporation,
respectively. Old Walter Industries then merged into
Hillsborough Holdings Corporation. Hillsborough Holdings
Corporation changed its name to Walter Industries, Inc. in
connection with such merger.
In December 1990, Old Walter Industries, Jim Walter
Resources and United Land filed a motion with the Bankruptcy
Court to assign and assume certain executory contracts in
connection with the completion of the Liquidation Plans. One
such executory contract was a material coal sales agreement
entered into in 1979 (for a term of 20 years) between Alabama
Power and Jim Walter Resources and Amendment No. 6 thereto, which
was singed in 1988 and which provides for delivery of up to
3,000,000 tons of coal annually. Alabama Power filed an
objection to the assignment and assumption of such contract
alleging that Jim Walter Resources was in default by virtue of
its failure to maintain a $250 million shareholders equity and a
current asset to current liability ratio of at least 1:1, as
required by Amendment No. 6. Alabama Power also asserted that
certification requirements under such Amendment No. 6 requires a
report from Jim Walter Resources' auditors, and that the report
received was "not without qualification because it was subject to
significant uncertainties especially in connection with the
Reorganization Proceedings and massive amounts of debt which are
in default and on which Jim Walter Resources is jointly and
severally liable." Alabama Power asserted that these
liabilities, as well as other significant uncertainties, created
a default under such agreement.
Alabama Power also asserted that the price paid by them
under such agreement is in excess of the short-term price for
coal and is directly connected to the long-term commitment of
capital, the reliability of a supply of coal under such
agreement, and the creditworthiness of Jim Walter Resources and,
thus, constitute a financial accommodation under section
365(c)(2) of
the Bankruptcy Code. This section prohibits the assumption or
assignment of an executory contract "if such contract is a
contract to make a loan or extend other debt financing or
financial accommodations to or for the benefit of the debtor...."
A final hearing was held on February 13, 1991 at which time
testimony was taken and argument of counsel was presented to the
Bankruptcy Court. At the conclusion of the proceedings, the
Bankruptcy Court orally ruled that the financial condition of Jim
Walter Resources did not constitute a default under the
applicable provisions of section 365 of the Bankruptcy Code and
that
the assignee had demonstrated adequate assurances of its current
and future ability to perform the executory contract, and that
such executory contract did not constitute an agreement to make a
loan or to extend debt financing. The Bankruptcy Court further
indicated that it was not prepared to make a final determination
at that time that the contract did not constitute a financial
accommodation under section 365(c)(2) of the Bankruptcy Code.
Subsequently, on March 4, 1991, the Bankruptcy Court entered its
order allowing the assumption and assignment of such agreement,
following which an amended order was entered on March 13, 1991 ex
parte on the Court's own motion for purposes of reconsidering the
March 4, 1991 order, which left open the question as to whether
or not such agreement was in fact a contract for financial
accommodation and thus within the exceptive provisions of
section 365(c)(2) of the Bankruptcy Code which renders such
contracts
non-assumable. Upon such reconsideration, the Bankruptcy Court
found it unnecessary to hold any additional hearings on the
remaining issues and concluded that the contract was to within
the exceptive provisions for assumability, and thus none of the
exceptions set forth in section 365(c)(2) applied. The
Bankruptcy
Court further stated that it was also satisfied that based upon
the record established at the final evidentiary hearing, the
prospective assignee, JW Resources, Inc. was financially able to
perform the contract and thus met the requirements of
SECTION 365(b)(1)(c).
On March 14, 1991, Alabama Power filed its Notice of Appeal
to the United States District Court for the Middle District of
Florida, Tampa Division (the "District Court") from the Order
Allowing Assumption and Assignment of Executory Contract with
Alabama Power of the Bankruptcy Court entered on March 4, 1991,
and the Amended Order on Motion to Assume and Assign Executory
Contract with Alabama Power entered on March 13, 1991. Such
appeal is presently pending in the District Court.
The Alabama Power contract provides for a review of billing
price and price components prior to July 1, 1993. Officials of
Jim Walter Resources and Alabama Power met since 1992 in an
attempt to satisfy the contract provisions; however, during that
time numerous disputes arose. On June 28, 1993, Jim Walter
Resources filed in the Bankruptcy Court a Complaint for
Declaratory Judgment asking the Bankruptcy Court to interpret
certain provisions of the contract relating to the billing rice
effective July 1, 1993. The Court has not ruled on such
complaint. Alabama Power filed a Motion to Dismiss, or in the
Alternative to Transfer Venue as to which a hearing was held on
January 12, 1994. A decision on such motion is now pending.
An interim agreement was reached with Alabama Power in
August 1993 to the ship only the Reduced Base Tonnage Coal (2
million tons of coal per year) and the Period 2 Tonnage Coal
(500,000 tons) for the contract year ending June 30, 1994.
Shipments of Period 2 Additional Tonnage Coal (500,000 tons) were
to resume in the contract year beginning July 1, 1994. Until the
pricing dispute was resolved the parties agreed that current
payments would be based on $61.00 per ton delivered (subject to
adjustment upon resolution of the pricing disputes), the
approximate blended price in effect on June 30, 1993 for the 3
million tons delivered in the contract year ended June 30, 1993.
Under the contract the billing price to Alabama Power Company for
the 2 million tons of Reduced Base Tonnage Coal was to revert to
the provisions of the 1979 contract as adjusted for escalations,
subject to the aforementioned review of billing price and price
components. The billing price for the Period 2 Tonnage Coal and
Period 2 Additional Tonnage Coal were to be based on domestic
market prices meeting certain criteria.
On March 14, 1994, Jim Walter Resources and Alabama Power
signed a Settlement Agreement as to the disputes discussed above.
Such agreement in principal will be embodied in a restated coal
purchase contract which will completely replace the 1979 contract
and the 1988 amendment thereto. Under the new proposed contract,
Alabama Power will purchase 4.0 million tons of coal per year
from Jim Walter Resources during the period July 1, 1994 thorough
August 31, 1999. In addition, Jim Walter Resources will have the
option to extend the new contract through August 31, 2004,
subject to mutual agreement on the market price, terms and
conditions of such extension. The new contract will have a fixed
price subject to an escalation based on the Consumer Price Index
or other appropriate published index and adjustment for
governmental impositions and quality. Other matters currently
being resolved for inclusion in such new agreement include
modification of specifications, shipping deviations and
transportation arrangements. Upon execution of the new
agreement, Jim Walter Resources will seek approval thereof by the
Court as a compromise and settlement of Jim Walter Resources'
Complaint for Declaratory Judgment discussed above. Upon receipt
of a non-appealable order of the Court, Alabama Power will also
dismiss its appeal regarding Jim Walter Resources' assumption of
the 1979 contract now pending in the District Court.
The long-term contracts with the six Japanese steel mills
for 2.75 to 3.0 million tons annually, depending on the level of
steel production in Japan, expired March 31, 1994. The pricing
mechanism of such contracts were market driven and reflected
changes in the prices of four specific coal indices. The
composite change in market prices of these coal indices from the
base point was the reflected in the billing price to the steel
mills. Tentative agreement has been reached with the Japanese
steel mills as to one-year contracts for shipment of
approximately 1.2 million tons of coal at a current market price.
In addition, approximately 800,000 tons of coal not previously
shipped under terms of the long-term contracts will be shipped
from April 1994 through March 1995 at the long-term contract
price, which is substantially higher than current market price.
Liquidity
The Debtors did not commence the Reorganization Proceedings
as a result of their inability to fund normal operating
liabilities either on a short-term or long-term basis; therefore,
the following discussion of liquidity presents a somewhat unusual
position compared to that normally associated with many
bankruptcy filings.
The Company normally uses its cash flows for three principal
purposes: (1) for working capital requirements (including the
financing of home sales); (2) for capital expenditures for
business expansion, productivity improvement, cost reduction and
replacements necessary to maintain the business; and (3) to
provide a return to lenders and shareholders.
Working capital is required to fund adequate levels of
inventories and accounts receivable, including instalment notes
receivable arising from the homebuilding business. At February
28, 1994, the Company had free cash balances and short-term
investments of approximately $114 million available for
operations. On July 1, 1992, pursuant to approval by the
Bankruptcy Court, installment notes receivable having a gross
amount of $638,078,000 were sold by Mid-State to Mid-State Trust
III ("Trust III"), a business trust established under the laws of
Delaware, in exchange for the net proceeds from the public
issuance of $249,864,000 of Asset Backed Notes by Trust III which
bear an interest rate of 7-5/8%. Net proceeds were utilized to
repay in full all outstanding indebtedness due under the Mid-
State credit facility with the excess cash to be used to fund the
ongoing operations of the Debtors (see Note 4 of the Notes to
Financial Statements). Under the Mid-State Trust II indenture
for the Mortgage-Backed Notes, if certain criteria as to
performance of the pledged instalment notes are met, Mid-State
Trust II is allowed to make distributions of cash to Mid-State
Homes, its sole beneficial owner, to the extent that cash
collections on such instalment notes exceed Mid-State Trust II's
cash expenditures for its operating expenses, interest expense
and mandatory debt payments on the Mortgage-Backed Notes. In
addition to the performance based distribution, the indenture
permits distribution of additional excess funds, if any, provided
such distributions are consented to by the guarantor of the
Mortgage-Backed Notes. The guarantor has approved an additional
distribution of approximately $14.1 million for the April 1, 1994
distribution. During the period from formation of Mid-State
Trust II through April 1, 1994 such distributions amounted to
$56.9 million.
At the present time, approximately 97% of all home sales
made by Jim Walter Homes are for credit. Jim Walter Homes
obtains funds necessary to operate its home construction business
primarily using cash flow from operations of the Company. The
Company believes that, under present operating conditions,
sufficient cash flow will be generated, together with some sue of
free cash balances, to finance home sales, to make planned
capital expenditures and to meet all operating needs, including
any cash deposits to collateralize letters of credit. There are
no material commitments for capital expenditures; however, the
Debtors' business plans for 1994 include capital expend duties of
approximately $19 million for the balance of the year ending May
31, 1994. The Reorganization Proceedings have had no adverse
impact on capital expenditures.
Greater cash flow from operations in future years is
dependent upon the Company's ability to grow and to improve its
profitability. The effects that the Reorganization Proceedings
will have on the levels of cash flow generated by future
operations are unknown at this time.
<PAGE>
EXHIBIT XI
AGREEMENT
This Agreement (as the same may be amended, modified or
supplemented from time to time, the "Agreement") is entered into
by and among AIF II, L.P., certain affiliates of AIF II, L.P. and
certain accounts managed or controlled by such affiliates
("Apollo"); Lehman Brothers Inc. ("Lehman"); the Official
Bondholders Committee of the Debtors (as defined ) (the
"Bondholders Committee"); the Official Committee of General
Unsecured Creditors of the Debtors (the "Creditors' Committee");
the Unofficial Ad Hoc Committee of Pre-LBO Bondholders (the "Ad
Hoc Committee") (Apollo, Lehman, the Bondholders Committee, the
Creditors Committee and the Ad Hoc Committee, the "Proponents")
and Chemical Bank and Bankers Trust Company (the "Bank Agents")
as co-agents under the Bank Credit Agreement dated as of
September 10, 1987, as amended among Hillsborough Holdings
Corporation ("Hillsborough"), Walter Industries, Inc. ("Old
Walter Industries") and certain of their subsidiaries and the
bank parties thereto (the "Revolving Credit Banks"), and the
Working capital Agreement dated as of December 29, 1987, as
amended, among Hillsborough, Old Walter Industries and certain of
their subsidiaries and the bank parties thereto (the "Working
Capital Banks") (each of the Proponents and the Bank Agents, a
"Party"), by their authorized undersigned counsel.
WITNESSETH:
WHEREAS, Hillsborough, Old Walter Industries and certain of
their subsidiaries and affiliates (collectively, the "Debtors")
are the subject of cases under Chapter 11 of 11 U.S.C. section
101 et seq. (the "Bankruptcy Code"), in the United States
Bankruptcy Court for the Middle District of Florida, Tampa
Division (the "Court"), all of which are being jointly
administered under Case No. 89-9715-8P1 (the "Chapter 11 Cases");
WHEREAS, certain of the Proponents filed a Joint Plan of
Reorganization of Debtors Proposed by Certain Creditor Proponents
Dated as of December 16, 1993 in the Chapter 11 Cases (the
"Original Settlement Plan") and a Disclosure Statement therefor;
WHEREAS, the Bank Agents filed a Bank Agents' Joint Plan of
Reorganization Dated as of December 28, 1993 in the Chapter 11
Cases (as such plan may be modified or amended from time to time,
the "Bank Agents' Plan") and a Disclosure Statement therefor;
WHEREAS, the Bank Agents have filed documents stating that
they intend to recommend to the holders of Bank Claims acceptance
of the treatment of the claims of the Revolving Credit Banks,
Working Capital Banks and Bank Agents ("Bank Claims") which have
been incorporated in the Original Settlement Plan;
WHEREAS, the Proponents intend to file an amendment to the
Original Settlement Plan, and the Bank Agents have received a
copy in substantially the form of such amendment, on or before
April 20, 1994, or such other date set by the Court (as such
amendment of the Original Settlement Plan may be further amended,
revised or modified from time to time, the "Settlement Plan");
and
WHEREAS, the Parties desire to defer the Court's
consideration of the Bank Agents' Plan and the Disclosure
Statement therefor on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
1. The Proponents shall not adversely modify or amend the
treatment of any or all of the Bank Claims under the Settlement
Plan until after (a) December 31, 1994 and either (b) both of the
following conditions occur, if ever: (i) there shall have
occurred a material adverse change in the business, results of
operations, financial condition, properties or assets of the
Debtors, taken together, from the date of this Agreement, and
(ii) the treatment of the claims of the Proponents under the
Settlement Plan is materially adversely modified or amended, or
(c) the Court disapproves such Bank treatment on motion of a
party other than a Proponent.
2. The Bank Agents hereby affirm that they will recommend
and will not withdraw (except under a circumstance in which they
could file a motion under Section 3) their recommendation to the
holders of Bank Claims that they accept the treatment provided
for such Claims under the Settlement Plan.
3. The Bank Agents shall file a motion with the Court to
defer the Court's consideration of the Bank Agents' Plan and the
Disclosure Statement therefor and shall not request the Court to
renew consideration of the Bank Agents' Plan and the Disclosure
Statement therefor until after the earlier of (a) December 31,
1994 and (b) such date, if any, that the Court denies approval of
the Disclosure Statement for the Settlement Plan.
4. The Parties agree that any damages arising from the
breach of a Party's obligations under Section 1, 2 or 3 hereof
are not susceptible to a money satisfaction and that specific
performance shall be the remedy for any such breach. The court
shall have jurisdiction to hear and determine any claim arising
out of any breach hereof.
5. This Agreement may not be amended except in a writing
signed by the Parties.
6. Notwithstanding any other provision of this Agreement,
nothing in this Agreement is intended to be or constitute, and
shall not be deemed to be or constitute, a solicitation of any
vote or any agreement to vote for or against any plan of
reorganization, and nothing in this Agreement shall impair the
right or the ability of any Party to vote for or against, or
abstain form voting with respect to, any plan of reorganization.
Nor shall this Agreement impair the right or the ability of the
Bank Agents also to recommend to the holders of the Bank Claims
that they accept the treatment of the Bank Claims under any other
plan or reorganization in the Chapter 11 Cases.
7. No part of this Agreement shall be deemed as an admission
of any Party for any purpose.
8. Except to the extent the Bankruptcy Code or Bankruptcy
Rules are applicable, the rights and obligations arising under
this Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of New York, without
giving effect to the principles of conflicts of law thereof.
9. This Agreement is intended to bind and inure to the
benefit of the Parties and their respective successors, assigns,
heirs, executors, administrators and representatives.
10. This document embodies the complete agreement and
understanding between the parties with respect to the subject
matter hereof and supersedes and preempts any prior agreement,
understanding or representation made by and between any or all of
such Parties, whether written or oral, which may have related to
the subject matter hereof in any way whatsoever.
11. This Agreement is intended solely for the benefit of the
Parties, and there shall be no third-party beneficiaries of this
Agreement.
12. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all
of which shall constitute one and the same Agreement.
<PAGE>
Dated: As of April 18, 1994
AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.
By:/s/
Steven M. Pesner, P.C.
Ellen R. Werther
65 East 55th Street
New York, New York 10022
(212)872-1070
For APOLLO
PAUL, WEISS, RIFKIND, WHARTON
& GARRISON
By:/s/
Robert Drain
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3236
For LEHMAN BROTHERS INC.
STROOCK & STROOCK & LAVAN
By:/s/
Daniel H. Golden
7 Hanover Square
New York, NY 10004
(212) 806-5400
For the BONDHOLDERS COMMITTEE
JONES, DAY, REAVIS & POGUE
By:/s/
Marc S. Kirschner
599 Lexington Avenue
New York, NY 10022
(212) 326-3939
For The CREDITORS COMMITTEE
MARCUS MONTGOMERY WOLFSON P.C.
By:/s/
Peter D. Wolfson
53 Wall Street
New York, NY 10005
For The AD HOC COMMITTEE
WACHTELL, LIPTON, ROSEN & KATZ
By: /s/
Harold S. Novikoff
51 West 52nd Street
New York, NY 10019
(212) 403-1000
For the BANK AGENTS
Exhibit XII
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
IN RE: CASE NOS. 89-9715-8P1
through 89-9746-8P1
HILLSBOROUGH HOLDINGS and 90-11977-8P1
CORPORATION, et. al.
Debtor
HILLSBOROUGH HOLDINGS
CORPORATION, et. al.
Plaintiff
vs. ADV. NO. 90-03 & 90-04
THE CELOTEX CORPORATION,
et. al.,
Defendant
THIS IS an adversary proceeding commenced in these
yet-to-be-confirmed Chapter 11 cases of Hillsborough Holdings
Corporation (HHC), now known as Walter Industries, Inc., and its
31 wholly-owned subsidiaries (collectively referred to as the
Debtors). In this connection, it should be noted that none of
the Chapter 11 cases have been substantially consolidated,
although procedurally the Debtors have been treated as a group
as the matter involved impacts the interests of all Debtors.
In order to fully understand the role of the parties
involved in this litigation, it is important to note that prior
to 1987, the Debtors, together with other non-debtor entities,
operated within the corporate structure of Jim Walter
Corporation (JWC) acting as the holding company, owning all the
stock in each of the subsidiaries, including Celotex Corporation
(Celotex). In 1987, JWC was the subject of a leveraged buy-out,
out of which HHC emerged as the new holding company and it is
now the parent of all the subsidiaries of JWC except Celotex
which was not part of the group of subsidiaries which emerged
after the leveraged buy-out.
The matter under consideration was presented by a
Complaint filed by the Debtors on January 2, 1990 seeking
declaratory relief. In their Complaint, the Debtors named as
defendants Celotex, JWC, and hundreds of individuals
(collectively referred to as Asbestos Claimants) who claim to
have suffered personal injuries as the result of exposure to
asbestos products manufactured and distributed by Celotex.
In Count I of the Complaint, the Debtors sought a
declaration that the corporate veil between Celotex and JWC
cannot be pierced. In Count II of the Complaint, the Debtors
sought a declaration that the leveraged buy-out of the JWC
subsidiaries, which did not include Celotex, was not a
fraudulent transfer. In Count III, the Debtors sought a
declaration that under applicable law, they are not the
successors in interest (sic) to the asbestos-related personal
injury claims asserted against JWC or Celotex. In Count IV,
the Debtors sought a declaration that under applicable law,
they are not liable for the asbestos-related claims against
either JWC or Celotex.
Extensive discovery was undertaken by both sides, and
on February 28, 1992, the Debtors filed a Motion for Summary
Judgment, contending that there were no genuine issues of
material facts and based on the undisputed facts they presented,
that they were entitled to the relief sought as a matter of law.
In due course, this Court heard argument of counsel
for the respective parties, considered the extensive record
relevant to the motion, and on August 25, 1992 entered an Order
denying the Debtors' Motion for Summary Judgment, based upon the
Court's conclusion that there were in fact genuine issues of
material fact which, of course, prevented the disposition of the
controversy as a matter of law. Shortly thereafter, this Court
scheduled a pre-trial conference in order to prepare the
remaining issues for final evidentiary hearing. On February 3,
1993, this Court entered an Order at the conclusion of the
pre-trial conference, which set forth five specific issues
to be tried at the final evidentiary hearing. They are
as follows:
(1) whether or not during the period relevant, JWC
exercised such pervasive dominant control over the
affairs of Celotex which, in fact, made Celotex
nothing more than a sham or an alter ego of JWC;
(2) whether or not the inter-company transactions
between Celotex and JWC disregarded all hallmarks of
the separateness of the legal and equitable existence
of a subsidiary from its parent, that is, the
operation of the cash management system, and the
record-keeping activities of both entities concerning
inter-company transactions;
(3) to what extent JWC was involved in the decision-
making process concerning the sale of assets of
Celotex;
(4) whether or not the disposition of assets of
Celotex was based on a valid economic basis and was
fully justified by the prevailing market conditions;
and
(5) whether or not the utilization of the proceeds
in fact was not repayment of valid obligations
and resulted in rendering Celotex insolvent and
without sufficient assets to respond to the claims
of the Asbestos Claimants.
Additional discovery was allowed, but limited solely
to the five (5) issues specified, and on December 13, 1993, the
trial commenced on schedule. During the five days of trial, the
Court received live testimony of witnesses, and received in
evidence close to three thousand exhibits, including numerous
charts and summaries of the testimony of the witnesses. Having
received the trial transcript, and the post-trial briefs,
submitted by the parties, the resolution of the five specific
issues is now ripe for consideration.
Before discussing in detail the facts as established
at the trial, it should be noted at the outset that,
notwithstanding the formal and technical line-up of the
litigants in this adversary proceeding, in which the Debtors are
nominally the Plaintiffs, the party who carries the burden of
proof is in reality the Asbestos Claimants, the named
Defendants. In order to place these several claims and the
relief sought in proper context, it should be helpful to
understand the core of the controversy. The claims asserted by
the Asbestos Claimants are two-fold. First, the Asbestos
Claimants seek to pierce the corporate veil between Celotex and
JWC, the predecessor-in-interest of HHC. Second, if the
Asbestos Claimants are successful in piercing the corporate veil
and then hold JWC liable to their claims already asserted
against Celotex this, in turn, would, according to the Asbestos
Claimants, would have rendered JWC insolvent thus the transfer
accomplished through the LBO could be attached and set aside as
a fraudulent transfer. In preparing these issues for trial,
this Court concluded that the veil-piercing issue was a
threshold issue, and therefore, should be tried first and, only
in the event the Asbestos Claimants succeed on the veil-piercing
issue, will this Court consider and try the fraudulent transfer
issue.
It should also be noted that the central issue in this
adversary proceeding is not the liability vel non of any of
these Debtors to the Claimants, since it is beyond dispute that
HHC and the other debtor subsidiaries never manufactured,
distributed or sold any products containing asbestos. Thus, one
must focus solely on the veil piercing issue, and nothing
relevant to the fraudulent transfer claim will be considered
and treated by this memorandum opinion. The facts relevant
to the issues outlined in the February 3, 1993 Order, as
established at the evidentiary hearing, through testimony and
documentary evidence are as follows:
HISTORICAL BACKGROUND
JWC was formed in 1995 as a successor to Walter
Construction Company, the home building business founded by
James Walter in 1946. In 1964, JWC acquired a 100% interest
in Celotex Corporation, a large manufacturer of home and
building materials. In 1970, JWC became the holding company
of its several operating entities, in order to manage their
diverse and large business activities, which included coal and
marble mining, and the manufacture of gypsum board, building
materials and cast iron and ductile pipe.
In April of 1972, Celotex acquired a controlling
interest in The Panacon Corporation (Panacon) with a $62
million loan obtained from its parent JWC. Shortly thereafter,
Celotex and Panacon merged with the unanimous written consent
of the Board of Directors of Celotex and Panacon. At the time
of the acquisition of Celotex, Panacon had revenues of
$181.1 million, net income of $10.6 million and assets of
$106 million in 1971, and employed 5500 people.
Beginning in the mid-1970's, numerous lawsuits were
initiated against Panacon by parties who claim to have been
injured as the result of alleged exposure to products
distributed and sold by Panacon which contained asbestos.
After the merger, Celotex was named as a defendant in these
lawsuits. A great majority of these lawsuits alleged
liability based on pre-1972 activities of Philip Carey
Corporation, a predecessor-in-interest of Panacon.
Due to JWC's role as a parent of its wholly-owned
subsidiaries, the members of its Board of Directors also sat on
the Boards of the subsidiaries, including the Board of Celotex.
In addition, JWC established a central cash management system
through which JWC and its wholly-owned subsidiaries managed
both payables and receivables. It is the propriety vel non
of the cash management system and the alleged pervasive control
by JWC over the affairs of Celotex, especially the disposition
of certain assets of Celotex, which are central in the
determination of the rights of the Asbestos Claimants to
pierce the corporate veil of JWC.
CASH MANAGEMENT SYSTEM AND FINANCING
The cash management system for all of its wholly-owned
subsidiaries, was established by JWC in the 1970's. Under this
system all cash generated by the subsidiaries was transferred to
the central cash management account maintained by JWC in Tampa.
Payments to the subsidiaries were made directly to a depository
bank account maintained by the subsidiary ("lock box"). These
funds were then wire transferred to the JWC concentration
account. JWC maintained a record of the funds deposited into
the concentration account by each subsidiary, and entered a
credit on the books of the subsidiary in an amount equal to the
amount of the cash deposited into the concentration account.
The funds in the cash management account were used in
the overall operation of JWC, both for day-to-day operations
and also to provide intercompany loans to the subsidiaries at
rates more favorable than those available at outside
institutional lenders. Each subsidiary maintained its own
checking account and had the discretion to pay its own expense.
However, the checking account was a "zero-balance" account.
The subsidiary wrote checks against the zero balance and, at
the end of the day, JWC transferred enough money into the
subsidiary's account to cover the checks negotiated against the
account, thereby always maintaining a zero balance in the
account. The funds transferred into the zero balance account
were recorded as an intercompany payable on the subsidiaries'
books.
JWC also provided services to its subsidiaries, and
assessed a charge upon the subsidiaries for these services.
These services included professional services, such as legal
advice, accounting and tax services, as well as human resources
and investment advisory services. The corporate assessment also
included the cost incurred by the parent of obtaining money and
making it available to the subsidiaries. Finally, the costs of
insurance premiums and taxes were also paid by the subsidiaries
as a part of the corporate assessment. The corporate assessment
was calculated based on a proportion of the projections of net
assets employed, by the respective subsidiary. JWC used the
preliminary budgets prepared by the subsidiaries, summarized
their net assets employed in any given business years. JWC
then would divide the total expenses of JWC by the net assets
employed, arriving at a break-even rate, provided that each
subsidiary met its projected budget for the coming year. That
rate was then used by the subsidiaries in their budgets to
calculate the corporate assessment to be paid to JWC. Because
of fluctuations in interest rates on the money borrowed by JWC,
the actual costs of the services provided by JWC changed, and
therefore, there were times when the corporate assessment
collected was more than was necessary to cover costs of JWC, and
other times the assessment collected was less than was required
to meet the operating expenses of JWC. Be that as it may, there
always was an adjustment made on the records, either by a debit
or a credit entry to reflect the deviation for the projected
budget. The cash management system was operated by JWC through
their separate bank accounts, the "501 account" and the "502
account." The 501 account contained all funds which were
deposited into the cash management system, i.e. deposits from
the subsidiary lock boxes. The 502 account maintained all other
transactions. Into this account would be payments made directly
to JWC on behalf of the subsidiary, corporate assessments and
intercompany adjustments. The 502 account generated a statement
to the subsidiary any time any transaction was made which
affected that subsidiary. It was for that reason that payments
made directly to JWC on behalf of the subsidiary were deposited
in the 502 account, which would generate an "advice" to the
subsidiary notifying the subsidiary that a payment on an
accounts receivable had been made. The 501 account and the 502
account were reconciled against each other on a monthly basis.
One of the items was recorded on the 502 account
was loans made by JWC to Celotex and to other subsidiaries. As
a general practice, JWC would obtain outside financing and
funnel the proceeds of the loan down to its subsidiaries as it
was needed, generally, but not always, for capital
expenditures. This practice made economic sense and was
beneficial to both JWC and to all subsidiaries, and to Celotex
as a subsidiary because JWC was able to obtain financing at
more favorable rates than any individual subsidiary would have
been able to obtain on their own. In addition, to acquire
outside financing by a subsidiary
alone would have resulted in significant limitations
on the financing imposed by the lender, even if obtained, and
rigid reporting requirements, and certainly would have required
substantial and significantly higher interest rates for the
loan. Advances by JWC to the subsidiaries, including Celotex,
was never fully formalized by the execution of loan documents or
promissory notes. However, it is equally without dispute that
no additional stock in Celotex, or in any other subsidiaries,
were ever issued to JWC as consideration for these advances.
These advances were recorded on the 502 account ledger as an
intercompany payables, acknowledged by the officers of Celotex
as an obligation due to JWC, and were payable upon demand.
CORPORATE GOVERNANCE
A substantial part of the evidence presented
extensively focused on the corporate structure both of JWC and
of Celotex. As noted earlier, Celotex and several others were a
wholly-owned subsidiaries of JWC, and as such, members of JWC's
Board of Directors also sat on the Board of Celotex and the
other subsidiaries. JWC had, in addition to the traditional
officers of corporations such as President, Chief Executive
Officer, Chief Financial Officer, etc., also had five Group
Vice Presidents who were responsible for specific business areas
of the Company. Subsidiaries reported both to Group Vice
Presidents as well as to the traditional management of JWC.
There is no question that the Board of JWC as intimately
involved in long-term decision making which affected specific
subsidiaries as well as the health of the parent and all of its
subsidiaries. These decisions included acquisition and
construction of plants, the sale or closing of plants, and the
acquisition or transfer of assets. The JWC Board also monitored
key events of subsidiaries and provided oversight functions, but
there is no evidence in this record which warrants the finding
that JWC was involved in the day-to-day operation of the
business of the subsidiaries.
It is also true that the Board of Directors of Celotex
seldom met face-to-face, but as a general rule they acted by
written consent to any proposed action to be undertaken by the
Board. Celotex hired and fired, independent of JWC its own
employees; was a full charge of its own payroll and the
promotion of its employees, with the exception of management if
the proposed promotion did deviate from the procedural
guidelines established by JWC for all subsidiaries. Celotex
maintained its own corporate minute books and its individual
accounting records in which all transactions involving
inter-company transactions were properly recorded.
Celotex itself had its own subsidiaries and divisions.
Certain of Celotex's businesses, Celotex's "core" businesses,
were included in one of three divisions: Building Products,
Roofing Products and Industrial Products. These divisions
reported directly to the president of Celotex. However, the
subsidiaries of Celotex, which were not part of the three
divisions just described, reported directly to the Group Vice
Presidents of JWC. Although standing alone, this reporting
structure appears odd, within the complete structure of JWC, it
is apparent that the subsidiaries and divisions of the Company
reported through profit centers designated along business lines
established in order to enable JWC to monitor the performance of
its subsidiaries. This method of reporting allowed JWC to
report the financial health of the subsidiaries when JWC filed
its Report with the Securities and Exchange Commission, and of
course in its annual report to its shareholders.
ASSET DISPOSITIONS
During the 1980's, the United States faces a recession
which was marked by high interest rates and inflation. These
high rates affected JWC's business as it chilled the real estate
market, making it unattractive to purchase homes. As a result
the demand for construction of homes and construction components
fell. In addition, JWC was carrying approximately $1 billion in
long and short term debts. All of these debts were on
adjustable interest or on floating interest rates so, as the
interest rates climbed, which eventually passed 20%, the amount
owed by JWC also increased and reached the point when the
outstanding loans could no longer be managed.
As a result of the drastic downturn of the market, JWC
embarked upon a cost-cutting plan. The initial plan included an
evaluation and re-evaluation of the operating expenses of the
Company as a whole, and of each subsidiary, as-well-as an
evaluation of the economic viability of each of the subsidiaries
and its representative divisions. The evaluations of the
viability of particular businesses were done at the subsidiary
level initially by the officers of each subsidiary.
As a result of this evaluation process, particular
subsidiaries were targeted for sale. Some, but not all, of the
subsidiaries targeted for sale were owned by Celotex and were
targeted by the Celotex officers for sale. Between 1981-1987,
twenty-one subsidiaries or divisions were sold, and an
additional eight operations were simply closed, because they
could not be sold. Of the twenty-one companies sold, seventeen
companies were owned by Celotex, and fifteen of those were sold
to third parties. The sales of Celotex subsidiaries or
divisions generated $151.6 million. Overall, these companies
were businesses which had historically performed poorly, and
this poor performance reached an economically unacceptable stage
during the recession of the 1980's. There is no dispute that
the Board of Directors of Celotex and also the Board of JWC
was involved in each of these sales.
By way of example, in August, 1982, Hamer Lumber was
sold. Hamer was originally acquired by JWC as an in-house
supplier of raw materials. In 1977, Celotex purchased Hamer
from JWC. During the years Hamer was held by Celotex, Hamer
saw only two profitable years. In late 1981, JWC received an
unsolicited inquiry from Plum Creek Lumber Co. for purchase of
Hamer. JWC and Celotex decided to pursue the sale, and on
August 27, 1982, the Celotex and JWC Boards of Directors
approved the sale of Hamer to Plum Creek for a price of
approximately $12 million.
For instance, Jim Walter Doors was formed by Celotex
in 1972 with the combining of four divisions. By the late
1970's, Doors was in financial trouble, and between 1975 and
1978, Doors lost $10 million in pre-tax dollars. Attempts were
made to sell Doors during the 1975 and 1978 time period, but all
attempts failed. In 1981, Doors lost almost $9 million. In
1982, Celotex recommended either sale or closure of Doors. JWC
approved the recommendation, and Doors' Portland, Charlotte and
Century plants were closed. The balance of Doors operations
were sold in pieces over the next few years, ultimately
realizing proceeds of $12.1 million.
The proceeds generated by the sale of the Celotex
subsidiaries were then used to reduce and ultimately satisfy the
outstanding amounts of intercompany advances made by JWC to
Celotex. This payable was made up of the corporate assessments,
as well as the advances made by JWC, which JWC and Celotex both
characterized as inter-company "loans."
ASBESTOS LITIGATION
There is no question that during the time period
between 1972 and 1987 asbestos litigation increased, and the
number of plaintiffs with cases pending against Celotex had
doubled each year. Further, between 1982 and 1983, lawsuits
against Celotex increased from 15,100 to 20,1000; between 1983
and 1984, it increased to 25,600; and between 1984 and 1985, it
increased to 34,900. Litigation costs also increased, from $18
million in 1982, to an ultimate $79 million in 1987.
The management of Celotex, and of JWC were fully aware
of the impact of the asbestos litigation on the economic health
of Celotex and of course also indirectly upon JWC. In fact,
the JWC legal department regularly distributed reports on the
number of claims and the cost of settlements and the prospect
of litigation to the officers and to the Board of Directors of
JWC. In addition, JWC's annual reports and Forms 10-K filed
with the SEC regularly disclosed the key facts concerning
asbestos litigation.
Basically, these are the salient facts established
at the trial, upon which this Court is called upon to resolve
the claim under consideration; that is, the right of the
Asbestos Claimants to pierce the corporate veil of JWC.
BURDEN OF PROOF/CHOICE OF LAW
It should be noted at the outset that the party
seeking to pierce the corporate veil bears the burden of
proof. Matter of Multiponics, Inc., 622 F.2d 709 (5th Cir.
1980); Kingston Square Tenants Ass'n v. Tuskegee Gardens,
Ltd., 792 F.Supp. 1566 (S.D. Fla. 1992); Publicker Indus.,
Inc. v. Roman Ceramics, Corp., 603 F.2d 1065 (3rd Cir. 1979).
This burden does not change because the Debtors are the
plaintiffs in this declaratory action. Moreover, the
Asbestos Claimants concede that the burden of proof is
placed on them.
This controversy is controlled by the applicable
state law, either by the laws of the State of Florida or
the State of incorporation of the Debtors, which is the
State of Delaware. In re Blanton, 105 B.R. 811 (Bankr. W.D.
Tex. 1989). JWC is a Florida corporation and Celotex is
a Delaware corporation, which raises the question of choice of
law. In determining which state's law applies, the bankruptcy
court must apply choice-of-law rules of the state in which
it sits. In re Master Mortgages Inv. Fund,
Inc., 151 B.R. 513 (Bankr. W.D. Mo. 1993); In re O.P.M.
Leasing Svs., Inc., 40 B.R. 380 (Bankr. S.D.N.Y.) aff'd
44 B.R. 1023 (S.D.N.Y. 1984); In re Shepard, 29 B.R. 928
(Bankr. M.D. Fla. 1983). Since this Court sits in Florida,
Florida choice-of-law rules apply. Florida's courts look
to the Restatement (Second) of Conflicts (1971) for choice-
of-law questions. See Bishop v. Florida Specialty Paint Co.,
389 So.2d 999 (Fla. 1980).
Section 145 of the Restatement sets forth the "most
significant contracts test" to determine the choice-of-law.
Under this test, Florida law would apply. Celotex and JWC were
headquartered in Florida, this action is pending in Florida and
JWC is incorporated in Florida. However, under Section 307 of
the Restatement, Delaware law would apply because the Asbestos
Claimants seek to ultimately impose liability on the shareholder
of a Delaware corporation. See Jefferson Pilot Broadcasting v.
Hilary & Hogan, 617 F.2d 133 (5th Cir. 1980). However, the
resolution of this conflict in the application of law is largely
insignificant, since the laws of Delaware and Florida are
functionally the same. In re Rodriguez, 895 F.2d 725 (11th Cir.
1990).
GENERAL PRINCIPLES RELEVANT TO THE ISSUES
Florida and Delaware courts disregard the corporate
entity in only the most extraordinary cases. Those who seek to
pierce the corporate veil, in either jurisdiction, carry a very
heavy burden. Eagle v. Benefield-Chappell, Inc., 476 So.2d 716
(Fla. 4th DCA 1985); Harco Nat'l Ins. Co. v. Green Field Farms,
Inc., 1989 WL 110537 (Del. Ch.).
In order to pierce the corporate veil under Florida
and Delaware law, it is the claimant's burden to establish by
a preponderance of the evidence that: (1) the shareholder
dominated and controlled the corporation to such an extent that
the corporation independent existence, was in fact non-existent
and the shareholder shareholders were in fact alter egos of the
corporation; (2) the corporate form must have been used
fraudulently or for an improper purpose; and (3) the
fraudulent or improper use of the corporate form caused injury
to the claimant. Dania Jai-Alai Palace, Inc. v. Sykes, 450
So.2d 1114 (Fla. 1984); Mobil Oil Corp. v. Linear Films,
Inc., 718 F. Supp. 260 (D. Del. 1989).
In order to overcome the presumption of the separate
existence of the corporation from its shareholder, it must
be established with the requisite degree of proof that the
parent and the subsidiary operated as a single economic
entity. Mabon, Nugent & Co. v. Texas American Energy Corp.,
1990 WL 44267 (Del. Ch.); cf. Solomon v. Betras Plastics,
Inc., 550 So.2d 1182 (Fla. 5th DCA) (individual liability
imposed where "the personal affairs of the shareholder become
confused with the business affairs of the corporation") rev.
dismissed, 554 So.2d 1168 (Fla. 1989).
Under both the laws of Florida and Delaware, there must
be persuasive proof of shareholder misconduct before a Court
will pierce the corporate veil. The courts of both Florida
and Delaware require proof of deliberate misuse of the
corporate form--tantamount to fraud-- before they will pierce
the corporate veil. Thus, absent proof of fraud or ulterior
motive by the shareholder, the corporate veil shall not be
pierced. Conant v. Blount, 192 So. 481 (Fla. 1939); Advertects,
Inc. v. Sawyer Industries, Inc., 84 So.2d 21 (Fla. 1955);
Corvell v. Pilkington 39 F.Supp 142 (S.D. Fla. 1941), aff'd 128
F.2d 702 (5th Cir. 1942), aff'd 317 U.S. 406, 63 S.Ct. 291, 87
L. Ed. 363 (1943).
The Florida Supreme Court has unequivocally stated that
"the corporate veil may not be pierced absent a showing of
improper conduct." Dania Jai-Alai Palace, Inc., supra. It is
true that the courts of this state do not hesitate to find such
conduct where "the corporation was organized or employed for the
purpose to mislead creditors or to work a fraud upon them."
Id., at 1120 (quoting Advertects, Inc., supra; see also Gershuny
v. Martin McFall Messenger Anesthesia, P.A., 539 So.2d 1131
(Fla. 1989) ("courts will not look behind [the corporate] entity
to hold liable the individuals who compose it absent fraud or
some illegal purpose").
Florida cases after Dania looked to shareholders'
subjective motivation, and not to the effect of their actions.
In Steinhardt v. Banks, 511 So.2d 336 (Fla. 4th DCA 1987) (per
curiam), rev. denied 518 So.2d 1273 (Fla. 1987), the Florida
District Court of Appeal offered a "workable formula for
applying the [Dania] reference to 'improper conduct'." The
court stated:
Florida decisions uniformly hold that courts
will look through the screen of corporate
entity to the individuals who compose it in
cases in which the corporation was a mere
device or sham to accomplish some ulterior
purpose, . . . or where the purpose is to
evade some statute or to accomplish some
fraud or illegal purpose, or where the
corporation was employed by the stockholders
for fraudulent or misleading purposes, was
organized or used to mislead creditors or to
perpetrate a fraud upon them, or to evade
existing personal liability. (emphasis
added).
Id. (citing Tiernan v. Sheldon, 191 So.2d 87 (Fla. 4th DCA
1966), cert. discharged, 200 So.2d 183 (Fla. 1967). Thus it is
that the improper conduct must be deliberate misconduct. See
also Barkett v. Hardy, 571 So.2d 13 (Fla. 2d DCA 1990) (absence
of corporate formalities, lack of equity capital, proof of
domination and control, and that corporation was used as a
vehicle for personal interest were insufficient to establish
improper conduct); Futch v. Head, 511 So.2d 314 (Fla. 1st DCA)
(veil pierced where shareholder employed corporation to cheat
co-broker out of a sales commission), rev. denied, 518 So.2d
1275 (Fla. 1987); U-Haul Int'l v. Jartran, Inc., 793 F.2d 1034
(9th Cir. 1986) (interpreting Dania to require actual fraud as a
prerequisite to alter ego liability for trademark infringement).
One would have to be less than candid not to ignore the
decisions which have considered also the "instrumentality/alter
ego" theory in connection with the veil piercing actions.
See, e.g. Mabon, Nugent, supra. Under this theory, once the
plaintiff proved that the shareholder completely disregarded
the corporate form, and in fact acted not as a corporation,
the courts did not require additional misconduct to pierce the
corporate veil. For example, if the shareholders entered into
business relationships as an individual and not as a
corporation, especially if the shareholder ignored the
formalities required by law, or held himself out to the market
place as an individual, no doubt the shareholder will not be
permitted to hide behind the corporate shield. Then the veil
may be pierced for no other reason than that the shareholders
are bound by their conduct and are estoppel to hide behind
the corporate veil.
However, no Delaware court actually held that the
corporate veil may be pierced solely on the instrumentality
theory. See Mabon, Nugent, supra. ("The Delaware courts have
also stated, although not held, that the corporate veil may be
pierced where a subsidiary is in fact a mere instrumentality
or alter ego of its parent"). Nor is this Court aware of a
Florida decision to the contrary. Moreover they do not stand
for the proposition that misconduct is not required.
In this connection it should also be noted that this
Court has already found in its Memorandum Opinion on the Motion
for Summary Judgment that before one can resort to the
instrumentality theory, there must have been a complete
disregard for corporate formalities--where shareholders "have
ignored the 'corporateness' of the corporation," Irwin &
Leighton, Inc., v. W.M. Anderson Co., 532 A.2d 983 (Del. Ch.
1987), and where the parent and subsidiary corporations are
"operated as a single economic entity such that it would be
inequitable for [a] Court to uphold a legal distinction between
them." Mabon, Nugent, supra.
It is clear that negligence or even reckless conduct,
of which by the way there is not evidence in this case in spite
of some insinuation and innuendo, are not sufficient to
establish improper conduct under either Florida or Delaware law.
In Ally v. Naim, 581 So.2d 961 (Fla. 3d DCA 1991), the plaintiff
was an employee of a corporation that owned and operated food
vending machines. In 1985, the corporation sold all of its
machines to a third party. It continued to sell soda through
1988. From 1985 through 1989, the president and sold
stockholder took all corporate income, net after expenses, as
personal compensation. Plaintiff was injured in the course of
his employment in 1986. He filed a worker's compensation claim.
In 1990, unable to collect his judgment from the corporation,
the plaintiff sued the individual stockholder. The trial court
pierced the corporate veil and entered judgment against the
individual stockholder.
On appeal, the Florida court reversed the judgment.
Although the defendant had not set aside any corporate funds to
cover the worker's compensation claim, the court refused to
pierce the corporate veil "unless it is shown that the
corporation was organized or employed to mislead creditors or to
work a fraud upon them." Id. at 963 (quoting Advertects,
supra.) The court further stated that "it is not enough to show
that the corporation's 'business affairs had been rather poorly
handled.'" Id.
In Harco Nat'l Ins. Co. v. Green Farms, Inc., supra, a
former employee sought to collect a worker's compensation
judgment from he individual stockholders of Green Farms, Inc.,
his past employer. The corporation had failed to carry worker's
compensation insurance, as required by statute, and was
otherwise undercapitalized. In denying summary judgment on the
plaintiff's veil-piercing claim, the court stated:
[The stockholders] apparently made loans to
Green Farms, Inc., and then obtained
repayment by transferring assets from the
corporation to themselves. Such a transfer
of assets, however, is not necessarily a
basis for piercing the corporate veil. The
Plaintiffs must also show that such
transfers were done to defraud creditors or
were done merely to siphon off corporate
assets, rather than repay outstanding loans.
(emphasis added).
The conduct of a shareholder in both Ally and Harco was
clearly negligent and reckless. Notwithstanding, in both
cases the fact that the persons in charge breached their legal
duty to provide insurance for their employees did not warrant
piercing the corporate veil. The controlling case law requires
more, intentional misconduct, or, put a different way, before
the conduct may form the basis to disregard the corporate
structure, it must be established that the corporation was
operated as a shell game and the corporate shield between the
parent and subsidiary was nothing more than a sham. Mobil Oil
Corp., supra.
In the present instance JWC had no legal obligation to
assure that Celotex had adequate insurance to meet the projected
and, in a large measure, the claims of the asbestos victims,
some of whom are yet to be identified, related to the exposure
of asbestos is certainly insufficient to conclude that they
intentionally failed to provide for the Asbestos Claimants and
would warrant piercing the corporate veil. There is hardly any
question that even if the conduct of a parent is reckless or
negligent, as a matter of law it is insufficient to carry the
burden of proof placed on the parties who seek to pierce the
corporate veil. Even assuming without conceding that JWC was
negligent or even reckless by failing to assure that Celotex had
enough insurance, this is not sufficient to warrant to pierce
the corporate veil.
PERVASIVE DOMINION AND CONTROL
INTERCOMPANY TRANSACTIONS
A. Cash Management System
One element of the attack on the corporate separateness
of Celotex and JWC centered around the cash management
system. It has been widely recognized in the corporate
world that there is nothing inherently wrong in a parent
managing all the cash generated by the subsidiaries through
a cash management system. Tyco Lab., Inc. v. DASI Indus.,
Inc. 1993 WL 356929 (N.D. Ill. 1993) (evidence that parent
served a 'centralized cash management function' for itself
and its subsidiaries did not justify piercing veil); United
States v. Bliss, 108 F.R.D. 127 (E.D. Mo. 1985) (claim
that parent "manipulated cash flows through a cash management
system" did not indicate anything more "than a usual parent-
subsidiary relationship"); Japan Petroleum (Nigeria) Ltd. v.
Ashland Oil, Inc., 456 F.Supp. 831 (D. Del. 1978) (fact that
parent paid invoices of subsidiary "pursuant to a cash
management system for its subsidiaries" was not grounds to
pierce veil).
Based on this record there is no doubt, and this Court
is satisfied, that the cash management system was totally
consistent with sound business practices widely recognized in
the corporate business world.
B. Corporate Assessment
The next thrust of the attack by the Asbestos
Claimants focused on the corporate assessment by the parent to
its subsidiaries and contended it was somehow improper. In the
case of Pulte Home Corp., Inc., v. Ply Gem Industries, Inc., 804
F.Supp. 1471 (M.D.Fla. 1992), the District Court for the Middle
District of Florida held that:
The only payments made by Hoover to Ply Gem are
reasonable amounts that it, like the other
operating subsidiaries, pays to compensate Ply
Gem for financing and other services that Ply Gem
provides to it, and provide Ply Gem with a
reasonable return on its investment. Ply Gem
charges Hoover a working capital fee that is
calculated at a fixed percentage of Hoover's net
working capital. The percentage rate changes
annually and reflects the interest rate paid by
Ply Gem to its own lenders. This rate is lower
than any fixed rate that would be available to
Hoover from outside lenders if Hoover were to
finance its working capital.
See also Johnson v. Warnaco, Inc., 426 F.Supp. 44 (S.D. Miss.
1976) "corporate charge" of 1.3% of sales was levied for
services rendered by parent). Again, it is clear that there is
nothing inherently improper in the assessment by a parent of
charges incurred on behalf of the subsidiary. Without anything
more, it is difficult to accept that the existence of a
corporate assessment warrants the piercing of the corporate veil
between Celotex and JWC.
This is evident inasmuch as had the parent not furnished
the services for which it charged a reasonable cost, the
subsidiary would have to obtain these services from outside
sources at no doubt equal or greater cost. Such an arrangement
would not have been conducive to an efficient or economic manner
to conduct the business of the various enterprises.
C. Line-of-Business Reporting
In the same vein, the line-of-business reporting and
general oversight of the operations of a subsidiary by a parent
is equally common and proper. This Court that the line-of-
business reporting is a proper manner for a parent to oversee
the operation of its subsidiaries and does not support the
conclusion to pierce the corporate veil. See In re Fairfield
Plantation, Inc., 147 B.R. 946 (Bankr. E.D. Ark. 1992)
("centralized records for all FCI subsidiaries were kept by
FCI."); In re School Asbestos Litigation, 1993 WL 209719 (E.D.
Pa. 1993) (fact that subsidiary president and division manager
reported to group vice president did not exhibit control
necessary to pierce veil); Fidenas AG v. Honeywell, Inc., 501 F.
Supp. 1029 (S.D.N.Y. 1980) (no piercing although parent reported
subsidiaries' profits as part of parent financial, had a unified
marketing plan, approved long range plans and annual plans, and
held themselves out as a "single integrated world-wide
operation"). These holdings are sound and all emphasize one
basic point, that a 100% stockholder has the right to know what
is going on with his investment. In re School Asbestos
Litigation, supra.
DECISION-MAKING PROCESS
Also, the Asbestos Claimants contend that the
requirement of approval by the parent of capital expenditures,
acquisitions and sales of capital assets was improper. There is
substantial authority to support the proposition that such
involvement by a parent is not only proper but common and has
been approved by the courts. See Phoenix Canada Oil Co., Ltd.
v. Texaco, Inc., 842 F.2d 1466 (3d Cir.) cert. denied 488 U.S.
908, 109 S.Ct. 259, 102 L. Ed. 2d 247 (1988) (subsidiaries were
"required to secure approval from their parent corporations for
large investments and acquisitions or disposal of major
assets"); Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145
(3d Cir. 1988) ("widespread involvement" in financial and
management decisions, including "close scrutiny of new capital
expenditure projects," did not rise to high standard of
domination required to pierce the veil); Quarles v. Fuqua
Industries, Inc., 504 F.2d 1358 (10th Cir. 1974) (it is
appropriate for a corporate parent to approve budgets and
generally to supervise and coordinate subsidiaries' financial
matters); Mobil Oil Corp., supra. (approval of major subsidiary
expenditures merely demonstrated that parent and subsidiary were
"closely connected" and did not warrant piercing the veil);
Akzona Inc. v. E.I. DuPont de Nemours & Co., 607 F.Supp. 227
(D.Del. 1984) (no piercing where parent had to approve capital
expenditures of subsidiary); D.L. Auld Co. v. Park
Electrochemical Corp., 553 F.Supp. 804 (E.D.N.Y. 1982) (no
piercing where subsidiary "must follow the orders of [parent
company] regarding significant business decisions"); Fidenas,
supra (fact that parent approved subsidiary expenditures over a
certain level did not support piercing).
The one and only asset of JWC was its stock holdings in
Celotex. It would have been sheer, utter folly, and would defy
common business sense to require the parent to stand aloof with
its eyes closed to the subsidiary's activities concerning the
acquisition and sale of capital assets. JWC owed, as a
fiduciary, the duty to its stockholders to assure that nothing
done by its wholly owned subsidiaries impaired or put in
jeopardy the investment of its shareholders. Based upon the
foregoing, this Court is satisfied that the involvement by JWC
in the area of capital expenditure and capital liquidation was
within the accepted standards of the corporate business world
and was proper.
MOTIVATION TO SELL ASSETS OF CELOTEX
In the last analysis the underlying basis of the Asbestos
Claimants' position is based on the assertion that the assets of
Celotex were sold in order to denude Celotex of its assets and
render it unable to respond to the ever-growing claims of
individuals and entities who claimed to have suffered damage as
a result of exposure to products containing asbestos
manufactured and/or distributed by Celotex. It is clear that
all asbestos manufacturers were aware of the media coverage of
the asbestos litigation, especially when Johns-Manville filed
for protection under the Bankruptcy Code, the first major
asbestos related Chapter 11 case. Everybody who had a
connection with asbestos or asbestos related products was fully
aware of the progress of the Johns-Manville Chapter 11 case.
One would be less than candid not to admit that this threat to
enterprises who were connected and involved with asbestos would
raise concern in the minds of the management of JWC and the
legal department of JWC.
Juxtaposed to this disturbing and ever mounting development
in the asbestos related litigation was the real and radical
downturn of the economy due to the unprecedented inflation and
an unheard of rise in the interest rates which, as noted
earlier, approached and ultimately passed the 20% annual rate.
It is unnecessary to indulge in any unwarranted speculation of
the tremendous impact and the effect of this development on the
real estate market, particularly on sales of new homes. One of
the strongest and healthiest member of the JWC family was Jim
Walter Homes, which builds prefabricated homes all over the
country. The almost devastating impact of this development
brought home to the management of JWC that it was presented with
the inevitable choice between further attempts to strengthen
business and struggle to survive through cost cutting and in the
event that failed to produce the necessary results, possibly
targeting certain parts of the JWC family for liquidation in
order to raise the necessary cash to survive. The line of
credit which was clearly the life blood of the economic health
and the operation of the JWC family was in serious danger and
thus it was absolutely imperative to secure the necessary cash
to keep the ship afloat. The divisions or subsidiaries of
Celotex which were targeted and were actually sold were
historically poor performers, some never having generated any
profit, and some only marginally.
There is no hard evidence in this record which would
warrant the conclusion based on this record that JWC embarked
upon conduct using its dominating position as a parent to
liquidate the assets of Celotex specifically for the purpose of
evading any possible liability resulting from the asbestos
litigation. The most that could be said is that the theory
advanced by the Asbestos Claimants is supported somewhat, albeit
slightly, by this record. It is equally true that this record
also supports, but with a greater force, the position taken by
JWC that the liquidation proceeds was a result of a sound proper
business judgment and was not motivated by any desire to injure
the Asbestos Claimants or denude Celotex of its assets in order
to assure that in the event they prevail they will not be able
to obtain satisfaction of their judgments, if and when they
obtain the judgments. This being the case it is clear that the
record supports more strongly the claim of the Debtors and for
this reason the Asbestos Claimants have failed to carry the
burden placed on them which is persuasive and definitely the
preponderance of the evidence.
UTILIZATION OF PROCEEDS OF LIQUIDATION
REPAYMENT OF LOANS VS RECOVERY OF EQUITY
The propriety of the repayment of the intercompany payable
with the proceeds of the asset disposition was hotly contested
by the parties. The question centers around whether the
intercompany payable was in fact a payable, i.e. debt, or really
an equity investment, i.e. capital.
It should be pointed out at the outset that the financing
of a subsidiary by a parent is not improper per se. This notion
was has been repeatedly rejected by courts, finding that it is
proper for the parent to provide all financing to the
subsidiary. In re Fairfield Plantation, Inc., supra. See Pulte
Home Corp., supra, (no piercing where parent financed
subsidiary's working capital); In re Blanton, supra,
(intercompany loans, documented only on accounting books, do
"not reveal a disregard of the legal separateness of the various
corporations, but only reflects the factual relatedness of the
various corporations"); Bliss, supra (parent's guarantee of bank
loans for subsidiary did not indicate a relationship "other than
a usual parent-subsidiary relationship"); Akzona Inc., supra
(parent "arranging financing" for subsidiary was not grounds for
piercing veil); Fidenas, supra (fact that defendants procured
loans for subsidiary was "common" and not grounds for piercing
the veil); Japan Petroleum Co., supra (treasury department of
parent advanced funds to subsidiary as part of cash management
system, but that was not grounds to pierce veil); Johnson v.
Warnaco, supra, (parent obtained financing as needed, charging
subsidiaries on inter-corporate books).
Thus, in the last analysis the issue involves the proper
classification of the advances--described by JWC as a bona fide
loan and by the Asbestos Claimants as an equity investment. In
determining whether the advance of funds is equity or debt,
courts have looked to a variety of factors, including the
initial capitalization of the corporation, the amount of
shareholder control, the label placed on the transaction by the
parties involved, the intent of the parties involved in the
transaction, and the documentation of the transaction.
Turning first to the issue of whether the funds advanced
were in fact bona fide loans or capital investment, Courts
frequently consider the question of whether or not the
corporation was initially properly capitalized or whether the
capitalization was either nominal or "thin." The longer the
corporation operated before the advance was made by the
insiders, stockholders or affiliates, the less likely that the
Courts will finds the corporation was undercapitalized, and the
more likely the advance was a bona fide loan. In re Regency,
Inc., 96 F.Supp. 535 (D.N.J. 1951); Costello v. Fazio, 256 F.2d
903 (9th Cir. 1958); Bijour-Pensacola Corp. v. United States,
172 F.Supp. 309 (N.D. Fla. 1959). There is no question that
Celotex was established long before it was acquired by JWC, and
there is not a scintilla of evidence in this record that at its
creation, Celotex was undercapitalized.
In addition to capitalization, the courts also look to the
amount of control exercised by the shareholders of the parent
over the affairs of the subsidiary. The absence of control has
been a factor in cases where advances were determined to be
loans, In the Matter of Lumber, Inc., 124 F.Supp. 302 (D.Ore.
1954). However, the rule is best stated in the negative, that
is, absence of control makes a strong case for the plaintiff,
but the presence of control alone will not make out the case for
finding that an advance of funds was an actual infusion of
capital rather than bona fide loans. Although there is no
question that there was a certain amount of control exercised by
JWC over the affairs of Celotex and the other subsidiaries, it
was exercised within the context of the holding company's
relationship with its wholly owned subsidiary. This Court is
satisfied that this control was within normal and accepted
ranges. After all, the control by the parent was part and
parcel of the parent's responsibility to its shareholders, to
ensure that their investments would be monitored and would not
be jeopardized, which might have occurred had JWC given an
unbridled control and carte blanche authority to its
subsidiaries, including Celotex.
Next, the courts frequently look at the label placed upon
the advance in the corporate books. In re Otis & Edwards, P.C.,
55 B.R. 185 (Bankr. E.D. Mich. 1985), ("A corporation's general
ledger will usually reveal how payments on the receivables have
been treated by the corporation."); The label placed upon the
advance often reveals the parties' intent as to the treatment of
the transaction, and as held in In re Lane, 742 F.2d 1311 (11th
Cir. 1984), a deciding factor is the intent of the parties. Id.
at 1315. (quoting Bayerlite Corp. v. Williams 286 F.2d 285 (6th
Cir. 1960) ("the decisive factor is not what the payments are
called but what, in fact, they are, and that depends upon the
real intention of the parties")); Estate of Mixon v. United
States, 464 F.2d 394 (5th Cir. 1972) ("we agree that the
parties' intent to create either a debt or equity relationship
is, in a sense, the ultimate issue to be determined here.") In
re Otis & Edwards, P.C., supra ("The character of the debt
depends on the intent of the parties at the time the transfer
was made"). In the case of Celotex, both Celotex and JWC
labeled the intercompany payable as a payable and treated the
advance as such. This treatment of the intercompany payable was
recognized to be debt not only by the parties involved, but also
by third party lenders and financial analysts, and this payable
was also reported as a liability in the report filed with the
Securities and Exchange Commission.
In sum, the funds advanced by JWC were no different than a
line of credit transaction between an institutional lender and a
creditor, in which the outstanding balance owed constantly
fluctuates, yet there is no question that the outstanding
balance is expected to be repaid. As a matter of fact, in this
particular instance the funds advanced by JWC to Celotex were in
fact, repaid in full.
Along with the label placed on the transaction, the
formality of the transaction was placed into issue. It is
without dispute that these advances were not evidenced by
executed promissory notes, nor did the corporation issue
additional stock for the advance. The answer to this question
was furnished by Fidelity Capital Corp., 920 F.2d 827 (11th Cir.
1991) where the court determined that an entry of an advance on
the corporate books is sufficient formality for an intercompany
loan. See also Stewart Bros. v. Allen, 189 Ga. App. 816, 377
S.E.2d 724 (Ga. App. 1989) (checks demarcated as "loans"
provided sufficient formality to establish debt). Based upon
the foregoing, this Court is satisfied that the documentation of
the advance, or the lack thereof, is not a fatal element in this
situation. It is clear from the record that the parties
involved intended that these advances be treated as debt, and
Celotex understood it had an obligation to repay the funds
advanced.
It is intimated in this instance, however, that the
repayment by Celotex to JWC of the loans were somewhat tainted
suggesting that the repayment of the loans by Celotex to JWC was
improper because the funds used to make this repayment should
have been kept by Celotex especially because these funds were
realized from the liquidation of Celotex assets and should have
been used to purchase adequate insurance to cover the claims of
the Asbestos Claimants. Or put in a different way, the Asbestos
Claimants contend that JWC was preferred over the bona fide
claims asserted by the asbestos victims against Celotex and,
therefore, this conduct was somewhat improper and by itself
would warrant to pierce the corporate veil. To the extent that
it is intimated or suggested that these repayments were voidable
preferences obviously misses the mark inasmuch as these
transactions were way outside of any time frame provided by
Section 547 to avoid preferences, i.e., the one year time frame
for insiders, Section 547 (b)(1)(B).
The contention that, because of the repayment of the
advances by Celotex, JWC deprived Celotex from funds and assets
which would otherwise be available to respond to the massive-
tort claims, in this Court's opinion, also misses the mark.
This same argument was examined--and rejected--by the court in
In re Silicone Gel Breast Implants Products Liability
Litigation, 837 F.Supp. 1128 (N.D. Ala. 1993), where personal
injury plaintiffs sought to pierce the veil between Dow Corning
and one of its parents, Dow Chemical. Judge Pointer granted
summary judgment rejecting the claim. He had this to say on the
question of capitalization:
One could argue that whenever the potential tort
liabilities facing a corporation exceed its
assets, the corporation is undercapitalized.
Plaintiffs make this argument, but fail to cite
any decision so holding, nor is this court aware
of any such case. As the movants point out, such
a definition of under-capitalization would result
in limited liability for a corporation in the
tort context only when it does not need it, i.e.
when the corporation's assets are sufficient to
satisfy its liabilities.
. . . [T]he plaintiff's argument is tantamount to
a call for disregarding the limited liability of
corporate organizations whenever a closely-held
corporation becomes confronted with potential
tort liabilities that could exceed its assets.
No court has taken such an expansive view of the
veil-piercing doctrine, and this court refuses to
do so now.
837 F.Supp. at 1137-38 (emphasis added).
CONCLUSION
Having considered the entire record together with the
exhibits and being fully advised by post-trial submissions by
the parties, there is no doubt that in the matter under
consideration there is a lot of smoke, but not sufficient fire
and the proof presented in support of the veil piercing claim is
a slender reed, indeed, upon which to hang a sword with
sufficient strength required under the law to pierce the
corporate veil. With some exception, the proof presented did
not even reach the level of equilibrium which by itself would be
insufficient to carry the burden of proof. Even on points
viewed in the most favorable light which would support the
Debtors' claims, such as JWC's motivation and its involvement in
the asset disposition of Celotex, the record equally supports
the theory urged by the Asbestos Claimants. It is equally
consistent with the position taken by JWC and the Debtors that
it was a sold and sound business decision and never reached the
level of intention wrongdoing which is required under the law to
pierce the corporate veil.
A separate Final Judgment shall be entered in accordance
with the foregoing.
DATED at Tampa, Florida, on April 18, 1994.
__________________________
ALEXANDER L. PASKAY
Chief Bankruptcy Judge
c: Debtor
Debtor/Plaintiff Atty-D Stichter, Esq. & M Crames, Esq.
Defendant Atty-Marsha Rydberg, Esq. & E Inselbuch, Esq.
All Interested Parties
U.S. Trustee
All Interested parties on Attached List
<PAGE>
EXHIBIT T3E5
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING
THE CREDITORS' PLAN
BALLOT FOR CLASS S-6
(SERIES B & C SENIOR NOTE) CLAIMS
(BENEFICIAL OWNERS)
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND
RETURN
IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE
HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE
"BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR
BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED.
The statutorily appointed Bondholders' Committee and
Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc
Committee of Pre-LBO Bondholders are soliciting your votes with
respect to the "Creditors' Joint Plan of Reorganization Dated As
Of
August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan is
further described in the "Disclosure Statement For Creditors'
Plan
Dated As Of August 1, 1994" (the "Creditors' Disclosure
Statement"). On August 2, 1994, the United States Bankruptcy
Court
for the Middle District of Florida (Tampa Division) entered an
order approving the Creditors' Disclosure Statement as containing
adequate information.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR
ACCEPTANCE
OR REJECTION OF THE CREDITORS' PLAN, YOUR PREFERENCE FOR THE
CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING NEW
SENIOR NOTES AND YOUR ELECTION REGARDING THE SPECIFIC RELEASE
CONTAINED IN THE CREDITORS' PLAN:
Item 1. Principal Amount of Series B & C Senior Notes As To
Which Votes Are Cast. This Ballot is cast by or on behalf of the
Beneficial Owner of the aggregate principal amount of the Series
B & C Senior Notes indicated immediately below. Please fill out
the following as may be appropriate:
Account Number (if known) Aggregate Principal Amount
Total = $
Or, if you do not hold your Series B & C Senior Notes through an
account or accounts, $ in aggregate principal amount.
Item 2. Class S-6 (Series B & C Senior Note Claims) Vote.
The Beneficial Owner of the aggregate principal amount of Series
B & C Senior Notes set forth in Item 1 votes to (please check one
box below):
Accept the Creditors' Plan
Reject the Creditors' Plan
Item 3. Preference. The Beneficial Owner of the aggregate
principal amount of Series B & C Senior Notes set forth in Item 1
wishes to indicate a preference for one Plan over the other in
the following manner (please check one box below):
Prefer the Creditors' Plan
over the Debtors' Plan.
Prefer the Debtors' Plan
over the Creditors' Plan.
Item 4. Series B & C Senior Note Claim Election.
Pursuant to Section 3.11 of the Creditors' Plan, each holder
of a Claim in Class S-6 may elect to receive all, but not part,
of its Series B & C Senior Note Claim in the form of New Senior
Notes.
I wish to have all of my Allowed Series B & C Senior
Note Claim satisfied by New Senior Notes
Item 5. Section 6.1 of the Creditors' Plan, which is set
forth in its entirety below, provides for a general release to be
granted creditors of and equity holders in the Debtors in one of
several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS
ENTIRETY
AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU
SPECIFICALLY AGREE TO GRANT SUCH RELEASE.
6.1 Release by Holders of Claims or Interests. As of
the Effective Date, Holders of any Claims or Interests:
(i) that accept any property or New Common Stock to be
distributed to or for the benefit of a Holder of any Claims,
or with respect to a Holder of Interests, that exercises its
Equity Call Option, pursuant to Article III of the Creditors'
Plan and in consideration therefor; (ii) in a Class that
accepts the Creditors' Plan; or (iii) that mark a box on the
ballot sent to such Holder for purposes of voting whether to
accept or reject the Creditors' Plan, indicating such Holder's
agreement to such release (the text of which release shall be
set forth in full on such ballot) (and all trustees and/or
agents on behalf of such Holder) shall be deemed to have
released, to the extent permitted by the Court, (A) the
Settling Parties (other than Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), the
Proponents, the Holders of Revolving Credit Bank Claims, the
Holders of Working Capital Bank Claims, the Revolving Credit
Agents, the Working Capital Agents, the Holders of Series B &
C Senior Note Claims, the Holders of Subordinated Note Claims,
the Series B & C Senior Note Trustee, the Subordinated Note
Trustees, the Holders of Allowed Indemnity Claims (to the
extent of such Claims), the members of the Official
Committees, the members of the Ad Hoc Committee of Pre-LBO
Bondholders and the respective present and former parents,
subsidiaries, Affiliates, directors, officers, partners,
shareholders, employees, agents, advisors, predecessors in
interest and representatives of the all of the foregoing
(other than any (x) Holders or former Holders of Allowed Old
Common Stock Interests that are not Settling Equityholders,
(y) any of Celotex's or Jim Walter Corporation's or any of the
Debtors' respective present and former shareholders,
directors, officers, partners, employees, agents, advisors and
representatives, and (z) Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), in
each case in such Person's capacity as a Holder of a Claim or
Interest, as a plan proponent, if applicable, as a shareholder
of any Debtor, or any other capacity (including, with respect
to the Bondholder Proponents, any action or inaction related
to or set forth in the definition of Qualified Securities
herein) (it being understood that this clause (A) does not
include any shareholder, director, officer, partner, employee,
agent, advisor or representative of any Debtor, in each case
that is a Holder or former Holder of an Allowed Old Common
Stock Interest that is not a Settling Equityholder or that is
not a Celotex/JWC Released Party) and (B) the holders of
Allowed Indemnity Claims that are not parties to the Veil
Piercing Settlement Agreement, but only to the extent of such
Allowed Indemnity Claims and only in the capacity in which
such Allowed Indemnity Claims provide indemnification,
reimbursement or contribution (collectively, the Persons
described in (A) and (B) are referred to herein, in such
capacities, as the "Released Parties"), of and from any and
all Claims, obligations, rights, causes of action and
liabilities (other than the right to enforce the Debtors'
obligations under the Creditors' Plan) which such Holder may
be entitled to assert, whether known or unknown, foreseen or
unforeseen, then existing or thereafter arising, based in
whole or in part upon any act, omission or other occurrence
taking place on or prior to the Effective Date in any way
relating to the Debtors, the Chapter 11 Cases or the
Creditors' Plan (including, without limitation, any of the
Veil Piercing-Related Issues or LBO-Related Issues).
The undersigned specifically AGREES TO grant
the release provided in Section 6.1. of the
Creditors' Plan.
YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF
YOUR ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE.
YOU MAY VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT
NOT TO SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT
CHECKING THE BOX ABOVE.
Item 6. By signing this Ballot, the undersigned certifies
that the Beneficial Owner has been provided with a copy of the
Creditors' Disclosure Statement, including all Exhibits thereto.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, you (as payee) are required by
law to provide the Debtors with your correct taxpayer
identification number ("TIN"). If you are an individual, your
TIN is your social security number. If the Debtors are not
provided with your correct TIN, you may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition,
payments and distributions to be made to you pursuant to the
Creditors' Plan may be subject to "backup withholding" for
federal income tax purposes.
Completing Substitute Form W-9
To prevent backup federal income tax withholding in
connection with distributions to be received pursuant to the
Creditors' Plan,
you must provide the Debtors with your correct TIN by completing
the Substitute Form W9 below, certifying that the TIN provided on
Substitute Form W-9 is correct and that either (1) you have not
been notified by the Internal Revenue Service that you are
subject to backup withholding or (2) the Internal Revenue Service
has notified you that you are no longer subject to backup
withholding. If you are an exempt holder, you must also provide
the Debtors with your correct TIN by completing the Substitute
Form W-9, and should indicate your exempt status by writing
"EXEMPT" in Part III of the
Substitute Form W-9. If you are subject to backup withholding,
please cross out Item Number 2 in Part IV of the Substitute Form
W-9. If you have not been issued a TIN and have applied for one,
or if you intend to apply for one in the near future, please
check
the box in Part II of the Substitute Form W-9, and sign and date
both the Substitute Form W-9 and the "Certificate of Taxpayer
Awaiting Identification Number". If you fail to do so, the
Debtors
will withhold 31% from any payments and distributions made to you
thereafter until a TIN and new Substitute Form W-9 are provided
to the Debtors.
What Taxpayer Identification Number to Provide
You are required to provide the Debtors the social
security number or employer identification number of the record
holder of the Claim held by you. If the Claim is in more than
one name or is
not in the name of the actual owner, consult the enclosed
"Guidelines for certification of Taxpayer Identification Number
on Substitute Form W-9" for additional guidance on which number
to report.
<PAGE>
EXHIBIT T3E6
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
MASTER BALLOT FOR
ACCEPTING OR REJECTING
THE CREDITORS' PLAN
FOR USE BY RECORD HOLDERS OF CLASS S-6 (SERIES B & C SENIOR NOTE)
CLAIMS
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT
AND
RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE
BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 23, 1994, IT WILL NOT BE COUNTED.
Name of Bank, Broker or Nominee:
Address:
1. The undersigned, a record holder as of July 13, 1994
of
the aggregate principal amount of $ of Series B & C Senior Notes
certifies the following (please fill out):
beneficial owners of an aggregate principal amount
of $ of Series B & C Senior Notes accepted the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of Series B & C Senior Notes rejected the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of Series B & C Senior Notes agreed to grant the specific
release provided in Section 6.1 of the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of Series B & C Senior Notes prefer the Creditors' Plan to
the Debtors' Plan.
beneficial owners of an aggregate principal amount
of $ of Series B & C Senior Notes prefer the Debtors' Plan to the
Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of Series B & C Senior Notes elected to receive New Senior
Notes.
2. The undersigned certifies that each beneficial owner
of the Series B & C Senior Notes described above whose votes are
being
transmitted along with this summary ballot has been provided with
a copy of the Creditors' Disclosure Statement.
3. The undersigned certifies that it is the registered
record
holder in its own name or through a position held at a securities
depository of the Series B & C Senior Notes set forth above.
4. Beneficial Owner Information
Please complete the following schedule below. The
undersigned certifies that
it is a true and accurate schedule of the votes of the beneficial
owners of the Series B & C Senior Notes described above.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF OF OF OF OF OF
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
ELECTS TO
RECEIVE
ACCEPTS REJECTS PREFERS PREFERS QUALIFIED
ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN
NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Total =N/A
</TABLE>
(ATTACH ADDITIONAL PAGES IF NECESSARY)
Name:
(Print or Type)
Federal Tax I.D. No.
Signature:
By:
(If Appropriate)
Title:
(If Appropriate)
Address:
Street
City, State and Zip Code
Telephone Number:
( )
Date Completed:
<PAGE>
INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT
The Master Ballot on the reverse side is not a letter of
transmittal and may not be used for any purpose other than for
the
record holders of the Series B & C Senior Notes holding on behalf
of another to record acceptances or rejections of the Creditors'
Plan, the preferences for the Creditors' Plan or the Debtors'
Plan,
elections of New Senior Notes and the grant of the specific
release
contained in the Creditors' Plan by the Beneficial Owners of
Series
B & C Senior Notes. Accordingly, holders should not surrender
any
certificates representing their securities in connection with
voting on the Creditors' Plan, and the Balloting Agent will not
accept delivery of any such certificates tendered together with
this Master Ballot.
The Creditors' Plan may be confirmed by the Bankruptcy
Court and thereby made binding on you if it is accepted by the
holders of
two-thirds in amount and more than one-half in number of claims
in
each class and the holders of two-thirds in amount of equity
security interests in each class voting on such plan. In the
event
the requisite acceptances are not obtained, the Bankruptcy Court
may nevertheless confirm such plan if the Bankruptcy Court finds
that such plan accords fair and equitable treatment to the class
or
classes rejecting it and otherwise satisfies the requirements of
section 1129(b) of the Code. If the Creditors' Plan is confirmed
by the
Bankruptcy Court, all holders of the Series B & C Senior Notes
Claims and any and all other holders of Claims against and equity
interests in the Debtors (including those who abstain or reject
such plan) will be bound by the confirmed plan and the
transactions contemplated thereby.
The record date (the "Voting Record Date") for purposes of
determining which holders of Series B & C Senior Notes are
eligible
to vote on the Creditors' Plan is July 13, 1994. Only holders of
Series B & C Senior Notes in whose name such Series B & C Senior
Notes are held on the books of the Series B & C Senior Note
Trustee
on the Voting Record Date or any person who has obtained a
properly
completed proxy from such person are eligible to vote on the
Creditors' Plan.
This Master Ballot is to be used by brokerage firms,
banks, or
nominees for summarizing votes cast by beneficial owners of
Series
B & C Senior Notes and received by 5:00 P.M., Eastern Time, on
September 19, 1994. Individual Ballots received after such time
must not be counted.
Please retain all executed Individual Ballots for one
year.
Please forward this Master Ballot in the enclosed return
envelope to:
If By Mail
Donlin, Recano & Company, Inc.
P.O. Box 2022
Murray Hill Station
New York, New York 10156-0701
If By Courier or Hand
Donlin, Recano & Company, Inc.
419 Park Avenue South
Suite 1206
New York, New York 10016
To have your vote count, you must complete, sign and
return
this Master Ballot so that it is received by the Balloting Agent
not later than 5:00 pm., Eastern Time, on September 23, 1994.
IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT,
CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868.
<PAGE>
EXHIBIT T3E7
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING
THE CREDITORS' PLAN
BALLOT FOR CLASS U-4 (SENIOR
SUBORDINATED NOTE) CLAIMS
(BENEFICIAL OWNERS)
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND
RETURN
IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE
HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, INC. (THE
"BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR
BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED.
The statutorily appointed Bondholders' Committee and
Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc
Committee of Pre-LBO Bondholders are soliciting your votes with
respect to the "Creditors' Joint Plan of Reorganization Dated As
Of
August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan is
further described in the "Disclosure Statement For Creditors'
Plan
Dated As Of August 1, 1994" (the "Creditors' Disclosure
Statement"). On August 2, 1994, the United States Bankruptcy
Court
for the Middle District of Florida (Tampa Division) entered an
order approving the Creditors' Disclosure Statement as containing
adequate information.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR
ACCEPTANCE
OR REJECTION OF THE CREDITORS' PLAN, YOUR PREFERENCE FOR THE
CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING
QUALIFIED SECURITIES, AND YOUR ELECTION REGARDING THE SPECIFIC
RELEASE CONTAINED IN THE CREDITORS' PLAN:
Item 1. Principal Amount of Senior Subordinated Notes As
To
Which Votes Are Cast. This Ballot is cast by or on behalf of the
Beneficial Owner of the aggregate principal amount of the Senior
Subordinated Notes indicated immediately below. Please fill out
the following as may be appropriate:
Account Number (if known) Aggregate Principal Amount
Total = $
Or, if you do not hold your Senior Subordinated Notes through an
account or accounts, $ in aggregate principal amount.
<PAGE>
Item 2. Class U-4 (Senior Subordinated Note Claims) Vote.
The Beneficial Owner of the aggregate principal amount of Senior
Subordinated Notes set forth in Item 1 votes to (please check one
box below):
Accept the Creditors' Plan
Reject the Creditors' Plan
Item 3. Preference. The Beneficial Owner of the aggregate
principal amount of Senior Subordinated Notes set forth in Item 1
wishes to indicate a preference for one Plan over the other in
the following manner (please check one box below):
Prefer the Creditors' Plan
over the Debtors' Plan.
Prefer the Debtors' Plan
over the Creditors' Plan.
Item 4. Subordinated Note Claim Election.
Pursuant to Section 1.26 of the Creditors' Plan, each holder
of a Claim in Classes U-4, U-5 and/or U-6 may elect to receive
all or any part of its Allowed Claim in Qualified Securities.
Any part
of such Claim that is not satisfied by Qualified Securities will
be satisfied by New Common Stock.
Please select one of the following:
I wish to have all of my Allowed Subordinated
Note Claim satisfied by Qualified Securities.
I wish to have $ aggregate principal
amount (fill in any amount up to the full amount
of your Allowed Subordinated Note Claim for the
Class to which this Election Form relates) of my
Allowed Subordinated Note Claim satisfied by
Qualified Securities.
Item 5. Section 6.1 of the Creditors' Plan, which is set
forth in its entirety below, provides for a general release to be
granted creditors of and equity holders in the Debtors in one of
several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS
ENTIRETY
AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU
SPECIFICALLY AGREE TO GRANT SUCH RELEASE.
6.1 Release by Holders of Claims or Interests. As of
the Effective Date, Holders of any Claims or Interests:
(i) that accept any property or New Common Stock to be
distributed to or for the benefit of a Holder of any Claims,
or with respect to a Holder of Interests, that exercises its
Equity Call Option, pursuant to Article III of the Creditors'
Plan and in consideration therefor; (ii) in a Class that
accepts the Creditors' Plan; or (iii) that mark a box on the
ballot sent to such Holder for purposes of voting whether to
accept or reject the Creditors' Plan, indicating such Holder's
agreement to such release (the text of which release shall be
set forth in full on such ballot) (and all trustees and/or
agents on behalf of such Holder) shall be deemed to have
released, to the extent permitted by the Court, (A) the
Settling Parties (other than Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), the
Proponents, the Holders of Revolving Credit Bank Claims, the
Holders of Working Capital Bank Claims, the Revolving Credit
Agents, the Working Capital Agents, the Holders of Series B &
C Senior Note Claims, the Holders of Subordinated Note Claims,
the Series B & C Senior Note Trustee, the Subordinated Note
Trustees, the Holders of Allowed Indemnity Claims (to the
extent of such Claims), the members of the Official
Committees, the members of the Ad Hoc Committee of Pre-LBO
Bondholders and the respective present and former parents,
subsidiaries, Affiliates, directors, officers, partners,
shareholders, employees, agents, advisors, predecessors in
interest and representatives of the all of the foregoing
(other than any (x) Holders or former Holders of Allowed Old
Common Stock Interests that are not Settling Equityholders,
(y) any of Celotex's or Jim Walter Corporation's or any of the
Debtors' respective present and former shareholders,
directors, officers, partners, employees, agents, advisors and
representatives, and (z) Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), in
each case in such Person's capacity as a Holder of a Claim or
Interest, as a plan proponent, if applicable, as a shareholder
of any Debtor, or any other capacity (including, with respect
to the Bondholder Proponents, any action or inaction related
to or set forth in the definition of Qualified Securities
herein) (it being understood that this clause (A) does not
include any shareholder, director, officer, partner, employee,
agent, advisor or representative of any Debtor, in each case
that is a Holder or former Holder of an Allowed Old Common
Stock Interest that is not a Settling Equityholder or that is
not a Celotex/JWC Released Party) and (B) the holders of
Allowed Indemnity Claims that are not parties to the Veil
Piercing Settlement Agreement, but only to the extent of such
Allowed Indemnity Claims and only in the capacity in which
such Allowed Indemnity Claims provide indemnification,
reimbursement or contribution (collectively, the Persons
described in (A) and (B) are referred to herein, in such
capacities, as the "Released Parties"), of and from any and
all Claims, obligations, rights, causes of action and
liabilities (other than the right to enforce the Debtors'
obligations under the Creditors' Plan) which such Holder may
be entitled to assert, whether known or unknown, foreseen or
unforeseen, then existing or thereafter arising, based in
whole or in part upon any act, omission or other occurrence
taking place on or prior to the Effective Date in any way
relating to the Debtors, the Chapter 11 Cases or the
Creditors' Plan (including, without limitation, any of the
Veil Piercing-Related Issues or LBO-Related Issues).
The undersigned specifically AGREES TO grant
the release provided in Section 6.1. of the
Creditors' Plan.
YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF
YOUR ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE.
YOU MAY VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT
NOT TO SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT
CHECKING THE BOX ABOVE.
Item 6. By signing this Ballot, the undersigned certifies
that the Beneficial Owner has been provided with a copy of the
Creditors' Disclosure Statement, including all Exhibits thereto.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, you (as payee) are required by
law to provide the Debtors with your correct taxpayer
identification number ("TIN"). If you are an individual, your
TIN
is your social security number. If the Debtors are not provided
with your correct TIN, you may be subject to a $50 penalty
imposed
by the Internal Revenue Service. In addition, payments and
distributions to be made to you pursuant to the Creditors' Plan
may be subject to "backup withholding" for federal income tax
purposes.
Completing Substitute Form W-9
To prevent backup federal income tax withholding in
connection
with distributions to be received pursuant to the Creditors'
Plan,
you must provide the Debtors with your correct TIN by completing
the Substitute Form W9 below, certifying that the TIN provided on
Substitute Form W-9 is correct and that either (1) you have not
been notified by the Internal Revenue Service that you are
subject
to backup withholding or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding.
If you are an exempt holder, you must also provide the Debtors
with
your correct TIN by completing the Substitute Form W-9, and
should
indicate your exempt status by writing "EXEMPT" in Part III of
the
Substitute Form W-9. If you are subject to backup withholding,
please cross out Item Number 2 in Part IV of the Substitute Form
W-9. If you have not been issued a TIN and have applied for one,
or if you intend to apply for one in the near future, please
check
the box in Part II of the Substitute Form W-9, and sign and date
both the Substitute Form W-9 and the "Certificate of Taxpayer
Awaiting Identification Number". If you fail to do so, the
Debtors
will withhold 31% from any payments and distributions made to you
thereafter until a TIN and new Substitute Form W-9 are provided
to the Debtors.
What Taxpayer Identification Number to Provide
You are required to provide the Debtors the social
security
number or employer identification number of the record holder of
the Claim held by you. If the Claim is in more than one name or
is
not in the name of the actual owner, consult the enclosed
"Guidelines for certification of Taxpayer Identification Number
on
Substitute Form W-9" for additional guidance on which number to
report.
<PAGE>
EXHIBIT T3E8
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
MASTER BALLOT FOR
ACCEPTING OR REJECTING
THE CREDITORS' PLAN
FOR USE BY RECORD HOLDERS OF CLASS U-4 (SENIOR SUBORDINATED NOTE)
CLAIMS
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT
AND
RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE
BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER
23, 1994, IT WILL NOT BE COUNTED.
Name of Bank, Broker or Nominee:
Address:
1. The undersigned, a record holder as of July 13, 1994 of
the aggregate principal amount of $ of Senior Subordinated Notes
certifies the following (please fill out):
beneficial owners of an aggregate principal amount
of $ of Senior Subordinated Notes
accepted the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of Senior Subordinated Notes
rejected the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of Senior Subordinated Notes agreed
to grant the specific release provided in Section 6.1 of the
Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of Senior Subordinated Notes prefer
the Creditors' Plan to the Debtors' Plan.
beneficial owners of an aggregate principal amount
of $ of Senior Subordinated Notes prefer
the Debtors' Plan to the Creditors' Plan.
2. The undersigned certifies that each beneficial owner
of the Senior Subordinated Notes described above whose
votes are being transmitted along with this summary ballot has
been provided with a copy of the Creditors' Disclosure Statement.
3. The undersigned certifies that it is the registered
record holder in its own name or through a position held at
a securities depository of the Senior Subordinated Notes set
forth above.
4. Beneficial Owner Information
Please complete the following schedule below. The
undersigned certifies that
it is a true and accurate schedule of the votes of the beneficial
owners of the Senior Subordinated Notes described above.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF OF OF OF OF OF
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
ELECTS TO
RECEIVE
ACCEPTS REJECTS PREFERS PREFERS QUALIFIED
ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN
NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Total =N/A
</TABLE>
(ATTACH ADDITIONAL PAGES IF
NECESSARY)
Name:
(Print or Type)
Federal Tax I.D. No.
Signature:
By:
(If Appropriate)
Title:
(If Appropriate)
Address:
Street
City, State and Zip Code
Telephone Number: ( )
Date Completed:
<PAGE>
INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT
The Master Ballot on the reverse side is not a letter of
transmittal and may not be used for any purpose other than for
record holders of the Senior Subordinated Notes holding on behalf
of another to record acceptances or rejections of the Creditors'
Plan, the preferences for the Creditors' Plan or the Debtors'
Plan,
elections of Qualified Securities, and the grant of the specific
release contained in the Creditors' Plan by the Beneficial Owners
of Senior Subordinated Notes. Accordingly, holders should not
surrender any certificates representing their securities in
connection with voting on the Creditors' Plan, and the Balloting
Agent will not accept delivery of any such certificates tendered
together with this Master Ballot.
The Creditors' Plan may be confirmed by the Bankruptcy
Court
and thereby made binding on you if it is accepted by the holders
of
two-thirds in amount and more than one-half in number of claims
in
each class and the holders of two-thirds in amount of equity
security interests in each class voting on such plan. In the
event
the requisite acceptances are not obtained, the Bankruptcy Court
may nevertheless confirm such plan if the Bankruptcy Court finds
that such plan accords fair and equitable treatment to the class
or
classes rejecting it and otherwise satisfies the requirements of
section 1129(b) of the Code. If the Creditors' Plan is confirmed
by the
Bankruptcy Court, all holders of Senior Subordinated Note Claims
and any and all other holders of Claims against and equity
interests in the Debtors (including those who abstain or reject
such plan) will be bound by the confirmed plan and the
transactions contemplated thereby.
The record date (the "Voting Record Date") for purposes of
determining which holders of Senior Subordinated Notes are
eligible
to vote on the Creditors' Plan is July 13, 1994. Only holders of
Senior Subordinated Notes in whose name such Senior Subordinated
Notes are held on the books of the Senior Subordinated Indenture
Trustee on the Voting Record Date or any person who has obtained
a
properly completed proxy from such person are eligible to vote on
the Creditors' Plan.
This Master Ballot is to be used by brokerage firms,
banks, or nominees for summarizing votes cast by Beneficial
Owners of Senior Subordinated Notes and received by 5:00 p.m.,
Eastern Time, on September 19, 1994. Individual Ballots received
after such time must not be counted.
Please retain all executed Individual Ballots for one
year.
Please forward this Master Ballot in the enclosed return
envelope to:
If By Mail
Donlin, Recano & Company, Inc.
P.O. Box 2022
Murray Hill Station
New York, New York 10156-0701
If By Courier or Hand
Donlin, Recano & Company, Inc.
419 Park Avenue South
Suite 1206
New York, New York 10016
To have your vote count, you must complete, sign and
return
this Master Ballot so that it is received by the Balloting Agent
not later than 5:00 p.m., Eastern Time, on September 23, 1994.
IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT,
CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868.
<PAGE>
EXHIBIT T3E9
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING
THE CREDITORS' PLAN
BALLOT FOR CLASS U-5
(17% SUBORDINATED NOTE) CLAIMS
(BENEFICIAL OWNERS)
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND
RETURN
IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE
HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, Inc. (THE
"BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR
BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED.
The statutorily appointed Bondholders' Committee and
Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc
Committee of Pre-LBO Bondholders are soliciting your votes with
respect to the "Creditors' Joint Plan of Reorganization Dated As
Of
August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan is
further described in the "Disclosure Statement For Creditors'
Plan
Dated As Of August 1, 1994" (the "Creditors' Disclosure
Statement"). On August 2, 1994, the United States Bankruptcy
Court
for the Middle District of Florida (Tampa Division) entered an
order approving the Creditors' Disclosure Statement as containing
adequate information.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR
ACCEPTANCE
OR REJECTION OF THE CREDITORS' PLAN , YOUR PREFERENCE FOR THE
CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING
QUALIFIED SECURITIES, AND YOUR ELECTION REGARDING THE SPECIFIC
RELEASE CONTAINED IN THE CREDITORS' PLAN:
Item 1. Principal Amount of 17% Subordinated Notes As To
Which Votes Are Cast. This Ballot is cast by or on behalf of the
Beneficial Owner of the aggregate principal amount of the 17%
Subordinated Notes indicated immediately below. Please fill out
the following as may be appropriate:
Account Number (if known) Aggregate Principal Amount
Total = $
Or, if you do not hold your 17% Subordinated Notes through an
account or accounts, $ in aggregate principal amount.
Item 2. Class U-5 (17% Subordinated Note Claims) Vote.
The
Beneficial Owner of the aggregate principal amount of 17%
Subordinated Notes set forth in Item 1 votes to (please check one
box below):
Accept the Creditors' Plan
Reject the Creditors' Plan
Item 3. Preference. The Beneficial Owner of the
aggregate
principal amount of 17% Subordinated Notes set forth in Item 1
wishes to indicate a preference for one Plan over the other in
the
following manner (please check one box below):
Prefer the Creditors' Plan
over the Debtors' Plan.
Prefer the Debtors' Plan
over the Creditors' Plan.
Item 4. Subordinated Note Claim Election.
Pursuant to Section 1.26 of the Creditors' Plan, each
holder of a Claim in Classes U-4, U-5 and/or U-6 may elect to
receive all
or any part of their Allowed Claim in Qualified Securities. Any
part of such Claim that is not satisfied by Qualified Securities
will be satisfied by New Common Stock.
Please select one of the following:
I wish to have all of my Allowed Subordinated
Note Claim satisfied by Qualified Securities.
I wish to have $ aggregate principal
amount (fill in any amount up to the full amount
of your Allowed Subordinated Note Claim for the
Class to which this Election Form relates) of my
Allowed Subordinated Note Claim satisfied by
Qualified Securities.
Item 5. Section 6.1 of the Creditors' Plan, which is set
forth in its entirety below, provides for a general release to be
granted creditors of and equity holders in the Debtors in one of
several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS
ENTIRETY
AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU
SPECIFICALLY AGREE TO GRANT SUCH RELEASE.
6.1 Release by Holders of Claims or Interests. As of
the Effective Date, Holders of any Claims or Interests:
(i) that accept any property or New Common Stock to be
distributed to or for the benefit of a Holder of any Claims,
or with respect to a Holder of Interests, that exercises its
Equity Call Option, pursuant to Article III of the Creditors'
Plan and in consideration therefor; (ii) in a Class that
accepts the Creditors' Plan; or (iii) that mark a box on the
ballot sent to such Holder for purposes of voting whether to
accept or reject the Creditors' Plan, indicating such Holder's
agreement to such release (the text of which release shall be
set forth in full on such ballot) (and all trustees and/or
agents on behalf of such Holder) shall be deemed to have
released, to the extent permitted by the Court, (A) the
Settling Parties (other than Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), the
Proponents, the Holders of Revolving Credit Bank Claims, the
Holders of Working Capital Bank Claims, the Revolving Credit
Agents, the Working Capital Agents, the Holders of Series B &
C Senior Note Claims, the Holders of Subordinated Note Claims,
the Series B & C Senior Note Trustee, the Subordinated Note
Trustees, the Holders of Allowed Indemnity Claims (to the
extent of such Claims), the members of the Official
Committees, the members of the Ad Hoc Committee of Pre-LBO
Bondholders and the respective present and former parents,
subsidiaries, Affiliates, directors, officers, partners,
shareholders, employees, agents, advisors, predecessors in
interest and representatives of the all of the foregoing
(other than any (x) Holders or former Holders of Allowed Old
Common Stock Interests that are not Settling Equityholders,
(y) any of Celotex's or Jim Walter Corporation's or any of the
Debtors' respective present and former shareholders,
directors, officers, partners, employees, agents, advisors and
representatives, and (z) Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), in
each case in such Person's capacity as a Holder of a Claim or
Interest, as a plan proponent, if applicable, as a shareholder
of any Debtor, or any other capacity (including, with respect
to the Bondholder Proponents, any action or inaction related
to or set forth in the definition of Qualified Securities
herein) (it being understood that this clause (A) does not
include any shareholder, director, officer, partner, employee,
agent, advisor or representative of any Debtor, in each case
that is a Holder or former Holder of an Allowed Old Common
Stock Interest that is not a Settling Equityholder or that is
not a Celotex/JWC Released Party) and (B) the holders of
Allowed Indemnity Claims that are not parties to the Veil
Piercing Settlement Agreement, but only to the extent of such
Allowed Indemnity Claims and only in the capacity in which
such Allowed Indemnity Claims provide indemnification,
reimbursement or contribution (collectively, the Persons
described in (A) and (B) are referred to herein, in such
capacities, as the "Released Parties"), of and from any and
all Claims, obligations, rights, causes of action and
liabilities (other than the right to enforce the Debtors'
obligations under the Creditors' Plan) which such Holder may
be entitled to assert, whether known or unknown, foreseen or
unforeseen, then existing or thereafter arising, based in
whole or in part upon any act, omission or other occurrence
taking place on or prior to the Effective Date in any way
relating to the Debtors, the Chapter 11 Cases or the
Creditors' Plan (including, without limitation, any of the
Veil Piercing-Related Issues or LBO-Related Issues).
The undersigned specifically AGREES TO grant
the release provided in Section 6.1. of the
Creditors' Plan.
YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF
YOUR
ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE. YOU MAY
VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT NOT TO
SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT CHECKING
THE BOX ABOVE.
Item 6. By signing this Ballot, the undersigned certifies
that the Beneficial Owner has been provided with a copy of the
Creditors' Disclosure Statement, including all Exhibits thereto.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, you (as payee) are required by
law to provide the Debtors with your correct taxpayer
identification number ("TIN"). If you are an individual, your
TIN
is your social security number. If the Debtors are not provided
with your correct TIN, you may be subject to a $50 penalty
imposed
by the Internal Revenue Service. In addition, payments and
distributions to be made to you pursuant to the Creditors' Plan
may be subject to "backup withholding" for federal income tax
purposes.
Completing Substitute Form W-9
To prevent backup federal income tax withholding in
connection
with distributions to be received pursuant to the Creditors'
Plan,
you must provide the Debtors with your correct TIN by completing
the Substitute Form W9 below, certifying that the TIN provided on
Substitute Form W-9 is correct and that either (1) you have not
been notified by the Internal Revenue Service that you are
subject
to backup withholding or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding.
If you are an exempt holder, you must also provide the Debtors
with your correct TIN by completing the Substitute Form W-9, and
should indicate your exempt status by writing "EXEMPT" in Part
III of the
Substitute Form W-9. If you are subject to backup withholding,
please cross out Item Number 2 in Part IV of the Substitute Form
W-9. If you have not been issued a TIN and have applied for one,
or if you intend to apply for one in the near future, please
check
the box in Part II of the Substitute Form W-9, and sign and date
both the Substitute Form W-9 and the "Certificate of Taxpayer
Awaiting Identification Number". If you fail to do so, the
Debtors
will withhold 31% from any payments and distributions made to you
thereafter until a TIN and new Substitute Form W-9 are provided
to the Debtors.
What Taxpayer Identification Number to Provide
You are required to provide the Debtors the social
security number or employer identification number of the record
holder of the Claim held by you. If the Claim is in more than
one name or is not in the name of the actual owner, consult the
enclosed "Guidelines for certification of Taxpayer Identification
Number on
Substitute Form W-9" for additional guidance on which number to
report.
<PAGE>
EXHIBIT T3E10
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
MASTER BALLOT FOR
ACCEPTING OR REJECTING
THE CREDITORS' PLAN
FOR USE BY RECORD HOLDERS OF CLASS U-5 (17% SUBORDINATED NOTE)
CLAIMS
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT
AND
RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE
BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER
23, 1994, IT WILL NOT BE COUNTED.
Name of Bank, Broker or Nominee:
Address:
1. The undersigned, a record holder as of July 13, 1994
of
the aggregate principal amount of $ of 17% Subordinated Notes
certifies the following (please fill out):
beneficial owners of an aggregate principal amount
of $ of 17% Subordinated Notes accepted the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of 17% Subordinated Notes rejected the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of 17% Subordinated Notes agreed to grant the specific
release provided in Section 6.1 of the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of 17% Subordinated Notes prefer the Creditors' Plan to the
Debtors' Plan.
beneficial owners of an aggregate principal amount
of $ of 17% Subordinated Notes prefer the Debtors' Plan to the
Creditors' Plan.
2. The undersigned certifies that each beneficial owner
of
the 17% Subordinated Notes described above whose votes are being
transmitted along with this summary ballot has been provided with
a copy of the Creditors' Disclosure Statement.
3. The undersigned certifies that it is the registered
record holder in its
own name or through a position held at a securities depository of
the 17% Subordinated Notes set forth above.
4. Beneficial Owner Information
Please complete the following schedule below. The
undersigned certifies that
it is a true and accurate schedule of the votes of the beneficial
owners of the 17% Subordinated Notes described above.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF OF OF OF OF OF
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C>
ELECTS TO
RECEIVE
ACCEPTS REJECTS PREFERS PREFERS QUALIFIED
ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN
NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Total =N/A
</TABLE>
(ATTACH ADDITIONAL PAGES IF NECESSARY)
Name:
(Print or Type)
Federal Tax I.D. No.
Signature:
By:
(If Appropriate)
Title:
(If Appropriate)
Address:
Street
City, State and Zip Code
Telephone Number:
( )
Date Completed:
INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT
The Master Ballot on the reverse side is not a letter of
transmittal and may not be used for any purpose other than for
record holders of the 17% Subordinated Notes holding on behalf of
another to record acceptances or rejections of the Creditors'
Plan,
the preferences for the Creditors' Plan or the Debtors' Plan,
elections of Qualified Securities, and the grant of the specific
release contained in the Creditors' Plan by the Beneficial Owners
of 17% Subordinated Notes. Accordingly, holders should not
surrender any certificates representing their securities in
connection with voting on the Creditors' Plan, and the Balloting
Agent will not accept delivery of any such certificates tendered
together with this Master Ballot.
The Creditors' Plan may be confirmed by the Bankruptcy
Court and thereby made binding on you if it is accepted by the
holders of two-thirds in amount and more than one-half in number
of claims in
each class and the holders of two-thirds in amount of equity
security interests in each class voting on such plan. In the
event
the requisite acceptances are not obtained, the Bankruptcy Court
may nevertheless confirm such plan if the Bankruptcy Court finds
that such plan accords fair and equitable treatment to the class
or classes rejecting it and otherwise satisfies the requirements
of SECTION 1129(b) of the Code. If the Creditors' Plan is
confirmed by the Bankruptcy Court, all holders of 17%
Subordinated Note Claims and any and all other holders of Claims
against and equity interests in
the Debtors (including those who abstain or reject such plan)
will be bound by the confirmed plan and the transactions
contemplated thereby.
The record date (the "Voting Record Date") for purposes of
determining which holders of 17% Subordinated Notes are eligible
to vote on the Creditors' Plan is July 13, 1994. Only holders of
17% Subordinated Notes in whose name such 17% Subordinated Notes
are held on the books of the 17% Subordinated Indenture Trustee
on the Voting Record Date or any person who has obtained a
properly completed proxy from such person are eligible to vote on
the Creditors' Plan.
This Master Ballot is to be used by brokerage firms,
banks, or
nominees for summarizing votes cast by Beneficial Owners of 17%
Subordinated Notes and received by 5:00 p.m., Eastern Time, on
September 19, 1994. Individual Ballots received after such time
must not be counted.
Please retain all executed Individual Ballots for one
year.
Please forward this Master Ballot in the enclosed return
envelope to:
If By Mail
Donlin, Recano & Company, Inc.
P.O. Box 2022
Murray Hill Station
New York, New York 10156-0701
If By Courier or Hand
Donlin, Recano & Company, Inc.
419 Park Avenue South
Suite 1206
New York, New York 10016
To have your vote count, you must complete, sign and
return
this Master Ballot so that it is received by the Balloting Agent
not later than 5:00 pm, Eastern Time, on September 23, 1994.
IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT,
CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868.
<PAGE>
EXHIBIT T3E11
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
INDIVIDUAL BALLOT FOR ACCEPTING OR REJECTING
THE CREDITORS' PLAN
BALLOT FOR CLASS U-6
(PRE-LBO DEBENTURE) CLAIMS
(BENEFICIAL OWNERS)
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND
RETURN
IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. IF YOUR VOTE
HAS NOT BEEN RECEIVED BY DONLIN, RECANO & COMPANY, Inc. (THE
"BALLOTING AGENT") BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 23, 1994, OR, IF YOU ARE NOT THE RECORD HOLDER, BY YOUR
BROKER, BANK OR NOMINEE BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 19, 1994, IT WILL NOT BE COUNTED.
The statutorily appointed Bondholders' Committee and
Creditors' Committee, Lehman Brothers Inc., Apollo and the Ad Hoc
Committee of Pre-LBO Bondholders are soliciting your votes with
respect to the "Creditors' Joint Plan of Reorganization Dated As
Of August 1, 1994" (the "Creditors' Plan"). The Creditors' Plan
is further described in the "Disclosure Statement For Creditors'
Plan Dated As Of August 1, 1994" (the "Creditors' Disclosure
Statement"). On August 2, 1994, the United States Bankruptcy
Court for the Middle District of Florida (Tampa Division) entered
an order approving the Creditors' Disclosure Statement as
containing adequate information.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR
ACCEPTANCE
OR REJECTION OF THE CREDITORS' PLAN, YOUR PREFERENCE FOR THE
CREDITORS' PLAN OR THE DEBTORS' PLAN, YOUR ELECTION REGARDING
QUALIFIED SECURITIES, AND YOUR ELECTION REGARDING THE SPECIFIC
RELEASE CONTAINED IN THE CREDITORS' PLAN:
Item 1. Principal Amount of 10 7/8% Subordinated
Debentures,
13 1/8% Subordinated Notes and 13 3/4% Subordinated Debentures As
To Which Votes Are Cast. This Ballot is cast by or on behalf of
the Beneficial Owner of the aggregate principal amount of the
10 7/8% Subordinated Debentures, 13 1/8% Subordinated Notes
and/or
13 3/4% Subordinated Debentures indicated immediately below.
Please fill out the following as may be appropriate:
(a) 10 7/8% Subordinated Debentures.
Account Number (if known) Aggregate Principal Amount
Total = $
Or, if you do not hold your 10 7/8% Subordinated Debentures
through an account or accounts, $ in aggregate principal amount.
(b) 13 1/8% Subordinated Notes.
Account Number (if known) Aggregate Principal Amount
Total = $
Or, if you do not hold your 13 1/8% Subordinated Notes through an
account or accounts, $ in aggregate principal amount.
(c) 13 3/4% Subordinated Debentures.
Account Number (if known) Aggregate Principal Amount
Total = $
Or, if you do not hold your 13 3/4% Subordinated Debentures
through an account or accounts, $ in aggregate principal amount.
Grand Total Aggregate Principal Amount = $
Item 2. Class U-6 (Pre-LBO Debenture Claims) Vote. The
Beneficial Owner of the aggregate principal amount of 10 7/8%
Subordinated Debentures set forth in Item 1 votes to (please
check one box below):
Accept the Creditors' Plan
Reject the Creditors' Plan
The Beneficial Owner of the aggregate principal amount of
13 1/8% Subordinated Notes set forth in Item 1 votes to (please
check one box below):
Accept the Creditors' Plan
Reject the Creditors' Plan
The Beneficial Owner of the aggregate principal amount of
13 3/4% Subordinated Debentures set forth in Item 1 votes to
(please check one box below):
Accept the Creditors' Plan
Reject the Creditors' Plan
Item 3. Preference. The Beneficial Owner of the
aggregate principal amount of 10 7/8% Subordinated Debentures set
forth in Item 1 wishes to indicate a preference for one Plan over
the other in the following manner (please check one box below):
Prefer the Creditors' Plan
over the Debtors' Plan.
Prefer the Debtors' Plan over
the Creditors' Plan.
The Beneficial Owner of the aggregate principal amount of
13 1/8% Subordinated Notes set forth in Item 1 wishes to indicate
a preference for one Plan over the other in the following manner
(please check one box below):
Prefer the Creditors' Plan
over the Debtors' Plan.
Prefer the Debtors' Plan over
the Creditors' Plan.
The Beneficial Owner of the aggregate principal amount of
13 3/4% Subordinated Debentures set forth in Item 1 wishes to
indicate
a preference for one Plan over the other in the following manner
(please check one box below):
Prefer the Creditors' Plan
over the Debtors' Plan.
Prefer the Debtors' Plan over
the Creditors' Plan.
Item 4. Subordinated Note Claim Election. Pursuant to
Section 1.26 of the Creditors' Plan, each holder of a Claim in
Classes U-4, U-5 and/or U-6 may elect to receive all or any part
of its Allowed Claim in Qualified Securities. Any part of such
Claim that is not satisfied by Qualified Securities will be
satisfied by New Common Stock.
Please select one of the following:
I wish to have all of my Allowed Subordinated
Note Claim satisfied by Qualified Securities.
I wish to have $ aggregate principal
amount (fill in any amount up to the full
amount of your Allowed Subordinated Note
Claim for the Class to which this Election
Form relates) of my Allowed Subordinated
Note Claim satisfied by Qualified Securities.
Item 5. Section 6.1 of the Creditors' Plan, which is set
forth in its entirety below, provides for a general release to be
granted creditors of and equity holders in the Debtors in one of
several ways. PLEASE READ THE TEXT OF SECTION 6.1 IN ITS
ENTIRETY
AND THEN INDICATE BY CHECKING THE BOX WHETHER OR NOT YOU
SPECIFICALLY AGREE TO GRANT SUCH RELEASE.
6.1 Release by Holders of Claims or Interests. As of
the Effective Date, Holders of any Claims or Interests:
(i) that accept any property or New Common Stock to be
distributed to or for the benefit of a Holder of any Claims,
or with respect to a Holder of Interests, that exercises its
Equity Call Option, pursuant to Article III of the Creditors'
Plan and in consideration therefor; (ii) in a Class that
accepts the Creditors' Plan; or (iii) that mark a box on the
ballot sent to such Holder for purposes of voting whether to
accept or reject the Creditors' Plan, indicating such Holder's
agreement to such release (the text of which release shall be
set forth in full on such ballot) (and all trustees and/or
agents on behalf of such Holder) shall be deemed to have
released, to the extent permitted by the Court, (A) the
Settling Parties (other than Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), the
Proponents, the Holders of Revolving Credit Bank Claims, the
Holders of Working Capital Bank Claims, the Revolving Credit
Agents, the Working Capital Agents, the Holders of Series B &
C Senior Note Claims, the Holders of Subordinated Note Claims,
the Series B & C Senior Note Trustee, the Subordinated Note
Trustees, the Holders of Allowed Indemnity Claims (to the
extent of such Claims), the members of the Official
Committees, the members of the Ad Hoc Committee of Pre-LBO
Bondholders and the respective present and former parents,
subsidiaries, Affiliates, directors, officers, partners,
shareholders, employees, agents, advisors, predecessors in
interest and representatives of the all of the foregoing
(other than any (x) Holders or former Holders of Allowed Old
Common Stock Interests that are not Settling Equityholders,
(y) any of Celotex's or Jim Walter Corporation's or any of the
Debtors' respective present and former shareholders,
directors, officers, partners, employees, agents, advisors and
representatives, and (z) Jim Walter Corporation and The
Celotex Corporation and their respective subsidiaries), in
each case in such Person's capacity as a Holder of a Claim or
Interest, as a plan proponent, if applicable, as a shareholder
of any Debtor, or any other capacity (including, with respect
to the Bondholder Proponents, any action or inaction related
to or set forth in the definition of Qualified Securities
herein) (it being understood that this clause (A) does not
include any shareholder, director, officer, partner, employee,
agent, advisor or representative of any Debtor, in each case
that is a Holder or former Holder of an Allowed Old Common
Stock Interest that is not a Settling Equityholder or that is
not a Celotex/JWC Released Party) and (B) the holders of
Allowed Indemnity Claims that are not parties to the Veil
Piercing Settlement Agreement, but only to the extent of such
Allowed Indemnity Claims and only in the capacity in which
such Allowed Indemnity Claims provide indemnification,
reimbursement or contribution (collectively, the Persons
described in (A) and (B) are referred to herein, in such
capacities, as the "Released Parties"), of and from any and
all Claims, obligations, rights, causes of action and
liabilities (other than the right to enforce the Debtors'
obligations under the Creditors' Plan) which such Holder may
be entitled to assert, whether known or unknown, foreseen or
unforeseen, then existing or thereafter arising, based in
whole or in part upon any act, omission or other occurrence
taking place on or prior to the Effective Date in any way
relating to the Debtors, the Chapter 11 Cases or the
Creditors' Plan (including, without limitation, any of the
Veil Piercing-Related Issues or LBO-Related Issues).
The undersigned specifically AGREES TO grant
the release provided in Section 6.1. of the
Creditors' Plan.
YOUR VOTE ON THE CREDITORS' PLAN IS COMPLETELY INDEPENDENT OF
YOUR ELECTION TO GRANT OR NOT TO GRANT THE FOREGOING RELEASE.
YOU MAY VOTE TO ACCEPT THE CREDITORS' PLAN AND NONETHELESS ELECT
NOT TO
SPECIFICALLY GRANT THE RELEASE IN SECTION 6.1. BY NOT CHECKING
THE BOX ABOVE.
Item 6. By signing this Ballot, the undersigned certifies
that the Beneficial Owner has been provided with a copy of the
Creditors' Disclosure Statement, including all Exhibits thereto.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, you (as payee) are required by
law to provide the Debtors with your correct taxpayer
identification number ("TIN"). If you are an individual, your
TIN
is your social security number. If the Debtors are not provided
with your correct TIN, you may be subject to a $50 penalty
imposed
by the Internal Revenue Service. In addition, payments and
distributions to be made to you pursuant to the Creditors' Plan
may be subject to "backup withholding" for federal income tax
purposes.
Completing Substitute Form W-9
To prevent backup federal income tax withholding in
connection
with distributions to be received pursuant to the Creditors'
Plan,
you must provide the Debtors with your correct TIN by completing
the Substitute Form W-9 below, certifying that the TIN provided
on
Substitute Form W-9 is correct and that either (1) you have not
been notified by the Internal Revenue Service that you are
subject
to backup withholding or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding.
If you are an exempt holder, you must also provide the Debtors
with
your correct TIN by completing the Substitute Form W-9, and
should
indicate your exempt status by writing "EXEMPT" in Part III of
the
Substitute Form W-9. If you are subject to backup withholding,
please cross out Item Number 2 in Part IV of the Substitute Form
W-9. If you have not been issued a TIN and have applied for one,
or if you intend to apply for one in the near future, please
check
the box in Part II of the Substitute Form W-9, and sign and date
both the Substitute Form W-9 and the "Certificate of Taxpayer
Awaiting Identification Number". If you fail to do so, the
Debtors
will withhold 31% from any payments and distributions made to you
thereafter until a TIN and new Substitute Form W-9 are provided
to the Debtors.
What Taxpayer Identification Number to Provide
You are required to provide the Debtors the social
security
number or employer identification number of the record holder of
the Claim held by you. If the Claim is in more than one name or
is
not in the name of the actual owner, consult the enclosed
"Guidelines for certification of Taxpayer Identification Number
on Substitute Form W-9" for additional guidance on which number
to report.
<PAGE>
EXHIBIT T3E12
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
HILLSBOROUGH HOLDINGS Case Nos. 89-9715-8P1
CORPORATION, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
MASTER BALLOT FOR
ACCEPTING OR REJECTING
THE CREDITORS' PLAN
FOR USE BY RECORD HOLDERS OF CLASS U-6 (PRE-LBO DEBENTURE) CLAIMS
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. PLEASE COMPLETE, SIGN, AND DATE THIS MASTER BALLOT
AND
RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY TO THE
BALLOTING AGENT. IF YOUR VOTE HAS NOT BEEN RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, ON OR BEFORE
SEPTEMBER 23, 1994, IT WILL NOT BE COUNTED.
Name of Bank, Broker or Nominee:
Address:
1. a. The undersigned, a record holder as of July 13,
1994
of the aggregate principal amount of $ of 10 7/8% Subordinated
Debentures certifies the following (please fill out):
beneficial owners of an aggregate principal amount
of $ of 10 7/8% Subordinated Debentures accepted the
Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of 10 7/8% Subordinated Debentures rejected the
Creditors' Plan.
beneficial owners of an aggregate principal amount
of $
of 10 7/8% Subordinated Debentures agreed to grant the specific
release provided in Section 6.1 of the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $
of 10 7/8% Subordinated Debentures prefer the Creditors' Plan to
the Debtors' Plan.
beneficial owners of an aggregate principal amount
of $
of 10 7/8% Subordinated Debentures prefer the Debtors' Plan to
the Creditors' Plan.
b. The undersigned, a record holder as of July 13 1/8,
1994 of the aggregate principal amount of $ of 13 1/8%
Subordinated Notes certifies the following (please fill out):
beneficial owners of an aggregate principal amount of $ of 13
1/8% Subordinated Notes accepted the Creditors' Plan.
beneficial owners of an aggregate principal amount of $ of 13
1/8% Subordinated Notes rejected the Creditors' Plan.
beneficial owners of an aggregate principal amount of $ of 13
1/8% Subordinated Notes agreed to grant the specific release
provided in Section 6.1 of the Creditors' Plan.
beneficial owners of an aggregate principal amount of $ of 13
1/8% Subordinated Notes prefer the Creditors' Plan to the
Debtors' Plan.
beneficial owners of an aggregate principal amount of $ of 13
1/8% Subordinated Notes prefer the Debtors' Plan to the
Creditors' Plan.
c. The undersigned, a record holder as of July 13, 1994
of the aggregate principal amount of $ of 13 3/4% Subordinated
Debentures certifies the following (please fill out):
beneficial owners of an aggregate principal amount
of $ of 13 3/4% Subordinated Debentures accepted the Creditors'
Plan.
beneficial owners of an aggregate principal amount
of $ of 13 3/4% Subordinated Debentures rejected the
Creditors' Plan.
beneficial owners of an aggregate principal amount
of $
of 13 3/4% Subordinated Debentures agreed to grant the specific
release provided in Section 6.1 of the Creditors' Plan.
beneficial owners of an aggregate principal amount
of $ of 13 3/4% Subordinated Debentures prefer the Creditors'
Plan to the Debtors' Plan.
beneficial owners of an aggregate principal amount
of $ of 13 3/4% Subordinated Debentures prefer the Debtors'
Plan to the Creditors' Plan.
2. The undersigned certifies that each beneficial owner
of the Pre-LBO Debenture Claims described above whose votes are
being transmitted along with this summary ballot has been
provided with a copy of the Creditors' Disclosure Statement.
3. The undersigned certifies that it is the registered
record holder in its own name or through a position held at a
securities depository of the Pre-LBO Debenture Claims set forth
above.
4. Beneficial Owner Information
Please complete the following schedule below. The
undersigned certifies that
it is a true and accurate schedule of the votes of the beneficial
owners of the Pre-LBO Debenture Claims described above.
<TABLE>
<CAPTION>
a. 10 7/8% Subordinated Debentures
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF OF OF OF OF OF
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
ELECTS TO
RECEIVE
ACCEPTS REJECTS PREFERS PREFERS QUALIFIED
ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN
NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Total =N/A
</TABLE>
<TABLE>
<CAPTION>
b. 13 1/8% Subordinated Notes
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF OF OF OF OF OF
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
ELECTS TO
RECEIVE
ACCEPTS REJECTS PREFERS PREFERS QUALIFIED
ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN
NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Total =N/A
</TABLE>
<TABLE>
<CAPTION>
c. 13 3/4% Subordinated Debentures
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF OF OF OF OF OF
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
ELECTS TO
RECEIVE
ACCEPTS REJECTS PREFERS PREFERS QUALIFIED
ACCOUNTCREDITORS' CREDITORS' GRANTS CREDITORS' DEBTORS' SECURITIES IN
NAME (Optional)NUMBERPLAN PLAN RELEASE PLAN PLAN SUCH AMOUNT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Total = N/A
</TABLE>
(ATTACH ADDITIONAL PAGES IF NECESSARY)
Name:
(Print or Type)
Federal Tax I.D. No.
Signature:
By:
(If Appropriate)
Title:
(If Appropriate)
Address:
Street
City, State and Zip Code
Telephone Number: ( )
Date Completed:
<PAGE>
INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT
The Master Ballot on the reverse side is not a letter of
transmittal and may not be used for any purpose other than for
the record holders of the Pre-LBO
Debenture Claims holding on behalf of another to record
acceptances or rejections
of the Creditors' Plan, the preferences for the Creditors' Plan
or the Debtors'
Plan, elections of Qualified Securities and the grant of the
specific release
contained in the Creditors' Plan by the Beneficial Owners of
Pre-LBO Debenture
Claims. Accordingly, holders should not surrender any
certificates representing
their securities in connection with voting on the Creditors'
Plan, and the
Balloting Agent will not accept delivery of any such certificates
tendered together with this Master Ballot.
The Creditors' Plan may be confirmed by the Bankruptcy
Court and thereby made binding on you if it is accepted by the
holders of two-thirds in amount and more
than one-half in number of claims in each class and the holders
of two-thirds in amount of equity security interests in each
class voting on such plan. In the
event the requisite acceptances are not obtained, the Bankruptcy
Court may nevertheless confirm such plan if the Bankruptcy Court
finds that such plan
accords fair and equitable treatment to the class or classes
rejecting it and
otherwise satisfies the requirements of section 1129(b) of the
Code. If the Creditors'
Plan is confirmed by the Bankruptcy Court, all holders of Pre-LBO
Debenture Claims
and any and all other holders of Claims against and equity
interests in the Debtors (including those who abstain or reject
such plan) will be bound by the confirmed plan and the
transactions contemplated thereby.
The record date (the "Voting Record Date") for purposes of
determining which
holders of Pre-LBO Debenture Claims are eligible to vote on the
Creditors' Plan
is July 13, 1994. Only holders of Pre-LBO Debenture Claims in
whose name such
Pre-LBO Debenture Claims are held on the books of the 10 7/8%
Indenture Trustee,
13 1/8% Indenture Trustee or 13 3/4% Indenture Trustee, as
applicable, on the
Voting Record Date or any person who has obtained a properly
completed proxy from such person are eligible to vote on the
Creditors' Plan.
This Master Ballot is to be used by brokerage firms, banks,
or nominees for
summarizing votes cast by Beneficial Owners of Pre-LBO Debenture
Claims and
received by 5:00 p.m., Eastern Time, on September 19, 1994.
Individual Ballots received after such time must not be counted.
Please retain all executed Individual Ballots for one year.
Please forward this Master Ballot in the enclosed return
envelope to:
If By Mail
Donlin, Recano & Company, Inc.
P.O. Box 2022
Murray Hill Station
New York, New York 10156-0701
If By Courier or Hand
Donlin, Recano & Company, Inc.
419 Park Avenue South
Suite 1206
New York, New York 10016
To have your vote count, you must complete, sign and return
this Master Ballot so that it is received by the Balloting Agent
not later than 5:00 pm, Eastern Time, on September 23, 1994.
IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR MASTER BALLOT,
CONTACT DONLIN, RECANO & COMPANY, Inc. AT 1 (800) 433-3868.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL 1 (800) 433-3868.
<PAGE>
EXHIBIT T3E19
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re Chapter 11
Jointly Administered
Hillsborough Holdings Case Nos. 89-9715-8P1
Corporation, et al., to 89-9746-8P1 and
90-11997-8P1 Inclusive
Debtors.
BALLOT FOR ACCEPTING OR REJECTING
THE CONSENSUAL PLAN OF REORGANIZATION
BALLOT FOR CLASS U-7 CLAIMS
(VEIL PIERCING CLAIMANTS)
The statutorily appointed Bondholders' Committee and
Creditors' Committee, Lehman Brothers Inc., Apollo, the Ad Hoc
Committee of Pre-LBO Bondholders, the above-captioned
Hillsborough Debtors and the KKR Proponents are soliciting your
vote with respect to the Amended Joint Plan of Reorganization
Dated As Of December 9, 1994 (the "Consensual Plan")
for the Hillsborough Debtors which represents a modification of
the Creditors' Joint Plan of Reorganization Dated As Of August 1,
1994 (the "Creditors' Plan"). The Consensual Plan
is further described in the Supplement To Disclosure Statement
For Amended Joint Plan of Reorganization Dated As Of December 9,
1994 (the "Disclosure Statement Supplement") and
the Creditors' Plan is described in the Disclosure Statement For
Creditors' Plan Dated As Of August 1, 1994 (the "Creditors'
Disclosure Statement").
PLEASE READ THE INFORMATION BELOW AND ON THE REVERSE SIDE
CAREFULLY. IN ORDER TO HAVE YOUR VOTE COUNT, YOU OR YOUR
AUTHORIZED ATTORNEY MUST COMPLETE, SIGN, AND DATE THE
BALLOT AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
PROMPTLY TO DONLIN, RECANO & COMPANY, Inc. (THE "BALLOTING
AGENT") BUT IN NO EVENT LATER THAN BY 5:00 P.M., EASTERN
TIME, ON OR BEFORE FEBRUARY 22, 1995.
THE CONSENSUAL PLAN INCLUDES PROVISIONS FOR SETTLING VEIL
PIERCING AND RELATED
CLAIMS BY ALLOWING A CLAIM OF BETWEEN $375,000,000 AND
$390,000,000 AGAINST THE DEBTORS.
YOUR VOTE MAY BE IMPORTANT TO ACHIEVING THIS SETTLEMENT.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE YOUR
ACCEPTANCE OR REJECTION OF THE CONSENSUAL PLAN:
Item 1. CLASS U-7 (Veil Piercing Claimants) Vote. The
undersigned holder of a Class U-7 Claim or the undersigned
authorized attorney of the holder of the Class U-7
Claim identified below votes to (Please check one box below):
Accept the Consensual Plan _________
Reject the Consensual Plan _________
PURSUANT TO AN ORDER OF THE BANKRUPTCY COURT DATED
DECEMBER 15, 1994, EACH CLASS U-7 CLAIM HAS BEEN TEMPORARILY
ALLOWED AGAINST EACH DEBTOR FOR VOTING PURPOSES ONLY ON
THE CONSENSUAL PLAN IN THE AMOUNT OF ONE DOLLAR ($1.00).
Accordingly, Your Vote Will Be Counted in the Amount of One
Dollar ($1.00), As Will All Other Class U-7 Claims (Veil Piercing
Claimants).
YOUR FAILURE TO COMPLETE AND RETURN THIS BALLOT WILL NOT
AFFECT (1) THE VALIDITY AND AMOUNT OF YOUR CLAIM AGAINST THE
CELOTEX CORPORATION IN THE CELOTEX CORPORATION
CHAPTER 11 CASE, OR (2) YOUR RIGHTS IN RESPECT OF YOUR CLAIM
UNDER AN EFFECTIVE PLAN OF REORGANIZATION FOR THE CELOTEX
CORPORATION CHAPTER 11 CASE.
THIS IS NOT A PROOF OF CLAIM FORM.
Item 2. By signing this Ballot, the undersigned certifies
that (a)(i) he/she/it holds a Class U-7 Claim, (ii) he/she/it has
authority to vote to accept or reject the Consensual Plan, and
(iii) the holder has been provided with a copy of the Consensual
Plan and the Disclosure Statement Supplement or (b) he/she is an
attorney for a holder of a
Class U-7 Claim set forth in (a) above, and is authorized by such
holder to execute this Ballot on the holder's behalf.
Name:
(Print or Type)
Class U-7 Holder
OR:
Signature Of Attorney In Fact
AND:
Print or Type Name of Claimant
By:
(If Appropriate)
Title:
(If Appropriate)
Address:
Street
City, State and Zip Code
Telephone Number:()
Date Completed:
IF THIS BALLOT IS CAST BY THE CLASS U-7 CLAIMHOLDER'S
ATTORNEY, THE ATTORNEY MUST COMPLETE THE FOLLOWING:
Item 3. AFFIRMATION OF ATTORNEY IN FACT
I , an attorney at law and member of the bar of the State
of , with offices at declare under penalty of perjury that (a) I
am the Attorney In Fact for the Claimant
named herein, and (b) I am authorized to vote this Claim in
connection with the Consensual Plan.
Signature of Attorney In Fact
Dated:
<PAGE>
INSTRUCTIONS FOR COMPLETING THE CLASS U-7 BALLOT
The effectiveness of the Second Amended and Restated Veil
Piercing Settlement Agreement is conditioned upon, among other
things, confirmation by the Court and
consummation of the Consensual Plan. If the conditions to the
effectiveness of the Second
Amended and Restated Veil Piercing Settlement Agreement occur and
the Consensual Plan is
consummated, in consideration of the full and complete
settlement, satisfaction, release
and discharge of all Settlement Claims against all Released
Parties (as defined in the
Second Amended and Restated Veil Piercing Settlement Agreement
and the Consensual Plan),
there shall be an aggregate allowed claim for the exclusive
benefit of the holders of all
Settlement Claims as treated under the Consensual Plan equal to
approximately (A) $375,000,000, plus, under certain conditions,
an amount not to exceed $15,000,000 all as
provided in the Second Amended and Restated Veil Piercing
Settlement Agreement.
The Consensual Plan may be confirmed by the Bankruptcy
Court and thereby made binding on you if it is accepted by the
holders of two-thirds in amount and more than
one-half in number of claims in each class and the holders of
two-thirds in amount of equity security interests in each class
voting on such plan. In the event the requisite
acceptances are not obtained, the Bankruptcy Court may
nevertheless confirm the Consensual
Plan if the Bankruptcy Court finds that such plan accords fair
and equitable treatment to the class or classes rejecting it and
otherwise satisfies the requirements of section 1129(b)
of the Code. If the Consensual Plan is confirmed by the
Bankruptcy Court, all holders of Class U-7 Claims and any and all
other holders of claims against and equity interests
in the Debtors (including those who abstain or reject such plan
or are not entitled to vote thereon) will be bound by the
confirmed plan and the transactions contemplated
thereby. To have your vote count, you must complete, sign and
return this Ballot in the enclosed return envelope to:
If By Mail If By Courier or Hand
Donlin, Recano & Company, Inc. Donlin, Recano & Company, Inc.
P.O. Box 2022 419 Park Avenue South
Murray Station Suite 1206
New York, New York 10156-0701 New York, New York 10016
To have your vote count, you must complete, sign and
return this Ballot so that it
is received by the Balloting Agent not later than 5:00 p.m.,
Eastern Time, on February 22, 1995. Any Ballot which is executed
but which does not indicate either an acceptance or
rejection of the Consensual Plan or which indicates both an
acceptance and a rejection of the Consensual Plan will not be
counted. Your original signature is required on the Ballot in
order for your vote to count.
All capitalized terms used herein shall have the meanings
ascribed to them in the Consensual Plan.
To properly complete the Ballot, you must follow the
procedures described below:
(a) cast one vote to accept or reject the
Consensual Plan by checking the proper box in Item 1;
(b) make sure the information required in Item 2
has been inserted, and that you sign the Ballot;
(c) if you are completing this Ballot on behalf of
another entity, indicate your relationship with such entity and
the capacity in which you are signing;
(d) if you are the authorized attorney of a Class
U-7 Claimholder you must complete the Affirmation at Item 3;
(e) return your Ballot using the enclosed return
envelope. Please mail your Ballot so that it will be received by
February 22, 1995.
IF YOU DID NOT RECEIVE A RETURN ENVELOPE WITH YOUR BALLOT,
OR YOU BELIEVE THAT YOU ARE MISSING ANY MATERIALS FROM THE
SOLICITATION PACKAGE OR IF YOU BELIEVE THAT YOU HAVE
RECEIVED THE WRONG BALLOT, CONTACT DONLIN, RECANO & COMPANY, Inc.
AT 1 (800) 489-7444.
IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL 1 (800) 489-7444.
