Document:

Exhibit
10.2

 

TRANSITION SERVICES AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 1.

 

DEFINITIONS

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

Other
terms are used as defined elsewhere herein.

 

ARTICLE 2.

 

SERVICES

 

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

 

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

 

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

 

ARTICLE 3.

 

COMPENSATION

 

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

 

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

 

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

 

 

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

 

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

 

3.5           Allocation of Certain Expenses.

 

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

 

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

 

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

 

3.6           Terms of Payment; Dispute
Resolution.

 

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

 

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

 

 

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

 

ARTICLE 4.

 

OCCUPANCY
RIGHTS

 

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

 

ARTICLE 5.

 

TERM

 

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

 

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

 

ARTICLE 6.

 

CERTAIN COVENANTS

 

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

 

 

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

 

6.2           Cooperation;
Reasonable Care.

 

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

 

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

 

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

 

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

 

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

 

 

(a)          Disbursements.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

ARTICLE 7.

 

FORCE
MAJEURE

 

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

 

ARTICLE 8.

 

INDEMNITY

 

8.1           Indemnity.

 

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

 

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

 

ARTICLE 9.

 

MISCELLANEOUS

 

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

 

 

9.2           Confidentiality.

 

(a)           Disclosure.

 

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

 

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

 

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

 

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

 

 

	
  As
  to Walter or any other Walter Entity:

  
	
   

  	
  Walter
  Industries, Inc.

  
	
   

  	
  4211
  W. Boy Scout Blvd., 10th Floor

  
	
   

  	
  Tampa,
  FL 33607

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
  Fax
  No.: (813) 871-4420

  
	
   

  
	
  As
  to Spinco or any other Spinco Entity:

  
	
   

  	
  Walter
  Investment Management LLC

  
	
   

  	
  4211
  W. Boy Scout Blvd., 4th Floor

  
	
   

  	
  Tampa,
  FL 33607

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
  Fax
  No.: (813) 871-[ ]

  

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

[Signature pages to follow]

 

 

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

 

	
  Spinco
  Entities:

  	
   

  	
  Walter
  Entities:

  
	
   

  	
   

  	
   

  
	
  Walter
  Investment Management LLC

  	
   

  	
  Walter
  Industries, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
   

  	
   

  	
  /s/ 

  
	
  Name:

  	
  Mark
  J. O’Brien

  	
   

  	
  Name:

  	
  Victor
  P. Patrick

  
	
  Title:

  	
  President
  and Chief Executive Officer

  	
   

  	
  Title:

  	
  Vice Chairman, Chief Financial Officer and General
  CounselExhibit 10.3

 

TAX SEPARATION AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

SECTION 1.           DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

1.17         “IRS” means the Internal Revenue Service.

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 2.           PREPARATION AND
FILING OF TAX RETURNS

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

8

 

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

 

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

 

SECTION 3.           PAYMENT OF TAXES
AND TAX SHARING AMOUNTS

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

SECTION 4.           DISTRIBUTION TAXES

 

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

 

12

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

SECTION 5.           EARNINGS AND PROFITS ADJUSTMENTS

 

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

 

5.2           REIMBURSEMENT.

 

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

 

15

 

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

 

SECTION 6.           MISCELLANEOUS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

	
   

  	
  WALTER INDUSTRIES, INC.

  
	
   

  	
  on behalf of itself and the Walter
  Affiliates

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
  Victor P. Patrick

  
	
   

  	
  Title:

  	
  Vice Chairman, Chief Financial Officer and
  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WALTER INVESTMENT MANAGEMENT LLC,

  
	
   

  	
  on behalf of itself and the Spinco
  Affiliates

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
  Mark J. O’Brien

  
	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

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