THIS AGREEMENT is entered into this ______ day of May, 2000 by and among: (1) named plaintiffs with Defendant United States Gypsum Company's EIFS on their Property in the above litigation ("Plaintiffs"), for themselves and on behalf of the plaintiff settlement class as hereinafter defined (the "Settlement Class"); and (2) Defendant United States Gypsum Company (the "Settling Defendant"). The Settling Defendant and Plaintiffs, shall hereinafter be referred to as "Party" or "Parties," as appropriate.

WHEREAS, subject to the Court's approval, as required by Rule 23 of the North Carolina Rules of Civil Procedure, and as hereinafter provided, it is hereby stipulated and agreed by the Parties that, in consideration of the promises and covenants set forth in this Settlement Agreement and upon the entry by the Court of a Final Order and Judgment approving the Settlement Agreement and directing the implementation of the terms and conditions of the settlement as set forth in this Settlement Agreement, this Action shall be settled and compromised as to the Parties to this Settlement Agreement upon the terms and conditions contained herein; and

WHEREAS, claims have been filed against Settling Defendant regarding residential structures clad with Settling Defendant's Exterior Insulation and Finish Systems ("EIFS" or "EIF System"); and

WHEREAS, Plaintiffs in this Action contend that EIFS related Damage occurs to the Property upon or shortly after installation and continues until remediation; and

WHEREAS, this Action was filed on January 6, 1996, with Setting Defendant having been made a party by Amended Complaint filed on January 19, 1996, and certified ex parte as a class action on January 9, 1996, pursuant to North Carolina Rule of Civil Procedure 23 (which is unique and varies from its Federal counterpart), a ruling which was subsequently reaffirmed by order dated September 18, 1996, and the Court having questioned whether the Action would be certified were the issues presented today, the Parties, in considering the legal and factual difficulties of this analysis, desire to resolve all disputes between them as further described herein; and

WHEREAS, the Parties have investigated the facts and law relating to the matters set forth in this Action and have conducted extensive pretrial discovery on the claims and defenses asserted therein; and

WHEREAS, the Parties have engaged in extensive, arms-length negotiations regarding settlement of the claims against Settling Defendant; and

WHEREAS, based upon analysis of the facts and the law applicable to this Settlement Agreement, taking into account the burdens and expense of litigation, including the risks and uncertainties associated with protracted trials and appeals, as well as the fair, cost-effective, and assured method of resolving claims of the Settlement Class provided in this Settlement Agreement, Plaintiffs' Class Counsel have concluded that this Settlement Agreement provides substantial benefits to the Settlement Class and is fair and reasonable, and in the best interests of the Settlement Class; and

WHEREAS, Settling Defendant has denied all allegations of wrongdoing and has asserted affirmative defenses to Plaintiffs' claims, and, while continuing to deny all allegations of liability, including all allegations that this action could have been maintained as a class action through trial, also desires to settle, compromise and terminate the Plaintiffs' claims against it so as to avoid the further substantial expense, inconvenience and distraction of protracted litigation, and put to rest forever all claims that have or could have been asserted against Settling Defendant in this Action, or elsewhere, which arise from or are in any way related to the acts, transactions or occurrences alleged or that could have been alleged in this Action and relating to any Settled Claim against Settling Defendant; and

NOW, THEREFORE, the Parties, by and through their respective counsel, stipulate and agree that all claims of the Settlement Class shall be finally settled and resolved on the terms and conditions set forth below, subject to the Court's approval of this Settlement Agreement as a good faith, fair, reasonable, and adequate settlement under Rule 23 of the North Carolina Rules of Civil Procedure.

1. DEFINITIONS

As used in this Settlement Agreement and in the exhibits annexed hereto, in addition to any definitions elsewhere in this Settlement Agreement, the following terms shall have the meanings set forth below.

Action means Civil Action Number 96-CVS-0059, pending in Superior Court for New Hanover County, North Carolina.

ADR means the Alternative Dispute Resolution procedures attached hereto as Exhibit "F" and as further described in Section 9 of this Settlement Agreement.

Claim Period means the period commencing on the Notice Date and terminating either (A) December 31, 2002 or (B) the date the Settlement Agreement is terminated pursuant to any provision in the Agreement, whichever is earlier.

Claimant means a Person who is both a Settlement Class Member and who has timely filed a Claim Form with the Claims Administrator.

Claims Administrator means Andrew J. Clausen, Quality Manager, United States Gypsum Company, or such other person or persons designated by Settling Defendant upon consultation with Plaintiffs' Class Counsel and approval by the Court to process claims in accordance with this Settlement Agreement.

Claim Form means the form completed by Settlement Class Members pursuant to the terms of this Settlement Agreement substantially in the form attached as Exhibit "A", hereto.

Class Notice of Settlement means the form of Court-approved notice substantially in the form attached as Exhibit "D".

Court means the Honorable Ben F. Tennille, Special Superior Court Judge for Complex Business Cases, or his successor, Superior Court for New Hanover County, North Carolina.

Damage means with respect to the Property, two or more moisture readings of greater than 20% from separate Water Sources or two (2) square feet of wall with evidence of loss of structural integrity of the sheathing as determined by the Inspection Protocol. Damage does not include, and recovery cannot be based upon, moisture readings greater than 20% or loss of structural integrity of sheathing caused by an extreme natural event, including, without limitation, flood, tornado, hurricane or earthquake, or directly attributable to harm to the Property caused by foreign objects, including, without limitation, falling trees, moving vehicles, flying debris and other physical impact.

Date of the Claim means the date on which a Claim Form is post-marked under this Settlement Agreement by a Settlement Class Member.

EIF System or EIFS means the non-drainable Exterior Insulation and Finish System of Settling Defendant, which is not a Mixed Product, installed on the Property of a Settlement Class Member. EIF System or EIFS shall include application over plywood, oriented strand board (OSB) or exterior grade gypsum but shall not include application where insulating board was mechanically or adhesively attached over CMU block, cement or fiber cement board, brick or other masonry unit. Settling Defendant marketed EIFS over expanded polystyrene (EPS) insulation board from July 1993 to April 8, 1996, and EIFS over polyisocyanurate insulation board from January 1995 to April 8, 1996. Additionally, EIF System or EIFS shall NOT include Settling Defendant's water-managed systems (sometimes marketed as "InsulScreen 2000", "InsulScreen 2100", "InsulScreen 2115", "InsulScreen 2200", "InsulScreen 2600", and "InsulScreen 4000"), direct applied applications, or any exterior systems manufactured or marketed by Settling Defendant after April 8, 1996, on which date the Settling Defendant ceased to manufacture and market non-drainable EIFS.

Fairness Hearing means the hearing to be conducted by the Court in connection with the determination of the fairness, adequacy and reasonableness of this Settlement Agreement under Rule 23 of the North Carolina Rules of Civil Procedure.

Final Order and Judgment means the Order to be entered by the Court, in a form that is mutually agreeable to the Parties, approving this Settlement Agreement without material alterations, as fair, adequate and reasonable under Rule 23 of the North Carolina Rules of Civil Procedure and making such other findings and determinations as the Court deems necessary and appropriate to effectuate the terms of this Settlement Agreement.

Former Owner means a Settlement Class Member who owned a Property clad, in whole or in part, with Settling Defendant's EIFS, but who, as of the Notice Date, no longer owns the Property.

Identification Protocol means the product identification protocol used to identify whether Settling Defendant's EIFS was installed on the Claimant's Property.

Independent Inspector means SPEC Group (f/k/a Southeastern Testing) or such other firm(s) or person(s) selected by the Parties to conduct an inspection of a Claimant's Property pursuant to the Inspection Protocol.

Inspection Protocol means the protocol established by the Parties to be followed by the Independent Inspector for the purpose of gathering and recording factual information relating to a Property, substantially in the form attached as Exhibit "B".

Inspection Report means the written report completed by the Independent Inspector, substantially in the form attached as Exhibit "C".

Mixed Product means an EIFS that is not, in its substantial majority, an EIFS manufactured, marketed and/or distributed by Settling Defendant. For purposes of determining Mixed Product, "substantial majority" shall mean that at least 90% of the total dollar amount paid for the four primary EIFS components (insulation board, base coat, mesh and finish coat) that were applied to the Property was paid for components manufactured, marketed and/or distributed by Unites States Gypsum Company.

Notice Date means the date set by the Court by which Class Notice of Settlement must be initially disseminated.

Notice Plan means the proposal for dissemination of the Class Notice of Settlement. The Notice Plan is described in Section 10 of this Settlement Agreement.

Person means both an individual and an entity, and their respective successors or assigns.

Plaintiffs' Class Counsel means the following counsel: (A) Gary K. Shipman and Carl W. Thurman III of Shipman & Associates, L.L.P.; (B) Marvin K. Blount, Jr., of The Blount Law Firm, P.L.L.C.; (C) Everette L. Doffermyre of Doffermyre, Shields, Canfield, Knowles & Devine; (D) William M. Audet of Alexander, Hawes & Audet, L.L.P.; (E) Gary E. Mason of Cohen, Milstein, Hausfeld & Toll, P.L.L.C.; (F) Samuel D. Heins and Kent Williams of Heins Mills & Olson, P.L.C.; (G) Joseph McLeod of the McLeod Law Firm, P.A.; (H) Michael A. Worel and Richard T. Dorman of Cunningham, Bounds, Yance, Crowder & Brown; (I) A. Hoyt Rowell and H. Blair Hahn of Ness, Motley, Loadholt, Richardson & Poole; (J) Laurence S. Berman of Levin, Fishbein, Sedran & Berman; (K) Laura Shamp of Brown & Shamp; (L) Joel Rhine of Lea, Clyburn & Rhine; (M) Auley M. Crouch III of Block, Crouch, Keeter & Huffman.

Preliminary Approval means the Court's order granting Preliminary Approval of this Settlement Agreement and approval of the Class Notice of Settlement pursuant to Rule 23 of the North Carolina Rules of Civil Procedure and entry of an order substantially in the form attached as Exhibit "E" hereto.

Preliminary Approval Hearing means the hearing to be conducted by the Court in connection with the Preliminary Approval of the Settlement Agreement.

Property means any one or two family residential dwelling and townhouse located in North Carolina.

Recovery Program means the procedures for the entitlement determination to be made pursuant to Sections 5 and 6 of the Settlement Agreement.

Recovery Protocol means the criteria by which the Claims Administrator will determine the recovery to which a Claimant may be entitled.

Settled Claim means any claim, liability, right, demand, suit, matter, obligation, damage, loss or cost, action or cause of action, of every kind, nature and description that any Settlement Class Member, on behalf of himself or herself, and any Person claiming by or through his or her heir, administrator, devisee, predecessor, successor, representative of any kind, shareholder, partner, director, owner of any kind, affiliate, subrogee, assignee, or insurer, has or may have, whether known or unknown, asserted or unasserted, latent or patent, that is, has been, could have been or in the future might be asserted either in this Action or in any other action or proceeding in this Court or any other court or forum, regardless of legal theory, and regardless of the type or amount of relief or damages claimed, against Settling Defendant, arising from or in any way relating to any defects or alleged defects of EIFS relating to damage and/or potential damage to the Property. Without limiting the generality of the foregoing, Settled Claim shall include:

(A) any claim for breach or violation of any federal, state, common or other law;

Settled Claim does not include and specifically excludes: (A) any claim for bodily injury (including wrongful death) and associated or resulting emotional distress and mental anguish, (B) any claims arising from the purchase of Settling Defendant's EIFS distributed, marketed and/or sold by the Settling Defendant after the Notice Date, (C) any claim related to a Mixed Product; and (D) any claim asserted by or on behalf of any Person with respect to a residential structure that does not meet the definition of Property.

Settlement Agreement means this Settlement Agreement, including all exhibits hereto.

Settlement Class means a class composed of all Persons who, as of the Notice Date, have owned or own Property in the State of North Carolina clad, in whole or in part, with Settling Defendant's EIFS.

Excluded from the Settlement Class are:

Included in the Settlement Class are Persons whose Property includes a structure clad with Settling Defendant's EIFS (e.g. a garage) along with structure(s) clad with other manufacturers' EIFS. In such an instance, the Recovery Program limited to the extent of the structure clad with Settling Defendant's EIFS.

Settlement Class Member(s) means a Person (or Persons) who falls (or fall) within the definition of the Settlement Class.

Settlement Date means the date of entry of the Final Order and Judgment.

Settling Defendant means United States Gypsum Company.

Square Foot of EIFS means each square foot of EIFS installed on a Property, exclusive of doors, windows, fenestrations and other penetrations.

Term of the Agreement means the period commencing upon entry by the Court of the Final Order and Judgment and ending the earlier of: (A) December 31, 2002; or (B) termination of this Settlement Agreement.

Water Source means an element, feature or component in the exterior of the Property with a path or paths for water to penetrate behind the EIFS. Perimeter joints and sealants shall be considered a part of that element.

2. SETTLEMENT PURPOSES ONLY

2.1 This Settlement Agreement is for settlement purposes only, and neither the fact of, nor any provision contained in this Settlement Agreement or its attachments, nor any action taken hereunder shall constitute, be construed as, or be admissible in evidence as, any admission of the validity of any claim or any fact alleged by Plaintiffs in this Action or in any other action or proceeding of any nature or of any wrongdoing, fault, violation of law, or liability of any kind on the part of Settling Defendant or any admission by them of any claim or allegation made in this Action or in any action or proceeding of any nature, or as an admission that class action litigation is lawful or appropriate against Settling Defendant or against any other party to the Action in any other Court or forum, nor as an admission by any of the Plaintiffs, Settlement Class Members or Plaintiffs' Class Counsel of the validity of any fact or defense asserted by them or against them in this Action.

2.2 Notwithstanding Section 2.1, the provision of this Settlement Agreement may be admissible in any proceeding to enforce the rights, obligations or effect of the terms herein.

3. SUBMISSION FOR PRELIMINARY APPROVAL

3.1 Promptly after execution of this Settlement Agreement and the entry of an Order granting Plaintiffs' Motion to Add United States Gypsum Company Class Representative, the Parties shall jointly submit this Settlement Agreement, through their respective counsel of record, to the Court for Preliminary Approval.

3.2 The Parties hereto shall obtain from the Court an order (the "Preliminary Approval Order"), specifically including, inter alia, provisions that:

(A) Approve this Settlement Agreement preliminarily, subject to the right of Settlement Class Members to be heard on the terms and on the reasonableness of the Settlement at the Fairness Hearing scheduled as described below;

(B) Approve the Notice Plan;

(C) Direct the Parties to disseminate the Class Notice of Settlement to those Settlement Class Members who can be identified through reasonable effort;

(D) Find that the Notice of Class Settlement constitutes the best notice practicable under the circumstances, and is due and sufficient notice to the Settlement Class, and that the Notice Plan fully satisfies the requirements of due process, Rule 23 of the North Carolina Rules of Civil Procedure and other applicable law;

(E) Set a date for a Fairness Hearing, to be held by the Court to determine whether there exists any reasonable basis why the Settlement should not be approved as being fair, reasonable and adequate to the Settlement Class and why judgment should not be entered thereon;

(F) Provide that any objection to the proposed Settlement, and any papers submitted in support of said objection, shall be received by the Court at the Fairness Hearing (unless, in its discretion, the Court shall direct otherwise), only if, on or before a date to be specified in the Class Notice of Settlement, the Person making objection shall file notice of his or her intentions and copies of such papers he or she proposes to submit at the hearing with the Clerk of the Court on or before the date specified in the Class Notice of Settlement and, on or before such date, such papers are served in accordance with the instruction contained in the Class Notice of Settlement. In addition, any objection to the Settlement Agreement must include: (1) the identity of the Property clad with Settling Defendant's EIFS; and (2) proof of past or present ownership of the Property; and (3) prima facie evidence of product identification as demonstrated by submitting with the objection papers one of the following: (a) a Settling Defendant's project-specific warranty with respect to the Property; or (b) an Inspection Report issued by Settling Defendant indicating that it is Settling Defendant's EIFS; or (c) Bill of Sale/purchase documents indicating the purchase of Settling Defendant's EIFS with respect to the Property; or (d) correspondence from Settling Defendant indicating that it is the Settling Defendant's EIFS;

(G) Provide that Plaintiffs' Class Counsel will apply for approval by the Court to pay attorneys' fees and reimbursement of costs with the hearing thereon at the same date and time of the Fairness Hearing; and

(H) Provide that the Fairness Hearing may, from time to time, and without further notice to the Settlement Class, be continued or adjourned by order of the Court.

4. PRIMA FACIE PRODUCT IDENTIFICATION

4.1 The Claims Administrator shall determine whether the Property is or was clad, in whole or in part, with Settling Defendant's EIFS. In determining product identification, the Claims Administrator may rely on the information provided by the Claimant on the Claim Form and by the Independent Inspector on the Inspection Report.

4.2 The Claim Form shall contain certain information relating to the Property and EIFS cladding. The information provided in connection with submission of the Claim Form will be used by the Claims Administrator to make an initial product identification determination.

4.3 In determining EIFS product identification, a Claimant establishes a prima facie showing of Settling Defendant's EIFS by submitting with the Claim Form any one of the following: (A) Settling Defendant's project-specific warranty with respect to the Property; or (B) an inspection report issued by Settling Defendant indicating it is the Settling Defendant's EIFS; or (C) Bill of Sale/purchase documents indicating the purchase of Settling Defendant's EIFS with respect to the Property; or (D) correspondence from Settling Defendant indicating that it is Settling Defendant's EIFS; or (E) an affidavit by a builder, contractor or applicator stating that, based on personal knowledge, the Property is clad with Settling Defendant's EIFS along with any supporting documentation that will assist the identification determination or a statement that such documentation is not in the possession of the affiant and the affiant identifies, to the extent known, who is the custodian of such documentation; or (F) a report under seal from a licensed engineer or architect stating that the Property is clad with Settling Defendant's EIFS, provided that this determination is based on first-hand personal knowledge of the engineer or architect, obtained through his or her inspection of the Property and, if the report is created subsequent to the Notice Date, the report identifies the facts that support the determination.

4.4 Where a prima facie showing is not or cannot be established, the Claimant may submit to the Claims Administrator for consideration other evidence of product identification of Settling Defendant's EIFS including, but not limited to, one or more of the following: (A)  a report from an inspector stating that the Property is clad with Settling Defendant's EIFS provided that this determination is based on first-hand personal knowledge of the inspector obtained by his or her inspection of the Property and, if the report is created subsequent to the Notice Date, the report identifies the facts that support the determination, or (B) identifying or presenting the physical characteristics of the EIFS such as texture and color of the finish coat, the mesh weave and color, type and color of the base coat. The mesh color may be established by either submission of a color photograph that shows the color of the mesh, or submission of a sample of EIFS of sufficient size to determine the mesh color.

4.5 Whether product identification is prima facie or determined upon alternative evidence, following receipt of the Inspection Report, the Claims Administrator shall have no more than thirty (30) days in which to accept or reject product identification or such shorter time as agreed by the Parties. Any product identification procedures used in connection with this Settlement Agreement shall be limited to determining whether the product is Settling Defendant's EIFS.

5. RECOVERY PROGRAM FOR CLAIMANTS, EXCLUDING FORMER OWNERS WHO DID NOT RECLAD

5.1 This Section applies to Claimants, excluding Former Owners who did not reclad.

5.2 To be eligible for a recovery under this Settlement Agreement, a Settlement Class Member must timely file a completed Claim Form with the Claims Administrator. Claim Forms may be submitted by Settlement Class Members until December 31, 2002. In no event may a Claim Form be filed with the Claims Administrator later than December 31, 2002.

5.3 After the Claims Administrator or ADR determines that a Claimant has identified the EIFS that had been installed on the Property as the Settling Defendant's EIFS, the Claimant will be eligible for an entitlement determination as provided in this Section and the Claims Administrator will direct an Independent Inspector to promptly inspect the Property (the "Inspection") and issue an Inspection Report, at no cost to the Claimant. No inspection under this Settlement Agreement is required until after the Settlement Date.

5.4 The Independent Inspector shall forward the completed Inspection Report to the Claims Administrator no later than ten (10) days following the Inspection.

5.5 If a Claimant has not reclad the Property, the Claimant shall be entitled to six dollars ($6.00) per square foot of EIFS installed on the Property provided: (A) that Claimant is able to establish product identification through the product identification protocol in Section 4; and (B) if the Inspection Report reveals Damage.

5.6 If, for reasons other than a product identification determination, the Property does not qualify for a recovery based on information contained in the Inspection Report, the Claimant may elect to have a subsequent inspection conducted by the Independent Inspector. The subsequent inspection must be requested no later than one year after the date of the initial Inspection Report. The cost of the subsequent inspection shall be borne by the Settling Defendant.

5.7 If a Claimant has reclad the Property prior to the Notice Date or within thirty (30) days after the Notice Date, and submits an affidavit that Claimant has not been compensated for the reclad, in whole or in part, by Settling Defendant, the Claimant shall be entitled to six dollars ($6.00) per square foot of EIFS installed on the Property, provided the Claimant: (A) establishes product identification through the product identification protocol in Section 4; and (B) establishes that an inspection was performed on the Property prior to the reclad which revealed Damage.

5.8 If a Claimant has reclad the Property more than thirty (30) days after the Notice Date, and submits an affidavit that Claimant has not been advised through the Notice Plan or otherwise not to reclad and has not been compensated for remediation of the Property, in whole or in part, by Settling Defendant, the Claimant shall be entitled to six dollars ($6.00) per square foot of EIFS installed on the Property, provided the Claimant: (A) establishes product identification through subsections (A) through (D) of the product identification protocol in Section 4.3; and (B) establishes that an inspection was performed on the Property prior to the reclad by a licensed engineer, architect or home inspector who issued a report under seal revealing Damage.

5.9 In all instances, Settling Defendant shall be entitled to a credit against compensation due to a Claimant for any and all sums that have been paid or are due to the Claimant, regardless of source, for unrepaired injury to the EIFS or the substrate caused by an extreme natural event, including, without limitation, flood, tornado, hurricane or earthquake, or directly attributable to harm to the EIFS or the substrate caused by foreign objects, including, without limitation, falling trees, moving vehicles, flying debris and other physical impact.

5.10 Claimants who, upon receipt of Class Notice of Settlement have already made plans to reclad the Property, shall advise the Claims Administrator immediately of those plans pursuant to the instructions in the Class Notice of Settlement. The purposes of this requirement include: (1) allowing the Settling Defendant to take reasonable measures to ensure against the spoliation of evidence used for product identification purposes; and (2) allowing, if feasible, the Independent Inspector to conduct an inspection of the Property prior to reclad.

5.11 ADR: Any controversy arising out of or relating to this Recovery Program shall be resolved by ADR.

5.12 The Claims Administrator, in his discretion, can request the Independent Inspector to conduct a follow-up inspection to take additional moisture readings of a Claimant's Property prior to making a determination under the Recovery Program. The cost of the follow-up inspection shall be borne by Settling Defendant.

5.13 Pertinent data from all Claim Forms shall be maintained in a computerized database by the Claims Administrator. Information from the database shall be made available to the Independent Inspector (as to a specific Property as deemed necessary by the Claims Administrator), Settling Defendant, and Plaintiffs' Class Counsel, upon reasonable notice and with notice to Settling Defendant.

6. RECOVERY PROGRAM FOR FORMER OWNERS WHO DID NOT RECLAD

6.1 Claimants who are Former Owners and who did not reclad the Property, but who timely file a completed Claim Form with the Claims Administrator pursuant to Section 5.2 of this Agreement, shall be entitled to payment of actual damages up to $1,000, upon demonstration to the Claims Administrator:

6.2 In all instances, Settling Defendant shall be entitled to a credit against compensation due to a Claimant for any and all sums that have been paid or are due to the Claimant, regardless of source, for unrepaired injury to the EIFS or the substrate caused by an extreme natural event, including, without limitation, flood, tornado, hurricane or earthquake, or directly attributable to harm to the EIFS or the substrate caused by foreign objects, including, without limitation, falling trees, moving vehicles, flying debris and other physical impact.

6.3 ADR: Any controversy arising out of or relating to this Recovery Program shall be resolved by ADR.

7. SETTLEMENT OBLIGATION

7.1 Settling Defendant will be obligated to pay all recovery determinations made by the Claims Administrator subject to resolution of any dispute submitted to ADR.

8. SELECTION, DUTIES AND COMPENSATION OF CLAIMS ADMINISTRATOR

8.1 Appointment of the Claims Administrator shall be subject to approval by the Court.

8.2 The Claims Administrator shall, under supervision of the Court, administer the claims process as set forth in this Settlement Agreement, by resolving claims submitted by Claimants in a rational, responsive, cost-effective, and timely manner.

8.3 All fees and expenses incurred in relation to the performance of the duties and obligations of the Claims Administrator, including without limitation salary, benefits, and insurance shall be paid by Settling Defendant.

8.4 The Claims Administrator shall have the right to hire and, for good cause shown, fire Independent Inspectors, who will be selected upon agreement between the Settling Defendant and Plaintiffs' Class Counsel. The Settling Defendant shall train the Independent Inspector(s) to perform duties and gather information required under the Inspection Protocol and Identification Protocol.

8.5 The Claims Administrator will submit periodic reports to Class Counsel, Settling Defendant and the Court during the Term of the Agreement. Nothing in this Settlement Agreement shall be interpreted to make any documents in the possession or control of the Claims Administrator public documents.

8.6 In the event Settling Defendant or Plaintiffs' Class Counsel reasonably believe that the Claims Administrator is not properly applying any of the terms of this Settlement Agreement or in the event there is a question about the application of the terms of this Settlement Agreement by the Claims Administrator, then:

8.7 Prior to implementation of policies or procedures not provided for in this Settlement Agreement, the Claims Administrator shall notify Settling Defendant and Class Counsel of the proposed policy or procedure. Any dispute as to the implementation of any proposed policy or procedure shall be resolved by agreement between the Parties or, if no agreement can be reached, by submission to the Court.

8.8 The Claims Administrator shall supervise an ADR mechanism for resolving all disputes under this Settlement Agreement, although the Claims Administrator may not initiate ADR.

8.9 Upon termination of this Settlement Agreement for any reason, all records maintained by the Claims Administrator shall be provided to the Settling Defendant. The Settling Defendant shall maintain these records pursuant to Section 19.2 for the limited purpose of determining compliance with the terms of this Settlement Agreement.

9. ALTERNATIVE DISPUTE RESOLUTION

9.1 Unless otherwise provided in this Settlement Agreement, any and all disputes arising under this Settlement Agreement of any nature whatsoever including, without limitation, product identification and recovery determinations, shall be submitted to Alternative Dispute Resolution ("ADR"). Unless the Parties agree otherwise, the ADR arbitrator shall be an ADR professional with the Duke Private Adjudication Center.

9.2 In lieu of ADR, Claimants and Settling Defendant, either directly or through the Claims Administrator, may compromise any dispute arising under this Settlement Agreement in writing, and such writing shall supersede the provisions of this Settlement Agreement only as expressly agreed to between the Claimant and Settling Defendant. A copy of any such compromise shall be provided to and maintained by the Claims Administrator.

9.3 Once approved by the Court, the ADR procedures, attached hereto as Exhibit "F" shall govern all ADR proceedings under this Settlement Agreement.

9.4 The decision reached pursuant to an ADR proceeding is binding and non-appealable to any forum, venue or court, on all parties to the ADR proceeding as well as the Claims Administrator with respect to that ADR proceeding.

10. NOTICE TO THE CLASS

10.1 Upon Preliminary Approval, and as the Court may direct, the Parties or their designees shall cause notice of the pendency of the Action, the settlement embodied herein, and the Fairness Hearing to be disseminated to Settlement Class Members as provided in this Section.

10.2 If, for any reason, the Settlement is terminated pursuant to the provisions of this Settlement Agreement, neither Plaintiffs nor Class Counsel shall have any responsibility or obligation to reimburse the Settling Defendant for any funds used or committed for costs incurred in connection with providing Notice to the Class and/or administration of the Settlement.

10.3 Settling Defendant agrees that on or about the Notice Date, the Class Notice of Settlement, to be approved by the Court, shall be mailed, first class postage prepaid, together with a Claim Form, to each Settlement Class Member identified by the Parties through reasonable efforts, and to each Person who would be a Settlement Class Member, but who previously opted out of the Action, a Claim Form and Request for Revocation of Prior Election. In addition, such mailing shall be sent to each Settlement Class Member whose identity becomes known as a result of the Class Notice of Settlement or who contacts the Claims Administrator during the Term of the Agreement or who becomes known to Settling Defendant as a result of the settlement notices regarding other EIFS manufacturers. In addition, Settling Defendant shall ensure that a link is posted on the www.ncstucco.com website or its successor to direct potential claimants to information regarding the Settlement, including a method of obtaining a Claim Form. In addition, on or about the Notice Date, Settling Defendant shall send a letter to its two North Carolina distributors (one in Wilmington, NC and one in Raleigh, NC) informing them of the Settlement Agreement so that they may direct potential claimants to information regarding the Settlement. In addition, on or about the Notice Date, Settling Defendant shall issue a press release to the major newspapers of Wilmington, NC and Raleigh, NC, informing them of the Settlement Agreement, including a method of obtaining a Claim Form.

10.4 The Class Notice of Settlement, either substantially in its original form or as modified by the Court, shall begin on the Notice Date and be disseminated throughout the Claim Period as additional Settlement Class Members are identified.

10.5 The right to institute an action against Settling Defendant after December 31, 2002 is reserved for Settlement Class Members who have not otherwise resolved their claims against Settling Defendant and who are able to establish no notice of this Settlement Agreement. In such instance, all of Settling Defendant's defenses are reserved, including but not limited to defenses based upon statutes of repose and limitations, subject to the tolling of same from the filing of this Action against Settling Defendant to the date of the Final Order and Judgment.

11. SETTLEMENT CLASS MEMBERS' REQUEST FOR INCLUSION

11.1 Persons who would be Settlement Class Members, but previously opted out of the Action pursuant to the notice of class action disseminated on or about July 25, 1997,or pursuant to the Court order dated June 16, 1999, may request to participate in this Settlement Agreement ("Opt In") by timely completing and mailing to the Claims Administrator the Claim Form and the Request for Revocation of Prior Election, (Exhibit "G"), both of which must be postmarked no later than the expiration of the Claim Period. Opt In requests will be allowed, if at all, at the absolute discretion of the Settling Defendant and shall not be effective until, and if, allowed by Settling Defendant. The decision of the Settling Defendant to allow a Person to Opt In or not is not subject to ADR or other review.

11.2 Upon approval of Settling Defendant to permit a Person to Opt In, that Person shall be deemed a Settlement Class Member and be bound by this Settlement Agreement for all purposes and have no standing to object to or otherwise be heard by the Court and/or on appeal with respect to any aspect of this Settlement Agreement.

12. IMMEDIATE IMPLEMENTATION OF CLASS MEMBER BENEFITS

12.1 This Settlement Agreement becomes effective upon entry of the Final Order and Judgment. Implementation of the terms of this Settlement Agreement, unless otherwise provided herein, shall not be affected or delayed by any appeal from the Final Order and Judgment. Any Party may petition the Court for relief from the obligation of immediate implementation of this Settlement Agreement.

13. STATUTES OF LIMITATIONS OR REPOSE AND REACTIVATION OF CLAIMS

13.1 A Claimant shall not be barred from obtaining relief for any Settled Claim under this Settlement Agreement because of application of any statute of limitations or repose.

13.2 Nothing in this Settlement Agreement is intended nor shall it be construed to toll any statute of limitations or repose period or to revive any claim of any Person including, but not limited to, those Persons who elected to Opt Out or otherwise be excluded from the Action pursuant to the notice of class action disseminated on or July 25, 1997, or thereafter pursuant to the Court's order dated June 16, 1999, or otherwise.

14. EXCLUSIVE REMEDY; DISMISSAL OF ACTION; JURISDICTION OF COURT

14.1 Except as otherwise provided in this Settlement Agreement, this Settlement Agreement shall be the sole and exclusive remedy for any and all Settled Claims of Settlement Class Members against Settling Defendant arising from its EIFS and, upon entry of the Final Order and Judgment by the Court, each Settlement Class Member shall be barred from initiating, asserting or prosecuting any Settled Claim against Settling Defendant.

14.2 Plaintiffs' Class Counsel agree to dismiss any other action of any Settlement Class Member for Settled Claims pending in any Court against the Settling Defendant and for which a Plaintiffs' Class Counsel is counsel of record or otherwise on the pleadings.

14.3 The Final Order and Judgment shall dismiss the Settling Defendant from the Action, with prejudice, on the condition that the Court shall retain exclusive and continuing jurisdiction of the Action, all Parties, and Settlement Class Members, to interpret and enforce the terms, conditions and obligations of this Settlement Agreement.

15. RELEASES AND ASSIGNMENTS

15.1 Upon entry of the Final Order and Judgment, each class member on behalf of himself or herself, and any Person claiming by or through his or her heir, administrator, devisee, predecessor, successor, representative of any kind, shareholder, partner, director, owner of any kind, affiliate, subrogee, assignee, or insurer (the "Releasing Party") shall be deemed to and does hereby release and forever discharge Settling Defendant, its insurers, Settling Defendant's vendors which distributed or sold Settling Defendant's EIFS in the regular course of their business (but not including the EIFS applicator or others actively involved in the construction of the Property), their insurers, and any and all of the predecessors, successors, parents, subsidiaries, divisions, departments, affiliates, distributors, dealers, counsel and any and all of the past, present and future officers, directors, stockholders, partners, agents, servants, successors, subrogees and assigns of the Settling Defendant, of its vendors, and of the insurers of Settling Defendant and its vendors, from any and all Settled Claims and related subrogation claims of the Releasing Party's subrogees or insurance carriers. Each Releasing Party, upon entry of the Final Order and Judgment shall be deemed to and does hereby release and discharge Settling Defendant of and from any and all Settled Claims. Any person who claims and receives a recovery under the Settlement Agreement shall be deemed a Settlement Class Member and a Releasing Party and shall be bound by the terms of this Settlement Agreement.

15.2 Nothing in this Settlement Agreement shall prejudice or in any way interfere with the rights of the Plaintiffs, Settlement Class Members and Settling Defendant to pursue all of their rights and remedies against non-settling Persons, third-parties or their respective insurers, including, without limitation, claims for contribution and/or indemnity.

15.3 Notwithstanding the provisions of the preceding paragraph, upon entry of the Final Order and Judgment, the Settling Defendant shall release and have no right to seek or otherwise obtain any payment a Settlement Class Member may receive or recover from any third party and/or insurance company as a result of a Settled Claim. Nothing in this Settlement Agreement shall be interpreted to create any subrogation claim or right on the part of Settling Defendant or any of its agents as against any monies or recovery by the Settlement Class Member for claims against third parties and/or under any insurance policy relating to a Settled Claim.

15.4 Upon entry of Final Order and Judgment and subject to the warranties made and obligations imposed under the terms of this Settlement Agreement, Settling Defendant, and its agents (including Settling Defendant's counsel in this Action), assigns and insurers, shall release Settlement Class Members, and Plaintiffs' Class Counsel from all claims arising out of, relating to, or in connection with the filing, assertion or resolution of the Action.

16. ATTORNEYS' FEES, EXPENSES AND COSTS

16.1 Plaintiffs' Class Counsel shall apply to the Court for an initial award of $125,000.00 for attorneys' fees, expenses and costs in the Action, plus an additional award of an amount equal to 25% of the total paid under the Recovery Program, with such additional award not to exceed an aggregate total of $75,000.00. Settling Defendant agrees that the initial award amount and the additional award amount are reasonable under the circumstances and will not oppose Class Counsel's Petition for Attorneys' Fees, Expenses and Costs in that amount. Settling Defendant shall pay the initial award amount within forty (40) days after entry of the Final Order and Judgment granting final approval of the settlement and awarding attorneys fees, and the additional award in yearly installments on or about the anniversary of the Notice Date. If no appeal is taken from said Final Order and Judgment, payment shall be made to Doffermyre, Shields, Canfield, Knowles & Devine (ATTN: Everette Doffermyre, Esq.), 1355 Peachtree Street, Atlanta, Georgia 30309.

If an appeal of said Final Order and Judgment is taken by any person or entity, Settling Defendant shall deposit the full amount of the initial attorneys fee award in an interest-bearing escrow account during the pendency of the entire appeal process. The escrow account shall be maintained with an independent financial institution or other independent escrow agent to be selected by mutual agreement of Plaintiffs' Class Counsel and Settling Defendant. If the aforesaid Final Order and Judgment is reversed or otherwise overturned on appeal and the obligations of the Parties under the Settlement Agreement are therefore terminated or nullified, the escrow agent shall, within five days of receiving written notification of the final conclusion and result of said appeal, refund the full amount of the deposit, with accrued interest, to the Settling Defendant. If the aforesaid Final Order and Judgment is affirmed on appeal, or the appeal is dismissed, and the Court approval of the settlement and award of attorneys fees thus becomes final, the escrow agent shall, within five days of receiving written notification of the conclusion and result of said appeal, remit the full amount of the deposit, with accrued interest, to Doffermyre, Shields, Canfield, Knowles & Devine (ATTN: Everette Doffermyre, Esq.), 1355 Peachtree Street, Atlanta, Georgia 30309. A copy of any notification or other communication between a settling Party and the escrow agent shall be served on the other settling Party at the same time and by the same means as submitted to the escrow agent.

16.2 Plaintiffs' Class Counsel agree not to petition for or otherwise seek the payment of any additional fees, expenses or costs from Settling Defendant or its insurers.

17. ENFORCEMENT OF THE COURT'S SETTLEMENT APPROVAL ORDER

17.1 This Settlement Agreement is subject to and conditioned upon the issuance by the Court following the Fairness Hearing of a Final Order and Judgment granting final approval of the Settlement Agreement. After issuance of a Final Order and Judgment, the Parties shall be obligated to comply with the terms of the Settlement Agreement, notwithstanding (A) objections to the Settlement, (B) the possibility of an appeal, or (C) the filing of an appeal or notice of appeal, unless the Court relieves the Parties from any such obligations.

17.2 In the event any Party fails to comply with its obligations under the terms of this Settlement Agreement, or is in default of this Settlement Agreement in any other respect, the non-defaulting Party shall so notify the Court. The defaulting Party shall then be given up to twenty (20) calendar days to meet its obligations under the Settlement Agreement. If the defaulting Party does not meet its obligations within twenty (20) calendar days, the non-defaulting Party may apply to the Court for relief.

18. REPRESENTATIONS AND WARRANTIES

18.1 Settling Defendant represents and warrants that: (A) it has all requisite corporate power and authority to execute this Settlement Agreement and to consummate and perform the transactions contemplated herein; and (B) this Settlement Agreement has been duly and validly executed and delivered by Settling Defendant and constitutes a legal, valid and binding obligation.

18.2 Plaintiffs' Class Counsel represent and warrant that they have the authority to enter into and execute this Settlement Agreement and to consummate and perform the transactions contemplated herein as of the date of execution of this Settlement Agreement. Plaintiffs' Class Counsel hereby represent and warrant that this Settlement Agreement has been duly and validly executed and delivered by them and constitutes a legal, valid and binding obligation.

19. TERMINATION OF THE SETTLEMENT AGREEMENT

19.1 The performance of this Settlement Agreement is expressly contingent upon the Court's issuance of the Final Order and Judgment. If the Court fails to issue such Order within ninety (90) days following the conclusion of the Fairness Hearing, either Party may elect to terminate this Settlement Agreement, rendering it as having no force or effect whatsoever, null and void ab initio, and not admissible as evidence for any purpose in any pending or future litigation (in any jurisdiction) involving any of the Parties.

19.2 Settling Defendant agrees to use its best efforts to preserve all documents produced (or withheld upon attorney-client privilege or work product doctrine) by it in this Action through January 1, 2003. Settling Defendants may preserve such documents in any manner including, without limitation, as paper copies (e.g. documents maintained in the In Re Stucco repository) or in electronic form in lieu of paper copies.

20. JUDGMENT REDUCTION PROVISION

20.1 The purpose of this Section is to eliminate the possibility of any liability of Settling Defendant based on claims against Settling Defendant (regardless of the legal theory on which such claims may be based) for contribution (under any theory of law or equity including pro rata or otherwise) toward, or indemnity for, all or any part of (A) the amount of any judgment or settlement in favor of Settlement Class Members (individually or otherwise) against any third party in any other action, including attorneys' fees and costs, or (B) the amount paid by any third party in settlement of any action proceeding and/or claim, so that the payment obligations of Settling Defendant pursuant to this Settlement Agreement, if any, shall be all that Settling Defendant shall ever be required to pay in connection with any of the matters alleged, or that could have been alleged, in this or any subsequent action.

20.2 Each Settlement Class Member agrees to reduce the amount of any total judgment against any third party to which it may be entitled in any action by the amount, if any, of such total judgment for which the fact finder determines the Settling Defendant is liable and which the third party would be entitled to recover from the Settling Defendant by way of contribution (under any theory of law or equity including pro rata or otherwise), indemnification or otherwise, but for the release or any other term of this Settlement Agreement. Each Settlement Class Member also consents to determination of any claim of contribution or indemnity against Settling Defendant in the same action or proceeding in which such Settlement Class Member asserts claims against any other party without the necessity of joinder of Settling Defendant.

20.3 Some Class Members may pursue separate actions against builders or other third parties who may be responsible for damages to their homes, including damages for which those third parties may contend that the Settling Defendant is liable in whole or in part. It is the intent of the Parties that, because of the terms of the Settlement Agreement, the participation of the Settling Defendant shall not be required in such separate actions. If claims for indemnity or contribution are brought against a Settling Defendant despite the provisions of this Section, the Settling Defendant shall:

21. MISCELLANEOUS PROVISIONS

21.1 The Court shall retain continuing jurisdiction over the Parties and this Settlement for any and all purposes related to this Settlement including all rights, duties and obligations arising herein; however, unless otherwise provided in this Settlement Agreement, any and all disputes arising under this Settlement Agreement, including the interpretation and application thereof, will be resolved by ADR as described in Section 9.1 of this Agreement.

21.2 Subject to the Court's approval, the Settling Defendant shall make one payment of $15,000 to Class Counsel, which shall be paid by Class Counsel, at Class Counsel's discretion, to the named plaintiff(s) for the Property with respect to which they individually or jointly assert claims, separate and apart from any determination to which such Persons are entitled under the Settlement Agreement, in recognition of their efforts on behalf of the Settlement Class.

21.3 In no event shall Settling Defendant, their insurers, any attorneys representing Settling Defendant, Plaintiffs or Plaintiffs' Class Counsel have any liability for claims of wrongful or negligent conduct by the Independent Inspectors or their respective agents or employees.

21.4 This Settlement Agreement, including all exhibits attached hereto, shall constitute the entire Settlement Agreement among the Parties with regard to the subject of this Settlement Agreement and shall supersede any previous agreements and understandings between the Parties with respect to the subject matter of this Settlement Agreement. This Settlement Agreement may not be changed, modified, or amended except in writing signed by all Parties, subject to Court approval.

21.5 Notwithstanding any provision to the contrary, in the event the Court does not enter Final Order and Judgment or this Settlement is reversed or vacated on appeal, or rejected upon remand, or terminated pursuant to this Settlement Agreement, any expense or costs incurred by any Party in connection with this Settlement Agreement may be deemed a litigation cost to the extent permitted by law and may be awarded, if at all, as provided by the Court.

21.6 This Settlement Agreement shall be construed under and governed by the laws of the State of North Carolina, applied without regard to its laws applicable to choice of law.

21.7 This Settlement Agreement may be executed by the Parties in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

21.8 This Settlement Agreement shall be binding upon and inure to the benefit of the Settlement Class, the Parties, and their representatives, heirs, successors, and assigns.

21.9 The headings of the sections of this Settlement Agreement are included for convenience only and shall not be deemed to constitute part of this Settlement Agreement or to affect its construction. The decimal numbering of provisions herein is intended to designate sub-sections where applicable.

21.10 Any notice, request, instruction, application for Court approval or application for Court orders sought in connection with this Settlement Agreement, or other document to be given by any Party to any other Party, shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, if to the Settling Defendant, to the attention of Settling Defendant's respective representative, and to Plaintiffs' Counsel on behalf of Settlement Class Members or to other recipients as the Court may specify.

IN WITNESS WHEREOF, the Parties hereto have caused this Settlement Agreement to be executed by their duly authorized attorneys, as of the dates indicated, with the most recent date constituting the date of this Settlement Agreement.

By:_________________________ Date:________________________ James B. Pressly, Jr. Moffatt G. McDonald Wm. David Conner HAYNSWORTH, MARION, McKAY & GUERARD P. O. Box 2048 Greenville, SC 29602 Telephone: 864.240-3200 Fax: 864.240-3300 Attorneys for United States Gypsum Company   By: ________________________ Date:_______________________ Christopher J. McElroy Senior Corporate Counsel United States Gypsum Company P. O. Box 6721 Chicago, IL 60680-6721 Telephone: 312.606-4000 Fax: 312.606-4200 PLAINTIFFS' COUNSEL   By: ________________________ Date:_______________________ Marvin K. Blount, Jr. THE BLOUNT LAW FIRM, P.L.L.C. 400 West First Street Greenville, North Carolina 27835 Telephone: 919.752.6000 Fax: 919.752.2174   By: _________________________ Date:________________________ Gary K. Shipman SHIPMAN & ASSOCIATES 11 South Fifth Avenue Wilmington, NC 28401 Telephone: 910.762.1990 Fax: 910.762.6752   By:__________________________ Date:_________________________ Everette Doffermyre DOFFERMYRE, SHIELDS, CANFIELD, KNOWLES & DEVINE 1600 The Peachtree 1355 Peachtree Street Atlanta, Georgia 30309 Telephone: 404.881.8900 Fax: 404.881.3007 Co-Lead Plaintiffs' Counsel   William M. Audet ALEXANDER, HAWES & AUDET, L.L.P. 152 North Third St., Suite 600 San Jose, CA 95112 Telephone: 408.289.1776 Fax: 408.287.1776   Gary E. Mason COHEN, MILSTEIN, HAUSFELD & TOLL, P.L.L.C. 1100 New York Avenue, NW West Tower, Suite 500 Washington, D.C. 20005 Telephone: 202.408.4600 Fax: 202.408.4699   Samuel D. Heins Kent M. Williams HEINS MILLS & OLSON, P.L.C. 608 Second Avenue South, Suite 700 Minneapolis, MN 55402 Telephone: 612.338.4605 Fax: 612.338.4692   Joe McLeod THE McLEOD LAW FIRM, P.A. 705 First Citizen Bank Building 109 Green Street Post Office Box 1539 Fayetteville, NC 28302 Telephone: 910.323.1425 Fax: 910.323.4582   A. Hoyt Rowell, III H. Blair Hahn NESS, MOTLEY, LOADHOLT, RICHARDSON & POOLE 174 East Bay Street, Suite 100 P.O. Box 1137 Charleston, SC 29402 Telephone: 803.720.9000 Fax: 803.723.6665   Richard T. Dorman Michael A. Worel CUNNINGHAM, BOUNDS, YANCE, CROWDER & BROWN 1601 Dauphin Street Post Office Box 66705 Mobile, AL 36660 Telephone: 334.471.6191 Fax: 334.479.1031   Laurence S. Berman LEVIN, FISHBEIN, SEDRAN & BERMAN 510 Walnut Street, Suite 500 Philadelphia, PA 19106 Telephone: 215.592.1500 Fax: 215.592.4663   Plaintiffs' Steering Committee Auley M. Crouch, III CROUCH & KEETER, L.L.P. 202 North Third Street Post Office Box 4 Wilmington, NC 28401 Telephone: 910.762.0595 Fax: 910.762.6429   Joel Rhine LEA, CLYBURN & RHINE 8 South 7th Street Wilmington, NC 28401 Telephone: 910.772.9960 Fax: 910.772.9062   Laura M. Shamp BROWN & SHAMP 230 Peachtree Street, Suite 1501 Atlanta, GA 30303 Telephone: 404.893.9400 Fax: 404.523.5671   Other Plaintiff's Counsel