Plugin3: Applet fails to load classes from <jre>/lib/applet

With Plugin3 applets fails to load classes from jars sitting inside <jre>/lib/applet

Steps to reproduce:
------------------
1) Copy hostile.jar from following location and copy it inside the <jre>/lib/applet directory
http://sqeweb.sfbay.sun.com/deployment2/jitu/deployment_mustang_exec_ws/deployment/src/plugin/AppletSecurity/AppletSecurity/lib/
2) try to load applet
http://sqeweb.sfbay.sun.com/deployment2/jitu/deployment_mustang_exec_ws/deployment/src/plugin/AppletSecurity/AppletSecurity/html/app_security02.html
If applets fail to load by throwing following exception then bug is reproduced
java.lang.reflect.InvocationTargetException
at sun.plugin2.awtless.impl.awt.ui.UIEventUtilImpl.invokeAndWait(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.runOnEDT(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObjectRaw(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObject(Unknown Source)
at sun.plugin2.applet.Plugin2Manager$AppletExecutionRunnable.run(Unknown Source)
at java.lang.Thread.run(Unknown Source)
Caused by: java.lang.RuntimeException: java.lang.NoClassDefFoundError: StaticHolder
at sun.plugin2.applet.Plugin2Manager$13.run(Unknown Source)
at java.awt.event.InvocationEvent.dispatch(Unknown Source)
at java.awt.EventQueue.dispatchEvent(Unknown Source)
at java.awt.EventDispatchThread.pumpOneEventForFilters(Unknown Source)
at java.awt.EventDispatchThread.pumpEventsForFilter(Unknown Source)
at java.awt.EventDispatchThread.pumpEventsForHierarchy(Unknown Source)
at java.awt.EventDispatchThread.pumpEvents(Unknown Source)
at java.awt.EventDispatchThread.pumpEvents(Unknown Source)
at java.awt.EventDispatchThread.run(Unknown Source)
Caused by: java.lang.NoClassDefFoundError: StaticHolder
at java.lang.Class.getDeclaredConstructors0(Native Method)
at java.lang.Class.privateGetDeclaredConstructors(Unknown Source)
at java.lang.Class.getConstructor0(Unknown Source)
at java.lang.Class.newInstance0(Unknown Source)
at java.lang.Class.newInstance(Unknown Source)
... 9 more
Caused by: java.lang.ClassNotFoundException: StaticHolder
at sun.plugin2.applet.Applet2ClassLoader.findClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
... 14 more
Caused by: java.io.IOException: open HTTP connection failed:http://sqeweb.sfbay.sun.com/deployment2/jitu/deployment_mustang_exec_ws/deployment/src/plugin/AppletSecurity/AppletSecurity/classes/wwwX/StaticHolder.class
at sun.plugin2.applet.Applet2ClassLoader.getBytes(Unknown Source)
at sun.plugin2.applet.Applet2ClassLoader.access$000(Unknown Source)
at sun.plugin2.applet.Applet2ClassLoader$1.run(Unknown Source)
at java.security.AccessController.doPrivileged(Native Method)
... 17 more
java.lang.NoClassDefFoundError: Appletmain
at java.lang.ClassLoader.defineClass1(Native Method)
at java.lang.ClassLoader.defineClassCond(Unknown Source)
at java.lang.ClassLoader.defineClass(Unknown Source)
at java.security.SecureClassLoader.defineClass(Unknown Source)
at sun.plugin2.applet.Applet2ClassLoader.findClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
at sun.plugin2.applet.Plugin2ClassLoader.loadCode(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObjectRaw(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObject(Unknown Source)
at sun.plugin2.applet.Plugin2Manager$AppletExecutionRunnable.run(Unknown Source)
at java.lang.Thread.run(Unknown Source)
Caused by: java.lang.ClassNotFoundException: Appletmain
at sun.plugin2.applet.Applet2ClassLoader.findClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
... 12 more
Caused by: java.io.IOException: open HTTP connection failed:http://sqeweb.sfbay.sun.com/deployment2/jitu/deployment_mustang_exec_ws/deployment/src/plugin/AppletSecurity/AppletSecurity/classes/wwwY/Appletmain.class
at sun.plugin2.applet.Applet2ClassLoader.getBytes(Unknown Source)
at sun.plugin2.applet.Applet2ClassLoader.access$000(Unknown Source)
at sun.plugin2.applet.Applet2ClassLoader$1.run(Unknown Source)
at java.security.AccessController.doPrivileged(Native Method)
... 15 more
Exception: java.lang.NoClassDefFoundError: Appletmain
Exception: java.lang.reflect.InvocationTargetException
java.lang.NullPointerException
at sun.plugin2.applet.Plugin2Manager.findAppletJDKLevel(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObjectRaw(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObject(Unknown Source)
at sun.plugin2.applet.Plugin2Manager$AppletExecutionRunnable.run(Unknown Source)
at java.lang.Thread.run(Unknown Source)
Exception: java.lang.NullPointerException
java.lang.reflect.InvocationTargetException
at sun.plugin2.awtless.impl.awt.ui.UIEventUtilImpl.invokeAndWait(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.runOnEDT(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObjectRaw(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObject(Unknown Source)
at sun.plugin2.applet.Plugin2Manager$AppletExecutionRunnable.run(Unknown Source)
at java.lang.Thread.run(Unknown Source)
Caused by: java.lang.RuntimeException: java.lang.NoClassDefFoundError: B
at sun.plugin2.applet.Plugin2Manager$13.run(Unknown Source)
at java.awt.event.InvocationEvent.dispatch(Unknown Source)
at java.awt.EventQueue.dispatchEvent(Unknown Source)
at java.awt.EventDispatchThread.pumpOneEventForFilters(Unknown Source)
at java.awt.EventDispatchThread.pumpEventsForFilter(Unknown Source)
at java.awt.EventDispatchThread.pumpEventsForHierarchy(Unknown Source)
at java.awt.EventDispatchThread.pumpEvents(Unknown Source)
at java.awt.EventDispatchThread.pumpEvents(Unknown Source)
at java.awt.EventDispatchThread.run(Unknown Source)
Caused by: java.lang.NoClassDefFoundError: B
at java.lang.Class.getDeclaredConstructors0(Native Method)
at java.lang.Class.privateGetDeclaredConstructors(Unknown Source)
at java.lang.Class.getConstructor0(Unknown Source)
at java.lang.Class.newInstance0(Unknown Source)
at java.lang.Class.newInstance(Unknown Source)
... 9 more
Caused by: java.lang.ClassNotFoundException: B
at sun.plugin2.applet.Applet2ClassLoader.findClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
... 14 more
Caused by: java.io.IOException: open HTTP connection failed:http://sqeweb.sfbay.sun.com/deployment2/jitu/deployment_mustang_exec_ws/deployment/src/plugin/AppletSecurity/AppletSecurity/classes/wwwA/B.class
at sun.plugin2.applet.Applet2ClassLoader.getBytes(Unknown Source)
at sun.plugin2.applet.Applet2ClassLoader.access$000(Unknown Source)
at sun.plugin2.applet.Applet2ClassLoader$1.run(Unknown Source)
at java.security.AccessController.doPrivileged(Native Method)
... 17 more
Exception: java.lang.reflect.InvocationTargetException
java.lang.NullPointerException
at sun.plugin2.applet.Plugin2Manager.findAppletJDKLevel(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObjectRaw(Unknown Source)
at sun.plugin2.applet.Plugin2Manager.createAppletObject(Unknown Source)
at sun.plugin2.applet.Plugin2Manager$AppletExecutionRunnable.run(Unknown Source)
at java.lang.Thread.run(Unknown Source)
Exception: java.lang.NullPointerException