8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): June 1, 2009 (June 4, 2009)

FREMONT GENERAL CORPORATION

(Exact Name of Registrant as Specified in Charter)

Nevada	001-08007	95-2815260
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2727 East Imperial Highway
Brea, California	92821
(Address of Principal Executive Offices)	(Zip Code)

(Registrant’s Telephone Number, Including Area Code) (714) 961-5000

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

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

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

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

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

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

TABLE OF CONTENTS

	Item 8.01 Other Events.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EX-99.1
EX-99.2

Item 8.01 Other Events.

On June 1, 2009, Fremont General Corporation (the “Company”) filed a “Plan of Reorganization Under Chapter 11 of the Bankruptcy Code” (the “Plan”) with the United States Bankruptcy Court for the Central District of California, Santa Ana Division (the “Bankruptcy Court”) in connection with the Company’s pending bankruptcy proceedings (the “Bankruptcy” and/or the “Bankruptcy Proceeding”). Contemporaneously with the filing of the Plan, the Company filed its “Disclosure Statement Describing Debtor’s Plan Pursuant to Chapter 11 of the Bankruptcy Code” (the “Disclosure Statement”), which must be approved by the Bankruptcy Court before the Plan can be transmitted to creditors or equity interest holders for approval.

The purpose of the Plan is to vest title to all assets of the Company, including the prosecution of all causes of action and suits of the Company, in the Reorganized Debtor (as defined in the Plan), free and clear of all liens in accordance with the United States Bankruptcy Code, as amended (the “Bankruptcy Code”). The Reorganized Debtor will then be responsible for the distribution and orderly liquidation of the Company’s assets to resolve the claims against the Company’s bankruptcy estate, as well as the equity interests of the Company, all in accordance with the terms of the Plan. The Plan designates a series of classes of claims and one class of equity interests, which takes into consideration all claims against, and equity interests in, the Company and its assets. These classes take into account the differing nature and priority under the Bankruptcy Code of the various claims and equity interests. If the Disclosure Statement is approved, the Plan will be subject to confirmation by the Bankruptcy Court and the approval of certain creditors and equity interest holders of the Company, as described in the Plan and summarized below. The Company cannot provide any assurance that the Disclosure Statement will be approved by the Bankruptcy Court or that the Plan will be acceptable to the Company’s creditors and equity interest holders or confirmed by the Bankruptcy Court.

Classification and Treatment

The Plan provides an opportunity for the Company’s creditors, equity interest holders and its other constituents to participate in the Company’s liquidation process, while also setting forth the relative priorities of the constituents’ claims and interests, all in accordance with the Bankruptcy Code. The Plan establishes five (5) classes of claims: (i) Priority Non-Tax Claims; (ii) General Unsecured Claims, which includes the holders of the 7.875% Senior Notes due 2009, which were issued pursuant to that certain indenture dated March 1, 1999 by and between The Bank of New York, as Trustee and the Company (the “Senior Notes”); (iii) the claims of the holders of the 9% Trust Originated Preferred Securities issued by Fremont General Financing I, a statutory business trust, formed under Delaware law pursuant to the Amended and Restated Declaration of Trust, dated as of March 6, 1996 (the “TOPrS Claims”); (iv) Equity Interests (as described below); and (v) securities related claims, including, without limitation, any claims arising from equity forward agreements and other understandings to purchase an equity security in the Company, which claim is subject to subordination in accordance with Section 510(b) of the Bankruptcy Code (the “Section 510(b) Claims”). Only those classes that are “impaired” by the Plan are entitled to vote to accept or reject the Plan. A class is “impaired” if the legal, equitable, or contractual rights of the claims or equity interests in the class are altered. Classes of claims

that are not impaired are conclusively presumed to have voted to accept the Plan pursuant to the Bankruptcy Code and, therefore, are not entitled to vote on the Plan.

Certain types of claims are not placed into these classes because they are automatically entitled to specific treatment in priority and payment as set forth in the Bankruptcy Code. Such unclassified claims are not considered impaired and they do not vote on the Plan. These claims include: (i) claims for administrative costs or expenses that are allowable under the Bankruptcy Code (the “Administrative Claims”); and (ii) Priority Tax Claims. Pursuant to the Plan, except to the extent that any holder of an Administrative Claim or Priority Tax Claim agrees to a less favorable treatment or unless otherwise ordered by the Bankruptcy Court, each such holder will receive in full satisfaction, discharge, exchange and release of their claim, an amount of cash equal to the unpaid portion of such claim or such other treatment as to which the Company and such holder have agreed upon in writing. Such payments will be made only after the Bankruptcy Court has confirmed the Plan, provided, however, that ordinary course Administrative Claims will continue to be paid in full in accordance with the terms and conditions of the particular transactions and any applicable agreements or as otherwise authorized by the Bankruptcy Court.

The following is a summary of the priority and treatment of each of the classes set forth in the Plan:

Priority Non-Tax Claims. Priority Non-Tax Claims include claims, other than Administrative Claims or Priority Tax Claims, entitled to priority in right of payment under Section 507(a) of the Bankruptcy Code. Except to the extent that a holder of an “Allowed” Priority Non-Tax Claim agrees to a less favorable treatment, each such claim will be paid, in full satisfaction, discharge, exchange and release thereof, in cash in the full amount of the claim.

An “Allowed” claim or equity interest means a claim or equity interest, other than an Administrative Claim, to the extent that: (a) either (1) a proof of claim or proof of interest was timely filed prior to the previously disclosed Claims Bar Date (as defined in the Plan); or (2) a proof of claim or proof of interest that is deemed timely filed either under Bankruptcy Code or by a final order of the Bankruptcy Court; and (b) either (1) the claim or equity interest is not disputed by the Company; or (2) the claim or equity interest is allowed either by a final order of the Bankruptcy Court or under the Plan. Any portion of a claim that is satisfied or released during the Bankruptcy Proceeding is not an “Allowed” claim.

Priority Non-Tax Claims are not impaired by the Plan and, therefore, such claims are not entitled to vote on the Plan.

General Unsecured Claims. A General Unsecured Claim means any claim that is not an Administrative Claim, a Priority Tax Claim, a Priority Non-Tax Claim, a TOPrS Claim or a Section 510(b) Claim. The holder of an Allowed General Unsecured Claims will receive a semi-annual pro rata distribution of any distributable cash based upon the amount of such holder’s Allowed General Unsecured Claim, until such claim has been satisfied. Notwithstanding the above, no such distribution will be paid unless reserves have been established and funded in an estimated amount deemed necessary to pay, in full, the Administrative Claims, Priority Tax Claims, and Allowed Priority Non-Tax Claims and a $25,000 reserve for expenses related to the Equity Trust (as defined below). In the event all Allowed General Unsecured Claims are paid in

full, then the Plan provides for the payment of post-petition interest and penalties associated with such claims to the extent permissible under the Bankruptcy Code. Such post-petition interest will be paid to the holders of such claims at the federal judgment rate in effect as of the date the Bankruptcy Proceedings commenced, unless the holder of a claim obtains a Bankruptcy Court determination that it is entitled to interest at a different rate.

Notwithstanding the above, the Plan provides that if the Reorganized Debtor pays $175,000,000 to the holders of the Senior Notes on or before October 31, 2009, such distribution will constitute a full and final satisfaction and accord of all claims represented by the Senior Notes. In addition, if the Reorganized Debtor pays, in full, the other holders of Allowed General Unsecured Claims by October 31, 2009, such distributions will constitute a full and final satisfaction and accord of all such claims, and the post-bankruptcy interest will be waived.

The General Unsecured Claims are impaired by the Plan and, therefore, are entitled to vote on the Plan.

TOPrS Claims. Allowed TOPrS claims will be paid when assets are available and after the payment of the Administrative Claims, Priority Tax Claims, and Allowed Priority Non-Tax Claims. In addition, the Allowed TOPrS Claims will only be paid after all amounts have been paid to resolve Allowed General Unsecured Claims on the Senior Notes pursuant to the contractual subordination rights set forth in their respective indentures and in accordance with the Plan. Allowed TOPrS Claims will not include post-petition interest nor include any penalty on such claims, unless the Reorganized Debtor pays, in full, all Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed General Unsecured Claims, all post-effective date Plan expenses, and all Allowed TOPrS Claims. If the foregoing are paid, then Allowed TOPrS Claims shall also include any penalty or post-petition interest component that is payable in accordance with the Bankruptcy Code.

The TOPrS Claims are impaired by the Plan and, therefore, are entitled to vote on the Plan.

Equity Interests. The holders of an equity security in the Company are within this class (the “Equity Interests”). As of the date the Company commenced the Bankruptcy Proceedings, approximately 82,116,179 shares of Company common stock had been issued. The holders of Equity Interests will receive a beneficial interest in a trust established pursuant to the Plan (the “Equity Trust”) in exchange for such holder’s Equity Interest in the Company. Upon the Plan’s confirmation by the Bankruptcy Court, the Equity Trust will be established for the benefit of the Equity Interest holders and holders of the Section 510(b) Claims. Holders of Equity Interests will receive Series A Equity Trust Interests and holders of Allowed Section 510(b) Claims will receive Series B Equity Trust Interests (collectively referred to as the “Equity Trust Interests”). Holders of Equity Interests will receive Series A Equity Trust Interests in an amount equal to the number of shares of Company common stock owned by such holder. By way of example, if a holder owns 100,000 shares of the Company’s common stock, such holder would receive 100,000 Series A Equity Trust Interests. On the effective date of the Plan, the stock certificates representing shares of common stock issued by the Company prior to the effective date of the Plan will be deemed to be of no force and effect against the Reorganized Debtor and will only represent the right to receive a Series A Equity Trust Interest.

In the event the Reorganized Debtor makes a distribution to the Equity Trust, as set forth below, the holders of Series A Equity Trust Interests shall receive distributions from the Equity Trust under the terms of an Equity Trust Agreement and Declaration of Trust (the “Equity Trust Agreement”), which will be entered into by and among, the Reorganized Debtor, the official committee of Equity Security Holders appointed by the Office of the U.S. Trustee for the Central District of California and an Equity Trustee.

This class is impaired and the holders of Allowed Equity Interests are entitled to vote to accept or reject the Plan.

Section 510(b) Claims. Allowed Section 510(b) Claims will receive Series B Equity Trust Interests in the Equity Trust in an amount equal to the allowed amount of such Allowed Section 510(b) Claim.

In accordance with the Equity Trust Agreement, prior to any distribution on the Equity Trust Interests, the Equity Trustee must determine the value of the Series B Equity Trust Interests, relative to the total Equity Trust Interests. In making this determination, the Equity Trustee shall (i) calculate the total amount of Allowed Section 510(b) Claims, after deducting payments made on account of such claims by applicable insurance; (ii) reasonably estimate the value of each such Allowed Section 510(b) Claims compared to the total value of all Equity Interests, as of the date of incurrence of the Allowed Section 510(b) Claim; and (iii) if the calculation in section (i) above is less than the estimated Section 510(b) Claims, redistribute all excess Series B Equity Interests to all holders of Allowed Section 510(b) Claims and Allowed Equity Interests on a pro rata basis (the “Equity Reconciliation”). After completion of the Equity Reconciliation, there shall be no distinction between a Series A Equity Trust Interest and a Series B Equity Trust Interest.

Sixty (60) days after the later of (i) the completion of the Equity Reconciliation and (ii) the Equity Trust’s receipt of distributable funds from the Reorganized Debtor, the Equity Trustee will distribute such funds to the holders of the Equity Trust Interests. The Equity Trust may retain such amounts (i) as are reasonably necessary to meet contingent liabilities and to maintain the value of the assets of the Equity Trust during liquidation, (ii) to pay reasonable administrative expenses (including any taxes imposed on the Equity Trust or in respect of the assets of the Equity Trust), and (iii) to satisfy other liabilities incurred or assumed by the Equity Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Equity Trust Agreement.

To the extent that there are members in this class, such class has been impaired and the holders of such claims are entitled to vote to accept or reject the Plan.

Copies of the Plan and Disclosure Statement are attached to this Current Report on Form 8-K as Exhibits 99.1 and 99.2 and are incorporated by reference as though fully set forth herein. The foregoing summary description of the Plan and the transactions contemplated therein are not intended to be complete and are qualified in their entirety by the complete text of the Plan and the Disclosure Statement.

Documents filed with the Bankruptcy Court

Documents filed with the Bankruptcy Court in connection with the Company’s bankruptcy case (other than documents filed under seal or otherwise subject to confidentiality protections) will be accessible at the Bankruptcy Court’s Internet site, www.cacd.uscourts.gov, through an account obtained from Pacer Service Center at 1-800-676-6856. Additional information may also be found at the Company’s website at www.fremontgeneral.com under “Restructuring Information” where you will find the following link www.kccllc.net/fremontgeneral. The information set forth on the foregoing websites shall not be deemed to be a part of or incorporated by reference into this Form 8-K.

Cautionary Statement Regarding Forward Looking Statements

Certain statements contained in this Current Report on Form 8-K may be deemed to be forward-looking statements under federal securities laws and the Company intends that such forward-looking statements be subject to the safe-harbor created thereby. The Company cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements. Such factors include, but are not limited to, the outcome of litigation concerning certain causes of action of the Company, the results of the Company’s review of submitted claims and the Company’s ability to resolve contingent and unliquidated claims. Additional information on these and other factors is contained in the Company’s Securities and Exchange Commission filings. The Company assumes no, and hereby disclaims any, obligation to update the forward-looking statements contained in this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
Exhibit 99.1	Fremont General Corporation’s Plan of Reorganization Under Chapter 11 of the Bankruptcy Code
Exhibit 99.2	Fremont General Corporation’s Disclosure Statement Describing Debtor’s Plan Pursuant to Chapter 11 of the Bankruptcy Code

SIGNATURES

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

	FREMONT GENERAL CORPORATION
Date: June 4, 2009	By:	/s/ RICHARD A. SANCHEZ
		Name:	Richard A. Sanchez
		Title:	Interim President and Chief Executive Officer

EX-99.1

Exhibit 99.1

THEODORE B. STOLMAN (State Bar No. CA 52099)
TStolman@Stutman.com
WHITMAN L. HOLT (State Bar No. CA 238198)
WHolt@Stutman.com
STUTMAN, TREISTER & GLATT, P.C.
1901 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067
Telephone: (310) 228-5600
Facsimile:   (310) 228-5788

-and-

ROBERT W. JONES (State Bar No. TX 10951200)
RWJones@pattonboggs.com
J. MAXWELL TUCKER (State Bar No. TX 20270900)
mtucker@pattonboggs.com
BRENT R. MCILWAIN (State Bar No. TX 24013140)
BMcIlwain@pattonboggs.com
PATTON BOGGS LLP
2001 Ross Avenue, Suite 3000
Dallas, TX 75201-8001
Telephone: (214) 758-1500
Facsimile:   (214) 758-1550

Reorganization Counsel for Debtor and Debtor in Possession

Debtor’s Mailing Address:
2727 East Imperial Highway
Brea, California 92821

UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
SANTA ANA DIVISION

In re:	§	Case No. 8:08-bk-13421-ES
	§	CHAPTER 11
FREMONT GENERAL CORPORATION,	§
a Nevada corporation,	§ §	FREMONT GENERAL CORPORATION’S PLAN PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
Debtor.	§
	§
Tax I.D. 95-2815260	§
	§
	§

Table of Contents

	Page
I. DEFINITIONS		2
II. RULES OF INTERPRETATION		16
III. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS		17
A. Allowance and Treatment of Unclassified Claims (Administrative Claims and Priority Tax Claims)		19
1. Administrative Claims		19
2. Priority Tax Claims		21
B. Classification and Treatment of Priority Non-Tax Claims (Class 1)		21
C. Classification and Treatment of General Unsecured Claims (Class 2A)		22
D. Classification and Treatment of TOPrS Claims (Class 2B)		24
E. Classification and Treatment of Equity Interests (Class 3A)		25
F. Classification and Treatment of holders of Section 510(b) Claims (Class 3B)		25
IV. EXECUTORY CONTRACTS AND UNEXPIRED LEASES		26
V. PLAN IMPLEMENTATION		27
A. Implementing Actions in General; Conditions to Plan Effectiveness		27
B. Corporate Action		28
C. VESTING OF ASSETS		28
D. Board of Directors of the Reorganized Debtor		28
E. Board of Directors of FRC and other subsidiaries		29
F. The Plan Administrator		30
1. Appointment of the Plan Administrator		30
2. Responsibilities of the Reorganized Debtor Plan Administrator		30
3. Powers of the Plan Administrator		31
4. Compromise and Settlement of Significant Matters		31

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	Page
5. Plan Administrator as Representative of the Estate and Creditor Trustee		31
6. Compensation and Termination of the Plan Administrator		32
7. Limitation on Liability of Plan Administrator		32
G. The Equity Trust		33
1. Establishment and Effectiveness of the Equity Trust		33
2. Purpose of the Equity Trust		33
3. Beneficiaries and Equity Reconciliation		34
4. Transfer of Exchanged Common Stock		35
5. Expenses of the Equity Trust		35
6. Investment Powers		35
7. Annual Distribution and Withholding		36
8. Reporting Duties		37
9. Other		38
H. The Committees		38
I. Allowance of Equity Interests		39
J. Distribution of Property Under the Plan		39
1. Manner of Cash Payments		39
2. Setoff and Recoupment		39
3. No De Minimis Distributions		39
4. No Distributions With Respect to Disputed Claims		40
5. Undeliverable or Unclaimed Distributions		40
6. Record Date		41
7. Fractional Cents		41
8. Release of Reserved Funds		41
9. Insurance Policies		41

ii

	Page
VI. LITIGATION AND CLAIMS OBJECTIONS		42
A. Preservation of All Causes of Action		42
B. Disputed Claims		44
1. Reserves for Claims Other Than General Unsecured Claims		44
2. Disputed Unsecured Claims Reserve		44
3. Objections to and Resolution of Disputed Claims		45
VII. OTHER PLAN PROVISIONS		45
A. Exculpation and Limited Release of Debtor, Committees and Professionals		45
B. Exemption from Stamp, Transfer and Other Taxes		46
C. Injunction Enjoining Holders of Claims Against and Equity Interests in the Debtor		46
D. Discharge of the Debtor		47
E. Entry of a Final Decree		48
F. Post-Effective Date Quarterly Fees		48
G. Post-Effective Date Status Reports		48
H. Withholding and Reporting Requirements		48
I. Evidence of Claims		49
J. Injunctions or Stays		49
K. No Admissions		49
L. Revocation of the Plan		49
M. Severability of Plan Provisions		49
N. Governing Law		50
O. Retention of Jurisdiction		50
P. Successors and Assigns		52
Q. Nonconsensual Confirmation		53
R. Saturday, Sunday, or Legal Holiday		53

iii

	Page
S. No Waiver		53
T. Plan Modification		53
U. Post-Confirmation Date Notice		54
VIII. RECOMMENDATIONS AND CONCLUSION		55

EXHIBITS
[RESERVED]

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I.
DEFINITIONS

          The following Defined Terms (which appear in this Plan as capitalized terms), when used in this Plan, have the meanings set forth below:

          “Administrative Claim” means a claim for administrative costs or expenses that are allowable under Bankruptcy Code section 503(b) or 28 U.S.C. § 1930. These costs or expenses may include: (a) actual, necessary costs and expenses of preserving the Debtor’s Estate after the Petition Date; (b) Ordinary Course Administrative Claims; (c) Professional Fee Claims; (d) Administrative Tax Claims; and (e) U.S. Trustee Fees.

          “Administrative Claims Reserve” means a Cash deposit maintained by the Reorganized Debtor in a separate account to which the Plan Administrator shall be a signatory. The Reorganized Debtor shall transfer Cash to such separate account on the Effective Date, in the estimated amount necessary to pay all Administrative Claims outstanding as of the Effective Date, including Professional Fee Claims and Ordinary Course Administrative Claims, in full.

          “Administrative Tax Claim” means a Claim that a governmental unit asserts against the Debtor for taxes or related interest or penalties, which Claim is entitled to priority and allowable under Bankruptcy Code section 503(b).

          “Allowed Administrative Claim” means an Administrative Claim that is allowed by a Final Order.

          “Allowed Claim” or “Allowed Equity Interest” means a Claim or Equity Interest, other than an Administrative Claim, to the extent that:

(a) Either: (1) a proof of claim or proof of interest was timely filed prior to the Claims Bar Date; or (2) a proof of claim or proof of interest is deemed timely filed either under Bankruptcy Rule 3003(b)(1)-(2) or by a Final Order; and

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(b) Either: (1) the Claim or Equity Interest is not a Disputed Claim or a Disputed Equity Interest; or (2) the Claim or Equity Interest is allowed either by a Final Order or under the Plan.

Any portion of a Claim that is satisfied or released during the Case is not an Allowed Claim.

          “Allowed Class ‘___’ Claim” means an Allowed Claim classified in the specified Class.

          “Assets” means all assets of the Debtor’s Estate including “property of the estate” as described in section 541 of the Bankruptcy Code.

          “Avoidance Action” means an adversary proceeding, lawsuit or other proceeding with respect to Causes of Action arising under, relating to, or similar to Bankruptcy Code sections 502(d), 506, 510, 542, 543, 544, 545, 547, 548, 549, 550, 551, 552 or 553, or any fraudulent conveyance, fraudulent transfer or preference laws, or any Cause of Action arising under, or relating to, any similar state law or federal law that constitutes property of the Estate under Bankruptcy Code section 541, whether or not an action is initiated on or before the Effective Date.

          “Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101-1532, as now in effect or hereafter amended.

          “Bankruptcy Court” means the United States Bankruptcy Court for the Central District of California, Santa Ana Division.

          “Bankruptcy Rules” means, collectively, (a) the Federal Rules of Bankruptcy Procedure promulgated under 28 U.S.C. § 2075, as amended from time to time; and (b) the Local Bankruptcy Rules applicable to cases pending before the Bankruptcy Court, as now in effect or hereafter amended.

          “Bankruptcy Schedules” means the Schedules of Assets and Liabilities and Statement of Financial Affairs filed by the Debtor in the Case, as may have been amended from time to time.

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          “Board of Directors” means the board of directors of the Reorganized Debtor selected pursuant to the terms of the Plan.

          “Business Day” means any day other than a Saturday, Sunday or a legal holiday (as defined in Bankruptcy Rule 9006(a)).

          “Case” means the case under chapter 11 of the Bankruptcy Code commenced by the Debtor and bearing Case Number 8:08-bk-13421-ES.

          “Cash” means cash or cash equivalents including, but not limited to, bank deposits, checks or other similar items.

          “Causes of Action” means any and all claims, demands, rights, actions, Rights of Action, causes of action and suits of the Debtor or the Estate, of any kind or character whatsoever, known or unknown, suspected or unsuspected, whether arising prior to, on or after the Petition Date, in contract or in tort, at law or in equity or under any other theory of law, that the Debtor or the Debtor’s Estate has or asserts or may have or assert against third parties, whether or not brought as of the Effective Date, and which have not been settled or otherwise resolved by Final Order as of the Effective Date, including but not limited to (1) rights of setoff, counterclaim or recoupment, and claims on contracts or for breaches of duties imposed by law, (2) the right to object to claims or interests, (3) such claims and defenses as fraud, mistake, duress and usury, (4) Avoidance Actions, (5) claims for tax refunds (6) claims to recover outstanding accounts receivable, (7) such claims and defenses as alter ego and substantive consolidation, and (8) any other claims which may be asserted against third parties.

          “Claim” means a claim—as the term “claim” is defined in Bankruptcy Code section 101(5)—against the Debtor.

          “Claims Bar Date” means (a) with respect to Claims other than those held by governmental units, November 10, 2008, which was the last date for filing Claims against the Estate pursuant to the Court’s Order entered on September 4, 2008; and (b) with respect to Claims held by governmental units, December 15, 2008.

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          “Claims Objection Deadline” means the deadline for the Plan Administrator and parties in interest to file objections to Claims as set forth herein.

          “Class” means a group of Claims or Equity Interests as classified in Section III.

          “Confirmation” means the entry of the Order by the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code.

          “Confirmation Date” means the date on which the Bankruptcy Court enters the Confirmation Order on its docket.

          “Confirmation Hearing” means the hearing before the Court to consider the confirmation of the Plan pursuant to Bankruptcy Code section 1128(a), as such hearing may be continued from time to time.

          “Confirmation Hearing Date” means the first date on which the Bankruptcy Court holds the Confirmation Hearing.

          “Confirmation Order” means the order of the Bankruptcy Court confirming this Plan under Bankruptcy Code section 1129.

          “Court” means the Bankruptcy Court or any other court that exercises competent jurisdiction over the Case.

          “Creditor” means the Holder of a Claim against the Debtor.

          “Creditor Trust” means that certain trust established pursuant to the Plan, Confirmation Order, and the Creditor Trust Agreement for the primary benefit of the creditors classified in Class 2A and Class 2B.

          “Creditor Trust Agreement” means that certain “Creditor Trust Agreement and Declaration of Trust,” by and between, Fremont General Corporation, the Creditors Committee and the Creditor Trustee, to be entered into pursuant to the Plan and the Confirmation Order, as may be amended from time to time.

          “Creditor Trustee” means the trustee of the Creditor Trust.

          “Creditors Committee” means the Official Committee of Unsecured Creditors appointed in the Case by the Office of the U.S. Trustee for the Central District of California.

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          “Debtor” means Fremont General Corporation, a Nevada corporation.

          “Defined Term” means any capitalized term that is defined in this Article I.

          “Disbursing Agent” means the Plan Administrator or such other officer of the Reorganized Debtor so designated by the Plan Administrator.

          “Disclosure Statement” means the disclosure statement relating to the Plan, including, without limitation, all exhibits and schedules thereto, as approved by the Bankruptcy Court pursuant to Bankruptcy Code section 1125.

          “Disclosure Statement Order” means the Order entered by the Bankruptcy Court approving the Disclosure Statement.

          “Disputed Amount” means the lesser of (a) the liquidated amount set forth in the proof of claim filed with the Bankruptcy Court relating to a Disputed Claim, (b) if the Bankruptcy Court has estimated such Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, the amount of a Disputed Claim as estimated by the Bankruptcy Court, and (c) the amount of such Disputed Claim allowed by the Bankruptcy Court pursuant to section 502 of the Bankruptcy Code, or zero, if such Disputed Claim is disallowed by the Bankruptcy Court pursuant to such section, in either case, regardless of whether the order or judgment allowing or disallowing such Claim has become a Final Order.

          “Disputed Claim” means any Claim: (a) as to which a proof of claim has been filed and the dollar amount of such Claim, respectively, is not specified in a fixed amount; (b) prior to the deadline to object to such Claim, as to which a proof of claim has been filed and the dollar amount of such Claim is specified in a fixed liquidated amount, the extent to which the stated amount of such Claim exceeds the amount of such Claim listed in the Schedules; (c) prior to the deadline to object to such Claim, as to which a proof of claim has been filed and such Claim is not included in the Schedules; (d) with respect to a proof of claim that is filed or is deemed filed under Bankruptcy Rule 3003(b)(1) and is listed as contingent, disputed or unliquidated; (e) as to which an objection has been filed or is deemed to have been filed pursuant to any order approving procedures for objecting to Claims and such objection has

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neither been overruled nor been denied by a Final Order and has not been withdrawn; or (f) with respect to an Administrative Claim, as to which an objection: (1) has been timely filed (or the deadline for objection to such Administrative Claim has not expired) and (2) has neither been overruled nor been denied by a Final Order and has not been withdrawn; provided, however, that in each case, a Claim or Administrative Claim shall not be deemed to be a Disputed Claim to the extent that the Plan Administrator otherwise agrees with any such Claim or Administrative Claim, and such Claim or Administrative Claim is Allowed under the Bankruptcy Code or by Final Order, as applicable.

          “Disputed Equity Interest” means any Equity Interest, as to which (a) an objection has been timely filed, which has neither been overruled nor been denied by a Final Order and has not been withdrawn or (b) is the subject of a filed Cause of Action that is related to such Equity Interest which has not been settled or otherwise resolved by Final Order.

          “Disputed Unsecured Claim Reserve” means a Cash reserve which shall be maintained by the Plan Administrator in the estimated amount necessary to pay all Disputed Claims which are General Unsecured Claims (“Disputed Unsecured Claims”) in accordance with the provisions of this Plan, if such Disputed Claims become Allowed Claims.

          “Distribution(s)” means any transfer under the Plan of Cash or other property or instruments to a Holder of an Administrative Claim, a Holder of an Allowed Claim, or to the Equity Trust.

          “Distributable Cash” means that amount of Cash (exclusive of Cash held in Reserve) that is determined by the Board of the Reorganized Debtor from time to time to be currently available for distribution to holders of Allowed Claims and Allowed Interests by the Plan Administrator in the order of priority established by the Plan.

          “Effective Date” shall mean the first Business Day occurring ten (10) days after entry of the Confirmation Order, as further qualified by the provisions of Section V of the Plan. However if the effectiveness of the Confirmation Order is stayed other than by operation of

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Bankruptcy Rule 3020(e), then the Effective Date shall mean the first business day occurring ten (10) days after the lifting of any such stay of the Confirmation Order.

          “Estimated Section 510(b) Claims” means the estimated Allowed Section 510(b) Claims, after taking into account applicable insurance coverage.

          “Equity Committee” means the Official Committee of Equity Security Holders appointed in the Case by the Office of the U.S. Trustee for the Central District of California.

          “Equity Interest” means the interest—as the term “interest” is defined in Bankruptcy Code section 101(17)—of any entity who holds an equity security in the Debtor no matter how held, including issued and outstanding shares of common stock, preferred stock, stock options, warrants, membership interests, or other evidence of interests in securities of the Debtor; provided, however, that in no event shall the TOPrS Claims be considered “Equity Interests.”

          “Equity Interest Holder(s)” means the record Holder of an Equity Interest.

          “Equity Trust” means that certain trust established pursuant to the Plan, Confirmation Order, and the Equity Trust Agreement for the benefit of the Equity Interest Holders and holders of the Section 510(b) Claims.

          “Equity Trust Agreement” means that certain “Equity Trust Agreement and Declaration of Trust,” by and between, Fremont General Corporation, the Equity Committee and the Equity Trustee, to be entered into pursuant to the Plan and the Confirmation Order, as may be amended from time to time.

          “Equity Trust Expense Amount” means $25,000.

          “Equity Trust Interest” means a beneficial interest in the Equity Trust entitling the Holder thereof to the distribution from the Equity Trust as provided for in the Plan and in the Equity Trust Agreement which shall collectively include Series A Equity Trust Interests and Series B Equity Trust Interests.

          “Equity Trustee” means the trustee of the Equity Trust.

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          “Estate” means the estate created in the Case under Bankruptcy Code section 541.

          “Excess Series B Equity Interests” means any remaining Series B Equity Interests after deducting the actual Allowed Section 510(b) Claims from the Estimated Section 510(b) Claims.

          “Exchanged Common Stock” means all authorized and issued common stock of the Debtor, which under the Plan shall be deemed to have been exchanged by holders of such Equity Interest for Equity Trust Interests.

          “FGFI Trust” means Fremont General Financing I, a statutory business trust, formed under Delaware law pursuant to that certain “Amended and Restated Declaration of Trust” dated as of March 6, 1996, for the sole purpose of issuing securities representing undivided beneficial interests in the FGFI Trust’s assets.

          “Final Order” means an order or judgment of the Court or other applicable court, as entered on the applicable docket, that has not been reversed, stayed, modified or amended, and as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending or as to which any right to appeal, petition for certiorari, reargue, or rehear shall have been waived in writing in form and substance satisfactory to the Debtor prior to the Effective Date or to the Plan Administrator after the Effective Date, as applicable, or, in the event that an appeal, writ of certiorari, or reargument or rehearing thereof has been sought, such order or judgment of the Court or other applicable court shall have been affirmed by the highest court to which such order or judgment was appealed, or certiorari has been denied, or from which reargument or rehearing was sought, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired.

          “FRC” means Fremont Reorganizing Corporation f/k/a Fremont Investment & Loan, a corporation organized under the laws of the state of California.

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          “FRC Board of Directors” means the board of directors of FRC.

          “Fremont NOLs” means the federal consolidated net operating loss carryovers of the affiliated tax group of which the Debtor is the common parent.

          “General Unsecured Claim” or “Unsecured Claim” means any Claim that is not an Administrative Claim, a Priority Tax Claim, a Priority Non-Tax Claim, a TOPrS Claim, or a Section 510(b) Claim.

          “Holder” means the Holder of a Claim or Equity Interest against the Debtor.

          “Impaired” means, when used with reference to a Claim or Equity Interest, a Claim or Equity Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code.

          “Late Filed Claim” means any Unsecured Claim described in Bankruptcy Code sections 726(a)(2) or 726(a)(3).

          “Loans” means the residential mortgage loans owned by FRC.

          “Local Bankruptcy Rules” means the Local Bankruptcy Rules for the United States Bankruptcy Court for the Central District of California, as now in effect or hereafter amended.

          “Non-Subordinate Members of the Creditors Committee” means the members of the Creditors Committee other than the Subordinate Members of the Creditors Committee.

          “Ordinary Course Administrative Claim” means a claim for administrative costs or expenses that are allowable under Bankruptcy Code section 503(b) that are incurred in the ordinary course of the Debtor’s operations or the Case, or are provided for in an order of the Bankruptcy Court.

          “Penalty” means any Claim for any fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the Petition Date, to the extent that such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the Holder of such claim as set forth in Bankruptcy Code section 726(a)(4).

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          “Person” means any natural person or entity.

          “Petition Date” means June 18 2008, the date on which the Debtor filed its voluntary petition commencing the Case.

          “Plan” means this plan of reorganization under chapter 11 of the Bankruptcy Code, including, without limitation, all exhibits, supplements, appendices, and schedules hereto, either in its present form or as it may be altered, amended, or modified from time to time.

          “Plan Administration Agreement” means the agreement prescribing the powers, duties and rights of the Plan Administrator in administering the Plan, in form approved by the Creditors Committee, Equity Committee, the Reorganized Debtor and the Plan Administrator.

          “Plan Administrator” means the Chief Executive Officer of the Reorganized Debtor, who shall be responsible for, among other things, administration of the Plan in accordance with the Plan Administration Agreement and serving as the Creditor Trustee of the Creditor Trust.

          “Plan Administrator Disclosure” means a written disclosure, to be filed with the Bankruptcy Court at least ten (10) Business Days prior to the Confirmation Hearing, disclosing the identity of the Plan Administrator, his/her credentials, any and all relevant affiliations, connections or actual or potential conflicts of interest and an engagement letter setting forth the terms of the Plan Administrator’s retention.

          “Post Effective Date Plan Expense(s)” means all voluntary and involuntary, costs, expenses, charges, obligations, or liabilities of any kind or nature, whether unmatured, contingent, or unliquidated (collectively, the “Expenses”) incurred by the Reorganized Debtor after the Effective Date of or related to the implementation of the Plan, including, but not limited to: (i) the Expenses of the Plan Administrator in connection with administering and implementing the Plan, including any taxes incurred by the Reorganized Debtor and accrued on or after the Effective Date; (ii) all fees which accrue after the Effective Date which are payable to the U.S. Trustee under 28 U.S.C. § 1930(a)(6); (iii) the Expenses of the Plan Administrator in

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making the Distributions required by the Plan, including paying taxes, filing tax returns, and paying professionals’ fees with respect to such Distributions; (iv) the Expenses of independent contractors and professionals (including, without limitation, attorneys, advisors, accountants, brokers, consultants, experts, professionals and other Persons) providing services to the Plan Administrator; and (vi) the fees and expenses of the Disbursing Agent as set forth in the compensation agreement for the Disbursing Agent as approved by the Bankruptcy Court, or with respect to any successor Disbursing Agent approved by the Plan Administrator, in the compensation agreement approved by the Plan Administrator.

          “Postpetition” means the time after the filing of the voluntary chapter 11 petition in the Debtor’s Case, specifically, June 18, 2008.

          “Postpetition Interest” means interest accrued on any Allowed Claim from the Petition Date until the date of payment at the federal judgment rate as set forth in 28 U.S.C. § 1961(a), in effect as of the Petition Date; provided, however that if the holder of a particular Allowed Claim in connection with Confirmation of the Plan obtains a ruling from the Bankruptcy Court that another interest rate applies with respect to such holder’s Allowed Claim, then such rate shall determine the Postpetition Interest due such holder.

          “Preferred Securities Guarantee” means that certain “Preferred Securities Guarantee Agreement” related to the TOPrS dated March 6, 1996, executed by the Debtor.

          “Priority Non-Tax Claims” means Claims, other than Administrative Claims or Priority Tax Claims, entitled to priority in right of payment under section 507(a) of the Bankruptcy Code.

          “Priority Non-Tax Claims Reserve” means a Cash deposit maintained by the Reorganized Debtor in a separate account to which the Plan Administrator shall be a signatory. The Reorganized Debtor shall transfer Cash to such separate account on the Effective Date, in the estimated amount deemed necessary by the Plan Administrator to pay all Priority Non-Tax Claims outstanding as of the Effective Date, in full. After the Effective Date, the Plan

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Administrator shall determine from time to time any supplemental amounts needed to fund the Priority Non-Tax Claims Reserve.

          “Priority Tax Claim” means a Claim entitled to priority against the Estate under Bankruptcy Code section 507(a)(8).

          “Priority Tax Claims Reserve” means a Cash deposit maintained by the Reorganized Debtor in a separate account to which the Plan Administrator shall be a signatory. The Reorganized Debtor shall transfer Cash to such separate account on the Effective Date, in the estimated amount by the Plan Administrator necessary to pay all Priority Tax Claims outstanding as of the Effective Date, in full. After the Effective Date, the Plan Administrator shall determine any supplemental amounts needed to fund the Priority Tax Claims Reserve.

          “Professionals” means those Persons (i) retained pursuant to an order of the Bankruptcy Court in accordance with sections 327, 1103 and/or 1106 of the Bankruptcy Code and to be compensated for services rendered prior to the Effective Date pursuant to sections 327, 328, 329, 330 and/or 331 of the Bankruptcy Code; or (ii) for which compensation and reimbursement has been allowed by the Bankruptcy Court pursuant to sections 330 and 503(b)(2) of the Bankruptcy Code.

          “Professional Fee Claim” means:

(a)	A claim under Bankruptcy Code sections 327, 328, 330, 331, 503(b), 1103 or 1106 for compensation for professional services rendered or expenses incurred prior to the Effective Date on the Estate’s behalf; or
(b)	A claim either under Bankruptcy Code section 503(b)(4) for compensation for professional services rendered or under Bankruptcy Code section 503(b)(3)(D) for expenses incurred prior to the Effective Date in making a substantial contribution to the Estate.

          “Pro Rata” means proportionately so that the ratio of (a) the amount of consideration distributed on account of an Allowed Claim to (b) the amount of the Allowed Claim is the same as the ratio of (x) the amount of consideration available for distribution on

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account of all Allowed Claims in the Class in which that Allowed Claim is included to (y) the amount of all Allowed Claims in that Class. Notwithstanding the foregoing, with respect to the treatment of Classes 2A and 2B under this Plan, “Pro Rata” means proportionately so that the ratio of (a) the amount of consideration distributed on account of an Allowed Claim to (b) the amount of the Allowed Claim is the same as the ratio of (x) the amount of consideration available for distribution on account of all Allowed Claims in the combined Classes 2A and 2B in which that Allowed Claim is included to (y) the amount of all Allowed Claims in combined Classes 2A and 2B. For purposes of the application of this definition, the amount of any Disputed Claim shall be the stated liquidated “face amount” of such claim, unless such claim is estimated by order of the Bankruptcy Court. If a Disputed Claim does not set forth a stated liquidated “face amount” of such claim, then the “face amount” of such Disputed Claim shall be estimated by the Plan Administrator in his or her reasonable business judgment for purposes of this definition. If the Disputed Claim is estimated, the amount of such Disputed Claim shall be the estimated amount and such estimated amount shall set the maximum amount of the distribution on account of such Disputed Claim absent a Final Order to the contrary. For purposes of making a Pro Rata calculation, a Claim (or the portion of a Claim) based upon interest that will mature, accrue, or accrete after the Effective Date shall be disregarded.

          “Reorganized Debtor” means the Debtor, from and after the Effective Date.

          “Reserves” means all reserve accounts to be established by the Reorganized Debtor, including, without limitation, the Administrative Claims Reserve, Priority Tax Claims Reserve, Priority Non-Tax Claims Reserve, and Disputed Unsecured Claims Reserve. For purposes of determining the amount of the Reserves, the amount of any Disputed Claim shall be the stated liquidated “face amount” of such Claim, unless such Claim has been estimated by order of the Bankruptcy Court. If a Disputed Claim does not set forth a stated liquidated “face amount” of such Claim, then the “face amount” of such Disputed Claim shall be estimated by the Plan Administrator in his or her reasonable business judgment for purposes of this definition. If the Disputed Claim has been estimated by Bankruptcy Court order, the amount

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of such Disputed Claim shall be the estimated amount and such estimated amount shall set the maximum amount of the distribution on account of such Disputed Claim absent a Final Order to the contrary.

          “Requisite Creditors” shall mean the holder(s) of a simple majority (in terms of dollar amount) of the General Unsecured Claims until such time as the Class 2A Claims (and, in each case, any and all accreted amounts not previously compounded) have been paid in full in cash and, thereafter, the holders of a simple majority (in terms of dollar amount) of the Class 2B Claims until such time as the Class 2B Claims (and any and all accreted amounts not previously compounded) have been paid in full in cash.

          “Rights Of Action” means any and all actions, causes of action, suits, accounts, controversies, agreements, promises, rights to legal remedies, rights to equitable remedies, rights to payment and claims, whether known, unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured and whether asserted or assertable directly or derivatively, in law, equity or otherwise, and whether commenced or arising before or after the Effective Date.

          “Section 510(b) Claim” means any Claim for rescission of or damages arising from the purchase or sale of a security, including, without limitation, any Claims arising from equity forward agreements and other understandings to purchase Equity Interests, which Claim is subject to subordination in accordance with section 510(b) of the Bankruptcy Code. For the avoidance of doubt, “Section 510(b) Claim” shall include any claim against the Estate for reimbursement or contribution on account of a Section 510(b) Claim.

          “Senior Notes” means the 7.875% Senior Notes due 2009, which were issued pursuant to that certain indenture dated March 1, 1999, by and between The Bank of New York, as Trustee and the Fremont General Corporation.

          “Series A Equity Trust Interests” means the Equity Trust Interests to be distributed to Holders of Allowed Equity Interests.

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          “Series B Equity Trust Interests” means the Equity Trust Interests to be distributed to Holders of Allowed Section 510(b) Claims.

          “Significant Matter(s)” means (i) any proposed resolution of a claim or cause of action asserted by or against the Debtor, Reorganized Debtor or FRC for an amount in excess of $250,000; (ii) any settlement of a claim or cause of action that would require payment to or from either the Debtor or FRC of an amount in excess of $250,000; (iii) the sale of any asset listed on Exhibit “1”; or (iv) the settlement of any matter listed on Exhibit “2.”

          “Subordinated Debenture” means that certain 9% Junior Subordinated Debenture due March 31, 2026, which was issued pursuant to that certain indenture dated March 6, 1996, and which is the sole asset of the FGFI Trust.

          “Subordinate Members of the Creditors Committee” means the member (or members) of the Creditors Committee who holds, or represents holders of, or serves as an indenture trustee with respect to, the TOPrS.

          “TOPrS Claims” means the Claims of the FGFI Trust under the Subordinated Debenture.

          “Unclassified Claim” means any Claim which is not part of any Class.

          “Unimpaired” means, when used with reference to a Claim or Equity Interest, a Claim or Equity Interest that is not Impaired within the meaning of section 1124 of the Bankruptcy Code.

          “U.S. Trustee” means the Office of the United States Trustee for the Central District of California.

          “U.S. Trustee Fees” means all fees and charges assessed against the Estate by the U.S. Trustee and due pursuant to section 1930 of title 28 of the United States Code.

II.
RULES OF INTERPRETATION

     (1) The rules of construction in Bankruptcy Code section 102 apply to this Plan.

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     (2) Except as otherwise provided in the Plan, Bankruptcy Rule 9006(a) applies when computing any time period under the Plan.

     (3) Any term used in the Plan that is not a Defined Term, but that is used in the Bankruptcy Code or Bankruptcy Rules has the meaning assigned to such term in the Bankruptcy Code or Bankruptcy Rules, as applicable, unless the context requires otherwise.

     (4) The definition given to any term or provision in the Plan supersedes and controls any different meaning that may be given to that term or provision in the Disclosure Statement.

     (5) Whenever it is appropriate from the context, each term, whether stated in the singular or the plural, includes both the singular and the plural.

     (6) Any reference to a document or instrument being in a particular form or on particular terms means that the document or instrument will be substantially in that form or on those terms or as amended by the terms thereof.

     (7) Any reference to an existing document means the document as it has been, or may be, amended or supplemented.

     (8) Unless otherwise indicated, the phrase “under the Plan” and similar words or phrases refer to this Plan in its entirety rather than to only a portion of the Plan.

     (9) Unless otherwise specified, all references to Sections or Exhibits are references to this Plan’s Sections or Exhibits.

     (10) Section captions and headings are used only as convenient references and do not affect this Plan’s meaning.

III.
CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS

          This Section classifies Claims—except for Administrative Claims and Priority Tax Claims, which are not classified—for all purposes, including voting, Confirmation, and distribution under the Plan. A Claim or Equity Interest is classified in a particular Class only to the extent that the Claim or Equity Interest falls within the Class description. To the extent that part of the Claim or Equity Interest falls within a different Class description, the Claim or

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Equity Interest is classified in that different Class. The following table summarizes the Classes of Claims and Equity Interests under this Plan:

		IMPAIRED/	VOTING
CLASS	DESCRIPTION	UNIMPAIRED	STATUS
Class 1	Priority Non-Tax Claims	Unimpaired	Deemed to Accept Plan
Class 2A	General Unsecured Claims	Impaired	Entitled to Vote on Plan
Class 2B	TOPrS Claims	Impaired	Entitled to Vote on Plan
Class 3A	Equity Interests	Impaired	Entitled to Vote on Plan
Class 3B	Section 510(b) Claims	Impaired	Entitled to Vote on Plan

          As set forth above, Class 1 is Unimpaired by the Plan, and Holders of Claims in that Class are conclusively presumed to have accepted the Plan. Classes 2A, 2B, 3A and 3B are Impaired by the Plan, and shall be entitled to vote to accept or reject this Plan.

          The treatment in this Plan is in full and complete satisfaction of the legal, contractual, and equitable rights that each entity holding an Allowed Claim or an Allowed Equity Interest may have in or against the Debtor or its property. This treatment supersedes and replaces any agreements or rights those entities have in or against the Debtor or its property. All Distributions under the Plan will be tendered to the Person holding the Allowed Claim or Allowed Equity Interest. EXCEPT AS SPECIFICALLY SET FORTH IN THIS PLAN, NO DISTRIBUTIONS WILL BE MADE AND NO RIGHTS WILL BE RETAINED ON ACCOUNT OF ANY CLAIM OR EQUITY INTEREST THAT IS NOT AN ALLOWED CLAIM OR ALLOWED EQUITY INTEREST.

A. Allowance and Treatment of Unclassified Claims (Administrative Claims and Priority Tax Claims).

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          Certain types of Claims are not placed into Classes that are entitled to vote to accept or reject this Plan; instead, such Claims are unclassified. Such Claims are not considered Impaired and they do not vote on the Plan because they are automatically entitled to specific treatment provided for them in the Bankruptcy Code. As such, the Debtor has not placed the following Claims in a Class. The respective treatments for these Claims are provided below.

          1. Administrative Claims.

          Except to the extent that any entity entitled to payment of any Allowed Administrative Claim agrees to a less favorable treatment or unless otherwise ordered by the Bankruptcy Court, each Holder of an Allowed Administrative Claim shall receive in full satisfaction, discharge, exchange and release thereof, Cash in an amount equal to such Allowed Administrative Claim on the later of (i) the Effective Date, and (ii) the fifteenth (15^th) Business Day after such Administrative Claim becomes an Allowed Administrative Claim, or, in either case, as soon thereafter as is practicable; provided, however, that Ordinary Course Administrative Claims shall be paid in full in accordance with the terms and conditions of the particular transactions and any applicable agreements or as otherwise authorized by the Bankruptcy Court.

               a. Administrative Claim Reserve.

          On the Effective Date, the Administrative Claims Reserve shall be funded. Distributions shall be made to Holders of Allowed Administrative Claims from the Administrative Claims Reserve by the Plan Administrator.

          Except as otherwise ordered by the Court, to the extent the Administrative Claims Reserve has insufficient funds to pay all Allowed Administrative Claims in full, the Plan Administrator is authorized and directed to use any other available Assets to ensure payment, in full, of all Allowed Administrative Claims. Any amounts remaining in Administrative Claims Reserve after payment of all Allowed Administrative Claims shall be available for payment of Allowed Claims and Allowed Equity Interests, in accordance with the terms of this Plan.

               b. Administrative Claim Bar Date.

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          All requests for payment of an Administrative Claim that accrued from the Petition Date through the Effective Date, except for (i) U.S. Trustee Fees and (ii) Professional Fee Claims, shall be filed with the Bankruptcy Court no later than thirty (30) days after the Effective Date (the “Administrative Claim Bar Date”) or be forever barred. Within five (5) business days after the Effective Date, the Plan Administrator shall serve notice of the Effective Date and the Administrative Claim Bar Date on all creditors and parties in interest.

               c. Deadline for Objections.

          All objections to allowance of Administrative Claims (excluding Professional Fee Claims) must be filed by any parties in interest no later than sixty (60) days after the Administrative Claim Bar Date (the “Administrative Claim Objection Deadline”). The Administrative Claim Objection Deadline may be extended for a one-time sixty (60) day period by the Plan Administrator by filing a notice of the extended Administrative Claim Objection Deadline with the Bankruptcy Court. Thereafter, the Administrative Claim Objection Deadline may be further extended only by an order of the Bankruptcy Court. If no objection to the applicable Administrative Claim is filed on or before that date, such Administrative Claim shall be deemed Allowed as of that date.

               d. U.S. Trustee Fees.

          Quarterly fees owed to the Office of the U.S. Trustee shall be paid prior to the Effective Date by the Debtor, and after the Effective Date by the Reorganized Debtor, in each case, when due in accordance with applicable law and the Debtor and the Plan Administrator, respectively as applicable, shall continue to file reports to show the calculation of such fees for the Estate until the Case is closed under Bankruptcy Code section 350.

               e. Professional Fee Claims.

          Each Holder of a Professional Fee Claim seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date shall (i) file their respective interim (if applicable) and final applications for allowances of compensation for services rendered and reimbursement of

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expenses incurred through the Effective Date by no later than the forty-fifth (45^th) day after the Effective Date or such other date as may be fixed by the Bankruptcy Court and (ii) if granted such an award by the Bankruptcy Court, be paid in full satisfaction, discharge, exchange and release thereof, Cash in such amounts as are Allowed by the Bankruptcy Court on the date such Professional Fee Claim becomes an Allowed Claim, or as soon thereafter as is practicable. All objections to allowance of Professional Fee Claims through the Effective Date must be timely filed and served in accordance with Local Bankruptcy Rule 2016-1(a)(3).

     2. Priority Tax Claims.

          Except to the extent that a Holder of an Allowed Priority Tax Claim has been paid by the Debtor before the Effective Date or agrees to a less favorable treatment, each Holder of an Allowed Priority Tax Claim shall receive in full satisfaction, discharge, exchange and release thereof, Cash in an amount equal to such Allowed Priority Tax Claim on the later of (i) the Effective Date and (ii) the fifteenth (15^th) Business Day after such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is practicable. On the Effective Date, the Priority Tax Reserve shall be funded in Cash and held by the Disbursing Agent. Distributions shall be made to Holders of Allowed Priority Tax Claims from the Priority Tax Claim Reserve by the Disbursing Agent, as approved by the Plan Administrator.

          Except as otherwise ordered by the Court, to the extent the Priority Tax Claim Reserve has insufficient funds to pay all Priority Tax Claim Claims in full, the Plan Administrator is authorized and directed to use any other available Assets to ensure payment, in full, of all Allowed Priority Tax Claims. Any amounts remaining in Priority Tax Claims Reserve after payment of all Allowed Priority Tax Claims shall be available for payment of Allowed Claims and Allowed Equity Interests, in accordance with the terms of this Plan.

B. Classification and Treatment of Priority Non-Tax Claims (Class 1).

          Classification: Class 1 consists of all Priority Non-Tax Claims.

          Treatment: Except to the extent that a Holder of an Allowed Priority Non-Tax Claim agrees to a less favorable treatment, each Allowed Priority Non-Tax Claim will be paid,

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in full satisfaction, discharge, exchange and release thereof, in Cash in full the amount of the Allowed Priority Non-Tax Claim on the later of (i) the Effective Date and (ii) the fifteenth (15^th) Business Day after such date that the Claim becomes an Allowed Priority Non-Tax Claim, or as soon thereafter as is practicable.

          On the Effective Date, the Priority Non-Tax Reserve shall be funded in Cash and held by the Disbursing Agent. Distributions shall be made to Holders of Allowed Non-Priority Tax Claims from the Priority Non-Tax Claim Reserve by the Disbursing Agent, as approved by the Plan Administrator.

          Except as otherwise ordered by the Court, to the extent the Priority Non-Tax Claim Reserve has insufficient funds to pay all Priority Non-Tax Claims in full, the Plan Administrator is authorized and directed to use any other available Assets to ensure payment, in full, of all Priority Non-Tax Claims. Any amounts remaining in Priority Non-Tax Claim Reserve after payment of all Allowed Priority Non-Tax Claims shall be available for payment of Allowed Claims and Allowed Equity Interests, in accordance with the terms of this Plan.

          Class 1 is unimpaired, and the Holders of Claims in Class 1 are presumed to have accepted the Plan.

C. Classification and Treatment of General Unsecured Claims (Class 2A).

          Classification: Class 2A consists of all General Unsecured Claims. Class 2A is Impaired, and the Holders of Claims in Class 2 are entitled to vote to accept or reject the Plan.

          Treatment: The Holder of an Allowed General Unsecured Claim shall receive a Pro Rata Distribution of the Distributable Cash based upon the amount of its Allowed General Unsecured Claim, until such Claim has been satisfied, including payment of Postpetition Interest, as applicable.

          Notwithstanding the above, no Distribution shall be made to holders of Class 2A Claims unless the Administrative Claims Reserve, Priority Tax Claims Reserve, Priority Non-Tax Claims Reserve, and Equity Trust Expense Amount have been established and funded. Furthermore Allowed General Unsecured Claims will not include Postpetition Interest nor

22

include any Penalty on such Claim, except to the extent that sufficient Distributable Cash exist to pay, in full, all Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed General Unsecured Claims, Late Filed Claims, and all Post Effective Date Plan Expenses, and if the foregoing are paid, then Allowed General Unsecured Claims shall also include any Penalty or Postpetition Interest component of any such Claim that is payable (and to the extent and priority payable) in accordance with section 726(a)(4) and 726(a)(5) of the Bankruptcy Code.

          The Creditor Trust has been established under the Plan for the purpose of facilitating the prosecution of affirmative Causes of Action and the recovery of property that may be ultimately converted to Distributable Cash. While the Reorganized Debtor retains the entire beneficial interest in the Creditor Trust, until such time as Class 2A Claims have been paid in full the Requisite Creditors may remove the Creditor Trustee and appoint a substitute trustee.

          Until such time as Class 2A Claims have been paid in full, the Requisite Creditors holding Class 2A Claims may appoint three of the five directors to the Reorganized Debtor’s Board.

          Notwithstanding the above, in the event (i) the Effective Date of the Plan occurs on or before October 31, 2009, and (ii) on such Effective Date the Reorganized Debtor distributes Distributable Cash of $175,000,000 pro rata to holders of the Senior Notes, or their indenture trustee or similar agent, such $175,000,000 distribution shall constitute a full and final satisfaction and accord of all Claims represented by the Senior Notes. Also notwithstanding the above, in the event (i) the Effective Date of the Plan occurs on or before October 31, 2009, and (ii) on such Effective Date the Reorganized Debtor distributes Distributable Cash to the holder of a Class 2A Claim not evidenced by a Senior Note, in an amount equal to the Allowed Amount of such Class 2A Claim (but excluding the portion of the Allowed Amount of such Claim allocable to Postpetition Interest), such distribution shall constitute a full and final

23

satisfaction and accord of such Class 2A Claim, including any Claim such holder may have for Postpetition Interest.

D. Classification and Treatment of TOPrS Claims (Class 2B).

          Classification: Class 2B consists of all TOPrS Claims. Class 2B is Impaired, and the Holder(s) of Allowed TOPrS Claims in Class 2B is entitled to vote to accept or reject the Plan.

          Treatment: The Holder of an Allowed TOPrS Claim shall receive a Pro Rata Distribution of the Distributable Cash based upon the amount of its Allowed TOPrS Claim, until such Claim has been satisfied, including payment of Postpetition Interest, as applicable.

          Notwithstanding the above, no Distribution shall be made to holders of Class 2B Claims unless the Administrative Claims Reserve, Priority Tax Claims Reserve, and Priority Non-Tax Claims Reserve have been established and funded. The Plan Administrator shall make Distributions to the Holders of the Allowed TOPrS Claims from the net Distributable Cash as provided for in this Plan and the Confirmation Order; provided, however, that, notwithstanding the foregoing, the contractual subordination rights of Holders of the Senior Notes shall be preserved and enforced hereunder pursuant to section 510(a) of the Bankruptcy Code and, any such distributions shall be distributed to Holders of Allowed Claims that constitute Senior Notes, until such time as such Holder’s Claims have been satisfied in accordance with the terms and provisions of Article Eleven of the March 6, 1996 indenture relating to the Subordinated Debenture.

          Allowed TOPrS Claims will not include Postpetition Interest nor include any Penalty on such Claim, except to the extent that sufficient net Distributable Cash exist to pay, in full, all Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed General Unsecured Claims, Late Filed Claims, all Post Effective Date Plan Expenses, and all Allowed TOPrS Claims, and if the foregoing are paid, then Allowed TOPrS Claims shall also include any Penalty or Postpetition

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Interest component of any such Claim that is payable (and to the extent and priority payable) in accordance with section 726(a)(4) and 726(a)(5) of the Bankruptcy Code.

          Until such time as Class 2A Claims have been paid in full, the Requisite Creditors holding Class 2B Claims may appoint one of the five directors to the Reorganized Debtor’s Board. Thereafter until such time as Class 2B Claims have been paid in full, the Requisite Creditors holding Class 2B Claims may appoint three of the five directors to the Reorganized Debtor’s Board.

E. Classification and Treatment of Equity Interests (Class 3A).

          Classification: Class 3A consists of all Equity Interests. As of the Petition Date, approximately 82,116,179 shares of the Debtor common stock had been issued, and the holders thereof are classified in Class 3A. Class 3A is Impaired, and the Holders of Allowed Equity Interests in Class 3A are entitled to vote to accept or reject the Plan.

          Treatment: The Holders of Allowed Equity Interests, in exchange for such Interests, shall be deemed to have received Series A Equity Trust Interests under the Plan in an amount equal to the number of shares of the Debtor’s common stock owned by such Holder.

          On the Effective Date, the stock certificates representing shares of common stock issued by the Debtor prior to the Effective Date shall be deemed to be of no force and effect against the Reorganized Debtor, and the Exchanged Common Stock shall be issued to the Equity Trust in lieu thereof.

          In the event the Reorganized Debtor makes a distribution of Distributable Cash to the Equity Trustee, the holders of Plan Series A Equity Trust Interests shall receive distributions from the Equity Trust under the terms of the Equity Trust Agreement, subject to the Equity Reconciliation.

F. Classification and Treatment of holders of Section 510(b) Claims (Class 3B).

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          Classification: Class 3B consists of all Section 510(b) Claims. Class 3B is Impaired, and the Holders of Allowed Section 510(b) Claims in Class 3B are entitled to vote to accept or reject the Plan.

          Treatment: The Holder of an Allowed Section 510(b) Claims, in full satisfaction of such Claim, shall be deemed to have received under the Plan Series B Equity Trust Interests in an amount equal to the Allowed Amount of such Section 510(b) Claims.

          In the event the Reorganized Debtor is able to make a distribution of Distributable Cash to the Equity Trustee, the holders of Plan Series B Equity Trust Interests may receive distributions from the Equity Trust under the terms of the Equity Trust Agreement, subject to the Equity Reconciliation.

IV.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES

     Effective upon Confirmation, the Debtor rejects all executory contracts and unexpired leases that exist between the Debtor and any other Person which have not previously been rejected, other than those executory contracts and unexpired leases which are listed on the final schedule to be filed with the Bankruptcy Court of executory contracts and unexpired leases to be assumed under this Plan at Confirmation.

          All Allowed Claims arising from the rejection of executory contracts or unexpired leases, whether under the Plan or by separate proceeding, shall be treated as General Unsecured Claims in Class 2A.

          If the rejection of an executory contract or unexpired lease by the Debtor results in damages to the counterparty to such contract or lease, then a Claim for damages or any other amounts related in any way to such contract or lease shall be forever barred and shall not be enforceable against the Debtor, the Estate or their property, unless a proof of claim is filed with the Bankruptcy Court and served on the Plan Administrator within thirty (30) days after the Effective Date. The rejection claim bar date for leases and contracts rejected prior to the

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Effective Date, outside of the Plan, shall be, as applicable, (i) the date(s) set forth in the applicable order(s) rejecting such lease or contract or (ii) the Claims Bar Date.

V.
PLAN IMPLEMENTATION

A. Implementing Actions in General; Conditions to Plan Effectiveness.

          On the Effective Date, the following shall occur in implementation of the Plan:

          (i) all actions, documents and agreements necessary to implement the Plan shall have been effected or executed;

          (ii) the Debtor shall have received all authorizations, consents, rulings, opinions or other documents that are determined by the Debtor to be necessary to implement the Plan;

          (iii) the Disbursing Agent shall make all Distributions required to be made on the Effective Date to Holders of Allowed Claims pursuant to the Plan; and

          (iv) the Reserves shall be funded.

          The Plan will not be consummated or become binding unless and until the Effective Date occurs. The Effective Date will be the first Business Day, as determined by the Debtor in its reasonable discretion, on which the following conditions have been satisfied:

          (1) At least ten (10) days have passed since the Confirmation Date;

          (2) The Confirmation Order is not stayed; and

     (3) All documents, instruments and agreements, in form and substance reasonably satisfactory to the Debtor, provided for under or necessary to implement the Plan have been executed and delivered by the parties thereto, unless such execution or delivery has been waived by the parties benefited thereby.

          The Debtor may in its reasonable discretion waive any of the conditions set forth above without notice and a hearing. Additionally, the Debtor’s rights under the “mootness doctrine” shall be unaffected by any provision hereof. The failure to satisfy any condition may

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be asserted by the Debtor regardless of the circumstances giving rise to the failure of such condition to be satisfied (including, without limitation, any act, action, failure to act, or inaction by the Debtor). If the Debtor fails to assert the non-satisfaction of any such conditions, such failure shall not be deemed a waiver of any other rights thereunder.

B. Corporate Action.

          Upon the Effective Date, all transactions and applicable matters provided for under the Plan shall be deemed to be authorized and approved by the Debtor without any requirement of further action by the Debtor, the Debtor’s shareholders, or the Debtor’s board of directors.

C. Vesting of Assets.

          Except as otherwise provided by the Plan, on the Effective Date, title to all assets and properties encompassed by the Plan shall vest in the Reorganized Debtor free and clear of all liens and in accordance with section 1141 of the Bankruptcy Code, and the Confirmation Order shall be a judicial determination of discharge of the liabilities of the Debtor except as provided in the Plan.

D. Board of Directors of the Reorganized Debtor.

          On the Effective Date, the initial Board of Directors shall consist of five (5) persons selected as follows: (i) three (3) persons selected by the Non-Subordinate Members of the Creditors Committee (unless such selections are superseded by the action of the Requisite Creditors in Class 2A), (ii) one (1) person selected by the Subordinate Members of the Creditors Committee (unless such selections are superseded by the action of the Requisite Creditors in Class 2B), and (iii) one (1) person selected by the Equity Committee. Upon payment in full of the Class 2A Allowed General Unsecured Claims, the Board of Directors shall be reconstituted to consist of five (5) persons, selected as follows: (i) three (3) persons selected by the Subordinate Members of the Creditors Committee (unless such selections are superseded by the action of the Requisite Creditors in Class 2B) and (ii) two (2) persons selected by the Equity

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Trustee. Upon payment in full of the Class 2B Allowed TOPrS Claims, the Board of Directors shall be reconstituted to include five (5) persons selected by the Equity Trustee. Further terms and manner of selection of the Board of Directors shall be as provided in the Reorganized Debtor’s certificate of incorporation and by-laws, as the same may be amended. The identity of the membership of the initial Board of Directors shall be disclosed at the Confirmation Hearing, if not prior thereto. From and after the Effective Date, the Debtor’s officers and directors shall be relieved of any responsibilities to the Debtor.

E. Board of Directors of FRC and other subsidiaries.

          Promptly after the Effective Date, the Plan Administrator, on behalf the Reorganized Debtor, shall take all corporate action necessary to appoint the same five (5) persons serving on the Board of Directors as members of the FRC Board of Directors. Thereafter, the FRC Board of Directors shall be reconstituted at the same time, and in the same manner, as the Board of Directors for the Reorganized Debtor.

          The FRC Board of Directors shall appoint the Plan Administrator as the chief executive officer of FRC, with the primary duty of liquidating assets of FRC as the Plan Administrator deems appropriate.

          Promptly after the Effective Date, the Plan Administrator, on behalf the Reorganized Debtor, shall take all corporate action necessary to appoint the same five (5) persons serving on the Board of Directors for the Reorganized Debtor as members of the board of directors of such other of the Debtor’s direct and indirect subsidiaries as deemed necessary. Thereafter, such boards of directors shall be reconstituted at the same time, and in the same manner, as the Board of Directors for the Reorganized Debtor.

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          Such boards of directors may appoint the Plan Administrator as the chief executive officer of such subsidiaries, with the primary duty of administering or liquidating assets of such subsidiaries as the Plan Administrator deems appropriate.

F. The Plan Administrator.

     1. Appointment of the Plan Administrator.

     On the Effective Date, the provisions of the Plan shall be executed and carried out by the Plan Administrator (subject to the supervision of the Board of Directors) pursuant to and in accordance with the provisions of the Plan and the Plan Administration Agreement.

     2. Responsibilities of the Reorganized Debtor Plan Administrator.

     In accordance with the Plan Administration Agreement, the responsibilities of the Plan Administrator shall include (a) facilitating the Reorganized Debtor’s prosecution or settlement of objections to and estimations of Claims; (b) prosecution or settlement of claims and Causes of Action held by the Debtor; (c) calculating and assisting the Disbursing Agent in implementing all Distributions in accordance with the Plan; (d) filing all required tax returns and paying taxes and all other obligations on behalf of the Reorganized Debtor from funds held by the Reorganized Debtor or other available funds; (e) periodic reporting if required by the Bankruptcy Court regarding the status of the claims resolution process, Distributions on Allowed Claims and prosecution of Causes of Action; (f) liquidating the remaining Assets and providing for the distribution of the net proceeds thereof in accordance with the provisions of the Plan; (g) such other responsibilities as may be vested in the Plan Administrator pursuant to the Plan, the Reorganized Debtor Plan Administration Agreement or Bankruptcy Court order or as may be necessary and proper to carry out the provisions of the Plan.

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     3. Powers of the Plan Administrator.

     The powers of the Plan Administrator shall, without any further Bankruptcy Court approval, include (a) the power to invest funds in, and withdraw, make distributions and pay taxes and other obligations owed by the Reorganized Debtor from funds held by the Plan Administrator and/or the Reorganized Debtor in accordance with the Plan; (b) the power to compromise and settle claims and causes of action on behalf of or against the Reorganized Debtor, other than Significant Matters; (c) the power to direct FRC to compromise and settle claims and causes of action on behalf of or against FRC, other than Significant Matters; and (d) such other powers as may be vested in or assumed by the Plan Administrator pursuant to the Plan, the Plan Administration Agreement or as may be deemed necessary and proper to carry out the provisions of the Plan.

     4. Compromise and Settlement of Significant Matters.

     Prior to the effectiveness of any settlement or compromise of a Significant Matter, the Plan Administrator shall obtain approval from the Board of Directors of the Reorganized Debtor.

     5. Plan Administrator as Representative of the Estate and Creditor Trustee.

     The Plan Administrator shall be, and hereby is, appointed as the representative of the Estate pursuant to sections 1123(a)(5), (a)(7) and (b)(3)(B) of the Bankruptcy Code and as such shall be vested with the authority and power (subject to the Plan Administration Agreement) to: (i) administer, hold and liquidate the Assets; (ii) administer, investigate, prosecute, settle and abandon all Causes of Action in the name of, and for the benefit of, the Estate; (iii) administer, investigate, prosecute, settle and abandon all Rights of Action; (iv) make Distributions provided for in the Plan, including, but not limited to, on account of Allowed Claims and make

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Distributions on account of Equity Trust Interests; and (v) take such action as required to administer, wind-down, and close the Case. As the representative of the Estate, the Plan Administrator shall succeed to all of the rights and powers of the Debtor and the Estate with respect to all Causes of Action, and the Plan Administrator shall be substituted and shall replace the Debtor, the Estate, the Creditors Committee, and/or the Equity Committee, as applicable, as the party in interest in all such litigation pending as of the Effective Date. Further, for purposes of any insurance policy of the Debtor, the Plan Administrator shall be considered the equivalent of a “Bankruptcy Trustee,” “Examiner”, “Receiver”, “Conservator”, “Rehabilitator”, or “Liquidator” of the Debtor.

     Until such time as the Class 2A and Class 2B Claims have been paid in full, the vesting of all Causes of Action in the Plan Administrator shall be deemed to have been made in his capacity as the Creditor Trustee of the Creditor Trust.

     6. Compensation and Termination of the Plan Administrator.

          In addition to reimbursement for actual out-of-pocket expenses incurred by the Plan Administrator, the Plan Administrator shall be entitled to receive reasonable compensation for services rendered on behalf of the Reorganized Debtor in an amount and on such terms as may be reflected in the Plan Administration Agreement. The duties, responsibilities and powers of the Reorganized Debtor Plan Administrator shall terminate pursuant to the terms of the Reorganized Debtor Plan Administration Agreement.

     7. Limitation on Liability of Plan Administrator.

     To the maximum extent permitted by law, the Plan Administrator and its employees, officers, directors, agents, members, representatives, or professionals employed

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or retained by the Plan Administrator (the “Plan Administrator’s Agents”), whether acting as Plan Administrator, chief executive officer, or Creditor Trustee, shall not have or incur liability to any Person for an act taken or omission made in good faith in connection with or related to the Plan and the Distributions made thereunder or Distributions made under the Equity Trust by the Equity Trustee. The Plan Administrator and the Plan Administrator’s Agents shall in all respects be entitled to reasonably rely on the advice of counsel with respect to its duties and responsibilities under the Plan and the Plan Administration Agreement. Entry of the Confirmation Order constitutes a judicial determination that the exculpation provision contained in this Section is necessary to, inter alia, facilitate Confirmation and feasibility and to minimize potential claims arising after the Effective Date for indemnity, reimbursement or contribution from the Estates, or their respective property.

G. The Equity Trust.

     1. Establishment and Effectiveness of the Equity Trust.

          On the Effective Date, the Equity Trust Agreement shall become effective, and, if not previously signed, the Debtor and the Equity Trustee shall execute the Equity Trust Agreement. The Equity Trust will be organized and established as a trust for the benefit of the Beneficiaries, as defined below, and is intended to qualify as a liquidating trust within the meaning of Treasury Regulation Section 301.7701-4(d). On such date of execution, or as soon as practicable thereafter, including, without limitation, subject to appropriate or required governmental, agency or other consents, the Debtor shall issue to the Equity Trust the Exchanged Common Stock subject to the Equity Trust Agreement

     2. Purpose of the Equity Trust.

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     The Equity Trust shall be established for the (i) purpose of holding the Exchanged Common Stock in accordance with Treasury Regulation Section 301.7701-4(d) and the terms and provisions of the Equity Trust Agreement; and (ii) redistributing any Distributions received by the Equity Trustee under this Plan to the Holders of Section 510(b) Claims and Equity Interests, but in no event will any Holders of Section 510(b) Claims or Equity Interests receive a distribution of Exchanged Common Stock.

     3. Beneficiaries and Equity Reconciliation.

          In accordance with Treasury Regulation Section 301.7701-4(d), the beneficiaries (“Beneficiaries”) of the Equity Trust are the Holders of Allowed Section 510(b) Claims and Allowed Equity Interests. The beneficial interests in the Equity Trust shall be divided into Series A Equity Trust Interests and Series B Equity Trust Interests. Holders of Allowed Equity Interests shall receive an allocation of the Series A Equity Trust Interests equal to the number of shares of the Debtor held by such Equity Interest Holder as determined on the Effective Date. Holders of Allowed Section 510(b) Claims shall receive an allocation of Series B Equity Trust Interests equal to the amount of such Allowed Claim, subject to the Equity Reconciliation.

          In accordance with the Equity Trust Agreement, prior to any distribution on account of Equity Trust Interests, the Equity Trustee shall determine the value of the Series B Equity Trust Interests, relative to the total Equity Trust Interests. In connection therewith, the Equity Trustee shall (i) calculate the total amount of Allowed Section 510(b) Claims, after deducting payments made on account of such Claims by applicable insurance; (ii) reasonably estimate the value of each such Allowed Section 510(b) Claims compared to the total value of all Equity Interests, as of the date of incurrence of the Allowed Section 510(b) Claim; and (iii) if the calculation in section (i) above is less than the Estimated Section 510(b) Claims, redistribute all Excess Series B Equity Interests to all Beneficiaries on a pro rata basis (the “Equity Reconciliation”).

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          The Equity Trustee shall file a copy of the Equity Reconciliation with the Court, with service to each of the Beneficiaries, at least sixty (60) days prior to the first distribution to the Beneficiaries from the Equity Trust. Each Beneficiary shall have the right to file an objection with the Court to the Equity Reconciliation, and any such objections will be resolved by the Court prior to any distributions being made to the Beneficiaries; provided, however, the Court may allow interim distributions while objections to the Equity Reconciliation are pending. After the Equity Reconciliation is complete, the Beneficiaries shall receive distributions from the Equity Trust as provided for in the Plan and the Equity Trust Agreement.

     4. Transfer of Exchanged Common Stock.

     The issuance of the Exchanged Common Stock to the Equity Trust shall be made, as provided herein, for the benefit of the Beneficiaries. For all federal income tax purposes, all parties (including, without limitation, the Debtor, the Equity Trustee and the Beneficiaries) shall treat the issuance of the Exchanged Common Stock to the Equity Trust in accordance with the terms of the Plan, as an issuance to the Holders of Allowed Section 510(b) Claims and Allowed Equity Interests, followed by a transfer by such Holders to the Equity Trust and the Beneficiaries of the shall be treated as the grantors and owners thereof.

     5. Expenses of the Equity Trust.

     In accordance with the Equity Trust Agreement and any agreements entered into in connection therewith, the Equity Trustee shall be entitled to seek reimbursement for reasonable expenses from the Reorganized Debtor in an amount not to exceed the Equity Trust Expense Amount; provided, however, that the Reorganized Debtor shall have no liability or obligation to provide reimbursement in an amount greater than the Equity Trust Expense Amount.

     6. Investment Powers.

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     The right and power of the Equity Trustee to invest assets transferred to the Equity Trust, the proceeds thereof, or any income earned by the Equity Trust, shall be limited to the right and power to invest such assets in Cash Equivalents; provided, however, that (a) the scope of any such permissible investments shall be limited to include only those investments, or shall be expanded to include any additional investments, as the case may be, that a liquidating trust, within the meaning of Treasury Regulation Section 301.7701-4(d) may be permitted to hold, pursuant to the Treasury Regulations, or any modification in the IRS guidelines, whether set forth in IRS rulings, other IRS pronouncements or otherwise, and (b) the Equity Trustee may expend the assets of the Equity Trust (i) as reasonably necessary to meet contingent liabilities and to maintain the value of the assets of the Equity Trust during liquidation, (ii) to pay reasonable administrative expenses (including, but not limited to, any taxes imposed on the Equity Trust or fees and expenses in connection with litigation), and (iii) to satisfy other liabilities incurred or assumed by the Equity Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Equity Trust Agreement; and, provided, further, that, under no circumstances, shall the Equity Trust segregate the assets of the Equity Trust on the basis of classification of the Holders of Equity Trust Interests, other than with respect to distributions to be made on account of Disputed Claims and Disputed Equity Interests in accordance with the provisions hereof.

     7. Annual Distribution and Withholding.

     Sixty (60) days after the later of (i) the completion of the Equity Reconciliation and (ii) the Equity Trust’s receipt of Distributable Cash, the Equity Trustee shall distribute same to the Holders of Equity Trust Interests; provided, however, that the Equity Trust may retain such amounts (i) as are reasonably necessary to meet contingent liabilities and to maintain the value of

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the assets of the Equity Trust during liquidation, (ii) to pay reasonable administrative expenses (including any taxes imposed on the Equity Trust or in respect of the assets of the Equity Trust), and (iii) to satisfy other liabilities incurred or assumed by the Equity Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Equity Trust Agreement. All such distributions shall be pro rata based on the number of Equity Trust Interests held by a Holder after the Equity Reconciliation compared with the aggregate number of Equity Trust Interests outstanding, subject to the terms of the Plan and the respective Equity Trust Agreement. After completion of the Equity Reconciliation, there shall be no distinction between a Series A Equity Trust Interest and a Series B Equity Trust Interest. The Equity Trustee may withhold from amounts distributable to any Person any and all amounts, determined in the Equity Trustee’s reasonable sole discretion, to be required by any law, regulation, rule, ruling, directive or other governmental requirement.

     8. Reporting Duties.

     Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt by the Equity Trustee of a private letter ruling if the Equity Trustee so requests one, or the receipt of an adverse determination by the IRS upon audit if not contested by the Equity Trustee), the Equity Trustee shall file returns for the Equity Trust as a grantor trust pursuant to Treasury Regulation Section 1.671-4(a). The Equity Trustee shall also annually send to each Holder of a Equity Trust Interest a separate statement setting forth the Holder’s share of items of income, gain, loss, deduction or credit and shall instruct all such Holders to report such items on their federal income tax returns.

     Allocations of Equity Trust taxable income shall be determined by reference to the manner in which an amount of cash equal to such taxable income would be distributed (without

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regard to any restrictions on distributions described herein) if, immediately prior to such deemed distribution, the Equity Trust had distributed all of its other assets (valued for this purpose at their tax book value) to the Holders of the Equity Trust Interests (treating any Holder of a Disputed Claim, for this purpose, as a current Holder of a Equity Trust Interest entitled to distributions), taking into account all prior and concurrent distributions from the Equity Trust (including all distributions held in escrow pending the resolution of Disputed Claims). Similarly, taxable loss of the Equity Trust shall be allocated by reference to the manner in which an economic loss would be borne immediately after a liquidating distribution of the remaining assets of the Equity Trust. The tax book value of the assets of the Equity Trust for this purpose shall equal their fair market value on the date the Equity Trust was created or, if later, the date such assets were acquired by the Equity Trust, adjusted in either case in accordance with tax accounting principles prescribed by the Internal Revenue Code, associated regulations, and other applicable administrative and judicial authorities and pronouncements.

     9. Other.

     The Equity Trustee shall file (or cause to be filed) any other statements, returns or disclosures relating to the Equity Trust that are required by any governmental unit.

H. The Committees.

          Until the Effective Date, the Creditors Committee and Equity Committee shall continue in existence. Prior to the Effective Date, the Creditors Committee and Equity Committee shall have determined the identity of the directors of the Reorganized Debtor (including the directors whose appointment will become effective only upon the payment in full of Class 2A and 2B Claims). As of Effective Date, the Creditors Committee and Equity Committee shall terminate and disband and the members of the Creditors Committee and the

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Equity Committee shall be released and discharged of and from all further authority, duties, responsibilities and obligations related to and arising from their service as Committee members.

I. Allowance of Equity Interests.

          Each Holder of an Equity Interest as of the Effective Date will be deemed to have an Allowed Equity Interest for the number of such shares of record and need not file a proof of Equity Interest with respect thereto. The Reorganized Debtor and Equity Trust are only required to recognize the record holders of the Debtor’s common stock determined on the Effective Date, for purposes of calculating the relative Series A Equity Trust Interest beneficial interests to given in exchange for the common stock.

J. Distribution of Property Under the Plan.

     1. Manner of Cash Payments.

          Cash Distributions made pursuant to this Plan shall be in United States funds, by check drawn on a domestic bank, or, if the Plan Administrator so elects in its discretion for Distributions to certain large claimants, by wire transfer from a domestic bank.

     2. Setoff and Recoupment.

          NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE PLAN, THE PLAN ADMINISTRATOR MAY SET OFF, RECOUP, OR WITHHOLD AGAINST THE DISTRIBUTIONS TO BE MADE ON ACCOUNT OF ANY ALLOWED CLAIM ANY CLAIMS THAT THE DEBTOR OR THE ESTATE MAY HAVE AGAINST THE ENTITY HOLDING THE ALLOWED CLAIM. THE DEBTOR AND THE ESTATE WILL NOT WAIVE OR RELEASE ANY CLAIM AGAINST THOSE ENTITIES BY FAILING TO EFFECT SUCH A SETOFF OR RECOUPMENT, BY ALLOWING ANY CLAIM AGAINST THE DEBTOR OR THE ESTATE, OR BY MAKING A DISTRIBUTION ON ACCOUNT OF AN ALLOWED CLAIM.

     3. No De Minimis Distributions.

          Notwithstanding anything to the contrary in this Plan, no Distribution of less than $10.00 will be made to any Holder of an Allowed Claim or Allowed Interests on account

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thereof. No consideration will be provided in lieu of the de minimis Distributions that are not made under this Section.

     4. No Distributions With Respect to Disputed Claims.

          Notwithstanding any other Plan provision, Distributions will be made on account of a Disputed Claim only after, and only to the extent that, the Disputed Claim either becomes or is deemed to be an Allowed Claim for purposes of Distributions.

     5. Undeliverable or Unclaimed Distributions.

          Distributions to entities holding Allowed Claims will initially be made by mail as follows:

(a)	Distributions will be sent to the address, if any, set forth on a filed proof of claim as amended by any written notice of address change that is received by the Debtor or Plan Administrator no later than ten (10) Business Days prior to the date of any Distribution; or
(b)	If no such address is available, Distributions will be sent to the address set forth on the Bankruptcy Schedules.

          If no address is available either on a proof of claim or on the Bankruptcy Schedules, the Distribution will be deemed to be undeliverable. If a Distribution is returned to the Plan Administrator as an undeliverable Distribution or is deemed to be an undeliverable Distribution, the Plan Administrator will make no further Distribution to the entity holding the Claim on which the Distribution is being made unless and until the Plan Administrator is timely notified in writing of that entity’s current address. Subject to the following paragraph, until they become deliverable, the Plan Administrator may create a separate Reserve for undeliverable Distributions for the benefit of the entities entitled to the Distributions. These entities will not be entitled to any interest on account of the undeliverable Distributions.

          Any entity that is otherwise entitled to an undeliverable Distribution and that does not, within one (1) year after a Distribution is returned as undeliverable, provide Plan Administrator with a written notice asserting its claim to or interest in that undeliverable

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Distribution and setting forth a current, deliverable address will be deemed to waive any claim to or interest in that undeliverable Distribution and will be forever barred from receiving that undeliverable Distribution or asserting any Claim against the Debtor, the Estate, or their property. Nothing in the Plan requires the Plan Administrator to attempt to locate any entity holding an Allowed Claim and whose distribution is undeliverable.

     6. Record Date.

          The record date for purposes of Distributions under this Plan shall be the Effective Date. The Disbursing Agent will rely on the register of proofs of claim filed in the Case determined as of the Effective Date except to the extent a notice of transfer of Claim or Equity Interest has been filed with the Court prior to the record date pursuant to Bankruptcy Rule 3001.

     7. Fractional Cents.

          When any payment of a fraction of a cent would otherwise be called for, the actual payment shall reflect a rounding of such fraction to the nearest whole cent (rounding down in the case of less than $0.005 and rounding up in the case of $0.005 or more); provided, however, that, in no event, shall a Distribution of less than $10.00 will be made to any Holder of an Allowed Claim on account thereof as set forth above.

     8. Release of Reserved Funds.

          Any Cash remaining in any Reserve, after all applicable Distributions or other payments have been made from said Reserve, shall be released therefrom and be turned over to the Reorganized Debtor for distribution in accordance with this Plan.

     9. Insurance Policies.

          To the extent any insurance policies exist in which either the Debtor and/or its personnel have an insurable or other interest in or right to make a claim, such policies shall remain available, before and after the Effective Date, to satisfy any and all Claims held by, or asserted against, the Debtor and/or the Debtor’s current or former management or other personnel that may be covered by such policies.

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VI.
LITIGATION AND CLAIMS OBJECTIONS

A. Preservation of All Causes of Action.

          As of the Effective Date, the Plan Administrator shall retain all rights on behalf of the Reorganized Debtor and the Creditor Trust to commence, pursue and settle, as appropriate, any and all Causes of Action (including Avoidance Actions), whether arising before or after the Petition Date, in any court or other tribunal, including, without limitation, a bankruptcy court adversary proceeding filed in the Case. The failure to explicitly list any Causes of Action and other potential or existing claims of the Debtor or Estate is not intended to limit the rights of the Reorganized Debtor, through the Plan Administrator, to pursue any Causes of Action and such claims not so identified. The Debtor may elect to file a non-exhaustive list of Causes of Action at least ten (10) Business Days prior to the Confirmation Hearing; provided, however, notwithstanding any otherwise applicable principle of law or equity, including, without limitation, any principles of judicial estoppel, res judicata, collateral estoppel, issue preclusion, or any similar doctrine, the failure to list, disclose, describe, identify, analyze or refer to any Cause of Action, or potential Cause of Action, in this Plan, the Disclosure Statement, or any other document filed with the Bankruptcy Court shall in no manner waive, eliminate, modify, release, or alter the Debtor’s or the Plan Administrator’s right to commence, prosecute, defend against, settle, and realize upon any Cause of Action that the Debtor or the Estate has or may have as of the Confirmation Date. Subject to the limitations expressly set forth in the Plan Administration Agreement, the Plan Administrator may commence, prosecute, defend against, recover on account of, and settle all Causes of Action in its sole discretion in accordance with what is in the best interests, and for the benefit, of the Reorganized Debtor and the Creditor Trust; provided, however, that any agreement to settle or compromise any Significant Matters shall require the approval of the Board of the Reorganized Debtor.

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          Unless a Cause of Action against a Person is expressly waived, relinquished, released, compromised, or settled in the Plan or any Final Order, the Debtor expressly reserves such Causes of Action for later adjudication (including, without limitation, Causes of Action of which the Debtor may presently be unaware, or which may arise or exist by reason of additional facts or circumstances unknown to the Debtor at this time, or facts or circumstances which may change or be different from those which the Debtor now believes to exist) and, therefore, no preclusion doctrine, including, without limitation, the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, waiver, estoppel (judicial, equitable, or otherwise), or laches shall apply to Causes of Action upon, or after, the Confirmation or consummation of the Plan based on the Disclosure Statement, the Plan, or the Confirmation Order, except where such Causes of Action have been expressly released by virtue of the Plan or other Final Order.

          As of the Effective Date, subject to the Plan Administration Agreement, the Plan Administrator, on behalf of the Reorganized Debtor, shall be authorized to exercise and perform the rights, powers and duties held by the Debtor’s Estate with respect to the Causes of Action, including, without limitation, the authority under Bankruptcy Code section 1123(b)(3) to provide for the settlement, adjustment, retention and enforcement of claims and interests of the Estate, without the consent or approval of any third party, and without any further order of the Bankruptcy Court, except as otherwise provided in this Section.

          Any Person with respect to whom the Debtor has incurred an obligation (whether on account of services, purchase or sale of property, or otherwise), or who has received services from the Debtor or a transfer of money or property of the Debtor, or who has transacted business with the Debtor, or leased equipment or property from the Debtor should assume that such obligation, transfer, or transaction may be reviewed by the Plan Administrator, on behalf of the Reorganized Debtor, subsequent to the Effective Date and may, if appropriate, be the subject of an action after the Effective Date, whether or not (i) such Person has filed a proof of Claim against the Debtor; (ii) such Person’s proof of Claim has been objected to by the Debtor; (iii) such Person’s Claim was included in the Bankruptcy Schedules; or (iv) such Person’s

43

scheduled Claims have been objected to by the Debtor or has been identified by the Debtor as disputed, contingent, or unliquidated.

          SUBJECT TO THE PLAN ADMINISTRATION AGREEMENT, THE PLAN ADMINISTRATOR WILL MAKE THE DECISION OF WHETHER OR NOT TO PURSUE ANY CAUSES OF ACTION. THIS DECISION WILL BE BASED UPON HIS OR HER REVIEW OF THE MERITS OF THE VARIOUS CLAIMS AS WELL AS THE COSTS REQUIRED TO PROSECUTE SUCH CLAIMS IN LIGHT OF THE LIMITED RESOURCES AVAILABLE FOR THE DISTRIBUTION TO CREDITORS. SUBJECT TO THE PLAN ADMINISTRATION AGREEMENT, THE PLAN ADMINISTRATOR MAY SEEK TO RETAIN COUNSEL ON A CONTINGENCY BASIS TO PROSECUTE SOME OR ALL OF SUCH CLAIMS, MAY SEEK TO FINANCE ANY COSTS RELATING TO THE PROSECUTION OF SUCH LITIGATION OR MAY DECIDE NOT TO PURSUE SUCH CLAIMS AT ALL.

B. Disputed Claims.

     1. Reserves for Claims Other Than General Unsecured Claims.

          On the Effective Date the Administrative Claims Reserve, Priority Tax Claims Reserve and Priority Non-Tax Claims Reserve shall be funded with sufficient monies to pay for, as applicable, all Allowed Administrative Claims, Allowed Claims, and Disputed Claims (in the event such claims become Allowed Claims), in such categories. Any Cash remaining in these Reserves, after all applicable Distributions or other payments have been made from said Reserve, shall be released therefrom and turned over to the Reorganized Debtor for distribution in accordance with this Plan.

     2. Disputed Unsecured Claims Reserve.

          Prior to any Distributions being made to Holders of Allowed Unsecured Claims, the Plan Administrator shall deposit into the Disputed Unsecured Claims Reserve an amount equal to the Pro Rata share of the Distribution allocable to Disputed Unsecured Claims, as if such Claims were Allowed Claims in the Disputed Amount, and shall release or cause to have

44

released from this Reserve monies to fund Distributions to Holders of Disputed Unsecured Claims as, and if and to the extent, Disputed Claims become Allowed Claims, and any Cash remaining in Disputed Unsecured Claims Reserve, after any such Distributions, shall be released therefrom and turned over to the Reorganized Debtor for distribution in accordance with this Plan.

     3. Objections to and Resolution of Disputed Claims.

          On and after the Effective Date, the Plan Administrator shall have the right to make and file objections to Claims and Administrative Claims and to prosecute, settle and/or withdraw such objections. The Plan Administrator shall have the authority to compromise, settle, withdraw or otherwise resolve any objections for any Claim without approval of the Bankruptcy Court; provided, however, that the Plan Administrator may in his or her discretion seek relief before the Bankruptcy Court with respect to any Disputed Claim; provided, further, however, that any agreement to settle or compromise any Significant Matters shall require Board approval as set forth herein. The Plan Administrator shall file and serve all objections to Claims upon the Holder of the Claim as to which the objection is made no later than 180 days after the later of (i) the Effective Date or (ii) the date on which a proof of claim or request for payment is filed with the Bankruptcy Court (the “Claims Objection Deadline”). The Plan Administrator may extend the Claims Objection Deadline for one or more 120 day periods by filing a notice of the extended deadline with the Bankruptcy Court; provided, however, that nothing herein shall modify the statute of limitations for any affirmative Cause of Action that the Plan Administrator may assert against any third party. Thereafter, the deadline may be further extended only by an order of the Bankruptcy Court.

VII.
OTHER PLAN PROVISIONS

A. Exculpation and Limited Release of Debtor, Committees and Professionals.

          Except to the extent arising from willful misconduct or gross negligence, any and all Claims, liabilities, causes of action, rights, damages, costs and obligations held by any party

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against the Debtor, the Creditors Committee, the Equity Committee and their respective attorneys, accountants, agents and other professionals, and their officers, directors and employees, whether known or unknown, matured or contingent, liquidated or unliquidated, existing, arising or accruing, whether or not yet due in any manner related to the Postpetition administration of the Case or the formulation, negotiation, prosecution or implementation of the Plan, shall be deemed fully waived, barred, released and discharged in all respects, except as to rights, obligations, duties, claims and responsibilities preserved, created or established by terms of the Plan. Further, except to the extent arising from willful misconduct or gross negligence, any and all Claims, liabilities, causes of action, rights, damages, costs and obligations held by any party against the Debtor and its officers, directors, employees, attorneys, accountants, agents and other professionals, relating to or the preparation for and the commencement of the Case shall be deemed fully waived, barred, released and discharged in all respects, except as to rights, obligations, duties, claims and responsibilities preserved, created or established by terms of the Plan.

B. Exemption from Stamp, Transfer and Other Taxes.

          Pursuant to section 1146(a) of the Bankruptcy Code, the issuance, transfer, or exchange of assets under this Plan by the Debtor, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or instrument of transfer under, in furtherance of, or in connection with this Plan, shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax.

C. Injunction Enjoining Holders of Claims Against and Equity Interests In the Debtor.

          The Plan is the sole means for resolving, paying or otherwise dealing with Claims and Equity Interests. To that end, except as expressly provided herein, at all times on and after the Effective Date, all Persons who have been, are, or may be Holders of Claims against or Equity Interests in the Debtor arising prior to the Effective Date, shall be permanently enjoined from taking any of the following actions, on account of any such

46

Claim or Equity Interest, against the Debtor, its Estate, or its property (other than actions brought to enforce any rights or obligations under the Plan and any adversary proceedings pending in the Case as of the Effective Date):

     (i) commencing, conducting or continuing in any manner, directly or indirectly any suit, action, or other proceeding of any kind against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or assets; (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date which shall be deemed to be withdrawn or dismissed with prejudice);

     (ii) enforcing, levying, attaching, executing, collecting, or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree, or order against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or assets;

     (iii) creating, perfecting, or otherwise enforcing in any manner, directly or indirectly, any lien, security interest or encumbrance against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or assets; and

     (iv) proceeding in any manner in any place whatsoever against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or assets, that does not conform to or comply with the provisions of the Plan.

D. Discharge of the Debtor.

     Except as otherwise provided in the Plan, the Confirmation Order or such other order of the Bankruptcy Court that may be applicable, on the latest to occur of (a) the Effective Date, (b) the entry of a Final Order resolving all Claims in the Case and (c) the final distribution made to holders of Allowed Claims and Allowed Equity Interests, all Claims against and Equity Interests

47

in the Debtor shall be discharged and released in full; provided, however, that, the Bankruptcy Court may, upon request by the Reorganized Debtor, and notice and a hearing, enter an order setting forth that such Claims and Equity Interests shall be deemed discharged and released on such earlier date as determined by the Bankruptcy Court. All Persons shall be precluded from asserting against the Debtor and its successors or assigns, including, without limitation, the Reorganized Debtor or its assets, properties or interests in property, any other or further Claims based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date, whether or not the facts or legal bases therefor were known or existed prior to the Confirmation Date regardless of whether a proof of Claim or Equity Interest was filed, whether the holder thereof voted to accept or reject the Plan or whether the Claim or Equity Interest is an Allowed Claim or an Allowed Equity Interest.

E. Entry of a Final Decree.

          As soon as practicable following the resolution of all Disputed Claims and Disputed Equity Interest, the Plan Administrator may file a motion with the Bankruptcy Court to obtain entry of a final decree closing the Case.

F. Post-Effective Date Quarterly Fees.

          After the Effective Date, and pending entry of a Final Decree, the Plan Administrator, on behalf of the Reorganized Debtor, shall pay all required U.S. Trustee Fees.

G. Post-Effective Date Status Reports.

          The Plan Administrator shall file status reports regarding the status of implementation of the Plan as ordered by the Bankruptcy Court.

H. Withholding and Reporting Requirements.

          In connection with the consummation of the Plan, the Plan Administrator shall comply with all withholding and reporting requirements imposed by any federal, state, local or foreign taxing authority and all Distributions hereunder shall be subject to any such withholding

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and reporting requirements. The Plan Administrator may reasonably request tax reporting information from persons entitled to receive Distributions under the Plan and may withhold the payment of such Distributions pending the receipt of such tax reporting information.

I. Evidence of Claims.

          As of the Effective Date, notes and any other evidence of Claims will represent only the right to receive the Distributions contemplated under the Plan.

J. Injunctions or Stays.

          Unless otherwise provided, all injunctions or stays arising under or entered during the Case under section 105 or section 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date.

K. No Admissions.

          Except as specifically provided in the Plan, nothing contained in the Plan or the related Disclosure Statement shall be deemed or construed in any way as an admission by the Debtor or its Estate with respect to any matter set forth in the Plan, including the amount or allowability of any claim, or the value of any property of the Estate.

          Notwithstanding anything to the contrary in the Plan, if the Plan is not confirmed or the Effective Date does not occur, the Plan will be null and void, and nothing contained in the Plan will: (a) be deemed to be an admission by the Debtor with respect to any matter discussed in the Plan, including liability on any Claim or the propriety of any Claim’s classification; (b) constitute a waiver, acknowledgement, or release of any Claims, Equity Interests, or any claims held by the Debtor; or (c) prejudice in any manner the rights of the Debtor or the Estate in any further proceedings.

L. Revocation of the Plan.

          The Debtor reserves the right to withdraw the Plan before the Confirmation Date.

M. Severability of Plan Provisions.

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          If, before Confirmation, the Court holds that any Plan term or provision is invalid, void, or unenforceable, the Court may alter or interpret that term or provision so that it is valid and enforceable to the maximum extent possible consistent with the original purpose of that term or provision. That term or provision will then be applicable as altered or interpreted. Notwithstanding any such holding, alteration, or interpretation, the Plan’s remaining terms and provisions will remain in full force and effect and will in no way be affected, impaired, or invalidated. The Confirmation Order will constitute a judicial determination providing that each Plan term and provision, as it may have been altered or interpreted in accordance with this Section, is valid and enforceable under its terms.

N. Governing Law.

          The rights and obligations arising under the Plan and any agreements, contracts, documents, or instruments executed in connection with the Plan will be governed by, and construed and enforced in accordance with, California law without giving effect to California law’s conflict of law principles, unless a rule of law or procedure is supplied by: (a) federal law (including the Bankruptcy Code and the Bankruptcy Rules); or (b) an express choice-of-law provision in any document provided for, or executed under or in connection with, the Plan.

O. Retention of Jurisdiction.

          The Bankruptcy Court will retain and have exclusive jurisdiction over any matter arising under the Bankruptcy Code, arising in or related to the Case or the Plan, or that relates to the following:

          (1) resolution of any matters related to the assumption, assumption and assignment, or rejection of any executory contract or unexpired lease to which the Debtor is a party or with respect to which the Debtor may be liable, and to hear, determine and, if necessary, liquidate, any Claims arising therefrom;

          (2) entry of such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan and all contracts, instruments, releases, and other agreements or documents created in connection with the Plan;

50

          (3) determination of any and all motions, adversary proceedings, applications, and contested or litigated matters that may be pending on the Effective Date or that, pursuant to the Plan, may be instituted by the Plan Administrator after the Effective Date, including, without limitation, any related to the Causes of Action;

          (4) ensuring that Distributions to Holders of Allowed Claims are accomplished as provided in the Plan;

          (5) hearing and determining any objections to Administrative Claims or proofs of Claim, both before and after the Confirmation Date, including any objections to the classification of any Claim and to allow, disallow, determine, liquidate, classify, estimate, or establish the priority of secured or unsecured status of any Claim, in whole or in part;

          (6) entry and implementation of such orders as may be appropriate in the event that the Confirmation Order is, for any reason, stayed, revoked, modified, reversed, or vacated;

          (7) issuance of such orders in aid of execution of the Plan, to the extent authorized by section 1142 of the Bankruptcy Code;

          (8) consideration of any modifications of the Plan, to cure any defect or omission, or reconcile any inconsistency in any order of the Bankruptcy Court, including the Confirmation Order;

          (9) hearing and determining all applications for awards of compensation for services rendered and reimbursement of expenses incurred prior to the Effective Date;

          (10) hearing and determining disputes arising in connection with, or relating to, the Plan or the interpretation, implementation, or enforcement of the Plan, or the extent of any Person’s obligations incurred in connection with or released or exculpated under the Plan;

          (11) the recovery of all assets of the Debtor and property of the Estate, wherever located;

          (12) issuance of injunctions or other orders as may be necessary or appropriate to restrain interference by any Person with consummation or enforcement of the Plan;

51

          (13) determination of any other matters that may arise in connection with, or are related to, the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument release, or other agreement or document created in connection with the Plan or the Disclosure Statement, including, without limitation, the Plan Administration Agreement;

          (14) hearing and determining disputes arising in connection with, or relating to, the Equity Reconciliation;

          (15) hearing and determining matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;

          (16) hearing any other matter or for any purpose specified in the Confirmation Order that is not inconsistent with the Bankruptcy Code;

          (17) entry of a final decree closing the Case;

          (18) hearing and determining, to the fullest extent authorized by applicable law, any issue or dispute directly or indirectly arising from or related to the Equity Trust;

          (19) hearing and determining any other matter deemed relevant to the consummation of the Plan and the administration of the Case; and

          (20) interpreting and enforcing Orders entered by the Bankruptcy Court; provided that if the Bankruptcy Court abstains from exercising jurisdiction, or is without jurisdiction, over any matter, this Section will not effect, control, prohibit, or limit the exercise of jurisdiction by any other court that has jurisdiction over that matter.

P. Successors and Assigns.

          The rights, benefits, and obligations of any entity referred to in this Plan will be binding on, and will inure to the benefit of, any heir, executor, administrator, successor, or assign of that entity.

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Q. Nonconsensual Confirmation.

          In the event that the Classes entitled to vote to accept or reject this Plan fail to accept the Plan in accordance with Bankruptcy Code section 1129(a)(8), the Debtor reserves the right to modify the Plan in accordance with Bankruptcy Code section 1127(a). In accordance with section 1127 of the Bankruptcy Code, the Debtor reserves the right to alter, amend, modify, revoke or withdraw the Plan or any Plan exhibit or schedule, including amending or modifying it to satisfy the requirements of the Bankruptcy Code.

R. Saturday, Sunday, or Legal Holiday.

          If any payment or act under the Plan should be made or performed on a day that is not a Business Day, then the payment or act may be completed on the next succeeding day that is a Business Day, in which event the payment or act will be deemed to have been completed on the required day.

S. No Waiver.

          Neither the failure to list a Claim in the Schedules filed by the Debtor, the failure of any Person to object to any Claim for purposes of voting, the failure of any Person to object to a Claim or Administrative Expense Claim prior to Confirmation or the Effective Date, the failure of any Person to assert a Right of Action prior to Confirmation or the Effective Date, the absence of a proof of Claim having been Filed with respect to a Claim, nor any action or inaction of any Person with respect to a Claim, Administrative Expense Claim, or Right of Action other than a legally effective express waiver or release shall be deemed a waiver or release of the right of the Debtor or its successors or representatives, before or after solicitation of votes on the Plan or before or after Confirmation or the Effective Date to (a) object to or examine such Claim or Administrative Expense Claim, in whole or in part or (b) retain and either assign or exclusively assert, pursue, prosecute, utilize, otherwise act or otherwise enforce any Right of Action.

T. Plan Modification.

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          Subject to the restrictions set forth in Bankruptcy Code section 1127, the Debtor reserves the right to alter, amend, or modify the Plan before it is substantially consummated.

U. Post-Confirmation Date Notice.

          From and after the Effective Date, any Person who desires notice of any pleading or document filed in the Case, or of any hearing in the Court, or of any matter as to which the Bankruptcy Code requires notice to be provided, shall file a request for post-Confirmation notice and shall serve the request on counsel for the Debtor, counsel for the Creditors Committee, and the Plan Administrator; provided, however, that the U.S. Trustee and the Plan Administrator, shall be deemed to have requested post-Confirmation notice.

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VIII.
RECOMMENDATIONS AND CONCLUSION

          The Debtor believes that confirmation and implementation of this Plan are preferable to any other alternative because, in its view, the Plan will provide Holders of Allowed Claims and Allowed Equity Interests with the maximum recovery under the circumstances. Accordingly, the Debtor urges all Creditors and Equity Interest Holders to vote to accept the Plan.

Dated: June 1, 2009	Fremont General Corporation, Chapter 11 Debtor and Debtor in Possession
	By:	/s/ RICHARD A. SANCHEZ
		Name:	Richard A. Sanchez
		Title:	Interim President and Interim Chief Executive Officer

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EX-99.2

Exhibit 99.2

THEODORE B. STOLMAN (State Bar No. CA 52099)
TStolman@Stutman.com
WHITMAN L. HOLT (State Bar No. CA 238198)
WHolt@Stutman.com
STUTMAN, TREISTER & GLATT, P.C.
1901 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067
Telephone: (310) 228-5600
Facsimile: (310) 228-5788

-and-

ROBERT W. JONES (State Bar No. TX 10951200)
RWJones@pattonboggs.com
J. MAXWELL TUCKER (State Bar No. TX 20270900)
mtucker@pattonboggs.com
BRENT R. MCILWAIN (State Bar No. TX 24013140)
BMcIlwain@pattonboggs.com
PATTON BOGGS LLP
2001 Ross Avenue, Suite 3000
Dallas, TX 75201-8001
Telephone: (214) 758-1500
Facsimile: (214) 758-1550

Reorganization Counsel for Debtor and Debtor in Possession

Debtor’s Mailing Address:
2727 East Imperial Highway
Brea, California 92821

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

SANTA ANA DIVISION

In re	CASE NO. 8:08-BK-13421-ES
	CHAPTER 11
FREMONT GENERAL CORPORATION,
a Nevada corporation, Debtor. Tax I.D. 95-2815260	FREMONT GENERAL CORPORATION’S DISCLOSURE STATEMENT DESCRIBING DEBTOR’S PLAN PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE

IMPORTANT DATES

o   Date by which Ballots must be received: July      , 2009, at           :00 p.m. (Pacific Time).

o   Date by which objections to Confirmation of the Plan must be filed and served: July      , 2009, at           :00 p.m. (Pacific Time).

o   Hearing on Confirmation of the Plan: August           , 2009, at      :30 p.m. (Pacific Time).

THEODORE B. STOLMAN (State Bar No. CA 52099)
TStolman@Stutman.com
WHITMAN L. HOLT (State Bar No. CA 238198)
WHolt@Stutman.com
STUTMAN, TREISTER & GLATT, P.C.
1901 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067
Telephone: (310) 228-5600
Facsimile: (310) 228-5788

-and-

ROBERT W. JONES (State Bar No. TX 10951200)
RWJones@pattonboggs.com
J. MAXWELL TUCKER (State Bar No. TX 20270900)
mtucker@pattonboggs.com
BRENT R. MCILWAIN (State Bar No. TX 24013140)
BMcIlwain@pattonboggs.com
PATTON BOGGS LLP
2001 Ross Avenue, Suite 3000
Dallas, TX 75201-8001
Telephone: (214) 758-1500
Facsimile: (214) 758-1550

Reorganization Counsel for Debtor and Debtor in Possession

Dated: June 1, 2009

TABLE OF CONTENTS

I INTRODUCTION	-1-
II DISCLAIMER	-4-
III OVERVIEW OF THE CHAPTER 11 PROCESS AND THE PLAN	-7-
A. The Chapter 11 Process	-7-
B. Overview of the Debtor’s Proposed Plan	-8-
SUMMARY OF TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN	-10-
C. Other Sources of Information	-13-
D. Cautionary Statement Regarding Forward Looking Statements	-13-
IV COMPANY HISTORY	-14-
A. The Debtor and Its Pre-Petition Business	-14-
1. FIL’s Lending Operations	-14-
2. Indemnity and Life’s Insurance Operations	-16-
B. The Debtor’s Management	-16-
C. Selected Financial Information	-17-
V THE CHAPTER 11 CASE	-17-
A. Events Leading to the Debtor’s Bankruptcy Filing	-17-
B. Significant Events During the Chapter 11 Case	-19-
1. Retention of Debtor’s Professionals and Agents	-19-
2. Appointment of the Creditors Committee and the Equity Committee	-20-
3. Consummation of the CapitalSource Transaction	-21-
4. Insider Compensation	-21-
5. Establishment of General Bar Date and Filing of Claims	-22-
6. Relief from Stay Motions — McIntyre, Faigin & The Bank of New York Mellon	-22-
7. Engagement of KPMG Corporate Finance and the Plan Marketing Process	-23-

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8. Plan Exclusivity	-25-
9. Settlements of Claims and Litigation	-26-
VI LITIGATION AND CAUSES OF ACTION	-37-
A. Litigation Commenced Pre-Petition	-37-
B. Post-Petition and Other Potential Causes of Action	-37-
1. In General	-37-
2. Adv. Pro. No. 8:08-ap-01256-ES and Adv. Pro No. 8:09-ap-01103-ES	-37-
3. Adv. Pro. No. 8:08-ap-01258-ES	-38-
4. Adv. Pro. No. 8:08-ap-01418-ES	-38-
5. Adv. Pro. No. 8:08-ap-01470-ES	-38-
6. Other Actions	-39-
7. Other Significant Litigation Claims	-39-
8. Causes of Action are to be Retained Under Plan; No Waiver Should be Implied	-39-
VII THE PLAN	-40-
A. Overview of the Plan	-40-
B. Treatment of Claims and Equity Interests Under the Plan	-40-
1. Allowance and Treatment of Unclassified Claims (Administrative Claims and Priority Tax Claims)	-41-
2. Classification and Treatment of Priority Non-Tax Claims (Class 1)	-44-
3. Classification and Treatment of General Unsecured Claims (Class 2A)	-45-
4. Classification and Treatment of TOPrS Claims (Class 2B)	-47-
5. Classification and Treatment of Equity Interests (Class 3A)	-48-
6. Classification and Treatment of Section 510(b) Claims (Class 3B)	-49-
C. Executory Contracts and Unexpired Leases	-49-
D. Provisions Governing Plan Implementation	-50-
1. Implementing Actions in General; Conditions to Plan Effectiveness	-50-

ii

2. Corporate Action	-51-
3. Vesting of Assets	-52-
4. Board of Directors of the Reorganized Debtor	-52-
5. Board of Directors of FRC and other Subsidiaries	-53-
6. The Plan Administrator	-53-
7. The Equity Trust	-57-
8. The Committees	-61-
9. Allowance of Equity Interests	-61-
10. Distribution of Property Under the Plan	-61-
E. Litigation and Claims Objections	-64-
1. Preservation of All Causes of Action	-64-
2. Disputed Claims	-67-
VIII OTHER PLAN PROVISIONS	-68-
A. Exculpation and Limited Release of Debtor, the Committees, and Professionals	-68-
B. Exemption from Stamp, Transfer and Other Taxes	-69-
C. Injunction Enjoining Holders of Claims Against and Equity Interests in the Debtor	-69-
D. Discharge of the Debtor	-70-
E. No Waiver	-71-
F. Plan Modification	-71-
G. Post-Confirmation Date Notice	-71-
IX CERTAIN FACTORS TO BE CONSIDERED	-72-
A. Risk of Adverse Resolution of Claims Pending Against FRC	-72-
1. Commonwealth of Massachusetts Claim	-73-
2. Repurchase Obligations	-73-
3. Other Litigation	-75-

iii

4. Conclusion	-75-
B. Risk Regarding Unanticipated and Unresolved Claims Against the Debtor	-75-
1. The IRS Claim	-76-
2. California Insurance Commissioner Claims	-79-
3. Rampino-Related Claims	-79-
C. Risk of Reorganized Debtor’s Inability to Realize Cash from Its Causes of Action	-80-
D. Bankruptcy Confirmation Risks	-80-
E. The Reorganized Debtor May Not Be a Public Company	-81-
F. The Plan’s Postpetition Interest Rate Is Subject to Adjustment	-82-
G. Risk of Dilution Resulting from the Equity Reconciliation	-83-
X VOTING PROCEDURES AND REQUIREMENTS	-84-
A. Parties in Interest Entitled to Vote	-85-
B. Classes Impaired and Entitled to Vote Under the Plan	-86-
XI CONFIRMATION OF THE PLAN	-87-
A. Confirmation Hearing	-87-
B. Requirements for Confirmation of the Plan	-88-
1. Acceptance	-88-
2. Fair and Equitable Test	-89-
3. Feasibility	-90-
4. “Best Interests” Test	-90-
XII ALTERNATIVES TO CONFIRMATION OF THE PLAN	-91-
XIII CERTAIN U.S. FEDERAL TAX CONSEQUENCES OF THE PLAN	-93-
A. Introduction	-93-
B. Consequences to the Debtor	-95-
C. Consequences to Holders of General Unsecured Claims	-96-
1. Recognition of Gain or Loss Generally	-96-

iv

2. Distributions in Payment of Accrued But Unpaid Interest	-97-
3. Tax Treatment of the Equity Trust and Holders of Beneficial Equity Interests Therein	-98-
4. Withholding	-101-
XIV SECURITIES LAW MATTERS	-102-
A. In General	-102-
1. Initial Issuance	-102-
2. Resales	-104-
3. Exchange Act Compliance	-104-
4. Investment Company Act	-105-
B. Compliance if Required	-105-
XV RECOMMENDATIONS AND CONCLUSION	-105-

EXHIBITS

EXHIBIT A — Debtor’s Plan of Reorganization Under Chapter 11 of the Bankruptcy Code

EXHIBIT B — Liquidation Analysis (To be provided prior to Disclosure Statement Hearing)

EXHIBIT C — Selected Financial Information (To be provided prior to Disclosure Statement Hearing)

EXHIBIT D — Form of Equity Trust Agreement (To be provided prior to Confirmation Hearing)

v

I
INTRODUCTION

     Fremont General Corporation, the above-captioned debtor and debtor in possession (the “Debtor”), submits this Disclosure Statement (the “Disclosure Statement”) in connection with the solicitation of acceptances and rejections with respect to the Debtor’s Plan (the “Plan”) submitted under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), a copy of which Plan is attached hereto as Exhibit A. All capitalized terms used but not otherwise defined herein will have the same meanings ascribed to such terms in the Plan.

     The purpose of this Disclosure Statement is to set forth information (a) regarding the history of the Debtor, its business, and this chapter 11 case; (b) concerning the Plan and alternatives to the Plan; (c) advising the holders of Claims and Equity Interests of their rights under the Plan; (d) assisting the Debtor’s Creditors and Equity Interest Holders who are entitled to vote on the Plan in making an informed judgment regarding whether they should vote to accept or reject the Plan; and (e) assisting the Bankruptcy Court in determining whether the Plan complies with the provisions of chapter 11 of the Bankruptcy Code, and should be confirmed.

     By Order dated                     , 2009 (the “Disclosure Statement Order”), the Bankruptcy Court, after notice and a hearing, approved this Disclosure Statement as containing “adequate information” to permit affected Creditors and Equity Interest Holders to make an informed judgment in exercising their rights to vote to accept or reject the Plan, and authorized this Disclosure Statement’s use in connection with the solicitation of votes with respect to the Plan. THE BANKRUPTCY COURT’S APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT MEAN THAT THE COURT RECOMMENDS EITHER ACCEPTANCE OR REJECTION OF THE PLAN. No solicitation of votes may be made except pursuant to this Disclosure Statement and section 1125 of the Bankruptcy Code. In voting on the Plan, Creditors and Equity Interest Holders should not rely on any information relating to the Debtor, other than that

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contained in this Disclosure Statement, the Plan, and all exhibits hereto and thereto, or such other materials approved by the Bankruptcy Court.

     Only Holders of Claims or Equity Interests Allowed under section 502 of the Bankruptcy Code, or temporarily allowed for voting purposes under Bankruptcy Rule 3018, whose Claims or Equity Interests are in those Classes of Claims or Equity Interests that are “impaired” (as defined in section 1124 of the Bankruptcy Code) under the Plan are entitled to vote to accept or reject the Plan. A Class is Impaired if the legal, equitable, or contractual rights of the Claims or Equity Interests in the Class are altered. Classes of Claims that are not Impaired are conclusively presumed to have voted to accept the Plan pursuant to section 1126(f) of the Bankruptcy Code and, therefore, are not entitled to vote on the Plan. The following chart summarizes which Classes of Claims and Equity Interests are Impaired and which Classes of Claims are Unimpaired under the Plan.

CLASS	DESCRIPTION	IMPAIRED/ UNIMPAIRED	VOTING STATUS
Class 1	Priority Non-Tax Claims	Unimpaired	Deemed to Accept Plan
Class 2A	General Unsecured Claims	Impaired	Entitled to Vote on Plan
Class 2B	TOPrS Claims	Impaired	Entitled to Vote on Plan
Class 3A	Equity Interests	Impaired	Entitled to Vote on Plan
Class 3B	Section 510(b) Claims	Impaired	Entitled to Vote on Plan

     If you are a Holder of a Claim in Class 2A, Class 2B, and/or Class 3B or a holder of an Allowed Equity Interest in Class 3A, accompanying this Disclosure Statement is a Ballot for casting your vote(s) on the Plan and a pre-addressed envelope for the return of the Ballot. BALLOTS FOR ACCEPTANCE OR REJECTION OF THE PLAN ARE BEING PROVIDED ONLY TO HOLDERS OF CLAIMS AND EQUITY INTERESTS IN CLASSES LISTED IN THE ABOVE

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CHART WHICH ARE ENTITLED TO VOTE TO ACCEPT OR REJECT THE PLAN. If you are the holder of a Claim and/or Equity Interest in said Class(es), and (a) did not receive a Ballot, (b) received a damaged or illegible Ballot, or (c) lost your Ballot, or if you are a party in interest and have any questions concerning the Disclosure Statement, any of the Exhibits hereto, the Plan, or the voting procedures in respect thereof, please contact Patton Boggs LLP, Attn: Brent McIlwain, 2001 Ross Avenue, Suite 3000, Dallas, Texas 75201; Telephone: (214) 758-1500; E-mail: bmcilwain@pattonboggs.com and Stutman, Treister & Glatt, P.C., Attn: Whitman L. Holt, 1901 Avenue of the Stars, 12th Floor, Los Angeles, California 90067; Telephone: (310) 228-5600; E-mail: wholt@stutman.com.

     THE DEBTOR, AS PROPONENT OF THE PLAN, RECOMMENDS THAT THE HOLDERS OF CLAIMS IN CLASSES 2A, 2B, AND 3B AND EQUITY INTERESTS IN CLASS 3A VOTE TO ACCEPT THE PLAN. [IF APPLICABLE: IN ADDITION, THE CREDITORS COMMITTEE RECOMMENDS THAT THE HOLDERS OF CLAIMS IN CLASSES 2A AND 2B VOTE TO ACCEPT THE PLAN.] [IF APPLICABLE: IN ADDITION, THE EQUITY COMMITTEE RECOMMENDS THAT THE HOLDERS OF EQUITY INTERESTS IN CLASS 3A VOTE TO ACCEPT THE PLAN.]

     VOTING ON THE PLAN, BY EACH HOLDER OF A CLAIM AND/OR EQUITY INTEREST ENTITLED TO VOTE, IS IMPORTANT. EACH SUCH CREDITOR OR EQUITY INTEREST HOLDER SHOULD READ THIS DISCLOSURE STATEMENT WITH ITS EXHIBITS, INCLUDING THE PLAN, IN ITS ENTIRETY. AFTER CAREFULLY REVIEWING THESE DOCUMENTS, PLEASE FOLLOW THE DIRECTIONS FOR VOTING CONTAINED ON THE BALLOT, AND RETURN THE BALLOT IN THE ENVELOPE PROVIDED. TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED BY                     , 2009, AT                 P.M.

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(THE “VOTING DEADLINE”) AT THE ADDRESS SET FORTH ON THE PRE-ADDRESSED ENVELOPE ENCLOSED WITH YOUR BALLOT.

     Votes cannot be transmitted orally or by e-mail. Accordingly, you are urged to return your signed and completed Ballot promptly. Ballots not received by the Voting Deadline and unsigned Ballots will not be counted. Any executed Ballots that are timely received, but which do not indicate either an acceptance or rejection of the Plan, will be deemed to constitute an acceptance of the Plan.

     The Bankruptcy Court has scheduled a hearing on Confirmation of the Plan for                , 2009 at                 p.m. (Pacific Time) at the United States Bankruptcy Court for the Central District of California, Santa Ana Division, Courtroom 5A, 411W. 4^th Street, Santa Ana, California. Any objections to confirmation of the Plan must be in writing and filed with the Bankruptcy Court, and served so as to be received by                 p.m. (Pacific Time) on                , 2009, upon the following: (1) counsel to the Debtor, Patton Boggs LLP, 2001 Ross Avenue, Suite 3000, Dallas, Texas 75201, Attn: Robert W. Jones, J. Maxwell Tucker, and Brent McIlwain and Stutman, Treister & Glatt, P.C., 1901 Avenue of the Stars, 12^th Floor, Los Angeles, California 90067, Attn: Theodore B. Stolman and Whitman L. Holt; (2) Office of the United States Trustee, 411 W 4^th Street, Suite 9041, Santa Ana, California 92701, Attn: Frank Cadigan; (3) counsel to the Official Committee of Unsecured Creditors, Klee, Tuchin, Bogdanoff & Stern LLP, 1999 Avenue of the Stars, 39^th Floor, Los Angeles, California 90067, Attn: Lee Bogdanoff & Jonathon Shenson; and (4) counsel to the Equity Committee, Weiland, Golden, Smiley, Wang Ekvall & Strok LLP, 650 Town Center Drive, Suite 950, Costa Mesa, California 92626, Attn: Evan D. Smiley.

II
DISCLAIMER

     THIS DISCLOSURE STATEMENT CONTAINS INFORMATION THAT MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT THE PLAN. PLEASE READ THIS DOCUMENT WITH CARE. THE PURPOSE OF THE DISCLOSURE STATEMENT

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IS TO PROVIDE “ADEQUATE INFORMATION” OF A KIND, AND IN SUFFICIENT DETAIL, AS FAR AS IS REASONABLY PRACTICABLE IN LIGHT OF THE NATURE AND HISTORY OF THE DEBTOR AND THE CONDITION OF THE DEBTOR’S BOOKS AND RECORDS, THAT WOULD ENABLE A HYPOTHETICAL REASONABLE INVESTOR, TYPICAL OF HOLDERS OF CLAIMS OR EQUITY INTERESTS OF THE RELEVANT CLASS, TO MAKE AN INFORMED JUDGMENT CONCERNING THE PLAN. SEE 11 U.S.C. § 1125(a). UNLESS OTHERWISE INDICATED, THE DATE OF ALL OF THE FINANCIAL INFORMATION PROVIDED IN THIS DISCLOSURE STATEMENT IS AS OF JUNE 1, 2009.

     FOR THE CONVENIENCE OF CREDITORS AND EQUITY INTEREST HOLDERS, THIS DISCLOSURE STATEMENT SUMMARIZES THE TERMS OF THE PLAN, BUT THE PLAN ITSELF QUALIFIES ANY SUMMARY. IF ANY INCONSISTENCY EXISTS BETWEEN THE PLAN AND THE DISCLOSURE STATEMENT, THE TERMS OF THE PLAN ARE CONTROLLING.

     NO REPRESENTATIONS CONCERNING THE DEBTOR, ITS FINANCIAL CONDITION, OR ANY ASPECT OF THE PLAN ARE AUTHORIZED BY THE DEBTOR, OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. ANY REPRESENTATIONS OR INDUCEMENTS MADE TO SECURE YOUR ACCEPTANCE, WHICH ARE OTHER THAN AS CONTAINED IN, OR INCLUDED WITH, THIS DISCLOSURE STATEMENT, SHOULD NOT BE RELIED UPON BY YOU IN ARRIVING AT YOUR DECISION.

     THE FINANCIAL INFORMATION CONTAINED HEREIN, UNLESS OTHERWISE INDICATED, IS UNAUDITED. THE DEBTOR IS UNABLE TO WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN IS WITHOUT

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INACCURACIES. GREAT EFFORT, HOWEVER, HAS BEEN MADE TO ENSURE THAT ALL SUCH INFORMATION IS PRESENTED FAIRLY.

     PATTON BOGGS LLP, (“PB”) AND STUTMAN, TREISTER & GLATT, P.C. (“ST&G”) COMMENCED REPRESENTING THE DEBTOR IN ITS BANKRUPTCY CASE IN JUNE 2008 AS CO-REORGANIZATION COUNSEL. ADDITIONALLY, DEBTOR HAS EMPLOYED FTI CONSULTING, INC. (“FTI”) TO PROVIDE INTERIM MANAGEMENT AND MANAGEMENT ASSISTANCE TO THE DEBTOR DURING ITS BANKRUPTCY. PB, ST&G, AND FTI HAVE RELIED UPON INFORMATION PROVIDED BY THE DEBTOR’S MANAGEMENT AND EMPLOYEES IN CONNECTION WITH PREPARATION OF THIS DISCLOSURE STATEMENT. ALTHOUGH PB, ST&G, AND FTI HAVE PERFORMED CERTAIN LIMITED DUE DILIGENCE IN CONNECTION WITH THE PREPARATION OF THIS DISCLOSURE STATEMENT, THEY HAVE NOT INDEPENDENTLY VERIFIED ALL OF THE INFORMATION CONTAINED HEREIN.

     ALTHOUGH A COPY OF THE DISCLOSURE STATEMENT HAS BEEN SERVED ON THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) AND THE SEC HAS BEEN GIVEN AN OPPORTUNITY TO OBJECT TO THE ADEQUACY OF THE DISCLOSURE STATEMENT, THIS DISCLOSURE STATEMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. NEITHER THE SEC NOR ANY STATE REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS DISCLOSURE STATEMENT, THE EXHIBITS HERETO, OR THE STATEMENTS CONTAINED HEREIN.

     THE CONTENTS OF THIS DISCLOSURE STATEMENT SHOULD NOT BE CONSTRUED AS LEGAL, BUSINESS, OR TAX ADVICE. ANY TAX ADVICE HEREIN

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WAS NOT INTENDED TO BE USED, AND IT CANNOT BE USED, FOR THE PURPOSE OF AVOIDING ANY TAX PENALTIES THAT MAY BE IMPOSED ON ANY PERSON. NOTHING IN THIS DISCLOSURE STATEMENT MAY BE USED OR REFERRED TO IN PROMOTING, MARKETING OR RECOMMENDING A PARTNERSHIP OR OTHER ENTITY, INVESTMENT PLAN, OR ARRANGEMENT TO ANY PERSON. ALL CREDITORS AND/OR EQUITY INTEREST HOLDERS SHOULD CONSULT THEIR OWN LEGAL COUNSEL AND/OR ACCOUNTANT(S) AS TO LEGAL, TAX, AND OTHER MATTERS CONCERNING THEIR CLAIMS OR EQUITY INTERESTS.

III
OVERVIEW OF THE CHAPTER 11 PROCESS AND THE PLAN

A. The Chapter 11 Process

     Chapter 11 of the Bankruptcy Code contains numerous provisions, the general effect of which is to provide debtors with “breathing space” within which to propose a restructuring of their obligations to third parties. The filing of a chapter 11 bankruptcy petition creates a bankruptcy “estate” comprising all of the property interests of the debtor. Unless a trustee is appointed by the Bankruptcy Court for cause (no trustee has been appointed in this Case), a debtor remains in possession and control of all its assets as a “debtor in possession.” The debtor may continue to operate its business in the ordinary course on a day-to-day basis without Bankruptcy Court approval. Bankruptcy Court approval is only required for various enumerated kinds of transactions (such as certain sales and financing transactions out of the ordinary course of a debtor’s business). The filing of the bankruptcy petition gives rise to what is known as the “automatic stay” which, generally, enjoins creditors from taking any action to collect or recover obligations owed by a debtor prior to the commencement of a chapter 11 case. The Bankruptcy Court can, however, grant relief from the automatic stay, under certain specified conditions or for cause.

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     A chapter 11 debtor may propose a plan providing for the reorganization of the debtor or for the orderly liquidation and administration of the assets of the estate. A plan may either be consensual or non-consensual and provides, among other things, for the treatment of the claims of creditors and interests of shareholders.

B. Overview of the Debtor’s Proposed Plan

     The following is a brief overview of the material provisions of the Plan and is qualified in its entirety by reference to the full text of the Plan. For a more detailed description of the terms and provisions of the Plan, see Article VII below, entitled “Fremont General Corporation’s Plan Pursuant to Chapter 11 of the United States Bankruptcy Code.” This brief overview of the Plan should not be considered without regard to the disclosures made in Article IX below, entitled “Certain Factors to be Considered.”

     The Plan’s objective is to vest title to all Assets of the Debtor, including the prosecution of Causes of Action, in the Reorganized Debtor (or if applicable the Creditors Trust), which shall then distribute Assets to Holders of Allowed Claims and Equity Interests in accordance with the Plan. The Plan designates a series of Classes of Claims and one Class of Equity Interests, which include all Claims against, and Equity Interests in, the Debtor. These Classes take into account the differing nature and priority under the Bankruptcy Code of the various Claims and Equity Interests.

     The following table (the “Plan Summary Table”) summarizes the treatment of Claims and Equity Interests under the Plan with: (a) the Debtor’s estimates of the amount of Claims in each category or Class that will be finally determined to be Allowed Claims, and (b) a description of the treatment provided for in the Plan for each Class of Claims and Equity Interests. The dollar amounts included in Plan Summary Table have been estimated by the Debtor as of the Petition Date, or the date of this Disclosure Statement and do not constitute an admission by the Debtor as to the validity or amount of any particular Claim or Equity Interest. The Debtor reserves the right to dispute the

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validity or amount of any Claim or Equity Interest that has not already been Allowed by the Bankruptcy Court or by agreement of the parties.

     The following summary of estimated distributions under the Plan lists both estimated Allowed Amount of Claims or Equity Interests in each Class, and an estimated recovery for such Class. The estimated aggregate amounts of all Classes of Claims are based on the Debtor’s good faith estimates of the aggregate amount of such Claims upon resolution of all such Claims that are Disputed Claims, based on all currently known information. The amount of the Pro Rata Distributions of Cash that ultimately will be received by a particular Holder of an Allowed Claim or Interest may be adversely or favorably affected by the aggregate amount of Administrative Claims and Priority Tax Claims ultimately Allowed, as well as the length of time that is required to accomplish payment in full Class 2A and Class 2B claims. These estimates also are based on good faith estimated amounts of available Cash for distribution to Holders of Claims, based on all currently known information. These estimates exclude any recovery on any Causes of Action that may be prosecuted by the Plan Administrator as Creditor Trustee after the Effective Date pursuant to the Plan.

     For all of the reasons stated above, no representation can be, or is being, made with respect to whether (a) the estimated Allowed amount of Claims in each Class is accurate, or (b) the estimated percentage recoveries shown on the table below actually will be realized by the holder of an Allowed Claim or Allowed Interest in any particular Class. As further disclosed herein, such estimates assume a favorable resolution of certain risk factors and other contingencies.

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SUMMARY OF TREATMENT OF CLAIMS AND
EQUITY INTERESTS UNDER THE PLAN

				Estimated
				Percentage
			Estimated	Recovery of
			Aggregate	Allowed
			Amount of	Claims or
Claim	Claim/Interest	Treatment	Allowed Claims	Interests
n/a	Administrative Claims1	Except to the extent that any entity entitled to payment of an Allowed Administrative Claim agrees to a less favorable treatment or unless otherwise ordered by the Court, each Holder of an Allowed Administrative Claim will receive in full satisfaction, discharge, exchange and release thereof, Cash in an amount equal to such Allowed Administrative Claim on the later of (i) the Effective Date, and (ii) the fifteenth (15th) Business Day after such Administrative Claim becomes an Allowed Administrative Claim, or, in either case, as soon thereafter as is practicable; provided, however, that Ordinary Course Administrative Claims will be paid in full in accordance with the terms and conditions of the particular transactions and any applicable agreements or as otherwise authorized by the Bankruptcy Court.	$1,112,000 in Administrative Claims (including professional fees and U.S. Trustee fees). This projected amount refers to the estimated amount of unpaid Administrative Claims as of 7/31/09. The projected range of unpaid Administrative Claims as of 10/31/09 is from $600,000 to $750,000.		100	%
n/a	Priority Tax	Except to the extent that a Holder of an Allowed Priority Tax Claim has been paid by the Debtor before the Effective Date or agrees to a less favorable treatment, each Holder of an Allowed Priority Tax Claim shall receive in full satisfaction, discharge, exchange and release thereof, Cash in an amount equal to such Allowed Priority Tax Claim on the later of (i) the Effective Date and (ii) the fifteenth (15th) Business Day after such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is practicable.	Estimated Range from $100,271 to $102,676,574.2		100	%

1

A substantial portion of the referenced Administrative Claims have already been allowed and paid on an interim basis, and this estimated amount does not include Administrative Claims that will have been paid during the course of this chapter 11 Case, nor any intercompany Administrative Claims due to FRC. See also the Liquidation Analysis, Exhibit B attached hereto, for additional explanations and disclosures.

2

The $102,676,574 figure includes the IRS’ proof of claim filed in the amount of $89,384,470 and the California Franchise Tax Board’s proof of claim of $13,292,104, and does not represent the Debtor’s current view of the amount that ultimately is likely to be Allowed. The Debtor disputes the proofs of claim filed by the IRS and the California Franchise Tax Board.

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				Estimated
				Percentage
			Estimated	Recovery of
			Aggregate	Allowed
			Amount of	Claims or
Claim	Claim/Interest	Treatment	Allowed Claims	Interests
1	Priority Non-Tax Claims	Except to the extent that a Holder of an Allowed Priority Non-Tax Claim agrees to a less favorable treatment, each Allowed Priority Non-Tax Claim will be paid, in full satisfaction, discharge, exchange and release thereof, in Cash in full the amount of the Allowed Priority Non-Tax Claim on the later of (i) the Effective Date and (ii) the fifteenth (15th) Business Day after such date that the Claim becomes an Allowed Priority Non-Tax Claim, or as soon thereafter as is practicable.	Estimated Range from $0 to $68,253		100	%
2A	General Unsecured Claims (including the $176,402,107 of claims represented by the 7.875% Senior Notes due 2009, but excluding any intercompany obligations of the Debtor to FRC)	The Holder of an Allowed General Unsecured Claim shall receive a [semi-annual] Pro Rata Distribution of the Distributable Cash based upon the amount of its Allowed General Unsecured Claim, until such Claim has been satisfied, including payment of Post-Petition Interest, as applicable. Notwithstanding the above, in the event (i) the Effective Date of the Plan occurs on or before October 31, 2009, and (ii) on such Effective Date the Reorganized Debtor distributes Distributable Cash of $175,000,000 pro rata to holders of the Senior Notes, or their indenture trustee or similar agent, such $175,000,000 distribution shall constitute a full and final satisfaction and accord of all Claims represented by the Senior Notes. Also notwithstanding the above, in the event (i) the Effective Date of the Plan occurs on or before October 31, 2009, and (ii) on such Effective Date the Reorganized Debtor distributes Distributable Cash to the holder of a Class 2A Claim not evidenced by a Senior Note, in an amount equal to the Allowed Amount of such Class 2A Claim (but excluding the portion of the Allowed Amount of such Claim allocable to Postpetition Interest), such distribution shall constitute a full and final satisfaction and accord of such Class 2A Claim, including any Claim such holder may have for Postpetition Interest.	Estimated Range from $222,171,214 to $241,003,550		100	%

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				Estimated
				Percentage
			Estimated	Recovery of
			Aggregate	Allowed
			Amount of	Claims or
Claim	Claim/Interest	Treatment	Allowed Claims	Interests
2B	TOPrS Claims	The Holder(s) of an Allowed TOPrS Claim shall receive a Pro Rata Distribution of the Distributable Cash based upon the amount of its Allowed TOPrS Claim until such Claim has been satisfied, including payment of Post-Petition Interest, as applicable.	$107,467,913	100%
3A	Equity Interests	The Holders of an Allowed Equity Interests, in exchange for such Interests, shall be deemed to have received Series A Equity Trust Interests under the Plan in an amount equal to the number of shares of the Debtor’s common stock owned by such Holder. By way of example, if a Allowed Interest Holder owns 100,000 shares of the Debtor’s common stock, such holder would receive 100,000 Series A Equity Trust Interest units. The proportionate distributions of the Distributable Cash as between the Series A Equity Trust Interests and the Series B Equity Trust Interests are subject to the Equity Reconciliation.	As of the Petition Date, approximately 82,116,179 shares of the Debtor’s common stock had been issued.	See Liquidation Analysis, Exhibit B hereto for projected cash distributions that may be available to Classes 3A and 3B
3B	Section 510(b) Claims	The Holder of an Allowed Section 510(b) Claims, in full satisfaction of such Claim, shall be deemed to have received under the Plan Series B Equity Trust Interests in an amount equal to the Allowed Amount of such Section 510(b) Claims. By way of example, if a Section 510(b) Claim holder is Allowed a Claim in the amount of $100,000, such holder would receive 100,000 Series B Equity Trust Interest units. The proportionate distributions of the Distributable Cash as between the Series A Equity Trust Interests and the Series B Equity Trust Interests are subject to the Equity Reconciliation.	The Section 510(b) Claims are Disputed, and the Debtor has not recorded a liability for such Claims	See Liquidation Analysis, Exhibit B hereto

     THE TREATMENT AND DISTRIBUTIONS PROVIDED TO HOLDERS OF ALLOWED CLAIMS AND EQUITY INTERESTS PURSUANT TO THE PLAN ARE IN FULL AND COMPLETE SATISFACTION OF THE ALLOWED CLAIMS AND EQUITY INTERESTS ON ACCOUNT OF WHICH SUCH TREATMENT IS GIVEN AND DISTRIBUTIONS ARE MADE.

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C. Other Sources of Information

     Documents filed with the Bankruptcy Court in connection with the Debtor’s bankruptcy case (other than documents filed under seal or otherwise subject to confidentiality protections) will be accessible at the Bankruptcy Court’s Internet site, www.cacd.uscourts.gov, through an account obtained from Pacer Service Center at 1-800-676-6856. Additional information may also be found at the Debtor’s website at www.fremontgeneral.com under “Restructuring Information” where you will find the following link www.kccllc.net/fremontgeneral. The information set forth on the foregoing websites shall not be deemed to be a part of or incorporated by reference into this Disclosure Statement.

D. Cautionary Statement Regarding Forward Looking Statements

     Certain statements contained in this Disclosure Statement may be deemed to be forward-looking statements under federal securities laws and the Debtor intends that such forward-looking statements be subject to the safe-harbor created thereby and/or the safe-harbor provided in section 1125(e) of the Bankruptcy Code. The Debtor cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements. Such factors include, but are not limited to, the outcome of litigation concerning certain causes of action asserted against or belonging to the Debtor, the results of the Debtor’s review of submitted Claims, and the Debtor’s ability to resolve contingent, disputed, and unliquidated claims. Additional information on these and other factors is contained in the disclosures made in Article IX below, entitled “Certain Factors to be Considered.” The Debtor assumes no, and hereby disclaims any, obligation to update the forward-looking statements contained in this Disclosure Statement.

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IV
COMPANY HISTORY

A. The Debtor and Its Pre-Petition Business

     Fremont General Corporation, the Debtor, is a publicly held Nevada corporation that has functioned as a financial services holding company. The Debtor’s pre-petition business operations were generally conducted through two intermediate holding companies — one for the “banking side” and one for the “insurance side.”

     1. FIL’s Lending Operations.

     On the banking side, the Debtor owns 100% of the common stock of Fremont General Credit Corporation (“FGCC”), which in turn owns 100% of the common stock of Fremont Reorganizing Corporation, f/k/a Fremont Investment & Loan, a non-debtor entity (“FIL” or “FRC”). While FIL was still a California-charted industrial bank, FIL engaged in both commercial and residential (consumer) real estate lending nationwide. FIL focused on the origination of commercial real estate loans, which FIL primarily held for investment. FIL’s consumer lending operations focused on the origination of non-prime and subprime residential real estate loans, most of which were sold to third party investors through whole loan sales or securitizations. FIL was one of the nation’s largest originators of subprime loans.

     FIL’s business grew rapidly in the years just before the Debtor’s bankruptcy filing. FIL’s total amount of residential loan originations increased from approximately $14 billion in 2003 to approximately $33 billion in 2006. Its commercial real estate loan portfolio also increased from approximately $1.1 billion in 2003 to approximately $6.3 billion in 2006. However, the subprime lending market deteriorated significantly in 2007. A periodic review by the Federal Deposit Insurance Corporation (“FDIC”) of FIL’s subprime lending operations lead to the issuance of a Cease-and-Desist Order, which was consented to by FIL and the Debtor on March 7, 2007 (the “ Cease and Desist Order”). The Cease and Desist Order required FIL to (among other requirements)

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make a variety of changes designed to restrict the level of lending in its subprime residential mortgage and commercial real estate business, to adopt a Capital Adequacy Plan to improve FIL’ Tier-1 leverage capital in relation to its risk profile, to provide for enhanced regulatory oversight, and to mandate the retention of qualified management acceptable to the FDIC and the Department of Financial Institutions of the State of California (“DFI”). The requirement for FIL to maintain higher capital levels made it more difficult for FIL to operate its lending business. Consequently, FIL decided to discontinue its subprime lending activities. As of March 7, 2007, FIL ceased entering into new funding commitments for subprime mortgage loans, although it continued to honor remaining outstanding commitments. FIL also sold its entire commercial real estate loan portfolio and its commercial lending platform to an unaffiliated third party in July 2007, terminating FIL’s commercial real estate lending operations. In addition to the Cease and Desist Order, FIL and the Debtor entered into a Final Order with the DFI on April 13, 2007 (“Final Order”), which was substantially similar in content to the Cease and Desist Order.

     As previously stated, the vast majority of FIL’s originated residential loans were transferred to third parties via a whole loan sales or securitizations. In a whole loan sale, FIL entered into an agreement to sell loans for cash, generally on a servicing released basis, but occasionally on a servicing retained basis. As part of the sale process, FIL gave customary representations and warranties regarding the characteristics and origination process of the loans. FIL also generally committed to repurchase loans if a payment default occurred within a certain period after the loan was sold.

     In a securitization, FIL transferred residential loans to a qualifying special-purpose entity, established for the limited purpose of purchasing the loans and issuing interest bearing securities that represented interests in the loans. The transfer of the loans in a securitization is treated as a sale,

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with the loans being removed from FIL’s balance sheet, although FIL continued to perform loan servicing functions for the securitizations.

     2. Indemnity and Life’s Insurance Operations.

     On the insurance side, the Debtor owns 100% of the common stock of Fremont Compensation Insurance Group, Inc. (“FCIG”). As of the date of this Disclosure Statement, FCIG in turn owns 100% of bare title to the common stock of Fremont Indemnity Company in Liquidation (“Indemnity”) and 100% of bare title to the common stock of Fremont Life Insurance Company (“Life”). Indemnity was placed into a state “conservation” proceeding under section 1011 of the California Insurance Code in June 2003, which proceeding was subsequently converted into a state “liquidation” proceeding under section 1016 of the California Insurance Code in July 2003. In connection with those proceedings, the California Insurance Commissioner (the “CIC”) obtained all the powers of the directors, officers, and managers of Indemnity, as well as sole control over all of Indemnity’s property. Life was placed into a state “conservation” proceeding in June 2008. In his capacity as statutory conservator or statutory liquidator, the CIC fulfills a role very broadly analogous to that of a bankruptcy trustee under the Bankruptcy Code.

B. The Debtor’s Management

     Until November of 2007, the Debtor had been managed by a management team that included Chairman of the Board James A. McIntyre (“McIntyre”), and President and Chief Executive Officer Louis J. Rampino (“Rampino”). McIntyre and Rampino had each been employed by the Debtor for more than thirty years. McIntyre had served as the Debtor’s Chief Executive Officer from 1976 until 2004, when Rampino was appointed as Chief Executive Officer.

     In November of 2007, McIntyre, Rampino, and several of the Debtor’s other officers and directors resigned after the Debtor and FIL continued to experience significant financial difficulties. The Debtor’s previous management team was replaced in November 2007 with a new management

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team, including Chairman of the Board of Directors and Chief Executive Officer Stephen H. Gordon and Vice-Chairman and President David S. DePillo. This new management team has managed the Debtor from November 2007 through October 2008. Gordon and DePillo resigned from day-to-day management on September 30, 2008, but remain on the board as Chairman and Vice-Chairman, respectively. On October 1, 2008, Richard A. Sanchez replaced Mr. DePillo and Mr. Gordon and became the Debtor’s Interim President and Interim Chief Executive Officer and he continues to in these positions through the present date. Prior to the appointment as Interim President and Interim Chief Executive Officer, Mr. Sanchez served as the Debtor’s Executive Vice President and Chief Administrative Officer from November 2007 through September 30, 2008. Other members of the new management team, namely the Executive Vice President and Chief Financial Officer, Thea K. Stuedli, and the Executive Vice President and General Counsel Donald E. Royer, have remained in their respective positions since November 2007.

C. Selected Financial Information

     Attached hereto as Exhibit C, for general informational purposes, are the Debtor’s unaudited income statement from the Petition Date through April 30, 2009 and unaudited balance sheet data as of April 30, 2009.

V
THE CHAPTER 11 CASE

A. Events Leading to the Debtor’s Bankruptcy Filing

     FIL was one of the nation’s largest subprime lenders. Although FIL sold the vast majority of all loans that it originated via “whole loan” sales, FIL remained obligated to repurchase loans sold if they experienced a payment default within a certain period of time after being sold or in the event of a breach of customary representation and warranties included in the whole loan sale agreements. FIL’s loan repurchase obligations began increasing by the end of 2006.

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     A combination of loan repurchase losses and deterioration in the subprime loan price caused FIL to experience significant erosion in its earnings and statutorily mandated capital ratios. Consequently, the Debtor and FIL consented to the Cease and Desist Order and the Final Order. As a result of the Cease and Desist Order and the Final Order, FIL decided to completely terminate all new subprime funding commitments on March 7, 2007, although it continued to honor existing funding commitments made before March 7, 2007. As discussed herein, FIL reached agreements to sell the majority of its remaining residential loan portfolio and its entire commercial real estate loan portfolios and its commercial lending platform to third parties during the first half of 2007.

     Even after ceasing residential lending, disposing of residential and commercial loan portfolios, completing the sale of significant portions of FIL’s assets, and taking other actions to comply with the Cease and Desist Order and the Final Order, the Debtor was not able to sufficiently repair the damage to FIL’s capital position caused primarily by the subprime lending crisis. The FDIC issued a Supervisory Prompt Corrective Action Directive (the “Directive”) on March 26, 2008, which required within sixty days for the Debtor to either recapitalize FIL or accept an offer for FIL to be acquired by another depository institution. In order to comply with the Directive, the Debtor reached an agreement with CapitalSource, Inc. (“CapitalSource”), where CapitalSource or its designee would agree to purchase a substantial portion of FIL’s principal assets and assume its deposits (the “CapitalSource Transaction”). Because the Debtor was a publicly traded entity, it would usually have to comply with SEC proxy rules in order to complete the sale to CapitalSource. However, due in part to its illiquid financial condition and the possible recording of additional asset write-downs and reserves, the Debtor determined that it would be unable, on a timely basis, to complete an audit of its consolidated financial statements for the year ended December 31, 2007 and its consolidated unaudited quarterly financial statements for the quarter ended March 31, 2008 or to file the related periodic reports with the SEC. Under SEC proxy rules, availability of this financial

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information would be necessary before the Debtor could solicit the Debtor’s shareholders for approval of the CapitalSource Transaction. Given the difficulties associated with completing a sale outside of bankruptcy, the Debtor determined that its best option for completing the CapitalSource Transaction would be to seek protection under chapter 11 of the Bankruptcy Code and complete the transaction with Bankruptcy Court approval. Accordingly, on June 18, 2008 (the “Petition Date”), the Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor continues to manage its assets and properties as a debtor-in-possession pursuant to Bankruptcy Code sections 1107 and 1108.

B. Significant Events During the Chapter 11 Case

     1. Retention of Debtor’s Professionals and Agents

     After filing its chapter 11, the Debtor sought Bankruptcy Court approval for its retention of the law firm of Patton Boggs LLP, as co-reorganization counsel, effective as of June 18, 2008. The Debtor also retained the law firm of Stutman, Treister & Glatt, PC as the Debtor’s co-reorganization counsel. The Bankruptcy Court approved the Debtor’s employment of these professionals, effective as of the Petition Date, pursuant to orders entered on September 29, 2008.The Debtor has also retained, with the Bankruptcy Court’s approval, (i) FTI Consulting, Inc. to provide interim management and management assistance to the Debtor; (ii) the law firms of Willenken, Wilson, Loh & Lieb LLP, Epstein Becker & Green, PC, and The Caldwell Law Firm as the Debtor’s special counsel for discrete purposes; and (iii) KPMG Corporate Finance LLC as the Debtor’s exclusive financial advisor in conjunction with a contemplated transaction that could undergird a plan of reorganization.

     The Debtor also has, with the Bankruptcy Court’s approval, employed Squar, Milner, Peterson, Miranda & Williamson, LLP to provide auditing and accounting services. The Debtor further has a pending application to employ Ernst & Young, LLP as its tax services provider.

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     2. Appointment of the Creditors Committee and the Equity Committee

     On July 1, 2008, the Office of the United States Trustee for the Central District of California (the “U.S. Trustee”) appointed an official committee of creditors holding unsecured claims against the Debtor (the “Creditors Committee”) to represent the interests of the general unsecured creditors of the Estate. The members of the Creditors Committee are: (1) Tennenbaum Multi-Strategy Master Fund (which serves as the chair); (2) HSBC Bank USA, N.A., the Indenture Trustee for holders of the Debtor’s 7.875% Senior Notes; (3) Wells Fargo Bank, N.A., as successor trustee to the Bank of New York Trust Company, N.A., the Indenture Trustee for holders of the Debtor’s 9% Junior Subordinated Debentures; (4) Dennis & Loretta Danko Family Trust; and (5) Rita Angel. In addition, Howard Amster and Roark, Rearden, & Hamot Capital Management serve as “ex officio” members of the Creditors Committee.

     The Creditors Committee has employed, with the Bankruptcy Court’s approval, Klee, Tuchin, Bogdanoff & Stern LLP as its counsel, the Solon Group, Inc. as its financial advisor on a limited basis in the Case, and Bocarsly Emden Cowan Esmail & Arndt LLP as its tax counsel.

     On July 8, 2008, the U.S. Trustee appointed an official committee of the Debtor’s equity holders (the “Equity Committee”) to represent the interests of the Debtor’s equity holders. The initial members of the Equity Committee were: (1) John M. Koral; (2) William M. Stern; (3) Paul Dagostino; (4) William Holmes; (5) Frank E. Williams, Jr.; (6) Jeffrey M. Pies; (7) Lynn Ehlers; (8) John M. Mlynick; and (9) Jonathan Siegal. Messrs. Mlynick and Siegal subsequently resigned from the Equity Committee. The Equity Committee has employed, with the Bankruptcy Court’s approval, Weiland Golden, Smiley, Wang Ekvall & Strok LLP as its counsel and CRG Group Partners, LLC as its financial advisor.

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     3. Consummation of the CapitalSource Transaction

     Within a week of the Petition Date, the Debtor filed its Motion for Order Authorizing the Debtor to Use the Shares of Non-Debtor Subsidiary to Consummate the CapitalSource Transaction (the “CapitalSource Motion”), which sought entry of an order authorizing the Debtor, as sole shareholder, to use (by voting) its shares of a non-debtor subsidiary to consummate the CapitalSource Transaction. Following a hearing on July 17, 2008, the Bankruptcy Court entered an order approving the CapitalSource Motion, which order was supported by accompanying Findings of Fact and Conclusions of Law. The CapitalSource Transaction closed on or about July 25, 2008, and FRC subsequently surrendered its banking charter to the state of California and changed its name from Fremont Investment & Loan to Fremont Reorganizing Corporation. As a result of the CapitalSource Transaction — which both the Creditors Committee and the Equity Committee supported — a receivership of FIL was averted and significant value was preserved for all stakeholders. This result stands in marked contrast to the outcome in other cases involving troubled banks and their parent holding companies — including Washington Mutual, IndyMac, Downey Savings & Loan, and Security Pacific Bank — all of which involved the appointment of the FDIC as receiver for the failed banks, and a subsequent loss of value for all stakeholders of the parent holding companies.

     4. Insider Compensation

     During the Case, the Debtor sought Court approval of the post-petition compensation of its current and past officers and directors, including Stephen H. Gordon, David S. DePillo, Donald E. Royer, Richard A. Sanchez, and Thea K. Stuedli. The Court approved a stipulation on September 15, 2008 that set the post-petition compensation for each of these officers or directors and established a mechanism for apportioning the executive compensation cost among the Debtor and FRC.

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     5. Establishment of General Bar Date and Filing of Claims

     On September 4, 2008, pursuant to a Stipulated Order Regarding the Claims Bar Date, the Court established November 10, 2008 as the general claims bar date for all Persons other than governmental units to file proofs of Claim or Equity Interests arising prior to the Petition Date, pursuant to section 501 of the Bankruptcy Code, and (2) December 15, 2008 as the claims bar date for governmental units to file pre-petition Claims.

     Over 900 Proofs of Claim were filed against the Debtor, including a limited number after the Claims Bar Date. Based on its preliminary review, the Debtor believes that many of these asserted Claims are invalid and/or inflated and, ultimately after Claims objection litigation, which has already begun, the aggregate Claims amounts will be significantly reduced. However, at this point no assurances can be made that the aggregate Claims will be reduced. See also article IX hereof, entitled “Certain Factors To Be Considered.”

     6. Relief from Stay Motions — McIntyre, Faigin & The Bank of New York Mellon

     During the course of the Case, two of the Debtor’s former Officers, McIntyre and Alan W. Faigin have filed motions seeking relief from the automatic stay under Bankruptcy Code section 362. Former CEO McIntyre sought relief from the automatic stay to allow him to pursue litigation requiring the Debtor to hold a shareholder’s meeting. After conducting a hearing on the matter, the Bankruptcy Court entered an order on October 24, 2008, denying, without prejudice, McIntyre’s motion to lift the stay.

     Former General Counsel Faigin filed a motion to lift the automatic stay in order to pursue state court litigation against the Debtor and FRC under a theory that both entities were jointly liable for amounts that were still allegedly owed to Faigin under his pre-petition employment contract with the Debtor. Although the Debtor, but not FRC, was a party to Faigin’s employment contract, Faigin had attempted to pursue arbitration against FRC, which is not a debtor in bankruptcy, under a theory

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that both Debtor and FRC were joint employers of Faigin. The Bankruptcy Court entered an order on December 24, 2008 allowing Faigin’s litigation against FRC to proceed on the condition that Faigin amend his complaint to remove all allegations against the Debtor and refrain from seeking discovery from the Debtor in connection with the state court litigation.

     More recently, The Bank of New York Mellon (“BONY”) filed a motion to lift the automatic stay so that prepetition litigation BONY commenced against the Debtor, which was pending in the United States District Court for the Central District of California (the “District Court”) on the Petition Date, could resume. No hearing has yet been held on BONY’s motion. BONY’s prepetition litigation claims have been expressed in the Debtor’s Case by way of a proof of claim BONY filed in excess of $20,000,000. The Debtor disputes any liability to BONY, and if the BONY claim cannot be settled, the matter will need to proceed to trial in the District Court.

     7. Engagement of KPMG Corporate Finance and the Plan Marketing Process

     KPMG Corporate Finance LLC (“KPMGCF”) was retained by the Debtor with the Court’s approval pursuant to that certain engagement letter dated November 26, 2008 (the “Engagement Letter”), a copy of which was included with KPMGCF’s employment application. The Engagement Letter was the product of negotiation, review, comment, and ultimately approval (or at least non-objection) by the Debtor, the Creditors Committee, and the Equity Committee.

     The Engagement Letter contemplated that KPMGCF would initially engage in a comprehensive marketing process intended to locate third parties with an expressed interest in acting as a stalking horse plan proponent for, or otherwise sponsoring, a chapter 11 plan adding new value to the Debtor’s estate. Toward that end, the Debtor and its professionals assisted KPMGCF in the preparation of a comprehensive due diligence dataroom and plan marketing materials during December 2008.

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     Because the Order approving KPMGCF’s engagement was not entered until January 6, 2009 and KPMGCF could not commence the marketing process until that Order was entered, KPMGCF was left with only about five weeks in which to locate a qualified plan proponent by the February 15 deadline contained in the Engagement Letter. Thereafter, KPMGCF went to work by distributing a large number of “teasers” designed to inform the market of the potential opportunity for investors acting as the proponent of a Fremont plan. Those “teasers” resulted in twenty-six parties executing non-disclosure agreements and receiving a detailed Confidential Information Memorandum about the Debtor and FRC.

     Of the 26 parties receiving the Confidential Information Memorandum, six expressed substantial interest in serving as a plan proponent. Pursuant to the solicitation process structured by KPMGCF, all six of those parties timely submitted proof of their financial qualifications to KPMGCF. KPMGCF determined that all six are financially well-qualified to sponsor a chapter 11 plan in this case.

     Contemporaneously with their qualifying financially, the six parties invested substantial time and effort engaging in due diligence regarding the assets and liabilities of both the Debtor and its non-debtor subsidiary FRC. Such due diligence not only involved the review and analysis of thousands of pages of documents contained at an on-line data site, but also involved numerous telephonic and in-person meetings with KPMGCF, the Debtor’s management, the Debtor’s reorganization counsel, the Debtor’s outside litigation counsel, and the Debtor’s other professionals.

     All six of the prospective proponents ultimately submitted an executed non-binding term sheet or letter of intent by the February 15, 2009 deadline established by KPMGCF. Five of the six proposals expressly stated that they were not subject to any financing or due diligence conditions, thereby automatically extending the term of KPMGCF’s engagement.

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     Based upon the existence of six executed proposals submitted by proponents that KPMGCF deemed to be financially qualified, KPMGCF and the Debtor’s Board of Directors concluded that it would be in the best interests of the Debtor’s estate to work toward implementation of one of the proposals through a plan of reorganization. Doing so requires that at least one of the proposals be refined via further negotiation and memorialized in definitive transaction documents.

     During the months of March, April, and May 2009, meaningful discussions and negotiations, encompassing hundreds of hours of effort on the part of the Debtor’s management, professionals, the proponents, and the committees, took place between certain potential proponents, the Debtor, the Creditors Committee, and the Equity Committee. Those discussions included lengthy and numerous in-person meetings, conference calls, and e-mail exchanges. Many draft term sheets were exchanged between the parties, but ultimately no agreement has, to date, been reached with any of the potential proponents, the Debtor, and both committees. Accordingly, the Debtor has filed the Plan as a “standalone” plan, without the participation of a third party proponent.

     In the event that the Reorganized Debtor engages in a “Transaction” (as defined in the Engagement Letter) within twelve months after the termination of KPMGCF’s engagement, KPMGCF will remain entitled to the payment of the “Transaction Fee” (as defined in the Engagement Letter) pursuant to the terms of the Engagement Letter.

     8. Plan Exclusivity

     Pursuant to section 1121 of the Bankruptcy Code, a debtor in possession, such as the Debtor, has at least 120 days from the date of the filing of its chapter 11 petition in which to file a plan of reorganization, subject to Bankruptcy Court’s discretion to grant extensions of this exclusive period for “cause.” During this exclusive period, no other person or entity is permitted to file a plan of reorganization. A debtor further has an additional 60 days in which to solicit votes on a filed plan.

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     The Debtor has received three extensions of its exclusivity periods, ultimately resulting in a June 1, 2009 deadline for filing a plan and a September 1, 2009 deadline for soliciting votes on that plan. Neither of these deadlines are subject to further extension without the Creditors Committee’s consent.

     9. Settlements of Claims and Litigation

     During the course of the Case, the Debtor has achieved settlements of various matters. In some instances, the Debtor has negotiated final terms of settlement, subject only to obtaining Bankruptcy Court approval. The following narrative describes the more significant settlements.

          a. California Insurance Commissioner.

     In June 2004, the CIC, as Indemnity’s statutory liquidator, filed suit in Los Angeles Superior Court against the Debtor and FCIG alleging that they improperly utilized certain net operating loss deductions (“NOLs”) allegedly belonging to Indemnity (the “NOL Case”). In 2005, the CIC filed an additional and separate complaint against the Debtor and others on behalf of Indemnity as successor in interest to Comstock Insurance Company (“Comstock”), a former affiliate of Indemnity that was subsequently merged into Indemnity. This case alleged similar causes of action regarding the utilization of the NOLs as in the NOL Case as well as assertions of improper transactions with other insurance subsidiaries and affiliates of Indemnity (the “Comstock Action”). In 2008, FRC was added as a defendant in both the NOL Case and the Comstock Action.

     As a result of disagreements as to whether Indemnity, which is in liquidation, and/or its subsidiaries could be considered part of the Debtor’s consolidated taxpayer group for federal income tax purposes, the CIC requested that the Internal Revenue Service (“IRS”) issue a private letter ruling to resolve the dispute, which the IRS issued on July 26, 2006. Based upon this IRS private letter ruling, the CIC has taken the position that Indemnity and its subsidiaries should be included in

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the Debtor’s consolidated taxpayer group, and the Debtor has maintained its objection to such tax treatment (the “Tax Deconsolidation Dispute”).

     In March 2008, the CIC filed a lawsuit in California state court asserting, on behalf of Indemnity, claims of ownership to substantial portions of certain artwork, including any related proceeds from the sale of such artwork, that at any time were in the possession or control of the Debtor or any of its affiliates. That state court lawsuit was removed to the Bankruptcy Court by the Debtor on July 11, 2008, and is now a pending adversary proceeding No. 8:08-ap-01258-ES (the “Art Adversary Dispute”), wherein the CIC has asserted ownership rights to such artwork and related proceeds and asserted claims against the Debtor, FRC, and four individuals that are current or former employees of the Debtor.

     In connection with the aforementioned actions, the CIC filed four proofs of claim with the Bankruptcy Court asserting against the Debtor all of the claims set forth in the NOL Case, the Comstock Action, the Art Adversary Dispute, and the Tax Consolidation Dispute. Collectively, the liquidated amount of the claims asserted by the CIC exceeded $489 million, and further included claims based upon various alleged unliquidated components.

     On April 17, 2009, the Debtor, FRC, and FCIG (FCIG, the Debtor, and FRC are collectively referred to herein as the “Fremont Entities”), and the CIC, as the statutory liquidator of Indemnity and the statutory conservator of Life, entered into a stipulation and agreement regarding the global and integrated settlement and release of all claims and disputes (the “CIC Stipulation”).

     In consideration of the aggregate and integrated final settlement of all claims and disputes between them, the Fremont Entities and the CIC agreed to the following”

     Tax Matters: Within 20 days of the CIC Stipulation’s effective date, the Fremont Entities will make any necessary requests, enter into any agreements, and/or make any necessary filings with the IRS to document that Indemnity has been deconsolidated from the group of affiliates of the Debtor

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that elect to participate in a consolidated federal taxpayer group so that Indemnity may utilize on its separate tax returns without limitation or restriction any NOLs generated by Indemnity on or after January 1, 2003. In addition, after the CIC Stipulation’s effective date, the Debtor will reasonably cooperate with the CIC in the preparation, filing, approval, and consummation of the statutory liquidation case involving Indemnity as more fully set forth in the CIC Stipulation.

     Life Stock: On the CIC Stipulation’s effective date, FCIG, as the holder of all of the issued and outstanding stock of Life, will transfer to the Commissioner for the benefit of Indemnity all of its right, title, and interest in the stock of Life.

     Proofs of Claim: On the CIC Stipulation’s effective date, each of the proofs of claim filed by the CIC with the Bankruptcy Court will be withdrawn, disallowed, and expunged in their entirety and with prejudice. The CIC will be allowed a $5 million general unsecured non-priority claim in the Debtor’s bankruptcy proceeding, which claim shall be the sole and exclusive right to payment the CIC, Indemnity, and Life will have against the Debtor’s bankruptcy estate, except in connection with the D&O Case (as described below).

     Disposition of the Artwork Adversary Dispute: On the CIC Stipulation’s effective date, the CIC will receive $4.1 million of the funds, presently held in escrow, resulting from the sale of certain of the Debtor’s artwork. The Debtor will receive the remaining proceeds held in an escrow account (approximately $300,000) and ownership rights to all of the remaining artwork, including any future proceeds from the sale or disposition of such artwork.

     Cash Payment: On the CIC Stipulation’s effective date, FRC will pay to Indemnity $5.0 million in cash.

     Dismissal of Pending Litigation: As soon as practicable after the CIC Stipulation’s effective date, the CIC will cause to be dismissed with prejudice all of the aforementioned actions, including any counterclaim or cross-complaint filed therein, and the Fremont Entities will cause to be

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dismissed with prejudice any proofs of claim filed in connection with the statutory liquidation case involving Indemnity.

     Exchange of Releases: Except for the agreements and obligations expressly undertaken or to be performed under the CIC Stipulation, on the CIC Stipulation’s effective date, in consideration of the payments and other consideration recited in the CIC Stipulation, the CIC, Indemnity, Life, and the Fremont Entities will mutually release, acquit, and forever discharge each party and certain related parties (subject to specified exceptions) from the claims set forth in the aforementioned actions.

     The Debtor filed a motion for approval of the CIC Stipulation pursuant to Federal Rule of Bankruptcy Procedure 9019(a) on April 23, 2009, and that motion was approved by the Bankruptcy Court at a hearing held on May 14, 2009. The CIC Stipulation has further been approved by the two necessary state courts, and the Debtor and the CIC are presently in the process of closing and implementing that settlement. For more information regarding this controversy, see Article IX “Certain Factors to be Considered.”

          b. Massachusetts Attorney General.

     In October 2007, the Attorney General for the Commonwealth of Massachusetts (the “Commonwealth”) filed a lawsuit in Massachusetts Superior Court in Suffolk County (“MA Superior Court”) alleging that the Debtor and its indirect wholly-owned subsidiary, FRC, engaged in unfair or deceptive practices in connection with the origination and servicing of residential mortgage loans made to residents of Massachusetts (the “Massachusetts Action”). The lawsuit was brought on behalf of the Commonwealth and such borrowers. The Commonwealth’s complaint sought injunctive relief, equitable relief for such Massachusetts borrowers, and civil penalties. Since February 25, 2008, the Debtor and FRC have been operating under a preliminary injunction issued by the MA Superior Court, as modified on March 31, 2008 (the “Preliminary Injunction”), which

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enjoined the Debtor and FRC from foreclosing on certain of such loans made to Massachusetts residents without the approval of the MA Superior Court and prevented the Debtor and FRC from selling, transferring, or assigning any such Massachusetts residential mortgage loan unless certain conditions were met. The Debtor concluded that the Massachusetts Action was likely outside the scope of the automatic stay pursuant to 11 U.S.C. § 362(b)(4).

     On April 17, 2009, the Commonwealth, the Debtor, and FRC entered into a Final Judgment By Consent (the “Final Judgment”). Pursuant to the Final Judgment’s terms, FRC will pay $10 million to the Commonwealth on the Final Judgment’s effective date. If neither FRC nor FGCC is the subject of a bankruptcy proceeding under the Bankruptcy Code as of a date which is approximately 95 days after the Final Judgment’s effective date, and no court has determined that either the Debtor or FRC has violated any of the terms of the Final Judgment, then the Commonwealth will withdraw with prejudice the proof of claim in the estimated amount of $20 million that the Commonwealth filed in the Debtor’s Case on December 12, 2008. In the event that either FRC or FGCC are in bankruptcy proceedings on such date (which date has not passed as of the date of this Disclosure Statement), then the Commonwealth may void the Final Judgment and refund the $10 million.

     To the extent the Final Judgment becomes effective, the Preliminary Injunction will be modified and will become a permanent injunction that will only apply to loans to Massachusetts residents or to loans secured by property in Massachusetts (the “Permanent Injunction”). The parties agree that the entry of the Permanent Injunction may not be construed as, evidence that FRC or the Debtor used or employed unfair or deceptive acts or practices. Pursuant to the Permanent Injunction, the Debtor or FRC must provide the Massachusetts Attorney General (the “Attorney General”) with prior notice before initiating or advancing a foreclosure on any such mortgage loan originated by FRC. If the Attorney General does not provide a written objection, the Debtor or FRC

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may proceed with the foreclosure. In the event that there is a written objection, the parties have agreed to follow the resolution procedures set forth in the Final Judgment. In addition, before the Debtor or FRC may sell, transfer or assign any mortgage loan originated by FRC that is secured by any residential property in Massachusetts, they must (i) provide the Attorney General prior notice; (ii) a purchaser or assignee from FRC must agree to be bound by the foreclosure and sale restrictions of the Permanent Injunction; and (iii) a copy of the written assignment must be provided to the Attorney General.

     In consideration of the Debtor and FRC’s compliance with the provisions of the Final Judgment, upon the entry of the Final Judgment by the MA Superior Court, the Commonwealth will release and forever discharge the Debtor and FRC from the claims set forth in the Massachusetts Action. This general release is subject to possible revocation as noted above.

     The Debtor filed a motion for approval of the Final Judgment pursuant to Federal Rule of Bankruptcy Procedure 9019(a) on April 23, 2009, and that motion was approved by the Bankruptcy Court at a hearing held on May 14, 2009. The Debtor, FRC, and the Commonwealth are presently in the process of implementing that agreement. For more information regarding this controversy, see Article IX “Certain Factors to be Considered.”

          c. Enron.

     On April 24, 2009, the Debtor entered into a stipulation and agreement (the “Enron Stipulation”) with Enron Creditors Recovery Corporation (“Enron”) to settle the outstanding litigation discussed below and resolve an approximately $25.5 million proof of claim filed by Enron on or about October 14, 2008 in the Case.

     On December 2, 2001, Enron and certain affiliates filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States District Court for the Southern District of New York (the “Enron Court”). Prior to December 2, 2001, Enron issued unsecured commercial

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paper to various entities, including the Debtor. Such commercial paper had maturities of up to 270 days. In a series of transfers, Enron allegedly paid over $1 billion dollars to various entities, including $25,426,521.66 to the Debtor, in respect of such commercial paper prior to such commercial paper’s stated maturity. In November 2003, representatives of Enron’s bankruptcy estate commenced adversary proceedings in the Enron Court against the Debtor and various defendants, asserting claims that the payments made in respect of the commercial paper are avoidable and recoverable under various sections of the Bankruptcy Code (the “CP Adversary Proceeding”).

     In consideration of the aggregate and integrated final settlement of all claims and disputes between them, the Debtor and Enron agreed to the following:

     Allowed General Unsecured Claim: On the Enron Stipulation’s effective date, Enron will be allowed for purposes of voting on any proposed plan in the Case and receiving any distributions made pursuant to such plan or otherwise in the Case, a general unsecured non-priority claim against the Debtor in the amount of $4.0 million (the “Allowed Enron Claim”). However, upon Enron’s actual receipt of distributions from the Debtor’s bankruptcy estate totaling $2.0 million, the Allowed Enron Claim shall be deemed to be satisfied in full, and Enron shall have no further right to any distributions or payment from the Debtor’s bankruptcy estate. The Allowed Enron Claim shall be the sole and exclusive right to payment that Enron will have against the Debtor’s bankruptcy estate or otherwise.

     Dismissal of the CP Adversary Proceeding: As soon as is practicable after the effective date of the Enron Stipulation, Enron will cause the CP Adversary Proceeding to be dismissed with prejudice as to the Debtor, with the Debtor and Enron to bear their own respective attorneys’ fees and costs.

     Exchange of Releases: Except for the agreements and obligations expressly undertaken or to be performed under the Enron Stipulation, on its effective date, in consideration of the payments and

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other consideration recited in the Enron Stipulation, Enron and the Debtor will mutually release, acquit, and forever discharge each other and certain related parties from any and all past, present, and future claims, arising in whole or in part out of any facts, circumstances, or events in existence on or before its effective date.

     The Debtor filed a motion for approval of the Enron Stipulation pursuant to Federal Rule of Bankruptcy Procedure 9019(a), and that motion was approved by the Bankruptcy Court at a hearing held on May 19, 2009. The Enron Stipulation has further been approved by the Enron Court. For more information regarding this controversy, see Article IX “Certain Factors to be Considered.”

          d. The “Rampino” Litigation and Associated Defendants’ Wage, SERP, and Indemnification Claims.

     On May 15, 2009, the Debtor entered into a trilateral stipulation and agreement (the “Rampino Stipulation”) with Rampino, McIntyre, Wayne R. Bailey (“Bailey”), John A. Donaldson (“Donaldson”), Ronald A. Groden (“Groden”), W. Brian O’Hara (“O’Hara”), and Raymond G. Meyers (“Meyers”) (collectively, the “Rampino Defendants”) and the CIC, as statutory liquidator of Indemnity, to settle the outstanding litigation between the Rampino Defendants, as former officers and directors of the Debtor and/or of Indemnity, and the CIC, as the statutory liquidator of Indemnity, and to resolve fifteen proofs of claims, asserting liquidated amounts that, in the aggregate, exceed $27 million, and that contain substantial contingent and unliquidated components, which were filed by the Rampino Defendants in the Debtor’s Case.

     On October 12, 2006, the CIC, as statutory liquidator of Indemnity, filed a First Amended Complaint in the Los Angeles Superior Court (Case No. BC357691) against the Rampino Defendants, as former directors and officers of Indemnity, which alleged the Rampino Defendants breached their fiduciary duties by allowing Indemnity to engage in an inappropriate underwriting scheme that caused injury to Indemnity’s reinsurers, which in turn injured Indemnity by settlements it made with those reinsurers (the “D&O Case”). Although neither the Debtor nor any of its

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affiliates are defendants in the D&O Case, it is possible that the Debtor could have indemnification obligations to some or all of the Rampino Defendants pursuant to the Debtor’s governing documents and applicable state law. After the Debtor commenced the Bankruptcy Case, each of the Rampino Defendants filed one or more proofs of claim based upon, among other things, the theory that the Debtor is liable to indemnify each of the Rampino Defendants for any settlement amounts or judgment that may be entered against the Rampino Defendants in the D&O Case.

     In accordance with the terms of the Rampino Stipulation and in consideration of the settlement of all claims and disputes among them, the CIC, Indemnity, the Debtor, and the Rampino Defendants agreed to the following:

     Allowed General Unsecured CIC Claim: On the Rampino Stipulation’s effective date, the CIC will be allowed for purposes of voting on any proposed plan in the Case and receiving any distributions made pursuant to such plan or otherwise in the Debtor’s Case, a general unsecured non-priority claim against the Debtor in the amount of $35 million (the “Allowed CIC-Rampino Claim”). However, upon the CIC’s actual receipt of distributions from the Debtor’s bankruptcy estate totaling $22.0 million, the Allowed CIC-Rampino Claim shall be deemed to be satisfied in full, and the CIC shall have no further right to any distributions or payment from the Debtor’s bankruptcy estate on account of the D&O Case. The Allowed CIC-Rampino Claim shall be the sole and exclusive right to payment that the CIC will have against the Debtor’s bankruptcy estate on account of the D&O Case. The Allowed CIC-Rampino Claim will be in addition to the $5 million general unsecured non-priority claim against the Debtor’s bankruptcy estate for an unrelated settlement accomplished via the CIC Stipulation (as discussed above)

     Final Disallowance of the Proofs of Claim: On the Rampino Stipulation’s effective date, each of the Rampino Defendants’ respective proofs of claim shall be deemed to have been withdrawn, disallowed, and expunged in their entirety and with prejudice.

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     Allowed General Unsecured SERP Claims: On the Rampino Stipulation’s effective date, Messrs. Bailey, Rampino, McIntyre, Meyers will each be allowed for purposes of voting on any plan and receiving any distributions made pursuant to such plan or otherwise in the Debtor’s Case, a general unsecured non-priority claim against the Debtor in the amounts of $4.6 million, $5.6 million, $5.2 million and $2.3 million, respectively (collectively, the “Allowed SERP Claims”). However, upon Messrs. Bailey, Rampino, McIntyre, and Meyers’ actual receipt of distributions from the Debtor’s bankruptcy estate totaling approximately $2.874 million, $3.470 million, $3.227 million and $1.420 million, respectively, the Allowed SERP Claims shall be deemed to be satisfied in full, and Messrs. Bailey, Rampino, McIntyre, and Meyers shall have no further right to any distributions or payment from the Debtor’s bankruptcy estate. The Allowed SERP Claims shall constitute only general unsecured non-priority claims, and Messrs. Bailey, Rampino, McIntyre, and Meyers shall have no right to any distribution or payment from either the Fremont General Corporation Supplemental Executive Retirement Plan, as amended, or the Fremont General Corporation Supplemental Executive Retirement Plan II, as amended.

     Dismissal of Pending Litigation: As soon as is practicable after the Rampino Stipulation’s effective date, the CIC and Indemnity will cause the D&O Case to be dismissed with prejudice, with all parties thereto to bear their own respective attorneys’ fees and costs. In addition, Messrs. Bailey, Rampino, and McIntyre will cause each of their respective adversary proceedings pending before the Bankruptcy Court to be dismissed with prejudice against all defendants thereto other than the Debtor, with all parties thereto to bear their own respective attorneys’ fees and costs, with dismissal as against the Debtor conditioned upon Messrs. Bailey, Rampino, and McIntyre receiving full payment on their Allowed SERP Claims.

     Exchange of Releases: Except for the agreements and obligations expressly undertaken or to be performed under the Rampino Stipulation, on its effective date, in consideration of the payments

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and other consideration recited in the Rampino Stipulation, the CIC, Indemnity, the Debtor and the Rampino Defendants will mutually release, acquit, and forever discharge each other and certain related parties from any and all past, present, and future claims, arising in whole or in part out of any facts, circumstances, or events in existence on or before the effective date; provided, however, that nothing in the Rampino Stipulation is intended to release any claims that any of the parties may have with respect to any insurance policy issued by any insurer of any of the parties. In addition, the Rampino Stipulation will not operate to release any claims that the Rampino Defendants may have against the Debtor’s bankruptcy estate as a result of their ownership of Debtor common stock or other securities of the Debtor or any of its affiliates.

     The Debtor filed a motion for approval of the Rampino Stipulation pursuant to Federal Rule of Bankruptcy Procedure 9019(a), and that motion is set for hearing before the Bankruptcy Court on June 11, 2009. The Rampino Stipulation also remains subject to the approval of the “Liquidation Court” overseeing Indemnity’s liquidation proceeding. For more information regarding this controversy, see Article IX “Certain Factors to be Considered.”

          e. Other Settled and Resolved Claims.

     The Debtor and FRC entered into an agreement with Credit Suisse to provide for the payment and resolution of a proof of claim in excess of $2 million filed by Credit Suisse, which agreement was approved by the Court pursuant to Federal Rule of Bankruptcy Procedure 9019(a).

     The Debtor entered into a stipulation providing for the withdrawal with prejudice of 86 separate proofs of claim filed by the plaintiffs in the so-called Scheid action, which stipulation was approved by the Court.

     The Debtor and FRC agreed to settle their affirmative claims against BlackRock, Inc., Private National Mortgage Acceptance Company, LLC, and John Lawrence, which agreement was also approved by the Court pursuant to Federal Rule of Bankruptcy Procedure 9019(a).

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          f. Other Issues Regarding Filed Proofs of Claim.

     Via the stipulations described above, the Debtor has resolved, at least preliminarily, 112 of the proofs of claim filed against its estate. The Debtor is in the process of attempting to resolve other disputed Claims, including the claims filed by the IRS and BONY, and has already filed objections to a number of other Claims. Although the Debtor has not fully analyzed all filed Claims, the Debtor anticipates continuing the claim objection process through the date of Plan Confirmation.

VI
LITIGATION AND CAUSES OF ACTION

A. Litigation Commenced Pre-Petition

     As of the Petition Date, the Debtor was involved in certain litigation and other actions set forth in the Bankruptcy Schedules. The Debtor’s discussion of certain litigation claims deemed material to consideration of the Plan, is found in article IX hereof, entitled “Certain Factors to be Considered.”

B. Post-Petition and Other Potential Causes of Action

     1. In General

     After the Petition Date, the Debtor has prosecuted or defended adversary proceedings that are connected with this chapter 11 case. In some instances, the Debtor has removed civil actions that were pending in other courts on the Petition Date to the Bankruptcy Court. The discussion in this section is for general informational purposes only. Nothing herein is intended nor should be construed to be any admission or acknowledgement by the Debtor or Estate of any matter. The Debtor and Plan Administrator reserve all of their respective rights with respect to any potential and/or actual claims against any Persons.

     2. Adv. Pro. No. 8:08-ap-01256-ES and Adv. Pro No. 8:09-ap-01103-ES

     The initial referenced adversary proceeding involves certain claims asserted by McIntyre and Alan W. Faigin against the Debtor arising from two supplemental executive retirement plans, or

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“SERPs.” This proceeding was removed from California state court to the Bankruptcy Court by the Debtor on July 7, 2008. The Debtor filed a motion to dismiss the plaintiffs’ complaint. The plaintiffs have filed a second amended complaint,

     A different set of plaintiffs filed the separate adversary proceeding No. 8:09-ap-01103-ES, styled Bailey v. Fremont General Corporation, et al. This proceeding was brought by two former executive employees of the Debtor, Bailey and Rampino, and involves certain ERISA claims asserted against the Debtor related to the SERPs. The Debtor intends to pursue a vigorous defense to both of these SERP related adversary proceedings.

     The Rampino Stipulation described above resolves, subject to final distributions on the Allowed SERP Claims, these two pieces of litigation with respect to all plaintiffs other than Mr. Faigin.

     3. Adv. Pro. No. 8:08-ap-01258-ES

     This proceeding involves the CIC’s asserted ownership interests in certain artwork and related proceeds. This proceeding was removed from California state court to this Court by the Debtor on July 11, 2008. This litigation was settled with the CIC as part of the above-described CIC Stipulation.

     4. Adv. Pro. No. 8:08-ap-01418-ES

     This proceeding involves the Debtor and FRC’s rights to coverage under certain insurance policies issued by the Federal Insurance Company, including with respect to amounts paid by FRC to settle the Massachusetts Action. This proceeding was commenced by the Debtor and FRC on October 20, 2008.

     5. Adv. Pro. No. 8:08-ap-01470-ES

     This proceeding involves the Debtor’s claims against National Relocation Services, Inc., Mike Garrett, and other parties in connection with the misappropriation of certain furniture, fixtures,

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and equipment from the Debtor’s Water Garden location. This proceeding was commenced by the Debtor on November 20, 2008, and a pre-trial conference is presently scheduled for July 2009.

     6. Other Actions

     The Debtor has addressed a series of motions for relief from stay, motions for conversion, motions for Rule 2004 exams, and various other contested matters that have arisen during this Case.

     7. Other Significant Litigation Claims

     Certain litigation Claims, not presently pending, may present material risks to holders of Claims and Interests under the Plan if not resolved in a manner satisfactory to the Debtor.. See Article IX, “Certain Factors to be Considered” at subsections A and B thereof and discussion therein of the “Commonwealth of Massachusetts Claim,” the “IRS Claim,” the “California Insurance Commissioner Claim,” and the “Rampino Claim.”

     8. Causes of Action are to be Retained Under Plan; No Waiver Should be Implied

     As set forth in the Plan, the Debtor and Creditors Committee will file at least ten (10) Business Days prior to the Confirmation Hearing a non-exhaustive list of potential Causes of Action; provided, however, that notwithstanding any otherwise applicable principle of law or equity, including, without limitation, any principles of judicial estoppel, res judicata, collateral estoppel, issue preclusion, or any similar doctrine, the failure to list, disclose, describe, identify, analyze or refer to any Cause of Action, or potential Cause of Action, in the Plan, this Disclosure Statement, or any other document filed with the Bankruptcy Court will in no manner waive, eliminate, modify, release, or alter the Debtor’s or the Plan Administrator’s right to commence, prosecute, defend against, settle, and realize upon any Cause of Action that the Debtor or the Estate has or may have as of the Confirmation Date. Unless otherwise provided in the Plan or Confirmation Order, to the extent any filed or to-be-filed actions are not resolved, after the Effective Date, the Plan Administrator will continue to prosecute, settle, or otherwise resolve or dispose of those actions.

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VII
THE PLAN

A. Overview of the Plan

     The following is only a brief summary of the material terms of the Plan. Creditors, Equity Interest Holders and other parties in interest are urged to review the Plan in its entirety.

     The Plan’s objective is to vest title to all Assets of the Debtor, including all Causes of Action, in the Reorganized Debtor free and clear of all Liens and in accordance with section 1141 of the Bankruptcy Code. In the event that: (i) all Allowed Claims, Allowed Administrative Claims and Allowed Unclassified Claims are paid in full, along with any and all accrued Postpetition Interest; (ii) all Post Effective Date Plan Expenses are paid in full; and (iii) all amounts payable pursuant to section 726(a)(1) through 726(a)(5) of the Bankruptcy Code, inclusive, are paid, any remaining amounts will be paid to the Equity Trust, and then will be distributed to the holders of Allowed Section 510(b) Claims and Allowed Equity Interests.

B. Treatment of Claims and Equity Interests Under the Plan

     The treatment under the Plan of Allowed Claims and Allowed Equity Interests is in full and complete satisfaction of the legal, contractual, and equitable rights that each entity holding an Allowed Claim or an Allowed Equity Interest may have in or against the Debtor or its property. This treatment supersedes and replaces any agreements or rights those entities have in or against the Debtor or its property. All Distributions under the Plan will be tendered to the Person holding the Allowed Claim or the Allowed Equity Interest. EXCEPT AS SPECIFICALLY SET FORTH IN THE PLAN, NO DISTRIBUTIONS WILL BE MADE AND NO RIGHTS WILL BE RETAINED ON ACCOUNT OF ANY CLAIM OR EQUITY INTEREST THAT IS NOT AN ALLOWED CLAIM OR ALLOWED EQUITY INTEREST.

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     1. Allowance and Treatment of Unclassified Claims (Administrative Claims and Priority Tax Claims)

     Certain types of Claims are not placed into Classes that are entitled to vote to accept or reject the Plan; instead, such Claims are unclassified. Such Claims are not considered impaired and they do not vote on the Plan because they are automatically entitled to specific treatment provided for them in the Bankruptcy Code. As such, the Debtor has not placed the following Claims in a Class. The respective treatments for these Claims are provided below.

          a. Administrative Claims

     Administrative Claims are claims for administrative costs or expenses that are allowable under Bankruptcy Code section 503(b) or 28 U.S.C. § 1930, which costs or expenses may include: (a) actual, necessary costs and expenses of preserving the Debtor’s Estate after the Petition Date; (b) Ordinary Course Administrative Claims; (c) Professional Fee Claims; (d) Administrative Tax Claims; and (e) U.S. Trustee Fees. Except to the extent that any entity entitled to payment of any Allowed Administrative Claim agrees to a less favorable treatment or unless otherwise ordered by the Bankruptcy Court, each Holder of an Allowed Administrative Claim will receive in full satisfaction, discharge, exchange and release thereof, Cash in an amount equal to such Allowed Administrative Claim on the later of (i) the Effective Date, and (ii) the fifteenth (15th) Business Day after such Administrative Claim becomes an Allowed Administrative Claim, or, in either case, as soon thereafter as is practicable; provided, however, that Ordinary Course Administrative Claims (i.e., claims for administrative costs or expenses that are allowable under Bankruptcy Code section 503(b) that are incurred in the ordinary course of the Debtor’s operations or the Case, or are provided for in an order of the Bankruptcy Court) will be paid in full in accordance with the terms and conditions of the particular transactions and any applicable agreements or as otherwise authorized by the Bankruptcy Court.

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          b. Administrative Claim Reserve

     On the Effective Date, the Administrative Claims Reserve³ will be funded in Cash. Distributions will be made to Holders of Allowed Administrative Claims from the Administrative Claims Reserve. Except as otherwise ordered by the Court, to the extent the Administrative Claims Reserve has insufficient funds to pay all Allowed Administrative Claims in full, the Plan Administrator is authorized and directed to use any other available Assets to ensure payment, in full, of all Allowed Administrative Claims. Any amounts remaining in the Administrative Claims Reserve after payment of all Allowed Administrative Claims will be available for payment of Allowed Claims and Allowed Equity Interests, in accordance with the terms of this Plan.

               (i) Administrative Claim Bar Date

     All requests for payment of an Administrative Claim that accrued from the Petition Date through the Effective Date, except for (i) U.S. Trustee Fees and (ii) Professional Fee Claims, must be filed with the Bankruptcy Court no later than thirty (30) days after the Effective Date (the “Administrative Claim Bar Date”) or be forever barred. Within five (5) business days after the Effective Date, the Plan Administrator will serve notice of the Effective Date and the Administrative Claim Bar Date on all creditors and parties in interest.

               (ii) Deadline for Objections

     All objections to allowance of Administrative Claims (excluding Professional Fee Claims) must be filed by any parties in interest no later than sixty (60) days after the Administrative Claim Bar Date (the “Administrative Claim Objection Deadline”). The Administrative Claim Objection Deadline may be extended for a one-time sixty (60) day period by the Plan Administrator by filing a notice of the extended Administrative Claim Objection Deadline with the Bankruptcy Court.

³ The Administrative Claims Reserve is a Cash deposit maintained by the Reorganized Debtor in a separate account to which the Plan Administrator shall be a signatory. The Reorganized Debtor shall transfer Cash to such separate account on the Effective Date, in the estimated amount necessary to pay all Administrative Claims outstanding as of the Effective Date, including Professional Fee Claims and Ordinary Course Administrative Claims, in full.

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Thereafter, the Administrative Claim Objection Deadline may be further extended only by an order of the Bankruptcy Court. If no objection to the applicable Administrative Claim is filed on or before that date, such Administrative Claim will be deemed Allowed as of that date.

               (iii) U.S. Trustee Fees

     Quarterly fees owed to the Office of the U.S. Trustee will be paid prior to the Effective Date by the Debtor, and after the Effective Date by the Reorganized Debtor, in each case, when due in accordance with applicable law and the Debtor and the Plan Administrator, respectively as applicable, will continue to file reports to show the calculation of such fees for the Estate until the Case is closed under Bankruptcy Code section 350.

               (iv) Professional Fee Claims

     Each Holder of a Professional Fee Claim seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date must (i) file their respective interim (if applicable) and final applications for allowances of compensation for services rendered and reimbursement of expenses incurred through the Effective Date by no later than the forty-fifth (45^th) day after the Effective Date or such other date as may be fixed by the Bankruptcy Court and (ii) if granted such an award by the Bankruptcy Court, be paid in full satisfaction, discharge, exchange and release thereof, Cash in such amounts as are Allowed by the Bankruptcy Court on the date such Professional Fee Claim becomes an Allowed Claim, or as soon thereafter as is practicable. All objections to allowance of Professional Fee Claims through the Effective Date must be timely filed and served in accordance with Local Bankruptcy Rule 2016-1.

               (v) Priority Tax Claims

     Priority Tax Claims are Claims entitled to priority against the Estate under Bankruptcy Code section 507(a)(8). Except to the extent that a Holder of an Allowed Priority Tax Claim has been

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paid by the Debtor before the Effective Date or agrees to a less favorable treatment, each Holder of an Allowed Priority Tax Claim will receive in full satisfaction, discharge, exchange and release thereof, Cash in an amount equal to such Allowed Priority Tax Claim on the later of (i) the Effective Date and (ii) the fifteenth (15^th) Business Day after such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is practicable.

     On the Effective Date, the Priority Tax Reserve⁴ will be funded in Cash and held by the Disbursing Agent. Distributions will be made to Holders of Allowed Priority Tax Claims from the Priority Tax Claim Reserve by the Disbursing Agent, as approved by the Plan Administrator.

     Except as otherwise ordered by the Court, to the extent the Priority Tax Claim Reserve has insufficient funds to pay all Priority Tax Claim Claims in full, the Plan Administrator is authorized and directed to use any other available Assets to ensure payment, in full, of all Allowed Priority Tax Claims. Any amounts remaining in the Priority Tax Reserve after payment of all Allowed Priority Tax Claims will be available for payment of Allowed Claims and Allowed Equity Interests, in accordance with the terms of this Plan.

     2. Classification and Treatment of Priority Non-Tax Claims (Class 1)

     Class 1 consists of all Priority Non-Tax Claims.

     Except to the extent that a Holder of an Allowed Priority Non-Tax Claim agrees to a less favorable treatment, each Allowed Priority Non-Tax Claim will be paid, in full satisfaction, discharge, exchange and release thereof, in Cash in full the amount of the Allowed Priority Non-Tax Claim on the later of (i) the Effective Date and (ii) the fifteenth (15^th) Business Day after such date that the Claim becomes an Allowed Priority Non-Tax Claim, or as soon thereafter as is practicable.

⁴ The Priority Tax Claims Reserve is a Cash deposit maintained by the Reorganized Debtor in a separate account to which the Plan Administrator shall be a signatory. The Reorganized Debtor shall transfer Cash to such separate account on the Effective Date, in the estimated amount deemed necessary by the Plan Administrator to pay all Priority Non-Tax Claims outstanding as of the Effective Date, in full. After the Effective Date, the Plan Administrator shall determine from time to time any supplemental amounts needed to fund the Priority Non-Tax Claims Reserve.

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     On the Effective Date, the Priority Non-Tax Reserve shall be funded in Cash and held by the Disbursing Agent. Distributions shall be made to Holders of Allowed Non-Priority Tax Claims from the Priority Non-Tax Claim Reserve by the Disbursing Agent, as approved by the Plan Administrator.

     Except as otherwise ordered by the Court, to the extent the Priority Non-Tax Claim Reserve has insufficient funds to pay all Priority Non-Tax Claims in full, the Plan Administrator is authorized and directed to use any other available Assets to ensure payment, in full, of all Priority Non-Tax Claims. Any amounts remaining in Priority Non-Tax Claim Reserve after payment of all Allowed Priority Non-Tax Claims shall be available for payment of Allowed Claims and Allowed Equity Interests, in accordance with the terms of this Plan.

     Class 1 is unimpaired, and the Holders of Claims in Class 1 are presumed to have accepted the Plan.

     3. Classification and Treatment of General Unsecured Claims (Class 2A)

     Class 2 consists of all General Unsecured Claims. A “General Unsecured Claim” means any Claim that is not an Administrative Claim, a Priority Tax Claim, a Priority Non-Tax Claim, a TOPrS Claim or a Section 510(b) Claim. The Class 2A General Unsecured Claims includes the Claims represented by the Senior Notes. The Plan proposes the following treatment of Class 2A Claims.

     (i) The Holder of an Allowed General Unsecured Claim shall receive a Pro Rata Distribution of the Distributable Cash based upon the amount of its Allowed General Unsecured Claim, until such Claim has been satisfied, including payment of Post-Petition Interest, as applicable.

     (ii) Notwithstanding the above, no Distribution shall be made to holders of Class 2A Claims unless the Administrative Claims Reserve, Priority Tax Claims Reserve, Priority Non-Tax Claims Reserve, and Equity Trust Expense Amount have been established and funded. Furthermore

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Allowed General Unsecured Claims will not include Postpetition Interest nor include any Penalty on such Claim, except to the extent that sufficient Distributable Cash exist to pay, in full, all Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed General Unsecured Claims, Late Filed Claims, and all Post Effective Date Plan Expenses, and if the foregoing are paid, then Allowed General Unsecured Claims shall also include any Penalty or Postpetition Interest component of any such Claim that is payable (and to the extent and priority payable) in accordance with section 726(a)(4) and 726(a)(5) of the Bankruptcy Code.

     (iii) The Creditor Trust has been established under the Plan for the purpose of facilitating the prosecution of affirmative Causes of Action and the recovery of property that may be ultimately converted to Distributable Cash. While the Reorganized Debtor retains the entire beneficial interest in the Creditor Trust, until such time as Class 2A Claims have been paid in full the Requisite Creditors may remove the Creditor Trustee and appoint a substitute trustee.

     (iv) Until such time as Class 2A Claims have been paid in full, the Requisite Creditors holding Class 2A Claims may appoint three of the five directors to the Reorganized Debtor’s Board.

     (v) Notwithstanding the above, in the event (i) the Effective Date of the Plan occurs on or before October 31, 2009, and (ii) on such Effective Date the Reorganized Debtor distributes Distributable Cash of $175,000,000 pro rata to holders of the Senior Notes, or their indenture trustee or similar agent, such $175,000,000 distribution shall constitute a full and final satisfaction and accord of all Claims represented by the Senior Notes. Also notwithstanding the above, in the event (i) the Effective Date of the Plan occurs on or before October 31, 2009, and (ii) on such Effective Date the Reorganized Debtor distributes Distributable Cash to the holder of a Class 2A Claim not evidenced by a Senior Note, in an amount equal to the Allowed Amount of such Class 2A Claim (but excluding the portion of the Allowed Amount of such Claim allocable to Postpetition Interest),

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such distribution shall constitute a full and final satisfaction and accord of such Class 2A Claim, including any Claim such holder may have for Postpetition Interest.

     Class 2A is Impaired, and the Holders of Claims in Class 2A are entitled to vote to accept or reject the Plan.

     4. Classification and Treatment of TOPrS Claims (Class 2B)

     Class 2B consists of all TOPrS Claims.

     The Holder of an Allowed TOPrS Claim shall receive a Pro Rata Distribution of the Distributable Cash based upon the amount of its Allowed TOPrS Claim, until such Claim has been satisfied, including payment of Post-Petition Interest, as applicable.

     Notwithstanding the above, no Distribution shall be made to holders of Class 2B Claims unless the Administrative Claims Reserve, Priority Tax Claims Reserve, and Priority Non-Tax Claims Reserve have been established and funded. The Plan Administrator shall make Distributions to the Holders of the Allowed TOPrS Claims from the net Distributable Cash as provided for in this Plan and the Confirmation Order; provided, however, that, notwithstanding the foregoing, the contractual subordination rights of Holders of the Senior Notes shall be preserved and enforced hereunder pursuant to section 510(a) of the Bankruptcy Code and, any such distributions shall be distributed to Holders of Allowed Claims that constitute Senior Notes, until such time as such Holder’s Claims have been satisfied in accordance with the terms and provisions of Article Eleven of the March 6, 1996 indenture relating to the Subordinated Debenture.

     Allowed TOPrS Claims will not include Postpetition Interest nor include any Penalty on such Claim, except to the extent that sufficient net Distributable Assets exist to pay, in full, all Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed General Unsecured Claims, Late Filed Claims, all Post Effective Date Plan Expenses, and all Allowed TOPrS Claims, and if the foregoing are paid, then Allowed

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TOPrS Claims shall also include any Penalty or Postpetition Interest component of any such Claim that is payable (and to the extent and priority payable) in accordance with section 726(a)(4) and 726(a)(5) of the Bankruptcy Code.

     Until such time as Class 2A Claims have been paid in full, the Requisite Creditors holding Class 2B Claims may appoint one of the five directors to the Reorganized Debtor’s Board. Thereafter until such time as Class 2B Claims have been paid in full, the Requisite Creditors holding Class 2B Claims may appoint three of the five directors to the Reorganized Debtor’s Board.

     Class 2B is Impaired, and the Holders of Allowed TOPrS Claims in Class 2B are entitled to vote to accept or reject the Plan.

     5. Classification and Treatment of Equity Interests (Class 3A)

     Class 3A consists of all Equity Interests. As of the Petition Date, approximately 82,116,179 shares of the Debtor common stock had been issued. All holders of Equity Interests are classified in Class 3A.

     The Holders of an Allowed Equity Interests, in exchange for such Interests, shall be deemed to have received Series A Equity Trust Interests under the Plan in an amount equal to the number of shares of the Debtor’s common stock owned by such Holder. By way of example, if a Allowed Interest Holder owns 100,000 shares of the Debtor’s common stock, such holder would receive 100,000 Series A Equity Trust Interest units.

     On the Effective Date, the stock certificates representing shares of common stock issued by the Debtor prior to the Effective Date shall be deemed to be of no force and effect against the Reorganized Debtor, and the Exchanged Common Stock shall be issued to the Equity Trust in lieu thereof.

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     In the event the Reorganized Debtor makes a distribution of Distributable Cash to the Equity Trustee, the holders of Plan Series A Equity Trust Interests shall receive distributions from the Equity Trust under the terms of the Equity Trust Agreement, subject to the Equity Reconciliation.

     Class 3A is Impaired, and the Holders of Allowed Equity Interests in Class 3A are entitled to vote to accept or reject the Plan.

     6. Classification and Treatment of Section 510(b) Claims (Class 3B)

     Class 3B consists of all Section 510(b) Claims. The Debtor considers all Class 3B Claims to be Disputed Claims, and thus it is possible that there will be no members of Class 3B.

     The Holder of an Allowed Section 510(b) Claims, in full satisfaction of such Claim, shall receive under the Plan Series B Equity Trust Interests in an amount equal to the Allowed Amount of such Section 510(b) Claims. By way of example, if a Section 510(b) Claim holder is Allowed a Claim in the amount of $100,000, such holder would receive 100,000 Series B Equity Trust Interest units.

     In the event the Reorganized Debtor is able to make a distribution of Distributable Cash to the Equity Trustee, the holders of Plan Series B Equity Trust Interests may receive distributions from the Equity Trust under the terms of the Equity Trust Agreement, subject to the Equity Reconciliation.

     Class 3B is Impaired, and the Holders of Allowed Section 510(b) Claims in Class 3B are entitled to vote to accept or reject the Plan to the extent their Claims have been Allowed (including a temporary allowance) as of the Confirmation Hearing. .

C. Executory Contracts and Unexpired Leases

     Effective upon Confirmation, the Debtor rejects all executory contracts and unexpired leases that exist between the Debtor and any other Person which have not previously been rejected, other than those executory contracts and unexpired leases which are listed on the final schedule to be filed

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with the Bankruptcy Court of executory contracts and unexpired leases to be assumed under the Plan at Confirmation.

     All Allowed Claims arising from the rejection of executory contracts or unexpired leases, whether under the Plan or by separate proceeding, shall be treated as General Unsecured Claims in Class 2A.

     If the rejection of an executory contract or unexpired lease by the Debtor results in damages to the counterparty to such contract or lease, then a Claim for damages or any other amounts related in any way to such contract or lease shall be forever barred and shall not be enforceable against the Debtor, the Estate or their property, unless a proof of claim is filed with the Bankruptcy Court and served on the Plan Administrator within thirty (30) days after the Effective Date. The rejection claim bar date for leases and contracts rejected prior to the Effective Date, outside of the Plan, shall be, as applicable, (i) the date(s) set forth in the applicable order(s) rejecting such lease or contract or (ii) the Claims Bar Date.

D. Provisions Governing Plan Implementation

     1. Implementing Actions in General; Conditions to Plan Effectiveness.

     On the Effective Date, the following will occur in implementation of the Plan:

     (i) all actions, documents and agreements necessary to implement the Plan will have been effected or executed;

     (ii) the Debtor will have received all authorizations, consents, rulings, opinions or other documents that are determined by the Debtor to be necessary to implement the Plan;

     (iii) the Disbursing Agent will make all Distributions required to be made on the Effective Date to Holders of Allowed Claims pursuant to the Plan; and

     (iv) the Reserves will be funded.

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     The Plan will not be consummated or become binding unless and until the Effective Date occurs. The Effective Date will be the first Business Day, as determined by the Debtor in its reasonable discretion on which the following conditions have been satisfied:

(1)	At least ten (10) days have passed since the Confirmation Date;
(2)	The Confirmation Order is not stayed;
(3)	All documents, instruments and agreements, in form and substance reasonably satisfactory to the Debtor, provided for under or necessary to implement the Plan have been executed and delivered by the parties thereto, unless such execution or delivery has been waived by the parties benefited thereby; and
(4)	The Debtor has determined in its reasonable discretion that sufficient Cash and/or Reserves exist to satisfy all Administrative Claims, Professional Fee Claims, Priority Tax Claims and Priority Non-Tax Claims, which are Allowed Claims.

     The Debtor may in its reasonable discretion waive any of the conditions set forth above without notice and a hearing. Additionally, the Debtor’s rights under the “mootness doctrine” will be unaffected by any provision hereof or the Plan. The failure to satisfy any condition may be asserted by the Debtor regardless of the circumstances giving rise to the failure of such condition to be satisfied (including, without limitation, any act, action, failure to act, or inaction by the Debtor). If the Debtor fails to assert the non-satisfaction of any such conditions, such failure will not be deemed a waiver of any other rights thereunder.

     2. Corporate Action

     Upon the Effective Date, all transactions and applicable matters provided for under the Plan will be deemed to be authorized and approved by the Debtor without any requirement of further action by the Debtor, the Debtor’s shareholders, or the Debtor’s board of directors.

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     3. Vesting of Assets

     Except as otherwise provided by the Plan, on the Effective Date, title to all assets and properties encompassed by the Plan shall vest in the Reorganized Debtor free and clear of all liens and in accordance with section 1141 of the Bankruptcy Code, and the Confirmation Order shall be a judicial determination of discharge of the liabilities of the Debtor except as provided in the Plan.

     4. Board of Directors of the Reorganized Debtor

     Under the Plan, the “Subordinate Members of the Creditors Committee” means the member (or members) of the Creditors Committee who holds, or represents holders of, or serves as an indenture trustee with respect to, the TOPrS. The “Non-Subordinate Members of the Creditors Committee” means the members of the Creditors Committee exclusive of the Subordinate Member(s) of the Creditors Committee. On the Effective Date, the initial Board of Directors of the Reorganized Debtor shall consist of five (5) persons selected as follows: (i) three (3) persons selected by the Non-Subordinate Members of the Creditors Committee (unless such selections are superseded by the action of the Requisite Creditors in Class 2A), (ii) one (1) person selected by the Subordinate Member(s) of the Creditors Committee (unless such selections are superseded by the action of the Requisite Creditors in Class 2B), and (iii) one (1) person selected by the Equity Committee. Upon payment in full of the Class 2A Allowed General Unsecured Claims, the board shall be reconstituted to consist of five (5) persons, selected as follows: (i) three (3) persons selected by the Subordinate Members of the Creditors Committee (unless such selections are superseded by the action of the Requisite Creditors in Class 2B) and (ii) two (2) persons selected by the Equity Trustee. Upon payment in full of the Class 2B Allowed TOPrS Claims, the board shall be reconstituted to include five (5) persons selected by the Equity Trustee. Further terms and manner of selection of the directors of the Reorganized Debtor shall be as provided in the Reorganized Debtor’s certificate of incorporation and by-laws, as the same may be amended. The identity of the

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membership of the initial Board of Directors shall be disclosed at the Confirmation Hearing, if not prior thereto. From and after the Effective Date, the Debtor’s officers and directors shall be relieved of any responsibilities to the Debtor.

     5. Board of Directors of FRC and other Subsidiaries

     Promptly after the Effective Date, the Plan Administrator, on behalf the Reorganized Debtor, shall take all corporate action necessary to appoint the same five (5) persons serving on the Board of Directors for the Reorganized Debtor as members of the FRC Board of Directors. Thereafter, the FRC Board of Directors shall be reconstituted at the same time, and in the same manner, as the Board of Directors for the Reorganized Debtor.

     The FRC Board of Directors shall appoint the Plan Administrator as the chief executive officer of FRC, with the primary duty of administering or liquidating assets of FRC as the Plan Administrator deems appropriate.

     Promptly after the Effective Date, the Plan Administrator, on behalf the Reorganized Debtor, shall take all corporate action necessary to appoint the same five (5) persons serving on the Board of Directors for the Reorganized Debtor as members of the board of directors of such other of the Debtor’s direct and indirect subsidiaries as deemed necessary. Thereafter, such boards of directors shall be reconstituted at the same time, and in the same manner, as the Board of Directors for the Reorganized Debtor.

     Such boards of directors may appoint the Plan Administrator as the chief executive officer of such subsidiaries, with the primary duty of administering or liquidating assets of such subsidiaries as the Plan Administrator deems appropriate.

     6. The Plan Administrator

          a. Appointment of the Plan Administrator.

     On the Effective Date, the provisions of the Plan shall be executed and carried out by the Plan Administrator (subject to the supervision of the Board of Directors) pursuant to and in

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accordance with the provisions of the Plan and the Plan Administration Agreement. The Plan Administrator shall be a natural person acceptable to each of the Debtor, the Creditors Committee and the Equity Committee, and shall be appointed by the Court by a provision of the Confirmation Order. The Plan Administration Agreement shall be filed as an exhibit at the Confirmation Hearing.

          b. Responsibilities of the Reorganized Debtor Plan Administrator.

     In accordance with the Plan Administration Agreement, the responsibilities of the Plan Administrator shall include (a) facilitating the Reorganized Debtor’s prosecution or settlement of objections to and estimations of Claims; (b) prosecution or settlement of claims and Causes of Action held by the Debtor; (c) calculating and assisting the Disbursing Agent in implementing all Distributions in accordance with the Plan; (d) filing all required tax returns and paying taxes and all other obligations on behalf of the Reorganized Debtor from funds held by the Reorganized Debtor or other available funds; (e) periodic reporting if required by the Bankruptcy Court regarding the status of the claims resolution process, Distributions on Allowed Claims and prosecution of Causes of Action; (f) administering or liquidating the remaining Assets and providing for the distribution of the net proceeds thereof in accordance with the provisions of the Plan; (g) such other responsibilities as may be vested in the Plan Administrator pursuant to the Plan, the Reorganized Debtor Plan Administration Agreement or Bankruptcy Court order or as may be necessary and proper to carry out the provisions of the Plan.

          c. Powers of the Plan Administrator.

     The powers of the Plan Administrator shall, without any further Bankruptcy Court approval, include (a) the power to invest funds in, and withdraw, make distributions and pay taxes and other obligations owed by the Reorganized Debtor from funds held by the Plan Administrator and/or the Reorganized Debtor in accordance with the Plan; (b) the power to compromise and settle claims and causes of action on behalf of or against the Reorganized Debtor, other than Significant Matters; (c)

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the power to direct FRC to compromise and settle claims and causes of action on behalf of or against FRC, other than Significant Matters; and (d) such other powers as may be vested in or assumed by the Plan Administrator pursuant to the Plan, the Plan Administration Agreement or as may be deemed necessary and proper to carry out the provisions of the Plan.

          d. Compromise and Settlement of Significant Matters.

     Prior to the effectiveness of any settlement or compromise of a Significant Matter, the Plan Administrator shall obtain approval from the Board of Directors of the Reorganized Debtor.

          e. Plan Administrator as Representative of the Estate and Creditor Trustee.

     The Plan Administrator shall be appointed as the representative of the Estate pursuant to sections 1123(a)(5), (a)(7) and (b)(3)(B) of the Bankruptcy Code and as such shall be vested with the authority and power (subject to the Plan Administration Agreement) to: (i) administer, hold and liquidate the Assets; (ii) administer, investigate, prosecute, settle and abandon all Causes of Action in the name of, and for the benefit of, the Estate; (iii) administer, investigate, prosecute, settle and abandon all Rights of Action; (iv) make Distributions provided for in the Plan, including, but not limited to, on account of Allowed Claims and make Distributions on account of Equity Trust Interests; and (v) take such action as required to administer, wind-down, and close the Case. As the representative of the Estate, the Plan Administrator shall succeed to all of the rights and powers of the Debtor and the Estate with respect to all Causes of Action, and the Plan Administrator shall be substituted and shall replace the Debtor, the Estate, the Creditors Committee, and/or the Equity Committee, as applicable, as the party in interest in all such litigation pending as of the Effective Date. Further, for purposes of any insurance policy of the Debtor, the Plan Administrator shall be considered the equivalent of a “Bankruptcy Trustee,” “Examiner”, “Receiver”, “Conservator”, “Rehabilitator”, or “Liquidator” of the Debtor.

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     Until such time as the Class 2A and Class 2B Claims have been paid in full, the vesting of all Causes of Action in the Plan Administrator shall be deemed to have been made in his capacity of the Creditor Trustee of the Creditor Trust.

          f. Compensation and Termination of the Plan Administrator.

     In addition to reimbursement for actual out-of-pocket expenses incurred by the Plan Administrator, the Plan Administrator shall be entitled to receive reasonable compensation for services rendered on behalf of the Reorganized Debtor in an amount and on such terms as may be reflected in the Plan Administration Agreement. The duties, responsibilities and powers of the Reorganized Debtor Plan Administrator shall terminate pursuant to the terms of the Reorganized Debtor Plan Administration Agreement.

          g. Limitation on Liability of Plan Administrator.

     To the maximum extent permitted by law, the Plan Administrator and its employees, officers, directors, agents, members, representatives, or professionals employed or retained by the Plan Administrator (the “Plan Administrator’s Agents”), whether acting as Plan Administrator, chief executive officer, or Creditor Trustee, shall not have or incur liability to any Person for an act taken or omission made in good faith in connection with or related to the Plan and the Distributions made thereunder or Distributions made under the Equity Trust by the Equity Trustee. The Plan Administrator and the Plan Administrator’s Agents shall in all respects be entitled to reasonably rely on the advice of counsel with respect to its duties and responsibilities under the Plan and the Plan Administration Agreement. Entry of the Confirmation Order constitutes a judicial determination that the exculpation provision contained in the Plan is necessary to, inter alia, facilitate Confirmation and feasibility and to minimize potential claims arising after the Effective Date for indemnity, reimbursement or contribution from the Estates, or their respective property.

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     7. The Equity Trust

          a. Establishment and Effectiveness of the Equity Trust.

     On the Effective Date: (i) the Equity Trust Agreement shall become effective, and, if not previously signed, the Debtor and the Equity Trustee shall execute the Equity Trust Agreement. The Equity Trust will be organized and established as a trust for the benefit of the Beneficiaries, as defined below, and is intended to qualify as a liquidating trust within the meaning of Treasury Regulation Section 301.7701-4(d). On such date of execution, or as soon as practicable thereafter, including, without limitation, subject to appropriate or required governmental, agency or other consents, the Debtor shall issue to the Equity Trust the Exchanged Common Stock subject to the Equity Trust Agreement

          b. Purpose of the Equity Trust.

     The Equity Trust shall be established for the (i) purpose of holding the Exchanged Common Stock in accordance with Treasury Regulation Section 301.7701-4(d) and the terms and provisions of the Equity Trust Agreement; and (ii) redistributing any Distributions received by the Equity Trustee under this Plan to the Holders of Section 510(b) Claims and Equity Interests, but in no event will any Holders of Section 510(b) Claims or Equity Interests receive a distribution of Exchanged Common Stock.

          c. Beneficiaries.

     In accordance with Treasury Regulation Section 301.7701-4(d), the beneficiaries (“Beneficiaries”) of the Equity Trust are the Holders of Allowed Section 510(b) Claims and Allowed Equity Interests. The beneficial interests in the Equity Trust shall be divided into Series A Equity Trust Interests and Series B Equity Trust Interests. Holders of Allowed Equity Interests shall receive an allocation of the Series A Equity Trust Interests equal to the number of shares of the Debtor held by such Equity Interest Holder as determined on the Effective Date. Holders of Allowed Section

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510(b) Claims shall receive an allocation of Series B Equity Trust Interests as provided in the Plan on the Effective Date.

          d. Transfer of Exchanged Common Stock.

     The issuance of the Exchanged Common Stock to the Equity Trust shall be made, as provided herein, for the benefit of the Beneficiaries. For all federal income tax purposes, all parties (including, without limitation, the Debtor, the Equity Trustee and the Beneficiaries) shall treat the issuance of the Exchanged Common Stock to the Equity Trust in accordance with the terms of the Plan, as an issuance to the Holders of Allowed Section 510(b) Claims and Allowed Equity Interests, followed by a transfer by such Holders to the Equity Trust and the Beneficiaries of the shall be treated as the grantors and owners thereof.

          e. Expenses of the Equity Trust.

     In accordance with the Equity Trust Agreement and any agreements entered into in connection therewith, the Equity Trustee shall be entitled to seek reimbursement for reasonable expenses from the Reorganized Debtor in an amount not to exceed the Equity Trust Expense Amount; provided, however, that the Reorganized Debtor shall have no liability or obligation to provide reimbursement in an amount greater than the Equity Trust Expense Amount.

          f. Investment Powers.

     The right and power of the Equity Trustee to invest assets transferred to the Equity Trust, the proceeds thereof, or any income earned by the Equity Trust, shall be limited to the right and power to invest such assets in Cash Equivalents; provided, however, that (a) the scope of any such permissible investments shall be limited to include only those investments, or shall be expanded to include any additional investments, as the case may be, that a liquidating trust, within the meaning of Treasury Regulation Section 301.7701-4(d) may be permitted to hold, pursuant to the Treasury Regulations, or any modification in the IRS guidelines, whether set forth in IRS rulings, other IRS pronouncements or otherwise, and (b) the Equity Trustee may expend the assets of the Equity Trust

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(i) as reasonably necessary to meet contingent liabilities and to maintain the value of the assets of the Equity Trust during liquidation, (ii) to pay reasonable administrative expenses (including, but not limited to, any taxes imposed on the Equity Trust or fees and expenses in connection with litigation), and (iii) to satisfy other liabilities incurred or assumed by the Equity Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Equity Trust Agreement; and, provided, further, that, under no circumstances, shall the Equity Trust segregate the assets of the Equity Trust on the basis of classification of the Holders of Equity Trust Interests, other than with respect to distributions to be made on account of Disputed Claims and Disputed Equity Interests in accordance with the provisions hereof.

          g. Annual Distribution and Withholding.

     Within sixty (60) days of the Equity Trust’s receipt of Distributable Cash, the Equity Trustee shall distribute same to the Holders of Equity Trust Interests; provided, however, that the Equity Trust may retain such amounts (i) as are reasonably necessary to meet contingent liabilities and to maintain the value of the assets of the Equity Trust during liquidation, (ii) to pay reasonable administrative expenses (including any taxes imposed on the Equity Trust or in respect of the assets of the Equity Trust), and (iii) to satisfy other liabilities incurred or assumed by the Equity Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Equity Trust Agreement. All such distributions shall be pro rata based on the number of Equity Trust Interests held by a Holder compared with the aggregate number of Equity Trust Interests outstanding, subject to the terms of the Plan and the respective Equity Trust Agreement. In making such calculation and distribution, there shall be no distinction between a Series A Equity Trust Interest and a Series B Equity Trust Interest. The Equity Trustee may withhold from amounts distributable to any Person any and all amounts, determined in the Equity Trustee’s reasonable sole discretion, to be required by any law, regulation, rule, ruling, directive or other governmental requirement.

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          h. Reporting Duties.

     Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt by the Equity Trustee of a private letter ruling if the Equity Trustee so requests one, or the receipt of an adverse determination by the IRS upon audit if not contested by the Equity Trustee), the Equity Trustee shall file returns for the Equity Trust as a grantor trust pursuant to Treasury Regulation Section 1.671-4(a). The Equity Trustee shall also annually send to each Holder of a Equity Trust Interest a separate statement setting forth the Holder’s share of items of income, gain, loss, deduction or credit and shall instruct all such Holders to report such items on their federal income tax returns.

     Allocations of Equity Trust taxable income shall be determined by reference to the manner in which an amount of cash equal to such taxable income would be distributed (without regard to any restrictions on distributions described herein) if, immediately prior to such deemed distribution, the Equity Trust had distributed all of its other assets (valued for this purpose at their tax book value) to the Holders of the Equity Trust Interests (treating any Holder of a Disputed Claim, for this purpose, as a current Holder of a Equity Trust Interest entitled to distributions), taking into account all prior and concurrent distributions from the Equity Trust (including all distributions held in escrow pending the resolution of Disputed Claims). Similarly, taxable loss of the Equity Trust shall be allocated by reference to the manner in which an economic loss would be borne immediately after a liquidating distribution of the remaining assets of the Equity Trust. The tax book value of the assets of the Equity Trust for this purpose shall equal their fair market value on the date the Equity Trust was created or, if later, the date such assets were acquired by the Equity Trust, adjusted in either case in accordance with tax accounting principles prescribed by the Internal Revenue Code, associated regulations, and other applicable administrative and judicial authorities and pronouncements.

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          i. Other.

     The Equity Trustee shall file (or cause to be filed) any other statements, returns or disclosures relating to the Equity Trust that are required by any governmental unit..

     8. The Committees

     Until the Effective Date, the Creditors Committee and Equity Committee shall continue in existence. Prior to the Effective Date, the Creditors Committee and Equity Committee shall have determined the identity of the directors of the Reorganized Debtor (including the directors whose appointment will become effective only upon the payment in full of Class 2A and 2B Claims). As of Effective Date, the Creditors Committee and Equity Committee shall terminate and disband and the members of the Creditors Committee and the Equity Committee shall be released and discharged of and from all further authority, duties, responsibilities and obligations related to and arising from their service as Committee members.

     9. Allowance of Equity Interests

     Each Holder of an Equity Interest as of the Effective Date will be deemed to have an Allowed Equity Interest for the number of such shares of record and need not file a proof of Equity Interest with respect thereto. The Reorganized Debtor and Equity Trust are only required to recognize the record holders of the Debtor’s common stock determined on the Effective Date, for purposes of calculating the relative Series A Equity Trust Interest beneficial interests to given in exchange for the common stock.

     10. Distribution of Property Under the Plan

          a. Manner of Cash Payments

     Cash Distributions made pursuant to the Plan will be in United States funds, by check drawn on a domestic bank, or, if the Plan Administrator so elects in its discretion for Distributions to certain large claimants, by wire transfer from a domestic bank.

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          b. Setoff and Recoupment

     NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE PLAN, THE PLAN ADMINISTRATOR MAY SET OFF, RECOUP, OR WITHHOLD AGAINST THE DISTRIBUTIONS TO BE MADE ON ACCOUNT OF ANY ALLOWED CLAIM ANY CLAIMS THAT THE DEBTOR OR THE ESTATE MAY HAVE AGAINST THE ENTITY HOLDING THE ALLOWED CLAIM. THE DEBTOR AND THE ESTATE WILL NOT WAIVE OR RELEASE ANY CLAIM AGAINST THOSE ENTITIES BY FAILING TO EFFECT SUCH A SETOFF OR RECOUPMENT, BY ALLOWING ANY CLAIM AGAINST THE DEBTOR OR THE ESTATE, OR BY MAKING A DISTRIBUTION ON ACCOUNT OF AN ALLOWED CLAIM.

          c. No De Minimis Distributions

     Notwithstanding anything to the contrary in the Plan, no Distribution of less than $10.00 will be made to any Holder of an Allowed Claim or Allowed Interest on account thereof. No consideration will be provided in lieu of the de minimis Distributions.

          d. No Distributions With Respect to Disputed Claims and Equity Interests

     Distributions will be made on account of a Disputed Claim only after, and only to the extent that, the Disputed Claim either becomes or is deemed to be an Allowed Claim for purposes of Distributions.

          e. Undeliverable or Unclaimed Distributions

     Distributions to entities holding Allowed Claims will initially be made by mail as follows:

               (i) Distributions will be sent to the address, if any, set forth on a filed proof of claim as amended by any written notice of address change that is received by the Debtor or Plan Administrator no later than ten (10) Business Days prior to the date of any Distribution; or

               (ii) If no such address is available, Distributions will be sent to the address set forth on the Bankruptcy Schedules.

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               (iii) If no address is available either on a proof of claim or on the Bankruptcy Schedules, the Distribution will be deemed to be undeliverable. If a Distribution is returned to the Plan Administrator as an undeliverable Distribution or is deemed to be an undeliverable Distribution, the Plan Administrator will make no further Distribution to the entity holding the Claim on which the Distribution is being made unless and until the Plan Administrator is timely notified in writing of that entity’s current address. Subject to the following paragraph, until they become deliverable, the Plan Administrator may create a separate Reserve for undeliverable Distributions for the benefit of the entities entitled to the Distributions. These entities will not be entitled to any interest on account of the undeliverable Distributions.

     Any entity that is otherwise entitled to an undeliverable Distribution and that does not, within one (1) year after a Distribution is returned as undeliverable, provide the Plan Administrator with a written notice asserting its claim to or interest in that undeliverable Distribution and setting forth a current, deliverable address will be deemed to waive any claim to or interest in that undeliverable Distribution and will be forever barred from receiving that undeliverable Distribution or asserting any Claim against the Debtor, the Estate, or their property. Nothing in the Plan requires the Plan Administrator and/or the Disbursing Agent to attempt to locate any entity holding an Allowed Claim and whose distribution is undeliverable.

          f. Record Date

     The record date for purposes of Distributions under the Plan will be the Effective Date. The Disbursing Agent will rely on the register of proofs of claim filed in the Case determined as of the Effective Date except to the extent a notice of transfer of Claim or Equity Interest has been filed with the Court prior to the record date pursuant to Bankruptcy Rule 3001.

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          g. Fractional Cents

     When any payment of a fraction of a cent would otherwise be called for, the actual payment will reflect a rounding of such fraction to the nearest whole cent (rounding down in the case of less than $0.005 and rounding up in the case of $0.005 or more); provided, however, that, in no event, will a Distribution of less than $10.00 will be made to any Holder of an Allowed Claim on account thereof as set forth above.

          h. Release of Reserved Funds

     Any Cash remaining in any Reserve, after all applicable Distributions or other payments have been made from said Reserve, will be released therefrom and be turned over to the Reorganized Debtor for distribution in accordance with the Plan.

          i. Insurance Policies

     To the extent any insurance policies exist in which either the Debtor and/or its personnel have an insurable or other interest in or right to make a claim, such policies shall remain available, before and after the Effective Date, to satisfy any and all Claims held by, or asserted against, the Debtor and/or the Debtor’s current or former management or other personnel that may be covered by such policies.

E. Litigation and Claims Objections

     1. Preservation of All Causes of Action

     As of the Effective Date, the Plan Administrator shall retain all rights on behalf of the Reorganized Debtor and the Creditor Trust to commence, pursue and settle, as appropriate, any and all Causes of Action (including Avoidance Actions), whether arising before or after the Petition Date, in any court or other tribunal, including, without limitation, a bankruptcy court adversary proceeding filed in the Case. The failure to explicitly list any Causes of Action and other potential or existing claims of the Debtor or Estate is not intended to limit the rights of the Reorganized Debtor, through the Plan Administrator, to pursue any Causes of Action and such claims not so

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identified. The Debtor and the Creditors Committee may elect to file a non-exhaustive list of Causes of Action at least ten (10) Business Days prior to the Confirmation Hearing; provided, however, notwithstanding any otherwise applicable principle of law or equity, including, without limitation, any principles of judicial estoppel, res judicata, collateral estoppel, issue preclusion, or any similar doctrine, the failure to list, disclose, describe, identify, analyze or refer to any Cause of Action, or potential Cause of Action, in this Plan, the Disclosure Statement, or any other document filed with the Bankruptcy Court shall in no manner waive, eliminate, modify, release, or alter the Debtor’s or the Plan Administrator’s right to commence, prosecute, defend against, settle, and realize upon any Cause of Action that the Debtor or the Estate has or may have as of the Confirmation Date. Subject to the limitations expressly set forth in the Plan Administration Agreement, the Plan Administrator may commence, prosecute, defend against, recover on account of, and settle all Causes of Action in its sole discretion in accordance with what is in the best interests, and for the benefit, of the Reorganized Debtor and the Creditor Trust; provided, however, that any agreement to settle or compromise any Significant Matters shall require the approval of the Board of the Reorganized Debtor.

     Unless a Cause of Action against a Person is expressly waived, relinquished, released, compromised, or settled in the Plan or any Final Order, the Debtor expressly reserves such Causes of Action for later adjudication (including, without limitation, Causes of Action of which the Debtor may presently be unaware, or which may arise or exist by reason of additional facts or circumstances unknown to the Debtor at this time, or facts or circumstances which may change or be different from those which the Debtor now believes to exist) and, therefore, no preclusion doctrine, including, without limitation, the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, waiver, estoppel (judicial, equitable, or otherwise), or laches shall apply to Causes of Action upon, or after, the Confirmation or consummation of the Plan based on the Disclosure

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Statement, the Plan, or the Confirmation Order, except where such Causes of Action have been expressly released by virtue of the Plan or other Final Order.

     As of the Effective Date, subject to the Plan Administration Agreement, the Plan Administrator, on behalf of the Reorganized Debtor, shall be authorized to exercise and perform the rights, powers and duties held by the Debtor’s Estate with respect to the Causes of Action, including, without limitation, the authority under Bankruptcy Code section 1123(b)(3) to provide for the settlement, adjustment, retention and enforcement of claims and interests of the Estate, without the consent or approval of any third party, and without any further order of the Bankruptcy Court, except as otherwise provided in the Plan.

     Any Person with respect to whom the Debtor has incurred an obligation (whether on account of services, purchase or sale of property, or otherwise), or who has received services from the Debtor or a transfer of money or property of the Debtor, or who has transacted business with the Debtor, or leased equipment or property from the Debtor should assume that such obligation, transfer, or transaction may be reviewed by the Plan Administrator, on behalf of the Reorganized Debtor, subsequent to the Effective Date and may, if appropriate, be the subject of an action after the Effective Date, whether or not (i) such Person has filed a proof of Claim against the Debtor; (ii) such Person’s proof of Claim has been objected to by the Debtor; (iii) such Person’s Claim was included in the Bankruptcy Schedules; or (iv) such Person’s scheduled Claims have been objected to by the Debtor or has been identified by the Debtor as disputed, contingent, or unliquidated.

     SUBJECT TO THE PLAN ADMINISTRATION AGREEMENT, THE PLAN ADMINISTRATOR WILL MAKE THE DECISION OF WHETHER OR NOT TO PURSUE ANY CAUSES OF ACTION. THIS DECISION WILL BE BASED UPON HIS OR HER REVIEW OF THE MERITS OF THE VARIOUS CLAIMS AS WELL AS THE COSTS REQUIRED TO PROSECUTE SUCH CLAIMS IN LIGHT OF THE LIMITED RESOURCES AVAILABLE FOR

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THE DISTRIBUTION TO CREDITORS. SUBJECT TO THE PLAN ADMINISTRATION AGREEMENT, THE PLAN ADMINISTRATOR MAY SEEK TO RETAIN COUNSEL ON A CONTINGENCY BASIS TO PROSECUTE SOME OR ALL OF SUCH CLAIMS, MAY SEEK TO FINANCE ANY COSTS RELATING TO THE PROSECUTION OF SUCH LITIGATION OR MAY DECIDE NOT TO PURSUE SUCH CLAIMS AT ALL.

     2. Disputed Claims

          a. Reserves for Claims Other Than General Unsecured Claims

     On the Effective Date the Administrative Claims Reserve, Priority Tax Claims Reserve and Priority Non-Tax Claims Reserve shall be funded with sufficient monies to pay for, as applicable, all Allowed Administrative Claims, Allowed Claims, and Disputed Claims (in the event such claims become Allowed Claims), in such categories. Any Cash remaining in these Reserves, after all applicable Distributions or other payments have been made from said Reserve, shall be released therefrom and turned over to the Reorganized Debtor for distribution in accordance with this Plan.

          b. Disputed Unsecured Claims Reserve

     Prior to any Distributions being made to Holders of Allowed Unsecured Claims, the Plan Administrator shall deposit into the Disputed Unsecured Claims Reserve an amount equal to the Pro Rata share of the Distribution allocable to Disputed Unsecured Claims, as if such Claims were Allowed Claims in the Disputed Amount, and shall release or cause to have released from this Reserve monies to fund Distributions to Holders of Disputed Unsecured Claims as, and if and to the extent, Disputed Claims become Allowed Claims, and any Cash remaining in Disputed Unsecured Claims Reserve, after any such Distributions, shall be released therefrom and turned over to the Reorganized Debtor for distribution in accordance with this Plan.

          c. Objections to and Resolution of Disputed Claims

     On and after the Effective Date, the Plan Administrator shall have the right to make and file objections to Claims and Administrative Claims and to prosecute, settle and/or withdraw such

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objections. The Plan Administrator shall have the authority to compromise, settle, withdraw or otherwise resolve any objections for any Claim without approval of the Bankruptcy Court; provided, however, that the Plan Administrator may in his or her discretion seek relief before the Bankruptcy Court with respect to any Disputed Claim; provided, further, however, that any agreement to settle or compromise any Significant Matters shall require Board approval as set forth herein. The Plan Administrator shall file and serve all objections to Claims upon the Holder of the Claim as to which the objection is made no later than 180 days after the later of (i) the Effective Date or (ii) the date on which a proof of claim or request for payment is filed with the Bankruptcy Court (the “Claims Objection Deadline”). The Plan Administrator may extend the Claims Objection Deadline for one or more 120 day periods by filing a notice of the extended deadline with the Bankruptcy Court; provided, however, that nothing herein shall modify the statute of limitations for any affirmative Cause of Action that the Plan Administrator may assert against any third party. Thereafter, the deadline may be further extended only by an order of the Bankruptcy Court.

VIII
OTHER PLAN PROVISIONS

A. Exculpation and Limited Release of Debtor, the Committees, and Professionals

     Except to the extent arising from willful misconduct or gross negligence, any and all Claims, liabilities, causes of action, rights, damages, costs and obligations held by any party against the Debtor, the Creditors Committee, the Equity Committee and their respective attorneys, accountants, agents and other professionals, and their officers, directors and employees, whether known or unknown, matured or contingent, liquidated or unliquidated, existing, arising or accruing, whether or not yet due in any manner related to the Postpetition administration of the Case or the formulation, negotiation, prosecution or implementation of the Plan, shall be deemed fully waived, barred, released and discharged in all respects, except as to rights, obligations, duties, claims and responsibilities preserved, created or established by terms of the Plan. Further, except to the extent

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arising from willful misconduct or gross negligence, any and all Claims, liabilities, causes of action, rights, damages, costs and obligations held by any party against the Debtor and its officers, directors, employees, attorneys, accountants, agents and other professionals, relating to or the preparation for and the commencement of the Case shall be deemed fully waived, barred, released and discharged in all respects, except as to rights, obligations, duties, claims and responsibilities preserved, created or established by terms of the Plan.

B. Exemption from Stamp, Transfer and Other Taxes

     Pursuant to section 1146(a) of the Bankruptcy Code, the issuance, transfer, or exchange of assets under the Plan by the Debtor, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or instrument of transfer under, in furtherance of, or in connection with the Plan, will not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax.

C. Injunction Enjoining Holders of Claims Against and Equity Interests in the Debtor

     The Plan is the sole means for resolving, paying or otherwise dealing with Claims and Equity Interests. To that end, except as expressly provided herein, at all times on and after the Effective Date, all Persons who have been, are, or may be Holders of Claims against or Equity Interests in the Debtor arising prior to the Effective Date, shall be permanently enjoined from taking any of the following actions, on account of any such Claim or Equity Interest, against the Debtor, its Estate, or its property (other than actions brought to enforce any rights or obligations under the Plan and any adversary proceedings pending in the Case as of the Effective Date):

               (i) commencing, conducting or continuing in any manner, directly or indirectly any suit, action, or other proceeding of any kind against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or

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assets; (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date which shall be deemed to be withdrawn or dismissed with prejudice);

               (ii) enforcing, levying, attaching, executing, collecting, or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree, or order against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or assets;

               (iii) creating, perfecting, or otherwise enforcing in any manner, directly or indirectly, any lien, security interest or encumbrance against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or assets; and

               (iv) proceeding in any manner in any place whatsoever against the Debtor, its Estate, the Creditor Trust, the Equity Trust, or the Plan Administrator, their successors, or their respective property or assets, that does not conform to or comply with the provisions of the Plan.

D. Discharge of the Debtor

     Except as otherwise provided in the Plan, the Confirmation Order or such other order of the Bankruptcy Court that may be applicable, on the latest to occur of (a) the Effective Date, (b) the entry of a Final Order resolving all Claims in the Case and (c) the final distribution made to holders of Allowed Claims and Allowed Equity Interests, all Claims against and Equity Interests in the Debtor shall be discharged and released in full; provided, however, that, the Bankruptcy Court may, upon request by the Reorganized Debtor, and notice and a hearing, enter an order setting forth that such Claims and Equity Interests shall be deemed discharged and released on such earlier date as determined by the Bankruptcy Court. All Persons shall be precluded from asserting against the Debtor and its successors or assigns, including, without limitation, the Reorganized Debtor or its assets, properties or interests in property, any other or further Claims based upon any act or

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omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date, whether or not the facts or legal bases therefor were known or existed prior to the Confirmation Date regardless of whether a proof of Claim or Equity Interest was filed, whether the holder thereof voted to accept or reject the Plan or whether the Claim or Equity Interest is an Allowed Claim or an Allowed Equity Interest.

E. No Waiver

     Neither the failure to list a Claim in the Schedules filed by the Debtor, the failure of any Person to object to any Claim for purposes of voting, the failure of any Person to object to a Claim or Administrative Expense Claim prior to Confirmation or the Effective Date, the failure of any Person to assert a Right of Action prior to Confirmation or the Effective Date, the absence of a proof of Claim having been Filed with respect to a Claim, nor any action or inaction of any Person with respect to a Claim, Administrative Expense Claim, or Right of Action other than a legally effective express waiver or release will be deemed a waiver or release of the right of the Debtor or its successors or representatives, before or after solicitation of votes on the Plan or before or after Confirmation or the Effective Date to (a) object to or examine such Claim or Administrative Expense Claim, in whole or in part or (b) retain and either assign or exclusively assert, pursue, prosecute, utilize, otherwise act or otherwise enforce any Right of Action.

F. Plan Modification

     Subject to the restrictions set forth in Bankruptcy Code section 1127, the Debtor reserves the right to alter, amend, or modify the Plan before it is substantially consummated.

G. Post-Confirmation Date Notice

     From and after the Confirmation Date, any Person who desires notice of any pleading or document filed in the Case, or of any hearing in the Court, or of any matter as to which the Bankruptcy Code requires notice to be provided, will file a request for post-confirmation notice and will serve the request on counsel for the Debtor, counsel for the Creditors Committee, and the Plan

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Administrator; provided, however, that the U.S. Trustee and the Plan Administrator, will be deemed to have requested post-confirmation notice.

IX
CERTAIN FACTORS TO BE CONSIDERED

     Holders of Impaired Claims and Impaired Equity Interests entitled to vote on the Plan should read and consider carefully the factors set forth below, as well as other information set forth in this Disclosure Statement and the documents delivered together herewith and/or incorporated by reference herein, prior to voting to accept or reject the Plan.

A. Risk of Adverse Resolution of Claims Pending Against FRC

     Generally the Plan provides that the payments of the General Unsecured Claims, TOPrS Claims, Equity Interests, and Section 510(b) Claims will be accomplished by means of Distributions of Distributable Cash. The term “Distributable Cash” means that amount of Cash (exclusive of Cash held in Reserve) that is determined by the Board of the Reorganized Debtor from time to time to be currently available for Distribution to holders of Allowed Claims and Allowed Interests by the Plan Administrator in the order of priority established by the Plan.

     As of April 30, 2009, the Debtor had Unrestricted Cash of $26,525,397. Such amount is clearly insufficient to pay in full all Class 2A General Unsecured Claims and Class 2B TOPrS Claims. The Reorganized Debtor’s projected ability to pay Class 2A General Unsecured Claims and Class 2B TOPrS Claims in full is entirely contingent upon its ability to successfully realize upon its substantial investment in its indirect, non-debtor subsidiary FRC. In the amended Bankruptcy Schedules, the Debtor assigned a $278,481,263 value to its indirect interest in FRC, subject to the qualifications stated therein.

     As discussed in sections IV.A.1, V.A, and V.B.3 above, FRC sold a substantial portion of its assets in the CapitalSource Transaction. It is anticipated that FRC will liquidate its remaining assets in a tax efficient manner. However, before the cash proceeds that have been and will be realized by

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FRC’s asset dispositions may be transferred to the Debtor in the form of a dividend (or otherwise), a host of other legal requirements will have to be taken into account, the most significant of which may be described as the principle of structural subordination. The term “structural subordination” as used in this Disclosure Statement refers to the general principle that creditors of a parent entity (in this case, the Debtor) are subordinate to creditors of a subsidiary entity (in this case, FRC), with respect to payments made on account of the subsidiary’s assets. As of the date of this Disclosure Statement, FRC has material unresolved creditor claims. Furthermore FRC is not a debtor in any bankruptcy case. The following text describes certain litigation claims against FRC deemed by the Debtor to be material to consideration of the Plan.

     1. Commonwealth of Massachusetts Claim

     The Massachusetts Action and the related settlement by way of a Final Judgment by Consent are described in section V.B.9.b. above. As explained, the Debtor and FRC have preliminary settled this litigation, subject to certain contingencies; however, if such settlement is not fully consummated by the Plan’s Effective Date or is unwound pursuant to its terms, it is conceivable that ongoing litigation with the Commonwealth could impair FRC’s ability to distribute funds to the Debtor, which in turn would preclude the Reorganized Debtor’s Board’s ability to obtain Distributable Cash to fund Distributions under the Plan.

     2. Repurchase Obligations

     The vast majority of FIL’s originated residential loans were sold to third parties in either whole loan sales or securitization transactions. In a whole loan sale, FIL entered into an agreement to sell loans for cash. As part of the sale process, FIL frequently gave customary representations and warranties regarding the characteristics and origination process of the loans. FIL also generally committed to repurchase loans (the “Repurchase Obligations”) if a certain defaults occurred within a certain period after the loans were sold.

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     The total amount of FIL’s Repurchase Obligations began increasing in 2006. In 2006, loan repurchases comprised approximately 2.4% of all loans sold and securitized in 2006. By comparison, loan repurchases comprised approximately 0.9% of all loans sold and securitized in 2005 and 0.7% of all loans sold and securitized in 2004. During the first six months of 2007, FIL recorded a loss of approximately $878.8 million relating to the whole loan sales of residential real estate loans.

     Since the Petition Date, FRC has continued to receive demands for payment based upon Repurchase Obligations. Since the Petition Date, FRC has contested, and in some instances settled, the Repurchase Obligations.

     Under the principle of structural subordination, holders of valid Repurchase Obligations for which FRC is liable will have a senior claim to the assets of FRC before creditors of FGC may share in such assets. Thus, the known and estimated Repurchase Obligation based claims presumably will be taken into account by the Board of the Reorganized Debtor in its determination of the amount of the available Distributable Cash that can fund Distributions under the Plan.

     As of the date of this Disclosure Statement, FRC has reserved approximately $10.6 million on account of known Repurchase Claims, and it is expected that $10.6 million of FRC’s cash will be used to satisfy such Repurchase Obligations. FRC estimates that additional Repurchase Obligations in the range of $14.4 million and $29.4 million will require resolution and payment prior to a final dividend of FRC’s remaining cash to the Reorganized Debtor can be accomplished. These figures are reported in the Liquidation Analysis discussed later herein. No assurance can be given that the final amount of FRC’s remaining Repurchase Obligations will fall within this range, although management considers this range to be a reasonable estimate.

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     3. Other Litigation

     FRC is further a defendant in excess of 150 litigations in various forums related to its lending operations. The ability of the Debtor to fully realize upon FRC’s assets is constrained by FRC’s need to retain funds to defend against and settle these litigations.

     4. Conclusion

     As highlighted above, the Debtor’s residual interest in its indirect subsidiary FRC is the primary source of funding the Plan. However, no assurances can be given that the Debtor will able to realize any Distributable Cash from a disposition of the Debtor’s illiquid interest in FRC or from distributions of FRC’s assets to the Debtor.

B. Risk Regarding Unanticipated and Unresolved Claims Against the Debtor

     While the Debtor has endeavored to estimate what it believes are likely to be the Distributions (if any) to be made to parties holding Allowed Claims and Allowed Equity Interests, there can be no certainty that the Debtor’s projections will be accurate, and that Creditors and Equity Interest Holders will receive the Distributions described in the Plan.

     The Debtor’s projections regarding payments to Claims and Interest will necessarily be affected by, among other things, the outcome of the anticipated objections to allowance of Disputed Claims. In that regard, over 900 proofs of claim have been filed against the Debtor, which collectively assert approximately $1,100,000,000 in alleged Claims (as well as potentially significant unliquidated amounts).

     Based on its preliminary review, the Debtor believes that many of these asserted Claims are invalid and/or inflated. For example, numerous “claims” appear to have been filed erroneously by persons holding the Debtor’s common stock. Ultimately, after Claims objection litigation, the Debtor anticipates the aggregate Claims amounts will be significantly reduced such that the claims amounts to be Allowed against the Debtor will be generally consistent with the following table

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(however, at this point no assurances can be made that the aggregate Claims will be reduced as shown on the table).

		Estimated Aggregate Amount
Class	Claim/Interest	of Projected Allowed Claims
Unclassified	Administrative	$1,112,000 in unpaid Administrative Claims (including professional fees and U.S. Trustee fees). This projected amount refers to the estimated amount of Administrative Claims as of 7/31/09.
Unclassified	IRS/California Franchise Tax	Up to $102,676,574
1	Priority Non-Tax Claims	Estimated range from $0 to $68,253
2A	General Unsecured Claims (including the 7.875% Senior Notes due 2009)	Estimated range from $222,171,214 to $241,003,550
2B	TOPrS Claims	$107,467,913
3A	Equity Interests	As of the Petition Date, approximately 82,116,179 shares of the Debtor’s common stock had been issued
3B	Section 510(b) Claims	The Section 510(b) Claims are Disputed, and the Debtor has not recorded a liability for such Claims

     The ultimate Distribution to every stakeholder in this Case will be materially impacted by the resolution of several contingent litigation claims described below. Final resolution of the following Disputed Claims will be a “Significant Matter” requiring approval of the Board of the Reorganized Debtor.

     1. The IRS Claim

     The IRS has filed a proof of claim against the Debtor for over $89 million (the “IRS Claim”). The IRS asserts that its IRS Claim is entitled to priority over all unsecured claims, and if the IRS Claim is Allowed, it would likely receive the “priority tax claim” treatment described in the Plan. Under the Plan, “Priority Tax Claims” are entitled to payment before Creditors in Classes 2A and 2B, as well as Class 3A Equity Interests and Class 3B Section 510(b) Claims.

     The Debtor has administratively appealed adjustments proposed during the IRS examination of tax years 2004 and 2005. The adjustments proposed by the IRS relate to the valuation of retained interests in securitizations and non accrual interest income on commercial real estate loans, and will

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increase the Debtor’s taxable income. The additional tax assessments associated with these adjustments were included in the IRS Claim. The Debtor anticipates entering into a settlement with the IRS in full resolution of outstanding IRS claims associated with the 2004/2005 tax years that would not adversely impact the Debtor’s ability to carry out the Plan.

     The Debtor’s 2006 tax year return is currently under examination by the IRS. The Debtor received notice of an IRS audit in December 2008. In tax year 2006, the Debtor recorded a NOL of approximately $459 million. This loss was fully carried back to the 2004 tax return period to recapture the majority of the taxes the Debtor paid in 2004. This resulted in the Debtor receiving a “carryback refund” of approximately $160 million in January 2008. In the event that the IRS proposes adjustments which reduce the NOL recorded on the 2006 tax return and prevails over any appeal put forth by the Debtor, the carryback refund received will be impacted and will likely result in the Debtor having an obligation to repay a portion or all of the tax refund already received.

     The 2007 tax year is also currently under examination by the IRS. The Debtor received notice of the audit in January 2009 and is working to complete the information and document requests received from the IRS. In tax year 2007, the Debtor recorded a NOL in excess of $1 billion. This loss was partially carried back to 2005 to recapture the taxes paid in 2005. This resulted in the Debtor receiving a “carryback refund” of approximately $105 million in June 2008. As disclosed in the Bankruptcy Schedules, this refund was transferred to FRC in accordance with the existing tax allocation agreement.

     While the Debtor believes it has a reasonable position for disputing the adjustments proposed by the IRS, as of the date of this Disclosure Statement, the IRS Claim remains unresolved. As noted, the IRS has filed a proof of claim in the amount of $89 million, and the Debtor’s ultimate tax liability could conceivably be higher than the asserted IRS Claim.

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     Absent a settlement of the IRS Claim prior to Confirmation on a basis generally consistent within the reasonable range of Debtor’s projections, the Debtor may be required to either (i) amend the plan to provide for installment payments to the IRS within the parameters allowed by section 1129(a)(9) of the Bankruptcy Code, or (ii) withdraw the Plan. A similar risk is presented by reason of the $13,292,104 Proof of Claim filed by the California Franchise Tax Board, whose Claim is based upon similar tax law concepts as that asserted by the IRS. The Debtor expects that both Claims will be resolved in a similar basis.

     In addition to the $89 million proof of claim asserted by the IRS against the Debtor, the following tax related event may adversely impact the availability of Distributable Cash under the Plan. In November 2008, FRC entered into a Consent Agreement with the IRS, under which the IRS granted permission for FRC to change its method of accounting for loan repurchase obligations. Pursuant to the terms and conditions of the Consent Agreement, FRC is required to recognize an increase in computing taxable income of $100,358,879 (the “Adjustment”). FRC is required to recognize one-fourth of the Adjustment in computing taxable income beginning with the tax year ended December 31, 2008 and is required to recognize one-fourth of the Adjustment in each the subsequent three years. Further if FRC ceases to engage in the trade or business associated with the loan repurchase obligations or terminates its existence, FRC must take the remaining balance of the Adjustment into account in computing taxable income in the year of the cessation or termination. Therefore in the event FRC does not generate a sufficient offset against the taxable income recognized pursuant to the Consent Agreement, such as by use of NOL carryforwards to offset such taxable income (as further described in Section XIII.B. of this Disclosure Statement), FRC and the Debtor may incur a federal and state tax liability beyond that disputed liability included within the IRS’ $89 million proof of claim. Such Consent Agreement based liability would be required to be paid from cash that would otherwise be Distributable Cash under the Plan.

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     2. California Insurance Commissioner Claims

     As described in section V.B.9.a above, the CIC has asserted claims aggregating over $489 million in four separate proofs of claim filed in the Case. As noted, the Fremont Entities and the CIC recently have reached an agreement to resolve all of the disputes between the parties, which has been approved by the Bankruptcy Court and the other necessary courts. The Fremont Entities and the CIC are in the process of closing and consummating the settlement as of the date of this Disclosure Statement; however, if for some reason, the parties are unable to consummate the settlement and litigation resumed prior to the Plan’s Effective Date, there remains a risk of an adverse ruling to the Debtor with respect to such Claims. Such a result would impair the Debtor’s ability to make Distributions pursuant to the Plan.

     3. Rampino-Related Claims

     As described in section V.B.9.d above, the CIC has asserted claims against the Rampino Defendants that could result in those individuals asserting indemnity claims against the Debtor’s estate. In a worst case scenario, those indemnity claims could be in excess of $250 million, and could be in addition to the millions of wage and SERP-related claims asserted against the Debtor by the Rampino Defendants. As noted, the Debtor, the Rampino Defendants, and the CIC recently have reached a trilateral agreement to resolve all of the disputes between the parties, which has been submitted to the Bankruptcy Court for its approval. If the Bankruptcy Court or Indemnity’s state “Liquidation Court” do not approve the Rampino Stipulation, or if for some other reason, the parties are unable to consummate the settlement and litigation resumed prior to the Plan’s Effective Date, there remains a risk of an adverse ruling to the Debtor with respect to the D&O Case and the other settled Claims. Such a result would impair the Debtor’s ability to make Distributions pursuant to the Plan.

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C. Risk of Reorganized Debtor’s Inability to Realize Cash from Its Causes of Action

     The Plan preserves the Debtors’ Causes of Action, and places their prosecution in the hands of the Plan Administrator/Creditor Trustee. The Debtor’s projections regarding payments to Claims and Interest will necessarily be affected by, among other things, the actual recoveries that the Plan Administrator generates from the Causes of Action, and the cost and expenses of such actions.

D. Bankruptcy Confirmation Risks

     Even if all Classes of Claims and Equity Interests that are entitled to vote accept the Plan, the Plan might not be confirmed by the Bankruptcy Court. Section 1129 of the Bankruptcy Code sets forth the requirements for confirmation and requires, among other things, that the value of distributions to dissenting creditors and equity security holders not be less than the value of distributions such creditors and equity security holders would receive if the debtor were liquidated under chapter 7 of the Bankruptcy Code. The Debtor believes that the Plan satisfies all of the requirements for confirmation of a plan under section 1129.

     Section 1122 of the Bankruptcy Code provides that a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class. The Debtor believes that the classification of Claims and Equity Interests under the Plan complies with the requirements set forth in the Bankruptcy Code. However, there can be no assurance that the Bankruptcy Court would reach the same conclusion.

     The Plan cannot be confirmed by the Bankruptcy Court unless it is “feasible,” which in the instance means the Debtor has sufficient funds by the Effective Date to pay or reserve for all Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims and that the Debtor thereafter can reasonably be expected to realize sufficient cash to make the distributions of Distributable Cash as provided in the Plan. The Debtor believes that at the time of Confirmation it will have sufficient Cash to satisfy or Reserve for all Allowed Administrative

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Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims. However, there can be no assurance that the Bankruptcy Court would reach the same conclusion.

     The Plan will not be Confirmed if the Reorganized Debtor is unable to retain a Plan Administrator to serve in such capacity under the Plan. As of the date of this Disclosure Statement, such individual has not yet been selected. Similarly, the Plan cannot be confirmed in its present form if the Creditor Committee and Equity Committee fail to designate the new directors to serve on the Reorganized Debtor’s Board.

E. The Reorganized Debtor May Not Be a Public Company

     At present the Debtor is classified as a “reporting company” for purposes of the 1934 Securities and Exchange Act (the “Exchange Act”). For reasons already disclosed in the Debtor’s most recent filings made with the U.S. Securities and Exchange Commission (the “SEC”), the Debtor’s management determined that the Debtor was unable to file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 by the May 15, 2009 due date and the Debtor was not able to make that filing within the fifteen-day extension permitted by the rules of the SEC. A similar disclosure has been made regarding the Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and 2008 in addition to the Quarterly Report on Form 10-Q for the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008.

     If the Plan is Confirmed, the Reorganized Debtor will issue the Exchanged Common Stock under the Plan to the Equity Trust, and the Debtor’s current common stock will be of no further force and effect. Accordingly, it is anticipated that the Reorganized Debtor will not be subject to the reporting requirements of the Exchange Act or otherwise. This will benefit the Reorganized Debtor and its constituencies by eliminating the significant accounting and legal expenses attendant to full compliance with the reporting requirements of the Exchange Act, to the extent compliance is even possible under the circumstances. However, the absence of such public information may impair the

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ability of the holders of Series A Equity Trust Interests and Series B Equity Trust Interests to value or dispose of such Interests.

F. The Plan’s Postpetition Interest Rate Is Subject to Adjustment

     The Plan proposes that Classes 2A and 2B shall receive payment in full of the principal indebtedness owed to holders of Senior Notes and the holder of the Subordinated Debenture. In addition, the Plan proposes that Classes 2A and 2B shall receive “Postpetition Interest.” The term “Postpetition Interest” is defined to mean “interest accrued on any Allowed Claim from the Petition Date until the date of payment at the federal judgment rate as set forth in 28 U.S.C. § 1961(a), in effect as of the Petition Date; provided, however, that if the holder of a particular Allowed Claim obtains an order from the Bankruptcy Court holding that another interest rate applies, then such rate shall determine the Postpetition Interest due such holder.”

     As of the Petition Date, the federal judgment rate as set forth in 28 U.S.C. § 1961(a) was 2.51%. The Debtor has selected this 2.51% federal judgment rate as the baseline Postpetition Interest rate in order to comply with the Ninth Circuit’s opinion in Onink v. Duke (In re Cardelucci), 285 F.3d 1231 (9th Cir. 2002). In the Cardelucci case, the Ninth Circuit considered whether postpetition interest is to be calculated using the federal judgment interest rate or is to be determined by the parties’ contract or state law.

     As a general rule, the Bankruptcy Code requires the disallowance of a claim for unmatured Postpetition interest against the Debtor. See 11 U.S.C. § 502(b)(2). However, where a debtor in a chapter 7 bankruptcy case is solvent, an unsecured creditor is entitled to “payment of interest at the legal rate from the date of the filing of the petition” prior to the bankruptcy trustee’s distribution of remaining assets to the debtor. See 11 U.S.C. § 726(a)(5). The question presented by the Cardelucci appeal was whether “interest at the legal rate” means a rate fixed by federal statute or a rate determined either by the parties’ contract or state law. The Ninth Circuit concluded that the

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Bankruptcy Code’s reference to “legal rate” means the federal judgment rate as set forth in 28 U.S.C. § 1961(a) instead of a contractual rate to the contrary. The Ninth Circuit further held that the provisions of 11 U.S.C. § 726(a)(5) applied in the chapter 11 plan context, and mandated application of the federal judgment interest rate.

     However, because the chapter 11 plan before the Ninth Circuit in the Cardelucci case had specified yet another interest rate to be applied after confirmation of the Plan, it is plausible that the Ninth Circuit’s holding may be construed as limited to the period commencing on the bankruptcy petition date and ending on the plan’s effective date. If such construction were correct, it is possible that to achieve confirmation of the Plan, the Debtor may be required to pay interest that accrues after the Effective Date, at a rate greater than the federal judgment rate. The Plan currently requires the holder of a 2A and 2B Claim asserting entitlement to post-Effective Date interest rate greater than the federal judgment rate to establish such entitlement at the hearings on Confirmation of the Plan.

     The postpetition interest issue is material to Classes 2B, 3A, and 3B, because if Class 2A creditors establish an entitlement to interest at a rate higher than the federal judgment rate, recoveries to Classes 2B, 3A, and 3B will be reduced, if not eliminated Further, if Class 2A is paid in full, but Class 2B creditor(s) establish an entitlement to interest at a rate higher than the federal judgment rate, then recoveries to Classes 3A and 3B will be reduced, if not eliminated. For more information see the comparison in Exhibit B (the Liquidation Analysis) of the potential impact upon recoveries of application of the federal judgment rate and contract rates.

G. Risk of Dilution Resulting from the Equity Reconciliation

     The Debtor is of the view that certain of the Proof of Claims filed on or before the Bar Date are susceptible to the statutory subordination required under section 510(b) of the Bankruptcy Code. Such Claims have been classified under Class 3(b). As required by section 510(b) of the Bankruptcy

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Code, holders of Class 3(b) Claims shall not receive anything under the Plan until Classes 2A and 2B have been satisfied.

     Nonetheless, it is possible that the Reorganized Debtor may eventually realize sufficient Distributable Cash to make a distribution to its sole remaining stockholder, the Equity Trust. In this situation, the Equity Trustee will require a basis to equitably apportion the Distributable Cash among the beneficiaries of the Trust.

     In the event no Section 510(b) Claims are Allowed, the Equity Trustee will be permitted under the Plan to distribute all the Distributable Cash (net of Equity Trust expenses) to the holders of the Series A Equity Trust Interests per the beneficial ownership records maintained by the Equity Trustee. However, the Equity Trustee must first complete the Equity Reconciliation to determine the relative value of Section 510(b) Claims as compared to total interests in the Equity Trust. After the Equity Reconciliation is complete, the Beneficiaries shall receive distributions from the Equity Trust as provided for in the Plan and the Equity Trust Agreement.

     Accordingly, holders of Class 3A Interests are cautioned that the Series A Equity Trust Interests remain subject to a material dilution resulting from any Section 510(b) Claims that may ultimately be Allowed until the Equity Reconciliation occurs.

X
VOTING PROCEDURES AND REQUIREMENTS

     IT IS IMPORTANT THAT HOLDERS OF CLAIMS AND EQUITY INTERESTS EXERCISE THEIR RIGHT TO VOTE TO ACCEPT OR REJECT THE PLAN. All known Holders of Claims and Equity Interest Holders entitled to vote on the Plan have been sent a Ballot together with this Disclosure Statement. Such Persons should read the Ballot carefully and follow the instructions contained therein. Please use only the Ballot (or Ballots) that accompanies this Disclosure Statement.

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     FOR YOUR VOTE TO COUNT, YOUR BALLOT MUST BE ACTUALLY RECEIVED BY THE BALLOTING AGENT (AS DEFINED BELOW), NO LATER THAN ____ P.M., PACIFIC TIME, ON                                , 2009.

     ANY BALLOT THAT IS EXECUTED AND RETURNED BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN WILL BE DEEMED AN ACCEPTANCE OF THE PLAN. IF YOU HAVE ANY QUESTIONS CONCERNING VOTING PROCEDURES OR IF A BALLOT IS DAMAGED OR LOST, YOU MAY CONTACT DEBTOR’S COUNSEL, PATTON BOGGS LLP, ATTN: BRENT MCILWAIN, 2001 ROSS AVENUE, SUITE 3000, DALLAS, TEXAS 75201; TELEPHONE: (214) 758-1500; E-MAIL: BMCILWAIN@PATTONBOGGS.COM OR STUTMAN, TREISTER & GLATT, P.C., ATTN: WHITMAN L. HOLT, 1901 AVENUE OF THE STARS, 12^TH FLOOR, LOS ANGELES, CALIFORNIA 90067; TELEPHONE: (310) 228-5600; E-MAIL: WHOLT@STUTMAN.COM.

A. Parties in Interest Entitled to Vote

     Subject to the provisions of the Disclosure Statement Order, any Holder of a Claim against, or Equity Interest in, the Debtor as of the Petition Date, which Claim or Equity Interest has not been disallowed by order of the Bankruptcy Court and is not disputed, is entitled to vote to accept or reject the Plan if (1) such Claim or Equity Interest is Impaired under the Plan and is not of a Class that is deemed to have accepted the Plan pursuant to sections 1126(f) of the Bankruptcy Code, and (2) either (a) such Holder’s Claim or Equity Interest has been scheduled by the Debtor (and such Claim is not scheduled as disputed, contingent, or unliquidated), or (b) such Holder has filed a proof of Claim or Equity Interest on or before the Claims Bar Date. Unless otherwise permitted in the Plan, the Holder of any Disputed Claim or Disputed Equity Interest is not entitled to vote on the Plan on account of such Disputed Claim or Disputed Equity Interest unless the Bankruptcy Court, upon application by such Holder, temporarily allows such Disputed Claim or Disputed Equity Interest for

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the limited purpose of voting to accept or reject the Plan. A vote on the Plan may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that such vote was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code.

     The Debtor intends to file a motion to estimate various disputed, contingent and unliquidated claims for voting purposes. The Debtor believes that allowing such creditors to vote based upon such amounts listed in its Schedules is a fair and efficient method for determining such creditors’ Claims for voting purposes.

B. Classes Impaired and Entitled to Vote Under the Plan

     The following chart summarizes which Classes of Claims and Equity Interests are Impaired and which Classes of Claims are Unimpaired under the Plan.

		IMPAIRED/
CLASS	DESCRIPTION	UNIMPAIRED	VOTING STATUS
Class 1	Priority Non-Tax Claims	Unimpaired	Deemed to Accept Plan
Class 2A	General Unsecured Claims	Impaired	Entitled to Vote on Plan
Class 2B	TOPrS Claims	Impaired	Entitled to Vote on Plan
Class 3A	Equity Interests	Impaired	Entitled to Vote on Plan
Class 3B	Section 510(b) Claims	Impaired	Entitled to Vote on Plan

     The Bankruptcy Code defines acceptance of a Plan by a class of claims as acceptance by holders of at least two-thirds in dollar amount and more than one-half in number of the claims of that class that actually cast ballots for acceptance or rejection of the Plan. Thus, acceptance by a Class of Claims occurs only if at least two-thirds in dollar amount and a majority in number of the Holders of such Claims voting cast their Ballots in favor of acceptance.

     The Bankruptcy Code defines acceptance of a Plan by a class of interests as acceptance by holders of at least two-thirds in amount of the interests of that class that actually cast ballots for

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acceptance or rejection of the Plant. Thus, acceptance by a Class of Equity Interests occurs only if at least two-thirds in dollar amount voting cast their Ballots in favor of acceptance.

     CREDITORS, EQUITY INTEREST HOLDERS AND OTHER PARTIES IN INTEREST ARE CAUTIONED TO REVIEW THE DISCLOSURE STATEMENT ORDER FOR A FULL UNDERSTANDING OF VOTING REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, COMPLETION AND SUBMISSION OF BALLOTS.

XI
CONFIRMATION OF THE PLAN

     Under the Bankruptcy Code, the following steps must be taken to confirm the Plan.

A. Confirmation Hearing

     Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on confirmation of a proposed plan. By order of the Bankruptcy Court, the Confirmation Hearing has been scheduled for                     , 2009 at                      p.m. (Pacific Time) at the United States Bankruptcy Court for the Central District of California, 411 W. 4^th Street, Santa Ana, California, Courtroom SA. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for an announcement made at the Confirmation Hearing or any adjournment thereof.

     Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of a proposed plan. Any objection to confirmation of the Plan must be in writing, conform to the Federal Rules of Bankruptcy Procedure and the Local Rules of the Bankruptcy Court, set forth the name of the objecting party, the nature and amount of the Claim or Equity Interest held or asserted by the objecting party against the Debtor’s Estate, the basis for the objection, and the specific grounds therefor. The objection, together with proof of service thereof, must then be filed with the Bankruptcy Court, with a copy to chambers, and served upon: (1) counsel to the Debtor, Patton Boggs LLP, Attn: Robert Jones and Brent McIlwain, 2001 Ross Avenue, Suite 3000, Dallas,

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Texas 75201; and Stutman, Treister & Glatt, P.C., Attn: Theodore B. Stolman and Whitman L. Holt, 1901 Avenue of the Stars, 12th Floor, Los Angeles, California 90067; (2) Office of the United States Trustee, 411 W. Fourth Street, Suite 9041, Santa Ana, California 92701, Attn: Frank Cadigan; (3) counsel to the Official Committee of Unsecured Creditors, Klee, Tuchin, Bogdanoff & Stern LLP 1999 Avenue of the Stars, 39th Floor, Los Angeles, California 90067, Attn: Lee Bogdanoff & Jonathon Shenson; and (4) counsel to the Equity Committee, Weiland, Golden, Smiley, Wang Ekvall & Strok LLP, 650 Town Center Drive, Suite 950, Costa Mesa, California 92626, Attn: Evan D. Smiley and Philip Strok. Objections to confirmation of the Plan are governed by Rule 9014 of the Federal Rules of Bankruptcy Procedure. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY AND PROPERLY SERVED AND FILED, IT MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT.

B. Requirements for Confirmation of the Plan

     At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for confirmation are that the Plan (1) is accepted by all Impaired Classes of Claims and Equity Interests or, if rejected by an Impaired Class, that the Plan “does not discriminate unfairly” and is “fair and equitable” as to such Class, (2) is feasible, and (3) is in the “best interests” of holders of Claims and Equity Interests Impaired under the Plan.

     1. Acceptance

     Claims in Classes 2A, 2B and 3B and Equity Interests in Class 3A are Impaired. The holders of such Claims and Equity Interests are entitled to vote on the Plan and, therefore, these Classes must accept the Plan in order for the Plan to be confirmed without application of the “fair and equitable test,” described below, to such Classes. As stated above, a Class of Claims will have accepted the Plan if the Plan is accepted by at least two-thirds in dollar amount, and a majority in

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number of the Claims of each such Class (other than any Claims of creditors designated under section 1126(e) of the Bankruptcy Code) that have voted to accept or reject the Plan. An Impaired Class of Equity Interests that votes will have accepted the Plan if holders (other than those designated under section 1126(e)) of at least two-thirds in amount of the Allowed Equity Interests actually voting in such Class have voted to accept the Plan.

     Claims in Class 1 are Unimpaired by the Plan, and the holders thereof are conclusively presumed to have accepted the Plan.

     2. Fair and Equitable Test

     The Debtor will seek to have the Plan confirmed notwithstanding the rejection or deemed rejection of the Plan by any Impaired Class of Claims or Equity Interests. To obtain such confirmation, it must be demonstrated to the Bankruptcy Court that the Plan “does not discriminate unfairly” and is “fair and equitable” with respect to any dissenting Impaired Class. A plan does not discriminate unfairly if the legal rights of a dissenting class are treated in a manner consistent with the treatment of other classes whose legal rights are substantially similar to those of the dissenting class, and if no class receives more than it is entitled to for its claims or interests. The Debtor believes that the Plan satisfies this requirement.

     The Bankruptcy Code establishes different “fair and equitable” tests for unsecured claims and interests, as follows:

a. Unsecured Claims

     Either (i) each Holder of an Impaired Unsecured Claim receives or retains under the Plan property of a value equal to the amount of its Allowed Claim, or (ii) the holders of Claims and Equity Interests that are junior to the Claims of the dissenting Class will not receive any property under the Plan.

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b. Equity Interests

     The holders, if any, of Equity Interests that are junior to the other Equity Interests will not receive any property under the Plan.

     THE DEBTOR BELIEVES THAT THE PLAN MAY BE CONFIRMED ON A NONCONSENSUAL BASIS (PROVIDED AT LEAST ONE IMPAIRED CLASS OF CLAIMS VOTES TO ACCEPT THE PLAN). ACCORDINGLY, THE DEBTOR WILL DEMONSTRATE AT THE CONFIRMATION HEARING THAT THE PLAN SATISFIES THE REQUIREMENTS OF SECTION 1129(b) OF THE BANKRUPTCY CODE AS TO ANY NON-ACCEPTING CLASS.

     3. Feasibility

     The Bankruptcy Code requires that confirmation of a plan is not likely to be followed by the liquidation, or the need for further financial reorganization of a debtor, unless such liquidation or reorganization is proposed in the plan. The Debtor believes that it will reasonably be able to make all payments required pursuant to the Plan and that Confirmation of the Plan is not likely to be followed by additional liquidation or the need for further reorganization, subject to the discussion of “Certain Factors to be Considered” as set forth in Article IX hereof. Thus, Debtor believes that the Plan will satisfy the Bankruptcy Code’s “feasibility” requirement.

     4. “Best Interests” Test

     With respect to each Impaired Class of Claims and Equity Interests, Confirmation of the Plan requires that each such holder either (a) accepts the Plan, or (b) receives or retains under the Plan property of a value, as of the Effective Date of the Plan, that is not less than the value such holder would receive or retain if the Debtor were liquidated under chapter 7 of the Bankruptcy Code.

     This analysis requires the Bankruptcy Court to determine what the holders of Allowed Claims and Allowed Equity Interests in each Impaired Class would receive from the liquidation of the Debtor’s Assets in the context of a chapter 7 liquidation case. In a chapter 7 liquidation, it is highly unlikely that there would be more any more money available for Distribution to Creditors and

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Equity Interest Holders than will be available under the Plan, and as further discussed in Exhibit B (Liquidation Analysis), distributions to Creditors in a chapter 7 case would likely be materially delayed, given the substantial time that a chapter 7 trustee would require to become familiar with the Debtor’s financial affairs, Assets, and Causes of Action. As further set forth in the Debtor’s Liquidation Analysis, the Estate’s administrative costs would likely be higher if the Case were converted to a chapter 7 proceeding because, among other things, (i) the chapter 7 trustee and his or her professionals and agents would incur substantial fees and costs in “getting up to speed” regarding the Debtor and FRC; and (ii) under section 326(a) of the Bankruptcy Code, a chapter 7 trustee is entitled to compensation based upon a percentage of all monies disbursed or turned over in the case to parties in interest (excluding the Debtor) and thus, recovery to Creditors and Equity Interest Holders would also be decreased by such cost. Accordingly, the Debtor believes that if Creditors and Equity Interest Holders could or would receive anything in a chapter 7 liquidation, such Persons may be expected to receive significantly smaller distributions pursuant to a chapter 7 liquidation than under the Plan.

XII
ALTERNATIVES TO CONFIRMATION OF THE PLAN

     The Debtor has evaluated all alternatives to the Plan. After studying these alternatives, the Debtor has concluded that the Plan is the best alternative under the circumstances, and will maximize ultimate recoveries by all the Debtor’s stakeholders, assuming Confirmation of the Plan. Among other things, the administrative costs associated with converting the Case to a chapter 7 liquidation would be higher than if the Debtor’s Assets were liquidated pursuant to the Plan. See Exhibit B (Liquidation Analysis). The Debtor believes that the Plan fairly adjusts the rights of various Classes of Creditors and Equity Interest Holders consistent with the distribution scheme

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embodied in the Bankruptcy Code and enables such Persons to realize the most possible under the circumstances.

     The Debtor could convert its chapter 11 Case to a case under chapter 7 (liquidation) of the Bankruptcy Code. In the event of a chapter 7 case for the Debtor, a chapter 7 trustee would be appointed from the panel of standing chapter 7 trustees for the Central District of California. There is a strong probability that such chapter 7 trustee would not possess any particular knowledge of the business in which the Debtor engaged.

     Chapter 7 of the Bankruptcy Code establishes various priorities for distributions among the creditor groups. The chapter 7 trustee would first be required to pay the bankruptcy Administrative Expenses in full. These expenses would include not only the trustee’s fees and expenses, and fees and expenses for the attorneys and other professionals engaged by the trustees, but also all other claims incurred during the chapter 7 administration and Claims incurred in the chapter 11 administration. Only after payment of the Administrative Claims, would the chapter 7 trustee be permitted to make any distributions to the pre-chapter 11 priority claims and other unsecured claims. If the chapter 7 trustee eventually is able to pay all Allowed Claims in full, with interest at the “legal rate” as provided in section 726 of the Bankruptcy Code, then the residual cash is paid to the Debtor as a corporation, and not directly to the holders of the Debtor’s common stock.

     The Plan offers several material benefits over a conversion of the Debtor’s case to a case under chapter 7. An important consideration is the relative expense of completing the liquidations under the Plan versus under chapter 7. Under the Plan, it is anticipated that the Reorganized Debtor will complete the liquidation of FRC without resorting to a separate bankruptcy filing by FRC. In contrast, if the Debtor’s case is converted to chapter 7, the Debtor is of the opinion that its chapter 7 trustee would very likely place FRC into a separate bankruptcy case, due in part to such trustee’s uncertainty as to the obligations of FRC. Such a separate bankruptcy filing for FRC will, in the

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Debtor’s opinion, delay the resolution of the Debtor’s own Case for several years. Such a separate bankruptcy filing for FRC will also, in the Debtor’s opinion, add an additional layer of administrative expenses at the FRC corporate level, which would be paid before FRC could dividend any additional cash to the Debtor for distribution to its creditors.

     Attached as Exhibit B to this Disclosure Statement is the Debtor’s Liquidation Analysis, which reflects the Debtor’s opinion of likely recoveries by holders of Claims and Interests under the Plan as compared to a hypothetical chapter 7 case. As set forth in Exhibit B to this Disclosure Statement, each Class of Claims and Interests are projected to recover not less under the Plan than under chapter 7. The footnotes thereto are an integral part of the Liquidation Analysis.

XIII
CERTAIN U.S. FEDERAL TAX CONSEQUENCES OF THE PLAN

A. Introduction

     The following discussion summarizes certain federal income tax consequences of the implementation of the Plan to the Holders of General Unsecured Claims. The following summary does not address the federal income tax consequences to Holders of any other Claims and Claims that are not Impaired by the Plan, or to Equity Interest Holders. The following summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated and proposed thereunder, judicial decisions and published administrative rules and pronouncements of the IRS as in effect on the date hereof. Changes in such rules or new interpretations thereof may have retroactive effect and could significantly affect the federal income tax consequences described below. Further, any discussion of the Reorganized Debtor and the powers, obligations and/or actions of the Plan Administrator that may be set forth below is subject to the applicable provisions of the Plan and the Equity Trust Agreement; if and to the extent that there is any inconsistency between such discussion on the one hand and the Plan and the Equity Trust Agreement on the other

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hand, the terms of the latter documents shall control. Creditors and Equity Interest Holders should read the Plan and the Equity Trust Agreement in their entirety.

     The federal income tax consequences of the Plan are complex and are subject to significant uncertainties. The Debtor has not requested a ruling from the IRS or an opinion of counsel with respect to any of the tax aspects of the Plan. Thus, no assurance can be given as to the interpretation that the IRS or a reviewing court might adopt. In addition, this summary does not address foreign, state or local tax consequences of the Plan, nor does it purport to address the federal income tax consequences of the Plan to special classes of taxpayers (such as foreign taxpayers, broker-dealers, banks, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax-exempt organizations, investors in pass-through entities, Holders that hold Claims as part of a hedge, straddle or conversion, Holders who acquired their Claims as compensation, and Holders who do not hold their Claims as capital assets).

     ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM OR EQUITY INTEREST. ALL HOLDERS OF CLAIMS OR EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.

     IRS CIRCULAR 230 NOTICE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE IRS, PLEASE BE ADVISED THAT ANY WRITTEN U.S. TAX ADVICE CONTAINED IN THIS DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENT) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF (1) AVOIDING PENALTIES UNDER THE INTERNAL

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REVENUE CODE OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTION OR MATTER ADDRESSED HEREIN.

B. Consequences to the Debtor

     In general, the Code provides that a debtor in a bankruptcy case is not taxable on cancellation of debt (“COD”) income, but must reduce certain of its tax attributes (such as its NOL carryforwards and its tax basis in its assets) by the amount of COD income. COD income results when the amount of debt discharged exceeds the consideration given in exchange therefor, and is equal to such excess amount. Notwithstanding the absence of a bankruptcy discharge, it is likely that a cancellation of debt will be deemed to have occurred on the Effective Date. Any reduction in tax attributes does not occur, however, until the end of the taxable year or, in the case of asset basis reduction, the first day of the taxable year following the taxable year in which the COD is incurred.

     On the Petition Date, the consolidated federal income taxpayer group of which the Debtor is the common parent had reported NOLs for the 2007 tax year amounting to over $1 billion. Approximately $418 million of those NOLs were carried back to earlier tax years to obtain a tax refund, leaving, as of the Petition Date, estimated NOL carryforwards for 2007 into 2008 and future tax years of $695,469,659. As part of its “first day” motions, the Debtor obtained an order of the Bankruptcy Court that gave effect to the automatic stay by establishing certain procedures regarding trading in the Debtor’s common stock designed to preserve these NOL carryforwards. To the best of the Debtor’s knowledge, those procedures have been effective, and the 2007 NOL carryforwards remain available today.

     The Debtor believes that the Plan should not impair the Debtor’s NOLs because (i) the Debtor’s existing common shareholders remain the Debtor’s residual owners and stakeholders by virtue of the Equity Trust and (ii) the structure of the Equity Trust should preclude a further “ownership change” with adverse effects on the NOLs. Accordingly, the Debtor believes — but

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cannot guarantee — that the Debtor’s NOLs should remain available for use by the Reorganized Debtor. The Reorganized Debtor’s ability to realize any value from those NOLs is contingent upon the Reorganized Debtor’s ability to acquire income-producing assets or to otherwise engage in business that generates positive income which can be offset by the NOLs. Any and all decisions relating to these matters will be made by the Board of the Reorganized Debtor that is appointed pursuant to the Plan.

C. Consequences to Holders of General Unsecured Claims

     1. Recognition of Gain or Loss Generally

     In general, each Holder of an Allowed Claim will recognize gain or loss in an amount equal to the difference between (i) the sum of the amount of any Cash and the fair market value of any other property that such Holder receives in satisfaction of its Claim (other than in respect of any Claim for accrued but unpaid interest, and excluding any portion required to be treated as imputed interest due to the post-Effective Date Distribution of such consideration upon the resolution of Disputed Claims), and (ii) such Holder’s adjusted tax basis in its Claim (other than any Claim for accrued but unpaid interest). For a discussion of the U.S. federal income tax consequences of any Claim for accrued interest, see Section XIII.C.2 below.

     Due to the possibility that a Holder of an Allowed Claim may receive more than one Distribution subsequent to the Effective Date (due to the subsequent disallowance of certain Disputed Claims or unclaimed Distributions), the imputed interest or original issue discount provisions of the Code may apply to treat a portion of such later Distributions to such holders as imputed interest. In addition, it is possible that any loss realized by a Holder in satisfaction of an Allowed Claim in Classes 2A or 2B may be deferred until all subsequent Distributions relating to Disputed Claims are determinable, and that a portion of any gain realized may be deferred under the “installment method” of reporting. Holders are urged to consult their tax advisors regarding the

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possibility for deferral, and the potential ability to elect out of the installment method of reporting any gain realized in respect of their Claims.

     Where a Holder recognizes gain or loss in respect of its Claim, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the Holder, whether the Claim constitutes a capital asset in the hands of the Holder and how long it has been so held, whether the Holder had acquired the Claim at a market discount, and whether and to what extent the Holder had previously claimed a bad debt deduction. A Holder that purchased its Claim from a prior Holder at a market discount may be subject to the market discount rules of the Code. Under those rules, assuming that the Holder has made no election to amortize the market discount into income on a current basis with respect to any market discount instrument, any gain recognized on the exchange of such Claim (subject to a de minimis rule) generally would be characterized as ordinary income to the extent of the accrued market discount on such Claim as of the date of the exchange.

     In general, a Holder’s tax basis in any property received will equal the fair market value of the property on the date of distribution. The holding period for such assets generally will begin the day following the date of distribution.

     2. Distributions in Payment of Accrued But Unpaid Interest

     Distributions to any Holder of an Allowed Claim will be allocated first to the original principal portion of such Claim as determined for federal income tax purposes, and then, to the extent the consideration exceeds such amount, to the portion of such Claim representing accrued but unpaid interest. However, there is no assurance that the IRS would respect such allocation for federal income tax purposes.

     To the extent a Holder receives an amount of Cash or property in satisfaction of interest accrued during its holding period, such Holder generally recognizes taxable interest income in such

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amount (if not previously included in the Holder’s gross income). Conversely, a Holder generally recognizes a deductible loss to the extent any accrued interest claimed was previously included in its gross income and is not paid in full. Each Holder is urged to consult its tax advisor regarding the allocation of consideration and the deductibility of unpaid interest for U.S. federal income tax purposes.

     3. Tax Treatment of the Equity Trust and Holders of Beneficial Equity Interests Therein

     On the Effective Date, the Equity Trust will be established for the benefit of Holders of Allowed Section 510(b) Claims (Class 3B) and Allowed Equity Interests (Class 3A). The Equity Trust is intended to qualify as a liquidating trust for federal income tax purposes. In general, a liquidating trust is not a separate taxable entity but rather is treated for federal income tax purposes as a “grantor” trust (i.e., a pass-through entity). However, merely establishing a trust as a liquidating trust does not ensure that it will be treated as a grantor trust for U.S. federal income tax purposes. The IRS, in Revenue Procedure 94-45, 1994-2 C.B. 684, set forth the general criteria for obtaining an IRS ruling as to the grantor trust status of a liquidating trust under a chapter 11 plan. The Equity Trust has been structured with the intention of complying with such general criteria. Pursuant to the Plan, and in conformity with Revenue Procedure 94-45, all parties (including the Debtor, the Equity Trustee, and the Beneficiaries of the Equity Trust) are required for federal income tax purposes to treat the Equity Trust as a grantor trust of which the Persons receiving interests therein are the owners and grantors. The following discussion assumes that the Equity Trust will be so respected for U.S. federal income tax purposes. However, no ruling has been requested from the IRS and no opinion of counsel has been requested concerning the tax status of the Equity Trust as a grantor trust. Accordingly, there can be no assurance that the IRS would not take a contrary position. If the IRS were to challenge successfully such classification, the federal income tax consequences to the Equity Trust and the Beneficiaries could vary from those discussed herein.

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     For all U.S. federal income tax purposes, all parties (including the Debtor, the Equity Trustee, and the Beneficiaries) must treat the transfer of assets to the Equity Trust, in accordance with the terms of the Plan and the Equity Trust Agreement, as a transfer of such assets directly to the Beneficiaries, followed by such Beneficiaries’ transfer of the assets to the Equity Trust. Consistent therewith, all parties must treat the Equity Trust as a grantor trust of which the Beneficiaries are the owners and grantors. Thus, such Beneficiaries will be treated as the direct owners of their respective undivided interests in the Equity Trust assets for all U.S. federal income tax purposes. Each such Beneficiary will have a tax basis in its proportionate share of the Equity Trust assets deemed owned equal to the fair market value thereof on the Effective Date. As set forth in the Equity Trust Agreement, as soon as practicable after the Effective Date, and thereafter as may be required, the Equity Trustee will (if reasonably deemed necessary or desirable by the Equity Trustee) make or have caused to be made a good faith valuation of the Equity Trust assets, and all parties, including the Beneficiaries, must consistently use such valuation for all federal income tax purposes.

     Accordingly, except as discussed below (in connection with pending Disputed Claims), each Beneficiary receiving a beneficial interest in the Equity Trust will be required to report on its U.S. federal income tax return its allocable share of any income, gain, loss, deduction, or credit recognized or incurred by the Equity Trust, in accordance with its relative beneficial interest.⁵ The character of items of income, deduction, and credit to any holder and the ability of such Beneficiary to benefit from any deduction or losses may depend on the particular situation of such Beneficiary.

     The U.S. federal income tax reporting obligations of a Beneficiary are not dependent upon the Equity Trust distributing any Cash or other proceeds. Therefore, a Beneficiary may incur a

⁵ Among other notices and information that may be provided by the Equity Trustee in accordance with the Plan and Equity Trust Agreement, pursuant to the Equity Trust Agreement, following the end of each calendar year, the Equity Trustee will promptly submit to each Beneficiary appearing in its records during such year a separate statement setting forth the information necessary for such Beneficiary to determine its share of items of income, gain, loss, deduction, or credit and will instruct each Beneficiary to report such items on its federal income tax returns (and state and local tax returns, as applicable).

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federal income tax liability with respect to its allocable share of the income of the Equity Trust regardless of the fact that Beneficiary has not received any prior or concurrent Distribution. The Equity Trust’s Distribution of Assets to Beneficiaries generally will not be taxable to said Beneficiaries because they already are regarded for federal income tax purposes as owning the underlying Equity Trust Assets.

     Subject to the Equity Trust Agreement, absent definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the issuance of applicable Treasury Regulations, the receipt by the Equity Trustee of a private letter ruling if the Equity Trustee so requests one, or the receipt of an adverse determination by the IRS upon audit if not contested by the Equity Trustee), the Equity Trustee will:

               (i) treat all Equity Trust assets allocable to, or retained on account of, Disputed Claims or Disputed Equity Interests, as a discrete trust for federal income tax purposes, consisting of separate and independent shares to be established in respect of each Disputed Claim or Disputed Equity Interest, in accordance with the trust provisions of the Code (sections 641 et seq. of the Code);

               (ii) treat as taxable income or loss of this separate trust with respect to any given taxable year the portion of the taxable income or loss of the Equity Trust that would have been allocated to the holders of such Disputed Claims or Disputed Equity Interests had such Claims or Equity Interests been Allowed on the Effective Date (but only for the portion of the taxable year with respect to which such Claims are unresolved);

               (iii) treat as a distribution from this separate trust any increased amounts distributed by the Equity Trust as a result of any Disputed Claim or Disputed Equity Interest resolved earlier in the taxable year, to the extent such distribution relates to taxable income or loss of this separate trust determined in accordance with the provisions hereof, and

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               (iv) to the extent permitted by applicable law, report consistently for state and local income tax purposes.

     In addition, pursuant to the Equity Trust Agreement, all Beneficiaries are required to report consistently with such treatment. Accordingly, subject to issuance of definitive guidance, the Equity Trustee will report on the basis that any amounts earned by this separate trust and any taxable income of the Equity Trust allocable to it are subject to a separate entity level tax, except to the extent such earnings are distributed during the same taxable year. Any amounts earned by or attributable to the separate trust and distributed to a Beneficiary during the same taxable year will be includible in such Equity Trust Interest Holder’s gross income.

     4. Withholding

     All Distributions to Holders of Allowed Claims in Classes 2A and 2B are subject to any applicable tax withholding, including employment tax withholding. Under federal income tax law, interest, dividends, and other reportable payments may, under certain circumstances, be subject to “backup withholding” at the then applicable withholding rate (currently 28%). Backup withholding generally applies if the Holder (a) fails to furnish its social security number or other taxpayer identification number (“TIN”), (b) furnishes an incorrect TIN, (c) fails properly to report interest or dividends, or (d) under certain circumstances, fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is its correct number and that it is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons are exempt from backup withholding, including, in certain circumstances, corporations and financial institutions.

     THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS OF CLAIMS OR EQUITY INTERESTS ARE URGED TO

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CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.

XIV
SECURITIES LAW MATTERS

A. In General

     The Plan provides for the establishment of the Equity Trust and for the issuance of beneficial interests therein. Beneficial interests in trusts may be deemed to be “securities” under applicable federal and state securities laws. However, as discussed herein, the Debtor does not believe that the Equity Trust Interests (the “Trust Interests”) constitute “securities” for purposes of applicable nonbankruptcy law. Alternatively, even if the Trust Interests constitute “securities,” the Debtor believes that the Trust Interests would be exempt from registration pursuant to Bankruptcy Code section 1145(a)(1). Finally, the Debtor does not believe that the Investment Company Act of 1940, as amended (the “Investment Company Act”) is applicable in that the Equity Trust will not be, and is not controlled by, an “investment company” for purposes of the Investment Company Act.

     1. Initial Issuance

     Unless an exemption is available, the offer and sale of a security generally is subject to registration with the SEC under section 5 of the Securities Act of 1933, as amended (the “Securities Act”). In the opinion of the Debtor, the Trust Interests do not constitute “securities” within the definition of section 2(11) of the Securities Act and corresponding definitions under state securities laws and regulations (“Blue Sky Laws”) because generally they are non-transferable. Accordingly, the Trust Interests should be issuable in accordance with the Plan without registration under the Securities Act or any Blue Sky Law.

     Alternatively, in the event that the Trust Interests are deemed to constitute securities, section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a plan of

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reorganization from registration under the Securities Act and Blue Sky Laws if three principal requirements are satisfied:

     A. The securities are offered and sold under a plan of reorganization and are securities of the debtor, of an affiliate of the debtor participating in a joint plan with the debtor, or of a successor to the debtor under the plan;

     B. The recipients of the securities hold a pre-petition or administrative claim against the debtor or an interest in the debtor; and

     C. The securities are issued entirely in exchange for recipient’s claim against or interest in the debtor, or principally in such exchange and partly for cash or property.

     If and to the extent that the Trust Interests may constitute securities, the Debtor believes that these beneficial interests issued in respect of Allowed Class 4 Claims and Class 5 Equity Interests will qualify as securities “of the debtor ... or of a successor to the debtor” pursuant to section 1145(a)(1). In addition, the Trust Interests will be issued entirely in exchange for Claims or Equity Interests. Thus, the Debtor believes that the issuance of the Trust Interests pursuant to the Plan will satisfy the applicable requirements of section 1145(a)(1) of the Bankruptcy Code, and that such issuance should be exempt from registration under the Securities Act and any applicable Blue Sky Law.

     The Debtor believes that its reliance upon the foregoing exemptions in respect of the issuance of the Trust Interests is consistent with positions taken by the SEC with respect to similar transactions and arrangements by other chapter 11 debtors in possession. However, the Debtor has not sought and will not seek any “no-action” letter by the SEC with respect to any such matters, and therefore no assurance can be given regarding the availability of any exemptions from registration with respect to any securities, if any, issued pursuant to the Plan.

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     2. Resales

     The Trust Interests are subject to transfer restrictions under the terms of the Equity Trust Agreement. The Trust Interests cannot be assigned or transferred other than by death, by operation of law or otherwise in compliance with the securities laws, and will not be represented by certificates.

     3. Exchange Act Compliance

     Section 12(g) of the Exchange Act applies only to a company that has both (A) total assets in excess of $10 million and (B) a class of equity securities held by more than 500 persons as of the end of its fiscal year. The Debtor believes that, although the Equity Trust may be deemed to have both total assets in excess of $10 million and a class of equity securities held by more than 500 persons, the Equity Trust should not be required to register under section 12(g) of the Exchange Act. The Debtor has been advised that the staff of the SEC has issued no-action letters with respect to the non-necessity of Exchange Act registration of a bankruptcy plan trust when the following are true:

     A. the beneficial interests in the trust are not represented by certificates or, if they are, the certificates bear a legend stating that the certificates are transferable only upon death or by operation of law;

     B. the trust exists only to effect a liquidation and will terminate within a reasonable period of time; and

     C. the trust will issue annual unaudited financial information to all beneficiaries.

     Based on the foregoing, the Debtor believes that the Equity Trust will not be subject to registration under the Exchange Act. However, the views of the SEC on the matter have not been sought and will not be sought by the Debtor and, therefore, no assurance can be given regarding this matter.

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     4. Investment Company Act

     As the assets of the Equity Trust do not consist of securities issued by the Debtor or any other person, and this trust is organized as a liquidating Person in the process of liquidation, the Debtor does not believe that the Equity Trust falls within the definition of “investment company” in any manner requiring such entity to register under the Investment Company Act.

B. Compliance if Required

     Notwithstanding the preceding discussion, if the Plan Administrator determines, with the advice of counsel, that the Equity Trust is required to comply with the registration and reporting requirements of the Exchange Act or the Investment Company Act, then prior to the registration of the Equity Trust under the Exchange Act or the Investment Company Act, the Plan Administrator or the Equity Trustee shall seek to amend the Equity Trust Agreement to make such changes as are deemed necessary or appropriate to ensure that the Equity Trust is not subject to registration or reporting requirements of the Exchange Act, or the Investment Company Act, and the Equity Trust Agreement, as so amended, shall be effective after notice and opportunity for a hearing provided to the Post Effective Date Service List, and the entry of a Final Order of the Bankruptcy Court. If the Equity Trust Agreement, as amended, is not approved by Final Order of the Bankruptcy Court or the Bankruptcy Court otherwise determines in a Final Order that registration under one or both of the Exchange Act or Investment Company Act is required, then, to the extent that doing so is reasonably practicable, the Equity Trustee shall take such actions as may be required to satisfy the registration and reporting requirements of the Exchange Act and/or the Investment Company Act, as applicable.

XV
RECOMMENDATIONS AND CONCLUSION

     The Debtor believes that Confirmation and implementation of this Plan are preferable to any other alternative because, in the Debtor’s view, the Plan will provide Holders of Allowed

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Claims and Allowed Equity Interests with the maximum recovery available under the circumstances. Accordingly, the Debtor urges all Creditors and Equity Interest Holders to vote to accept the Plan.

Dated: June 1, 2009	Fremont General Corporation., Debtor and Debtor in Possession
	By:	/s/ RICHARD A. SANCHEZ
		Name:	Richard A. Sanchez
		Title:	Interim President and Interim Chief Executive Officer

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