EX-2.2 3 jg02-2712_8ke22.htm EXHIBIT 2.2 - THE DISCLOSURE STATEMENT jg02-2712_8ke22.htm
EXHIBIT 2.2
 
THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE SEVENTH AMENDED PLAN.  ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT.  THIS DISCLOSURE STATEMENT IS BEING SUBMITTED FOR APPROVAL BUT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT.

 
UNITED STATES BANKRUPTCY COURT
 
DISTRICT OF DELAWARE
 
   x      
         
 
:
     
In re
:
Chapter 11
   
 
:
     
WASHINGTON MUTUAL, INC., et al.,1
:
     
 
:
Case No. 08-12229 (MFW)
   
 
:
     
    Debtors.
:
(Jointly Administered)
   
 
:
     
 
:
     
 
   x      



DISCLOSURE STATEMENT FOR THE SEVENTH AMENDED
JOINT PLAN OF AFFILIATED DEBTORS PURSUANT TO
CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
 

 
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
 
-and-
 
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
(302) 651-7700
 
Attorneys for Debtors
and Debtors in Possession
 
Dated:                      January 12, 2012

__________________________
1 The Debtors in these chapter 11 cases along with the last four digits of each Debtor’s federal tax identification number are: (i) Washington Mutual, Inc. (3725); and (ii) WMI Investment Corp. (5395).  The Debtors’ principal offices are located at 925 Fourth Avenue, Suite 2500, Seattle, Washington 98104.
 
 
 
 

 
 

TABLE OF CONTENTS

I.
INTRODUCTION
1
 
A.
Background
1
 
B.
The Sixth Amended Plan and the January Opinion
2
 
C.
The Modified Sixth Amended Plan and the September Opinion
3
 
D.
The Equity Committee Standing Motion
4
 
E.
The September Opinion Appeals
5
 
F.
Mediation
5
 
G.
The Seventh Amended Plan Incorporates Modifications Resulting From the Mediation Among the Debtors, the Creditors’ Committee, the Equity Committee, AAOC, and Certain Other Creditor Constituencies
6
   
1.
Issuance of Runoff Notes to Certain Creditors and Distribution of Reorganized Common Stock to Certain Holders of Equity Interests
11
   
2.
Commitment by AAOC to Provide Exit Financing
13
   
3.
Resolution of Certain Governance-Related Issues
13
 
H.
The Seventh Amended Plan
14
   
1.
Plan Modifications Consistent with the September Opinion
14
 
I.
The Global Settlement Agreement
17
   
1.
Background
17
   
2.
Bankruptcy Court Approval of the Global Settlement Agreement
18
   
3.
Subsequent Amendments to the Global Settlement Agreement and Bankruptcy Court Approval Thereof
18
II.
THE DISCLOSURE STATEMENT
19
III.
GENERAL OVERVIEW OF THE SEVENTH AMENDED PLAN
19
 
A.
Chapter 11 Overview
19
 
B.
Significant Features of the Seventh Amended Plan
20
   
1.
Reorganization
20
   
2.
Credit Facility
25
   
3.
Creditor Cash
26
   
4.
The Liquidating Trust
27
   
5.
Reorganized WMI’s Board of Directors
31
   
6.
General Overview of Treatment Pursuant to the Seventh Amended Plan of Allowed Claims and Equity Interests
31
   
7.
Releases
51
 
C.
Approximate Amounts of Certain Fees and Expenses Incurred, Payment of Which  May Be Requested Pursuant to Sections 31.12 and 41.18 of the Seventh Amended Plan
51
   
1.
Section 31.12 of the Seventh Amended Plan
51
 
 
 
i

TABLE OF CONTENTS
 
 
   
2.
Section 41.18 of the Seventh Amended Plan
51
IV.
OVERVIEW OF THE DEBTORS’ OPERATIONS
52
 
A.
The Debtors’ Corporate History and Past and Current Organizational Structure and Assets
52
   
1.
Overview
52
   
2.
List of WMI’s Current Directors
53
   
3.
WMI’s Consolidated Corporate Organizational Structure
53
   
4.
Analysis of Subsidiary Equity
58
   
5.
Assets of WMI Investment
63
   
6.
WM Mortgage Reinsurance Company, Inc. (“WMMRC”)
64
   
7.
Assets of WMI’s Non-Debtor Subsidiaries, Other than WMMRC
65
   
8.
WMI Non-Debtor Subsidiary Balance Sheets
72
   
9.
Other Assets
76
 
B.
The Debtors’ Capital Structure And Significant Prepetition Indebtedness
78
   
1.
Overview
78
   
2.
Senior Notes
78
   
3.
Senior Subordinated Notes
80
   
4.
Guarantees of Commercial Capital Bank, Inc. Securities (the “CCB Guarantees”)
81
   
5.
Junior Subordinated Debentures Related to the PIERS Claims
81
   
6.
Preferred Equity Interests
83
   
7.
Common Stock
85
V.
OVERVIEW OF THE CHAPTER 11 CASES
85
 
A.
Significant Events Leading To Commencement Of The Chapter 11 Cases
85
 
B.
The Chapter 11 Cases
86
   
1.
Certain Administrative Matters
86
   
2.
Litigation with the FDIC and JPMC
88
   
3.
The Global Settlement Agreement
92
   
4.
The Appointment of the Examiner and the Examiner’s Report
98
   
5.
Certain Significant Litigations
100
   
6.
Certain Other Litigations and Claims
117
   
7.
Government Investigations and Hearings
134
   
8.
Employee Benefits
135
   
9.
Insurance
139
VI.
SUMMARY OF THE SEVENTH AMENDED PLAN
140
 
 
ii

TABLE OF CONTENTS
 
 
A.
Provisions For Payment Of Administrative Expense Claims And Priority Tax Claims Under The Seventh Amended Plan
140
   
1.
Administrative Expense Claims
140
   
2.
Professional Compensation and Reimbursement Claims
141
   
3.
Priority Tax Claims
142
   
4.
Statutory Fees
142
 
B.
Classification Of Claims And Equity Interests Under The Seventh Amended Plan
142
   
1.
Priority Non-Tax Claims (Class 1)
143
   
2.
Senior Notes Claims (Class 2)
143
   
3.
Senior Subordinated Notes Claims (Class 3)
145
   
4.
WMI Medical Plan Claims (Class 4)
147
   
5.
JPMC Rabbi Trust/Policy Claims (Class 5)
147
   
6.
Other Benefit Plan Claims (Class 6)
148
   
7.
Qualified Plan Claims (Class 7)
148
   
8.
WMB Vendor Claims (Class 8)
148
   
9.
Visa Claims (Class 9)
149
   
10.
Bond Claims (Class 10)
149
   
11.
WMI Vendor Claims (Class 11)
149
   
12.
General Unsecured Claims (Class 12)
149
   
13.
Late-Filed Claims (Class 12A)
151
   
14.
Convenience Claims (Class 13)
152
   
15.
CCB-1 Guarantees Claims (Class 14)
152
   
16.
CCB-2 Guarantees Claims (Class 15)
154
   
17.
PIERS Claims (Class 16)
156
   
18.
WMB Notes Claims (Class 17)
158
   
19.
Subordinated Claims (Class 18)
161
   
20.
Preferred Equity Interests (Class 19)
161
   
21.
Dime Warrants (Class 21)
163
   
22.
Common Equity Interests (Class 22)
163
 
C.
Provision For Treatment Of Disputed Claims and Disputed Equity Interests
164
   
1.
Objections to Claims; Prosecution of Disputed Claims and Disputed Equity Interests
164
   
2.
Estimation of Claims
164
   
3.
Payments and Distributions on Disputed Claims and Disputed Equity Interests
164
 
 
iii

TABLE OF CONTENTS
 
 
D.
Liquidating Trust
167
   
1.
Execution of the Liquidating Trust Agreement
167
   
2.
Purpose of the Liquidating Trust
167
   
3.
Liquidating Trust Assets
167
   
4.
Administration of the Liquidating Trust
168
   
5.
The Liquidating Trustee
168
   
6.
Role of the Liquidating Trustee
168
   
7.
Liquidating Trustee’s Tax Power for Debtors
168
   
8.
Transferability of Liquidating Trust Interests
169
   
9.
Cash
169
   
10.
Distribution of Liquidating Trust Assets
169
   
11.
Costs and Expenses of the Liquidating Trust
170
   
12.
Compensation of the Liquidating Trustee
170
   
13.
Retention of Professionals/Employees by the Liquidating Trustee
170
   
14.
Federal Income Tax Treatment of the Liquidating Trust
170
   
15.
Indemnification of Liquidating Trustee
173
   
16.
Privileges and Obligation to Respond to Ongoing Investigations
173
 
E.
Prosecution And Extinguishment Of Claims Held By The Debtors
174
   
1.
Prosecution of Claims
174
 
F.
Seventh Amended Plan Provisions Governing Distributions
174
   
1.
Time and Manner of Distributions
174
   
2.
Timeliness of Payments
175
   
3.
Distributions by the Disbursing Agent
176
   
4.
Manner of Payment under the Seventh Amended Plan
176
   
5.
Delivery of Distributions
176
   
6.
Undeliverable/Reserved Distributions
177
   
7.
Withholding and Reporting Requirements
178
   
8.
Time Bar to Cash Payments
179
   
9.
Distributions After Effective Date
179
   
10.
Setoffs
179
   
11.
Allocation of Plan Distributions Between Principal and Interest
180
   
12.
Payment of Trustee Fees and Expenses
180
   
13.
Runoff Notes
180
 
G.
Means Of Implementation Of The Seventh Amended Plan
181
   
1.
Incorporation and Enforcement of the Global Settlement Agreement
181
 
 
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TABLE OF CONTENTS
 
   
2.
Intercompany Claims
182
   
3.
Merger/Dissolution/Consolidation
182
   
4.
Cancellation of Existing Securities and Agreements
182
   
5.
Claims of Subordination
183
   
6.
Surrender of Instruments
183
   
7.
Issuance of Runoff Notes, Liquidating Trust Interests and Reorganized Common Stock
183
   
8.
Exemption from Securities Laws
183
   
9.
Hart-Scott-Rodino Compliance
184
   
10.
Fractional Stock or Other Distributions
184
   
11.
Credit Facility
184
   
12.
Creditors’ Committee And Equity Committee
184
 
H.
Executory Contracts And Unexpired Leases
185
   
1.
Rejection or Assumption of Remaining Executory Contracts and Unexpired Leases
185
   
2.
Approval of Rejection or Assumption of Executory Contracts and Unexpired Leases
186
   
3.
Inclusiveness
186
   
4.
Cure of Defaults
186
   
5.
Rejection Damage Claims
187
   
6.
Indemnification and Reimbursement Obligations
187
   
7.
Termination of Benefit Plans
187
   
8.
Termination of Vendor Stipulation
188
 
I.
Rights and Powers of Disbursing Agent
188
   
1.
Exculpation
188
   
2.
Powers of the Disbursing Agent
188
   
3.
Fees and Expenses Incurred From and After the Effective Date
188
 
J.
Conditions Precedent to Effective Date of the Seventh Amended Plan
189
   
1.
Conditions Precedent to Confirmation of the Seventh Amended Plan
189
   
2.
Waiver of Conditions Precedent to Confirmation
190
 
K.
Conditions Precedent to Effective Date of the Seventh Amended Plan
190
   
1.
Conditions Precedent to Effective Date of the Seventh Amended Plan
190
   
2.
Waiver of Conditions Precedent
190
 
L.
Retention of Jurisdiction
191
 
M.
Modification, Revocation, or Withdrawal of the Seventh Amended Plan
192
   
1.
Modification of Plan
192
 
 
v

TABLE OF CONTENTS
 
   
2.
Revocation or Withdrawal
193
   
3.
Amendment of Plan Documents
193
   
4.
No Admission of Liability
193
 
N.
Corporate Governance and Management of the Reorganized Debtors
194
   
1.
Corporate Action
194
   
2.
Reincorporation
194
   
3.
Amendment of Articles of Incorporation and By-Laws
194
   
4.
Directors of the Reorganized Debtors
195
   
5.
Officers of the Reorganized Debtors
195
 
O.
Miscellaneous Provisions
195
   
1.
Title to Assets
195
   
2.
Discharge and Release of Claims and Termination of Equity Interests
195
   
3.
Injunction on Claims
196
   
4.
Integral to Plan
197
   
5.
Releases by the Debtors, the Creditors’ Committee and the Equity Committee
197
   
6.
Releases by Holders of Claims and Equity Interests
198
   
7.
Injunction Related to Releases
201
   
8.
Exculpation
201
   
9.
Bar Order
202
   
10.
Deemed Consent
202
   
11.
No Waiver
202
   
12.
Supplemental Injunction
203
   
13.
Term of Existing Injunctions or Stays
203
   
14.
Payment of Statutory Fees
204
   
15.
Post-Effective Date Fees and Expenses
204
   
16.
Exemption from Transfer Taxes
204
   
17.
Withdrawal of Equity Committee Proceedings
204
   
18.
Payment of Fees and Expenses of Certain Creditors
204
   
19.
Securities Litigations Documents
205
   
20.
Severability
205
   
21.
Governing Law
205
   
22.
Closing of Cases
206
VII.
FINANCIAL INFORMATION AND PROJECTIONS
206
 
 
vi

TABLE OF CONTENTS
 
 
A.
Projected Financial Information
206
 
B.
Projected Statement of Operations (Unaudited)
209
 
C.
Projected Balance Sheet (Unaudited)
210
 
D.
Projected Statement of Cash Flow – Indirect Method (Unaudited)
211
 
E.
Projected Statement of Cash Flow – Direct Method (Unaudited)
212
 
F.
Assumptions to the Projections
213
   
1.
Projections
213
   
2.
Key Assumptions
213
VIII.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SEVENTH AMENDED PLAN
216
 
A.
Consequences to the Debtors
218
   
1.
Cancellation of Debt
219
   
2.
Potential Limitations on NOL Carryforwards and Other Tax Attributes
219
   
3.
Debt Status of the Second Lien Runoff Notes
224
   
4.
Alternative Minimum Tax
224
   
5.
Transfer of Assets to the Liquidating Trust
224
 
B.
Consequences to Holders of Certain Claims and Equity Interests
225
   
1.
Allowed Convenience Claims and Priority Non-Tax Claims
226
   
2.
Certain Unsecured Claims, Subordinated Claims and Equity Interests
226
   
3.
Ownership and Disposition of Runoff Notes
230
   
4.
Ownership and Disposition of Reorganized Common Stock
237
 
C.
Tax Treatment of Liquidating Trust and Holders of Beneficial Interests
238
   
1.
Classification of the Liquidating Trust
238
   
2.
General Tax Reporting by the Liquidating Trust and its Beneficiaries
238
   
3.
Tax Reporting for Assets Allocable to Disputed Claims and Distributions from the Liquidating Trust Claims Reserve
240
 
D.
Tax Reporting for Assets Allocable to the Disputed Equity  Escrow and Distributions from the Disputed Equity Escrow
241
 
E.
Information Reporting and Withholding.
241
IX.
CONSEQUENCES UNDER THE FEDERAL SECURITIES LAWS
242
 
A.
General Application of section 1145 to New Interests
242
 
B.
Reorganized WMI Interests
243
   
1.
Transfer Restrictions Under the Securities Laws
243
 
 
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TABLE OF CONTENTS
 
   
2.
Listing and SEC Reporting
244
   
3.
Transfer Restrictions under the New Certificate of Incorporation of Reorganized WMI with respect to the Reorganized Common Stock
244
   
4.
Transfer Restrictions under the Indenture for the Second Lien Runoff Notes
245
 
C.
Liquidating Trust Interests
245
   
1.
Transfer Restrictions Under the Securities Laws
245
   
2.
Listing and SEC Reporting
245
X.
CERTAIN FACTORS TO BE CONSIDERED
246
 
A.
Certain Bankruptcy Law Considerations
246
   
1.
Risk of Non-Confirmation of the Seventh Amended Plan
246
   
2.
Non-Consensual Confirmation
246
   
3.
Risk of Non-Occurrence of the Effective Date
246
   
4.
Conversion into Chapter 7 Cases
246
 
B.
Additional Factors To Be Considered
246
   
1.
The Debtors Have No Duty to Update
246
   
2.
No Representations Outside This Disclosure Statement Are Authorized
247
   
3.
Claims Could Be More Than Projected
247
   
4.
The Debtors Estimate That a Three and One-Half (3.5) Months’ Delay in Confirmation Will Eliminate All Recoveries for Holders of Allowed PIERS Claims, and That Additional Delay Will Begin to Reduce, and May Eliminate, Recoveries for Holders of Allowed Claims That Are Senior in Recovery to Holders of Allowed PIERS Claims
247
   
5.
Projections and Other Forward-Looking Statements Are Not Assured, and Actual Results May Vary
247
   
6.
Non-Recourse Nature of the Runoff Notes; Full Satisfaction of Principal and Interest due on the Runoff Notes Is Not Assured
248
   
7.
The Runoff Notes Will Be Effectively Subordinate to the Liabilities of WMMRC
248
   
8.
Any Trading Market that Develops for the Runoff Notes May Not Be Liquid, and There are Restrictions on Transfers of the Second Lien Runoff Notes
248
   
9.
Holders of Runoff Notes May Be Required to Pay U.S. Federal Income Tax on Such Notes Even if Reorganized WMI Does Not Pay Cash Interest
249
   
10.
No Legal or Tax Advice is Provided to You By This Disclosure Statement
249
   
11.
No Admission Made
249
 
 
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12.
Certain Tax Consequences
249
   
13.
Debtors Could Withdraw Plan
249
   
14.
Subject to Certain Limited Exceptions, the Liquidating Trust Interests Are Not Transferable or Assignable
249
   
15.
Ability to Transfer Reorganized Common Stock
249
   
16.
Pending Appeal of TPS Order
250
XI.
VOTING AND ELECTION PROCEDURES
250
 
A.
Solicitation of Votes With Respect to the Seventh Amended Plan
250
   
1.
The Debtors Will Solicit Votes from Holders of Claims in Classes 2, 3, 5, 6, 8, 9, 10, 11, 12, 12A, 13, 14, 15, 16, 18, 19, and 22
250
   
2.
Classes 1, 4, 7, and 17A Will Be Deemed to Accept the Seventh Amended Plan, While Classes 17B and 21 Will Be Deemed to Reject
252
   
3.
Holders of Disputed Claims Are Not Entitled to Vote
253
   
4.
Ballots
253
 
B.
Solicitation of Elections With Respect to the Seventh Amended Plan
253
   
1.
Certain Holders of Claims and Equity Interests Must Elect to Be Bound by the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan) to Receive a Distribution Pursuant to the Seventh Amended Plan
253
   
2.
Solicitation of Runoff Notes Elections
257
   
3.
Solicitation of Reorganized Common Stock Election
258
   
4.
Voting and Election Procedures
259
   
5.
Notice to Holders of Publicly Traded Securities
260
XII.
CONFIRMATION OF THE SEVENTH AMENDED PLAN
262
 
A.
The Confirmation Hearing
262
 
B.
Objections To Confirmation
262
 
C.
Requirements For Confirmation Of The Seventh Amended Plan
263
   
1.
Requirements of Section 1129(a) of the Bankruptcy Code
263
   
2.
Requirements of Section 1129(b) of the Bankruptcy Code
267
XIII.
ALTERNATIVES TO THE SEVENTH AMENDED PLAN
268
 
A.
Liquidation Under Chapter 7
269
 
B.
Alternative Chapter 11 Plans
269
XIV.
CONCLUSION
270

 
ix

TABLE OF CONTENTS



EXHIBIT A:                                Seventh Amended Plan
 
EXHIBIT B:                                Disclosure Statement Order
 
EXHIBIT C:                                Updated Liquidation Analysis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
x

 



THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT (THE “DISCLOSURE STATEMENT”)1 IS INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES AND ELECTIONS WITH RESPECT TO OF THE SEVENTH AMENDED JOINT PLAN OF WASHINGTON MUTUAL, INC. AND WMI INVESTMENT CORP. AND MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON THE SEVENTH AMENDED PLAN OR IN CONNECTION WITH AN ELECTION.  NO SOLICITATION OF VOTES TO ACCEPT THE SEVENTH AMENDED PLAN MAY BE MADE EXCEPT PURSUANT TO SECTION 1125 OF TITLE 11 OF THE UNITED STATES CODE (THE “BANKRUPTCY CODE”).
 
HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED TO VOTE AND/OR TO MAKE CERTAIN ELECTIONS WITH RESPECT TO THE SEVENTH AMENDED PLAN ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND THE SEVENTH AMENDED PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE SEVENTH AMENDED PLAN OR MAKING ANY ELECTION WITH RESPECT THERETO, AND, WHERE POSSIBLE, CONSULT WITH COUNSEL OR OTHER ADVISORS PRIOR TO VOTING OR ELECTING.  ALL HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD CAREFULLY READ AND CONSIDER FULLY THE RISK FACTORS SET FORTH IN ARTICLE X OF THIS DISCLOSURE STATEMENT BEFORE VOTING TO ACCEPT OR REJECT THE SEVENTH AMENDED PLAN AND BEFORE MAKING ANY ELECTION WITH RESPECT THERETO.  A COPY OF THE SEVENTH AMENDED PLAN IS ANNEXED HERETO AS EXHIBIT A.  SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE SEVENTH AMENDED PLAN AND THE EXHIBITS ANNEXED THERETO.  THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, UNLESS OTHERWISE SPECIFIED HEREIN, AND THE DELIVERY OF THIS DISCLOSURE STATEMENT DOES NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE SUCH DATE.  IN THE EVENT OF ANY CONFLICT BETWEEN THE DESCRIPTIONS SET FORTH IN THIS DISCLOSURE STATEMENT AND THE TERMS OF THE SEVENTH AMENDED PLAN, THE TERMS OF THE SEVENTH AMENDED PLAN WILL GOVERN.  IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE SEVENTH AMENDED PLAN AND THE CONFIRMATION ORDER, THE TERMS AND PROVISIONS OF THE CONFIRMATION ORDER WILL GOVERN AND BE DEEMED A MODIFICATION OF THE SEVENTH AMENDED PLAN; PROVIDED, HOWEVER, THAT UNDER NO CIRCUMSTANCES SHALL THE CONFIRMATION ORDER MODIFY THE ECONOMIC TERMS SET FORTH IN THE SEVENTH AMENDED PLAN.
 
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE AND RULE 3016(b) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH OTHER NON-BANKRUPTCY LAW.
 
CERTAIN OF THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE FORWARD LOOKING PROJECTIONS AND FORECASTS, BASED UPON CERTAIN ESTIMATES AND ASSUMPTIONS.  THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL BE REFLECTIVE OF ACTUAL OUTCOMES.  THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON BY ANY PERSONS FOR ANY OTHER PURPOSE OTHER THAN BY HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED TO VOTE FOR THE PURPOSE OF DETERMINING WHETHER TO VOTE TO ACCEPT OR REJECT THE
 
__________________________
2 Capitalized terms not defined herein shall have the meaning ascribed to them in the Seventh Amended Plan (as defined below).
 
 
 

 
 
 SEVENTH AMENDED PLAN, AND NOTHING CONTAINED HEREIN SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY, OR BE ADMISSIBLE IN ANY PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE EVIDENCE OF THE TAX OR LEGAL EFFECTS OF THE SEVENTH AMENDED PLAN ON HOLDERS OF CLAIMS OR EQUITY INTERESTS.
 
IRS CIRCULAR 230 NOTICE:  TO ENSURE COMPLIANCE WITH IRS CIRCULAR 230, HOLDERS OF CLAIMS AND EQUITY INTERESTS ARE HEREBY NOTIFIED THAT:  (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES CONTAINED OR REFERRED TO IN THIS DISCLOSURE STATEMENT IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY HOLDERS OF CLAIMS OR EQUITY INTERESTS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THEM UNDER THE TAX CODE; (B) SUCH DISCUSSION IS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING BY THE DEBTORS OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
 
 
 
 
 
 
 
 
 
 
 

ii 
 

 



DISCLOSURE STATEMENT FOR THE SEVENTH AMENDED
JOINT PLAN OF AFFILIATED DEBTORS PURSUANT TO
CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE

On September 26, 2008 (the “Petition Date”), Washington Mutual, Inc. (“WMI”) and WMI Investment Corp. (“WMI Investment” and, together with WMI, the “Debtors”) each commenced with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) a voluntary case pursuant to chapter 11 of the Bankruptcy Code.
 
The Debtors submit this Disclosure Statement pursuant to section 1125 of the Bankruptcy Code in connection with the solicitation of acceptances and elections with respect to the Seventh Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code (as amended, modified or supplemented from time to time, the “Seventh Amended Plan”).
 
Similar to the prior versions of the Debtors’ plan of reorganization, the Seventh Amended Plan is premised upon and incorporates the terms of the Global Settlement Agreement (defined below), which the Bankruptcy Court has determined is fair, reasonable and in the best interests of the Debtors’ estates.  In addition, the Seventh Amended Plan incorporates each modification the Bankruptcy Court has specified as necessary to permit confirmation thereof.  Furthermore, to resolve certain pending motions, appeals and anticipated objections that stood as potential impediments to, and were certain to further delay, confirmation, the Seventh Amended Plan contains a compromise and settlement among, and has the full support of, each of the Debtors, the Creditors’ Committee, the Equity Committee and certain Creditor constituencies.  Accordingly, the Debtors, together with the Creditors’ Committee and the Equity Committee, believe the Seventh Amended Plan is in the best interest of all parties in interest and represents the most expeditious means for the Debtors to successfully emerge from the Chapter 11 Cases.
 
Unless otherwise defined herein, capitalized terms used, but not defined, herein shall have the same meanings ascribed to them in the Seventh Amended Plan.  Annexed as exhibits to this Disclosure Statement are copies of the following documents:
 
 
 
1.
Seventh Amended Plan – Exhibit A
 
 
2.
Disclosure Statement Order – Exhibit B
 
 
3.
Liquidation Analysis – Exhibit C
 
All exhibits to this Disclosure Statement are incorporated into and are part of this Disclosure Statement as if set forth in full herein.
 
I.
INTRODUCTION
 
A.  
Background
 
WMI, a holding company incorporated in the State of Washington, is the direct parent of WMI Investment, a Delaware corporation, which, as of the Petition Date, held a variety of securities and investments.
 
Prior to the Petition Date, WMI was a multiple savings and loan holding company that owned Washington Mutual Bank (“WMB”) and, indirectly, WMB’s subsidiaries, including Washington
 
 
 
 

 
 
Mutual Bank fsb (“FSB”).  As of the Petition Date, WMI also had several non-banking, non-debtor subsidiaries.  Like all savings and loan holding companies, prior to the Petition Date, WMI was subject to regulation by the Office of Thrift Supervision (the “OTS”).  WMB and FSB, in turn, like all depository institutions with federal thrift charters, were subject to regulation and examination by the OTS.  In addition, WMI’s banking and non-banking subsidiaries were overseen by various federal and state authorities, including the Federal Deposit Insurance Corporation (“FDIC”).
 
On September 25, 2008 (the “Receivership Date”), the OTS, by order number 2008-36, closed WMB, appointed the FDIC as receiver for WMB (the “FDIC Receiver”) and advised that the FDIC Receiver was immediately taking possession of WMB’s assets.  Immediately after its appointment as receiver, the FDIC Receiver sold substantially all the assets of WMB, including, among other things, the stock of FSB, to JPMorgan Chase Bank, National Association (“JPMC”), pursuant to that certain Purchase and Assumption Agreement, Whole Bank, effective September 25, 2008 (the “Purchase and Assumption Agreement”) (publicly available at http://www.fdic.gov/about/freedom/popular.html), in exchange for payment of $1.88 billion and the assumption of all of WMB’s deposit liabilities.
 
B.  
The Sixth Amended Plan and the January Opinion
 
On October 6, 2010, the Debtors filed the Sixth Amended Plan3 and a corresponding disclosure statement.  The Debtors solicited votes and certain elections with respect to the Sixth Amended Plan and, as set forth in more detail in the materials filed by the Debtors in support of confirmation of the Sixth Amended Plan, four (4) impaired Classes voted to accept the Sixth Amended Plan, while an additional ten (10) Classes were deemed to accept the Sixth Amended Plan.  A hearing to consider confirmation of the Sixth Amended Plan (the “December Confirmation Hearing”) commenced on December 2, 2010 and concluded on December 7, 2010.
 
On January 7, 2011, the Bankruptcy Court entered an opinion [D.I. 6528] (the “January Opinion”)4 and related order [D.I. 6529] denying confirmation of the Sixth Amended Plan, but noting certain modifications to the Sixth Amended Plan that, if made, would permit confirmation thereof.  As discussed in more detail in Section I.I.2 below, pursuant to the January Opinion, the Bankruptcy Court also determined that the compromise and settlement embodied in the Initial Global Settlement Agreement,5 upon which the Sixth Amended Plan was premised, and the transactions contemplated therein, are fair, reasonable, and in the best interests of the Debtors and their estates.
 
On January 19, 2011, the Equity Committee filed a notice of appeal of that portion of the January Opinion finding that the Initial Global Settlement Agreement satisfies the requisite standards for approval [D.I. 6575].  This action, styled as Official Committee of Equity Security Holders v. Washington Mutual, Inc., et al., Civil Action No. 11-158 (the “January Equity Committee Appeal”), is
 

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3 Sixth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the Bankruptcy Code, dated October 6, 2010, as modified by (a) the first plan modification, dated October 29, 2010  [D.I. 5714], and (b) the second plan modification, dated November 24, 2010 [D.I. 6081] (collectively, the “Sixth Amended Plan”).
 
4 A full and complete copy of the January Opinion is available at http://www.kccllc.net/wamu or the Bankruptcy Court’s website, www.deb.uscourts.gov, and also is available for inspection during regular business hours in the office of the Clerk of the Bankruptcy Court, 824 Market Street, 3rd Floor, Wilmington, Delaware 19801.
 
5 Amended and Restated Settlement Agreement, dated as of October 6, 2010, by and among WMI and WMI Investment Corp., JPMC, the FDIC Receiver, FDIC Corporate, the Creditors’ Committee and certain other creditor constituencies (the “Initial Global Settlement Agreement”).

 
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currently pending in the United States District Court for the District of Delaware (the “Delaware District Court”), as, by order, dated February 8, 2011 [D.I. 6703], the Bankruptcy Court denied the Equity Committee’s motion for a direct appeal to the United States Court of Appeals for the Third Circuit.  In the Delaware District Court, among other things, the Equity Committee has filed a motion for leave to appeal, which the Debtors opposed, and on which the Delaware District Court has not yet ruled.  The January Equity Committee Appeal is discussed in more detail in Section V.B.5.b hereof.
 
C.  
The Modified Sixth Amended Plan and the September Opinion
 
In accordance with the January Opinion, the Debtors revised the Sixth Amended Plan and, on February 8, 2011, filed the Modified Sixth Amended Plan.6  Thereafter, the Debtors solicited votes and elections with respect thereto.  As set forth in more detail in the materials filed by the Debtors in support of confirmation of the Modified Sixth Amended Plan twelve (12) of the fifteen (15) Classes entitled to vote on the Modified Sixth Amended Plan voted overwhelmingly to accept, while an additional four (4) Classes were deemed to accept the Modified Sixth Amended Plan.
 
Subsequently, with the full support of the Creditors’ Committee, Equity Committee and major creditor constituencies, the Debtors adjourned the hearing on confirmation of the Modified Sixth Amended Plan, to permit, among other things, the negotiation and documentation of an agreed upon and announced understanding among the Equity Committee and certain other parties in interest regarding modifications to the Modified Sixth Amended Plan.  After several weeks of efforts to document such understanding, the Equity Committee withdrew from negotiations and suggested the Debtors proceed with confirmation of the Modified Sixth Amended Plan.
 
Consequently, the Bankruptcy Court held a hearing to consider, among other things (as discussed below), confirmation of the Modified Sixth Amended Plan.  The hearing commenced on July 13, 2011, and concluded on July 21, 2011 (the “July Confirmation Hearing”).  Subsequent thereto, on August 10, 2011, various parties submitted post-hearing briefing with respect to, among other things, confirmation of the Modified Sixth Amended Plan, and, on August 24, 2011, the Bankruptcy Court held closing arguments (the “Closing Arguments”).
 
On September 13, 2011, the Bankruptcy Court entered an Opinion [D.I. 8612] (the “September Opinion”)7 and related order [D.I. 8613] (the “September Order”) that, among other things:  (i) found that the Bankruptcy Court has jurisdiction to approve the Global Settlement Agreement8 (September Opinion at 16, 22-23); (ii) reaffirmed its conclusion that the Global Settlement Agreement and all the transactions contemplated therein, including the settlement with holders of WMB Senior Notes
 
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6 Modified Sixth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of Bankruptcy Code, dated February 7, 2011 [D.I. 6696], as modified by (a) the first plan modification, dated March 16, 2011 [D.I. 6964], (b) the second plan modification, dated March 25, 2011 [D.I. 7040], and (c) the third plan modification, dated August 10, 2011 [D.I. 8423] (collectively, the “Modified Sixth Amended Plan”).
 
7 A full and complete copy of the September Opinion is available at http://www.kccllc.net/wamu or the Bankruptcy Court’s website, www.deb.uscourts.gov, and also is available for inspection during regular business hours in the office of the Clerk of the Bankruptcy Court, 824 Market Street, 3rd Floor, Wilmington, Delaware 19801.
 
8 Second Amended and Restated Global Settlement Agreement, dated as of February 7, 2011, by and among WMI and WMI Investment Corp., JPMC, the FDIC Receiver, FDIC Corporate, and the Creditors’ Committee (as it has been and may be further amended, and together with all exhibits annexed thereto, the “Global Settlement Agreement”).

 
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discussed in Section V.B.5.g(i) hereof, are fair and reasonable (id. at 26, 35, 101); (iii) ordered that its ruling with respect to the Global Settlement Agreement constitutes the “law of the case” (id. at 27); (iv) overruled objections that the Modified Sixth Amended Plan was not proposed in good faith (id. at 73); (v) denied confirmation of the Modified Sixth Amended Plan, but identified certain modifications that, if incorporated, would permit confirmation thereof, as set forth in more detail in Section I.H.1 hereof; and (vi) directed certain parties to mediation (id. at 138), as discussed in more detail in Section I.E below.9
 
In addition to the foregoing, the Bankruptcy Court determined, pursuant to the September Opinion, that the present value of the projected income stream from the runoff of WMMRC’s existing portfolio, excluding any value attributed to potentially available net operating losses (“NOLs”), is $140 million.  (Id. at 43-45.)  The Bankruptcy Court’s conclusion as to the present value of the projected income stream from the runoff of WMMRC’s existing portfolio was based in part on the testimony of the Debtors’ valuation expert at the hearing on confirmation of the Modified Sixth Amended Plan.  (September Opinion at 44.)  The $140 million valuation established by the Bankruptcy Court for the projected income stream from the runoff of WMMRC’s existing portfolio was at the high end of the valuation expert’s range of values for that projected income stream.  (Id. at 45.)  The valuation expert’s valuation of WMMRC’s existing portfolio was primarily based on a discounted cash flow analysis that assumed, among other things, (i) that Reorganized WMI would achieve the Debtors’ projections in all material respects, and (ii) a thirteen percent (13%) to fifteen percent (15%) range for the weighted average cost of capital.  The Bankruptcy Court determined, in the context of the Modified Sixth Amended Plan, that the total enterprise value for Reorganized WMI, including potentially available NOLs, is $210 million (id. at 62).
 
D.  
The Equity Committee Standing Motion
 
On July 12, 2011, the Equity Committee filed, under seal, a motion seeking authority to prosecute, on the Debtors’ behalf, an action to equitably disallow or, in the alternative, to equitably subordinate certain Claims [D.I. 8179] (the “Standing Motion”).   At the July Confirmation Hearing, which, as stated, commenced on July 13, 2011, counsel for the Equity Committee requested that the Court, “take into account the evidence . . . adduced at [the July Confirmation Hearing]” in connection with deciding the Standing Motion.  On August 10, 2011, the Debtors, the Creditors’ Committee, certain members of AAOC,10 and certain other parties filed objections to the Standing Motion, arguing, among other things, that neither the evidence nor the law supported the relief requested.  During Closing Arguments, certain parties presented argument with respect to the Standing Motion.
 

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9 As described in greater detail in Section I.D below, in the September Opinion, the Bankruptcy Court also granted the Equity Committee standing to prosecute certain claims on behalf of the Debtors’ estates against certain parties.
 
10 The Seventh Amended Plan defines “AAOC” as each of (a) Appaloosa Management L.P., Appaloosa Investment L.P. I, Palomino Fund Ltd., Thoroughbred Fund, L.P., and Thoroughbred Master Ltd. (collectively, “Appaloosa”), (b) Aurelius Capital Management, LP, Aurelius Capital Partners, LP , Aurelius Convergence Master, Ltd., ACP Master, Ltd., Aurelius Capital Master, Ltd.and Aurelius Investment, LLC (collectively, “Aurelius”), (c) Owl Creek Asset Management, L.P., Owl Creek I, L.P., Owl Creek II, L.P., Owl Creek Overseas Fund, Ltd., Owl Creek Socially Responsible Investment Fund, Ltd., Owl Creek Asia I, L.P., Owl Creek Asia II, L.P., and Owl Creek Asia Master Fund, Ltd. (collectively, “Owl Creek”) and (d) Centerbridge Partners, L.P., Centerbridge Special Credit Partners, L.P., Centerbridge Credit Partners, L.P., and Centerbridge Credit Partners Master, L.P. (collectively, “Centerbridge”) and any other Affiliates of the funds listed in (a) through (d) above which own or, during the Chapter 11 Cases, owned securities issued by and/or have direct or indirect Claims against WMI.  Certain members of AAOC were “Settlement Note Holders,” as defined in the Initial Global Settlement Agreement, as discussed in Section I.I.3 hereof.  The Standing Motion did not seek to prosecute an action against Appaloosa and Owl Creek.

 
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In the September Opinion, the Bankruptcy Court denied the Standing Motion with respect to the prosecution of equitable subordination claims.  With respect to claims for equitable disallowance, the Bankruptcy Court granted the Standing Motion, but stayed all proceedings related to the Standing Motion pending mediation, discussed below.
 
E.  
The September Opinion Appeals
 
On September 27, October 4, and October 11, 2011, respectively, each of (i) AAOC, with (a) Aurelius [D.I. 8670] filing individually and (b) Appaloosa, Owl Creek and Centerbridge (collectively, “AOC”) filing jointly [D.I. 8673], (ii) the Creditors’ Committee [D.I. 8726] and (iii) the Debtors [D.I. 8785] filed notices of appeal from that portion of the September Opinion granting the Standing Motion with respect to the equitable disallowance claims.  Aurelius [D.I. 8672], AOC [D.I. 8674] and the Creditors’ Committee [D.I. 8727] filed motions for leave to appeal together with such notices, and the Debtors [D.I. 8781] joined the Creditors’ Committee’s motion.  Aurelius’s motion also seeks to appeal that portion of the September Opinion concluding, as discussed in Section I.H.1.a hereof, that the Debtors must pay Postpetition Interest Claims at the federal judgment rate rather than the applicable contract rate.  The Debtors have opposed Aurelius’s motion in this respect [D.I. 8783].
 
The WMB Noteholders [D.I. 8679] and Normandy Hill Capital L.P. [D.I. 8671] (“Normandy Hill”) also filed notices of appeal from the September Opinion on September 27, 2011, and, on October 10, 2011, Wells Fargo Bank, National Association, solely in its capacity as the PIERS Trustee, filed its notice of appeal [D.I. 8771].
 
The Equity Committee, for its part, filed a notice of cross-appeal and a motion for leave to cross-appeal on October 11, 2011, seeking to challenge, among other things, those portions of the September Opinion finding that the Modified Sixth Amended Plan was proposed in good faith and that the settlement with holders of WMB Senior Notes, discussed in more detail in Section V.B.5.g(i) hereof, is fair, reasonable and in the best interests of the Debtors’ estates [D.I. 8790, 8791] (the “October Equity Committee Appeal”).  In addition, on October 14, 2011, the Equity Committee filed an opposition to the motions for leave to appeal filed by each of AAOC, the Creditors’ Committee and the Debtors, [D.I. 8811], with respect to which the Creditors’ Committee has filed a reply [D.I. 8866].  In addition, on October 25, 2011, the Debtors [D.I. 8878] and Creditors’ Committee [D.I. 8887] filed oppositions to the Equity Committee’s motion to cross-appeal.
 
All the motions for leave to appeal, as well as the Equity Committee’s opposition, have been transmitted to, and are pending in, the Delaware District Court.
 
F.  
Mediation
 
Pursuant to the September Opinion and related order, the Bankruptcy Court directed certain parties to participate in mediation to explore a possible settlement of the Standing Motion and any issues that remain an impediment to confirmation of a plan of reorganization (the “Mediation”).  On October 10, 2011 [D.I. 8780], the Bankruptcy Court appointed the Honorable Raymond Lyons as mediator (the “Mediator”) and ordered the following parties to participate in the Mediation:  (i) the Debtors, (ii) the Creditors’ Committee, (iii) the Equity Committee, (iv) Aurelius, (v) Appaloosa, (vi) Centerbridge, (vii) Owl Creek, (viii) the TPS Consortium and the TPS Group, (ix) the WMB Noteholders, (x) Normandy Hill, (xi) The Bank of New York Mellon Trust Company, N.A., (“BNY Mellon”), in its capacity as Indenture Trustee for the Senior Notes, and (xii) the WMI Noteholders Group (as such term is used in the September Opinion) (collectively, the “Mediation Parties”); provided, however, that Normandy Hill and BNY Mellon were not required to attend the Mediation.
 
 
 
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The Mediation commenced on October 19, 2011.  At a status conference held on November 7, 2011, the Bankruptcy Court granted the Mediator’s request for additional time to continue the Mediation.  As a result of the Mediation, and with the assistance of the Mediator, discussions among the Debtors, the Creditors’ Committee, the Equity Committee, AAOC, and certain other creditor constituencies culminated in certain modifications to the Modified Sixth Amended Plan, described below, which modifications are embodied in the Seventh Amended Plan and resolve, among other things, certain plan-related issues and objections, as well as the Standing Motion.
 
G.  
The Seventh Amended Plan Incorporates Modifications Resulting From the Mediation Among the Debtors, the Creditors’ Committee, the Equity Committee, AAOC, and Certain Other Creditor Constituencies
 
During the Mediation, the Debtors, the Creditors’ Committee, the Equity Committee, AAOC and other Creditor constituencies engaged in extensive, arms’ length negotiations designed to formulate a chapter 11 plan that addresses the prior opinions of the Bankruptcy Court as well as the concerns of all of the Debtors’ stakeholders.  The Seventh Amended Plan is premised upon the Modified Sixth Amended Plan but incorporates modifications thereto made after the Mediation as well as modifications consistent with the September Opinion.  For the reasons discussed in more detail herein, such parties believe that the Seventh Amended Plan is in the best interest of all parties in interest and represents the most expeditious means for the Debtors to successfully emerge from the Chapter 11 Cases.  The modifications consistent with the September Opinion are discussed in Section I.H.1 hereof.  The salient aspects of the modifications made after the Mediation are summarized below:
 
·  
Subject to the Bankruptcy Court approval, those current holders of WMI’s Equity Interests that elect to grant the releases set forth in Section 41.6 of the Seventh Amended Plan (such provision, the “Non-Debtor Release Provision” and such holders, the “Releasing Equity Interest Holders”) will receive the Reorganized Common Stock (subject to reduction on account of the Reorganized Common Stock Elections (defined and discussed in Section III.B.6.b(iv) below), to be allocated among such holders as described herein, and as set forth in the Seventh Amended Plan.
 
 
Such releases are described, to a limited extent, below, and are summarized in more detail in Section VI.O.6 hereof.
 
·  
In consideration for, and subject in all respects to the grant and approval of, the releases by the Releasing Equity Interest Holders, and to avoid further delay as well as costly litigation, holders of Allowed Senior Notes Claims and Allowed Senior Subordinated Notes Claims will contribute to Reorganized WMI, for and on behalf of each Releasing Equity Interest Holder, respectively, Nine Hundred Sixty-Eight Thousandths of one percent (.968%) and Two and One-Tenth percent (2.1%) of the initial distributions received by them pursuant to the Seventh Amended Plan, having an aggregate value of approximately Seventy Five Million Dollars ($75,000,000.00), with the aggregate amount for all Allowed Senior Notes Claims equal to Forty Million Dollars ($40,000,000.00) (defined in the Seventh Amended Plan as the “Senior Notes Release Consideration”) and the aggregate amount for all Allowed Senior Subordinated Notes Claims equal to Thirty-Five Million Dollars ($35,000,000.00) (defined in the Seventh Amended Plan as the “Senior Subordinated Notes Release Consideration”).
 
·  
Subject to Reorganized WMI’s right to seek and obtain financing on better terms and to the right, discussed in Sections III.B.2 and VI.G.11.b hereof, of certain qualifying Creditors and Equity Interest holders to become lenders of such loans, AAOC has collectively committed to provide Reorganized WMI the senior secured multidraw term Credit Facility, in the aggregate original
 
 
 
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principal amount of One Hundred Twenty Five Million Dollars ($125,000,000.00), to be used by Reorganized WMI to finance working capital and general corporate purposes, as well as certain permitted acquisitions and originations, all subject to the terms and conditions set forth in more detail in the Seventh Amended Plan and the definitive documentation governing such loans.
 
·  
Subject to availability, and further subject to the relative rights thereto of the holders of Runoff Notes (discussed in Section III.B.1.b below), Reorganized WMI will also be funded by an additional Ten Million Dollars ($10,000,000.00), as well as interest accrued thereon at a rate of thirteen percent (13%) per annum, in the form of a portion of the proceeds from the runoff of WMMRC’s existing portfolio (as defined in the Seventh Amended Plan, the “Runoff Proceeds”) (the majority of which will be used to repay principal and interest on the Runoff Notes), (ii) certain potential litigation proceeds, if realized (defined in the Seventh Amended Plan as the “Litigation Proceeds”), and (iii) all distributions of Runoff Proceeds after all amounts due on the Runoff Notes have been paid in full, solely to the extent any such additional distributions are available.
 
 
Specifically, certain Creditors are eligible to make the Reorganized Common Stock Elections defined and described in Sections I.G.1.a and III.B.6.b(iv) hereof.  To the extent such elections are undersubscribed (i.e., if Creditors having the right to make Runoff Notes Elections decline to make Reorganized Common Stock Elections with respect to Runoff Notes having an original principal amount, in the aggregate, of less than Ten Million Dollars ($10,000,000.00) (defined in the Seventh Amended Plan as the “Runoff Threshold”)), then each of AAOC, severally and not jointly, will be deemed to have made Reorganized Common Stock Elections to receive such holder’s Pro Rata Share of the Common Stock Allotment (i.e., Ten Million (10,000,000) shares of Reorganized Common Stock, representing five percent (5%) of the issued and outstanding Reorganized Common Stock as of the Effective Date) in lieu of (i) Runoff Notes (based upon an allocation developed in their sole and absolute discretion) that they would otherwise receive on the Effective Date in their capacity as a holder of Allowed PIERS Claims, in the aggregate amount as is necessary to reach the Runoff Threshold; provided, however, that, to the extent that any of AAOC would not receive Runoff Notes on the Effective Date in its capacity as a holder of Allowed PIERS Claims in an amount sufficient to reach its allocable share of the Runoff Threshold, such AAOC Entity will instead be deemed to have elected to receive such amount of Runoff Notes (based upon an allocation developed in their sole and absolute discretion) in lieu of distributions of Creditor Cash on the Effective Date on account of its Allowed Senior Subordinated Notes Claims, and (ii) fifty percent (50%) of such holders’ Litigation Proceeds Interest (described in Section III.B.6.b(iv) hereof) in their capacity as holders of Allowed PIERS Claims.
 
In consideration for, among other things, the foregoing, the Seventh Amended Plan provides for the following releases, among others, as summarized more fully in Sections VI.O.5 and VI.O.6 hereof:
 
·  
As and to the extent set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), summarized more fully in Section VI.O.6 below, to the fullest extent permissible under applicable law, each holder of an Equity Interest that has held, currently holds or may hold any Released Third Party Causes of Action11 or a Released Claim12 (defined below), (ii) is
 

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11 The Seventh Amended Plan defines “Released Third Party Causes of Action” as any Claims and causes of action, regardless of whether asserted by any of the parties executing and delivering a release in accordance with the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), whether known, unknown, reduced to
 
 
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entitled to receive, directly or indirectly, a distribution or satisfaction of its Equity Interest pursuant to the Seventh Amended Plan, and (iii) elects, by not checking or checking the appropriate box on its Ballot (as defined in Section XI.A.2 hereof) or Election Form (as defined in Section XI.B.2.a hereof), as the case may be, to grant the releases set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), on their own behalf and on behalf of anyone claiming through them, will be deemed to have irrevocably and unconditionally, fully, finally and forever waived, released, acquitted and discharged (1) each and all of the Released Parties (as defined in the Seventh Amended Plan), from any and all Released Claims and/or any claim, act, fact, transaction, occurrence, statement, or omission in connection with or alleged in the Actions or in the Texas Litigation, or that could have been alleged in respect of the foregoing or other similar proceeding, including, without limitation, any such claim demand, right, liability, or cause of action for indemnification, contribution or any other basis in law or equity for damages, costs or fees incurred by the releasors herein arising directly or indirectly from or otherwise relating thereto and (2) each of (a) the AAOC Releasees, (b) the Senior Notes Claims Releasees, (c) the Senior Subordinated Notes
 
 
 
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judgment, not reduced to judgment, liquidated or 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 asserted or unasserted as of the date of entry of the order confirming the Seventh Amended Plan, that are based upon, relate to, or arise out of or in connection with, in whole or in part any act, omission, transaction, event or other circumstance relating to the Debtors and the Chapter 11 Cases and taking place or existing on or prior to the Effective Date, including, without limitation, (a) any such claim relating to the trading of the Debtors’ securities during the period from the Petition Date up to and including the Effective Date and (b) any claim for equitable subordination or equitable disallowance with respect to any Claims held by (i) the AAOC Releasees (as defined in the Seventh Amended Plan), (ii) the Senior Notes Claims Releasees (as defined in the Seventh Amended Plan), (iii) the Senior Subordinated Notes Claims Releasees (as defined in the Seventh Amended Plan), (iv) the PIERS Claims Releasees (as defined in the Seventh Amended Plan), and (v) the CCB Releasees (as defined in the Seventh Amended Plan) against the Debtors or the Debtors’ chapter 11 estates.
 
12 The Seventh Amended Plan’s definition of “Released Claim” includes, among other things, claims or causes of action that arise in, relate to or have been or could have been asserted (i) in the Chapter 11 Cases, the Receivership or the Related Actions, or (ii) by holders of Equity Interests relating to Equity Interests they have against the Debtors, and (iii) claims that otherwise arise from or relate to the Receivership, the Purchase and Assumption Agreement, the 363 Sale and Settlement, as defined in the Global Settlement Agreement, the Plan, the Global Settlement Agreement, and the negotiations and compromises set forth in the Global Settlement Agreement and the Plan, including, without limitation, in connection with or related to any of the Debtors, the Affiliated Banks (as defined in the Seventh Amended Plan), and their respective subsidiaries, assets, liabilities, operations, property or estates, the assets to be received by JPMC pursuant to the Global Settlement Agreement, the Debtors’ Claims, the JPMC Claims, the FDIC Claim, the WMI/WMB Intercompany Claims, any intercompany claims on the books of WMI or WMB related to the WaMu Pension Plan or the Lakeview Plan, or the Trust Preferred Securities (including, without limitation, the creation of the Trust Preferred Securities, the financing associated therewith, the requested assignment of the Trust Preferred Securities by the Office of Thrift Supervision and the transfer and the asserted assignment of the Trust Preferred Securities subsequent thereto); provided, however, that “Released Claims” does not include (1) any and all claims that the JPMC Entities, the Receivership, the FDIC Receiver and the FDIC Corporate are entitled to assert against each other or any other defenses thereto pursuant to the Purchase and Assumption Agreement, which claims and defenses shall continue to be governed by the Purchase and Assumption Agreement, (2) any and all claims held by Entities against WMB, the Receivership and the FDIC Receiver solely with respect to the Receivership, and (3) subject to the exculpation provisions set forth in the Plan, any avoidance action or claim objection regarding an Excluded Party (as defined in the Seventh Amended Plan ) or the WMI Entities (as defined in the Seventh Amended Plan), WMB, each of the Debtors’ estates, the Reorganized Debtors and their respective Related Persons; and, provided, further, that “Released Claims” is not intended to release, nor shall it have the effect of releasing, any party from the performance of its obligations in accordance with the order confirming the Seventh Amended Plan or the Seventh Amended Plan.

 
 
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Claims Releasees, (d) the PIERS Claims Releasees and (e) the CCB Releasees from any and all Released Third Party Causes of Action.
 
·  
Each of the Debtors and the Reorganized Debtors, on its own behalf and as representative of its respective estate, the Disbursing Agent and each of the Debtors’ Related Persons, the Creditors’ Committee and the Equity Committee, without giving any legitimacy or merit to any of the allegations raised or asserted with respect to AAOC, holders of Allowed Senior Notes Claims, Allowed Senior Subordinated Notes Claims and holders of Allowed PIERS Claims during the Chapter 11 Cases, will be deemed to have irrevocably and unconditionally, fully, finally and forever waived, released, acquitted, and discharged (1) the AAOC Releasees, (2) the Senior Notes Claims Releasees, (3) the Senior Subordinated Notes Claims Releasees, (4) the PIERS Claims Releasees and (5) the CCB Releasees, and each of their respective officers, directors, agents, employees and, solely in their capacity as counsel with respect to the Chapter 11 Cases, attorneys from any and all Estate Claims13 that the Debtors, the Creditors’ Committee and the Equity Committee, have or may have or claim to have, now or in the future, against (1) the AAOC Releasees, (2) the Senior Notes Claims Releasees, (3) the Senior Subordinated Notes Claims Releasees, (4) the PIERS Claims Releasees and (5) the CCB Releasees, and each of their respective officers, directors, agents, employees and, solely in their capacity as counsel with respect to the Chapter 11 Cases, attorneys.
 
In addition to the foregoing, the Equity Committee will (i) support confirmation of the Seventh Amended Plan, and (ii) take any and all action as is necessary to cause the withdrawal and dismissal, with prejudice, of the January Equity Committee Appeal and the October Equity Committee Appeal, each of which is discussed above, as well as the Equity Committee Adversary Proceeding and Equity Committee Motion to Compel (each of which is discussed in Section V.B.5.a hereof).
 
Upon entry of the order confirming the Seventh Amended Plan, each of the Debtors, Creditors’ Committee and AAOC, among others, will take any and all action as is necessary to cause the
 
 
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13 The Seventh Amended Plan defines “Estate Claims” as any Claims and causes of action, regardless of whether asserted by the Debtors, the Liquidating Trust, the Creditors’ Committee or the Equity Committee, whether known, unknown, reduced to judgment, not reduced to judgment, liquidated or 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 asserted or unasserted as of the date of entry of the Confirmation Order, that (a) are based upon, relate to, or arise out of or in connection with, in whole or in part any act, omission, transaction, event or other circumstance relating to the Debtors and the Chapter 11 Cases, (b) exist on or prior to the Effective Date, and (c) are or may be asserted against (i) the AAOC Releasees with respect to any conduct or, (ii) any of (1) the PIERS Claims Releasees, (2) the Senior Notes Claims Releasees, (3) the Senior Subordinated Notes Claims Releasees and (4) the CCB Releasees with respect to (A) any and all Claims for equitable disallowance and equitable subordination, (B) any and all Claims with respect to any conduct undertaken during the period from and after the Petition Date and (C) any and all Claims with respect to conduct undertaken during the period prior to the Petition Date solely in their capacity as holders of any securities issued by the Debtors or their subsidiaries, including, without limitation, any claims for insider trading or violations of securities laws; provided, however, that, solely with respect to clause (ii) above, under no circumstances shall Estate Claims include (y) any Claims related to trading in the securities issued by the Debtors or their subsidiaries that are based on an allegation that such trading contributed to the failure of WMB or the commencement of the Chapter 11 Cases, including, without limitation, any Claims discussed on pages 330-338 of that certain Final Report of the Examiner, dated November 1, 2010, issued by Joshua R. Hochberg, appointed as Examiner in these Chapter 11 Cases, and (z) Preserved Avoidance Actions (as defined in the Seventh Amended Plan).  For the avoidance of doubt, “Estate Claims” shall include, without limitation, (1) any claim relating to the trading of the Debtors’ securities during the period from the Petition Date up to and including the Effective Date and (2) any claim for equitable subordination or equitable disallowance.


 
 
9

 
 
withdrawal and dismissal, with prejudice, of their respective appeals related to the September Opinion and September Order.
 
The Seventh Amended Plan further provides that the order confirming the Seventh Amended Plan must provide for the withdrawal and vacatur, for all purposes, of (i) the September Order to the extent relating to the Standing Motion, and (ii) those portions of the September Opinion relating to the Standing Motion, including, but not limited to, (i) Section III (H) of the September Opinion, pages 108 through 139, and (ii) the first sentence on page 68, footnote 31 on page 70, and the last paragraph of Section III(D) of the September Opinion, page 73.
 
As stated, the Seventh Amended Plan is the result of extensive arms’ length negotiations between the Debtors, the Creditors’ Committee, the Equity Committee, AAOC and other Creditor constituencies.  Such parties believe that the Seventh Amended Plan and the terms embodied therein are in the best interests of all parties in interest and represent the most expeditious means for the Debtors to successfully emerge from the Chapter 11 Cases.  Among other things, unlike the Modified Sixth Amended Plan, the Seventh Amended Plan resolves the Standing Motion and has the support of the Equity Committee.  In contrast, an attempt to confirm a plan without the underlying agreements embodied in the Seventh Amended Plan would have invited significant confirmation objections by the Equity Committee, among others, including with respect to issues related to the Standing Motion and the effect that such disputes would have with respect to distributions pursuant to any such plan.  For example, the Debtors and the Equity Committee, among others, have opposing views as to whether the Claims subject to the Standing Motion should be treated as Disputed Claims pursuant to any such plan.  The Equity Committee has asserted that such Claims would have to be estimated by the Bankruptcy Court before any distributions could be made pursuant to a modified plan.  In addition, the Equity Committee indicated that, absent a settlement, it intended to object as to, among other things, whether a plan could be confirmed at all without prior resolution of the issues raised in the Standing Motion, in light of complications regarding distributions or reserves of the Reorganized Common Stock.  Without addressing the merits, it is beyond doubt that such issues could lead to further contested confirmation hearings, significant delays in confirmation of a plan, and erosion of Creditor distributions.
 
The detrimental effects of further delay in confirmation and consummation of a plan in the Chapter 11 Cases—now over three years old—should not be underestimated.  Each day of delay is accompanied by a continued accrual of interest and fees and the attendant depletion of estate assets and increase in total Claims, all of which results in eroded recoveries for the Debtors’ junior-most Creditors and stakeholders.  To quantify the cost of delay, as a result of (i) the contractual obligations of holders of Allowed PIERS Claims to payover their distributions to certain Creditors that are senior in recovery, on account of such senior Creditors’ Intercreditor Interest Claims at the applicable contract rate, and (ii) the continued depletion of estate assets as a result of the ongoing accrual of professionals’ fees, recoveries for holders of Allowed PIERS Claims decline at a rate of approximately $30 million per month.  As a result of the rulings in the September Opinion, the Debtors are obligated to pay Postpetition Interest Claims at the federal judgment rate, rather than at the applicable contract rate, such that the burn rate for holders that are more junior to PIERS claimants is slightly lower than that of the holders of Allowed PIERS Claims.  Notwithstanding, the rate of decline in recoveries for such holders is still significant.  Specifically, recoveries for such junior holders are reduced by approximately $18 million per month as a result of the ongoing accrual of interest and fees.
 
Currently, the Updated Liquidation Analysis (defined below) attached hereto as Exhibit C and the corresponding recovery estimates set forth in Section III.B.6.d hereof assume an Effective Date for the Seventh Amended Plan of February 29, 2012.  The Debtors estimate that if the Effective Date is delayed even three and one-half (3.5) months past February 29, 2012, recovery for holders of Allowed
 
 
 
10

 
 
PIERS Claims in Class 16 (the first Class to suffer from a deterioration or elimination in recoveries as a result of the continued accrual of interest and fees) will be wiped out.  Additionally, the Debtors estimate that if the Effective Date is delayed past June 15, 2012, the recoveries for holders of Allowed CCB Guarantee Claims will begin to be reduced, and after approximately three (3) to four (4) additional months, may also be eliminated.  After such time, while the accrual of postpetition interest will continue on Allowed Senior Notes Claims and Allowed Senior Subordinated Notes Claims, the rate of recovery on those claims will be reduced.
 
Unlike the Modified Sixth Amended Plan (or the aforementioned modified version thereof), the Seventh Amended Plan resolves many of the objections and issues that have been or could be raised, regardless of the merits, and is thus more likely to result in an expeditious exit from bankruptcy and prevent further deterioration of Creditors’ recoveries.  It is therefore undeniable that swift confirmation of the Seventh Amended Plan will benefit the Debtors and their estates, and is in the best interests of all constituencies.
 
1.  
Issuance of Runoff Notes to Certain Creditors and Distribution of Reorganized Common Stock to Certain Holders of Equity Interests
 
As discussed in more detail in Sections III.B.1, III.B.6.b(iv), III.B.6.c(ii), III.B.6.c(iii), VI.G.7, VI.F.1.a, VI.F.1.d, XI.B.2, and XI.B.3 hereof, Reorganized WMI will issue two types of securities: (i) the Runoff Notes to be issued in the aggregate original principal amount of One Hundred Forty Million Dollars ($140,000,000.00) (subject to reduction as a result of the Reorganized Common Stock Elections discussed below), maturing on the eighteenth (18th) anniversary of the Effective Date, bearing interest at a rate of thirteen percent (13%) per annum (payable in cash to the extent available and payable in kind through the capitalization of accrued interest at the rate of thirteen percent (13%) per annum to the extent cash is unavailable), the repayment thereof secured by, and having a specified priority in right of payment in, as and to the extent set forth in more detail in the definitive documents governing the Runoff Notes, (a) a securities or deposit account into which Reorganized WMI will deposit distributions it receives of Runoff Proceeds and (b) the equity interests in either WMMRC or such other Entity as holds the WMMRC Trusts (defined below) and their assets, to the extent a lien has been granted therein (with any such lien subject to regulatory approval), and (ii) Reorganized Common Stock.
 
Pursuant to the Seventh Amended Plan, the Runoff Notes will either (a) be distributed to Entities electing distributions of Runoff Notes in lieu of Creditor Cash received on the Effective Date or (b) to the extent that eligible Creditors do not elect all of the Runoff Notes, any remaining balance of the Runoff Notes will constitute Liquidating Trust Assets, as discussed in more detail in Section III.B.6.b(iv) hereof.
 
Subject to reduction on account of the Reorganized Common Stock Elections, the Reorganized Common Stock will be allocated seventy percent (70%) to those Preferred Equity Interest holders that are Releasing Equity Interest Holders and thirty percent (30%) to those holders of WMI’s common stock (i.e., pari passu to holders of Common Equity Interests and Dime Warrants, to the extent such Dime Warrant holders are determined, pursuant to a Final Order or a compromise and settlement approved by the Bankruptcy Court, to hold Common Equity Interests14) that are Releasing Equity Interest
 
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14 As discussed in Section V.B.5.d hereof, by opinion and order, each dated January 3, 2012, the Bankruptcy Court determined that holders of Dime Warrants hold Common Equity Interests in, rather than Claims against, the Debtor’s estates.  See Nantahala Capital Partners, LP et al. vs. Washington Mutual Inc., et al., Adv. No. 10-50911, D.I. 313 (Bankr. D. Del.) (MFW) (defined below as the “Dime Warrants Opinion”).  Subsequently, the Debtors and the LTW Plaintiffs (defined below) entered into the LTW Stipulation (defined below) discussed in Section V.B.5.d


 
11

 
 
Holders, or as otherwise allocated by the Bankruptcy Court.  Within each group, the Reorganized Common Stock will be allocated and distributed, pro rata with respect to shares owned, solely among the Releasing Equity Interest Holders (i.e., those current holders of WMI’s Equity Interests that affirmatively agree to grant the releases set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan)).
 
a.  
The Reorganized Common Stock Election
 
As discussed in more detail in Sections III.B.6.b(iv) and XI.B.3 hereof, pursuant to the Seventh Amended Plan (i) each eligible holder of an Allowed Senior Notes Claim, Allowed Senior Subordinated Notes Claim, Allowed General Unsecured Claim, Allowed CCB-1 Guarantees Claim, Allowed CCB-2 Guarantees Claim that made the Runoff Notes Election defined and described in Section III.B.6.b(iv) hereof (i.e., that elected to receive Runoff Notes in lieu of some or all of the Creditor Cash, if any, that such holder is otherwise entitled to receive on the Effective Date) or holder of an Allowed PIERS Claim that is otherwise entitled to receive Runoff Notes pursuant to the Seventh Amended Plan, as well as (ii) each holder of a Disputed Claim or Dime Warrant that made a contingent Runoff Notes Election (which elections will be effective only if and to the extent that (a) such holders are determined pursuant to a Final Order or pursuant to a compromise and settlement approved by the Bankruptcy Court,13 to hold Allowed General Unsecured Claims and (b) are entitled to receive Creditor Cash on the Effective Date), will have the right to elect, in its sole and absolute discretion, to receive such holder’s Pro Rata Share of the Common Stock Allotment (i.e., Ten Million (10,000,000) shares of Reorganized Common Stock, representing five percent (5%) of the issued and outstanding Reorganized Common Stock as of the Effective Date) in lieu of (i) fifty percent (50%) of such holder’s Litigation Proceeds Interest (described in Section III.B.6.b(iv) hereof) (except with respect to the AAOC Deemed Election (defined below), solely in its capacity as the holder of the Allowed Claim to which the Reorganized Common Stock Election is effective) and (ii) some or all of the Runoff Notes that such holder otherwise is entitled to and, if applicable, has elected to receive pursuant to the Runoff Notes Election.  To the extent an electing Creditor receives Reorganized Common Stock pursuant to the foregoing election, such Creditor’s share of the Runoff Notes to which the election was effective (i.e., One Dollar ($1.00) of original principal amount of Runoff Notes for each share of Reorganized Common Stock) will not be issued, and, furthermore, Reorganized WMI will retain an economic interest in certain litigation proceeds such Creditor otherwise would have received on account of its Liquidating Trust Interests (and such proceeds will not constitute a component of the Liquidating Trust Assets, and the Creditor’s rights in respect of distributions from the Liquidating Trust will be adjusted to the extent such proceeds are received by Reorganized WMI).
 
Deemed AAOC Election.  The Seventh Amended Plan further provides that, in the event that holders of Claims with the right to make Reorganized Common Stock Elections decline to tender, in the aggregate, Runoff Notes in the original principal amount necessary to reach the Runoff Threshold (i.e., Ten Million Dollars ($10,000,000.00)), each of AAOC, severally and not jointly, will be deemed to have made Reorganized Common Stock Elections to receive such holder’s Pro Rata Share of the Common Stock Allotment (i.e., Ten Million (10,000,000) shares of Reorganized Common Stock, representing five percent (5%) of the issued and outstanding Reorganized Common Stock as of the Effective Date) in lieu of (i) Runoff Notes (based upon an allocation developed in their sole and absolute
 

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hereof.   As of the date of this Disclosure Statement, however, the LTW Stipulation has not yet been approved by the Bankruptcy Court.
 
15 See supra, n.14.

 
12

 
 
discretion) that they would otherwise receive on the Effective Date in their capacity as a holder of Allowed PIERS Claims, in the aggregate amount as is necessary to reach the Runoff Threshold; provided, however, that, to the extent that any of AAOC would not receive Runoff Notes on the Effective Date in its capacity as a holder of Allowed PIERS Claims in an amount sufficient to reach its allocable share of the Runoff Threshold, such AAOC Entity will instead be deemed to have elected to receive such amount of Runoff Notes (based upon an allocation developed in their sole and absolute discretion) in lieu of distributions of Creditor Cash on the Effective Date on account of its Allowed Senior Subordinated Notes Claims, and (ii) fifty percent (50%) of such holders’ Litigation Proceeds Interest (described in Section III.B.6.b(iv) hereof) in their capacity as holders of Allowed PIERS Claims.
 
2.  
Commitment by AAOC to Provide Exit Financing
 
As discussed in more detail in Sections III.B.2 and VI.G.11 hereof, AAOC has committed to make available to Reorganized WMI the four and one half (4½) year or five (5) year, as applicable, senior secured multi-draw term Credit Facility, in an aggregate original principal amount not to exceed One Hundred Twenty Five Million Dollars ($125,000,000.00), bearing interest on amounts outstanding at a rate of seven percent (7.0%) per annum, with Reorganized WMI having the option to pay one percent (1%) thereof in kind, upon which Reorganized WMI may draw during a three (3) year availability period from and after the Effective Date.  The Credit Facility will consist of three tranches: a (i) a Tranche A Term Loan in the aggregate principal amount of Ten Million Dollars ($10,000,000.00) and (ii) a Tranche A-1 Term Loan in the aggregate principal amount of Fifteen Million Dollars ($15,000,000.00) will be available to fund working capital and for general corporate purposes of Reorganized WMI and its subsidiaries, subject to the terms and conditions of the definitive documentation governing the Credit Facility (together, the “Tranche A Credit Facility”), and (iii) a Tranche B Term Loan in the aggregate principal amount of One Hundred Million Dollars ($100,000,000.00) will be available for certain specified purposes (the “Tranche B Credit Facility”).  Specifically, advances on the Tranche B Credit Facility may only be used to fund acquisitions and originations meeting certain criteria which include, among other things, that at least twenty percent (20%) of the funding for any such transaction is new equity contributions or subordinated indebtedness or Cash on hand (other than proceeds of the Credit Facility, “Restricted Disposition Proceeds” (defined in the documentation governing the Credit Facility to include the proceeds of dispositions of assets or equity interests to the extent purchased with proceeds advanced pursuant to the Credit Facility) and proceeds of other indebtedness) and satisfy certain additional conditions precedent, all as discussed in more detail in Sections III.B.2 and VI.G.11 hereof.
 
3.  
Resolution of Certain Governance-Related Issues
 
As discussed in more detail in Sections I.H.1.b(i), III.B.4, and III.B.5 hereof, the Seventh Amended Plan incorporates modifications that resolve certain governance-related issues including and in addition to those identified by the Bankruptcy Court in the September Opinion such as, among other things, modifications to the composition of the Trust Advisory Board and Reorganized WMI’s board of directors.  In addition, the Liquidating Trust Agreement, a copy of which will be included in the Plan Supplement for the Seventh Amended Plan, contemplates the creation of a Litigation Subcommittee (defined and described below) of the Trust Advisory Board.
 
a.  
The Establishment of a Litigation Subcommittee
 
As discussed in more detail in Section III.B.4.a hereof, the Liquidating Trust under the Seventh Amended Plan will provide for a subcommittee of the Trust Advisory Board (the “Litigation Subcommittee”) that will oversee all litigation relating to the prosecution of Causes of Action against
 
 
 
13

 
 
third parties including, among other things, subject to the exculpation and release provisions of the Seventh Amended Plan, (a) claims against present and former officers and directors of the Debtors for actions arising during the period prior to the Petition Date (the “D&O Claims”), (b) claims against professionals and representatives retained by the Debtors with respect to actions arising during the period prior to the Petition Date, and (c) claims arising prior to the commencement of the Debtors’ bankruptcy cases against third-parties for any non-contractual breach of duty to WMI, including, but not limited to, antitrust claims and business tort claims.16  The Litigation Subcommittee will be comprised of one (1) member selected by the Creditors’ Committee and two (2) members selected by the Equity Committee.  Twenty Million Dollars ($20,000,000.00) will be allocated to the Litigation Subcommittee for the prosecution of Causes of Action against third parties.  Proceeds from all litigation will be distributed to the Liquidating Trust Beneficiaries consistent with the terms of the Seventh Amended Plan, in accordance with the Subordination Model annexed as an exhibit to the Seventh Amended Plan, a copy of which is set forth in Section III.B.6.d hereof.
 
H.  
The Seventh Amended Plan
 
On December 12, 2011, the Debtors filed the Seventh Amended Plan, the terms of which are summarized in greater detail in Section III.B and Article VI below.  Except with respect to those limited modifications consistent with the September Opinion, discussed below, as well as the aforementioned modifications related to the Mediation among the Debtors, the Creditors’ Committee, the Equity Committee, AAOC, and certain other creditor constituencies, the Seventh Amended Plan largely mirrors the Modified Sixth Amended Plan which, as stated above, was accepted by the vast majority of Claims and Equity Interests entitled to vote thereon.
 
In particular, the Seventh Amended Plan is premised upon and incorporates the terms of the Global Settlement Agreement, which, as discussed above, the Bankruptcy Court has already determined, pursuant to both the January Opinion and the September Opinion, to be fair, reasonable and in the best interests of the Debtors’ estates.  In addition, as was the case pursuant to the Modified Sixth Amended Plan, pursuant to the Seventh Amended Plan, WMI will reorganize around its sole remaining active subsidiary, WMMRC, a mortgage reinsurance company currently operating on a runoff basis.  Furthermore, the provisions of the Seventh Amended Plan are similar to the Modified Sixth Amended Plan with respect to the creation of the Liquidating Trust and the distribution of Creditor Cash and Liquidating Trust Interests in accordance with the Subordination Model attached as an exhibit to the Seventh Amended Plan, a copy of which is set forth in Section III.B.6.d hereof.
 
The Debtors will solicit votes and elections with respect to the Seventh Amended Plan from certain Creditors and Equity Interest holders as set forth in more detail in Article XI below.  Holders of Claims and Equity Interests are thus advised to carefully review the voting and election procedures for the Seventh Amended Plan discussed in Article XI.
 
1.  
Plan Modifications Consistent with the September Opinion
 
The Seventh Amended Plan incorporates all the additional modifications that the Bankruptcy Court determined, pursuant to the September Opinion, were required for the Modified Sixth Amended Plan to satisfy the confirmation requirements set forth in section 1129 of the Bankruptcy Code, each of which is discussed in detail below.
 

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16 For the avoidance of doubt, the Litigation Subcommittee will not pursue business tort claims released against JPMC and its Related Persons pursuant to the Global Settlement Agreement.
 
14

 
 
a.  
Adjustment of Postpetition Interest
 
Pursuant to the September Opinion, the Court opined that, in accordance with applicable law, postpetition interest should be (i) paid at the federal judgment rate (determined as of the Petition Date), and (ii) compounded annually.  (September Opinion at 77-78, 89-90.)  As reflected in Section 1.169 of the Seventh Amended Plan, the definition of “Postpetition Interest Claim” has been amended (i) to reflect that postpetition interest is to be paid at the federal judgment rate as in effect on the Petition Date (1.95%), and (ii) to include the phrase “compounded annually,” with interest continuing to accrue only on the then outstanding and unpaid obligation or liability, including any postpetition interest compounded thereon, that is the subject of an Allowed Claim.
 
b.  
Changes to the Liquidating Trust and Liquidating Trust Interests Consistent With the September Opinion
 
(i)  
Composition of the Trust Advisory Board
 
In the September Opinion, the Bankruptcy Court stated that the Modified Sixth Amended Plan must provide that (i) the Liquidating Trustee may be removable at the discretion of a majority of the Trust Advisory Board, and (ii) the composition of the Trust Advisory Board should change once creditors have been paid in full, to ensure that the Trust Advisory Board adequately represents the constituencies of the Liquidating Trust at that time.  (See September Opinion at 24-25.)  To address these concerns, the Debtors have amended the form of Liquidating Trust Agreement to reflect that the Liquidating Trustee may be removed by a majority vote of the members of the Trust Advisory Board.  In addition, the Liquidating Trust Agreement now provides, as discussed in more detail in Section III.B.4.a hereof, that the Trust Advisory Board will consist initially of seven (7) members in total, three (3) of which will be selected by the Creditors’ Committee, three (3) by the Equity Committee and one (1) by the Creditors’ Committee subject to approval by the Equity Committee, which approval shall not be unreasonably withheld.  Trust Advisory Board members solely appointed by the Creditors’ Committee are subject to replacement on a staggered basis as and when all Allowed Claims, Allowed Subordinated Claims and Postpetition Interest Claims approach satisfaction in full, as discussed in more detail in Section III.B.4.a hereof.  The Trust Advisory Board will have oversight responsibility for all functions of the Liquidating Trust including, among others, litigation of certain Disputed Claims.
 
(ii)  
Transferability of Liquidating Trust Interests
 
Pursuant to Section 27.8 of the Seventh Amended Plan, all Liquidating Trust Interests that will be distributed to certain holders of Claims and Equity Interests are now non-transferable and non-assignable except by will, intestate succession or operation of law.  This change was not required by the September Opinion but, rather, the Debtors determined that due to the significant passage of time and the ongoing collection and/or liquidation of the Debtors’ assets, including state and federal tax refunds, preserving transferability is not justified economically and is not in the best interests of the Debtors’ estates.  Specifically, it is estimated that inclusion of a transferability right would cost the Debtors or the Reorganized Debtors, as the case may be, approximately $11.1 million in connection with compliance and administrative fees, e.g., fees and expenses related to the engagement and retention of a transfer agent.
 
c.  
Tax Consequences in Connection with Liquidating Trust Interests
 
In the September Opinion, the Bankruptcy Court suggested that the Debtors consider a means to avoid negative tax consequences to creditors associated with the receipt of Liquidating Trust
 
 
 
15

 
Interests.  See September Opinion at 100-01.  Specifically, the Court expressed a concern that, by using a liquidating trust structure, certain creditors would be required to pay capital gains tax based upon the value of the interests in the Liquidating Trust that are distributed to them, without any concomitant payment to them of any value for many years until the claims of the estate are litigated to judgment or settled.
 
The use of a liquidating trust structure is common to reorganization cases where assets unassociated with the reorganizing debtor are distributed to a liquidating trust to be liquidated for the benefit of creditors and/or equity holders.  For federal income tax purposes, this generally is treated no differently than if the plan distributed the assets directly to the creditors, and such assets were subsequently sold by the creditors themselves.  (See Section VIII.C hereof.)  Significantly, the tax treatment to each creditor with respect to the receipt of a Liquidating Trust Interest depends on the value of the Liquidating Trust Interest received and on the Creditor’s or equity holder’s individual circumstances.  For example, the holders of Common Equity Interests, and the holders of Dime Warrants (if and to the extent they are determined pursuant to a Final Order or pursuant to a compromise and settlement approved by the Bankruptcy Court to hold Equity Interests that are pari passu with the Common Equity Interests, rather than Claims17), would be considered to receive a contingent right to distributions of Liquidating Trust Interests, which right is (presumably) of little or no current fair market value and, thus, would have no real risk of taxable income regardless of their individual circumstances.  In contrast, as to more senior Creditors who receive a meaningful economic interest in the Liquidating Trust, such Creditors may have sufficient tax basis in their claims, such that the receipt of the Liquidating Trust Interest creates a tax loss.  Others, however, may recognize income or gain, but have sufficient other tax losses to offset such income.   Accordingly, whereas the receipt of a Liquidating Trust Interest may have negative tax consequences to some, it may have neutral or favorable tax consequences to others.
 
No reasonable change to the Modified Sixth Amended Plan could have avoided the potential that certain Creditors may have taxable income; thus, no modification to this effect has been incorporated in the Seventh Amended Plan.  (See Sections VIII.B and VIII.C hereof.)  Nevertheless, the initial distributions to holders of Class 12 Claims (General Unsecured Claims) (which would include the holders of Dime Warrants, if and to the extent their claims/interests were determined pursuant to a Final Order or pursuant to a compromise and settlement approved by the Bankruptcy Court to be Claims and not be otherwise subordinated) will be a combination of cash, Reorganized Common Stock (to the extent elected pursuant to the Reorganized Common Stock Elections) and Liquidating Trust Interests—with substantially all the consideration being cash.  Accordingly, contrary to the assertion of certain holders of Dime Warrants, many creditors that receive Liquidating Trust Interests will receive a sufficient contemporaneous Cash distribution to pay any potential tax liability incurred by them in connection with the distribution of the Liquidating Trust Interests on, or shortly after, the Effective Date.
 
d.  
Payment of Certain Fees
 
The September Opinion found that the Modified Sixth Amended Plan must provide for Court approval of fees to be paid by the Debtors, including the fees of the WMB Noteholders and the Liquidating Trustee.  (See September Opinion at 23-24.)
 
Accordingly, as to the fees of the Liquidating Trustee, the Debtors have modified Section 27.12 of the Seventh Amended Plan to provide that “[t]he individual(s) serving as or comprising
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17 See supra, n.14.
 
 
 
16

 
 
the Liquidating Trustee shall be entitled to reasonable compensation in an amount consistent with that of similar functionaries in similar roles, the payment of which shall be subject to the approval of the Bankruptcy Court” (emphasis added), and have made corresponding changes to the form of Liquidating Trust Agreement.  With respect to the WMB Noteholders, Section 43.18 of the Modified Sixth Amended Plan already provided (as does Section 41.18 of the Seventh Amended Plan) for Court approval of the fees incurred by counsel to the WMB Noteholders, Pachulski Stang Ziehl & Jones LLP, Wilmer Cutler Pickering Hale & Dorr, and Boies, Schiller & Flexner LLP.  Accordingly, no change is necessary to this section of the Seventh Amended Plan.
 
I.  
The Global Settlement Agreement
 
Set forth below is a brief description of the Global Settlement Agreement, certain relevant background, and the Bankruptcy Court’s approval thereof.  The Global Settlement Agreement is described in more detail in Sections V.B.2 and V.B.3 hereof.
 
1.  
Background
 
In the wake of the seizure and sale of the assets of WMB, a multitude of disputes arose among the Debtors, JPMC, and the FDIC, both in its capacity as the FDIC Receiver (the receiver for WMB) and in its corporate capacity (“FDIC Corporate”), among other parties, with each asserting Claims for billions of dollars against one or more of the others in various forums each of the parties contended had jurisdiction over the issues.  The Claims of the Debtors, JPMC, the FDIC Receiver and FDIC Corporate are the subject of myriad disputes in the Bankruptcy Court and three lawsuits in which the Creditors’ Committee and certain holders of funded indebtedness of WMB (collectively, the “WMB Notes Holders”) have either intervened or seek to intervene.  The three lawsuits consist of (i) a lawsuit initiated by the Debtors in the United States District Court for the District of Columbia (the “D.C. District Court”) against the FDIC Receiver and FDIC Corporate (the “D.C. Action”) challenging the FDIC Receiver’s disallowance of the claim WMI asserted in WMB’s receivership and asserting various additional claims, in which JPMC has intervened, (ii) an adversary proceeding initiated by JPMC in the Bankruptcy Court against the Debtors and the FDIC (the “JPMC Adversary Proceeding”), in which the parties thereto have asserted various claims, and (iii) an adversary proceeding initiated by the Debtors in the Bankruptcy Court against JPMC (the “Turnover Action”) for turnover of in excess of $4 billion of the Debtors’ funds on deposit in accounts now held by JPMC (the “Disputed Accounts”), in which the FDIC Receiver has intervened.
 
In these litigations, the parties dispute (i) the ownership of various assets as of the date of the Receivership and, accordingly, whether such assets either were transferred to JPMC pursuant to the Purchase and Assumption Agreement or were retained by WMI or WMI Investment, and (ii) the validity and extent of the numerous claims the parties have asserted against each other for various prepetition and pre-Receivership transactions and obligations.  The most significant disputes between the Debtors, JPMC, the FDIC Receiver, and FDIC Corporate are the parties’ disputes regarding ownership of (i) the Disputed Accounts, (ii) approximately $5.5 to $5.8 billion in tax refunds (the “Tax Refunds”), including interest through a projected future date of receipt and net of tax payments estimated to be owed to certain taxing authorities, that WMI either already has received or, the Debtors believe, will receive, in its capacity as the common parent of a consolidated or combined tax group for federal and state income tax purposes, comprised of WMI, WMB and other subsidiaries (the “Tax Group”), and (iii) the Trust Preferred Securities, which have a liquidation preference of approximately $4 billion.  In addition, the parties dispute ownership of and responsibility for certain employee benefit plans and trusts created to fund employee-related obligations, certain intellectual property and contractual rights, shares in Visa Inc., and the proceeds of certain litigation and insurance policies (each, as described herein).
 
 
 
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In an effort to resolve these various disputes, the Debtors, JPMC, the FDIC, and certain Creditor constituencies negotiated a settlement, as set forth in the Initial Global Settlement Agreement.  The Sixth Amended Plan was premised upon, and incorporated the terms of, the Initial Global Settlement Agreement.  At the December Confirmation Hearing, the Debtors sought and received approval of the Initial Global Settlement Agreement.  As described herein, the Bankruptcy Court reaffirmed its approval of the Global Settlement Agreement in the September Opinion.
 
2.  
Bankruptcy Court Approval of the Global Settlement Agreement
 
Based upon evidence and testimony provided by the Debtors in connection with the December Confirmation Hearing, the Bankruptcy Court determined, in the January Opinion, that the compromise and settlement embodied in the Initial Global Settlement Agreement, and the transactions contemplated therein, are fair, reasonable, and in the best interests of the Debtors and their estates.  In that regard, the Bankruptcy Court found that the various litigations and claims that are resolved pursuant to the Initial Global Settlement Agreement constitute “the precise type of multi-faceted litigation that cries out for settlement” due to the multiplicity of issues, the complexity of the various arguments, and the significant risks associated with litigation of the multitude of claims asserted therein.  The Bankruptcy Court further found that, with respect to each of the claims resolved by the Initial Global Settlement Agreement, the Debtors are unlikely to receive greater value by continuing to litigate than that which they will procure for their estates through consummation of the Initial Global Settlement Agreement, such that the Initial Global Settlement Agreement provides “a reasonable return in light of the possible results of the litigation.”
 
3.  
Subsequent Amendments to the Global Settlement Agreement and Bankruptcy Court Approval Thereof
 
Notwithstanding the fact that the Bankruptcy Court approved the Initial Global Settlement Agreement, because the Bankruptcy Court determined that the Debtors needed to make certain modifications to the Sixth Amended Plan before the Bankruptcy Court would enter an order confirming the plan, the Debtors were not able to implement the terms of the Initial Global Settlement Agreement.  On January 31, 2011, the Initial Global Settlement Agreement became terminable by any party.  Due to, among other things, the passage of time, the Settlement Note Holders (as defined in the Initial Global Settlement Agreement)18 determined they did not want to agree to a further extension of the termination date of the Initial Global Settlement Agreement.  As a result, the Debtors (i) exercised their rights pursuant to Section 7.3 of the Initial Global Settlement Agreement and terminated the Initial Global Settlement Agreement, and (ii) entered into the Global Settlement Agreement.  Except with respect to modifications, consistent with the January Opinion, to certain of the release provisions set forth therein, the Global Settlement Agreement retains the same terms as the Initial Global Settlement Agreement as between the Debtors, JPMC, the FDIC Receiver, FDIC Corporate, and the Creditors’ Committee.  A copy of the Global Settlement Agreement is annexed as an exhibit to the Seventh Amended Plan, which is annexed hereto as Exhibit A and also is available at www.kccllc.net/wamu.
 
__________________________
18 The Initial Global Settlement Agreement defined the “Settlement Note Holders” as (i) Appaloosa Management L.P., on behalf of Appaloosa Investment L.P. I, Palomino Fund Ltd., Thoroughbred Fund, L.P., and Thoroughbred Master Ltd., (ii) Centerbridge Partners, L.P, on behalf of Centerbridge Credit Advisors, LLC and Centerbridge Special Credit Advisors, LLC, (iii) Owl Creek Asset Management, L.P., on behalf of Owl Creek I, L.P., Owl Creek II, L.P., Owl Creek Overseas Fund, Ltd., Owl Creek Socially Responsible Investment Fund, Ltd., Owl Creek Asia I, L.P., Owl Creek Asia II, L.P., and Owl Creek Asia Master Fund, Ltd. and (iv) Aurelius Capital Management, LP, on behalf of Aurelius Capital Partners, LP and Aurelius Investment, LLC and other managed fund entities.
 
 
 
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In its September Opinion, the Bankruptcy Court reiterated that the Global Settlement Agreement “provides a reasonable resolution in light of the possible results of the multiple complex litigation, the likely difficulties in collection, the expense inherent in any further delay, and the paramount interests of the stakeholders,” found that such conclusion is now the “law of the case,” and that there was “not any intervening change in the law or facts to cause it to reconsider its conclusion in the [January Opinion] that the [Global Settlement Agreement] is reasonable.”  (September Opinion at 27, 31-32, 35.)
 
II.
THE DISCLOSURE STATEMENT
 
The purpose of this Disclosure Statement is to provide holders of Claims against and Equity Interests in the Debtors with adequate information regarding (i) the Debtors’ history, businesses, and these chapter 11 cases, (ii) the Seventh Amended Plan and alternatives to the Seventh Amended Plan, (iii) the rights of holders of Claims and Equity Interests pursuant to the Seventh Amended Plan, and (iv) other information necessary to enable holders of Claims and Equity Interests to make an informed judgment as to whether to vote to accept or reject and how to make elections with respect to the Seventh Amended Plan.
 
On January 12, 2012 after notice and a hearing, the Bankruptcy Court entered the Disclosure Statement Order approving this Disclosure Statement, in accordance with section 1125 of the Bankruptcy Code, as containing adequate information of a kind and in sufficient detail to enable hypothetical reasonable investors typical of holders of Claims against and Equity Interests in the Debtors to make an informed judgment in voting to accept or reject the Seventh Amended Plan.  However, the Bankruptcy Court has not passed on the merits of the Seventh Amended Plan.  No solicitation of votes on the Seventh Amended Plan may be made except pursuant to this Disclosure Statement and section 1125 of the Bankruptcy Code.  In voting on the Seventh Amended Plan, holders of Claims against or Equity Interests in the Debtors should not rely on any information relating to the Debtors, other than the information contained in this Disclosure Statement, the Seventh Amended Plan, and all exhibits hereto and thereto.
 
THIS DISCLOSURE STATEMENT IS NOT INTENDED TO REPLACE A CAREFUL AND DETAILED REVIEW AND ANALYSIS OF THE SEVENTH AMENDED PLAN BY EACH HOLDER OF A CLAIM OR EQUITY INTEREST.  THE DISCLOSURE STATEMENT IS INTENDED TO AID AND SUPPLEMENT THAT REVIEW.  THE DESCRIPTION OF THE SEVENTH AMENDED PLAN IS A SUMMARY ONLY, WHICH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE SEVENTH AMENDED PLAN, AND IF ANY INCONSISTENCY EXISTS BETWEEN THE TERMS AND PROVISIONS OF THE SEVENTH AMENDED PLAN AND THIS DISCLOSURE STATEMENT, THE TERMS AND PROVISIONS OF THE SEVENTH AMENDED PLAN ARE CONTROLLING.  HOLDERS OF CLAIMS AND EQUITY INTERESTS AND OTHER PARTIES IN INTEREST ARE CAUTIONED TO REVIEW THE SEVENTH AMENDED PLAN AND ANY RELATED ATTACHMENTS FOR A FULL UNDERSTANDING OF THE SEVENTH AMENDED PLAN’S PROVISIONS.
 
III.
GENERAL OVERVIEW OF THE SEVENTH AMENDED PLAN
 
A.  
Chapter 11 Overview
 
Chapter 11 is the chapter of the Bankruptcy Code primarily used for business reorganization.  Asset sales, stock sales, and other disposition efforts, however, can also be conducted
 
 
 
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during a chapter 11 case or pursuant to a chapter 11 plan.  Under chapter 11, a company endeavors to restructure its finances such that it maximizes recovery to its creditors and other stakeholders.  Formulation of a chapter 11 plan is the primary purpose of a chapter 11 case.  A chapter 11 plan sets forth and governs the treatment and rights to be afforded to creditors and stockholders with respect to their claims against and equity interests in the debtor.  According to section 1125 of the Bankruptcy Code, acceptances of a chapter 11 plan may be solicited only after a written disclosure statement has been provided to each creditor or stockholder who is entitled to vote on the plan.  This Disclosure Statement is presented by the Debtors to holders of Claims against and Equity Interests in the Debtors to satisfy the disclosure requirements contained in section 1125 of the Bankruptcy Code.
 
B.  
Significant Features of the Seventh Amended Plan
 
The following is a brief overview of certain provisions of the Seventh Amended Plan and is qualified in its entirety by reference to the full text of the Seventh Amended Plan, a copy of which is annexed hereto as Exhibit A, as well as the documents included in the Plan Supplement.  For a more detailed summary of the terms and provisions of the Seventh Amended Plan, see Article VI below.
 
1.  
Reorganization
 
The Seventh Amended Plan contemplates a reorganization of the Debtors pursuant to chapter 11 of the Bankruptcy Code.  After the Effective Date of the Seventh Amended Plan, Reorganized WMI’s assets will consist of its Equity Interests in WMI Investment and WMMRC, as well as in WMB (unless and until WMI abandons its interest in WMB prior to the Effective Date, as discussed further in Article VIII hereof and in all respects, in a manner consistent with previously issued rulings by the Bankruptcy Court), the Senior Notes Release Consideration and Senior Subordinated Notes Consideration (discussed below in Section III.B.6.b(iv) hereof), as well as, as a result of the Reorganized Common Stock Elections, certain Runoff Proceeds and Litigation Proceeds.
 
As set forth in Sections 1.140 and 27.3 of the Seventh Amended Plan, all of WMI Investment’s assets will be contributed to a Liquidating Trust (discussed below), such that WMMRC, which is currently operating on a “runoff” basis, will be Reorganized WMI’s only operating subsidiary.  WMMRC, a Hawaiian corporation and non-debtor, wholly-owned subsidiary of WMI, is a captive reinsurance company, created to reinsure the risk associated with residential mortgages that were originated or acquired by WMB.  Mortgage insurance for WMB-originated or acquired loans had historically been provided by seven mortgage insurance companies (collectively, the “Mortgage Insurers”), although currently WMMRC is party to mortgage reinsurance agreements (the “Reinsurance Agreements”) with only six mortgage insurance companies.  WMMRC entered into Reinsurance Agreements with each Mortgage Insurer, pursuant to which it would share in the risk, in the form of claim losses, in exchange for a portion of the premiums generated from the residential mortgage loan portfolio held by the Mortgage Insurer.19  See Section IV.A.6 and Articles VII and VIII hereof for financial projections and information related to Reorganized WMI (including, in particular, WMMRC), as well as further discussions relevant to WMMRC’s business and to certain tax consequences related to the consummation of the Seventh Amended Plan.
 
 
 
__________________________
19 One of WMMRC’s Reinsurance Agreement counterparties is PMI Mortgage Ins. Co., Inc. (“PMI Mortgage”), which Entity was seized by Arizona state regulators on October 20, 2011.  The Debtors understand that, although PMI Mortgage has ceased writing new business, PMI Mortgage will continue to insure its existing mortgage loan portfolio on a runoff basis, and will continue to make payments of premium income to WMMRC pursuant to the Reinsurance Agreement.
 
 
 
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Pursuant to the Seventh Amended Plan, Reorganized WMI will issue (i) the Runoff Notes and (ii) the Reorganized Common Stock.  Certain Creditors may elect to receive or may by default receive Runoff Notes in lieu of the distributions of Creditor Cash such holders would otherwise be eligible to receive on the Effective Date, which elections will be honored, to the extent Runoff Notes are available and to the extent that electing holders are entitled to receive Creditor Cash on the Effective Date, in a manner consistent with the Subordination Model annexed as an exhibit to the Seventh Amended Plan, a copy of which is set forth in Section III.B.6.d hereof.  The Reorganized Common Stock will be distributed (i) to holders of Equity Interests, to be allocated among the current holders of WMI’s preferred and common Equity Interests in the manner set forth in the Seventh Amended Plan or such other manner as ordered by the Bankruptcy Court, and (ii) with respect to the Common Stock Allotment (i.e., Ten Million (10,000,000) shares of Reorganized Common Stock, representing five percent (5%) of the issued and outstanding Reorganized Common Stock as of the Effective Date), to those eligible Creditors that make Reorganized Common Stock Elections, all as discussed in greater detail below.
 
Reorganized WMI will be funded by (i) the Seventy Five Million Dollar ($75,000,000.00) Senior Notes Release Consideration and Senior Subordinated Notes Consideration from the holders of Allowed Senior Notes Claims and Allowed Senior Subordinated Notes Claims, (ii) as a result of the Reorganized Common Stock Elections, subject to the relative priorities thereto set forth in the definitive documentation governing the Runoff Notes, Runoff Proceeds in an aggregate original amount of Ten Million Dollars ($10,000,000.00) plus any interest accrued thereon at a rate of thirteen percent (13%) per annum, as well as certain Litigation Proceeds, and (iii) to the extent of any, all Runoff Proceeds that are generated after full satisfaction of all amounts due on the Runoff Notes.  In addition, subject to the terms and conditions set forth more fully in the Seventh Amended Plan and the definitive documentation governing such loans, AAOC has committed to provide the One Hundred Twenty Five Million Dollar ($125,000,000.00) Credit Facility to be used by Reorganized WMI to finance working capital and general corporate purposes, as well as certain permitted acquisitions and transactions.
 
a.  
Runoff Proceeds
 
As discussed in Section IV.A.6 hereof, WMMRC’s existing portfolio of assets is held in the following trusts and accounts (such trusts and accounts, collectively, the “WMMRC Trusts”): (a) Home Loan Reinsurance Co. United Guaranty Residential Insurance Company Reinsurance Agreement (Acct. No. x6401); (b) Home Loan Reinsurance Co. Genworth Reinsurance Co. Trust Agreement (Acct. No. x6403); (c) Mortgage Guaranty Insurance Corporation/WM MTG Reinsurance Co. Trust; (Acct. No. x2400); (d) Reinsurance Escrow Agreement among WM Mortgage Reinsurance Co. PMI Mortgage Insurance Company and US Bank (Acct. No. x6404); (e) Radian Guaranty Inc. and WM Mortgage Reinsurance Company Agreement, dated March 27, 2001 (Acct. No. x5700); (f) Home Loan Reinsurance Co. Republic Mortgage Co. Reinsurance Agreement, dated December 14, 1998 (Acct. No. x6402); (g) Washington Mutual Custody Account (Acct. No. x6406); and (h) WM Mortgage Reinsurance Company Inc. (Acct. No. x4202).
 
Pursuant to the Seventh Amended Plan and the definitive documentation governing the Runoff Notes (discussed below), the “Runoff Proceeds” are (a)(i) all net premiums, reinsurance recoverables, net revenue resulting from commutation of insurance contracts, net interest income, reserve releases and other revenues derived from the reinsurance contracts, investments and other assets of the WMMRC Trusts less, without duplication, (ii)(A) the reasonable and necessary costs and expenses of the WMMRC Trusts and the Trust Holder (defined below) (including, but not limited to, general and administrative expenses, audit fees, required regulatory capital contributions (which capital contributions will be added back to the Runoff Proceeds if applicable regulations permit such distributions thereof), expenses of regulatory compliance, including all costs associated with the Insurance Book Closing (as
 
 
 
 
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defined in the definitive documentation governing the Runoff Notes), expenses of administering the indenture for the Runoff Notes and taxes) attributable to the administration of the WMMRC Trusts or the assets thereof and the collection of premiums and/or management of investments in connection therewith (which expenses shall include reasonable and customary expenses attributable to the foregoing paid under any administrative services agreement, investment management agreement or similar agreement), and (B) claims paid for covered losses and (b) the proceeds from the foregoing received by Trust Holder or Reorganized WMI in cash, securities and/or other property from any sale, liquidation, merger or other disposition in respect of the Trust Holder or its interests in the WMMRC Trusts or the assets thereof.  Pursuant to the definitive documentation governing the Runoff Notes, the inclusion of clause (b) of the definition of Runoff Proceeds shall not be construed as a consent to any sale, liquidation, merger or other disposition or waiver of compliance with any covenant related thereto.  For the avoidance of doubt, to the extent that WMI or WMMRC pays any such cost, capital contribution or expense described in clause (ii)(A), payment by WMI or WMMRC will be deemed a cost or expense of the WMMRC Trusts.
 
b.  
Runoff Notes
 
The “Runoff Notes,” which are more fully described in the definitive documents governing the Runoff Notes, as attached as an exhibit to the Seventh Amended Plan, are the non-recourse senior secured promissory notes to be issued on the Effective Date by Reorganized WMI, in two series, with a combined original principal amount of One Hundred Forty Million Dollars ($140,000,000.00), which will be reduced to a combined original principal amount of One Hundred Thirty Million Dollars ($130,000,000.00) on account of the Reorganized Common Stock Elections, as follows: (i) the First Lien Runoff Notes, in an original principal amount of One Hundred Ten Million Dollars ($110,000,000.00) (the “First Lien Runoff Notes”); and (ii) the Second Lien Runoff Notes, in an original principal amount of Twenty Million Dollars ($20,000,000.00) (the “Second Lien Runoff Notes”).  Any summary of the Runoff Notes set forth herein is subject, in its entirety, to the definitive documents governing the Runoff Notes, and in the event of any conflict between this summary and such documents, such documents shall govern.  The Runoff Notes bear interest at a rate of thirteen percent (13%) per annum, payable in cash to the extent available and payable in kind through quarterly capitalization of accrued interest to the extent cash is unavailable.

The Runoff Notes’ original principal amount of One Hundred Forty Million Dollars ($140,000,000.00) will be subject to reduction on account of the Reorganized Common Stock Elections described in Sections I.G.1.a and III.B.6.b(iv) hereof.  Specifically, to the extent any holder of an Allowed Senior Notes Claim, Allowed Senior Subordinated Notes Claim, Allowed General Unsecured Claim, Allowed CCB-1 Guarantees Claim, Allowed CCB-2 Guarantees Claim, Allowed PIERS Claim or, on a contingent basis, Disputed Claim or Dime Warrant, makes the Reorganized Common Stock Election described in Sections I.G.1.a and III.B.6.b(iv) hereof, such holder’s share of the Runoff Notes to which the Reorganized Common Stock Election was effective will not be issued, thereby reducing the aggregate amount of Runoff Notes outstanding and, subject to the relative priorities set forth below, Reorganized WMI will retain (and will not transfer to the Liquidating Trust) Runoff Proceeds in an amount equal to the payments of principal and interest that would have been due on the Runoff Notes to which the Reorganized Common Stock Election was effective (i.e., One Dollar ($1.00) of original principal amount of Runoff Notes for each share of Reorganized Common Stock).  AAOC has committed to make the Reorganized Common Stock Elections (to the extent such elections are not made by other eligible Creditors) with respect to any distributions of Runoff Notes that AAOC is eligible to receive pursuant to the Seventh Amended Plan on account of such holders’ Allowed PIERS Claims, in an aggregate principal amount of up to Ten Million Dollars ($10,000,000.00).  Thus, as a result, the aggregate original principal amount of Runoff Notes issued will be One Hundred Thirty Million Dollars ($130,000,000.00).
 
 
 
 
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To the extent an electing Creditor receives Reorganized Common Stock pursuant to the foregoing election, such Creditor’s share of the Runoff Notes to which the election was effective  (i.e., One Dollar ($1.00) of original principal amount of Runoff Notes for each share of Reorganized Common Stock) will not be issued and Reorganized WMI will retain an economic interest in the Litigation Proceeds (and such proceeds will not constitute a component of the Liquidating Trust Assets) equal to fifty percent (50%) of the Litigation Proceeds such holder (solely in its capacity as the holder of the Allowed Claim to which the Reorganized Common Stock Election is effective) otherwise would have received (and the holder’s rights in respect of distributions from the Liquidating Trust shall be adjusted to the extent such proceeds are received by Reorganized WMI).
 
Runoff Notes Collateral.  Reorganized WMI will use its commercially reasonable efforts to cause the transfer of the WMMRC Trusts and their assets to a “protected cell” pursuant to § 431:19-303 of Title 24 of the Hawaii Code (“Newco”), the equity of which will be owned by Reorganized WMI in conformance with all applicable requirements of law, and subject to certain restrictions (such transfer, the “Insurance Book Closing”).  Reorganized WMI will, and will cause the Entity holding the WMMRC Trusts and their assets (i.e., WMMRC or, after the Insurance Book Closing, Newco) (such Entity, the “Trust Holder”), to segregate and not commingle the Runoff Proceeds with any other funds.  Reorganized WMI will cause the Trust Holder to seek permission of applicable regulators to pay, to the extent permitted by applicable law and regulation (including without limitation, state insurance regulations), all Runoff Proceeds to Reorganized WMI as a distribution, dividend or other payment in respect of Reorganized WMI’s equity in the Trust Holder (as defined in the definitive documentation governing the Runoff Notes, the “Runoff Proceeds Distributions”).  At all times, all of the Runoff Proceeds Distributions will be deposited directly into a securities or deposit account (as defined in the definitive documentation governing the Runoff Notes, the “Collateral Account”) on the date paid to Reorganized WMI.  All Runoff Proceeds delivered to the Collateral Account will be applied in the following order:
 
(i)  
first, to satisfy any fees and expenses of the indenture trustee for the Runoff Notes and the agent for the Collateral Account then due and owing for any services rendered pursuant to the documentation governing the Runoff Notes;
 
(ii)
second, to Reorganized WMI until Reorganized WMI has received an aggregate amount equal to (i) Four Million Dollars ($4,000,000.00) plus (ii) an additional amount equal to 13% per annum on the unpaid portion of such Four Million Dollars ($4,000,000.00).
 
(iii)
 third, to accrued and unpaid interest on the First Lien Runoff Notes and then to the outstanding principal of the First Lien Runoff Notes until all accrued and unpaid interest on and principal of the First Lien Runoff Notes have been paid in full;
 
(iv)
 fourth, to Reorganized WMI until Reorganized WMI has received an aggregate amount equal to (i) Six Million Dollars ($6,000,000.00) plus (ii) an additional amount equal to 13% per annum on the unpaid portion of such Six Million Dollars ($6,000,000.00);
 
(v)
fifth, to accrued and unpaid interest on the Second Lien Runoff Notes and then to the outstanding principal of the Second Lien Runoff Notes until all accrued and unpaid interest on and principal of the Second Lien Runoff Notes have been paid in full; and
 
(vi)
 sixth, to Reorganized WMI.
 
 
 
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Reorganized WMI has agreed to use commercially reasonable efforts to obtain approval of the applicable regulators to grant a first priority perfected lien in the equity of WMMRC (to the extent and so long as WMMRC is the Trust Holder), and from and after the Insurance Book Closing, in the equity issued by and the assets of Newco, in each case to secure Reorganized WMI’s obligations in respect of the First Lien Runoff Notes.  The First Lien Runoff Notes will also be secured by a first priority perfected security interest in the Collateral Account and the Runoff Proceeds Distributions (together with the collateral described in the preceding sentence, the “Runoff Notes Collateral”).  The Second Lien Runoff Notes will be secured by a second priority, “silent,” perfected security interest in the Runoff Notes Collateral.  The Runoff Notes will have recourse solely to the Runoff Notes Collateral and, to the extent of any Runoff Proceeds that were required to be deposited in the Collateral Account but were not so deposited and in certain other limited circumstances set forth in the definitive documentation governing the Runoff Notes, to Reorganized WMI.  The right of the holders of the Runoff Notes to receive payment from the Collateral Account and the liens in the Runoff Notes Collateral will be subject to the right of Reorganized WMI to receive payments from the Collateral Account in accordance with the order of priorities described above.
 
Reorganized WMI has no obligation to satisfy any deficiency if the Runoff Proceeds are insufficient to fully repay the Runoff Notes.  There are no assurances that Runoff Proceeds will in fact be sufficient to fully repay the Runoff Notes.  Indeed, the Projections (defined below) set forth in Article VII hereof, project that the Runoff Proceeds will be sufficient to satisfy only a portion of the principal and interest owed in connection with the Second Lien Runoff Notes.
 
Reorganized WMI is prohibited from permitting liens on the Collateral Account, any interests in the Trust Holder, Newco or in any of the WMMRC Trusts, the Runoff Proceeds Distributions or any Runoff Proceeds, or deposit accounts into which Runoff Proceeds are deposited or any proceeds, other than the lien in favor of the agent for the Collateral Account for the benefit of the holders of the First Lien Runoff Notes and Second Lien Runoff Notes or as otherwise permitted pursuant to the definitive documents governing the Runoff Notes.  In addition, the Trust Holder will be prohibited from transferring any interest it has in any of the WMMRC Trusts, will be required to remain a wholly-owned subsidiary of Reorganized WMI, and its activities will be limited to administering the WMMRC Trusts, collecting premiums, and depositing the Runoff Proceed Distributions into the Collateral Account.
 
The final maturity date of the Runoff Notes is the eighteenth (18th) anniversary of the issuance of the Runoff Notes.  Any and all of the Runoff Notes, however, may be redeemed, at Reorganized WMI’s discretion, at any time without premium or penalty.  All Runoff Proceeds generated after satisfaction in full of all amounts due on the Runoff Notes, if any, will be contributed to Reorganized WMI.
 
The Runoff Notes will be issued pursuant to the exemption from securities laws afforded by Section 1145 of the Bankruptcy Code and pursuant to an indenture qualified under the Trust Indenture Act.  The Runoff Notes will be freely transferable by any Entity other than an Entity deemed an affiliate of Reorganized WMI; provided, however, that the Second Lien Runoff Notes may include certain restrictions on accumulation of 4.75% or more of the aggregate principal amount of such notes if such restrictions would not preclude the listing of such notes with the Depository Trust Company (“DTC”).
 
c.  
Reorganized Common Stock
 
“Reorganized Common Stock” is the Two Hundred Million (200,000,000) shares of duly authorized common stock of Reorganized WMI to be issued on the Effective Date, with a par value of $0.00001 per share.
 
 
 
 
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2.  
Credit Facility
 
The Seventh Amended Plan provides that the lenders under the Credit Facility will provide the Credit Facility, also discussed in Sections I.G.2 and VI.G.11 hereof, to Reorganized WMI, as borrower, for the purposes of financing Reorganized WMI’s working capital and general corporate purposes, as well as permitted acquisitions and permitted originations by Reorganized WMI, as more fully described in the Seventh Amended Plan and the definitive documents governing the Credit Facility, which documents are attached as an exhibit to the Seventh Amended Plan.  Any summary of the Credit Facility set forth herein is subject, in its entirety, to the definitive documents governing the Credit Facility, and in the event of any conflict between this summary and such documents, such documents shall govern.
 
The Credit Facility is a senior secured multi-draw term loan with a four and one-half (4½) year or five (5) year maturity, as applicable, a three (3) year availability period, and an aggregate original principal amount not to exceed One Hundred Twenty Five Million Dollars ($125,000,000.00), to be made available to Reorganized WMI in three tranches, namely, (i) the Tranche A Credit Facility (including the Tranche A-1 Term Loan) in the aggregate amount of Twenty Five Million Dollars ($25,000,000.00) and (ii) the Tranche B Credit Facility of One Hundred Million Dollars ($100,000,000.00).  Reorganized WMI may draw on the Tranche A Credit Facility to fund working capital and for general corporate purposes, as set forth in the documents governing the Credit Facility.  Reorganized WMI may draw on the Tranche B Credit Facility, however, only to fund “Permitted Acquisitions” and “Permitted Originations” (as such terms are defined in the documents governing the Credit Facility).
 
Permitted Acquisitions.  The financing agreement governing the Credit Facility defines a “Permitted Acquisition” as an acquisition meeting certain criteria, including, among others, the requirements that (i) any assets or equity interests acquired will be part of a business engaged in financial services, insurance services, origination of loan or insurance or financial services assets, (ii) not less than twenty percent (20%) of the purchase price is funded by new equity contributions or subordinated indebtedness or with cash on hand (other than proceeds of the Credit Facility, “Restricted Disposition Proceeds” (defined in the documentation governing the Credit Facility to include the proceeds of dispositions of assets or equity interests to the extent purchased with proceeds advanced pursuant to the Credit Facility) and proceeds of other indebtedness).  Pursuant to the definitive documentation governing the Credit Facility, funds drawn from the Credit Facility may be used to finance a Permitted Acquisition only if such acquisition has been (i) approved by either a majority of Reorganized WMI’s board of directors, including the member appointed by AAOC, or (ii) approved by a majority of Reorganized WMI’s board of directors excluding the member appointed by AAOC and pursuant to the Independent Valuation Process as defined in such documentation and including the opinion of a qualified valuation firm that the consideration paid is not greater than the fair market value of the property acquired.
 
Permitted Originations.  The financing agreement governing the Credit Facility defines a “Permitted Origination” as an origination subject to a business plan that has been approved by Reorganized WMI’s board of directors that meets certain criteria, including, among others, the requirement that at least twenty percent (20%) of the amount requested by Reorganized WMI in connection with any proposed origination business is funded by new equity contributions or subordinated indebtedness or with cash on hand (other than proceeds of the Credit Facility, “Restricted Disposition Proceeds” (defined in the documentation governing the Credit Facility to include the proceeds of dispositions of assets or equity interests to the extent purchased with proceeds advanced pursuant to the Credit Facility) and proceeds of other indebtedness).  The Tranche B Credit Facility advances in connection with Permitted Originations will be in an amount less than or equal to Ten Million Dollars
 
 
 
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($10,000,000.00) in the aggregate or greater amounts if approved by lenders holding at least two-thirds of the sum of the outstanding principal amount and unfunded commitments, in their sole discretion.
 
Outstanding amounts on the Credit Facility bear interest at a rate of seven percent (7.0%) per annum, with Reorganized WMI having the option to pay one percent (1%) thereof in kind.  AAOC’s obligation to provide the Credit Facility is conditioned on Reorganized WMI’s maintenance of certain performance ratios, as set forth in more detail in the documents governing the Credit Facility.  Each of the draws pursuant to the Credit Facility will be not less than Two Million Five Hundred Thousand Dollars ($2,500,000.00) and, once repaid, may not be re-borrowed.  The number of draws permitted will be limited to one per month.  Upon the first draw on each respective tranche under the Credit Facility, a funding fee of one and a half percent (1.5%) of the full amount of the commitments in each respective tranche will be earned in full, due and will be paid by capitalizing such amount and adding it to the principal amount of the Credit Facility.  Subject to applicable law and necessary regulatory approvals, the Credit Facility will be guaranteed by all existing and future subsidiaries of Reorganized WMI (collectively, the “Guarantors”), be secured by a first perfected priority security interest in all real and personal assets (subject to limited exceptions to be agreed upon) of Reorganized WMI and the Guarantors (including, to the extent permitted by applicable law and approval by applicable regulatory authorities the pledge of the capital stock and assets of Reorganized WMI’s subsidiaries) and contain other terms and conditions as may be agreed upon.
 
Replacement Lenders.  During the period from the date hereof up to and including the Ballot Date, the Debtors will market the terms of the Credit Facility in an effort to obtain terms superior to those set forth in the Seventh Amended Plan; provided, however, that, in accordance with the procedures set forth on the applicable Ballot, any Creditor or holder of an Equity Interest may, upon (i) presentation of financial information necessary to establish the ability to participate as a lender in accordance with the provisions of the Credit Facility and (ii) the consent of the Equity Committee, which consent will not be unreasonably withheld, become a lender under the Credit Facility in lieu of the lenders contemplated pursuant to the definitive documentation governing the Credit Facility.  Prior to the commencement of the Confirmation Hearing, the Debtors will file a notice with the Bankruptcy Court setting forth the lender(s) selected to provide the Credit Facility.
 
3.  
Creditor Cash
 
As discussed in Section III.B.6.b(iv) and Article VI below, pursuant to the Seventh Amended Plan, holders of Allowed Senior Notes Claims, Allowed Senior Subordinated Notes Claims, Allowed General Unsecured Claims, Allowed CCB-1 Guarantees Claims, Allowed CCB-2 Guarantees Claims, and Allowed PIERS Claims in Classes 2, 3, 12, 14, 15, and 16, respectively, will receive, in accordance with the Subordination Model annexed as an exhibit to the Seventh Amended Plan, a copy of which is set forth in Section III.B.6.d hereof, their Pro Rata Share of Creditor Cash on account of their Allowed Claims and Postpetition Interest Claims.  Creditor Cash is the excess Cash, if any, of (i) all Cash and Cash Equivalents to be distributed by the Disbursing Agent in accordance with the Seventh Amended Plan over (ii) such amounts of Cash (a) reasonably determined by the Disbursing Agent as necessary to satisfy, in accordance with the terms and conditions of the Seventh Amended Plan, Allowed Administrative Expense Claims, Allowed Priority Tax Claims (to the extent necessary), Allowed Priority Non-Tax Claims, Allowed Convenience Claims, Trustee Claims, the fees and expenses owed to certain Creditors’ professionals pursuant to Section 41.18 of the Seventh Amended Plan, and fees and expenses of the Disbursing Agent as of the Effective Date, (b) necessary to fund the Liquidating Trust in accordance with the Seventh Amended Plan, as reasonably determined by the Debtors, (c) necessary to make pro rata distributions to holders of Disputed Claims as if such Disputed Claims were, at such time, Allowed Claims, (d) necessary to make pro rata distributions to holders of Administrative Expense
 
 
 
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Claims that have not yet been filed or Allowed as of the Effective Date, and (e) such other amounts reasonably determined by the Disbursing Agent (in consultation with the Liquidating Trustee) as necessary to fund the ongoing operations of the Liquidating Trust during the period from the Effective Date up to and including such later date as the Disbursing Agent shall reasonably determine; provided, however, that “Creditor Cash” shall include Cash in the Vendor Escrow only to the extent of WMI’s share of Cash remaining in such escrow after payment of Allowed WMI Vendor Claims.
 
The Debtors estimate that the total amount of Creditor Cash available on the Effective Date will be approximately $6.25 billion.  This includes $2.095 billion of Tax Refunds (representing WMI’s portion under the Global Settlement Agreement, after the payment to holders of Allowed WMB Senior Notes Claims and Accepting Non-Filing WMB Senior Notes Holders as and to the extent set forth in the Seventh Amended Plan, as discussed in Sections VI.B.18.a and V.B.5.g(i) below) based on receipt of an aggregate of approximately $5.278 billion of tax refunds.
 
4.  
The Liquidating Trust
 
As discussed in Sections III.B.6.b(iv), III.B.6.b(vi), V.B.5.g(i), VI.B.2, VI.B.3, VI.B.12, VI.B.15, VI.B.16, VI.B.17, VI.B.18.a VI.B.18.b, VI.B.19, VI.B.20, and VI.D below, the Seventh Amended Plan provides for the establishment of a Liquidating Trust for the benefit of the Liquidating Trust Beneficiaries—(i) holders of Allowed Senior Notes Claims, Allowed Senior Subordinated Notes Claims, Allowed General Unsecured Claims, Allowed CCB-1 Guarantees Claims, Allowed CCB-2 Guarantees Claims, Allowed PIERS Claims, Allowed WMB Senior Notes Claims, Allowed Late-Filed Claims, (ii) Accepting Non-Filing WMB Senior Note Holders, and (iii) in certain circumstances, holders of Allowed Subordinated Claims, Preferred Equity Interests, Dime Warrants and Common Equity Interests in accordance with the terms and provisions of the Seventh Amended Plan.  The Liquidating Trust Assets will include all Assets of the Debtors (including, without limitation, certain Plan Contribution Assets and such Runoff Notes which are either (a) not distributed on the Effective Date or (b) placed into the Liquidating Trust Claims Reserve) except (i) Cash to be distributed by the Reorganized Debtors as Disbursing Agent to holders of Allowed Administrative Expense Claims, Allowed Priority Tax Claims (to the extent applicable), Allowed Priority Non-Tax Claims, Allowed Convenience Claims, Allowed WMI Vendor Claims, Allowed Trustee Claims, and the fees and expenses owed to certain Creditors’ professionals pursuant to Section ‎41.18 of the Seventh Amended Plan, in each case as of the Effective Date, (ii) Cash necessary to reimburse the Reorganized Debtors for fees and expenses incurred in connection with initial distributions made by the Reorganized Debtors as Disbursing Agent, (iii) the economic interest retained by the Debtors in any Litigation Proceeds pursuant to the respective elections for Reorganized Common Stock, and (iv) Creditor Cash on the Effective Date and the equity interests in each of WMI Investment (all the assets of which, for the avoidance of doubt, shall be contributed to the Liquidating Trust, including any Intercompany Claims), WMMRC and WMB.  For the avoidance of doubt, the Liquidating Trust Assets shall include abandoned and/or escheated property received after the Effective Date.  The Liquidating Trust Interests will not be transferable or assignable except by will, intestate succession or operation of law.
 
Except with respect to holders of Allowed WMB Senior Notes Claims and Accepting Non-Filing WMB Senior Notes Claims, Liquidating Trust Interests will be distributed to holders of Allowed Claims pursuant to the Seventh Amended Plan in accordance with the Subordination Model annexed as an exhibit to the Seventh Amended Plan, a copy of which is set forth in Section III.B.6.d hereof.  As discussed in Sections III.B.6.b(vi), V.B.5.g(i), VI.B.18.a, and VI.B.18.b below, the interests of holders of WMB Senior Notes Claims and Accepting Non-Filing Senior Notes Holders in the Liquidating Trust are limited to the BB Liquidating Trust Interests, or those certain Liquidating Trust Interests that, in the aggregate, represent an undivided interest in WMI’s share of the Homeownership Carryback Refund
 
 
 
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Amount, as defined and set forth in Section 2.4 of the Global Settlement Agreement, in an amount equal to Three Hundred Thirty-Five Million Dollars ($335,000,000.00).
 
a.  
The Trust Advisory Board
 
The Trust Advisory Board will consist initially of seven (7) members, with three (3) of such members selected by the Creditors’ Committee (together with any successors, the “CC Members”), three (3) selected by the Equity Committee (together with any successors, the “EC Members”) and one (1) selected by the Creditors’ Committee subject to approval by the Equity Committee (together with any successor, the “CC-EC Member”), which approval will not be unreasonably withheld.  The Trust Advisory Board will have oversight responsibility for all functions of the Liquidating Trust including, among others:  (i) determination of the timing and amount of distributions to the Liquidating Trust Beneficiaries, subject to the objective criteria set forth in the Plan; (ii) subject to the terms of the Liquidating Trust Agreement, liquidation of assets of the Liquidating Trust; and (iii) reconciliation of claims asserted against the Debtors and their chapter 11 estates, including, without limitation, oversight of the litigation of Disputed Claims within Class 12 (General Unsecured Claims) and Claims that, if litigated, could result in the classification of such Claims within Class 12 (General Unsecured Claims), including claims relating to the Dime Warrants.
 
If, during the term of the Liquidating Trust, the aggregate outstanding amount of the Liquidating Trust Interests representing (i) Allowed Claims, (ii) the greater of Intercreditor Interest Claims or Postpetition Interest Claims in respect of such Allowed Claims, (iii) Disputed Claims, (iv) the greater of Intercreditor Interest Claims or Postpetition Interest Claims in respect of such Disputed Claims, and (v) contingent, unliquidated Claims, is Fifty Million Dollars ($50,000,000.00) or less, (X) one (1) CC Member who is not a CC Subcommittee Member (as defined below) shall without any further action by the Liquidating Trustee, the Trust Advisory Board, the Bankruptcy Court or any other Person, resign, and (Y) within twenty (20) Business Days of such event, the EC Members shall appoint a new member of the Trust Advisory Board and notify the Liquidating Trustee in writing.  If, during the term of the Liquidating Trust, all Liquidating Trust Interests representing Allowed Claims and Postpetition Interest Claims in respect of such Allowed Claims are paid in full, (X) any remaining CC Members shall be removed immediately without any further action by the Liquidating Trustee, the Trust Advisory Board, the Bankruptcy Court or any other Person, and (Y) within twenty (20) Business Days of such event, the remaining members of the Trust Advisory Board shall (i) appoint two (2) new members of the Trust Advisory Board and notify the Liquidating Trustee in writing, or (ii) elect to continue without such replacement members and notify the Liquidating Trustee in writing.
 
In the event of a vacancy in a member’s position (whether by removal, death or resignation), a new member may be appointed, (A) in the case of a CC Member, by the other CC Member(s) or, if there are no remaining CC Members, by (1) the Creditors’ Committee as notified in writing to the Trust Advisory Board and the Liquidating Trustee within five (5) Business Days, or (2) if the Creditors’ Committee has been dissolved, the Liquidating Trustee as notified in writing to the Trust Advisory Board within five (5) Business Days, (B) in the case of an EC Member, by the other EC Members, or (C) in the case of the CC-EC Member, by the other CC Member(s) subject to the approval of the EC Members (such approval not to be unreasonably withheld) or, if there is no remaining CC Member, by the Creditors’ Committee subject to the reasonable approval of the EC members as notified in writing to the Trust Advisory Board and the Liquidating Trustee within five (5) Business Days.  In each case, the appointment of a successor member of the Trust Advisory Board shall be evidenced by the filing with the Bankruptcy Court by the Liquidating Trustee of a notice of appointment, which notice shall include the name, address, and telephone number of the successor member of the Trust Advisory Board.
 
 
 
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Currently, (i) Wells Fargo Bank, N.A., Arnold Kastenbaum and Marc Kirschner have been selected as CC Members of the Trust Advisory Board; (ii) Joel Klein, Michael Willingham and the Honorable Douglas Southard have been selected as EC Members of the Trust Advisory Board; (iii) Matthew Cantor has been selected as the CC-EC Member of the Trust Advisory Board, and (iv) William Kosturos has been named the Liquidating Trustee.  One CC Member and one EC Member have not yet been selected.
 
 The identification of the remaining initial members of the Trust Advisory Board will be established prior to the Effective Date.  Members of the Trust Advisory Board shall receive such market compensation as is agreeable to each of the Debtors, the Creditors’ Committee, the Equity Committee, and AAOC, or such other compensation as the Bankruptcy Court finds to be reasonable.
 
Each member of the Trust Advisory Board shall have a fiduciary duty to act in the best interests of the Liquidating Trust Beneficiaries as a whole.
 
b.  
The Litigation Subcommittee
 
On the Effective Date, the Litigation Subcommittee will be formed and will be initially comprised of one (1) member selected by the Creditors’ Committee from the CC Members of the Trust Advisory Board (together with any successors, the “CC Subcommittee Member”), and two (2) members, who shall also be the EC Members of the Trust Advisory Board.  Each member of the Litigation Subcommittee shall continue to act as a member of the Litigation Subcommittee until he or she is no longer a member of the Trust Advisory Board.
 
The Litigation Subcommittee will oversee (i) the prosecution of, subject to the exculpation and release provisions of the Seventh Amended Plan, (A) D&O Claims, (B) claims against professionals and representatives retained by the Debtors with respect to actions arising during the period prior to the Petition Date; and (C) claims arising prior to the commencement of the Debtors’ bankruptcy cases against third-parties for any non-contractual breach of duty to WMI, including, but not limited to, antitrust claims and business tort claims (collectively, categories (A), (B), and (C) are the “Recovery Claims”) and (ii) the defense of Junior Disputed Claims (other than Claims that, if litigated, could result in the classification of such Claims in Class 12 (General Unsecured Claims)), including Disputed Claims of WMB Noteholders for misrepresentation, which Disputed Claims are classified in Class 18 (Subordinated Claims) pursuant to the Seventh Amended Plan.  In connection with the foregoing, and subject to the review and approval of the Bankruptcy Court, upon notice and a hearing, the Litigation Subcommittee shall have discretion over the following matters:  (x) retention of counsel and professionals in conjunction with the Recovery Claims and the Junior Disputed Claims; provided, however, that the prosecution of any D&O Claims shall be handled by Klee, Tuchin, Bogdanoff, & Stern LLP and the defense of any Junior Disputed Claims shall be handled by Weil, Gotshal & Manges LLP, Quinn Emanuel Urquhart & Sullivan, LLP and such other counsel as may be appointed from time to time with the consent of the Trust Advisory Board; (y) prosecution and settlement of the Recovery Claims; and (z) establishment of budgets and expenditure of the first Ten Million Dollars ($10,000,000.00) of the Litigation Funding (as defined below).  In the event that all of the Litigation Funding has been spent, the Litigation Subcommittee may request additional funds from the Trust Advisory Board who shall have the sole and absolute discretion as to whether to allocate such additional funds.  To the extent the Litigation Funding or any additional funds that are allocated to the Litigation Subcommittee are unused, such funds shall be distributed by the Liquidating Trust in accordance with the terms and conditions of the Seventh Amended Plan.
 
 
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Each member of the Litigation Subcommittee will be a member of the Trust Advisory Board.  The identification of such Litigation Subcommittee member will be made prior to the Effective Date and any compensation to be paid for being a member of the Litigation Subcommittee will be established prior to the Effective Date and be set forth in the Confirmation Order.
 
c.  
Funding of Liquidating Trust Activities
 
On the Effective Date, there shall be set aside out of the Liquidating Trust Assets an amount of Cash reasonably determined by the Debtors and the Creditors’ Committee prior to the Effective Date to be necessary to fund the activities of the Liquidating Trust, which amount shall be Sixty Million Dollars ($60,000,000.00) (the “Funding”); provided, however, that the Funding may be increased from time to time during the term of the Liquidating Trust upon the request of the Liquidating Trustee and the approval of the Trust Advisory Board, such approval not to be unreasonably withheld.  Twenty Million Dollars ($20,000,000.00) of the Funding (the “Litigation Funding”) will be allocated to the Litigation Subcommittee, with both the first Ten Million Dollars ($10,000,000.00) of the Litigation Funding and the second Ten Million Dollars ($10,000,000.00) of the Litigation Funding to be used for the prosecution of the Recovery Claims (as defined above); provided, however, that, prior to the allocation and use of any portion of the second Ten Million Dollars ($10,000,000.00) of the Litigation Funding, the Litigation Subcommittee shall obtain the approval of the Trust Advisory Board as to the reasonable expenditure of such funds, which approval will not be unreasonably withheld.  Subject to the terms of the Liquidating Trust Agreement, the Litigation Funding may be increased during the term of the Liquidating Trust upon the request of the Litigation Subcommittee and the approval of the Trust Advisory Board, which approval may be granted or withheld by the Trust Advisory Board in its sole and absolute discretion.  Further, the Liquidating Trust Agreement does not preclude the Trust Advisory Board or the Litigation Subcommittee from seeking additional financing from sources other than the Liquidating Trust Assets in the discharge of their fiduciary duties.
 
Any funds recovered by settlement, judgment, or otherwise on the Recovery Claims will be held by the Liquidating Trust and be distributed in accordance with the terms and conditions of the Seventh Amended Plan.  To the extent the Litigation Funding or any additional funds that are allocated to the Litigation Subcommittee are unused, such funds shall be distributed by the Liquidating Trust in accordance with the terms and conditions of the Seventh Amended Plan.
 
d.  
Litigation and Settlement Authority
 
The Liquidating Trustee shall submit any proposed settlement, disposition or abandonment of any Claims asserted against the Debtors or the Debtors’ estates to the Trust Advisory Board or to the Litigation Subcommittee for consideration and approval, other than (i) any proposed final settlement, disposition or abandonment that was made or accepted by the Debtors prior to the Effective Date, the principal terms of which have been evidenced in writing (whether or not such offer or acceptance is conditioned upon approval of any supervising authority), and (ii) any settlement, disposition or abandonment of a GUC Claim (as defined below) where the proposed settlement, disposition or abandonment amount with respect to such GUC Claim is $2,000,000.00 or less (each such GUC Claim, a “De Minimis GUC Claim”).  Proposed settlements, dispositions or abandonments of (A) Claims asserted against the Liquidating Trust (other than De Minimis GUC Claims), (B) claims previously asserted against the Debtors or the Debtors’ estates within Class 12 (General Unsecured Claims) of the Seventh Amended Plan (“GUC Claims”), or (C) Claims, that if litigated, could result in the classification of such Claim within Class 12 (General Unsecured Claims), including claims related to Dime Warrants, in each case, shall be submitted to the Trust Advisory Board for consideration and approval and the Trust Advisory Board shall promptly, and in any event within twenty (20) Business Days of such submission,
 
 
 
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make a determination regarding the proposed settlement, disposition or abandonment.  Proposed settlements, abandonments or dispositions of Claims asserted against the Liquidating Trust or claims previously asserted against the Debtors or the Debtors’ estates within Class 17A (WMB Senior Notes Claims), Class 17B (WMB Subordinated Notes Claims) and Class 18 (Subordinated Claims) of the Plan (collectively, the “Junior Disputed Claims”), shall be submitted to the Litigation Subcommittee for consideration and approval and the Litigation Subcommittee shall promptly, and in any event within twenty (20) Business Days of such submission, make a determination regarding the proposed settlement, disposition or abandonment.  If the Litigation Subcommittee does not approve a settlement offer that the Liquidation Trustee believes in good faith should be accepted within twenty (20) Business Days of its submission to the Litigation Subcommittee, the Liquidating Trustee may submit the settlement offer to the Trust Advisory Board for consideration and approval.
 
The Trust Advisory Board shall have the authority, subject to Bankruptcy Court review and approval, to settle all GUC Claims (other than any De Minimis GUC Claim) and all Claims relating to Dime Warrants.  Notwithstanding the foregoing, the Litigation Subcommittee shall have authority to settle all Recovery Claims and the Junior Disputed Claims (other than Claims that, if litigated, could result in the classification of such Claims within Class 12 (General Unsecured Claims)), subject to Bankruptcy Court review and approval; provided, however, that, from and after the expiry of the six (6) month period beginning on the Effective Date, both the Trust Advisory Board and the Litigation Subcommittee shall have the authority to settle all Recovery Claims and the Junior Disputed Claims, subject to Bankruptcy Court review and approval.
 
The Trust Advisory Board shall have the authority to retain counsel and professionals in conjunction with the GUC Claims (other than any De Minimis GUC Claim), subject to Bankruptcy Court review and approval.  Except as provided above, the Litigation Subcommittee will have authority to retain counsel and professionals in conjunction with the Recovery Claims and Junior Disputed Claims, subject to Bankruptcy Court review and approval.
 
5.  
Reorganized WMI’s Board of Directors
 
The initial members of Reorganized WMI’s board of directors will be selected as follows: four (4) members selected by the Equity Committee and one (1) member selected by the lenders party to the Credit Facility.  Subsequently, the owners of the Reorganized Common Stock will elect the board of Reorganized WMI; provided, however, that for so long as the Credit Facility is outstanding, the lenders party to the Credit Facility will be entitled to appoint one member to the board of Reorganized WMI.
 
6.  
General Overview of Treatment Pursuant to the Seventh Amended Plan of Allowed Claims and Equity Interests
 
The following constitutes a generalized overview of the treatment provisions of the Seventh Amended Plan.  The summaries set forth below are qualified in their entirety by the provisions of the Seventh Amended Plan, which are summarized in greater detail in Article VI hereof.
 
a.  
Treatment of Unclassified Claims
 
(i)  
Allowed Administrative Expense Claims
 
As set forth in Section VI.A.1 below, pursuant to the Seventh Amended Plan, holders of Allowed Administrative Expense Claims will be paid in full, in Cash, or in accordance with such other
 
 
 
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terms as may be agreed upon by the holder of an Administrative Expense Claim and the Disbursing Agent; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtors will be paid in full and performed by the Disbursing Agent in the ordinary course of business in accordance with the terms and subject to the conditions of any agreement governing, instrument evidencing, or other document relating to such transactions; and provided, further, that, if any such ordinary course expense is not billed, or a request for payment is not made, within ninety (90) days after the Effective Date, such ordinary course expense will be barred and the holder thereof shall not be entitled to a distribution pursuant to the Seventh Amended Plan.
 
(ii)  
Allowed Professional Compensation and Reimbursement Claims
 
As set forth in Section VI.A.2 below, except as otherwise provided in Section 41.18 of the Seventh Amended Plan, all Entities awarded compensation or reimbursement of expenses by the Bankruptcy Court in accordance with section 328, 330, or 331 of the Bankruptcy Code or entitled to priorities established pursuant to section 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code, shall be paid in full, in Cash, in the amounts allowed by the Bankruptcy Court (i) on or as soon as reasonably practicable following the later to occur of (a) the Effective Date and (b) the date upon which the Bankruptcy Court order allowing such Claim becomes a Final Order or (ii) upon such other terms no more favorable to the claimant than as may be mutually agreed upon between such claimant and the Disbursing Agent; provided, however, that, except as provided herein, each professional must file its application for final allowance of compensation for professional services rendered and reimbursement of expenses on or prior to the Administrative Claim Bar Date.  The Disbursing Agent is authorized to pay compensation for professional services rendered and reimbursement of expenses incurred after the Effective Date in the ordinary course and without the need for Bankruptcy Court approval.
 
(iii)  
Allowed Priority Tax Claims
 
As set forth in Section VI.A.3 below, pursuant to the Seventh Amended Plan, at the option and discretion of the Debtors, which option shall be exercised, in writing, on or prior to the commencement of the Confirmation Hearing, such payment shall be made (i) in full, in Cash, on or as soon as reasonably practicable following the later to occur of (a) the Effective Date and (b) the date on which such claim becomes an Allowed Claim, (ii) in accordance with section 1129(a)(9)(C) of the Bankruptcy Code, in full, in Cash, in equal quarterly installments commencing on the first (1st) Business Day following the Effective Date and continuing over a period not exceeding five (5) years from and after the Petition Date, together with interest accrued thereon at the applicable non-bankruptcy rate, subject to the sole option of the Disbursing Agent to prepay the entire amount of the Allowed Priority Tax Claim, or (iii) by mutual agreement of the holder of such Allowed Priority Tax Claim and the Disbursing Agent.
 
b.  
Treatment of Non-Subordinated Claims
 
(i)  
Treatment of Allowed Claims in Class 1
 
As set forth in Section VI.B.1 below, pursuant to the Seventh Amended Plan, holders of Allowed Priority Non-Tax Claims will be paid in full, in Cash, on the Effective Date.
 
(ii)  
Treatment of Allowed Claims in Classes 4, 5, 6, 7, 8, 9, 10, and 11
 
As set forth in more detail in Sections VI.B.4, VI.B.5, VI.B.6, VI.B.7, VI.B.8, VI.B.9, VI.B.10, and VI.B.11 below, pursuant to the Seventh Amended Plan and the Global Settlement Agreement, JPMC will pay or fund the payment of all Allowed WMI Medical Claims (Class 4), Allowed
 
 
 
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JPMC Rabbi Trust/Policy Claims (Class 5), Allowed Other Benefit Plan Claims (Class 6), Allowed Qualified Plan Claims (Class 7), Allowed WMB Vendor Claims (Class 8), Allowed Visa Claims (Class 9), Allowed Bond Claims (Class 10), and Allowed Vendor Claims (Class 11).
 
(iii)  
Treatment of Allowed Convenience Claims in Class 13 and Certain Electing Allowed General Unsecured Claims in Class 12
 
As set forth in more detail in Section VI.B.14 hereof, the Debtors will pay, in full in Cash, all Allowed Convenience Claims, as well as any Allowed General Unsecured Claims to the extent that the holders thereof elect, on their Ballots, to have their Allowed Claims reduced to Fifty Thousand Dollars ($50,000.00) to be treated as Allowed Convenience Claims.
 
(iv)  
Treatment of Allowed Claims in Classes 2, 3, 12, 14, 15, and 16
 
As set forth in more detail in Sections VI.B.2, VI.B.3, VI.B.12, VI.B.15, VI.B.16, and VI.B.17 below, the Seventh Amended Plan is structured so that, subject to the Senior Notes Release Consideration and Senior Subordinated Notes Release Consideration (defined and discussed below), and except to the extent such holders elect to receive Runoff Notes in lieu of Cash on account of Liquidating Trust Interests, holders of Allowed Senior Notes Claims (Class 2), Allowed Senior Subordinated Notes Claims (Class 3), Allowed General Unsecured Claims (Class 12), Allowed CCB-1 Guarantees Claims (Class 14), Allowed CCB-2 Guarantees Claims (Class 15) and Allowed PIERS Claims (Class 16) will be entitled to receive Creditor Cash and Liquidating Trust Interests in accordance with such holders’ relative priorities as set forth in the Subordination Model attached as an exhibit to the Seventh Amended Plan, a copy of which is set forth below in Section III.B.6.d hereof.
 
Senior Notes Release Consideration and Senior Subordinated Notes Release Consideration.  On the Effective Date, in consideration for, and subject in all respects to the grant and approval of, the releases pursuant to Section 41.6 of the Seventh Amended Plan (the Non-Debtor Release Provision) being granted by each Releasing Equity Interest Holder, and to avoid further delay as well as costly litigation, from the initial distributions of Creditor Cash referred to above, each holder of an Allowed Senior Notes Claims in Class 2 will contribute to Reorganized WMI, for and on behalf of each Releasing Equity Interest Holder, the Senior Notes Release Consideration (i.e., Cash in an amount equal to Nine Hundred Sixty-Eight Thousandths of one percent (.968%) of such holder’s Allowed Claim (with the aggregate amount for all Allowed Senior Notes Claims equal to Forty Million Dollars ($40,000,000.00))), and each holder of an Allowed Senior Subordinated Notes Claims in Class 3 will contribute to Reorganized WMI, for and on behalf of each Releasing Equity Interest Holder, the Senior Subordinated Notes Release Consideration (i.e., Cash in an amount equal to Two and One-Tenth percent (2.1%) of such holder’s Allowed Claim (with the aggregate amount for all Allowed Senior Subordinated Notes Claims equal to Thirty-Five Million Dollars ($35,000,000.00))).  Thereby, Cash in an aggregate amount of Seventy Five Million Dollars ($75,000,000.00) will be contributed to Reorganized WMI; provided, however, that, notwithstanding the applicability of any contractual subordination provisions, such contributions will not be recouped through the enforcement of any such contractual subordination provision.  Solely for purposes of the Creditor Contribution, “Allowed Claim” will mean the principal amount of such Senior Notes Claim or Senior Subordinated Notes Claim, as applicable, as well as interest accrued thereon, remaining unpaid and relating to the period up to and including the Petition Date.
 
Runoff Notes Elections.  Each holder of an Allowed Senior Notes Claim (Class 2), Allowed Senior Subordinated Notes Claim (Class 3), Allowed General Unsecured Claim (Class 12), CCB-1 Guarantees Claim (Class 14), and CCB-2 Guarantees Claim (Class 15) will be provided the right to elect to receive Runoff Notes in lieu of some or all of the Creditor Cash that such holder otherwise is
 
 
 
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entitled to receive pursuant to the Seventh Amended Plan (such election, a “Runoff Notes Election”).  Holders of Disputed Claims and Dime Warrants will be permitted to make contingent Runoff Notes Elections, which elections will be effective if and to the extent such holders are determined, pursuant to a Final Order or pursuant to a compromise and settlement approved by the Bankruptcy Court, to hold Allowed General Unsecured Claims in Class 1220 and if and to the extent such holders are entitled to receive Creditor Cash on the Effective Date.  As set forth in more detail in the applicable provisions of the Seventh Amended Plan and in Sections VI.B.2, VI.B.3, VI.B.12, VI.B.15, VI.B.16 and VI.F.1.a hereof, Runoff Notes Elections by such holders will be honored, to the extent such holders are entitled to receive Creditor Cash on the Effective Date, and in a manner consistent with relative priorities of such holders as set forth in the Subordination Model attached as an exhibit to the Seventh Amended Plan, a copy of which is set forth below in Section III.B.6.d hereof.  As summarized in more detail in Section VI.B.17 hereof, and only to the extent holders of Allowed PIERS Claims (Class 16) are entitled to receive Creditor Cash on the Effective Date, such holders will receive their Pro Rata Share of the balance of any Runoff Notes not distributed to eligible electing Creditors in Classes that are senior in recovery.  To the extent that, on the Effective Date, a holder of an Allowed Claim receives Runoff Notes, such holder’s distribution of Creditor Cash to be received on the Effective Date will be reduced on a dollar-for-dollar basis by the original principal amount of the Runoff Notes received.21
 
Limitation on Runoff Notes Elections; Deemed Election by AAOC.  As summarized in Section VI.F.13 hereof, in the event that Runoff Notes Elections are made in an aggregate original principal amount greater than One Hundred Forty Million Dollars ($140,000,000.00), such elections will be reduced pro rata such that the aggregate original principal amount elected is equal to One Hundred Forty Million Dollars ($140,000,000.00); provided, however, that, in the event that, (i) Runoff Notes Elections are made in an aggregate original principal amount equal to or greater than One Hundred Thirty Million Dollars ($130,000,000.00) and (ii) Reorganized Common Stock Elections are made in an aggregate amount less than the Runoff Threshold (i.e. Runoff Notes in the original principal amount of Ten Million Dollars ($10,000,000.00)), such elections to receive Runoff Notes will be reduced pro rata by an amount necessary to permit the AAOC Deemed Elections (defined below) to occur.
 
Furthermore, in the event that, due to the unavailability of sufficient Creditor Cash on the Effective Date, less than all of the original principal amount of Runoff Notes have been distributed in lieu of Creditor Cash on the Effective Date, the balance thereof will constitute Liquidating Trust Assets, and the proceeds thereof will be distributed to beneficial holders of Liquidating Trust Interests in accordance with the provisions of Article XXVII of the Seventh Amended Plan.
 
Disputed Claims and Dime Warrants.  Holders of Disputed Claims and Dime Warrants (Class 21) will be entitled to make contingent Runoff Notes Elections, which elections will be honored only to the extent that such holders are determined, pursuant to a Final Order or pursuant to a compromise
 
__________________________
20 See supra, n.14.
 
21 Because the estimated amount of Creditor Cash (approximately $6.25 billion) is less than the aggregate amount of Claims that will be paid pursuant to the Seventh Amended Plan having the priority set forth in Tranches 1 and 2 of the Subordination Model (see Section III.B.6.d hereof), namely, Allowed Senior Notes Claims and their corresponding Intercreditor Interest Claims, Allowed General Unsecured Claims and possibly certain of their corresponding Postpetition Interest Claims, and the Allowed Senior Subordinated Notes Claims and their corresponding Intercreditor Interest Claims (as set forth in the Updated Liquidation Analysis attached hereto as Exhibit C, approximately $6.737 billion in the aggregate), it is not likely that any Runoff Notes Elections made by holders of Allowed CCB-1 Guarantees Claims, or Allowed CCB-2 Guarantees Claims will be effective.
 
 
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and settlement approved by the Bankruptcy Court, to hold Allowed Claims, and such Allowed Claims are not otherwise subordinated in accordance with section 510 of the Bankruptcy Code.22  Runoff Notes will be reserved for such holders until the final resolution of such Claims.
 
Distribution of Balance of Runoff Notes.  As summarized in Section VI.F.13 hereof, upon the earlier to occur of (x) the determination of the Trust Advisory Board, with the consent of each Entity which would be a recipient of Runoff Notes, (y) all Allowed CCB-1 Guarantees Claims and Allowed CCB-2 Guarantees Claims having been paid, in full, in accordance with the provisions of Articles XIX and XX of the Plan, respectively, and (z) Runoff Notes being the sole remaining Liquidating Trust Asset (and only upon the earlier to occur of (x), (y) or (z)), the balance of the Runoff Notes in the Liquidating Trust, as the balance thereof may have been reduced from time-to-time, will be distributed to Creditors and whose Allowed Claims have not been paid in full as of the date thereof.  To the extent that a holder of an Allowed Claim receives Runoff Notes pursuant to such distribution, the amount of such holder’s outstanding Claim will be reduced on a dollar-for-dollar basis by the lesser of (i) the original outstanding principal amount of the Runoff Notes so received and (ii) the then outstanding principal amount (without regard to any interest paid-in-kind) of the Runoff Notes so received.
 
Reorganized Common Stock Elections.  As summarized in Sections VI.B.2, VI.B.3, VI.B.12, VI.B.15, VI.B.16, VI.B.17 and VI.F.13 hereof, each holder of an (i) Allowed Senior Notes Claim (Class 2), Allowed Senior Subordinated Notes Claim (Class 3), Allowed General Unsecured Claim (Class 12), Allowed CCB-1 Guarantees Claim (Class 14), and Allowed CCB-2 Guarantees Claim (Class 15), (ii) Allowed PIERS Claim in Class 16 (who, pursuant to the Seventh Amended Plan, may receive its Pro Rata Share of the balance of any Runoff Notes not distributed to eligible electing Creditors in Classes that are senior in recovery, but only to the extent any such holder of an Allowed PIERS Claim is entitled to receive Creditor Cash on the Effective Date), and (iii) a Disputed Claim or Dime Warrant (Class 21) that made a contingent Runoff Notes Election, will have the right to elect, in its sole and absolute discretion, to receive such holder’s Pro Rata Share of the Common Stock Allotment (i.e., Ten Million (10,000,000) shares of Reorganized Common Stock, representing five percent (5%) of the issued and outstanding Reorganized Common Stock as of the Effective Date) in lieu of (i) fifty percent (50%) of the Litigation Proceeds Interest of such holder (solely in its capacity as the holder of the Allowed Claim to which the Reorganized Common Stock Election is effective) and (ii) some or all of the Runoff Notes that such holder otherwise is entitled to and, if applicable, has elected to receive pursuant to the Runoff Notes Election (such election, the “Reorganized Common Stock Election”).
 
To the extent any electing Creditor receives Reorganized Common Stock pursuant to a Reorganized Common Stock Election, such Creditor’s share of the Runoff Notes to which the election was effective (i.e., One Dollar ($1.00) of original principal amount of Runoff Notes for each share of Reorganized Common Stock) will not be issued and Reorganized WMI will retain an economic interest in the Litigation Proceeds (and such proceeds will not constitute a component of the Liquidating Trust Assets) equal to fifty percent (50%) of the Litigation Proceeds such Creditor (solely in its capacity as the holder of the Allowed Claim to which the Reorganized Common Stock Election is effective) otherwise would have received (and the Creditor’s rights in respect of distributions from the Liquidating Trust will be adjusted to the extent such Litigation Proceeds are received by Reorganized WMI).
 
The Seventh Amended Plan defines “Litigation Proceeds” as the recoveries, net of related legal fees and other expenses, of the Liquidating Trust on account of Causes of Action23 against third
__________________________
22See supra, n.14.
 
 
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parties, including, without limitation, and subject to the release and exculpation provisions herein, professionals and other advisors engaged by the Debtors on or prior to the Petition Date, officers, directors and employees and relating to actions taken or inactions, as the case may be, during the period prior to the Petition Date, but, expressly excluding recoveries on account of any Avoidance Actions.24
 
The Seventh Amended Plan defines a “Litigation Proceeds Interest” as the interest right of a holder of a Claim or Equity Interest in the Litigation Proceeds by virtue of such holder’s right to receive Liquidating Trust Interests pursuant to the Seventh Amended Plan.
 
Limitation on Reorganized Common Stock Elections; Deemed AAOC Election.  As summarized in Section VI.F.13 hereof, in the event that Reorganized Common Stock Elections are made with respect to Runoff Notes having an aggregate original principal amount in excess of the Runoff Threshold (i.e. Ten Million Dollars ($10,000,000.00), such elections will be reduced pro rata by the amount of such excess so that each holder making such an election will receive shares of Reorganized Common Stock equal to its Pro Rata Share of the Common Stock Allotment (i.e., Ten Million (10,000,000) shares of Reorganized Common Stock, representing five percent (5%) of the issued and outstanding Reorganized Common Stock as of the Effective Date).
 
The Seventh Amended Plan further provides that, in the event that holders of Claims with the right to make Reorganized Common Stock Elections decline to tender, in the aggregate, Runoff Notes in the original principal amount necessary to reach the Runoff Threshold (i.e., Ten Million Dollars ($10,000,000.00)), each of AAOC, severally and not jointly, will be deemed to have made Reorganized Common Stock Elections to receive such holder’s Pro Rata Share of the Common Stock Allotment (i.e., Ten Million (10,000,000) shares of Reorganized Common Stock, representing five percent (5%) of the issued and outstanding Reorganized Common Stock as of the Effective Date) in lieu of (i) Runoff Notes (based upon an allocation developed in their sole and absolute discretion) that they would otherwise receive on the Effective Date in their capacity as a holder of Allowed PIERS Claims, in the aggregate amount as is necessary to reach the Runoff Threshold; provided, however, that, to the extent that any of AAOC would not receive Runoff Notes on the Effective Date in its capacity as a holder of Allowed PIERS Claims in an amount sufficient to reach its allocable share of the Runoff Threshold, such AAOC Entity will instead be deemed to have elected to receive such amount of Runoff Notes (based upon an allocation developed in their sole and absolute discretion) in lieu of distributions of Creditor Cash on the
__________________________
23 The Seventh Amended Plan defines “Causes of Action” as all Claims, actions, causes of action, rights to payment, choses in action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, remedies, rights of set-off, third-party claims, subrogation claims, contribution claims, reimbursement claims, indemnity claims, counterclaims, and cross claims (including, but not limited to, all claims for breach of fiduciary duty, negligence, malpractice, breach of contract, aiding and abetting, fraud, inducement, avoidance, recovery, subordination, and all Avoidance Actions) of any of the Debtors and/or their estates that are pending or may be asserted against any Entity on or after the date hereof, based in law or equity, including, but not limited to, under the Bankruptcy Code, 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 asserted or unasserted as of the date of entry of the Confirmation Order.
 
24 The Seventh Amended Plan defines “Avoidance Actions” as any and all avoidance, recovery, subordination or other actions or remedies against Entities that may be brought by or on behalf of a Debtor or its estate under the Bankruptcy Code or applicable non-bankruptcy law under sections 510, 542, 543, 544, 545, 547, 548, 549, 550, 551, 552 and 553 of the Bankruptcy Code.
 
 
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Effective Date on account of its Allowed Senior Subordinated Notes Claims, and (ii) fifty percent (50%) of such holders’ Litigation Proceeds Interest (described in Section III.B.6.b(iv) hereof) in their capacity as holders of Allowed PIERS Claims (the “AAOC Deemed Elections”).
 
Waiver of Elections.  Failure by any holder of an Allowed Senior Notes Claim, Allowed Senior Subordinated Notes Claim, General Unsecured Claim (whether such General Unsecured Claim is an Allowed Claim or a Disputed Claim), Allowed CCB-1 Guarantees Claim, Allowed CCB-2 Guarantees Claim, Allowed PIERS Claim or Dime Warrants to make a Runoff Notes Election or a Reorganized Common Stock Election, as applicable, on or before the Ballot Date will constitute a deemed waiver and relinquishment of the right to make any such election by such holder.  Any election made after the Ballot Date will not be binding upon the Debtors unless the Ballot Date is waived, in writing, by the Debtors; provided, however, that under no circumstance may such waiver by the Debtors occur on or after the Effective Date.
 
(v)  
Treatment of Late-Filed Claims (Class 12A)
 
As discussed in greater detail in Section VI.B.13 hereof, pursuant to the Seventh Amended Plan, each holder of an Allowed Late-Filed Claim will receive such holder’s Pro Rata Share of Liquidating Trust Interests, in an aggregate amount equal to (a) such holder’s Allowed Late-Filed Claim and (b) in the event that all Allowed Claims (other than Subordinated Claims) are paid in full, such holder’s Postpetition Interest Claim, which interests will entitle such holder to distributions from the Liquidating Trust after all Allowed Unsecured Claims are paid in full (but prior to payment of Subordinated Claims).  Holders of Late-Filed Claims are not entitled to elect to have their Late-Filed Claims treated as Convenience Claims pursuant to the Seventh Amended Plan.
 
(vi)  
Treatment of WMB Senior Notes Claims (Class 17A)
 
As discussed in Sections VI.B.18.a and V.B.5.g(i) hereof, to the extent that a holder of a WMB Senior Notes Claim elected, in connection with the solicitation of votes on and elections related to the Sixth Amended Plan, to grant the releases provided in the Non-Debtor Release Provision (at that time, Section 43.6 of the Sixth Amended Plan), including, without limitation, a release of the Debtors, the Reorganized Debtors, and the Liquidating Trustee from all direct and derivative Claims arising from or related to such holder’s WMB Senior Notes, as well as any Misrepresentation Claim or other similar Claim for damages arising from the purchase or sale of such holders’ WMB Senior Notes (including, without limitation, any Claim on account of WMB Senior Notes or WMB Subordinated Notes that such holder may have that is determined pursuant to a Final Order to be subordinated in accordance with section 510(b) of the Bankruptcy Code), such holder’s WMB Senior Notes Claim will be deemed allowed against the Debtors as an Allowed WMB Senior Notes Claim in an amount equal to the aggregate face value and interest accrued as of the Petition Date with respect to all WMB Senior Notes held by such holder as of October 25, 2010, and such holder will receive its Pro Rata Share of BB Liquidating Trust Interests, which interests, in the aggregate, represent an undivided interest in WMI’s share of the Homeownership Carryback Refund Amount, as set forth in Section 2.4 of the Global Settlement Agreement, in an amount equal to Three Hundred Thirty-Five Million Dollars ($335,000,000.00); provided, however, that, notwithstanding the foregoing, but subject to the provisions of Section 41.18 of the Seventh Amended Plan, the Settlement WMB Senior Note Holders (as defined in the Seventh Amended Plan) will have first priority to recover Cash distributions made on account of the BB Liquidating Trust Interests up to an aggregate amount of Ten Million Dollars ($10,000,000.00), to compensate such holders and other WMB Senior Note Holders for the legal fees and expenses they incurred in connection with the Chapter 11 Cases.
 
 
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Holders of WMB Senior Notes that did not file a proof of claim (Non-Filing WMB Senior Note Holders) will also be paid their Pro Rata Share of the BB Liquidating Trust Interests, but only if such holders elected, in connection with the solicitation of votes on and elections related to the Sixth Amended Plan, to grant the releases provided in the Non-Debtor Release Provision (at that time, Section 43.6 of the Sixth Amended Plan), as set forth in Sections VI.B.18.b and V.B.5.g(i) hereof.
 
The Claim of any holder of a WMB Senior Notes Claim that did not elect to grant the releases provided in the Non-Debtor Release Provision will not be deemed allowed, and the Debtors, the Liquidating Trustee, and all parties in interest will reserve and maintain all of their respective rights to dispute such WMB Senior Notes Claim on any ground; provided, however, that, to the extent that any WMB Senior Notes Claim eventually is determined pursuant to a Final Order of the Bankruptcy Court to be an Allowed Claim, (i) such Claim will be deemed an Allowed WMB Senior Notes Claim, (ii) the holder of such Allowed WMB Senior Notes Claim will be entitled to receive its Pro Rata Share of the BB Liquidating Trust Interests, and (iii) such holder will be deemed to have consented to the releases provided in the Non-Debtor Release Provision.
 
For the avoidance of doubt, all the $335 million allocated for payment to holders of Allowed WMB Senior Notes Claims and Accepting Non-Filing Senior Note Holders, as provided in the Seventh Amended Plan, will be paid to holders of Allowed WMB Senior Notes Claims and Accepting Non-Filing WMB Senior Note Holders, and none of the foregoing amounts will revert either to the Debtors or the Reorganized Debtors, or be payable to Creditors in any other Class under the Seventh Amended Plan.
 
The FDIC Receiver acknowledges that amounts distributed to the holders of WMB Senior Notes pursuant to the Seventh Amended Plan will not be credited against or otherwise reduce their claims against the Receivership; provided, however, that no holder of a WMB Senior Note will be entitled to receive more from the Receivership than the amount owed with respect to such WMB Senior Note.
 
Pursuant to the September Opinion, the Bankruptcy Court reaffirmed its approval of the treatment of holders of WMB Senior Notes pursuant to the Modified Sixth Amended Plan on the basis that such treatment “will avoid contentious and expensive securities litigation which could result in a significantly larger judgment against the Debtors.”  (September Opinion at 101-02.)  The Seventh Amended Plan’s terms regarding the treatment of such holders are identical to the terms that were approved by the Bankruptcy Court.
 
(vii)  
Treatment of WMB Subordinated Notes Claims (Class 17B)
 
As discussed in Sections V.B.5.g(ii) and VI.B.18.c hereof, because they are derivative in nature of the claims and causes of action asserted by the FDIC Receiver, FDIC Corporate and the Receivership in the FDIC Claim and the D.C. Action and the Claims and causes of action that have been or may be asserted by the FDIC Receiver, FDIC Corporate and the Receivership against the Debtors and their estates, and in consideration for the distribution to be made to the FDIC Receiver pursuant to the Global Settlement Agreement, on the Effective Date, all WMB Subordinated Notes Claims (Class 17B), to the extent that they are not Section 510(b) Subordinated WMB Notes Claims, will be deemed disallowed, and holders thereof will not receive any distribution from the Debtors.
 
 
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c.  
Treatment of Subordinated Claims and Equity Interests
 
(i)  
Treatment of Class 18
 
As discussed in Section VI.B.19 hereof, pursuant to the Seventh Amended Plan, in the event that all Allowed Claims (other than Subordinated Claims) and Postpetition Interest Claims in respect of such Claims are paid in full, the Liquidating Trust Interests will be redistributed, and holders of Allowed Subordinated Claims will be entitled to receive their Pro Rata Share of such interests.
 
(ii)  
Treatment of Class 19
 
As discussed in Section VI.B.20 hereof, pursuant to the Seventh Amended Plan, subject to the execution and delivery by any such holder of the releases set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), each holder of a Preferred Equity Interest, including, without limitation, each holder of a REIT Series, will be entitled to receive such holder’s Pro Rata Share of seventy percent (70%) of (a) subject to the Reorganized Common Stock Elections, Reorganized Common Stock, and (b) in the event that all Allowed Claims and Postpetition Interest Claims in respect of Allowed Claims are paid in full (including with respect to Allowed Subordinated Claims), any Liquidating Trust Interests to be redistributed; provided, however, that, in the event that, at the Confirmation Hearing and in the Confirmation Order, the Bankruptcy Court determines that a different percentage should apply, the foregoing percentage will be adjusted in accordance with the determination of the Bankruptcy Court and be binding upon each holder of a Preferred Equity Interest; provided, further, that such distributions will only be made (to be shared on a pro rata basis) to Releasing Equity Interest Holders (i.e., such holders who execute the releases set forth in the Non-Debtor Release Provision (Section 41.6 of  the Seventh Amended Plan)).
 
(iii)  
Treatment of Class 21, Class 22, and Claims Subordinated to the Level of Common Equity Interests
 
As discussed in Sections VI.B.21 hereof, pursuant to the Seventh Amended Plan, and subject to the execution and delivery of the releases set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), each holder of Dime Warrants in Class 21 shall be entitled to receive such holder’s Pro Rata Share of (a) distributions to be made in accordance with the terms and provisions of the LTW Stipulation (defined and discussed in Section V.B.5.d hereof) or (b) in the event that the compromise and settlement set forth in the LTW Stipulation is not approved by the Bankruptcy Court, thirty percent (30%) of (1) subject to Reorganized Common Stock Elections, the Reorganized Common Stock and (2) in the event that all Allowed Claims and Postpetition Interest Claims in respect of Allowed Claims are paid in full (including with respect to Allowed Subordinated Claims), any Liquidating Trust Interests to be redistributed, each to be shared on a pari passu basis with holders of Common Equity Interests; provided, however, that, in the event at the Confirmation Hearing and in the Confirmation Order, the Bankruptcy Court determines that a different percentage should apply, the foregoing percentage shall be adjusted in accordance with the determination of the Bankruptcy Court and be binding upon each holder of a Dime Warrant; and, provided, further, that, to the extent that holders of Dime Warrants are determined, pursuant to a Final Order, to hold Allowed Claims, and such Allowed Claims are not otherwise subordinated to the level of Common Equity Interests in accordance with section 510 of the Bankruptcy Code, such Allowed Claims shall be deemed to be Allowed General
 
 
 
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 Unsecured Claims classified in Class 12 and will receive the treatment summarized in Section VI.B.12 hereof.25
 
As discussed in Section VI.B.22 hereof, pursuant to the Seventh Amended Plan, and subject to the execution and delivery by such holders of the releases set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), each holder of Common Equity Interests in Class 22 will be entitled to receive such holder’s Pro Rata Share of thirty percent (30%) of (a) subject to Reorganized Common Stock Elections, the Reorganized Common Stock and (b) in the event that all Allowed Claims and Postpetition Interest Claims in respect of Allowed Claims are paid in full including with respect to Allowed Subordinated Claims, any Liquidating Trust Interests to be redistributed, subject to the provisions of the LTW Stipulation and the approval thereof by the Bankruptcy Court, each to be shared on a pari passu basis with holders of Dime Warrants; provided, however, that, in the event that, at the Confirmation Hearing and in the Confirmation Order, the Bankruptcy Court determines that a different percentage should apply, the foregoing percentage will be adjusted in accordance with the determination of the Bankruptcy Court and be binding upon each holder of a Common Equity Interest; provided, further, that such distributions will only be made to Releasing Equity Interest Holders (i.e., such holders who execute the releases set forth in the Non-Debtor Release Provision (Section 41.6 of  the Seventh Amended Plan)).
 
The Seventh Amended Plan defines “Common Equity Interest” as collectively, (a) an Equity Interest represented by the 3,000,000,000 authorized shares of common stock of WMI, including, without limitation, one of the 1,704,958,913 shares of common stock of WMI issued and outstanding as of the Petition Date, or any interest or right to convert into such an Equity Interest or acquire any Equity Interest of WMI that was in existence immediately prior to or on the Petition Date or (b) a Claim, other than with respect to the Dime Warrants, which pursuant to a Final Order, has been subordinated to the level of Equity Interest in accordance with section 510 of the Bankruptcy Code or otherwise and whose share count, for purposes of calculating Pro Rata Share of distributions, shall be determined by dividing the amount of an Allowed Claim by the per share price of WMI common stock as of either (a) the Petition Date, (b) the close of business on the day immediately preceding the Petition Date, (c) December 12, 2011, or (d) such other date as determined by the Bankruptcy Court.  Thus, holders of Claims that have been subordinated to the level of Equity Interest pursuant to a Final Order (e.g., the Allowed Claim held by Principal Financial Group, Inc.)26 will also be entitled to receive such holders’ Pro Rata Shares of the recovery to Common Equity Interests.
 
The Debtors dispute whether the interests of certain holders of Equity Interests or Claims against the Debtors (which Claims are or have been determined by the Bankruptcy Court to be subject to subordination to the level of Common Equity Interest in accordance with section 510 of the Bankruptcy Code), including, without limitation, holders of restricted shares of Common Equity Interests, should be allowed.  In addition, as discussed in more detail in Section V.B.5.d hereof, notwithstanding that (i) pursuant to the Dime Warrants Opinion, dated January 3, 2012, the Bankruptcy Court determined that holders of Dime Warrants hold Common Equity Interests in, rather than Claims against, the Debtor’s estates, and (ii) on January 11, 2012, the Debtors and LTW Plaintiffs (defined below) entered into the LTW Stipulation (defined below) discussed in Section V.B.5.d hereof, as of the date of this Disclosure
 
 
__________________________
1 See supra, n.14.
 
2 See, e.g., Order Approving Stipulation and Agreement Between Washington Mutual, Inc. and Principal Financial Group, Inc. (I) Disallowing Proof of Claim Number 2835 and (II) Allowing Proof of Claim Number 3835, dated December 16, 2010 [D.I. 6365].
 
 
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Statement, the Bankruptcy Court has not yet approved the LTW Stipulation.  Thus, there is still an open dispute as to whether holders of Dime Warrants hold Equity Interests or Claims and, if the latter, whether such Claims should be subordinated in accordance with section 510 of the Bankruptcy Code.
 
All such Equity Interests will constitute Disputed Equity Interests pursuant to the Seventh Amended Plan to the extent the allowance of any such Equity Interest is the subject of a timely objection in accordance with the Seventh Amended Plan, the Bankruptcy Code, the Bankruptcy Rules, or the order confirming the Seventh Amended Plan, or as otherwise disputed by the Debtors in accordance with applicable law, and which objection or dispute has not been withdrawn, with prejudice, or determined by a Final Order.
 
The Seventh Amended Plan provides for the creation of the Disputed Equity Escrow.  Pursuant to the Seventh Amended Plan, the Disputed Equity Escrow is an escrow that will be created on the Effective Date to hold such shares of Reorganized Common Stock allocable to any Disputed Equity Interest, including, but not limited to, Dime Warrants until such time as the LTW Stipulation is approved by the Bankruptcy Court or the Dime Warrants Litigation is otherwise resolved pursuant to a Final Order.
 
Specifically, from and after the Effective Date, (i) until such time as the Dime Warrant Litigation is determined, pursuant to a Final Order, or a compromise and settlement is approved by the Bankruptcy Court with respect to the Dime Warrant Litigation, there shall be held in the Disputed Equity Escrow by the Liquidating Trustee, as escrow agent, for the benefit of each holder of a Dime Warrant, Reorganized Common Stock, and any dividends, gains or income attributable in respect of such Reorganized Common Stock, in an amount equal to the Pro Rata Share of Reorganized Common Stock that would have been made to the holders of Dime Warrants if such Dime Warrants were Allowed Equity Interests; and (ii) until such time, or from time to time, as each Disputed Equity Interest has been compromised and settled or allowed or disallowed by Final Order of the Bankruptcy Court, there shall be held in the Disputed Equity Escrow by the Liquidating Trustee, as escrow agent, for the benefit of each holder of a Disputed Equity Interest, Reorganized Common Stock and any dividends, gains or income attributable in respect of such Reorganized Common Stock, in an amount equal to the Pro Rata Share of distributions that would have been made to the holder of such Disputed Equity Interest if it were an Allowed Equity Interest.  The share count for holders of Dime Warrants, for purposes of calculating Pro Rata Share of distributions and the number of shares of Reorganized Common Stock to be reserved in the Disputed Equity Escrow, shall be determined by dividing the amount of the Claim by the per share price of WMI common stock as of either (a) the Petition Date, as if the Trigger Event, as defined in the Dime Warrant Litigation, had not occurred, (b) the close of business on the day immediately preceding the Petition Date, (c) December 12, 2011, as if the Trigger Event had not occurred, (d) the Petition Date, as if the Trigger Event had occurred, (e) December 12, 2011, as if the Trigger Event had occurred, or (f) such other date as determined by the Bankruptcy Court.
 
At such time as it is determined, pursuant to a Final Order, that (i) the holders of the Dime Warrants hold Allowed Claims, and such Allowed Claims are not otherwise subordinated to the level of Common Equity Interests in accordance with section 510 of the Bankruptcy Code, the Liquidating Trustee, as escrow agent, will distribute to the holders of Common Equity Interests entitled to receive a distribution in accordance with the Seventh Amended Plan, on a pro rata basis, the shares of the Reorganized Common Stock, together with any dividends, gains or income attributable thereto, in the Disputed Equity Escrow and (ii) the holders of Dime Warrants hold Equity Interests or Allowed Claims, and Allowed Claims are otherwise subordinated to the level of Common Equity Interests in accordance with section 510 of the Bankruptcy Code, the Liquidating Trustee will distribute to the holders of Dime Warrants the shares of Reorganized Common Stock, together with any dividends, gains or income attributable thereto in the Disputed Equity Escrow.  At such time as any other Disputed Equity Interest
 
 
 
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becomes, in whole or in part, an Allowed Equity Interest, the Liquidating Trustee will distribute to the holder thereof the distributions, if any, to which such holder is then entitled pursuant to the Seventh Amended Plan, together with any dividends, gains or income attributable thereto.  To the extent a Disputed Equity Interest is disallowed, in whole or in part, the Liquidating Trustee, as escrow agent, will distribute to the holders of Common Equity Interests entitled to receive a distribution pursuant to the Seventh Amended Plan, on a pro rata basis, the shares of Reorganized Common Stock, together with any dividends, gains or income attributable thereto, allocable to such Disputed Equity Interest, to the extent of such disallowance.  Such distributions will be made as soon as practicable after the date that the order or judgment of the Bankruptcy Court with respect to the Dime Warrant Litigation becomes a Final Order, but in no event more than ninety (90) days thereafter.
 
(iv)  
Additional Payment to REIT Series Holders from JPMC
 
As discussed in Sections V.B.3.b(viii) and VI.B.20 hereof, in addition to and separate from the distribution to be provided to holders of the REIT Series from the Debtors, pursuant to the Global Settlement Agreement and in exchange for the releases set forth in the Global Settlement Agreement and the Seventh Amended Plan, on the Effective Date, JPMC will pay, or transfer to the Disbursing Agent for payment to, each Releasing REIT Trust Holder (as defined in the Seventh Amended Plan) cash in an amount equal to $12,500.00 times the number of shares of REIT Series held by such Releasing REIT Trust Holder on the voting record date for the Sixth Amended Plan; provided, however, that, at the election of JPMC, the amount payable to Releasing REIT Trust Holders may be paid in shares of common stock of JPMC, valued at the average trading price during the thirty (30) day period immediately preceding the Effective Date.27
 
d.  
Subordination Model
 
The following Subordination Model, also attached as an exhibit to the Seventh Amended Plan, is a model developed by Alvarez & Marsal LLC for the Debtors which implements the Debtors’ interpretation of the respective subordination provisions in the Senior Subordinated Notes Indenture, CCB-1 Guarantee Agreements, CCB-2 Guarantee Agreements, Junior Subordinated Notes Indenture and PIERS Guarantee Agreement with respect to the relative priorities among holders of Allowed Senior Notes Claims, Allowed Senior Subordinated Notes Claims, Allowed General Unsecured Claims, Allowed CCB-1 Guarantees Claims, Allowed CCB-2 Guarantees Claims, Allowed PIERS Claims, and Allowed Late-Filed Claims and the order in which such holders are entitled to receive payment of their Allowed Claims, Intercreditor Interest Claims and Postpetition Interest Claims, including, without limitation, on account of contractual subordination and subrogation provisions.
 
As used in the Subordination Model and the Seventh Amended Plan, the term “Intercreditor Interest Claim” refers to a Claim for interest accrued in respect of an outstanding obligation or liability during the period from the Petition Date up to and including the date of final payment in full of such Claim, arising from contractual subordination rights and payable in accordance with the Subordination Model, as required by section 510(a) of the Bankruptcy Code, calculated at the contract rate set forth in any agreement related to such Claim, compounded as provided in such
__________________________
27 Each Releasing REIT Trust Holder will receive from JPMC, or from the Disbursing Agent on behalf of JPMC, $12,500.00 in cash or stock for every One Million Dollars ($1,000,000.00) in principal amount outstanding of Trust Preferred Securities related to the REIT Series shares they held on the voting record date for the Sixth Amended Plan.
 
 
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agreement, provided that interest shall continue to accrue only on the then outstanding and unpaid obligation or liability that is the subject of such Claim.
 
As used in the Subordination Model and the Seventh Amended Plan, the term “Postpetition Interest Claim” refers to a Claim against any of the Debtors or the Debtors’ estates for interest accrued in respect of an outstanding obligation or liability that is the subject of an Allowed Claim during the period from the Petition Date up to and including the date of final payment in full of such Allowed Claim, calculated at the federal judgment rate of 1.95%, the rate as in effect on the Petition Date, compounded annually, provided that interest shall continue to accrue only on the then outstanding and unpaid obligation or liability, including any postpetition interest compounded thereon, that is the subject of an Allowed Claim.
 
As used in the Subordination Model and the Seventh Amended Plan, the term “Remaining Postpetition Interest Claim” refers to a Claim by a holder of an Allowed Senior Notes Claim with respect to Floating Rate Notes against any of the Debtors or the Debtors’ estates for interest accrued during the period from the Petition Date up to and including the date of final payment of such Claim, in an amount equal (a) such holder’s Postpetition Interest Claim minus (b) such holders’ Intercreditor Interest Claim, all as set forth in the Subordination Model.
 

 
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Washington Mutual, Inc.
Waterfall Recovery Matrix
 

   
Senior Fixed Rate Notes
Senior Floating Rate Notes
Senior Subordinated Notes
CCB Guarantees(1)
PIERS
General Unsecured Creditors
510(b) Sub. Claims
Preferred Stock
Recovery(2)
Tranche 1
Prepetition Claim
Prepetition Claim
Pro Rata Share Based on Prepetition Claims(3)
   
Tranche 2(4)
Intercreditor Interest Claim
Intercreditor Interest Claim
Prepetition Claim & Intercreditor Interest Claim
Pro Rata Share Based on Prepetition Claims(3)
Late Filed Claims(5)
Post-Petition Interest Claim(6)
Tranche 3
 
Prepetition Claim & Intercreditor Interest Claim
Post-Petition Interest Claim(6)
Tranche 4
 
PIERS Claim
Remaining Postpetition Interest Claim(7)
Tranche 5
Claims
Tranche 6
 
Claims
 
Notes:
__________________________
(1)
CCB Guarantees include HFC Capital Trust I, CCB Capital Trust IV, CCB Trust V, CCB Trust VI, CCB Capital Trust VII, CCB Capital Trust VIII and CCB Capital Trust IX.
 
(2)
Eligible claims in Tranches will be paid in order with Tranche 1 claims receiving disbursements first and Tranche 5 claims receiving disbursements last. Tranche 1 eligible claims must be satisfied in full prior to Tranche 2 eligible claims receiving disbursements and so forth. For information regarding the distribution of Reorganized Common Stock, see Sections 6.2, 7.2, 16.2, 18.2, 19.2, 20.2 and 32.1(a) of the Plan.
 
(3)
Pro Rata share of General Unsecured Claims are calculated by (a) determining the fraction in which the numerator equals the amount of General Unsecured Claims and the denominator equals the total amount of prepetition claims, and (b) by multiplying that by total cash distributed within the Tranche. The cash distributed within the Tranche is the lesser of (i) the amount necessary to satisfy all claims within the Tranche or (ii) the amount of cash available.
 
(4)
Within Tranche 2, the Senior Notes Intercreditor Interest Claim and the Subordinated Notes Prepetition Claim and Intercreditor Interest Claim will share pro rata based on the size of those claims. For the calculation of the General Unsecured Creditors' pro rata share in all Tranches, see footnote 3.
 
(5)
Late filed claims will be paid only after all other prepetition claims (other than Subordinated Claims) are paid in full without giving effect to applicable turnover provisions. Late filed claims will not share pro rata with any other claims. Therefore, to the extent late filed claims are paid, this will create a break in the recovery of other creditors prior to their recovery on account of post-petition interest from the Debtors. The placement of late filed claims in the chart above is illustrative only, as the size of the pre-petition Allowed General Unsecured Claims and the amount of post-petition interest turned over on account of contractual subordination provisions will influence their position in the waterfall. The late filed claims will, in any event, be paid immediately after satisfaction of pre-petition Allowed General Unsecured Claims, but prior to the payment of post-petition interest and Subordinated Claims.
 
(6)
If it is provided for in an applicable contract or by law, the General Unsecured Creditors' Post-Petition Interest Claim will share pro rata with distributions to holders of PIERS claims on account of post-petition interest with respect to all post-petition interest claims, including Post-Petition Interest Claims to which the holders of PIERS Claims have been subrogated (on account of turnover in accordance with contractual subordination provisions). The chart above is illustrative only, as the point at which the Allowed General Unsecured Claims begin receiving post-petition interest is dependent on the size of the Allowed General Unsecured prepetition claims and the amount of post-petition interest paid pursuant to contractual subordination.
 
(7)
The Senior Floating Rate Notes Remaining Post-Petition Interest Claim will be paid only when interest in excess of the contract rate would have been paid if such payment were actually being made by the Debtors as opposed to by reason of contractual subordination. After that trigger has been met (currently projected to occur during the payouts in Tranche 4), that claim will be paid pari passu with the remaining claims in Tranche 4.
 

 
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e.  
Projected Recoveries for Holders of Claims and Equity Interests
 
The following table summarizes (i) assuming an Effective Date of February 29, 2012, the estimated recoveries for holders of Claims, and Equity Interests, (ii) which Classes are impaired by the Seventh Amended Plan, and (iii) which Classes are entitled to vote on the Seventh Amended Plan.  A detailed discussion of the analysis underlying the estimated recoveries, including the assumptions underlying such analysis, is set forth in the Updated Liquidation Analysis attached hereto as Exhibit C.  The votes of Class 17A accepting the Sixth Amended Plan/Modified Sixth Amended Plan will be deemed acceptance by Class 17A of the Seventh Amended Plan for the reasons described in Section XI.A hereof.
 
Class
Claim or Equity
Interest
Estimated
Recovery for
Allowed
(Prepetition)
Claims
Estimated Recovery
Including Postpetition
Claims, as Applicable28
Whether
Class is
Impaired or
Unimpaired
Whether Class is
Entitled to Vote
on the Seventh
Amended Plan
Class 1
Priority Non-Tax Claims
100%
100%
Unimpaired
Deemed to Accept
Class 2
Senior Notes Claims
100%
97-100%29
Impaired
Yes
Class 3
Senior Subordinated Notes Claims
100%
100%30
Impaired
Yes
Class 4
WMI Medical Claims
100%
100%
Unimpaired
Deemed to Accept
 
 
__________________________
28 For the purposes of this chart, “Postpetition Claims” includes Postpetition Interest Claims or Intercreditor Claims, as applicable.
 
29 The Debtors estimate that holders of Allowed Senior Notes Claims related to Fixed Rate Notes will receive one hundred percent (100%) of such holders’ Intercreditor Interest Claims pursuant to the Seventh Amended Plan.  The Debtors estimate that holders of Allowed Senior Notes Claims related to Floating Rate Notes will receive one hundred percent (100%) of such holders’ Intercreditor Interest Claims and one percent (1%) of such holders’ Remaining Postpetition Interest Claims (and, therefore, a ninety-seven percent (97%) recovery including postpetition Claims).  The stated estimate of recovery for holders of Allowed Senior Notes Claims does not take into account the Senior Notes Release Consideration.  After the Senior Notes Release Consideration is taken into account, the Debtors estimate that holders of Allowed Senior Notes Claims related to Fixed Rate Notes will receive ninety-nine percent (99%) of such holders’ combined total Allowed Senior Notes Claims and Intercreditor Interest Claims, while holders of Allowed Senior Notes Claims related to Floating Rate Notes will receive ninety-six percent (96%) of such holders’ combined total Allowed Senior Notes Claims, Intercreditor Interest Claims and Remaining Postpetition Interest Claims.
 
30 The stated estimate of recovery for holders of Allowed Senior Subordinated Notes Claims does not take into account the Senior Subordinated Notes Release Consideration.  After the Senior Subordinated Notes Release Consideration is taken into account, the Debtors estimate that holders of Allowed Senior Subordinated Notes Claims will receive ninety-eight percent (98%) of such holders’ total Allowed Senior Subordinated Notes Claims and Intercreditor Interest Claims.
 
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Class
Claim or Equity
Interest
Estimated
Recovery for
Allowed
(Prepetition)
Claims
Estimated Recovery
Including Postpetition
Claims, as Applicable28
Whether
Class is
Impaired or
Unimpaired
Whether Class is
Entitled to Vote
on the Seventh
Amended Plan
Class 5
JPMC Rabbi Trust/Policy Claims
100%
100%
Impaired
Yes
Class 6
Other Benefit Plan Claims
100%
100%
Impaired
Yes
Class 7
Qualified Plan Claims
100%
100%
Unimpaired
Deemed to Accept
Class 8
WMB Vendor Claims
100%
100%
Impaired
Yes
Class 9
Visa Claims
100%
100%
Impaired
Yes
Class 10
Bond Claims
100%
100%
Impaired
Yes
Class 11
WMI Vendor Claims
100%
100%
Impaired
Yes
Class 12
General Unsecured Claims
100%
97%
Impaired
Yes
Class 12A
Late-Filed Claims
100%
97%
Impaired
Yes
Class 13
Convenience Claims
100%
100%
Impaired
Yes
Class 14
CCB-1 Guarantees Claims
100%
100%
Impaired
Yes
Class 15
CCB-2 Guarantees Claims
100%
100%
Impaired
Yes
Class 16
PIERS Claims
12%
11%31
Impaired
Yes
 
__________________________ 
31 The Debtors’ Updated Liquidation Analysis assumes no Litigation Proceeds and an ultimate aggregate total of $375 million for Allowed General Unsecured Claims upon final determination of all Disputed Claims.  To the extent of material Litigation Proceeds or reduction in the ultimate aggregate amount of Allowed General Unsecured Claims, recoveries for holders of Allowed PIERS Claims could be materially higher than the given estimate.  Conversely, to the extent that confirmation of the Seventh Amended Plan is further delayed, the Class of PIERS Claims will be the first Class to suffer from a deterioration or elimination in recoveries as a result of the continued accrual of interest and fees.
 
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Class
Claim or Equity
Interest
Estimated
Recovery for
Allowed
(Prepetition)
Claims
Estimated Recovery
Including Postpetition
Claims, as Applicable28
Whether
Class is
Impaired or
Unimpaired
Whether Class is
Entitled to Vote
on the Seventh
Amended Plan
Class 17A
WMB Senior Notes Claims
0-100%
 
0-100%
Impaired
Deemed to Accept (Based on Vote on Sixth Amended Plan)
Class 17B
WMB Subordinated Notes Claims32
0%
0%
Impaired
Deemed to Reject
Class 18
Subordinated Claims
0%
0%
Impaired
Yes
Class 19
Preferred Equity Interests
Pro Rata Share of 133 million shares of Reorganized Common Stock
N/A
Impaired
Yes
Class 21
Dime Warrants
Pro Rata Share of 57 million shares of Reorganized Common Stock
N/A
Impaired
Deemed to Reject
Class 22
Common Equity Interests
Pro Rata Share of 57 million shares of Reorganized Common Stock
N/A
Impaired
Yes

 
f.  
Disclosure Regarding the Remaining Postpetition Interest Claims of Holders of Allowed Senior Notes Claims Related to Floating Rate Notes
 
Pursuant to the Subordination Model, recoveries to holders of Allowed PIERS Claims will be reduced to fund Intercreditor Interest Claims, including in favor of holders of Allowed Senior Notes Claims related to Floating Rate Notes.  After the Allowed Claims and Intercreditor Interest Claims
 
__________________________
32 With respect to Class 17B (WMB Subordinated Notes), there are no Allowed Claims in that Class because, except to the extent that they are Section 510(b) Subordinated WMB Notes Claims, the Claims in this Class are derivative in nature and the Debtors intend to provide a distribution on account of such Claims to the FDIC Receiver pursuant to the Global Settlement Agreement.  In reality, this is an empty Class with no Claims at all, because the FDIC Receiver is releasing all such Claims.
 
47

 
of holders of Allowed Senior Notes Claims and Allowed Senior Subordinated Notes Claims have been satisfied in full, such holders will have been paid in full pursuant to the terms of their respective notes and indentures, and holders of Allowed PIERS Claims will then be subrogated (to the extent they have paid up) to the remaining rights, as against the Debtors, of the holders of Allowed Senior Notes Claims and Allowed Senior Subordinated Notes Claims.  In the case of the Floating Rate Notes, once holders of Allowed PIERS Claims have exercised their subrogation rights in respect of such notes, the Remaining Postpetition Interest Claims of holders of Allowed Senior Notes Claims related to Floating Rate Notes will be pari passu with Allowed PIERS Claims.
 
g.  
Disclosure Regarding the Maximum Possible Recovery for Holders of Allowed PIERS Claims
 
As stated, the Seventh Amended Plan provides that distributions of Cash and Cash on account of Liquidating Trust Interests, as well as, to the extent eligible Creditors elect to receive them, Runoff Notes, will be made in accordance with the Subordination Model attached as an exhibit to the Seventh Amended Plan, a copy of which is set forth in Section III.B.6.d hereof.  The Subordination Model implements the Debtors’ interpretation of the respective subordination provisions in the Senior Subordinated Notes Indenture, CCB-1 Guarantee Agreements, CCB-2 Guarantee Agreements, Junior Subordinated Notes Indenture and PIERS Guarantee Agreement with respect to the relative priorities among holders of Allowed Senior Notes Claims, Allowed Senior Subordinated Notes Claims, Allowed General Unsecured Claims, Allowed CCB-1 Guarantees Claims, Allowed CCB-2 Guarantees Claims, Allowed PIERS Claims, and Allowed Late-Filed Claims and the order in which such holders are entitled to receive payment of their Allowed Claims, Intercreditor Interest Claims and Postpetition Interest Claims including, without limitation, on account of contractual subordination and subrogation provisions.  The Seventh Amended Plan thus effectuates the payover by holders of Allowed PIERS Claims of some or all of the distributions from the Debtors that such holders would otherwise be entitled to receive to those holders of Allowed Claims that are, as depicted in the Subordination Model, senior in recovery to holders of Allowed PIERS Claims, on account of such senior holders’ Intercreditor Interest Claims, to the extent that such senior holders’ Intercreditor Interest Claims (which are calculated at the applicable contract rate) exceed such holders’ Postpetition Interest Claims (which are calculated at the federal judgment rate).
 
As a result of the fact that, consistent with the September Opinion, the Seventh Amended Plan effectuates the payover obligations of holders of Allowed PIERS Claims at contract rates that exceed the federal judgment rate, while only having subrogation rights with respect to the lower federal judgment rate, the maximum possible recovery for holders of Allowed PIERS Claims is less than the total amount of Allowed PIERS Claims and Postpetition Interest Claims thereon.  Assuming an Effective Date of February 29, 2012, the maximum possible recovery for holders of Allowed PIERS Claims is approximately Two Hundred Fifty Million Dollars ($250,000,000.00).  The amount of the maximum possible recovery can be calculated by subtracting (i) the sum of Allowed Senior Notes Claims and Intercreditor Interest Claims thereon, Allowed Senior Subordinated Notes Claims and Intercreditor Interest Claims thereon, Allowed CCB-1 Guarantees Claims and Intercreditor Interest Claims thereon, and Allowed CCB-2 Guarantees Claims and Intercreditor Interest Claims thereon from (ii) the sum of Allowed Senior Notes Claims and Postpetition Interest Claims thereon, Allowed Senior Subordinated Notes Claims and Postpetition Interest Claims thereon, Allowed CCB-1 Guarantees Claims and Postpetition Interest Claims thereon, Allowed CCB-2 Guarantees Claims and Postpetition Interest Claims thereon, and Allowed PIERS Claims and Postpetition Interest Claims thereon.  For clarity, applying the stated formula, the maximum possible recovery for holders of Allowed PIERS Claims, assuming an Effective Date of February 29, 2012, is calculated as $7.114 billion less $6.863 billion.  To the extent the Effective Date is delayed past February 29, 2012, however, such amount is reduced by $14 million to $16 million every month due to the difference between the federal judgment rate and contract rate.
 
 
 
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h.  
Disclosure Regarding Potential for Distributions of Liquidating Trust Interests to Holders of Allowed Subordinated Claims (Class 18) and to Holders of Preferred Equity Interests (Class 19), Dime Warrants (Class 21) and Common Equity Interests (Class 22)
 
As discussed in more detail elsewhere herein, the Seventh Amended Plan provides that in the event that all Allowed Claims (other than Allowed Subordinated Claims), and Postpetition Interest Claims and Intercreditor Interest Claims in respect of such Allowed Claims, are paid in full, the Liquidating Trust Interests will be redistributed, and holders of Allowed Subordinated Claims (Class 18) will be entitled to receive their Pro Rata Share of such interests.  As set forth in the Updated Liquidation Analysis attached hereto as Exhibit C, the Debtors estimate that holders of Allowed PIERS Claims (Class 16) will receive a distribution of approximately $94 million pursuant to the Seventh Amended Plan.  As set forth in Section III.B.6.g hereof, the maximum possible recovery for holders of Allowed PIERS Claims is approximately $250 million, such that the Debtors estimate that there will be a shortfall with respect to recovery for holders of Allowed PIERS Claims in the amount of approximately $156 million.  In addition, the Debtors estimate that there will be remaining claims of approximately $40 million of Remaining Postpetition Interest Claims with respect to the Floating Rate Senior Notes, as well as approximately $11 million of Postpetition Interest Claims on account of Allowed General Unsecured Claims.  Accordingly, for Liquidating Trust Interests to be redistributed to holders of Allowed Subordinated Claims pursuant to the Seventh Amended Plan, the amount of net Cash proceeds available for distribution from the Liquidating Trust would have to be approximately $207 million greater than currently estimated by the Debtors.
 
The Seventh Amended Plan further provides that, subject to granting the releases set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), in the event that all Allowed Claims and Postpetition Interest Claims in respect of Allowed Claims are paid in full (including with respect to Allowed Subordinated Claims), (i) each holder of a Preferred Equity Interest, including, without limitation, each holder of a REIT Series, will be entitled to receive such holder’s Pro Rata Share of seventy percent (70%) of, and (ii) holders of Dime Warrants in Class 21 and Common Equity Interests in Class 22 will be entitled to receive such holders’ Pro Rata Shares of thirty percent (30%) of (to be shared on a pari passu basis between these two Classes), among other things, any Liquidating Trust Interests to be redistributed; provided, however, that, in the event that, at the Confirmation Hearing and in the Confirmation Order, the Bankruptcy Court determines that a different percentage should apply, the foregoing percentage will be adjusted in accordance with the determination of the Bankruptcy Court and be binding upon each Equity Interest holder.
 
Thus, pursuant to the Seventh Amended Plan, all Allowed Subordinated Claims must be satisfied in full prior to redistribution of Liquidating Trust Interests to holders of Equity Interests.  The ultimate amount in which Subordinated Claims in Class 18 will be allowed is unknown and any estimate at the current time would be highly speculative.  Claims that are or potentially will be classified in Class 18 include, among others, the following:  Certain Claims filed by holders of WMB Notes.  For example, pursuant to the Motion of Debtors for an Order Pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019, Approving Stipulation and Agreement by and Among the Debtors and the G&E Group, dated December 28, 2011 [D.I. 9279], the Debtors seek approval of a stipulation with certain holders of Misrepresentation Claims related to WMB Notes pursuant to which the Debtors have agreed that such holders will be deemed to hold Allowed Subordinated Claims in the amount of $15 million.  (See Section V.B.5.g hereof.)  The hearing on said motion is scheduled for January 19, 2012.  Pursuant to the Motion of Debtors for an Order Pursuant to Section 105(a) of the Bankruptcy Code, Bankruptcy Rules 7023 and 9019, and Federal Rule of Civil Procedure 23(e), Approving Stipulation and Agreement Between the Debtors and Class Representatives of the LTW Holders Resolving Adversary Proceeding and
 
 
 
49

 
the LTW Proofs of Claim [D.I. 9389], the Debtors seek approval of the LTW Stipulation (defined below) pursuant to which the Debtors have agreed that Dime Warrant holders will be deemed to hold, among other things, Allowed Subordinated Claims in the aggregate amount of $10 million.  (See Section V.B.5.d hereof.)  The hearing on said motion is scheduled for February 1, 2012.
 
Certain additional Claims either are or could be classified in Class 18, but are disputed on the basis of, among other things, validity, amount, and/or appropriate classification.  For example, pursuant to that certain Stipulation Resolving Debtors’ Amended Thirty-Second Omnibus (Substantive) Objection With Respect to Claim Nos. 3812 and 2689 [D.I. 6068], dated November 23, 2010, by and among, among others, the Debtors and the Policeman’s Annuity and Benefit Fund of the City of Chicago (defined in Section V.B.6.g below as “Chicago PABF”) and Doral Bank Puerto Rico (defined below as “Doral Bank”), as lead plaintiffs, on behalf of a putative class, in the consolidated putative securities class action entitled Boilermakers National Annuity Trust Fund v. WAMU Mortgage Pass Through Certificates Series ARI, Case No. 09-0037 (MJP) (the “Boilermakers Plaintiffs”), the parties thereto agreed that certain Claims filed by and on behalf of the Boilermakers Plaintiffs would be withdrawn, without prejudice to the re-filing of such Claims in the event that a plan was filed that would provide recovery to holders of Allowed Subordinated Claims.  Certain Boilermaker Plaintiffs argue that they are now permitted to refile their Claims because the Seventh Amended Plan provides for a conditional distribution to holders of Allowed Subordinated Claims.  In the Boilermaker Plaintiffs’ objection to this Disclosure Statement [D.I. 9316], filed January 4, 2012, the Boilermaker Plaintiffs asserted that they are entitled to re-file their Claims as General Unsecured Claims rather than as Subordinated Claims.  On January 10, 2012 the Boilermakers Plaintiffs submitted a new proof of Claim, asserted in the amount of “at least $273 million,” on behalf of the putative securities litigation class.  The Debtors dispute this Claim, and, as of the date of this Disclosure Statement, no party has moved to estimate such Claim.
 
In addition, certain directors and officers filed indemnification Claims against the Debtors that the Debtors have objected to, arguing that such Claims should be disallowed and, in the alternative subordinated to Class 18.  (See Debtors’ Sixtieth Omnibus Objection (Substantive) to Claims (Claim Nos. 2108, 2240, 2241, 2246, 2247, 2248, 2604, 2606, 2631, 2633, 2634, 2635, 2636, 2637, and 3242) [D.I. 5970], dated November 17, 2010.)  In the context of the Estimation Motion (defined and discussed in Section V.B.5.h hereof), pursuant to which the Debtors have asserted that $0 should be reserved for said director and officer indemnification Claims, certain director and officer claimants have argued that at least $100 million must be reserved for such claims.
 
In addition, the Creditors’ Committee has filed a motion [D.I. 9301], in which the Debtors have joined [D.I. 9302], requesting that the Bankruptcy Court alter or amend its December 20, 2011 opinion and order, discussed in Section V.B.6.k hereof, ruling that the Debtors have not stated a basis for subordination of the Claim filed by Tranquility (defined below), which Claim was filed in the amount of approximately $49.6 million.
 
In addition, pursuant to the Order Approving Stipulation Between Claimants Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., and Morgan Stanley & Co., Inc., and the Debtors Resolving the Twenty-Ninth Omnibus Substantive Objection to Claims Pursuant to Section 510(b) of the Bankruptcy Code [D.I. 6687], dated February 4, 2011, the Bankruptcy Court approved a stipulation pursuant to which the Debtors agreed that certain underwriters’ Claims are classified in Class 18 as Subordinated Claims, but reserved the right to object to such Claims.
 
 
50

 
7.  
Releases
 
As set forth in more detail in Section VI.O hereof, the Seventh Amended Plan provides for certain releases of Claims by the Debtors, Creditors’ Committee, Equity Committee and by holders of Claims and Equity Interests.  The releases in the Seventh Amended Plan are (i) essential to the success of the Debtors’ reorganization, (ii) based on a critical financial contribution of the Released Parties, (iii) necessary to make the Seventh Amended Plan feasible, and (iv) fair to Creditors.  The releases are integral to obtaining the value provided pursuant to (i) the Global Settlement Agreement and (ii) the compromise and settlement reached during the Mediation, both of which are deliverable pursuant to the Seventh Amended Plan.  Accordingly the releases constitute an essential component of the compromises reached among the parties to the Global Settlement Agreement and the Mediation, and an essential component of the Seventh Amended Plan.  As set forth in Section VI.O.5.b hereof, except with respect to Classes 1, 4, and 7, any holder of a Claim or Equity Interest that elects to opt out of, or fails to elect to opt in to, as the case may be, the releases set forth in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan) will not receive a distribution.
 
C.  
Approximate Amounts of Certain Fees and Expenses Incurred, Payment of Which
 
 
May Be Requested Pursuant to Sections 31.12 and 41.18 of the Seventh Amended Plan
 
1.  
Section 31.12 of the Seventh Amended Plan
 
Section 31.12 of the Seventh Amended Plan, entitled “Payment of Trustees Fees and Expenses,” provides, among other things, that, upon entry of an order of the Bankruptcy Court authorizing payment thereof, upon notice and a hearing, the Disbursing Agent, unless otherwise stayed, shall pay the Trustee Claims, which consist of the Claims of the Senior Notes Indenture Trustee, Senior Subordinated Notes Indenture Trustee, CCB-1 Trustee, CCB-2 Trustees, PIERS Trustee, and Trust Preferred Trustees, pursuant to the Senior Notes Indenture, Senior Subordinated Notes Indenture, CCB-1 Guarantee Agreements, CCB-2 Guarantee Agreements, Junior Subordinated Notes Indenture and PIERS Guarantee Agreement, and Trust Preferred Securities documents, respectively, for indemnification and for reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and expenses.  In May 2011, each of the Trustees filed a motion requesting, among other things, partial liquidation and allowance of fees and expenses respectively earned/incurred by the Trustees and their attorneys through March or April 2011 (as applicable) (collectively, the “Trustees’ First Fee Motions”).  Pursuant to the Trustees’ First Fee Motions, the Trustees requested allowance of fees in the aggregate amount of approximately $9.6 million.  By separate orders, the Bankruptcy Court granted the Trustees’ First Fee Motions.
 
In August, 2011, the Trustees each filed motions requesting further, partial liquidation and allowance of the fees and expenses each Trustee respectively earned/incurred during the four-month period ending July 31, 2011 or August 31, 2011 (as applicable) (collectively, the “Trustees’ Second Fee Motions”), which fees and expenses aggregate to approximately $2.4 million.  In October 2011, by separate orders, the Bankruptcy Court granted the Trustees’ Second Fee Motions.
 
2.  
Section 41.18 of the Seventh Amended Plan
 
Section 41.18 of the Seventh Amended Plan, entitled “Payment of Fees and Expenses of Certain Creditors,” provides that, within ninety (90) days of the Effective Date, (i) Fried, Frank, Harris, Shriver & Jacobson LLP (“Fried Frank”), (ii) Blank Rome LLP (“Blank Rome”), (iii) White & Case LLP (“White & Case”), (iv) Kasowitz, Benson, Torres & Friedman LLP (“Kasowitz”), (v) Zolfo Cooper (“Zolfo”), (vi) Kramer, Levin, Naftalis & Frankel LLP, (vii) Halperin Battaglia Raicht LLP, and (viii) in
 
 
 
51

 
accordance with Section 21.1(a) of the Seventh Amended Plan, Wilmer Cutler Pickering Hale & Dorr LLP (“Wilmer Hale”), Pachulski Stang Ziehl & Jones LLP (“Pachulski”), and Boies, Schiller & Flexner LLP (“Boies Schiller” and, collectively with Fried Frank, Blank Rome, White & Case, Kasowitz, Zolfo, Wilmer Hale, and Pachulski, the “Section 41.18 Professionals”), to the extent the clients with respect to the Section 41.18 Professionals seek reimbursement for the payment of fees and expenses incurred, shall file with the Bankruptcy Court an application (for purposes of reviewing the reasonableness of the amounts requested therein), together with detailed invoices annexed thereto, requesting payment for reasonable fees and expenses incurred during the period from the Petition Date through and including the Effective Date, in connection with the Chapter 11 Cases, the Global Settlement Agreement, the Seventh Amended Plan, or the transactions contemplated therein (including, without limitation, investigating, negotiating, documenting, and completing such transactions and enforcing, attempting to enforce, and preserving any right or remedy contemplated under the Global Settlement Agreement and in the Chapter 11 Cases), and that, within ten (10) Business Days of the entry of a Final Order by the Bankruptcy Court approving the payment thereof, in whole or in part, the Disbursing Agent shall pay such fees and expenses so approved.  The Debtors have been informed by the Section 41.18 Professionals that the Section 41.18 Professionals project that they will request an aggregate total of at least33 $37.3 million on account of fees for services rendered and expenses incurred through the date hereof in connection with the Chapter 11 Cases, the Global Settlement Agreement, the Seventh Amended Plan, or the transactions contemplated therein.  As summarized in Section VI.B.18.a below, up to $10 million of Cash distributed on account of the BB Liquidating Trust Interests will be used to satisfy the fees and expenses of Wilmer Hale, Pachulski, and Boies Schiller (which currently account for approximately $7.9 of the total amount the Section 41.18 Professionals project they will request).
 
 
 
IV.
OVERVIEW OF THE DEBTORS’ OPERATIONS
 
A.  
The Debtors’ Corporate History and Past and Current Organizational Structure and Assets
 
1.  
Overview
 
WMI is a holding company incorporated in the State of Washington and headquartered at 925 Fourth Avenue, Suite 2500, Seattle, Washington 98104.34  WMI is the direct parent of WMI Investment (discussed below).
 
Prior to the Petition Date, WMI was a multiple savings and loan holding company that owned WMB and such bank’s subsidiaries, including FSB.  WMB primarily provided banking services to consumers and small businesses in major U.S. markets.  WMI was the largest savings and loan holding company and WMB, together with its subsidiaries, was the seventh largest U.S.-based bank.  As of the Petition Date, WMI also had several non-debtor subsidiaries.  Like all savings and loan holding companies, prior to the Petition Date, WMI was subject to regulation by the OTS.  WMB and FSB, in turn, like all depository institutions with federal thrift charters, were subject to regulation and examination by the OTS.  In addition, WMI’s banking and non-banking subsidiaries were overseen by various federal and state authorities, including the FDIC.
 
__________________________
33 Some of the Section 41.18 Professionals have not provided current accountings of fees and expenses.
 
34 The Debtors anticipate relocating to 1201 Third Avenue, Suite 3000, Seattle, Washington 98101 by the end of January 2012.
 
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On September 25, 2008, the OTS, by order number 2008-36, closed WMB, appointed the FDIC Receiver as receiver for WMB and advised that the FDIC Receiver was immediately taking possession of WMB’s assets.  Immediately after its appointment as receiver, the FDIC sold substantially all the assets of WMB, including the stock of FSB, to JPMC pursuant to the Purchase and Assumption Agreement in exchange for payment of $1.88 billion and the assumption of all of WMB’s deposit liabilities, including those deposit liabilities owed to the Debtors.  Shortly thereafter, JPMC assumed all of FSB’s deposit liabilities by merging FSB with its own banking operations.
 
Prior to the Receivership, WMI’s equity securities were registered with the United States Securities and Exchange Commission (the “SEC”) and were traded on the New York Stock Exchange (NYSE) under the symbol “WM.”  Accordingly, WMI was subject to the informational disclosure requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and filed annual, quarterly and current reports and other information with the SEC.  WMI has adopted so-called “modified Exchange Act reporting” under the SEC Staff’s Legal Bulletin No. 2 and, accordingly, no longer files Form 10-Q and 10-K reports.  Instead, WMI files its monthly operating reports (the “MORs”) with the Bankruptcy Court and furnishes the MORs to the SEC under cover of Form 8-K.  WMI also files 8-K reports as necessary to report “line items” and material developments concerning WMI and WMI’s chapter 11 case.
 
2.  
List of WMI’s Current Directors
 
As set forth in WMI’s public filings with the SEC, available at www.sec.gov, WMI’s current directors are Stephen E. Frank, Alan Fishman, Margaret Osmer McQuade, Phillip Matthews, Regina T. Montoya, Michael K. Murphy, William G. Reed, Jr., Orin Smith, and James H. Stever.
 
3.  
WMI’s Consolidated Corporate Organizational Structure
 
On the Petition Date, in addition to WMB,35 WMI owned, directly and indirectly, thirty-three (33) subsidiaries (the “Non-Banking Subsidiaries”).  For the avoidance of doubt, Second and Union LLC is not now and has never been an asset of the Debtors’ estates.  (See Debtor’s Response to the Letter of Joe Schorp Requesting Information Regarding Second and Union LLC [D.I. 6811].)  A complete list of the Non-Banking Subsidiaries, as well as information regarding their organizational relationships, financial information and a summary of their respective operations, is set forth below.  During the pendency of the Chapter 11 Cases, in addition to monetizing assets at such Non-Banking Subsidiaries, the Debtors have undertaken three corporate reorganizations in order to consolidate WMI’s corporate structure.  Upon completion of each of these reorganizations, available cash has been either distributed to WMI in accordance with applicable law or paid to WMI in satisfaction of an intercompany obligation.  After giving effect to these reorganizations, WMI owned (and continues to own) seven directly-owned Non-Banking Subsidiaries.  Below are visual representations of WMI’s corporate organizational chart (i) prior to the FDIC Receiver’s seizure of all of WMB’s assets on September 25, 2008 and JPMC’s purchase, pursuant to the Purchase and Assumption Agreement, of substantially all of such assets (including FSB and all other subsidiaries owned, directly and indirectly, by WMB), (ii) as of the Petition Date, and (iii) as of the date of the filing of this Disclosure Statement.
 
__________________________
35 Although, as of the date hereof, WMB remains a subsidiary of WMI, the FDIC seized all of WMB’s assets on September 25, 2008, including all of WMB’s subsidiaries, and sold substantially all of WMB’s assets to JPMC pursuant to the Purchase and Assumption Agreement.  Accordingly, none of WMB’s subsidiaries are considered subsidiaries of WMI.
 
 
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a.  
WMI and WMB Combined Organizational Chart Prior to FDIC Seizure36
 
The organizational chart on the following page reflects the combined WMI and WMB structure prior to the FDIC seizure and JPMC’s acquisition of WMB’s assets.
 
[AREA INTENTIONALLY LEFT BLANK]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

__________________________
36 The Non-Banking Subsidiaries are denoted in blue; WMB’s direct and indirect subsidiaries are denoted in green; Subsidiaries are indented to the right underneath the parent, colored arrows to the left of a company box indicate a multiple parent relationship and colored arrows to the right of a company box indicate a subsidiary interest in another subsidiary.

 
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55

 

 
b.  
WMI Organizational Chart as of Petition Date37
 
WMB’s banking operations and its subsidiaries (including FSB) were seized by the FDIC Receiver and then acquired by JPMC on September 25, 2008 pursuant to the Purchase and Assumption Agreement.  The organizational chart below reflects WMI and the 33 Non-Banking Subsidiaries as of the Petition Date, September 26, 2008.   It should be noted that the Washington Mutual Capital Trust 2001 is a trust related to the PIERS Units (defined below), further described in Section IV.B.5 of this Disclosure Statement, and is not considered one of the 33 Non-Banking Subsidiaries.


[AREA INTENTIONALLY LEFT BLANK]
 

__________________________ 
37 Subsidiaries are indented to the right underneath the parent, colored arrows to the left of a company box indicate a multiple parent relationship, and colored arrows to the right of a company box indicate a subsidiary interest in another subsidiary.
 
 
 
 
56

 
 
 
 
 
 
 
 
57

 
 
c.  
WMI Current Organizational Chart38
 
The organizational chart below reflects the remaining seven Non-Banking Subsidiaries, after the three corporate reorganizations, owned by WMI as of the date of the filing of this Disclosure Statement.
 
 
 
4.  
Analysis of Subsidiary Equity
 
The following chart lists the Non-Banking Subsidiaries owned by WMI as of the Petition Date, a summary in the change in equity value at those subsidiaries from the Petition Date, September 26, 2008, through to, and including, October 31, 2011, and WMI’s estimate of the current market value of

__________________________ 
38 Colored arrows to the left of a company box indicate a multiple parent relationship and colored arrows to the right of a company box indicate a subsidiary interest in another subsidiary.
 
 
 
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assets remaining in each remaining Non-Banking Subsidiary.39  This summary is further supplemented by (i) a reconciliation of the change in equity, (ii) background information for all Non-Banking Subsidiaries, and (iii) balance sheets for Non-Banking Subsidiaries as of October 31, 2011, each of which are set forth in the following sections.  It should be noted that the financial information referenced in (iii) is not included for WMI Investment or WMMRC, as adequate information on this has been previously provided elsewhere in this Disclosure Statement or in the Debtors’ MORs.


[AREA INTENTIONALLY LEFT BLANK]

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
__________________________ 
39 Of WMI’s seven remaining Non-Banking Subsidiaries, WMMRC, which is currently operating on a run-off basis, WMMRC is the only Non-Banking Subsidiary with ongoing operations.  Refer to Articles IV.A.6, VII, and VIII of this Disclosure Statement for additional information regarding WMMRC.  After the Effective Date, WMMRC will be Reorganized WMI’s sole operating entity.  Pursuant to the September Opinion, the Bankruptcy Court determined, based upon the evidence presented at the July Confirmation Hearing, that the enterprise value of Reorganized WMI is $210 million.  For each of the Non-Banking Subsidiaries other than WMMRC, the market value stated is a sum of, where applicable, (i) cash, (ii) notes receivable being paid by JPMC, carried at current market value, and (iii) in some cases, certain other de minimis assets and liabilities, less certain disbursements for expenses related to mergers with other Non-Banking Subsidiaries or dissolution, as applicable. The principal difference between the book value and the stated market value results from the fact that intercompany balances do not represent additional value to the Debtors’ estates.
 
 
 
 
 
59

 
 
 
 
 
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a.  
Reconciliation of Change in “Investment in Subsidiaries”
 
WMI’s “Investment in Subsidiaries,” as shown on WMI’s balance sheet (set forth in each of the Debtors’ MORs), and in the preceding chart, reflects the total book equity of the Non-Banking Subsidiaries.  The total change in “Investment in Subsidiaries” from the Petition Date to October 31, 2011 is approximately $455 million, as explained below.

Investment in Subsidiaries – 9/26/2008
  $ 1,895,218,467    
Notes
 
               
Income / (Loss) from Subsidiaries
    (205,040,767 )     (1)  
Cash Distributed to WMI
    (386,865,257 )     (2  
Paid Notes and Tax Payables to WMI
    72,236,573       (2)  
Distribution of Remaining Marion Business to WMI
    (16,443,787 )  
Reported in Dec 2009 MOR40
 
Change in Other Comprehensive Income (“OCI”)
    64,183,030       (3)  
Other Miscellaneous Changes
    17,278,143          
                 
Cumulative Change from Petition Date
    (454,652,065 )        
                 
Investment in Subsidiaries – 10/31/2011
  $ 1,444,609,697          

Notes to the chart follow on the next page.

 

 

 
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40 (See Note 4 to the “Financial Statements” in the December 2009 MOR [D.I. 2280].)

 
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5.  
Assets of WMI Investment
 
WMI Investment is a Delaware corporation that, as of the Petition Date, held a variety of securities and investments.  Certain entities have argued that the Debtors must more fully disclose the assets of WMI Investment, including all securities held by WMI Investment, and the divestiture of any such assets since the Petition Date.
 
Information regarding the assets of WMI Investment has been disclosed by the Debtors in every monthly operating report (“MOR”) filed subsequent to the Petition Date, each of which was also filed with the Securities and Exchange Commission (the “SEC”) under the cover of a form 8-K, and in WMI Investment’s schedule of assets and liabilities, first filed with the Bankruptcy Court on December 19, 2008 (the “WMI Investment Schedule”).  As detailed in the WMI Investment Schedule, WMI Investment’s assets consisted, as of the Petition Date, of:
 
·  
a $566 million intercompany receivable from WMI (which, pursuant to Section 32.2 of the Seventh Amended Plan, will be extinguished, unless otherwise agreed or resolved);
 
·  
a membership interest in JPMC Wind Investment Portfolio LLC with a book value of $65 million41 (which WMI Investment will transfer to JPMC pursuant to the Global Settlement Agreement) (see Sections IV.A.9.a and V.B.3.b(iii) below);
 
·  
$53 million of cash on deposit at JPMC (which the Debtors will receive free and clear pursuant to the Global Settlement Agreement) (see Section V.B.3.b(i) below);
 
·  
a tax receivable from WMI in the amount of $22 million42 (which, pursuant to Section 32.2 of the Seventh Amended Plan, will be extinguished, unless otherwise agreed or resolved); and
 
·  
$266 million of investments and $4 million of accrued interest.
 
After the Petition Date, the Debtors were required to liquidate the $266 million of investments held by WMI Investment to comply with section 345(b) of the Bankruptcy Code, which governs investment requirements for bankrupt companies.  The conversion of these assets to cash was disclosed in the Schedule of Cash Receipts and Disbursements included as part of the MORs filed with the Bankruptcy Court and the SEC with respect to November 2008 through December 2008, as “Cash Receipts” from the “Sale of Assets/Securities.”  Furthermore, the applicable balance sheets set forth in each MOR during that period illustrated the increase of cash and the reduction of securities.  Each of these documents are publicly available on the Bankruptcy Court’s docket, as well as on the website maintained by the Debtors’ solicitation and voting agent, Kurtzman Carson Consultants, LLC, at www.kccllc.net/wamu, and the SEC, at www.sec.gov. 43
 

__________________________ 
41 The book value of WMI Investment’s membership interest in JPMC Wind Investment Portfolio LLC is now approximately $49 million.
 
42 This amount is included in, and is not incremental to, the estimated total amount of Tax Refunds to be received by the Debtors.
 
43 At a hearing before the Bankruptcy Court held on March 21, 2011, Bettina Haper asserted that the Debtors’ liquidation of WMI Investment’s securities, discussed herein, was unauthorized.  On October 2, 2008, the Debtors filed the Motion of Debtors for (I) Authorization to Maintain Existing Bank Accounts and Business Forms, and (II) for an Extension of Time to Comply with Section 345(b) of the Bankruptcy Code [D.I. 16].  On October 8, 2008, the Court entered the order extending the Debtors’ time period to comply with Section 345(b) of the Bankruptcy [D.I. 44].  In the Supplemental Motion of Debtors for an Extension of Time to Comply with Section 345(b) of the Bankruptcy Code, dated December 8, 2008 [D.I. 402], the Debtors noted that they had undertaken, and were continuing to undertake, a “steady liquidation of WMI Investment’s remaining non-government backed securities.”  Ms. Haper also noted that, early in the Chapter 11 Cases, the U.S. Trustee filed an objection regarding sales of certain investments by the Debtors.  (See Objection of the United States Trustee to the Motion of Debtors Pursuant to Sections 105(a) and 363 of the Bankruptcy Code for Order Approving Procedures for Sale of the Debtors’ Interests in Certain Investments Free and Clear of Liens, Claims and Encumbrances and Without Further Court Approval [D.I. 420] (the “Securities Sales Objection”); see also Section IV.A.9.b below.)  The Securities Sales Objection, however, was filed by the U.S. Trustee in response to a motion by the Debtors regarding the sale of WMI’s limited partner interests in venture capital funds held directly by WMI—not by WMI Investment.  (See Motion of Debtors Pursuant to Sections 105(a) and 363 of the Bankruptcy Code for Order Approving Procedures for Sale of the Debtors’ Interests in Certain Investments Free and Clear of Liens, Claims and Encumbrances and Without Further Court Approval [D.I. 334] (the “Securities Sales Motion”).)  The Bankruptcy Court approved the Securities Sales Motion, with certain modifications, by order, dated January 5, 2009 [D.I. 536].  Pursuant to the order, the Debtors were authorized to sell the limited partner interests held by WMI without seeking court approval of each sale, but were required to give notice of any such sale prior thereto.
 
 
 
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Pursuant to Sections 1.140 and 27.3 of the Seventh Amended Plan, all assets of WMI Investment will be contributed to the Liquidating Trust.
 
6.  
WM Mortgage Reinsurance Company, Inc. (“WMMRC”)
 
WM Mortgage Reinsurance Company, Inc. (previously defined as “WMMRC”), a Hawaiian corporation and non-debtor, wholly-owned subsidiary of WMI, is a captive reinsurance company, created to reinsure the risk associated with residential mortgages that were originated or acquired by WMB.  Mortgage insurance for WMB-originated or acquired loans had historically been provided by seven mortgage insurance companies (collectively, the “Mortgage Insurers”), although currently WMMRC is party to mortgage reinsurance agreements with only six mortgage insurance companies.  WMMRC entered into reinsurance agreements (the “Reinsurance Agreements”) with each Mortgage Insurer, pursuant to which it would share in the risk, in the form of Claim losses, in exchange for a portion of the premiums generated from the residential mortgage loan portfolio held by the Mortgage Insurer.44

Pursuant to each Reinsurance Agreement, WMMRC established a trust account with US Bank N.A. (defined above as the “WMMRC Trusts”), for the benefit of the Mortgage Insurer, to hold premiums collected and to secure WMMRC’s obligations to each Mortgage Insurer with respect to the insured loans.  WMMRC was historically party to seven trust agreements—one for each Reinsurance Agreement to which it was a party.  As of October 31, 2011, the value of the six remaining Trust’s assets was estimated to be $344 million.

Each Reinsurance Agreement requires that WMMRC maintain a certain minimum amount of capital in the applicable Trust (the “Reinsurance Reserve”), which amount is determined by applicable law, as well as each Mortgage Insurer’s calculation of reserves needed, which is generally inclusive of reserves for known delinquencies within the loan portfolio and a percentage of the remaining aggregate risk exposure contained in each portfolio.  Minimum capital requirements fluctuate on a
 
__________________________
Court entered the order extending the Debtors’ time period to comply with Section 345(b) of the Bankruptcy [D.I. 44].  In the Supplemental Motion of Debtors for an Extension of Time to Comply with Section 345(b) of the Bankruptcy Code, dated December 8, 2008 [D.I. 402], the Debtors noted that they had undertaken, and were continuing to undertake, a “steady liquidation of WMI Investment’s remaining non-government backed securities.”  Ms. Haper also noted that, early in the Chapter 11 Cases, the U.S. Trustee filed an objection regarding sales of certain investments by the Debtors.  (See Objection of the United States Trustee to the Motion of Debtors Pursuant to Sections 105(a) and 363 of the Bankruptcy Code for Order Approving Procedures for Sale of the Debtors’ Interests in Certain Investments Free and Clear of Liens, Claims and Encumbrances and Without Further Court Approval [D.I. 420] (the “Securities Sales Objection”); see also Section IV.A.9.b below.)  The Securities Sales Objection, however, was filed by the U.S. Trustee in response to a motion by the Debtors regarding the sale of WMI’s limited partner interests in venture capital funds held directly by WMI—not by WMI Investment.  (See Motion of Debtors Pursuant to Sections 105(a) and 363 of the Bankruptcy Code for Order Approving Procedures for Sale of the Debtors’ Interests in Certain Investments Free and Clear of Liens, Claims and Encumbrances and Without Further Court Approval [D.I. 334] (the “Securities Sales Motion”).)  The Bankruptcy Court approved the Securities Sales Motion, with certain modifications, by order, dated January 5, 2009 [D.I. 536].  Pursuant to the order, the Debtors were authorized to sell the limited partner interests held by WMI without seeking court approval of each sale, but were required to give notice of any such sale prior thereto.
 
44One of WMMRC’s Reinsurance Agreement counterparties is PMI Mortgage Ins. Co., Inc. (“PMI Mortgage”), which Entity was seized by Arizona state regulators on October 20, 2011.  The Debtors understand that, although PMI Mortgage has ceased writing new business, PMI Mortgage will continue to insure its existing mortgage loan portfolio on a runoff basis, and will continue to make payments of premium income to WMMRC pursuant to the Reinsurance Agreement.


 
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monthly basis and are reflected in monthly “cession statements” provided by each Mortgage Insurer to WMMRC.  By order dated December 3, 2008, the Bankruptcy Court approved a loan from WMI to WMMRC in the amount of approximately $11.9 million in order to maintain an adequate Reinsurance Reserve in one of its Trusts.
 
As of the Petition Date, due to the FDIC’s seizure of WMB’s assets and the sale of substantially all of WMB’s assets to JPMC, all the WMMRC Trusts are operating on a “run-off” basis because WMMRC has ceased to reinsure any newly originated loans.
 
WMMRC’s failure to maintain adequate Reinsurance Reserves could result in the Mortgage Insurers’ election to terminate the Reinsurance Agreements on a “cut-off” basis, in which case WMMRC would no longer be liable for the reinsured loans and would no longer receive reinsurance premiums with respect thereto.  WMMRC would, however, be liable for the Reinsurance Reserve, which may, in certain cases, result in the extinguishment of all assets on account in the Trust at issue.  As described in Section V.B.6.h hereof, WMMRC was named as a defendant in the Alexander & Reed Action.

Refer to Articles VII and VIII of this Disclosure Statement for additional information regarding WMMRC.  Pursuant to the Seventh Amended Plan, WMMRC will not be transferred to the Liquidating Trust but, rather, will be the sole operating subsidiary of Reorganized WMI.

7.  
Assets of WMI’s Non-Debtor Subsidiaries, Other than WMMRC
 
Pursuant to applicable law, and as stated by the Bankruptcy Court at the March 21, 2011 hearing, the Bankruptcy Court’s jurisdiction is limited to assets of the Debtors and not to those of any non-Debtor subsidiary.  However, because the value of the Debtors’ interests in such non-Debtor subsidiaries and non-Debtor assets, including WMMRC, ultimately accretes to the benefit of the Debtors’ chapter 11 estate, the Debtors have reflected such value in their liquidation and recovery analyses.  To provide parties in interest with additional information, set forth below is information related to WMI’s direct and indirect subsidiaries as of the Petition Date, including WMMRC, as well as historical information regarding any transfers of assets by WMI’s non-Debtor subsidiaries from and after the Petition Date.  Pursuant to Section 1.140 of the Seventh Amended Plan, WMI’s Equity Interest in all of its subsidiaries, except for WMI Investment, WMMRC and WMB, will be transferred to the Liquidating Trust.  For the avoidance of doubt, and as set forth in more detail below, with the exception of a few de minimis residential real estate properties held by Ahmanson Obligation (defined below) as a result of mortgage foreclosures, neither the Debtors nor their non-Debtor subsidiaries hold any real estate.

The general background and status of the Non-Debtor Non-Banking Subsidiaries set forth below is delineated as follows:  (a) subsidiaries currently owned by WMI, (b) subsidiaries merged on or prior to December 30, 2008, (c) subsidiaries merged in April 2009, and (d) subsidiaries merged or liquidated on June 30, 2010.

a.  
Currently Owned WMI Non-Banking Subsidiaries, Other than WMMRC
 
WaMu 1031 Exchange. Prior to the Petition Date, WaMu 1031 Exchange (“WaMu 1031”) facilitated Section 1031 exchanges for residential and commercial property owners.  Specifically, WaMu 1031 provided qualified intermediary services to assist real estate investors in deferring capital gains taxes with respect to real estate transactions involving investment properties.  WaMu 1031 Exchange was formed as a combination of three predecessor 1031 exchange companies and processed 15,000 exchanges annually, with each exchange averaging $300,000 to $400,000 in size.  WaMu 1031 ceased facilitating exchanges, however, in July 2009.  The company has been undergoing a wind-down
 
 
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process and currently has no employees, offices or assets other than cash.  Since the Petition Date, WaMu 1031 has paid $4 million to WMI, either as distributions or in satisfaction of obligations to WMI.  WaMu 1031’s balance sheet as of October 31, 2011 is shown below in Section IV.IV.8.

WM Citation Holdings, LLC.  WM Citation Holdings, LLC (“WM Citation”) is a Delaware limited liability company formed in July 2001.  As of the Petition Date, WM Citation held partial interests in three corporate aircraft managed by NetJets, which interests were sold immediately after the commencement of the Chapter 11 Cases.  The aggregate sale proceeds were approximately $3 million after NetJets broker fees, and the eventual buyers were NetJets and JPMC.  Over the course of the reorganizations, WM Citation also has been utilized to consolidate other Non-Banking Subsidiaries and, as a result, has accumulated various assets and cash through those reorganizations.  Since the Petition Date, WM Citation along with the Non-Banking Subsidiaries that have merged into it have paid $287 million to WMI, either as distributions or in satisfaction of obligations to WMI.

Through the consolidation process of merging PCA Asset Holdings and HS Loan Partners into WM Citation, WM Citation owns two note receivables payable by WMB which continue to accrue monthly interest.  Pursuant to the Global Settlement Agreement, JPMC will pay all obligations of WMB, WMB’s subsidiaries, or JPMC under the Revolving Notes set forth on Exhibit “V” thereto.  (See Global Settlement Agreement § 2.16 and Section V.B.3.b(v) below.)  Specifically, Exhibit “V” to the Global Settlement Agreement includes the following Revolving Notes which relate to WM Citation: (i) $73,670,153 under that certain Revolving Master Note, dated as of December 22, 2005, by and between WMB, as borrower, and WM Citation (as successor to HS Loan Partners), as lender, and (ii) $13,576,245 under that certain Registered Security, Note A, dated as of December 17, 2004, by and between University Street, Inc., as payor and predecessor in interest to WMB, and WM Citation (as successor to WMRP Delaware Holdings LLC), as payee, and predecessor in interest to PCA Asset Holdings LLC.

WM Citation owned six (6) multi-family home mortgages through the mergers of Flower Street, Sutter Bay Corporation and HS Loan Partners into WM Citation.  Collectively, through a competitive auction process, 14 multi-family loan mortgages, consisting of eight (8) owned by H.S. Loan Corporation and the 6 owned by WM Citation, were sold in June 2009 and generated approximately $3.5 million in proceeds after fees and expenses.

Through the consolidation process, WM Citation became the eventual owner of WM Aircraft’s 72% interest in SoundBay Leasing LLC (“SoundBay Leasing”).  SoundBay Leasing owned a 1986 Boeing 767-223ER, which was leased by American Airlines.  The lease term expires at the beginning of 2012.  Through an airline broker, SoundBay Leasing auctioned the plane, received six (6) bids, and generated gross proceeds of $5.1M in January 2010, of which WM Citation retained 72%.

WM Citation’s balance sheet, as of October 31, 2011, is shown below in Section IV.A.8.

Ahmanson Obligation Company.  Ahmanson Obligation Company (“Ahmanson Obligation”) is a California corporation acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  Prior to the Petition Date, Ahmanson Obligation generally purchased loans that had been sold with recourse by WMI affiliates.  Both Freddie Mac and Fannie Mae filed Claims against WMI, which guaranteed recourse obligations of Ahmanson Obligation.  Ahmanson Obligation settled a $53 million recourse Claim with Freddie Mac for $250,000 in March 2010 and a $17 million recourse Claim with Fannie Mae for $50,000 in September 2010.

As of the Petition Date, Ahmanson Obligation held approximately $18 million in unpaid principal balance (“UPB”) on outstanding mortgage loans.  In July 2010, through a third party advisor, Ahmanson Obligation engaged outside buyers in a competitive bidding process and received nineteen
 
 
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(19) bids for a majority of these loans.  Total proceeds on the sale of approximately 220 loans, or approximately $14 million in UPB, were $10.3 million after fees and expenses.  Ahmanson Obligation currently has 50 remaining loans on the balance sheet with a total UPB of approximately $2 million.  These loans are currently in the process of being sold or prepared for sale.  In addition, all previous loans or owned real estate through the loan foreclosure process has either been sold or reclassified.

Since the Petition Date, Ahmanson Obligation has paid $22 million to WMI, either as distributions or in satisfaction of obligations to WMI.  Ahmanson Obligation’s balance sheet, as of October 31, 2011, is shown below in Section IV.A.8.

WMI Rainier LLC.  WMI Rainier LLC (“WMI Rainier”) is a Washington limited liability company formed in April 2006.  Prior to the Petition Date, the company primarily served as a consolidation subsidiary for use in merging former WMI subsidiaries out of existence.  Over the course of the reorganizations after the Petition Date, the company acquired Ahmanson Developments, Inc. which had potential liabilities related to the BKK Litigation and certain warranty obligations.  The BKK Litigation and the Claims associated with it are further described in Section V.B.6.j of this Disclosure Statement.  Pursuant to a pending settlement with JPMC and the plaintiffs, WMI will pay JPMC $1.49 million on behalf of WMI Rainier in exchange for a release by JPMC of all Claims against WMI and the Non-Banking Subsidiaries related to the BKK Litigation.  In addition, JPMC will indemnify the WMI Entities for any loss related to the BKK Litigation not covered by insurance; provided, that such indemnification is limited to an amount of up to $1.49 million with respect to liabilities of WMI Rainier or its predecessor ADI (defined below) or Oxford Investment Corp. (See Certification of Counsel Regarding Order Approving Settlement Agreement Between Debtors, JPMorgan Chase Bank N.A., California Department of Toxic Substances Control, the BKK Joint Defense Group and Certain of That Group's Individual Members, Exhibit A [D.I. 6261].)

The Debtors recently learned that, through ADI’s (defined below) historical real estate development activities, WMI Rainier may own two parcels of land in Riverside County, California.  Both parcels are approximately two acres each and consist of narrow strips of land abutting alongside a highway.  Additionally, such parcels are designated as utility corridors and zoned as “open space limiting development” and encumbered by the City of Corona and Riverside County.  These utility corridors were most likely intended to be conveyed to the city during development and have zero value or assessed property tax.

WMI Rainier LLC’s balance sheet, as of October 31, 2011, is shown below in Section IV.A.8.

H.S. Loan Corporation.  H.S. Loan Corporation (“H.S. Loan”) is a California corporation and was acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  As of the Petition Date, the company owned 8 multi-family home mortgages.  Collectively, through a competitive auction process, 14 multi-family loan mortgages, consisting of the 6 owned by H.S. Loan and 8 owned by WM Citation (previously owned by Flower Street, Sutter Bay Corp. and HS Loan Partners at the Petition Date), were sold in June 2009 and generated approximately $3.5 million in proceeds after fees and expenses.

As of the Petition Date, H.S. Loan also owned a note receivable asset payable by WMB, which continues to accrue monthly interest. Pursuant to the Global Settlement Agreement, JPMC will pay all obligations of WMB, WMB’s subsidiaries, or JPMC under the Revolving Notes as set forth on Exhibit “V” thereto.  (See Global Settlement Agreement § 2.16 and Section V.B.3.b(v) below.)  Exhibit “V” to the Global Settlement Agreement includes the following Revolving Note which relates to H.S. Loan:
 
 
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$82,048,081 under that certain Revolving Master Note, dated as of December 22, 2005, by and between WMB, as borrower, and H.S. Loan, as lender.

JPMC owns a minority interest in H.S. Loan of approximately 1.33% and will convey such minority interest to WMI upon implementation of the Global Settlement Agreement, as set forth in Section V.B.3.b(iv) below.

H.S. Loan’s balance sheet as of October 31, 2011 is shown below in Section IV.A.8.

b.  
WMI Subsidiaries Merged at December 31, 2008
 
ACD 2 (Merged into WM Citation).  ACD 2 was a California corporation acquired as a part of the H.F. Ahmanson & Co. acquisition in October 1998.  ACD 2 was incorporated in September 1992 to engage in real estate development.  As of the Petition Date, ACD 2 did not have any ongoing operations or hold any real estate.

Great Western Service Corporation Two (Merged into WM Citation).  Great Western Services Corporation Two (“GWSCT”) was a California corporation acquired as part of the Great Western Bank acquisition in July 1997.  At the Petition Date, GWSCT held one subsidiary, Washington Mutual Finance Group, LLC, which was involved in class action litigation in Mississippi, described below.

Providian Services Corporation (Merged into WMI Rainier).  Providian Services Corporation (“PSC”) was a Delaware corporation acquired as part of the Providian acquisition in October 2005.  PSC was incorporated in June 1998 to hold certain investments in the Robena coal project transaction.  As of the Petition Date, PSC was not active and did not have any assets.

Ahmanson Developments, Inc. (Merged into WMI Rainier).  Ahmanson Developments, Inc. (“ADI”) was a California corporation acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  ADI was incorporated in August 1971 to engage in real estate development.  As of the Petition Date, ADI was no longer active in development, but continued to hold warranty liabilities on various development projects.  ADI had potential liabilities related to the BKK Litigation as well as certain outstanding warranty liabilities, but transferred all liabilities to WMI Rainier when it merged with WMI Rainier through the consolidation process.  Refer to the above discussion of WMI Rainier for further explanation.

Ahmanson Residential Development (Merged into WM Citation).  Ahmanson Residential Development (“ARD”) was a California corporation acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  Prior to the Petition Date, ARD owned a real estate development project in Owing Mills, Maryland.  As of the Petition Date ARD did not have any ongoing operations or hold any real estate.

WM Funds Disbursements, Inc. (Merged into WMI Rainier).  WM Funds Disbursements, Inc. (“WM Funds Disbursements”) was a Nevada corporation acquired as part of the Commercial Capital Bancorp Inc. acquisition in October 2006.  WM Funds Disbursements did not engage in business activities prior to 2007.  As of April 2007, WM Funds Disbursement’s name was changed to its current name, “WM Fund Disbursements, Inc.,” and it was repurposed to make employee benefit payments to people who were employees of WM Advisors, Inc., WM Funds Distributor, Inc. and WM Shareholder Services, Inc. before WMI and/or its affiliates sold those companies.  WM Funds Disbursements also held a small equity stake in Providian Technology Services Private Limited.  The
 
 
 
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equity stake was believed to have no value and WM Funds Disbursements disposed of it in September 2009.

H.F. Ahmanson & Company (Merged into WMI Rainier).  H.F. Ahmanson & Co. was a Nevada corporation acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  As of the Petition Date, H.F. Ahmanson & Co. was not active and did not have any assets.

Flower Street Corporation (Merged into WM Citation).  Flower Street Corporation (“Flower Street”) was a California corporation acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  Flower Street was formed in November 1996 to engage in real estate development.  As of the Petition Date, Flower Street (a) had divested itself of any of its Los Angeles real estate assets and (b) owned a few multi-family home mortgages.  Through the consolidation process these mortgages were sold to WM Citation.  See the above discussion of WM Citation for further detail on the sale and proceeds.

Robena Feedstock LLC (Merged into WMI Rainier).  Robena Feedstock LLC (“Robena Feedstock”) was a Delaware limited liability company acquired as part of the Providian acquisition in October 2005.  The company was formed in June 1998 to own a wash plant associated with the coal agglomeration plant owned by Robena LLC.  As of the Petition Date, the company was not active and did not have any assets.

Providian Services LLC (Merged into WMI Rainier).  Providian Services LLC was a Delaware limited liability company acquired as part of the Providian acquisition in October 2005.  The company was formed in June 1998 to hold a limited partnership interest in Robena LP.  As of the Petition Date, the company was not active and did not have any assets.

ACD 3 (Merged into WM Citation).  ACD 3 was a California corporation acquired as a part of the H.F. Ahmanson & Co. acquisition in October 1998. ACD 3 was incorporated in January 1994 to develop real estate.  As of the Petition Date, ACD 3 did not hold any real estate or any other assets.

Ahmanson GGC LLC (Merged into WM Citation).  Ahmanson GGC was a California limited liability company originated as a limited partnership formed in December 1996 by H.F. Ahmanson & Co.  Ahmanson GGC converted to a limited liability company in June 1999.  As of the Petition Date, Ahmanson GGC operated as a holding company for WM Aircraft Holdings LLC.

Ahmanson Residential 2 (Merged into WM Citation).  Ahmanson Residential 2 was a California corporation acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  Prior to the Petition Date, Ahmanson Residential 2 historically engaged in real estate development.  As of the Petition Date, Ahmanson Residential 2 did not have ongoing operations or hold any real estate.

Sutter Bay Associates LLC (Merged into WM Citation).  Sutter Bay Associates was a California limited liability company originated as a limited partnership formed by H.F. Ahmanson & Co. in December 1994.  Sutter Bay Associates converted to a limited liability company in June 1999.  As of the Petition Date, Sutter Bay Associates was a holding company for WaMu entities that leased commercial aircraft.

Sutter Bay Corporation (Merged into WM Citation).  Sutter Bay Corporation was a California corporation acquired as part of the H.F. Ahmanson & Co. acquisition in October 1998.  Sutter Bay Corporation was incorporated in November 1996 to engage in real estate development.  As of the Petition Date, Sutter Bay Corporation owned a few multi-family home mortgages, but did not hold any
 
 
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real estate.  Through the consolidation process these mortgages were sold to WM Citation.  See the above discussion of WM Citation for further detail on the sale and proceeds.

Robena LLC (Merged into WMI Rainier).  Robena LLC was a Delaware limited liability company acquired as part of the Providian acquisition in October 2005.  Robena LLC was formed in March 1998 to own a coal agglomeration plant.  As of the Petition Date, Robena LLC was not active and did not have any assets.

WMHFA Delaware Holdings LLC (Merged into PCA Asset Holdings).  WMHFA Delaware Holdings LLC was a Delaware limited liability company formed in June 1999.  As of the Petition Date, WMHFA Delaware Holdings LLC did not hold any assets or liabilities.

c.  
WMI Subsidiaries Merged at April 30, 2009
 
HS Loan Partners LLC (Merged in WM Citation).  HS Loan Partners LLC was a California limited liability company originated as a limited partnership formed in December 1996 by H.F. Ahmanson & Co.  HS Loan Partners LLC converted to a limited liability company in June 1999.  As of the Petition Date, HS Loan Partners LLC owned a note receivable asset payable by WMB which continues to accrue monthly interest.  Through the consolidation process this asset now is owned by WM Citation and is discussed more fully in the above discussion of WM Citation.  As of the Petition Date, HS Loan Partners LLC owned 1 multi-family home mortgage.  Through the consolidation process this mortgage was sold to WM Citation.  See the above discussion of WM Citation for further detail on the sale and proceeds.

PCA Asset Holdings LLC (Merged in WM Citation).  PCA Asset Holdings LLC (“PCA”) was a California limited liability company formed in January 2005.  PCA served as a holding company for real estate that was to be sold to third parties.  As of the Petition Date, PCA owned a note receivable asset payable by WMB (acquired by JPMC and outlined in the Global Settlement Agreement) which continues to accrue monthly interest.  Through the consolidation process this asset now is owned by WM Citation and is discussed more fully in the above discussion of WM Citation.  As of the Petition Date, PCA did not have any ongoing operations or hold any real estate.

WM Aircraft Holdings LLC (Merged in WM Citation).  WM Aircraft was a Delaware limited liability company was formed in December 2000 to act as a holding company.  As of the Petition Date, the company directly held a 72% interest in SoundBay Leasing.  This 72% interest was merged into WM Citation through the consolidation process.

Riverpoint Associates (Merged in WM Citation).  Riverpoint Associates (“Riverpoint”) was a California general partnership acquired as part of the H.F. Ahmanson & Co., acquisition in October 1998.  Riverpoint was formed to engage in real estate development.  As of the Petition Date, Riverpoint did not have ongoing operations or hold any real estate.

ACD  4 (Merged in WM Citation).  ACD 4 was a California corporation acquired as a part of the H.F. Ahmanson & Co. acquisition in October 1998.  ACD 4 was incorporated in October 1993 to develop real estate.  As of the Petition Date, ACD 4 did not have any ongoing operations or any assets.

Washington Mutual Finance Group, LLC (Merged into WM Citation).  WM Finance Group was a Delaware limited liability company formed in April 2000 to engage in mortgage lending in Kentucky, Maryland, Mississippi, North Carolina, Tennessee, Virginia and West Virginia.  Substantially all of WM Finance Group’s assets were sold to CitiFinancial Credit company in March 2004.  As of the
 
 
 
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Petition Date, the company existed to address certain Mississippi class action litigation arising from Mississippi loans, which since has been resolved.

d.  
WMI Subsidiaries Merged or Dissolved at June 30, 2010
 
Marion Insurance Company, Inc. (Merged into WM Citation).  Marion Insurance Company (“Marion”), a Vermont corporation and non-debtor, wholly-owned subsidiary of WMI, was a captive reinsurance company, incorporated in September 2000 to act as a Vermont domiciled captive insurance company to reinsure the risk associated with lender placed hazard insurance policies, accidental death and dismemberment and mortgage life insurance.  Prior to the Petition Date, Marion reinsured mortgage life, disability, and accidental death insurance written on mortgagees of WMB’s banks as well as lender placed hazard-related coverage on loans in the banks’ servicing portfolios.
 
In February 2009, the insurance commissioner of Vermont notified Marion that it was no longer in compliance with Vermont captive law because it no longer reinsured the risks of its affiliates, and therefore required that Marion no longer provide reinsurance as a Vermont captive.  In response to this directive, in early 2009, Marion began the process of commuting its existing reinsurance contracts with four separate companies.  By the beginning of June 2010, Marion had successfully commuted all reinsurance agreements with the four companies, including its reinsurance agreement with Assurant.  As part of its commutation effort with Assurant, Marion created and deposited $17 million into a trust for the benefit of Assurant to pay remaining Claims over the next two years.  Per the insurance commissioner’s requirements, Marion subsequently distributed the trust to WMI to ensure the successful wind-down of the Marion entity.  In March 2011, the Assurant Trust distributed $7.7 million to WMI.  The term of the trust expires on December 31, 2011, after which the remaining assets, currently approximately $6.4 million,  will revert, unrestricted, to WMI.   In total, since the Petition Date, Marion has paid $74 million to WMI, either as distributions or in satisfaction of obligations to WMI.
 
As of June 30, 2010, Marion surrendered its Vermont insurance license and merged out of existence as part of the ongoing WMI subsidiary wind-down process.

SoundBay Leasing LLC (Dissolved).  SoundBay Leasing was a Delaware limited liability company formed in December 2000 to be a joint venture with Bank of America involved in the leasing of aircraft and other equipment.  As of the Petition Date, SoundBay Leasing owned a 1986 Boeing 767-223ER which was leased by American Airlines.  The asset was sold in June 2010.  For further information on the sale, refer to the above discussion of WM Citation.

WMGW Delaware Holdings LLC (Merged into WM Citation).  WMGW Delaware Holdings LLC (“WMGW”) was a Delaware limited liability company formed in June 1999 to engage in commercial leasing and lending.  As of the Petition Date, WMGW did not hold any assets or leases.
 
 
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8.  
WMI Non-Debtor Subsidiary Balance Sheets
 
Balance sheets as of October 31, 2011 for all the WMI subsidiaries, save WMI Investment and WMMRC, are below.  For financial information regarding WMMRC, refer to Article VII of this Disclosure Statement.  For WMI Investment’s balance sheet, refer to the Debtors’ MORs.

WaMu 1031 Exchange Balance Sheet
(Unaudited)



 
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WM Citation Holdings, LLC Balance Sheet
(Unaudited)



 
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Ahmanson Obligation Company Balance Sheet
(Unaudited)



 
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