Andrew I. Silfen (AS-1264) ARENT FOX LLP 1675 Broadway New York, NY Telephone: (212) Facsimile: (212)

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1 0 Andrew I. Silfen (AS-) Broadway New York, NY 00 Telephone: () -00 Facsimile: () -0 Aram Ordubegian (SBN ) Michael S. Cryan (SBN 0) West Fifth Street, th Floor Los Angeles, CA 00-0 Telephone: () -00 Facsimile: () -0 Attorneys for Wells Fargo Bank, N.A. and Wells Fargo Delaware Trust Company IN THE UNITED STATES BANKRUPTCY COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION 0 In re: FREMONT GENERAL CORPORATION, a Nevada corporation, Debtor, Case No. :0-bk--ES Chapter Number: JOINDER TO OBJECTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO (A) OFFICIAL COMMITTEE OF EQUITY HOLDERS FIRST AMENDED DISCLOSURE STATEMENT DESCRIBING FIRST AMENDED CHAPTER PLAN OF REORGANIZATION AND (B) MOTION FOR ORDER APPROVING OFFICIAL COMMITTEE OF EQUITY HOLDERS FIRST AMENDED DISCLOSURE STATEMENT DESCRIBING FIRST AMENDED CHAPTER PLAN OF REORGANIZATION Hearing Date: September, 00 Time: :00 p.m. Courtroom: Courtroom A West Fourth Street Santa Ana, California 0 NYC/. Wells Fargo Bank, N.A. ( Wells Fargo or the Trustee ), solely in its capacity as: (a) Indenture Trustee; (b) Institutional Trustee; (c) Guaranty Trustee; and (d) Delaware Trustee, JOINDER OF WELLS FARGO TO

2 0 0 hereby respectfully joins in the Objection of Official Committee of Unsecured Creditors to (A) Official Committee of Equity Holders First Amended Disclosure Statement Describing First Amended Chapter Plan of Reorganization and (B) Motion for Order Approving Official Committee of Equity Holders First Amended Disclosure Statement Describing First Amended Chapter Plan of Reorganization [Docket No. ] (the Creditors Committee Objection ) and respectfully represents as follows: PRELIMINARY STATEMENT. This Court should deny approval of the Equity Committee Disclosure Statement because the Equity Committee Disclosure Statement describes a legally flawed and unconfirmable plan. The Court should not approve the Equity Committee Disclosure Statement since doing so would only waste precious time and monetary resources by permitting the solicitation of votes on an unconfirmable plan and place the negotiated and confirmable plan proposed by the Creditors Committee at risk. As a result of the shortcomings and fundamental legal defects and infirmities of the Equity Committee Plan and the need to go forward with the confirmable Creditor Committee Plan, it makes little sense to approve the Equity Committee Disclosure Statement.. The cornerstones of the Equity Committee Plan are the purported reinstatement of the claims of the holders of the TOPrS Debenture and the diversion of cash to make undisclosed strategic investments and to purchase reverse mortgages after the Effective Date of the Equity Committee Plan. Rather than distribute cash to the TOPrS Holders, the Equity Committee Plan contemplates undisclosed investments and the conduct of speculative and unknown future business. The Equity Committee Plan also materially impairs the rights of the TOPrS Holders because certain defaults under the TOPrS Indenture will remain uncured and certain breaches under the Indenture will occur as a result of the terms of the proposed Equity Committee Plan. The Equity Committee Plan will not leave the legal, equitable and contracts rights of the TOPrS All capitalized terms not defined herein shall have the meanings ascribed to them in the Creditors Committee Objection. NYC/. - - JOINDER OF WELLS FARGO TO

3 0 0 Holders unaltered. Thus, reinstatement is not satisfied and can not be satisfied and the TOPrS Holders are impaired.. Accordingly, without even examining the other infirmities and flaws, the proposed plan cannot be confirmed. As courts have recognized, when a plan contains fundamental legal defects and infirmities, and cannot ultimately be confirmed, those defects should be considered as objections to the related disclosure statement. Here, applicable law dictates that the objections set forth in the Creditors Committee Objection should be considered, and upon consideration thereof, the Equity Committee Disclosure Statement should not be approved. BACKGROUND A. The Trust Structure and Transaction Documents i. The Trust Structure. The vast portion of the undisputed liabilities of Fremont General Corporation (the Debtor or Sponsor ) arise from prepetition debt issuances of.% Senior Notes due 00 in the original aggregate principal amount of $00,000,000 (the Senior Notes ) and % Junior Subordinated Debentures due March, 0 in the original aggregate principal amount of $0,0, (the TOPrS Debenture ). As of the Petition Date, approximately $. million in principal and accrued interest was outstanding under the Senior Notes, and approximately $0. million in principal and accrued interest was outstanding under the TOPrS Debenture.. The TOPrS Debenture is currently held by Fremont General Financing I ( Fremont General Financing or the Trust ), a statutory business trust that was formed pursuant to the Delaware Business Trust Act and an Amended and Restated Declaration of Trust of Fremont General Financing I dated March, (the Trust Declaration ), by and among the Institutional Trustee, Delaware Trustee, and Thea Stuedli and Richard Sanchez, individuals who are employed by the Sponsor, as Regular Trustees (collectively, the Trust Trustees ). Fremont General Financing is a wholly owned subsidiary of the Debtor that was created as a special purpose financing entity to hold the TOPrS Debenture as its sole asset. NYC/. - - JOINDER OF WELLS FARGO TO

4 0 0 NYC/.. In, Fremont General Financing issued and sold $0,0, million of % Trust Originated Preferred Securities ( TOPrS ) in a public offering, which represent preferred undivided beneficial interests in the assets of Fremont General Financing (i.e., the TOPrS Debenture).. The TOPrS were sold to the public and the Trust issued the common securities to the Sponsor. The Trust imposes on Fremont the continuing obligation, in connection with the issuance and sale of TOPrS, to register those securities. See, e.g., Section.(c) of the Trust.. In general, Fremont would make payments on account of the TOPrS Debenture to Fremont General Financing, and Fremont General Financing would in turn distribute those payments to holders of the TOPrS Holders as provided under the Trust Documents.. Under a separate guarantee, Fremont also guaranteed all payments due to the Guarantor Trustee for the benefit of the holders of TOPrS Securities. ii. The Trust Documents 0. In conjunction with the issuance of the TOPrS Debenture, the Debtor entered into that certain Indenture, dated March,, between the Debtor and The Bank of New York Trust Company, N.A., as successor to First Interstate Bank of California (the Indenture ).. Pursuant to the documents described below, Wells Fargo is currently Indenture Trustee under the Indenture and Institutional Trustee under the Trust Declaration pursuant to which the TOPrS Debenture and related common securities (collectively, the TOPrS Securities ) were issued and Wells Fargo Delaware Trust Company is currently a Delaware Trustee under the Trust Declaration.. Wells Fargo is also Guaranty Trustee under the Preferred Securities Guaranty Agreement, dated as of March, (the Guaranty ), executed by the Debtor in favor of the Guarantor Trustee for the benefit of holders TOPrS Securities. Under the Guaranty, the Debtor guaranteed the repayment of the obligations under the TOPrS Debenture. iii. Indenture Tripartite Agreement. Wells Fargo accepted appointment as successor Indenture Trustee pursuant to the Agreement of Resignation, Appointment and Acceptance, dated as of June 0, 00, between The - - JOINDER OF WELLS FARGO TO

5 0 0 Bank of New York Trust Company, N.A., as the resigning Trustee, and Wells Fargo, as successor Trustee (the Indenture Tripartite Agreement ). NYC/.. Wells Fargo accepted appointment as successor Institutional Trustee pursuant to the Instrument of Resignation, Appointment and Acceptance (the Instrument ), dated as of June 0, 00, by and among (i) Fremont General Corporation, (ii) Fremont General Financing Trust I, a Delaware Statutory Trust, (iii) The Bank of New York Trust Company, N.A., as the resigning Institutional Trustee, (iv) BNYM (Delaware), as resigning Delaware Trustee, (v) Wells Fargo, as successor Institutional Trustee, (vi) Wells Fargo Delaware Trust Company, as successor Delaware Trustee, and (vii) the Regular Trustees as set forth therein. Also pursuant to the Instrument, Wells Fargo Delaware Trust Company accepted appointment as successor Delaware Trustee.. Wells Fargo also accepted appointment as successor Guaranty Trustee pursuant to the Agreement of Resignation, Appointment and Acceptance, dated as of June 0, 00, by and among Fremont General Corporation as guarantor, JPMorgan Chase Bank, N.A., as resigning trustee, and Wells Fargo, as successor Trustee (the Guaranty Tripartite Agreement ).. Wells Fargo holds all rights and powers as are provided and set forth in the Indenture, the Trust Declaration, the Guaranty and all related and ancillary documents executed and delivered in connection therewith (collectively, the Trust Documents ). iv. The Termination of the Trust. Pursuant to the terms of the Trust, the Trust was terminated.. Pursuant to Section. of the Trust Declaration, the Trust, unless earlier terminated pursuant to Article VIII of the Trust Declaration (entitled Termination of the Trust ), was to have an existence of years. Under the Delaware Statutory Trust Act (the Act ), Del Code Ann. 0, et seq., a statutory trust that does not have perpetual existence is dissolved and its affairs must be wound up at the time or upon the happening of events specified in the governing instrument. Act at 0(a).. Section.0(a) of the Trust Declaration provides that the Trust shall terminate, among other times and upon the occurrence of other events, (ii) upon the bankruptcy of the - - JOINDER OF WELLS FARGO TO

6 0 0 Holder of the Common Securities or the Sponsor [i.e., the Debtor]. As such, the Trust terminated automatically upon the bankruptcy filing by the Debtor, and the affairs of the Trust must be wound up. 0. As part of this process, the Trust trustees must wind down the Trust and file a certificate of cancellation with the Delaware Secretary of State, as soon as is practicable after termination of the Trust. See Section.(b) of the Trust Declaration.. Section (entitled Liquidation Distribution Upon Dissolution ) of Annex I to the Trust Declaration provides that, in the event of any winding up or termination of the Trust, the TOPrS Holders on the date of the termination will be entitled to receive out of the assets of the Trust available for distribution to TOPrS Holders, after satisfaction of liabilities of creditors, inter alia, debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such TOPrS Debenture, with an interest rate equal to the coupon rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid distributions. The Trust, the terms of which we incorporated into the Indenture, impose material and continuing obligations on Fremont as issuer.. The Trustee is currently in the process of winding down the Trust. B. TOPrS Claims. As of the Petition Date, the Debtor was in default under the Trust Documents and remains indebted to Wells Fargo separately as the Trustee and Guarantee Trustee pursuant to, inter alia, the Trust Documents in the following amount (excluding costs, expenses, charges, penalties, indemnities, and other claims): $0,,0., consisting of (a) $0,0, in the principal amount of the TOPrS Debenture and (b) $,,. in accrued but unpaid interest at the applicable rates specified in the Trust Documents as well as other fees and costs associated therewith. See Claim Nos. 0-0 (as amended). Plus certain other costs, charges, expenses and other indemnities as provided in the relevant documents and any claims for breach or violations of the Indenture and claims under securities laws, and any other claims arising under state or federal law, including but not limited to claims arising under applicable fraudulent conveyance laws. NYC/. - - JOINDER OF WELLS FARGO TO

7 0 0 C. Debtor s Business and Cessation Thereof. The Debtor is a publicly held Nevada company incorporated in. The Debtor has operated as a financial services holding company. Prior to the Petition Date, the Debtor s common stock was traded on the New York Stock Exchange. As a holding company, the Debtor s primary assets and business consisted of direct and indirect ownership in various subsidiaries operating in the financial services and insurance industries.. FRC, one of the Debtor s subsidiaries, was a California-chartered industrial bank. FRC had engaged in commercial and residential real estate lending, offering certificate of deposit and savings, money market deposit and other accounts and related banking services.. On March, 00, FRC consented to a Cease and Desist Order issued by the Federal Deposit Insurance Corporation (the FDIC ).. In July 00, FRC sold its entire commercial real estate loan portfolio and commercial lending platform.. On April, 00, FRC and the Debtor entered into a Final Order with the Department of Financial Institution of the State of California.. In June 00, FIC, another subsidiary of the Debtor, was placed into a state conservation proceeding under Section 0 of the California Insurance Code, which was subsequently converted into a state liquidation proceeding under Section 0 of the California Insurance Code in July FIC has discontinued operations and the California Insurance Commissions controls FIC s property. D. The Chapter Case. On June, 00 (the Petition Date ), the Debtor filed a petition for relief under chapter of title of the United States Code, U.S.C. 0 et seq. (as amended, the Bankruptcy Code ) in the United States Bankruptcy Court for the Central District of California (Santa Ana) (the Bankruptcy Court ). The Debtor remains in possession of its assets as a debtor-in-possession pursuant to Sections 0 and 0 of the Bankruptcy Code. NYC/. - - JOINDER OF WELLS FARGO TO

8 0 0. Thereafter, on July, 00, the Office of the United States Trustee appointed the Official Committee of Unsecured Creditors (the Creditors Committee ). Wells Fargo is a member of the Creditors Committee.. Following the appointment of the Creditors Committee, on July, 00, the Office of the United States Trustee also appointed the Official Committee of Equity Holders (the Equity Committee ). E. The Termination of Exclusivity and Competing Plans. On June, 00, the Creditors Committee filed the Notice of Motion and Motion of the Official Committee of Unsecured Creditors for Order Terminating the Exclusive Periods in Which Only the Debtor May File a Plan and Solicit Acceptances Thereto; Memorandum of Points and Authorities in Support Thereof [Docket No. ] (the Motion to Terminate Exclusivity ). After the July, 00 contested hearing, the Court entered the Order Granting Motion of Official Committee of Unsecured Creditors for Order Terminating the Exclusive Periods in Which Only the Debtor May File a Plan and Solicit Acceptances Thereto [Docket No. ], which terminated the Debtor s exclusive periods effective July, 00.. Just prior to the termination of exclusivity, on July, 00, the Equity Committee filed the Official Committee of Equity Holders Chapter Plan of Reorganization and an accompanying disclosure statement.. On August, 00, the Equity Committee filed the Equity Committee Plan [Docket No. ] and the Equity Committee Disclosure Statement [Docket No. ] (together with the Equity Committee Plan, the Equity Committee Plan Documents ).. In addition to the filing of the Equity Committee Plan, on August, 00, the Creditors Committee filed that certain Chapter Plan of Fremont General Corporation Presented by the Official Committee of Unsecured Creditors [Docket No. 0] (the Creditors Committee Plan ) and related disclosure statement [Docket No. ] (the Creditors Committee Disclosure Statement ). Wells Fargo supports the Creditors Committee Plan. NYC/. - - JOINDER OF WELLS FARGO TO

9 0 0 F. TOPrS Debenture Treatment Under Equity Committee Plan. Under the Equity Committee Plan, the TOPrS Holders are included in Class B. The treatment to be provided to Class B creditors is the reinstatement of the Indenture such that the TOPrS Holders will retain all of their legal, equitable and contractual rights thereunder. See Equity Committee Plan at II.C.. The Class B Claimants are purportedly unimpaired under the Equity Committee Plan and are deemed to accept the Equity Committee Plan without the right to vote. Id. JOINDER. Wells Fargo hereby respectfully adopts, incorporates and joins in the Creditors Committee Objection and requests denial of approval of the Equity Committee Disclosure Statement. 0. The Bankruptcy Court should not approve the Equity Committee Disclosure Statement because the proposed plan is legally flawed and patently unconfirmable. There are numerous deficiencies that preclude confirmation. Some of which are described in the Creditors Committee Objection. One of the most glaring legal defects discussed in the Creditors Committee Objection is that the Equity Committee Plan improperly deems the TOPrS Holders unimpaired by claiming to reinstate the Indenture. The Indenture, however, cannot be reinstated because, inter alia, uncurable defaults exist and will continue to exist, events of default and other breaches under the Indenture will occur under the terms of the proposed plan, the rights of the TOPrS Holders are altered and impaired under the proposed plan, and as a result, Class B creditors cannot be reinstated and are impaired. The Equity Committee Plan also impermissibly shift the burden to the TOPrS Holders (Class B claimants) to prove that such holder is impaired and what cures need to be made under reinstatement. Such shifting of burden is contrary to the Bankruptcy Code and case law.. The fact that the Equity Committee Plan does not, and cannot, unimpair the rights of the TOPrS holders is based upon multiple provisions of the Indenture and related documents. The Indenture Trustee is especially troubled by the Equity Committee's proposal to continue the Debtor's status as a public reporting company and "hope" that the Securitas & Exchange NYC/. - - JOINDER OF WELLS FARGO TO

10 0 0 Commission will grant a waiver of years of non-compliance. As noted above, the TOPrS Securities are registered securities and thus are publicly traded. Under Section 00 of the Indenture, the Debtor has an affirmative duty to keep and maintain its existence, rights and franchises, and action by the Debtor to the contrary must not be disadvantageous to the TOPrS in any material respect. Needless to say, subjecting the Reorganized Debtor to civil and possibly criminal sanctions renders any concept of "unimpairment" frivolous.. The Equity Committee Disclosure Statement should not be approved because the proposed Equity Committee Plan is unconfirmable on its face. See In re Beyond.com, B.R., (Bankr. N.D. Cal. 00) (approval of disclosure statement should be denied if plan is clearly unconfirmable); In re Filex, Inc., B.R., (Bankr. S.D.N.Y. 0) ( this court will not approve a disclosure statement for an admittedly unconfirmable plan... only those plans which have been proposed in good faith and patently comply with the applicable provisions of the Bankruptcy Code will pass muster for disclosure purposes ); In re O Leary, B.R., (Bankr. D. Mass. ) ( courts may refuse to approve disclosure statements that describe plans that cannot be confirmed ); California Fed. Bank, F.S.B. v. Moorpark Adventure (In re Moorpark), B.R., (Bankr. C.D. Cal. ) (denying debtor s request to approve disclosure statement in light of debtor s plan being unconfirmable); In re Criimi Mae, Inc., B.R., (Bankr. D. Md. 000); In re Washington Assocs., B.R., (Bankr. E.D.N.Y. ) aff d, B.R. (E.D.N.Y. ); accord, In re Phoenix Petroleum Co., B.R., (Bankr. E.D. Pa. 00); In re Main St. AC, Inc., B.R. at ; see also In re Pecht, B.R., (Bankr. E.D. Va. ); In re McCall, B.R., (Bankr. E.D. Pa. ); In re Kehn Ranch, Inc., B.R., (Bankr. D.S.D. ).. In fact, if the plan on its face cannot be confirmed, it is incumbent on the court to decline approval of the disclosure statement in order to prevent the diminution in the value of the estate that would result from the expense of soliciting votes and seeking confirmation. See, e.g., In re Main St. AC, B.R. at. Courts have found that undertaking the burden and expense of plan distribution and vote solicitation is unwise and inappropriate if the proposed plan could never be confirmed. In re Pecht, B.R., (Bankr. E.D. Va. ). See also In re Atlanta NYC/ JOINDER OF WELLS FARGO TO

11 0 0 West VI, B.R. 0, (Bankr. N.D. Ga. ) ( A court may refuse to approve a disclosure statement when it is apparent that the plan which accompanies the disclosure statement is not confirmable. This is to avoid engaging in a wasteful and fruitless exercise of sending the disclosure statement to creditors and soliciting votes on the proposed plan when the plan is unconfirmable on its face. Such an exercise in futility only serves to further delay a debtor s attempts to reorganize. ).. Section (a) of the Bankruptcy Code provides that courts shall confirm a plan of reorganization only if all of the requirements of Sections (a) are met. See U.S.C. (a). The proponent of a chapter plan, bears the burden of proving compliance with each of the requirements of Section (a) by a preponderance of the evidence. In re Arnold and Baker Farms, B.R., - (B.A.P. th Cir. ), aff d, F.d (th Cir. ); In re Kent Terminal Corp., B.R., (Bankr. S.D.N.Y. ). If all of the requirements of Section (a) are not met, the Court may still confirm the plan, but only if the requirements of Section (b) are satisfied. See U.S.C. (b). Moreover, the Bankruptcy Court has an independent duty to determine whether the plan proponent has met its evidentiary burden under Sections (a) and (b) prior to entering an order confirming chapter plan. See In re Ne. Dairy Coop. Fed n, Inc., B.R., (Bankr. N.D.N.Y. ). Here, because the Equity Committee Plan is unconfirmable for the reasons described in the Creditors Committee Objection, the Equity Committee Disclosure Statement should not be approved. RESERVATION OF RIGHTS. Wells Fargo reserves its rights to further address the Equity Committee Plan, confirmation thereof and other ancillary issues and to respond to any reply of the Equity Committee, or any other party, either by further submission to this Court, at oral argument or testimony to be presented at any hearing. Wells Fargo further reserves all rights to object to confirmation of the Equity Committee Plan on any grounds whatsoever regardless of whether such grounds are addressed in this Joinder or the Creditors Committee Objection. NYC/. - - JOINDER OF WELLS FARGO TO

12 CONCLUSION. Sending the Equity Committee Disclosure Statement to creditors and soliciting votes on the Equity Committee Plan would be a waste of time and would be costly to the estate. Any delay or uncertainty would place the Creditor Committee Plan at risk. Thus, approval would be contrary to the best interests of the Debtors estate and creditors. Dated: September 0, 00 Respectfully submitted, 0 0 By: /s/ Aram Ordubegian Aram Ordubegian (SBN ) Michael S. Cryan (SBN 0) West Fifth Street, th Floor Los Angeles, CA 00-0 Telephone: () -00 Facsimile: () -0 - and - Andrew I. Silfen (AS-) Broadway New York, NY 00 Telephone: () -00 Facsimile: () -0 Attorneys for Wells Fargo Bank, N.A. and Wells Fargo Delaware Trust Company NYC/. - - JOINDER OF WELLS FARGO TO

Case Filed 03/13/13 Doc 764 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIA, SACRAMENTO DIVISION

Case Filed 03/13/13 Doc 764 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIA, SACRAMENTO DIVISION Case - Filed 0// Doc 0 0 WINSTON & STRAWN LLP Lawrence A. Larose (admitted pro hac vice llarose@winston.com 00 Park Avenue New York, NY 0- Telephone: ( -00 Facsimile: ( -00 WINSTON & STRAWN LLP Matthew