Case MFW Doc Filed 03/10/14 Page 1 of 30 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

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1 Case MFW Doc Filed 03/10/14 Page 1 of 30 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE x In re : Chapter 11 : WASHINGTON MUTUAL, INC., et al., 1 : Case No (MFW) : Debtors. : (Jointly Administered) : Hearing Date: April 4, 2014 at 10:30 a.m. (ET) (Requested) x Objection Deadline: March 24, 2014 at 4:00 p.m. (ET) x WMI LIQUIDATING TRUST : Plaintiff, : v. : x STEPHEN E. WHITTAKER, : Adversary Proc. No (MFW) x ROBERT C. HILL, : Adversary Proc. No (MFW) x RICHARD C. STRAUCH, : Adversary Proc. No (MFW) x ROBERT C. BJORKLUND, : Adversary Proc. No (MFW) DARYL DAVID, : MARY BETH DAVIS, : MICHELE GRAU-IVERSEN, : DEBORA HORVATH, JEFFREY JONES, : JOHN MCMURRAY, : MICHAEL REYNOLDSON, : DAVID SCHNEIDER, : DAVID TOMLINSON, : BRUCE ALAN WEBER, AND : JEFFREY WEINSTEIN, : : Defendants. : x 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 principal offices of WMILT, as defined herein, are located at 1201 Third Avenue, Suite 3000, Seattle, Washington US_ACTIVE:\ \9\

2 Case MFW Doc Filed 03/10/14 Page 2 of 30 MOTION OF WMI LIQUIDATING TRUST FOR AN ORDER, PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE, (A) APPROVING PROVIDIAN SETTLEMENT AGREEMENT AND (B) AUTHORIZING AND DIRECTING THE CONSUMMATION THEREOF WMI Liquidating Trust ( WMILT or the Trust ), as successor in interest to Washington Mutual, Inc. ( WMI ) and WMI Investment Corp., formerly debtors and debtors in possession (collectively, the Debtors ), files this motion (the Motion ) for an order, pursuant to section 105(a) of title 11 of the United States Code (the Bankruptcy Code ) and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), (a) approving that certain Providian Agreement, dated as of March 10, 2014 (the Settlement Agreement ), a copy of which is annexed hereto as Exhibit A, between WMILT and certain former employees of Providian (as defined below) (collectively, the Providian Claimants 2 and, together with WMILT, the Parties ), with respect to the Providian Claimants claims asserted in the Debtors chapter 11 cases and (b) authorizing and directing the consummation thereof, and respectfully represents as follows: PRELIMINARY STATEMENT 1. The Employee Claims Litigation (as defined below) has been pending for over five years. With the filing of the Original Fifth and Sixth Omnibus Objections (as defined below), and then the subsequent objections, such litigation has taken on a life separate and apart from the Debtors chapter 11 cases and, based upon the ongoing discovery, the involvement of federal regulatory agencies and the commencement of ancillary litigation, such litigation is 2 The Providian Claimants are: Robert C. Boxberger ( Boxberger ), Mary Beth Davis ( Davis ), Michele S. Grau- Iversen ( Grau-Iversen ), Robert C. Hill ( Hill ), Robert G. Merritt ( Merritt ), Michael W. Rapaport ( Rapaport ), Luis P. Rodriguez ( Rodriguez ), Laura C. Rogers-Rodrigues ( Rogers-Rodrigues ), Daniel T. Shanks ( Shanks ), Richard C. Strauch ( Strauch ), Jose O. N. Tagunicar ( Tagunicar ), David A. Tomlinson ( Tomlinson ), John A. Webber ( Webber ), Stephen E. Whittaker ( Whittaker ), and Kathy H. Yeu ( Yeu ). US_ACTIVE:\ \9\

3 Case MFW Doc Filed 03/10/14 Page 3 of 30 assured of continuing for several additional years. All the while, creditors holding Allowed Claims will be forced to await their rightful distributions. 2. By this Motion, WMILT attempts to break that logjam and seeks the approval of a compromise and settlement with the Providian Claimants, a group of claimants who, pursuant to their proofs of claim and related documentation and agreements, maintain historical claims relating to the period prior to the seizure of WMB s assets (as defined below) (the Pre-Seizure Component ), as well as claims arising from or relating to the seizure of WMB s assets (the Post-Seizure Component ). Pursuant to the Settlement Agreement, WMILT has agreed to resolve the Pre-Seizure Component of the Claimants Claims (as defined below) and the Providian Claimants have agreed to waive any and all recoveries relating to the Post- Seizure Component. By so limiting recoveries, any settlement payments pursuant to the Settlement Agreement would not constitute golden parachute payments subject to the Golden Parachute Provisions (as defined below) and, thus, may be paid without prior regulatory authority review and approval thereof. 3. The contemplated settlement will alleviate the uncertainty, delay and, most importantly, expense connected with litigation of the Claimants Claims, including eliminating the protracted discovery and costs uniquely attributable to the Providian Claimants. Likewise, it will remove the expenditure of a significant amount of judicial resources because the unique aspect associated with the WMB/Providian relationship will no longer need to be litigated at a change in control or wrong party hearing on the merits. 4. WMILT submits that the proposed compromise and settlement more than satisfies the standards necessary for approval thereof and is in the best interests of the Debtors US_ACTIVE:\ \9\

4 Case MFW Doc Filed 03/10/14 Page 4 of 30 creditors and the Debtors chapter 11 estates. As such, WMILT requests entry of an order approving the Settlement Agreement. JURISDICTION 5. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C and BACKGROUND 6. On September 26, 2008 (the Commencement Date ), each of the Debtors commenced with the Court a voluntary case pursuant to chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases ). 7. On December 12, 2011, the Debtors filed their Seventh Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code [D.I. 9178] (as modified, the Plan ). By order, dated February 23, 2012, the Court confirmed the Plan [D.I. 9759] (the Confirmation Order ) and, upon satisfaction or waiver of the conditions described in the Plan, the transactions contemplated by the Plan were consummated on March 19, Pursuant to the Plan, the Confirmation Order and that certain related Liquidating Trust Agreement, effective March 6, 2012, the administration of the Chapter 11 Cases and the responsibility to reconcile and litigate remaining disputed proofs of claim, among other things, were transferred to the Trust. 8. Prior to the Commencement Date, WMI operated as a savings and loan holding company that owned Washington Mutual Bank ( WMB ) and, indirectly, such bank s subsidiaries, including Washington Mutual Bank fsb ( WMBfsb ). Like all savings and loan holding companies, WMI was subject to regulation by the Office of Thrift Supervision (the OTS ). WMB and WMBfsb, in turn, like all depository institutions with federal thrift charters, US_ACTIVE:\ \9\

5 Case MFW Doc Filed 03/10/14 Page 5 of 30 were subject to regulation and examination by the OTS. In addition, certain of WMI s subsidiaries were overseen by various federal and state authorities, including the Federal Deposit Insurance Corporation ( FDIC ). 9. On or around September 18, 2008, WMB was assigned a composite regulatory CAMELS Rating of 4. Thereafter, on September 25, 2008, the Director of the OTS, by order number , appointed the FDIC as receiver for WMB and advised that the receiver was immediately taking possession of WMB s assets (the Bank Seizure ). Immediately after its appointment as receiver, the FDIC sold substantially all of such assets, including the stock of WMBfsb (the JPMC Transaction ), to JPMorgan Chase Bank, National Association ( JPMC ) pursuant to that certain Purchase and Assumption Agreement, Whole Bank, dated as of September 25, The Providian Merger and Related Transactions 10. Prior to October, 2005, the Providian Claimants worked for Providian Financial Corporation ( PFC ) or its banking subsidiary, Providian National Bank ( PNB and, together with PFC, Providian ). On or around October 1, 2005, New American Capital, Inc. ( NACI ), a former subsidiary of WMI, acquired PFC through merger. Concurrently therewith, PNB merged with and into WMB. After the October 2005 transactions (the Providian Merger ), the Providian Claimants worked in the business division of WMB referred to as Card Services. In November, 2007, through a series of transactions, NACI merged into WMB. 11. Prior to the Providian Merger, the Providian Claimants entered into certain employment contracts entitled Change of Control Employment Agreement with PFC (each, a Providian Agreement and, collectively, the Providian Agreements ). 3 The Providian 3 A sample Providian Agreement with personal information redacted is attached hereto as Exhibit B. US_ACTIVE:\ \9\

6 Case MFW Doc Filed 03/10/14 Page 6 of 30 Agreements had a three year term (the Employment Period ) and provided for, among other things, annual bonuses and termination payments. 12. While the majority of the Providian Claimants were terminated in connection with the Bank Seizure and/or JPMC Transaction, seven (7) Providian Claimants Boxberger, Merritt, Rapaport, Shanks, Tagunicar, Webber and Yeu (collectively, the Pre- Seizure Claimants ) resigned or were terminated prior to the events of September, 2008 as follows: The Providian Claims Providian Claimant s Name Date of Termination or Resignation Robert C. Boxberger January 31, 2008 Robert G. Merritt October 3, 2005 Michael W. Rapaport June 2, 2008 Daniel T. Shanks October 13, 2006 Jose O. N. Tagunicar May 15, 2006 John A. Webber June 30, 2006 Kathy H. Yeu January 31, By order, dated January 30, 2009 (the Bar Date Order ), the Court established March 31, 2009 (the Bar Date ) as the deadline for filing proofs of claim against the Debtors estates. On or before the Bar Date, the Providian Claimants filed their respective proofs of claims (collectively, the Original Claims ) against WMI, seeking payments based on their alleged employment with WMI and/or the termination thereof. The Original Claims assert, among other things, claims for bonus and/or termination payments pursuant to Sections 4(b)(ii) and 6(i) of the Providian Agreements, respectively, including prepetition interest pursuant to Section 8 of the Providian Agreements and wage penalties equal to thirty (30) days wages pursuant to California Labor Code section 201 and 203 with respect thereto. US_ACTIVE:\ \9\

7 Case MFW Doc Filed 03/10/14 Page 7 of In particular, certain of the Providian Claimants allege that the annual bonuses they were paid in January 2006, 2007 and/or 2008 (on account of the 2005, 2006 and 2007 fiscal years, respectively) were below the minimum annual bonuses to which they were entitled pursuant to Section 4(b)(ii) of the Providian Agreements. Among other things, the Providian Claimants allege that WMB failed to comply with Section 4(b)(ii) of the Providian Agreements by erroneously excluding from their annual cash bonuses the value of prior equity compensation they received from PFC. As a result of the alleged historical miscalculation of their annual bonuses, the Providian Claimants have asserted claims for the difference between the bonuses actually paid by WMB in January 2006, 2007 and/or 2008, and the bonuses to which they believe they were entitled for each applicable year pursuant to the Providian Agreements, including prepetition interest pursuant to Section 8 of the Providian Agreements 4 and wage penalties equal to thirty (30) days wages pursuant to California Labor Code section 201 and with respect thereto (collectively, the Unpaid Bonus Components ). 15. Moreover, certain Providian Claimants all of whom were Pre-Seizure Claimants assert that the lump sum severance payments paid upon their prepetition termination from WMB were insufficient pursuant to the terms of their respective Providian Agreements. In particular, these Providian Claimants allege that, when calculating their respective severance payments pursuant to Section 6(a)(i) of their Providian Agreements, WMB failed to include the value of prior equity compensation that the Providian Claimants received from PFC in the three years preceding the Providian Merger. As a result of the alleged historical miscalculation of 4 Specifically, Section 8 of the Providian Agreements provides that The Corporation agrees to pay... interest[ ] on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of California Labor Code Sections 201 and 203 provide for penalties against an employer who willfully fails to pay wages to its employee. US_ACTIVE:\ \9\

8 Case MFW Doc Filed 03/10/14 Page 8 of 30 their severance payments, such Providian Claimants have asserted claims for the difference between the severance payments that they were paid by WMB at the time of their prepetition termination and the severance payments they believe they were entitled to receive pursuant to the Providian Agreements, as well as prepetition interest pursuant to Section 8 of the Providian Agreements 6 and wage penalties equal to thirty (30) days wages pursuant to California Labor Code section 201 and 203 with respect thereto (collectively, the Unpaid Severance Components and, together with the Unpaid Bonus Components, the Providian Underpayment Components ). 16. In April, 2013, each of the Providian Claimants filed motions to amend their Original Claims. See D.I ; Thereafter, the Court entered a series of orders granting the motions to amend [D.I ; 11268], which orders permitted the Providian Claimants to file amended proofs of claim (the Amended Claims and, together with the Original Claims, the Claims ), and further provided that WMILT could amend its Original Omnibus Objections (as defined below) with respect thereto. On or around June, 2013, the Providian Claimants filed their Amended Claims. 17. In addition to the Providian Underpayment Components, which the Providian Claimants assert were due and owing long before the Bank Seizure and/or JPMC Transaction, the Providian Claimants have also asserted Claims for one or more of the following: (i) change in control payments pursuant to a WMB Change in Control Agreement ( WMB CIC Agreement ); (ii) bonus payments pursuant to a Wamu Special Opportunity Bonus Agreement ( WMB Retention Bonus Agreement ); (iii) bonus payments pursuant to a WMB Special Opportunity Bonus Agreement, which, by its terms, superseded all prior bonus 6 See supra note 4. US_ACTIVE:\ \9\

9 Case MFW Doc Filed 03/10/14 Page 9 of 30 agreements and the Providian Agreement ( Superseding WMB Retention Bonus Agreement ); (iv) retirement benefits; (v) long term cash incentive awards; (vi) bonus payments pursuant to a 2008 Leadership Bonus Memo from Anthony Vuoto (the 2008 Leadership Bonus ); (vii) amounts pursuant to a pension plan; (viii) claims for payment of legal fees and expenses incurred in connection with prosecuting the Claims pursuant to Section 8 of the Providian Agreements as well as other contracts that were included in the Claims ( Providian Legal Expense Component ); 7 (ix) alternate claims pursuant to the Providian Agreements; and (x) severance payments pursuant to the Wamu Severance Plan Providian Claimant Whittaker also asserted a claim for a prepetition bonus payment pursuant to his Superseding WMB Retention Bonus Agreement. Whittaker alleges that such bonus was due and payable on September 1, 2008 for his service through such date (the Whittaker September Bonus ) before WMB s CAMELS downgrade, the Bank Seizure, the JPMC Transaction and the filing of these Chapter 11 Cases (the Pre-Seizure Retention Bonus Component and, together with the Providian Underpayment Components, the Pre-Seizure Component, as defined above). The Claims Objections and Related Litigation 19. On June 26, 2009, the Debtors filed the Debtors Fifth Omnibus (Substantive) Objection to Claims [D.I. 1233] (the Original Fifth Omnibus Objection ) and the Debtors Sixth Omnibus (Substantive) Objection to Claims [D.I. 1234] (the Original Sixth Omnibus Objection and, together with the Original Fifth Omnibus Objection, the July 7 Specifically, Section 8 of the Providian Agreements provides that: The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur in good faith as a result of any contest (regardless of the outcome thereof) by the Corporation, the [Providian Claimants] or others of the validity or enforceability of, or liability under, any provision of this [Providian] Agreement A breakdown of the total dollar amount of each Providian Claimant s Claims is set forth in the Settlement Agreement Section I, attached hereto as Exhibit A. US_ACTIVE:\ \9\

10 Case MFW Doc Filed 03/10/14 Page 10 of 30 Omnibus Objections ), wherein WMILT objected to Grau-Iversen s Original Claims 613 and 610 in the Fifth Omnibus Objection and Whittaker s Original Claims 2832 and 3458 in the Sixth Omnibus Objection, on the basis that, among other things, no change in control occurred to trigger the payments sought and, even if a change in control had occurred, the claims were asserted against the wrong party. The deadline to file responses, if any, to the Original Fifth Omnibus Objection and Original Sixth Omnibus Objection was July 16, 2009 (the July Objection Deadline ). 20. On August 15, 2012, WMILT filed, among other objections, the WMI Liquidating Trust s Seventy-Ninth Omnibus (Substantive) Objection to Claims [D.I ], WMI Liquidating Trust s Eightieth Omnibus (Substantive) Objection to Claims [D.I ], and WMI Liquidating Trust s Eighty-First Omnibus (Substantive) Objection to Claims [D.I ] (collectively, the August Omnibus Objections and, together with the July Omnibus Objections, the Original Omnibus Objections ), wherein WMILT objected to the remaining Original Claims on bases similar to those set forth in the July Omnibus Objections. The deadline to file responses, if any, to the August Omnibus Objections was September 4, 2012 (the September Objection Deadline ). 21. On September 17, 2012, WMILT filed, among other objections, the WMI Liquidating Trust s Eighty-Eighth Omnibus (Substantive) Objection to Disputed Equity Interests [D.I ] (the Eighty-Eighth Omnibus Objection ), wherein WMILT objected to all Disputed Equity Interests held by the Providian Claimants, among others, pursuant to an equity incentive plan (the Equity Incentive Plan ). The deadline to file responses, if any, to the Eighty-Eighth Omnibus Objection was October 8, 2012 (the Eighty-Eighth Objection Deadline US_ACTIVE:\ \9\

11 Case MFW Doc Filed 03/10/14 Page 11 of 30 and, together with the July Objection Deadline and the September Objection Deadline, the Objection Deadlines ). 22. Following the filing of the Original Omnibus Objections, and before the respective Objection Deadlines, the Providian Claimants filed responses to the applicable objections. 23. On October 15, 2012, the Court entered an order [D.I ] (the Scheduling Order ) with respect to a hearing (the Employee Claims Litigation ) to consider the Original Claims of the Providian Claimants, along with the claims of other former employees of WMB and WMI, as applicable, included in certain other omnibus objections filed by the Debtors or WMILT. The Scheduling Order has subsequently been amended from time to time. See D.I ; 10975; On September 24, 2010, September 18, 2012, and October 22, 2012, the Debtors and WMILT, respectively, filed adversary proceedings against certain of the Providian Claimants seeking to avoid certain of the payments sought pursuant to the Claims based on, among other things, causes of action under Chapter 5 of the Bankruptcy Code (collectively, the Adversary Proceedings ). 25. On November 13, 2012, the Court entered a scheduling order in the Adversary Proceedings (as amended, the Adversary Proceeding Scheduling Order and, together with the Scheduling Order, the Scheduling Orders ). Together, the Scheduling Orders provide for a schedule of litigation deadlines and related discovery protocols to be followed by the parties to the Employee Claims Litigation and related Adversary Proceedings. 26. On July 12, 2013, pursuant to the Court s orders permitting the Providian Claimants to amend their Original Claims, WMILT filed, among other objections, the WMI US_ACTIVE:\ \9\

12 Case MFW Doc Filed 03/10/14 Page 12 of 30 Liquidating Trust s First Amended Fifth Omnibus (Substantive) Objection to Claims [D.I ], WMI Liquidating Trust s First Amended Sixth Omnibus (Substantive) Objection to Claims [D.I ], WMI Liquidating Trust s First Amended Seventy-Ninth Omnibus (Substantive) Objection to Claims [D.I ], WMI Liquidating Trust s First Amended Eightieth Omnibus (Substantive) Objection to Claims [D.I ], and WMI Liquidating Trust s First Amended Eighty-First Omnibus (Substantive) Objection to Claims [D.I ] (collectively, the Amended Objections and together with the Original Omnibus Objections and the Eighty-Eighth Omnibus Objection, the Omnibus Objections ), which asserted, among other defenses to the Amended Claims, defenses pursuant to the Golden Parachute Provisions (as defined below). 27. On August 21, 2013, WMILT filed the Motion of WMI Liquidating Trust for an Order Pursuant to Section 502(c) of the Bankruptcy Code and Section 26.2 of the Seventh Amended Plan, Estimating the Maximum Amount of Certain Employee Claims [D.I ] (the Motion to Estimate ), seeking to estimate, among other claims, the Providian Claimants Claims pursuant to their WMB CIC Agreements and the Wamu Severance Plan in accordance with 11 U.S.C. 502(b)(7) ( Section 502(b)(7) ). 28. On September 17, 2013, the Providian Claimants filed oppositions to the Motion to Estimate [D.I ; 11385]. 29. On September 24, 2013, at the hearing to consider the Motion to Estimate, the Court stated that the relief requested in the Motion to Estimate was akin to a motion for partial summary judgment and ordered WMILT to file a motion for summary judgment seeking a determination as to the applicability of Section 502(b)(7). See Hr g Tr. at 34:24-25, 35:1-4, 36:17-20, Sept. 24, US_ACTIVE:\ \9\

13 Case MFW Doc Filed 03/10/14 Page 13 of On October 31, 2013, WMILT filed, among other motions, the Motion of WMI Liquidating Trust for Partial Summary Judgment with Respect to Providian Claims [D.I ] (the Providian Summary Judgment Motion ) and a related brief and declarations in support thereof. 31. On January 31, 2014, the Providian Claimants filed their opposition to the Providian Summary Judgment Motion [D.I ]. On February 21, 2014, WMILT filed a reply with respect thereto [D.I ]. 32. A hearing to consider the Providian Summary Judgment Motion is currently scheduled for March 14, 2014, and a trial on the change in control issues raised in the Omnibus Objections is currently scheduled to begin in September, The Golden Parachute Provisions and Related Litigation 33. On February 19, 2013, WMILT filed WMI Liquidating Trust s Motion for Leave to Amend the Fifth, Sixth, Seventy-Ninth, Eightieth, Eighty-First, Eighty-Second, Eighty- Fourth, Eighty-Fifth, and Eighty-Eighth Omnibus Objections to Claims [D.I ] ( WMILT s Motion to Amend ), seeking leave of the Court to amend the Original Omnibus Objections, among other objections, to include certain additional legal theories supporting the disallowance of the claims included therein. WMILT s Motion to Amend sought to amend the Original Omnibus Objections to assert, among other things, that WMILT is not liable for certain claims because they seek payments that constitute impermissible golden parachute payments pursuant to 12 C.F.R. 359, et seq. (the Golden Parachute Provisions ). 34. In particular, the Golden Parachute Provisions provide that [n]o insured depository institution or depository institution holding company shall make or agree to make any golden parachute payment as such term is defined by the Golden Parachute Provisions. US_ACTIVE:\ \9\

14 Case MFW Doc Filed 03/10/14 Page 14 of C.F.R Section 359.1(f) generally defines a golden parachute payment in a five-part test, with each part constituting a required element: 1. [A]ny payment (or any agreement to make any payment) in the nature of compensation by any insured depository institution [such as WMB] or an affiliated depository institution holding company [such as WMI] ; 2. [F]or the benefit of any current or former [institution affiliated party] ; 3. Which obligation [i]s contingent on, or by its terms is payable on or after, the termination of such party s primary employment or affiliation with the institution or holding company ; 4. Is received on or after, or is made in contemplation of, a Distress Event 9 (as defined below) including, without limitation, the insolvency (or similar event) of the insured depository institution... [or] the depository institution holding company which is making the payment... [or] the appointment of any conservator or receiver ; and 5. The institution affiliated party s employment was terminated at a time when the insured depository institution or depository institution holding company, as applicable, satisfied any of the Distress Events enumerated in Section 359. See 12 C.F.R (f) (emphasis added). 35. On March 18, 2013, the Providian Claimants, among others, filed objections to WMILT s Motion to Amend, asserting, among other things, that (i) the Golden Parachute Provisions do not apply to the Claims, claiming, among other things, that WMILT is not a depository institution holding company or insured depository institution subject to regulation by the FDIC, (ii) the contracts and benefits plans giving rise to the Claims fall within 9 The distress events include: the insolvency (or similar event) of the depository institution or the bankruptcy or insolvency (or similar event) of the depository institution holding company; the appointment of a receiver or conservator for the insured depository institution; a determination by the appropriate federal banking agency that the depository institution or its holding company is in a troubled condition ; the depository institution or the depository institution holding company is assigned a composite regulatory CAMEL rating of 4 or 5 by the appropriate federal banking agency; and the insured depository institution is subject to a proceeding to terminate or suspend deposit insurance (collectively, the Distress Events ). See 12 C.F.R (f)(1)(ii)(A) (E). US_ACTIVE:\ \9\

15 Case MFW Doc Filed 03/10/14 Page 15 of 30 one or more of the exceptions to the definition of golden parachute payment in the Golden Parachute Provisions and (iii) WMILT does not have standing to raise the Golden Parachute Provisions or other federal regulations as a defense. See D.I At a hearing held on August 22, 2013 (the August 2013 Hearing ) to consider WMILT s Motion to Amend, and pursuant to a subsequent order, dated August 23, 2013 [D.I ] (the August 2013 Order ), the Court denied WMILT s Motion to Amend to assert the Golden Parachute Provisions as defenses to claims that had not been amended and directed WMILT to file a separate declaratory judgment action against the FDIC, the FRB and all parties to the Employee Claims Litigation to resolve the issues raised as to the applicability of the Golden Parachute Provisions, among other federal regulations. 37. On September 20, 2013, pursuant to the August 2013 Order, WMILT filed a complaint (the Complaint ) against the FDIC, FRB, and all parties to the Employee Claims Litigation (the Seattle Litigation ), requesting, among other things, a determination of whether the Golden Parachute Provisions apply to claims asserted pursuant to the WMB CIC Agreements, the WMB Retention Bonus Agreements, cash long term incentive awards, the Equity Incentive Plan, the Providian Agreements, or the Wamu Severance Plan and, thus, prohibit WMILT from making any payments with respect thereto. See WMI Liquidating Trust v. FDIC, No. 2:13-cv (W.D. Wa. Sept. 20, 2013). 38. By letter, dated October 4, 2013, counsel to the Providian Claimants requested that WMILT amend the Complaint in the Seattle Litigation to reflect that certain Pre- Seizure Claimants were terminated before the Distress Events of September, 2008, rather than in connection with the Bank Seizure and/or JPMC Transaction as provided in the Complaint. US_ACTIVE:\ \9\

16 Case MFW Doc Filed 03/10/14 Page 16 of On November 5, 2013, WMILT filed an amended complaint (the Amended Complaint ), which, among other things, removed the Pre-Seizure Claimants from all counts related to the Golden Parachute Provisions on account of their termination dates. Settlements of Certain Other Employee Claimants 40. In March and April, 2013, the WMILT engaged in good faith, arms - length settlement discussions and reached agreements-in-principle on economic terms with certain of the other claimants in the Employee Claims Litigation, but not the Providian Claimants. In connection therewith, WMILT was required to submit a letter to the FDIC requesting a determination as to the applicability of the Golden Parachute Provisions with respect to the applicable settlement agreements. Consistent therewith, on May 30, 2013, WMILT submitted a letter to the FDIC (the May 30 Letter Request ), per the instructions of the FDIC and FRB, requesting a determination as to whether the Golden Parachute Provisions were applicable to the settlement agreements. None of the claimants with settlements asserted a Pre- Seizure Component, and the May 30 Letter request did not pertain to or address the Pre-Seizure Component. 41. On July 17, 2013, in response to the May 30 Letter, WMILT received a letter, dated July 16, 2013, from the FDIC (the FDIC Letter ), wherein the FDIC stated that the settlement payments sought by the settling claimants under their respective settlement agreements were subject to the restrictions of the Golden Parachute Provisions and, with the exception of one de minimis settlement payment, were prohibited without prior regulatory approval. Thus, all proposed settlement payments (except for the de minimis payment) would require a formal application to the FRB and FDIC pursuant to the Golden Parachute Provisions. The FDIC Letter further noted that, [f]ailure to submit an application for any current or future US_ACTIVE:\ \9\

17 Case MFW Doc Filed 03/10/14 Page 17 of 30 settlements of golden parachute payments would result in a violation of Part 359 and potential civil monetary penalties. FDIC Letter, p. 3. In accordance therewith, on August 14, 2013, the Trust submitted a formal application to the FRB and FDIC seeking permission to make payments pursuant to thirty-one (31) executed settlement agreements (the FDIC Application ). Neither the FDIC letter nor FDIC Application addressed the Pre-Seizure Component or the Providian Claimants. On the same day, the Trust also submitted a letter request (the August 14 Letter Request ) seeking a determination as to whether the Golden Parachute Provisions applied to certain contracts and benefits plans that were not included in the May 30 Letter Request or FDIC Application, including components arising from the Providian Agreements. The Settlement Agreement 42. WMILT and the Providian Claimants have disputed, and continue to dispute, the validity of the Claims. Furthermore, WMILT expressly denies any liability with respect to the Claims, and any and all other liability or damages relating to the Omnibus Objections or the Chapter 11 Cases, and believes that WMILT would prevail in any litigation with respect to the Claims or the Adversary Proceedings. Nevertheless, upon review of the relevant legal and factual information and after good faith, arms -length negotiations, subject to this Court s approval, the Parties have agreed to fully resolve and settle, with finality, (i) the Claims, (ii) the Adversary Proceedings and (iii) the Providian Claimants Disputed Equity Interests. 43. As mentioned above, the Claimants Claims are divisible into a Pre- Seizure Component and a Post-Seizure Component, asserted by the Providian Claimants to be (inclusive of attorneys fees and expenses) $19,186, and $17,233,673.53, respectively, or $36,420, in the aggregate. The Settlement Agreement recognizes the distinction between US_ACTIVE:\ \9\

18 Case MFW Doc Filed 03/10/14 Page 18 of 30 the Pre-Seizure Component and the Post-Seizure Component. Specifically, WMILT has been able to compromise and settle the Pre-Seizure Component and the Providian Claimants have agreed to waive all claims associated with the Post-Seizure Component, thereby being consistent with the Golden Parachute Provisions and obviating the need for regulatory agency approval. 44. The salient terms of the Settlement Agreement are as follows 10 : A cash payment by WMILT to the Providian Claimants of Twelve Million, Four Hundred Fifty-Seven Thousand, Twenty-Two Dollars and Fifty Cents ($12,457,022.50) on the Effective Date, in consideration for, and in full and complete satisfaction of, the Pre-Seizure Component; A full and complete waiver and release of the Post-Seizure Component by the Providian Claimants; Withdrawal, with prejudice, or the expungement of (i) the Claims by the Providian Claimants and (ii) the Omnibus Objections by WMILT, solely with respect to the Claims; A stay of the Adversary Proceedings, the Employee Claims Litigation and the Seattle Litigation and the subsequent dismissal of such actions, with prejudice; and The execution and delivery of mutual releases. RELIEF REQUESTED 45. By this Motion, WMILT seeks the entry of an order, pursuant to section 105(a) of the Bankruptcy Code and Rule 9019 of the Bankruptcy Rules, among other things, (i) approving the Settlement Agreement as fair and reasonable, (ii) authorizing and directing the Parties to consummate the Settlement Agreement, (iii) discharging WMILT from any liability pursuant to the Claims, and (iv) deeming the Claims withdrawn, with prejudice, in their entirety upon the Effective Date of the Settlement Agreement (as defined therein). 10 The following is a summary of the Settlement Agreement. The Settlement Agreement is incorporated by reference as if fully set forth herein. In the event of any inconsistency between this summary and the Settlement Agreement, the Settlement Agreement controls. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Settlement Agreement. US_ACTIVE:\ \9\

19 Case MFW Doc Filed 03/10/14 Page 19 of 30 BASIS FOR RELIEF I. The Settlement Agreement Does Not Implicate the Golden Parachute Provisions and, Thus, May Be Paid Without FDIC or FRB Approval 46. Pursuant to the Settlement Agreement, the Providian Claimants will receive a payment solely on account of the Pre-Seizure Component, the claims of which, WMILT asserts, are not subject to the Golden Parachute Provisions. (a) The Unpaid Bonus Components Are Not Golden Parachute Payments 47. The alleged back pay owed to the Providian Claimants pursuant to the Unpaid Bonus Components is for annual bonuses for fiscal years 2005, 2006 and/or 2007, which the Providian Claimants allege were deficient. As described above, the Golden Parachute Provisions set forth a five-part test for determining when a payment or contract is a prohibited golden parachute payment. As applied here, the Unpaid Bonus Components might fail to satisfy at least two of the requirements set forth in Section 359.1(f) to qualify as a golden parachute payment. 48. First, the Providian Claimants assert that the Unpaid Bonus Components are not obligations contingent on, or by [their] terms... payable on or after, the termination of [the Providian Claimants ] primary employment or affiliation with the institution or holding company. See 12 C.F.R (f)(1)(i). Indeed, the historical bonus payments are not contingent on the Providian Claimants termination, as evidenced by the terms of the Providian Agreement itself: [T]he Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus. Exhibit B, Sample Providian Agreement, 4(b)(ii). Rather, the annual bonuses pursuant to Section 4(b)(ii) of the Providian Agreements were asserted to have been earned by the Providian Claimants over the course of each fiscal year in the Employment Period. To the extent the Providian Claimants are correct that they were US_ACTIVE:\ \9\

20 Case MFW Doc Filed 03/10/14 Page 20 of 30 entitled to additional bonus amounts, such amounts would have been earned or payable in January 2005, 2006 and/or 2007 and were not accelerated or otherwise contingent upon termination of their employment. 49. Second, the Pre-Seizure Claimants, who constitute seven (7) of the fifteen (15) Providian Claimants with Unpaid Bonus Components, were terminated well before WMB or WMI experienced a Distress Event in September, Thus, payments to such claimants on account of the Unpaid Bonus Components might not satisfy the fifth element because such Providian Claimants were not terminated at a time when WMI or WMB experienced a Distress Event. As discussed above, WMILT amended the Complaint to remove the Pre-Seizure Claimants from the Seattle Litigation on this basis. 50. Accordingly, an argument exists that the Unpaid Bonus Components do not constitute golden parachute payments, and regulatory approval is not required before making any payments on account thereof. See 12 C.F.R (f)(1)(i), (iii). (b) The Unpaid Severance Components Are Not Golden Parachute Payments 51. The Providian Claimants further assert that the alleged termination payments owed to the Providian Claimants pursuant to the Providian Agreements are for lump sum severance payments relating to prepetition terminations or resignations, which payments the Providian Claimants allege were deficient. As applied here, the Unpaid Severance Components might fail to satisfy at least one of the five requirements set forth in Section 359.1(f) to qualify as golden parachute payments. 11 In September, 2008, WMB experienced the following Distress Events: (i) on September 18, 2008, WMB was assigned a composite regulatory CAMELS Rating of 4 and, thus, was designated as troubled and (ii) on September 25, 2008, the OTS seized WMB and appointed the FDIC as receiver. See 359.1(f)(1)(ii)(B)-(C); 12 C.F.R (c) ( Troubled condition means any insured state nonmember bank that... [h]as a composite rating, as determined in its most recent report of examination, of 4 or 5 under the Uniform Financial Institutions Rating System. ). Moreover, WMI experienced a Distress Event when, on September 26, 2008, the Debtors filed petitions for relief under chapter 11 of the Bankruptcy Code. See 359.1(f)(1)(ii)(A). US_ACTIVE:\ \9\

21 Case MFW Doc Filed 03/10/14 Page 21 of The only Providian Claimants who have asserted Unpaid Severance Components are Pre-Seizure Claimants who were terminated well before WMB or WMI experienced a Distress Event in September, Thus, as discussed above, such claimants may not satisfy the fifth element of the definition of a golden parachute payment because they were not terminated at a time when WMI or WMB experienced a Distress Event. 53. Accordingly, an argument exists that the Unpaid Severance Components do not constitute golden parachute payments, and WMILT might not need to obtain regulatory approval before making any payments on account thereof. See 12 C.F.R (f)(1)(iii). (c) The Pre-Seizure Retention Bonus Component is Not a Golden Parachute Payment 54. One of the Providian Claimants, Whittaker, has asserted a claim pursuant to his Superseding WMB Retention Bonus Agreement for a bonus he allegedly earned on September 1, Whittaker s prepetition bonus payment fails to satisfy at least one of the five golden parachute requirements enumerated in Section As noted above, Whittaker had to remain employed through the target date of September 1, 2008 to earn the September Bonus, which he did. Indeed, Whittaker was terminated weeks after September 1, 2008, in connection with the Bank Seizure and/or JPMC Transaction. Accordingly, Whittaker s September Bonus vested and became due and payable on September 1, 2008 and was not accelerated upon or by its terms payable on or after Whittaker s termination. Thus, at a minimum, an argument exists that the September Bonus fails to satisfy the third factor of the five-part test and does not qualify as a golden parachute payment. See 12 C.F.R (f)(1)(i). 12 See supra note 11. US_ACTIVE:\ \9\

22 Case MFW Doc Filed 03/10/14 Page 22 of 30 (d) The Providian Legal Expense Components are Not Golden Parachute Payments 55. The Providian Legal Expense Components allegedly owed to the Providian Claimants relate to legal fees and expenses reasonably incurred in connection with prosecuting the Providian Underpayment Components. As applied here, an argument exists that the Providian Legal Expense Components fail to satisfy at least two of the requirements set forth in Section 359.1(f) to qualify as golden parachute payments. 56. First, the Providian Legal Expense Components are not obligations, which are contingent on, or by [their] terms... payable on or after, the termination of [the Providian Claimants ] primary employment or affiliation with the institution or holding company. See 12 C.F.R (f)(1)(i). Such components are unrelated to and are not dependent on the Providian Claimants termination, as evidenced by the very terms of Section 8: The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur in good faith as a result of any contest (regardless of the outcome thereof) by the Corporation, the [Providian Claimants] or others of the validity or enforceability of, or liability under, any provision of this [Providian] Agreement.... Exhibit B, Sample Providian Agreement, 8. Thus, to the extent the Providian Claimants are entitled to legal fees and expenses, the payment of such fees and expenses pursuant to Section 8 was not accelerated or contingent upon the termination of the Providian Claimants employment. 57. Second, the Pre-Seizure Claimants, who constitute seven (7) of the Providian Claimants with Providian Underpayment Components, were terminated well before WMB or WMI experienced a Distress Event in September, Thus, payments to such claimants on account of the Providian Legal Expense Components may not satisfy the fifth 13 See supra note 11. US_ACTIVE:\ \9\

23 Case MFW Doc Filed 03/10/14 Page 23 of 30 element because such Providian Claimants were not terminated at a time when WMI or WMB experienced a Distress Event. 58. Accordingly, an argument exists that the Providian Legal Expense Components do not constitute golden parachute payments, and WMILT need not obtain regulatory approval before making any payments on account thereof. See 12 C.F.R (f)(1)(i), (iii). (e) The Pre-Seizure Component is Unique to the Providian Claimants and Was Not Within the Scope of the FDIC Letter, the FDIC Application or, in Some Instances, the Amended Complaint 59. The Pre-Seizure Component is distinguishable from the claims of other employee claimants that are the subject of the Employee Claims Litigation. Importantly, only the Providian Claimants were parties to a Providian Agreement and, thus, any claims pursuant thereto, including the Providian Underpayment Components and the Providian Legal Expense Components, are particular to just the Providian Claimants. Indeed, no other claimants have asserted or can assert claims pursuant to a Providian Agreement. As the Pre-Seizure Component is unique to the Providian Claimants and WMILT asserts is not subject to the Golden Parachute Provisions, it was not within the scope of the FDIC Letter directing WMILT to file the FDIC Application with respect thereto or the FDIC Application itself nor has the FDIC made a determination with respect to the August 14 Letter Request, which will be withdrawn with respect to the Providian Agreements and the Providian Claimants. And, importantly, recognizing that the Pre-Seizure Claimants may not be subject to the Golden Parachute Provisions, because such Providian Claimants were terminated well before the September, 2008 Distress Events, WMILT removed them from the Amended Complaint in the Seattle Litigation with respect to the Golden Parachute Provision counts. US_ACTIVE:\ \9\

24 Case MFW Doc Filed 03/10/14 Page 24 of 30 II. The Factors Courts Consider in Approving Settlement Agreements Weigh in Favor of Approving the Settlement Agreement 60. Section 105(a) of the Bankruptcy Code provides that [t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. 11 U.S.C. 105(a). Bankruptcy Rule 9019, which governs the approval of compromises and settlements, provides that [o]n motion by the [debtor in possession] and after notice and a hearing, the court may approve a compromise or settlement. Fed. R. Bankr. P. 9019(a). The decision to approve a particular settlement lies within the sound discretion of the bankruptcy court. In re Key3Media Group, Inc., 336 B.R. 87, 92 (Bankr. D. Del. 2005); In re World Health Alternatives, Inc., 344 B.R. 291, 296 (Bankr. D. Del. 2006). 61. A starting point in analyzing any proposed settlement agreement is the general policy of encouraging settlements and favoring compromises. See Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996) ( To minimize litigation and expedite the administration of a bankruptcy estate, [c]ompromises are favored in bankruptcy. ) (internal quotation marks omitted). To approve a settlement, a bankruptcy court must determine that such settlement is in the best interest of a debtor s estate. Law Debenture Trust Co. of New York v. Kaiser Aluminum Corp. (In re Kaiser Aluminum Corp.), 339 B.R. 91, (D. Del. 2006). In addition, a court must assess and balance the value of the claim that is being compromised against the value to the estate of the acceptance of the compromise proposal in light of four factors: (1) the probability of success in the litigation, (2) the likely difficulties in collection, (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it, and (4) the paramount interests of the creditors. Id. at 96 (quoting In re Martin, 91 F.3d at 393). The United States District Court for the District of Delaware has explained that a court s ultimate inquiry is whether a settlement is fair, US_ACTIVE:\ \9\

25 Case MFW Doc Filed 03/10/14 Page 25 of 30 reasonable and in the best interest of a debtor s estate. In re Marvel Entm t Group, Inc., 222 B.R. 243, 249 (D. Del. 1998) (quoting In re Louise s, Inc., 211 B.R. 798, 801 (D. Del. 1997)). 62. A court need not decide the numerous issues of law and fact raised by the settlement, but rather should should canvass the issues to see whether the settlement falls below the lowest point in the range of reasonableness. In re Key3Media Group, Inc., 336 B.R. 87, (Bankr. D. Del. 2005) (internal quotation marks omitted); see also In re World Health Alternatives, Inc., 344 B.R. at An analysis of the four factors that bankruptcy courts use to determine whether to approve a compromise or settlement demonstrates that the Settlement Agreement is fair, reasonable and in the best interests of WMILT, the Debtors estates and creditors, and all parties in interest. (a) Probability of Success in the Providian Litigation with Respect to the Claims 64. WMILT denies and continues to deny liability pursuant to the Claims and believes that the Claims are without merit. Although WMILT believes that its position is supported by the law and facts, WMILT also acknowledges that there is an inherent uncertainty, delay, and expense connected with full litigation of the Claims and, thus, believes that settlement of the Claims and the Employee Claims Litigation solely with respect to the applicable Claims (the Providian Litigation ) on the terms set forth in the Settlement Agreement is in the best interests of WMILT, the Debtors estates and creditors and all parties in interest. WMILT will benefit from consummation of the Settlement Agreement because it will no longer need to incur the prohibitive expenses of discovery and the multiple trials that will be necessary to resolve the Providian Claimants labyrinth of Claims. US_ACTIVE:\ \9\