Settlement Discussions with FDIC-Receiver

The Debtor and the Case Committee have engaged in several telephonic and in-person meetings and other discussions with the FDIC-Receiver regarding potential settlements of various disputes and claims asserted by the FDIC-Receiver against the Debtor and various disputes and claims asserted by the Debtor against the FDIC-Receiver. To date, those settlement discussions have not resulted in an agreement to settle any of the significant issues asserted by or against the FDIC-Receiver or the Debtor. The Case Committee has been an active participant, directly or indirectly, in all of the settlement discussions. All settlement conferences with the FDIC-Receiver have been conducted under a confidentiality stipulation pursuant to Rule 408 of the Federal Rules of Evidence and other applicable privileges. In the course of those settlement discussions, the Debtor received three proposals to settle all disputes with the FDIC-Receiver, the last of which exceeded in dollar amount the prior two proposals.

In its objection to the Debtor's first filed disclosure statement, however, the FDIC- Receiver stated on the public record the effect that it believed its most recent settlement proposal would have upon Distributions available to creditors if its settlement proposal were accepted by the Debtor and approved by the Bankruptcy Court. According to the objection filed by the FDIC-Receiver, an acceptance and Bankruptcy Court approval of the FDIC-Receiver's most recent settlement proposal would result in payment in full of all Secured, Administrative and Priority Claims and would allow for a "significant" Distribution to the Holders of General Unsecured Claims. The Debtor believes that a partial disclosure of settlement terms is misleading and, with the consent of the FDIC-Receiver, the Debtor has set forth below its understanding of the FDIC-Receiver's most recent settlement proposal. Before doing so, however, it should be emphasized that the FDIC-Receiver's settlement proposal is conditioned upon (i) execution of definitive settlement documentation by the parties, (ii) a recommendation being made to and approved by the FDIC's board of directors following agreement on definitive terms (none of which, the Debtor is advised, has occurred), and (iii) Bankruptcy Court approval after notice and an opportunity for objections to the settlement. The settlement proposal may be revoked by the FDIC-Receiver at any time prior to formal approval by the FDIC's board of directors or approval by the Bankruptcy Court. Subject to the foregoing, the settlement proposal now on the table from the FDIC-Receiver as of the date of this Disclosure Statement is as follows:

(1) The FDIC-Receiver would agree to carve out from its asserted Claims, Liens and rights of offset with respect to all of the Core Assets that are in dispute a cash amount equal to (i) $30 million plus (ii) the balance of the Deposits in the Bank Accounts (approximately $33 million on the date hereof) minus all amounts utilized by the Debtor in the administration of the Case from the Operating Account after the date of this Disclosure Statement (the "Cash Settlement Amount"), in full settlement and satisfaction of all claims of the Debtor to any of the Core Assets or against the FDIC-Receiver, Colonial Bank, and BB&T (other than claims and defenses related to BB&T's asserted offset rights with respect to certain of the Deposits);

(2) The FDIC-Receiver would be entitled to all other Core Assets that are in dispute and the proceeds of which have not been expended in the administration of the Case;

(3) The Capital Maintenance Claim of the FDIC-Receiver, with priority under Section 507(a)(9) over all General Unsecured Claims, would be granted in the amount of $200 million, but the FDIC-Receiver would agree that it would not receive any Distribution on account of that Claim or any other Claim, whether asserted in its proof of claim or otherwise;

(4) The Debtor would release all claims and causes of action that it may hold against the FDIC-Receiver, Colonial Bank and/or BB&T (other than claims and defenses related to BB&T's asserted offset rights with respect to certain of the Deposits); (5) From the Cash Settlement Amount, together with the proceeds (if any) of any

Core Assets that are not in dispute (and the Debtor is presently unaware of any material Core Assets the ownership of which by the Debtor are not disputed by the FDIC-Receiver), the Debtor would be required to settle and pay (i) an amount necessary to settle or discharge BB&T's claim to certain of the Deposits in the Bank Accounts (which claim is asserted by BB&T in an aggregate amount that would exceed all of the Deposits other than those currently in the Operating Account (approximately $10.5 million in the Operating Account on this date)); (ii) the Secured Claim of the Alabama Revenue Department (asserted to be approximately $12 million); (iii) Priority Non-Tax Claims, which on the date hereof (exclusive of a disputed Priority Non-Tax Claim of the PBGC) is in an asserted aggregate amount of $123,000; and (iv) Administrative Expenses (estimated to be in the range of $2 million), with the balance available for Distribution to Holders of General Unsecured Claims (with aggregate dollar amount of all proofs of General Unsecured Claims, before any objection thereto, in an aggregate amount of approximately $2.1 billion).

The Debtor has not as yet formally accepted or rejected the FDIC-Receiver's last settlement offer. However, the Debtor understands that both the Case Committee and the Holders of a sizeable percentage of the Indenture Claims would vigorously oppose any effort by the Debtor to obtain Bankruptcy Court approval of the proposed settlement. The Debtor is fully prepared to continue to participate in settlement discussions, and is desirous of reaching a settlement that is in the best interests of the Estate and all creditors. While the Debtor will continue to exercise its independent judgment, the Debtor must be respectful of and take seriously into account the opinions of the Case Committee and substantial claimants in the Case that the current FDIC-Receiver settlement offer does not fairly represent a fair and reasonable compromise of Disputed Claims with respect to Core Assets.

The FDIC-Receiver's statement that its settlement proposal would result in a "significant" Distribution to Holders of General Unsecured Claims clearly must rely on a number of assumptions regarding a resolution (all in favor of the Debtor) of a number of hotly contested disputes regarding Secured, Priority Non-Tax and other Claims asserted against the Debtor that

are sizeable in amount. For example, if BB&T's asserted Secured Claim with respect to the Bank Accounts (other than the Operating Account) were sustained, the amount that would be available to the Estate would be reduced by $24 million (leaving a total amount of settlement proceeds available for Distribution of approximately $40.5 million); if the Secured Claim of the Alabama Revenue Department (approximately $12 million) is allowed in the amount asserted by it, the amount available for Distribution would be further reduced from approximately $40.5 million to $28.5 million; assuming Administrative Expenses of an additional $2 million, the adjusted amount available for Distribution would be reduced to $26.5 million; and if Priority Non-Tax Claims are allowed in the amount asserted (approximately $123,000), exclusive of the Claim of the PBGC of approximately $30 million (which will be vigorously contested by the Debtor), then the net amount available for Holders of General Unsecured Claims would be $26.377 million.3 _{Assuming that General Unsecured Claims total (in a worst case scenario) in} excess of $435 million (which assumes that the Bank of America asserted proof of claim of up to $1.75 billion is withdrawn or disallowed), the Holders of such Claims would receive approximately 6.07 cents on the dollar on account of their Claims. Assuming that General Unsecured Claims total (in a best case scenario) approximately $421 million (which also assumes that the Bank of America asserted proof of claim of up to approximately $1.75 billion is withdrawn or disallowed), the Holders of such Claims would receive approximately 6.26 cents on the dollar on account of their Claims. If on the other hand, the Debtor were successful in resolving by settlement the asserted Secured Claims of BB&T and the Alabama Revenue Department for an aggregate amount of $10 million and asserted Priority Non-Tax Claims for an aggregate amount of $50,000, the amount available for Holders of General Unsecured Claims would be $52.55 million and the pro rata Distribution to such Holders (in a worst case scenario) might be as low as approximately 12.09 cents on the dollar or (in a best case scenario) might be as high approximately 12.47 cents on the dollar.4

In light of the significant amount of litigation pending before the Bankruptcy Court and the District Court involving claims asserted by and against the Debtor, including the Capital Maintenance Claim on appeal, and in light of the inherent uncertainties of litigation, it is certainly possible that one or more adverse rulings to the Debtor could result in Distributions to creditors in amounts that would be less than the amount of Distributions under the FDIC- Receiver's most recent settlement offer, assuming that settlement offer were (if accepted by the Debtor) approved by the Bankruptcy Court over the objection of the Case Committee and significant claimants in the Case.

The Debtor intends to continue efforts at settlement and, in consultation with the Case Committee, will bring to the Bankruptcy Court (and the creditor constituency) pursuant to Bankruptcy Rule 9019 any settlement that reasonably reflects all of the claims, defenses and litigation risks associated with pending adversary proceedings and contested matters.

3

Of course, if the Debtor is unsuccessful in challenging the PBGC Claim as a Priority Non-Tax Claim then there will be nothing available for Distributions to the Holders of General Unsecured Claims under the FDIC-Receiver's settlement proposal.

4

These calculations of General Unsecured Claims assume that approximately $30 million of filed Claims arguably arising from or related to the purchase and sale of a security are not statutorily subordinated and does not include any estimation of substantial contingent and unliquidated Claims asserted against the Debtor.