SETTLEMENT AND RELEASE AGREEMENT 

This Settlement and Release Agreement ("Agreement") is made by, between, and among 

the Federal Deposit Insurance Corporation as Receiver for Franklin Bank, S.S.B. ("FDIC~R"), 

and National Union Fire Insurance Company of Pittsburgh, Pa. (''National Union") (the FDIC~R 

and National Union may be referred to herein individually as "Party" and collectively as the 

"Parties"). 

RECITALS 

WHEREAS: 

Prior to November 7, 2008, Franklin Bank, S.S.B. ("Bank"), was a depository institution 

organized and existing under the laws of the State of Texas. 

National Union issued a Financial Institution Bond, bond nwnber._l __ .... _ ........ _ ........ _,.Jto··the·Bank, ...... (b.)(4.) 

for the period April 30, 2007, to April 30, 2008 ("Bond"), which insured the Bank according to 

the terms, provisions, and conditions of the Bond. 

On April 17, 2008, the Bank sent to National Union a notice of loss under the Bond 

("Notice"), which claim was designated as Claim No. L..l __ ....... _ ........ _ ........ _,···k''€laim1'-); .. 0nJanuary13·, .................... (0.)(4.) 

2009, the Bank submitted to National Union a proof ofloss with respect to the Claim ("Proof of 

Loss"). 

On November 7, 2010, the Texas Banking Department closed the Bank and, pursuant to 

12 U.S.C. § 1821(c), the Federal Deposit Insurance Corporation was appointed Receiver. In 

accordance with 12 U.S.C. § 1821(d), the FDIC~R succeeded to all rights, titles, powers and 

privileges of the Bank, including those with respect to its assets. 

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Among the assets to which the FDIC-R succeeded were any and all claims, demands, and 

causes of action against insurance carriers, including National Union, that issued any Financial 

Institution Bonds to the Bank. 

On October 24, 2014, the FDIC-R filed suit against National Union to recover on the 

Claim. That lawsuit is now pending in the United States District Court for the Eastern District of 

Virginia in FDIC as Receiver for Franklin Bank v. National Union Fire Insurance Company of 

Pittsburgh, Pa., Case No. 1:14-cv-1408 (E.D. Va.) (the "Bond Action"). National Union has 

denied liability in the Bond Action. 

The undersigned Parties deem it in their best interests to enter into this Agreement to 

avoid the w1certainty and expense of further litigation. 

NOW, THEREFORE, in consideration of the promises, undertakings, payments, and 

releases stated herein, the sufficiency of which consideration is hereby acknowledged, the 

undersigned Parties agree as follows: 

SECTION 1: Payment to the FDIC-R 

A. The Recitals above are incorporated by Reference. 

B. As an essential covenant and condition of this Agreement and as consideration for 

the releases set forth in Section III of this Agreement, National Union agrees to pay the FDIC-R 

the sum of TWO MILLION FOUR HUNDRED THOUSAND DOLLARS AND ZERO CENTS 

($2,400,000.00) (the "Settlement Payment"). The Settlement Payment shall be made to the 

FDIC-R within thirty (30) calendar days after both Parties sign the Agreement and the FDIC-R 

delivers its signed Agreement to National Union (the "Payment Due Date"). 

C. On or before the Payment Due Date, National Union shall deliver the Settlement 

Payment to the FDIC-R by check made payable to "FDIC," to this lockbox: 

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JPMorgan Chase (TX 1-0006) 

ATTN: FDIC Receivership Lock Box M 

14800 Frye Road 2nd Floor 

Fort Worth TX 76155 

••••••••••••••••••••I •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••m•••••• (b)(4) • m••••••••••••••••••••••••••••••••••••••••• •••••••• ••• •••••••• • 

The check or accompanying stub will contain this information: Fund 1 0021, Asset 

I, Contact Jan Hamrick, (972) 761-8111. The transmittal letter accompanying the 

check shall reference this information: OTHER BENEFICIARY INFORMATION (OBI): Fund 

(b)(S) 10021, Assetl~..._····· ___ _,I, Franklin Bank Bond Settlement Funds, Contact DRR 

Investigations- Jan Hamrick, (972) 761-8111 

D. If the FDIC-R does not receive the Settlement Payment in full on or before the 

Payment Due Date, then the FDIC-R, in its sole discretion, shall have the right at any time prior 

to receipt of the Settlement Payment in full to: 

1. Extend the period oftime for the Settlement Payment; 

2. Enforce this Agreement, in which event National Union agrees to jurisdiction in 

the United States District Court for the Eastern District of Virginia; 

3. Terminate the Agreement, move to vacate any dismissal order, to which National 

Union agrees to consent, and reinstitute any aciion on the FDIC-R's claims. National Union 

further agrees to waive any defense based on any statute of limitations that would bar any of the 

FDIC-R's claims and to waive all objections, defenses, claims or counterclaims, and covenants 

and agrees not to assert any objections, defenses, claims or counterclaims that did not exist or 

were otherwise unavailable as of the date this Agreement was fully executed; and/or 

4. Seek any other relief available to it in law or equity. 

Any extension of time under Section l.D.1 for the delivery of the Settlement Payment or 

acceptance of a portion of the Settlement Payment shall not prejudice the FDIC-R's rights to take 

1027443.1 3 oflO 
any of the actions set forth in Section I.D.2 through I.D.4 at any time prior to receipt of the 

Settlement Payment in full. 

SECTION II: Stipulation of Dismissal 

Within three (3) business days after receipt of the Settlement Payment in full, the FDIC-R 

shall file in the Bond Action a Stipulation of Dismissal with Prejudice in the form attached 

hereto as Exhibit A. 

SECTION III: Releases 

A. The FDIC-R's Release of National Union. 

Effective upon its receipt of the Settlement Payment in full as provided in Section I, and 

except as provided in Section III.C., the FDIC-R, for itself and its successors and assigns, hereby 

releases and discharges National Union~ its parents, subsidiaries, affiliates and reinsurers, and 

their respective employees, officers, directors, agents, representatives, successors, and assigns 

(collectively, the "National Union Released Parties"), from any and all claims, demands, 

obligations, damages, actions and causes of action, direct or indirect, in law or in equity, that 

arise from or relate to the Notice, the Proof of Loss, the Claim, National Union's adjusting of the 

Claim, the Bond, or the Bond Action (including all claims that were asserted in the Bond 

Action). As part of this release of National Union and the National Union Released Parties, the 

FDIC-R agrees that any interest it has or may have under the Bond is extinguished. 

B. National Union's Release of the FDIC-R. 

Effective simultaneously with the release granted in Section liLA. above, National 

Union, for itself and its successors and assigns, and on behalf of the National Union Released 

Parties, hereby releases and discharges the FDIC-R and its employees, officers, directors, agents, 

1027443.1 4 of 10 
representatives, attorneys, successors, and assigns from any and all claims, demands, obligations, 

damages, actions, and causes of action, direct or indirect, in law or in equity, that arise from or 

relate to the Notice, the Proof of Loss, the Claim, the Bond, or the Bond Action. 

C. Exceptions from Releases by the FDIC-R 

1. Notwithstanding any other provision of this Agreement, the FDIC-R does not 

release, and expressly preserves fully and to the same extent as if this Agreement had not been 

executed, any rights, claims, or causes of action: 

a. against National Union, the National Union Released Parties, or any other 

person or entity for liability, if any, incurred as the maker, endorser or guarantor of any 

promissory note or indebtedness payable or owed by them to the FDIC-R, the Bank, other 

financial institutions, or any other person or entity, including without limitation any such claims 

acquired by the FDIC-R as successor in interest to the Bank or any person or entity other than the 

Bank; 

b. against any person or entity not expressly released by the FDIC-R in this 

Agreement; and. 

c. that are not expressly released in Section III. A. above. 

2. Notwithstanding any other provision of this Agreement, nothing in this 

Agreement shall be construed or interpreted as limiting, waiving, releasing, or compromising the 

jurisdiction and authority of the Federal Deposit Insurance Corporation in the exercise of its 

supervisory or regulatory authority or to diminish its ability to institute administrative 

enforcement or other proceedings seeking removal, prohibition, or any other relief it is 

authorized to seek pursuant to its supervisory or regulatory authority against any person. 

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3. Notwithstanding any other provision of this Agreement, this Agreement does not 

purport to waive, or intend to waive, any claims that could be brought by the United States 

through the Department of Justice, the United States Attorney's Office for any federal judicial 

district, or any other department or agency of the United States as defined by 18 U.S.C. § 6. [n 

addition, the FDIC-R specifically reserves the right to seek court-ordered restitution pursuant to 

the relevant provisions of the Mandatory Victims Restitution Act, 18 U.S.C. §§ 3322 and 3363, 

et seq., if appropriate. 

SECTION IV: Representations and Acknowledgements 

A. Authorized Signatories. Each of the undersigned persons represents and warrants 

that he or she is authorized to sign this Agreement on behalf of the respective Party on behalf of 

whom he or she is signing, and that he or she has the full power and authority to bind such Party 

to each and every provision of this Agreement. This Agreement shall be binding upon and inure 

to the benefit of the undersigned Parties and their respective heirs, executors, administrators, 

representatives, successors, and assigns. 

B. Advice of Counsel. Each Party hereby acknowledges that it has consulted \Vith 

and obtained the advice of counsel prior to executing this Agreement, and that this Agreement 

has been explained to the Party by its counsel. 

SECTION V: Reasonable Cooperation 

The Parties agree to cooperate in good faith to effectuate all the terms and conditions of 

this Agreement, including doing, or causing their agents and attorneys to do, whatever is 

reasonably necessary to effectuate the signing, delivery, execution, filing, recording, and entry, 

of any docwnents necessary to conclude the Bond Action and to otherwise perform the terms of 

this Agreement. 

I 027443.1 6 of 10 
SECTION VI: Other Matters 

A. Ownership of Bond Claim. The FDIC-R represents and warrants that it is the sole 

owner of the Claim. The FDIC-R understands and agrees that this representation is a material 

portion of the consideration provided to National Union in this Agreement. 

B. Assignment 

Pursuant to Section 7 of the Bond, and subject to Section III of this Agreement and 

receipt of the Settlement Payment by the FDIC-R, the FDIC-R assigns to National Union, and 

National Union is subrogated to, all rights, claims, and actions the FDIC-R may have against 

Kamran Khan, Vijay Taneja, and any other persons, firms, corporations, or entities, except for 

former officers, directors, employees, agents, or affiliates of the Bank, arising from the Claim, 

limited to the extent of the amount of the Settlement Payment and subject to the provisions of 

Section 7 of the Bond. 

C. No Admission ofLiabilitv. The undersigned Parties each acknowledge and agree 

that the matters set forth ih this Agreement constitute the settlement and compromise of disputed 

claims and defenses, that this Agreement is not an admission or evidence of liability or infirmity 

by them regarding any claim or defense, and that this Agreement shall not be offered or received 

in evidence by or against any Party except to enforce its terms. 

D. No Precedential Value. The undersigned Parties each acknowledge and agree that 

neither this Agreement nor the handling of the Claim shall set precedent with any other claim 

under a policy or bond issued by National Union, its parents, subsidiaries, or affiliates. 

E. Binding Effect. This Agreement is intended to confer rights and benefits only on 

the Parties. This Agreement shall be binding upon and inure to the benefit of the Parties and 

their respective successors, assigns, representatives, members, alter egos, and related entities. 

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Except as otherwise expressly provided herein, no person or entity other than the Parties shall 

have any rights under this Agreement. 

F. Confidential Materials. National Union may retain possession of any and all 

documents produced to it by the FDIC-R in connection with the Claim; however, National Union 

shall not publish such docwnents or disclose them to any other person, except as may be 

necessary in comtection with any claim National Union may pursue pursuant to the assignment 

in Section VI. B. above, or as may be permitted under the Confidentiality Agreement between the 

FDIC-R and Chartis Claims, Inc., effective December 1, 2010 (the "Coniidentiality 

Agreement"). Upon the conclusion of any claim that National Union may pursue related to the 

Claim, or ifNational Union decides not to pursue such a claim, National Union shall maintain or 

dispose of all documents produced to it by the FDIC-R in connection with the Claim, as provided 

under the Confidentiality Agreement. 

G. Attorney's Fees. Each Party shall bear all of its attorney's fees and costs with 

respect to the Notice, the Proof of Loss, the Claim, the Bond, or the Bond Action. However, in 

the event of litigation in connection with or concerning this Agreement, the prevailing party shall 

be entitled to recover all reasonable costs and expenses incurred by that Party. 

H. Execution in Counteroarts. This Agreement may be executed in counterparts by 

one or more of the Parties and all such counterparts when so executed shall together constitute 

the final Agreement, as if one document had been signed by all Parties, and each such 

counterpart, upon execution and delivery, shall be deemed a complete original, binding the 

Parties subscribed thereto upon the execution by all Parties to this Agreement. A copy of this 

Agreement shall be treated as an original. 

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(b)(6) ............ 

(b)(6) .... 

I. Choice of Law. This Agreement shall be interpreted, construed, and enforced 

according to applicable federal law, or in its absence, the laws of the State of Texas. 

J. Notices. Any notices required hereunder shall be sent by first class mail, return 

receipt requested, and by email, to the following: 

If to the FDIC-R: 

and 

Stephen J. Kott 

Counsel, Federal Deposit Insurance Corporation 

3501 Fairfax Drive, VS-B-7016 

Arlington, VA 22226 

.... -.. 1 .................... ····· ··· I 

Bruce E. Alexander 

Weiner Brodsky Kider PC 

1300 l91h Street, NW, 5th Floor 

Washington, DC 20036 

I . ........................ . ································ 

If to National Union: 

Sam H. Poteet, Jr. Esq. 

Justin D. Wear, Esq. 

Manier & Herod 

One Nashville Place 

150 Fourth Avenue North, Suite 2200 

Nashville, TN 37219 

K. Entire Agreement and Amendments. This Agreement constitutes the entire 

agreement and understanding between and among the undersigned Parties concerning the matters 

set forth herein and supersedes any prior agreements or understandings. This Agreement may 

not be amended or modified, nor may any of its provisions be waived, except in writing signed 

1027443.1 9 of 10 
by the Parties bound thereby or by their respective authorized attomey(s) or other 

representative( s ). 

L. Titles and Captions. All section titles and captions contained in this Agreement 

are for convenience only and shall not affect the interpretation of this Agreement. 

M. No Confidentiality. All Parties acknowledge that this Agreement shall not be 

confidential and will be disclosed pursuant to the Federal Deposit Insurance Corporation's 

applicable policies, procedures, and other legal requirements. 

In witness whereof, the Parties hereto have caused this Agreement to be executed by each 

of them by their authorized representatives on the date hereinafter subscribed. 

FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR 

FRANKLIN BANK, S.S.B. 

Date: December J.!l, 2015 BY: __ -L~------·····_·········_··········_m·m_.mrl-·· --

j j1 j 

TITLE: ___ LD~&.t:;::;14~~::..:.t.o::....\.L..-____ _ 

PRINT NAME: S+!.f h~ :r: }( DT1' 

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. 

Date: December_, 2015 BY:-------------

TITLE: -----------

PRINT NAME: _______ _ 

1027443.1 10 of 10