SETTLEMENT AND RELEASE AGREEMENT 

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

the Federal Deposit Insurance Corporation as Receiver for Innovative Bank ("FDIC-R") and 

National Union Fire Insurance Company of Pittsburgh, Pa. ("National Union" or "Bond Insurer") 

(individually, the FDIC-R and National Union may be referred to herein as "Party" and 

collectively as the "Parties,'). 

RECITALS 

WHEREAS: 

Prior to April16, 2010, Innovative Bank ("Bank',) was a depository institution organized 

and existing under the laws of California; 

National Union issued the following Financial Institution Bonds to the Bank: bond 

(b)( 4) numbed l for the bond period of September 1, 2007 to September 1, 2008, bond 

(b)( 4) ............ numbed ······· L for the bond period of September 1, 2008, to September 1, 2009, and 

(b)(4) ... bond-number!._ ___ ___.~ for the bond period of October 9, 2009, to September 1, 2010 

(collectively, the "Bonds"). 

Prior to closing, the Bank sent a Notice of Claim to National Union, pursuant to Section 

S(a) of the Bond (the "Notice,.), which claim was designated as Claim. Nos. I ··········································I·-·········· - .... (P)(4.) 

OnApri116, 2010, the Califomia~epartmentofFinancial Institutions 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. § l82l{d), the FDIC-R succeeded to all rights, titles, 

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

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

causes of action under the Bonds or with respect to the Bond Claims. On October 29, 2010, 

147&S3l!l.7 
pursuant to an extension granted to the FDIC.R by National Union, the FDIC-R submitted its 

Proofs of Loss under Section 5( c) of the Bond (the "Proofs of Loss'') with respectto the Bond 

Claims. 

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

avoid the uncertainty and further expense of 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, each with the other, as follows: 

SECTION 1: Payment to the FDIC-R 

On or before thirty (30) calendar days following the FDIC-R's execution of this 

Agreement, National Union agrees to pay to the FDIC.R the sum ofFive Hundred Ten Thousand 

Dollars ($510,000) ("the SettlcmentPaymenf'). 

National Union shall deliver its payment by check made payable to the Federal Deposit 

Insurance Corporation as receiver for Innovative Bank, to Christine P. Hsu, Esq., FDIC Legal 

Division, FDIC, 3501 Fairfax Drive, Room VS-B-7054, Arlington, VA 22226-3500. 

SECTION ll: Releases and Assignment 

A. Release ofNational Union by the FDIC.R. 

Effective upon its receipt of the Settlement Payment in full, as described in Section I, 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, predecessors, successors, and assigns, from any and all claims, 

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

equity, known or unknown, that arise from or relate to the Bonds, the Bond Claims, the Notice, 

and the Proofs of Loss. The FDIC-R agrees that any interest it may have under the Bonds or 

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with respect to the Bond Claims, the Notice, and the Proofs of Loss is extinguished. Upon 

payment of the amount described in Section I of this Agreement, National Union shall have no 

further obligation with respect to the Notice, the Proof of Loss, the Bond Claims, and/or the 

Bonds. 

B. Release of the FDIC~R by the Bond Insurer. 

Effective simultaneously with the release granted in Paragraph ll.A. above, National 

Union, for itself and its predecessors, successors, and assigns, hereby releases and discharges the 

FDIC-R and its employees, officers, directors, agents, representatives, predecessors, 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 Bonds, the Bond 

Claim, the Notice, and the Proofs of Loss, including but not limited to any rights of subrogation, 

legal, equitable, or otherwise. 

C. Assignment of Subrogation Rights to National Union. 

In further consideration of the aforesaid payment by National Union, the FDIC.R does 

hereby transfer, assign and sign over to National Union all of its claims and rights against Jenny 

Shinn and/or any and all other persons, firms, or corporations arising out of the Bond Claims, the 

Proof of Loss, or the Bonds, but only to the extent of the Settlement Payment and only to the 

extent that such claims are not resolved or released by the tenns and conditions of any Settlement 

Agreement with respect to the action entitled Federal Depos/1 Insurance Corporation as 

Receiver for Innovative Bank v. Hong et al., United States District Court for the North em District 

of California Case No. CV -12-2658. The FDIC·R does hereby agree to execute any and all 

further papers, releases, and/or assignments, and shall provide any further cooperation and 

assistance that may be necessary to effectuate the purposes of this assignment. It is understood 

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that National Union maintains these subrogation rights, and is entitled, but not obligated, to 

pursue recovery under its subrogation rights and/or assignment rights subject to the provisions of 

the Bond. 

D. Release and Waiver of Rights Under Cal. Civ. Code Section 1542. 

The Parties agree that the releases provided in Section II include and encompass a release 

and waiver of any and all rights or benefits conferred by the provisions of Section 1531 of the 

California Civil Code and/or any other federal statute or common law principle of similar effect. 

In connection with this waiver, the Parties hereby acknowledge that they are aware that they may 

hereafter discover claims or facts in addition to, or different from, those which they now know or 

believe to exist with respect to the subject matter of this Agreement. 

The Parties acknowledge that they have been advised by legal counsel and are familiar 

with the provisions of Section 1542 ofthc California Civil Code, which provides as follows: 

A general release does not extend to claims which the creditor does 

not know or suspect to exist in his or her favor at the time of 

executing the release, which if known by him or her must have 

materially affected his or her settlement with the debtor. 

SECTION ill: Representations and Aclmowlcdgcmcnts 

A. Authorized Signatories. All of the undersigned persons represent and warrant that 

they are Parties hereto or are authorized to sign this Agreement on behalf of the respective Party, 

and that they have 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. 

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B. Advice of Counsel. Each Party hereby acknowledges that he, she, or it has 

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

this Agreement has been explained to that Party by his, her, or its counsel. 

C. Ownership of the Claims. The Parties hereby represent and warrant that they have 

not transferred, assigned, released, or otherwise compromised any rights or claims released 

herein. The FDIC~R represents and warrants that it is the sole owner of the Bond Claims. The 

FDIC-R understands and agrees that this representation is a material portion of the consideration 

provided to National Union in this Agreement. 

D. 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. 

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

have any rights under this Agreement. 

E. Attorney's Fees. Each Party shall bear all of his or its attorney's fees and costs 

with respect to the Notice, the Proof of Loss, the Bond Claims, and/or the Bonds. 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. 

F. 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 perfonn the tenns of this 

Agreement. 

G. No Admission ofLiabilif¥. The undersigned Parties each acknowledge and agree 

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

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

(b)(6) .. 

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

by any of them regarding any claim or defense, and that the Agreement shall not be offered or 

received in evidence by or against any Party except to enforce its tenns. This Agreement shall 

have no precedential effect in any other matter or claim involving National Union and/or any 

member company of the American International Group, Inc. 

H. Execution in Counterparts. 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. 

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

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

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

class, retum receipt requested, and by email, to the following: 

IftoFDIC-R 

Christine P. Hsu 

FDIC 

3501 Fairfax Drive, Room VS~B~7054 

Arlington. VA 22226 

lH· H ... I 

and 

Kathleen M. Balderston 

Nixon Peabody LLP 

437 Madison Avenue 

New York, NY 10022 

I 

_________ ............................................... ___. 

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(b)(6) 

(b)(6) 

If to National Union: 

Kenneth D. Watnick 

Anderson McPharlin & Conners 

444 South Flower Street 

Suite3100 

Los Angeles, California 90012 

Telephone: (213) 688-0080 

, ........................ ,L-·······--------1 

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 

by the Parties bound thereby, or by the4' 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 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed 

by each of them or their duly authorized representatives on the dates hereinafter subscribed. 

FEDERAL DEPOSIT INSURANCE CORPORATION 

As Receiver ffmlnnoyativc.Bank 

By:······! ..... =· :"""":"""-=---=-==----------____. 

Christine P. HsU 

Its: Counsel 

Date: CS/ '1.-l b4 

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(b )(6)_ 

NATIONAL UNION FIRE INSURANCE COMPANY 

OF PITTSBURGH, Pa. by its authorized representative 

AIG CLAIMS, INC. 

sri--- Print Name: . 'X ~ ' \4 I i ' / \ ., 

Title: '. ~_(· ____ .:..____ I / ' ( 

Date: 

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