SETTLEMENT AGREEMENT AND 

MUTUAL RELEASE 

1. PARTIES: The parties to this Settlement Agreement ( .. Agreement") are Plaintiff 

FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for Downey Savings & Loan 

Association, F.A. ("FDIC-R"), Defendant broker JAMES W. MILNES, an individual 

("MILNES") and AMERICAN PRIME FUNDING, INC., a dissolved Nevada corporation 

("AMERICAN PRIME"). The FDIC-R, MILNES and AMERICAN PRIME are sometimes 

herein collectively referred to as the "Parties." 

2. RECITALS: This Agreement is made with reference to the following facts: 

2.1 Certain claims arose between the Parties concerning ten (1 0) residential 

loans that were made by Downey Savings and Loan Association, F.A. ("Downey") to the 

respective borrowers thereon in 2005 and 2006 (jointly, the "Loans"). 

2.2 The Loans were secured by trust deeds on real properties then owned by 

each borrower. AMERICAN PRIME was the mortgage broker that submitted to Downey the ten 

(1 0) loan applications. MILNES is alleged to have been, at the time, the managing and 

qualifying broker through whose license AMERICAN PRIME did business with Downey. 

2.3 The Loans were approved and funded by Downey and subsequently 

defaulted. Following foreclosure sales, each of the properties securing the Loans reverted to 

Downey, resulting in a combined alleged loss to the thrift of over $2,700,000. 

2.4 In November 2008, the FDIC-R was appointed the Receiver over all of 

Downey's assets and liabilities. Among the assets the FDIC-R is charged with trying to recover 

upon is the loss relating to the Loans ("Claims"). 

2.5 The Claims subsequently became the subject of an Adversary Complaint 

("Adversary Complaint") entitled FDIC-R v. James W. Milnes, an individual, et al., Case No. 

I 0-3199. ft.led by the FDIC-R in the United States Bankruptcy Court for the Northern District of 

California. Also, the Claims became the subject of a civil Complaint entitled FDIC-R v. 

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SETILEMENT AGREEMENT AND MUTUAL RELEASE 
American Prime Funding, Inc., etc., et al., Case No. 3:11-cv-00996, filed by the FDIC-R in the 

United States District Court for the Northern District of California ("Complaint''). 

2.6 By this Agreement the Parties hereto intend to settle and dispose of, fully 

and completely, any and all claims, demands, causes of action, obligations, damages, and 

liabilities that arise out of or relate to the Adversary Complaint and the Complaint and all of the 

Claims alleged therein by the FDIC-R against MILNES and AMERICAN PRIME. 

2.7 The Federal Deposit Insurance Corporation in its separate corpomte 

capacity as the insurer of deposits and bank regulator, and all other federal agencies of the 

United States of America, are not parties to this Agreement and are not bound in any manner to 

its terms and conditions. The FDIC-R enters into this Agreement solely in its limited capacity as 

the appointed Receiver ofDo\VD.ey Savings & Loan Association, F.A., and no other receivership 

now existing, previously existing or hereafter appointed. 

3. NO ADMISSION RE MERITS OF CLAIMS: The Parties agree that nothing in 

this Agreement, and no performance under this Agreement, shall be construed as an admission 

by any Party of the validity or invalidity of the Claims alleged in the Action; and, the Parties 

agree that this Agreement is entered into solely for the purpose of convenience and to 

compromise the disputed Claims the FDIC-R has alleged in the Action. 

4. SETTLEMENT TERMS: The Parties agree to the following settlement terms: 

MILNES shall pay the FDIC-R the amount of Eleven Thousand No/100 Dollars ($11,000.00) 

over a period of nine (9) months in installment payments not less than $1,222.22 commencing on 

the 15th day of the month after which this Agreement is executed by the Parties. Payment of that 

sum shall be secured by a Stipulation for Entry of Judgment in favor of FDIC-R in the event 

default in the payments occurs, in which event, judgment shall be entered in the sum of 

$25,000.00 less all payments made prior to the default by MILNES. After all of the payments 

have been made and funds have cleared, the entire Adversary Complaint and the Compliant shall 

be dismissed with prejudice. 

5. MUTUAL RELEASES AND WAIVER OF CIV. CODE§ 1542: 

5.1 In consideration of the Settlement terms as set forth in Paragraph 4 above, 

and all other promises, covenants and consideration provided for herein, the Parties agree that, 

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SETILEMENT AGREEMENT AND MUTUAL RELEASE 
except as to such rights or claims as may be created by this Agreement, they hereby covenant not 

to sue each other ever again on the Claims and the Parties acknowledge full and complete 

satisfaction of, and hereby release, remise, and forever discharge each other, including their 

respective insurers, officers, directors, affiliated companies, agents, servants, representatives, 

spouse, heirs, successors or predecessors in interest, . assignees, attorneys, employees and 

contractors from arty and all the Claims, demands, counts, obligations, agreements, damages, 

liabilities, losses, costs and expenses of any kind, in law or in equity, whether known or 

unknown, that either Party now holds, or has ever held against the other, or may hold in the 

future, that arise out of or are in any way connected with, the Claims alleged in the Action. 

5.2. This Agreement shall be binding on the Parties and on their respective 

officers, directors, affiliated companies, agents, representatives, spouses, heirs, successors or 

predecessors in interest, assignees, attorneys, employees and contractors and shall inure to the 

benefit of the Parties, and each of them. 

5.3 The Parties specifically intend that the release contained in this Agreement 

shall bar all released claims, including those which are currently unknown to them. The Parties 

understand and accept the risk that they may later discover a claim encompassed by the Release 

in this Agreement which they did not know or suspect to exist, or which they could not have 

known or suspect to exist. The Parties hereby specifically waive the protection of Civil Code 

section 1542 which reads 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 qr her must have 

materially affected his or her settlement with the debtor. 

The foregoing waiver is expressly limited to the claims held by the Plaintiff, Federal Deposit 

Insurance Corporation as Receiver for Downey Savings and Loan Association, F.A., and no 

other receivership, nor to the Federal Deposit Insurance Corporation in its separate corp()iate 

capacity, as more particularly set for in paragraph 2.7above. 

6. ATTORNEYS' FEES: In the event any action is brought to enforce or interpn::t 

this Agreement, the prevailing party shall be entitled to an award of reasonable attorneys' fees in 

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SETILEMENT AGREEMENT AND MUTUAL RELEASE 
addition to any other relief to which the prevailing party may be entitled. 

7. REPRESENTATIONS AND WARRANTIES: The Parties represent, warrant, 

and agree as follows: 

7.1 The FDIC-R is the lawfully appointed Receiver for Downey and has 

succeeded to and now holds each of the Claims that are the subject of the Action and this 

Agreement. The FDIC-R has the authority to enter into this compromise and settlement of the 

Claims as the Receiver of Downey. 

7.2 Each of the Parties have received or had the opportunity to seek their own 

independent legal advice with respect to the advisability of executing this Agreement. The 

Parties acknowledge that they have executed this Agreement without fraud, duress, or undue 

influence. The Parties affirm that they have read this Agreement and understand the contents 

hereof. 

7.3 No Party, nor any agent or attorney of any Party, has made any statement, 

representation, or promise to any other Party regarding any facts which the Party has then relied 

upon in entering into this Agreement, and the Parties here each affirm that they have not relied 

upon any statement, representation or promise by any other Party, or of any agent or attorney for 

another Party, in executing this Agreement, or in making the settlement provided for herein, 

except as is expressly represented or promised in this Agreement. 

7.4 None of the Parties have heretofore assigned, transferred, or granted, or 

purported to assign, transfer, or grant, any of the Claims that are alleged in the Action. 

7.5 Each Party agrees to execute any additional documents as reasonably 

convenient, necessary or desirable to carry out the provisions of this Agreement. 

8. MISCELLANEOUS: 

8.1 This Agreement shall be deemed to have been executed and delivered 

within the State of California, and the rights and obligations of the Parties hereto shall be 

construed and enforced in accordance with, and governed by, the laws of the State of California. 

8.2 This Agreement constitutes a single, integrated written contract expressing 

the entire agreement of the Parties. This Agreement may only be modified in a writing signed by 

all the Parties. This Agreement shall be interpreted in accordance with the plain meaning of its 

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SETILEMENT AGREEMENT AND MUTUAL RELEASE 
(b)(6) 

(b)(6) 

terms and not strictly for or against any of the Parties to this Agreement 

8.3 The provisions of this Agreement are contractual and not mere recitals. 

The Agreement shall be considered severable, such thai if any provision or part of the Agreement 

is ever held invalid under any law or ruling, that provision or part of the Agreement shall remain 

in force and effect to the extent allowed by law, and all other provisions or parts shall remain in 

full force and effect. 

8.4 This Agreement may be excxuted in counterparts and shall be effective on 

the date first executed by any one of the Parties hereto if so executed in counterpazts {the 

"effective date"). Any signature obtained by facsimile cr e-mail shall be as valid as an original 

signature. An authenticated copy of this Agreement can be used for any purpose for which the 

original may be used. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION, as Receiver for Downey Savings 

&s..p1JIIl.t:f3..s.sLliC......Jt:..a. _____ _, 

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SETTLEMENT AGREEMENT AND MUT!JAL RELEASE 

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

(b)(6) 

APPROVED AS TO FORM: 

By 

(b)(6) ox 

omeys for Plaintiff, 

Federal Deposit lnsunmce 

...._ _ _, Corporation as Receiver for Downey 

Savings & Loan Association. F.A. 

(b)(6) 

KLEINLAWGR 

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SETTLEMENT AGREEMENT AND MUTUAL RELEASE