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SETTLEMENT AND RELEAS.E AGREEMENT 

This Settlement and Release Agreement ("Agreement") is made effective as of August 

28, 2013, by, between, and among the following undersigned parties: 

The Federal Deposit Insurance Corporation ("FDIC11), as Receiver for Prosperan Bank 

("FDIC·R"), Scott A. Johnson, James S. Kloosterboer, and Richard T. Sandquist (collectively, 

the "Settling D&Os"), and the Chubb & Son division of Federal Insurance Company ("Chubb") 

(individually, the FDIC¥R, the Settling D&Os and Chubb may be referred to herein as a "Party" 

and collectively as the "Parties"). 

RECITALS 

WHEREAS: 

l. Prior to November 6, 2009, Prosperan Bank ("the Bank") was a depository 

institution organized and existing under the laws of the State of Minnesota. 

2. On November 6, 2009, the Bank was closed by the Minnesota Depa1tment of 

Commerce 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. 

3. Among the assets to which the FDIC-R succeeded were any and all of the Bank's 

' 

claims, demands, and causes of action against its fom1er directors and officers arising from the 

performance, nonperformance and manner of performance of their respective functions, duties 

and acts as directors and/or officers of the Bank. 

4. The FDIC·R has asserted certain claims against the Settling D&Os, each of whom 

had served at various times as a director and/or oflicer of tile Banlc The Settling D&Os have 

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denied and continue to deny liability for the FDIC~R's claims. No lawsuit has been fiJcd by the 

FDIC-R against the Settling D&Os. 

5. Chubb issued Forefront Portfolio for Community Banks Policy Number [3 JP.)(~) 

(b)(4) .. t=J including directors and officers liability coverage (the "Chubb Policy"), which insured the 

directors and officers of the Bank according to the terms, provisions and conditions of the Chubb 

Policy, for the policy period from March 12, 2007 to March 12, 2010. The Settling D&Os made 

claims under the Chubb Policy for coverage of the claims asse11ed against them by the FDIC-R. 

Chubb has reserved its rights to deny coverage under the Chubb Policy for the claims assc1icd by 

the FDIC-R against the Settling D&Os. 

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

to avoid the unce11ainty, trouble, and expense of further litigation. 

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

releases stated herein, the sutlicicncy of which consideration is hereby acknowledged, and in 

reliance upon the Recitals, which are incorporated by reference into the rest of this Agreement 

and are a material pm1 of this Agreement, the undersigned Parties agree, each with the other, as 

follows: 

SECTION I. Payments 

As an ess~ntial covenant and condition to this Agreement, within ten (I 0) business days 

after the ef1ective date of this Agreement ("Payment Date"), Chubb shall pay the FDIC-R the 

sum of one million, two hundred fifty thousand dollars ($1 ,250>000.00) ("Settlement Funds"). 

A. The Settlement Funds shall be delivered to the FDIC-R by Chubb by check to 

Barbara Amold> Federal Deposit Insurance Corporation, 350 I Fairfax Drive, Arlington, VA 

22226. 

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B. ln the event that the full Settlement Funds are not received by FDIC-R on or 

before the Payment Date due to intentional non-payment> the FDIC-R, in its sole discretion> shall 

have i) the right at any time prior to receipt of all the Settlement Funds to declare this Agreement 

null and void, ii) the right to extend this Agreement for any period of time until it receives those 

Settlement Funds, and/or iii) the right to enforce this Agreement against the Party or Pa1ties 

failing to deliver the Settlement Funds, in which event the non-delivering Party or Pmties agree 

to jurisdiction in Federal District Court in the District of Minnesota. Any decision by the FDIC-R 

to extend the terms of this Agreement shall not prejudice its rights to declare this Agreement null 

and void at any time prior to receipt of the Settlement Funds or to enforce the terms of this 

Agreement. In the event the FDIC-R declares this Agreement null and void, the Settling D&Os 

agree to waive any statute of limitations, laches or similar defenses to the FDIC-R's claims 

against them. Should the FDIC-R declare this Agreement null and void it will be in all respects. 

SECTION II. Releases 

A. FDIC-R's Release. Effective upon the payment of the Settlement Funds pursuant 

to Section I, and except as provided in Paragraph Il.F below and except for claims for breach of 

this Agreement, the FDIC-R, solely in its capacity as receiver of the Bank and not in its 

corporate capacity, for itself and its successors and assigns, hereby releases and discharges the 

Settling D&Os, Bruce C. Bennett, Thomas M. Weiner, MichaelS. Hohenwald, Patrick J.Kelly, 

Bruce A.Hendrickson, Randall Bednar, Barry Crawford, Al Steffens, and all other former 

directors, officers, and employees of the Bank, and their respective heirs, legatees, beneficiaries, 

executors, administrators, agents, attorneys, representatives, successors and assigns (collectively 

the 11Releasees"), from any and all claims, demands, contracts, obligations, damages, actions, and 

causes of action, direct or indirect, in law or in equity, known or tmknown, belonging to or that 

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ever did belong to the FDIC-R, that anse from or relate to the Relcasces• performance, 

nonperfotmance, or manner of performance of their respective functions, duties, actions and 

omissions as officers, directors and/or employees of the Bank or its affiliates, including but not 

limited to their actions or failure to act in their respective capacities as directors, officers and/or 

employees of the Bank. This release includes, but is not limited to, any and all claims the FDICR has or ever had against the Releasees under FIRREA, any and all claims for dishonest or 

fraudulent acts, negligence, gross negligence, or breach of fiduciary duty, any and all claims 

arising under any statute or common law, and any and all claims that arise from or relate to the 

Chubb Policy. Claims released herein by the FDIC-R arc referred to as "FDIC Claims." 

B. Settling D&Os' Release. Upon the release granted in Paragraph II.A. above 

becoming effective, and except for claims for breach of this Agreement, the Settling D&Os, on 

behalf of themselves individually and their respective heirs, legatees, beneficiaries, executors, 

administrators, agents, attomeys, representatives, successors and assigns, hereby release and 

discharge the FDIC-R and its employees, officers, directors, agents, representatives, attorneys, 

administrators, successors and assigns, from any and all claims, demands, contracts, obligations, 

damages, actions, and causes of action, direct or indirect, in law or in equity, known or unknown, 

that arise from or re]ate to the Bank or its affiliates or to the perfotmance, nonperformance, or 

manner of perfonnance of the Settling D&Os' respective functions, duties and actions as 

officers, directors and/or employees of the Bank or its aftiliates or that arise from or relate to the 

Chubb Policy; except with respect to any claims which are not released pursuant to Paragraph 

li.F. The Settling D&Os expressly reserve all defenses, rights and claims they have as to the 

FDIC-R with respect to any claims which are not released pursuant to Paragraph Il.f. 

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C. Release of Settling D&Os by Each Other. 

Upon the releases granted in Paragraphs II.A and II.B above becoming effective, and 

except for claims for breach of this Agreement, Settling D&Os and their respective heirs, 

legatees, beneficiaries, executors, administrators, agents, attorneys, representatives, successors 

and assigns, hereby release and discharge each other, and/or any person who may be considered 

an "insured" as defined by the Chubb Policy, from any and all claims, demands, contracts, 

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

unknown, that arise from or relate to the perfonnance, nonperformance, or manner of 

performance of their respective functions, duties and actions as officers, directors and/or 

employees of the Bank or its affiliates. 

D. Release of Chubb by FDIC-R. 

Upon the releases granted in Paragraphs II.A and II.B above becoming effective, and 

except for claims for breach of this Agreement, the FDIC-R, for itself and its successors and 

assigns, hereby releases and discharges Chubb, its parents, subsidiaries, affiliates and reinsurers, 

and its respective employees, officers, directors, agents, attorneys, representatives, successors 

and assigns, from any and all claims, demands, contracts, 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 Chubb l'olicy. The FDIC-R agrees that any interest it may have under tbe Chubb 

Policy shall be extinguished upon the payment of the Settlement Funds as provided in Section I. 

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E. Release of FDIC-R by Chubb. 

Upon the releases granted in Paragraph II.D above becoming effective, and except for 

claims for breach of this Agreement, Chubb, for itself and its successors and assigns, and on 

behalf of its parents, subsidiaries and affiliates, and their successors and assigns, hereby releases 

and discharges the FDIC-R, and its employees, officers, directors, agents, auomeys, 

representatives, successors and assigns, from any and all claims, demands, contracts, obligations, 

damages, actions, and causes of action, direct or indirect, in law or in equity, known or unknown, 

that arise J:i'om or relate to FDIC Claims or the Chubb Policy. 

F Exceptions from Releases. 

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 claims or causes of action: 

a. against the Settling D&Os 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 ("Excluded Obligations"), including without limitation any claims 

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

Bank with respect to such Excluded Obligations, and 

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

in this Agreement, 

c. which are not expressly released in Paragraph II.A. 

2. Notwithstanding any other provision, nothing in this Agreemt::nt shall be 

construed or interpreted as limiting, waiving, releasing or compromising the jurisdiction and/or 

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authority of the FDIC in the exercise of its supervisory and/or regulatory capacities, or to 

diminish its ability to institute administrative enforcement proceedings seeking removal, 

prohibition or any other administrative enforcement action. Notwithstanding any other provision, 

this Agreement does not purport to waive, or intend to waive, any claims which could be brought 

by the United States through the Department of Justice, the United States Attorney's Office, or 

any othe r federal agency. In addition, rhe FDIC-R specifically reserves the right to seek courtordered restitution pursuant to the relevant provisions of the Victim and Witness Protection Act, 

18 U.S.C. § 3663, et. seq., jf approptiate. 

SECTION Ill. Waiver of Dividends and Proceeds from Litigation 

To the extent, if any, that the Settling D&Os are or were creditors or shareholders of the 

Bank, and by virtue thereof are or may be entitled to a dividend, payment, or other distribution 

upon resolution of the receivership of the Bank or proceeds in any litigation that has been or 

could be brought against the United States based on or arising out ot: in whole or in part, the 

closing of the Bank, or any alleged acts or omissions by the FHLBB, OTS, RTC, FDIC, the 

FSLIC Resolution fund or the United States government in connection with the Bank or its 

receivership, they hereby knowingly assign to the FDJC-R any and all rights, tit]es and interest in 

and to any and all such dividends, payments or other distributions, or such proceeds. 

SECTION IV. Termination 

In the event the FDIC-R exercises its right to terminate this Agreement pursuant to 

Section I.B, then, for the purposes of any statute of limitations or other time-based defense to any 

of the claims of the FDIC-R~ the Parties to this Agreement hereby agree that the statute of 

limitations shall be deemed to be extended to 12:59 p.m. on the 301

h day after the FDIC-R 

terminated this Agreement. 

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(b)(6) 

(b)(6) 

(b)(6) 

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SECTION V. Notices 

Any notices required hereunder shall be sent by registered mail, first class, retum receipt 

requested, and may also be sent by email, to the following: 

Ifto the FDIC-R: 

L. Anthony Lehr 

Counsel 

FDIC, Legal Division 

Professional Liability Unit 

Virginia Square, L. William Seidman Center 

3501 Fairfax Drive 

Arlington. VA 22226 

H .... I I 

with a copy to: 

Richard G. Morgan 

Bowman and Brooke LLP 

150 South Fifth Street, Suite 3000 

Minneapolis, MN 55402 

l ........................................... .................................... 

If to Settling D&Os: 

.......................... 1---···········------···············-~---------·---

Counsel for Settling D&Os 

lfto Chubb: 

Nora B. Neary 

Senior Claims Officer 

Specialty Claim Discipline-N011hem Claims 

Chubb Group of Insurance Companies 

Fifth A venue Place 

120 Fifth A venue 

Pittsburgh, P A 15222 

(b)(6) ... ---1 1 

with a copy to Randall M. Lending at the address above. 

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SECTION VI. Representations and Acknowledgements 

A. No Admission of Liability. The undersigned Parties each acknowledge and agree 

that this Agreement and all negotiations, discussions and proceedings in connection with this 

settlement shall not be deemed or constitute an admission by the Settling D&Os of fault, liability 

or wrongdoing as to any facts or claims and shall not be offered or received in evidence or 

otherwise used by any person in any other action or proceeding for any purpose, except in 

connection with a proceeding to enforce this Agreement. There has been no adjudication by any 

court pursuant to which the Settling D&Os have been detetmined to have caused a loss to the 

Bank. The Settling D&Os deny any fault, liability or wrongdoing as to any facts or claims 

alleged or asset1ed by FDIC-R in the FDIC Claims and in any other action or proceeding. 

Payment by Chubb shall not be an admission of coverage. 

B. Execution in Counterparts. This Agreement may be executed in counterparts by 

one or more of the Parties named herein and all such counterpruts when so executed shaH 

together constitute the final Agreement, as if one document had been signed by all Parties hereto; 

and each such counterpart, upon execution and delivery, shall be deemed a complete original, 

binding the Party or Parties subscribed thereto upon the execution by all Patties to this 

Agreement. Signed signature pages may be delivered by facsjmile, e-mail or .pdf transmission, 

which will constitute complete delivery without the necessity of delivery of original signed 

signature pages. 

C. Binding Effect. Each of the undersigned persons represents and warrants that they 

are a Party hereto or are authorized to sign this Agreement on behalf of the respective Pa11y, and 

that they have the full power and authority to bind such Party to each and every provision of this 

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Agreement. This Agreement shall be binding upon and inure to the benetit of the undersigned 

Parties and their respective heirs, executors, legatees, beneficiaries, administrators, affiliates, 

representatives, successors, and assigns. 

D. Choice of Law/Forum. This Agreement shall be interpreted, construed and 

enforced according to applicable tederal law, or in its absence, the laws of the State of 

Minnesota, without regard to conflicts of law rules. Any legal action brought to enforce this 

Agreement shall be brought in the United States District Court for the District of Minnesota, 

unless that Court lacks jurisdiction, in which event, or upon a tina) order determining a Jack of 

jurisdiction, the Patties agree to jurisdiction in the Mitmesota Fourth Judicial District, Hennepin 

County. 

E. Entir~r~emeqt__and Amendments. This Agreement constitutes the entire 

agreement and tmderstanding between and among the undersigned Patties concerning the matters 

set forth herein. This Agreement may not be amended or modified, nor may any of its provisions 

be waived, except by another written instrument signed by the Party or Parties to be bound 

thereby, or by their respective authorized attorney(s) or other represcntativc(s). 

F. S.~~1ic Represent~~ions, Wananties. and Disclairne.(. Each Settling D&O has 

submitted to the FDIC-R a signed and notarized Personal Financial Statement (FDIC Form 

7600/01 ). The Settling D&Os represent that there have ·been no material changes since the 

submission of the signed and notarized Personal Financial Statement, other than as disclosed in 

writing to the FDIC-R before the eftective date of this Agreement. The Parties expressly 

acknowledge that, in determining to settle the claims released herein, the FDIC-R has reasonably 

and justifiably relied upon the accuracy of the Personal Financial Statement and other financial 

information submitted by each Settling D&O to the FDIC-R. 

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If one or more of the Settling D&Os failed to disclose in their Personal financial 

Statement any material interest, legal, equitable, or beneficial, in any asset (each such Settling 

0&0 a "Non-Disclosing Settling D&O"), then each such Non-Disclosing Settling D&O agrees 

to cooperate fully with the FDIC-R to transfer his entire interest in each such asset to the FDIC-R 

and to sign any and all documents necessary to transfer his interest in the asset to the FDIC-R. In 

addition, the FDIC-R, in its sole discretion, may exercise one or more or all of the following 

remedies as to each Non-Disclosing Settling D&O: (a) the FDIC-R may declare the releases 

granted to the Non-Disclosing Settling D&Os to be null and void; (b) the FDIC-R may retain the 

Settlement Funds; and/or (c) the FDIC-R may sue the Non-Disclosing Settling D&O for 

damages, an injLmction, and specific performance for the breach of this Agreement. The Settling 

D&Os agree that each Non-Disclosing Settling D&O consents to the FDIC-R filing suit asserting 

any of the claims that the FDIC-R has against him, agree that any release of such claims in this 

Agreement shall be null and void as to such a suit, and agree to waive any statute of limitations, 

laches or similar defenses to the FDIC-R's claims in such a suit. A Non-Disclosing Settling 

D&O shall not be entitled to offset against any claim of the FDIC-R in such a suit any portion of 

the Settlement Funds paid to the FDIC-R. 

Notwithstanding the FDIC-R's right to exercise the remedies set forth in this Section, the 

releases provided by FDIC-R and the other Settling D&Os to each other, the releases provided 

by FDIC-R to Chubb, and Chubb's releases ofFDIC-R shall remain valid and in effect. 

G. Reasonable Cooperation. The undersigned Parties agree to cooperate in good faith 

to eftectuate all the tenns and conditions of this Agreement. 

H. Time is of the Essence. Time is of the essence with respect to all provisions of 

this settlement agreement, including, but not limited to, the tetms relating to payment. 

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(b)(6) 

(b)(6) 

Page 12 

I. 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. 

J. Title and Captions. AU section titles and captions contained in this Agreement are 

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

K. Authorship/Construction. This Agreement sets forth terms and agreements jointly 

negotiated by the Parties. It is expressly agreed that this Agreement sha ll not be construed for or 

against any Party by reason of which Party drafted it. 

L. Agreement Not Confidential. Pursuant to 12 U.S.C. § 182l(s), this Agreement 

cannot be and shall not be deemed to be confidential. 

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 for Prosperan Bank 

Millicent Kaplan Commonwealth or VIrginia 

Notery Public 

Commission No. 7389422 

My Commission Expl1'8s 6130/2015 

SIGNED AND SWORN TO BEFORE ME 

THIS .2 <J 11.DA Y OF A t/ f:'~-~ , 20 13. 

·-------------- ----------

NOTARY .Pffi~.J:('- · 

~ ... ·· .... ·· 

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(b)(6) ·····················································• 

SIGNED AI'D SWORN TO BEFORE ME 

THIS JQ.~. J>A Y OF 2013. 

NOTAR 

JAMES S. KLOOSlERBOER, an Individual 

Dated: 

SIGNED AND SWOfu'J TO BEFORE ME 

THIS DAY OF ... ____ , 2013. 

NOTARY PUBLIC 

13 
(b)(6) 

(b)(6) 

Page 14 

SCOTT A. JOHNSON, an Individual 

Dated: ___________ _ 

SIGNED AND SWORN TO BFFORE ME 

THIS DAY OF , 2013. 

NOTARY PUBLIC 

SIGNED AND SWORN TO BEFORE ME 

THIS_QQ_DAYOF ~9u.~f ,2013. 

······················································································································································································· '································································································ 

NOTARY PUBLIC 

13 

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(b)(6) 

(b)(6) 

Page 15 

RICHARDT. SANDQUIST, an Individual 

Dated: _______ _ 

SIGNED AND SWORN TO BEFORE ME 

THIS DAY OF , 2013. 

NOTARY PUBLIC 

FEDERAL INSURANCE COMPANY 

J3 y: Chubb & Son, a division offedernl Insuran~ Company, 

Manager 

----- ----

By:.......,.....,. ____ _,. __ __,.,._--~._ 

Name: 

Title: S r: 

SIGNED .AND SWO~EFORE ME . TI-llS .B.i!2_ DAY OF · wnbu)OI3. 

------ J --- I _ 

~~-T --PU l-~I ----------z; --~L 

COMMONWEAlTH OF PENNSYLVANIA · 

Notarial Seil. 

14 

Sharon A. &Jbaa, Notafy PvOiic 

Oty of Pittsbunjh, ~ Coooty 

Mv Commission E~ May l6, 2017 

~ ~YWAIGA ASSOCl.ll'IOII Of JIC'ITAAIES 
. (b)(6) 

Page 16 

R.lCHAlU> T. SA.\IUQUIST, an Individual 

...... !··················· . I . ................................................................... . 

STG~F.O ANn SWORN TO RF.FORF. MF. 

TlllS.£_DAYOF ~em/Qe,c,2013. 

Amanda M. Komro 

(b)(

6

) .......................... 'sr~~rg~~~~~~siN ··············~1=-=-=--=-==-:!~~~----....J--- eJ/...: B /

7 /Ju "fOTARY" PT.fRL£C 

FRDERAL lNSURANCE COMPANY 

By: Chubb & Son, a divisionoffeden1l Insumnce Company, 

M3nagcr 

By: __________ _ 

Nnme: 

Title: 

SlGNF!D A~O SWORN TO RF.FORF. ME 

TI·HS DAY OF , 2013. 

NOTARY PURfJC 

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