SRTTLRMENT AND .RFLJ<:ASE AGIU M~ NT . 

ih 

This Settlement and Rekasc Agreement ("Agrt;cment") is made as of this _j Q day of 

J u1y, 2014, by, between, and arnong the following undersigned parties: 

The Pellerol Deposit Insurance Corpomtion as Rccciwr f<n· United Commercial Bank 

("FDIC-.R"); and 

St. Paul Mercury Insurance Company ("Travelers"), as issuer of financial Institution 

(b)( 4 )--·- I=k·md-No:{-- l(the "Policy'') (individually, the PDIC-R and Travelers may be referred to 

herein as a "Purty" and collectively as the "Parties"). 

I~fi:CITALS 

WHEREAS: 

Prior to November 6, 2009, United Commereiall1ank ("Bank") was a depository 

institution organized and existing Hnder the laws of California. 

On or about September 20, 2009, the Bank provided notice under the Policy of a loss 

involving alleged dishonest and fraudulent activities of Bank officers James Chan ("Chan") and 

~i mon Pang (''Pang"). 

On November G, 2009, the Bank was closed by the California Department of Financial 

Institutions and the Federal. Deposit Insurance Corporation was appointed as RecGivcr for tlle 

Bank. Under 12 U.S.C. § J!Ql(d)> the FDIC-R succeeded to all rights, titles, powers and 

privileges of the Bank, induding those with respect to its assets, including claims under the 

Policy. 

On September I 6, 20 I 0, the FDIC-R submitted a Proof of Loss to Travelers in support of 

a claim under the Policy based on alleged dishonesty by Chan and Pang, who allegedly colluded 

with borrowers and their principals, including Soyo Group·, Inc., causing the Bank to extend 

ISOJ 1713.:1. 
(b )(4) 

(b)(4) 

more than $85 million dollars in loans secured by non-existent or worthless inventory and 

accounts rcccivahk, that caused losses totaling in excess of $80 million (the "Bond Claim"). 

NOW, TIIEKEFORE, in consideration of the promises, undertaki ngs, payments, and 

relca<;es stated herein , the sufficiency of which consideration is hereby acknowledged, the 

undersigned Pm1ics agree, each with the other, as follows: 

SJ1:CTION 1: Payment to FDIC-.R 

A. The Recitals ahove arc incorporated here in hy reference. 

n. As an essential covenant and condition of this Agreement, Travelers agrees to pay 

to the FDI C~ R the sum o f $6.3 million (the "Settlement Funds"). 

C. Not la ter than fourteen business days following the execution of a signed original, 

or signed originals in counterpart, ofthis Agreement by the undersigned Parties to this 

Agreem<.;nt (the "Payment Due Date"), the Settl ement Funds shall be delivered to the FOT R hy 

direct wire transfer into the llowin~ designated account: 

BANK: Federa l Home Loan Bank ofNcw York 

.. ROU:f.lNG#·d ·· I 

FOR CREDIT TO: FDlC National Liquidation Account 

AC .OUN ~ ... #:l .. I 

ORr: FIN 10147; United Commcrcial 13ank, San Francisco, CA, Contact: Michael R. Duncan 

(972) 761 -S 112; FDIC as Rect;ivcr fo r United Commerc ial Bank Travelers Bond Claim 

Settlement. 

D. In ~ event that the Settlement Funds a rc not delivered in full to the FDIC-R hy 

the Payment Due Da te, interest shall accrue on all unpaid amounts at the compound rate of 5% 

per annum from sucb date until the date of payment in full. 

E. In addition, in the event that all Sdtlcment Funds arc not received hy the fDIC-R 

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

2 

1SOJ1 71U 
prior to receipt of all Settlt:mcnt Funds (including all accrued interest) to declare this Agreement 

null and void, shall have the right to extend this Agreement for any period of time until it 

receives all Settlement Funds (including all accrued interest), and/or shall have the right to 

enforce this Agreement against Travelers, which agrees to pay all the FDIC-R's reasonable 

attorneys' fees expended in enforcing Travelers' obligation to pay the Settlement Funds or any 

part ofthcrr1. Any decisi on by the FDTC-R to extend the terms of this J\grccmcnt or to accept a 

portion of the Settlement Funds shall not prejudice the f'DIC-R's rights to declare this 

1\grccmenl null and vo id if it does not receive all of the Settlement Funds by the Payment Due 

Oatc or to enforce the terms of this Settlement Agreement; provided however, that in the event 

the FDIC-R declares this Agreement null and void, the FDJC-R will return all amounts paid to it 

under this Agreement by Travelers. 

SECTION II: Releases 

A. R.~lcasc fT~a.ve lcrs by I:'J)JC-R. 

EfTcctivc upon its receipt of the Settlement Funds, together with any accrued inkrest (as 

specifi ed in Section J.D. above), the FDJC-R hereby releases and discharges Travelers, its 

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 acts or 

omissions described in the Bond Claim and Travelers' handling, investigation, and adjustme nt of 

same. 

B. Rd~.: a~ __ c of FDIC-R by_Travelcrs. 

Effective simultaneously with the release granted in Paragraph I I.A. above, Travelers, for 

itself and its successors and assigns, and on beha lf of its parents, subsidiaries, affiliates and 

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

and assigns, hereby releases and discharges the FDJC-R and its employees, officers, directors, 

3 IS1!3 l'/13:l 
agents, representatives, attomeys, successors and assigns from any and all claims, mand~. 

obligations, damages, actions, and causes of action, dit .. eet or indirect, in law or in equity, that 

arise from or relate to acts or omissi on:-; descri bed in the Bond Claim. 

C. Calif01:nia Civii _Cotk § 1542 Rckasc ~ 

The parties hereby acknowledge their familiarity with the provisions of Section 1542 of 

the California Civil Code and hereby expressly wa ive and release any rights or benefits they 

have or may have thereunder. Section 1542 of the California Civil Code provides: 

"A general rdcase docs not extend to claims which the creditor 

docs not know or SlJSpcct to exist in his favor at the time of 

executing the release, which if known by him must have materially 

affected his settlement with the debtor. " 

D. .&.rrt<;.ss Reserv tio .frpm R. eases. 

1. Notwithstanding any other provision, by this Agreement, the FDIC-R docs 

not release, and expressly preserves rully and to the same extent as if the Agreement had not 

heen executed, any claims or causes of action: 

a. against any person or entity fur liability) if any, incurred as the . 

maker, endorser or guarantor of any promissory note or indebtedness payable or owed by them to 

the F1 )JC-R, the Hank, other financial institutions, or any other person or entity, including 

without limitation any daims at:quired by the fDIC-R as successor in interest to the Bank or any 

person or entity otht.;r than the Bank ; 

b. against any pr.:rson or entity not expressly released in this 

Agreement; 

c. against Travelers fur any other losses, claims, demands, 

obligations, damages, actions and causes of action, din:cl or indirect, in law or in equity, aside 

4 150~ 72.'-2 
from those arising from the 13ond Claim, for which coverage may be provided under any other 

Travelers insurance policy issued to the l3ank; and 

d. that are no t expressly released in Section IT.A. and ll .C above. 

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

Agreement shi:!ll he constr@d or interpreted as limiting, waiving, releasing, or compromising the 

jurisdiction and authority of the fedcral 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 scek pursuant to its supervisory or reg ulatory authority against any person. 

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.Tustice, the United States Attorney's Office for any fedcral 

j udicial district, or any other dcpatiment or agency of the United Slates as defined by 18 U.S. C. § 

6. Tn addition, the PDIC-R specifically reserves the right to seck court-ordered restitution 

pursuant to the relevant provisions of the Mandatory Victims Restitution Act, 18 lJ.S.C. §§ 3322 

and 3603 et, .seJL., if appropriate. 

SECTION Ill: Additional Covenants 

A. ;\ssig ~nt. The FDJC-R hereby aqsigns and transfers to Travelers, its 

successors and assigns, for their usc and benefit, all rights, claims und actions that the FDJC-R 

may have against Chan and Pang based upon or arising fi·om act-; or omissions described in the 

Bond Claim, limited to the extent of the amount of the ~cttlemcnt Punds. Excluded from the 

scope of this assignment arc any rights, claims and actions that the FDIC-H. may have that would 

compensate thc FDJC-R for any losses arising from the Bond Claim that are not covered by the 

Policy or that arc in excess of the Settlcment Funds. 

5 

1503 1723.2 
B. Confidential l\1.,1!tcrials. Travelers may retain possession of any and all documents 

produced to it hy the Bank and/or the FDIC-R in connection with the Bond Claim; however, 

Travelers shall not puhlish such documents or disclose them to any other person except as may 

be necessary in connection with any claim Travelers may pursue pursuant to the assignment in 

Section III.A and Traveler's shall continue to treat such documents as confidential. Upon the 

conclusion of any claim that Travelers may ptlrsue pursuant to the assignment in Scctionlll.A., 

or .ifTravclcrs decides not to pursue such a claim, Travelers shall continue to treat such 

documents and all in formation in or dcri vcd from such documents as con fidcntial and shall not 

disclose that information except as may be necessary in the ordinary course of Travelers' 

business to its rc-insmcrs, auditors and accountants or regulators (and counsel for such entiti es). 

SI!:CTJON IV: Representations and Acknowledgments 

t\. No .c\drnission ofJjability. The undersigned Parties each acknowledge and agree 

that the matters set forth in thi:> Agreement constitute the settlement and compromise of a 

disputed claim, and that this Agreement is not an admission or evidence of liability hy either of 

them regardin~ any claim nor is it intended to be, nor shall it be construed as, an interpretation of 

the Policy or any other insurance policy. This Agreement and its negotiation shall not he used as 

evidence, or in any other manner, hcfore any court or any proceeding to create, prove, or 

interpret the obligations or alleged obligations of Travelers under the Policy to any Party or non~ 

party to this Agreement~ provided, however, the Parties may use the Agreement in any manner as 

may be necessary to enforce the terms of the Agreement and/or to cstabJ ish the fact of payment 

by Travelers to the FDIC~R. 

B. Coonerali vc Q~a.fting . The Parties to this .1\!,rreemcnt have participated jointly in the 

negotialion and preparation of this Agrccm.cnl. Accordingly, each Party agrees not to assert that 

the other Party is the sole or principal drafler of the Agreement. The Parties also agree not to 

6 

ISOJ 172J 1 
assert that any canon of construction applicable to sole or principal drafters should be applied 

against any Party. 

C. Execution in CQtmlerparts. This Agreement may be executed in cotmterpar1s hy 

one or more o fthc Parties named herein and all such counterparts when so executed shall 

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

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

binding the party or parties subscribed thereto upon the execution by a ll parties to this 

Agreement. 

D. J;3hgling EffCct. Each of the undersigned persons represents and warrants that he 

or she is duly authorit..cd to sign this Agreement on behalf of the respective Party, and has the 

full power and authority to hind such Party to each and e very provision of this Agreement. This 

Agreement shall be binding upon and inure to the benefit of the undersigned P a11ies and their 

respective heirs, executors, administrators, representatives, directors, oflicers, employees, agents, 

attorneys, successors and assigns. 

E. No Confi.dcntiality. The undersigned Parties acknowledge that this Agreement 

shall not be confidential and will be disclosed pursuant to the Fedcml Deposit rnsurance 

Corporation's applicable policies, procedures, and other legal requirements. 

F. Ccmstruction. The descriptive headings of this Agreement are for convenienee 

only and shall not affect the construction or interpretation of this Agreement. 

G. ~9tic.c~, Ir any Party gives notice to another Party under this Agreemen t, such 

notice shall be (i) delivered personally, (ii) sent by Pedcral Express (or another recognized 

overnight or two-day courier) requesting next or second business day delivery, or (iii) sent by 

United States certified or registered mail, postage prepaid, rclurn receipt requested. Any such 

7 15031723.2 
notice shall be deemed given when (i) so delivered personally, (ii) if sent hy express courier, one 

or two business days (as the case may be) following delivery to the courier, or (iii) if sent hy 

certified or registered mail, three business days after the date of deposit in the United States mail 

to the respecti vc address of the Party as set forth below: 

If to the FDIC-R: 

and 

If to Travelers: 

and 

Andrew Nicely 

Counsel 

Federal Deposit fnsurance Corporation 

350 l North Fairfax Drive 

Arlington, VA 2222G 

Telephone: (703) 516-5729 

Kathleen M. Balderston 

Nixon Peabody LLP 

4 3 7 Madison A venue 

New York, NY 1 0022 

. relephonc: (212) 940-304 1 

Robert Flowers 

2d Vice President 

Travelers 

One Tower Square/S 104 

Ilartford, CT 

Telephone: (860) 277-7632 

Fax: (860) 277-5722 

Lynda Jen~cn 

Claims Counsel 

350 Granite Street, Suite 1201 

Braintree, MA 02184-3965 

Telephone: ('lS I) 81 7-8453 

Fax: (866) 833-3197 

or to such other address as the recipient Party has speci f'icd by prior written notice to the sending 

Party (or in the case of counsel, to such other rcadi! y asce rtainable business address as such 

counsel may hereafter maintain). Tf more than one method fclf sending notice as set forth above 

is used, the earliest no tice date established as set forth above shall control. 

IS03177U 
H. Choice of La~ This Agreement shall be interpreted, construed and enforced 

according to applicabk. federal Jaw, or in its absence, the laws of the State of California. 

T. )~:ntirc Agr~cment apd. A rncnd!:g~nt~ This Agreement constitutes the entire 

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

set forth herein. This Agreement may not be amended or modified except by another written 

instrument signed by the Party or Parties to be bound thereby, or by their respective authorized 

attorncy(s) or other representative(s). 

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

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

Date: J.Ji~._f.D__ _. , 2014 

Date: - - - · .• 201 4 

1503112.1 ]. 

l,.EDERAL DEPOSIT INSURANCE CORPORATJON 

AS RECEIVER FOR UNITED COMMERCIAL BANK 

By: . /l ::=:: 

Title: e_'t ~ _ _; . _ !_·---. -. 

Print Name: ... _A_ •'1M!_ A· f\il~tl¥-- · - - · _ _ 

ST. PAlfl. MERCURY INSURANCE COMPANY 

By: 

Ti tle: 

Print Name: 

4 

9 

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

H. 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 California. 

I. Entire Agreement and Amendments. This Ag1·eement constitutes the entire 

agreement and understanding between and among the undersigned parties conceming the matters 

set fmth herein. This Agreement may not he amended or modified except hy another written 

instrument signed by the Party or Patties to be bound thereby, or by their respective authorized 

attorncy(s) or other rcprcscntativc(s). 

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

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

Date: ____ ,2014 

1195189.1 

FEDERAL DEPOSIT INSURANCE CORPORATION 

AS RECEIVER FOR UNITED COMMERCIAL BANK 

Dy: 

Title: ---------- ----

Print Name: 

ST. PAUL MERCURY INSURANCE COMPANY 

9