Exhibit 10.4

 

CASE NO. 01-06-00798-CV

 

IN THE FIRST COURT OF APPEALS
HOUSTON, TEXAS

 

Timothy J. Blair, Class Representative, and
FCLT Loans Asset Corporation
Appellant

 

v.

 

FirstCity Financial Corporation
Appellee

 

On Appeal from the 152nd Judicial District Court
Harris County, Texas
Trial Court Cause No. 2005-04492

 

MEDIATOR’S PROPOSAL
CONFIDENTIAL

 

NOT TO BE FILED WITH THE COURT UNLESS ACCEPTED

 

I, Michael S. Wilk, as mediator appointed by the Court of Appeals for the First
District for the State of Texas (“Appellate Court”) and agreed to by the FCLT
Loans Asset Corporation (“FCLT”), FirstCity Financial Corporation (“WACO”),
Timothy J. Blair, Class Representative of former employees of FirstCity
Bancorporation of Texas, Inc. (“Employees”), and JP Morgan Chase Bank, N.A.,
successor trustee, (“Trustee”) hereby propose that the lawsuit above referenced
presently pending be settled pursuant to the following terms and conditions:

 

1.          The parties will act together in advising the Appellate Court of the
settlement and requesting that the Appellate Court refrain from ruling until the
settlement process has been completed, including the District Court’s approval
or disapproval of the settlement.

 

2.          The settlement would be in two payments, one payment before the
Appellate Court rules and the second and final payment after the Appellate Court
rules. The Parties and their able counsel will cooperate with each other to
determine and agree to the procedure to be followed since the Appellate Court
has jurisdiction and District Court’s approval to the settlement is necessary.
If the District Court does not approve the settlement the parties will be
restored to their current positions, without prejudice.

 

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3.          If the District Court approves the settlement, the District Court’s
Order will contain appropriate provisions approving the settlement, authorizing
the Trustee to make the first payment, the second and final payment and
releasing and discharging of the Trustee.

 

4.          The first payment would be made by the Trustee as soon as possible
after the District Court’s Order approving the settlement becomes final and
non-appealable.

 

5.          The first payment would be in the amount equal to 75% of the total
funds available (the total funds being approximately $18,600,000, less expenses
and reserves, if any). The payment would be paid 1/3rd of 75% amount each to
FCLT, WACO and the Employees.

 

6.          The second and final payment would be made as follows:

 

A.     If WACO’s trial court judgment is affirmed by the Appellate Court, the
Trustee would pay to WACO the balance of the amount held by the Trustee, less
final expenses.

 

B.      If WACO’s trial court judgment is not affirmed by the Appellate Court
(i.e., the judgment is reversed and remanded or reversed and rendered for either
FCLT or the Employees or otherwise not affirmed), the Trustee would pay the
balance of the amount held by the Trustee, less final expenses, 1/3rd of such
balance each to WACO, FCLT and the Employees.

 

The result would be that if WACO’s trial court judgment is affirmed the fund
would be shared 50% to WACO, 25% to FCLT and 25% to the Employees. If WACO’s
trial court judgment is not affirmed the fund would be shared 33.3% to WACO,
33.3% to FCLT and 33.3% to the Employees.

 

7.          No party could appeal from the ruling by the Appellate Court.

 

8.          Each party will pay their own attorney’s fees and costs incurred in
the litigation.

 

9.          Appropriate mutual releases would be executed by the parties to this
litigation (with the members of the Class Action being handled pursuant to the
applicable rules).

 

10.        Counsel for WACO, FCLT, the Employees and the Trustee shall work
together to prepare formal settlement documents for execution by all parties by
December 31, 2008. The formal settlement documents will be executed prior to,
but subject to, approval by the District Court.

 

11.        If all parties accept this proposal, the proposal shall become a
mediation settlement agreement (the “Agreement”). If any dispute arises in
connection with the formal settlement documents or with regard to the
interpretation and/or performance of the

 

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Agreement, of any of its provisions, the parties agree to schedule a full day
mediation with the Mediator to resolve the disputes and to share the costs of
same equally.

 

12.        The parties hereby acknowledge as follows:

 

(a)           The mediator is not the attorney of any party; and

 

(b)           They have been advised by their respective attorney with regard to
this Agreement.

Please indicate you acceptance or rejection of the Proposal by indicating your
decision below.

 

 

 

 

 

 

FCLT:

Yes:

 

No:

 

 

 

 

 

 

WACO:

Yes:

 

No:

 

 

 

 

 

 

Employees:

Yes:

 

No:

 

 

 

 

 

 

Trustee:

Yes:

 

No:

 

 

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