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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