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					                                                                       FILED
                                                                       IN THE SUPREME COURT
                                                                       OF TEXAS
                                                                       11 September 13 P6:44
                                                                        BLAKE. A. HAWTHORNE
                                                                       CLERK
                          NO. ____________________

________________________________________________________________________

                  IN THE SUPREME COURT OF TEXAS
________________________________________________________________________

                    In re F.C. HOLDINGS, INC. ET AL.
_______________________________________________________________________

                        Original Proceeding from the
                   Twelfth Court of Appeals in Tyler, Texas
                            No. 12-10-0424-CV

                        Trial Court Cause No. 10-0043
________________________________________________________________________

                  PETITION FOR WRIT OF MANDAMUS
________________________________________________________________________



                                          Dan Hartsfield
                                          Texas Bar No. 09170800
                                          dan.hartsfield@jacksonlewis.com
                                          Katrin U. Schatz
                                          Texas Bar No. 00796284
                                          schatzk@jacksonlewis.com
                                          Jackson Lewis LLP
                                          3811 Turtle Creek Blvd., Suite 500
                                          Dallas, Texas 75219-4497
                                          PH: (214) 520-2400
                                          FX: (214) 520-2008

                                          ATTORNEYS FOR RELATORS
                                          F.C. HOLDINGS, INC. ET AL.




Oral Argument Requested
                    IDENTITY OF PARTIES AND COUNSEL

RELATORS/DEFENDANTS:                    COUNSEL FOR RELATORS:

F.C. Holdings, Inc.                     Dan Hartsfield, Esq.
First Community Bank, N.A.              Texas Bar No. 09170800
Nigel Harrison                          dan.hartsfield@jacksonlewis.com
JLL Associates FCH, L.P.                Katrin U. Schatz
JLL Associates G.P. FCH, L.L.C.         Texas Bar No. 00796284
JLL Partners Fund FCH, L.P.             schatzk@jacksonlewis.com
JLL Partners Fund IV, L.P.              Jackson Lewis LLP
JLL/FCH Holdings I, L.L.C.              3811 Turtle Creek Blvd., Suite 500
                                        Dallas, Texas 75219-4497
                                        PH: (214) 520-2400
                                        FX: (214) 520-2008

RESPONDENT:

The Honorable Mark Calhoon,
349th Judicial District Court
Houston County Courthouse
401 East Houston Ave.
Crockett, Texas 75835

REAL PARTY IN                           COUNSEL FOR REAL PARTY IN
INTEREST/PLAINTIFF:                     INTEREST:

Don Reavis                              Susan Hays
                                        Texas Bar No. 24002249
                                        hayslaw@me.com
                                        Godwin Ronquillo, P.C.
                                        1201 Elm Street, Suite 1700
                                        Dallas, Texas 75270
                                        PH: (214) 939-4424
                                        FX: (214) 432-8273

                                        Jim Parsons
                                        Texas Bar No. 00000065
                                        jparsons@jimparsons-law.com
                                        Law Offices of Jim Parsons
                                        1007 N. Mallard
                                        Palestine, Texas 75801


                                   ii
  PH: (903) 723-0580
  FX: (903) 723-0580

  and

  Michael C. Dodge
  Texas Bar No.: 05937000
  mdodge@gpm-law.com
  Glast, Phillips & Murray, P.C.
  14801 Quorum Dr., Suite 500
  Dallas, Texas 75254
  PH: (972) 419-7172
  FX: (972) 419-8329




iii
                                            TABLE OF CONTENTS


INDEX OF AUTHORITIES ............................................................................................... v

I.    STATEMENT OF THE CASE ................................................................................. vii

II.   STATEMENT OF JURISDICTION ........................................................................viii

III. ISSUES PRESENTED ............................................................................................. viii

IV. STATEMENT OF FACTS ......................................................................................... 1

V.    ARGUMENT .............................................................................................................. 5

         A.       Summary of Argument .................................................................................. 5

         B.       Standard of Review ....................................................................................... 6

         C.       A Valid and Enforceable Arbitration Agreement Governs This Dispute. .... 6

                       1.      The Employment Agreement‘s Arbitration Clause Is Valid and
                               Uncontested. .................................................................................... 7

                       2.      The Arbitration Agreement Covers All Claims. ............................. 7

                       3.      Reavis Expressly Agreed to Arbitrate His Claims and Abate the
                               Court Action. ................................................................................... 8

         D.       The Trial Court Abused Its Discretion by Failing to Compel Arbitration. ... 8

                       1.      Respondent Had a Duty to Enforce the Parties‘ Rule 11
                               Agreement to Arbitrate and Abate. ................................................. 8

                       2.      Respondent Had a Duty to Stay Proceedings and Determine the
                               Motion to Compel Arbitration Without Delay. ............................. 10

         E.       The Trial Court Abused Its Discretion by Directing Relators to Respond
                  to Merits Discovery While a Motion to Compel Arbitration Was
                  Pending. ....................................................................................................... 11

         F.       The Trial Court Abused Its Discretion by Imposing Discovery Sanctions. 13

VI. CONCLUSION AND PRAYER............................................................................... 14




                                                               iv
                                          INDEX OF AUTHORITIES

                                                 FEDERAL CASES

                                                                                                                    Page(s)
Circuit City Stores, Inc. v. Adams,
   532 U.S. 105 (2001) ....................................................................................................... 6

                                                   STATE CASES
Cantella & Co. v. Goodwin,
  924 S.W.2d 943 (Tex. 1996) (per curiam) ..................................................................... 8

Fortis Benefits v. Cantu,
   234 S.W.3d 642 (Tex. 2007) .......................................................................................... 9

GTE Comm. Sys. Corp. v. Tanner,
  856 S.W.2d 725 (Tex. 1993) ........................................................................................ 13

In re Champion Techs., Inc.,
    173 S.W.3d 595 (Tex. App.—Eastland 2005, orig. proceeding) ................................. 12

In re F.C. Holdings, Inc.,
    No. 12-10-00424-cv, 2011 Tex. App. LEXIS 7107 (Tex. App.—Tyler Aug. 31,
    2011, orig. proceeding) ................................................................................................ vii

In re Houston Pipe Line Co.,
    311 S.W.3d 449 (Tex. 2009) ........................................................................ 6, 11, 12, 13

In re Kaplan Higher Educ. Corp.,
    235 S.W.3d 206 (Tex. 2007) .......................................................................................... 8

In re MHI P’ship, Ltd.,
    7 S.W.3d 918 (Tex. App.—Houston [1st Dist.] 1999, orig. proceeding) .................... 13

In re Next Fin. Group, Inc.,
    271 S.W.3d 263 (Tex. 2008) (per curiam) ..................................................................... 6

In re Oakwood Mobile Homes, Inc.,
    987 S.W.2d 571 (Tex. 1999) .......................................................................................... 7

In re Shredder Co.,
    225 S.W.3d 676 (Tex. App. —El Paso 2006, orig. proceeding) ................................. 12




                                                               v
In re Weekley Homes, L.P.,
    180 S.W.3d 127 (Tex. 2005) .......................................................................................... 7

In re Weekley Homes, L.P.,
    295 S.W.3d 309 (Tex. 2009) .......................................................................................... 6

J.M. Davidson, Inc. v. Webster,
   128 S.W.3d 223 (Tex. 2003) .......................................................................................... 6

Jack B. Anglin Co. v. Tipps,
   842 S.W.2d 266 (Tex. 1992) ........................................................................................ 12

Meyer v. WMCO-GP, LLC,
  211 S.W.3d 302 (Tex. 2006) ...................................................................................... 7, 8

Universal Computer Sys., Inc. v. Dealer Solutions, L.L.C.,
   183 S.W.3d 741 (Tex. App. – Houston [1st Dist.] 2005, pet. denied)................... 11, 12

                                                FEDERAL STATUTES

9 U.S.C. § 3 ....................................................................................................................... 10

                              STATE CONSTITUTIONS AND STATUTES

Texas Constitution, Article V, Section 3 .......................................................................... viii

Tex. Civ. Prac. & Rem. Code Ann. § 171.001(a)(1) ........................................................... 9

Tex. Civ. Prac. & Rem. Code Ann. § 171.025(a)................................................................ 9

Tex. Gov. Code Ann. §22.002 .......................................................................................... viii

                                                        RULES

Tex. R. Civ. P. 196.3 ....................................................................................................... 4, 9

Tex. R. Civ. P. 11 ................................................................................................................ 9




                                                                  vi
                                     I.     STATEMENT OF THE CASE

           The underlying proceeding involves a dispute over the terms of an employment

agreement between Relator F.C. Holdings, Inc. (―F.C. Holdings‖) and Real Party in

Interest Don Reavis (―Reavis‖). Although the agreement contains an arbitration clause,

Reavis filed suit for damages in the 349th Judicial District Court of Houston County,

Texas, against F.C. Holdings, along with its former chief executive, bank subsidiary,

majority shareholder and several affiliated entities.1 He asserts breach of contract and

other claims to recover benefits under the employment agreement.

           Relators seek relief from the Honorable Mark Calhoon‘s December 10, 2010,

order compelling Relators to answer Reavis‘s pre-arbitration merits discovery requests

and imposing discovery sanctions, which the trial court entered after Relators filed a

motion to compel arbitration and the parties executed a Rule 11 agreement to arbitrate

and abate the court action. (App. Tab A at 1-2.)2 Relators previously sought relief from

the Twelfth Court of Appeals in Tyler, Texas, on December 20, 2010, without oral

argument, together with Relators‘ motion for temporary relief. (App. Tab C at 32.) On

January 3, 2011, the court of appeals temporarily stayed proceedings in the trial court.

On August 31, 2011, the Twelfth Court of Appeals denied Defendants‘ petition in a final

order and opinion authored by Chief Justice Worthen. (App. Tab C at 32-33.); In re F.C.

Holdings, Inc., No. 12-10-00424-cv, 2011 Tex. App. LEXIS 7107 (Tex. App.—Tyler




1
    All Defendants in the underlying action are Relators in this proceeding.
2
    The Appendix is cited as ―App.,‖ with reference to the corresponding Tab and page number.


                                                           vii
Aug. 31, 2011, orig. proceeding), attached in Tab D of the Appendix in support of

Relator‘s petition. Justices Griffith and Hoyle also participated in the decision.

                       II.   STATEMENT OF JURISDICTION

       This Court has jurisdiction to grant this petition under Article V, Section 3 of the

Texas Constitution and Section 22.002 of the Texas Government Code.

                              III.   ISSUES PRESENTED

       1.     Whether Respondent abused his discretion by failing to compel arbitration

where a valid and enforceable arbitration agreement covered the entire dispute and the

parties had executed an enforceable Rule 11 agreement to arbitrate and abate the trial

court proceedings.

       2.     Whether Respondent abused his discretion by compelling responses to

merit discovery while a motion to compel arbitration was pending and after the parties

had executed an enforceable Rule 11 agreement to arbitrate and abate court proceedings.

       3.     Whether Respondent abused his discretion by sanctioning Relators for

objecting to merit discovery while a motion to compel arbitration was pending.




                                            viii
                                  IV.     STATEMENT OF FACTS

          Reavis is a former Branch President of First Community Bank. (App. Tab N at

205, Ex. 1.)3 On April 27, 2007, Reavis and F.C. Holdings signed an employment

agreement, which contained an arbitration provision stating, in relevant part:

                  11. Arbitration. Any unresolved dispute or controversy
                  arising under or in connection with this Agreement . . . shall
                  be settled exclusively by arbitration . . . . A decision of the
                  arbitration panel shall be final and binding. . . .

(Id. at 213.) Despite this provision, Reavis filed suit in the 349th Judicial District in

Houston County, Texas, on February 9, 2010. (R. Tab A at 1.)4 He asserted counts for

breach of contract, specific performance, common law fraud, conspiracy to commit

tortious interference with contract, and conspiracy to violate the Bank Holding Company

Act of 1956. (Id. at 8, 10, 11, 12.) On November 18, 2010, Reavis amended his petition

to drop the last count. (App. Tab N at 188, 200-01.)

          At the heart of each of Reavis‘s claims is his allegation that he was entitled to

participate in a bonus plan and a stock option plan under Section 2 of the employment

agreement. (Id. at 191-92, ¶¶ 14, 15.) Thus, the operative disputes in this case are the

interpretation and meaning of the employment agreement and whether Relators had

breached its terms. (Id.) Reavis has not contested the validity of the employment

agreement.

          On June 7, 2010, Reavis served requests for admission and requests for production

on all Relators, seeking discovery regarding F.C. Holdings‘ stock option plans, option

3
4
    The Record is cited as ―R.,‖ with reference to the corresponding Tab and page number.


                                                     1
grants, and stock ownership. (App. Tab I at 75-86.) On June 21, 2010, before expiration

of Relators‘ deadline to respond, Relators moved to compel arbitration. (R. Tab E at

148.)   Two days later, Reavis served another round of discovery requests on F.C.

Holdings, First Community Bank, N.A., and Nigel Harrison, now seeking discovery

concerning the valuation of F.C. Holdings‘ stock. (App. Tab I at 87-106.) Both the June

7 and June 23 discovery requests relate directly to questions of liability and damages and

thus go to the merits of the case.

        On July 6, 2010, the parties entered into a Rule 11 letter agreement to mediate.

(App. Tab E at 41-42.) The July 6 agreement also specifically stayed Relators‘ obligation

to ―answer or object to any of [Reavis‘s] outstanding discovery‖ until seven days before a

hearing on the motion to compel arbitration is conducted. (Id. at 41) (emphasis added).

The agreement specifically set out the pending discovery as the June 7 and June 23

requests. (Id.)

        When mediation failed to resolve the matter, the motion to compel was set for

hearing on November 12, 2010.        (App. Tab I at 70, ¶ 2.)     On October 22, 2010,

Relators—now represented by new counsel—filed an amended motion to compel

arbitration and to abate the proceedings under both the Federal Arbitration Act (―FAA‖)

and the Texas General Arbitration Act (―TGAA‖). (R. Tab G at 162.) Reavis has never

responded to either the original or the amended motion.

        Eight days before the scheduled hearing, on November 4, 2010, Relators served

Reavis with objections to his June 7 and June 23 discovery requests. (App. Tab H at 50.)

The same day, Relators also filed a motion for protective order. (App. Tab I at 69.) In


                                            2
both their objections and motion, Relators argued that they were not obligated to answer

merit discovery, beyond objections, while their motion to compel arbitration was

pending. (App. Tab H at 53-54, 59-60, 64-66; Tab I at 71-73, ¶¶ 7-11.)

       Also on November 4, 2010, the parties resolved the arbitration question—and, by

extension, any discovery issues—by entering into a one-sentence Rule 11 agreement.

(App. Tab F at 46.) In its entirety, the November 4, 2010 agreement states: ―The parties

agree that the Reavis v. F.C. Holdings, Inc. et al. case (Cause No. 10-0043) will be

resolved through arbitration and that the Reavis case will be abated pending the

arbitration.‖ (Id.)

       The November 4 agreement also included a transmittal letter from Relators‘

counsel. (Id. at 45-46.) The letter explained that, given the parties‘ agreement, Relators

would pass the hearing, prepare an order referring the case to arbitration, and withdraw

the motion for protective order. (Id. at 45.) As to discovery, the letter stated: ―I will . . .

gather and produce the documents you have requested in the context of arbitration.

While some may need to be produced under a confidentiality agreement/order, I will

honor your existing discovery requests and you don‘t need to send new ones.‖ (Id. at 45-

46) (emphasis added.)

       Reavis‘s counsel signed the agreement on November 4, 2010, adding the notation

―see attached letter from me setting out amending Plaintiff‘s Petition – JP.‖ (Id. at 46)

This attached letter reiterated the parties‘ agreements to ―[a]rbitrate [sic] the above cause

through arbitration,‖ to execute an ―Agreed Order referring the cause to arbitration and

abating the cause pending arbitration,‖ and to pass the November 12 hearing. (App. Tab


                                              3
G at 47.) The letter also noted Reavis‘s intent to amend the petition. (Id.) Regarding

discovery, it stated, ―You will produce in accordance with outstanding discovery we have

sent as set out in the prior Rule 11 without objection but upon confidentiality if requested

by you.‖ (Id.) Reavis did not request a countersignature, and Relators provided none.

       Both parties separately filed the November 4 Rule 11 agreement with the trial

court, indicating their mutual desire to be bound. (App. Tab F at 43; App. Tab G at 47.)

Based on their agreement, Relators cancelled the November 12 hearing on the motion to

compel arbitration and abate proceedings.        (App. Tab J at 107.)        Thereafter, in

anticipation of arbitration and in that stated context, Relators produced documents to

Reavis on November 17, 2010. (App. Tab F at 45, App. Tab K at 109-10.)

       Yet, on November 23, 2010, Reavis filed a motion to compel discovery, arguing

that Relators had not substantively answered all his June 7 and June 23 merits discovery

requests and had not properly organized the documents under Texas Rule of Civil

Procedure 196.3. (See App. Tab L at 114-15, ¶¶ 13, 15.) He set his motion to compel for

hearing on December 10, 2010, along with Relators‘ discovery objections. Relators, in

turn, re-set their motions for protective order and to compel arbitration for hearing at the

same time. (App. Tab B at 7:7 to 8:4.)

       At the December 10 hearing, Reavis‘s counsel conceded that Relators had since

organized the document production to his satisfaction. (Id. at 14:12-21.) The remaining

issue under the motion to compel discovery was thus whether, notwithstanding their

objections and the November 4 agreement to arbitrate and abate, Relators could be




                                             4
compelled to provide substantive responses to requests for admission and to produce still

more documents. (App. Tab B at 14:21 to 15:3, 16:11-14.)

      Rather than refer the case to arbitration and abate the action, Judge Calhoon

granted Reavis‘s motion to compel, denied Relators‘ motion for protective order, and

ordered Relators to answer all pending discovery requests fully and substantively. (App.

Tab A at 1-2, App. Tab B at 28:12-15.) He also issued discovery sanctions against

Relators for resisting merits discovery. (App. Tab A at 1-2, App. Tab B at 28:12-15.)

Having compelled discovery on the merits, Judge Calhoon then deferred a ruling on

Relators‘ motion to compel arbitration and stay the action until Relators demonstrated

compliance with the discovery order. (App. Tab B at 28:15-21.)

                                   V.    ARGUMENT

A.    Summary of Argument

      Texas trial courts have a clear statutory mandate to enforce valid arbitration

agreements without delay. Both the FAA and the TGAA impose a stay on proceedings,

including merits discovery and motions related to merits discovery, once a party raises

the issue of arbitrability. This Court has stated unequivocally that, when arbitrability is

disputed, a trial court lacks authority to order pre-arbitration discovery on the merits

while a motion to compel arbitration is pending.

      If a trial court abuses its discretion by ordering discovery on the merits when a

party challenges a request to compel arbitration, it certainly also lacks discretion to

require merits discovery when no such challenge is ever made. Here, it is undisputed that

the parties agreed to arbitrate and stay the court proceeding. Respondent‘s decision to


                                            5
continue the case and defer the motion to compel arbitration in order to compel discovery

on the merits is contrary to settled law and undermines the very purpose of arbitration: to

provide an efficient and cost-effective litigation alternative.

B.     Standard of Review

       Mandamus relief is appropriate to correct a clear abuse of discretion or the

violation of a duty imposed by law when there is no other adequate remedy at law. See

In re Weekley Homes, L.P., 295 S.W.3d 309, 322 (Tex. 2009) (orig. proceeding). It is an

abuse of discretion for a trial court to defer ruling on a motion to compel arbitration or to

refuse to compel arbitration in order to allow discovery on the merits of a plaintiff‘s

claims. See In re Houston Pipe Line Co., 311 S.W.3d 449, 452 (Tex. 2009) (orig.

proceeding). As the court of appeals correctly noted, mandamus is the appropriate

procedure in this case, as appeal is not available under either the FAA or TGAA based on

the trial court‘s decision to defer ruling on Relators‘ motion to compel arbitration. (App.

Tab D at 35.)

C.     A Valid and Enforceable Arbitration Agreement Governs This Dispute.

       Both federal and state law strongly favor arbitration of disputes. See Circuit City

Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001); In re Next Fin. Group, Inc., 271 S.W.3d

263, 267 (Tex. 2008) (orig. proceeding) (per curiam).       Accordingly, where, as here, an

arbitration agreement contains promises to arbitrate disputes that are mutual and the

moving party has the right to compel arbitration, the trial court should enforce the

agreement. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex. 2003).




                                               6
       1.     The Employment Agreement’s Arbitration Clause Is Valid and
              Uncontested.

       In this case, the validity of the underlying employment agreement containing the

parties‘ agreement to arbitrate is not in dispute. (App. Tab N at 197, ¶ 26.) The

arbitration provision is mutually binding: any modification of the agreement requires the

written consent of both parties, and neither party may unilaterally modify or waive its

provisions. (Id. at 214, Ex. 1.) Furthermore, all Relators have the right to compel

arbitration. While the employment agreement is between F.C. Holdings and Reavis,

under Texas law the non-signatory Relators are entitled to enforce the arbitration clause

because Reavis‘s claims against them emanate from the employment agreement. See

Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 305 (Tex. 2006); In re Weekley Homes,

L.P., 180 S.W.3d 127, 131 (Tex. 2005).            As this Court has affirmed, a plaintiff is

equitably estopped from refusing to arbitrate his case against non-signatories to an

agreement if his claims against them rely on the terms of the agreement. See Meyer, 211

S.W.3d at 306 (―When each of a signatory‘s claims against a nonsignatory makes

reference to or presumes the existence of the written agreement, the signatory‘s claims

arise out of and relate directly to the written agreement, and arbitration is appropriate.‖).

       2.     The Arbitration Agreement Covers All Claims.

       Given the existence of a valid agreement to arbitrate, the only remaining issue is

whether the parties‘ dispute falls within the scope of the agreement. See In re Oakwood

Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999). If so, the trial court must compel

arbitration and stay the proceedings. See id. Here, all of Reavis‘s claims are within the



                                              7
broad scope of the arbitration clause, which encompasses ―[a]ny unresolved dispute or

controversy arising under or in connection with this Agreement.‖ (App. Tab N at 213,

Ex. 1.) As each claim arises from or relates to the employment agreement, each is

covered by the arbitration provision. See Meyer, 211 S.W.3d at 306; see also In re

Kaplan Higher Educ. Corp., 235 S.W.3d 206, 209 (Tex. 2007) (finding a fraudulent

inducement claim to be within the scope of the parties‘ agreement to arbitrate all disputes

―involving‖ the underlying contract).

       3.     Reavis Expressly Agreed to Arbitrate His Claims and Abate the Court
              Action.

       Reavis never filed any opposition to Relators‘ motion to compel arbitration that

challenged either the validity or scope of the arbitration agreement. To the contrary, on

November 4, 2010, he unequivocally agreed to abate the court action and to submit his

entire case to arbitration. (App. Tab G at 47.) As his counsel confirmed at the December

10 hearing, Reavis does not object to arbitration, only to the timing of discovery. (App.

Tab B at 28:15-21.)

D.     The Trial Court Abused Its Discretion by Failing to Compel Arbitration.

       Given the employment agreement‘s valid arbitration provision and the parties‘

express agreement to arbitrate and abate court proceedings, the trial court‘s refusal to

compel arbitration was a clear abuse of discretion.

       1.     Respondent Had a Duty to Enforce the Parties’ Rule 11 Agreement to
              Arbitrate and Abate.

       Courts must liberally construe arbitration agreements and resolve any doubts about

such agreements in favor of arbitration. See Cantella & Co. v. Goodwin, 924 S.W.2d


                                             8
943, 944 (Tex. 1996) (per curiam). An agreement to submit to binding arbitration after a

lawsuit is filed is as valid and enforceable as any other Rule 11 agreement. See Tex. Civ.

Prac. & Rem. Code Ann. § 171.001(a)(1) (―A written agreement to arbitrate is valid and

enforceable if the agreement is to arbitrate a controversy that exists at the time of the

agreement‖). It is settled law, moreover, that a trial court has a duty to enforce the

specific terms of a valid Rule 11 agreement. See Fortis Benefits v. Cantu, 234 S.W.3d

642, 651 (Tex. 2007) (holding that trial court properly dismissed claims relinquished in a

Rule 11 agreement). When the agreement to arbitrate is in writing, signed and filed with

the trial court, it must be given effect. See Tex. R. Civ. P. 11.

        The November 4 Rule 11 agreement, signed by the parties and filed with the trial

court, is plain, unconditional and unambiguous: ―The parties agree that the Reavis v. F.C.

Holdings, Inc. et al. case (Cause No. 10-0043) will be resolved through arbitration and

that the Reavis case will be abated pending the arbitration.‖                       (App. Tab F at 46.)

Nonetheless, the court of appeals justified its denial of mandamus by concluding that the

parties‘ earlier July 6 Rule 11 agreement, (App. Tab E at 41-42), had made completion of

the pending merits discovery a condition precedent to consideration of the motion to

compel arbitration. (App. Tab D at 38.) Such an interpretation, however, not only

misconstrues the July 6 agreement but also disregards the terms of the subsequent

November 4 Rule 11 agreement to arbitrate and abate the case.5 (App. Tab F at 46.)




5
  The court of appeals also erred in determining that Relators‘ document production violated Texas Rule of Civil
Procedure 196.3. (App. Tab D at 38.) By Reavis‘s own admission, this matter was no longer an issue before the
trial court at the December 10 hearing. (App. Tab B at 14:12-21.)


                                                       9
       As Relators‘ transmittal letter pointed out, the November 4 agreement to arbitrate

eliminated the need for a hearing. (Id. at 45.) Accordingly, the November 12 hearing

was cancelled. (App. Tab J. at 107.) The November 4 agreement makes no mention of

merits discovery as a condition to entry of an agreed arbitration order. To the contrary,

Relators‘ transmittal letter specifically stated that documents would be produced in the

context of arbitration—albeit without the necessity for issuance of new discovery

requests.   (App. Tab F at 45.)        Reavis‘s response did not take issue with this

representation. (App. Tab G at 47.)

       There is no suggestion in the correspondence accompanying the November 4 Rule

11—let alone any agreement—that the pending discovery be completed by a date certain,

prior to entry of an arbitration order, or subject to the Rules of Civil Procedure. The

hearing on Relators‘ motion to compel was re-set only after Reavis breached the

November 4 agreement by withholding execution of an agreed order to arbitrate in an

effort to extract discovery from Relators. (App. Tab B at 26:1-8, App. Tab M at 187.)

The Court abused its discretion by failing to give effect to the November 4 agreement.

       2.     Respondent Had a Duty to Stay Proceedings and Determine the Motion
              to Compel Arbitration Without Delay.

       Both the FAA and TGAA impose a legal duty on the trial court to stay

proceedings once an application for an order to compel arbitration is filed. See 9 U.S.C.

§ 3 (when an issue is referable to arbitration, the court ―shall on application of one of the

parties stay the trial of the action until such arbitration has been had in accordance with

the terms of the agreement‖); Tex. Civ. Prac. & Rem. Code Ann. § 171.025(a) (―The



                                             10
court shall stay a proceeding that involves an issue subject to arbitration if an order for

arbitration or an application for that order is made under this subchapter.‖). Consistent

with this statutory mandate, Relators objected to Reavis‘s discovery requests, citing their

pending application to compel arbitration. (App. Tab H at 53-54, 59-60, 64-66; Tab I at

71-73, ¶¶ 7-11.)

       After Reavis refused to honor the November 4 Rule 11 agreement, Relators set

their motion to compel arbitration for hearing on December 10, 2010. (App. Tab B. at

7:12-13.) The trial court, however, disregarded the statutory mandate to issue a stay and

resolve the arbitration question ―without delay.‖ In re Houston Pipe Line, 311 S.W.3d at

451. Instead, it proceeded to rule on unrelated discovery disputes not necessary to a

determination of the motion to compel.

       By conditioning its decision regarding referral to arbitration on Relators‘

submission of proof of their substantive compliance with pending merits discovery, the

trial court clearly abused its discretion. See Universal Computer Sys., Inc. v. Dealer

Solutions, L.L.C., 183 S.W.3d 741, 749-50 (Tex. App. – Houston [1st Dist.] 2005, pet.

denied) (―once the parties presented the agreed order to compel arbitration and UCS

moved to compel arbitration, the trial court should not have delayed in referring the case

to the arbitration to undertake further discovery matters‖).

E.     The Trial Court Abused Its Discretion by Directing Relators to Respond to
       Merits Discovery While a Motion to Compel Arbitration Was Pending.

       The trial court also abused its discretion when it ordered Relators to answer

discovery requests related to the merits of Reavis‘s claims. (App. Tab A at 1-2.) This



                                             11
Court has cautioned that ―when a party contests the applicability of an arbitration

provision in an agreement, the court is instructed to proceed summarily to determine the

issue.‖ Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 268-69 (Tex. 1992). The trial court

is not authorized to direct a party to answer discovery that pertains ―to the merits of the

underlying controversy,‖ rather than to the question of arbitrability, after a motion to

compel arbitration has been filed. In re Houston Pipe Line, 311 S.W.3d at 451 (finding

discovery requests seeking to determine the identity of potential defendants and each

defendant‘s liability to be impermissible merits discovery).

       The Court‘s holding in In re Houston Pipe Line followed a line of similar opinions

by Texas courts of appeals finding merits discovery to be inappropriate once the question

of arbitrability is raised. See, e.g., In re Shredder Co., 225 S.W.3d 676, 679 (Tex. App.

—El Paso 2006, orig. proceeding) (holding that the trial court abused its discretion in

deferring a ruling on a motion to compel arbitration until the completion of discovery); In

re Champion Techs., Inc., 173 S.W.3d 595, 599 (Tex. App.—Eastland 2005, orig.

proceeding) (same); see also Universal Computer Sys., 183 S.W.3d at 750 (stating that

―trial court(s) should not . . . enter orders attempting to curtail the proceedings before the

arbitrators as a result of . . . discovery rulings‖). As the Houston Court of Appeals aptly

observed:

       Delaying a decision on the merits of arbitrability until after discovery
       substantially defeats the policy behind section 171.021‘s abbreviated
       procedure, and it violates 171.021‘s mandate to decide issues summarily.
       We agree with [Relators] that, ‗in effect, the trial court is forcing them to
       litigate before the court will rule on the motion to compel arbitration and
       stay litigation.‘



                                             12
In re MHI P’ship, Ltd., 7 S.W.3d 918, 923 (Tex. App.—Houston [1st Dist.] 1999, orig.

proceeding).

      As in those cases, the discovery sought by Reavis here aims directly at the merits.

(See App. Tab I at 75-106.) He does not need it to determine whether the case should be

referred to arbitration and does not argue that it is required for this purpose. Quite the

opposite: he elected to waive any challenges to the arbitration agreement when he signed

the November 4 Rule 11 agreement. (See App. Tab G at 47.) The trial court abused its

discretion when it forced Relators to continue to litigate the case and answer merits

discovery despite a pending motion to compel.         Relators are therefore entitled to

mandamus relief from the December 10 order.

F.    The Trial Court Abused Its Discretion by Imposing Discovery Sanctions.

      A trial court abuses its discretion when it improperly imposes sanctions for

discovery abuse. See GTE Comm. Sys. Corp. v. Tanner, 856 S.W.2d 725, 729 (Tex.

1993) (orig. proceeding) (holding that the trial court abused its discretion in awarding

sanctions for purported discovery abuses when it was clear the court could not have

determined that the abuses occurred). As a matter of law, the trial court had no basis to

conclude that Relators abused the discovery process by resisting discovery on the merits.

Under this Court‘s clear precedent, pre-arbitration discovery is permissible only to the

extent it is relevant to the determination of a motion to compel arbitration. See In re

Houston Pipe Line, 311 S.W.3d at 451 (holding that the TGAA does not authorize

discovery on the merits of the underlying controversy when a motion to compel is

pending).


                                           13
       All of Reavis‘ pending discovery requests go directly to the merits of his claims.

(See App. Tab I at 75-106.) Relators properly resisted this discovery in the context of the

court proceeding. Sanctioning them for seeking to enforce their legal right was an abuse

of discretion for which mandamus relief is proper.

                         VI.    CONCLUSION AND PRAYER

       The trial court abused its discretion by failing to compel arbitration of the parties‘

dispute and to abate the court action, by ordering Defendants to answer Reavis‘ merits

discovery, and by issuing discovery sanctions. Accordingly, this Court should issue a

writ of mandamus directing the trial court to enter orders granting Relators‘ motion to

compel arbitration and abate court proceedings and to vacate the trial court‘s December

10, 2010, order compelling discovery and imposing sanctions.

       Relators therefore respectfully request that their Petition for Writ of Mandamus be

granted and that the Court issue a writ of mandamus instructing the trial court to vacate

its December 10, 2010, order, and to enter an order referring Reavis‘ claims to arbitration

and abating judicial proceedings pending arbitration.



Dated: September 13, 2011                 Respectfully submitted,



                                           /s/ Dan Hartsfield
                                          Dan Hartsfield
                                          Texas Bar No. 09170800
                                          dan.hartsfield@jacksonlewis.com
                                          Katrin U. Schatz
                                          Texas Bar No. 00796284
                                          schatzk@jacksonlewis.com
                                          Jackson Lewis LLP


                                             14
3811 Turtle Creek Blvd., Suite 500
Dallas, Texas 75219-4497
PH: (214) 520-2400
FX: (214) 520-2008

ATTORNEYS FOR RELATORS




  15
                                         CERTIFICATION

STATE OF TEXAS                     §
                                   §
DALLAS COUNTY                      §

               Before me, the undersigned notary, on this day personally appeared Dan
Hartsfield, the affiant, and a person whose identity is known to me. After I administered
the oath to affiant, he testified as follows: '.

   1. "My name is Dan Hartsfield. I am pver the age of eighteen (J 8), of sound mind,
      and capable of making this Affidavit. The facts in this Affidavit are within my
      personal knowledge and are true and correct.

   2. "I am the attorney for F.C. Holdings, Inc., et a!., the Relators. All of the
      documents included with the Petition for Writ of Mandamus are true and correct
      copies.

   3. "I have reviewed the foregoing Petition for Writ of Mandamus and have
      concluded that every factual statement therein is supported by competent evidence
      included in the appendix or record."

   4. "The attached Appendix contains true and correct copies of the documents
      pertinent to the issues or points presented for review, including the trial court's
      December 10,2010, Order from which Relators seek relief and the Judgment and
      Opinion of the Court of Appeals on Relators ' Petition for Writ of Mandamu dated
      August 31, 2011."

                                          and
   5. "The separate Record contains true < correct copies of every document that is
      material to Relators' . claim for relief and that was filed in any underlying
      proceeding. "

       \      FURTHER AFFIANT SA YETH NOT.


    /~/k
Dan Hartsfield
                                                                        9113111
                                                                        Date

Sworn to and subscribed before me this i:)-\1'\Iay of September 2011.



       '"     P"hl;(' ;n onti rot      he State of Texas
              SHANNON M. OSBORNE
              MY COMMISSION EXPIRES
                   July 21, 2013
                             CERTIFICATE OF SERVICE

               On September 13, 2011, as required by Texas Rule of Appellate Procedure
6.3 and 9.5(b), (d), and (e), I certify that I have served this Petition for Writ of Mandamus
via certified mail, return receipt requested, on The Honorable Mark Calhoon at the 349th
Judicial District Court of Houston County, Texas, Houston County Courthouse, 401 E.
Houston Ave., Crockett, Texas 75835, and served it via certified mail return receipt
requested and via electronic mail, per the parties‘ agreement, on counsel for Plaintiff Don
Reavis, who is Susan Hays, Godwin Ronquillo, P.C., 1201 Elm Street, Suite 1700,
Dallas, Texas 75270.


                                                   /s/ Dan Hartsfield
                                                  Dan Hartsfield




                                             17
                                                                                   FILED
                                                                                   IN THE SUPREME COURT
                                                                                   OF TEXAS
                                                                                   11 September 13 P6:44
                                                                                    BLAKE. A. HAWTHORNE
                                                                                   CLERK
     APPENDIX IN SUPPORT OF PETITION FOR WRIT OF MANDAMUS

              Pursuant to Rule 52.3 of the Texas Rules of Appellate Procedure, Relators,

F.C. Holdings, Inc., et al., file the following appendix in support of their Petition for Writ

of Mandamus:

      Tab A            December 10, 2010, Order Granting Plaintiff’s Motion to Compel
                       Discovery and For Sanctions

      Tab B            Transcript of December 10, 2010, Hearing

      Tab C            Judgment - Twelfth Court of Appeals District of Texas August 31,
                       2011

      Tab D            Opinion - Twelfth Court of Appeals District of Texas August 31,
                       2011

      Tab E            July 6, 2010, Rule 11 Agreement to Jim Parsons

      Tab F            November 4, 2010, Rule 11 Agreement, filed by Defendants on
                       December 6, 2010

      Tab G            November 4, 2010, Rule 11 Agreement, filed by Reavis on
                       November 18, 2010

      Tab H            Defendants’ Discovery Responses, served on Reavis on
                       November 4, 2010

      Tab I            Defendants’ Motion for Protective Order Pending Decision on
                       First Amended Verified Motion to Compel Arbitration, filed on
                       November 4, 2010

      Tab J            November 5, 2010, Letter from Defendants to District Clerk of
                       trial court, informing trial court that the parties agreed to arbitrate
                       and no longer required hearing on motion to compel arbitration or
                       motion for protective order

      Tab K            November 17, 2010, Email from Defendants to Reavis,
                       transmitting documents in the context of arbitration




                                              1
Tab L   Plaintiff’s Motion to Compel, filed on November 24, 2010

Tab M   December 8, 2010, Letter from Reavis to Defendants, regarding
        allocation of document production

Tab N   Plaintiff’s First Amended Original Petition, filed November 19,
        2010

Tab O   Statutory text of 9 U.S.C. § 3

Tab P   Statutory text of Tex. Civ. Prac. & Rem. Code § 171.001

Tab Q   Statutory text of Tex. Civ. Prac. & Rem. Code § 171.025

Tab R   Text of In re Houston Pipe Line Co., 311 S.W.3d 449, 452 (Tex.
        2009)




                              2
~ "" ~ .~                                                                                          FILED
,   >
    ~
                                                                                              HOUSTON COUNTY
                                                                                               DISTRICT CLERK
                                                                                                {;;L(rO/fo@q:C/I?(1.iY),
                                                   CAUSE NO. 10-0043                        CA      LYN RAINS
                                                                                       BY                   DEPUTY
            DON R. REAVlS,                                         §       IN tHE DISTRICT CO           T
                                                                   §
                   Plaintiff,                                      §
                                                                   §
            v.                                                     §       OF HOUSTON COUNTY, TExAs
                                                                   §
            FC HOLDINGS, INC., NIGEL J. HARRISON,                  §
            INDNIDUALLY, JLL ASSOCIATES FCH, L.P.,                 §
            JLL ASSOCIATES G. P. FCH, L.L.C., ILL                  §       349TH JUDICIAL DISTRICT
            PARTNERS FUND FCH, L.P., ILL PARTNERS                  §
            FUND IV, L.P., and JLLIFCH HOLDINGS I,                 §
            L.L.C.; and, FIRST COMMUNITY BANK,                     §
            NATIONAL ASSOCIATION                                   §
                                                                   §
                   Defendants.                                     §

                         ORDER ON PLAINTIFF'S MOTION TO COMPEL DISCOVERY
                                        AND FOR SANCTIONS


                   Be it "remembered that on the 10th day of December, 2010, came on to be heard the Motion to

            Compel Discovery and for Sanctions filed by PlaintiffDon Reavis; and, the parties annotUlced Ready

            and the Court considered the Motion and argument of counsel, and following the same is of the

            opinion that the Motion should be GRANTED;

                   IT IS THEREFORE ORDERED that the Motion to Compel Discovery and for Sanctions

            filed by Plaintiff is GRANTED;

                   IT IS FURTHER ORDERED that on or before

            20~ Defendants shall          submit formal; written and categorized responses to the following

            discovery in accordance with the Texas Rules of Civil Procedure:

                   1.       Plairitiff's Juhe 7, 20 I 0 First Requests for Admissions and Requests for Production to
                            Defendants JLL ASSOCIATES FCH, LP., JLL ASSOCIATES G.P. FCR, L.L.C.,
                            JLL PARTNERS FUND FCH, L.P.,JLLPAR1NERS FUND IV, L.P., and JLUFCH
                            HOLDINGS 1, L.L.C. and




                                                                                             ~ OR\G1NAl


                                                                                                                           App. 1
,., ';<t.-:'




                                Plaintiffs Second Requests for Admissions and Requests for Production to
                                Defendants FC HOLDINGS, INC., NIGEL HARRISON, Individually, and FIRST
                                COMMUNITY BANK, NATIONAL ASSOCIATION.; and

                        2.      Plaintiffs June 23, 201 0 Third Requests for Admissions and Requests for Production
                                to Defendant FC HOLDINGS, INC., NIGEL HARRISON and FIRST
                                COMMUNITY BANK, NATIONAL ASSOCIATION.

                        Defendants ARE FURTHER ORDERED to identify each response to the individual

               request; to organize and label their production; to answer each request for admission as requested in

               accordance with the Rule 11 Agreement reached between the parties regarding the discovery listed

               above.

                        IT IS FURTHER ORDERED that a hearing will be held on                   --';,(-bl-fi--ItC.L..:()=----~
                                                                                                     'f.
               2011, to ensnre Defendants are in compliance with this order.

                        THE COURT FURTHER FINDS that the conduct of the Defendants in responding to

                Plaintiff's discovery requests made the basis of the Motion to Compel Discovery and for Sanctions is

                in violation of the Texas Rules of Civil Procedure; and accordingly, is sanctionable.

                        IT IS THEREFORE ORDERED that on or before                    :JO N       1   ()-«3j 1e),1.D II
               . 2011, the Defendants shall pay to the attorney for the Plaintiff, Jim Parsons, at his office, the sum of

                $       0500
                        Signed the 1.tL- day of December, 2010.



                                                                    Honora15 e Mark Calhoon
                                                                    District Judge, 3,d Judicial District
                Prepared and Presented BY:


                JIM PARSONS, SBOT No. 00000065
                1007 N. Mallard
                Palestine, Texas 75801
                TEL.: 903-723-0580IFAX: 903-723-0580
                Attorney for Plaintiff, Don Reavis

                Order on Plaintiffs Mtn to Compel Dis-cQvery and for Sanctions                                         Page 2




                                                                                                                                App. 2
                                                                   Transmission Report
Datefnme           12-10-2010          02:58!35 p.m.                              TransmIt Header Text                      HOUSTON cq D15TRI(TCLERK
LocallP 1          9365449523                                                     Local Name ~                              carolyn ra1t15; dIstrict clerk
local rD2                                                                         Local Name2




                                                          This document: Confirmed
                                                      (reduced sample and details below)
                                                           Document size: 8.S"x11"
                                                                                                                            FILED
                                                                                                                        HOUSTON COlW'lln'
                                                                                                                         DIST~fCT flEAK

                                                                                                                         1.J.IIO/lo@Q4'?IL'11'
                                                                           CAUSE NO.!9J!!i!l                            ~ RAINS
                                                                                                                       flY ~ ,DEPUtY
                                DON It.. REAVIS,                                                     IN HIE DISnUCT CO           T
                                         Plaintitl:

                                v.                                                                   Of HOUSrON COl1NTY. TEXAS
                                Fe HOl,DINGS, INC., NIGEL J. HARRISON.
                                INDIViDUALLY, M ASSOCIATES FCH, LP.,
                                ILL ASSOCIATES G, P. FCB, LJ~C.. JLI.   .                            34?ll! JUDICIAL DISTRICT
                                PARTNER."). FUND FeH. LP., ILl, PARTNERS
                                PUND IV, L.P., and JLLfFCH EO-LDlNOS I,
                                Ll..C,; and. FIRST COMMUNITY BM«.,
                                ~ATIONAL       ASSOCIATION

                                         DefendanUl.
                                         - - - . _ - - - _ . - ..- - - - - -
                                              ORDER ON PLAINTIff'S MOTION TO COMPEL DISCOVERY
                                                                        AND FO)'lSANCfIOI'IIS                   .


                                         Be it rtnle'llIbered that un the toll< day cfDcoonbI.-'T. Z-QW. came on to be bwrl the Ml,lion1a
                                t' ompe I Discovery and for Slllll:tiOns fiI~by PlaintiffDoo Rblv]s; Hnd, the partiesannounte~ Read),

                                and the Court considered 1.htI Motion and argument of OOlllllWt, srLd following. tho J;3tt1e is (If thu

                                -oplnir.m ,hal1he Motion should be GRANTED;

                                        IT IS THI!:REJfORE ORDERED lbaltbe Molion toCompel Di8COvety and forSQilcUOIa

                                filed by Piainliffis GRANTED:

                                        IT IS FtJRTH~R ORDERED. dUll on or before

                                1{)Ji. DefendD.1lli: shall submit ibl11lal. "...ritlen aJtd (."tI.tegOOU!d re:SJ!Oil5'I!S to the- following

                                di!\(:(lvCf)' illllC(;(lrdance \\!jjh the- Texas Rllks of Civil ProcedW"<!:

                                         I,      PllI.ibtiCf's June 7,1010 Fir.;t Requests for AdmissionsandRequCSlsfor Production to
                                                 Dt-tCndimlS JLL ASSOC.lA TES FCH. LP .• ILL ASSOCIAn<s G.P. FeH, U.~C .•
                                                 JLL PAR1NERS FUNDfCH, L.P.• Jll PAR1NERS FUND lV, LP., :mdJLL!FCH
                                                 HOLDINCS I. L.i..C. and



                                                                                                                       ~ ORIGINAL
Total Pages Scanned: 2                           Total Pages Confirmed: 2
 No.    Job    Remote Station                 StartTlme                   Duration                            (Pages           line           Mod.     Job Type          Results
 001    099    19037230580                    02:56: 16 p,m.12-10-2010 00:01:49                               212                             EC       HS                CP14400

Abbreviations:
HS; Host send              PL: Polled lo<:al                        MP: Mailbox. print                         TU: TermInated by user
HR: HO$t receive           PR: Polled remote                        CP: Completed                              TS: Terminated bysystoem              G3: Group 3
WS: Waiting send           MS: Mallbo~save                          FA: Fall                                   RP: Report                            EC; Error Correct




                                                                                                                                                                                   App. 3
                                                                     1



 1                              REPORTER'S RECORD
                              VOLUME 1 OF 1 VOLUME:S
 2                        TRIAL COUR~ CAUSE NO. 10-0043

 3

 4    DON R. REAVIS                          IN THE DISTRICT COURT

 5
            Plaintiff,
 6
      VS.                                    HOUSTON COUNTY, TEXAS
 7

 8    FC HOLDINGS, INC., ET AI

 9
                                             3RD JUDICIAL DISTRICT
10          Defendants.

11

12

13
        ORIGINAL                     *****
14                         ***ALL PENDING MOTIONS***

15                                   *****
16

17

18

19

20          On the 10th day of December, 2010, the following

21   proceedings came on to be heard in the above-entitled and

22   numbered cause before the Honorable Judge Mark Calhoon, Judge

23   presiding, held in Crockett, Houston County, Texas;

24

25          Proceedings reported by machine shorthand.




                                                                         App. 4
                                                              2



 1                      A P PEA RAN C E S

 2

 3   Mr. James Parsons              Mr. Dan Hartsfield
     Attorney at Law                Attorney at Law
 4   SBOT NO. 00000065              SBOT NO. 09170800
     1007 North Mallard             3811 Turtle Creek Blvd.
 5   Palestine, Texas     75801     Suite 500
     Phone:  (903) 723-0580         Dallas, Texas 75219
 6   ATTORNEY FOR PLAINTIFF         Phone:   (214) 520-2400
                                    ATTORNEY FOR DEFENDANTS
 7

 8

 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25




                                                                  App. 5
                                                                  3



 1                                I N 0 E X
                                  VOLUME 1
 2                         (ALL PENDING I~OTIONS)
                                                    Page   Vol.
 3
     DECEr1BER 10, 2010
 4
     Announcements . . .                              4      1
 5

 6

 7
     Arguments by r1r. Parsons.                       5      1
 8
     Arguments by r1r. Hartsfield.                   13      1
 9
     Court' 8 Ruling   .                             25      1
10
     End of Proceedings                              27      1
11
     Court Reporter's Certificate.                   28      1
12

13

14

15

16

17

18

19
20

21

22

23

24

25




                                                                      App. 6
                                                                              4



 1                          PRO C E E DIN G S

 2                  MR .. PARSONS:     Judge! I'm present and ready on

 3   Reavis verses FC Holdings.

 4                  MR. HARTSFIELD:          Dan Hartsfield, Your Honor, I'm

 5   here as well, Your Honor.

 6                  THE COURT:       Okay.     Y'all step forward.

 7                  All right.       This is 10-0043 Reavis verses FC

 8   Holdings and several others.       What do we have today, folks?

 9                  MR. PARSONS:       Judge, it's my motion to oompel

10   performance under Rule 11 agreement, with regard to answering

11   request for admissions and production.

12                  MR.   P~RTSFIELD:        And we have our motion to

13   compel arbitration and our motion to -- for a protective order.

14                  THE COURT:       Mr. Parsons, you represent who?

15                  MR. PARSONS:       I represent the Plaintiff.

16                  MR. HARTSFIELD:          And I represent First Community

17   Bank and all of the other Defendants.

13                  THE COURT:       Your name, sir?

19                  11R. HARTSFIELD:         Dan Hartsfield.

20   H-A-R-T-S-F-I-E-L-D.

21                  THE COURT:       All right.     Mr. Parsons, you got the

22   motion to compel, and Mr. Hartsfield, you have the motion to

23   compel arbitration and what else?

24                  MR. HARTSFIELD:          A motion for protective order.

25                  MR. PARSONS:       And actually, Judge, my motion to




                                                                                  App. 7
                                                                                   5



1    compel enforcement of a Rule 11.

 2                  THE COUFT:       Okay.     Protective order for what?

 3                  NR. HARTSFIELD:          In response to discovery that

 4   Mr. Parsons served.

 5                  THE COUFT:       Okay.     Go ahead, Nr. Parsons.

 6                  MI'.. PARSONS:     All right, Judge, there is       i~   the

 7   file, and I refer to the Court's very        volu~inous   file, the

 8   Plaintiff's motion to compel, which has a chronology of the

 9   events giving rise to the Rule 11 agreement.

10                  THE COURT:       I tell you what, let me find that

11   and let me take a look at it here.

12                  MI'.. PARSONS:     Okay.     Here's one, Judge.

13                  THE COUFT:       Thank you.     Let me brief through it

14   here.

15                  MR. PARSONS:       Sure, Judge.

16                  THE COOF'r:      What was the November 12th hearing

17   supposed to be for?

18                  1'(1'.. HARTSFIELD:      The motion to compel

19   arbitration.

20                  MR. PAFSONS:       Actually, Judge, it was all

21   pending motions.     The motion to compel was filed July 23rd of

22   2002.

23                  THE COUFT:       Okay.

24                  ~IF   . HARTSFIELD:      Actually, I think it was June

25   21st.




                                                                                       App. 8
                                                                                 6



 1                    THE COURT:     Did you file anything in response?

 2                    ~R.   HARTSFIELD:      In response to what, Your

 3   Honor?

 4                    THE   COURT~   To the motion to compel?

 5                    HR. HARTSFIELD:        We did not.

 6                    THE COURT:     Okay.     I just wanted to read through

 7   it.

 8                    All right.     Mr. Parsons, go ahead.

 9                    MR. PARSONS:     Thank you, Your Honor.

10                    Judge, on March 30th we sent out request for

11   disclosure to all Defendants and they responded.          All

12   Defendants responded in April.          In May they filed additional

13   responses to request for disclosures.          In June we sent out our

14   first set of request for admissions, or request for productions

15   to JL Defendants, and to the other Defendants, Harrison and            Fe
16   Holdings.    They responded in June,       June 18th, June 23rd, and

17   then on June 23rd, there was a motion to compel arbitration,

18   and that was the first tirr,e the motion was filed.

19                    And then counsel, Mr. Hartsfield came in, in

20   September 17th of 2010 after we had a Rule 11 agreement with

21   prior counsel in July to stay the case, essentially and

22   mediate.    Hediation fell through.        Part of the agreement was

23   that they would answer the outstanding discovery seven days

24   prior to the hearing, which is, essentially, would be today's

25   hearing.




                                                                                     App. 9
                                                                              7



 1                      And then after Mr. Hartsfield came in, they

 2   we didn T t   engage in much discussion.   Some commu!"lications 1 but

 3   on November 4th, we reached a Rule 11 agreement, and I'm going

 4   to hand you as Exhibit 1, a copy of the Rule 11 agreement.

 5                      The Rule 11 agreement is actually two part.        One

 6   part is my response, which was not signed by Mr. Hartsfield, so

 7   let's direct our attention to the second part, which is

 8   Mr. Hactsfield letter.      And what had happened was, I called his

 9   associate because JI.1r. Hartsfield Nouldn I t   return rEy calls

10   except for one time, nor has he ever responded to any of my

11   letters except for this.      And I had told his associate, look,

12   we want our answers to our discovery, and then we're willing to

13   arbitrate.     We're willing to go to arbitration.      And so his

14   associate, Mr. White talked to Mr. Hartsfield, and that's when

15   I got this letter of November 4th.

16                      And I direct the Court's attention to the bottom

17   paragraph.      Says I will also withdraw our motion for protective

18   order that is being filed today, gather and produce documents

19   as requested in the context of arbitration.         While there may be

20   some need under a confidential order with regard to those

21   documents, I will honor your exists discovery request.          You

22   need not to send anymore.      So I signed that.

23                      Also, when I talked to White, I told him that I

24   wanted to amend my petition,     to clean it up, and that1s the

25   reason that I have attached to the Rule 11 agreement, my letter




                                                                                  App. 10
                                                                            8



 1   saying 11m going to amend my petition, which I     subsequently

 2   did, which I'm entitled to do at any time, which the Court is

 3   aware under the Rules, up until seven days prior to trial.

 4                      So, then on November 5th, Mr. White sends to the

 5   Court   --   to the clerk, Exhibit No. 2, which is the parties    --
 6   this letter is to inform the parties have agreed to arbitrate

 7   and abate the proceedings, accomplished the agreement by a

 8   letter signed by the parties on November 4th.      In other words,

 9   there was no complaint about the letter.      There was no

10   complaint about my attacf®ent to the letter.      There was no

11   complaint about anything, it's just that he was agreeing to

12   pass the hearing and are recognizing that we did in fact have a

13   Rule 11 agreement.

14                      Now, as you can see, counsel previously had said

15   that he would withdraw his objections pursuant to his cover

16   letter that I signed.     But then they started filing all of

17   their objections that they said they were going to withdraw.

18   And so I wrote him a letter f   vJ"hich I never got a response to,

19   on November 9th, said attached you will find confidentiality

20   agreement which I signed.     Revision merely expands the

21   procedure of protection itself.     So since we entered into the

22   Rule 11 agreement I received several filings which contravene

23   the Rule 11 agreement.

24                     This past Friday, upon inquiry, we were insured

25   that the filings vJ"ere made for protection not in contravention,




                                                                                App. 11
                                                                              9



 1   that 1 s a conversation with White.

 2                   Then yesterday we received responses to

 3   outstanding production.      Responses were not responsive as

 4   agreed, but merely objections stating r     quote,   "this discovery

 5   request is premature and inappropriate, pending a resolution of

 6   Defendant's motion to compel arbitration."

 7                   Well, Judge, that was the purpose of the Rule 11

 8   agreement, which is, look, you guys answer discovery and I will

 9   agree to your arbitration and we will go up there and try this

10   thing.   But then they file, after the Rule 11 agreement.         They

11   say they are filing responses which say this discovery request

12   is prematurely and inappropriate pending a resolution of the

13   Defendant's motion to compel.      The Rule 11 agreement pre-dates

14   yours filing of your objections for discovery,        Again, I assume

15   you're filing for merely defensive, and not in contravention.

16   I'm reaching out.   We've signed a confidentiality agreement,

17   the Rule 11 agreement was "vithout obj ection, now it's time for

18   appropriate production and responses per our agreement.

19   There's been some discussion about re -- and then I have a

20   mediation issue.

21                   THE COURT;     Sure.

22                   MR. PARSONS;     Okay.   Then on November 19th,

23   having heard nothing from counself I write him again.        And I

24   say Dear Dan, on July 6th we entered into a Rule 11 agreement

25   saying the outstanding discovery pending, they would stay it,




                                                                                  App. 12
                                                                          10



 1   the agreement stayed r:equest admissions for production until

 27th day, that was July 20th agreement.            On November 4th I

 3   received a letter from you it \;as a Rule 11 agreement follo'Ning

 4   the conversation I had with your associate wherein I told him I

 5   would agree to arbitration provided the outstanding discovery

 6   was answered and produced.       The letter attached to go with my

 7   attachment, which   vJaS   faxed to you at 3: 54, both have been

 8   filed with the Court.       In your letter you state that you would

 9   produce under confidentiality agreement.         I will honor your

10   existing discovery request and you don't need to send new ones.

11   That was Mr. Hartsfield signature.

12                   On November 4th, the same day, you sent a letter

13   agreeing to honor your existing discovery request, by fax, at

14   approximately 4 o'clock I received a fax from Mr. White in your

15   office, and that enclosed the letter that I've introduced as

16   Exhibit 2, which is telling the clerk it can be passed pursuant

17   to Rule 11 agreement.

18                   THE COURT:      That's fine.    I've read all of

19   those.   The responses that you got on November 17th, tell me

20   about that.

21                   MR. PARSONS:      November 17th, Judge, they -- let

22   me see what you're reading.

23                   THE COURT:      On the 341 pages.

24                   MR. PARSONS:      Well, what happened was, they

25   then -- there then was an e-mail from Hartsfield to his




                                                                               App. 13
                                                                           11



 1   associate which said Mr. Parsons has been very patient about

 2   this production and you need to get it out, we need to get it

 3   to him now.    And what they did, they sent out two e-mails.       One

 4   for one through 190, and the second one, 191 through 341.

 5   Well, I respond and say, wait a minute, all you did was send me

 6   341 documents, unorganized.     Non-responsive.   You didn't tell

 7   me which requests for productions -- I've got five Defendants

 8   here.     I don1t know who produced what, or what produced

 9   anything.

10                     Well, I didn't hear anything back.    These people

11   don't communicate, Judge, it's beneath them to do so.       And

12   so -- but then on the 8th of this week, which is Wednesday, I

13   get a letter from 'White, not Hartsfield, but White, which says,

14   pursuant to the request, and he identified request, certain

15   requests for production, nine, ten, eleven and twelve, I think,

16   and he broke them down, finally.     And I wrote him back and I

17   said, well that's fine, that's a start.      And I sent him this

18   letter.     I said, okay! first we're making headway.    Second,

19   there's still a failure to communicate.      You have assigned your

20   responses for request of productions nine, ten, eleven, and

21   twelve for all Defendants.     You have not anBi-l1ered request for

22   admissions ten and eleven for all Defendants, the answers to

23   those admissions should be in the affirmative.       If in the

24   negative -- and what it is, Judg-e, a reguest for admissions

25   that they did not create a document, and then if they deny it,




                                                                                App. 14
                                                                        12



 1   I say, well, give me the document.     It says you nave not

 2   answered request for number 12, TFC Holdings.      Do the above and

 3   we will pass our hearing.

 4                     Of course, I never hear a response, and sign an

 5   agreed arbitration.     In other '/lords, 11m saying, look, I'm

 6   willing to enter into an agreed arbitration, all you have to do

 7   is file a response, which they did not -- which they have not

 8   done, and even as we stand here today, have never responded in

 9   writing or in person.

10                     Judge, they are taking a.position that -- and

11   this is a new position.     Never taken prior to the time they

12   entered the case, which means the Defendant previously waived

13   all these issues '.;ith regard to any federal law that prohibits

14   arb -- I mean, prohibits discovery when there's pending

15   arbitration.

16                     What has happened is, these other lawyers

17   engaged in discussions because we were trying to resolve the

18   case.     We were exchanging documents and they would respond to

19   requests for disclosure they would respond to request for

20   admissions, and then we enter into an agreement that says I

21   will honor your outs"tanding request, and then honor goes away

22   and they don1t honor the outstanding request, the next day or

23   that day.     They file objections to everything and refuses to

24   give it to me until the 17th, and then the 17th they just blast

25   e-mail.     And then on the 8th they corne up, two days before this




                                                                             App. 15
                                                                              13



 1   hearing and say, well, okay, weIll tell yeu where it came from

 2   but we're not going to answer those request for admissions!

 3   although we have answered request for admissions repeatedly

 4   before, and we have an agreement that we're going to honor your

 5   outstanding request! we're not going to do that.

 6                     So, there's nothing in writing, they never filed

 7   a response appropriately under the Rules, where you don't

 8   you don't file responses to request for production by letter,

 9   you file request for -- response by written instrument.

10   Counsel doesn't believe in that, they just send letters every

11   now and then.    So I'm here seeking compulsion.          I want to

12   enforce the Rule 11 agreement.      I want answers to my request

13   for admissions or subject to denials of the request for

14   admissions.     I want my production, and I'm willing to

15   arbitrate.    That's what the Rule 11 agreement said.          It's clear

16   on its face, and they donlt want to live up to it.

17                     THE COURT:   All right.        Mr. Hartsfield?

18                    MR. HARTSFIELD:    Thank you.

19                    THE COURT:    Yes, sir.

20                    MR. HARTSFIELD:    Mr. Parsons reputations for

21   spinning a good yarn is upheld today.            Let -- there's just a

22   fundamental misunderstanding of -- I think, how the law applies

23   to this case between Mr. Parsons and        I~   The parties here have

24   an agreement to arbitrate.      The Defendants and the Plaintiff.

25   And this is the tirneline.     Mr. Parsons served discovery on




                                                                                   App. 16
                                                                           14



 1   June   7th.   On June 21st the original latrJyers that were

 2   defending the case filed a motion to compel arbitration.         On

 3   June 23rd, two days after that motion was filed, ',;e filed

 4   another discovery request.     Those are the two that are at

 5   issue.    And then en July 6th they entered into a Rule 11

 6   agreement, which you have, that says, we're going to stay the

 7   case -- 'VI1e' re going to mediate, if we don I t we' 11 respond to

 8   your discovery request, it doesn!t waive objections.

 9                     It specifically refers to objections in the Rule

10   11 agreement, seven days before the arbitration hearing.

11                     All right.   So let's     the point that's -- that

12   seems to be missed, is the effect that the filing of the motion

13   to compel arbitration had on these proceedings.        And I don't

14   quibble with any of the legal positions that he takes in his

15   briefing to the Court.     I think they are generally accurate

16   statements of the law.     I do take position or issue with his

17   statement of the Rule 11 agreement that he has mane.          But under

18   the--

19                     THE COURT:   In what regard?

20                     MR. HARTSFIELD:   Well,   our Rule 11 agreement,

21   Your Honor, is very simple.      I send him a letter on

22   November 4th, and if you look at the agreement of counsel

23                     THE COURT:   I've got it right here.

24                     MR. HARTSFIELD:   It's on page two, says

25   agreement of counsel.     The parties agree that Reavis will be




                                                                                App. 17
                                                                            15



 1   resolved   ~hrough   arbitration, and the Reavis case will be

 2   abated pending arbitration.        I signed it, he signed it.    And

 3   that's the Rule 11 agreement.       Now, what I told him

 4                     THE COURT:     Wait, let me see that one again.

 5                    MR. PARSONS:      It's at the bottom, Judge.

 6                     MR. HARTSFIELD:     It's at the bottom, it's a one

 7   sentence Rule 11 agreement, just as simple as it could be.

 8                     Now, what I told him in this letter, and this

 9   was our -- I believe our first corrununication together.

10                     MR. PARSONS:     First one you responded to.

11                     MR. HARTSFIELD:     And -- »hat I told him is -- so

12   we agreed to arbitrate on November 4th.        So, these are the two

13   Rule 11 agreements.

14                     THE COURT:     How ccme in the letter it also says

15   I will withdraw our motion for protective order that was being

16   filed today, gather and produce the documents you have

17   requested?

18                     MR. HARTSFIELD:     Right, and I've done that.

19                     THE COURT:     I will honor your existing discovery

20   request.     You don't need to send new ones.

21                     MR. HARTSFIELD:     That's correct.   That's

22   correct.     And I said I will withdraw our motion for protective

23   order that's be been filed today, which was filed on the 4th

24   before this Rule 11 agreement, and requested -- and if you

25   notice, what I say here, produce the documents you have




                                                                                 App. 18
                                                                               16



 1   requested in the context of the arbitration.       Well! you may

 2   need to -- we may need to produce some under a confidentiality

 3   agreement, I will honor the existing discovery request, you

 4   don't need to send new ones.       And once we get the arbitration

 5   going,   I can be less formal and will respond to e-mail request

 6   for records.   What we're talking about there,     or what I was

 7   talking about there, was giving him the documents that he vlas

 8   entitled to get in the arbitration.

 9                    Now -- but let's go back to what happened here

10   when the motion to compel arbitration, because the relevant law

11   that controls his motion, is the Texas General Arbitration Act.

12   And under the Texas General Arbitration Act, when a motion to

13   compel arbitration is filed,   that stays the litigation.          It's a

14   statutory, mandatory stay.

15                    I mean, the statute frankly couldn't be clearer.

16   It said the Court shall stay if an application for an order

17   compelling arbitration is made.       I mean, this -- so when the

18   motion to compel arbitration was filed by the other lawyers on

19   June 21st, where were we?     Procedurally there was one request

20   that was served on them that was two weeks earlier.        So that

21   request was stayed.    He filed a second request two days after

22   that motion was filed.    That--

23                    THE COURT:   Why wasn't this ever mentioned in

24   any of your correspondences?

25                    MR. HARTSFIELD:     Well, we filed the   ~otion    for




                                                                                    App. 19
                                                                         17



 1   protective order, Your Eonor.

 2                  MR. PARSONS:     You said you withdrew it, too.

 3                  MR. HARTSFIELD:        We have taken this position

 4   that we will engage in the discovery in the context of

 5   arbitration, but the --

 6                  THE COURT:     What does it mean in your letter

 7   when you say you will withdraw the request for protective

 8   order?

 9                  MR. HARTSFIELD:        Because the case is stayed.

10   We've agreed to arbitrate.     We don't need to have a hearing on

11   the motion for protective order.

12                  THE COURT:     Okay.

13                  MR. HARTSFIELD:        So, if you look at the

14   objections that we filed, and just for the record, I mean, the

15   Rule 11 agreement with the prior lawyers said we will respond

16   seven days before the hearing.        Obviously, we had prepared

17   these before the Rule 11 agreement.        We mailed them to

18   Mr. Parsons on tl:e 4th and filed our motion for protective

19   order on the 4th, and then we had this Rule 11 agreement

20   resolving all of this stuff late in the day on the 4th.

21                  But -- so where are we in terms of back in June

22   at the time that this motion was filed?        Both discovery

23   requests that are subject of the motion to compel were stayed

24   by operation of lavl under the Texas General Arbitration Act.

25   It's Section 171.025.     And if you look at the case law on this,




                                                                              App. 20
                                                                                          18



         1   I mean,   1',7e   have Supreme Court authority   on   t,his.   And to give

         2   the Court just a flavor for v-lhat the law says, the trial court

         3   is compelled by statute to stay any proceeding that involves an

         4   issue subject to arbitration, if a party seeks an order to

         5   arbitrate.         And that's what the statute says.       That's what the

         6   Courts say.

         7                         Now, so given the statutory stay, of Section

         8   171.025, does that mean that no discovery can be allowed, well,

         9   no, it doesn't, because the Texas General Arbitration Act

        10   addresses that issue as well.         What it says under Section

        11   171.023B, is that there can be discovery, but the discovery has

        12   to be limited to the issue of arbitrability.              So once the

        13   motion to compel is filed, merit discovery is stayed by

        14   operation of law under the statute.         But to the extent he wants

        15   to contest arbitration, the parties didn't have an agreement,

        16   the agreements not valid or enforceable, and he needs discovery

        17   LO    oppose that motion, the statute says it, and the Courts say

        18   it.

        19                         But if he attempts to go into merit discovery

        20   over the underlying dispute that is captured by the arbitration

        21   agreement, the Courts say you canrt do that.             And we have a --

        22   this is -- this issue has been addressed by the Supreme Court

        23   in a recent case, actually.

        24                         THE COURT:   Why would you send the discovery

        25   that you sent to him, then, if that's your position?

- -.)




                                                                                               App. 21
                                                                                     19



 1                     MR. HARTSFIELD:        I objected to it.   I didn't

 2   send him discovery, I -- I sent him no -- no discovery,

 3                     MR. PARSONS:     But you --

 4                     MR. HARTSFIELD:        But in my letter transmitting

 5   the Rule 11 agreement,     I said I am producing these documents in

 6   the context of arbitration.        That was -- that was -- that's

 7   expressly stated in my letter.

 8                     THE COURT:     All right.     Go ahead.

 9                     MR. HARTSFIELD:        And so where are we today?         I

10   mean, the Supreme Court says,       just to give the Court a flavor

11   for this l   on the scope of discovery, a pre-arbitration

12   discovery is expressly authorized under the arbitration act,

13   when the trial court cannot fairly and properly make its

14   decision on a motion to compel, because it lacks sufficient

15   information regarding the scope of arbitration, or other issues

16   of arbitrability.     This however is not an authorization to

17   order discovery as to the merits of the underlying controversy.

18                     That's o'Ll:r point.     And we -- if you --   \tile   then

19   filed an amended motion to compel arbitration in October, and

20   the -- under the Rule, and that was set for hearing on

21   November 12th.     And so the responses that we filed on November

22   4th, directly comply with the prior counsels! and Mr. Parsons

23   July 6th Rule 11 agreement.

24                     Now, if you look at Mr. Parsons request, all of

25   them to go merits.     Every single request goes to merits of the




                                                                                          App. 22
                                                                          20



 1   case.    That's what the statute prohibits, and that's what our

 2   objections say.

 3                     Now, the November 4th Rule 11 agreement simply

 4   says we will go to arbitration.      Now, what does that mean on

 5   the case?    Well, once the -- this case is still under statutory

 6   stay.    And what it also means, is that the parties now have

 7   agreed that this case should be compelled to arbitration.        And

 8   what he's trying to do now, is essentially hold hostage an

 9   agreement -- well, actually, just to sign off on an agreed

10   order compelling arbitration.       Unless until we engage in merit

11   discovery in this case, and that's clearly inappropriate under

12   the statute.    Merit discovery has been stayed since June 21st

13   of this year.     It's remained stayed, and at this point, the

14   only issue is the arbitrability -- I mean, that he could engage

15   in discovery on, is the -- is the arbitrability of the dispute.

16   And he's agreed now to arbitrate that dispute, so there -- one,

17   he doesn't have any request going to that issue.       And if he

18   had,    clearly that should have been answered, but he doesn't

19   have any going to the issue of arbitrability.       All go to merits

20   and the -- the fact is, he canlt engage in merit discovery

21   under the Texas General Arbitration Act of the Supreme Court

22   authority.

23                     THE COURT:   Which is what you say he's asked for

24   in his discovery?

25                     MR. HARTSFIELD:    All of it is merit discovery.




                                                                               App. 23
                                                                              21



 1                  THE COURT:     Well, the problem I have with that,

 2   in your letter November 4th, you say you will withdraw your

 3   motion for protective order.     You "ill gather and produce the

 4   documents that he has requested, including those,        I aSS1Jme,

 5   that go the merits.

 6                  MR. HARTSFIELD:        In the context of arbitration.

 7                  THE COURT:     I will honor your existing discovery

 8   request, you don't need to send new ones.        To me that's pretty

 9   straightforward.

10                  MR. HARTSFIELD:        Well, Your Honor, it is.     But

11   I'm saying in the context of arbitration.        Not -- we can't

12   engage in merit discovery in this lawsuit.

13                  THE COURT:     Okay.     I understand.   What else do

14   you haver

15                  MR. HARTSFIELD:        So what he is asking you to do,

16   is to enter an order, compelling the Defendants to engage in

17   merit discovery, which would be a violation of the statutory,

18   mandatory stay, because this stuff should be handled in the

19   arbitration context.   ThatTs what the law requires, that's what

20   the Supreme Court says.     We obj ected and responded consistent

21   "ith the Rule 11 agreement.     That's been our position

22   consistently with Mr. Parsons, and he says, no, I don't care if

23   we have an agreement to arbitrate.        I don't care I!ve entered

24   into a Rule 11 agreement.     I'm going to demand that you engage

25   in merit discovery in this case, and clearly that's not




                                                                                   App. 24
                                                                                22



 1   authorized.

 2                    THE COURT:     Okay.   You have anything else?

 3                    BR. PARSONS:     Q"c1ickly.   There's such a thing as

 4   waiver.   You can waive anything, including statutes.           That's

 5   not a non-waiveable statute.       We entered into waiver agreement

 6   by virtue of a Rule 11 agreement.        Here's a brief on the

 7   enforceability of a Rule 11 agreement,         and the Court says that

 8   you have no discretion not to enforce a Rule 11 agreement.

 9   That's the reason you have Rule 11 agreements.          It is the very

10   type of shenanigans that counsel is trying engage in here,

11   slide of hand,   slide of word.     He has waived the discovery as

12   to two requests for admissions that he has not answered.             He

13   his letter of November 8th where he            where he, in essence,

14   identifies by bates numbers, this blast of 341 doc1Jffients,

15   that's also a waiver, but it's in compliance with the Rule 11

16   agreement.

17                    Judge, there was an issue with regard to the

18   question of the enforceability of arbitration, and I'm going to

19   hand the Court, counsel has not seen this, this is a response

20   that we file -- that we're going to file,         to the arbitrability

21   of the Rule 11 -- of the case, as to the JLL Defendants, which

22   who were not parties to the underlying issue.          Ar~d   there's an

23   open question with regard to them, because we allege that they

24   actually interfered with the contract that they are now seeking

25   to enforce, as it relates to arbitration.




                                                                                     App. 25
                                                                                      23



 1                    So my point in handing you that r is this, we

 2   gave up the issue of contesting the issue of arbitration in

 3   exchange for a promise to produce documents and answer our

 4   discovery.    Ar.:.d I have an agreed order, and he knows I have an

 5   agreed order, because I wrote his counsel, his associate, the

 6   only one that will talk to me, and told him that I have

 7   prepared an agreed order.       When you respond to this, submitting

 8   it to   arbitration~


 9                    So, this is also -- I don I t       knOI-V   why they don't

10   want to answer what is obvious r which is they didn't ever

11   produce these documents.       It's a slide of hand, and you know,

12   we're all priests in the temple of justice, and we kind of rely

13   on one anothers words.     And when somebody tells me,            I will

14   honor your existing discovery request and you don't need to

15   send any new ones, I kind of assume that the guy means what he

16   says.    Evidently, he doesn't.       And so live learned that.            So,

17   in the future,   I would say, you know, you're going to answer

18   request for admissions number one, number two, number three.

19   You're not going to blast e-mail me 341 documents, you're going

20   to identify them.

21                    THE COURT:     That's fine.      Anything else?

22                    MR. PARSONS:       No.

23                    MR. HARTSFIELD:          Well, Your Honor, again, I just

24   want to -- if you "ill look at the agreement --

25                    THE COORI':    I   did.     I've looked at all of the




                                                                                           App. 26
                                                                            24



 1   agreements.

 2                     HR. HARTSFIELD:     Clearly what I'm saying is I

 3   vJill engage in discovery in the context of arbitration.

 4                     THE COURT:     That's not as clear to me.

 5                     HR. HARTSFIELD:     Okay.   Well, that was my intent

 6   when I wrote that letter.

 7                     MR. PARSONS:     Here's a proposed order.

 8                     MR. HARTSFIELD:     Because ioJe can't engage -- I

 9   mean, before I wrote that letter, I had served the motion for

10   protective order, and served the written discovery responses,

11   objecting to merit discovery.       And my position is the same,

12   he's entitled to documents, he's entitled to discovery, but not

13   in the context of litigation.        This case is stayed.

14                     And my -- my view is the only thing that the

15   Court should do at this point,       I think the statute compels the

16   Court to do, is to enter an order compelling arbitration.          It's

17   not in dispute.     We have a Rule 11 agreement from Mr. Parsons

18   saying this case should go to arbitration, and this case should

19   be stayed.    And given that        that Rule 11 agreement is in

20   place, he can conduct his discovery, but it's got to be in the

21   proper forum,   and that's the arbitration forum.

22                     He can       what I've told him/ is you don't have

23   to file nei'l stuff for purposes of the arbitration, but we're

24   going to engage in discovery in the proper forum, and this

25   isn't it.




                                                                                 App. 27
                                                                            25



 1                    THE COURT:     I understand.    You want to be heard

 2   on attorney's fees?

 3                    MR. PARSONS:     Judge, it's -- I'm seeking the

 4   enforcement under Rule 215, and also under 196.3 with regard to

 5   specificity_    I have approximately five hours in the case, not

 6   ~ncluding   today, which will be an additional two hours,· so

 7   seven hours.    I bill at $300 an hour.      My associate, Mike Davis

 8   spent two days in preparing a trial brief response.         He bills

 9   at $175.    That's eight times $175, which would be approximately

10   a thousand.    So we've got about 3 or $4,000, at least, in

11   attorney's fees here, unnecessarily.

12                    THE COURT:     All right.   Granting the motion on

13   PlaintiffT s motion to compel discovery.        I'm awarding $2,500 in

14   attorney fees, denying the Defendant's motion for protective

15   order, enforcing the Rule 11, and it seems to me, the -- with

16   regard to arbitration, am I correct in that issue should be put

17   off until we get the discovery?

18                    MR. PARSONS:     Exactly.   If they will produce the

19   discovery and satisfy the Court that they've done what they

20   said they would do,   I'm willing to sign an order.       I've got it

21   prepared.

22                    THE COURT:     All right.   Looking at the order

23   that you've submitted, is it on or before what date,        Defendant

24   shall submit formal written categorized responses?

25                    MR. PARSONS:     Judge, we have a vacation letter




                                                                                 App. 28
                                                                          26



 1   December 17th through January 3rd. I would request the first

 2   setting in January.

 3                   THE COfJR'r:   Sometime in January?

 4                   MR. PARSONS:     First setting, whatever your

 5   nonjury setting is.    If theylve done itl we can get you to sign

 6   the order.

 7                   THE COURT:     What1s a mid-January setting?

 8                   MS. HAYNES:     January 14th.

 9                   THE COURT:     All right.     January 14th, 2011.

10                   MR. PARSONS:     Judge, I'm -- hate to do that to

11   you,   I'm in   with an ABOTA meeting in New Orleans that date.

12                   MS. HAYNES:     February 7th?

13                   THE COfJRT:    What about February 7th?

14                   MR. PARSONS:     I tell you what, my associate can

15   handle it on the 14th.

16                   THE COaRT:     Okay.    That's the date of the

17   hearing if they are not turned over.        What date vlOuld

18   you suggest that the responses be sent, before what date?

19                   MR. PARSONS:     If counsel will communicate '"ith

20   me, any time before then.

21                   THE COURT:     What about if I -- January 1st?

22                   HR. PARSONS:     I don't --

23                   HR. HARTSFIELD:        Could we have until the day

24   before the hearing?

25                   THE COURT:     Okay.




                                                                               App. 29
                                                                         27



 1                  l1R. PARSONS;     Sure.

 2                  THE COURT;      I'll put January 13th.   Anything

 3   else, folks?

 4                  MR. HARTSFIELD;      Nothing further, Your Honor.

 5                  MR. PARSONS;      No, thank you.   Thanks for your

 6   time.

 7                  THE COURT:      Certainly.

 8                  (End of Proceedings)

 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25




                                                                              App. 30
                                                                        28



 1   THE STATE OF TEXAS)

 2   COUNTY OF HOUSTON)

 3           I, Brandi Ray, Official Court Reporter in and for the 3rd

 4   District Court of Houston County, State of Texas, do hereby

 5   certify that the above and foregoing contains a true and

 6   correct transcription of all portions of evidence and other

 7   proceedings requested in writing by counsel for the parties to

 8   be included in this volume of the Reporter's Record, in the

 9   above-styled and -numbered cause, all of which occurred in open

10   court or in chambers and were reported by me.

11           I further certify that this Reporter's Record of the

12   proceedings truly and correctly reflects the exhibits, if any,

13   admitted by the respective parties.

14           I further certify that the total cost for the preparation

15   of this Reporter's Record is    $/]&.00    and was paid/will be

16   paid by   j~A.-U" H(vvt-~;tl
                                                I<}I,          ~I\
17           WITNESS MY OFFICIAL HAND this the L:L--. day of   yam/wI
18   2010.                          ......              ~


                                 B~"Pff ~.~:~
19

20                                                      8299
                                 Expiration Date:   12/31/12
21                               Official Court Reporter,
                                 3rd District Court
22                               Houston County, Texas
                                 109 West Corsicana Street
23                               Athens, Texas 75751
                                 (903) £7£-4039
24

25




                                                                             App. 31
                               COURT OF APPEALS
     TWELFTH COURT OF APPEALS DISTRICT OF TEXAS
                                      JUDGMENT

                                      AUGUST 31, 2011


                                    NO. 12-10-00424-CR


    IN RE: F. C. HOLDINGS, INC., NIGEL J. HARRISON, INDIVIDUALLY, JLL
          ASSOCIATES FCH, L.P., JLL ASSICIATES G. P. FCH, L.L.C., JLL
 PARTNERS FUND FCH, L.P., JLL PARTNERS FUND IV, L.P., JLL/FCH HOLDINGS
     I, L.L.C.; AND, FIRST COMMUNITY BANK, NATIONAL ASSOCIATION,
                                   Relators
                                      v.
                           HON. MARK A. CALHOON,
                                  Respondent


                                  ORIGINAL PROCEEDING

                      ON THIS DAY came to be heard the p~tition for writ of mandamus filed
by F. C. HOLDINGS, INC., NIGEL J. HARRISON, INDIVIDUALLY, JLL ASSOCIATES
FCH, L.P., JLL ASSICIATES G. P. FCH, L.L.C., JLL PARTNERS FUND FCH, L.P., JLL
PARTNERS FUND           IV, L.P., JLLIFCH HOLDINGS I, L.L.C.;                  AND,    FIRST
COMMUNITY BANK, NATIONAL ASSOCIATION, who are the relators in Cause No. 10-
0043, pending on the docket of the 349th Judicial District Court of Houston County, Texas. Said
petition for writ of mandamus having been filed herein on December 20, 2010, and the same
having been duly considered, because it is the opinion of this Court that writ of mandamus
should not issue, it is therefore CONSIDERED, ADJUDGED and ORDERED that the said




                                                                                                  App. 32
08/07120111415 FAX
                                                                                                                     141 002/002




       petition for writ of mandamus be, and tbe same is, hereby denied.                  OUf    stllY of January 3, 2011
       is lifted. Reavis's motion seeking sanctions against F.C. Holdings is overruled.
                             James T. Wortben, Chief Justice.
                             Panel consi.lted oj Worthen,   c.~,   Griffith, J., and Hoyle, J.




                                                             9



                                                                                                                                   App. 33
                                        NO. 12-10-00424-CV

                          IN THE COURT OF APPEALS

                 TWELFTH COURT OF APPEALS DISTRICT

                                           TYLER, TEXAS

IN RE: F.C. HOLDINGS, INC.,                              §
NIGEL J. HARRISON, INDIVIDUALL Y,
JLL ASSOCIATES FCn, L.P.,
JLLASSOCIATES G. P. FCn, L.L.C,
JLL PARTNERS FUND FCn, L.P.,                             §             ORIGINAL PROCEEDING
JLL PARTNERS FUND IV, L.P.,
JLLIFCH HOLDINGS I, L.L.C; AND
FIRST COMMUNITY BANK,
NATIONAL ASSOCIATION,
RELATORS                                                §

                                                   OPINION
         In this original proceeding, Relator F.C. Holdings, Inc. seeks a writ of mandamus
requiring the trial court to vacate its order compelling compliance with Texas Rule of Civil
Procedure 196.3 and granting sanctions for discovery abuse. l For the reasons stated in this
opinion, we deny the petition.


                                                BACKGROUND

        In April 2007, Don R. Reavis, the real party in interest, entered into an employment
contract with the First National Bank of Crockett. This contract included a clause to arbitrate
any disputes between the parties to the contract. F.C. Holdings later acquired First National
Bank of Crockett. In February 2010, Reavis filed suit against F.C. Holdings, Inc.; Nigel J.
Harrison, Individually; JLL Associates, FCH, L.P.; JLL Associates G. P. FCH, L.L.C.; JLL


         1 The respondent is the Honorable Mark A. Calhoon, Judge of the 3rd Judicial District Court of Houston
County, Texas. All of the defendants named in Reavis's lawsuit are identified in the mandamus petition as relators.
In the discussion, however, the references are to F.C. Holdings only except as necessary to relate the underlying
facts. We will do the same in this opinion.




                                                                                                                      App. 34
Partnership Fund FCH, L.P.; JLL Partners Fund IV, L.P.; JLLlFCH Holdings I, L.L.C.; and First
Community Banlc, National Association. In his original petition, Reavis alleged breach of the
employment contract and sought specific performance of the contract. He also alleged common
law fraud, conspiracy to commit tortious interference with an existing contract, and conspiracy to
violate the Banlc Holding Company Act of 1956. The mandamus record indicates that the
following actions relevant to this proceeding occurred in 2010:


       June 7 - Reavis served his second requests for admissions and requests for
       production on F.C. Holdings. Later in June, he served his third requests for
       admissions and requests for production on F.C. Holdings.

       June 21 - F.C. Holdings filed a motion to compel arbitration.

       July 6 - Reavis and F .C. Holdings entered into a Rule 11 agreement. The
       agreement stated that the parties would mediate the case and that F. C. Holdings
       would answer the requests for admissions and production served on it by Reavis
       seven days before a hearing was set on F.C. Holdings' motion to compel
       arbitration.

       August - Mediation failed.

       October 26 - F.C. Holdings filed "Defendants' First Amended Verified Motion to
       Compel Arbitration and to Abate Proceedings Pending Arbitration." (The trial
       court set a hearing on this motion for November 12.)

       November 4 - Reavis and F .C. Holdings entered into a second Rule 11
       agreement. This agreement provided that the case would be resolved through
       arbitration and be abated pending arbitration. The parties exchanged letters as
       part of the Rule 11 agreement. In his letter, the attorney for F.C. Holdings stated
       that he would "gather and produce the documents you have requested in the
       context of the arbitration."

       November 12 - No hearing was held on the motion to compel arbitration.

       November 17 - F.e. Holdings produced by email 341 pages of unsorted and
       unorganized pages that were unidentified as to responsiveness to particular
       requests and unattributed to a particular defendant as the production source.

       November 24 - Reavis filed a motion to compel requesting the court to require
       F.e. Holdings to comply with Texas Rule of Civil Procedure 196.3(c) with
       reference to the documents that it produced on November 17 and to answer the
       discovery as agreed in its Rule 11 agreements. Reavis also sought sanctions


                                                2



                                                                                                     App. 35
       against F.C. Holdings under Texas Rule of Civil Procedure 215(d) for its failure
       to comply with Texas Ru1e of Civil Procedure 196.3.

       December 10 - Following a hearing on all pending motions, the trial court signed
       an order directing that F.C. Holdings comply with its Rule 11 agreements,
       including but not limited to organizing and labeling the documents it produced in
       compliance with Texas Rule of Civil Procedure 196.3, and that F.C. Holdings be
       sanctioned for its conduct in its production of documents on November 17. A
       further hearing was set for January 14, 2011, to ensure that F.C. Holdings
       complied with the court's order.

       December 20 - F.C. Holdings filed a petition for writ of mandamus with this
       court, after which all actions pending in the trial court were stayed.

                                        ISSUE PRESENTED

       Did the trial court abuse its discretion by failing to immediately compel arbitration and
stay the proceedings after the parties entered into a Rule 11 agreement to arbitrate?

                                  AVAILABILITY OF MANDAMUS

       A writ of mandamus will issue only if the trial court has connnitted a clear abuse of
discretion and the relator has no adequate remedy by appeal. In re Cerberus Capital Mgmt.,
L.P., 164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding). A clear abuse of discretion occurs
when an action is so arbitrary and unreasonable as to amount to a clear and prejudicial error of
law. In re CSX, Corp., 124 S.W.3d 149, 151 (Tex. 2003) (orig. proceeding). A trial court
abuses its discretion if it acts without reference to any guiding rules and principles or in an
arbitrary or unreasonable manner. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238,
241-42 (Tex. 1985). So long as a trial court decides a matter within its discretionary authority,
an appellate court cannot disturb the trial court's decision even if the reviewing court would have
decided the issue differently. See id. at 242; Walker v. Packer, 827 S.W.2d 833, 839 (Tex.
1992) (orig. proceeding). Instead, a trial court's ruling should be reversed only if it is arbitrary
and unreasonable. Cire, 134 S.W.3d at 839.
       Regardless of whether arbitration is sought under the Federal Arbitration Act or the
Texas Arbitration Act, appeal is not available when a trial court defers ruling on a motion to
compel arbitration. See 9 U.S.C. § 16 (no provision for appealing trial court's deferral of ruling
on motion to compel arbitration under Federal Arbitration Act); TEx. CIV. PRAc. & REM. CODE
ANN. § 51.016 (West Supp. 2010) (in matters subject to Federal Arbitration Act, appeal available

                                                 3




                                                                                                       App. 36
under same circumstances that appeal from federal district court's order would be permitted);
TEX. CIY. PRAC. & REM. CODE ANN. § 171.098 (West 2011) (no provision for appealing trial
court's deferral of ruling on motion to compel arbitration under Texas Arbitration Act).
Therefore, mandamus is the appropriate procedure by which we review the trial court's deferral
of a ruling on whether to grant or deny a motion to compel arbitration. In re Champion Techs.,
173 S.W.3d 595, 598-99 (Tex. App.-Eastland 2005, orig. proceeding) (deferral of ruling on
motion to compel arbitration under Federal Arbitration Act until after completion of discovery);
In re MHI P'ship, Ltd., 7 S.W.3d 918, 921 (Tex. App.-Houston [1st Dist] 1999, orig.
proceeding) (deferral of ruling on motion to compel arbitration under Texas Arbitration Act until
after completion of discovery).    Accordingly, F.C. Holdings need not show that it has no
adequate remedy by appeal.


                                     ABUSE OF DISCRETION

       Prearbitration discovery is available if the trial court lacks sufficient information
regarding the scope of an arbitration provision or other issues of arbitrability. In re Houston
Pipe Line Co., 311 S.W.3d 449, 451 (Tex. 2009) (orig. proceeding).            But this is not an
authorization to order discovery on the merits of the underlying controversy. ld. However, an
arbitration agreement is a contract. See In re Palm Harbor Homes, Inc., 195 S.W.3d 672,676-
77 (Tex. 2006) (orig. proceeding). And the parties having the power to make a contract have the
power to modify it by making additions to it. Moser Co. v. Awalt Indus. Props., Inc., 584
S.W.2d 902, 906 (Tex. eiv. App.-Amarillo 1979, no pet.); Drexler v. Bryan Bldg. Prods. Co.,
374 S.W.2d 806-07 (Tex. Civ. App.-Waco 1964, no pet.). Modification of a contract is some
change in an original agreement that introduces a new or different element into the details of the
contract, but leaves its general purposes and effect undisturbed. Enserch Corp. v. Rebich, 925
S.W.2d 75,83 (Tex. App.-Tyler 1996, writ dism'd).
Modification and Performance
       The parties in the instant case had the power to modify the arbitration clause in their
employment agreement. They did so with the Rule 11 agreements of July 6 and November 4,
2010. The parties agreed to certain discovery, which would take place before any hearing held
on F .C. Holdings' motion to compel arbitration.



                                                   4



                                                                                                     App. 37
       The trial court has a duty to enforce the terms of a valid Rule 11 agreement. Fortis
Benefits v. Cantu, 234 S.W.3d 642, 651 (Tex. 2007); see also In re Guardianship of White, 329
S.W.3d 591, 592 (Tex. App.-El Paso 2010) (orig. proceeding) ("A trial court has a ministerial
duty to enforce a valid Rule 11 agreement."). F.C. Holdings does not argue that the Rule 11
agreements of July 6 and November 4 were invalid. Instead, F. C. Holdings contends that once
Reavis agreed to arbitrate, the trial court had to immediately grant its motion to compel
arbitration and stay the proceedings. However, the July 6 Rule 11 agreement stated that F .C.
Holdings would answer and produce the discovery requested in June by Reavis seven days
before any hearing on its motion to compel arbitration. F.C. Holdings performed under this Rule
11 agreement on November 17 when it sent the 341 pages to Reavis. But F.e. Holdings' failure
to organize and identify those pages violated Texas Rule of Civil Procedure 196.3, which states
as follows:


       196.3 Production.



                (c) Organization. The responding party must either produce documents and tangible
       tbings as they arc kept in the usual course of business or organize and label them to correspond
       with the categories in the request.


TEx. R. CIY. P. 196.3(c).
       The July 6 Rule 11 agreement between F.C. Holdings and Reavis created a condition
precedent to the trial court's consideration of F.C. Holdings' motion to compel arbitration.
When F.C. Holdings produced documents to satisfy this condition precedent, it did so in a
manner that violated the Texas Rules of Civil Procedure. Had there been no Rule 11 agreements,
discovery would have been conducted in the arbitration proceeding, and the Texas Rules of Civil
Procedure would not have applied See Crossmark, Inc. v. Hazar, 124 S.W.3d 422,432 n.lO
(Tex. App.-Dallas 2004, pet. denied). But under the facts presented here, the trial court had a
duty to enforce F.C. Holdings' performance of its Rule 11 obligations pursuant to the Texas
Rules of Civil Procedure. The trial court was therefore fulfilling its ministerial duty by requiring
F.C. Holdings to comply with Rule 196.3. See Fortis Benefits, 234 S.W.3d at 651.
       F .C. Holdings contends that the trial court was required to take up the motion to compel
arbitration before the motion to compel discovery and for sanctions and cites In re HQuston Pipe


                                                      5




                                                                                                          App. 38
Line Co., 311 S.W.3d 449 (Tex. 2009) as support. In Houston Pipe, the Texas Supreme Court
ruled that the trial court abused its discretion by ordering prearbitration discovery· instead of
ruling on the motion to compel arbitration. ld. at 452. However, in that case, there had been no
modification of the arbitration agreement by a Rule 11 agreement as there was here. ld. at 450.
Here, the parties agreed to prearbitration discovery, but F.C. Holdings responded to that
prearbitration discovery in a manner that did not comply with the Texas Rwes of Civil
Procedure. We do not read Houston Pipe to llinit a trial court's authority to require a party to
comply with the rules of procedure when it agrees to pre arbitration discovery. Therefore, the
facts in that case are distinguishable from the facts ofthe instant case.
        F .C. Holdings also contends that a statutory stay was imposed, which prevented the trial
court from considering the motion to compel discovery and for sanctions filed by Reavis.
Section 171.02S(a) of the Texas Practice and Remedies Code states as follows:


        (a) The court shall stay a proceeding that involves an issue subject to arbitration if an order for
        arbitration or an application for that order is made tmder this subchapter.



TEX. PRAC. & REM. CODE ANN. § 171.025(a) (West 2011). This statute provides on its face that
"the court shall stay" a proceeding. In other words, the stay is not automatic. As we have
explained, the parties' Rule II agreements and F.C. Holdings' deficient performance under these
agreements delayed the trial court's consideration of the motion to compel arbitration and the
order of the statutory stay. The order in which the trial court considered the motious before the
motion to compel arbitration was not an abuse of discretion.
F.e. Holdings' Interpretation of the Rule 11 Agreements
        F.C. Holdings contends that the trial court misinterpreted the November 4 Rule 11
agreement. It contends that the trial court should have interpreted the phrase "in the context of
arbitration" as meaning the parties wowd immediately go into arbitration and that any discovery
would take place in arbitration. But there was no need for the trial court to interpret the Rule II
agreement.     F.C. Holdings had already interpreted the November 4 Rule 11 agreement as
requiring it to tender the responses to Reavis's outstanding discovery requests. It did so on
November 17, in a manner that violated Texas Rule of Civil Procedure 196.3. It was this
deficient performance by F.C. Holdings under the Rule 11 agreements that triggered the trial


                                                         6




                                                                                                              App. 39
court's duty to consider Reavis's motion to compel discovery and for sanctions prior to
considering F.C. Holdings' motion to compel arbitration. See Fortis Benefits, 234 S.W.3d at
651.


                                                  CONCLUSION

         F .C. Holdings has failed to show that the trial court abused its discretion in deferring its
ruling on F.C. Holdings' motion to compel arbitration until after it considered Reavis's motion to
compel discovery and impose sanctions. Therefore, F.C. Holdings has failed to show that it has
a clear right to the relief sought. Accordingly, its petition for writ of mandamus is denied. Our
stay of January 3, 2011 is lifted. Reavis has filed a motion in this      COlli"t   seeking sanctions against
F.C. Holdings. We overrule the motion.



                                                               JAMES T. WORTHEN
                                                                  Chief Justice




Opinion delivered August 31, 2011.
Panel consisted a/Worthen, G.1., Griffith, 1., and Hoyle, 1.




                                                    (PUBLISH)

                                                          7




                                                                                                                App. 40
From: C;VIS~ M cKlnJt!)'   Fa'X:: !;l1J3-723-Cl5130              To;>: Mr_ Michael R. Ross   Fax'.... 1 (713) -622~055-5   Page 3 of 4   7f7/Z0Hl8:56

                                                                               'IRIBBLB, ROSS & WAGNER                                                  @a02




                                                        TRIBBLE, ROSS & WAGNER
                                                                                   July6,20l()

                           Via Facsimile 903--723-0581}
                           Jlm Parsons
                           Attorney at law
                           1007 N. Mallard Street
                           Palestine, T"".& 75802

                                         RE:          Cause No. 1O-ll043; Do" R. Reavis v. FC Hdding.r, /nc., Mge' J
                                                      Han-ison, Individually. JLL ASSociates FeB. L.P., JLL Associates GP.
                                                      FCn, L.LC" JUL Partners Fund FCR. L.P.• JLL Partners Fund W. L.P.
                                                      and JLUFCH Holding, /, L. L. c.; and FirS! Commun'l)I Bank, Na!iotIfJl
                                                      Association; In the 349th District Court of Houstcm County, Texas

                           Dear Jim:

                                  In accordanoe with Rille 11 of the Texas Rule. of Civil Procedure, Plaintiff Don
                           R. Reavis ("Plaintiff'), and Defendants FC Holdings, InC., Nigel J. flZrrison,
                           rndlvidually, JLL Associates FCH, L.1'., JLL Associates G.P. FeH, L.L.e., JLL Partners
                           Fund FCH, L.P., JLL Partners Fund TV, 1.1'. and JLLlFCH Holdings I, LL.C.; and First
                           Community Bank. National Association, ("Defendants''), agree to attend mediation in the
                           above case.

                                   Plaintiff aJld Defendants will not conduct discovery until after mediation.
                           Plaintiff and Defendants agree that Defendants need not ansv.'l::r or oJUoct to any of
                           Plaintiff's OUl>laoding. discovery, including but not limited to, Plaintiff. First Requests
                           for Admission and Requests fur Production to Defendants JLL Associate..: FCH, L.P '.
                           JLL Associates G.P. FCR, L.LC.,.ILL Partners Fund FCR, L.P., JLL Partners Fund IV,
                           L.1'. and lUJFCH Holdmgs r, L.1.C.; Plointiffs Second Requests for Admissions and
                           Requests for Produotion to Nigel Ra:rri:son, Individually, FC Holdin.,<>;;; Inc., and First
                           Conununity Bank. National Assooiation:; and Plaintiff's Third RO<j1lC$l"$ for Admissions



                                                                                                                                                          #
                           end Requests for Production to Defendants FC Holdings, Inc., Nigel Hamson,
                           Individually and First Cowmtlnity Bank, N atiOllll! Association .
                                                        .....p.J"'> d:;:~         7
                                  nefendams will answer the discovery,         o~ the date a hearing is conducted on
                           Dcfrndant's Motion to Compel ArilitIati5 0 I-;r >=. ,1)~ 1- llt1 qn"e 'I1n»1!)                                                      \
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                           Yow professional courtesy is greatly appreciated_                                                                             y
                                         3355 WEST ALABAMA STREET. sn;; 12QO ~ HOUsrON 1)( 77096
                                          7i3.62<:.0444. 71:3.622..0555. WWW.TRIBBLELAWFfRM.COM
                                                          HOUSTON. SAN ANTONIO

                                                             201IJ.07-06f7~1:26GMT·OO:OO     I (903)723-0580 11.tfJ5S0




                                                                                                                                                                   App. 41
F,om: Christy McKinley   Fax; .9G3·723_OS90         To; Mr. Michaej R. Rass     ."ax:; 4-1 (713) S;a·0555   Page 4 of 4 7nn010 8:56

         07/06,/2010 17:19 F3.X 'il-::.a22055-5                   TRlBBLE.       ~O;SS &.    WACl-."ER



                         Rule 11 Agreement to Jim Parsons
                         July 6, 2()10
                         Page 2




                                                                              -rlliBBLE,ROSS & WAGNER

                                                                         /f/!//c? 7(;9-
                                                                              Michael R. Ross




                                              2iJ11).D7-l1617:1l7:26 GMT ·08:00 ! ~fl3)72J..05BD I 140560




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                 Carolyn Rains, District Clerk       .                                                                                                                 -<
                 Houston County Courthouse
                 401 East Houston Avenue
                 Crockett, Texas 75835

                                                                                                  Re:       Don R. Reavis v. F. C, Holdi"'jfS' Inc., et a[;
                                                                                                             Cause No. 10-0043; In the 349 District Court
                                                                                                             of Houston Coun~. Texas

                 Dear Ms. Rains:
                         Enclosed please find lin origin/ll and one copy of a RIlle 11 agreement between the
                 Parties dated November 4. 2010, for filing in the above-referenced matter. It should be Doted
                 that Plaintiff's counsel's hand-written notation below the signature block was added unilatetally
                 by Plaintiff's counsel after Defendants' counsel's signature. Please return a file-stamped copy in
                 the envelope provided.

                                We are )lotlfying opposing counsel via facsimile of the tlling of this Rule 11 agreement.

                                                                                                                  Sincerely

                                                                                                                  JACKSON LEWIS LLP

                                                                                                                  ~+1J~
                                                                                                                  Taylor E. White
                 TEW/eh
                 Enclosures

                 cc:            VIAFACSlMILE
                                Jim Parsons
                                Law Offices of Jim Parsons




                                                                                                                                                                                                                       App. 43
                                        11V,   "T"'T'i.l


                                          Carolyn Rains
                                       December 6, 2010
                                                 Page 2


cc:   YlAFACSIMILE
      Michael C. Dodge
      Glast, Phillips & Murray, P.C.




                                                           App. 44
                                To:·Dan Hu\ii;5eId          FIQ(: +f (214) 52(1.2\109




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  IimParsoDS
  Law OftiIlCS of JIm !'mons
  10()7 N. Mallard
  Palestine, TX 75801
                                                           D." R. 1IP(lVi.r v. F.C. H<>/dinl}'. /w., III al;
                                                           Cau •• No. lIHJ043; In tluo 349'" District CDurt
                                                           ofHpgtpnCpunty.                      rm,
  Deo:rrJD1:

                   Taylor m""tioIted Ihet he spoke with }'OIl this IIIcminj obout the motions fur
  protective ()I'I!er and to compcllUbitntliOll. lllllderstmd that Mr. RtlllVis b .. agreed to fII'O'*ld
  with art>l1nItion per his .mploynllml agrceJIICn!.

                 Giv.... the pBttles' asre-enr. there should be DO need to proceed with next
  ~.     hearing on 1hc m.ctlon 10 compeL If)'O\l """'" ",>uld you sign this Ietmr In the splICe
  below, _timing the parti..- agreemelll to prcce<ld II:> albilration. r II call tho Cowt 1D I'OIIll>Ve
  the hearing fiQm the docket and prepare a draft order tefuriIIg the case to albitration l1r your
  revl~.

               I will also wiJhdraw our motion fur protOOtive ordes dial " being flied today and
  pthtr WId produc; mo documents y~ bave requcst<d in Ihe _text of the arl>itra1lDn. WhIle
  scme 1Il1ly ~ 11> be prodooed andlll' a COIIJldentlality qreementlorder. ! wlll hontJr your




                                                                                                                                                            App. 45
                                                                                      IH', .,..,.V./   I . . J ! ./




     existing discoveryrequcSII, SlId .you don't tleedlo ~d.,!ewOllllS; And once We gefdll.
     arbitrirtlmi ll"ittg, I fCild to be leu foimaIBndWUlrespooo 1<> emNI roques15 fur records.

.                     I a.I1<)gotacall1'i:om Willl'ryotJast ~ lndieaJlng~.~t(~ybc jus\
    . hls) In gettingm;.pal1:1osbad<lAlgelher.lfMr.Reavls wmllito)a.kellllOiher ltabCat gettlng this
      Ie901ved;I'm   sure 1can blillg my guyaback to tblItlIblo. .                           .    .

                     J hot>c all ~. otherwise wen With yoU.




      Attorney for Defendants




                                                                                                                      App. 46
        JIM PARSONS
              LAWOfficrs
                                                                                                 November 4, 2010

 lim Par.OIlJl                           VIA EMAIL ONL\1y
 Judge, 3rd District Court
   (1996-2IJiJ6)                         Dan Hartsfield        ---------OEPUTy
 PresidEnt State Bar of Texss            Jackson Lewis LLP
  (1990-1991)                            3 g11 Turtle Creek Blvd, Suite 500
 American l10ard of Trial Advocate!>
 E-mail: jpatsons@j.i:mparsons-law.com
                                         Dallas, Texas 75219
                                         EMAIL: PortisG@jacksonlewis.com
 C, Mkhael Davis
 E-mail.cmd.vi<@jlmpatson.-I.w.rom       Re:   Canse Number 10-0043; Reavis v, Fe Holdings, Inc" et al;
                                         Pending in the 349th Judicial District Court of Houston County, Texas
 Of Cmmsel,
 Susan H.ys---DaIl as, Texas             Dear Dan:
 E-mail: sna}'8@jimpatSODS-law,cmn
                                         I have signed your letter wherein we agree to:
 Chris T'msl~-Athens. Texas
 E-mail;ctinsley@jimparsoos-Iaw.com
                                                   1, Arbitrate the above cause through arbitration;
                                                   2, You will produce in accordance with outstanding discovery
                                                      we have sent as set out in the prior Rille 11 wilhout
                                                      objection but upon confidentiality if requested by you;
                                                   3, We will pass the hearing on the Motion to Compel
 Main Office.:
 Palestine
                                                      Arbitration set for the 12th of November;
  1007 N. Mallard                                  4. The Order to arbitrate will be an Agreed Order referring the
 Palestine, Texas 75B0l                               cause to arbitration and abating the cause pending
 Voice 903-723-0580                                   arbitration; and,
 ra.<c; 903-723-0580
    (PDF conversion)                               5. And, as I noted on the letter we are additionally amending
                                                      our petition which we will ille next week before the 12th not




                                                   ya
                                                      adding parties but addressing the facts pled and causes
Other Offices:                                        alleged.
Athens
  903-67(}'3379

Crockett
  888-546-7277                                 l                 ~
                                         Jim Parsons
Dallas
  Vmc.e': 888-546-7277                   Cc:       Mr. Mike Dodge
  fax: 214432-8273
                                                   Mr. Don Reavis
Tyler
 88B-546-7277


LegiillAssislants:
Christy McRin1ey
Chrlsty@jimparsona--law.com

LamE- Bruner
1aure@jimparsans--l.aw.oom



www.jimparsons-law.com


                                                                                                      COpy
                                                                                                                      App. 47
                                                   Jacbon !!.eWis u.iP           ATL~yrA.. (;,\            LONG [SL,\KD,).'Y         I'ORl1.ANo.. OR


jackson lewis                            3611 TUrtle lC,reek SOtelemtrdl
                                                                Sufu! 000
                                                                                 .alll'v!L~(lff"",'Il.AL

                                                                                 l'I0ST0N.MA
                                                                                                           WSJl.NGFt.ES,C'A
                                                                                                           MlAMl.n..
                                                                                                           Mfl','NEAPOLL'l.MN
                                                                                                                                     PROVIDENCE. itT
                                                                                                                                     RALruQH-OURHAM.}lC
                                                                                                                                     RrL1LIXQND, VA
                                                                                 ant,~aO,lL
                  Attorneys at Law                !1lial!;;:m, TelI':a5 1521"9
                                                                                 (LlWELA.""ID.OH           Moall.iStO~1'J, N1        SA(;llWEl't'W,CA
                                                      Tst 2'!4 52C-2400          DAUAS,TX                  NEW (JRLEA."fS. LA        SAN fRANCISCO, CA

                                                     fax- 214 S2;Q.200B          pEf't\'1'1t.cQ            NEW\'oru;:,~,'            !>EATl1.e, WA

                                              www·laclsanFeWls.com               ))/tlROIT ,\fl'           O!l'iNGECOltN'"fY.CJ...   llT AMroRJJ. IT
                                                                                 GIllia.,'1.'[(.lE.SC      ORtANOO.l'l               w,\S!-t£I,;<JfON,   0{   Roo!ON

                                                                                 lMRtroJU).CT              I'HlLADELl'H!A. PA        VlHrffiPt.,\Thi5..NY

                                                                                 HouSTON,ax                t'HOS'iIX,M
                                                                                   ..sVSG,\s.~v
                                                                                 L..                       PITTSBURGH, f>A




  My DJRE<T DIAL rs: 214.2135057
  My EMAIL ADDRESSIS;DM".HARlSFlELD@rAcI<SONLEWIS.COM



                                            November 4, 2010



  VIA E-MAlL ANQ
  AND CMIRRR #7010 0780 0002 15556590

  Jim Parsons
  Law Offices Qf Jim Parsons
  1007 N. Mallard
  Palestine, TX 75801

                                              Re:         Don K Reavis v. F. c. Holdtnls, Inc., et al;
                                                          Cause No. 10-0043; In the 349 District CQurt
                                                          ofRoaston County, Texas

  Dear Jim:

                   Taylor mentioned that he spoke with you this morning about ilia motions for
  protective order and to compel arbitratiou. I understand that Mr. Reavis has agreed to prooeed
  wiili arbitration per his employment agreement.

                 Given the parties' agreement, there should be no need to proceed with next
  week's hearing on the motion to compel. If you agree, would you sign this letter in the space
  below, confilming the parties' agreement to pmceed to arlJitration. I'll call the Court to remove
  the hearing from the docket and prepare a draft order referring the case to arbitration for your
  review.

                I will also withdraw our motion fur protective order that is being filed today and
  gather and produce the documents you have requested in the context of the arbitration. While
  some may ueed to be produced under a confidentiality agreement/order, I will honor your




                                                                                                                                                                       App. 48
jackson lewis                                                                          N(wemwr 4. 2-010
                   Attorneys at Law                                                             Pagel



    existing discovery requests, and you don'! need to send new ones. And once we get the
    arbitration going, I tend to be less fannal and will respond to email requests for records. .

                   I also got a call from Will Pryor last week indicating· some interest (maybe just
   his) in getting the parties back together. If Mr. Reavis wants to take another stsb at getting this
   resolved. I'm sure I can bring my guys back to the table.

                  I hope all is otherwise well with you.


                                                           Sincerely




   Agreement o/Counsel:

   The parties agree that the Reavis v. F.C. Holdings. Inc. el al. case (Cause No. 10·0043) will be
   resolVed through ar' 'on and that the Reavis case will be abated pending tbe arbitration:


 '+~JL.un~P~ar~so~n~s~--~~~~~~~~
   Attorney fur Plaintiff Don Reavis




   Dan Hartsfield
   Attorney for Defendants




                                                                                                          App. 49
App. 50
App. 51
                                      CAUSE NO. 10-0043

DON R. REAVIS,                                  §          IN THE DISTRICT COURT OF
                                                §
         Plaintiff,                             §
                                                §
v.                                              §
                                                §
F.C. HOIDINGS, INC.,                            §
NIGEL J. HARRISON, INDIVIDUALLY,                §
JLL ASSOCIATES FCH, L.P.,                       §          HOUSTON COUNTY, TEXAS
JLL ASSOCIATES G.P. FCH, LL.C.,                 §
JLL PARTNERS FUND FCR, LoP.,                    §
JLL PARTNERS FUND IV, LP, and                   §
JLLIFCR HOIDINGS I, LLC; and,                   §
FIRST COMMUNITY BANK,                           §
NATIONAL ASSOCIATION,                           §
                                                §
         Defendants.                            §           349TH mmCIAL DISTRICT

     RESPONSES FOR DEFENDANTS JLL ASSOCIATES FCH, LP., JLL ASSOCIATES
     G.P. Fell, L.L.C., JLL PARTNERS FUND FCll, LP. JLL PARTNERS FUND IV, L.P.
                             and JLLlFCll HOLDINGS I, L.L.C.,
     . TO PLAINTIFF'S FmST REQUESTS FOR ADMISSIONS AND REQUESTS FOR
                                      PRODUCTION

TO:      Plaintiff, Don Reavis, by and through Iris attorneys of record, Jim Parsons, Law Offices
         of Jim Parsons, 1007 N. Mallard, Pal",,1:ine, Tex.s 75801, and Michael C. Dodge, Glast,
         Phillips & Murray, P.C., 14801 Quorum Dr., Suite 500, Dallas, Texas, 75254.

         Subject to Defendants' First Amended Verified Motion to Compel Arbitration (''Motion
to Compel Arbitration") and to Defendants' Motion for Protective Order pen<ling the Court's
decision on the Motion to Compel Albitration ("Motion for Protective Order"), JLL
ASSOCIATES FCH, L.P., JLL ASSOCIATES G.P. FCH, L.L.C., JLL PARTNERS FUND
FeH, L.P., JLL PARTNERS FUND lV, L.P., and JLLlFCH HOLDINGS I, L.L.C. (collectively,
"Defendants") respond to Plaintiff's First Requests for Admissions and Requests for Production
as follows:




                                                 I




                                                                                                    App. 52
                          OBJECTIONS TO THE SCOPE OF l'LAINmiF'S
                FIRST REQUEST FOR ADMISSIONS AND PRODUCTION REQUESTS

       As reflected in the Motion tD Compel Arbitration, Plaintiff and P,C. Holdings, Inc. are
parties to an Employment Agreement that contains an arbitration provision to resolve disputes
arising under it. The Employment Agreement states:
       11.     Arbitration. Any umesolved dispute or controversy arising under or in
       connection with this Agreement, other than enforcement of the provisions of
       Paragraphs 6-9 of this Agreement, shall be settled exclusively by arbitration,
       conducted in Harris County, Texas, in accordance with the Employment Dispute
       Resolution Rilles of the American Arbitration Association ("AAA") then in
       effect, providedthal the Executive and the Employer shall comply with the
       Employer's grievance procedures in an effort to resolve such dispute or
       controversy before resorting tD arbitratioIL The arbitrators shall not have the
       authority to add to, detract from, or modify any provision hereof nor to award
       punitive damages to any injured party. A decision of the arbitration panel shall be
       final and binding. Judgment may be entered on the arbitrators' award in any court
       having jurisdiction. The direct expeose of any arbitration proceeding shall be
       apportioned by the arbitration award.

The hearing on Defendants' Motion to Compel Arbitration pursuant to this provision is

scheduled for November 12,2010.

        Defendants, therefore, object to Plaintiff's First Requests for Admissions and Requests
for Production as inappropriate and prematore attempts to engage in merit discovery before the
Court has ruled on Defendants' Motion to Compel Arbitration.          The document requests seek
records pertaining to the bank equity records, stock option plans, acquisition agreements and
stock ledger books. Each document reqnest relates to Plaintiff's underlying claim regarding his
entitlement to stock options under his Employment Agreement. The requests for admissions
similarly seek merit discovery on his stock option claim. See, e.g., Request for Admission No.
11, referencing "section 2(g) of the Employment Agreement between FC Holdings, Inc. and
Reavis."
               1.      None of the Plaintiff'S discovery requests relate to the enforceability of the

arbitration provision contained in the Employment Agreement or the arbitrability of the

underlying disputes. While pre-arbitration discovery is anthorized to the extent the parties need

infonnation pertaining to the issnes in a motion to compel arbitration, the plaintiff may not


                                                 2




                                                                                                        App. 53
conduct "discovery as to the merits of the underlying controversy" peuding a resolution of that

motion. See In re Houston Pipe Line Co., 311 S.W.3d 449,451 (Tex. 2009); .laekB. Anglin Co.

v. Tipps, 842 S.W.2d 266,268-69 (Tex. 1992) see also ON Equity Sales Co. v. Emmertz, 526 F.

SUPP. 2d 523, 528 (E.D. Penn. 2007) (stating "the evidence before the court is sufficient to

determine the issue of arbitrability without fin1:her discovery"); Recognition Equip., Inc. v. NCR

Corp., 532 F. Supp. 271, 273, 275 (N.D. Tex. 1981) (citing Miss. Power Co. y. Peabody Coal

Co., 69 F.R.D. 558 (S.D. Miss. 1976) (noting that "[i]t can hardly be said that discovery ...

pendiog arbitration in this case        woUld~6;[rh~r'g6~ls"of expeditious resolution of disputes
and decreased litigation expenses). None of the Plaintiff's discovery requests go to the issue of

the enforeeability of the Employment Agreement. I                     Similarly, none relate to proof or an

argument that Plaintiff's claims fall outside the scope of the arbitration provision.




              RESPONSE TO lNDIVIDUAL REQUESTS FOR PRODUCTION AND ADMISSION
Reqllest for Production No.9: Produce a true and correct copy of the Subsidiary Bank Equity
Summary prepared by FC Holdings for December 31, 2007 together with all exhibits and
attachments.

RESPONSE:

Defendants object to this discovery request because it improperly seeks infonnation related to
the merits of Plaintiff's claim(s), rather than the arhitrability of the underlying dispute.
Accordingly, this discovery request is premature and inappropriate pending a resolution of
Defendmrts' motion to compel arbitration. See In re Houston Pipe Line Co., 311 S.W.3d 449,
451 (Tex. 2009); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266,268-69 (Tex. 1992).


Request for Prodncnon No. 10: Produce a true and correct copy of all First Natioual Bank of
Crockett stock option plans or plan covering shares of common stock of First National Bank of
Crockett, First Community Bank East Texas andlor First Community Bank N.A.


l In fact. rather than disputing it. validity, the plaintiff bas judicially .dmitted the enforceability of the Employment
Agreement. See 1 6.2 afPlaintifrs Original Petition ("On April 27, 2007, Plaintiff and Defendant FCH entered into
a valid and enforceable written contract, the Employment Agreemen~ effective November 30, 2007, as amended
August I, 2008.").

                                                           3




                                                                                                                            App. 54
RESPONSE:

See Response to Request for Production No.9, incorporated by ",lerence. 1m. request is also
overly broad in time and scope.


Request for Prodnetion No. 11: Produce true and correct copies of all agreements together with
exhibits andlor attachments between JLL Associates FCH, L.P., JLL Associates G.P. FCH,
L.L.C., JLL Partners Fund FCH, L.P., JLL Partners Fund N, L.P., JLUFCH Holdings l, L.L.C.
or either or any of them and FC Holdings, Inc. andlor Nigel Harrison, concerning acquisition
ownership andlor stock ofFC Holdings, Inc.

RESPONSE:

See Response to Request for Production No.9, incorporated by reference.

Reqnest for Production No. 12: Produce true and correct copies of the stock ledger books
and/or any additional documents xeflecting the stock ownership of First National Bank of
Crockett, First National Bank East Texas and First Community Bank N.A. from April 1, 2007 to
date of answer showing the nnmber of authorized shares of stock, the classes of authorized
shares, the issuance of shares of stock, the redemption of shares of stock, the date of issuance or
redemption of shares of stock, the transfer of shores of stock, and the ownership of shores of
stock.

RESPONSE;

See Response to Request for Production No.9, incorporated by refereuce.


Request for Admission No. 10: Do you admit or deny that subsequent to October 21, 2008 no
documents were created to meet the "options" Chainuan Harrison "committed to honor" andlor
containing the "options" Chairman Harrison "committed to honor" following discussion
"relating to Mr. Reavis's concerns" "pe, the employment agreements with motion being second
by Director Mike Buoy and unanimously approved by the board" as reflected by the minutes of
October 21, 2008 Board of Directors Meeting for the First Community Bank of East Texas?

RESPONSE~


See Response to Request for Production No.9, incorporated by reference. Defeudaots also
object to this Request because it is argumentative, compound, confusing aod ambiguous. See
Birdo v. Holbrook, 775 S.W.2d 411, 413 (Tel<. App.-Fort Worth 1989, writ denied).

Reqnest for Production No. 13: In the event you deny Request for Admission No. 10, produce
a true and correct copy ofthe documents upon which denial is based.

RESPONSE:
                                                 4




                                                                                                      App. 55
See Response to Request for Production No.9 and Request for Admission No. 10, incorporated
by reference.

Request for Admission No. 11: Do you admit or deny that FC Holdings, lnc. as "employer" of
Don R. Reavis "Executive" never caused "First National Bank of Crockett to establish a stock
option plan covering shares of common stock of the bank" allowing Don R. Reavis "to
participate in such plan" and "purchase 12,500 shares of bank common stock". See section 2(g)
of the Employment Agreement between FC Holdings, me. ''Employer'' and Don R. Reavis
"Executive" dated April 21, 200??

RESPONSE:

See Response to Request for Admission No. 10, incorporated by reference


Request for Production No. 14: In the event you deny Request fur Admission No. II, produce
a true and correct copy of the stock option plan upon which denial is based.

RESPONSE:

See Response to Request for Production No. 9 and to Request for Admission No. 11,
incorporated by reference.




                                              5




                                                                                                App. 56
                                                 Respectfully stihmitted,




                                                 JACRSONLEWlSLLP
                                                 ~8r1   TurtleCto;<lk Blvd, IMtl; suo
                                                 Jjauas,T<Wl$75~19
                                                 Telephone:      (214) 52+2400
                                                 Facsimile;      (214) 524.2008

                                                 ATTORNEYS F9~ I)EFENDANTS
                                                . JLL ASSOCIATES FCH; L.P" ILL-ASSOCIATES
                                                  G.P~ FCH, L.L.C., JLLPARTNERSFUND. FCH,
                                                  L.P., JLL.pARTNERS FUND. lV, L.p.,art4
                                                 :i11.IFOa HOLDINGs!, L.t.C.
                                   CERTIFlCATEOFSERvrCE

       there):'! cettrry that ll. 4'1l-e ~!l4 eptrect copy q( the foregQwg was. sel,"Ve.ct;)Jl.ln\1lalit tg
Tel'as R)1tes. ofGivilpro~"'e21and 21a, "ill Unit'!4 states C'lrlj.fied Mail; Wt>,lnl receipt
request'1d; qn tllis1he4th day ofNoven1ber; 2QW, to:

Jim Parsons
LlIw'Oflices ofJimParsons
1(jOTN~ Mallard
Palestine, Texas 75801.

lvllc!t:.e\, G.DQdg"
Gla;il,PPi)l\ps &; Mmtay,I',C,
148()! Quorum Dr., 81lite500
Dallas, Texas 75254




                                                                                                              App. 57
                                      CAUSE NO. IO-OO43

DONR. REAVIS,                                 §           IN THE DISTRICT COURT OF
                                              §
       Plaintiff,                             §
                                              §
~§
                                              §
F.C. HOLDINGS, INC.,                          §
NIGEL J. HARRISON, INDIVIDUALLY,              §
JLL ASSOCIATES FCR, L.P.,                     §           HOUSTON COUNTY, TEXAS
JLLASSOCIATES G.P. FCR, LLC.,                 §
JLL PARTNERS FUND FCH, L.P.,                  §
JLL PARTNERS FUND IV, LP, and                 §
JLL/FCR HOLDINGS I, LLC; and,                 §
FIRST COMMUNITY BANK,                         §
NATIONAL ASSOCIATION,                         §
                                              §
       Defendants.                            §           349TII JUDICIAL DISTRICT


 RESPONSES OF DEFENDANTS FC HOLDINGS, INC., FIRST COMMUNITY BANK,
   . N.A., AND NIGEL HARRISON, INDMDUALLY TO PLAINTIFF'S SECOND
   .   REQUESTS FOR ADMISSIONS AND REQUESTS FORPRQDUCTION


TO:    Plaintiff; Don Reavis, by and through his attorneys of record, Jim Parsons, Law Offices
       of Jim Parsons, 1007 N. Mallard, Palestine, Texas 75801, and Michael C. Dodge, Glast,
       Phillips & Murray, P .C., 14801 Quorum Dr., Suite 500, Dallas, Texas, 75254.

       Subject to Defendants' First Amended Verified Motion to Compel Arbitration ("Motion
to Compel Arbitration") and to Defendants' Motion for Protective Order pending the Court's
decision on the Motion to Compel Arbitratinn ("Motion for Protective Order''), FC HOLDINGS,
INC., FIRST COMMUNITY BANK, N.A., AND NIGEL HARRISON, INDIVIDUALLY
(collectively, "Defendants"), respond to Plaintiff's Second Requests for Admissions and
Requests for Production as follows:




                                                                                                 App. 58
                        OBJECTIONS TO THE SCOPE OF PLATNTlFF'S
                FIRsT REQUEST FOR ADMISSIONS A..'W PRODUCTION REQUESTS

       As reflected in the Mation to Compel Arbitration, Plaintiff and F .C. Holdings, lnc. are
parties to an Employment Agreement that contains an arbitration provision to resolve disputes
arising under it. The Employment Agreement states:
       11.     Arbitration. Any unresolved dispute or controversy arising under or in
       connection with this Agreement, other than enfurcement of the provisions of
       Paragraphs 6-9 of fins Agreement, shall be settled exclru;ively by arbitration,
       conducted in Harris County, Texas, in accordance with the Employment Dispnte
       Resolution Rules of the American Arbitration. Association ("AAA") then in
       effect, provided that the Executive and the Employer shall comply with the
       Employer's grievance procedures in an effort to resolve such dispute or
       controversy before resorting to arbitration. The arbitrators shall not have the
       authority to add to, detract from, or modify any provision hereof nOr to award
       punitive damages to any injured party. A decision of the arbitration panel shall be
       final and binding. Judgment may be entered on the arbitrators' award in any court
       having jurisdiction. The direct expense of any arbitration proceeding shall be
       apportioned by the arbitration award.

The hearing on Defendants' Motion to Compel Arbitration pursuant to tlrls provision is

scheduled for November 12, 2010.

       Defendants, therefore, object to Plaintiffs First Reqnests for Adnrlssions and Requests
for Production as inappropriate and premature attempts to engage in merit discovery before the
Court has ruled on Defendants' Motion to Compel Arbitration.         The document requests seek
records pertaining to the bank equity records, stock option plans, acquisition agreements and
stock ledger books. Each document request relates to Plaintiff's underlying claim regarding his
entitlement to stock options under his Employment Agreement The requests for admissions
similarly seek merit discovery on his stock option claim. See, e.g., Request for Admission No.
11, referencing "section 2(g) of the Employment Agreement between FC Holdings, Inc. and
Reavis."
               1.     None of the Plaintiffs discovery requests relate to the enforceability of the

arbitration provision contained in the Employment Agreement or the arbitrability of the

underlying disputes. While pre-arbitration discovery is authorized to the extent the parties need



                                                 2




                                                                                                      App. 59
information pertaining to the issues in a motion to compel arbitration, the Plaintiff may not

condnct "discovery as to tbe merits of the underlying controversy" pending a resolution of that

motion. See In re Houston Pipe Line Co., 311 S.W.3d 449, 451 (Tex. 2009); see also Jack B.

Anglin Co. v. Tipps, 842 S.W.2d 266, 268·69 (Tex. 1992) see also ON. Equity Sales Co. v.

Emmertz, 526 F. Supp. 2d 523, 528 (RD. Penn. 2007) (stating "the evidence before the court is

sufficient to determine the issue of arbitrability without fin:ther discovery"); Recognition Equip.,

Inc. v. NCR Corp., 532 F. Supp. 271, 273,275 (N.D. Tex. 1981) (citing Miss. Power 0,. v.

Peabody Coal Co., 69 F.R.D. 558 (S.D. Miss. 1976) (noting that "[i]t can hardly be said that

discovery ... pending arbitration in this case would fin:ther [the] goals" of expeditious resolution

of disputes and decreased litigation expenses). None of the Plaintiff's discovery requests go to

the issue of the enforceability of the Employment Agreement. 1 Similarly, none relate to proof o(

an argmnent that Plaintiff's claims fuU outside the scope of the arbitration provision.




               RESPONSE TO INDIVIDUAL REQUESTS FORPRoDucnON AND ADMISSION

Request for Production No.9: Produce a troe and correct copy of the Subsidiary Bank Equity
Summary prepm-ed by FC Holdings for December 31, 2007 together with aU exhibits and
attachments.

RESPONSE:

Defendants object to tbis discovery request because it improperly seeks information related to
the merits of Plaintiff's claim(s), rather than the arbitrability of the underlying dispute.
Accordingly, this discovery request i. premature and inappropriate pendiug a resolution of
Defendants' motion to compel arbitration. See In re Houston Pipe Line Co., 311 S.W.3d 449,
451 (Tex. 2009); JackS. Anglin Co. v. Tipps, 842 S.W.2d 266,268-69 (Tex. 1992).




1 In f.c~ ralher than disputing its validity, thf: Plaintiffhas judicially admitted the enfurceability of thf: Employment
ANeomenL See ~ 6.2 ofPlaiJrtif['s Original Petition ("On April 27, Z007, Plaintiff and Defendant FCH entered into
11   valid and enforceable written conb."act, the: Employment Agreement, effective November 30, 2007, as amended
August 1, 2008.").

                                                           3




                                                                                                                            App. 60
Request for Produdiou No. 10: Produce a true and correct copy of all First National Bank of
Crockett stock option plans or plan covering shares of common stock of First National Bank of
Crookett, First Community Bank East Texas and/or First Community Bank N.A.

RESPONSE:

See Response to Request for Produotion No.9, incorporated by reference. This request is also
overly broad in time and scope.


Reqnest for Production No. 11: Produce true and correct copies of all agreements together with
exlulJits and/or attachments between JLL Associates FCH, L.P., JLL Associates G.P. FCH,
L.L.C., ILL Partners Fund FCH, L.P., ILL Partners Fund IV, L.P., ILUFCH Holdings I, L.L.C.
or either or any of them and FC Holdings, Inc. and/or Nigel Harrison, concerning acquisition
ownership and/or stock ofFC Holdings, Inc.

RESPONSE:

See Response to Reqnest for Produotion No.9, incorporated by reference.

Reqnest for Production No. 12: Produce true and correct copies of the stock ledger books
and/or any additional documents reflecting the stock ownership of First National Bank of
Crockett, First National Bank East Texas and First Community Bank N.A. from April 1, 2007 to
date of ansWer showing the number of anthorized shares of stock, the classes of authorized
shares, the issuance of shares of stock, the redemption of shares of stock, the date of issuance or
redemption of shares of stock, the transfer of shares of stock, and the ownership of shares of
stock.

RESPONSE:

See Response to Request fur Produotion No.9, incorporated by reference.


Request for Admission No. 10: Do you admit or deny that subsequent to October 21, 2008 no
documents were created to meet the '~options" Chairman Harrison "committed to honor" and/or
containing the "options'" Chairman Harrison '~committed to honor" following discussion
"relating to Mr. Reavis's concerns" "per the employment agreements with motion being seoond
by Director Mike Buoy and unanimously spproved by the board" as reflected by the minutes of
October 21, 2008 Board of Directors Meeting for .the First Community Bank ofEas! Texas?

RESPONSE:

See Response to Request for Production No.9, incorporated by reference. Defendants also
object to tbis Request because it is argumentative, compound, confusing and ambiguous. See
Birdo v. Holbrook, 715 SW.2d 411, 413 (Tex. App.-Fort Worth 1989, writ denied).



                                                 4




                                                                                                      App. 61
Request fOf Production No. 13: In the event you deny Request for Admission No. 10, produce
a true and correct copy of the documents upon which denial is based.

RESPONSE:

See Response to Request for Production No.9 and Request for Admission No. 10, incorporated
by reference.

Reqnest for Admission No. 11: Do yon admit or deny that PC Holdings, Inc. as "employer" of
Don R. Reavis "Executive" never caused "First National Bank of Crockett to establish a stock
option plan covering shares of common stock of the bank" allowing Don R. Reavis "to
participate in such plan" and ''purchase 12,500 shares of bank common stock". See section 2(g)
of the Employment Agreement between FC Holdings, Inc. "Employer" and Don R. Reavis
"Executive" dated April 21, 2007?

RESPONSE:

See Response to Request for Admission No. 10, incorporated by reference


Reqnest for Production No. 14: In the event you deny Request for Admission No. 11, produce
a true and correct copy of the stock option plan upon which denial is based.

RESPONSE:

See Response to Request for Production No. 9 and to Request fur Admission No. 11,
incorpor~ by reference.




                                               5




                                                                                                 App. 62
                                                        TaylotE. W~-.ite
                                                        State BarNd. 2407()843

                                                JACI<;SO;NLEWISLLP
                                                381) Twtl~Creek Elv,!, S\lile5DO
                                                IJaUaS,.Texas-75219
                                                Telephone:    (214) $24-2,1Q()
                                                Faq;jn)il,,:    ('214) :;;'44"200&

                                                ATTORNEYS'FOR DEFENDANT
                                                FC HOLDINGS,INCc



.I herobycertifyihat a we ana, C01'f~t GOPy of thefocegoing wi'S served, plltSl\aI1tto TexasR\lles
 bl'Ciyil Pro eedu'I'l1211JD.d21a, v1l1 pmt¢,j States certifieii M:;il, ,el1= receipt reqU'e;teii;on thi$
 the 4.thday ofN"v"'llber,201(), tq:                                                     .

Jim Parsons
Law OfficesofJfuiP!i.ffiOIlS
1()()7 N. Mal\!)til
J'!ll""tllle, Texas 75801
Michael C, Dodge
Glas!, Phillips~M1lITay.J;'.Cl.
14&\l'IQt;rolU,Ill Dr., S1,ltte 500


                                              ::.u-
Dallas,. Texas 75254

                                                                  U5~'~---




                                                                                                            App. 63
                                     CAUSE NO. 10-0043

DON R. REAVIS,                                  §           IN THE DISTRICT COURT OF
                                                §
       Plaintiff;                               §
                                                §
v.                                              §
                                                §
F.e. HOLDlNGS, lNe.,                            §
NIGEL J. HARRISON, lNDIVIDUALLY,                §
JLLASSOCIATES FCR, L.P"                         §           HOUSTON COUNTY, TEXAS
JLL ASSOCIATES G.P. FCR, L.L.C.,                §
JLL PARTNERS FUND FCH, L.P.,                    §
JLLPARTNERS FUND IV, LP, and                    §
JLUFCH HOLDlNGS I, LLC; and,                    §
FIRST COMMUNITY BANK.                           §
NATIONAL ASSOCIATION,                           §
                                                §
       Defendants.                              §           349TH JUDICIAL DISTRICT


 RESPONSES OF DEFENDANTS Fe HOLDINGS, INC., FIRST COMMUNITY BANK,
    N.A~ AND NIGEL BARRISON, INDIVIDUALLY, TO PLAINTIFF'S THIRD
      REQUESTS FOR ADMISSION AND REQUESTS FOR PRODUCTION

TO:    Plaintiff, Don Reavis, by and tbrough his attorneys of record, Jim Parsons, Law Offices
       of Jim Parsons, 1007 N. Mallard, Palestine, Texas 75801, and Michael C. Dodge, Glast,
       Phillips & Murray, P.C., 14801 Quorum Dr., Suite 500, Dallas, Texas, 75254.

       Subject to Defendaots' First Amended Verified Motion to Compel Arbitration ("Motion
to Compel Arbitration") and to Defendants' Motion for Protective Order pending the Court's
decision on the Motion to Compel Arbitration ("Motion fur Protective Order'), FC HOLDlNGS,
lNC., FIRST COMMUNITY BANK. N.A., AND NIGEL HARRISON, INDIVIDUALLY
(collectively, "Defendants"), and hereby serve the following responses to Plaintiff's Third
Requests for Admissions and Requests for Production, porsnan! to Texas Rules of Civil
Procedure 198 and 196;
                            OBJECTIONS TO THE SCOPE OF I'LAINTlFF'S
                    FIRsT REQUEST FORADMlSSlONS AND PRODUCTION REQUESTS

       As reflected in the Motion to Compel Arbitration, Plaintiff and F.C. Holdings, Inc. are
parties to an Employment Agreement tM contams an arbitration provision to resolve disputes
arising under il The Employment Agreement states:




                                                                                                 App. 64
       11.     Arbitration. Any unresolved dispute or controversy arising under or in
       c[mneclion with this Agreement, other than enforcement of the provisions of
       Paragraphs 6-9 of this Agreement, shall be settled exclusively by arbitration,
       conducted in Harris County, Texas, in accordance with the Employment Dispute
       Resolution Rules of the American Arbitratioll Association CAAA") thoo in
       effect, provided that the Executive and the Employer shall comply with the
       Employer's grievance procedures in an effort to resolve such dispute or
       controversy before resorting to arbitration. The arbitrators shall not have the
       authority to add to, detract fi'Om, or modify any provision hereof nor to award
       puoitive damages to any injured party. A decision of the arbitration panel shall be
       final and binding. Judgment may be entered on the arbitrators' award in any court
       having jurisdiction. The direct expense of any arbitration proceeding shall be
       apportioned by the arbitration award.

The hearing on Defendauts' Motiou to Compel Arbitration PUfSllJUlt to this provision is

scheduled for November 12, 2010.

       Defendants, therefore, object to Plaintiffs First Requests for Admission. and Requests
for Production as ioappropriate and premature attempts to engage in merit discovery before the
Court has rnled on Defendants' Motion to Compel Arbitration.         The document requests seek
records pertaining to the bank equity records, stock option plans, acquisition agreements and
stock ledger books. Each document request relates to Plaintiff s underlying claim regarding bis
entitlement to stock options under bis Employment Agreement The requests for admissions
similarly seek ruetit discovery on his stock option claim. See, e.g., Request for Admission No.
II, referencing "section 2(g) of the Employment Agreement between FC Holdings, Inc. and
Reavis.."
               1.     None of the Plaintiff s discovery requests relate to the enforceability of the

arbitration prOvision contained in tbe Employment Agreement or the arbitrability of the

underlying disputes. While pre-arbitration discovery is authorized to the extent the parties need

information pertaining to the issues in a motion to compel arbitration, the Plaintiff may not

conduct "discovery as to the merits of the underlying controversy" pending a resolution of that

motion. Seeln reHouston Pipe Line Co., 311 S.W.3d 449, 451 (Tex. 2009); JackB. Anglin Co.

v. Tipps, 842 S.W.2d 266, 268-69 (Tex.. 1992) see also O.N. EqUity Sales Co. v. Emmertz, 526 F.

Supp. 2d 523, 528 (E.D. Penn. 2007) (stating "the evidence before the court is sufficient to




                                                                                                       App. 65
determine the issue of arbitrability without furtber discovery"); Recognition Equip., Inc. v, NCR

Corp" 532 F, Supp, 271, 273, 275 (N,D. Tex. 1981) (citing Miss. Power Co. v, Peabody Coal

Co., 69 ER.D. 558 (S.D, Miss. 1976) (noting that "[iJt can hardly be said iliat discovery ...

pending arbitration in this case would further [ilie] goals" of expeditious resolution of disputes

and decreased litigation expenses). None of the Plaintiff's discovery requests go to the issue of

the enforceability of the Employment Agreement. '                     Similarly, none relate to proof or an

argument that Plaintiff's claims fall outside the scope of the arbitration provision.




              RESl'ONSE TO INDIVIDUAL REQUESTS FOa Pll.ODUCTION AND ADMISSION

Request for Admission No. 12: Attached is a copy oftha Fairness Opinion Agreement and Plan
of Merger by and among FC Holdings, lnc., FC Crockett Corporati()n and First Crockett
Bancshates, lnc. dated March 6, 2007.                                    '

Do you admit that it is a true and correct copy of the finalized Fairness Opinion Agreement and
Plan of Merger by and among FC Holdings, Inc., FC Crockett Corporation and First Crockett
Bancshares, lnc. dated March 6, 200??

OBJECTION:

Defendants object to this discovery request in its entirety becanse it improperly seeks
information related to the merits of Plaintiff's claim(s), rather than the arbitrability of the
nnderlying dispute. Accordingly, this discovery request is premature and inappropriate pending
a resolntion of Defendants' motion to compel arbitration. See In re Houston, 311 S,W.3d at 451
(Tex. 2009); Tipps, 842 S.W.2dat268-69 (Tex. 1992),


Request for Productiou No. 15: ln the event you have denied Request fur Admissions 12,
produce a true and correct copy of the finalized Fairness Opinion Agreement and Plan of Merger
by and among FC Holdings, Inc., FC Crockett Corporation and First Crockett Bancshares, Inc.
dated Match 6,2007.




1 In fact, rather than disputing its validity, the Plaintiff has judicially admitted the enforceability of the Employment
AgreemenL See 1 6.2 ofP1aintiffs Original Petition ("On April TI, 2007, Plaintiff and Defendant FCH entered into
a valid and enforceable written contract, the Employment Ag:reemout, effective November 30, 2007, as amended
August 1, 2U08.").




                                                                                                                            App. 66
OBJECTION:

See Response to Request for Admission No. 12, incorporated by reference here.




                                                                                App. 67
                                             RespectfulIys>I1)mitted,


                                             ,By:-
                                                .
                                                     ~#=;z
                                                      r '.-
                                                     -DanHartsfield.~7-
                                                       ~()~
                                                                        -,-."-,,,~.~~
                                                                     :-_.      ./ -'                   h"",.




                                                     State Bitt No. 09170800
                                                     TayIorE. White:
                                                     StateB'I[N6, 24070843

                                             JACKSDN.LEWIS LLP
                                             3311 TurtleCreekBlvd, Suite 500
                                             Dalla.s;T~75219
                                             Telephone:      (;2i4) 524,2400
                                             Facsimile:      (214) 524'2008

                                             ATIOENEY:S.fOR IJEFENDANT
                                             FC HQLDrNGs,lNC.


                                  CERTIFICATE OF SERVICE

I hereby¢rti:fY 1hata 4lJe,anil COIT!Xt co:pYQfi.hefdtegi:rin!lW\lSserYe~, PlltilUalltto Texas Rul"s
ofCMl I'roqedure 21·at)li· 21., via Uj,ik:d J?tates Certifieq Mail,re~rJ1r~pt requeste4, on this
the 4th day ofNDVem.her, 20m, to;~

Ji:(nJ'al'SOrIs
J..,;wQffices.ofJlJnParsOllS
10.0.7 },f, Mall'l[d
Palestihe, TeXas 75801

KfichaefO,.Dodge
Glas~Phi!lipl18G Ml!rJ1'Y,J?,C.
14801 Quorui:I1Dr., Suite 500
Dalla~,Tex$ 75254

                                                                                             ~'-"

                                              Dan HBrtsfield




                                                                                                               App. 68
                                      CAUSE NO. 10-0043

 DON R. REAVIS,                                 §
                                                §
        Plaintiff,                              §
                                                §
 v.                                             §
                                                §
F.C. HOLDINGS, INC.,                            §
NIGEL I. HARRISON, INDIVIDUALLY,                §
JLL ASSOCIATES FCH, L.P.,                       §          HOUSTON COUNTY, TEXAS
JLL ASSOCIATES G.P. FCH, L.L.C.,                §
JLL PARTNERS FUND FCH, L.P.,                    §
ILL PARTNERS FUND IV, LP,                       §
JWFCH HOLDINGS I, LLC, and                     §
FIRST COMMUNITY BANK,                          §
NATIONAL ASSOCIATION,                          §
                                               §
        Defendants.                            §           349TH JUDICIAL DISTRICT

      DEFENDANTS' MOTION FOR PROTECTIVE ORDER PENDING DECISION
       ON FIRST AMENDED VERIFIED MOTION TO COMPEL ARBITRATION

TO TIlE HONORABLE JUDGE FOR THE 349TH DISTRICT COURT:

                Defendants F.C. Holdings, Inc., Nigel I. Harrison, individually, ILL Associate.

FCH, L.P., JLL Associates G.P. FCR, L.L.C., JLL Partners Fund FCR, L.P., JLL Partners Fund .

IV, LP, JLLJFCH Holding. I, LLC, and First Community Bank, Natioual A ••oeiation

(collectively, the "Defendants") file this Motion for Proteetive Order Pending Decision on First

Amended Verified Motion to Compel Arbitration and would show the court as fOllows, without

waiving any other objections its subsequent responses to discovery may contain:

                                     I. Background Faols

               I.     Plaintiff Do~ Reavis (the "Executive") bas filed a petition against the

Defendants, asserting various causes of action to recover benefits (bonuses and stock options)

provided in his Employment Agreement. All of hi. claims rely squarely on the Employment

Agreement.

DEFENDANTS' MOTION FOR PROTECTIVE ORDER PENDING DECISION
ON FIRST AMENDED VERIFIED MOTION TO COMPEL ARBITRATION                                  PAGEl




                                                                                                   App. 69
.' '"1




                        2.       Because the Employment Agreement contains a valid, enforceable

         aroitration provision that captures alI of the Executive's claims, the Defendants filed their

         Verified Motion to Compel Arbitration and Abate Proceedings Peru:li:ng Arbitration on June 21,

         2010. After substitution of counsel, the Defendants filed their First Amended Verified Motion to

         Compel Arbitration and to Abate Proceedings Pending Arbitration on October 22, 2010. A

         hearing on that motion, as well as any other outstanding motions, is scheduled for November 12,

         2010.

                        3.       On June 7, 2010, the Execntive served the Defendants with Plaintiff's

         First Requests fur Admissions and Requests for Production to Defendants ILL Associates FCH,

         L.P., ILL Associates G.P. FCH, L.L.C., ILL Partners Fund FCH, L.P., ILL Partners Fund lV,

         LP, and JUlFCH Holdings I, LLC, and PIaintifPs Second Requests for Admissions and

         Requests fur Production to Defendants FC Holdings, Inc., Nigel Hrurison, individually, and First

         Community Bank, National Association. (Ex. A.) On June 23, 2010, the Execntive served the

         Defendants with Plaintiff's Third Requests for Adurissions and Requests for Production to

         Defendants FC Holdings, Inc., Nigel Harrison, and First Community Bank, National

         Association. (Ex. B.)

                        4.       In order to mutually resolve the dispute, the parties agreed to mediate the

         Executive's claims against the Defendants and to push back response deadlines to the

         Executive's discovery requests. Mediation, however, waS unsuccessful.

                                          II. ArgumentJ and Authoritie.

                        5.       In light of the undeniable enforceability of the arbitration provision and

         the pending hearing on the Defendants' motion to compel arbittation, the Executive's discovery

         requests are inappropriate. Accordingly, the Defendants respectfully request this Court to enter


         DEFENDANTS' MOTION FOR PROTECTIVE ORDER PENDING DECISION
         ON FIRSTAMENDED VERIFIED MOTION TO COMPEL ARBITRATION                                      PAGE 2




                                                                                                               App. 70
an order protecting them from responding to the Executive's discovery requests pending this

Court's decision on Defendants' First Amended Verified Motion to Compel Arbitration and to

 Abate Proceedings Pending Arbitration.

                6.      The trial court has discretion to issue a protective order "in the interest o(

justice." TEX. R.. CIY. P. 192.6(a); In re Alford Chevrolet-Geo, 997 S.W.2d 173, 181 (Tel<.

 1999). This means the court bas the authority to limit the scope of discovery based on the needs

and circumstances of the case. TEX. R. CIY. P. 192.4; see also TEX. R.. elY. P. 192 cmt 7 (noting

that court soould limit discovery "to prevent unwarranted delay and expensive").

                7.      Under the circumstances of the present case, the Executive seeks

discovery of infonnation related to the merits of his claims, mther than the arbitrability of the

underlying dispute•. While pre-arbitration discovery is authorized to the extent the psrties need

infonnation pertaining to the issues in a motion to compel arbitration, the Executive should not

conduct "discovery as 10 the merits of the underlying controversy" pending a resolution of that

motion. See In re Houslen Pipe Line Co., 311 S.W3d 449, 451 (Tex. 2009); .ee generally Jack

B. Anglin Co. v. Tipps, 842 S.W.2d 266, 268-69 (Tex. 1992) (stating that ''when a party contests

the applicability of an arbitration provision in an agreement, the court is instructed to proceed

snnnnarily to delennine the issne''); see al.o ON; Equity Sales Co.   v. Emmert;:, 526 F. Sopp. 2d

523,528 (B.D. Penn. 2007) (slating "the evidence before the court is sufficient to detennine the

issue of arbitrsbility without further discovery"); Recognition Equip., Inc. v. NCR Corp., 532 F.

Supp, 271, 273, 275 (N.D. Tex. 1981) (ciling Miss. Pawer Co. v. Peabody Coal Co., 69 F.R..D.

558 (S.D. Miss. 1976) (noting that "[iJt can hardly be said thaI discovery ... pending arbitration

in Ibis case would further [the1 goals" of expeditious resolution of disputes and decreased

litigation expenses).


DEFENDANTS' MOTION FOR PROTECTIVE ORDER PENDING DECISION
ON FIRST AMENDED VERIFIED MOTION TO COMPEL ARBITRATION                                      PAGE 3




                                                                                                         App. 71
                8.     For example, discovery requests seeking "to detennine the identity of all

potential defendants and to what extent each defendsnt is liable" are impennissible. Houston

Pipe Line, 842 S.W.2d at 451.       With that in mind, the Texas Supreme Court is clear that

overbroad discovery orders and agreements pertaining to merits discovery must be vacated

pending a resolution of arbitration issues. See irl at 452.

                9.     In addition to being objectionable or non-discoverable for a variety of

reasons, each of the Executive's production requests and requests for admission go to the merits

of his causes of action. For example, the Executive requests various documents unrelated to the

arbitration provision in· the Employment Agreement (See, e.g.. Ex. A, Requests for Production

Nos. 9-14.) These requests pertain instead to the extent each Defendant is allegedly liable to the

Executive onder his claims. Given the context of the action; this is expressly impennissible

under Texas law regarding discovery. See Houston Pipe Line, 311 S.W.3d at 451. In ar<ier for

these documents to be relevant to the current circumstances, the Executive must link them ta

some issue pertaining ta arbitration, such as the scope (If the arbitration provision. Irl In that

regard, he cannot do so.

               10.     Even more compelling is the fuet that the Executive specifically asks the

Defendaots to .dmit fuets which he must prove as a matter of law to sustain his claitns. (See Ex.

A. Requests for Admission Nos. 10-11.) Not only are these discovery requests impermissible in

the first place because they ask the Defundants to admit propositions of law and invade the

province of the filet-finder, but also they go directly to the merits of his claims. The requested

admissions are not relevant to his response to the Defendaots' motion to compel arbitration. See

Houston Pipe Line, 311 S.W.3d at 451. Instead, he is attempting to collect evidence going to the

merits of his claims, and such discovery requests shonld not go forward because they are


DEFENDANTS' MOTION FOR PROTECTIVE ORDER PENDING DECISION
ON FIRST AMENDED VERIFIED MOTION TO COMPEL ARBITRATION                                    PAGE 4




                                                                                                     App. 72
unrelated to issues in the Defendants' motion to compel arbitration.

                11.    AcoordingIy, Defendants reqnest this Court to issne a protective order that

snspends Defendants' obJigatinns to respnnd to Plaintiffs premature and impermissible

discovery requests peuding this Court resolves the Defendants' motion to compel arbitration.

                                            m.   Prayer

               WHEREFORE, Defendants respectfully request that this Court grant their Motion

for Protective OnIer Pending Decision on First Amended Verified Motion to Compel

Arbitration, lllld that this Court issue such further orders which justine may require.



                                                      Respectfully Submitted,


                                                      Ma&mC~=~
                                                      By:-1;:2"-
                                                            Hartsfield
                                                                           ~
                                                        Texas Bar No. 09
                                                        Taylor E. White
                                                        Texas State Bar No.: 24070843
                                                           JACKllON LEwIS LLP
                                                           3911 Turtle Creek Blvd., Suite 500
                                                           Dallas, Texas 75219
                                                           PH: (214) 520-2400
                                                           FX: (214) 520-2008

                                                      AITORNEYSFoRDEFENDANTS




DEFENDANTS' MOTION FOR PROTECTIVE ORDER PENDING DECISION
ON FIRST AMENDED VERIFIED MOTION TO COMPEL ARBITRATION                                    PAGES




                                                                                                     App. 73
                                           CERTIFICATE OF CONFERENCE

        Counsel for defendants conferred with counsel for plaintiff with respect to this motion via
teleconference on November 4, 2010, but was unable to re,olve the issues raised in it prior to
fIling.

         Certified to the 4th day of November, 201 0, by:




                                                            Taylo .   White



                                              CERTIFICATE OF SERVICE

         I herebycertifY that a true copy of Defendants' Motion for Protective Order Pending Decision on
First Amended Verified Motion trJ Compel Arbitration was faxed and mailed via certified mail, retum-
receipt requested, to the foUowing couosels of record on this, the 4th day ofNOV<t1Iber, 2010:

                          Jim Parsons
                          Law Offices of Jim Parsons
                          1007 N. Mallard
                          Palestine, TX 75801
                          Fax: 903-723-0580

                          Michael C. Dodge
                          Glast, PlriI1ips & Murray, P.C.
                          2200 00. Galleria Tower
                          13355 Noel Rd., L.B. 48
                          Dallas, TX 75240-1518
                          Fax: 972-419-8329




48394043.3611.   v.   2




DEFENDANTS' MOTION FOR PROTECTIVE ORDER PENDING DECISION
ON FIRST AMENDED VERIFIED MOTION TO COMPEL ARBITRATION                                        PAGE 6




                                                                                                           App. 74
                                       CAUSE NO. 10-0043

  DON R. REA VIS,                                     §      IN THE DISTRICT COURT
                                                      §
         PJaintiff,                     §
                                        §
 v.                                     §                    OF HOUSTON COUNTY, TEXAS
                                        §
 FC HOLDlNGS,INC., NIGEL J. HARRISON,   §
 lNDlVIDUALLY,JLLASSOCIATES FCH, L.P., §
 JLLASSOCIATES G. P. FCH,L.L.C.,JLL     §                    349 Til JUDICIAL DISTRICT
 PARTNERS FUND FCR, L.P., ILL PARTNERS §
 FUND IV, L.P., and JLLIFCH HOLDINGS I, §
 L.L.C.; and, FIRST COMMUNlTY BANK.     §
 NADONALASSOCIADON                      §
                                        §
        Defendants.                     §

              PLAINTIFF'S FIRST REQUESTS FOR ADMISSIONS
                                    AND
                      REOUESTSFORPRODUCTION
                                     TO
 !)EFENDANTS JLL ASSOCIATES VCH. LP.. JLL ASSOCIATES G.P. FCH. L.L.C.. JLL
      PARTNERS FUN!) FCR LoP.. JLL PARTNERS FUND IV, L.P. and JLLlFCH
                           HOLDINGS ]. L.L.C.
                                   AND
            PLAINTIFF'S SECOND REQUESTS FOR ADMISSIONS
                                               Mill
                     REQUESTS FOR PRODUCTION
                                  IQ
    PEFENDANTS Fe HOLDINGS, INC. NIGEL HARRISON, INDIVIDUALLY. AND
           FIRST COMMUNITY BANK, NATIONAL ASSOCiA nON

TO:     Defendants Fe Holdings, Inc., Nigol Harrison, Individually, JLL As.ociates FCR,
        L.P., JLL Associate~ G.P. FCH, LL,C., JLL Partnen Fund FCR, L.P., JLL
        Partners Fund IV, LP., JLLIFCH Holdings I, L.L.C., and Firs' Communily Bank,
        National Association, by and through their attomey of record~ Michelle C. Mishoe of
        Tribble, Ross & Wagner

        NOW COMES Plaintiff, DON R. REA VIS, 'in the above styled and Dwnbored cause,
and pursuant to Rule 198 and Rule 196 of the Texas Rules of Civil Procedure, makes the
following Requests for Admissions .ofFset an~ Requests for Production.
       You are notified that Plaintiff demands that within 30 days after the service of these
requests, Defendants, speciticalIy admit or deny the facts requested as set forth on Exhibit "A,"



                                                                                       EXHIBIT

                                                                                  fA


                                                                                                    App. 75
~,o'"   ChrIst"   M~Kinllt\'      fa"      9Q3·72~_0580                     To: MG.   MlchelltMr~h .. e   Fax:"'1 (71J) 621·0555   Page 4 of 1260120104:44




                      A failure to specifically answer any request, or an evasive an."l,",-er to any request, \'.ill be taken as
                      an admission of truth of such request.
                                    Please take nOlice that request is hereby made by DON R. REA VlS. Plaintiff, pursuant to
                      Rule 196 of lbe Texas Rules of Civil Procedure. that Defendants produce or pennit the
                      undersigned attorney, Jim Parsons? to inspect and copy or reproduce the items hereinafter
                      desi gnated on Exhibit "A" attached hereto_
                                   Within 30 days after service of these Requests for Production. you must serve a written
                     response to the undersigned attorney at 1007 N. Mallard, Palestine, Texas 75802, including the
                     items requested or stating with respect to each request that an inspection and copying Or
                     reproduction will be permitted as requested.
                                   In the event a request is objected to, please ''J'OCif'JCa11y state (a) the legal or factual basis
                     for the objection, and (b) the extent to wlUch you refuse                                    (0   comply with the requesL Pursuant to
                     Rule I 93_2(b) of the Texas Rules of Civil Procedure, a party must comply with as much of the
                     request to which the party has made no objection unless it is WlfeasonabJe under the
                    circumstances to do so before obtaining a ruling on the objection.
                                  Respectfully submitred tlUs                     7               day of J


                                                                             ~.;;;.ca~~"~S~B~O~T;;:N;:;::O.=-:O"'O~O::::OO;O,",6C:;5---=~~
                                                                                                 Law Offices of Jim Parsons
                                                                                                1007 N.- Mallard
                                                                                                Palestine, Texas 7580]
                                                                                                (903) 723-0580 - Telephone and Fax

                                                                                                Michael C. D<tdgo, SBOT No. 05937000
                                                                                                GLAST, PHILLIPS & MURRAY, P_C.
                                                                                                2200 One Galleria Tower
                                                                                                /3355 Noel Road, L.B. 48
                                                                                                Dallas, TX 75240-1518
                                                                                                Tel: (972) 419-71721Fax: (972) 419-8329

                                                                                                AITORNEYS fOR PLAINTIFF DON R. REA VIS




                  Maiuti./rll Re1:IUClil   rot Admissions 3!ld .Requesls for PtOcluctlOl1 to ~it'ndanlS                                               J'aJ;".2of1




                                                                                                                                                                    App. 76
                                                                                      Page   I;,   or "I;: 6(1l2010 4;44




                                                DEFINITIONS AND INSTRUCTIONS

           1.    As used herein, the tenns- lIyou" and tlyour1t shaH mean FC HoJding~ Inc., Nigel
    Harrison, Individually, JLL Associates FeU. L.P., JLL Associates G.P. "FeH, L.L.C., JLL
   Partners Fund FCH, L.P., JLL Partners Fund IV, L.P., JLLIFCH Holdings I, L.L.C., and
   First Community Bank, National Associatioo t and all attorneys, agents, and other natural
   persons or business or legal entities acting or purporting to act fOT or on behalf of Fe Holdings,
   Inc., Nigel Harrison, Individually, JLL Associate. FCB, L.P., JLL Associates G.P. FCH,
   L.L.C., JLL Partners Fund FCB, L.l"., JLL Partners FUIld IV, L.P., JLLlFCB Holdings I,
   LL.C., and Fint CommuDity Bank. National Association, whether authorized to do so or not.

            2.     As used herein, the term .ldocuments" shall mean all writings of every kjn~
   source and authorship, both originals and all non-identical copies thereof, in your possession.
   cl1stody~ or controJ, or known by you to exist,. irrespective of whether the writing is one intended
   for or transmitted intemalJy by you~ or intended for or transmitted to any other person or entity.
   including withom limitation any government agency, department, administrative, or private
   entity or person. The term shall include handwritten. typewritteD, printed, photocopied,
   photographic~   or recorded matter. It shall include communications in words, symbols, pictures.
   sound recordings. films., tapes, and infonnatioD stored ~ or accessible through, computer or
   other informatiol1 storage or retrieval systems. together with the codes and/or programming
   instructions and other materials necessary to Wlderstand and use such systems. For purposes of
   illustration and not limitation, the term shall include: affida.vits: agendas~ agreements; analyses;
   announcements; bjlls, statements! and other records of obligations and expenditures; books;
   brochures; b'qUetins; calendars; canceled checks1 vouchers.. receipts and other re-cords of
   payments; charts or drawings; check registers; checkbooks~ circuJars; collateral files and
   contents; contrac1s~ corporate bylaws; corporate charters; correspondenoc; credit fiJes and
  contents; deeds of trust; .deposit slips; diaries or drafts; files; guaranty agreements; instructions;
  invoices; ledgers. jouma1s~ balance sheets. profit and loss statements~ and other sources of
  financial data.: letlers; logs, notes, or memoranda of telephonic or face-to·face conversations;
  manuals; memoranda of all kinds) to and from any persons~ agencies, or entities; minutes. mjnute
  books; notes; notices; parts lists; papers; press releases; printed matter (including books~ articles"
  speeches~ and newspaper clippings); purchase orrI.ers; records; records of administrative,.
  technical~ and financIal ac:tio-nq taken or recommended; reports; safety deposit boxes and
 contents and records of entry; schedules; security agreements; specifications; statements of bank
 accounts; statements or interviews; stock transfer Jedgersi technical and engineering repo~
 evaluations, advice, recommendations~ commentaries, conclusions. studies~ test plans, manuals.
 procedures~ data, reports, results. and concJusions; summaries. noteS:. and other records and
 recordings of any conferences. meetings~ visits, stawments. interviews or teJephone
 conversations; telegrams; teletypes and other communications sent or received: transcripts of
 testimony; DeC instruments; work papers; and all other writings, the Contents ofwhic-h relate to.
 discuss, consid~r, or -otherwise refer to the subject matter of the particular-discovery requested.

        3.      In accordance with Tex. R Civ. P. Rule 192.7, a document is deemed to be in
your possesSion, custody or control if you either have physical possessjon of the item or have a
right to possession of the item iliat is equal or superior to the person who has physical control of
the jtem.



PI<tif1liff"s RCqllesl for Admissi(l.ns ami RC'qUt'.l>u for Pr.o('luclion to ~ant!l                                !'age 3 01"7




                                                                                                                                  App. 77
                                 To:   M~.   Mkholla   Mldl~   fa,,~   +1 (71:;J 621.G5:55   .... gft 6. of t2iW(.1010 4:4<1




        4.     "Person" or "persons" means any natural persons, finns, partnerships,
:)ssociadons~ join1 ventures, corporations and any other form of husiness- organization or
arrangement,. as well as governmental or quasi-governmental agencies, If other than a natural
person~ include all natural persons associated with'such entity.

       5.      Any and all data or information which is in electronic or magnetic funn should be
produced in a reasonable manner.                                .

                                       USE OF DEFINITIONS

        The use of any particul.... gender in the plucal or singular number of the words defined
under paragraph. "1 fl, "Definitiom" is intended to include the appropriate gender -or number as the
text of'any particular request for production of documents may require.

                                               TIME PERIOD

        Unless specifically stated in a request for production of documents, all information herein
requested is for the entire time period from January 1, 2006 through the date of production of
d()curnenlS requested herein.




                                                                                                                               App. 78
                                  , To;   M~_ MkheRc Mlrohoe   F""-'''l (713) Sn·05S!;




                                                   EXHIBIT A

  Request for Prnduction No.9: Produce a. true and COTTect copy of the Subsidiary Bank Equity
  Summary prepared by Fe Holdings for December 31, 2007 together with all exhibils and
  attachments.

 ReEponse:



 Request fer Production No. 10: Produce a true and correct copy of all First National Bank of
 Crockett stock option plans or plan covering shares of common stock of First National Bank of
 Crockett, First Community Bank East Texas andlor First Community Bank N. A.

 Response:



 Request for P:roduction No.ll~ Produce true and correct copies of811 agreements together with
 exhibits andlor attachments between JLL Associates FCB, L.P., JLL Associates G.P. FeH,
 LLC .• JLL Partners Fund FeH, L.P" JLL Partners Fund IV, L.P" JLLlFCH Holdings /, L.L.C.
 or either or any of them and Fe Holdings. Inc. and/or Nigel Harrison, concerning !Wquisition
 ownership and/or stock ofFC Holdings.. Tne.

 Response:



Request for Production No. 12: Prodace true and correct caples of the stock ledger books
andlor any additional documents reflecting the stock ownership of First National Bank of
Cl'Ockett, First National Bank East Tex.. and First Community Bank N.A. from Aprill, 2007 to
date of answer showing the number of authorized shares· of stock, the classes of authorized
shares, the issuance of shares of stock, the redemption of shares of stockt the date of issuance or
redemption of shares of stock, the transfer of shares of stock, and the ownership of shares of
stock.

Response:



Request for Admission No. 10: Do you admit or deny that subsequent to October 21t 2008 no
documents were created to meet the "options" Chairman Harrison hcommitted to honor' andJor
containing the   '~options~'   Chairman Harrison "committed to honor" following discussion
'''relating to Mr. Reavis's concemsn '"per the employment agreements with motion being second
by Director Mike Buoy and tmanimously approved by the board" as reflected by the minutes of
OctOber 21,2008 Board of Directors Meering for the First Community Bank ofEas! Tex.. ?




                                                                                                      App. 79
From ch"sry McKi"'''Y   Fa~.   90::\· 723·,;)S80                                    "age 9 of 12617120104;44




                Response;



               Request for Production No. 13: In the event you deny Request for Admission No_ 10 produce a
               true and con-eet copy ofrhe documents upon which denial is based.

                Response:.



               Request for Admis,ion No. 11: Do you admit or deny that Fe Holdings, Inc. as "employer" of
               Don R. Reavis ··Executive" never caused "}'irst National Bank of Crockett to establish a stock
               option plan covering shares of common stock of the bank" allowing Don R. Reavis '10
               partidpate in such pJan" and "purchase 12,500 shares of bank common stock~'. See section 2(g)
               of the Employment Agreement between FC Holdings~ Inc, "Employer" and Don R. Reavis
               "Executive" dated April 21. 2007?                         .

               Response:



               Request for Production No. 14: In the event you deny Request for Admission No. J 1 produce a
               true and correct copy of the stock option plan upon which denia1 is based,

              Response:




                                                                                                        Pagl!6 ufJ




                                                                                                                     App. 80
                                 CERTIFICATE OF SERVICE

I hereby certify !halon this    7        day of June, 2010, a true and coneet copy of the foregoing,
Plaintiff's First Request for Admissions and Request for Production 10 Defendants JLL
ASSOCIATES FCH, LP" JLL ASSOCIATES G.P. FCn, LLC, JLL PARTNERS FUND
FeH, LP., JLL PARTNERS FUND W. LP. and JLL/FCH HOLDINGS J, LLC and
PlaintifFs Second Requests fOT Admissions and Requests fol' Product/flit to DefendQllts Fe
HOLDINGS, INC, NIGEL HARRISON, INDIVIDUALLY, AND FIRST COMMUNITY
BANK, NATIONAL ASSOCIATION, was duly served in accordance with the Texas Rules of
Cjvil Procedure to the tollov..ring by the method indicated below:

 Wesson H. Tdbbl., SBOT#20213960
 Michael R. Ross, SBOT #11035800
 Margaret J. Graeff: SHOT #24040999
 Michelle Mishoe, SHOT #24044991
Tribble Ross & Wagner
3355 W. Alabama, Suite 1200
Houston, Texas 77098
Tel.: 713·622-0444
Fax: 713-622-0555
Attorney for Defendants
FC Holdings, Inc., Nigel J. Harrison, Individually,
JLL Associates FCH, L.P., JLL Associates G.P. FeH,
L.L.C.,JLL Partners Fund FeH, L.P., ILL PllTlners Fund N, L.P.,
,,",>0. H o _ '. LLC, OM ';.."""'""""~
National Association
~j'a Fflc.imile Ollly         ~ ~.

                                             Jim~




                                                                                                       App. 81
                                                                                                             ~a~e   1001 12 ~J7nOfO 4:44
                                                  To: M!;. Micl1&ll~ MI~hOlJ   f'1I,X:   +1 (713) 622-0555




                                                                                                                                 June 7,2010




Hm Pars.om
rudg!!. 3.'] Dfm-!~ Court
                                                 MS. carolyn Rains
  (l9%-2006)                                     Houston County District Court Clerk
Pre;;;idenl St~u! Bar ",fT<\X!rs
                                                 Post Office Box 1186
  (1990·1991)
America!1 Buard          0(   Trial Ad1tOCate~   Crockett, Texas 75835
f.-IDa.!, jparsWI$@jimpanoIl./:-law.rom

                                                 Re:        Reavis v. Fe Holdjngs" Inc., et al; Houston County 349th
C. Michael Davis
E   lIl.'i!/;   cmdavi,@j.imp<ir$OO$-lMl,'.rom
                                                            Judicial District Court Cause no. 10~0043

                                                 Dear Ms. Rains:
Of Counsel:
SYw! Hays=::-:DalljU Thxa.3                      Endosed please find an original and one copy of Plaintiff1s
L-III"il: sh~@jjmpa:rson.s-l~w.CDtn
                                                 Certificate of Written Discovery Directed to Defendants.
Chris Tirulr!y:=:Athrm. Texas
t:-llt:>iI; ctinsieY@Jlmp{lnons-lnw,rom          Please file the original, conform the copy and return the
                                                 conformed copy to me in the self-addressed~ stamped envelope
                                                 endosed for your convenience.

                                                 Thank you In advance for your assistance in this matter and if you
Main Office::                                    have any questions or need further information from us, please
Palestine
  r007 11:. lIfuilHd                             do not hesitate to call me.
  p,;jle::rme.lexa.s;1SBOI
 V(lU;t": 903-723-{)560                          Sincerely.
  F:;c.;:   ~·723-0S80




                                                 ~W}~
       (PIlF conWll$ion)



Oilier Offices:
Amens                                            Ch risty R. McKinley
    !oI03-670-3379                               Legal Assistant to Jim Parsons
Crockett
    88B-S46-nn                                   JNP:crm
                                                 Encls.: as stated
D.JJn                                            ce:        Ms. Michelle Mishoe (w/encis. via FAX to 713-622-0555)
    VOiC'e: 88S--S%--7277
                                                            Mr. Mike Dodge (w/enels.)
    Fs.x:214-432-S273
                                                            Mr. Don Reavis (w/enels.)



Legal Ass{staets:
Christ( MelWUey
Chri!ty@jimpar-'On.Haw.ao m

Laure Brun,EU'
[.aw-s@ji.mpaTSons--law.<;om



www.jimparsons-iaw."Com




                                                                                                                                               App. 82
                                     To: Ms.   M;ch..,j~ W~hoe   FO!:.c: +1   (71~)   6'22-0555   '-.. gtl 110f iZ6J7J20104:44




                                               CAUSE NO. to·0043

 DON R. REAVIS,                                                     §                 IN TIlE DISTRICT COURT
                        Plaintiff,                                  §
 v.                                                                 I
                                                                    §
FC HOLDINGS, INC., NIGEL J. HARRISON,                               §
INDlVIDUALLY, JLL ASSOCIATES FCR, L.P.,                            §
1LL ASSOCIATES G. P. FCH, L.L.C., JLL                              §                  OF HOUSTON COUNTY, TEXAS
PARTNERS FUND FCH, L.P., JLL PARTNERS                              §
FUND IV, L.P., and JLLlFCH HOLDINGS T,                             §
LL.C.; and, FIRST COMMUNITY BANK.                                  §
"iA TIONAL ASSOCIA nON                                             §
                                                                   §
                        Defendants.                                §              349TH JUDICIAL DISTRICT

                 PLAINTIFF'S CERTIFICATE OF WRITTEN DlSCOVERV
                                 DIRECTED TO DEFENDANTS
Plaintiff files this Certificate of Written Discovery Directed to Defendanu pursuant to the
applicable locaJ rule and states that on June -+---~ 2010 the following discovery:    '
      I. Plaintiffs First Requests for Admissions and Requests for Production to Defendants JLL
         Associates FCH, L.P., JLL Associates G.P. FCR, L.L.C., JLL Partners Fund FCR, L.P.,
         ILL Panners Fund IV, L.P. and JLLlFCH Holdings I, L.L.e. and Second Requests for
         Admissions and Requests for Production to Defendants FC Holdings, rnc_~ Nlgel
         Harrison) Individually, and First Community Bank. National Association.

was se·rved upon Defendants by FAXing the samc~ digital return recgi.nk46-m-alLomey of record
Michelle Mishoe at 713·622·0555.                                 ..'
        Respectfully submitted this            '7.


                                                       Palestine, Texas 7580]
                                                       (903) 723-05&0 - Telephone and Fax
                                                       Mi.haeJ C. Dodge, SBOT No. 05937000
                                                       GLAST, PHILLWS & MURRAY, P.C.
                                                       2200 One Galleria Tower
                                                       13355 Noel Road, L.B. 48
                                                       Dallas, TX75240·1518
                                                       Tel: (972) 419·71 72lFax: (972) 419·8329

                                                    . ATTORNEYS FOR PLAINTIFF DON R. REA VIS




                                                                                                                                 App. 83
                                   TOo: Ms, Michell(t MisheG   Fn:: +1 (713) 622·(155'5.   'il'go)-   12nf 1:;!fJn/Z0104:44




                                   CERTIFICATE OF SERVICE

         I hereby certify that on this      7           day of June, 2010, a true and COrrect copy of the

foregoing, Plaintiffs CertifICate of Written Disc(}very Directed to Defendtmts, was duly served

in accordance willi the Texas Rules of Civil Procedure to the following by the method indicated

below:

Wesson H, Tribble. SBOr #20213960
Michael R, Ross, SBOT #11035800
Mal'garet), Graeff, SBOT #24040999
Michelle Mjshoe, SBOT #24044991
Tribble Ross & Wagner
3355 W, Alabama, Suite 1200
Houston, Texas 77098
Tel.: 713·622-0444
Fax: 713-622-0555
Attorney for Defendants
Viti Facsimile Only




                                                                                                                              App. 84
From ChrISty   M~KinJ"Y   F~~: 90$.72~05S0                                                                ~gl> 1 of 126m20104:44




         i
         I                                                            ..   .. ..                                                    ..
         ! I To:            Ms. Michelle Mishoe                                        From:            Christy McKinley               !
         II                                                                                             Jim Parsons Law Offices


        II                  Tribble, Ross           &     Wagner                                        ~:~:s:eMalJard
         I                                                                                             TX                  75801

                      Phone:                                                           Phone:          903-723-0580 ext 3
                    Fax Phone:            + 1 (713) 622-0555                           Fax Phone: 903-723-0580

        i
        I           Date:                 6/7/2010


        i          Pages including                               12                                                                  I
        !          cover sheet:


        L_==========::::-=================================:===~I
        , .. .
        r .. -". ..
                        .. .. .. .. .. .. . .. . . . . . . .. .. ..'---------_ . -
                      ------.----~~-.-




                              ~   ~
                                                          ._--
                                                                     . . . .. ..                                                   ....


        f .. . .. .. .. . .. . .. .. . .. . .. . .. . . . . .. .. .. . .. . .. .. ..
             Note:




                                                                                                                                   i
                                                                                                                                   j       I
               :
               "                      .. + ............   ~ ......... ,.. .. *""cONFrDENTIALrrY NOTICE"~""**"~"*";-*"~*
                                                                                                                                   I
                                                                                                                                   l
                                                                                                                                            1
                                                                                                                                            '
                 This e:lect.rord c message t:r&nsmission contains inforlnation froIn the Law (iftices ('t ~                               I'
              j..!im Parsons, which may be confidential or protected by tt-le att.Clrney-cli"I'J:
                 priVilege ,;.nd/or the work product doctrine. This message is intended for tb.:; use
                 o[ t-~he individu-al OJ: entity to which it is addressed and may cont.ain infot"Itl-Cltion
             / th;;:rt is privi.leged, confidential and exen:-pt ~rom disclosure under c.pplicable 1".....
              I                                                                                                                            II
             111""        alon.:;:!' 1./"1 th any attachments her-eto, .lS also covered by the Electronic
             lComnlUl""lications Privacy Act, 19 U.s.C. SECTIONS 2510- 2512. If you ",re not. UIG
             I :i.ntt:pded recipient or i f the reader of this message is hot the int.€nde-d 'I
             ! .t<?>:ipioent,

             I
                                     or: the employee or ag-ent responsible :for delivering this m8SSaqe to
                T_he intended recipient, YOll a.re hereby notified that any dissemination or copyir.(j
             ! ,::Ii tbL; .cmnmunication is strictly prohibited. If you have received thi.s
                                                                                                                                   I
             I  ':;':-'Intnunico.t-ion in error. please notify us immediately {plel.>se call collect) "md
             LJelete. "thE. original message from your system. Thank you~                                   I




                                                                                                                                                App. 85
FloIT' G ~tl~ty MccKlnIt!.y         F~     $03.723·0580              To; Ms. Micheli" Mls:hpe   FAX:"1 (713) 622·0555




                                                                                                                                    June 7, 2010


          tim PatSQm
                                                                    VIA FACSIMILE ONLY
          l"dn.~.   3rd Dr"tri.;."'1 Court
             09?6- 2 00G)                                           Ms. Michelle Mishoe
          f'n.~ idl.'nt
                      SLate B2I1" of TE')'as                        Tribble, Ross & Wagner
             1l990·199!)
          .-\mC':rknn Board o(Tn:u AdvOGl.[~s
                                                                    3355 W. Alabama, Suite 1200
          r ",-"J; j-p;lnol'.s@\jimpill!;(.o!l.S-l.lw.colD          Houston. Texas 77098
                                                                    FAX, 713-622-0555
         C Michael Dilvi5
          t:-maIJ:   ~m,d .. vi1@Jlnlp;ul;lan:s-1OJ ..... "e.llj
                                                                    Re:       Reavis 'V. FC Holdings, Inc., el al; Houston County 349th
                                                                              Judicial District Court Cause 110. 10-0043
         OfC..oUllseJ:
         "s'ps3n Hays-:--:Dallts. Teas                              Dear Ms. Mishoe:
         E·:n31l:    ."h,,~jimp;:!n<lll~-I:llw'£D1Il.

                                                                    Enclose<l you will find. and served upon you as attorney of record for
         Gllris 'finsley-Atheuj! Texas
         E !rail: ''':rino;1'''Y@lfinllUn:cnS--l:l"w.t;"om
                                                                    Defendants in the above-referenced matter, the following:
                                                                              I. Plaintiff's First Request for Admissions aod Request for
                                                                                 Production to Defendants JLL Associares, fCB, LP, JLL
                                                                                 Associates G.P. FCR, LL.C., JLL Partners Fund FCH, L.P.,
                                                                                 JLL PamterS Fund lV, L.P. and JLLlFCH Holdings J,
         Mail! Office:
                                                                                 L.L.C. and Plaintiff's Second Requests for Admissions and
         Palestine
          JCQ7 N.     '-1a!1~rd
                                                                                 Requests for Production to Defendan1s Fe Holdings, Inc .•
          P"lo><li""" j"ex.~s 7500 I                                             Nigel Harrison, Individually, and Firs! Community Bank,
          "nin.· w:-'._723--0SHO                                                 National Association; and
          f ;1:",. '103-723-0580
              wnF cQnv~f:;ion}                                               ~,    Plaintiff's Certificate of Written Discovery regarding same.
                                                                   Truly,
        Othe:t Offices:
        Athans
          903--670-3379




        Dallas                                                     JNP:crm
          V~,i~; ~~-546-7277
           l'a~:   214---431-8213
                                                                   Ends.: as stated abol-'e
                                                                   ce:    Mr. Mike Dodge
        Tyler                                                             Mr, Don Reavis
          8"i.$l3-546·, 7217


       Lcgal.ll!!osistan($:
       cnnsty M'e.IGnley
       (,nn$ty@Jimpe.r.son~J.aw_coro


       La-.::.re Bruner
       Lallre@jimp-.u-cons--Jaw.com.



      www.jimparsons-law.com




                                                                                                                                                   App. 86
                                                                             Page :3 of 256/2312010 11 :37




                                         CAUSE NO. 10-0043

DON R. REAVIS,                                          §       IN THE DISTRICT COURT
                                                        §
        Plaintiff,                                      §
                                                        §
v.                                                      §
                                                        §
                                                                         .
                                                                OF HOUSTON COUNTY, TEXAS

FC HOLDINGS, INC., NIGEL J. HARRISON,                   §
INDNIDUALLY, JLL ASSOCIATES FCH, L.P.,                  §
JLL ASSOCIATES G. P. FCH, L.L.C., JLL                   §       349m minCIAL DISTRICT
PARTNERS FUND FCH, L.P., JLLPARTNERS                    §
FUNDN, L.P., andJLLfFCHHOLDINGSI,                       §
LLC.; and, FIRST COMMUNITY BANK,                        §
NATIONAL ASSOCIATION                                    §
                                                        §
        Defendants.                                     §

                     PLAINTIFF'S TffiRD REQIJESTS FOR ADMISSIONS
                                          ~          .'
                                REQUESTS FQRPRQDIJCTION
                                                  !Q                     .
                     DEFENDANT FC HOLDINGS, INC. NIGEL HARRISON
                                    ..!W!          '
                 FIRST COMMUNIty BANK. NATIONAL ASSgelATION
TO:     FC HOLDINGS, INC., NIGEL HARRISON and FIRST COMMUNITY BANK,
        NATIONAL ASSOCIATION by and througb their attomey of r=«I, Michelle C.
        Mishoe of Tribble, Ro•• & Wagner

        NOW COMES Plaintiff, DON R. REAVIS, in the above styled and numbered cause,

and pursuant to Rule 198 and Rule 196 of the Y""ag Rules of Civil Procedure, makes the

following Requests ror Admissions of Fact'liml Requests for Productibn.

        You are notified that Plaintiff demaods that within 30 days after the service of these

requests,   Defendant,     FC    HOLDL"GS,. INC.,           NIGEL      $IuuSON                and      FIRST

COMMUNITY BANK, NATIONAL ASSOCIATION specifically admit or deny the facts

re'lllesteci as set forth on Exhibit riA." A failure to specifically answer any request. or an evasive

ans.wer to any request. will be taken as an admission of truth of such J.'equest.




                                                                                               EXHIBIT

                                                                                      '13

                                                                                                               App. 87
From: Ch',isty McKini"'Y   Fall: 903-723-05S0                To: Ms. MTo;h,,1ie Mh;hQ.   FU::.f.1 (113) 512.0565    Psge 4 of 2"S6JZ3I2G1G 1j:37




                             Please take notice thai request is hereby made by DON R. REAVIS, Plaintiff. pursuant to

                   Rule 196 of the Texas Rules of Civil Procedure, thai Defendant, FC HOLDINGS, INC.,

                   NIGEL HARRISON and FIRST COMMUNITY BANK, NATIONAL ASSOCIATION

                   produce or permit the Wldersigned attorney, Jim Parsons, to inspect and copy or reproduce the

                   items hereinafter designated on Exhibit "A" attachad hereto.

                             Within 30 deys after service of these Requests for Production. you must serve a written

                   response to the undersigned attorney at 1007 N. Mallard. Palestine, Texas 75802, including the

                   items requested or stating with respect to each request that an                                 ~ection        and copying or

                   repmduction will be permitted as requested.

                            In the event a request is objected to, please specifically state (a)·the legal or factual basis

                  for·the objection, and (b) the extent to which you refuse to comply with the request. Pursuant to

                  Rule 193.2(b) of tho Texas Rule. of Civil Procedure, a party must oomply with as much of the

                  request to which the party baa made no objection unless it is unreasonable under the

                  circtllIlStanCeS to do so before obtaining a ruling on the objection.

                            Respectfully submitted this -'==



                                                                                      Parsons, S OT N(). 00000065
                                                                                 Law Offices of Tun Parsons
                                                                                 1007 N. MaI1ard        .
                                                                                 Palestine, Texas 75801 ~
                                                                                 (903) 723-0580 - Telephone and Fax

                                                                                Mlcltael C. Dodge, SBOT No. 05937000
                                                                                GLAST, PHILLIPS & MUR~AY.    P.C.
                                                                                2200 One Galleria Tower
                                                                                13355 Noel Road, L.B. 48
                                                                                Dl!ilas, TX75240·1518 ,
                                                                                Tel: (9"72) 419-71721Fax: (972) 419·8329

                                                                                ATTORNEYS FOR PLAINTIFF DON R. REAVIS


                 P!~ntiff$ TIRRD .Rcqueo1 fur AdmissiOns IIIJd Requeue for PmdllClicm to DefendUlt FC HOLDINGS. INC., NIGEl, HA.R)lISON soo FIRST
                 ('''OMMINfrV DANK, NATIONAL ASSOCIATION                                            .                                   Pil&~ 20ffi




                                                                                                                                                      App. 88
                                                 To:   Ms:,Mj~lTe/IltMi<s:hoe   FIl)(: +1 (7j3) S;ZZ·CS55     p~   5   or :i5612~010 11:37




                                           DEFINITIONS AND                      INSTRUCTION~

          1.     As used herein,. the tenns "you'l and I'yourt! shall mean Fe HOLDINGS~ INC.,
 NIGEL HARRISON and FIRST COMMUNITY BANK, NATIONAL ASSOCIATION and
 all attorneys, agents, and other natural persans or business or legal entities acting or purporting to
 act for or on behalf of FC HOLDINGS, INC., NIGEL JIARRISON and FIRST
 COMMUNITY BANK, NATIONAL ASSOCIATION whether auiliorized to do so or not.

          2.     As used herein, the tenn I'documents'~            mean                   shall
                                                                                -writings of every Jdnd~    all
 source and authorship~ both originals and all non-identical copies thereof~ in your possession,
 custody. or control. or known by you to exist, irrespective of whetber the writing is one intended
for or transmitted internally by you,. or intended for or transmitted t~ any other person or entity,
 including without limitation any government agency. department;. administrative, -or private
entity or person. The tron shall include handwritten. typewritten,' printed, photocopied,
 photographic., or recorded matter. It shall include communications in words, symbols, pictures,
sound recordings. films, tapes, and infO/mation stored in, or accessible through, computer or
 other infonnation storage or retrieval _systemS; together with the 'codes and/or programming
 instructions and other materials necessary to under~d and use such systems. For purposeS of
 illustration and not limitation, the term shall include: aflldavits; agendas; agreements; analyses;
aruiouncements; bills, statements. and other records of obligations and expenditures; books;
 brqchures; bulletins; calendars; canceled checks~ vouchers, receipts and other records of
payments; charts or drawings; check registers; checkbooks; Gir4ulars; collateral mes and
contents; contracts; corporate bylaWs; corporate charters; cOLTespondence~ credit files and
contents; deeds of trust; deposit slips; diaries or drafts; files; guaranty agreements; instructions;
invoices; ledgers-, journals, balance sheets, profit and loss statements~ and other sources of
financial data; letters; logs, notes, or memoranda of telephonic or 'fiwe-to-fuce conversations;
manuals; memoranda of all kinds,.to and from any persons, agencies,.:or entities; minutes; minute
books; notes; notices; parts lists; papers; press releases; printed lll!ltter (including books, articles,
speeches, and newspaper clippings); pur.hose orders; recQrds; records of administrative,
technical, and financial actions taken or recommended; reports;, safety deposit boxes and
contents and records of entry; soh.dllle.; security agreements; specifications; statements of bank
accounts; statements or inte.rvic-ws; stock transfer Jedgers; technical: and engineering reports)
evaluations, adv.ice~ recommendations, co:m.mentari~ conclusions, studies, test plans, manuals,
procedures,. data" reports~ results. and conclusions; sununaries, n(jtes~ and other records ami'
reOOrdings of any conferences, meetings. visits,,' statements," interviews or te1epho-n~
conversations; telegrams; teletypes and -other communications sen~1 o-r received; transcripts o~
testimony; vee instrUments; work papers; and all other writings, the' .on(ents of which relate to!
discuss, consider. or otherwise refer to the .su~ect matter of the partiCular discovery requested.

        3.     In accordance with Tex. R. eiv. P. Rule 192.7, a dobmnent is deemed to be in
your possession, custody or control if you either have physical possession of the jtem or have a
right to possession of the item that is equal or SIlJ'erior to the person who has physical control of
the.item.

        4.      ,rperson" or "persons" means any natural persons, firms, partnerships;
associations.. joint ventures, corporations and any other form of business organization or


PJaitJ1;iffSTHlRD R~qucJt for Admilll:ions and ReqaC!o1$ fbr Prod'Ltdlon to lkfclit1~    Fe HOLDJNCS,'I!K ... :'\lGEL HA RRlSON alld HKS'f,'
CO~NITY BANK,NATro~A.LASSOCIAnON                                                                                                      Page 3 of6




                                                                                                                                                   App. 89
Frtlm: chrlsty McKinley    FlO:':: 805.723- 0580                                                                        PI!IQQ 6 of 2!!SJ2312010 11:37




                 arikgement. as well as governmental or quasi-governmental agencies. If other than a natural
                 person, include all natural pernons associated with such entity.

                       5.       Any and all data or information which is in electronlc or magnetic fmm should 00
                 produced in a reasonable manner.

                                                                     USE OF DEFINlTIONS

                         The use of any particular gender in the plural or singular number of the words defined
                 under paragraph to I "~ "Definitions" Is intended to include the appropriate gender or number as the
                 text of any particular request for production of documents may req~.

                                                                           TIME PERIOD
                        Unless specifically stated in a request for production of documents. all infonnation herein
                 requested is for the entire time period from January 1, 2006 through the dote of production of
                 documents requested herein.                                           .




                PlaJn.tift's rHIRD Request fur AdmlHkms and Requests forPro!.luctiDlt tnOe!!Illdll.nl. Fe J{Ol.DI:\'Gs., The.. MCEI.• lIARRrsON and FIRST
                COMMlT:oiITV SANK,. NATlONAI. ,.l$SOClATfON                                                                                    "Page 4 01'6 .




                                                                                                                                                                App. 90
From: Christy McKin1ey   Fax: S(!3-123-0560                                                                        Pag. 7 of 266"1231201 P 1i:37




                                                                          EXHIBIT A

                Request for Admission No. 12; Attached is a copy oftbe Fairness Opinion Agreement and Plan
                of Merger by and among FC Holdings, Inc., FC Crockett Corporation and First Crockett
                Bancshares, Inc. dated March 6, 2007.

                Do you admit that it is a true and correct copy of the finalized Fairness Opinion Agreement and
                Plan of Merger by and among FC Holdings, Inc., FC Crockett Corporation and First Crockett
                Baneshares, Inc. dated March 6, 2oo7?

                Response:



                Request for Produetion No.. IS: In the ~ent you have denied Request for Admissions 12,
                produce a true and correct copy of the finalized Fairness Opinion Agreement and Plan of Merger
                by and among FC Holdings, Inc., FC Crockett Corporation and First Crockett Baneshares, Inc.
                dated March 6,2007.

                Response:




              Plainli1rs niTRO Request fur Adtnlssiorul aruJ Requests for ProducrlOll. ttl Dd:n-dantFC HOl.l)INGS. INC., i\iGELllARRlSON aD{! FlRST
              COM~11iNnY      BAl'IK,. ~A'l10NAL ASSOClATJOOY                                                                            Pag~ 5 \'Ifo




                                                                                                                                                        App. 91
                                             To: Ms. MfcheU, Mish"e   FilII; +1 (713) 622,0555




                                             CERTIFICATE OF SERVICE

            I hereby certifY that on this           ¥           day of Imle, 2010, a true and correct copy of the

  toregoing, Plaintiff's THIllD Request for Admisskms aJUl Requt!$t for Production to

  Defendants Fe HOLDINGS, INC, NIGEL HARRISON and FIRST COMMUNITY BANK.

  NATJONAL ASSOClATION was duly served in accordance with the Texas Rules of Civil

  Procedure to the following by the method indicated below:

 Wesson H. Tribble, SBOT #20213960
  Michael R. Ross, SBOT 1111035800
  Margaret J. Omen: SBOT #24040999
 Michelle Mishoe, SBOT #24044991
 Tribble Ross & Wagoec
 3355 W.Alabam .. Suite 1200
 Houston. Tex"" n098
 Tel.: 713-622-0444
 Fax: 713·622·0555
 Attorney for Detendants
 FC.Holdings,Inc., Nigel J. Harrison, lndividuaUy,
 JLL Associates FCH, CP., JLL Associates G.P. FCH,
 CL.e., JLL Partners Fund FCH, L.l'., JLL Partner. Fund IV, L.P.•
 JLLlFCH Holdings I, L.L.C., and First Community Bank.
 National Association
 Via Fllcsimik Only
                                                                      ex
                                                          ~~,.~a~~~~~~.~~<:~                                  _____
                                                              Jim Parsons                        .




Plafr:lritrsTH.IRD Request for Aifm~'Giol1S ana Rr:quests for PrOOlfdtolJ !ooe&ndaot.fie HOLDINGS.JNC.. ;\'IGEL HARRISON and FlRb'T
COMMLJNm' BA.'1K, ~ATIONAL ASSOCIATIOi'!                                                                               Page 6 111'6




                                                                                                                                      App. 92
From' ChrlsryMeKlnl6Y   >'ax:   ga~-723·   06SQ   To: Ms. Mle/lsUa Misho..   F;!Ix:.1   (11~)   622·0555   Pags 9 or 2S61.ZS1ZCl10 11:37




                   \




                                                                                                                                           App. 93
"rom: Ghrist)' McKlntey   Fa);:   903-723-05~O                 To: M.... MIchelle Millholl   Fax: +1 (713) 622.0555   Page lO"f 26 61231201Q 11:31




                                  .          .

                      Board   ~f.~~~J~:t.;:~: .:/.    o


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                      Fitsl Ct~ekit B~~~~~)~
                      C~ketl, TC;>I:;as.              .




                                                                                                                                                     App. 94
From'   Cliri~ty   MeKlnll!y




                               App. 95
PI!g.t 12O-~ 2~ &.Z3/201Q 1137




                                 App. 96
:O,om: CI1.;'I~1y MeKlnlejl         Fu: 9{)")..723·0S60




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                                                                                                App. 97
From: cfiristyM"Kinloy   F1Q:: a03-723.0.saO   . PagllJ !4of 25612~121)10 11;37

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                                                                                    App. 98
App. 99
                                F~:   +1 (713} 622·0555




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                                                                  App. 100
App. 101
1e~ 2S61l3J201G 11:37




                        App. 102
          F >IX;   ;03-7230-05&0
                                                 .. p~ Hlor~9~93(201Qlf;37




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                                                                             App. 103
From: C~ris:t}' McKlnloy   FII": 003-72:}-Q580   F,III';: +1 (713) 622·0555
                                                                              ::. ~~j~~~,~~55rz312?;~O 11:37
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                                                                                                               App. 104
From: Ct\rl:!;!y McKinley   F ..)c 903.723->Osao   To: M!;c, Micllfl1le MlII.M.   f'.x: +1 (713) 622-0555   PIIg/;l 21Qf 256/23/2610    11:~7




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                                                                                                                                                      App. 105
"ram: c~r!.ty MeKlrdqy   Fax:   903-7~3.0590   F~:   -1-1 (713)   S2t..?~S.5
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                                                                                                       App. 106
App. 107
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                                                                           .,"   . .'




                       201{)'11-0513:13:24 GMT ·llltOO I (003) 713-C5~O Ilf1312


                                                                                                                  App. 108
Christy R. McKinley.
From:                   Jim Parsons
SaUlt:                  Thursday, November 18,20109:29 AM
To:                     Mike Dodge; Don Reavis
Cc:                     Christy R McKinley
Subject:                FW: Documents Reavis v. FC Holdings, Inc.
Attachments:            l-l90.pdf    -

OutlookEntrylD:         OOOOOOOODA9B1D9D8FD5234B91B2D92CB791319307004148626D63C39742A717CE23053
                        B7B3C00000000001F00004E82D2F468549046ADD3736B3744EC8400000001A4C80000
TimeMattersiD:          MED529E4DBA77370
TM Contact:             Don Reavis
1M Matler No:           2009-259
TM Matler Referellce:   Reavis, Don R. vs FC Holdings, Inc. and Nigel J. Harrison




-----Original Message-----
From: White, Taylor E. (OAL) [mailto:Taylor.White@Jacl<sonlewis.com)
Sent: wednesday, November 17, 2010 6:09 PM
To: Jim Parsons
cc: Hartsfield, Dan (OAL)
Subject: Documents_Reavis v. FC Holdings, Inc.

Mr. Parsons,

Attached are FC Holding/Reavis 0e0el-00190'

Sincerely,

Taylor White



Representing management exclusively in workplace law and related litigation

Confidentiality Note: This e-mail, and any attachment to it, contains privileged and
confidential information intended only for the use of the individual(s) or entity named on
the e-mail. If the reader of this e-mail is not the intended recipient, or the employee or
agent responsible for delivering it to the intended recipient, you are hereby notified that
reading it is strictly prohibited. If you have received this e-mail in error, please
immediately return i t to the sender and delete it from your system. Thank you.




                                                                                                  App. 109
Chris?, R. McKinlGY

From:                  Jim Parsons
Se"l:                  Thursday, November 18, 2010 9:40 AM
To:                    Mike Dodge; Don Reavis; Christy R. McKinley
Subject:               FW; Fe Holding/Reavis
Attachments:           191-341,pdf

OuUookEniry!D;         00000000DA9B 1D9D8FD5234B91 B2D92CB791319307004148626D63C39742A717CE23053
                       B7B3COOOOOOOOOO 1F00004E82D2F468549046ADD3736B3744EC8400000001 A4CAOOOO
TimeMatierslD:         M018E9E4DA965743
TM Conlact:            Don Reavis
TM Matter No:          2009-259
TM Matter Reference:   Reavis, Don R. vs FC Holdings, Inc. and Nigel J. Harrison



-----Original Message-----
From: White, Taylor E. (DAl) [mailto:Taylor.White@jacksonlewis.com]
Sent: Wednesday, November 17, 2818 6:09 PM
To: Jim Parsons
Cc: Hartsfield, Dan (DAl)
Subject: FW: Fe Holding/Reavis

Mr. Parsons,

Attached are Fe Holding/Reavis 00191-08341.


Sincerely,
Taylor White


Representing management exclusively in workplace law and related litigation

confidentiality ~ote: This e-mail, and any attachment to it, contains privileged and
confidential information intended only for the Use of the individual(s) or entity named on
the e-mail. If the reader of this e-mail is not the intended recipient, or the employee or
agent responsible for delivering it to the intended recipient, you are hereby notified that
reading it is strictly prohibited. If you have received this e-mail in error, please
immediately return it to the sender and delete it from your system. Thank you.




                                                      1




                                                                                                   App. 110
App. 111
App. 112
App. 113
App. 114
App. 115
App. 116
App. 117
App. 118
App. 119
App. 120
App. 121
App. 122
App. 123
App. 124
App. 125
App. 126
App. 127
App. 128
App. 129
App. 130
App. 131
App. 132
App. 133
App. 134
App. 135
App. 136
App. 137
App. 138
App. 139
App. 140
App. 141
App. 142
App. 143
App. 144
App. 145
App. 146
App. 147
App. 148
App. 149
App. 150
App. 151
App. 152
App. 153
App. 154
App. 155
App. 156
App. 157
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App. 159
App. 160
App. 161
App. 162
App. 163
App. 164
App. 165
App. 166
App. 167
App. 168
App. 169
App. 170
App. 171
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App. 174
App. 175
App. 176
App. 177
App. 178
App. 179
App. 180
App. 181
App. 182
App. 183
App. 184
App. 185
App. 186
         JIM PARSONS
               lAWOmCES                                                                         December 8, 2010

-11m Parsons                                  VIA FACSlMlLE ONLY
 Judge,3nl Distact Court
   (1996-2006)                                Taylor E. White
 President State Bar of Texas
   (1990-1991)                                Jackson Lewis LLP
 Diplomflt:~AmeTica[J Boal."d of Trial        3811 Turtle Creek Blvd, Suite 500
 Advocates                                    Dallas, Texas 75219
  2010 President-East Texas Chapter
  2010 President-Elect-Texes Chapter          FAX: 214-520-2008

 n-ma):1: jparso!ls@jimpatsOus-Iaw.com        Re:      Reavis v. Fe Holdings, Inc., et ai; Houston COtillty 349th
                                                       Judicial District Court Cause no. 10-0043
 C. Michael Davis
 E-mail: cmda-vis@jimpl:l!SOns-taw.com
                                              Dear Taylor:

                                              I am in receipt of your letter dated December 8th •
            eo                                First, we are making headway.
   Of Counsel:
   Susan Hays         Dallas. Texas           Second, there is still a failure to communicate. You have assigned
   E-mail: shays@jimparsons-law.com
                                              your responses to requests for production for Requests 9, 10, 11
   Chris Tinsley-Athens. T"""s                and 12 for all Defendants.
   E-mail: ctinsley@jirnparsons-law.com
                                              You have not answered the Requests for Admissions Nos. 10 and
                                              11 for all Defendants. The answer to those admissions should be in
- MaJn Office:                                the affirmative. Ii in the negative then you need to respond to
  Palestine                                   Request for Production Nos. 13 and 14 for all Defendants.
    l007N. Mallard
    PaIestine. Tex::!:; 75801                 You also have not answered the Request for Admission No. 12 to
    Voice: 903-723-0500
    Fax: 91)3-7230{)58O                       FC Holdings, Harrison and First Community. Again, the answer to
       (PDf' conveISion)                      this admission should be in the affirmative. If in the negative theu
                                              you need to respond to Request for Production No. 15.
  Other Offkes:
                                              Do the above and we pass our hearing and sign an agreed
  Athens
    90..1-670-3379                            arbitration Order referring the matter and all Defendants to
                                              arbitration per the employment agreement. FYI, I have drafted an
  Crockett                                    Order referring to arbitration in anticipation of resolution.
    B8B-546-7277
                                              We await yonr responses.
  Dallas
    Voice: 888-546-7217
     Fax: 888-546-7277                        Truly,

  Tyler
    888-546-7277                          -   ~ fOJ--.
                                          ~imparsons
  Legal &;s!s1anis:
  Christy McKittrey
  Christy@jimpatso-ns-Iaw,com                 JNP:cml
  Laure Bruner                                cc:   Mr. Milee Dodge
  Laure@iimparsons-law.com

  www.jimparsons-law.com




                                                                                                                     App. 187
DON R. REAVIS,                                        §
                                                      §
         Plaintiff,                                   §
                                                      §
v.                                      §
                                        §
FC HOLDINGS, INC., NIGEL J. HARRISON,   §
INDIVIDUALLY, JLL ASSOCIATES FCH, L.P., §                    OF HOUSTON COUNTY, TEXAS
JLLASSOCIATES G. P. FCH, L.L.C., JLL    §
PAR1NERS FUND FCH, L.P., JLL PAR1NERS §
FUND IV, L.P., and JLLIFCH HOLDINGS I,  §
L.L.C.; and, FIRST COMMUNITY BANK,      §
NATIONAL ASSOCIATION,                   §
                                        §
        Defendants.                     §                    349TH JUDICIAL DISTRICT


                      PLAINTIFF'S FIRST AMENDED ORIGINAL PETITION

TO THE HONORABLE COURT:'

         Don R. Reavis, plaintiff ("Reavis" or "Plaintiff") complains of FC Holdings, Inc.

("FCH"); Nigel J. Harrison ("Harrison"); JLL ASSOCIATES FCH, L.P., JLL ASSOCIATES

G.P. FCH, L.L.C., JLL PAR1NERS FUND FCH, L.P., JLL PAR1NERS FUND IV, L.P., ""d

JLLIFCH HOLDINGS I, L.L.C. (collectively, "The JLL Defendants"); and, First Community

Bank, National Association ("First Community -Bank"), Defendants, and for cause of action

shows:

                                      DISCOVERY CONTROL PLAN

         1.       Plaintiff intem1s to conduct discovery under Level 2 of the Texas Rules of Civil

Procedure. See TEX. R. Crv. P. 190.3.

                                              PARTIES

         2.       Plaintiff Don R. Reavis is a resident of Dallas County, Texas, and formerly

worked for FCH as Executive Vice President, Managing Director of Special Assets at First


P1aintiff's First Amended Original Petition
                                                               ~         OR1G1NAL
                                                                                            P~ge   1




                                                                                                       App. 188
COIDlllUl)ity Bank, a wholly-owned subsidiary of FCR having a banking' office in Houston

County, Texas.

        3.      Defendant FC Holdings, Tnc, is a bank holding company headquartered in

Houston, Texas. FCH has been served and answered.

        4.      Defendant Nigel J. Harrison is a resident of Harris COUllty, Texas. Harrison has

been served and answered.

        5.      Defendant JLL ASSOCIATES FCH, L.P. is a bank holding company

headquartered in New York, New York and doing business in the state. of Texas; it has been

served and answered.

        6.       Defendant JLL ASSOCIATES G.P. FCH, L.L.C. is a bank holding company

headquartered in New York, New York and doing business in the state of Texas and Houston

County; it has been served and answered.

        7.       Defendant JLL PARTNERS FUND FCH; L.P. is a bank holding company

headquartered in New York, New York and doing business in the state of Texas and Houston

County; it has been served and answered.

        8.       Defendant JLL PARTNERS FUND IV, L.P. is a bank holding company

headquartered in New York, New York and doing business in the state of Texas and Houston

County; it has been served and answered.

        9.       Defendant JLLIFCH HOLDINGS I, L.L.C. is a bank holding company

headquartered in New York, New York and doing business in the state of Texas and Houston

County; it has been served and answered ..




Plaintiff's First Amended Original Petition                                               Page 2




                                                                                                   App. 189
       10.       Defendant First Community Bank, National Association (Fed ID 359360), is a

federally chartered banking institution doing business in Texas and Houston County.           First

Community Bank has been served and answered.

                                             JURISDICTION"

       1I.     This Conrt has jurisdiction over tins lawsnit because the amount in controversy

exceeds the Conrt's minimum jurisdictional requirement.

                                                VENUE

       12.      Venue is proper in Houston County under Texas Civil Practice & Remedies Code

section 15.002 because all or a substantial part of the events or onllssions that gave rise to this

suit occurred in Houston County. First Community Bank maintains a banking office in Houston

County, Texas.     Defendant Harrison's October 21, 2008 representations to Plaintiff, as alleged

below, were made to and received by Plaintiff during a board of directors' meeting held in

Houston County, Texas.

                                                FACTS

        I3.     In conjunction with the proposed merger of First National Bank of Crockett

(Reavis' then employer) into FCH, on April 27, 2007 Reavis and FCH entered into an

employment contract (the "Employment Agreement").            Under the Employment Agreement,

FCH agreed to cause First Community Bank (then known as First National Bank of Crockett,

and subsequently merged into First Community Bank as the sale bank subsidiary of FCH) to

employ Reavis as Branch President and manager of its Richardson, Texas branch.                 The
                                                                ,
Employment Agreement was to, and did continue through December 31, 2009.                       The

Employment Agreement was executed and became effective contemporaneous with a bank

merger agreement entitled "Agreement and Plan of Merger" whereby through a series of



PJaintifrs First Amended Original Petition                                                   Page 3




                                                                                                      App. 190
.-.
      transactions FCH    acquir~d   First Crockett Bancsharcs, Inc. First National Bank of Crockett, the

      banking subsidiary of First Crockett Bancshares, Inc., then became a wholly-owned subsidiary of

      FCH. FCHsubsequently renamed First National Bank of Crockett as First Community Bank of

      East Texas, N.A. lbe Employment Agreement was conditioned on closing the bank merger, and

      both became effective on November 30, 2007, along with a capital infusion into FCH in the

      amount of $75,000,000 by the JLL Defendants. The capital infusion was the vehicle which

      enabled the JLL Defendants to acquire slim majority control (54%) of the voting shares ofFCH.

      A true and correct copy of .the Employment Agreement is attached as Exhibit 1 to this First

      Amended Petition, and incorporated ?erein by this reference.

              14.      As a material part of Reavis' compensation and benefits under the Employment

      Agreement, Reavis was to participate in both a "Bonus Plan" and a "Stock Option Plan".

      Section 2(f) of the Employment Agreement provides:

                      (f)     Bonus Plan. The Executive [Reavis] shall be entitled to participate
              in the existing First National Bank of Crockett bonus plan for the 2007 fiscal year.
              Executive will be entitled to participate in the design and implementation of a
              revised bonus plan for the First National Bank of Crockett for subsequent fiscal
              years, which plan will afford Execntive a reasonable opportuniiy to earn bonus
              amounts comparable to the existing plan; provided, however, that Executive shall
              be entitled to receive a bonus of $50,000 in December 2008 and a bonus of
              $50,000 in December 2009.

      Section 2(g) of the Employment Agreement provides:

                      (g)     Stock Option Plan. The Executive [Reavis] shall be entitled to
              participate in the FC Holdings, Inc. 2006 Stock Option Plan and shall be awarded
              options to purchase 15,000 shares of Employer [FC Holdings, Inc.] common stock
              at a price of $10.00 per share (or, if greater, the fair market value of a share of
              Employer common stock on the date such options are granted), subject to the
              vesting schedule and other terms and conditions to be set forth in a Stock Option
              /l.greement. Employer shall cause First National Bank of Crockett to establish a
              stock option plan covering shares of common stock .of the bank and Executive
              shall be entitled to 'participate in such plan and shall be awarded options to
              purchase 12,500 shares of bank common stock pursuant to the terms of a stock
              option agreement issued pursuant to the plan.

      Plaintiff's First Ame-nded Original Petition                                                   Page 4




                                                                                                              App. 191
On information and belief, a true and accurate copy oftbe FC Holdings, Inc. "2006 Stock Option

Plan" is attached as Exhibit 2 to this First Amended Petition, and incorporated herein by this

reference.

        15.    During April of 2008, Reavis exchanged a series of e-mails with Larry Babb

("Babb"), an FCH Regional Bank President, and Reavis' superior, informing Babb of his concem

that Reavis had not received bonus worksheets for 2008, which hampered Reavis' Branch

employees' (including Reavis) attempts to meet any objectives which might be necessary to eam

personnel bonuses, or allow Reavis any time to provide input to the design and implementation

of his Branch bonns plan, as reqnired under Section 2.(1) of the Employment Agreement. Reavis

also infolmed Babb that none of the three bank officers (including Reavis) who had signed

similar employment agreements with FCH had received their promised stock options under

section 2(g) of their respective employment agreements. On April 9, 2008, at Reavis' request,

Reavis met with Babb and Honey Shelton, FCH's Operations and Human Resources Manager, at

the Richardson Branch offices, to discuss FCH's breaches under the Employment Agreement.

Reavis was advised by Babb and Shelton at that meeting that he would "have an answer back in

a week." No answer or other response was ever received by Reavis from this meeting.

        16.     On August 1, 2008, Reavis and.FCH executed an amendment to the Employment

Agreement entitled "Amendment to Employment Agreement" (the "Amendment") whereby

ReaVis continued employment with FCH's subsidiary First Community Bank of East Texas,

N.A., as "Executive Vice President, Managing Director of Special Assets." All other terms of

the Employment Agreement remained the same.

        17.      On October 21,2008 during the regular monthly Board of Directors (the "Board"

meeting of First Community Bank of East Texas, N .A., Reavis voiced concem to the Board that

Plaintiff's First Amended Original Petition                                             PageS




                                                                                                 App. 192
the act of merging First Community Bank of East Texas, N.A. into First COIlununity Bank,

National Association, would directly conflict with specific provisions of his and others'

employment agreements made by FCR Reavis'complaint to the Board, as well as Harrison's

and the Board's contractual re-affirmation of its obligation to Reavis was memorialized at page 3

of the Minutes recorded and preserved for that Board meeting (the "Minutes"):

       The next item of husiness to come before the meeting was the review of a
       Director Resolution adopting the Agreement and Plan of Merger by and between
       East Texas and First Community Bank, N.A. Director Reavis directed attention
       to item number 1. Declarations ofthe Agreement and Plan of Merger. Mr. Reavis
       read the following sentence "There are no existing options, warrants, calls or
       commitments of any kind obligating East Texas to issue any East Texas Common
       Stock." Mr. Reavis stated this is inconsistent with employment contracts. Mr.
       Reavis then read the relevant paragraph from employment contracts Item 2(g)
       Stock Option Plan "Employer shall cause First National Bank of Crockett to
       establish a stock option plan covering shares of common stock of the bank and
       Executive shall be entitled to participate in such plan and shall be awarded
       options to purchase 12,500 share of bank common stock pursuant to the terms of a
       stock option agreement issued pursuant to the plan." Following discussion
       relating to Mr. Reavis's concerns, Cbairman Harrison committed to bonor
       options and made a motion to approve Agreement save and accept options,
       warrants, calls or commitments per employment agreements with motion
       being second by Director Mike Buoy and unanimously approved by the
       board. (Empbasis added).

A true and accurate copy of the Minutes is attached as Exhibit 3 to this First Amended Petition,

and incorporated herein by this reference. At the time oftbis Board·meeting, Harrison was Chief

Executive Officer of botb FCH and First Commlrnity Bank of East Texas, N.A. All of the bank

subsidiaries of FCH were merged serially into Defendant First Community Bank during 2008

and 2009, and all of their respective outstanding obligations and liabilities were assumed by First

Community Bank, including any obligations to Reavis under the Employment Agreement.

        18.      On April 8, 2009, after going several months without any performance by FCH of

its promised yet breached stock option obligations under the Employment Agreement, Reavis

gave formal notice of default to FCH by letter delivered to Defendant Harrison, as required by

Plaintiff's First Amended Original Petition                                                  Page 6




                                                                                                      App. 193
paragraph 5 .(b) of the Employment Agreement, stating that FCH had breached the Employment

Agreement in several material respects, as detailed herein. FCH had already defaulted on the

other two employment contracts containing terms similar to those in the Employment

Agreement.     In an attempt to avoid litigation, Reavis requested cure of the breaches, and

indicated he felt he had been fraudulently induced to enter and continue his performance under

the Employment Agreement. A copy of this letter (''Notice of Breach") was also sent to Andy

Black (then President of the newly-named Defendant First Community Baak, National

Association), Jim Grant (Regional Branch President), and Larry Babb (Regional Branch

President). A true and accurate copy of the Notice of Breach letter is attached as Exhibit 4 to

this First Amended Original Petition, and incorporated herein by this reference.

        19.     No Defendant has made any attempt to cure any breach under the Employment

Agreement, subsequent to the date of Reavis' Notice of Breach letter. On May 28, 2009, Reavis

informed FCH by letter that the default cure period in the Employment Agreement had passed,

and of his intent to prosecute all his available claims under the Employment Agreement and

otherwise. A true and accurate copy of the intent to prosecute letter is attached as Exbibit 5 to

this First Amended Original Petition, and incorporated herein by this reference. In this letter,

Reavis unilaterally agreed to "stand still" until July 22,2009, to allow FCH time to address his

demands at two of its regular and sequential monthly Board meetings.

        20. Defendants FCH, Harrison and/or the JLL Defendants intentionally interfered with

Plaintiff's Employment Agreement. Early in 2008, Harrison and FCH were maneuvering to re-

enter the Houston, Texas baaking market as soon as an existing non-compete agreement expired

against Harrison. However, FCH was losing money and did not have enough capital standing-

alone to re-enter the Houston market as a viable banking competitor. Harrison and FCR had to



Plaintiff's First Amended Original Petition                                                Page 7




                                                                                                    App. 194
.'




     attract a solvent investor. To do so, Harrison and FCH first needed to strengthen their collection

     of Texas community baoks by ocquiring First Crockett Bancshares, Inc., which would also gain

     FCH a branch (Reavis' Branch) in the lucrative Dallas/Ft. Worth market. Harrison approached

     and attractcd the .ILL Defendants to inject a proposed $75,000,000 of equity capital into FCH, in

     exchange for slim majority control (54 percent) of FCH, along with voting control over the FCH

     Board of Directors. This investment would fund FCH's acquisition of First Crockett Bancshares,

     Inc. (the "Merger").

             21.     Reavis and Defendant FCH entered into the Employment Agreement on April 27,

     2007, which provided Reavis with his promised options ,md burdened existing stock owners with

     exercisable dilution. The Merger and the .ILL Defendants' capital injection of $75,000,000 into

     FCH were contracted to be effective on November 30, 2007. The merger documents and private

     equity investment docnments conflicted with the promises made to Reavis in his Employment

     Agreement and at the October 21, 2008 Board meeting. Defendants Harrison and FCH

     knowingly placed themselves under' conflicting contractual obligations by executing the

     Employment Agreement promising an option of equity participation, and the JLL Defendants'

     contract requiring no dilution of share ownership and prohibiting issuance of stock options such

     as those repeatedly promised to Reavis. The lLL Defendants were aware of the conflicting

     obligations, and knowingly interfered with Reavis' rights and Employment Agreement.

             22.     The bargained-for stock options under Section 2.(g) were a material inducement

     for Plaintiff to sign and perfonn the Employment Agreement. The stock option agreement with

     Reavis was conunon with FCH. FCH had entered similar employment agreements with two

     other bank officers to be employed by FCH after the original Merger. Had these options been

     honored by Defendants Harrison and FCR, their exercise would have diluted the JLL



     Plaintiff's First Amended Original Petition                                                 PageS




                                                                                                          App. 195
Defendants' slim majority control (54% of the voting shares) over FCH, and reduced them below

a majority as voting shareholders and as directors. FCH and Harrison were faced with the

dilemma of honoring two conflicting obligations (one of which would infuse $75,000,000 cash;

the other of which would have jeopardized the $75,000,000 infusion). Their decision was driven

by $75,000,000 cash and resulting control by the JLL Defendants. Accordingly, the Defendants

knowingly elected to proceed with the Merger and $75,000,000 cash infusion, without gtanting

the share options provided for in Section 2.(g) to Reavis, nor the similar options to any of the

contracted bank officers.

        23.     From the period of March '08 through March '09, Defendants FCH and Harrison

renamed the charter of One of its wholly-owned banking subsidiaries, First Community Bank

FOlt Bend, N.A. as First Community Bank, National Association, and subsequently merged the

charters of its remaining banking subsidiaries (including First Community Bank of East Texas,

N.A., formerly First National Bank of Crockett) serially into First Community Bank, National

Association, thereby rendering Reavis' bank share options under Section 2.(g) impossible. The

bank charter which was to issue stock options to Reavis was merged out of existence by

Defendants. The JLL Defendants, FCH and Harrison intentionally and willfully conspired to

withhold, and did withhold the FCH stock options from Reavis. They conspired to and did

merge First Community Bank of East Texas, N.A. out of existence, thereby interfering with and

defeating on both hands Reavis' receipt of any of the stock options promised him under Section

2.(g) of the Employment Agreement

        24.      The JLL Defendants', Harrison's and FCH's interference with the Employment

Agreement proximately caused Plaintiff to lose all of his stock options promised under the

Employment Agreement. Had his bank share options not been rendered impossible, but instead



Plaintiff's First Amended Original Petition                                               Page 9




                                                                                                   App. 196
,


    been issued, as holder of an "ownership interest" in First Community Bank of East Texas, N.A.,

    Reavis could have exercised his rights under law as a dissenting "owner of an ownership

    interest" upon its merger into First Community Bank. Reavis was denied any notice of his

    statutory rights of dissent and appraisal, and then denied those rights themselves, along with their

    concomitant procedures for fair compensation for his ownership interest (See Tex. Business

    Organizations Code Sees. 10.354 through 10.356). Plaintiff has suffered substantial injury and

    damages as a result of Defendants' conspiring to interfere with, interfering with, and Defendant

    FCH's breach of the Employment Agreement, thereby (i) denying Reavis his FCB stock options

    and (ii), rendering performance of Section 2.(g) impossible with respect to Reavis' First

    Community Bank of East Texas, N.A. stock options.

                                              CLAIMS FOR RELIEF

                                         Count One: Breach of Contract

            25.     Plaintiff realleges and reincorporates the allegations of paragraphs I through 24,

    as if fully set forth herein.

            26.     On April 27, 2007, Plaintiff and DefendantFCB entered into a valid and

    enforceable written contract, the Employment Agreement, conditioned to be effective November

    30,2007, as amended August 1,2008.

            27.     Plaintiff has fully performed his contractual obligations under the Employment

    Agreement.

            28.     Defendant FCB breached Section 2.(1) of the Employment Agreement by' not

    allowing Plaintiff to "participate in the design and implementation of a revised bonus plan for the

    First National Bank of Crockett" for fiscal years subsequent to 2007. Plaintiff made several

    inquiries to FCH's Regional Bank Presidents as to when Reavis would be able to provide input



    Plaintiff's First Amended Original Petition




                                                                                                           App. 197
on design of the relevant employee bonus plans, and when they would otherwise arrive at his

Branch.     Plaintiff s attempts to participate in the design and implementation of a revised

employee bonus plan proved futile. Plaintiff was not allowed to participate in either the desigri

or implementation of any FCH employee bonus plan for FCH fiscal years subsequent to 2007.

Defendant FCH repeatedly neglected and breached its obligations under Section 2.(1) of the

Employment Agreement.

        29.     Defendant FCH has breach~ Section 2.(g) of the Employment Agreement several

times, and in several ways. First, Defendant FCH did not allow Plaintiff "to participate in the FC

Holdings, Inc. 2006 Stock Option Plan"; second, Plaintiff was never "awarded options to

purchase 15,000 shares of Employer [FC Holdings, Inc.] common stock at a price of$10.00 per

share"; third, Defendant FCH never "caused First National Bank of Crockett to establish a stock

option plan covering shares of common stock of the bank"; and fourth, Defendant FCH never

allowed Plaintiff "to participate in such plan and be awarded options to purchase 12,500 shares

of bank common stock pursuant to the terms of a stock option agreement issued pursuant to the

plan." Moreover, FCH, with full awareness of the Employment Agreement, proceeded to merge

First National Bank of Crockett out of existence, thus rendering impossible any of its promised

stock options. Despite the Board vote and Harrison's assurances at the October 21, 2008 Board

of Directors Meeting for First Community Bank of East Texas, N.A., that FCH would honor the

agreement to provide Plaintiff with stock options, those options have not been granted.

Defendant FCH has wholly failed to honor its obligations under Section 2.(g) of the Employment

Agreement.

          30.    Defendant FCH's breaches have' caused injnry to Plaintiff, resulting in damages in

excess of the minimum jurisdictional limits of this Court. By failing to honor its contractual



Plaintiff's First Amended Original Petition                                                Page 11




                                                                                                      App. 198
obligations· under Sections 2.(1) and 2.(g) ofthe Employment Agreement, Defendant FCH caused

Plaintiff significant injury, and denied Plaintiff material and bargained-for considerations under

the Employment Agreement.

                      Count Two: Performance of the EmploymentAgreement

        31.     Plaintiff realleges and reincorporates the allegations of paragraphs I through 30,

above, as if fully set forth herein.

        32.     Plaintiff has fully performed his contractual obligations under the Employment

Agreement. Plaintiff has fully discharged his duties under the Employment Agreement from its

effective date of November 30, 2007 through the December 31" 2009 termination of the

Employment Agreement, and until Ploaintiffwas terminated after the filing of this action.

        33.     Defendant FCH has failed and refused, and continues to refuse, to perform its

obligations under the Employment Agreement and provide Plaintiff the stock options promised

him under Section 2.(g) of the Employment Agreement.

        34.     Plaintiff requests judgment against Defendant FCH ordering it to: I) allow

Plaintiff "to participate in the FC Holdings, Inc. 2006 Stock Option Plan"; 2) award Plaintiff

"options to purchase 15,000 shares of Employer [FC Holdings, Inc.] cominon stock at a price of

$10.00 per share" as adjusted for subsequent dilntion; 3) "cause First National Bank of Crockett

to establish a stock option plan covering· shares of common stock of the bank"; and 4) allow

Plaintiff "to participate in such plan and be awarded options to purchase 12,500 shares of bank

common stock pursuant to the terms ofa stock option agreement issued pursuant to the plan."

                                  Count Three: Common-Law Fraud

        35.     Plaintiffre-alleges and reincorporates the allegations of paragraphs 1 through 34,

above, as if fully set forth herein.



Plaintiffs First Amended Original.Petition                                                  Page 12




                                                                                                      App. 199
        36.     The JLL Defendants, FCH and Harrison committed fraud against Plaintiff when

those Defendants induced Plaintiff to continue his performance under the Employment

Agreement. Defendants FCH and Harrison knowingly made the following representations to

Plaintiff or knowingly concealed material information from Plaintiff which would have shown

the representations made to be untrue when made: at the October 21, 2008 Board of Directors

Meeting for First COrnlnunity Bank of East Texas, N.A., Defendants FCH and Harrison with the

full knowledge and participation of the JLL Defendants again committed to issue all stock

options to Plaintiff as required under the Employment Agreement.

        37.      Plaintiff further alleges that the representations Bet forth in paragraph 17 were

material inducements for Plaintiff to continue his own performance under the Employment

Agreement, while Defendants had no intent of honoring their inducements. The representations

were relied on by Plaintiff to Plaintiff's sUbstantial injury and damage.

       Count Four: Conspiracy to Commit Tortious Interference with an Existing Contract

        38.     Plaintiff realleges and reincorporates the allegations of paragraphs 1 through 37,

above, as if fully set forth herein.

        39. The JLL Defendants, FCH and Harrison intentionally conspired to and, in fact, did

interfere with Plaintiff's Employment Agreement. The JLL Defendants, FCH and Harrison

intentionally and willfully conspired to withhold, and did withhold the FCH stock options from

Reavis. They then conspired to and did merge First Community Bank of East Texas, N.A. out of

existence, thereby interfering with Reavis' receipt of the stock options promised him under

Section 2.(g) of the Employment Agreement.           The JLL Defendants, Harrison and FCH's

conspiracy to and actual interference with the Employment Agreement proximately caused

Plaintiff damages by loss of his promised stock options under the Employment Agreement, and



Plaintiff's First Amended Original Petition                                                Page 13




                                                                                                     App. 200
.',




      his ownership .interest dissent and appraisal rights upon merger into First Community Banle

      Plaintiff has suffered substantial injury and damages as a result of Defendants' conspiring to

      interfere with, and interfering with, the Employment Agreement, thereby denying Reavis his

      FCH stock options and rendering performance of Section 2,(g) and its accompanying rights of

      dissent and appraisal of his ownership interest impossible with respect to the First National Bank

      of Crockett shares, FCH acting alone breached its contract with Reavis. Acting in concert with

      the JLL Defendants and Harrison, FCH conspired to interfere, and did intentionally interfere

      with Reavis' Employment Agreement, and denied Reavis' his dissent and appraisal rights in

      respect of his ownership interest in First Community Bank of East Texas, N.A"

                                                      ATTORNEY'S FEES

              40.      Plaintiff has retained the finns of Glast, Phillips & Murray, P.c" and Law Offices

      of Jim Parsons to represent him in this action and has agreed to pay those firms reasonable and

      necessary attorney's fees. An award of reasonable and necessary attorney's fees to the plaintiff

      would be authorized by section 38,002 of the Texas Civil Practice and Remedies Code.

                                                       JURY DEMAN,D
                                                                        ,
              41.      Plaintiff demands a jury trial and tenders the appropriate fee with this Original

      Petition.

                                                CONDITIONS PRECEDENT

              42.      All conditions precedent to Plaintiff's claim for relief have been performed or

      have occurred.




      Plaintiff's First Amended Original p'etitioll                                               P~ge   14




                                                                                                              App. 201
                                              PRAYER

       43.      For these reasons, Plaintiff asks that the Court issue citations for Defendants to

appear and answer, and that Plaintiff be awarded a judgment against all Defendants for the

following;

                a. Actual damages within the jurisdictional limits ofthis Court;

                b. Exemplary damages as determined by the trier offaet;

                c. Prejudgment interest and post-judgment interest;

                d. Costs of suit;

                e. Attorney's fees; and

                f. Such other and further relief to which plaintiff may be justly entitled.




                                               Jim Parson
                                               State ar No. 00000065
                                               LAW OFFICES OF JIM PARSONS
                                               1007 N. Mallard
                                               Palestine, Texas 75801
                                               (903) 723-0580 - Telephone and Fax

                                               Michael C. Dodge
                                               State Bar No. 05937000
                                               GLAST, PHILLIPS & MURRAY, P.C.
                                                1480 I Quorum Drive, Suite 500
                                               Dallas, Texas 75254-1449
                                               (972) 419-8300 - Telephone
                                               (972) 419-8329 - Facsimile

                                               ATTORNEYS FOR PLAINTIFF
                                               DON R. REAVIS




Plaintiff's First Amended Original Petition                                                   PagelS




                                                                                                       App. 202
,


                                                  CERTIFICATE OF SERVICE

             ·1 hereby certify that on thisflday of November, 2010, a true· and conce! copy of the

    foregoing, Plaintiff's First Amended Original Petition, was duly served in accordance with the

    Texas Rules of Civil Procedure to the following by the method indicated below:


    Dan Hartsfield, SBOT No. 09170800
    Taylor E. White, SBOT No. 24070843
    Jackson Lewis LLP
    3911 Turtle Creek Blvd., Suite 500
    Dallas, Texas 75219
    (214) 520-2400 - Telephone
    (214) 520-2008 - Facsimile

    ATTORNEYS FOR DEFENDANTS
    Via Certified Mail Return Receipt Requested




    4730141 v 1 Reavis First Amended Original Petitioll
    Plaintiff's First Amended Original Petition                                                Page 16




                                                                                                         App. 203
,




    EXHIBIT 1




                App. 204
..,'




                                       EMPLOYMENTAGREID~NT


                ~ Employment Agreement dated·as of~rila ?o07(ims "~eem~t") is made,,;d.
         entered mto by and between I':C Holdings, me. (beremaiter called the "Employer") and Don R.
         Reavis (berein1lfler called iIle '~xecutive"), an individual who reSides in Richardson, Texas.·
       . Capitalized tenus used but not defined herein and .defined in the lYferger Agreement (as defined.
         below) have the respective meanings ascnbed to them in the Merger Agreemoot .                 .

              WHEREAS, the parties desire to entednto this Agieemenl setting forth the terms and
       condition, of the employment relationship between the Employer and the Executive as set forth .
       hereig;                                  . .                                     .

                WHEREAS, the Employer desires for the Executive io serve as an office,!' of one or more.
       of its subsidiaries and affiliated ootities;              .                            .

              WHEREAS, concurrootly herewith, "Employer, FC Crockett Corporation, a TeXas,
       corporation and a wholly owned subsidiary of Employer. ("Merger Snbsidiary"), and First
       Crockett Bancshares, me. ("Baneshares") are ootoring into an Agreement and Plan of Merger (as .
       such agreemeot may hereafter be amended and supplemooted from time to time, the "Merger
       Agreemoot"), pursuant to which, among other things; Merger Subsidiary will be merged witli. .
       aod into Bancshares, with Bancsha.rcs continuing as Ihe surviving company 'and a wbolly owned.
       snbsidiary of Employer (the "Merger'1;                                            ,

               NOW, TIlERllFORB, the parties, iuteoding to be legally hound, for the consideration s~t
       forth in this Agreement and for other good and valuable collsideration,agree as follows:

               1.     Employment Employer agrees to. cause its affiliate known as First National '
       Bank of Crockett to employ the Executive as Branch President of such ootity. The Executive:
       shall have responsibilities. duties and authority customarily accorded to and expected of an.
       executive holding such position. The Executive agree. to devote hi. full time, attention and
       effurts to promote and fintber"lhe business of the Employer, including its ,affiliates•. The' .
       Executive shau report to the Board of Directors of the Employer (the "Board') and shall perform
       his duties under this Agreement in accordance with such reasonable standards established from .
       time to time by the Board.

              2.        ~~:~~~~~~;2~                   For .all services reodered by the Executive to the
       Employer       1                               Ihe Employ<;r shall compensate the Executive as'
       follows:

                 .      Ca)    Base Salary. Commencing the Effective Date,. Ihe Employer agrees to pay
                the Executive a baBe salary of $140,000 per annum, less applicable statutory deductions
                Clhe. "Base Salary"), payable on a regular basis in accordaoce with the Employer's
              . standard paymll procedures, but not less frequently than monthly. The amonnt of Base
                Salary shall be reviewed .by Ihe Board no less often than annually and may be increased
                from time to time by such amounts as !he Board in its disCretion may decide.




        HOUST0N\20S7107.6
                                                                                                  '.~.

                                                                                                             App. 205
        -"-~.---   ..-.-.• ...---.".-...,.-- .. __.,-_....._-,...-
                        ~                                            ~   .
    >




(
                                                     (b)    Benefits. Executive shan be entitleOtO coverage, without contributions by
                                             the Executive, for the Executive and depend.ent family members· under health.... ··
                                             hospitalization, disability, dental, life and other insutance pla,ns that the Employer may
                                             have.in effect from time to time for the benefit of similarly situated. employees of the·
                                             Employer.                                                              .            ..

                                                     (c)    Re~onabie Execunv. Expenses. During the Executive'. employment with •.
                                             the Employer, the Executive shill! be entitled to receive prompt reinibursement for all .
                                             reasonable expenses incurred by him (in accordance with the policies and practices ·of the·
                                             Employer or as may be established by the Board for its senior executives) in performing
                                             services under this Agreement, .provided that the· Executive properly accounts for sUch
                                             expenses in accordance with the Employer's policies. Reasonable expense. shan include
                                             reimbursement of country .club dues (ftot to. exceed $5,000 per annum) and cell phone
                                             charges Cor business usage..                                                .

                                                    (d)     Vacation. The Executive s1tal1 be eutitled to annual vacation ·time
                                             detennined in acDordarice with .the Employ"'s standard practices,. and equal to the.
                                             vacation time g;ranted. other similarly. situated executive employees of Employer.

                                                     (e)     Fri~ge Benej/t Prqgrams. During the Executive's employment with "the
                                             E)llployOr, the Executive s1tal1 pe eligible to participate iIi. any fiinge benefit plan or
                                             program which IiIay be or become applicable to the Employer's executive employees,
                                             includm.g without limitation, twenty-eight (28) days of paid lime off per amnmi,
                                             participation in the Empioyer 4010<:) plan and a vebicie allowance of$I,OOO per month or
                                             a back owned vehicle with       a  maximum purchase price of $35,000, along with
                                             reimbursement for gas and maintenance expenses for such vehicle:

                                                      (f).   Bonus Plan. The Executive shaI1 be entitled t" participate in tlte ·existfug
                                              First National :Back of Crockett bonus plan for the 2007 fiscal year. Executive will be .
                                              entitled to participate in.the design and implementation of a revised bonus pl"!l for the .
                                              First National Back of Cnlckett for subsequent. fiscal years, ",hich plan wiJI.afford·
                                            :.Executive·a reasonable opportunity to earn bonus amounts comparable to the existing
                                             .plan; provided, however, that Executive shaI1 be entitled to receive a bonus of$50,Ooo in
                                             ·December 2008 mid a bonus of$50,ooO in December 2009.
                                            : ..~.                                              .     .        .

                                           ,....     . (g)    Stock Option plan. The Executive ,ball be entitled to participate in the FG
                                          ; Holdings, Inc. 2006 Stock Option Plan and shall be awarded options to purohase 15,000
                                          :·shares of Employer collunon stock at a price. of $10.00 per share (or, if greater, the fair
                                            . market value ofa share ofEl'nployer conunon stock on the date such options are granted);
                                             .•ubject to the vesting schedule and other terms and conditions to beset forth in a Stock·
                                           .. Option Agreement. Employer shall cause First National :Sank ·of.Crockett to establish a
                                              stock option plan covering shares of common stock of the bank and E"ecutive shall be
                                              entitled to participate in such plan and shall be awarded options·to purchase 12,500
                                              shares of bank common stock pursuant to tlte tenns of a stock option agreement issued
                                              pursuant to tlte plan.




                               HOUSTON'a0S7107.6                                     -2-




                                                                                                                                            App. 206
...... -.- .._.•...• _. -_ .. ----_ ...... _-_ ..... .




                                             .   .       .                    ,   ..                    .




                     ' . '(h?         Executive Supple':'ental Income Plan.' Employer agrees to continue the '
                      FIrst Natronal Bank of Crockett Executi'Ve Supplemental'Income Plan, and Executi'Ve '
                      shall be entitled to participate in such plan on !he same basis as now in effect.     '

         For purposes of Employer's 'Various employ~e benefit plans following the Effective Date time of
         service with !he Filet National Bank of Crockett, or its affiliates prior to the Effective Date will
         be c.redited to \he El(ecuiive foq~urposes. of'detenniiiing and calcUlating his eligibility fur and         ':..

         vesting tO,'the greatest extent peumtted under Employer's plans and applicable law.'             , '

                       3.            Term, Tenidn.tion arid Rights upon Termination.

                               (a)      Term. The term of this Agreement ,hall begin on the Effective Date and '
                       end at the close of business on December 31; 2009 (the "Tenn") unless temllnated sooner,
                       as herein provided. Upon such termil1ation. Executive shall receive paymeut for all
                       unpaid compensation remaining thiough such date, pluS any accrued, unused personal '
                       leave, less all required statutory'wi1:hhQldings ~d deduc;ions., ''N9·jjJi!ber Comp~jm'
                       shall be owed under this Agreement, except as otherwise providedmParagraphs 3(b)..(e)
                       below. Thls Agreement ami the Executi'Ve's employment may be terminated in ooyone
                       of the funowing ways:,

                               (h)     T""minalio~ as aIlP3ult 'oj the Executive's Death. The death ~i' thO '
                       Executive shall immediately terminate this Agreement, and ,the ExecUtive's estate shall b~
                       entitled to a lmnp smn cash amount repre8<;!lting all compensation, and benefits ea:med by
                       the Executive and. unpaid, as' of !he 'date of tennination,' less applicable statutory .
                      . deductions, and any other benefits under insurance programs and other employee plans in
                       accordance with the terins of such arrangements.                          '   ,

                             (c)     Termination on Account of Di.abili~l. If, as a result of incapacity due to
                      physical' or mental illness or injury, the Executive shall bave been abseut from his fu!lo,
                      time duties hereunder for six (6) consecutive months, the Employer may terminate the
                      Executive's employment provided Executive is unable to reB1llIle his ftlll-time duties with
                      reasonable acconimodstion, and the Executive shall be eutitled to a lump sum callb,
                      amollDt representing all compensation anci benefits earned by !he Executive and unpaid as '
                      of the dste of tennination, less applicable statutory deduotions, and any other benefils'
                      under insurance programs and o!her employee plans in accordance with the terms, of such
                      arrangements.                                                   . .

                              (d)    Termination by the Employer lor Cause. The 1idnployer may, iu its soie '
                    , discretion. terminate this Agreement for "Cause," ,,,:hich shall mean: (i) the Executive's
                      oet(s) of dishonesty; (li) the Executive's fallure to devote substantially all of his fun.
                      bUsiness time, attention ami 'energies to the business of Employer or to discbargehis
                      duties on behalf of Employer diligently and in a maoner consistent with the standard
                      detennined by Employer fur perfOlmamo of !hese duties; (iii) Ibe Executive's acts of
                      willful misconduct; (iv) the Executive's commission of any serious violation of
                      Employer's policies, procedures or guidelines for appropriate, conduct; (v) !he Executive's
                      acts or' omissions that breach biB fiduciary duties to Ibe Employer (or any affiliate or
                      subsidiary); (vi) the Executive's conviction of, or pleading no contest to, a' felony or,



                                                                                                                    r'" ••

         HOUSTON\20S1101.6                                      -3-




                                                                                                                             App. 207
           crime involving ~aud ~r moral'tm:pitudej or (vii) the Bxecutive'~ ~ts which breach his."
           obligatiol!S PllIsuant to this Agreement ;prior IQ.!flmli.nation for "Cause;" the Employer·
           shall (1) provide the Executive with written notide describi!Jg in detail the actions taken . .
           by· ihe Executive and the reasons why EmploYoi· believes that such actions· constitote .
           "C.ause," (ii) afford the Executive With. the· opportunity to attend a meeting of the entire· .
           Board of Employer at which he may make a presentation chaljenging the Employer'.
           determination that "Cause" exists, which meeting shall not OCcllI until 10 business days .
           after Executive·receives the written notice, and (Iii) it; after such meeting,· the Employer
           continues to believe that "Cause" exists, give Executive thirty (30) days to cure the basis·
           for the Employers det~ation that IICauSel~ exists. If the basis for the Emp~oyerts .
         . determination that "Cause" exists has not been cured within such 30-day period, or if not
           practicable to be cured wi1lrin 30 days, the Executive has not made reasonable efforts to ..
         . cure, tl)en Employer may terminate this Agreemen.t for·"Caose" by giving written notice
           of terrni)1ation to the Executive, specifically stating the groUIlds upon which the.
           termination is based. In the event the Executive" employment is terminated by the
           Employer for Cause; the Executive shall be entitled to· a lump sum cash amount
           representing all compensation and benefits eamed by the Executive and unpaid as of the ..
           date oftemiination, less applicable statutory deductions, to be paid within six (6) days of
           termination.                              .

                  (e)      Xmnination. Witlwut Cause. . At any ·!i;no after the commencement of ...
           employment, either·the Executive or the Employer may, voluntarily or without Cause,
           respectively, terminate this Agreement and the Executive'" employment, effeCtj"" thirty.
           (30) days atter written n(ttjce is provided to the other: Upon termination by the Einployer
           without Cause or by Executive for Good Reason unrelated to a Change of Control, the
           provisiona.ofParagraph 5 shall apply to Executive's post-employment entii1ements.
I                                                                                                            ~   ..
           4.        Change In Control. . A change in Conitol Sball not occur by reason uf         any: .
    traosaction in which the Executive, or a group of individuala or.entities including the Executive,
I   participates· as. an Acquiring Person, or owns, directly or indirectly, a majurity of a corporation

I
,
    described in this paragraph.

                   Ca)
                                                                  .

                          Definition of Chcmge in Control. . For purposes' of. this       Agreement,
           "Change in Control" shall mean:

                             (i)   any "person" {as;~\IchJe"!l' isuseg. in Scctio';" 13(d) ~d 4(<1) 'of·
                                                                                              i
             the Securities Exchange Alit i>f·1934, ... ··amended (the "Exchange Act"), an "Acquiring
           ·.Person") becomes the "beneficiOJ. owner"· (as such· term is defined in Rule 13d-3· .
           . promulg~ted under the Exchange Act, a "Beneficial Ownei'~, directly or indirectiy, of·
        ". .~ecurities -of the Em.ployer representing 50% or mODe of the combined voting power of
             the Employer's then outstanding socurities;                .

             .            (ii)   the Employer's stockholders approve an agreement to merge· or
           consolidate the Employer with another corporation (other than a 'cOrporation !?O% or more .
           of which is controlled by, or is under cornman control with, the Employer) in which the
           Employer is not the surviving entity;


                                                                                                  &::.
    IfOUBT0N\20~101.6                               -4-




                                                                                                                      App. 208
                      .. (iii) . the Employer sells 80% or more ,of its assets 10 .80· Acquiring.
        Person; or.

        .            (iv)    the p~rsons who wore members of Ihe Board of DirectorS of the
        Empl?ye,; immediately prior to a I""der offer, exohange offer, contested election, or any·.
        combmallon of the foregomg, cease to constitute a majority of the Board ofDlrectors.

           . . (b)     EiRet of Change .in Control. In the event the Executive's employment is
        lermina1;ed by the Employer without Cause, or by the Executive for Good Reasoo, as
        defined in Paragraph 5 hereof, withln one (1) year following a Change in Conltol,· the.
        Executive shall be entitled to the following:

                       (i}     A lutnp suni .cash amoUnt Iopresentlng all compensation ;"'d
        benefits earned by the Executive and nnpald as of the date of termination, less applicable.
        statutory deductions, to be paid within thlIty (30) days oftertnination; .

                         (il)    A lump snm caJlh amoUllt equal to the aggregate of payments owed
        to the Executive for the Iemaining period of the Term, calculated by using·the Base
                                                                                           or
        Salary at the date of termination, plus imInedlate and full vesting of aU options. stock
        appreciation rights, deferred compensation and Executive Supplemental InCome·
        Agreement benefits; provided, however, that snob payment shall be limited to an amount
        that, when added to aU other arnoUllts to be received by the Executive from the Employer .
        that could constitute "parachute payments" (as defined in Section 280G(b)(2) of the
        Internal Revenue Code of 1986, as amended (the "Code")}, shan not el(ceed.. one dollar
        (SI.OO) less than three (3) times the Executive's "base amount" (as defined in
        Section 2800 of th. Code), so that no portion of such ainounls shall constitute a non-
        deducll'ble payment under Seetion 280G of the Code. The cash payments under thls
        paragraph shall b. made in one lunrp sum on !jJ.. date of termination of the Executive',
        employment or as soon as administratively feasible thereafter, but in no event after the .
        later of (i) the last day of the calendar year in which Executive's employment terminates, ..
        or (ii) the fifteenth (15th) day of the third calendar month following the date of
        temiination ofExecutive's employment.

                       (iil) The Employer shall maintain ·in full force and effect for the
        Executive's continued benefit: all life, medical, deutal and prescription drug insurance
        plans, programs or arrangements in which the Exooirtiv. was entitled to participate at any
        time during the six (6) ·monlh period prior to the date of termination, provided that the
        Executive's continued participation is possible under the general terms and provisions of
        such plans, ·programs or arrangements, until the earliest of (i) the expiration of six (6)
        months after tenninatioo, (il) the Executive's commencement of full time employment
        With a new employer, or (ill) the expiration of the Employer's obligation to ofier
        continued coverage under any such plans under applicable law. The Employer shall pay
        all premiums associated with the level of coverage elected by the Executive.




                                                                                                ..      I
HOUSTON\20S1101.6                               -5-                                             ~

                                                                                                            App. 209
         ,
."-'--~'-".'




                        s.       Termination Without Canse or Executive Te~mination for Good" Reason.

                              .. (~)    If, at any tim"~~ the T~tm.other thanthe one-year period f~lIoWing a
                        Chang~ m Con:r0!, the. Executive IS ·!ermm.ted by the Employer without Cause or the
                        Exewtive ~at.es this Agreement for Good Reason (as defmed below), the Executive
                        shallhe en!itled to a lump ~ cas~ amount equaUo the agg,egate ofpayments owed to .
                        the Executive for ~e ~armll!! penod of the Term, calculated by using the Base Salary .
                        ~t the. ?a!e of termmatio:" which amount shall never be less than 360 days pay, plus .. ,
                        Im)Ilema!e and full vesting of all options or stock appreciation rights. and deferred,
                        co~eDS.tion, including the Executive Supplem6ntal Income Agreement benefits, ~s·
                        ~pphc,,?le statutory deductions, subject to the limitation on parachute payments set forth
                        In Section 4(b) hereof. The cash payments under this paragraph shall be TIlade in one .
                        lump sum on" the date of te.ri:ni.l:tation of the Executive's employment or ~ soon as'
                       . adroitllstratively feasible thereafter, but in no event after the later of (i) llie last day oftlle·
                        caleiJ.dar year in which Executive's employment terminates,or (ii) the fiftCenlli (15") day
                       .of the third calendar month follOwing the date oftennination of Executive's emploYment..
                        The Executive shall be entitled to heallli and other benefit coverage, at bis expense, ~.
                        provided under federal law by COBRA. .

                                (b)     For purposes of this Agreement, llie     ~xecotive .haIl hav~ "Good Reason"
                       . to terminate this AgreenIent and his employment hereunder if, .without'the Executive'.
                        prior writton consent; (i) the Execntive is unreasonably denIoted by means of a reduction
                        in aulliority, responsibilities, duties or title to a position of materially less stature ot
                        importance within the Employer or its affiiiales than as described in Paragraph 1 hereef;
                        (il) the Employer breaches this Agree1"eot in any material respect and fails to cure ,such
                        breach within thirty (30) days after the Executive delivers written notice and a written
                        description of such breach to the Employer, which notice sha!1 specifically refer to this
                        paragraph of this AgreenIent; or (iii) the Employer reduces the Exeentive's Base Salary or
                        materially reduCes his bonefits..

                          6.     Code Section 409A. Notwithstaorung any provision of this Agreement to the '
                 contrery; if at the time of the Executive'. termination of omployment, the Executive is a
                 "specified employee" as defined in Section 409A of !he Code, no payment or benefit will be :
               . provided under Section 4 'or 5 Wltil the earliest of (A) the first day of the sevenlli month after the
                 date of Executive'. tennination of employment, or (B) tbe date of the Executive's death. The
                 first sentence of this paragraph shall apply only to the eJ<tent required to avoid the Executive'.
                 incllITOOce of any additional tax .or interest under Section 409A ofllie Code or any regulations or
               . Treasury guidance promulgated thereunder.                                                      '

                        If any provision of this AgreOUlent (or of any award of cOmpensation) would cause !he
                Executive to incor any additional tax or interest under Section 409A o{ the Code or any
                regulations or Treasury guidance promulgated lliereunder, the Employer may refonn such
                provision; provided that llie Employer shall (il maintain, to the maxinIum extent practicable, the
                original intent of llie applicable provision Without violating the provisions of Se!,tion 409A of Ihe
                Coda and (li) notifY and consult with the Executive regarding such amendments or modifications
                prior to the effective date of any such change.




                HOUSTON\20511 0?6"                                 -6-




                                                                                                                                App. 210
       Notwithstanding any pr?vision of this Agreement to the contrary, to the .xtent that any , .,'
payment under the t~rrns of this Agreement woUld constitote an impermissible acceleration of
payments under Sectioo 409A of the Code or any regulations or Treasury guidance promUlgated '
thereunder, such payments shall be made, no earlier than at such times allowed UI1der Secti
409A,ofthe C o d e . '                                                      ,on

       7.    . Non-Disclosure, Non-Competition and       Non-SOlici~tion Covena~ts "
               (.)   C:0nfi~e'n~al Informali?,: Defined. The Executive acknowledgeS th~t
      Employer's busmess 1S highly competitive and that Employer possesses information thai'
      is a valuable, special and unique asset used by F.mployer in its business. Executive
      acknowledges that such infunnation is constantly evolving 'and changing. He furthei
      acknowledges that contePlPoraneouS witj1 !hi: execution of this Agreement and prior to '
      Execn!ive's termination, Employer promises to give Executive Confidential Information
      in a greater qlUllllity andlor, expanded natpre than previously provided to Executive.'
      Executive agrees that protection of such Confideotial Infozmation from urumthDrized
      disclosure and use is of critical importance to'Employer. "Confidential Information" of,
      Employer (which shall include any affiliate or subsidisry fur purposes of this paragraph}
      means and includes COnfidential and/or proprietary information'andlor trade secrets \hat
      have been andlor will b~ developed or used and that cannot be obtained'reedily by third '
      parties from outside Sources. ' Confideotial Information includes, but is not limited to, thl>
      following: infurmation regarding customers, employees, contractors and the industry not'
      generally known to the pubJic; strategies, methods, books, records and documents;
      technical infonnation conCerning products, equipment, services·             and  processes;;
      proourement proced1JIel!, pricing and prioing techniques; information conrerning past,.
      current and prospective cUstomers, investors and business affiliates (such as contact'
      name; service provided, pricing, type and amount of services used, financial data and/or
      other'such informati~n); pricing strategies and price curves; positions; plans or strategies
      for expansioo or aequisitions; budgetS; research; financial and' sales data; trailing,
      methodologi\'S and terms; communications information; evaluations, opinions and
      interpretations of information and data; marketing and merchimilising techriiques;.
     . electronic databases;. models; specifications; computer programs;· contracts; bids or
       propOsals; technologies and methods; training methods and processes; organizational
       structure'; personnel information; payments ~ rates paid to consultants"or other service·
       providers; and other such confidential orpropriet"!)' information.

                (b)     Non,-D/sclosure Obligations. The Executive agrees that he will not, at any
        time dwing or after his employment.with Employer,.make my unauthorized discloslll'6,
      , directly or indirectly,'of any Conlidential Infonnation oIEmployer, ·its subsidiaries,or of
        any. third porties that the Executive received in connection with his employment with
        Employer, or make any us. thereat; directly or indirectly, except in walking for
        Employer. , The Executive also agrees that he sball deliver promptly to Employer at tbe
        tenni:niltion of employment or at any'other time at Employer's request, without retlrlning
        any copies, all documents and other material. in the Executive's possession reIl'lting,
        directly or indirectly, to any Confidential Irifunnation or other Wormation of Employer,
        or Confidential Information or other infonnation regarding third parties, learned as an
        employee at Employer,
                                                                                                       I
                                                                                                           ,'".'




                                                                                                                   App. 211
             ,    (~),   N~n.Competition Obligations.' In order ,to protect' the Confidential',
          Information and m or4er to enforce Executive's agreement not to disclose Confidential .
          Information, Employer and Executive agree that, during th" term of the Executive'S: '
          employment with Employer or ita affiliates, which may, excc>ed the Terni of this
          Agreement, and fur" twelve (12) months after the termination of the 'Executive'.
          ~ployment y.>ith Employer or its, affiliates ("Non:Competition Period"), the Executi~e '
          Wlll not, except .. an employee of Employer or ita affiliates,in any capacity for the'
          Executive or others, directly or indirectly:

                        {i)anywher. in the geographic area comprised of Dallas and Collin
      ,Counties, Texas ("Marlcet Area"), compete or engage in a business similar to ,that of '
    , Employer or ita affiliates, or compete or engage in tQat type of business which Employer'
     , or its affiliates has plans to, engage in, or any business which Employer or its affiliates '
       has engaged in during the preceding twelve (12) mcnth period if within the twelve (12)
       months before the termination of the Executive's empioyrnent; the E){ec1itive had access
       to or knowledge ,regarding the proposed plans or the business in which Employer or ita '
       affiliates engaged;                                                                         ,

                       , (li) 'take any ~on to invest in, own.' manage, o~erate, control,'
      . participate in, be employed or engaged by or be 'cormected in any manner with any'
        parroersDip, COrporation or other b\l1liriess or entity engaging in a b\l1liness similar, to that '
        of Employer or its affiliates anywhere-Within the Market Area; except that the Executive
        is permi\ted to own, directly or indirectly, up to five percent (5%) of ,the issued and
        outstanding securities of 80y publicly traded financial institution conducting business in
        the Market Mea;

                          .(iii)  anywhere in tile Marl<et Area cail on, sccopt business from, semce
          or solicit competing business from customers or prospective customers ofE!nployer or its ,
          affiliates if, within the twelve (12) months bofure the termination of thi> Executi~e'..
          employmeot, the ExecUtive had or made contact with the customer, or had access to
          information and files about t:h.e customer; or                                           .              ' ..   -
                                                                                                                  ..•.
                          (iv)     calIon, solicit or induce any employee of Employer or ita affiliates
          whom the Executive had contact With, knowledge of, or association with in the previous
          twelve mouths, to terminate employment from Employer or ita affiliates to engage in
          work similar to that in whiub the employee was engaged on behalf of Employer or its
          affillates, and will not assist any other person or entity in such activities.

      ,            (d)     Injunctive Relief. Employer and the Executive acknOWledge and agree
           that breach of any of the covenants made by the Executive in this Paragtaph 6 would                     .
                                                                                                                  ; .".;

          'cause irreparable injury to Employer or ita affiliates, which could not sufficiently be                -/,;
           remedi"!! by monetary damages; and, therefure, !hat Employer, or its affiliates shall be
           entitled to obtain suub equitable relief as declaratory judgmenta; temporary, preHmiriary
           and permanent injunctions; and order of specific performance to enforce those covenants
           or to prohibit any act or omisSion that constitutes a breach thereof. If aparty must bring         I
           suit to enforce this Agreement or to defeod any such action, the prevailing party shall be
           entitied to recover its altoJ:fieys' fees and costa related thereto.                               I
                                                                                                              !

                                                                                                                  l
HOUSTON\2057107.G"                                 .g.




                                                                                                                             App. 212
                " (e)    Tolling,,~ the event Executive is found to ,have breached an~ promise'
            mad~ m Paragraph 6 of this Agreement, the t;welve-month period apecifiep in Paragraph.6
            of this Agreement shall be extended by the period, of tille, thr which Executive was in
            breach.      ,                                        '     '                         '

      , ; 8.      ,Return of Employer Prope'1Y' ,All records, designs, patents, ,business plans; , ' '
    finan~lal statements, manuals, memoranda, lists, contracts and other property delivered to or
    compiled by the Executive by or on behalf of 'the Employer or its affiliates or their"
    representatives, vendors or custrnners which pertain to the business of the Employer (inclUding
    any affiliate or subsidiary) shall be and remain the property of the Employer and subject.t all '.-
    times to its discretion and control Likewise~ all oorr~"Po~ce, reports, records. charts,
    advertising materials and other similar data pertaining to the business, activities or futare plans
    of the Employer or its affiliates w\lich is collected by Executive during the       course   of his
                                                                                                             .,":
    emplo}'lllent with the Employer or its affiliates shall be delivOfOd promptly to the Employer ,
    without request by it upon tenniuation of Executive's employmeot.                                   '

            9.     Inventions. Executive shall disclose promptly to the Employer any and all
    significant conceptions and ideas for inventions, improvements and valuable iliseoveries,
I   whether patentable or not, which ate conceived or made by the EXOC]ltive, solely or joiritly with
i   another, during the period of employment or witQin one (1) year'thereafter, and which ar." ,
    directly related to the business or activities of the EmPloyer or its affiliates and which the' ,
    Executive conceives as a result of his, employment hereunder. The Executive hereby assigns and
    agrees to assign ,all his interests th~rciu to the Employer,or its nominee, Whenever requested 'to
    do so by the Employer, t1!e Executive shall execute any and all applications. assignments or other'
    instruments that the Employer shall deem necessary to appiy for and obtain I,etters Patent of the
    Unit~d States or any foreign COlDltry or to otb.erWi.se protect the Employer's interest therein:

            10.     Trade Secrets. ' The Executive 'agrees not to, during" or after the term Of tltis-: ,
    Agreement, directly or indirectly, disclose or use for the benefit of any person other than the ' ",
    Employer, Employer" trade secrets or other confideotlal business infonnation of the Employer
    (including any affiliate or subsidiary), whetber in existence or proposed, to any person, :finn,
    partnership, corporation or business for any reason or porpose whatsoever, except and only to the
    extent (1) snch information is or becomes known to the public generally througli no fault of the
                                                                                                            ,"r..
    Executive or (ii) required by law or legal process following notice to the Employer,                    ;~.•.;


               11.    Arbitration. Any unresolved dispute 'or controversy arising urider or: in:
    , connection with. this Agreement,' other' than enforcement of the provisions of Paragrapbs 6-9 of '
      this Agreemeot, sball be settled exclusively by arbitration, condncted in Harris County, Texas, in
      accordance with ,the Employment Dispute' Resolution Rules of the American Arbitration:
      Association (n AAAn) then in effect, ,provided that the Executive and the Employer .ball comply
      with the Employer's grievance procedure. in an effort to resolve such diapute or controversy
      before'resorting to arhitration. The arbitrators sha1l not have the authority to add to, detract
      from, or modify any provisioll hereof nor to award punitive damages to any injured party. A
      decision of the arbitration panel shall be final and' binding. Jndgment may be entered on the
       arbitrato",' award in any court having jurisdiction. The direct expense of aoy arbitration
      proceeding shali be apportioned by the arbitration award:




     HQUSTQN\WS7101.6                              -9-




                                                                                                                     App. 213
          12.     Successor; Binding Agreement. The Empleyer shall require any.Successor
  (whether direct or iI1direct, by purchase, merger, consolidation, liquidatiQn or otherwise) to all or ..
  substantially all of the business and/Qr assets of the Employer to agree to· assume and to assume·
  all of the obligations of the Employer under this Agreement upon or prior to such su9Cession
. taking place. A copy Qf such assmpption imd agreement wall be delivered to Executive                       .....
  promptly after its execution by the .succesSQr. However, this Agreement is· personal to· thi:
  Executive and the Executive may not assign· or transfer any part ofhis rights or duties hereunder,
  or any compensation due to him hereunder, to any other person, except that ihis Agreement sball
  inure to the benefit of and be enforceable by the Executive's personal Qr legal representatives, ..
. executors, administrators, heirs, distributees~ devisees or beneficiaries.
        13.     Modification; Waiver. No provision of this Agreement may be: modified,
 waived or discharged uuiess such· waiver, modification or disroarge is. agreed to in a writing
 signed by the Executive ·and by SUch director of the Employer as may be specific.uly designated
 by the Board. Waiver by any party of anybresch of or failure to comply with any provision of
 this Agreement by the other party wall not be construed· as, or constitute waiver of suro
 provision, or a waiver of any other breach of, or failure to comply with, any other Rtovision Qf'
 this Agreement.                                                       .              ,

        14.      Notice. All no~ices, requests, demands and other commUnications required or
 permitted to be given by either party shall be in writing. deemed to have been given when .
 delivered personally or received by certified or registered mail, return receipt requested, postage
 prepaid, at the address of the other p/IrtY as follows:

         Iftu the Employer to:

                                 Fe Holdings, lno.
                                ·14200 Gulf Freeway, Suite210
                                 Houston, Texas 77034

          If to Bxecutive tu:

                                 Don R. ~eavis
                                 p.o. Box 830677        .     .                                                      ,..;
                                 Riehardson, Texas 75083~0667

  Either· party hareto may cliange its eddreos for purposes oethi. PmaSraph 13 by giviI1g·fifteen
  (15) days prior notice to the other party hereto.                                              .

           15.     Governilig Law. This ASreement has been executed m(l delivered in the State of
  Texas, and its validity, inte1]lretation, performance and enforcement shall be gQverned
  .exelusively by the laws of that State. Venue of any dispute related to this Agreement or any
   aspect of Executive's emploYment with or termination from Employer sb!Ul be, and is



   ... ...                                                            ..._-
   c~nveniellip iD Harris County, Texas.



  ,
          16.
          ""-                                    ""' ....... ""
                  Complete Agreement. This Agreement sets forth the entire agreement of the
                          ",,,~-,.~,                                                               ~


  HOUSTON\20S1101.6                                  -10~




                                                                                                                            App. 214
" understandings, written or oral; between the Employer, its predecessors" and the Executive" The
  Executive has no oral repres:eD:tat.ions~ understandings or agreements with the Employer or any of .
  its officers, directors or represeiltatives covering the same subject matter as this Agre.ement. TIlls
  Agreement is the final, complete and exclusive statement apd expression of the agreement
  between the Employer" and the Executive and of all the tenus of this Agreement, and it cannot be
  varied, contradicted or supplemented by evidence afany prior or contemporaneous oral or                      ",-.
  written agreements.

        17.     Severability. If any portion of this Agreemont is "held invalid or inoperative, the
 other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable"
 and possible, effect shall be given to the inteot manifested by the portion held invalid or"
 inoperative.'                                                                   .

         18.    Termination of Merger Agreement. "This Agreement is executed and delivt.r.d
 coutemporaneously with the executiou and "delivery of the Merger Agreement, but shall bocQllle
 effective on and as of the Effective Date (as denned in the Merger Agreement) of the Merger. If
 the Effective Date shall not occur, 1hls Agreement shall not become effective bnt shall be void "
 and of no force or effect.                                                  "

                                                EMPLOYER:

                                               Fe HOLDINGS, INC.




                                                B~
                                                Name:    «IBEL ,} HAJe.f?IS.tJ      ---
                                                TitJ.:   CAa tr ..... ..£~6e. Spud ~
                                                         C~ie~ e';<e.e~·"1I. IJFFi'c.,.~
                                                EXECUTIVE:
                                                                                                               "-''.
                                                Don R. Reavis



                                                  Lk~,~~
                                                                                                                    ',:
                                                                                                               \\
                                                                                                                    ""
                                                                                                               i.




                                                                                                               ;.;-.~.

                                                                                                               1;'
                                                                                                               i
                                                                                                               !


                                                                                                           I

                                                                                                           I I      ....


  HOUSTONU0571ff1,(i                              -11-




                                                                                                                      App. 215
     ,
     "

                                                                                                     DRAFT



                                  AMENDMENT TO EMPLOYMENT AGREEMENT

                  This amendment ("Amendment") to that oenain Employment Agreement dated as of
           April 27, 2007 betw.een FC Holdings, Inc, andDon R. Reavis is dated as of Angusl L 2008, '

                   In considemtion of the mutual covenants and agreements contained in this Amendment
           and for other good and valuable consideration, the parties agree as fullows:

          1.     Capitalized terms used but not defined in this Amendment shall have the meanings given
          to them in the Employment Agreement.

          2,      The Employment Agreement is hereby amended in the following respects:
                  2,1        Section 1 of the Employment Agreement is amended in its entirety as follows:

                           1.     Employment. Employer agrees to cause its affiliate known as First
                  Community Bank East 1'exas, N,A. to employ the ExeCutive as "Executive Vice
                  President, Managing Director of Special Assets" of such entity. The Executive shall have
                  responsibilities, duties and authority customarily accorded to and expected of an
                  executive holding such position. The Exec)ltive agrees to devote his fulI time, attention
                  and drum to promote and fulil,er the business of the Employer, incinding its affiliates.
                  The Executive shall report to the Regional President. of the Employer and shall perfonn
                  his duties under this Agreement in accordance with such reasonable standards established
                  from time to time by the snch Regional Presidents.

           3.      This Amendment shall' constitute an amendment to the Employment Agreement                  as
           provided in Section 13 thereof. Except as specifically amended herein, the Employment
           Agreement remains in full force and effect. This Amendment and the Employment Agreement,
           as amended by this Amendment, shall be one and 'the same instrument and may be amended' and
         . restated in one instrument

          4.     This Amendment shall be governed by and construed In accordance v;ith the laws of the
          State of Texas, and ~ the extent applicable, federal\aw. The parties agree that, aIlY action ,or
          proceeding instituted with respect to this. Amendment ehall be '90niinenced .and ,maintained
          exclusively in the courts of general jurisdiction in Harris Cou!ity, Texas. This Amen"ment may
          be executed in two or more countel1'arts; each of which shall be.de<iined an original, but .aU !)f
          which shall cOllstitute but cine instnunent                              ..        ".. .




                                                                                                       ., ,
          HOUSTON\22l6MO,l
\

:\
                                                                                                                   App. 216
       IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Ule
 Employment Agreoment as of the date indicated .bove.

                                      FCHOLDINGS, INC.



                                            By:
P. . Box 830677                             Title:
Richardson, Texas 75083-0667




                                                                                         ,
                                                                                         !
                                                                                        1
                                                                                        i
                                                                                        l'


HQUSTOml236840,t                      -2-                                               i
                                                                                        ,I
                                                                                    /




                                                                                             App. 217
EXHIBIT 2



            App. 218
       ,


'i.-




                                                 FC HOLDINGS, INC.
                                              2006 STOCK OPTION PLAN


                      SECTION 1. Purpose of the Plan. The pUlpose of the FC Holdlngl', Inc. :2006 Stock
              Option Plan (''Plan") i. to encourage ownership of common stock, $0.01 par value ("Common
              Stock"), of the Company by employees, directors and consllltants (Including advisory directors)
              of the Company and its Affiliates (as defined below), and to provide increased Incentive for such
              employees, directors and 'consultants to render services and to exert maximum effort for the
              success of the Company. In addition, the Company expects that the Plan will further strengthen
              the identification of the employees, directors and 'cons1lltants with the stockholders. Certain
              options to be grsnted under this Plan are Intended to qualiJy as incentive Stock Options (''IS08'')
           . pursuant to Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), while other
              options granted under this Plan will be nonqualified options which are not intended to qualiJy as
              ISO. (''Nonqualified Options',), either or both as 'provide<! in the agreements evidencing the
            .options as provided In Section 6 hereof. As used in this Plan, the lerm "Affiliates" means aoy
              entity with whom· tha Company wollld be considered a single employer under Code Section
              414(b) or 414(c); provided, however, that in applying Code Section 1563(0)(1), (2) and (3) fur
              PUlposes of determining a controlled group of corporations under Code Section 414(b), the
              language "at least 50 percent!! is us~ instead of "at least 80 percent"- each place ii, appears in
              Code Section 1563(a)(I), (2) and (3), aod in applying TreasuryRegolation Section 1.414(0)-2 for
              purposes of determining trsdes or businesses that are under common control for purposes of
            . Code Section· 414(c), the !nnguage l·'at.!...t. 50 percent" is used instead of "at least 80 percent"
              each place it appears in Section 1.414(c)-2.

                    SECTION 2,        Administration of the Plan.

                            (a)    . Composition of Committee. The Plan shall be adminiStered by the Board
                    of Directors (the "Board") .or a Compensation Committee desigoated by the Board which
                    shall also designate the Chairman of the Compensation Committee. If the Company is
                    subject to Seotion 16 of the Securities Exchange Act of 1934, as amended ("Exchaoge
                    Act"), the Compen.ation Committee Sball be cOmposed entirely of not less than two (2)
                    non-employee directors (within the mesning of Rule 16b-3 prom1llgated by the Secmities
                    and Exchange Commission C'Commission") under the Exchange Act ("Rnl6 16b-3'')),
                                                                                                                     ;.~.

                    each of Whom shall be an "outoide director" fur PUlpO..S of Code Section l62(m)(4), and          '.",
                    shall be appointed by end serve at the pleasure of the Board. The Board or the
                    Compensation Committee as administrator of the Plan shall hereinafter be referred to as
                    "Committee.11
                            (b)                                                                    at
                                    Committee Action. The Committee shall hold its meetings such thnes
                    and places as it may detennlne. A m!ljority of its members shall constitote a quorum, and
                    all derermmations of the Committee shall be made by not less than a IIl!!iority of it.
                    members. Any decision or determination reduced 10 writing and sigoed by a majority of
                    the members shall be fully as effective as if it had been mOde by a majority vote of its
                    members at • meeting duly called and held. The Committee may desigoate the Secretary
                    of the Company or other Company employees to assist the Committee in the
                    administration of the Plan, and may graol. authority 10 such persons to execute award




                                                                                                                     .;.,




                                                                                                                            App. 219
., ....... ,_..

                                                                                                                                 ,




                          agreements or other documents on behalf of the Coruunittee and the Company. Any duly
                                                                                                                                 I'
                          constitUted committee of the Board satisfYing the qualifications ofthis Section 2 may be
                          appointed as the Committee.
                                                                                                                                 I
                               (el     Committee Expenses. Ail eXpenses and liabilities incurred by the
                                                                                                                                 i
                                                                                                                                 ,
                                                                                                                                 ! '
                          Committee in the administration of the Plan shall be bome by the Company. The                          i
                          Committee may employ attorneys, consultsnts, aocOlmtants or other persons.

                         SECTION 3. Stock Reserved for the Plan. Subject to adjUBtmimt as provided in
                  Section 6 hereol; the maximwn aggregate nmnber of shares of Common Slack that may be
                  issued under the Plan is 1,000,000, any or all ofwhich may be issued through ISOs. The shares
                  subject to the Plan shall consist of authorized but unissued shares of Common Stock and such
                  nmnber of shares shall be and is hereby reserved for sale for such purpose. Any of such shares
                  which may remain unsold and which are not subject to outstanding options at the termination of
                  the Plan shall cease to be reserved fur the purpose of the Plan, but untillermination of the Plan or
                  the temrination of the last of the options granted under the Plan, whichever last occurs, the
                  Company shall at all times reserve a sufficient number of shares to meet the requlrements of the
                  Plan. Should any option expire or be cancelled prior 10 its 6Xercise in full, the shares theretofore
                  subject to such option may again be made subject to an option under the Plan.

                        SECTION 4. EHgibilltv. A recipient of an option under the Plan shall be referred to
                  as an "Optionee." Nonqualified Options may be granted to all employees, directors and
                  <:OD.ultants of the .Coom>!'l1}'9f.i.t.s Afijliates, .1!!cluding Af.tlli.tes that become such after adoption
                  of the Plan. ISOs may be granted to all employee, of the Company or its Affiliates, including
                  Affiliates that become ,uch.fter adoption, of lllePlan. An Optionee must be an employee,
                  rurector or consultant at Ille time the option is granted. An ISO may be granted only In an
                  employee of, the Company, a "parent corporation" of the Company (within the meacing of Code
                  Section 424(e» or a "subsiruary corporation" of the Company (within the meacing of Code
                  Section 424(f). An employee, director or consultant who has, been granted an option hereunder
                  maybe granted an additional option or options, if the Committee shaIl.o determine.

                          SECfION 5.         Grant of Options.
                                    (al      Committee Discretion. The COIllII!ittee shall have sole and shsolute
                           ruscretionary authority (i) ,to select the eligible persons pursuant to this Plan who lire to
                           receive options under the Plan, (ii) to determine the number of shares of Common Stock
                           to be covered by such options and the term, therool; and (iii) to determine the type of
                           option granted: ISO, Nonqua1ified Option or a combination of ISO and Nonqualified
                           Options. The Conunittee shall thereupon grant options in accordance with such
                           determinations as evidenced by a written option agreement. Subject to the expres,
                           provisions of the Plan, the. Committee shall have discretionary authority to prescribe,
                           amend and rescind rules and regulations relating to the Plan, to interpret the Plan,' to                    '-',
                          ,prescribe and amend the terms ofibe option agreements (which need not be identical) and
                           to tnal<;e all other delemrinations deemed necessary or advisable fur the administration of
                           the Plan.




                  aOuSTON\1898706.1                                   -2.,




                                                                                                                                          App. 220
                (b)     Stockholder Approval. All options granted under this Plan are subject to,
        and may not be exercised befuro, 1:4e approval ofthis Plan by tho stockholders prior to the
        first anniversary date of the Board meeting held to approve the Plan, by the affirmative
        vote of the holders of a m,gority of the shares of the Company present, or represented by
        proxy, and entitled to vat. at a meeting at which a quorum is present, or by written
        consent in accordance with the laws of the United States and tho State of Texas, as· may
        be applicable; provided that if such approval by the stockholders of the Company is not
        forthcoming, all options previously granted under this Plan shall be void.

                 (c)    Limitation on Incentive Stock Options. Tlie aggregate f\Ur market value
        (determined in acconlance with Section· 6.(b) of this Plan at the time the option is
        granted) or'the Common Stock with respect to which ISOs may be ""ercisable for the                                   .:,:-
        first time by any Optionee during any calendar year under all such plans of the Company                              ';,
        and its Affiliates shall not exceed $100,000.
                                                                                                                             :;'-:
                                                                                                                             ~.':.
        SECIION 6. Terms and Conditions. Each option granted under the Plan sball be
.evidenced by an agreement, ili a form approved by the' Committee, which shall be subject tc the                  I
 following express terms and conditions and tc such o!ber terms and conditions as the Committee
 may deem appropriate.

                  (a)    Option Period. The Committee shall promptly notify the Optionee of the
                                                                                                                  I
                                                                                                                  ,
                                                                                                                  i
          option grant and a Written agreement shall promptly b. executed and delivered by and on                 I
       , .beholf of the Company altd. !be Optio"ee, provi4¢ th~t Ill!' opti!>!l grn)ltshall. expir9 if I! ~.._.   !   '-0'   j
          written agreement is not signed by .aid Optionee (or his agent or attorney) and returned }
          to ihe Company within 60d.ys from date of recoiptby the Optionee of such agreement.
          The date of grant shall be ihe date the option is actually granted by the Committee, even
                                                                                                             .    I
          though the writtee agreement may be executed and deJlvered by the Company and the
          Optionee after that date. Each option agreement sball spe.city the period for which ihe
          option thereunder is granted (which in no event shall exceed ten years from thedete of
          grant) and shall provide tbat the option shall expire at th. end of such period. However,
          in the cas. of an'ISO granted to an indiVidual who, at the time of grant,' owns stock
          possessing more than 10% of the total combined voting power of all classes of stock of
          th. Company or' its Affiliates ("Ten Percent Stockholder"), such period shall not exceed
          five years from the dete of grant

                (b)     Option Price. The purchase price of each share of Common Stock subject
         to each option granted pursuaot to the Plan shall be detennined by the Committe. at the
         time !be option is granted and shall never be less than 100% of the fair market value of a
         share of Common Stock on the date the option is granted. In the case of an ISO granted
         to a Tel. Percent Stockholder, the option price shall not .be less than 110% of tho fair
         market value of a share of Common Stock on the date ihe option is granted.

                For all purposes under this Plan, ihe f\Ur market value of a share of Common
         Stock on a particu1lir date shall be equal to !be closing sales price of the Common Stock
         on the exchange on which the Common Stock is traded on that date, or if no prices are
         reported on that date, on the last preceding date on which suoh prices of the Common
         Stock are so reported. In ihe event the Common Stock is not publicly traded at the time a


 HOUSTON\1898706.1                                 ~3-




                                                                                                                                     App. 221
                          detemrination of its value is reqtrired to be made herelmder, the determination of its fair
                          market value shall bl' made. by the Committee iu such manner as it deems appropriate,
                          consistent with Treasury regulations and other formal Internal Revenue Service guidance
                          under Code Section 409A so that options gninted under this Plan shall not constitute
                          deferred compensation subject to Cod. Section 409A.                                                        j        \
                                                                                                                                              !'>:
                                   (c)     Exercise Period.' The Committee may provide iu the option agreement
                          that an option may be exercised iu whole, immediately, or is to be exercisable iu
                                                                                                                                     i,   (   ~ ~."




                          increments.

                                     (d)      Procedure fur Exercise. Options shall he exercised by the delivery of
                             written notice to the Secretsry of the Company settiug forth the number of shares with
                            .respect to which the option is beiug exercised. Such notice shall be accompanied by
                             (i) cash, cashier's check, bank draft, or postal or express money order payable to the order
                             of the Company, (li) subject to the approval by the Committee, certificates representing
                             "mature shares" of Common Stock theretofore owned by the Optionee duly endorsed for
                            .transfer to the Company, or (iii) any combination of the preceding, equal iu value to the
                             full amount of the exercise price. For purposes of this Plan, "mature shares" means
                             shares of Common Stock that an Optionee has held :free of any tcansferability restrictions
                             or risk of furfuitore for at least six (6) months. Notice may also b. delivered by fux or
                             telecopy provided that the purohase price of such shares is delivered to the Company via
                                                                                                                                     I
                        .    wire transfer on the same day the fux is received by the Company. The notice shall
.____________ .. __ ._._____specify.,.the.. addres•._Io_wbich._tho_certificat••.. fur. such share•.. 8I1l.Jo ...be mailed. ._Ali..
                             Optionee shall be deemed to be a.stocltholder with respect to shares covered by an option
                                                                                                                                     I
                                                                                                                                     \-

                           . on the date the Company receives such written notice and such option payment As
                                                                                                                                     I
                                                                                                                                     ,
                             promptly as practicable after receipt of such. written notification and payment, the
                             Company shall deliver to the Optionee c<;rtificates for the number of shares with respect
                             to which such option bas been so exercised, issued iu the Optionee's name or .uch other
                             name as Optionee directs; provided, however, that such delivery shall be deemed effected
                             for all purposes wben a stock. transfer· agent of the Company· shall have deposited such
                             certificates iu the United States mail, addressed to the Optionee at the address specified
                             pursuant to this Scotion 6.(d).

                                  (e)     Termination ofED1ployment. If an Optionee to whnm an option is granted
                          ceases to be employed by the Company or any of its Affiliates or ceases to serve as a
                          director or consultant of the Company or any of its Affiliate. fur any reason other than
                          death or disability, the options preViously !iranted to the Optionel> may be exercised (to                 i,.
                          tIie extent the options are exercisable at th.· date of termination of employment or                       !
                          cessation of service) during a three month p.nod after such date (after which pl>riod the
                          option will expire). but iu no event may the option be exercised after its expiration under
                          tho terms of the option agreement; provided, however, that if an Optionee'. employment
                          or seMoe is terminated beCause of the Optionee's theft. qr embezzlement from 1he
                          Company or any of its Affiliate., disclosure of trade secrets of the Company or any ofits
                          Affiliates or the commission of a willful, felonious act while serving as an employee or
                          dircotor of the Company or any of its Affiliate. (such reasons shall hereinafter be
                          collectively referred to as "for cause"), then any option or unexercised portion thereof



                 _ HOUSTON\1S98706.1.                                   -4-



                                                                                                                                              j.,.




                                                                                                                                                  App. 222
       granted to said Optionee shall expire upon such tennluation of employment or cessation
       of service.

               (f)     Disability or Death of Optionee. In the event of the determination of
       disability or death of an Optionee under the Plan wIrlle the Optionee is employed by the
       Company or any of its Affiliates or wIrlle the Optionee serves as a director or consultant
       of the Company or any of its Affiliates, the options previously granted to him may be
       exercised (to the extent he or she would bave been entitled to do so at the date of the
                                                                                                        !'
       determination of disability or death) at any tim. aod from time to time, within' a one year
       period after tbe date of such determination of disability or death, by the Optionee, the
       guardiao of his estate, the executor or administrator of his est.te or by the porson or
       persons to whom his rights under the option shall pass by will or the laws of descent and
       distribution (after which period the options will expire), but in no event may the option be
       exercised after its expiration 1ll1der the terms of the option agreement. An Optionee shall
       be deemed to be'disabled if, in the opinion of a physician selected by the Committee, he
       or she is incapable of perfunning services for the Company 'or any of its Affiliates of the
       kind h. or she was perfonning al the time the disability occurred by reason of any
       medically determinable ph)'llical or mental impairment which can be expected to result in
       death or to be of long, continued and indefinite dnration. .The date of determination of
       disability for purposes hereof shall be the date of such determination by such physician.

                 (g)    Transferabilitv.    An option sbell not b. assignable or' otherwise
     .. _transferable except by.will or by the laws of descent and distribution. During the lifetime
         of ao Optionee, an option shall be exercisable only by him or his authorized legal
        representative. Any heir or legatee of the Optionee shall take rights granted herein llJld in
         the option agreement subject to the term. and conditions hereof and thereof. No such
        transfer of any option to heir. or legatees of the Optionee shall be effective to bind the
                                                                                                        I
                                                                                                        l.

         Company unless the Company shall bave been furnishe4 with written notice thereof and a
         copy of snch evidence as the Connnlttee may deem neceSBaIY to eslablish the validity of
         the tranafer and the acceptance by the transferee or transferees of the terms and
         conditions hereof.

              (h)     Incentive Stock Options. Each option agreement may oontain such terms
       and provisions as the Connnlttee may detennine 10 be necessary or deairable in order to
       qualify an option designated as an incentive stock option.

               (i)    No Ri!!hls as Stockholder. No Optionee sball have any rights as a
       stockholder with respect to shares covered by an oplion until the option is exercised by
       the written notice and accompanied by payment as provided in c1anse (d) above.

               (j)     Extraordinary Comorate Tta!lBactions. The existence of outstanding                    -..   '~



        options shall not affecl in any way the right or power of the Company or its stockholders
        to make or authorize any or all adjustments, recapitalizations:, reorganizations, exchanges,
        or other changes in the Company's capital strectnre or its business, or any merger or
        consolidation of the Company, or any issuance of Common Slock or other securities or
        SUbscription rights thereto, or any issWlllce of bonds, debentnres, preferred or prior
        preference stock ahead of or affecting the Common Stock or the rights thereof, or the


HOUSTON\189B706.1                               -5-




                                                                                                                    App. 223
                 dissolution or liquidation of the Company, or any sale or transfer of all or any part ofits .
                 assets or business, or any other corporate act or proceeding. whether of a similar
                 character or otherwise. If the Company merges~ C{)nsolidares, sells all of its assets or
                 dissolves (each of the foregoing a "Fundamental Change"). then thereafter upon .oy
                 exercise of an option theretofore granted the Optionee shall be entitled to purohase under
                 such option, in lieu of the nUmber of 'hares of Common Stock as to which option shall
                 them be exercisable. the number and class of shares of stock and securities to which the
                 Optionee would have been entitled plll'Suant to the terms of the Fundamental Change if.
                 innnemately prior to such Fundsmental Change, the Optionee hed been the holder of
                 record of the number of shares of Common· Stock as to which such option is then
                 exercisable. If (i) the Company shall not be the snrviving entity in any' merger or
                 consolidation (or snrv:ives only as a subsidiary of another entity), (li) the Company seUs
                                                                                                                 -.:.
                 all or substantially all of its assets to any other .person or entity (other than a whoUy-
                 owned subsidiary). (iii) any porson or entity (including a "group" as contemplated by
                 Section 13(d)(3) of the Exchange Act) acquires or gains ownership or control of
                 (including, without limitation,. power to vote) more thaa 50% of the oulstanding shares of
                 Cornman Stock. (iv) the Company is to be dissolved and liquidated. or (v) as a result of
                 or in connection with a contested election of directors, the persons who were directors of
                 the Company before such eleotion aba1I cesse to oonstitute a majority "f the Board (each
                 such event in clauses (i) tbrough (v) above i. referred to herein as a "Corporate Change").
                 the Committee, in its sole discretion. may accelerate the time at which all or a portion of
                 an Optionee's options may be exercised. Further, in the event of a Corporat. Change. the
"...... ".."-"-- Committee,·in4tsdiseretion,·shall act-toeffeet one or more of the following alternatives
                 with respect to outstanding options, which may vary among individual Optionees and
                 which may vary among options held by any individual Optionee: (1) determine a
                 reasouable period of time on or before a specified date (before or after such Corporate
                 Change) after which specified date all unexercised'options and all rights of Optionees
                 thereunder shall tormin.te. (2) require the mandatory surrender to the Company by
                 selected Optioneos of some or sII of the outstanding options held ·by such Optionees
                 (irrespeetive of whether :such options are then exeroisable under the provisions of the
                 Plan) as of a date, before or after such Corporate Chango, specified by the CommittOo, in
                 which event the Committee shall thereupon cancel such options and the Company shall
                 pay to each Optionee an amount of cash per share equal to the excess, if any. of the fair
                  maIket value of the shares subject to such option over the exercise price(s) under such
                 options for such shares. or (3) provide that thereafter upon any exercise of an option
                 theretofore granted, the Qptionee· shaU be entitled to purohase under such option, in Iieo
                 of the number of shares of Common Stock then .oovered by such option. the number and
                 class of shares of stook or other securities or property (including. without limitation,
                 cash) to which the Optionee would have been entitled pursuant to the terms of an
                 agreement of merger, consolidation or sa.le of assets and dissolution it: immediately prior
                  to such merger, consolidation or osIe of assets and dissolution, the Optionee had been the
                  holder of record of the number of sbares of Common Stock then oovered by such option.
                 The provisions contained in this paragraph shall not tmmin.te any rights of the Optionee
                  to further payments· pursuant to any other agreement with the Company following •
                  Corporate Change.




   HqtJSTON\189870Ii.l                                -6-




                                                                                                                    App. 224
                 (k)    Changes in Company's Capital Structure. If the outstantling shares of
         C0ltll;'0n Stock or other .securities of the Company, or both, for which the option is then
         exerclSable shan at any fune be changed or exclmnged by declaration of'. stock dividend,
         s~ock splitt combina~on of shares, recapitalization, or reorganization, -the number and"
         kind of shares of Common Stock or other securities which are subject to the Plan or
         subject to any options theretofore grauted, and the option prices, shaJJ be appropriately
         and equitably adjusted so as to maintain the proportionate nllDlber of shares or other
         securities without changing the aggregate option price.

                (1)    No Adjus1ment. Except as hereinbefore expressly provided, (i) the
        issuance by the Company of shares of stock or any class of securities convertible into
        share. of stock of any cless, for casb, property, labor or services, upon direct sale, upon
        the exercise of rights or warrants to subsen"b. therefor, or upon oonversion of shares or
        obligations of the Company convertible into such shares or other secnrities, (Ii) the
        payment of a dividend in pmperty other than Common Stock or (Iii) the occurrence of
        any sinnlar transactioll, and in any cese whether or not for fair value, .haJJ not affect, and
        no adjustment by reason thereof ,hall be made with reapect la, the DllDlber of shares of
        Common Stock 'ubject to options theretofore graoted or the purchese price per share,
        unless the Committee sball determioe, in its sole discretion, than an adjus1ment is
        necessary to provide equitable treatment to Optionee.

               (m)     Acceleration of Options. Notwithstanding anything to the oontrary
        contained in this.PIan,.ilie .Committee may, in it. sole disoretiOJ1, accelerate the time .t.
        which any option may be exercjsed, including, but Dot limited to, upon the occurrence of
        the event. apecified in this Section 6.

         SECTION.7. Amendments or TerminatloJl., The Board may amend, alter or
discontinue the Plan, but no amendment or alteration shall be made which would impair the
rights of any Optionee, without his consent, under any option theretofore granted, or which,
without the approval oIthe stockholders, would: (i) except as is provided in Section 6.(k} of the
Plan, increase the total number of shares reserved for the ptuposes, of the Plan, (il) cbange the
class of persons eligible to participate in the Plan as provided in Section 4 of the Plan,
(Iii) extend the applicable maximum option period providad for in Seotioo 6.(a) of the Plan,
(iv) extend the expiration date of this Plan set forth in Section 14 of the Plan, (v) except as
providOd in Sectioil6.(k) of the Plati, decrease to any extent the cplion price of any option
granted under the Plan or (vi) withdtaw the administration of the Plan from the Commillee.
Further, no amendment shaJJ barnacle without approval of tim. shareholders if such approval is
required to comply with Rule 161>-3, any rule promulgated by the exchange on which Common
Stock is tradeable, or Section 162(m) of the Code or any successor provisions.

          SECTION 8. Compliance With Other Laws and Regulations. The Plan, the graut
  and exercise of options thereunder, and the obligation of the Company to sell and deliver shares
  under such options, shall be subject to all applicable federal and.tate laws, rules and regulations.
  and to such approvals by any governmental or regulatory agency es may be required. The
. Company shaJJ not be required to is,ue or deliver any certificates for shares of Common Stock
  prior to the completion of any registration Or quaIification of such shares under any federal or
  state law or issuance of any ruling or regulation of any government body which the Corcpany


 HOUSTON\l898706.1                               -7-




                                                                                                         App. 225
 shall, in i1ll sale discretion, determine· to be neceSSBrY or advisable. Any adjus1ments provided
 for in Section 6 shall be subject to any stockholder action reqllired by Texas or federal law.

         SECTION 9. Purchase for Investment. Unless the options and abares of Common
.Stock covered by this Plan have been registered under the Securities Act of 1933, as amended, or
 the Company has detarmined that such registration is unnecessary, each person exercising an
 option under this Plan may b. reqllired by the Company to give a represeniation in Writing that
;he or she is acquiring such shares for his own account for investment and not with a view to, or
 for sale in connection with, the distribution of any part thereof.

        SECTION 10. Taxes.

               (a)     The Company may make such provisions as it may deem appropriate for
        the withholding of any taxes whlch it determines is required in connection with any
        options granted under this Plan.

                    (b)    Notwithstanding tbe temas of Section 1O.(a), any Optionee may pay all or
          any portion of the taxes required to be withheld by the Company or paid by him or her in
          connection with the exercise of a Nonqualified Option by electing to have !he Company
          withhold shares of Common Stock, or by delivericg previously owned shares of Common
          Stock, having a fair market value, detarmined in accordance with Section 6.(b), equal to
          the amount required to be withheld or paid; provided that such tax withholding or stock
          deli1fery right was specifically pre-approved by the Commltte. as a f.ature of the option
        . iir is olliOiWi,eijJpioVii<f in-aCCordimce With RuIe rcm.;3, if applicable. Ali Optione" must
          make the foregoing election on or before the date that the amount of tax tob. withheld is
          determined.

         SECnON.ll. ReplacellJent of Options. The Committee· from time to timo may
pennit an Optionee under the Plan to surrender for cancellation any unexercised outstanding.
option and receive from the Company in exchange an option fur such number of shares of
Common Stock as may be designated by the Cominittee. The Committee may, with the consent
.of the person entitled to exerciso any outstauding option, lI!Dend such option, including reducing
the exercise price of any. option to not less than the fair market value oithe Common Stock at the
time of the amendment and extending the term thereof.

          SECTION 12. No Right to Company Employment or Service. Nothing in tIii. Plan
  or as a result of any option granted p"",uant to this Plan sban confer on any individual any right
. to continue in the employ of the Company or any Affiliate or to cotitinue to servo as a director or
. consultant of !he Company or any Affiliate or interfere in any way with the right of the Company
 ·or any Affiliate to terminate an individual's employment at any tiro•. The option agreements
  ·may contain such provisions as the Committee may approve with reference to the effect of
 ~provedleavesofabBenca

        SECTION. 13. LiablHtv of Company. The Compaoy and any Affiliate which is in
 existence or bereafter COIIlfl8 into existence slw1l not be liable to an Optionee or other persons as
 to:




 HOUSTON\1898705.l                                -8-




                                                                                                          App. 226
                 (a)    NonwIssuance of Shares. The non..issuance or sale of shares as to which
         the Company has been unable to obtain from any regulatory body having jurisdiction the
         aUthority deemed by the Company's counsel to be necessary to the lawful issuence and
         sale of any shares hereunder; and

               (b)     Tax Consequences. Any tax consequence e"Pecred, but not realized, by
         any Optionee or other person due to the exercise of any option granted hereunder.

        SECTION 14, Effectiveness 'and Expiration of Plan. This Plan shall be effuctive on
 the date of its approval and adoption by the Board. If the shareholders of the Company fail to
 approve this Plan within twelve months of the date of the Board adoption, this Plan shall
 terminate and all options previously gnmted under this Plan shall become void and of DO effect.            ,-
                                                                                                            '.;

                                                                                                            ::',
 This Plan shall expire ten yearS after the date the Board adopts this Plan and thereafter no nption        .,"
 shan be granted purSuant to this Plan.

        SECTION 15. Non-Exclusivity of the Plan. Neither the adoption by the Board of
 Directors of the Company nor the subsequent approval of the plan by the stockholders of the
 Company shall be construed as creating any linrltations on the power of the Board of Directors of
 the Company to adopt such other inoentive ammgements as it may d..... desirable, including
 without thnitation, the granting of restricted stock or stock options otherwise than undor the Plan,
 and such arrangements may be either gonerslJy applicable or applicable only in specific cases.
                                                                                                        \
          SECTION 16•. GQverning Law. This Plan and any agreements hereunder sball be
"iiiterpreteaai:i:a'consiriienii-"ccoroance 'Witli theta...s oftlio state dC  Texas
                                                                             andappliciible
                                                                                                        1
  federal law.

         Adopted hy the Board of Directors ofFC Holdings, Inc.    on October 26, 2006.
                                                  Fe HOWINGS, INC.


                                                                                                            .;",

                                                  By:
                                                  Name:
                                                   Title: - - - - - - - - - - -                              :>.
                                                                                                             .~ .




  HOUSTONUS98706.1                               -9- _                                                       .::




                                                                                                                 App. 227
       .,




EXHIBIT 3



            App. 228
      Page 2 Minutes of Board of DirectorsMeeting       October 21, 2008


      The next item of busi ness to come before the meeting was the review of the
      Bank's Internal Loan Watch Ustwith particular emphasis being placed upon
      changes made during the month of September. Loan Loss Allocations were also
      reviewed and determined to be adequate.

      Executive Vice President Wallace Emerson then presented an update on Crockett
      Discount Auto, Wade Sullivan and Trailer Connection/Buzz Post credits.

      Report of Indebtedness sUbmitted by Don Reavis was then reviewed and
      approved by the Board and made a part of these minutes.

       A letter of resignation submitted by Larry Babb, resigning his pOSition as a
      Director of First Community Bank of East Texas was reviewed and a motion was
      made by David Gay and seconded by Charles Cunningham to accept Mr. Babb's
      letter of resignation. A motion was then made by pavid Gay and seconded by ~
      Charles Cunningham to elect John Prewitt to serve as Director of First Community
      Bank oHast Texas. The Board unanimously approved both motions.

       The next item of business related to the review of the Bank Secrecy Act Quarterly
       Report and the Bank's Information Security Program Monthly Audit Report
       submitted by Paula Kinsey, FCH Executive Vice President and Risk Management
       Director. During the month of October, four employees were selected and
       reviewed with one violation from Debbie Hawkins of the Bank's Acceptable Use
       Policy, Information Security Program and Information Technology Policies. David     ,':,
                                                                                           ~;

     . Baty will issue a verbal warning to Ms. Hawkins and follow-up with Paula Kinsey.
        Following review and discussion, the Board unanimously approved the above
       listed reports as presented upon a motion made by Paul Dawson and seconded by
       David Gay.
                                                                                           \.-
                                                                                           ,
                                                                                           i _
     President Lightsey then directed attention to the review of Identity Theft
     Prevention Program (Policy, Procedures and Risk Assessment) from Risk
     Management Director, Paula Kinsey. Following review and discussion, the Board
i    unanimously approved the Identity Theft Prevention Program upon a motion
     made by John Prewitt and seconded by Paul Dawson. It was noted that BSI
I
                    .
1 _____________ .. _. _..... ____ _

                                                                                                 App. 229
          Page.3 Minutes of Board of Director Meeting             October 21, 2008


          Training Department was working to develop and imp e      a training schedule.
          prior to the mandatory compliance deadline of November 1, 2008.

           The next item cif business to come before the meeting was the review of a .
           Director Resolution adopting the Agreement and Plan of Merger by and between
           East Texas and First Community Bank, N.A. Director Reavis directed attention to
           item number 1. Declarations ofthe Agreement and Plan of Merger. Mr. Reavis
           read the following sentence "There are no existing options, warr<Jnts, calls or
           commitments of any kind obligating East Texas to issue any East Texas Common
           Stock." Mr. Reavis stated this is inconsistent with employment contracts. Mr.
    --'-'-Rea'iJiS1:hen-reai:l-the-rele",ant-pafagrap'h-frem-el'l'lpIOYl'l'len~e!)ntfaets-ftem-2 .g)---
           Stock Option Plan "Employer shall cause First National Bank of Crockett to
           establish a stock option plan covering shares of common stock of the bank and
           Executive shall be entitled to participate in such plan and shall be awarded
           options tq purchase 12,500 share of bank common stock pursuant.to the terms of
           a stock option agreement issued pursuant to the plan." Following discussion
           relating to Mr. Reavis's concerns, Chairman Harrison committed to honor options
           made a motion to approve Ag~eement save and accept options, warrants;calls or
           commitments pe'r employment agreements with motion being second by Director
         , Mike Buoy and unanimously approved by the board.
I
,
I        President Lightsey then presented a recommendation for a promotion and salary
         increase for Rhonda Stanley from Vice President to Senior Vice President. Mrs.


I
         Ughtsey also reported Rhonda Stanley will be transferring to First Community
         Bank in Trinity.

         Director Gay then relayed to the Board he had been approached by 'outside
         parties conSisting of a group of 20 or more to see if Fe Holdings, Inc. had an
I        interest in selling Crockett, Trinity and Huntsville locations. Chairman Harrison
I
J
         responded that the three branches were not for sale.

!        PreSident Lightsey then asked if there was any additional business to come before
J
         the meeting, there being none, the meeting was then adjourned.




                                                                                                          App. 230
                           Michelle Holcomb,
                           Secretary




1_=================================================
                                                      ,    .
                                                      "
                                                      !
                                                      ,.'




                                                      :
                                                      '.




                                                           App. 231
EXHIBIT 4



            App. 232
                                                                                               •
 DonR Reavis                                   633 Silverstone Drive
                                               RichardSon, Texas 75080




                                        Aprll8,2009

. Via Certified Mail Retum Receipt Requested
  No. 70030500000319208976;
. and. Regular Mail

 FC Holdlngs.lnc.
 Nigel Harrison, Chainnan
 14200 Gulf Freeway
 Suite 210
 Houston, TX 77034

        Ro:     Employment Agreement with Don R. Reavis                                        ;-

 Dear Nigel:

This leiter is written pUISUant 10 Ih. Employmenl Agreement ("Agreement'') dated April 27,
2007, as amended August I, 2008, between FC Holdings, Inc. ("Employer") and Don R.·
Reavis ("Execulive,. This letter is formal notice by the Executive, as required in paragraph
S.(b) of the Agreement, thai Employer has breached the Agreement in several material
respeets. SpeeillcaUy, the breaches include:

     I. The Employer did nol allow the Executive to "participate in. the design and
        implementation of a revised bonus plan for the Fina National Bank of Crockett" for
        fiscal yems subsequent to 2007 as agreed in paragraph 2.(1) of the Agreement .

     2. The Employer has nol allowed the Executive ''to participate in the FC Holdings, Inc.
        2006 Stock Option Plan" and Executive has not been "awarded options to purchase
        15,000 shares ofEmployer common slock at a price ofSIO.OO per share" as agreed in      .":

        paragraph 2.(g) of the Agreement.

     3. Th. Employer has not "caused First National Bank of Crockett to establish a stock
        option plan covering shares of common stock of the bank" and Employer has nol
        allowed Executive ''to participate in su~ plan and be awarded options to pUIthase
        12,500 shares of bank common stock pUISUBDI to the 1emts of a stock option
        agreemenl issued pUISUanl to the plan" as agreed to in paragraph 2.(g) of the
        Agreement. Moreover, Employer has merged First National Bank of Crockett oul of
        existence, thus rendering impossible any swan! ofthese options.




                                                                                                     App. 233
Fe Holdingo;,l\1o.
Nig~lf:lNrison,Ch:Ulman
                                                                                              AprlL8,2009

This.l~tt~':isfl>nn~l.llQti~e·.tp.Emplo)'erlhatEl@\ltiveeon.slclers·the.~bove;<les¢I'11J,d·bl'e\Whes
 by Eiill'wyer (!lie. ''Brooches'''), to·be:·bolhlltaterinl and·. advel'se' '\0: Execuliv.:s'.l'e._nablc
;cx,pcctatlons; Thc'Se- :ateacllf~s:·need 1'0 oe:,cul'eq~ If.Excc.\lti\le_-is· p::qtiired ~o ~ain cQunsel and
 ~ue l\>.obtaiil.'''cljl'C'ofthe Breachiis, or any other remedy which maybe.avaihlblelo·him·tlndel'
 the-Agteemenl, then Exocutivew\lI alSomake'aciaim fothls attorney's fees·in lh.i-litigation.

 fil)ally. Execulivebelievcs he was fr-"udlilently induced to both                   ent.;·and conlinue
 pel'fonnnnce. of \11e Agreement, by written and o"d repl~enU)tions made to· him by FC
'liIollliligs; meollersonrrel, upon whichhe'reJlSbnably relied ..... all to liis.signifiCllllHllltriment




c:c;. M~, Andy Black
      (Via Rl>!ltllilr Mail)

      Mr,ftmGrMt
      (Via Hand DeliveI)i)

      Mr;L;!rry Bobb
      (ili. Rej;Ula, Mail),




                                                                                                                App. 234
EXHIBIT 5



            App. 235
·   . ,}

                                    GLAST, PHILLIPS & MURRAY
                                           .A PROFJiSSIONAl., CORPORATION


               AnORNE'tSAND                                                           SAN" ANToNIO
                CoutiSElORS                  22000NEGAU£mAToweR
                                                                                     (210) 244.. 100
                                             13355 NOEl. ROAD. La. 46
                MIKEooooe                    DAU.AS, TEXAS 75240-1518
                                                  (972) 419-8300                       HOUSTON
               (972)41'>7172
               (214) ..... 162                                                       {71J)237-3111
                                             TELtCOPJeR(972}419-8329
            mdodge@gpm-law.co ftl




                                                 May28,2oo9

           Via Certified Mail. Return
           Receipt Requested No. 70012510000172604185
           Jay Aldis, Esquire
           Bracewell & Giuliani LLP
           711 Louisiana ST, STE 2300
           Houston, Texas 77002-278\

                 Re:      Employment Agreement between Don R. Reavis ("Reavis") and FC
           Holdings, Inc. ("FC Holdings"), dated April 27, 2007, as amended August 1,2008 (the
           "Agreement", as amended).

           Dear Jay:

                   We made written demand on AprilS, 2009 in behalf of Reavis, for certain
           specific perfonnances by FC Holdings under the above referenced Agreement. FC
           Holdings' opportunity to perform or otherwise cure breaches under the Agreement has
           elapsed without any cure or perfonnance. As we discussed on the phone several days
           ago, this letter is intended to both delay and hopefully avoid litigation nom Reavis
           against FC Holdings, and probably against others. under the Agreement.

                   Absent a promptly-negotiated settlement, Reavis intends to prosecute all of his
           claims available under the Agreement, which may include: (I) anticipatory and absolute
           breach of the Agreement; (2) fraudulent inducement to enter and perform the Agreement;
           (3) tortuous interference with Reavis' contractual rights under the Agreement by persons
           and entities acting unilaterally or in concert with FC Holdings; and (4), civil conspiracy
           to commit fraud. Of course, Reavis reserves his rights to add additional claims and
           parties other than FC Holdings, as they may be subsequently identified during that
           process.

                   In light oflh. situation, Reavis and FC Holdings want to avoid litigation and to
           "stand still" for a period oftiine, specifically through July 22, 2009, to negotiate a
           mutually agreeable settlement and satisfaction of all Reavis' claims against Fe Holdings,
           in lieu of the contemplated Iitigation ..... an outcome which is mutually desired.




                                                                                                        App. 236
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                                                                                                     App. 240
Get a Document - by Citation - Tex. Civ. Prac. & Rem. Code § 171.025                                                       Page 1 of 4

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https://www.lexis.com/research/retrieve?_m=e6a0f3cb582ada3845d4e14fbd068552&csvc...                                            9/12/201
                                                                                                                                            App. 241
                                                                                                             Page 1




                        IN RE HOUSTON PIPE LINE COMPANY, ET AL., RELATOR

                                                    NO. 08-0800

                                         SUPREME COURT OF TEXAS

                           311 S.W.3d 449; 2009 Tex. LEXIS 468; 52 Tex. Sup. J. 1098


                                          July 3, 2009, Opinion Delivered

SUBSEQUENT HISTORY: Rehearing overruled by In
                                                                When deciding a motion to compel arbitration under
re Houston Pipe Line Co., 2009 Tex. LEXIS 818 (Tex.,
                                                           the Federal Arbitration Act, a Texas trial court applies
Oct. 23, 2009)
                                                           Texas procedure, which permits discovery to be taken
                                                           when it is needed before the arbitration or to permit the
PRIOR HISTORY: Houston Pipe Line Co., L.P. v.
                                                           arbitration to be conducted in an orderly manner. TEX.
O'Connor & Hewitt, Ltd., 269 S.W.3d 90, 2008 Tex.
                                                           CIV. PRAC. & REM. CODE § 171.086 (a)(4),(6); see
App. LEXIS 6525 (Tex. App. Corpus Christi, 2008)
                                                           also Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 268
                                                           (Tex. 1992). At issue in this proceeding is whether the
                                                           trial court abused its discretion by permitting discovery
COUNSEL: For Houston Pipe Line Company, L.P.,
                                                           on damage calculations and other potential defendants,
Relator: Mr. Charles W. Schwartz, Ms. Kelley M. Keller,
                                                           instead of deciding the motion to compel arbitration. For
Mrs. Heather A. Hegefeld, Mr. Daniel E. Bolia, Skadden
                                                           the reasons below, we conclude the trial court should not
Arps Slate Meagher & Flom LLP; Mr. John Lohmann
                                                           have ordered pre-arbitration discovery, but rather should
III, Lohmann Glazer & Irwin, Houston, TX.
                                                           have decided the motion to compel arbitration.
For O'Connor & Hewitt, Ltd., Real Party in Interest: Mr.        Houston Pipe Line Company, L.P., signed an
Thomas J. Sims, Mr. Neel Alan Choudhury, Mr. Stanley       agreement to purchase gas from O'Connor & Hewitt,
B. Binion, Binion & Sims, P.C., Houston, TX; Mr. Ti-       Ltd., based on the Houston Ship Channel Price Index. 1
mothy S. Perkins, Smith Underwood & Perkins, P.C.,         Several years later, O'Connor sued Houston Pipe Line,
Dallas, TX; Mr. James W. Cole, Cole Cole & Easley;         Energy Transfer Partners, L.P., Energy Transfer Equity,
Mr. William F. Seerden, Cullen Carsner Seerden & Cul-      L.P., and La Grange Acquisition, L.P., for manipulating
len; Mr. Ronald B. Walker, Walker Keeling & Carroll,       the Index downward, which caused O'Connor to receive
Victoria, TX; Mr. Gilberto Hinojosa, Magallanes & Hi-      lower payments for gas delivered [**2] pursuant to the
nojosa, PC, Brownsville, TX; Mr. Craig T. Enoch, Ms.       contract. As a signatory to the contract, Houston Pipe
Melissa Prentice Lorber, Mr. Alex S. Valdes, Winstead      Line sought to enforce the arbitration provision. 2 Energy
PC, Austin, TX.                                            Transfer and La Grange were not parties to the agree-
                                                           ment, but tried to compel arbitration based on a direct
For McGraw-Hill Companies, Inc., Other: Mr. John Ki-       benefits equitable estoppel theory. See Meyer v.
ley Edwards, Jackson Walker, LLP, Houston, TX.             WMCO-GP, LLC, 211 S.W.3d 302, 305 (Tex. 2006);
                                                           Sherer v. Green Tree Servicing LLC, 548 F.3d 379, 382
OPINION                                                    (5th Cir. 2008). O'Connor resisted arbitration by attack-
 [**1]                                                     ing the scope of the arbitration provision and contending
                                                           that it would be impossible to identify all potential de-
   [*450]     ON PETITION FOR WRIT OF MAN-
                                                           fendants and to complete damages calculations within
DAMUS
                                                           the sixty days allotted for discovery, as set out in the
                                                           arbitration provision. Rather than rule on the motion to
PER CURIAM
                                                           compel, the trial court ordered discovery to aid it in de-




                                                                                                                        App. 242
                                                                                                                 Page 2
                                      311 S.W.3d 449, *; 2009 Tex. LEXIS 468, **;
                                                 52 Tex. Sup. J. 1098

ciding the motion. Specifically, the trial court ordered
discovery to determine if additional defendants could
equitably invoke the arbitration clause, whether O'Con-
nor's claims fell within the [*451] scope of the arbitra-           3 Although not determinative here, ordinarily
tion clause, and if the time limitations imposed by the             the arbitrator, rather than the trial court, will be
clause were jurisdictional. In its order, the trial court           better able to determine the preclusive effects of
suggested that it would be virtually impossible 3 to con-           discovery limitations in the arbitration agreement.
duct the necessary discovery within [**3] the sixty-day             See In re Poly-America, L.P., 262 S.W.3d 337,
time frame allotted to the arbitrator under the agreement           358 (Tex. 2008).
and that O'Connor:
                                                                   Houston Pipe Line and Energy Transfer sought
                                                             mandamus relief in the court of appeals, arguing that the
          lacks sufficient information [regarding
                                                             trial court had abused its discretion by not ruling on the
       the possible price manipulation]. . . and
                                                             motion to compel. The court of appeals refused to issue
       that discovery is needed so that the scope
                                                             the writ, concluding that the trial court had acted within
       of the Arbitration clause . . . may be
                                                             its discretion. We disagree that the discovery ordered by
       properly applied to the actual party re-
                                                             the trial court was needed for it to rule on the motion to
       sponsible . . . Moreover, the documents
                                                             compel.
       sought by [O'Connor] from [Houston Pipe
       Line and Energy Transfer]: (1) Would be                    When a party disputes the scope of an arbitration
       needed before any Arbitration proceed-                provision or raises a defense to the provision, the trial
       ings begin; (2) Will permit any Arbitra-              court, not the arbitrator, must decide the issues. Buckeye
       tion to be conducted in an orderly manner;            Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444,
       (3) Will facilitate any Arbitration under             126 S. Ct. 1204, 163 L. Ed. 2d 1038 (2006). And
       Section 171.086 of the Texas Civil Prac-              "[w]hen [**5] Texas courts are called on to decide if
       tice and Remedies Code; and (4) Will aid              disputed claims fall within the scope of an arbitration
       in determining the issues of arbitrability. .         clause under the Federal Act, Texas procedure controls
       .                                                     that determination." Tipps, 842 S.W.2d at 268.
                                                             Pre-arbitration discovery is expressly authorized under
                                                             the Texas Arbitration Act when a trial court cannot fairly
                                                             and properly make its decision on the motion to compel
                                                             because it lacks sufficient information regarding the
       1 This index is published monthly in the natu-        scope of an arbitration provision or other issues of arbi-
       ral gas industry trade journal Inside FERC.           trability. See TEX. CIV. PRAC. & REM. CODE §§
       2 The arbitration provision provided:                 171.023(b), 171.086(a)(4),(6). This, however, is not an
                                                             authorization to order discovery as to the merits of the
                  Except for matters within the              underlying controversy. Motions to compel arbitration
              jurisdiction of the Railroad Com-              and any reasonably needed discovery should be resolved
              mission of Texas, any and all                  without delay. Tipps, 842 S.W.2d at 269.
              claims, demands, causes of action,
              disputes, controversies, and other                  The discovery authorized by the trial court seeks to
                                                             determine the identity of all potential defendants and to
              matters in question arising out of
                                                             what extent each defendant is liable, including Houston
              or relating to this Agreement, any
                                                             Pipe Line. Such an inquiry is inappropriate because de-
              of its provisions, or the relation-
              ship between the Parties created               terminations of ultimate liability ordinarily must be ans-
              by this Agreement . . . shall be re-           wered during the arbitration proceeding, while questions
                                                             regarding the scope of the arbitration clause should be
              solved by binding arbitration pur-
                                                             decided by the trial court. [**6] See AT&T Techs., Inc.
              suant to [**4] the Federal Arbi-
                                                             v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.
              tration Act . . . . If a Party refuses
                                                             Ct. 1415, 89 L. Ed. 2d 648 (1986). The necessity of iden-
              to . . . arbitrate, the other Party
              may seek to compel arbitration in              tifying other culpable parties could, under some cir-
              either federal or state court. . . .           cumstances, be related to arbitrability. But, a party can-
                                                             not avoid its agreement to arbitrate merely by alleging
              The final hearing shall be con-
                                                             that there may be other potential defendants; it must link
              ducted within 60 days of the selec-
                                                             the identity of the defendants to an issue of arbitrability,
              tion of the third arbitrator. . . [and]
                                                             such as scope, or a defense to arbitration. See 9 U.S.C. §
              shall not exceed 10 business days.
                                                             4; TEX. CIV. PRAC. & REM. CODE §§ 171.021,



                                                                                                                            App. 243
                                                                                                               Page 3
                                   311 S.W.3d 449, *; 2009 Tex. LEXIS 468, **;
                                              52 Tex. Sup. J. 1098

171.026; see also J.M. Davidson, Inc. v. Webster, 128      dingly, without hearing oral argument, we conditionally
S.W.3d 223, 227 (Tex. 2003).                               grant the writ and direct the trial court to vacate the dis-
                                                           covery order and to rule on the motion to compel arbitra-
      [*452] Because the discovery ordered here is
                                                           tion. TEX. R. APP. P. 52.8(c). We are confident the trial
overbroad and beyond the issues raised in the motion to
                                                           court will comply, and our writ will issue only if it does
compel, we conclude that the trial court abused its dis-
                                                           not.
cretion by ordering this discovery rather than ruling on
the legal issues raised by the motion to compel. Accor-        OPINION DELIVERED: July 3, 2009




                                                                                                                          App. 244

				
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