8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 11, 2007

FIRSTCITY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	033-19694	76-0243729
(State of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

6400 Imperial Drive

Waco, Texas 76712

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (254) 761-2800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))  

Section 1 - Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

On October 11, 2007, the Compensation Committee of the Registrant granted incentive stock options to certain of the executive officers of the Registrant under the FirstCity Financial Corporation 2006 Stock Option and Award Plan (the “2006 Plan”). Each option granted under the 2006 Plan is required to be set forth in writing pursuant to the form of option agreement required by the Plan. The form of option award agreement for non-employee directors under the 2006 Plan is included as Exhibit 10.1 to this Report and is incorporated herein by reference. The form of option award agreement under the 2006 Plan for employees, including employee directors, is included as Exhibit 10.2 to this Report and is incorporated herein by reference.

The options received by the executive officers listed below have a Grant Date of October 11, 2007, will vest in equal parts over four years beginning on October 11, 2008, will terminate upon the expiration of ten years from the Grant Date, and have an exercise price of $9.85, the closing price of the common stock of FirstCity Financial Corporation on the Grant Date.

Each of the following executive officers was granted an option to purchase the number of shares of the Registrant’s common stock under the 2006 Plan as is set forth for that executive officer:

2006 Stock Option and Award Plan

Employee	Number of Shares
J. Bryan Baker	8,000
Terry R. DeWitt	8,000
Joe S. Greak	8,000
James C. Holmes	8,000
Richard Vander Woude	8,000

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

10.1* Form of Option Award Agreement for Non-Employee Directors under the FirstCity Financial Corporation 2006 Stock Option and Award Plan.

10.2* Form of Option Award Agreement for Employees under the FirstCity Financial Corporation 2006 Stock Option and Award Plan.

10.3  2006 Stock Option and Award Plan (incorporated herein by reference to Appendix A of the Company’s Schedule 14A, Definitive Proxy Statement, dated June 26, 2006).

*  Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FIRSTCITY FINANCIAL CORPORATION
Date: October 17, 2007	By:	/s/ J. Bryan Baker
		J. Bryan Baker
		Senior Vice President and Chief Financial Officer

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EXHIBIT INDEX

10.1* Form of Option Award Agreement for Non-Employee Directors under the FirstCity Financial Corporation 2006 Stock Option and Award Plan.

10.2* Form of Option Award Agreement for Employees under the FirstCity Financial Corporation 2006 Stock Option and Award Plan.

10.3  2006 Stock Option and Award Plan (incorporated herein by reference to Appendix A of the Company’s Schedule 14A, Definitive Proxy Statement, dated June 26, 2006).

*  Filed herewith

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EX-10.1

EXHIBIT 10.1

FIRSTCITY FINANCIAL CORPORATION

2006 Stock Option and Award Plan

AWARD AGREEMENT

[Date]

[Name]

[Title]

FirstCity Financial Corporation

P. O. Box 8216

6400 Imperial Drive

Waco, TX  76714-8216

Re:Grant of Stock Option- Non-Employee Director

Dear                      :

You have been granted an option to purchase common stock of FirstCity Financial Corporation, a Delaware corporation (the “Company”), pursuant to the Company’s 2006 Stock Option and Award Plan (the “Plan”) for certain individuals, Directors and key employees of the Company and its Subsidiaries. A copy of the Plan is being furnished to you concurrently with the execution of this Award Agreement and shall be deemed a part of this Award Agreement as if fully set forth herein. Unless the context otherwise requires, all terms defined in the Plan shall have the same meaning when used herein.

1.Grant

Subject to the conditions set forth below, the Company hereby grants to you, effective as of                           ,          (the “Grant Date”), as a matter of separate inducement and not in lieu of any other compensation for your services, the right and option to purchase (the “Option”), in accordance with the terms and conditions set forth herein and in the Plan, an aggregate of                Shares (the “Option Shares”), at a price equal to $           per Share, subject to the adjustments and limitations set forth herein and in the Plan (the “Option Price”). The Option granted hereunder is a Nonqualified Stock Option within the meaning of the Plan. You should consult with your tax advisor concerning the proper reporting of any federal or state tax liability that may arise as a result of the grant or exercise of the Option.

2.Exercise

(a)For purposes of this Award Agreement, the Option Shares shall be deemed “Non-vested Shares” unless and until they have become “Vested Shares.”  The Option Shares shall become “Vested Shares” on (a)                               ,                , or (b) in                 equal, consecutive annual installments, commencing on the first anniversary of                     ,           , provided that vesting shall cease upon your ceasing to be a Director of the Company as and to the extent provided in Section 3 hereof.

(b)Subject to the relevant provisions and limitations contained herein and in the Plan, you may exercise the Option to purchase all or any portion of the Vested Shares at any time prior to the termination of the Option pursuant to this Award Agreement. In no event shall you be entitled to exercise the Option for any Non-Vested Shares or for a fraction of any Vested Share.

(c)The unexercised portion of the Option, if any, will automatically, and without notice, terminate and become null and void upon the expiration of                      (    ) years from the Grant Date.

(d)Any exercise by you of the Option shall be in writing addressed to the Secretary of the Company at its principal place of business (a copy of the form of exercise notice to be used will be available upon written request to the Secretary), and shall be accompanied by a certified or bank check payable to the order of the Company in the full amount of the Option Price of the shares so purchased, or in such other manner as described in the Plan and approved by the Committee.

3.Termination of Position

Upon your ceasing to be a Director of the Company, the Option shall terminate and/or be exercisable pursuant to Section 6.7 of the Plan.

4.Transferability

The Option and any rights or interests therein are not assignable or transferable by you except by will or the laws of descent and distribution or as allowed under Section 6.8 of the Plan to members of your Immediate Family (as such term is defined in the Plan), to one or more trusts for the benefit of such Immediate Family members, or to one or more partnerships where such Immediate Family members are the only partners, provided that you do not receive any consideration in any form whatsoever for said transfer. During your lifetime, the Option shall be exercisable only by you, any transferee as allowed in this Section 4 and pursuant to the terms of the Plan, or, in the event that a legal representative has been appointed in connection with your Disability (as such term is defined in the Plan), such legal representative. Any Options so transferred shall continue to be subject to the same terms and conditions in the hands of the transferee as were applicable to said Option immediately prior the transfer thereof. Any reference in herein to your ceasing to serve as a Director of the Company shall continue to refer to your ceasing to serve as a Director of the Company.

5.Withholding Taxes

By acceptance hereof, you hereby (1) agree to reimburse the Company for any federal, state or local taxes required by any government to be withheld or otherwise deducted by such entity in respect of your exercise of all or a portion of the Option; (2) authorize the Company to withhold from any cash compensation paid to you or on your behalf, an amount sufficient to discharge any federal, state and local taxes imposed on the Company, in respect of your exercise of all or a portion of the Option, which otherwise has not been reimbursed by you, in respect of your exercise of all or a portion of the Option; and (3) agree that the Company may, in its discretion, hold the stock certificate to which you are entitled upon exercise of the Option as security for the payment of the aforementioned withholding tax liability, until cash sufficient to pay that liability has been accumulated, and may, in its discretion, effect such withholding by retaining shares issuable upon the exercise of the Option having a Fair Market Value on the date of exercise which is equal to the amount to be withheld.

6.Miscellaneous

(a)This Award Agreement is subject to all the terms, conditions, limitations and restrictions contained in the Plan. In the event of any conflict or inconsistency between the terms hereof and the terms of the Plan, the terms of the Plan shall be controlling.

(b)This Award Agreement is not a contract of employment and the terms of your service and compensation as a Director shall not be affected by, or construed to be affected by, this Award Agreement, except to the extent specifically provide herein. Nothing herein shall impose, or be construed as imposing any obligation (1) on the part of the Company to continue you in your position as a Director of the Company, or (2) on your part to remain in your position as a Director of the Company.

By your signature and the signature of the Company’s representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of the Company’s 2006 Stock Option and Award Plan and this Award Agreement. Please indicate your acceptance of all the terms and conditions of the Option and the Plan by signing and returning a copy of this Award Agreement.

Very truly yours,

FIRSTCITY FINANCIAL CORPORATION

By:

Name:

Title:

ACCEPTED:

Signature of Optionee

Print Name of Optionee

Date:

EX-10.2

EXHIBIT 10.2

FIRSTCITY FINANCIAL CORPORATION

2006 Stock Option and Award Plan

AWARD AGREEMENT

[Date]

[Name]

[Title]

FirstCity Financial Corporation

P. O. Box 8216

6400 Imperial Drive

Waco, TX  76714-8216

Re:          Grant of Stock Option

Dear                      :

You have been granted an option to purchase common stock of FirstCity Financial Corporation, a Delaware corporation (the “Company”), pursuant to the Company’s 2006 Stock Option and Award Plan (the “Plan”) for certain individuals, directors and key employees of the Company and its Subsidiaries. A copy of the Plan is being furnished to you concurrently with the execution of this Award Agreement and shall be deemed a part of this Award Agreement as if fully set forth herein. Unless the context otherwise requires, all terms defined in the Plan shall have the same meaning when used herein.

1.             Grant

Subject to the conditions set forth below, the Company hereby grants to you, effective as of             ,          (the “Grant Date”), as a matter of separate inducement and not in lieu of any salary or other compensation for your services, the right and option to purchase (the “Option”), in accordance with the terms and conditions set forth herein and in the Plan, an aggregate of         Shares (the “Option Shares”), at a price equal to $         per Share, subject to the adjustments and limitations set forth herein and in the Plan (the “Option Price”). The Option granted hereunder is intended to constitute an Incentive Stock Option within the meaning of the Plan; however, you should consult with your tax advisor concerning the proper reporting of any federal or state tax liability that may arise as a result of the grant or exercise of the Option.

2.             Exercise

(a)           For purposes of this Award Agreement, the Option Shares shall be deemed “Non-vested Shares” unless and until they have become “Vested Shares.”  The Option Shares shall become “Vested Shares” on (a)                  ,             , or (b) in             equal, consecutive annual installments, commencing on the first anniversary of              ,         , provided that vesting shall cease upon your ceasing to be an employee of the Company as and to the extent provided in Section 3 hereof.

(b)           Subject to the relevant provisions and limitations contained herein and in the Plan, you may exercise the Option to purchase all or any portion of the Vested Shares at any time prior to the termination of the Option pursuant to this Award Agreement. In no event shall you be entitled to exercise the Option for any Non-Vested Shares or for a fraction of any Vested Share.

(c)           The unexercised portion of the Option, if any, will automatically, and without notice, terminate and become null and void upon the expiration of                (     ) years from the Grant Date.

(d)           Any exercise by you of the Option shall be in writing addressed to the Secretary of the Company at its principal place of business (a copy of the form of exercise notice to be used will be available upon written request to the Secretary), and shall be accompanied by a certified or bank check payable to the order of the Company in the full amount of the Option Price of the shares so purchased, or in such other manner as described in the Plan and approved by the Committee.

3.             Termination of Employment

Upon the termination of your employment with the Company and any Subsidiary, the Option shall terminate and/or be exercisable pursuant to Section 6.7 of the Plan.

4.             Transferability

The Option and any rights or interests therein are not assignable or transferable by you except by will or the laws of descent and distribution or as allowed under Section 6.8 of the Plan to members of your Immediate Family (as such term is defined in the Plan), to one or more trusts for the benefit of such Immediate Family members, or to one or more partnerships where such Immediate Family members are the only partners, provided that you do not receive any consideration in any form whatsoever for said transfer. During your lifetime, the Option shall be exercisable only by you, any transferee as allowed in this Section 4 and pursuant to the terms of the Plan, or, in the event that a legal representative has been appointed in connection with your Disability (as such term is defined in the Plan), such legal representative. Any Options so transferred shall continue to be subject to the same terms and conditions in the hands of the transferee as were applicable to said Option immediately prior the transfer thereof. Any reference in herein to the employment by or performance of services for the Company by you shall continue to refer to your employment or performance by you.

5.             Withholding Taxes

By acceptance hereof, you hereby (1) agree to reimburse the Company or any Subsidiary by which you are employed for any federal, state or local taxes required by any government to be withheld or otherwise deducted by such entity in respect of your exercise of all or a portion of the Option; (2) authorize the Company or any Subsidiary by which you are employed to withhold from any cash compensation paid to you or on your behalf, an amount sufficient to discharge any federal, state and local taxes imposed on the Company, or the Subsidiary by which you are employed, and which otherwise has not been reimbursed by you, in respect of your exercise of all or a portion of the Option; and (3) agree that the Company may, in its discretion, hold the stock certificate to which you are entitled upon exercise of the Option as security for the payment of the aforementioned withholding tax liability, until cash sufficient to pay that liability has been accumulated, and may, in its discretion, effect such withholding by retaining shares issuable upon the exercise of the Option having a Fair Market Value on the date of exercise which is equal to the amount to be withheld.

6.             Miscellaneous

(a)           This Award Agreement is subject to all the terms, conditions, limitations and restrictions contained in the Plan. In the event of any conflict or inconsistency between the terms hereof and the terms of the Plan, the terms of the Plan shall be controlling.

(b)           This Award Agreement is not a contract of employment and the terms of your employment shall not be affected by, or construed to be affected by, this Award Agreement, except to the extent specifically provide herein. Nothing herein shall impose, or be construed as imposing any obligation (1) on the part of the company or any Subsidiary to continue your employment, or (2) on your part to remain in the employ of the Company or any Subsidiary.

By your signature and the signature of the Company’s representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of the Company’s 2006 Stock Option and Award Plan and this Award Agreement. Please indicate your acceptance of all the terms and conditions of the Option and the Plan by signing and returning a copy of this Award Agreement.

Very truly yours,

FIRSTCITY FINANCIAL CORPORATION

By:

Name:

Title:

ACCEPTED:

Signature of Optionee

Print Name of Optionee

Date: