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): November 25, 2008

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.

Amendment to FirstCity Revolving Credit Agreement.

On December 12, 2008, FirstCity Financial Corporation (“FirstCity”) and Bank of Scotland, as agent for the lenders and as lender, entered into Amendment No. 27 dated December 12, 2008, to the Revolving Credit Agreement dated November 12, 2004 (the “Credit Agreement”) to (1) amend and restate Section 8.18(a)(i) to change the ratio of indebtedness to tangible net worth from being equal to or less than 3.0 to 1.00 to being equal to or less than 5.25 to 1.00, provided that such ratio shall reduce to 5.00 to 1.00 effective upon FirstCity’s certification to the lenders, and the lenders’ written approval of such certification, that FirstCity has received net proceeds (“Litigation Proceeds”) from the lawsuit related to the Prudential demutualization proceeds of at least $3,500,000, (2) amend and restate Section 8.18(a)(iii) to reduce the required tangible net worth from being equal to or greater than $85,000,000 to being equal to or greater than $50,000,000, provided that the tangible net worth requirement will be increased upon receipt of any Litigation Proceeds by the amount of the Litigation Proceeds received, and (3) revise the definition of the base rate interest so that the rate would be at least as high as the adjusted one month LIBOR Rate in effect for each day. The foregoing description of Amendment No. 27 is qualified in its entirety by reference to the full text of Amendment No. 27 attached hereto as Exhibit 10.1 and is incorporated herein by this reference.

Amendment to FirstCity Subordinated Delayed Draw Credit Agreement.

On December 12, 2008, FirstCity and BoS(USA) Inc., as agent for the lenders and as lender, entered into Amendment No. 14 dated December 12, 2008, to the Subordinated Delayed Draw Credit Agreement dated as of September 5, 2007 (the “Subordinated Credit Agreement”) to (1) amend and restate Section 8.18(a)(i) to change the ratio of indebtedness to tangible net worth from being equal to or less than 3.0 to 1.00 to being equal to or less than 5.25 to 1.00, provided that such ratio shall reduce to 5.00 to 1.00 effective upon FirstCity’s certification to the lenders, and the lenders’ written approval of such certification, that FirstCity has received Litigation Proceeds of at least $3,500,000, (2) amend and restate Section 8.18(a)(iii) to reduce the required tangible net worth from being equal to or greater than $85,000,000 to being equal to or greater than $50,000,000, provided that the tangible net worth requirement will be increased upon receipt of any Litigation Proceeds by the amount of the Litigation Proceeds received, and (3) revise the definition of the base rate interest so that the rate would be as at least high as the adjusted one month LIBOR Rate in effect for each day. The foregoing description of Amendment No. 14 is qualified in its entirety by reference to the full text of Amendment No. 14 attached hereto as Exhibit 10.2 and is incorporated herein by this reference.

Amendment to FH Partners LLC Revolving Credit Agreement.

On December 12, 2008, FH Partners LLC, an indirect wholly-owned subsidiary of FirstCity, and Bank of Scotland, as agent for the lenders and as lender, entered into Amendment No. 7 dated December 12, 2008, to the Revolving Credit Agreement dated as of August 26, 2005 (the “FH Partners Credit Agreement”) to (1) amend and restate Section 8.18A(a)(i) to change the ratio of indebtedness to tangible net worth from being equal to or less than 3.0 to 1.00 to being equal to or less than 5.25 to 1.00, provided that such ratio shall reduce to 5.00 to 1.00 effective upon FirstCity’s certification to the lenders, and the lenders’ written approval of such certification, that FirstCity has received Litigation Proceeds of at least $3,500,000, (2) amend and restate Section 8.18A(a)(iii) to reduce the required tangible net worth from being equal to or greater than $85,000,000 to being equal to or greater than $50,000,000, provided that the tangible net worth requirement will be increased upon receipt of any Litigation Proceeds by the amount of the Litigation Proceeds received, and (3) revise the definition of the base rate interest so that the rate would be at least as high as the adjusted one month LIBOR Rate in effect for each day. The foregoing description of Amendment No. 7 is qualified in its entirety by reference to the full text of Amendment No. 7 attached hereto as Exhibit 10.3 and is incorporated herein by this reference.

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Nature of Material Relationship with Bank of Scotland.

FirstCity has had a significant relationship with Bank of Scotland and The Governor and The Company of the Bank of Scotland (“BoS-UK”) and their subsidiaries since September 1997. FirstCity and its wholly-owned subsidiaries have entered into loan agreements with Bank of Scotland, BoS(USA) Inc. and BoS-UK from time to time since 1997.

Since December 2002, the Bank of Scotland has provided to FirstCity and its subsidiaries a loan facility under a revolving credit loan facility consisting of (i) a revolving acquisition loan facility providing for a maximum principal balance of loans outstanding at any time of $45,000,000, and (ii) a revolving loan facility in the maximum principal amount of $5,000,000 for corporate purposes. This facility is secured by all of the assets of FirstCity and certain of its wholly-owned subsidiaries and is guaranteed by certain of the wholly-owned subsidiaries.  The outstanding balances under this facility were converted to loans under the revolving credit agreement between FirstCity and the Bank of Scotland dated November 12, 2004, which amended and restated the revolving loan facility and increased the loan facility to a maximum loan amount of $96,000,000.  This revolving facility was most recently amended on August 22, 2007, to increase the maximum available commitment under the revolving credit facility from $175,000,000 to $225,000,000.

On August 26, 2005, FH Partners LLC and Bank of Scotland entered into the FH Partners Credit Agreement which provided a $50,000,000 revolving loan facility to be used to finance portfolio and asset purchases made by FH Partners LLC.  The FH Partners Credit Agreement was amended on August 22, 2007, to increase the maximum loan amount under the revolving loan facility to $100,000,000.  The FH Partners Credit Agreement is secured by all of the assets of FH Partners LLC. The obligations of FH Partners LLC under the FH Partners Credit Agreement are guaranteed by FirstCity and the primary wholly-owned subsidiaries of FirstCity.

On September 5, 2007, FirstCity and BoS(USA), Inc. entered into the Subordinated Credit Agreement which provides a $25,000,000 loan facility to FirstCity.  This $25,000,000 loan facility can be used to finance equity investments in new ventures approved by BoS(USA) Inc. to be funded under the facility, the senior debt and equity portion of portfolio and asset purchases, to provide for the issuance of letters of credit and for working capital loans.  The Subordinated Credit Agreement is secured by all of the assets of FirstCity and certain of its wholly-owned subsidiaries and is guaranteed by certain of the wholly-owned subsidiaries.

On September 21, 2004, FirstCity, FirstCity Consumer Corporation (“Consumer Corp.”), FirstCity Funding LP (“Funding LP”) and FirstCity Funding GP (“Funding GP”), all affiliates of FirstCity, entered into a Securities Purchase Agreement (the “2004 Securities Purchase Agreement”) to sell a 31% beneficial ownership interest in Drive Financial Services, L.P. and its general partner, Drive GP LLC, to IFA Drive GP Holdings LLC (“IFA-GP”), IFA Drive LP Holdings LLC (“IFA-LP”) and Drive Management LP (“MG-LP”), all affiliates of Bank of Scotland. In the 2004 Securities Purchase Agreement, FirstCity, Consumer Corp., Funding LP and Funding GP made various representations and warranties concerning (i) their respective organizations, (ii) their power and authority to enter into the 2004 Securities Purchase Agreement and the transactions contemplated therein, (iii) the ownership of the limited partnership interests in Drive by Funding LP, (iv) the ownership of membership interests in Drive-GP by Consumer Corp., and (iv) the capital structure of Funding LP. FirstCity, Consumer Corp., Funding LP and Funding GP also agreed to indemnify BoS (USA), IFA-GP, IFA-LP and MG-LP from damages resulting from a breach of any representation or warranty contained in the 2004 Securities Purchase Agreement or otherwise made by FirstCity, Consumer Corp. or Funding LP in connection with the transaction. The indemnity obligations under the 2004 Securities Purchase Agreement survive for a maximum period of five (5) years from November 1, 2004. Neither FirstCity, Consumer Corp., Funding LP, or Funding GP is required to make any payments as a result of the indemnity provided under the 2004 Securities Purchase Agreement until the aggregate amount payable exceeds $25,000, and then only for the amount in excess of $25,000 in the aggregate; however certain representations and warranties are not subject to this $25,000 threshold. On November 1, 2004, FirstCity and certain of its subsidiaries completed the sale of a 31% beneficial

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ownership interest in Drive and its general partner, Drive GP LLC, to IFA-GP, IFA-LP and MG-LP for a total purchase price of $108,478,300 in cash, which resulted in distributions and payments to FirstCity and Consumer Corp. in the aggregate amount of $86,800,000 in cash, from various sources. The proceeds of the sale were used in part to pay indebtedness owed to the Bank of Scotland and BoS-UK.

BoS(USA) Inc. has a warrant to purchase 425,000 shares of FirstCity’s voting Common Stock at $2.3125 per share, which is subject to adjustment in the number of shares in the event of certain changes in the Common Stock, grants of options or issuance of convertible securities by FirstCity or certain corporate changes or reorganizations.  The warrant will expire on August 31, 2010, if it is not exercised prior to that date.

Settlement of Lawsuit Related to Demutualization Proceeds.

On November 25, 2008, FirstCity, FCLT Loans Asset Corporation and Tony J. Blair, individually and as representative of a class of former employee beneficiaries, accepted a mediator’s proposal for settlement of the claims in the interpleader suit styled Prudential Financial, Inc. v. JP Morgan Chase Bank, National Association, et. al. (the “Interpleader Suit”). The Interpleader Suit was originally filed by Prudential Financial, Inc. (“Prudential”) to determine the ownership of stock and dividends that became available as a result of the demutualization of Prudential Insurance Company of America (“Prudential Insurance”).  Pursuant to an order of the trial court on January 27, 2005, the Prudential stock and dividends were liquidated, and the proceeds are being held by JP Morgan Chase Bank, National Association (“JP Morgan”) pending resolution of the conflicting claims.  According to JP Morgan, at the time of the mediation, the demutualization proceeds held by JP Morgan totaled approximately $18.6 million.

Pursuant to the mediator’s proposal, each of the parties will receive 25% of the demutualization proceeds (approximately $4,650,000 each) upon approval of the settlement by the trial court and the remaining 25% ($4,650,000) will be held pending the determination of the appeal by the Court of Appeals. The remaining 25% will be distributed to FirstCity if the Court of Appeals affirms the summary judgment granted by the trial court in favor of FirstCity; in the event of any other result, the remaining 25% will be split one-third to each party (approximately $1,550,000 each). In the event that the Court of Appeals affirms the summary judgment granted by the trial court in favor of FirstCity, FirstCity will receive 50% of the demutualization proceeds (approximately $9,300,000). If the Court of Appeals does not affirm the decision of the trial court, FirstCity will receive 33.3% of the demutualization proceeds (approximately $6,200,000).

Pursuant to the mediator’s proposal, the parties to the Interpleader Suit will request the Court of Appeals to refrain from ruling on the appeal until the settlement process is completed, including the trial court’s approval or disapproval of the settlement on behalf of the class of former employees. The parties will agree, subject to approval of the Court of Appeals, upon the procedure to be followed as the Court of Appeals has jurisdiction of the suit and the trial court’s approval of the settlement is necessary. If the trial court does not approve the settlement the parties will be restored to their positions in the suit prior to the acceptance of the mediator’s proposal.

The mediator’s proposal provides that the parties will enter into a more detailed settlement agreement including mutual releases of all parties. The settlement is subject to approval of the procedure for the settlement by the Court of Appeals and the preliminary approval of the terms of the settlement by the trial court, notice to the class of the action, and final approval by the trial court after hearings on the fairness of the settlement with respect to the class of former employees.

The foregoing description of the settlement set forth in the mediator’s proposal is qualified in its entirety by reference to the full text of Mediator’s Proposal attached hereto as Exhibit 10.4 and is incorporated herein by this reference.

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Section 8 – Other Events.

Item 8.01 Other Events.

FirstCity has issued the press release attached hereto as Exhibit 99.1 which is incorporated by reference herein.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits.
	10.1	Amendment No. 27 dated December 12, 2008 between FirstCity Financial Corporation and Bank of Scotland
	10.2.	Amendment No. 14 dated December 12, 2008 between FirstCity Financial Corporation and BoS(USA) Inc.
	10.3	Amendment No. 7 dated December 12, 2008 between FH Partners LLC and Bank of Scotland
	10.4	Mediator’s Proposal dated November 20, 2008.
	99.1	Press Release dated December 15, 2008.

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: December 15, 2008	By:	/s/ J. Bryan Baker
		J. Bryan Baker
		Senior Vice President and Chief Financial Officer

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EXHIBIT INDEX

10.1	Amendment No. 27 dated December 12, 2008 between FirstCity Financial Corporation and Bank of Scotland
10.2.	Amendment No. 14 dated December 12, 2008 between FirstCity Financial Corporation and BoS(USA) Inc.
10.3	Amendment No. 7 dated December 12, 2008 between FH Partners LLC and Bank of Scotland
10.4	Mediator’s Proposal dated November 20, 2008.
99.1	Press Release dated December 15, 2008.

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 27 TO REVOLVING CREDIT AGREEMENT

AMENDMENT (this “Amendment”), dated as of December 12, 2008, among FIRSTCITY FINANCIAL CORPORATION, a Delaware corporation (the “Borrower”), the financial institutions which are parties to the Agreement hereinafter referred to (each a “Lender” and collectively, the “Lenders”), and BANK OF SCOTLAND PLC, acting through its New York branch, as agent for the Lenders under such Agreement (in such capacity, the “Agent”), to the Revolving Credit Agreement, dated as of November 12, 2004, among the Borrower, the Lenders and the Agent, as such agreement has been amended in writing from time to time prior to this Amendment (the “Agreement”).

W I T N E S S E T H:

WHEREAS, the Borrower anticipates receiving cash proceeds from a judgment in certain litigation in which the Borrower has been engaged; and

WHEREAS, the Borrower has requested that certain amendments set forth herein be made to the Agreement to reflect certain agreements the Lenders and the Borrower have reached, including with respect to the treatment of the proceeds from such litigation; and

WHEREAS, subject to the terms and conditions contained below, the Agent and the Lenders are willing so to amend the Agreement;

NOW, THEREFORE, it is agreed:

1.  Definitions.  All terms used herein which are defined in the Agreement (including, to the extent any such terms are to be added or amended by this Amendment, as if such terms were already added or amended by this Amendment, unless the context shall otherwise indicate) shall have the same meanings when used herein unless otherwise defined herein.  All references to Sections in this Amendment shall be deemed references to Sections in the Agreement unless otherwise specified.

2.  Effect of Amendment.  As used in the Agreement (including all Exhibits thereto), the Notes and the other Loan Documents and all other instruments and documents executed in connection with any of the foregoing, on and subsequent to the Amendment Closing Date (as hereinafter defined), any reference to the Agreement shall mean the Agreement as amended hereby.

3.  Amendments.  The Agreement is hereby amended as follows:

(a)           Annex I.  Annex I to the Agreement is amended as follows:

(i)            by restating in its entirety the definition of “Base Rate” therein to read as follows:

“Base Rate” shall mean, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate in effect for such day plus

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1/2 of 1%; (b) the rate of interest in effect for such day as publicly announced by the Agent from time to time as its “prime rate”; and (c) the Adjusted One Month LIBOR Rate in effect for such day plus 1%.  Any change in the Federal Funds Rate, the Agent’s “prime rate”, or the Adjusted One Month LIBOR Rate shall be reflected in the Base Rate on the first Business Day such change in the Federal Funds Rate, the Agent’s “prime rate” or the Adjusted One Month LIBOR Rate, as the case may be, becomes effective without any requirement for the Agent to give notice of such change in rate to the Borrower.

(ii)           by inserting the following new definitions therein in appropriate alphabetical order therein:

“Adjusted One Month LIBOR Rate” shall mean, for any day, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time on such day for Dollar deposits with a one month term.

“Litigation” shall mean Prudential Financial, Inc. v. JP Morgan Chase Bank, National Association, et. al.

“Litigation Net Proceeds” shall mean the cash received by the Borrower from time to time as a result of a settlement of the Litigation, less costs, expenses, including, without limitation, attorneys’ fees, incurred by the Borrower in connection with the Litigation.

(b)           Section 8.18.  Section 8.18(a)(i) and Section 8.18(a)(iii) of the Agreement are amended and restated in their entirety to read as follows:

(i)  maintain a ratio of Indebtedness to Tangible Net Worth equal to or less than 5.25 to 1.00 for the last day of the fiscal quarter then ended; provided that such ratio shall reduce to 5.00 to 1.00 effective upon the Borrower’s certification to the Lenders, and the Lenders’ written approval of such certification, that the Borrower has received Litigation Net Proceeds of at least $3,500,000;

(iii)  maintain a Tangible Net Worth equal to or greater than $50,000,000 (the “Base”) for the last day of the fiscal quarter then ended; provided that the Base shall be increased from time to time by the amount of Litigation Net Proceeds certified as received by the Borrower (and the Borrower covenants to provide such certification promptly after receipt of Litigation Net Proceeds from time to time), such increase to be effective on and as of the Lenders’ written approval of such certification.

4.  Representations.  In order to induce the Agent and the Lenders to execute this Amendment, the Borrower hereby represents, warrants and covenants to the Agent and the Lenders as of the date hereof and (if different) as of the Amendment Closing Date (which

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representations, warranties and covenants shall survive the execution, delivery and effectiveness of this Amendment) as follows:

(a)           No Default or Event of Default exists nor, after giving effect to the consents contained herein, will any Default or Event of Default arise.

(b)           Each representation and warranty made by the Borrower in the Loan Documents is true and correct.

(c)           The execution and delivery of this Amendment by the Borrower and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate action.

(d)           This Amendment is the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization and similar laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).

(e)           No Material Adverse Change has occurred since November 12, 2004.

5.  Effectiveness.  This Amendment shall become effective as of the date hereof when each of the following conditions (the first date on which all such conditions have been so satisfied (or waived) is herein referred to as the “Amendment Closing Date”) has been fulfilled to the satisfaction of the Agent (or waived by the Agent in its sole discretion).

(a)           Signed Copies.  The Borrower, the Lenders and the Agent shall have executed a copy hereof and delivered the same to the Agent at 1095 Avenue of the Americas, New York, New York 10036 (Attention:  Loan Administration) or such other place directed by the Agent.

(b)           No Change.  On the Amendment Closing Date, both before and after giving effect to the transactions contemplated by this Amendment to be effective on the Amendment Closing Date, no Material Adverse Change shall have occurred since November 12, 2004.

(c)           Guarantor’s Consent.  Each Guarantor shall have executed a confirming consent, substantially in the form attached hereto as Annex A or otherwise satisfactory to the Agent (a “Confirming Consent”), and delivered the same to the Agent at 1095 Avenue of the Americas, New York, New York 10036 (Attention:  Loan Administration) or such other place directed by the Agent.

(d)           No Defaults.  No Default or Event of Default shall exist.

(e)           Accuracy of Representations.  Each representation and warranty made by the Borrower, each Primary Obligor, each Portfolio Entity, each Related Entity and each other Loan Party in the Agreement and the other Loan Documents shall be true and correct in all material respects as of the Amendment Closing Date with the same effect as though made at and as of such date (except for those that specifically speak as of a prior date).

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(f)            Amendment Fee.  The Borrower shall have paid to the Lenders an amendment fee in the amount of $50,000.

6.  Ratification and Release. The Borrower does hereby remise, release and forever discharge the Agent and the Lenders and each of their respective affiliates, successors, officers, directors, employees, counsel and agents, past and present, and each of them, of and from any and all manner of actions, and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands whatsoever in law or in equity, which against the Agent, the Lenders or any of their respective affiliates, successors, officers, directors, employees, counsel or agents, or any one or more of them, the Borrower ever had, now has, or hereafter can, shall or may have for or by reason of any cause, matter or thing that occurred or did not occur on or prior to the Amendment Closing Date with respect to the Loan Agreement, this Amendment or any Security Document or other Loan Document, any previous version hereof or thereof or any proposed amendment or waiver hereof or thereof.

7.  Limited Nature of Amendments and Consent.  The amendments and consent set forth herein are limited precisely as written and shall not be deemed to (a) be a consent by the Agent or the Lenders to any waiver of, or modification of, any other term or condition of the Agreement, or any of the documents referred to in any of the foregoing or (b) prejudice any right or rights which any of the Lenders or the Agent may now have or may have in the future under or in connection with the Agreement, or any of the documents referred to in any of the foregoing.  Except as expressly amended hereby, the terms and provisions of the Agreement shall remain in full force and effect.

8.  Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

9.  Jurisdiction, Waiver of Jury Trial.  THE BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AMENDMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS THE AGENT OR ANY LENDER MAY ELECT, and, by execution and delivery hereof, the Borrower accepts and consents for itself and in respect to its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts, unless waived in writing by the Agent and the Majority Lenders.  EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER, ANY AFFILIATE OF THE BORROWER, THE AGENT OR ANY LENDER.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDER ENTERING INTO THIS AMENDMENT.

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10.  Headings.  The descriptive headings of the various provisions of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

11.  Writings Only.  BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT NO TERM OR PROVISION OF THE AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE CHANGED, WAIVED, SUPPLEMENTED OR OTHERWISE MODIFIED VERBALLY, BUT ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE RELEVANT PARTIES, AS FURTHER PROVIDED IN SECTION 12.2 OF THE CREDIT AGREEMENT.

12.  Entire Agreement.  THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

13.  Counterparts.  This Amendment may be executed in any number of counterparts, and by the different parties on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which together shall constitute one and the same agreement.  Telecopied signatures hereto and to the Confirming Consent shall be of the same force and effect as an original of a manually signed copy.

[Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first shown.

BANK OF SCOTLAND PLC, acting through
its New York branch, as Agent and as Lender
By
	Name:
	Title:
FIRSTCITY FINANCIAL CORPORATION
By
	Name:
	Title:

[Signature Page to Amendment No. 27 to Revolving Credit Agreement]

Annex A

CONFIRMING CONSENT

Reference is hereby made to the foregoing Amendment No. 27 (the “Amendment”) to the Revolving Credit Agreement dated as of December 12, 2008 among the Borrower, the Lenders and the Agent; said agreement, as previously amended and modified from time to time prior to the Amendment, as amended and modified by the Amendment and from time to time hereafter further amended or otherwise modified, the “Amended Agreement”.

Each Guarantor hereby consents to the terms and provisions of the Amendment and confirms and acknowledges that:

(a)  its obligations under the Loan Documents to which it is a party remain in full force and effect and the terms “Obligations” and “Secured Obligations” used in such Loan Documents include all Obligations of the Borrower under the Amended Agreement; and

(b)  its consent and acknowledgement hereunder is not required under the terms of such Loan Documents and any failure to obtain its consent or acknowledgment to any subsequent amendment to the Agreement or the Amended Agreement or any of the other Loan Documents will not affect the validity of its obligations under the aforesaid Loan Documents or any other Loan Document, and this consent and acknowledgement is being delivered for purposes of form only.

Capitalized terms used herein and not otherwise defined have the same meanings as in the Amended Agreement.  This Consent is dated as of the Amendment Closing Date (as defined in the Amendment).

FIRSTCITY COMMERCIAL CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FC CAPITAL CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY CONSUMER LENDING CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY EUROPE CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY HOLDINGS CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY HOLDINGS CORPORATION OF MINNESOTA
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY INTERNATIONAL CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY MEXICO, INC.
By:
	Name: James C. Holmes
	Title: Executive Vice President
FIRSTCITY SERVICING CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President
BOSQUE ASSET CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President

BOSQUE LEASING, L.P.
By:
	Name: James C. Holmes
	Title: Executive Vice President
BOSQUE LEASING GP CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President

EX-10.2

Exhibit 10.2

AMENDMENT NO. 14

Amendment No. 14 to Subordinated Delayed Draw Credit Agreement (this “Amendment”), dated as of December 12, 2008, among FirstCity Financial Corporation (the “Borrower”) and the financial institutions (each a “Lender” and collectively, the “Lenders”) party to that certain Subordinated Delayed Draw Credit Agreement, dated as of September 5, 2007 (as heretofore amended or otherwise modified, the “Loan Agreement”), among the Borrower, the Lenders and BoS(USA) Inc., as Agent for the Lenders (the “Agent”).

W I T N E S S E T H :

WHEREAS, the Borrower anticipates receiving cash proceeds from a judgment in certain litigation in which the Borrower has been engaged; and

WHEREAS, the Borrower has requested that certain amendments set forth herein be made to the Agreement to reflect certain agreements the Lenders and the Borrower have reached, including with respect to the treatment of the proceeds from such litigation; and

WHEREAS, subject to the terms and conditions contained below, the Agent and the Lenders are willing so to amend the Agreement;

NOW, THEREFORE, it is agreed:

1.Definitions.     All terms used herein which are defined in the Agreement (including, to the extent any such terms are to be added or amended by this Amendment, as if such terms were already added or amended by this Amendment, unless the context shall otherwise indicate) shall have the same meanings when used herein unless otherwise defined herein.  All references to Sections in this Amendment shall be deemed references to Sections in the Agreement unless otherwise specified.

2.Effect of Amendment.   As used in the Agreement (including all Exhibits thereto), the Notes and the other Loan Documents and all other instruments and documents executed in connection with any of the foregoing, on and subsequent to the Amendment Closing Date (as hereinafter defined), any reference to the Agreement shall mean the Agreement as amended hereby.

3.Amendments.  The Agreement is hereby amended as follows:

(a)           Annex I.  Annex I to the Agreement is amended as follows:

(i)            by restating in its entirety the definition of “Base Rate” therein to read as follows:

“Base Rate” shall mean, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate in effect for such day plus 1/2 of 1%; (b) the rate of interest in effect for such day as publicly announced

by the Agent from time to time as its “prime rate”; and (c) the Adjusted One Month LIBOR Rate in effect for such day plus 1%.  Any change in the Federal Funds Rate, the Agent’s “prime rate”, or the Adjusted One Month LIBOR Rate shall be reflected in the Base Rate on the first Business Day such change in the Federal Funds Rate, the Agent’s “prime rate” or the Adjusted One Month LIBOR Rate, as the case may be, becomes effective without any requirement for the Agent to give notice of such change in rate to the Borrower.

(ii)           by inserting the following new definitions therein in appropriate alphabetical order therein:

“Adjusted One Month LIBOR Rate” shall mean, for any day, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time on such day for Dollar deposits with a one month term.

“Litigation” shall mean Prudential Financial, Inc. v. JP Morgan Chase Bank, National Association, et. al.

“Litigation Net Proceeds” shall mean the cash received by the Borrower from time to time as a result of a settlement of the Litigation, less costs, expenses, including, without limitation, attorneys’ fees, incurred by the Borrower in connection with the Litigation.

(b)           Section 8.18.  Section 8.18(a)(i) and Section 8.18(a)(iii) of the Agreement are amended and restated in their entirety to read as follows:

(i)  maintain a ratio of Indebtedness to Tangible Net Worth equal to or less than 5.25 to 1.00 for the last day of the fiscal quarter then ended; provided that such ratio shall reduce to 5.00 to 1.00 effective upon the Borrower’s certification to the Lenders, and the Lenders’ written approval of such certification, that the Borrower has received Litigation Net Proceeds of at least $3,500,000;

(iii)  maintain a Tangible Net Worth equal to or greater than $50,000,000 (the “Base”) for the last day of the fiscal quarter then ended; provided that the Base shall be increased from time to time by the amount of Litigation Net Proceeds certified as received by the Borrower (and the Borrower covenants to provide such certification promptly after receipt of Litigation Net Proceeds from time to time), such increase to be effective on and as of the Lenders’ written approval of such certification.

4.Representations.  In order to induce the Agent and the Lenders to execute this Amendment, the Borrower hereby represents, warrants and covenants to the Agent and the Lenders as of the date hereof and (if different) as of the Amendment Closing Date (which

2

representations, warranties and covenants shall survive the execution, delivery and effectiveness of this Amendment) as follows:

(a)           No Default or Event of Default exists nor, after giving effect to the consents contained herein, will any Default or Event of Default arise.

(b)           Each representation and warranty made by the Borrower in the Loan Documents is true and correct.

(c)           The execution and delivery of this Amendment by the Borrower and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate action.

(d)           This Amendment is the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization and similar laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).

(e)           No Material Adverse Change has occurred since November 12, 2004.

5.Effectiveness.  This Amendment shall become effective as of the date hereof when each of the following conditions (the first date on which all such conditions have been so satisfied (or waived) is herein referred to as the “Amendment Closing Date”) has been fulfilled to the satisfaction of the Agent (or waived by the Agent in its sole discretion).

(a)           Signed Copies.  The Borrower, the Lenders and the Agent shall have executed a copy hereof and delivered the same to the Agent at 1095 Avenue of the Americas, New York, New York 10036 (Attention:  Loan Administration) or such other place directed by the Agent.

(b)           No Change.  On the Amendment Closing Date, both before and after giving effect to the transactions contemplated by this Amendment to be effective on the Amendment Closing Date, no Material Adverse Change shall have occurred since November 12, 2004.

(c)           Guarantor’s Consent.  Each Guarantor shall have executed a confirming consent, substantially in the form attached hereto as Annex A or otherwise satisfactory to the Agent (a “Confirming Consent”), and delivered the same to the Agent at 1095 Avenue of the Americas, New York, New York 10036 (Attention:  Loan Administration) or such other place directed by the Agent.

(d)           No Defaults.  No Default or Event of Default shall exist.

(e)           Accuracy of Representations.  Each representation and warranty made by the Borrower, each Primary Obligor, each Portfolio Entity, each Related Entity and each other Loan Party in the Agreement and the other Loan Documents shall be true and correct in all material respects as of the Amendment Closing Date with the same effect as though made at and as of such date (except for those that specifically speak as of a prior date).

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(f)            Amendment Fee.  The Borrower shall have paid to the Lenders an amendment fee in the amount of $25,000.

6.Ratification and Release. The Borrower does hereby remise, release and forever discharge the Agent and the Lenders and each of their respective affiliates, successors, officers, directors, employees, counsel and agents, past and present, and each of them, of and from any and all manner of actions, and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands whatsoever in law or in equity, which against the Agent, the Lenders or any of their respective affiliates, successors, officers, directors, employees, counsel or agents, or any one or more of them, the Borrower ever had, now has, or hereafter can, shall or may have for or by reason of any cause, matter or thing that occurred or did not occur on or prior to the Amendment Closing Date with respect to the Loan Agreement, this Amendment or any Security Document or other Loan Document, any previous version hereof or thereof or any proposed amendment or waiver hereof or thereof.

7.Limited Nature of Amendments and Consent.  The amendments and consent set forth herein are limited precisely as written and shall not be deemed to (a) be a consent by the Agent or the Lenders to any waiver of, or modification of, any other term or condition of the Agreement, or any of the documents referred to in any of the foregoing or (b) prejudice any right or rights which any of the Lenders or the Agent may now have or may have in the future under or in connection with the Agreement, or any of the documents referred to in any of the foregoing.  Except as expressly amended hereby, the terms and provisions of the Agreement shall remain in full force and effect.

8.Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

9.Jurisdiction, Waiver of Jury Trial.  THE BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AMENDMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS THE AGENT OR ANY LENDER MAY ELECT, and, by execution and delivery hereof, the Borrower accepts and consents for itself and in respect to its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts, unless waived in writing by the Agent and the Majority Lenders.  EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER, ANY AFFILIATE OF THE BORROWER, THE AGENT OR ANY LENDER.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDER ENTERING INTO THIS AMENDMENT.

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10.Headings.  The descriptive headings of the various provisions of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

11.Writings Only.  BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT NO TERM OR PROVISION OF THE AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE CHANGED, WAIVED, SUPPLEMENTED OR OTHERWISE MODIFIED VERBALLY, BUT ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE RELEVANT PARTIES, AS FURTHER PROVIDED IN SECTION 12.2 OF THE CREDIT AGREEMENT.

12.Entire Agreement.  THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

13.Counterparts.  This Amendment may be executed in any number of counterparts, and by the different parties on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which together shall constitute one and the same agreement.  Telecopied signatures hereto and to the Confirming Consent shall be of the same force and effect as an original of a manually signed copy.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first shown and to be effective as of the date first set forth above.

BoS(USA) Inc., as Agent and as a Lender
By:
	Name:
	Title:
FIRSTCITY FINANCIAL CORPORATION
By:
	Name:  James C. Holmes
	Title:  Executive Vice President

[Signature Page to Amendment No. 14]

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Annex A

CONFIRMING CONSENT

Reference is hereby made to the foregoing Amendment No. 14 (the “Amendment”) to the Subordinated Delayed Draw Credit Agreement dated as of December 12, 2008 among the Borrower, the Lenders and the Agent (said agreement, as from time to time amended or otherwise modified, the “Agreement”).

Each Guarantor hereby consents to the terms and provisions of the Amendment and confirms and acknowledges that:

(a)           its obligations under the Loan Documents to which it is a party remain in full force and effect; and

(b)           its consent and acknowledgement hereunder is not required under the terms of such Loan Documents and any failure to obtain its consent or acknowledgment in connection herewith or with any subsequent consent, waiver or amendment to the Agreement or any of the other Loan Documents will not affect the validity of its obligations under the aforesaid Loan Documents or any other Loan Document, and this consent and acknowledgement is being delivered for purposes of form only.

Capitalized terms used herein and not otherwise defined have the same meanings as in the Agreement. This Consent is dated as of the Amendment Closing Date (as defined in the Amendment).

FIRSTCITY COMMERCIAL CORPORATION
By:
	Name:  James C. Holmes
	Title:  Executive Vice President
FC CAPITAL CORP.
By:
	Name:  James C. Holmes
	Title:  Executive Vice President

FIRSTCITY CONSUMER LENDING
CORPORATION
By:
	Name:  James C. Holmes
	Title:  Executive Vice President
FIRSTCITY EUROPE CORPORATION
By:
	Name:  James C. Holmes
	Title:  Executive Vice President
FIRSTCITY HOLDINGS CORPORATION OF
MINNESOTA
By:
	Name:  James C. Holmes
	Title:  Executive Vice President
FIRSTCITY INTERNATIONAL CORPORATION
By:
	Name:  James C. Holmes
	Title: Executive Vice President
FIRSTCITY MEXICO, INC.
By:
	Name:  James C. Holmes
	Title:  Executive Vice President
FIRSTCITY SERVICING CORPORATION
By:
	Name:  James C. Holmes
	Title:  Executive Vice President
BOSQUE ASSET CORP.
By:
	Name:  James C. Holmes
	Title:  Executive Vice President

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BOSQUE LEASING, L.P.
By:
	Name:  James C. Holmes
	Title:  Executive Vice President
BOSQUE LEASING GP CORP.
By:
	Name:  James C. Holmes
	Title:  Executive Vice President

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EX-10.3

Exhibit 10.3

AMENDMENT NO. 7

Amendment No. 7 (this “Amendment”), dated as of December 12, 2008, among FH Partners LLC, a Texas limited liability company (the “Borrower”) and the financial institutions (each a “Lender” and collectively, the “Lenders”) party to that certain Revolving Credit Agreement, dated as of August 26, 2005 (as heretofore amended or otherwise modified, the “Loan Agreement”), among the Borrower, the Lenders and Bank of Scotland plc, as Agent for the Lenders (the “Agent”).

W I T N E S S E T H :

WHEREAS, the Borrower anticipates receiving cash proceeds from a judgment in certain litigation in which the Borrower has been engaged; and

WHEREAS, the Borrower has requested that certain amendments set forth herein be made to the Agreement to reflect certain agreements the Lenders and the Borrower have reached, including with respect to the treatment of the proceeds from such litigation; and

WHEREAS, subject to the terms and conditions contained below, the Agent and the Lenders are willing so to amend the Agreement;

NOW, THEREFORE, it is agreed:

1.Definitions.  All terms used herein which are defined in the Agreement (including, to the extent any such terms are to be added or amended by this Amendment, as if such terms were already added or amended by this Amendment, unless the context shall otherwise indicate) shall have the same meanings when used herein unless otherwise defined herein.  All references to Sections in this Amendment shall be deemed references to Sections in the Agreement unless otherwise specified.

2.Effect of Amendment.  As used in the Agreement (including all Exhibits thereto), the Notes and the other Loan Documents and all other instruments and documents executed in connection with any of the foregoing, on and subsequent to the Amendment Closing Date (as hereinafter defined), any reference to the Agreement shall mean the Agreement as amended hereby.

3.Amendments.  The Agreement is hereby amended as follows:

(a)Annex I.  Annex I to the Agreement is amended as follows:

(i)by restating in its entirety the definition of “Base Rate” therein to read as follows:

“Base Rate” shall mean, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate in effect for such day plus 1/2 of 1%; (b) the rate of interest in effect for such day as publicly announced

by the Agent from time to time as its “prime rate”; and (c) the Adjusted One Month LIBOR Rate in effect for such day plus 1%.  Any change in the Federal Funds Rate, the Agent’s “prime rate”, or the Adjusted One Month LIBOR Rate shall be reflected in the Base Rate on the first Business Day such change in the Federal Funds Rate, the Agent’s “prime rate” or the Adjusted One Month LIBOR Rate, as the case may be, becomes effective without any requirement for the Agent to give notice of such change in rate to the Borrower.

(ii)by inserting the following new definitions therein in appropriate alphabetical order therein:

“Adjusted One Month LIBOR Rate” shall mean, for any day, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time on such day for Dollar deposits with a one month term.

“Litigation” shall mean Prudential Financial, Inc. v. JP Morgan Chase Bank, National Association, et. al.

“Litigation Net Proceeds” shall mean the cash received by the Borrower from time to time as a result of a settlement of the Litigation, less costs, expenses, including, without limitation, attorneys’ fees, incurred by the Borrower in connection with the Litigation.

(b)Section 8.18.  Section 8.18(a)(i) and Section 8.18(a)(iii) of the Agreement are amended and restated in their entirety to read as follows:

(i)  maintain a ratio of Indebtedness to Tangible Net Worth equal to or less than 5.25 to 1.00 for the last day of the fiscal quarter then ended; provided that such ratio shall reduce to 5.00 to 1.00 effective upon the Borrower’s certification to the Lenders, and the Lenders’ written approval of such certification, that the Borrower has received Litigation Net Proceeds of at least $3,500,000;

(iii)  maintain a Tangible Net Worth equal to or greater than $50,000,000 (the “Base”) for the last day of the fiscal quarter then ended; provided that the Base shall be increased from time to time by the amount of Litigation Net Proceeds certified as received by the Borrower (and the Borrower covenants to provide such certification promptly after receipt of Litigation Net Proceeds from time to time), such increase to be effective on and as of the Lenders’ written approval of such certification.

4.Representations.  In order to induce the Agent and the Lenders to execute this Amendment, the Borrower hereby represents, warrants and covenants to the Agent and the Lenders as of the date hereof and (if different) as of the Amendment Closing Date (which

2

representations, warranties and covenants shall survive the execution, delivery and effectiveness of this Amendment) as follows:

(a)No Default or Event of Default exists nor, after giving effect to the consents contained herein, will any Default or Event of Default arise.

(b)Each representation and warranty made by the Borrower in the Loan Documents is true and correct.

(c)The execution and delivery of this Amendment by the Borrower and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate action.

(d)This Amendment is the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization and similar laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).

(e)No Material Adverse Change has occurred since November 12, 2004.

5.Effectiveness.  This Amendment shall become effective as of the date hereof when each of the following conditions (the first date on which all such conditions have been so satisfied (or waived) is herein referred to as the “Amendment Closing Date”) has been fulfilled to the satisfaction of the Agent (or waived by the Agent in its sole discretion).

(a)Signed Copies.  The Borrower, the Lenders and the Agent shall have executed a copy hereof and delivered the same to the Agent at 1095 Avenue of the Americas, New York, New York 10036 (Attention:  Loan Administration) or such other place directed by the Agent.

(b)No Change.  On the Amendment Closing Date, both before and after giving effect to the transactions contemplated by this Amendment to be effective on the Amendment Closing Date, no Material Adverse Change shall have occurred since November 12, 2004.

(c)Guarantor’s Consent.  Each Guarantor shall have executed a confirming consent, substantially in the form attached hereto as Annex A or otherwise satisfactory to the Agent (a “Confirming Consent”), and delivered the same to the Agent at 1095 Avenue of the Americas, New York, New York 10036 (Attention:  Loan Administration) or such other place directed by the Agent.

(d)No Defaults.  No Default or Event of Default shall exist.

(e)Accuracy of Representations.  Each representation and warranty made by the Borrower, each Primary Obligor, each Portfolio Entity, each Related Entity and each other Loan Party in the Agreement and the other Loan Documents shall be true and correct in all material respects as of the Amendment Closing Date with the same effect as though made at and as of such date (except for those that specifically speak as of a prior date).

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6.Ratification and Release. The Borrower does hereby remise, release and forever discharge the Agent and the Lenders and each of their respective affiliates, successors, officers, directors, employees, counsel and agents, past and present, and each of them, of and from any and all manner of actions, and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands whatsoever in law or in equity, which against the Agent, the Lenders or any of their respective affiliates, successors, officers, directors, employees, counsel or agents, or any one or more of them, the Borrower ever had, now has, or hereafter can, shall or may have for or by reason of any cause, matter or thing that occurred or did not occur on or prior to the Amendment Closing Date with respect to the Loan Agreement, this Amendment or any Security Document or other Loan Document, any previous version hereof or thereof or any proposed amendment or waiver hereof or thereof.

7.Limited Nature of Amendments and Consent.  The amendments and consent set forth herein are limited precisely as written and shall not be deemed to (a) be a consent by the Agent or the Lenders to any waiver of, or modification of, any other term or condition of the Agreement, or any of the documents referred to in any of the foregoing or (b) prejudice any right or rights which any of the Lenders or the Agent may now have or may have in the future under or in connection with the Agreement, or any of the documents referred to in any of the foregoing.  Except as expressly amended hereby, the terms and provisions of the Agreement shall remain in full force and effect.

8.Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

9.Jurisdiction, Waiver of Jury Trial.  THE BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AMENDMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS THE AGENT OR ANY LENDER MAY ELECT, and, by execution and delivery hereof, the Borrower accepts and consents for itself and in respect to its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts, unless waived in writing by the Agent and the Majority Lenders.  EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER, ANY AFFILIATE OF THE BORROWER, THE AGENT OR ANY LENDER.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDER ENTERING INTO THIS AMENDMENT.

4

10.Headings.  The descriptive headings of the various provisions of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

11.Writings Only.  BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT NO TERM OR PROVISION OF THE AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE CHANGED, WAIVED, SUPPLEMENTED OR OTHERWISE MODIFIED VERBALLY, BUT ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE RELEVANT PARTIES, AS FURTHER PROVIDED IN SECTION 12.2 OF THE CREDIT AGREEMENT.

12.Entire Agreement.  THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

13.Counterparts.  This Amendment may be executed in any number of counterparts, and by the different parties on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which together shall constitute one and the same agreement.  Telecopied signatures hereto and to the Confirming Consent shall be of the same force and effect as an original of a manually signed copy.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first shown.

BANK OF SCOTLAND PLC, acting through its
New York branch as Agent and as a Lender
By:
	Name:
	Title:

FH PARTNERS LLC
By:
	Name:  James C. Holmes
	Title:  Executive Vice President

[Signature Page to Amendment No. 7]

5

Annex A

CONFIRMING CONSENT

Reference is hereby made to the foregoing Amendment No. 7 (the “Amendment”) to the Revolving Credit Agreement dated as of December 12, 2008 among the Borrower, the Lenders and the Agent (said agreement, as from time to time amended or otherwise modified, the “Agreement”).

Each Guarantor hereby consents to the terms and provisions of the Amendment and confirms and acknowledges that:

(a)its obligations under the Loan Documents to which it is a party remain in full force and effect; and

(b)its consent and acknowledgement hereunder is not required under the terms of such Loan Documents and any failure to obtain its consent or acknowledgment in connection herewith or with any subsequent consent, waiver or amendment to the Agreement or any of the other Loan Documents will not affect the validity of its obligations under the aforesaid Loan Documents or any other Loan Document, and this consent and acknowledgement is being delivered for purposes of form only.

Capitalized terms used herein and not otherwise defined have the same meanings as in the Agreement. This Consent is dated as of the Amendment Closing Date (as defined in the Amendment).

FIRSTCITY COMMERCIAL CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

FC CAPITAL CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY CONSUMER LENDING
CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY EUROPE CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY HOLDINGS CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY HOLDINGS CORPORATION OF
MINNESOTA
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY INTERNATIONAL CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY MEXICO, INC.
By:
	Name: James C. Holmes
	Title: Executive Vice President

FIRSTCITY SERVICING CORPORATION
By:
	Name: James C. Holmes
	Title: Executive Vice President

[Signature Page to Confirming Consent to Amendment No. 7]

BOSQUE ASSET CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President

BOSQUE LEASING, L.P.
By:
	Name: James C. Holmes
	Title: Executive Vice President

BOSQUE LEASING GP CORP.
By:
	Name: James C. Holmes
	Title: Executive Vice President

[Signature Page to Confirming Consent to Amendment No. 7]

EX-10.4

Exhibit 10.4

CASE NO. 01-06-00798-CV

IN THE FIRST COURT OF APPEALS
HOUSTON, TEXAS

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

v.

FirstCity Financial Corporation
Appellee

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

MEDIATOR’S PROPOSAL
CONFIDENTIAL

NOT TO BE FILED WITH THE COURT UNLESS ACCEPTED

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

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

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

1

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

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

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

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

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

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

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

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

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

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

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

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

2

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

12.The parties hereby acknowledge as follows:

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

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

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

FCLT:	Yes:	No:
WACO:	Yes:	No:
Employees:	Yes:	No:
Trustee:	Yes:	No:

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EX-99.1

Exhibit 99.1

NEWS RELEASE

Contact:	Suzy W. Taylor
	866-652-1810

FirstCity Financial (NASDAQ: FCFC) Agrees to Settle Lawsuit —

FirstCity to Receive Between $6.2 and $9.3 Million of Proceeds

and

FirstCity Financial To Take a Non-Cash Charge to Write Down Deferred Tax Asset

Waco, Texas, December 15, 2008……  FirstCity Financial Corporation today announced that it has reached a preliminary agreement to settle the lawsuit involving the disputed ownership of approximately $18.6 million of proceeds from the demutualization of Prudential Insurance Company.  A court-ordered mediation was held on November 18, 2008 and following the unsuccessful mediation the mediator submitted the mediator’s proposal to the three claimants. The mediator’s proposal accepted by the claimants on November 25, 2008 provides for each of the parties to receive 25% of the demutualization proceeds (approximately $4,650,000 each) upon approval of the settlement by the trial court, and for the remaining 25% ($4,650,000) to be held pending the determination of the appeal by the Court of Appeals.  The remaining 25% will be distributed to FirstCity if the Court of Appeals affirms the summary judgment granted by the trial court in favor of FirstCity. In the event of any other ruling by the Court of Appeals, the remaining 25% will be split one-third to each party (approximately $1,550,000 each).

The trial court’s approval of the settlement is necessary.  If the trial court does not approve the settlement the parties will be restored to their positions in the suit prior to the acceptance of the mediator’s proposal.

The effect of the agreement is that FirstCity would receive in total approximately $9,300,000 of the demutualization proceeds (50%), if the Court of Appeals affirms the summary judgment granted in 2006 by the trial court in favor of FirstCity, and alternatively, if the Court of Appeals does not affirm the decision in favor of FirstCity, FirstCity will receive $6,200,000 (33.3%) of the demutualization proceeds. Details of the lawsuit and settlement are more fully described in a Form 8-K filed with the SEC today. The mediator’s proposal provides that the initial $4,650,000 of proceeds will be distributed to FirstCity upon approval of the settlement by the trial court, with the remaining proceeds payable to FirstCity (either $1,550,000 or $4,650,000) distributed upon issuance of a decision by the Court of Appeals.

Separately, the Company disclosed today that it expects to recognize a non-cash charge by increasing its valuation allowance against its deferred tax asset in its fourth quarter of 2008.  While the amount of the increase in the valuation allowance has not yet been determined, FirstCity expects it to approximate substantially the entire $20.1 million asset amount on the balance sheet at September 30, 2008.

The financial covenants in Company’s lending facilities with the Bank of Scotland and BoS (USA) have been amended to take into account this non-cash charge. The amendments to the loan facilities are detailed in a Form 8-K filed with the SEC today.

James T. Sartain, President and CEO, said, “In connection with the preparation of fourth quarter financial statements, we conducted a review of FirstCity’s deferred tax asset and identified the need to increase the valuation allowance against it. The increase in the valuation allowance will likely result in a substantial non-cash charge to income, but the charge will not adversely impact FirstCity’s operations, our credit facilities, or our relationship with our primary lender. Furthermore, a valuation allowance does not affect FirstCity’s net operating loss carry forwards, as we still retain $231 million of these carry forwards and can use them to off-set future taxable income.”

FirstCity Financial Corporation is a diversified financial services company with operations dedicated primarily to portfolio asset acquisition and resolution with offices in the U.S. and with affiliate organizations in Europe and Latin America. FirstCity common stock is listed on the NASDAQ Global Select Market (NASDAQ: FCFC).

Forward-Looking Statements

FirstCity may from time to time make written or oral forward-looking statements, including statements contained in this press release, FirstCity’s filings with the SEC, in its reports to stockholders and in other FirstCity communications. These statements relate to the Company’s strategic objectives and future performance, which are not historical facts, and may be deemed to be forward-looking statements under the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements include, without limitation, statements regarding our future financial position, business strategy, and plans and objectives of management for future operations, as well as any statement that may project, indicate or imply future results, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “may,” “could,” “would,” “should,” “will likely result,” “indication,” “outlook,” “projects” and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual results and outcomes may differ materially from those expressed in, or implied by, our forward-looking statements.

There are many important factors that could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements. Such factors include, but are not limited to, the Company’s continued need for financing; availability of the Company’s credit facilities; ability to obtain additional financing from the Bank of Scotland or any other lender; the impact of certain covenants in loan agreements of the Company and its subsidiaries; the ability of the Company to utilize NOLs; uncertainities related to and liabilities resulting from litigation, including costs, expenses, settlements and judgments; and factors more fully discussed and identified in the Company’s Annual Report on Form 10-K, for the year ended December 31, 2007, filed with the SEC on March 17, 2008 (including those discussed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”), as well as in other SEC filings of the Company. Many of these factors are beyond the Company’s control. In addition, it should be noted that past financial and operational performance of the Company is not necessarily indicative of future financial and operational performance. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements in this press release represent beliefs and assumptions only as of the date of this press release. Except as required by applicable law, the Company expressly disclaims any obligation or intention to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations with regard thereto or any change in future events, conditions or circumstances on which any forward-looking statement is based.

The forward-looking statements in this release speak only as of the date of this release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.