Summary of FIRSTCITY FINANCIAL CORP

Item 1.01 Entry into a Material Definitive Agreement.

On September 25, 2009, FirstCity Financial Corporation ("FirstCity"), FCLT Loans Asset Corporation and Tony J. Blair, individually and as representative of a class of former employee beneficiaries, entered into an Agreement and Stipulation of Settlement, subject to court approval, which provides for the settlement of the pending lawsuit related to the ownership of proceeds from the sale of Prudential stock and dividends interpled by Prudential Financial, Inc. The settlement provides for each party to receive one-third of the demutualization proceeds ten days after an order of the trial court approving the settlement is final and non-appealable. Each of the parties to the lawsuit will release the other parties from all claims related to the lawsuit. The demutualization proceeds are being held by JP Morgan Chase Bank, National Association ("JP Morgan") subject to the resolution of all issues in the lawsuit. According to report of JP Morgan dated as of August 3, 2009, the demutualization proceeds totaled approximately $18.6 million. Pursuant to the settlement, JP Morgan will hold approximately $250,000 of the funds as a reserve to pay fees, expenses and tax payments. On September 29, 2009, the trial court granted preliminary approval of the terms of the settlement. The settlement is subject to 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. If the trial court does not approve the settlement the parties will be restored to their positions in the suit prior to the entry into the Agreement and Stipulation of Settlement.