**EXHIBIT 10.19**
**SEPARATION AGREEMENT AND RELEASE**
     This Separation Agreement and Release (“Agreement”) is made and enteredinto on April 23, 2004 to be effective as of March 31**,**2004, by and between G.Stephen Fillip (hereinafter referred to as “Employee”), FirstCity ServicingCorporation**.**(hereinafter referred to as “FCSC”), and FirstCity FinancialCorporation (hereinafter referred to as “FirstCity”).
     **WHEREAS,**Employee’s employment with FCSC and/or FCFC will terminateeffective March 31, 2004; and
     **WHEREAS,**Employee, FCSC and FirstCity desire to settle the differencesbetween them relating to all claims and causes of action that could be assertedby Employee including but not limited to those for vacation pay, severance payor other payments that may be due or asserted to be due to Employee and to setforth their agreement concerning certain matters relating to their relationshipfollowing termination of employment and related agreements between them.
     In consideration of the mutual promises, covenants and agreements setforth herein, and in full compromise, release and settlement, accord andsatisfaction, and discharge of all claims or causes of action, known orunknown, possessed by or belonging to Employee, the parties covenant and agreeas follows:
     **1. **Each party shall take the following actions, subject to the terms ofthis Agreement:
               **(a)**FCSC will, on the later to occur of either (1) seven (7) daysafter the complete execution of this Agreement or (2) April 1, 2004,begin payment to Employee an amount equal to $10,000.00 per month lesspayroll deductions and continue payment of such amount to Employee bymaking two payments per month of $5,000.00 each on the first (1st) andfifteenth (15th) of each month thereafter until and including June 15,2006. Employee will not be entitled to any other payments orcompensation from FCSC or FCFC (as defined herein), except as provided inSections 1(b), 1(c), 1(e) and 1(f). The payments set forth in thisSection 1(a) may be subject to set-off by FCSC under the terms of theConsultant Agreement described in Section 1(f).
               **(b)**The current insurance carried by FirstCity will not allowEmployee to continue coverage after March 31, 2004. FirstCity shall pay apercentage of Employee’s COBRA payments equal to the portion ofEmployee’s insurance paid by FirstCity as of March 31, 2004 divided bythe total insurance premium to insure Employee as of March 31, 2004.After Employee’s COBRA coverage period has expired and until the earlierto occur of June 30, 2006 or when Employee is able to be covered byanother group health insurance plan, FirstCity shall pay Employee anamount monthly equal to the dollar amount paid by FirstCity towardsEmployee’s COBRA payment for the last month of Employee’s COBRA coverageperiod. Employee shall not be considered an employee of
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FCSC and/or FCFC after March 31, 2004 and shall not be eligible toparticipate in FirstCity’s benefit plans after March 31, 2004.
               **(c)**The second paragraph of Section 2 of a Promissory Note dated asof December 12, 2002 in the principal amount of $971,250.00 executed byFirstCity Commercial Corporation payable to the order of Employee (the“Note”) shall be deleted in its entirety and replaced with the following:
“Notwithstanding the payment provisions set forth above, (a)if this Note is not paid in full on or before the MaturityDate, Maker and Payee agree that any amounts remainingunpaid hereunder as of the Maturity Date shall be forgiven,shall be deemed paid in full, and Payee shall not beentitled to any further payment under this Note and (b) ifFirstCity Servicing Corporation (“FCSC”) terminates Payee“For Cause” under the terms of a Consultant Agreement datedApril 23, 2004 executed by Payee and FCSC, this Note willbe deemed paid in full and Payee will no longer be entitledto payments under this Note.”
               The definition of “Incentive Fees” set forth in the Note shall bedeleted in its entirety and replaced with the following:
***“Incentive Fees”***means the aggregate amount, in US dollars,of all incentive servicing fees or consulting fees (i)received by FirstCity Servicing Corporation in any monthrelated to acquisitions made prior to January 1, 2004 in itsMexico operations, and (ii) paid to Maker in such month, netof all taxes and/or other charges that may be assessed byapplicable governmental authorities.”
               **(d)**Employee agrees that any Options (as defined in the Plans) heldby Employee under the FirstCity Financial Corporation 1995 Stock Optionand Award Plan and the FirstCity Financial Corporation 1996 Stock Optionand Award Plan (collectively referred to as the “Plans”) shall be subjectto the terms of such Plans including but not limited to the provisionsconcerning vesting and exercise. Employee further agrees that Employeeshall not be considered or treated as an “Employee” (as the term“Employee” is defined in the Plans) under the terms of the Plans afterMarch 31, 2004.
               **(e)**FCSC shall convey ownership of the Dell Latitude Laptop Computercurrently in Employee’s possession to Employee after FCSC has removed allproprietary information and systems from such computer.
               **(f)**FCSC and Employee shall enter into a Consultant Agreement in theform of the Consultant Agreement set forth at Exhibit A attached hereto.
               **(g)**Employee, on behalf of himself and his agents, successors,assigns, heirs, executors, administrators, and legal representatives,releases FCSC, FirstCity and all of FirstCity Financial Corporation’saffiliates and subsidiaries (collectively, “FCFC”), their agents,servants, legal representatives, officers, directors, shareholders,partners and employees, and all persons, natural or corporate, in privitywith them or any of them (all shall be collectively referred to as the“Released Parties”), from any and all claims or
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causes of action of any kind whatsoever, at common law, statutory,contractual or otherwise, that Employee has or might have, or that couldbe asserted in an administrative complaint or in a lawsuit, known orunknown, now existing or arising in the future, arising out of or relatedto employment, termination of employment, operation of FCSC or FCFC, orany other matters between or among Employee and the Released Parties,save and except as to performance of agreements set forth in thisAgreement; this release shall include, without limitation, all claims ofEmployee related to any obligations, responsibilities, or liabilities ofFCSC and/or FCFC: **(i)**under any written or oral employment orcompensation agreement between Employee, FCSC and/or FCFC; **(ii)**under anyagreements relating to compensation, reimbursement, or payment of anykind from FCSC or FCFC, save and except any 401K or other benefitobligations as in effect on March 31, 2004, any such obligations beingsubject to the terms and provisions of such benefit plans; **(iii)**underany written or oral agreements relating to an ownership of stock oroperation of FCSC or FCFC; and **(v)**any and all claims, demands, suits,damages, losses, wrongs, actions, causes of action, or suits in equity orotherwise of any kind or nature whatsoever regarding his employment, andseparation from employment, with FCSC or FCFC, including, but not limitedto, any claim arising under the Age Discrimination in Employment Act, theCivil Rights Act of 1964, the Equal Pay Act, the Civil Rights Act of1991, Americans with Disabilities Act, the Family and Medical Leave Act,the National Labor Relations Act, 42 U.S.C. Section 1981, 42 U.S.C.Section 1988 (including any claims by Employee or his counsel, if any,for attorney fees) the Occupational Safety and Health Act, the EmployeeRetirement Income Security Act, the Worker Adjustment and RetrainingNotification Act, breach of contract, and all federal, state or local lawclaims, whether statutory or common law.
     **2. **Employee resigns as a director, officer and/or employee of FCSC, and ofall its subsidiaries and affiliates, effective as of March 31, 2004 and shallassist FCSC and FCFC with a smooth transition of Employee’s responsibilities.
     **3. **In exchange for the payment and release of claims set forth in Section1 and Employee’s agreement to strictly comply with the obligations set forth inSection 4, FCSC and FirstCity agree as follows:
               **(a)**FCSC and/or FCFC shall respond to any inquiry as to Employee’semployment status by confirming that he was an employee of FCSC untilMarch 31, 2004.
               **(b)**FCSC shall report the payment of the amount under Section 1(a)on Employee’s IRS Form W-2 and the fair market value of the computerreferenced in Section 1(e) on an IRS From 1099 to Employee. The amounts,if any, paid to Employee under the Note shall be reported to the IRS assuch amounts have been previously reported to the IRS.
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     **4. **Employee agrees that:
               **(a)**Employee agrees that he shall not initiate any contact ordiscussions regarding the business interests or activities of FCSC orFCFC with any vendor or customer of FCSC or FCFC, however this should notbe construed to prevent communication between the Employee and any otherparty, whether considered a vendor or customer of FCSC or FCFC, that doesnot relate to or regard the business interests or activities of FCSC orFCFC; nor shall Employee disclose any confidential information, tradesecrets, or proprietary business information of FCSC and/or FCFC with anythird parties, unless required by law or court order and only afterproviding prior written notice to FCSC or FCFC a sufficient amount oftime prior to any such disclosure so that FCSC or FCFC would be able totake any protective action it would desire to pursue.
               **(b)**Employee agrees that until the latter of (i) October 1, 2005 or(ii) one (1) year after the expiration or termination of the ConsultantAgreement (the “Non-Competition Period”), Employee will not, directly orindirectly, for himself or for any other person or entity participate inany business involving the acquisition of and/or servicing of portfoliosof assets and/or loans (whether secured or unsecured, and whetherperforming or non-performing), whether acquired through a public auctionor a privately negotiated transaction in competition with FCFC or itsaffiliates. For purposes of this Agreement, the term “participate” shallinclude any direct or indirect interest, as well as being holder of anyequity or membership interest in any enterprise, fund, trust, whether asan officer, director, employee, partner, sole proprietor, agent,representative, independent contractor, consultant, advisor, provider ofpersonal services, creditor, owner (other than by ownership of less thanten percent (10%) of the stock of a publicly-held corporation whose stockis traded on a national securities exchange or in the over-the countermarket) or otherwise when FCFC or its affiliates are interested in theacquisition of and/or servicing of the same portfolios of loans orcollateral securing such loans. The term “participate” shall not includeany direct or indirect interest, as well as being holder of any equity ormembership interest in CMC Cityscape II, Ltd. If at the time ofenforcement of this sub-paragraph (a), a court holds that therestrictions stated herein are unreasonable under circumstances thenexisting, the parties hereto agree that the maximum period, scope, orgeographical area legally permissible under such circumstances will besubstituted for the period, scope or area stated herein. To obtainconsent to participate in the acquisition of and/or servicing ofportfolios of assets and/or loans, Employee may give written notice toFCFC that Employee is interested in a transaction; after which FCFC shallhave fifteen (15) business days from FCFC’s receipt of such writtennotice to consent to Employee’s participation in the transaction. In theevent FCFC has not responded to Employee concerning any written notice atthe expiration of the fifteen (15) business day period, then FCFC shallbe deemed to have consented to Employee’s participation in thetransaction described in the notice. Employee shall provide specificdetail of the proposed transaction in the written notice.
               **(c)**Until the expiration of the Non-Competition Period, Employeeagrees not to solicit the employment of any officer, director or employeeof FCFC and/or FCSC, except with the express written permission ofFirstCity.
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               **(d)**Employee will or shall return any and all property, documents,files, or other paper or electronic media in his possession which ispertinent to FCSC’s or FCFC’s business and copies thereof.
               **(e)**Employee agrees that FCSC and FCFC have specialized expertise inthe acquisition, pricing methodology, servicing and sale of distressedassets and that Employee has knowledge of proprietary, confidential andnonpublic material concerning the business, methodology, models, computerprograms and services of FCSC and FCFC and that during the term of theConsultant Agreement, FCSC and FCFC might disclose to Employee otherproprietary, confidential and nonpublic material concerning the businessand services of FCSC and FCFC (collectively, all such information isherein the “Confidential Information”). Before, during and after theterm of this Agreement, Employee shall treat as confidential and notdivulge, disclose or communicate any Confidential Information for anyreason or in any manner to any person, except to those persons approvedin writing by FCSC, who have been advised by Employee of the confidentialnature of the information, and who have agreed in writing, a copy ofwhich will be delivered to FCSC and FCFC, to comply with the terms ofthis Agreement for the benefit of FCSC and FCFC and which writingexpressly provides that FCSC and FCFC may rely thereon and directlyenforce such agreements against those persons. Further, Employee agreesthat during the Non-Competition Period Employee will not knowingly, as aresult of knowledge or information obtained from the ConfidentialInformation, divert or attempt to divert any business or customer of FCSCand/or FCFC.
               The parties hereto agree that FCSC and FCFC would suffer irreparableharm from a breach by Employee of any of the covenants or agreementscontained in Sections 4 (a), (b), (c), (d) and (e). Therefore, in theevent of the actual or threatened breach by Employee of those provisionsof this Agreement, FCSC and FCFC or their successors or assigns may, inaddition and supplementary to other rights and remedies existing on theirfavor, apply to any court of law or equity of competent jurisdiction forspecific performance, injunctive or other relief in order to enforcecompliance with, or prevent any violation of, the provisions hereof(including the extension of the Non-Competition Period by a period equalto the length or proceedings necessary to stop such violation). In theevent of an alleged breach or violation by Employee of any of theprovisions of this Agreement, the Non-Competition Period will be tolleduntil such alleged breach or violation is resolved. Employee agrees thatthese restrictions are reasonable.
               **(f)**Employee shall not, at any time in the future, make or publishany critical or disparaging statements about FCSC or FCFC or any of theirofficers, employees, directors or operations to any other person orentity, nor will he do anything to disrupt or detrimentally affect,directly or indirectly, the business, operations or liabilities of FCSCand FCFC.
               **(g)**Employee acknowledges that he has been paid for allcompensation, commission, wages, vacation, sick pay, severance pay,retention pay, and other payments of any kind that he earned for servicesthrough March 31, 2004. Employee understands and acknowledges that heshall not be entitled to any payments or benefits from FCSC orFCFC in his capacity as an employee or as an officer of FCSC or FCFCother than those
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expressly set forth in this Agreement, and furtheracknowledges that he is not entitled to any other payment, monies orbenefits, and that FCSC and FCFC by complying with Section 1(a) of thisAgreement will have fully complied with any and all obligations they haveto Employee and shall not have any further liability to him.
     **5. **FCSC, FCFC and Employee acknowledge that this Agreement is entered intofor the purpose of resolving any and all matters in controversy between them.The parties agree that neither FCSC, FCFC nor Employee will take any actioninconsistent with the spirit and intent of this Agreement.
     **6. **FCSC, FirstCity and Employee each agree that they will keepconfidential the existence and terms of this Agreement, except that the termsof this Agreement may be disclosed to Employee’s spouse, the attorney of eitherof the parties, necessary employees of FCSC or FCFC, or other persons only asrequired by law.
     **7. **Nothing contained herein shall be construed as an admission ofliability by FCSC, FCFC or Employee, any such liability being expressly denied.
     **8. **It is understood and agreed that this Agreement contains the entireagreement between the parties and supersedes any and all prior agreements,arrangements, or undertakings between the parties relating to the subjectmatter. No oral understandings, statements, promises or inducements contraryto the terms of this Agreement exist. This Agreement cannot be changed orallyand any changes or amendments must be signed by all parties affected by thechange or amendment.
     **9. **Employee acknowledges and agrees if he breaches any provision of thisAgreement then FCSC and/or FCFC may pursue any other relief available to themunder applicable law, including appropriate injunctive relief.
     **10. **If any section, paragraph, sentence, clause, or phrase contained inthis Agreement shall become illegal, null, or void, or shall be found to beagainst public policy, for any reason, or shall be held by any court ofcompetent jurisdiction to be illegal, null, or void, or found to be againstpublic policy, the remaining sections, paragraphs, sentences, clauses, orphrases contained in this Agreement shall not be affected thereby.
     **11. **One or more waivers of a breach of any provision hereunder by anyparty to this Agreement shall not be deemed to be a waiver of any proceeding orsubsequent breach hereunder.
     **12. **Employee hereby acknowledges and expressly warrants and represents forhimself, his predecessors, successors, assigns, heirs, executors,administrators and legal representatives that Employee **(a)**is legally competentand authorized to execute this Agreement, **(b)**has not assigned, pledged, orotherwise in any manner, sold or transferred, either by instrument in writingor otherwise, any rights, title, interest, or claim that he may have by reasonof any matter described or released in this Agreement, and **(c)**has the fullright and authority to enter into this Agreement. FCSC and FirstCity herebyacknowledge and expressly warrant andrepresent for themselves and their agents and successors that they are legallyauthorized to execute this Agreement, and they have the full right andauthority to enter into this Agreement.
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     **13. **By executing this Agreement, Employee acknowledges that **(a)**any andall questions regarding the terms of this Agreement have been asked andanswered to his complete satisfaction; **(b)**Employee has read this Agreement andfully understands its terms and their importance; **(c)**Employee is entering intothis Agreement voluntarily, of his own free will, and without any coercion,undue influence, threat or intimidation of any kind or type whatsoever; and **(d)**Employee acknowledges that he has been advised by FCSC and FCFC that he has theright to consult with an attorney or other advisor prior to executing thisAgreement.
     **14. **This Agreement is made and entered into in the State of Texas, andshall in all respects be interpreted, enforced and governed under the laws ofsaid State. The language of all parts of this Agreement shall in all cased beconstrued as a whole, according to its fair meaning, and not strictly for oragainst any of the parties.
     **15. **The terms of this Agreement are subject to the approval of theCompensation Committee.
     **16. YOU ARE HEREBY ADVISED TO CAREFULLY CONSIDER THIS AGREEMENT AND TOCONSULT WITH AN ATTORNEY. IN THIS AGREEMENT YOU ARE BEING ASKED TO WAIVEPOTENTIAL LEGAL CLAIMS AND RIGHTS THAT YOU MAY HAVE. YOU ARE FURTHER ADVISEDTHAT YOU HAVE TWENTY_ONE (21) CALENDAR DAYS TO CONSIDER THIS AGREEMENT ANDRELEASE. IF YOU CHOOSE NOT TO SIGN THIS AGREEMENT AND RELEASE WITHIN SUCHPERIOD, IT SHALL BE CONSIDERED WITHDRAWN. FURTHER, YOU HAVE SEVEN (7) CALENDARDAYS TO REVOKE YOUR ACCEPTANCE OF THIS AGREEMENT AND RELEASE.**
     **IN WITNESS WHEREOF,**the parties hereto have executed this Agreement as ofthe date hereinabove written.     Date: April 23, 2004   G. Stephen Fillip       **FirstCity Servicing Corporation**      By:      Name: James T. Sartain    Title: Chairman          **FirstCity Financial Corporation**   By:      Name: James T. Sartain    Title: Chairman   
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   **THE STATE OF TEXAS** **§****COUNTY OF MCLENNAN** **§**
     BEFORE ME, the undersigned, a Notary Public, on this day personallyappeared G. Stephen Fillip, known to me to be the person whose name issubscribed to the foregoing instrument and he acknowledged to me that heexecuted the same for the purposes and consideration therein expressed.
     GIVENUNDER MY HAND AND SEAL OF OFFICE this 23rd day of April,2004.      Notary Public   **THE STATE OF TEXAS** **§****COUNTY OF MCLENNAN** **§**
     BEFORE ME, the undersigned, a Notary Public in and for said county andstate, on this day personally appeared James T. Sartain, who is theChairmanfor **FirstCity Servicing Corporation**, known to me to bethe person whose name is subscribed to the foregoing instrument, andacknowledged to me that he/she executed the same for the purposes andconsideration therein expressed, as the act and deed of said corporation, andin the capacity therein stated.
     Givenunder my hand and seal of office this 23rd day of April, 2004.      Notary Public   **THE STATE OF TEXAS** **§****COUNTY OF McLENNAN** **§**
     BEFORE ME, the undersigned, a Notary Public in and for said county andstate, on this day personally appeared James T. Sartain, who is theChairmanfor **FirstCity Financial Corporation**, known to me to bethe person whose name is subscribed to the foregoing instrument, and heacknowledged to me that he executed the same for the purposes and considerationtherein expressed, as the act and deed of said corporation, and in the capacitytherein stated.
     Givenunder my hand and seal of office this 23rd day of April, 2004.      Notary Public, State of Texas
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