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                                                                    EXHIBIT 10.9

                              EMPLOYMENT AGREEMENT


         This Employment Agreement (this "Agreement") is made as of JULY 1,
1997, by and between HARBOR FINANCIAL MORTGAGE CORPORATION, a Texas corporation
(the "Employer"), and RICHARD J. GILLEN, an individual (the "Executive").

                                   RECITALS:

         Concurrently with the execution and delivery of this Agreement,
FirstCity Financial Corporation, a Delaware corporation ("FirstCity"), is
acquiring from the Executive and other Persons all of the issued and
outstanding shares of stock of Harbor Financial Group, Inc. ("HFGI"), the
parent of the Employer, pursuant to an Agreement and Plan of Merger dated as of
March 26, 1997, by and among FirstCity, HFGI Acquisition Corp. and the Employer
(the "Merger Agreement").  FirstCity and the Employer desire the Executive's
continued employment with the Employer, and the Executive wishes to accept such
continued employment, upon the terms and conditions set forth in this
Agreement.

                                   AGREEMENT

         The parties, intending to be legally bound, agree as follows:

1.       DEFINITIONS

         For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.

         "AGREEMENT"--this Employment Agreement, as amended from time to time.

         "BASIC COMPENSATION"--Salary and Benefits.

         "BENEFITS"--as defined in Section 3.1(b).

         "BOARD OF DIRECTORS"--the board of directors of the Employer.

         "CONFIDENTIAL INFORMATION"--any and all:

         (a)     trade secrets concerning the business and affairs of the
         Employer; and

         (b)     information concerning the business and affairs of the
         Employer (which includes historical financial statements, financial
         projections and budgets, historical and projected sales, capital
         spending budgets and plans, the names and backgrounds of key
         personnel, personnel training and techniques and materials) however
         documented; and

         (C)     notes, analyses, compilations, studies, summaries, and other
         material prepared by or for the Employer containing or based, in whole
         or in part, on any information included in the foregoing.





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         "DISABILITY"--as defined in Section 6.2.

         "EFFECTIVE DATE"--the date stated in the first paragraph of the
Agreement.

         "EMPLOYEE INVENTION"--any idea, invention, technique, modification,
process, or improvement (whether patentable or not) and any work of authorship
(whether or not copyright protection may be obtained for it) created,
conceived, or developed by the Executive, either solely or in conjunction with
others, during the Employment Period, or a period that includes a portion of
the Employment Period, that relates in any way to, or is useful in any manner
in, the business then being conducted or proposed to be conducted by the
Employer, and any such item created by the Executive, either solely or in
conjunction with  others, following termination of the Executive's employment
with the Employer, that is based upon or uses Confidential Information.

         "EMPLOYMENT PERIOD"--the term of the Executive's employment under this
Agreement.

         "FISCAL YEAR"--the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.

         "FOR CAUSE"--as defined in Section 6.3.

         "FOR GOOD REASON"--as defined in Section 6.4.

         "INCENTIVE BONUS"--as defined in Section 3.2.

         "PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.

         "POST-EMPLOYMENT PERIOD"--as defined in Section 8.2.

         "PROPRIETARY ITEMS"--as defined in Section 7.2(a)(iv).

         "SALARY"--as defined in Section 3.1(a).

2.       EMPLOYMENT TERMS AND DUTIES

         2.1     EMPLOYMENT.  The Employer hereby employs the Executive, and
the Executive hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.

         2.2     TERM.  Subject to the provisions of Section 6, the term of the
Executive's employment under this Agreement will be three (3) years, beginning
on the Effective Date and ending on the third anniversary of the Effective
Date.





EMPLOYMENT AGREEMENT                                                    PAGE 2
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         2.3     DUTIES.  The Executive will have such duties as are assigned
or delegated to the Executive by the Board of Directors, and will initially
serve as President and Chief Executive Officer of the Employer and a member of
the Executive Committee of FirstCity.  The Executive will devote his entire
business time, attention, skill, and energy exclusively to the business of the
Employer, will use his best efforts to promote the success of the Employer's
and FirstCity's business, and will cooperate fully with the Board of Directors
in the advancement of the  best interests of the Employer and FirstCity.
Nothing in this Section 2.3, however, will prevent the Executive from engaging
in additional activities in connection with personal investments and community
affairs that are not inconsistent with the Executive's duties under this
Agreement.

3.       COMPENSATION

         3.1     BASIC COMPENSATION.

         (a)      SALARY.  The Executive will be paid an annual salary of
         $300,000.00, subject to adjustment as provided below (the "Salary"),
         which will be payable in equal periodic installments according to the
         Employer's customary payroll practices, but no less frequently than
         monthly.  The Salary will be reviewed by the Compensation Committee of
         the Board of Directors of FirstCity not less frequently than annually,
         and may be adjusted upward or downward in the sole discretion of the
         Board of Directors of FirstCity; provided, however, the Executive's
         Salary will be comparable to the salaries of the members of the
         Executive Committee of the Board of Directors of FirstCity.

         (b)     BENEFITS.  The Executive will, during the Employment Period,
         be permitted to participate in such pension, profit sharing, bonus,
         stock option, life insurance, hospitalization, major medical, and
         other employee benefit plans of the Employer and FirstCity that may be
         in effect from time to time, to the extent the Executive is eligible
         under the terms of those plans (collectively, the "Benefits");
         provided, however, the Executive's employee benefits will be
         comparable to the employee benefits of the members of the Executive
         Committee of the Board of Directors of FirstCity.

         3.2     INCENTIVE BONUS.  As additional compensation (the "Incentive
Bonus") for the services to be rendered by the Executive pursuant to this
Agreement, the Employer will pay to the Executive with respect to each Fiscal
Year during the Employment Period, commencing on or after the Effective Date
(prorated for the remainder of the Fiscal Year of FirstCity ending December 31,
1997), an incentive bonus based on the profits of FirstCity.  The amount of the
Incentive Bonus and the terms and conditions of payment of the Incentive Bonus
will be comparable to the incentive bonuses of the members of the Executive
Committee of the Board of Directors of FirstCity.





EMPLOYMENT AGREEMENT                                                    PAGE 3
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4.       FACILITIES AND EXPENSES

         4.1     GENERAL.  The Employer will furnish the Executive office
space, equipment, supplies, and such other facilities and personnel as the
Employer deems necessary or appropriate for the performance of the Executive's
duties under this Agreement.  The Employer will pay on behalf of the Executive
(or reimburse the Executive for) reasonable expenses incurred by the Executive
at the request of, or on behalf of, the Employer in the performance of the
Executive's duties pursuant to this Agreement, and in accordance with the
Employer's employment policies, including reasonable expenses incurred by the
Executive in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses.
The Executive must file expense reports with respect to such expenses in
accordance with the Employer's policies.

         4.2     AUTOMOBILE.  The Employer will include the Executive in
FirstCity's automobile allowance policy.  The Executive must file expense
reports with respect to such automobile in accordance with FirstCity's and the
Employer's policies.

5.       VACATIONS AND HOLIDAYS

         The Executive will be entitled to paid vacation each Fiscal Year in
accordance with the vacation policies of the Employer in effect for its
executive officers from time to time.  The Executive will also be entitled to
the paid holidays and other paid leave set forth in the Employer's policies.

6.       TERMINATION

         6.1     EVENTS OF TERMINATION.  The Employment Period, the Executive's
Basic Compensation and Incentive Bonus, and any and all other rights of the
Executive under this Agreement or otherwise as an employee of the Employer will
terminate (except as otherwise provided in this Section 6):

         (a)     upon the death of the Executive;

         (b)     upon the disability of the Executive (as defined in Section
         6.2) immediately upon notice from either party to the other;

         (c)     for cause (as defined in Section 6.3), immediately upon notice
         from the Employer to the Executive, or at such later time as such
         notice may specify; or

         (d)     for good reason (as defined in Section 6.4) upon not less than
         thirty days' prior notice from the Executive to the Employer.

         6.2     DEFINITION OF "DISABILITY".  For purposes of Section 6.1, the
Executive will be deemed to have a "disability" if, for physical or mental
reasons, the Executive is unable to perform the Executive's duties under this
Agreement for 120 consecutive days, or 180 days during any twelve (12) month
period, as determined in accordance with this Section 6.2.  The disability of





EMPLOYMENT AGREEMENT                                                    PAGE 4
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the Executive will be determined by a medical doctor selected by written
agreement of the Employer and the Executive upon the request of either party by
notice to the other.  If the Employer and the Executive cannot agree on the
selection of a medical doctor, each of them will select a medical doctor and
the two medical doctors will select a third medical doctor who will determine
whether the Executive has a disability.  The determination of the medical
doctor selected under this Section 6.2 will be binding on both parties.  The
Executive must submit to a reasonable number of examinations by the medical
doctor making the determination of disability under this Section 6.2, and the
Executive hereby authorizes the disclosure and release to the Employer of such
determination and all supporting medical records.  If the Executive is not
legally competent, the Executive's legal guardian or duly authorized
attorney-in-fact will act in the Executive's stead, under this Section 6.2, for
the purposes of submitting the Executive to the examinations, and providing the
authorization of disclosure, required under this Section 6.2.

         6.3     DEFINITION OF "FOR CAUSE".  For purposes of Section 6.1, the
phrase "for cause" means: (a) the Executive's material breach of this
Agreement; (b) the Executive's failure to adhere to any written policy of the
Employer or FirstCity if the Executive has been given a reasonable opportunity
to comply with such policy or cure his failure to comply (which reasonable
opportunity must be granted during the ten-day period preceding termination of
this Agreement); (c) the appropriation (or attempted appropriation) of a
material business opportunity of the Employer or FirstCity, including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of the Employer or FirstCity; (d) the
misappropriation (or attempted misappropriation) of any of the Employer's or
FirstCity's funds or property; or (e) the conviction of, the indictment for (or
its procedural equivalent), or the entering of a guilty plea or plea of no
contest with respect to, a felony, the equivalent thereof, or any other crime
with respect to which imprisonment is a possible punishment.

         6.4     DEFINITION OF "FOR GOOD REASON".  For purposes of Section 6.1,
the phrase "for good reason" means any of the following: (a) the Employer's
material breach of this Agreement; or (b) the assignment of the Executive
without his consent to a position, responsibilities, or duties of a materially
lesser status or degree of responsibility than his position, responsibilities,
or duties at the Effective Date.

         6.5     TERMINATION PAY.  Effective upon the termination of this
Agreement, the Employer will be obligated to pay the Executive (or, in the
event of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 6.5, and in lieu of all other
amounts and in settlement and complete release of all claims the Executive may
have against the Employer or FirstCity.  For purposes of this Section 6.5, the
Executive's designated beneficiary will be such individual beneficiary or
trust, located at such address, as the Executive may designate by notice to the
Employer from time to time or, if the Executive fails to give notice to the
Employer of such a beneficiary, the Executive's estate.  Notwithstanding the
preceding sentence, the Employer and FirstCity will have no duty, in any
circumstances, to attempt to open an estate on behalf of the Executive, to
determine whether any beneficiary designated by the Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of
any trust, to determine whether any person or entity purporting to act as the
Executive's personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to locate or
attempt to locate any beneficiary, personal representative, or trustee.





EMPLOYMENT AGREEMENT                                                    PAGE 5
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         (a)     SALARY.  Upon the termination of this Agreement, the Executive
         will be entitled to receive his Salary only through the date such
         termination is effective.

         (b)     BENEFITS.  The Executive's accrual of, or participation in
         plans providing for, the Benefits will cease at the effective date of
         the termination of this Agreement, and the Executive will be entitled
         to accrued Benefits pursuant to such plans only as provided in such
         plans.

7.       NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

         7.1     ACKNOWLEDGMENTS BY THE EXECUTIVE.  The Executive acknowledges
that (a) during the Employment Period and as a part of his employment, the
Executive will be afforded access to Confidential Information; (b) public
disclosure of such Confidential Information could have an adverse effect on the
Employer and its business; (c) because the Executive possesses substantial
technical expertise and skill with respect to the Employer's business, the
Employer desires to obtain exclusive ownership of each Employee Invention, and
the Employer will be at a substantial competitive disadvantage if it fails to
acquire exclusive ownership of each Employee Invention; (d) FirstCity has
required that the Executive make the covenants in this Section 7 as a condition
to its purchase of the Employer's stock of HFGI; and (e) the provisions of this
Section 7 are reasonable and necessary to prevent the improper use or
disclosure of Confidential Information and to provide the Employer with
exclusive ownership of all Employee Inventions.

         7.2     AGREEMENTS OF THE EXECUTIVE.  In consideration of the
compensation and benefits to be paid or provided to the Executive by the
Employer under this Agreement, the Executive covenants as follows:

         (a)     CONFIDENTIALITY.

                 (i)      During and following the Employment Period, the
                 Executive will hold in confidence the Confidential Information
                 and will not disclose it to any person except with the
                 specific prior written consent of the Employer or except as
                 otherwise expressly permitted by the terms of this Agreement.

                 (ii)     Any trade secrets of the Employer will be entitled to
                 all of the protections and benefits under applicable law.  If
                 any information that the Employer deems to be a trade secret
                 is found by a court of competent jurisdiction not to be a
                 trade secret for purposes of this Agreement, such information
                 will, nevertheless, be considered Confidential Information for
                 purposes of this Agreement.  The Executive hereby waives any
                 requirement that the Employer submit proof of the economic
                 value of any trade secret or post a bond or other security.

                 (iii)    None of the foregoing obligations and restrictions
                 applies to any part of the Confidential Information that the
                 Executive demonstrates was or became generally available to
                 the public other than as a result of a disclosure by the
                 Executive.





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                 (iv)     The Executive will not remove from the Employer's
                 premises (except to the extent such removal is for purposes of
                 the performance of the Executive's duties at home or while
                 traveling, or except as otherwise specifically authorized by
                 the Employer) any document, record, notebook, plan, model,
                 component, device, or computer software or code, whether
                 embodied in a disk or in any other form (collectively, the
                 "Proprietary Items").  The Executive recognizes that, as
                 between the Employer and the Executive, all of the Proprietary
                 Items, whether or not developed by the Executive, are the
                 exclusive property of the Employer.  Upon termination of this
                 Agreement by either party, or upon the request of the Employer
                 during the Employment Period, the Executive will return to the
                 Employer all of the Proprietary Items in the Executive's
                 possession or subject to the Executive's control, and the
                 Executive shall not retain any copies, abstracts, sketches, or
                 other physical embodiment of any of the Proprietary Items.

         (b)     EMPLOYEE INVENTIONS. Each Employee Invention will belong
         exclusively to the Employer.  If it is determined that any such works
         are not works made for hire, the Executive hereby assigns to the
         Employer all of the Executive's right, title, and interest, including
         all rights of copyright, patent, and other intellectual property
         rights, to or in such Employee Inventions.  The Executive covenants
         that he will promptly:

                 (i)      disclose to the Employer in writing any Employee
                 Invention;

                 (ii)     assign to the Employer or to a party designated by
                 the Employer, at the Employer's request and without additional
                 compensation, all of the Executive's right to the Employee
                 Invention for the United States and all foreign jurisdictions;

                 (iii)    execute and deliver to the Employer such
                 applications, assignments, and other documents as the Employer
                 may request in order to apply for and obtain patents or other
                 registrations with respect to any Employee Invention in the
                 United States and any foreign jurisdictions;

                 (iv)     sign all other papers necessary to carry out the
                 above obligations; and

                 (v)      give testimony and render any other assistance but
                 without expense to the Executive in support of the Employer's
                 rights to any Employee Invention.

         7.3     DISPUTES OR CONTROVERSIES.  The Executive recognizes that
should a dispute or controversy arising from or relating to this Agreement be
submitted for adjudication to any court, arbitration panel, or other third
party, the preservation of the secrecy of Confidential Information may be
jeopardized.  All pleadings, documents, testimony, and records relating to any
such adjudication will be maintained in secrecy and will be available for
inspection by the Employer, the Executive, and their respective attorneys and
experts, who will agree, in advance and in writing, to receive and maintain all
such information in secrecy, except as may be limited by them in writing.





EMPLOYMENT AGREEMENT                                                    PAGE 7
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8.       NON-COMPETITION AND NON-INTERFERENCE

         8.1     ACKNOWLEDGMENTS BY THE EXECUTIVE.  The Executive acknowledges
that: (a) the services to be performed by him under this Agreement are of a
special, unique, unusual, extraordinary, and intellectual character; (b) the
Employer's business is national in scope and its products and services are
marketed throughout the United States; (c) the Employer competes with other
businesses that are or could be located in any part of the United States; (d)
FirstCity has required that the Executive make the covenants set forth in this
Section 8 as a condition to FirstCity's acquisition of the Executive's stock of
HFGI; and (e) the provisions of this Section 8 are reasonable and necessary to
protect the Employer's business.

         8.2     COVENANTS OF THE EXECUTIVE.  In consideration of the
acknowledgments by the Executive, and in consideration of the compensation and
benefits to be paid or provided to the Executive by the Employer, the Executive
covenants that he will not, directly or indirectly:

         (a)     during the Employment Period, except in the course of his
         employment hereunder, and during the Post- Employment Period, engage
         or invest in, own, manage, operate, finance, control, or participate
         in the ownership, management, operation, financing, or control of, be
         employed by, associated with, or in any manner connected with, lend
         the Executive's name or any similar name to, lend Executive's credit
         to or render services or advice to, any business whose products,
         services or activities compete in whole or in part with the products
         or activities of the Employer or FirstCity anywhere within the United
         States where the Employer or FirstCity conducts or markets its
         business, products or services; provided, however, that the Executive
         may purchase or otherwise acquire up to (but not more than) one
         percent of any class of securities of any enterprise (but without
         otherwise participating in the activities of such enterprise) if such
         securities are listed on any national or regional securities exchange
         or have been registered under Section 12(g) of the Securities Exchange
         Act of 1934;

         (b)     whether for the Executive's own account or for the account of
         any other person, at any time during the Employment Period and the
         Post-Employment Period, solicit business of the same or similar type
         being carried on by the Employer, from any person known by the
         Executive to be a customer of the Employer or FirstCity, whether or
         not the Executive had personal contact with such person during and by
         reason of the Executive's employment with the Employer;

         (c)     whether for the Executive's own account or the account of any
         other person (i) at any time during the Employment Period and the
         Post-Employment Period, solicit, employ, or otherwise engage as an
         employee, independent contractor, or otherwise, any person who is or
         was an employee of the Employer at any time during the Employment
         Period or in any manner induce or attempt to induce any employee of
         the Employer to terminate his employment with the Employer; or (ii) at
         any time during the Employment Period and for three years thereafter,
         interfere with the Employer's relationship with any person, including
         any person who at any time during the Employment Period was an
         employee, contractor, supplier, or customer of the Employer; or





EMPLOYMENT AGREEMENT                                                    PAGE 8
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         (d)     at any time during or after the Employment Period, disparage
         the Employer or any of its shareholders, directors, officers,
         employees, or agents.

         For purposes of this Section 8.2, the term "Post-Employment Period"
means the three (3) year period beginning on the date of termination of the
Executive's employment with the Employer.

         For purposes of this Section 8.2, the term "FirstCity" means FirstCity
Financial Corporation, a Delaware corporation, and/or any of its subsidiaries
or affiliates.

         If any covenant in this Section 8.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.

         The period of time applicable to any covenant in this Section 8.2 will
be extended by the duration of any violation by the Executive of such covenant.

         The Executive will, while the covenant under this Section 8.2 is in
effect, give notice to the Employer, within ten (10) days after accepting any
other employment, of the identity of the Executive's employer.  FirstCity or
the Employer may notify such employer that the Executive is bound by this
Agreement and, at the Employer's election, furnish such employer with a copy of
this Agreement or relevant portions thereof.

9.       GENERAL PROVISIONS

         9.1     INJUNCTIVE RELIEF AND ADDITIONAL REMEDY.  The Executive
acknowledges that the injury that would be suffered by the Employer as a result
of a breach of the provisions of this Agreement (including any provision of
Sections 7 and 8) would be irreparable and that an  award of monetary damages
to the Employer for such a breach would be an inadequate remedy.  Consequently,
the Employer will have the right, in addition to any other rights it may have,
to obtain injunctive relief to restrain any breach or threatened breach or
otherwise to specifically enforce any provision of this Agreement, and the
Employer will not be obligated to post bond or other security in seeking such
relief.  Without limiting the Employer's rights under this Section 9 or any
other remedies of the Employer, if the Executive breaches any of the provisions
of Section 7 or 8, the Employer will have the right to cease making any
payments otherwise due to the Executive under this Agreement.

         9.2     COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT
COVENANTS.  The covenants by the Executive in Sections 7 and 8 are essential
elements of this Agreement, and without the Executive's agreement to comply
with such covenants, FirstCity would not have acquired the Executive's stock of
HFGI under the Merger Agreement and the Employer would not have entered into
this Agreement or employed or continued the employment of the Executive.  The
Employer and the Executive have independently consulted their respective
counsel and have been advised in all respects concerning the





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reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Employer.

         The Executive's covenants in Sections 7 and 8 are independent
covenants and the existence of any claim by the Executive against the Employer
under this Agreement or otherwise, or against FirstCity, will not excuse the
Executive's breach of any covenant in Section 7 or 8.

         If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 7 and 8.

         9.3     REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE.  The
Executive represents and warrants to the Employer that the execution and
delivery by the Executive of this Agreement does not, and the performance by
the Executive of the Executive's obligations hereunder will not, with or
without the giving of notice or the passage of time, or both: (a) violate any
judgment, writ, injunction, or order of any court, arbitrator, or governmental
agency applicable to the Executive; or (b) conflict with, result in the breach
of any provisions of or the termination of, or constitute a default under, any
agreement to which the Executive is a party or by which the Executive is or may
be bound.

         9.4     OBLIGATIONS CONTINGENT ON PERFORMANCE.  The obligations of the
Employer hereunder, including its obligation to pay the compensation provided
for herein, are contingent upon the Executive's performance of the Executive's
obligations hereunder.

         9.5     WAIVER.  The rights and remedies of the parties to this
Agreement are cumulative and not alternative.  Neither the failure nor any
delay by either party in exercising any right, power, or privilege under this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege.  To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.

         9.6     BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED.  This
Agreement shall inure to the benefit of, and shall be binding upon, the parties
hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.

         9.7     NOTICES.  All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by





EMPLOYMENT AGREEMENT                                                    PAGE 10
<PAGE>   11
hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and facsimile numbers set forth below
(or to such other addresses and facsimile numbers as a party may designate by
notice to the other parties):

         If to Employer:          Harbor Financial Mortgage Corporation
                                  340 North Sam Houston Parkway East, Suite 100
                                  Houston, Texas  77060
                                  Attention:
                                            -----------------------
                                  Facsimile No.:  713-448-4098

         With a copy to:          FirstCity Financial Corporation
                                  P.O. Box 8216
                                  Waco, Texas  76714-8216
                                  Attention:  Matt Landry, Jr.
                                  Facsimile No.:  817-751-1208

         If to the Executive:     Richard J. Gillen       

                                  ---------------------------------

                                  ---------------------------------

         9.8     ENTIRE AGREEMENT; AMENDMENTS.  This Agreement, the Merger
Agreement, and the documents executed in connection with the Merger Agreement,
contain the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, between the parties hereto with respect to the subject matter hereof.
This Agreement may not be amended orally, but only by an agreement in writing
signed by the parties hereto.

         9.9     GOVERNING LAW.  This Agreement will be governed by the laws of
the State of Texas without regard to conflicts of laws principles.

         9.10    SECTION HEADINGS, CONSTRUCTION.  The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation.  All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement unless
otherwise specified.  All words used in this Agreement will be construed to be
of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.

         9.11    SEVERABILITY.  If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect.  Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.

         9.12    COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of





EMPLOYMENT AGREEMENT                                                    PAGE 11
<PAGE>   12
which, when taken together, will be deemed to constitute one and the same
agreement.

         IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.

                                      EMPLOYER:

                                      HARBOR FINANCIAL MORTGAGE CORPORATION


                                      By:    /s/ RONALD E. HAMES
                                             --------------------------------
                                      Name:  Ronald E. Hames
                                             --------------------------------
                                      Title: Sr. Vice President
                                             --------------------------------


                                      EXECUTIVE:

                                      /s/ RICHARD J. GILLEN
                                      --------------------------------------
                                      RICHARD J. GILLEN





EMPLOYMENT AGREEMENT                                                    PAGE 12