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                                                                  EXHIBIT 10.29

                              EMPLOYMENT AGREEMENT


         This Employment Agreement (this "Agreement") is made as of OCTOBER 1,
1998, by and between FIRSTCITY FINANCIAL MORTGAGE CORPORATION, a Texas
corporation (the "Employer"), and BUDDY L. TERRELL, an individual (the
"Executive"). 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" means this Employment Agreement, as amended from time to
time.

         "BASIC COMPENSATION" means Salary and Benefits.

         "BENEFITS" has the meaning as defined in Section 3.1(c).

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

         "CONFIDENTIAL INFORMATION" means any and all of the following, but
only to the extent such information or documents were created, learned and/or
obtained during the Employment Period (defined below) and only to the extent
any such information, at the time of its disclosure as contemplated by Section
7 hereunder has been treated as confidential by Employer: (A) trade secrets
concerning the business and affairs of the Employer; (B) non-public 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, analysis, 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.

         "CONSULTING FEE" has the meaning as defined in Section 3.1(b).

         "CONSULTING PERIOD" has the meaning as defined in Section 2.3.

         "DISABILITY" has the meaning as defined in Section 6.2.

         "EFFECTIVE DATE" means October 1, 1998.

         "EMPLOYEE INVENTION" means any 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, the mortgage business as now
conducted or then being conducted by the Employer.



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         "EMPLOYMENT PERIOD" means the term of the Executive's employment under
this Agreement commencing on the Effective Date and ending on September 30,
2003.

         "EMPLOYER" means FirstCity Financial Mortgage Corporation.

         "EQUITY DISTRIBUTION" means the amounts available for distribution to
FirstCity Financial Corporation, as equity holder, from the net sales proceeds
of the sale of stock or all of the assets of the specified affiliate of
FirstCity Financial Corporation after payment of all amounts payable to
creditors of Employer, FirstCity Financial Corporation and/or the subsidiaries
of Employer and all other liabilities or debt of Employer (including, without
limitation, the Capital Note), and further reduced by the amount of any capital
contributions made by FirstCity Financial Corporation to the Employer or its
subsidiaries after September 30, 1998.

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

         "FOR CAUSE" has the meaning as defined in Section 6.3.

         "FOR GOOD REASON" has the meaning as defined in Section 6.4.

         "INITIAL PERIOD" has the meaning as defined in Section 2.3.

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

         "PROPRIETARY ITEMS" has the meaning as defined in Section 7.2(a)(iv).

         "SALARY" has the meaning as defined in Section 3.1(a).

         "SUCCESS/SALE BONUS" has the meaning as defined in Section 3.2.

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 five (5) years, beginning
on the Effective Date and ending on September 30, 2003.

         2.3 DUTIES. During the period beginning on the Effective Date and
ending on April 30, 2000 (the "Initial Period"), the Executive will devote a
substantial portion of his business time, attention, skill, and energy to the
business of the Employer, will use his best efforts to promote the success of
the Employer's business, and will cooperate with the Board of Directors in the
advancement of the best interests of the Employer. The Executive will have such
duties as are assigned or delegated to the Executive by the Board of Directors
which are generally those common to the position of Vice Chairman of a mortgage
company. During the period beginning on May 1,


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2000 and ending on September 30, 2003 (the "Consulting Period"), the Executive
shall assume the role of a consultant to Employer and will be available for
consultation to the Employer. During the Consulting Period, the Executive will
be available for consultation to the Employer and will continue to be subject
to the non-competition provisions of Section 8; it being the intent of the
Employer and the Executive that the Executive will have additional free time
available to him to pursue activities that are not in competition with the
business of the Employer or any of the subsidiaries or affiliates of the
Employer. During the Consulting Period, the Executive will only be entitled to
receive the Consulting Fee and Benefits. The Executive will be reimbursed for
reasonable travel and related expenses incurred in connection with such
consultation services. Consultant will not be entitled to receive the Salary
during the Consulting Period. Nothing in this Section 2.3, however, will
prevent the Executive from engaging in additional activities that are not
inconsistent with the Executive's duties under this Agreement.

3.       COMPENSATION

         3.1 BASIC COMPENSATION. Subject to the terms of this Agreement, the
Executive will receive compensation as set forth in subparts (a), (b), and (c)
of this Section 3.1.

         (a) SALARY. The Executive will be paid an annual salary of $300,000.00
         per year (or a pro-rata portion thereof during any period which is
         shorter than a full year), commencing October 1, 1998, and continuing
         during the Initial Period (the "Salary"). The Salary will be payable
         in equal periodic installments according to the Employer's customary
         payroll practices, but no less frequently than monthly.

         (b) CONSULTING FEE. The Executive will be paid an annual consulting
         fee of $600,000.00 per year (or a pro-rata portion thereof during any
         period which is shorter than a full year), commencing October 1, 1998,
         and continuing during the Employment Period (the "Consulting Fee").
         The Consulting Fee will be payable in equal periodic installments
         according to the Employer's customary payroll practices, but no less
         frequently than monthly. The Consulting Fee will be payable
         notwithstanding termination of this Agreement; provided, that the
         Executive is not in breach of Section 8 at the time the Consulting Fee
         is payable.

         (c) BENEFITS. The Executive will, during the Employment Period, be
         permitted to participate in the profit sharing, stock option,
         hospitalization, and major medical plans of the Employer that may be
         in effect from time to time, to the extent the Executive is eligible
         subject to the terms of those plans. In the event Executive is not
         eligible to participate in Employer's hospitalization and major
         medical plans, Employer will provide equivalent coverage to Executive
         at no cost to Executive. (All of the foregoing collectively referred
         to as "Benefits"). During the Initial Period the Executive will be
         entitled to receive life insurance benefits based upon his Salary. The
         Executive will not be entitled to receive life insurance benefits
         during the Consulting Period.

         3.2 SUCCESS/SALE BONUS. In addition to the Salary and Consulting Fee,
the Executive shall, provided he is employed pursuant to the terms of this
Agreement on the date that an event takes place which entitles the Executive to
a bonus under this Section 3.2, be entitled to a bonus (the "Success/Sale
Bonus") upon the earliest to occur of:



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         (a) a sale of all of the stock of the Employer or all of the stock of
         Harbor Financial Mortgage Corporation; or

         (b) a sale of substantially all of the assets or stock of New America
         Financial, Inc.

         Executive shall only be entitled to be paid for one Success/Sale Bonus
(i.e., in the event there is a sale of all of the stock of New America
Financial, Inc., or substantially all of its assets, the Executive will be paid
a Success/Sale Bonus and thereafter the Executive shall not be entitled to the
payment of a Success/Sale Bonus in the event of the subsequent sale of all of
the stock of Harbor Financial Mortgage Corporation or of the Employer). The
Success/Sale Bonus shall be an amount equal to 1.0% of the Equity Distribution
from the sale if the sale price is greater than $75,000,000.00 but less than
$100,000,000.00, 1.5% of the Equity Distribution from the sale if the price is
between $100,000,000.00 and $150,000,000.00, or 2% of the Equity Distribution
from the sale if the price is in excess of $150,000,000.00.

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,
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.

5.       INTENTIONALLY OMITTED

6.       TERMINATION

         6.1 EVENTS OF TERMINATION. During the Employment Period, the
Executive's Salary and the Success/Sale 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
         fifteen (15) days prior written notice from the Executive to the
         Employer and the failure of the Employer to cure the breach or
         reduction which constitutes Good Reason during such fifteen (15) day
         period. In the event Executive exercises his right to terminate the
         Agreement under this


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         subparagraph, all rights of the Employer under this Agreement,
         including those set forth in paragraphs 7 and 8 and all subparagraphs
         thereof, will terminate and will not be enforceable against Executive.

         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
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" shall have the meaning as determined under common law, and shall
include, without limitation: (A) the Executive's material breach of this
Agreement; (B) the Executive's failure to adhere to any written Employer policy
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 Executive's appropriation (or attempted appropriation) of a material
business opportunity of the Employer, including attempting to secure or
securing any personal profit in connection with any transaction entered into on
behalf of the Employer; (D) the Executive's misappropriation (or attempted
misappropriation) of any of the Employer's funds or property or commission of
any act of fraud or embezzlement by the Executive; (E) willful misconduct by
the Executive in the performance of his duties hereunder; (F) any breach by the
Executive of any fiduciary duty to the Employer; or (G) the Executive's
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 the Employer's material breach of this
Agreement.

         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. 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 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

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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.

         (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
         or by operation of law. Notwithstanding the termination of this
         Agreement, during any period that the Consulting Fee is payable
         Employer will provide hospitalization and major medical coverage for
         the Executive which is equivalent to that provided to other employees
         at no cost to Executive.

         (c) CONSULTING FEE. The Consulting Fee shall be payable
         notwithstanding termination of this Agreement; provided that the
         Executive is not in breach of Section 8 at any time that the
         Consulting Fee is payable. In the event that the Employer determines
         at any time that the Executive is in breach of Section 8, the Employer
         may discontinue payment of the Consulting Fee in addition to pursuing
         any other remedy available to Employer under this Agreement, by
         statute or under common law.

         (d) BONUS. The Success/Sale Bonus is only payable in the event that
         the Executive is actively employed by Employer on the date the
         Success/Sale Bonus is payable. Upon the termination of this Agreement,
         the Executive will not be entitled to any Success/Sale Bonus.

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) Employer has
required that the Executive make the covenants in this Section 7 as a condition
to entering into this Agreement; 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 the Employment Period and the Post-Employment
                  Period (as defined below), the Executive will hold in
                  confidence the Confidential Information and will


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                  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
                  can, nevertheless, be considered Confidential Information for
                  purposes of this Agreement. The Executive hereby waives any
                  requirement that 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.

                  (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 owned by the
                  Employer, 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 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 rights 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


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                  (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. In
the event any arbitration or court proceeding is instigated relating to this
Agreement, the parties to this Agreement agree to make good faith efforts to
preserve the secrecy of any Confidential Information.

8.       NON-COMPETITION

         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 international in scope and its products are marketed throughout
North America; (C) the Employer competes with other businesses that are or could
be located in any part of North America; (D) Employer has required that the
Executive make the covenants set forth in this Section 8 as a condition to
entering into this Agreement; 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 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 or activities compete in whole
         or in part with the products or activities of the Employer's mortgage
         business as conducted by Employer anywhere within North America where
         the Employer conducts or markets its business or products; provided,
         however, that the Executive may purchase or otherwise acquire up to
         (but not more than) five percent (5%) 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; or

         (b) whether for the Executive's own account or for the account of any
         other person, at any time during the 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, whether or not the Executive had personal contact with such
         person during and by reason of the Executive's employment with the
         Employer.

         For purposes of this Section 8 only, the term "Employer" means the
Employer and/or any of the Employer's 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


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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. The Buyer 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, 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 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 the Buyer, will not excuse the
Executive's breach of any covenant in Section 7 or 8 unless the Agreement is
terminated pursuant to paragraph 6.1(d) hereof.

         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
unless the Agreement is terminated pursuant to paragraph 6.1(d) hereof.

         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 do 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



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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 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.

         9.5 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
assigned.

         9.6 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 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:            FirstCity Financial Mortgage Corporation
                                    340 N. Sam Houston Pkwy., Suite 100
                                    Houston, Texas  77060
                                    Attention:  Board of Directors
                                    Facsimile No. 281-931-1771

         With a copy to:            FirstCity Financial Corporation
                                    P.O. Box 8216
                                    Waco, Texas  76714-8216
                                    Attention:  Rick R. Hagelstein
                                    Facsimile No. 254-751-1208

         If to the Executive:       Buddy L. Terrell
                                    3747 Cole Avenue, #139
                                    Dallas, Texas  75204



<PAGE>   11



         With a copy to:            Buddy L. Terrell
                                    P.O. Box 170
                                    Sointula, B.C.
                                    Canada  VON 3EO

         9.7 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes 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.

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

         9.9 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.

         9.10 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.

         9.11 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 which, when taken together, will be deemed to constitute
one and the same agreement.

         9.12 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors, permitted assigns, heirs and legal representatives.

         9.13 NO CONSTRUCTION AGAINST PREPARER. No provision of this Agreement
shall be construed against or interpreted to the disadvantage of any party by
any court or other governmental or judicial authority by reason of such party's
having or being deemed to have prepared or imposed such provision.

         9.14 COUNSEL. Each party hereto warrants and represents that each
party has been afforded the opportunity to be represented by counsel of its
choice in connection with the execution of this Agreement, and has had ample
opportunity to read, review, and understand the provisions of this Agreement.

         9.15 ATTORNEYS' FEES. In the event of any litigation between Employer
and the Executive arising under or in connection with this Agreement, the
prevailing party shall be entitled to recover from the other party the expenses
of litigation (including reasonable attorneys' fees, expenses and
disbursements) incurred by the prevailing party.



<PAGE>   12


         9.16 NON-WAIVER. Failure by any party to complain of any action,
non-action or breach of any other party shall not constitute a waiver of any
aggrieved party's rights hereunder. Waiver by any party of any right arising
from any breach of any other party shall not constitute a waiver of any other
right arising from a subsequent breach of the same obligation or for any other
default, past, present or future.

         9.17 TIME OF ESSENCE; DATES. Time is of the essence of this Agreement.
Anywhere a day certain is stated for payment or for performance of any
obligation, the day certain so stated enters into and becomes a part of the
consideration for this Agreement. If any date set forth in this Agreement shall
fall on, or any time period set forth in this Agreement shall expire on, a day
which is a Saturday, Sunday, federal or state holiday, or other non-business
day, such date shall automatically be extended to, and the expiration of such
time period shall automatically be extended to, the next day which is not a
Saturday, Sunday, federal or state holiday or other non-business day. The final
day of any time period under this Agreement or any deadline under this
Agreement shall be the specified day or date, and shall include the period of
time through and including such specified day or date.

         9.18 FACSIMILE AS WRITING. The parties expressly acknowledge and agree
that, notwithstanding any statutory or decisional law to the contrary, the
printed product of a facsimile transmittal shall be deemed to be "written" and
a "writing" for all purposes of this Agreement.

         9.19 ARBITRATION. The parties agree that any controversy or claim
arising out of or relating to this Agreement, the Executive's employment or
termination, including all statutory and common law claims (except for workers'
compensation and unemployment claims) will be settled exclusively by final and
binding arbitration. Arbitration will be governed by the Federal Arbitration
Act and administered by the Judicial Arbitration and Mediation Services Rules
for the Resolution of Employment Disputes (JAMS). The arbitrator is empowered
to award all appropriate remedies under Texas or federal law. The arbitrator
shall have exclusive authority to resolve any dispute relating to the validity,
interpretation, application and enforcement of this Agreement. Judgment on the
arbitrator's award may be enforced in any court with proper jurisdiction. Each
party will equally bear all costs and legal fees of arbitration, unless
otherwise required by law. The parties further agree that the arbitration will
occur in Dallas County, Texas.

         9.20 TERMINATION OF PRIOR AGREEMENTS. EMPLOYER AND EXECUTIVE
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT IS THE ONLY AGREEMENT RELATING TO THE
TERMS OF EMPLOYMENT, COMPENSATION, BONUSES, RIGHTS TO ANY PROFITS (OR INTEREST
THEREIN) OR ANY OTHER CLAIM TO PAYMENTS OF ANY KIND OF THE EXECUTIVE RELATING
TO THE EMPLOYER, NEW AMERICA FINANCIAL, INC., HARBOR FINANCIAL MORTGAGE
CORPORATION, OR ANY OF THEIR AFFILIATES OR SUBSIDIARIES COVERING THE EMPLOYMENT
PERIOD OR ANY PERIOD OF TIME PRIOR TO THE EFFECTIVE DATE. ANY AND ALL OTHER
AGREEMENTS BETWEEN THE PARTIES TO THIS AGREEMENT RELATING TO THE TERMS OF
EMPLOYMENT, COMPENSATION, BONUSES, RIGHTS TO ANY PROFITS (OR INTEREST THEREIN)
OR ANY OTHER CLAIM TO PAYMENTS OF ANY KIND (WHETHER DEFERRED OR OTHERWISE), OR
OTHER EMPLOYMENT MATTERS BETWEEN THE EXECUTIVE AND EMPLOYER, FIRSTCITY
FINANCIAL CORPORATION, OR ANY OF THEIR AFFILIATES OR SUBSIDIARIES ARE HEREBY
TERMINATED.


<PAGE>   13


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

                                   EMPLOYER:

                                   FIRSTCITY FINANCIAL MORTGAGE CORPORATION


                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------


                                   EXECUTIVE:


                                   -------------------------------------------
                                   BUDDY L. TERRELL