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Tell your friend you're planning on leaving.
Make SOP manuals for successor.
If he fires the replacement you've been training and knows you're planning on leaving, you're not leaving him high and dry. He's just shooting himself in the face and it's not your issue.
Let your boss know you're looking for a new job. That's like sending a shot across the bow so he takes notice. Maybe at work you should apply for some jobs on the company's computer so he'll see it in the network logs, receive some phone calls from recruiters (make sure he's within earshot), etc. If he cares for you as much as you do him he'll find someone reputable to hire and help.
I'd be honest with your boss before he fires the new guy. Also think about whether there's a dollar amount that would make you stay because he may ask. I'd give as much notice as you can but ultimately you have to look after your own best interest.
I don't think I would tell my boss if I was in your situation. But I would start writing instructions on how to do things. If your boss does fire this other employee first, when you leave you can hand him a notebook with instructions on all your job duties.
Loyalty is a wonderful attribute, but it should never rule above your own personal well being and future.
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