EMPLOYMENT AGREE. OF RONALD A. FREYBERG

Exhibit 10.4



EMPLOYMENT AGREEMENT


This Agreement made as of the 16th day of July, 1997, by and between
AMERICA FIRST COMPANIES LLC, a Delaware limited liability company with its
office at 399 Park Avenue, New York, New York 10022 (the "LLC"), and RONALD
FREYDBERG, residing at 59 Green Way Circle, Rye Brook, NY 10573 (the
"Employee") shall become effective July 1, 1997 (the "Effective Date").

W I T N E S S E T H:

WHEREAS, the LLC desires to employ the Employee and the Employee desires to
accept such employment with the LLC and represents that he is not restricted
from entering into and performing this Agreement, and the LLC and the Employee
desire to set forth in writing the terms and conditions under which the LLC
shall employ the Employee;

NOW, THEREFORE, the parties hereby covenant and agree as follows:

1. EMPLOYMENT.

(a) Effective as of the Effective Date hereof, the LLC hereby employs the
Employee as Senior Vice President of the mortgage division of the LLC to perform
such duties as are customarily performed by financial strategists of similarly
situated mortgage entities and such other duties as may be mutually agreed upon
between the Employee and the President of the Mortgage Division. The Employee
shall report directly to the President. It is anticipated by both the LLC and
the Employee that the LLC will form a Mortgage Real Estate Investment Trust
("the Mortgage REIT") which will be managed by an independent manager (the
"Manager") which will be majority owned by the LLC. The employer and the LLC
agree that if the Mortgage REIT and the Manager are successfully formed and
established then the Employee will become a Senior Vice President of the Manager
and all of the duties, obligations and benefits of the LLC set forth in this
Agreement shall be assigned to and assumed by to the Manager. All references to
the LLC shall apply to Manager as the context permits. If the Mortgage REIT and
the Manager are not successfully formed and established, then the LLC may either
(i) offer Employee a comparable position in New York City, New York with the
identical salary, bonus and other benefits described herein or (ii) subject to
the terms of Section 22 hereof, terminate this Agreement and pay to Employee
upon such termination all outstanding amounts due to Employee under Sections 4
and 5 of this Agreement.

2. SUBSTANTIALLY FULL TIME EMPLOYMENT.


(a) The Employee agrees to devote substantially all of his business time
and effort to the performance of his duties as such Senior Vice President of the
mortgage division of the LLC and in turn, the Manager.

(b) The Employee shall be permitted to (i) perform charitable activities,
(ii) deliver lectures and participate as a member of business and professional
panels and (iii) perform services as a member of the Board of Directors or Board
of Trustees or similar body of any for-profit or non-profit entity, provided
that such activities do not interfere with the ability of the Employee to
perform the services and discharge the responsibilities required of him under
this Agreement.

3. TERM.

Except in the case of earlier termination for Cause, as hereinafter
defined, this Agreement shall terminate on the first to occur of (i) the death
of the Employee, (ii) the expiration of a continuous period of one hundred and
eighty (180) days during which the Employee shall be Disabled, as hereinafter
defined, (iii) the expiration of thirty (30) days (or such shorter period as
shall be agreed upon between the Employee and the LLC, or the Manager as the
case may be) after the Employee shall have notified the LLC, or the Manager as
the case may be, of his intent to voluntarily terminate his employment
hereunder, (iv) the failure of the LLC to successfully establish the Mortgage
REIT and the Manager by December 31, 1997 (subject to provisions of Section 22
hereof) and (v) June 30, 2000. As used herein, the term "Disabled" shall mean
the inability of the Employee to perform his duties hereunder by reason of
medical, emotional, or mental injury, illness, disease or defect as determined
under the terms of the long-term disability insurance policy maintained by the
LLC under which the Employee is covered as in effect at the time of such
determination.

4. BASE COMPENSATION.

For the services rendered by the Employee as Senior Vice President of the
mortgage division of the LLC and in turn as Senior Vice President of the
Manager, the LLC or the Manager, as the case may be, agrees to pay the Employee
a base salary of One Hundred Thirty-two Thousand Five Hundred Dollars ($132,500)
per annum, payable in equal semi-monthly installments in accordance with the
standard payroll practices of the LLC. The Employee's base annual salary
payable pursuant to this Section 4 (including any increases therein approved by
the Compensation Committee and ratified by the Board pursuant to this Section)
is hereinafter referred to as "Employee's Base Compensation." The Board shall,
not less frequently than annually, review the Employee's Base Compensation and
may increase such compensation by such amounts as the Board deems proper.

5. BONUS.

For each calendar year during the term of this Agreement, except the year
ended December 31, 1997, the Employee shall be eligible to receive a bonus in
such amount as the Compensation Committee of the Board of the LLC, or, in turn
the Manager may determine in


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its discretion, based on the attainment of the LLC's or the Manager's business
goals for such calendar year as set forth in the LLC's or the Manager's business
plan for such calendar year. Such bonus, if any, shall be paid by the LLC or
the Manager to the Employee in a lump sum within sixty (60) days of the end of
the fiscal year to which it relates. Notwithstanding the above, the Employee is
hereby guaranteed a bonus of $100,000 for the first year of employment payable
on or before March 31, 1998. Notwithstanding the above, the amount of the bonus
granted to Employee by LLC in 1999 shall not be diminished or otherwise
correlated to the bonus granted by Employee by LLC in 1998.

6. OPTION TO PURCHASE EQUITY INTEREST IN MANAGER .

Employee will be awarded an option to purchase 3% of the issued and
outstanding equity interest of the Manager as of the date the contract between
the Manager and the Mortgage REIT becomes effective. Such option shall have a
term of ten (10) years and shall be exercisable by Employee upon vesting as set
forth below. The exercise price of such option will be equal to the original
capitalization price invested by the LLC in creating the Manager multiplied by
the applicable percentage equity interest in the Manager and shall be payable in
the same manner as the original capitalization price (i.e. cash, note, or other
form of payment). The right of the Employee to exercise such option will vest
as follows:


Percent of Option
DATE EXERCISABLE WHICH MAY BE EXERCISED

July 1, 1998 20%
July 1, 1999 40%
July 1, 2000 60%
July 1, 2001 80%
July 1, 2002 100%

Notwithstanding the foregoing, the entire amount of the option shall immediately
vest upon the occurrence of a Change of Control (as defined in Section 10(a)
hereof), the Employee's death or becoming Disabled (as defined in Section 3
hereof). In the case of Employee's death or disability, Employee's option
hereunder may be exercised by Employee's personal representative or guardian
within 180 days of the Employee's termination. If the Employee's employment is
terminated, for any reason (other than Change of Control, death or disability as
set forth in the previous sentences) prior to the vesting of any portion of his
option award, such nonvested portion shall be immediately forfeited except that
if Employee is terminated without cause the vesting schedule set forth above
shall be applied as if Employee had terminated on a date one year from the date
of termination and the Employee shall have thirty (30) days from the date of
termination to exercise the options thus vested. Appropriate and equitable
adjustment shall be made in the amount of the equity interest available to
Employee under this equity interest option and the exercise price thereof, and
in the amount of any equity interest which shall have been acquired upon the
exercise of such equity interest option, in the event of any changes in the
amount or value of outstanding equity interest in the Manager by reason of an
equity or


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extraordinary cash dividend, equity split, recapitalization, reorganization,
split up, spin-off, merger, consolidation, sale or exchange of assets,
combination or exchange of interests, offering of warrants or subscriptions
rights, or similar restructuring or distribution with respect to the equity
interests in the Manager.

7. STOCK OPTION.

Employee shall be eligible to participate in any stock option plan adopted
by the Mortgage REIT during his term of employment. Employee and the LLC agree
that Employee's participation in said stock option plan shall be subject to such
regulations and limitations as may be established by the Mortgage REIT stock
option plan as adopted by the Mortgage REIT Board of Directors. Employee's
level of participation shall be reasonably determined by the Board of Directors
of the Manager after the allocation of stock options has been made to the
Manager by the Mortgage REIT. It is understood by Employee that nothing
contained herein guarantees or grants him an award of stock options from the
Mortgage REIT.

8. EFFECT ON BENEFIT PLANS.

At all times during the term of this Agreement, the Employee shall be
eligible to participate in all executive compensation and employee benefit and
welfare plans or programs generally applicable to senior executives of the LLC.

9. VACATION.

(a) During each year the Employee is employed under this Agreement, the
Employee shall be entitled to five (5) weeks vacation in accordance with the
standard vacation practices and policies of the LLC, as the case may be.

10. CHANGE IN CONTROL.

(a) As used herein, a "Change in Control" shall mean any one or more of
the following:

(i) any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the LLC, the Mortgage REIT
or the Manager as the case may be, representing more than
thirty percent (30%) of the combined voting power of the
then outstanding securities of the LLC, the Mortgage REIT or
the Manager as the case may be; or

(ii) there has been a tender or exchange offer merger,
consolidation or equivalent combination involving the
Manager after either (a) which more than fifty percent (50%)
of the voting stock of the surviving entity is held

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by persons other than former stockholders of the LLC or the
Mortgage REIT or (b) persons who were directors of the
Manager before such event shall cease to constitute a
majority of the Board of Directors of the Manager or any
successor entity after such event;

(iii) there has been a sale or other disposition of all or
substantially all the assets of the Manager; or

(iv) the Mortgage REIT changes the Manager.


If an event constituting a "Change in Control" occurs, then Employee shall
be 100% vested in his equity interest options in accordance with the provisions
of Section 6.

11. TERMINATION FOR CAUSE.

The LLC or the Manager shall have the right at any time, by written notice
to the Employee, to terminate this Agreement and to discharge the Employee for
"Cause." As used herein, the term "Cause" shall mean that the Employee has
materially breached the terms of this Agreement by engaging in dishonest or
fraudulent actions in connection with the performance of his duties hereunder
which results in material economic injury to the business of the LLC or the
Manager. Notwithstanding the foregoing, the Employee shall not be deemed to
have been terminated for Cause without (i) reasonable prior written notice to
the Employee setting forth the reasons for the decision to terminate the
Employee for Cause, (ii) an opportunity for the Employee, together with his
counsel, to be heard by the Board of the LLC or, in turn, the Manager and
(iii) delivery to the Employee of a notice of termination approved by said Board
stating its good faith opinion that the Employee has engaged in actions or
conduct described in the preceding sentence, which notice specifies the
particulars of such action or conduct in reasonable detail; provided, however,
that the LLC or the Manager, as the case may be, may suspend the Employee until
such time as his appearance before the Board has been exercised so long as such
appearance is within two (2) weeks of the date of suspension.

12. VOLUNTARY TERMINATION.

Any termination of the employment of the Employee hereunder otherwise than
as a result of (i) termination by the LLC or the Manager in violation of the
terms of this Agreement, (ii) the Employee's death, (iii) the Employee's
becoming Disabled for a continuous period of one hundred and eighty (180) days
or (iv) the Employee's termination for Cause. A Voluntary Termination shall be
deemed to be effective immediately upon such termination.

13. CERTAIN EFFECTS OF TERMINATION OF EMPLOYMENT.

(a) Upon the termination of the Employee's employment hereunder pursuant
to a Voluntary Termination or a termination for Cause, neither the Employee nor
his estate or beneficiaries shall have any further rights or claims against the
LLC or, in turn, the Manager under this Agreement except to receive:


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(i) the unpaid portion of the Employee's Base Compensation
computed on a pro rata basis to the date of termination;

(ii) reimbursement for any reimbursable expenses for which the
Employee shall not have theretofore been reimbursed; and

(iii) any benefits provided under any plans maintained by the LLC
or, in turn, the Manager in which the Employee is a
participant which are generally provided to other
participants who have terminated employment under similar
circumstances.

(b) In addition to the rights granted to Employee pursuant to Section 6
hereof, upon the termination of the Employee's employment hereunder by reason of
Employee's becoming Disabled for a continuous period of 180 days, the LLC or the
Manager shall pay to the Employee or the Employee's personal representative or
custodian within ten (10) days of the date of the termination of the Employee's
employment hereunder, a lump sum cash payment equal to the amount of the
Employee's Base Compensation as in effect on the date of termination.

(c) Upon the termination of Employee's employment hereunder other than for
Cause, death, disability or Voluntary Termination, Employee shall receive the
then unpaid portion of the Employee's Base Compensation through June 30, 2000,
in accordance with the standard payroll practices of the LLC or the Manager, as
the case may be, together with any unpaid portion of his guaranteed bonus
payable on March 31 and June 30, 1998.

(d)(i) Upon the termination of the Employee's employment hereunder
pursuant to a termination for Cause, LLC shall be entitled, but not obligated,
to purchase from Employee any interest in the Manager purchased by Employee
pursuant to Section 6 of this Agreement for an amount equal to the book value of
such interests. Any unvested interest options granted to Employee by LLC
pursuant to Section 6 of this Agreement shall be terminated.

(ii) Upon the termination of the Employee's employment hereunder for any
other than for Cause, LLC shall be entitled, but not obligated, to purchase from
Employee any interest in the Manager purchased by Employee or his personal
representative pursuant to Section 6 of this Agreement for an amount equal to
the appraised fair market value of such interests.

(iii) For the purposes of this Section 13, the appraised fair market
value for such interests in Manager shall be determined in the following manner.
Employee and LLC shall attempt to agree upon an appraiser. If the parties agree
upon an appraiser, the appraiser so selected shall appraise the fair market
value of the applicable interests in Manager within 30 days after selection. If
the parties fail to so agree upon the selection of one such appraiser within
10 days after Employee's notice that he is entitled to such increased value of
such interests, Employee and LLC shall each designate, within 5 days from the
end of such 10-day period, one appraiser to determine such fair market value.
In the event either party fails to so select its own appraiser, the other party
may obtain court appointment of an appraiser. The two appraisers so

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selected shall attempt to agree upon such fair market value of the applicable
interests as at the date of said appraisal. In the event the two appraisers
fail to agree upon the fair market value of the applicable interests within
30 days, the two appraisers shall meet and select a third appraiser within
5 days after the expiration of such 30-day period. In the event the two
appraisers fail to so select a third appraiser, either party may obtain court
appointment of such third appraiser. Within 5 days after the third appraiser is
selected, the three appraisers so selected shall meet and attempt to agree upon
such fair market value of the applicable interests as at the date of said
appraisal. In the event the three appraisers fail to agree upon the fair market
value of the applicable interests within 5 days, the third appraiser shall
independently appraise the fair market value of the applicable interests, and
the arithmetic average of the three appraisals will be the fair market value of
the applicable interests. The parties shall equally split the cost of all
appraisals. The appraisers shall not discount the value of the Employee's
interest in the Manager merely because of the Employee's interest in the Manager
is that of a non-controlling minority interest holder or for lack of
marketability.

14. RESIGNATION AS BOARD MEMBER.

In any instance where the Employee ceases to be employed by the LLC or the
Manager, and if the Employee is then a member of the Board, the Employee hereby
agrees that, unless otherwise requested by the Board, he shall simultaneously
submit his resignation as a member of the Board in writing on or before the date
he ceases to be an employee of the LLC. If the Employee fails or neglects to
submit such resignation in writing, this Section 14 may be deemed by the LLC or
the Manager to constitute the Employee's written resignation as a member of the
Board effective on the same date that the Employee ceases to be an employee of
the LLC.

15. GOVERNING LAW.

This Agreement shall be governed by, construed and enforced in accordance
to the internal laws of the State of New York without reference to the
principles of conflicts of law thereof.

16. NOTICES.

All notices provided for or permitted to be given pursuant to this
Agreement must be in writing. All notices shall be personally delivered or sent
by registered or certified mail to the LLC, the Manager or the Employee at the
address set forth above or to such other address as the LLC, the Manager or the
Employee may notify the other in accordance with the provisions of this Section
16 and shall be effective upon receipt.

17. ENTIRE AGREEMENT.

This Agreement contains the sole and entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings between the Employee and the LLC with respect to the subject
matter hereof, whether written or oral. This Agreement cannot be amended,
modified or changed orally. To be effective any amendment,


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modification or change shall be in writing and signed on behalf of the LLC or
the Manager and by the Employee.

18. WAIVER, CONSENT TO BREACH.

In the event any term or condition contained in this Agreement should be
breached by any party and thereafter waived or consented to by the other party,
such waiver or consent shall be limited to the particular breach so waived or
consented to and shall not be deemed to constitute a waiver of or consent to any
other breach occurring prior or subsequent to the breach so waived or consented
to.

19. SEVERABILITY.

If any provision of this Agreement or the application thereof to any person
or circumstance shall be invalid or unenforceable to any extent, the remainder
of this Agreement and the application of such provisions to other persons or
circumstances shall not be affected thereby and the remaining provisions of this
Agreement shall be enforced to the fullest extent permitted by law.

20. BENEFIT.

This Agreement shall inure to the benefit of and be binding upon the LLC,
the Manager, the Employee and their successors, including, in the case of the
Employee, his executor, custodian and beneficiaries; provided, however, that (a)
the obligations of the Employee hereunder shall be personal obligations of the
Employee and may not be delegated or assigned, and (b) except for an assignment
by LLC to Manager, LLC may not assign this Agreement without Employee's prior
written consent.

21. NON-ALIENATION OF BENEFITS.

Except insofar as applicable law may otherwise require, no amount payable
to or in respect of the Employee at any time under this Agreement shall be
subject in any manner to alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any
attempt to so alienate, sell, transfer, assign, pledge, attach, charge or
otherwise encumber any such amount, whether presently or hereafter payable,
shall be void; provided, however, that nothing in this Section 20 shall preclude
the Employee from designating a beneficiary or beneficiaries to receive any
benefit hereunder on his death.

22. VOTE FAILURE.

Notwithstanding the above, if the LLC shall fail to establish the Mortgage
REIT on or before December 31, 1997 (the "Decision Date") or if it is
acknowledged by the LLC that it will be unable to establish the Mortgage REIT
then the LLC shall offer Employee another position within the LLC of equal
stature and compensation and if the LLC fails to do so then the Employee shall
be entitled to his Base Compensation and guaranteed bonus through June 30,



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1998 and the Employee may seek other full time employment. At the option of the
LLC the Decision Date may be extended by one month increments which shall
simultaneously extend the term of guaranteed payment provided by this Section 22
by a similar one month period, thus providing the Employee with guaranteed
payments of Base Compensation and, to the extent applicable, guaranteed bonus,
for at least six months after the Decision Date. The extensions may be for no
more than six months extending the Decision Date no later than June 30, 1998.

23. INDEMNIFICATION.

(a) The Manager shall indemnify the Employee to the fullest extent
permitted by New York law in effect as of the date hereof against all costs,
expenses, liabilities and losses (including, without limitation, attorneys'
fees, judgments, fines, penalties, ERISA excise taxes and amounts paid in
settlement) reasonably incurred by the Employee in connection with a Proceeding.
For purposes of this Section 23, a "Proceeding" shall mean any action, suit or
proceeding, whether civil, criminal, administrative or investigative, in which
the Employee is made, or threatened to be made, a party to, or a witness in,
such action, suit or proceeding by reason of the fact that he is or was an
officer, director or employee of the Manager, as the case may be, or is or was
serving as an officer, director, member, employee, trustee or agent of any other
entity at the request of the Manager.

(b) The Manager shall use its best efforts to obtain Directors and
Officers liability insurance, which shall provide insurance coverage to the
Employee at a reasonable cost to the Manager on the Mortgage REIT as the case
may be.

24. SURVIVORSHIP.

The respective rights and obligations of the parties hereunder shall
survive any termination of the Agreement to the extent necessary to the intended
preservation of such rights and obligations.

IN WITNESS WHEREOF, the LLC has caused this Agreement to be executed on its
behalf and the Employee has hereunto set his hand as of the day and year first
above written.


AMERICA FIRST COMPANIES LLC


By: /S/ MICHAEL THESING
-------------------------
Name: Michael Thesing
Title: Vice President


By: /S/ RONALD FREYDBERG
--------------------------
Name: Ronald Freydberg
Title:


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