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Exhibit 10.1    
    

FIRST AMENDED AND RESTATED

ADVISORY AGREEMENT  

        THIS FIRST AMENDED AND RESTATED ADVISORY AGREEMENT (this "Agreement") is entered into as of October 21,
2003, by and between AMERICA FIRST APARTMENT INVESTORS, INC., a Maryland corporation (the "Company"), and AMERICA FIRST
APARTMENT ADVISORY CORPORATION, a Maryland corporation (the "Advisor"). 

W
I T N E S S E T H: 

        WHEREAS,
the Company operates as a real estate investment trust (a "REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"); and 

        WHEREAS,
the Company, directly or through its Subsidiaries, invests in multifamily apartment complexes, mortgage-backed securities and other real estate related investments meeting the
investment criteria established from time to time by its Board of Directors; and 

        WHEREAS,
the Company retained the Advisor to manage the operations and investments of the Company and its Subsidiaries and to perform administrative services for the Company and its
Subsidiaries, each in the manner and on the terms set forth in the original Advisory Agreement between the Company and the Advisor, dated June 18, 2002 (the "Original Agreement"); and 

        WHEREAS,
the Company expects to invest in mortgage-backed securities and other types of real estate investments to a greater extent than it has in the past; and 

        WHEREAS,
as a result of the foregoing, the Company (acting with the concurrence of each of its Independent Directors) and the Advisor believe that it is necessary and appropriate to
amend and restate the terms of the Original Agreement as set forth in this Agreement which shall supercede the Original Agreement in its entirety; 

        NOW,
THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto agree as follows: 

        Section 1. Definitions.    Capitalized terms used herein shall have the respective meanings assigned them in this
Section 1: 

        (a)   "Affiliate" means, with respect to either party hereto, (i) any person who directly or indirectly controls or is
controlled by or is under common control with the specified party, (ii) any person who is (or has the power to designate) an officer of, general partner in or trustee of, or serves (or has the
power to designate a person to serve) in a similar capacity with respect to, the specified party, and (iii) any person who, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of the specified party. 

        (b)   "Agreement" means this First Amended and Restated Advisory Agreement between the Company and the Advisor, as amended from
time to time. 

        (c)   "Board of Directors" means the board of directors of the Company. 

        (d)   "Foreclosed Bonds" means any one or more of the tax-exempt housing bonds which were originally issued by
various state or local authorities to America First Tax Exempt Mortgage Fund 2 Limited Partnership (the predecessor to the Prior Partnership) in order to provide construction and permanent financing
for seven multifamily housing properties that the Prior Partnership acquired through foreclosure or deed in lieu of foreclosure. 

        (e)   "Funds From Operations" means the Company's net income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from debt restructuring and sales of properties, plus real estate related depreciation and amortization (excluding amortization of 

 

deferred
financing cost) and after comparable adjustments for an entity's portion of these items related to unconsolidated entities and joint ventures. 

        (f)    "GAAP" means accounting principles generally accepted in the United States of America. 

        (g)   "Governing Instruments" means the articles of incorporation and bylaws, in the case of a corporation, the limited
liability company agreement, in the case of a limited liability company and the partnership agreement, in the case of a partnership, as such instruments may be amended from time to time. 

        (h)   "Independent Directors" means those members of the Board of Directors who are neither executive officers of the Company
nor executive officers or directors of the Advisor and who otherwise qualify as independent directors under the rules of the stock exchange on which the common stock of the Company is listed. 

        (i)    "Investment Assets" means Real Estate Assets, Mezzanine Investments, Mortgage-backed Securities and other real estate
related investments meeting the investment criteria established from time to time by the Company's Board of Directors. 

        (j)    "MBS Gross Asset Value" means the value, in U.S. dollars of the Mortgage-backed Securities held by the Company determined
monthly on a marked-to-market basis. 

        (k)   "Mezzanine Investments" means investments in the form of subordinate mortgage loans, preferred equity or similar
arrangements consistent with the underwriting or acquisition criteria established by the Company from time to time made by the Company to unaffiliated owners of multifamily apartment properties. 

        (l)    "Mortgage-backed Securities" means mortgage-backed securities meeting the investment criteria established by the Company
from time to time which have been acquired by the Company. 

        (m)  "NAREIT Index Rate" means the composite dividend yield, expressed in terms of an annual percentage rate, as reported by
the National Association of Real Estate Investment Trusts for equity REITs which invest in residential apartment properties. 

        (n)   "Prior Partnership" means America First Apartment Investors, L.P., a Delaware limited partnership which merged with and
into the Company as of the date of this Agreement. 

        (o)   "Qualified REIT Subsidiary" means a corporation, 100% of the stock of which is held by the Company at all times during
the existence of the corporation, consistent with the definition of Qualified REIT Subsidiary in Section 856(i)(2) of the Code. 

        (p)   "Real Estate Assets" means multifamily apartment complexes and other real property meeting the investment criteria
established by the Company from time to time which is owned in fee, directly or indirectly, by the Company 

        (q)   "Subsidiary" shall mean any corporation, whether now existing or in the future established, of which the Company,
directly or indirectly, owns more than 50% of the outstanding voting securities of any class or classes, or any business trust, partnership or similar noncorporate form in which the Company, directly
or indirectly, owns more than 50% of the beneficial interests. 

        (r)   "Taxable REIT Subsidiary" means a corporation, the stock of which is held by the Company, consistent with the definition
of Taxable REIT Subsidiary in Section 856(l) of the Code. 

        Section 2. General Duties of the Advisor.    Subject to the supervision of the Board of Directors, the Advisor shall
provide services to the Company, and to the extent directed by the Board of Directors, shall provide similar services to any Subsidiary of the Company as follows: 

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        (a)   administer
the day-to-day operations of the Company and its Subsidiaries and perform or supervise the performance of such administrative
functions necessary in the management of the Company and its Subsidiaries as may be agreed upon by the Advisor and the Board of Directors, including, without limitation, collection of revenues and
payment of expenses, debts and obligations and maintenance of appropriate computer services to provide such administrative functions; 

        (b)   serve
as the Company's consultant with respect to formulation of investment criteria and preparation of policy guidelines by the Board of Directors; 

        (c)   act
as the authorized agent of the Company in connection with the identification, evaluation, purchase, financing, operation and disposition of Investment Assets and, as
such, the officers and designated employees of the Advisor will have the authority to execute documents in connection therewith on behalf of the Company; 

        (d)   furnish
reports and statistical and economic research to the Company regarding the investments, activities and results of operations of the Company and its Subsidiaries
and the services performed for the Company and its Subsidiaries by the Advisor; 

        (e)   monitor
and provide to the Board of Directors on an on-going basis information and other data regarding national and local real estate markets in which the
Company or its Subsidiaries maintain or expect to acquire Investment Assets; 

        (f)    communicate
on behalf of the Company with the holders of equity and debt securities of the Company as required to satisfy the continuous reporting and other requirements
of any governmental or regulatory bodies or agencies and maintain effective relations with such holders of the Company's securities; 

        (g)   to
the extent not otherwise subject to an agreement executed by the Company, designate one or more property managers for the Company's Real Estate Assets, which managers
may be Affiliates of the Advisor, and monitor and administer such managers; 

        (h)   counsel
the Company in connection with policy decisions to be made by the Board of Directors; 

        (i)    upon
request by, and in accordance with the directions of, the Board of Directors, invest or reinvest any money of the Company; 

        (j)    engage
in hedging activities on behalf of the Company or any of its Subsidiaries consistent with the Company's qualification as a REIT and any other directions of the
Board of Directors; 

        (k)   provide
the executive and administrative personnel and services required in rendering the foregoing services to the Company and its Subsidiaries; 

        (l)    supervise
compliance with REIT provisions of the Code and maintain exemption from the Investment Company Act of 1940, as amended; 

        (m)  qualify
and cause the Company to qualify to do business in all applicable jurisdictions; 

        (n)   cause
the Company to retain qualified legal counsel, independent public accountants, tax experts and other professionals; 

        (o)   comply
with and use its best efforts to cause the Company to comply with all applicable laws; and 

        (p)   as
approved and directed by the Board of Directors, perform such other services as may be required from time to time for management and other activities relating to the
assets of the 

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Company
and its Subsidiaries as the Advisor shall deem appropriate under the particular circumstances. 

        Section 3. Additional Activities of the Advisor.    Nothing herein shall prevent the Advisor or any of its Affiliates
from engaging in other businesses or from rendering services of any kind to any other person or entity, including investment in or advisory service to other entities investing in any type of real
estate investment, including investments which meet the principal investment objectives of the Company and its Subsidiaries. Directors, officers, employees and agents of the Advisor or its Affiliates
may serve as directors, officers, employees, agents, nominees or signatories for the Company or any of its Subsidiaries, to the extent permitted by the Company's Governing Instruments, or by any
resolutions duly adopted by the Board of Directors. When executing documents or otherwise acting in such capacities for the Company, such persons shall use their respective titles in the Company. 

        Section 4. Bank Accounts.    At the direction of the Board of Directors, the Advisor may establish and maintain one or
more bank accounts in the name of the Company or any of its Subsidiaries, and may collect and deposit funds into any such account or accounts, and disburse funds from any such account or accounts,
under such terms and conditions as the Board of Directors may approve; and the Advisor shall from time to time render appropriate accounting of such collections and payments to the Board of Directors
and, upon request, to the auditors of the Company or any of its Subsidiaries. 

        Section 5. Records; Confidentiality.    The Advisor shall maintain appropriate books of account and records relating to
services performed hereunder, and such books of account and records shall be accessible for inspection by representatives of the Company or any of its Subsidiaries at any time during normal business
hours. The Advisor shall keep confidential any and all information it obtains from time to time in connection with the services it renders under this Agreement and shall not disclose any portion
thereof to nonaffiliated third parties except with the prior written consent of the Company or any of its Subsidiaries. 

 Section 6. Obligations of the Advisor. 

        (a)   The
Advisor shall establish and maintain a committee consisting of persons who are qualified to evaluate investments in real estate and the financing thereof (the
"Investment Committee") which shall be responsible for the establishment of investment guidelines and criteria relating to the acquisition and disposition of Investment Assets on behalf of the
Company. All acquisitions and dispositions of Real Estate Assets and Mezzanine Investments by the Company must be reviewed and approved in advance by the Investment Committee. 

        (b)   The
Advisor shall require each seller or transferor of Real Estate Assets to the Company, and each property owner in which the Company makes a Mezzanine Investment, to
make such representations and warranties regarding such Real Estate Assets or the real estate or other assets securing such Mezzanine Investment, as may, in the judgment of the Advisor, be necessary
and appropriate. In addition, the Advisor shall take such other action as it deems necessary or appropriate with regard to the protection of the Company's Real Estate Assets and other Investment
Assets. 

        (c)   The
Advisor shall refrain from any action which, in its sole judgment made in good faith, would adversely affect the status of the Company as a REIT or, if applicable,
any of its Subsidiaries as either a Qualified REIT Subsidiary, Taxable REIT Subsidiary or a partnership for federal income tax purposes or which, in its sole judgment made in good faith, would violate
any law, rule or regulation of any governmental or regulatory body or agency having jurisdiction over the Company or any such Subsidiary or which would otherwise not be permitted by the Company's or
any such Subsidiary's Governing Instruments. If the Advisor is ordered to take any such action by the Board of Directors, the Advisor shall promptly notify the Board of Directors of the 

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Advisor's
judgment that such action would adversely affect the status of the Company or any of its Subsidiaries under the Code or violate any such law, rule or regulation or the Governing Instruments.
Notwithstanding the foregoing, the Advisor, its directors, officers, stockholders and employees shall not be liable to the Company, any Subsidiary of the Company, the Independent Directors or the
Company's or any Subsidiary's stockholders for any act or omission by the Advisor, its directors, officers, stockholders or employees except as provided in Section 10 of this Agreement. 

        Section 7. Compensation of the Advisor.    The Company shall pay to the Advisor, for ongoing advisory services rendered
under this Agreement: 

        (a)   an
Administrative Fee in an amount equal to 

        (i)    0.60%
per annum of the first $250,000,000 of the sum of (A) the original principal amount of the Foreclosed Bonds (even if such Foreclosed Bonds are subsequently
reissued in different principal amounts), (B) the gross purchase price of any other Real Estate Assets acquired by the Company or its predecessors, and (C) the aggregate outstanding
principal balance of the Mezzanine Investments on the payment date for the Administrative Fee; and 

        (ii)   0.50%
per annum of such sum in excess of $250,000,000; provided that the Administrative Fee will be 0.60% of such sum in excess of $250,000,000 with respect to any
calendar year for which the Funds From Operations exceeds an amount equal to $1.60 times the average number of shares of the Company's common stock issued and outstanding during such calendar year
(adjusted appropriately for stock splits, reverse stock splits and similar transactions). 

Such
Administrative Fee will be payable in arrears on a monthly basis, except that if the Administrative Fee payable as provided in clause (ii) above shall be increased from 0.50% to 0.60% for
a particular calendar year, then the additional amount will be payable in a single payment which shall be due on the date that the Company receives the final audit report from its independent
accountants on the financial statements relating to such calendar year. 

        (b)   An
MBS Administrative Fee at an annual rate equal to 0.25% of the MBS Gross Asset Value. The MBS Administrative Fee will accrue daily and be payable monthly in arrears. 

        (c)   An
MBS Incentive Fee equal to 20% of the amount by which (i)(A) the total revenues realized by the Company from its Mortgage-backed Securities during each calendar month
less (B) the total interest payments made by the Company during such calendar month on borrowings incurred to finance the acquisition of Mortgage-backed Securities exceeds (ii)(A) the average
dollar amount of the Company's shareholders' equity invested in Mortgage-backed Securities during such month times (B) the then current NAREIT Index Rate on the payment date for the MBS
Incentive Fee. The MBS Incentive Fee will be payable in arrears on a monthly basis. 

        (d)   a
Property Acquisition Fee in connection with the identification, evaluation and acquisition of (i) Real Estate Assets (other than the multifamily properties that
had originally been financed by the Foreclosed Bonds) and the financing thereof, including through the reissuance of Foreclosed Bonds, and (ii) the underwriting and making of Mezzanine
Investments, which shall be in an amount equal to 1.25% of the gross purchase price paid by the Company for such additional Real Estate Assets or the original principal amount of such Mezzanine
Investments. The Property Acquisition Fee with respect to an acquisition of a Real Estate Asset or making of a Mezzanine Investment will be payable at the time of the closing of the acquisition of
such Real Estate Asset or making of such Mezzanine Investment by the Company. 

        (e)   The
Company may pay an Affiliate of the Advisor a reasonable property management fee in connection with the management of the Company's Real Estate Assets. The property 

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management
fee paid with respect to any Real Estate Asset may not exceed the fees that would be charged for such management services by independent parties in the same geographic location. 

        (f)    If
loans are made to the Company by an Affiliate of the Advisor, the maximum amount of interest that may be charged by such Affiliate shall be the lesser of the interest
rate (i) which would be charged by an unaffiliated lender to the Company or (ii) which the Advisor or its Affiliates paid to obtain the funds to make the loan to the Company. 

 Section 8. Reimbursement of Expenses Incurred by the Advisor.  

        (a)   The
Company will reimburse the Advisor and its Affiliates on a monthly basis for the actual out-of-pocket costs of direct telephone and travel
expenses incurred by them on Company business, direct out-of-pocket fees, expenses and charges paid by them to third parties for rendering legal, auditing, accounting,
bookkeeping, computer, printing and public relations services, expenses of preparing and distributing reports to the Company's stockholders, an allocable portion of the salaries and fringe benefits of
the employees of the Advisor or its Affiliates (including the officers of the Advisor except as set forth in paragraph (c) below), insurance premiums (including premiums for liability insurance
which will cover the Company, the Advisor and their respective Affiliates), the cost of compliance with all state and federal regulatory requirements, any stock exchange or NASDAQ listing fees for the
Company's securities, and charges and other payments to third parties for services rendered to the Company. 

        (b)   Expenses
incurred by the Advisor on behalf of the Company shall be reimbursed monthly to the Advisor within 30 days after the end of each month. The Advisor shall
prepare a statement documenting the expenses incurred by the Advisor on behalf of the Company during each month, and shall deliver such statement to the Company within 15 days after the end of
each month. 

        (c)   The
Company will not reimburse the Advisor or its Affiliates for any items of general overhead, including, but not limited to, rent, utilities or the use of computers,
office equipment or other capital items owned by the Advisor or its Affiliates. In addition, the Company will not reimburse the Advisor or its Affiliates for the salaries, fringe benefits or travel
expenses of the officers of the Advisor who are also executive officers of America First Companies L.L.C., the principal owner of the Advisor or for any compensation paid to the Board of Managers of
America First Companies L.L.C. 

        (d)   If,
as a result of a review by the Company's independent accountants of expense reimbursement paid to the Advisor under this Section 8, an adjustment thereto is
recommended by such independent accounts, then the Advisor shall credit any excess reimbursement against any future reimbursements to be paid under this Section 8 or, if such excess
reimbursement is made after the termination of this Agreement, refund such excess reimbursement to the Company. 

        (e)   The
Company and its Subsidiaries shall be responsible for the payment of all of their own expenses. 

        Section 9. Monitoring Services.    The Advisor will monitor the management of the Company's Real Estate Assets. Such
monitoring will include, but not be limited to, the following activities: serving as the Company's consultant with respect to the on-site management of Real Estate Assets; performing
periodic on-site inspections of Real Estate Assets, review and approval of annual operating budgets for Real Estate Assets, review and approval of capital improvements for Real Estate
Assets, collection of information and submission of reports pertaining to the Real Estate Assets and to moneys remitted to the Advisor or the Company by property managers; periodic review and
evaluation of the performance of each Real Estate Asset; acting as a liaison between property managers and the Company and working with property managers to the extent necessary to improve their
performance; review of and recommendations as to placement of insurance coverage, handling of insurable losses, easement 

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problems
and condemnation, delinquency and foreclosure procedures with regard to the Real Estate Assets; and review of property manager's reports on the Real Estate Assets. The Advisor may enter into
subcontracts with other parties, including its Affiliates, to provide any such services for the Advisor. The Advisor will perform similar services with respect to real properties securing Mezzanine
Investments to the extent requested by the Company. 

 Section 10. Limits of Advisor Responsibility. 

        (a)   The
Advisor assumes no responsibility under this Agreement other than to render the services called for hereunder in good faith and shall not be responsible for any
action of the Board of Directors in following or declining to follow any advice or recommendations of the Advisor, including as set forth in Section 6(c) of this Agreement. The Advisor and its
directors, officers, stockholders and employees will not be liable to the Company, any of its Subsidiaries, the Independent Directors or the stockholders of the Company or its Subsidiaries for any
acts or omissions by the Advisor, its directors, officers, stockholders or employees under or in connection with this Agreement, except by reason of acts or omissions constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties. The Company or its Subsidiaries shall reimburse, indemnify and hold harmless the Advisor and
its stockholders, directors, officers and employees from and against any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including, without
limitation, reasonable attorneys' fees) in respect of or arising from any acts or omissions of the Advisor or its stockholders, directors, officers and employees made in good faith in the performance
of the Advisor's duties under this Agreement and not constituting bad faith, willful misconduct, gross negligence or reckless disregard of its duties. 

        (b)   The
Advisor shall reimburse, indemnify and hold harmless the Company, any of its Subsidiaries, or any of their stockholders, directors, officers and employees from any
and all expenses, losses, damages, liabilities, demands, charges and claims (including, without limitation, reasonable attorneys' fees) arising out of any intentional misstatements of fact made by the
Advisor in connection with this Agreement and the services to be rendered hereunder. 

        Section 11. Relationship of the Parties.    The Advisor shall for all purposes be an independent contractor with respect
to the Company and the services provided to the Company hereunder. The Company and the Advisor are not partners or joint venturers with each other and nothing herein shall be construed to make them
partners or joint venturers or impose any liability as such on either of them. 

        Section 12. Term.    This Agreement shall commence on the date hereof shall continue in force through December 31,
2006, which is a period of five years from the effective date of the Original Agreement. This Agreement will be automatically extended for additional one-year terms unless either the
Company or the Advisor elects not to renew this Agreement and notifies the other party in writing thereof not less than 60 days prior to the end of the term of this Agreement or any extension
thereof. Any decision by the Company not to renew this Agreement shall be made by a majority of the Independent Directors of the Company. 

        Section 13. Termination by the Company for Cause.    At the option of the Company, this Agreement or any extension hereof
shall be and become terminated upon 60 days' written notice of termination from the Board of Directors to the Advisor if any of the following events shall occur: 

        (a)   if
the Advisor shall materially breach any provision of this Agreement and, after notice of such breach, shall not cure such breach within 30 days; or 

        (b)   there
is entered an order for relief or similar decree or order with respect to the Advisor by a court having competent jurisdiction in an involuntary case under the
federal bankruptcy laws 

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as
now or hereafter constituted or under any applicable federal or state bankruptcy, insolvency or other similar laws; or the Advisor (i) ceases or admits in writing its inability to pay its
debts as they become due and payable, or makes a general assignment for the benefit of, or enters into any composition or arrangement with, creditors, (ii) applies for or consents (by admission
of material allegations of a petition or otherwise) to the appointment of a receiver, trustee, assignee, custodian, liquidator or sequestrator (or other similar official) for itself or for any
substantial part of its assets or authorizes such an application or consent, (iii) authorizes or files a voluntary petition in bankruptcy, or applies for or consents (by admission of material
allegations of a petition or otherwise) to the application of any bankruptcy, reorganization, arrangement, readjustment of debt, insolvency, dissolution, liquidation or other similar law of any
jurisdiction, or authorizes such application or consent, or (iv) permits or suffers all or any substantial part of its assets to be sequestered or attached by court order and the order remains
undismissed for 30 days; or proceedings seeking the appointment of a receiver, trustee, assignee, custodian, liquidator or sequestrator (or other similar official) for the Advisor or for any
substantial part of its assets are commenced without authorization, consent or application against the Advisor and continue undismissed for 30 days; or proceedings to sequester or attach all or
any substantial part of the Advisor's assets are instituted against the Advisor without authorization, consent and application and are approved as properly instituted and remain undismissed for
30 days or result in adjudication of bankruptcy or insolvency. 

If
any of the events specified in this Section 13 shall occur, the Advisor shall give prompt written notice thereof to the Board of Directors upon the happening of such event. 

        Section 14. Termination Without Cause.    Either party may terminate this Agreement without cause upon 60 days'
prior written notice by, (i) in the case of termination by the Company, a majority vote of the Independent Directors or by a vote of the holders of a majority of the outstanding shares of the
Company's common stock, and (ii) in the case of termination by the Advisor, by a majority vote of the Board of Directors of the Advisor. In the event this Agreement is terminated by the Company
without cause, or in the event this Agreement is not renewed by the Company without cause, the Company, in addition to its obligations under Section 16, shall pay the Advisor a termination or
nonrenewal fee equal to the appraised present value of the amount of Administrative Fees that would have been earned under this Agreement through December 31, 2016. In making this calculation,
the appraiser shall give due consideration to the record of the growth in the Company's Investment Assets through the date of termination or non-renewal. Such appraisal shall be conducted
by an independent nationally-recognized appraisal firm mutually agreed upon by the Independent Directors (on behalf of the Company) and the Advisor and the costs of such appraisal shall be borne
equally by the parties. If the parties are unable to agree upon such appraisal firm within 30 days following notice of termination or, in the event of nonrenewal, the termination date, then the
Independent Directors (on behalf of the Company) and the Advisor shall as soon as reasonably practicable, but in no event more than 45 days following notice of termination or, in the event of
nonrenewal, the termination date, each choose a nationally-recognized independent appraisal firm to conduct an appraisal. In such event, (i) the termination fee shall be deemed to be the
average of the appraisals as conducted by each party' s chosen appraiser and (ii) each party shall pay the costs of its appraiser so chosen. Any appraisal
conducted hereunder shall be performed no later than 45 days following selection of the appraiser or appraisers. 

 Section 15. Assignments. 

        (a)   Except
as set forth in Section 15(b) of this Agreement, this Agreement shall terminate automatically in the event of its assignment, in whole or in part, by the
Advisor, unless such assignment is consented to in writing by the Company with the approval of a majority of the Independent Directors. Any such assignment shall bind the assignee hereunder in the
same 

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manner
as the Advisor is bound. In addition, the assignee shall execute and deliver to the Company a joinder agreement to this Agreement naming such assignee as Advisor. This Agreement shall not be
assigned by the Company without the prior written consent of the Advisor, except in the case of assignment by the Company to a REIT or other organization which is a successor (by merger, consolidation
or purchase of assets) to the Company, in which case such successor organization shall be bound hereunder and by the terms of such assignment in the same manner as the Company is bound hereunder. 

        (b)   Notwithstanding
any provision of this Agreement, the Advisor may subcontract and assign any or all of its responsibilities as provided under Section 9 of this
Agreement, and the Company hereby consents to any such assignment and subcontracting. 

        Section 16. Action Upon Termination.    From and after the effective date of termination of this Agreement, pursuant to
Sections 13, 14 or 15 of this Agreement, the Advisor shall not be entitled to compensation for further services hereunder, but shall be paid all compensation accruing to the date of termination. Upon
such termination, the Advisor shall forthwith: 

        (a)   after
deducting any accrued compensation and reimbursement for its expenses to which it is then entitled, pay over to the Company or any of its Subsidiaries all money
collected and held for the account of the Company or any of its Subsidiaries pursuant to this Agreement; 

        (b)   deliver
to the Board of Directors a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the
period following the date of the last accounting furnished to the Board of Directors with respect to the Company or any of its Subsidiaries; and 

        (c)   deliver
to the Board of Directors all property and documents of the Company or any of its Subsidiaries then in the custody of the Advisor. 

        Section 17. Release of Money or Other Property Upon Written Request.    The Advisor agrees that any money or other
property of the Company or any of its Subsidiaries held by the Advisor under this Agreement shall be held by the Advisor as custodian for the Company or any such Subsidiary, and the Advisor's records
shall be appropriately marked clearly to reflect the ownership of such money or other property by the Company or any such Subsidiary. Upon the receipt by the Advisor of a written request signed by a
duly authorized officer of the Company requesting the Advisor to release to the Company or any of its Subsidiaries any money or other property then held by the Advisor for the account of the Company
or any of its Subsidiaries under this Agreement, the Advisor shall release such money or other property to the Company or any of its Subsidiaries within a reasonable period of time, but in no event
later than 60 days following such request. The Advisor shall not be liable to the Company, any Subsidiary of the Company, or any of their respective officers, directors, stockholders, employees
or agents for any acts performed or omissions to act by the Company or any of its Subsidiaries in connection with the money or other property released to the Company or any of its Subsidiaries in
accordance with this Section 17. The Company and any of its Subsidiaries shall indemnify the Advisor, its directors, officers, stockholders and employees against any and all expenses, losses,
damages, liabilities, demands, charges and claims of any nature whatsoever, which arise in connection with the Advisor's release of such money or other property to the Company or any of its
Subsidiaries in accordance with the terms of this Section 17. Indemnification pursuant to this provision shall be in addition to any right of the Advisor to indemnification under
Section 10 of this Agreement. 

 Section 18. Representations and Warranties. 

        (a)   The
Company hereby represents and warrants to the Advisor as follows: 

        (i)    The
Company is duly incorporated, validly existing and in good standing under the laws of Maryland, has full corporate power and authority to own its assets and to
transact the 

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business
in which it is now engaged and is duly qualified or registered as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification or registration, except where the failure to be so qualified or registered would not in the aggregate have a material adverse effect on the
business, operations, assets or financial condition of the Company and its Subsidiaries, taken as a whole. The Company does not do business under any fictitious business name. 

        (ii)   The
Company has the corporate power and authority to execute, deliver and perform this Agreement and all obligations required hereunder and has taken all necessary
corporate action to authorize this Agreement on the terms and conditions hereof and the execution, delivery and performance of this Agreement and all obligations required hereunder. No consent of any
other person including, without limitation, stockholders and creditors of the Company, and no license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing
or declaration with, any governmental or regulatory authority or agency is required by the Company in connection with this Agreement or the execution, delivery, performance, validity or enforceability
of this Agreement and all obligations required hereunder. This Agreement has been, and each instrument or document required hereunder will be, executed and delivered by a duly authorized officer of
the Company, and this Agreement constitutes, and each instrument or document required hereunder when executed and delivered hereunder will constitute, the legally valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium or similar laws now or hereafter in effect
relating to the rights and remedies of creditors generally, and general principles of equity. 

        (iii)  The
execution, delivery and performance of this Agreement, and the documents or instruments required hereunder, will not violate any provision of any existing law or
regulation binding on the Company, or any order, judgment, award or decree of any court, arbitrator or governmental or regulatory authority or agency binding on the Company, or the Governing
Instruments of, or any securities issued by, the Company or any of its subsidiaries, or any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which the Company or
any of its Subsidiaries is a party or by which the Company, any Subsidiary of the Company or any of their assets may be bound, the violation of which would have a material adverse effect on the
business operations, assets or financial condition of the Company and its Subsidiaries, taken as a whole, and will not result in, or require, the creation or imposition of any lien on any of their
property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking. 

        (b)   The
Advisor hereby represents and warrants to the Company as follows: 

        (i)    The
Advisor is duly incorporated, validly existing and in good standing under the laws of Maryland, has full corporate power and authority to own its assets and to
transact the business in which it is now engaged and is duly qualified or registered to do business and is in good standing under the laws of each jurisdiction where its ownership or lease of property
or the conduct of its business requires such qualification or registration, except where the failure to be so qualified or registered would not in the aggregate have a material adverse effect on the
business, operations, assets or financial condition of the Advisor and its Subsidiaries, taken as a whole. The Advisor does not do business under any fictitious business name. 

        (ii)   The
Advisor has the corporate power and authority to execute, deliver and perform this Agreement and all obligations required hereunder and has taken all necessary
corporate 

10

 

action
to authorize this Agreement on the terms and conditions hereof and the execution, delivery and performance of this Agreement and all obligations required hereunder. No consent of any other
person including, without limitation, stockholders and creditors of the Advisor, and no license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental or regulatory authority or agency is required by the Advisor in connection with this Agreement or the execution, delivery, performance, validity or enforceability of
this Agreement and all obligations required hereunder. This Agreement has been and each instrument or document required hereunder will be executed and delivered by a duly authorized agent of the
Advisor, and this Agreement constitutes, and each instrument or document required hereunder when executed and delivered hereunder will constitute, the legally valid and binding obligation of the
Advisor enforceable against the Advisor in accordance with its terms. 

        (iii)  The
execution, delivery and performance of this Agreement, and the documents or instruments required hereunder, will not violate any provision of any existing law or
regulation binding on the Advisor, or any order, judgment, award or decree of any court, arbitrator, or governmental or regulatory authority or agency binding on the Advisor, or the Governing
Instruments of, or any securities issued by, the Advisor or any of its Subsidiaries, or any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which the Advisor or
any of its Subsidiaries is a party or by which the Advisor or any Subsidiary of the Advisor or any of its assets may be bound, the violation of which would have a material adverse effect on the
business operations, assets or financial condition of the Advisor and its Subsidiaries, taken as a whole, and will not result in, or require, the creation or imposition of any lien on any of their
property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking. 

        Section 19. Notices.    Unless expressly provided otherwise herein, all notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered or upon actual receipt of registered or
certified mail, postage prepaid, return receipt requested. The parties may deliver to each other notice by electronically transmitted facsimile copies provided that such facsimile notice is followed
within 24 hours by any type of notice otherwise provided for in this paragraph. Any notice shall be duly addressed to the parties as follows: 

	(a)	 	If to the Company:	 	1004 Farnam Street

Omaha, Nebraska 68102

Attention: Lisa Y. Roskens

Telephone: (402) 444-1630
	

(b)	
 	

If to the Advisor:	
 	

1004 Farnam Street

Omaha, Nebraska 68102

Attention: Lisa Y. Roskens

Telephone: (402) 444-1630
	

In each case with a copy given

in the manner prescribed above, to:	
 	

Kutak Rock LLP

1650 Farnam Street

Omaha, Nebraska 68102

Attention: Steven P. Amen

Telephone: (402) 346-6000

Either
party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 19 for the
giving of notice. 

11

 

        Section 20. Binding Nature of Agreement; Successors and Assigns.    This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns as provided herein. 

        Section 21. Entire Agreement; Amendment.    This Agreement contains the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements (including the Original Agreement), understandings, inducements and conditions,
express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing. 

        Section 22. Controlling Law.    This Agreement and all questions relating to its validity, interpretation, performance
and enforcement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of Nebraska, notwithstanding any Nebraska provisions relating to conflicts of law
to the contrary. 

        Section 23. No Waiver.    Neither the failure nor any delay on the part of a party to exercise any right, remedy, power
or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. 

        Section 24. Titles Not To Affect Interpretation.    The titles of paragraphs and subparagraphs contained in this
Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof. 

        Section 25. Execution in Counterparts.    This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. 

        Section 26. Severability of Provisions.    The provisions of this Agreement are independent of and separable from each
other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in
part. 

        Section 27. Interpretation.    Words used herein, regardless of the number and gender specifically used, shall be deemed
and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. 

12

 

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

	 	 	AMERICA FIRST APARTMENT INVESTORS, INC., a Maryland corporation, as Company
	

 	
 	

By:	

/s/  JOHN H. CASSIDY      

	 	 	Name	John H. Cassidy

	 	 	Title	President and Chief Executive Officer

	

 	
 	

AMERICA FIRST APARTMENT ADVISORY CORPORATION, a Maryland corporation, as Advisor
	

 	
 	

By:	

/s/  JOHN H. CASSIDY      

	 	 	Name	John H. Cassidy

	 	 	Title	President and Chief Executive Officer

13

QuickLinks

Exhibit 10.1EXHIBIT 4.2.67
                                                                  --------------

                       NOTE AND WARRANT PURCHASE AGREEMENT

            This Note and Warrant Purchase Agreement, dated as of November 24,
2003 (the "Agreement"), is entered into by and among Salon Media Group, Inc., a
Delaware corporation (the "Company"), and each of the undersigned purchasers
(collectively the "Purchasers" and individually a "Purchaser") listed on the
Schedule of Purchasers attached hereto as Exhibit A.

                                     RECITAL

            On the terms and subject to the conditions set forth herein, the
Purchasers are willing to purchase from the Company and the Company is willing
to sell to the Purchasers, Convertible Promissory Notes (individually a "Note",
and collectively, the "Notes") and warrants to purchase common stock
(individually, a "Warrant", and collectively, the "Warrants") to be issued by
the Company in the principal amounts and for the number of shares, respectively,
set forth opposite each Purchaser's name on the Schedule of Purchasers.

                                    AGREEMENT

            NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:

     1. Notes and Warrants.

     (a) Issuance of Notes and Warrants. In reliance upon the representations,
warranties and covenants of the parties set forth herein, the Company agrees to
issue, sell and deliver to the Purchasers, and the Purchasers agree to purchase
from the Company, the Notes and Warrants. The purchase price for the Notes and
Warrants shall be payable in immediately available funds.

     (b) Terms of the Notes and Warrants. The terms and conditions of the Notes
and Warrants are set forth in the forms of Note and Warrant attached hereto as
Exhibit C and Exhibit D, respectively. Capitalized terms not otherwise defined
herein shall have the meaning set forth in Exhibit C or Exhibit D.

     (c) Delivery. The Company will deliver to each Purchaser a Note and Warrant
to be purchased by such Purchaser against receipt by the Company of the purchase
price for such Note.

     2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser that:

     (a) Organization and Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to carry on its businesses
as now conducted and as proposed to be conducted.

<PAGE>

     (b) Corporate Power. The Company has all requisite corporate power
necessary for the authorization, execution and delivery of this Agreement, and
the Warrants, to sell and issue the Notes hereunder, to carry out and perform
all of its obligations under the terms of this Agreement, and to carry on its
business as presently conducted and as presently proposed to be conducted, and
such other agreements and instruments. Each of the Agreement, the Notes and the
Warrants is a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, moratorium, and other laws of general application affecting the
enforcement of creditors' rights.

     (c) Capitalization. As of November 15, 2003, the authorized capital stock
of the Company is Fifty million (50,000,000) shares of Common Stock and Five
million (5,000,000) shares of Preferred Stock, and there are issued and
outstanding (i) 14,155,276 shares of the Common Stock, (ii) 809 shares of Series
A Preferred Stock, (iii) 125 shares of Series B Preferred Stock (iv) warrants to
purchase an aggregate of 17,902,954 shares of Common Stock, (v) options to
purchase an aggregate of 4,981,289 shares of Common Stock granted to employees
pursuant to the Company's 1995 Stock Option Plan, and (vi) an aggregate of
16,125,960 shares of Common Stock reserved for issuance upon conversion of the
Series A Preferred Stock and Series B Preferred Stock. The 16,125,960 shares of
Common Stock reserved for issuance upon conversion of the Series A Preferred
Stock and Series B Preferred Stock may increase according to anti-dilution
provisions to approximately 38,000,000 common shares on an "as converted" basis
should a Series C and D Preferred Round of approximately $4 million close with a
conversion ratio equaling $0.04 per common share. Bridge financing in the gross
amount of $3,777,044 has been received designated for conversion to Series C
Preferred Stock, and may represent approximately 94 million shares of common
stock, on an "as converted" basis. All such issued and outstanding shares have
been duly authorized and validly issued, are fully paid and nonassessable, and
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. From the period between October 31, 2003 and the
date hereof, the Company has not issued any shares of capital stock, nor granted
any warrants or options to purchase shares of Common Stock.

     (d) Authorization.

            (i) Corporate Action. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the sale and
issuance of the Notes and the authorization, execution and performance of the
Company's obligations hereunder and under the Warrants has been taken.

            (ii) Valid issuance. The Notes, the Warrants, and any shares of
common or preferred stock issued upon conversion or exercise of the Notes or
Warrants (the "Conversion Securities"), when issued in compliance with the
provisions of this Agreement will be validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions under the Warrants and under applicable federal and state
securities laws.

     (e) No Preemptive Rights. No person has any right of first refusal or any
preemptive rights in connection with the issuance of the Notes, the Warrants or
Conversion Securities or any future issuances of securities by the Company.

<PAGE>

     (f) Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Agreement, the Notes or the Warrants by
the Company, and the issuance and sale of the Conversion Securities, will not
result in any violation of the Certificate of Incorporation or Bylaws of the
Company or in any violation of or default in any material respect under the
terms of any mortgage, indenture, contract, agreement, instrument, judgment or
decree.

     (g) Offering. In reliance on the representations and warranties of the
Purchaser in Section 3 hereof, the offer, sale and issuance of the Notes and the
Warrants in conformity with the terms of this Agreement, the Notes and the
Warrants will not result in a violation of the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities laws, including the
qualification or registration requirements of applicable blue sky laws.

     (h) Company Reports; Disclosure.

            (i) Company Reports. For the purposes of this Agreement, the term
"Company Reports" shall mean, collectively, each registration statement, report,
proxy statement or information statement filed with the Securities and Exchange
Commission (the "SEC") since January 1, 1999, in the form (including exhibits,
annexes and any amendments thereto) filed with the SEC. As of their respective
dates, the Company Reports complied in all material respects with the
requirements of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. Nothing has occurred since November 13,
2003 (the date of filing of the Company's Form 10-Q reporting the six month
period ending September 30, 2003) which would require the filing of any
additional report or of any amendment to any of the Company Reports with the
SEC, or which would cause any of the Company Reports to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading.

            (ii) Disclosure. No representation or warranty by the Company in
this Agreement, or in any document or certificate furnished or to be furnished
to the Purchaser pursuant hereto or in connection with the transactions
contemplated hereby, when taken together, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements made herein and therein, in the light of the
circumstances under which they were made herein and therein, in the light of the
circumstances under which they were made, not misleading. The Company has either
filed with the SEC or fully provided the Purchaser with all the information
necessary for the Purchaser to decide whether to purchase the Note.

     3. Representations and Warranties by the Purchaser. The Purchaser
represents and warrants to the Company as of the time of issuance of the Notes
and Warrants as follows:

     (a) Investment Intent: Authority. This Agreement is made with the Purchaser
in reliance upon such Purchaser's representation to the Company, evidenced by
Purchaser's execution of this Agreement, that Purchaser is acquiring the Note
and Warrant, including the

<PAGE>

Conversion Securities, for investment for such Purchaser's own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act. Purchaser has the full right, power, authority and
capacity to enter into and perform this Agreement and this Agreement will
constitute a valid and binding obligation upon Purchaser, except as the same may
be limited by bankruptcy, insolvency, moratorium, and other laws of general
application affecting the enforcement of creditors' rights.

     (b) Securities Not Registered. The Purchaser understands and acknowledges
that the offering of the Notes, the Warrants and the Conversion Securities
pursuant to this Agreement will not be registered under the Securities Act or
qualified under applicable blue sky laws on the grounds that the offering and
sale of securities contemplated by this Agreement are exempt from registration
under the Securities Act and exempt from qualifications available under
applicable blue sky laws, and that the Company's reliance upon such exemptions
is predicated upon the Purchaser's representations set forth in this Agreement.
The Purchaser acknowledges and understands that the Note, the Warrant and the
Conversion Securities must be held for at least 12 months after Closing and
thereafter indefinitely unless they are registered under the Securities Act and
qualified under applicable blue sky laws or an exemption from such registration
and such qualification is available.

     (c) No Transfer. Purchaser covenants that in no event will it transfer the
Note, the Warrant or the Conversion Securities other than (i) in conjunction
with an effective registration statement for the Securities under the Securities
Act or pursuant to an exemption therefrom, or in compliance with Rule 144
promulgated under the Securities Act, or (ii) to a partner, former partner,
limited partner, member, former member, stockholder or other entity affiliated
with Purchaser or, in the case of a Purchaser who is an individual, to a spouse,
lineal descendant or ancestor, or any trust for any of the foregoing, by
transfer by gift, will or intestate succession; provided that in each of the
foregoing cases the transferee agrees in writing to be subject to the terms of
this Agreement to the same extent as if the transferee were the original
Purchaser hereunder.

     (d) Knowledge and Experience. Purchaser (i) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of Purchaser's prospective investment in the Note, the Warrant
and the Conversion Securities; (ii) has the ability to bear the economic risks
of Purchaser's prospective investment; (iii) has had access to such information
as Purchaser has considered necessary to make a determination to purchase the
Note, the Warrant and the Conversion Securities together with such additional
information as is necessary to verify the accuracy of the information supplied;
and (iv) has not been offered the Note, the Warrant or the Conversion Securities
by any form of advertisement, article, notice or other communication published
in any newspaper, magazine, or similar media or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any such
media.

     (e) Accredited Investor. Purchaser is an "accredited investor" as that term
is defined in Rule 501(a) under the Securities Act.

<PAGE>

     (f) Legends. Each certificate representing the Notes, the Warrants and the
Conversion Securities may be endorsed with the following legends:

     (i) Federal Legend. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ARE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT
(i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
THE ACT OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF
COUNSEL, THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE,
OFFER OR DISTRIBUTION.

     (ii) Other Legends. Any other legends required by applicable state blue sky
laws. The Company need not register a transfer of any legended Note, Warrant or
Conversion Securities, and may also instruct its transfer agent not to register
the transfer of the Notes, Warrants or Conversion Securities, unless the
conditions specified in each of the foregoing legends are satisfied.

     (g) Removal of Legend and Transfer Restrictions. Any legend endorsed on a
certificate pursuant to subsection 3(f) and the stop transfer instructions with
respect to such legend shall be removed, and the Company shall issue a
certificate without such legend to the holder of such Note, Warrant or
Conversion Securities if such Note, Warrant or Conversion Securities are
registered under the Securities Act and a prospectus meeting the requirements of
Section 10 of the Securities Act is available or if such holder satisfies the
requirements of Rule 144(k).

     4. Security Interest. The Company hereby grants to the Purchasers a
security interest in all of the Company's right, title and interest in presently
existing and hereafter acquired assets (the "Collateral"), as more fully
described in Exhibit B attached hereto, of the Company to secure the payment of
indebtedness under the Note. The Company agrees to prepare and file any UCC
financing statements and other documentation as may be necessary, and to take
such reasonable actions as may be requested by Purchasers, to perfect
Purchasers' security interest. Pre-existing apparently perfected security
interests, as further described in Exhibit E attached hereto, may be in
existence and may be senior in interest to the security interest granted to
Purchasers hereby. The security interest evidenced by the Note is junior certain
liens arising under or related to the Note and Warrant Purchase Agreement, dated
as of various dates among Salon Media Group, Inc. and the Purchasers identified
therein.

     5. Subordination. The indebtedness evidenced by the Notes ("Subordinated
Indebtedness") is hereby expressly subordinated, to the extent and in the manner
hereinafter set forth, in right of payment to the prior payment in full of all
of the Company's Senior Indebtedness (as defined below).

     (a) Definition of Senior Indebtedness. "Senior Indebtedness" shall mean the
principal of (and premium, if any), unpaid interest on and amounts reimbursed,
fees, expenses, costs of enforcement and other amounts due in connection with
any indebtedness of the

<PAGE>

Company to a commercial bank lender Silicon Valley Bank ("Bank"), which may be
incurred from time to time pursuant to an agreement between the Company and
Bank, which credit facility shall not exceed $1,000,000 ("Senior Indebtedness").

     (b) Payment and Remedies Blockage. Other than payouts made by the Company
so as to avoid issuing fractional shares upon conversion of the Notes, Purchaser
will not demand or receive from Company (and Company will not pay to Purchaser)
all or any part of the Subordinated Indebtedness by way of payment, prepayment,
setoff, lawsuit or otherwise, nor will Purchaser exercise any remedy with
respect to the Collateral, nor will Purchaser commence, or cause to commence,
prosecute or participate in any administrative, legal or equitable action
against the Company for so long as any portion of the Senior Indebtedness
remains outstanding. Notwithstanding the foregoing, (i) Purchaser may accept,
and the Company may pay, regularly scheduled interest payments in accordance
with the terms of the Notes provided an Event of Default does not exist under
any document executed in connection with the Senior Indebtedness or would exist
after giving effect to such payment, (ii) in the event that the stockholders of
the Company have not approved the Notes and Warrants, the Company shall repay
any and all Senior Indebtedness then outstanding so as to allow the Company to
pay the Purchasers any and all amounts of principal and accrued interest owing
under the Notes, and (iii) nothing in this Section 5 shall prevent or otherwise
restrict Purchaser from converting the Note into equity securities in accordance
with its terms.

     (c) Lien Subordination. The security interest granted in this Agreement is
subordinate to the security interest that Bank or its successor or assignee may
hold from time to time in the Collateral. Notwithstanding the respective dates
of attachment or perfection of the security interest of Purchaser and the
security interest of Bank, the security interest of Bank shall at all time be
prior to the security interest of Purchaser.

     (d) Bankruptcy, Insolvency. If there shall occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of the
Company, no amount shall be paid by the Company in respect of the principal of,
interest on or other amounts due with respect to this Note at the time
outstanding, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full.

     (e) Subrogation. Subject to the payment in full of all Senior Indebtedness,
the holder of the Notes shall be subrogated to the rights of the holder(s) of
such Senior Indebtedness (to the extent of the payments or distributions made to
the holder(s) of such Senior Indebtedness pursuant to the provisions of this
Section 5) to receive payments and distributions of assets of the Company
applicable to the Senior Indebtedness. No such payments or distributions
applicable to the Senior Indebtedness shall, as between the Company and its
creditors, other than the holders of Senior Indebtedness and the Purchaser, be
deemed to be a payment by the Company to or on account of the Notes; and for
purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness to which the Purchaser would be entitled except for the
provisions of this Section 5 shall, as between the Company and its creditors,
other

<PAGE>

than the holders of Senior Indebtedness and the Purchasers, be deemed to
be a payment by the Company to or on account of the Senior Indebtedness.

     (f) No Impairment. Nothing contained in this Section 5 shall impair, as
between the Company and Purchasers, the obligation of Company, subject to the
terms and conditions hereof, to pay to the Purchaser the principal hereof and
interest hereon as and when the same become due and payable, or shall prevent
the Purchasers of the Notes, upon default hereunder, from exercising all rights,
powers and remedies otherwise provided herein or by applicable law.

     (g) Reliance of Purchasers of Senior Indebtedness. Purchaser, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Note, and each such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness. No
amendment of this Agreement, the Notes or any other agreements relating to the
Subordinated Indebtedness shall modify the provision of this Section 5 in a way
that could reasonably be expected to impair the subordination of the security
interest or lien that Purchaser may have in the Collateral or the subordination
of any payment rights under the Subordinated Indebtedness. At any time and from
time to time, without notice to Purchaser, Bank may take such actions with
respect to the Senior Indebtedness as Bank, in its sole discretion, may deem
appropriate, including without limitation terminating advances to the Company,
increasing the principal amount up to $1,000,000, extending the time of payment,
increasing applicable interest rates, compromising or otherwise amending the
terms of any documents affecting the Senior Indebtedness, and enforcing or
failing to enforce any rights against the Company or any other person.

     6. Miscellaneous.

     (a) Waivers and Amendments. Any provision of this Agreement other than the
principal amount of the Notes and the number of shares subject to the Warrants
may be amended, waived or modified upon the written consent of the Company and
the Purchasers providing a majority of the aggregate principal amounts provided
pursuant to this Agreement.

     (b) Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware.

     (c) Entire Agreement. This Agreement together with the Notes and Warrants
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.

     (d) Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be duly given upon receipt if
personally delivered or mailed by registered or certified mail, postage prepaid,
or by recognized overnight courier or personal delivery, addressed (i) if to a
Purchaser, at the address or facsimile number of such Purchaser set forth below
such party's name on Exhibit A, or at such other address or

<PAGE>

number as such Purchaser shall have furnished to the Company in writing, or (ii)
if to Company, at 22 Fourth Street, 16th Floor, San Francisco, CA 94103,
Attention: Chief Financial Officer or at such other address as Company shall
furnish to the Purchaser in writing.

     (e) Validity. If any provision of this Agreement, the Notes or the Warrants
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

     (f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.

<PAGE>

            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date and year first written above.

                                    COMPANY:

                                    SALON MEDIA GROUP, INC.
                                    a Delaware corporation

                                    By: /s/ David Talbot

                                    Name: David Talbot

                                    Title: Chairman and Chief Executive Officer

PURCHASER:

By:
    --------------------------------

<PAGE>

                                    EXHIBIT A
                                    ---------

                             SCHEDULE OF PURCHASERS

--------------------------------------- ----------------------------------------
John Warnock                                           $100,000
--------------------------------------- ----------------------------------------
HAMCO Capital Corporation                               $50,000
--------------------------------------- ----------------------------------------

Note Transaction: November 24, 2003 Warnock

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}]]