Exhibit
10.6


 


FIRST
AMENDMENT TO PROMISSORY NOTE AND


PLEDGE AND SECURITY AGREEMENT


 


THIS FIRST AMENDMENT TO PROMISSORY NOTE AND PLEDGE AND SECURITY
AGREEMENT (this “Amendment”), is dated as of May 31, 2007, by and among CMR MORTGAGE FUND II, LLC, a California limited
liability company (“Borrower”),  CMR INCOME FUND, LLC, a Nevada limited liability
company (“Lender”), and WELLS FARGO FOOTHILL,
INC. a California corporation (“Wells Fargo”).


 


WITNESSETH:


 


WHEREAS, Borrower executed a Promissory Note, dated as of May 26,
2006 in the principal amount of $25,000,000 in favor of Lender (the “Note”);


 


WHEREAS, Borrower executed a Pledge and Security
Agreement, dated as of May 26, 2006, in favor of Lender and
Wells Fargo (the “Pledge”);


 


WHEREAS, concurrently with the modification of the Note, the Loan
Agreement (as defined in the Note) is being
modified pursuant to a Second Amendment to Loan and Security Agreement (“Second Amendment”) among Wells Fargo,
Lender, Airport Hotels, LLC, a Nevada limited
liability company and California Mortgage and Realty, Inc., a Delaware
corporation;


 


WHEREAS, modification of the Note is a condition
precedent to the effectiveness of the Second Amendment; and


 


WHEREAS, the parties hereto desire to amend the
Note, subject to the terms hereof;


 


NOW THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:


 


SECTION 1. 
Defined Terms. Unless otherwise defined herein, all capitalized
terms used herein have the meanings assigned to such terms in
the Note, as amended hereby, or the Second Amendment.


 


SECTION 2. 
Amendments. Upon the Second Amendment Effective Date, the Note
and Security Agreement shall be amended as follows:


 


(a)      Each
reference to the Note in the Note and the Security Agreement shall mean the Note as amended, modified, extended, supplemented and renewed, from time
to time.


 


(b)          Each reference to the Loan
Agreement in the Note and the Security Agreement shall mean the Loan Agreement,
as amended as of May 26, 2006, and modified by Joinder Agreement, dated as
of May 29, 2006, and Temporary Advance Agreement, dated as of


 

















 


December 28, 2006 (as further amended, extended,
restated, supplemented, renewed or otherwise modified, from time to
time).


 


(c)     Section 2 of the Note is
hereby deleted in its entirety and replaced with the following:


 


“2.          Interest and Maturity Date. The unpaid
principal amount hereof shall bear interest at a per annum rate equal to the
rate of interest payable by Lender on the Term Loan as set forth in Section 17
of the Loan Agreement (i.e., from the date of advance
to the Second Amendment Effective Date, the LIBOR Rate plus six and one-half percent
(6.5%), and from and after the Second Amendment Effective Date, the LIBOR Rate plus five and one-fourth percent (5.25%)),
and such interest shall be due and payable in arrears, on the first day
of each month, commencing July 1, 2006, and the Maturity Date. All outstanding principal under this Note
shall be due and payable on May 31, 2008 (the “Maturity Date”).


 


(d)     The period at
the end of Section 8(b) is replaced with a semicolon and the following section is hereby added to the end of Section 8
of the Note to read as follows:


 


“(c)     if at any time the net worth of Borrower shall be less than
$50,000,000.”


 


SECTION 3.  Waivers.
On the Second Amendment Effective Date, Lender hereby waives Borrower’s
noncompliance with Section 2 of the Note for the period of May 31,
2007 though the Second Amendment Effective Date.


 


SECTION 4.  Representations.
Warranties and Covenants of Borrower. Borrower represents and warrants to
Lender, and agrees that:


 


(a)      after
giving effect to this Amendment, no Event of Default will have occurred and be continuing, and the Note remains in full force and effect, secured
by a first priority security interest in the EMW
Note, which in turn is not in default and remains secured by a first lien in the EMW Property, a second lien in the Casa Grande Property (subject only to
debt in the principal amount of $17,000,000 secured by a prior lien), and a
third lien in the Brisbane Property (subject only to debt in the aggregate
principal amount of $32,000,000, secured by prior liens);


 


(b)          after giving
effect to this Amendment, no Event of Default will have occurred and be continuing, and the Security Agreement remains in full force and
effect;


 


(b)        the
execution, delivery and performance of this Amendment have been duly authorized
by all necessary action on the part of, and duly executed and delivered by,
Borrower, and this Amendment is a legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance
with its terms, except as the enforcement thereof may be subject to the effect
of any applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors’ rights
generally and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law); and


 

















 


(c)      the
execution, delivery and performance of this Amendment do not conflict with or result in a breach by Borrower of any term of any material contract,
loan agreement, indenture or other agreement or
instrument to which Borrower is a party or is subject.


 


(d)     the
unpaid principal balance on the Note as of May 31, 2007, is
$21,786,091.84.


 


SECTION 5.  Conditions
Precedent to Effectiveness of Amendment. This Amendment shall become effective (the “Second Amendment
Effective Date”) upon satisfaction of each of the following
conditions:


 


(a)          Borrower
and Lender shall have executed and delivered to Lender this Amendment and such other
documents as Lender may reasonably request;


 


(b)          All legal matters incident
to the transactions contemplated hereby shall be reasonably satisfactory to
counsel for Lender.


 


SECTION 6.  Execution in
Counterparts. This Amendment may be executed in counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.


 


SECTION 7.  GOVERNING
LAW.    THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUCTED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS
THEREOF.


 


SECTION 8.  Effect of Amendment: Reaffirmation of Loan
Documents.


 


(a)       The parties
hereto agree and acknowledge that (i) nothing contained in this Amendment in any manner or respect limits or
terminates any of the provisions of the Note, the Pledge or the other
outstanding loan documents other than as expressly set forth herein and (ii) the
Note (as amended hereby), the Pledge (as amended hereby) and each of the other outstanding
loan documents remain and continue in full force and effect and are hereby
ratified and reaffirmed in all respects.


 


(b)      The waivers agreed to herein (i) are strictly limited to the
provisions expressly referenced and, except as expressly set forth herein, all
the other terms, provisions and conditions of the Note and the Pledge shall
remain in full force and effect, (ii) shall not extend nor be deemed to
extend to any other Event of Default or Default that may now exist or hereafter
arise under the Note, the Pledge or any of the other loan documents, whether
similar or dissimilar to the matters waived
herein, (iii) shall not impair, restrict or limit any right or remedy of
Lender with respect to any Event of Default that may now exist or hereafter
arise under the Note, the Pledge or any of the
other loan documents, and (iv) shall not constitute any course of dealing
or other basis for altering any obligation of the Borrower or any right,
privilege or remedy of Lender under the Note, the Pledge or any of the other
loan documents.


 

















 


SECTION 9.  Headings. Section headings in this
Amendment are included herein for convenience
of any reference only and shall not constitute a part of this Amendment for any
other purposes.


 


 


[Signature page follows]


 

















 


IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be executed and delivered as of
the date first above written.


 


	
   

  	
  BORROWER:

  	
   

  
	
   

  	
   

  
	
   

  	
  CMR MORTGAGE
  FUND II, LLC, 

  
	
   

  	
  a California
  limited liability company,

  
	
   

  	
   

  
	
   

  	
  By: California Mortgage
  and Realty, Inc., 

         a Delaware corporation, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Gala

  	
   

  
	
   

  	
  Name:

  	
  James
  Gala

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  CMR INCOME FUND,
  LLC,

  
	
   

  	
   a Nevada limited liability company

  
	
   

  	
   

  
	
   

  	
  By: California Mortgage
  and Realty, Inc., 

  
	
   

  	
         a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Gala

  	
   

  
	
   

  	
  Name:

  	
  James
  Gala

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS
  FARGO:

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL,
  INC., 

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ F.W. McCollum

  	
   

  
	
   

  	
  Name:

  	
  F.W. McCollum

  	
   

  
	
   

  	
  Title:

  	
  Vice President