Exhibit 10.4


PROMISSORY NOTE


(Commercial)


	
  $5,400,000.00

  	
  December 29, 2006

  



 


Loan  #  06-075


FOR VALUE
RECEIVED, the undersigned,


California Mortgage and Realty, Inc. (collectively “Maker”),


whose address for purposes of this Promissory Note (this “Note”) is


62 1st Street, Fourth Floor, San Francisco California (the State of
California is referred to as the “State”),


PROMISES TO PAY to the order of


CMR Mortgage Fund II, LLC, a CFL Licensed Lender, as to undivided 100%
interest (collectively “Holder”),


at 62 1st Street, Fourth Floor, San Francisco California 94105, or such
other place as the Holder may specify, the principal sum of Five Million Four
hundred Thousand Dollars and Zero Cents ($5,400,000.00), together with interest
thereon from the Date of Disbursement (as defined below) at the rate of Twelve
and Fifty Hundredth Percent (12.50%) per annum (the “Contract Rate”), to be
paid in lawful money of the United States of America as follows:


a.                                       Interest
from the Date of Disbursement through the end of the month shall be due and
payable on the Date of Disbursement; and,


b.                                      The
payments on this Note shall be as follows:


	
  Number of

  Payments

  	
   

  	
  Amount of

  Payment

  	
   

  	
  Date Series Commences “Date of Commencement”

  	
   

  
	
  35

  	
   

  	
  $

  	
  56,250.00

  	
   

  	
  February
  01, 2007

  	
   

  
	
  1

  	
   

  	
  $

  	
  5,456,250.00

  	
   

  	
  January 01, 2010

  	
   

  



 


The day of the month on which
payments are due is called the “Installment Payment Date.”
The last day in the last series above is called the “Date of
Maturity.” Each installment payment shall be applied first to
accrued interest and then to principal.


1.                                       The “Date of Disbursement” for purposes of this Note shall mean
the day upon which a closing agent disburses the majority of the principal
amount of this Note.


2.                                       A “Loan Month” for purposes of this Note shall mean each
successive calendar month of the term of this Note, beginning with the month in
which the Date of Commencement falls.


3.                                       If any
installment of principal and/or interest not be paid within Ten (10) Days after
the due date (“Grace Period Expiration Date”,
Maker shall also pay to Holder a late charge of 10%) of such installment. THE


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LATE CHARGE SHALL BE PAID WITHOUT PREJUDICE TO THE RIGHT OF THE HOLDER
TO COLLECT ANY OTHER AMOUNTS PROVIDED TO BE PAID OR TO DECLARE A DEFAULT UNDER
THIS NOTE OR THE DEED OF TRUST (AS DEFINED BELOW). THE LATE CHARGE SHALL BE
PAYABLE NOT LATER THAN THE DUE DATE OF THE NEXT PAYMENT AND SHALL BE SECURED BY
THE DEED OF TRUST AND OTHER SECURITY DOCUMENTS (AS DEFINED BELOW). MAKER
RECOGNIZES THAT ITS DEFAULT IN MAKING ANY PAYMENT AS AGREED TO BE PAID WHEN
DUE, OR THE OCCURRENCE OF ANY OTHER EVENT OF DEFAULT UNDER THE DEED OF TRUST OR
ANY OTHER SECURITY DOCUMENT, WILL REQUIRE HOLDER TO INCUR ADDITIONAL EXPENSE IN
SERVICING AND ADMINISTERING THE LOAN, IN LOSS TO HOLDER OF THE USE OF THE MONEY
DUE AND IN FRUSTRATION TO HOLDER IN MEETING ITS OTHER FINANCIAL AND LOAN
COMMITMENTS AND THAT THE DAMAGES CAUSED THEREBY WOULD BE EXTREMELY DIFFICULT
AND IMPRACTICAL TO ASCERTAIN. MAKER AGREES (A) THAT AN AMOUNT EQUAL TO THE LATE
CHARGE PLUS THE ACCRUAL OF INTEREST AT THE DEFAULT RATE IS A REASONABLE
ESTIMATE OF THE DAMAGE TO HOLDER CAUSED BY A LATE PAYMENT, AND (B) THAT THE
ACCRUAL OF INTEREST AT THE DEFAULT RATE FOLLOWING ANY OTHER EVENT OF DEFAULT IS
A REASONABLE ESTIMATE OF THE DAMAGE TO HOLDER CAUSED BY ANOTHER EVENT OF
DEFAULT, REGARDLESS OF WHETHER THERE HAS BEEN AN ACCELERATION OF THE DEBT.
NOTHING IN THIS NOTE SHALL BE CONSTRUED AS AN OBLIGATION ON THE PART OF HOLDER
TO ACCEPT, AT ANY TIME, LESS THAN THE FULL AMOUNT THEN DUE, OR AS A WAIVER OR
LIMITATION OF HOLDER’S RIGHT TO COMPEL PROMPT PERFORMANCE.


INITIAL:               


4.                                       [NO] If the box
preceding this sentence contains the word “yes,” Holder has no obligation to
accept tendered full or partial prepayments of any portion of the principal
balance outstanding hereunder until 0 after the Date of Disbursement (the “Lock Period”).


[NO] If the box preceding this sentence
contains the word “yes,” in the event of a Prepayment after the Lock Period,
Maker shall, as a condition to the Holder’s acceptance of the Prepayment, pay
to Holder a prepayment premium (the “Prepayment Premium”)
equal to (0) months’ interest on that portion of the unpaid balance of this
Note prepaid.


Maker shall have no right to prepay, and the Holder shall have no
obligation to accept tendered full or partial prepayments of any portion of the
principal balance outstanding hereunder (a “Prepayment”)
unless and until prepayment is made on an Installment Payment Date, with not
less than thirty (30) days’ prior written notice to Holder, and pays any
Prepayment Premium called for in the previous paragraph. Any amounts to he
prepaid as specified in said notice shall become due and payable at the time
provided in said notice, and said notice shall not relieve the Maker from
making any payment due prior to or, in the event of a partial Prepayment,
after, the time specified in said notice. Prepayments shall be credited to
installments of principal in the inverse order of their maturity.


5.                                       If an Event of
Default occurs and the Holder accelerates payment of the indebtedness, the
Holder shall suffer damages and opportunity costs which are now difficult or
impossible to ascertain. Therefore, if that occurs, Maker shall pay to the
Holder, as liquidated damages and not as a penalty, and in addition to the
entire balance of principal and accrued interest and all other sums then due
under this Note, the Deed of Trust and the Other Security Documents, an amount
equal to the Prepayment Premium computed as if the entire unpaid balance of
this Note were prepaid on the date of default.


The Maker waives all rights under California Civil Code Section 2954.10
which provides, in part, as follows:


 


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AN OBLIGEE WHICH ACCELERATES
THE MATURITY DATE OF THE PRINCIPAL AND ACCRUED INTEREST, PURSUANT TO CONTRACT,
ON ANY LOAN SECURED BY A MORTGAGE OR DEED OF TRUST ON REAL PROPERTY UPON THE
CONVEYANCE OF ANY RIGHT, TITLE, OR INTEREST IN THAT PROPERTY, MAY NOT CLAIM,
EXACT, OR COLLECT ANY CHARGE, FEE, OR PENALTY FOR ANY PREPAYMENT RESULTING FROM
THAT ACCELERATION.


The Maker understands and acknowledges that
the Holder bargained for this waiver as part of the consideration that induced
the Holder to enter into this transaction. The Maker initials this paragraph
for the purpose of evidencing its understanding of Civil Code Section 2954.10
recited in part above and the Maker’s agreement to the waiver of its terms.


INITIAL:                         


6.                                       This Note is
secured, without limitation), by that certain Deed of Trust, Security
Agreement, Assignment of Leases and Rents and Fixture Financing Statement (the
“Deed of Trust”) of the same date given
by Maker to California Mortgage and Realty, Inc., as Trustee, for the benefit
of Holder, on certain real estate and personal property (the “Trust Property”) and the Other Security Documents (as
defined in the Deed of Trust, referred to as the “Other
Security Documents”). This Promissory Note is the Note referred to
in, and is entitled to the benefits of, the Deed of Trust and the Other
Security Documents. Among the provisions of the Deed of Trust is the following
paragraph 12:


12. Transfer or Encumbrances of the Trust Property. Trustor
acknowledges that Beneficiary has examined both the creditworthiness of Trustor
and Trustor’s experience in owning and operating properties such as the Trust
Property in determining whether or not to make the Loan, that Beneficiary has
relied on Trustor’s creditworthiness and experience in deciding to make the
Loan, and that Beneficiary will continue to rely on Trustor’s ownership of the
Trust Property as a means of maintaining the value of the Trust Property as
security for repayment of the Debt. Trustor acknowledges that Beneficiary has a
valid interest in maintaining the value of the Trust Property so as to ensure
that, if Trustor defaults in the repayment of the Debt, Beneficiary can recover
the Debt by a sale of the Trust Property. If Trustor shall, without the prior
written consent of Beneficiary, further encumber the Trust Property with any
lien imposed in connection with any other financing, or sell, transfer or
convey any part of the Trust Property or the right to manage or control the
operation of any part of the Trust Property, the entire Debt shall become due,
at the option of Beneficiary. A sale, transfer or conveyance within the meaning
of this Paragraph shall be deemed to include (i) an installment sales agreement
in which Trustor agrees to sell any part of the Trust Property for a price to
be paid in installments; (ii) an agreement by Trustor leasing all or a
substantial part of the Trust Property, or a sale, pledge, assignment or other
transfer of, or the grant of a security interest in, Trustor’s tight, title and
interest in any Leases or any Rents; (iii) if Trustor is a corporation or a
limited partnership with a corporate general partner, the transfer of stock of
the Trustor or its corporate general partner to parties who do not now hold a
controlling interest; (iv) if Trustor is a general or limited partnership,
joint venture, or other form of partnership (a “Partnership”),
a transfer of any general partnership interest or the admission of any new
general partner; and (v) if Trustor is a limited liability company or a limited
partnership with a limited liability company as general partner, the transfer
of membership interests in the Trustor or its limited liability company general
partner (or the stock or membership interests in any corporation or limited
liability company controlling Trustor or its limited liability company general
partner) or the creation or issuance of new memberships in Trustor or its
limited liability company general partner to parties who do not now own a
controlling interest. Beneficiary reserves the right to condition its consent
upon a modification of the terms of this Deed of Trust and the Note and on
assumption of this Deed of Trust as so modified, by the proposed transferee,
payment of a transfer or assumption fee, or such other conditions as
Beneficiary shall determine in its sole discretion to be in the interest of
Beneficiary. Beneficiary shall not be required to demonstrate any actual
impairment of its security or any increased risk of


 


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default in order to declare the
Debt immediately due and payable upon Trustor’s sale, transfer, conveyance or
further encumbrance of the Trust Property without Beneficiary’s consent. This
provision shall apply to every sale, transfer, conveyance, or further
encumbrance of the Trust Property regardless of whether voluntary or not or
whether or not Beneficiary has consented to any previous sale, transfer,
conveyance, or further encumbrance of the Trust Property.


7.                                       Maker shall be in
default under this Note (referred to as an “Event of
Default”) and the whole sum of principal and interest shall become
due and payable at the option of the Holder without notice or demand, upon: (i)
the nonpayment, by the Grace Period Expiration Date of any installment of
principal and/or interest, or any other monetary obligation under this Note,
the Deed of Trust or the Other Security Documents; or (ii) any other Event of
Default under the Deed of Trust or the Other Security Documents.


8.                                       If an Event of
Default occurs, this Note shall thereafter bear interest at the rate of the
lesser of (i) the Maximum Rate (as hereinafter defined) or (ii) 18 percent %
per annum (which lesser rate is referred to as the “Default Rate”)
from the date of the Event of Default until cured. In the event Maker fails to
pay, in full, all outstanding principal, interest and other sums due under the
terms of this Note, on or before the maturity date as set forth herein,
Borrower shall pay to Holder as liquidated damages the additional sum of 10% of
the total outstanding balance due as of such maturity date.


9.                                       Additional
Advances: The Holder shall be entitled to advance such further sums as
necessary, in the Holder’s sole discretion, to cure any default(s) on any
senior lien(s) including property tax liens. Any sum or sums so advanced shall
be considered additional advances under this Note and the Deed of Trust by
which this Note is secured and shall bear interest at the Default Rate set
forth above from the date of the advance(s) until paid by the Borrower.
Further, Maker shall pay to Holder as liquidated damages an additional fee
equal to ten percent (10.00%) of any sum(s) advanced hereon for services
rendered in connection with such advance(s).


10.                                 Liquidated Damages:
Maker agrees that the actual damages to Holder, in the event of a default by
Maker and/or failure by Maker to pay upon maturity, would be extremely
difficult or impracticable to determine because they involve such factors,
among others, as the need of Holder to make decisions, undertake risks, and
take action; and the impact on business relations between Holder and its
members and/or investors. Therefore, by signing below, Maker acknowledges that
the above charges have been agreed upon as a reasonable estimate of such
damages.


INITIAL:               


11.                                 Acceptance by Holder
of any payment for less than what is due shall be deemed an acceptance on
account only, and the failure to pay the entire amount then due before the
Grace Period Expiration Date, shall be and continue to be an Event of Default
under this Note. The rights or remedies of the Holder, as provided in this
Note, the Deed of Trust or any of the Other Security Documents, or as provided
at law or in equity shall be cumulative and concurrent, and may be pursued
singly, jointly or successively against the Trust Property, Leases, Rents (as
defined in the Deed of Trust) or any other funds, property or security held by
Holder for the payment or performance thereof, or against the Maker or
otherwise, at the sole discretion of the Holder. The failure to exercise any
such right or remedy shall not be construed as a waiver or release of any
rights or remedies or of the right to exercise them at any later time.


12.                                 Maker
and all endorsers, guarantors, sureties, accommodation parties hereof, and all
other persons liable or to become liable for all or any part of the
indebtedness under this Note, the Deed of Trust, and the Other Security
Documents, waive all applicable exemption rights, whether under the laws of the
State, homestead laws, or otherwise, and also waive valuation and appraisement,
diligence, presentment, protest and demand, and also notice of protest, of
demand, of nonpayment, of dishonor, of acceleration, of intention to accelerate
and of maturity. All endorsers,


 


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guarantors, sureties, and accommodation parties hereby consent to any
and all renewals, extensions or modifications of the terms hereof, including
time for payment. Any such renewals, extensions or modifications may be made
without notice to any of said parties.


13.                                 Maker and all
endorsers, guarantors, sureties, accommodation parties hereof and all other
persons liable or to become liable for all or any part of this indebtedness
agree to pay all costs of collection, including reasonable attorneys’ fees and
all costs of suit, if this Note is not paid when due, or if it is necessary to
protect the security for this Note or to commence foreclosure proceedings under
the Deed of Trust or any of the Other Security Documents, or if Holder is made
a party to any litigation because of this Note, the Deed of Trust or any of the
Other Security Documents, whether or not suit is filed, and whether through
courts of original jurisdiction, as well as in courts of appellate
jurisdiction, or through a bankruptcy court or other legal proceedings. Such
costs of collection shall include attorneys fees and costs in all aspects of
bankruptcy proceedings affecting the security for this Note or performance
hereunder, including plan objection proceedings, objections to discharge, claim
objection proceedings, preference actions, relief from stay litigation, motions
to dismiss, convert or appoint a trustee, case monitoring and serving on a
creditor’s committee.


14.                                 This Note shall not be
amended, modified or changed, nor shall any waiver of any of its provision be
effective unless accomplished by an instrument in writing signed by the party
against whom enforcement of any amendment, modification, change or waiver is
sought.


15.                                 Maker acknowledges
that this Note and the loan it evidences was made by a licensed California
Finance Lender or licensed California Real Estate Broker or it was arranged by
a licensed California Real Estate Broker and that the broker’s participation
was a material factor in the consummation of this transaction. However, none of
the terms and provisions contained in this Note, the Deed of Trust, or any of
the Other Security Documents, shall ever be construed to create a contract for
the use, forbearance or detention of money requiring payment of interest at a
rate in excess of the Maximum Rate. The Maker or other party now or later
liable for the payment of this Note shall never be required to pay interest on
this Note at a rate in excess of the Maximum Rate, and the provisions of this
paragraph shall control over all other provisions and of any other instrument
executed in connection herewith this loan transaction. If Holder collects
monies which are deemed to be interest in excess of the Maximum Rate, all excess
sums shall be applied against the unpaid principal balance and not to the
payment of interest; and if a surplus remains after full payment of principal
and lawful interest, the surplus shall be refunded to the Maker in cash and the
Maker hereby agrees to accept such refund. As used in this Note, the term “Maximum Rate” means the maximum rate (or, if the context so
permits or requires, an amount calculated at such rate) of interest which, at
the time in question would not cause the interest charged on the indebtedness
evidenced by this Note, the Deed of Trust, or any of the Other Security
Documents at such time to exceed the maximum amount which Holder would be
allowed to contract for, charge, take, reserve or receive under the laws of the
State or any other applicable law after taking into account, to the extent
required by the laws of the State or any other applicable law, all relevant
payments or charges under this Note, the Deed of Trust, and the Other Security
Documents.


16.                                 Whenever used herein,
the words “Maker” and “Holder” shall be deemed to include their respective
successors and assigns. In the event Maker is comprised of more than one
individual or entity, each such individual or entity shall be jointly and
severally liable under this Note.


17.                                 Time is of the essence
of this Note.


18.                                 Any
notice, demand, statement, request, or consent made under this Note shall be in
writing and shall be deemed given when hand-delivered or within Three (3) Days
after the date sent by certified mail, return receipt requested, or the next
business day after the date sent by nationally recognized overnight mail or
courier service to the address, as


 


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set forth above, of the party to whom such notice is to be given, or to
such other address as Maker or Holder, as the case may be, shall in like manner
designated in writing.


19.                                 The singular number
shall include the plural, and the plural the singular, and any gender shall be
substituted for any other gender, where appropriate.


20.                                 This Note is to be
governed by and construed in accordance with the laws of the State, without
giving effect to the conflicts of law provisions thereof. Whenever possible,
each provision of this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Note. Maker consents to the
jurisdiction of the state and federal courts in the State for any actions
involving the enforcement or interpretation of this Note, Deed of Trust and the
transaction they evidence.


MAKER HEREBY WAIVES TRIAL BY JURY IN ANY SUIT INVOLVING THE HOLDER OR
ANY ARRANGER OF THIS LOAN AS WELL AS ANY CLAIM FOR PUNITIVE DAMAGES.


21.                                 THIS NOTE, THE DEED OF
TRUST, THE ENVIRONMENTAL iNDEMnity,
ANY GUARANTY AND THE OTHER SECURITY DOCUMENTS COLLECTIVELY REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.


22.                                 This Note is made by
Maker pursuant to that certain Assignment of Membership Interest and Claims
between Maker and Holder dated December 29, 2006.


IN WITNESS
WHEREOF, the undersigned has executed and delivered
this Note effective as of the date first above written.


California Mortgage and Realty, Inc.


	
  BY:

  	
  /s/ Henry Park

  	
   

  
	
  California Mortgage and Realty, Inc.

  
	
  Henry Park, Vice President

  



 


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