Document:

Exhibit 10.2

PLEDGE AND SECURITY AGREEMENT

THIS
PLEDGE AND SECURITY AGREEMENT, dated as of May 26, 2006 (this “Agreement”), is
made by CMR MORTGAGE FUND II, LLC, a California limited liability company
(“Pledgor”), in favor of CMR INCOME FUND, LLC, a Nevada limited liability
company (“CMR Income Fund”), and WELLS FARGO FOOTHILL, INC., a California
corporation (“WFF”) (CMR Income Fund and WFF are referred to collectively as
“Secured Party”).

RECITALS

A.
           Secured Party,
California Mortgage and Realty, Inc., a Delaware corporation and WFF are
parties to that certain Loan and Security Agreement, dated as of August 11,
2005 (“Original Loan Agreement”), whereby WFF agreed to make certain extensions
of credit from time to time to or for the account of Secured Party.

B.
           Contemporaneously
herewith, WFF is making an additional term loan of Twenty Five Million Dollars
($25,000,000) to Secured Party (the “Additional Advance”) on the terms and
conditions set forth in a First Amendment to Loan Agreement of even date herewith
to enable the Secured Party to fund a loan (the “Loan”) to Pledgor in the
original principal amount of Twenty Five Million Dollars ($25,000,000.00),
which Loan is evidenced by that certain Promissory Note dated as of even date
herewith executed by Pledgor and payable to the order of Secured Party
(together with all extensions, amendments, renewals, substitutions,
consolidations or modifications thereof, the “Note”).

B.
           In connection
with and as a condition to making the Additional Advance and the Loan, WFF and
Secured Party have required Pledgor to execute and deliver this Agreement
granting a security interest in the collateral described herein.  Pledgor expects to derive substantial benefit
from Secured Party’s making of the Loan and is willing to execute and deliver
this Agreement and perform its respective obligations hereunder in order to
induce Secured Party to make the Loan.

NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

1.1
Certain Terms. In addition to all
of the other capitalized terms defined herein, the following terms shall the
following meanings:

“Code”
means the Uniform Commercial Code, as in effect form time to time in the State
of California.

“Collateral” is defined in Section 2.1.

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“Distributions” means any payments of interest, principal, late fees or
other amounts received in connection with the Collateral.

“Event
of Default” means (i) any default by Pledgor hereunder, or (ii) any default,
not cured within any applicable grace period, with respect to any of the
Obligations.

“Obligations”
means (1) all principal, interest, fees and expenses owing with respect to the
Note, (2) all principal, interest, fees and expenses owing with respect to the
Additional Advance; in each case whether direct or indirect, absolute or
contingent, liquidated or unliquidated, voluntary or involuntary, due or to
become due, or whether or not jointly owed with others, or whether now existing
or hereafter incurred.

“Proceeds”
means all proceeds (as such term is defined in Section 9102(64) of the Code)
with respect to the Collateral, and all proceeds of such proceeds, and, in any
event, shall include all Distributions with respect thereto.

1.2           Code
Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the Code are used
in this Agreement, including in its preamble and recitals, with such meanings.

ARTICLE 2

PLEDGE AND SECURITY AGREEMENT

2.1           Grant of
Security Interest. As collateral security for the prompt and complete
payment and performance of the Obligations when due, Pledgor hereby (i) pledges,
transfers, hypothecates and assigns to Secured Party, and (ii) grants to
Secured Party, a continuing first priority lien on and security interest in,
all of Pledgor’s right, title, and interest in and to the following, whether
now or hereafter existing or acquired (the “Collateral”):

(a)           Promissory Note, dated as of May 25,
2006, in the original principal amount of Forty Eight Million Dollars
($48,000,000), executed by Eagle Meadows of Wheatland 187, LLC, Eagle Meadows
of Wheatland 130, LLC and Eagle Meadows of Wheatland 115, LLC payable to the
order of Pledgor (the “EMW Note”), the Deeds of Trust (as defined in the EMW
Note), the Other Security Documents (as defined in the EMW Note) and any and
all other documents evidencing or securing the EMW Note (collectively, the
“Loan Documents”); and

(b)           all Proceeds of any of the foregoing.

2.2           Delivery of Collateral.
Pledgor shall deliver to Secured Party all notes, loan agreements, deeds of
trusts, assignments of deeds of trust or other writings representing or
evidencing any Collateral, which writings shall be in suitable form for

 

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transfer by delivery, and shall be accompanied by all
necessary instruments of transfer or assignment, duly executed in blank, all in
form and substance satisfactory to Secured Party.

2.3           Continuing Security Interest.
This Agreement shall create a continuing security interest in the Collateral
and shall:

(a)           remain
in full force and effect until each and every one of the Obligations has been
fully and indefeasibly paid and performed in accordance with the terms of the
applicable Loan Document(s),

(b)           be
binding upon Pledgor and its, successors, transferees, and assigns, and

(c)           inure,
together with the rights and remedies of Secured Party hereunder, to the
benefit of Secured Party and its successors and assigns.

Upon the full and
indefeasible payment of the Obligations, the security interest granted herein
shall terminate and all rights to the Collateral shall revert to Pledgor.  Upon any such termination, Secured Party
will, at Pledgor’s sole expense, deliver to Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all Collateral
held by Secured Party hereunder, and execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

Pledgor hereby represents
and warrants, as of the date hereof, that:

3.1           Ownership, No Liens, etc.
Pledgor is (or, in the case of after acquired Collateral, at the time Pledgor
acquires rights therein, will be) the record legal and beneficial owner of, and
has (or, in the case of after acquired Collateral, at the time Pledgor acquires
rights therein, will have) good and marketable title to (and has full right and
authority to pledge and assign) such Collateral, free and clear of all claims,
liens, options and encumbrances of any kind, except for the security interests
granted pursuant hereto in favor of Secured Party.

3.2           Valid Security Interest.  This Agreement will be effective to create,
as security for the Obligations, a valid security interest and grants to
Secured Party a valid first priority security interest in such Collateral.

3.3           Enforceability, No Default, Approval, etc. The execution and delivery of this Agreement and the
performance of Pledgor’s obligations hereunder will not conflict with or result
in a breach of the terms or provisions of any existing law or existing rule,
regulation or order of any court or governmental body binding on or affecting
Pledgor, and this Agreement constitutes the valid and legally binding

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obligations of Pledgor and is fully enforceable against
Pledgor in accordance with its terms. 
Further, the execution, delivery and performance of this Agreement by
Pledgor will not cause a violation of or a default under (y) any mortgage,
lease or other agreement, oral or written, to which or Pledgor is a party or by
which any of their respective assets are subject, or (z) any pending
litigation, judgment, decree, arbitration award, governmental order, statute,
rule or regulation to which or Pledgor is subject, nor will this Agreement
cause a dissolution or other termination of or Pledgor.  No approval by, authorization of, or filing
with any federal, state or other governmental commission, agency or authority
or any other person or entity is necessary in connection with the execution,
delivery and performance by Pledgor of this Agreement or the other Loan
Documents to which Pledgor is a party or to perfect the security interests
granted herein.

3.4           No Setoff, etc. There are
no setoffs, counterclaims or defenses with respect to the Collateral and no
agreement, oral or written, has been made with any other person or party under
which any deduction or discount may be claimed with respect to such Collateral
and Pledgor does not know of any fact which would prohibit or prevent Pledgor
assigning or granting a security interest in the Collateral.

3.5           Accuracy of Information.
All information heretofore, herein or hereafter supplied to Secured Party by or
on behalf of Pledgor with respect to the Collateral is true and correct.

ARTICLE 4

COVENANTS

4.1           Protect
Collateral; Further Assurances, etc. Pledgor shall: (a)
promptly furnish Secured Party with any information or documents which Secured
Party may request concerning the Collateral; (b) promptly notify Secured Party
of any material change in any fact or circumstances warranted or represented by
Pledgor in this Agreement or in any other instrument furnished by Pledgor to
Secured Party in connection with the Collateral or the Obligations; (c)
promptly notify Secured Party of any claim, action or proceeding affecting
title, or any other matter relating to the Collateral, or any part thereof, or
the security interest created herein, and at Secured Party’s request, appear in
and defend, at Pledgor’s expense, any such claim, action or proceeding; (d)
promptly make such further assurances as may be reasonably necessary to
establish proof of Pledgor’s title to the Collateral; (e) promptly furnish
Secured Party with true copies of all notices of default sent or received by
Pledgor with respect to any agreements relating to the Collateral; and (f) not,
without Secured Party’s prior written consent, create any other security
interest in, assign, pledge or otherwise encumber the Collateral or any part
thereof, or permit any part of the Collateral to be or become subject to any
lien, attachment, execution, sequestration, other legal or equitable process,
or encumbrance of any kind or character other than the security interests
created by this Agreement.

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ARTICLE 5

SECURED PARTY

5.1           Secured
Party Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints Secured Party as Pledgor’s attorney-in-fact, with full authority in
the place and stead of Pledgor and in the name of Pledgor or otherwise, from
time to time in Secured Party’s discretion after an Event of Default exists, to
take any action and to execute any instrument which Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement including,
without limitation:

(a)           to
ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of any of the Collateral;

(b)           
to receive, endorse, and collect any drafts or other instruments, documents and
chattel paper, in connection with clause (a) above;

(c)           
to file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral;

(d)           
to perform the affirmative obligations of Pledgor hereunder (including all
obligations of Pledgor pursuant to Section 4.1);

(e)           to
execute and deliver for and on behalf of Pledgor any and all instruments,
documents, agreements, and other writings necessary or advisable for the
exercise on behalf of Pledgor of any rights, benefits or options created or
existing under or pursuant to the Collateral; and

(f)            to
execute endorsements, assignments or other instruments of conveyance and
transfer.

Pledgor hereby acknowledges,
consents, and agrees that the power of attorney granted pursuant to this
Section is irrevocable and coupled with an interest, which power of attorney
shall remain in full force and effect until this Agreement is terminated and
the security interests created hereby are released in accordance with the terms
hereof.

5.2           Secured
Party May Perform. If Pledgor fails to perform any agreement
contained herein, Secured Party may perform, or cause performance of, such
agreement, and the expenses of such person incurred in connection therewith
shall be payable by Pledgor pursuant to Section 6.4.

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ARTICLE 6

REMEDIES

6.1           Certain
Remedies. If any Event of Default exists:

(a)           Secured
Party may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Code (whether or not the
Code applies to the affected Collateral) and also may, without notice except as
specified below, sell the Collateral or any part thereof at one or more public
or private sales, at any of Secured Party’s offices or elsewhere, and upon such
other terms and in such manner as Secured Party may deem commercially
reasonable. Pledgor agrees that, to the extent notice of sale shall be required
by law, at least ten days’ prior notice to Pledgor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. 
Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Secured Party may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.

(b)           
Secured Party may:

(i)            transfer
all or any part of the Collateral into the name of Secured Party or its
nominee,

(ii)           endorse
any checks, drafts, or other writings in Pledgor’s name to allow collection of
the Collateral,

(iii)          take
control of any Proceeds of the Collateral, and

(iv)          execute
(in the name, place, and stead of Pledgor) endorsements, assignments, stock
powers, and other instruments of conveyance or transfer with respect to all or
any of the Collateral.

6.2           Compliance with Restrictions.
Pledgor agrees that in any sale of any of the Collateral whenever any Event of
Default exists, Secured Party is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of any law (including
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that such prospective bidders and purchasers
have certain qualifications, and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental authority, and Pledgor further
agrees that such compliance shall not result in such sale being considered or
deemed not to have been made in a commercially reasonable manner, nor shall
Secured Party be liable nor accountable to Pledgor for any discount allowed by
reason of the fact that such Collateral is sold in compliance with any such
limitation or restriction.  Pledgor
further agrees that disposition of the Collateral pursuant to any private sale
made as provided above may be at prices and on other terms less favorable that
if the Collateral were sold at public sale, and that Secured Party has no
obligation to delay the sale of any

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Collateral for public sale under the Securities Act of 1933,
as amended.  If any consent, approval or
authorization of any governmental authority shall be necessary to effectuate
any sale or other disposition of the Collateral, or any part thereof, Pledgor
will execute such applications and other instruments as may be required in
connection with securing any such consent, approval or authorization, and will
other-wise use its best efforts to secure the same

6.3           Application of Proceeds.
All cash Proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon, all or any part of the Collateral,
after first deducting the costs and expenses of sale, including reasonable
attorneys’ fees and costs and reasonable costs of Secured Party’s agents, to
the payment of the Obligations in such order as Secured Party shall elect, in
its sole discretion, it being understood that this Agreement shall remain in
full force and effect and Secured Party shall retain all rights hereunder,
until the date on which all of the Obligations have been indefeasibly satisfied
in full, after deducting all such costs and expenses.  If, after any sale of the Collateral pursuant
to this Article VI, there shall be a balance remaining after the payment of all
of the items described above, such balance shall be paid to persons or entities
entitled by law to receive such balance to allocate among themselves, without
any liability resulting therefrom on the part of Secured Party.

6.4           Indemnity and Expenses.
Pledgor hereby indemnifies and holds harmless Secured Party from and against
any and all claims, losses, liabilities, costs and expenses in any way relating
to, arising out of or resulting from this Agreement or any documents contemplated
hereby or transactions contemplated hereby or thereby (including, without
limitation, any such claims, losses, liabilities, costs and expenses resulting
from enforcement of this Agreement, Secured Party being the registered or
record owner of the Collateral, any trading authorizations given to Pledgor and
any service fees and commissions payable with respect to the Collateral). Upon
demand, Pledgor will pay to Secured Party the amount of any and all expenses
including reasonable attorneys’ fees and cost (whether in a bankruptcy
proceeding, related to a suit or action or any reviews of or appeals from a
judgment or decree therein or in connection with nonjudicial action), which
Secured Party may incur in connection with:

(a)           
the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral;

(b)           the
exercise or enforcement of any of the rights of Secured Party hereunder; or

(c)           the failure by
Pledgor to perform or observe any of the provisions hereof.

6.5           Remedies
Cumulative. All remedies of Secured Party hereunder are
cumulative and are in addition to any other remedies provided for at law or in
equity and may, to the extent permitted by law, be exercised concurrently or
separately, and the exercise of any one remedy shall not be deemed an election
of such remedy or to preclude the exercise of any other remedy. No failure on
the part of Secured Party to

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exercise and no delay in
exercising any right, remedy, power or privilege hereunder shall operate as a
waiver thereof or in any way modify or be deemed to modify the terms of this
Agreement or of the obligations secured hereby, nor shall any single or partial
exercise by Secured Party of any right, remedy, power or privilege preclude any
other or further exercise of the same or any other right, remedy, power or
privilege.  Except as otherwise
specifically required herein, notice of the exercise of any right, remedy,
power or privilege granted to Secured Party by this Agreement is not required
to be given.  Secured Party may exercise
any one or more of its rights, remedies, powers and privileges at its option
without regard to the adequacy of its security.

ARTICLE 7

MISCELLANEOUS PROVISIONS

7.1           Notices. All notices,
requests, demands and other communications which are required or may be given
under this Agreement shall be in writing or by facsimile, signed by or on
behalf of the party sending the notice, and delivered personally, by private messenger
service, nationally recognized overnight courier (e.g., Federal Express,
Airborne or Express Mail), or by United States mail, certified with return
receipt requested. Notices shall be deemed served at the time of personal
delivery, at the time of delivery by a private messenger service, or upon
receipt or rejection when mailed as provided above, postage prepaid, addressed
to the party to whom such notice is sent at its address set forth below:

	
  

  	
  To Pledgor:

  	
  CMR MORTGAGE FUND
  II, LLC c/o California 

  
	
   

  	
   

  	
  Mortgage and
  Realty, Inc. 62 First Street, Fourth 

  
	
   

  	
   

  	
  Floor San
  Francisco, California 94105 Attention: 

  
	
   

  	
   

  	
  Mr. David Choo
  Telephone: (415) 974-1100 

  
	
   

  	
   

  	
  Facsimile: (415)
  974-1143

  
	
   

  	
   

  	
   

  
	
   

  	
  To Secured
  Party:

  	
  CMR INCOME FUND,
  LLC

  
	
   

  	
   

  	
  c/o Manager:
  Henry Park

  
	
   

  	
   

  	
  62 First Street,
  Fourth 

  
	
   

  	
   

  	
  Floor San
  Francisco, 

  
	
   

  	
   

  	
  California 94105
  

  
	
   

  	
   

  	
  Attention: Mr.
  David 

  
	
   

  	
   

  	
  Choo Telephone:
  (415) 974-1100

  
	
   

  	
   

  	
  Facsimile: 

  
	
   

  	
   

  	
  (415) 974-1143

  

 

7.2           Entire Agreement. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof.

7.3           Assignment. Secured
Party may transfer or assign this Agreement and Secured Party’s rights
hereunder, the Note and the other Loan Documents, in one or more transactions,
without releasing Pledgor, or any portion of the Collateral and upon such
assignment, negotiation or transfer, the assignee or holder shall be entitled
to all the

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rights, powers, privileges and remedies of Secured Party to
the extent assigned or transferred. 
Pledgor may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of Secured Party.

7.4           Governing Law. This
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of California applicable to contracts made and wholly
performed in the State of California without regard to conflicts or choice of
laws rules.

7.5           Amendments. This
Agreement may not be modified, amended or supplemented and any of the terms
hereof may be waived only by a written instrument executed by all of the
parties hereto.

7.6           Severability. All
provisions of this Agreement shall be considered as separate terms and
conditions, and in the event any one shall be held illegal, invalid or
unenforceable, all the other provisions hereof shall remain in full force and
effect as if the illegal, invalid or unenforceable provision were not a part
hereof.

7.7           No Liability. Neither
Secured Party nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of Pledgor or otherwise.

7.8           Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and all of which taken together shall constitute one and the
same instrument.

7.9           Pledgor’s
Waivers.

(a)           Rights of Secured Party. Pledgor
authorizes Secured Party to perform any or all of the following acts at any
time in its sole discretion, all without notice to Pledgor, without affecting
Pledgor’s obligations under this Agreement or any other Loan Documents and
without affecting the liens and encumbrances against the Collateral in favor of
Secured Party:

(i)            Secured
Party may take and hold security for the Obligations, accept additional or
substituted security, and subordinate, exchange, enforce, waive, release,
compromise, fail to perfect and sell or otherwise dispose of any such security.

(ii)           Secured
Party may direct the order and manner of any sale of all or any part of any
security now or later to be held for the Obligations, and Secured Party (or its
nominees or designees) may also bid at any such sale.

(iii)          Secured
Party may apply any payments or recoveries from any borrower, Pledgor or any
other source, and any proceeds of any security, to the obligations under the
Loan Documents in such manner, order and priority as Secured

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Party may elect.

(iv)          Secured
Party may release any borrower or any other person or entity of its liability
for the Obligations or any part thereof.

(v)           Secured
Party may substitute, add or release any one or more guarantors or endorsers.

(b)           Absolute
Obligations.  Pledgor
expressly agrees that until all Obligations are paid and performed in full and each
and every term, covenant and condition of this Agreement and each other Loan
Document is fully performed, Pledgor shall not be released of its obligations,
waivers and agreements set forth herein or in any other Loan Document, nor
shall the validity, enforceability or priority of the liens and encumbrances
against the Collateral in favor of Secured Party be affected in any manner by
or because of:

(i)            Any
act or event which might otherwise discharge, reduce, limit or modify Pledgor’s
obligations hereunder or under the other Loan Documents or the liens and
encumbrances against the Collateral in favor of Secured Party;

(ii)           
Any waiver, extension, modification, forbearance, delay or other act or
omission of Secured Party or any failure to proceed promptly or otherwise as
against any borrower, Pledgor, or any other person or entity or any security;

(iii)          
Any action, omission or circumstance which might increase the likelihood that
Secured Party might enforce the rights granted under this Agreement or under
the other Loan Documents or which might affect the rights or remedies of
Pledgor as against any borrower; or

(iv)          
Any dealings occurring at any time between any borrower and Secured Party,
whether relating to the Obligations or otherwise.

Pledgor
hereby expressly waives and surrenders any defense to the performance of the
obligations under this Agreement and under all other Loan Documents or to the
enforcement of the liens and encumbrances against the Collateral in favor of
Secured Party based upon any of the foregoing acts, omissions, agreements,
waivers or matters described in this subsection. It is the purpose and intent
of this Agreement that the obligations of Pledgor under this Agreement and
under all other Loan Documents shall be absolute and unconditional under any
and all circumstances.

(c)           Pledgor’s
Waivers.  Pledgor
hereby waives:

(i)            
Any constitutional or other right to a judicial hearing prior to the time
Secured Party takes possession or disposes of the Collateral upon an Event of
Default as provided herein;

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(ii)           All
statutes of limitations as a defense to any action or proceeding brought
against Pledgor or the Collateral by Secured Party, to the fullest extent
permitted by law;

(iii)          Any
right it may have to require Secured Party to proceed against any Borrower or
any other person or entity, proceed against or exhaust any security held from,
any Borrower or any person or entity, or pursue any other remedy in Secured
Party’s power to pursue;

(iv)          Any
defense:  (A) based on any legal
disability of any other person or entity, (B) based on any release, discharge,
modification, impairment or limitation of the liability of any other person or
entity to Secured Party from any cause, whether consented to by Secured Party
or arising by operation of law, (C) arising out of or able to be asserted as a result
of any case, action or proceeding before any court or other governmental
authority relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of any other person or entity
or any of their affiliates, or any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors; in each case as undertaken under any U.S. Federal or State law
(each of the foregoing described in this clause (C) being referred to herein as
an “Insolvency Proceeding”); or (D) arising from any rejection or disaffirmance
of the Obligations, or any part thereof, or any security held therefor, in any
such Insolvency Proceeding;

(v)           Any
defense based on any action taken or omitted by Secured Party in any Insolvency
Proceeding involving any other person or entity, including any election to have
Secured Party’s claim allowed as being secured, partially secured or unsecured,
any extension of credit by Secured Party to any other person or entity in any
Insolvency Proceeding, and the taking and holding by Secured Party of any
security for any such extension of credit;

(vi)          All
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, notices of intention to accelerate,
notices of acceleration, notices of acceptance of this Agreement or any other
Loan Document and of the existence, creation, or incurring of new or additional
indebtedness, and demands and notices of every kind; and

(vii)         Any defense
based on or arising out of any defense that any Borrower or any of its
respective affiliates may have to the payment or performance of the Obligations.

(d)           Revival and Reinstatement. 
To the extent any borrower, Pledgor
or any other person makes any payment to Secured Party in connection with the
Obligations, and all or any part of such payment is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
by Secured Party or paid over to a trustee, receiver or any other entity,
whether under any bankruptcy act or otherwise (any

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such payment is hereinafter referred to as a “Preferential
Payment”), then this Agreement shall continue to be effective or shall be
reinstated, as the case may be, and, to the extent of such payment or repayment
by Secured Party, the Obligations or part thereof intended to be satisfied by
such Preferential Payment shall be revived and continued in full force and
effect as if said Preferential Payment had not been made.

(e)           Additional Obligations. Pledgor’s
obligations under this Agreement are in addition to Pledgor’s obligations under
any other existing or future agreements, each of which shall remain in full
force and effect until it is expressly modified or released in a writing signed
by Secured Party. Secured Party may exercise its remedies hereunder, without
first proceeding against any Borrower, any other person or entity or any
collateral that Secured Party may hold, and without pursuing any other remedy.
Secured Party’s rights under this Agreement shall not be exhausted by any
action by Secured Party until all Obligations have been paid and performed in
full.

IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Security Agreement to be duly executed and delivered by its officer thereunto
duly authorized as of the day and year first above written.

	
  PLEDGOR:

  	
  CMR MORTGAGE
  FUND II, LLC,

  
	
   

  	
  a California
  limited liability company

  
	
   

  	
  By:

  	
  California
  Mortgage And Realty, Inc.,

  
	
   

  	
   

  	
  a Delaware
  corporation, Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Craig Raymond

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Craig Raymond

  	
   

  
	
   

  	
   

  	
  Title:

  	
   Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SECURED
  PARTY:

  	
  CMR INCOME FUND,
  LLC, a 

  
	
   

  	
  Nevada limited
  liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Henry Park

  	
   

  
	
   

  	
  Name: Henry Park

  
	
   

  	
  Title:
    Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
  SECURED
  PARTY:

  	
  WELLS FARGO
  FOOTHILL, INC,

  
	
   

  	
  a California corporation, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ F.W. McCollum

  	
   

  
	
   

  	
  Name: 

  	
  F.W. McCollum

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

12Exhibit
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

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